<PAGE>
FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1994
COMMISSION FILE NUMBER 0-6116
INTERNATIONAL DAIRY QUEEN, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 41-0852869
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------------------ I.R.S. Employer I.D. No.
State of Incorporation
7505 METRO BOULEVARD, MINNEAPOLIS, MINNESOTA 55439
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 830-0200
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
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CLASS B COMMON STOCK, PAR VALUE $.01 PER SHARE
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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 and (2) has been subject to such filing requirements for
the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF
JANUARY 20, 1995:
CLASS A COMMON STOCK -- 14,666,344
CLASS B COMMON STOCK -- 8,807,180
APPROXIMATE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES AS OF
JANUARY 20, 1995:
CLASS A COMMON STOCK -- $200,674,756
CLASS B COMMON STOCK -- $ 75,094,273
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TOTAL $275,769,029
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DOCUMENTS INCORPORATED BY REFERENCE:
1. Portions of the Annual Report to Stockholders for the year ended November 30,
1994 are incorporated by reference into Parts I and II.
2. Portions of the definitive proxy statement for the annual meeting of
stockholders to be held on March 8, 1995 are incorporated by reference into
Part III.
1
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PART I
Item 1.BUSINESS
GENERAL
The Company develops and services a system of more than 5,500 DAIRY QUEEN
stores in the United States, Canada and other foreign countries featuring
hamburgers, hot dogs, various dairy desserts and beverages; more than 450 ORANGE
JULIUS stores in the United States, Canada and other foreign countries featuring
blended drinks made from orange juice, fruits and fruit flavors, along with
various snack items; and more than 80 KARMELKORN stores featuring popcorn and
other treat items.
To support and promote the businesses of its franchisees, the Company
undertakes product development and market testing, creates and coordinates
advertising programs, provides training and advisory services for store
operators and enforces quality control standards.
A major portion of the Company's operating income is derived from franchise
fees paid by franchised stores and stores licensed by territorial operators. The
Company does not itself operate stores except for one DAIRY QUEEN store which is
used for market and product testing.
The Company also sells equipment to stores and sells other products used in
store operations to a system of independently owned warehouses, which also
purchase approved products from other suppliers. These warehouses in turn sell
products to retail stores in their geographical areas.
Except for providing financing for the sale of specialized equipment to its
franchisees, offering limited financing services for the remodeling of existing
franchised stores and for providing certain leasing services for stores located
in shopping malls, the Company has not generally provided financial assistance
or guarantees for the construction or operation of franchised stores.
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>
CONVERTED
TOTAL TO TREAT OWNERSHIP TOTAL
11/30/93 OPENED CLOSED CENTERS CHANGES 11/30/94
--------- ------- ------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
DAIRY QUEEN system
United States
Franchised by the Company:
DAIRY QUEEN stores.................................... 3,083 56 (53) (1) 110 3,195
TREAT CENTER units.................................... 93 8 (2) 5 104
Franchised by territorial operators..................... 1,683 71 (30) (110) 1,614
Company operated stores................................. 1 1
-
--------- ------- ------- --- ---------
4,860 135 (85) 4 0 4,914
-
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Canada
Franchised by the Company:
DAIRY QUEEN stores.................................... 420 14 (1) (1) 432
TREAT CENTER units.................................... 18 2 (1) 1 20
-
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438 16 (2) 0 0 452
-
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Other foreign............................................. 173 29 (26) 176
-
--------- ------- ------- --- ---------
Total DAIRY QUEEN stores................................ 5,471 180 (113) 4 5,542
-
--------- ------- ------- --- ---------
ORANGE JULIUS stores........................................ 480 16 (39)(a) (3) 454
KARMELKORN shoppes.......................................... 95 3 (15) (1) 82
GOLDEN SKILLET restaurants.................................. 17 4 21
-
--------- ------- ------- --- ---------
Total................................................... 6,063 203 (167) 0 0 6,099
-
-
--------- ------- ------- --- ---------
--------- ------- ------- --- ---------
<FN>
- - ------------------------
(a) The ORANGE JULIUS stores which closed in 1994 reflect the continued high
concentration of lease expirations during the 1988 through the 1994 period.
The Company's policy is not to renew its lease obligations with respect to
stores which have not achieved satisfactory operating results.
</TABLE>
2
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FRANCHISING SYSTEM
DAIRY QUEEN. Stores are located in all states, except Rhode Island, as well
as Canada, Japan and several other countries. Most stores are located in smaller
towns and suburbs of larger cities. Some franchised stores offer only soft serve
dairy products, while others also offer some or all of the food items in the
BRAZIER line. The Company endeavors to have its DAIRY QUEEN franchisees offer a
more complete line of authorized products.
The first DAIRY QUEEN store was opened in Illinois in 1940. In 1945, two
predecessor companies began to develop the DAIRY QUEEN system on a national
basis by granting territorial franchise rights for specific geographical areas.
In 1962, certain territorial operators formed International Dairy Queen, Inc.,
by contributing their territorial franchise rights and acquiring ownership of
the DAIRY QUEEN trademarks and other franchise rights.
DAIRY QUEEN/BRAZIER stores offer a menu of fast food items, including
hamburgers, various dairy desserts (including soft serve and frozen yogurt) and
beverages which are marketed under the DAIRY QUEEN and BRAZIER trademarks.
Retail prices are determined by the store operators.
The DAIRY QUEEN dairy dessert product line which includes cones of various
sizes, BLIZZARD Flavor Treats, as well as shakes, malts and sundaes, hardpacked
products for home consumption and specialty frozen confections. These products
are prepared in the store from the Company's specially formulated mixes by means
of distinctive freezing and dispensing units.
The BRAZIER product line, adopted nationally in 1968, consists of a food menu
featuring hamburgers, hot dogs, chicken strips, barbecue and chicken sandwiches,
french fried potatoes and onion rings.
The Company franchises DAIRY QUEEN stores either directly through agreements
with individual retail store operators or indirectly through agreements with
territorial operators who are authorized to grant franchise rights to store
operators within a specified territory.
The terms of direct store franchise agreements used by the Company have been
modified from time to time as experience and changing circumstances have
required. The present DAIRY QUEEN/BRAZIER franchise agreement provides that the
store franchisee shall pay to the Company an initial service and set-up fee of
$30,000, and a continuing franchise service fee of 4% of gross retail sales. The
Company may permit certain qualified existing franchisees to open additional
stores by paying a reduced service and set-up fee. Other forms of store
agreements currently in force, most of which were entered into prior to 1968,
provide for varying levels of service fees computed on different bases, such as
the amount of total DAIRY QUEEN mix or products dispensed. All direct
franchisees pay some fees to the Company, and at November 30, 1994, 2,603 of the
3,751 stores franchised by the Company in the United States and Canada were
paying a continuing franchise service fee of 4% or more.
At November 30, 1994, there were 143 DAIRY QUEEN territorial operators in the
United States who are licensed by the Company to grant franchise rights in
specific geographic areas. Most of the existing territorial operator agreements
were granted prior to 1950 during the early stages of development of the
predecessor companies. Since 1973, the Company has acquired the rights of a
number of territorial operators and has sought to convert subfranchisees to a
direct franchise basis. The Company expects to continue to acquire the rights of
territorial operators when it has the opportunity to do so on terms acceptable
to the Company.
While the business terms of individual territorial operator agreements may
differ in certain respects, they generally provide for substantial uniformity in
terms of operation and product quality. The territory covered by territorial
operator agreements vary, although most are for limited geographical areas as is
evidenced by the fact that most have five or fewer stores. Many of the Company's
territorial franchises provide for continuing payments to the Company generally
computed on the basis of a percentage of the franchise service fees collected by
the territorial operator. However, at November 30, 1994, 139 stores were
subfranchised or operated by territorial operators who do not have any
obligation to pay the Company any franchise service fees. As to most of these
stores, the Company's right to control and supervise quality standards and
methods of operation is limited to that activity normally required of the holder
of a trademark or service mark under the laws related to trademark protection to
control the nature and quality of goods sold under its trademark or service
mark.
TREAT CENTER. With the acquisition of KARMELKORN in 1986 and ORANGE JULIUS in
1987, the TREAT CENTER concept has emerged. This franchising concept combines
DAIRY QUEEN treat items together with either or both ORANGE JULIUS and
KARMELKORN menu items under one storefront within a shopping mall. By combining
the products of these franchising systems, the Company seeks to substantially
increase store sales volumes in order to support the signing of leases that
would be too expensive for a one product-line store. The present TREAT CENTER
franchise agreement provides that the store franchisee shall pay to the Company
an initial service and set-up fee of $15,000, and a continuing franchise service
fee of 6% of gross retail sales. The Company permits certain existing
franchisees to open additional stores without paying an initial service and
set-up fee. At November 30, 1994, there were 124 TREAT CENTER units, of which
104 were in the United States and 20 in Canada, all of which were franchised by
the Company.
