Beard, who owns more than 10% of Schlotzsky's shares, said he is disappointed with company's diminishing performance financially and in stock value. He wants Schlotzsky's to put a proposal to sell all or parts of the company before shareholders at its 2003 annual meeting. He also wants transactions completed by Feb. 1, 2004. He notified the company of his proposal in a letter delivered to its headquarters in downtown Austin and filed with the Securities and Exchange Commission.
A call to Schlotzsky's Wednesday afternoon did not elicit a response to Beard's letter.Westdale owns and manages multifamily communities in Texas and several other states as well as some commercial property. Beard owns 421,000 of his Schlotzsky's shares through Westdale.
In the letter, Beard's lawyers say that some shareholders are disappointed with the company's financial performance and stock value. "These shareholders seek to increase shareholder value for all Schlotzsky's Inc. shareholders through an open, publicly announced sale of the company," the letter said.
In its financial report for its third fiscal quarter, Schlotzsky's posted revenue of $15 million, a 2.7% decline from the 2001 third quarter, and a net loss of $240,000. The company blamed the performance on the continuing soft economy as it continues to invest to develop its concept. The company operated 658 stores in 37 states as of Sept. 30, 2002.
The company recently announced plans to build a store that at 5,800 sf is nearly 2,000 sf bigger than its largest stores. The new store is to open in May in the Tech Ridge Shopping Center in Austin.
In the letter, Beard's lawyers listed eight measures that they said showed the company's lackluster performance.
In stock performance, the company's share price dropped from $6.50 in January 2002 to about $3 in December 2002. It closed yesterday at $3.31 per share, down 5 cents. The stock traded, at times, for more than $20 five years ago.
In financial performance, the letter said net income fell to $876,000, 12 cents per share, for the first nine months of 2002 from $2 million, 27 cents per share, in the first nine months of 2001. Earnings before interest, taxes, depreciation and amortization were deducted were $1.6 million in the 2002 third quarter, a decline from $2.5 million in the 2001 third quarter. The letter also said that debt as a percentage of shareholder's equity increased to 80% at the end of September 2002 from 53% at the end of 2001.
As for store performance, the letter said system-wide sales dropped 7.7% and same-store sales fell 6.3% in through the 2002 third quarter compared to the 2001 third quarter. The company and its franchisees opened 18 stores compared to 32 and 66 in each of the previous two years. And, finally, the company and franchisees closed 225 stores from 1999 to 2001.
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