-----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, PBeQKb2c+3KU8dkC7sO+RaKoSejXJxRJXGKYuOdoZMpzkM9zBl6+HIzLrMAOZMEI GmNY+DLjmAJvm9oWR2QzKg== 0000916641-99-000669.txt : 19990813 0000916641-99-000669.hdr.sgml : 19990813 ACCESSION NUMBER: 0000916641-99-000669 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990812 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: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19867 FILM NUMBER: 99684868 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, 1999 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, 1999. Class Outstanding at July 31, 1999 ----- ---------------------------- Common Stock, $1.00 Par Value 3,462,850 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, 1999 and 1998 Condensed Consolidated Balance Sheets 2 June 30, 1999; December 31, 1998 and June 30, 1998 Condensed Consolidated Statements of Cash Flows 3 Six Months Ended June 30, 1999 and 1998 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial 7 Condition and Results of Operations Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 11 ESKIMO PIE CORPORATION Condensed Consolidated Statements of Income (Unaudited)
Three months ended Six months ended June 30, June 30, 1999 1998 1999 1998 - ----------------------------------------------------------------------------------------------------------------------------------- (In thousands, except share data) Net sales $ 22,146 $ 20,114 $ 38,275 $ 36,145 Cost of products sold 11,715 11,052 20,998 20,553 ----------------------------------------------------------------------- Gross profit 10,431 9,062 17,277 15,592 Advertising and sales promotion expenses 5,827 5,215 9,708 8,877 Selling, general and administrative expenses 2,039 2,072 4,182 4,490 Expense from restructuring activities 258 - 572 - ----------------------------------------------------------------------- Operating income 2,307 1,775 2,815 2,225 Interest income 31 41 50 102 Interest expense and other - net 117 152 276 344 ----------------------------------------------------------------------- Income before income taxes 2,221 1,664 2,589 1,983 Income tax expense 822 615 958 733 ----------------------------------------------------------------------- Net income $ 1,399 $ 1,049 $ 1,631 $ 1,250 ======================================================================= Per Share Data Basic: Weighted average number of common shares outstanding 3,462,824 3,458,370 3,462,810 3,458,187 Net income $ 0.40 $ 0.30 $ 0.47 $ 0.36 ======================================================================= Assuming dilution: Weighted average number of common shares outstanding 3,462,824 3,637,836 3,464,031 3,629,990 Net income $ 0.40 $ 0.30 $ 0.47 $ 0.36 ======================================================================= 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 1999 1998 1998 - -------------------------------------------------------------------------------------------------------------------------------- (In thousands, except share data) Assets Current assets: Cash and cash equivalents $ 2,179 $ 530 $ 2,285 Receivables 12,073 6,817 11,011 Inventories 5,227 4,897 5,895 Prepaid expenses 287 889 819 ------------------------------------------------------ Total current assets 19,766 13,133 20,010 Property, plant and equipment - net 6,839 7,665 7,983 Goodwill and other intangibles 17,142 17,645 17,221 Other assets 1,048 1,645 1,399 ------------------------------------------------------ Total assets $ 44,795 $ 40,088 $ 46,613 ====================================================== Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 3,496 $ 2,875 $ 6,144 Accrued advertising and promotion 4,562 1,728 3,381 Accrued compensation and related amounts 386 211 401 Other accrued expenses 1,064 657 784 Income taxes 250 - - Current portion of long term debt 1,202 1,317 1,317 ------------------------------------------------------ Total current liabilities 10,960 6,788 12,027 Long term debt 7,157 3,901 4,559 Convertible subordinated notes - 3,800 3,800 Postretirement benefits and other liabilities 3,108 3,373 3,216 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, 3,462,824 issued and outstanding in 1999, 3,458,597 at December 31, 1998 and 3,458,601 at June 30, 1998 3,463 3,459 3,459 Additional capital 4,448 4,393 4,376 Retained earnings 15,659 14,374 15,176 ------------------------------------------------------ Total shareholders' equity 23,570 22,226 23,011 ------------------------------------------------------ Total liabilities and shareholders' equity $ 44,795 $ 40,088 $ 46,613 ======================================================
2 ESKIMO PIE CORPORATION Condensed Consolidated Statements Of Cash Flows (Unaudited)
