UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 1, 1997
________________________________
OR
___TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to
_______________
Commission file number 1-10046
_______
TCBY ENTERPRISES, INC.
___________________________________________________________
(Exact name or registrant as specified in its charter)
Delaware 71-0552115
____________________________________________________________
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
425 West Capitol Avenue Little Rock, Arkansas 72201
___________________________________________________________
(Address of principal executive offices) (Zip Code)
(501) 688-8229
___________________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 of the
Securities Exchange Act of 1934 during the preceding 12
months, (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
Yes _X_ No ___
On June 30, 1997 there were 23,876,876 shares of the
registrant's common stock outstanding.
Sequential Page No. 1
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PART I. FINANCIAL INFORMATION
Page
____
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets
June 1, 1997 and November 30, 1996 3
Consolidated Statements of Operations
Quarter ended and six months ended
June 1, 1997 and May 31, 1996 5
Consolidated Statements of Cash Flows
Six months ended June 1, 1997 and May
31, 1996 6
Notes to Consolidated Financial Statements
June 1, 1997 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of
Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
</TABLE>
Sequential Page No. 2
PART 1
FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS (UNAUDITED)
TCBY ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
June 1, November 30,
1997 1996
________________________________
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,684,066 $ 14,919,008
Short-term investments 4,172,552 4,252,552
Receivables:
Trade accounts 16,315,653 8,620,498
Notes 2,391,070 2,429,967
Allowance for doubtful accounts
and impaired notes (1,050,733) (1,187,628)
_____________ _____________
17,655,990 9,862,837
Refundable income taxes - 332,873
Deferred income taxes 1,451,190 1,451,190
Inventories 12,744,300 11,321,751
Prepaid expenses and other assets 1,811,790 1,742,801
Assets held for sale 754,652 822,583
_____________ _____________
TOTAL CURRENT ASSETS 46,274,540 44,705,595
PROPERTY, PLANT, AND EQUIPMENT:
Land 2,866,820 2,866,820
Buildings 23,629,978 23,581,923
Furniture, vehicles, and equipment 49,744,449 49,073,757
Leasehold improvements 3,607,828 3,511,509
Construction in progress 69,614 -
Allowances for depreciation (37,944,109) (35,694,982)
_____________ _____________
41,974,580 43,339,027
OTHER ASSETS:
Notes receivable, less current portion
(less allowance for doubtful and impaired
notes of $8,028,053 in 1997 and
$8,494,396 in 1996) 5,937,351 6,131,070
Intangibles (less amortization of
$1,842,386 in 1997 and $1,731,199
in 1996) 4,504,365 4,485,689
Other 2,607,852 3,807,066
_____________ _____________
13,049,568 14,423,825
_____________ _____________
TOTAL ASSETS $101,298,688 $102,468,447
============= =============
</TABLE>
See notes to consolidated financial statements.
Sequential Page No. 3
TCBY ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
June 1, November 30,
1997 1996
________________________________
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 4,097,253 $ 1,906,568
Accrued expenses 5,525,167 5,699,381
Income taxes payable 1,361,713 -
Current portion of long-term debt 3,171,448 3,171,448
_____________ _____________
TOTAL CURRENT LIABILITIES 14,155,581 10,777,397
LONG-TERM DEBT, less current portion 7,883,732 9,469,456
DEFERRED INCOME TAXES 3,001,101 3,001,101
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 27,063,345 in 1997 and
27,062,345 shares in 1996 2,706,335 2,706,235
Additional paid-in capital 25,551,084 25,547,184
Retained earnings 66,100,843 65,165,190
_____________ _____________
94,358,262 93,418,609
Less treasury stock, at cost (3,187,469
shares in 1997 and 2,424,769 in 1996) (18,099,988) (14,198,116)
_____________ _____________
TOTAL STOCKHOLDERS' EQUITY 76,258,274 79,220,493
_____________ _____________
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $101,298,688 $102,468,447
============= =============
</TABLE>
See notes to consolidated financial statements.
