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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 28, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from
------------------------- to
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Commission file number 0-14190
DREYER'S GRAND ICE CREAM, INC.
(Exact name of registrant as specified in its charter)
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Delaware No. 94-2967523
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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5929 College Avenue, Oakland, California 94618
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 652-8187
Securities registered pursuant to Section 12(b) of the Act: None
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Name of Each Exchange
Title of Each Class on Which Registered
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Not applicable Not applicable
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 Par Value
Preferred Stock Purchase Rights
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value (based on the average of the high and low sales
prices on March 24, 1997, as reported by NASDAQ) of the Common Stock held by
non-affiliates was approximately $342,683,981. (Such amount excludes the
aggregate market value of shares beneficially owned by the executive officers
and members of the Board of Directors of the registrant.)
As of March 24, 1997, the latest practicable date, 13,400,607 shares of
Common Stock were outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Dreyer's Grand Ice Cream, Inc. Proxy Statement for the 1997
Annual Meeting of Stockholders to be filed with the Commission on or before
April 27, 1997 are incorporated by reference into Part III of this Annual Report
on Form 10-K. With the exception of those portions which are specifically
incorporated by reference in this Annual Report on Form 10-K, the Dreyer's Grand
Ice Cream, Inc. Proxy Statement for the 1997 Annual Meeting of Stockholders is
not to be deemed filed as part of this Report.
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PART I
ITEM 1. BUSINESS
GENERAL
Dreyer's Grand Ice Cream, Inc. and its consolidated subsidiaries are,
unless the context otherwise requires, sometimes referred to herein as
"Dreyer's" or the "Company." The Company, successor to the original Dreyer's
Grand Ice Cream business, was originally incorporated in California on February
23, 1977 and reincorporated in Delaware on December 28, 1985.
Dreyer's manufactures and distributes premium ice cream and other frozen
dessert products. Since 1977, Dreyer's Grand Ice Cream has developed from a
specialty ice cream sold principally in selected San Francisco Bay Area grocery
and ice cream stores to a broad line of frozen dairy and other frozen desserts
sold under the Dreyer's and Edy's brand names in retail outlets serving more
than 85% of the households in the United States. The Dreyer's line of products
are available in the thirteen western states, Texas and certain markets in the
Far East. The Company's products are sold under the Edy's brand name generally
throughout the remaining regions of the United States. The Dreyer's and Edy's
line of products are distributed through a direct-store-delivery system further
described below under the caption "Marketing, Sales and Distribution." The
Company also distributes and, in certain instances, manufactures branded ice
cream and frozen dessert products of other companies. The Dreyer's and Edy's
line of ice cream and related products is relatively expensive and is sold by
the Company and its independent distributors to grocery stores, convenience
stores, club stores, ice cream parlors, restaurants, hotels and certain other
accounts. The Dreyer's and Edy's brands enjoy strong consumer recognition and
loyalty.
MARKETS
Ice cream was traditionally supplied by dairies as an adjunct to their
basic milk business. Accordingly, ice cream was marketed like milk, as a
fungible commodity, and manufacturers competed primarily on the basis of price.
This price competition motivated ice cream producers to seek economies in their
formulations. The resulting trend to lower quality ice cream created an
opportunity for the Company and other producers of premium ice creams, whose
products can be differentiated on the basis of quality, technological
sophistication and brand image, rather than price. Moreover, the market for all
packaged ice creams was influenced by the steady increase in market share of
"private label" ice cream products owned by the major grocery chains and the
purchase or construction by the chains of their own milk and ice cream plants.
The resulting reduction in the market for milk and the "regular" ice cream
brands produced by the independent dairies has caused many such dairies to
withdraw from the market. Manufacturing and formulation complexities, broader
flavor requirements, consumer preference and brand identity, however, make it
more difficult for the chains' private label brands to compete effectively in
the premium market segment. As a result, independent premium brands such as the
Company's are normally stocked by major grocery chains.
While many foodservice operators, including hotels, schools, hospitals and
other institutions, buy ice cream primarily on the basis of price, there are
also those in the foodservice industry who purchase ice cream based on its
quality. Operators of ice cream shops wanting to feature a quality brand,
restaurants that include an ice cream brand on their menu and clubs or chefs
concerned with the quality of their fare are often willing to pay for Dreyer's
quality, image and brand identity.
PRODUCTS
The Company and its predecessors have always been innovators of flavor,
package development and formulation. William A. Dreyer, the creator of Dreyer's
Grand Ice Cream, is credited with inventing many popular flavors including Rocky
Road. Dreyer's was among the first ice creams in the West packaged in round
containers with window lids that allow consumers to see the actual product they
are buying. The Company was also the first to produce an ice cream lower in
calories. The Company's Grand Light(R) formulation was a precursor to the
reduced fat, reduced sugar and low cholesterol products in the Company's current
product line.
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The Company uses only the highest quality ingredients in its products. The
Company's management philosophy is to resist changes in its formulations or
production processes that compromise quality for cost even though the industry
in general may adopt such new formulation or process compromises.
Dreyer's and Edy's Grand Ice Cream is the Company's flagship product. This
brand of ice cream utilizes traditional formulations with all natural flavorings
and is characterized by premium quality taste and texture, and diverse flavor
selection. The flagship product is complimented by the Company's successful
reduced fat, low cholesterol products such as Frozen Yogurt; Grand Light, No
Sugar Added and Fat Free ice creams; and the Company's Sherbet and Whole Fruit
Sorbet products. The Company believes these products are well positioned in the
segments of the market where products are characterized by lower levels of fat,
sugar and cholesterol than those of regular ice cream. During 1996, the Company
introduced Portofino(TM) brand Italian style ice cream in selected western
markets. The Company also began manufacturing and distributing Starbucks(TM) Ice
Cream products during 1996 for its joint venture with Starbucks Coffee Company.
The Company also produces a premium soft serve product, Grand Soft(TM), which is
available as ice cream or frozen yogurt. The Company's novelty line features
Dreyer's and Edy's Ice Cream Bars, Fruit Bars, and Sundae Cones. The Company
redesigned its 1997 packaging for the novelty products to reposition these
products to target the family segment of the market. The Company also
distributes and, in some instances, manufactures selected branded frozen dessert
products of other companies.
The Company's product lines now include over 100 flavors that are selected
both on the basis of general popularity and on the intensity of consumer
response. Some flavors are seasonal and are produced only as a featured flavor
during particular months. The Company operates a continuous flavor development
and evaluation program.
The Company holds registered trademarks on many of its products. Dreyer's
believes that consumers associate the Company's trademarks, distinctive
packaging and trade dress with its high quality products. The Company does not
own any patents that are material to its business. Historically, research and
development expenses have not been significant.