ORANGE JULIUS. In August 1987, the Company acquired Orange Julius of America
and Orange Julius Canada Limited, franchisors of retail stores which feature
blended drinks made from orange juice, fruits and fruit flavors. Most of the
stores are located in shopping malls. At November 30, 1994, there were 454
ORANGE JULIUS stores, of
3
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which 325 were in the United States, 105 were in Canada, and 24 in other foreign
countries, all of which were franchised by the Company.
The present ORANGE JULIUS franchise agreement provides that the store
franchisee shall pay to the Company an initial service and set-up fee of $15,000
($5,000 for certain existing franchises), and a continuing franchise service fee
of 6% of gross retail sales.
KARMELKORN. In March 1986, the Company acquired Karmelkorn Shoppes, Inc., a
franchisor of retail stores which sell popcorn, candy and other treat items.
Most of the stores are located in shopping malls. At November 30, 1994, there
were 82 Karmelkorn stores, of which 77 were in the United States and 5 were in
foreign countries, all of which were franchised by the Company.
GOLDEN SKILLET. In December 1981, the Company acquired the United States and
international (exclusive of Canada) franchise rights and other selected assets
of the GOLDEN SKILLET system. GOLDEN SKILLET stores feature fried chicken and
side dishes. In October 1992, the Company assigned the franchises, trademarks
and related assets for GOLDEN SKILLET in the contiguous 48 United States and the
District of Columbia to a non-affiliated company. The Company continues to hold
the GOLDEN SKILLET franchises and rights for the rest of the world. At November
30, 1994, there were 21 GOLDEN SKILLET stores in foreign countries, all of which
were franchised by the Company.
FIRSTAFF. In March 1989, the Company acquired 60% ownership of Firstaff,
Inc., specialists in the placement and training of permanent and temporary
office support personnel. Firstaff operates four placement offices in the
Minneapolis/St. Paul and Atlanta areas and a franchised office in Seattle.
NEW STORES
The Company is continuously seeking to open new stores. The ability of the
Company to open new stores is most dependent upon recruiting qualified operators
with suitable sites. New stores franchised by the Company are constructed in
accordance with the Company's specifications and standards. Substantially all
stores have a standardized appearance as well as uniform product lines and
operating methods.
The Company also has a program whereby existing franchisees in good standing
with the Company may be awarded an additional store franchise at reduced cost.
FOREIGN OPERATIONS
Foreign operations, excluding Canada, did not have a significant effect on
consolidated operations for the year ended November 30, 1994. The Company's
operations in Canada are substantially similar to its U.S. operations. Of the
783 foreign stores, at November 30, 1994, 557 were located in Canada, 109 in
Japan and 117 in 17 other foreign countries.
COMPANY SERVICES
PRODUCT DEVELOPMENT AND TEST MARKETING. The Company continually attempts to
develop new products. New product concepts are obtained from vendors,
franchisees and Company personnel who work with the Company's Research and
Development personnel to develop a product concept into a finished product
suitable for the system.
ADVERTISING AND SALES PROMOTION. The Company develops and conducts national
and area sales promotion and advertising programs principally through
television, radio and newspapers. For each of the four food systems the Company
is assisted by an advisory council, the majority of whose members are elected by
members of the system. Substantially all amounts expended for advertising and
promotion are provided by franchisees who contribute to advertising funds.
The present franchise agreements provide that franchisees shall pay an amount
equal to 3% to 6% of gross sales to the advertising and sales promotion funds
administered by the Company. Funds administered by the Company for advertising
and sales promotion during 1994, 1993 and 1992 aggregated approximately
$51,000,000, $47,800,000 and $44,200,000, respectively. In addition to the funds
administered by the Company, many stores expend funds for local and regional
advertising. Unexpended advertising funds were $1,108,279 and $2,092,851 at
November 30, 1994 and 1993, respectively.
MANUFACTURING AND DISTRIBUTION. The Company is one of over 80 approved
manufacturers of DAIRY QUEEN mix. In addition to DAIRY QUEEN mix and
concentrates, the Company sells equipment which is manufactured by independent
manufacturers. The Company also purchases approved perishable and nonperishable
supplies and resells them to independently-owned authorized warehouses described
below. Substantially all of the Company's sales of products consist of products
purchased for resale from manufacturers and suppliers unrelated to the Company.
Neither the retail stores nor the authorized warehouses are required to purchase
any products from the Company.
In order to provide stores with a convenient source of approved merchandise,
the Company has arranged for a system of over 80 authorized warehouses which
purchase, inventory and sell approved food and miscellaneous supplies to stores.
In addition to the authorized warehouses, there are a number of warehouses which
are not under contract with the Company which purchase products directly from
approved manufacturers for resale to stores.
4
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TRAINING AND ADVISORY SERVICES. The Company provides a wide range of training
and advisory services to its franchisees. New store operators franchised by the
Company are to attend a two-week course of intensive training at the Company's
training center in Minneapolis, Minnesota. The attendees are given classroom and
practical instruction in procedures for product preparation, business and
financial management, marketing and promotion and related operational matters.
Periodic refresher training and instruction are available to all franchisees at
the Company's training center and at state, regional and national conferences
and seminars. The Company also makes available training aids and materials for
the franchisees' use in instructing store employees.
QUALITY CONTROL. The Company conducts a periodic evaluation program designed
to insure a high standard of operation, quality and product uniformity. Through
110 field consultants and 14 regional managers, the Company furnishes
franchisees with information, advice and recommendations relating to facility
image, menu/product preparation, financial management, personnel management and
marketing.
In order to maintain quality control, stores are generally required to use
approved products. The Company maintains a system of approved manufacturers
which are authorized to manufacture and sell products such as mix, meat,
containers, paper goods, equipment and sales promotion materials.
REGULATION OF FRANCHISE BUSINESS
The Company and its franchisees are subject to various federal, state and
local laws affecting their businesses. The Company and its franchisees are
subject to a variety of regulatory provisions relating to wholesomeness of food,
sanitation, health and safety.
The Company is also subject to a substantial number of state laws regulating
the offer and sale of franchises. Such laws impose registration and disclosure
requirements on franchisors in the offer and sale of franchises and may also
regulate termination, renewal fees and other substantive aspects of the
relationship between franchisor and franchisee. The Company is also subject to
Federal Trade Commission regulations governing disclosure requirements in the
sale of franchises. The Company believes it is in compliance with applicable
laws and regulations governing its operations.
COMPETITION
All areas of the fast food service business are highly competitive, and the
Company has many competitors, some of whom are large companies selling a more
diversified line of products and having greater financial resources than the
Company. The DAIRY QUEEN/BRAZIER, ORANGE JULIUS, KARMELKORN and GOLDEN SKILLET
stores compete with a large number of national chains as well as locally-owned
restaurants, drive-ins, take-home outlets and similar establishments, offering
food at low and medium prices. Extensive and active competition also exists in
the acquisition of commercial locations suitable for stores.
A key competitive factor is the reputation and image of the system. The
Company believes that public recognition of DAIRY QUEEN/BRAZIER, ORANGE JULIUS,
and KARMELKORN names contributes significantly to sales by stores.
The Company owns the DAIRY QUEEN and BRAZIER trademarks registered in the
United States Patent Office and in each of the fifty states and in the Canadian
Trademarks Office. The Company also owns a number of United States and foreign
registrations of other trademarks, including ORANGE JULIUS, KARMELKORN and
GOLDEN SKILLET, and service marks used in the conduct of its business. The
Company believes that the success of its business depends to a large extent on
its trademark and service mark protection and, where and when necessary, intends
to continue to protect its trademarks by appropriate legal action.
EMPLOYEES
At November 30, 1994, the Company employed 564 persons (including 64 persons
employed by Firstaff, Inc.) primarily in sales, supervisory, clerical and
managerial activities. The Company maintains a 401(k) Retirement Savings Plan
which is available to all full-time employees with one year or more of service.
The Company also maintains a Section 125 Plan which is available to full-time
employees after 30 days of service. The Company has never experienced a work
stoppage due to labor difficulty and considers its employee relations to be
satisfactory.
