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
For the fiscal year ended November 30, 1996
___ 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 1200
Little Rock, Arkansas 72201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (501) 688-8229<PAGE>
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, 1997: $50,638,000.
The number of shares of the Registrant's Common Stock ($.10
par value) outstanding as of January 1, 1997: 24,474,876.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the year
ended November 30, 1996 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, 1997 are incorporated by
reference into Part III.
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 TCBY Company-owned (one store as of
November 30, 1996) and TCBY franchised retail stores (TCBY
stores), TCBY non-traditional locations (e.g., airports,
schools, hospitals, convenience stores, and travel plazas),
and the retail grocery trade (e.g., grocery stores and
wholesale clubs). In September 1996, the Company purchased
a portion of the assets of two Phoenix, Arizona-based
companies which together constituted a two-unit juice bar
concept known as Juice Works and has begun developing
locations under the Juice Works brand. 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 N ovember 30, 1996, 1995, and
1994 included on pages 17 through 20 and page 30 of the
Company's 1996 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 store
in September 1981 and first franchised TCBY 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 locations; operates a domestic TCBY
location in Little Rock, Arkansas and sells yogurt and
novelty products to the retail grocery trade); Juice Works
Development, Inc. (which markets, franchises and licenses
domestic Juice Works stores, and operates a Juice Works
store in Phoenix, Arizona); 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 and Juice Works
locations) and the AIMCO Division (which sells and
distributes foodservice equipment and supplies primarily to
customers outside of the TCBY and Juice Works systems); and
Carlin Manufacturing, Inc. (which manufactures special
purpose vehicles and produces soft serve vending carts and
kiosks).
FOOD PRODUCTS SEGMENT
TCBY 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,"
"TCBY THE COUNTRY'S BEST YOGURT," "TCBY Treats," or related
tradenames (herein referred to as "TCBY locations").
On November 30, 1996 there were 2,696 TCBY locations,
including 1,197 domestic franchised stores, one
Company-owned store, 201 international licensed stores, and
1,297 non-traditional locations. Information regarding TCBY
location activity for 1996 and 1995 is incorporated by
reference to the information contained in the table on page
17 to the Company's 1996 Annual Report to Stockholders.
The Company currently manufactures its TCBY brand of premium
frozen yogurt and ice cream sold domestically and licenses
its manufacturing in select international markets. The
frozen yogurt and ice cream is served in a variety of ways,
including cups, cones, sundaes, and shakes, and with a
variety of toppings. TCBY locations also sell a changing
variety of flavors of frozen yogurt, prepared and pre-made
cakes and pies, and novelties from display freezer cases.
The TCBY Treats concept which is optional for existing
locations and generally required for new and relocated
locations features TCBY soft serve frozen yogurt, but adds
TCBY hand-dipped frozen yogurt, TCBY hand- dipped premium
ice cream, Paradise Ice shaved ice, and frozen custard.
Some TCBY locations are joined with other brands (referred
to as co-branding) allowing efficiencies in labor and real
estate and maximizing daypart sales. Examples of
co-branding concepts with TCBY locations include Juice
Works, Wall Street Deli, Taco Bell, and Pretzel Time.
TCBY Domestic Franchised Stores
TCBY domestic franchised stores ("TCBY stores") are located
primarily in shopping centers, free standing locations, and
shopping malls. Generally, a TCBY 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 store ranges from approximately $116,000 to
$341,900 ($52,900 to $143,400 for a mini-store or store
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 TCBY 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 fee of four percent of
its net revenues. In addition, a franchisee must contribute
an amount not in excess of three percent of its net revenues
to a separate national advertising fund ("Fund") which is
used to promote TCBY products. Substantially all
franchisees pay the continuing fees to the distributor for
the TCBY franchise system, ProSource Distribution Services
("ProSource"), a leading 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 Fund
may spend in any year an amount greater or less than the
aggregate contributions of TCBY 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 TCBY 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
specifications and standards. The Company is the only
approved supplier of frozen yogurt and ice cream products.
Prior to the opening of a TCBY store, a franchisee must
attend an eight 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 stores and to assist franchisees with operational
problems.
The Company has 698 domestic franchisees operating in all 50
states, of which 200 own more than one TCBY store and 35 own
five or more TCBY stores. As of November 30, 1996,
franchise agreements had been executed for approximately
100 TCBY stores to be opened in the United States, some of
which are currently expected to open in 1997. However, some
of these franchise agreements may terminate without the
related stores opening.
During 1996, a total of 88 TCBY stores were closed by
franchisees. Each TCBY 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 1,197 TCBY stores
reported open at November 30, 1996 were 147 TCBY stores
closed for relocation or the season. TCBY 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
for failure to reopen in a timely manner. TCBY 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 does not offer financing to domestic
TCBY franchisees for the purchase of the equipment,
furniture, and signage package required to open new stores.
However, during 1997 the Company will make available up to
$2.5 million of financing for domestic TCBY franchisees
meeting certain criteria. In addition, the Company has made
and may make available financing for the purchase of
existing TCBY stores, leasehold improvements, and working
capital in certain circumstances.
The Company from time to time receives inquiries from
unaffiliated financing companies to provide leasing or
financing programs for certain equipment purchases for TCBY
stores and TCBY non-traditional locations. These programs
would be available at the option of the franchisee or
licensee.
TCBY Non-traditional Locations
TCBY non-traditional locations include TCBY mini-stores and
TCBY stores operated in conjunction with other concepts,
discussed below; their principal differences from a
traditional domestic TCBY 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 store (an example of this would
be the operator of a TCBY store within a convenience store
at a nationally recognized branded petroleum outlet). TCBY
non-traditional locations 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
store and serve TCBY products through small stores, kiosks,
soft serve vending carts, and counter top display units.
Many TCBY non-traditional locations operate in a "captive"
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 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, 1996 there were 1,297 TCBY
non-traditional locations open and approximately 225 TCBY
non-traditional locations under development. A total of 643
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.
In 1996, significantly more TCBY non-traditional locations
than traditional locations opened. While the Company has
placed and continues to place equal emphasis upon both
traditional and non-traditional locations, the Company has
experienced more non-traditional development in the last two
years. The Company believes this trend will continue for
1997. While different in size and character, each TCBY
location is treated the same for purposes of encroachment
avoidance.
TCBY International Locations
Generally, the Company adopts a master franchise agreement
form of relationship for its international development. A
master franchisee is granted the right to develop a minimum
number of TCBY 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 (possibly to the
master franchisee). In addition, the Comp any may grant to
the master franchisee the distribution rights of TCBY
branded products in the defined country. The master
franchisee generally will receive subfranchising rights
within the country which is the subject of the master
franchise agreement.
As of November 30, 1996, there were 201 TCBY international
franchised locations, including TCBY stores in Japan (45),
Mexico (5), Thailand (16), South Korea (43), China (25),
Canada (10), Aruba (5), The Bahamas (3), Qatar (9), Bahrain
(2), Saudi Arabia (3), United Arab Emirates (3), Costa Rica
(3), Hong Kong (13), Philippines (2), Dominican Republic
(1), Israel (2), Kuwait (2), The Netherlands (3), Spain (1),
Jamaica (3), and Indonesia (2). TCBY has also finalized
agreements for the development of TCBY international master
franchise locations in Australia, Brazil, Cayman Islands,
Ecuador, Egypt, India, Lebanon, Malaysia, New Zealand,
Portugal, Russia, Oman, Macao, Singapore, St. Maarten, and
Vietnam. Within the licensed countries there are several
thousand retail points of sale for TCBY products. Revenues
from any single country are not expected to be material in
1997. In the aggregate, revenues from international
locations in 1997 are expected to be comparable to 1996
which represented five percent of combined sales and
franchising revenues.
Juice Works Stores
Juice Works stores sell fruit and vegetable juices,
fresh-made fruit smoothies mad e with frozen yogurt, dietary
supplements to add to juices and smoothies, and
lowfat/nonfat baked goods. The Company anticipates future
Juice Works stores will primarily be located in shopping
centers, free standing locations, and shopping malls.
Generally, a Juice Works store will occupy 1,000 to 1,500
square feet and accommodate both carryout and in-store
business. The Company estimates that the total initial
investment required for the establishment of a Juice Works
store ranges from approximately $105,300 to $251,300
excluding real property costs. These costs will 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 Juice Works stores issued since Juice Works
was purchased by the Company (September, 1996) 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. A franchisee will pay an initial franchise fee and
a royalty fee of four percent of its net revenues. In
addition, a franchisee must contribute an amount not in
excess of three percent of its net revenues to separate
national advertising fund ("Fund") which will be used to
promote Juice Works products. All franchisees will pay the
continuing fees to the Company each week based on net sales
for each of their stores for that week. The Company may
spend in any year an amount greater or less than the
aggregate contributions of Juice Works 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 and product approvals are the same as discussed
above for TCBY domestic franchised stores. The TCBY field
inspection program is also utilized by Juice Works.
To date, there are 11 Juice Works locations open or under
development, including five co-branded Juice Works/TCBY
loca tions. However, some of these agreements may terminate
without the related stores opening.
Generally, the Company is not offering financing to
franchisees for the purchase of the equipment, furniture,
and signage package required to open new Juice Works stores.
Retail Grocery Trade
The Company sells TCBY brand hardpack frozen yogurt and
frozen novelties for distribution to the retail grocery
trade 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 wa rehouse shelf space and the
competition for such space continues to intensify. At
November 30, 1996, the Company had approximately 25 retail
grocery trade customers.
Food Products Production
The Company's frozen yogurt and ice cream products sold in
TCBY stores and TCBY 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 1996, 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 anticipated
requirements in the future.
The Company also manufactures TCBY 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," "The Country's Best Yogurt," "TCBY The Country's
Best Yogurt," "TCBY Yogurt," "All the Pleasure. None of the
Guilt," and "Juice Works." 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
in most cases.
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 a few 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 or to protect its
existing registrations.
EQUIPMENT SEGMENT
Riverport Equipment and Distribution Company, Inc. offers
for sale a complete equipment, furniture, and signage
package in order to assist TCBY and Juice Wor ks franchisees
in opening their stores in a timely manner. TCBY store
packages cost a franchisee between $51,000 and $131,000 for
a domestic TCBY store, or between $25,000 and $50,000 for a
mini-store or store operated in conjunction with another
concept. Juice Works store packages cost a franchisee
between $43,500 and $73,500. 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
and Juice Works franchise system.
