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, 1997
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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, 1998: $88,265,451.
The number of shares of the Registrant's Common Stock ($.10
par value) outstanding as of January 1, 1998: 23,435,401.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the year
ended November 30, 1997 are incorporated by reference into
Parts I and II.
Portions of the Proxy Statement for the annual meeting of
stockholders to be held April 16, 1998 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 frozen
food products through Company-owned and franchised retail
stores ("TCBY" 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 sells
equipment related to the foodservice industry and develops
locations under the Juice Works brand which are intended to
be co-branded with TCBY locations. Industry segment data
for the Company's two business segments, food products and
equipment, for the years ended November 30, 1997, 1996, and
1995 included on pages 13 through 18 and page 30 of the
Company's 1997 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 franchises and licenses domestic and international
TCBY or TCBY-with-Juice Works locations; operates a domestic
TCBY location in Little Rock, Arkansas and sells yogurt and
novelty products to the retail grocery trade); Americana
Foods Limited Partnership (which manufactures 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 locations) and the
AIMCO Division (which sells and distributes foodservice
equipment and supplies primarily to customers outside of the
TCBY systems).
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 domestic 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, 1997 there were 2,782 TCBY locations,
including 1,102 domestic franchised stores, one
Company-owned store, 229 international licensed stores, and
1,450 non-traditional domestic locations. Information
regarding TCBY and Juice Works location activity for 1997
and 1996 is incorporated by reference to the information
contained in the table on page 13 to the Company's 1997
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, 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, hand-dipped premium ice cream, and Paradise
Ice(Trademark) shaved ice. 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, Pretzel Time, and
Nathan's.
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 $113,000 to
$330,200 ($54,600 to $135,700 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 an on-going 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, ice cream, and frozen
dessert products. Prior to the opening of a TCBY store, a
franchisee must attend a seven 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 651 domestic franchisees operating in all 50
states, of which 180 own more than one TCBY store and 27 own
five or more TCBY stores. As of November 30, 1997,
franchise agreements had been executed for over 50 TCBY
stores to be opened in the United States, some of which may
open in 1998. However, some of these franchise agreements
may terminate without the related stores opening.
During 1997, a total of 132 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 1,102 TCBY stores
reported open at November 30, 1997 were 111 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.
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, hosp itals, 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.
These 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, 1997 there were 1,450 TCBY
non-traditional locations open and approximately 300 TCBY
non-traditional locations under development. A total of 589
of these locations are airport locations, toll road travel
plazas, and other foodservice outlets, operated under a
joint venture agreement with Host Marriott Services
Corporation.
In 1997, significantly more TCBY non-traditional locations
than traditional locations opened. While the Company
continues to offer both traditional and non-traditional
franchising opportunities, the Company has experienced more
non-traditional development in the last two years. The
Company believes this trend will continue in 1998. While
different in size and character, each TCBY location is
treated the same in the site evaluation process, and the
Company believes it has successfully avoided and intends to
continue to avoid approving the placement of a new "TCBY"
location, be it traditional or non-traditional, so close to
any existing "TCBY" location that sales of the two locations
would be materially impacted.
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 Company 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, 1997, there were 229 TCBY international
franchised locations. These locations are generally smaller
than domestic locations and produce less sales and royalties
per location. Within the licensed countries there are
several thousand retail points of sale for TCBY packaged
products. Revenues from any single country are not expected
to be material in 1998. In the aggregate, revenues from
international locations in 1998 are expected to be
comparable to 1997 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 made with frozen yogurt, dietary
supplements to add to juices and smoothies, and
lowfat/nonfat baked goods.
For 1998, the Company is merging the operations of the Juice
Works concept into the TCBY concept. TCBY franchisees will
be able to purchase an addendum to their franchise agreement
under which they will be allowed to operate a Juice Works
store within the TCBY store.
The Company estimates that the total additional initial
investment required to establish a Juice Works store within
or in conjunction with a TCBY store will be $8,500 to
$64,290 depending on the size of the Juice Works portion of
the TCBY store excluding real property costs. The franchise
rights granted under a Juice Works addendum to the TCBY
franchise agreement will terminate when the related TCBY
franchise agreement ends. Royalties and contributions to
the Fund due to the Company from franchisees who have
executed the Juice Works addendum to their franchise
agreement will be paid and treated in an identical manner as
under the TCBY franchise agreement.
The Company has entered a development agreement with Host
Marriott Services Corporation. The companies will develop
Juice Works locations in existing and new operations for
airports, toll roads, and mall food courts. As of November
30, 1997, Host Marriott had opened five Juice Works
locations and an additional 10 were under development.
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.
The Company from time to time receives inquiries from
unaffiliated financing companies to provide leasing or
financing programs for certain equipment purchases for Juice
Works stores and Juice Works non-traditional locations.
These programs would be available at the option of the
franchisee or licensee.
For the 26 Juice Works locations (traditional and
non-traditional) open and 18 under development, the Company
plans to convert as many of them as it can to the co-branded
format with TCBY. Some of these agreements may terminate.
The Company does not intend to sell Juice Works franchises
in any form other than as an addendum to TCBY franchise
agreements.
Specialty Products
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 warehouse shelf space and the
competition for such space continues to intensify. At
November 30, 1997, the Company had approximately 20 retail
grocery trade customers.
The Company also manufactures other products such as ice
cream and frozen novelties under private label and various
trade names for distribution to supermarkets, convenience
stores, dairies, foodservice distributors, club stores, and
private label suppliers. The Company has pursued private
label opportunities to utilize available capacity at its
manufacturing facility. Private label sales were a major
contributor to the growth in revenues during 1997. The
Company continues to pursue additional private label
production opportunities.
Food Products Production
The Company's frozen yogurt, ice cream, and frozen dessert
products sold in TCBY stores and non-traditional locations
as well as specialty products are produced at the Company's
manufacturing facility in Dallas, Texas. Raw materials used
in the production of the Company's products consist
primarily of fresh milk, cream, water, and sweeteners. Each
of these materials is generally available from several
sources. During 1997, 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 costs to procure dairy
components used in production are currently tied to the
federal milk orders system. Of course, this market
fluctuates based on supply and demand with prices being
variable from month to month. Dairy Farmers of America is
the Company's principal supplier of dairy components.
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 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 $26,000 and $50,000 for a mini-store or
store operated in conjunction with another concept. Juice
Works addendum packages cost a franchisee between $3,000 and
$30,889. 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
franchise system.
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 1997 Annual Report to Stockholders
incorporated by reference for information regarding
unaudited consolidated quarterly results of operations for
1997 and 1996.
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
products 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 specialty products category 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
foodservice operations.
EMPLOYEES
As of November 30, 1997, the Company employed approximately
400 full-time and 40 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
400 full-time and 60 part-time associates employed on
November 30, 1996. None of the Company's employees are
covered by collective bargaining agreements.
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.
To the best of its knowledge, the Company believes that it
is presently in substantial compliance with all existing
applicable environmental laws and does not anticipate that
such compliance will have a material effect on its future
capital expenditures, earnings, or competitive position with
respect to its business.
Item 2. PROPERTIES
The Company's executive offices, which are leased pursuant
to a ten-year lease which commenced in January, 1997, occupy
approximately 53,500 square feet in the TCBY Tower, a
40-story office building located in downtown Little Rock.
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 during certain periods in producing
products for TCBY locations and private label customers
during 1998. 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 and licensed locations are operated
from premises which are leased. See Note 6 of Notes to
Consolidated Financial Statements in the Company's 1997
Annual Report to Stockholders incorporated by reference for
information regarding store rental obligations.
Riverport equipment distribution operations 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 stores and reorders of equipment and supplies from
TCBY 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".
The Company owns the production facility previously occupied
by Carlin Manufacturing, Inc. In July, 1997, the Company
sold a portion of the subsidiary's assets to a company
controlled by the subsidiary's president. The real property
was retained by the Company and is being leased to the
purchaser. The facility contains 34,000 square feet and 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, 1997, 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 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
judgment order, and in response the Company will vigorously
argue that the order should be upheld.
A customer for whom Americana Foods produces private label
products has asserted a claim alleging damages due to
production defects. Immediate and voluntary recalls of
limited quantities of product were undertaken in 1997. The
Company believes sufficient insurance coverage is in place
to cover any potential damages over the uninsured portion
which was accrued in fiscal 1997.
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 1997.
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 1997
Annual Report to Stockholders. As of January 31, 1998,
there were 4,736 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 1997
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 13 through 18 of the Company's 1997 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
19 through 31 of the Company's 1997 Annual Report to
Stockholders.
Quarterly results of operations are incorporated by
reference to page 31 (Note 13) of the Company's 1997 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 1998 Proxy Statement.
EXECUTIVE OFFICERS OF TCBY ENTERPRISES, INC.
