-----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, CyLWAi47GYjN+MUrnKVxq7zSM3Ga7VHwkFA1TuyAQsbOj79O6UXbhclyi0BtNcwg wUyp51f0leiKSMAA4Ab8Fg== 0000916641-97-000505.txt : 19970515 0000916641-97-000505.hdr.sgml : 19970515 ACCESSION NUMBER: 0000916641-97-000505 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ESKIMO PIE CORP CENTRAL INDEX KEY: 0000787520 STANDARD INDUSTRIAL CLASSIFICATION: ICE CREAM & FROZEN DESSERTS [2024] IRS NUMBER: 540571720 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19867 FILM NUMBER: 97604635 BUSINESS ADDRESS: STREET 1: 901 MOOREFIELD PARK DR CITY: RICHMOND STATE: VA ZIP: 23236 BUSINESS PHONE: 8045608400 MAIL ADDRESS: STREET 1: 901 MOOREFIELD PARK DR CITY: RICHMOND STATE: VA ZIP: 23236 10-Q 1 1ST QUARTER 10-Q 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 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-19867 ------------------------ ESKIMO PIE CORPORATION (Exact name of registrant as specified in its charter) Virginia 54-0571720 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 901 Moorefield Park Drive Richmond, VA 23236 (Address of principal executive offices, including zip code) ------------ Registrant's phone number, including area code: (804) 560-8400 ------------ 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 April 15, 1997. Class Outstanding at April 15, 1997 ----- ----------------------------- Common Stock, $1.00 Par Value 3,457,573 ESKIMO PIE CORPORATION Index Page Number ------ Part I. Financial Information Item 1. Financial Statements (Unaudited) Condensed Consolidated Statements of Income Three Months Ended March 31, 1997 and 1996 1 Condensed Consolidated Balance Sheets March 31, 1997; December 31, 1996 and March 31, 1996 2 Condensed Consolidated Statements of Cash Flows Three Months Ended March 31, 1997 and 1996 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 7 ESKIMO PIE CORPORATION Condensed Consolidated Statements of Income (Unaudited)
For the three months ended March 31, 1997 1996 --------------------------------------------------------------------------------------- ------------------- ----------------- (In thousands, except share data) Net sales $ 18,078 $ 19,769 Cost of products sold 10,589 12,008 ------------------- ----------------- Gross profit 7,489 7,761 Advertising and sales promotion expenses 4,482 3,270 General and administrative expenses 2,789 2,595 ------------------- ----------------- Operating income 218 1,896 Interest income 41 29 Interest expense and other - net 174 182 ------------------- ----------------- Income before income taxes 85 1,743 Income tax expense 32 672 ------------------- ----------------- Net income $ 53 $ 1,071 =================== ================= Per common share Primary Weighted average number of common shares outstanding 3,450,684 3,476,221 Net income $ 0.02 $ 0.31 =================== ================= Fully diluted Weighted average number of common shares outstanding 3,613,251 3,638,788 Net income $ 0.02 $ 0.30 =================== ================= Cash dividend $ 0.05 $ 0.05 =================== ================= 1 ESKIMO PIE CORPORATION Condensed Consolidated Balance Sheets (Unaudited) March 31, December 31, March 31, As of 1997 1996 1996 - ---------------------------------------------------------------------------- ---------------- ------------------ ---------------- (In thousands, except share data) Assets Current assets: Cash and cash equivalents $ 1,139 $ 2,143 $ 767 Receivables 9,053 4,051 13,207 Inventories 6,499 6,608 6,939 Prepaid expenses 1,639 3,262 1,342 ---------------- ------------------ ---------------- Total current assets 18,330 16,064 22,255 Property, plant and equipment - net 8,696 8,716 8,881 Goodwill and other intangibles 17,837 17,999 18,601 Other assets 1,568 1,661 1,740 ---------------- ------------------ ---------------- Total assets $ 46,431 $ 44,440 $ 51,477 ================ ================== ================ Liabilities and Shareholders' Equity Current liabilities: Short term borrowings $ - $ - $ 3,900 Accounts payable 4,759 5,283 4,591 Accrued advertising and promotion 3,446 2,026 1,466 Accrued compensation and related amounts 435 730 245 Other accrued expenses 862 723 342 Income taxes - - 975 Current portion of long term debt 944 500 - ---------------- ------------------ ---------------- Total current liabilities 10,446 9,262 11,519 Long term debt 6,206 5,500 6,000 Convertible subordinated notes 3,800 3,800 3,800 Postretirement benefits and other liabilities 3,504 3,408 3,520 Shareholders' equity: Preferred stock, $1.00 par value; 1,000,000 shares authorized, none issued and outstanding Common stock, $1.00 par value; 10,000,000 shares authorized, 3,457,573 issued and outstanding in 1997 and 3,447,573 in 1996 3,458 3,448 3,478 Additional capital 4,283 4,168 4,671 Retained earnings 14,734 14,854 18,489 ---------------- ------------------ ---------------- Total shareholders' equity 22,475 22,470 26,638 ---------------- ------------------ ---------------- Total liabilities and shareholders' equity $ 46,431 $ 44,440 $ 51,477 ================ ================== ================ 2 ESKIMO PIE CORPORATION Condensed Consolidated Statements Of Cash Flows (Unaudited) For the three months ended March 31, 1997 1996 - ------------------------------------------------------------------------------------------ ------------------- ------------------ (In thousands) Operating activities Net income $ 53 $ 1,071 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 649 615 Change in deferred income taxes and other assets (17) (176) Change in postretirement benefits and other liabilities 88 53 Change in receivables (5,002) (4,512) Change in inventories and prepaid expenses 1,758 (1,333) Change in accounts payable and accrued expenses 738 1,901 ------------------- ------------------ Net cash used in operating activities (1,733) (2,381) Investing activities Capital expenditures (348) (167) Other 100 72 ------------------- ------------------ Net cash used in investing activities (248) (95) Financing activities Borrowings 1,150 2,700 Cash dividends (173) (174) ------------------- ------------------ Net cash provided by financing activities 977 2,526 ------------------- ------------------ Change in cash and cash equivalents (1,004) 50 Cash and cash equivalents at the beginning of the year 2,143 717 ------------------- ------------------ Cash and cash equivalents at the end of the quarter $ 1,139 $ 767 =================== ==================
3 ESKIMO PIE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE A - SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation: In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of only normal recurring accruals) necessary for a fair presentation of the Company's financial position as of March 31, 1997 and its results of operations for the three months ended March 31, 1997 and 1996. The results of operations for any interim period are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's 1996 Annual Report. NOTE B - INVENTORIES Inventories are classified as follows:
- ------------------------------------------------ -------------------------- ------------------------ ----------------------- March 31, 1997 December 31, 1996 March 31, 1996 - ------------------------------------------------ -------------------------- ------------------------ ----------------------- (In thousands) Finished goods $ 4,491 $ 4,987 $ 4,403 Raw materials and packaging supplies 3,059 2,672 3,757 ----------- ---------- --------- Total FIFO inventories 7,550 7,659 8,160 LIFO reserves (1,051) (1,051) (1,221) ----------- ---------- --------- $ 6,499 $ 6,608 $ 6,939 ========== ========= ========= - ------------------------------------------------ -------------------------- ------------------------ -----------------------
4 ESKIMO PIE CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company markets and manufactures through its own plants and licensed dairies a broad range of frozen novelties, frozen yogurt, ice cream and sorbet products under the Eskimo Pie, Welch's, Weight Watchers, SnackWell's, OREO and RealFruit brand names. The Company continues to manufacture ingredients and packaging for sale to the dairy industry and has recently begun to license the Eskimo Pie brand name in other product categories. RESULTS OF OPERATIONS Net Sales and Gross Profit Compared to the prior year, sales decreased by $1.7 million or 8.6%. This decrease relates primarily to an additional $2 million in 1996 sales resulting from the initial introduction of the Nabisco brand products. Exclusive of the impact from the Nabisco introductions, sales increased by approximately $300,000 or 1.7%. Eskimo Pie brand sales increased by approximately $700,000 and offset a net decline in sublicensed brands. The flavors business continues to grow as evidenced by a $200,000 increase (7.2%) as compared with the prior year. Gross profit, as a percent of sales, increased to 41.4% for the first quarter of 1997 as compared with 39.3% in the first quarter of 1996. Most of the increase is the result of a favorable change in product mix due to the increase in Eskimo Pie brand sales. Expenses and other Income As anticipated, advertising and sales promotion expense increased by $1.2 million or 37.1% as a direct result of the Company's increased focus on the marketing of Eskimo Pie and sublicensed brand products. The Company's previously announced 1997 marketing plan calls for both an increased amount of spending commitments as well as an acceleration of those commitments to earlier periods in the year. The Company believes that this early season spending will better position its products against the Company's primary competition