FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (TMF Debit)

Rainforest Cafe
(Nasdaq: RAIN)
607 Washington Ave. South, Ste. 204
Minneapolis, MN 55415
612-945-5400

August 5, 1997 /FOOLWIRE/ -- Rainforest Cafe reported their second quarter earnings today for the thirteen weeks ended June 29, 1997. Revenues rose 234% to $23.6 million from $7.1 million in the first fiscal quarter of 1996. Net income more than tripled to $2,955,000 from $833,000. On a per share basis the company earned $0.17 a share vs. $0.06 the year before.

STRONG SALES AT DISNEY. The company's largest unit, which opened last summer at Walt Disney World, reported sales of $9 million over those thirteen weeks. Revenues at the volcano-enclosed eatery have improved every quarter and CFO Mark Robinow sees an improving trend for the unit to surpass the $32.9 million the location rung up in its inaugural year.

ERRATIC RESULTS AT OLDER UNITS. While the original Mall of America location continues to improve their sales, up 4% for the quarter, the same cannot be said for the two Chicago units. Woodfield same store sales are down 11%. Gurnee opened last June but the comps for those weeks were off by 18%. The company explained that this is a natural occurence at theme restaurants where there is usually a drop-off after the initial "honeymoon" period. In July Gurnee had improved to just a 12% decline.

The company noted that despite the soft Chicago comps even those units are still exhibiting strong profitability and attractive unit economics.

MARGINS ARE IMPROVING. The units reported healthy 21% operating margins before pre-opening expenses due to improvements in many expense categories. Food and beverage costs were lower for three reasons: poultry prices were locked-in at a low rate, South Coast Plaza opened with much lower food costs than expected and the Disney unit had strong high-margin catering business for the quarter.

Retail margins were also strong as international sourcing helped reduce the cost of those sales.

The company expected margins to stay at 21%, possibly dipping to 20% in the fourth quarter as the company absorbs 5-6 openings that period, then resuming its 21% course by the first quarter in 1998.

SEARCH FOR PRESIDENT AND COO CONTINUES. Since Martin O'Dowd's departure three months ago the company has been looking for a successor. The company's only comment was that they were still in the hiring process and interviewing qualified applicants.

DEVELOPMENT SCHEDULE ON TRACK. "We are often at risk to the developers schedule," interim President Ken Brimmer noted when discussing the future unit at Palisades Center. Mall developer woes had threatened to slow down construction but those have since been resolved and yesterday the company got the green light to begin building and they expect a December 1st opening.

Along with the Palisades site there are seven domestic locations slated to open before the end of the year. The Source, at Long Island, New York, will open a month from today. By the end of the current quarter the third Chicagoland location, this one in the heavily travelled Downtown district, should be ready to open. Grapevine Mills in Texas, Arizona Mills near Tempe, Aventura Mall in Miami and MGM Grand in Las Vegas should all have fourth quarter openings completed by early December.

The company is projecting eight 1998 openings stateside and announced two new locations. Garden State Plaza in New Jersey and Ontario Mills in California joined Denver's Cherry Creek, Detroit's Great Lakes Crossing and the icon unit at the entrance of Disney's Animal Kingdom to fill out five of those eight slots.

The Animal Kingdom unit will have a soft opening a month before the actual park debut. As Disney's fourth gated attraction the company is excited to be the only sit-down restaurant in what will be Disney's largest park, in terms of acreage.

In continuation of their strong relationship with Disney they already have established the "framework" for a unit at Anaheim's Disneyland in 1999 or 2000.

NEW INTERNATIONAL DEVELOPMENTS. The first licensed Rainforest Cafe opened in London on June 24. While sales were flat the first three weeks the last two weeks have been "up nicely". Next week a small 200-seat unit will open in Cancun, Mexico. Another ECE-franchised Rainforest Cafe will open in the fourth quarter in Mexico City at the Grupo Santa Fe Mall. Canada and Hong Kong will chime in with their first units next year.

A new deal was announced with Far East Holdings that would develop a minimum of five units in Asia over the next ten years. The first one may open next year in the company's home country of Singapore.

Q&A. Asked about the rise in General & Administrative Expenses the company noted that they have already hired all seven of the Directors of Operations for the remaining 1997 units, as well as the head of the Animal Kingdom restaurant, and those are expensed at the G&A level until their respective units open.

While the G&A costs also rose as part of building corporate infrastructure the company hopes to have those down to a 5.5% run-rate of total revenues by the end of the year and eventually sub-5%.

In an effort to drum up sales at the slow Chicago units they have hired someone to look into exploiting the corporate catering business that has proven so lucrative at Disney World. A recent buyout at the Disney RAIN, where 3000 travel agents rented out the restaurant for a private party, produced a tab north of $100,000 for the night.

When asked by a Foolish attendee about unannounced sites at 4 Times Square and Concord Mills in North Carolina the company said that a lease for a unit at the 48 story building being erected at 4 Times Square has not been finalized and the company is pursuing two other locations in the area in the meantime. They did note they did sign a letter of intent for a location at Concord Mills, a new mall projected to open in the third quarter of 1997.

The balance sheet remains strong, with $143 million, or $8 a share in cash, and no debt. Net capital expenditures are estimated at $45-$50 million next year, as was the case this year, so capital should not be a problem going forward.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.

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