1727 Elm Hill Pike, Nashville, Tennessee 37210
SHONEY'S, INC.
NEWS
FOR IMMEDIATE RELEASE Contact: SHONEY'S, INC.
V. Michael Payne
(615) 231-2332
SHONEY'S, INC. ANNOUNCES REVISION OF 1998 RESULTS
Nashville, TN, January 4, 1999 -- Officials of Shoney's, Inc. announced
today that the Company has revised its announced operating results for the
fiscal year and fourth quarter ended October 25, 1998.
On December 17, 1998, the Company reported for fiscal 1998 a net
loss of $104.2 million, or $2.14 per common share, compared with a net loss of
$35.7 million, or $0.74 per common share, for fiscal 1997. For the fourth
quarter of fiscal 1998, the Company previously reported a net loss of $8.6
million, or $0.18 per common share, compared with a net loss of $36.0 million,
or $0.74 per common share, in the fourth quarter of 1997.
On December 22, 1998, the Company received various court orders in
certain litigation pending against the Company. Although certain of the
orders were favorable to the Company, the Court ruled that the Company had
failed to pay certain management personnel in accordance with the overtime
pay provisions of the federal Fair Labor Standards Act and set the case for
a hearing on damages to begin June 1, 1999. The Company disagrees with the
Court's ruling on liability and intends to appeal the ruling and defend
vigorously against plaintiffs' damage claims. Based upon the Court's
decisions, however, accounting rules require the Company to record an amount
for potential expenses and liability that it might be required to pay in the
event that the Court's ruling ultimately is upheld and damages are awarded.
If the ruling were to be upheld, the Company's ultimate liability could
exceed the amount that it has recorded; however, the Company presently is
unable to estimate the exact amount of that liability. Because the Court's
ruling occurred prior to the Company's filing its Annual Report on Form 10-K
with the Securities and Exchange Commission (but subsequent to the end of the
fiscal year), the expense was required to be accrued in the recently ended
fiscal year. Accordingly, the Company has recorded an additional non-cash
expense of $3.5 million in the fourth quarter of fiscal 1998.
The additional expense results in the Company reporting for fiscal 1998
a net loss of $107.7 million, or $2.21 per common share, and for the fourth
quarter, a loss of $12.1 million, or $0.25 per common share.
"We are disappointed with the Court's decision," said Raymond D.
Schoenbaum, Chairman, and J. Michael Bodnar, President and CEO, in a joint
statement. "The Company has been and continues to be advised that it has
several meritorious defenses that could reduce or eliminate the Company's
exposure." Said Schoenbaum and Bodnar, "On the basis of the advice that we
have received, we intend to pursue all available avenues of appeal."
Certain statements in this release are "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
All forward looking statements involve risks and uncertainties which, in many
cases, are beyond the control of the Company and could cause actual results to
differ materially. The Company undertakes no obligation to update any forward
looking statements, or to make any other forward looking statements, whether
as a result of new information, future events or otherwise. Further
information on factors which could affect the Company's financial results is
contained in the Company's filings with the Securities and Exchange
Commission, including the ability of management to implement successfully its
strategy for improving Shoney's Restaurants performance, the ability to effect
asset sales consistent with the projected proceeds and timing expectations,
the results of pending litigation (including the litigation described above),
adequacy of management personnel resources, shortages of restaurant labor,
commodity price increases, product shortages, adverse general economic
conditions, turnover and a variety of other factors.
Shoney's, Inc. owned and operated 1,261 restaurants as of October 25, 1998,
including 789 Company-owned and 472 franchised restaurants. The Company's
common stock is traded on the New York Stock Exchange under the symbol "SHN."
