UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ x ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended August 25, 1995
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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 0-6116
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INTERNATIONAL DAIRY QUEEN INC.
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(Exact name of registrant as specified in its charter)
Delaware 41-0852869
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(State of Incorporation) (I.R.S. Employer Identification Number)
7505 Metro Boulevard, Minneapolis, Minnesota 55439
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number 612/830-0200
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Neither name, address nor fiscal year has been changed since the last report.
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(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
----- -----
Number of registrant's Class A Common Shares outstanding at
September 29, 1995: 14,333,986
Number of registrant's Class B Common Shares outstanding at
September 29, 1995: 8,475,957
<PAGE>
INTERNATIONAL DAIRY QUEEN, INC.
Securities and Exchange Commission Form 10-Q
for the Third Quarter Ended August 25, 1995
I N D E X
Page
Number
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PART I: FINANCIAL INFORMATION:
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet
August 25, 1995 and November 30, 1994 3
Condensed Consolidated Statement of Income
Three months and nine months ended August 25, 1995
and August 26, 1994 4
Condensed Consolidated Statement of Cash Flows
Nine months ended August 25, 1995 and August 26, 1994 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 7-9
PART II. OTHER INFORMATION:
Items 1 through 6 have been omitted since such items are inapplicable
or the answers are negative.
SIGNATURES 9
<PAGE>
PART I
INTERNATIONAL DAIRY QUEEN, INC.
CONSOLIDATED BALANCE SHEET
(Condensed and in Thousands)
(Unaudited)
<TABLE>
August 25, November 30,
ASSETS 1995 1994
---------- ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents and marketable
securities $ 40,520 $ 38,722
Receivables--net 47,412 32,408
Inventories 5,300 5,404
Other current assets 3,670 3,718
-------- --------
Total current assets 96,902 80,252
Notes receivable and other--net 18,957 15,789
Other revenue producing assets--net:
Franchise rights and service contracts 88,855 87,754
Rental properties 2,723 2,895
Miscellaneous 11 23
------- --------
Total other revenue producing assets 91,589 90,672
Property, plant and equipment--net 10,970 9,783
-------- --------
$218,418 $196,496
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Drafts and accounts payable $ 24,039 $ 17,127
Accrued liabilities 12,867 7,758
Committed advertising (911) 1,108
Current maturities of long-term debt 388 367
Total current liabilities 36,383 26,360
Deferred income taxes 14,995 14,995
Long-term debt 25,013 23,344
Other non-current liabilities 221 436
Common stock and other stockholders' equity 141,806 131,361
-------- --------
$218,418 $196,496
======== ========
</TABLE>
See accompanying notes.
<PAGE>
INTERNATIONAL DAIRY QUEEN, INC.
CONSOLIDATED STATEMENT OF INCOME
(Condensed and in Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
Nine Months Ended Third Quarter Ended
--------------------- -----------------------
August 25, August 26, August 25, August 26,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Operating Revenues:
Net Sales $231,602 $209,705 $ 92,477 $ 85,715
Service Fees 44,345 42,063 18,178 17,142
Franchise sales and other fees 6,694 6,540 2,630 2,623
Real estate finance and rental income 5,654 6,197 1,800 1,943
Other 746 811 276 38
-------- -------- -------- --------
289,041 265,316 115,361 107,461
Operating Expenses:
Cost of Sales 208,025 189,028 83,010 77,139
Expenses applicable to real estate
finance and rental income 5,274 5,817 1,656 1,802
Selling, general and administrative 33,393 30,164 11,762 10,454
-------- -------- -------- --------
246,692 225,009 96,428 89,395
-------- -------- -------- --------
42,349 40,307 18,933 18,066
Net interest income 1,466 1,081 484 388
-------- -------- -------- --------
Income before income taxes 43,815 41,388 19,417 18,454
Provision for income taxes 17,310 16,350 7,670 7,290
-------- -------- -------- --------
Net income $ 26,505 $ 25,038 $ 11,747 $ 11,164
-------- -------- -------- --------
Earnings per common and common
equivalent share $ 1.14 $ 1.03 $ .51 $ .46
======== ======== ======== ========
Average common and common equivalent
shares outstanding 23,280 24,395 23,001 24,189
======== ======== ======== ========
</TABLE>
See accompanying notes.
