-----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, STCZtqjON1UxMTc3Qe1joQ+GElWtl+TfBQjuuvhRvzkmo2HslADwAtg4W7h6AvYZ 94Z5Ff2d9VYnQyU4wHAxCQ== 0000950149-96-001835.txt : 19961113 0000950149-96-001835.hdr.sgml : 19961113 ACCESSION NUMBER: 0000950149-96-001835 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961101 FILED AS OF DATE: 19961112 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: 96660129 BUSINESS ADDRESS: STREET 1: 5929 COLLEGE AVE CITY: OAKLAND STATE: CA ZIP: 94618 BUSINESS PHONE: 5106528187 10-Q 1 FORM 10-Q 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 September 28, 1996 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 November 8, 1996 ---------------- Common stock, $1.00 par value 13,340,885 2 DREYER'S GRAND ICE CREAM, INC. PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DREYER'S GRAND ICE CREAM, INC. CONSOLIDATED BALANCE SHEET
September 28, December 30, ($ in thousands, except per share amounts) 1996 1995 ------------- ------------ (unaudited) Assets Current Assets: Cash and cash equivalents $ 2,495 $ 3,051 Trade accounts receivable, net of allowance for doubtful accounts of $764 in 1996 and $698 in 1995 91,983 59,298 Other accounts receivable 15,725 19,072 Inventories 45,751 33,201 Prepaid expenses and other 7,892 12,487 -------- -------- Total current assets 163,846 127,109 Property, plant and equipment, net 223,440 182,757 Goodwill and distribution rights, net 90,783 86,812 Other assets 19,624 17,427 -------- -------- Total assets $497,693 $414,105 ======== ========
See accompanying Notes to Consolidated Financial Statements 2 3 DREYER'S GRAND ICE CREAM, INC. CONSOLIDATED BALANCE SHEET
September 28, December 30, ($ in thousands, except per share amounts) 1996 1995 ----------- ----------- (unaudited) Liabilities and Stockholders' Equity Current Liabilities: Accounts payable and accrued liabilities $ 60,678 $ 35,514 Accrued payroll and employee benefits 13,981 18,634 Current portion of long-term debt 8,512 3,600 -------- -------- Total current liabilities 83,171 57,748 Long-term debt, less current portion 171,799 134,000 Deferred income taxes 35,075 31,712 -------- -------- Total liabilities 290,045 223,460 -------- -------- Commitments and contingencies Redeemable convertible Series B preferred stock, $1 par value - 1,008,000 shares authorized; 1,008,000 shares issued and outstanding in 1996 and 1995 98,700 98,382 -------- -------- Stockholders' Equity: Preferred stock, $1 par value - 8,992,000 shares authorized; no shares issued or outstanding in 1996 and 1995 Common stock, $1 par value - 30,000,000 shares authorized; 13,341,000 shares and 12,929,000 shares issued and outstanding in 1996 and 1995, respectively 13,341 12,929 Capital in excess of par 51,783 39,370 Retained earnings 43,824 39,964 -------- -------- Total stockholders' equity 108,948 92,263 -------- -------- Total liabilities and stockholders' equity $497,693 $414,105 ======== ========
See accompanying Notes to Consolidated Financial Statements 3 4 DREYER'S GRAND ICE CREAM, INC. CONSOLIDATED STATEMENT OF INCOME (unaudited)
Thirteen Weeks Ended Thirty-Nine Weeks Ended -------------------- ----------------------- ($ in thousands, except per share amounts) Sept. 28, 1996 Sept. 30, 1995 Sept. 28, 1996 Sept. 30, 1995 -------------- -------------- -------------- --------------- Revenues: Net sales $234,644 $205,226 $613,182 $534,564 Other income 63 789 1,203 1,702 -------- -------- -------- -------- 234,707 206,015 614,385 536,266 Costs and expenses: Cost of goods sold 180,228 154,773 475,046 412,042 Selling, general and administrative 46,178 45,914 116,174 107,091 Interest, net of interest capitalized 2,936 2,768 6,917 8,006 -------- -------- -------- -------- 229,342 203,455 598,137 527,139 -------- -------- -------- -------- Income before income taxes 5,365 2,560 16,248 9,127 Income taxes 2,060 1,006 6,239 3,587 -------- -------- -------- -------- Net income 3,305 1,554 10,009 5,540 Accretion of preferred stock to redemption value 106 318 Preferred stock dividends 1,144 661 3,431 661 -------- -------- -------- -------- Net income applicable to common stock $ 2,055 $ 893 $ 6,260 $ 4,879 ======== ======== ======== ======== Net income per common share $ .15 $ .07 $ .47 $ . 36 ======== ======== ======== ======== Dividends per common share $ .06 $ .06 $ .18 $ .18 ======== ======== ======== ========
