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Boston Chicken squawks
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November 6, 1998: 4:58 p.m. ET
Struggling restaurant chain reports huge 3Q loss after bankruptcy filing
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NEW YORK (CNNfn) - Struggling fast-food chain Boston Chicken reported a dramatic third-quarter loss Friday, just one month after the company filed for Chapter 11 bankruptcy protection and closed 178 restaurants.
The Golden, Colo.-based operator and franchiser of homestyle meal restaurants posted a third-quarter net loss of $290.8 million, or $3.79 a diluted share, compared with net income of $11 million, or 16 cents a share in the year-ago period.
Boston Chicken said revenues for the fiscal quarter ended Oct. 4 climbed to $261 million from $110.8 million a year earlier. The company attributed the higher sales, however, to an increase in the number of Boston Market Company restaurants and Einstein/Noah Bagel Corp. restaurants.
Per-restaurant weekly revenues, Boston Chicken said, were down 18.3 percent from the year-earlier quarter. Net systemwide revenues at the Boston Market restaurants declined 21.5 percent to $207.9 million from $265.1 million.
The results included $260 million in special charges, including $105.5 million restaurant closure costs and charges associated with the Oct. 5 bankruptcy filing, a $110.7 million charge for restructuring the company's 1996 Master Lease, a provision for loan losses and other charges related to asset costs and write-downs.
Last month, Boston Chicken said it had received $70 million in debtor-in-possession (DIP) financing from a group of lenders led by General Electric Capital Corp. and Bank of America.
On Friday, the company said a bankruptcy court in Phoenix approved the credit facility on Oct. 26.
The company added that the publicity generated by the Chapter 11 filing had caused a seven to nine percent drop in customer visits so far in the fourth quarter.
"We have countered this with a well-received introduction of an a la carte rotisserie-roasted chicken for $5.99, but we expect sales and margin softness to continue in the near term," J. Michael Jenkins, Boston Chicken's chairman, president and chief executive officer said in a statement.
"It will take time before the impact of our Chapter 11 filing wears off and customers realize we still have nearly 900 stores serving the chicken America loves," Jenkins added.
Boston Chicken said it had been notified by the Nasdaq that the company is not in compliance with the net tangible assets requirement or the alternative $5 minimum closing bid price requirement for continued listing on the market. A hearing is scheduled for Nov. 19 on the compliance issues.
Pending a resolution, Boston Chicken said "there can be no assurance" that the hearing will result in continued listing of the common stock on the Nasdaq. The company also said that while it is "exploring opportunities" to preserve value for shareholders. "there can be no assurance that existing shareholders will retain any value."
Under its reorganization, the restaurant chain said it is working to reduce its current debt of over $900 million by over two-thirds.
Friday's results are the latest in a litany of financial woes for the company, which specializes in homestyle entrees, fresh vegetables, sandwiches, salads, and side dishes.
In May, Arthur Andersen accounting firm filed an auditor's report with the Securities and Exchange Commission in which it stated that Boston Chicken's financial situation "raises substantial doubt about its ability to continue as a going concern."
Boston Chicken (BOSTQ) stock lost 7/16 to ¾ on the Nasdaq market, down from a 52-week high of 9-13/32.
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Boston Chicken
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