UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
_x_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended November 30, 1995
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ___________to___________
Commission File No. 1-10046
TCBY ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Delaware 71-0552115
(State of incorporation) (I.R.S. Employer Identification No.)
425 West Capitol Avenue - Suite 1100
Little Rock, Arkansas 72201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (501) 688-8229
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
___________________________________________________________
Common stock, $.10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. __x__
The registrant (1) has filed all reports required to be filed by Section
13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding
12 months and (2) has been subject to such filing requirements for the
past 90 days. Yes __x__ No _____
The aggregate market value of common stock ($.10 par value) held by
non-affiliates of the Registrant (see item 12 hereof) on January 1, 1996:
$57,032,000.
The number of shares of the Registrant's Common Stock ($.10 par value)
outstanding as of January 1, 1996: 25,634,376.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal
year ended November 30, 1995 are incorporated by reference
into Parts I and II.
Portions of the Proxy Statement for the annual meeting of
stockholders to be held April 17, 1996 are incorporated by
reference into Part III.
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PART I
Item 1. BUSINESS
The Company manufactures and sells soft serve frozen yogurt, hardpack
frozen yogurt and ice cream, and novelty food products through
Company-owned and franchised retail stores ("TCBY"(Registered) stores),
non-traditional locations (e.g., airports, schools, hospitals, and travel
plazas), and the retail grocery trade (e.g., grocery stores and wholesale
clubs). In addition, the Company manufactures and sells equipment
related to the foodservice industry. Industry segment data for the
Company's two primary business segments, food products and equipment, for
the years ended November 30, 1995, 1994, and 1993 included on pages 17
through 20 and pages 30 and 31 of the Company's 1995 Annual Report to
Stockholders, is incorporated herein by reference.
The Company was incorporated under the laws of the State of Delaware on
January 10, 1984 and is the successor to businesses which opened the
first Company-owned "TCBY"(Registered) store in September 1981 and first
franchised "TCBY"(Registered) stores in June 1982. Unless the context
otherwise requires, the term "Company" includes TCBY Enterprises, Inc.,
its predecessors and its wholly owned consolidated subsidiaries. The
Company's principal subsidiaries are: TCBY Systems, Inc. (which markets,
franchises and licenses domestic and international "TCBY"(Registered)
locations; operates certain domestic "TCBY"(Registered) locations and
sells yogurt and novelty products to the retail grocery trade); Americana
Foods Limited Partnership (which manufactures and distributes yogurt and
other frozen dessert products); Riverport Equipment and Distribution
Company, Inc. which is composed of the Riverport Division (which sells
and distributes restaurant equipment and supplies primarily to
"TCBY"(Registered) locations) and the AIMCO Division (which sells and
distributes foodservice equipment and supplies primarily to customers
outside of the TCBY system); and Carlin Manufacturing, Inc. (which
manufactures special purpose vehicles and produces soft serve vending
carts and kiosks).
FOOD PRODUCTS SEGMENT
"TCBY"(Registered) Stores and Non-traditional Locations
The Company's food products are marketed as a treat, dessert, snack or
light meal item. The domestic franchised, Company- owned, international
licensed stores, and non-traditional locations operate under the name
"TCBY THE COUNTRY'S BEST YOGURT"(Registered), and are referred to herein
as "TCBY"(Registered) locations.
On November 30, 1995 there were 2,720 "TCBY"(Registered) locations,
including 1,218 domestic franchised stores, 42 Company- owned stores, 187
international licensed stores, and 1,273 non-traditional locations.
Information regarding "TCBY"(Registered) location activity for fiscal
1995 and 1994 is incorporated by reference to the information contained
in the table on page 17 to the Company's 1995 Annual Report to
Stockholders.
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The Company currently manufactures its "TCBY"(Registered) brand of
premium frozen yogurt sold domestically and licenses its manufacturing in
select international markets. The frozen yogurt is served in a variety
of ways, including cups, cones, sundaes, and shakes, and with a variety
of toppings. "TCBY"(Registered) locations also sell a changing variety of
flavors of frozen yogurt, prepared and pre-made cakes and pies, and
novelties from display freezer cases. A bakery program offering selected
freshly baked cookies, muffins, brownies, and gourmet coffee is included
in some of the domestic "TCBY"(Registered) stores. The Company
introduced the new "TCBY"(Registered) Treats concept which is optional
for existing locations and generally required for new and relocated
locations. The "TCBY"(Registered) Treats concept features
"TCBY"(Registered) soft serve frozen yogurt, but adds "TCBY"(Registered)
hand-dipped frozen yogurt, "TCBY"(Registered) hand-dipped premium ice
cream, Paradise Ice(Registered) shaved ice, frozen custard, and the
"TCBY"(Registered) bakery items.
Domestic Franchised Stores
"TCBY"(Registered) domestic franchised stores are located primarily in
shopping centers, free standing locations, and shopping malls.
Generally, a "TCBY"(Registered) store occupies 800 to 1,600 square feet
and accommodates both carryout and in-store business. The Company
estimates that the total initial investment required for the
establishment of a franchised "TCBY"(Registered) store ranges from
approximately $113,500 to $341,900 ($55,400 to $124,700 for a mini-store,
and $52,400 to $122,700 for a store to be operated in conjunction with
another concept), excluding real property costs. These costs vary
depending upon the size and location of the store. This investment
includes construction costs and leasehold improvements, equipment,
furniture and signs, initial inventory and supplies, opening expenses,
initial working capital, and the appropriate initial franchise fee.
Franchises for traditional "TCBY"(Registered) stores are usually granted
for a period of ten years with an option to renew for ten years at then
current terms being offered by the Company (for mini-store and other
concept stores, the initial term is five years with a renewal term of
five years). A franchisee pays an initial franchise fee and a royalty
and service fee of 4% of its net revenues. In addition, a franchisee
must contribute an amount not in excess of 3% of its net revenues to a
separate national advertising fund ("Fund") which is used to promote
"TCBY"(Registered) products. Substantially all franchisees pay the
continuing fees to the distributor for the TCBY franchise system,
ProSource Distribution Services ("ProSource"), a leading international
foodservice distributor to restaurant chains, through a surcharge per
case on frozen yogurt and certain other food purchases. ProSource remits
the surcharge to the Company on a weekly basis. The Company may spend in
any fiscal year an amount greater or less than the aggregate
contributions of "TCBY"(Registered) stores to the Fund in that year and
the Company may make loans to the Fund bearing reasonable interest to
cover any deficits of the Fund and cause the Fund to invest any surplus
for future use by the Fund.
The site of a franchised store is subject to Company approval. All food
products as well as furniture, fixtures, and equipment used by a
franchisee must conform to the Company's specifica-
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tions and standards. The Company is the only approved supplier of frozen
yogurt mix products. Prior to the opening of a franchised
"TCBY"(Registered) store, a franchisee must attend a ten day training
program. A franchisee is required to maintain the confidentiality of the
Company's trade secrets and is prohibited from engaging in competitive
activities during the term of the franchise agreement, and generally for
two years thereafter. The Company has the right to terminate the
franchise agreement for cause and has the option to purchase a
franchisee's store upon such termination or upon expiration of the
franchise agreement. The Company has the right of first refusal upon any
assignment by the franchisee, as well as the right to approve an
assignee.
The Company has a field inspection program to help maintain the high
standards of quality and cleanliness required in "TCBY"(Registered)
stores and to assist franchisees with operational problems.
The Company has 705 domestic franchisees operating in all 50 states, of
which 200 own more than one store and 32 own five or more stores. As of
November 30, 1995, franchise agreements had been executed for
approximately 100 stores to be opened in the United States, some of which
are currently expected to open in 1996. However, some of these franchise
agreements may terminate without the related stores opening.
During fiscal 1995, a total of 82 domestic stores were closed by
franchisees. Each franchised store closed is the result of the
franchisee's evaluation of its financial condition, cash flow, lease
expiration, profitability, and store operations, among other things.
Included in the 1,447 stores (Franchised, International, and
Company-owned) reported open at November 30, 1995 were 135
"TCBY"(Registered) stores closed for relocation or the season. Stores
closed for relocation have been closed with the intent to relocate the
store to a more suitable location subject to site approval by the
Company. Some of these agreements may be terminated by the Company for
failure to reopen in a timely manner. Stores closed for the season are
stores closed during winter or off-peak months, with the intent to reopen
the store during the warmer months.
Generally, the Company is not offering financing to franchisees for the
purchase of the equipment, furniture, and signage package required to
open new stores as it has historically done. However, the Company has
made and may make available financing for the purchase of existing
stores, leasehold improvements, and working capital in certain
circumstances.
The Company is currently working with unaffiliated financing companies to
provide leasing or financing programs for certain equipment purchases for
"TCBY"(Registered) stores and non-traditional locations. These programs
would be available at the option of the franchisee or licensee.
Non-traditional Locations
TCBY non-traditional locations include "TCBY"(Registered) mini-stores and
"TCBY"(Registered) stores operated in conjunction with other concepts,
discussed below; their principal
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differences from a traditional domestic store are size and initial costs,
with "other concept" stores having the presence of another nationally or
regionally recognized chain concept operated in conjunction with the
"TCBY"(Registered) store (an example of this would be the operator of a
"TCBY"(Registered) store within a convenience store at a nationally
recognized branded petroleum outlet). "TCBY"(Registered) non-traditional
stores also operate in airports, toll road travel plazas, hospitals,
office buildings, schools, sports arenas, and other foodservice outlets.
Generally, these locations offer a limited menu as compared to a
"TCBY"(Registered) store and serve "TCBY"(Registered) products through
kiosks, soft serve vending carts and counter top display units. The
principal difference between non-traditional locations and domestic
franchise stores is the "captive" nature of the location (as opposed to
being open to the general public; for example, an airport location tends
to serve only people that are physically at the airport for reasons other
than the purchase of "TCBY"(Registered) brand soft serve frozen yogurt
and other store products). Recognizing the uniqueness of captive
locations, their generally high costs of occupancy, and their inherent
marketing value, the Company has, in some instances, waived the
requirement for participation in local or national programs, and
sometimes assisted in the purchase of equipment for use at these
locations.
As of November 30, 1995 there were 1,273 non-traditional locations open
and approximately 125 non-traditional locations under development. A
total of 682 of these locations are airport locations, toll road travel
plazas, and other non-commercial foodservice outlets, which are operated
under a joint venture agreement with Marriott Corporation.
The Company will continue its efforts to obtain additional
non-traditional locations during fiscal 1996. However, the Company's
joint venture partners were not successful in retaining all of the
"TCBY"(Registered) locations at the Dallas/Ft. Worth, Atlanta, and Los
Angeles airports where the foodservice contracts were up for bid, thus,
closings in these airports will occur during 1996. The amount of the
expected decline in frozen yogurt sales in these airports is not known at
this time due to uncertain closing dates and relocation of existing units
at these sites; however, these airports have historically experienced
higher yogurt sales than other non-traditional locations.
Company-owned stores
The Company owns and operates "TCBY"(Registered) stores in several
markets within the United States including Atlanta, Arkansas, Dallas/Ft.
Worth, and Las Vegas. During the fourth quarter of fiscal 1995, the
Company decided to franchise or close most of the Company-owned stores.
The Company believes the stores can operate more effectively with local
ownership. At November 30, 1995, the Company operated 42 stores most of
which the Company expects to franchise during fiscal 1996.
International Licensed Locations
Generally, the Company adopts a license agreement form of relationship
for its international development. A licensee is granted the right to
develop a minimum number of
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"TCBY"(Registered) locations in the defined territory within a certain
time period. The Company determines, on a country by country basis,
whether it will export frozen yogurt products from the United States to
that country or license the production of frozen yogurt locally. In
addition, the Company may grant to the licensee the distribution rights
of "TCBY"(Registered) branded products in the defined country.
As of November 30, 1995, there were 187 international locations,
including "TCBY"(Registered) stores in Japan (36), Mexico (20), Thailand
(23), Korea (18), China (33), Canada (9), Egypt (6), Aruba (4), The
Bahamas (3), Qatar (7), Bahrain (2), Saudi Arabia (3), United Arab
Emirates (3), Chile (2), Costa Rica (1), Hong Kong (12), Philippines (1),
Jamaica (2), and Indonesia (2). TCBY has also finalized agreements for
the development of "TCBY"(Registered) locations in Brazil, Cayman
Islands, India, Lebanon, Netherlands Antilles, Portugal, Russia, Spain,
Kuwait, Oman, Macao, and Dominican Republic. Revenues from any single
country are not expected to be material in fiscal 1996. In the
aggregate, revenues from international locations in fiscal 1996 are
expected to be comparable to fiscal 1995.
Retail Grocery Trade
The Company sells hardpack frozen yogurt and frozen novelties for
distribution to the retail grocery market for resale primarily in grocery
stores and wholesale clubs. The Company does employ a small direct sales
force; however, a broker network is the primary means of sales and
service to the retail grocery trade. The retail grocery trade has
limited retail and warehouse shelf space and the competition for such
space continues to intensify. Obtaining shelf space for
"TCBY"(Registered) products requires the payment of distribution
allowances (See Note #1 to the Consolidated Financial Statements). Once
shelf space is obtained, the movement of the product determines the
length of time that benefit is received from these distribution
allowances. On-going marketing support is essential to maintaining
movement of "TCBY"(Registered) products.
At November 30, 1995, the Company had approximately 75 retail grocery
trade customers.
In April 1995, the Company sold the rights for the exclusive
manufacturing and distribution of the "TCBY"(Registered) refrigerated
yogurt products throughout the United States to Mid-America Dairymen,
Inc., who previously co-packed these products for the Company. The sale
will also result in lower sales to the retail grocery trade in the first
quarter of 1996 as sales of "TCBY"(Registered) refrigerated yogurt
products during 1995 were primarily in the first quarter.
Food Products Production
The Company's frozen yogurt product sold in "TCBY"(Registered) stores and
non-traditional locations is produced at the Company's manufacturing
facility in Dallas, Texas. Raw materials used in the production of the
Company's yogurt consist primarily of fresh milk, cream, and sweeteners.
Each of these materials is generally available from several sources.
During fiscal 1995, raw materials were available in adequate quantities
to meet the Company's requirements. The
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Company believes that raw materials will be available from a
number of suppliers to meet the Company's anticipated requirements in the
future.
The Company also manufactures "TCBY"(Registered) hardpack frozen yogurt
products and other frozen dessert products such as ice cream and frozen
novelties under private label and various trade names for distribution to
the retail grocery trade and restaurants. The Company considers and
utilizes other channels of distribution for such products to accommodate
its customers.
The Company's yogurt manufacturing subsidiary has not experienced a
significant backlog of orders in the past.
Trademarks
The Company claims common law rights to its service marks "TCBY", "TCBY
The Country's Best Yogurt", "TCBY Yogurt", and "All the Pleasure. None
of the Guilt". The Company has sought to maximize legal protection of
these marks by registering them on the Principal Register of the United
States Patent and Trademark Office. Registrations for the service marks
have been issued and the registrations have become incontestable.