as well as provide the best opportunity for repeat consumer purchases. General and administrative and interest expense, as well as interest income, were consistent with the prior year. The effective income tax rate was also consistent with 1996. LIQUIDITY AND CAPITAL RESOURCES The Company's financial position remains strong. The net cash used in operations is consistent with historical seasonal working capital requirements although the amount used decreased in 1997 largely as a result of a reduction in inventory purchases and the recovery of $1.4 million in 1996 federal income tax payments. The $1,150,000 in borrowings relate to the technology purchases discussed in the 1996 Annual Report. The Company believes that the annual cash generated from operations and funds available under its credit agreements will provide the Company with sufficient funds and the financial flexibility to support its ongoing business, strategic objectives and debt repayment requirements. 5 On April 10, 1997, the Company filed a Form S-8 Registration Statement with the Securities and Exchange Commission to register 450,000 shares of the Company's common stock to be used in connection with the previously approved 1996 Incentive Stock Plan and other employee benefit and stock purchase plans. Pursuant to this registration, the Company will provide an option for employees to invest their 401(k) contributions in Company stock and will offer an employee stock purchase plan. The Company will also begin to make its 401(k) match with shares of the Company's Common Stock. These initiatives were undertaken to increase employee ownership of Company stock in order to more closely align employee interests with that of shareholders. The incremental costs of these plans are not significant and the Company intends to purchase common stock on the open market as employee contributions are made through payroll deductions. On May 7, 1997, the Board of Directors declared a quarterly cash dividend of $.05 per share, payable July 3, 1997, to Shareholders of Record on June 13, 1997. While the Company anticipates a regular quarterly dividend, the amount and timing of any future dividends will depend on the general business conditions encountered by the Company, as well as the financial condition, earnings and capital requirements of the Company and other factors deemed relevant by the Board of Directors. 6 PART II, OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K a. Exhibits: 10.23 Letter Agreement dated February 21, 1997 between the Company and Crestar Bank, filed herewith. 27. Financial Data Schedules, filed herewith. b. Reports on Form 8-K: None 7 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. ESKIMO PIE CORPORATION Date: May 12, 1997 By /s/ David B. Kewer ------------------- David B. Kewer President and Chief Operating Officer Date: May 12, 1997 By /s/ Thomas M. Mishoe, Jr. -------------------------- Thomas M. Mishoe, Jr. Chief Financial Officer, Vice President, Treasurer and Corporate Secretary Date: May 12, 1997 By /s/ William T. Berry, Jr. -------------------------- William T. Berry, Jr. Assistant Vice President, Controller 8 EX-10.23 2 LETTER AGREEMENT BETWEEN THE CO. AND CRESTAR BK. Exhibit 10.23 January 3, 1997 Mr. Thomas M. Mishoe, Jr. Chief Financial Officer Eskimo Pie Corporation 901 Moorefield Park Drive Richmond, VA 23235 Dear Tom: On behalf of Crestar Bank (the "Bank"), I am pleased to advise you that the Bank has approved the request of Eskimo Pie Corporation (the "Company"), to waive the covenant defaults under the existing Letter Agreement and to reinstate the line of credit for the purposes and subject to the terms and conditions set forth below. 1. Amount and Purpose. Upon acceptance of this letter, the Bank will provide a revolving line of credit of $10,000,000 to the Company for general corporate purposes. Advances under the line will be evidenced by the Company's master note in the amount of the line. 2. Repayment. All loans shall be payable no later than the expiration date of this line of credit. 3. Interest. Interest shall be computed on the aggregate unpaid principal balance of the loans from time to time outstanding at a rate equal to the Bank's overnight Money Market Rate plus .75% on the basis of a 360-day year for the actual number of days elapsed. The interest rate will be changed on the same day a change occurs in the rate. Accrued interest shall be billed or debited monthly. 4. Guaranty. All advances shall be guaranteed, by all present and future subsidiaries of the Company. 5. Commitment Fee. The Company agrees to pay the Bank a non-refundable commitment fee of .25% per annum on the unused amount of the commitment payable quarterly in arrears. 6. Expiration of Line. Unless extended in writing at the sole option of the Bank, the line of credit shall expire on April 30, 1998. 