MARKETING, SALES AND DISTRIBUTION
The Company's marketing strategy is based upon management's belief that a
significant number of people prefer a quality product and quality image in ice
cream just as they do in other product categories. A quality image is
communicated in many ways - taste, packaging, flavor selection, price and often
through advertising and promotion. If consistency in the product's quality and
image are strictly maintained, a brand can develop a clearly defined and loyal
consumer following. It is the Company's goal to develop such a consumer
following in each major market in which it does business.
The Company embarked on a five year plan (the Strategic Plan) during the
second quarter of 1994 to accelerate the sales of its brand throughout the
country. The key elements of this plan are: 1) to build a high margin brand with
a leading market share through effective consumer marketing activities, 2) to
expand the Company's direct-store-delivery distribution network to a national
scale and enhance this capability with sophisticated information and logistics
systems and 3) to introduce innovative new products. The potential benefits of
the Strategic Plan are increased market share and future earnings above those
levels that would be attained in the absence of the Strategic Plan. The Company
anticipates that the earnings benefits expected under the Strategic Plan will be
achieved in 1997 and future years. However, no assurance can be given that these
expectations relative to future market share and earnings benefits of the
strategy will be achieved. The success of the strategy will depend upon, among
other things, consumer purchase responsiveness to the increased marketing
expenditures, competitors' marketing responses, market conditions affecting the
price of the Company's products, commodity costs and efficiencies achieved in
manufacturing and distribution operations. For additional information regarding
the Strategic Plan see the discussion set forth under the caption "Management's
Discussion and Analysis" which appears on pages 30-32 of the Company's 1996
Annual Report to Stockholders.
Unlike many other ice cream manufacturers, the Company uses a
direct-store-delivery system which allows distribution of the Company's products
directly to the retail ice cream cabinet by either the Company's
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own personnel or independent distributors who primarily distribute the Company's
products. This store level distribution allows service to be tailored to the
needs of each store. Dreyer's believes this service ensures proper product
handling, quality control, flavor selection and retail display. The
implementation of this system has resulted in an ice cream distribution network
capable of providing frequent direct service to grocery stores in every market
where the Company's products are sold. Under the Strategic Plan, the Company's
distribution network has been significantly expanded to where the Company's
products are available to grocery stores serving approximately 85% of the United
States. This distribution system is considerably larger than any other
direct-store-delivery system for ice cream products currently operating in the
United States.
Each distributor, whether Company-owned or independent, is primarily
responsible for sales of all products within its respective market area.
However, the Company provides sales and marketing support to its independent
distributors, including training seminars, sales aids of many kinds, point of
purchase materials, assistance with promotions and other sales support.
The distribution network in the West now includes fourteen distribution
centers operated by the Company in large metropolitan areas such as Los Angeles,
the San Francisco Bay Area, Phoenix, San Diego, Seattle and Denver. The
remaining metropolitan areas throughout the thirteen western states, Texas and
the Far East are served through independent distributors.
Distribution in the remainder of the United States is under the Edy's brand
name with most of the distribution handled through nineteen Company-owned
distribution centers, including centers in New York, Chicago, Washington, D.C.,
Atlanta, Tampa and Milwaukee. The Company also has independent distributors
handling the Company's products in certain market areas east of the Rocky
Mountains.
Taken together, independent distributors accounted for approximately 23% of
consolidated net sales in 1996. The Company's agreements with its independent
distributors are generally terminable upon 30 days notice by either party.
For fiscal 1996, no customer accounted for more than 10% of consolidated
net sales of the Company. The Company's export sales were about 2% of 1996
consolidated net sales.
The Company experiences a seasonal fluctuation in sales, with more demand
for its products during the spring and summer than during the fall and winter.
MANUFACTURING
The Company manufactures its products at its plants in Union City,
California; City of Commerce, California; Fort Wayne, Indiana; Houston, Texas;
and Salt Lake City, Utah. In order to serve high altitude markets, the Company
has manufacturing agreements with an ice cream manufacturer to produce Dreyer's
line of products in accordance with specifications and quality control provided
by Dreyer's. Of the approximately 71 million gallons of the Company's products
sold in 1996, approximately 2 million gallons were manufactured under these
arrangements. The Company also has manufacturing agreements with two different
facilities to produce a portion of its novelty products. During 1996, these
facilities produced approximately 3 million cases of Dreyer's and Edy's Ice
Cream Bars and Fruit Bars. In addition, the Company has agreements to produce
products for other manufacturers. In 1996, the Company manufactured
approximately 13 million gallons of product under these agreements.
The primary factor in the Company's product costs is the price of basic
dairy ingredients (cream, milk and skim milk) and sugar. The minimum prices paid
for dairy ingredients are established by the market under the Federal Milk Price
Support Program. During 1996, the Company experienced an $8,140,000 increase in
dairy raw materials costs which negatively impacted the Company's gross profit.
However, these higher costs were offset by price increases and productivity
gains.
In order to ensure consistency of flavor, each of the Company's
manufacturing plants purchases, to the extent practicable, all of its required
dairy ingredients from one local supplier. These dairy products and most other
ingredients or their equivalents are available from multiple sources. The
Company maintains a rigorous process for evaluating qualified alternative
suppliers of its key ingredients.
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COMPETITION
The Company's manufactured products compete on the basis of brand image,
quality and breadth of flavor selection. The ice cream industry is highly
competitive and most ice cream manufacturers, including full line dairies, the
major grocery chains and the other independent ice cream processors, are capable
of manufacturing and marketing high quality ice creams. Furthermore, there are
relatively few barriers to new entrants in the ice cream business. However,
reduced fat, reduced sugar and low cholesterol ice cream products generally
require technologically sophisticated formulations in comparison to standard or
"regular" ice cream products.
Much of the Company's competition comes from the "private label" brands
produced by or for the major supermarket chains and which generally sell at
prices below those charged by the Company for its products. Because these brands
are owned by the retailer, they often receive preferential treatment when the
retailers allocate available freezer space. The Company's competition also
includes premium ice creams produced by other ice cream manufacturers, some of
whom are owned by parent companies much larger than Dreyer's.
EMPLOYEES
On December 28, 1996, the Company had approximately 2,900 employees. The
Company's Union City manufacturing and distribution employees are represented by
the Teamsters Local 853, whose contract with the Company expires between March
1998 and December 2001 for different types of employees, and the International
Union of Operating Engineers, Stationary Local No. 39, whose contract with the
Company expired in August 1996 and is currently under negotiation. The
Sacramento distribution employees are represented by the Chauffeurs, Teamsters
and Helpers Union, Local 150 whose contract with the Company expires in August
1999. The St. Louis distribution employees are represented by the United Food &
Commercial Workers Union, Local 655 whose contract with the Company expires in
December 1997. The Company has never experienced a strike by any of its
employees.
