0000950149-95-000517.txt : 19950816 0000950149-95-000517.hdr.sgml : 19950816 ACCESSION NUMBER: 0000950149-95-000517 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19950701 FILED AS OF DATE: 19950815 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: 1934 Act SEC FILE NUMBER: 000-14190 FILM NUMBER: 95564386 BUSINESS ADDRESS: STREET 1: 5929 COLLEGE AVE CITY: OAKLAND STATE: CA ZIP: 94618 BUSINESS PHONE: 5106528187 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED JULY 1, 1995 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 1, 1995 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 August 11, 1995 ----------------- Common stock, $1.00 par value 12,860,073
2 DREYER'S GRAND ICE CREAM, INC. PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DREYER'S GRAND ICE CREAM, INC. CONSOLIDATED BALANCE SHEET
July 1, December 31, ($ in thousands, except per share amounts) 1995 1994 -------- ---------- (unaudited) Assets Current Assets: Cash and cash equivalents $ 3,262 $ 6,334 Trade accounts receivable, net of allowance for doubtful accounts of $716 in 1995 and $635 in 1994 88,845 47,519 Other accounts receivable 14,627 6,243 Inventories 38,130 29,081 Prepaid expenses and other 6,353 9,657 -------- -------- Total current assets 151,217 98,834 Property, plant and equipment, net 174,283 160,322 Goodwill and distribution rights, net 88,187 87,825 Other assets, net 14,997 15,045 -------- -------- Total assets $428,684 $362,026 ======== ========
See accompanying Notes to Consolidated Financial Statements 2 3 DREYER'S GRAND ICE CREAM, INC. CONSOLIDATED BALANCE SHEET
July 1, December 31, ($ in thousands, except per share amounts) 1995 1994 -------- ----------- (unaudited) Liabilities and Stockholders' Equity Current Liabilities: Accounts payable and accrued liabilities $ 64,505 $ 30,130 Accrued payroll and employee benefits 14,040 15,801 Current portion of long-term debt 4,500 4,500 -------- -------- Total current liabilities 83,045 50,431 Long-term debt, less current portion 115,500 46,100 Convertible subordinated debentures 100,752 100,752 Deferred income taxes 29,746 28,822 -------- -------- Total liabilities 329,043 226,105 -------- -------- Commitments and contingencies Stockholders' Equity: Preferred stock, $1 par value - 10,000,000 shares authorized; no shares issued or outstanding in 1995 and 1994 Common stock, $1 par value - 30,000,000 shares authorized; 12,858,000 shares and 14,064,000 shares issued and outstanding in 1995 and 1994, respectively 12,858 14,064 Capital in excess of par 37,787 75,257 Retained earnings 48,996 46,600 -------- -------- Total stockholders' equity 99,641 135,921 -------- -------- Total liabilities and stockholders' equity $428,684 $362,026 ======== ========
See accompanying Notes to Consolidated Financial Statements 3 4 DREYER'S GRAND ICE CREAM, INC. CONSOLIDATED STATEMENT OF INCOME (unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended ---------------------- ---------------------- ($ in thousands, except per share amounts) July 1, 1995 June 25, 1994 July 1, 1995 June 25, 1994 ------------ ------------- ------------ ------------- Revenues: Net sales $188,083 $147,727 $329,338 $259,728 Other income 673 409 913 682 -------- -------- -------- -------- 188,756 148,136 330,251 260,410 Costs and expenses: Cost of goods sold 145,038 109,659 257,269 198,411 Selling, general and administrative 34,687 38,398 61,177 57,126 Interest, net of interest capitalized 2,995 2,424 5,238 4,633 -------- -------- -------- -------- 182,720 150,481 323,684 260,170 -------- -------- -------- -------- Income (loss) before income taxes 6,036 (2,345) 6,567 240 Income tax (provision) benefit (2,372) 910 (2,581) (93) -------- -------- -------- -------- Net income (loss) $ 3,664 $ (1.435) $ 3,986 $ 147 ======== ======== ======== ======== Net income (loss) per share $ .27 $ (.10) $ .29 $ .01 ======== ======== ======== ======== Dividends per share $ .06 $ .06 $ .12 $ .12 ======== ======== ======== ========
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 25, 1993 14,671 $14,671 $ 59,145 $49,218 $123,034 Net income 147 147 Cash dividends declared (1,860) (1,860) Common stock and warrants issued to an affiliate of Nestle USA, Inc. 3,000 3,000 99,560 102,560 Repurchases and retirements of common stock (1,680) (1,680) (36,236) (37,916) Employee stock plans 123 123 1,450 1,573 ------ ------- -------- ------- -------- Balance at June 25, 1994 16,114 $16,114 $123,919 $47,505 $187,538 ====== ======= ======== ======= ======== Balance at December 31, 1994 14,064 $14,064 $ 75,257 $46,600 $135,921 Net income 3,986 3,986 Cash dividends declared (1,590) (1,590) Repurchases and retirements of common stock (1,317) (1,317) (39,129) (40,446) Employee stock plans 111 111 1,659 1,770 ------ ------- -------- ------- -------- Balance at July 1, 1995 12,858 $12,858 $ 37,787 $48,996 $ 99,641 ====== ======= ======== ======= ========