7. General and Special Conditions. A) Capital Expenditures. Without the prior consent of the Bank, capital expenditures for fixed assets as defined by generally accepted accounting principles known as GAAP (exclusive of the current accounting system upgrade) of the Company during the term of this line of credit shall be limited to $1,750,000. B) Additional Debt. The Company shall not incur or assume more than $7,000,000 of additional debt for borrowed funds in excess of the amounts or facilities already existing as of December 31, 1996, without the prior written consent of the Bank. C) Minimum Shareholders' Equity. The Company shall, at its fiscal year ending December 31, 1996, and at all times thereafter, maintain shareholders' equity, as defined by GAAP, of not less than $20,500,000 plus an amount equal to 50% of the Company's positive net income after taxes determined in accordance with GAAP. D) Maximum Leverage Ratio. The Company shall, at all times, maintain a ratio of Total Liabilities to Net Worth not to exceed 1.25 to 1.00. E) Minimum Cash Coverage Ratio. Cash Coverage Ratio is defined as Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") less CAPEX divided by the sum of interest expense plus principal payments (principal payments refers to required repayments of long-term debt and/or capital leases but does not include borrowings under the line of credit contemplated by this note). For the fiscal period ending March 31, 1997 (covering 3 months), the Company shall maintain a minimum Cash Coverage Ratio of 1.0; for the fiscal periods ending June 30, 1997 (covering 6 months) and September 30, 1997 (covering 9 months), the Company shall maintain a minimum Cash Coverage Ratio of 1.3; and for the fiscal period ending December 31, 1997, and all fiscal periods thereafter, the Company shall maintain a minimum Cash Coverage Ratio (on rolling 4 quarter basis) of 1.5. F) Loan Documents. The line will be governed by this letter agreement and by the other loan documents required by the Bank, including the master note, guarantees, and corporate borrowing resolution. All loan documents must be in form and substance satisfactory to the Bank. G) Expenses. The Company shall pay all of the Bank's out-of-pocket expenses, including all filing fees and all fees and expenses of the Bank's counsel, in connection with the making of loans from acceptance of this commitment. H) Financial Statements. The Company must furnish to the Bank (1) within 90 days after the end of its fiscal year, a copy of its audited financial statements containing the unqualified report of its independent certified public accountants; (2) within 60 days after the end of each of its fiscal quarters, a copy if its interim quarterly financial statements in form satisfactory to the Bank; and (3) such other information as the Bank may from time to time request. I) Negative Pledge. The loans will be unsecured, but the Company hereby agrees not to pledge any of its assets to secure future indebtedness without the prior written consent of the Bank. This condition is not meant to apply to liens existing on the date hereof and disclosed in writing to the Bank, liens arising through the ordinary course of business, statutory liens or liens arising by operation of law so long as such liens are either inchoate or being contested in good faith. 8. Non-Assignability. The Commitment is personal to Eskimo Pie Corporation and is not assignable by operation of law or otherwise, and any assignment shall be null and void and of no force and effect. 9. Governing Law. This commitment shall be governed by the internal laws of the Commonwealth of Virginia and applicable federal laws. 10. Events of Default. Those outlined in Crestar Bank's standard commercial note form and failure of the borrower to comply with any term of any agreement with Crestar Bank or its other existing lenders. Should you have any questions, please do not hesitate to call me at 782-5449. Otherwise, if the terms and conditions of this letter are satisfactory, please signify your acceptance by signing and returning the enclosed copy of this letter no later than February 21, 1997, when this commitment will otherwise expire. We appreciate this opportunity to work with you and wish you continued success. Sincerely yours, CRESTAR BANK By: /s/ T. Patrick Collins ------------------------ T. Patrick Collins Vice President Accepted and agreed to this 21st day of February, 1997. /s/ Thomas M. Mishoe, Jr. ----------------------------- By: Thomas M. Mishoe, Jr. Title: Chief Financial Officer EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1997 MAR-31-1997 1,139 0 9,053 0 6,499 18,330 20,562 11,866 46,431 10,446 10,006 0 0 3,458 19,017 46,431 18,078 18,078 10,589 17,860 0 0 174 85 32 53 0 0 0 53 .02 .02
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