UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2004
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________________ to ________________________
Commission file number 0-12919
PIZZA INN, INC.
401(K) SAVINGS PLAN
(Full title of plan)
PIZZA INN, INC.
3551 PLANO PARKWAY
THE COLONY, TEXAS 75056
(name of the issuer of the securities held pursuant to the plan and the address
of its principal executive office)
PIZZA INN, INC.
401(K) SAVINGS PLAN
FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULE
YEARS ENDED DECEMBER 31, 2004 AND 2003
PIZZA INN, INC. 401(K) SAVINGS PLAN
CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 3
FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits -
December 31, 2004 and 2003 4
Statement of Changes in Net Assets Available for Benefits-
Year Ended December 31, 2004 5
Notes to Financial Statements 6
SUPPLEMENTAL SCHEDULES
Schedule of Assets Held at End of Year 15
Schedule of Reportable Transactions 16
Note: Other schedules required by Section 2520.103 - 10 of the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act ("ERISA") of 1974 have been omitted because they
are not applicable.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants and Administrator
Pizza Inn, Inc. 401(k) Savings Plan:
We have audited the accompanying statement of net assets available for benefits
of the Pizza Inn, Inc. 401(k) Savings Plan (the "Plan") as of December 31, 2004
and 2003, and the related statement of changes in net assets available for
benefits for the year ended December 31, 2004. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). These standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2004 and 2003, and the changes in net assets available for benefits
for the year ended Decebmer 31, 2004 in conformity with accounting principles
generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of the Plan
are presented for the purpose of additional analysis and are not a required part
of the basic financial statements but are supplementary information required by
the Department of Labor's Rules and Regulations for Reporting and Disclosure
under the Employee Retirement Income Security Act of 1974. These supplemental
schedules are the responsibility of the Plan's management. The supplemental
schedules have been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the 2004 basic financial statements taken as a
whole.
/s/ BDO Seidman, LLP
Dallas, Texas
June 10, 2005
PIZZA INN, INC. 401(K) SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 2004 2003
- ----------------------------------------------------------- ---------- ----------
ASSETS
Investments, at fair value:
Mutual funds. . . . . . . . . . . . . . . . . . . . . . $1,744,657 $1,251,946
Common/collective fund. . . . . . . . . . . . . . . . . 280,916 335,597
Pizza Inn, Inc. common stock, at market value (281,306
and 411,840 shares at December 31, 2004 and 2003,
respectively) . . . . . . . . . . . . . . . . . . . . 677,526 1,060,487
Participant loans . . . . . . . . . . . . . . . . . . . 133,329 142,834
- ----------------------------------------------------------- ---------- ----------
Total investments . . . . . . . . . . . . . . . . . . . . 2,836,428 2,790,864
LIABILITIES:
Excess contributions payable. . . . . . . . . . . . . . . 9,755
- ----------------------------------------------------------- ---------- ---------
NET ASSETS AVAILABLE FOR BENEFITS . . . . . . . . . . . . $2,836,428 $2,781,109
- ----------------------------------------------------------- ---------- ----------
See accompanying notes to financial
statements.
PIZZA INN, INC. 401(K) SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year ended December 31,. . . . . . . . . . . . . . 2004
- ---------------------------------------------------- ----------
ADDITIONS
Investment income:
Net appreciation in the fair value of
investments. . . . . . . . . . . . . . . . . . $ 63,616
Interest and dividends . . . . . . . . . . . . . 69,934
- ---------------------------------------------------- ----------
Total investment income. . . . . . . . . . . . . . 133,550
- ---------------------------------------------------- ----------
Contributions:
Participants contributions . . . . . . . . . . . 367,670
Employer contributions . . . . . . . . . . . . . 58,488
Rollover contributions . . . . . . . . . . . . . 60,526
- ---------------------------------------------------- ----------
Total contributions. . . . . . . . . . . . . . . . 486,684
- ---------------------------------------------------- ----------
Total additions. . . . . . . . . . . . . . . . . . 620,234
- ---------------------------------------------------- ----------
DEDUCTIONS
Benefits paid to participants and other deductions 564,915
- ---------------------------------------------------- ----------
Total deductions . . . . . . . . . . . . . . . . . 564,915
- ---------------------------------------------------- ----------
Net increase . . . . . . . . . . . . . . . . . . . 55,319
Net assets available for benefits, beginning of year 2,781,109
- ---------------------------------------------------- ----------
Net assets available for benefits, end of year . . . $2,836,428
- ---------------------------------------------------- ----------
See accompanying notes to financial
statements.