For the six months ended June 30, 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------------- (In thousands) Operating activities Net income $ 1,631 $ 1,250 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,192 1,257 Change in deferred income taxes and other assets 704 (56) Change in postretirement benefits and other liabilities (292) (9) Change in receivables (5,256) (5,691) Change in inventories and prepaid expenses - (755) Change in accounts payable and accrued expenses 4,334 4,708 -------------------------------------- Net cash provided by operating activities 2,313 704 Investing activities Capital expenditures (221) (832) Proceeds from disposal of fixed assets 401 - Other 161 63 -------------------------------------- Net cash provided by (used in) investing activities 341 (769) Financing activities Borrowings 3,800 - Redemption of convertible subordinate notes (3,800) - Principal payments on long term debt (659) (659) Cash dividends (346) (344) -------------------------------------- Net cash used in financing activities (1,005) (1,003) -------------------------------------- Change in cash and cash equivalents 1,649 (1,068) Cash and cash equivalents at the beginning of the year 530 3,353 -------------------------------------- Cash and cash equivalents at the end of the quarter $ 2,179 $ 2,285 ======================================
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, 1999 and its results of operations for the three and six months ended June 30, 1999 and 1998. 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 1998 Annual Report. NOTE B - INVENTORIES Inventories are classified as follows:
June 30, 1999 December 31, 1998 June 30, 1998 - ------------------------------------------------------------------------------------------------------------------------- (In thousands) Finished goods $ 3,488 $ 3,294 $ 3,783 Raw materials and packaging supplies 2,776 2,642 3,043 ---------- --------- ---------- Total FIFO inventories 6,264 5,936 6,826 LIFO reserves (1,037) ( 1,039) (931) ---------- --------- ---------- $ 5,227 $ 4,897 $ 5,895 ========== ========= ==========
NOTE C - FINANCING ARRANGEMENTS On May 20, 1999, the Company renewed its $10 million committed line of credit which is now available for general corporate purposes through April 2001. Borrowings under the line bear interest at the lender's overnight money market rate plus 100 basis points. The Company used the line to refinance, on a long term basis, the February 1999 redemption of the previously issued $3.8 million in convertible subordinated notes. 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, 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Net income $ 1,399,000 $ 1,049,000 $ 1,631,000 $ 1,250,000 Reversal of interest expense from convertible subordinated notes (after tax) - 27,000 - 53,000 ----------- ----------- ------------ ------------ Net income assuming potential dilution $ 1,399,000 $ 1,076,000 $ 1,631,000 $ 1,303,000 =========== ============ ============ Weighted average number of common shares outstanding 3,462,824 3,458,370 3,462,810 3,458,187 Effect of dilutive securities: Stock options - 16,899 1,221 9,236 Convertible subordinated notes - 162,567 - 162,567 ----------- ----------- ------------ ------------ Weighted average number of common shares outstanding assuming potential dilution 3,462,824 3,637,836 3,464,031 3,629,990 =========== =========== ============ ============ Basic earnings per share $0.40 $0.30 $0.47 $0.36 ===== ===== ===== ===== Earnings per share - assuming dilution $0.40 $0.30 $0.47 $0.36 ===== ===== ===== ===== 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. NOTE E - BUSINESS SEGMENTS National Business Segments Brands Flavors Foodservice Other Totals - ------------------------------------------------------------------------------------------------------------------------------------ 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 restructuring activities (258) Interest income and expense - net (86) -------- Income before income taxes $ 2,221 ======== - ------------------------------------------------------------------------------------------------------------------------------------ Three months ended June 30, 1998 Sales $14,472 $ 3,109 $ 2,132 $ 401 $ 20,114 ======= ======= ======== ======== ======== Segment profitability $ 2,941 $ 454 $ 434 $ 18 $ 3,847 Selling, general and administrative expenses (2,072) Interest income and expense - net (111) -------- Income before income taxes $ 1,664 ======== - ------------------------------------------------------------------------------------------------------------------------------------ 5 National Business Segments Brands Flavors Foodservice Other Totals - ------------------------------------------------------------------------------------------------------------------------------------ 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 restructuring activities (572) Interest income and expense - net (226) Income before income taxes $ 2,589 ======== - ------------------------------------------------------------------------------------------------------------------------------------ Six months ended June 30, 1998 Sales $25,496 $ 5,905 $ 3,945 $ 799 $ 36,145 ======= ======= ======= ======= ======== Segment profitability $ 4,896 $ 963 $ 972 $ (116) $ 6,715 Selling, general and administrative expenses (4,490) Interest income and expense - net (242) ---------- Income before income taxes $ 1,983 =========
