<PAGE>
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 OCTOBER 12, 1997
|__| 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
SIZZLER INTERNATIONAL, INC.
________________________________________________________________________________
(Exact Name of Registrant as specified in its Charter)
DELAWARE 95-4307254
_______________________________________________________________________________
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
12655 WEST JEFFERSON BOULEVARD, LOS ANGELES, CALIFORNIA 90066
________________________________________________________________________________
(Address of Principal Executive Offices, including zip code)
(310) 827-2300
____________________________________________________________
(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 November 17, 1997
- ---------------------------- ----------------------------------------
COMMON STOCK $0.01 PAR VALUE 28,850,908 SHARES
<PAGE>
PART I. FINANCIAL INFORMATION
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------
<TABLE>
<CAPTION>
October 12, April 30,
1997 1997
----------------- ---------------
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $33,045 $34,085
Receivables, net of reserves of $3,833 at
October 12, 1997 and $3,547 at April 30, 1997 3,286 4,398
Inventories 5,134 5,464
Prepaid expenses and other current assets 1,705 2,323
-------- --------
Total current assets 43,170 46,270
Property and equipment, net 89,290 104,875
Long-term notes receivable, net of reserves of $334
at October 12, 1997 and $424 at April 30, 1997 1,627 1,619
Deferred income taxes 3,410 4,004
Intangible assets, net of accumulated amortization of
$5,425 at October 12, 1997 and $698 at April 30, 1997 2,434 1,430
Other assets, net of accumulated amortization and reserves
of $6 at April 30, 1997 6,913 9,912
-------- --------
Total assets $146,844 $168,110
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
2
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
October 12, April 30,
1997 1997
----------------- ----------------
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' INVESTMENT
<S> <C> <C>
Current Liabilities:
Current portion of long-term debt $ 5,233 $ 94
Accounts payable 11,078 13,634
Other current liabilities 14,101 14,240
Income taxes payable 2,248 2,401
-------- --------
Total current liabilities 32,660 30,369
Long-term Liabilities:
Long-term debt, net of current portion 41,945 329
Other liabilities 29,932 9,111
Liabilities subject to compromise under reorganization
proceedings - 83,900
-------- --------
Total long-term liabilities 71,877 93,340
Stockholders' Investment:
Capital stock -
Preferred, authorized 1,000,000 shares, $5 par value;
no shares issued - -
Common, authorized 50,000,000 shares, $0.01
par value; outstanding 28,850,908 shares at October 12, 1997
and 28,898,003 shares at April 30, 1997 289 289
Additional paid-in capital 276,711 276,200
Accumulated deficit (232,698) (234,961)
Cumulative foreign currency translation adjustments (1,995) 2,873
-------- --------
Total stockholders' investment 42,307 44,401
Total liabilities and stockholders' investment $146,844 $168,110
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
3
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TWENTY-FOUR WEEKS ENDED
---------------------------------
OCTOBER 12, OCTOBER 13,
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
REVENUES
Restaurants $113,040 $146,596
Franchise operations 3,053 5,873
-------- --------
Total revenues 116,093 152,469
-------- --------
COSTS AND EXPENSES
Cost of sales 42,288 56,106
Labor and related expenses 30,801 43,457
Other operating expenses 23,679 31,897
Depreciation and amortization 5,750 6,810
General and administrative expenses 8,208 12,940
-------- --------
Total operating costs 110,726 151,210
-------- --------
Interest expense 2,780 484
Investment income (1,022) (514)
-------- --------
Total costs and expenses 112,484 151,180
-------- --------
INCOME BEFORE INCOME TAXES 3,609 1,289
Provision for income taxes 1,346 1,417
-------- --------
NET INCOME $ 2,263 $ (128)
======== ========
Net income per common and common equivalent share $ 0.08 -
