Pizza Inn Reports Results for Fourth Quarter and Fiscal Year 2007
Operating Performance Strengthens as Company Posts Positive Same Store Sales Growth in Q4
PIZZA INN, INC.
-- Comparable buffet restaurant sales increased 3.1% for the fourth
quarter from the fourth quarter of fiscal 2006. For fiscal 2007,
comparable buffet restaurant sales increased 0.8% from fiscal 2006, the
first such annual increase in five years.
-- Domestic chain-wide comparable restaurant sales increased 1.1% for the
fourth quarter from the fourth quarter of fiscal 2006. For fiscal
2007, domestic chain-wide comparable restaurant sales decreased 0.7%
from fiscal 2006.
-- Overall domestic chain-wide restaurant sales decreased 3.2% for the
fourth quarter from the fourth quarter of fiscal 2006 due to a net
reduction in franchise openings driven by additional closures of
underperforming restaurants.
-- General and administrative expenses for fiscal 2007 were lower by
$1.5 million compared to fiscal 2006. The reduction was due primarily
to a reduction in payroll expenses of $416,000, driven primarily by the
outsourcing of our warehousing and distribution activities, and a
reduction in stock compensation expense of $355,000, due primarily to
the reversal of prior expenses for unvested options that terminated.
Occupancy costs for fiscal 2007 were lower by $211,000 compared to
fiscal 2006, also due primarily to the outsourcing initiative.
-- Net income for the fourth quarter improved $5,079,000 compared to the
fourth quarter of fiscal 2006, due primarily to accrued expenses in the
fourth quarter of fiscal 2006 of $2,800,000 related to the litigation
settlement between the Company and its former CEO as well as an
impairment expense in the fourth quarter of fiscal 2006 of $1,166,000
related to two Company-owned restaurants.
Operating results for the fourth quarter mark the third consecutive profitable quarter for Pizza Inn, further strengthening the Company's financial and cash positions.
Charlie Morrison, Interim CEO and Chief Financial Officer, commented, "We are encouraged by our continued progress. We believe that our foundation is much stronger as evidenced by our increases in cash and the elimination of our debt. The fiscal year end marks the fourth consecutive month of comparable buffet sales gains and reflects the momentum we have achieved in part due to the increasing number of franchisees remodeling their restaurants. We continue to strive to identify ways to reduce costs and improve the profitability of our franchisees to assist in the reinvestment in their businesses. While executing these initiatives, we are working on the long-term development of this chain, specifically in the areas of domestic and international restaurant growth."
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 direct bearing on Pizza Inn's operating results, performance or financial condition are its ability to implement its growth strategies; success of its franchise operations; national, regional and local economic conditions affecting the restaurant industry; competition within the restaurant industry; restaurant sales cannibalization; negative publicity; fluctuations in quarterly results of operations, including seasonality; government regulations; weather; and commodity, insurance and labor costs.
Pizza Inn, Inc. (http://www.pizzainn.com/) is headquartered in The Colony, Texas, along with its distribution division, Norco Restaurant Services Company. Pizza Inn franchises approximately 350 restaurants and owns one restaurant with annual domestic and international chain-wide sales of approximately $145 million.