SHONEY'S, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
October 25, October 26,
1998 % 1997 %
------------- ----- ------------ -----
ASSETS
Current Assets
Cash and cash equivalents $ 16,277,722 3.1 $ 11,851,223 1.8
Notes and accounts receivable 10,263,490 2.0 11,611,369 1.8
Refundable income taxes 14,005,359 2.7
Inventories 37,146,297 7.1 38,382,843 6.0
Other current assets 3,390,458 0.6 4,840,539 0.8
Deferred taxes 38,835,385 6.0
Net property, plant, and equipment held for sale 69,878,238 13.3 28,021,259 4.3
----------- ---- ----------- -----
Total Current Assets 150,961,564 28.8 133,542,618 20.7
Property, Plant and Equipment
Land 100,136,968 19.1 134,119,937 20.8
Buildings 215,112,056 41.1 254,888,645 39.5
Restaurant and other equipment 261,081,978 49.9 281,930,600 43.8
Leasehold improvements 69,020,663 13.2 70,277,951 10.9
Rental properties 13,848,502 2.6 20,818,708 3.2
Buildings under capital leases 17,605,400 3.4 24,803,349 3.8
Construction in progress 1,173,215 0.2 3,237,014 0.6
------------ ----- ------------ -----
677,978,782 129.5 790,076,204 122.6
Less accumulated depreciation and amortization (350,673,367) (67.0) (343,645,369) (53.4)
------------ ----- ------------ -----
Net Property, Plant and Equipment 327,305,415 62.5 446,430,835 69.2
Other Assets
Goodwill 29,819,721 5.7 47,803,815 7.4
Deferred charges and other intangible assets 10,581,373 2.0 5,889,044 0.9
Other 4,800,760 1.0 11,022,447 1.8
------------ ----- ------------ -----
Total Other Assets 45,201,854 8.7 64,715,306 10.1
------------ ----- ------------ -----
$523,468,833 100.0 $644,688,759 100.0
============ ===== ============ =====
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 37,522,186 7.2 $ 34,156,943 5.3
Federal and state income taxes 1,723,798 0.3 112,319 0.0
Accrued expenses 124,720,785 23.8 110,501,665 17.1
Reserve for litigation settlement 372,961 0.1 16,010,297 2.5
Debt and capital lease obligations due
within one year 11,980,656 2.3 10,997,069 1.7
------------ ----- ------------ -----
Total Current Liabilities 176,320,386 33.7 171,778,293 26.6
Long-term debt and capital lease
obligations due after one year 443,243,110 84.7 466,038,617 72.3
Reserve for litigation settlement 226,679 0.0 294,672 0.0
Deferred income and other liabilities 23,165,829 4.4 18,922,137 2.9
Shareholders' Deficit
Common stock 48,694,865 9.3 48,568,109 7.5
Additional paid-in capital 137,296,111 26.2 136,861,158 21.2
Accumulated deficit (305,478,147) (58.3) (197,774,227) (30.5)
------------ ----- ------------ -----
Total Shareholders' Deficit (119,487,171) (22.8) (12,344,960) (1.8)
------------ ----- ------------ -----
$523,468,833 100.0 $644,688,759 100.0
============ ===== ============ =====
/TABLE
SHONEY'S, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
Fifty-two Weeks Ended October 25, 1998 and October 26, 1997
1998 1997
Amount % Amount %
-------------- ----- -------------- -----
Revenues
Net sales $1,115,634,349 97.6 $1,202,755,479 98.0
Franchise fees 14,468,561 1.3 14,921,918 1.2
Other income 13,259,553 1.1 9,398,968 0.8
-------------- ----- -------------- -----
1,143,362,463 100.0 1,227,076,365 100.0
Costs and Expenses
Cost of sales
Food and supplies 434,764,523 38.0 478,673,418 39.0
Restaurant labor 308,465,116 27.0 319,367,035 26.0
Operating expenses 291,899,974 25.5 295,748,837 24.1
-------------- ----- -------------- -----
1,035,129,613 90.5 1,093,789,290 89.1
General and administrative 90,844,956 7.9 84,401,341 6.9
Impairment of long-lived assets 48,403,158 4.3 53,967,244 4.4
Interest expense 48,476,518 4.3 45,015,794 3.7
-------------- ----- -------------- -----
1,222,854,245 107.0 1,277,173,669 104.1
-------------- ----- -------------- -----
Loss before income taxes
and extraordinary charge (79,491,782) (7.0) (50,097,304) (4.1)
Provision for (benefit from)
income taxes 26,797,000 2.3 (14,386,462) (1.2)
-------------- ----- -------------- -----
Loss before extraordinary charge (106,288,782) (9.3) (35,710,842) (2.9)
Extraordinary charge on early
extinguishment of debt, net
of income taxes of $806,000 (1,415,138) (0.1)
-------------- ----- -------------- -----
Net loss $ (107,703,920) (9.4) $ (35,710,842) (2.9)
============== ===== ============== =====
Basic:
Net loss before extraordinary charge ($2.18) ($0.74)
Extraordinary charge for the early
extinguishment of debt (0.03) --
------ ------
Net loss ($2.21) ($0.74)
Diluted:
Net loss before extraordinary charge ($2.18) ($0.74)
Extraordinary charge for the early
extinguishment of debt (0.03) --
------ ------
Net loss ($2.21) ($0.74)
Weighted average shares outstanding
Basic 48,665,685 48,539,573
Diluted 48,665,685 48,539,573
SHONEY'S, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
Twelve Weeks Ended October 25, 1998 and October 26, 1997
1998 1997
Amount % Amount %
-------------- ----- -------------- -----
Revenues
Net sales $ 239,397,945 97.4 $ 268,527,603 97.9
Franchise fees 3,146,909 1.3 3,348,544 1.2
Other income 3,294,631 1.3 2,292,423 0.9
------------- ----- ------------- -----
