PAGE 1
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 May 31, 1994
OR
___
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission file number 1-10046
TCBY ENTERPRISES, INC.
(Exact name or registrant as specified in its charter)
Delaware 71-0552115
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
425 West Capitol Avenue Little Rock, Arkansas 72201
(Address of principal executive offices) (Zip Code)
(501) 688-8229
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 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
On June 30, 1994 there were 25,516,264 shares of the registrant's common
stock outstanding.
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<TABLE>
TABLE OF CONTENTS
<CAPTION>
PART I. FINANCIAL INFORMATION Page
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets
May 31, 1994 and November 30, 1993 3
Consolidated Statements of Income
Quarter ended and six months ended
May 31, 1994 and 1993 5
Consolidated Statements of Cash Flows
Six months ended May 31, 1994 and 1993 6
Notes to Consolidated Financial Statements
May 31, 1994 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of
Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
</TABLE>
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<PAGE>
PART 1
FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS (UNAUDITED)
TCBY ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
February 28, November 30,
1994 1993
<S> <C> c>
CURRENT ASSETS
Cash and cash equivalents $ 4,058,364 $ 10,167,074
Short-term investments 10,115,033 14,826,289
Receivables:
Trade accounts 21,130,980 10,859,638
Notes 2,398,978 2,577,182
Allowance for doubtful accounts
and notes (567,356) (650,547)
22,962,602 12,786,273
Refundable income taxes - 487,394
Deferred income taxes 611,914 611,914
Inventories 13,313,813 11,476,837
Prepaid expenses and other assets 1,928,771 2,539,461
TOTAL CURRENT ASSETS 52,990,497 52,895,242
PROPERTY, PLANT AND EQUIPMENT
Land 4,127,522 3,879,175
Buildings 23,197,721 22,519,574
Furniture, vehicles and equipment 50,920,858 49,932,263
Leasehold improvements 10,796,137 11,020,257
Construction in progress 3,005,031 743,493
Allowances for depreciation
and amortization (37,241,332) (34,179,906)
54,805,937 53,914,856
OTHER ASSETS
Notes receivable, less current portion
(less allowance for doubtful notes
1994 - $1,323,832; 1993 - $1,517,943) 9,389,990 10,146,885
Intangibles (less amortization
1994 - $3,298,681; 1993 - $2,705,816) 8,982,741 7,044,549
Other 4,787,034 4,689,604
23,159,765 21,881,038
TOTAL ASSETS $130,956,199 $128,691,136
============ ============
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
TCBY ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
February 28, November 30,
1994 1993
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 1,389,297 $ 1,199,737
Accrued expenses 7,123,414 5,276,677
Income taxes payable 869,774 -
Deferred franchise fee income 183,385 265,227
Current portion of long-term debt 2,094,897 2,092,761
TOTAL CURRENT LIABILITIES 11,660,767 8,834,402
LONG-TERM DEBT, less current portion 10,436,064 11,486,736
DEFERRED INCOME TAXES 3,138,784 3,138,784
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Preferred stock, par value $.10 per share;
authorized 2,000,000 shares - -
Common stock, par value $.10 per share;
authorized 50,000,000 shares; issued-
1994 - 26,822,958; 1993 - 26,804,385 2,682,296 2,680,439
Additional paid-in capital 24,350,412 24,255,981
Retained earnnings 88,099,075 87,705,993
115,131,783 114,642,413
Less treasury stock, at cost
(1,317,069 shares in 1994 and 1993) (9,411,199) (9,411,199)
105,720,584 105,231,214
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $130,956,199 $128,691,136
============= ============
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
TCBY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
May 31, May 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Sales $39,599,802 $31,110,937 $62,187,050 $52,098,431
Cost of Sales 23,548,378 16,359,340 36,884,643 27,805,038
GROSS PROFIT 16,051,424 14,751,597 25,302,407 24,293,393
Franchising revenues:
Initial franchise and
license fees 625,888 359,500 733,700 583,500
Royalty income 3,116,570 2,770,495 4,680,093 4,363,294
Total franchising
revenues 3,742,458 3,129,995 5,413,793 4,946,794
19,793,882 17,881,592 30,716,200 29,240,187
Selling, general and
administrative expenses 14,299,199 13,774,416 26,335,085 26,344,616
5,494,683 4,107,176 4,381,115 2,895,571
Interest expense (146,294) (228,227) (309,124) (462,700)
Interest income 229,705 327,287 517,912 675,132
Other expense (115,357) (10,077) (79,742) (120,738)
(31,946) 88,983 129,046 91,694
INCOME BEFORE
INCOME TAXES 5,462,737 4,196,159 4,510,161 2,987,265
Income taxes:
Current 1,899,393 1,459,006 1,568,184 1,038,672
