Worldwide Restaurant Concepts (NYSE:SZ)
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Worldwide Restaurant Concepts, Inc. Announces First Quarter
Fiscal 2005 Results
HIGHLIGHTS:
SHERMAN OAKS, Calif., Sept. 2 /PRNewswire-FirstCall/ -- Worldwide Restaurant
Concepts, Inc. (NYSE:SZ) today reported financial results for the first quarter
ended July 25, 2004.
The Company reported revenues of $82.0 million for the first quarter of fiscal
2005, an increase of 5.3 percent over the $77.8 million reported in the first
quarter of the prior year. Net income for the first quarter of fiscal 2005 was
$0.6 million, or $0.02 per diluted share, compared to net income of $3.6
million, or $0.12 per diluted share, in the same period a year ago. Continued
weak sales results at Pat & Oscar's, stemming from the fiscal 2004 second
quarter food borne illness incident, was partially offset by positive domestic
Sizzler system sales and strong same store sales growth at Sizzler Australia
and KFC. The strengthening of the Australian dollar compared to last year
contributed $3.4 million to 2005 first quarter revenues and $0.1 million to net
income.
Revenue and Cost Trends
The Company's 5.3 percent increase in revenues in the first quarter reflected
an aggregate 2.5 percent increase in same store sales across all company-owned
restaurants. Same store sales growth of 7.7 percent at KFC and 8.0 percent at
Sizzler Australia (company-owned only) were offset by declines of 2.2 percent
for Sizzler USA company owned units and 12.1 percent for Pat & Oscar's.
Pat & Oscar's sales trends improved over those in the fourth quarter of fiscal
2004, however, they continue to be disappointing. The ongoing effect of the
negative publicity stemming from the food-borne illness incident in the second
quarter of fiscal 2004 has continued to have an adverse impact on dine-in and
catering sales. To reverse these trends, the Company plans to continue their
television advertising campaign in the San Diego, California market, implement
a catering sales force, continue to pursue non-traditional channels of
distribution, and enhance and expand lunch value menu offerings with
initiatives including soups and sandwiches, to further appeal to the
value-oriented guest. The Company believes Pat & Oscar's sales trends will
continue to improve and are expected to turn positive by the third quarter of
this fiscal year. Also during the quarter, Pat & Oscar's profitability was
impacted by increasing commodities costs and the creeping labor expenses that
are due, in part, to the shortfall in sales. To offset cost increases, the
Company has taken a price increase on selected items and installed menu boards
designed to increase check averages via menu mix. "We are disappointed with
the slow recovery at Pat & Oscar's, but we believe we have the right programs
in place to reverse the trend," said Charles Boppell, CEO of Worldwide
Restaurant Concepts. "We need to build new guest trial, and although we've
laid the groundwork, the process can, and has been slow. We remain optimistic
that Pat & Oscar's will continue to improve throughout this year."
Sizzler system-wide sales trends were positive for the first quarter of fiscal
2005, but profitability was hurt by poor results in the New York market, and
increasing labor and labor related costs. The Company has refocused on labor
initiatives and continues its strategy of transitioning the New York market to
franchisees or third party ownership.
In the first quarter of this fiscal year, general and administrative expenses
increased by $1.6 million compared to the same period a year ago. In the prior
year, general and administrative expenses were reduced by a $1.0 million
foreign exchange gain from the repatriation of proceeds from an inter-company
loan. No material foreign exchange gain was recognized in the current quarter.
Additionally, in the prior year, reimbursements for certain legal fees also
reduced general and administrative expenses.
Due to a pre-tax net loss from domestic operations this quarter, the Company's
provision for income tax that primarily relates to the Australian operations
was approximately 53 percent of the consolidated pre-tax income.
In the first quarter of fiscal 2005, the Australian management group exercised
options for approximately 19 percent of the Australian operating company. The
Company's first quarter's net income reflects the impact of the income
attributable to minority interest of $0.4 million associated with the exercise
of these options.
Continued Focus On Strategic Initiatives
The Company remains committed to its growth strategies at each division,
including the recovery of sales from the food borne illness incident and then
development and expansion of the Pat & Oscar's chain, the ongoing repositioning
of the Sizzler brand, and the continued strengthening of its KFC operations.
In order to continue to move the brand forward, we are evaluating our remodel
and training programs at both our Company and franchised Sizzler restaurants
and remain optimistic about those results. The Company continues to review its
portfolio of locations and to pursue a plan to strategically transition stores
from Company to franchisee or third party ownership. The transitioning of the
New York market has been and continues to be hampered by restrictive existing
lease terms, however the Company did franchise two of its remaining locations
in the first quarter of this fiscal year, and anticipates transitioning most of
the remaining units to third parties or franchisees by the end of this fiscal
year.
In the first quarter, Pat & Oscar's opened their first location in Ventura
County in Thousand Oaks, California, which brings the total number of Pat &
Oscar's restaurants to 23. This location is the farthest north of the
restaurants, and was chosen using a more refined site selection process and is
currently generating solid sales. The Company expects to open four to six
additional locations over the next 12 to 15 months.
Investor Conference Call
Worldwide Restaurant Concepts will be holding an investor conference call today
at 11:00 a.m. EDT to discuss the Company's financial and operational results.
Investors will have the opportunity to listen to the conference call over the
Internet at http://www.wrconcepts.com/ or http://www.fulldisclosure.com/. To
listen to the live call, please go to either web site at least fifteen minutes
early to register, download, and install any necessary audio software. For
those who cannot listen to the live broadcast, a replay, also at
http://www.wrconcepts.com/ and http://www.fulldisclosure.com/, will be
available shortly after the call ends.
