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, 1995
____________
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, 1995 there were 25,525,139 shares of the registrant's common
stock outstanding.
Sequential Page No. 1
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PART I. FINANCIAL INFORMATION Page
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets
May 31, 1995 and November 30, 1994 3
Consolidated Statements of Operations
Quarter ended and six months ended
May 31, 1995 and 1994 5
Consolidated Statements of Cash Flows
Six months ended May 31, 1995 and 1994 6
Notes to Consolidated Financial Statements
May 31, 1995 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of
Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 19
</TABLE>
Sequential Page No. 2
<PAGE>
PART 1
FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS (UNAUDITED)
TCBY ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
May 31, November 30,
1995 1994
_________________________________
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,402,201 $ 4,938,118
Short-term investments 4,539,560 15,213,179
Receivables:
Trade accounts 16,749,636 15,805,358
Notes 2,268,224 2,120,932
Allowance for doubtful accounts
and notes (441,687) (383,515)
______________ _____________
18,576,173 17,542,775
Refundable income taxes 623,603 1,501,663
Inventories 18,349,412 13,621,790
Distribution allowances 1,806,147 4,098,965
Prepaid expenses and other assets 2,369,583 2,051,808
______________ _____________
TOTAL CURRENT ASSETS 48,666,679 58,968,298
PROPERTY, PLANT, AND EQUIPMENT
Land 4,063,868 4,225,248
Buildings 23,532,064 23,583,374
Furniture, vehicles, and equipment 56,155,099 55,172,254
Leasehold improvements 11,263,127 10,986,674
Construction in progress 8,656,307 3,089,350
Allowances for depreciation
and amortization (43,274,017) (40,213,323)
______________ _____________
60,396,448 56,843,577
OTHER ASSETS
Notes receivable, less current portion
(less allowance for doubtful notes of
$1,030,601 in 1995 and $894,869 in 1994) 17,394,027 8,358,703
Intangibles (less amortization of
$3,633,081 in 1995 and $3,317,663 in 1994) 5,771,820 5,795,445
Distribution allowances, less current
portion 1,812,924 7,105,649
Other 4,273,553 5,208,415
______________ _____________
29,252,324 26,468,212
______________ _____________
TOTAL ASSETS $138,315,451 $142,280,087
============= =============
</TABLE>
See notes to consolidated financial statements.
Sequential Page No. 3
<PAGE>
TCBY ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
May 31, November 30,
1995 1994
________________________________
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 5,126,470 $ 2,890,869
Accrued expenses 4,027,508 5,742,510
Deferred income taxes payable 751,859 751,859
Current portion of long-term debt 3,159,555 3,072,756
_____________ _____________
TOTAL CURRENT LIABILITIES 13,065,392 12,457,994
LONG-TERM DEBT, less current portion 14,597,368 15,909,857
DEFERRED INCOME TAXES 5,638,287 5,638,287
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
26,912,208 shares in 1995 and
26,911,333 shares in 1994 2,691,221 2,691,133
Additional paid-in capital 24,844,312 24,840,431
Retained earnings 87,214,758 90,153,584
_____________ _____________
114,750,291 117,685,148
Less treasury stock, at cost
(1,387,069 shares in 1995
and 1,317,069 in 1994) (9,735,887) (9,411,199)
_____________ _____________
TOTAL STOCKHOLDERS' EQUITY 105,014,404 108,273,949
_____________ _____________
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $138,315,451 $142,280,087
============= =============
</TABLE>
See notes to consolidated financial statements.
Sequential Page No. 4
<PAGE>
TCBY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
May 31, May 31,
1995 1994 1995 1994
________________________________________________________________
<S> <C> <C> <C> <C>
Sales $29,558,113 $39,599,802 $ 55,594,188 $ 62,187,050
Cost of sales 16,200,508 23,548,378 32,026,842 36,884,643
____________ ____________ ____________ _____________
GROSS PROFIT 13,357,605 16,051,424 23,567,346 25,302,407
Franchising revenues:
Initial franchise and
license fees 419,000 625,888 614,900 733,700
Royalty income 2,800,663 3,116,570 4,521,447 4,680,093
____________ ____________ ____________ _____________
Total franchising
revenues 3,219,663 3,742,458 5,136,347 5,413,793
____________ ____________ ____________ _____________
16,577,268 19,793,882 28,703,693 30,716,200
Selling, general and
administrative expenses 15,262,013 14,299,199 31,727,492 26,335,085
____________ ____________ ____________ _____________
1,315,255 5,494,683 (3,023,799) 4,381,115
Other income (expense):
Interest expense (225,540) (146,294) (523,991) (309,124)
Interest income 228,944 229,705 503,384 517,912
Other income (expense) 2,439,790 (115,357) 2,465,234 (79,742)
____________ ____________ ____________ _____________
2,443,194 (31,946) 2,444,627 129,046
____________ ____________ ____________ _____________
INCOME (LOSS) BEFORE
INCOME TAXES 3,758,449 5,462,737 (579,172) 4,510,161
Income tax expense
(benefit) 1,318,351 1,899,393 (199,816) 1,568,184
____________ ____________ ____________ _____________
NET INCOME (LOSS) $ 2,440,098 $ 3,563,344 $ (379,356) $ 2,941,977
============ ============ ============= =============
Net income (loss)
per share $ 0.10 $ 0.14 $ (0.01) $ 0.12
============ ============ ============= =============
Average shares
outstanding 25,556,636 25,495,360 25,575,922 25,492,432
============ ============ ============= =============
Cash dividends paid
per share $ 0.05 $ 0.05 $ 0.10 $ 0.10
============ ============ ============= =============
</TABLE>
See notes to consolidated financial statements.
