Worldwide Restaurant Concepts (NYSE:SZ)
Historical Stock Chart
From Jul 2019 to Jul 2024
Worldwide Restaurant Concepts, Inc. Announces Certain Accounting
Adjustments, Including the Write-Down of Pat & Oscar's Goodwill, in Connection
With the Definitive Merger Agreement and Finalized Restatement Due to Change in
Accounting Treatment for Leases
Pacific Equity Partners Reaffirms Merger Transaction
SHERMAN OAKS, Calif., June 10 /PRNewswire-FirstCall/ -- Worldwide Restaurant
Concepts, Inc. (NYSE:SZ) today announced its decision to write-down the value
of Pat & Oscar's goodwill related to certain under-performing Pat & Oscar's
assets. The write-down will not impact the pending transaction between Pacific
Equity Partners and Worldwide Restaurant Concepts. In addition, the Company
announced the completion of its restatement of its previously filed
consolidated financial statements for the first two quarters of fiscal year
2005 to correct the financial reporting resulting from its prior lease-related
accounting practices. Similar corrections have been made to the Company's
third quarter fiscal 2005 consolidated financial statements included in the
Company's previously issued press release dated March 24, 2005.
Pat & Oscar's Write-Down
In conjunction with the Pacific Equity Partner's merger agreement, and review
of the agreed upon purchase price which included the Pat & Oscar's division,
the Company determined that certain triggering events occurred under SFAS 142.
Accordingly, Pat & Oscar's goodwill has been written down to $0 resulting in a
charge of approximately $21.9 million. Additionally, in connection with the
goodwill write down, the pending merger transaction, and continued
under-performance of certain Pat & Oscar's locations opened during fiscal 2003,
the Company wrote down the assets for those locations by approximately $2.8
million under SFAS 144. The write-downs are non-cash adjustments and will not
impact the pending transaction between Worldwide Restaurant Concepts and
Pacific Equity Partners, which was announced in a press release dated April 28,
2005.
"We are aware of and fully support adjusting the value of Pat & Oscar's
goodwill and fixed assets. This adjustment will have no impact on the price,
financing or completion of the proposed merger," stated Rob Koczkar, Managing
Director of Pacific Equity Partners. Chuck Boppell, CEO of Worldwide
Restaurant Concepts echoed Mr. Koczkar's comments, adding, "The merger is
beneficial to our shareholders and we fully expect it to proceed on schedule
once all necessary conditions and consents have been satisfied."
Tax Provision and Valuation Allowance Adjustment
Due to the slower than anticipated recovery from a fiscal 2004 E.coli event at
Pat & Oscar's, as well as the on-going review associated with the pending
merger transaction, the Company determined it was necessary to increase the
valuation allowance established against its deferred income tax assets,
resulting in an increase in the income tax provision of approximately $2.0
million. The valuation allowance has been calculated pursuant to SFAS 109,
which requires an assessment of both positive and negative evidence when
measuring the need for a valuation allowance. Such evidence includes the
Company's past and projected future performance, the market environment in
which the Company operates and the expected timing and nature of the reversals
of its recorded deferred income tax assets.
Lease Accounting
On March 23, 2005, following the Company's review of its lease-related
accounting practices and management's discussions with its Audit Committee, the
Company determined that it was appropriate to restate its consolidated
financial statements as of April 30, 2004 and 2003 and for each of the three
years in the period ended April 30, 2004.
The cumulative effect of the lease accounting adjustments through the third
quarter of fiscal 2005 will be to increase accumulated deficit by approximately
$3.5 million, reflecting increased net property and equipment, deferred income
taxes, obligations under capital leases and deferred rent liability and
decreased additional paid-in-capital. The impact on the third quarter of
fiscal 2005 is to increase net income by approximately $95,000, or less than
$0.01 per diluted share. The impact on year-to-date net income through the
third quarter of fiscal 2005 is to decrease net income by $16,000, or $0.00 per
diluted share. Future cash flows will not be affected.
These non-cash adjustments will not have any impact on the Company's previously
reported total cash flows, sales, comparable sales or compliance with any
financial covenant under its credit facility or other debt instruments.
The Company has amended the appropriate filings with the Securities and
Exchange Commission to include the restated financial statements. As a result
of the restatement, the financial statements contained in the Company's prior
filings with the SEC reporting its consolidated financial results as of April
30, 2004 and 2003 and for each of the three years in the period ended April 30,
2004, and for the first two quarters of fiscal year 2005, as well as the
consolidated financial statements for the third quarter of fiscal 2005 included
in the Company's previously issued press release dated March 24, 2005, should
no longer be relied upon.
About Worldwide Restaurant Concepts
Worldwide Restaurant Concepts, Inc. operates, franchises or joint ventures 310
Sizzler(R) restaurants worldwide, 112 KFC(R) restaurants located primarily in
Queensland, Australia, and 21 Pat & Oscar's(R) restaurants. Additional
information about the Company can be found at http://www.wrconcepts.com/.
Certain statements contained in this document may contain forward-looking
statements that are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These statements may include but are
not limited to statements regarding: the estimated impact of the change in
lease accounting.
Worldwide Restaurant Concepts cautions that these statements are qualified by
important factors that could cause actual results to differ materially from
those reflected in the forward looking statements contained herein. Such
factors include, but are not limited to: (a) the impact of the Company's change
in lease accounting practices and (b) other risks as detailed from time to time
in the Company's SEC reports, including Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and Annual Reports on Form 10-K.