Sequential Page No. 4
TCBY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 1, May 31, June 1, May 31,
1997 1996 1997 1996
_______________________________________________________________
<C> <C> <C> <C>
Sales $26,802,645 $24,578,698 $ 42,687,532 $ 39,631,597
Cost of sales 18,029,523 15,745,751 28,712,488 25,197,737
____________ ____________ _____________ ____________
GROSS PROFIT 8,773,122 8,832,947 13,975,044 14,433,860
Franchising revenues:
Initial franchise and
license fees 1,456,711 616,875 2,218,086 1,149,625
Royalty income 2,924,669 2,749,467 4,750,106 4,441,471
____________ ____________ _____________ ____________
4,381,380 3,366,342 6,968,192 5,591,096
____________ ____________ _____________ ____________
13,154,502 12,199,289 20,943,236 20,024,956
Selling, general, and
administrative
expenses 8,457,652 8,494,992 15,985,048 17,154,105
____________ ____________ _____________ ____________
INCOME FROM
OPERATIONS 4,696,850 3,704,297 4,958,188 2,870,851
Other income (expense):
Interest expense (189,931) (240,030) (392,901) (502,784)
Interest income 243,620 246,013 546,705 521,791
Other income 57,139 63,904 82,840 107,900
____________ ____________ _____________ ____________
110,828 69,887 236,644 126,907
____________ ____________ _____________ ____________
INCOME BEFORE
INCOME TAXES 4,807,678 3,774,184 5,194,832 2,997,758
Income tax expense 1,682,688 1,320,963 1,818,191 1,049,214
____________ ____________ _____________ ____________
NET INCOME $ 3,124,990 $ 2,453,221 $ 3,376,641 $ 1,948,544
============ ============ ============= ============
Net income
per share $ 0.13 $ 0.10 $ 0.14 $ .08
============ ============ ============= ============
Average shares
outstanding 24,148,523 25,282,552 24,310,943 25,422,426
============ ============ ============= ============
Cash dividends paid
per share $ 0.05 $ 0.05 $ 0.10 $ .10
============ ============ ============= ============
</TABLE>
See notes to consolidated financial statements.
Sequential Page No. 5
TCBY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 1, May 31,
1997 1996
________________________________
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,376,641 $ 1,948,544
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 2,585,820 2,562,161
Amortization of intangibles 108,587 101,256
Provision for doubtful accounts and
impaired notes 31,398 44,358
Deferred income taxes - 485,636
Loss (gain) on sales of property
and equipment 978 (26,396)
Changes in operating assets and liabilities:
Receivables (7,975,188) (3,787,176)
Inventories (1,406,196) (534,242)
Prepaid expenses (68,989) (127,677)
Assets held for disposal - 1,965,339
Intangibles and other assets 935,473 1,811,152
Accounts payable and accrued expenses 2,016,471 (670,470)
Income taxes 1,694,586 4,127,559
_____________ _____________
NET CASH PROVIDED BY
OPERATING ACTIVITIES 1,299,581 7,900,044
INVESTING ACTIVITIES
Purchases of property, plant, and equipment (1,063,024) (1,448,587)
Proceeds from sales of property and equipment 25,731 288,472
Origination of notes receivable (388,349) (107,237)
Principal collected on notes receivable 735,703 727,553
Purchases of short-term investments (720,000) (9,481,107)
Proceeds from maturity of short-term
investments 800,000 13,327,978
_____________ _____________
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (609,939) 3,307,072
FINANCING ACTIVITIES
Proceeds from sale of common stock 4,000 -
Dividends paid (2,440,988) (2,547,463)
Purchases of treasury stock (3,901,872) (2,059,169)
Principal payments of long-term debt (1,585,724) (1,321,436)
_____________ _____________
NET CASH USED IN FINANCING ACTIVITIES (7,924,584) (5,928,068)
_____________ _____________
(DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (7,234,942) 5,279,048<PAGE>
Cash and cash equivalents at beginning
of period 14,919,008 5,565,654
_____________ _____________
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 7,684,066 $ 10,844,702
============= =============
</TABLE>
See notes to consolidated financial statements.
Sequential Page No. 6
TCBY ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 1, 1997
NOTE A -- FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the
quarter and six months ended June 1, 1997 are not
necessarily indicative of the results that may be expected
for the year ended November 30, 1997. For further
information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended November 30, 1996.
In the first quarter of 1997, the Company changed to a
fiscal year consisting of 52 or 53 weeks, ending on the
Sunday nearest November 30.
NOTE B -- RECLASSIFICATIONS AND RESTATEMENT
Certain amounts in the 1996 consolidated financial
statements have been reclassified to conform to the 1997
presentation.
NOTE C -- INVENTORIES
<TABLE>
<CAPTION>
June 1, November 30,
1997 1996
____________ ____________
<S> <C> <C>
Manufacturing materials and
supplies $ 5,318,784 $ 3,794,175
Finished food products 4,011,951 2,947,515
Equipment and other products 3,413,565 4,580,061
___________ ____________
$12,744,300 $11,321,751
=========== ============
</TABLE>
The increase in manufacturing materials and supplies and
finished food products is due to seasonality and expanded
private label sales of hardpack and novelty products as
described in Item 2.
Sequential Page No. 7
NOTE D -- ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
June 1, November 30,
1997 1996
____________ ____________
<S> <C> <C>
Rent $ 584,198 $ 960,371
Compensation 3,007,495 2,219,160
Other 1,933,474 2,519,850
____________ ____________
$ 5,525,167 $ 5,699,381
============ ============
</TABLE>
NOTE E -- CONTINGENCIES
A purported investor in a former franchisee claimed
approximately $26 million in trebled damages plus costs and
prejudgment interest from the former franchisee for alleged
fraudulent acts. The compensatory damages requested were
$8.7 million. The Company was also named in this suit as a
defendant. In April, 1997, summary judgment was granted by
the trial court in favor of the Company on the basis that as
a matter of law the Company could not be liable to the
purported investor; the plaintiff has appealed the summary
judgement order, and in response the Company will vigorously
argue that the order should be upheld.