Item 2.PROPERTIES
On December 1, 1992, the Company purchased a 14-year-old office building
aggregating 110,000 square feet, of which 73,400 square feet is utilized by the
Company for its principal administrative offices and training center. The
remaining 36,600 square feet is leased to a third party under a lease expiring
November 30, 1995.
The Company also owns a mix manufacturing plant in Decatur, Georgia, a
Canadian office building/warehouse and the store facilities described below.
Warehouse space aggregating 35,023 square feet is under lease expiring in 2001
and twelve regional offices comprising 15,251 square feet are under leases
expiring from 1994 to 1998. Firstaff, Inc. has four offices in Minnesota,
aggregating 15,807 square feet, which are under leases expiring from 1994 to
1997. The aggregate rental charges for the Company's administrative, Firstaff
and operating facilities, excluding stores, were approximately $670,000 and
$910,000 for fiscal 1994 and fiscal 1993, respectively.
At November 30, 1994, the Company owned real property relating to nine stores
with an aggregate net book value of approximately $1,920,000, all of which were
leased to franchisees. See Notes 4 and 5 of Notes to Consolidated Financial
Statements for additional information regarding the Company's properties.
5
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PART II
Item 3.LEGAL PROCEEDINGS
From time-to-time, and at present, the Company is subject to various claims
and lawsuits in the ordinary course of business, some of which include
allegations by franchisees and subfranchisees that the Company has violated
antitrust and other laws. Such claims sometimes arise in connection with actions
by the Company to collect amounts owed by franchisees or to enforce or terminate
franchise agreements.
HUGH COLLINS, ET AL. V. INTERNATIONAL DAIRY QUEEN, INC. AND AMERICAN DAIRY
QUEEN CORPORATION ("ADQ"), (United States District Court, Middle District of
Georgia, Macon Division, No. 94-95-4-MAC (WDO), commenced April 5, 1994). This
is an action by five franchisees in the state of Georgia for declaratory
judgment, injunctive relief, actual damages in an unspecified amount, treble
damages under federal antitrust law, costs, and attorneys' fees. Plaintiffs'
claims are that ADQ's approved supplier program and procedures constitute a
tying arrangement prohibited under Section I of the Sherman Antitrust Act (15
U.S.C. Section 1), a breach of contract, a breach of an implied covenant of good
faith and fair dealing between the parties, and breach of a prior settlement
agreement. The Company and ADQ have filed an answer to plaintiffs' complaint and
intend to vigorously defend against plaintiffs' claims. The Court has appointed
a Special Discovery Master, and pretrial proceedings are expected to be
extensive. In December 1994, the parties filed cross-motions for summary
judgment on all issues relating to the supply of cups and lids to the DAIRY
QUEEN system. The Court has scheduled an evidentiary hearing on those motions
for February 7-8, 1995. No trial date has been set.
Item 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Item 5.MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
(a) Since 1972, the Company's common stock has been traded in the
over-the-counter market. Both Class A common stock and Class B common stock are
listed on Nasdaq National Market and trade under the symbols INDQA and INDQB,
respectively.
The following table sets forth for the periods indicated the high and low
prices for the Class A common stock and Class B common stock as reported by
Nasdaq. The prices shown below do not include retail markups, markdowns or
commissions.
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
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LOW HIGH LOW HIGH
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<S> <C> <C> <C> <C>
Fiscal Year Ended November 30, 1993
First Quarter.............................. $17.00 $21.00 $17.00 $20.50
Second Quarter............................. $16.00 $19.50 $15.75 $18.50
Third Quarter.............................. $15.50 $17.75 $15.75 $17.75
Fourth Quarter............................. $15.50 $17.00 $15.50 $17.50
Fiscal Year Ended November 30, 1994
First Quarter.............................. $15.75 $18.50 $16.00 $19.50
Second Quarter............................. $17.00 $18.50 $17.00 $19.50
Third Quarter.............................. $15.75 $18.50 $16.00 $19.00
Fourth Quarter............................. $16.25 $17.75 $16.25 $18.25
</TABLE>
(b) As of January 20, 1995, the approximate number of record holders of the
Company's Class A common stock was 1,037 and the approximate number of record
holders of the Company's Class B common stock was 469.
(c) The Company has not paid cash dividends on its common stock. Future
dividends will be determined by the Company's Board of Directors whose decision
will be made in light of the earnings, financial position and cash requirements
of the Company and other relevant factors existing at the time. The Company's
credit agreements contain provisions limiting the payment of dividends. See
Notes 3 and 7 of Notes to Consolidated Financial Statements.
Item 6.SELECTED FINANCIAL DATA
The information set forth under the caption "Selected Financial Data" on page
1 of the Registrant's 1994 Annual Report to Stockholders is incorporated herein
by reference.
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Item 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following table sets forth, for the periods indicated, items from the
Company's statement of income expressed as percentages of revenues, and the
percentage changes in the dollar amounts of such items from the prior period.
<TABLE>
<CAPTION>
PERCENTAGES OF
REVENUES
-------------------
PERCENTAGE INCREASE
YEARS ENDED (DECREASE)
NOVEMBER 30, -------------------------
------------------- FISCAL 1994 FISCAL 1993
1994 1993 1992 OVER 1993 OVER 1992
----- ----- ----- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales..................................................................... 78.9 77.7 76.8 11.3 5.9
Service fees.................................................................. 15.9 16.6 17.0 5.0 1.9
Franchise sales and other fees................................................ 2.5 2.4 2.3 13.1 8.8
Real estate finance and rental income......................................... 2.4 2.9 3.4 (10.1) (10.0)
Other......................................................................... .3 .4 .5 (9.3) (11.8)
----- ----- -----
Total revenues.............................................................. 100.0 100.0 100.0 9.6 4.7
----- ----- -----
----- ----- -----
Costs and expenses:
Cost of sales................................................................. 71.1 69.8 68.9 11.6 6.1
Expenses applicable to real estate finance and rental income.................. 2.3 2.7 3.2 (10.3) (9.8)
Selling, general and administrative........................................... 11.9 12.1 11.9 7.9 5.8
----- ----- -----
Total costs and expenses.................................................... 85.3 84.6 84.0 10.4 5.5
----- ----- -----
Interest income (expense), net.................................................. .5 .5 (.1) 10.6 *
----- ----- -----
Income before income taxes...................................................... 15.2 15.9 15.9 5.1 4.4
Income taxes.................................................................... 6.0 6.3 6.1 5.1 7.1
----- ----- -----
Net income...................................................................... 9.2 9.6 9.8 5.1 2.7
----- ----- -----
----- ----- -----
<FN>
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* Not meaningful.
</TABLE>
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 service fees.
1994 COMPARED TO 1993. The increase of $27,192,317 in net sales resulted
primarily from an increase of $11,081,037 in unit sales of perishable (frozen
and non-frozen foods) supplies to authorized warehouses (who in turn sell to
franchisees), an increase in sales of equipment (primarily menu boards) of
$9,313,887, an increase of $3,444,978 in consumable and promotional supply items
sold to DAIRY QUEEN stores, and an increase of $2,489,886 in temporary placement
and training fees by Firstaff, Inc.
The Company introduced its newly-designed menu boards to the DAIRY QUEEN
system during the second quarter of fiscal 1994, which were offered to stores at
discounted prices during the introductory period to encourage system-wide
utilization of the product and resulted in net sales of $7,303,574 in 1994.
While the Company plans to introduce other newly-designed equipment in 1995,
equipment sales in 1995 are expected to be less than in 1994, due to anticipated
significant reductions in the sale of menu boards.
The decreases in real estate, finance and rental income and related expenses
in fiscal 1994 reflect a continued number of lease expirations. It is the
Company's policy not to renew the Company's obligations with respect to store
leases, except in certain limited situations.
Selling, general and administrative expenses increased $2,978,529 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 interest income is primarily the result of reduced
borrowings ($12 million in long-term debt was retired in 1994) and increased
yields on short-term investments and marketable securities.
The 11 cent increase in net income per share when comparing the 1994 period
with the 1993 period was due to an increase in the Company's net income and to a
3.4% decrease in the average number of common and common equivalent shares
outstanding.
1993 COMPARED TO 1992. The increase of $13,560,626 (5.9%) in net sales
resulted primarily from an increase of $6,441,716 in sales of perishable and
non-perishable supplies (frozen and non-frozen foods, paper and plastic items,
etc.) to authorized warehouses (who in turn sell to franchisees), an increase of
$1,917,839 in equipment sales to franchisees and an increase of $3,326,480 in
permanent and temporary placement fees by Firstaff, Inc.
