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: April 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:
MRS. FIELDS' HOLDING COMPANY, INC.
----------------------------------
(Exact name of registrant specified in its charter)
DELAWARE 87-0563475
- ------------------------------- --------------------------------
(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.
yes X no
The registrant had 3,387,019 shares of common stock, $0.001 par value,
outstanding at May 16, 2000.
<PAGE>
MRS. FIELDS' HOLDING COMPANY, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements (Unaudited)
<S> <C>
Condensed Consolidated Balance Sheets as of April 1, 2000 and January 1, 2000.................... 3
Condensed Consolidated Statements of Operations for the 13 Weeks
ended April 1, 2000 and April 3, 1999........................................................ 5
Condensed Consolidated Statements of Cash Flows for the 13 Weeks
ended April 1, 2000 and April 3, 1999........................................................ 6
Notes to Condensed Consolidated Financial Statements............................................. 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........... 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................................................... 19
Item 6. Exhibits and Reports on Form 8-K................................................................ 19
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
MRS. FIELDS' HOLDING COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
ASSETS
April 1, January 1,
2000 2000
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 545 $ 4,919
Accounts receivable, net of allowance for doubtful accounts
of $281 and $111, respectively 4,037 4,295
Amounts due from franchisees and licensees, net of allowance
for doubtful accounts of $903 and $821, respectively 4,120 3,708
Inventories 4,564 4,977
Prepaid rent and other 2,367 697
Deferred income tax assets, current portion 1,360 1,360
---------- ---------
Total current assets 16,993 19,956
---------- ---------
PROPERTY AND EQUIPMENT, at cost:
Leasehold improvements 26,805 26,698
Equipment and fixtures 23,178 22,540
Land 240 240
---------- ---------
50,223 49,478
Less accumulated depreciation and amortization (22,735) (20,813)
---------- ---------
Net property and equipment 27,488 28,665
---------- ---------
DEFERRED INCOME TAX ASSETS, net of current portion 2,139 2,139
---------- ---------
GOODWILL, net of accumulated amortization of
$23,751 and $21,310, respectively 129,851 133,025
---------- ---------
TRADEMARKS AND OTHER INTANGIBLES, net of accumulated
amortization of $3,989 and $3,700, respectively 12,773 13,062
---------- ---------
DEFERRED LOAN COSTS, net of accumulated amortization of
$5,329 and $4,523, respectively 11,831 12,618
---------- ---------
OTHER ASSETS 520 652
---------- ---------
$ 201,595 $ 210,117
========== =========
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these balance sheets.
3
<PAGE>
MRS. FIELDS' HOLDING COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands, except share and per share data)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
April 1, January 1,
2000 2000
---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 722 $ 781
Current portion of capital lease obligations 930 842
Accounts payable 5,743 10,514
Accrued liabilities 2,682 2,851
Current portion of store closure reserve 3,457 3,665
Accrued salaries, wages and benefits 3,088 3,180
Accrued interest payable 5,057 1,380
Sales taxes payable 760 1,128
Deferred income 122 132
---------- ----------
Total current liabilities 22,561 24,473
LONG-TERM DEBT, net of current portion 177,933 176,672
STORE CLOSURE RESERVE, net of current portion 3,191 3,529
CAPITAL LEASE OBLIGATIONS, net of current portion 2,975 3,107
---------- ----------
Total liabilities 206,660 207,781
---------- ----------
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 114 111
---------- ----------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.001 par value; 5,000,000 shares authorized
and 3,387,019 shares outstanding 3 3
Warrants to purchase common stock 2,895 2,895
Additional paid-in capital 35,711 35,711
Deferred compensation expense (385) (385)
Accumulated deficit (43,403) (37,069)
---------- ----------
Total stockholders' equity (deficit) (5,179) 1,155
---------- ----------
$ 201,595 $ 210,117
========== ==========
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these balance sheets.