ITEM 2. PROPERTIES
The Company owns its headquarters located at 5929 College Avenue in
Oakland, California. The headquarters buildings include 54,000 square feet of
office space utilized by the Company and 10,000 square feet of retail space
leased to third parties.
The Company owns a manufacturing and distribution facility in Union City,
California. This facility has approximately 60,000 square feet of manufacturing
and dry storage space, 40,000 square feet of cold storage warehouse space and
15,000 square feet of office space. The plant has the current production
capacity of 28 million gallons per year. During 1996, the facility produced
approximately 19 million gallons of ice cream and related products.
The Company leases an ice cream manufacturing plant with an adjoining cold
storage warehouse located in the City of Commerce, California. This facility has
approximately 76,000 square feet of manufacturing and dry storage space, 25,000
square feet of cold storage space and 19,000 square feet of office space. The
lease on this property, including renewal options, expires in 2022. The plant
has the current production capacity of 20 million gallons per year. During 1996,
the facility produced approximately 18 million gallons of ice cream and related
products.
In 1994, the Company completed construction of a cold storage warehouse
facility located on property acquired in the City of Industry, California. This
facility includes 52,000 square feet of cold and dry storage warehouse space and
13,000 square feet of office space. This facility supplements the cold storage
warehouse and office space leased in the City of Commerce.
The Company owns a manufacturing plant with an adjoining cold storage
warehouse in Fort Wayne, Indiana. This facility has approximately 116,000 square
feet of manufacturing and storage space and 6,000 square feet of office space.
In addition, the Company leases approximately 55,000 square feet of cold storage
and 8,000 square feet of office space near the Fort Wayne facility. The plant
has the current production
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capacity of 50 million gallons per year. During 1996, the facility produced
approximately 40 million gallons of ice cream and related products.
The Company owns a manufacturing and distribution facility in Houston,
Texas. This facility is being renovated and, upon completion, will have
approximately 69,000 square feet of manufacturing and dry storage space, 46,000
square feet of cold storage warehouse space and 20,000 square feet of office
space. At that time the plant's production capacity will be approximately 26
million gallons per year. During 1996, this facility produced approximately 7
million gallons of ice cream and related products.
The Company owns a manufacturing and distribution facility in Salt Lake
City, Utah. This facility has approximately 12,000 square feet of manufacturing
and dry storage space, 13,000 square feet of cold storage space and 1,000 square
feet of office space. The plant has the current production capacity of 5 million
gallons per year. During 1996, the facility produced approximately 3 million
gallons of ice cream and related products.
The Company intentionally acquires, designs and constructs its
manufacturing and distribution facilities with a capacity greater than current
needs require. This is done to facilitate growth and expansion and minimize
future capital outlays. The cost of carrying this excess capacity is not
significant.
The Company also leases or rents various local distribution and office
facilities with leases expiring through the year 2022 (including options to
renew).
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The Company's executive officers and their ages are as follows:
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NAME POSITION AGE
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T. Gary Rogers Chairman of the Board and Chief Executive Officer 54
William F. Cronk, III President 54
Edmund R. Manwell Secretary 54
Thomas M. Delaplane Vice President - Sales 52
J. Tyler Johnston Vice President - Marketing 43
William R. Oldenburg Vice President - Operations 50
Paul R. Woodland Vice President - Finance and Administration,
Chief Financial Officer & Assistant Secretary 46
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All officers hold office at the pleasure of the Board of Directors. There
is no family relationship among the above officers.
Mr. Rogers has served as Dreyer's Chairman of the Board and Chief Executive
Officer since its incorporation in February 1977.
Mr. Cronk has served as a director of the Company since its incorporation
in February 1977 and has been the Company's President since April 1981.
Mr. Manwell has served as Secretary of the Company since its incorporation
and as a director of the Company since April 1981. Since March 1982, Mr. Manwell
has been a partner in the law firm of Manwell & Milton, general counsel to the
Company.
Mr. Delaplane has served as Vice President - Sales of the Company since May
1987.
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Mr. Johnston has served as Vice President - Marketing of the Company since
March 1996. From September 1995 to March 1996, he served as the Company's Vice
President - New Business. From May 1988 to August 1995, he served as the
Company's Director of Marketing.
Mr. Oldenburg has served as Vice President - Operations of the Company
since September 1986.
Mr. Woodland has served as Vice President - Finance and Administration and
Chief Financial Officer of the Company since September 1981 and as Assistant
Secretary since December 1985.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information set forth in Note 16 under the caption "Price Range
(NASDAQ)" which appears on page 28 of the Company's 1996 Annual Report is
incorporated herein by reference. The bid and asked quotations for the Company's
Common Stock are as reported by NASDAQ.
On March 24, 1997, the number of holders of record of the Company's common
stock was 4,023.
The Company paid a regular quarterly dividend of $.06 per share of common
stock for each quarter of 1996. On March 4, 1997, the Board of Directors,
subject to compliance with law, contractual restrictions and future review of
the condition of the Company, declared its intention to issue regular quarterly
dividends of $.06 per share of common stock for each quarter of 1997. Also on
March 4, 1997, the Board of Directors declared a dividend of $.06 per share of
common stock for the first quarter of 1997 for stockholders of record on March
28, 1997.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Five Year Summary of
Significant Financial Data" which appears on page 29 of the Company's 1996
Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information set forth under the caption "Management's Discussion and
Analysis" which appears on pages 30-32 of the Company's 1996 Annual Report is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, together with the report thereon of
Price Waterhouse LLP dated March 12, 1997, appearing on pages 16-28 of the
Company's 1996 Annual Report are incorporated herein by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the captions "Board of
Directors -- Nominees for Director -- Continuing Directors," "Matters Submitted
to the Vote of Stockholders -- Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Company's Proxy Statement for
the 1997 Annual Meeting of Stockholders to be filed with the Commission on or
before April 27, 1997, and the information contained in Part I of this Annual
Report on Form 10-K under the caption "Executive Officers of the Registrant," is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation" in the
Company's Proxy Statement for the 1997 Annual Meeting of Stockholders to be
filed with the Commission on or before April 27, 1997 is incorporated herein by
reference.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Company's Proxy Statement for the 1997
Annual Meeting of Stockholders to be filed with the Commission on or before
April 27, 1997 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the captions "Compensation Committee
Interlocks and Insider Participation" and "Other Relationships" in the Company's
Proxy Statement for the 1997 Annual Meeting of Stockholders to be filed with the
Commission on or before April 27, 1997 is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES:
The following documents are filed as part of this report:
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PAGE(S) IN
ANNUAL
REPORT*
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1. Financial Statements:
Report of Independent Accountants 16
Consolidated Statement of Income for the three years ended
December 28, 1996 16
Consolidated Balance Sheet at December 28, 1996 and
December 30, 1995 17
Consolidated Statement of Changes in Stockholders' Equity
for the three years ended December 28, 1996 18
Consolidated Statement of Cash Flows for the three years ended
December 28, 1996 19
Notes to Consolidated Financial Statements 20-28
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2. Financial Statement Schedules:
Report of Independent Accountants on Financial Statement Schedule
for the three years ended December 28, 1996 15
II. Valuation and Qualifying Accounts 16
M-K-D Distributors, Inc. and Subsidiary Consolidated Financial
Statements:
Report of Independent Accountants 17
Consolidated Balance Sheet at December 30, 1995 18
Consolidated Statement of Income and Retained Earnings for
the fiscal years ended December 30, 1995 and December 31,
1994 (unaudited) 19
Consolidated Statement of Cash Flows for the fiscal years
ended December 30, 1995 and December 31, 1994 (unaudited) 20
Notes to Consolidated Financial Statements 21-25
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* Incorporated by reference to the indicated pages of the Company's 1996
Annual Report to Stockholders.