Sequential Page No. 5
<PAGE>
TCBY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
May 31,
1995 1994
________________________________ <S>
<C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (379,356) $ 2,941,977
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 5,784,228 3,863,282
Amortization of intangibles 315,418 512,283
Provision for doubtful accounts and notes 609,522 562,186
Loss (gain) on sales of property
and equipment 31,928 (264,657)
Gain on sale of product line (2,370,046) -
Changes in operating assets and liabilities:
Receivables (1,097,172) (11,110,830)
Inventories (4,979,306) (1,836,976)
Prepaid expenses (317,775) 610,690
Distribution allowances (415,234) (2,185,402)
Intangibles and other assets 693,099 (475,020)
Accounts payable and accrued expenses (2,541,384) 1,954,455
Income taxes 878,060 1,357,168
_____________ _____________
NET CASH USED IN OPERATING ACTIVITIES (3,788,018) (4,070,844)
INVESTING ACTIVITIES
Purchases of property, plant, and equipment (7,946,386) (4,973,140)
Proceeds from sales of property and equipment 417,569 595,950
Origination of notes receivable (275,968) (1,228,686)
Principal collected on notes receivable 1,289,145 2,357,896
Purchases of short-term investments (3,118,602) (3,267,451)
Proceeds from maturity of short-term
investments 13,792,222 7,978,707
Proceeds from sale of product line 1,200,000 -
_____________ _____________
NET CASH PROVIDED BY INVESTING ACTIVITIES 5,357,980 1,463,276
FINANCING ACTIVITIES
Proceeds from sale of common stock 3,969 96,288
Dividends paid (2,559,470) (2,548,895)
Purchases of treasury stock (324,688) -
Principal payments of long-term debt (1,225,690) (1,048,535)
_____________ _____________
NET CASH USED IN FINANCING ACTIVITIES (4,105,879) (3,501,142)
_____________ _____________
DECREASE IN CASH AND CASH EQUIVALENTS (2,535,917) (6,108,710)
Cash and cash equivalents at beginning
of period 4,938,118 10,167,074
_____________ _____________
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 2,402,201 $ 4,058,364
============= =============
</TABLE>
See notes to consolidated financial statements.
Sequential Page No. 6
<PAGE>
TCBY ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MAY 31, 1995
NOTE A -- FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three- and six-month periods ended May 31, 1995 are not
necessarily indicative of the results that may be expected for the year
ended November 30, 1995. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended November 30, 1994.
NOTE B -- INVENTORIES
<TABLE>
<CAPTION>
May 31, November 30,
1995 1994
___________ ___________
<S> <C> <C>
Manufacturing materials and
supplies $ 4,756,452 $ 4,417,832
Finished yogurt and other
food products 7,918,782 4,162,242
Equipment and other products 5,674,178 5,041,716
___________ ___________
$18,349,412 $13,621,790
=========== ===========
</TABLE>
Sequential Page No. 7
<PAGE>
NOTE C -- ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
May 31, November 30,
1995 1994
___________ ____________
<S> <C> <C>
Rent $ 682,266 $ 799,979
Compensation 1,646,439 2,411,903
Other 1,698,803 2,530,628
___________ ____________
Total accrued expenses $ 4,027,508 $ 5,742,510
=========== ===========
</TABLE>
NOTE D -- 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 million. The Company has also been named in this suit
as a defendant. 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 its discussions
with legal counsel, that resolution of these proceedings will have no
material adverse effect upon the Company's financial condition, either
individually or in the aggre gate; 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 reasonably possible loss.
NOTE E -- DISPOSITION
In April 1995, the Company sold the rights for the exclusive manufacturing
and distribution of the "TCBY" refrigerated yogurt product line throughout
the United States to Mid-America Dairymen, Inc., who co-packed the products
for the Company. The product line currently consists of low fat and
nonfat/no sugar added varieties of refrigerated yogurt, and the "TCBY"
Sequential Page No. 8
<PAGE>
Twosome product - refrigerated yogurt and topping, side-by-side. TCBY
sales of these products were approximately $23 million and $5.3 million for
fiscal 1994 and the first quarter of fiscal 1995, respectively.
Under the terms of the 15 year agreement, Mid-America Dairymen plans to
expand the distribution of these products, as well as develop additional
refrigerated dairy items under the "TCBY" brand. Mid-America currently
manufactures and distributes over 2,000 products nationwide. TCBY will
continue to m anufacture and distribute "TCBY" brand hardpack frozen yogurt
products through the retail grocery trade.