4
<PAGE>
MRS. FIELDS' HOLDING COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
13 Weeks Ended 13 Weeks Ended
April 1, 2000 April 3, 1999
-------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C>
REVENUES:
Net store and food sales $ 33,796 $ 37,129
Franchising 5,946 6,416
Licensing 160 447
--------- ---------
Total revenues 39,902 43,992
--------- ---------
OPERATING COSTS AND EXPENSES:
Selling and store occupancy costs 18,320 21,393
Cost of sales 10,967 11,931
General and administrative 5,121 5,379
Depreciation and amortization 5,670 5,409
--------- ---------
Total operating costs and expenses 40,078 44,112
--------- ---------
Loss from operations (176) (120)
--------- ---------
OTHER INCOME (EXPENSE), net:
Interest expense (6,138) (5,649)
Interest income 23 38
Other income (expense), net (32) (107)
--------- ---------
Total other income (expense), net (6,147) (5,718)
--------- ---------
Loss before provision for income taxes, preferred stock
accretion and dividends of subsidiaries and minority
interest (6,323) (5,838)
PROVISION FOR INCOME TAXES (8) (104)
--------- ---------
Loss before preferred stock accretion and dividends of
subsidiaries and minority interest (6,331) (5,942)
PREFERRED STOCK ACCRETION AND DIVIDENDS OF SUBSIDIARIES
- (111)
MINORITY INTEREST (3) (1)
--------- ---------
Net loss $ (6,334) $ (6,054)
========= =========
Basic and diluted net loss per common share $ (1.87) $ (1.84)
========= =========
Weighted average number of common shares outstanding 3,387 3,286
========= =========
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these balance sheets.
5
<PAGE>
MRS. FIELDS' HOLDING COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
13 Weeks Ended 13 Weeks Ended
April 1, 2000 April 3, 1999
-------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (6,334) $ (6,054)
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Depreciation and amortization 5,670 5,409
Amortization of discount on notes 1,427 1,392
Amortization of deferred loan costs 806 582
Deferred compensation expense - 55
Loss on sale of assets 351 107
Preferred stock accretion and dividends of subsidiaries - 111
Minority interest 3 1
Changes in assets and liabilities:
Accounts receivable 258 1,760
Amounts due from franchisees and licensees (412) 1,157
Inventories 413 355
Prepaid rent and other (1,670) 176
Other assets 132 916
Accounts payable and accrued liabilities (4,940) 6,479
Store closure reserve (546) (480)
Accrued salaries, wages and benefits (92) (428)
Accrued interest payable 3,677 3,593
Sales taxes payable (368) (312)
Deferred income (10) (101)
--------- --------
Net cash (used in) provided by operating activities (1,635) 14,718
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash paid for acquisition expenses - (97)
Purchase of property and equipment (1,192) (1,282)
--------- --------
Net cash used in investing activities (1,192) (1,379)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft - (1,133)
Reduction of long-term debt (225) (5,221)
Payment of debt financing costs (19) (800)
Principal payments on capital lease obligations (233) (423)
Reduction in preferred stock (1,070) (21)
--------- --------
Net cash used in financing activities (1,547) (7,598)
--------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (4,374) 5,741
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 4,919 4,759
--------- --------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 545 $ 10,500
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 228 $ 77
========= ========
Cash paid for income taxes $ 120 $ 164
========= ========
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these balance sheets.
6
<PAGE>
MRS. FIELDS' HOLDING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
---------------------
The accompanying unaudited condensed consolidated financial statements have
been prepared by Mrs. Fields' Holding Company, Inc. and subsidiaries ("Mrs.
Fields' Holding") 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' Holding as of April 1, 2000 and January 1, 2000, and the results
of its operations and its cash flows for the periods presented herein. These
unaudited 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' Holding's
registration statement on Form S-4, which was declared effective on May 16,
2000.
The results of operations for the 13 weeks ended April 1, 2000 are not
necessarily indicative of the results that may be expected for the remainder of
the fiscal year ending December 30, 2000. All dollar amounts presented are
stated in thousands.
Mrs. Fields' Holding is a majority owned subsidiary of Capricorn Investors
II, L.P. ("Capricorn"). Mrs. Fields' Holding is a holding company and does not
have any material operations other than ownership of all of the capital stock of
Mrs. Fields' Original Cookies, Inc. ("Mrs. Fields").
(2) RECLASSIFICATIONS
-----------------
Certain reclassifications have been made to the prior period's condensed
consolidated financial statements to conform with the current period's
presentation.
(3) STORE CLOSURE AND PROPERTY AND EQUIPMENT IMPAIRMENT RESERVES
------------------------------------------------------------
Mrs. Fields' Holding's 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' Holding's 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' Holding's policy provides
for 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 are accrued for. If
and when a reserve that was established as part of purchase accounting is not
fully utilized, Mrs. Fields' Holding 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.
