<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 July 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)
<TABLE>
<S> <C>
Delaware No. 94-2967523
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
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.
<TABLE>
<CAPTION>
Shares Outstanding
August 11, 1995
-----------------
<S> <C>
Common stock, $1.00 par value 12,860,073
</TABLE>
<PAGE> 2
DREYER'S GRAND ICE CREAM, INC.
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DREYER'S GRAND ICE CREAM, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
July 1, December 31,
($ in thousands, except per share amounts) 1995 1994
-------- ----------
(unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 3,262 $ 6,334
Trade accounts receivable, net of
allowance for doubtful accounts of
$716 in 1995 and $635 in 1994 88,845 47,519
Other accounts receivable 14,627 6,243
Inventories 38,130 29,081
Prepaid expenses and other 6,353 9,657
-------- --------
Total current assets 151,217 98,834
Property, plant and equipment, net 174,283 160,322
Goodwill and distribution rights, net 88,187 87,825
Other assets, net 14,997 15,045
-------- --------
Total assets $428,684 $362,026
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
2
<PAGE> 3
DREYER'S GRAND ICE CREAM, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
July 1, December 31,
($ in thousands, except per share amounts) 1995 1994
-------- -----------
(unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities $ 64,505 $ 30,130
Accrued payroll and employee benefits 14,040 15,801
Current portion of long-term debt 4,500 4,500
-------- --------
Total current liabilities 83,045 50,431
Long-term debt, less current portion 115,500 46,100
Convertible subordinated debentures 100,752 100,752
Deferred income taxes 29,746 28,822
-------- --------
Total liabilities 329,043 226,105
-------- --------
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; 12,858,000
shares and 14,064,000 shares issued and
outstanding in 1995 and 1994, respectively 12,858 14,064
Capital in excess of par 37,787 75,257
Retained earnings 48,996 46,600
-------- --------
Total stockholders' equity 99,641 135,921
-------- --------
Total liabilities and stockholders' equity $428,684 $362,026
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
3
<PAGE> 4
DREYER'S GRAND ICE CREAM, INC.
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
---------------------- ----------------------
($ in thousands, except per share amounts) July 1, 1995 June 25, 1994 July 1, 1995 June 25, 1994
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Revenues:
Net sales $188,083 $147,727 $329,338 $259,728
Other income 673 409 913 682
-------- -------- -------- --------
188,756 148,136 330,251 260,410
Costs and expenses:
Cost of goods sold 145,038 109,659 257,269 198,411
Selling, general and administrative 34,687 38,398 61,177 57,126
Interest, net of interest capitalized 2,995 2,424 5,238 4,633
-------- -------- -------- --------
182,720 150,481 323,684 260,170
-------- -------- -------- --------
Income (loss) before income taxes 6,036 (2,345) 6,567 240
Income tax (provision) benefit (2,372) 910 (2,581) (93)
-------- -------- -------- --------
Net income (loss) $ 3,664 $ (1.435) $ 3,986 $ 147
======== ======== ======== ========
Net income (loss) per share $ .27 $ (.10) $ .29 $ .01
======== ======== ======== ========
Dividends per share $ .06 $ .06 $ .12 $ .12
======== ======== ======== ========
</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 147 147
Cash dividends declared (1,860) (1,860)
Common stock and warrants issued
to an affiliate of Nestle USA, Inc. 3,000 3,000 99,560 102,560
Repurchases and retirements
of common stock (1,680) (1,680) (36,236) (37,916)
Employee stock plans 123 123 1,450 1,573
------ ------- -------- ------- --------
Balance at June 25, 1994 16,114 $16,114 $123,919 $47,505 $187,538
====== ======= ======== ======= ========
Balance at December 31, 1994 14,064 $14,064 $ 75,257 $46,600 $135,921
Net income 3,986 3,986
Cash dividends declared (1,590) (1,590)
Repurchases and retirements
of common stock (1,317) (1,317) (39,129) (40,446)
Employee stock plans 111 111 1,659 1,770
------ ------- -------- ------- --------
Balance at July 1, 1995 12,858 $12,858 $ 37,787 $48,996 $ 99,641
====== ======= ======== ======= ========
</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>
Twenty-Six Weeks Ended
