SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1 to Annual Report on Form 10-K for the fiscal year ended June 30,
1997 (the "Report") to correct typographical and EDGAR conversion errors
appearing in the Report at Item 6, Selected Financial Data, and in Notes 2, 3,
15 and 17 of registrant's audited financial statements appearing in the Report
at Item 8, Financial Statements.
BLIMPIE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Commission File No. 0-21036
New Jersey 13-2908793
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
740 Broadway, New York, NY 10003
(Address and Zip Code of Principal Executive Offices)
Registrant's Telephone Number: (212) 673-5900
Signature
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has caused this amendment to be signed on its behalf by the undersigned,
thereunto duly authorized.
BLIMPIE INTERNATIONAL, INC.
Dated: November 25, 1997 By: /s/ Joanne Guarnieri
-------------------------------------------------
Joanne Guarnieri, Vice President and
Chief Financial Officer (Principal Financial and
Accounting Officer)
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Item 6. SELECTED FINANCIAL DATA
Fiscal Years Ended June 30,
-------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Dollars in 000's, Except Per Share and
Outlets Open Data)
Revenues $38,127 $34,991 $26,374 $16,090 $11,800
Continuing Fees 15,391 12,465 8,734 6,017 4,310
Net Income 3,278 4,040 2,340 1,383 1,049
Primary Earnings Per Share $ 0.34 $ 0.43 $ 0.27 $ 0.16 $ 0.14*
Fully Diluted Earnings Per $ 0.34 $ 0.41 $ 0.27 $ 0.16 $ 0.14*
Share
Total Assets $27,704 $21,823 $15,252 $11,170 $ 7,876
Long Term Debt -0- 5 13 19 24
Long Term Trademark 3,509 -0- -0- -0- -0-
Obligations
Total Shareholders' Equity 18,865 15,675 7,308 5,311 3,376
Cash Dividends Declared Per $ 0.07 $ 0.06 $ 0.05 $ 0.02* $ 0.017*
Common Share
Outlets Open 1,684 1,407 986 674 499
- ----------
* Adjusted to account for three for two stock split implemented in March
1994.
Item 8. FINANCIAL STATEMENTS
Note 2: Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany balances
and transactions have been eliminated in consolidation.
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Revenue Recognition
Fees relating to subfranchisor and master licensor sales are recognized
when all material services or conditions relating to the sale are
substantially performed or satisfied by the Company. If fees are
collectible over an extended period and no reasonable basis exists for
estimating collectibility, those fees are recognized as they are collected
or when the uncertainty regarding collectibility of fees is resolved.
Initial fees from the awarding of individual franchises are deferred and
recorded as revenue when the franchisee's restaurant is opened. Expenses
associated with site selection, real estate, training, commissions and
design are deferred and charged to expense when the initial fees are
recognized. Continuing fees from franchised restaurants are recorded as
revenue when earned.
Revenue from equipment sales is recognized when the equipment is shipped.
Cash and Cash Equivalents
For the purpose of the statement of cash flows, the company considers all
short-term debt securities purchased with a maturity of three months or
less to be cash equivalents.
The Company has cash deposits with financial institutions which fluctuate
in excess of federally insured limits. If these financial institutions
were not to honor their contractual liability, the Company could incur
losses. Management is of the opinion that there is no significant risk of
loss because of the financial strength of the financial institutions.
Investments
Investment securities with maturities of three months or less at the time
of acquisition are considered cash equivalents. Pursuant to Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," debt securities included in
the company's investment portfolio for which there is a positive intent
and ability to hold to maturity are carried at amortized cost. Debt
securities that may be sold prior to maturity and all marketable equity
securities are classified as available-for-sale and carried at fair value.
Fair value is estimated based on quoted market prices for those or similar
investments. Net unrealized gains and losses, determined on the specific
identification method, on securities classified as available-for-sale are
carried as a separate component of Stockholders' Equity.
Fair Market Value Disclosure
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments" (SFAS 107), requires disclosure of
the fair value of certain items, including receivables, payables, debt and
investments. The Company believes that the amounts disclosed within the
consolidated balance sheet do not differ significantly from fair value as
defined in SFAS 107. The carrying value of cash and cash equivalents and
accounts receivable approximates fair value because of the short maturity
of those instruments. The carrying value of notes receivable was deemed
appropriate since recognition was deferred until such time as collection
can be assured. The carrying value of amounts due from related parties was
deemed to approximate fair value based on current market conditions as
well as the relationship of the parties.
Accounts and Notes Receivable
The Company provides an allowance for doubtful receivables equal to the
estimated collection losses that will be incurred in the collection of all
receivables. The estimated losses are based on historical collection
experience coupled with a review of all existing receivables.
