-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, MOGDghrg4aNFl40DKVbAOsU13erLCT9K7piTpu5thap6I4hdZ3QQp7HidxA0tQuC rW4j9jaEyxzAushYXW+FKQ== 0000912057-94-001302.txt : 19940411 0000912057-94-001302.hdr.sgml : 19940411 ACCESSION NUMBER: 0000912057-94-001302 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940225 FILED AS OF DATE: 19940408 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL DAIRY QUEEN INC CENTRAL INDEX KEY: 0000051207 STANDARD INDUSTRIAL CLASSIFICATION: 5140 IRS NUMBER: 410852869 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 34 SEC FILE NUMBER: 000-06116 FILM NUMBER: 94521106 BUSINESS ADDRESS: STREET 1: 7505 METRO BLVD CITY: MINNEAPOLIS STATE: MN ZIP: 55439-0286 BUSINESS PHONE: 6128300200 MAIL ADDRESS: STREET 1: PO BOX 39286 CITY: MINNEAPOLIS STATE: MN ZIP: 55439-0286 10-Q 1 FORM 10Q 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 February 25, 1994 ----------------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly 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 April 4, 1994: 15,356,479 Number of registrant's Class B Common Shares outstanding at April 4, 1994: 9,021,448 -1- INTERNATIONAL DAIRY QUEEN, INC. Securities and Exchange Commission Form 10-Q for the First Quarter Ended February 25, 1994 I N D E X Page Number ------ PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Condensed Consolidated Balance Sheet (Unaudited) February 25, 1994 and November 30, 1993 3 Consolidated Statement of Income (Unaudited) Three months ended February 25, 1994 and February 26, 1993 4 Condensed Consolidated Statement of Cash Flows (Unaudited) Three months ended February 25, 1994 and February 26, 1993 5 Notes to Condensed Consolidated Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-9 PART II. OTHER INFORMATION: Item 4. Submission of Matters to a Vote of Security Holders 9 Items 1 through 6 (except Item 4) have been omitted since such items are inapplicable or the answers are negative SIGNATURES 9 -2- PART I INTERNATIONAL DAIRY QUEEN, INC. CONSOLIDATED BALANCE SHEET (Condensed and in Thousands) (Unaudited)
February 25, November 30, 1994 1993 ------------ ------------ ASSETS (Restated) Current Assets: Cash and cash equivalents and marketable securities $ 24,390 $ 31,178 Receivables--net 33,506 26,659 Inventories 5,757 4,561 Other current assets 2,917 2,562 ------- ------- Total current assets 66,570 64,960 Notes receivable and other--net 20,633 23,037 Other revenue producing assets--net: Rental properties 3,189 3,241 Franchise rights and service contracts 86,961 83,771 Miscellaneous 35 39 ------- ------- Total other revenue producing assets 90,185 87,051 Property, plant and equipment--net 9,421 9,350 ------- ------- $186,809 $184,398 ------- ------- ------- ------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Drafts and accounts payable $ 20,379 $ 16,792 Accrued liabilities 9,196 7,779 Committed advertising 775 2,093 Current maturities of long-term debt 280 1,913 ------- ------- Total current liabilities 30,630 28,577 Deferred income taxes and other 15,080 15,234 Long-term debt 24,067 23,902 Common stock and other stockholders' equity 117,032 116,685 ------- ------- $186,809 $184,398 ------- ------- ------- -------
See accompanying notes. -3- INTERNATIONAL DAIRY QUEEN, INC. CONDENSED CONSOLIDATED STATEMENT OF INCOME (In Thousands, Except Per Share Amounts) (Unaudited)