NOTE F- RESTRUCTURING EXPENSES The Company incurred $572,000 in expenses associated with three separate restructuring activities during the first half of 1999. The Company incurred approximately $381,000 in costs (primarily associated with legal, investment banking and other professional fees) during the previously announced 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 as of June 30, 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 will be paid by the end of 1999. 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, RealFruit, 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 Corporation also manufactures soft serve yogurt and premium ice cream products for sale to the commercial 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 national brands it licenses. RESULTS OF OPERATIONS Net income for the quarter ended June 30, 1999 was $1,399,000 or $0.40 per share, a 33% improvement over second quarter 1998 net income of $1,049,000 or $0.30 per share. The 1999 results includes expense from restructuring activities of approximately $258,000 which, after related tax effects, reduced net income by $163,000 or $0.05 per share. Exclusive of the second quarter restructuring charges, 1999 net income would have increased by approximately 50% over 1998 second quarter results. The six months ending June 30, 1999 reflect a 30% increase in net income as compared to the comparable period in 1998. Net income was $1,631,000 or $0.47 per share in 1999 as compared to $1,250,000 or $0.36 per share in 1998. Restructuring charges totaling approximately $572,000 are included in the six month results and, after related tax effects, reduced net income by $360,000 or $0.10 per share. Exclusive of the year to date restructuring charges, 1999 net income would have increased by approximately 59% over 1998 results. It is not the Company's intent to imply that alternate measures of performance are more meaningful than net income as determined in accordance with generally accepted accounting principles. Management believes, however, that investors should consider the effects of the restructuring activities as they assess the results of the Company's on-going operations. Net Sales and Gross Profit Sales for the second quarter of 1999 increased by 10% to $22.1 million as compared to $20.1 million in 1998. For the six month period ending June 30, 1999, sales increased by 6% to $38.3 million as compared with $36.1 million during the comparable period in 1998. Revenues in the National Brands Division increased slightly during 1999 due largely to increased sales of Welch's and Weight Watchers Smart Ones brand products. The Company has received favorable responses to the introduction of two new Welch's Double Dare ice pops which capitalize on the youthful popularity of "sour" treats. The repositioning of the Weight Watchers novelties under the Smart One's banner also continues to attract new consumer attention. Also contributing to the year to date 1999 revenue growth was a $440,000 increase ($220,000 increase during the quarter ended June 30, 1999) in licensing fees earned from the new licensing agreements entered into with the Company's six largest customers effective January 1, 1999. 7 The Foodservice Division contributed to approximately half of the overall Company increase in net sales as a result of new business secured under its innovative "Right Choice" sales and marketing program. Under the Right Choice program, foodservice operators can offer consumers a choice between branded premium ice cream and frozen yogurt and, as a result, capture soft serve sales that would have been lost without alternative choices. The foodservice industry continues to grow as more and more consumers chose to "eat out" and the Company expects to capitalize on this momentum as it continues to build upon its Foodservice division. The Company's gross margins also increased in 1999 and, as a percent of sales, continued the improvement begun in recent years. The improved gross margin reflects the results of increased sales, the benefits associated with the additional licensing fees and, as discussed below, the discontinuance of certain unprofitable packaging operations in the first quarter of 1999. Expenses And Other Income Advertising and sales promotion for the quarter and six month period ending June 30, 1999 increased in both an absolute amount and as a percent of sales as compared to the comparable periods in 1998. This increase reflects the Company's intent to increase spending in support of the core Eskimo Pie brand in both the licensing and foodservice businesses, as well as the additional costs incurred to