The sale of the product line resulted in a net income of approximately $1.6
million, or $.06 per share, for TCBY in the second quarter. Under the
terms of the agreement, inventories and distribution allowances related to
the "TCBY" refrigerated yogurt product line were transferred to
Mid-America. The Company received cash proceeds of $1,200,000 upon closing
and a note receivable of $10.6 million as consideration in the transaction.
Sequential Page No. 9
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company's total sales for the second quarter of fiscal 1995 decreased
25.4 percent from sales for the second quarter of fiscal 1994. Total sales
for the first six months of fiscal 1995 decreased 10.6 percent from sales
for the first six months of fiscal 1994.
The Company's operations were primarily in two segments: food products and
equipment. The following table sets forth sales by category within the
Company's primary segments of operation (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended May 31 Six Months Ended May 31
1995 1994 1995 1994
Sales % Sales % Sales % Sales %
_______ ____ _______ ____ _______ ____ _______ ____
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Food Products:
Yogurt sales to
ProSource
Distribution
Services and
other foodservice
distributors $14,161 48% $15,942 40% $23,866 43% $24,401 39%
Yogurt sales to the
retail grocery
trade 5,941 20% 11,931 30% 14,654 26% 18,379 30%
Retail sales by
Company-owned
stores 5,195 18% 6,186 16% 8,835 16% 10,273 16%
_______ ____ _______ ____ _______ ____ _______ ____
25,297 86% 34,059 86% 47,355 85% 53,053 85%
Equipment:
Sales by the
Company's equip-
ment distributor 2,964 10% 4,053 10% 5,520 10% 6,992 11%
Sales of manufac-
tured specialty
vehicles 1,030 3% 1,276 3% 2,216 4% 1,720 3%
_______ ____ _______ ____ _______ ____ _______ ____
3,994 13% 5,329 13% 7,736 14% 8,712 14%
Other 267 1% 212 1% 503 1% 422 1%
_______ ____ _______ ____ _______ ____ _______ ____
Total Sales $29,558 100% $39,600 100% $55,594 100% $62,187 100%
======= ==== ======= ==== ======= ==== ======= ====
</TABLE>
Sales from the Company's food products segment include (i) wholesale sales
of frozen yogurt products to ProSource Distribution Services (which
acquired a portion of the distribution business of The Martin-Brower
Company) and to other foodservice distributors, which distribute yogurt and
other products to TCBY stores and non-traditional locations such as
airports, on-premises business cafeterias, hospitals, sporting arenas, toll
road plazas, etc., (ii) sales of hardpack
Sequential Page No. 10
<PAGE>
frozen yogurt and frozen novelties for distribution to the retail grocery
trade, and (iii) retail sales of yogurt and related food items by
Company-owned stores. Second quarter sales in the food products segment
decreased from $34.1 million in fiscal 1994 to $25.3 million in fiscal
1995. For the first six months, sales in the food products segment
decreased from $53.1 million in fiscal 1994 to $47.4 million in fiscal
1995.
For the second quarter of fiscal 1995, wholesale sales of soft serve frozen
yogurt mix decreased 11 percent. This is attributed to a reduction in the
number of domestic traditional "TCBY" stores (Company-owned and franchised
stores) in operation during the second quarter of fiscal 1995 compared to
the same period in fiscal 1994 and same store sales declines in traditional
"TCBY" stores. These reductions were partially offset by increased
purchases of frozen yogurt mix by non-traditional locations.
For the first six months of fiscal 1995, wholesale sales of soft serve
frozen yogurt mix decreased 2 percent. This is primarily attributed to a
reduction in the number of domestic traditional "TCBY" stores in operation
during the first six months of fiscal 1995 compared to the same period in
fiscal 1994. This reduction was partially offset by increased purchases of
frozen yogurt mix by non-traditional locations during the first six months
of fiscal 1995 compared to the same period in fiscal 1994.
The table below sets forth location activity for the second quarter and
first six months of fiscal 1995 and 1994.