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 and such
continues to be the case. Raw materials used in the
production process consist primarily of common building
materials which are generally available from several
sources. During 1996, 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 1996 Annual Report to Stockholders
incorporated by reference for information regarding
unaudited consolidated quarterly results of operations for
1996 and 1995.
COMPETITION
The Company is the world's largest franchisor and licensor
of stores serving primarily soft serve frozen yogurt. TCBY
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. TCBY 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. 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
competitors have greater success on individual contract
bids, have greater financial resources, more outlets, or are
better known than the franchises of the Company who operate
these locations.
Juice Works stores compete with other regional juice bar
concept chains. Some of these competitors may have greater
financial resources, more outlets, or be 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.
Riverport competes primarily with local or regional
equipment companies (both domestic and international) that
are in close proximity to TCBY 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
foodserviceoperations.
Carlin Manufacturing competes primarily with other domestic
competitors of approximately equal size in the sale of
mobile kitchen products.
EMPLOYEES
As of November 30, 1996, the Company employed approximately
400 full-time and 60 part-time associates who were engaged
primarily in the manufacture, sale, and distribution of
frozen yogurt products and foodservice equipment as well as
management of the Company. This compares to approximately
540 full-time and 335 part-time associates employed on
November 30, 1995. None of the Company's employees are
covered by collective bargaining agreements.
During 1996, the Company implemented a restructuring of its
organization and franchised or closed all but one of its
TCBY Company-owned stores which resulted in staff
reductions.
RESEARCH AND DEVELOPMENT
Research and development costs were not material in the last
three 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 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 and Juice Works 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 were 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.
The lease was renegotiated effective January 1, 1997 which
will reduce the leased space by 35,713 square feet. 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 frozen yogurt mix
and other frozen dessert products and is classified in the
industry segment titled "Food Products". The majority of
the Company's capacity for hardpack and novelty products
will be utilized in producing products for TCBY locations
and private label customers during 1997. The Company is
currently utilizing under 50 percent of its capacity for mix
and is actively pursuing new customers for its TCBY products
and other products to utilize the capacity available at the
facility.
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 1996 Annual Report to
Stockholders incorporated by reference for information
regarding store rental obligations.
Riverport equipment distribution operations (relocated in
1995) are in a building which 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 is currently offered for
sale or lease. The existing facility handles the
distribution of equipment packages for new TCBY and Juice
Works stores and reorders of equipment and supplies from
TCBY and Juice Works 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, 1996, 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 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
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 1996.
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 1996
Annual Report to Stockholders. As of January 31, 1997,
there were 5,114 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 1996
Annual Report to Stockholders.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 1996 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 1996 Annual Report to
Stockholders.
Quarterly results of operations are incorporated by
reference to page 31 (Note 13) of the Company's 1996 Annual
Report to Stockholders.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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 1997 Proxy Statement.
EXECUTIVE OFFICERS OF TCBY ENTERPRISES, INC.
The following sets forth certain information regarding
executive officers of the Company:
Frank D. Hickingbotham, age 60, has been the Chairman of the
Board and Chief Executive Officer of the Company and its
predecessors since 1970.
Herren C. Hickingbotham, age 38, 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 33, 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 39, 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 36, became Executive Vice President,
Treasurer, 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 51, became Executive Vice President,
Equipment Division, 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.
William P. Creasman, age 44, joined the Company as Senior
Vice President and General Counsel in 1987.
Jim Sahene, age 36, 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 35, 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 51, became President of the
International Division of TCBY Systems, Inc. in December
1990. Mr. Wingfield joined the Company in 1987.
Walt Winters, age 59, became President of Specialty Products
Division of TCBY Systems, Inc. in December 1993. Mr.
Winters joined the Company in 1982.
Ralph H. Goldbeck, age 40, 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 1996 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.
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 1997 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" and "Nominees for Election
as Directors; Security Ownership of Management" in the
Company's 1997 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 1997 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, 1996.
(c) See Item 14 (a) (3) above.
(d) The response to this portion of Item 14 is submitted
as a separate section of this report.
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 24, 1997
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 2-24-97
and Chief Executive Officer
(Principal Executive Officer)
Herren C. Hickingbotham* Director, President and Chief 2-24-97
Operating Officer
Daniel R. Grant* Director 2-24-97
F. Todd Hickingbotham* Director, President Riverport 2-24-97
Equipment and Distribution
Company, Inc.
Marvin D. Loyd* Director 2-24-97
Hugh H. Pollard* Director 2-24-97
Don O. Kirkpatrick* Director 2-24-97
William H. Bowen* Director 2-24-97
Gene H. Whisenhunt* Executive Vice President, 2-24-97
Treasurer, and Chief Financial
Officer
(Principal Financial Officer)
</TABLE>
*BY /s/ Gene H. Whisenhunt Individually and as Attorney-in-Fact.
______________________
Gene H. Whisenhunt
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, 1996
TCBY ENTERPRISES, INC.
LITTLE ROCK, ARKANSAS
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, 1996, are incorporated by reference in
Item 8:
Consolidated balance sheets -- November 30, 1996 and 1995
Consolidated statements of operations -- Years ended
November 30, 1996, 1995 and 1994
Consolidated statements of stockholders' equity -- Years
ended November 30, 1996, 1995 and 1994<PAGE>
Consolidated statements of cash flows -- Years ended
November 30, 1996, 1995 and 1994
Notes to consolidated financial statements -- November 30,
1996
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.
<TABLE>
<CAPTION>
EXHIBIT INDEX EXHIBIT INDEX 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 Enterpris
es, Inc. and Bank One, Texas, N.A., dated
November 28, 1994 to finance expansion 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 Restat
ed 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)
(h) Form of Franchise Agreement (Revised Febru
ary 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
restated (Incorporated by reference to
Exhibit 4 to Post-Effective Amendment No. 1
to Registration 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 (Incorporat
ed by reference to Exhibit I of the Compa
ny'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 refer
ence to Exhibit 10(q) to the Company's
Annual Report on Form 10-K for the fiscal
year ended November 30, 1987)
(r) Amendment to the 1992 Employee Stock Option
Plan (Incorporated by reference to the
Company's March 8, 1996 Proxy Statement)
(s) Third Addendum to Lease Agreement between the
Company, as tenant, and Capitol Avenue
Development Company, a Limited Partnership,
as landlord, dated December 12, 1996......... Attached
13 Management's Discussion and Analysis of
Financial Condition and Results of Opera-
tions; Report of Ernst & Young LLP, Indepen-
dent Auditors; Consolidated Balance Sheets;
Consolidated Statements of Operations; Con-
solidated Statements of Stockholders' Equity;
Consolidated Statements of Cash Flows; and
Notes to the Consolidated Financial State-
ments included in the Registrant's Annual
Report for the year ended November 30,
1996......................................... 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 1996 10-K ....................... Attached
99 (a) Press release, dated October 15, 1996, "TCBY
Signs Development Agreement with Finaserve,
Inc."........................................ Attached
99 (b) Press release, dated October 17, 1996, "TCBY
Announces Opening of 200th Convenience Store
Location".................................... Attached
99 (c) Press release, dated November 1, 1996, "TCBY"
Treats/Wall Street Deli Location Opens in
Hoover"...................................... Attached
99 (d) Press release, dated November 19, 1996, "TCBY
Signs Development Agreement for Guam and
Other Pacific Island Territories............. Attached
99 (e) Press release, dated December 13, 1996, "TCBY
Declares Cash Dividend"...................... Attached
99 (f) Press release, dated January 9, 1997, "TCBY
Reports Improved Results for Fourth Quarter
and Fiscal 1996"............................. Attached
</TABLE>
THIRD ADDENDUM TO LEASE
This is the Third Addendum, made effective as of
January 1, 1997, to that certain Lease between Capitol
Avenue Development Company, a limited partnership, an
Arkansas limited partnership ("Landlord") and TCBY
Enterprises, Inc. ("Tenant") dated as of April 20, 1987.
WHEREAS, Landlord and Tenant previously entered into an
Addendum to Lease and a Second Addendum to Lease, the sole
purposes of which were to modify and amend the Lease dated
April 20, 1987, which such Lease together with the Addenda
shall hereinafter be collectively referred to as the
"Lease"; and
WHEREAS, all terms and provisions of the Lease shall
remain in full force and effect, except as otherwise
modified or amended hereinbelow.
In consideration of the mutual covenants contained
herein, ten dollars ($10.00), and other valuable
consideration, which is hereby mutually acknowledged as
received, the undersigned agree as follows:
1. Effective January 1, 1997, the leased premises
will be reduced to 53,487 square feet located on floors 12,
13, and 14 of the building and the rental rate utilized to
calculate monthly rental shall be $13.00 per square foot of
net rentable area on floors 12, 13, and 14, consisting of
53,487 square feet. (The annual rent shall thus be $695,331
for 1997.) This rental rate shall be escalated by 3%
annually each January 1, commencing January 1, 1998. All
escalations shall be compounded, meaning that each annual
increase shall be applied to the then current rental set
each January 1.
2. The term of the Lease shall be extended for a
period of ten (10) years commencing January 1, 1997, and
terminating December 31, 2006.
3. Tenant shall pay Landlord $175,000 along with
its January, 1997 rent, as partial consideration for
Landlord's modification of the Lease and Addendums One and
Two. This shall be in full satisfaction of Tenant's base
rental rate obligations under the Lease and Addendums One
and Two which are now being modified.
4. Tenant shall be provided with the calculations
for its 1996 operating expense reimbursement obligation
under the Lease and shall make such payment to Landlord
consistent with the terms and conditions of the Lease and
Addenda prior to this Third Addendum. Commencing January 1,
1997, and for the ten- year period of this lease extension
and during the option period, if exercised, Tenant shall not
be required to pay any additional operating expense
reimbursement.
5. Tenant is hereby granted an option to extend the
Lease for an additional ten (10) year period, on the same
terms and conditions, including the 3% annual escalator
(compounded in the same manner as set forth in paragraph 1,
above, commencing with the first 3% increase on January 1,
2007, over the annual rental paid in 2006), upon giving
Landlord written notice of at least 180 days prior to
December 31, 2006. This renewal option shall henceforth be
the only renewal option, and all other options set forth in
the Lease are hereby deleted from the Lease and shall have
no force or effect.
