SOURCE: The Smith & Wollensky Restaurant Group

August 16, 2007 16:05 ET

Smith & Wollensky Reports Second Quarter 2007 Financial Results

NEW YORK, NY--(Marketwire - August 16, 2007) - The Smith & Wollensky Restaurant Group, Inc. (NASDAQ: SWRG) today announced financial results for the second quarter and six month period ended July 2, 2007.

--  Results for the second quarter of 2007 include approximately $414,000
    of costs associated with the Company's proposed merger.
    
--  For the second quarter of 2007, comparable consolidated restaurant
    sales decreased 1.5% as compared to the second quarter of 2006. Comparable
    consolidated restaurant sales include only units that have been open for 15
    months or longer and do not include the results from Smith & Wollensky's in
    New Orleans and Dallas, The Manhattan Ocean Club, Quality Meats or Park
    Avenue Café, which was closed on May 23, 2007 and renovated into our newest
    concept, Park Avenue Summer, which opened on June 8, 2007.
    
--  For the second quarter of 2007, total consolidated restaurant sales
    decreased $1.8 million to $28.4 million, as compared to $30.2 million in
    the second quarter of 2006.
    
--  Net loss for the second quarter of 2007 was ($812,000), or $(0.09) per
    share, vs. net income of $572,000, or $0.07 per diluted share, in 2006.
    
--  Pro forma net income for the second quarter of 2007 was $40,000, or
    $0.00 per basic and diluted share, as compared to a pro forma net income of
    $149,000, or $0.02 per basic and diluted share, in the second quarter of
    2006. Pro forma net income in 2007 reflects the exclusion of $414,000 of
    costs associated with the proposed merger with Patina Restaurant Group,
    LLC, as well as the exclusion of the write-down of renovated restaurant
    assets of $438,000 relating to Park Avenue (Summer, Autumn, Winter,
    Spring). Pro forma net income for the second quarter of 2006 reflects the
    exclusion of $423,000 of insurance proceeds related to the impairment of
    the assets at  Smith & Wollensky in New Orleans. A reconciliation of pro
    forma net income to GAAP net income (loss) is included in the financial
    tables that follow.
    
--  Operating income (loss) was ($260,000) in the second quarter of 2007,
    as compared to $1.1 million in the second quarter of 2006.
    
--  Food and beverage costs as a percentage of consolidated restaurant
    sales increased approximately 7 basis points during the second quarter of
    2007, as compared to the second quarter of 2006.
    
--  Salaries and related benefit expenses as a percentage of consolidated
    restaurant sales decreased approximately 109 basis points during the second
    quarter of 2007, as compared to the second quarter of 2006.
    
--  Restaurant operating expenses as a percentage of consolidated
    restaurant sales increased 126 basis points during the second quarter of
    2007, as compared to the second quarter of 2006, primarily due to increased
    operating supplies and insurance charges in 2007.
    
--  General and administrative expenses increased by 2 basis points during
    the second quarter of 2007 as compared to the second quarter of 2006,
    primarily due to an increase in professional fees and other miscellaneous
    charges in 2007.
    

Results for the six months ended July 2, 2007 are as follows:

--  For the first six months of 2007, comparable consolidated restaurant
    sales decreased 1.9% as compared to the first six months of 2006.
    Comparable consolidated restaurant sales include only units that have been
    open for 15 months or longer and do not include the results from Smith &
    Wollensky's in New Orleans and Dallas, The Manhattan Ocean Club, Quality
    Meats or Park Avenue Café, which was closed on May 23, 2007 and renovated
    into our newest concept, Park Avenue (Summer, Autumn, Winter, Spring),
    which opened on June 8, 2007.
    
--  For the first six months of 2007, total consolidated restaurant sales
    decreased $757,000 to $60.3 million, as compared to $61.1 million in the
    first six months of 2006. Results for the first six months of 2007 reflect
    no sales contribution from the Smith & Wollensky in New Orleans and Dallas,
    but do include sales from Quality Meats and Park Avenue (Summer, Autumn,
    Winter, Spring).
    
