Worldwide Restaurant Concepts (NYSE:SZ)
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Worldwide Restaurant Concepts, Inc. Announces Preliminary Third
Quarter Fiscal 2005 Results
HIGHLIGHTS:
SHERMAN OAKS, Calif., March 24 /PRNewswire-FirstCall/ -- Worldwide Restaurant
Concepts, Inc. (NYSE:SZ) today reported preliminary financial results for the
third quarter ended February 6, 2005.
The Company reported revenues of $110.3 million for the third quarter of fiscal
2005, an increase of 4.9 percent over the $105.2 million reported in the third
quarter of the prior year. Preliminary net income before any lease accounting
adjustment for the third quarter of fiscal 2005 was $3.9 million, or $0.14 per
diluted share, compared to a net loss of $0.7 million, or $0.04 per diluted
share, in the same period a year ago. Strengthening sales at Pat & Oscar's and
Sizzler USA, continued strong sales growth at Sizzler Australia and KFC,
insurance proceeds related to the food-borne illness event at Pat & Oscar's,
and gains on Sizzler USA sale-leaseback transactions, all contributed to the
overall earnings results. A 4.3 percent increase in the Australian dollar
exchange rate compared to last year contributed $3.0 million to 2005
third-quarter revenues and $0.2 million to net income. Total revenues at
Sizzler USA declined $4.2 million from last year's quarter due to having
fourteen fewer company operated restaurants, which is the result of the plan to
exit the New York market and focus on core California restaurant operations.
Sizzler USA revenue declines were partially offset by royalty revenues from an
additional eight franchise locations.
Revenue and Cost Trends
The Company's 4.9 percent increase in revenues in the third quarter reflected
an aggregate 4.4 percent increase in same store sales across all brands. Same
store sales growth of 6.8 percent at KFC and 7.1 percent at Sizzler Australia
(company-owned only), as well as an increase of 1.0 percent for Sizzler USA
company owned units and 11.0 percent for Pat & Oscar's, all contributed to the
overall growth.
Pat & Oscar's sales increased $2.5 million over the third quarter of last
fiscal year, and same store sales comparisons benefited from annualizing over
the food-borne illness incident that occurred in the last week of the second
quarter of fiscal 2004. Additionally, Pat & Oscar's had one more location open
during this period than in the same period last year. During the third quarter
of this year, the division benefited from approximately $1.5 million in
insurance proceeds related to the food-borne illness event of last year.
Sizzler system-wide same store sales were up 1.2 percent in the third quarter
of fiscal 2005 compared to the same period of last year. Additionally, margin
improvements and the net gains from the sale-leaseback transactions of
approximately $1.6 million, all contributed to the division's earnings
performance.
The Company's provision for income tax this quarter, which primarily relates to
income from our Australian operations, was 35.0 percent of consolidated pre-tax
income.
Minority interest expense for the third quarter of 2005 includes 19.1 percent
of the international division's net income attributed to the ownership by local
management.
Delayed Third Quarter 10-Q Filing and Lease Accounting Issue
On March 21, 2005, the Company announced that it would delay its third quarter
fiscal year 2005 earnings release and 10-Q filing due to its on-going lease
accounting review. The Company, with its independent auditors and in
consultation with its audit committee, continues to thoroughly assess its lease
accounting and amortization practices, in light of the recent restatements made
by many other restaurant and retail companies under various items of
authoritative accounting literature. The Company currently anticipates that it
will need to restate its prior year financial statements. Accordingly,
management and the Audit Committee determined that the Company's previously
issued consolidated financial statements, including for the years ending April
30, 2002, 2003, and 2004, and previously filed current year financial
statements, should no longer be relied upon. Further, the Company believes
that the year to date impact to current year net income will be no more than
$0.03 per diluted share.
Strategic Study and Operational Initiatives
The Company continues to successfully execute against its growth strategies, as
evidenced by the preliminary results this quarter. "I am pleased that we
continue to see improvement in our domestic divisions and strong performance in
our international group, and am optimistic about the on-going performance of
all our brands," said Chuck Boppell, Chief Executive Officer of Worldwide
Restaurant Concepts.
During the third quarter Pat & Oscar's exited its Downtown San Diego,
California location. The division is still expected to open two new
restaurants by the summer of 2005 and another three to five by the end of
fiscal 2006. All the new locations are expected to be in Southern California.
