-----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, Uoh6IyumGS/YfHdSCXPjCBHSqnWLD6UixYoomdiYmfp7dzN8MpQXMR99QSFiKcPn 8u9wiB7EK1bvoiE9SBuDvA== /in/edgar/work/20000811/0000916641-00-001114/0000916641-00-001114.txt : 20000921 0000916641-00-001114.hdr.sgml : 20000921 ACCESSION NUMBER: 0000916641-00-001114 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ESKIMO PIE CORP CENTRAL INDEX KEY: 0000787520 STANDARD INDUSTRIAL CLASSIFICATION: [2024 ] IRS NUMBER: 540571720 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19867 FILM NUMBER: 693108 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 0001.txt JUNE 30, 2000 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, 2000 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. Class Outstanding at August 2, 2000 - -------------------------------- ---------------------------------------- Common Stock, $1.00 Par Value 3,485,757 ESKIMO PIE CORPORATION Index
Page Number ---------------- Part I. Financial Information Item 1. Financial Statements (Unaudited) Condensed Consolidated Statements of Income Three and Six Months Ended June 30, 2000 and 1999 1 Condensed Consolidated Balance Sheets June 30, 2000; December 31, 1999 and June 30, 1999 2 Condensed Consolidated Statements of Cash Flows Six Months Ended June 30, 2000 and 1999 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 10
ESKIMO PIE CORPORATION Condensed Consolidated Statements of Income (Unaudited)
Three months ended Six months ended June 30, June 30, 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------- (In thousands, except share data) Net sales $ 20,311 $ 22,146 $ 36,697 $ 38,275 Cost of products sold 10,931 11,715 19,905 20,998 ------------------------------------------------ Gross profit 9,380 10,431 16,792 17,277 Advertising and sales promotion expenses 4,902 5,827 9,267 9,708 Selling, general and administrative expenses 1,892 2,039 3,555 4,182 Expense from analysis of strategic alternatives 337 172 537 381 and related activities Expense from restructuring activities - 86 - 191 ------------------------------------------------ Operating income 2,249 2,307 3,433 2,815 Interest income 63 31 84 50 Interest expense and other - net 85 117 171 276 ------------------------------------------------ Income before income taxes 2,227 2,221 3,346 2,589 Income tax expense 824 822 1,238 958 ------------------------------------------------ Net income $ 1,403 $ 1,399 $ 2,108 $ 1,631 ================================================ Per Share Data Basic: Weighted average number of common shares outstanding 3,484,849 3,462,824 3,482,406 3,462,810 Net income $ 0.40 $ 0.40 $ 0.61 $ 0.47 ================================================ Assuming dilution: Weighted average number of common shares outstanding 3,484,849 3,462,824 3,482,406 3,464,031 Net income $ 0.40 $ 0.40 $ 0.61 $ 0.47 ================================================ Cash dividends $ 0.00 $ 0.05 $ 0.00 $ 0.10 ================================================
ESKIMO PIE CORPORATION Condensed Consolidated Balance Sheets (Unaudited) June 30, December 31, June 30, As of 2000 1999 1999 - ----------------------------------------------------------------------------------------------------------- (In thousands, except share data) Assets Current assets: Cash and cash equivalents $ 2,297 $ 1,751 $ 55 Receivables 9,539 6,057 12,073 Inventories 3,854 4,032 5,227 Prepaid expenses 778 557 287 ---------------------------------- Total current assets 16,468 12,397 17,642 Property, plant and equipment - net 6,160 6,578 6,839 Goodwill and other intangibles 16,168 16,598 17,142 Other assets 920 913 1,048 ---------------------------------- Total assets $39,716 $36,486 $42,671 ================================== Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 3,440 $ 3,208 $ 3,496 Accrued advertising and promotion 3,851 2,217 4,562 Accrued compensation and related amounts 261 1,033 386 Other accrued expenses 815 1,038 1,064 Income taxes 725 - 250 Current portion of long term debt 857 972 1,202 ---------------------------------- Total current liabilities 9,949 8,468 10,960 Long term debt 2,500 2,929 5,033 Postretirement benefits and other liabilities 2,151 2,293 3,108 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, 3,485,757 issued and outstanding in 2000, 3,464,050 at December 31, 1999 and 3,462,824 at June 30, 1999 3,487 3,464 3,463 Additional capital 4,658 4,468 4,448 Retained earnings 16,971 14,864 15,659 ---------------------------------- Total shareholders' equity 25,116 22,796 23,570 ---------------------------------- Total liabilities and shareholders' equity $39,716 $36,486 $42,671 ==================================