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 31, 1994 14,064 $14,064 $75,257 $46,600 $135,921 Net income 5,540 5,540 Preferred stock dividends declared (2,364) (2,364) Common stock dividends declared (661) (661) Repurchases and retirements of common stock (1,319) (1,319) (39,201) (40,520) Employee stock plans 155 155 2,579 2,734 ------- ------- ------- ------- -------- Balance at September 30, 1995 12,900 $12,900 $38,635 $49,115 $100,650 ======= ======= ======= ======= ======== Balance at December 30, 1995 12,929 $12,929 $39,370 $39,964 $ 92,263 Net income 10,009 10,009 Accretion of preferred stock to redemption value (318) (318) Preferred stock dividends declared (3,431) (3,431) Common stock issued in acquisition of M-K-D Distributors, Inc. 320 320 10,480 10,800 Common stock dividends declared (2,400) (2,400) Repurchases and retirements of common stock (6) (6) (157) (163) Employee stock plans 98 98 2,090 2,188 ------- ------- ------- ------- --------- Balance at September 28, 1996 13,341 $13,341 $51,783 $43,824 $108,948 ======= ======= ======= ======= ========
See accompanying Notes to Consolidated Financial Statements 5 6 DREYER'S GRAND ICE CREAM, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Thirty-Nine Weeks Ended ----------------------- ($ in thousands) Sept. 28, 1996 Sept. 30, 1995 -------------- -------------- Cash flows from operating activities: Net income $ 10,009 $ 5,540 Adjustments to reconcile net income to cash from operations: Depreciation and amortization 20,314 14,950 Deferred income taxes 2,842 1,392 Changes in assets and liabilities, net of amounts acquired: Trade accounts receivable (26,594) (39,770) Other accounts receivable (1,278) (6,547) Inventories (10,380) (7,899) Prepaid expenses and other 5,039 5,310 Accounts payable and accrued liabilities 18,842 7,753 Accrued payroll and employee benefits (5,294) (1,405) -------- -------- 13,500 (20,676) -------- -------- Cash flows from investing activities: Acquisition of property, plant and equipment (50,289) (29,941) Retirement of property, plant and equipment 1,856 395 Increase in goodwill and distribution rights (968) (1,959) Increase in other assets (3,599) (1,096) -------- -------- (53,000) (32,601) -------- -------- Cash flows from financing activities: Proceeds from long-term debt 76,000 94,800 Reductions in long-term debt (35,194) (4,500) Issuance of common stock under employee stock plans 2,188 2,734 Repurchases of common stock (163) (40,520) Cash dividends paid (3,887) (3,113) -------- -------- 38,944 49,401 -------- -------- Decrease in cash and cash equivalents (556) (3,876) Cash and cash equivalents, beginning of period 3,051 6,334 -------- -------- Cash and cash equivalents, end of period $ 2,495 $ 2,458 ======== ======== Supplemental Cash Flow Information - Cash paid (refunded) during the period for: Interest (net of amounts capitalized) $ 5,901 $ 8,549 Income taxes (net of refunds) 102 2,137 Non-cash transaction: Acquisition of M-K-D Distributors, Inc. 10,800
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 to grocery and convenience stores, foodservice accounts and independent distributors in the United States. The consolidated financial statements for the thirteen and thirty-nine week periods ended September 28, 1996 and September 30, 1995, have not been audited by independent public accountants, but include all adjustments, such as normal recurring accruals, that 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 30, 1995, appearing in the Company's 1995 Annual Report on Form 10-K. NOTE 2 - Inventories: Inventories are stated at the lower of cost (determined by the first-in, first-out method) or market. Inventories at September 28, 1996 and December 30, 1995 consisted of the following (in thousands):
September 28, December 30, 1996 1995 ------------- ------------ Raw materials $ 6,630 $ 3,291 Finished goods 39,121 29,910 ------- ------- $45,751 $33,201 ======= =======
