After more than three years of losses, Checkers Drive-In Restaurants Inc. has finally eked out a gain.
For the first quarter ended March 23, the Clearwater fast-food chain reported net income of $394,000, compared with a net loss of $5.2-million a year ago.
It was Checkers' first profitable quarter since August 1994, when uncontrolled growth and price wars with the big burger chains caused what was once a high-flying company to falter and nearly expire.
"This is the start of something good," said Jay Gillespie, a former Applebee's executive who took over as Checkers' chief executive in November. "We'd certainly like to have a few more quarters of this kind of movement."
Checkers' stock, which was trading at less than 82 cents in mid-February, moved up 15| cents on Tuesday, closing at $1.15|.
The chain's revenues for the first quarter were $37-million, compared with $34.2-million a year ago. Earnings per diluted share were 1 cent, compared with a loss of 9 cents a share a year ago.
A big part of Checkers' turnaround is being attributed to an increase of nearly 9 percent in sales at stores open at least a year. Established Checkers' units saw sales drop about 9 percent a year ago. The chain has 479 restaurants and plans to open 30 to 40 new units this year. Checkers also has franchisees in Puerto Rico and Israel's West Bank.
The chain has benefited from alliances with CKE Restaurants Inc. and Rally's Hamburgers Inc.
California-based CKE, which operates a half-dozen restaurant chains including Carl's Jr., rescued Checkers by buying its debt in late 1996. Since then, CKE has taken over Checkers' board and installed new management.
In September, Rally's, a competing double drive-through chain based in Louisville, Ky., bought about 24 percent of Checkers' stock after a failed merger attempt between the two chains. Checkers said it saved nearly $400,000 in the first quarter in management expenses as a result of the Rally's relationship.
The purchasing power of Checkers' affiliation with Rally's and CKE also became evident in the first quarter, with costs of food, paper and labor dropping 6.3 percent to 62.9 percent of sales. In 1996, those categories were about 72 percent of sales.
"We just ran into one buying opportunity with CKE that will save us $400,000 on chickens," Gillespie said. "When you have a system of 5,000 hamburger stands, you have some leverage."