--  Net loss for the six months ended July 2, 2007 was ($785,000), or
    ($0.09) per basic share, vs. a net income of $1.1 million, or $0.13 per
    basic and diluted share in 2006.
    
--  Pro forma net income for the six months ended July 2, 2007 was
    $624,000 or $0.07 per basic and diluted share, as compared to a pro forma
    net income of $111,000 in 2006. Pro forma net income in 2007 reflects the
    exclusion of $1.8 million of costs associated with the proposed merger with
    Patina Restaurant Group, LLC, net gain on the sale of the retail business
    of $259,000, the write-off of the deferred rent balance for Cité restaurant
    of $563,000, which closed on April 2, 2007, as well as the exclusion of the
    write-down of renovated restaurant assets of $438,000 relating to Park
    Avenue (Summer, Autumn, Winter, Spring). Pro forma net income for the six
    months ended July 3, 2006 reflects the exclusion of $969,000 of insurance
    proceeds related to the impairment of the assets at our Smith & Wollensky
    in New Orleans. A reconciliation of pro forma net income to GAAP net income
    (loss) is included in the financial tables that follow.
    

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 second quarter ended July 2, 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. 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 Summer, 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, including the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 2, 2007. 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
              Unaudited Consolidated Statements of Operations
          (dollar amounts in thousands, except per share amounts)


                          Second Quarter Ended        Six Months Ended
                          July 2,      July 3,      July 2,      July 3,
                            2007         2006         2007         2006
                        -----------  -----------  -----------  -----------
                        (unaudited)  (unaudited)  (unaudited)  (unaudited)

 Consolidated
  restaurant sales      $    28,446  $    30,242  $    60,297  $    61,054
 Cost of consolidated
  restaurant sales:
     Food and beverage
      costs                   8,835        9,370       18,748       18,944
     Salaries and
      related benefit
      expenses                7,699        8,504       16,588       17,113
     Restaurant
      operating
      expenses                5,032        4,968       10,431        9,969
     Occupancy and
      related expenses        2,066        2,157        3,614        4,259
     Marketing and
      promotional
      expenses                  981        1,088        2,260        2,337
     Depreciation and
      amortization
      expenses                  921        1,055        1,842        2,123
     Write-down of
      renovated
      restaurant assets         438           --          438           --
     Insurance
      proceeds, net              --         (423)          --         (969)
                        -----------  -----------  -----------  -----------
       Total cost of
        consolidated
        restaurant
        sales                25,972       26,719       53,921       53,776
                        -----------  -----------  -----------  -----------
     Income from
      consolidated
      restaurant
      operations              2,474        3,523        6,376        7,278
 Management fee income          231          234          458          472
                        -----------  -----------  -----------  -----------
 Income from
  consolidated and
  managed restaurants         2,705        3,757        6,834        7,750
 General and
  administrative
  expenses                    2,119        2,246        4,168        4,838
 Gain on sale of retail
  business, net                  --           --         (259)          --
 Transaction costs              414           --        1,793           --
 Royalty expense                432          451          918          929
                        -----------  -----------  -----------  -----------
 Operating income
  (loss)                       (260)       1,060          214        1,983
 Interest expense              (147)        (151)        (315)        (303)
 Amortization of
  deferred debt
  financing costs                (7)         (14)         (13)         (21)
 Interest income                100           31          133           65
                        -----------  -----------  -----------  -----------
 Interest expense net
  of interest income            (54)        (134)        (195)        (259)
                        -----------  -----------  -----------  -----------
 Income (loss) before
  provision for income
  taxes                        (314)         926           19        1,724
 Provision for income
  taxes                         152          104          308          214
                        -----------  -----------  -----------  -----------
 Income (loss) before
  income of
  consolidated variable
  interest entity              (466)         822         (289)       1,510
 Income of consolidated
  variable interest
  entity                       (346)        (250)        (496)        (430)
                        -----------  -----------  -----------  -----------
 Net income (loss)      $      (812) $       572  $      (785) $     1,080
                        ===========  ===========  ===========  ===========
 Net income (loss) per
  share:
    Basic and diluted   $     (0.09) $      0.07  $     (0.09) $      0.13
                        ===========  ===========  ===========  ===========
 Weighted average
  common shares
  outstanding:
    Basic                 8,605,194    8,590,643    8,601,124    8,595,178
                        ===========  ===========  ===========  ===========
    Diluted               8,605,194    8,635,060    8,601,124    8,643,164
                        ===========  ===========  ===========  ===========