<TABLE>
<CAPTION>
NON-
FRANCHISED COMPANY INTERNATIONAL TRADITIONAL TOTAL
STORES STORES LOCATIONS LOCATIONS LOCATIONS
1995 1994 1995 1994 1995 1994 1995 1994 1995 1994
____________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the second quarter:
Locations open at
beginning of period 1,239 1,273 88 119 151 72 1,330 1,034 2,808 2,498
Opened 7 8 0 0 15 1 72 136 94 145
Closed (16) (16) 0 (2) 0 0 (121) (53) (137) (71)
Net locations purchased
(sold) between fran-
chisees and Company 1 3 (1) (3) 0 0 0 0 0 0
____________________________________________________________________
Locations open at
May 31 1,231 1,268 87 114 166 73 1,281 1,117 2,765 2,572
====================================================================
</TABLE>
Sequential Page No. 11
<PAGE>
<TABLE>
<CAPTION>
NON-
FRANCHISED COMPANY INTERNATIONAL TRADITIONAL TOTAL
STORES STORES LOCATIONS LOCATIONS LOCATIONS
1995 1994 1995 1994 1995 1994 1995 1994 1995 1994
____________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the first six months:
Locations open at
beginning of period 1,245 1,298 96 121 141 66 1,319 989 2,801 2,474
Opened 17 13 0 0 25 7 118 219 160 239
Closed (32) (47) (8) (3) 0 0 (156) (91) (196) (141)
Net locations purchased
(sold) between fran-
chisees and Company 1 4 (1) (4) 0 0 0 0 0 0
____________________________________________________________________
Locations open at
May 31 1,231 1,268 87 114 166 73 1,281 1,117 2,765 2,572
====================================================================
</TABLE>
Included in locations open are 127 and 140 "TCBY" stores closed for
relocation or for the season at May 31, 1995 and May 31, 1994,
respectively. During the first six months of 1995 the Company closed 156
non-traditional locations. These locations generally purchased low volumes
of yogurt from the Company. The Company expects that there may be
additional closings of low volume non-traditional accounts. During the
second quarter the Company learned that its joint venture partners were not
successful in retaining all TCBY locations at the Dallas/Ft. Worth and
Atlanta airports where the foodservice contracts were up for bid, thus,
closings in these airports will occur in late 1995. The loss of frozen
yogurt sales in these airports is not known at this time, however, these
airports have historically experienced higher yogurt sales compared to
other non-traditional locations.
Sales of yogurt to the retail grocery trade decreased 50 percent during the
second quarter and 20 percent during the first six months of fiscal 1995
as compared to the same periods in fiscal 1994. These decreases are a
result of the sale of the refrigerated yogurt product line. In April 1995,
the Company sold the rights for exclusive manufacturing and distribution of
the "TCBY" refrigerated yogurt products throughout the United States to
Mid-America Dairymen, Inc., who co-packed these products for the Company.
The sale resulted in net income of approximately $1.6 million in the second
quarter. As the Company's sales of refrigerated yogurt products totaled
approximately $8.7 million in the first six months of fiscal 1994, and
$23.0 million in fiscal 1994, the sale of this product line will result in
lower sales to the retail grocery trade for the remainder of 1995 compared
to fiscal 1994. The Company will continue the distribution of frozen
yogurt products in the retail grocery trade primarily in existing markets
during the remainder of 1995. In addition, second quarter sales were
impacted by a delay in sales of frozen products to private label customers
in part due to a delay in receipt of packaging materials from the customer.
Sequential Page No. 12
<PAGE>
Sales by Company-owned stores declined 16 percent and 14 percent during the
second quarter and first six months of fiscal 1995, respectively, as
compared to the same periods in fiscal 1994. These declines result from a
reduction in the number of Company-owned stores operated during the periods
and a decline in same store sales for Company-owned stores described below.
The Company currently operates 87 units; however, the Company will continue
to evaluate opportunities to refranchise stores or close stores when
necessary.
Combined same store sales (the comparison of fiscal 1995 individual
traditional "TCBY" store sales with sales by the same stores operating
during the same period of fiscal 1994) decreased 4.3 percent in the second
quarter of fiscal 1995. Combined same store sales decreased .4 percent in
the first six months of fiscal 1995. The decrease in same store sales in
the quarter and relatively flat sales for the six month period reflects
soft sales during late April and May. 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 which
began in April and will run through July, menu extensions, local media
advertising, store decor upgrades and relocations. The efforts to improve
same store sales include the Company's new "TCBY" Treats concept. The
"TCBY" Treats concept features "TCBY" soft serve frozen yogurt, but adds
"TCBY" hand-dipped frozen yogurt, hand-dipped premium ice cream, Paradise
Ice shaved ice, frozen custard, and the "TCBY" bakery items. As of May 31,
1995, 291 stores have converted and 148 were in the process of converting
to the new concept. Even with the successful implementation of these
programs, same store sales may decline and store closings may continue.
Sales in the equipment segment decreased 25 percent during the second
quarter of fiscal 1995 from $5.3 million in fiscal 1994 to $4.0 million in
fiscal 1995. The decrease in sales by the Company's equipment manufacturer
in the second quarter is due to decreased orders for specialty vehicles.
The decrease in sales by the Company's equipment distributor for the
quarter is due primarily to fewer sales of equipment packages to
international franchisees in fiscal 1995 compared to the same period in
fiscal 1994.
Sales in the equipment segment decreased 11 percent for the first six
months in fiscal 1995 from $8.7 million in fiscal 1994 to $7.7 million in
fiscal 1995. The increases in sales by the Company's equipment
manufacturer is primarily due to increased orders for specialty vehicles
completed in the first quarter of fiscal year 1995. This increase was
offset by decreases in sales by the Company's equipment distributor due
primarily to fewer sales of equipment packages to international franchisees
in the first six months of fiscal 1995 compared to the same period in
fiscal 1994.
