-----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, WyeBnfCjBFKRga+L8vBkBzpc0ayicLcBChL0EOpUw4Qiqu3k3VieFS3V0pd4eQsb 7I/39cuN1nUQq2Xp3ZD3Cw== 0000950149-98-000936.txt : 19980513 0000950149-98-000936.hdr.sgml : 19980513 ACCESSION NUMBER: 0000950149-98-000936 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980328 FILED AS OF DATE: 19980512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DREYERS GRAND ICE CREAM INC CENTRAL INDEX KEY: 0000352305 STANDARD INDUSTRIAL CLASSIFICATION: ICE CREAM & FROZEN DESSERTS [2024] IRS NUMBER: 942967523 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14190 FILM NUMBER: 98616032 BUSINESS ADDRESS: STREET 1: 5929 COLLEGE AVE CITY: OAKLAND STATE: CA ZIP: 94618 BUSINESS PHONE: 5106528187 10-Q 1 QUARTERLY REPORT FOR PERIOD ENDING 3-28-98 1 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 March 28, 1998 OR - ----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-14190 DREYER'S GRAND ICE CREAM, INC. (Exact name of registrant as specified in its charter) Delaware No. 94-2967523 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5929 College Avenue, Oakland, California 94618 (Address of principal executive offices) (Zip Code) (510) 652-8187 (Registrant's telephone number, including area code) 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 ------- ------- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.
Shares Outstanding May 8, 1998 ----------- Common stock, $1.00 par value 27,151,680
2 DREYER'S GRAND ICE CREAM, INC. PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DREYER'S GRAND ICE CREAM, INC. CONSOLIDATED BALANCE SHEET
March 28, 1998 December 27, 1997 -------------- ----------------- ($ in thousands, except per share amounts) (unaudited) Assets Current Assets: Cash and cash equivalents $ 4,038 $ 3,626 Trade accounts receivable, net of allowance for doubtful accounts of $761 in 1998 and $710 in 1997 94,681 82,011 Other accounts receivable 20,304 16,527 Inventories 54,415 49,720 Prepaid expenses and other 13,814 14,416 -------- -------- Total current assets 187,252 166,300 Property, plant and equipment, net 236,206 232,826 Goodwill and distribution rights, net 89,419 89,932 Other assets 13,596 13,740 -------- -------- Total assets $526,473 $502,798 ======== ========
See accompanying Notes to Consolidated Financial Statements 2 3 DREYER'S GRAND ICE CREAM, INC. CONSOLIDATED BALANCE SHEET
March 28, 1998 December 27, 1997 -------------- ----------------- (unaudited) ($ in thousands, except per share amounts) Liabilities and Stockholders' Equity Current Liabilities: Accounts payable and accrued liabilities $ 76,296 $ 57,037 Accrued payroll and employee benefits 20,938 22,323 Current portion of long-term debt 8,364 8,364 -------- -------- Total current liabilities 105,598 87,724 Long-term debt, less current portion 178,731 165,913 Deferred income taxes 38,905 40,591 -------- -------- Total liabilities 323,234 294,228 -------- -------- Commitments and contingencies Redeemable convertible preferred stock, $1 par value - 1,008,000 shares authorized; 1,008,000 shares issued and outstanding in 1998 and 1997 99,337 99,230 -------- -------- Stockholders' Equity: Preferred stock, $1 par value - 8,992,000 shares authorized; no shares issued or outstanding in 1998 and 1997 Common stock, $1 par value - 60,000,000 shares authorized; 27,102,000 shares and 27,020,000 shares issued and outstanding in 1998 and 1997, respectively 27,102 27,020 Capital in excess of par 44,020 42,822 Retained earnings 32,780 39,498 -------- -------- Total stockholders' equity 103,902 109,340 -------- -------- Total liabilities and stockholders' equity $526,473 $502,798 ======== ========
See accompanying Notes to Consolidated Financial Statements 3 4 DREYER'S GRAND ICE CREAM, INC. CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
Thirteen Weeks Ended ---------------------------------------- ($ in thousands, except per share amounts) March 28, 1998 March 29, 1997 -------------- -------------- Revenues: Net sales $ 215,082 $ 200,438 Other income 677 404 --------- --------- 215,759 200,842 --------- --------- Costs and expenses: Cost of goods sold 178,968 162,251 Selling, general and administrative 43,452 36,184 Interest, net of interest capitalized 2,667 2,489 --------- --------- 225,087 200,924 --------- --------- Loss before income taxes (9,328) (82) Income tax benefit (3,703) (32) --------- --------- Net loss (5,625) (50) Accretion of preferred stock to redemption value (106) (106) Preferred stock dividends (174) (1,144) --------- --------- Net loss applicable to common stock $ (5,905) $ (1,300) ========= ========= Net loss per common share: Basic $ (.22) $ (.05) ========= ========= Diluted $ (.22) $ (.05) ========= ========= Dividends per common share $ .03 $ .03 ========= =========
See accompanying Notes to Consolidated Financial Statements 4 5 DREYER'S GRAND ICE CREAM, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
Common Stock ----------------------- Capital in Retained (In thousands) Shares Amount Excess of Par Earnings Total -------- -------- -------- -------- -------- Balance at December 28, 1996 13,345 $ 13,345 $ 51,956 $ 38,762 $104,063 Net loss (50) (50) Accretion of preferred stock to redemption value (106) (106) Preferred stock dividends declared (1,144) (1,144) Common stock dividends declared (803) (803) Repurchases and retirements of common stock (4) (4) (110) (114) Employee stock plans 60 60 1,631 1,691 -------- -------- -------- -------- -------- Balance at March 29, 1997 13,401 $ 13,401 $ 53,477 $ 36,659 $103,537 ======== ======== ======== ======== ======== Balance at December 27, 1997 27,020 $ 27,020 $ 42,822 $ 39,498 $109,340 Net loss (5,625) (5,625) Accretion of preferred stock to redemption value (106) (106) Preferred stock dividends declared (174) (174) Common stock dividends declared (813) (813) Employee stock plans 82 82 1,198 1,280 -------- -------- -------- -------- -------- Balance at March 28, 1998 27,102 $ 27,102 $ 44,020 $ 32,780 $103,902 ======== ======== ======== ======== ========