-----------------------------------
($ in thousands) July 1, 1995 June 25, 1994
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,986 $ 147
Adjustments to reconcile net income to cash provided from
operations:
Depreciation and amortization 9,863 8,507
Deferred income taxes 924 12
Changes in assets and liabilities, net of amounts
acquired:
Trade accounts receivable (41,326) (26,217)
Other accounts receivable (8,384) (2,363)
Inventories (9,049) (9,374)
Prepaid expenses and other 3,304 2,351
Accounts payable and accrued liabilities 34,465 27,260
Accrued payroll and employee benefits (1,761) (685)
-------- --------
(7,978) (362)
-------- --------
Cash flows from investing activities:
Acquisition of property, plant and equipment (21,882) (19,210)
Retirement of property, plant and equipment 232 405
Increase in goodwill and distribution rights (1,843) (15,239)
Increase in other assets (645) (538)
-------- --------
(24,138) (34,582)
-------- --------
Cash flows from financing activities:
Decrease in short-term bank borrowings (23,400)
Increase in short-term bank borrowings 23,400
Proceeds from long-term debt 73,000
Reductions in long-term debt (3,600) (610)
Issuance of common stock under employee stock plans 1,770 1,573
Net proceeds from issuance of common stock
under Nestle Agreement 102,560
Repurchases of common stock (40,446) (37,916)
Cash dividends paid (1,680) (1,765)
-------- --------
29,044 63,842
-------- --------
(Decrease) increase in cash and cash equivalents (3,072) 28,898
Cash and cash equivalents, beginning of period 6,334 2,532
-------- --------
Cash and cash equivalents, end of period $ 3,262 $ 31,430
======== ========
Supplemental Cash Flow Information - cash paid during the period for:
Interest (net of amounts capitalized) $ 5,340 $ 4,640
Income taxes (net of refunds) 421 233
</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 and twenty-six week
periods ended July 1, 1995, and June 25, 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 July 1, 1995 and December 31, 1994
consisted of the following (in thousands):
<TABLE>
<CAPTION>
July 1, December 31,
1995 1994
-------- -----------
<S> <C> <C>
Raw materials $ 5,554 $ 3,153
Finished goods 32,576 25,928
------- -------
$38,130 $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 13,387,000 and
13,679,000 shares for the thirteen weeks and twenty-six weeks ended July 1,
1995 and 14,380,000 and 14,539,000 shares for the thirteen weeks and twenty-six
weeks ended June 25, 1994. The potentially dilutive effect of the Company's
convertible subordinated debentures and other common stock equivalents was
anti-dilutive for the thirteen and twenty-six week periods ended July 1, 1995
and June 25, 1994. Accordingly, fully diluted net income per share is not
presented.
NOTE 5 - Common Stock:
The Company's previously announced common stock repurchase program was
completed during the quarter. During the first two quarters of 1995 the
Company repurchased and retired 1,291,000 shares of its common stock at prices
ranging from $28.63 to $34.25 per share. Under the program the Company
repurchased 5,000,000 shares of its common stock at an average cost of $25.60
per share. In addition, during the first two quarters of 1995 the Company
repurchased and retired 26,000 shares of its common stock at prices ranging
from $24.50 to $30.00 per share from employees who previously acquired shares
under employee stock plans.
NOTE 6 - Subsequent Event:
On August 8, 1995, the Company converted $100,752,000 of 6.25% convertible
subordinated debentures into 1,008,000 shares of redeemable, convertible Series
B Preferred Stock, due June 30, 2001. On the conversion date, the Company had
$2,538,000 of unamortized debenture issuance costs which will be recorded as a
charge against the carrying value of this preferred stock. As was the case
with the convertible subordinated debentures, the Series B Preferred Stock is
convertible, under certain conditions, into a total of 1,008,000 shares of
redeemable, convertible Series A Preferred Stock, due June 30, 2001.
Additionally, as was the case with the debentures, both the Series A and
Series B Preferred Stock are convertible, under certain conditions, at an
initial conversion price of $34.74 into a total of 2,900,000 shares of common
stock and can be called for early redemption after December 15, 1997, subject
to certain limitations.