Sequential Page No. 13
<PAGE>
The ratio of cost of sales to sales was 54.8 percent for the second quarter
of fiscal 1995 as compared to 59.5 percent for the second quarter of fiscal
1994. The ratio of cost of sales to sales for the food products segment
and equipment segment in the second quarter of fiscal 1995 was 51.2 percent
and 81.6 percent, respectively, compared to 56.6 percent and 80.4 percent,
respectively, in the second quarter of fiscal 1994.
The decrease in the overall cost of sales to sales ratio for the second
quarter is attributed primarily to a change in sales mix within the food
products segment from the prior year. Wholesale sales to the retail
grocery trade and private label customers, which have a higher cost of
sales to sales ratio, were a smaller percentage of total food products
sales in fiscal 1995 compared to the prior year due primarily to the sale
of the refrigerated yogurt product line and decreased sales to private
label customers. A major component of the Company's cost of sales of food
products is the cost of milk. Milk pricing is regulated by the USDA which
sets pricing on a monthly basis. Milk prices decreased during the second
quarter of 1995 compared to the same period in fiscal 1994, but are
expected to increase in the third quarter to levels comparable to the third
quarter of 1994. The Company in the past has not adjusted its selling
price to reflect fluctuations in milk prices. The Company has experienced
increases in other components of cost of sales, such as product packaging
costs. As a result of these increased product packaging costs, the Company
instituted a price increase of approximately one percent on April 15, 1995.
The cost of sales to sales ratio for the equipment segment increased due to
an increase in sales of equipment with lower gross profit margins.
The ratio of cost of sales to sales was 57.6 percent for the first six
months of fiscal 1995 as compared to 59.3 percent for the first six months
of fiscal 1994. The ratio of cost of sales to sales for the food products
segment and eq uipment segment in the first six months of fiscal 1995 was
54.6 percent and 79.5 percent, respectively, compared to 56.6 percent and
78.7 percent, respectively, in the first six months of fiscal 1994. The
changes for the six month period are attributed to the same factors as
those discussed above for the second quarter.
Franchising revenues consist of initial franchise and license fees and
royalty income. In the second quarter of fiscal 1995, initial franchise
and license fees decreased 33 percent and royalty income decreased 10
percent from fiscal 1994. In the first six months of fiscal 1995, initial
franchise and license fees decreased 16 percent and royalty income
decreased 3 percent from fiscal 1994. The decrease in franchise and
license fees results primarily from decreased initial international
franchise fees. The decrease in royalty income results from decreased
international royalties as a result of large purchases in fiscal 1994
related to the start-up of a production facility in China and a decrease in
domestic royalties as a result of the decreased yogurt sales noted above
Sequential Page No. 14
<PAGE>
which was partially offset by the increased sales to non-traditional
locations.
Selling, general and administrative ( SG&A) expenses increased 7 percent in
the second quarter of fiscal 1995 compared to the second quarter of fiscal
1994. This increase is due primarily to an increase in selling costs, such
as consumer marketing expenses, trade allowances, and distribution
allowances, associated with the sale of hardpack frozen yogurt products
within the retail grocery trade. The Company continues to invest
significantly in selling and marketing expenses associated with its line of
hardpack frozen yogurt products. As the retail grocery trade continues to
be very competitive, annual SG&A expenses as a percentage of combined sales
and franchising revenues may remain at the current level. As a percentage
of combined sales and franchising revenues, SG&A expenses were 47 percent
and 33 percent for the second quarter of fiscal 1995 and 1994,
respectively.
SG&A expenses increased 20 percent in the first six months of fiscal 1995
compared to the first six months of fiscal 1994. As a percentage of
combined sales and franchising revenues, SG&A expenses were 52 percent and
39 percent for the first six months of fiscal 1995 and 1994, respectively.
The increase for the first six months are attributed to the same factors as
those discussed above for the second quarter.
Interest expense increased approximately $79,000 and $215,000 in the second
quarter and first six months of fiscal 1995, respectively, compared to the
same periods of fiscal 1994. These increases are due to an additional $7.5
million borrowing in November 1994, related to the expansion of the
Company's yogurt manufacturing facility, and a slight increase in the
average interest rate paid.
Income taxes as a percentage of income before income taxes was 35.1 percent
in the second quarter and 34.5 percent for the first six months of fiscal
1995. This compares to an effective rate of 33.3 percent for the fiscal
year ended November 30, 1994. The change in the effective tax rate is due
to a higher expected effective tax rate for fiscal 1995.
Sequential Page No. 15
<PAGE>
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 $13.2 million in the first six months
of fiscal 1995. This decrease resulted primarily from (i) normal
seasonality in operating accounts combined with the net loss for the first
six months, (ii) purchases of property, plant, and equipment primarily
related to the expansion of the Company's yogurt manufacturing facility,
and (iii) cash dividends paid. The Company's foreseeable cash needs for
operations and capital expenditures are expected to be met through cash
flows from operations; however, the Company has available a $5 million
unsecured credit line to meet seasonal cash needs.