First Quarter Ended --------------------------- February 25, November 30, 1994 1993 ------------ ------------ Operating Revenues: Net sales $47,103 $44,455 Service fees 10,176 9,941 Franchise sales and other fees 1,440 1,316 Real estate finance and rental income 2,200 2,426 Other 258 237 ------- ------- 61,177 58,375 Operating Expenses: Cost of sales 42,538 39,927 Expenses applicable to real estate finance and rental income 2,081 2,299 Selling, general and administrative 9,296 8,968 ------- ------- 53,915 51,194 ------- ------- 7,262 7,181 Net interest income 362 217 ------- ------- Income before income taxes 7,624 7,398 Provision for income taxes 3,010 2,850 ------- ------- Net income $ 4,614 $ 4,548 ------- ------- ------- ------- Earnings per common share and common equivalent share $ .19 $ .18 ------- ------- Coverage common and common equivalent shares outstanding 24,577 25,486 ------- ------- ------- -------
See accompanying notes. -4- INTERNATIONAL DAIRY QUEEN, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Condensed and in Thousands) (Unaudited)
First Quarter Ended --------------------------- February 25, November 30, 1994 1993 ------------ ------------ Net cash (used in) provided by operating activities $(2,071) $ 1,752 Cash flows from investing activities: Marketable securities, net maturities 2,204 -- Net payments received from (advanced to) operators for store renovations and equipment 1,507 (969) Capital expenditures (463) (3,446) Purchase of franchise rights and service contracts (134) (420) Other 5 16 ------- ------- Cash flows provided by (used in) investing activities 3,119 (4,819) Cash flows from financing activities: Principal payments on long-term debt (1,468) (1,663) Purchase and retirement of common shares (4,175) (5,100) Other 19 -- ------- ------- Cash flows used in financing activities (5,624) (6,763) Effect of exchange rate changes on cash (8) 80 ------- ------- Net decrease in cash and cash equivalents (4,584) (9,750) Cash and cash equivalents at beginning of year 21,188 31,243 ------- ------- Cash and cash equivalents at end of period $16,604 $21,493 ------- ------- ------- -------
See accompanying notes. -5- 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 financial position at February 25, 1994, and February 26, 1993, and results of operations and cash flows for the three-month periods then ended. 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, 1993. 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 39.5 percent for the quarter ended February 25, 1994, and 38.5 percent for the comparable period ended February 26, 1993. The Omnibus Budget Reconciliation Act of 1993, which was signed into law on August 10, 1993, increased corporate income tax rates from 34 to 35 percent. On December 1, 1993, the Company adopted Financial Accounting Standards No. 109, "Accounting for Income Taxes" which requires the Company to recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's consolidated financial statements or tax returns. Deferred tax assets and liabilities are calculated based on the difference between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The adoption of FAS 109 resulted in the restatement of the Company's previously issued consolidated financial statements, the principle effect of which was to record a net increase in deferred taxes and a reduction of $9,860,000 in retained earnings as of December 1, 1992. These changes related principally to the differences in the amortization of franchise rights and service contracts for financial statement and income tax purposes. The adoption of FAS 109 had no impact on previously reported net income. 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 three months ended February 25, 1994, may not be indicative of the results for the full year. -6- 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 equip-ment 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, "Orange Julius", "Karmelkorn", and "Golden Skillet" systems.