PIZZA INN, INC. 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN
The following description of the Plan's provisions provides only
general information. Participants should refer to the Plan agreement for more
complete information regarding the Plan's definitions, benefits, eligibility and
other matters.
General - Pizza Inn, Inc. 401(k) Savings Plan ("Plan") was approved
-------
and adopted by the board of directors of Pizza Inn, Inc. (the "Company") on May
30, 1985 and was implemented on July 1, 1985. The Plan is a defined
contribution plan and is subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA). The Plan is qualified under sections
401(a), 401(k) and 501(a) of the Internal Revenue Code ("Code") and,
accordingly, is exempt from federal income taxes. On January 1, 2002, the Plan
was amended to comply with the Economic Growth and Tax Relief Reconciliation Act
signed into law on June 8, 2001. The financial statements are prepared with the
assumption that the Plan has maintained its exemption under the Code (see Note
3).
Administration - The Company is responsible for the administration and
--------------
operation of the Plan. Wells Fargo Retirement Plan Services (the
"Recordkeeper") has been retained to provide recordkeeping services for the
Plan. The Wells Fargo Trust Operations is responsible for the custody and
management of the Plan's assets.
Participation - The Plan participation requirements allow employees
-------------
who have six months of service with the Company and who are 21 years of age or
older to participate in the Plan.
Participants can defer up to 30% of their salary toward Plan
contributions. Matching contributions can be made at the discretion of the
Company. Effective July 1, 2004, the Company elected to suspend matching the
participants' contributions. Company matching contributions from January 1,
2004 to June 30, 2004 equaled 50% up to the first 4% of the participants'
contributions. The matching Company contribution is invested directly in Pizza
Inn, Inc. common stock. Effective July 8, 2003, participants were able to move
the employer matching contributions out of the Pizza Inn, Inc. common stock and
into other investment options. In addition, at the election of the board of
directors, the Company may make discretionary contributions. There were no
additional discretionary contributions made for the year ended December 31,
2004. Rollover contributions from other qualified plans can be added to the
plan by eligible participants.
For the plan year ended December 31, 2004, the Plan passed the average
deferral percentage discrimination testing. For the plan year ended December
31, 2003, the Plan failed the average deferral percentage discrimination
testing. In order to continue as a qualified plan, the excess participant
contributions were refunded to participants during the 2004 plan year. Such
amounts refunded to participants are reflected as excess contributions payable
to participants on the statement of net assets available for benefits at
December 31, 2003.
Participant Accounts - Each participant's account is credited with the
--------------------
participant's contribution and an allocation of the Company's contribution and
plan earnings. The benefit to which a participant is entitled is the benefit
that can be provided from the participant's vested accounts. Participants may
direct the investment of their account balances into various investment options
offered by the Plan. Currently, the Plan offers eleven mutual funds, one
common/collective fund and common stock of the Plan sponsor as investment
options for participants.
Vesting - Participant contributions, and the earnings thereon, are
-------
fully and immediately vested. Company contributions vest at the rate of 25% per
year over four years of service.
Forfeitures - Forfeitures of unvested Company matching contributions
-----------
by terminated employees are accumulated and periodically applied to reduce the
Company's matching contributions for the applicable plan year. The unallocated
forfeited, nonvested account balance as of December 31, 2004 and 2003 was $1,286
and $0, respectively. Employer contributions were reduced by $2,709 from
forfeited, nonvested accounts during the year ended December 31, 2004.