See accompanying Notes to Consolidated Financial Statements 5 6 DREYER'S GRAND ICE CREAM, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Thirteen Weeks Ended ----------------------- ($ in thousands) March 28, March 29, 1998 1997 -------- -------- Cash flows from operating activities: Net loss $ (5,625) $ (50) Adjustments to reconcile net loss to cash from operations: Depreciation and amortization 8,406 7,618 Deferred income taxes (1,686) (17) Changes in assets and liabilities, net of amounts acquired: Trade accounts receivable (12,670) (14,576) Other accounts receivable (3,777) 1,011 Inventories (4,695) (6,419) Prepaid expenses and other 602 2,210 Accounts payable and accrued liabilities 19,252 20,740 Accrued payroll and employee benefits (1,385) 1,518 -------- -------- (1,578) 12,035 -------- -------- Cash flows from investing activities: Acquisition of property, plant and equipment (10,884) (6,059) Retirement of property, plant and equipment 135 310 Increase in goodwill and distribution rights (299) (96) Increase in other assets (81) (436) -------- -------- (11,129) (6,281) -------- -------- Cash flows from financing activities: Proceeds from long-term debt 17,600 Reductions in long-term debt (4,782) (7,889) Issuance of common stock under employee stock plans 1,280 1,691 Repurchases of common stock (114) Cash dividends paid (979) (1,944) -------- -------- 13,119 (8,256) -------- -------- Increase (decrease) in cash and cash equivalents 412 (2,502) Cash and cash equivalents, beginning of period 3,626 4,134 -------- -------- Cash and cash equivalents, end of period $ 4,038 $ 1,632 ======== ======== Supplemental Cash Flow Information- Cash paid (refunded) during the period for: Interest (net of amounts capitalized) $ 1,883 $ 1,960 Income taxes (net of refunds) 85 (2,832)
See accompanying Notes to Consolidated Financial Statements 6 7 DREYER'S GRAND ICE CREAM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - General: Dreyer's Grand Ice Cream, Inc. and its subsidiaries (the Company) is a single segment industry company engaged in the business of manufacturing and distributing premium ice cream and other frozen dessert products to grocery and convenience stores, foodservice accounts and independent distributors in the United States. The consolidated financial statements for the thirteen week periods ended March 28, 1998 and March 29, 1997 have not been audited by independent public accountants, but include all adjustments, such as normal recurring accruals, which management considers necessary for a fair presentation of the consolidated operating results for the periods. The statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosure normally included in financial statements prepared in conformity with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The operating results for interim periods are not necessarily indicative of results to be expected for an entire year. The aforementioned statements should be read in conjunction with the Consolidated Financial Statements for the year ended December 27, 1997, appearing in the Company's 1997 Annual Report to Stockholders. NOTE 2 - Inventories: Inventories are stated at the lower of cost (determined by the first-in, first-out method) or market. Inventories at March 28, 1998 and December 27, 1997 consisted of the following (in thousands):
March 28, December 27, 1998 1997 --------- ------------ (unaudited) Raw materials $ 8,211 $ 7,411 Finished goods 46,204 42,309 ------- ------- $54,415 $49,720 ======= =======
NOTE 3 - Net Loss Per Common Share: Net loss per common share is computed using the weighted average number of shares of common stock outstanding during the period, which were 27,041,000 shares for the quarter ended March 28, 1998 and 26,736,000 shares for the quarter ended March 29, 1997. The potentially dilutive effect of the Company's redeemable convertible preferred stock and other common stock equivalents was anti-dilutive for the thirteen week periods ended March 28, 1998 and March 29, 1997. Accordingly, diluted net loss per common share is the same as basic net loss per common share. 7 8 NOTE 4 - Preoperating Costs: In April 1998, the Accounting Standards Executive Committee issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" (SOP 98-5). SOP 98-5 requires that the cost of start-up activities, including preoperating costs, should be expensed as incurred. This new accounting standard is effective for financial statements for periods beginning after December 15, 1998. The Company currently capitalizes preoperating costs incurred during the construction and start-up of new manufacturing and distribution facilities and amortizes these costs over three years. Upon adoption of SOP 98-5, the Company will expense unamortized preoperating costs in the first quarter of 1999 as a cumulative change in accounting principle. The Company does not expect the adoption of SOP 98-5 to have a material adverse effect on its financial position. 8 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table sets forth for the periods indicated the percent which the items in the Consolidated Statement of Operations bear to net sales and the percentage change of such items compared to the indicated prior period:
Percentage of Net Sales ---------------------------- Period-to-Period Thirteen Weeks Ended Increase (Decrease) ---------------------------- ------------------- March 28, March 29, Thirteen Weeks 1998 1998 1997 Compared to 1997 -------- --------- ------------------- Revenues: Net sales 100.3% 7.3% 7.3% Other income 0.3 0.2 67.6 ----- ----- Total revenue 100.3 100.2 7.4 ----- ----- Costs and expenses: Cost of goods sold 83.2 80.9 10.3 Selling, general and administrative 20.2 18.1 20.1 Interest, net of interest capitalized 1.2 1.2 7.2 ----- ----- Total costs and expenses 104.6 100.2 12.0 ----- ----- Loss before income taxes (4.3) (0.0) NM Income tax benefit (1.7) (0.0) NM ----- ----- Net loss (2.6) 0.0 NM ----- ----- Accretion of preferred stock to redemption value 0.1 0.1 0.0 Preferred stock dividends 0.1 0.6 (84.8) ----- ----- Net loss applicable to common stock (2.8)% (0.7)% (354.2) ===== =====