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
4
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
--------------------------------------
OCTOBER 12, OCTOBER 13,
1997 1996
----------------- ----------------
(Unaudited)
<S> <C> <C>
REVENUES
Restaurants $54,770 $65,660
Franchise operations 1,737 2,373
------- -------
Total revenues 56,507 68,033
------- -------
COSTS AND EXPENSES
Cost of sales 20,567 26,240
Labor and related expenses 14,950 19,043
Other operating expenses 11,842 13,869
Depreciation and amortization 2,931 3,224
General and administrative expenses 3,801 5,893
------- -------
Total operating costs 54,091 68,269
------- -------
Interest expense 1,549 91
Investment income (678) (237)
------- -------
Total costs and expenses 54,962 68,123
------- -------
INCOME BEFORE INCOME TAXES 1,545 (90)
Provision for income taxes 769 532
------- -------
NET INCOME $ 776 $ (622)
======= =======
Net income per common and common equivalent share $ 0.03 $ (0.02)
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
5
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWENTY-FOUR WEEKS ENDING
------------------------------------
OCTOBER 12, OCTOBER 13,
1997 1996
------------------ -------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 2,263 ($128)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 5,750 6,810
Deferred income taxes (benefit) - 88
Provision for bad debts 360 498
Other 47 3,413
------- -------
8,420 10,681
Changes in operating assets and liabilities:
Receivables 729 664
Inventories 330 623
Prepaid expenses and other current assets 526 (2,535)
Accounts payable (2,701) 15,538
Accrued liabilities (1,877) (19,756)
Income taxes payable 441 (1,789)
------- -------
Net cash provided by operating activities 5,868 3,426
------- -------
INVESTING ACTIVITIES
Additions to property and equipment (3,563) (2,369)
Disposal of property and equipment 22,895 1,554
Other, net (3,919) 646
------- -------
Net cash provided by (used in) investing activities 15,413 (169)
------- -------
FINANCING ACTIVITIES
Issuance of long-term debt 46,895 11,310
Reduction of long-term debt (141) (193)
Payment of allowed claims
pursuant to the reorganization plan (69,075) -
Other, net - (59)
------- -------
Net cash provided by (used in) financing activities (22,321) 11,058
------- -------
Net increase (decrease) in cash and cash equivalents (1,040) 14,315
------- -------
Cash and cash equivalents at beginning of period 34,085 9,216
------- -------
Cash and cash equivalents at end of period $33,045 $23,531
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
6
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
AS OF OCTOBER 12, 1997
1. The interim consolidated condensed financial statements should be read in
conjunction with the financial statements and the notes thereto included in
the Company's 1997 annual report on Form 10-K.
In the opinion of management, all adjustments necessary for fair
presentation of results of operations for the twenty-four weeks have been
included in the interim financial statements.
On June 2, 1996, Sizzler International, Inc. (the "Company") enacted a
comprehensive restructuring strategy designed to return the U.S. operations
to profitability. This strategy included the closure of under-performing
restaurants in the U.S. and filing for bankruptcy protection through a
Chapter 11 proceeding. On June 2, 1996, the Company and four subsidiaries,
Sizzler Restaurants International, Inc. ("SRI"), Buffalo Ranch Steakhouses,
Inc. ("BRSH"), Tenly Enterprises, Inc. ("Tenly"), and Collins Properties,
Inc. ("CPI"), became debtors-in-possession subject to the supervision of
the U.S. Bankruptcy Court of the Central District of California (the
"Bankruptcy Court") under Chapter 11 of the federal bankruptcy code.
On June 2, 1997, the Bankruptcy Court entered an order confirming the
Chapter 11 plans of reorganization of the Company, SRI and CPI. The plans
of reorganization for Tenly and BRSH were confirmed on February 24, 1997.
On September 23, 1997, the reorganization plans became effective and the
Company and its subsidiaries emerged from the bankruptcy proceedings.
