-----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, Qz2RMavH2jCeDua9xeMyqy9e7nTMTSUTHL1+4t1b/o5DdsRa6Tx+hOOjD0IYBrtu Gg/D9Lw0EvXALsCOXG/MDA== 0000897101-97-001066.txt : 19971014 0000897101-97-001066.hdr.sgml : 19971014 ACCESSION NUMBER: 0000897101-97-001066 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970829 FILED AS OF DATE: 19971010 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: SEC FILE NUMBER: 000-06116 FILM NUMBER: 97693646 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 29, 1997. 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 (Zip Code) offices) 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 26, 1997: 14,005,042 Number of registrant's Class B Common Shares outstanding at September 26, 1997: 8,035,027 INTERNATIONAL DAIRY QUEEN, INC. Securities and Exchange Commission Form 10-Q for the Third Quarter Ended August 29, 1997 INDEX Page Number PART I: FINANCIAL INFORMATION: Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheet August 29, 1997 and November 30, 1996 3 Condensed Consolidated Statement of Income Three months and nine months ended August 29, 1997 and August 30, 1996 4 Condensed Consolidated Statement of Cash Flows Nine months ended August 29, 1997 and August 30, 1996 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: Items 1 through 5 have been omitted since such items are inapplicable or the answers are negative. 10 SIGNATURES 10 PART I INTERNATIONAL DAIRY QUEEN, INC. CONSOLIDATED BALANCE SHEET (Condensed and in Thousands) (Unaudited) August 29, November 30, ASSETS 1997 1996 - ------ ---------- ------------ Current Assets: Cash and cash equivalents and marketable securities $ 61,844 $ 41,483 Receivables--net 47,372 36,512 Inventories 6,118 6,511 Other current assets 4,302 4,430 -------- -------- Total current assets 119,636 88,936 Notes receivable and other--net 27,769 23,340 Other revenue-producing assets--net: Franchise rights and goodwill 97,369 98,762 Rental properties 4,972 4,471 Miscellaneous 7 12 -------- -------- Total other revenue-producing assets 102,348 103,245 Property, plant and equipment--net 12,706 13,913 -------- -------- $262,459 $229,434 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Accounts payable $ 16,340 $ 16,000 Accrued liabilities 16,091 11,086 Committed advertising 3,559 1,963 Current maturities of long-term debt 10,521 10,849 -------- -------- Total current liabilities 46,511 39,898 Deferred income taxes 14,920 14,920 Long-term debt 3,180 3,543 Other non-current liabilities 1,983 2,241 Minority interest in subsidiaries 612 722 Common stock and other stockholders' equity 195,253 168,110 -------- -------- $262,459 $229,434 ======== ======== 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 29, August 30, August 29, August 30, 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Operating Revenues: Net Sales $242,371 $244,450 $ 93,070 $ 94,730 Sales by company-operated restaurants 26,416 19,885 9,881 9,438 Service Fees 45,888 44,347 19,202 18,370 Franchise sales and other fees 6,790 7,058 2,798 2,977 Real estate finance and rental income 6,321 5,918 2,156 1,969 Other 4,568 1,071 474 447 -------- -------- -------- -------- 332,354 322,729 127,581 127,931 Operating Expenses: Cost of Sales 217,935 220,530 84,193 85,529 Cost of Sales: company-operated restaurants 23,581 17,430 8,572 8,194 Expenses applicable to real estate finance and rental income 5,880 5,517 1,987 1,811 Selling, general and administrative 35,711 34,442 11,873 12,069 -------- -------- -------- -------- 283,107 277,919 106,625 107,603 -------- -------- -------- -------- Operating Income 49,247 44,810 20,956 20,328 Net Interest Income 3,212 1,685 1,337 531 Minority interest in earnings of consolidated subsidiaries and joint ventures (758) (893) (290) (462) -------- -------- -------- -------- Income before income taxes 51,701 45,602 22,003 20,397 Provision for income taxes 20,320 17,920 8,650 8,010 -------- -------- -------- -------- Net income $ 31,381 $ 27,682 $ 13,353 $ 12,387 ======== ======== ======== ======== Earnings per common and common equivalent shares $ 1.41 $ 1.22 $ .60 $ .55 ======== ======== ======== ======== Average common and common equivalent shares outstanding 22,264 22,773 22,261 22,395 ======== ======== ======== ========
