-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TdearxOtkJv9Pbuot++ctmWRj7iI0Z/rusdEZnS/hAgGrSpcFwgWdOFF0scHfDOt GXi3ZmnDyRXGO3ExIAdWJg== 0000897101-96-000862.txt : 19961016 0000897101-96-000862.hdr.sgml : 19961016 ACCESSION NUMBER: 0000897101-96-000862 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960830 FILED AS OF DATE: 19961015 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL DAIRY QUEEN INC CENTRAL INDEX KEY: 0000051207 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & RELATED PRODUCTS [5140] IRS NUMBER: 410852869 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-06116 FILM NUMBER: 96643178 BUSINESS ADDRESS: STREET 1: 7505 METRO BLVD CITY: MINNEAPOLIS STATE: MN ZIP: 55439 BUSINESS PHONE: 6128300200 MAIL ADDRESS: STREET 1: 7505 METRO BLVD CITY: MINNEAPOLIS STATE: MN ZIP: 55439 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended August 30, 1996. 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 0-6116 INTERNATIONAL DAIRY QUEEN INC. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 41-0852869 - --------------------------- --------------------------------------- (State of Incorporation) (I.R.S. Employer Identification Number) 7505 Metro Boulevard, Minneapolis, Minnesota 55439 - -------------------------------------------- -------------------------------- (Address of principal executive offices) (Zip Code) Registrant's Telephone Number 612/830-0200 - ------------------------------ -------------------------------------- Neither name, address nor fiscal year has been changed since the last report. - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether 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 (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 ____ Number of registrant's Class A Common Shares outstanding at September 30, 1996: 13,866,406 Number of registrant's Class B Common Shares outstanding at September 30, 1996: 8,259,451 INTERNATIONAL DAIRY QUEEN, INC. Securities and Exchange Commission Form 10-Q for the Third Quarter Ended August 30, 1996
I N D E X Page Number PART I: FINANCIAL INFORMATION: Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheet August 30, 1996 and November 30, 1995 3 Condensed Consolidated Statement of Income Three months and nine months ended August 30, 1996 4 and August 25, 1995 Condensed Consolidated Statement of Cash Flows Nine months ended August 30, 1996 and August 25, 1995 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 7-9 PART II. OTHER INFORMATION: Item 1. Legal Proceedings 10 Items 2 through 6 have been omitted since such items are inapplicable or the answers are negative. SIGNATURES 10
PART I
INTERNATIONAL DAIRY QUEEN, INC. CONSOLIDATED BALANCE SHEET (Condensed and in Thousands) (Unaudited) ASSETS August 30, November 30, 1996 1996 ---------- ------------ Current Assets: Cash and cash equivalents and marketable securities $ 41,348 $ 42,450 Receivables--net 45,773 33,134 Inventories 5,938 5,376 Other current assets 3,650 4,762 -------- -------- Total current assets 96,709 85,722 Notes receivable and other--net 22,737 23,616 Other revenue-producing assets--net: Franchise rights and goodwill 98,262 88,182 Rental properties 3,421 3,305 Miscellaneous 13 17 -------- -------- Total other revenue-producing assets 101,696 91,504 Property, plant and equipment--net 13,874 10,647 -------- -------- $235,016 $211,489 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 17,281 $ 11,310 Accrued liabilities 12,885 9,493 Committed advertising 198 845 Current maturities of long-term debt 12,132 330 -------- -------- Total current liabilities 42,496 21,978 Deferred income taxes 15,070 15,070 Long-term debt 13,098 24,760 Other non-current liabilities 2,231 1,981 Minority interest in subsidiaries 643 -- Common stock and other stockholders' equity 161,478 147,700 -------- -------- $235,016 $211,489 ======== ======== See accompanying notes.