PIZZA INN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Year Ended
June 24, June 25, June 26,
2007 2006 2005
REVENUES:
Food and supply sales $41,029 $44,202 $49,161
Franchise revenue 4,622 4,799 5,162
Restaurant sales 1,485 1,458 946
47,136 50,459 55,269
COSTS AND EXPENSES:
Cost of sales 40,101 43,762 46,617
Franchise expenses 2,633 3,126 2,791
General and administrative expenses 4,002 5,531 4,882
Gain on sale of assets (570) (149) --
Impairment of long-lived assets and
goodwill 48 1,319 --
Litigation settlement accrual 302 2,800 --
Other (income) expense (159) -- --
Provision for bad debt 96 301 30
Total costs and expenses, net 46,453 56,690 54,320
OPERATING INCOME (LOSS) 683 (6,231) 949
Interest expense 477 787 590
INCOME (LOSS) BEFORE INCOME TAXES 206 (7,018) 359
Provision (benefit) for income taxes -- (1,029) 155
NET INCOME (LOSS) $206 $(5,989) $204
Basic earnings (loss) per common share $0.02 $(0.59) $0.02
Diluted earnings (loss) per common share $0.02 $(0.59) $0.02
Weighted average common shares
outstanding 10,145 10,123 10,105
Weighted average common and
potentially dilutive common shares
outstanding 10,146 10,123 10,142
PIZZA INN, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
June 24, June 25,
ASSETS 2007 2006
CURRENT ASSETS
Cash and cash equivalents $1,879 $184
Accounts receivable, less allowance for
doubtful accounts of $451 and $324,
respectively 2,716 2,627
Accounts receivable - related parties -- 452
Notes receivable, current portion 8 52
Inventories 1,518 1,772
Property held for sale 336 --
Deferred income tax assets 458 1,145
Prepaid expenses and other 165 299
Total current assets 7,080 6,531
LONG-TERM ASSETS
Property, plant and equipment, net 778 11,921
Notes receivable 12 20
Re-acquired development territory, net 239 431
Deposits and other 85 98
$8,194 $19,001
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $2,082 $2,217
Accrued expenses 1,805 4,791
Current portion of long-term debt -- 8,044
Total current liabilities 3,887 15,052
LONG-TERM LIABILITIES
Deferred gain on sale of property 209 --
Deferred revenues 314 379
Other long-term liabilities 7 58
Total liabilities 4,417 15,489
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; authorized
26,000,000 shares; issued 15,120,319 and
15,090,319 shares, respectively;
outstanding 10,168,494 and 10,138,494
shares, respectively 151 151
Additional paid-in capital 8,471 8,426
Retained earnings 14,799 14,593
Accumulated other comprehensive loss -- (14)
Treasury stock at cost
Shares in treasury: 4,951,825 for both
years (19,644) (19,644)
Total shareholders' equity 3,777 3,512
$8,194 $19,001
PIZZA INN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended
June 24, June 25, June 26,
2007 2006 2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $206 $(5,989) $204
Adjustments to reconcile net income
(loss) to cash provided by (used for)
operating activities:
Depreciation and amortization 692 1,214 1,143
Impairment of long-lived assets &
goodwill 48 1,443 --
Deferred rent expense (9) 56 --
Provision for bad debt 96 301 30
Stock compensation expense (14) 341 --
Litigation expense accrual 302 2,800 --
Gain on sale of assets (570) (149) --
Deferred income taxes 687 (1,029) 39
Deferred revenue 196 542 --
Changes in operating assets and liabilities:
Notes and accounts receivable 320 884 (256)
Inventories 254 145 (205)
Accounts payable - trade (135) 255 716
Accrued expenses (3,520) 7 (735)
Prepaid expenses and other 76 414 152
Cash (used for) provided by
operating activities (1,371) 1,235 1,088
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 11,325 589 --
Capital expenditures (249) (2,227) (753)
Cash provided by (used for)
investing activities 11,076 (1,638) (753)
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred financing costs (25) -- --
Change in line of credit, net -- 747 (234)
Repayments of long-term bank debt (8,044) (414) (415)
Purchases of treasury stock -- -- (160)
Proceeds from exercise of stock options 59 81 30
Cash (used for) provided by
financing activities (8,010) 414 (779)
Net increase in cash and cash equivalents 1,695 11 (444)
Cash and cash equivalents, beginning of
year 184 173 617
Cash and cash equivalents, end of year $1,879 $184 $173
Contact:
Danny Meisenheimer
VP of Brand Management
Pizza Inn, Inc.
469-384-5000
[email protected]
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,
Web site: http://www.pizzainn.com/