UNITED STATES
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 25, 2004
or
| ¨ | 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)
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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.) 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 22, 2004 | |
| Common Stock $0.01 Par Value | 27,517,690 shares |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
| ASSETS |
July 25, 2004 |
April 30, 2004 | ||||
| Current Assets: |
||||||
| Cash and cash equivalents |
$ | 22,804 | $ | 24,755 | ||
| Restricted cash |
6,499 | 5,131 | ||||
| Receivables, net of an allowance of $676 at July 25, 2004 and $641 at April 30, 2004 |
1,957 | 2,042 | ||||
| Inventories |
4,541 | 4,807 | ||||
| Deferred income taxes |
3,169 | 3,169 | ||||
| Prepaid expenses and other current assets |
2,653 | 2,718 | ||||
| Assets related to restaurants held for sale |
5,532 | 5,417 | ||||
| Total current assets |
47,155 | 48,039 | ||||
| Property and equipment, net |
74,168 | 74,232 | ||||
| Long-term notes receivable (including $191 related party receivables at July 25, 2004 and $200 at April 30, 2004) |
899 | 912 | ||||
| Deferred income taxes |
10,513 | 10,690 | ||||
| Goodwill, net |
23,647 | 23,647 | ||||
| Intangible assets, net of accumulated amortization of $1,101 at July 25, 2004 and $1,068 at April 30, 2004 |
2,062 | 2,090 | ||||
| Other assets |
990 | 1,127 | ||||
| Total assets |
$ | 159,434 | $ | 160,737 | ||
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 par value)
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
July 25, 2004 |
April 30, 2004 |
||||||
| Current Liabilities: |
||||||||
| Current portion of long-term debt |
$ | 7,020 | $ | 7,125 | ||||
| Accounts payable |
13,781 | 12,396 | ||||||
| Other current liabilities |
20,394 | 23,334 | ||||||
| Income taxes payable |
3,302 | 4,056 | ||||||
| Total current liabilities |
44,497 | 46,911 | ||||||
| Long-term debt, net of current portion |
24,576 | 29,217 | ||||||
| Deferred gains and revenues |
8,661 | 8,738 | ||||||
| Pension liability |
13,891 | 14,031 | ||||||
| Total liabilities |
91,625 | 98,897 | ||||||
| Minority interest |
18,347 | 14 | ||||||
| Stockholders’ Equity: |
||||||||
| Capital stock - |
||||||||
| Preferred, authorized 1,000 shares, $5 par value; no shares issued or outstanding |
— | — | ||||||
| Common, authorized 50,000 shares, $0.01 par value; issued and outstanding 29,501 and 27,501 shares and 29,438 and 27,438 shares at July 25, 2004 and April 30, 2004, respectively |
295 | 294 | ||||||
| Additional paid-in capital |
267,340 | 280,442 | ||||||
| Accumulated deficit |
(200,638 | ) | (201,233 | ) | ||||
| Treasury stock, 2,000 shares at July 25, 2004 and at April 30, 2004, at cost |
(4,135 | ) | (4,135 | ) | ||||
| Accumulated other comprehensive loss |
(13,400 | ) | (13,542 | ) | ||||
| Total stockholders’ equity |
49,462 | 61,826 | ||||||
| Total liabilities and stockholders’ equity |
$ | 159,434 | $ | 160,737 | ||||
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 25, 2004 AND JULY 20, 2003
(Unaudited)
(In thousands, except per share data)
| July 25, 2004 |
July 20, 2003 | |||||
| Revenues |
||||||
| Restaurant sales |
$ | 79,874 | $ | 75,767 | ||
| Franchise revenues |
2,078 | 2,053 | ||||
| Total revenues |
81,952 | 77,820 | ||||
| Costs and Expenses |
||||||
| Cost of sales |
27,618 | 25,555 | ||||
| Labor and related expenses |
21,596 | 20,498 | ||||
| Other operating expenses |
20,091 | 18,665 | ||||
| Depreciation and amortization |
2,792 | 2,625 | ||||
| General and administrative expenses |
7,077 | 5,408 | ||||
| Total operating costs |
79,174 | 72,751 | ||||
| Operating income |
2,778 | 5,069 | ||||
| Interest expense |
696 | 552 | ||||
| Investment income |
124 | 108 | ||||
| Income before income taxes and minority interest |
2,206 | 4,625 | ||||
| Provision for income taxes |
1,169 | 1,070 | ||||
| Minority interest |
442 | 2 | ||||
| Net income |
$ | 595 | $ | 3,553 | ||
| Basic earnings per share |
$ | 0.02 | $ | 0.13 | ||
| Diluted earnings per share |
$ | 0.02 | $ | 0.12 | ||
| Weighted average common shares outstanding: |
||||||
| Basic |
27,485 | 27,312 | ||||
| Diluted |
28,532 | 28,240 | ||||
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 25, 2004 AND JULY 20, 2003
(Unaudited)
(in thousands)
| July 25, 2004 |
July 20 2003 |
|||||||
| OPERATING ACTIVITIES |
||||||||
| Net income |
$ | 595 | $ | 3,553 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
2,792 | 2,625 | ||||||
| Deferred income tax provision |
112 | 87 | ||||||
| Allowance for bad debts |
34 | 49 | ||||||
| Loss on sale of assets |
16 | 163 | ||||||
| Amortization of deferred gains and revenues |
(275 | ) | (261 | ) | ||||
| Asset write downs and retirements |
138 | 185 | ||||||
| Foreign currency gain |
— | (954 | ) | |||||
| Income attributable to minority interest |
442 | 2 | ||||||
| Other |
26 | (92 | ) | |||||
| Changes in operating assets and liabilities: |
||||||||
| Receivables |
59 | (447 | ) | |||||
| Inventories |
259 | 105 | ||||||
| Prepaid expenses and other assets |
