_________________
CONTACT:
Robert E. Schermer, Jr.
Chief Executive Officer
Meritage Hospitality Group Inc. 616/776-2600
GRAND RAPIDS, Michigan, September 25, 2003. Meritage Hospitality Group Inc. (AMEX: MHG), the nation’s only publicly traded Wendy’s franchisee, today announced that net sales for the third quarter ended August 31, 2003 increased 6.0% to $13.2 million, compared to $12.4 million for the same period last year. Meritage’s net earnings for the quarter were $269,000 or $0.05 per share, compared to $443,000 or $0.08 per share for the third quarter in 2002.
Net sales for the nine months ended August 31, 2003 increased 3.1% to $35.6 million, compared to $34.6 million during the same period last year. Meritage’s net earnings for the nine month period were $315,000 or $0.06 per share compared to net earnings of $556,000 or $0.10 per share for the same period in 2002. The nine month results include a profit of $751,000 earned from the sale of surplus real estate which the Company acquires from time to time in its restaurant development efforts.
Meritage’s Chief Executive Officer, Robert E. Schermer, Jr., said, “Year-to-date, customer traffic and same-store sales are tracking above the Company’s expectations and continue to show progress quarter over quarter. In August, we introduced the new Homestyle Chicken Strips which have been well received by our customers. Our management team remains focused on a combination of restaurant operating initiatives and building market share through capital investment in existing restaurants and new restaurant development.”
Mr. Schermer added, “2003 represents another active year of development by Meritage. By calendar year end, we will have opened three new Wendy’s restaurants, purchased two previously leased stores, and performed major remodels on eight older facilities. One of the leased sites we are acquiring, located in Grand Haven, Michigan, will be torn down, rebuilt and reopened by the end of November. At calendar year end, Meritage will own 36 of its 48 Wendy’s restaurants (75%), and all but two of its owned facilities will be new or recently remodeled.”
The Company recently announced it has entered into an agreement in principle with O’Charley’s, Inc. to operate O’Charley’s restaurants throughout the State of Michigan pursuant to an exclusive multi-unit development agreement. Meritage will initially develop 15 stores, but believes that the market potential of O’Charley’s in Michigan would permit the construction of 35 O’Charley’s units over the next seven years. O’Charley’s is regarded as the quality leader in the casual restaurant segment, similar to Wendy’s reputation within the quick service segment. The agreement in principle with O’Charley’s is contingent upon certain conditions, and there is no assurance that these conditions will be met.
Meritage currently operates 48 “Wendy’s Old Fashioned Hamburgers” restaurants throughout Western and Southern Michigan serving 7.0 million customers annually. The Company has been one of the fastest growing Wendy’s franchisees within the Wendy’s franchise system for the past three years. The Wendy’s franchise system is the third largest quick-service restaurant hamburger chain in the world with more than 6,200 restaurants and system-wide sales in excess of $7.1 billion. Wendy’s is the leading national, high quality hamburger concept in the quick-service restaurant category.
SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION ACT OF 1995
Certainstatementscontainedinthisnewsreleasethatarenothistorical factsconstituteforward-lookingstatements,withinthemeaningofthePrivate SecuritiesLitigationReformActof1995,andareintendedtobecoveredbythe safeharborscreatedbythatAct.Relianceshouldnotbeplacedon forward-lookingstatementsbecausetheyinvolveknownandunknownrisks, uncertaintiesandotherfactorswhichmaycauseactualresults,performanceor achievementstodiffermateriallyfromthoseexpressedorimplied. Forward-lookingstatementsmayalsobeidentifiedbywordssuchasestimates, anticipates,projects,plans,expects,intends,believes,shouldandsimilar expressions,andbythecontextinwhichtheyareissued.Suchstatementsare baseduponcurrentexpectationsandspeakonlyasofthedatemade.TheCompany undertakesnoobligationtoupdateanyforward-lookingstatementstoreflect eventsorcircumstancesafterthedateonwhichtheyaremade.
