CYPRESS Calif. Real Mex Restaurants Inc., operator or franchisor of the El Torito, Chevys Fresh Mex and Acapulco Mexican Restaurant y Cantina brands, swung to a second quarter net loss from a year-ago profit on a $34 million asset impairment charge.
The vast majority of the company’s restaurants -- 156 locations within the 189-unit system -- are located in California, a state hard hit by housing troubles that have kept consumers from spending on restaurant meals. The company took the impairment charge, which reduces the fair value of its assets, because of the “continued impact of the downturn in the economy on current operations and growth projections,” it said in a report filed with securities regulators.
Real Mex is not a publicly traded restaurant stock, but because it holds publicly traded debt, it must file financial statements with the Securities and Exchange Commission. The company was purchased by a subsidiary of private-equity firm Sun Capital Partners in August 2006.
For the quarter ended June 29, Real Mex booked a net loss of $31.8 million, compared with a year-ago profit of $3.0 million. In addition to its impairment charges, Real Mex posted higher year-to-year costs of sales and labor expenses.
Revenues for the latest quarter rose 2.0 percent to $152.5 million. Same-store sales increased 1.4 percent, the company said.
Real Mex said it expects to open five restaurants this year, including its newest brand, Sinigual, which debuted earlier this year in Florida. Sinigual is the new name for El Torito Grills that will be opened outside Southern California, the company said. Real Mex also noted it had changed the name of the El Torito Grill in Beverly Hills, Calif., to the new Sinigual.
While Real Mex is compliant on all lending arrangements as of the quarter’s end, according to its report, the company holds $173.7 million in debt and said its ability to make payments will depend on increased cash flow or additional financing.