See accompanying Notes to Consolidated Financial Statements 5 6 DREYER'S GRAND ICE CREAM, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Twenty-Six Weeks Ended ----------------------------------- ($ in thousands) July 1, 1995 June 25, 1994 ------------ ------------- Cash flows from operating activities: Net income $ 3,986 $ 147 Adjustments to reconcile net income to cash provided from operations: Depreciation and amortization 9,863 8,507 Deferred income taxes 924 12 Changes in assets and liabilities, net of amounts acquired: Trade accounts receivable (41,326) (26,217) Other accounts receivable (8,384) (2,363) Inventories (9,049) (9,374) Prepaid expenses and other 3,304 2,351 Accounts payable and accrued liabilities 34,465 27,260 Accrued payroll and employee benefits (1,761) (685) -------- -------- (7,978) (362) -------- -------- Cash flows from investing activities: Acquisition of property, plant and equipment (21,882) (19,210) Retirement of property, plant and equipment 232 405 Increase in goodwill and distribution rights (1,843) (15,239) Increase in other assets (645) (538) -------- -------- (24,138) (34,582) -------- -------- Cash flows from financing activities: Decrease in short-term bank borrowings (23,400) Increase in short-term bank borrowings 23,400 Proceeds from long-term debt 73,000 Reductions in long-term debt (3,600) (610) Issuance of common stock under employee stock plans 1,770 1,573 Net proceeds from issuance of common stock under Nestle Agreement 102,560 Repurchases of common stock (40,446) (37,916) Cash dividends paid (1,680) (1,765) -------- -------- 29,044 63,842 -------- -------- (Decrease) increase in cash and cash equivalents (3,072) 28,898 Cash and cash equivalents, beginning of period 6,334 2,532 -------- -------- Cash and cash equivalents, end of period $ 3,262 $ 31,430 ======== ======== Supplemental Cash Flow Information - cash paid during the period for: Interest (net of amounts capitalized) $ 5,340 $ 4,640 Income taxes (net of refunds) 421 233
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 dairy products. The consolidated financial statements for the thirteen and twenty-six week periods ended July 1, 1995, and June 25, 1994, 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 31, 1994, appearing in the Company's 1994 Annual Report to Stockholders. NOTE 2 - Financial Statement Presentation: Certain reclassifications have been made to the prior period financial statements in order to conform to the current presentation. NOTE 3 - Inventories: Inventories are stated at the lower of cost (determined by the first-in, first-out method) or market. Inventories at July 1, 1995 and December 31, 1994 consisted of the following (in thousands):
July 1, December 31, 1995 1994 -------- ----------- Raw materials $ 5,554 $ 3,153 Finished goods 32,576 25,928 ------- ------- $38,130 $29,081 ======= =======
7 8 NOTE 4 - Net Income Per Share: Net income per common share is computed using the weighted average number of shares of common stock outstanding during the period which were 13,387,000 and 13,679,000 shares for the thirteen weeks and twenty-six weeks ended July 1, 1995 and 14,380,000 and 14,539,000 shares for the thirteen weeks and twenty-six weeks ended June 25, 1994. The potentially dilutive effect of the Company's convertible subordinated debentures and other common stock equivalents was anti-dilutive for the thirteen and twenty-six week periods ended July 1, 1995 and June 25, 1994. Accordingly, fully diluted net income per share is not presented. NOTE 5 - Common Stock: The Company's previously announced common stock repurchase program was completed during the quarter. During the first two quarters of 1995 the Company repurchased and retired 1,291,000 shares of its common stock at prices ranging from $28.63 to $34.25 per share. Under the program the Company repurchased 5,000,000 shares of its common stock at an average cost of $25.60 per share. In addition, during the first two quarters of 1995 the Company repurchased and retired 26,000 shares of its common stock at prices ranging from $24.50 to $30.00 per share from employees who previously acquired shares under employee stock plans. NOTE 6 - Subsequent Event: On August 8, 1995, the Company converted $100,752,000 of 6.25% convertible subordinated debentures into 1,008,000 shares of redeemable, convertible Series B Preferred Stock, due June 30, 2001. On the conversion date, the Company had $2,538,000 of unamortized debenture issuance costs which will be recorded as a charge against the carrying value of this preferred stock. As was the case with the convertible subordinated debentures, the Series B Preferred Stock is convertible, under certain conditions, into a total of 1,008,000 shares of redeemable, convertible Series A Preferred Stock, due June 30, 2001. Additionally, as was the case with the debentures, both the Series A and Series B Preferred Stock are convertible, under certain conditions, at an initial conversion price of $34.74 into a total of 2,900,000 shares of common stock and can be called for early redemption after December 15, 1997, subject to certain limitations. 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 Income bear to net sales and the percentage change of such items compared to the indicated prior period:
