SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| Quarterly report pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2000
OR
|_| Transition report pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the transition period from ________ to ________
Commission File Number 0-21036
BLIMPIE INTERNATIONAL, INC.
(Exact name of issuer as specified in its charter)
New Jersey
(State or Other Jurisdiction of Incorporation or Organization)
13-2908793
(IRS Employer Identification No.)
740 Broadway, New York, NY 10003
(Address and Zip Code of Principal Executive Offices)
(212) 673-5900
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No |_|
There were 9,475,026 shares of the registrant's common stock outstanding as of
May 9, 2000.
<PAGE>
Blimpie International, Inc.
Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 2000
Table of Contents
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets - March 31, 2000
and June 30, 1999 3
Condensed Consolidated Statements of Operations - Three and Nine
Months Ended March 31, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows - Nine
Months Ended March 31, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
2
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
BLIMPIE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands) March 31 June 30
2000 1999
-------- --------
Assets (Unaudited) (Note)
Current assets:
Cash and cash equivalents $ 7,048 $ 4,682
Investments 1,328 5,296
Accounts receivable, net 2,948 3,106
Prepaid expenses and other current assets 492 228
Deferred income taxes 85 85
Current portion of notes receivable 465 427
-------- --------
Total current assets 12,366 13,824
Property and equipment, net 1,829 1,749
Other assets:
Notes receivable less current portion, net 849 1,009
Investments 962 981
Trademarks, net 8,290 8,434
Deferred income taxes 1,828 1,828
Other 1,137 433
-------- --------
Total other assets 13,066 12,685
-------- --------
$ 27,261 $ 28,258
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and other current liabilities $ 2,945 $ 4,237
Income taxes payable 109 --
-------- --------
Total current liabilities 3,054 4,237
Deferred revenue, net 5,373 5,710
Trademark obligations -- 204
Shareholders' equity:
Common stock, $.01 par value 96 96
Additional paid-in capital 9,028 8,818
Retained earnings 10,320 9,640
Net unrealized gain on marketable securities 42 40
-------- --------
19,486 18,594
Treasury stock (592) (427)
Subscriptions receivable (60) (60)
-------- --------
Total shareholders' equity 18,834 18,107
-------- --------
$ 27,261 $ 28,258
======== ========
Note: The condensed consolidated balance sheet at June 30, 1999 has been derived
from the audited consolidated financial statements of the Company at that date
but does not include all of the information required by generally accepted
accounting principles for complete financial statements.
See notes to condensed consolidated financial statements.
3
<PAGE>
BLIMPIE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
(in thousands, except for per share amounts) March 31 March 31
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Continuing fees $ 4,582 $ 4,527 $ 14,037 $ 13,864
Subfranchisor fees, master license fees
and sale of franchises 912 956 2,882 3,425
Store equipment sales 1,451 2,107 4,997 7,181
License fees and other income 114 95 478 306
Company restaurant sales 190 113 448 220
-------- -------- -------- --------
7,249 7,798 22,842 24,996
Expenses
Subfranchisors' share of franchise
and continuing fees 2,618 2,480 8,214 8,593
Store equipment cost of sales 1,224 1,852 4,304 6,284
Selling, general and administrative expenses 2,698 2,697 8,310 7,998
Company restaurant operations 360 118 636 234
-------- -------- -------- --------
6,900 7,147 21,464 23,109
-------- -------- -------- --------
Operating income 349 651 1,378 1,887
Interest income 149 178 503 598
-------- -------- -------- --------
Income before income taxes and cumulative effect
of change in accounting principle 498 829 1,881 2,485
Income taxes on income before cumulative effect
of change in accounting principle 235 299 869 894
-------- -------- -------- --------
Income before cumulative effect of change
in accounting principle 263 530 1,012 1,591
Cumulative effect on prior years (to June 30, 1998) of changing to a different
subfranchisor and master license fee revenue recognition method
(less tax benefit of $1,815) - Note 1 -- -- -- (3,373)
-------- -------- -------- --------
