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 December 31, 1999
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
February 4, 2000.
<PAGE>
Blimpie International, Inc.
Quarterly Report on Form 10-Q
For the Quarter Ended December 31, 1999
Table of Contents
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets - December 31,
1999 and June 30, 1999 3
Condensed Consolidated Statements of Operations -
Three and Six Months Ended December 31, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows - Six
Months Ended December 31, 1999 and 1998 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 12
SIGNATURES 13
2
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
BLIMPIE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands) December 31 June 30
1999 1999
-------- --------
Assets (Unaudited) (Note)
Current assets:
Cash and cash equivalents $ 6,315 $ 4,682
Investments 2,702 5,296
Accounts receivable, net 3,008 3,106
Prepaid expenses and other current assets 378 228
Deferred income taxes 85 85
Current portion of notes receivable 466 427
-------- --------
Total current assets 12,954 13,824
Property and equipment, net 1,756 1,749
Other assets:
Notes receivable less current portion, net 923 1,009
Investments 972 981
Trademarks, net 8,366 8,434
Deferred income taxes 1,828 1,828
Other 648 433
-------- --------
Total other assets 12,737 12,685
-------- --------
$ 27,447 $ 28,258
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and other current liabilities $ 2,878 $ 4,237
Income taxes payable 382 --
-------- --------
Total current liabilities 3,260 4,237
Deferred revenue, net 5,503 5,710
Trademark obligations -- 204
Shareholders' equity:
Common stock, $.01 par value 96 96
Additional paid-in capital 9,028 8,818
Retained earnings 10,054 9,640
Net unrealized gain on marketable securities 2 40
-------- --------
19,180 18,594
Treasury stock (436) (427)
Subscriptions receivable (60) (60)
-------- --------
Total shareholders' equity 18,684 18,107
-------- --------
$ 27,447 $ 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 Six months ended
(in thousands, except for per share amounts) December 31 December 31
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Continuing fees $ 4,518 $ 4,537 $ 9,455 $ 9,337
Subfranchisor fees, master license fees
and sale of franchises 862 1,350 1,970 2,469
Store equipment sales 1,448 2,482 3,546 5,074
License fees and other income 230 108 364 211
Company restaurant sales 133 107 258 107
-------- -------- -------- --------
7,191 8,584 15,593 17,198
Expenses
Subfranchisors' share of franchise
and continuing fees 2,559 3,133 5,596 6,113
Store equipment cost of sales 1,191 2,048 3,080 4,432
Selling, general and administrative expenses 2,621 2,604 5,612 5,301
Company restaurant operations 155 116 276 116
-------- -------- -------- --------
6,526 7,901 14,564 15,962
-------- -------- -------- --------
Operating income 665 683 1,029 1,236
Interest income 172 235 354 420
-------- -------- -------- --------
Income before income taxes and cumulative effect
of change in accounting principle 837 918 1,383 1,656
Income taxes on income before cumulative effect
of change in accounting principle 371 330 634 595
-------- -------- -------- --------
Income before cumulative effect of change
in accounting principle 466 588 749 1,061
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) $ 466 $ 588 $ 749 $ (2,312)
======== ======== ======== ========
Basic and diluted earnings (loss) per share:
Income before cumulative effect of change
in accounting principle $ 0.05 $ 0.06 $ 0.08 $ 0.11
Cumulative effect of change in accounting principle -- -- -- (0.35)
-------- -------- -------- --------
Net income (loss) $ 0.05 $ 0.06 $ 0.08 $ (0.24)
======== ======== ======== ========
Weighted average basic shares outstanding 9,498 9,484 9,484 9,491
======== ======== ======== ========
Weighted average diluted shares outstanding 9,498 9,484 9,498 9,491
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
BLIMPIE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
(in thousands) December 31
1999 1998
------- -------
<S> <C> <C>
Cash Flows From Operating Activities
Income before cumulative effect of change in accounting principle $ 749 $ 1,061
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization 415 372
Incentive stock granted 6 10
Changes in operating assets and liabilities:
Accounts receivable 98 (645)
Prepaid expenses and other current assets (150) (40)
Other assets (215) (41)
Notes receivable 47 179
Accounts payable and other current liabilities (1,359) 1,314
Income taxes payable 382 146
