Saturday, August 11, 2007
Aug. 11, 2007 (McClatchy-Tribune Regional News delivered by Newstex) --
Landry's Restaurants on Friday posted a $21.8 million loss for 2006 in a report it had delayed for months while it conducted an internal investigation into past stock-option practices.
The delay allowed bondholders to call in $400 million in notes, led to a new round of potentially expensive financing for the company and set the stage for a battle in federal court with the bondholders Thursday.
The loss was largely the result of a write-off connected with the sale of 120 Joe's Crab Shack restaurants last year, the company said in the annual report. Landry's took an after-tax loss of $29.8 million in connection with the sale.
The options probe turned up no intentional wrongdoing on the part of management, the company has said. But revised measurement dates for the options led to a noncash after-tax charge of $10.9 million for the years 1993 to 2005, according to the annual report.
The charge will be reflected as adjustments in its past financial reports, including a non-cash after-tax charge of $1.8 million in the fourth quarter of 2006, Landry's finance chief Rick Liem said.
The company had originally said it would have to take an $8.6 million noncash charge related to the options matter.
The $21.8 million loss amounted to 99 cents a diluted share on revenue of $1.1 billion. That's compared with a net income of $44.8 million, or $1.95 a diluted share, on revenue of $897.5 million during 2005.
Company officials said first- and second-quarter reports for 2007 will be released next week.
Shares decline
Landry's shares closed at $28.03 Friday, down 51 cents.
Friday's report also disclosed CEO Tilman Fertitta's compensation for the year. He made $15.3 million, including $1.5 million salary, $1.6 million bonus, stock awards and $883,400 in other compensation.
Fertitta's other compensation included $283,680 in life insurance premiums, $246,912 in security, as well as $31,920 in use of the company aircraft.
On Thursday, Landry's said it had obtained backup financing that it could use if it loses its court hearing in federal district court in Galveston on Thursday.
Landry's won a temporary restraining order last week against the bondholders, putting the call on the notes on hold. Landry's wants to make the order permanent.
Early repayment will mean higher borrowing costs, but Landry's has not disclosed the terms of the new financing.
But Standard & Poor's (NYSE:MHP) LCD said in a report Thursday that Landry's had restructured it debt and obtained $590 million in financing that includes a $515 million term loan and a $75 million line of credit.
Standard & Poor's LCD reported an interest rate of about 10.5 percent for the arrangement.
That would amount to about $11 million in annual after-tax interest expense, said Mark Churchill, an analyst with Piper Jaffray (NYSE:PJC) & Co.
Landry's officials confirmed the interest rate would be 'in that range' but said that it has not been finalized.
Mum on financing fees
Landry's officials declined to disclose the amount of fees it will pay for the new financing. They also declined to say if the related interest expense and fees will total more than the fee the company could have paid bondholders to reinstate the bond notes.
Fertitta said few financing deals are being done these days.
'Landry's is able to do it because of our asset base, even though we're having to pay a higher rate,' he said.
purva.patel@chron.com Newstex ID: KRTB-0089-18829120
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