Period-to-Period Percentage of Net Sales Increase (Decrease) ----------------------- ---------------------- Thirteen Twenty-Six Thirteen Weeks Ended Twenty-Six Weeks Ended Weeks Weeks -------------------- ---------------------- 1995 1995 July 1, June 25, July 1, June 25, Compared Compared 1995 1994 1995 1994 with 1994 with 1994 -------------------- ---------------------- ---------------------- Revenues Net sales 100.0% 100.0% 100.0% 100.0% 27.3% 26.8% Other income 0.4 0.3 0.3 0.3 64.6 33.9 ----- ----- ----- ----- Total revenue 100.4 100.3 100.3 100.3 27.4 26.8 ----- ----- ----- ----- Costs and expenses: Costs of goods sold 77.1 74.2 78.1 76.4 32.3 29.7 Selling, general and administrative 18.5 26.0 18.6 22.0 (9.7) 7.1 Interest, net of interest capitalized 1.6 1.7 1.6 1.8 23.6 13.1 ----- ----- ----- ----- Total costs and expenses 97.2 101.9 98.3 100.2 21.4 24.4 ----- ----- ----- ----- Income (loss) before income taxes 3.2 (1.6) 2.0 0.1 357.4 2,636.3 Income tax (provision) benefit (1.3) 0.6 (.8) 0.0 (360.7) 2,675.3 ----- ----- ----- ----- Net income (loss) 1.9 (1.0) 1.2 0.1 (355.3) 2,611.6 ===== ===== ===== =====
9 10 RESULTS OF OPERATIONS Thirteen Weeks ended July 1, 1995 Compared with Thirteen Weeks ended June 25, 1994 The Company embarked on a five year plan during the second quarter of 1994 to accelerate the sales of its Company brands by greatly increasing its consumer marketing efforts and expanding its distribution system into additional markets (the Strategic Plan). Under the Strategic Plan, the Company increased the amount of its spending for advertising and consumer promotion from $11,486,000 in 1993 to $40,287,000 in 1994, and plans to spend approximately $50,000,000 annually on these marketing activities from 1995 through 1998. In 1994, the Company began selling its products for the first time in the Texas and New England markets as well as in several cities in the southern United States, and has continued to expand into additional geographic markets in 1995. The Company anticipates that the Strategic Plan will continue to materially reduce earnings during 1995 and some portion of 1996 below levels that would have been attained under the former business plan. The potential benefits of the new strategy are increased market share and future earnings above those levels that would be attained in the absence of the strategy. The Company believes that these benefits are not likely to impact its results until 1996 at the earliest, and no assurance can be given that the anticipated benefits of the strategy will be achieved. The success of the strategy will depend upon, among other things, consumer responsiveness to the increased marketing expenditures, competitors' activities and general economic conditions. Consolidated net sales for the second quarter of 1995 increased 27% to $188,083,000 compared with $147,727,000 for the same period last year. Sales of the Company's brands increased 23%. The increase related primarily to higher unit sales of the Company's established brands in all markets led by Dreyer's and Edy's Fat Free Ice Cream and Dreyer's and Edy's Grand Ice Cream. Sales of products purchased from other manufacturers (partner brands) increased 32%, led by frozen novelty and ice cream products from Nestle Ice Cream Company. Sales of partner brands represented 36% of consolidated net sales as compared with 35% in the second quarter of 1994. The effect of price increases for the Company's brands and partner brands was not significant. Cost of goods sold increased $35,379,000, or 32%, over the second quarter of 1995, while the overall gross margin decreased from 25.8% in the second quarter of 1994 to 22.9% in the second quarter of 1995. The decrease in gross margin was largely due to a relative increase in sales of partner brands which carry a lower margin than Company brands, combined with slightly higher distribution expenses. Selling, general and administrative expenses in the second quarter of 1995 were $3,711,000, or 10%, lower than in the same period of 1994. This decrease related primarily to a decrease in overall marketing expenses of $2,424,000 compared with the same quarter in the prior year. Interest expense increased $571,000, or 24%, over the second quarter of 1994 due primarily to increased borrowings under the Company's line of credit. Income taxes increased $3,282,000, reflecting a higher pre-tax income, while the effective tax rate increased from 38.8% for the second quarter of 1994 to 39.3% for the second quarter of 1995. 