11-K: Annual report of employee stock purchase, savings and similar plans
Published on June 28, 2004
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
(Mark One)
[X] Annual report pursuant to Section 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 2003
or
[ ] Transition report pursuant to Section 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _______________
Commission File No.: 0-12919
PIZZA INN, INC.
401(K) SAVINGS PLAN
(Full title of the plan)
PIZZA INN, INC.
3551 PLANO PARKWAY
THE COLONY, TEXAS 75056
(Name of the issuer of the securities held pursuant to the plan
and the address of its principal executive office)
PIZZA INN, INC.
401(K) SAVINGS PLAN
CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
December 31, 2003 3
December 31, 2002 4
FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits -
December 31, 2003 and 2002 5
Statement of Changes in Net Assets Available for Benefits-
Year Ended December 31, 2003 6
Notes to Financial Statements 7
SUPPLEMENTAL SCHEDULES
Schedule of Assets (Held at End of Year) (Schedule I) 17
Schedule of Reportable Transactions (Schedule II) 18
Note: Other schedules required by Section 2520.103 - 10 of the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act ("ERISA") of 1974 have been omitted because they
are not applicable.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants and Administrator of the
Pizza Inn, Inc. 401(k) Savings Plan:
We have audited the accompanying statement of net assets available for benefits
of the Pizza Inn, Inc. 401(k) Savings Plan (the "Plan") as of December 31, 2003,
and the related statement of changes in net assets available for benefits for
the year then ended. The financial statements of the Plan as of December 31,
2002, were reported on by other auditors whose report dated May 30, 2003,
included an unqualified opinion. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). These standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2003, and the changes in net assets available for benefits for the
year then ended in conformity with accounting principles generally accepted in
the United States of America.
Our audit was performed for the purpose of forming an opinion on the 2003 basic
financial statements taken as a whole. The supplemental schedules of the Plan
are presented for the purpose of additional analysis and are not a required part
of the basic financial statements but are supplementary information required by
the Department of Labor's Rules and Regulations for Reporting and Disclosure
under the Employee Retirement Income Security Act of 1974. These supplemental
schedules are the responsibility of the Plan's management. The supplemental
schedules have been subjected to the auditing procedures applied in the audit of
the 2003 basic financial statements and, in our opinion, are fairly stated in
all material respects in relation to the 2003 basic financial statements taken
as a whole.
/s/ BDO SEIDMAN LLP
Dallas, Texas
June 20, 2004
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants and Administrator of the
Pizza Inn, Inc. 401(k) Savings Plan:
In our opinion, the accompanying statement of net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of Pizza Inn, Inc. 401(k) Savings Plan (the "Plan") at December 31, 2002 in
conformity with accounting principles generally accepted in the United States of
America. This financial statement is the responsibility of the Plan's
management. Our responsibility is to express an opinion of this financial
statement based on our audit. We conducted our audit on this financial statement
in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statement is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
Dallas, Texas
May 30, 2003
PIZZA INN, INC.
401(K) SAVINGS PLAN
Notes to Financial Statements
I. DESCRIPTION OF THE PLAN
The following description of the Plan's provisions provides only
general information. Participants should refer to the Plan agreement for more
complete information regarding the Plan's definitions, benefits, eligibility and
other matters.
GENERAL
Pizza Inn, Inc. 401(k) Savings Plan ("Plan") was approved and adopted
by the board of directors of Pizza Inn, Inc. (the "Company") on May 30, 1985 and
was implemented on July 1, 1985. The Plan is a defined contribution plan and is
subject to the provisions of the Employee Retirement Income Security Act of 1974
(ERISA). The Plan is qualified under sections 401(a), 401(k) and 501(a) of the
Internal Revenue Code ("Code") and, accordingly, is exempt from federal income
taxes. On January 1, 2002, the Plan was amended to comply with the Economic
Growth and Tax Relief Reconciliation Act signed into law on June 8, 2001. The
financial statements are prepared with the assumption that the Plan has
maintained its exemption under the Code (see Note 3).
ADMINISTRATION
The Company is responsible for the administration and operation of the
Plan. Wells Fargo Retirement Plan Services (the "Recordkeeper") has been
retained to provide recordkeeping services for the Plan. The Wells Fargo Trust
Operations is responsible for the custody and management of the Plan's assets.
PARTICIPATION
The Plan participation requirements allow employees who have six
months of service with the Company and who are 21 years of age or older to
participate in the Plan.
