Benihana Inc. Reports Second Quarter Results and Firming Comparable Sales

Business Wire, Nov 11, 2003

Business Editors

MIAMI--(BUSINESS WIRE)--Nov. 11, 2003

Benihana Inc. (NASDAQ: BNHNA and BNHN), operator of one of the nation's largest chains of Asian restaurants, today reported net income for the second quarter (12 weeks) ended October 12, 2003, of $1.5 million, or $0.16 per fully diluted share, compared with $1.5 million, or $0.16 per fully diluted share, in the corresponding period a year-ago. Total revenues increased 5.4%, to $44.2 million, from approximately $42.0 million in the corresponding year-ago period.

Net income for the fiscal 2004 second quarter was in line with the Company's most recent guidance for the period. Comparable sales company-wide for the quarter were a negative 1.4%, with the teppanyaki restaurants off 2.6% but Haru posting a 6.7% increase. RA Sushi, acquired in December 2002, while not included in the current comparable sales, nonetheless continued to record strong year-to-year gains. The quarter also included results of a new teppanyaki restaurant opened in Westbury, New York; a new teppanyaki restaurant in Alpharetta, Georgia, came on stream in the final week of the second quarter.

Results for the second fiscal quarter, seasonally the slowest of the year, benefited from reduced labor expenses, the result of the Company's concerted, ongoing effort to improve productivity and reduce overtime wages.

Restaurant operating profits for the second quarter increased 15.8% to $6.4 million from $5.4 million in the second quarter of last year. Restaurant operating margins rose to 14.5% from 13.2% in the corresponding year-earlier period. Labor and related costs as a percentage of restaurant sales declined 2.8% year-to-year, improving to 36.3% compared with 39.1% a year-ago, the second consecutive quarter of year-to-year gains. Total operating expenses for the second quarter improved to 59.9%, from 62.0% in the corresponding year-ago period.

Cost of sales increased to 25.6% of sales from 24.8% in the year-ago second quarter. Prices for beef, which represents approximately 40% of commodity costs for the Teppan business, increased during the quarter and continue to be unusually volatile. Restaurant opening expenses increased to $590,000, up from $116,000 in the second quarter of last year, as a result of the growth in restaurant development activity.

Sales during the second fiscal quarter reflected weakness in consumer confidence, which of late has shown signs of improving, and continued economic softness, particularly in Texas where business conditions have been especially hard hit. The blackout in the Northeast and Midwest this past summer also had a slight, temporary impact. Plans to temporarily close two teppanyaki restaurants for renovation have been rescheduled, and now are not expected to take place until approximately a year from now.

First Half Results

For the first seven periods (28 weeks) ended October 12, 2003, revenues improved 6.3%, to $105.3 million as compared with $99.1 million in the preceding year. Gross profit improved to $77.7 million, compared with $74.1 million in the corresponding year-ago period. Restaurant operating profits totaled $15.9 million, compared with $14.5 million. Net income for the first half amounted to $4.4 million, or $0.49 per share, fully diluted, compared with $4.2 million or $0.45 per share, fully diluted, in the corresponding year-earlier period.

"Recent economic news, including reports of increasing consumer confidence, and increasing comparable sales trends in our core Benihana Teppan business, give us reason to be optimistic going into our third quarter" said Joel A. Schwartz, President. "Labor has returned to a relatively historical relationship to sales, and in the next few months we anticipate opening five new restaurants. Business has taken a favorable turn."

Outlook

Over the next few months, Benihana expects to add at least five new restaurants to the chain. Included are new Teppanyaki restaurants in Scottsdale, Arizona, and Carlsbad, California. A new RA Sushi restaurant opened in Tucson, Arizona, last week, and others are scheduled to open in San Diego, California, during the third quarter and in Chicago, Illinois, during the fourth quarter. The Haru restaurant under development in Philadelphia, Pennsylvania, which would be the chain's first outside New York City, is slated to open in the first quarter of fiscal 2005.

With the improving trend recently experienced in comparable sales, the Company is estimating an increase in comparable restaurant sales of 1-1.5% for the third fiscal quarter (12 weeks) ending January 4, 2004. Net income per share, fully diluted, is anticipated to approximate $0.19 to $0.21 per share.

About Benihana

Benihana, now approaching its 40th year and one of the nation's largest chains of Asian restaurants, currently operates 66 restaurants nationwide, including 55 Benihana teppanyaki restaurants, five Haru sushi restaurants, five RA Sushi Bar Restaurants and one Doraku restaurant. In addition, a total of 22 franchised Benihana teppanyaki restaurants are now open or under development in the U.S. and Latin America.