Schlotzsky’s, Inc. (Nasdaq:BUNZ) today announced results for the third quarter ended September 30, 2001, including net income of $659,000, or $0.09 per share (diluted), a 358% increase over net income of $144,000, or $0.02 per share in the third quarter of last year.
Revenues for the current quarter were $15.5 million, an increase of 2.5% over the third quarter of 2000. General and administrative (G&A) expenses for the quarter, including severance costs related to a reduction in force, decreased 14.4 % to $4.9 million compared to $5.7 million for the third quarter of 2000.
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For the first nine months of 2001, the Company reported net income of $2.0 million, or $0.27 per share (diluted), compared to a net loss of $2.7 million, or a loss of $0.36 per share, for the nine months ended September 30, 2000. Revenue for the first nine months of 2001 increased 6.2% to $46.9 million compared to the same period last year.
For the trailing 12 months ended September 30, 2001, Schlotzsky’s recorded revenues of $61.9 million and net income of $2.4 million, or $0.32 per share.
“The results for this quarter are a clear indication that the strategy to improve our overhead structure and to focus on recurring revenue, which we put in place in the last half of 2000, is yielding positive results. The results are evidence that we have a solid base to build on for the future. Even though our system experienced some sales declines in this transition period, mostly due to economic factors, we delivered improved earnings. Our income for the quarter increased more than 350 percent,” said John Wooley President and CEO.
Other developments include:
- Systemwide sales, including both Company-owned and franchised restaurants, were $106.2 million.
- Systemwide same store sales declined 5.2% from the third quarter of 2000.
- Recurring revenue from royalties, brand contribution and restaurant sales were approximately 95 percent of Company total revenue.
- Earnings before interest, taxes, depreciation and amortization (EBITDA) increased to $2.5 million in the third quarter compared to $1.8 million in the comparable quarter last year.
- Commercial bank debt reduction continued, with $1.4 million paid down in the quarter.
- The Schlotzsky’s®Deli system ended the third quarter with 692 stores systemwide (29 Company-owned and 663 franchised).
- 173,000 shares of Company common stock have been repurchased through September 30, 2001, including 9,500 shares in the third quarter.
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By GlobalData“Schlotzsky’s is now ready to focus its efforts on resuming growth in systemwide sales. We believe we have the best store designs and best store operating system that we have had in the history of our Company,” said Wooley. Future new restaurants will include both the 3,200 square foot freestanding units and shopping center units located in prime retail shopping areas, as well as Company-owned restaurants. Most new Company-owned units will incorporate such prototype features as coffee bars, pastries, computers with free internet access, and an upgraded decor package.
“We’re encouraged that many of the features and operating systems we’ve developed in our 3200 square foot freestanding restaurants are now working their way into our shopping center design. We believe this design offers franchisees an attractive alternative that can deliver strong value and good returns,” said Wooley.
“We have continued to make progress in the retail channel, and we’re seeing strong interest in our potato chips and meats,” said Wooley. Branded products have now been accepted into several retail chains, including Costco and Wal-Mart Supercenters.
OUTLOOK
Management expects earnings per share for the fourth quarter of 2001 to exceed those of the fourth quarter of 2000, when they were $0.05 per share. For the year 2002, based on the Company’s new cost structure, management expects earnings per share to exceed 2001 earnings, even if the economy remains soft.
“Our focus in 2002 will be on growth in systemwide sales using the tools we have developed in our Company-owned restaurants over the past year,” concluded Wooley.
Schlotzsky’s, Inc., founded in Austin, Texas, in 1971, is a franchisor of quick-service restaurants featuring made-to-order hot sandwiches served on distinctive sourdough bread, along with sourdough crust pizzas, salads and soups. As of September 30, 2001, there were 692 Schlotzsky’s® Deli restaurants open and operating in 38 states, the District of Columbia and 10 foreign countries. Visit www.schlotzskys.com or www.cooldeli.com for more information and e-coupons.