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The increase of $2,043,326 (5.8%) in selling, general and administrative
expenses was primarily from an increase in personnel and legal support costs.
The increase in net interest income of $1,742,104 is the result of reduced
borrowings, lower interest rates due to interest rate swap arrangements to
effectively convert fixed rate senior notes to lower variable rate debt, and the
accrual of $548,501 (U.S. dollars) in interest income due from Revenue Canada,
resulting from agreed adjustments to the Canadian subsidiaries' taxable income
for the years ended November 30, 1986 to November 30, 1992.
The Omnibus Budget Reconciliation Act of 1993, which was signed into law on
August 10, 1993, increased corporate income tax rates from 34 to 35 percent
retroactive to January 1, 1993. This retroactive increase required an increase
in the Company's effective tax rate from 38.5% to 39.5% for the fiscal year
ended November 30, 1993 and resulted in an additional tax charge for the year in
the amount of $500,000 (2 cents per share).
The 7 cents per share increase in net income per share, when comparing 1993
with 1992, was due to an increase in the Company's net income and to a 3.6%
decrease in the average number of common and common equivalent shares
outstanding.
SEASONALITY OF BUSINESS
The Company's business is highly seasonal. DAIRY QUEEN sales generally have
been higher during the spring and summer months, while ORANGE JULIUS and
KARMELKORN sales tend to be higher during the September to December back to
school and holiday shopping periods. Historically, the Company has earned a
substantial portion of its operating profit during the second and third quarters
(spring and summer months). The following table shows the Company's net income
by quarter for each of the past five fiscal years:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net income (in thousands)
1990.......................................................................... $ 4,094 $ 7,952 $ 9,704 $ 4,763 $26,513
1991.......................................................................... 4,374 8,227 10,185 5,135 27,921
1992.......................................................................... 4,406 8,674 10,536 5,479 29,095
1993.......................................................................... 4,548 8,727 10,677 5,936 29,888
1994.......................................................................... 4,614 9,260 11,164 6,383 31,421
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Funds for working capital, acquisitions of territorial rights, acquisitions of
the Company's common stock and capital expenditures during the last three years
have been provided by internally-generated funds (net income plus amortization
and depreciation). Available liquid resources at November 30, 1994, included
$31,766,220 in cash and cash equivalents. The Company does not have any material
commitments for capital expenditures during fiscal year 1995 and believes that
its existing credit arrangements, along with working capital generated by
operations, will be sufficient to meet existing and presently anticipated needs.
IMPACT OF INFLATION
The Company does not believe its business is affected by inflation to a
greater extent than the general economy. Generally, the Company has been able to
offset the inflationary impact of costs and wages through a combination of
productivity gains and price increases.
INCOME TAXES
The Company adopted FASB Statement No. 109, "Accounting for Income Taxes," in
the first quarter of fiscal year 1994, which resulted in an increase in deferred
tax liabilities of approximately $10 million. Since the Company elected to
restate prior year financial statements, the effect of adopting the new rules
was reflected as an adjustment to retained earnings as of December 1, 1991. The
adoption of FAS 109 had no impact on previously reported net income.
FINANCING RECEIVABLES
The Company will adopt FASB Statement No. 114, "Accounting by Creditors for
Impairment of a Loan", effective December 1, 1996, which requires that certain
impaired loans be measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate. The Company has not
assessed the impact of adopting FAS 114 on its Consolidated Statement of Income
or financial position.
Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
An index to the consolidated financial statements and financial statement
schedules is found on page 26 of this report.
Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
8
<PAGE>
PART III
Item 10.DIRECTORS AND OFFICERS OF THE REGISTRANT
Information with respect to Directors, appearing under "Election of Directors"
in the Company's Definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on March 8, 1995, is incorporated herein by reference.
The names, ages, and positions of all of the officers of the Company are listed
below along with their business experience during the past five years. Officers
are normally elected annually by the Board of Directors at its annual meeting.
Charles W. Mooty is the son of John W. Mooty. There are no other family
relationships among these officers, nor any arrangement between any officer and
any person pursuant to which the officer was selected.
<TABLE>
<CAPTION>
YEARS WITH
NAME POSITION WITH COMPANY (1) AGE COMPANY
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John W. Mooty Chairman of the Board and Chairman of the Executive Committee and Director 72 24
Michael P. Sullivan President and Chief Executive Officer and Director 60 20
Edward A. Watson Executive Vice President -- Operations 50 23
Charles W. Mooty Chief Financial Officer, Vice President and Treasurer 34 7
David M. Bond Secretary, Assistant Treasurer and Controller 58 25
Mark S. Broin Vice President -- Information Services 49 23
George H. Fougeron Vice President -- Franchise Operations 49 22
Stephen M. Frances Vice President -- Franchise Development and Lease Management 45 9
Services
John F. Hockert Vice President -- Financial Services 52 27
Michael J. Leary Vice President -- Purchasing and Distribution 55 23
Glenn S. Lindsey Vice President -- Research and Development 54 13
Srinivasa B. Murthy Vice President -- Administrative Services 51 23
Signe M. Pagel Vice President -- Human Resources, Meeting and Travel Services 45 24
Gary H. See Vice President -- Marketing and Consumer Research 48 20
William R. von Hassel Vice President -- Facilities 66 25
William C. Zucco Vice President -- Law and General Counsel 49 6
<FN>
- - ------------------------
(1) Unless indicated to the contrary, each of such person's primary occupation
for at least the past five years has been as an officer of the Company or a
subsidiary of the Company. John W. Mooty is a member of the Minneapolis law
firm of Gray, Plant, Mooty, Mooty & Bennett, P.A. with which firm he has
been associated for more than five years.
Charles W. Mooty has been employed by the Company since May 1987 in various
positions and has been a Vice President since April 1992.
</TABLE>
Item 11.EXECUTIVE COMPENSATION
Information with respect to directors and officers, appearing under
"Information Concerning Directors and Officers" in the Company's Definitive
Proxy Statement for the Annual Meeting of Stockholders to be held on March 8,
1995, is incorporated herein by reference.
Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to security ownership of certain beneficial owners
and management, appearing under "Outstanding Stock" in the Company's Definitive
Proxy Statement for the Annual Meeting of Stockholders to be held on March 8,
1995, is incorporated herein by reference.
Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and related transactions,
appearing under "Information Concerning Directors and Officers" in the Company's
Definitive Proxy Statement for the Annual Meeting of Stockholders to be held on
March 8, 1995, is incorporated herein by reference.
9
<PAGE>
Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Page
-----
(a) Index to exhibits, financial statements and financial statement
schedules.
Financial statements:
- - -------------------------------------------------------------------------
Consolidated balance sheet at November 30, 1994 and 1993....... 6-7
Consolidated statement of income for each of the three years in
the period ended November 30, 1994............................ 8
Consolidated statement of stockholders' equity for each of the
three years in the period ended November 30, 1994............. 9
Consolidated statement of cash flows for each of the three
years in the period ended November 30, 1994................... 10
Notes to consolidated financial statements..................... 11-14
Report of Independent Auditors................................. 15
Financial statements schedules:
- - -------------------------------------------------------------------------
Consolidated schedules for each of the three years in the
period ended November 30, 1994
II -- Valuation and qualifying accounts
All other schedules are omitted since the required
information is not present in amounts sufficient to require
submission of the schedule, or because the information required
is included in the financial statements and notes thereto.
Exhibits:
------------------------------------------------------------------
Restated Certificate of Incorporation, as amended
No. 3(a) (incorporated herein by reference to Registrant's
Annual Report, Form 10-K, for the fiscal year ended
November 30, 1991).
Restated By-Laws (incorporated herein by reference to
No. 3(b) Registrant's Annual Report, Form 10-K, for the fiscal
year ended November 30, 1986).
Computation of Earnings per Share.
No. 11
Copy of Registrant's 1994 Annual Report to
No. 13 Stockholders.
Subsidiaries of Registrant.
No. 22
Consent of Independent Auditors.
No. 23
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last
quarter of the period covered by this report.
10
<PAGE>
INTERNATIONAL DAIRY QUEEN, INC.
FINANCIAL STATEMENT SCHEDULES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
............................................................................................
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS YEAR
............................................................................................