2 ESKIMO PIE CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited) For the six months ended June 30, 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- (In thousands) Operating activities Net income $ 2,108 $ 1,631 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 1,094 1,192 Compensation for Board members in stock 203 - Change in deferred income taxes and other assets (12) 704 Change in postretirement benefits and other liabilities (306) (292) Change in receivables (3,482) (5,256) Change in inventories and prepaid expenses (44) - Change in accounts payable and accrued expenses 1,596 4,334 ------------------------------------------- Net cash provided by operating activities 1,157 2,313 Investing activities Capital expenditures (171) (221) Proceeds from disposal of fixed assets - 401 Other 104 161 ------------------------------------------- Net cash (used in) provided by investing activities (67) 341 Financing activities Borrowings - 3,800 Redemption of convertible subordinated notes - (3,800) Principal payments on long term debt (544) (2,783) Cash dividends - (346) ------------------------------------------- Net cash used in financing activities (544) (3,129) ------------------------------------------- Change in cash and cash equivalents 546 (475) Cash and cash equivalents at the beginning of the year 1,751 530 ------------------------------------------- Cash and cash equivalents at the end of the quarter $ 2,297 $ 55 ===========================================
3 ESKIMO PIE CORPORATION Notes to Condensed Consolidated Financial Statements NOTE A - SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation: The Company's business is highly seasonal which generally results in a higher level of sales and certain related advertising and sales promotion expenses preceding and during the summer. 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, 2000 and its results of operations for the three and six months ended June 30, 2000 and 1999. 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 1999 Annual Report. NOTE B - INVENTORIES Inventories are classified as follows:
As of June 30, 2000 December 31, 1999 June 30, 1999 - ---------------------------------------------------------------------------------------------------------------------- (In thousands) Finished goods $2,684 $2,667 $ 3,488 Raw materials and packaging supplies 2,091 2,286 2,776 ------ ------ ------- Total FIFO inventories 4,775 4,953 6,264 LIFO reserves (921) (921) (1,037) ------ ------ ------- $3,854 $4,032 $ 5,227 ====== ====== ======= - ---------------------------------------------------------------------------------------------------------------------
NOTE C - EARNINGS PER SHARE The following table sets forth the computation of earnings per share:
Three months ended June 30, Six months ended June 30, 2000 1999 2000 1999 ---- ---- ---- ---- Net income $1,403,000 $1,399,000 $2,108,000 $1,631,000 Weighted average number of common shares outstanding 3,484,849 3,462,824 3,482,406 3,462,810 Dilutive effect of stock options - - - 1,221 ---------- ---------- ---------- ---------- Weighted average number of common shares outstanding assuming potential dilution 3,484,849 3,462,824 3,482,406 3,464,031 ========== ========== ========== ========== Basic earnings per share $ 0.40 $ 0.40 $ 0.61 $ 0.47 ========== ========== ========== ========== Earnings per share - assuming dilution $ 0.40 $ 0.40 $ 0.61 $ 0.47 ========== ========== ========== ==========
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. 4 NOTE D - BUSINESS SEGMENTS
National Business Segments Brands Flavors Foodservice Other Totals - ---------------------------------------------------------------------------------------------------------- Three months ended June 30, 2000 - -------------------------------- Sales $13,096 $3,478 $3,284 $453 $20,311 ======== ======= =========== ===== ======= Segment profitability $ 2,931 $ 673 $ 869 $ 5 $ 4,478 Selling, general and administrative expenses (1,892) Expense from analysis of strategic (337) alternatives and related activities Interest income and expense - net (22) ------- Income before income taxes $ 2,227 ======= Three months ended June 30, 1999 - -------------------------------- Sales $15,210 $3,531 $2,823 $582 $22,146 ======== ======= =========== ===== ======= Segment profitability $ 3,110 $ 639 $ 720 $135 $ 4,604 Selling, general and administrative expenses (2,039) Expense from analysis of strategic alternatives (172) Expense from restructuring activities (86) Interest income and expense - net (86) ------- Income before income taxes $ 2,221 =======