Deferred revenue, net (207) (591)
------- -------
Net cash (used in) provided by operating activities (234) 1,845
Cash Flows From Investing Activities
Purchases of available-for-sale securities -- (1,553)
Proceeds from sale of available-for-sale securities 2,567 1,608
Reinvested dividends of available-for-sale securities (2) --
Purchase of trademarks (81) (188)
Purchases of property and equipment (273) (361)
------- -------
Net cash provided by (used in) investing activities 2,211 (494)
Cash Flows From Financing Activities
Purchases of treasury stock (9) (156)
Cash dividends paid (335) (332)
------- -------
Net cash used in financing activities (344) (488)
------- -------
Net increase in cash and cash equivalents 1,633 863
Cash and cash equivalents at beginning of period 4,682 4,021
------- -------
Cash and cash equivalents at end of period $ 6,315 $ 4,884
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
Notes To Condensed Consolidated Financial Statements
For the Six Months Ended December 31, 1999 (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 December 31, 1999 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 six
months ended December 31, 1998 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 six months of fiscal 1999 was
to increase income before cumulative effect of accounting change by $127,000,
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 Six months ended
December 31 December 31
(in thousands, except per share amounts) 1999 1998 1999 1998
----- ----- ------ ------
<S> <C> <C> <C> <C>
Income before cumulative effect of change
in accounting principle $ 466 $ 588 $ 749 $1,061
===== ===== ====== ======
Calculation of weighted average shares
outstanding plus assumed conversions:
Weighted average basic shares outstanding 9,498 9,484 9,484 9,491
Effect of dilutive employee stock options -- -- 14 --
----- ----- ------ ------
Weighted average diluted shares outstanding 9,498 9,484 9,498 9,491
===== ===== ====== ======
Basic earnings per share $0.05 $0.06 $ 0.08 $ 0.11
===== ===== ====== ======
Diluted earnings per share $0.05 $0.06 $ 0.08 $ 0.11
===== ===== ====== ======
</TABLE>
6
<PAGE>
Note 3: Comprehensive Income (Loss)
Comprehensive income (loss) consists of the following:
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31 December 31
(in thousands) 1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income (loss) $ 466 $ 588 $ 749 $(2,312)
Net unrealized (loss) gain on
marketable securities (14) (34) (38) 57
------- ------- ------- -------
Comprehensive income (loss) $ 452 $ 554 $ 711 $(2,255)
======= ======= ======= =======
</TABLE>
Note 4: Segment Information
Interim financial information by identifiable segments is as follows:
<TABLE>
<CAPTION>
Three months ended
(in thousands) December 31, 1999 December 31, 1998
----------------------- ----------------------
Operating Operating
Income Income
Revenue (Loss) Revenue (Loss)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Franchise operations:
United States $ 5,483 $ 754 $ 5,795 $ 775
International 116 (88) 174 (175)
Equipment and design 1,459 21 2,508 92
Company restaurant 133 (22) 107 (9)
$ 7,191 665 $ 8,584 683
======== ========
Interest income 172 235
-------- --------
Income before income taxes and cumulative
effect of change in accounting principle $ 837 $ 918
======== ========
</TABLE>
<TABLE>
<CAPTION>
Six months ended
December 31, 1999 December 31, 1998
----------------------- ----------------------
Operating Operating
Income Income
Revenue (Loss) Revenue (Loss)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Franchise operations:
United States $ 11,558 $ 1,300 $ 11,696 $ 1,509
International 208 (225) 284 (280)
Equipment and design 3,569 (28) 5,111 16
Company restaurant 258 (18) 107 (9)
-------- -------- -------- --------
$ 15,593 1,029 $ 17,198 1,236
======== ========
Interest income 354 420
-------- --------
Income before income taxes and cumulative
effect of change in accounting principle $ 1,383 $ 1,656
======== ========
</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 December 31, 1999, there were 2,126
Blimpie locations franchised by us in operation in the United States and 13
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 December 31, 1999, there were five Maui Tacos outlets operating and
six subfranchise territories operating. There also were four Pasta Central
outlets operating, and a majority of the Blimpie subfranchisors had agreed to
sell Pasta Central franchises in their territories. Finally, there were 40
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 December 31, 1999.