<S> <C> <C> <C> <C>
Reserves deducted from related assets:
Doubtful accounts and notes:
Years ended November 30
1994.............................. $ 845,071 $ 347,771 $ 582,104(1) $ 610,738
1993.............................. 787,995 257,112 200,036(1) 845,071
1992.............................. 1,200,023 255,883 667,911(1) 787,995
Inventory valuation:
Years ended November 30
1994.............................. 13,291 25,915 37,993(2) 1,213
1993.............................. 14,451 19,993 21,153(2) 13,291
1992.............................. 1,956 24,092 11,597(2) 14,451
Estimated losses and expenses relating
to system support:
Years ended November 30
1994.............................. 123,788 33,945 132,935(2) 24,798
1993.............................. 150,519 169,640 196,371(2) 123,788
1992.............................. 267,593 97,384 214,458(2) 150,519
<FN>
- - ------------------------
(1) Write-offs of uncollectible accounts and notes, net of recoveries
(2) Incurred losses charged against the reserve
</TABLE>
<PAGE>
EXHIBIT 11
INTERNATIONAL DAIRY QUEEN, INC.
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
...............................................................................................
YEAR ENDED NOVEMBER 30,
---------------------------------------------------------------
1990 1991 1992 1993 1994
...............................................................................................
<S> <C> <C> <C> <C> <C>
Net income for year........... $26,513,145 $27,921,275 $29,094,668 $29,887,693 $31,420,899
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Weighted average common shares
outstanding................. 27,409,971 26,528,137 25,988,362 25,081,056 24,218,145
Dilutive common stock
equivalents:
Stock options, based on
treasury stock method using
average market price....... 16,578 59,431 47,959 22,862 43,020
----------- ----------- ----------- ----------- -----------
Total common and common
equivalent shares included
in computation of primary
and fully-diluted earnings
per share:.................. 27,426,549 26,587,568 26,036,321 25,103,918 24,261,165
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Earnings per share: (A)....... $ .97 $ 1.05 $ 1.12 $ 1.19 $ 1.30
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
<FN>
- - ------------------------
(A) Fully-diluted earnings per share is not presented on face of statement of
income since incremental dilution is less than 3%.
</TABLE>
Prior year amounts have been restated to reflect the three-for-one stock split
approved by the Board of Directors on March 12, 1991.
<PAGE>
EXHIBIT 13
The following are portions of the 1994 Annual Report of International Dairy
Queen, Inc. incorporated by reference to Form 10-K for the fiscal year ended
November 30, 1994.
<TABLE>
<CAPTION>
Exhibit Page #
---------------
<S> <C>
Selected Financial Data
Financial statements: 2
- - ----------------------------------------------------------------------------------------------------
Consolidated balance sheet at November 30, 1994 and 1993............................................ 3-4
Consolidated statement of income for each of the three years in the period ended November 30,
1994.............................................................................................. 5
Consolidated statement of stockholders' equity for each of the three years in the period ended
November 30, 1994................................................................................. 6
Consolidated statement of cash flows for each of the three years in the period ended November 30,
1994.............................................................................................. 7
Notes to consolidated financial statements.......................................................... 8-11
Report of Independent Auditors...................................................................... 12
</TABLE>
<PAGE>
SELECTED FINANCIAL DATA
(000's omitted, except per share amounts)
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
Years Ended November 30: 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS
Revenues:
Net sales................... $268,804 $241,612 $228,051 $221,726 $216,080 $192,063 $181,856 $165,377 $146,085 $126,381
Service fees................ 54,170 51,601 50,627 46,933 45,065 42,387 40,603 33,389 28,242 24,939
Real estate finance and
rental income.............. 8,081 8,988 9,984 11,308 12,480 12,810 12,854 5,151 2,553 2,488
Other....................... 9,777 8,893 8,448 8,856 9,480 7,769 7,916 6,985 6,406 4,860
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
340,832 311,094 297,110 288,823 283,105 255,029 243,229 210,902 183,286 158,668
Costs and expenses:
Cost of sales............... 242,413 217,155 204,650 197,714 191,665 170,533 161,954 148,409 131,216 113,598
Expenses applicable to real
estate finance and rental
income..................... 7,572 8,441 9,357 10,677 11,816 11,975 12,030 4,537 2,006 1,963
Selling, general and
administrative............. 40,494 37,516 35,472 35,211 36,033 33,075 33,964 29,241 24,617 21,300
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
290,479 263,112 249,479 243,602 239,514 215,583 207,948 182,187 157,839 136,861
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
50,353 47,982 47,631 45,221 43,591 39,446 35,281 28,715 25,447 21,807
Interest income (expense),
net.......................... 1,578 1,426 (316) 180 232 (615) (1,755) (1,957) (2,223) (2,590)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income before income taxes.... 51,931 49,408 47,315 45,401 43,823 38,831 33,526 26,758 23,224 19,217
Income taxes.................. 20,510 19,520 18,220 17,480 17,310 15,540 13,410 11,850 11,170 9,550
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net income.................... $ 31,421 $ 29,888 $ 29,095 $ 27,921 $ 26,513 $ 23,291 $ 20,116 $ 14,908 $ 12,054 $ 9,667
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Earnings per common and common
equivalent share............. $1.30 $1.19 $1.12 $1.05 $.97 $.83 $.70 $.51 $.42 $.33
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Average common and common
equivalent shares
outstanding.................. 24,261 25,103 26,036 26,588 27,427 28,213 28,841 29,060 28,993 29,583
BALANCE SHEET DATA
(at period end):
Total assets.................. $196,496 $184,398 $179,480 $174,951 $161,400 $129,136 $115,047 $118,944 $ 82,208 $ 69,983
Long-term debt................ 23,344 23,902 25,820 46,011 41,813 21,699 26,953 36,842 27,879 29,289
Working capital............... 53,891 36,382 35,570 36,682 29,142 19,806 7,703 3,746 8,363 1,395
Total stockholders'
equity (1)................... 131,361 116,685 102,599 96,773 83,225 75,704 57,738 43,497 28,979 14,014
<FN>
- - --------------------------
(1) During the above periods the Company purchased shares of its common stock
as follows: 1994 -- 975,254 shares; 1993 -- 887,718 shares; 1992 -- 675,971
shares; 1991 -- 695,257 shares; 1990 -- 1,057,761 shares; 1989 -- 434,346
shares; 1988 -- 600,834 shares; 1987 -- 86,100 shares; 1986 -- none; and
1985 -- 1,810,680 shares. The aggregate cost of these repurchases was
$97,223,207 which amount has been charged to stockholders' equity.
On December 1, 1993, the Company adopted FASB Statement No. 109,
"Accounting for Income Taxes", which resulted in the restatement of the
Company's previously issued consolidated financial statements. The
principal effect of the restatement was to record a net increase in
deferred taxes and a reduction of $9,860,000 in retained earnings as of
December 1, 1991.
</TABLE>
E-2
<PAGE>
INTERNATIONAL DAIRY QUEEN, INC.
CONSOLIDATED BALANCE SHEETS
November 30, 1994 and 1993
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
<S> <C> <C>
ASSETS 1994 1993
- - -------------------------------------------------------------------------
(Restated)
Current assets:
Cash and cash equivalents.................. $ 31,766,220 $ 21,188,062
Marketable securities...................... 6,956,192 9,989,490
Notes receivable, less allowance for
doubtful notes of $47,843 and $57,552 in
1994 and 1993, respectively............... 7,318,076 3,411,747
Accounts receivable, less allowance for
doubtful accounts of $562,895 and $781,588
in 1994 and 1993, respectively............ 25,089,704 23,247,355
Inventories................................ 5,403,560 4,560,714
Prepaid expenses........................... 2,372,108 1,086,561
Miscellaneous.............................. 1,346,037 1,476,043
------------ ------------
Total current assets................... 80,251,897 64,959,972
Other assets:
Notes receivable, less allowance for
doubtful notes of $5,931 in 1993.......... 14,484,091 21,406,772
Miscellaneous.............................. 1,305,087 1,630,849
------------ ------------
Total other assets..................... 15,789,178 23,037,621
Other revenue producing assets:
Franchise rights and service contracts, at
cost less accumulated amortization of
$19,939,686 and $17,767,049 in 1994 and
1993, respectively (Note 3)............... 87,754,481 83,770,710
Rental properties, net (Note 5)............ 2,894,628 3,241,108
Miscellaneous.............................. 22,999 39,036
------------ ------------
Total other revenue producing assets... 90,672,108 87,050,854
Property, plant and equipment, net (Note
5).......................................... 9,783,053 9,349,670
------------ ------------
$196,496,236 $184,398,117
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
E-3
<PAGE>
November 30, 1994 and 1993
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
- - -------------------------------------------------------------------------
(Restated)
Current liabilities:
Drafts and accounts payable................ $ 17,127,108 $ 16,791,824
Committed advertising...................... 1,108,279 2,092,851
Other liabilities.......................... 7,318,827 6,761,960
Income taxes payable....................... 438,753 1,017,626
Current maturities of long-term debt (Note
3)........................................ 367,462 1,913,481
------------ ------------
Total current liabilities.............. 26,360,429 28,577,742
Deferred franchise income.................... 435,983 278,917
Deferred income taxes (Note 2)............... 14,995,000 14,955,000
Long-term debt (Note 3)...................... 23,343,752 23,901,770
Contingencies and commitments (Note 4)
Stockholders' equity (Note 7):
Class A common stock, $.01 par value:
Authorized shares -- 32,000,000
Issued and outstanding shares --
14,917,219 (15,659,400 in 1993)......... 149,172 156,594
Class B common stock, $.01 par value:
Authorized shares -- 10,000,000
Issued and outstanding shares --
8,815,980 (9,029,137 in 1993)........... 88,160 90,291
Paid-in capital............................ 4,109,104 3,957,075
Retained earnings (Note 3)................. 129,232,252 114,377,927
Equity adjustment from foreign currency
translation............................... (2,217,616) (1,897,199)
------------ ------------
Total stockholders' equity............. 131,361,072 116,684,688
------------ ------------
$196,496,236 $184,398,117
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
E-4
<PAGE>
INTERNATIONAL DAIRY QUEEN, INC.