INTERNATIONAL DAIRY QUEEN, INC. CONSOLIDATED STATEMENT OF INCOME (Condensed and in Thousands, Except Per Share Amounts) (Unaudited) Nine Months Ended Third Quarter Ended ------------------------ ------------------------- August 30, August 25, August 30, August 25, 1996 1995 1996 1995 ---------- ---------- ---------- ---------- Operating Revenues: Net Sales $ 244,450 $ 231,602 $ 94,730 $ 92,477 Sales by company-operated restaurants 19,885 -- 9,438 -- Service Fees 44,347 44,345 18,370 18,178 Franchise sales and other fees 7,058 6,694 2,977 2,630 Real estate finance and rental income 5,918 5,654 1,969 1,800 Other 1,071 746 447 276 --------- --------- --------- --------- 322,729 289,041 127,931 115,361 Operating Expenses: Cost of Sales 220,529 208,025 85,529 83,010 Cost of Sales: company-operated restaurants 17,430 -- 8,194 -- Expenses applicable to real estate finance and rental income 5,516 5,274 1,811 1,656 Selling, general and administrative 34,444 33,393 12,069 11,762 --------- --------- --------- --------- 277,919 246,692 107,603 96,428 --------- --------- --------- --------- Operating Income 44,810 42,349 20,328 18,933 Net Interest Income 1,685 1,466 531 484 Minority interest in earnings of consolidated subsidiaries and joint ventures (893) -- (462) -- --------- --------- --------- --------- Income before income taxes 45,602 43,815 20,397 19,417 Provision for income taxes 17,920 17,310 8,010 7,670 --------- --------- --------- --------- Net income $ 27,682 $ 26,505 $ 12,387 $ 11,747 ========= ========= ========= ========= Earnings per common and common equivalent shares $ 1.22 $ 1.14 $ .55 $ .51 ========= ========= ========= ========= Average common and common equivalent shares outstanding 22,773 23,280 22,395 23,001 ========= ========= ========= ========= See accompanying notes.
INTERNATIONAL DAIRY QUEEN, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Condensed and in Thousands) (Unaudited) Nine Months Ended ----------------------- August 30, August 25, 1996 1995 ---------- ---------- Net cash provided by operating activities $ 27,763 $ 23,797 Investing Activities: Net investments in marketable securities (2,559) (24) Cost of acquisitions, net of cash acquired (5,483) -- Net advances to operators for store renovations and equipment (728) (1,890) Net capital expenditures (3,575) (2,323) Purchase of franchise rights and goodwill (3,141) (1,170) Other 62 90 -------- -------- Cash flows used in investing activities (15,424) (5,317) Financing Activities: Purchase and retirement of common shares (14,703) (16,924) Principal payments on long-term debt (810) (355) Other 1,120 541 -------- -------- Cash flows used in financing activities (14,393) (16,738) Effect of exchange rate changes on cash (17) 32 -------- -------- Net (decrease)/increase in cash and cash equivalents (2,071) 1,774 Cash and cash equivalents at beginning of year 34,699 31,766 -------- -------- Cash and cash equivalents at end of period $ 32,628 $ 33,540 ======== ======== See accompanying notes.
INTERNATIONAL DAIRY QUEEN, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The interim financial statements included herein have been prepared by the Company without audit, but include all adjustments which are of a normal recurring nature and which the Company believes are necessary for a fair presentation of its condensed consolidated balance sheet as of August 30, 1996, and the related condensed consolidated statements of income for the three-month and nine-month periods ended August 30, 1996 and August 25, 1995 and the condensed consolidated statements of cash flows for the nine-month periods ended August 30, 1996 and August 25, 1995. The condensed financial statements do not include all disclosures required under generally accepted accounting principles since certain footnote information has been omitted. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report and Form 10-K for the year ended November 30, 1995. The Company calculates its income tax provision for interim periods by estimating its annual effective tax rate and applying this rate to the income of the interim period. The effective tax rate applied was 39.3 percent for the three-month and nine-month periods ended August 30, 1996, and 39.5 percent for the three-month and nine-month periods ended August 25, 1995. Earnings per common share amounts are based on the weighted average number of common and common equivalent shares outstanding during each period. The Company's business is seasonal in nature, and the results of operations for the periods ended August 30, 1996, may not be indicative of the results for the full year. INTERNATIONAL DAIRY QUEEN, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General: The Company's revenues are derived primarily from service and franchise fees received from franchisees and the sale of perishable and nonperishable supplies and equipment for use by franchised stores. Although the Company does not allocate interest or selling, general and administrative expenses by products sold or services rendered, it believes that a major portion of its operating income results from franchise service fees. The following table sets forth certain information as to the number of stores in the DAIRY QUEEN(R), ORANGE JULIUS(R), KARMELKORN(R), and GOLDEN SKILLET(R) systems.