6. Landlord covenants with Tenant not to install
roof antennae or other devices, structures, coverings, or
visual obstructions of any sort which will block the view of
the "TCBY" lettering on the top of the building. As of the
date of execution of this Third Addendum, Tenant hereby
acknowledges Landlord's compliance with this paragraph.
7. Both Landlord and Tenant understand and agree
that this Third Addendum to the Lease must be approved by
Landlord's Mortgagee, Texas Teacher Retirement System, and
the parties agree to use their best efforts to secure its
approval. If approval is not obtained by December 15, 1996,
and confirmed to Tenant, neither party hereto shall be bound
by the terms and conditions herein set forth.
8. Tenant hereby acknowledges and confirms to
Landlord that no additional tenant improvements or
allowances are required of Landlord pursuant to this Third
Addendum in either the initial term commencing January 1,
1997, or the renewal term, if exercised.
9. During the ten-year lease term commencing
January 1, 1997, and the ten-year renewal set forth above,
if exercised, Landlord shall provide Tenant with free use of
up to 150 parking spaces in the adjacent TCBY Tower parking
structure. Any spaces not utilized by Tenant at any time
during the term or renewal term, if exercised, shall be
available to Landlord. From time to time Landlord may
inquire of Tenant, or Tenant shall notify Landlord, as to
Tenant's total number of Tenant's employees in the offices
at the TCBY Tower, and any remainder resulting from
subtracting that number from 150 shall be deemed to be the
number of parking spaces not utilized by Tenant and thus
available to Landlord. It is anticipated by the parties
that the number of spaces available to Landlord shall
fluctuate in accordance with Tenant's total number of
employees in the TCBY Tower, but under no circumstances
shall Landlord have any duty whatsoever to furnish more than
150 parking spaces to Tenant at any time.
10. Any reference in the Lease to Tenant's right to
expand its space or right of first refusal on space in the
TCBY Tower is hereby deleted from the Lease.
11. This Third Addendum, executed on the date set
forth below, supersedes that certain Third Addendum executed
by the parties on November 26, 1996.
IN WITNESS WHEREOF, Landlord and Tenant have executed
this Third Addendum this _26th_ day of
_______November_______, 1996.
CAPITOL AVENUE DEVELOPMENT
COMPANY, A LIMITED
PARTNERSHIP, AN ARKANSAS
LIMITED PARTNERSHIP
Witness:
/s/ Henry Kelley, Jr.
___________________________________
/s/ John Flake
By:________________________________
TCBY ENTERPRISES, INC.
Witness:
/s/William P. Creasman
___________________________________
/s/ John Rogers
By:________________________________
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Fiscal 1996 Compared to Fiscal 1995
The Company's total sales for 1996 decreased 24 percent from
sales in 1995. As described below, the decrease in sales is
primarily related to strategic decisions implemented during
1995 including the franchising or closing of most
"TCBY"(Registered) Company-owned stores, the sale of the
rights for manufacturing and distribution of
"TCBY"(Registered) refrigerated yogurt products to
Mid-America Dairymen, Inc., and the Company's decision to
focus on geographic regions where hardpack products can be
delivered and marketed in a more efficient manner. While
the actions did result in a decline in sales, they
contributed to improved operating results in 1996. The
following table sets forth sales by category within the
Company's primary segments (food products and equipment) of
operation:
<TABLE>
<CAPTION>
(dollars in thousands)
1996 1995 1994
Sales % Sales % Sales %
________ ____ ________ ____ ________ _
<S> <C> <C> <C> <C> <C> <
Food Products:
Frozen products sales to
ProSource Distribution
Services and other
foodservice distributors $ 49,705 60% $ 51,003 46% $ 54,243
Yogurt sales to the retail
grocery trade 14,973 18% 25,327 23% 46,377
Retail sales by Company-
owned stores 2,599 3% 18,065 17% 21,734 15
________ ____ ________ ____ ________ _
67,277 81% 94,395 86% 122,354
Equipment:
Sales by the Company's
equipment distributor 11,779 14% 10,783 10% 13,262
Sales of manufactured
specialty vehicles 2,874 4% 3,642 3% 3,936 3
14,653 18% 14,425 13% 17,198
Other 1,034 1% 988 1% 893 1
________ ____ ________ ____ ________ _
Total Sales $ 82,964 100% $109,808 100% $140,445 1
======== ==== ======== ==== ======== =
</TABLE>
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 products decreased three percent
compared to 1995. This decrease is attributed primarily to
a reduction in the number of domestic traditional
"TCBY"(Registered) stores (Company-owned and franchise) in
operation and a decline in yogurt purchased by operating
stores d uring 1996 compared to 1995. These reductions were
partially offset by increased purchases of frozen yogurt
products by "TCBY"(Registered) non-traditional locations
during 1996 compared to 1995.
The following table sets forth location activity for 1996
and 1995 for "TCBY"(Registered) and Juice Works(Registered)
locations:
<TABLE>
<CAPTION> Non-
Franchised Company International Traditional To
Stores Stores Locations Locations Location
__________ _______ _____________ ___________ ____
<S> <C> <C> <C> <C> <C>
Locations Open at
December 1, 1994 1,245 96 141 1,319 2,8
Opened 34 -- 48 241 3
Closed (82) (33) (2) (287) (4
Net Stores Purchased
(Sold) Between Fran-
chisees & Company 21 (21) -- --
______ _____ _____ ______ ___
Locations Open at
November 30, 1995 1,218 42 187 1,273 2,7
Opened 38 1 75 322 4
Closed (88) (1) (61) (308) (4
Net Stores Purchased
(Sold) Between Fran-
chisees & Company 30 (40) -- 10 -
______ _____ _____ ______ ___
Locations Open at
November 30, 1996 1,198 2 201 1,297 2,6
======= ====== ====== ======= ====
</TABLE>
Included in the franchised store information are 147 and 135
"TCBY"(Registered) stores closed for relocation or for the
season at November 30, 1996 and 1995, respectively. The
non- traditional locations include sites at airports, travel
plazas, convenience stores, colleges, hospitals, theme
parks, and stadiums. During the past year, additional
opportunities have developed in locations where
"TCBY"(Registered) products are utilized with other brands
such as in petroleum stores or with other food concepts.
Locations developed in conjunction with petroleum stores are
a majority of the 322 non-traditional openings in 1996. The
Company's initial experience is that the volume of these
locations may exceed that of some other types of
non-traditional locations with the exception of airports.
During 1996, the Company closed 308 "TCBY"(Registered)
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 as they are not efficient
for the Company to service or the customer to operate.
These closings are not expected to have a material impact on
yogurt sales, but will allow the Company's support services
to be more effective and efficient. In addition, the
Company's joint venture partners were not successful in
retaining all of the "TCBY"(Registered) locations at the
Dallas/Ft. Worth (DFW), Atlanta, and Los Angeles airports
where the foodservice contracts were up for bid in prior
years. The transition in Atlanta and Los Angeles is
complete and declines in the frozen yogurt sales at these
airports are not material to the Company. The transition at
the DFW Airport has begun and the Company does not expect to
have locations in this airport at some point during 1997
unless new opportunities develop. The decline in frozen
product sales from the changes at DFW are not material to
the Company and are expected to be offset by continued
growth in new co-branded locations described above.
Sales of yogurt to the retail grocery trade decreased 41
percent during 1996 as compared to 1995. A portion of the
decline resulted from the Company's sale in April 1995 of
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 co-packed these products for the Company. The Company's
sales of refrigerated yogurt products totaled approximately
$5.3 million in 1995. The Company has continued the
distribution of hardpack frozen yogurt products to the
retail grocery trade. However, 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.
Retail sales by Company-owned stores declined 86 percent
during 1996 compared to 1995. This decline resulted
primarily from the Company's decision, during the fourth
quarter of 1995, to franchise or close most of the
"TCBY"(Registered) Company-owned stores. The Company
believes the stores can operate more effectively with local
ownership. The divestiture of the stores will lower sales
in the food products segment in 1997 as the Company operated
units for a portion of 1996. At November 30, 1996 and 1995,
the Company operated two stores (one "TCBY"(Registered) and
one Juice Works(Registered)) and 42 "TCBY"(Registered)
stores, respectively.
Average store sales (the average of sales by domestic
traditional stores open the entire year) for Company-owned
and franchised "TCBY"(Registered) stores decreased two
percent from $212,000 in 1995 to $207,000 in 1996. 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 relocations. The Company's efforts to improve store
sales includes the "TCBY"(Registered) Treats concept. As of
November 30, 1996, 581 existing stores have converted or are
in the process of converting to the concept. The
"TCBY"(Registered) Treats concept is generally required for
new and relocated locations. Even with the successful
implementation of these programs, store sales may decline
and store closings may continue.
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 two percent during 1996 over the prior year.
The increase in sales during 1996 is attributable to
increased sales at the Company's equipment distributor due
to the opening of non-traditional "TCBY"(Registered)
locations, some of which purchased a portion of their
original equipment packages from the Company. The increase
in sales for the equipment distributor was partially offset
by decreased orders for specialty vehicles at the Company's
equipment manufacturer. The Company has continued the
process to divest its equipment manufacturer located in
Fresno, California as this subsidiary is no longer a part of
the Company's core business.
The cost of sales to sales ratios for 1996 and 1995 for the
Company and its two primary segments are presented below:
<TABLE>
<CAPTION>
___________________
1996 1995
___________________
<S> <C> <C>
Food Products Segment 63% 57%
Equipment Segment 76% 82%
Company Total 65% 60%
</TABLE>
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
"TCBY"(Registered) Company-owned stores. The
"TCBY"(Registered) Company-owned stores had a lower cost of
sales to sales ratio than the overall ratio for the food
products segment. Therefore, as such stores we re sold or
closed, the cost of sales to sales ratio increased. In
addition, milk prices, which represent a major component of
the Company's cost of sales at its production facility,
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 decline in 1997
below those experienced in 1996, but not to the levels
experienced in years previous to 1996.