CONSOLIDATED STATEMENTS OF INCOME
Year Ended November 30, 1994, 1993 and 1992
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
1994 1993 1992
<CAPTION>
- - ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Net sales.................................. $268,804,179 $241,611,862 $228,051,236
Service fees............................... 54,170,022 51,601,113 50,626,542
Franchise sales and other fees............. 8,627,218 7,625,539 7,010,918
Real estate finance and rental income...... 8,081,030 8,988,027 9,984,184
Other...................................... 1,150,051 1,267,434 1,436,944
------------ ------------ ------------
340,832,500 311,093,975 297,109,824
Costs and expenses:
Cost of sales.............................. 242,412,898 217,154,994 204,649,409
Expenses applicable to real estate finance
and rental income......................... 7,571,984 8,441,375 9,357,056
Selling, general and administrative........ 40,494,230 37,515,701 35,472,375
------------ ------------ ------------
290,479,112 263,112,070 249,478,840
------------ ------------ ------------
50,353,388 47,981,905 47,630,984
Interest income (expense), net (Note 3)...... 1,577,511 1,425,788 (316,316)
------------ ------------ ------------
Income before income taxes................... 51,930,899 49,407,693 47,314,668
Income taxes (Note 2)........................ 20,510,000 19,520,000 18,220,000
------------ ------------ ------------
Net income................................... $ 31,420,899 $ 29,887,693 $ 29,094,668
------------ ------------ ------------
------------ ------------ ------------
Earnings per common and common equivalent
share (Notes 1 and 7)....................... $1.30 $1.19 $1.12
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes.
E-5
<PAGE>
INTERNATIONAL DAIRY QUEEN, INC.
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY
Year Ended November 30, 1994, 1993 and 1992
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common Stock Cumulative
----------------- Paid-in Retained Translation
Class A Class B Capital Earnings Adjustment
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
(Restated)
<S> <C> <C> <C> <C> <C>
Balance at November 30, 1991................. $169,157 $93,289 $4,088,861 $ 92,147,342 $ 274,426
Cumulative effect of change in accounting
for income taxes.......................... -- -- -- (9,860,000) --
Purchase and constructive retirement of
569,083 shares of Class A common stock.... (5,691) -- (91,213) (9,803,388) --
Purchase and constructive retirement of
106,888 shares of Class B common stock.... -- (1,069) (17,132) (2,007,755) --
Exercise of incentive stock options --
issued 7,619 shares of Class A common
stock..................................... 76 -- 118,842 -- --
Conversion of 46,927 shares of Class B
common stock to 46,927 shares of Class A
common stock.............................. 469 (469) -- -- --
Net income................................. -- -- -- 29,094,668 --
Translation adjustment for 1992............ -- -- -- -- (1,601,604)
-------- ------- ---------- ------------ -----------
Balance at November 30, 1992................. 164,011 91,751 4,099,358 99,570,867 (1,327,178)
Purchase and constructive retirement of
798,104 shares of Class A common stock.... (7,981) -- (127,920) (13,500,503) --
Purchase and constructive retirement of
89,614 shares of Class B common stock..... -- (896) (14,363) (1,580,130) --
Conversion of 56,381 shares of Class B
common stock to 56,381 shares of Class A
common stock.............................. 564 (564) -- -- --
Net income................................. -- -- -- 29,887,693 --
Translation adjustment for 1993............ -- -- -- -- (570,021)
-------- ------- ---------- ------------ -----------
Balance at November 30, 1993................. 156,594 90,291 3,957,075 114,377,927 (1,897,199)
Purchase and constructive retirement of
805,481 shares of Class A common stock.... (8,055) -- (133,637) (13,678,764) --
Purchase and constructive retirement of
169,773 shares of Class B common stock.... -- (1,697) (28,167) (2,887,810) --
Exercise of incentive stock options --
issued 19,916 shares of Class A common
stock..................................... 199 -- 313,833 -- --
Conversion of 43,384 shares of Class B
common stock to 43,384 shares of Class A
common stock.............................. 434 (434) -- -- --
Net income................................. -- -- -- 31,420,899 --
Translation adjustment for 1994............ -- -- -- -- (320,417)
-------- ------- ---------- ------------ -----------
Balance at November 30, 1994................. $149,172 $88,160 $4,109,104 $129,232,252 $(2,217,616)
-------- ------- ---------- ------------ -----------
-------- ------- ---------- ------------ -----------
</TABLE>
See accompanying notes.
E-6
<PAGE>
INTERNATIONAL DAIRY QUEEN, INC.
CONSOLIDATED STATEMENT OF
CASH FLOWS
Year Ended November 30, 1994, 1993 and 1992
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
1994 1993 1992
<CAPTION>
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income............................ $31,420,899 $29,887,693 $29,094,668
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization....... 4,293,917 4,086,739 4,100,201
Provision for losses on accounts and
notes receivable................... 347,771 257,112 255,883
Other............................... 2,902 (99,985) (76,301)
Changes in operating assets and
liabilities (Note 6)............... (2,304,869) 865,725 (7,168,095)
----------- ----------- -----------
Net cash provided by operating
activities............................. 33,760,620 34,997,284 26,206,356
Investing activities
Purchase of franchise rights and
service contracts.................... (3,662,463) (1,245,588) (1,092,811)
Net payments (advanced to) received
from operators, under secured loans,
for store renovations and
equipment............................ (2,046,425) (5,015,073) 4,930,243
Capital expenditures.................. (1,902,968) (8,505,523) (857,847)
Maturities of marketable securities... 9,789,490 2,184,557 --
Investments in marketable
securities........................... (6,756,192) (5,101,261) (7,072,786)
Proceeds from disposal of capital
assets............................... 12,382 444,984 15,148
Other................................. 16,039 31,197 (191,981)
----------- ----------- -----------
Net cash used in investing activities... (4,550,137) (17,206,707) (4,270,034)
Financing activities
Principal payments on long-term
debt................................. (2,103,785) (12,311,900) (11,086,279)
Purchase and retirement of common
shares............................... (16,738,130) (15,231,793) (11,926,248)
Other................................. 314,030 -- 147,425
----------- ----------- -----------
Net cash used in financing activities... (18,527,885) (27,543,693) (22,865,102)
Effect of exchange rate changes on
cash................................... (104,440) (302,216) (576,133)
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents............................ 10,578,158 (10,055,332) (1,504,913)
Cash and cash equivalents at beginning
of year................................ 21,188,062 31,243,394 32,748,307
----------- ----------- -----------
Cash and cash equivalents at end of
year................................... $31,766,220 $21,188,062 $31,243,394
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes.
E-7
<PAGE>
INTERNATIONAL DAIRY QUEEN, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
November 30, 1994, 1993 and 1992
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION POLICY:
The consolidated financial statements include the accounts of the Company and
its subsidiaries which, with the exception of Firstaff, Inc., are wholly-owned.
BUSINESS SEGMENT INFORMATION:
The Company is engaged in principally one business segment -- developing,
licensing, franchising and servicing a system of retail stores featuring over-
the-counter sales of dairy desserts, food and blended fruit drinks.
CASH EQUIVALENTS:
Short-term investments with a remaining maturity of ninety days or less at
date of purchase are considered cash equivalents.