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>
Period-to-Period
Percentage of Net Sales Increase (Decrease)
----------------------- ----------------------
Thirteen Twenty-Six
Thirteen Weeks Ended Twenty-Six Weeks Ended Weeks Weeks
-------------------- ---------------------- 1995 1995
July 1, June 25, July 1, June 25, Compared Compared
1995 1994 1995 1994 with 1994 with 1994
-------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Net sales 100.0% 100.0% 100.0% 100.0% 27.3% 26.8%
Other income 0.4 0.3 0.3 0.3 64.6 33.9
----- ----- ----- -----
Total revenue 100.4 100.3 100.3 100.3 27.4 26.8
----- ----- ----- -----
Costs and expenses:
Costs of goods sold 77.1 74.2 78.1 76.4 32.3 29.7
Selling, general and administrative 18.5 26.0 18.6 22.0 (9.7) 7.1
Interest, net of interest capitalized 1.6 1.7 1.6 1.8 23.6 13.1
----- ----- ----- -----
Total costs and expenses 97.2 101.9 98.3 100.2 21.4 24.4
----- ----- ----- -----
Income (loss) before income taxes 3.2 (1.6) 2.0 0.1 357.4 2,636.3
Income tax (provision) benefit (1.3) 0.6 (.8) 0.0 (360.7) 2,675.3
----- ----- ----- -----
Net income (loss) 1.9 (1.0) 1.2 0.1 (355.3) 2,611.6
===== ===== ===== =====
</TABLE>
9
<PAGE> 10
RESULTS OF OPERATIONS
Thirteen Weeks ended July 1, 1995 Compared with Thirteen Weeks ended June 25,
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 second quarter of 1995 increased 27% to
$188,083,000 compared with $147,727,000 for the same period last year. Sales
of the Company's brands increased 23%. The increase related primarily to
higher unit sales of the Company's established brands in all markets led by
Dreyer's and Edy's Fat Free Ice Cream and Dreyer's and Edy's Grand Ice Cream.
Sales of products purchased from other manufacturers (partner brands) increased
32%, led by frozen novelty and ice cream products from Nestle Ice Cream
Company. Sales of partner brands represented 36% of consolidated net sales as
compared with 35% in the second quarter of 1994. The effect of price increases
for the Company's brands and partner brands was not significant.
Cost of goods sold increased $35,379,000, or 32%, over the second quarter of
1995, while the overall gross margin decreased from 25.8% in the second quarter
of 1994 to 22.9% in the second quarter of 1995. The decrease in gross margin
was largely due to a relative increase in sales of partner brands which carry
a lower margin than Company brands, combined with slightly higher distribution
expenses.
Selling, general and administrative expenses in the second quarter of 1995 were
$3,711,000, or 10%, lower than in the same period of 1994. This decrease
related primarily to a decrease in overall marketing expenses of $2,424,000
compared with the same quarter in the prior year.
Interest expense increased $571,000, or 24%, over the second quarter of 1994
due primarily to increased borrowings under the Company's line of credit.
Income taxes increased $3,282,000, reflecting a higher pre-tax income, while
the effective tax rate increased from 38.8% for the second quarter of 1994 to
39.3% for the second quarter of 1995.
10
<PAGE> 11
Twenty-six Weeks ended July 1, 1995 Compared with Twenty-six Weeks ended
June 25, 1994
Consolidated net sales for the twenty-six weeks ended July 1, 1995 increased
27% to $329,338,000 compared with $259,728,000 for the same period last year.
Sales of the Company's brands increased 23%. The increase related primarily to
higher unit sales of the Company's established brands in all markets due 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 and Dreyer's and Edy's Grand Ice Cream. Sales of
products purchased from other manufacturers increased 31%, led by frozen
novelty and ice cream products from Nestle Ice Cream Company. Sales of partner
brands represented 36% of consolidated net sales as compared with 35% in the
same period last year. The effect of price increases for the Company's brands
and partner brands was not significant.
Cost of goods sold increased $58,858,000, or 30%, as compared with 1994, while
the overall gross margin decreased from 23.6% to 21.9% in 1995. The decrease in
gross margin was largely due to a relative increase in sales of partner brands
which carry a lower margin than Company brands, combined with slightly higher
distribution expenses.
Selling, general and administrative expenses in the first two quarters of 1994
increased $4,051,000 or 7% as compared with the same period in 1994. This
increase related primarily to an increase in overall marketing expenses of
$3,975,000.
Interest expense in the first two quarters of 1995 was $605,000, or 13%, higher
than in the same period in the prior year due primarily to increased borrowings
under the Company's long term line of credit.
Income taxes increased $2,488,000 reflecting a higher pre-tax income, while the
effective tax rate increased from 38.8% for the first two quarters of 1994 to
39.3% for the first two quarters of 1995.
