April 19, 2012
Dear Meritage Shareholder:
I am pleased to report we delivered record fiscal 2011 Sales and Net Income from Continuing Operations results driven by acquisitions, renovations and new store development. This is a testament to the hard work and commitment of our 2,800 employees.
Sales $91.9 million + 18.6%
Numbers in 000’s
Once again we demonstrated an ability to deliver strong results in the Wendy’s system and Twisted Rooster restaurants by offering relevant consumer products, supported by our web-based operating platform. Store level operations remain the key to our growth and consolidation plans.
2011 Highlights
Sales increased 18.6% to $91.9 million compared to $77.5 million last year thanks in part to the improving performance of Twisted Rooster restaurants (a newly-created Company owned concept) and our Wendy’s expansion in Atlanta, Georgia and Jacksonville, Florida.
Net Income from Continuing Operations increased 15.2% to $2.8 million compared to $2.4 million last year.
Net Income from Continuing Operations $2.7 million + 15.2%
Numbers in 000’s
EBITDA (a non-GAAP measure) increased 4.5% to $5.0 million compared to $4.8 million last year.
Meritage once again finished 2011 ranked as one of the top most effective multi-unit operators within the Wendy’s franchise system. The Company operates with one of the lowest general and administrative costs structures in the entire QSR Industry.
The Twisted Rooster restaurant concept continues to perform well in our flagship Grand Rapids, MI location. During 2011 we converted two former casual dining locations into Twisted Rooster restaurants with positive sales results. In 2012 we plan to open two to three new casual dining restaurants in Michigan, and plan for a positive earnings contribution from the casual dining operations.
Comparing Managements 2011 Plan with Actual 2011 Results
|
Item |
2011 Actual |
2011 Plan |
Actual 2011
Results as % of Plan |
|
Revenue |
$91,942,000 |
$88,100,000 |
104% |
|
Earnings from Operations |
$3,179,000 |
$3,700,000 |
86.0% |
|
Net Income |
$2,316,000 |
$3,000,000 |
77.2% |
|
EBITDA |
$5,025,000 |
$5,356,000 |
93.9% |
2012 Business Outlook: Opportunities abound in the Wendy’s franchise system
We believe that many of the smaller legacy Wendy’s franchisees, now at retirement ages, are not properly positioned to make the capital reinvestment and effectively complete the construction requirements of “Image Activation,” a system-wide upgrade estimated to cost between $500,000 and $750,000 per restaurant. The result is a major consolidation opportunity within the Wendy’s franchisee system for “next generation” franchise operators with scalable operating platforms and development capabilities. Wendy’s has acknowledged that in order to attract financing and acceptance by the franchisee community the Image Activation investment must demonstrate sustainable sales gains and an attractive return on investment. To fulfill these requirements, Wendy’s is currently building 20 new and renovating 50 existing restaurants into Image Activation stores.
Our near term operating strategy is to keep our G & A costs at the low end of the industry range, and leverage our highly efficient operating platform. Our four year growth target is 150 restaurants across diverse U.S. markets. We believe this will allow the Company to continue building intrinsic value and position Meritage for common share dividend distributions in 2012.
Thank you for your continued support.
Meritage Hospitality Group Inc.
Robert E. Schermer Jr.
President & CEO