Net income (loss) $ 263 $ 530 $ 1,012 $ (1,782)
======== ======== ======== ========
Basic and diluted earnings (loss) per share:
Income before cumulative effect of change
in accounting principle $ 0.03 $ 0.06 $ 0.11 $ 0.17
Cumulative effect of change in accounting principle -- -- -- (0.35)
-------- -------- -------- --------
Net income (loss) $ 0.03 $ 0.06 $ 0.11 $ (0.18)
======== ======== ======== ========
Weighted average basic shares outstanding 9,452 9,477 9,474 9,486
======== ======== ======== ========
Weighted average diluted shares outstanding 9,452 9,482 9,483 9,488
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
BLIMPIE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
(in thousands) March 31
2000 1999
------- -------
<S> <C> <C>
Cash Flows From Operating Activities
Income before cumulative effect of change in accounting principle $ 1,012 $ 1,591
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization 618 552
Incentive stock granted 6 14
Changes in operating assets and liabilities:
Accounts receivable 158 114
Prepaid expenses and other current assets (264) 49
Other assets (704) (44)
Notes receivable 122 398
Accounts payable and other current liabilities (1,292) (258)
Income taxes payable 109 0
Deferred revenue, net (337) (323)
------- -------
Net cash (used in) provided by operating activities (572) 2,093
Cash Flows From Investing Activities
Purchases of available-for-sale securities -- (1,720)
Proceeds from sale of available-for-sale securities 4,084 3,337
Reinvested dividends of available-for-sale securities (95) --
Purchase of trademarks (81) (3,045)
Purchases of property and equipment (473) (472)
------- -------
Net cash provided by (used in) investing activities 3,435 (1,900)
Cash Flows From Financing Activities
Purchases of treasury stock (165) (170)
Cash dividends paid (332) (329)
------- -------
Net cash used in financing activities (497) (499)
------- -------
Net increase in cash and cash equivalents 2,366 (306)
Cash and cash equivalents at beginning of period 4,682 4,021
------- -------
Cash and cash equivalents at end of period $ 7,048 $ 3,715
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
Notes To Condensed Consolidated Financial Statements
For the Nine Months Ended March 31, 2000 (Unaudited)
Note 1: Basis of Presentation
The unaudited interim financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial statements and
should be read in conjunction with the Company's June 30, 1999 Annual Report on
Form 10-K.
The unaudited financial statements include all adjustments consisting of only
normal recurring accruals which are, in the opinion of management, necessary to
present a fair statement of financial position as of March 31, 2000 and the
results of operations and cash flows for the period then ended. Results of
operations for the period are not necessarily indicative of the results to be
expected for the full year.
As indicated in Note 2 to the Company's annual financial statements for the year
ended June 30, 1999, the Company changed its methodology of accounting for fees
relating to subfranchisor and master licensor territory sales to recognize such
fees as revenue on a straight-line basis over a 10-year period, effective July
1, 1998. The Company considers the new revenue recognition methodology to result
in a better matching of revenues and related expenses incurred in the earnings
process related to such revenues. The amounts presented for the three and nine
months ended March 31, 1999 have been restated to give effect to the change in
accounting principle. The effect of the change as of the beginning of the first
quarter of fiscal 1999 (i.e., July 1, 1998) has been presented as a cumulative
effect of a change in accounting principle, net of a $1,815,000 income tax
benefit, of $3,373,000, and has been recorded as of such date. The effect of
this change on operations for the first nine months of fiscal 1999 was to
increase income before cumulative effect of accounting change by approximately
$200,000, net of income taxes.
In addition, certain other amounts have been reclassified to conform with the
current year presentation. Primarily, expenses incurred by the Company and
reimbursed by an advertising fund administered by the Company on behalf of
franchisees were reclassified from management fees and other income to selling,
general and administrative expenses. Such reimbursements are reflected as
offsets to the related expenses.