11
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
Working capital at July 1, 1995 increased $19,769,000 from year end 1994 due
primarily to the seasonal increase in trade accounts receivable, other accounts
receivable and inventories partially offset by an increase in accounts payable
and accrued liabilities. Cash was provided primarily from the $73,000,000
proceeds from long-term debt. This source was used to fund the $40,446,000
repurchases of common stock and the $21,882,000 increase in property, plant and
equipment.
At July 1, 1995, the Company had $3,262,000 in cash and cash equivalents, and
an unused credit line of $31,800,000. 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.
12
<PAGE> 13
PART II: OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 10, 1994, the Company held its 1995 Annual Meeting of Stockholders. A
total of 12,783,389 shares (91.7%) of the outstanding shares were represented
at the meeting either in person or by proxy. Matters submitted to a vote of
security holders at the meeting were as follows:
a. Election of two Class I directors to hold office until the 1998
Annual Meeting of Stockholders or until their successors are
elected are qualified; and
b. Approving the appointment of Price Waterhouse LLP as independent
public accountants for fiscal year 1995 and thereafter until
a successor is appointed.
At the Annual Meeting, Merrill M. Halpern, John W. Larson and Jack O.
Peiffer were elected as directors of Class I of the Company's Board of
Directors. Jerome L. Katz, Timm F. Crull and Edmund R. Manwell continue to
hold office as directors of Class II of the Board of Directors until the 1996
Annual Meeting. T. Gary Rogers, William F. Cronk,III and Anthony J. Martino
continue to hold office as directors of Class III of the Board of Directors
until the 1997 Annual Meeting.
Price Waterhouse LLP was approved as the Company's independent public
accountants for fiscal year 1995. The number of affirmative votes cast was
12,775,706. The number of negative votes was 2007.
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 July 1, 1995.
b. Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.1 First Amendment to Amended and Restated Credit Agreement dated May 11,
1995 and effective as of May 8, 1995 by and among the Company, ABN
AMRO Bank N.V., Bank of America N.T.&S.A. and Credit Suisse, amending
the Amended and Restated Credit Agreement dated December 13, 1994
among the Company, ABN AMRO Bank N.V., Bank of America N.T.&S.A.
and Credit Suisse.
10.2 Second Amendment to Securities Purchase Agreement dated July 28, 1995
and effective as of June 1, 1995 by and among the Company, Trustees of
General Electric Pension Trust, GE Investment Private Placement
Partners, I and General Electric Capital Corporation, amending the
Securities Purchase Agreement dated June 24, 1993 between the Company,
Trustees of General Electric Pension Trust, GE Investment Private
Placement Partners, I and General Electric Capital Corporation.
10.3 Third Amendment to Note Agreement dated as of June 5, 1995 between the
Company and each of Massachusetts Mutual Life Insurance Company, MML
Pension Insurance Company, Connecticut Mutual Life Insurance Company,
the Equitable Life Assurance Society of the United States, and
TransAmerica Occidental Life Insurance Company, amending the Note
Agreements dated as of March 15, 1991 and executed on April 12, 1991
between the Company and each of Massachusetts Mutual Life Insurance
Company, MML Pension Insurance Company, Connecticut Mutual Life
Insurance Company, the Equitable Life Assurance Society of the United
States, and TransAmerica Occidental Life Insurance Company.
11 Computation of Net Income Per Common Share.
27 Financial Data Schedule.
</TABLE>
13
<PAGE> 14
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.
<TABLE>
<S> <C>
DREYER'S GRAND ICE CREAM, INC.
Dated: August 15, 1995 By: /s/ Paul R. Woodland
-------------------------------------------
Paul R. Woodland
Vice President - Finance and Administration
and Chief Financial Officer
</TABLE>
14
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.1 First Amendment to Amended and Restated Credit Agreement dated May 11,
1995 and effective as of May 8, 1995 by and among the Company, ABN
AMRO Bank N.V., Bank of America N.T.&S.A. and Credit Suisse, amending
the Amended and Restated Credit Agreement dated December 13, 1994
among the Company, ABN AMRO Bank N.V., Bank of America N.T.&S.A.
and Credit Suisse.
10.2 Second Amendment to Securities Purchase Agreement dated July 28, 1995
and effective as of June 1, 1995 by and among the Company, Trustees of
General Electric Pension Trust, GE Investment Private Placement
Partners, I and General Electric Capital Corporation, amending the
Securities Purchase Agreement dated June 24, 1993 between the Company,
Trustees of General Electric Pension Trust, GE Investment Private
Placement Partners, I and General Electric Capital Corporation.