Franchising revenues consist of initial franchise and
license fees and royalty income. In 1996, initial franchise
and license fees increased 53 percent and royalty income
increased two percent from 1995. The increase in franchise
and license fees results primarily from increased domestic
franchise fees, which are due to the expansion into
convenience stores operated in association with national
petroleum companies. The increase in royalty income relates
to the growth in the number of franchises operated by
petroleum companies and their dealers or distributors,
international development, and from the franchising of
stores that were previously operated by the Company.
Five percent of combined sales and franchising revenues were
generated from international activity in 1996 compared to
three percent in 1995.
Operating expenses decreased 64 percent in 1996 compared to
1995. These decreases are a ttributable to several factors
including: (i) the Company's adoption of 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 1995; (ii) a
reduction in depreciation and amortization during 1996 due
to the reduction in the basis of various assets associated
with the adoption of Statement No. 121; (iii) a reduction
during 1996 in selling and marketing costs associated with
the refrigerated yogurt line sold in April 1995 and the
Company's decision in late 1995 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; (iv) a reduction in
expenses related to operation of "TCBY"(Registered)
Company-owned stores due to the franchising or closing most
of these stores during 1996, as discussed above; and (v) a
restructuring of the Company's organization in the fourth
quarter of 1995, which included a charge of $1.4 million for
employee severance costs. Operating expenses, as a
percentage of combined sales and franchising revenues, were
34 percent and 74 percent for 1996 and 1995, respectively.
Operating expenses, as a percentage of combined sales and
franchising revenues, were 51 percent in 1995, excluding the
impact of the adoption of new accounting standards as
discussed above.
The provision for doubtful accounts and impaired notes
decreased 99 percent in 1996 compared to 1995. The decrease
in 1996 is attributable to significant provisions made in
1995 relating to the adoption of Statement No. 114.
Interest expense decreased approximately $161,000 in 1996
compared to 1995. This decrease is due to reductions in
outstanding debt and lower interest rates. Interest
incurred by the Company in 1996 actually decreased $338,000
after considering capitalized interest of $177,000 in 1995
in association with expansion of the Company's manufacturing
facility.
Income tax expense or benefit as a percentage of pre-tax
income or loss changed to 34.6 percent in 1996 from 33.4
percent in 1995. 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 $3.7 million are expected to be realized through
the offset of existing taxable temporary differences.
Fiscal 1995 Compared to Fiscal 1994
Sales in the food products segment decreased from $122.4
million in 1994 to $94.4 million in 1995. The food products
segment represented 86 percent of the Company's total sales
during 1995 compared to 87 percent in 1994.
Within the food products segment, wholesale sales of frozen
yogurt to distributors decreased six percent. This was
attributed primarily to a reduction in the number of
domestic traditional "TCBY"(Registered) stores
(Company-owned and franchised stores) in operation during
1995 compared to 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 1994. These
reductions were partially offset by increased purchases of
frozen yogurt products by non-traditional locations during
1995 compared to 1994. See table above setting forth
location activity for 1995.
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
1995, the Company closed 287 non-traditional locations.
These locations generally purchased low volumes of yogurt
from the Company.
Sales of yogurt to the retail grocery trade decreased 45
percent during 1995 as compared to 1994. This decrease was
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 yogur t products throughout
the United States to Mid-America Dairymen, Inc. 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 1995
compared to 1994 as sales were $5.3 million and $23.0
million, respectively. The Company 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
1995. As a result, 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.
Sales by "TCBY"(Registered) Company-owned stores declined
17 percent during 1995. This decline resulted primarily
from a reduction in the number of "TCBY"(Registered)
Company-owned stores. During the fourth quarter of 1995,
the Company decided to franchise or close most of the
"TCBY"(Registered) Company-owned stores. The Company
believes the stores can operate more effectively with local
ownership. The sales in 1995 of "TCBY"(Registered)
Company-owned stores were approximately $18 million. At
November 30, 1995 and 1994, the Company operated 42 and 96
"TCBY"(Registered) stores, respectively.
Average store sales for Company-owned and franchised
"TCBY"(Registered) stores remained unchanged at $212,000 in
1995. 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.
Sales in the equipment segment decreased 16 percent from
$17.2 million in 1994 to $14.4 million in 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 ratio of cost of sales to sales was 60 percent for 1995
as compared to 59 percent for 1994. The ratio of cost of
sales to sales for the food products segment and equipment
segment in 1995 was 57 percent and 82 percent, respectively,
compared to 56 percent and 79 percent, respectively, in
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 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 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 1995 compared to
the prior year primarily because of the sale of the
"TCBY"(Registered) refrigerated yogurt product line. 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 experienced increases in
other components of cost of sales, such as product packaging
costs. As a result of these increased product packaging
costs, the Company instituted a price increase of
approximately one percent in the second quarter of 1995.
Franchising revenues consist of initial franchise and
license fees and royalty income. In 1995, initial franchise
and license fees increased 18 percent and royalty income
decreased five percent from 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 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.
Three percent of combined sales and franchising revenues
were generated from international activity in 1995 compared
to four percent in 1994.
Operating expenses, as a percentage of combined sales and
franchising revenues, were 74 percent and 39 percent for
1995 and 1994, respectively. The increase is primarily
attributed to the Company adopting several new accounting
standards during the fourth quarter of 1995 including
Statement No. 121 and Statement No. 114. The adoption of
the new standards resulted in pre-tax charges of $27.6
million in 1995.
The charges for impairment of assets resulted primarily from
the reduction of the carrying values of "TCBY"(Registered)
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 "TCBY"(Registered) 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
"TCBY"(Registered) 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 1995 for employee
severance costs. 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 1995 compared to 1994.
The impairment charges for loans relates to the receivables
from franchisees and Mid-America Dairymen, Inc. The
Company's estimated future cash receipts on certain
receivables from franchisees are less than 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 mi nimum 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.
The Company has agreed to waive minimum required payments
for a period of time, and accordingly 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 1995
compared to 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 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 changed slightly to 33.4 percent in 1995 from
33.3 percent in 1994.
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 $18 .9 million
in 1996 compared to $8.6 million in 1995 and $4.5 million
in 1994. The increase in 1996 resulted primarily from
improvements in operating results and cash received from tax
refunds, disposals of assets held for sale, and reductions
in inventories and receivables. The increase in 1995
resulted primarily from the reduction of receivables and
lower investments in distribution allowances.
On November 30, 1996 and 1995, working capital was $33.9
million and $36.7 million, respectively. The current ratio
for 1996 was 4.1 to 1 compared to 3.5 to 1 for 1995.
The Company's cash and short-term investments increased
approximately $4.8 million in 1996. This increase resulted
primarily from (i) the net income for 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 $4.5 million and cash dividends of 20 cents per
share or $5.0 million paid in 1996.
On September 11, 1996, the Company purchased the assets of
two Phoenix, Arizona-based companies which together
constitute a two-unit juice bar concept known as Juice
Works(Registered) for $1 million in cash.
Long-term debt repayments exceeded long-term debt proceeds
by $3.2 million in 1996 and 1995. Long-term debt proceeds
exceeded long-ter m debt repayments by $5.4 million in 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.
Cash generated from operations has been used to finance all
capital expenditures with the exception of the plant
expansion during 1995. Purchases of property, plant, and
equipment amounted to $2.4 million, $9.9 million, and $11.4
million in 1996, 1995, and 1994, respectively. The Company
had no material commitments for capital expenditures at
November 30, 1996. The Company has budgeted approximately
$2.4 million for capital expenditures in 1997. 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,
short or long term financing, issuance of equity, or other
financing sources 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 $1,564,000, $2,101,000, and $848,000 in 1996,
1995, and 1994, respectively. The Company will make
available additional financing for franchisees meeting
certain criteria totaling up to $2.5 million during 1997.
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.
In December 1995, the Company was authorized to repurchase
up to three million shares of its outstanding common stock.
Repurchases in 1996 totaled just over one million shares and
were funded with cash flows as noted above. Future
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 1996, 1995, and 1994. 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.
From time to time, the Company may publish forward-looking
statements relating to certain matters including anticipated
financial performance, business prospects, the future
opening of new units, anticipated capital expenditures, and
other similar matters. The Private Securities Litigation
Reform Act of 1995 provides a safe harbor for
forward-looking statements. In order to comply with the
terms of that safe harbor, the Company notes that a variety
of factors could cause the Company's actual results and
experience to differ materially from the anticipated results
or other expectations expressed in the Company's
forward-looking statements. In addition, the Company
disclaims any intent or obligation to update those
forward-looking statements.
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, 1996 and 1995, and the related consolidated statements
of operations, stockholders' equity, and cash flows for each
of the three years in the period ended November 30, 1996.
These financial statements are the responsibility of the
Company's management. Our responsibility is t o 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, 1996 and 1995, and the
consolidated results of their operations and their cash
flows for each of the three years in the period ended
November 30, 1996, 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 9, 1997
Little Rock, Arkansas
TCBY Enterprises, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
November 30
1996 1995
__________________________
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 14,919,008 $ 5,565,654
Short-term investments 4,252,552 8,824,163
Receivables:
Trade accounts 8,620,498 10,114,935
Notes 2,429,967 2,918,762
Allowance for doubtful accounts and impaired notes (1,187,628) (1,592,607)
__________________________
9,862,837 11,441,090
Refundable income taxes 332,873 4,418,936
Deferred income taxes 1,451,190 2,463,089
Inventories 11,321,751 12,920,468
Prepaid expenses and other assets 1,742,801 2,098,366
Assets held for sale 822,583 3,625,375
__________________________
Total current assets 44,705,595 51,357,141
Property, plant, and equipment:
Land 2,866,820 2,866,820
Buildings 23,581,923 23,402,389
Furniture, vehicles, and equipment 49,073,757 47,325,993
Leasehold improvements 3,511,509 3,214,117
Construction in progress - 31,483
Allowances for depreciation (35,694,982) (31,130,608)
__________________________
43,339,027 45,710,194
Other assets:
Notes receivable, less current portion (less allowance
for doubtful and impaired notes of $8,494,396 in 1996
and $9,585,410 in 1995) 6,131,070 7,035,259
Intangibles (less amortization of $1,731,199 in 1996
and $1,514,068 in 1995) 4,485,689 3,517,942
Other 3,807,066 4,004,707
__________________________
14,423,825 14,557,908
__________________________
Total assets $102,468,447 $111,625,243
==========================
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
November 30
1996 1995
_________________________
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 1,906,568 $ 2,455,127
Accrued expenses 5,699,381 9,041,380
Current portion of long-term debt 3,171,448 3,171,448
__________________________
Total current liabilities 10,777,397 14,667,955
Long-term debt, less current portion 9,469,456 12,640,904
Deferred income taxes 3,001,101 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 65,165,190 63,661,235
__________________________
93,418,609 91,914,654
Less treasury stock, at cost (2,424,769 shares
in 1996 and 1,387,069 shares in 1995) (14,198,116) (9,735,887)
__________________________
Total stockholders' equity 79,220,493 82,178,767
__________________________
Total liabilities and stockholders' equity $102,468,447 $111,625,243
==========================
</TABLE>
See accompanying notes.