The Company has pending, or is in the process of filing, applications for
trademark registrations in a number of foreign countries. In some of
these countries it may not be possible to register the name TCBY where
the laws do not permit the registration of acronyms. Similarly,
registering offices in some jurisdictions may refuse to register the mark
THE COUNTRY'S BEST YOGURT by taking the position that it is merely
descriptive of the product. In some foreign countries, unrelated third
parties have filed applications for registration of TCBY and similar
trademarks. Upon discovery of such filings, the Company routinely
contests such applications to preserve the Company's ability to register
its trademarks in those countries.
EQUIPMENT SEGMENT
Riverport Equipment and Distribution Company, Inc. offers for sale a
complete equipment, furniture, and signage package in order to assist
TCBY franchisees in opening their stores in a timely manner. Such
"TCBY"(Registered) store packages cost a franchisee between $51,000 and
$131,000 for a domestic "TCBY"(Registered) store, or between $25,000 and
$40,000 for a mini-store or store operated in conjunction with another
concept. The Company also sells equipment to facilitate non-traditional
location openings when it is needed. In addition, Riverport offers for
sale replacement equipment and supplies. Riverport operates at a
relatively low gross profit margin and its sales are tied primarily to
new store and location development.
AIMCO Equipment Company, located in Little Rock, Arkansas, is a regional
distributor of equipment to the foodservice industry and serves customers
primarily outside of the "TCBY"(Registered) franchise system.
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Carlin Manufacturing, Inc., located in California, produces and sells
manufactured mobile kitchens and other specialty vehicles primarily to
businesses and governments. The Company plans to divest its equipment
manufacturer as this subsidiary is no longer a part of the Company's core
business.
Equipment Production and Distribution
Carlin Manufacturing's production facility has not experienced a
significant backlog in the past. Raw materials used in the production
process consist primarily of common building materials which are
generally available from several sources. During fiscal 1995, raw
materials were available in adequate quantities to meet the Company's
requirements. The Company believes that raw materials will be available
from a number of suppliers to meet the Company's requirements.
Patents and Trademarks
Carlin Manufacturing has a patent in the U.S.A. and a design patent in
the U.K. and in Germany for its CK-1E Containerized Field Kitchen which
is designed for use by military organizations; a European patent
application covering several countries is pending. Carlin Manufacturing
has registered trademarks for the name "Carlin", "Commander", and the
phrase "Driven by a Passion for Perfection".
SEASONALITY
Generally, sales of the Company's food products segment have been greater
in the spring, summer and fall months, and tended to be lower in the
winter months. Sales for the equipment segment have not been as seasonal
in nature. See Note 13 of the Notes to Consolidated Financial Statements
of the Company's 1995 Annual Report to Stockholders incorporated by
reference for information regarding unaudited consolidated quarterly
results of operations for fiscal 1995 and fiscal 1994.
COMPETITION
The Company is the world's largest franchisor, licensor, and operator of
stores serving primarily soft serve frozen yogurt. "TCBY"(Registered)
stores compete with numerous other frozen yogurt stores, including stores
affiliated with smaller yogurt chains and with ice cream parlors,
especially those that serve premium ice cream. Frozen yogurt has been
added as a menu item by certain national restaurant chains and in recent
years there has been an overall increase in the number of foodservice
locations serving frozen yogurt. "TCBY"(Registered) locations compete
with restaurant chains and other foodservice locations, including snack
food or dessert item restaurants. Frozen yogurt may also be offered in
supermarkets, grocery stores, and wherever convenience food operations
are conducted. The bakery program offering cookies, muffins, and
brownies further expands the area of competition to include specialty
stores serving cookie and bakery products. Any addition of expanded menu
items currently being tested would further expand the amount and
intensity of competition with the Company's products. Competition
continues to increase in the area of airports, theme parks, sports
stadiums, etc., as some of the chains and other frozen yogurt
manufacturers market their product in these non-traditional locations.
Some of these
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<PAGE> competitors have greater financial resources, more outlets, or are
better known than the Company.
The retail grocery trade is a highly competitive market and competition
is expected to increase as new competitors and products enter the field.
The Company competes with national suppliers, which are larger than the
Company, as well as regional suppliers. Some of these competitors have
greater financial resources, larger market shares, broader product lines,
and more experience in the market. An extremely competitive environment
resulted in a decline in the operating results in the distribution of
products to the retail grocery trade during fiscal 1995. As a result,
during the fourth quarter of fiscal 1995, the Company began to focus on
geographic regions where the hardpack products can be delivered and
marketed in a more efficient manner. This action is expected to improve
operating results but may result in lower gross sales of hardpack frozen
yogurt products in fiscal 1996.
Riverport competes primarily with local or regional equipment companies
(both domestic and international) that are in close proximity to
"TCBY"(Registered) stores.
AIMCO competes primarily with other domestic competitors of approximately
equal size in the sale of equipment, fixtures, and other necessary items
to restaurants and other foodservice operations.
Carlin Manufacturing competes primarily with other domestic competitors
of approximately equal size in the sale of mobile kitchen products.
EMPLOYEES
As of November 30, 1995, the Company employed approximately 540 full-time
and 335 part-time associates who were engaged primarily in the
management, manufacture, sale, and distribution of frozen yogurt products
and foodservice equipment. This compares to approximately 650 full-time
and 500 part-time associates employed on November 30, 1994. None of the
Company's employees are covered by collective bargaining agreements.
In November, 1995, the Company decided to franchise or close most of its
Company-owned stores and sell Carlin Manufacturing. Staff reductions are
inherent in these decisions and are planned in conjunction with the sales
of these assets.
RESEARCH AND DEVELOPMENT
Research and development costs were not material in the last three fiscal
years.
REGULATION AND ENVIRONMENTAL MATTERS
Some states have statutes regulating franchise operations, including
registration and disclosure requirements in the offer and sale of
franchises and the application of statutory standards regulating
franchise relationships, such as termination
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and non-renewal of franchises. The Company is also subject to the
Federal Trade Commission regulations relating to disclosure requirements
in the offer and sale of franchises.
Each "TCBY"(Registered) location is subject to licensing and regulation
by the health, sanitation, safety, fire, and other applicable departments
of the state or municipality where it is located, as well as the federal
government in the areas of health and labeling. The Company's frozen
dessert production is also subject to similar licensing and regulation by
federal, state, and municipal authorities at its facility in Dallas,
Texas, and in the states to which it ships its products. Difficulties or
failures in obtaining or maintaining the required licensing or in meeting
regulatory standards could result in delays or cancellations in the
opening of new locations and could adversely affect the production of
yogurt and other frozen dessert products.
Carlin Manufacturing must comply with applicable California Health and
Building Codes, and vehicles built by Carlin Manufacturing must comply
with Federal Motor Vehicle Safety Standards.
To the best of its knowledge, the Company believes that it is presently
in substantial compliance with all existing applicable environmental laws
and does not anticipate that such compliance will have a material effect
on its future capital expenditures, earnings, or competitive position
with respect to its business.
Item 2. PROPERTIES
The Company's executive offices, which are leased pursuant to a ten-year
lease which commenced in April 1988, occupy approximately 89,200 square
feet in the TCBY Tower, a 40-story office building located in downtown
Little Rock, of which approximately 10,900 square feet has been
sub-leased. In connection with the lease, the Company owns a small
equity interest in the building.
The Company currently owns and leases to third parties its former
executive office building, which contains 29,000 rentable square feet of
space, in Little Rock, which is included in the industry segment titled
"Other".
Americana Foods Limited Partnership's yogurt manufacturing facility in
Dallas, Texas occupies approximately 216,000 square feet. The facility
produces "TCBY"(Registered) frozen yogurt mix and other frozen dessert
products and is classified in the industry segment titled "Food
Products". Demand for products grew in 1994, resulting in a decision to
expand production capacity at Americana Foods. The new equipment, along
with enhancements to the logistics function, has allowed for increased
production and customer service capabilities and has provided for
substantial additional manufacturing capacity. The Company is currently
utilizing under 50 percent of its total capacity and is actively pursuing
new customers for its "TCBY"(Registered) products and other frozen
dessert products
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to utilize the capacity available at the facility.
Substantially all of the Company-owned stores are operated from premises
which are leased. See Note 6 of Notes to Consolidated Financial
Statements in the Company's 1995 Annual Report to Stockholders
incorporated by reference for information regarding store rental
obligations.
During fiscal 1995, the Riverport equipment distribution operation was
relocated to the facility it acquired in fiscal 1993. The building is
located next to the AIMCO facility and contains approximately 37,000
square feet of warehouse space and 3,000 square feet of office space.
The previous site which contains approximately 60,000 square feet of
warehouse space and 11,000 square feet of office space may be offered for
sale or lease in the future if the building is not utilized by the
Company. Both warehouses are designed to handle the distribution of
equipment packages for new "TCBY"(Registered) stores, and reorders of
equipment and supplies from "TCBY"(Registered) locations. AIMCO is
located in a building which contains approximately 54,400 square feet of
warehouse and service space and 5,600 square feet of office space. These
buildings are classified in the industry segment titled "Equipment".
Carlin Manufacturing owns a 34,000 square foot facility in Fresno,
California for the purpose of manufacturing specialty vehicles, vending
carts, and kiosks which is classified in the industry segment titled
"Equipment".
The Company believes that these facilities are well maintained, suitably
equipped, and in good operating condition.
Item 3. LEGAL PROCEEDINGS
As of November 30, 1995 there were no material proceedings to which the
Company was a party reportable pursuant to the requirements of Form 10-K
except as set forth below.
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 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 its discussions
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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 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 reasonably
possible loss.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to stockholders during the fourth quarter of
fiscal 1995.
EXECUTIVE OFFICERS OF TCBY ENTERPRISES, INC.
The following sets forth certain information regarding executive officers
of the Company:
Frank D. Hickingbotham, age 59, has been the Chairman of the Board and
Chief Executive Officer of the Company and its predecessors since 1970.
Herren C. Hickingbotham, age 37, has been a director of the Company since
1982. He has been the President and Chief Operating Officer of the
Company since March 1988.
F. Todd Hickingbotham, age 32, has been a director of the Company since
1990. He has been President of Riverport Equipment and Distribution
Company, Inc. since 1988.
Jim H. Fink, age 38, became an Executive Vice President in December 1994.
He had been Senior Vice President, Finance and Chief Accounting Officer
since June 1991. Prior to that he had been Vice President, Finance since
joining the Company in March 1987.
Gene Whisenhunt, age 35, became Executive Vice President and Chief
Financial Officer in December 1995. He had been Senior Vice President
and Chief Accounting Officer since December 1994. Prior to that he was
Senior Vice President National Sales/Subsidiary Controller. Mr.
Whisenhunt joined the Company in 1989.
Gale Law, age 50, became a director of the Company in March 1989. He
became Executive Vice President, Equipment Division, and Treasurer in
December 1995. Prior to that he was Senior Vice President, Finance,
Chief Financial Officer and Treasurer of the Company. Mr. Law joined the
Company in 1984.
Bette D. Clay, age 53, Senior Vice President Administration and Secretary
and Assistant Treasurer, has served the Company and its predecessors in
various executive and administrative capacities since 1978.
William P. Creasman, age 43, joined the Company as Senior Vice President
and General Counsel on February 23, 1987.
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<PAGE>
Jim Sahene, age 35, became President of TCBY Systems, Inc. in April 1994.
Prior to that he was Executive Vice President and Chief Operating Officer
of TCBY Systems, Inc. Mr. Sahene joined the Company in 1986.
John Rogers, age 34, became Senior Vice President, Chief Information
Officer and Assistant Treasurer in December 1994. Prior to that he was
Senior Vice President and Corporate Controller. Mr. Rogers joined the
Company in 1986.
Hartsell Wingfield, age 50, became President of the International
Division of TCBY Systems, Inc. in December 1990. Mr. Wingfield joined
the Company in 1987.
Walt Winters, age 58, became President of Specialty Products Division of
TCBY Systems, Inc. in December 1993. Mr. Winters joined the Company in
1982.
Ralph H. Goldbeck, age 39, became President of Carlin Manufacturing, Inc.
in July 1993. He had been Vice President of Operations since December
1988.
All executive officers of TCBY Enterprises, Inc. were elected to serve at
the pleasure of the Board of Directors following the annual meeting of
stockholders in 1995 and until their successors are elected and
qualified; executive officers employed by subsidiary companies were
elected to serve at the pleasure of the boards of directors of the
applicable subsidiary company. Frank D. Hickingbotham is the father of
Herren C. Hickingbotham and F. Todd Hickingbotham. Frank D.
Hickingbotham is the brother-in-law of Walt Winters. No other family
relationships exist among any of the above named individuals or among
such individuals and any director of the Company.
PART II
Item 5. MARKET FOR TCBY ENTERPRISES, INC. COMMON STOCK AND
RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol "TBY". The high and low sales prices for the Common Stock and
dividends paid per share in the last two fiscal years are incorporated by
reference to the information contained on page 32 under the captions
"Common Stock" and "Dividend Policy" in the Company's 1995 Annual Report
to Stockholders. As of January 31, 1996, there were approximately 5,440
stockholders of record.
Item 6. SELECTED FINANCIAL DATA
Selected financial data is incorporated by reference to information set
forth under the caption "Ten Year Summary of Selected Financial Data" on
page 32 in the Company's 1995 Annual Report to Stockholders.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Page 13
<PAGE>
Management's discussion and analysis of financial condition and results
of operations is incorporated by reference to pages 17 through 20 of the
Company's 1995 Annual Report to Stockholders.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and report of independent auditors
are incorporated by reference to pages 21 through 31 of the Company's
1995 Annual Report to Stockholders.
Quarterly results of operations are incorporated by reference to page 31
(Note 13) of the Company's 1995 Annual Report to Stockholders.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Page 14
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF TCBY
ENTERPRISES, INC.
Information with respect to directors of the Company is incorporated by
reference to the information included under the caption "Nominees For
Election As Directors" in the Company's 1996 Proxy Statement.
Information with respect to executive officers of the Company follows
Item 4, Part I hereof under the caption "Executive Officers of TCBY
Enterprises, Inc." and in the Company's 1996 Proxy Statement.
Item 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is incorporated by
reference to the information included under the caption "Remuneration" in
the Company's 1996 Proxy Statement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information with respect to security ownership of certain beneficial
owners and management of the Company is incorporated by reference to the
information under the caption "Principal Stockholders" in the Company's
1996 Proxy Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and transactions is
incorporated by reference to the information included under the caption
"Remuneration" and "Certain Transactions" in the Company's 1996 Proxy
Statement.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) (1) and (2) The response to this portion of Item 14
is submitted as a separate section of this report.
