Exhibit 99.1
Schlotzsky's, Inc. Announces 2003 Third-Quarter Results
AUSTIN, Texas--(BUSINESS WIRE)--Nov. 14, 2003--Schlotzsky's, Inc.
(Nasdaq: BUNZ) today reported revenues of $13.8 million and a net loss
of $2.8 million, or $(0.38) per diluted share, for the quarter ended
September 30, 2003. This compares with revenues of $15.1 million and a
net loss of $240,000, or $(0.03) per diluted share, during the same
period in 2002. During the third quarter, the Company recognized
approximately $3.2 million related to events arising in the third
quarter. That amount includes $1.9 million for previously deferred
costs associated with a proposed debt securities offering and
approximately $500,000 in separation and salary costs resulting from
its 29 percent reduction of corporate office staff in July. Additional
reserves were taken against receivables and other items, and other
expenses were associated with developing, implementing and testing of
Concept 2005.
The Company made payments of $1.6 million on a seller-financed
note for the 2002 acquisition of development rights for a territory
that includes much of Texas and all or part of 10 other states. Over
the past 14 months, the Company has paid down the principal on the
note by almost $5 million, from $23.3 million to $18.4 million, which
officials characterized as an aggressive payment schedule. The Company
continues to seek to refinance this debt, which matures in 2005, so
that it can be amortized over a longer term. The payments on this
purchase of development rights reduced the Company's liquidity
position over the past 14 months, said officials.
Today the Company is entering into a short-term loan for $2.5
million with John C. Wooley, the Company's president and chief
executive officer, and Jeffrey J. Wooley, the Company's senior
vice-president. These funds will be used to improve the Company's
short-term liquidity while the Company continues to seek long-term
financing.
The Company expects to see improved performance in the fourth
quarter due to the cuts in overhead, and will see the full benefits of
these overhead cuts in 2004.
Schlotzsky's expects to see additional benefits as franchise
restaurants begin the re-imaging process and convert to an expanded
menu with more healthy choices, and upgraded restaurant decor.
Franchisees have reported increased excitement from customers towards
the new sophisticated menu and enhanced restaurant atmosphere.
After resuming its franchise sales and licensing program this past
summer, the Company has seen significant increase in applications from
prospective franchise owners. The Company expects to sign license
agreements for several restaurants by the end of 2003.
Schlotzsky's will conduct a conference call regarding information
included in this press release and related matters at 9:30 a.m. CDT on
Friday, November 14, 2003. The conference call will be available for
analysts and institutional investors at 1-800-341-2312, PIN #3556. The
conference call will be available simultaneously, and in its entirety,
to all interested investors and news media through a webcast at
www.cooldeli.com.
Schlotzsky's, Inc., founded in Austin, Texas, in 1971, through its
wholly-owned subsidiaries, is a franchisor and operator of restaurants
in the fast casual sector. Our current menu features upscale
made-to-order hot sandwiches and pizzas served on our proprietary buns
and crusts, wraps, chips, salads, soups, fresh baked cookies and other
desserts, and beverages. As of September 30, 2003, there were 583
Schlotzsky's(R) Deli restaurants open and operating in 37 states, the
District of Columbia and six foreign countries. Visit
www.schlotzskys.com or www.cooldeli.com for more information and
e-coupons.
This press release may contain statements deemed to be
"forward-looking statements" within the meaning of Section 27A of the
Securities Act or Section 21E of the Exchange Act. Any statements that
are not statements of historical fact may be deemed forward-looking
statements. Forward-looking statements are not meant to predict or
guarantee actual results, performance, events, or circumstances and
may not be realized because they are based upon our current
projections, plans, objectives, beliefs, expectations, estimates, and
assumptions and are subject to a number of risks and uncertainties,
many of which are beyond our control. Actual results and the timing of
certain events and circumstances may differ materially from those
described by the forward-looking statements as a result of these risks
and uncertainties. Forward-looking statements may include, without
limitation, statements concerning business, financial and growth
strategies and objectives, costs and earnings projections, new
restaurant development, and assumptions relating to any of these
statements. Factors that may influence forward-looking statements or
cause actual results to differ materially from those described or
anticipated by the forward-looking statements may include, without
limitation, inability of the Company or our franchisees to obtain
adequate financing, increased competition within the restaurant
industry, continued viability of restaurants during a weak economy,
inability to sell restaurants, failure to adequately motivate
franchisees to remodel and reimage their restaurants and to fully
implement the enhanced menu, failure to successfully recruit
multi-unit and single-unit franchisees, and stock volatility and
illiquidity. Because of the risks and uncertainties related to these
factors and the forward-looking statements, readers are cautioned not
to place undue reliance on the forward-looking statements. There can
be no assurance that any events or results described in any
forward-looking statement will actually occur or be achieved. We
undertake no obligation to publicly revise the forward-looking
statements to reflect events or circumstances that arise after the
date hereof or to reflect the occurrence of unanticipated events or
circumstances. Readers should carefully review the risk factors
described above and in other documents filed by the Company with the
SEC. Readers are specifically directed to the discussion under "Risk
Factors" in the Company's most recent Form 10-K.