7
<PAGE>
MRS. FIELDS' HOLDING COMPANY, 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 13 weeks ended April 1, 2000 and April 3, 1999:
<TABLE>
<CAPTION>
Mrs. Fields Inc. and
Original Cookie H &M Pretzel Time Great American
-------------------------- -------------------------- ------------------------- -----------------------
Company- Company- Company- Company-
Business Owned Business Owned Business Owned Business Owned
Combination Stores Combination Stores Combination Stores Combination Stores
and Unrelated and Unrelated and Unrelated and Unrelated
Subsequent to Subsequent to Subsequent to Subsequent to
Adjustments Acquisitions Adjustments Acquisitions Adjustments Acquisitions Adjustments Acquisitions
----------- ------------ ----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 2000 $ 1,614 $ 1,581 $ 536 $ 294 $ 109 $ 86 $ 1,674 $ 545
Utilization for the 13
weeks ended April 1, 2000 (89) (174) (48) (29) - - (157) (30)
------- -------- ------- -------- ------- ------- -------- -------
Balance, April 1, 2000 $ 1,525 $ 1,407 $ 488 $ 265 $ 109 $ 86 $ 1,517 $ 515
======= ======== ======= ======== ======= ======= ======== =======
Balance, January 2, 1999 $ 3,728 $ 4,674 $ 981 $ 367 $ 493 $ 264 $ 3,399 $ 305
Utilization for the 13
weeks ended April 3, 1999 (328) (165) (20) (17) - (5) (136) (48)
------- -------- ------- -------- ------- ------- -------- -------
Balance, April 3, 1999. $ 3,400 $ 4,509 $ 961 $ 350 $ 493 $ 259 $ 3,263 $ 257
======= ======== ======= ======== ======= ======= ======== =======
</TABLE>
<PAGE>
MRS. FIELDS' HOLDING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Pretzelmaker Consolidated
--------------------------- ----------------------------------------------
Total Total
Business Company- Business Company-
Combination Owned Combination Owned Total Business
and Stores and Stores Combinations
Subsequent Unrelated to Subsequent Unrelated to and Company-
Adjustments Acquisition Adjustments Acquisitions Owned Stores
----------- ----------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 2000 $ 105 $ 650 $ 4,038 $ 3,156 $ 7,194
Utilization for the 13
weeks ended April 1, 2000 (19) - (313) (233) (546)
------- -------- --------- --------- ----------
Balance, April 1, 2000 $ 86 $ 650 $ 3,725 $ 2,923 $ 6,648
======= ======== ========= ========= ==========
Balance, January 2, 1999 $ 500 $ - $ 9,101 $ 5,610 $ 14,711
Utilization for the 13
weeks ended April 3, 1999 - - (484) (235) (719)
------- -------- --------- --------- ----------
Balance, April 3, 1999 $ 500 $ - $ 8,617 $ 5,375 $ 13,992
======= ======== ========= ========= ==========
</TABLE>
8
<PAGE>
MRS. FIELDS' HOLDING COMPANY, 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 13 weeks ended April 1, 2000 and April 3, 1999. This table
does not include a summary of activity for stores Mrs. Fields' Holding 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 Great American Pretzelmaker Consolidated
----------------- ----------------- ---------------- ----------------- ----------------- -----------------
To Be To Be To Be To Be To Be To Be To Be To Be To Be To Be To Be To Be
Closed Franchised Closed Franchised Closed Franchised Closed Franchised Closed Franchised Closed Franchised
------ ---------- ------ ---------- ------ ---------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
2000 - 14 - - - - 6 1 - - 6 15
Stores closed or
franchised for the
13 weeks ended
April 1, 2000 - (1) - - - - - - - - - (1)
--- -- -- -- -- -- --- --- -- -- --- ---
Balance, April 1,
2000 - 13 - - - - 6 1 - - 6 14
=== == == == == == === === == == === ===
Balance, January 2,
1999 23 36 6 7 3 - 43 11 7 - 82 54
Stores closed or
franchised for the
13 weeks ended
April 3, 1999 (10) (9) (5) (3) (2) - (12) (1) - - (29) (13)
--- -- -- -- -- -- --- --- -- -- --- ---
Balance, April 3, 1999 13 27 1 4 1 - 31 10 7 - 53 41
=== == == == == == === === == == === ===
</TABLE>
9
<PAGE>
MRS. FIELDS' HOLDING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table presents a summary of activity for stores Mrs. Fields'
Holding intends to close or franchise that were not originally identified to be
closed or franchised in connection with a business combination for the 13 weeks
ended April 1, 2000, and April 3, 1999:
<TABLE>
<CAPTION>
Mrs. Fields Inc.
