Exhibit 99.1
Schlotzsky's Inc. Announces First Quarter Results for 2004
AUSTIN, Texas--(BUSINESS WIRE)--May 13, 2004--Schlotzsky's Inc.
(Nasdaq:BUNZ) today announced first quarter results for 2004 that
showed improvements in performance, expenses and net loss by
Company-operated restaurants compared to the same period in 2003.
For the quarter ended March 31, 2004, the Company reported revenue
of $13,047,000 compared to $13,830,000 during the same period in 2003.
After recognizing depreciation and amortization of $1,406,000, the
Company reported a net loss of $671,000, or $0.09 per diluted share,
an improvement over the first quarter of 2003, when the net loss was
$1,066,000, or $0.15 per diluted share.
Company-operated restaurant sales increased 2.2 percent to
$7,782,000 from the same period in 2003, while restaurant operating
expenses decreased 6.8 percent to $6,932,000, contributing $850,000 to
the Company's results for the quarter ended March 31, 2004. Operating
income (before depreciation and amortization) for the Company-operated
restaurants group showed a $677,000 improvement from the comparable
period in 2003.
Acceptance of the Company's new "Sandwich Cafe & Bakery" concept
continues to build. To date, approximately 43 percent of Schlotzsky's
restaurants systemwide have agreed voluntarily to the transition, and
the Company estimates it is in commitment conversations with another
31 percent of its franchisees.
The Company also reported positive customer response to its new
low-carb menu offerings, which include a high-fiber, low-carb tortilla
with only 10g net carbs (small size) that can be wrapped around any
sandwich instead of bread, or bunless sandwiches served on a bed of
lettuce.
In addition, the Company reports that Ray Rodriguez, a Board
member, area developer and franchisee, has resigned from the Board of
Directors. The Nominating and Corporate Governance Committee has
invited Gary M. Cadenhead, Ph.D., a senior lecturer in
Entrepreneurship in the McCombs School of Business at the University
of Texas at Austin, to join the Board and expects the full Board to
finalize the appointment early next week.
Other results include:
-- The Company significantly reduced its General and
Administrative expenses, which include corporate personnel
salaries and benefits, by more than 22 percent, from
$5,070,715 in the first quarter of 2003 to $3,942,874 in
the same period of 2004.
-- Due to operational improvements, menu-price increases and
improved personnel costs, expenses from Company-operated
restaurants decreased 6.8 percent to $6,932,000 from
$7,439,000 compared to the same period in 2003.
-- The Company reported continued interest in its new concept
from prospective franchise owners, and the pipeline of
applicants for new franchise restaurants continued to
grow.
Schlotzsky's will conduct a conference call regarding information
included in this press release and related matters at 4:00 p.m.
Central Time on Thursday, May 13, 2004. The conference call will be
available for analysts and institutional investors at 800-341-2312,
PIN 4120. The conference call will be available simultaneously, and in
its entirety, to all interested investors and news media through a
webcast at www.schlotzskys.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. As of March 31, 2004, there were 537
Schlotzsky's(R) restaurants open and operating in 37 states, the
District of Columbia and six foreign countries. Visit
www.schlotzskys.com for more information.