The following sets forth certain information regarding
executive officers of the Company:
Frank D. Hickingbotham, age 61, has been the Chairman of the
Board and Chief Executive Officer of the Company and its
predecessors since 1970.
Herren C. Hickingbotham, age 39, 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 34, 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 40, became President of Americana Foods in
June 1997 in addition to being an Executive Vice President.
He has been an Executive Vice President since December 1994.
He had been Senior Vice President, Finance and Chief
Accounting Officer since June 1991. Mr. Fink joined the
Company in March 1987.
Gene Whisenhunt, age 37, 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.
William P. Creasman, age 45, joined the Company as Senior
Vice President and General Counsel in 1987.
Jim Sahene, age 37, 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 36, 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.
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 1997 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. 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 1998 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 1998 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 1998 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, 1997.
(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 /s/Frank D. Hickingbotham
__________________________
Frank D. Hickingbotham,
Chairman of the Board and
Chief Executive Officer
February 24, 1998
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 2-24-98
and Chief Executive Officer
(Principal Executive Officer)
Herren C. Hickingbotham* Director, President and Chief 2-24-98
Operating Officer
Daniel R. Grant* Director 2-24-98
F. Todd Hickingbotham* Director, President Riverport 2-24-98
Equipment and Distribution
Company, Inc.
Marvin D. Loyd* Director 2-24-98
Hugh H. Pollard* Director 2-24-98
Don O. Kirkpatrick* Director 2-24-98
William H. Bowen* Director 2-24-98
Gene H. Whisenhunt* Executive Vice President, 2-24-98
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
SCHEDULE
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULE
YEAR ENDED NOVEMBER 30, 1997
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, 1997, are incorporated by reference in
Item 8:
Consolidated balance sheets -- November 30, 1997 and 1996
Consolidated statements of operations -- Years ended
November 30, 1997, 1996 and 1995
Consolidated statements of stockholders' equity -- Years
ended November 30, 1997, 1996 and 1995
Consolidated statements of cash flows -- Years ended
November 30, 1997, 1996 and 1995
Notes to consolidated financial statements -- November 30,
1997
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 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 Novem
ber 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
E-1
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
Restated Loan Agreement and Amendment to
Loan Documents. (Incorporated by reference
to Exhibit 4(ii)(a) of the Company's Quarter
ly 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
E-2
Exhibit 10(h) to the Company's Annual Report
on Form 10-K for the fiscal year ended
November 30, 1990)
(i) Form of Franchise Agreement (Revised July
1991) (Incorporated by reference to Exhibit
28(a) to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 31,
1991)
(j) Form of Franchise Agreement (Revised Decem
ber 1991) (Incorporated by reference to
Exhibit 10(j) to the Company's Annual Report
on Form 10-K for the fiscal year ended
November 30, 1992)
(k) Form of Executive Security Agreement entered
into with certain executives of the Company
dated December 1, 1990 (Incorporated by
reference to Exhibit 10(k) to the Company's
Annual Report on Form 10-K for the fiscal
year ended November 30, 1990)
(l) 1984 Stock Option Plan, as amended and re
stated (Incorporated by reference to Exhibit
4 to Post-Effective Amendment No. 1 to
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 Stock
holders)
(n) 1992 Employee Stock Option Plan (Incorporat
ed by reference to Exhibit I of the
Company's March 18, 1992 Proxy Statement)
(o) 1992 Nonemployee Director Stock Option Plan
(Incorporated by reference to Exhibit II of
the Company's March 18, 1992 Proxy Statement)
(p) Amendment to the 1992 Employee Stock Option
Plan (Incorporated by reference to the
Company's March 1, 1995 Proxy Statement)
(q) Lease Agreement between the Company, as
tenant, and Capitol Avenue Development
Company, a limited partnership, as landlord,
dated April 20, 1987 (Incorporated by 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
E-3
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
(t) Amendment to the 1992 Employee Stock Option
Plan (Incorporated by reference to the
Company's February 24, 1997 Proxy Statement)
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,
1997......................................... 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 1997 10-K ....................... Attached
99 (a) Press release, dated October 14, 1997, "Juice
Works Announces Development Agreement with
Host Marriott"............................... Attached
99 (b) Press release, dated October 24, 1997, ""TCBY"
TreatsR/Wall Street Deli Location Opens in
Trussville".................................. Attached
99 (c) Press release, dated December 15, 1997, "TCBY
Declares Cash Dividend and Announces Stock
Repurchase".................................. Attached
99 (d) Press release, dated December 30, 1997, "TCBY
and Subway Develop Co-Branding Alliance in
Canada"...................................... Attached
99 (e) Press release, dated January 13, 1998, "TCBY
Reports Net Income Up 36 Percent for Fiscal
1997"........................................ Attached
99 (f) Press release, dated January 27, 1998, "TCBY
Announces New International Development in
South America"............................... Attached
99 (g) Press release, dated February 2, 1998, "TCBY
Signs Development Agreement with Chevron
Petroleum Marketers Association"............. Attached
</TABLE>
E-4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
1997 Compared to 1996
The Company's total sales for 1997 increased nine percent
from sales in 1996. As described below, the Company has
experienced improved sales in the specialty products and
equipment distribution categories. These increases are
partially offset by decreased sales by Company-owned stores
due to the franchising of these stores during 1996; the
divestiture of Carlin Manufacturing in July, 1997; and
decreased sales to traditional "TCBY"(Registered) stores.
The Company's total sales excluding "TCBY"(Registered)
Company-owned units and Carlin Manufacturing increased 15
percent 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)
1997 1996 1995
Sales % Sales % Sales %
______ ____ _______ ____ _______ ____
<S> <C> <C> <C> <C> <C> <C>
Food Products:
______________
"TCBY"(Registered) frozen products
sales for distribution
to "TCBY"(Registered)
locations $ 47,851 53% $ 49,705 60% $ 51,003 46%
Sales of specialty products 25,103 28 14,973 18 25,327 23
Retail sales by Company-
owned stores 680 1 2,599 3 18,065 17
________ ____ ________ ____ ________ ____
73,634 82 67,277 81 94,395 86
Equipment:
Sales by the Company's
equipment distributor 14,624 16 11,779 14 10,783 10
Sales of manufactured
specialty vehicles 1,228 1 2,874 4 3,642 3
________ ____ ________ ____ ________ ____
15,852 17 14,653 18 14,425 13
Other 1,092 1 1,034 1 988 1
________ ____ ________ ____ ________ ____
Total Sales $ 90,578 100% $ 82,964 100% $109,808 100%
======== ==== ======== ==== ======== ====
</TABLE>
Sales from the Company's food products segment include (i)
wholesale sales of frozen yogurt and ice cream products to
ProSource Distribution Services ("ProSource") 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 "TCBY"(Registered) frozen
packaged products and other specialty dairy food products to
customers including supermarkets, convenience stores,
dairies, foodservice 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
decreased four percent in 1997 compared to 1996. The
decrease is attributed primarily to a reduction in the
number of domestic traditional "TCBY"(Registered) stores in
operation and a decline in yogurt purchased by operating
stores during 1997 compared to 1996. This decrease was
partially offset by increased purchases by
"TCBY"(Registered) non-traditional locations. The Company
continues to develop additional "TCBY"(Registered)
non-traditional locations with over 300 "TCBY"(Registered)
locations under agreement for development at November 30,
1997. Most of the "TCBY"(Registered) locations under
development will be co-branded locations with petroleum or
other food operations.
The following table sets forth "TCBY"(Registered) and Juice
Works(Registered) location activity for 1997 and 1996:
<TABLE>
<CAPTION>
Company Non-
Franchised Owned International Traditional Total
Stores Stores Locations Locations Locations
__________ _______ _____________ ___________ _________
<S> <C> <C> <C> <C> <C>
Locations Open at
December 1, 1995 1,218 42 187 1,273 2,720
Opened 38 1 75 322 436
Closed (88) (1) (61) (308) (458)
Net Stores Purchased
(Sold) Between Fran-
chisees & Company 30 (40) -- 10 --
_______ ______ ______ _______ ________
Locations Open at
November 30, 1996 1,198 2 201 1,297 2,698
Opened 47 1 52 350 450
Closed (132) -- (24) (184) (340)
Net Stores Purchased
(Sold) Between Fran-
chisees & Company (3) (1) -- 4 --
_______ ______ ______ _______ ________
Locations Open at
November 30, 1997 1,110 2 229 1,467 2,808
======= ====== ====== ======= ========
</TABLE>
During 1997, significantly more "TCBY"(Registered)
non-traditional locations than traditional locations opened.
