GRILE Grill Concepts Inc. (MM)

Grill Concepts Reports 2004 Second Quarter Results LOS ANGELES, Oct. 15 /PRNewswire-FirstCall/ -- Grill Concepts, Inc. (NASDAQ:GRILE) today reported that it has filed with the SEC its Form 10-Q for the three- and six-month periods ended June 27, 2004. The report had been delayed to complete a review of the company's consolidation principles applied to certain affiliates. For the 2004 second quarter, consolidated revenues, including cost reimbursements and management and license fees, increased 9.3 percent to $15.9 million, from $14.5 million, as adjusted, in the corresponding 2003 period. Total system-wide sales, including all restaurants, owned, operated, managed and licensed, rose to $18.9 million in the quarter, up 8.4 percent from $17.4 million in the 2003 second quarter. Management believes total system-wide sales, computed by adding revenues of unconsolidated restaurants to total revenues and subtracting cost reimbursements and management and license fees, is a key indicator for assessing brand strength. The company sustained a net loss of $163,000, or $0.03 per share, in the 2004 second quarter, compared with net income of $36,000, or $0.01 per diluted share, a year earlier. For the year-to-date period, consolidated revenues, including cost reimbursements and management and license fees, increased to $32.9 million, up 13.5 percent from $28.9 million, as restated, in the prior-year period. Total system-wide sales, including all restaurants, owned, operated, managed and licensed, advanced 10.9 percent to $38.5 million from $34.7 million in the 2003 six-month period. Same store sales year-to-date increased 3.27 percent. The company posted a net loss of $79,000, or $0.01 per share, in the first half of 2004, compared with adjusted net income of $269,000, or $0.05 per diluted share, in the 2003 six-month period. "The increase in revenues for both the three and six-month periods, primarily reflects the strong contribution from our newest Daily Grill restaurant in Bethesda, Maryland," said Robert Spivak, president and chief executive officer of Grill Concepts. "We are pleased with the performance to date, which underscores the growing strength of the Daily Grill brand." Spivak added: "We remain excited about our plans to open Daily Grill restaurants at prominent Southern California locations, including Long Beach prior to the end of this year, Santa Monica during the first quarter of 2005, and downtown Los Angeles in the second quarter of 2005. These new openings will further strengthen the penetration in our core market and will provide exceptional, added exposure for our restaurant brands." Results for the 2004 three- and six-month periods and for the corresponding prior-year periods reflect a re-evaluation of certain accounting principles in conjunction with the review by the company's independent accountants of the company's financial statements for the first and second quarters of 2004. Based on the results of the re-evaluation of accounting principles, the company has filed an amended Form 10-K for the 2003 year and an amended Form 10-Q for the 2004 first quarter to restate the results previously reported. As announced in May 2004, upon a review of the company's stock option plan, grants under the plan were determined to require a variable accounting treatment that resulted in an associated non-cash charge to compensation expense. As a result of the change in accounting treatment, the financial statements for the 2003 year were restated from those originally issued by the company to reflect the expensing of employee stock options and to make other miscellaneous adjustments. Upon a re-evaluation in September 2004 of the accounting for the company's joint ventures, it was determined that the terms of the company's investments in the San Jose Grill, the Chicago Grill on the Alley and the South Bay Daily Grill, precluded consolidation as a subsidiary, and required treatment under the equity method. In conjunction with this re-evaluation, the company also re-evaluated its manner of reporting certain expense reimbursements from managed restaurants and the reporting of certain tenant improvement allowances. Pursuant to that re-evaluation process, it was determined that the company's revenues should be grossed-up to reflect reimbursed expenses from managed restaurants as revenues with an offsetting deduction to reflect the payment of those expenses. It was also determined that certain tenant improvement allowances that had, prior to 2003, not been reflected on the company's balance sheet should have been reflected as increased depreciable assets and as a long-term liability. Based on the re-evaluation of applicable accounting principles, the financial statements for prior periods were restated to revise the accounting for the previously noted joint ventures, to record costs and revenues associated with