Worldwide Restaurant Concepts, Inc. Announces Second Quarter Fiscal 2005 Results

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Revenue growth of 4.0 percent over prior year, or $3.1 million for the second quarter

* Revenue growth of 4.0 percent over prior year, or $3.1 million for the second quarter.
* Second quarter same store sales growth, calculated in local currencies, of 6.6 percent at KFC, 7.5 percent at Sizzler Australia (company and franchise units) and 2.0 percent at Sizzler USA (company and franchise units) helped offset a 1.3 percent same store sales decline at Pat & Oscar's.
* Net income for the quarter of $0.9 million, or $0.03 per diluted share, up $0.6 million or $0.03 per diluted share from the same period a year ago.
* Pat & Oscar's has now annualized last year's food borne illness incident and is currently showing strong double-digit same store sales growth.
* Sizzler USA transitioned six California restaurants to franchisees, closed two California units and one unit in New York in connection with its strategy to grow the franchise system and focus its Company operations in two core California markets.

Worldwide Restaurant Concepts, Inc. (NYSE: SZ) today reported financial results for the second quarter ended October 17, 2004.

The Company reported revenues of $79.4 million for the second quarter of fiscal 2005, an increase of 4.0 percent over the $76.3 million reported in the second quarter of the prior year. Net income for the second quarter of fiscal 2005 was $0.9 million, or $0.03 per diluted share, compared to net income of $0.3 million, or $0.00 per diluted share, in the same period a year ago. Strengthening sales at Pat & Oscar's and Sizzler USA and continued strong sales growth at Sizzler Australia and KFC drove overall results. A 7.4 percent increase in the Australian dollar exchange rate compared to last year contributed $3.3 million to 2005 second-quarter revenues and $0.2 million to net income. Total revenues at Sizzler USA declined $3.3 million from last year's quarter due to having 12 fewer company operated restaurants reflecting the successful sale and conversion of nine Company-owned stores to franchisees.

Revenue and Cost Trends

The Company's 4.0 percent increase in revenues in the second quarter reflected an aggregate 3.7 percent increase in same store sales across all company-owned restaurants. Same store sales growth of 6.6 percent at KFC and 10.1 percent at Sizzler Australia (company-owned only) were offset by declines of 1.4 percent for Sizzler USA company owned units and 1.3 percent for Pat & Oscar's.

Pat & Oscar's sales increased $0.5 million over the second 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 and to having two more stores. At quarter end same store sales reached the level they were at prior to the incident due to the successful television advertising campaign in San Diego and a new catering sales force put in place in the first quarter. Same store sales trends have now turned positive in the first few weeks of the third quarter of fiscal 2005 due in part to annualizing over the food borne illness incident. Pat & Oscar's earnings also improved in the second quarter and was flat with the loss last year. Menu price increases taken during the middle of the quarter helped improve operating margins along with a continued strong focus on controls. "We're pleased with the strides Pat & Oscar's has made in rapidly recovering from last year's E.coli event, but recognize further sales improvements are needed to continue to move the brand forward," said Charles Boppell, CEO of Worldwide Restaurant Concepts. "We have the right programs and initiatives in place to grow the top line and to bring those results to the bottom line and expect that Pat & Oscar's will continue to improve in the third and fourth quarters."

Sizzler system-wide same store sales were up 2.0 percent in the second quarter of fiscal 2005 compared to the same period of last year. Profitability was up 36.3 percent, helped by margin improvements and lower operating expenses in the U.S. and to continued strong performance of our international operations. "We believe we are now very close to finally exiting the New York market's company operations which have continued to burden the division's same store sales growth and profitability. Once we have exited this market I am confident we will see stronger growth in our core California operations," said Mr. Boppell.

KFC same store sales and operating profit were up 6.6 and 39.5 percent, respectively, compared to the second quarter of fiscal 2004 due to strong promotions and continued strong operations.

The Company's provision for income tax this quarter, which primarily relates to income from our Australian operations, was 51.6 percent of consolidated pre-tax income due to a pre-tax loss from domestic operations and corporate general and administrative overhead expenses.

Minority interest expense for the second quarter of 2005 includes 19.1 percent of the international division's net income attributed to the ownership by local management.

Building on Strategic Initiatives

The company continues to execute against its growth strategies and the improved results this quarter over the prior year are a continued indication that the strategies at both domestic divisions are working and will continue to add to the strong performance of the Sizzler Australia and KFC operations. In line with the evaluation of the remodel and training programs at Sizzler in the U.S., all company and franchise restaurants are being updated with key branding elements that will bring consistency to the chain as a whole by the end of the current fiscal year. In addition, re-training is nearly complete and employees are being re-certified on updated procedures that directly tie independent guest satisfaction surveys to manager pay incentives.

Pat & Oscar's is expected to open two new stores by the summer of 2005 and another four by the end of fiscal 2006. All locations are in Southern California, outside San Diego County.

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Date Listed: 2004-11-23

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Industry: Restaurants
Category: Financial
Worldwide Restaurant Concepts
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