UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
---------
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended: July 1, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the Transition Period from to
Commission File Number: 333-45179
MRS. FIELDS' ORIGINAL COOKIES, INC.
-----------------------------------
(Exact name of registrant specified in its charter)
DELAWARE 87-0552899
--------------------------------- --------------------------------
(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)
2855 East Cottonwood Parkway, Suite 400
Salt Lake City, Utah 84121-7050
---------------------------------------- ------------------------------
(Address of principal executive offices) (Zip code)
(801) 736-5600
--------------
(Registrant's telephone number, including area code)
N/A
----
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X yes no
The registrant had 400 shares of common stock, $0.01 par value, outstanding at
August 15, 2000.
<PAGE>
MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
-------------------------------
<TABLE>
<CAPTION>
<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of July 1, 2000 and January 1, 2000..................... 3
Condensed Consolidated Statements of Operations for the 13 Weeks
Ended July 1, 2000 and July 3, 1999............................................................ 5
Condensed Consolidated Statements of Operations for the 26 Weeks
Ended July 1, 2000 and July 3, 1999............................................................ 6
Condensed Consolidated Statements of Cash Flows for the 26 Weeks
Ended July 1, 2000 and July 3, 1999............................................................ 7
Notes to Condensed Consolidated Financial Statements............................................. 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........... 24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................................................... 30
Item 6. Exhibits and Reports on Form 8-K................................................................ 30
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
July 1, January 1,
2000 2000
------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,775 $ 4,919
Accounts receivable, net of allowance for doubtful accounts of $230 and $111,
respectively 3,823 4,295
Amounts due from franchisees and licensees, net of allowance for doubtful
accounts of $700 and $821, respectively 3,838 3,708
Inventories 4,701 4,977
Prepaid rent and other 2,110 1,336
Deferred income tax assets, current portion 1,360 1,360
----------- ---------
Total current assets 17,607 20,595
----------- ---------
PROPERTY AND EQUIPMENT, at cost:
Leasehold improvements 29,018 26,698
Equipment and fixtures 22,666 22,540
Land 240 240
----------- ---------
51,924 49,478
Less accumulated depreciation and amortization (26,171) (20,813)
----------- ---------
Net property and equipment 25,753 28,665
----------- ---------
DEFERRED INCOME TAX ASSETS, net of current portion 2,154 2,139
----------- ---------
GOODWILL, net of accumulated amortization of $25,994 and $21,156,
respectively 126,185 132,479
----------- ---------
TRADEMARKS AND OTHER INTANGIBLES, net of accumulated
amortization of $4,276 and $3,700, respectively 12,486 13,062
----------- ---------
DEFERRED LOAN COSTS, net of accumulated amortization of $5,426 and
$4,052, respectively 9,694 10,818
----------- ---------
OTHER ASSETS 688 652
----------- ---------
$ 194,567 $ 208,410
=========== =========
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these balance sheets.
3
<PAGE>
MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)(Continued)
(dollars in thousands, except share data)
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
July 1, January 1,
2000 2000
------- ----------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 695 $ 781
Current portion of capital lease obligations 952 842
Line of credit 3,550 -
Accounts payable 8,369 10,514
Accrued liabilities 2,112 2,851
Current portion of store closure reserve 3,016 3,665
Accrued salaries, wages and benefits 3,107 3,180
Accrued interest payable 1,181 1,288
Sales taxes payable 745 1,128
Deferred credits 112 132
----------- ---------
Total current liabilities 23,839 24,381
LONG-TERM DEBT, net of current portion 141,469 141,755
STORE CLOSURE RESERVE, net of current portion 2,853 3,529
CAPITAL LEASE OBLIGATIONS, net of current portion 2,729 3,107
----------- ---------
Total liabilities 170,890 172,772
----------- ---------
MANDATORILY REDEEMABLE CUMULATIVE PREFERRED
STOCK of PTI (a wholly owned subsidiary), aggregate liquidation
preference of $1,070 at January 1, 2000 - 1,070
----------- ---------
MINORITY INTEREST 126 111
----------- ---------
STOCKHOLDER'S EQUITY:
Common stock, $.01 par value; 1,000 shares authorized and 400 shares
outstanding - -
Additional paid-in capital 61,899 61,899
Accumulated deficit (38,273) (27,442)
Cumulative foreign currency translation adjustment (75) -
----------- ---------
Total stockholder's equity 23,551 34,457
----------- ---------
$ 194,567 $ 208,410
=========== =========
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these balance sheets.
4
<PAGE>
MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
13 Weeks Ended 13 Weeks Ended
July 1, 2000 July 3, 1999
------------ ------------
<S> <C> <C>
REVENUES:
Net store and food sales $ 32,639 $ 34,786
Franchising 6,097 5,146
Management fee 1,333 -
Licensing 201 241
-------- --------
Total revenues 40,270 40,173
--------- --------
OPERATING COSTS AND EXPENSES:
Selling and store occupancy costs 18,387 19,725
Cost of sales 11,034 9,925
General and administrative 6,339 5,549
Store closure benefit (200) -
Depreciation and amortization 6,331 5,867
-------- --------
Total operating costs and expenses 41,891 41,066
-------- --------
Loss from operations (1,621) (893)
-------- --------
OTHER INCOME (EXPENSE), net:
Interest expense (4,528) (4,349)
Interest income 22 40
Other, net 97 (3)
-------- --------
Total other expense, net (4,409) (4,312)
-------- --------
Loss before provision for income taxes, preferred stock
accretion and dividends of subsidiaries and minority
interest (6,030) (5,205)
PROVISION FOR INCOME TAXES (7) (106)
-------- --------
Loss before preferred stock accretion and dividends of
subsidiaries and minority interest (6,037) (5,311)
PREFERRED STOCK ACCRETION AND DIVIDENDS OF SUBSIDIARIES
- (111)
MINORITY INTEREST (12) (3)
-------- --------
Net loss $ (6,049) $ (5,425)
======== ========
COMPREHENSIVE LOSS:
Net loss $ (6,049) $ (5,425)
Foreign currency translation adjustments (75) -
-------- --------
Comprehensive loss $ (6,124) $ (5,425)
======== ========
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these balance sheets.
5
<PAGE>
MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
26 Weeks Ended 26 Weeks Ended
July 1, 2000 July 3, 1999
------------ ------------
<S> <C> <C>
REVENUES:
Net store and food sales $ 66,435 $ 71,915
Franchising 12,043 11,562
Management fee 1,333 -
Licensing 361 688
-------- --------
Total revenues 80,172 84,165
-------- --------
OPERATING COSTS AND EXPENSES:
Selling and store occupancy costs 36,707 41,118
Cost of sales 22,001 21,856
General and administrative 11,460 10,873
Store closure benefit (200) -
Depreciation and amortization 11,989 11,263
-------- --------
Total operating costs and expenses 81,957 85,110
-------- --------
Loss from operations (1,785) (945)
-------- --------
OTHER INCOME (EXPENSE), net:
Interest expense (9,126) (8,686)
Interest income 45 78
Other, net 65 (110)
-------- --------
Total other expense, net (9,016) (8,718)
-------- --------
Loss before provision for income taxes, preferred stock
accretion and dividends of subsidiaries and minority
interest (10,801) (9,663)
PROVISION FOR INCOME TAXES (15) (210)
-------- --------
Loss before preferred stock accretion and dividends of
subsidiaries and minority interest (10,816) (9,873)
PREFERRED STOCK ACCRETION AND DIVIDENDS OF
SUBSIDIARIES - (222)
MINORITY INTEREST (15) (4)
-------- --------
Net loss $(10,831) $(10,099)
======== ========
COMPREHENSIVE LOSS:
Net loss $(10,831) $(10,099)
Foreign currency translation adjustments (75) -
-------- --------
Comprehensive loss $(10,906) $(10,099)
======== ========
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these balance sheets.
