UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
_X_QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1996
_____________
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to
______________
Commission file number 1-10046
_______
TCBY ENTERPRISES, INC.
___________________________________________________________
(Exact name or registrant as specified in its charter)
Delware 71-0552115
___________________________________________________________
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
425 West Capitol Avenue Little Rock, Arkansas 72201
___________________________________________________________
(Address of principal executive offices) (Zip Code)
(501) 688-8229
___________________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 of the
Securities Exchange Act of 1934 during the preceding 12
months, (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
Yes _X_ No ___
On June 30, 1996 there were 25,135,476 shares of the
registrant's common stock outstanding.
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<TABLE>
TABLE OF CONTENTS
<CAPTION>
PART I. FINANCIAL INFORMATION Page
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets
May 31, 1996 and November 30, 1995 3
Consolidated Statements of Operations
Quarter ended and six months ended
May 31, 1996 and 1995 5
Consolidated Statements of Cash Flows
Six months ended May 31, 1996 and 1995 6
Notes to Consolidated Financial Statements
May 31, 1996 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of
Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 18
</TABLE>
Sequential Page No. 2
PART 1
FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS (UNAUDITED)
TCBY ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
May 31, November 30,
1996 1995
_________________________________
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 10,844,702 $ 5,565,654
Short-term investments 4,977,292 8,824,163
Receivables:
Trade accounts 13,547,397 10,114,935
Notes 2,817,714 2,918,762
Allowance for doubtful accounts
and impaired notes (1,495,391) (1,592,607)
_____________ _____________
14,869,720 11,441,090
Refundable income taxes 291,377 4,418,936
Deferred income taxes 3,194,403 2,463,089
Inventories 13,454,710 12,920,468
Prepaid expenses and other assets 2,226,043 2,098,366
Assets held for sale 1,660,036 3,625,375
_____________ _____________
TOTAL CURRENT ASSETS 51,518,283 51,357,141
PROPERTY, PLANT, AND EQUIPMENT:
Land 2,866,820 2,866,820
Buildings 23,429,544 23,402,389
Furniture, vehicles, and equipment 47,506,837 47,325,993
Leasehold improvements 3,319,980 3,214,117
Construction in progress 649,916 31,483
Allowances for depreciation
and amortization (33,332,397) (31,130,608)
_____________ _____________
44,440,700 45,710,194
OTHER ASSETS:
Notes receivable, less current portion
(less allowance for doubtful and impaired
notes of $9,223,083 in 1996 and
$9,585,410 in 1995) 6,756,368 7,035,259
Intangibles (less amortization of
$1,615,323 in 1996 and $1,514,068 in
1995) 3,585,225 3,517,942<PAGE>
Other 1,891,623 4,004,707
_____________ _____________
12,233,216 14,557,908
_____________ _____________
TOTAL ASSETS $108,192,199 $111,625,243
============= =============
</TABLE>
See notes to consolidated financial statements.
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TCBY ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
May 31, November 30,
1996 1995
_________________________________
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 4,304,930 $ 2,455,127
Accrued expenses 6,521,107 9,041,380
Current portion of long-term debt 3,171,448 3,171,448
_____________ _____________
TOTAL CURRENT LIABILITIES 13,997,485 14,667,955
LONG-TERM DEBT, less current portion 11,319,468 12,640,904
DEFERRED INCOME TAXES 3,354,567 2,137,617
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 1996 and 1995 2,706,235 2,706,235
Additional paid-in capital 25,547,184 25,547,184
Retained earnings 63,062,316 63,661,235
_____________ _____________
91,315,735 91,914,654
Less treasury stock, at cost (1,857,469
shares in 1996 and 1,387,069 in 1995) (11,795,056) (9,735,887)
_____________ _____________
TOTAL STOCKHOLDERS' EQUITY 79,520,679 82,178,767
_____________ _____________
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $108,192,199 $111,625,243
============= =============
</TABLE>
See notes to consolidated financial statements.