Note 2: Earnings per Share
Earnings per share on a basic and diluted basis is calculated as follows:
<TABLE>
<CAPTION>
Three months
ended Nine months ended
March 31 March 31
(in thousands, except per share amounts) 2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Income before cumulative effect of change
in accounting principle $ 263 $ 530 $1,012 $1,591
====== ====== ====== ======
Calculation of weighted average shares
outstanding plus assumed conversions:
Weighted average basic shares outstanding 9,452 9,477 9,474 9,486
Effect of dilutive employee stock options -- 5 9 2
------ ------ ------ ------
Weighted average diluted shares outstanding 9,452 9,482 9,483 9,488
====== ====== ====== ======
Basic earnings per share $ 0.03 $ 0.06 $ 0.11 $ 0.17
====== ====== ====== ======
Diluted earnings per share $ 0.03 $ 0.06 $ 0.11 $ 0.17
====== ====== ====== ======
</TABLE>
6
<PAGE>
Note 3: Comprehensive Income (Loss)
Comprehensive income (loss) consists of the following:
Three months
ended Nine months ended
March 31 March 31
(in thousands) 2000 1999 2000 1999
------- ------- ------- -------
Net income (loss) $ 263 $ 530 $ 1,012 $(1,782)
Net unrealized (loss) gain on
marketable securities 40 (36) 2 21
------- ------- ------- -------
Comprehensive income (loss) $ 303 $ 494 $ 1,014 $(1,761)
======= ======= ======= =======
Note 4: Segment Information
Interim financial information by identifiable segments is as follows:
<TABLE>
<CAPTION>
Three months ended
(in thousands) March 31, 2000 March 31, 1999
------------------- -------------------
Operating Operating
Income Income
Revenue (Loss) Revenue (Loss)
------- ------- ------- -------
<S> <C> <C> <C> <C>
Franchise operations:
United States $ 5,513 $ 726 $ 5,523 $ 598
International 78 (159) 36 (29)
Equipment and design 1,468 (48) 2,126 87
Company restaurant 190 (170) 113 (5)
------- ------- ------- -------
$ 7,249 349 $ 7,798 651
======= =======
Interest income 149 178
------- -------
Income before income taxes and cumulative
effect of change in accounting principle $ 498 $ 829
======= =======
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Nine months ended
(in thousands) March 31, 2000 March 31, 1999
------------------- -------------------
Operating Operating
Income Income
Revenue (Loss) Revenue (Loss)
------- -------- -------- --------
<S> <C> <C> <C> <C>
Franchise operations:
United States $ 17,071 $ 2,026 $ 17,219 $ 2,107
International 286 (384) 320 (309)
Equipment and design 5,037 (76) 7,237 103
Company restaurant 448 (188) 220 (14)
-------- -------- -------- --------
$ 22,842 1,378 $ 24,996 1,887
======== ========
Interest income 503 598
-------- --------
Income before income taxes and cumulative
effect of change in accounting principle $ 1,881 $ 2,485
======== ========
</TABLE>
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains forward-looking statements subject to
the safe harbor created by the Private Securities Litigation Reform Act of 1995.
The words "may," "would," "could," "will," "expect," "estimate," "believe,"
"intends," "plans" and similar expressions and variations thereof are intended
to identify forward-looking statements. Management cautions that these
statements represent projections and estimates of future performance and involve
certain risks and uncertainties. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors including, without limitation, our ability to successfully implement the
new concepts currently being formulated; changes in global and local business
and economic conditions; consumer preferences, spending patterns and demographic
trends; food, labor and other operating costs; availability and cost of land and
construction; currency exchange rates; and other risks outside our control
referred to in the registration statements and periodic reports that we file
with the Securities and Exchange Commission.