National Business Segments Brands Flavors Foodservice Other Totals - ------------------------------------------------------------------------------------------------------------ Six months ended June 30, 2000 - ------------------------------ Sales $23,902 $6,460 $5,528 $ 807 $36,697 ======== ======= =========== ======= ======= Segment profitability $ 5,260 $1,150 $1,100 $ 15 $ 7,525 Selling, general and administrative expenses (3,555) Expense from analysis of strategic (537) alternatives and related activities Interest income and expense - net (87) ------- Income before income taxes $ 3,346 ======= Six months ended June 30, 1999 - ------------------------------ Sales $25,768 $6,447 $4,936 $1,124 $38,275 ======== ======= =========== ======= ======= Segment profitability $ 5,062 $1,240 $1,167 $ 100 $ 7,569 Selling, general and administrative expenses (4,182) Expense from analysis of strategic alternatives (381) Expense from restructuring activities (191) Interest income and expense - net (226) ------- Income before income taxes $ 2,589 =======
NOTE E - EXPENSE FROM ANALYSIS OF STRATEGIC ALTERNATIVES, RESTRUCTURING AND OTHER ACTIVITIES During 2000, the Company incurred $537,000 of expenses associated with the Company's pursuit of a sale of the Company, the execution of a merger agreement with CoolBrands International Inc. and subsequent activities associated with removing conditions to close the sale. These expenses primarily included legal, investment banking and other professional service fees. 5 During the first half of 1999, the Company incurred $572,000 in expenses associated with three separate activities, discussed below. The Company incurred approximately $381,000 in costs (primarily associated with legal, investment banking and other professional fees) associated with its examination of strategic alternatives to enhance shareholder value and its subsequent development of the Company's Growth and Restructuring Plan. In March 1999, the Company discontinued certain non-core manufacturing operations and as a result, terminated the employment of seven production employees at its Bloomfield, New Jersey packaging plant. As a result, the Company incurred related severance costs of approximately $105,000 all of which was paid during 1999. During the second quarter of 1999, the Company eliminated two vacant positions and terminated the employment of six employees located at the Company's corporate headquarters. The severance costs associated with the terminations totaled $86,000, the majority of which was paid by the end of 1999. NOTE F - OTHER INFORMATION In September 1999, the Company's Board of Directors approved a plan which would provide certain lump sum payments to key employees if a change in control of the Company occurred prior to December 31, 2000. Assuming all employees covered remain employed through a change in control, these payments would total approximately $1.8 million. In addition, the plan also provides for certain severance payments as well as continued medical and healthcare benefits to employees who are terminated subsequent to a change in control of the Company. During the second quarter of 2000, the Company executed a merger agreement with CoolBrands International Inc. (formerly, Yogen Fruz World-Wide Incorporated), for the acquisition of Eskimo Pie Corporation at a purchase price of (U.S.) $10.25 cash per share to shareholders of Eskimo Pie Corporation. The Company has called a special meeting of shareholders to be held on September 6, 2000 to vote on the merger transaction. 6 ESKIMO PIE CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations Eskimo Pie Corporation markets a broad range of frozen novelties, ice cream and sorbet products under the Eskimo Pie, Real Fruit, Welch's, Weight Watchers Smart Ones, SnackWell's and OREO brand names. These nationally branded products are generally manufactured by a select group of licensed dairies who purchase the necessary flavors ingredients and packaging directly from the Company. Eskimo Pie Foodservice is a leading supplier of premium soft serve ice cream, frozen yogurt, custard and smoothie products to the foodservice industry. The Company also sells a full line of quality flavors and ingredients for use in private label dairy products in addition to the brands it licenses. RESULTS OF OPERATIONS - --------------------- Net income for the quarter ended June 30, 2000 was $1,403,000, or $0.40 per share as compared to $1,399,000, or $0.40 per share for the quarter ended June 