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.
NOTE F -- IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board
issued Statement No. 128, Earnings Per Share, which is
required to be adopted by the Company in the first quarter
of 1998. At that time, the Company will be required to
change the method currently used to compute earnings per
share and to restate all prior periods. Under the new
requirements, primary earnings per share will be renamed
basic earnings per share and will exclude the dilutive
effect of stock options. The Company has determined the
impact of Statement No. 128 on the calculation of earnings
per share for the second quarter and six months ended June
1, 1997 and May 31, 1996 would not be material.
Sequential Page No. 8
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company's total sales for the second quarter and first
six months of 1997 increased nine percent and eight percent,
respectively, over the same periods in 1996. As described
below, the Company has experienced improved sales throughout
many of its categories including specialty products and
equipment distribution. These increases are partially
offset by decreased sales by Company-owned stores due to the
franchising of these stores during 1996. The Company's
total sales excluding "TCBY"(Registered) Company-owned units
for the quarter and for the six months increased 13 percent
and 14 percent, respectively, in 1997 compared to 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)
Quarter Ended Six Months Ended
June 1, 1997 May 31, 1996 June 1, 1997 May 31, 1996
_______________ _______________ ______________ _____________
Sales % Sales % Sales % Sales %
_______ ____ _______ ____ _______ ____ _____ ____
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Food Products:
"TCBY"(Registered)
Frozen Product sales
for distribution to
"TCBY"(Registered)
locations $14,796 55% $14,559 59% $23,427 55% $22,805 57%
Sales of specialty
products 7,345 27% 4,467 18% 10,369 24% 6,644 17%
Retail sales by
Company-owned
stores 207 1% 883 4% 372 1% 2,209 6%
_______ ____ _______ ____ _______ ____ _______ ____
22,348 83% 19,909 81% 34,168 80% 31,658 80%
Equipment:
Sales by the
Company's equip-
ment distributor 3,749 14% 3,719 15% 6,749 16% 5,984 15%
Sales of manufac-
tured specialty
vehicles 433 2% 690 3% 1,227 3% 1,474 4%
_______ ____ _______ ____ _______ ____ _______ ____
4,182 16% 4,409 18% 7,976 19% 7,458 19%
Other 273 1% 261 1% 544 1% 516 1%
_______ ____ _______ ____ _______ ____ _______ ____
Total Sales $26,803 100% $24,579 100% $42,688 100% $39,632 100%
======= ==== ======= ==== ======= ==== ======= ====
</TABLE>
Sequential Page No. 9
Sales from the Company's food products segment include (i)
wholesale sales of frozen yogurt and ice cream products to
ProSource Distribution Services and to other foodservice
distributors, which distribute products to
"TCBY"(Registered) stores and non-traditional locations, and
sales to international master franchisees of frozen yogurt
and ice cream products and proprietary ingredients for the
manufacture of frozen yogurt products in the countries that
produce locally, (ii) sales of "TCBY"(Registered) frozen
packaged products and other specialty dairy food products to
customers including supermarkets, convenience stores,
dairies, food service distributors, club stores, and private
label suppliers, and (iii) retail sales of yogurt, juices,
and related food items by Company-owned stores.
Wholesale sales of frozen yogurt and ice cream products
increased two percent and three percent during the second
quarter and first six months of 1997, respectively, compared
to the same periods in 1996. These increases are attributed
primarily to increased purchases by "TCBY"(Registered)
non-traditional locations. The Company continues to develop
additional "TCBY"(Registered) non-traditional locations with
302 "TCBY"(Registered) locations under agreement for
development at June 1, 1997. Most of the "TCBY"(Registered)
locations under development will be co-branded locations
with other food or petroleum operations.
The following table sets forth TCBY and Juice Works location
activity for the second quarter and first six months of 1997
and 1996.