This news release contains “forward-looking statements,” as defined under the federal securities laws. Forward-looking statements include those regarding the business prospects and projected earnings of the Company and the projected sales of the Schlotzsky’s® Deli system. Forward-looking statements reflect the Company’s expectations based on current information. The Company undertakes no obligation to update any forward-looking statements. Shareholders and prospective investors are cautioned that actual future results may be materially different because of various risks and uncertainties, including but not limited to: national and local economic conditions; success of the Company’s continuing cost control efforts; appeal of restaurant models to, and results for, existing and prospective franchisees; restaurant openings and closings by franchisees; and other factors identified in the Company’s Form 10-K under the heading “Risk Factors.”
SCHLOTZSKY’S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
—————————————————-
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2001 2000 2001 2000
————————————————–
Revenues
Royalties $ 5,471,449 $ 5,723,246 $16,639,449 $17,147,441
Franchise fees 132,500 150,000 317,500 420,850
Developer fees 208,901 120,923 378,950 622,765
Restaurant sales 7,320,478 6,623,139 22,384,680 18,603,091
Brand contribution 1,884,192 1,988,057 5,580,338 5,436,507
Other fees and
revenue 489,305 526,319 1,616,832 1,966,926
————————————————–
Total
revenues 15,506,825 15,131,684 46,917,749 44,197,580
————————————————–
Expenses
Service costs:
Royalties 1,162,233 1,370,912 3,646,464 4,035,155
Franchise fees 56,250 56,667 133,750 185,833
————————————————–
1,218,483 1,427,579 3,780,214 4,220,988
————————————————–
Restaurant operations:
Cost of sales 2,060,403 1,905,064 6,254,081 5,318,991
Labor cost 3,056,962 2,861,058 9,404,125 7,712,873
Operating
expenses 1,725,348 1,475,704 5,078,803 4,071,041
————————————————–
6,842,713 6,241,826 20,737,009 17,102,905
————————————————–
Equity loss on
investment 32,628 — 87,080 —
————————————————–
General and
administrative 4,873,360 5,692,439 14,563,112 22,910,400
————————————————–
Depreciation and
amortization 1,072,062 883,622 3,109,830 2,754,372
————————————————–
Total
expenses 14,039,246 14,245,466 42,277,245 46,988,665
————————————————–
Income (loss)
from
operations 1,467,579 886,218 4,640,504 (2,791,085)
Other
Interest income 251,471 448,946 781,737 1,893,041
Interest expense (665,512) (1,117,091) (2,158,246) (2,729,439)
————————————————–
Income (loss)
before
income taxes 1,053,538 218,073 3,263,995 (3,627,483)
Provision (credit)
for income taxes 395,000 74,145 1,263,000 (955,400)
————————————————–
Net income
(loss) $ 658,538 $ 143,928 $ 2,000,995 $(2,672,083)
==================================================
Earnings per
common share
– basic and
diluted $ 0.09 $ 0.02 $ 0.27 $ (0.36)
==================================================
OTHER OPERATING DATA
Restaurants Open
– Beginning
of Period 702 724 711 743
————————————————–
Openings During
Period – New 6 9 15 24
Reopenings 3 8 14 22
————————————————–
Total Openings 9 17 29 46
Closings During
Period (19) (19) (48) (67)
————————————————–
Restaurants Open
– End of Period 692 722 692 722
==================================================
Systemwide Sales $106,165,000 $111,443,000 $323,119,000 $326,003,000
Increase (decrease)
in Systemwide Sales (4.7%) 6.1% (0.9%) 8.7%
Increase (decrease)
in Same Store Sales (5.2%) 4.5% (1.3%) 4.8%
Average Weekly Sales $11,695 $11,900 $11,772 $11,530
Increase (decrease)
in Average Weekly
Sales (1.7%) 7.8% 2.1% 8.7%