Participant Loans - Participants may obtain a loan from the Plan in an
-----------------
amount not to exceed 50% of their vested balance up to a maximum of $50,000.
The minimum loan available is $1,000. Loans bear interest at a rate of 2% over
prime and are collateralized by the participant's vested account balance. Loan
principal and interest is repaid ratably through monthly payroll deductions over
a maximum period of five years, except for the purchase of a principal
residence, which may be repaid over a reasonable period of time that may be
longer than five years.
Payment of Benefits - Terminated participants are entitled to receive
--------------------
100% of their contributions to the Plan and any income or loss thereon, as well
as their vested portion of the Company contributions and any income or loss
thereon. Generally, benefits attributable to employer contributions are not
payable prior to termination. However, hardship distributions of a portion of
the employee's contribution and employer's contribution, to the extent vested,
may be made to the participant in certain situations, as defined in the Plan.
Terminated employees may continue to participate in the Plan, and the
expenses related to their participation are paid by the Company.
Plan Termination - Although it has not expressed any intent to do so,
-----------------
the Company maintains the right to terminate the Plan at any time. In the event
that the Plan is terminated, the participants become 100% vested in their
accounts.
Administrative Expenses - The Company pays substantially all
------------------------
administrative expenses associated with the administration of the Plan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The Plan's financial statements are presented
--------------------
using the accrual method of accounting in conformity with generally accepted
accounting principles.
Use of Estimates - The preparation of financial statements in
------------------
conformity with generally accepted accounting principles requires Plan
management to make significant estimates and assumptions that affect the
reported amounts of assets, liabilities, and changes therein, and disclosure of
contingent assets and liabilities. Actual results could differ significantly
from those estimates.
Investments and Investment Income - The Plan's investments are exposed
---------------------------------
to various risks, such as interest rate, market and credit risks. Due to the
level of risk associated with investments in mutual funds and stocks, it is at
least reasonably possible that changes in the values of such investments will
occur in the near term and that such changes could materially affect
participants' account balances and the amounts reported in the statements of net
assets available for benefits.
The investments are valued at fair value or the ending net asset value
on the last business day of the Plan year. Investments in the Company's common
stock are valued at the fair value as determined by the closing quoted market
price on December 31, 2004. Purchases and sales of securities are recorded on a
trade-date basis.
Dividends are recorded on the ex-dividend date. Interest is recorded
on the accrual basis.
Determination of Unrealized Appreciation/Depreciation and Gain or Loss
----------------------------------------------------------------------
on Investments - The Plan presents in the Statement of Changes in Net Assets
- ---------------
Available for Benefits the net appreciation (depreciation) in the fair value of
its investments, which consists of the realized gains or losses, and the
unrealized appreciation (depreciation) on those investments.
Unrealized appreciation or depreciation in the fair value of
investments held at year-end and gain or loss on sale of investments during the
year are determined using the fair value at the beginning of the year or
purchase price if acquired during the year.
Participant Loans - Participant loans are valued at original loan
------------------
value, plus accrued interest, less principal repayments, which approximates fair
value. Interest rates on the loans range from 6% to 11% at December 31, 2004.
Payment of Benefits - Benefits are recorded when paid.
---------------------
3. TAX STATUS OF THE PLAN
Management believes that the Plan is qualified under section 401(a) of
the Internal Revenue Code and therefore, the Plan is exempt from taxation under
section 501(a). The Internal Revenue Service ("IRS") granted a favorable letter
of determination to the Plan in 1986. During 1997 and 2001, the Company
received favorable letters of determination from the IRS for amendments to the
Plan. Generally, contributions to a qualified plan are deductible by the Company
when made. Earnings of the Plan are tax deferred and participants are not taxed
on their benefits until withdrawn from the Plan.