Sequential Page No. 10
<TABLE>
<CAPTION>
NON-
FRANCHISED COMPANY INTERNATIONAL TRADITIONAL TOTAL
STORES STORES LOCATIONS LOCATIONS LOCATIONS
1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
______________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the second quarter:
Locations open at
beginning of period 1,193 1,208 2 26 210 192 1,320 1,267 2,725 2,693
Opened 20 12 - - 25 6 86 119 131 137
Closed (44) (10) - - (10) (4) (33) (75) (87) (89)
Locations transferred - 18 - (18) - - - - - -
______________________________________________________________________
Locations open at
end of period 1,169 1,228 2 8 225 194 1,373 1,311 2,769 2,741
======================================================================
</TABLE>
<TABLE>
<CAPTION>
NON-
FRANCHISED COMPANY INTERNATIONAL TRADITIONAL TOTAL
STORES STORES LOCATIONS LOCATIONS LOCATIONS
1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the first six months:
Locations open at
beginning of period 1,198 1,218 2 42 201 187 1,297 1,273 2,698 2,720
Opened 33 14 - - 36 22 156 166 225 202
Closed (62) (28) - (1) (12) (15) (80) (137) (154) (181)
Locations transferred - 24 - (33) - - - 9 - -
________________________________________________________________________
Locations open at
end of period 1,169 1,228 2 8 225 194 1,373 1,311 2,769 2,741
========================================================================
</TABLE>
Included in the franchised and Company store information are
105 and 127 "TCBY"(Registered) stores closed for relocation
or for the season on June 1, 1997 and May 31, 1996,
respectively. During the first six months of 1997,
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 the remainder
of 1997. While different in size and character, each TCBY
location is treated the same for purposes of encroachment
avoidance. The non-traditional locations include sites at
airports, travel plazas, convenience stores, colleges,
hospitals, theme parks, and stadiums. The Company continues
to focus on the development of locations in conjunction with
petroleum stores and other food concepts (co-branded
locations). The majority of the 156 non-traditional
openings in the first six months of 1997 were co-branded.
The Company's current experience is that the volume of
yogurt of these locations will exceed that of other types of
non-traditional locations with the exception of
Sequential Page No. 11
airports. During the first six months of 1997, 80
non-traditional locations were closed. These locations
generally purchased low volumes of yogurt from the Company.
The Company expects that there may be additional closings of
low volume non-traditional locations 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.
Sales of specialty products increased 64 percent and 56
percent during the second quarter and first six months of
1997, respectively, as compared to the same periods in 1996.
A majority of this increase is attributed to increased sales
of private label products. The Company has pursued private
label opportunities to utilize available capacity at its
manufacturing facility in Dallas. Sales improvements have
also occurred due to the introduction of new
"TCBY"(Registered) products primarily through club stores.
Retail sales by Company-owned stores declined 77 percent and
83 percent during the second quarter and first six months of
1997, respectively, compared to the same periods in 1996.
These declines have resulted from the Company's
implementation during 1996 of its decision to franchise or
close most of its "TCBY"(Registered) Company-owned stores.
The Company took this action as it believes the stores could
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.
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 businesses and
governments. Sales in the equipment segment decreased five
percent in the second quarter of 1997 over the same period
in the prior year due to decreased sales at the Company's
equipment manufacturer. In July, 1997, the Company sold a
portion of the equipment manufacturers assets to a company
controlled by the subsidiary's president. The assets sold
included certain inventory, plant equipment, furniture and
fixtures, and intangibles. The transaction was financed by
the Company. The Company retained certain inventory items
which will be marketed with the assistance of the new
company. In addition, the real property was retained by the
Company and leased to the purchaser. This transaction could
result in lower sales in the equipment segment during the
remainder of 1997.
Sales in the equipment segment increased seven percent
during the first six months of 1997 over the same period in
the prior year. This improvement in sales is attributable
to increased international equipment orders and the opening
of non-traditional "TCBY"(Registered) locations, some of
which purchased a portion of their original equipment
packages from the Company's equipment distributor. The
increase was partially offset by decreased sales at the
Company's equipment manufacturer.
Sequential Page 12
As a percent of sales, cost of sales for the second quarter
and first six months of 1997 and 1996 for the Company and
its two primary segments are presented below:
<TABLE>
<CAPTION>
Second Quarter First Six Months
______________ ________________
1997 1996 1997 1996
_____________________________________________________________
<S> <C> <C> <C> <C>
Food Products Segment 67% 62% 66% 61%
Equipment Segment 76% 77% 77% 78%
Company Total 67% 64% 67% 64%
</TABLE>
The increase in the food products segment cost of sales
percentage is due to a number of factors including the
Company's decision to franchise or close most of its "TCBY
"(Registered) Company-owned stores. These stores had a
lower cost of sales percentage than the other categories of
the food products segment noted above. Therefore, as such
stores were sold or closed, cost of sales as a percent of
sales increased in the food products segment.
In addition, sales of specialty products, which generally
have a higher cost of sales percentage than the other food
segment categories, were a larger component of the food
products segment sales during 1997 compared to the prior
year. (See earlier discussion related to these sales
increases.) Cost of sales during 1997 compared to 1996 have
been favorably impacted by a slight decrease in dairy prices
which are a major component of the Company's cost of sales.
The Company's dairy costs are expected to be slightly lower
in the third quarter of 1997 compared to the costs in the
same period of 1996.
Franchising revenues consist of initial franchise and
license fees and royalty income. In the second quarter of
1997, initial franchise and license fees increased 136
percent while royalty income increased six percent from the
same period in 1996. For the first six months of 1997,
initial franchise and license fees increased 93 percent
while royalty income increased seven percent from the same
period in 1996. The improvements in franchise and license
fees result primarily from increased initial international
franchise fees. The increases in royalty income relate to
the growth in the number of franchises operated by petroleum
companies and their dealers or distributors and other food
companies, along with expanded distribution in international
markets.