SCHLOTZSKY'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
--------------------------- ---------------------------
September 30, September 30, September 30, September 30,
2003 2002 2003 2002
(Unaudited) (Unaudited)
--------------------------- ---------------------------
Revenues
Royalties $3,976,557 $4,984,274 $12,565,675 $15,368,072
Franchise fees 16,665 - 19,998 62,000
Developer fees 37,036 59,369 131,423 179,435
Restaurant
sales 7,937,396 7,934,927 23,550,234 24,075,180
Brand
contribution 1,600,807 1,820,224 4,960,869 5,694,381
Other fees
and revenue 281,034 294,307 713,073 862,986
--------------------------- ------------- -------------
Total revenues 13,849,495 15,093,101 41,941,272 46,242,054
--------------------------- ------------- -------------
Expenses
Service costs:
Royalties 606,787 1,008,337 1,937,696 3,249,705
Franchise fees - - - 25,955
--------------------------- ------------- -------------
606,787 1,008,337 1,937,696 3,275,660
--------------------------- ------------- -------------
Restaurant
operations:
Cost of sales 2,419,038 2,247,065 6,939,159 6,755,185
Personnel and
benefits 3,458,048 3,305,235 10,268,276 9,767,124
Operating
expenses 1,996,577 1,988,932 6,100,919 5,624,926
--------------------------- ------------- -------------
7,873,663 7,541,232 23,308,354 22,147,235
--------------------------- ------------- -------------
Loss on equity
investment 320,786 58,624 471,629 136,918
--------------------------- ------------- -------------
General and
administrative 7,115,000 4,833,741 18,898,305 14,149,018
--------------------------- ------------- -------------
Depreciation
and
amortization 1,271,385 1,273,342 3,803,386 3,443,073
--------------------------- ------------- -------------
Total expenses 17,187,621 14,715,276 48,419,370 43,151,904
--------------------------- ------------- -------------
Income (loss)
from
operations (3,338,126) 377,825 (6,478,098) 3,090,150
Other
Interest income 53,444 119,195 260,701 431,257
Interest
expense (954,604) (797,001) (2,980,477) (2,054,961)
--------------------------- ------------- -------------
Income (loss)
before income
taxes (4,239,286) (299,981) (9,197,874) 1,466,446
Provision
(credit) for
income taxes (1,463,000) (60,000) (3,088,000) 590,000
--------------------------- ------------- -------------
Net income
(loss) (2,776,286) $(239,981) (6,109,874) $876,446
=========================== ============= =============
Earnings per
common share -
basic $(0.38) $(0.03) $(0.83) $0.12
=========================== ============= =============
Earnings per
common share -
diluted $(0.38) $(0.03) $(0.83) $0.12
=========================== ============= =============
OTHER OPERATING DATA
Restaurants
Open -
Beginning of
Period 597 671 643 674
Openings During
Period -
New 1 1 8 8
Reopenings 1 2 3 8
--------------------------- ------------- -------------
Total Openings 2 3 11 16
Closings During
Period (16) (16) (71) (32)
--------------------------- ------------- -------------
Restaurants
Open - End of
Period 583 658 583 658
=========================== ============= =============
Systemwide
Contractual
Sales $81,036,000 $97,987,000 $251,812,000 $300,833,000
Decrease in
Systemwide
Contractual
Sales (17.3%) (7.7%) (16.3%) (6.9%)
Decrease in
Same Store
Contractual
Sales (10.6%) (6.3%) (11.3%) (5.7%)
Average Weekly
Contractual
Sales $10,570 $11,357 $10,579 $11,539
Decrease in
Average Weekly
Contractual
Sales (6.9%) (2.9%) (8.3%) (2.0%)
Note: Systemwide contractual sales, same store contractual sales and
average weekly contractual sales are all based on contractual sales as
defined in our Franchise Agreements and represent net sales under
generally accepted accounting principles plus the amounts of any
discounts for employee or manager meals. Contractual sales are used
because these are the basis of our royalty income and are the only
sales amounts reported by the franchisees.
CONTACT: Schlotzsky's Inc., Austin
Jessica Furlow, 512-236-3644