10.3 Third Amendment to Note Agreement dated as of June 5, 1995 between the
Company and each of Massachusetts Mutual Life Insurance Company, MML
Pension Insurance Company, Connecticut Mutual Life Insurance Company,
the Equitable Life Assurance Society of the United States, and
TransAmerica Occidental Life Insurance Company, amending the Note
Agreements dated as of March 15, 1991 and executed on April 12, 1991
between the Company and each of Massachusetts Mutual Life Insurance
Company, MML Pension Insurance Company, Connecticut Mutual Life
Insurance Company, the Equitable Life Assurance Society of the United
States, and TransAmerica Occidental Life Insurance Company.
11 Computation of Net Income Per Common Share.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
Exhibit 10.1
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the
"Amendment"), is dated as of May 11, 1995 and is effective as of May 8, 1995
(the "Effective Date") is entered into by and among DREYER'S GRAND ICE CREAM,
INC., a Delaware corporation (the "Company"), the several financial
institutions from time to time party to this Agreement (collectively, the
"Banks"; individually, a "Bank"), ABN AMRO BANK N.V., San Francisco
International Branch as Co-Agent, and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent for the Banks.
RECITALS
A. The Company, Banks, the Co-Agent and the Agent are parties to an Amended
and Restated Credit Agreement dated as of December 13, 1994, (the "Credit
Agreement") pursuant to which the Agent and the Banks have extended certain
credit facilities to the Company.
B. On April 27, 1995, Bank of America National Trust and Savings Association
and ABN AMRO Bank N.V., as Assignors, assigned and delegated portions of their
rights and duties in the Credit Agreement to Credit Suisse.
C. The Company has requested that the Banks agree to certain amendments of
the Credit Agreement.
D. The Banks are willing to amend the Credit Agreement subject to the terms
and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings, if any, assigned to them in the Credit
Agreement.
2. Amendments to Credit Agreement.
(a) Section 7.11(c) of the Credit Agreement shall be amended to
provide as follows:
"(c) during the Share Purchase Period purchase its common stock for
immediate retirement up to an aggregate purchase price of $135,000,000 or an
aggregate purchase of 5,000,000 shares, whichever first occurs;"
3. Representations and Warranties. The Company hereby represents and
warrants to the Agent and the Banks as follows:
1
<PAGE> 2
(a) No Default or Event of Default has occurred and is continuing.
(b) The execution, delivery and performance by the Company of this
Amendment have been duly authorized by all necessary corporate and other action
and do not and will not require any registration with, consent or approval of,
notice to or action by, any Person (including any Governmental Authority) in
order to be effective and enforceable. The Credit Agreement as amended by this
Amendment constitutes the legal, valid and binding obligations of the Company,
enforceable against it in accordance with its respective terms, without
defense, counterclaim or offset.
(c) All representations and warranties of the Company contained in the
Credit Agreement are true and correct.
(d) The Company is entering into this Amendment on the basis of its own
investigation and for its own reasons, without reliance upon the Agent and the
Banks or any other Person.
4. Conditions Precedent. This Amendment will be executed after satisfaction
of all of the following conditions precedent:
(a) The Agent has received from the Company and the Majority Banks a
duly executed original (or, if elected by the Agent, an executed facsimile
copy) of this Amendment.
(b) The Agent has received from the Company a copy of a resolution
passed by the board of directors of such corporation, certified by the
Secretary or an Assistant Secretary of such corporation as being in full force
and effect on the date hereof, authorizing the execution, delivery and
performance of this Amendment.
(c) The Banks, through the Agent, have received from the Company the
amount of One Hundred Thousand Dollars ($100,000) to be shared among the Banks
on a pro rata basis, representing payment in full of a non-refundable amendment
fee, which amount the Company hereby covenants to pay to the Banks on demand.
5. Reservation of Rights. The Company acknowledges and agrees that the
execution and delivery by the Agent and the Banks of this Amendment shall not
be deemed to create a course of dealing or otherwise obligate the Agent or the
Banks to forbear or execute similar amendments under the same or similar
circumstances in the future.
2
<PAGE> 3
6. Miscellaneous.
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Credit Agreement are and shall remain in full force and effect
and all references therein to such Credit Agreement shall henceforth refer to
the Credit Agreement as amended by this Amendment. This Amendment shall be
deemed incorporated into, and a part of, the Credit Agreement.