While the Company has placed and continues to place 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 in 1998. While different in size and character,
each "TCBY"(Registered) location is treated the same in the
site evaluation process, and the Company intends to avoid
approving the placement of a new "TCBY"(Registered)
location, be it traditional or non-traditional , so close to
any existing "TCBY"(Registered) location that sales of the
two locations would be materially impacted. The
non-traditional locations include sites at airports, travel
plazas, colleges, hospitals, theme parks, stadiums, and
locations in conjunction with petroleum stores and other
food concepts (co-branded locations). The majority of the
350 non-traditional openings in 1997 were "TCBY"(Registered)
co-branded locations. The Company's current experience is
that the volume of yogurt and ice cream at co-branded
locations will exceed that of other types of non-traditional
locations with the exception of airports. During 1997, 184
non-traditional locations were closed. These locations
generally purchased low volumes of product 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. During 1997, a total of 132 TCBY franchised 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. Of the 132 locations
closed, 64 operated for a portion of 1997, with the
remainder having originally closed for relocation in prior
years. Included in the franchised and Company-owned store
information are 111 and 147 "TCBY"(Registered) stores closed
for relocation or for the season at November 30, 1997 and
1996, respectively.
Average store sales (the average of sales by domestic
traditional stores open the entire year) for Company-owned
and franchised "TCBY"(Registered) stores were $207,000 in
1997 and 1996. The restaurant industry continues to be
highly competitive. The Company is continuing its efforts
to improve store sales through television advertising
campaigns, menu extensions, local media advertising, store
decor upgrades, and relocations. Even with the successful
implementation of these programs, store sales may decline
and store closings may continue.
Sales of specialty products increased 68 percent in 1997 as
compared to 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) novelty products primarily through
club stores.
Retail sales by Company-owned stores declined in 1997 due to
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
believed the stores could operate more effectively with
local ownership.
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 increased eight percent in
1997 as compared to the prior year. This improvement in
sales is primarily due to 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 by the Company's equipment
manufacturer. In July, 1997, the Company sold a portion of
the equipment manufacturer's 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 partially 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.
As a percent of sales, cost of sales for 1997 and 1996 for
the Company and its two primary segments are presented
below:
<TABLE>
<CAPTION>
___________________
1997 1996
___________________
<S> <C> <C>
Food Products Segment 65% 63%
Equipment Segment 78% 76%
Company Total 67% 65%
</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 have been favorably
impacted by a decrease in dairy prices which are a major
component of the Company's cost of sales. Although dairy
prices are beyond the Company's control, the Company's dairy
costs in 1998 are not expected to be materially different
than the average cost over the last few years.
The change in the equipment segment's cost of sales
percentage results from increased sales of new location
equipment packages which include large items with lower
margins than other sales components of the equipment
segment.
Franchising revenues consist of initial franchise and
license fees and royalty income. In 1997, initial franchise
and license fees increased 37 percent while royalty income
was flat compared to the prior year. The improvement in
franchise and license fees resulted primarily from increased
initial international franchise fees, increased development
of "TCBY"(Registered) non-traditional locations, and Juice
Works(Registered) locations. The flat royalty income is
primarily attributable to a decrease in domestic royalties
resulting from the decrease in the number of traditional
"TCBY"(Registered) stores and the decline in frozen products
purchased by the operating stores. This decrease was offset
by the increase in the number of non-traditional locations
and expanded distribution in international markets.
Five percent of combined sales and franchising revenues were
generated from international activity in 1997 and 1996.
Operating expenses decreased five percent in 1997 compared
to 1996. The decrease relates to reduced operating expenses
of 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 30
percent and 34 percent for 1997 and 1996, respectively. The
Company expects that the current operating expense level
will be maintained throughout 1998. The Company incurred
limited expenses during 1997 related to the modification of
computer programs to ensure proper recognition of the year
2000. Many of the Company's financial applications have
been modified by third party vendors and are year 2000
compliant. The expense to convert the Company's remaining
systems will not be material and the conversion should be
substantially completed during 1998.
Interest expense decreased approximately $201,000 in 1997
compared to 1996. This decrease is due to reductions in
outstanding debt.
Income tax expense as a percentage of pre-tax income was
34.5 percent and 34.6 percent in 1997 and 1996,
respectively. Assuming no significant change in federal and
state tax laws, the Company expects its future tax rate to
approximate the 1997 rate. Deferred tax assets of $2.8
million are expected to be realized through the offset of
existing taxable temporary differences.
1996 Compared to 1995
The Company's total sales for 1996 decreased 24 percent from
sales in 1995. As described below, the decrease in sales
was 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, 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.
Wholesale sales of frozen products decreased three percent
compared to 1995. This decrease was attributed primarily to
a reduction in the number of domestic traditional
"TCBY"(Registered) stores (Company-owned and franchised) in
operation and a decline in yogurt purchased by operating
stores during 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.
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. During
1996, opportunities developed in locations where
"TCBY"(Registered) products were utilized with other brands
such as in petroleum stores or with other food concepts.
Locations developed in conjunction with petroleum stores
were a majority of the 322 non-traditional openings in 1996.
During 1996, the Company closed 308 "TCBY"(Registered)
non-traditional locations. These locations generally
purchased low volumes of yogurt from the Company.
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 Dairy Farmers of America
(formerly 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 improved operating results
but 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. 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 for Company-owned and franchised
"TCBY"(Registered) stores decreased two percent from
$212,000 in 1995 to $207,000 in 1996.
During 1996, the Company continued its implementation of the
"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, and Paradise
Ice(Trademark) shaved ice. As of November 30, 1996, 581
existing stores had converted or were in the process of
converting to the concept. The "TCBY"(Registered) Treats
concept is generally required for new and relocated
locations.
Sales in the equipment segment increased two percent during
1996 over the prior year. The increase in sales during 1996
was 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 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 was 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 were 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 rose as
a result of lower milk production primarily due to extremely
high feed prices and strong consumer demand for dairy
products.
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 resulted primarily from increased domestic
franchise fees, which were due to the expansion into
convenience stores operated in association with national
petroleum companies. The increase in royalty income related
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 were attributable 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 was 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.
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 $17.1 million
in 1997 compared to $18.9 million in 1996 and $8.6 million
in 1995. The decrease in 1997 results primarily from a tax
refund of approximately $4.1 million and the proceeds of
sales of assets of approximately $2.4 million in 1996 which
did not reoccur in 1997. 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 following summarizes statistics related to the Company's
financial position:
<TABLE>
<CAPTION>
1997 1996
__________________________
<S> <C> <C>
Current Ratio 4.0 to 1.0 4.1 to 1.0
Working Capital (in millions) $34.5 $33.9
Long-Term Debt to Equity Ratio .08 to 1.0 .12 to 1.0
Tangible Net Worth (in millions) $73.1 $74.7
</TABLE>
The Company's cash and short-term investments increased
approximately $2.9 million in 1997. This increase resulted
primarily from improved operating activities.
Long-term debt repayments was reduced by $3.2 million in
1997, 1996, and 1995.
Cash ge nerated from operations has been used to finance all
capital expenditures. Purchases of property, plant, and
equipment amounted to $1.9 million, $2.4 million, and $9.9
million in 1997, 1996, and 1995, respectively. The Company
had no material commitments for capital expenditures at
November 30, 1997. The Company estimates $2 to $3 million
for capital expenditures in 1998. 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 stores. The
principal collected on notes receivable primarily from
franchisees exceeded origination of notes receivable by
approximately $1,410,000, $1,564,000, and $2,101,000 in
1997, 1996, and 1995, respectively.
The Company's foreseeable cash needs for operations and
capital expenditures are expected to be met through cash
flows from operations; however, the Com pany 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 2,128,200 shares with
1,090,500 shares purchased in 1997. The repurchases were
funded with cash flows from operations. In December, 1997,
the Company was authorized to repurchase an additional two
million shares of its outstanding common stock. Future
repurchases may be funded with cash flows from operations or
long-term financing.
Cash dividends of 20 cents per share were paid to
stockholders during 1997, 1996, and 1995. 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.
Any forward-looking statements contained herein with respect
to earnings, revenues, and operating expenses are based on
certain assumptions regarding the economy, competition,
costs of raw materials, unit openings and closings, sales
volumes per unit and other manufacturing opportunities, no
changes in governmental regulation of the food industry, and
no material event which would impact the reputation of the
Company's manufacturing facility or the Company's ability to
utilize that facility. 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.