<PAGE>
INTERNATIONAL DAIRY QUEEN, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Condensed and in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------
August 25, August 26,
1995 1994
---------- ----------
<S> <C> <C>
Net cash provided by operating activities $23,797 $23,639
Cash flows from investing activities:
Marketable securities, net (investments)/maturities (24) 5,833
Net advances to operators for store renovations
and equipment (1,890) (2,205)
Capital expenditures (2,323) (1,691)
Purchase of franchise rights and service contracts (1,170) (1,107)
Other 90 24
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Cash flows (used in)/provided by investing activities (5,317) 854
Cash flows from financing activities:
Purchase and retirement of common shares (16,924) (12,577)
Principal payments on long-term debt (355) (2,020)
Other 541 306
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Cash flows used in financing activities (16,738) (14,291)
Effect of exchange rate changes on cash 32 (29)
-------- -------
Net increase in cash and cash equivalents 1,774 10,173
Cash and cash equivalents at beginning of year 31,766 21,188
------- -------
Cash and cash equivalents at end of period $33,540 $31,361
======= =======
</TABLE>
See accompanying notes.
<PAGE>
INTERNATIONAL DAIRY QUEEN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The interim financial statements included herein have been prepared by the
Company without audit, but include all adjustments which are of a normal
recurring nature and which the Company believes are necessary for a fair
presentation of its financial position at August 25, 1995, and August 26,
1994, and results of operations and cash flows for the three-month and
nine-month periods then ended. The condensed financial statements do not
include all disclosures required under generally accepted accounting principles
since certain footnote information has been omitted. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's Annual Report and Form 10-K for the year ended November 30, 1994.
The Company calculates its income tax provision for interim periods by
estimating its annual effective tax rate and applying this rate to the income of
the interim period. The effective tax rate applied was 39.5 percent for the
three-month and nine-month periods ended August 25, 1995, and August 26, 1994.
Earnings per common share amounts are based on the weighted average number of
common and common equivalent shares outstanding during each period.
The Company's business is seasonal in nature, and the results of operations
for the nine months ended August 25, 1995, may not be indicative of the
results for the full year.
<PAGE>
INTERNATIONAL DAIRY QUEEN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General:
The Company's revenues are derived primarily from service and franchise fees
received from franchisees and the sale of perishable and nonperishable
supplies and equipment for use by franchised stores. Although the Company
does not allocate interest or selling, general and administrative expenses by
products sold or services rendered, it believes that a major portion of its
operating income results from franchise service fees.
The following table sets forth certain information as to the number of stores
in the "Dairy Queen," "Orange Julius," "Karmelkorn," and "Golden Skillet"
systems.
<TABLE>
<CAPTION>
Total Ownership Total
11/30/94 Opened Closed Converted Changes 8/25/95
-------- ------ ------ --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
DAIRY QUEEN SYSTEM
United States
Franchised by the Company:
"Dairy Queen" stores 3,195 61 (48) 25 3,233
"Treat Center" units 104 8 2 114
Franchised by territorial
operators 1,614 52 (24) (25) 1,617
Company operated stores 1 (1) 0
----- --- ---- --- --- -----
4,914 121 (73) 2 0 4,964
Canada
Franchised by the Company:
"Dairy Queen" stores 432 15 (1) 446
"Treat Center" units 20 1 21
----- --- ---- --- --- -----
452 16 (1) 467
----- --- ---- --- --- -----
Other foreign 176 17 30) 163
----- --- ---- --- --- -----
Total "Dairy Queen" stores 5,542 154 (104) 2 5,594
----- --- ---- --- --- -----
"Orange Julius" stores 454 10 (33) (1) 430
"Karmelkorn" shoppes 82 1 (12) (1) 70
"Golden Skillet" restaurants 21 21
----- --- ---- --- --- -----
TOTAL 6,099 165 (149) 0 0 6,115
===== === ==== === === =====
</TABLE>
<PAGE>
Results of Operations:
- ----------------------
The improvement in the Company's results of operations for the third quarter
and first nine months of 1995, compared to the third quarter and first nine
months of 1994, reflects an increase in net sales, increased service fees
received from stores franchised by the Company and an increase in net
interest income. These increases were partially offset by an increase in
selling, general and administrative expenses. The reason for the changes in
the third quarter periods were generally similar to the reasons, discussed
below, for the changes in the nine-month periods.