and Original Cookie H&M Pretzel Time Great American Consolidated
------------------- ----------------- ----------------- ------------------ -------------------
To Be To Be To Be To Be To Be To Be To Be To Be To Be To Be
Closed Franchised Closed Franchised Closed Franchised Closed Franchised Closed Franchised
------ ---------- ------ ---------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 2000 3 4 - - - 1 - - 3 5
Stores closed or franchised
during the 13 weeks ended
April 1, 2000 (1) (1) - - - (1) - - (1) (2)
--- -- -- -- -- -- -- -- --- --
Balance, April 1, 2000 2 3 - - - - - - 2 3
=== == == == == == == == === ==
Balance, January 2, 1999 20 10 2 1 2 3 5 - 29 14
Stores closed or franchised
during the 13 weeks ended
April 3, 1999 (10) - (2) - (1) (2) (1) - (14) (2)
--- -- -- -- -- -- -- -- --- --
Balance, April 3, 1999 10 10 - 1 1 1 4 - 15 12
=== == == == == == == == === ==
</TABLE>
10
<PAGE>
MRS. FIELDS' HOLDING COMPANY, 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 13 weeks ended April 1, 2000 and April
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 13 weeks ended
April 1, 2000 related to stores to be closed.... 29 - 22 - 51
Addition to impairment for the 13 weeks ended
April 1, 2000 related to stores to be franchised 14 - 10 - 24
Utilization for the 13 weeks ended April 1, 2000
related to stores to be closed.................. (204) - (419) - (623)
Utilization for the 13 weeks ended April 1, 2000
related to stores to be franchised.............. (742) (101) (43) - (886)
--------- ------- -------- ------- --------
Balance, April 1, 2000............................. $ 1,343 $ 539 $ 997 $ 169 $ 3,048
========= ======= ======== ======= ========
Balance, January 2, 1999........................... $ 3,844 $ 1,380 $ 2,877 $ 327 $ 8,428
Addition to impairment for the 13 weeks ended
April 3, 1999 related to stores to be closed.... 32 5 2 - 39
Addition to impairment for the 13 weeks ended
April 3, 1999 related to stores to be franchised 355 11 - - 366
Utilization for the 13 weeks ended April 3, 1999
related to stores to be closed.................. (936) (410) (629) (3) (1,978)
Utilization for the 13 weeks ended April 3, 1999
related to stores to be franchised.............. (623) (277) (6) - (906)
--------- ------ -------- ------- --------
Balance, April 3, 1999............................. $ 2,672 $ 709 $ 2,244 $ 324 $ 5,949
========= ====== ======== ======= ========
</TABLE>
11
<PAGE>
MRS. FIELDS' HOLDING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(5) REPORTABLE SEGMENTS
-------------------
Management evaluates performance at Mrs. Fields' Holding 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. 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 and other licensing activity not related to cookie or pretzel
stores. Sales and transfers between segments are eliminated in consolidation.
Mrs. Fields' Holding 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'
Holding does not allocate any 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- Franchising
Owned Stores and Licensing Total
------------ ------------- -----
<S> <C> <C> <C>
13 Weeks Ended April 1, 2000
- ----------------------------
Total revenues $ 33,796 $ 6,106 $ 39,902
Contribution margin 5,656 4,959 10,615
13 Weeks Ended April 3, 1999
- ----------------------------
Total revenues $ 37,129 $ 6,863 $ 43,992
Contribution margin 6,001 4,667 10,668
</TABLE>
The reconciliation of contribution margin to net loss is as follows (in
thousands):
<TABLE>
<CAPTION>
13 Weeks Ended 13 Weeks Ended
April 1, 2000 April 3, 1999
-------------- --------------
<S> <C> <C>
Contribution margin $ 10,615 $ 10,668
General and
administrative expense (5,121) (5,379)
Depreciation and amortization (5,670) (5,409)
Interest expense (6,138) (5,649)
Other expense, net (20) (285)
---------- ----------
Net loss $ (6,334) $ (6,054)
========= =========
</TABLE>
12
<PAGE>
MRS. FIELDS' HOLDING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Geographic segment information is as follows (in thousands):
<TABLE>
<CAPTION>
International Domestic International
Domestic Company- Company- Franchising Franchising
Owned Owned and and
Stores Stores Licensing Licensing
----------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Total revenues
- --------------
13 weeks ended April 1, 2000 $ 33,796 $ - $ 6,025 $ 81
13 weeks ended April 3, 1999 37,108 21 6,774 89
</TABLE>
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' Holding's total revenues or either segment's revenues.