138 | (563 | ) | |||||
| Accounts payable |
1,880 | (1,808 | ) | |||||
| Deferred gains and other current liabilities |
(2,733 | ) | (1,152 | ) | ||||
| Income taxes payable |
(709 | ) | (536 | ) | ||||
| Net cash provided by operating activities |
2,774 | 956 | ||||||
| INVESTING ACTIVITIES |
||||||||
| Additions to property and equipment |
(3,863 | ) | (2,656 | ) | ||||
| Proceeds from sale of property and equipment |
260 | 340 | ||||||
| Increase in restricted cash |
(1,368 | ) | (4,483 | ) | ||||
| Other, net |
83 | (55 | ) | |||||
| Net cash used in investing activities |
(4,888 | ) | (6,854 | ) | ||||
| FINANCING ACTIVITIES |
||||||||
| Reduction of long-term debt |
(4,475 | ) | (1,739 | ) | ||||
| Sale related to exercise of stock options in subsidiary |
4,642 | — | ||||||
| Distributions to minority interest partners |
— | (16 | ) | |||||
| Exercise of stock options |
148 | 173 | ||||||
| Net cash provided by (used in) financing activities |
315 | (1,582 | ) | |||||
| Effect of foreign exchange on cash |
(152 | ) | 766 | |||||
| Net decrease in cash and cash equivalents |
(1,951 | ) | (6,714 | ) | ||||
| Cash and cash equivalents at beginning of period |
24,755 | 26,303 | ||||||
| Cash and cash equivalents at end of period |
$ | 22,804 | $ | 19,589 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
FOR THE TWELVE WEEKS ENDED JULY 25, 2004 AND JULY 20 , 2003
(Unaudited)
(in thousands)
| July 25, 2004 |
July 20, 2003 | |||||
| Supplemental cash flow disclosures |
||||||
| Cash paid during the period for: |
||||||
| Interest |
$ | 559 | $ | 670 | ||
| Income taxes |
1,744 | 1,485 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
WORLDWIDE RESTAURANT CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 1. | General: |
The condensed consolidated financial statements include Worldwide Restaurant Concepts, Inc. and its subsidiaries (“WRC” or the “Company”). The financial statements include the Company’s worldwide operation of the Sizzler® family steakhouse concept, including Company-owned outlets and activities related to the development and operation of Sizzler® franchises, as well as the KFC® franchises operated by the Company in Queensland and New South Wales, Australia and the operations of Pat & Oscar’s® Company-owned outlets in the United States.
The information for the twelve weeks ended July 25, 2004 and July 20, 2003 has not been audited by independent public accountants, but includes all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for the fair presentation of the Company’s condensed consolidated 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 Securities and Exchange Commission, although the Company believes that the disclosures included in these condensed consolidated 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. The results of operations of restaurants that are held for sale have not been reflected as discontinued operations in the accompanying financial statements as it is contemplated that the substantial majority of such restaurants will be sold to existing or new franchisees. 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, 2004 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. In a fifty-two week fiscal year, the first, second and fourth fiscal quarters include 12 weeks of operations whereas the third fiscal quarter includes 16 weeks of operations. The current fiscal year will include fifty-two weeks.
7
| 2. | Stock-Based Compensation: |
The Company uses the intrinsic value method of accounting for stock options granted to employees as prescribed by Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees,” and accordingly does not recognize compensation expense if the exercise price of the Company’s stock options is equal to or greater than the market price of the underlying stock on the date of the grant. Had the Company applied fair value recognition provisions of Statement of Financial Accounting Standards No. 123 (“SFAS 123”), “Accounting for Stock-Based Compensation,” pro forma net income and pro forma earnings per share would have been as follows (in thousands, except per share data):
| Twelve weeks ended |
||||||||
| July 25, 2004 |
July 20, 2003 |
|||||||
| Net income |
$ | 595 | $ | 3,553 | ||||
| Add: Total stock-based employee compensation expense included in reported earnings, net of related tax effects |
20 | 109 | ||||||
| Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards |
(558 | ) | (601 | ) | ||||
| Pro forma basic net income |
57 | 3,061 | ||||||
| Deduct: Income attributed to AMG options dilution (see Note 10) |
(4 | ) | (237 | ) | ||||
| Pro forma diluted net income |
$ | 53 | $ | 2,824 | ||||
| Earnings per share: |
||||||||
| Basic, as reported |
$ | 0.02 | $ | 0.13 | ||||
| Basic, pro forma |
$ | 0.00 | $ | 0.11 | ||||
| Diluted, as reported |
$ | 0.02 | $ | 0.12 | ||||
| Diluted, pro forma |
$ | 0.00 | $ | 0.10 | ||||
8
| 3. | Comprehensive Income: |
Comprehensive income for the periods ended July 25, 2004 and July 20, 2003, is as follows (in thousands):
| Twelve weeks ended |
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