Deferred - - - -
1,899,393 1,459,006 1,568,184 1,038,672
NET INCOME $ 3,563,344 $ 2,737,153 $ 2,941,977 $ 1,948,593
============= ============= ============= =============
NET INCOME PER SHARE $ 0.14 $ 0.11 $ 0.12 $ 0.08
============= ============= ============= =============
Average shares
outstanding 25,542,049 25,645,955 25,492,432 25,632,787
============= ============= ============= =============
Cash dividends per share $ 0.05 $ 0.05 $ 0.10 $ 0.10
============= ============= ============= =============
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
TCBY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
May 31,
________________________________ 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 2,941,977 $ 1,948,593
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 3,863,282 3,948,798
Amortization of intangibles 512,283 264,472
Provision for doubtful accounts 562,186 587,535
Gain on disposal of property and
equipment (264,657) 125,143
Changes in operating assets and liabilities:
Accounts receivable (11,110,830) (7,868,001)
Inventories (1,836,976) (442,284)
Prepaid expenses 610,690 (785,841)
Intangibles and other assets (2,660,422) (2,867,772)
Accounts payable and accrued expenses 2,036,297 1,402,924
Deferred revenues (81,842) (135,386)
Income taxes 1,357,168 965,858
NET CASH USED IN OPERATING ACTIVITIES (4,070,844) (2,855,961)
INVESTING ACTIVITIES
Purchases of property, plant and
equipment (4,973,140) (3,779,291)
Proceeds from sale of property and
equipment 595,950 130,056
Origination of notes receivable (1,228,686) (652,888)
Principal collected on notes receivable 2,357,896 1,313,654
Purchases of short-term investments (3,267,451) (12,100,153)
Proceeds from sale of short-term
investments 7,978,707 13,051,037
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 1,463,276 (2,037,585)
FINANCING ACTIVITIES
Proceeds from sale of common stock 96,288 71,299
Dividends paid (2,548,895) (2,557,578)
Purchases of treasury stock - (107,064)
Retirement of long-term debt (1,048,535) (1,274,096)
NET CASH USED IN FINANCING ACTIVITIES (3,501,142) (3,867,439)
DECREASE IN CASH AND CASH EQUIVALENTS (6,108,710) (8,760,985)
Cash and cash equivalents at beginning
of period 10,167,074 17,055,288
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 4,058,364 $ 8,294,303
============= ============
</TABLE>
See notes to consolidated financial statements.
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TCBY ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MAY 31, 1994
NOTE A -- FINANCIAL STATEMENT PRESENTATION
The notes to the consolidated financial statements do not include all notes
which would be included in the annual report to stockholders and reference
to the footnotes contained in the annual report to stockholders for the
year ended November 30, 1993, will give additional information on such
items as significant accounting policies, long-term debt, income taxes,
lease commitments, contingencies and employee benefit plans. However, in
the opinion of management, all footnotes have been included for disclosures
required for compliance with the Securities and Exchange Commission rules,
as contained in Accounting Series Release No. 177. Also in the opinion of
management, all adjustments (consisting of normal recurring accruals) which
are necessary for a fair statement of the results for the interim periods
have been included.
NOTE B -- RECLASSIFICATION
Certain amounts in the 1993 consolidated financial statements have been
reclassified to conform to the 1994 presentation.
NOTE C -- INVENTORY
<TABLE>
<CAPTION>
May 31, November 30,
1994 1993
<S> <C> <C>
Manufacturing materials and
supplies $ 5,464,859 $ 3,775,732
Finished yogurt products and
other food products 4,560,957 3,281,552
Equipment and other products 3,287,997 4,419,553
$13,313,813 $11,476,837
=========== ===========
</TABLE>
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NOTE D -- ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
May 31, November 30,
1994 1993
<S> <C> <C>
Rent $ 914,633 $ 1,031,718
Compensation 1,821,419 1,714,336
Other 4,387,362 2,530,623
$ 7,123,414 $ 5,276,677
=========== ===========
</TABLE>
NOTE E -- CONTINGENCIES
A purported investor in a former franchisee has claimed approximately $26
million in trebled damages, plus costs and prejudgment interest, from the
former franchisee for alleged fraudulent acts. The compensatory damages
requested are $8.7 mill ion. The Company has also been named in this suit
as a defendant and has cross-claimed the former franchisee. The Company
believes the plaintiff's claims against the Company to be without merit,
and the Company is vigorously contesting the suit. Other than as set forth
above, there is no material litigation pending against the Company.