See accompanying notes. INTERNATIONAL DAIRY QUEEN, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Condensed and in Thousands) (Unaudited)
Nine Months Ended ------------------------ August 29, August 30, 1997 1996 ---------- ---------- Net cash provided by operating activities $ 23,225 $ 27,763 Investing Activities: Net investments in marketable securities (1,283) (2,559) Net proceeds from sale of business 5,945 -- Cost of acquisitions, net of cash acquired --- (5,483) Net advances to operators for store renovations and equipment (7,599) (728) Net capital expenditures (2,971) (3,575) Purchase of franchise rights and goodwill (1,455) (3,141) Other 12 62 -------- -------- Cash flows used in investing activities (7,351) (15,424) Financing Activities: Purchase and retirement of common shares (7,593) (14,703) Proceeds from the Exercise of Incentive Stock Options 3,686 1,428 Principal payments on long-term debt (1,057) (810) Other 79 (308) -------- -------- Cash flows used in financing activities (4,885) (14,393) Effect of exchange rate changes on cash (72) (17) -------- -------- Net increase/(decrease) in cash and cash equivalents 10,917 (2,071) Cash and cash equivalents at beginning of year 38,385 34,699 -------- -------- Cash and cash equivalents at end of period $ 49,302 $ 32,628 ======== ========
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 29, 1997 and the condensed consolidated statements of income for the three-month and nine-month periods ended August 29, 1997 and August 30, 1996 and the condensed consolidated statements of cash flows for the nine-month periods ended August 29, 1997 and August 30, 1996. 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, 1996. On March 31, 1997, the Company sold its 60% interest in Firstaff, Inc. Approximately 9(cent)after tax, of earnings per common share for the nine-month period ended August 29, 1997, resulted from this transaction. Earnings per common share amounts are based on the weighted average number of common and common equivalent shares outstanding during each period. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, EARNINGS PER SHARE. Effective for its quarter ending February 28, 1998, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements, the dilutive effect of stock options will be excluded from the calculation of primary earnings per share. The effect of Statement 128 on the calculation of primary and fully diluted earnings per share for the quarters and nine-month periods ended August 29, 1997 and August 30, 1996, is not expected to be significant. The Company's business is seasonal in nature, and the results of operations for the period ended August 29, 1997, 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 11/30/96 Opened Closed Converted Changes 8/29/97 -------- ------ ------ --------- --------- ------- DAIRY QUEEN(R) SYSTEM United States Franchised by the Company: DAIRY QUEEN(R)stores 3,274 53 (69) 0 0 3,258 TREAT CENTER(R)units 150 14 (3) 1 0 162 Franchised by territorial operators 1,577 61 (28) (1) 0 1,609 Company-operated stores 34 0 0 0 0 34 ----- ---- ---- -- ----- ----- 5,035 128 (100) 0 0 5,063 ----- ---- ---- -- ----- ----- Canada Franchised by the Company: DAIRY QUEEN(R)stores 458 13 0 0 0 471 TREAT CENTER(R)units 21 1 0 2 0 24 ----- ---- ---- -- ----- ----- 479 14 0 2 0 495 ----- ---- ---- -- ----- ----- Other Foreign 202 48 (12) 0 0 238 ----- ---- ---- -- ----- ----- Total DAIRY QUEEN(R)stores 5,716 190 (112) 2 0 5,796 ORANGE JULIUS(R)Stores 421 19 (24) (2) 0 414 KARMELKORN(R)Shoppes 61 0 (15) 0 0 46 GOLDEN SKILLET(R)Restaurants 21 1 0 0 0 22 ----- ---- ---- -- ----- ----- TOTAL 6,219 210 (151) 0 0 6,278 ===== ==== ==== == ===== =====
Results of Operations: The improvement in the Company's net income for the third quarter and first nine months of 1997 compared to the similar 1996 periods, reflects for the nine-month period an increase in gross margin dollars on net sales, an increase in service fees, an increase in other income, which for the nine-month period includes the gain from the sale of the Company's 60% interest in Firstaff, Inc., on March 31, 1997, and an increase in net interest income. The increases for the nine-month period were partially offset by an increase in selling general and administrative expenses. 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 1997 with the first nine months of 1996.