introduce the new Welch's brand novelties. Selling, general and administrative expenses continue to decline as a result of management's initiatives to control these costs. The Company incurred $572,000 in expenses associated with three separate restructuring activities completed during the first half of 1999. First, the Company incurred approximately $381,000 in costs relating to the previously announced examination of strategic alternatives to enhance shareholder value and the subsequent development of the Company's Growth and Restructuring Plan. Under the recently announced Growth and Restructuring Plan, the Company will focus on the rejuvenation of its core Eskimo Pie brand within the licensing and foodservice businesses. Key components of the Plan include significantly increased investments in advertising, promotion and product development for the core Eskimo Pie brand, the potential sale of certain non-core manufacturing operations, but only at prices accretive to shareholder value, and additional overhead and staff reductions. Actions taken under the Plan to date include: new product and promotional planning for the 2000 novelty season, the engagement of a new advertising agency to assist in the rejuvenation of the Eskimo Pie brand, the discontinuance of certain unprofitable packaging operations and headquarters staff reductions. In March 1999, the Company discontinued certain non-core manufacturing operations and terminated the employment of seven production employees at its Bloomfield, New Jersey packaging plant who were not involved in the production of products for the Company's licensing businesses. As a result, the Company incurred related severance costs of approximately $105,000, all of which was paid as of June 30, 1999. As a result of this action, year to date profitability in the Packaging Division, exclusive of the severance costs, has improved by approximately $250,000 over 1998 results. 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 these terminations totaled approximately $86,000, however, when combined with the savings from the eliminated positions, these actions are anticipated to provide annualized savings of approximately $300,000 per year. 8 LIQUIDITY, CAPITAL RESOURCES AND OTHER MATTERS The Company's liquidity and capital resources have continued to strengthen as improved profitability has led to an increase in cash from operations. Working capital is being managed closely and long term debt is being reduced by over $300,000 each quarter. As a result, the Company's working capital at June 30, 1999 exceeded the outstanding debt obligations for the first time in over five years. On May 20, 1999, the Company renewed its $10 million committed line of credit which is now available for general corporate purposes through April 2001. Borrowings under the line bear interest at the lender's overnight money market rate plus 100 basis points. The Company has used the line to refinance, on a long term basis, the February 1999 redemption of the previously issued $3.8 million in convertible subordinated notes. 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. EARNINGS OUTLOOK The Company expects continued improvement during the second half of 1999 with sales and operating profit exceeding that reported in the second half of 1998. IMPACT OF YEAR 2000 Considerable attention has been given to the Year 2000 (Y2K) Problem which stems from the inability of certain computerized applications and devices (hardware, software and equipment) to process dates after December 31, 1999. The Company's efforts to address the Y2K Problem consist of three main components; the implementation of a new management information system, review of other internal systems and equipment, and inquiries of external trading partners (key licensees, customers, suppliers, service providers). The Company continues with the implementation of a new management information system that will address the Company's Y2K Problems relating to financial and operational management information. The new information system is installed and implementation is complete in over half of the Company's operations. The remaining operations are expected to be implemented prior to the end of the year. Project expenditures relating to the new management information system approximate $1,700,000 through June 30, 1999 and the Company expects to incur an additional $250,000 to complete the project. The costs of the new management information system have been capitalized under the provisions of the AICPA's Statement of Position 98-1 and are being amortized to expense over the expected useful life. The Company has also reviewed other internal systems and equipment to assess their exposure to the Y2K Problem. Most of the Company's plant and office equipment is mechanical in nature and therefore, is not be subject to the Y2K Problem. At this time, all unidentified issues have been resolved without material cost, however, no