SOURCE: The Smith & Wollensky Restaurant Group

April 02, 2007 16:05 ET

Smith & Wollensky Reports Fourth Quarter & Full Year 2006 Financial Results

NEW YORK, NY -- (MARKET WIRE) -- April 2, 2007 -- The Smith & Wollensky Restaurant Group, Inc. (NASDAQ: SWRG) today announced financial results for the fourth quarter and year ended January 1, 2007.

--  Results for the fourth quarter of 2006 include impairment charges for
    the Smith & Wollensky in New Orleans of $1.8 million, for the Smith &
    Wollensky in Dallas of $3.2 million and for the Cité restaurant in New York
    City of $740,000. The property for the Smith & Wollensky in Dallas is
    currently under contract to be sold for $3.9 million, less commission and
    other expenses of approximately $250,000, and is scheduled to close during
    the beginning of April 2007. Results for the fourth quarter of 2005 include
    $750,000 of charges related to the impairment of the assets at the Smith &
    Wollensky in New Orleans and also include $314,000 relating to the write-
    down of assets of the Manhattan Ocean Club, which was closed on December
    31, 2005 and was renovated into our newest concept, Quality Meats, which
    opened in April 2006.
    
--  For the fourth quarter of 2006, comparable consolidated restaurant
    sales increased 3.9% as compared to the fourth quarter of 2005. Comparable
    consolidated restaurant sales include only units that have been open for 15
    months or longer and do not include the results from our Smith & Wollensky
    in New Orleans, the Manhattan Ocean Club or Quality Meats.
    
--  For the fourth quarter of 2006, total consolidated restaurant sales
    increased $2.5 million to $36.2 million, as compared to $33.7 million in
    the fourth quarter of 2005.
    
--  Net loss for the fourth quarter of 2006 was ($3.5) million, or ($0.40)
    per share, vs. a net loss of ($397,000), or ($0.04) per diluted share in
    2005.
    
--  Pro forma net income for the fourth quarter of 2006 was $2.3 million,
    or $0.27 per basic and diluted share, as compared to a pro forma net income
    of $667,000, or $0.07 per basic and diluted share, in the fourth quarter of
    2005. Pro forma net income in 2006 reflects the exclusion of $5.7 million
    of impairment charges for the Smith & Wollensky units in New Orleans and
    Dallas, as well as the Cité restaurant in New York City. Pro forma net
    income in 2005 reflects the exclusion of $750,000 of charges related to the
    impairment of the assets at our Smith & Wollensky in New Orleans and also
    excludes $314,000 relating to the write-down of assets of the Manhattan
    Ocean Club, which was closed on December 31, 2005 and was renovated into
    our newest concept, Quality Meats. A reconciliation of pro forma net income
    to GAAP net loss is included in the financial tables that follow.
    
--  Operating income (loss) was ($2.5) million in the fourth quarter of
    2006 as compared to $628,000 in the fourth quarter of 2005.
    
--  Food and beverage costs as a percentage of consolidated restaurant
    sales increased approximately 58 basis points during the fourth quarter of
    2006 as compared to the fourth quarter of 2005, primarily due to higher
    beef costs during December as compared to the prior year.
    
--  Salaries and related benefit expenses as a percentage of consolidated
    restaurant sales decreased approximately 279 basis points during the fourth
    quarter of 2006 as compared to the fourth quarter of 2005, primarily due to
    the concentrated efforts made by management in comparable units to reduce
    raw payroll and to a decrease in employee medical claims under our self
    insured health plan.
    
--  Restaurant operating expenses as a percentage of consolidated
    restaurant sales increased 102 basis points during the fourth quarter of
    2006 as compared to the fourth quarter of 2005 primarily due to increased
    professional fees and other miscellaneous charges in 2006.
    
--  General and administrative expenses improved by 76 basis points during
    the fourth quarter of 2006 as compared to the fourth quarter of 2005,
    primarily due to a reduction in both public relations and professional fees
    in 2006.
    
For the full year, total consolidated restaurant sales decreased $627,000 to $124.8 million, a 0.5% decrease from $125.4 million in 2005. Comparable consolidated restaurant sales for 2006 increased 1.8% from 2005. The net loss for the year was ($4.2) million, or ($0.49) per share, compared to a net loss of ($3.1) million, or ($0.33) per share, in 2005. The net loss for 2006 included impairment charges of $6.6 million. Pro forma net income for 2006 was $1.7 million, or $0.20 per share, as compared to a pro forma net loss of ($2.0) million, or ($0.22) per share, in 2005.