30, 1999. For the six-month period ending June 30, 2000 net income was $2,108,000, or $.61 per share, a 29% increase from $1,631,000, or $0.47 per share in the same period in 1999. Net Sales and Gross Profit - -------------------------- Sales for the six-month period ending June 30, 2000 were $36.7 million, as compared to $38.3 million in the same period in 1999. This 4% decline was primarily due to decreases of inventory levels at the Company's licensees, due to the pending sale of the Company to CoolBrands International Inc. (formerly Yogen Fruz World-Wide Incorporated). Although the Company's sales have decreased, based on Nielson data, for the 3-month period ending June 24, 2000, consumption of the Company's branded products increased 16.2% as compared to the same period a year ago, despite an overall category increase of only 1.2%. This gain was primarily driven by an increase of 24.2% in Eskimo Pie brand product consumption, and increases of 14.6% and 13% respectively in Weight Watchers and Welch's product consumption. The Company's branded products are available in 94% of the total U.S. supermarkets. Gross margin for the six-month period increased by 70 basis points, from 45.1% in 1999 to 45.8% in 2000 as a result of continued cost controls and inventory management efforts. Expenses and Other Income - ------------------------- Advertising and sales promotion expenses as a percent of sales remain consistent with last years spending. During the first quarter of the year, spending in absolute dollars and as a percent of sales had increased over prior year spending. As a result of the pending sale of the company, spending against the Company's growth plan, particularly in consumer spending and research, was curtailed during the second quarter, and spending was brought more in line with historical spending trends of the Company. Selling, general and administrative expenses continue to decline, decreasing by approximately 15% as compared to the first six months of 1999. This is due in part to management's initiatives to control these costs and the reduction in force that was completed in the second quarter of 1999. This reduction is also due to a decrease in personnel as a result of voluntary terminations as it has become increasingly difficult to hire replacements in light of the Company's announcement to pursue a possible sale of the Company and the subsequent announcement of a pending sale of the Company to CoolBrands. 7 During 2000, the Company incurred $537,000 of expenses associated with the Company's pursuit of a sale of the Company, the execution of a merger agreement with CoolBrands International Inc. and subsequent activities associated with removing conditions to close the sale. These expenses consist primarily of legal, investment banking and other professional fees. During 1999, the Company incurred $572,000 in expenses associated with three separate restructuring activities. During the first six months of 1999, the Company incurred approximately $381,000 in costs (primarily associated with legal, investment banking and other professional fees) associated with its examination of strategic alternatives to enhance shareholder value and the subsequent development of the Company's Growth and Restructuring Plan. In March 1999, the Company discontinued certain non-core manufacturing operations and as a result, terminated the employment of seven production employees at its Bloomfield, New Jersey packaging plant. As a result, the Company incurred related severance costs of approximately $105,000 all of which was paid during 1999. During the second quarter of 1999, the Company eliminated two vacant positions and terminated the employment of six employees located at the Company's corporate headquarters. The severance costs associated with the terminations totaled $86,000, the majority of which was paid by the end of 1999. LIQUIDITY, CAPITAL RESOURCES AND OTHER MATTERS - ---------------------------------------------- The Company's financial position continues to strengthen. The Company's net debt position (total debt less cash) has decreased by over $5.1 million, from $6.2 million as of June 30, 1999 to $1.1 million as of June 30, 2000. In addition, the Company's debt to equity position has significantly improved over the same period of time. The Company has a $10 million line of credit which is available for general corporate purposes through April of 2001. The Company generally seeks a one year extension of the line of credit during the second quarter of each year. The Company chose not to renew the line during