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 Six Months Ended December 31, 1999 Compared with Three and Six Months
Ended December 31, 1998
Our net income decreased 20.7% to $466,000 in the three months ended
December 31, 1999 from $588,000 in the three months ended December 31, 1998. Our
basic and diluted earnings per share decreased 16.7% to $0.05 per share in the
three months ended December 31, 1999 from $0.06 per share in the three months
ended December 31, 1998. 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 decreased 0.4% to $4,518,000
in the three months ended December 31, 1999 from $4,537,000 in the three months
ended December 31, 1998. This decrease resulted from a 3.2% increase in the
number of open Blimpie outlets from 2,061 at December 31, 1998 to 2,126 at
December 31, 1999, offset by a decrease in average unit volumes for existing
Blimpie outlets. Continuing fees increased 1.3% to $9,455,000 in the six months
ended December 31, 1999 from $9,337,000 in the six months ended December 31,
1998 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 36.1% to $862,000 in the three months ended
December 31, 1999 from $1,350,000 in the three months ended December 31, 1998.
These revenues decreased 20.2% to $1,970,000 in the six months ended December
31, 1999 from $2,469,000 in the six months ended December 31, 1998. The
following tables summarize the components of these fees for the three and six
months ended December 31, 1999 and 1998:
Three Months Ended
December 31,
(amounts in 000's) 1999 1998 Change
------ ------ ------
Amortization of deferred subfranchise
and master license fees $ 387 $ 358 8.1%
Franchise fees 392 860 -54.4%
Resale and other fees 83 132 -37.1%
------ ------ ------
Total $ 862 $1,350 -36.1%
====== ====== ======
Six Months Ended
December 31,
(amounts in 000's) 1999 1998 Change
------ ------ ------
Amortization of deferred subfranchise
and master license fees $ 774 $ 720 7.5%
Franchise fees 980 1,519 -35.5%
Resale and other fees 216 230 -6.1%
------ ------ ------
Total $1,970 $2,469 -20.2%
====== ====== ======
9
<PAGE>
The amortization of deferred subfranchise and master license fees for the
three and six months ended December 31, 1999 were 8.1% and 7.5% 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
six months ended December 31, 1999 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 past quarter. 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. This situation contributed to lower
revenues from franchise fees and resale fees during the three and six months
ended December 31, 1999.
Revenues from sales of franchises decreased 54.4% in the three months
ended December 31, 1999 due primarily to a 61.9% decrease in new outlets opened,
from 84 new outlets in the three months ended December 31, 1998 to 32 new
outlets in the three months ended December 31, 1999. Revenues from sales of
franchises decreased 35.5% in the six months ended December 31, 1999 due
primarily to a 31.3% decrease in new outlets opened, from 166 new outlets in the
six months ended December 31, 1998 to 114 new outlets in the six months ended
December 31, 1999. 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. Resale and other fees decreased 37.1% and 6.1% in
the three and six months ended December 31, 1999, respectively, due to fewer
outlets and subfranchise territories being transferred to new owners.
Store equipment sales decreased 41.7% to $1,448,000 in the three months
ended December 31, 1999 from $2,482,000 in the three months ended December 31,
1998. Store equipment sales decreased 30.1% to $3,546,000 in the six months
ended December 31, 1999 from $5,074,000 in the six months ended December 31,
1998. These decreases were consistent with the 61.9% and 31.3% decreases in new
outlets opened during the three and six months ended December 31, 1999,
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 December 31, 1999
increased 113.0% to $230,000 from $108,000 in the three months ended December
31, 1998. License fees and other income for the six months ended December 31,
1999 increased 72.5% to $364,000 from $211,000 in the six months ended December
31, 1998. 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 $133,000 for the three months ended December
31, 1999 compared to $107,000 in the three months ended December 31, 1998.
Company restaurant sales were $258,000 for the six months ended December 31,
1999 compared to $107,000 in the six months ended December 31, 1998. The
increase in the three month period is due to an Island
10
<PAGE>
Smoothie location that opened in October 1999. Island Smoothie is a stand-alone
juice bar concept being developed initially in the Houston, Texas market. The
increase in the six month period is due to both the Island Smoothie location, 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, Island Smoothie, and possibly for co-branded Blimpie / Pasta Central /
Smoothie Island locations.
The Subfranchisors' shares of continuing and franchise fees decreased
18.3% to $2,559,000 in the three months ended December 31, 1999 from $3,133,000
in the three months ended December 31, 1998. The Subfranchisors' shares of
continuing and franchise fees decreased 8.5% to $5,596,000 in the six months
ended December 31, 1999 from $6,113,000 in the six months ended December 31,
1998. These decreases were due primarily to the decreases in franchise and
resale fees in the related periods.