No Scheduled Conference Call

Given the recent developments with respect to the potential sale of the Company, the Company has determined not to schedule and conduct a conference call in respect to the press release relating to its financial results for the fourth quarter and year ended January 1, 2007.

About Smith & Wollensky Restaurant Group

The Smith & Wollensky Restaurant Group develops and operates high-end, high-volume restaurants in major cities across the United States. The original Smith & Wollensky, a traditional New York steakhouse, opened in 1977 and is currently believed to be the largest-grossing à la carte restaurant in the country. Since its inception, the company has grown to include 13 restaurants, including Smith & Wollensky in New York, Miami Beach, Chicago, Las Vegas, Washington, D.C., Philadelphia, Columbus, Houston, and Boston. SWRG also operates four other restaurants in New York, including Maloney & Porcelli, Park Avenue Café, The Post House, and Quality Meats.

Except for historical information contained herein, the statements made in this press release regarding the Company's business, strategy and results of operations are forward-looking statements which are based on management's beliefs and information currently available to management. Readers are cautioned not to put undue reliance on such forward-looking statements, which are subject to a number of risks and uncertainties that could cause actual results to differ materially from such statements. Factors that may cause such differences include changes in economic conditions generally or in each of the markets in which the Company is located, unanticipated changes in labor or food costs, changes in consumer preferences, the level of competition in the high-end segment of the restaurant industry and the success of the Company's growth strategy. For a more detailed description of such factors, please see the Company's filings with the Securities and Exchange Commission. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


                THE SMITH & WOLLENSKY RESTAURANT GROUP, INC.
                             AND SUBSIDIARIES
                  Consolidated Statements of Operations
          (dollar amounts in thousands, except per share amounts)

                             Fourth Quarter Ended     Fiscal Year Ended
                            January 1,  January 2,  January 1,  January 2,
                               2007        2006        2007        2006
                            ----------  ----------  ----------  ----------
                            (unaudited) (unaudited)

Consolidated restaurant
 sales                      $   36,209  $   33,669  $  124,820  $  125,447
Cost of consolidated
 restaurant sales:
  Food and beverage costs       11,176      10,198      38,604      38,021
  Salaries and related
   benefit expenses              8,959       9,271      34,422      37,112
  Restaurant operating
   expenses                      6,327       5,541      21,269      21,257
  Occupancy and related
   expenses                      2,170       1,993       8,541       7,609
  Marketing and promotional
   expenses                        531         961       3,981       4,976
  Depreciation and
   amortization expenses         1,044       1,208       4,216       4,778
  Impairment of assets, net      5,745         750       6,573         750
  Insurance proceeds, net          (50)         --      (1,175)         --
  Write-down of renovated
   restaurant assets                --         314          --         314
                            ----------  ----------  ----------  ----------
   Total cost of consoli-
    dated restaurant sales      35,902      30,236     116,431     114,817
                            ----------  ----------  ----------  ----------
  Income from consolidated
   restaurant operations           307       3,433       8,389      10,630
Management fee income              291         279         980         994
                            ----------  ----------  ----------  ----------
Income from consolidated
 and managed restaurants           598       3,712       9,369      11,624
General and administrative
 expenses                        2,555       2,633       9,625      10,195
Royalty expense                    553         451       1,886       1,830
                            ----------  ----------  ----------  ----------
Operating income (loss)         (2,510)        628      (2,142)       (401)
                            ----------  ----------  ----------  ----------
Interest expense                  (164)       (154)       (639)     (1,092)
Amortization of deferred
 debt financing costs              (10)         (3)        (42)        (61)
Interest income                     37          53         133         116
                            ----------  ----------  ----------  ----------
Interest expense net of
 interest income                  (137)       (104)       (548)     (1,037)
                            ----------  ----------  ----------  ----------
Income (loss) before
 provision for income taxes     (2,647)        524      (2,690)     (1,438)
Provision for income taxes         298         364         639         654
                            ----------  ----------  ----------  ----------
Income (loss) before income
 of consolidated variable
 interest entity                (2,945)        160      (3,329)     (2,092)
Income of consolidated
 variable interest entity         (515)       (557)       (904)       (984)
                            ----------  ----------  ----------  ----------
Net loss                    $   (3,460) $     (397) $   (4,233) $   (3,076)
                            ==========  ==========  ==========  ==========
Net loss per share:
  Basic and diluted         $    (0.40) $    (0.04) $    (0.49) $    (0.33)
                            ==========  ==========  ==========  ==========
Weighted average common
 shares outstanding:
  Basic and diluted          8,590,643   8,958,679   8,592,911   9,263,673
                            ==========  ==========  ==========  ==========