(3) The exhibits, as listed in the Exhibit Index set
forth on pages E-1 through E-4, are submitted as a
separate section of this report.
(b) The Company did not file any reports on Form 8-K
during the three months ended November 30, 1995, but
did file a Form 8-K on December 1, 1995, in relation
to stock repurchase, franchising of Company-owned
stores, and other developments.
(c) See Item 14 (a) (3) above.
Page 15
<PAGE>
(d) The response to this portion of Item 14 is submitted
as a separate section of this report.
Page 16
<PAGE>
__________ SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
(Registrant)
BY Frank D. Hickingbotham *
_________________________
Frank D. Hickingbotham,
Chairman of the Board and
Chief Executive Officer
February 26, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
_________ _____ ____
<S> <C> <C>
Frank D. Hickingbotham* Director, Chairman of the Board 2-26-96
and Chief Executive Officer
(Principal Executive Officer)
Herren C. Hickingbotham* Director, President and Chief 2-26-96
Operating Officer
Gale Law* Director, Executive Vice 2-26-96
President Equipment Division
and Treasurer
Daniel R. Grant* Director 2-26-96
F. Todd Hickingbotham* Director, President Riverport 2-26-96
Equipment and Distribution
Company, Inc.
Marvin D. Loyd* Director 2-26-96
Hugh H. Pollard* Director 2-26-96
Don O. Kirkpatrick* Director 2-26-96
William H. Bowen* Director 2-26-96
/s/ Gene Whisenhunt
___________________ Executive Vice President and 2-26-96
Gene Whisenhunt Chief Financial Officer
(Principal Financial Officer)
</TABLE>
/s/ Herren Hickingbotham*
BY _________________________Individually and as Attorney-in-Fact.
Herren C. Hickingbotham
Page 17
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 14 (a) (1) and (2); (c) and (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED NOVEMBER 30, 1995
TCBY ENTERPRISES, INC.
LITTLE ROCK, ARKANSAS
Page 18
<PAGE>
FORM 10-K -- ITEM 14 (a) (1) AND (2)
TCBY ENTERPRISES, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of TCBY Enterprises, Inc.
and subsidiaries, included in the annual report of the registrant to its
stockholders for the year ended November 30, 1995, are incorporated by
reference in Item 8:
Consolidated balance sheets -- November 30, 1995 and 1994
Consolidated statements of operations -- Years ended November 30, 1995,
1994 and 1993
Consolidated statements of stockholders' equity -- Years ended November
30, 1995, 1994 and 1993
Consolidated statements of cash flows -- Years ended November 30, 1995,
1994 and 1993
Notes to consolidated financial statements -- November 30, 1995
Information for consolidated financial statement Schedule II-- Valuation
and Qualifying Accounts of TCBY Enterprises, Inc. and subsidiaries is
included in Note 1 to the Consolidated Financial Statements.
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and
therefore have been omitted.
Page 19
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit No. Description Page No
___________ ___________ _______
<S> <C> <C>
3 (i) (a) Restated Certificate of Incorporation of
TCBY Enterprises, Inc. (Incorporated by
reference to Exhibit 3(a) (vii) to the
Company's Annual Report on Form 10-K for the
fiscal year ended November 30, 1988)
(ii) (a) Amended and Restated By-Laws of TCBY Enter-
prises, Inc. (Incorporated by reference to
Exhibit 3(b) of Registration Statement No.
33-8338)
(ii) (b) Article IX, Section 5 of the By-Laws of TCBY
Enterprises, Inc., as amended March 25, 1987
(Incorporated by reference to Exhibit 3(b)
(ii) to the Company's Annual Report on Form
10-K for the fiscal year ended November 30,
1987)
(ii) (c) Article II, Sections 8, 9 and 10 of the
By-Laws of TCBY Enterprises, Inc., as
amended December 3, 1990 (Incorporated by
reference to Exhibit 3(b) (iii) to the
Company's Annual Report on Form 10-K for the
fiscal year ended November 30, 1990)
4 (i) (a) Specimen Common Stock Certificate (Revised
September, 1988) (Incorporated by reference
to Exhibit 4(i) (b) to the Company's Annual
Report on Form 10-K for the fiscal year
ended November 30, 1988)
(ii)(a) Loan Agreement between TCBY Enterprises,
Inc. and Bank One, Dallas, N.A. dated June
11, 1993 for $14,610,000 to refinance four
notes payable to First Interstate Bank of
Texas, N.A. (Incorporated by reference to
Exhibit 4(ii)a of the Company's Quarterly
Report on Form 10-Q for the quarter ended
May 31, 1993)
(ii)(b) Amended and Restated Loan Agreement between
TCBY Enterprises, Inc. and Bank One, Texas,
N.A., dated November 28, 1994 to include a
$7,500,000 term promissory note dated
November 28, 1994 (Incorporated by reference
to Exhibit 4(ii)(b) to the Company's Annual
Report on a Form 10-K for the fiscal year
ended November 30, 1994)
(ii)(c) Term promissory note between TCBY
Enterprises, Inc. and Bank One, Texas, N.A.,
dated November 28, 1994 to finance expansion
E-1
<PAGE>
Exhibit No. Description Page No
___________ ___________ _______
of the Company's facility in Dallas, Texas
(Incorporated by reference to Exhibit
4(ii)(c) to the Company's Annual Report on
Form 10-K for the fiscal year ended November
30, 1994)
(ii)(d) Second Amended and Restated Loan Agreement
between TCBY Enterprises, Inc. and Bank One,
Texas, N.A., dated April 7, 1995 to include
a $5,000,000 revolving credit note dated
April 7, 1995, (Incorporated reference to
Exhibit 4(ii)(a) of the Company's Quarterly
Report on Form 10-Q for the quarter ended
February 28, 1995)
(ii)(e) First Amendment to Second Amended and
Restated Loan Agreement and Amendment to
Loan Documents. (Incorporated by reference
to Exhibit 4(ii)(a) of the Company's
Quarterly Report on Form 10-Q for the quarter
ended August 31, 1995)
10 (a) Original form of Franchise Agreement (Incor-
porated by reference to Exhibit 10(a) to
Registration Statement No. 2-89398)
(b) Form of Franchise Agreement (Revised Decem
ber 1982) (Incorporated by reference to
Exhibit 10(b) to Registration Statement No.
2-89398)
(c) Form of Franchise Agreement (Revised April
1983) (Incorporated by reference to Exhibit
10(c) to Registration Statement No. 2-89398)
(d) Form of Franchise Agreement (Revised January
1984) (Incorporated by reference to Exhibit
10(d) to Registration Statement No. 2-89398)
(e) Form of Franchise Agreement (Revised July
1985) (Incorporated by reference to Exhibit
10(e) to Registration Statement No. 2-99324)
(f) Form of Franchise Agreement (Revised Febru
ary 1986) (Incorporated by reference to
Exhibit 10(f) to the Company's Annual Report
on Form 10-K for the fiscal year ended
November 30, 1986)
(g) Form of Franchise Agreement (Revised March
1987) (Incorporated by reference to Exhibit
10(g) to the Company's Annual Report on Form
10-K for the fiscal year ended November 30,
1987)
E-2
<PAGE>
Exhibit No. Description Page No
___________ ___________ _______
(h) Form of Franchise Agreement (Revised February
1991) (Incorporated by reference to Exhibit
10(h) to the Company's Annual Report on Form
10-K for the fiscal year ended November 30, 1990)
(i) Form of Franchise Agreement (Revised July
1991) (Incorporated by reference to Exhibit
28(a) to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 31,
1991)
(j) Form of Franchise Agreement (Revised Decem
ber 1991) (Incorporated by reference to
Exhibit 10(j) to the Company's Annual Report
on Form 10-K for the fiscal year ended
November 30, 1992)
(k) Form of Executive Security Agreement
entered into with certain executives of the
Company dated December 1, 1990 (Incorporated
by reference to Exhibit 10(k) to the Company's
Annual Report on Form 10-K for the fiscal year
ended November 30, 1990)
(l) 1984 Stock Option Plan, as amended and re
stated (Incorporated by reference to Exhibit
4 to Post-Effective Amendment No. 1 to Regis
tration Statement No. 2-97039)
(m) 1989 Stock Option Plan (Incorporated by
reference to indented paragraphs following
the caption "Approval of 1989 Stock Option
Plan" on pages 7 and 8 of the Company's
definitive Proxy Statement of February 21,
1989 for the 1989 Annual Meeting of
Stockholders)
(n) 1992 Employee Stock Option Plan (Incorporated
by reference to Exhibit I of the Company's
March 18, 1992 Proxy Statement)
(o) 1992 Nonemployee Director Stock Option Plan
(Incorporated by reference to Exhibit II of
the Company's March 18, 1992 Proxy
Statement)
(p) Amendment to the 1992 Employee Stock Option
Plan (Incorporated by reference to the
Company's March 1, 1995 Proxy Statement)
(q) Lease Agreement between the Company, as
tenant, and Capitol Avenue Development
Company, a limited partnership, as landlord,
dated April 20, 1987 (Incorporated by
reference to Exhibit 10(q) to the Company's
E-3
<PAGE>
Exhibit No. Description Page No
___________ ___________ _______
Annual Report on Form 10-K for the fiscal
year ended November 30, 1987)
13 Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Report of Ernst & Young LLP,
Independent Auditors, Consolidated Balance
Sheets; Consolidated Statements of Opera
tions; Consolidated Statements of
Stockholders' Equity; Consolidated State
ments of Cash flows; and Notes to the
Consolidated Financial Statements included
in the Registrant's Annual Report for the
year ended November 30, 1995 ................ Attached
21 Subsidiaries of TCBY Enterprises, Inc. ...... Attached
23 Consent of Independent Auditors ............. Attached
24 Powers of attorney .......................... Attached
27 Article 5, Financial Data Schedule for the
Fiscal Year 1995 10-K ....................... Attached
99 (a) Press release, dated October 6, 1995, "TCBY
International Licenses Development in the
Cayman Islands" ............................. Attached
99 (b) Press release, dated October 31, 1995, "TCBY
Licenses Development in Russian Federation".. Attached
99 (c) Press release, dated December 1, 1995, "TCBY
Announces Stock Repurchase, Franchising of
Company-owned Stores and Other Developments". Attached
99 (d) Press release, dated December 14, 1995
"TCBY Declares Cash Dividend" ............... Attached
99 (e) Press release, dated January 12, 1996, "TCBY
Reports Year-end and Fourth Quarter Results
for 1995".................................... Attached
E-4
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Fiscal 1995 Compared to Fiscal 1994
The Company's total sales for fiscal 1995 decreased 21.8 percent from
sales in fiscal 1994. The Company operates 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>
1995 1994 1993 Sales
% Sales % Sales %
_____ ____ _____ ____ _____ ____
<S> <C> <C> <C> <C> <C> <C>
Food Products:
Yogurt sales to ProSource
and other foodservice
distributors $ 51,003 46% $ 54,243 39% $ 52,320 48%
Yogurt sales to the retail
grocery trade 25,327 23% 46,377 33% 13,161 12%
Retail sales by Company-
owned stores 18,065 17% 21,734 15% 26,873 24%
________ ____ ________ ____ ________ ____
94,395 86% 122,354 87% 92,354 84%
Equipment:
Sales by the Company's
equipment distributor 10,783 10% 13,262 9% 8,640 8%
Sales of manufactured
specialty vehicles 3,642 3% 3,936 3% 7,489 7%
________ ____ ________ ____ ________ ____
14,425 13% 17,198 12% 16,129 15%
Other 988 1% 893 1% 1,042 1%
________ ____ ________ ____ ________ ____
Total Sales $109,808 100% $140,445 100% $109,525 100%
======== ==== ======== ==== ======== ====
</TABLE>
Sales from the Company's food products segment include (i) wholesale sales
of frozen yogurt and ice cream products to ProSource Distribution Services
(which acquired a portion of the distribution business of The Martin-Brower
Company during 1995) and to other foodservice distributors, which
distribute yogurt and other products to "TCBY"(Registered) stores and
non-traditional locations, and sales to international master franchisees of
frozen yogurt products and proprietary ingredients for the manufacture of
frozen yogurt products in the countries that produce locally, (ii) sales
of hardpack frozen yogurt, refrigerated 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. Sales in the food products
segment decreased from $122.4 million in fiscal 1994 to $94.4 million in
fiscal 1995.
Page 1
<PAGE>
Wholesale sales of frozen yogurt to distributors decreased 6 percent. This
is attributed primarily to a reduction in the number of domestic
traditional "TCBY"(Registered) stores (Company-owned and franchised stores)
in operation during fiscal 1995 compared to fiscal 1994. In addition,
sales to international master franchisees were down slightly due to large
purchases of proprietary ingredients for the initial start-up of production
of frozen yogurt in China during fiscal 1994. These reductions were
partially offset by increased purchases of frozen yogurt products by
non-traditional locations during fiscal 1995 compared to fiscal 1994.
The following table sets forth location activity for fiscal 1995 and 1994:
<TABLE>
<CAPTION>
Non-
Franchised Company International Traditional Total
Stores Stores Locations Locations Locations
_________ _______ _____________ ___________ _________
<S> <C> <C> <C> <C> <C>
Locations Open at
December 1, 1993 1,298 121 66 989 2,474
Opened 31 2 77 506 616
Closed (89) (22) (2) (176) (289)
Net Stores Purchased
(Sold) Between Fran-
chisees & Company 5 (5) -- -- --
_______ ______ ______ _______ ________
Locations Open at
November 30, 1994 1,245 96 141 1,319 2,801
Opened 34 0 48 241 323
Closed (82) (33) (2) (287) (404)
Net Stores Purchased
(Sold) Between Fran-
chisees & Company 21 (21) -- -- --
_______ ______ ______ _______ ________
Locations Open at
November 30, 1995 1,218 42 187 1,273 2,720
======= ====== ====== ======= ========
</TABLE>
Included in locations open are 135 and 152 "TCBY"(Registered) stores closed
for relocation or for the season at November 30, 1995 and 1994,
respectively. During fiscal 1995 the Company closed 287 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 locations. In addition, the Company's joint
venture partners were not successful in retaining all of the
"TCBY"(Registered) locations at the Dallas/Ft. Worth, Atlanta, and Los
Angeles airports where the foodservice contracts were up for bid, thus,
closings in these airports will occur during 1996. The amount of the
expected decline in frozen yogurt
Page 2
<PAGE>
sales in these airports is not known at this time due to uncertain closing
dates and relocation of existing units at these sites; however, these
airports have historically experienced higher yogurt sales than other
non-traditional locations.