9 10 FORWARD LOOKING STATEMENTS The Company may from time to time make written or oral forward-looking statements. Written forward-looking statements may appear in documents filed with the Securities and Exchange Commission, in press releases, and in reports to stockholders. The Private Securities Litigation Reform Act of 1995 contains a "safe harbor" for forward-looking statements upon which the Company relies in making such disclosures. In accordance with this "safe harbor" provision, we have identified that forward-looking statements are contained in this Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances. Also, in connection with this "safe harbor" provision, the Company identifies important factors that could cause the Company's actual results to differ materially from those contained in any forward-looking statement made by or on behalf of the Company. Any such statement is qualified by reference to the cautionary statement set forth below and in the Company's other filings with the Securities and Exchange Commission. RESULTS OF OPERATIONS Strategic Plan The Company embarked on a strategic plan (the Strategic Plan) during the second quarter of 1994 to accelerate the sales of its brand throughout the country. The key elements of this plan are: 1) to build a high margin brand with a leading market share through effective consumer marketing activities, 2) to expand the Company's direct-store-delivery distribution network to national scale and enhance this capability with sophisticated information and logistics systems and 3) to introduce innovative new products. The potential benefits of the Strategic Plan are increased market share and future earnings above those levels that would be attained in the absence of the Strategic Plan. The Company continues to make significant progress against the key elements of the Strategic Plan. This progress has yielded a leading market share in a consolidating industry. The Company's direct-store-delivery system has now reached national scope and includes emerging category management and demand management capabilities. The Company has launched a wide range of new product initiatives including the national roll-outs of Whole Fruit Sorbet, Starbucks(R) Ice Cream and Dreyer's and Edy's Homemade Ice Cream. In light of these successes, the Company believes that the benefits under the Strategic Plan will be realized in future years. However, no assurance can be given that the expectations relative to future market share and earnings benefits of the strategy will be achieved. The realization of the benefits will depend upon, among other things, consumer purchase responsiveness to the Company's new products and increased marketing and promotion expenditures, competitors' marketing and promotion responses, market conditions affecting the price of the Company's products, commodity costs and efficiencies achieved in manufacturing and distribution operations. Thirteen Weeks ended March 28, 1998 Compared with Thirteen Weeks Ended March 29, 1997 Consolidated net sales for the first quarter of 1998 increased by $14,644,000, or 7%, to $215,082,000 from $200,438,000 for the same period last year. Sales of the Company's branded products were 9%, or $11,333,000, higher than the comparable quarter in 1997 and accounted for 77% of the overall increase. The increase in sales of the Company's branded products related primarily to higher unit sales in all markets due in part to the continued higher promotion spending under the Company's Strategic Plan. The products that led this increase were Dreyer's and Edy's Homemade Ice Cream and Dreyer's and Edy's Grand Ice Cream, more than offsetting declines in sales of the Company's better-for-you frozen yogurt, sugar free and fat free products. Sales of branded products purchased from other manufacturers (partner brands) increased 4% due to increases in sale of Ben and Jerry's Homemade(R) Superpremium products, partially offset by declines in Healthy Choice(R) Lowfat Ice Cream sales. Sales of partner brands represented 36% of consolidated net sales compared with 37% in the same period last year. Wholesale prices for the Company's branded products remained relatively unchanged between these periods, before the effect of increased trade promotion expense. The effect of price increases for partner brands was not significant. Cost of goods sold increased $16,717,000, or 10%, over the first quarter of 1997, while the overall gross margin decreased to 16.8% from 19.1%. The gross margin decreased due to lower margins on company brands in 1998 caused by higher dairy costs and a shift in the mix of products. 10 11 Selling, general and administrative expenses in the first quarter of 1998 were $7,268,000 or 20%, higher than in the same period of 1997. This increase related primarily to significantly higher trade promotion expenses in the first quarter of 1998 compared with the same period in 1997. Selling, general and administrative expenses increased to 20% of total sales in 1998 as compared to 18% of total sales in 1997. Interest expense increased $178,000, or 7%, over the first quarter of 1997, due primarily to additional interest expense due to higher average borrowings on the Company's line of credit. The income tax benefit increased due to a correspondingly higher pre-tax loss in 1998. The effective tax rate increased to 39.7% for the first quarter of 1998 from 39.3% for the first quarter of 1997. LIQUIDITY AND CAPITAL RESOURCES Working capital at March 28, 1998 increased $3,078,000 from year-end 1997 due primarily to the seasonal increase in accounts payable and accrued liabilities partially offset by an increase in trade accounts receivable. Cash was provided primarily from borrowings on the Company's line of credit and was used to fund a $10,884,000 increase in property, plant and equipment. At March 28, 1998, the Company had $4,038,000 in cash and cash equivalents, and an unused credit line of $45,000,000. The Company believes that its credit line, along with its liquid resources, internally generated cash and financing capacity, are adequate to meet anticipated operating and capital requirements. 