DENVER, CO – December 22, 2004

VICORP Restaurants, Inc. Announces Fiscal Fourth Quarter 2004 Results

DENVER, CO (December 22, 2004) – VICORP Restaurants, Inc., today announced financial results for its fiscal fourth quarter ended October 28, 2004. Net revenues for the fourth quarter of 2004 were $115.9 million, a 0.2% increase from net revenues of $115.7 million reported in the fourth quarter of 2003. Comparable restaurant sales for the fourth quarter of 2004 declined 0.6% versus the previous year’s fourth quarter. The net loss for the fourth quarter of 2004 was $0.7 million, which included a pre-tax charge of $3.2 million related to the settlement of litigation, versus a net loss of $0.4 million in the comparable period of 2003, which included $1.1 million of pre-tax expenses associated with the purchase of us by VI Acquisition Corp. Adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA” – as calculated in the accompanying Combined Consolidated Statements of Operations and discussed further below under the caption entitled “Factors Affecting Comparability and Non-GAAP Financial Information”) for the fourth quarter of 2004 was $12.2 million, a 25.8% increase from the $9.7 million Adjusted EBITDA for the fourth quarter of 2003.

Net revenues for the fiscal year ended October 28, 2004, were $399.7 million, an increase of 3.2% over the $387.2 million reported in the comparable period ended October 26, 2003. Comparable restaurant sales for fiscal 2004 increased 0.4% over the same period of 2003. Net income for the fiscal year ended October 28, 2004 was $0.7 million, which included the pre-tax litigation settlement charge of $3.2 million and pre-tax debt extinguishment costs totaling $6.9 million, versus a net loss in the comparable period in 2003 of $1.6 million, which included $17.2 million of pre-tax debt extinguishment and transaction expenses associated with the purchase of us by VI Acquisition Corp. Adjusted EBITDA for fiscal 2004 was $42.1 million, a 6.0% increase from Adjusted EBITDA of $39.7 million for the comparable period of 2003.

During the fourth quarter VICORP Restaurants, Inc. (“the Company”) established a reserve of $3.2 million in connection with its agreement in principle to settle two previously disclosed class action lawsuits. The proposed settlements represent the resolution of litigation proceedings that were initiated against the Company in October 2003 and May 2004 for claims arising out of the Company’s alleged violation of California law with regard to rest and meal periods, bonus calculations and employee classifications. The parties in both lawsuits are in the process of finalizing the settlement, which is subject to approval of the court.
Under the terms of the proposed settlements, the Company has agreed to pay up to an aggregate of $6.55 million for the alleged claims and associated legal fees. The Company’s parent has filed a lawsuit seeking indemnification for all of the damages related to such litigation under the purchase agreement dated June 14, 2003 pursuant to which the Company was acquired. While the Company believes that its claims are meritorious and that it will prevail, in the event the Company does not fully prevail on its indemnification claims, management estimates that the Company’s maximum exposure under the settlement agreements is the $3.2 million amount reserved.

All operating divisions (company-owned restaurants, franchise operations and VICOM) contributed to the increase in Adjusted EBITDA in the fourth quarter of 2004 versus the comparable quarter of 2003, with the company-owned restaurants contributing most significantly to the improvement. All company-owned restaurant divisions showed quarter-over-quarter improvement in both Adjusted EBITDA and Adjusted EBITDA margin, however, the Village Inn division was the predominant driver of the quarter’s increases. Company restaurant operating margins improved due to lower restaurant operating expenses and lower food cost, both as a percentage of restaurant sales. The improvement in percentage restaurant operating expenses was driven by decreased advertising spending as well as by lower utility costs throughout the quarter. In addition, restaurant-level commodity cost pressures moderated during the fourth quarter, leading to a 0.6% improvement in percentage food cost.

Debra Koenig, CEO, commented, “Our operating results were ahead of our expectations for the quarter. We are pleased with the strength of our Village Inn brand, which had positive comparable restaurant sales of 1.7% in the fourth quarter of 2004 versus the comparable quarter of 2003. The Bakers Square same store sales were disappointing, declining by 2.3%; however, the decline was an improvement sequentially over the third quarter comparable sales performance. We are pleased to report that the first phase of our broad-based Bakers Square brand re-positioning review has been completed. In fiscal 2005, we expect to refine the changes to the brand and to initiate selective market trials. During the quarter, we opened four new restaurants, bringing the total of new restaurants opened in fiscal 2004 to seven, and closed four under-performing locations whose leases had expired. Consistent with our stated long-term strategy, we plan to open 23 to 27 new restaurants throughout fiscal 2005, predominantly under the Village Inn brand and exclusively in our existing markets.”