TCBY Enterprises, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year Ended November 30
1996 1995 1994
_______________________________________
<S> <C> <C> <C>
Sales $ 82,964,258 $109,808,283 $140,444,739
Cost of sales 53,548,245 65,710,499 82,546,965
_______________________________________
Gross profit 29,416,013 44,097,784 57,897,774
Franchising revenues:
Initial franchise and license fees 2,439,125 1,590,510 1,342,311
Royalty income 10,400,873 10,171,075 10,684,055
_______________________________________
12,839,998 11,761,585 12,026,366
_______________________________________
42,256,011 55,859,369 69,924,140
Operating expenses:
Selling, general, and administrative
expenses 32,513,196 59,771,433 57,369,942
Provision for doubtful accounts and
impaired notes 88,205 12,572,172 1,469,630
Impairment of long-lived assets - 15,946,090 -
Restructuring charges - 1,400,000 -
_______________________________________
32,601,401 89,689,695 58,839,572
_______________________________________
Income (loss) from operations 9,654,610 (33,830,326) 11,084,568
Other income (expense):
Interest expense (961,154) (1,121,995) (618,121)
Interest income 1,147,484 969,652 1,070,029
Other income (expense) 168,669 1,911,884 (217,332)
_______________________________________
354,999 1,759,541 234,576
_______________________________________
Income (loss) before income taxes 10,009,609 (32,070,785) 11,319,144
Income tax expense (benefit):
Current 1,585,861 (3,982,309) (96,144)
Deferred 1,875,383 (6,715,618) 3,863,276
_______________________________________
3,461,244 (10,697,927) 3,767,132
_______________________________________
Net income (loss) $ 6,548,365 $(21,372,858)$ 7,552,012<PAGE>
=======================================
Net income (loss) per share $ .26 $ .(83)$ .30
=======================================
Average shares outstanding 25,156,994 25,602,375 25,523,436
=======================================
</TABLE>
See accompanying notes.
TCBY Enterprises, Inc.
Consolidated Statements of
Stockholders' Equity
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Retained Treasu
Shares Par Value Capital Earnings Stoc
________________________________________________________
<S> <C> <C> <C> <C> <C>
Balance at December 1, 1993 26,804,385 2,680,439 24,255,981 87,705,993 (9,411,
Exercise of stock options,
including tax benefit of
$47,575 106,948 10,694 584,450 -
Cash dividends--$.20 per share - - - (5,104,421)
Net income - - - 7,552,012
________________________________________________________
Balance at November 30, 1994 26,911,333 2,691,133 24,840,431 90,153,584 (9,411,
Exercise of stock options,
including tax benefit of
$18,991 151,012 15,102 706,753 -
Cash Dividends--$.20 per share - - - (5,119,491)
Purchase of treasury stock-
-70,000 shares - - - - (324,
Net loss - - - (21,372,858)
________________________________________________________
Balance at November 30, 1995 27,062,345 $2,706,235 $25,547,184 $63,661,235 (9,735,
Cash Dividends--$.20 per share - - - (5,044,410)
Purchase of treasury stock-
1,037,700 shares - - - - (4,462,
Net income - - - 6,548,365
________________________________________________________
Balance at November 30, 1996 27,062,345 $2,706,235 $25,547,184 $65,165,190$(14,198,
========================================================
</TABLE>
See accompanying notes.
TCBY Enterprises, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended November 30
1996 1995 1994
_______________________________________
<S> <C> <C> <C>
Operating activities
Net income (loss) $ 6,548,365 $(21,372,858)$ 7,552,012
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 5,156,622 10,880,350 8,862,307
Amortization of intangibles 217,131 599,053 611,847
Provision for doubtful accounts and
impaired notes 88,205 12,572,172 1,469,630
Provision of impairment of long-lived
assets - 15,946,090 -
Restructuring charges - 1,400,000 -
Deferred income taxes (benefits) 1,875,383 (6,715,618) 3,863,276
(Gain) loss on sales of property and
equipment (43,531) (66,721) 266,128
Gain on sale of product line - (2,370,046) -
Changes in operating assets and
liabilities:
Receivables 937,579 3,099,232 (4,945,720)
Inventories 1,608,413 413,853 (2,144,953)
Prepaid expenses 357,870 (708,548) 487,653
Distribution allowances - (919,585) (11,640,511)
Assets held for disposal 2,413,438 - -
Intangibles and other assets (391,497) 731,254 (803,749)
Accounts payable and accrued
expenses (3,926,558) (2,019,140) 1,891,738
Income taxes 4,086,063 (2,917,273) (1,014,269)
_______________________________________
Net cash provided by operating
activities 18,927,483 8,552,215 4,455,389
Investing activities
Purchases of property, plant, and
equipment (2,403,694) (9,883,365) (11,391,402)
Purchase of business, net of cash
acquired (952,800) - -
Proceeds from sales of property and
equipment 325,122 161,360 352,338
Origination of notes receivable (334,551) (453,892) (1,309,698)
Principal collected on notes
receivable 1,898,270 2,554,787 2,157,468
Purchases of short-term investments (1,457,224) (7,498,206) (12,111,419)
Proceeds from maturity of short-term
investments 6,028,835 13,887,222 11,724,529
Proceeds from sale of product line - 1,200,000 -<PAGE>
_______________________________________
Net cash provided by (used in)
investing activities 3,103,958 (32,094) (10,578,184)
Financing activities
Proceeds from long-term borrowings - - 7,500,000
Proceeds from sale of Common Stock - 721,855 595,144
Dividends paid (5,044,410) (5,119,491) (5,104,421)
Treasury stock transactions (4,462,229) (324,688) -
Principal payments on long-term debt (3,171,448) (3,170,261) (2,096,884)
_______________________________________
Net cash (used in) provided by
financing activities (12,678,087) (7,892,585) 893,839
_______________________________________
Increase (decrease) in cash and cash
equivalents 9,353,354 627,536 (5,228,956)
Cash and cash equivalents at beginning
of year 5,565,654 4,938,118 10,167,074
_______________________________________
Cash and cash equivalents at end of year $ 14,919,008 $ 5,565,654 $ 4,938,118
=======================================
</TABLE>
See accompanying notes.
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements
November 30, 1996
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 frozen
food products through Company-owned and franchised retail
stores ("TCBY"(Registered stores), non-traditional locations
(e.g., airports, schools, hospitals, convenience stores, 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 and develops locations under the Juice
Works(Registered) brand.
The following summarizes the number of "TCBY"(Registred) and
Juice Works(Registred) locations:
<TABLE>
<CAPTION>
November 30
1996 1995 1994
____________________
<S> <C> <C> <C>
Franchised or licensed 1,399 1,405 1,386
Company-owned 2 42 96
Non-traditional 1,297 1,273 1,319
____________________
2,698 2,720 2,801
====================
</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 non-equity 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.
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 throughout the United States and
internationally in the food products segment. In addition,
the Company from time to time extends credit in the form of
notes receivable to franchisees. During 1996 and 1995, the
Company extended credit of approximately $257,000 and
$1,483,000, respectively, to finance the sale of certain
"TCBY"(Registered) 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 1995, the Company adopted Financial Accounting Standards
Board Statement ("Statement") No. 114, "Accounting by
Creditors for Impairment of a Loan". Under Statement No.
114, the allowance for credit losses related to notes
receivable that are identified for evaluation in accordance
with the Statement 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, 1996 and 1995, the recorded investment in
notes considered to be impaired under Statement No. 114 was
$12,542,000 and $13,362,000, respectively. The entire 1996
balance and $13,027,000 of the 1995 balance were impaired
notes which had allowances for credit losses of $9,435,000
and $10,469,000, respectively. The 1995 balance included
$335,000 of impaired notes which as a result of write-downs
did 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
years ended November 30, 1996 and 1995 was approximately
$12,901,000 and $6,667,000, respectively. For the years
ended November 30, 1996 and 1995, the Company recognized
interest income on impaired notes of $1,000 and $32,000,
respectively, using the cash basis method of income
recognition. The notes considered to be impaired at
November 30, 1996 and 1995, include the note receivable from
Mid-America Dairymen, Inc. (See Note 11.)
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>
1996 1995 1994
_______________________________________
<S> <C> <C> <C>
Balance at December 1 $ 11,178,017 $ 1,278,384 $ 2,168,490
Provision for doubtful accounts and
impaired notes 88,205 12,572,172 1,469,630
Charge-offs (1,586,704) (2,824,072) (2,401,418)
Recoveries 2,506 151,533 41,682
_______________________________________
Balance at November 30 $ 9,682,024 $11,178,017 $ 1,278,384
=======================================
</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 3 to 40 years.
During 1995, intangibles related to "TCBY"(Registered)
Company-owned stores and Carlin Manufacturing were written
off. (See Notes 11 and 12.)
During 1995, the Company adopted 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.)
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements
(continued)
1. Accounting Policies (continued)
Revenue Recognition
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.
The Company recognizes revenue from product sales upon
shipment or, for sales by Company-owned stores, when
purchased by customers.
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 Income (Loss) Per Share
Net income (loss) per share is based on the average number
of common shares outstanding during each year. The dilutive
effect of stock options is insignificant.
Fair Value of Financial Instruments
The carrying amount of financial instruments including cash
and cash equivalents, short-term investments, accounts and
notes receivable, and accounts payable approximates fair
value at November 30, 1996, because of the relatively short
maturity of these instruments or valuation allowances which
have been recorded to report the balances at fair value.
The carrying amount of long-term debt also approximates fair
value due to its variable interest rate which is adjusted
every 30 to 180 days depending upon certain elections made
by the Company.