(5) TCBY MANAGEMENT AGREEMENT
-------------------------
On February 9, 2000, Capricorn Investors III, L.P., an affiliate of
Capricorn, the Company's majority shareholder, entered into an agreement to
acquire TCBY Enterprises, Inc. ("TCBY"), a retail snack food company. It is
expected that, if this acquisition is completed, Mrs. Fields will enter into a
management agreement to provide management services to TCBY. If completed, this
acquisition would occur during the second quarter of 2000. There can be no
assurance that this acquisition will be completed. Terms of the management
agreement have not been finalized. Management of Mrs. Fields' Holding believes
that, if completed, this acquisition would offer Mrs. Fields the opportunity to
sell its products in TCBY stores.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
Mrs. Fields' Holding Company, Inc. ("Mrs. Fields' Holding "), is a majority
owned subsidiary of Capricorn Investors II, L.P. ("Capricorn"). Mrs. Fields'
Holding is a holding company and does not have any material operations other
than ownership of all of the capital stock of Mrs. Fields' Original Cookies,
Inc. ("Mrs. Fields"). 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' Holding, through its Mrs. Fields subsidiary, primarily
operates and franchises retail stores, which sell freshly baked cookies,
brownies, pretzels and other food products through six specialty retail chains.
As of April 1, 2000, Mrs. Fields' Holding owned and operated 127 Mrs. Fields
Cookies stores, 91 Original Cookie Company stores, 92 Great American Cookies
stores, 51 Hot Sam Pretzels stores, 81 Pretzel Time stores and 4 Pretzelmaker
stores in the United States. Additionally, Mrs. Fields' Holding has franchised
or licensed 852 stores in the United States and 128 stores in several other
countries. As of April 1, 2000, Mrs. Fields' Holding owned and operated 421
continuing stores and 25 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' Holding's business follows seasonal trends and is also
affected by climate and weather conditions. Because Mrs. Fields' Holding's
stores are heavily concentrated in shopping malls, the Mrs. Fields' Holding's
sales performance is significantly dependent on the performance of those malls.
Mrs. Fields' Holding 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' Holding expressed in
thousands of dollars and percentage changes from period to period. Data in the
table reflects the consolidated results of Mrs. Fields' Holding for the 13 weeks
ended April 1, 2000 and the 13 weeks ended April 3, 1999. As supplemental
information the table also segregates the statement of operations data into a
continuing stores and stores in the process of being closed or franchised
format.
<TABLE>
<CAPTION>
% CHG
FROM
For the 13 Weeks Ended 1999 TO
April 1, 2000 April 3, 1999 2000
------------- ------------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Statement of Operations Data:
Revenues:
Net store and food sales.......... $ 33,796 $ 37,129 (9.0)%
Franchising....................... 5,946 6,416 (7.3)
Licensing......................... 160 447 (64.2)
--------- ---------
Total revenues.................. 39,902 43,992 (9.3)
--------- ---------
Operating Costs and Expenses:
Selling and store occupancy costs. 18,320 21,393 (14.4)
Cost of sales..................... 10,967 11,931 (8.1)
General and administrative........ 5,121 5,379 (4.8)
Depreciation and amortization..... 5,670 5,409 4.8
--------- ---------
Total operating costs and expenses 40,078 44,112 (9.1)
--------- ---------
Other Income (Expense):
Interest expense.................. (6,138) (5,649) 8.7
Interest income................... 23 38 (39.5)
Other expenses, net............... (43) (323) (86.7)
--------- ---------
Total other expense, net........ (6,158) (5,934) 3.8
--------- ---------
Net loss........................ $ (6,334) $ (6,054) 4.6%
========= =========
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
% CHG
FROM
For the 13 Weeks Ended 1999 TO
April 1, 2000 April 3, 1999 2000
------------- ------------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Supplemental Information
Continuing stores:
Net store and food sales........... $ 30,964 $ 32,601 (5.0)%
--------- ---------
Operating costs and expenses:
Selling and store occupancy costs 16,302 17,772 (8.3)
Cost of sales.................... 7,780 8,311 (6.4)
Depreciation and amortization.... 2,031 1,970 3.1
-------- ---------
Total operating costs and
expenses...................... 26,113 28,053 (6.9)
--------- ---------
Continuing stores contribution.. $ 4,851 $ 4,548 6.7 %
========= =========
Stores in the process of being closed
or franchised:
Net store and food sales........... $ 2,832 $ 4,528 (37.5)%
--------- ---------
Operating costs and expenses:
Selling and store occupancy costs.. 2,018 3,621 (44.3)
Cost of sales...................... 885 1,424 (37.9)
Depreciation and amortization...... 152 101 50.5
--------- ---------
Total operating costs and
expenses....................... 3,055 5,146 (40.6)
--------- ---------
Stores in the process of being
closed or franchised contribution $ (223) $ (618) (63.9)%
========= =========
</TABLE>
Store contribution is determined by subtracting all store operating
expenses, including depreciation from net store sales. Management uses store
contribution information to measure operating performance at the store level.