245,839,485 100.0 274,168,570 100.0
Costs and Expenses
Cost of sales
Food and supplies 91,552,385 37.2 108,032,547 39.4
Restaurant labor 68,254,219 27.8 71,326,231 26.0
Operating expenses 67,928,498 27.6 69,827,468 25.5
------------- ----- ------------- -----
227,735,102 92.6 249,186,246 90.9
General and administrative 24,301,067 9.9 22,857,771 8.3
Impairment of Long-lived assets 36,355,177 13.3
Interest expense 10,827,511 4.4 10,042,989 3.6
------------- ----- ------------- -----
262,863,680 106.9 318,442,183 116.1
------------- ----- ------------- -----
Loss before income taxes (17,024,195) (6.9) (44,273,613) (16.1)
Benefit from income taxes (4,880,000) (2.0) (8,272,462) (3.0)
------------- ----- -------------- -----
Net loss $ (12,144,195) (4.9) $ (36,001,151) (13.1)
============= ===== ============== =====
Earnings per common share
Basic
Net loss ($0.25) ($0.74)
Diluted
Net loss ($0.25) ($0.74)
Weighted average shares outstanding
Basic 48,694,865 48,568,109
Diluted 48,694,865 48,568,109
SHONEY'S, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Fifty-two Weeks Ended
October 25, October 26,
1998 1997
------------- ------------
Operating activities
Net loss $(107,703,920) $(35,710,842)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 46,979,482 53,857,415
Amortization of deferred charges and
other non-cash charges 11,451,655 13,318,645
Impairment write down of long-lived assets 48,403,158 53,967,244
Tax valuation adjustment 52,538,000 --
Changes in operating assets
and liabilities 3,395,548 (16,095,522)
------------- ------------
Net cash provided by operating activities 55,063,923 69,336,940
Investing activities
Cash required for property, plant
and equipment (28,935,977) (40,205,993)
Proceeds from disposal of property,
plant and equipment 33,236,036 35,220,651
Cash provided by (required for) other assets 2,251,102 (409,322)
------------- ------------
Net cash provided (used) by
investing activities 6,551,161 (5,394,664)
Financing activities
Payments on long-term debt and
capital lease obligations (329,304,224) (39,829,540)
Proceeds from long-term debt 300,533,143 484,390
Net payments on short-term borrowings (2,132,000)
Payments on litigation settlement (15,705,329) (22,582,554)
Cash required for debt issue costs (12,751,670) (2,155,948)
Proceeds from exercise
of employee stock options 39,495 155,717
------------- ------------
Net cash used by financing activities (57,188,585) (66,059,935)
------------- ------------
Change in cash and cash equivalents $ 4,426,499 $ (2,117,659)
============= ============
SHONEY'S, INC. AND SUBSIDIARIES
Comparison of Sales by Division
52 Weeks Ended October 25, 1998 and October 26, 1997
(000 Omitted)
SALES
Increase
1998 1997 (Decrease)
---------- ---------- ----------
Shoney's $ 638,940 $ 705,772 (9.5) %
Captain D's 305,180 295,380 3.3
Pargo's 30,454 36,936 (17.5)
Fifth Quarter 13,137 15,596 (15.8)
Barbwire's 0 7,385
---------- ----------
Total Restaurant Operations 987,711 1,061,069 (6.9)
Commissary Operations 123,135 137,866 (10.7)
Franchise Operations 14,416 14,827 (2.8)
Other 18,100 13,314 35.9
---------- ----------
$1,143,362 $1,227,076 (6.8) %
========== ==========
SHONEY'S, INC. AND SUBSIDIARIES
Comparison of Sales by Division
12 Weeks Ended October 25, 1998 and October 26, 1997
(000 Omitted)
SALES
Increase
1998 1997 (Decrease)
---------- ---------- ----------
Shoney's $ 136,541 $ 156,086 (12.5) %
Captain D's 68,077 68,482 (0.6)
Pargo's 5,997 8,662 (30.8)
Fifth Quarter 2,092 3,208 (34.8)
Barbwire's 0 0
---------- ----------
Total Restaurant Operations 212,707 236,438 (10.0)
Commissary Operations 25,663 30,973 (17.1)
Franchise Operations 3,154 3,341 (5.6)
Other 4,315 3,417 26.3
---------- ----------
$ 245,839 $ 274,169 (10.3) %
========== ==========
SHONEY'S, INC.
Reconciliation of Unusual Items in Pretax Income (Loss)
Fifty-Two Weeks Ended October 25, 1998 and October 26, 1997
(000's omitted)
1998 1997
---------- ----------
Loss before income taxes and
extraordinary charge $ (79,492) $ (50,097)
Severance and related expenses 3,129 1,290
Exit costs - leases, etc. 10,747 1,301
Writeoff obsolete inventory 1,327 0
Waiver fees (in interest) 1,067 0
Proxy contest expenses 0 5,324
Contingent loss on litigation settlement 3,500 0
Impairment of long-lived assets 48,403 53,967
--------- ---------
Adjusted pretax income (loss)
before income taxes and
extraordinary charge $ (11,319) $ 11,785
========= =========
SHONEY'S, INC.
Reconciliation of Unusual Items in Pretax Income (Loss)
Twelve Weeks Ended October 25, 1998 and October 26, 1997
(000's omitted)
1998 1997
---------- ----------
Income (loss) before income taxes
and extraordinary charge $ (17,024) $ (44,274)
Severance and related expenses 438 54
Exit costs - leases , etc. 4,993 1,301
Proxy contest expenses 0 3,836
Contingent loss on litigation settlement 3,500 0
Impairment of long-lived assets 0 36,355
--------- ---------
Adjusted pretax income (loss)
before income taxes
and extraordinary charge $ (8,093) $ (2,728)
========= =========