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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended July 21, 2002
 
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                          to                         
 
Commission File Number 1-10711
 
 
WORLDWIDE RESTAURANT CONCEPTS, INC.
(Exact Name of Registrant as specified in its Charter)
 
Delaware
  
95-4307254
(State or other Jurisdiction of
Incorporation or Organization)
  
(I.R.S. Employer
Identification No.)
 
15301 Ventura Blvd., Suite 300, Building B, Sherman Oaks, California 91403
(Address of Principal Executive Offices, including zip code)
 
(818) 662-9800
(Registrant’s telephone number, including area code)
 
 
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    x     No    ¨
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
Class
  
Outstanding at August 26, 2002
Common Stock $0.01 Par Value
  
27,230,135 shares
 

 
PART I.    FINANCIAL INFORMATION
 
ITEM 1.    FINANCIAL STATEMENTS
 
WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
 
    
July 21, 2002
   
April 30, 2002
ASSETS
              
Current Assets:
              
Cash and cash equivalents
   
$
25,163
   
$
25,943
Restricted cash
   
 
2,246
   
 
2,096
Receivables, net of an allowance of $872 at July 21, 2002 and $814 at April 30, 2002
   
 
2,468
   
 
2,101
Inventories
   
 
4,352
   
 
4,367
Deferred income tax asset
   
 
2,653
   
 
2,191
Prepaid expenses and other current assets
   
 
2,689
   
 
1,686
    
  
Total current assets
   
 
39,571
   
 
38,384
    
  
Property and equipment, net
   
 
60,507
   
 
61,334
Property held for sale, net
   
 
2,276
   
 
2,632
Long-term notes receivable (including $200 of related party receivables at July 21, 2002 and April 30, 2002), net of an allowance of $3 at July 21, 2002 and April 30, 2002
   
 
941
   
 
974
Deferred income tax asset
   
 
5,413
   
 
5,346
Goodwill, net
   
 
20,940
   
 
20,940
Intangible assets, net of accumulated amortization of $750 at July 21, 2002 and $734 at April 30, 2002
   
 
2,043
   
 
2,031
Other assets
   
 
1,796
   
 
1,866
    
  
Total assets
   
$
133,487
   
$
133,507
    
  
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

2

 
WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share data)
 
    
July 21, 2002
     
April 30, 2002
  
LIABILITIES AND STOCKHOLDERS' EQUITY
                  
Current Liabilities:
                  
Current portion of long-term debt
   
$
6,072
 
   
$
5,971
 
Accounts payable
   
 
9,295
 
   
 
11,304
 
Other current liabilities
   
 
14,936
 
   
 
14,531
 
Income taxes payable
   
 
2,311
 
   
 
2,669
 
    
  
Total current liabilities
   
 
32,614
 
   
 
34,475
 
    
  
Long-term debt, net of current portion
   
 
21,986
 
   
 
23,369
 
Deferred gains and revenues
   
 
8,691
 
   
 
8,737
 
Pension liability
   
 
11,600
 
   
 
11,725
 
    
  
Total liabilities
   
 
74,891
 
   
 
78,306
 
    
  
Stockholders' Equity:
                  
Capital stock—  
                  
Preferred, authorized 1,000,000 shares, $5 par value; no shares issued
   
 
—  
 
   
 
—  
 
Common, authorized 50,000,000 shares, $0.01 par value; issued and outstanding 29,230,135 and 27,230,135 shares and 29,205,491 and 27,205,491 shares at July 21, 2002 and April 30, 2002, respectively
   
 
292
 
   
 
292
 
Additional paid-in capital
   
 
279,948
 
   
 
279,904
 
Accumulated deficit
   
 
(209,309
)
   
 
(212,566
)
Treasury stock, 2,000,000 shares at July 21, 2002 and 2,000,000 shares at April 30, 2002, at cost
   
 
(4,135
)
   
 
(4,135
)
Accumulated other comprehensive loss
   
 
(8,200
)
   
 
(8,294
)
    
  
Total stockholders' equity
   
 
58,596
 
   
 
55,201
 
    
  
Total liabilities and stockholders' equity
   
$
133,487
 
   
$
133,507
 
    
  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

3

WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE TWELVE WEEKS ENDED JULY 21, 2002 AND JULY 22, 2001
(Unaudited)
(In thousands, except per share data)
 
    
July 21, 2002
   
July 22, 2001
Revenues
              
Restaurant sales
   
$
65,683
   
$
59,273
Franchise revenues
   
 
2,004
   
 
1,999
    
  
Total revenues
   
 
67,687
   
 
61,272
    
  
Costs and Expenses
              
Cost of sales
   
 
22,259
   
 
20,201
Labor and related expenses
   
 
18,187
   
 
16,899
Other operating expenses
   
 
15,611
   
 
14,274
Depreciation and amortization
   
 
2,171
   
 
2,160
General and administrative expenses
   
 
5,464
   
 
5,477
    
  
Total operating costs
   
 
63,692
   
 
59,011
    
  
Operating income
   
 
3,995
   
 
2,261
    
  
Interest expense
   
 
817
   
 
869
Investment income
   
 
191
   
 
222
Other income
   
 
—  
   
 
412
    
  
Income before provision for income taxes
   
 
3,369
   
 
2,026
    
  
Provision for income taxes
   
 
112
   
 
362
    
  
Net income
   
$
3,257
   
$
1,664
    
  
Basic and diluted earnings per share
   
$
0.12
   
$
0.06
    
  
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

4

WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWELVE WEEKS ENDED July 21, 2002 AND July 22, 2001
(Unaudited)
(in thousands)
 