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


                          Second Quarter Ended        Six Months Ended
                          July 2,      July 3,      July 2,      July 3,
                            2007         2006         2007         2006
                        -----------  -----------  -----------  -----------
                        (unaudited)  (unaudited)  (unaudited)  (unaudited)


Net income (loss)       $      (812) $       572  $      (785) $     1,080

Transaction selling
 costs                          414           --        1,793           --
Gain on sale of retail
 business, net                   --           --         (259)          --
Write-off of deferred
 rent (closed
 restaurant)                     --           --         (563)          --
Write-down of renovated
 restaurant assets              438           --          438           --

Insurance proceeds,
 net (building and
 contents only)                  --         (423)          --         (969)

                        -----------  -----------  -----------  -----------

Pro forma net income(1) $        40  $       149  $       624  $       111
                        ===========  ===========  ===========  ===========

Pro forma net income
 per share:

  Basic and diluted     $      0.00  $      0.02  $      0.07  $      0.01
                        ===========  ===========  ===========  ===========

Weighted average
 common shares
 outstanding:

  Basic                   8,605,194    8,590,643    8,601,124    8,595,178
                        ===========  ===========  ===========  ===========

  Diluted                 8,784,190    8,635,060    8,715,395    8,643,164
                        ===========  ===========  ===========  ===========


(1)  Pro forma net income  excludes transaction selling
 costs associated with proposed merger, net gain on the sale of the retail
 business, write-off of deferred rent balance for a closed restaurant,
 write-down of renovated restaurant assets  and certain insurance proceeds.

Management believes that 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)

                                                    July 2,    January 1,
                                                      2007         2007
                                                  ===========  ===========
                Assets
Current assets:
  Cash and cash equivalents                       $     7,021  $     8,270
  Short-term investments                                  356          311
  Accounts receivable, net                                766          483
  Credit card receivable, net                           1,130        2,217
  Due from managed units                                  238          116
  Merchandise inventory                                 4,434        4,961
  Prepaid expenses and other current assets             1,443        1,365
                                                  ===========  ===========
  Total current assets                                 15,388       17,723
Property and equipment, net                            45,784       46,185
Assets held for sale, net of impairment charges         2,144        5,873
Goodwill                                                6,886        6,886
Licensing agreement, net                                2,898        2,975
Long-term investments                                   3,175        3,175
Other assets                                            3,768        3,936
                                                  ===========  ===========
  Total assets                                    $    80,043  $    86,753
                                                  ===========  ===========
          Liabilities and Stockholders’ Equity
Current liabilities:
  Current portion of long-term debt               $       161  $       944
  Current portion of obligations under capital
   lease                                                  106          148
  Current portion of deferred gain                        352          367
  Due to managed units                                     35          967
  Accounts payable and accrued expenses                10,508       14,156
                                                  ===========  ===========
  Total current liabilities                            11,162       16,582
Obligations under capital leases                        7,420        7,601
Deferred gain on sales leasebacks                      12,388       12,604
Long-term debt, net of current portion                  2,094        2,180
Deferred rent                                           8,590        9,120
                                                  ===========  ===========
  Total liabilities                                    41,654       48,087

Interest in consolidated variable interest
 entity                                                  (239)        (494)
Commitments and contingencies
Stockholders’ equity:
  Common stock                                             94           94
  Additional paid-in capital                           70,501       70,293

  Accumulated deficit                                 (27,521)     (26,736)
  Accumulated other comprehensive income                  234          189

  Treasury stock                                       (4,680)      (4,680)
                                                  ===========  ===========
                                                       38,628       39,160
                                                  ===========  ===========
  Total liabilities and stockholders’ equity      $    80,043  $    86,753
                                                  ===========  ===========

Contact Information

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