Fiscal Year
The Company's fiscal year is the twelve months ending on
November 30. All references to years in these notes to
consolidated financial statements represent fiscal years
ending November 30. In 1997, the Company will change to a
fiscal year consisting of 52 or 53 weeks, ending on the
Sunday nearest November 30.
Stock-Based Compensation
Statement No. 123, "Accounting for Stock-Based
Compensation", permits stock compensation cost to be
measured using the intrinsic value method or the fair value
method. The Company will continue to use the intrinsic
value method of accounting as prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees"; however, expanded disclosure of the
impact of the fair value method will be provided in the
footnotes to the 1997 financial statements as required by
Statement No. 123. The Company's existing stock option
plans have no intrinsic value at grant date, and no
compensation cost has been recognized for them (Note 8).
Use of Estimates
The preparation of consolidated financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
2. Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
November 30
1996 1995
__________________________
<S> <C> <C>
Manufacturing materials and supplies $ 3,326,392 $ 4,449,940
Finished yogurt and other food products 3,415,298 4,203,058
Equipment and other products 4,580,061 4,267,470
__________________________
$ 11,321,751 $ 12,920,468
==========================
</TABLE>
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements
(continued)
3. Long-Term Debt
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
November 30
1996 1995
__________________________
<S> <C> <C>
Unsecured notes payable $ 12,640,904 $ 15,812,352
Less current portion 3,171,448 3,171,448
__________________________
$ 9,469,456 $ 12,640,904
==========================
</TABLE>
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, 1996 was 6.53125% for both notes. The notes are due in
monthly installments of approximately $264,000 plus interest
and mature on June 1, 2000 and December 31, 2001. The loan
agreement requires, among other things, a fixed charge
coverage ratio of greater than 1.25 to 1.0 be maintained.
This ratio is defined as the sum of net income and non-cash
charges adjusted for extraordinary and nonrecurring 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.
The Company was in compliance with these covenants at
November 30, 1996.
Annual maturities of long-term debt total $3,171,448 in 1997
through 1999, $2,301,819 in 2000, and $824,741 in 2001.
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 1995. No interest was capitalized in 1996 and 1994.
During 1996, 1995, and 1994, the Company paid interest of
approximately $961,000, $1,299,000, and $631,000,
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
1996 1995
__________________________
<S> <C> <C>
Deferred tax assets:
Impairment allowance on fixed assets $ 893,874 $ 1,563,460
Allowance for doubtful accounts and impaired notes 260,145 753,693
Accrued expenses related to assets held for sale 383,733 669,002
Accrued rent 108,304 189,526
Other 2,027,618 1,894,158
__________________________
Total deferred tax assets 3,673,674 5,069,839
Deferred tax liabilities:
Tax over book depreciation 3,260,914 2,736,595
Other 1,962,671 2,007,772
__________________________
Total deferred tax liabilities 5,223,585 4,744,367
__________________________
Net deferred tax (liabilities) assets $(1,549,911) $ 325,472
==========================
</TABLE>
Significant components of the provision (benefit) for income taxes are as
follows:
<TABLE>
<CAPTION>
Year ended November 30
1996 1995 1994
_______________________________________
<S> <C> <C> <C>
Current:
Federal $ 1,420,321 $ (3,894,150) $ (81,245)
State 165,540 (88,159) (14,899)
_______________________________________
Total current 1,585,861 (3,982,309) (96,144)
Deferred 1,875,383 (6,715,618) 3,863,276
_______________________________________
$ 3,461,244 $(10,697,927) $ 3,767,132
=======================================
</TABLE>
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 rate to income tax (benefit) is:
<TABLE>
<CAPTION>
Year ended November 30
1996 1995 1994
________________________________________
<S> <C> <C> <C>
Income tax (benefit) at the
federal statutory rate $ 3,403,267 $(10,904,067) $ 3,861,700
State income taxes, net of
federal benefit (28,430) (58,185) (9,833)
Other, net 86,407 264,325 (84,735)
________________________________________
Total income tax (benefit) $ 3,461,244 $(10,697,927) $ 3,767,132
========================================
</TABLE>
The Company made income tax payments of approximately $1,105,000, $25,000, and
$871,000 in 1996, 1995, and 1994, respectively.
5. Accrued Expenses
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
November 30
1996 1995
__________________________
<S> <C> <C>
Rent $ 960,371 $ 1,547,372
Compensation 2,219,160 3,355,348
Other 2,519,850 4,138,660
__________________________
$ 5,699,381 $ 9,041,380
==========================
</TABLE>
Accrued expenses at November 30, 1996 and 1995 include $1.3
million and $3.5 million, respectively, of costs related
primarily to the Company's restructuring and sale of
"TCBY"(Registered) Company-owned stores.
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements
(continued)
6. Lease Commitments
In 1996, 1995, and 1994, rent expense totaled approximately
$2,884,000, $5,020,000, and $5,083,000, respectively. The
future minimal rental commitments for all non-cancelable
operating leases with initial or remaining terms in excess
of one year are as follows: 1997--$2,690,000;
1998--$2,250,000; 1999--$1,948,000; 2000--$1,359,000;
2001--$1,271,000; and thereafter--$5,273,000.
Certain of the leases relating to Company-owned stores are
renewable for substantially the same rentals for up to five
additional years. The rental commitments (net of subleases)
for Company-owned stores closed in conjunction with the
Company's decision to no longer operate "TCBY"(Registered)
stores (see Note 12) totaled approximately $315,000 at
November 30, 1996 and are excluded from the future minimum
commitments as this amount was accrued in 1995. The future
minimum rental commitments for stores, which total
approximately $4,161,000, relate primarily to the remaining
Company-owned stores and stores sold where the lease
commitment has been assumed by the buyer but the Company
remains on the lease as a responsible party. These future
commitments are expected to be offset by future minimum
rentals to be received under non-cancelable subleases of
approximately $3,700,000.
The lease commitments also include a lease for the corporate
headquarters which was renegotiated effective January 1,
1997 with a new 10-year term. The base rent escalates three
percent annually and the lease contains a 10-year renewal
option at the rental rate effective at the end of the
initial term. The rate would continue to increase three
percent annually during the renewal period.
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 to the extent the pace of the litigation
allows.
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
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 4,869,960 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, 1996, outstanding option prices
range from $4.00 to $17.19 per share and the options expire
on various dates from May 1997 to April 2006.
The following summarizes the option transactions under the
plans for 1996 and 1995:
<TABLE>
<CAPTION>
Shares Under Option Aggregate Option Price
________________________________________________
1996 1995 1996 1995
________________________________________________
<S> <C> <C> <C> <C>
Outstanding at beginning of
year 2,055,263 1,643,898 $13,011,827 $10,929,936
Granted 810,000 810,511 3,736,250 4,302,715
Exercised - (151,012) - (702,864)
Terminated (467,575) (248,134) (3,137,973) (1,517,960)
________________________________________________
Outstanding at end of year 2,397,688 2,055,263 $13,610,104 $13,011,827
================================================
Reserved for future grant 917,516 759,941
======================
Exercisable at end of year 773,271 620,162
======================
</TABLE>
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 $213,000, $257,000, and $210,000,
in 1996, 1995, and 1994, respectively.
9. Certain Transactions
In 1996, 1995, and 1994, the Company paid gross billings
totaling approximately $75,000, $180,000, and $195,000,
respectively, to a marketing consulting firm whose chief
executive officer is a shareholder and director of the
Company.
In 1996, 1995, and 1994, the Company recorded sales totaling
approximately $437,000, $440,000, and $447,000,
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 outstanding balance on
these notes was $1,001,000 at November 30, 1996.
The notes are payable in periodic installments including
interest. In addition, the franchisee groups manage seven
additional stores and receive $130,000 annually for these
services; the Company retains ownership of these stores for
research and development and training purposes. These
stores are all classified as licensed units in Note 1.
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>
1996
____
Net sales and franchising
revenues $ 80,117,290 $ 14,651,976 $ 1,034,990 $ 95,804,256
Income (loss) from
operations 18,973,050 841,617 (10,160,057) 9,654,610
Identifiable assets 63,557,411 15,678,242 23,232,794 102,468,447
Capital expenditures 2,153,862 61,155 188,677 2,403,694
Depreciation 4,157,198 224,227 775,197 5,156,622
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 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
Income (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 7,291,780 444,398 1,126,129 8,862,307
</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.
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements
(continued)
10. Operations by Industry Segment (continued)
Substantially all frozen yogurt products sold to domestic
"TCBY"(Registered) traditional stores are distributed
exclusively by ProSource Distribution Services
("ProSource"), a foodservice distributor. Sales by the
Company's manufacturing subsidiary to ProSource totaled
approximately $43.2 million, $45.6 million, and $49.0
million in 1996, 1995, and 1994, respectively.
Approximately $2.4 million and $2.1 million were receivable
from ProSource as of November 30, 1996 and 1995,
respectively.
11. Acquisition/Disposition
On September 11, 1996, the Company acquired certa in assets
of Whatever Works Inc. and Juice Works International
Franchise Corporation (collectively "Juice Works"), a
Phoenix-based juice bar concept, for a purchase price of $1
million. The acquisition was accounted for as a purchase
and the results of operations of Juice Works from the date
of acquisition are reflected in the consolidated statement
of operations of the Company. The results of operations of
Juice Works prior to its acquisition by the Company were not
significant. Goodwill of approximately $867,000 associated
with the purchase is being amortized on a straight-line
basis over 20 years.
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 Company's
sales of these products were approximately $23.0 million and
$5.3 million for 1994 and the first quarter of 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. 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 r esulted in an after-tax gain
of approximately $1.6 million, or $.06 per share, in the
second quarter of 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.
Mid-America
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements
(continued)
11. Acquisition/Disposition
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 "TCBY"(Registered)
Company-owned stores (food products segment) and divest
Carlin Manufacturing (equipment segment) located in Fresno,
California. The "TCBY"(Registered) 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 1995. The loss includes
future lease commitments, taxes, and other closing costs of
$2.0 million. During 1996, the Company paid $.9 million in
connection with the settlement of these liabilities and
expects to pay additional amounts in future years until
future lease commitments expire. These "TCBY"(Registered)
Company-owned stores had sales of approximately $18.1
million in 1995 and incurred a direct operating loss of
approximately $4.0 million, excluding any benefit realized
by the Company on manufacturing the yogurt products. During
1996, the Company franchised or obtained operating
agreements for all but one "TCBY"(Registered) Company-owned
unit.