Participants can defer up to 15% of their salary toward Plan
contributions. Matching contributions can be made at the discretion of the
Company. Company matching contributions for the plan year ended December 31,
2003 equaled 50% up to the first 4% of the participants' contributions. The
matching Company contribution is invested directly in Pizza Inn, Inc. common
stock. Effective July 8, 2003, participants were able to move the employer
matching contributions out of the Pizza Inn, Inc. common stock and into other
investment options. In addition, at the election of the board of directors, the
Company may make discretionary contributions. There were no additional
discretionary contributions made for the year ended December 31, 2003. Rollover
contributions from other qualified plans can be added to the plan by eligible
participants.
For the plan year ended December 31, 2003, the Plan failed the
average deferral percentage discrimination testing. In order to continue as a
qualified plan, the excess participant contributions must be refunded to
participants during the following Plan year. Such amounts refunded to
participants are reflected as excess contributions payable to participants on
the statement of net assets available for benefits.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contribution and an allocation of the Company's contribution and plan earnings.
The benefit to which a participant is entitled is the benefit that can be
provided from the participant's vested accounts. Participants may direct the
investment of their account balances into various investment options offered by
the Plan. Currently, the Plan offers eleven mutual funds, one common/collective
fund and common stock of the Plan sponsor as investment options for
participants.
VESTING
Participant contributions, and the earnings thereon, are fully and
immediately vested. Company contributions vest at the rate of 25% per year over
four years of service.
FORFEITURES
Forfeitures of unvested Company matching contributions by terminated
employees are accumulated and periodically applied to reduce the Company's
matching contributions for the applicable plan year. There were no unallocated
forfeited, nonvested account balances as of December 31, 2003 and 2002.
Employer contributions were reduced by $3,369 from forfeited, nonvested accounts
during the year ended December 31, 2003.
PARTICIPANT LOANS
Participants may obtain a loan from the Plan in an amount not to
exceed 50% of their vested balance up to a maximum of $50,000. The minimum loan
available is $1,000. Loans bear interest at a rate of 2% over prime and are
collateralized by the participant's vested account balance. Loan principal and
interest is repaid ratably through monthly payroll deductions over a maximum
period of five years, except for the purchase of a principal residence which may
be repaid over a reasonable period of time that may be longer than five years.
PAYMENT OF BENEFITS
Terminated participants are entitled to receive 100% of their
contributions to the Plan and any income or loss thereon, as well as their
vested portion of the Company contributions and any income or loss thereon.
Generally, benefits attributable to employer contributions are not payable prior
to termination. However, hardship distributions of a portion of the employee's
contribution and employer's contribution, to the extent vested, may be made to
the participant in certain situations, as defined in the Plan.
Terminated employees may continue to participate in the Plan, and the
expenses related to their participation are paid by the Company.
PLAN TERMINATION
Although it has not expressed any intent to do so, the Company
maintains the right to terminate the Plan at any time. In the event that the
Plan is terminated, the participants become 100% vested in their accounts.
ADMINISTRATIVE EXPENSES
The Company pays substantially all administrative expenses associated
with the administration of the Plan.
II. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
BASIS OF ACCOUNTING
The Plan's financial statements are presented using the accrual
method of accounting in conformity with generally accepted accounting
principles.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires Plan management to make significant
estimates and assumptions that affect the reported amounts of assets,
liabilities, and changes therein, and disclosure of contingent assets and
liabilities. Actual results could differ significantly from those estimates.
INVESTMENTS AND INVESTMENT INCOME
The Plan's investments are exposed to various risks, such as
interest rate, market and credit risks. Due to the level of risk associated
with investments in mutual funds and stocks, it is at least reasonably possible
that changes in the values of such investments will occur in the near term and
that such changes could materially affect participants' account balances and the
amounts reported in the statements of net assets available for benefits.
The investments are valued at fair value or the ending net asset
value on the last business day of the Plan year. Investments in the Company's
common stock are valued at the fair value as determined by the closing quoted
market price on December 31, 2003 and 2002. Purchases and sales of securities
are recorded on a trade-date basis.
Dividends are recorded on the ex-dividend date. Interest is recorded
on the accrual basis.
DETERMINATION OF UNREALIZED APPRECIATION/DEPRECIATION AND GAIN OR
LOSS ON INVESTMENTS
The Plan presents in the Statement of Changes in Net Assets Available
for Benefits the net appreciation (depreciation) in the fair value of its
investments, which consists of the realized gains or losses, and the unrealized
appreciation (depreciation) on those investments.
