-----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, EMGdFHBfEwccX2QxhwT+vroG6lySgqT0GGu2noUBLcsmGY5AdCkf0yMypk0Zt+um DoeL6yreyy0zuPiWOCQ4LA== 0000916641-97-001069.txt : 19971114 0000916641-97-001069.hdr.sgml : 19971114 ACCESSION NUMBER: 0000916641-97-001069 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 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: SEC FILE NUMBER: 000-19867 FILM NUMBER: 97712795 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 THIRD QUARTER REPORT 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 September 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] 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 October 31, 1997. Class Outstanding at October 31, 1997 ----- ------------------------------- Common Stock, $1.00 Par Value 3,458,006 ESKIMO PIE CORPORATION Index
Page Number ------ Part I. Financial Information Item 1. Financial Statements (Unaudited) Condensed Consolidated Statements of Income Three and Nine Months Ended September 30, 1997 and 1996 1 Condensed Consolidated Balance Sheets September 30, 1997; December 31, 1996 and September 30, 1996 2 Condensed Consolidated Statements of Cash Flows Nine Months Ended September 30, 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 6 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 8 ESKIMO PIE CORPORATION Condensed Consolidated Statements of Income (Unaudited) Three months ended Nine months ended September 30, September 30, - ------------------------------------------------------------------------------------------------------------------------------------ 1997 1996 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ (In thousands, except share data) Net sales $ 13,124 $ 16,898 $ 55,038 $ 61,991 Cost of products sold 7,964 11,726 32,095 38,870 ------------------ ------------------ ------------------- -------------- Gross profit 5,160 5,172 22,943 23,121 Advertising and sales promotion expenses 3,445 5,741 13,927 13,357 General and administrative expenses 2,065 3,107 7,512 8,676 Income from restructuring activities 689 - 689 - ------------------ ------------------ ------------------- -------------- Operating income (loss) 339 (3,676) 2,193 1,088 Interest income 48 88 142 151 Interest expense and other - net 179 159 533 513 Gain (loss) on disposal of fixed assets 57 (777) 182 (777) ------------------ ------------------ ------------------- -------------- Income (loss) before income taxes 265 (4,524) 1,984 (51) Income tax expense (benefit) 101 (1,725) 755 (17) ------------------ ------------------ ------------------- -------------- Net income (loss) $ 164 $ (2,799) $ 1,229 $ (34) ================== ================== =================== ============== Per common share Primary Weighted average number of common shares outstanding 3,458,006 3,446,216 3,455,565 3,464,612 Net income (loss) $ 0.05 $ (0.81) $ 0.36 $ (0.01) ================== ================== =================== ============== Fully diluted Weighted average number of common shares outstanding 3,620,573 3,608,783 3,618,132 3,627,179 Net income (loss) $ 0.05 $ (0.81) $ 0.36 $ (0.01) ================== ================== =================== ============== Cash dividend $ 0.05 $ 0.05 $ 0.15 $ 0.15 ================== ================== =================== ============== 1 ESKIMO PIE CORPORATION Condensed Consolidated Balance Sheets (Unaudited) Sept. 30, December 31, Sept. 30, As of 1997 1996 1996 - ------------------------------------------------------------------------------ ------------------ ------------------ --------------- (In thousands, except share data) Assets Current assets: Cash and cash equivalents $ 3,400 $ 2,143 $ 3,222 Receivables 6,305 4,051 5,574 Inventories 5,998 6,608 5,543 Prepaid expenses 944 3,262 2,391 ------------------ ------------------ --------------- Total current assets 16,647 16,064 16,730 Property, plant and equipment - net 7,731 8,716 7,958 Goodwill and other intangibles 17,828 17,999 18,191 Other assets 1,394 1,661 1,558 ------------------ ------------------ --------------- Total assets $ 43,600 $ 44,440 $ 44,437 ================== ================== =============== Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 2,981 $ 5,283 $ 2,152 Accrued advertising and promotion 1,852 2,026 2,374 Accrued compensation and related amounts 617 730 996 Other accrued expenses 737 723 924 Current portion of long term debt 1,317 500 286 ------------------ ------------------ --------------- Total current liabilities 7,504 9,262 6,732 Long term debt 5,547 5,500 5,714 Convertible subordinated notes 3,800 3,800 3,800 Postretirement benefits and other liabilities 3,444 3,408 3,589 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, 3,458,006 issued and outstanding in 1997, 3,447,573 at December 31, 1996 and 3,445,073 at September 30, 1996 3,458 3,448 3,445 Additional capital 4,283 4,168 4,121 Retained earnings 15,564 14,854 17,036 ------------------ ------------------ --------------- Total shareholders' equity 23,305 22,470 24,602 ------------------ ------------------ --------------- Total liabilities and shareholders' equity $ 43,600 $ 44,440 $ 44,437 ================== ================== =============== 2 ESKIMO PIE CORPORATION Condensed Consolidated Statements Of Cash Flows (Unaudited) Nine months ended September 30, 1997 1996 - ------------------------------------------------------------------------------------------ -------------------------------------- (in thousands) Operating activities Net income (loss) $ 1,229 $ (34) Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: Depreciation and amortization 1,884 1,894 (Gain) loss on disposal of fixed assets (1,181) 777 Change in deferred income