Percentage of Revenue Nine Months Ended ------------------------ Percentage August 29, August 30, Increase 1997 1996 (Decrease) ---------- ---------- ------------ Operating Revenues: Net Sales 72.9 75.8 (.9) Sales by company-operated restaurants 8.0 6.2 32.8 Service Fees 13.8 13.7 3.5 Franchise Sales & other fees 2.0 2.2 (3.8) Real estate finance & rental income 1.9 1.8 6.8 Other 1.4 .3 * Total Revenues 100.0 100.0 3.0 ----- ----- Operating Expenses: Cost of Sales 65.6 68.3 (1.2) Cost of Sales: company-operated restaurants 7.1 5.4 35.3 Expense applicable to real estate finance & rental income 1.8 1.7 6.6 Selling, general & administrative 10.7 10.7 3.7 ----- ----- Total Operating Expenses 85.2 86.1 1.9 Operating Income 14.8 13.9 9.9 Net interest income 1.0 .5 90.7 Minority interest (.2) (.3) - ----- ----- Income before income taxes 15.6 14.1 13.4 Provision for income taxes 6.2 5.5 13.4 ----- ----- Net income 9.4 8.6 13.4 ===== =====
* Not meaningful since it includes the gain from the sale of the company's 60% interest in Firstaff, Inc. on March 31, 1997. The decrease of $1,659,477 and $2,078,481 in net sales during the third quarter and first nine months of 1997, respectively, when compared to the similar 1996 periods, resulted primarily from a decrease during the nine-month period of $6,033,543 in permanent and temporary placement and training fees due to the sale by the Company of its 60% interest in Firstaff, Inc. on March 31, 1997, and to a decrease of $877,479 and $2,436,761 in the third quarter and first nine months of 1997, respectively, in unit sales of frozen, non-frozen food, paper, plastics and manufactured novelties to authorized warehouses (who in turn sell to franchisees). These decreases were partially offset by an increase of $807,151 and $2,056,580 in sales of promotional items to DAIRY QUEEN stores, and an increase of $2,486,515 and $4,535,203 in the third quarter and first nine months of 1997, respectively, in equipment sales to franchisees. Sales by Company-operated restaurants increased by $6,531,568 when comparing the first nine months of 1997 with the first nine months of 1996 (December 1, 1995 to August 29, 1996) primarily due to the absence of Company-operated restaurants' operations prior to February 7, 1996. The increase in other income for the nine-month period ended August 29, 1997, when compared to the similar period of 1996, reflects primarily the gain resulting from the Firstaff transaction. The increases in net interest income of $806,078 and $1,527,785 in the third quarter and first nine months of 1997, respectively, are primarily the result of increases 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 increases in net income per share, when comparing the first third quarter and first nine months of 1997 with the first similar periods of 1996, were due to increases in the Company's net income, the gain resulting from the sale of the Company's interest in Firstaff, Inc. (approximately nine cents of the increase for the nine months) and to a decrease in the average number of common and common equivalent shares outstanding. Liquidity and Capital Resources: Available liquid resources at August 29, 1997, include $61.8 million in cash, cash equivalents and marketable securities. The Company believes it has sufficient capital to meet existing and presently anticipated needs. The Company's business is highly seasonal. Historically, the Company has earned a substantial portion of its operating profits during the second and third quarters (spring and summer months). As a result, the Company's working capital is the greatest at the end of the nine-month period, decreasing during the fourth and first quarters of the fiscal year. PART II Item 6. -- Exhibits and Reports on Form 8-K: (a) Exhibits - Exhibit 27, Financial Data Schedule. (b) The Company was not required to file a report on Form 8-K during the quarter ended August 29, 1997. 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 10, 1997 /s/ CHARLES W. MOOTY - ------------------------- ---------------------------------------------- Date Charles W. Mooty Chief Financial Officer, Vice President and Treasurer October 10, 1997 /s/ DAVID M. BOND - ------------------------- ---------------------------------------------- Date David M. Bond Secretary/Assistant Treasurer F450 and Controller EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS NOV-30-1997 DEC-01-1996 AUG-29-1997 49,302 12,542 47,920 548 6,875 119,636 24,945 12,239 262,459 46,511 3,180 0 0 223 195,030 262,459 268,787 332,354 241,516 247,396 35,711 248 886 51,701 20,320 31,381 0 0 0 31,381 1.41 1.41
-----END PRIVACY-ENHANCED MESSAGE-----