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TCBY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
May 31, May 31,
1996 1995 1996 1995
____________________________________________________________
<S> <C> <C> <C> <C>
Sales $24,578,698 $30,362,346 $ 39,631,597 $ 55,594,
Cost of sales 15,745,751 16,958,946 25,197,737 32,026,
____________ ____________ _____________ _________
GROSS PROFIT 8,832,947 13,403,400 14,433,860 23,567,
Franchising revenues:
Initial franchise and
license fees 616,875 419,000 1,149,625 614,
Royalty income 2,749,467 2,754,868 4,441,471 4,521,
____________ ____________ _____________ _________
3,366,342 3,173,868 5,591,096 5,136,
____________ ____________ _____________ _________
12,199,289 16,577,268 20,024,956 28,703,
Operating expenses:
Selling, general, and
administrative expenses 8,472,689 14,862,570 17,109,747 31,117,
Provision for doubtful
accounts and impaired
notes 22,303 399,443 44,358 3,076,
____________ ____________ _____________ _________
8,494,992 15,262,013 17,154,105 34,194,
INCOME (LOSS) FROM
OPERATIONS 3,704,297 1,315,255 2,870,851 (5,490,<PAGE>
Other income (expense):
Interest expense (240,030) (225,540) (502,784) (523,
Interest income 246,013 228,944 521,791 503,
Other income 63,904 2,439,790 107,900 2,465,
____________ ____________ _____________ _________
69,887 2,443,194 126,907 2,444,
____________ ____________ _____________ _________
INCOME (LOSS) BEFORE
INCOME TAXES 3,774,184 3,758,449 2,997,758 (3,046,0
Income tax expense
(benefit) 1,320,963 1,318,351 1,049,214 (1,050,9
____________ ____________ _____________ _________
NET INCOME (LOSS) $ 2,453,221 $ 2,440,098 $ 1,948,544 $ (1,995,
============ ============ ============= =========
Net income (loss)
per share $ 0.10 $ 0.10 $ 0.08 $ (0
============ ============ ============= =========
Average shares
outstanding 25,282,552 25,556,636 25,422,426 25,575,
============ ============ ============= =========
Cash dividends paid
per share $ 0.05 $ 0.05 $ 0.10 $ 0
============ ============ ============= =========
</TABLE>
See notes to consolidated financial statements.
Sequential Page No. 5
TCBY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
May 31,
1996 1995
________________________________
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 1,948,544 $ (1,995,192)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,562,161 5,784,228
Amortization of intangibles 101,256 315,418
Provision for doubtful accounts and
impaired notes 44,358 3,076,444
Deferred income taxes 485,636 -
(Gain) loss on sales of property
and equipment (26,396) 31,928<PAGE>
Gain on sale of product line - (2,370,046)
Changes in operating assets and liabilities:
Receivables (3,787,176) (1,097,172)
Inventories (534,242) (4,979,306)
Prepaid expenses (127,677) (317,775)
Distribution allowances - (415,234)
Assets held for disposal 1,965,339 -
Intangibles and other assets 1,811,152 693,099
Accounts payable and accrued expenses (670,470) (2,541,384)
Income taxes 4,127,559 26,974
_____________ _____________
NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES 7,900,044 (3,788,018)
INVESTING ACTIVITIES
Purchases of property, plant, and equipment (1,448,587) (7,946,386)
Proceeds from sales of property and equipment 288,472 417,569
Origination of notes receivable (107,237) (275,968)
Principal collected on notes receivable 727,553 1,289,145
Purchases of short-term investments (9,481,107) (3,118,602)
Proceeds from maturity of short-term
investments 13,327,978 13,792,222
Proceeds from sale of product line - 1,200,000
_____________ _____________
NET CASH PROVIDED BY INVESTING ACTIVITIES 3,307,072 5,357,980
FINANCING ACTIVITIES
Proceeds from sale of common stock - 3,969
Dividends paid (2,547,463) (2,559,470)
Purchases of treasury stock (2,059,169) (324,688)
Principal payments of long-term debt (1,321,436) (1,225,690)
_____________ _____________
NET CASH USED IN FINANCING ACTIVITIES (5,928,068) (4,105,879)
_____________ _____________
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 5,279,048 (2,535,917)
Cash and cash equivalents at beginning
of period 5,565,654 4,938,118
_____________ _____________
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 10,844,702 $ 2,402,201
============= =============
</TABLE>
See notes to consolidated financial statements.
Sequential Page No. 6
TCBY ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
May 31, 1996
NOTE A -- FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the
three-month and six-month period ended May 31, 1996 are not
necessarily indicative of the results that may be expected
for the year ended November 30, 1996. For further
information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended November 30, 1995.
NOTE B -- RECLASSIFICATIONS AND RESTATEMENT
Certain amounts in the 1995 consolidated financial
statements have been reclassified to conform to the 1996
presentation.
Net loss per share as originally reported differs from the
amount set forth in the Consolidated Statement of Operations
for the first six months of 1995 due to the adoption of
Financial Accounting Standards Board Statement No. 114,
"Accounting by Creditors for Impairment of a Loan" in
November 1995. The effect of the adoption of this statement
increased the net loss by $1,615,836 or $.06 per share for
the first six months of 1995.
NOTE C -- INVENTORIES
<TABLE>
<CAPTION>
May 31, November 30,
1996 1995
___________ ____________
<S> <C> <C>
Manufacturing materials and
supplies $ 5,814,438 $ 4,449,940
Finished yogurt products and
other food products 4,009,106 4,203,058
Equipment and other products 3,631,166 4,267,470
___________ ____________
$13,454,710 $12,920,468
=========== ===========
</TABLE>
Sequential Page No. 7
NOTE D -- ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
May 31, November 30,
1996 1995
___________ ____________
<S> <C> <C>
Rent $ 1,034,470 $ 1,547,372
Compensation 2,069,151 3,355,348
Other 3,417,486 4,138,660
___________ ____________
$ 6,521,107 $ 9,041,380
=========== ===========
</TABLE>
NOTE E -- CONTINGENCIES
A purported investor in a former franchisee has claimed
approximately $26 million in trebled damages plus costs and
prejudgment interest from the former franchisee for alleged
fraudulent acts. The compensatory damages requested are
$8.7 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 to the extent the pace of the litigation
allows.