10 11 Twenty-six Weeks ended July 1, 1995 Compared with Twenty-six Weeks ended June 25, 1994 Consolidated net sales for the twenty-six weeks ended July 1, 1995 increased 27% to $329,338,000 compared with $259,728,000 for the same period last year. Sales of the Company's brands increased 23%. The increase related primarily to higher unit sales of the Company's established brands in all markets due to substantially higher advertising and consumer promotion spending under the Company's Strategic Plan. The products that led this increase were Dreyer's and Edy's Fat Free Ice Cream and Dreyer's and Edy's Grand Ice Cream. Sales of products purchased from other manufacturers increased 31%, led by frozen novelty and ice cream products from Nestle Ice Cream Company. Sales of partner brands represented 36% of consolidated net sales as compared with 35% in the same period last year. The effect of price increases for the Company's brands and partner brands was not significant. Cost of goods sold increased $58,858,000, or 30%, as compared with 1994, while the overall gross margin decreased from 23.6% to 21.9% in 1995. The decrease in gross margin was largely due to a relative increase in sales of partner brands which carry a lower margin than Company brands, combined with slightly higher distribution expenses. Selling, general and administrative expenses in the first two quarters of 1994 increased $4,051,000 or 7% as compared with the same period in 1994. This increase related primarily to an increase in overall marketing expenses of $3,975,000. Interest expense in the first two quarters of 1995 was $605,000, or 13%, higher than in the same period in the prior year due primarily to increased borrowings under the Company's long term line of credit. Income taxes increased $2,488,000 reflecting a higher pre-tax income, while the effective tax rate increased from 38.8% for the first two quarters of 1994 to 39.3% for the first two quarters of 1995. 11 12 LIQUIDITY AND CAPITAL RESOURCES Working capital at July 1, 1995 increased $19,769,000 from year end 1994 due primarily to the seasonal increase in trade accounts receivable, other accounts receivable and inventories partially offset by an increase in accounts payable and accrued liabilities. Cash was provided primarily from the $73,000,000 proceeds from long-term debt. This source was used to fund the $40,446,000 repurchases of common stock and the $21,882,000 increase in property, plant and equipment. At July 1, 1995, the Company had $3,262,000 in cash and cash equivalents, and an unused credit line of $31,800,000. 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. 12 13 PART II: OTHER INFORMATION ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On May 10, 1994, the Company held its 1995 Annual Meeting of Stockholders. A total of 12,783,389 shares (91.7%) of the outstanding shares were represented at the meeting either in person or by proxy. Matters submitted to a vote of security holders at the meeting were as follows: a. Election of two Class I directors to hold office until the 1998 Annual Meeting of Stockholders or until their successors are elected are qualified; and b. Approving the appointment of Price Waterhouse LLP as independent public accountants for fiscal year 1995 and thereafter until a successor is appointed. At the Annual Meeting, Merrill M. Halpern, John W. Larson and Jack O. Peiffer were elected as directors of Class I of the Company's Board of Directors. Jerome L. Katz, Timm F. Crull and Edmund R. Manwell continue to hold office as directors of Class II of the Board of Directors until the 1996 Annual Meeting. T. Gary Rogers, William F. Cronk,III and Anthony J. Martino continue to hold office as directors of Class III of the Board of Directors until the 1997 Annual Meeting. Price Waterhouse LLP was approved as the Company's independent public accountants for fiscal year 1995. The number of affirmative votes cast was 12,775,706. The number of negative votes was 2007. 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 July 1, 1995. b. Exhibits
Exhibit No. Description ----------- ----------- 10.1 First Amendment to Amended and Restated Credit Agreement dated May 11, 1995 and effective as of May 8, 1995 by and among the Company, ABN AMRO Bank N.V., Bank of America N.T.&S.A. and Credit Suisse, amending the Amended and Restated Credit Agreement dated December 13, 1994 among the Company, ABN AMRO Bank N.V., Bank of America N.T.&S.A. and Credit Suisse. 10.2 Second Amendment to Securities Purchase Agreement dated July 28, 1995 and effective as of June 1, 1995 by and among the Company, Trustees of General Electric Pension Trust, GE Investment Private Placement Partners, I and General Electric Capital Corporation, amending the Securities Purchase Agreement dated June 24, 1993 between the Company, Trustees of General Electric Pension Trust, GE Investment Private Placement Partners, I and General Electric Capital Corporation. 10.3 Third Amendment to Note Agreement dated as of June 5, 1995 between the Company and each of Massachusetts Mutual Life Insurance Company, MML Pension Insurance Company, Connecticut Mutual Life Insurance Company, the Equitable Life Assurance Society of the United States, and TransAmerica Occidental Life Insurance Company, amending the Note Agreements dated as of March 15, 1991 and executed on April 12, 1991 between the Company and each of Massachusetts Mutual Life Insurance Company, MML Pension Insurance Company, Connecticut Mutual Life Insurance Company, the Equitable Life Assurance Society of the United States, and TransAmerica Occidental Life Insurance Company. 11 Computation of Net Income Per Common Share. 27 Financial Data Schedule.