Carlin Manufacturing had a carrying value of $4.1 million
prior to recording an impairment loss (including estimated
selling costs) of $1.3 million in the fourth quarter of
1995. Carlin is expected to be disposed of in 1997. Carlin
incurred pre-tax operating losses of approximately $.6
million and $1.0 million in 1996 and 1995, respectively.
During the fourth quarter of 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 "TCBY"(Registered)
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.
Primarily due to the divestiture of "TCBY"(Registered)
Company-owned stores, the Company implemented a
restructuring of its organization in the fourth quarter of
1995. The Company recorded a charge of $1.4 million for
severance costs to be paid in fiscal 1996 related to the
restructuring. The Company has paid severance costs of
approximately $1.1 million in 1996 related to this
restructuring with the remaining costs expected to be paid
in 1997.
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements
(continued)
13. Quarterly Results of Operations (Unaudited)
Financial results by quarter for 1996 and 1995 are
summarized below:
<TABLE>
<CAPTION>
Quarters
_____________________________________________________
First Second Third Fourth
_____________________________________________________
<S> <C> <C> <C> <C>
1996
____
Sales $ 15,052,899 $24,578,698 $26,075,002 $ 17,257,659
Gross profit 5,600,913 8,832,947 9,347,348 5,634,805
Franchising revenues 2,224,754 3,366,342 4,146,177 3,102,725
Net income (loss) (504,677) 2,453,221 3,755,387 844,434
Net income (loss) per share $ (.02) $ .10 $ .15 $ .03
Average shares outstanding 25,563,836 25,282,552 25,036,405 24,745,128
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 (4,435,290) 2,440,098 2,188,584 (21,566,250)
Net (loss) income per share $ (.17) $ .10 $ .09 $ (.84)
Average shares outstanding 25,595,638 25,556,636 25,585,110 25,672,737
</TABLE>
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
Investor Relations
Stacy L. Duckett
Vice President
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, 1996, will be sent without charge to each
stockholder upon written request to the Corporate
Communications Department at the Corporate offices.
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. The Company, through subsidiaries, develops
locations and products under the "TCBY"(Registered) and
Juice Works(Registered) brands.
Annual Meeting
The Annual Meeting of Stockholders of TCBY Enterprises,
Inc., will be held at 10:00 a.m., April 17, 1997, at the
Statehouse Convention Center in Little Rock, Arkansas.
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 1996 High Low
_______________________________________________________________________________
<S> <C> <C>
First Quarter $4 1/2 $3 7/8
Second Quarter 5 4 1/8
Third Quarter 4 7/8 3 3/4
Fourth Quarter 4 5/8 4
Fiscal 1995 High Low
_______________________________________________________________________________
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
</TABLE>
As of November 30, 1996, there were 5,210 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 1996 1995
______________________________________________________________________________
<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>
1996 1995 1994 1993 1992
__________________________________________________
<S> <C> <C> <C> <C> <C>
Sales $ 82,964 $109,808 $140,445 $109,525 $107,633
Franchising revenues 12,840 11,762 12,026 10,952 11,063
Net (loss) income 6,548 (21,373) 7,552 6,409 5,073
Total assets 102,468 111,625 142,280 128,691 131,925
Long-term debt 9,469 12,641 15,910 11,487 14,799
Per share:
Net (loss) income $ .26 $(.83) $ .30 $ .25 $ .20
Cash dividends .20 .20 .20 .20 .20
Total stockholders' equity 3.22 3.20 4.23 4.13 4.09
</TABLE>
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987
__________________________________________________
<S> <C> <C> <C> <C> <C>
Sales $116,679 $134,832 $131,730 $87,995 $ 58,767
Franchising revenues 12,231 16,475 19,593 14,482 12,664
Net (loss) income 8,017 19,950 29,493 19,794 13,012
Total assets 134,806 141,537 133,559 92,649 64,017
Long-term debt 17,330 19,696 21,258 14,034 5,461
Per share:
Net (loss) income $ .31 $ .75 $1.10 $ .75 $ .49
Cash dividends .35 .18 .07 .02 ---
Total stockholders' equity 4.10 4.15 3.69 2.62 1.88
</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
Juice Works Development, Inc. Arkansas
TCBY of Australia, Inc. Arkansas
TCBY of Jordan, Inc. Arkansas
For Future Use VIII 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 International, Inc. is wholly
owned by TCBY Systems, 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 9, 1997, included in the 1996 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 9, 1997, with respect to the
consolidated financial statements incorporated herein by
reference in this Annual Report (Form 10-K) of TCBY
Enterprises, Inc. for the year ended November 30, 1996.
/s/ Ernst & Young LLP
_____________________
Ernst & Young LLP
Little Rock, Arkansas
February 20, 1997
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 GENE H. WHISENHUNT, 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 a nd 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 17, 1996.
/s/ Frank D. Hickingbotham
__________________________________
Frank D. Hickingbotham
/s/ Herren C. Hickingbotham
__________________________________
Herren C. Hickingbotham
/s/ Marvin D. Loyd
__________________________________
Marvin D. Loyd
/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, 1996 AND THE CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE YEAR ENDED NOVEMBER 30, 1996 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-30-1996
<PERIOD-END> NOV-30-1996
<CASH> 14,919,008
<SECURITIES> 4,252,552
<RECEIVABLES> 11,050,465
<ALLOWANCES> 1,187,628
<INVENTORY> 11,321,751
<CURRENT-ASSETS> 44,705,595
<PP&E> 79,034,009
<DEPRECIATION> 35,694,982
<TOTAL-ASSETS> 102,468,447
<CURRENT-LIABILITIES> 10,777,397
<BONDS> 9,469,456
<COMMON> 2,706,235
0
0
<OTHER-SE> 76,514,258
<TOTAL-LIABILITY-AND-EQUITY> 102,468,447
<SALES> 82,964,258
<TOTAL-REVENUES> 95,804,256
<CGS> 53,548,245
<TOTAL-COSTS> 53,548,245
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 88,205
<INTEREST-EXPENSE> 961,154
<INCOME-PRETAX> 10,009,609
<INCOME-TAX> 3,461,244
<INCOME-CONTINUING> 6,548,365
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,548,365
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
PRESS RELEASE
EXHIBIT 99(a)
FOR IMMEDIATE RELEASE
TUESDAY
OCTOBER 15, 1996
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY SIGNS DEVELOPMENT AGREEMENT WITH
FINASERVE, INC.
LITTLE ROCK, AR - Tuesday (October 15) - TCBY ENTERPRISES,
INC. (NYSE:TBY) today announced it has signed a development
agreement with FinaServe, Inc. Under terms of the
agreement, "TCBY" Treats(Service Mark) locations may be
located in FINA'S distributor as well as company-owned
stores. The first two locations will be operational within
the next few months. There are currently approximately 2600
FINA branded locations in the United States.
"TCBY is proud to be working with FINA to develop
locations," said Herren C. Hickingbotham, President of TCBY
Enterprises, Inc. "Convenience store development is a
strong growth area for us. FINA will certainly make a
positive contribution to that growth."
"We are very excited to be working with TCBY," said Jim
McWhirter, FINA District Marketing Manager. "FINA realizes
the benefits of developing locations with branded concepts.
A TCBY Treats location is the perfect complement to other
food operations."
FINA, Inc. (AMEX:FI) through its principal operating
subsidiary, Fina Oil and Chemical Company, engages in crude
oil and natural gas exploration and production; petroleum
products refining, supply and transportation, and marketing;
and chemicals manufacturing and marketing. Organized in
1956, it is part of an international group of 166 companies
in 34 countries affiliated with PetroFina S.A.,
headquartered in Brussels, Belgium.
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. The Company, through subsidiaries, develops
locations and products under the "TCBY"(Registered) and
Juice Works(Registered_ brands.
FINA Contact: Jim McWhirter (214) 706-4377
-30-
PRESS RELEASE
EXHIBIT 99(b)
FOR IMMEDIATE RELEASE
THURSDAY
OCTOBER 17, 1996
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY ANNOUNCES OPENING OF
200TH CONVENIENCE STORE LOCATION
LITTLE ROCK, AR - Thursday (October 17) - TCBY ENTERPRISES,
INC. (NYSE:TBY) today announced the opening of its 200th
convenience store location. The "TCBY" Treats(Service Mark)
location is operated by Golden Gallon, Inc. at one of its
CITGO branded retail outlets in Chattanooga, Tennessee.
Golden Gallon, Inc. currently operates 27 "TCBY"
Treats(Service Mark) locations in its CITGO and Exxon
convenience stores, and has signed franchise agreements for
an additional 18 locations. Golden Gallon has stated it
intends to operate over 90 "TCBY" Treats(Service Mark)
locations as it places the operation in all of its outlets.
TCBY executed a development agreement with CITGO Petroleum
Corporation in February, 1996 which allows for the
development of "TCBY" Treats(Service Mark) locations within
CITGO branded retail outlets. There are over 14,000 CITGO
branded retail outlets in the United States.
TCBY began testing convenience store locations in 1991. A
full-scale development program was launched in late 1994.
There are now 200 convenience store locations in operation.
Agreements have already been signed for over 100 more
locations, many of which are scheduled to open in 1996.
The Company has signed several development agreements with
petroleum companies, including CITGO, Exxon, Texaco, Shell,
BP, and FINA. In addition, there are test locations
operating through other petroleum companies. Convenience
store locations often share space with other national food
operations, including McDonald's, Taco Bell, Burger King,
Pizza Inn and Subway.
"We are so pleased to announce the opening of our 200th
convenience store location," said Herren C. Hickingbotham,
President of TCBY Enterprises, Inc. "These locations have
been a tremendous source of growth for TCBY, and we expect
this to continue. Golden Gallon has been and will continue
to be an important part of our program."
"Our relationship with TCBY has been great," said Ron
Durham, President of Golden Gallon, Inc. "We are proud to
be the owners of the 200th convenience store location and
look forward to the opening of additional TCBY Treats
operations."
Golden Gallon, Inc., based in Chattanooga, Tennessee
operates 130 convenience stores in Tennessee and Georgia.