MARKETABLE SECURITIES:
Investments with a remaining maturity of more than ninety days at the date of
purchase are classified as marketable securities. Management determines the
appropriate classification of debt securities at the time of purchase. Debt
securities are classified as held-to-maturity because the Company has the
positive intent and ability to hold such securities to maturity. Investments are
stated at amortized cost, which approximates market value. Interest on
securities is included in interest income.
DEPRECIATION AND AMORTIZATION:
Depreciation and amortization of rental properties and property, plant and
equipment are provided principally on the straight-line method over estimated
useful lives of the asset or the remaining term of the lease for leasehold
improvements.
The Company follows a policy of amortizing the cost of franchise rights and
service contracts acquired subsequent to 1970 over forty years. The cost of
acquisitions prior to 1971 (approximately $12,800,000) is not being amortized.
The Company periodically evaluates the existence of potential impairment of
franchise rights by assessing whether the carrying value of franchise rights is
fully recoverable from projected, undiscounted net cash flows from the
underlying service fees.
INVENTORIES:
Inventories consist primarily of store equipment and merchandise and are
carried at the lower of cost (first-in, first-out) or market.
FRANCHISE SALES:
The Company recognizes revenues from initial store franchise fees when the
store is opened, and from the sale of area franchise rights over the period when
services are expected to be performed. Direct costs incurred prior to store
openings are deferred until the revenue is recognized.
COMMITTED ADVERTISING:
Committed advertising represents unexpended amounts received from franchisees
to finance national and regional advertising programs.
INCOME TAXES:
The Company has not provided for income taxes on the undistributed earnings of
its Canadian subsidiaries (approximately $8,300,000 at November 30, 1994). To
the extent these earnings may be repatriated, foreign tax credits will be
available to substantially eliminate any additional U.S. income taxes which
might otherwise result from such repatriation.
On December 1, 1993, the Company adopted FASB Statement No. 109, (FAS 109)
"Accounting for Income Taxes" which requires the Company to recognize deferred
tax assets and liabilities for the expected future tax consequences of events
that have been recognized in the Company's consolidated financial statements or
tax returns. Deferred tax assets and liabilities are calculated based on the
difference between the financial statement carrying amounts and the tax basis of
assets and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse.
The adoption of FAS 109 resulted in the restatement of the Company's
previously issued consolidated financial statements, the principle effect of
which was to record a net increase in deferred taxes and a reduction of
$9,860,000 in retained earnings as of December 1, 1991. These changes related
principally to the differences in the amortization of franchise rights and
service contracts for financial statement and income tax purposes. The adoption
of FAS 109 had no impact on previously reported net income.
E-8
<PAGE>
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE:
Earnings per common share amounts are based on the adjusted weighted average
number of common and common equivalent shares outstanding during each year of
24,261,165, 25,103,918 and 26,036,321 in 1994, 1993 and 1992, respectively.
CONCENTRATIONS OF CREDIT RISK:
Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of temporary cash investments and accounts
and notes receivable.
The Company places its temporary cash investments with high credit quality
financial institutions and, by policy, limits the amount of credit exposure of
any one financial institution. Accounts receivable are generally unsecured;
however, concentrations of credit risk with respect to these receivables are
limited due to the large number of customers and their dispersion across many
different geographic areas. Notes receivable are generally secured by the
equipment purchased or the existing franchise agreement.
2.INCOME TAXES
United States income before income taxes, which includes charges for foreign
exchange losses, was: $48,062,230, $44,730,521 and $42,448,670 in 1994, 1993 and
1992, respectively. Foreign income before income taxes, which includes certain
nontax-deductible charges was: $3,868,669, $4,677,172 and $4,865,998 in 1994,
1993 and 1992, respectively.
Income taxes consist of the following (000's omitted):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Current:
U.S. federal.............................................. $15,126 $13,913 $13,074
State..................................................... 2,574 2,489 2,285
Foreign................................................... 2,703 2,807 2,682
------- ------- -------
20,403 19,209 18,041
Deferred:
U.S. federal.............................................. 144 102 165
State..................................................... 20 13 28
Foreign................................................... (57) 196 (14)
------- ------- -------
107 311 179
------- ------- -------
$20,510 $19,520 $18,220
------- ------- -------
------- ------- -------
</TABLE>
Included in foreign taxes are taxes withheld by foreign countries on dividends
and service fees received by U.S. entities.
Deferred income taxes relate principally to differences in amortization of
franchise rights and service contracts for financial statement and income tax
purposes.
The following is a reconciliation of differences between the U.S. federal
statutory income tax rate and the consolidated effective tax rate:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
U.S. federal statutory rate................................. 35.0% 34.9% 34.0%
State income taxes, net of federal effect................... 3.3 3.3 3.2
Foreign income taxes........................................ 1.0 .9 1.1
Other, net.................................................. .2 .4 .2
------ ------ ------
Consolidated effective tax rate............................. 39.5% 39.5% 38.5%
------ ------ ------
------ ------ ------
</TABLE>
The Internal Revenue Service is currently examining the Company's U.S.
consolidated federal income tax returns for the years ended November 30, 1991
through 1993. In the opinion of management, adjustments, if any, resulting from
the examinations will not have a materially adverse effect on the Company's
financial position or results of operations.
3.LONG-TERM DEBT
Long-term debt is summarized as follows (000's omitted):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
8.25% subordinated capital notes, maturing in December of
1996....................................................... $11,509 $11,509
8.45% senior notes, maturing in
October of 1997............................................ 10,000 10,000
8.03% senior notes, maturing in
February of 1994........................................... -- 1,429
6% to 12% notes payable, secured by certain franchise rights
and service contracts, maturing at various dates through
April of 2009 (current maturities -- $302 and $383 at 1994
and 1993, respectively).................................... 1,818 2,389
Other long-term debt (current maturities -- $50 and $65 at
1994 and 1993, respectively)............................... 346 411
Obligations under capital leases (current maturities -- $15
and $36 at 1994 and 1993, respectively).................... 38 77
------- -------
23,711 25,815
Less current maturities..................................... 367 1,913
------- -------
$23,344 $23,902
------- -------
------- -------
</TABLE>
The capital notes are subordinated to the senior notes, which are guaranteed
by certain of the Company's subsidiaries.
The Company's senior notes and the capital note indentures contain provisions
which, among other things, limit additional indebtedness and commitments under
lease agreements and limit the amount available for dividends or purchase of the
Company's capital stock, the most restrictive of which is that
E-9
<PAGE>
dividends are limited to 100% of net income for the fiscal year immediately
preceding the year in which any such dividend is paid.
Aggregate maturities of long-term debt for the years subsequent to November
30, 1994 are: $367,462, $11,707,979, $10,105,068, $91,729, $99,665 and
$1,339,311 in 1995, 1996, 1997, 1998, 1999 and thereafter, respectively.
Interest expense (income), net consists of interest income of $3,463,755,
$3,623,159 and $3,575,249 in 1994, 1993 and 1992, respectively, and interest
expense of $1,886,244, $2,197,371 and $3,891,565 in 1994, 1993 and 1992,
respectively.
4.LEASES
The Company and its subsidiaries have leases for retail stores, administrative
facilities and equipment. Certain of the leased properties are subleased to
franchise operators under noncancellable operating subleases, with rentals
generally equal to or greater than rentals payable on the prime leases. Most of
the leases and subleases require the lessee to pay executory costs (property
taxes, maintenance, and insurance); and many of the leases provide for one or
more renewal options. In addition, Company-owned real estate has been leased to
franchise operators under long-term leases.
Total operating lease rental expense in the statement of income, including
rentals on leases with terms of one year or less and including executory costs
when included in rent, is summarized as follows (000's omitted):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Minimum rentals............................................. $ 7,710 $ 8,926 $10,519
Contingent rentals.......................................... 413 483 557
Less sublease income:
Minimum rentals........................................... (6,114) (6,771) (7,669)
Contingent rentals........................................ (463) (576) (649)
------- ------- -------
$ 1,546 $ 2,062 $ 2,758
------- ------- -------
------- ------- -------
</TABLE>
Minimum future rental obligations, excluding executory costs included in
rentals, under operating leases at November 30, 1994 are $4,224,679, $3,412,070,
$2,804,566, $2,292,789, $1,737,960 and $5,373,843 in 1995, 1996, 1997, 1998,
1999 and thereafter, respectively.
Minimum future rental receivables under operating leases at November 30, 1994
are $4,289,636, $3,293,134, $2,740,853, $2,207,435, $1,504,777 and $5,223,857 in
1995, 1996, 1997, 1998, 1999 and thereafter, respectively.