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.
Sequential Page No. 8
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company's total sales during the second quarter of 1996
decreased 19 percent from sales in the second quarter of
1995. Total sales during the first six months of 1996
decreased 29 percent from sales in the first six months of
1995. As described below, the decrease in sales are
primarily related to the franchising or closing of most
Company-owned stores, the sale of the rights for
manufacturing and distribution of "TCBY"(Registered)
refrigerated yogurt products to Mid-America Dairymen, Inc.
in April 1995, and the Company's decision to focus on
geographic regions where hardpack products can be delivered
and marketed in a more efficient manner. 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>
Quarter Ended May 31, Six Months Ended
1996 1995 1996
Sales % Sales % Sales % Sales
_______ ____ _______ ____ _______ ____ _____
<S> <C> <C> <C> <C> <C> <C> <C>
Food Products:
Yogurt sales to
ProSource
Distribution
Services and
other foodservice
distributors $14,559 59% $14,965 49% $22,805 57% $23,8
Yogurt sales to the
retail grocery
trade 4,467 18% 5,941 20% 6,644 17% 14,6
Retail sales by
Company-owned
stores 883 4% 5,195 17% 2,209 6% 8,835 16%
_______ ____ _______ ____ _______ ____ _____
19,909 81% 26,101 86% 31,658 80% 47,3
Equipment:
Sales by the
Company's equip-
ment distributor 3,719 15% 2,964 10% 5,984 15% 5,5
Sales of manufac-
tured specialty
vehicles 690 3% 1,030 3% 1,474 4% 2,216
_______ ____ _______ ____ _______ ____ _____
4,409 18% 3,994 13% 7,458 19% 7,7
Other 261 1% 267 1% 516 1% 503
_______ ____ _______ ____ _______ ____ _____
Total Sales $24,579 100% $30,362 100% $39,632 100% $55,5
======= ==== ======= ==== ======= ==== =====
</TABLE>
Sequential Page No. 9
Sales from the Company's food products segment include (i)
wholesale sales of frozen yogurt and ice cream products to
ProSource Distribution Services 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 (through April 1995), and frozen novelties for
distribution to the retail grocery trade, and (iii) retail
sales of yogurt and related food items by Company-owned
stores.
Wholesale sales of frozen yogurt decreased three percent and
four percent during the second quarter and first six months
of 1996, respectively, compared to the same periods in 1995.
These decreases are attributed primarily to a reduction in
the number of domestic traditional "TCBY"(Registered) stores
in operation and a decline in yogurt purchased by operating
stores during 1996 compared to 1995. The purchases of
yogurt by operating stores is generally greater during warm
weather conditions and diminishes during periods of
inclement weather. As weather conditions throughout the USA
during the first quarter and part of the second quarter of
1996 were generally more severe than the prior year,
purchases of yogurt by operating stores were adversely
impacted. The Company also believes the sale of frozen
yogurt during the second quarter of 1996 was adversely
impacted by an aggressive marketing campaign of one of its
primary competitors.
The following table sets forth location activity for the
second quarter and first six months of 1996 and 1995.
Sequential Page No. 10
<TABLE>
<CAPTION>
NON-
FRANCHISED COMPANY INTERNATIONAL TRADITIONAL
STORES STORES LOCATIONS LOCATIONS L
1996 1995 1996 1995 1996 1995 1996 1995 19
_________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <c
For the second quarter:
Locations open at
beginning of period 1,208 1,239 26 88 192 151 1,267 1,330 2
Opened 12 7 - - 6 15 119 72
Closed (10) (16) - - (4) - (75) (121)
Locations transferred 18 1 (18) (1) - - - -
_________________________________________________________
Locations open at
end of period 1,228 1,231 8 87 194 166 1,311 1,281 2
=========================================================
</TABLE>
<TABLE>
<CAPTION>
NON-
FRANCHISED COMPANY INTERNATIONAL TRADITIONAL
STORES STORES LOCATIONS LOCATIONS L
1996 1995 1996 1995 1996 1995 1996 1995 19
_________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <c
For the first six months:
Locations open at
beginning of period 1,218 1,245 42 96 187 141 1,273 1,319 2
Opened 14 17 - - 22 25 166 118
Closed (28) (32) (1) (8) (15) - (137) (156)
Locations transferred 24 1 (33) (1) - - 9 -
_________________________________________________________
Locations open at
end of period 1,228 1,231 8 87 194 166 1,311 1,281 2
=========================================================
</TABLE>
Included in the franchised and Company store information are
127 "TCBY"(Registered) stores closed for relocation or for
the season on May 31, 1996 and 1995. During the first six
months of 1996, 137 non-traditional locations were closed.
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 in
1995, 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.