Continuing store contribution measures the amount of store contribution from
stores that Mrs. Fields' Holding does not intend to close or franchise. Store
contribution for stores in the process of being closed or franchised measures
the amount of store contribution from stores that Mrs. Fields' Holding has
determined to either close or franchise and for which Mrs. Fields' Holding has
included in a store closure reserve. Store contribution for stores in the
process of being closed or franchised as a separate caption is not in accordance
with accounting principles generally accepted in the United States. Store
contribution may not be comparable to other similarly titled measures.
13 Weeks Ended April 1, 2000 Compared to the 13 Weeks Ended April 3, 1999
As of April 1, 2000, there were 446 company-owned stores and 980
franchised or licensed stores in operation. The store activity for the 13 weeks
ended April 1, 2000 and April 3, 1999 is summarized as follows:
<TABLE>
<CAPTION>
Company-owned and Franchised or Licensed Store Activity April 1,2000 April 3, 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. 462 981 566 972
Stores opened (including relocations).................... 3 35 6 31
Stores closed (including relocations).................... (13) (41) (16) (19)
Stores sold to franchisees............................... (3) 3 (3) 3
Non-continuing (exit plan) stores closed (September 18,
1996 forward)............................................ (1) - (33) -
Non-continuing (exit plan) stores franchised (September 18, (3) 3 (6) 6
1996 forward).........................................
Stores acquired from franchisees......................... 1 (1) 2 (2)
--- --- --- ---
Stores open as of the end of the 13 weeks ended....... 446 980 516 991
=== === === ===
</TABLE>
15
<PAGE>
Revenues
Net Store and Food Sales. Total net store sales decreased $3,333, or 9.0
percent, from $37,129 to $33,796 for the 13 weeks ended April 1, 2000 compared
to the 13 weeks ended April 3, 1999. For stores that had been open one year or
more, mall store sales decreased 1.5 percent when compared to the same period in
the prior year. The decrease is primarily due to the Easter holiday not
occurring until the second quarter in fiscal 2000, and the continued decline of
non-core brands.
Net store sales from continuing stores, including sales of our mail order
facility, decreased $1,637, or 5.0 percent, from $32,601 to $30,964 for the 13
weeks ended April 1, 2000 compared to the 13 weeks ended April 3, 1999. The
decrease in net store sales from continuing stores was primarily attributable to
the Easter holiday not occurring until the second quarter in fiscal 2000, and
the continued decline of non-core brands. Mail order sales increased $1,237 or
112.4 percent for the 13 weeks ended April 1, 2000 compared to the 13 weeks
ended April 3, 1999. The increase was due to increased mail order sales and the
direct sales of frozen cookie dough in supermarkets, that had been previously
marketed by an outside licensee.
Net store sales from stores in the process of being closed or franchised
decreased $1,696, or 37.5 percent, from $4,528 to $2,832 for the 13 weeks ended
April 1, 2000 compared to the 13 weeks ended April 3, 1999. This decrease
resulted from closing 49 stores and franchising 34 stores since the first
quarter of 1999.
Franchising Revenues. Franchising revenues decreased $470, or 7.3 percent,
from $6,416 to $5,946 for the 13 weeks ended April 1, 2000 compared to the 13
weeks ended April 3, 1999. Franchising revenues were negatively impacted by the
Easter holiday not occurring until the second quarter in fiscal 2000. Also,
sales of cookie dough to our Great American franchisees decreased during the 13
weeks ended April 1, 2000, compared to the 13 weeks ended April 3, 1999.
Licensing Revenues. Licensing revenues decreased $287, or 64.2 percent,
from $447 to $160 for the 13 weeks ended April 1, 2000 compared to the 13 weeks
ended April 3, 1999. The decrease in licensing revenues for the 13 weeks ended
April 1, 2000 was primarily attributable to no new agreements signed in the
first quarter of 2000.
Operating Costs and Expenses
Selling and Store Occupancy Costs. Total selling and store occupancy costs
decreased $3,073 or 14.4 percent, from $21,393 to $18,320 for the 13 weeks ended
April 1, 2000 compared to the 13 weeks ended April 3, 1999.
