View:
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: February 9, 2004
PIZZA INN, INC.
(Exact name of registrant as specified in its charter)
MISSOURI 0-12919 47-0654575
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File Number) Identification Number)
3551 PLANO PARKWAY, THE COLONY, TX 75056
(Address of principal executive offices)(zip code)
Telephone number of registrant, including area code: (469) 384-5000
ITEM 5.
See attached Exhibit 1.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
PIZZA INN, INC.
By: /s/ Shawn M. Preator
Shawn M. Preator, Chief Financial Officer
Date: February 9, 2004
February 9, 2004
Dear Pizza Inn Shareholder,
I want to take this opportunity to update you on your company's performance and
efforts since this management team began in late August, 2002, particularly
looking at this past quarter as well as our fiscal year ended on June 29, 2003.
We have implemented many new initiatives since the fall of 2002 in order to
increase shareholder value. I will summarize the major ones and their impact to
date in this letter. These initiatives have one common foundation, and that is
to improve company performance and shareholder value by helping our Pizza Inn
franchisees, both existing and new, become more successful. As will be
specifically noted below, these programs address the areas of both sales
building and expense reductions, while staying focused on our number one
restaurant level goal of attracting and satisfying customers. By reaching more
of these goals faster, all shareholders will benefit directly through Pizza
Inn's financial success and stock price growth, which we have continued to see
in recent months.
The following list outlines the key initiatives:
(1) Marketing and Sales Building Improvements
As I discussed at our last shareholder meeting about a year ago, one of our
first acts was to change the leadership and direction of our marketing
efforts. First we conducted extensive research in many of our strategic markets,
talking directly with consumers about the strengths and weaknesses of our brand.
Our management team then worked with the franchisee advertising board and our
new advertising agency, Launch, to develop new brand positioning and supporting
advertising materials for 2003. These programs, which included new television
and radio commercials as well as direct marketing materials, were first
presented to franchisees at our May, 2003 Franchisee Owners' Conference. The
subsequent use of these materials and strategies began in July, and we are very
pleased with their impact on sales as demonstrated by the enclosed graph
entitled "Comparable Sales Growth." Subsequent expansion of these creative
materials will continue to focus on Pizza Inn's strong foundation of both
quality pizza and menu variety as well as our appeal to families.
(2) Franchisee Communications and Teamwork
Quality franchisee relations are the bedrock of success for Pizza Inn and one of
the keys to optimizing shareholder value. Without a high level of cooperation
and trust, Pizza Inn's new marketing and operational initiatives could not be
fully implemented in the field. As a result, the Company's performance would
suffer.
I am happy to report that recent success in the areas of marketing and
comparable sales is due in large part to inspired teamwork. The efforts of the
franchisee advertising board, in addition to the support of other franchisees,
are helping to make Pizza Inn better every day.
The previously mentioned May, 2003 Franchisee Owners' Conference proved to be
one of our best-attended and most productive events in many years. The
enthusiasm and teamwork created continues with many of the programs rolled out
last May, and we are already receiving indications of strong attendance support
and program participation from our franchisees for our June, 2004 conference in
Biloxi, MS.
(3) Operation and Training Programs
Another key step began in late 2002, when we increased the service and support
levels for newly opened Pizza Inn restaurants, especially for operators new to
the Pizza Inn system. We believe this increased commitment to start-up support
is improving sales levels and franchisee profitability in our new units. As
mentioned above, our operations and training team also continues to work with
our franchisees on new product testing. For example, we are currently field
testing "Take and Bake" pizza and Pizza Inn's "4 -Pack Sampler" as new ways to
address consumers' changing needs and preferences.
This same team remains focused on assistance to all existing franchisees as
well. Their highest priorities remain cooperative efforts with our franchisees
regarding quality training and compliance with our standards, each of which
contributes to our high quality of products, excellent service and cleanliness.
(4) Franchise Development, Including Net Unit Growth
In fiscal 2004, we have opened 20 new units, of which three had been previously
closed. During this time, we have closed 15 units of which four were express
operations. We have placed significant emphasis on minimizing closings, as
evidenced by the fact that year-to-date closings on an annualized basis are the
fewest in more than ten years. We feel our ongoing commitment to increasing
franchisee profitability will continue to improve our closing results.
Regarding our 20 year-to-date openings, eight are buffet restaurants and another
eight are delivery/carry out (DELCO) restaurants, including a recently opened
DELCO company restaurant in Little Elm, TX, near our offices. We are pleased
with the sales levels of these new units, with opening sales higher overall than
in past years.
