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<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
---- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
---- SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-14190
DREYER'S GRAND ICE CREAM, INC.
(Exact name of registrant as specified in its charter)
Delaware No. 94-2967523
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5929 College Avenue, Oakland, California 94618
(Address of principal executive offices) (Zip Code)
(510) 652-8187
(Registrant's telephone number, including area code)
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 the latest practicable date.
Shares Outstanding
May 12, 1995
------------------
Common stock, $1.00 par value 13,435,117
<PAGE> 2
DREYER'S GRAND ICE CREAM, INC.
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DREYER'S GRAND ICE CREAM, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
April 1, December 31,
($ in thousands, except per share amounts) 1995 1994
---------- ------------
(unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 2,101 $ 6,334
Trade accounts receivable, net of
allowance for doubtful accounts of
$611 in 1995 and $635 in 1994 63,212 47,519
Other accounts receivable 9,810 6,243
Inventories 32,551 29,081
Prepaid expenses and other 7,777 9,657
-------- --------
Total current assets 115,451 98,834
Property, plant and equipment, net 165,858 160,322
Goodwill and distribution rights, net of
accumulated amortization of $11,192
in 1995 and $10,443 in 1994 88,852 87,825
Other assets 15,025 15,045
-------- --------
Total assets $385,186 $362,026
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
2
<PAGE> 3
DREYER'S GRAND ICE CREAM, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
April 1, December 31,
($ in thousands, except per share amounts) 1995 1994
----------- ------------
(unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities $ 52,882 $ 30,130
Accrued payroll and employee benefits 9,565 15,801
Current portion of long-term debt 4,500 4,500
-------- --------
Total current liabilities 66,947 50,431
Long-term debt, less current portion 58,000 46,100
Convertible subordinated debentures 100,752 100,752
Deferred income taxes 29,029 28,822
-------- --------
Total liabilities 254,728 226,105
-------- --------
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $1 par value -
10,000,000 shares authorized; no shares
issued or outstanding in 1995 and 1994
Common stock, $1 par value -
30,000,000 shares authorized; 13,919,000
shares and 14,064,000 shares issued and
outstanding in 1995 and 1994, respectively 13,919 14,064
Capital in excess of par 70,435 75,257
Retained earnings 46,104 46,600
-------- --------
Total stockholders' equity 130,458 135,921
-------- --------
Total liabilities and stockholders' equity $385,186 $362,026
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
3
<PAGE> 4
DREYER'S GRAND ICE CREAM, INC.
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
---------------------------------------
($ in thousands, except per share amounts) April 1, 1995 March 26, 1994
------------- --------------
<S> <C> <C>
Revenues:
Net sales $141,255 $112,001
Other income 239 273
-------- --------
141,494 112,274
-------- --------
Costs and expenses:
Cost of goods sold 112,230 88,752
Selling, general and administrative 26,491 18,728
Interest, net of interest capitalized 2,242 2,209
-------- --------
140,963 109,689
-------- --------
Income before income taxes 531 2,585
Income taxes 209 1,003
-------- --------
Net income $ 322 $ 1,582
======== ========
Net income per share $ .02 $ .11
======== ========
Dividends per share $ .06 $ .06
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
4
<PAGE> 5
DREYER'S GRAND ICE CREAM, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(unaudited)
<TABLE>
<CAPTION>
Common Stock
-------------------- Capital In Retained
(In thousands) Shares Amount Excess of Par Earnings Total
-------- ------- ------------- -------- -------
<S> <C> <C> <C> <C> <C>
Balance at December 25, 1993 14,671 $14,671 $59,145 $49,218 $123,034
Net income 1,582 1,582
Cash dividends declared (884) (884)
Repurchases and retirements
of common stock (25) (25) (628) (653)
Employee stock plans 91 91 1,183 1,274
------ ------- ------- ------- --------
Balance at March 26, 1994 14,737 $14,737 $59,700 $49,916 $124,353
====== ======= ======= ======= ========
Balance at December 31, 1994 14,064 $14,064 $75,257 $46,600 $135,921
Net income 322 322
Cash dividends declared (818) (818)
Repurchases and retirements
of common stock (250) (250) (6,403) (6,653)
Employee stock plans 105 105 1,581 1,686
------ ------- ------- ------- --------
Balance at April 1, 1995 13,919 $13,919 $70,435 $46,104 $130,458