Store equipment cost of sales decreased 41.8% to $1,191,000 in the three
months ended December 31, 1999 from $2,048,000 in the three months ended
December 31, 1998. Store equipment cost of sales decreased 30.5% to $3,080,000
in the six months ended December 31, 1999 from $4,432,000 in the six months
ended December 31, 1998. These decreases were due to the related decreases in
store equipment sales. The gross margin on store equipment sales increased to
17.7% in the three months ended December 31, 1999 from 17.5% in the three months
ended December 31, 1998. The gross margin on store equipment sales increased to
13.1% in the six months ended December 31, 1999 from 12.7% in the six months
ended December 31, 1998. The slight increases in the 1999 periods were due to a
favorable product mix during the current year.
Selling, general and administrative expense rose 0.7% to $2,621,000 in the
three months ended December 31, 1999 from $2,604,000 in the three months ended
December 31, 1998. Selling, general and administrative expense rose 5.9% to
$5,612,000 in the six months ended December 31, 1999 from $5,301,000 in the six
months ended December 31, 1998. The increase in the six 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 33.6% to $155,000 in the three
months ended December 31, 1999 from $116,000 in the three months ended December
31, 1998. Company restaurant operations increased by 137.9% to $276,000 in the
six months ended December 31, 1999 from $116,000 in the six months ended
December 31, 1998. The first Company-owned Maui Tacos outlet was opened in
October 1998, and the first Company-owned Island Smoothie was opened in October
1999. The locations were not open for the full three- or six-month period in
fiscal 1999, resulting in the increases between the periods.
Interest income in the three months ended December 31, 1999 decreased by
26.8% to $172,000 from $235,000 in the three months ended December 31, 1998.
Interest income in the six months ended December 31, 1999 decreased by 15.7% to
$354,000 from $420,000 in the six months ended December 31, 1998. 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 44.3% and 45.8%, respectively, in the three and six months
ended December 31,
11
<PAGE>
1999 and 35.9% excluding the impact of the change in accounting principle in the
three and six months ended December 31, 1998. The increase in the effective rate
was due to certain losses of our majority-owned subsidiary which may not be
deductible for tax purposes in fiscal 2000.
12
<PAGE>
Liquidity and Capital Resources
Our cash used in operating activities was $234,000 in the six months ended
December 31, 1999. We generated $1,845,000 in cash flows from operating
activities in the six months ended December 31, 1998. 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 six months ended
December 31, 1999 was $2,211,000. Net cash used in investing activities during
the six months ended December 31, 1998 was $494,000. The change between the two
periods is due primarily 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 with maturities of less than three months, so
the investments have been included in cash and cash equivalents as of December
31, 1999.
Net cash used in financing activities was $344,000 in the six months ended
December 31, 1999 and $488,000 in the six months ended December 31, 1998. The
decrease in the cash used in financing activities was due to fewer purchases of
treasury stock in the current year period. We have recently implemented a stock
repurchase program, and anticipate that purchases of treasury stock will
increase during the remainder of fiscal 2000.
The Company's primary liquidity needs arise from expansion, capital
expenditures and trademark obligations. 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.
13
<PAGE>
PART II. Other Information
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.
14
<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: February 11, 2000 By: /s/ Brian D. Lane
--------------------------------------
Brian D. Lane
Vice President and Chief Financial
Officer (Principal Financial Officer)
15
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet at December 31, 1999 (Unaudited) and the
Condensed Consolidated Statement of Operations for the six months ended December
31, 1999 (Unaudited) and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 6,315
<SECURITIES> 3,674
<RECEIVABLES> 3,481
<ALLOWANCES> 473
<INVENTORY> 0
<CURRENT-ASSETS> 12,954
<PP&E> 3,822
<DEPRECIATION> 2,066
<TOTAL-ASSETS> 27,447
<CURRENT-LIABILITIES> 3,260
<BONDS> 0
0
0
<COMMON> 96
<OTHER-SE> 18,588
<TOTAL-LIABILITY-AND-EQUITY> 27,447
<SALES> 15,593
<TOTAL-REVENUES> 15,593
<CGS> 8,952
<TOTAL-COSTS> 8,952
<OTHER-EXPENSES> 5,612
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,383
<INCOME-TAX> 634
<INCOME-CONTINUING> 749
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 749
<EPS-BASIC> 0.08
<EPS-DILUTED> 0.08
</TABLE>