Sales of yogurt to the retail grocery trade decreased 45 percent during
fiscal 1995 as compared to fiscal 1994. This decrease is primarily a
result of the sale of the refrigerated yogurt product line. In April 1995,
the Company sold the rights for the exclusive manufacturing and
distribution of the "TCBY"(Registered) refrigerated yogurt products
throughout the United States to Mid-America Dairymen, Inc., who previously
co-packed these products for the Company. The sale resulted in an after-
tax gain of approximately $1.6 million in the second quarter. The sale of
this product line resulted in lower sales to the retail grocery trade in
fiscal 1995 compared to fiscal 1994 as sales were $5.3 million and $23.0
million in f iscal 1995 and 1994, respectively. The sale will also result
in lower sales to the retail grocery trade in the first quarter of 1996 as
sales of "TCBY"(Registered) refrigerated yogurt products during 1995 were
primarily in the first quarter. The Company has continued the distribution
of hardpack frozen yogurt products to the retail grocery trade. An
extremely competitive environment resulted in a decline in the operating
results from the distribution of products to the retail grocery trade
during fiscal 1995. As a result, during the fourth quarter of fiscal 1995,
the Company began to focus on geographic regions where the hardpack
products can be delivered and marketed in a more efficient manner. This
action is expected to improve operating results but may result in lower
gross sales of hardpack frozen yogurt products in 1996.
Sales by Company-owned stores declined 17 percent during fiscal 1995.
This decline resulted primarily from a reduction in the number of
Company-owned stores. During the fourth quarter, the Company decided to
franchise or close most of the Company-owned stores. The Company believes
the stores can operate more effectively with local ownership. The sales in
fiscal 1995 of Company-owned stores were approximately $18 million and the
divestiture of the stores will lower future sales of the Company in the
food products segment. At November 30, 1995, the Company operated 42
stores most of which the Company expects to franchise during fiscal 1996.
Average store sales (the average of sales by domestic traditional stores
open the entire fiscal year) for Company-owned and franchised
"TCBY"(Registered) stores remained unchanged at $212,000 in fiscal 1995.
Same store sales (the comparison of fiscal 1995 individual traditional
"TCBY"(Registered) store sales with sales by the same stores operating
during the same period of fiscal 1994) decreased one percent in fiscal
1995. The restaurant industry continues to be highly competitive. The
Company is continuing its efforts to improve store sales through national
television advertising campaigns, menu extensions, local media advertising,
store decor upgrades, and relo-
Page 3
<PAGE>
cations. The efforts to improve store sales include the Company's new
"TCBY"(Registered) Treats concept. The "TCBY"(Registered) Treats concept
features "TCBY"(Registered) soft serve frozen yogurt, but adds
"TCBY"(Registered) hand- dipped frozen yogurt, hand-dipped premium ice
cream, Paradise Ice(Trademark) shaved ice, frozen custard, and
"TCBY"(Registered) bakery items. As of November 30, 1995, 348 stores had
converted and 134 were in the process of converting to the new concept.
Even with the successful implementation of these programs, store sales may
decline and store closings may continue.
Sales in the equipment segment decreased 16 percent during fiscal 1995 from
$17.2 million in fiscal 1994 to $14.4 million in fiscal 1995. This
decrease is primarily the result of fewer sales of equipment packages by
the Company's equipment distributor to domestic and international
franchisees. The Company plans to divest its equipment manufacturer
located in Fresno, California as this subsidiary is no longer a part of the
Company's core business.
The ratio of cost of sales to sales was 59.8 percent for fiscal 1995 as
compared to 58.8 percent for fiscal 1994. The ratio of cost of sales to
sales for the food products segment and equipment segment in fiscal 1995
was 57.1 percent and 81.8 percent, respectively, compared to 56.3 percent
and 79.2 percent, respectively, in fiscal 1994.
The increase in the overall cost of sales to sales ratio is attributed to
higher overhead costs per unit at the Company's manufacturing facility in
Dallas as a result of lower volumes produced in fiscal 1995 compared to the
previous year and higher total overhead costs primarily related to the
expansion of the manufacturing facility. In addition, the Company's
equipment manufacturing subsidiary experienced increases in cost of sales
during fiscal 1995 as a result of lower margins on certain specialty
vehicle contracts. The increase in the cost of sales to sales ratio was
partially offset by 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 primarily because of the sale of the
refrigerated yogurt product line. As previously discussed, the Company
decided to franchise or close most of its Company-owned stores. The
Company-owned stores have a lower cost of sales to sales ratio than the
overall ratio for the food products segment, therefore, as such stores are
sold or closed, the cost of sales to sales ratio is expected to increase in
fiscal 1996. Milk prices, which represent a major component of the
Company's cost of sales, remained relatively constant compared to the prior
period. However, 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
Page 4
<PAGE>
increase of approximately one percent in the second quarter of fiscal 1995.
Franchising revenues consist of initial franchise and license fees and
royalty income. In fiscal 1995, initial franchise and license fees
increased 18 percent and royalty income decreased five percent from fiscal
1994. The increase in franchise and license fees results primarily from
increased initial international franchise fees. The decrease in royalty
income results from decreased international royalties as a result of large
purchases of proprietary ingredients 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 decrease in domestic traditional "TCBY"(Registered) stores as
noted above. Four percent of food products sales and franchising revenues
were generated from international activity in fiscal 1995 compared to five
percent in fiscal 1994.
Operating expenses, as a percentage of combined sales and franchising
revenues, were 74 percent and 39 percent for fiscal 1995 and 1994,
respectively. The increase is primarily attributed to the Company adopting
several new accounting standards during the fourth quarter of 1995
including Financial Accounting Standards Board Statement ("Statement") No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" and Statement No. 114 "Accounting by Creditors
for Impairment of a Loan". The adoption of the new standards resulted in
pre-tax charges of $27.6 million in fiscal 1995.
The charges for impairment of assets resulted primarily from the reduction
of the carrying values of Company-owned stores held for sale or disposal,
distribution allowances, and Carlin Manufacturing. As previously
discussed, the Company decided to franchise or close most of its
Company-owned stores and recorded an impairment loss of $9.1 million to
reduce the carrying value of these assets and for costs such as lease
commitments, taxes, and other closing costs. The decision to close some
Company-owned stores was made after consideration of, among other things,
store sales, store profitability, store cash flow, lease terms, and market
conditions. Due to these actions, a restructuring of the Company's
organization was implemented and a restructuring charge of $1.4 million was
recorded in fiscal 1995 for employee severance costs to be paid in fiscal
1996. The restructuring is estimated to result in a reduction of
approximately $2.4 million in salary and benefits in fiscal 1996. The
impairment of distribution allowances resulted from lower cash flows
related to the distribution of products to the retail grocery trade. Due
to increased competitive activity in the frozen dessert category, the
Company experienced increased selling costs associated with the sale of
hardpack yogurt products within the retail grocery trade during fiscal 1995
compared to fiscal 1994. The retail grocery trade remains very competitive
and the Company is refining its
Page 5
<PAGE>
focus to geographic regions where hardpack products can be delivered and
marketed in a more efficient manner. Carlin Manufacturing is no longer a
part of the Company's core business and the Company has initiated the
process to divest this subsidiary. The reduction of the carrying value of
these assets is estimated to reduce depreciation and amortization by
approximately $6.0 million in fiscal 1996.
The impairment charges for loans relates to the receivables from
franchisees and Mid-America Dairymen, Inc. Impairment losses are required
when future cash flows are expected to vary from the original terms of the
receivable. The Company's cash receipts on certain receivables from
franchisees have varied from the original terms; thus requiring an
impairment charge. As previously discussed, Mid-America Dairymen, Inc.
purchased the rights for the exclusive manufacturing and distribution of
the "TCBY"(Registered) refrigerated yogurt line throughout the United
States in April, 1995. The Company received cash proceeds of $1.2 million
upon closing and a receivable of $10.6 million as consideration in the
transaction. Payments on the receivable are primarily based on volumes of
yogurt sold by Mid-America Dairymen, Inc. with certain required payments
regardless of volume. The receivable represented the net present value of
the minimum required payments over the term of the agreement at the time
the transaction was consummated. Subsequently, the sales of the
"TCBY"(Registered) refrigerated yogurt line and related cash payments have
been less than anticipated due to a very competitive environment in the
refrigerated yogurt industry. Mid-America Dairymen, Inc. has introduced
new products and is developing additional products to introduce in the
future in an attempt to increase sales. However, the Company has agreed to
waive minimum required payments for a period of time, and accordingly has
provided an impairment allowance related to the receivable based on
management's best estimate of future discounted cash flows.
Interest expense increased approximately $504,000 in fiscal 1995 compared
to fiscal 1994. This increase is due to an additional $7.5 million
borrowing in November 1994 related to the expansion of the Company's
manufacturing facility and a slight increase in the average interest rate
paid. The increase in interest expense is partially offset by capitalized
interest cost of $177,000 in fiscal 1995 in association with expansion of
the Company's manufacturing facility.
Income tax benefit or expense as a percentage of pre-tax loss or income
increased slightly to 33.4 percent in fiscal 1995 from 33.3 percent in
fiscal 1994. Assuming no significant change in federal and state tax laws,
the Company expects its future tax rate to approximate the statutory
federal rate. Deferred tax assets of $5.1 million will be realized
primarily through the offset of existing deferred tax liabilities, the
divestiture of assets held for sale, and payment of liabilities related to
the divestiture of these assets.
Page 6
<PAGE>
In summary, the operating results of fiscal 1995 were significantly below
those of previous years. The Company experienced sales declines due to the
sale of the refrigerated yogurt line, reduced distribution of the
"TCBY"(Registered) hardpack products to the retail grocery trade, and the
sale or closing of Company-owned stores. The Company also incurred some
additional operating costs associated with the start-up of new equipment at
the manufacturing facility. This new equipment, along with enhancements to
the logistics function, has allowed for increased production and customer
service capabilities and has provided for substantial additional
manufacturing capacity. The Company is actively pursuing new customers for
its "TCBY"(Registered) products and other frozen dessert products to
utilize the capacity available at the facility. Overall results were also
impacted by a decline in the operating results from the distribution of
products to the retail grocery trade, operations of Company-owned stores,
and the adoption of new accounting standards.
Management spent the greater part of 1995 analyzing the Company's strategic
direction and taking actions to move the Company forward. These actions
included the sale of the refrigerated yogurt business to Mid-America
Dairymen, Inc., beginning the process to franchise or close most
Company-owned stores, initiating the process to divest of Carlin
Manufacturing, exploring strategic alternatives in the distribution of
hardpack yogurt products to the retail grocery trade, introduction of the
"TCBY"(Registered) Treats concept, and restructuring the Company's
organization. As a result of these actions, management believes the
Company is positioned for improved results in fiscal 1996.
Fiscal 1994 Compared to Fiscal 1993
The Company's total sales for fiscal 1994 increased 28 percent from sales
in fiscal 1993. The Company's operations were primarily in two segments:
food products and equipment.
Sales in the food products segment increased from $92.4 million in fiscal
1993 to $122.4 million during fiscal 1994. The food products segment
represented 87 percent of the Company's total sales during fiscal 1994 as
compared to 84 percent in fiscal 1993.
Within the food products segment, wholesale sales of frozen yogurt
increased four percent during fiscal 1994 as compared to fiscal 1993. This
increase was due to a greater number of non-traditional locations operating
during fiscal 1994 compared to fiscal 1993 and was partially offset by a
reduction in the number of domestic traditional "TCBY"(Registered) stores
in operation. See table above setting forth location activity for fiscal
1994.
Included in the franchised and Company-owned store in formation are 152 and
166 "TCBY"(Registered) stores closed for relocation or for the season on
November 30, 1994 and 1993, respectively.
Page 7
<PAGE>
Sales of yogurt to the retail grocery trade increased 252 percent during
fiscal 1994 as compared to fiscal 1993. This increase was a result of
expanded geographic distribution of both hardpack frozen yogurt and
refrigerated yogurt products.
Sales by Company-owned stores declined 19 percent during fiscal 1994 as
compared to fiscal 1993. This decline resulted primarily from a reduction
in the number of Company-owned stores operated during fiscal 1994.
Sales in the equipment segment increased seven percent during fiscal 1994
from $16.1 million in fiscal 1993 to $17.2 million in fiscal 1994. Sales
by the equipment segment represented 12 percent of the Company's total
sales during fiscal 1994 as compared to 15 percent in fiscal 1993. The
increase in sales by the Company's equipment distributor was primarily due
to sales of equipment packages to international franchisees and a full year
of sales for AIMCO Equipment Company, which was acquired in April 1993.
This increase was partially offset by the completion by the equipment
manufacturer 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.
Average store sales for Company-owned and franchised "TCBYR" stores
increased five percent from $202,000 in fiscal 1993 to $212,000 in fiscal
1994. Same store sales increased 3.6 percent in fiscal 1994 from fiscal
1993. The increase in average store sales was due primarily to improved
same store sales and the closing of stores with sales less than the average
store sales reported for fiscal 1994. The overall improvement in same
store sales for the year reflected the Company's continued efforts to
increase sales through national and local media advertising, menu
extensions, store decor upgrades, and relocations.
The ratio of cost of sales to sales was 59 percent for fiscal 1994 as
compared to 53 percent for fiscal 1993. The ratio of cost of sales to
sales for the food products segment and equipment segment in fiscal 1994
was 56 percent and 79 percent, respectively, compared to 44 percent and 78
percent, respectively, in fiscal 1993. The increase in the cost of sales
to sales ratio was attributed primarily to a change in sales mix. Retail
sales through Company-owned stores declined while wholesale sales to the
retail grocery trade and private label customers increased (private label
and refrigerated yogurt have a higher cost of sales to sales ratio). A
major component of the Company's cost of sales of food products is milk.
Milk pricing is regulated by the USDA which sets pricing on a monthly
basis. Milk prices in fiscal 1994 were approximately six percent higher
than prices in fiscal 1993. The Company in the past has not adjusted its
selling prices to reflect fluctuations in milk pricing. In addition, the
Company experienced increases in
Page 8
<PAGE>
other components of cost of sales, such as product packaging costs. 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.
Franchising revenues consist of initial franchise and license fees and
royalty income. In fiscal 1994, initial franchise and license fees
increased 24 percent while royalty income increased eight percent from
fiscal 1993. The increase in franchise and license fees resulted primarily
from domestic and international franchising activity. The increase in
royalty income resulted from international franchise activity and a higher
number of non-traditional locations. Five percent of food products sales
and franchising revenues were generated from international activity in
fiscal 1994 compared to three percent in fiscal 1993.
Operating expenses increased 11 percent in fiscal 1994 compared to fiscal
1993. This increase was due primarily to an increase in expenses (e.g.,
hiring of additional salespersons and administrative staff and higher
selling costs, such as consumer marketing expenses, trade allowances,
distribution allowances, and brokerage fees) associated with the sales
growth and increased distribution of yogurt products within the retail
grocery trade and the continued development of non-traditional locations.
Increases in operating expenses were partially offset by a reduction in the
number of Company-owned stores operating during fiscal 1994 (see location
activity schedule above) which resulted in a decrease in the amount of
total operating expenses within Company-owned stores. As a percentage of
combined sales and franchising revenues, operating expenses were 39 percent
and 44 percent for fiscal 1994 and 1993, respectively.