Various legal and administrative proceedings are pending against the
Company which are incidental to the business of the Company. The ultimate
legal and financial liability of the Company in connection with such
proceedings and that discussed above cannot be estimated with certainty,
but the Company believes, based upon its examination of these matters, its
experience to date, and discussions with counsel, that these proceedings
will have no material adverse effect upon the Company's financial
condition, either individually or in the aggregate; of course, any
substantial loss pursuant to any litigation might have a material adverse
impact upon results of operations in the fiscal quarter or year in which it
were to be incurred, but the Company cannot estimate the range of any
reasonable possible loss.
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ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Total sales for the second quarter of fiscal 1994 increased 27.3 percent
from sales for the second quarter of fiscal 1993. Total sales for the
first six months of fiscal 1994 increased 19.4 percent from sales for the
first six months of fiscal 1993.
The following table sets forth sales by category within the Company's
primary segments of operation:
<TABLE>
<CAPTION>
Three Months Ended May 31 Six Months Ended May 31
% of % of % of % of
1994 Sales 1993 Sales 1994 Sales 1993 Sales
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Food Products:
Yogurt sales to
Martin-Brower and
other food service
distributors $15,942 40% $15,631 50% $24,401 39% $25,038 48%
Retail sales by
Company-owned
stores 6,186 16% 7,751 25% 10,273 16% 13,118 25%
Yogurt sales to the
retail grocery
trade 11,931 30% 3,416 11% 18,379 30% 5,190 10%
34,059 86% 26,798 86% 53,053 85% 43,346 83%
Equipment:
Sales by the
Company's equip-
ment distributor 4,053 10% 2,422 8% 6,992 11% 4,245 8%
Sales of manufac-
tured specialty
vehicles 1,276 3% 1,587 5% 1,720 3% 3,893 8%
5,329 13% 4,009 13% 8,712 14% 8,138 16%
Other 212 1% 304 1% 422 1% 614 1%
Total Sales $39,600 100% $31,111 100% $62,187 100% $52,098 100%
======= ==== ======= ==== ============ ======= =====
</TABLE>
($ rounded to nearest thousand)
Sales from the Company's food products segment include (i) wholesale sales
of frozen yogurt products to The Martin-Brower Company, which distributes
yogurt and other products to TCBY locations, and to other food service
distributors, which distribute to non-traditional locations such as
airports, on-premises business cafeterias, hospitals, sporting arenas, toll
road plazas, etc., (ii) retail sales of yogurt and related food items by
Company-owned stores, and (iii) sales of "hardpack" frozen yogurt and
refrigerated "traditional style" yogurt for distribution to retail
groceries. Second quarter sales in the food products segment increased
from $26.8 million in fiscal 1993 to $34.1 million in fiscal 1994. The
food products segment represented 86 percent of the Company's total
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sales in the second quarter of fiscal 1994 and fiscal 1993. Within the
food products segment, wholesale sales of soft serve frozen yogurt mix
increased 2 percent during the second quarter of fiscal 1994 from the same
quarter in fiscal 1993. This is attributed to a greater number of
non-traditional locations open during the second quarter of fiscal 1994
compared to the same period in fiscal 1993. This increase was partially
offset by a reduction in the number of traditional "TCBYR" stores
(Company-owned and franchised stores) open during the second quarter of
fiscal 1994 along with a reduction in the average amount of yogurt
purchased by those stores. The Company expects a continuation of growth in
the number of non-traditional locations during the remainder of fiscal
1994, and the general stabilization of the combined number of franchised
and Company-owned stores.
For the first six months, sales in the food products segment increased from
$43.3 million in fiscal 1993 to $53.1 million in fiscal 1994. The food
products segment represented 85 percent of the Company's total sales in the
first six months of fiscal 1994 and 83 percent in fiscal 1993. Within the
food products segment, wholesale sales of soft serve frozen yogurt mix
decreased 2.5 percent during the first six months of fiscal 1994. This is
attributed to a reduction in the number of traditional "TCBYR" stores open
during the first six months of fiscal 1994 along with a reduction in the
average amount of yogurt purchased by those stores. This reduction was
partially offset by a greater number of non-traditional locations open
during the first six months of fiscal 1994 compared to the same period in
fiscal 1993 and the increase in sales for the second quarter of fiscal 1994
noted above.
The table below sets forth location activity for the second quarter and
first six months of fiscal 1994 and 1993.