Management is unaware of any variations in the operation of the Plan from
the terms of the Plan documents, as amended. Management believes the Plan is
qualified under the applicable sections of the Code and the Employee Retirement
Income Security Act of 1974 ("ERISA").
4. INVESTMENTS
The following presents investments that represent 5% or more of the
Plan's net assets:
December 31,. . . . . . . . . . . 2004 2003
- ----------------------------------- -------- ----------
Pizza Inn, Inc. common stock. . . $677,526 $1,060,487
Wells Fargo Stable Return EBT
Fund. . . . . . . . . . . . . . 280,916 335,597
Janus Fund. . . . . . . . . . . . 305,956 324,331
Franklin Small-Cap Growth Fund. . 208,024 283,306
MFS Mid-Cap Growth Fund . . . . . 178,430
Participant Loans . . . . . . . . 142,834
Fidelity Advisors High Yield Fund 166,005
MFS Total Return A. . . . . . . . 188,359
Wells Fargo Index . . . . . . . . 167,307
American Century Equity Income. . 168,441
Strong Small Cap Value. . . . . . 203,161
- --------------------------------------------------------------
Total investments greater than 5% 2,365,695 2,324,985
Total investments less than 5% 470,733 465,879
- --------------------------------------------------------------
Total investments $ 2,836,428 $ 2,790,864
- --------------------------------------------------------------
During 2004, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated in value by
$63,616 as follows:
Year ended December 31,. . . 2004 2003
- ------------------------------ --------- --------
Common/collective fund . . . $ 11,454 $ 8,643
Mutual funds . . . . . . . . 119,335 308,442
Pizza Inn, Inc. common stock (67,173) $110,888
- ------------------------------ --------- --------
$ 63,616 $427,973
--------- --------
- ------------------------------ --------- --------
5. NON-PARTICPANT DIRECTED INVESTMENTS
Employer contributions are automatically invested in Pizza Inn, Inc.
common stock. Employees also have the option of investing their contribution,
or a portion thereof, in Pizza Inn, Inc. common stock. Effective July 8, 2003,
the Plan was amended to allow participants to move employer contributions from
employer common stock to other investment options provided by the Plan. Since
the activity of the nonparticipant-directed and participant-directed investments
are combined, the entire investment option is considered nonparticipant-directed
for purposes of this disclosure. Information about the net assets and the
significant components of the changes in net assets relating to
nonparticipant-directed investments is as follows:
December 31, . . . . . . . . . 2004 2003
- -------------------------------- ------- ---------
NET ASSETS:
Pizza Inn, Inc. common stock 677,526 1,060,487
- -------------------------------- ------- ---------
Year Ended December 31, . . . . . . . . . . . . 2004
- ------------------------------------------------- ----------
CHANGES IN NET ASSETS
Contributions . . . . . . . . . . . . . . . $ 106,863
Net depreciation. . . . . . . . . . . . . . (67,173)
Benefits paid to participants . . . . . . . . . (113,169)
Transfers from participant-directed investments (309,482)
- ------------------------------------------------- ----------
$(382,961)
----------
- ------------------------------------------------- ----------
6. PARTY-IN-INTEREST TRANSACTIONS
One of the Plan's investments options is in shares of Pizza Inn, Inc.
Common Stock. Pizza Inn, Inc. sponsors the Plan; therefore, the related
transactions are deemed party-in-interest transactions. The Plan recorded
purchases of $154,729 and sales of $445,961 of the Company's stock during the
year ended December 31, 2004.
Certain Plan investments are shares of mutual funds managed by Wells
Fargo or its affiliates. This institution serves as trustee to the Plan and,
therefore, these investments are deemed party-in-interest transactions. In
addition, the Plan has a program to provide loans to participants and therefore
these also are deemed party-in-interest transactions.
7. SUBSEQUENT EVENT
Effective January 1, 2005, the Plan changed the plan Recordkeeper from
Wells Fargo Retirement Plan Services to BISYS Retirement Services. The
Retirement Group at Merrill Lynch is responsible for the custody and management
of the Plan's assets.