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All other schedules are omitted because they are not applicable
or the required information is shown in the financial statements
or notes thereto.
Financial statements of any other 50% or less owned company have
been omitted because the Registrant's proportionate share of the
income from continuing operations before income taxes, and total
assets is less than 20% of the respective consolidated amounts,
and the investment in and advances to any such company is less
than 20% of consolidated total assets.
3. List of Management Compensation Agreements
(i) Dreyer's Grand Ice Cream, Inc. Incentive Stock Option Plan (1982)
referenced in Exhibit 10.3 herein.
(ii) Indemnification Agreements by and between Dreyer's Grand Ice
Cream, Inc. and each of its directors, executive officers and certain other
officers referenced in Exhibit 10.10 herein.
(iii) Dreyer's Grand Ice Cream, Inc. Stock Option Plan (1992)
referenced in Exhibit 10.16 herein.
(iv) Dreyer's Grand Ice Cream, Inc. Incentive Bonus Plan referenced
in Exhibit 10.19 herein.
(v) Dreyer's Grand Ice Cream, Inc. Stock Option Plan (1993)
referenced in Exhibit 10.20 herein.
(vi) Dreyer's Grand Ice Cream, Inc. Income Swap Plan referenced in
Exhibit 10.21 herein.
(B) REPORTS ON FORM 8-K
Not applicable.
(C) EXHIBITS
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EXHIBIT
NUMBER DESCRIPTION
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2.1 Securities Purchase Agreement dated June 24, 1993 by and among Dreyer's Grand Ice
Cream, Inc., Trustees of General Electric Pension Trust, GE Investment Private
Placement Partners, I and General Electric Capital Corporation (Exhibit 2.1(11)).
2.2 Amendment to Securities Purchase Agreement dated May 6, 1994 by and among Dreyer's
Grand Ice Cream, Inc., Trustees of General Electric Pension Trust, GE Investment
Private Placement Partners, I and General Electric Capital Corporation, amending
Exhibit 2.1 (Exhibit 2.1(14)).
2.3 Stock and Warrant Purchase Agreement dated as of May 6, 1994 by and between
Dreyer's Grand Ice Cream, Inc. and Nestle Holdings, Inc. (Exhibit 2.1(15)).
2.4 First Amendment to Stock and Warrant Purchase Agreement dated as of June 14, 1994
by and between Dreyer's Grand Ice Cream, Inc. and Nestle Holdings, Inc., amending
Exhibit 2.3 (Exhibit 2.1(16)).
2.5 Second Amendment to Securities Purchase Agreement dated July 28, 1995 and effective
as of June 1, 1995 by and among Dreyer's Grand Ice Cream, Inc., Trustees of General
Electric Pension Trust, GE Investment Private Placement Partners, I and General
Electric Capital Corporation, amending Exhibit 2.1 (Exhibit 10.2(18)).
2.6 Third Amendment to Securities Purchase Agreement dated October 30, 1995 and
effective as of September 30, 1995 by and among Dreyer's Grand Ice Cream, Inc.,
Trustees of General Electric Pension Trust, GE Investment Private Placement
Partners, I and General Electric Capital Corporation, amending Exhibit 2.1 (Exhibit
10.1(19)).
2.7 Amended and Restated Fourth Amendment to Securities Purchase Agreement dated March
12, 1996 and effective as of October 1, 1995 by and among Dreyer's Grand Ice Cream,
Inc., Trustees of General Electric Pension Trust, GE Investment Private Placement
Partners, I and General Electric Capital Corporation, amending Exhibit 2.1 (Exhibit
2.8(20)).
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EXHIBIT
NUMBER DESCRIPTION
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3.1 Certificate of Incorporation of Dreyer's Grand Ice Cream, Inc., as amended,
including the Certificate of Designation of Series A Convertible Preferred Stock,
as amended, setting forth the Powers, Preferences, Rights, Qualifications,
Limitations and Restrictions of such series of Preferred Stock and the Certificate
of Designation of Series B Convertible Preferred Stock, as amended, setting forth
the Powers, Preferences, Rights, Qualifications, Limitations and Restrictions of
such series of Preferred Stock (Exhibit 3.1(16)).
3.2 Certificate of Designation, Preferences and Rights of Series A Participating
Preference Stock (Exhibit 3.2(17)).
3.3 By-laws of Dreyer's Grand Ice Cream, Inc., as last amended May 2, 1994 (Exhibit
3.2(16)).
4.1 Amended and Restated Rights Agreement dated March 4, 1991 between Dreyer's Grand
Ice Cream, Inc. and Bank of America, NT & SA (Exhibit 10.1(6)).
4.2 Registration Rights Agreement dated as of June 30, 1993 among Dreyer's Grand Ice
Cream, Inc., Trustees of General Electric Pension Trust, and GE Investment Private
Placement Partners, I and General Electric Capital Corporation (Exhibit 4.1(12)).
4.3 Amendment to Registration Rights Agreement dated May 6, 1994 by and among Dreyer's
Grand Ice Cream, Inc., Trustees of General Electric Pension Trust, GE Investment
Private Placement Partners, I and General Electric Capital Corporation, amending
Exhibit 4.2 (Exhibit 4.1(14)).
4.4 First Amendment to Amended and Restated Rights Agreement dated as of June 14, 1994
between Dreyer's Grand Ice Cream, Inc. and First Interstate Bank of California (as
successor Rights Agent to Bank of America NT & SA), amending Exhibit 4.1 (Exhibit
4.1(16)).
4.5 Registration Rights Agreement dated as of June 14, 1994 between Dreyer's Grand Ice
Cream, Inc. and Nestle Holdings, Inc. (Exhibit 4.2(16)).