taxes and other assets (43) (296) Change in postretirement benefits and other liabilities (37) 83 Change in receivables (2,255) 3,121 Change in inventories and prepaid expenses 2,924 (926) Change in accounts payable and accrued expenses (2,578) 729 -------------------- ----------------- Net cash (used in) provided by operating activities (57) 5,348 Investing activities Capital expenditures (907) (552) Proceeds from disposal of fixed assets 1,992 - Other (116) 13 -------------------- ----------------- Net cash provided by (used in) investing activities 969 (539) Financing activities Cash dividends (519) (521) Borrowings 1,150 - Repayment of short term borrowings - (1,200) Principal payments on long term debt (286) - Repurchase of common stock - (583) -------------------- ----------------- Net cash provided by (used in) financing activities 345 (2,304) -------------------- ----------------- Change in cash and cash equivalents 1,257 2,505 Cash and cash equivalents at the beginning of the year 2,143 717 -------------------- ----------------- Cash and cash equivalents at the end of the quarter $ 3,400 $ 3,222 ==================== =================
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 September 30, 1997 and its results of operations for the three and nine months ended September 30, 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. Accounting Change: In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share. Statement No. 128, which is effective for both interim and annual financial statements ending after December 15, 1997, establishes revised standards for computing and reporting earnings per share. The Company will change the method currently used to compute earnings per share and restate all prior periods in its December 31, 1997 Annual Report. The impact on earnings per share is not expected to be material. Reclassifications: Certain prior year amounts have been reclassified to conform to current year presentation. NOTE B - INVENTORIES Inventories are classified as follows: - ------------------------------------------------ -------------------------- ------------------------ ----------------------- September 30, 1997 December 31, 1996 September 30, 1996 - ------------------------------------------------ -------------------------- ------------------------ ----------------------- (In thousands) Finished goods $ 2,705 $ 4,987 $ 3,387 Raw materials and packaging supplies 4,344 2,672 3,266 ---------- --------- ---------- Total FIFO inventories 7,049 7,659 6,653 LIFO reserves (1,051) (1,051) (1,110) ---------- --------- ---------- $ 5,998 $ 6,608 $ 5,543 ========== ========= ========== - ------------------------------------------------ -------------------------- ------------------------ -----------------------
NOTE C - INCOME FROM RESTRUCTURING ACTIVITIES During the third quarter of 1997, the Company consolidated its flavors production in New Berlin, Wisconsin. In connection with the consolidation, the Company discontinued flavors operations in Los Angeles, California, terminated the employment of the plant's 14 employees and sold the plant facility. The Company recorded income of $689,000 as a result of these actions. The income from restructuring activities includes a gain on the sale of plant assets of approximately $1.0 million offset primarily by employee severance payments. With the exception of approximately $110,000 of severance payments which will be paid to former employees through the second quarter of 1998, all cash receipts and payments relating to the consolidation have been settled as of September 30, 1997. 4 NOTE D - GAIN ON DISPOSAL OF FIXED ASSETS During 1997, the Company identified buyers for certain components of equipment which were written off in the third quarter of 1996 (see additional discussion in Note E below). The gain on disposal of fixed assets equals the proceeds received from the sale of the equipment which had no book value at the beginning of 1997. NOTE E - SPECIAL CHARGES During the third quarter of 1996, the Company recorded special charges not identifiable with preceding interim periods of approximately $2,398,000. These special charges included accruals relating to severance commitments associated with a change in executive management ($593,000), the disposal of certain equipment leased to one of the Company's licensees ($725,000) and the disposal of licensee and Company held inventories ($920,000). After related tax benefits, the special charges reduced 1996 net income by approximately $1,482,000. 5 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, RealFruit, Welch's, Weight Watchers, SnackWell's and OREO 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 Total Company sales decreased during both the quarter and nine month period ended September 30, 1997. These declines are primarily attributable to disappointing second year sales of Nabisco branded items and a decline in the sorbet category where the Company's RealFruit brand competes. However, supermarket sales of Eskimo Pie and Welch's brand products outperformed their respective categories this summer (based on consumption data collected by Information Resources, Inc.) in response to the early season advertising and sales promotion activity. Sales of Eskimo Pie brand products increased by approximately 4.9% during the nine month period and offset declines in the sublicensed brands. Component sales to licensees decreased during the quarter in response to the planned reduction of late season advertising and sales promotion activity. Gross profit, as a percent of sales, improved in 1997 due to an improved product mix resulting from increased sales of higher margin