NOTE 3 - 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 13,340,000 and 13,216,000 shares for the thirteen weeks and thirty-nine weeks ended September 28, 1996 and 12,873,000 and 13,410,000 shares for the thirteen weeks and thirty-nine weeks ended September 30, 1995. The potentially dilutive effect of the Company's redeemable convertible Series B preferred stock and other common stock equivalents was anti-dilutive for the thirteen and thirty-nine week periods ended September 28, 1996 and September 30, 1995. Accordingly, fully diluted net income per share is not presented. 7 8 NOTE 4 -Insurance Settlement: In March 1996, the Company settled an insurance claim relating to the malfunction of a refrigeration system at one of its plants. The malfunction caused the accidental release of ammonia (refrigerant) into the plant which contaminated the finished goods inventory. In accordance with the settlement, the Company received the value of the finished goods inventory at its normal selling price, plus expenses incurred recovering from the accident. This resulted in a gain of $2,100,000, which was recorded as a reduction in cost of goods sold during the first quarter of 1996. NOTE 5 - Purchase of M-K-D Distributors Inc.: On March 27, 1996, the Company acquired the remaining 50.3% of the outstanding common stock of M-K-D Distributors, Inc. (M-K-D) for 320,000 newly issued shares of the Company's common stock having a value of $10,800,000. The acquisition was accounted for as a purchase and the amount by which the purchase price exceeded the fair value of the net identifiable assets acquired of $5,865,000 has been recorded as goodwill and distribution rights. The Company has consolidated the results of operations of M-K-D since the beginning of fiscal 1996. That portion of M-K-D's pre-acquisition earnings before income taxes which was attributable to the former shareholders' interest, approximately $148,000, was recorded as a charge to selling, general and administrative expenses. NOTE 6 - Lease Transaction: On March 29, 1996, the Company entered into a lease transaction involving a large majority of its direct-store-delivery truck fleet. The $26,000,000 proceeds received by the Company from the lease transaction were used to repay a portion of existing bank borrowings and to fund capital expenditures. The four year lease has been classified as a capital lease and is recorded in property, plant and equipment. NOTE 7 - Senior Notes: On June 6, 1996, the Company completed a private placement of $50,000,000 of senior notes, due 2002 through 2006. Proceeds from the senior notes were used to repay a portion of existing bank borrowings and to fund capital expenditures. Interest on the notes is payable semi-annually. NOTE 8 - Accounting for Stock-Based Compensation: As of the beginning of fiscal 1996, the Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," which established accounting and reporting standards for stock-based compensation plans. This standard encourages the adoption of the fair value-based method of accounting for employee stock options or similar equity instruments, but continues to allow the Company to measure compensation cost for those equity instruments using the intrinsic value-based method of accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Under the fair value-based method, compensation cost is measured at the grant date based on the value of the award. Under the intrinsic value-based method, compensation cost is the excess, if any, of the quoted market price of the stock at the grant date or other measurement date over the amount the employee must pay to acquire the stock. The Company continues to use the intrinsic value-based method. The adoption of this standard did not have any effect on the Company's Consolidated Financial Statements. The Company will disclose the pro-forma effect on net income of using the fair value-based method of accounting in the 1996 Annual Report to Stockholders. 8 9 NOTE 9 - Preoperating costs: During the thirty-nine week period ended September 28, 1996, the Company capitalized $2,560,000 of preoperating costs associated with the start-up of its Houston, Texas manufacturing facility. These costs will be amortized on a straight line basis over the next three years. 9 10 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:
Percentage of Net Sales Period-to-Period ----------------------- Increase (Decrease) ------------------- Thirteen Thirty-Nine Thirteen Weeks Ended Thirty-Nine Weeks Ended Weeks Weeks -------------------- ----------------------- 1996 1996 Sept. 28, Sept. 30, Sept. 28, Sept. 30, Compared Compared 1996 1995 1996 1995 to 1995 to 1995 Revenues: ----------------------- ---------------------- --------------------- Net sales 100.0% 100.0% 100.0% 100.0% 14.3% 14.7% Other income 0.0 0.4 0.2 0.3 (92.0) (29.3) ----- ----- ----- ----- Total revenues 100.0 100.4 100.2 100.3 13.9 14.6 ----- ----- ----- ----- Costs and expenses: Cost of goods sold 76.8 75.4 77.5 77.1 16.4 15.3 Selling, general and administrative 19.7 22.4 19.0 20.0 0.6 8.5 Interest, net of interest capitalized 1.2 1.3 1.1 1.5 6.1 (13.6) ----- ----- ----- ----- Total costs and expenses 97.7 99.1 97.6 98.6 12.7 13.5 ----- ----- ----- ----- Income before income taxes 2.3 1.3 2.6 1.7 109.6 78.0 ----- ----- ----- ----- Income taxes 0.9 0.5 1.0 0.7 104.8 73.9 ----- ----- ----- ----- Net income 1.4 0.8 1.6 1.0 112.7 80.7 Accretion of preferred stock to redemption value 0.0 0.0 NM NM Preferred stock dividends 0.5 0.4 0.6 0.1 73.1 419.1 ----- ----- ----- ----- Net income applicable to common stock 0.9 0.4 1.0 0.9 130.1 28.3 ===== ===== ===== =====