<TABLE>
<CAPTION>
FRANCHISED COMPANY NON-TRADITIONAL
STORES STORES LOCATIONS TOTAL
1994 1993 1994 1993 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the second quarter:
Locations open at
beginning of period 1,345 1,372 119 148 1,034 421 2,498 1,941
Opened/Added 9 15 0 0 136 221 145 236
Closed (16) (14) (2) (1) (53) (11) (71) (26)
Net locations purchased
(sold) between fran-
chisees and Company 3 10 (3) (10) 0 0 0 0
Locations open at
May 31 1,341 1,383 114 137 1,117 631 2,572 2,151
================================================================
</TABLE>
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<TABLE>
<CAPTION>
FRANCHISED COMPANY NON-TRADITIONAL
STORES STORES LOCATIONS TOTAL
1994 1993 1994 1993 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the first six months:
Locations open at
beginning of period 1,364 1,401 121 147 989 292 2,474 1,840
Opened/Added 20 30 0 1 219 353 239 384
Closed (47) (58) (3) (1) (91) (14) (141) (73)
Net locations purchased
(sold) between fran-
chisees and Company 4 10 (4) (10) 0 0 0 0
Locations open at
May 31 1,341 1,383 114 137 1,117 631 2,572 2,151
================================================================
</TABLE>
Included in locations open are 140 and 125 "TCBY"R stores closed for
relocation or for the season at May 31, 1994 and May 31, 1993,
respectively.
Sales by Company-owned stores declined 20 percent during the second quarter
of fiscal 1994 as compared to the same period in fiscal 1993. Sales by
Company-owned stores declined 22 percent during the first six months of
fiscal 1994 as compared to the same period in fiscal 1993. These declines
result primarily from a reduction of Company-owned stores operated during
the periods and a decline in same store sales for Company-owned stores
described below. The Company expects the number of Company-owned stores to
stabilize during fiscal 1994. However, the Company will continue to
evaluate opportunities to refranchise stores.
Sales of yogurt to the retail grocery trade increased 249 percent during
the second quarter of fiscal 1994 as compared to the second quarter of
fiscal 1993. Sales of yogurt to the retail grocery trade increased 254
percent during the first six months of fiscal 1994 as compared to the first
six months of fiscal 1993. This increase is a result of expanded
geographic distribution of both "hardpack" frozen and "traditional style"
refrigerated yogurt products. The Company plans to continue to expand the
distribution of yogurt products in the retail grocery trade during the
remainder of fiscal 1994.
Sales from the Company's equipment segment include (i) sales from the
distribution of equipment to the food service industry and (ii) sales of
manufactured mobile kitchens and other specialty vehicles primarily to
businesses and governments. Sales in the equipment segment increased 33
percent during the second quarter of fiscal 1994 from $4.0 million in
fiscal 1993 to $5.3 million in fiscal 1994. Sales by the equipment segment
represented 13 percent of the Company's total sales during the second
quarter of fiscal 1994 and fiscal 1993. This increase in sales results
primarily from increased sales by the Company's equipment distributor due
to sales of equipment packages to international franchisees and inclusion
of a full quarter of sales for AIMCO Equipment Company, which was acquired
in April 1993.
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Sales in the equipment segment increased 7 percent for the first six months
in fiscal 1994 from $8.1 million in fiscal 1993 to $8.7 million in fiscal
1994. Sales by the equipment segment represented 14 percent of the
Company's total sales during the first six months of fiscal 1994 as
compared to 16 percent during fiscal 1993. The increase in sales results
primarily from increased sales in fiscal 1994 over the prior year by the
Company's equipment distributor due to sales of equipment packages to
international franchisees and inclusion of a full six months of sales for
AIMCO Equipment Company which was acquired in April 1993. The increase was
partially offset by the completion in the second quarter of 1993 of an $11
million contract with a foreign government that was accounted for on a
percentage-of-completion basis. The Company's equipment manufacturing
subsidiary has not entered into any additional contracts of this magnitude.
Combined same store sales (the comparison of fiscal 1994 individual
traditional "TCBYR" store sales with sales by the same stores operating
during the same period of fiscal 1993) increased 4 percent in the second
quarter of fiscal 1994. Same store sales for Company-owned stores
decreased 4 percent and franchised stores increased 5 percent in the second
quarter of fiscal 1994. Combined same store sales increased 1 percent in
the first six months of fiscal 1994. Same store sales for Company-owned
stores decreased 3 percent and franchised stores increased 2 percent in the
first six mon ths of fiscal 1994. The overall improvement in same store
sales in the quarter and for the six month period reflects the Company's
continuing efforts to increase sales through national and local media
advertising, menu extensions, store decor upgrades and relocations. Same
store sales for Company-owned stores continued to decline in the second
quarter primarily due to poor sales results in the Dallas market which
contains approximately 35% of the Company-owned stores. The decline in
sales in the Dallas market is primarily the result of a difficult
competitive environment. The Company plans to increase its local marketing
effort and update the decor and menu in several of its Dallas stores. The
restaurant industry continues to be highly competitive. The Company is
continuing its efforts to improve same store sales through a national
television advertising campaign that will run through June, menu
extensions, local media advertising, store decor upgrades and relocations.
