Schlotzsky’s, Inc., announced results for the twelve months and fourth quarter ended December 31, 2001.

For the twelve months ended December 31, 2001, the company reported net income of $2.5 million, or $0.33 per share (diluted), compared to a net loss of $2.3 million, or $0.31 per share, for fiscal 2000. Revenue for the full year 2001 increased to $61.9 million, up 4.5 percent compared to 2000.

For the fourth quarter of 2001, the company reported net income of $488,000, or $0.07 per share (diluted), a 35.2 percent increase over net income of $361,000, or $0.05 per share in the fourth quarter of 2000. Revenues for the most recent quarter were $14.9 million, a slight decrease from the fourth quarter of 2000.

“For Schlotzsky’s, 2001 was a very important year. We returned to profitability and significantly increased our cash flow, generated almost exclusively from recurring revenue. Our efforts to improve operations, reduce costs, develop new products and innovative restaurant systems produced solid financial performance. As a result, Schlotzsky’s financial foundation is much stronger that it was a year ago. And of equal importance, we set the stage for the future,” said president and CEO John C. Wooley. “We accomplished this even in a challenging environment.”

Other developments for the full year 2001 include:

• Systemwide sales, including both company-owned and franchised restaurants, were $423.2 million. Systemwide
same store sales declined 1.4 percent from 2000.

• Earnings before interest, taxes, depreciation and amortization (EBITDA) increased to $10.3 million in 2001, a new record for the company.

• Recurring revenue from royalties, brand contribution and company-owned restaurant sales was 95.5 percent of
company total revenue.

• Average weekly unit sales for the company’s eleven Austin area restaurants was $31,751.

• Commercial bank debt reduction continued, with $1.5 million paid down in the fourth quarter, making the total
reduction for 2001 $5.4 million.

• The Schlotzsky’s® Deli system ended the year with 674 restaurants systemwide (33 Company-owned and 641

• 176,300 shares of Company common stock were repurchased during 2001, including 3,300 shares in the fourth

Developments for the fourth quarter of 2001 include:

• Systemwide sales were $100.0 million. Systemwide same store sales declined 2.7 percent from fourth quarter of

• EBITDA for the quarter increased 23.2 percent to $2.6 million.

• Recurring revenue was 96.9 percent of company total revenue.

• General and administrative (G & A) expenses were reduced 16.1 percent from fourth quarter of 2000.

“Now that we have reduced our G & A and improved profitability, we must reestablish the pipeline for growth during 2002. This means 1) building additional company restaurants for strategic leadership, 2) motivating current franchisees to remodel and grow, and 3) attracting new franchisees who are experienced and well capitalized,” said Wooley. “The success of our company restaurants in Austin has transformed our understanding of what is possible. We now have a deeper understanding of operations, which is allowing us to bring stronger programs and innovations to our entire franchise system. We’re rolling out new menu items supported by national network television advertising. I believe 2002 and 2003 will be years in which Schlotzsky’s is increasingly recognized as a leader in quick-casual upscale sandwiches.”

Wooley also reported that the company has expanded its relationship with major retailers, such as Wal-Mart and Costco, for its Schlotzsky’s® Deli brand chips and deli meats. The result of this expansion was a 7 percent increase in revenue from this growing business segment.

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