10 11 RESULTS OF OPERATIONS The Strategic Plan The Company embarked on a five year plan (the Strategic Plan) during the second quarter of 1994 to accelerate the sales of its brand throughout the country. This plan includes three primary strategies: 1) a quadrupling of advertising and consumer promotion spending, 2) rapid expansion and development of the Company's direct-store-delivery system, and 3) introduction of 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. As originally announced, the Company anticipated that the cost of implementing the Strategic Plan would materially reduce earnings during 1994 and 1995. Under the Strategic Plan, the Company increased the amount of its spending for advertising and consumer promotion from 1993 levels to approximately $40,000,000 in 1994 and 1995, and plans to continue this level of marketing spending. Since the inception of the Strategic Plan, the Company expanded its direct-store-delivery system into 34 new markets and the Company's products are presently available to grocery stores serving approximately 85% of the consumers in the United States. This distribution system is considerably larger than any other direct-store-delivery system for ice cream products currently operating in the United States. The Company anticipates an improvement in earnings during 1996, and that the earnings benefits expected under the Strategic Plan will be achieved in 1997 and future years. However, no assurance can be given that the Company's expectations relative to future market share and earnings benefits of the strategy will be achieved. The success of the strategy will depend upon, among other things, consumer purchase responsiveness to the increased marketing expenditures, competitors' marketing responses, market conditions affecting the price of the Company's products, commodity costs, and efficiencies achieved in manufacturing and distribution operations. Thirteen Weeks ended September 28, 1996 Compared with Thirteen Weeks ended September 30, 1995 Consolidated net sales for the third quarter of 1996 increased 14% to $234,644,000 compared with $205,226,000 for the same period last year. Sales of the Company's branded products increased 7%. The increase in sales was led by the recently introduced Starbucks(R) Ice Cream (developed in a joint venture with the Starbucks Coffee Company), and Dreyer's and Edy's Grand Ice Cream and Dreyer's and Edy's Whole Fruit Sorbet(TM). The increase was offset in part by a decrease in "good for you" ice cream products sales (i.e., yogurt, lowfat, and no sugar added), which reflects an industry-wide trend of lower sales of similar products. Sales of products purchased from other manufacturers (partner brands) increased 28%, led by Healthy Choice(R) from ConAgra and frozen novelty and ice cream products from Nestle Ice Cream Company. Sales of partner brands represented 38% of consolidated net sales as compared with 34% in the third quarter of 1995. The increase in partner brand sales was primarily a result of the consolidation of M-K-D Distributors Inc. (M-K-D) (See Note 5 of Notes to Consolidated Financial Statements). The effect of price increases for Company and partner brands was not significant. Cost of goods sold increased $25,455,000, or 16%, over the third quarter of 1995, while the overall gross margin decreased from 24.6% in the third quarter of 1995 to 23.2% in the third quarter of 1996. The decrease in gross margin was largely due to an increase in dairy raw materials costs and a higher proportion of partner brand sales (which yield lower margins), partially offset by a decrease in distribution costs relative to sales and certain adjustments to accrued manufacturing liabilities (see following paragraph). The increase in dairy raw materials costs is expected to negatively impact gross profit margins for the remainder of 1996. 