6
<PAGE>
MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
26 Weeks Ended 26 Weeks Ended
July 1, 2000 July 3, 1999
------------ ------------
<S> <C> <C>
Decrease in Cash and Cash Equivalents
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(10,831) $(10,099)
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Depreciation and amortization 11,989 11,263
Amortization of deferred loan costs and accretion on loan discount 1,416 1,021
Loss on sale of assets 511 117
Preferred stock accretion and dividends of subsidiaries - 222
Minority interest 15 4
Changes in assets and liabilities:
Accounts receivable, net 472 1,638
Amounts due from franchisees and licensees, net (130) 1,195
Inventories 276 590
Prepaid rent and other (774) 149
Other assets (36) 918
Accounts payable and accrued liabilities (2,884) (1,006)
Bank overdraft - (1,231)
Store closure reserve (1,325) (1,311)
Accrued salaries, wages and benefits (73) (90)
Accrued interest payable (107) 38
Sales taxes payable (383) (584)
Deferred credits (35) (126)
-------- --------
Net cash (used in) provided by operating activities (1,899) 2,708
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash paid for acquisition expenses - (100)
Purchase of property and equipment (2,529) (2,604)
-------- --------
Net cash used in investing activities (2,529) (2,704)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of long-term debt (414) (5,340)
Payment of debt financing costs (250) (1,155)
Borrowings under line of credit 3,550 7,000
Principal payments on capital lease obligations (457) (572)
Reduction in preferred stock (1,070) (43)
-------- --------
Net cash provided by (used in) financing activities 1,359 (110)
-------- --------
Effect of foreign exchange rates (75) -
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,144) (106)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 4,919 4,751
-------- --------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 1,775 $ 4,645
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 7,817 $ 7,588
======== ========
Cash paid for income taxes $ 124 $ 164
======== ========
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these balance sheets.
7
<PAGE>
MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
(1) Basis of Presentation
---------------------
The accompanying unaudited condensed consolidated financial statements have
been prepared by Mrs. Fields' Original Cookies, Inc. and subsidiaries ("Mrs.
Fields") in accordance with the rules and regulations of the Securities and
Exchange Commission for Form 10-Q, and accordingly, do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States. In the opinion of management, these condensed consolidated
financial statements reflect all adjustments, which consist only of normal
recurring adjustments, necessary to present fairly the financial position of
Mrs. Fields as of July 1, 2000 and January 1, 2000, and the results of its
operations and its cash flows for the periods presented herein. These condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto for the fiscal year ended
January 1, 2000 contained in Mrs. Fields' Annual Report on Form 10-K.
The results of operations for the 13 and 26 weeks ended July 1, 2000 are
not necessarily indicative of the results that may be expected for the remainder
of the fiscal year ending December 30, 2000. Loss per share information is not
presented as Mrs. Fields is wholly owned by Mrs. Fields' Holding Company, Inc.
("Mrs. Fields' Holding") and therefore, its shares are not publicly traded. All
dollar amounts presented are stated in thousands.
(2) RECLASSIFICATIONS
-----------------
Certain reclassifications have been made to the prior periods' condensed
consolidated financial statements to conform with the current periods'
presentation.
(3) STORE CLOSURE AND PROPERTY AND EQUIPMENT IMPAIRMENT RESERVES
------------------------------------------------------------
Mrs. Fields' management reviews the historical and projected operating
performance of its stores on a periodic basis to identify underperforming stores
for impairment of net property investment or for targeted closing. Mrs. Fields'
policy is to recognize a loss for that portion of the net property investment
determined to be impaired. Additionally, when a store is identified for targeted
closing, Mrs. Fields' accrues the costs of closing the store, which are
predominantly estimated lease termination costs. Lease termination costs include
both one-time settlement payments and continued contractual payments over time
under the original lease agreements where no settlement can be reached with the
landlord. As a result, although all stores under the current exit plans will be
exited by at least the end of fiscal year 2000, a portion of the store closure
reserve will remain until all cash payments have been made. No operating losses
have been accrued. The classification of some stores to be closed or franchised
may be changed and the store removed from the exit plan if that store's
operations change positively, or if the Company is unable to negotiate a
settlement with the landlord. If and when a reserve that was established as part
of purchase accounting is not fully utilized, Mrs. Fields reduces the reserve to
zero and goodwill is adjusted for the corresponding amount. Any excess reserve
that was not established as part of purchase accounting is adjusted through the
income statement.
8
<PAGE>
MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands)
(Unaudited)
The following table presents a summary of the activity in the store closure
reserve during the 26 weeks ended July 1, 2000 and July 3, 1999:
<TABLE>
<CAPTION>
Mrs. Fields Inc. and
Original Cookie H & M Pretzel Time Great American
-------------------- ----------------------- ----------------------- ---------------------------
Business Company- Business Company - Business Company- Business Company-
Combination Owned Combination Owned Combination Owned Combination Owned
and Stores and Stores and Stores and Stores
Subsequent Unrelated to Subsequent Unrelated to Subsequent Unrelated to Subsequent Unreleated to
Adjustments Acquisition Adjustments Acquisition Adjustments Acquisition Adjustments Acquisition
----------- ------------ ----------- ------------ ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 2000 $1,614 $1,581 $536 $294 $109 $ 86 $1,674 $545
Reversal during the 26
weeks ended July 1, 2000 - - - - - - - -
Utilization for the 26
weeks ended July 1, 2000 (218) (312) (57) (120) (22) - (233) (130)
------ ------ ---- ---- ---- ----- ------ ----
Balance, July 1, 2000 $1,396 $1,269 $479 $174 $ 87 $ 86 $1,441 $415
====== ====== ==== ==== ==== ===== ====== ====
Balance, January 2, 1999 $3,728 $4,674 $981 $367 $493 $ 264 $3,399 $305
Utilization for the 26 weeks
ended July 3, 1999 (813) (504) - (43) - (67) (288) -
------ ------ ---- ---- ---- ----- ------ ----
Balance, July 3, 1999 $2,915 $4,170 $981 $324 $493 $197 $3,111 $305
====== ====== ==== ==== ==== ===== ====== ====
</TABLE>
<PAGE>
MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands)
(Unaudited)
The following table presents a summary of the activity in the store closure
reserve during the 26 weeks ended July 1, 2000 and July 3, 1999:
<TABLE>
<CAPTION>
Pretzelmaker Consolidated
----------------------- ------------------------------------------
Total Total Total
Business Company- Business Company- Business
Combination Owned Combination Owned Combinations
and Stores and Stores and
Subsequent Unrelated to Subsequent Unreleated to Company
Adjustments Acquisition Adjustments Acquisition Owned Stores
----------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 2000 $105 $650 $4,038 $3,156 $ 7,194
Reversal during the 26
weeks ended July 1, 2000 - (200) - (200) (200)
Utilization for the 26
weeks ended July 1, 2000 (16) (17) (546) (579) (1,125)
---- ---- ------ ------ --------
Balance, July 1, 2000 $ 89 $433 $3,492 $2,377 $ 5,869
==== ==== ====== ====== ========
Balance, January 2, 1999 $500 $ - $9,101 $5,610 $ 14,711
Utilization for the 26 weeks
ended July 3, 1999 - - (1,101) (614) (1,715)
---- ---- ------ ------ --------
Balance, July 3, 1999 $500 $ - $8,000 $4,996 $ 12,996
==== ==== ====== ====== ========
</TABLE>
9
<PAGE>
MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands)
(Unaudited)
The following table presents a summary of activity for stores originally
identified to be closed or franchised in connection with the applicable business
combination for the 26 weeks ended July 1, 2000 and July 3, 1999. This table
does not include a summary of activity for stores Mrs. Fields intends to close
or franchise that were not originally identified in connection with a business
combination.
<TABLE>
<CAPTION>
Mrs. Fields Inc.
and
Original Cookie H&M Pretzel Time
------------------- ----------------- -----------------
To Be To Be To Be To Be To Be To Be
Closed Franchised Closed Franchised Closed Franchised
------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 2000 - 14 - - - -
Stores closed, franchised or removed
for the 26 weeks ended July 1, 2000 - (11) - - - -
--- --- -- -- -- --
Balance, July 1, 2000 - 3 - - - -
=== === == == == ==
Balance, January 2, 1999 23 36 6 7 3 -
Stores closed, franchised, or removed for
the 26 weeks ended July 3, 1999 (13) (13) (4) (4) (3) -
--- --- -- -- -- --
Balance, July 3, 1999 10 23 2 3 - -
=== === == == == ==
</TABLE>
<PAGE>
MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands)
(Unaudited)
The following table presents a summary of activity for stores originally
identified to be closed or franchised in connection with the applicable business
combination for the 26 weeks ended July 1, 2000 and July 3, 1999. This table
does not include a summary of activity for stores Mrs. Fields intends to close
or franchise that were not originally identified in connection with a business
combination.