====== ======= ======= ======= ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
5
<PAGE> 6
DREYER'S GRAND ICE CREAM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
------------------------------------
($ in thousands) April 1, 1995 March 26, 1994
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 322 $ 1,582
Adjustments to reconcile net income to cash provided from operations:
Depreciation and amortization 4,900 4,090
Deferred income taxes 207 195
Changes in assets and liabilities, net of amounts acquired:
Trade accounts receivable (15,693) (6,311)
Other accounts receivable (3,567) (35)
Inventories (3,470) (3,362)
Prepaid expenses and other 1,880 2,113
Accounts payable and accrued liabilities 22,796 5,576
Accrued payroll and employee benefits (6,236) (1,421)
-------- -------
1,139 2,427
-------- -------
Cash flows from investing activities:
Acquisition of property, plant and equipment (9,430) (11,470)
Retirement of property, plant and equipment 93 52
Increase in goodwill and distribution rights (1,776) (14,790)
Increase in other assets, net (330) (699)
-------- -------
(11,443) (26,907)
-------- -------
Cash flows from financing activities:
Increase in short-term bank borrowings 23,400
Proceeds from long-term debt 15,500
Reductions in long-term debt (3,600) (610)
Issuance of common stock under employee stock plans 1,686 1,274
Repurchases of common stock (6,653) (653)
Cash dividends paid (862) (881)
-------- -------
6,071 22,530
-------- -------
Decrease in cash and cash equivalents (4,233) (1,950)
Cash and cash equivalents, beginning of period 6,334 2,532
-------- -------
Cash and cash equivalents, end of period $ 2,101 $ 582
======== =======
Supplemental Cash Flow Information - cash paid during the year for:
Interest (net of amounts capitalized) $ 2,843 $ 2,789
Income taxes (net of refunds) 106 166
</TABLE>
See accompanying Notes to Consolidated Financial Statements
6
<PAGE> 7
DREYER'S GRAND ICE CREAM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - General:
Dreyer's Grand Ice Cream, Inc. and its subsidiaries (the "Company") is a
single segment industry company engaged in the business of manufacturing and
distributing premium ice cream and other frozen dairy products.
The consolidated financial statements for the thirteen week periods ended
April 1, 1995, and March 26, 1994, have not been audited by independent public
accountants, but include all adjustments, such as normal recurring accruals,
which management considers necessary for a fair presentation of the consolidated
operating results for the periods. The statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosure normally
included in financial statements prepared in conformity with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The operating results for interim periods are not necessarily
indicative of results to be expected for an entire year. The aforementioned
statements should be read in conjunction with the consolidated financial
statements for the year ended December 31, 1994, appearing in the Company's 1994
Annual Report to Stockholders.
NOTE 2 - Financial Statement Presentation:
Certain reclassifications have been made to the prior period financial
statements in order to conform to the current presentation.
NOTE 3 - Inventories:
Inventories are stated at the lower of cost (determined by the first-in,
first-out method) or market. Inventories at April 1, 1995 and December 31, 1994
consisted of the following (in thousands):
<TABLE>
<CAPTION>
April 1, December 31,
1995 1994
-------- ------------
<S> <C> <C>
Raw materials $ 4,464 $ 3,153
Finished goods 28,087 25,928
-------- --------
$ 32,551 $ 29,081
======== ========
</TABLE>
7
<PAGE> 8
NOTE 4 - Net Income Per Share:
Net income per common share is computed using the weighted average
number of shares of common stock outstanding during the period which were
13,971,000 shares for the quarter ended April 1, 1995 and 14,698,000 shares for
the quarter ended March 26, 1994. The potentially dilutive effect of the
Company's convertible subordinated debentures and other common stock equivalents
was anti-dilutive for the thirteen week periods ended April 1, 1995 and March
26, 1994. Accordingly, fully diluted net income per share is not presented.
NOTE 5 - Common Stock:
During the quarter, the Company repurchased and retired 232,000 shares
of its common stock at prices ranging from $25.38 to $27.00 per share under a
plan to repurchase up to 5,000,000 shares through open market purchases and
negotiated transactions. In addition, the Company repurchased and retired 18,000
shares of its common stock at prices ranging from $24.75 to $28.00 per share
from employees who previously acquired shares under employee stock plans.
