-----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, D5ee7DKMy0kmpEOX8pnyQpNkbZ/5iqDMFo1gUVqW8AachwIrU7YzJU5hPftefPNM wKnR/oVCfFQHQPrWQEh1EQ== 0000916641-98-000884.txt : 19980812 0000916641-98-000884.hdr.sgml : 19980812 ACCESSION NUMBER: 0000916641-98-000884 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980810 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: 98681462 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 SECOND 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 June 30, 1998 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 July 31, 1998. Class Outstanding at July 31, 1998 ----- ---------------------------- Common Stock, $1.00 Par Value 3,458,597 ESKIMO PIE CORPORATION Index Page Number ------ Part I. Financial Information Item 1. Financial Statements (Unaudited) Condensed Consolidated Statements of Income 1 Three and Six Months Ended June 30, 1998 and 1997 Condensed Consolidated Balance Sheets 2 June 30, 1998; December 31, 1997 and June 30, 1997 Condensed Consolidated Statements of Cash Flows 3 Six Months Ended June 30, 1998 and 1997 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial 6 Condition and Results of Operations Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders 8 Item 6. Exhibits and Reports on Form 8-K 8 ESKIMO PIE CORPORATION Condensed Consolidated Statements of Income (Unaudited)
Three months ended Six months ended June 30, June 30, 1998 1997 1998 1997 - ----------------------------------------------------- ------------------ ------------------ ------------------- ----------------- (In thousands, except share data) Net sales $ 20,114 $ 23,837 $ 36,145 $ 41,915 Cost of products sold 11,052 13,542 20,553 24,131 ------------------ ------------------ ------------------- ----------------- Gross profit 9,062 10,295 15,592 17,784 Advertising and sales promotion expenses 5,215 6,005 8,877 10,487 Selling, general and administrative expenses 2,072 2,654 4,490 5,443 ------------------ ------------------ ------------------- ----------------- Operating income 1,775 1,636 2,225 1,854 Interest income 41 53 102 94 Interest expense and other - net 152 180 344 354 Gain on disposal of fixed assets - 125 - 125 ------------------ ------------------ ------------------- ----------------- Income before income taxes 1,664 1,634 1,983 1,719 Income tax expense 615 621 733 653 ------------------ ------------------ ------------------- ----------------- Net income $ 1,049 $ 1,013 $ 1,250 $ 1,066 ================== ================== =================== ================= Per Share Data: Basic: Weighted average number of common shares outstanding 3,458,370 3,457,923 3,458,187 3,454,324 Net income $ 0.30 $ 0.29 $ 0.36 $ 0.31 ================== ================== =================== ================= Assuming Dilution: Weighted average number of common shares outstanding 3,637,836 3,626,128 3,629,990 3,622,644 Net income $ 0.30 $ 0.29 $ 0.36 $ 0.31 ================== ================== =================== ================= Cash dividends $ 0.05 $ 0.05 $ 0.10 $ 0.10 ================== ================== =================== ================= 1 ESKIMO PIE CORPORATION Condensed Consolidated Balance Sheets (Unaudited) June 30, December 31, June 30, As of 1998 1997 1997 - ------------------------------------------------------------------------- ------------------ ------------------ ---------------- (In thousands, except share data) Assets Current assets: Cash and cash equivalents $ 2,285 $ 3,353 $ 2,073 Receivables 11,011 5,321 11,787 Inventories 5,895 4,342 5,748 Prepaid expenses 819 1,617 1,078 ------------------ ------------------ ---------------- Total current assets 20,010 14,633 20,686 Property, plant and equipment - net 7,983 7,892 8,635 Goodwill and other intangibles 17,221 17,588 17,629 Other assets 1,399 1,467 1,610 ------------------ ------------------ ---------------- Total assets $ 46,613 $ 41,580 $ 48,560 ================== ================== ================ Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 6,144 $ 3,386 $ 4,679 Accrued advertising and promotion 3,381 1,389 4,427 Accrued compensation and related amounts 401 530 468 Other accrued expenses 784 698 1,204 Current portion of long term debt 1,317 1,317 1,202 ------------------ ------------------ ---------------- Total current liabilities 12,027 7,320 11,980 Long term debt 4,559 5,218 5,876 Convertible subordinated notes 3,800 3,800 3,800 Postretirement benefits and other liabilities 3,216 3,161 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, 3,458,601 issued and outstanding in 1998, 3,458,002 at December 31, 1997 and 3,458,006 at June 30, 1997 3,459 3,458 3,458 Additional capital 4,376 4,353 4,283 Retained earnings 15,176 14,270 15,574 ------------------ ------------------ ---------------- Total shareholders' equity 23,011 22,081 23,315 ------------------ ------------------ ---------------- Total liabilities and shareholders' equity $ 46,613 $ 41,580 $ 48,560 ================== ================== ================ 2 ESKIMO PIE CORPORATION Condensed Consolidated Statements Of Cash Flows (Unaudited) For the six months ended June 30, 1998 1997 - ----------------------------------------------------------------------------------------- --------------------------------------- (In thousands) Operating activities Net income $ 1,250 $ 1,066 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 1,257 1,291 Gain on disposal of fixed assets - (125) Change in deferred income taxes and other assets (56) (30) Change in postretirement benefits and other