SUPPLEMENTAL SCHEDULES
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
EIN: 47-0654575
Plan Number: 005
- --------------------------------------------------------------------------------------------------------------------------
December 31, 2004 Schedule I
- --------------------------------------------------------------------------------------------------------------------------
(c)
Description of investment,
(b) including maturity date, rate (e)
Identity of issue, borrower, of interest, collateral, par or (d) Current
(a) . . lessor or similar party maturity value Cost Value
- --------------------------------------------------------------------------------------------------------------------------
* Pizza Inn, Inc. Common Stock ** $677,526
* Wells Fargo Stable Return Fund Common/Collective fund ** 280,916
Fidelity Advisors High Yield Fund
Fund. . . . . . . . . . . . . . . . . . Mutual Fund ** 166,005
MFS Mid-Cap Growth Fund . . . . . . . . Mutual Fund ** 115,816
Strong Small Cap Value. . . . . . . . . Mutual Fund ** 203,161
MFS Total Return A. . . . . . . . . . . Mutual Fund ** 188,359
Franklin Small-Cap Growth Fund . . . . . Mutual Fund ** 208,024
American Century International
Growth Fund . . . . . . . . . . . . . . Mutual Fund ** 72,665
* Wells Fargo Diversified Bond
Fund. . . . . . . . . . . . . . . . . . Mutual Fund ** 38,709
Janus Fund. . . . . . . . . . . . . . . Mutual Fund ** 305,956
Van Kampen Comstock A. . . . . . . . . . Mutual Fund ** 110,214
American Century Equity Income
Fund. . . . . . . . . . . . . . . . . . Mutual Fund ** 168,441
* Wells Fargo Index Fund Mutual Fund ** 167,307
* Participant loans General purpose loans,
maturing from 2003-2007
bearing interest at 6.25% to
11.5% ** 133,329
- --------------------------------------------------------------------------------------------------------------------------
Total assets held for investment
purposes $ 2,836,428
- --------------------------------------------------------------------------------------------------------------------------
* Party-in interest
** Cost not required for participant-directed investments.
See accompanying Report of Independent Registered Accounting Firm
SCHEDULE OF REPORTABLE TRANSACTIONS
- --------------------------------------------------------------------------------------------------------------------------
EIN: 47-0654575
Plan Number: 005
- --------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 2004 Schedule II
- --------------------------------------------------------------------------------------------------------------------------
(i)
(a) (b) (c) (d) (g) Net Gain
Identity of Party Description of Asset Purchase Price Selling Price Cost of Asset or (Loss)
- --------------------------------------------------------------------------------------------------------------------------
Series of transactions within the plan year with respect to securities of the same issue that, when aggregated,
involve more than 5% of the current value of plan assets:
Pizza Inn, Inc. Common Stock $ 154,729
Pizza Inn, Inc. Common Stock $ 445,961 428,088 17,873
- --------------------------------------------------------------------------------------------------------------------------
See accompanying Report of Independent Registered Accounting Firm
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Administrator has duly caused this annual report to be signed on its behalf by
the undersigned hereunto duly authorized.
Administrative Committee for the
Pizza Inn, Inc. 401(k) Savings Plan
DATE June 28, 2005 By:/s/ Susan Milliman
Susan Milliman
Member of the Pizza Inn, Inc.
401(k) Savings Plan
Administrative Committee
CONSENT OF REGISTERED INDEPENDENT ACCOUNTING FIRM Pizza Inn, Inc. 401(k) Savings Plan Dallas, Texas We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-56590) of Pizza Inn, Inc. of our report dated June 10, 2005 relating to the financial statements and supplemental schedules of the Pizza Inn, Inc. 401(k) Savings Plan as of and for the year ended December 31, 2004 which appears in this Form 11-K. /s/ BDO Seidman, LLP Dallas, Texas June 23, 2005