(b) This Amendment shall be binding upon and inure to the benefit of the
parties hereto and thereto and their respective successors and assigns. No
third party beneficiaries are intended in connection with this Amendment.
(c) This Amendment shall be governed by and construed in accordance with
the law of the State of California.
(d) This Amendment may be executed in any number of counterparts, each
of which shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument. Each of the parties hereto
understands and agrees that this document (and any other document required
herein) may be delivered by any party thereto either in the form of an executed
original or an executed original sent by facsimile transmission to be followed
promptly by mailing of a hard copy original, and that receipt by the Agent of a
facsimile transmitted document purportedly bearing the signature of a Bank or
the Company shall bind such Bank or the Company, respectively, with the same
force and effect as the delivery of a hard copy original. Any failure by the
Agent to receive the hard copy executed original of such document shall not
diminish the binding effect of receipt of the facsimile transmitted executed
original of such document of the party whose hard copy page was not received by
the Agent.
(e) This Amendment may not be amended except in accordance with the
provisions of Section 10.01 of the Credit Agreement.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Credit Agreement, respectively.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first above written.
DREYER'S GRAND ICE CREAM, INC.
By: /s/ WILLIAM C. COLLETT
---------------------------
Name: William C. Collett
-------------------------
Title: Treasurer
------------------------
3
<PAGE> 4
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By: /s/ CHRISTINE CORDI
--------------------------
Name: Christine Cordi
Title: Vice President
ABN AMRO BANK N.V.,
as Co-Agent
By: /s/ GINA M. BRUSATORI
-------------------------
Name: Gina M. Brusatori
Title: Vice President
By: /s/ DIANNE D. WAGGONER
-------------------------
Name: Dianne D. Waggoner
Title: Group Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a
Bank
By: /s/ MICHAEL J. DASHER
--------------------------
Name: Michael J. Dasher
Title: Vice President
ABN AMRO BANK N.V., as a Bank
By: /s/ GINA M. BRUSATORI
--------------------------
Name: Gina M. Brusatori
Title: Vice President
By: /s/ DIANNE D. WAGGONER
--------------------------
Name: Dianne D. Waggoner
Title: Group Vice President
4
<PAGE> 5
CREDIT SUISSE
By: /s/ DAVID J. WORTHINGTON
--------------------------
Name: David J. Worthington
Title: Member of Senior
Management
By: /s/ MARLOU PALENZUELA
--------------------------
Name: Marlou Palenzuela
Title: Member of Senior
Management
5
<PAGE> 1
Exhibit 10.2
SECOND AMENDMENT TO SECURITIES PURCHASE AGREEMENT
This Second Amendment to Securities Purchase Agreement (the "Amendment")
is dated July 28, 1995 and is effective as of June 1, 1995 by and among
Dreyer's Grand Ice Cream, Inc., a Delaware corporation (the "Company"), and
Trustees of General Electric Pension Trust, a New York common law trust ("GE
Pension"), GE Investment Private Placement Partners, I, a Delaware limited
partnership ("GEIPPP") and General Electric Capital Corporation, a New York
corporation (collectively the "Purchasers").
Recitals
A. Company entered into a Securities Purchase Agreement with Purchasers
dated June 24, 1993, and amended May 6, 1994 (the "Agreement"), pursuant to
which Purchasers acquired various securities of Company.
B. Company and Purchasers now desire to amend the Agreement as set forth
herein.
1. Amendment. Section 6.1(a) of the Agreement is hereby amended to read in
its entirety as follows:
"6.1. Financial Covenants. (a) The Company will not permit its
Consolidated Net Worth at any time to be less than the sum of (i)
$100,000,000 or, only during the Company's second fiscal quarter of
1995, $99,000,000 and (ii) the aggregate Stated Value of the
outstanding shares of Preferred Stock (it being understood that, for
the purposes of this paragraph (a), (x) the Notes and any other
Subordinated Indebtedness of the Company shall not be treated as
equity and (y) Consolidated Net Worth shall not be reduced by any
amount up to one hundred and six million dollars ($106,000,000)
borrowed to redeem, purchase or acquire shares of Common Stock to
the extent such amounts are repaid from the net cash proceeds
received, not more than 180 days after the effective date of such
borrowing, by the Company from Nestle for the issue and sale of
shares of Common Stock and warrants to purchase or acquire shares of
Common Stock on the terms set forth in the Nestle Purchase Agreement
and the Nestle Warrant Agreement)."