liabilities (9) 155 Change in receivables (5,691) (7,737) Change in inventories and prepaid expenses (755) 3,029 Change in accounts payable and accrued expenses 4,708 2,014 -------------------- ------------------ Net cash provided by (used in) operating activities 704 (337) Investing activities Capital expenditures (832) (656) Proceeds from disposal of fixed assets - 125 Other 63 65 -------------------- ------------------ Net cash used in investing activities (769) (466) Financing activities Borrowings - 1,150 Principal payments on long term debt (659) (71) Cash dividends (344) (346) -------------------- ------------------ Net cash (used in) provided by financing activities (1,003) 733 -------------------- ------------------ Change in cash and cash equivalents (1,068) (70) Cash and cash equivalents at the beginning of the year 3,353 2,143 -------------------- ------------------ Cash and cash equivalents at the end of the quarter $ 2,285 $ 2,073 ==================== ==================
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 June 30, 1998 and its results of operations for the three and six months ended June 30, 1998 and 1997. 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 1997 Annual Report. NOTE B - INVENTORIES Inventories are classified as follows:
- -------------------------------------------------------------------------------------------- June 30, 1998 December 31, 1997 June 30, 1997 - -------------------------------------------------------------------------------------------- (In thousands) Finished goods $ 3,783 $ 2,943 $ 3,818 Raw materials and packaging supplies 3,043 2,330 2,981 ---------- ---------- ----------- Total FIFO inventories 6,826 5,273 6,799 LIFO reserves (931) ( 931) (1,051) ---------- ---------- ------------ $ 5,895 $ 4,342 $ 5,748 ========== ========= ========== - --------------------------------------------------------------------------------------------
NOTE C - CONVERTIBLE SUBORDINATED NOTES The Company's convertible subordinated notes mature in February 1999 if not previously converted to common stock. These notes remain classified with long term debt in accordance with the Company's intention and ability to refinance the notes on a long term basis (through April 2000) under the available $10 million committed line of credit. 4 NOTE D - EARNINGS PER SHARE The following table sets forth the computation of earnings per share:
- ------------------------------------------------------ ------------------------------------ --------------------------------------- Three months ended June 30, Six months ended June 30, 1998 1997 1998 1997 - ------------------------------------------------------ ------------------- ---------------- ------------------ -------------------- Net income $ 1,049,000 $ 1,013,000 $ 1,250,000 $ 1,066,000 Reversal of interest expense from convertible subordinated notes (after tax) 27,000 27,000 53,000 53,000 ----------- ------------ ------------ ------------ Net income assuming potential dilution $ 1,076,000 $ 1,040,000 $ 1,303,000 $ 1,119,000 =========== ============ ============ ============ Weighted average number of common shares outstanding 3,458,370 3,457,923 3,458,187 3,454,324 Effect of dilutive securities: Stock options 16,899 5,638 9,236 5,753 Convertible subordinated notes 162,567 162,567 162,567 162,567 ------------- -------------- ------------- -------------- Weighted average number of common shares outstanding assuming potential dilution 3,637,836 3,626,128 3,629,990 3,622,644 ============ ============= ============ ============= Basic earnings per share $0.30 $0.29 $0.36 $0.31 ===== ===== ===== ===== Earnings per share - assuming dilution $0.30 $0.29 $0.36 $0.31 ===== ===== ===== ===== - ------------------------------------------------------ ------------------- ---------------- ------------------ --------------------
Certain stock options were excluded from consideration for their dilutive effect because the exercise price of the options exceeded the average market price for the respective periods, and as such, the effect would be anti-dilutive. 5 ESKIMO PIE CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations Eskimo Pie Corporation 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 also continues to manufacture ingredients and packaging for sale to the dairy industry. RESULTS OF OPERATIONS Net income for the quarter ended June 30, 1998 increased 3.6% to $1,049,000 ($0.30 per share) as compared with $1,013,000 ($0.29 per share) for the same period in 1997. For the six months ended June 30, net income increased 17.3% to $1,250,000 in 1998 as compared with $1,066,000 in 1997. Included in 1997 results are gains of $125,000 resulting from the sale of fixed assets. Exclusive of these gains, net income increased 12.2% and 26.5% for the quarter and six months, respectively. Net Sales and Gross Profit Sales of components and ingredients for the Company's licensed brands decreased during both the quarter and six month period ended June 30, 1998 in spite of expanded distribution of Eskimo Pie branded products in the populous Northeast markets, the successful introduction of OREO brand novelties in the West and Southwest markets and the initiation of the single serve impulse program. The incremental sales resulting from these initiatives only partially offset the continued decline of the Company's SnackWell's and RealFruit brands (which together fell by approximately $2.5 million during the first half of 1998) and, according to Information Resources, Inc., an overall industry decline