11 12 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. DREYER'S GRAND ICE CREAM, INC. Dated: May 12, 1998 By: /s/ Timothy F. Kahn ------------------------------------------ Timothy F. Kahn Vice President - Finance and Administration and Chief Financial Officer 12 13 PART II: OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. No reports on Form 8-K were filed by the Company during the quarter ended March 28, 1998. b. Exhibits Exhibit No. Description 10.1 Amended and Restated Credit Agreement dated as of March 27, 1998 by and among Dreyer's Grand Ice Cream, Inc., Bank of America National Trust and Savings Association, as one of the Banks and as Agent, ABN AMRO Bank, N.V., as one of the Banks and as Co-Agent, Credit Suisse First Boston and Union Bank of California, N.A. 27 Financial Data Schedule. EX-10.1 2 AMENDED AND RESTATED CREDIT AGREEMENT 3-27-98 1 EXHIBIT 10.1 AMENDED AND RESTATED CREDIT AGREEMENT THIS AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of March 27, 1998 by and among DREYER'S GRAND ICE CREAM, INC., a Delaware corporation (the "Company"); the several financial institutions from time to time party to this agreement (collectively, the "Banks"); BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for the Banks (the "Agent"); and ABN AMRO BANK N.V., San Francisco International Branch, as co-agent (the "Co-Agent"). RECITALS A. WHEREAS, the Company, the Banks, the Agent and the Co-Agent are parties to a Credit Agreement dated as of December 22, 1995, as amended as of April 15, 1996 and December 26, 1997 (the "Agreement"), pursuant to which the Agent and the Banks have extended certain credit facilities to the Company; and B. WHEREAS, the Company and BofA, ABN AMRO Bank, N.V. and Union Bank of California, N.A. (collectively, the "Majority Banks") desire to amend the Agreement as set forth herein and to restate the Agreement in its entirety to read as set forth in the Agreement with the amendments specified below; and C. WHEREAS, Credit Suisse First Boston (formerly "Credit Suisse") desires to agree and consent solely to the provisions of, and amendments set forth in, Subsections 2(a)(1) (Applicable Margin), 2(a)(4) (Interest Period), 2(a)(5) (Offshore Rate), 2(b) (Amendments to Subsection 2.09(c)(Commitment Fees)), 2(c) (Repayment of Credit Suisse First Boston and Termination of Credit Suisse First Boston's Commitment), and 2(j) (Purchase and Assignment of Loans and Amendment to Schedule 2.01 (Commitments)) below. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Definitions; References. (a) Unless otherwise defined herein, capitalized terms used herein shall have the meanings, if any, assigned to them in the Agreement as amended and restated hereby. (b) Each reference to "hereof", "hereunder", "herein", and "hereby" and each other similar reference and each reference to "this agreement" and each other similar reference contained in the Agreement and in the other Loan Documents shall from and after the date hereof refer to the Agreement as amended and restated hereby. -1- 2 2. Amendments to Agreement. (a) Amendments to Section 1.01 (Certain Defined Terms). (1) The Company and the Banks agree that the definition of "Applicable Margin" in Section 1.01 of the Agreement is amended in its entirety to read as follows: "Applicable Margin" means for each period from the date which is three Business Days after the date the Agent receives a Compliance Certificate pursuant to Section 6.02(b) (the "Current Compliance Certificate") through the date which is two Business Days after the Agent receives the next such Compliance Certificate, and for each Loan made, converted, or continued during such period, if the current Compliance Certificate shows the Company's Funded Debt/EBITDA Ratio is:
==================================================================================================== 2.50 or 3.00 or 3.50 or above and above and above and For Each Below 2.50 below 3.00 below 3.50 below 4.00 4.00 or above - ---------------------------------------------------------------------------------------------------- Offshore 0.500% 0.625% 0.750% 0.875% 1.000% Rate Loan - ---------------------------------------------------------------------------------------------------- Base Rate 0.000% 0.000% 0.000% 0.000% 0.000% Loan - ---------------------------------------------------------------------------------------------------- Same Day 0.500% 0.625% 0.750% 0.875% 1.000% Rate Loan ====================================================================================================
(2) The Company and the Majority Banks agree that the definition of "Arranger" in Section 1.01 of the Agreement is amended in its entirety to read as follows: "Arranger" means BancAmerica Robertson Stephens, a Delaware corporation. (3) The Company and the Majority Banks agree that the definition of "Funded Debt" in Section 1.01 of the Agreement is amended in its entirety to read as follows: "Funded Debt" of any Person means, without duplication, (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than trade payables entered into in the ordinary course of business on ordinary -2- 3 terms); (c) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (d) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property); (e) all obligations with respect to capital leases; and (f) in the case of the Company, the current portion of mandatory redeemable Series A Preferred Stock; provided, however, that the Company's Funded Debt at each quarterly measurement period shall include the reductions shown in the following table to accommodate increases in the Company's seasonal debt: Fiscal quarter ending in: - ---------------------------------------------------------------------- March $20,000,000 - ---------------------------------------------------------------------- June $50,000,000 - ---------------------------------------------------------------------- September $40,000,000 - ---------------------------------------------------------------------- December $0 ======================================================================