Overview
Our principal operations are centered around the Blimpie Subs & Salads
chain of quick-service restaurants. As of March 31, 2000, there were 2,125
Blimpie locations franchised by us in operation in the United States and 14
other countries. The chain's growth has been achieved through a system of
subfranchisors that purchased the rights to develop certain territories. The
subfranchisor fees were a significant and profitable revenue source for us
through fiscal 1996. By the end of fiscal 1996, the majority of the domestic
subfranchise rights had been sold, and this revenue stream began to decline. As
a result, our profitability also declined, despite the continued growth in the
number of franchised units opened and an increase in continuing fee revenues.
Faced with declining profitability despite the consistent growth in the
number of Blimpie outlets and continuing fees, we implemented several new
initiatives, including the acquisition or development of three new brands. The
three new franchise concepts are Maui Tacos(TM), Pasta Central(TM) and Smoothie
Island(TM). Maui Tacos restaurants provide a health-oriented, affordable menu of
"Maui-Mex" items, including traditional Mexican foods marinated in Hawaiian
spices. Pasta Central's baked pasta meals are designed to address current eating
trends for eat-in or take home meals. Smoothie Island is a selection of blended
beverages of frozen yogurt, fruit and nutritional supplements sold through the
Blimpie, Maui Tacos and Pasta Central locations.
As of March 31, 2000, there were eight Maui Tacos outlets operating and
seven subfranchise territories operating. There also were six Pasta Central
outlets operating, and a majority of the Blimpie subfranchisors had agreed to
sell Pasta Central franchises in their territories. Finally, there were 49
Smoothie Island locations operating, all of which were located in Blimpie or
Maui Tacos locations. As anticipated, each of the new brands was generating
revenues for us as of March 31, 2000.
We believe that these new concepts will be well received and that the
Blimpie brand will continue to be successful. The new concepts have increased
selling, general and administrative expenses during the past year, and
management believes that these expenses will continue to increase as these
brands require additional support through the early stages of their growth.
There can be no assurance that the introduction of these concepts will continue
to result in increased revenues, or that such revenues will exceed the related
costs.
8
<PAGE>
Results of Operations
Three and Nine Months Ended March 31, 2000 Compared with Three and Nine Months
Ended March 31, 1999
Our net income decreased 50.4% to $263,000 in the three months ended March
31, 2000 from $530,000 in the three months ended March 31, 1999. Our basic and
diluted earnings per share decreased 50.0% to $0.03 per share in the three
months ended March 31, 2000 from $0.06 per share in the three months ended March
31, 1999. Such decreases are attributable primarily to decreases in franchise
fees and equipment sales, and an increase in selling, general and administrative
expenses, all of which are discussed below.
Our continuing fees derived from franchises increased 1.2% to $4,582,000
in the three months ended March 31, 2000 from $4,527,000 in the three months
ended March 31, 1999. This increase resulted from a 2.6% increase in the number
of open Blimpie outlets from 2,071 at March 31, 1999 to 2,125 at March 31, 2000,
offset by a decrease in average unit volumes for existing Blimpie outlets.
Continuing fees increased 1.2% to $14,037,000 in the nine months ended March 31,
2000 from $13,864,000 in the nine months ended March 31, 1999 due to an increase
in the number of outlets, partially offset by a decrease in the average unit
volumes per outlet.
Subfranchisor fees, master license fees and fees from the sales and
resales of franchises decreased 4.6% to $912,000 in the three months ended March
31, 2000 from $956,000 in the three months ended March 31, 1999. These revenues
decreased 15.9% to $2,882,000 in the nine months ended March 31, 2000 from
$3,425,000 in the nine months ended March 31, 1999. The following tables
summarize the components of these fees for the three and nine months ended March
31, 2000 and 1999:
Three Months Ended
March 31,
(amounts in 000's) 2000 1999 Change
-------------------------
Amortization of deferred subfranchise
and master license fees $390 $357 9.2%
Franchise fees 381 465 -18.1%
Resale and other fees 141 134 5.2%
------------------------
Total $912 $956 -4.6%
========================
Nine Months Ended
March 31,
(amounts in 000's) 2000 1999 Change
-------------------------------
Amortization of deferred subfranchise
and master license fees $1,164 $1,077 8.1%
Franchise fees 1,361 1,984 -31.4%
Resale and other fees 357 364 -1.9%
-----------------------------
Total $2,882 $3,425 -15.9%
=============================
9
<PAGE>
The amortization of deferred subfranchise and master license fees for the
three and nine months ended March 31, 2000 were 9.2% and 8.1% higher,
respectively, than the amortization for the same three and six month periods of
the prior fiscal year, due primarily to amortization of deferred revenues
related to the sales of new Maui Tacos subfranchise territories between the two
periods.
