Pizza Inn Holdings, Inc. Reports Fourth Quarter and Fiscal Year 2014 Financial Results

Company financial performance strengthens with accelerating growth of Pie Five and strong comparable sales at Pizza Inn and Pie Five.

THE COLONY, Texas - Sept. 23, 2014 // PRNewswire // - Pizza Inn Holdings, Inc. (NASDAQ: PZZI) today reported financial results for the fourth quarter and fiscal year ended June 29, 2014.

Fourth Quarter Highlights:

  • Pizza Inn domestic comparable sales increased 1.5% from the same period in the prior year.
  • Pie Five comparable store sales increased 12.9% from the same period in the prior year.
  • Pie Five Company-owned average weekly sales per store increased 25.2% year over year.
  • Company-owned restaurant sales from continuing operations increased 42.6% year over year, or 53.6% when prior year quarter is normalized to 13 weeks.
  • Adjusted EBITDA, a non-GAAP financial measure, increased by $0.3 million sequentially over the previous quarter to $0.1 million.
  • Net losses improved by $0.3 million over the same quarter of the prior year to a loss of $0.4 million.

Annual Highlights:

  • Pizza Inn domestic comparable store franchisee retail sales decreased 1.1% year over year.
  • Pie Five Company-owned average weekly sales per store increased 12.4% year over year.
  • Company-owned restaurant sales increased 33.0% year over year, or 35.5% when prior year is normalized to 52 weeks.
  • The Company continued to invest in infrastructure to support future Pie Five growth, contributing to an Adjusted EBITDA loss of $0.5 million, a decrease of $1.1 million compared to prior year.
  • Net loss increased $0.3 million from prior year to a loss of $1.6 million

Pizza Inn Holdings, Inc. (NASDAQ: PZZI) today announced results for the fourth fiscal quarter and year ended June 29, 2014. The Company's net loss in the fourth quarter improved by $0.3 million over the comparable period in the prior fiscal year to $0.4 million from a loss of $0.7 million. Conversely, the Company's net loss for the 2014 fiscal year increased $0.3 million to $1.6 million compared to a net loss of $1.3 million in the prior fiscal year. The increase in net loss from prior year was primarily due to higher general and administrative expenses and franchise costs attributable to growth of the Pie Five brand, as well as lower food and supply sales. The fourth fiscal quarter and fiscal year 2014 had 13 and 52 weeks, respectively, as compared to 14 and 53 weeks, respectively, in the same periods of the prior fiscal year.

"Fiscal 2014 was an investment year as we continued to build the talent and infrastructure to effectively grow both of our restaurant brands. That investment is reflected in the losses recorded for the last several quarters," said Randy Gier, President and Chief Executive Officer. "We are very pleased to see the improving financial performance each of the last three quarters, and especially pleased with the most recent quarter results which we believe reflect our turning the corner on this investment of resources. Both of our brands recorded strong positive comparable store sales growth for the fourth quarter, a trend that has continued in the first quarter of fiscal 2015," added Gier.

Fourth Quarter 2014 Operating Results

Total revenues for the fourth quarter of fiscal 2014 and the comparable prior year quarter were $10.9 million and $10.4 million, respectively. When the prior year period is normalized to 13 weeks, fourth quarter franchise revenue increased by 1.5% year over year. Additional franchise development fees previously received from Pie Five franchisees have been deferred and will be recognized as future restaurants are opened.

Pizza Inn domestic franchisee sales for comparable stores increased 1.5% from the same period in the prior year. "We are very pleased to report positive comparable store sales for domestic franchisees in the Pizza Inn system. These results reflect the hard work that we have undertaken in partnership with our franchise leadership to improve quality, drive consistent operating standards, create aligned marketing programs, establish tools, and instill training to run better, more profitable restaurants," said Gier. "We have terrific franchise leaders with whom we are working very closely to restore growth to Pizza Inn. Comparable store sales trends have strengthened each of the last four quarters, with the most recent quarter reporting the first year over year increase in nearly three years. Improving sales and profitability has helped to slow the rate of restaurant closures, and is beginning to instill greater interest in building new restaurants. We have only begun this journey, but appreciate the dedication of all of our franchisees to the work that is required to achieve excellence for our flagship brand," Gier stated.