On May 31, 1995, working capital was $35.6 million compared to $46.5
million on November 30, 1994. The current ratio was 3.7 to 1.0 on May 31,
1995 and 4.7 to 1.0 on November 30, 1994. The long-term debt to equity
ratio was .14 to 1.0 at May 31, 1995 and .15 to 1.0 at November 30, 1994.
On June 16, 1995, the Company's Board of Directors declared a five cents
per share dividend payable on July 14, 1995 to stockholders of record on
June 30, 1995. The Company will consider adjustments to the dividend rate
after giving consideration to return to stockholders, profitability
expectations and financing needs.
Sequential Page No. 16
<PAGE>
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 12,
1995.
c) A total of 22,738,892 shares were present or represented
at the meeting. The first matter voted upon was the
uncontested election of directors. 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:
Frank D. Hickingbotham 22,418,019
Herren C. Hickingbotham 22,398,609
William H. Bowen 22,370,310
Daniel R. Grant 22,372,913
F. Todd Hickingbotham 22,401,918
Don O'Neal Kirkpatrick 22,388,370
Gale Law 22,412,890
Marvin D. Loyd 22,381,381
Hugh H. Pollard 22,420,003
The second matter voted upon was a request to amend the
1992 Employee Stock Option Plan of TCBY Enterprises,
Inc. (the "Plan") which would increase the number of
shares available under the Plan by 500,000 shares. A
total of 21,517,244 shares voted "for" the amendment
and 1,139,219 shares voted "against" the amendment.
Abstentions and withholdings of votes constituted the
differences between the total shares voted and the
total shares voting.
ITEM 5: OTHER INFORMATION
In June 1995, the Company engaged the investment banking firm of Stephens
Inc. to explore strategic alternatives for the Company with the intent of
maximizing shareholder value. No assurances can be given that this
initiative will result in any material corporate development.
<TABLE>
<CAPTION>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
<S> <C>
27 - Article 5, Financial Data Schedule for
the Second Quarter Fiscal 1995 10-Q
99(a) - Press release, dated April 27, 1995,
"TCBY Rolls out Strongest National
Television Campaign in its History"
Sequential Page No. 17
<PAGE>
99(b) - Press release, dated May 1, 1995,
"TCBY International Licenses
Development in Portugal"
99(c) - Press release, dated May 17, 1995,
"Amos Hall Named Senior Vice President
of TCBY Systems, Inc."
99(d) - Press release, dated June 21, 1995,
"TCBY Enterprises, Inc. Announces
Second Quarter and Mid-Year Results;
Board of Directors Declares Dividend"
</TABLE>
b) The Company filed a Current Report on Form 8-K,
dated March 24, 1995 announcing the sale of
rights for the exclusive manufacturing and
distribution of the "TCBY" refrigerated yogurt
products division throughout the United States.
Sequential Page No. 18
<PAGE>
__________ SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TCBY ENTERPRISES, INC.
Date: 07/12/95 /s/ Frank D. Hickingbotham
__________________________
Frank D. Hickingbotham,
Chairman of the Board and
Chief Executive Officer
Date: 07/12/95 /s/ Gale Law
__________________________
Gale Law,
Senior Vice President,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
EXHIBIT 27
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF MAY 31, 1995 AND THE CONSOLIDATED
STATEMENT OF INCOME FOR THE QUARTER ENDED MAY 31, 1995 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> MAY-31-1995
<CASH> 2,402,201
<SECURITIES> 4,539,560
<RECEIVABLES> 19,017,860
<ALLOWANCES> 441,687
<INVENTORY> 18,349,412
<CURRENT-ASSETS> 48,666,679
<PP&E> 103,670,465
<DEPRECIATION> 43,274,017
<TOTAL-ASSETS> 138,315,451
<CURRENT-LIABILITIES> 13,065,392
<BONDS> 14,597,368
<COMMON> 2,691,221
0
0
<OTHER-SE> 102,323,183
<TOTAL-LIABILITY-AND-EQUITY> 138,315,451
<SALES> 29,558,113
<TOTAL-REVENUES> 32,777,776
<CGS> 16,200,508
<TOTAL-COSTS> 16,200,508
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 225,540
<INCOME-PRETAX> 3,758,449
<INCOME-TAX> 1,318,351
<INCOME-CONTINUING> 2,440,098
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,440,098
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
Exhibit 99(a)
PRESS RELEASE
FOR IMMEDIATE RELEASE
THURSDAY
APRIL 27, 1995
CONTACT PERSON: STACY DUCKETT
CORPORATE COMMUNICATIONS
501-688-8229
TCBY ROLLS OUT STRONGEST NATIONAL TELEVISION CAMPAIGN
IN ITS HISTORY
LITTLE ROCK, AR - THURSDAY (APRIL 27, 1995) - TCBY SYSTEMS, INC.,
(NYSE:TBY) has launched its 1995 national television campaign this week.
The $5.6 million campaign is the strongest in Company history. The spots
began running April 24 and run into the summer on network and major cable
broadcasts.