Converted Total to Treat Ownership Total 11/30/93 Opened Closed Centers Changes 02/25/94 -------- ------ ------ --------- --------- -------- DAIRY QUEEN SYSTEM United States Franchised by the Company: "Dairy Queen" stores 3,083 7 (10) -- 57 3,137 "Treat Center" units 93 1 -- 2 -- 96 Franchised by territorial operators 1,683 7 (9) -- (57) 1,624 Company operated stores 1 -- -- -- -- 1 ----- ---- ---- ---- ---- ----- 4,860 15 (19) 2 0 4,858 ----- ---- ---- ---- ---- ----- Canada Franchised by the Company: "Dairy Queen" stores 420 2 (1) -- -- 421 "Treat Centers" units 18 -- -- -- -- 18 ----- ---- ---- ---- ---- ----- 438 2 (1) 0 0 439 ----- ---- ---- ---- ---- ----- Other foreign 173 9 (3) -- -- 179 ----- ---- ---- ---- ---- ----- Total "Dairy Queen" stores 5,471 26 (23) 2 0 5,476 ----- ---- ---- ---- ---- ----- "Orange Julius" stores 480 2 (3) (2) -- 477 "Karmelkorn" shoppes 95 1 (2) -- -- 94 "Golden Skillet" restaurants 17 2 -- -- -- 19 ----- ---- ---- ---- ---- ----- Total 6,063 31 (28) 0 0 6,066 ----- ---- ---- ---- ---- ----- ----- ---- ---- ---- ---- -----
-7- RESULTS OF OPERATIONS: The improvement in the Company's results of operations for the first quarter of 1994, compared to the first quarter of 1993, reflects an increase in net sales, increased service fees received from stores franchised by the Company and an increase in net interest income. These increases 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 quarter of 1994 with the first quarter of 1993.
Percentage of Revenue Three Months Ended ------------------------- Percentage February 25, February 26, Increase 1994 1993 (Decrease) ------------ ------------ ---------- Operating Revenues: Net sales 77.0 76.2 6.0 Service fees 16.6 17.0 2.4 Franchise sales & other fees 2.4 2.2 9.4 Real estate finance & rental income 3.6 4.2 (9.3) Other .4 .4 9.2 ----- ----- Total Revenues 100.0 100.0 4.8 ----- ----- Operating Expenses: Cost of Sales 69.5 68.4 6.5 Expenses applicable to real estate finance & rental income 3.4 3.9 (9.5) Selling, general & administrative 15.2 15.4 3.5 ----- ----- Total Operating Expenses 88.1 87.7 5.3 ----- ----- Net interest income .6 .4 66.7 Income before income taxes 12.5 12.7 3.1 Provision for income taxes 5.0 4.9 5.6 ----- ----- Net income 7.5 7.8 1.5 ----- ----- ----- ----- ----- -----
The increase of $2,648,400 in net sales resulted primarily from an increase of $1,748,784 in unit sales of perishable (frozen and non-frozen foods) to authorized warehouses (who in turn sell to franchisees), and an increase of $867,325 in permanent and temporary placement fees by Firstaff, Inc. These increases were partially offset by a reduction in the sale of other products sold to authorized warehouses due to the timing of promotional terms which are planned to occur later in the current fiscal year. The increase in net interest income is primarily the result of reduced borrowings ($12 million in long-term debt has been retired since the first quarter of 1993). -8- The one cent increase in net income per share when comparing the first quarter of 1994 with the first quarter of 1993 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 February 25, 1994, include $24.4 million in cash, cash equivalents and marketable securities. The Company's business is highly seasonal with its working capital requirements generally being the greatest during the first six months of its fiscal year. The Company believes it has sufficient capital to meet existing and presently anticipated needs. PART II ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's annual meeting of stockholders was held on Wednesday, March 9, 1994. All members of the Board of Directors were re-elected and the selection of Ernst & Young as independent auditors for the fiscal year ending November 30, 1994 was ratified and approved (7,510,178 shares voted for, 2,630 shares voted against and 756 shares abstained). No additional items requiring a vote were presented. All other items required under Part II have been omitted since they are inapplicable or the answers negative. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the reg- istrant has duly caused this report to be signed on its behalf by the under- signed thereunto duly authorized. International Dairy Queen, Inc. ---------------------------------- (Registrant) April 8, 1994 /s/ Charles W. Mooty - ------------- ---------------------------------- Date Charles W. Mooty Chief Financial Officer, Vice President and Treasurer April 8, 1994 /s/ David M. Bond - ------------- ---------------------------------- Date David M. Bond Secretary/Assistant Treasurer and Controller -9- -----END PRIVACY-ENHANCED MESSAGE-----