Franchise fees and resale fees were negatively impacted in the three and
nine months ended March 31, 2000 due to the Company not being able to sell
franchises during the period from October 29, 1999 to early January 2000. As
previously disclosed, we were unable to complete our audited financial
statements for the year ended June 30, 1999 pending our determination of the
most appropriate revenue recognition method for the subfranchise and master
license fees discussed in the previous paragraph. Effective October 28, 1999,
our franchise disclosure documents for most states expired, and could not be
renewed until we were able to complete our audited financial statements. We are
required to give these documents to potential franchisees before we can sell a
franchise, so we were unable to sell franchises or assist with reselling most
franchises for approximately two months during the second quarter of fiscal
2000. After our audited financial statements were completed, we were able to
renew our various state disclosure documents, comply with the Federal Rule on
franchising and then recommence our franchise sales operations. In several
states, we were unable to sell franchises or assist with reselling franchises
well into the quarter ended March 31, 2000. This situation contributed to lower
revenues from franchise fees and resale fees during the three and nine months
ended March 31, 2000.
Revenues from sales of franchises decreased 18.1% in the three months
ended March 31, 2000 due primarily to a 41.4% decrease in new outlets opened,
from 58 new outlets in the three months ended March 31, 1999 to 34 new outlets
in the three months ended March 31, 2000. Revenues from sales of franchises
decreased 31.4% in the nine months ended March 31, 2000 due primarily to a 33.9%
decrease in new outlets opened, from 224 new outlets in the nine months ended
March 31, 1999 to 148 new outlets in the nine months ended March 31, 2000. The
decreases in revenues were less than the decreases in the number of outlets
opened due to increases in the franchise fee revenue per outlet, as well as the
recognition of franchise fees for franchises sold but not opened after two
years.
Store equipment sales decreased 31.1% to $1,451,000 in the three months
ended March 31, 2000 from $2,107,000 in the three months ended March 31, 1999.
Store equipment sales decreased 30.4% to $4,997,000 in the nine months ended
March 31, 2000 from $7,181,000 in the nine months ended March 31, 1999. These
decreases were consistent with the 41.4% and 33.9% decreases in new outlets
opened during the three and nine months ended March 31, 2000, respectively, when
compared to the same period of the prior fiscal year. The decrease in sales to
Blimpie franchises was partially offset by higher sales per location due to Maui
Tacos and co-branded Blimpie / Pasta Central sales, as well as an increase in
sales to non-affiliates.
License fees and other income for the three months ended March 31, 2000
increased 20.0% to $114,000 from $95,000 in the three months ended March 31,
1999. License fees and other income for the nine months ended March 31, 2000
increased 56.2% to $478,000 from $306,000 in the nine months ended March 31,
1999. These increases were due to greater license fees from the sale of Blimpie
branded products, as well as royalties from the Canteen Vending Service Program.
Company restaurant sales were $190,000 for the three months ended March
31, 2000 compared to $113,000 in the three months ended March 31, 1999. Company
restaurant sales were $448,000 for the nine months ended March 31, 2000 compared
to $220,000 in the nine months ended March 31, 1999. The increase in the three
month period is due to the addition of two Smoothie Island Juice Bar locations
that were open in the current year but not in the prior year. Smoothie Island
Juice Bar is a stand-alone juice bar concept being developed initially in the
Houston, Texas market. The increase in the nine month period is due to both the
Smoothie Island
10
<PAGE>
Juice Bar locations, as well as the Maui Tacos location that opened in October
1998. We intend to continue to open and operate a limited number of
Company-owned outlets for Maui Tacos, Smoothie Island, and possibly for
co-branded Blimpie / Pasta Central / Smoothie Island locations.