Even with the successful implementation of these programs, same store sales
may decline and store closings may occur.
The ratio of cost of sales to sales was 59.5 percent for the second quarter
of fiscal 1994 as compared to 52.6 percent for the second quarter of fiscal
1993. The increase in the cost of sales to sales ratio is attributed
primarily to a change in sales mix and increased milk prices. The sales
mix within the food products segment changed with retail sales through
Company-ow ned stores declining while wholesale sales to the retail grocery
trade and private label customers, which are
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PAGE 13
made at a hhigher cost of sales to sales ratio, increased. The ratio of
cost of sales to sales for the food products segment and equipment segment
in the second quarter of fiscal 1994 was 56.6 percent and 80.4 percent,
respectively, compared to 48.7 percent and 81.7 percent, respectively, in
the second quarter of fiscal 1993. A major component of the Company's cost
of sales of food products is milk. Average milk prices for the
second quarter of fiscal 1994 were 14% higher than prices in the second
quarter of fiscal 1993. Average milk prices are expected to decrease in
the third quarter of fiscal 1994 with an expected increase in milk supply.
The ratio of cost of sales to sales was 59.3 percent for the first six
months of fiscal 1994 as compared to 53.4 percent for the first six months
of fiscal 1993. The ratio of cost of sales to sales for the food products
segment and equipment segment in the first six months of fiscal 1994 was
56.6 percent and 78.7 percent, respectively, compared to 48.8 percent and
81.0 percent, respectively, in the first six months of fiscal 1993.
Franchising revenues consist of initial franchise and license fees and
royalty income. In the second quarter of fiscal 1994, initial franchise
and license fees increased 74 percent and royalty income increased 12
percent from fiscal 1993. In the first six months of fiscal 1994, initial
franchise and license fees increased 26 percent and royalty income
increased 7 percent from fiscal 1993. The increase in franchise and
license fees results primarily from increased domestic and international
franchising activity. The increase in royalty income results from
increased international franchise activity and the increased number of
non-traditional locations. These increases were partially offset by a
decrease in domestic royalties as a result of the decreased yogurt sales
noted above.
Selling, general and administrative (SG&A) expenses increased 4 percent in
the second quarter of fiscal 1994 compared to the second quarter of fiscal
1993. This increase is due primarily to (i) an increase in expenses (e.g.,
hiring of additional salespersons and administrative staff and increasing
selling costs due to the increasing sales volume) incurred by the Company
in an effort to expand the geographic distribution of the Company's yogurt
products within the retail grocery trade and the continued development of
non-traditional locat ions, and (ii) an increase in expenses related to the
operation of AIMCO. The increase referred to above was partially offset by
a reduction in the number of Company-owned stores operating during the
second quarter of fiscal 1994 (see location activity schedule above) which
results in a decrease in the amount of total operating expenses within
Company-owned stores. As a percentage of combined sales and franchising
revenues, SG&A expenses were 33 percent and 40 percent for the second
quarter of fiscal 1994 and 1993, respectively. The Company plans to
continue the development of sales opportunities in non-traditional
locations and the retail grocery trade. This will result in increased
sales personnel and selling costs.
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PAGE 14
Selling, general and administrative (SG&A) expenses were even in the first
six months of fiscal 1994 compared to the first six months of fiscal 1993.
As a percentage of combined sales and franchising revenues, SG&A expenses
were 39 percent and 46 percent for the first six months of fiscal 1994 and
1993, respectively.
Interest expense decreased approximately $82,000 in the second quarter of
fiscal 1994 compared to the second quarter o f fiscal 1993. Interest
expense decreased approximately $154,000 in the first six months of fiscal
1994 compared to the same period of fiscal 1993. These decreases are due
to a reduction in the principal balances of outstanding long-term debt and
a reduction in the average interest rate paid.
Interest income decreased approximately $98,000 in the second quarter of
fiscal 1994 compared to the same period of fiscal 1993. Interest income
decreased approximately $157,000 in the first six months of fiscal 1994
compared to the same period of fiscal 1993. These decreases are due to
reductions in the outstanding balances and yields on interest earning
assets.
Income taxes as a percentage of income before income taxes was 34.8 percent
in the second quarter and first six months of fiscal 1994. This
approximates the effective rate recorded for the comparable periods in
fiscal 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically generated cash from operations sufficient to
meet its normal operating requirements. The Company's cash and short-term
investments decreased approximately $10.8 million from November 30, 1993.