Operating expenses were comparable in the second quarter of
1997 to the same period in 1996 while a decrease of seven
percent was experienced in the first six months of 1997
compared to 1996. The decrease for the six month period is
due to a reduction in operating expenses related to
corporate stores due to the franchising or closing of these
units as discussed above. As a percentage of combined sales
and franchising revenues, operating expenses were 27 percent
and 30 percent for the second quarter of 1997 and 1996,
respectively. For the first six months of 1997 and 1996,
operating expenses as a percentage of combined sales and
franchising revenues were 32 percent and 38 percent,
respectively.
Sequential Page No. 13
The Company and its representatives may from time to time
make written or oral forward-looking statements with respect
to their current views and estimates of future economic
circumstances, industry conditions, company performance, and
financial results. These forward-looking statements are
based on certain assumptions regarding the economy, unit
openings and closings, sales volumes per unit and other
manufacturing opportunities. Should the Company's
performance differ materially from the assumptions regarding
these areas, actual results could vary significantly from
the performance noted in the forward-looking statements.
Thus, the Company cautions readers not to place undue
reliance on any forward-looking statements, which speak only
as of the date made.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically generated cash from operations
sufficient to meet its normal operating requirements. The
Company's cash and short-term investments decreased approxi-
mately $7.3 million during the first six months of 1997.
This decrease resulted primarily from (i) purchases of
treasury stock, (ii) an increase in trade accounts
receivable primarily attributed to the normal seasonal
increase along with expansion in the private label market,
(iii) an increase in inventory due to seasonality and
additional raw goods and packaging materials related to
increased volume of private label products, and (iv) cash
dividends. 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.
Subsequently, repurchases have totaled 1,800,400 shares with
762,700 shares purchased in the first six months of 1997.
The repurchases were funded with cash flows from operations.
Future repurchases may be funded with cash flows from
operations or long-term financing.
The following summarizes statistics related to the Company's
financial position:
<TABLE>
<CAPTION>
June 1, November 30,
1997 1996
____________ ____________
<S> <C> <C>
Current Ratio 3.3 to 1.0 4.1 to 1.0
Working Capital (in millions) $32.1 $33.9
Long-Term Debt to Equity Ratio .10 to 1.0 .12 to 1.0
Tangible Net Worth (in millions) $71.8 $74.7
</TABLE>
On June 20, 1997, the Company's Board of Directors declared
a five cents per share dividend payable on July 14, 1997 to
the stockholders of record on July 3, 1997. The Company
will consider adjustments to the dividend rate after giving
consideration to return to stockholders, profitability
expectations and financing needs.
Sequential Page No. 14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A purported investor in a former franchisee claimed
approximately $26 million in trebled damages plus costs and
prejudgment interest from the former franchisee for alleged
fraudulent acts. The compensatory damages requested were
$8.7 million. The Company was also named in this suit as a
defendant. In April, 1997, summary judgment was granted by
the trial court in favor of the Company on the basis that as
a matter of law the Company could not be liable to the
purported investor; the plaintiff has appealed the summary
judgement order, and in response the Company will vigorously
argue that the order should be upheld.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
a) The Annual Meeting of Shareholders was held April 17,
1997.
c) A total of 22,208,776 shares were present or
represented at the meeting. The first matter voted upon was
the uncontested election of directors. Abstentions and
withheld votes constituted the difference between the
total shares voted for each director and the total shares
represented in person or by proxy. All individuals
nominated to be directors of the Corporation were elected
with the following number of votes:
Frank D. Hickingbotham 21,417,906
Herren C. Hickingbotham 21,401,679
William H. Bowen 21,403,958
Daniel R. Grant 21,400,252
F. Todd Hickingbotham 21,400,447
Don O'Neal Kirkpatrick 21,423,194
Marvin D. Loyd 21,404,404
Hugh H. Pollard 21,338,205
The second matter voted upon was a request to amend the
1992 Employee Stock Option Plan of TCBY Enterprises, Inc.
(the "Plan") which would increase the number of shares
available under the Plan by 1,000,000 shares. A total of
14,125,230 shares voted "for" the amendment and 3,105,876
voted "against" the amendment. Abstentions and withheld
votes constituted the difference between the total shares
voted and the total shares represented in person or by
proxy; 4,875,084 broker non-votes were also counted
against the proposal.
The third matter voted upon was a stockholder's
proposal to engage an investment banker. A total of
1,752,875 shares voted "for" the amendment and 11,860,892
voted "against" the amendment. Abstentions and withheld
votes constituted the difference between the total shares
voted and the total shares represented in person or by
proxy; 8,410,110 broker non-votes were also counted
against the proposal.