13 14 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: August 15, 1995 By: /s/ Paul R. Woodland ------------------------------------------- Paul R. Woodland Vice President - Finance and Administration and Chief Financial Officer
14 15 EXHIBIT INDEX
Exhibit No. Description ----------- ----------- 10.1 First Amendment to Amended and Restated Credit Agreement dated May 11, 1995 and effective as of May 8, 1995 by and among the Company, ABN AMRO Bank N.V., Bank of America N.T.&S.A. and Credit Suisse, amending the Amended and Restated Credit Agreement dated December 13, 1994 among the Company, ABN AMRO Bank N.V., Bank of America N.T.&S.A. and Credit Suisse. 10.2 Second Amendment to Securities Purchase Agreement dated July 28, 1995 and effective as of June 1, 1995 by and among the Company, Trustees of General Electric Pension Trust, GE Investment Private Placement Partners, I and General Electric Capital Corporation, amending the Securities Purchase Agreement dated June 24, 1993 between the Company, Trustees of General Electric Pension Trust, GE Investment Private Placement Partners, I and General Electric Capital Corporation. 10.3 Third Amendment to Note Agreement dated as of June 5, 1995 between the Company and each of Massachusetts Mutual Life Insurance Company, MML Pension Insurance Company, Connecticut Mutual Life Insurance Company, the Equitable Life Assurance Society of the United States, and TransAmerica Occidental Life Insurance Company, amending the Note Agreements dated as of March 15, 1991 and executed on April 12, 1991 between the Company and each of Massachusetts Mutual Life Insurance Company, MML Pension Insurance Company, Connecticut Mutual Life Insurance Company, the Equitable Life Assurance Society of the United States, and TransAmerica Occidental Life Insurance Company. 11 Computation of Net Income Per Common Share. 27 Financial Data Schedule.
EX-10.1 2 FIRST AMENDMENT TO CREDIT AGREEMENT 1 Exhibit 10.1 FIRST AMENDMENT TO CREDIT AGREEMENT THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the "Amendment"), is dated as of May 11, 1995 and is effective as of May 8, 1995 (the "Effective Date") is entered into 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"; individually, a "Bank"), ABN AMRO BANK N.V., San Francisco International Branch as Co-Agent, and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent for the Banks. RECITALS A. The Company, Banks, the Co-Agent and the Agent are parties to an Amended and Restated Credit Agreement dated as of December 13, 1994, (the "Credit Agreement") pursuant to which the Agent and the Banks have extended certain credit facilities to the Company. B. On April 27, 1995, Bank of America National Trust and Savings Association and ABN AMRO Bank N.V., as Assignors, assigned and delegated portions of their rights and duties in the Credit Agreement to Credit Suisse. C. The Company has requested that the Banks agree to certain amendments of the Credit Agreement. D. The Banks are willing to amend the Credit Agreement subject to the terms and conditions of this Amendment. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Defined Terms. Unless otherwise defined herein, capitalized terms used herein shall have the meanings, if any, assigned to them in the Credit Agreement. 2. Amendments to Credit Agreement. (a) Section 7.11(c) of the Credit Agreement shall be amended to provide as follows: "(c) during the Share Purchase Period purchase its common stock for immediate retirement up to an aggregate purchase price of $135,000,000 or an aggregate purchase of 5,000,000 shares, whichever first occurs;" 3. Representations and Warranties. The Company hereby represents and warrants to the Agent and the Banks as follows: 1 2 (a) No Default or Event of Default has occurred and is continuing. (b) The execution, delivery and performance by the Company of this Amendment have been duly authorized by all necessary corporate and other action and do 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 Credit Agreement as amended by this Amendment constitutes the legal, valid and binding obligations of the Company, enforceable against it in accordance with its respective terms, without defense, counterclaim or offset. (c) All representations and warranties of the Company contained in the Credit Agreement are true and correct. (d) The Company is entering into this Amendment on the basis of its own investigation and for its own reasons, without reliance upon the Agent and the Banks or any other Person. 