Sequential Page No. 11
Sales of yogurt to the retail grocery trade decreased 25
percent and 55 percent during the second quarter and first
six months of 1996, respectively, compared to the same
periods in 1995. In April 1995, the Company sold the rights
for exclusive manufacturing and distribution of the
"TCBY"(Registered) refrigerated yogurt products throughout
the United States to Mid-America Dairymen, Inc., who
co-packed the products for the Company. The sale resulted
in a pre-tax gain of $2.4 million in the second quarter of
1995 which is included in other income on the Consolidated
Statements of Operations. The Company's sales of
refrigerated yogurt products totaled approximately $5.3
million in 1995. During the fourth quarter of 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 has improved operating
results but has resulted in lower sales of hardpack yogurt
products to the retail grocery trade in 1996.
Sales by Company-owned stores declined 83 percent and 75
percent during the second quarter and first six months of
1996, respectively, compared to the same periods in 1995.
These declines result primarily from a reduction of
Company-owned stores operated during 1996. During the
fourth quarter of 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. The divestiture of the stores will lower future
sales in the food products segment. At May 31, 1996 and
1995, the Company operated 8 stores and 87 stores,
respectively. The Company expects to franchise most of the
remaining stores during 1996.
Sales in the Company's equipment segment include (i) sales
from the distribution of equipment to the foodservice
industry and (ii) sales of manufactured mobile kitchens and
other specialty vehicles primarily to business and
government entities. Sales in the equipment segment
increased 10 percent during the second quarter of 1996 over
the same period in the prior year. Sales decreased four
percent during the first six months of 1996 over the same
period in the prior year.
The increase in sales during the second quarter is
attributable to i ncreased sales at the Company's equipment
distributor due to the opening of non-traditional locations
which are purchasing a portion of their original equipment
packages from the Company. These increased sales were
partially offset by decreased orders for specialty vehicles
at the Company's equipment manufacturer. The decrease in
sales for the six month period is due to the same reasons
described above except that the decrease in orders at the
equipment manufacturer exceeded the increase in sales for
the equipment distributor. The Company has continued the
process to possibly divest its equipment manufacturer
located in Fresno, California as this subsidiary is no
longer a part of the Company's core business.
Sequential Page 12
The ratio of cost of sales to sales was 64 percent for the
second quarter of 1996 as compared to 56 percent for the
second quarter of 1995. The ratio of cost of sales to sales
for the food products segment and equipment segment in the
second quarter of 1996 was 62 percent and 77 percent,
respectively, compared to 53 percent and 82 percent,
respectively, in the second quarter of 1995.
The ratio of cost of sales to sales was 64 percent for the
first six months of 1996 as compared to 58 percent for the
first six months of 1995. The rat io of cost of sales to
sales for the food products segment and equipment segment in
the first six months of 1996 was 61 percent and 78 percent,
respectively, compared to 55 percent and 80 percent,
respectively, in the first six months of 1995.
The increase in the overall cost of sales to sales ratio for
1996 is attributed to a number of factors including the
Company's decision 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 increased.
In addition, milk prices which represent a major component
of the Company's cost of sales increased during 1996
compared to 1995. Milk prices have risen as a result of
lower milk production primarily due to extremely high feed
prices and strong consumer demand for dairy products. Milk
prices are expected to remain higher in the third quarter of
1996 compared to the same period in 1995. Lastly, the
overhead cost per unit at the Company's manufacturing
facility in Dallas has increased during 1996 as a result of
lower volumes produced compared to the previous year and
higher total overhead costs primarily related to the 1995
expansion of the manufacturing facility. The increase in
the cost of sales to sales ratio was partially offset by
reduced sales to the retail grocery trade. 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 1996
compared to 1995 primarily for the reasons previously
discussed.
Franchising revenues consist of initial franchise and
license fees and royalty income. In the second quarter of
1996, initial franchise and license fees increased 47
percent over the same period in 1995 while royalty income
was virtually unchanged compared to the same period in 1995.
The increase in franchise and license fees results primarily
from increased initial international and domestic franchise
fees. The increase in domestic franchise fees results
primarily from the expansion into convenience stores
operated in association with national petroleum companies.
Sequential Page No. 13
In the first six months of 1996, initial franchise and
license fees increased 87 percent over the same period in
1995 while royalty income decreased two percent from the
same period in 1995. The increase in franchise and license
fees is discussed above. The decrease in royalty income is
due primarily to a decrease in domestic royalties as a
result of the decrease in domestic traditional
"TCBY"(Registered) stores and the decline in store sales
noted above.
Selling, general, and administrative expenses decreased 43
percent and 45 percent in the second quarter and first six
months of 1996, respectively, compared to the same periods
in 1995. These decreases are attributable to several
factors including: (i) a reduction in depreciation and
amortization due to the reduction in the basis of various
assets associated with the adoption of Financial Accounting
Standards Board Statement No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" during 1995; (ii) a reduction in selling and
marketing costs due to the sale of the refrigerated yogurt
line in April 1995 and the Company's decision to focus
distribution of its hardpack frozen yogurt products to the
retail grocery trade in geographic regions where the
products can be delivered and marketed in a more efficient
manner; (iii) a reduction in expenses related to operation
of corporate stores due to the franchising or closing of
most of these stores as discussed above, and; (iv) a
restructuring of the Company's organization in the fourth
quarter of 1995. As a percentage of combined sales and
franchising revenues, selling, general, and administrative
expenses were 30 percent and 44 percent for the second
quarter of 1996 and 1995, respectively. As a percentage of
combined sales and franchising revenues, operating expenses
were 38 percent and 51 percent for the first six months of
1996 and 1995, respectively.
