Wednesday February 7, 6:34 pm ET
THE COLONY, Texas, Feb. 7 /PRNewswire-FirstCall/ — PIZZA INN, INC. (Nasdaq: PZZI – News) today reported a net income per share for its second fiscal quarter ended December 24, 2006 of $0.01 versus a net loss of ($0.06) per share for the same quarter last year. The quarter resulted in net income of $152,000 versus a net loss of ($601,000) for the same quarter last year on revenues of $12.4 million and $12.8 million, respectively. 

     * Comparable buffet restaurant sales increased 0.6% for the quarter.
        Domestic chain-wide comparable restaurant sales decreased 1.3% for the
        quarter.
     * Total domestic chain-wide restaurant sales decreased 6% for the
        quarter due to the decrease in comparable restaurant sales and a net
        reduction in franchised restaurants.
     * Excluding the impact of gains on sale of assets and rental income, the
        Company's revenues decreased approximately 8%, or $1,028,000,
        primarily due to the Company's recent decision to reduce the prices of
        key food and supply products sold to franchisees through the Company's
        distribution division, lower chain-wide restaurant sales, as discussed
        above, lower cheese prices, and lower equipment sales. The resulting
        reductions in food and supply sales and royalty revenue were partially
        offset by increased restaurant sales at company-owned restaurants as a
        result of the opening of three company-owned buffet restaurants in
        fiscal year 2006.
     * During the quarter, the Company incurred $375,000 of legal fees, as
        compared to $442,000 in the prior year, which is reflected in general
        and administrative expenses.
     * During the quarter, the Company incurred non-cash stock compensation
        expense of $55,000 as compared to $94,000 in the prior year, which is
        reflected in general and administrative expenses.
     * During the quarter, the Company recognized a $108,000 benefit from the
        reduction to the provision for litigation costs due to the reduction
        of accounts payable to PepsiCo as a result of the Company's recent
        settlement with PepsiCo, which is broken out separately in the
        statement of operations.

The Company’s President and CEO, Tim Taft, commented, “Much has been accomplished in the pursuit of turning around this brand. Franchisees report being healthier than they have been in a long while and, with the recent hiring of Charlie Morrison (CFO) and Susan Gray (Training, HR), we have a complete management team capable of significantly affecting our positive momentum.”
Certain statements in this press release, other than historical information, may be considered forward-looking statements, within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, and are subject to various risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ from those anticipated, estimated or expected. Among the key factors that may have a direct bearing on Pizza Inn’s operating results, performance or financial condition are its ability to implement its growth strategies, national, regional and local economic conditions affecting the restaurant/ entertainment industry, competition within each of the restaurant and entertainment industries, store sales cannibalization, success of its franchise operations, negative publicity, fluctuations in quarterly results of operations, including seasonality, government regulations, weather, commodity, insurance and labor costs.
Pizza Inn, Inc. (http://www.pizzainn.com ) is headquartered in The Colony, Texas, along with its distribution division, Norco Restaurant Services Company. Pizza Inn franchises approximately 282 domestic and 77 international restaurants and owns three restaurants with annual domestic and international chain-wide sales of approximately $145 million. 

     For more information contact:
     Charlie Morrison
     Chief Financial Officer
     (469) 384-5203
 
 
 
                               PIZZA INN, INC.
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   (In thousands, except per share amounts)
                                 (Unaudited)
 
                                Three Months Ended       Six Months Ended
                           December 24, December 25, December 24, December 25,
                              2006          2005         2006         2005
    REVENUES:
 
      Food and supply
       sales                 $10,232       $11,215      $20,620      $22,523
      Franchise revenue        1,118         1,199        2,307        2,379
      Restaurant sales           375           339          745          557
      Gain on sale of assets     554           ---          564          147
      Rental income              146           ---          179          ---
 
                              12,425        12,753       24,415       25,606
 
    COSTS AND EXPENSES:
      Cost of sales           10,207        11,060       20,385       22,153
      Franchise expenses         746           793        1,418        1,601
      General and
       administrative
       expenses                1,154         1,581        2,745        3,171
      Provision for
       litigation costs         (108)          ---          302          ---
      Interest expense           274           199          474          368
 
                              12,273        13,633       25,324       27,293
 
    INCOME (LOSS) BEFORE
     INCOME TAXES                152          (880)        (909)      (1,687)
 