4.6 Warrant Agreement dated as of June 14, 1994 between Dreyer's Grand Ice Cream, Inc.
and Nestle Holdings, Inc. (Exhibit 4.3(16)).
10.1 Agreement dated September 18, 1978 between Dreyer's Grand Ice Cream, Inc. and
Kraft, Inc. (Exhibit 10.8(1)).
10.2 Agreement and Lease dated as of January 1, 1982 and Amendment to Agreement and
Lease dated as of January 27, 1982 between Jack and Tillie Marantz and Dreyer's
Grand Ice Cream, Inc., as amended (Exhibit 10.2(17)).
10.3 Dreyer's Grand Ice Cream, Inc. Incentive Stock Option Plan (1982), as amended.
(Exhibit 10.6(13)).
10.4 Loan Agreement between Edy's and City of Fort Wayne, Indiana dated September 1,
1985 and related Letter of Credit, Letter of Credit Agreement, Mortgage, Security
Agreement, Pledge and Security Agreement and General Continuing Guaranty of
Dreyer's Grand Ice Cream, Inc. (Exhibit 10.33(2)).
10.5 Distribution Agreement between Dreyer's Grand Ice Cream, Inc. and Ben & Jerry's
Homemade, Inc. dated January 6, 1987 (Exhibit 10.1(3)).
10.6 Amendment and Waiver dated July 17, 1987 between Dreyer's Grand Ice Cream, Inc. and
Security Pacific National Bank, amending the General Continuing Guaranty referenced
in Exhibit 10.4 (Exhibit 10.44(7)).
10.7 Amendment and Waiver dated December 24, 1987 between Dreyer's Grand Ice Cream, Inc.
and Security Pacific National Bank, amending the General Continuing Guaranty
referenced in Exhibit 10.4 (Exhibit 10.45(7)).
10.8 Agreement for Amendments to Distribution Agreement dated as of January 20, 1989
among Dreyer's Grand Ice Cream, Inc., Edy's Grand Ice Cream, Edy's of New York,
Inc., and Ben & Jerry's Homemade, Inc., amending Exhibit 10.5 (Exhibit 10.46 (4)).
10.9 Amendment to the Distribution Agreement dated as of April 11, 1989 by and among
Dreyer's Grand Ice Cream, Inc., Edy's Grand Ice Cream, Edy's of New York, Inc., and
Ben & Jerry's Homemade, Inc., amending Exhibit 10.5 (Exhibit 10.46(5)).
10.10 Form of Indemnification Agreement between Dreyer's Grand Ice Cream, Inc. and each
officer and director of Dreyer's Grand Ice Cream, Inc. (Exhibit 10.47(4)).
10.11 Assignment of Lease dated as of March 31, 1989 among Dreyer's Grand Ice Cream,
Inc., Smithway Associates, Inc. and Wilsey Foods, Inc. (Exhibit 10.52(5)).
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------
<C> <S>
10.12 Amendment of Lease dated as of March 31, 1989 between Dreyer's Grand Ice Cream,
Inc. and Smithway Associates, Inc., as amended by letter dated April 17, 1989
between Dreyer's Grand Ice Cream, Inc. and Wilsey Foods, Inc., amending Exhibit
10.11 (Exhibit 10.53(5)).
10.13 Third Amendment to General Continuing Guaranty and Waiver dated January 29, 1991
between Dreyer's Grand Ice Cream, Inc. and Security PacificNational Bank, amending
the General Continuing Guaranty referenced in Exhibit 10.4 (Exhibit 10.46(7)).
10.14 $25,000,000 9.3% Senior Notes: Form of Note Agreement dated as of March 15, 1991,
and executed on April 12, 1991 between Dreyer's Grand Ice Cream, Inc. and each of
Massachusetts Mutual Life Insurance Company, Massachusetts Mutual Life Pension
Insurance Company, Connecticut Mutual Life Insurance Company, the Equitable Life
Assurance Society of the United States, and Transamerica Occidental Life Insurance
Company (Exhibit 19.1(8)).
10.15 Second Amendment to Distribution Agreement dated as of August 31, 1992 between
Dreyer's Grand Ice Cream, Inc. and Ben & Jerry's Homemade, Inc., amending Exhibit
10.5 (Exhibit 19.6(9)).
10.16 Dreyer's Grand Ice Cream, Inc., Stock Option Plan (1992) (Exhibit 10.35(13)).
10.17 Agreement of Amendment and Waiver, dated as of September 30, 1992, between Dreyer's
Grand Ice Cream, Inc. and each of Massachusetts Mutual Life Insurance Company, MML
Pension Insurance Company, the Connecticut Mutual Life Insurance Company, the
Equitable Life Assurance Society of the United States, and Transamerica Occidental
Life Insurance Company (together, the "Lenders") regarding the Note Agreements
dated as of March 15, 1991 between Dreyer's Grand Ice Cream, Inc. and each of the
Lenders, which Note Agreements are referenced in Exhibit 10.14 (Exhibit 19.5(9)).
10.18 Second Amendment to Note Agreements dated as of September 30, 1992, between
Dreyer's Grand Ice Cream, Inc. and each of Massachusetts Mutual Life Insurance
Company, MML Pension Insurance Company, the Connecticut Mutual Life Insurance
Company, the Equitable Life Assurance Society of the United States, and
Transamerica Occidental Life Insurance Company (together, the "Lenders") regarding
the Note Agreements dated as of March 15, 1991 between Dreyer's Grand Ice Cream,
Inc. and each of the Lenders, which Note Agreements are referenced in Exhibit 10.14
(Exhibit 10.58(10)).
10.19 Description of Dreyer's Grand Ice Cream, Inc. Incentive Bonus Plan (Exhibit
10.57(10)).
10.20 Dreyer's Grand Ice Cream, Inc. Stock Option Plan (1993), as amended May 1, 1996.
10.21 Dreyer's Grand Ice Cream, Inc. Income Swap Plan (Exhibit 10.38(13)).
10.22 Amendment to Distribution Agreement dated April 18, 1994, and Letter Agreement
modifying such Amendment to Distribution Agreement dated April 18, 1994 between
Dreyer's Grand Ice Cream, Inc. and Ben & Jerry's Homemade, Inc., amending Exhibit
10.5 (Exhibit 10.3(14)).
10.23 Amendment to Distribution Agreement dated December 12, 1994 between Dreyer's Grand
Ice Cream, Inc. and Ben & Jerry's Homemade, Inc., amending Exhibit 10.5 (Exhibit
10.27(17)).