1
<PAGE> 2
2. Miscellaneous.
2.1. Except as expressly amended herein, all terms, covenants and
provisions of the Agreement are and shall remain in full force and effect and
all references therein to such Agreement shall henceforth refer to the
Agreement as amended by this Amendment. This Amendment shall be deemed
incorporated into, and a part of, the Agreement.
2.2. This Amendment shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. No third party
beneficiaries are intended in connection with this Amendment.
2.3. This Amendment shall be governed by and construed in accordance
with the law of the State of Delaware.
2.4. This Amendment may be executed in any number of counterparts,
each of which shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the Company and the Purchasers have caused this
Amendment to be executed and delivered as of the date first above written.
<TABLE>
<S> <C>
DREYER'S GRAND ICE CREAM, INC. TRUSTEES OF GENERAL ELECTRIC
PENSION TRUST
By: /s/ Paul R. Woodland By: /s/ Al M. Lewis
-------------------------- ------------------------
Title: CEO Title: Trustee
----------------------- ----------------------
GENERAL ELECTRIC CAPITAL GE INVESTMENT PRIVATE
CORPORATION PLACEMENT PARTNERS, I
By: GE Investment Management
By: /s/ Incorporated, its
-------------------------- General Partner
Title: Managing Director
-----------------------
By: /s/ Al M. Lewis
-------------------------
Title: Executive Vice President
-------------------------
</TABLE>
2
<PAGE> 1
EXHIBIT 10.3
June 5, 1995
Mr. John Joyce
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Mr. Larry Stillman
Connecticut Mutual Life Insurance Company
140 Garden Street
Hartford, CT 06154
Mr. Robert Flowers
Equitable c/o Alliance Capital
1345 Avenue of the Americas, 37th Floor
New York, NY 10105
Mr. John Casparian
Transamerica Investment Service
1150 South Olive Street, Suite 2700
Los Angeles, CA 90015
re: Third Amendment to Note Agreement dated as of March 15, 1991 between
Dreyer's Grand Ice Cream, Inc. (the "Company"), as Borrower, and each of
Massachusetts Mutual Life Insurance Company, MML Pension Insurance Company, the
Equitable Life Assurance Society of the United States, and TransAmerica
Occidental Life Insurance Company (together, the "Lenders")
Gentlemen:
I have previously discussed in detail with John Joyce Dreyer's proposal to
amend the terms of Section 5.8 (b), Restricted Payments and Investments to
permit Dreyer's to complete its 5,000,000 share repurchase program. It is our
opinion, and John Joyce has concurred in this view, that the best way to do
this would be to consider the two million warrants held by Nestle to be a
"substantially concurrent issue or sale of other shares of capital stock of the
Company" on an as-if exercised basis at their put price of $24.00. All other
covenant tests would remain at their current levels.
The warrants are currently in the money and exercisable by Nestle at a price of
$32.00. Upon exercise by Nestle the Company will receive $64,000,000 in cash
and a like amount will be added to the Company's stockholder's equity account.
Upon a put by Dreyer's at $24.00 the net proceeds and addition to stockholder's
equity would be $48,000,000. Nestle paid ten million dollars for the warrants,
and thereby have a material incentive to realize the value of that investment.
This approach will essentially mirror the approach taken by our bank group, led
by Bank of America as agent. They have set a restricted payment limit of the
earlier of the repurchase of
<PAGE> 2
John Joyce, Larry Stillman, Robert Flowers, John Caparian
June 5, 1995
Page 2
5,000,000 shares or the payment of total consideration for shares repurchased
of $135,000,000. Considering the warrants as a substantially concurrent issue
would equate to a basket for restricted payments of approximately $144,000,000
under our Note Agreement with you. However, Dreyer's would still be restricted
to the bank agreement's basket and their various debt tests, effectively giving
the Note holders the benefit of their lower test limits through the cross
default provisions of the Note Agreement.
This Letter Amendment as Third Amendment to the Note Agreement shall add the
following proviso to the end of the parenthetical language of Section 5.8 (b):
"provided, however, that for the purpose of Section 5.8 (b), the 2,000,000
warrants to purchase common stock of the Company issued to Nestle Holdings,
Inc. by the Company on June 14, 1994 shall be considered, to the extent
such warrants have not expired, an issuance of 2,000,000 shares of common
stock of the Company at $24.00 per share substantially concurrent with the
Company's 1994 common stock repurchase program for the purchase of up to
5,000,000 common shares; and provided, further that if said warrants are
exercised at an exercise price of greater than $24.00 per common share, the
difference shall be deemed net cash proceeds to the Company from the
issuance of common stock for purposes of Section 5.8(b)."