4. Conditions Precedent. This Amendment will be executed after satisfaction of all of the following conditions precedent: (a) The Agent has received from the Company and the Majority Banks a duly executed original (or, if elected by the Agent, an executed facsimile copy) of this Amendment. (b) The Agent has received from the Company a copy of a resolution passed by the board of directors of such corporation, certified by the Secretary or an Assistant Secretary of such corporation as being in full force and effect on the date hereof, authorizing the execution, delivery and performance of this Amendment. (c) The Banks, through the Agent, have received from the Company the amount of One Hundred Thousand Dollars ($100,000) to be shared among the Banks on a pro rata basis, representing payment in full of a non-refundable amendment fee, which amount the Company hereby covenants to pay to the Banks on demand. 5. Reservation of Rights. The Company acknowledges and agrees that the execution and delivery by the Agent and the Banks of this Amendment shall not be deemed to create a course of dealing or otherwise obligate the Agent or the Banks to forbear or execute similar amendments under the same or similar circumstances in the future. 2 3 6. Miscellaneous. (a) Except as herein expressly amended, all terms, covenants and provisions of the Credit Agreement are and shall remain in full force and effect and all references therein to such Credit Agreement shall henceforth refer to the Credit Agreement as amended by this Amendment. This Amendment shall be deemed incorporated into, and a part of, the Credit Agreement. (b) This Amendment shall be binding upon and inure to the benefit of the parties hereto and thereto and their respective successors and assigns. No third party beneficiaries are intended in connection with this Amendment. (c) This Amendment shall be governed by and construed in accordance with the law of the State of California. (d) This Amendment 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. (e) This Amendment may not be amended except in accordance with the provisions of Section 10.01 of the Credit Agreement. (f) If any term or provision of this Amendment shall be deemed prohibited by or invalid under any applicable law, such provision shall be invalidated without affecting the remaining provisions of this Amendment or the Credit Agreement, respectively. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment as of the date first above written. DREYER'S GRAND ICE CREAM, INC. By: /s/ WILLIAM C. COLLETT --------------------------- Name: William C. Collett ------------------------- Title: Treasurer ------------------------ 3 4 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: /s/ CHRISTINE CORDI -------------------------- Name: Christine Cordi Title: Vice President ABN AMRO BANK N.V., as Co-Agent By: /s/ GINA M. BRUSATORI ------------------------- Name: Gina M. Brusatori Title: Vice President By: /s/ DIANNE D. WAGGONER ------------------------- Name: Dianne D. Waggoner Title: Group Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank By: /s/ MICHAEL J. DASHER -------------------------- Name: Michael J. Dasher Title: Vice President ABN AMRO BANK N.V., as a Bank By: /s/ GINA M. BRUSATORI -------------------------- Name: Gina M. Brusatori Title: Vice President By: /s/ DIANNE D. WAGGONER -------------------------- Name: Dianne D. Waggoner Title: Group Vice President 4 5 CREDIT SUISSE By: /s/ DAVID J. WORTHINGTON -------------------------- Name: David J. Worthington Title: Member of Senior Management By: /s/ MARLOU PALENZUELA -------------------------- Name: Marlou Palenzuela Title: Member of Senior Management 5 EX-10.2 3 SECOND AMENDMENT TO SECURITIES PURCHASE AGREEMENT 1 Exhibit 10.2 SECOND AMENDMENT TO SECURITIES PURCHASE AGREEMENT This Second Amendment to Securities Purchase Agreement (the "Amendment") is dated July 28, 1995 and is effective as of June 1, 1995 by and among Dreyer's Grand Ice Cream, Inc., a Delaware corporation (the "Company"), and Trustees of General Electric Pension Trust, a New York common law trust ("GE Pension"), GE Investment Private Placement Partners, I, a Delaware limited partnership ("GEIPPP") and General Electric Capital Corporation, a New York corporation (collectively the "Purchasers"). Recitals A. Company entered into a Securities Purchase Agreement with Purchasers dated June 24, 1993, and amended May 6, 1994 (the "Agreement"), pursuant to which Purchasers acquired various securities of Company. B. Company and Purchasers now desire to amend the Agreement as set forth herein. 