Unrealized appreciation or depreciation in the fair value of
investments held at year-end and gain or loss on sale of investments during the
year are determined using the fair value at the beginning of the year or
purchase price if acquired during the year.
PARTICIPANT LOANS
Participant loans are valued at original loan value, plus accrued
interest, less principal repayments, which approximates fair value. Interest
rates on the loans range from 6.25% to 11.5% both at December 31, 2003 and 2002.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
RECLASSIFICATIONS
Certain reclassifications have been made to amounts reported in
prior year to conform to the current year's presentation.
III. TAX STATUS OF THE PLAN
Management believes that the Plan is qualified under section 401(a) of
the Internal Revenue Code and therefore, the Plan is exempt from taxation under
section 501(a). The Internal Revenue Service ("IRS") granted a favorable letter
of determination to the Plan in 1986. During 1997 and 2001, the Company
received favorable letters of determination from the IRS for amendments to the
Plan. Generally, contributions to a qualified plan are deductible by the Company
when made. Earnings of the Plan are tax deferred and participants are not taxed
on their benefits until withdrawn from the Plan.
Management is unaware of any variations in the operation of the Plan
from the terms of the Plan documents, as amended. Management believes the
Plan is qualified under the applicable sections of the Code and the Employee
Retirement Income Security Act of 1974 ("ERISA").
IV. INVESTMENTS
The following presents investments that represent 5% or more of the
Plan's net assets:
Total investments greater than 5% 2,324,985 1,803,642
Total investments less than 5% 465,879 342,578
------- -------
Total investments 2,790,864 2,146,220
- ----------------- --------- ---------
During 2003, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated in value by
$427,973 as follows:
V. NONPARTICIPANT-DIRECTED INVESTMENTS
Employer contributions are automatically invested in Pizza Inn, Inc. common
stock. Employees also have the option of investing their contribution, or a
portion thereof, in Pizza Inn, Inc. common stock. Effective July 8, 2003, the
Plan was amended to allow participants to move employer contributions from
employer common stock to other investment options provided by the Plan. Since
the activity of the nonparticipant-directed and participant-directed investments
are combined, the entire investment option is considered nonparticipant-directed
for purposes of this disclosure. Information about the net assets and the
significant components of the changes in net assets relating to
nonparticipant-directed investments is as follows:
VI. PARTY-IN-INTEREST TRANSACTIONS
One of the Plan's investments options is in shares of Pizza Inn, Inc.
Common Stock. Pizza Inn, Inc. sponsors the Plan; therefore, the related
transactions are deemed party-in-interest transactions. The Plan recorded
purchases of $148,534 and sales of $207,942 of the Company's stock during the
year ended December 31, 2003.
Certain Plan investments are shares of Mutual funds managed by Wells
Fargo or its affiliates. This institution serves as trustee to the Plan and,
therefore, these investments are deemed party-in-interest transactions. In
addition, the Plan has a program to provide loans to participants and therefore
these also are deemed party-in-interest transactions.
VII. SUBSEQUENT EVENT
Effective January 1, 2004, the Plan was amended to allow participants
to contribute up to 30% of their compensation to the Plan. Also effective with
this amendment, non-management restaurant employees are no longer eligible for
participation in the Plan.
SUPPLEMENTAL SCHEDULES
See accompanying Report of Independent Registered Accounting Firm.
PIZZA INN, INC. 401(K) SAVINGS PLAN
SCHEDULE H, LINE 4J - SCHEDULE OF REPORTABLE TRANSACTIONS
- -----------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 2003 SCHEDULE II
- ------------------------------------------
EIN 47-0654575
Plan Number:005
See accompanying Report of Independent Registered Accounting Firm.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Administrator of the Pizza Inn, Inc. 401(k) Savings Plan has duly caused this
annual report to be signed on its behalf by the undersigned hereto duly
authorized.
PIZZA INN, INC.
401(k) SAVINGS PLAN
Administrative Committee for the
By: Pizza Inn, Inc. 401(k) Savings Plan
Date: June 30, 2003 By: /s/ Susan Milliman
Susan Milliman
Member of the Pizza Inn, Inc.
401(k) Savings Plan Administrative
Committee
INDEX TO EXHIBITS
NUMBER DESCRIPTION PAGE
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Pricewaterhouse Coopers