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Crunch Toons Smash Maker's Profits, Then Discontinued

Poore Brothers Inc., the owners of T.G.I. Friday's restaurants, has discontinued its Crunch Toons product line of salted snacks featuring Warner Bros. cartoon characters. The company decided to discontinue the brand since testing of different consumer marketing variables did not significantly improve sales. In connection, Poore Brothers negotiated amendments to its license agreements with Warner Bros. Consumer Products, which will stop Poore Brothers' right to use the characters after September 30, 2004.

Poore Brothers expects to record expenses in the second quarter of approximately $1.8 million, or $1.1 million ($0.06 per diluted share) after taxes. The expenses cover approximately $1.1 million related to royalties under the license agreements, $0.3 million in inventories and capital equipment, and $0.4 million in estimated allowances to sell-off remaining distributor and retailer inventories. The company estimates the after-tax cash impact to be approximately $0.6 million.

"We are disappointed that the Crunch Toons brand was not successful," commented Eric J. Kufel, president/ceo. "High resolution character-shaped products represented true innovation for the category. As an innovation-focused company, we plan to continue to pursue new product and brand ideas to stimulate growth. Our T.G.I. Friday's brand products continue to outperform expectations thanks to expanded distribution and consumption growth in the mass merchandiser, vending and convenience store channels."

"The expenses mentioned above will negatively affect the second quarter's and the fiscal year's financial results," stated Thomas W. Freeze, svp/cfo. "However, we believe that the stronger than expected sales performance to-date of the T.G.I. Friday's brand should still allow us to achieve our revenue guidance for the fiscal year of $70-$75 million, despite the loss of Crunch Toons brand revenues included in our original revenue estimates. Accordingly, we are increasing our 2004 growth expectations for the T.G.I. Friday's brand up to 20-30% versus the mid-teen percentages previously communicated. We also believe that we will achieve our profit guidance for the fiscal year of $2.8-$3.3 million, or $0.14-$0.17 per diluted share, excluding the impact of the expenses for the Crunch Toons brand discontinuation, due to stronger than expected performance from the T.G.I. Friday's brand."

With facilities in Indiana and Arizona, Poore Bros. markets and manufactures salted snack foods under a variety of owned or licensed brand names. For more information, visit www.poorebrothers.com.

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