The Subfranchisors' shares of continuing and franchise fees increased 5.6%
to $2,618,000 in the three months ended March 31, 2000 from $2,480,000 in the
three months ended March 31, 1999. The Subfranchisors' shares of continuing and
franchise fees decreased 4.4% to $8,214,000 in the nine months ended March 31,
2000 from $8,593,000 in the nine months ended March 31, 1999. The increase in
the three month period was due to the increases in continuing and resale fees,
partially offset by a decrease in franchise fees. The decrease in the nine month
period was due primarily to the decreases in franchise and resale fees in the
related periods.
Store equipment cost of sales decreased 33.9% to $1,224,000 in the three
months ended March 31, 2000 from $1,852,000 in the three months ended March 31,
1999. Store equipment cost of sales decreased 31.5% to $4,304,000 in the nine
months ended March 31, 2000 from $6,284,000 in the nine months ended March 31,
1999. These decreases were due to the related decreases in store equipment
sales. The gross margin on store equipment sales increased to 15.6% in the three
months ended March 31, 2000 from 12.1% in the three months ended March 31, 1999.
The gross margin on store equipment sales increased to 13.9% in the nine months
ended March 31, 2000 from 12.5% in the nine months ended March 31, 1999. The
slight increases in the 1999 periods were due to a favorable product mix during
the current year.
Selling, general and administrative expense was flat at $2,698,000 in the
three months ended March 31, 2000 compared to $2,697,000 in the three months
ended March 31, 1999. Selling, general and administrative expense rose 3.9% to
$8,310,000 in the nine months ended March 31, 2000 from $7,998,000 in the nine
months ended March 31, 1999. The increase in the nine month period was due
primarily to additional personnel and related costs associated with the growth
in number of Blimpie outlets, as well as personnel, legal and other costs
incurred in the development of the Maui Tacos, Smoothie Island and Pasta Central
brands. We believe that the number of franchised outlets will continue to
increase and the new brands will continue to require increased support as
franchises and/or subfranchise territories are sold. Therefore, we expect
selling, general and administrative expenses will continue to increase for at
least the next year.
Company restaurant operations increased by 205.1% to $360,000 in the three
months ended March 31, 2000 from $118,000 in the three months ended March 31,
1999. Company restaurant operations increased by 171.8% to $636,000 in the nine
months ended March 31, 2000 from $234,000 in the nine months ended March 31,
1999. The first Company-owned Maui Tacos outlet was opened in October 1998, and
the first Company-owned Smoothie Island Juice Bar was opened in October 1999.
The locations were not open for the full three- or nine-month period in fiscal
1999, resulting in the increases between the periods. Net operating losses from
the company restaurant operations resulted primarily from start-up costs
associated with opening two new Smoothie Island Juice Bar locations in the
current year periods.
Interest income in the three months ended March 31, 2000 decreased by
16.3% to $149,000 from $178,000 in the three months ended March 31, 1999.
Interest income in the nine months ended March 31, 2000 decreased by 15.9% to
$503,000 from $598,000 in the nine months ended March 31, 1999. These decreases
resulted from our sale of a portion of our U.S. Treasury notes in February 1999
in order to satisfy our remaining obligation for the purchase of the various
international trademarks and service marks of the Blimpie brand in February
1997.
The effective income tax rates (income taxes expressed as a percentage of
pre-tax income) were 47.2% and 46.2%, respectively, in the three and nine months
ended March 31, 2000 and 36.1% and 36.0%, excluding the impact of the change in
accounting principle, in the three and nine months ended March 31, 1999,
respectively. The increases in the effective rate
11
<PAGE>
were due to certain losses of our majority-owned subsidiary which may not be
deductible for tax purposes in fiscal 2000.