The following table indicates as a percentage of revenue, line items from the
income statement, and the percentage increase/decrease of such items when
comparing the first nine months of 1995 with the first nine months of 1994.
<TABLE>
<CAPTION>
Percentage of Revenue
Nine Months Ended
---------------------- Percentage
August 25, August 26, Increase
1995 1994 (Decrease)
---------- ---------- ----------
<S> <C> <C> <C>
Operating Revenues:
Net Sales 80.1 79.0 10.4
Service Fees 15.3 15.9 5.4
Franchise sales & other fees 2.3 2.5 2.4
Real estate finance & rental income 2.0 2.3 (8.8)
Other .3 .3 (8.0)
----- -----
Total Revenues 100.0 100.0 8.9
Operating Expenses:
Cost of Sales 71.9 71.2 10.1
Expense applicable to real estate finance
& rental income 1.8 2.2 (9.3)
Selling, general & administrative 11.6 11.4 10.7
----- -----
Total Operating Expenses 85.3 84.8 9.6
Net interest income .5 .4 35.6
Income before income taxes 15.2 15.6 5.9
Provision for income taxes 6.0 6.2 5.9
----- -----
Net income 9.2 9.4 5.9
===== =====
</TABLE>
The increase of $21,897,777 in net sales resulted primarily from an increase
of $18,663,130 in unit sales of frozen and non-frozen foods, meat products
(primarily chicken) and paper and plastics to authorized warehouses (who in
turn sell to franchisees), an increase of $1,487,900 in sales of promotional
items sold to "Dairy Queen" stores, and an increase of $2,527,015 in fees by
Firstaff, Inc.
These increases were partially offset by a reduction in equipment sales to
franchisees of $1,504,343 when comparing the first nine months of 1995 with
the comparable period of 1994. This decrease resulted from the introduction
of newly-designed menu boards which were offered to stores at discounted
prices during the 1994 introductory period and which resulted in net sales of
$5,654,879 in the first nine months of 1994.
<PAGE>
Selling, general and administrative expenses increased $3,229,465 due to
additional personnel and support costs, increased marketing and research
costs, legal costs, and other costs required to support and develop a higher
overall level of operations.
The increase in net income per share when comparing the 1995 period with the
1994 period was due to an increase in the Company's net income and to a
decrease in the average number of common and common equivalent shares
outstanding.
Liquidity and Capital Resources:
- --------------------------------
Available liquid resources at August 25, 1995, include $40.5 million in cash,
cash equivalents and marketable securities. The Company's business is highly
seasonal with its working capital requirements generally being the greatest
during the first nine months of its fiscal year. The Company believes it has
sufficient capital to meet existing and presently anticipated needs.
PART II
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All items required under Part II have been omitted since they are
inapplicable or the answers are negative.
SIGNATURES
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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.
International Dairy Queen, Inc.
-------------------------------------
(Registrant)
October 6, 1995 /s/ CHARLES W. MOOTY
- ------------------------- -------------------------------------
Date Charles W. Mooty
Chief Financial Officer,
Vice President and Treasurer
October 6, 1995 /s/ DAVID M. BOND
- ------------------------- -------------------------------------
Date David M. Bond
Secretary/Assistant Treasurer
and Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> AUG-25-1995
<CASH> 33,539
<SECURITIES> 6,980
<RECEIVABLES> 48,004
<ALLOWANCES> 592
<INVENTORY> 5,300
<CURRENT-ASSETS> 96,902
<PP&E> 21,069
<DEPRECIATION> 10,099
<TOTAL-ASSETS> 218,418
<CURRENT-LIABILITIES> 36,875
<BONDS> 25,013
<COMMON> 237
0
0
<OTHER-SE> 141,569
<TOTAL-LIABILITY-AND-EQUITY> 218,418
<SALES> 231,602
<TOTAL-REVENUES> 289,041
<CGS> 208,025
<TOTAL-COSTS> 213,299
<OTHER-EXPENSES> 33,393
<LOSS-PROVISION> 62
<INTEREST-EXPENSE> 1,613
<INCOME-PRETAX> 43,815
<INCOME-TAX> 17,310
<INCOME-CONTINUING> 26,505
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,505
<EPS-PRIMARY> 1.14
<EPS-DILUTED> 1.14
</TABLE>