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, 1997 and 1996, and the related consolidated statements
of operations, stockholders' equity, and cash flows for each
of the three years in the period ended November 30, 1997.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of TCBY Enterprises, Inc. and
subsidiaries at November 30, 1997 and 1996, and the
consolidated results of their operations and their cash
flows for each of the three years in the period ended
November 30, 1997, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
January 13, 1998
Little Rock, Arkansas
1
TCBY Enterprises, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
November 30
1997 1996
__________________________
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 19,693,693 $ 14,919,008
Short-term investments 2,406,045 4,252,552
Receivables:
Trade accounts 8,750,207 8,620,498
Notes 2,127,328 2,429,967
Allowance for doubtful accounts and impaired notes (833,447) (1,187,628)
__________________________
10,044,088 9,862,837
Refundable income taxes 12,472 332,873
Deferred income taxes 1,086,406 1,451,190
Inventories 10,679,231 11,321,751
Prepaid expenses and other assets 1,549,643 1,742,801
Assets held for sale 754,652 822,583
__________________________
Total Current Assets 46,226,230 44,705,595
Property, Plant, and Equipment:
Land 2,866,820 2,866,820
Buildings 23,753,155 23,581,923
Furniture, vehicles, and equipment 49,987,506 49,073,757
Leasehold improvements 3,625,054 3,511,509
Allowances for depreciation (39,891,253) (35,694,982)
__________________________
40,341,282 43,339,027
Other Assets:
Notes receivable, less current portion (less allowance
for doubtful and impaired notes of $7,741,180 in 1997
and $8,494,396 in 1996) 5,495,337 6,131,070
Intangibles (less amortization of $1,964,433 in 1997
and $1,731,199 in 1996) 4,326,193 4,485,689
Other 2,875,354 3,807,066
__________________________
12,696,884 14,423,825
__________________________
Total Assets $ 99,264,396 $102,468,447
==========================
</TABLE>
See accompanying notes.
2
<TABLE>
<CAPTION>
November 30
1997 1996
_________________________
<S> <C> <C>
Liabilities And Stockholders' Equity
Current Liabilities:
Accounts payable $ 1,910,414 $ 1,906,568
Accrued expenses 6,612,146 5,699,381
Current portion of long-term debt 3,171,448 3,171,448<PAGE>
__________________________
Total Current Liabilities 11,694,008 10,777,397
Long-Term Debt, less current portion 6,298,008 9,469,456
Deferred Income Taxes 3,846,858 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 27,095,620 shares in
1997 and 27,062,345 shares in 1996 2,709,562 2,706,235
Additional paid-in capital 25,761,424 25,547,184
Retained earnings 69,216,099 65,165,190
__________________________
97,687,085 93,418,609
Less treasury stock, at cost (3,515,269 shares
in 1997 and 2,424,769 shares in 1996) (20,261,563) (14,198,116)
__________________________
Total Stockholders' Equity 77,425,522 79,220,493
__________________________
Total Liabilities And Stockholders' Equity $ 99,264,396 $102,468,447
==========================
</TABLE>
See accompanying notes.
3
TCBY Enterprises, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year Ended November 30
1997 1996 1995
_______________________________________
<S> <C> <C> <C>
Sales $ 90,577,654 $ 82,964,258 $109,808,283
Cost of sales 60,398,466 53,548,245 65,710,499
_______________________________________
Gross Profit 30,179,188 29,416,013 44,097,784
Franchising revenues:
Initial franchise and license fees 3,347,773 2,439,125 1,590,510
Royalty income 10,406,033 10,400,873 10,171,075
_______________________________________
13,753,806 12,839,998 11,761,585
_______________________________________
43,932,994 42,256,011 55,859,369
Operating expenses:
Selling, general, and administrative
expenses 30,925,889 32,513,196 59,771,433
Provision for doubtful accounts and
impaired notes 48,705 88,205 12,572,172<PAGE>
Impairment of long-lived assets - - 15,946,090
Restructuring charges - - 1,400,000
_______________________________________
30,974,594 32,601,401 89,689,695
_______________________________________
Income (Loss) From Operations 12,958,400 9,654,610 (33,830,326)
Other income (expense):
Interest expense (759,766) (961,154) (1,121,995)
Interest income 1,209,393 1,147,484 969,652
Other income 148,029 168,669 1,911,884
_______________________________________
597,656 354,999 1,759,541
_______________________________________
Income (Loss) Before Income Taxes 13,556,056 10,009,609 (32,070,785)
Income tax expense (benefit):
Current 3,466,300 1,585,861 (3,982,309)
Deferred 1,210,541 1,875,383 (6,715,618)
_______________________________________
4,676,841 3,461,244 (10,697,927)
_______________________________________
Net Income (Loss) $ 8,879,215 $ 6,548,365 $(21,372,858)
=======================================
Net Income (Loss) Per Share $ .37 $ .26 $ .(83)
=======================================
Average Shares Outstanding 24,061,999 25,156,994 25,602,375
=======================================
</TABLE>
See accompanying notes.
4<PAGE>
TCBY Enterprises, Inc.
Consolidated Statements of
Stockholders' Equity
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Retained Treasury
Shares Par Value Capital Earnings Stock Total
__________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Balance at December 1, 1994 26,911,333 $2,691,133 $24,840,431 $90,153,584 $ (9,411,199) $108,273,949
Exercise of stock options,
including tax benefit of
$18,991 151,012 15,102 706,753 - - 721,855
Cash Dividends--$.20 per share - - - (5,119,491) - (5,119,491)
Purchase of treasury stock-
-70,000 shares - - - - (324,688) (324,688)
Net loss - - - (21,372,858) - (21,372,858)
__________________________________________________________________________
Balance at November 30, 1995 27,062,345 2,706,235 25,547,184 63,661,235 (9,735,887) 82,178,767
Cash Dividends--$.20 per share - - - (5,044,410) - (5,044,410)
Purchase of treasury stock-
1,037,700 shares - - - - (4,462,229) (4,462,229)
Net income - - - 6,548,365 - 6,548,365
__________________________________________________________________________
Balance at November 30, 1996 27,062,345 2,706,235 25,547,184 65,165,190 (14,198,116) 79,220,493
Exercise of stock options,
including tax benefit of
$42,592 33,275 3,327 214,240 - - 217,567
Cash Dividends--$.20 per share - - - (4,828,306) - (4,828,306)
Purchase of treasury stock-
1,090,500 shares - - - - (6,063,447) (6,063,447)
Net income - - - 8,879,215 - 8,879,215
__________________________________________________________________________
Balance at November 30, 1997 27,095,620 $2,709,562 $25,761,424 $69,216,099 $(20,261,563) $77,425,522
==========================================================================
</TABLE>
See accompanying notes.
5
TCBY Enterprises, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended November 30
1997 1996 1995
_______________________________________
<S> <C> <C> <C>
Operating Activities
Net income (loss) $ 8,879,215 $ 6,548,365 $(21,372,858)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 4,915,965 5,156,622 10,880,350
Amortization of intangibles 264,022 217,131 599,053
Provision for doubtful accounts and
impaired notes 48,705 88,205 12,572,172
Provision for impairment of long-lived
assets - - 15,946,090
Restructuring charges - - 1,400,000
Deferred income taxes (benefits) 1,210,541 1,875,383 (6,715,618)
Gain on sales of property and
equipment (51,144) (43,531) (66,721)
Gain on sale of product line - - (2,370,046)
Changes in operating assets and
liabilities:
Receivables (877,273) 937,579 3,099,232
Inventories 692,926 1,608,413 413,853
Prepaid expenses 193,158 357,870 (708,548)
Distribution allowances - - (919,585)
Assets held for disposal - 2,413,438 -
Intangibles and other assets 579,951 (391,497) 731,254
Accounts payable and accrued
expenses 916,611 (3,926,558) (2,019,140)
Income taxes 320,401 4,086,063 (2,917,273)
_______________________________________
Net Cash Provided By Operating
Activities 17,093,078 18,927,483 8,552,215
Investing Activities
Purchases of property, plant, and
equipment (1,869,282) (2,403,694) (9,883,365)
Purchase of business, net of cash
acquired - (952,800) -
Proceeds from sales of property and
equipment 139,866 325,122 161,360
Origination of notes receivable (1,098,771) (334,551) (453,892)
Principal collected on notes
receivable 2,508,921 1,898,270 2,554,787
Purchases of short-term investments (1,838,338) (1,457,224) (7,498,206)
Proceeds from maturity of short-term
investments 3,684,845 6,028,835 13,887,222
Proceeds from sale of product line - - 1,200,000
_______________________________________
Net Cash Provided By (Used In)
Investing Activities 1,527,241 3,103,958 (32,094)
Financing Activities
Proceeds from sale of Common Stock 217,567 - 721,855
Dividends paid (4,828,306) (5,044,410) (5,119,491)
Treasury stock transactions (6,063,447) (4,462,229) (324,688)
Principal payments on long-term debt (3,171,448) (3,171,448) (3,170,261)
_______________________________________
Net Cash Used In Financing Activities (13,845,634) (12,678,087) (7,892,585)
_______________________________________
Increase In Cash And Cash Equivalents 4,774,685 9,353,354 627,536
Cash and cash equivalents at beginning
of year 14,919,008 5,565,654 4,938,118
_______________________________________
Cash And Cash Equivalents At End Of Year $ 19,693,693 $14,919,008 $ 5,565,654
=======================================
</TABLE>
See accompanying notes.