Total Ownership Total 11/30/95 Opened Closed Converted Changes 8/30/96 -------- ------ ------ --------- --------- ------- DAIRY QUEEN(R) SYSTEM United States Franchised by the Company: DAIRY QUEEN(R)stores 3,283 45 (64) 0 15 3,279 TREAT CENTER(R)units 124 13 (1) 3 0 139 Franchised by territorial operators 1,593 50 (20) 0 (47) 1,576 Company-operated stores 1 32 33 ----- ---- ---- --- ---- ----- 5,000 109 (85) 3 0 5,027 ----- ---- ---- --- ---- ----- Canada Franchised by the Company: DAIRY QUEEN(R)stores 447 10 (3) 0 0 454 TREAT CENTER(R)units 21 0 (1) 0 0 20 ----- ---- ---- --- ---- ----- 468 10 (4) 0 0 474 ----- ---- ---- --- ---- ----- Other Foreign 162 33 (3) 0 0 192 ----- ---- ---- --- ---- ----- Total DAIRY QUEEN(R)stores 5,630 152 (92) 3 0 5,693 ----- ---- ---- --- ---- ----- ORANGE JULIUS(R)Stores 433 18 (26) (3) 0 422 KARMELKORN(R)Shoppes 69 1 (7) 0 0 63 GOLDEN SKILLET(R)Restaurants 21 0 0 0 0 21 ----- ---- ---- --- ---- ----- TOTAL 6,153 171 (125) 0 0 6,199 ===== ==== ==== === ==== =====
Results of Operations: The improvement in the Company's results of operations for the third quarter and first nine months of 1996 compared to the third quarter and first nine months of 1995, reflects an increase in net sales and an increase in net interest income. These increases were partially offset by an increase in selling, general and administrative expenses. The strong influence of weather on revenue was readily apparent in the first half of 1996 when cold, snowy and very wet weather across much of North America adversely affected sales by franchisees. The following table indicates as a percentage of revenue, line items from the income statement, and the percentage increase/decrease of such items when comparing the first nine months of 1996 with the first nine months of 1995.
Percentage of Revenue Nine Months Ended ---------------------------- Percentage August 30, August 25, Increase 1996 1995 (Decrease) ---------- ---------- ---------- Operating Revenues: Net Sales 75.8 80.1 5.5 Sales by company-operated restaurants 6.2 -- * Service Fees 13.7 15.3 -- Franchise Sales & other fees 2.2 2.3 5.4 Real estate finance & rental income 1.8 2.0 4.7 Other .3 .3 43.6 ----- ----- Total Revenues 100.0 100.0 11.7 ----- ----- Operating Expenses: Cost of Sales 68.3 71.9 6.0 Cost of Sales: company-operated restaurants 5.4 -- * Expense applicable to real estate finance & rental income 1.7 1.8 4.6 Selling, general & administrative 10.7 11.6 3.1 ----- ----- Total Operating Expenses 86.1 85.3 12.7 Operating Income 13.9 14.7 5.8 Net interest income .5 .5 14.9 Minority interest (.3) -- * ----- ----- Income before income taxes 14.1 15.2 4.1 Provision for income taxes 5.5 6.0 3.5 ----- ----- Net income 8.6 9.2 4.4 ===== ===== *Not meaningful
The increase during the first nine months of 1996 when compared to the first nine months of 1995 of $12,846,963 in net sales resulted primarily from an increase of $11,441,881 in unit sales of frozen, non-frozen foods, paper, plastics and manufactured novelties to authorized warehouses (who in turn sell to franchisees), an increase of $1,292,919 in sales of promotional items sold to DAIRY QUEEN stores and an increase of $963,307 in permanent and temporary placement and training fees by Firstaff, Inc. These increases were partially offset by a reduction in equipment sales to franchisees of $1,025,865. The reasons for the net changes when comparing the third quarter of 1996 with the third quarter of 1995 are basically the same. On February 7, 1996, the Company acquired 10 DAIRY QUEEN/BRAZIER stores and a majority interest in 21 other DAIRY QUEEN/BRAZIER stores located in Kentucky, Tennessee and Indiana. Two additional stores have subsequently been acquired. Net sales for these 33 stores through August 30, 1996, were $19,884,467 and related cost of sales was $17,430,109. Net sales for the third quarter were $9,437,777 and related cost of sales was $8,194,149. Service fee income was flat primarily due to the elimination in 1996 of intercompany service fees of $795,379 in the first nine months and $377,511 in the third quarter of 1996 due from company-operated restaurants acquired in 1996. The