Blimpie International, Inc. (Amex: BLM), reported May 15 financial results for the third quarter of fiscal 2000 ended March 31, 2000.
Revenues for the three months ended March 31, 2000 were $7,249,000, compared to $7,798,000 for the same quarter in the prior year. Net income for the third quarter of fiscal 2000 was $263,000, or $0.03 per diluted share, compared to $530,000, or $0.06 for the same period in the prior year.Revenues for the nine months ended March 31, 2000 were $22,842,000, compared to $24,996,000 for the same period in the prior year. Income before cumulative effect of change in accounting principle for the first three quarters of fiscal 2000 was $1,012,000, or $0.11 per diluted share, compared to $1,591,000, or $0.17 for the same period in the prior year.
Revenues from continuing fees, the ongoing fees paid by franchisees to Blimpie International, increased 1.2% to $4,582,000 for the quarter ended March 31, 2000, from $4,527,000 for the same period in the prior year.Revenues from subfranchisor fees, master license fees and the sale of franchises were $912,000 for the quarter, compared with $956,000 for the same period in the prior year. Store equipment sales were $1,451,000 for the quarter, compared to $2,107,000 for the same period in the prior year.
As previously disclosed, the Company was unable to sell franchises during parts of the second and third quarters of fiscal 2000 due to circumstances associated with an uncertainty regarding its accounting principle relating to revenue recognition for subfranchise and master license fees. The Company resolved this matter completely during the third quarter, but this situation contributed to lower revenues from the sale of franchises, resale fees, and equipment sales during the second and third quarters of fiscal 2000. The inability to sell franchises also led to lower numbers of new store openings in the second and third quarters.
Selling, general and administrative expenses were only slightly higher in the three and nine months ended March 31, 2000 as compared to the same periods in fiscal 1999 due primarily to higher personnel costs associated with developing 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.
“We continued to feel the effects of the 1999 revenue recognition issue in the third quarter, but that’s now behind us,” said Tony Conza, co-founder, chairman, and CEO. “Consistent with other franchisors, we’re seeing lower franchise sales than in past years and are taking the opportunity of the slowdown in unit growth to focus on increasing unit volumes and unit profitability. The most obvious example of this initiative is the recent change in our advertising strategy, in which we’ve adopted ‘Simply BLIMPIE¨’ as our new tag line. We’ve produced new commercials for both radio and television, and the initial results are positive for the BLIMPIE Subs & Salads locations. For the month of March, same store sales were up 6% compared to March 1999, which is the highest increase we’ve generated since 1993.
“Our operating results continue to suffer from the combination of lower revenues from franchise fees and equipment sales and high start-up costs for our new concepts, Conza continued. “We continue to focus on reducing our costs while helping our franchisees drive higher volumes in their locations. The new advertising strategy is just one component of this plan, but a very important one. We’re beginning to see positive momentum at the operating unit level, which we believe will lead to improved profitability for Blimpie International.”