Liquidity and Capital Resources
Our cash used in operating activities was $572,000 in the nine months
ended March 31, 2000. We generated $2,093,000 in cash flows from operating
activities in the nine months ended March 31, 1999. The change between the two
periods is due primarily to a decrease in accounts payable and other current
liabilities and lower income before cumulative effect of change in accounting
principle.
Net cash provided by investing activities during the nine months ended
March 31, 2000 was $3,435,000. Net cash used in investing activities during the
nine months ended March 31, 1999 was $1,900,000. The change between the two
periods is due to proceeds from the sale of securities with no offsetting
purchases in the current year. The proceeds in the current period were used to
purchase investments that mature in less than three months, so they have been
included in cash and cash equivalents as of March 31, 2000. In addition, in the
1999 period we paid the remaining balance of our trademark obligation of
$3,000,000.
Net cash used in financing activities was $497,000 in the nine months
ended March 31, 2000 and $499,000 in the nine months ended March 31, 1999. Both
periods included a dividend payment and purchases of treasury stock. We
currently are executing a stock repurchase program, and anticipate that
purchases of treasury stock will continue during the remainder of fiscal 2000.
The Company's primary liquidity needs arise from expansion and capital
expenditures. These needs are primarily met by the cash flows from operations
and from the Company's cash and investments. The Company believes that the cash
flows from operations and the Company's cash and investments will be sufficient
to fund its future liquidity needs for the foreseeable future.
12
<PAGE>
PART II. Other Information
Item 4. Submission of Matters to a Vote of Shareholders
The Company held its annual meeting of shareholders on March 20, 2000. As
of the January 21, 2000 record date of the Meeting, there were a total of
9,498,826 shares of the Company's $.01 par value common stock outstanding and
entitled to be voted at the annual meeting. There were 8,879,311 shares (93.5%)
present in person or by proxy at the Meeting.
The following directors were elected at and continued in office after the
meeting:
Number of Shares
------------------------
Director For Withheld
------------------------- --------- --------
Anthony P. Conza 8,280,454 598,857
David L. Siegel 8,277,696 601,615
Patrick J. Pompeo 8,271,689 607,622
Charles G. Leaness 8,276,696 602,615
Alvin Katz 8,283,446 595,865
Harry G. Chernoff 8,282,696 596,615
Also at the Meeting, the shareholders ratified the selection of Ernst &
Young L.L.P. as the Company's independent accountants for the fiscal year ending
June 30, 2000 by a vote of 8,809,424 shares (99.2% of shares voted) in favor.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits are filed as part of this
report:
Exhibit no. Description
27 Financial Data Schedule
(b) No Current Reports on Form 8-K were filed by the Company
during the quarter for which this report has been filed.
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Blimpie International, Inc.
(Registrant)
Dated: May 12, 2000 By: /s/ Brian D. Lane
------------------------------------------
Brian D. Lane
Vice President and Chief Financial Officer
(Principal Financial Officer)
14
SS<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet at March 31, 2000 (Unaudited) and the
Condensed Consolidated Statement of Operations for the nine months ended March
31, 2000 (Unaudited) and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 7,048
<SECURITIES> 2,290
<RECEIVABLES> 3,445
<ALLOWANCES> 497
<INVENTORY> 0
<CURRENT-ASSETS> 12,366
<PP&E> 4,033
<DEPRECIATION> 2,204
<TOTAL-ASSETS> 27,261
<CURRENT-LIABILITIES> 3,054
<BONDS> 0
0
0
<COMMON> 96
<OTHER-SE> 18,738
<TOTAL-LIABILITY-AND-EQUITY> 27,261
<SALES> 22,842
<TOTAL-REVENUES> 22,842
<CGS> 13,154
<TOTAL-COSTS> 13,154
<OTHER-EXPENSES> 8,310
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,881
<INCOME-TAX> 869
<INCOME-CONTINUING> 1,012
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,012
<EPS-BASIC> 0.11
<EPS-DILUTED> 0.11
</TABLE>