Interest expense decreased 24 percent in fiscal 1994 over fiscal 1993.
This decrease was due to a reduction in the average principal balances of
outstanding long-term debt during 1994.
Interest income decreased 18 percent in fiscal 1994 from fiscal 1993. This
decrease was due to reductions in the outstanding balances of interest
earning assets. The Company's practice is not to accrue interest income on
franchise notes receivable when collection becomes uncertain.
Income taxes as a percentage of pre-tax income decreased to 33.3 percent in
fiscal 1994 from 34.3 percent in fiscal 1993. The decrease related
primarily to a reduction in tax allowances established in prior years.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically generated cash from operations sufficient to
meet its normal operating requirements. Cash provided by operating
activities amounted to $8.6 million in
Page 9
<PAGE>
fiscal 1995 compared to $4.5 million in fiscal 1994 and $12.4 million in
fiscal 1993. The increase in fiscal 1995 resulted primarily from the
reduction of receivables and lower investments in distribution allowances.
The decrease in fiscal 1994 resulted primarily from increases in
distribution allowances and trade accounts receivable to expand
distribution into the retail grocery trade.
On November 30, 1995, working capital was $36.7 million compared to $46.5
million on November 30, 1994. The current ratio was 3.5 to 1 on November
30, 1995, and 4.7 to 1 on November 30, 1994.
The Company's cash and short-term investments decreased approximately $5.8
million in fiscal 1995. This decrease resulted primarily from (i) lower
earnings in fiscal 1995 compared to fiscal 1994, (ii) the expansion of the
Company's yogurt manufacturing facility and related debt service, and (iii)
cash dividends paid.
Long-term debt repayments exceeded long-term debt proceeds by $3.2 million
and $3.8 million in fiscal 1995 and 1993, respectively. Long-term debt
proceeds exceeded long-term debt repayments by $5.4 million in fiscal 1994.
In November, 1994, the Company received $7.5 million in loan proceeds to
finance the expansion of the Company's manufacturing facility in Dallas,
Texas. The $7.5 million was borrowed under an unsecured note and was in
addition to existing debt with the same bank. At November 30, 1995, the
Company was not in compliance with certain financial covenants required
under the loan agreements. The bank waived these events of default as of
and for the period ended November 30, 1995 and has agreed to amend the loan
agreement to require a fixed charge coverage ratio of 1.25 to 1.00 be
maintained in future periods. The Company is required to comply with
various financial covenants on quarterly measurement dates in 1996. Based
upon the Company's projected operating results in 1996, management believes
it is probable that the Company will be in compliance with the financial
covenants throughout 1996.
Cash generated from operations has been used to finance all capital
expenditures, with the exception of the plant expansion during fiscal 1995.
Purchases of property, plant, and equipment amounted to $9.9 million, $11.4
million, and $6.0 million in fiscal 1995, 1994, and 1993, respectively.
The Company had no material commitments for capital expenditures at
November 30, 1995. The Company has budgeted approximately $2.0 million for
capital expenditures in fiscal 1996. It is expected that operating cash
flows will be used to finance these capital expenditures, although certain
equipment may be acquired through capital leases. In addition, from time
to time the Company may evaluate and make acquisitions. Any acquisition
may require the use of operating cash flows, long-term or short-term
financing, or issuance of equity or other financing
Page 10
<PAGE>
services in order to consummate such acquisition or to fund operating and
capital expenditures of any acquired business.
Cash provided by operating activities has also been used by the Company in
the past to provide financing to franchisees for the purpose of acquiring
equipment and other fixed assets for the development or purchase of
"TCBY"(Registered) stores. The principal collected on notes receivable
primarily from franchisees exceeded origination of notes receivable by
$2,101,000, $848,000, and $965,000 in fiscal 1995, 1994, and 1993,
respectively.
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.
The Company is authorized to repurchase up to three million shares of its
outstanding common stock. These repurchases will be funded with cash flows
from operations or long-term financing.
Cash dividends of 20 cents per share were paid to stockholders during
fiscal 1995, 1994, and 1993. The Company will consider adjustments to the
dividend rate after giving consideration to return to stockholders,
profitability expectations, financing and cash needs of the Company, and
other factors.
Page 11
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Stockholders
TCBY Enterprises, Inc.
We have audited the accompanying consolidated balance sheets of TCBY
Enterprises, Inc. and subsidiaries as of November 30, 1995 and 1994, and
the related consolidated statements
of operations, stockholders' equity, and cash flows for each of the
three years in the period ended November 30, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of TCBY
Enterprises, Inc. and subsidiaries at November 30, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of
the three years in the period ended November 30, 1995, in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1995
the Company changed its method of accounting for the impairment of notes
receivable and long-lived assets.
/s/ Ernst & Young LLP
______________________________
Ernst & Young LLP
January 18, 1996
Little Rock, Arkansas
1
<PAGE>
TCBY Enterprises, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
November 30
1995 1994
__________________________
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 5,565,654 $ 4,938,118
Short-term investments 8,824,163 15,213,179
Receivables:
Trade accounts 10,114,935 15,805,358
Notes 2,918,762 2,120,932
Allowance for doubtful accounts and impaired notes (1,592,607) (383,515)
__________________________
11,441,090 17,542,775
Refundable income taxes 4,418,936 1,501,663
Deferred income taxes 2,463,089 -
Inventories 12,920,468 13,621,790
Distribution allowances - 4,098,965
Prepaid expenses and other assets 2,098,366 2,051,808
Assets held for sale 3,625,375 -
__________________________
Total current assets 51,357,141 58,968,298
Property, plant, and equipment:
Land 2,866,820 4,225,248
Buildings 23,402,389 23,583,374
Furniture, vehicles, and equipment 47,325,993 55,172,254
Leasehold improvements 3,214,117 10,986,674
Construction in progress 31,483 3,089,350
Allowances for depreciation and amortization (31,130,608) (40,213,323)
__________________________
45,710,194 56,843,577
Other assets:
Notes receivable, less current portion (less allowance
for doubtful and impaired notes of $9,585,410 in 1995
and $894,869 in 1994) 7,035,259 8,358,703
Intangibles (less amortization of $1,514,068 in 1995
and $3,317,663 in 1994) 3,517,942 5,795,445
Distribution allowances, less current portion - 7,105,649
Other 4,004,707 5,208,415
__________________________
14,557,908 26,468,212
__________________________
Total assets $111,625,243 $142,280,087
==========================
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
<CAPTION>
November 30
1995 1994
_________________________
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 2,455,127 $ 2,890,869
Accrued expenses 9,041,380 5,742,510
Deferred income taxes - 751,859
Current portion of long-term debt 3,171,448 3,072,756
__________________________
Total current liabilities 14,667,955 12,457,994
Long-term debt, less current portion 12,640,904 15,909,857
Deferred income taxes 2,137,617 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 27,062,345 shares in 1995
and 26,911,333 shares in 1994 2,706,235 2,691,133
Additional paid-in capital 25,547,184 24,840,431
Retained earnings 63,661,235 90,153,584
__________________________
91,914,654 117,685,148
Less treasury stock, at cost (1,387,069 shares
in 1995 and 1,317,069 shares in 1994) (9,735,887) (9,411,199)
__________________________
Total stockholders' equity 82,178,767 108,273,949
__________________________
Total liabilities and stockholders' equity $111,625,243 $142,280,087
==========================
</TABLE>
See accompanying notes.
3
<PAGE>
TCBY Enterprises, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year Ended November 30
1995 1994 1993
_______________________________________
<S> <C> <C> <C>
Sales $109,808,283 $140,444,739 $109,525,036
Cost of sales 65,710,499 82,546,965 58,309,928
_______________________________________
Gross profit 44,097,784 57,897,774 51,215,108
Franchising revenues:
Initial franchise and license fees 1,590,510 1,342,311 1,079,000
Royalty income 10,171,075 10,684,055 9,873,042
_______________________________________
11,761,585 12,026,366 10,952,042
_______________________________________
55,859,369 69,924,140 62,167,150
Operating expenses:
Selling, general, and administrative
expenses 59,771,433 57,369,942 51,822,295
Provision for doubtful accounts and
impaired notes 12,572,172 1,469,630 1,079,630
Impairment of long-lived assets 15,946,090 - -
Restructuring charges 1,400,000 - -
_______________________________________
89,689,695 58,839,572 52,901,925
_______________________________________
(Loss) income from operations (33,830,326) 11,084,568 9,265,225
Other income (expense):
Interest expense (1,121,995) (618,121) (810,216)
Interest income 969,652 1,070,029 1,311,958
Other income (expense) 1,911,884 (217,332) (19,536)
_______________________________________
1,759,541 234,576 482,206
_______________________________________
(Loss) Income before income taxes (32,070,785) 11,319,144 9,747,431
Income tax (benefit) expense:
Current (3,982,309) (96,144) 3,122,246
Deferred (6,715,618) 3,863,276 216,374
_______________________________________
(10,697,927) 3,767,132 3,338,620
_______________________________________
Net (loss) income $(21,372,858)$ 7,552,012 $ 6,408,811
=======================================
Net (loss) income per share $ .(83)$ .30 $ .25
=======================================
Average shares outstanding 25,602,375 25,523,436 25,605,753
=======================================
</TABLE>
See accompanying notes.
4
<PAGE>
TCBY Enterprises, Inc.
Consolidated Statements of
Stockholders' Equity
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Retained Treasury
Shares Par Value Capital Earnings Stock Total
__________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Balance at
12/1/92 26,781,099 $2,678,110 $24,155,249 $86,412,866 $(8,438,600) $104,807,625
Exercise
of stock
options 23,286 2,329 107,874 - - 110,203
Cash divi-
dends--$.20
per share - - - (5,115,684) - (5,115,684)
Purchase of
treasury
stock-
-172,838
shares - - - - (1,012,899) (1,012,899)
Sale of
treasury
stock-
-4,081
shares - - (7,142) - 40,300 33,158
Net income - - - 6,408,811 - 6,408,811
_______________________________________________________________________
Balance at
11/30/93 26,804,385 2,680,439 24,255,981 87,705,993 (9,411,199) 105,231,214
Exercise
of stock
options,
including
tax bene-
fit of
$47,575 106,948 10,694 584,450 - - 595,144
Cash divi-
dends--$.20
per share - - - (5,104,421) - (5,104,421)
Net income - - - 7,552,012 - 7,552,012
dends--$.20
per share - - - (5,119,491) - (5,119,491)
Purchase of
treasury
stock-
-70,000
shares - - - - (324,688) (324,688)
Net loss - - - (21,372,858) - (21,372,858)
__________________________________________________________________________
Balance at
11/30/95 27,062,345 $2,706,235 $25,547,184 $63,661,235 $(9,735,887) $ 82,178,767
=========================================================================
</TABLE>
See accompanying notes. 5
<PAGE>
TCBY Enterprises, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended November 30
1995 1994 1993
_______________________________________
<S> <C> <C> <C>
Operating Activities
Net (loss) income $(21,372,858) $ 7,552,012 $ 6,408,811
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Depreciation and amortization 10,880,350 8,862,307 7,691,565
Amortization of intangibles 599,053 611,847 554,761
Provision for doubtful accounts and
impaired notes 12,572,172 1,469,630 1,079,630
Provision of impairment of long-lived
assets 15,946,090 - -
Restructuring charges 1,400,000 - -
Deferred income taxes (benefits) (6,715,618) 3,863,276 216,374
(Gain) loss on sales of property and
equipment (66,721) 266,128 (90,140)
Gain on sale of product line (2,370,046) - -
Changes in operating assets and
liabilities:
Receivables 3,099,232 (4,945,720) (1,859,088)
Inventories 413,853 (2,144,953) 618,941
Prepaid expenses (708,548) 487,653 (1,178,751)
Distribution allowances (919,585) (11,640,511) (922,195)
Intangibles and other assets 731,254 (803,749) 370,779
Accounts payable and accrued
expenses (2,019,140) 1,891,738 64,181
Income taxes (2,917,273) (1,014,269) (588,393)
_______________________________________
Net Cash Provided By Operating
Activities 8,552,215 4,455,389 12,366,475
Investing Activities
Purchases of property, plant, and
equipment (9,883,365) (11,391,402) (6,021,878)
Purchase of business, net of cash
acquired - - (2,244,262)
Proceeds from sales of property and
equipment 161,360 352,338 1,903,415
Origination of notes receivable (453,892) (1,309,698) (2,036,213)
Principal collected on notes
receivable 2,554,787 2,157,468 3,001,231
Purchases of short-term investments (7,498,206) (12,111,419) (25,874,278)
Proceeds from maturity of short-term
investments 13,887,222 11,724,529 21,775,892
Proceeds from sale of product line 1,200,000 - -
_______________________________________
Net Cash Used In Investing Activities (32,094) (10,578,184) (9,496,093)
Financing Activities
Proceeds from long-term borrowings - 7,500,000 14,622,357
Proceeds from sale of Common Stock 721,855 595,144 110,203
Dividends paid (5,119,491) (5,104,421) (5,115,684)
Net treasury stock transactions (324,688) - (979,741)
Principal payments of long-term debt (3,170,261) (2,096,884) (18,395,731)
_______________________________________
Net Cash (Used In) Provided By
Financing Activities (7,892,585) 893,839 (9,758,596)
_______________________________________
Increase (Decrease) In Cash And Cash
Equivalents 627,536 (5,228,956) (6,888,214)
Cash and cash equivalents at beginning
of year 4,938,118 10,167,074 17,055,288
_______________________________________
Cash And Cash Equivalents At End Of Year $ 5,565,654 $ 4,938,118 $ 10,167,074
=======================================
</TABLE>
See accompanying notes.
6
<PAGE>
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements
November 30, 1995
1. Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
Description of Business
The Company manufactures and sells soft serve frozen yogurt, hardpack
frozen yogurt and ice cream, and novelty food products through
Company-owned and franchised retail stores ("TCBY"(Registered) stores,
non-traditional locations (e.g., airports, schools, hospitals, and travel
plazas), and the retail grocery trade (e.g., grocery stores and wholesale
clubs). In addition, the Company manufactures and sells equipment related
to the foodservice industry.
The following summarizes "TCBY"(Registered) locations:
<TABLE>
<CAPTION>
November 30
1995 1994 1993
____________________
<S> <C> <C> <C>
Franchised or licensed 1,405 1,386 1,364
Company-owned 42 96 121
Non-traditional 1,273 1,319 989
____________________
2,720 2,801 2,474
====================
</TABLE>
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Short-term Investments
Short-term investments consist of certificates of deposit and other income
producing nonequity securities with an original maturity of greater than
three months and less than one year. These investments are recorded at
cost which approximates market value and are intended to be held to
maturity.
7
<PAGE>
TCBY ENTERPRISES, Inc.