<TABLE>
<CAPTION>
Great American Pretzelmaker Consolidated
------------------- ------------------ ----------------
To Be To Be To Be To Be To Be To Be
Closed Franchised Closed Franchised Closed Franchised
------ ---------- ------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 2000 6 1 - - 6 15
Stores closed, franchised or removed
for the 26 weeks ended July 1, 2000 (2) (1) - - (2) (12)
--- -- -- -- --- ---
Balance, July 1, 2000 4 - - - 4 3
=== == == == === ===
Balance, January 2, 1999 43 11 7 - 82 54
Stores closed, franchised, or removed for
the 26 weeks ended July 3, 1999 (21) (1) (4) - (45) (18)
--- -- -- -- --- ---
Balance, July 3, 1999 22 10 3 - 37 36
=== == == == === ===
</TABLE>
10
<PAGE>
MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table presents a summary of activity for stores Mrs. Fields
intends to close or franchise that were not originally identified to be closed
or franchised in connection with a business combination for the 26 weeks ended
July 1, 2000, and July 3, 1999:
<TABLE>
<CAPTION>
Mrs. Fields Inc.
and
Original Cookie H&M Pretzel Time
------------------- ----------------- -----------------
To Be To Be To Be To Be To Be To Be
Closed Franchised Closed Franchised Closed Franchised
------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 2000 3 4 - - - 1
Stores closed, franchised or removed
for the 26 weeks ended July 1, 2000 (1) (2) - - - (1)
--- --- -- -- -- --
Balance, July 1, 2000 2 2 - - - -
=== === == == == ==
Balance, January 2, 1999 20 10 2 1 2 3
Stores closed, franchised, or removed for
the 26 weeks ended July 3, 1999 (19) (4) (2) - (1) (2)
--- --- -- -- -- --
Balance, July 3, 1999 1 6 - 1 1 1
=== === == == == ==
</TABLE>
<PAGE>
MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table presents a summary of activity for stores Mrs. Fields
intends to close or franchise that were not originally identified to be closed
or franchised in connection with a business combination for the 26 weeks ended
July 1, 2000, and July 3, 1999:
<TABLE>
<CAPTION>
Great American Consolidated
------------------- ----------------
To Be To Be To Be To Be
Closed Franchised Closed Franchised
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Balance, January 1, 2000 - - 3 5
Stores closed, franchised or removed
for the 26 weeks ended July 1, 2000 - - (1) (3)
--- -- --- ---
Balance, July 1, 2000 - - 2 2
=== == === ===
Balance, January 2, 1999 5 - 29 14
Stores closed, franchised, or removed for
the 26 weeks ended July 3, 1999 (1) - (23) (6)
--- -- --- ---
Balance, July 3, 1999 4 - 6 8
=== == === ===
</TABLE>
11
<PAGE>
MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands)
(Unaudited)
The following table presents a summary of changes in the property and
equipment impairment reserves that were established in connection with the
applicable business combination for the 26 weeks ended July 1, 2000 and July 3,
1999 for stores to be closed and franchised:
<TABLE>
<CAPTION>
Mrs. Fields,
Inc. and
Original Great
Cookie Co. H&M American Pretzelmaker Consolidated
------------ --- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 2000........................... $ 2,246 $ 640 $ 1,427 $ 169 $ 4,482
Addition to impairment for the 26 weeks ended
July 1, 2000 related to stores to be closed..... 42 - 89 - 131
Addition to impairment for the 26 weeks ended
July 1, 2000 related to stores to be franchised. 129 5 251 - 385
Utilization for the 26 weeks ended July 1, 2000
related to stores to be closed.................. (605) (17) (209) - (831)
Utilization for the 26 weeks ended July 1, 2000
related to stores to be franchised.............. (40) (85) - - (125)
-------- ------ -------- ------- -------
Balance, July 1, 2000.............................. $ 1,772 $ 543 $ 1,558 $ 169 $ 4,042
======== ====== ======== ======= =======
Balance, January 2, 1999........................... $ 3,844 $1,380 $ 2,877 $ 327 $ 8,428
Addition to impairment for the 26 weeks ended
July 3, 1999 related to stores to be closed..... 25 - - - 25
Addition to impairment for the 26 weeks ended
July 3, 1999 related to stores to be franchised. 362 - - - 362
Utilization for the 26 weeks ended July 3, 1999
related to stores to be closed.................. (1,114) (405) (1,166) (157) (2,842)
Utilization for the 26 weeks ended July 3, 1999
related to stores to be franchised.............. (665) (335) (5) - (1,005)
-------- ------ -------- ------- -------
Balance, July 3, 1999.............................. $ 2,452 $ 640 $ 1,706 $ 170 $ 4,968
======== ====== ======== ======= =======
</TABLE>
12
<PAGE>
MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(4) TCBY MANAGEMENT AGREEMENT
-------------------------
On February 9, 2000, Capricorn Investors III, L.P., an affiliate of
Capricorn Investors II, L.P., Mrs. Fields' Holding's majority shareholder,
entered into an agreement to acquire TCBY Enterprises, Inc. ("TCBY"), a retail
snack food company. This acquisition (the "TCBY Transaction") was completed on
June 1, 2000.
In connection with the TCBY Transaction, on June 1, 2000, Mrs. Fields
entered into a Management Agreement (the "TCBY Management Agreement") with TCBY
Holding Company, Inc., the parent company of TCBY, and TCBY Systems, LLC, a
wholly-owned subsidiary of TCBY, pursuant to which the corporate and
administrative functions of TCBY were transferred to Mrs. Fields. Under the TCBY
Management Agreement, Mrs. Fields has agreed to manage and operate TCBY's
business, and pay specified operating and other costs of TCBY (including
specified costs associated with the transfer of the management function from
Little Rock, Arkansas to Salt Lake City, Utah), in exchange for a management fee
that will be paid by TCBY semi-monthly. Revenue generated from the management
fee is reported under the caption "Management fee revenue" on the income
statement. Mrs. Fields does not separate the costs incurred under the management
agreement from costs of operating Mrs. Fields, as most of Mrs. Fields' employees
support both companies, therefore the activity for managing TCBY is not reported
as a separate segment.
In accordance with the terms and conditions of the TCBY Management
Agreement, Mrs. Fields and TCBY will share cost savings that may be obtained
through the joint purchase of ingredients, supplies and services and Mrs. Fields
will be eligible to receive a portion of the anticipated cost savings in
connection with the expected outsourcing of TCBY's yogurt and ice cream
manufacturing requirements. The TCBY Transaction will also provide the
opportunity for Mrs. Fields and its eligible franchisees to become TCBY
franchisees and for eligible TCBY franchisees to become franchisees of Mrs.
Fields or its subsidiaries.
In connection with the TCBY Transaction, Mrs. Fields received a $300,000
acquisition advisory fee for its services rendered in connection with the
acquisition and for partial reimbursement of out-of-pocket costs and
expenses totaling approximately $725,000 incurred by Mrs. Fields in connection
with its performance of acquisition advisory services. Mrs. Fields will receive
a fee of up to $1.5 million from TCBY when TCBY is successful in selling its
existing dairy processing plant for net proceeds sufficient to retire debt
associated with the plant. Mrs. Fields' management expects that the revenues
from the TCBY Management Fee and any fees earned in connection with a sale of
the TCBY dairy processing plant will exceed any costs not fully reimbursed by
the acquisition advisory fee and related reimbursement.
(5) REPORTABLE SEGMENTS
-------------------
Management evaluates performance at Mrs. Fields using two reportable
operating segments; namely, (1) company-owned stores and related activity and
(2) franchising and licensing activity. The segments are determined by revenue
source; direct sales or royalties and license fees. The company-owned stores
segment consists of both cookie and pretzel stores owned and operated by Mrs.
Fields and sales of its mail order business. The franchising and licensing
segment consists of cookie and pretzel stores, which are owned and operated by
third parties who pay Mrs. Fields an initial franchise fee and monthly royalties
based on a percentage of gross sales, sales of cookie dough manufactured by the
Company to its franchisees and other licensing activity not related to cookie or
pretzel stores. Sales and transfers between segments are eliminated in
consolidation.