guarantee can be made that subsequent problems will not be identified which will require material costs to remedy. The Company will develop remedies and contingent plans to address any future problems when, and if, they are identified. Finally, the Company made inquiries with its external trading partners to assess their readiness to the Y2K Problem. Such inquiries have resulted in the collection and appraisal of voluntary statements made by external parties with limited opportunity for independent factual verification. Although the Company has undertaken reasonable efforts to determine the readiness of its trading partners, no assurance can be given to the validity or reliability of information obtained. During the remainder of the year, the Company will develop 9 initial contingency plans to address the potential failure of its key trading partners to be Y2K compliant. Management believes, based on past experience, that it could locate suitable replacements if any partners were lost due to Y2K Problems. However, the Company can not reliably predict the readiness of all of its partners (as well as the readiness of their respective external trading partners) and as such, the Company could be affected by the disruption of other business interests outside of the Company's control. The Company believes its approach to the Y2K Problem is adequate to maintain the continuation of its business operations with limited financial or operational impact. However, the Y2K Problem has many aspects and potential consequences, some of which may not be reasonably anticipated, and there can be no assurance that unforeseen consequences will not arise. 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, the impact of Year 2000 matters and 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, 1998. Actual results may vary materially from those included herein and the Company assumes no responsibility for updating these statements. 10 PART II, OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 10.1 Letter Agreement dated May 20, 1999 between the Company and Crestar Bank, filed herewith. 10.2 Severance Agreement dated April 15, 1999 between the Company and William J. Weiskopf, filed herewith. 27. Financial Data Schedules, filed herewith. (b) Reports on Form 8-K: Current report on Form 8-K dated June 30, 1999 - Item 5. Other Events, to file the Company's press release announcing the receipt of notice from Yogen Fruz World-Wide Incorporated indicating their intent to present certain shareholder proposals at the Company's Annual Meeting of Shareholders. 11 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 12, 1999 By /s/ David B. Kewer ------------------------------------ David B. Kewer President and Chief Executive Officer Date: August 12, 1999 By /s/ Thomas M. Mishoe, Jr. ------------------------------------ Thomas M. Mishoe, Jr. Chief Financial Officer, Vice President, Treasurer and Corporate Secretary Date: August 12, 1999 By /s/ William T. Berry, Jr. ------------------------------------ William T. Berry, Jr. Assistant Vice President, Controller 12 EX-10.1 2 LETTER AGREEMENT Exhibit 10.1 [Crestar Bank Letterhead] Crestar Bank P.O. Box 26665 Richmond, VA 23261-6665 (804) 782-5000 May 20, 1999 Mr. Thomas M. Mishoe, Jr. Chief Financial Officer Eskimo Pie Corporation 901 Moorefield Park Drive Richmond, VA 23235 Dear Tom: I am writing in reference to the Letter Agreement dated March 20, 1998, and the $10,000,000 Commercial Note of the same date (the Letter Agreement and Commercial Note collectively referred to as the "Loan Documents") between Eskimo Pie Corporation (the "Company") and Crestar Bank (the "Bank"). The Bank hereby agrees to modify and amend the $10,000,000 Line of Credit and supporting Loan Documents as follows: Paragraph 3 of the Letter Agreement dated March 20, 1998, is hereby amended such that the Interest rate will be equal to the Bank's overnight Money Market Rate plus 1.00%; Paragraph 6 of the Letter Agreement dated March 20, 1998, is hereby amended to read that the expiration date is April 30, 2001. All other terms and conditions set forth in the Loan Documents shall remain the same. If the modifications and amendments specified above are satisfactory, please signify your acceptance by signing and returning the enclosed copy of this letter no later than May 28, 1999. Sincerely, CRESTAR BANK By: /s/ T. Patrick Collins T. Patrick Collins Vice President Accepted and agreed to this 21st day of May , 1999. /s/ Thomas M. Mishoe, Jr By: Thomas M. Mishoe, Jr. Title: Chief Financial Officer EX-10.2 3 SEVERANCE AGREEMENT Exhibit 10.2 SEVERANCE AGREEMENT This Agreement ("Agreement") is entered into as of April 15, 1999 between ESKIMO PIE CORPORATION, a Virginia corporation ("Eskimo Pie"), and William J. Weiskopf ("Executive"). 