Notes to Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
Inventories
Inventories are carried at the lower of cost or market. The cost of food
products is generally based on the latest invoice cost, while other
inventory cost is determined on a first-in, first-out basis.
Receivables
A majority of the Company's trade accounts receivable are due from
customers in the food products segment. In addition, the Company from time
to time extends credit in the form of notes receivable to franchisees.
During fiscal 1995 and 1994, the Company extended credit of approximately
$1,483,000 and $290,000, respectively, to finance the sale of certain
Company-owned stores.
Notes receivable from franchisees are primarily collateralized by equipment
located in "TCBY"(Registered) stores. Most of these notes receivable are
intended to be paid over five years and bear interest at market rates.
Notes receivable are placed on a non-accrual status when the collectibility
of principal or interest becomes uncertain.
In fiscal 1995, the Company adopted Financial Accounting Standards Board
Statement No. 114, "Accounting by Creditors for Impairment of a Loan".
Under the new standard, the 1995 allowance for credit losses related to
notes receivable that are identified for evaluation in accordance with
Statement No. 114 is based on discounted cash flows using the note's
initial effective interest rate or the fair value, net of estimated selling
costs, of the collateral for certain collateral dependent notes. Prior to
1995, the allowance for credit losses related to these notes was based on
undiscounted cash flows or the fair value of the collateral for collateral
dependent notes.
At November 30, 1995, the recorded investment in notes considered to be
impaired under Statement No. 114 was $13,362,000. Included in this balance
are $13,027,000 of impaired notes for which the related allowance for
credit losses is $10,469,000 and $335,000 of impaired notes which as a
result of write-downs do not have an allowance for credit losses. The
impairment losses are recorded in the food products segment. The average
recorded investment in impaired notes during the year ended November 30,
1995 was approximately $6,667,000. For the year ended November 30, 1995,
the Company recognized interest income on impaired notes of $32,000 using
the cash basis method of income recognition. The notes considered to be
impaired at November 30, 1995, include the note receivable from Mid-America
Dairymen, Inc. (See Note 11.)
8
<PAGE>
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
The following presents changes in the allowance for doubtful accounts and
impaired notes:
<TABLE>
<CAPTION>
1995 1994 1993
_______________________________________
<S> <C> <C> <C>
Balance at December 1 $ 1,278,384 $ 2,168,490 $ 2,333,422
Provision for doubtful accounts and
impaired notes 12,572,172 1,469,630 1,079,630
Charge-offs (2,824,072) (2,401,418) (1,271,238)
Recoveries 151,533 41,682 26,676
_______________________________________
Balance at November 30 $ 11,178,017 $ 1,278,384 $ 2,168,490
=======================================
</TABLE>
Long-Lived Assets
Property, plant, and equipment is recorded at cost and is depreciated by
the straight-line method for financial reporting purposes over the
estimated useful lives of the individual assets. For tax reporting
purposes, accelerated cost recovery depreciation methods are used.
Intangibles include the cost in excess of net assets of businesses
acquired, trademarks, and non-compete agreements. These intangibles are
being amortized over the estimated future periods benefited, ranging from 5
to 40 years. During fiscal 1995, intangibles related to Company-owned
stores and Carlin Manufacturing were written off. (See Note 12.)
Distribution allowances are paid to customers to obtain retail or wholesale
shelf space. These costs are capitalized and amortized on a straight-line
basis over a three-year period. If shelf space with a customer is lost,
the unamortized allowances are written off.
During 1995, the Company adopted Financial Accounting Standards Board
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of", which requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount.
Statement 121 also requires that impairment losses be recorded on
long-lived assets to be disposed of when the carrying value of the asset
exceeds the fair value (usually based on discounted cash flows) less the
estimated selling costs. (See Note 12.)
9
<PAGE>
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
Franchising Revenues
Franchising revenues consist of initial franchise and license fees and
royalty income. Initial franchise and license fees are recognized as
revenue when the Company has substantially completed its obligations under
the franchise or license agreement. Royalty income is earned on sales by
franchisees and is recognized as revenue when the related sales are made.
Income Taxes
The liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse.
Net (Loss) Income Per Share
Net (loss) income per share is based on the average number of common shares
outstanding during each year. The dilutive effect of stock options is
insignificant.
Reclassification
Certain amounts in the 1994 and 1993 consolidated financial statements have
been reclassified to conform to the 1995 presentation.
2. Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
November 30
1995 1994
__________________________
<S> <C> <C>
Manufacturing materials and supplies $ 4,449,940 $ 4,417,832
Finished yogurt and other food products 4,203,058 4,162,242
Equipment and other products 4,267,470 5,041,716
__________________________
$ 12,920,468 $ 13,621,790
==========================
</TABLE>
10
<PAGE>
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements (continued)
3. Long-Term Debt
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
November 30
1995 1994
__________________________
<S> <C> <C>
Unsecured notes payable $ 15,812,352 $ 18,979,110
Capitalized lease obligations - 3,503
__________________________
15,812,352 18,982,613
Less current portion 3,171,448 3,072,756
__________________________
$ 12,640,904 $ 15,909,857
==========================
</TABLE>
Effective June 11, 1993, the Company entered into a loan agreement with a
bank. The proceeds of the note issued under this loan agreement were used
to retire existing indebtedness. In November 1994, the loan agreement was
revised and the Company borrowed an additional $7.5 million. These
proceeds were used to finance various projects designed to expand the
Company's food products production capabilities. The notes are unsecured
and bear interest at the bank's base rate less 0.75% or at a match-funding
rate of the adjusted Eurodollar rate plus 1.0%. The interest rate at
November 30, 1995 was 7.0625% for the original note and 6.90625% for the
additional borrowing. The notes are due in monthly installments of
approximately $265,000 plus interest. The original note matures on June 1,
2000 with the additional $7.5 million borrowing maturing December 31, 2001.
The loan agreement requires, among other things, a fixed charge coverage
ratio of greater than 1.5 to 1.0 be maintained. This ratio is defined as
the sum of net income and non-cash charges adjusted for extraordinary and
non-recurring items divided by the sum of the current portion of long-term
debt, cash dividends paid, and capital expenditures incurred to maintain or
replace existing property, plant, and equipment.
At November 30, 1995, the Company was not in compliance with certain
financial covenants required in the loan agreement. The bank waived these
events of default as of and for the period ended November 30, 1995 and has
agreed to amend the loan agreement to require a fixed charge coverage ratio
of 1.25 to 1.00 be maintained for future periods. The Company is required
to comply with various financial covenants on quarterly me asurement dates
in fiscal 1996. Based upon the Company's projected operating results in
fiscal 1996, management believes it is probable that the Company will be in
compliance with the financial covenants throughout fiscal 1996. As such,
the debt is classified in the balance sheet based on the terms of the loan
agreement.
Annual maturities of long-term debt total $3,171,448 in fiscal 1996 through
1999 and $2,301,819 in fiscal 2000.
11
<PAGE>
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements (continued)
3. Long-Term Debt (continued)
In connection with the construction of certain property, the Company
capitalized interest costs of approximately $177,000 in fiscal 1995. There
was no capitalized interest in fiscal 1994 and 1993. During fiscal 1995,
1994, and 1993, the Company paid interest of approximately $1,299,000,
$631,000, and $810,000, respectively.
4. Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
November 30
1995 1994
__________________________
<S> <C> <C>
Deferred tax assets:
Impairment allowance on fixed assets $ 1,563,460 $ -
Allowance for doubtful accounts and impaired notes 753,693 339,800
Accrued expenses related to assets held for sale 669,002 -
Accrued rent 189,526 270,748
Other 1,894,158 1,556,632
__________________________
Total deferred tax assets 5,069,839 2,167,180
Deferred tax liabilities:
Distribution allowances - 3,865,592
Tax over book depreciation 2,736,595 2,398,335
Other 2,007,772 2,293,399
__________________________
Total deferred tax liabilities 4,744,367 8,557,326
__________________________
Net deferred tax assets (liabilities) $ 325,472 $(6,390,146)
==========================
</TABLE>
Significant components of the (benefit) provision for income taxes are as
follows:
<TABLE>
<CAPTION>
Year ended November 30
1995 1994 1993
_______________________________________
<S> <C> <C> <C>
Current:
Federal $(3,894,150) $ (81,245) $ 3,081,333
State (88,159) (14,899) 40,913
_______________________________________
Total current (3,982,309) (96,144) 3,122,246
Deferred (6,715,618) 3,863,276 216,374
_______________________________________
$(10,697,927) $ 3,767,132 $ 3,338,620
=======================================
</TABLE>
12
<PAGE>
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements (continued)
4. Income Taxes (continued)
The reconciliation of income tax (benefit) computed at the United States
federal statutory tax rates to income tax (benefit) expense is:
<TABLE>
<CAPTION>
Year ended November 30
1995 1994 1993
________________________________________
<S> <C> <C> <C>
Income tax (benefit) at the
statutory federal rate $(10,904,067) $ 3,861,700 $ 3,314,127
State income taxes, net of
federal benefit (58,185) (9,833) 27,003
Other, net 264,325 (84,735) (2,510)
________________________________________
Total income tax (benefit) $(10,697,927) $ 3,767,132 $ 3,338,620
========================================
</TABLE>
The Company made income tax payments of approximately $25,000, $871,000,
and $3,711,000 in fiscal 1995, 1994, and 1993, respectively.
5. Accrued Expenses
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
November 30
1995 1994
__________________________
<S> <C> <C>
Rent $ 1,547,372 $ 799,979
Compensation 3,355,348 2,411,903
Other 4,138,660 2,530,628
__________________________
$ 9,041,380 $ 5,742,510
==========================
</TABLE>
Accrued expenses at November 30, 1995 include $3.5 million of costs related of
primarily to the Company's restructuring and sale of Company-owned stores.
13
<PAGE>
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements (continued)
6. Lease Commitments
In fiscal 1995, 1994, and 1993, rent expense totaled approximately
$5,020,000, $5,083,000, and $4,951,000, respectively. The future minimum
rental commitments as of November 30, 1995, for all non-cancelable operating
leases with initial or remaining terms in excess of one year are as follows:
<TABLE>
<CAPTION>
Offices and
Total Stores (1) Other (2)
_______________________________________
<S> <C> <C> <C>
1996 $ 3,353,239 $ 1,158,264 $ 2,194,975
1997 3,007,593 889,552 2,118,041
1998 1,568,395 689,052 879,343
1999 486,993 425,467 61,526
2000 338,006 302,116 35,890
Thereafter 1,211,295 1,211,295 -
_______________________________________
$ 9,965,521 $ 4,675,746 $ 5,289,775
=======================================
</TABLE>
(1) Certain of the leases are renewable for substantially the same rentals or
at increased rentals of up to approximately 20% for up to 20 additional
years. The rental commitments for Company-owned locations closed in
conjunction with the Company's decision to no longer operate stores
(see Note 12) totaled $949,000 and is excluded from the future minimum
commitments as this amount was accrued in fiscal 1995. The future minimum
rental commitments for stores relate primarily to locations held for sale.
(2) Includes a lease for the corporate headquarters with an initial term of 10
years. Rent expense is being recognized ratably over the initial 10-year
term. Renewal options exist for four 5-year terms at increased rentals of
up to approximately 16%.
Aggregate future minimum rentals to be received under non-cancelable
subleases are approximately $2,210,000 at November 30, 1995.
7. Contingencies
A purported investor in a former franchisee has claimed approximately $26
million in trebled damages plus costs and prejudgement 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 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.
14
<PAGE>
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements (continued)
7. Contingencies (continued)
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 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 reasonably possible loss.
8. Employee Benefit Plans
The Company's 1984, 1989, and 1992 Stock Option Plans, as amended, along
with the 1992 Non-employee Director Stock Option Plan, made available
options for the purchase of up to 4,369,960 shares of the Company's Common
Stock to certain officers and employees. The option prices are to be no
less than the fair market value of the Common Stock on the date of grant.
The options are generally exercisable in four equal installments, beginning
one year after the date of grant. As of November 30, 1995, outstanding
option prices range from $4.00 to $17.19 per share and the options expire
on various dates from May 1996 to April 2005.
The following summarizes the option transactions under the plans for fiscal
1995 and 1994:
<TABLE>
<CAPTION>
Shares Under Option Aggregate Option Price
________________________________________________
1995 1994 1995 1994
________________________________________________
<S> <C> <C> <C> <C>
Outstanding at beginning of
year 1,643,898 1,154,153 $10,929,936 $ 7,246,957
Granted 810,511 755,750 4,302,715 5,267,136
Exercised (151,012) (106,948) (702,864) (547,569)
Terminated (248,134) (159,057) (1,517,960) (1,036,588)
________________________________________________
Outstanding at end of year 2,055,263 1,643,898 $13,011,827 $10,929,936
================================================
Reserved for future grant 759,941 822,318
======================
Exercisable at end of year 620,162 512,428
======================
</TABLE>
15
<PAGE>
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements (continued)
8. Employee Benefit Plans (continued)
The Company maintains a pre-tax savings plan in accordance with the
provisions of Section 401(k) of the Internal Revenue Code (the "Plan").
Employees who have completed one year of service with the Company, are over
the age of 21, and fulfill the statutory minimum hours of service (1,000)
during the plan year are eligible to participate in the Plan. Under the
Plan, employees are eligible to contribute up to the lesser of 15% of
compensation or the statutory limit, with the Company matching 50% of the
first 5% of compensation contributed by the employee. The Company's
matching portion of employee contributions resulted in expense of
approximately $277,000, $210,000, and $184,000 in fiscal 1995, 1994, and
1993, respectively.
9. Certain Transactions
In fiscal 1995, 1994, and 1993, the Company paid gross billings totaling
approximately $180,000, $195,000 and $191,000, respectively, to a marketing
consulting firm whose chief executive officer is a director of the Company.
In fiscal 1995, 1994, and 1993, the Company recorded sales totaling
approximately $440,000, $447,000 and $329,000, respectively, to a
foodservice distributor whose chief executive officer is a director of the
Company.
On October 2, 1995, nine Company-owned stores were sold to franchisee
groups which included a shareholder and director of the Company. The gross
sales price of $1,065,000 was financed with promissory notes. The notes
are payable in periodic installments including interest. In addition, the
franchisee groups will manage six Company-owned stores and receive $140,000
annually for these services; the Company will retain ownership of these
stores for research and development and training purposes.
16
<PAGE>
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements (continued)
10. Operations by Industry Segment
Financial information for each of the Company's segments is set forth
below.