This decrease resulted primarily from (i) an increase in trade accounts
receivable and other assets (i.e., slotting fees), primarily attributed to
the normal increase in these accounts in the first an d second quarters
along with expansion into the Private Label and Retail Grocery Trade
markets, (ii) purchases of property, plant and equipment, including the
purchase of the building previously being leased by AIMCO and various
construction projects; the construction of Treat Express Units, modular
units designed to enter markets which cannot support a full size store
($881,000); reconfiguration of the vault refrigeration system ($506,000)
and modifications to the novelty products equipment line at the production
facility in Dallas, Texas ($447,000); and the construction of new stores,
and (iii) cash dividends of ten cents per share or $2.5 million paid in
fiscal 1994. Although inventories also increased, the offset was an
increase in accrued expenses instead of a decrease in cash and short-term
investments.
In June 1994, the Board of Directors authorized the Executive Committee to
spend up to $7 million on capital expenditures on various projects designed
to expand the production capabilities
Sequential Page No. 14
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PAGE 15
of "hardpack" frozen yogurt products at the Company's manufacturing
facility in Dallas, Texas. Funding for the various projects may be made
f rom internal working capital or through bank financing, with a final
determination to be made at a later date. No commitments or expenditures
have been made for any of the proposed projects at this time.
e.
On May 31, 1994, working capital was $41.3 million compared to $44.1
million on November 30, 1993. The current ratio was 4.54 to 1.0 on May 31,
1994 and 5.99 to 1.0 on November 30, 1993.
The long-term debt to equity ratio was .10 to 1.0 at May 31, 1994 and .11
to 1.0 at November 30, 1993. The Company has a tangible net worth of $96.7
million at May 31, 1994.
On June 10, 1994, the Company's Board of Directors declared a five cents
per share dividend payable on July 6, 1994 to the stockholders of record on
June 21, 1994. The Company will consider adjustments to the dividend rate
after giving consideration to return to stockholders, profitability
expectations and financing needs.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There were no changes from previously reported litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The Annual Meeting of Shareholders was held April 14, 1994.
c) The only matter voted upon was the uncontested election of directors.
A total of 22,625,398 shares were present or represented at the
meeting. Abstentions and withholdings of votes constituted the
differences between the total shares voted for each director and the
total shares voting. All individuals nominated as directors of the
corporation were elected with the following number of votes:
<TABLE>
<S> <C>
Frank D. Hickingbotham 22,281,648
Herren C. Hickingbotham 22,292,536
William H. Bowen 22,298,649
Daniel R. Grant 22,297,349
F. Todd Hickingbotham 22,296,324
Don O'Neal Kirkpatrick 22,303,698
Gale Law 22,304,452
Marvin D. Loyd 22,299,224
Hugh H. Pollard 22,305,232
</TABLE>
Sequential Page No. 15
<PAGE>
PAGE 16
<TABLE>
<CAPTION>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<S> <C>
a) Exhibits
28(a) - Press release, dated April 4, 1994, "David Evans
Joins TCBY as Senior VP of Foodservice Sales; Mark Rikal
Joins TCBY as Senior VP of National Accounts"
28(b) - Press release, dated April 14, 1994, "TCBY Names Jim
Sahene President and COO Replacing Charlie Cocotas"
28(c) - Press release, dated June 10, 1994, "TCBY Declares
Cash Dividend"
28(d) - Press release, dated June 16, 1994 "TCBY Reports 51%
Increase in Net Income for the First Half of Fiscal 1994"
b) The Company did not file any reports on Form 8-K during the
three months ended May 31, 1994.
</TABLE>
Sequential Page No. 16
<PAGE>
PAGE 17
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 of the
undersigned thereunto duly authorized.
TCBY ENTERPRISES, INC.
Date: 07/12/94 /s/ Frank D. Hickingbotham
Frank D. Hickingbotham,
Chairman of the Board and
Chief Executive Officer
Date: 07/12/94 /s/ Gale Law
Gale Law,
Senior Vice President,
Chief Financial Officer
Sequential Page No. 17
<PAGE>
EXHIBIT 28(a)
PRESS RELEASE
FOR IMMEDIATE RELEASE
MONDAY
APRIL 4, 1994
CONTACT PERSON: STACY DUCKETT, DIRECTOR
CORPORATE COMMUNICATIONS
(501) 688-8229
DAVID EVANS JOINS TCBY AS SENIOR VP OF FOODSERVICE SALES
MARK RIKAL JOINS TCBY AS SENIOR VP OF NATIONAL ACCOUNTS
LITTLE ROCK, AR - April 4, 1994 - Tom Tipps, President of TCBY National
Sales announced that joining the National Sales Division of TCBY Systems,
Inc. are David Evans as Senior Vice President of Foodservice Sales and
Mark Rikal as Senior Vice President of National Accounts. TCBY National
Sales is responsible for the distribution of frozen yogurt through
non-traditional locations.