6
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements
November 30, 1997
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 sells equipment related to the foodservice
industry and develops locations under the Juice
Works(Registered) brand.
The following summarizes the number of "TCBY"(Registered)
and Juice Works(Registered) locations:
<TABLE>
<CAPTION>
November 30
1997 1996 1995
____________________
<S> <C> <C> <C>
Franchised or licensed 1,339 1,399 1,405
Company-owned 2 2 42
Non-traditional 1,467 1,297 1,273
____________________
2,808 2,698 2,720
====================
</TABLE>
Cash and Cash Equivalents
The Company considers all highly liquid investments with an
original maturity of 90 days 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 90 days and less than one
year. These investments are recorded at cost which
approximates market value and are intended to be held to
maturity.
7
TCBY ENTERPRISES, Inc.
Notes to Consolidated Financial Statements
(continued)
1. Accounting Policies (continued)
Inventories
Inventories consist primarily of yogurt and ice cream
products and related manufacturing materials, and
foodservice equipment. Inventories are carried at the lower
of cost or market.
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 1997 and 1996, the
Company extended credit of approximately $70,000 and
$257,000, respectively, to finance the sale of certain
"TCBY"(Registered) and Juice Works(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 No. 114, "Accounting by Creditors for
Impairment of a Loan" ("Statement No. 114"). 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, 1997 and 1996, the recorded investment in
notes considered to be impaired under Statement No. 114 was
$10,507,000 and $12,542,000, respectively. The entire 1997
and 1996 balances were impaired notes which had allowances
for credit losses of $8,492,000 and $9,435,000,
respectively. The impairment losses are recorded in the
food products segment. The average recorded investment in
impaired notes during the years ended November 30, 1997 and
1996 was approximately $11,671,000 and $12,901,000,
respectively. For the years ended November 30, 1997 and
1996, the Company recognized interest income on impaired
notes of $19,000 and $1,000, respectively, using the cash
basis method of income recognition. The notes considered to
be impaired at November 30, 1997 and 1996, included the note
receivable from Dairy Farmers of America (formerly
Mid-America Dairymen, Inc.) (See Note 11.)
8
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>
1997 1996 1995
_______________________________________
<S> <C> <C> <C>
Balance at beginning of year $ 9,682,024 $11,178,017 $ 1,278,384
Provision for doubtful accounts and
impaired notes 48,705 88,205 12,572,172
Charge-offs (1,173,093) (1,586,704) (2,824,072)
Recoveries 16,991 2,506 151,533
_______________________________________
Balance at end of year $ 8,574,627 $ 9,682,024 $11,178,017
=======================================
</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, the Company adopted Financial Accounting
Standards Board Statement No. 121, "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed Of" ("Statement No. 121"), 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 No. 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.)
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.
9
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements
(continued)
1. Accounting Policies (continued)
Revenue Recognition (continued)
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.
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 reporting
period ended March 1, 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 for calculating basic earnings per
share, the dilutive effect of stock options will be
excluded. The Company's earnings per share reported in 1997
and 1996 equate to the basic earnings per share as common
stock equivalents were not material under the guidance of
Accounting Principals Board Opinion No. 15, "Earnings Per
Share". The Company will also be required to disclose
diluted earnings per share which will not be materially
different from 1997 and 1996 earnings per share as reported.
Fair Value of Financial Instruments
The carrying amount of financial instruments including cash
and cash equivalents, accounts and notes receivable, and
accounts payable approximates fair value at November 30,
1997, 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.
10
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements
(continued)
1. Accounting Policies (continued)
Fiscal Year
Effective December 1, 1996, the Company changed its fiscal
year end from November 30 to a 52 or 53 week year ending on
the Sunday nearest November 30. All general references to
years relate to fiscal years unless otherwise noted.
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.
Segment Reporting
In June 1997, the Financial Accounting Standards Board
issued Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("Statement No. 131").
Under the provisions of Statement No. 131, public business
enterprises must report financial and descriptive
information about its reportable segments. Management is
currently studying and analyzing Statement No. 131 as well
as the Company's operations to determine all of the
Company's reportable segments. This statement will be
effective for fiscal 1999.
Reclassification
Certain amounts in the 1996 consolidated financial
statements have been reclassified to conform to the 1997
presentation.
2. Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
November 30
1997 1996
__________________________
<S> <C> <C>
Manufacturing materials and supplies $ 4,307,719 $ 3,794,175
Finished yogurt and other food products 2,929,034 2,947,515
Equipment and other products 3,442,478 4,580,061
__________________________
$ 10,679,231 $ 11,321,751
==========================
</TABLE>
11
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements
(continued)
3. Long-term Debt
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
November 30
1997 1996
__________________________
<S> <C> <C>
Unsecured notes payable $ 9,469,456 $ 12,640,904
Less current portion 3,171,448 3,171,448
__________________________
$ 6,298,008 $ 9,469,456
==========================
</TABLE>
Two unsecured notes 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, 1997 was 6.9688% 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, 1997.
Annual maturities of long-term debt are $3,171,448 in 1998
through 1999, $2,301,819 in 2000, and $824,741 in 2001.
The Company has available a $5 million unsecured credit
line.
In connection with the construction of certain property, the
Company capitalized interest costs of approximately $177,000
in 1995. No interest was capitalized in 1997 and 1996.
During 1997, 1996, and 1995, the Company paid interest of
approximately $760,000, $961,000, and $1,299,000,
respectively.
12
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements
(continued)
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
1997 1996
__________________________
<S> <C> <C>
Deferred tax assets:
Impairment allowance on fixed assets $ 811,158 $ 893,874
Accrued expenses related to assets held for sale 101,047 383,733
Other accrued expenses 872,443 524,411
Other 1,063,130 1,871,656
__________________________
Total deferred tax assets 2,847,778 3,673,674
Deferred tax liabilities:
Tax over book depreciation 4,182,635 3,260,914
Other 1,425,595 1,962,671
__________________________
Total deferred tax liabilities 5,608,230 5,223,585
__________________________
Net deferred tax liabilities $(2,760,452) $(1,549,911)
==========================
</TABLE>
Significant components of the provision (benefit) for income
taxes are as follows:
<TABLE>
<CAPTION>
Year ended November 30
1997 1996 1995
_______________________________________
<S> <C> <C> <C>
Current:
Federal $ 3,443,225 $ 1,420,321 $ (3,894,150)
State 23,075 165,540 (88,159)
_______________________________________
Total current 3,466,300 1,585,861 (3,982,309)
Deferred 1,210,541 1,875,383 (6,715,618)
_______________________________________
$ 4,676,841 $ 3,461,244 $(10,697,927)
=======================================
</TABLE>
13
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements
(continued)
4. Income Taxes (continued)
The reconciliation of income tax (benefit) computed at the
United States federal statutory tax rates to income tax
(benefit) is:
<TABLE>
<CAPTION>
Year ended November 30
1997 1996 1995
________________________________________
<S> <C> <C> <C>
Income tax (benefit) at the
statutory federal rate $ 4,644,620 $ 3,403,267 $(10,904,067)
State income taxes, net of
federal benefit 14,999 (28,430) (58,185)
Other, net 17,222 86,407 264,325
________________________________________
Total income tax (benefit) $ 4,676,841 $ 3,461,244 $(10,697,927)
========================================
</TABLE>
The Company made income tax payments of approximately
$3,088,000, $1,105,000, and $25,000, in 1997, 1996, and
1995, respectively.
5. Accrued Expenses
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
November 30
1997 1996
__________________________
<S> <C> <C>
Rent $ 662,224 $ 960,371
Compensation 2,534,394 2,219,160
Other 3,415,528 2,519,850
__________________________
$ 6,612,146 $ 5,699,381
==========================
</TABLE>
Accrued expenses at November 30, 1997 and 1996 includes $1.0
million and $1.3 million, respectively, of costs related
primarily to the Company's restructuring and sale of
"TCBY"(Registered) Company-owned stores.
6. Lease Commitments
In 1997, 1996, and 1995, rent expense totaled approximately
$1,775,000, $2,884,000, and $5,020,000, 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: 1998--$2,380,000;
1999--$2,094,000; 2000--$1,521,000; 2001--$1,419,000;
2002--$1,208,000; and thereafter--$4,178,000.
14
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements
(continued)
6. Lease Commitments (continued)
Certain of the leases relating to corporate stores are
renewable for substantially the same rentals for up to five
additional years. The rental commitments (net of subleases)
for Company-owned locations closed in conjunction with the
Company's decision to no longer operate "TCBY"(Registered)
stores (see Note 12) totaled approximately $114,000 at
November 30, 1997 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 $3,346,000, 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 $3,156,000 at November 30, 1997.
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 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
judgment order, and in response the Company will vigorously
argue that the order should be upheld.