    
July 21, 2002
     
July 22, 2001
  
OPERATING ACTIVITIES
                  
Net income
   
$
3,257
 
   
$
1,664
 
Adjustments to reconcile net income to net cash provided by operating activities:
                  
Depreciation and amortization
   
 
2,171
 
   
 
2,160
 
Deferred income tax provision (benefit)
   
 
(462
)
   
 
128
 
Provision for bad debts
   
 
58
 
   
 
—  
 
Gain on sale of assets
   
 
(10
)
   
 
(412
)
Amortization of deferred revenue
   
 
(291
)
   
 
(215
)
Other
   
 
55
 
   
 
(36
)
Changes in operating assets and liabilities:
                  
Receivables
   
 
(384
)
   
 
(225
)
Inventories
   
 
55
 
   
 
118
 
Prepaid expenses and other assets
   
 
(987
)
   
 
464
 
Accounts payable
   
 
(1,118
)
   
 
258
 
Accrued liabilities
   
 
351
 
   
 
712
 
Income taxes payable
   
 
(416
)
   
 
139
 
    
  
Net cash provided by operating activities
   
 
2,279
 
   
 
4,755
 
    
  
INVESTING ACTIVITIES
                  
Additions to property and equipment
   
 
(943
)
   
 
(1,762
)
Proceeds from sale of property and equipment
   
 
424
 
   
 
1,048
 
(Increase) decrease in restricted cash
   
 
(150
)
   
 
6,139
 
Other, net
   
 
(52
)
   
 
16
 
    
  
Net cash (used in) provided by investing activities
   
 
(721
)
   
 
5,441
 
    
  
FINANCING ACTIVITIES
                  
Reduction of long-term debt
   
 
(1,689
)
   
 
(1,329
)
Repurchase of common stock
   
 
—  
 
   
 
(215
)
Exercise of stock options
   
 
44
 
   
 
—  
 
Payment related to acquisition of minority interest in subsidiary
   
 
(1,015
)
   
 
—  
 
Other, net
   
 
2
 
   
 
38
 
    
  
Net cash used in financing activities
   
 
(2,658
)
   
 
(1,506
)
    
  
Net (decrease) increase in cash and cash equivalents
   
 
(1,100
)
   
 
8,690
 
    
  
Effect of foreign exchange on cash
   
 
320
 
   
 
(160
)
    
  
Cash and cash equivalents at beginning of period
   
 
25,943
 
   
 
9,998
 
    
  
Cash and cash equivalents at end of period
   
$
25,163
 
   
$
18,528
 
    
  
Supplemental cash flow disclosures
                  
Cash paid during the period for:
                  
Interest
   
$
745
 
   
$
1,399
 
Income taxes
   
$
832
 
   
$
265
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

5

 
WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
1.    General:
 
The condensed consolidated financial statements include Worldwide Restaurant Concepts, Inc. (“WRC” or the “Company”) and its subsidiaries. The financial statements include the Company’s worldwide operation of the Sizzler® family steak house concept, including Company-owned outlets, activity related to the development and operation of Sizzler® franchises, the operation of KFC® franchises in Queensland, Australia and the operation of Pat & Oscar’sSM Company-owned outlets in the United States.
 
The information for the 12 weeks ended July 21, 2002 and July 22, 2001 has not been audited by independent public accountants, but includes all adjustments (consisting of normal recurring accruals) that are, in the opinion of management, necessary for a fair presentation of the Company’s condensed financial statements. Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the requirements of the Security and Exchange Commission, although the Company believes that the disclosures included in these condensed financial statements are adequate to make the information not misleading. The results of operations for the periods presented should not necessarily be considered indicative of operations for the full year. Certain reclassifications have been made to prior period financial statements in order to conform to the current period presentation. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s April 30, 2002 Annual Report on Form 10-K as filed with the Securities and Exchange Commission.
 
The Company uses a fifty-two, fifty-three week fiscal year ending on the Sunday nearest to April 30. The first, second and fourth fiscal quarters include 12 weeks of operations whereas the third fiscal quarter includes 16 weeks of operations.

6

WORLDWIDE RESTAURANT CONCEPTS, INC AND SUBSIDIARIES
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
2.    Earnings Per Share:
 
The following table sets forth the computation of basic and diluted EPS:
 
    
Twelve weeks ended
    
July 21,
2002
   
July 22,
2001
    
(In thousands, except EPS)
Numerator for basic and diluted EPS Net income
   
$
3,257
   
$
1,664
    
  
Denominator for basic EPS—weighted average shares of common stock outstanding
   
 
27,230
   
 
27,662
Effect of dilutive stock options
   
 
735
   
 
122
    
  
Denominator for diluted EPS—adjusted weighted average shares outstanding
   
 
27,965
   
 
27,784