(4) The Company and the Banks agree that clause (iii) of the definition of "Interest Period" in Section 1.01 of the Agreement is amended in its entirety to read as follows: (iii) no Interest Period for any Loan shall extend beyond December 31, 2000. (5) The Company and the Banks agree that the definition of "Offshore Rate" in Section 1.01 of the Agreement is amended in its entirety to read as follows: "Offshore Rate" means, for any Interest Period, with respect to Offshore Rate Loans comprising part of the same Borrowing, the rate of interest per annum at which dollar deposits in the approximate amount of BofA's Offshore Rate Loan for such Interest Period would be offered by BofA's applicable Lending Office to major banks in the London interbank market upon request of such banks at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period. (6) The Company and the Banks agree that the definition of "Revolving Termination Date" in Section 1.01 of the Agreement is amended in its entirety to read as follows: "Revolving Termination Date" means the earlier to occur of: -3- 4 (a) December 31, 2000; and (b) the date on which the Commitments terminate in accordance with the provisions of this Agreement. (b) Amendments to Subsection 2.09(c)(Commitment Fees). (1) The Company and the Banks agree that the phrase "average daily unused portion" in Subsection 2.09(c)(1) of the Agreement is amended in its entirety to read "actual daily unused portion". (2) The Company and the Banks agree that the chart in Subsection 2.09(c)(1)(B) of the Agreement is amended in its entirety to read as follows: Below 3.00 0.250% per annum 3.00 or above 0.375% per annum (c) Repayment of Credit Suisse First Boston and Termination of Credit Suisse First Boston's Commitment. The Company and the Banks agree that Article II of the Agreement is amended by the addition of the following new Section 2.14: 2.14 Repayment of Credit Suisse First Boston and Termination of Credit Suisse First Boston's Commitment. On December 31, 1999 (i) the Company shall pay to the Agent for the account of Credit Suisse First Boston an amount equal to the aggregate unpaid principal amount of all outstanding Loans of Credit Suisse First Boston, all interest accrued and unpaid thereon, and all other amounts owing or payable to Credit Suisse First Boston hereunder or under any other Loan Document and (ii) the Commitment of Credit Suisse First Boston shall be canceled and terminated. If for any reason the Company fails to pay to the Agent for the account of Credit Suisse First Boston the full amount specified in the immediately preceding sentence, then all payments by the Company on December 31, 1999 and thereafter shall be distributed by the Agent on the same basis as though Credit Suisse First Boston's Commitment had not been canceled and terminated. (d) Amendment to Section 7.11 (Restricted Payments). The Company and the Majority Banks agree that the words "except that the Company and any Wholly- Owned Subsidiary may" in the first paragraph of Section 7.11 of the Agreement are amended in their entirety to read as follows: except that if no Default or Event of Default exists or would exist after giving effect thereto, the Company and any Wholly-Owned Subsidiary may -4- 5 (e) Amendment to Section 7.13 (Consolidated Net Worth). The Company and the Majority Banks agree that Section 7.13 of the Agreement is amended in its entirety to read as follows: 7.13 Consolidated Net Worth. The Company shall not permit its Consolidated Net Worth at any time during any fiscal quarter to be less than the sum of (i) $185,000,000; plus (ii) 75% of the Company's consolidated net income for each fiscal quarter beginning with the second fiscal quarter of 1998 (with no deduction for losses); plus (iii) 75% of Net Issuance Proceeds of any stock offerings or subordinated debt incurred since March 27, 1998. (f) Amendment to Subsection 7.14(a) (Minimum Fixed Charge Coverage Ratio). The Company and the Majority Banks agree that Subsection 7.14(a) of the Agreement is amended in its entirety to read as follows: (a) The Company shall not permit its Fixed Charge Coverage Ratio: ======================================================================================= To be less than: For the period consisting of the four consecutive fiscal quarters ending on the last day of its: - --------------------------------------------------------------------------------------- 2.00 First, second, third and fourth fiscal quarters of 1998 - --------------------------------------------------------------------------------------- 2.50 First fiscal quarter of 1999 and each fiscal quarter thereafter =======================================================================================
(g) Amendment to Section 7.15 (Funded Debt/EBITDA Ratio). The Company and the Majority Banks agree that Section 7.15 of the Agreement is amended in its entirety to read as follows: 7.15 Funded Debt/EBITDA Ratio. The Company shall not permit its Funded Debt/EBITDA Ratio to be greater than: (1) 4.25 for its first fiscal quarter in 1998; (2) 3.75 for its second, third and fourth fiscal quarters in 1998 and its first fiscal quarter in 1999; (3) 3.50 for its second, third and fourth fiscal quarters in 1999; and (4) 3.00 for its first fiscal quarter in 2000 and each of its fiscal quarters thereafter. -5- 6 (h) Amendment to Section 7.18 (Other Contracts). The Company and the Majority Banks agree that Section 7.18 of the Agreement is amended in its entirety to read as follows: 7.18 Other Contracts. (a) The Company shall not enter into any employment contracts or other employment or service-retention arrangements whose terms, including salaries, benefits and other compensation, are not normal and customary. (b) After March 27, 1998, the Company shall not enter into, and shall not suffer or permit any Subsidiary to enter into, any other agreement that would prohibit or restrict the ability of any Subsidiary to make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any share of any class of its capital stock now or hereafter outstanding; provided, however, that the foregoing provisions of this Subsection 7.18(b) shall not apply to any Subsidiary until 90 days after the date such Subsidiary first became a Subsidiary. (i) Amendment to Subsection 10.08(a) (Assignments, Participation, etc.). The Company and the Majority Banks agree that Subsection 10.08(a) of the Agreement is amended to change the processing fee in clause (iii) of the proviso in Subsection 10.08(a) from "$3,000" to "$3,500". (j) Purchase and Assignment of Loans and Amendment to Schedule 2.01 (Commitments). The Company and the Banks agree as follows: (1) On April 30, 1998, Union Bank of California, N.A. will purchase and assume from Credit Suisse First Boston, and Credit Suisse First Boston will sell and assign to Union Bank of California, N.A., the following percentage of (i) the Loans of Credit Suisse First Boston outstanding on such date and (ii) all related rights, benefits, obligations, liabilities and indemnities of Credit Suisse First Boston under and in connection with the Agreement and the Loan Documents:
