Western Sizzlin Reports Second Quarter Results
2007-08-15
For the second quarter ended June 30, 2007, net income was $232,163 or $0.13 per basic and diluted earnings per share compared with net income of $143,106 or $0.12 per basic and diluted earnings per share for the second quarter of 2006.
Year to date net income for the six months ended June 30, 2007 was $382,120 or $0.21 per basic and diluted earnings per share compared with net income for the six months ended June 30, 2006 of $149,404 or $0.13 per basic and $0.12 per diluted earnings per share. Unrealized gains or losses in marketable securities do not impact net income but are important in determining intrinsic business value. Thus, we urge shareholders not to rely exclusively on the net income figure because it can be affected by non- economic factors, such as non-cash expense of amortization.
Western Sizzlin's objective is to maximize its intrinsic business value per share over the long term. In meeting this objective, the Company will engage in a number of diverse business activities to achieve above-average returns on capital in pursuit of maximizing the eventual net worth of its shareholders. Western Sizzlin Corporation, through wholly-owned subsidiaries, operates and franchises a total of 124 units in 19 states as of August 14, 2007. The Company will continue to franchise restaurants and maximize cash flows.
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PART I. FINANCIAL INFORMATION
WESTERN SIZZLIN CORPORATION
Consolidated Balance Sheets
June 30, 2007 and December 31, 2006
June 30, December 31,
2007 2006
(unaudited)
Assets
Current assets:
Cash and cash equivalents $2,782,133 $2,344,644
Trade accounts receivable, net of
allowance for doubtful accounts of
$517,142 in 2007 and $470,758 in 2006 931,803 866,565
Current installments of notes receivable,
less allowance for impaired notes of
$28,480 in 2007 and $17,409 in 2006 219,399 205,624
Other receivables 248,110 239,531
Income taxes receivable 249,695 248,559
Inventories 83,167 55,207
Prepaid expenses 256,044 253,556
Deferred income taxes 337,281 296,671
Total current assets 5,107,632 4,510,357
Notes receivable, less allowance for
impaired notes receivable of $163,327
and $164,396 in 2006, excluding current
installments 708,412 800,841
Property and equipment, net 2,070,044 2,270,300
Investments in marketable securities
(Note 3) 8,938,433 6,508,645
Cash held by broker 9,882 -
Franchise royalty contracts, net of
accumulated amortization of $8,508,988
in 2007 and $8,193,840 in 2006 945,443 1,260,592
Goodwill 4,310,200 4,310,200
Financing costs, net of accumulated
amortization of $190,753 in 2007 and
$188,670 in 2006 9,457 11,540
Investment in unconsolidated joint venture 213,155 147,479
$22,312,658 $19,819,954
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt $145,315 $163,089
Accounts payable 633,782 555,110
Accrued expenses and other 680,101 554,443
Income taxes payable 135,208 -
Total current liabilities 1,594,406 1,272,642
Long-term debt, excluding current
installments 623,296 685,036
Other long-term liabilities 80,480 69,370
Deferred income taxes 1,302,782 394,885
3,600,963 2,421,933
Commitments and contingencies (Note 8)
Stockholders' equity:
Common stock, $.01 par value. Authorized
4,000,000 shares (2,000,000 shares at
December 31, 2006); 1,797,750 issued and
outstanding shares in 2007 and 1,787,750
in 2006 (Note 2) 17,978 17,878
Additional paid-in capital 12,881,791 12,790,681
Retained earnings 3,603,938 3,340,193
Accumulated other comprehensive
income - unrealized holding gains,
net of taxes 2,207,987 1,249,269
Total stockholders' equity 18,711,694 17,398,021
$22,312,658 $19,819,954
WESTERN SIZZLIN CORPORATION
Consolidated Statements of Income
Three Months and Six Months Ended June 30, 2007 and 2006
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
2007 2006 2007 2006
Revenues:
Company-operated restaurants $3,542,157 $3,579,938 $6,590,457 $6,577,611
Franchise operations 1,148,414 1,136,787 2,229,804 2,284,764
Total revenues 4,690,571 4,716,725 8,820,261 8,862,375
Costs and expenses:
Company-operated restaurants
-- food, beverage and labor
costs 2,460,149 2,449,659 4,706,135 4,732,858
Restaurant occupancy and other 575,785 586,374 1,178,751 1,172,288