Prior to joining TCBY National Sales, Mr. Evans was Vice Preside nt of
Sales for Foodservice at Colombo Inc., a manufacturer and distributor of
frozen yogurt. Before joining Colombo, he was Manager-Business
Development for National Accounts at Ocean Spray Cranberries, Inc., where
he participated in the creation of Ocean Spray's first direct sales
department. Among his other accomplishments, Evans was responsible for
the introduction and development of Equal (the low-calorie sweetener) in
foodservice for The NutraSweet Company, formerly G. D. Searle. Mr. Evans
will be responsible for the administration and development of the
Company's foodservice sales organization.
Prior to joining TCBY National Sales, Mr. Rikal was Director of
Foodservice for Colombo Inc., a manufacturer and distributor of frozen
yogurt. Before joining Colombo, he was Vice President of Sales for the
Foodservice Division of The Dannon Company, a manufacturer of yogurt
products. Rikal also has extensive foodserivce experience through
General Mills, Inc. and Campbell Soup Company. Mr. Rikal will be
responsible for the direction and management of the Company's foodservice
national accounts sales efforts.
"Mr. Evans and Mr. Rikal bring to TCBY National Sales tremendous
experience in the foodservice industry, and will greatly enhance our
sales development in this area," said Frank D. Hickingbotham, Chairman of
the Board.
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<PAGE>
EXHIBIT 28(b)
FOR: CONTACT:
TCBY Systems, Inc. Tracy Pritts
1100 TCBY Tower Jodi Abrams
425 West Capitol Avenue (708) 291-1616
Little Rock, AR 72201
FOR RELEASE: April 14, 1994
TCBY NAMES JIM SAHENE PRESIDENT AND COO
REPLACING CHARLIE COCOTAS
LITTLE ROCK, AR--Jim Sahene has been named president and chief
operating officer of TCBY Systems, Inc., replacing the departing
President and Chief Executive Officer, Charles A. Cocotas, it was
reported today by Frank D. Hickingbotham, chairman of the board and chief
executive officer of TCBY Enterprises, Inc.
Sahene, with 14 years in the food-service industry and experience in
virtually every facet of TCBY operations since joining the company in
1986, has been executive vice president and chief operating officer of
TCBY Systems, Inc., since 1993 with responsibility for franchise and
company store operations.
Cocotas, whose management contract with TCBY ends in April, has
elected to pursue other business and personal interests. The 32-year
franchise-industry veteran, recognized as a turnaround and start-up
specialist, was retained by TCBY in 1992 with a two-year mandate to
increase store revenues, improve franchisee relations, and develop new
marketing strategies.
"Charlie has accomplished all of that and more," said Hickingbotham.
Applauding Cocotas, who will continue with TCBY as a consultant,
Hickingbotham recounted, "Charlie has made a dramatic and lasting impact
on TCBY, setting the stage for our future. He also has expanded TCBY's
market share, boosted average store sales at the unit level, implemented
effective advertising and public relations programs, and brought
franchisor-franchisee relations to a new level of solidarity and harmony.
In addition, agreements for development in foreign markets have grown by
12 additional countries since 1992."
Sequential Page No. 19
<PAGE>
SAHENE/TCBY/Page Two
Cocotas called the last two years "challenging and rewarding." He
pointed to "extraordinary and effective plans that we have already put in
place for 1994 and beyond in terms of exciting new products, dynamic
marketing concepts, and sound growth strategies both here and abroad. I
have completed my agreed upon assignment confident that TCBY is
positioned to continue moving in a positive direction, and that Jim
Sahene will skillfully propel TCBY toward continued growth and
profitability."
To that end, Sahene plans to "continue TCBY's commitment to
developing and executing programs aimed at improving sales and reducing
costs at the store level, while reinforcing the attitude of partnership
with our franchisees. For the past two years, Sahene has been the direct
liaison with the franchisee association and their board of directors."
Sahene launched his food-industry career as a restaurant owner which
he operated until 1982, when he joined Altoona, PA-based Sheetz, Inc.
Four years later, he left his job as director of merchandising for the
150 unit convenience store chain to become a store manager/field
management trainee with TCBY. Over the last eight years t he Pittsburgh
native and father of three has held the positions of division manager,
director of plans and projects, vice president of plans and projects,
assistant to the president, and senior vice president of operations of
TCBY Systems, Inc.
TCBY is the world's largest frozen yogurt chain, with nearly 2,500
outlets spanning all 50 states as well as 21 foreign countries. The
company also leads the industry in placing its branded frozen yogurt
products in such non-traditional locations as universities, office
buildings, hospitals, high schools, plant cafeterias, sporting arenas,
and nearly 300 airports.