Percentage of Credit Suisse Bank First Boston's Outstanding Loans ---- -------------------------------- Union Bank of California, N.A. 14.285714258%
As consideration for such sale and assignment, Union Bank shall pay to Credit Suisse First Boston an amount equal to the percentage set forth above opposite its name of the principal amount of all Loans by Credit Suisse First Boston outstanding on such date. No processing fee will be payable with respect to such sales and assignments. -6- 7 (2) Immediately upon the completion of such sales and assignments, and without further action by the parties, Schedule 2.01 (Commitments) of the Agreement shall be amended in its entirety to read as set forth in Exhibit A hereto. (3) In the event that any Notice of Borrowing is given by the Company requesting a Borrowing Date on April 30, 1998, then, subject to the terms and conditions of the Agreement, such Borrowing shall be funded by the Banks in accordance with their Pro Rata Share after giving effect to the amendment of Schedule 2.01 of the Agreement (Commitments) pursuant to Subsection 2(i)(2) above. (k) Amendments to Schedule 2 of the Compliance Certificate. The Company and the Majority Banks agree as follows: (1) The words "except that the Company and any Wholly-Owned Subsidiary may" in the first paragraph of the portion of Schedule 2 of the Compliance Certificate relating to Section 7.11 of the Agreement is amended in its entirety to read as set forth below: except that if no Default or Event of Default exists or would exist after giving effect thereto, the Company and any Wholly-Owned Subsidiary may (2) The portion of Schedule 2 of the Compliance Certificate relating to Section 7.13 of the Agreement is amended in its entirety to read as set forth in Exhibit B hereto. (3) The portion of Schedule 2 of the Compliance Certificate relating to Section 7.14 of the Agreement is amended in its entirety to read as set forth in Exhibit C hereto. (4) The portion of Schedule 2 of the Compliance Certificate relating to Section 7.15 of the Agreement is amended in its entirety to read as set forth in Exhibit D hereto. 3. Representations and Warranties. The Company hereby represents, warrants and covenants to the Agent and the Banks as follows: (a) After giving effect to this agreement, no Default or Event of Default has occurred and is continuing. (b) The execution, delivery and performance by the Company of this agreement and the Agreement as amended and restated by this agreement have been duly authorized by all necessary corporate and other action and does not and will not require any registration with, consent or approval of, notice to or action by, any Person (including any Governmental Authority) in order to be effective and enforceable. The Agreement as amended and restated by this agreement constitutes -7- 8 the legal, valid and binding obligations of the Company, enforceable against it in accordance with its terms, without defense, counterclaim or offset. (c) The execution, delivery and performance by the Company of this agreement will not (i) contravene the terms of any of the Company's Organization Documents, (ii) conflict with or result in any breach or contravention of, or the creation of any Lien under, any document evidencing any Contractual Obligation to which the Company is a party or any order, injunction, writ or decree of any Governmental Authority to which the Company or its property is subject, or (iii) violate any Requirement of Law. (d) All representations and warranties of the Company contained in the Agreement are true and correct. (e) The Company is entering into this agreement on the basis of its own investigation and for its own reasons, without reliance upon the Agent, the Banks or any other Person. 4. Effective Date. (a) This agreement will become effective as of March 27, 1998 (the "Effective Date"), provided that each of the following conditions precedent is satisfied: (1) The Agent shall have received from the Company and the Majority Banks a duly executed original (or, if elected by the Agent, an executed facsimile copy) of this agreement. (2) The Agent shall have received from the Company, in form and substance satisfactory to the Agent and the Majority Banks, a copy of a resolution passed by the Company's board of directors, certified by the Secretary or an Assistant Secretary of the Company as being in full force and effect on the date of execution hereof, authorizing the execution, delivery and performance of this agreement. (3) All representations and warranties contained herein shall be true and correct as of the Effective Date. (4) The Agent shall have received, in form and substance satisfactory to the Agent and the Majority Banks, an opinion of Manwell & Milton, counsel to the Company and addressed to the Agent and the Banks as to the matters set forth in Subsections 3(b) and (c) of this agreement. (5) The Agent shall have received evidence of payment by the Company of all accrued and unpaid fees, costs and expenses to the extent then due and payable on the Effective Date, together with Attorney Costs of the Agent to the extent invoiced prior to or on the Effective Date, plus such additional amounts of Attorney Costs as shall constitute the Agent's reasonable estimate of Attorney Costs -8- 9 incurred or to be incurred by it through the Effective Date (provided that such estimate shall not thereafter preclude final settling