Eskimo Pie brand products, reduced material costs resulting from recent negotiations with the suppliers of key ingredients and packaging, and enhanced inventory management which has reduced inventory obsolescence. Expenses and Other Income Advertising and sales promotion expense increased on a year to date basis as a reflection of the investment spending undertaken to rebuild the Company's core brands. The decline in third quarter expenses reflects the effect of the Company's 1997 marketing plan which accelerated a larger portion of the promotional activity to earlier in the summer selling season. The third quarter expense also reflects an overall reduction in promotional activities made in response to the sales declines discussed above. Exclusive of 1996 severance accruals, general and administrative expenses have declined by over $400,000 during both the quarter and nine month period. These expenses continue to decline as a result of management's increased focus in all portions of the business. In June 1997, the Company announced the consolidation of its flavors production in New Berlin, Wisconsin. In connection with the consolidation, the Company has discontinued flavors operations in Los Angeles, California, terminated the employment of the plant's 14 employees and sold the plant facility. The income from restructuring activities of $689,000 is the result of these actions. The income from restructuring activities includes a gain on the sale of plant assets of approximately $1.0 million offset primarily by employee severance payments. With the exception of approximately $110,000 of severance payments which will be paid to former employees through the second quarter of 1998, all cash receipts and payments relating to the consolidation have been settled as of September 30, 1997. 6 The Company plans to use the proceeds from the sale of the Los Angeles facility to complete an expansion of the New Berlin facility. The New Berlin expansion will provide the capacity to serve the Company's current and expected business requirements at costs which are lower than operating two plants. The Company estimates that the consolidation of its two flavors plants into an expanded New Berlin operation will generate annual cost savings of approximately $500,000 (before tax) beginning in 1998. In the third quarter of 1996, the Company recorded a loss on disposal of fixed assets of $725,000 relating to certain equipment leased to one of the Company's licensees. The licensee had asked to have the equipment removed and no alternate use appeared available. During 1997, the Company identified buyers for certain components of the equipment written off in 1996. The 1997 gains on disposal of fixed assets equals the proceeds received from the sale of the equipment which had no book value at the beginning of 1997. LIQUIDITY AND CAPITAL RESOURCES The Company's financial position remains strong. Although the Company generated less cash from operations than in prior years, the Company's cash and current ratio remained consistent with the prior year due to the recovery of $1.4 million in 1996 Federal income tax payments, $1,150,000 in borrowings related to 1996 technology purchases and the proceeds from the sale of the Los Angeles plant facility. 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. On October 17, 1997, the Company's Board of Directors declared a quarterly cash dividend of $.05 per share, payable on January 2, 1998, to shareholders of record on December 16, 1997. While the Company anticipates that it will have 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. FORWARD LOOKING STATEMENTS Statements contained in this Report on Form 10-Q regarding the Company's future plans and expected performance are forward looking statements within the meaning of federal securities laws and are based upon management's current expectations and beliefs about future events and their effect upon Eskimo Pie Corporation. There can be no assurance that future developments will mirror those currently anticipated by management. These forward looking statements involve risks and uncertainties including but not limited to, the level of consumer interests in the Company's products, product costing, the weather, performance of the Company's management team, the Company's relationships with its licensees and licensors, the highly competitive nature of the frozen dessert market, as well as government regulation. The risks and uncertainties are further discussed in the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission for the year ended December 31, 1996. Actual results may vary materially from those included herein and the Company assumes no responsibility for updating these statements. 7 PART II, OTHER INFORMATION Item 6. Exhibits and Report on Form 8-K (a) Exhibits: 27. Financial Data Schedules, filed herewith. (b) Reports on Form 8-K: None 8 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: November 12, 1997 By /s/ David B. Kewer -------------------------- David B. Kewer President and Chief Operating Officer Date: November 12, 1997 By /s/ Thomas M. Mishoe, Jr. ----------------------------- Thomas M. Mishoe, Jr. Chief Financial Officer, Vice President, Treasurer and Corporate Secretary Date: November 12, 1997 By /s/ William T. Berry, Jr. ------------------------------ William T. Berry, Jr. Assistant Vice President, Controller 9 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1997 SEP-30-1997 3,400 0 6,305 0 5,998 16,647 18,609 10,878 43,600 7,504 9,347 0 0 3,458 19,847 43,600 55,038 55,038 32,095 53,534 (689) 0 533 1,984 755 1,229 0 0 0 1,229 .36 .36
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