Subleased properties 52,645 194,816 86,748 154,254
Franchise operations -- direct
support 275,246 306,494 504,194 610,783
Corporate expenses 729,585 659,180 1,243,260 1,284,507
Depreciation and amortization 265,674 263,940 531,608 523,981
Total costs and expenses 4,359,084 4,460,463 8,250,696 8,478,671
Income from operations 331,487 256,262 569,565 383,704
Other income (expense):
Interest expense (19,727) (32,255) (40,051) (78,347)
Loss on early extinguishment
of long term debt --
-- -- (92,535)
Interest income 13,775 16,534 30,353 37,100
Equity in joint venture 51,973 (34,194) 65,675 (38,228)
Other 501 27,889 4,198 35,679
46,522 (22,026) 60,175 (136,331)
Income before income
tax expense 378,009 234,236 629,740 247,373
Income tax expense:
Current 8,257 -- 18,184 --
Deferred 137,589 91,130 229,436 97,969
Total income tax expense 145,846 91,130 247,620 97,969
Net income $232,163 $143,106 $382,120 $149,404
Earnings per share (Note 6):
Basic $.13 $.12 .21 $.13
Diluted $.13 $.12 .21 $.12
WESTERN SIZZLIN CORPORATION
Consolidated Statement of Changes in Stockholders' Equity
Six Months Ended June 30, 2007
(Unaudited)
Accumulated
Common Stock Additional Other
Shares Dollars Paid-in Retained Comprehensive
Capital Earnings Income Total
Balances,
December
31, 2006 1,787,750 $17,878 $12,790,681 $3,340,193 $1,249,269 $17,398,021
Net income -- -- -- 382,120 -- 382,120
Change in
unrealized
holding
gains, net
of taxes -- -- -- -- 958,718 958,718
Comprehensive
income 1,340,838
Share based
compensation -- -- 5,920 -- -- 5,920
Cumulative
effect of
adopting
FIN 48 -- -- (118,375) -- (118,375)
Stock options
exercised 10,000 100 85,190 -- 85,290
Balances,
June 30,
2007 1,797,750 $17,978 $12,881,791 3,603,938 $2,207,987 $18,711,694
WESTERN SIZZLIN CORPORATION
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2007 and 2006
(Unaudited)
Six Months Ended June 30,
2007 2006
Cash flows from operating activities:
Net income $382,120 $149,404
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of property
and equipment 214,376 208,832
Amortization of franchise royalty contracts 315,149 315,148
Amortization of financing costs 2,083 10,827
Loss on sale/disposal of property and equipment -- 57,717
Write off of financing costs related to early
extinguishment of long term debt -- 29,699
Provision for doubtful accounts 60,000 50,000
Share-based compensation 5,920 39,100
Equity in (income) loss of unconsolidated
joint venture (65,676) 38,228
Provision for deferred income taxes 229,435 97,969
(Increase) decrease in:
Trade accounts receivable and notes
receivable (46,584) 46,951
Other receivables (8,579) 20,454
Income taxes receivable (1,136) (6,310)
Insurance receivable --
business interruption -- 244,961
Inventories (27,960) (16,868)
Prepaid expenses (2,488) 13,777
Other assets -- (22,526)
Cash held by broker (9,882) --
Increase (decrease) in:
Accounts payable 78,672 (15,965)
Accrued expenses 125,658 (276,667)
Income taxes payable 16,833 --
Other long-term liabilities 11,110 14,674
Net cash provided by operating
activities 1,279,051 999,405
Cash flows from investing activities:
Change in short-term investments -- 260,069
Additions to property and equipment (14,120) (378,415)
Proceeds from sale of property --
2,800
Purchases of marketable securities (833,218) --
Proceeds from fire casualties -- 784,993
Net cash (used in) provided by investing
activities (847,338) 669,447
Cash flows from financing activities:
Cash received from exercise of stock options 85,290 9,200
Payments on long-term debt (79,514) (1,312,213)
Net cash provided by (used in) financing
activities 5,776 (1,303,013)
Net increase in cash and cash equivalents 437,489 365,839
Cash and cash equivalents at beginning of
period 2,344,644 1,664,848
Cash and cash equivalents at end of period $2,782,133 $2,030,687
Supplemental disclosure of cash flow information:
Cash payments for interest $40,710 $141,337
Income taxes paid $2,485 $16,341
Adoption of FIN 48 (non-cash) $118,375 $--
Non-cash investing activities:
Reclassification of deposits from other assets
to property and equipment $-- $320,336
Gross unrealized gains from marketable equity
securities $1,600,612 $--
Logos, product and company names mentioned are the property of their respective owners.
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