The 1995 campaign is com prised of three spots, all focusing on "TCBY"
yogurt products and using musical parodies of favorite songs. The
Company's signature Waffle Cone will be promoted, as will parfaits and
"TCBY" sorbet products. The musical parodies are of "The Hustle", "It's My
Party" and "Day-O". The television campaign will generate over 890 million
consumer impressions. Networks purchased include ABC, NBC, CBS, CNN,
Discovery, Arts & Entertainment, Lifetime and Nickelodeon.
"I'm highly optimistic about our ability to continue our record of sales
growth. For this year we're using product-based promotional spots to
further enhance "TCBY" brand awareness, build traffic and increase sales,"
said Dan Charleton, Sr. Vice President of Marketing.
In addition to the television campaign, the Company will feature other
products and promotions through free-standing inserts that began in April.
TCBY will also promote its packaged frozen yogurt products through
free-standing inserts throughout the year.
Stone & Ward Advertising, Marketing and Public Relations of Little Rock
developed and launched the campaign. The commercials were filmed by
Director David Deahl of Big Deahl in Chicago. Editing was completed by
Filmworkers Club of Chicago, and the music was produced and mixed by
Patterson, Walz and Fox in Los Angeles. The media buy was managed by
International Communications Group, Inc. of Los Angeles.
Sequential Page No. 21
<PAGE>
"We're pleased with the execution of the spots. They have strong product
visuals with people enjoying "TCBY"R products. Familiar tunes were added
to bring instant recognition and recall," said Larry Stone, Executive
Creative Director and Chief Executive Officer at Stone & Ward.
TCBY Enterprises, Inc., through subsidiary companies, manufactures and
sells soft serve frozen yogurt, hardpack frozen yogurt, novelty products,
and custom foodservice vehicles, and markets foodservice equipment. The
Company is the largest franchisor, licensor and operator of frozen yogurt
stores in the world.
-30-
Sequential Page No. 22
EXHIBIT 99(b)
PRESS RELEASE
FOR IMMEDIATE RELEASE
MONDAY
MAY 1, 1995
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY INTERNATIONAL LICENSES DEVELOPMENT IN PORTUGAL
First Development in Europe for the Company
LITTLE ROCK, AR - MONDAY (MAY 1, 1995) - TCBY ENTERPRISES, INC.,
(NYSE:TBY) TCBY International has awarded local development rights for
"TCBY" products in Portugal to Companhia de Gelados.
Companhia de Gelados' licensing agreement calls for the opening of 10
"TCBY" frozen yogurt stores in Portugal during the next five years in
addition to implementing wholesale distribution for the "TCBY" hardpack
frozen yogurt product line to supermarkets and other foodservice outlets.
"We are very excit ed about the opportunity to market "TCBY" yogurt
products in Portugal. Companhia de Gelados will do an excellent job of
introducing our products to local consumers. This will be the Company's
first venture into the European market, and we are looking forward to
further expansion throughout Europe." said Hartsell Wingfield, President
TCBY International Division.
TCBY Enterprises, Inc., through subsidiary companies, manufactures and
sells soft serve frozen yogurt, hardpack frozen yogurt, novelty products
and custom foodservice vehicles, and markets refrigerated yogurt and
foodservice equipment. The Company is the largest franchisor, licensor
and operator of frozen yogurt stores in the world.
-30-
Sequential Page No. 23
EXHIBIT 99(c)
PRESS RELEASE
FOR IMMEDIATE RELEASE
WEDNESDAY
MAY 17, 1995
CONTACT PERSON: STACY DUCKETT
CORPORATE COMMUNICATIONS
501-688-8229
AMOS HALL NAMED SENIOR VICE PRESIDENT
OF TCBY SYSTEMS, INC.
LITTLE ROCK, AR - WEDNESDAY (MAY 17, 1995) - Amos Hall has joined TCBY
Systems, Inc. as Senior Vice President of Operations. He will be
responsible for operations in both franchised and Company-owned
locations.
Mr. Hall has 30 years of experience in the foodservice industry. He
served as Vice President/General Manager and Regional Vice President of
Operations for Kentucky Fried Chicken. Most recently, he served as
Director of Operations for the East Division with Church's Restaurants.
Mr. Hall earned his B.A. in Business Administration from the University
of Puget Sound in Tacoma, Washington.
TCBY Enterprises, Inc., through subsidiary companies, manufactures and
sells soft serve frozen yogurt, hardpack frozen yogurt, novelty products,
and custom foodservice vehicles, and markets foodservice equipment. The
Company is the largest franchisor, licensor and operator of frozen yogurt
stores in the world.
-30-
Sequential Page No. 24
EXHIBIT 99(d)
PRESS RELEASE
FOR IMMEDIATE RELEASE
WEDNESDAY
JUNE 21, 1995
CONTACT PERSON: STACY DUCKETT
VICE PRESIDENT, CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY ENTERPRISES, INC.