Property and equipment are carried at cost. Depreciation is computed over
the estimated useful lives of the assets using both accelerated and
straight-line methods. Significant expenditures for additions and
improvements are capitalized and expenditures for routine repairs and
maintenance are charged to operations as incurred. The costs of assets
retired or otherwise disposed of and the related accumulated depreciation
are eliminated from the accounts in the year of disposal. Gains or losses
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resulting from disposals are included in operations.
Trademarks
Trademarks are carried at cost less accumulated amortization which is
calculated on a straight-line basis over the estimated useful lives of
15-40 years. Amortization expense was $135,004 in 1997 and $19,132 in
1996.
Advertising
The Company follows the policy of charging the costs of advertising to
expense as incurred. Advertising expense was $477,026 in 1997, $427,256 in
1996 and $192,494 in 1995.
Income Taxes
The Company and its wholly-owned subsidiaries file a consolidated Federal
income tax return. The provision for income taxes and corresponding
balance sheet accounts are determined in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
(SFAS 109). Under SFAS 109, the deferred tax liabilities and assets are
determined based on temporary differences between the basis of certain
assets and liabilities for income tax and financial reporting purposes.
These differences are primarily attributable to differences in the
recognition of depreciation and amortization of property and revenues.
Earnings per Share and Per Share Amounts
Primary and fully diluted earnings per share amounts are computed on the
weighted average number of shares outstanding, 9,517,462 in 1997,
9,372,447 in 1996 and 8,573,797 in 1995, adjusted for the assumed
conversion of dilutive common stock equivalents, principally stock
options.
Common Stock
On January 10, 1995, the shareholders approved an increase in the
authorized common stock from 10,000,000 shares to 20,000,000. On August
11, 1995, the Company issued 862,500 additional shares of common stock
(see Note 16).
Use of Estimates
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amount of assets
and liabilities and disclosures of contingent assets and liabilities at
the dates of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Accordingly, actual results
could differ from those estimates.
Accounting Pronouncements
In February, 1997 the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings per Share" (SFAS 128), which the Company is
required to adopt effective for fiscal year ended June 30, 1998. SFAS 128
establishes standards for computing and presenting earnings per share
(EPS). SFAS 128 simplifies the standards for computing earnings per share
and makes them comparable to international EPS standards. It replaces the
presentation of primary EPS with a presentation of basic EPS and requires
dual presentation of basic and diluted EPS on the face of the income
statement. Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common
share outstanding for the period. The Company does not believe the
adoption will have a material effect on the financial statements.
In June, 1997 the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS 131), which the Company is required to adopt effective
for fiscal year ended June 30, 1998. SFAS 131 requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments. Operating segments are components of an
enterprise about which separate financial information is available that is
evaluated regularly by management in deciding how to allocate resources
and in assessing performance. Management is currently reviewing the
provisions of SFAS
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131 and does not believe that the Company's financial statements will be
significantly impacted by the adoption.
Reclassifications
Certain amounts have been reclassified to conform with current year
presentation.
Note 3: Investments
The following is a summary of available-for-sale securities included in
investments as of June 30:
1997 Unrealized Fair
Cost Gain (Losses) Value
---- ------------- -----
Available-for-Sale Securities:
Current
Common stock $ 60,969 $ 19,508 $ 80,477
Preferred stock 178,765 4,968 183,733
Mutual funds 124,986 (1,401) 123,585
U. S. Government securities 4,071,628 3,952 4,075,580
------------ ------------ -----------
$ 4,436,348 $ 27,027 $ 4,463,375
============ ------------ ===========
Long-Term
U.S. Government securities 3,877,827 (1,122) 3,876,705
------------ ------------ -----------
$ 8,314,175 $ 25,905 $ 8,340,080
============ ============ ===========
1997 Unrealized Fair
Cost Gain (Losses) Value
---- ------------- -----
Available-for-Sale Securities:
Current
Common stock $ 86,362 $ (1,230) $ 85,132
Preferred stock 255,896 (2,818) 253,078
Mutual funds 86,829 458 87,287
------------ ------------ -----------
$ 429,087 $ (3,590) $ 425,497
============ ============ ===========
Held-to-Maturity Securities:
Current
U.S. Government securities $ 5,005,453 $ (18,340) $ 4,987,113
Long-Term
U.S. Government securities 6,016,014 (7,114) 6,008,900
------------ ------------ -----------
$ 11,021,467 $ (25,454) $10,996,013
============ ============ ===========
The contractual maturities of long-term debt securities at June 30, 1997
are as follows: $3,527,402 in 1999 and $350,425 in 2000.
On February 19, 1997, the Company sold held-to-maturity securities with an
aggregate cost of $2,646,039 and realized a gain of $27,766. The proceeds
from the sale were $2,673,805.
At June 30, 1997, United States Treasury notes previously categorized as
being held-to-maturity were recategorized as available-for-sale.
Accordingly, this group of securities has been marked to market with the
resulting adjustment reported in shareholders' equity.