A customer for whom Americana Foods produces private label
products has asserted a claim alleging damages due to
production defects. Immediate and voluntary recalls of
limited quantities of product were undertaken in 1997. The
Company believes sufficient insurance coverage is in place
to cover any potential damages over the uninsured portion
which was accrued in fiscal 1997.
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 operation s in the
quarter or year in which it were to be incurred, but the
Company cannot estimate the range of any reasonably possible
loss.
15
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements
(continued)
8. Employee Benefit Plans
The Company's Stock Option Plans made available options for
the purchase of up to 5,869,960 shares of the Company's
Common Stock to certain officers, employees, and
non-employee directors. The options are exercisable in one,
two, or four equal annual installments, beginning six months
or one year after the date of grant with a 10 year life.
The Company has elected to follow Accounting Principals
Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB No. 25") and related Interpretations in
accounting for its employee stock options versus the
alternative fair value accounting provided for under
Financial Accounting Standards Board Statement No. 123,
"Accounting for Stock-Based Compensation" ("Statement No.
123"). Under APB No. 25, because the exercise price of the
Company's employee stock opti ons equals the market price of
the underlying stock on the date of grant, no compensation
expense is recognized.
Pro forma information regarding net income and earnings per
share is required by Statement No. 123 and has been
determined as if the Company had accounted for its stock
options under the fair value method of that Statement. The
fair value of these options was estimated at date of grant
using a Black-Scholes option pricing model with the
following weighted-average assumptions for 1997 and 1996,
respectively: risk free interest rates of 6.34% and 6.22%;
dividend yields of 3.0% and 4.0%; volatility factors of the
expected market price of the Company's common stock of .26
and .30; and the weighted-average expected life of four
years.
For purposes of pro forma disclosures, the estimated fair
value of the stock options is amortized to expense over
their respective vesting periods. The pro forma effects on
reported net income and earnings per share assuming the
Company had elected to account for its stock option grants
in accordance with Statement No. 123 for the years ended
November 30, 1997 and 1996, respectively, would have been
net income of approximately $8,603,000 or $.36 per share and
$6,447,000 or $.26 per share. Such pro forma effects are
not necessarily indicative of the effect on future years.
16
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements
(continued)
8. Employee Benefit Plans (continued)
A summary of the Company's stock option activity, and
related information for the years ended November 30 follows:
<TABLE>
<CAPTION>
Weighted
Average
Shares Option Price
Under Option Per Share
____________________________________
<S> <C> <C>
Outstanding at December 1, 1994 1,643,898 $6.65
Granted 810,511 5.31
Exercised (151,012) 4.65
Terminated (248,134) 6.12
____________________________________
Outstanding at November 30, 1995 2,055,263 6.33
Granted 810,000 4.61
Terminated (467,575) 6.71
____________________________________
Outstanding at November 30, 1996 2,397,688 5.68
Granted 958,500 4.70
Exercised (33,275) 5.26
Terminated (13,472) 9.20
____________________________________
Outstanding at November 30, 1997 3,309,441 $5.30
====================================
</TABLE>
The numbers of shares exercisable as of November 30, 1997,
1996, and 1995 was 1,469,835; 773,271; and 620,162,
respectively. The weighted-average option prices for
exercisable shares as of November 30, 1997, 1996, and 1995
was $5.84; $6.59; and $7.55, respectively. The
weighted-average fair value of options granted in 1997 and
1996 was $1.07 and $1.04, respectively.
The following table summarizes information concerning
outstanding and exercisable stock options as of November 30,
1997:
<TABLE>
<CAPTION>
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Options Contractual Exercise Options Exercise
Exercise Prices Outstanding Life (Years) Price Exercisable Price
_______________ ___________ ___________ ________ ___________ ________
<S> <C> <C> <C> <C> <C>
$4.00- 7.75 3,248,490 7.42 $ 5.20 1,408,884 $ 5.63
8.38- 18.13 60,951 1.90 10.61 60,951 10.61
___________ ___________
3,309,441 1,469,835
=========== ===========
</TABLE>
17
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 $251,000, $213,000, and $257,000 in
1997, 1996, and 1995, respectively.
9. Certain Transactions
In 1996 and 1995, the Company paid approximately $75,000 and
$180,000, respectively, to a marketing consulting firm whose
chief executive officer is a shareholder and director of the
Company. There were no payments in 1997.
In 1997, 1996, and 1995, the Company had sales totaling
approximately $307,000, $437,000, and $440,000,
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 $972,000 at November 30, 1997. The notes
are payable in periodic installments including interest. In
addition, the franchisee groups manage six 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.
18
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>
1997
____
Net sales and franchising
revenues $ 87,388,000 $ 15,851,821 $ 1,091,639 $104,331,460
Income (loss) from
operations 20,960,498 799,267 (8,801,365) 12,958,400
Identifiable assets 57,675,539 13,718,822 27,870,035 99,264,396
Capital expenditures 1,333,458 78,059 457,765 1,869,282
Depreciation 3,891,182 287,381 737,402 4,915,965
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
</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.
Substantially all frozen yogurt products sold to domestic
"TCBY"(Registered) traditional stores are distributed
exclusively by ProSource. Sales by the Company's
manufacturing subsidiary to ProSource totaled approximately
$42.9 million, $43.2 million, and $45.6 million in 1997,
1996, and 1995, respectively. Approximately $2.5 million
and $2.4 million were receivable from ProSource as of
November 30, 1997 and 1996, respectively.
19
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements
(continued)
11. Acquisition/Dispositions
In July, 1997, the Company sold a portion of Carlin
Manufacturing's 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 partially 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.
On September 11, 1996, the Company acquired certain 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 Dairy Farmers of America, 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
Dairy Farmers of America is permitted to distribute these
products, as well as develop additional refrigerated dairy
products 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 resulted in an after-tax gain
of approximately $1.6 million, or $.06 per share, for the
Company 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 Dairy Farmers of America.
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 Dairy Farmers
of America 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
20
TCBY Enterprises, Inc.
Notes to Consolidated Financial Statements
(continued)
11. Acquisition/Dispositions (continued)
and related cash payments were less than anticipated due to a
very competitive environment in the refrigerated yogurt
industry. Dairy Farmers of America has introduced new
products 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 and 1997, the Company paid a
total of $1.2 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 of $1.3 million in the
fourth quarter of 1995. The loss includes estimated selling
costs. Carlin Manufacturing incurred pre-tax operating
losses of approximately $.4 million, $.6 million, and $1.0
million in 1997, 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
fiscal 1995. The Company recorded a charge of $1.4 million
for severance costs to be paid related to the restructuring.
The Company has paid severance costs of approximately $1.2
million in 1996 and 1997 related to this restructuring.
13. Quarterly Results of Operations (Unaudited)
Financial results by quarter for 1997 and 1996 are
summarized below:
<TABLE>
<CAPTION>
Quarters
_____________________________________________________
First Second Third Fourth
_____________________________________________________
<S> <C> <C> <C> <C>
1997
____
Sales $ 15,884,887 $26,802,645 $ 30,018,752 $ 17,871,370
Gross profit 5,201,922 8,773,122 10,236,144 5,968,000
Franchising revenues 2,586,812 4,381,380 4,119,155 2,666,459
Net income 251,651 3,124,990 4,325,146 1,177,428
Net income per share $ .01 $ .13 $ .18 $ .05
Average shares outstanding 24,471,597 24,148,523 23,880,545 23,742,831
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 (loss) income (504,677) 2,453,221 3,755,387 844,434
Net (loss) income per share $ (.02) $ .10 $ .15 $ .03
Average shares outstanding 25,563,836 25,282,552 25,036,405 24,745,128
</TABLE>
21
CORPORATE INFORMATION
TCBY ENTERPRISES, INC.
Corporate Offices
TCBY Enterprises, Inc.
1200 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
Continental Stock Transfer and Trust Co.