<TABLE>
<CAPTION>
Food
Products Equipment Other Total
_____________________________________________________
<S> <C> <C> <C> <C>
1995
____
Net sales and franchising
revenues $106,156,236 $ 14,425,426 $ 988,206 $121,569,868
Loss from operations (19,995,402) (2,306,930) (11,527,994) (33,830,326)
Identifiable assets 69,329,346 16,907,595 25,388,302 111,625,243
Capital expenditures 9,485,393 138,564 259,408 9,883,365
Depreciation and
amortization 9,370,086 543,982 966,282 10,880,350
1994
____
Net sales and franchising
revenues $134,379,486 $ 17,198,176 $ 893,443 $152,471,105
Profit (loss) from
operations 18,695,987 154,897 (7,766,316) 11,084,568
Identifiable assets 96,219,172 18,953,812 27,107,103 142,280,087
Capital expenditures 9,452,681 1,538,922 399,799 11,391,402
Depreciation and
amortization 7,291,780 444,398 1,126,129 8,862,307
1993
____
Net sales and franchising
revenues $103,306,766 $ 16,128,588 $ 1,041,724 $120,477,078
Profit (loss) from
operations 16,770,719 469,052 (7,974,546) 9,265,225
Identifiable assets 80,544,294 16,140,042 32,006,800 128,691,136
Capital expenditures 4,995,399 640,046 386,433 6,021,878
Depreciation and
amortization 5,959,263 396,840 1,335,462 7,691,565
</TABLE>
(a) Inter-segment sales and transfers are insignificant.
(b) The Company's business segments are described and discussed in
Management's Discussion and Analysis of Financial Condition and Results
of Operations.
(c) The "Other" segment is composed of unallocated corporate expenditures and
other sundry operations.
17
<PAGE>
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements (continued)
10. Operations by Industry Segment (continued)
Substantially all frozen yogurt products sold to "TCBY"(Registered) stores
are distributed exclusively by ProSource Distribution Services
("ProSource") (which acquired a portion of the distribution business of The
Martin-Brower Company during 1995), an international foodservice
distributor. Sales by the Company's manufacturing subsidiary to ProSource
totaled approximately $45.6 million, $49.0 million, and $49.7 million in
fiscal 1995, 1994, and 1993, respectively. Approximately $2.1 million and
$3.9 million were receivable from ProSource as of November 30, 1995 and
1994, respectively.
11. Disposition
In April 1995, the Company sold the rights for the exclusive manufacturing
and distribution of the "TCBY"(Registered) refrigerated yogurt product line
throughout the United States to Mid-America Dairymen, Inc., who previously
co-packed these products for the Company. The product line currently
consists of low fat and non-fat/no sugar added varieties of refrigerated
yogurt, and the "TCBY"(Registered) Twosome product-refrigerated yogurt and
topping, side-by-side. The Company's sales of these products were
approximately $23.0 million and $5.3 mil lion for fiscal 1994 and the first
quarter of fiscal 1995, respectively.
The term of the agreement is 15 years during which time Mid-America
Dairymen, Inc. is permitted to distribute these products, as well as
develop additional refrigerated dairy items under the "TCBY"(Registered)
brand. Mid-America Dairymen, Inc. currently manufactures and distributes
over 2,000 products nationwide. The Company has continued to manufacture
and distribute "TCBY"(Registered) brand hardpack frozen yogurt products
through the retail grocery trade.
The sale of the product line resulted in an after-tax gain of approximately
$1.6 million, or $.06 per share, for the Company in the second quarter of
fiscal 1995. Under the terms of the agreement, inventories and
distribution allowances related to the "TCBY"(Registered) refrigerated
yogurt product line were transferred to Mid-America Dairymen, Inc. The
Company received cash proceeds of $1.2 million upon closing and a
receivable of $10.6 million as consideration in the transaction. Payments
on the receivable are primarily based on volumes of yogurt sold by
Mid-America Dairymen, Inc. with certain required payments regardless of
volume. The receivable represented the net present value of the minimum
required payments over the term of the agreement at the time the
transaction was consummated. Subsequently, the sales of the
"TCBY"(Registered) refrigerated yogurt line and related cash payments have
been less than anticipated due to a very competitive environment in the
refrigerated yogurt industry.
18
<PAGE>
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements (continued)
11. Disposition
Mid-America Dairymen, Inc. has introduced new products and is
developing additional products to introduce in the future in an attempt to
increase sales. However, the Company has agreed to waive minimum required
payments for a period of time, and accordingly has provided an impairment
allowance related to the receivable based on management's best estimate of
future discounted cash flows.
12. Restructuring
During the fourth quarter of 1995, the Company decided to franchise or
close most of its Company-owned stores (food products segment) and divest
Carlin Manufacturing (equipment segment) located in Fresno, California.
The Company believes most of the remaining stores will be sold in fiscal
1996 and can operate more effectively
with local ownership. The Company is expected to realize a reduction
in general and administrative costs associated with the operation of these
stores. The Company-owned stores held for sale or disposal had a carrying
value of $11.2 million prior to recording an impairment loss of $9.1
million in the fourth quarter of fiscal 1995. The loss includes future
lease commitments, taxes, and other closing costs of $2.0 million to be
paid in future periods. These Company-owned stores had sales of
approximately $18.1 million in fiscal 1995 and incurred a direct operating
loss of approximately $4.0 million, excluding any benefit realized by the
Company on manufacturing the yogurt products.
Carlin Manufacturing had a carrying value of $4.1 million prior to
recording an impairment loss of $1.3 million in the fourth quarter of
fiscal 1995. Carlin is expected to be disposed of in fiscal 1996. The
loss includes estimated selling costs. Carlin incurred an operating loss
of approximately $1.0 million in fiscal 1995.
The Company recorded additional impairment losses of approximately $5.6
million on assets used in operations of the food products segment primarily
related to distribution allowances associated with the retail hardpack
product line and Company-owned stores held for use in operations. The
total carrying value of these assets was $8.1 million prior to recording
the impairment loss in the fourth quarter of fiscal 1995.
Primarily due to the divestiture of Company-owned stores, the Company
implemented a restructuring of its organization in the fourth quarter of
fiscal 1995. The Company recorded a charge of $1.4 million for severance
costs to be paid in fiscal 1996 related to the restructuring.
19
<PAGE>
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements (continued)
13. Quarterly Results of Operations (Unaudited)
Financial results by quarter for fiscal 1995 and 1994 are summarized below:
<TABLE>
<CAPTION>
Quarters
_____________________________________________________
First Second Third Fourth
_____________________________________________________
<S> <C> <C> <C> <C>
1995
____
Sales $ 26,036,075 $29,558,113 $ 35,176,849 $ 19,037,246
Gross profit 10,209,741 13,357,605 14,536,706 5,993,732
Franchising revenues 1,916,684 3,219,663 4,061,961 2,563,277
Net (loss) income as
originally reported $ (2,819,454) $ 2,440,098 $ 2,188,584 $(21,566,250)
Effect of adoption of new
accounting standard (1,615,836) - - -
_____________________________________________________
Net (loss) income as
restated $ (4,435,290) $ 2,440,098 $ 2,188,584 $(21,566,250)
=====================================================
Net (loss) income per share
as originally reported $ (.11) $ .10 $ .09 $ (.84)
Per share effect of adoption
of new accounting standard (.06) - - -
_____________________________________________________
Net (loss) income per share
as restated $ (.17) $ .10 $ .09 $ (.84)
=====================================================
Average shares outstanding 25,595,638 25,556,636 25,585,110 25,672,737
</TABLE>
Net (loss) income and net (loss) income per share as originally reported
differ from the amounts set forth above for the first quarter due to the
adoption of Financial Accounting Standards Board Statement No. 114,
"Accounting by Creditors for Impairment of a Loan" as discussed in Note 1.
13. Quarterly Results of Operations (Unaudited) (continued)
<TABLE>
<CAPTION>
Quarters
_____________________________________________________
First Second Third Fourth
_____________________________________________________
<S> <C> <C> <C> <C>
1994
____
Sales $ 22,587,248 $39,599,802 $ 46,691,476 $31,566,213
Gross profit 9,250,983 16,051,424 19,585,803 13,009,564
Franchising revenues 1,671,335 3,742,458 3,983,204 2,629,369
Net (loss) income (621,367) 3,563,344 4,479,591 130,444
Net (loss) income per share (.02) .14 .18 .01
Average shares outstanding 25,489,439 25,495,360 25,518,767 25,589,561
</TABLE>
20
<PAGE>
CORPORATE INFORMATION
TCBY ENTERPRISES, INC.
Corporate Offices
TCBY Enterprises, Inc.
1100 TCBY Tower, 425 West Capitol Avenue
Little Rock, Arkansas 72201
(501)688-8229
Independent Auditors
Ernst & Young LLP
Little Rock, Arkansas
Transfer Agent and Registrar
Wachovia Bank & Trust Company N.A.
P.O. Box 3001, 301 North Church
Winston-Salem, NC 27101
1-800-633-4326
Form 10-K
The Company's Annual Report on Form 10-K, filed with the Securities and
Exchange Commission for the year ended November 30, 1995, will be sent
without charge to each stockholder upon written request to the Corporate
Communications Department at the Corporate offices.
Annual Meeting
The Annual Meeting of Stockholders of TCBY Enterprises, Inc., will be held
at 10:00 a.m., April 17, 1996, at the Statehouse Convention Center in
Little Rock, Arkansas.
Business
TCBY Enterprises, Inc., through subsidiary companies, manufactures and
sells soft serve frozen yogurt, hardpack frozen yogurt, hardpack ice cream,
and frozen novelty products, and markets foodservice equipment. The
Company is the largest manufacturer-franchisor of frozen yogurt in the
world.
Common Stock
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol TBY. The following table sets forth, for the periods indicated,
the high and low composite sales prices.
<TABLE>
<CAPTION>
Fiscal 1995 High Low
_______________________________________________________________________________
<S> <C> <C>
First Quarter $6 $5
Second Quarter 5 1/2 4 1/8
Third Quarter 6 1/2 4 5/8
Fourth Quarter 5 7/8 4 1/4
Fiscal 1994 High Low
_______________________________________________________________________________
First Quarter $7 5/8 $5 7/8
Second Quarter 6 5 1/8
Third Quarter 6 1/2 5 1/4
Fourth Quarter 6 1/4 5 1/2
</TABLE>
As of November 30, 1995, there were 5,581 shareholders of record of the
Company's Common Stock and 27,062,345 shares issued.
Dividend Policy
The Company will consider adjustments to the dividend rate after giving
consideration to return to stockholders, profitability expectations, financing
and cash needs of the Company, and other factors. See Note 3 to Consolidated
Financial Statements.
<TABLE>
<CAPTION>
Dividends Per Share 1995 1994
______________________________________________________________________________
<S> <C> <C>
First Quarter $.05 $.05
Second Quarter .05 .05
Third Quarter .05 .05
Fourth Quarter .05 .05
____ ____
Total $.20 .20
==== ====
</TABLE>
TEN YEAR SUMMARY OF SELECTED FINANCIAL DATA
TCBY ENTERPRISES, INC.
($000, Except Per Share Amounts)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
__________________________________________________
<S> <C> <C> <C> <C> <C>
Sales $109,808 $140,445 $109,525 $107,633 $116,679
Franchising revenues 11,762 12,026 10,952 11,063 12,231
Net (loss) income (21,373) 7,552 6,409 5,073 8,017
Total assets 111,625 142,280 128,691 131,925 134,806
Long-term debt 12,641 15,910 11,487 14,799 17,330
Per share:
Net (loss) income $(.83) $ .30 $ .25 $ .20 $ .31
Cash dividends .20 .20 .20 .20 .35
Total stockholders' equity 3.20 4.23 4.13 4.09 4.10
</TABLE>
<TABLE>
<CAPTION>
1990 1989 1988 1987 1986
__________________________________________________
<S> <S> <S> <S> <S> <S>
Sales $134,832 $131,730 $ 87,995 $ 58,767 $ 31,736
Franchising revenues 16,475 19,593 14,482 12,664 9,518
Net (loss) income 19,950 29,493 19,794 13,012 8,031
Total assets 141,537 133,559 92,649 64,017 49,621
Long-term debt 19,696 21,258 14,034 5,461 6,699
Per share:
Net (loss) income $ .75 $1.10 $ .75 $ .49 $ .31
Cash dividends .18 .07 .02 --- ---
Total stockholders' equity 4.15 3.69 2.62 1.88 1.42
</TABLE>
EXHIBIT 21
<TABLE>
<CAPTION>
The subsidiaries of TCBY Enterprises, Inc. and their respective states of
incorporation are as follows:
<S> <C>
American Best Care, Inc. Arkansas
Americana Foods General Partner, Inc. Arkansas
Americana Foods Limited Partnership Texas
Carlin Manufacturing, Inc. Arkansas
FSL, Inc. Nevada
Riverport Equipment and
Distribution Company Arkansas
TCBY International, Inc. Arkansas
TCBY International Foreign Sales
Corporation Virgin Islands
TCBY of Georgia, Inc. Georgia
TCBY of Texas, Inc. Texas
TCBY Systems, Inc. Arkansas
TCBY of Aruba, Inc. Arkansas
TCBY of Mexico, Inc. Arkansas
TCBY of Saudi Arabia, Inc Arkansas
TCBY of Qatar, Inc. Arkansas
TCBY United Kingdom, Inc. Arkansas
TCBY of the Philippines, Inc. Arkansas
TCBY of Israel, Inc. Arkansas
TCBY of Portugal, Inc. Arkansas
TCBY of The Netherlands, Inc. Arkansas
For Future Use VII, Inc. Arkansas
</TABLE>
Each of these subsidiaries does business under its respective corporate
name. All of the outstanding capital stock of each subsidiary is owned by
TCBY Enterprises, Inc. except Americana Foods Limited Partnership which is
99% owned by FSL, Inc. and 1% owned by Americana Foods General Partner,
Inc.; FSL, Inc. is wholly owned by Americana Foods General Partner, Inc.
TCBY of Texas, Inc. is also wholly owned by Americana Foods General
Partner, Inc.
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form
10-K) of TCBY Enterprises, Inc. of our report dated January 18, 1996,
included in the 1995 Annual Report to Stockholders of TCBY Enterprises, Inc.
We also consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-37484) pertaining to the 1989 Stock Option Plan
of TCBY Enterprises, Inc. of our report dated January 18, 1996, with
respect to the consolidated financial statements incorporated herein by
reference in this Annual Report (Form 10-K) of TCBY Enterprises, Inc.
/s/ Ernst & Young LLP
_____________________
Ernst & Young LLP
Little Rock, Arkansas
February 22, 1996
POWER OF ATTORNEY
_________________
The undersigned, being a director of TCBY ENTERPRISES, INC., a
Delaware Corporation (the "Corporation"), does hereby constitute and appoint
FRANK D. HICKINGBOTHAM, HERREN C. HICKINGBOTHAM and GALE LAW, with full power to
each of them to act alone, as the true and lawful attorneys and agents of
the undersigned, with full power of substitution and resubstitution to each
of said attorneys, to execute, file, electronically transmit, or deliver
any and all instruments and to do any and all acts and things which said
attorneys and agents, or any of them, deem advisable to enable the
Corporation to comply with the Securities Exchange Act of 1934, as amended,
and any requirements of the Securities and Exchange Commission in respect
thereto, relating to annual reports on Form 10-K, including specifically,
but without limitation of the general authority hereby granted, the power
and authority to sign such person's name in the name and on behalf of the
Corporation to annual reports on Form 10-K or any amendments or filings
supplemental thereto; and the undersigned does hereby fully ratify and
confirm all that said attorneys and agents, or any of them, or the
substitute of any of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney on April 12, 1995.