Selling and store occupancy costs for continuing stores decreased by
$1,470, or 8.3 percent, from $17,772 to $16,302 for the 13 weeks ended April 1,
2000 compared to the 13 weeks ended April 3, 1999. These decreases were
primarily attributable to fewer company owned stores and cost cutting efforts.
Selling and store occupancy costs as a percentage of sales decreased from 54.5
percent in 1999 to 52.7 percent in 2000.
Selling and store occupancy costs for stores in the process of being closed
or franchised decreased $1,603, or 44.3 percent, from $3,621 to $2,018 for the
13 weeks ended April 1, 2000 compared to the 13 weeks ended April 3, 1999. This
decrease was primarily the result of closing 49 stores and franchising 34 stores
since the first quarter of 1999.
Cost of Sales. Total food cost of sales decreased $964, or 8.1 percent,
from $11,931 to $10,967 for the 13 weeks ended April 1, 2000 compared to the 13
weeks ended April 3, 1999.
Food cost of sales for continuing stores decreased $531, or 6.4 percent,
from $8,311 to $7,780 for the 13 weeks ended April 1, 2000, compared to the 13
weeks ended April 3, 1999. As a percentage of sales, food costs for continuing
stores decreased from 25.5 percent for the 13 weeks ended April 3, 1999 to 25.1
percent for the 13 weeks ended April 1, 2000. This decrease was primarily the
result of favorable raw material prices and increased sales prices in selected
markets.
Food cost of sales for stores in the process of being closed or franchised
decreased $539, or 37.9 percent, from $1,424 to $885 for the 13 weeks ended
April 1, 2000 compared to the 13 weeks ended April 3, 1999. This decrease is
primarily the result of closing 49 stores and franchising 34 stores since the
first quarter of 1999.
General and Administrative Expenses. General and administrative expenses
decreased $258, or 4.8 percent, from $5,379 to $5,121 for the 13 weeks ended
April 1, 2000 compared to the 13 weeks ended April 3, 1999. The decrease in
general and administrative expenses was primarily attributable to lower
expenditures on marketing costs.
16
<PAGE>
Depreciation and Amortization. Total depreciation and amortization expense
increased by $261, or 4.8 percent, from $5,409 to $5,670 for the 13 weeks ended
April 1, 2000 compared to the 13 weeks ended April 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.
Depreciation and amortization expense for continuing stores increased $61,
or 3.1 percent, from $1,970 to $2,031 for the 13 weeks ended April 1, 2000
compared to the 13 weeks ended April 3, 1999. This increase in depreciation and
amortization expense was primarily attributable to the factors mentioned above.
Interest Expense. Interest expense increased $489 or 8.7 percent, from
$5,649 to $6,138 for the 13 weeks ended April 1, 2000 compared to the 13 weeks
ended April 3, 1999. The increase resulted primarily from higher interest rates.
Other Income (Expense). Other income (expense) for the 13 weeks ended April
1, 2000 was comparable to other income (expense) for the 13 weeks ended April 3,
1999.
Net Loss. The net loss increased by $280, or 4.6 percent, from $6,054 to
$6,334 for the 13 weeks ended April 1, 2000 compared to the 13 weeks ended April
3, 1999 due to the combination of factors described above.
Contribution from Continuing Stores. Contribution from continuing stores
increased by $303, or 6.7 percent, from $4,548 to $4,851 for the 13 weeks ended
April 1, 2000 compared to the 13 weeks ended April 3, 1999.
Negative Contribution from Stores in the Process of Being Closed or
Franchised. The negative contribution from stores in the process of being closed
or franchised decreased by $395, or 63.9 percent, from a loss of $618 to a loss
of $223, for the 13 weeks ended April 1, 2000 compared to the 13 weeks ended
April 3, 1999. This decrease was primarily the result of losses incurred by
stores closed in 1999 and not recurring in 2000. See Note 3 to the Unaudited
Condensed Consolidated Financial Statements for a more detailed analysis of Mrs.
Fields' Holdings store closure reserve.
Liquidity and Capital Resources
General
Mrs. Fields' Holding's principal sources of liquidity are cash flows from
operating activities, cash on hand and available borrowings under Mrs. Fields'
Holding's existing revolving credit facility. As of April 1, 2000, Mrs. Fields'
Holding has $545 of cash and cash equivalents on hand and $8,282 additional
borrowings available under its revolving credit facility. Mrs. Fields' Holding
expects to use its existing cash, cash flows from operations and its credit
facility to provide working capital, finance capital expenditures and to meet
debt service requirements, including the June 1, 2000 interest payment. Based on
current operations, Mrs. Fields' Holding 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' Holding's business will continue to
generate cash flows at or above current levels.