reimbursed costs under management agreements and to make other miscellaneous corrections. Additionally, the company corrected its initial adoption of FASB Interpretation No. 46 (FIN 46) related to consolidation of variable interest equities, which was effected in the first quarter of 2004. The company also elected to apply the retroactive adoption provisions of FIN 46 to the previously reported amounts for 2003 so that the financial presentation is more consistent with ongoing financial position and results of operations. As a result of the retroactive adoption, The San Jose Grill, the Chicago Grill on the Alley, the South Bay Daily Grill and the Universal CityWalk Daily Grill are presented as consolidated entities prior to fiscal 2004 with no minority interest reflected with respect to the Chicago Grill on the Alley. About Grill Concepts, Inc. Grill Concepts owns and manages upscale casual and fine dining, full service restaurants under two core brand names: The Grill on the Alley and Daily Grill. The company operates 23 restaurants including four The Grill on the Alley-branded restaurants in Beverly Hills, Hollywood, San Jose, California, and Chicago, as well as 19 Daily Grill restaurants in Southern and Northern California, the Washington, D.C. metropolitan region, Houston, Texas, Portland, Oregon and Skokie, Illinois. This news release contains forward-looking statements, which are based on current operations, plans and expectations. Such statements include, but are not limited to, the company's ability to continue expanding its restaurant network, and the company's ability to complete construction and open Daily Grill restaurants in Santa Monica and downtown Los Angeles, among other factors. Actual results may differ materially from these statements due to risks and uncertainties beyond the company's control, which are detailed from time to time in the company's filings with the United States Securities and Exchange Commission. GRILL CONCEPTS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (unaudited) Three Months Ended Six Months Ended June 27, June 29, June 27, June 29, 2004 2003 2004 2003 (restated) (restated) Revenues: Sales $12,646,000 $12,050,000 $26,156,000 $24,184,000 Cost reimbursements 2,903,000 2,217,000 6,093,000 4,284,000 Management and license fees 306,000 235,000 602,000 466,000 Total revenues 15,855,000 14,502,000 32,851,000 28,934,000 Cost of sales (exclusive of depreciation, presented separately below) 3,607,000 3,354,000 7,379,000 6,637,000 Gross profit 12,248,000 11,148,000 25,472,000 22,297,000 Operating expenses: Restaurant operating expenses 8,054,000 7,444,000 16,179,000 14,751,000 Reimbursed costs 2,903,000 2,217,000 6,093,000 4,284,000 Gain on disposal of assets (1,000) -- (1,000) (11,000) General and administrative 1,083,000 993,000 2,310,000 1,903,000 Depreciation and amortization 454,000 428,000 903,000 930,000 Pre-opening costs 1,000 -- 148,000 187,000 Total operating expenses 12,494,000 11,082,000 25,632,000 22,044,000 Income (loss) from operations (246,000) 66,000 (160,000) 253,000 Interest expense, net (66,000) (80,000) (132,000) (162,000) Income (loss) before provision for income taxes and minority interest (312,000) (14,000) (292,000) 91,000 Provision for income taxes (5,000) (26,000) (28,000) (81,000) Minority interest in loss of subsidiaries 166,000 88,000 266,000 284,000 Net income (loss) (151,000) 48,000 (54,000) 294,000 Preferred dividends accrued (12,000) (12,000) (25,000) (25,000) Net income (loss) applicable to common stock $(163,000) $36,000 $(79,000) $269,000 Net income (loss) per share applicable to common stock: Basic net income (loss) $(0.03) $0.01 $(0.01) $0.05 Diluted net income (loss) $(0.03) $0.01 $(0.01) $0.05 Weighted average shares outstanding: Basic 5,590,445 5,537,071 5,568,155 5,537,071 Diluted 5,590,445 5,563,370 5,568,155 5,547,389 GRILL CONCEPTS, INC. AND SUBSIDIARIES RECONCILIATION OF NON-U.S. GAAP MEASURES TO U.S. GAAP (unaudited) System-wide Sales The following table reconciles Grill Concepts' total consolidated revenues, prepared on the basis of GAAP, to total system-wide sales for the periods presented: Three Months Ended Six Months Ended June 27, June 29, June 27, June 29, 2004 2003 2004 2003 (restated) (restated) Total consolidated revenues $15,855,000 $14,502,000 $32,851,000 $28,934,000 Managed restaurants sales 4,027,000 3,203,000 8,048,000 6,037,000 Licensed restaurants sales 2,221,000 2,184,000 4,269,000 4,479,000 Less reimbursed costs (2,903,000) (2,217,000) (6,093,000) (4,284,000) Less management and license fees (306,000) (235,000) (602,000) (466,000) Total system-wide sales $18,894,000 $17,437,000 $38,473,000 $34,700,000 DATASOURCE: Grill Concepts, Inc. CONTACT: Philip Gay, Chief Financial Officer of Grill Concepts, Inc., +1-310-820-5559; or Roger Pondel, or Angie Yang, both of PondelWilkinson Inc., for Grill Concepts, Inc., +1-310-279-5980,

Copyright