The provision for doubtful accounts and impaired notes
decreased 94 percent and 99 percent for the second quarter
and first six months of 1996, respectively, compared to the
same periods in 1995. The decreases are attributable to the
adoption of Financial Accounting Standards Board Statement
No. 114 "Accounting by Creditors for Impairment of a Loan"
in 1995.
Sequential Page No. 14
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically generated cash from operations
sufficient to meet its normal operating requirements. The
Company's cash and short-term investments increased
approximately $1.4 million in the first six months of 1996.
This increase resulted primarily from (i) the net income for
the first six months of 1996, (ii) cash from the disposal of
assets held for sale; and (iii) receipt of federal tax
refunds from 1995 tax benefits. These increases were
partially offset by purchases of treasury stock totalling
$2.1 million and cash dividends of ten cents per share or
$2.5 million paid in 1996. The Company's foreseeable cash
needs for operations and capital expenditures are expected
to be met through cash flows from operations; however, the
Company has available a $5 million unsecured credit line to
meet seasonal cash needs.
On May 31, 1996, working capital was $37.5 million compared
to $36.7 million on November 30, 1995. The current ratio
was 3.7 to 1.0 on May 31, 1996 and 3.5 to 1.0 on November
30, 1995. The long-term debt to equity ratio was .14 to 1.0
at May 31, 1996 and .15 to 1.0 at November 30, 1995. The
Company has tangible net worth of $75.9 million at May 31,
1996.
On June 14, 1996, the Company's Board of Directors declared
a five cents per share dividend payable on July 15, 1996 to
the stockholders of record on June 28, 1996. The Company
will consider adjustments to the dividend rate after giving
consideration to return to stockholders, profitability
expectations and financing needs.
Sequential Page No. 15
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There were no changes from previously reported litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
a) The Annual Meeting of Shareholders was held April 17,
1996.
c) A total of 23,845,452 shares were present or
represented at the meeting. The first matter voted
upon was the unconstested election of directors.
Abstentions and withholdings of votes constituted the
differences between the total shares voted for each
director and the total shares voting. All individuals
nominated as directors of the Corporation were
elected with the following number of votes:
Frank D. Hickingbotham 23,296,715
Herren C. Hickingbotham 23,302,331
William H. Bowen 23,311,005
Daniel R. Grant 23,329,722<PAGE>
F. Todd Hickingbotham 23,297,478
Don O'Neal Kirkpatrick 23,292,114
Marvin D. Loyd 23,305,676
Hugh H. Pollard 23,335,196
The second matter voted upon was a request to amend the
1992 Employee Stock Option Plan of TCBY Enterprises,
Inc. (the "Plan") which would increase the number of
shares available under the Plan by 500,000 shares. A
total of 22,399,066 shares voted "for" the amendment
and 1,323,499 voted "against" the amendment.
Abstentions and withholdings of votes constituted the
differences between the total shares voted and the
total shares voting.
<TABLE>
<CAPTION>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
<S> <C>
27 Article 5, Financial Data Schedule for the
Second Quarter Fiscal 1996 Form 10-Q
99(a) Press release, dated April 11, 1996, "TCBY
Licenses Development in the Netherlands"
99(b) Press release, dated April 15, 1996, "TCBY's
Hong Kong Franchisee Launches Distribution in 7-11
Stores"
99(c) Press release, dated April 17, 1996, "TCBY and
Wall Street Deli Announce Co-Branding Plans"
Sequential Page No. 16
99(d) Press release, dated April 22, 1996, "TCBY to
Launch $7.5 Million National Television
Campaign"
99(e) Press release, dated June 17, 1996, "TCBY
Reports Improved Results for the First Half of 1996"
99(f) Press release, dated July 10, 1996, "TCBY and
Texaco to Develop Caribbean and Latin American
Locations"
</TABLE>
b) The Company did not file any reports on Form
8-K during the three months ended May 31, 1996.
Sequential Page No. 17
SIGNATURES
__________
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
TCBY ENTERPRISES, INC.