Pie Five comparable store sales for the fourth quarter of fiscal 2014 increased 12.9% when compared to the same period in the prior year. Average weekly sales in Company-owned Pie Five restaurants increased 25.2% reflecting both strong comparable store sales growth and higher average sales of Company-owned restaurants opened during fiscal 2014.

Gier explained, "We have worked hard over the past two years to refine our Pie Five concept to respond to consumer feedback, to improve site selection through rigorous analysis of each opening, to enhance marketing productivity, and to establish replicable, scalable operating processes. The continued improving results are a direct reflection of that work. We are not only seeing strong positive comparable store sales in our existing restaurants, we are also seeing newer restaurants opening that are sustaining at higher sales levels than the previous restaurants. This is leading to an acceleration of new restaurant openings and additional franchise signings."

Fourth quarter fiscal 2014 food and supply sales decreased by $0.1 million, or 1.5%, compared to the same quarter of the prior year. However, when the prior year period is normalized to 13 weeks, fourth quarter food and supply sales increased over the prior year by $0.4 million, or 6.0%, primarily due to increased average weekly domestic franchisee retail sales.

Fourth quarter Company-owned restaurant sales from continuing operations increased $0.7 million, or 42.6%, compared to the prior year as a result of the opening of one new Company-owned Pie Five restaurant in the fourth quarter of fiscal 2013 and four new Company-owned Pie Five restaurants in fiscal 2014 (one of which was a relocation of an existing restaurant), partially offset by the closing of two Company-owned Pizza Inn restaurants. Fourth quarter general and administrative expenses decreased $0.1 million.

Fiscal Year 2014 Operating Results

Total revenues for the 2014 fiscal year and prior year were $42.2 million and $41.2 million, respectively. Fiscal 2014 franchise revenue decreased by $0.1 million compared to the prior year, primarily due to one less week in fiscal year 2014. A decrease in franchise fees and royalties from Pizza Inn franchisees was largely offset by increased royalties and franchise fees from Pie Five franchisees. Additional franchise development fees previously received from Pie Five franchisees have been deferred and will be recognized as future restaurants are opened.

Fiscal 2014 food and supply sales decreased by $1.3 million, or 4.3%, compared to the prior year, primarily due to decreased Pizza Inn domestic franchisee retail sales. However, based on a comparable 52 week year, fiscal 2014 food and supply sales decreased by only $0.7 million, or 2.4%.

Fiscal 2014 Company-owned restaurant sales increased $2.5 million, or 33.0%, compared to the prior year as a result of the opening of two new Company-owned Pie Five restaurants in the second half of fiscal 2013 and four new Company-owned Pie Five restaurants in fiscal 2014 (one of which was a relocation of an existing restaurant). Fiscal 2014 general and administrative expenses increased $0.3 million over the prior year primarily to support growth for new Company-owned Pie Five restaurants and future growth plans.

Development Review

Nine new Pie Five restaurants were opened by the Company and franchisees in fiscal 2014, including one in the fourth quarter, to bring the fiscal year-end total to 20 stores. Franchisees opened 24 new Pizza Inn restaurants for the year while closing 21 restaurants, ending the fiscal year at 253 total Pizza Inn Company and franchise stores.

"The five Pie Five restaurants opened by franchisees so far in fiscal 2015 are off to a strong start, and we remain on track to nearly double our fiscal year end Pie Five restaurant count by the end of the calendar year," said Gier.

During fiscal 2014, the Company signed nine new franchise development agreements to develop up to 131 Pie Five restaurants and has signed two additional development agreements during the first quarter of fiscal 2015. The Company currently has Pie Five franchise restaurant development commitments for a total of up to 229 restaurants.

Gier continued, "Most importantly, we have prepared and resourced our organization with the tools, the talent, and the systems to reliably replicate and expand. In our business, there is no substitute for great operations delivering comeback food quality and service that surprises on every visit. We are prepared to support our franchisees and to run our own restaurants at world class standards even as we ramp up new restaurant openings."