13
<PAGE>
MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Mrs. Fields evaluates performance of each segment based on contribution
margin. Contribution margin is computed as the difference between the revenues
generated by a reportable segment and the selling and store occupancy costs and
cost of sales related to that reportable segment. It is used as a measure of the
operating performance of an operating segment. Mrs. Fields does not allocate any
revenue generated from the TCBY management fee, general and administrative
expense, other income (expense), interest expense, depreciation and amortization
of assets to its reportable operating segments. Segment revenue and contribution
margin are presented in the following table (in thousands).
<TABLE>
<CAPTION>
Company-
Owned Stores, Franchising
including Mail Order and Licensing Total
------------ ------------- -----
<S> <C> <C> <C>
13 weeks ended July 1, 2000
---------------------------
Segment revenues $32,639 $ 6,298 $38,937
Contribution margin 5,659 3,857 9,516
13 weeks ended July 3, 1999
---------------------------
Segment revenues 34,786 5,387 40,173
Contribution margin 7,403 3,120 10,523
26 weeks ended July 1, 2000
---------------------------
Segment revenues 66,435 12,404 78,839
Contribution margin 12,386 7,745 20,131
26 weeks ended July 3, 1999
---------------------------
Segment revenues 71,915 12,250 84,165
Contribution margin 13,404 7,787 21,191
</TABLE>
The reconciliation of contribution margin to net loss is as follows (in
thousands):
<TABLE>
<CAPTION>
13 Weeks Ended 13 Weeks Ended 26 Weeks Ended 26 Weeks Ended
July 1, 2000 July 3, 1999 July 1, 2000 July 3, 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Contribution margin $ 9,516 $ 10,523 $ 20,131 $ 21,191
Management fee revenue 1,333 - 1,333 -
General and
administrative expense (6,339) (5,549) (11,460) (10,873)
Store closure benefit 200 - 200 -
Depreciation and amortization (6,331) (5,867) (11,989) (11,263)
Interest expense (4,528) (4,349) (9,126) (8,686)
Other income (expense), net 100 (183) 80 (468)
-------- --------- -------- --------
Net loss $ (6,049) $ (5,425) $(10,831) $(10,099)
======== ========= ======== ========
</TABLE>
Geographic segment information is as follows (in thousands):
<TABLE>
<CAPTION>
Domestic International Domestic International Domestic
Company-Owned Company-Owned Franchising and Franchising Management Fee
Stores Stores Licensing and Licensing Revenue
------------- ------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Total revenues
--------------
13 weeks ended July 1, 2000 $32,639 $ - $ 6,242 $ 56 $1,333
13 weeks ended July 3, 1999 34,786 - 5,276 111 -
26 weeks ended July 1, 2000 66,435 - 12,267 137 1,333
26 weeks ended July 3, 1999 71,894 21 12,050 200 -
</TABLE>
14
<PAGE>
MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Revenues from international franchising and licensing are generated from
Canada and Australia with no other countries having material representation.
During the year ended January 1, 2000 all remaining international company-owned
stores were closed.
There were no customers who accounted for more than 10 percent of Mrs.
Fields' total revenues or either segment's revenues.
(6) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
----------------------------------------------------------
Mrs. Fields' obligation related to its $140,000,000 aggregate principal
amount of 10 1/8 percent Series A, B and C Senior Notes due 2004 is fully and
unconditionally guaranteed (the "Guarantee") on a senior basis by four of Mrs.
Fields' wholly owned subsidiaries. The Guarantee is a general unsecured
obligation of The Mrs. Fields' Brand, Inc., Great American Cookies, Inc.,
Pretzel Time, Inc. and Pretzelmaker Holdings, Inc. (the "Guarantors"), ranks
senior in right of payment to all subordinated indebtedness of the Guarantors
and ranks equal in right of payment with all existing and future senior
indebtedness of the Guarantors. There are no restrictions on Mrs. Fields'
ability to obtain cash dividends or other distributions of funds from the
Guarantors, except those imposed by applicable law. The following supplemental
financial information sets forth, on a condensed consolidating basis, balance
sheets, statements of operations and statements of cash flows for Mrs. Fields'
Original Cookies, Inc. (the "Parent Company"), the Guarantor Subsidiaries and
the Non-guarantor Subsidiaries (which include Mrs. Fields' Cookies Australia,
Mrs. Fields' Cookies (Canada) Ltd., H & M Canada, and Fairfield Foods, Inc. and
three partially owned subsidiaries). Mrs. Fields has not presented separate
financial statements and other disclosures concerning the Guarantors because
management has determined that such information is not material.
15
<PAGE>
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JULY 1, 2000
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ -------------- ------------ ------------
ASSETS
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,387 $ (39) $ 427 $ - $ 1,775
Accounts receivable, net 3,515 295 13 - 3,823
Amounts due from franchisees and
licensees, net 888 2,950 - - 3,838
Inventories 3,529 1,169 3 - 4,701
Other current assets and amounts due
from (to) affiliates, net 13,958 (9,713) (775) -
--------- -------- -------- ---------- ----------
Total current assets 23,277 (5,338) (332) - 17,607
PROPERTY AND EQUIPMENT, net 23,547 2,087 119 - 25,753
INTANGIBLES, net 70,950 77,201 214 - 148,365
INVESTMENT IN SUBSIDIARIES 65,010 - - (65,010) -
OTHER ASSETS 2,658 184 - - 2,842
--------- -------- -------- ---------- ----------
$ 185,442 $ 74,134 $ 1 $ (65,010) $ 194,567
========= ======== ======== ========== ==========
LIABILITIES AND STOCKHOLDER'S
-----------------------------
EQUITY (DEFICIT)
----------------
CURRENT LIABILITIES:
Current portion of long-term debt
and capital lease obligations $ 1,647 $ - $ - $ - $ 1,647
Current portion of store closure reserve 3,016 - - - 3,016
Accounts payable 7,037 1,320 12 - 8,369
Accrued liabilities 9,762 1,032 13 - 10,807
--------- -------- -------- ---------- ----------
Total current liabilities 21,462 2,352 25 - 23,839
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, net of current portion 143,828 370 - - 144,198
STORE CLOSURE RESERVE, net of
current portion 2,853 - - - 2,853
MINORITY INTEREST - - - 126 126
STOCKHOLDER'S EQUITY (DEFICIT) 17,299 71,412 (24) (65,136) 23,551
--------- -------- -------- ---------- ----------
$ 185,442 $ 74,134 $ 1 $ (65,010) $ 194,567
========= ======== ======== ========== ==========
</TABLE>
16
<PAGE>
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE 13 WEEKS ENDED JULY 1, 2000
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
TOTAL REVENUES $ 35,221 $ 6,165 $ 110 $ (1,226) $ 40,270
--------- -------- -------- ---------- ----------
OPERATING COSTS AND EXPENSES:
Selling and store occupancy costs 18,595 - 57 (265) 18,387
Cost of sales 9,626 2,357 12 (961) 11,034
General and administrative 6,508 (188) 19 - 6,339
Store closure benefit (200) - - - (200)
Depreciation and amortization 4,782 1,548 1 - 6,331
--------- -------- -------- ---------- ----------
Total operating costs and
expenses 39,311 3,717 89 (1,226) 41,891
--------- -------- -------- ---------- ----------
Income (loss) from operations (4,090) 2,448 21 - (1,621)
INTEREST EXPENSE AND
OTHER, net (4,305) (104) - - (4,409)
--------- -------- -------- ---------- ----------
(Loss) income before provision for
income taxes and equity in net loss
of consolidated subsidiaries (8,395) 2,344 21 - (6,030)
PROVISION FOR INCOME TAXES (7) - - - (7)
--------- -------- -------- ---------- ----------
(Loss) income before equity in net
loss of consolidated subsidiaries (8,402) 2,344 21 - (6,037)
EQUITY IN NET LOSS OF CONSOLIDATED
SUBSIDIARIES - - - (12) (12)
--------- -------- -------- ---------- ----------
NET (LOSS) INCOME $ (8,402) $ 2,344 $ 21 $ (12) $ (6,049)
========= ======== ======== ========== ==========
</TABLE>
17
<PAGE>
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE 26 WEEKS ENDED JULY 1, 2000
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
TOTAL REVENUES $ 70,214 $ 12,280 $ 278 $ (2,600) $ 80,172
--------- -------- -------- ---------- ----------
OPERATING COSTS AND EXPENSES:
Selling and store occupancy costs 37,171 - 104 (568) 36,707
Cost of sales 19,347 4,659 27 (2,032) 22,001
General and administrative 11,522 (130) 68 - 11,460
Store closure benefit (200) - - - (200)
Depreciation and amortization 8,840 3,141 8 - 11,989
--------- -------- -------- ---------- ----------
Total operating costs and
expenses 76,680 7,670 207 (2,600) 81,957
--------- -------- -------- ---------- ----------
Income (loss) from operations (6,466) 4,610 71 - (1,785)
INTEREST EXPENSE AND
OTHER, net (8,771) (245) - - (9,016)