1. Definitions of Certain Terms. For purposes of this Agreement, (a) a "Termination" shall occur if Executive's employment by Purchaser is terminated by Purchaser at any time within two years following Sale of the Flavors Division for reasons other than: (i) for Cause (as defined in Section 3(a)); (ii) as a result of Executive's death, permanent disability, or retirement at or after the first day of the month following the month in which Executive attains age 65 ("Normal Retirement Date"); (b) a "Termination" shall also occur if Executive's employment by Purchaser is terminated by Executive for Good Reason (as defined in Section 4) within two years following Sale of the Flavors Division; and (c) "Sale of the Flavors Division" shall mean the consummation of the sale or disposition by Eskimo Pie of substantially all the assets or business of its Flavors Division to a third party ("Purchaser"). 2. Benefit upon Termination. Except as provided in Section 3, upon Termination, Eskimo Pie agrees to provide or cause Purchaser to provide to Executive the benefits described in Section 2(a) below, subject to the limitations set forth in Sections 2(b) and (c) below: (a) Benefit Payment. Executive shall receive (i) within five business days of Termination a lump sum payment in cash in an amount equal to one times Executive's annual base salary as in effect on the date hereof or as the same may be increased from time to time and (ii) no later than the end of the month following the month of Termination a lump sum payment in cash in an amount equal to Executive's actual bonus incentive (including any proration), if any, payable for 1999. (b) Other Benefit Plans and Perquisites. The benefit payable upon Termination in accordance with this Section 2 is not intended to exclude Executive's participation in any benefit plans or enjoyment of other perquisites which are available to executive personnel generally in the class or category of Executive or to preclude such other compensation or benefits as may be authorized from time to time by Purchaser. (c) No Duty to Mitigate. Executive's entitlement to benefits hereunder shall not be governed by any duty to mitigate his damages by seeking further employment nor offset by any compensation which he may receive from future employment. (d) Interest on Delayed Payments. If payment of any benefit due to Executive under this Section 2 is not timely made, Executive shall be entitled to interest on the amount not timely paid at 120% of the applicable federal rate, compounded semi-annually, under Section 1274(d) of the Code determined at the time Sale of the Flavors Division occurs, such interest to accrue from the date such payment is due through the date of payment thereof. 3. Conditions to the Obligations of Eskimo Pie and Purchaser. Eskimo Pie shall have no obligation to provide or cause Purchaser to provide to Executive the benefit described in Section 2 hereof if the following event shall occur: (a) Termination for Cause. Purchaser shall terminate Executive's employment for Cause. For purposes of this Agreement, termination of employment for "Cause" shall mean termination solely for dishonesty, conviction of a felony, or willful unauthorized disclosure of confidential information of Purchaser. 4. Termination for Good Reason. Executive may terminate his employment with Purchaser following Sale of the Flavors Division for Good Reason and shall be entitled to receive the benefit described in Section 2 hereof. For purposes of this Agreement, "Good Reason" shall mean: (a) a reduction by Purchaser in Executive's annual base salary as in effect on the date hereof or as the same may be increased from time to time; (b) Purchaser's requiring Executive to be based anywhere other than (i) Richmond, Virginia, (ii) Milwaukee, Wisconsin or (iii) any location which Executive agrees in writing is not objectionable, except for required travel on Purchaser's business to an extent substantially consistent with Executive's present business travel obligations; (c) except in the event of reasonable administrative delay, the failure by the Purchaser to pay to Executive any portion of Executive's current compensation within seven (7) days of the date such compensation is due; (d) the failure of Eskimo Pie or Purchaser to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 9 hereof; (e) the failure by Purchaser to provide Executive with participation in any compensation plan in which Executive participates immediately prior to Sale of the Flavors Division that is material to Executive's total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by Purchaser to provide Executive with participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of Executive's participation relative to other participants, as it existed at the time of Sale of the Flavors Division; or (f) the failure by Purchaser to provide Executive with benefits substantially similar in the aggregate to those enjoyed by Executive under any of Eskimo Pie's life insurance, medical, health and accident, disability plans, or other welfare and defined benefit plans (qualified and non-qualified) in which Executive was participating at the time of Sale of the Flavors Division, the taking of any action by Purchaser which would directly or indirectly materially reduce any of such benefits or deprive Executive of any material fringe benefit enjoyed by Executive at the time of Sale of the Flavors Division, or the failure by Purchaser to provide Executive with the number of paid vacation days to which Executive is entitled on the basis of years of service with Eskimo Pie in accordance with Eskimo Pie's normal vacation policy in effect at the time of Sale of the Flavors Division. 