2 Broadway
New York, NY 10004
(212)509-4000
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, 1997, 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 and sorbet,
hardpack frozen yogurt, sorbet, 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 16, 1998, 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 1997 High Low
_______________________________________________________________________________
<S> <C> <C>
First Quarter $4 1/2 $4
Second Quarter 6 4 5/8
Third Quarter 6 15/16 6
Fourth Quarter 7 6 1/16
Fiscal 1996 High Low
_______________________________________________________________________________
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
</TABLE>
As of November 30, 1997, there were 4,753 shareholders of
record of the Company's Common Stock and 27,095,620 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 1997 1996
______________________________________________________________________________
<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>
1997 1996 1995 1994 1993
__________________________________________________
<S> <C> <C> <C> <C> <C>
Sales $ 90,578 $ 82,964 $109,808 $140,445 $109,525
Franchising revenues 13,754 12,840 11,762 12,026 10,952
Net income (loss) 8,879 6,548 (21,373) 7,552 6,409
Total assets 99,264 102,468 111,625 142,280 128,691
Long-term debt 6,298 9,469 12,641 15,910 11,487
Per share:
Net income (loss) $ .37 $ .26 $(.83) $ .30 $ .25
Cash dividends .20 .20 .20 .20 .20
Total stockholders' equity 3.28 3.22 3.20 4.23 4.13
</TABLE>
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988
__________________________________________________
<S> <C> <C> <C> <C> <C>
Sales $107,633 $116,679 $134,832 $131,730 $ 87,995
Franchising revenues 11,063 12,231 16,475 19,593 14,482
Net income (loss) 5,073 8,017 19,950 29,493 19,794
Total assets 131,925 134,806 141,537 133,559 92,649
Long-term debt 14,799 17,330 19,696 21,258 14,034
Per share:
Net income (loss) $ .20 $ .31 $ .75 $1.10 $ .75
Cash dividends .20 .35 .18 .07 .02
Total stockholders' equity 4.09 4.10 4.15 3.69 2.62
</TABLE>
NOTE: The 1995 results included pre-tax charges of $27.6 million, or
$.72 per share net of taxes, due to the adoption of new accounting
standards, and an additional $1.4 million dollars, or $.04 per share
net of taxes, resulting from a restructuring of the Company during
the fourth quarter of 1995.
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
CMI Property Holdings, 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
TCBY of Turkey, Inc. Arkansas
TCBY of Bolivia, Inc. Arkansas
TCBY of Colombia, Inc. Arkansas
TCBY of Ireland, Inc. Arkansas
TCBY of South Africa, 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.
</TEXT)
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 13, 1998, included in the 1997 Annual Report
to Stockholders of TCBY Enterprises, Inc.
We also consent to the incorporation by reference in the
Registration Statements (Form S-8 No. 33-37484) pertaining
to the 1989 Stock Option Plan of TCBY Enterprises, Inc.
and Form S-8 (No. 333-30827) pertaining to the 1992 Employee
Stock Option Plan of TCBY Enterprises, Inc of our report
dated January 13, 1998, 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, 1997.
/s/ Ernst & Young LLP
_____________________
Ernst & Young LLP
Little Rock, Arkansas
February 23, 1998
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 and things
which said attorneys and agents, or any of them, deem
advisable to enable the Corporation to comply with the
Securities Exchange Act of 1934, as amended, and any
requirements of the Securities and Exchange Commission in
respect thereto, relating to annual reports on Form 10-K,
including specifically, but without limitation of the
general authority hereby granted, the power and authority to
sign such person's name in the name and on behalf of the
Corporation to annual reports on Form 10-K or any amendments
or filings supplemental thereto; and the undersigned does
hereby fully ratify and confirm all that said attorneys and
agents, or any of them, or the substitute of any of them,
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this
power of attorney on April 17, 1997.
/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. Kirkpatrick
__________________________________
Don O. Kirkpatrick
/s/ Daniel R. Grant
__________________________________
Daniel R. Grant
/s/ Hugh Hart Pollard
__________________________________
Hugh Hart 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, 1997 AND THE CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE YEAR ENDED NOVEMBER 30, 1997 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-30-1997
<PERIOD-END> NOV-30-1997
<CASH> 19,693,693
<SECURITIES> 2,406,045
<RECEIVABLES> 10,877,535
<ALLOWANCES> 833,447
<INVENTORY> 10,679,231
<CURRENT-ASSETS> 46,226,230
<PP&E> 80,232,535
<DEPRECIATION> 39,891,253
<TOTAL-ASSETS> 99,264,396
<CURRENT-LIABILITIES> 11,694,008
<BONDS> 6,298,008
<COMMON> 2,709,562
0
0
<OTHER-SE> 74,715,960
<TOTAL-LIABILITY-AND-EQUITY> 99,264,396
<SALES> 90,577,654
<TOTAL-REVENUES> 104,331,460
<CGS> 60,398,466
<TOTAL-COSTS> 60,398,466
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 48,705
<INTEREST-EXPENSE> 759,766
<INCOME-PRETAX> 13,556,056
<INCOME-TAX> 4,676,841
<INCOME-CONTINUING> 8,879,215
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,879,215
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
Exhibit 99(a)
PRESS RELEASE
FOR IMMEDIATE RELEASE
TUESDAY
OCTOBER 14, 1997
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
TCBY ENTERPRISES, INC.
(501) 688-8229
WENDY WATKINS, DIRECTOR
PUBLIC RELATIONS
HOST MARRIOTT SERVICES CORPORATION
(301) 380-7903
JUICE WORKS ANNOUNCES DEVELOPMENT
AGREEMENT WITH HOST MARRIOTT
LITTLE ROCK, AR - Tuesday (October 14) - TCBY ENTERPRISES,
INC. (NYSE:TBY) today announced that Juice Works
Development, Inc. has entered a development agreement with
three divisions of Host Marriott Services Corporation. The
companies will develop Juice Works(Registered) locations in
existing and new operations for airports, toll roads and
mall food courts.
There are currently two Juice Works locations operating in
the San Diego and Chicago O'Hare airports. Locations are
under development at the Montvale and Monmouth tollroad
plazas in New Jersey, at Grapevine Mall in Grapevine, Texas,
and at several airports across the country.
"We are very pleased to be working with Host Marriott
Services to expand the Juice Works concept," said Herren C.
Hickingbotham, President of TCBY Enterprises, Inc. "We have
had a great relationship with Host Marriott since 1989. We
now have over 350 TCBY locations within their venues
throughout the United States. We are pleased to extend our
partnership to include Juice Works."
"Juice bars are one of the hottest trends in the food
industry," said Patrick Carroll, Director of Food Concepts.
"We were interested in a juice concept and were very excited
when we learned we could pursue this through our existing
relationship with TCBY. Juice Works is a great addition to
our portfolio of branded concepts."
Host Marriott Services Corporation (NYSE:HMS), with its
worldwide headquarters in Bethesda, Maryland, is the leading
food, beverage and retail concessionaire at nearly 200
travel and entertainment venues, with over 23,000 employees
in five countries around the globe. Host Marriott Services,
with revenues of $1.3 billion, is best known for its custom
solutions business approach that combines internationally
known brands with regional favorites in airports, travel
plazas, shopping malls and sports and entertainment
attractions. The company, which spun-off from Host Marriott
Corporation in December 1995, has concentrated its recent
growth initiatives on international airports and domestic
shopping malls.
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
FRIDAY
OCTOBER 24, 1997
CONTACT PERSONS: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
TCBY ENTERPRISES, INC.
(501) 688-8229
JEFF KAUFMAN, EXECUTIVE VICE
PRESIDENT
WALL STREET DELI, INC.
(205) 870-0020
"TCBY" TREATS(Registered)/WALL STREET DELI LOCATION OPENS
IN TRUSSVILLE
BIRMINGHAM, AL - Friday (October 24, 1997) - TCBY
ENTERPRISES, INC. (NYSE:TBY) and Wall Street Deli, Inc.
today celebrated the grand opening of a new co-branded
"TCBY" Treats(Registered)/Wall Street Deli location at 5969
Chalkville Road in Trussville. The location is owned and
operated by TCBY franchisee, Charlie Wiles.
The new location offers the full menu of "TCBY"
Treats(Registered) 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 our second co-branded TCBY Treats/Wall Street
Deli," said Wiles. "The success of our locations in Hoover
made it possible for us to move ahead in Trussville."
According to Jeff Kaufman, Executive Vice President and
Chief Operating Officer of Wall Street Deli, Inc., the
Hoover location served as a test location for the co-branded
"TCBY" Treats(Registered)/Wall Street Deli format. "Based on
the success of the Hoover Wall Street Deli/TCBY location, we
were ready to expand this concept," 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.
"Charlie Wiles has done an excellent job developing and
marketing the TCBY/Wall Street Deli concept. We are proud of
his success."
A ribbon-cutting ceremony and grand opening festivities
began at 10:00 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 October 25 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-
Exhibit 99(c)
PRESS RELEASE
FOR IMMEDIATE RELEASE
MONDAY
DECEMBER 15, 1997
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY DECLARES CASH DIVIDEND AND ANNOUNCES STOCK
REPURCHASE
LITTLE ROCK, AR - December 15, 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 January 15, 1998 to shareholders of
record as of December 30, 1997.
The Board also authorized the repurchase from time-to-time
of up to an additional two million shares of the Company's
outstanding common stock. Under prior authorization to
repurchase up to three million shares of the Company's
common stock, announced December 1, 1995, the Company has
repurchased approximately 2.2 million shares. Accordingly,
the Company now has authority to repurchase approximately
2.8 million shares of its common stock in open market and
privately negotiated transactions.
TCBY Enterprises, Inc., through subsidiary companies,
manufactures and distributes frozen yogurt and ice cream
products.