I have included a copy of the press release issued upon completion of the
Nestle transaction. The release includes details of the entire Nestle
transaction, including the warrants, as well as a summary of our strategic
plan.
Your signature on letter amendment will indicate your agreement to amend the
referenced issue as described above and will constitute the third amendment to
the Note Agreement. Please sign and return all 5 [five] copies of this letter
amendment directly to my attention. I will distribute copies of all signatures
to each note holder.
In WITNESS WHEROF, the Company and the Lenders have executed this Letter of
Amendment as of June 5, 1995.
DREYER'S GRAND ICE CREAM, INC.
/s/ William C. Collett
--------------------------
By: William C. Collett
Its: Treasurer
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ John B. Joyce
---------------------
Its: Vice President
<PAGE> 3
John Joyce, Larry Stillman, Robert Flowers, John Casparian
June 5, 1995
Page 3.
MML PENSION INSURANCE COMPANY
By: /s/ John B. Joyce
---------------------------
Its: Investment Officer
CONNECTICUT MUTUAL LIFE INSURANCE COMPANY
By: __________________________
Its: __________________________
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
By: _________________________
Its: _________________________
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
By: /s/ John M. Casparian
---------------------------
Its: Investment Officer
<PAGE> 1
EXHIBIT 11
DREYER'S GRAND ICE CREAM, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
------------------------------ ---------------------------
(in thousands, except per share amount) July 1, 1995 June 25, 1994 July 1, 1995 June 25, 1994
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
PRIMARY
-------
Net income (loss) $ 3,664 $(1,435) $ 3,986 $ 147
Weighted average number of shares of common
stock outstanding 13,387 14,380 13,679 14,539
------- ------- ------- -------
Net income (loss) per share, as reported $ .27 $ (.10) $ .29 $ .01
======= ======= ======= =======
Weighted average number of shares of common
stock outstanding 13,387 14,380 13,679 14,539
Common stock equivalent--assumed exercise of
common stock options 288 86 195 89
------- ------- ------- -------
Weighted average number of shares of common
stock outstanding, including common stock
equivalents 13,675 14,466 13,874 14,628
======= ======= ======= =======
Net income (loss) per share $ .27(1) $ (.10)(1) $ .29(1) $ .01(1)
======= ======= ======= =======
FULLY DILUTED
-------------
Net income (loss) $ 3,664 $(1,435) $ 3,986 $ 147
Add interest expense on convertible
subordinated debentures issued June 1993,
due June 2006 and amortization of related
issuance costs, net of tax 1,020 1,048 2,037 2,049
------- ------- ------- -------
Adjusted net income (loss) $ 4,684 $ (387) $ 6,023 $ 2,196
======= ======= ======= =======
Weighted average number of shares of common
stock outstanding 13,387 14,380 13,679 14,539
Common stock equivalent--assumed exercise of
common stock options 437 86 437 89
Assumed conversion of debentures 2,900 2,900 2,900 2,900
------- ------- ------- -------
Adjusted shares 16,724 17,366 17,016 17,528
======= ======= ======= =======
Net income (loss) per share $ .28(2) $ (.02)(2) $ .35(2) $ .13(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
<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> 6-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> JUL-01-1995
<CASH> 3,262
<SECURITIES> 0
<RECEIVABLES> 89,561
<ALLOWANCES> (716)
<INVENTORY> 38,130
<CURRENT-ASSETS> 151,217
<PP&E> 244,422
<DEPRECIATION> (70,139)
<TOTAL-ASSETS> 428,684
<CURRENT-LIABILITIES> 83,045
<BONDS> 216,252
<COMMON> 12,858
0
0
<OTHER-SE> 86,783
<TOTAL-LIABILITY-AND-EQUITY> 428,684
<SALES> 329,338
<TOTAL-REVENUES> 330,251
<CGS> 257,269
<TOTAL-COSTS> 257,269
<OTHER-EXPENSES> 60,685
<LOSS-PROVISION> 492
<INTEREST-EXPENSE> 5,238
<INCOME-PRETAX> 6,567
<INCOME-TAX> 2,581
<INCOME-CONTINUING> 3,986
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,986
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
