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 February 24, 1995
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OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period from ___________ to ____________
Commission file number 0-6116
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INTERNATIONAL DAIRY QUEEN, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 41-0852869
- ----------------------- ----------------------
(State of Incorporation) (I.R.S. Employer
Identification Number)
7505 Metro Boulevard, Minneapolis, Minnesota 55439
- -------------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number 612/830-0200
----------------------
Neither name, address nor fiscal year has been changed since the last report.
(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
March 31, 1995: 14,501,927
Number of registrant's Class B Common Shares outstanding at
March 31, 1995: 8,642,483
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INTERNATIONAL DAIRY QUEEN, INC.
Securities and Exchange Commission Form 10-Q
for the First Quarter Ended February 24, 1995
I N D E X
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Page
Number
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PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheet
(Unaudited)
February 24, 1995 and November 30, 1994 3
Consolidated Statement of Income
(Unaudited)
Three months ended February 24, 1995
and February 25, 1994 4
Condensed Consolidated Statement of Cash Flows
(Unaudited)
Three months ended February 24, 1995
and February 25, 1994 5
Notes to Condensed Consolidated Financial
Statements (Unaudited) 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 (except Item 4) have been omitted
since such items are inapplicable or the answers are negative. 9
SIGNATURES 9
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PART I
INTERNATIONAL DAIRY QUEEN, INC.
CONSOLIDATED BALANCE SHEET
(Condensed and in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
February 24, November 30,
ASSETS 1995 1994
----------- ------------
<C> <C>
Current Assets:
Cash and cash equivalents and
marketable securities $ 30,961 $ 38,722
Receivables--net 40,342 32,408
Inventories 5,898 5,404
Other current assets 4,163 3,718
-------- --------
Total current assets 81,364 80,252
Notes receivable and other--net 16,094 15,789
Other revenue producing assets--net:
Rental properties 2,872 2,895
Franchise rights and service contracts 89,887 87,754
Miscellaneous 19 23
-------- --------
Total other revenue producing assets 92,778 90,672
Property, plant and equipment--net 10,000 9,783
-------- --------
$200,236 $196,496
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Drafts and accounts payable $ 20,000 $ 17,127
Accrued liabilities 9,247 7,758
Committed advertising 1,190 1,108
Current maturities of long-term debt 405 367
-------- --------
Total current liabilities 30,842 26,360
Deferred income 355 436
Deferred income taxes 14,995 14,995
Long-term debt 24,944 23,344
Common stock and other stockholders' equity 129,100 131,361
-------- --------
$200,236 $196,496
-------- --------
-------- --------
</TABLE>
See accompanying notes.
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INTERNATIONAL DAIRY QUEEN, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
First Quarter Ended
------------------------------
February 24, February 25,
1995 1994
------------ ------------
Operating Revenues:
<S> <C> <C>
Net sales $52,924 $47,103
Service fees 10,681 10,176
Franchise sales and other fees 1,764 1,440
Real estate finance and rental income 1,965 2,200
Other 196 258
------- -------
67,530 61,177
Operating Expenses:
Cost of sales 47,556 42,538
Expenses applicable to real estate
finance and rental income 1,856 2,081
Selling, general and administrative 10,496 9,296
------- -------
59,908 53,915
------- -------
7,622 7,262
Net interest income 498 362
------- -------
Income before income taxes 8,120 7,624
Provision for income taxes 3,210 3,010
------- -------
Net income $ 4,910 $ 4,614
------- -------
------- -------
Earnings per common share and
common equivalent share $ .21 $ .19
------- -------
Average common and common equivalent
shares outstanding 23,557 24,577
------- -------
------- -------
</TABLE>
See accompanying notes.
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INTERNATIONAL DAIRY QUEEN, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Condensed and in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
First Quarter Ended
------------------------------
February 24, February 25,
1995 1994
------------ ------------
<S> <C> <C>
Net cash provided by (used in) operating activities $1,885 $(2,071)
Cash flows from investing activities:
Net maturities in marketable securities 2,200 2,204
Net payments (advance to) received from operators
for store renovations and equipment (715) 1,507
Capital expenditures (675) (463)
Purchase of franchise rights and service contracts (1,108) (134)
Other 4 5
------- -------
Cash flows (used in) provided by investing activities (294) 3,119
Cash flows from financing activities:
Principal payments on long-term debt (52) (1,468)
Purchase and retirement of common shares (7,065) (4,175)
Other -- 19
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Cash flows used in financing activities (7,117) (5,624)
Effect of exchange rate changes on cash (35) (8)
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Net decrease in cash and cash equivalents (5,561) (4,584)
Cash and cash equivalents at beginning of year 31,766 21,188
-------
Cash and cash equivalents at end of period $26,205 $16,604
------- -------
------- -------
</TABLE>
See accompanying notes.
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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 February 24, 1995, and February 25,
1994, and results of operations and cash flows for the three-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 consoli-
dated 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 esti-
mating 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 periods ended February 24, 1995, and February 25, 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 three months ended February 24, 1995, may not be indicative of the
results for the full year.