-30-
Exhibit 99(d)
PRESS RELEASE
FOR IMMEDIATE RELEASE
TUESDAY
DECEMBER 30, 1997
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY AND SUBWAY DEVELOP CO-BRANDING ALLIANCE IN
CANADA
LITTLE ROCK, AR - December 30 (Tuesday) - TCBY ENTERPRISES,
INC. (NYSE:TBY) today announced that its Master Franchisee
in Canada, Tremlac Foods, Inc., has entered into an
agreement with Doctor's Associates, Inc. to develop
TCBY/Subway co-branded units.
At present, there are over 1200 Subway(Registered) locations
across Canada. TCBY(Registered) locations are currently in
Ontario and Quebec. As previously announced by the Company,
TCBY and Subway have an alliance for the development of co-
branded units in the United States. There are currently
over 40 TCBY/Subway locations in the United States.
"TCBY International feels that developing these two concepts
together will enhance the expansion and brand awareness of
both TCBY and Subway throughout Canada", said Ward Hillegas,
Sr. Vice President of TCBY International. "Tremlac Foods is
very pleased with this new development opportunity."
"Subway(Registered) Sandwiches & Salads is enthusiastic
about developing these Canadian
TCBY(Registered)/Subway(Registered) locations," says John
Skerritt, co-branding development manager for
Subway(Registered) restaurants. He adds, "We've worked hard
to offer the same co-branding opportunities to our franchise
owners in Canada, that are available in the United States."
The Subway(Registered) restaurant system is the world's
second largest fast food franchise with more than 13,000
sandwich shops in 64 countries. Worldwide sales for the
Subway(Registered) franchises were $3.2 billion (U.S.) in
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-
Exhibit 99(e)
PRESS RELEASE
FOR IMMEDIATE RELEASE
TUESDAY
JANUARY 13, 1998
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY REPORTS NET INCOME UP 36 PERCENT FOR FISCAL 1997
LITTLE ROCK, AR - Tuesday (January 13, 1998) - TCBY
ENTERPRISES, INC. (NYSE:TBY) today announced net income for
1997 improved to $8,879,215 or $.37 per share, from
$6,548,365 or $.26 per share, for 1996. Net income for the
fourth quarter of 1997 improved to $1,177,428 or $.05 per
share, from $844,434, or $.03 per share, for the same period
of 1996.
Sales and franchising revenues for 1997 and 1996 were
$104,331,460 and $95,804,256, respectively. Sales and
franchising revenues for the fourth quarter ended November
30, 1997 and 1996 were $20,537,829 and $20,360,384,
respectively. The increase in sales and franchising
revenues during the year 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.
Earnings for the year also benefitted from further
reductions in selling, general and administrative expenses
(SG&A) as a result of the Company's restructuring plan
implemented in 1996. The Company expects that the current
SG&A level will be maintained throughout 1998.
There were 2,782 "TCBY"(Registered) locations at the
conclusion of 1997. In addition, there are several thousand
retail points-of-sale for "TCBY"(Registered) products
domestically and abroad. As of November 30, 1997, there
were over 300 locations under agreement for development, the
majority of which will open in 1998. Agreements have been
signed for development with many major companies including
Exxon, Texaco, Shell, Subway, and a test project with Taco
Bell continues. These alliances offer multiple development
opportunities for the TCBY brand.
International development continued to expand in 1997. As
of November 30, agreements were in place to develop
"TCBY"(Registered) locations in over 65 countries. The
Company expects additional agreements to be executed, and
will assist existing franchisees in the development of new
locations in their markets.
During 1997, the Company continued the development of the
Juice Works(Registered) concept. To date, there are over 40
Juice Works(Registered) locations open or under development.
As previously announced, Host Marriott has committed to
develop Juice Works(Registered) locations in airports,
travel plazas and malls. The Company feels this will
greatly contribute to the development and awareness of the
Juice Works(Registered) concept. As of November 30, Host
Marriott had opened five Juice Works locations and an
additional 10 were under development.
"We are very pleased with our 1997 results. The Company has
experienced eight consecutive quarters of income
improvements over the comparable prior periods," said Frank
D. Hickingbotham, Chairman of the Board and Chief Executive
Officer. "We continue to pursue opportunities that will
expand the TCBY brand, making our quality products more
available to consumers. With over 300 franchise agreements
signed for development primarily in 1998 we expect to
continue the expansion of the brand."
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 approximately 2.3 million shares under
this authorization. In addition, in December, 1997 the
Board authorized the purchase of an additional two million
shares. To date, all purchases have been made utilizing the
Company's cash from operations.
During 1998, 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.
A key objective of the Company continues to be the
enhancement of shareholder value. As such, the Company's
executive management team will only receive their full
incentive bonus if the Company attains basic earnings per
share of $.46 in 1998, which would approximate a 24 percent
increase over 1997 earnings per share. The Company expects
revenues from food products and equipment sales to increase
over 1997 due to continued expansion of co-branded locations
and other manufacturing opportunities.
The forward-looking statements with respect to earnings,
revenues, and SG&A are based on certain assumptions
regarding the economy, competition, costs of raw materials,
unit openings and closings, sales volumes per unit and other
manufacturing opportunities, no changes in governmental
regulation of the food industry, and no material event which
would impact the reputation of the Company's manufacturing
facility or the Company's ability to utilize that facility.
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.
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
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Operating Results
Sales & Franchising Revenue $20,538 $20,360 $104,331 $95,804
Net Income 1,177 844 8,879 6,548
Net Income Per Share .05 .03 .37 .26
Average Shares Outstanding 23,743 24,745 24,062 25,157
Dividends Paid Per Share .05 .05 .20 .20
</TABLE>
<TABLE>
<CAPTION>
November 30 November 30
1997 1996
<S> <C> <C>
Financial Position
Current Assets $46,226 $ 44,706
Current Liabilities 11,694 10,777
Property, Plant & Equipment, Net 40,341 43,339
Total Assets 99,264 102,468
Long-term Debt, Less
current portion 6,298 9,469
Stockholders' Equity 97,687 93,419
Less Treasury Stock (20,262) (14,198)
Total Stockholders' Equity 77,426 79,220
-30-
</TABLE>
Exhibit 99(f)
PRESS RELEASE
FOR IMMEDIATE RELEASE
TUESDAY
JANUARY 27, 1998
CONTACT PERSON: STACY DUCKETT, VICE PRESIDENT
CORPORATE COMMUNICATIONS
(501) 688-8229
TCBY ANNOUNCES NEW INTERNATIONAL DEVELOPMENT
IN SOUTH AMERICA
LITTLE ROCK, AR - Tuesday (January 27) - TCBY ENTERPRISES,
INC. (NYSE:TBY) today announced it has executed a
development agreement for Bolivia and Paraguay. TCBY now
has development agreements in over 65 foreign countries.
Succesores de Salah Abou Saleh will be responsible for the
development of the "TCBY"(Registered) brand throughout these
countries through franchising and retail distribution. This
company has operated in Paraguay since 1960, primarily
pursuing beverage distribution and export. The company is
also an importer and distributor of electronic products.
A minimum of twelve stores will be developed over the next
five year within Paraguay and Bolivia. The Company did not
disclose the specific terms of the agreement.
"We are very excited about developing the TCBY brand in
Paraguay and Bolivia," said Hartsell Wingfield, President of
TCBY International. "With this agreement, we will now have
distribution in virtually all of South America."
TCBY Enterprises, Inc., through subsidiary companies,
manufactures and sells soft serve frozen yogurt and sorbet,
hardpack frozen yogurt and 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(g)
PRESS RELEASE
FOR IMMEDIATE RELEASE
MONDAY
FEBRUARY 2, 1998
CONTACT PERSON: STACY DUCKETT
TCBY ENTERPRISES, INC.
(501) 688-8229
NORM CRUM, CHEVRON PETROLEUM
MARKETERS ASSOCIATION
(209) 948-9412
TCBY SIGNS DEVELOPMENT AGREEMENT WITH
CHEVRON PETROLEUM MARKETERS ASSOCIATION
LITTLE ROCK, AR - Monday (February 2) - TCBY ENTERPRISES,
INC. (NYSE:TBY) today announced it has signed a development
agreement with Chevron Petroleum Marketers Association.
Under terms of the agreement, "TCBY" Treats(Registered)
locations may be placed in Chevron outlets. There are
currently 14 co-branded locations operating.
"TCBY is proud to be working with Chevron locations," said
Jim Sahene, President of TCBY Systems, Inc. "Convenience
store development is a strong growth area for us. Chevron
locations will certainly be an important partner in our
co-branded development."
"We are very excited to be working with TCBY," said Norm
Crum, President. "CPMA realizes the benefits of developing
locations with branded concepts. A TCBY Treats location is
the perfect complement to our operations."
TCBY Enterprises, Inc., through subsidiary companies,
manufactures and sells soft serve frozen yogurt and sorbet,
hardpack frozen yogurt and 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-