1. Amendment. Section 6.1(a) of the Agreement is hereby amended to read in its entirety as follows: "6.1. Financial Covenants. (a) The Company will not permit its Consolidated Net Worth at any time to be less than the sum of (i) $100,000,000 or, only during the Company's second fiscal quarter of 1995, $99,000,000 and (ii) the aggregate Stated Value of the outstanding shares of Preferred Stock (it being understood that, for the purposes of this paragraph (a), (x) the Notes and any other Subordinated Indebtedness of the Company shall not be treated as equity and (y) Consolidated Net Worth shall not be reduced by any amount up to one hundred and six million dollars ($106,000,000) borrowed to redeem, purchase or acquire shares of Common Stock to the extent such amounts are repaid from the net cash proceeds received, not more than 180 days after the effective date of such borrowing, by the Company from Nestle for the issue and sale of shares of Common Stock and warrants to purchase or acquire shares of Common Stock on the terms set forth in the Nestle Purchase Agreement and the Nestle Warrant Agreement)." 1 2 2. Miscellaneous. 2.1. Except as expressly amended herein, all terms, covenants and provisions of the Agreement are and shall remain in full force and effect and all references therein to such Agreement shall henceforth refer to the Agreement as amended by this Amendment. This Amendment shall be deemed incorporated into, and a part of, the Agreement. 2.2. This Amendment 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 Amendment. 2.3. This Amendment shall be governed by and construed in accordance with the law of the State of Delaware. 2.4. This Amendment 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. IN WITNESS WHEREOF, the Company and the Purchasers have caused this Amendment to be executed and delivered as of the date first above written. DREYER'S GRAND ICE CREAM, INC. TRUSTEES OF GENERAL ELECTRIC PENSION TRUST By: /s/ Paul R. Woodland By: /s/ Al M. Lewis -------------------------- ------------------------ Title: CEO Title: Trustee ----------------------- ---------------------- GENERAL ELECTRIC CAPITAL GE INVESTMENT PRIVATE CORPORATION PLACEMENT PARTNERS, I By: GE Investment Management By: /s/ Incorporated, its -------------------------- General Partner Title: Managing Director ----------------------- By: /s/ Al M. Lewis ------------------------- Title: Executive Vice President -------------------------
2 EX-10.3 4 THIRD AMENDMENT TO NOTE AGREEMENT 1 EXHIBIT 10.3 June 5, 1995 Mr. John Joyce Massachusetts Mutual Life Insurance Company 1295 State Street Springfield, MA 01111 Mr. Larry Stillman Connecticut Mutual Life Insurance Company 140 Garden Street Hartford, CT 06154 Mr. Robert Flowers Equitable c/o Alliance Capital 1345 Avenue of the Americas, 37th Floor New York, NY 10105 Mr. John Casparian Transamerica Investment Service 1150 South Olive Street, Suite 2700 Los Angeles, CA 90015 re: Third Amendment to Note Agreement dated as of March 15, 1991 between Dreyer's Grand Ice Cream, Inc. (the "Company"), as Borrower, and each of Massachusetts Mutual Life Insurance Company, MML Pension Insurance Company, the Equitable Life Assurance Society of the United States, and TransAmerica Occidental Life Insurance Company (together, the "Lenders") Gentlemen: I have previously discussed in detail with John Joyce Dreyer's proposal to amend the terms of Section 5.8 (b), Restricted Payments and Investments to permit Dreyer's to complete its 5,000,000 share repurchase program. It is our opinion, and John Joyce has concurred in this view, that the best way to do this would be to consider the two million warrants held by Nestle to be a "substantially concurrent issue or sale of other shares of capital stock of the Company" on an as-if exercised basis at their put price of $24.00. All other covenant tests would remain at their current levels. The warrants are currently in the money and exercisable by Nestle at a price of $32.00. Upon exercise by Nestle the Company will receive $64,000,000 in cash and a like amount will be added to the Company's stockholder's equity account. Upon a put by Dreyer's at $24.00 the net proceeds and addition to stockholder's equity would be $48,000,000. Nestle paid ten million dollars for the warrants, and thereby have a material incentive to realize the value of that investment. This approach will essentially mirror the approach taken by our bank group, led by Bank of America as agent. They have set a restricted payment limit of the earlier of the repurchase of 2 John Joyce, Larry Stillman, Robert Flowers, John Caparian June 5, 1995 Page 2 5,000,000 shares or the payment of total consideration for shares repurchased of $135,000,000. Considering the warrants as a substantially concurrent issue would equate to a basket for restricted payments of approximately $144,000,000 under our Note Agreement with you. However, Dreyer's would still be restricted to the bank agreement's basket and their various debt tests, effectively giving the Note holders the benefit of their lower test limits through the cross default provisions of the Note Agreement. This Letter Amendment as Third Amendment to the Note Agreement shall add the following