increase of $1,049,351 in the first nine months and $306,750 in the third quarter of 1996 in selling, general and administrative expenses was primarily from an increase in personnel and legal support costs. The increase in net interest income of $218,319 in the first nine months and $46,207 in the third quarter of 1996 is primarily the result of an increase in the funds available for investing in interest-generating activities. Minority interest represents the income from operations allocated to the minority ownership in 21 DAIRY QUEEN/BRAZIER stores and Firstaff, Inc. The increase in net income per share when comparing the 1996 periods with the 1995 periods was due to an increase in the Company's net income and to a decrease in the average number of common and common equivalent shares outstanding. Liquidity and Capital Resources: Available liquid resources at August 30, 1996, include $41.3 million in cash, cash equivalents and marketable securities. The Company believes it has sufficient capital to meet existing and presently anticipated needs. PART II Item 1. Legal Proceedings HUGH COLLINS, ET AL. V. INTERNATIONAL DAIRY QUEEN, INC. AND AMERICAN DAIRY QUEEN CORPORATION ("ADQ"), (United States District Court, Middle District of Georgia, Macon Division, No. 94-95-4-MAC (WDO), commenced April 5, 1994). This matter, previously reported in the Company's Annual Reports (Forms 10-K) for fiscal 1994 and 1995, began as an action by five franchisees in the State of Georgia for declaratory judgment, injunctive relief, actual damages in an unspecified amount, treble damages under federal antitrust law, costs, and attorneys' fees. Plaintiffs' claims were that ADQ's approved supplier program and procedures constitute a tying arrangement prohibited under Section I of the Sherman Antitrust Act (15 U.S.C. ss. 1), a breach of contract, a breach of an implied covenant of good faith and fair dealing between the parties, and breach of a prior settlement agreement. The Company and ADQ filed an answer to plaintiff's complaints. In December 1994, the parties filed cross-motions for summary judgment on all issues relating to the supply of cups and lids to the "Dairy Queen" system. Plaintiffs later amended the complaint to add new claims under federal antitrust law and state law, and to have the case certified as a class action. The Company subsequently filed motions for summary judgment dismissing the antitrust claims. The plaintiffs later withdrew their claims for breach of implied covenant of good faith and fair dealing. The Company and ADQ filed an answer to the amended complaint. On August 30, 1996, the Court granted the plaintiffs' motion for class certification, and denied the Company and ADQ's motion for summary judgment on the antitrust tying motions. No ruling has been made on the cup and lid motions, on the Company and ADQ's motions to stay the action to all potential class members who have arbitration clauses in their franchise agreements, or on the Company and ADQ's motions to certify the class action and antitrust tying claims for interlocutory appeal, or to reconsider those orders. No trial date has been set. The Company and ADQ intend to vigorously defend against plaintiffs' claims. All other items required under Part II have been omitted since they are inapplicable or the answers are negative. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. International Dairy Queen, Inc. ---------------------------------------- (Registrant) October 11, 1996 /s/ CHARLES W. MOOTY - ------------------------ ---------------------------------------- Date Charles W. Mooty Chief Financial Officer, Vice President and Treasurer October 11, 1996 /s/ DAVID M. BOND - ------------------------ ---------------------------------------- Date David M. Bond Secretary/Assistant Treasurer and Controller EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS NOV-30-1996 DEC-1-1995 AUG-30-1996 32,628 8,720 46,199 426 5,938 96,709 24,971 11,097 235,016 42,496 13,098 0 0 228 161,250 235,016 264,335 322,729 237,959 243,475 34,444 54 1,605 45,602 17,920 27,682 0 0 0 27,682 1.22 1.22
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