Date: 07/12/96 /s/ Frank D. Hickingbotham
___________________________
Frank D. Hickingbotham,
Chairman of the Board and
Chief Executive Officer
Date: 07/12/96 /s/ Gene Whisenhunt
___________________________
Gene Whisenhunt,
Executive Vice President
Chief Financial Officer
Sequential Page No. 18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF MAY 31,
1996 AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE
QUARTER ENDED MAY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> MAY-31-1996
<CASH> 10,844,702
<SECURITIES> 4,977,292
<RECEIVABLES> 16,365,111
<ALLOWANCES> 1,495,391
<INVENTORY> 13,454,710
<CURRENT-ASSETS> 51,518,283
<PP&E> 77,773,097
<DEPRECIATION> 33,332,397
<TOTAL-ASSETS> 108,192,199
<CURRENT-LIABILITIES> 13,997,485
<BONDS> 11,319,468
<COMMON> 2,706,235
0
0
<OTHER-SE> 76,814,444
<TOTAL-LIABILITY-AND-EQUITY> 108,192,199
<SALES> 24,578,698
<TOTAL-REVENUES> 27,945,040
<CGS> 15,745,751
<TOTAL-COSTS> 15,745,751
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 22,303
<INTEREST-EXPENSE> 240,030
<INCOME-PRETAX> 3,774,184
<INCOME-TAX> 1,320,963
<INCOME-CONTINUING> 2,453,221
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,543,221
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
Exhibit 99(a)
PRESS RELEASE
FOR IMMEDIATE RELEASE
THURSDAY
APRIL 11, 1996
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY LICENSES DEVELOPMENT IN
THE NETHERLANDS
LITTLE ROCK, AR - THURSDAY (APRIL 11, 1996) - TCBY
ENTERPRISES, INC. (NYSE:TBY) today announced that TCBY's
International Division has awarded local development rights
for TCBY stores and products in The Netherlands, which
will be operated by P. Karsten Horeca-Franchise B.V., based
in Blokker, The Netherlands.
The franchise agreement calls for opening a minimum of
twenty TCBY frozen yogurt stores in The Netherlands during
the next five years. The franchisee intends to open the
first three TCBY locations within the next twelve months.
Plans also call for the distribution of "TCBY"(Registered)
branded hardpack and novelty frozen yogurt products through
supermarkets and other channels.
The Karsten Group is a very successful Dutch company
involved in franchising and food distribution for many
years. Their primary business is the wholesale distribution
of food products throughout The Netherlands and the
operation of the Amax and A-Market supermarket chains. The
Karsten Group has recently begun offering their customers
the opportunity to bundle various franchise concepts
including TCBY, Pizza Hut, Kentucky Fried Chicken, Kelly's
Restaurant, and others in a co-branded environment.
"TCBY feels that the Karsten Group is an ideal master
franchisee for developing our concept in The Netherlands.
This is our first development in Northern Europe and we feel
that it will be a springboard to other European countries,"
said Hartsell Wingfield, President of TCBY International.
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.
-30-
Exhibit 99(b)
PRESS RELEASE
FOR IMMEDIATE RELEASE
MONDAY
APRIL 15, 1996
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY'S HONG KONG FRANCHISEE
LAUNCHES DISTRIBUTION IN 7-11 STORES
LITTLE ROCK, AR - MONDAY (APRIL 15, 1996) - TCBY
ENTERPRISES, INC. (NYSE:TBY) today announced its Hong Kong
Franchisee, Top Green International, has begun distribution
of "TCBY"(Registered) branded products in 7-11 Stores in
that country.
The 330 7-11 Stores in Hong Kong will offer thirteen
varieties of "TCBY"(Registered) mini-cups and
Yog-A-Bar(Registered) novelties. The franchisee's
production facility in China is supplying the stores.
"TCBY"(Registered) products were introduced in 7-11 Stores
last week. A six-day newspaper and television campaign
promoted the arrival of "TCBY"(Registered) items in the
stores, including a full-page, color ad in the Sing Pao
Daily News, one of Hong Kong's largest newspapers.
Neil Friedman of Top Green International said, "We are very
excited about this opportunity to distribute TCBY frozen
yogurt through 7-11 Stores. Already, over 250,000 TCBY
novelty items have been sold through the 330 7-11 Stores
during the 6-day introductory promotion."
"We are so pleased for Top Green International. The 7-11
Stores offer a tremendous amount of sales potential for Top
Green, and certainly contribute to the overall brand
awareness of TCBY," said Herren Hickingbotham, President and
Chief Operating Officer of TCBY Enterprises, Inc.
Top Green International is the franchisee for TCBY in China,
Hong Kong and Macao. Jardines/Dairy Farm is the owner of
7-11 Stores in Hong Kong.
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.
-30-
Exhibit 99(c)
PRESS RELEASE
FOR IMMEDIATE RELEASE
WEDNESDAY
APRIL 17, 1996
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
TCBY ENTERPRISES, INC.
(501) 688-8229
BOB BARROW, PRESIDENT
WALL STREET DELI, INC.
(901) 684-1020
TCBY AND WALL STREET DELI
ANNOUNCE CO-BRANDING PLANS
LITTLE ROCK, AR - WEDNESDAY (APRIL 17, 1996) - TCBY
ENTERPRISES, INC. (NYSE:TBY) and Wall Street Deli, Inc.
(NASDAQ:WSDI) today announced co-branding plans for the two
companies to begin immediately.
Plans call for 10 Wall Street Deli units in Dallas, Denver
and Los Angeles to be retrofitted with a "TCBY"
Treats(Service Mark) unit. The first unit will be
operational in Dallas in May.
"We are excited about this project with Wall Street Deli,"
said Herren Hickingbotham, President and Chief Operating
Officer of TCBY Enterprises, Inc. "We expect to move beyond
these markets with additional units. Wall Street Deli
affords us access to some great locations in these cities."