--------- -------- -------- ---------- ----------
(Loss) income before equity in net
loss of consolidated subsidiaries (15,237) 4,365 71 - (10,801)
PROVISION FOR INCOME TAXES (15) - - - (15)
--------- -------- -------- ---------- ----------
(Loss) income before preferred stock
accretion and dividends of
subsidiaries and equity in net loss
of consolidated subsidiaries (15,252) 4,365 71 - (10,816)
EQUITY IN NET LOSS OF CONSOLIDATED
SUBSIDIARIES - - - (15) (15)
--------- -------- -------- ---------- ----------
NET (LOSS) INCOME $ (15,252) $ 4,365 $ 71 $ (15) $ (10,831)
========= ======== ======== ========== ==========
</TABLE>
18
<PAGE>
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE 26 WEEKS ENDED JULY 1, 2000
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES $ (2,706) $ 621 $ 186 $ - $ (1,899)
--------- -------- -------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment,
net (2,303) (226) - - (2,529)
--------- -------- -------- ---------- ----------
Net cash used in investing
activities (2,303) (226) - - (2,529)
--------- -------- -------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of long-term debt and
capital lease obligations (715) (156) - - (871)
Borrowings under line of credit 3,550 - - - 3,550
Payment of debt financing fees (250) - - - (250)
Reduction in preferred stock - (1,070) - - (1,070)
--------- -------- -------- ---------- ----------
Net cash provided by (used in)
financing activities 2,585 (1,226) - - 1,359
--------- -------- -------- ---------- ----------
Effect of foreign exchange rates (75) - - - (75)
--------- -------- -------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (2,499) (831) 186 - (3,144)
CASH AND CASH EQUIVALENTS, beginning of
the period 3,886 792 241 - 4,919
--------- -------- -------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of the
period $ 1,387 $ (39) $ 427 $ - $ 1,775
========= ======== ======== ========== ==========
</TABLE>
19
<PAGE>
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JANUARY 1, 2000
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 3,886 $ 792 $ 241 $ - $ 4,919
Accounts receivable, net 2,151 2,131 13 - 4,295
Amounts due from franchisees and
licensees, net 1,314 2,394 - - 3,708
Inventories 4,009 968 - - 4,977
Other current assets and amounts due
from (to) affiliates, net 22,236 (18,898) (642) - 2,696
--------- -------- -------- ---------- ----------
Total current assets 33,596 (12,613) (388) - 20,595
PROPERTY AND EQUIPMENT, net 26,481 2,033 151 - 28,665
INTANGIBLES, net 74,301 81,769 289 - 156,359
INVESTMENT IN SUBSIDIARIES 65,468 - - (65,468) -
OTHER ASSETS 2,714 134 (57) - 2,791
--------- -------- -------- ---------- ----------
$ 202,560 $ 71,323 $ (5) $ (65,468) $ 208,410
========= ======== ======== ========== ==========
LIABILITIES AND STOCKHOLDER'S
-----------------------------
EQUITY (DEFICIT)
----------------
CURRENT LIABILITIES:
Current portion of long-term debt and
capital lease obligations $ 1,377 $ 246 $ - $ - $ 1,623
Current portion of store closure reserve 3,665 3,665
Accounts payable 8,823 1,676 15 - 10,514
Accrued liabilities 7,469 1,000 110 - 8,579
--------- -------- -------- ---------- ----------
Total current liabilities 21,334 2,922 125 - 24,381
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, net of current
portion 144,582 280 - - 144,862
STORE CLOSURE RESERVE, net of
current portion 3,529 - - - 3,529
MANDATORILY REDEEMABLE CUMULATIVE PREFERRED
STOCK - 1,070 - - 1,070
MINORITY INTEREST - - - 111 111
STOCKHOLDER'S EQUITY (DEFICIT) 33,115 67,051 (130) (65,579) 34,457
--------- -------- -------- ---------- ----------
$ 202,560 $ 71,323 $ (5) $ (65,468) $ 208,410
========= ======== ======== ========== ==========
</TABLE>
<PAGE>
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE 13 WEEKS ENDED JULY 3, 1999
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
NET REVENUES $ 36,108 $ 6,129 $ 45 $ (2,109) $ 40,173
--------- -------- -------- ---------- ----------
OPERATING COSTS AND EXPENSES:
Selling and store occupancy costs 20,002 - 37 (314) 19,725
Food cost of sales 10,457 1,246 17 (1,795) 9,925
General and administrative 5,549 - - - 5,549
Depreciation and amortization 4,222 1,645 - - 5,867
--------- -------- -------- ---------- ----------
Total operating costs and
expenses 40,230 2,891 54 (2,109) 41,066
--------- -------- -------- ---------- ----------
(Loss) income from operations (4,122) 3,238 (9) - (893)
INTEREST EXPENSE AND
OTHER, net (4,259) (53) - - (4,312)
--------- -------- -------- ---------- ----------
(Loss) income before provision for
income taxes, preferred stock
accretion, dividends of subsidiaries
and equity in net loss
of consolidated subsidiaries (8,381) 3,185 (9) - (5,205)
PROVISION FOR INCOME TAXES (106) - - - (106)
--------- -------- -------- ---------- ----------
(Loss) income before preferred stock
accretion and dividends of
subsidiaries and equity in net loss
of consolidated subsidiaries (8,487) 3,185 (9) - (5,311)
PREFERRED STOCK ACCRETION AND DIVIDENDS
OF SUBSIDIARIES - (111) - - (111)
EQUITY IN NET LOSS OF CONSOLIDATED
SUBSIDIARIES 3,065 - - (3,068) (3)
--------- -------- -------- ---------- ----------
NET (LOSS) INCOME $ (5,422) $ 3,074 $ (9) $ (3,068) $ (5,425)
========= ======== ======== ========== ==========
</TABLE>
20
<PAGE>
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE 26 WEEKS ENDED JULY 3, 1999
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
NET REVENUES $ 74,365 $ 12,764 $ 104 $ (3,068) $ 84,165
--------- -------- -------- ---------- ----------
OPERATING COSTS AND EXPENSES:
Selling and store occupancy costs 41,634 - 120 (636) 41,118
Food cost of sales 19,787 4,463 38 (2,432) 21,856
General and administrative 10,819 54 - - 10,873
Depreciation and amortization 7,967 3,296 - - 11,263
--------- -------- -------- ---------- ----------
Total operating costs and
expenses 80,207 7,813 158 (3,068) 85,110
--------- -------- -------- ---------- ----------
(Loss) income from operations (5,842) 4,951 (54) - (945)
INTEREST EXPENSE AND
OTHER, net (8,638) (80) - - (8,718)
--------- -------- -------- ---------- ----------
(Loss) income before provision for
income taxes, preferred stock
accretion, dividends of subsidiaries
and equity in net loss
of consolidated subsidiaries (14,480) 4,871 (54) - (9,663)
PROVISION FOR INCOME TAXES (210) - - - (210)
--------- -------- -------- ---------- ----------
(Loss) income before preferred stock
accretion and dividends of
subsidiaries and equity in net loss
of consolidated subsidiaries (14,690) 4,871 (54) - (9,873)
PREFERRED STOCK ACCRETION AND DIVIDENDS
OF SUBSIDIARIES - (222) - - (222)
EQUITY IN NET LOSS OF CONSOLIDATED
SUBSIDIARIES 4,595 - - (4,599) (4)
--------- -------- -------- ---------- ----------
NET (LOSS) INCOME $ (10,095) $ 4,649 $ (54) $ (4,599) $ (10,099)
========= ======== ======== ========== ==========
</TABLE>
21
<PAGE>
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE 26 WEEKS ENDED JULY 3, 1999
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 1,138 $ 1,531 $ 39 $ - $ 2,708
--------- -------- -------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash paid for acquisitions (100) - - - (100)
Purchase of property and
equipment, net (2,520) (84) - - (2,604)
--------- -------- -------- ---------- ----------
Net cash used in investing
activities (2,620) (84) - - (2,704)
--------- -------- -------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 7,000 - - - 7,000
Payment of debt financing costs (1,130) (25) - - (1,155)
Reduction of long-term debt and
capital lease obligations (5,291) (621) - - (5,912)
Reduction in preferred stock - (43) - - (43)
--------- -------- -------- ---------- ----------
Net cash provided by (used
in) financing activities 579 (689) - - (110)
--------- -------- -------- ---------- ----------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS
(903) 758 39 - (106)
CASH AND CASH EQUIVALENTS, beginning of
the period 3,539 1,134 78 - 4,751
--------- -------- -------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of the
period $ 2,636 $ 1,892 $ 117 $ - $ 4,645
========= ======== ======== ========== ==========
</TABLE>
22
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
Mrs. Fields' Original Cookies, Inc. ("Mrs. Fields" or the "Company"), a
Delaware corporation, is a wholly owned subsidiary of Mrs. Fields' Holding
Company, Inc. ("Mrs. Fields' Holding"). Mrs. Fields' Holding is a majority owned
subsidiary of Capricorn Investors II, L.P. ("Capricorn"). Mrs. Fields has eight
wholly owned operating subsidiaries; namely, Great American Cookie Company,
Inc., The Mrs. Fields' Brand, Inc., Pretzel Time, Inc., Pretzelmaker Holdings,
Inc., Mrs. Fields' Cookies Australia, Mrs. Fields' Cookies (Canada) Ltd., H&M
Canada, and Pretzelmaker of Canada; and three partially owned subsidiaries.