Note 15: Subfranchisor Fees and Franchise Revenue
Franchise Fees and Costs
The initial non-refundable fee for franchisees that have never owned a
Blimpie restaurant is $18,000, which is payable in cash at the time of
execution of the franchise agreement. Additional franchises are awarded at
lesser amounts based upon the number of units awarded. The initial
non-refundable fee
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for new concept franchisees, such as convenience stores, institutional
food service entities, colleges, schools, mass feeders, hospitals and
others range from $1.00 to $18,000 (dependent upon the number of new
concept transactions executed, the location of the new concept franchisee,
the marketing area and other subjective concerns). The Company reserves
the right to issue franchises to its subfranchisors or their designees for
$1.00 to $5,000 each in order to accelerate the development of the area of
subfranchisor. The Company defers recognition of the revenues and costs
related to these transactions until the restaurant is opened. The number
of franchised restaurants open as of June 30, 1997, 1996 and 1995 were
1,684 (1,667 United States, 17 International), 1,407 (1,402 United States,
5 International) and 986, respectively. The following is a summary of the
deferred franchise revenues and costs.
No. of
Revenue Costs Units
------- ----- -----
Balance June 30, 1994 $ 2,506,880 $ 1,728,311 368
Franchises awarded 4,775,377 3,679,125 792
Revenue recognized (3,276,524) (2,425,533) (451)
----------- ----------- ----
Balance June 30, 1995 4,005,733 2,981,903 709
Franchises awarded 3,881,419 3,019,592 774
Revenue recognized (3,991,459) (3,091,749) (605)
----------- ----------- ----
Balance June 30, 1996 3,895,693 2,909,746 878
Franchises awarded 3,356,041 2,612,079 632
Revenue recognized (3,710,820) (2,833,585) (737)
----------- ----------- ----
Balance June 30, 1997 $ 3,540,914 $ 2,688,240 773
=========== =========== ====
Subfranchisor and Master Licensor Fees
The subfranchisor and master licensor fee ranges from $10,000 to $575,000.
These fees are established by calculating the population of the area of
the subfranchisor or master licensor and multiplying the population by
$0.10 for the United States and $0.01 for International. Subfranchisors
and master licensors in operation as of June 30, 1997, 1996 and 1995 were,
121 (105 United States, 16 International), 117 (109 United States, 8
International) and 107, respectively. During the year ended June 30, 1995,
the Company implemented new subfranchisor agreements which provide for
annual renewals. In addition, the Company amended certain of the existing
subfranchisor agreements to an annual renewable basis. The aggregate
revenue recognized in the year ended June 30, 1995 related to these
replacement agreements was approximately $75,000. Pursuant to the new form
of agreement, the Company sells a territory to a subfranchisor or master
licensor for a one year period, followed by four to six renewal terms, all
but the last of which are annual in duration. If the subfranchisor or
master licensor has met all terms and conditions of the subfranchise or
master license agreement during the initial one year term and each of the
one year renewal terms, a 50 to 60 year right is granted during the final
renewal term upon payment of the fee set forth in the agreement. The
following is a summary of the remaining deferred subfranchisor fees.
Revenue
-------
Balance June 30, 1994 $ 2,627,772
Subfranchisor fees 1,322,238
Revenue recognized (1,722,662)
Contracts amended (613,159)
-----------
Balance June 30, 1995 1,614,189
Revenue recognized (921,218)
-----------
Balance June 30, 1996 692,971
Revenue recognized (220,499)
-----------
Balance June 30, 1997 $ 472,472
===========
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Note 17: Quarterly Information (Unaudited)
The following table sets forth a summary of the unaudited quarterly results of
operations for the twelve month periods ended June 30, 1997 and June 30, 1996.
<TABLE>
<CAPTION>
1997 First Second Third Fourth Total
<S> <C> <C> <C> <C> <C>
Total Revenues $10,017,062 $9,186,739 $8,928,875 $9,994,323 $38,126,999
Gross Profit 3,923,459 3,553,852 3,453,292 4,394,573 15,325,176
Net Income 940,723 850,714 755,748 730,809 3,277,994
Primary Earnings Per Share 0.10 0.08 0.08 0.08 0.34
Fully Diluted Earnings Per Share $ 0.10 $ 0.08 $ 0.08 $ 0.08 $ 0.34
1996 First Second Third Fourth Total
Total Revenues $7,767,427 $8,578,196 $8,929,892 $9,715,867 $34,991,382
Gross Profit 3,059,062 3,667,177 3,937,010 4,063,098 14,726,347
Net Income 784,463 1,015,846 1,247,379 992,587 4,040,275
Primary Earnings Per Share 0.09 0.11 0.13 0.10 0.43
Fully Diluted Earnings Per Share $ 0.09 $ 0.11 $ 0.13 $ 0.08 $ 0.41
</TABLE>
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