10.24 Third Amendment to Note Agreement dated as of June 5, 1995 between Dreyer's Grand
Ice Cream, Inc. and each of Massachusetts Mutual Life Insurance Company, MML
Pension Insurance Company, the Connecticut Mutual Life Insurance Company, the
Equitable Life Assurance Society of the United States, and Transamerica Occidental
Life Insurance Company (together, the "Lenders"), regarding the Note Agreements
dated as of March 15, 1991 between Dreyer's Grand Ice Cream, Inc. and each of the
Lenders, which Note Agreements are referenced in Exhibit 10.14 (Exhibit 10.3(18)).
10.25 Letter Agreement dated August 4, 1995 between Dreyer's Grand Ice Cream, Inc. and
Smithway Associates, Inc., amending Exhibits 10.2 and 10.11 (Exhibit 10.29(20)).
10.26 Credit Agreement dated as of December 22, 1995 among Dreyer's Grand Ice Cream,
Inc., Bank of America NT & SA (as a Bank and as Agent), ABN-AMRO Bank N.V. (as a
Bank and as Co-Agent), Credit Suisse and The Bank of California (Exhibit
10.30(20)).
10.27 Participation Agreement dated March 29, 1996 among Dreyer's Grand Ice Cream, Inc.,
Edy's Grand Ice Cream, BA Leasing & Capital Corporation (as Agent and as a
Participant), ABN-AMRO Bank, NV and Credit Suisse (Exhibit 10.2(21)).
10.28 First Amendment to Credit Agreement dated April 15, 1996 among Dreyer's Grand Ice
Cream, Inc., Bank of America, NT & SA (as Agent and as a Bank), ABN-AMRO Bank, NV
(as Co-Agent and as a Bank), Credit Suisse and Union Bank of California, NA,
amending Exhibit 10.26 (Exhibit 10.1(21)).
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------
<C> <S>
10.29 April 1996 Amendment to Commerce Lease dated April 23, 1996 between Dreyer's Grand
Ice Cream, Inc. and Smithway Associates, Inc., amending Exhibits 10.2 and 10.11.
10.30 Letter Agreement dated April 23, 1996 between Dreyer's Grand Ice Cream, Inc. and
Smithway Associates, Inc., amending Exhibits 10.2 and 10.11.
10.31 $15,000,000 7.86% Series A Senior Notes Due 2002, $15,000,000 8.06% Series B Senior
Notes Due 2006 and $20,000,000 8.34% Series C Senior Notes Due 2008: Form of Note
Agreement dated as of June 6, 1996 between Dreyer's Grand Ice Cream, Inc. and each
of The Prudential Insurance Company of America, Pruco Life Insurance Company, and
Transamerica Life Insurance and Annuity Company (Exhibit 10.1(22)).
11 Computation of Net Income Per Share.
13 Those portions of the Dreyer's Grand Ice Cream, Inc. 1996 Annual Report to
Stockholders which are incorporated by reference into this Annual Report on Form
10-K.
21 Subsidiaries of Registrant.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
</TABLE>
- ---------------
(1) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Registration Statement on Form S-1 and Amendment No. 1
thereto, filed under Commission File No. 2-71841 on April 16, 1981 and June
11, 1981, respectively.
(2) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Annual Report on Form 10-K and Amendment No. 1 thereto for
the fiscal year ended December 28, 1985 filed under Commission File No.
0-10259 on March 28, 1986 and April 14, 1986, respectively.
(3) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Current Report on Form 8-K filed under Commission File No.
0-10259 on January 23, 1987.
(4) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Annual Report on Form 10-K for the fiscal year ended December
31, 1988 filed under Commission File No. 0-10259 on March 31, 1989.
(5) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Annual Report on Form 10-K for the fiscal year ended December
30, 1989 filed under Commission File No. 0-10259 on March 30, 1990.
(6) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Current Report on Form 8-K filed under Commission File No.
0-10259 on March 20, 1991.
(7) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Annual Report on Form 10-K for the fiscal year ended December
29, 1990 filed under Commission File No. 0-10259 on March 29, 1991.
(8) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended
on June 29, 1991 filed under Commission File No. 0-10259 on August 13,
1991.
(9) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended
on September 26, 1992 filed under Commission File No. 0-10259 on November
10, 1992.
(10) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Annual Report on Form 10-K for the fiscal year ended December
26, 1992 filed under Commission File No. 0-10259 on March 26, 1993.
(11) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Current Report on Form 8-K filed under Commission File No.
0-10259 on June 25, 1993.
12
<PAGE> 15
(12) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended
on June 26, 1993 filed under Commission File No. 0-10259 on August 10,
1993.
(13) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Annual Report on Form 10-K for the fiscal year ended December
25, 1993 filed under Commission File No. 0-14190 on March 25, 1994.
(14) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended
March 26, 1994 filed under Commission File No. 0-14190 on May 10, 1994.
(15) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Current Report on Form 8-K filed under Commission File No.
0-14190 on May 9, 1994.
(16) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended
June 25, 1994 filed under Commission File No. 0-14190 on August 9, 1994.
(17) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Annual Report on Form 10-K for the fiscal year ended December
31, 1994 filed under Commission File No. 0-14190 on March 30, 1995.
(18) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended
July 1, 1995 filed under Commission File No. 0-14190 on August 15, 1995.
(19) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1995 filed under Commission File No. 0-14190 on November 14,
1995.
(20) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Annual Report on Form 10-K for the fiscal year ended December
30, 1995 filed under Commission File No. 0-14190 on March 29, 1996.
(21) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended
March 30, 1996 filed under Commission File No. 0-14190 on May 14, 1996.
(22) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended
June 29, 1996 filed under Commission File No. 0-14190 on August 13, 1996.
13
<PAGE> 16
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
Date: March 28, 1997
DREYER'S GRAND ICE CREAM, INC.
By: /s/ PAUL R. WOODLAND
------------------------------------
(Paul R. Woodland)
Vice President - Finance and
Administration,
Chief Financial Officer and
Assistant Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ----------------------------------------------
<C> <S> <C>
/s/ T. GARY ROGERS Chairman of the Board and Chief March 28, 1997
- --------------------------------------------- Executive Officer and Director
(T. Gary Rogers) (Principal Executive Officer)
/s/ WILLIAM F. CRONK, III President and Director March 28, 1997
- ---------------------------------------------
(William F. Cronk, III)
/s/ EDMUND R. MANWELL Secretary and Director March 28, 1997
- ---------------------------------------------
(Edmund R. Manwell)
/s/ PAUL R. WOODLAND Vice President - Finance March 28, 1997
- --------------------------------------------- and Administration,
(Paul R. Woodland) Chief Financial Officer
and Assistant Secretary
(Principal Financial Officer)
/s/ JEFFREY P. PORTER Corporate Controller March 28, 1997
- --------------------------------------------- (Principal Accounting Officer)
(Jeffrey P. Porter)
/s/ JAN L. BOOTH Director March 28, 1997
- ---------------------------------------------
(Jan L. Booth)
/s/ TIMM F. CRULL Director March 28, 1997
- ---------------------------------------------
(Timm F. Crull)
/s/ M. STEVEN LANGMAN Director March 28, 1997
- ---------------------------------------------
(M. Steven Langman)
/s/ JOHN W. LARSON Director March 28, 1997
- ---------------------------------------------
(John W. Larson)
/s/ JACK O. PEIFFER Director March 28, 1997
- ---------------------------------------------
(Jack O. Peiffer)
/s/ TIMOTHY P. SMUCKER Director March 28, 1997
- ---------------------------------------------
(Timothy P. Smucker)
</TABLE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT:
Not applicable.