                THE SMITH & WOLLENSKY RESTAURANT GROUP, INC.
                             AND SUBSIDIARIES
        Pro Forma Net Income and Pro Forma Net Income Per Share (1)
          (dollar amounts in thousands, except per share amounts)


                             Fourth Quarter Ended     Fiscal Year Ended
                            January 1,  January 2,  January 1,  January 2,
                               2007        2006        2007        2006
                            ----------  ----------  ----------  ----------
                            (unaudited) (unaudited) (unaudited) (unaudited)

Net loss                    $   (3,460) $     (397) $   (4,233) $   (3,076)


Impairment of assets, net        5,745         750       6,573         750

Insurance proceeds, net
 (building and contents
  only)                             --          --        (609)         --


Write-down of renovated
 restaurant assets                  --         314          --         314
                            ----------  ----------  ----------  ----------


Pro forma net income (1)    $    2,285  $      667  $    1,731  $   (2,012)
                            ==========  ==========  ==========  ==========


Pro forma net income
 per share:

  Basic                     $     0.27  $     0.07  $     0.20  $    (0.22)
                            ==========  ==========  ==========  ==========

  Diluted                   $     0.27  $     0.07  $     0.20  $    (0.22)
                            ==========  ==========  ==========  ==========

Weighted average common
 shares outstanding:

  Basic                      8,590,643   8,958,679   8,592,911   9,263,673
                            ==========  ==========  ==========  ==========

  Diluted                    8,627,011   8,958,679   8,634,839   9,263,673
                            ==========  ==========  ==========  ==========


(1) Pro forma net income excludes impairment of assets, certain insurance
    proceeds, and write-down of renovated restaurant assets. These pro
    forma calculations provide meaningful information of the Company's
    operating results on a basis comparable with that of
    future periods.



                THE SMITH & WOLLENSKY RESTAURANT GROUP, INC.
                             AND SUBSIDIARIES
                        Consolidated Balance Sheet
                      (dollar amounts in thousands)

                                                 January 1,    January 2,
                                                    2007          2006
                                                ------------  ------------
                         Assets

Current assets:
  Cash and cash equivalents                     $      8,270  $      2,362
  Short-term investments                                 311           265
  Accounts receivable, net                               483           549
  Credit card receivable, net                          2,217         1,990
  Due from managed units                                 116           750
  Merchandise inventory                                4,961         4,589
  Prepaid expenses and other current assets            1,365         1,486
                                                ------------  ------------
  Total current assets                                17,723        11,991
Property and equipment, net                           46,185        47,571
Assets held for sale, net of impairment charges        5,873        12,062
Goodwill                                               6,886         6,886
Licensing agreement, net                               2,975         3,471
Long-term investments                                  3,175         4,417
Other assets                                           3,936         4,208
                                                ------------  ------------
  Total assets                                  $     86,753  $     90,606
                                                ============  ============
       Liabilities and Stockholders' Equity

Current liabilities:
  Current portion of long-term debt             $        944  $        202
  Current portion of obligations under
   capital lease                                         148           139
  Current portion of deferred gain                       367           365
  Due to managed units                                   967           538
  Accounts payable and accrued expenses               14,156        13,578
                                                ------------  ------------
  Total current liabilities                           16,582        14,822
Obligations under capital leases                       7,601         7,749
Deferred gain on sales leasebacks                     12,604        12,958
Long-term debt, net of current portion                 2,180         3,113
Deferred rent                                          9,120         9,133
                                                ------------  ------------
  Total liabilities                                   48,087        47,775

Interest in consolidated variable
 interest entity                                        (494)         (668)
Commitments and contingencies
Stockholders' equity:
  Common stock                                            94            94
  Additional paid-in capital                          70,293        70,066

  Accumulated deficit                                (26,736)      (22,503)
  Accumulated other comprehensive income                 189           143

Treasury stock                                        (4,680)       (4,301)
                                                ------------  ------------
                                                      39,160        43,499
                                                ------------  ------------
  Total liabilities and stockholders' equity    $     86,753  $     90,606
                                                ============  ============

Contact Information

  • Investor Contact:
    Allison Good
    The Smith & Wollensky Restaurant Group
    Phone: 212-838-2061 x2379
    Email: Email Contact