To improve upon this success, we will continue to focus on lowering the
investment costs of new restaurants as well as remodeling costs of existing
units. Our modular construction option is one of these lower cost alternatives.
In fact, our recently opened company-owned DELCO is modular in construction.
Overall, we expect to open about 35 new Pizza Inn's for fiscal 2004, and have
received a high level of interest for fiscal 2005 also.
(5) Key Financial Trends
Revenue Growth, Including Norco Sales
The major components of our revenue growth plans for fiscal 2004 are net unit
growth, increased comparable restaurant sales, and additional Norco sales market
share. Our net unit growth is now positive for the first time in five years and
average retail sales for new buffet units are 19.3% higher than last year's and
6.0% higher for DELCO units. Comparable sales, which decreased 5.5% in fiscal
2003, have shown steady improvement since July, 2003, as shown on the enclosed
graph entitled "Comparable Sales Growth." Average weekly comparable sales
decreased 2.4% over the last seven months, but have been positive beginning with
the last week in December. In addition, our comparable Norco sales to
franchisees have increased by 2.1% year to date.
General and Administrative Expenses
We have decreased our general and administrative expenses, excluding bad debt
expenses, $458,000, or 9.7%, for fiscal 2003 and $247,000, or 11.0%, for the
first six months of fiscal 2004, compared to the same respective periods in the
prior years.
Total compensation for the Company's top five employees in fiscal 2003 decreased
$1,072,000 or 37.6% from fiscal 2002 and the Company has realized additional
savings at the top five level for the first six months of fiscal 2004 of $55,000
or 5.5%.
Cash Flow, Uses of Cash, and Debt Balances
Pizza Inn generated approximately $4.0 million in cash flow from operating
activities in fiscal 2003 and $2.6 million in the first six months of fiscal
year 2004. This cash was primarily used to reduce our debt load, to reacquire
certain area development rights, and to fund the construction of our recently
opened Company-owned store. As of today, current debt balances are the lowest in
many years: $1.4 million on our line of credit, $209,000 on our term loan and
$7.3 million on our corporate facilities mortgage.
Pizza Inn Stock Price
As shown on the enclosed graph, Pizza Inn's stock price has grown from $1.04 on
August 22, 2002 to $2.94 as of Friday, February 6, 2004.
In closing, we believe that an objective evaluation of the Company's performance
over the last 17 months will show that we have been highly focused on increasing
both shareholder value and franchisee profitability, two goals we pledge to
remain our top priorities in the months and years to come.
Sincerely,
/s/ Ronald W. Parker
Ronald W. Parker
President and Chief Executive Officer
Attachments (2)
Comparable Sales Growth
Month/Year Comp Sales Comment
- ------ ----------- ----------------
Aug .2002 -5.0%
Sept.2002 . -4.8%
Oct .2002 . -5.7%
Nov .2002 . -6.5%
Dec .2002 . -5.7% December 2002 New positioning research begins
Jan .2003 . -6.6%
Feb .2003 . -5.2%
Mar 2003 . -6.7%
Apr 2003 . -7.7%
May 2003 -5.6% May 2003 Research findings, positioning recommendations,communication
strategy and creative materials presented chainwide
Jun 2003 . -6.4% June 2003 Co-Ops begin implementation of new ad campaigns
July.2003 . -6.9% July 2003 TV and FSI creative with new positioning begins chainwide
Aug .2003 . -3.6%
Sept.2003 . -4.5%
Oct .2003 . -2.3% October 2003 "Family Savings Blitz" FSI distributed chainwide
Nov .2003 . -1.5%
Dec .2003 . -1.4%
Jan .2004 . 1.2% January 2004 "Free Medium Pizza" FSI introduced chainwide
Pizza Inn Stock Price
Monthly Average
---------------
Date Close
Aug 2002 1.24
Sep 2002 1.64
Oct 2002 1.67
Nov 2002 1.68
Dec 2002 2.25
Jan 2003 2.40
Feb 2003 1.85
Mar 2003 1.71
Apr 2003 1.64
May 2003 1.77
Jun 2003 1.96
Jul 2003 2.18
Aug 2003 2.27
Sep 2003 2.60
Oct 2003 2.71
Nov 2003 2.85
Dec 2003 2.94
Jan 2004 2.95
Feb 2004 2.90