SZ Worldwide Restaurant Concepts

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/

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