Mrs. Fields primarily operates and franchises retail stores, which sell
freshly baked cookies, brownies, pretzels and other food products through six
specialty retail chains. As of July 1, 2000, Mrs. Fields owned and operated 126
Mrs. Fields Cookies stores, 89 Original Cookie Company stores, 91 Great American
Cookies stores, 47 Hot Sam Pretzels stores, 77 Pretzel Time stores and 4
Pretzelmaker stores in the United States. Additionally, Mrs. Fields has
franchised or licensed 852 stores in the United States and 115 stores in several
other countries. As of July 1, 2000, Mrs. Fields owned and operated 423
continuing stores and 11 stores which are in the process of being closed or
franchised. All of the stores in the process of being closed or franchised are
expected to be closed or franchised by the end of fiscal year 2000.
Mrs. Fields' business follows seasonal trends and is also affected by
climate and weather conditions. Because Mrs. Fields' stores are heavily
concentrated in shopping malls, Mrs. Fields' sales performance is significantly
dependent on the performance of those malls. Mrs. Fields experiences its highest
revenues in the fourth quarter of the calendar year due to the holiday season.
All dollar amounts presented herein are stated in thousands.
Results of Operations
The following table sets forth, for the periods indicated, certain
information relating to the operations of Mrs. Fields and percentage changes
from period to period. Data in the table reflect the consolidated results of
Mrs. Fields for the 13 and 26 weeks ended July 1, 2000 and the 13 and 26 weeks
ended July 3, 1999.
<TABLE>
<CAPTION>
% CHG % CHG
For the 13 Weeks Ended FROM For the 26 Weeks Ended FROM
------------------------- 1999 TO --------------------------- 1999 TO
July 1, 2000 July 3, 1999 2000 July 1, 2000 July 3, 1999 2000
------------ ------------ ------- ------------ ------------ -------
(Dollars in thousands)
Statement of Operations Data:
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Net store and food sales.......... $32,639 $34,786 (6.2)% $ 66,435 $ 71,915 (7.6)%
Franchising....................... 6,097 5,146 18.5 12,043 11,562 4.2
Management fee revenue............ 1,333 - N/A 1,333 - N/A
Licensing......................... 201 241 (16.6) 361 688 (47.5)
------- ------- -------- --------
Total revenues.................. 40,270 40,173 .2 80,172 84,165 (4.7)
------- ------- -------- --------
Operating Costs and Expenses:
Selling and store occupancy costs. 18,387 19,725 (6.8) 36,707 41,118 (10.7)
Cost of sales..................... 11,034 9,925 11.2 22,001 21,856 .7
General and administrative........ 6,339 5,549 14.2 11,460 10,873 5.4
Store closure benefit............. (200) - - (200) - -
Depreciation and amortization..... 6,331 5,867 7.9 11,989 11,263 6.4
------- ------- -------- --------
Total operating costs and
expenses 41,891 41,066 2.0 81,957 85,110 (3.7)
------- ------- -------- --------
Other Income (Expense):
Interest expense.................. (4,528) (4,349) 4.1 (9,126) (8,686) 5.1
Interest income................... 22 40 (45.0) 45 78 (42.3)
Other income (expense), net....... 78 (223) N/A 35 (546) N/A
------- ------- -------- --------
Total other expense, net (4,428) (4,532) (2.3) (9,046) (9,154) (1.2)
------- ------- -------- --------
Net loss........................ $(6,049) $(5,425) 11.5% $(10,831) $(10,099) 7.2%
======= ======= ======== ========
</TABLE>
23
<PAGE>
13 Weeks Ended July 1, 2000 Compared to the 13 Weeks Ended July 3, 1999
As of July 1, 2000, there were 434 Company-owned stores and 967 franchised
or licensed stores in operation. The store activity for the 13 weeks ended July
1, 2000 and July 3, 1999 is summarized as follows:
Company-owned and Franchised or Licensed Store Activity
<TABLE>
<CAPTION>
July 1, 2000 July 1, 1999
----------------------- ---------------------
Company- Franchised Company- Franchised
Owned or Licensed Owned or Licensed
----- ----------- ----- -----------
<S> <C> <C> <C> <C>
Stores open as of the beginning of the 13 weeks ended 446 980 516 991
Stores opened (including relocations) 1 42 4 18
Stores closed (including relocations) (8) (57) (7) (19)
Stores sold to franchisees (3) 3 (4) 4
Non-continuing (exit plan) stores closed (2) (1) (10) -
Non-continuing (exit plan) stores franchised - - (8) 8
Stores acquired from franchisees - - 1 (1)
--- --- --- -----
Stores open as of the end of the 13 weeks ended 434 967 492 1,001
=== === === =====
</TABLE>
Revenues
Net Store and Food Sales. Total net store sales decreased $2,147, or 6.2
percent, from $34,786 to $32,639 for the 13 weeks ended July 1, 2000 compared to
the 13 weeks ended July 3, 1999. The decrease was due primarily to 58, or 11.8
percent, fewer stores open at July 1, 2000 compared to July 3, 1999. Sales were
flat for mall stores that had been open one year or more when compared to the
same period in the prior year. Mail order sales for the 13 weeks ended July 1,
2000 increased $871, or 77 percent, compared to the 13 weeks ended July 3, 1999.
The increase was due to increased mail order sales and the direct sales of
frozen cookie dough in supermarkets that in the prior year had been marketed by
an outside licensee.
Franchising Revenues. Franchising revenues increased $951, or 18.5 percent,
from $5,146 to $6,097 for the 13 weeks ended July 1, 2000 compared to the 13
weeks ended July 3, 1999. Franchising revenues were positively impacted by the
Easter holiday occurring in the second quarter in fiscal 2000 compared to Easter
occurring in the first quarter in 1999. Sales of cookie dough to our Great
American franchisees also increased $166 during the 13 weeks ended July 1, 2000,
compared to the 13 weeks ended July 3, 1999.
Management Fee Revenue. The Company received management fee revenue of
$1,033 in June of 2000 to manage TCBY, which was acquired by an affiliate of the
Company's parent on June 1, 2000. The Company also received a $300 acquisition
advisory fee as part of the acquisition. Under the terms of the management
agreement, the Company will receive monthly payments of $1,033 for managing and
operating TCBY's business.
