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Pizza Inn, Inc. Reports Results for the Second Quarter of Fiscal Year 2008

3.8% Domestic Chain-Wide Comparable Sales Growth and New International Master Licenses Fuel Strong Quarter

PIZZA INN, INC. today reported net income of $0.08 per share for its second fiscal quarter ended December 23, 2007 versus net income of $0.01 per share for the same quarter in the prior fiscal year. The quarter resulted in net income of $853,000 versus a net income of $152,000 for the same quarter in the prior fiscal year on revenues of $12.7 million and $11.5 million respectively. Operating performance for the second quarter of fiscal year 2008 included the following:

  -- Total domestic chain-wide comparable restaurant sales increased 3.8%
     for the second quarter and 2.7% year-to-date compared to the comparable
     periods in the prior fiscal year.
  -- Comparable domestic buffet restaurant sales increased 5.2% for the
     second quarter and 4.3% year-to-date compared to the comparable periods
     in the prior fiscal year.
  -- Four new domestic franchised buffet restaurants opened.
  -- General and administrative expenses for the second quarter decreased
     36% or $405,000 due primarily to lower payroll costs associated with
     reductions in headcount and lower legal fees due to the settlement of
     litigation in the prior fiscal year.
  -- Income of $150,000 associated with the signing of master license
     agreement in the country of Kuwait.
  -- Income of $284,000 related to the settlement of litigation.
  -- Interest expense decreased 100% or $274,000 compared to the same
     quarter in the prior fiscal year due to the repayment of all
     outstanding debt in December 2006.


As of the date of this press release, the Company has repurchased approximately 604,000 shares of its common stock under the 2007 Stock Purchase Plan approved by the Board of Directors in the fourth quarter of fiscal 2007.

Charlie Morrison, President and CEO, commented, "Our business continues to strengthen. Our same store sales growth momentum continues and reflects the investments made by our franchisees in their businesses. Our four new franchised buffet restaurants opened strong during the quarter and were a hit with customers in their markets. These openings and fewer restaurant closings contributed to positive overall domestic chain-wide sales growth for the first time in twelve quarters. We believe we have put the right team in place to restore a strong restaurant operating culture to Pizza Inn, led by our newly-appointed Vice President of Operations, Jason Daniel. Jason brings a wealth of experience to the table and is expected to ensure that we deliver the experience that Pizza Inn customers have come to expect over the past 50 years."

Certain statements in this press release, other than historical information, may be considered forward-looking statements, within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, and are subject to various risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those anticipated, estimated or expected. Among the key factors that may have a bearing on our operating results, performance or financial condition are our ability to implement our growth strategies, national, regional and local economic conditions affecting the restaurant/entertainment industry, competition within the restaurant and entertainment industries, sales cannibalization, the success of our franchise operations, negative publicity and fluctuations in results of operations, including those attributable to seasonality, government regulations, weather, commodity, insurance and labor costs.

Pizza Inn, Inc. (https://www.pizzainn.com/) is headquartered in The Colony, Texas, along with its distribution division, Norco Restaurant Services Company. Pizza Inn franchises approximately 340 restaurants and owns one restaurant with annual and domestic and international chain-wide sales of approximately $147 million.

   Contact:
   Danny Meisenheimer
   VP of Brand Management
   Pizza Inn, Inc.
   469-384-5000
   [email protected]



                             PIZZA INN, INC.
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In thousands, except per share amounts)
                               (Unaudited)

                                  Three Months Ended     Six Months Ended
                                  December   December  December    December
   REVENUES:                      23, 2007   24, 2006  23, 2007    24, 2006

    Food and supply sales         $11,174    $10,232    $21,953     $20,620
    Franchise revenue               1,346      1,118      2,462       2,307
    Restaurant sales                  175        199        358         389

                                   12,695     11,549     24,773      23,316

  COSTS AND EXPENSES:
    Cost of sales                  10,530      9,974     20,602      19,903
    Franchise expenses                706        746      1,326       1,418
    General and administrative
     expenses                         721      1,126      1,356       2,675
    Severance                          79          -        379           -
    Bad debts                          35          -         58           -
    Loss (gain) on sale of assets       7       (554)         7        (564)
    Other income                        -       (146)         -        (179)
    (Recovery) provision for
     litigation costs                (284)      (108)      (284)        302
    Interest expense                    -        274          -         474
                                   11,794     11,312     23,444      24,029

  INCOME (LOSS) FROM CONTINUING
   OPERATIONS BEFORE TAXES            901        237      1,329        (713)
    Income taxes                        -          -          -         -
  INCOME (LOSS) FROM CONTINUING
   OPERATIONS                         901        237      1,329        (713)

    Income (loss) from
     discontinued operations,
     net of taxes                     (48)       (85)      (131)       (196)
  NET INCOME (LOSS)                  $853       $152     $1,198       $(909)

  EARNINGS PER SHARE OF COMMON
   STOCK -- BASIC:
    Income (loss) from continuing
     operations                     $0.09      $0.02      $0.13      $(0.07)
    Income (loss) from
     discontinued operations       $(0.01)    $(0.01)    $(0.01)     $(0.02)
    Net income (loss)               $0.08      $0.01      $0.12      $(0.09)