Gier concluded, "As a result of continued strength in our restaurant performance we will be accelerating Pie Five Company-owned restaurant growth in the coming quarters by expanding the development of Company-owned Pie Five restaurants into several new metropolitan markets in addition to the continued development of the Dallas-Fort Worth market."

Non-GAAP Financial Measures

The Company uses certain non-GAAP financial measures in evaluating operating performance. These non-GAAP financial measures should not be viewed as an alternative or substitute for its financial statements prepared in accordance with generally accepted accounting principles. Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, stock compensation expense and impairment on long lived assets and other lease charges. A reconciliation of Adjusted EBITDA to net income is included with the accompanying financial statements. The fourth fiscal quarter and fiscal year 2014 had 13 and 52 weeks, respectively, as compared to 14 and 53 weeks, respectively, in the same periods of the prior year. For purposes of certain year to year comparisons, fourth quarter and full year fiscal 2013 results have been divided by the actual number of weeks in the respective period and then multiplied by the comparable number of weeks in the same period of fiscal 2014.

Note Regarding Forward Looking Statements

Certain statements in this press release, other than historical information, may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are intended to be covered by the safe harbors created thereby. These forward-looking statements are based on current expectations that involve numerous risks, uncertainties and assumptions. Assumptions relating to these forward-looking statements involve judgments with respect to, among other things, future economic, competitive and market conditions, regulatory framework and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of Pizza Inn Holdings. Although the assumptions underlying these forward-looking statements are believed to be reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that any forward-looking statements will prove to be accurate. In light of the significant uncertainties inherent in these forward-looking statements, the inclusion of such information should not be regarded as a representation that the objectives and plans of Pizza Inn Holdings will be achieved.

About Pizza Inn Holdings, Inc.

Headquartered in the Dallas suburb of The Colony, TX, Pizza Inn Holdings, Inc., is an owner, franchisor and supplier of a system of restaurants operating domestically and internationally under the trademarks "Pizza Inn" and "Pie Five Pizza Co." Pizza Inn is an international pizza chain featuring traditional and specialty pizzas, as well as freshly made pastas, sandwiches, and desserts. Pie Five Pizza Co. is a fast-casual concept offering individual pizzas made to order and cooked in less than five minutes. Founded in 1958, Pizza Inn Holdings, Inc. owns and franchises approximately 273 restaurants. The Company's common stock is listed on the Nasdaq Capital Market under the symbol "PZZI". For more information, please visit www.pizzainn.com.

Contact:

Investor Relations
Pizza Inn Holdings, Inc.
469-384-5000

PIZZA INN HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

                 
                 
   

Year Ended

 

Three Months Ended

   

June 29,

    

June 30,

    

June 29,

    

June 30,

   

2014

 

2013

 

2014

 

2013

                 

REVENUES:

$ 42,224

 

$ 41,181

 

$ 10,943

 

$ 10,414

                 

COSTS AND EXPENSES:

             
 

Cost of sales

36,325

 

34,767

 

9,297

 

8,640

 

Franchise expenses

2,931

 

2,390

 

781

 

715

 

General and administrative expenses

4,373

 

4,106

 

1,059

 

1,111

 

Pre-opening expenses

161

 

286

 

1

 

37

 

Impairment of long-lived assets and other lease charges

253

 

766

 

253

 

766

 

Bad debt

253

 

205

 

50

 

70

 

Interest expense

142

 

244

 

29

 

47

   

44,438

 

42,764

 

11,470

 

11,386

                 

LOSS FROM CONTINUING OPERATIONS BEFORE TAXES

 

(2,214)

 

 

(1,583)

 

 

(527)

 

(972)

                 
 

Income tax benefit

(760)

 

(504)

 

(233)

 

(334)

                 

LOSS FROM CONTINUING OPERATIONS

 

(1,454)

 

 

(1,079)

 

 

(294)

 

(638)

                 
 

Loss from discontinued operations, net of taxes

(113)