The Company's plan of reorganization provided for full payment of allowed
creditors' claims, including interest, over five years, from the operations
of its international division. In September 1997, the Company obtained
sufficient financing from Westpac Banking Corporation to pay its creditors'
allowed claims in full including interest. All allowed claims for CPI,
Tenly and BRSH have also been paid in full. SRI's plan provided for full
payment of allowed unsecured creditors' claims (estimated at approximately
$20 million) through the formation of a creditor trust. SRI's installment
payments to the trust will be evidenced by a four-year note. The note will
bear interest at the floating annual rate of prime plus one percent through
the first year, prime plus two percent for the next two years, and prime
plus three percent for the fourth year. SRI will secure the note with a
pledge of the stock of its subsidiaries and with substantially all of the
domestic division's operating assets.
The Company and its subsidiaries have paid approximately $69 million in
pre-petition claims and interest and reinstated the remaining pre-petition
liabilities. Remaining bankruptcy liabilities were reclassified from
"Liabilities subject to compromise under reorganization proceedings" to the
appropriate liability captions of the consolidated balance sheet.
7
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CHAPTER 11 BANKRUPTCY REORGANIZATION
- ------------------------------------
On June 2, 1997, the Bankruptcy Court entered an order confirming the Chapter 11
plans of reorganization of the Company, SRI and CPI. The plans of reorganization
for Tenly and BRSH were confirmed on February 24, 1997. On September 23, 1997,
the reorganization plans became effective and the Company and its subsidiaries
emerged from the bankruptcy proceedings.
The Company's plan of reorganization provided for full payment of allowed
creditors' claims, including interest, over five years, from the operations of
its international division. In September 1997, the Company obtained sufficient
financing from Westpac Banking Corporation to pay its creditors' allowed claims
in full including interest. All allowed claims for CPI, Tenly and BRSH have also
been paid in full. SRI's plan provided for full payment of allowed unsecured
creditors' claims (estimated at approximately $20 million) through the formation
of a creditor trust. SRI's installment payments to the trust will be evidenced
by a four-year note. The note will bear interest at the floating annual rate of
prime plus one percent through the first year, prime plus two percent for the
next two years, and prime plus three percent for the fourth year. SRI will
secure the note with a pledge of the stock of its subsidiaries and with
substantially all of the domestic division's operating assets.
The Company and its subsidiaries have paid approximately $69 million in pre-
petition claims and interest and reinstated the remaining pre-petition
liabilities. Remaining bankruptcy liabilities were reclassified from
"Liabilities subject to compromise under reorganization proceedings" to the
appropriate liability captions of the consolidated balance sheet.
MATERIAL CHANGES IN RESULTS OF OPERATIONS TWENTY-FOUR WEEKS ENDED OCTOBER 12,
- -----------------------------------------------------------------------------
1997 VERSUS OCTOBER 13, 1996
- ----------------------------
Domestic Company-operated restaurant sales and franchised restaurant revenues
(including franchise fees, royalties and rental income) and international
Company-operated restaurant sales and franchised restaurant revenues represent
the Company's primary sources of revenue. The addition or closure of
restaurants, both Company-operated and franchised, and the sales volume of
comparable restaurants (those restaurants open more than one year) are important
factors to consider in evaluating the Company's results.
Total revenues were $116.1 million for the first twenty-four weeks of fiscal
1998, which represents a decrease of $36.4 million, or 23.9 percent, compared to
the first twenty-four weeks of the prior fiscal year. This decrease is primarily
due to the closure of 22 Company-operated restaurants, the transfer of seven
restaurants to franchisees and a net decrease of 56 franchised Sizzler
restaurants. During the same period, the Company added five KFC
8
<PAGE>
restaurants in Australia. Revenues declined domestically by $22.3 million or
33.0 percent. International revenues decreased by $14.1 million or 16.6 percent
compared to the first twenty-four weeks of the prior year.