5.RENTAL PROPERTIES AND PROPERTY, PLANT AND
EQUIPMENT
Rental properties and property, plant and equipment consist of (000's
omitted):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Rental properties, at cost:
Land...................................................... $ 446 $ 440
Buildings................................................. 1,802 2,182
Equipment................................................. 789 795
Leasehold improvements.................................... 1,215 1,459
------- -------
4,252 4,876
Less accumulated depreciation............................... 1,357 1,635
------- -------
$ 2,895 $ 3,241
------- -------
------- -------
Property, plant and equipment, at cost:
Land...................................................... $ 800 $ 800
Buildings................................................. 5,304 5,459
Equipment................................................. 12,542 11,570
Leasehold improvements.................................... 385 362
------- -------
19,031 18,191
Less accumulated depreciation............................... 9,248 8,841
------- -------
$ 9,783 $ 9,350
------- -------
------- -------
</TABLE>
6.STATEMENT OF CASH FLOWS
Changes in operating assets and liabilities included in net cash provided by
operating activities (000's omitted):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Accounts and notes receivable............................... $ 1,528 $(1,991) $(7,373)
Inventories and prepaid expenses............................ (2,547) 86 546
Drafts and accounts payable................................. 375 5 (542)
Committed advertising....................................... (970) 513 1,615
Other liabilities........................................... (440) 792 125
Income taxes payable........................................ (515) 896 (2,012)
Deferred franchise income................................... 157 (116) (188)
Deferred income taxes....................................... 107 681 661
------- ------- -------
$(2,305) $ 866 $(7,168)
------- ------- -------
------- ------- -------
</TABLE>
Supplementary disclosures to consolidated statement of cash flows:
Cash payments for income taxes, net of refunds, were $21,062,976 $18,797,712
and $19,989,926 in 1994, 1993 and 1992, respectively; in these periods interest
payments were $1,929,624, $2,545,033 and $4,052,302, respectively.
The Company incurred liabilities for the acquisition of franchise rights of
$2,862,504 and $120,000 in 1994 and 1992, respectively, and $267,693 for the
acquisition of fixed assets in 1993.
E-10
<PAGE>
7.STOCKHOLDERS' EQUITY
Class A common stock is entitled to dividends of 110% of dividends paid on
Class B common stock, other than dividends payable solely in Company stock.
Class A common stock has more limited voting rights than Class B common stock.
Generally, the holders of Class A common stock are entitled to elect 25% of the
Company's Board of Directors, but, except as otherwise required by law, shall
not be entitled to vote on any other matter. Class A common stock also has
certain liquidation preferences which, among other things, provide for a minimum
distribution to holders of Class A common stock before any distributions are
made to holders of Class B common stock. Class B common stock may be converted
into Class A common stock at the option of the holder.
In 1994, the Company purchased and constructively retired 805,481 shares of
Class A common stock at an average price of $17.16 per share and 169,773 shares
of Class B common stock at an average price of $17.19 per share. In 1993, the
Company purchased and constructively retired 798,104 shares of Class A common
stock at an average price of $17.09 per share and 89,614 shares of Class B
common stock at an average price of $17.80 per share. The number of retired
shares has been eliminated from common stock and the cost allocated between
common stock, additional paid-in capital and retained earnings.
In 1993, the Company adopted its Incentive Stock Option Plan of 1993 which
provides for the granting of options to key employees of the Company and its
subsidiaries to purchase common shares. The plan also reserves 600,000 shares of
Class A common stock for issuance thereunder. Under this plan, the option price
per share may not be less than the fair market value of a share on the date of
grant. One year after the grant, 25% of granted options become exercisable with
an additional 25% becoming exercisable each year thereafter.
Stock option activity under this plan is summarized as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES PRICE RANGE
--------- -------------
<S> <C> <C>
Outstanding at November 30, 1992............................ 548,413 $15.33-$20.25
Granted................................................... 251,300 17.50
Canceled.................................................. (28,707) $15.33-$20.25
Exercised................................................. --
---------
Outstanding at November 30, 1993............................ 771,006 $15.33-$20.25
Granted................................................... 325,540 16.00
Canceled.................................................. (38,023) $15.33-$20.25
Exercised................................................. (19,916) $15.33-$16.50
---------
Outstanding at November 30, 1994............................ 1,038,607
---------
---------
Exercisable at November 30, 1994............................ 389,900
---------
---------
</TABLE>
At November 30, 1994, shares of authorized Class A common stock were reserved
as follows:
<TABLE>
<S> <C>
Conversion of Class B common stock into Class A common
stock...................................................... 8,815,980
Exercise of Incentive Stock Option Plan options............. 1,071,134
---------
9,887,114
---------
---------
</TABLE>
8.QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly operating data for 1994 and 1993 are as follows (000's omitted,
except per share amounts):
<TABLE>
<CAPTION>
1994 1993
---------------------------------- ----------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.................................... $47,103 $76,887 $85,715 $59,099 $44,455 $68,609 $77,211 $51,337
Cost of sales................................ 42,538 69,352 77,139 53,384 39,927 61,471 69,531 46,226
------- ------- ------- ------- ------- ------- ------- -------
4,565 7,535 8,576 5,715 4,528 7,138 7,680 5,111
Service fees and other revenues.............. 14,074 19,791 21,746 16,417 13,920 18,723 21,562 15,277
------- ------- ------- ------- ------- ------- ------- -------
18,639 27,326 30,322 22,132 18,448 25,861 29,242 20,388
Other costs and expenses..................... 11,377 12,347 12,256 12,086 11,267 11,975 11,593 11,122
Net interest income.......................... 362 331 388 497 217 301 358 550
------- ------- ------- ------- ------- ------- ------- -------
Income before taxes.......................... 7,624 15,310 18,454 10,543 7,398 14,187 18,007 9,816
Income taxes................................. 3,010 6,050 7,290 4,160 2,850 5,460 7,330 3,880
------- ------- ------- ------- ------- ------- ------- -------
Net income................................... $ 4,614 $ 9,260 $11,164 $ 6,383 $ 4,548 $ 8,727 $10,677 $ 5,936
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
Earnings per share........................... $ .19 $ .38 $ .46 $ .27 $ .18 $ .35 $ .43 $ .24
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
</TABLE>
E-11
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
International Dairy Queen, Inc.
We have audited the accompanying consolidated balance sheet of International
Dairy Queen, Inc. as of November 30, 1994 and 1993, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended November 30, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of International
Dairy Queen, Inc. at November 30, 1994 and 1993, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended November 30, 1994, in conformity with generally accepted accounting
principles.
As discussed in Note 1, in 1994 the Company changed its method of accounting
for income taxes.
[SIGNATURE]
Minneapolis, Minnesota
January 12, 1995
E-12
<PAGE>
EXHIBIT 21
INTERNATIONAL DAIRY QUEEN, INC.
EXHIBIT
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
..............................................................................
JURISDICTION OF
SUBSIDIARY (1) INCORPORATION
..............................................................................
<S> <C>
American Dairy Queen Corporation............................ Delaware
Orange Julius of America.................................... California
DQF, Inc.................................................... Minnesota
Golden Skillet International, Inc........................... Minnesota
Karmelkorn Shoppes, Inc..................................... Delaware
Dairy Queen Canada, Inc. (2)(3)............................. Canada (Federal)
<FN>
- - ------------------------
(1) All subsidiaries are 100% owned by Registrant.
(2) IDQ Canada, Inc. [Canada (Federal)] is a wholly-owned subsidiary of Dairy
Queen Canada, Inc.
(3) Orange Julius Canada, Ltd. [Canada (Federal)] is a wholly-owned subsidiary
of Dairy Queen Canada, Inc.
</TABLE>
Registrant also owns 60% of the outstanding capital stock of Firstaff, Inc., a
Minnesota corporation and 15% of the outstanding capital stock of Dairy Queen
(Japan) Company, Ltd., a Japanese corporation.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of International Dairy Queen, Inc. of our report dated January 12, 1995,
included in the 1994 Annual Report to Shareholders of International Dairy Queen,
Inc.
Our audits also included the financial statement schedule of International
Dairy Queen, Inc. listed in Item 14(a). This schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration
Statements (Nos. 33-40784 and 33-52781) on Form S-8 of our report dated January
12, 1995, with respect to the consolidated financial statements incorporated
herein by reference, and our report included in the preceding paragraph with
respect to the financial statement schedule included in this Annual Report (Form
10-K) of International Dairy Queen, Inc.
[SIGNATURE]
Minneapolis, Minnesota
February 8, 1995