  EARNINGS PER SHARE OF COMMON
   STOCK -- DILUTED:
  Diluted income (loss) per
   common share
    Income (loss) from
     continuing operations          $0.09      $0.02      $0.13      $(0.07)
    Income (loss) from
     discontinued operations       $(0.01)    $(0.01)    $(0.01)     $(0.02)
    Net income (loss)               $0.08      $0.01      $0.12      $(0.09)

  Weighted average common shares
   outstanding -- basic             10,061     10,138     10,114      10,138

  Weighted average common
   shares outstanding -- diluted    10,087     10,138     10,142      10,138



                             PIZZA INN, INC.
        CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                              (In thousands)

                                  Three Months Ended     Six Months Ended
                                  December   December   December    December
                                  23, 2007   24, 2006   23, 2007    24, 2006

  Net income (loss)                   $853       $152     $1,198      $(909)
  Interest rate swap (loss)
   gain -- (net of tax
   expense)                              -          -          -         14
  Comprehensive income (loss)         $853       $152     $1,198      $(895)



                             PIZZA INN, INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                   (In thousands, except share amounts)
                               (Unaudited)

                                                December 23,       June 24,
  ASSETS                                            2007             2007

  CURRENT ASSETS
    Cash and cash equivalents                      $1,180           $1,879
    Accounts receivable, less allowance
     for bad debts of $501 and $451,
     respectively                                   3,607            2,716
    Notes receivable, current portion                   9                8
    Inventories                                     1,351            1,518
    Property held for sale                            331              336
    Deferred income tax assets, net                   458              458
    Prepaid expenses and other assets                 281              165
        Total current assets                        7,217            7,080

  LONG-TERM ASSETS
    Property, plant and equipment, net                623              778
    Notes receivable                                    9               12
    Re-acquired development territory, net            142              239
    Deposits and other assets                         139               85
                                                   $8,130           $8,194

  LIABILITIES AND SHAREHOLDERS' EQUITY
  CURRENT LIABILITIES
    Accounts payable -- trade                      $2,018           $2,082
    Accrued expenses                                1,520            1,805
        Total current liabilities                   3,538            3,887

  LONG-TERM LIABILITIES
    Deferred gain on sale of property                 197              209
    Deferred revenues                                 297              314
    Other long-term liabilities                         8                7
        Total liabilities                           4,040            4,417

  COMMITMENTS AND CONTINGENCIES

  SHAREHOLDERS' EQUITY
    Common stock, $.01 par value;
     authorized 26,000,000 shares;
     issued 15,123,909 and 15,120,319
     shares, respectively;
     outstanding 9,858,977 and
     10,168,494 shares, respectively                  151              151
    Additional paid-in capital                      8,473            8,471
    Retained earnings                              15,996           14,799
    Treasury stock at cost
      Shares in treasury: 5,264,932 and
       4,951,825, respectively                    (20,530)         (19,644)
        Total shareholders' equity                  4,090            3,777
                                                   $8,130           $8,194



                             PIZZA INN, INC.
             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In thousands)
                               (Unaudited)

                                                    Six Months Ended
                                              December 23,      December 24,
                                                  2007              2006

  CASH FLOWS FROM OPERATING ACTIVITIES:

    Net income (loss)                            $1,198            $(909)
    Adjustments to reconcile net income
     (loss) to cash provided (used) by
     operating activities:
      Depreciation and amortization                 171              448
      Severance expense                             379                -
      Deferred rent expense                           -                3
      Stock compensation expense                      2               97
      (Recovery) provision for
       litigation costs                            (284)             302
      Loss (gain) on sale of assets                   7             (564)
      Provision for bad debts                        58                -
    Changes in operating assets and
     liabilities:
      Notes and accounts receivable              (1,039)             118
      Inventories                                   167              212
      Deferred revenue                              (17)             196
      Accounts payable -- trade                     (64)             626
      Accrued expenses                             (363)          (3,096)
      Prepaid expenses and other                    (51)            (331)
      Cash provided (used) by operating
       activities                                   164           (2,898)

  CASH FLOWS FROM INVESTING ACTIVITIES:

    Proceeds from sale of assets                     92           11,319
    Capital expenditures                            (69)            (248)
      Cash provided by investing
       activities                                    23           11,071

  CASH FLOWS FROM FINANCING ACTIVITIES:
    Deferred financing costs                          -              (26)
    Repayments of long-term bank debt                 -           (8,044)
    Repurchase of common stock                     (886)               -
      Cash used for financing activities           (886)          (8,070)

  Net (decrease) increase in cash and
   cash equivalents                                (699)             103
  Cash and cash equivalents, beginning
   of period                                      1,879              184
  Cash and cash equivalents, end of
   period                                        $1,180             $287



                             PIZZA INN, INC.
            SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
                              (In thousands)
                               (Unaudited)

                                                    Six Months Ended
                                              December 23,      December 24,
                                                 2007              2006

  CASH PAYMENTS FOR:

    Interest                                       $-               $495

  NON CASH FINANCING AND INVESTING
   ACTIVITIES:
    Capital lease obligations incurred
    Loss on interest rate swap                     $-                $22

First Call Analyst:
FCMN Contact: [email protected]

SOURCE: Pizza Inn, Inc.

CONTACT: Danny Meisenheimer, VP of Brand Management of Pizza Inn, Inc.,
+1-469-384-5000, [email protected]