Earnings before interest and taxes were $5.4 million for the first twenty-four
weeks of fiscal 1998, an increase of $4.1 million or 326.3 percent compared to
the prior year. In the international operations, earnings before interest and
taxes declined $0.4 million. Domestically, earnings before interest and taxes
improved from a loss of $2.8 million in the prior year, to income of $2.5
million in the current fiscal year, primarily due to the impact of closing
under-performing units. Pretax income for the first twenty-four weeks of fiscal
1998 increased $2.3 million to $3.6 million or 3.1 percent of revenues. During
the first twenty-four weeks of fiscal 1997, pretax income was $1.3 million or
0.9 percent of revenues.
Net income for the twenty-four weeks ended October 12, 1997, was $2.3 million or
$0.08 per share, versus a net loss of $128,000 in the prior year. The average
primary shares were 28,880,000 for the twenty-four weeks ended October 12, 1997,
versus 28,955,000 for the same period last year.
INTERNATIONAL OPERATIONS
- ------------------------
International restaurant sales accounted for 59.9 percent of consolidated
revenues for the first twenty-four weeks of fiscal 1998. Sales from Company-
operated restaurants of $69.5 million were $13.3 million or 16.1 percent lower
than the prior year primarily due to lower foreign currency exchange rates,
comparable restaurant sales declines and the closure of underperforming
Sizzlers, partially offset by the addition of five KFC units. Since the second
quarter of fiscal 1997, international operations had a net reduction of 11
Company-operated and 29 franchised Sizzler restaurants. Eleven franchised
restaurants were opened in Thailand, South Korea, Indonesia and Japan while a
total of 40 franchised restaurants were closed, 39 in Australia and one in
Indonesia. As of October 12, 1997, the international operation included 32
Company-operated, three joint ventured, and 49 franchised Sizzler restaurants,
98 KFC restaurants and one The Italian Oven restaurant.
On a comparative restaurant basis, sales in Australian dollars for Company-
operated Sizzler restaurants and customer counts decreased 17.6 percent and 20.1
percent, respectively, due to the increasing competitive casual dining market.
The average guest check increased 3.2 percent. The KFC restaurants decreased 2.9
percent in average restaurant sales and 7.9 percent in the average number of
customers per restaurant primarily due to the discontinuance of breakfast
service. The average customer check has increased 5.4 percent, reflecting price
increases since the second quarter of the prior year.
The Company's international franchise revenues decreased $0.7 million or 35.6
percent due to the restaurant closures mentioned above. At October 12, 1997,
there were 52 international franchised and joint-ventured Sizzler restaurants in
Japan, Taiwan, Thailand, South Korea, Singapore and Indonesia, versus 81
restaurants in eight countries at October 13, 1996.
Earnings before interest and taxes were down $0.4 million or 12.5 percent from
the prior year. Occupancy costs and general and administrative expense both
increased 0.7 percent, as a percentage of revenues, due to the relatively fixed
nature of certain restaurant costs at lower sales levels.
9
<PAGE>
DOMESTIC OPERATIONS
- -------------------
Domestic restaurant operations accounted for 37.5 percent of the Company's
consolidated revenues. Sales reflect a decrease of $20.2 million or 31.7 percent
to $43.5 million when compared to the prior year. This decline is due to the
closure of ten Company-operated restaurants and the transfer of seven
restaurants to franchisees since the second quarter of last year. At October 12,
1997, the number of domestic Company-operated restaurants was 67 versus 84
restaurants at October 13, 1996.
On a comparative restaurant basis, average sales per restaurant decreased 2.0
percent, average customers per restaurant declined 4.8 percent while the average
customer check increased 2.9 percent. However, sales trends are continuing to
show improvement as the sales decrease was 14.1 percent in the prior year.
Management is aggressively implementing a plan to sustain its operations' return
to profitability. The key components of the plan include: 1) the recent
introduction of a new steak line which includes USDA Choice steaks; 2) continue
to upgrade the menu, focusing on redefining Sizzler as a popularly priced grill-
based restaurant with a great salad bar; 3) improve restaurant operations; 4)
implementing a new marketing strategy focused on new menu introductions and 5)
refresh restaurant facilities including new signage.