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<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 equip-ment 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>
Converted
Total to Treat Ownership Total
11/30/94 Opened Closed Centers Changes 02/24/95
-------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
DAIRY QUEEN SYSTEM
United States
Franchised by the Company:
"Dairy Queen" stores 3,195 22 (15) 26 3,228
"Treat Center" units 104 2 -- 106
Franchised by territorial operators 1,614 9 (12) (26) 1,585
Company operated stores 1 -- (1) -- -- 0
----- --- --- -- --- -----
4,914 33 (28) 0 0 4,919
----- --- --- -- --- -----
Canada
Franchised by the Company:
"Dairy Queen" stores 432 2 (1) 433
"Treat Centers" units 20 1 -- 0 21
----- --- -- -- --- -----
452 3 (1) 0 0 454
----- --- -- -- --- -----
Other foreign 176 8 (12) 0 0 172
----- --- --- -- --- -----
Total "Dairy Queen" stores 5,542 44 (41) 0 0 5,545
----- --- --- -- --- -----
"Orange Julius" stores 454 3 (15) 0 442
"Karmelkorn" shoppes 82 -- (5) 0 77
"Golden Skillet" restaurants 21 -- -- 0 21
----- -- --- -- --- -----
Total 6,099 47 (61 ) 0 0 6,085
----- -- --- -- --- -----
</TABLE>
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<PAGE>
<PAGE>
Results of Operations:
The improvement in the Company's results of operations for the first quarter
of 1995, compared to the first quarter 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 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 three months of 1995 with the first three months of 1994.
<TABLE>
Percentage of Revenue
Three Months Ended
-------------------------- Percentage
February 24, February 25 Increase
1995 1994 (Decrease)
------------ ----------- ----------
<S> <C> <C> <C>
Operating Revenues:
Net sales 78.4 77.0 12.4
Service fees 15.8 16.6 5.0
Franchise sales & other fees 2.6 2.4 22.6
Real estate finance & rental income 2.9 3.6 (10.7)
Other .3 .4 (24.2)
----- -----
Total Revenues 100.0 100.0 10.4
----- -----
Operating Expenses:
Cost of Sales 70.4 69.5 11.8
Expenses applicable to real
estate finance & rental income 2.7 3.4 (10.8)
Selling, general & administrative 15.5 15.2 12.9
---- ----
Total Operating Expenses 88.6 88.1 11.1
----- -----
Net interest income .7 .6 37.5
Income before income taxes 12.1 12.5 6.5
Provision for income taxes 4.8 5.0 6.6
----- -----
Net income 7.3 7.5 6.4
----- -----
----- -----
</TABLE>
The increase of $5,820,790 in net sales resulted primarily from an increase of
$2,928,838 in unit sales of frozen, non-frozen foods, paper and plastics to
authorized warehouses (who in turn sell to franchisees), an increase of
$929,981 in equipment sales due primarily to a higher level of new store
development, an increase of $1,119,481 in sales of promotional items sold to
"Dairy Queen" stores, and an increase of $468,413 in permanent and temporary
placement fees by Firstaff, Inc.
Selling, general and administrative expenses increased $1,199,876 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.
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<PAGE>
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 February 24, 1995, include $30.9 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 six months of its fiscal year. The Company believes it has
sufficient capital to meet existing and presently anticipated needs.
PART II
Item 4 - Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on Wednesday, March 8,
1995, and the following resolutions were approved.
The following were elected to serve as directors of the Corporation until the
next Annual Meeting of Stockholders:
<TABLE>
<CAPTION>
To Represent Votes To Represent Votes
Class A Stockholders For Withheld Class B Stockholders For Withheld
- -------------------- --- -------- -------------------- --- --------
<S> <C> <C> <S> <C> <C>
Michael P. Sullivan 12,694,987 20,041 John Mooty 7,103,439 5,539
Frank Heit 12,694,355 20,673 Ernest Dorn, Jr. 7,103,739 5,239
Richard Giertsen 7,103,739 5,239
C. David Luther 7,103,439 5,539
Raymond Mithun 7,103,739 5,239
Jane Mooty 7,103,439 5,539
Ray Schweigert 7,103,739 5,239
</TABLE>
The Company's Stock Option Plan of 1993 was amended to increase the number of
Class A Common Stock issuable thereunder from 600,000 shares to 1,200,000
shares. 6,610,715 shares voted for, 213,174 against and 9,506 shares abstained.
The appointment of Ernst & Young LLP as the independent auditors of the Corp-
oration for the fiscal year ending November 30, 1995, was approved. 7,104,618
shares voted for, 4,060 against and 300 abstained.
No additional items requiring a vote were presented.
All other items required under Part II have been omitted since they are
inapplicable or the answers are negative.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
under-signed thereunto duly authorized.
International Dairy Queen, Inc.
-----------------------------------
(Registrant)
April 6, 1995 /s/ CHARLES W. MOOTY
- --------------- -----------------------------------
Date Charles W. Mooty
Chief Financial Officer,
Vice President and Treasurer
April 6, 1995 /s/ DAVID M. BOND
- --------------- -----------------------------------
Date David M. Bond
Secretary/Assistant Treasurer
and Controller
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> FEB-24-1995
<CASH> 26,205
<SECURITIES> 4,756
<RECEIVABLES> 41,000
<ALLOWANCES> 658
<INVENTORY> 5,898
<CURRENT-ASSETS> 81,364
<PP&E> 19,524
<DEPRECIATION> 9,524
<TOTAL-ASSETS> 200,236
<CURRENT-LIABILITIES> 31,565
<BONDS> 24,944
<COMMON> 237
0
0
<OTHER-SE> 128,863
<TOTAL-LIABILITY-AND-EQUITY> 200,236
<SALES> 52,924
<TOTAL-REVENUES> 67,530
<CGS> 47,556
<TOTAL-COSTS> 49,412
<OTHER-EXPENSES> 10,496
<LOSS-PROVISION> (23)
<INTEREST-EXPENSE> 532
<INCOME-PRETAX> 8,120
<INCOME-TAX> 3,210
<INCOME-CONTINUING> 4,910
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,910
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