 

(182)

 

(74)

 

(55)

                 

NET LOSS

$ (1,567)

 

$ (1,261)

 

$    (368)

 

$    (693)

                 

LOSS PER SHARE OF COMMON STOCK - BASIC:

             
 

Loss from continuing operations

$   (0.17)

 

$   (0.13)

 

$   (0.04)

 

$   (0.08)

 

Loss from discontinued operations

$   (0.01)

 

$   (0.03)

 

$   (0.01)

 

$   (0.01)

 

Net loss

$   (0.18)

 

$   (0.16)

 

$   (0.05)

 

$   (0.09)

                 

LOSS PER SHARE OF COMMON STOCK - DILUTED:

             
 

Loss from continuing operations

$   (0.16)

 

$   (0.13)

 

$   (0.03)

 

$   (0.08)

 

Loss from discontinued operations

$   (0.01)

 

$   (0.02)

 

$   (0.01)

 

$   (0.01)

 

Net loss

$   (0.17)

 

$   (0.15)

 

$   (0.04)

 

$   (0.09)

                 

Weighted average common shares outstanding - basic

 8,635

 

 8,031

 

 8,058

 

 8,021

                 

Weighted average common shares outstanding - diluted

9,173

 

 8,310

 

 8,525

 

 8,143

 

PIZZA INN HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

 
         

June 29,

     

June 30,

ASSETS

   

2014

 

2013

               

CURRENT ASSETS

           
 

Cash and cash equivalents

$

2,796

$

919

 

Accounts receivable, less allowance for doubtful accounts of $276 and $228, respectively

 

 3,276

 

3,139

 

Notes receivable

 

81

 

292

 

Inventories

 

1,703

 

1,615

 

Income tax receivable

 

386

 

343

 

Deferred income tax assets

 

951

 

882

 

Prepaid expenses and other

 

173

 

307

     

Total current assets

 

9,366

 

7,497

               

LONG-TERM ASSETS

       
 

Property, plant and equipment, net

 

5,133

 

4,711

 

Long-term notes receivable

 

134

 

40

 

Long-term deferred tax asset

 

939

 

168

 

Deposits and other

 

396

 

119

     

Total assets

$

15,968

$

12,535

LIABILITIES AND SHAREHOLDERS' EQUITY

       

CURRENT LIABILITIES

       
 

Accounts payable - trade

$

2,023

$

1,572

 

Accrued expenses

 

926

 

792

 

Deferred rent

 

163

 

249

 

Deferred revenues

 

177

 

169

 

Bank debt

 

500

 

669

     

Total current liabilities

 

3,789

 

3,451

               

LONG-TERM LIABILITIES

       
 

Bank debt, net of current portion

 

267

 

1,856

 

Deferred tax liability

 

-

 

-

 

Deferred rent, net of current portion

 

822

 

708

 

Deferred revenues, net of current portion

 

791

 

370

 

Deferred gain on sale of property

 

34

 

59

 

Other long-term liabilities

 

23

 

22

     

Total liabilities

 

5,726

 

6,466

               

COMMITMENTS AND CONTINGENCIES

       
               

SHAREHOLDERS' EQUITY

       
 

Common stock, $.01 par value; authorized 26,000,000

shares; issued 16,240,412 and 15,312,680 shares, respectively; outstanding 9,121,012 and 8,193,280 shares, respectively

 

162

 

153

 

Additional paid-in capital

 

15,905

 

10,174

 

Retained earnings

 

18,811

 

20,378

 

Treasury stock at cost

       
   

 7,119,400 shares

 

(24,636)

 

(24,636)

     

Total shareholders' equity 

 

10,242

 

6,069

     

Total liabilities and shareholders' equity

$

15,968

$

12,535

 

PIZZA INN HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

                   
     

Year Ended

 

Three Months Ended

     

June 29,

    

June 30,

    

June 29,

    

June 30,

     

2014

 

2013

 

2014

 

2013

                   

CASH FLOWS FROM OPERATING ACTIVITIES:

             
                 
 