# # # #
Sequential Page No. 20
<PAGE>
EXHIBIT 28(c)
PRESS RELEASE
FOR IMMEDIATE RELEASE
FRIDAY
JUNE 10, 1994
CONTACT PERSON: STACY DUCKETT
DIRECTOR, CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY DECLARES CASH DIVIDEND
LITTLE ROCK, AR - June 10, 1994 - TCBY ENTERPRISES, INC. (NYSE:TBY) today
announced the Board of Directors of the Company declared a $.05 per share
cash dividend. This dividend is payable on July 6, 1994 to shareholders
of record as of June 21, 1994.
TCBYR is the largest franchisor, licensor and operator of frozen yogurt
stores in the United States. The Company manufactures and sells soft
serve frozen yogurt, frozen yogurt hardpack and novelty products and
foodservice equipment.
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<PAGE>
EXHIBIT 28(d)
PRESS RELEASE
FOR IMMEDIATE RELEASE
THURSDAY
JUNE 16, 1994
CONTACT PERSON: STACY DUCKETT
DIRECTOR, CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY REPORTS 51% INCREASE IN NET INCOME
FOR THE FIRST HALF OF FISCAL 1994
LITTLE ROCK, AR - June 16, 1994 - TCBY ENTERPRISES, INC. (NYSE:TBY) today
announced net income for the six month period ended May 31, 1994,
increased 51% over the same period in the previous year. Net income for
the first six months of fiscal 1994 was $2,941,977 or $.12 per share,
compared to $1,948,593 or $.08 per share for the first six months of
fiscal 1993. Sales and franchising revenues in the first six months of
fiscal 1994 and 1993 were $67,600,843 and $57,045,225, respectively,
representing a 19% increase.
Net income for the second quarter ended May 31, 1994 increased 30% over
the same period last year. Net income for the second quarter of fiscal
1994 was $3,563,344 or $.14 per share, compared to $2,737,153 or $.11 per
share for the second quarter ended May 31, 1993. Sales and franchising
revenues for the second quarter ended May 31, 1994 and 1993 were
$43,342,260 and $34,240,932, respectively, a 27% increase.
For the second quarter of fiscal 1994, same store sales for combined
Company-owned and franchised stores increased 4% as compared to the same
period in fiscal 1993. Same store sales for franchised stores increased
5% for the second quarter over the same period of the prior year while
same store sales for the Company-owned stores decreased 4% in the second
quarter of fiscal 1994, as compared to the same period in the prior year.
Same store sales comparisons do not include sales from non-traditional
locations.
TCBY had 2,572 total locations at the conclusion of the second quarter of
fiscal 1994, compared to 2,151 locations at May 31, 1993. During the
second quarter of fiscal 1994, the TCBY system opened 145 new locations
consisting of 9 traditional or licensed stores and 136 non-traditional
locations.
2nd Quarter Earnings June 16, 1994
33
Sequential Page No. 22
<PAGE>
Frank D. Hickingbotham, Chairman of the Board and Chief Executive Officer
said, "We are pleased with these positive results in the second quarter,
and they represent the seventh consecutive quarter of earnings
improvement over comparable quarters of the previous years. During the
second quarter, the Company returned to national television, and
introduced several new products in the Company-owned and franchised
stores. The Company's expansion into the retail market continued to
increase consumer brand awareness through consumer packaged goods. The
International Division signed agreements for the development of Hong Kong
and The Philippines and now has agreements signed in 24 countries. These
positive earnings are the results of continuing attention to expense
control, marketing, product development, and distribution strategies
begun in 1993."
The Company manufactures and sells soft serve frozen yogurt, hardpack
frozen yogurt, novelty products, foodservice equipment and markets
traditional style cup yogurt. TCBY Enterprises, Inc., through a
subsidiary company, is the largest franchisor, licensor and operator of
frozen yogurt stores in the world.
TCBY Enterprises, Inc.
Selected Financial Highlights
($000, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
May 31, May 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Operating Results
Sales & Franchising Revenue $ 43,342 $ 34,241 $ 67,601 $ 57,045
Income Before Income Taxes $ 5,463 $ 4,196 $ 4,510 $ 2,987
Net Income $ 3,563 $ 2,737 $ 2,942 $ 1,949
Net Income Per Share $ .14 $ .11 $ .12 $ .08
Average Shares Outstanding 25,542 25,646 25,492 25,633
Dividends Paid Per Share $ .05 $ .05 $ .10 $ .10
May 31, November 30,
1994 1993
<S> <C> <C>
Financial Position
Current Assets $ 52,990 $ 52,895
Current Liabilities $ 11,661 $ 8,834
Property, Plant & Equipment, Net $ 54,806 $ 53,915
Total Assets $130,956 $128,691
Long-term Debt, less current portion $ 10,436 $ 11,487
Stockholders' Equity $105,721 $105,231
</TABLE>
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