proviso to the end of the parenthetical language of Section 5.8 (b): "provided, however, that for the purpose of Section 5.8 (b), the 2,000,000 warrants to purchase common stock of the Company issued to Nestle Holdings, Inc. by the Company on June 14, 1994 shall be considered, to the extent such warrants have not expired, an issuance of 2,000,000 shares of common stock of the Company at $24.00 per share substantially concurrent with the Company's 1994 common stock repurchase program for the purchase of up to 5,000,000 common shares; and provided, further that if said warrants are exercised at an exercise price of greater than $24.00 per common share, the difference shall be deemed net cash proceeds to the Company from the issuance of common stock for purposes of Section 5.8(b)." I have included a copy of the press release issued upon completion of the Nestle transaction. The release includes details of the entire Nestle transaction, including the warrants, as well as a summary of our strategic plan. Your signature on letter amendment will indicate your agreement to amend the referenced issue as described above and will constitute the third amendment to the Note Agreement. Please sign and return all 5 [five] copies of this letter amendment directly to my attention. I will distribute copies of all signatures to each note holder. In WITNESS WHEROF, the Company and the Lenders have executed this Letter of Amendment as of June 5, 1995. DREYER'S GRAND ICE CREAM, INC. /s/ William C. Collett -------------------------- By: William C. Collett Its: Treasurer MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: /s/ John B. Joyce --------------------- Its: Vice President 3 John Joyce, Larry Stillman, Robert Flowers, John Casparian June 5, 1995 Page 3. MML PENSION INSURANCE COMPANY By: /s/ John B. Joyce --------------------------- Its: Investment Officer CONNECTICUT MUTUAL LIFE INSURANCE COMPANY By: __________________________ Its: __________________________ THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES By: _________________________ Its: _________________________ TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY By: /s/ John M. Casparian --------------------------- Its: Investment Officer EX-11 5 COMPUTATION OF NET INCOME PER COMMON SHARE 1 EXHIBIT 11 DREYER'S GRAND ICE CREAM, INC. COMPUTATION OF NET INCOME PER COMMON SHARE (unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended ------------------------------ --------------------------- (in thousands, except per share amount) July 1, 1995 June 25, 1994 July 1, 1995 June 25, 1994 ------------ ------------- ------------ ------------- PRIMARY ------- Net income (loss) $ 3,664 $(1,435) $ 3,986 $ 147 Weighted average number of shares of common stock outstanding 13,387 14,380 13,679 14,539 ------- ------- ------- ------- Net income (loss) per share, as reported $ .27 $ (.10) $ .29 $ .01 ======= ======= ======= ======= Weighted average number of shares of common stock outstanding 13,387 14,380 13,679 14,539 Common stock equivalent--assumed exercise of common stock options 288 86 195 89 ------- ------- ------- ------- Weighted average number of shares of common stock outstanding, including common stock equivalents 13,675 14,466 13,874 14,628 ======= ======= ======= ======= Net income (loss) per share $ .27(1) $ (.10)(1) $ .29(1) $ .01(1) ======= ======= ======= ======= FULLY DILUTED ------------- Net income (loss) $ 3,664 $(1,435) $ 3,986 $ 147 Add interest expense on convertible subordinated debentures issued June 1993, due June 2006 and amortization of related issuance costs, net of tax 1,020 1,048 2,037 2,049 ------- ------- ------- ------- Adjusted net income (loss) $ 4,684 $ (387) $ 6,023 $ 2,196 ======= ======= ======= ======= Weighted average number of shares of common stock outstanding 13,387 14,380 13,679 14,539 Common stock equivalent--assumed exercise of common stock options 437 86 437 89 Assumed conversion of debentures 2,900 2,900 2,900 2,900 ------- ------- ------- ------- Adjusted shares 16,724 17,366 17,016 17,528 ======= ======= ======= ======= Net income (loss) per share $ .28(2) $ (.02)(2) $ .35(2) $ .13(2) ======= ======= ======= =======
(1) This calculation is submitted in accordance with Regulation S-K item 601 (b) (11) although it is not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%. (2) This calculation is submitted in accordance with Regulation S-K item 601 (b) (11) although it is contrary to APB Opinion No. 15 because it produces an anti-dilutive effect. EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-30-1995 JUL-01-1995 3,262 0 89,561 (716) 38,130 151,217 244,422 (70,139) 428,684 83,045 216,252 12,858 0 0 86,783 428,684 329,338 330,251 257,269 257,269 60,685 492 5,238 6,567 2,581 3,986 0 0 0 3,986 .29 .29