14
<PAGE> 17
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Dreyer's Grand Ice Cream, Inc.
Our audits of the consolidated financial statements referred to in our
report dated March 12, 1997 appearing in the 1996 Annual Report to Stockholders
of Dreyer's Grand Ice Cream, Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14(a)2
of this Form 10-K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
San Francisco, California
March 12, 1997
15
<PAGE> 18
SCHEDULE II
DREYER'S GRAND ICE CREAM, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END
CLASSIFICATION OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
- ---------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Fiscal year ended December 31, 1994:
Allowance for doubtful accounts............. $ 535 $1,672 $1,572(1) $ 635
Amortization of goodwill and distribution
rights................................... 7,572 2,871 -- 10,443
Amortization of other assets................ 3,509 2,921 208(2) 6,222
------- ------ ------ -------
$ 11,616 $7,464 $1,780 $ 17,300
======= ====== ====== =======
Fiscal year ended December 30, 1995:
Allowance for doubtful accounts............. $ 635 $1,234 $1,171(1) $ 698
Amortization of goodwill and distribution
rights................................... 10,443 2,971 -- 13,414
Amortization of other assets................ 6,222 1,184 3,209(2) 4,197
------- ------ ------ -------
$ 17,300 $5,389 $4,380 $ 18,309
======= ====== ====== =======
Fiscal year ended December 28, 1996:
Allowance for doubtful accounts............. $ 698 $ 891 $ 834(1) $ 755
Amortization of goodwill and distribution
rights................................... 13,414 3,202 -- 16,616
Amortization of other assets................ 4,197 992 191(2) 4,998
------- ------ ------ -------
$ 18,309 $5,085 $1,025 $ 22,369
======= ====== ====== =======
</TABLE>
- ---------------
(1) Write-off of receivables considered uncollectible.
(2) Removal of fully-amortized assets.
16
<PAGE> 19
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of M-K-D Distributors, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position of M-K-D
Distributors, Inc. and its subsidiary at December 30, 1995, and the results of
their operations and their cash flows for the fiscal year in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
April 9, 1996
17
<PAGE> 20
M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 30,
ASSETS 1995
-------------
<S> <C>
Current Assets:
Cash.......................................................................... $ 46,871
Trade accounts receivable, net of allowance for doubtful accounts of
$71,303.................................................................... 4,784,633
Inventories................................................................... 2,361,881
Prepaid expenses and other.................................................... 562,266
-----------
Total current assets....................................................... 7,755,651
Property, plant and equipment, net............................................ 9,256,360
Notes receivable and other.................................................... 432,458
-----------
Total assets............................................................... $ 17,444,469
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities...................................... $ 2,804,416
Accrued payroll and employee benefits......................................... 709,343
Current portion of long-term debt............................................. 446,334
Income taxes payable
-----------
Total current liabilities.................................................. 3,960,093
Long-term debt, less current portion............................................ 1,563,263
Deferred income taxes........................................................... 521,027
-----------
Total liabilities.......................................................... 6,044,383
-----------
Commitments
Stockholders' Equity:
Common stock, $1 par value -- 10,000 shares authorized, issued and
outstanding................................................................ 10,000
Capital in excess of par...................................................... 40,265
Retained earnings............................................................. 11,349,821
-----------
Total stockholders' equity................................................. 11,400,086
-----------
Total liabilities and stockholders' equity...................................... $ 17,444,469
===========
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE> 21
M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------
UNAUDITED
DECEMBER 30, DECEMBER 31,
1995 1994
------------- -------------
<S> <C> <C>
REVENUES:
Net sales....................................................... $ 74,218,680 $ 62,816,959
Other income.................................................... 334,884 64,709
----------- -----------
74,553,564 62,881,668
----------- -----------
COSTS AND EXPENSES:
Cost of goods sold.............................................. 58,902,661 48,324,932
Selling, general and administrative............................. 12,806,842 11,118,291
Interest........................................................ 119,758 86,514
----------- -----------
71,829,261 59,529,737
----------- -----------
Income before income taxes...................................... 2,724,303 3,351,931
Income taxes.................................................... 1,037,090 1,205,721
----------- -----------
Net income...................................................... 1,687,213 2,146,210
Retained earnings, beginning of year............................ 9,662,608 7,516,398
----------- -----------
Retained earnings, end of year.................................. $ 11,349,821 $ 9,662,608
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE> 22
M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------
UNAUDITED
DECEMBER 30, DECEMBER 31,
1995 1994
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................ $ 1,687,213 $ 2,146,210
Adjustments to reconcile net income to cash provided from
operations:
Depreciation................................................... 1,191,747 904,440
Deferred taxes................................................. 129,330 40,013
Gain on sale of assets......................................... (10,854)
Changes in assets and liabilities, net of amounts acquired:
Trade accounts receivable...................................... (156,585) (812,342)
Inventories.................................................... 964,040 (1,102,532)
Prepaid expenses and other..................................... (318,147) 410,618
Notes receivable and other..................................... (27,728) (213,228)
Accounts payable and accrued liabilities....................... (1,179,772) 1,529,746
Accrued payroll and employee benefits.......................... 97,010 158,305
Income taxes payable........................................... (145,141)
----------- -----------
2,241,967 3,050,376
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment...................... (3,135,357) (3,214,223)
Proceeds from sale of equipment................................... 100,000
----------- -----------
(3,135,357) (3,114,223)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt...................................... 2,075,547 135,000
Reductions in long-term debt...................................... (1,369,700) (255,000)
----------- -----------
705,847 (120,000)
----------- -----------
Decrease in cash.................................................... (187,543) (183,847)
Cash, beginning of year............................................. 234,414 418,261
----------- -----------
Cash, end of year................................................... $ 46,871 $ 234,414
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest....................................................... $ 101,749 $ 107,831
Income taxes (net of refunds).................................. 1,038,500 899,000
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE> 23
M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements of M-K-D Distributors,
Inc. and subsidiary (the Company) include the accounts of M-K-D Distributors,
Inc. (MKD) and its wholly-owned subsidiary, Snelgrove Ice Cream, Inc.