Domestic franchise revenues, including franchise fees, royalties and rental
income, accounted for 1.5 percent of consolidated revenues. Compared to the
prior year, revenues decreased $2.1 million or 54.7 percent. The revenue decline
reflects the impact of a temporary royalty abatement program, which expires
October 31, 1997, pursuant to the plan of reorganization and a net reduction of
27 franchised restaurants. Management expects that strategies being tested and
implemented by the Company will also improve sales and profits for domestic
franchisees. As of October 12, 1997, the number of domestic franchised
restaurants was 203, including 10 Latin American restaurants, versus 230
restaurants at October 13, 1996.
Domestically, earnings before interest and taxes improved $5.3 million to $2.5
million, from a loss of $2.8 million in the same period last year. This increase
primarily reflects the improvement related to closing under-performing units,
partially offset by the franchise royalty abatement program discussed above.
CONSOLIDATED COSTS AND EXPENSES
- -------------------------------
Consolidated costs and expenses, as a percentage of revenues, decreased 2.3
percentage points from the prior year. This decrease is primarily the result of
lower payroll and related expenses, general and administrative expense and food
costs, offset by higher interest expense. Interest expense was $2.8 million
in fiscal 1998 and $0.5 million in fiscal 1997, reflecting interest on long-term
debt and general unsecured bankruptcy claims.
The effective income tax rate decreased from 109.9 percent of pretax income in
fiscal 1997 to 37.3 percent in fiscal 1998, primarily due to the utilization of
loss carryforwards to offset domestic earnings.
10
<PAGE>
MATERIAL CHANGES IN RESULTS OF OPERATIONS - TWELVE WEEKS
- --------------------------------------------------------
ENDED OCTOBER 12, 1997 VERSUS OCTOBER 13, 1996
- ----------------------------------------------
Total revenues were $56.5 million for the second quarter of fiscal 1998, which
represents a decrease of $11.5 million, or 16.9 percent, compared to the second
quarter of the prior fiscal year. This decrease is primarily due to the closure
of 22 Company-operated restaurants, the transfer of seven restaurants to
franchisees and a net decrease of 56 franchised Sizzler restaurants. During the
same period, the Company added five KFC restaurants in Australia. Revenues
declined domestically by $4.6 million or 17.0 percent. International revenues
decreased by $6.9 million or 16.9 percent compared to the second quarter of the
prior year.
Earnings before interest and taxes were $2.4 million for the second quarter of
fiscal 1998, an increase of $2.7 million compared to the prior year. In the
international operations, earnings before interest and taxes increased $0.4
million. Domestically, earnings before interest and taxes improved from a loss
of $3.4 million in the prior year, to income of $1.0 million in the current
fiscal quarter, primarily due to the impact of closing under-performing units.
Pretax income for the second quarter of fiscal 1998 increased $1.6 million to
$1.5 million or 2.7 percent of revenues. The second quarter of fiscal 1997
showed a pretax loss of $90,000 or 0.1 percent of revenues.
Net income for the second quarter ended October 12, 1997, was $0.8 million or
$0.03 per share, versus a net loss of $622,000 or $0.02 per share in the prior
year. The average primary shares were 28,858,000 for the second quarter ended
October 12, 1997, versus 29,061,000 for the same period last year.
INTERNATIONAL OPERATIONS
- ------------------------
International restaurant sales accounted for 59.4 percent of consolidated
revenues. Sales from Company-operated restaurants of $33.6 million were $7.1
million or 17.4 percent lower than the prior year primarily due to lower foreign
currency exchange rates, comparable restaurant sales declines and the closure of
underperforming Sizzlers, partially offset by the addition of five KFC
restaurants.
On a comparative restaurant basis, sales in Australian dollars for Company-
operated Sizzler restaurants and customer counts decreased 13.6 percent and 17.8
percent, respectively, due to the increasing competitive casual dining market.