NOTE 6 - Subsequent Event:
Subsequent to quarter end, the Company repurchased and retired 481,000
shares of its common stock at prices ranging from $28.63 to $34.25 per share
under the plan to repurchase up to 5,000,000 shares. (See Note 5.)
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percent which
the items in the Consolidated Statement of Income bear to net sales and the
percentage change of such items compared to the indicated prior period:
<TABLE>
<CAPTION>
Percentage of Net Sales
----------------------------- Period-to-Period
Thirteen Weeks Ended Increase (Decrease)
----------------------------- -------------------
April 1, March 26, Thirteen Weeks 1995
1995 1994 Compared to 1994
-------- --------- -------------------
<S> <C> <C> <C>
Revenues:
Net sales 100.0% 100.0% 26.1%
Other income 0.2 0.2 12.5
----- -----
Total revenue 100.2 100.2 26.0
----- -----
Costs and expenses:
Cost of goods sold 79.4 79.2 26.5
Selling, general and administrative 18.8 16.7 41.5
Interest, net of interest capitalized 1.6 2.0 1.5
----- -----
Total costs and expenses 99.8 97.9 28.5
----- -----
Income before income taxes 0.4 2.3 (79.5)
Income taxes 0.2 0.9 (79.2)
----- -----
Net income 0.2 1.4 (79.7)
===== =====
</TABLE> 9
<PAGE> 10
RESULTS OF OPERATIONS
Thirteen Weeks ended April 1, 1995 Compared with Thirteen Weeks Ended March 26,
1994
The Company embarked on a five year plan during the second quarter of 1994
to accelerate the sales of its Company brands by greatly increasing its
consumer marketing efforts and expanding its distribution system into additional
markets (the Strategic Plan). Under the Strategic Plan, the Company increased
the amount of its spending for advertising and consumer promotion from
$11,486,000 in 1993 to $40,287,000 in 1994, and plans to spend approximately
$50,000,000 annually on these marketing activities from 1995 through 1998. In
1994, the Company began selling its products for the first time in the Texas and
New England markets as well as in several cities in the southern United States,
and has continued to expand into additional geographic markets in 1995. The
Company anticipates that the Strategic Plan will continue to materially reduce
earnings during 1995 and some portion of 1996 below levels that would have been
attained under the former business plan. The potential benefits of the new
strategy are increased market share and future earnings above those levels that
would be attained in the absence of the strategy. The Company believes that
these benefits are not likely to impact its results until 1996 at the earliest,
and no assurance can be given that the anticipated benefits of the strategy
will be achieved. The success of the strategy will depend upon, among other
things, consumer responsiveness to the increased marketing expenditures,
competitors' activities and general economic conditions.
Consolidated net sales for the first quarter of 1995 increased 26% to
$141,255,000 compared with $112,001,000 for the same period last year. Sales of
the Company's brands increased 24%. The increase related primarily to higher
unit sales of the Company's established brands in all markets due in part to
substantially higher advertising and consumer promotion spending under the
Company's Strategic Plan. The products that led this increase were Dreyer's and
Edy's Fat Free Ice Cream, Dreyer's and Edy's Frozen Yogurt and Dreyer's and
Edy's Grand Ice Cream. Sales of products purchased from other manufacturers
(partner brands) increased 28%, led by frozen novelty and ice cream products
from Nestle Ice Cream Company and Healthy Choice(R) lowfat ice cream from
ConAgra, Inc. Sales of partner brands represented 35% of consolidated net
sales as compared with 34% in the first quarter of 1994. The effect of price
increases for the Company's brands and partner brands was not significant.
Cost of goods sold increased $23,478,000, or 27%, over the first quarter of
1995, while the overall gross margin decreased slightly from 20.8% in the first
quarter of 1994 to 20.6% in the first quarter of 1995.
Selling, general and administrative expenses in the first quarter of 1995 were
$7,763,000, or 42%, higher than in the same period of 1994. This increase
related primarily to an increase in overall marketing expenses of $6,399,000.
Income taxes decreased $794,000, reflecting a lower pre-tax income, while the
effective tax rate increased from 38.8% for the first quarter of 1994 to 39.4%
for the first quarter of 1995.