5. Other Covenants. Upon Termination, if Executive is entitled to receive the benefit described in Section 2, then: (a) At Executive's request, Purchaser shall arrange outplacement services for Executive, at Purchaser's expense, for a period of one year following Termination. (b) Executive and/or his qualified dependents shall be provided coverage, at his/their expense, under any medical benefit plans covering him and/or them at the time of Termination in accordance with the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended from time to time. 6. Confidentiality: Non-Solicitation: Cooperation. (a) Confidentiality. At all times following Termination, Executive will not, without the prior written consent of Eskimo Pie and Purchaser, disclose to any person, firm or corporation any confidential information of Eskimo Pie or its subsidiaries or affiliates or Purchaser which is now known to him or which hereafter may become known to him as a result of his employment or association with Eskimo Pie or Purchaser and which could be helpful to a competitor; provided, however, that the foregoing shall not apply to confidential information which becomes publicly disseminated by means other than a breach of this Agreement. (b) Non-Solicitation. For a period of three years following the date of Termination, Executive will not induce or attempt to induce, either directly or indirectly, any management or executive employee of Eskimo Pie or of any of its subsidiaries or affiliates or of Purchaser to terminate his or her employment. (c) Cooperation. At all times following Termination, Executive will furnish such information and render such assistance and cooperation as may reasonably be requested in connection with any litigation or legal proceedings concerning Eskimo Pie or any of its subsidiaries or affiliates (other than any legal proceedings concerning Executive's employment) or of Purchaser. In connection with such cooperation, Eskimo Pie or Purchaser will pay or reimburse Executive for reasonable expenses actually incurred. (d) Remedies for Breach. It is recognized that damages in the event of breach of Sections 6(a) and (b) above by Executive would be difficult, if not impossible, to ascertain, and it is therefore specifically agreed that Eskimo Pie and Purchaser, in addition to and without limiting any other remedy or right it may have, shall have the right to an injunction or other equitable relief in any court of competent jurisdiction, enjoining any such breach. The existence of this right shall not preclude Eskimo Pie or Purchaser from pursuing any other rights and remedies at law or in equity which Eskimo Pie or Purchaser may have. 7. Term of Agreement. This Agreement shall commence on the date hereof and shall remain in force until the earlier of December 31, 1999 or a "Change in Control" as that term is defined in the Executive Severance Agreement dated as of September 1, 1997 between Eskimo Pie and Executive; provided, however, that if Sale of the Flavors Division occurs during the term of this Agreement, this Agreement shall continue in effect for a period of 24 months beyond the month in which the Sale of the Flavors Division occurred. This Agreement shall terminate automatically in the event of a Change in Control, it being the express intent of the parties that no benefit shall be payable under this Agreement in the Event of a Change in Control. Notwithstanding the foregoing, this Agreement shall terminate if either Eskimo Pie or Executive terminates the employment of Executive before Sale of the Flavors Division occurs. Except as otherwise provided in Section 9(b), this Agreement shall also terminate upon the Executive's death or permanent disability. 