The average guest check increased 5.1 percent. The KFC restaurants decreased 3.1
percent in average restaurant sales and 7.3 percent in the average number of
customers per restaurant, primarily due to the discontinuance of breakfast
service. The average customer check has increased 4.5 percent, reflecting price
increases since the second quarter of the prior year.
Earnings before interest and taxes increased slightly, $0.4 million or 29.6
percent from the prior year. Food costs and labor and related expense both
decreased 1.7 percent and other operating expense decreased 1.6 percent, as a
percentage of revenues. Royalty expense increased 1.3 percent, as a percentage
of revenues, reflecting an increase in the contractual royalty rate. Occupancy
costs and general and administrative expense increased 0.3 percent and 0.7
percent, respectively, as a percentage of revenues, due to the relatively fixed
nature of certain restaurant costs at lower sales levels.
11
<PAGE>
DOMESTIC OPERATIONS
- -------------------
Domestic restaurant operations accounted for 37.5 percent of the Company's
consolidated revenues. Sales from Company-operated restaurants reflect a
decrease of $3.8 million or 15.3 percent to $21.2 million when compared to the
prior year. This decline is due to the closure of ten company operated
restaurants and the transfer of seven restaurants to franchisees since the
second quarter of last year.
On a comparative restaurant basis, average sales per restaurant increased 0.6
percent, average customers per restaurant declined 3.6 percent and the average
customer check increased 4.3 percent.
Domestic franchise revenues, including franchise fees, royalties and rental
income, accounted for 2.0 percent of consolidated revenues. Compared to the
prior year, revenues decreased $0.7 million or 40.3 percent. The revenue decline
reflects the impact of a temporary royalty abatement program, which expires
October 31, 1997, pursuant to the plan of reorganization and a net reduction of
27 franchised restaurants. Management expects that strategies being tested and
implemented by the Company will also improve sales and profits for domestic
franchisees.
Domestically, earnings before interest and taxes improved $4.4 million to $1.0
million, from a loss of $3.4 million in the same period last year. This increase
primarily reflects the improvement related to closing under-performing units.
CONSOLIDATED COSTS AND EXPENSES
- -------------------------------
Consolidated costs and expenses, as a percentage of revenues, decreased 2.9
percentage points from the prior year. This decrease is primarily the result of
lower payroll and related expenses, reflecting the closure of unprofitable
restaurants, and lower general and administrative expense, and food costs.
Interest expense was $1.5 million in fiscal 1998 and $0.1 million in 1997.
The effective income tax rate decreased from 591.1 percent of pretax income in
fiscal 1997 to 49.8 percent in fiscal 1998 primarily due to the utilization of
loss carryforwards to offset domestic earnings.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
WORKING CAPITAL
- ---------------
The Company's principal source of working capital is cash provided by operations
which amounted to $8.4 million for the first twenty-four weeks of fiscal 1998
versus $10.7 million for the same period of the prior year.
The Company's working capital at October 12, 1997 was $10.5 million including
cash and cash equivalents of $33.0 million. At April 30, 1997, working capital
was $15.9 million.
12
<PAGE>
TOTAL ASSETS / CAPITAL EXPENDITURES
- -----------------------------------
At October 12, 1997, total assets were $146.8 million, a decrease of $21.3
million or 12.7 percent from April 30, 1997. Property and equipment represented
approximately 60.8 percent of total assets at October 12, 1997 and 62.4 percent
at April 30, 1997.
Capital expenditures were $3.6 million for the first twenty-four weeks of fiscal
1998, including new restaurant construction of $1.1 million and replacements of
$2.5 million. The Company anticipates continuing to build its international
operations through additional investment in Company-operated restaurants and the
development of the franchise system. Domestically, no new unit growth is planned
in fiscal 1998. Instead, the Company will focus on the previously mentioned
revitalization program. The Company has entered into certain commitments for
capital expenditures necessary to efficiently operate and to improve the
profitability of existing businesses.