Also during the third quarter the Company announced the opening of the first
Sizzler in Beijing, China. The opening was in conjunction with the joint
venture agreement with the Minor Food Group Pcl, a subsidiary of Royal Garden
Resorts Pcl, to develop franchise opportunities for Sizzler restaurants in
China.
In addition to operational and growth initiatives, the Company continues to
focus on increasing shareholder value through other strategic options. In
September 2004, the Company announced the hiring of Houlihan Lokey Howard &
Zukin, an investment-banking firm, to review different strategies to optimize
shareholder value. The firm is continuing to work with all divisions in
assessing the opportunities available to them as well as with the Company as a
whole. The project is progressing on schedule.
As mentioned earlier in this release, and detailed on a Form 8-K in February
2005, the Company entered into a sale lease back transaction on seven domestic
Sizzler properties that allowed it to unlock a substantial amount of value. The
transaction generated approximately $16.1 million in proceeds, which allowed
the Company to retire approximately $6.9 million in debt. The rest of the
monies will be used for brand development and other corporate purposes.
Investor Conference Call
Worldwide Restaurant Concepts will be holding an investor conference call
Thursday, March 24th at 11:00 a.m. EST 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 309
Sizzler(R) restaurants worldwide, 112 KFC(R) restaurants located primarily in
Queensland, Australia, and 22 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; the opening of one or two new
Pat & Oscar's restaurants by the summer of 2005 and another three to five new
restaurants by April 30, 2006; on-going expansion in China; and the impact of
the Company's on-going lease accounting review.
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 impact of the
Company's on-going lease accounting review. (c) the ability to design marketing
and product initiatives resulting in same store sales growth; (d) the
availability of capital to upgrade the facilities at its domestic Sizzler(R)
locations and build new Pat & Oscar's restaurants; (e) Pat & Oscar's ability to
improve dine-in and catering sales through the implementation of marketing and
operational programs; (f) Pat & Oscar's ability to acquire a sufficient number
of suitable sites to open the proposed number of new locations; (g) the
Company's ability to identify new and existing franchisees or third parties to
purchase New York area restaurants; (h) economic conditions, both generally and
as they affect the restaurant industry in particular; and (i) 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
PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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
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 26,233 26,705
Depreciation and amortization 3,831 3,493
General and administrative expenses 9,546 8,678
Gain on sale-leaseback and legal
settlement (3,161) --
Total operating costs 102,327 103,379
Operating income 8,004 1,782
Interest expense 791 1,060
Investment income 251 162
Income before income taxes and
minority interest 7,464 884
Provision for income taxes 2,616 1,654
Minority interest expense (benefit) 900 (83)
Net income $3,948 $(687)
Basic earnings per share $0.14 $(0.03)
Diluted earnings per share $0.14 $(0.04)
WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES
PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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
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 65,452 64,517
Depreciation and amortization 9,446 8,617
General and administrative expenses 23,529 20,849
Gain on sale-leaseback and legal
settlement (3,161) --
Total operating costs 257,480 250,668
Operating income 14,219 8,655
Interest expense 2,154 2,311
Investment income 492 423
Income before income taxes and
minority interest 12,557 6,767
Provision for income taxes 5,276 3,704
Minority interest expense (benefit) 1,877 (121)
Net income $5,404 $3,184
Basic earnings per share $0.20 $0.12
Diluted earnings per share $0.19 $0.08
WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES
PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
February 6, April 30,
ASSETS 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 69,117 74,232
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 10,543 10,690
Goodwill, net 23,647 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 $159,578 $160,737
WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES
PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except par value)
February 6, April 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 2005 2004
Current Liabilities:
Current portion of long-term debt $6,847 $7,125
Accounts payable 13,594 12,396
Other current liabilities 22,191 21,255
Income taxes payable 5,919 6,135
Total current liabilities 48,551 46,911
Long-term debt, net of current portion 7,462 29,217
Deferred gains and revenues 15,577 8,738
Pension liability 13,566 14,031
Total liabilities 85,156 98,897
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 260,505 280,442
Accumulated deficit (195,829) (201,233)
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 47,755 61,826
Total liabilities and stockholders'
equity $159,578 $160,737
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 Laurie Berman, General Information, +1-310-854-8315, or
Tricia Ross, Investor/Analyst, +1-617-520-7064, both of Financial Relations
Board, for Worldwide Restaurant Concepts, Inc.
Web site: http://www.fulldisclosure.com/
Web site: http://www.wrconcepts.com/