Originally created 08/14/97

Flagstar posts another loss



SPARTANBURG, S.C. - Continued debt and restructuring costs, as well as poor restaurant sales nearly doubled losses at Flagstar Cos. Inc. in the second quarter, compared with 1996 figures.

The company said Wednesday it loss $32.3 million, or 84 cents per share in the second quarter, an 86 percent increase compared with losses of $17.4 million, or 49 cents per share in the same quarter of last year.

Comparable store sales were down in all but one of the holding company's restaurant chains.

Revenues increased to $659.4 million, from $626.6 million in the second quarter of last year.

"We are pleased with overall results for the quarter and are on target with the projections set for in our financial restructuring plan," said James B. Adamson, chairman and chief executive. "We continue to expect emergence from Chapter 11 during the fall of this year with a stronger capital structure that will help us resume a course of growth and profitability."

The company has been working to reduce $2 billion in debt left from a 1989 leverage buyout.

Flagstar's reorganization plan would give debt holders a 95.5 percent equity interest in the company.

Interest payments increased 8 percent from the second quarter of last year, to $68 million.

Second-quarter results included a $7.9 million charge for reorganization expenses.

Comparable store sales at Denny's declined by 5.5 percent. Lower customer counts were partially offset by an increase in the average guest bill, the company said. Higher prices imposed in September improved the restaurant's profit margins.

Comparable store sales at Hardee's were down 9.4 percent. That reflected aggressive promotions by competitors, weakness in Hardee's brand positioning and advertising programs, the company said. Profitability improved because of a continued focus on flow-through management, Flagstar said.

Sales at Quincy's restaurants that had been opened at least a year declined 7.3 percent, but profitability improved because of better food cost management.

El Pollo Loco reported a 1.9 percent increase in same store sales, compared with the same quarter last year. The company credited a change in promotional emphasis.

Comparable store sales dropped 1.5 percent at Coco's and 3.2 percent at Carrows.

For the first six months of the fiscal year, Flagstar reported losses of $84 million, or $2.15 per share, compared with a loss of $44.7 million, or $1.22 per share, last year.