DEBT
- ----
On September 23, 1997, the Company obtained a $63.5 million AUD (approximately
$46.9 million US) bank facility from Westpac Banking Corporation in order to
refinance the claims of the Company's unsecured creditors. The Westpac loan
provides for a five-year term at an interest rate equal to the Australian
interbank borrowing rate, plus a margin. The margin will be based on a formula
tied to the Company's international operations ratio of debt to earnings before
interest and taxes, and will vary between 1.25% and 2.25%. The Westpac loan
involved the collateralization of the Company's principal operating assets of
its international division. The Westpac loan is subject to a number of financial
covenants and other restrictions.
Based on current levels of operations and anticipated sales growth, management
believes that cash flow from operations will be sufficient to meet all of its
debt service requirements when due and to fund its capital expenditure and
working capital requirements.
13
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibit 11 - Computation of Per Share Earnings.
Exhibit 27 - Financial Data Schedule
b. Reports on Form 8-K
The Company filed a report on Form 8-K dated August 26, 1997 reporting an
order by the U.S. Bankruptcy Court of the Central District of California
confirming the Chapter 11 plans of reorganization of the Company and its
subsidiaries, Sizzler Restaurants International, Inc. and Collins
Properties, Inc.
The Company filed a report on Form 8-K dated October 8, 1997 reporting the
consummation of a $63.5 million AUD bank facility from Westpac Banking
Corporation.
14
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIZZLER INTERNATIONAL, INC.
Registrant
Date: November 24, 1997 /s/ James A. Collins
------------------------------
James A. Collins
Chief Executive Officer
Date: November 24, 1997 /s/ Ryan S. Tondro
-------------------------------
Ryan S. Tondro
Vice President
(Principal Financial Officer)
15
<PAGE>
SIZZLER INTERNATIONAL, INC. AND SUBSIDIARIES
EXHIBIT 11 - PART I
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
The weighted average number of shares used in the computation of
net income per share is as follows:
TWELVE WEEKS ENDED TWENTY-FOUR WEEKS ENDED
----------------------------- ----------------------------------
October 12, October 13, October 12, October 13,
1997 1996 1997 1996
----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
Weighted average of outstanding shares 28,855,441 29,060,972 28,878,144 28,954,549
Common stock equivalents 2,981 - 1,490 33
----------- ----------- ----------- -----------
Primary shares 28,858,422 29,060,972 28,879,634 28,954,582
Additional shares 157 52 79 37
----------- ----------- ----------- -----------
Fully diluted shares 28,858,579 29,061,024 28,879,713 28,954,619
=========== =========== =========== ===========
Net income used to calculate primary
and fully diluted earnings per share $ 776,000 ($622,000) $ 2,263,000 ($128,000)
=========== =========== =========== ===========
Earnings per share $ 0.03 ($0.02) $ 0.08 ($0.00)
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-03-1998
<PERIOD-START> APR-28-1997
<PERIOD-END> OCT-12-1997
<CASH> 33,045
<SECURITIES> 0
<RECEIVABLES> 7,119
<ALLOWANCES> 3,833
<INVENTORY> 5,134
<CURRENT-ASSETS> 43,170
<PP&E> 192,037
<DEPRECIATION> 102,747
<TOTAL-ASSETS> 146,844
<CURRENT-LIABILITIES> 32,660
<BONDS> 41,945
0
0
<COMMON> 289
<OTHER-SE> 42,018
<TOTAL-LIABILITY-AND-EQUITY> 146,844
<SALES> 113,040
<TOTAL-REVENUES> 116,093
<CGS> 42,288
<TOTAL-COSTS> 42,288
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,780
<INCOME-PRETAX> 3,609
<INCOME-TAX> 1,346
<INCOME-CONTINUING> 2,263
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,263
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