Statementsconcerningexpectedfinancialperformance,on-goingbusiness strategiesandactionwhichtheCompanyintendstopursuetoachievestrategic objectives,constituteforward-lookinginformation.Implementationofthese strategiesandachievementofsuchfinancialperformancearesubjecttonumerous conditions,uncertaintiesandriskfactors.Factorswhichcouldcauseactual performancetodiffermateriallyfromtheseforwardlookingstatementsinclude, withoutlimitation:competition;changesinthenationalorlocaleconomy; changesinconsumertastesandviewsaboutquick-servicefood;severeweather; changesintravelpatterns;increasesinfood,laborandenergycosts;the availabilityandcostofsuitablerestaurantsites;theabilitytofinance expansion;fluctuatinginterestrates;fluctuatinginsurancerates;the availabilityofadequateemployees;directivesissuedbythefranchisor;the generalreputationofWendy’srestaurants;andtherecurringneedforrenovation andcapitalimprovements.Also,theCompanyissubjecttoextensivegovernment regulationsrelatingto,amongotherthings,zoning,minimumwage,publichealth certification,andtheoperationofitsrestaurants.BecausetheCompany’s operationsareconcentratedinsmallerurbanareasofMichigan,amarkeddecline intheMichiganeconomycouldadverselyaffectitsoperations.
Exhibit 99
| 2003 | 2002 | |||||||
|---|---|---|---|---|---|---|---|---|
| Food and beverage revenue | $ | 13,168,844 | $ | 12,427,270 | ||||
| Costs and expenses | ||||||||
| Cost of food and beverages | 3,354,705 | 3,013,978 | ||||||
| Operating expenses | 7,505,410 | 7,128,753 | ||||||
| General and administrative expenses | 763,100 | 707,721 | ||||||
| Depreciation and amortization | 708,529 | 631,497 | ||||||
| Total costs and expenses | 12,331,744 | 11,481,949 | ||||||
| Earnings from operations | 837,100 | 945,321 | ||||||
| Other income (expense) | ||||||||
| Interest expense | (582,335 | ) | (512,934 | ) | ||||
| Interest income | 8,008 | 10,130 | ||||||
| Miscellaneous income | 5,892 | 380 | ||||||
| Total other expense | (568,435 | ) | (502,424 | ) | ||||
| Net earnings | 268,665 | 442,897 | ||||||
| Dividends on preferred stock | 6,641 | 6,641 | ||||||
| Net earnings on common shares | $ | 262,024 | $ | 436,256 | ||||
| Net earnings per common share - basic and diluted | $ | 0.05 | $ | 0.08 | ||||
| Weighted average shares outstanding - basic | 5,347,501 | 5,329,775 | ||||||
| Weighted average shares outstanding - diluted | 5,640,591 | 5,738,096 | ||||||
| 2003 | 2002 | |||||||
|---|---|---|---|---|---|---|---|---|
| Food and beverage revenue | $ | 35,640,797 | $ | 34,559,034 | ||||
| Costs and expenses | ||||||||
| Cost of food and beverages | 8,833,286 | 8,466,828 | ||||||
| Operating expenses | 21,296,687 | 20,053,933 | ||||||
| General and administrative expenses | 2,152,834 | 2,213,735 | ||||||
| Depreciation and amortization | 2,093,307 | 1,912,679 | ||||||
| Total costs and expenses | 34,376,114 | 32,647,175 | ||||||
| Earnings from operations | 1,264,683 | 1,911,859 | ||||||
| Other income (expense) | ||||||||
| Interest expense | (1,743,008 | ) | (1,430,256 | ) | ||||
| Interest income | 28,109 | 34,160 | ||||||
| Miscellaneous income | 14,559 | 23,535 | ||||||
| Gain on sale of assets held for sale | 750,716 | -- | ||||||
| Total other expense | (949,624 | ) | (1,372,561 | ) | ||||
| Earnings before income taxes | 315,059 | 539,298 | ||||||
| Income tax benefit | -- | 17,000 | ||||||
| Net earnings | 315,059 | 556,298 | ||||||
| Dividends on preferred stock | 19,926 | 19,926 | ||||||
| Net earnings on common shares | $ | 295,133 | $ | 536,372 | ||||
| Net earnings per common share - basic | $ | 0.06 | $ | 0.10 | ||||
| Net earnings per common share - diluted | $ | 0.05 | $ | 0.09 | ||||
| Weighted average shares outstanding - basic | 5,345,331 | 5,326,918 | ||||||
| Weighted average shares outstanding - diluted | 5,653,943 | 5,668,463 | ||||||