"Wall Street Deli is very pleased to be working with TCBY,"
said Jeffrey Kaufman, Executive Vice President and Chief
Operating Officer of Wall Street Deli, Inc. "We think our
customers will respond positively. TCBY products will add a
great new dimension to these locations."
Wall Street Deli, Inc. is one of the nation's largest food
service operators specializing in office locations. The
Company owns and operates 125 delicatessen-style restaurants
which are located primarily in office buildings or high
traffic retail complexes in central business districts of
large metropolitan cities.
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 world's largest manufacturer-franchisor of frozen yogurt
in the world.
-30-
Exhibit 99(d)
PRESS RELEASE
FOR IMMEDIATE RELEASE
MONDAY
APRIL 22, 1996
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
TCBY ENTERPRISES, INC.
(501) 688-8229
MILLIE WARD, PRESIDENT
STONE & WARD
(501) 375-3003
TCBY TO LAUNCH $7.5 MILLION
NATIONAL TELEVISION CAMPAIGN
LITTLE ROCK, AR - MONDAY (APRIL 22, 1996) - TCBY SYSTEMS,
INC. today announced it will launch its 1996 national
television campaign featuring the new "TCBY" Treats(Service
Mark) concept and menu. This campaign, beginning on May 6,
will be the first to promote the addition of hand-dipped ice
cream and hand- dipped frozen yogurt to the
"TCBY"(Registered) menu.
The spot, "Celebration", announces the upgrade of
traditional "TCBY"(Registered) stores to the "TCBY"
Treats(Service Mark) frozen snacks and desserts concept.
"TCBY" Treats(Service Mark) stores feature
"TCBY"(Registered) soft-serve frozen yogurt and sorbet, and
"TCBY"(Registered) hand-dipped frozen yogurt, premium ice
cream and sorbet. Currently, over 60 percent of traditional
operating stores in the U.S. have converted to the new
format or are in the process of doing so.
The campaign will run for ten weeks beginning May 6. It
will appear on the major cable networks, as well as national
broadcast networks. Over 4,400 :30 and :15 spots will air
during this time.
The national campaign was developed and launched by Stone &
Ward Advertising, Marketing and Public Relations of Little
Rock, Ark., which has been the agency of record for the
Company for three years.
"We're pleased with the execution of the spots," said Larry
Stone, Executive Creative Director and Chief Executive
Officer of Stone & Ward. "The campaign combines strong
product visuals with upbeat, original music to effectively
introduce the next generation of TCBY products. It all
works together to build the value of the brand."
Kathy Scharff of Stone & Ward served as Producer/Creative
Director and Jean Romano of Stone & Ward was Associate
Creative Director. The television commercials were filmed
by Director Greg Ramsey of Fahrenheit Films of New York.
Editing was completed by Palestrini Post Production of New
York, and music was produced and mixed by Shapiro Music of
Boston.
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.
-30-
Exhibit 99(e)
PRESS RELEASE
FOR IMMEDIATE RELEASE
MONDAY
JUNE 17, 1996
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY REPORTS IMPROVED RESULTS
FOR THE FIRST HALF OF 1996
LITTLE ROCK, AR - June 17, 1996 - TCBY ENTERPRISES, INC.
(NYSE:TBY) today announced net income for the first six
months of 1996 was $1,948,544, or $.08 per share, compared
to a net loss of $(1,995,192), or $(.08) per share, for the
same period in 1995. Year-to-date results for 1995 included
a $(.06) per share loss due to the adoption of a new
accounting standard which was offset by a $.06 per share
gain from the sale of the marketing and distribution rights
of the Company's refrigerated yogurt product line. Net
income for the second quarter of 1996 was $2,453,211, or
$.10 per share, compared to $2,440,098, or $.10 per share,
for the same period in 1995, which included in 1995 a $.06
per share gain from the sale of the marketing and
distribution rights of the Company's refrigerated yogurt
product line. The improvements in results in 1996 reflect a
43% reduction for the second quarter and a 45% reduction
year-to- date in selling, general and administrative costs
primarily achieved through the Company's restructuring, the
sale of Company-owned stores, and a focus on geographic
regions where the Company's hardpack frozen products can be
delivered and marketed in a more efficient manner.
Sales and franchising revenues for the second quarter ended
May 31, 1996 and 1995 were $27,945,040 and $33,536,214,
respectively. Sales and franchising revenues for the first
six months of 1996 and 1995 were $45,222,693 and
$60,730,535, respectively. The declines in sales and
franchising revenues are primarily attributable to the
execution of the Company's decision to franchise or close
its Company-owned stores, and a decrease in sales to the
retail grocery trade resulting from the sale of the
refrigerated yogurt line and the refocus of the geographic
regions where the Company's hardpack frozen products are
marketed.
TCBY had 2,741 total locations at the conclusion of the
second quarter of 1996. These locations consisted of 8
Company-owned stores, 194 international locations, 1,311
non-traditional locations and 1,228 franchised stores. The
Company continues to pursue the development of franchised
non-traditional locations with a special focus on
convenience stores operated in association with national
petroleum companies. As of May 31, 1996, the Company had
opened 159 of these petroleum locations and had an
additional 76 locations under agreement for development in
1996. These locations offer dual-branding opportunities
with other national food companies.