in consumer purchases of branded frozen novelties which, management believes, resulted from cooler weather during the first half of the year and increased consumer purchases of less expensive private label products. Sales were also weaker in the first half of 1998 than in 1997 due to differences in the timing of consumer and trade promotions. The 1998 promotional calendar is not as front loaded as that in 1997 and as such, promotional spending and the resulting sales should be more evenly spread throughout the year. Sales within the Company's Flavors and Foodservice divisions also decreased during the quarter ($566,000) and six month period ($932,000) ended June 30, 1998 as compared with 1997 results. The Flavors decrease relates primarily to the loss of two customers following the closure of the Los Angeles production facility as part of the 1997 Flavors consolidation. Production efficiencies and enhanced divisional focus resulting from the consolidation is beginning to enhance our pricing competitiveness and customer service which may lead to increased sales going forward. The Foodservice decrease relates primarily to the loss of one large volume, low margin customer which was lost in late 1997 from a pricing decision. New business has recently been obtained which should offset the lost volume beginning in the fourth quarter of 1998. Gross profit, as a percent of sales, increased during both the quarter and six month periods as a result of an improved product mix, the impact of the third quarter 1997 Flavors consolidation and the benefit of 1997's initiatives to obtain more favorable pricing on key materials and ingredients. 6 Expenses and Other Income Advertising and sales promotion expenses decreased during both the quarter and six month period ended June 30, 1998, as compared with 1997, primarily as a result of a change in the Company's promotional spending pattern. As discussed above, the Company's 1998 marketing plan calls for heavier "in-season" promotional support as compared with the 1997 plan which included an emphasis on "pre-season" spending. Promotional spending also decreased in tandem with the decreased sales as a large percentage of promotional spending is volume based and as sales decline, spending against promotional commitments fall as well. Selling, general and administrative expenses continue to trend at levels below prior year results as a result of management's initiatives to control these costs throughout the Company. Interest income and expense, as well as the effective income tax rate, remain consistent with the prior year. LIQUIDITY AND CAPITAL RESOURCES The Company's financial position remains strong. During 1998, the Company has made approximately $832,000 of capital investments (primarily related to computer technology and New Berlin plant improvements) and $659,000 in scheduled debt payments. 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. FORWARD LOOKING STATEMENTS The information included in this Annual Report regarding the Company's future plans and performance contains forward looking statements within the meaning of federal securities laws. These statements 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 affecting the Company will mirror those currently anticipated by management. These forward looking statements involve risks and uncertainties, including but not limited to, the level of consumer interest in the Company's products, product costing, the weather, the performance of the new management team, the Company's relationships with its licensors and licensees, the highly competitive frozen dessert market as well as government regulation. Actual results may vary materially from those included in the forward looking statements. The Company's Annual Report on Form 10-K for the year ended December 31, 1997 contains additional discussion of the risk factors affecting the Company's business. 7 PART II, OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) At the Company's Annual Meeting held on May 6, 1998, 2,712,028 of the Company's 3,458,002 shares were present in person or by proxy and entitled to vote, which constituted a quorum. (b) At the Annual Meeting, the following nominees were elected to serve until the 1999 Annual Meeting having received the following vote: FOR ABSTAIN --- ------- Arnold H. Dreyfuss 2,446,444 265,584 Wilson H. Flohr, Jr. 2,536,562 175,466 F. Claiborne Johnston, Jr. 2,536,562 175,466 David B. Kewer 2,704,677 7,351 Daniel J. Ludeman 2,600,560 111,468 Judith B. McBee 2,600,560 111,468 Robert C. Sledd 2,704,862 7,166 (c) At the Annual Meeting, designation of Ernst & Young LLP as auditors for the Company was ratified having received the following vote: FOR 2,605,811 AGAINST 7,996 ABSTAIN 98,222 Item 6. Exhibits and Reports 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: August 10, 1998 By /s/ David B. Kewer -------------------------- David B. Kewer President and Chief Executive Officer Date: August 10, 1998 By /s/ Thomas M. Mishoe, Jr. --------------------------- Thomas M. Mishoe, Jr. Chief Financial Officer, Vice President, Treasurer and Corporate Secretary Date: August 10, 1998 By /s/ William T. Berry, Jr. ------------------------------ William T. Berry, Jr. Assistant Vice President, Controller 9 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1998 JUN-30-1998 2,285 0 11,011 0 5,895 20,010 19,948 11,965 46,613 12,027 8,359 0 0 3,459 19,552 46,613 36,145 36,145 20,553 33,920 0 0 344 1,983 733 1,250 0 0 0 1,250 .36 .36
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