Industry News | February 14, 2000
Blimpie Announces 2nd Q, 2000
Revenues for the three months ended December 31, 1999 were $7,191,000, compared to $8,584,000 for the same quarter in the prior year. Net income for the second quarter of fiscal 2000 was $466,000, or $0.05 per diluted share, compared to $588,000, or $0.06 for the same period in the prior year. Revenues from continuing fees, the ongoing fees paid by franchisees to Blimpie International, decreased 0.4% to $4,518,000 for the quarter ended December 31, 1999, from $4,537,000 for the same period in the prior year. Revenues from subfranchisor fees, master license fees and the sale of franchises were $862,000 for the quarter, compared with $1,350,000 for the same period in the prior year. Store equipment sales were $1,448,000 for the quarter, compared to $2,482,000 for the same period in the prior year.
Franchise fees, resale fees and equipment sales were negatively impacted in the quarter due to the Company's inability to sell franchises during the period from October 29, 1999 to early January 2000. As previously disclosed, the Company was unable to complete its audited financial statements for the year ended June 30, 1999 pending its determination of the most appropriate revenue recognition method for subfranchise and master license fees. Effective October 28, 1999, the Company's franchise disclosure documents for most states expired, and could not be renewed until it was able to complete its audited financial statements. The Company is required to give these documents to potential franchisees before it can sell a franchise, so it was unable to sell franchises or assist with reselling most franchises for approximately two months during the past quarter. After the audited financial statements were completed, the Company was able to renew its various state disclosure documents, comply with the Federal Rule on franchising and then recommence its franchise sales operations. This situation contributed to lower revenues from franchise fees, resale fees and equipment sales during the three months ended December 31, 1999.
Selling, general and administrative expenses were only slightly higher in the quarter due primarily to higher personnel costs associated with developing the new brands, offset by cost savings in various areas of the business. Also, income taxes were a greater percentage of income before income taxes due to losses of the Company's majority-owned subsidiary, Maui Tacos International, Inc., which may not be deductible for income tax purposes in fiscal 2000.
Tony Conza, Co-Founder, Chairman, and Chief Executive Officer, commented, "The second quarter was a difficult one for us since we weren't able to sell or resell franchises for most of the quarter. The related decrease in store openings also affected equipment sales, which hurt our revenues. We also had additional expenses associated with the new brands, but were able to partially offset them with other cost containment measures. We recently announced several personnel changes in our Blimpie Subs & Salads group, designed to improve our services to our franchisees. We anticipate that these promotions will have a positive impact on the profitability of our franchisees. Also, our new brands are continuing to increase momentum. We now have seven Maui Tacos, four Pasta Central, and 40 Smoothie Island locations open. We also have opened our first Island Smoothie location, a stand-alone juice bar concept that we're developing initially in the Houston, Texas market. We continue to receive positive feedback about the new concepts, and I'm excited about the potential for growth in revenues and profits that each of our brands holds today."
Headquartered in New York, with offices in Atlanta and Houston, Blimpie International, Inc. franchises Blimpie Subs & Salads and Pasta Central and is the majority owner of Maui Tacos International, Inc., the franchisor of Maui Tacos and Smoothie Island. Blimpie Subs & Salads, a quick- service sandwich chain, has more than 2,100 units operating in locations throughout the United States and in 14 other countries. Pasta Central is a quick service Italian food concept that addresses current eating trends for eat-in or take home meals. Maui Tacos offers a healthy, affordable restaurant-quality menu of "Maui-Mex" items, including traditional Mexican food marinated in Hawaiian spices. Smoothie Island offers a menu of blended beverages of frozen yogurt, fruit and nutritional supplements. The Company also owns the subsidiary B I Concept Systems, Inc., a professional design and equipment service company.
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