Licensing Revenues. Licensing revenues decreased $40, or 16.6 percent, from
$241 to $201 for the 13 weeks ended July 1, 2000 compared to the 13 weeks ended
July 3, 1999. The decrease in licensing revenues for the 13 weeks ended July 1,
2000 was primarily attributable to a decrease in the number of licensees with
agreements in effect during the current quarter compared to 1999.
Operating Costs and Expenses
Selling and Store Occupancy Costs. Total selling and store occupancy costs
decreased $1,338, or 6.8 percent, from $19,725 to $18,387 for the 13 weeks ended
July 1, 2000 compared to the 13 weeks ended July 3, 1999. The decrease is
attributable to 58, or 11.8 percent, fewer stores open at July 1, 2000 compared
to July 3, 1999, and to cost cutting efforts.
Cost of Sales. Total food cost of sales increased $1,109, or 11.2 percent,
from $9,925 to $11,034 for the 13 weeks ended July 1, 2000 compared to the 13
weeks ended July 3, 1999. This increase was primarily the result of increased
mail order and batter facility sales and sales of frozen cookie dough to retail
outlets in 2000 compared to 1999. These sales have a lower gross profit
percentage than regular food store sales and the mail order business incurred
large advertising costs that negatively impacted its contribution in the 13
weeks ended July 1, 2000 compared with the prior year period. Cost of goods sold
for mall stores decreased $1,120 or 14.0 percent due to fewer stores open during
the 13 weeks ended July 1, 2000, compared to the prior period. Cost of sales as
percentage of sales for mall stores decreased from 25.6 percent for the 13 weeks
ended July 3, 1999, to 24.0 percent for the 13 weeks ended July 1, 2000.
24
<PAGE>
General and Administrative Expenses. General and administrative expenses
increased $790, or 14.2 percent, from $5,549 to $6,339 for the 13 weeks ended
July 1, 2000 compared to the 13 weeks ended July 3, 1999. The increase in
general and administrative expenses was primarily attributable to one-time costs
incurred by the Company in conjunction with Capricorn Investors III, L.P.'s
acquisition of TCBY. These costs were offset by the $300 acquisition advisory
fee and the $1,033 management fee revenue discussed above. This increase was
partially offset by lower legal and risk management insurance expenditures in
the current period. The Company expects general and administrative costs to
continue at increased levels in the future as it manages and operates TCBY's
business. However, these increased costs will be offset by the management fee
revenue received from TCBY.
Store Closure Benefit. The Company recorded a $200 store closure benefit in
the current period. The Company was able to close certain stores at a cost less
than what had been provided for in the plan. There was no comparable benefit or
provision in 1999. See Note 3 to the Condensed Consolidated Financial Statements
for a detailed explanation of the store closure reserve.
Depreciation and Amortization. Total depreciation and amortization expense
increased by $464, or 7.9 percent, from $5,867 to $6,331 for the 13 weeks ended
July 1, 2000 compared to the 13 weeks ended July 3, 1999. The increase is
primarily due to depreciation on the newly installed point of sale and other
computer equipment, depreciation of new equipment installed in continuing stores
and the acceleration of depreciation on stores in the process of being closed.
Total Other Income (Expense). Total other income (expense) decreased by
$104, or 2.3 percent, from $4,532 to $4,428 for the 13 weeks ended July 1, 2000
compared to the 13 weeks ended July 3, 1999. The decrease resulted primarily
from higher interest expense resulting from higher interest rates, partially
offset by a lower tax provision and no preferred stock dividends in the current
quarter.
Net Loss. The net loss increased by $624, or 11.5 percent, from $5,425 to
$6,049 for the 13 weeks ended July 1, 2000 compared to the 13 weeks ended July
3, 1999 due to the combination of factors described above.
26 Weeks Ended July 1, 2000 Compared to the 26 Weeks Ended July 3, 1999
As of July 1, 2000, there were 434 Company-owned stores and 967 franchised
or licensed stores in operation. The store activity for the 26 weeks ended July
1, 2000 and July 3, 1999 is summarized as follows:
Company-owned and Franchised or Licensed Store Activity
<TABLE>
<CAPTION>
July 1, 2000 July 1, 1999
----------------------- ---------------------
Company- Franchised Company- Franchised
Owned or Licensed Owned or Licensed
----- ----------- ----- -----------
<S> <C> <C> <C> <C>
Stores open as of the beginning of the 26 weeks ended 462 981 566 972
Stores opened (including relocations) 4 77 10 49
Stores closed (including relocations) (21) (98) (23) (38)
Stores sold to franchisees (6) 6 (7) 7
Non-continuing (exit plan) stores closed (3) (1) (43) -
Non-continuing (exit plan) stores franchised (3) 3 (14) 14
Stores acquired from franchisees 1 (1) 3 (3)
--- --- --- -----
Stores open as of the end of the 26 weeks ended 434 967 492 1,001
=== === === =====
</TABLE>
Revenues
Net Store and Food Sales. Total net store sales decreased $5,480, or 7.6
percent, from $71,915 to $66,435 for the 26 weeks ended July 1, 2000 compared to
the 26 weeks ended July 3, 1999. The decrease was due primarily to 58, or 11.8
percent, fewer stores open at July 1, 2000 compared to July 3, 1999. For stores
that had been open one year or more, mall store sales decreased .8 percent when
compared to the same period in the prior year. Mail order sales for the 26 weeks
ended July 1, 2000 increased $1,786, or 80 percent, compared to the 26 weeks
ended July 3, 1999. The increase was due to increased mail order sales and the
direct sales of frozen cookie dough in supermarkets that in the prior year had
been marketed by an outside licensee.
Franchising Revenues. Franchising revenues increased $481, or 4.2 percent,
from $11,562 to $12,043 for the 26 weeks ended July 1, 2000 compared to the 26
weeks ended July 3, 1999. The increase was primarily from the sales of cookie
dough to our Great American franchisees during the 26 weeks ended July 1, 2000,
compared to the 26 weeks ended July 3, 1999.
25
<PAGE>
Management Fee Revenue. The Company received management fee revenue of
$1,033 in June of 2000 to manage TCBY, which was acquired by an affiliate of the
Company's parent on June 1, 2000. The Company also received a $300 acquisition
advisory fee as part of the acquisition. Under the terms of the management
agreement, the Company will receive monthly payments of $1,033 for managing and
operating TCBY's business.
Licensing Revenues. Licensing revenues decreased $327, or 47.5 percent,
from $688 to $361 for the 26 weeks ended July 1, 2000 compared to the 26 weeks
ended July 3, 1999. The decrease in licensing revenues for the 26 weeks ended
July 1, 2000 was primarily attributable to a decrease in the number of licensees
with agreements in effect during the first six months of 2000 compared to 1999.
Also, the agreement with the licensee of frozen cookie dough for sale to
supermarkets was in effect during the first six months of 1999, but not during
2000.
Operating Costs and Expenses
Selling and Store Occupancy Costs. Total selling and store occupancy costs
decreased $4,411, or 10.7 percent, from $41,118 to $36,707 for the 26 weeks
ended July 1, 2000 compared to the 26 weeks ended July 3, 1999. The decrease is
primarily attributable to 58, or 11.8 percent, fewer stores open at July 1, 2000
compared to July 3, 1999, and to cost cutting efforts. Selling and store
occupancy costs as a percentage of sales decreased from 57.2 percent in 1999 to
55.3 percent in 2000.
Cost of Sales. Total food cost of sales increased $145, or .7 percent, from
$21,856 to $22,001 for the 26 weeks ended July 1, 2000 compared to the 26 weeks
ended July 3, 1999. This increase was primarily the result of increased mail
order and batter facility sales and sales of frozen cookie dough to retail
outlets in 2000 compared to 1999. These sales have a lower gross profit
percentage than regular food store sales and the mail order business incurred
large advertising costs that negatively impacted its contribution in the 26
weeks ended July 1, 2000 compared with the prior period. Cost of goods sold for
mall stores decreased $2,109 or 12.4 percent due to fewer stores open during the
26 weeks ended July 1, 2000, compared to the prior period. Cost of sales as
percentage of sales for mall stores decreased from 25.2 percent for the 26 weeks
ended July 3, 1999, to 24.7 percent for the 26 weeks ended July 1, 2000.