11 12 During September 1996, management revised its estimate of certain accrued liabilities relating to the Company's Fort Wayne, Indiana manufacturing facility. These revisions reduced the allowances and reserves for inventory obsolescence, accrued rent, utilities and property taxes, among others, by $920,000. A total of $510,000 of these adjustments relates to changes in estimates reflecting circumstances arising in the third quarter of 1996. Management has no identifiable basis on which to allocate the remaining $410,000 adjustment to prior periods; as such, this adjustment has been accounted for as a change in estimate in the third quarter of 1996. These adjustments had the effect of increasing net income for the thirteen week period ended September 28, 1996 by $566,000, or $.04 per common share. Selling, general and administrative expenses in the third quarter of 1996 were $264,000, or 1%, higher than in the same period of 1995. This increase related primarily to the consolidation of M-K-D partially offset by lower marketing expenditures compared to the same period in 1995 (See Note 5 of Notes to Consolidated Financial Statements regarding the consolidation of M-K-D). Selling, general and administrative expenses decreased as a percentage of net sales to 19.7% for the third quarter of 1996 compared with 22.4% for the same period in 1995. Interest expense increased $168,000, or 6%, over the third quarter of 1995, due primarily to the completion of the lease transaction and the issuance of senior notes, partially offset by the conversion of convertible subordinated debentures into redeemable convertible Series B preferred stock in the third quarter of 1995 and lower comparative borrowings on the Company's line of credit (See Notes 6 and 7 of Notes to Consolidated Financial Statements). Income taxes increased $1,054,000, reflecting a higher pre-tax income, while the effective tax rate decreased from 39.3% for the third quarter of 1995 to 38.4% for the third quarter of 1996. Thirty-Nine Weeks ended September 28, 1996 Compared with Thirty-Nine Weeks ended September 30, 1995 Consolidated net sales for the thirty-nine weeks ended September 28, 1996 increased 15% to $613,182,000 compared with $534,564,000 for the same period last year. Sales of the Company's branded products increased 9%. The products that led this increase were Dreyer's and Edy's Grand Ice Cream, Dreyer's and Edy's Fat Free Ice Cream and Starbucks(R) Ice Cream. The increase was offset in part by a decrease in frozen yogurt sales, which reflects an industry-wide trend of lower sales of similar products. Sales of partner brands increased 26%, led by frozen novelty and ice cream products from Nestle Ice Cream Company and Ben and Jerry's Homemade(R) superpremium products. Sales of partner brands represented 38% of consolidated net sales as compared with 35% in the same period last year. The increase in partner brand sales was primarily a result of the consolidation of M-K-D (See Note 5 of Notes to Consolidated Financial Statements). The effect of price increases for Company and partner brands was not significant. Cost of goods sold increased $63,004,000, or 15%, as compared with the comparable period in 1995, while the overall gross margin decreased slightly from 22.9% to 22.5% in 1996. The decrease in gross margin related to a higher proportion of partner brand sales and higher dairy costs, offset by a decrease in distribution costs relative to sales an insurance gain of $2,100,000 recorded as a reduction in cost of goods sold in the first quarter (See Note 4 of Notes to Consolidated Financial Statements). As discussed in Note 9 of Notes to Consolidated Financial Statements, the Company capitalized $2,560,000 of preoperating costs associated with the start-up of its Houston, Texas manufacturing facility during the thirty-nine week period ended September 28, 1996. 