of accounts between the Company and the Agent); including all fees required by the letter agreement between the Company and the Arranger dated March 27, 1998. (6) The Agent has received, in form and substance satisfactory to the Agent and the Majority Banks, all other documents it may reasonably request relating to any matters relevant hereto. For purposes of determining compliance with the foregoing conditions specified in this Section 4, each Bank that has executed this Amended and Restated Credit Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Agent to such Bank for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to, such Bank. (b) From and after the Effective Date, the Agreement is amended as set forth herein and is restated in its entirety to read as set forth in the Agreement with the amendments specified herein. The Company represents and warrants that its obligations under the Agreement and under the other Loan Documents are not subject to any defense, counterclaim, set-off, right of recoupment, abatement or other claim. 5. Miscellaneous. (a) This agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. No third party beneficiaries are intended in connection with this agreement. (b) This agreement shall be governed by and construed in accordance with the law of the State of California. (c) This agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Each of the parties hereto understands and agrees that this document (and any other document required herein) may be delivered by any party thereto either in the form of an executed original or an executed original sent by facsimile transmission to be followed promptly by mailing of a hard copy original, and that receipt by the Agent of a facsimile transmitted document purportedly bearing the signature of a Bank or the Company shall bind such Bank or the Company, respectively, with the same force and effect as the delivery of a hard copy original. Any failure by the Agent to receive the hard copy executed original of such document shall not diminish the binding effect of receipt of the facsimile transmitted executed original of such document of the party whose hard copy page was not received by the Agent. -9- 10 (d) If any term or provision of this agreement shall be deemed prohibited by or invalid under any applicable law, such provision shall be invalidated without affecting the remaining provisions of this agreement or the Agreement. (e) The Company covenants to pay to or reimburse the Agent, the Arranger and the Banks, upon demand, for all costs and expenses (including costs and expenses of outside counsel and allocated costs of in-house counsel) incurred in connection with the development, preparation, negotiation, execution and delivery of this agreement and the administration hereof, including without limitation any and all syndication costs and expenses, closing costs and expenses, and appraisal, audit, search and filing fees incurred in connection herewith. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amended and Restated Credit Agreement as of the date first above written. DREYER'S GRAND ICE CREAM, INC. By:____________________________________ Name:__________________________________ Title:_________________________________ BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By:____________________________________ Name:__________________________________ Title:_________________________________ ABN AMRO BANK N.V., as Co-Agent By:____________________________________ Name:__________________________________ Title:_________________________________ By:____________________________________ Name:__________________________________ Title:_________________________________ -10- 11 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank By:____________________________________ Name:__________________________________ Title:_________________________________ ABN AMRO BANK N.V., as a Bank By:____________________________________ Name:__________________________________ Title:_________________________________ By:____________________________________ Name:__________________________________ Title:_________________________________ CREDIT SUISSE FIRST BOSTON By:____________________________________ Name:__________________________________ Title:_________________________________ By:____________________________________ Name:__________________________________ Title:_________________________________ UNION BANK OF CALIFORNIA, N.A. By:____________________________________ Name:__________________________________ Title:_________________________________ By:____________________________________ Name:__________________________________ Title:_________________________________ -11- 12 EXHIBIT A TO AMENDED AND RESTATED CREDIT AGREEMENT Schedule 2.01 Commitments A. Commitment from April 30, 1998 to December 31, 1999:
========================================================================================= BANK COMMITMENT PRO RATA SHARE - ----------------------------------------------------------------------------------------- BANK OF AMERICA NATIONAL TRUST $ 65,000,000.00 37.142857143% AND SAVINGS ASSOCIATION - ----------------------------------------------------------------------------------------- ABN AMRO BANK N.V. 60,000,000.00 34.285714286% - ----------------------------------------------------------------------------------------- CREDIT SUISSE FIRST BOSTON 25,714,285.71 14.693877549% - ----------------------------------------------------------------------------------------- UNION BANK OF CALIFORNIA, N.A. 24,285,714.29 13.877551023% - ----------------------------------------------------------------------------------------- TOTAL $175,000,000.00 100.000000000% =========================================================================================
B. Commitment from December 31, 1999* to the Revolving Termination Date:
========================================================================================= BANK COMMITMENT PRO RATA SHARE - ----------------------------------------------------------------------------------------- BANK OF AMERICA NATIONAL TRUST $ 65,000,000.00 43.540669855% AND SAVINGS ASSOCIATION - ----------------------------------------------------------------------------------------- ABN AMRO BANK N.V. 60,000,000.00 40.191387558% - ----------------------------------------------------------------------------------------- CREDIT SUISSE FIRST BOSTON 0 0 - ----------------------------------------------------------------------------------------- UNION BANK OF CALIFORNIA, N.A. 24,285,714.29 16.267942586% - ----------------------------------------------------------------------------------------- TOTAL $149,285,714.29 100.000000000% =========================================================================================
* On which date the Company shall repay the amount, if any, by which the aggregate principal of outstanding Loans exceeds the combined Commitments. -12- 13 EXHIBIT B TO AMENDED AND RESTATED CREDIT AGREEMENT "7.13 Consolidated Net Worth. The Company shall not permit its Consolidated Net Worth at any time during any fiscal quarter to be less than the sum of (i) $185,000,000; plus (ii) 75% of the Company's consolidated net income for each fiscal quarter beginning with the second fiscal quarter of 1998 (with no deduction for losses); plus (iii) 75% of Net Issuance Proceeds of any stock offerings or subordinated debt incurred since March 27, 1998." ========================================================================================== 1. (a) Base amount $185,000.000.00 - ------------------------------------------------------------------------------------------ (b) 75% of the Company's consolidated net income for each fiscal quarter beginning with the second fiscal quarter of 1998 (with no deduction for losses) $______________ - ------------------------------------------------------------------------------------------ (c) 75% of Net Issuance Proceeds of any stock offerings $______________ incurred since March 27, 1998 - ------------------------------------------------------------------------------------------ (d) 75% of Net Issuance Proceeds of any subordinated $______________ debt incurred since March 27, 1998 - ------------------------------------------------------------------------------------------ 2. Sum of 1(a), 1(b), 1(c) and (d) or required Consolidated $______________ Net Worth - ------------------------------------------------------------------------------------------ 3. Actual Consolidated Net Worth $______________ ==========================================================================================
-13- 14 EXHIBIT C TO AMENDED AND RESTATED CREDIT AGREEMENT "7.14 Minimum Fixed Charge Coverage Ratio. (a) The Company shall not permit its Fixed Charge Coverage Ratio:
======================================================================================= To be less than: For the period consisting of the four consecutive fiscal quarters ending on the last day of its: - --------------------------------------------------------------------------------------- 2.00 First, second, third and fourth fiscal quarters of 1998 - --------------------------------------------------------------------------------------- 2.50 First fiscal quarter of 1999 and each fiscal quarter thereafter =======================================================================================
(b) For purposes of this Section, Fixed Charge Coverage Ratio means the ratio of "A" to "B" where: "A" means the sum of EBITDA plus current operating lease expenses; and "B" means interest expense plus current operating lease expenses; in all cases computed on a consolidated basis and measured at the end of the relevant fiscal quarter for the four successive fiscal quarters ending on the last day of such fiscal quarter." ======================================================================================== A = - ---------------------------------------------------------------------------------------- 1. EBITDA $____________ - ---------------------------------------------------------------------------------------- 2. Current operating lease expenses $____________ - ---------------------------------------------------------------------------------------- A = 1 + 2 $____________ ======================================================================================== ======================================================================================== B = - ---------------------------------------------------------------------------------------- 1. Interest expense $____________ - ---------------------------------------------------------------------------------------- 2. Current operating lease expenses $____________ - ---------------------------------------------------------------------------------------- A = 1 + 2 $____________ ========================================================================================
RATIO OF A TO B = _________________ REQUIRED RATIO AS SET FORTH IN SECTION 17.14(a): NOT LESS THAN ________________ -14- 15 EXHIBIT D TO AMENDED AND RESTATED CREDIT AGREEMENT "7.15 Funded Debt/EBITDA Ratio. The Company shall not permit its Funded Debt/EBITDA Ratio to be greater than: (1) 4.25 for its first fiscal quarter in 1998; (2) 3.75 for its second, third and fourth fiscal quarters in 1998 and its first fiscal quarter in 1999; (3) 3.50 for its second, third and fourth fiscal quarters in 1999; and (4) 3.00 for its first fiscal quarter in 2000 and each of its fiscal quarters thereafter." 1. CAPITALIZED LEASE OBLIGATIONS $___________ 2. OTHER FUNDED DEBT BEFORE DEDUCTION OF AMOUNT DETERMINED ACCORDING TO TABLE IN DEFINITION OF FUNDED DEBT ___________ 3. MINUS AMOUNT DETERMINED ACCORDING TO TABLE IN DEFINITION OF FUNDED DEBT ___________ 4. FUNDED DEBT (1 + 2 - 3) $___________ 5. EBITDA $___________ 6. RATIO OF FUNDED DEBT TO EBITDA = ___________ 7. REQUIRED RATIO AS SET FORTH IN SECTION 7.15: NOT GREATER THAN ___________ -15- EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS 1,000 U.S. DOLLARS 3-MOS DEC-26-1998 DEC-28-1997 MAR-28-1998 1 4,038 0 95,442 (761) 54,415 187,252 355,885 (119,679) 526,473 105,598 178,731 99,337 0 27,102 76,800 526,473 215,082 215,759 178,968 178,968 43,271 181 2,667 (9,328) (3,703) (5,625) 0 0 0 (5,625) (.22) (.22)
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