About Worldwide Restaurant Concepts
Worldwide Restaurant Concepts, Inc. operates, franchises or joint ventures 312
Sizzler(R) restaurants worldwide, 112 KFC(R) restaurants located primarily in
Queensland, Australia, and 23 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: improving revenues and earnings; that Pat
& Oscar's sales trends will continue to improve and are expected to turn
positive in the third quarter of this fiscal year; commencement of construction
on additional remodels at Sizzler USA; the opening of four to six new Pat &
Oscar's restaurants over the next 12 to 15 months; and the transitioning of
Company-owned Sizzler locations in New York and other areas to franchisees or
third parties.
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 Company's ability to implement
its strategic plan and manage its costs and expenses; (b) the ability to design
marketing and product initiatives resulting in same store sales growth; (c) the
availability of capital to upgrade the facilities at its domestic Sizzler(R)
locations and build new Pat & Oscar's restaurants; (d) Pat & Oscar's ability to
improve dine-in and catering sales through continuation of television
advertising and implementation of other marketing and operational programs; (e)
Pat & Oscar's ability to acquire a sufficient number of suitable sites to
increase restaurant count by four to six units over the next 12 to 15 months;
(e) the Company's ability to identify new and existing franchisees or third
parties to purchase New York area restaurants; (f) economic conditions, both
generally and as they affect the restaurant industry in particular; and (g)
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.
For further information, please contact: Keith Wall, Vice President and CFO,
+1-818-662-9800, or Liz Baskerville, Director, Planning, +1-818-662-9800, both
of Worldwide Restaurant Concepts, Inc.; or Laurie Berman, General Information,
+1-310-407-6547, or Tricia Ross, Investor/Analyst, +1-310-407-6540, both of
Financial Relations Board, for Worldwide Restaurant Concepts, Inc.
WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE TWELVE WEEKS ENDED JULY 25, 2004 AND JULY 20, 2003
(Unaudited)
(In thousands, except per share data)
July 25, July 20,
2004 2003
Revenues
Restaurant sales $79,874 $75,767
Franchise revenues 2,078 2,053
Total revenues 81,952 77,820
Costs and Expenses
Cost of sales 27,618 25,555
Labor and related expenses 21,596 20,498
Other operating expenses 20,091 18,665
Depreciation and amortization 2,792 2,625
General and administrative expenses 7,077 5,408
Total operating costs 79,174 72,751
Operating income 2,778 5,069
Interest expense 696 552
Investment income 124 108
Income before income taxes
and minority interest 2,206 4,625
Provision for income taxes 1,169 1,070
Minority interest 442 2
Net income $595 $3,553
Basic earnings per share $ 0.02 $ 0.13
Diluted earnings per share $ 0.02 $ 0.12
Weighted average common shares outstanding:
Basic 27,485 27,312
Diluted 28,532 28,240
WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
July 25, April 30,
ASSETS 2004 2004
Current Assets:
Cash and cash equivalents $22,804 $24,755
Restricted cash 6,499 5,131
Receivables, net of an allowance of $676 at
July 25, 2004 and $641 at April 30, 2004 1,957 2,042
Inventories 4,541 4,807
Deferred income taxes 3,169 3,169
Prepaid expenses and other current assets 2,653 2,718
Assets related to restaurants held for sale 5,532 5,417
Total current assets 47,155 48,039
Property and equipment, net 74,168 74,232
Long-term notes receivable (including $191
of related party receivables at
July 25, 2004 and $200 at April 30, 2004) 899 912
Deferred income taxes 10,513 10,690
Goodwill, net 23,647 23,647
Intangible assets, net of accumulated
amortization of $1,101 at July 25, 2004
and $1,068 at April 30, 2004 2,062 2,090
Other assets 990 1,127
Total assets $159,434 $160,737
WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except par value)
July 25, April 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 2004 2004
Current Liabilities:
Current portion of long-term debt $7,020 $ 7,125
Accounts payable 13,781 12,396
Other current liabilities 20,394 23,334
Income taxes payable 3,302 4,056
Total current liabilities 44,497 46,911
Long-term debt, net of current portion 24,576 29,217
Deferred gains and revenues 8,661 8,738
Pension liability 13,891 14,031
Total liabilities 91,625 98,897
Minority interest 18,347 14
Stockholders' Equity:
Capital stock -
Preferred, authorized 1,000 shares,
$5 par value; no shares issued or outstanding -- --
Common, authorized 50,000 shares,
$0.01 par value; issued and outstanding
29,501 and 27,501 shares and
29,438 and 27,438 shares at July 25, 2004
and April 30, 2004, respectively 295 294
Additional paid-in capital 267,340 280,442
Accumulated deficit (200,638) (201,233)
Treasury stock, 2,000 shares at July 25, 2004
and at April 30, 2004, at cost (4,135) (4,135)
Accumulated other comprehensive loss (13,400) (13,542)
Total stockholders' equity 49,462 61,826
Total liabilities and stockholders' equity $159,434 $160,737
DATASOURCE: Worldwide Restaurant Concepts, Inc.
CONTACT: Keith Wall, Vice President and CFO, +1-818-662-9800, or Liz
Baskerville, Director, Planning, +1-818-662-9800, both of Worldwide Restaurant
Concepts, Inc.; or Laurie Berman, General Information, +1-310-407-6547, or
Tricia Ross, Investor/Analyst, +1-310-407-6540, both of Financial Relations
Board, for Worldwide Restaurant Concepts, Inc.
Web site: http://www.fulldisclosure.com/
Web site: http://www.wrconcepts.com/