Sequential Page No. 15
<TABLE>
<CAPTION>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<S> <C>
a) Exhibits
27 Article 5, Financial Data Schedule for the Second
Quarter Fiscal 1997 Form 10-Q
99(a) Press release, dated April 25, 1997, "TCBY
Launches New Sorbet Fizz with National Media"
99(b) Press release, dated May 1, 1997, "TCBY
Introduces New Sorbet Fizz"
99(c) Press release, dated May 2, 1997, "TCBY Announces
New International Development in Europe"
99(d) Press release, dated May 2, 1997, "TCBY Announces
New International Development in Central America"
99(e) Press release, dated June 11, 1997, "TCBY Reports
73% Increase in Net Income for the First Half of
1997"
99(f) Press release, dated June 20, 1997, "TCBY
Declares Cash Dividend"
</TABLE>
b) The Company did not file any reports on Form
8-K during the three periods ended June 1, 1997.
Sequential Page No. 16
SIGNATURES
__________
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
TCBY ENTERPRISES, INC.
Date: 07/11/97 /s/ Frank D. Hickingbotham
__________________________
Frank D. Hickingbotham,
Chairman of the Board and
Chief Executive Officer
Date: 07/11/97 /s/ Gene H. Whisenhunt
__________________________
Gene H. Whisenhunt,
Executive Vice President
Chief Financial Officer
Sequential Page No. 17
EXHIBIT 27
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF JUNE 1,
1997 AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE
QUARTER ENDED JUNE 1, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> JUN-1-1997
<CASH> 7,684,066
<SECURITIES> 4,172,552
<RECEIVABLES> 18,706,723
<ALLOWANCES> 1,050,733
<INVENTORY> 12,744,300
<CURRENT-ASSETS> 46,274,540
<PP&E> 79,918,689
<DEPRECIATION> 37,944,109
<TOTAL-ASSETS> 101,298,688
<CURRENT-LIABILITIES> 14,155,581
<BONDS> 7,883,732
<COMMON> 2,706,335
0
0
<OTHER-SE> 73,551,939
<TOTAL-LIABILITY-AND-EQUITY> 101,298,688
<SALES> 26,802,645
<TOTAL-REVENUES> 31,184,025
<CGS> 18,029,523
<TOTAL-COSTS> 18,029,523
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 13,699
<INTEREST-EXPENSE> 189,931
<INCOME-PRETAX> 4,807,678
<INCOME-TAX> 1,682,688
<INCOME-CONTINUING> 3,124,990
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,124,990
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
Exhibit 99(a)
PRESS RELEASE
FOR IMMEDIATE RELEASE
FRIDAY
APRIL 25, 1997
CONTACT PERSON: STACY DUCKETT
CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY LAUNCHES NEW SORBET FIZZ
WITH NATIONAL MEDIA
LITTLE ROCK, AR - (FRIDAY, APRIL 25, 1997) - TCBY
ENTERPRISES, INC. (NYSE:TBY) today announced the
introduction of the new Sorbet Fizz menu item at
"TCBY"(Registered) and "TCBY" Treats(Service Mark)
locations. Available April 28, the Sorbet Fizz will be
strongly supported with cable and broadcast television,
network radio, and an FSI.
The Sorbet Fizz is a refreshing blend of "TCBY"(Registered)
soft serve non-dairy/nonfat sorbet and Sprite(Registered).
The promotion coincides with the introduction of two new
soft serve sorbet flavors - Strawberry Kiwi and Pineapple
Passion Fruit - to this already extensive line of five
flavors. The Sorbet Fizz was the consumer favorite of
several test items the Company considered in 1996. The
suggested promotional retail price is $1.79.
In support of this introduction, the Sorbet Fizz will be
featured in a national FSI, television, and radio. The
television spot, "Gone Fizzin", will run in :15 and :30
versions on broadcast and cable networks. This is the first
television spot from the Company that highlights the "TCBY"
Treats(Service Mark) shop, a concept that units have been
converting to since 1995. The ad features a family that
drives into a seemingly deserted town, only to find that
everyone has "Gone Fizzin'" at the local "TCBY"
Treats(Service Mark) shop.
"TCBY is the market leader in soft serve sorbet products,"
said Tony Passarello, Senior Vice President of Marketing,
TCBY Systems, Inc. "The Sorbet Fizz is a great menu item
for summer, allows us to highlight our sorbet line, and
creates some tremendous marketing opportunities. It easily
fits into all of our locations whether they are traditional
or non-traditional units." Passarello added, "This is our
first foray into the beverage segment of the treats market.
The Sorbet Fizz re-emphasizes our commitment to the entire
family as 'the customer' that began with the TCBY Treats
concept."
The television spot was developed and produced by Stone &
Ward, the Company's agency of record. Greg Winter with
Wilson Griak of Minneapolis directed.
"The "Gone Fizzin" spot is a new initiative for TCBY," said
Larry Stone, CEO/Creative Director, Stone & Ward. "The
focus on one product, and use of a storyline makes the spot
very entertaining, and easy to remember."