Net loss

$ (1,567)

 

$ (1,261)

 

$    (368)

 

$    (693)

 

Adjustments to reconcile net loss to cash  (used in) provided by operating activities:

             
   

Impairment of fixed assets and other assets

253

 

766

 

253

 

766

   

Depreciation and amortization

1,454

 

1,304

 

398

 

346

   

(Gain) loss on the sale of assets

(97)

 

129

 

(57)

 

-

   

Provision for bad debt

48

 

25

 

(155)

 

(19)

   

Stock compensation expense

68

 

150

 

23

 

15

   

Deferred income taxes

(840)

 

(671)

 

(289)

 

(428)

 

Changes in operating assets and liabilities:

       

-

 

-

   

Notes and accounts receivable

(70)

 

(283)

 

478

 

(111)

   

Income tax receivable

(41)

 

88

 

(41)

 

88

   

Inventories

(88)

 

237

 

(102)

 

(93)

   

Prepaid expenses and other

(213)

 

247

 

154

 

349

   

Deferred revenue

404

 

-

 

128

 

(61)

   

Accounts payable - trade

451

 

10

 

(155)

 

31

   

Accrued expenses

163

 

(7)

 

253

 

(136)

   

   Cash (used) provided by operating activities

 

(75)

 

 

734

 

 

520

 

54

                   

CASH FLOWS FROM INVESTING ACTIVITIES:

             
                   
 

Proceeds from sale of assets

106

 

184

 

48

 

-

 

Capital expenditures

(2,068)

 

(2,244)

 

(81)

 

(697)

   

Cash used for investing activities

(1,962)

 

(2,060)

 

(33)

 

(697)

                   

CASH FLOWS FROM FINANCING ACTIVITIES:

             
                   
 

Borrowings of bank debt

-

 

3,460

 

(3,288)

 

3,460

 

Repayments of bank debt

(1,758)

 

(2,677)

 

(1,840)

 

(2,677)

 

Proceeds from sale of stock

5,590

 

872

 

5,590

 

(2,288)

 

Proceeds from exercise of stock options

82

 

-

 

1,482

 

2,252

   

Cash provided by financing activities

3,914

 

1,655

 

1,944

 

747

                   

Net increase (decrease) in cash and cash equivalents

1,877

 

 

329

 

 

2,431

 

104

Cash and cash equivalents, beginning of year

919

 

590

 

365

 

815

Cash and cash equivalents, end of year

$   2,796

 

$      919

 

$   2,796

 

$      919

                   

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

       
                   

CASH PAID FOR:

             
                   
   

Interest

$      142

 

$       296

 

$        29

 

$        48

   

Income taxes (refunded) paid

$        17

 

$      (67)

 

$        16

 

$        17

 

PIZZA INN HOLDINGS, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(In thousands)

The Company provided detailed explanation of this non-GAAP financial measure, including a discussion of the usefulness and purpose of the measure, in its Form 10-K filed with the Securities and Exchange Commission on 23, 2014. 

                 
   

 Fiscal Year Ended 

 

 Three Months Ended 

   

 June 29 

 

 June 30, 

 

 June 29 

 

 June 30, 

   

2014

 

2013

 

2014

 

2013

 Net Loss 

 

$  (1,567)

 

$   (1,261)

 

$     (368)

 

$      (693)

 Interest Expense 

 

142

 

244

 

29

 

47

 Income Tax Benefit--Continuing Operations 

 

(760)

 

(504)

 

(233)

 

(334)

 Income Tax Benefit--Discontinued Operations 

 

(58)

 

(94)

 

(38)

 

(72)

 Stock compensation expense 

 

68

 

150

 

23

 

15

 Impairment of long-lived assets and other lease charges 

 

253

 

766

 

253

 

766

 Depreciation and amortization 

 

1,454

 

1,304

 

398

 

347

 Adjusted EBITDA 

 

$     (468)

 

$       605

 

$        64

 

$         76

 

Logo - http://photos.prnewswire.com/prnh/20140923/147993

SOURCE Pizza Inn Holdings, Inc

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