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, 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 new 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
(Unaudited)
Three Months Ended
-------------------------
March 31, March 31, Change from Percentage
2004 2003 prior year change
----------- ------------ ------------ ------------
Revenues
Royalties $3,592,768 $4,303,888 ($711,120) (16.5%)
Developer fees 36,307 50,159 (13,852) (27.6%)
Restaurant sales 7,781,785 7,612,229 169,556 2.2%
Brands
contribution 1,416,596 1,651,105 (234,509) (14.2%)
Other fees and
revenue 219,996 212,649 7,347 3.5%
----------- ------------ ------------ ------------
Total revenues 13,047,452 13,830,030 (782,578) (5.7%)
----------- ------------ ------------ ------------
Expenses
Service costs:
Royalties 528,883 663,792 (134,909) (20.3%)
----------- ------------ ------------ ------------
528,883 663,792 (134,909) (20.3%)
----------- ------------ ------------ ------------
Restaurant
operations:
Cost of sales 2,110,003 2,171,620 (61,617) (2.8%)
Personnel and
benefits 2,950,497 3,365,161 (414,664) (12.3%)
Operating
expenses 1,871,420 1,902,247 (30,827) (1.6%)
----------- ------------ ------------ ------------
6,931,920 7,439,028 (507,108) (6.8%)
----------- ------------ ------------ ------------
Loss on
investment -- 67,150 (67,150) (100.0%)
----------- ------------ ------------ ------------
General and
administrative 3,942,874 5,070,715 (1,127,841) (22.2%)
----------- ------------ ------------ ------------
Depreciation and
amortization 1,406,008 1,249,406 156,602 12.5%
----------- ------------ ------------ ------------
Total Expenses 12,809,685 14,490,091 (1,680,406) (11.6%)
----------- ------------ ------------ ------------
Income (loss)
from
operations 237,767 (660,061) 897,828 (136.0%)
Other
Interest income 62,393 103,648 (41,255) (39.8%)
Interest
expense (931,470) (1,015,905) 84,435 (8.3%)
----------- ------------ ------------ ------------
Income (loss)
before income
taxes (631,310) (1,572,318) 941,008 (59.8%)
Provision
(credit) for
income taxes 40,000 (506,000) 546,000 (107.9%)
----------- ------------ ------------ ------------
Net income
(loss) ($671,310) ($1,066,318) 395,008 (37.0%)
=========== ============ ============ ============
Earnings per
common share --
basic ($0.09) ($0.15) $0.06 (40.0%)
=========== ============ ============ ============
Earnings per
common share --
diluted ($0.09) ($0.15) $0.06 (40.0%)
=========== ============ ============ ============
OTHER OPERATING DATA
Domestic Franchised Restaurants
-------------------------------
Three Months Ended
-------------------------
March 31, March 31,
2004 2003
----------- ------------
Restaurants
opened:
Domestic --
New -- --
Re-openings -- 1
----------- ------------
Total domestic
openings -- 1
Domestic closings (24) (25)
----------- ------------
Operating domestic
restaurants end
of quarter 479 566
=========== ============
Average weekly
sales for
domestic
franchised
restaurants $9,926 $10,301
----------- ------------
Change in same
store sales for
domestic
franchised
restaurants (7.8%) (11.8%)
----------- ------------
Supplemental Restaurant Operations Information -
Performance of Long-term Portfolio Restaurants
-------------------------------------------------
The following table is presented for the Company-operated restaurants
in the Company's long-term portfolio for the quarter ended March 31,
2004. As of March 31, 2004, this restaurant group included ten
restaurants in the Austin area, two in Houston, Texas, two in
College Station, Texas and one in suburban Atlanta, Georgia. This
group includes 14 freestanding restaurants and one shopping center
end-cap restaurant. In accordance with the Company's internal
management reporting practices for consistent comparisons, line item
categories have been expanded and percentages are calculated based
on gross sales, instead of net sales as used elsewhere in this
report. Facility costs vary by restaurant because some facilities
are rented and some are owned. The table provides the average
percentage results for each line item for the 15 Schlotzsky's
restaurants in the long-term portfolio group as a whole, as well as
the best and worst percentage performance for each line item for any
restaurant in the group.
Three
Months Best Worst
Ended Percentage Percentage Percentage
March 31, of Gross Performance Performance
2003 Sales (a) (a)
(in thousands,
unaudited)
Gross sales $5,130 100.0%
Less-discounts 136 2.7% 1.9% 3.5%
-----------
Net sales 4,994 97.3%
Cost of sales 1,353 26.4% 24.1% 31.0%
Personnel and
benefits:
Crew costs 1,130 22.0% 19.6% 25.7%
Management costs 589 11.5% 8.7% 19.3%
Operating
expenses:
Advertising(b) 222 4.3% 3.1% 4.7%
Controllable
expenses 398 7.8% 5.9% 10.5%
-----------
Operating income
before facility
costs, and
depreciation and
amortization 1,302 25.4% 32.8% 11.1%
Facility costs 282 5.5% 1.4% 15.8%
-----------
Operating income
before
depreciation and
amortization $1,020 19.9% 30.8% -4.7%
===========
(a) Represents the actual best and worst percentage performance for a
restaurant in the group.
(b) Stores contribute 4% of contractual sales to the NAMF marketing
fund, but vendor rebates will reduce this rate periodically, and
some stores spend additional amounts on advertising
CONTACT: Schlotzsky's Inc., Austin
Investor Relations, 512-236-3644