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. The Company, through subsidiaries, develops
locations and products under the "TCBY"(Registered) and
Juice Works(Registered) brands.
-30-
Golden Gallon Contact: Len Allen
Advertising Director
423-899-3800
CITGO Contact: Richard Green
Light Oil Development Manager
918-495-4218
PRESS RELEASE
EXHIBIT 99(c)
FOR IMMEDIATE RELEASE
FRIDAY
NOVEMBER 1, 1996
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
TCBY ENTERPRISES, INC.
(501) 688-8229
"TCBY" TREATS(Service Mark)/WALL STREET DELI LOCATION
OPENS IN HOOVER
BIRMINGHAM, AL - Friday (November 1, 1996) - TCBY
ENTERPRISES, INC. (NYSE:TBY) and Wall Street Deli, Inc.
today celebrated the grand opening of the first suburban,
co-branded "TCBY" Treats(Service Mark)/Wall Street Deli
location at The Delchamps Shopping Center, 3305 Lorna Road
in Hoover. The location is owned and operated by TCBY
franchisee, Charlie Wiles.
The new location offers the full menu of "TCBY"
Treats(Service Mark) frozen yogurt, ice cream, pies and
cakes, and the complete Wall Street Deli menu of bagels,
gourmet coffees, soup, salads and sandwiches. Hours of
operation are 7 a.m.- 9 p.m. Monday through Friday, 8 a.m.-
9 p.m. Saturday, and 11 a.m.- 9 p.m. Sunday.
"This is the first suburban restaurant for a co-branded TCBY
Treats/Wall Street Deli," said Wiles. "TCBY actually began a
partnership with Wall Street Deli in May in Dallas, offering
selected TCBY products in Wall Street Deli locations. We
wanted to take the partnership a step further with this new
store format."
According to Jeff Kaufman, Executive Vice President and
Chief Operating Officer of Wall Street Deli, Inc., the
Hoover location will serve as a test location for the
co-branded "TCBY" Treats(Service Mark/Wall Street Deli
format. "Based on the success of this Wall Street Deli/TCBY
location, we will be looking for ways to expand this concept
outside our traditional, downtown office building market,"
said Kaufman. "TCBY has an excellent product and we
anticipate a long, successful partnership with them."
Herren Hickingbotham, President and Chief Operating Officer
of TCBY Enterprises, Inc. pointed out how the partnership
with Wall Street Deli fits into the Company's overall
co-branding program.
"TCBY has had positive experiences co-branding with other
food concepts such as Wall Street Deli," said Hickingbotham.
"Co- branding allows us to bundle with other food operations
that appeal to the same customers that we do. Initial tests
have shown that the co-branded TCBY Treats/Wall Street Deli
locations will be successful."
A ribbon-cutting ceremony and grand opening festivities
began at 10:30 a.m. today. The ribbon was comprised of one
hundred $1 bills, and was donated to United Cerebral Palsy
(UCP). Grand Opening festivities will continue throughout
the weekend with 25 percent of profits on November 2 going
to UCP. Door prizes will also be awarded.
Wall Street Deli, Inc., based in Birmingham, is one of the
nation's largest food service operators specializing in
office locations. Wall Street Deli, Inc. owns and operates
128 delicatessen-style restaurants which are located
primarily in office buildings and complexes.
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. The Company, through subsidiaries, develops
locations and products under the "TCBY"(Registered) and
Juice Works(Registered) brands.
-30-
Wall Street Deli Contact: Jeff Kaufman
Executive VP and COO
Wall Street Deli, Inc.
205-822-3960
PRESS RELEASE
EXHIBIT 99(d)
FOR IMMEDIATE RELEASE
TUESDAY
NOVEMBER 19, 1996
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY SIGNS DEVELOPMENT AGREEMENT FOR
GUAM AND OTHER PACIFIC ISLAND TERRITORIES
LITTLE ROCK, AR - Tuesday (November 19) - TCBY ENTERPRISES,
INC. (NYSE:TBY) announced today it has signed a development
agreement for Guam and several other territories in the
Pacific. The new agreement includes Guam, The Marshall
Islands, the Commonwealth of Northern Mariana Islands,
Palau, and the Federated States of Micronesia.
Triple J. Enterprises is the franchisee for this area. The
agreement calls for a minimum of ten stores to be opened
over a five year period. The first store is scheduled to
open in Guam in mid-1997. Triple J. Enterprises owns and
operates several businesses in the region, including a food
distribution company, a real estate agency and a restaurant.
"We are very pleased to have Triple J. join TCBY as a
franchisee," said Hartsell Wingfield, President, TCBY
International. "The company and its staff have vast
experience in this region and will represent us well."
TCBY now has franchise development agreements in place in 43
foreign countries. There are over 200 "TCBY"(Registered)
stores and thousands of points-of-sale around the world,
including department stores, supermarkets, and convenience
stores.
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. The Company, through subsidiaries, develops
locations and products under the "TCBY"(Registered) and
Juice Works(Registered) brands.
-30-
PRESS RELEASE
EXHIBIT 99(e)
FOR IMMEDIATE RELEASE
FRIDAY
DECEMBER 13, 1996
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY DECLARES CASH DIVIDEND
LITTLE ROCK, AR - December 13, 1996 - 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, 1997 to shareholders of
record as of December 30, 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 world's largest manufacturer-franchisor of frozen
yogurt. The Company, through subsidiaries, develops
locations and products under the "TCBY"(Registered) and
Juice Works(Registered) brands.
-30-
PRESS RELEASE
EXHIBIT 99(f)
FOR IMMEDIATE RELEASE
THURSDAY
JANUARY 9, 1997
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY REPORTS IMPROVED RESULTS FOR
FOURTH QUARTER AND FISCAL 1996
LITTLE ROCK, AR - Thursday (January 9) - TCBY ENTERPRISES,
INC. (NYSE:TBY) today announced net income for the fourth
quarter of 1996 improved to $844,434 or $.03 per share, from
a net loss of $(21,566,250), or $(.84) per share, for the
same period of 1995. Net income for 1996 improved to
$6,548,365 or $.26 per share, from a net loss of
$(21,372,858) or $(.83) per share, for 1995. Fourth quarter
and 1995 results include significant charges resulting from
the adoption of new accounting standards and a restructuring
of the Company during the fourth quarter of 1995.
Improvements in 1996 were also achieved through growth in
non-traditional franchise development, and the Company's
restructuring announced in November 1995. The restructuring
included the franchising or closing of Company-owned stores
resulting in reduced overhead costs, and focusing 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 fourth quarter ended
November 30, 1996 and 1995 were $20,360,384 and $21,600,523,
respectively. Sales and franchising revenues for 1996 and
1995 were $95,804,256 and $121,569,868, respectively. The
declines in sales and franchising revenues primarily result
from the execution of the Company's strategic decisions to
franchise or close its Company-owned stores; to sell the
marketing and distribution rights to its refrigerated yogurt
line; and to refocus the geographic regions where the
Company's hardpack frozen products are marketed.
There were 2,696 "TCBY"(Registered) locations at the
conclusion of 1996. In addition, there are several thousand
retail points-of-sale for "TCBY"(Registered) products
domestically and abroad. The Company continues to pursue the
development of franchised non-traditional locations with an
emphasis on convenience stores operated in association with
national petroleum companies. As of November 30, 1996, 209
of these petroleum locations were in operation and an
additional 119 locations were under agreement for
development. Agreements have been signed for multi-location
developments with many major petroleum companies including
Exxon, Citgo, and Shell. These locations offer
dual-branding opportunities with other national food
companies.
International development continued to expand in 1996. As
of November 30, agreements were in place to develop
"TCBY"(Registered) locations in 38 countries. The Company
continues to expand into additional countries, as well as
assist existing franchisees in the development of new
locations in their markets.
In September, 1996, the Company announced it had acquired
Juice Works(Registered), a Phoenix-based juice bar concept.
The Company has been in the process of finalizing the
programs and systems necessary to develop the Juice
Works(Registered) brand through traditional franchises,
co-branding, and non-traditional development across the
country. To date, there are 11 Juice Works(Registered)
locations open or under development, including 5 co-branded
locations with the "TCBY"(Registered) brand.
"We are very pleased with our fourth quarter and year-end
results. These improvements reflect the decision made during
the fourth quarter of 1995 to implement a strategic
restructuring of the Company," said Frank D. Hickingbotham,
Chairman of the Board and Chief Executive Officer. "We
continue to pursue opportunities that will expand the TCBY
Treats and Juice Works brands through traditional,
co-branded, and non-traditional development. There are
already over 100 franchise agreements signed for development
in 1997. Significant reductions in selling, general, and
administrative expenses have been realized and we will
continue to focus on improving sales and profitability."
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 1.2 million shares under this
authorization. Purchases have been made utilizing the
Company's cash from operations.
During 1997, the Company plans to continue the development
of locations in conjunction with national and regional
petroleum companies and to expand co-branded locations with
other national food companies. The Company will also focus
on the development of the Juice Works(Registered) brand and
franchise system. International development is expected to
occur with the addition of new countries and expansion in
current markets. There will be on-going attention to
selling, general, and administrative expense in order to
obtain additional efficiencies where possible. The Company
expects to continue its stock repurchase program initiated
in December, 1995.
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. The Company, through subsidiaries, develops
locations and products under the "TCBY"(Registered) and
Juice Works(Registered) brands.
TCBY Enterprises, Inc.
Selected Financial Highlights
($000, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Year Ended
November 30 November 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Operating Results
Sales & Franchising Revenue $20,360 $21,601 $95,804 $121,570
Net Income (Loss) $ 844 (21,566) 6,548 (21,373)
Net Income (Loss) Per Share $ .03 (.84) .26 (.83)
Average Shares Outstanding 24,745 25,673 25,157 25,602
Dividends Paid Per Share $ .05 .05 .20 .20
</TABLE>
<TABLE>
<CAPTION>
November 30 November 30
1996 1995
<S> <C> <C>
Financial Position
Current Assets $ 44,706 $ 51,357
Current Liabilities $ 10,777 $ 14,668
Property, Plant & Equipment, Net $ 43,339 $ 45,710
Total Assets $102,468 $111,625
Long-term Debt, Less current portion $ 9,469 $ 12,641
Stockholders' Equity $ 79,220 $ 82,179
-30-
</TABLE>