the second quarter of 2000, due to the pending sale of the Company. There was no outstanding balance on this line of credit as of June 30, 2000. In September 1999, the Company's Board of Directors voted to suspend the quarterly dividend payments indefinitely. The Board's decision to suspend the dividend was made in light of the Company's decision to pursue all strategic alternatives to maximize shareholder value, including a possible sale of the Company as a whole or one or more sales of the Company's strategic assets. Management believes that the elimination of the dividend has enhanced the Company's financial flexibility as it pursued a possible sale of the Company. At this time the Board of Directors has no plans to reinstate the quarterly dividend 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. 8 FUTURE PLANS AND FINANCIAL EXPECTATIONS - --------------------------------------- During the second quarter, the Company executed a merger agreement with CoolBrands International Inc. (formerly, Yogen Fruz World-Wide Incorporated), for the acquisition of Eskimo Pie Corporation at a cash price of (U.S.) $10.25 per share to shareholders of Eskimo Pie Corporation. Based on the agreement with CoolBrands, the Company has called a special meeting of shareholders to be held on September 6, 2000, to vote on a merger transaction by which Eskimo Pie Corporation would become a wholly-owned subsidiary of CoolBrands. If the merger is approved by a vote of at least two- thirds of Eskimo Pie shares outstanding, exclusive of the approximate 17% interest owned by CoolBrands, the merger will be consummated upon satisfaction of closing conditions. If the vote necessary for the merger is not obtained, CoolBrands will commence a tender offer to purchase, for a cash price of $10.25 per share, all shares of Eskimo Pie stock tendered, subject to a minimum of approximately 41% of the Eskimo Pie shares not owned by CoolBrands being tendered. The proposed transaction, whether it is consummated in the form of a merger or a tender offer, remains subject to customary closing conditions. FORWARD LOOKING STATEMENTS - -------------------------- Statements contained in this Report on Form 10-Q regarding the Company's future plans and projected 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 highly competitive nature of the frozen dessert market and the level of consumer interest in the Company's products, product costing, the weather, the performance of management including management's ability to implement its plans as contemplated, the Company's relationships with its licensees and licensors, government regulation and closing the sale of the Company with CoolBrands International Inc.. 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, 1999. Actual results may vary materially from those included herein and the Company assumes no responsibility for updating these statements. 9 PART II, OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 27. Financial Data Schedules, filed herewith. (b) Reports on Form 8-K: Current Report on Form 8-K dated May 4, 2000 - Item 5. Other Events, to file the Company's press release announcing that the Company entered into a Definitive Agreement with CoolBrands International Inc. for the acquisition of Eskimo Pie Corporation. Current Report on Form 8-K dated June 1, 2000 - Item 5. Other Events, to file the Company's press release announcing the execution of an amendment to the previously announced merger agreement entered into on May 3, 2000 with CoolBrands International Inc. Current Report on Form 8-K dated July 13, 2000 - Item 5. Other Events, to file the Company's press release announcing the special meeting of shareholders to be held on September 6, 2000 to vote on the proposed merger with CoolBrands International Inc., and to disclose other activities related to satisfying closing conditions of the sale of the Company. 10 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, 2000 By /s/ David B. Kewer ------------------- David B. Kewer President and Chief Executive Officer Date: August 10, 2000 By /s/ Thomas M. Mishoe, Jr. -------------------------- Thomas M. Mishoe, Jr. Chief Financial Officer, Vice President, Treasurer and Corporate Secretary Date: August 10, 2000 By /s/ Kathryn L. Tyler --------------------- Kathryn L. Tyler Controller 11 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1999 JUN-30-2000 2,297 0 9,539 0 3,854 16,468 19,628 13,468 39,716 9,949 2,500 0 0 3,487 21,629 39,716 36,697 36,697 19,905 33,264 0 0 171 3,346 1,238 2,108 0 0 0 2,108 .61 .61
-----END PRIVACY-ENHANCED MESSAGE-----