Iotron Technology Inc.

[counter]

011029 Checkers Reports 3rd Quarter Results

October 20, 2001

Clearwater, FL - Checkers Drive-In Restaurants, Inc. reported financial results for its third quarter ended September 10, 2001. Checkers Drive-In Restaurants, Inc. posted Company-owned restaurant sales of $34.3 million, growing comparable Company-owned restaurant sales by 13.6% during the third quarter as compared to those units that were operating for the full quarter ended September 11, 2000. Franchise royalty income on a per restaurant unit basis was up for the quarter. The number of operating franchise restaurants, however, had decreased from 649 to 606 from the quarter ended September 11, 2000 to September 10, 2001. In addition, 48 franchised restaurants in Detroit are being operated under receivership, as a result total franchise royalty income decreased by only $22,000. Additionally, there were minimal restaurants sold, opened or transferred this quarter as compared to the sale of corporate restaurants to franchisees during the quarter ended September 11, 2000. Consequently, one-time franchise fees and other income decreased by $2.2 million during this same period.

For the quarter ended September 10, 2001 net income before income taxes more than doubled from $223,000 to $543,000 compared to the quarter ended September 11, 2000. Net income of $452,000 or $0.04 per diluted share was reported after taking a $223,000 non-cash goodwill write-down during the quarter related to the closing of certain franchise locations. This non-cash goodwill write-down will be largely offset during the fourth quarter by the recognition of $180,000 of franchise fee revenue from the transfer announced October 17, 2001 of 60 Rally's Hamburger restaurants. Net income increased from $1.9 million for the three quarters ended September 11, 2000 to $2.1 million for the three quarters ended September 10, 2001.

Restaurant operating expenses for the quarter ended September 11, 2001 increased by 1.8% of sales as compared to the quarter ended September 11, 2000. The increase is due to increases in food and paper costs by 2.6% of sales due to increased beef and cheese prices combined with competitively priced promotions that could not be strategically changed. A 1.1% of sales increase in restaurant occupancy expenses arising from additional reserves of $133,000 recorded during the current quarter for previously abandoned sites, higher rental rates for the restaurants in the California market operated as Company-owned restaurants since operations were taken over from CKE Restaurants, Inc., and increased insurance costs. In addition, other restaurant operating expenses increased by 0.3% of sales. Offsetting decreases were realized in both restaurant labor and restaurant depreciation expenses by 1.1% of sales. Restaurant labor costs decreased as a percentage of sales due to productivity enhancements, resulting from increased restaurant management training and retention. Restaurant depreciation expense decreased as a percentage of sales due to its fixed nature and increased sales volume.

Net working capital improved by $7.4 million from September 11, 2000 to September 10, 2001. Additionally, the Company's net debt position (total debt less unrestricted cash) improved $10 million from $46.7 million to $36.7 million as of the quarter ended September 10, 2001 since September 11, 2000. Moreover, net working capital will be further improved subsequent to the current quarter end by an additional $2.6 million from the exercise of options and warrants into 613,311 shares of common stock. Accordingly, interest expense decreased $707,000 for the quarter ended September 10, 2001 as compared to the quarter ended September 11, 2000.

Checkers' Chief Executive Officer and President, Daniel J. Dorsch commented: I am pleased that we were able to increase working cash by over $7.4 million while reducing net debt by $10 million. My focus has been to turn this company around by increasing sales, reducing the large debt we began with 21 months ago, while balancing new innovative ideas at the restaurant level.

Dorsch continued: I am pleased with the confidence the public has demonstrated by purchasing additional common stock shares through the exercise of options and warrants providing $856,000 of capital during the quarter ended September 10, 2001, and an additional $2.6 million subsequent to September 10, 2001.

As of September 10, 2001, Checkers Drive-In Restaurants, Inc. and its franchisees own 419 Checkers (R) operating primarily in the Southeastern United States and 423 Rally's (R) operating primarily in the Midwestern United States. Checkers is headquartered in Tampa, Florida.

RETURN TO HOME PAGE

Meat Industry INSIGHTS Newsletter
Meat News Service, Box 553, Northport, NY 11768

E-mail: sflanagan@sprintmail.com