California Pizza Kitchen Reports Financial Results For The Fourth Quarter And Fiscal Year Ended December 28, 2003

Business Wire, Jan 29, 2004

Business Editors

LOS ANGELES--(BUSINESS WIRE)--Jan. 29, 2004

California Pizza Kitchen, Inc., (Nasdaq: CPKI) today reported revenues and earnings for the fourth quarter and fiscal year ended December 28, 2003. Highlights for the fourth quarter of 2003 relative to the same quarter last year were as follows:

-- Total revenues up approximately 17.8% to $96.1 million

-- Comparable restaurant sales increase of 2.8%

-- Net income before non-cash impairment, severance and tax

benefit of $0.22 per diluted share compared to net income of

$0.22 per diluted share for the prior period

-- Net income of $0.23 per diluted share compared to net income

of $0.22 per diluted share for the prior period

Highlights for fiscal 2003 compared to fiscal 2002 were as follows:

-- Total revenues up approximately 17.5% to $359.9 million

-- Comparable restaurant sales increase of 2.5%

-- Net income before non-cash impairment, severance and tax

benefit of $0.89 per diluted share, compared to net income

before impairment and closure charges of $0.90 per diluted

share

-- Net income of $0.42 per diluted share compared to net income

of $0.81 per diluted share for the prior period

Rick Rosenfield and Larry Flax, Co-CEO's of California Pizza Kitchen stated, "The fourth quarter caps a year of transition for California Pizza Kitchen. During the past year, we identified that while our core business was strong, based on the performance of our most recent classes, our site selection process needed to be significantly altered. We've made those changes and now have a team and selection process in place that we believe will lead to new restaurant performance on a par with our pre-2002 classes." Rosenfield and Flax continued, "In addition to significant development changes, we've also invested in management infrastructure to ensure operational excellence for new and existing stores. These initiatives are aimed at improving sales performance and financial results in all underperforming locations while simultaneously raising the standard for new restaurant development."

As a result of a significant sales decline in one of the 2003 restaurants, the Company recorded a non-cash impairment charge of $1.7 million during the fourth quarter of 2003. Non-cash impairment charges for fiscal 2003 totaled $14.7 million, or $0.77 per diluted share, compared to $2.4 million, or $0.13 per diluted share in the prior year. The non-cash impairment charge included 12 restaurants in 2003 compared to two restaurants in 2002 and was in compliance with Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment of Long-Lived Assets."

The Company also recorded a non-cash severance charge of approximately $401,000 during the fourth quarter of 2003 related to the management transition.

Additionally, the higher than anticipated 2003 FICA tax tip credits and non-cash charges resulted in an after tax benefit of $2.4 million or $0.12 per diluted share. This benefit was recorded in the fourth quarter and reduced the effective full year tax rate from 33.0% to 15.0%. There was no corresponding tax benefit in the prior year.

Rosenfield and Flax concluded, "We continue to analyze our business in great detail and are committed to providing transparent disclosure to shareholders. As part of this approach, we are providing restaurant class operating data that illustrates performance. We are especially pleased with our 94 pre-2002 full service stores which represent 81.0% of our overall restaurant base. They are stronger than ever, achieving a 19.9% operating margin for the quarter and a record 20.4% operating margin for the fiscal year. In terms of the 2002 and 2003 classes, we are disappointed with sales and operating margins. However, based on what we see, further impairment charges are not likely and we are making a concerted effort to improve performance at these locations."

Average weekly sales for the Company's full service restaurants were $54,495 for the fourth quarter of 2003, compared to $55,106 for the same quarter last year, a 1.1% decrease. For the 2003 fiscal year, average weekly sales for the Company's full service restaurants were $54,896 compared to $55,712 for the prior year, or a 1.5% decrease.

Full year average weekly sales for the five 2002 restaurants and three 2003 restaurants impaired were $31,612 and $30,048, respectively.

During the fourth quarter, the Company opened five new restaurants (San Jose, CA; Lyndhurst, OH; Houston, TX; Long Beach, CA and Fairfax, VA.) for a total of 22 restaurants in 2003.

As outlined in the third quarter earnings release, management is maintaining its earnings outlook for the 2004 fiscal year of $0.95 to $1.00 per diluted share. Additionally, the Company anticipates first quarter earnings per diluted share to be in the range of $0.17 to $0.19.

California Pizza Kitchen, Inc., founded in 1985, is a leading casual dining chain in the premium pizza segment. The Company's full service restaurants feature an imaginative line of hearth-baked pizzas, including the original BBQ Chicken Pizza, and a broad selection of distinctive pastas, salads, soups, and sandwiches. The average guest check is approximately $11.60. The chain operates, licenses or franchises 168 restaurants as of January 29, 2004, of which 139 are company-owned and 29 operate under franchise or license agreements. The Company also has a strategic alliance with Kraft Pizza Company to manufacture and distribute a line of California Pizza Kitchen premium frozen pizzas.