FOG CUTTER CAPITAL GROUP INC. REPORTS FIRST QUARTER 2007 OPERATING RESULTS
May 11, 2007
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FOG CUTTER CAPITAL GROUP INC. |
| CONTACT: |
Fog Cutter Capital Group Inc. |
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(503) 721-6500 Andrew A. Wiederhorn, Chairman and CEO |
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(503) 721-6500 R. Scott Stevenson, Chief Financial Officer |
For Immediate Release
FOG CUTTER CAPITAL GROUP INC.
REPORTS FIRST QUARTER 2007 OPERATING RESULTS
PORTLAND, Ore. — May 11, 2007 – Fog Cutter Capital Group Inc. (OTC: FCCG) reported a net loss of $3.7 million or $0.46 per share for the three months ended March 31, 2007. These results compare to a net loss of $1.0 million or $0.12 per share for the first quarter of 2006. Approximately $1.4 million of the loss for the 2007 period came from the Company’s Fatburger restaurant chain, which is currently in the process of nationwide and international expansion. “We expect that 2007 will be a pivotal year for Fatburger as we continue to expand into new markets,” explained chairman and chief executive officer Andrew A. Wiederhorn. “We are particularly excited about opening our first restaurants in greater China later this year.”
The Company’s first quarter results include a gain of $2.5 million from the sale of its mortgage brokerage unit, George Elkins Mortgage Banking Company. A Fog Cutter subsidiary owned 51% of George Elkins and, together with Elkins’ management, sold the entire commercial mortgage brokerage operation to a division of MuniMae for $10.4 million. The sale of George Elkins was in line with Fog Cutter’s strategy to divest its non-core subsidiaries and concentrate its focus on the Fatburger restaurant operation.
The Company currently conducts its operations in four business segments: (1) restaurant operations through its Fatburger subsidiary; (2) manufacturing activities conducted through its DAC International subsidiary; (3) real estate operations; and (4) software development and sales conducted through its Centrisoft Corporation subsidiary. The following summarizes the general activities in the Company’s areas of interest:
Restaurant Operations
Fatburger, “The Last Great Hamburger Stand”®, opened its first restaurant in Los Angeles in 1952. At March 31, 2007, there were currently 87 Fatburger restaurants located in 14 states and Canada. The restaurants specialize in fresh, made to order hamburgers and other specialty sandwiches. French fries, homemade onion rings, hand-scooped ice cream shakes and soft drinks round out the menu.
Fatburger plans to open additional restaurants throughout the United States, Canada and China through a combination of company owned restaurants and franchised locations. Franchisees currently own and operate 52 of the Fatburger locations and the company has agreements for approximately 207 new franchise locations in the United States and Canada.
For the three months ended March 31, 2007, company-owned restaurant sales increased 20.6% to $7.6 million. This increase was primarily the result of the addition of nine company-owned restaurants in 2006 and a system-wide price increase in June 2006. Same store sales for company-owned restaurants open during all of 2006 decreased 6.3% in the first quarter of 2007 compared to the same period in 2006. The operating margin as a percentage of sales for company-owned stores was 35.8% in the first quarter of 2007, down from 37.2% for the same period in 2006. This was due primarily to increases in labor costs of 3.9% as a percentage of sales and restaurant depreciation expense of 1.6% (from the addition of nine company-owned restaurants in 2006), partially offset by reductions in food costs as a percentage of sales of 4.1%.
System-wide sales increased 4.1% to $16.8 million, primarily as the result of the addition of 6 new restaurant locations. System-wide same store sales (stores open during all of 2006) decreased 9.3% for the first quarter of 2007.
Manufacturing Operations
The Company conducts manufacturing activities through DAC International. DAC is a supplier of computer controlled lathes and milling machinery for the production of eyeglass, contact, and intraocular lenses. In the three months ended March 31, 2007, DAC had sales revenues of $2.3 million and earned approximately $0.1 million in net income.
Real Estate Operations
The Company invests directly and indirectly in real estate, both in the United States and Europe. During the first quarter of 2007, the Company lost $0.1 million from its real estate operations, including $0.1 million of depreciation and $0.6 million of interest expense. The Company’s major holdings in real estate as of March 31, 2007 are as follows:
• Freestanding Retail Properties – The Company owns or controls 74 freestanding retail buildings throughout the United States, either directly or through leases. The buildings are approximately 4,500 square feet and are leased to a variety of tenants including convenience stores, video rental outlets, shoe stores and other small businesses.
• Barcelona Apartments – As of March 31, 2007 the Company owned two apartment buildings through equity participating loans to special purpose Spanish corporations. The properties consist of 33 residential units located in Barcelona, Spain. The two buildings were acquired subject to below market leases and the Company has relocated these tenants and is now selling the properties for development. In December 2006, the Company entered into an agreement to sell one of the two remaining apartment buildings in Barcelona, Spain for a sales price of approximately $8.6 million.
Software Development and Sales
The Company’s Centrisoft subsidiary develops and sells software that controls and enhances the productivity of enterprise networks and provides first level security against unauthorized applications and users. Centrisoft is marketing its software to potential customers both directly and through re-seller relationships.
Forward Looking Statements
Certain statements contained herein and certain statements contained in future filings by the Company with the SEC may not be based on historical facts and are “Forward-Looking Statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-Looking Statements are based on various assumptions (some of which are beyond the Company’s control) and may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “anticipate,” “continue,” or similar terms or variations on those terms, or the negative of those terms. Actual results could differ materially from those set forth in Forward-Looking Statements due to a variety of factors, including, but not limited to the Risk Factors identified herein and the following:
• economic factors, particularly in the market areas in which the Company operates;
• the financial and securities markets and the availability of and costs associated with sources of liquidity;
• competitive products and pricing;
• the real estate market, including the residential real estate market in Barcelona, Spain;
• the ability to sell assets to maintain liquidity;
• fiscal and monetary policies of the U.S. Government;
• changes in prevailing interest rates;
• changes in currency exchange rates;
• acquisitions and the integration of acquired businesses;
• performance of retail/consumer markets, including consumer preferences and concerns about diet;
• effective expansion of the Company’s restaurants in new and existing markets;
• profitability and success of franchisee restaurants;
• availability of quality real estate locations for restaurant expansion;
• the market for Centrisoft’s software products;
• credit risk management; and
• asset/liability management.
Except as may be required by law, the Company does not undertake, and specifically disclaims any obligation, to publicly release the results of any revisions which may be made to any Forward-Looking Statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. The following financial results should be read in conjunction with the Form 10-Q filed with the Securities and Exchange Commission on May 11, 2007.
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