10
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
Working capital at April 1, 1995 increased $101,000 from year end 1994 due
primarily to the seasonal increase in trade accounts receivable and a decrease
in accrued payroll and employee benefits, offset almost entirely by an increase
in accounts payable and accrued liabilities. Cash was provided primarily from
the $15,500,000 proceeds from long-term debt. This source was used to fund the
$9,430,000 increase in property, plant and equipment and the $6,653,000
repurchases of common stock.
Subsequent to quarter end, the Company repurchased and retired 481,000 shares of
its common stock at prices ranging from $28.63 to $34.25 per share under a plan
to repurchase up to 5,000,000 shares through open market purchases and
negotiated transactions.
At April 1, 1995, the Company had $2,101,000 in cash and cash equivalents, and
an unused credit line of $89,300,000. The Company believes that its credit line,
along with its liquid resources, internally generated cash and financing
capacity, are adequate to meet anticipated operating and capital requirements.
11
<PAGE> 12
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. No reports on Form 8-K were filed by the Company during the
quarter ended April 1, 1995.
b. Exhibits
Exhibit No. Description
- ----------- -----------
11 Computation of Net Income Per Common Share.
27 Financial Data Schedule.
12
<PAGE> 13
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.
DREYER'S GRAND ICE CREAM, INC.
Dated: May 16, 1995 By: /s/ Paul R. Woodland
------------------------------------------
Paul R. Woodland
Vice President - Finance and Administration
and Chief Financial Officer
<PAGE> 14
EXHIBIT INDEX
Exhibit No. Description
- ----------- ------------
11 Computation of Net Income Per
Common Share.
27 Financial Data Schedule.
<PAGE> 1
EXHIBIT 11
DREYER'S GRAND ICE CREAM, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
----------------------------------------------------
(in thousands, except per share amounts) April 1, 1995 March 26, 1994
------------- --------------
<S> <C> <C>
PRIMARY
Net income $ 322 $ 1,582
Weighted average number of shares of common
stock outstanding 13,971 14,698
--------- ---------
Net income per share, as reported $ .02 $ .11
========= ==========
Weighted average number of shares of common
stock outstanding 13,971 14,698
Common stock equivalent--assumed exercise of
common stock options 95 73
--------- ----------
Weighted average number of shares of common
stock outstanding, including common stock
equivalents 14,066 14,771
========= ==========
Net income per share $ .02(1) $ .11(1)
========= ==========
FULLY DILUTED
Net income $ 322 $ 1,582
Add interest expense on convertible subordinated
debentures issued June 1993, due June 2006 and
amortization of related issuance costs, net of tax 1,017 1,020
--------- ---------
Adjusted net income $ 1,339 $ 2,602
========= =========
Weighted average number of shares of common
stock outstanding 13,971 14,698
Common stock equivalent--assumed exercise of
common stock options 95 73
Assumed conversion of debentures 2,900 2,900
--------- ---------
Adjusted shares 16,966 17,671
========= ==========
Net income per share $ .08(2) $ .15(2)
========= ==========
</TABLE>
(1) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is not required by footnote 2 to paragraph 14 of
APB Opinion No. 15 because it results in dilution of less than 3%.
(2) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to APB Opinion No. 15 because it
produces an anti-dilutive effect.
<TABLE> <S> <C>
<ARTICLE> 5 EXHIBIT 27
FINANCIAL DATA SCHEDULE
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> APR-1-1995
<CASH> 2,101
<SECURITIES> 0
<RECEIVABLES> 63,823
<ALLOWANCES> (611)
<INVENTORY> 32,551
<CURRENT-ASSETS> 115,451
<PP&E> 232,185
<DEPRECIATION> (66,327)
<TOTAL-ASSETS> 385,186
<CURRENT-LIABILITIES> 66,947
<BONDS> 158,752
<COMMON> 13,919
0
0
<OTHER-SE> 116,539
<TOTAL-LIABILITY-AND-EQUITY> 385,186
<SALES> 141,255
<TOTAL-REVENUES> 141,494
<CGS> 112,230
<TOTAL-COSTS> 112,230
<OTHER-EXPENSES> 26,267
<LOSS-PROVISION> 224
<INTEREST-EXPENSE> 2,242
<INCOME-PRETAX> 531
<INCOME-TAX> 209
<INCOME-CONTINUING> 322
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 322
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
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