12 13 Selling, general and administrative expenses in the first three quarters of 1996 increased $9,083,000, or 9%, as compared with the same period in 1995. This increase related primarily to the consolidation of M-K-D partially offset by lower comparative marketing expenditures (See Note 5 of Notes to Consolidated Financial Statements regarding the consolidation of M-K-D). Selling, general and administrative expenses were lower as a percentage of net sales at 18.9 % for the first three quarters of 1996 compared with 20.0% for the same period in 1995. Interest expense in the first three quarters of 1996 was $1,089,000, or 14%, lower than in the same period in the prior year due primarily to the effect of the conversion of the convertible subordinated debentures into redeemable convertible Series B preferred stock in the third quarter of 1995, partially offset by higher borrowings on the Company's line of credit, completion of the lease transaction and issuance of the senior notes (See Notes 6 and 7 of Notes to Consolidated Financial Statements). Income taxes increased $2,652,000 reflecting a higher pre-tax income, while the effective tax rate decreased from 39.3% for the first three quarters of 1995 to 38.4% for the first three quarters of 1996. 13 14 LIQUIDITY AND CAPITAL RESOURCES Working capital at September 28, 1996 increased $11,314,000 from year-end 1995 due primarily to the seasonal increase in trade accounts receivable and inventories, partially offset by an increase in accounts payable and accrued liabilities. Cash was provided primarily from the completion of the $26,000,000 lease transaction and the issuance of $50,000,000 of senior notes (See Notes 6 and 7 of Notes to Consolidated Financial Statements). These sources were used to fund the $50,289,000 increase in property, plant and equipment and reduce the Company's long-term line of credit by $35,194,000. At September 28, 1996, the Company had $2,495,000 in cash and cash equivalents, and $91,900,000 available under its credit line. 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. 14 15 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 September 28, 1996. b. Exhibits Exhibit No. Description - ----------- ----------- 11 Computation of Net Income Per Common Share. 27 Financial Data Schedule. 15 16 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: November 11, 1996 By: /s/ Paul R. Woodland --------------------------------------------- Paul R. Woodland Vice President - Finance and Administration and Chief Financial Officer EX-11 2 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 Thirty-Nine Weeks Ended ------------------------------ ------------------------------- (In thousands, except per share amount) Sept. 28, 1996 Sept. 30, 1995 Sept. 28, 1996 Sept. 30, 1995 -------------- -------------- -------------- -------------- PRIMARY Net income applicable to common stock $ 2,055 $ 893 $ 6,260 $ 4,879 Weighted average number of shares of common stock outstanding 13,340 12,873 13,216 13,410 ------- ------- ------- ------- Net income per share, as reported $ .15 $ .07 $ .47 $ .36 ======= ======= ======= ======= Weighted average number of shares of common stock outstanding 13,340 12,873 13,216 13,410 Common stock equivalent--assumed exercise of common stock options and warrants 148 788 251 280 ------- ------- ------- ------- Weighted average number of shares of common stock outstanding, including common stock 13,488 13,661 13,467 13,690 equivalents ======= ======= ======= ======= Net income per common share $ .15(1) $ .07 $ .46(1) $ .36 ======= ======= ======= ======= FULLY DILUTED Net income applicable to common stock $ 2,055 $ 893 $ 6,260 $ 4,879 Add preferred dividends on redeemable convertible Series B preferred stock, due June 2001, and accretion of preferred stock to redemption value 1,250 661 3,749 661 Add interest expense on convertible subordinated debentures issued June 1993, and amortization of related issuance costs, net of tax 533 2,571 ------- ------- ------- ------- Adjusted net income $ 3,305 $ 2,087 $10,009 $ 8,111 ======= ======= ======= ======= Weighted average number of shares of common stock outstanding 13,340 12,873 13,216 13,410 Common stock equivalent--assumed exercise of common stock options 148 829 251 829 Assumed conversion of preferred stock 2,900 2,900 2,900 2,900 ------- ------- ------- ------- Adjusted shares 16,388 16,602 16,367 17,139 ======= ======= ======= ======= Net income per common share $ .20(2) $ .13(2) $ .61(2) $ .47(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 3 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 U.S. DOLLARS 9-MOS DEC-28-1996 DEC-31-1995 SEP-28-1996 1 2,495 0 92,747 (764) 45,751 163,846 319,119 (95,679) 497,693 83,171 180,311 98,700 0 13,341 95,607 497,693 613,182 614,385 475,046 475,046 115,632 542 6,917 16,248 6,239 10,009 0 0 0 10,009 .47 .47
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