Exhibit 99.1
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| | | FOR FURTHER INFORMATION |
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| N E W S B U L L E T I N | | RE: |
| FROM: | |  |
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| | 15301 Ventura Blvd., Bldg B, Suite 300 Sherman Oaks, CA 91403 (818) 662-9800 NYSE: SZ |
| | | | | | |
| AT THE COMPANY: | | | | AT FINANCIAL RELATIONS BOARD: |
| Keith Wall | | Liz Baskerville | | Laurie Berman | | Tricia Ross |
| Vice President and CFO | | Director, Planning | | General Information | | Investor/Analyst Contact |
| (818) 662-9800 | | (818) 662-9800 | | (310) 854-8315 | | (617) 520-7064 |
FOR IMMEDIATE RELEASE
March 24, 2005
WORLDWIDE RESTAURANT CONCEPTS, INC. ANNOUNCES PRELIMINARY THIRD
QUARTER FISCAL 2005 RESULTS
HIGHLIGHTS:
| | • | | Delayed third quarter 10-Q filing due to on-going lease accounting review. Anticipated restatement of prior year financials, with current year-to-date impact to net income not expected to exceed $0.03 per diluted share. |
| | • | | Revenue growth of 4.9 percent over prior year, or $5.2 million for the third quarter. |
| | • | | Third quarter same store sales growth, calculated in local currencies, was 6.8 percent at KFC, 6.5 percent at Sizzler Australia (company and franchise units), 1.2 percent at Sizzler USA (company and franchise units), and 11.0 percent at Pat & Oscar’s. |
| | • | | Net income for the quarter, before pending lease accounting adjustments, was $3.9 million, or $0.14 per diluted share, up $4.6 million or $0.18 per diluted share from the same period a year ago. |
| | • | | Successful opening of the first Sizzler in Beijing. |
| | • | | Continued progress on strategic study and review of options to maximize shareholder value. |
| | • | | Gains of approximately $3.2 million from the domestic Sizzler sale lease back transaction and Pat & Oscar’s insurance proceeds. |
SHERMAN OAKS, Calif. — March 24, 2005 — 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
-more -
FRB serves as financial relations counsel to this company, is acting on the company’s behalf in issuing this bulletin and receiving compensation therefore.
The information contained herein is furnished for information purposes only and is not to be construed as an offer to buy or sell securities.
Worldwide Restaurant Concepts, Inc.
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$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.
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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 atwww.wrconcepts.com orwww.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 atwww.wrconcepts.com andwww.fulldislcosure.com, will be available shortly after the call ends.
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About Worldwide Restaurant Concepts
Worldwide Restaurant Concepts, Inc. operates, franchises or joint ventures 309 Sizzler® restaurants worldwide, 112 KFC®restaurants located primarily in Queensland, Australia, and 22 Pat & Oscar’s® restaurants. Additional information about the Company can be found atwww.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® 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.
[tables to follow]
Worldwide Restaurant Concepts, Inc.
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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,
2005
| | | February 1,
2004
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| Revenues | | | | | | | | |
Restaurant sales | | $ | 107,518 | | | $ | 102,591 | |
Franchise revenues | | | 2,813 | | | | 2,570 | |
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Total revenues | | | 110,331 | | | | 105,161 | |
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| 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 | ) | | | — | |
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Total operating costs | | | 102,327 | | | | 103,379 | |
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Operating income | | | 8,004 | | | | 1,782 | |
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Interest expense | | | 791 | | | | 1,060 | |
Investment income | | | 251 | | | | 162 | |
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| Income before income taxes and minority interest | | | 7,464 | | | | 884 | |
Provision for income taxes | | | 2,616 | | | | 1,654 | |
Minority interest expense (benefit) | | | 900 | | | | (83 | ) |
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| Net income | | $ | 3,948 | | | $ | (687 | ) |
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Basic earnings per share | | $ | 0.14 | | | $ | (0.03 | ) |
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Diluted earnings per share | | $ | 0.14 | | | $ | (0.04 | ) |
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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, 2005
| | | February 1,
2004
| |
| Revenues | | | | | | | | |
Restaurant sales | | $ | 264,511 | | | $ | 252,662 | |
Franchise revenues | | | 7,188 | | | | 6,661 | |
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Total revenues | | | 271,699 | | | | 259,323 | |
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| 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 | ) | | | — | |
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Total operating costs | | | 257,480 | | | | 250,668 | |
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Operating income | | | 14,219 | | | | 8,655 | |
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Interest expense | | | 2,154 | | | | 2,311 | |
Investment income | | | 492 | | | | 423 | |
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| 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 | ) |
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| Net income | | $ | 5,404 | | | $ | 3,184 | |
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Basic earnings per share | | $ | 0.20 | | | $ | 0.12 | |
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Diluted earnings per share | | $ | 0.19 | | | $ | 0.08 | |
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WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES
PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
| | | | | | |
| | | February 6,
2005
| | April 30,
2004
|
| ASSETS | | | | | | |
| 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 |
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Total current assets | | | 51,570 | | | 48,039 |
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Property and equipment, net | | | 69,117 | | | 74,232 |
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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 |
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Intangible assets, net of accumulated amortization of $1,269 at February 6, 2005 and $1,068 at April 30, 2004 | | | 2,037 | | | 2,090 |
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Other assets | | | 966 | | | 1,127 |
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Total assets | | $ | 159,578 | | $ | 160,737 |
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WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES
PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except par value)
| | | | | | | | |
| | | February 6,
2005
| | | April 30,
2004
| |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
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 | |
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Total current liabilities | | | 48,551 | | | | 46,911 | |
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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 | |
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Total liabilities | | | 85,156 | | | | 98,897 | |
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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 | ) |
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Total stockholders’ equity | | | 47,755 | | | | 61,826 | |
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Total liabilities and stockholders’ equity | | $ | 159,578 | | | $ | 160,737 | |
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