General and Administrative Expenses. General and administrative expenses
increased $587, or 5.4 percent, from $10,873 to $11,460 for the 26 weeks ended
July 1, 2000 compared to the 26 weeks ended July 3, 1999. The increase in
general and administrative expenses was primarily attributable to one-time costs
incurred by the Company in conjunction with Capricorn Investors III, L.P.'s
acquisition of TCBY. These costs were offset by the $300 acquisition advisory
fee and the $1,033 management fee revenue discussed above. This increase was
partially offset by lower legal and risk management insurance expenditures in
the current period. The Company expects general and administrative costs to
continue at increased levels in the future as it manages and operates TCBY's
business. However, these increased costs will be offset by the management fee
revenue received from TCBY.
Store Closure Benefit. The Company recorded a $200 store closure benefit in
the current period. The Company was able to close certain stores at a cost less
than what had been provided for in the plan. There was no comparable benefit or
provision in 1999. See Note 3 to the Condensed Consolidated Financial Statements
for a detailed explanation of the store closure reserve.
Depreciation and Amortization. Total depreciation and amortization expense
increased by $726, or 6.4 percent, from $11,263 to $11,989 for the 26 weeks
ended July 1, 2000 compared to the 26 weeks ended July 3, 1999. The increase is
primarily due to depreciation on the newly installed point of sale and other
computer equipment, depreciation of new equipment installed in continuing stores
and the acceleration of depreciation on stores in the process of being closed.
Total Other Income (Expense). Total Other income (expense) decreased by
$108, or 1.2 percent, from $9,154 to $9,046 for the 26 weeks ended July 1, 2000
compared to the 26 weeks ended July 3, 1999. The decrease resulted primarily
from higher interest expense resulting from higher interest rates, partially
offset by a lower tax provision and no preferred stock dividends in the current
period.
Net Loss. The net loss increased by $732, or 7.2 percent, from $10,099 to
$10,831 for the 26 weeks ended July 1, 2000 compared to the 26 weeks ended July
3, 1999 due to the combination of factors described above.
26
<PAGE>
Liquidity and Capital Resources
General
Mrs. Fields' principal sources of liquidity are cash flows from operating
activities, cash on hand and available borrowings under Mrs. Fields' existing
revolving credit facility. As of July 1, 2000, Mrs. Fields had $1,775 of cash
and cash equivalents on hand and $4,366 additional borrowings available under
its revolving credit facility. Mrs. Fields expects to use its existing cash,
cash flows from operating activities and its credit facility to provide working
capital, finance capital expenditures and to meet debt service requirements,
including the December 1, 2000 interest payment. Based on current operations,
Mrs. Fields believes that its sources of liquidity will be adequate to meet its
anticipated requirements for working capital, capital expenditures, scheduled
debt service requirements and other general corporate purposes on both a short
and long-term basis. There can be no assurance, however, that Mrs. Fields'
business will continue to generate cash flows at or above current levels.
July 1, 2000 Compared to January 1, 2000
As of July 1, 2000, Mrs. Fields had liquid assets (cash and cash
equivalents and receivables) of $9,436, a decrease of 27.0 percent, or $3,486,
from January 1, 2000 when liquid assets were $12,922. Cash decreased $3,144, or
63.9 percent, to $1,775 at July 1, 2000 from $4,919 at January 1, 2000. Cash
decreased primarily from the retirement of the preferred stock of Pretzel Time,
the purchase of capital assets with cash rather than using capital lease
financing, and the payment of expenses incurred in 1999, but not due until 2000.
Total receivables at July 1, 2000 were lower due to lower sales and improved
cash collection procedures.
Mrs. Fields' working capital decreased by $2,446, or 64.6 percent, to a
negative $6,232 at July 1, 2000 from a negative $3,786 at January 1, 1999. This
decrease is due primarily to lower cash balances in the current period.
Long-term assets decreased $10,855 or 5.8 percent to $176,960 at July 1,
2000 from $187,815 at January 1, 2000. This decrease was primarily the result of
scheduled depreciation and amortization of property and equipment, goodwill and
deferred loan costs.
Mrs. Fields' operating activities used cash of $1,899 for the 26 weeks
ended July 1, 2000, primarily due to lower accounts payable balances and for
cash payments to close stores.
Mrs. Fields utilized $2,529 of cash in investing activities during the 26
weeks ended July 1, 2000, primarily for capital expenditures relating to store
remodels and renovations.
Mrs. Fields received $1,359 in cash from financing activities during the 26
weeks ended July 1, 2000. The increase resulted from borrowings on the Company's
bank line of credit. During the current period, the Preferred stock of Pretzel
Time was redeemed in full.
The specialty cookie and pretzel businesses do not require the maintenance
of significant receivables or inventories; however, Mrs. Fields continually
invests in its business by upgrading and remodeling stores and adding new
stores, carts, and kiosks as opportunities arise. Investments in these long-term
assets, which are key to generating current sales, reduce Mrs. Fields' working
capital. During the 26 weeks ended July 1, 2000 and July 3, 1999, Mrs. Fields
expended $2,529 and $2,604, respectively, for capital assets and expects to
expend a total of approximately $9,500 in 2000. Management anticipates that
these expenditures will be funded with cash generated from operating activities
and short-term borrowings under its credit facility as needed.
Inflation
The impact of inflation on the earnings of the business has not been
significant in recent years. Most of Mrs. Fields' leases contain escalation
clauses (however, such leases are accounted for on a straight-line basis as
required by accounting principles generally accepted in the United States, which
minimizes fluctuations in operating income) and many of Mrs. Fields' employees
are paid hourly wages at the Federal minimum wage level. Minimum wage increases
will negatively impact Mrs. Fields' payroll costs in the short term, but
management believes such impact can be offset in the long term through
operational efficiency gains and, if necessary, through product price increases.
27
<PAGE>
Forward-looking Information
This report contains certain forward-looking statements based on our
current expectations and projections about future events, developed from the
information currently available to us. The forward-looking statements include,
among other things, our expectations and estimates about Mrs. Fields' future
financial performance, including growth in net sales and earnings, cash flows
from operating activities, capital expenditures, the ability to refinance
indebtedness. These forward-looking statements are subject to risks,
uncertainties and assumptions, including the following:
o Our ability to continue integrating the businesses of companies acquired
with Mrs. Fields and to realize the expected ongoing benefits and cost
savings from our acquisitions;
o Our ability to meet our debt and interest obligations,
o Performance by franchisees and licensees;
o Difficulties or delays in developing and introducing anticipated new
products or failure of customers to accept new product offerings;
o Changes in consumer preferences and our ability to adequately anticipate
such changes;
o The seasonal nature of our operations;
o Changes in general economic and business conditions;
o Actions by competitors, including new product offerings and marketing and
promotional successes;
o Claims which might be made against Mrs. Fields, including product liability
claims;
o Changes in business strategy, new product lines, changes in raw ingredient
and employee labor costs;
o Changes in our relationships with our franchisees and licensees and
o Changes in mall customer traffic
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this report may not occur.
28
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
--------------------------
In the ordinary course of business, Mrs. Fields is involved in routine
litigation, including franchise disputes. Mrs. Fields is not a party to any
legal proceedings which, in the opinion of management of Mrs. Fields, after
consultation with legal counsel, is material to Mrs. Fields' business, financial
condition or results of operations beyond amounts provided for in the
accompanying financial statements.
Mrs. Fields' stores and products are subject to regulation by numerous
governmental authorities, including, without limitation, federal, state and
local laws and regulations governing health, sanitation, environmental
protection, safety and hiring and employment practices.
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
Exhibit No. Description
----------- -----------
27.1 Financial data schedule (for SEC use only)
(b) Forms 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MRS. FIELDS' ORIGINAL COOKIES, INC.
/s/Larry A. Hodges August 15, 2000
-------------------------------- ---------------
Larry A. Hodges, President & CEO Date
/s/Michael B. Malan August 15, 2000
--------------------------------------------- ---------------
Michael B. Malan, Vice President & Controller Date
(Principal Accounting Officer)
29