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-
Exhibit 99(b)
PRESS RELEASE
FOR IMMEDIATE RELEASE
THURSDAY
MAY 1, 1997
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY INTRODUCES NEW SORBET FIZZ
LITTLE ROCK, AR - THURSDAY (MAY 1, 1997) - TCBY ENTERPRISES,
INC. (NYSE:TBY) today announced the introduction of the new
Sorbet fizz menu item at "TCBY"(Registered) and "TCBY"
Treats(Service Mark) locations. This new item will be
available for a limited time.
The Sorbet Fizz is a refreshing blend of "TCBY"(Registered)
soft serve sorbet and Sprite(Registered). This promotion
coincides with the introduction of two new soft serve sorbet
flavors - Strawberry Kiwi and Pineapple Passion Fruit - to
this already extensive line of five flavors. The suggested
promotional retail price is $1.79.
"TCBY is the market leader in soft serve sorbet products,"
said Tony Passarello, Senior Vice President of Marketing,
TCBY Systems, Inc. "The Sorbet Fizz is a great item for
summer, allows us to highlight our soft serve sorbet line,
and fits easily into all of our locations whether they are
traditional or non-traditional units." Passarello added,
"This is our first foray into the beverage segment of the
treats market. The Sorbet Fizz reemphasizes our commitment
to the entire family as 'the customer' that began with the
TCBY Treats concept."
In support of this introduction, the Sorbet Fizz will be
featured in a national free-standing insert, network and
cable television, and radio throughout May. This is the
most extensive national advertising the Company has
initiated for the introduction of a new menu item.
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.
Note: Photo available.
-30-
Exhibit 99(c)
PRESS RELEASE
FOR IMMEDIATE RELEASE
FRIDAY
MAY 2, 1997
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY ANNOUNCES NEW INTERNATIONAL DEVELOPMENT
IN EUROPE
LITTLE ROCK, AR - FRIDAY (MAY 2, 1997) - TCBY ENTERPRISES,
INC. (NYSE:TBY) today announced it has executed a
development agreement for Germany, Belgium and Luxembourg.
TCBY now has development agreements in over 60 foreign
countries.
P. Karsten Horeca - Franchise B.V. will be responsible for
the development of the "TCBY"(Registered) brand throughout
these countries through franchising and retail distribution.
This company is also the master franchisee for TCBY for The
Netherlands.
The Karsten Group is a very successful Dutch company
involved in franchising and food distribution for many
years. Their primary business is the wholesale distribution
of food products throughout The Netherlands and the
operation of the Amax and A-Market supermarket chains. The
Karsten Group has recently begun offering their customers
co-brand franchise concepts including TCBY, Pizza Hut,
Kentucky Fried Chicken, Kelly's Restaurant, and others.
A minimum of 50 stores will be developed within these
countries over the next five years. The Company did not
disclose the specific terms of the agreement.
"TCBY feels that the Karsten Group is an ideal master
franchisee for developing our concept in Germany, Belgium
and Luxembourg. This will provide great continuity to our
development in this part of Europe." said Hartsell
Wingfield, President of TCBY International.
TCBY Enterprises, Inc., through subsidiary companies,
manufactures and sells soft serve frozen yogurt, hardpack
frozen yogurt, hardpack ice cream, and frozen novelty
products, and markets foodservice equipment. The Company is
the 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-
Exhibit 99(d)
PRESS RELEASE
FOR IMMEDIATE RELEASE
FRIDAY
MAY 2, 1997
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY ANNOUNCES NEW INTERNATIONAL DEVELOPMENT
IN CENTRAL AMERICA
LITTLE ROCK, AR - FRIDAY (MAY 2, 1997) - TCBY ENTERPRISES,
INC. (NYSE:TBY) today announced it has executed a
development agreement for E. Salvador, Panama, Belize,
Honduras and Nicaragua. TCBY now has development agreements
in over 60 foreign countries.
Mr. Gerardo Jaspers will be the master franchisee and will
develop the "TCBY"(Registered) brand throughout these
countries through franchising and retail distribution. Mr.
Jaspers is the master franchisee for TCBY in Costa Rica, as
well, where he has established production capabilities to
supply the development of "TCBY"(Registered) products in
Central America.
A minimum of five locations must be developed over the next
five years. All of the countries involved have free trade
arrangements with Costa Rica making product distribution for
shops and retail sales more efficient. The Company did not
disclose the specific terms of the agreement.
"We are very excited about developing the TCBY brand in
these additional countries," said Hartsell Wingfield,
President of TCBY International. "With this agreement, we
will now have distribution in all of Central America."
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-
Exhibit 99(e)
PRESS RELEASE
FOR IMMEDIATE RELEASE
WEDNESDAY
JUNE 11, 1997
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY REPORTS 73% INCREASE IN NET INCOME
FOR THE FIRST HALF OF 1997
LITTLE ROCK, AR - (Wednesday) JUNE 11, 1997 - TCBY
ENTERPRISES, INC. (NYSE:TBY) today announced net income for
the first six months of 1997 increased 73 percent to
$3,376,641, or $.14 per share, from $1,948,544, or $.08 per
share, for the same period in 1996. Net income for the
second quarter of 1997 increased 27 percent to $3,124,990,
or $.13 per share, from $2,453,221, or $.10 per share, for
the same period in 1996.
