SZ Worldwide Restaurant Concepts

Worldwide Restaurant Concepts, Inc. Announces Certain Accounting Adjustments, Including the Write-Down of Pat & Oscar's Goodwill, in Connection With the Definitive Merger Agreement and Finalized Restatement Due to Change in Accounting Treatment for Leases Pacific Equity Partners Reaffirms Merger Transaction SHERMAN OAKS, Calif., June 10 /PRNewswire-FirstCall/ -- Worldwide Restaurant Concepts, Inc. (NYSE:SZ) today announced its decision to write-down the value of Pat & Oscar's goodwill related to certain under-performing Pat & Oscar's assets. The write-down will not impact the pending transaction between Pacific Equity Partners and Worldwide Restaurant Concepts. In addition, the Company announced the completion of its restatement of its previously filed consolidated financial statements for the first two quarters of fiscal year 2005 to correct the financial reporting resulting from its prior lease-related accounting practices. Similar corrections have been made to the Company's third quarter fiscal 2005 consolidated financial statements included in the Company's previously issued press release dated March 24, 2005. Pat & Oscar's Write-Down In conjunction with the Pacific Equity Partner's merger agreement, and review of the agreed upon purchase price which included the Pat & Oscar's division, the Company determined that certain triggering events occurred under SFAS 142. Accordingly, Pat & Oscar's goodwill has been written down to $0 resulting in a charge of approximately $21.9 million. Additionally, in connection with the goodwill write down, the pending merger transaction, and continued under-performance of certain Pat & Oscar's locations opened during fiscal 2003, the Company wrote down the assets for those locations by approximately $2.8 million under SFAS 144. The write-downs are non-cash adjustments and will not impact the pending transaction between Worldwide Restaurant Concepts and Pacific Equity Partners, which was announced in a press release dated April 28, 2005. "We are aware of and fully support adjusting the value of Pat & Oscar's goodwill and fixed assets. This adjustment will have no impact on the price, financing or completion of the proposed merger," stated Rob Koczkar, Managing Director of Pacific Equity Partners. Chuck Boppell, CEO of Worldwide Restaurant Concepts echoed Mr. Koczkar's comments, adding, "The merger is beneficial to our shareholders and we fully expect it to proceed on schedule once all necessary conditions and consents have been satisfied." Tax Provision and Valuation Allowance Adjustment Due to the slower than anticipated recovery from a fiscal 2004 E.coli event at Pat & Oscar's, as well as the on-going review associated with the pending merger transaction, the Company determined it was necessary to increase the valuation allowance established against its deferred income tax assets, resulting in an increase in the income tax provision of approximately $2.0 million. The valuation allowance has been calculated pursuant to SFAS 109, which requires an assessment of both positive and negative evidence when measuring the need for a valuation allowance. Such evidence includes the Company's past and projected future performance, the market environment in which the Company operates and the expected timing and nature of the reversals of its recorded deferred income tax assets. Lease Accounting On March 23, 2005, following the Company's review of its lease-related accounting practices and management's discussions with its Audit Committee, the Company determined that it was appropriate to restate its consolidated financial statements as of April 30, 2004 and 2003 and for each of the three years in the period ended April 30, 2004. The cumulative effect of the lease accounting adjustments through the third quarter of fiscal 2005 will be to increase accumulated deficit by approximately $3.5 million, reflecting increased net property and equipment, deferred income taxes, obligations under capital leases and deferred rent liability and decreased additional paid-in-capital. The impact on the third quarter of fiscal 2005 is to increase net income by approximately $95,000, or less than $0.01 per diluted share. The impact on year-to-date net income through the third quarter of fiscal 2005 is to decrease net income by $16,000, or $0.00 per diluted share. Future cash flows will not be affected. These non-cash adjustments will not have any impact on the Company's previously reported total cash flows, sales, comparable sales or compliance with any financial covenant under its credit facility or other debt instruments. The Company has amended the appropriate filings with the Securities and Exchange Commission to include the restated financial statements. As a result of the restatement, the financial statements contained in the Company's prior filings with the SEC reporting its consolidated financial results as of April 30, 2004 and 2003 and for each of the three years in the period ended April 30, 2004, and for the first two quarters of fiscal year 2005, as well as the consolidated financial statements for the third quarter of fiscal 2005 included in the Company's previously issued press release dated March 24, 2005, should no longer be relied upon. About Worldwide Restaurant Concepts Worldwide Restaurant Concepts, Inc. operates, franchises or joint ventures 310 Sizzler(R) restaurants worldwide, 112 KFC(R) restaurants located primarily in Queensland, Australia, and 21 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: the estimated impact of the change in lease accounting. 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 impact of the Company's change in lease accounting practices and (b) 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 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 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 (as restated) 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 26,128 26,779 Depreciation and amortization 3,843 3,533 General and administrative expenses 9,546 8,678 Gains on sale-leaseback and legal settlement (3,161) -- Asset impairment 2,771 -- Goodwill impairment 21,924 -- Total operating costs 126,929 103,493 Operating income (loss) (16,598) 1,668 Interest expense 830 1,076 Investment income 251 162 Income (loss) before income taxes and minority interest (17,177) 754 Provision for income taxes 4,583 1,646 Minority interest expense (benefit) 888 (80) Net loss $(22,648) $(812) Basic loss per share $(0.82) $(0.03) Diluted loss per share $(0.82) $(0.05) Weighted average common shares outstanding: Basic 27,648 27,395 Diluted 27,648 27,395 WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 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 (as restated) 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 65,060 64,228 Depreciation and amortization 9,511 8,967 General and administrative expenses 23,529 20,849 Gains on sale-leaseback and legal settlement (3,161) -- Asset impairment 3,067 177 Goodwill impairment 21,924 -- Total operating costs 282,144 250,906 Operating income (loss) (10,445) 8,417 Interest expense 2,269 2,357 Investment income 492 423 Income (loss) before income taxes and minority interest (12,222) 6,483 Provision for income taxes 7,224 3,688 Minority interest expense (benefit) 1,857 (109) Net income (loss) $(21,303) $2,904 Basic earnings (loss) per share $(0.77) $0.11 Diluted earnings (loss) per share $(0.77) $0.07 Weighted average common shares outstanding: Basic 27,580 27,355 Diluted 27,580 28,367 WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands) ASSETS February 6, April 30, 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 67,818 75,471 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 8,662 10,757 Goodwill 1,723 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 $134,474 $162,043 WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except par value) LIABILITIES AND STOCKHOLDERS' EQUITY February 6, April 30, 2005 2004 Current Liabilities: Current portion of long-term debt $6,932 $7,156 Accounts payable 13,594 12,396 Other current liabilities 24,431 23,334 Income taxes payable 3,679 4,056 Total current liabilities 48,636 46,942 Long-term debt, net of current portion 9,286 30,809 Deferred gains, rent and landlord incentives 18,764 11,894 Pension liability 13,566 14,031 Total liabilities 90,252 103,676 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 260,485 280,442 Accumulated deficit (226,009) (204,706) 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 17,555 58,353 Total liabilities and stockholders' equity $134,474 $162,043 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 General Information, Laurie Berman, +1-310-854-8315, or Investor/Analyst Contact, Tricia Ross, +1-617-520-7064, both of Financial Relations Board, for Worldwide Restaurant Concepts, Inc. Web site: http://www.wrconcepts.com/

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