8. Adjudication and Expenses. (a) If a dispute or controversy arises under or in connection with this Agreement, Executive shall be entitled to an adjudication in an appropriate court of the State of Virginia, or in any other court of competent jurisdiction. Alternatively, Executive, at Executive's option, may seek an award in arbitration to be conducted by a single arbitrator under the Commercial Arbitration Rules of the American Arbitration Association. (b) If any contest or dispute shall arise under this Agreement involving the failure or refusal of Eskimo Pie to perform fully in accordance with the terms hereof, Eskimo Pie shall reimburse Executive, on a current basis, for all legal fees and expenses, if any, incurred by Executive in connection with such contest or dispute (regardless of the result thereof), together with interest in an amount equal to the prime rate of BankAmerica from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date Eskimo Pie receives Executive's statement for such fees and expenses through the date of payment thereof. Such reimbursement shall include the cost of attorney's fees in reviewing this Agreement in connection with such contest or dispute and in negotiating or attempting to negotiate a settlement of such contest or dispute prior to Executive's making such claim or commencing any action or proceeding and in settling any matter relating to this Agreement. (c) If any claim, action or proceeding (including without limitation a claim, action or proceeding by Executive against Eskimo Pie) occurs with respect to this Agreement other than one described in Section 8(b), Eskimo Pie shall pay or reimburse Executive for all costs and expenses, including without limitation court costs and attorneys' fees, incurred by Executive as a result thereof, provided that if the claim, action or proceeding is by Executive against Eskimo Pie, Executive is successful in whole or in part on the merits or otherwise in such claim, action or proceeding. Such reimbursement shall include interest in an amount equal to the prime rate of BankAmerica from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date Eskimo Pie receives Executive's statement for such fees and expenses through the date of payment thereof. 9. Successors; Binding Agreement. (a) This Agreement shall inure to the benefit of and be binding upon Eskimo Pie and its successors and assigns. Eskimo Pie will require (i) any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Eskimo Pie and (ii) the Purchaser and its successors to assume expressly and agree to perform this Agreement in the same manner and to the same extent that Eskimo Pie would be required to perform it if no such succession had taken place. (b) This Agreement shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive should die while any amount would still be payable hereunder if Executive had continued to live, any such amount, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive's devisee, legatee or other designee or, if there is no such designee, Executive's estate. 10. Miscellaneous. (a) Assignment. No right, benefit or interest hereunder shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, except by will or the laws of descent and distribution, and any attempt thereat shall be void; and no right, benefit or interest hereunder shall, prior to receipt of payment, be in any manner liable for or subject to the recipient's debts, contracts, liabilities, engagements or torts. (b) Construction of Agreement. Nothing in this Agreement shall be construed to amend any provision of any plan or policy of Eskimo Pie. This Agreement is not, and nothing herein shall be deemed to create, a commitment of continued employment of Executive by Eskimo Pie or by any of its subsidiaries and affiliates. (c) Statutory References. Any reference in this Agreement to a specific statutory provision shall include that provision and any comparable provision or provisions of future legislation amending, modifying, supplementing or superseding the referenced provision. (d) Amendment. This Agreement may not be amended, modified or terminated except by written agreement of both parties. (e) Waiver. No provision of this Agreement may be waived except by a writing signed by the party to be bound thereby. (f) Severability. If any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall remain in full force and effect to the fullest extent permitted by law. (g) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be considered an original and all of which together shall constitute one agreement. (h) Taxes. Any payment required under this Agreement shall be subject to all requirements of the law with regard to withholding of taxes, filing, making of reports and the like, and Eskimo Pie shall use its best efforts to satisfy promptly all such requirements. (i) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Virginia. (j) Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the matters covered hereby. Each of the parties has therefore caused this Agreement to be executed on its or his behalf as of the date first written above. ESKIMO PIE CORPORATION By /s/ David B. Kewer ----------------------------------- EXECUTIVE /s/ William J. Weiskopf ----------------------------------- EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1999 JUN-30-1999 2,179 0 12,073 0 5,227 19,766 19,252 12,413 44,795 10,960 7,157 0 0 3,463 20,107 44,795 38,275 38,275 20,998 35,460 0 0 276 2,589 958 1,631 0 0 0 1,631 .47 .47
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