      Credit for income taxes    ---          (279)         ---         (596)
 
    NET INCOME (LOSS)           $152         $(601)       $(909)     $(1,091)
 
    Basic income (loss)
     per common share          $0.01        $(0.06)      $(0.09)      $(0.11)
 
    Diluted income (loss)
     per common share          $0.01        $(0.06)      $(0.09)      $(0.11)
 
    Weighted average common
     shares outstanding       10,138        10,108       10,138       10,119
 
    Weighted average common
     and potential dilutive
     common shares
     outstanding              10,138        10,108       10,138       10,119
 
 
 
                               PIZZA INN, INC.
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                     (In thousands, except share amounts)
 
                                                   December 24,       June 25,
    ASSETS                                            2006              2006
                                                   (unaudited)
 
    CURRENT ASSETS
      Cash and cash equivalents                        $287             $184
      Accounts receivable, less allowance
       for doubtful accounts of $331 and
       $324, respectively                             2,625            2,627
      Accounts receivable -- related parties            364              452
      Notes receivable, current portion,
       less allowance                                    28               52
      Inventories                                     1,560            1,772
      Assets held for sale                              383              ---
      Current deferred income tax asset               1,138            1,145
      Prepaid expenses and other                        411              299
        Total current assets                          6,796            6,531
 
    LONG-TERM ASSETS
      Property, plant and equipment, net              1,008           11,921
      Non-current notes receivable                       16               20
      Re-acquired development territory, net            335              431
      Deposits and other                                305               98
                                                     $8,460          $19,001
    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT LIABILITIES
      Accounts payable -- trade                      $2,843           $2,217
      Accrued litigation expenses                       410            2,800
      Other accrued expenses                          1,839            1,991
      Current portion of long-term debt                 ---            8,044
        Total current liabilities                     5,092           15,052
 
    LONG-TERM LIABILITIES
      Other long-term liabilities                       654              437
                                                      5,746           15,489
 
    COMMITMENTS AND CONTINGENCIES
 
    SHAREHOLDERS' EQUITY
      Common Stock, $.01 par value;
       authorized 26,000,000 shares;
       issued 15,090,319 and 15,090,319
       shares, respectively; outstanding
       10,138,494 and 10,138,494 shares,
       respectively                                     151              151
      Additional paid-in capital                      8,523            8,426
      Retained earnings                              13,684           14,593
      Accumulated other comprehensive loss              ---              (14)
      Treasury stock at cost
        Shares in treasury: 4,951,825 and
         4,951,825, respectively                    (19,644)         (19,644)
           Total shareholders' equity                 2,714            3,512
                                                     $8,460          $19,001
 
 
 
                               PIZZA INN, INC.
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)
                                 (Unaudited)
 
                                                       Six Months Ended
                                                 December 24,     December 25,
                                                     2006             2005
 
    CASH FLOWS FROM OPERATING ACTIVITIES:
 
      Net loss                                       $(909)          $(1,091)
      Adjustments to reconcile net loss to
        cash used in operating activities:
        Depreciation and amortization                  448               568
        Deferred rent expense                            3                31
        Stock compensation expense                      97               197
        Litigation expense accrual                     302               ---
        Gain on sale of assets                        (564)             (147)
        Deferred revenue                               196               ---
      Changes in operating assets and liabilities:
        Notes and accounts receivable                  118               195
        Inventories                                    212              (425)
        Accounts payable -- trade                      626               645
        Accrued expenses                            (3,096)             (385)
        Prepaid expenses and other                    (331)               70
        Cash used in operating activities           (2,898)             (342)
 
    CASH FLOWS FROM INVESTING ACTIVITIES:
 
      Proceeds from sale of assets                  11,319               474
      Capital expenditures                            (248)           (1,315)
        Cash provided by (used for)
         investing activities                       11,071              (841)
 
    CASH FLOWS FROM FINANCING ACTIVITIES:
      Deferred financing costs                         (26)              ---
      Change in line of credit, net                    ---             1,381
      Repayments of long-term bank debt             (8,044)             (209)
      Proceeds from exercise of stock options          ---                22
        Cash (used for) provided by
         financing activities                       (8,070)            1,194
 
    Net increase in cash and cash equivalents          103                11
    Cash and cash equivalents, beginning
     of period                                         184               173
    Cash and cash equivalents, end of period          $287              $184

 

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