/s/ Frank D. Hickingbotham
__________________________________
Frank D. Hickingbotham
/s/ Herren C. Hickingbotham
__________________________________
Herren C. Hickingbotham
/s/ Marvin D. Loyd
__________________________________
Marvin D. Loyd
/s/ Gale Law
__________________________________
Gale Law
<PAGE>
/s/ William H. Bowen
__________________________________
William H. Bowen
/s/ Don O'Neal Kirkpatrick
__________________________________
Don O'Neal Kirkpatrick
/s/ Daniel R. Grant
__________________________________
Daniel R. Grant
/s/ Hugh H. Pollard
__________________________________
Hugh H. Pollard
/s/ F. Todd Hickingbotham
__________________________________
F. Todd Hickingbotham
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF NOVEMBER 30, 1995 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE YEAR ENDED NOVEMBER 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> NOV-30-1995
<CASH> 5,565,654
<SECURITIES> 8,824,163
<RECEIVABLES> 13,033,697
<ALLOWANCES> 1,592,607
<INVENTORY> 12,920,468
<CURRENT-ASSETS> 51,357,141
<PP&E> 76,840,802
<DEPRECIATION> 31,130,608
<TOTAL-ASSETS> 111,625,243
<CURRENT-LIABILITIES> 14,667,955
<BONDS> 12,640,904
<COMMON> 2,706,235
0
0
<OTHER-SE> 79,472,532
<TOTAL-LIABILITY-AND-EQUITY> 111,625,243
<SALES> 109,808,283
<TOTAL-REVENUES> 121,569,868
<CGS> 65,710,499
<TOTAL-COSTS> 65,710,499
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 12,572,172
<INTEREST-EXPENSE> 1,121,995
<INCOME-PRETAX> (32,070,785)
<INCOME-TAX> (10,697,927)
<INCOME-CONTINUING> (21,372,858)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,372,858)
<EPS-PRIMARY> (.83)
<EPS-DILUTED> (.83)
</TABLE>
PRESS RELEASE
EXHIBIT 99(a)
FOR IMMEDIATE RELEASE
FRIDAY
OCTOBER 6, 1995
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
TCBY ENTERPRISES, INC.
501-688-8229
TCBY INTERNATIONAL LICENSES DEVELOPMENT
IN THE CAYMAN ISLANDS
LITTLE ROCK, AR - FRIDAY (OCTOBER 6, 1995) - TCBY ENTERPRISES, INC.,
(NYSE:TBY) today announced that TCBY International has awarded local
development rights for "TCBY"(Registered) stores and products for the
Cayman Islands to Ambrosia Ltd.
The licensing agreement calls for the opening of two "TCBY"(Registered)
frozen yogurt stores in the Cayman Islands during the next two years. The
franchisee intends to open both "TCBY"(Registered) locations on Grand
Cayman. In addition, Ambrosia Ltd. will operate kiosks in hotels and
import "TCBY"(Registered) hardpack frozen yogurt for grocery distribution
throughout the Cayman Islands.
The Cayman Islands consist of three islands in the Western Caribbean and
have a population of about 25,000. Although a United Kingdom Commonwealth,
the Cayman Islands have strong ties to the United States through trade and
tourism.
"The Cayman Islands are a very popular tourist spot in the Caribbean," said
Hartsell Wingfield, President of TCBY International. "We are excited about
introducing "TCBY"(Registered) products in this market with our new
partners," he said.
In the Caribbean, the Company has licensed the development of "TCBY"
branded products in Aruba, The Bahamas, The Dominican Republic, Jamaica,
and The Netherland Antilles.
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-
PRESS RELEASE
EXHIBIT 99(b)
FOR IMMEDIATE RELEASE
TUESDAY
OCTOBER 31, 1995
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
TCBY ENTERPRISES, INC.
501-688-8229
BOB WOLINSKY
FAST FOODS OF RUSSIA, INC.
203-374-0076
TCBY LICENSES DEVELOPMENT IN RUSSIAN FEDERATION
LITTLE ROCK, AR - TUESDAY (OCTOBER 31, 1995) - TCBY ENTERPRISES, INC.,
(NYSE:TBY) today announced that TCBY's International Division has awarded
local development rights for "TCBY"(Registered) stores and products in
Russia to Fast Foods of Russia, Inc. (FFR).
The licensing agreement calls for the opening of 30 "TCBY"(Registered)
frozen yogurt stores in Russia during the next six years. The franchisee
intends to open the first "TCBY"(Registered) locations in the city of
Moscow. Plans also call for the local production of frozen yogurt products
in the Moscow area. From this base, FFR will develop other areas of
Russia, often jointly with dairies or other local partners.
Fast Foods of Russia, Inc. is a U.S. company with American and Russian
shareholders. FFR's Chairman and CEO is Robert I. Wolinsky, a U.S.
foodservice and franchising professional. Its senior management is
comprised of Americans, each of whom has more than two decades of
experience in food, franchising and related industries. The Russian team
is headed by Marx I. Tesker, a member of the former Supreme Economic
Counsel and director of the USSR's oil and gas construction industry.
Based on its experience and market research, FFR is developing a vertically
integrated company which will engage in food processing, distribution of
packaged products, franchising, and operating food courts. The food courts
will contain fast-food shops of franchisors, such as TCBY, for which FFR
owns development rights.
"The Russian economy has been improving and presents many opportunities,"
said Hartsell Wingfield, President of TCBY
<PAGE>
International. "We are excited about introducing "TCBY"(Registered)
products in this market with our new partners, Fast Foods of Russia," he
said.
The Russian Federation's land area is nearly twice that of the United
States. The population is 150 million. It is the largest of the former
Soviet Republics.
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-
PRESS RELEASE
EXHIBIT 99(c)
FOR IMMEDIATE RELEASE
FRIDAY
DECEMBER 1, 1995
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
501-688-8229
TCBY ANNOUNCES STOCK
REPURCHASE, FRANCHISING OF
COMPANY-OWNED STORES AND OTHER DEVELOPMENTS
LITTLE ROCK, AR - DECEMBER 1, 1995 - TCBY ENTERPRISES, INC., (NYSE:TBY)
today announced that its engagement of Stephens Inc. in June of this year
to explore various strategic alternatives with the intent to maximize
shareholder value has resulted in a determination by the Board of
Directors of the Company to authorize the repurchase from time to time of
up to three million shares of its outstanding common stock, franchise
Company-owned "TCBY"(Registered) stores, sell the Carlin Manufacturing
company, restructure its organization, and consider alternative methods
for the distribution of its retail hard-pack products.
Since announcing the retention of Stephens, the Company's Board of
Directors and management have explored various strategic alternatives.
As a result of this process, the Board of Directors authorized the
repurchase of up to three million shares of its common stock in the open
market or in negotiated private transactions.
The Company's plan includes the sale and franchising of most of its 85
Company-owned "TCBY"(Registered) stores and the sale of Carlin
Manufacturing located in Fresno, California. Due to efficiencies
available primarily as a result of the franchising of Company-owned
stores, the Company will implement an internal restructuring of its
organization. This will result in a pre-tax restructuring charge of
approximately $1.4 million. As a result of these actions, the Company
has concluded the process initiated in June, 1995 of exploring strategic
alternatives. No assurance can be given that any of the sales or other
initiatives currently planned will be accomplished upon terms favorable
to the Company.
The Company will seek to continue the development of its new
"TCBY"(Registered) Treats stores. Currently over 40% of the domestic
franchise stores have implemented this new concept. In addition, the
Company will also emphasize the development of
<PAGE>
nontraditional locations with a focus on national petroleum convenience
stores. The Company currently has over 1,250 nontraditional locations
open. Many of these locations share space with other national food
companies such as McDonald's, Taco Bell, Pizza Hut, Burger King, Blimpie,
and Subway.
During the fourth quarter, the Company will adopt several new accounting
standards recently issued by the Financial Accounting Standards Board.
The Company is finalizing the complex calculations associated with these
new standards, but estimates that the adoption of these standards will
result in pre-tax charges of approximately $26 million, or $0.67 per
share after taxes, in fiscal 1995. Management of the Company expects a
net loss for fiscal 1995.
"As a result of the process with Stephens Inc., the Company has redefined
its market position and growth strategy," said Herren C. Hickingbotham,
President and Chief Operating Officer. "We will continue the expansion
of the "TCBY"(Registered) Treats program and pursuit of growth
opportunities in the nontraditional segment. The Company expects to add
international locations, with agreements for 32 countries. As of today
we have approximately 2,700 locations and we are the world's largest
manufacturer-franchisor of frozen yogurt."
-30-
PRESS RELEASE
EXHIBIT 99(d)
FOR IMMEDIATE RELEASE
THURSDAY
DECEMBER 14, 1995
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY DECLARES CASH DIVIDEND
LITTLE ROCK, AR - December 14, 1995 - 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 January 15, 1996 to
shareholders of record as of December 29, 1995.
TCBY Enterprises, Inc., through subsidiary companies, manufactures and
sells soft serve frozen yogurt, hardpack frozen yogurt, novelty products,
and markets foodservice equipment. The Company is the world's largest
manufacturer-franchisor of frozen yogurt.
-30-
PRESS RELEASE
EXHIBIT 99(e)
FOR IMMEDIATE RELEASE
THURSDAY
JANUARY 18, 1996
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
501-688-8229
TCBY REPORTS YEAR-END AND FOURTH QUARTER RESULTS FOR 1995
LITTLE ROCK, AR - THURSDAY, JANUARY 18, 1996 - TCBY ENTERPRISES, INC.,
(NYSE:TBY) today announced total sales and franchising revenues for the year
ended November 30, 1995 were $121,570,000 compared to $152,471,000 in the prior
year. The decline in sales and franchising revenues is primarily attributable
to the April 1, 1995 sale of the "TCBY"(Registered) refrigerated yogurt product
line to Mid-America Dairymen resulting in a decrease in Company sales to the
retail grocery trade. In December, the Company announced it was adopting
several new accounting standards that would result in significant charges
against operating results in the fourth quarter, and would incur charges
related to restructuring. The Company reported a net loss of $21,373,000, or
$.83 per share in fiscal 1995, compared to net income of $7,552,000, or $.30
per share, for fiscal 1994.
During the fourth quarter of 1995, the Company adopted several new accounting
standards including Financial Accounting Standards Board Statements No. 114 and
118, "Accounting by Creditors for Impairment of a Loan", and No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets
to be Disposed Of". The adoption of the new standards resulted in pre-tax
charges of $27.6 million, or $.72 per share after taxes, in fiscal 1995. Also
during the fourth quarter, the Company implemented a restructuring of its
organization that resulted in pre-tax charges of $1.4 million, or $.04 per
share after taxes.
Total sales and franchising revenues for the fourth quarter of fiscal 1995 were
$21,601,000 as compared to $34,196,000 for the fourth quarter of fiscal 1994.
The Company reported a net loss for the fourth quarter of fiscal 1995 of
$21,566,000, or $.84 per share, compared to net income of $130,000, or $.01 per
share, in the prior year.
<PAGE>
As of November 30, 1995, there were 2,720 "TCBY"(Registered) locations, which
included 1,218 domestic franchised stores, 187 international franchised or
licensed stores, 42 Company-owned stores, and 1,273 non-traditional locations.
Average store sales for fiscal 1995 were $212,000, unchanged from fiscal 1994.
Same store sales decreased 4.5 percent in the fourth quarter and 1.4 percent
for fiscal 1995. Store sales comparisons do not include sales from
non-traditional locations such as airports, travel plazas, and other
foodservice locations.
On December 1, the Company announced that its engagement of Stephens Inc. in
June of 1995 to explore various strategic alternatives with the intent of
maximizing shareholder value had concluded. This project resulted in a
determination by the Board of Directors of the Company to authorize the
repurchase from time to time of up to three million shares of its outstanding
common stock, franchise the majority of its Company-owned "TCBY"(Registered)
stores, sell Carlin Manufacturing Company, restructure the Company's
organization, and consider alternative methods for the distribution of its
retail hardpack products. No assurance can be given that any of the sales or
other initiatives currently planned will be accomplished upon terms favorable
to the Company.
The Company continues the development of its new "TCBY"(Registered) Treats
stores. Over 40 percent of the domestic franchised stores have implemented
this new concept. In addition, the Company will also emphasize the development
of non-traditional locations with a focus on national petroleum company
convenience stores. The Company introduced its public account program in March
of 1995. As of November 30, over 200 petroleum locations were open or under
development. The growth of these locations is expected to accelerate during
1996 based on current levels of interest. Many of these locations share space
with other national food companies such as McDonald's, Taco Bell, Pizza Hut,
Burger King, Blimpie, and Subway.
As of November 30, 1995, "TCBY"(Registered) products were licensed for sale and
distribution in 32 foreign countries. To support its international growth and
development, the Company now has licensed production of its frozen yogurt
products in Canada, Japan, China, Korea, Russia, Costa Rica, and Thailand.
"The actions taken in 1995 have renewed the Company's focus on its core
business. We are encouraged for 1996 by our many opportunities. We have
started 1996 with a new position and direction which we believe will achieve
positive results," said Herren Hickingbotham, President and Chief Operating
Officer.
TCBY Enterprises, Inc., through subsidiary companies, manufactures and sells
soft serve frozen yogurt, hardpack frozen yogurt, novelty products, and markets
foodservice equipment. The Company is the largest manufacturer-franchisor of
frozen yogurt in the world.
<PAGE>
TCBY Enterprises, Inc.
Selected Financial Highlights
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Year Ended
November 30 November 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Operating Results
Sales & Franchising Revenue $ 21,601 $ 34,196 $121,570 $152,471
Net (Loss) Income $(21,566) $ 130 $(21,373) $ 7,552
Net (Loss) Income Per Share $ (.84) $ .01 $ (.83) $ .30
Average Shares Outstanding 25,673 25,590 25,602 25,523
Dividends Paid Per Share $ .05 $ .05 $ .20 $ .20
</TABLE>
<TABLE>
<CAPTION>
November 30 November 30
1995 1994
<S> <C> <C>
Financial Position
Current Assets $ 51,357 $ 58,968
Current Liabilities $ 14,668 $ 12,458
Property, Plant & Equipment (Net) $ 45,710 $ 56,844
Total Assets $111,625 $142,280
Long-term Debt $ 12,641 $ 15,910
Stockholders' Equity $ 82,179 $108,274
-30-
</TABLE>