In addition, it was announced during the second quarter that
a development agreement had been reached with Citgo
Petroleum Corporation, and development alliances had been
established with A&W Restaurants and Wall Street Deli. The
Company is pursuing similar agreements and alliances with
other companies.
The Company's "TCBY" Treats(Service Mark) concept continues
to expand through the TCBY franchise system. To date,
approximately 65% of operating traditional domestic
franchise stores have converted or are in the process of
converting to the new "TCBY" Treats(Service Mark) concept.
To support this new development, a national television
campaign, running from May through July, focuses on the new
products, including premium ice cream, offered under the
"TCBY" Treats(Service Mark) concept.
During the second quarter, the Company announced its
international division had finalized new franchise
agree ments for Israel and the Netherlands and now has
development agreements in 32 countries. International
Franchise Conferences were held in Hong Kong and Mexico
during the quarter to introduce the "TCBY" Treats(Service
Mark) concept to international franchisees. It was also
announced during the second quarter that Top Green
International, the licensee for China, Hong Kong and Macao,
reached an agreement with 7-11 Stores for the distribution
of "TCBY"(Registered) products in over 330 7-11 Stores in
Hong Kong.
"We are pleased with our second quarter results and the
continued improvements we are experiencing," said Herren
Hickingbotham, President and Chief Operating Officer. "We
continue to be excited about our development opportunities
in 1996 through new international and non-traditional
locations, as well as through conversions and expansion of
the TCBY Treats program in our traditional franchise stores.
We expect the improvements in SG&A to hold throughout the
year, and will continue our focus on improving sales and
profitability throughout the Company."
In December, 1995, the Company announced the authorization
by its Board of Directors to purchase up to three million
shares of its outstanding common stock. To date, the
Company has purchased over 470,000 shares. Purchases have
been made utilizing the Company's cash resources.
The Board of Directors of the Company declared a $.05 per
share cash dividend payable on July 15, 1996 to stockholders
of record as of June 28, 1996.
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.
TCBY Enterprises, Inc.
Selected Financial Highlights
($000, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
May 31, May 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Operating Results
Sales & Franchising Revenue $ 27,945 $ 33,536 $ 45,223 $ 60,731
Net Income (Loss) $ 2,453 $ 2,440 $ 1,949 $ (1,995)
Net Income (Loss) Per Share $ .10 $ .10 $ .08 $ ( .08)
Average Shares Outstanding 25,283 25,557 25,422 25,576
Dividends Paid Per Share $ .05 $ .05 $ .10 $ .10
</TABLE>
<TABLE>
<CAPTION>
May 31, November 30,
1996 1995
<S> <C> <C>
Financial Position
Current Assets $ 51,518 $ 51,357
Current Liabilities $ 13,997 $ 14,668
Property, Plant & Equipment, Net $ 44,441 $ 45,710
Total Assets $108,192 $111,625
Long-term Debt, less current portion $ 11,319 $ 12,641
Stockholders' Equity $ 79,521 $ 82,179
</TABLE>
-30-
Exhibit 99(f)
PRESS RELEASE
FOR IMMEDIATE RELEASE
WEDNESDAY
JULY 10, 1996
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
TCBY ENTERPRISES, INC.
(501) 688-8229
PAUL MEREDITH
TEXACO LATIN AMERICA/WEST AFRICA
(305) 529-4524
TCBY AND TEXACO TO DEVELOP
CARIBBEAN AND LATIN AMERICAN LOCATIONS
LITTLE ROCK, AR - WEDNESDAY (JULY 10, 1996) - TCBY
ENTERPRISES, INC. (NYSE:TBY) and Texaco today announced that
they will pursue joint development opportunities in the
Caribbean and Latin America.
To date, one location has been opened in Jamaica, one is
under construction in the Dominican Republic, and a third
location is under development in the Cayman Islands. All of
these markets offer additional locations for joint
development.
"We are very excited about the development opportunities
with Texaco in these markets. This is a natural extension
of our successful convenience store development in the
U.S.," said Hartsell Wingfield, President of TCBY
International.
"A TCBY Treats location allows us to offer our customers a
great snack alternative from a company they know and like,"
said J. Carey McHugh, Vice President of Texaco Caribbean,
Inc. "We are pleased we can join our two brands to serve
consumers in these markets."
Locations in the Bahamas, Brazil and Costa Rica are
currently under consideration. In some cases, TCBY
franchisees will operate the "TCBY" Treats(Service Mark)
location; in others, the Texaco convenience store operator
will become a TCBY franchisee and manage both operations.
Branded food concepts inside convenience stores is a booming
trend in the United States. TCBY currently has over 200
such locations operating or in development. Texaco has
partnerships with more than 20 food franchises and has
launched a redesign of its outlets to better accommodate the
addition of these concepts to its operations.
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 world's largest manufacturer-franchisor of frozen
yogurt.
-30-