AT THE COMPANY:
Keith Wall Liz Baskerville
Vice President and CFO Director, Planning
(818) 662-9800 (818) 662-9800
AT Financial Relations Board:
Laurie Berman Tricia Ross
General Information Investor/Analyst Contact
(310) 854-8315 (617) 520-7064
WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIXTEEN WEEKS ENDED FEBRUARY 6, 2005 AND FEBRUARY 1, 2004
(Unaudited)
(In thousands, except per share data)
February 6, February 1,
2005 2004
(as restated)
Revenues
Restaurant sales $107,518 $102,591
Franchise revenues 2,813 2,570
Total revenues 110,331 105,161
Costs and Expenses
Cost of sales 37,146 36,083
Labor and related expenses 28,732 28,420
Other operating expenses 26,128 26,779
Depreciation and amortization 3,843 3,533
General and administrative expenses 9,546 8,678
Gains on sale-leaseback and
legal settlement (3,161) --
Asset impairment 2,771 --
Goodwill impairment 21,924 --
Total operating costs 126,929 103,493
Operating income (loss) (16,598) 1,668
Interest expense 830 1,076
Investment income 251 162
Income (loss) before income taxes
and minority interest (17,177) 754
Provision for income taxes 4,583 1,646
Minority interest expense (benefit) 888 (80)
Net loss $(22,648) $(812)
Basic loss per share $(0.82) $(0.03)
Diluted loss per share $(0.82) $(0.05)
Weighted average common shares outstanding:
Basic 27,648 27,395
Diluted 27,648 27,395
WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FORTY WEEKS ENDED FEBRUARY 6, 2005 AND FEBRUARY 1, 2004
(Unaudited)
(In thousands, except per share data)
February 6, February 1,
2005 2004
(as restated)
Revenues
Restaurant sales $264,511 $252,662
Franchise revenues 7,188 6,661
Total revenues 271,699 259,323
Costs and Expenses
Cost of sales 90,864 87,162
Labor and related expenses 71,350 69,523
Other operating expenses 65,060 64,228
Depreciation and amortization 9,511 8,967
General and administrative expenses 23,529 20,849
Gains on sale-leaseback and
legal settlement (3,161) --
Asset impairment 3,067 177
Goodwill impairment 21,924 --
Total operating costs 282,144 250,906
Operating income (loss) (10,445) 8,417
Interest expense 2,269 2,357
Investment income 492 423
Income (loss) before income taxes
and minority interest (12,222) 6,483
Provision for income taxes 7,224 3,688
Minority interest expense (benefit) 1,857 (109)
Net income (loss) $(21,303) $2,904
Basic earnings (loss) per share $(0.77) $0.11
Diluted earnings (loss) per share $(0.77) $0.07
Weighted average common shares outstanding:
Basic 27,580 27,355
Diluted 27,580 28,367
WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
ASSETS February 6, April 30,
2005 2004
Current Assets:
Cash and cash equivalents $28,182 $24,755
Restricted cash 6,072 5,131
Receivables, net of an
allowance of $465 at
February 6, 2005 and $641
at April 30, 2004 2,834 2,042
Inventories 5,928 4,807
Deferred income taxes 3,169 3,169
Prepaid expenses and other
current assets 2,547 2,718
Assets related to restaurants
held for sale 2,838 5,417
Total current assets 51,570 48,039
Property and equipment, net 67,818 75,471
Long-term notes receivable, net
(including $200 related party
receivables at February 6, 2005
and $200 at April 30, 2004) 1,698 912
Deferred income taxes 8,662 10,757
Goodwill 1,723 23,647
Intangible assets, net of
accumulated amortization of
$1,269 at February 6, 2005
and $1,068 at April 30, 2004 2,037 2,090
Other assets 966 1,127
Total assets $134,474 $162,043
WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except par value)
LIABILITIES AND STOCKHOLDERS' EQUITY February 6, April 30,
2005 2004
Current Liabilities:
Current portion of long-term debt $6,932 $7,156
Accounts payable 13,594 12,396
Other current liabilities 24,431 23,334
Income taxes payable 3,679 4,056
Total current liabilities 48,636 46,942
Long-term debt, net of
current portion 9,286 30,809
Deferred gains, rent and
landlord incentives 18,764 11,894
Pension liability 13,566 14,031
Total liabilities 90,252 103,676
Minority interest 26,667 14
Stockholders' Equity:
Capital stock
Preferred, authorized 1,000 shares,
$5 par value; no shares issued
and outstanding -- --
Common, authorized 50,000 shares,
$0.01 par value; issued and
outstanding 29,661 and 27,661
shares and 29,438 and 27,438
shares at February 6, 2005 and
April 30, 2004, respectively 297 294
Additional paid-in capital 260,485 280,442
Accumulated deficit (226,009) (204,706)
Treasury stock, 2,000 shares at
February 6, 2005 and at
April 30, 2004, at cost (4,135) (4,135)
Accumulated other comprehensive loss (13,083) (13,542)
Total stockholders' equity 17,555 58,353
Total liabilities and
stockholders' equity $134,474 $162,043
DATASOURCE: Worldwide Restaurant Concepts, Inc.
CONTACT: Keith Wall, Vice President and CFO, or Liz Baskerville,
Director, Planning, both of Worldwide Restaurant Concepts, Inc.,
+1-818-662-9800; or General Information, Laurie Berman, +1-310-854-8315, or
Investor/Analyst Contact, Tricia Ross, +1-617-520-7064, both of Financial
Relations Board, for Worldwide Restaurant Concepts, Inc.
Web site: http://www.wrconcepts.com/