April 1, 2000 Compared to January 1, 2000
As of April 1, 2000, Mrs. Fields' Holding had liquid assets (cash and cash
equivalents and accounts receivable) of $8,702, a decrease of 32.7 percent, or
$4,220, from January 1, 2000 when liquid assets were $12,922. Cash decreased
$4,374, or 88.9 percent, to $545 at April 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 December 1999, but not
due until January 2000. Total receivables at April 1, 2000 were comparable to
the balance at January 1, 2000.
Mrs. Fields' Holding's working capital decreased by $1,051, or 23.3
percent, to a negative $5,568 at April 1, 2000 from a negative $4,517 at January
1, 2000. This decrease is due primarily to the decrease in cash.
Long-term assets decreased $5,559, or 2.9 percent, to $184,602, at April 1,
2000 from $190,161 at January 1, 2000. This decrease was primarily the result of
scheduled depreciation and amortization of fixed assets, goodwill and deferred
loan costs.
Mrs. Fields' Holding's utilized $1,635 of cash for operating activities for
the 13 weeks ended April 1, 2000, primarily for the payment of expenses incurred
in December 1999, but not paid until January.
17
<PAGE>
Mrs. Fields' Holding utilized $1,192 of cash in investing activities during
the 13 weeks ended April 1, 2000, primarily for capital expenditures relating to
store remodels and renovations.
Mrs. Fields' Holding utilized $1,547 of cash in financing activities during
the 13 weeks ended April 1, 2000, primarily for the payment of debt related to
acquisitions. During the current quarter, 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' Holding
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' Holding's working capital. During the 13 weeks ended April 1, 2000 and
April 3, 1999, Mrs. Fields expended $1,192 and $1,282, respectively, for capital
assets and expects to expend a total of approximately $9,000 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' Holding's 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' Holding's employees are paid hourly wages at the Federal minimum wage
level. Minimum wage increases will negatively impact Mrs. Fields' Holding's
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.
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' Holding's
future financial performance, including growth in net sales and earnings, cash
flows from operations, capital expenditures, the ability to refinance
indebtedness, and the sale of assets. These forward-looking statements are
subject to risks, uncertainties and assumptions, including the following:
o Our ability to combine the businesses of companies acquired during the
year with Mrs. Fields' Holding and to realize the expected 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' Holding, 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.
18
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
In the ordinary course of business, Mrs. Fields' Holding is involved in
routine litigation, including franchise disputes. Mrs. Fields' Holding is not a
party to any legal proceedings which, in the opinion of management of Mrs.
Fields' Holding, after consultation with legal counsel, is material to Mrs.
Fields' Holding's business, financial condition or results of operations beyond
amounts provided for in the accompanying financial statements.
Mrs. Fields' Holding's 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
None
(b) Forms 8-K
None
19
<PAGE>
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' HOLDING COMPANY, INC.
/s/Larry A. Hodges May 16, 2000
- -------------------------------- ------------
Larry A. Hodges, President & CEO Date
/s/Mark S. Tanner May 16, 2000
- -------------------------------- ------------
Mark S. Tanner, Chief Financial Officer Date
(Principal Accounting Officer)
20
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
MRS. FIELDS HOLDINGS FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-END> APR-01-2000
<CASH> 545
<SECURITIES> 0
<RECEIVABLES> 9,341
<ALLOWANCES> 1,184
<INVENTORY> 4,564
<CURRENT-ASSETS> 16,993
<PP&E> 50,223
<DEPRECIATION> 22,735
<TOTAL-ASSETS> 201,595
<CURRENT-LIABILITIES> 22,561
<BONDS> 180,908
0
0
<COMMON> 3
<OTHER-SE> (5,182)
<TOTAL-LIABILITY-AND-EQUITY> 201,595
<SALES> 33,796
<TOTAL-REVENUES> 39,902
<CGS> 10,967
<TOTAL-COSTS> 40,078
<OTHER-EXPENSES> 32
<LOSS-PROVISION> 8
<INTEREST-EXPENSE> 6,138
<INCOME-PRETAX> (6,323)
<INCOME-TAX> 8
<INCOME-CONTINUING> (6,331)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,334)
<EPS-BASIC> (1.87)
<EPS-DILUTED> (1.87)
</TABLE>