Sales and franchising revenues for the first half of 1997
increased to $49,655,724 from $45,222,693 in 1996, a 10
percent increase. Sales and franchising revenues for the
second quarter of 1997 increased to $31,184,025 from
$27,945,040 last year, a 12 percent improvement. The
increase in sales and franchising revenues during both
periods is primarily attributable to the Company's continued
development of co-branded locations, increased distribution
of "TCBY"(Registered) branded products through retail
channels, private label manufacturing opportunities, and
expanded international development.
There were 2,754 "TCBY"(Registered) locations and 15 Juice
Works(Registered) locations open, as well as several
thousand retail points-of-sale for "TCBY"(Registered)
products worldwide, at the conclusion of the second quarter
of 1997. There were an additional 302 "TCBY"(Registered)
locations and 12 Juice Works(Registered) locations under
agreement for development. Most of the "TCBY"(Registered)
locations under development will be co-branded locations
with other food or petroleum operations. During the second
quarter, the Company announced a new co-branding alliance
with Subway(Registered) and locations are currently under
development. In addition, the first Juice Works(Registered)
airport locations opened in May in the San Diego and Chicago
O'Hare airports. Other Juice Works(Registered) airport and
toll road travel plaza locations are currently under
development.
During the second quarter, the Company announced its
international division had finalized new franchise
agreements for Germany, Belgium, Luxembourg, and several
countries in Central America. The Company now has
development agreements in over 60 countries. The first
locations in Malaysia and Grand Cayman, as well as
additional locations in Japan, Hong Kong, U.A.E. and Israel,
opened during the second quarter.
The Company has introduced its new product, the Sorbet Fizz,
a blend of "TCBY"(Registered) soft serve sorbet and
Sprite(Registered). This product was the focus of national
television, radio, and newspaper advertising in April, May,
and June. In addition, the Company continues to pursue
various partner promotions, similar to those with AT&T, Toys
R Us, Fisher-Price and Party City.
"We are pleased with our second quarter results and the
continued improvements we are experiencing," said Frank D.
Hickingbotham, Chairman and Chief Executive Officer. "This
is the sixth consecutive quarter of income improvements over
the prior periods. The strategy of expanding the sale of
TCBY products through co-branded locations is contributing
strongly to the improvements in our results. The Company
expects these improvements to continue to occur throughout
1997."
The above quote contains forward-looking statements based on
certain assumptions regarding the economy, unit openings and
closings, sales volumes per unit and other manufacturing
opportunities. Should the Company's performance differ
materially from the assumptions regarding these areas,
actual results could vary significantly from the performance
noted in the forward-looking statements.
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 1.8 million shares under this
authorization. Purchases have been made utilizing the
Company's cash resources.
TCBY Enterprises, Inc., through subsidiary companies,
manufactures and sells soft serve frozen yogurt, soft serve
sorbet, 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.
TCBY Enterprises, Inc.
Selected Financial Highlights
($000, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 1 May 31 June 1 May 31
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Operating Results
Sales & Franchising Revenue $ 31,184 $ 27,945 $ 49,656 $ 45,223
Net Income $ 3,125 $ 2,453 $ 3,377 $ 1,949
Net Income Per Share $ .13 $ .10 $ .14 $ .08
Average Shares Outstanding 24,149 25,283 24,311 25,422
Dividends Paid Per Share $ .05 $ .05 $ .10 $ .10
</TABLE>
<TABLE>
<CAPTION>
June 1 November 30
1997 1996
<S> <C> <C>
Financial Position
Current Assets $ 46,275 $ 44,706
Current Liabilities $ 14,156 $ 10,777
Property, Plant & Equipment, net $ 41,975 $ 43,339
Total Assets $101,299 $102,468
Long-term Debt, less current portion $ 7,884 $ 9,469
Stockholders' Equity $ 94,358 $ 93,419
Less Treasury Stock $(18,100) $(14,198)
Total Stockholders' Equity $ 76,258 $ 79,220
</TABLE>
-30-
Exhibit 99(f)
PRESS RELEASE
FOR IMMEDIATE RELEASE
FRIDAY
June 20, 1997
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY DECLARES CASH DIVIDEND
LITTLE ROCK, AR - June 20, 1997 - TCBY ENTERPRISES, INC.
(NYSE:TBY) today announced the Board of Directors of the
Company declared a $.05 per share cash dividend. This
dividend is payable on July 14, 1997 to shareholders of
record as of July 3, 1997.
TCBY Enterprises, Inc., through subsidiary companies,
manufactures and sells soft serve frozen yogurt, soft serve
sorbet, 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-