Factors Affecting Comparability and Non-GAAP Financial Information

On June 13, 2003, Midway Investors Holdings, the previous parent company of VICORP, was purchased by VI Acquisition Corp., a newly created holding company. The application of purchase accounting rules required us to revalue our assets and liabilities at the acquisition date, which resulted in different accounting bases being applied in different periods. Because of this change of accounting bases, we do not show combined results for the year ended October 26, 2003 in our consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). However, we have included additional non-GAAP schedules that combine the information prepared on different bases to provide combined information for the year ended October 26, 2003. Such combined information is not necessarily comparable to the information presented for year ended October 28, 2004.

Our fiscal year, which historically ended on the last Sunday in October, is comprised of 52 or 53 weeks divided into four fiscal quarters of 12 or 13, 12, 12, and 16 weeks. Beginning January 22, 2004, we changed our fiscal year so that it ends on the Thursday nearest to October 31st of each year. This increased the first quarter in fiscal 2004 by an extra four days (88 days in the first quarter of fiscal 2004 versus 84 days in the first fiscal quarter of 2003). This change was made to facilitate restaurant operations by moving the end of our fiscal periods and weekly reporting and payroll periods away from weekends when our restaurants are busier.

We believe that, in addition to other financial measures, earnings before interest, taxes, depreciation and amortization, “EBITDA” and “Adjusted EBITDA” are appropriate indicators to assist in the evaluation of our operating performance because they provide additional information with respect to our ability to meet our future debt service, capital expenditures and working capital needs and are used by securities analysts and others in evaluating companies in our industry. However, “EBITDA” and “Adjusted EBITDA” are not prescribed terms under accounting principles generally accepted in the United States, do not directly correlate to cash provided by or used in operating activities and should not be considered in isolation, nor as an alternative to more meaningful measures of performance determined in accordance with accounting principles generally accepted in the United States. Because “EBITDA” and “Adjusted EBITDA” are not calculated in the same manner by all companies, they may not be comparable to other similarly titled measures of other companies. Refer to the accompanying Combined Consolidated Statements of Operations for a reconciliation of these non-GAAP financial performance measures to the GAAP measures and other information.

Conference Call Information

VICORP will conduct a conference call on Wednesday, December 22, 2004, at 1:00 p.m. Eastern Time. The conference call can be accessed by dialing 1-800-268-8047, Conference ID 6848845. A recording of the conference call will be available by dialing 1-800-839-6713 or 1-402-220-2306, Conference ID 6848845.

About VICORP Restaurants, Inc.

VICORP Restaurants, Inc. operates family-dining restaurants under two proven and well-recognized brands, Village Inn and Bakers Square. VICORP, founded in 1958, has 377 restaurants in 25 states, consisting of 274 company-operated restaurants and 103 franchised restaurants. Village Inn is known for serving fresh breakfast items throughout the day, and we have also successfully leveraged its strong breakfast heritage to offer traditional American fare for lunch and dinner. Bakers Square offers delicious food for breakfast, lunch and dinner complimented by its signature pies, including dozens of varieties of multi-layer specialty pies made from premium ingredients. Our headquarters are located at 400 West 48th Avenue, Denver, Colorado 80216.

Safe Harbor Statement

This announcement includes statements that are, or may be deemed to be, "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this announcement. See the "Risk Factors" section of our Registration Statement dated July 9, 2004, filed with the Securities and Exchange Commission, for a discussion of some of the factors that may affect the Company and its operations. Such factors include the following: competitive pressures within the restaurant industry; changes in consumer preferences; the level of success of our operating strategy and growth initiatives; the level of our indebtedness and the terms and availability of capital; fluctuations in commodity prices; changes in economic conditions; government regulation; litigation; and seasonality and weather conditions. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. Any forward-looking statements which we make in this announcement speak only as of the date of such statement, and we undertake no obligation to update such statements. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

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VICORP Restaurants, Inc., Village Inn and Bakers Square are either registered trademarks or trademarks of VICORP Restaurants, Inc., or its subsidiaries in the United States and/or other countries.

Contact: Anthony J. Carroll
Chief Financial Officer
VICORP Restaurants, Inc.
Direct: (303) 672-2266
Email: tony.carroll@vicorpinc.com

View the complete financial statement online.