ANNOUNCES SECOND QUARTER AND MID-YEAR RESULTS;
BOARD OF DIRECTORS DECLARES DIVIDEND
LITTLE ROCK, AR - June 21, 1995 - TCBY ENTERPRISES, INC. (NYSE:TBY) today
announced sales and franchising revenues for the second quarter ended May
31, 1995 and 1994 were $32,777,776 and $43,342,260, respectively. Sales
and franchising revenues in the first six months of fiscal 1995 and 1994
were $60,730,535 and $67,600,843, respectively. The decrease in sales
and franchising revenues for the second quarter is primarily attributable
to the sale of the " TCBY" refrigerated yogurt product line to
Mid-America Dairymen resulting in a decrease in Company sales to the
retail grocery trade, and a delay in sales of frozen yogurt products to
private label customers in part due to a delay in receipt of packaging
materials from the customer. Additional factors were a reduction in the
number of Company-owned stores, and unusually strong international
equipment sales in the comparable quarter of fiscal 1994.
Net income for the second quarter ended May 31, 1995 was $2,461,785, or
$.10 per share, compared to $3,563,344, or $.14 per share, for the second
quarter ended May 31, 1994. The Company reported a net loss for the
six-month period ended May 31, 1995, of $379,356, or $.01 per share,
compared to net income of $2,941,977, or $.12 per share, for the first
six months of fiscal 1994. While selling, general and administrative
expenses for the second quarter increased compared to the same quarter in
1994, they decreased compared to the first quarter of 1995 as a result of
the sale of the manufacturing and distribution rights of the "TCBY"R
refrigerated yogurt line. The gain on this sale resulted in net income
of $1.6 million in the second quarter. The Company continues to invest
significantly in selling and marketing expenses associated with the
introduction and expansion of its hardpack frozen yogurt products.
Sequential Page No.25
<PAGE>
The Company's new "TCBY" Treats concept has been well-received by
franchisees and consumers. Year-to-date, 291 stores have converted and
148 are in the process of converting, for a total of 439 stores,
representing approximately 37% of operating domestic stores. Same store
sales for "TCBY" Treats locations are trending positively compared to
other traditional "TCBY" locations. Same store sales year-to-date
decreased 0.4%, as compared to the same period in fiscal 1994, while same
store sales decreased 4.3% for the second quarter of fiscal 1995. As of
May 31, same store sales are up 3.2% for the trailing 52- week period.
Same store sales comparisons do not include sales from non-traditional
locations.
TCBY had 2,765 total locations at the conclusion of the second quarter of
fiscal 1995, compared to 2,572 locations at May 31, 1994. These
locations consisted of 87 Company-owned stores, 166 international stores,
1,281 non-traditional locations and 1,231 franchised stores. During the
second quarter the Company announced its public account program for the
development of non-traditional locations with a special focus on
convenience stores operated in association with national petroleum
companies. As of May 31, 1995, the Company had opened 27 locations and
had 36 under agreement for development under this new program. These
locations offer dual-branding opportunities with other national food
companies.
Frank D. Hickingbotham, Chairman of the Board and Chief Executive Officer
said, "We are pleased with the pace of the "TCBY"R Treats development and
its results, as well as with overall non-traditional development. The
Company's expansion into the retail market continued through its frozen
yogurt product lines. We have introduced a nonfat pint line in Southern
California and other markets that has been well-received and plan to
expand distribution of these nonfat products. Internationally, the
Company signed agreements for the development of India, Portugal and
Lebanon and now has agreements signed for 30 countries. The expansion at
Americana Foods is nearing completion and we expect to see improved
efficiencies in production and inventory management."
The Board of Directors of the Company declared a $.05 per share cash
dividend. This dividend is payable on July 14, 1995 to shareholders of
record as of June 30, 1995.
In addition, the Company today announced that it has engaged the
investment banking firm of Stephens Inc. to explore strategic
alternatives for the Company with the intent of maximizing shareholder
value. No assurances can be given that this initiative will result in
any material corporate development.
Sequential Page No.26
<PAGE>
TCBY Enterprises, Inc., through subsidiary companies, manufactures and
sells soft serve frozen yogurt, hardpack frozen yogurt, novelty products
and custom foodservice vehicles, and markets foodservice equipment. The
Company is the largest franchisor, licensor and operator of frozen yogurt
stores in the world.
TCBY Enterprises, Inc.
Selected Financial Highlights
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
May 31, May 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Operating Results
Sales & Franchising Revenue $ 32,778 $ 43,342 $ 60,731 $ 67,601
Net Income (Loss) $ 2,462 $ 3,563 $ ( 379) $ 2,942
Net Income (Loss) Per Share $ .10 $ .14 $ ( .01) $ .12
Average Shares Outstanding 25,557 25,542 25,576 25,492
Dividends Paid Per Share $ .05 $ .05 $ .10 $ .10
May 31, November 30,
1995 1994
Financial Position
Current Assets $ 48,667 $ 58,968
Current Liabilities $ 13,065 $ 12,458
Property, Plant and Equipment, net $ 60,396 $ 56,844
Total Assets $138,315 $142,280
Long-term Debt, less current portion $ 14,597 $ 15,910
Stockholders' Equity $105,014 $108,274
</TABLE>
-30-
Sequential Page No. 27