(Snelgrove). All significant intercompany balances and transactions have been
eliminated. The Company reports on a fifty-two or fifty-three week fiscal year,
ending on the last Saturday in December.
Operations
MKD, a Texas corporation, was incorporated on December 14, 1979, and is
engaged in the wholesale distribution of Dreyer's Grand Ice Cream, Ben and
Jerry's, Nestle and other premium ice cream products, primarily in Washington,
Oregon and Alaska. Dreyer's Grand Ice Cream, Inc. (Dreyer's), a Delaware
corporation, holds 49.7% of MKD's outstanding common stock (see Note 11,
Subsequent Event). In 1991, MKD acquired the assets of Snelgrove Ice Cream, Inc.
(formerly known as Snelgrove Distinctive Ice Cream, Inc.), a manufacturer and
distributor of premium ice cream products, and commenced manufacturing and
distribution operations late in 1991 for Utah and other high altitude markets in
the western United States. Sales are primarily to retail grocers.
Revenue Recognition
Sales revenues are recognized when deliveries of products are made to
customers.
Inventories
Inventories of purchased and manufactured products are stated at the lower
of cost (first-in, first-out method) or market. Costs of purchased products
manufactured by others and of raw materials include costs of acquisition and
transportation in. Manufactured product inventories are costed based on
standards which approximate actual costs of materials, labor and production
overhead.
Property, Plant and Equipment
Depreciation and amortization are provided on property, plant and equipment
on the straight-line basis over their estimated useful lives as follows:
<TABLE>
<S> <C>
Building and improvements...................................... 5 to 35 years
Equipment...................................................... 3 to 15 years
Delivery trucks and other vehicles............................. 5 to 8 years
Furniture and fixtures......................................... 3 to 8 years
</TABLE>
Leasehold improvements are amortized over the life remaining in the
applicable lease (4 to 10 years).
The cost of maintenance and repairs, which neither materially add to the
value of property nor appreciably prolong its life, are expensed as incurred.
Estimates and Assumptions
Management makes estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles. These
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and the reported revenues
and expenses. Actual results could differ from those estimates.
21
<PAGE> 24
M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Federal and State Income Taxes
Effective for the fiscal year ended December 25, 1993, the Company adopted
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109), on a prospective basis. SFAS 109 required the Company to
change its method of accounting for income taxes from the deferred method to the
liability method. Under the liability method, deferred tax liabilities and
assets are recognized for the tax consequences of temporary differences between
the financial reporting and tax basis of assets and liabilities. The adoption of
SFAS 109 did not have a material effect on the Company's Consolidated Financial
Statements.
Financial Statement Presentation
Certain reclassifications have been made to prior years' financial
statements to conform to the 1995 presentation.
2. INVENTORIES
Components of inventories at December 30, 1995 were as follows:
<TABLE>
<S> <C>
Purchased products................................................ $1,639,437
Raw materials..................................................... 365,745
Finished goods.................................................... 356,699
----------
$2,361,881
==========
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT
The cost and accumulated depreciation of property, plant and equipment at
December 30, 1995 were as follows:
<TABLE>
<S> <C>
Building and improvements........................................ $ 2,722,371
Machinery and equipment.......................................... 9,869,316
Office furniture and fixtures.................................... 1,498,363
------------
14,090,050
Accumulated depreciation......................................... (5,539,341)
------------
8,550,709
Land............................................................. 705,651
------------
$ 9,256,360
============
</TABLE>
Depreciation expense for property, plant and equipment was $1,191,747 and
$904,440 (unaudited) in 1995 and 1994, respectively.
4. LONG-TERM NOTES RECEIVABLE
At December 30, 1995, long-term notes receivable of $144,779 are due from a
customer with payments due every year beginning in 1996 in the amount of $20,000
plus accrued interest at the prime rate plus 2%. The notes are secured by
delivery and freezer equipment and are due in December 2000.
22
<PAGE> 25
M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT
Long-term debt at December 30, 1995 consisted of the following:
<TABLE>
<S> <C>
Note payable to bank, payable in monthly installments of $16,687
from August 1995 to June 2000, plus interest at 7.81% per
annum, secured by equipment.................................... $ 916,665
Note payable to bank, payable in monthly installments of $17,335
from August 1995 to July 2000, plus interest at 7.8% per annum,
secured by equipment........................................... 954,475
Capital lease obligation payable in monthly minimum payments of
$1,026 from August 1995 to July 1998, including interest at
4.9%, secured by computer equipment............................ 30,457
Note payable, payable in annual installments of $27,000 from June
1995 to June 1999, plus interest at 8.00% per annum, secured by
property and building.......................................... 108,000
---------
2,009,597
Less current portion of long-term debt........................... 446,334
---------
$1,563,263
=========
</TABLE>
Principal payments due on long-term debt for each of the years subsequent
to December 30, 1995 are as follows:
<TABLE>
<S> <C>
1996............................................................. $ 446,334
1997............................................................. 446,889
1998............................................................. 443,026
1999............................................................. 435,264
2000............................................................. 238,084
---------
$2,009,597
=========
</TABLE>
At December 30, 1995, the Company had an unused secured revolving line of
credit of $2,000,000 available for working capital needs. The interest rate on
borrowings is equal to the bank's floating commercial loan reference rate or
LIBOR plus 1.5%.
6. PROFIT SHARING PLAN
The Company has a 401(k) profit sharing plan and trust covering all
employees over 21 years of age with more than one year of service. Participating
employees may make elective salary deferrals into the plan up to the maximum
qualifying amount permitted by federal income tax law. In addition, employer
matching contributions and/or profit sharing contributions are made to the plan
at the discretion of the Company's Board of Directors. Matching and profit
sharing contributions made by the Company to the plan for fiscal 1995 were
$225,440 (fiscal 1994 -- $189,480, unaudited).
23
<PAGE> 26
M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
The provision for income taxes for the fiscal years ended December 30, 1995
and December 31, 1994 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
UNAUDITED
<S> <C> <C>
Current
Federal........................................... $ 825,960 $1,060,481
State............................................. 81,800 105,227
---------- ----------
907,760 1,165,708
Deferred............................................ 129,330 40,013
---------- ----------
$1,037,090 $1,205,721
========== ==========
</TABLE>
The deferred tax liability arises principally because of an accumulated
depreciation temporary difference. The effective tax rate differs from the
federal statutory income tax rate due primarily to state taxes, net of federal
benefit.
8. RELATED PARTIES
The Company purchases premium ice cream and related products from Dreyer's
under a long-term distribution agreement. In addition, the Company sells ice
cream products to Dreyer's, which are manufactured at the Snelgrove plant in
Utah. Purchases from Dreyer's were $25,174,000 and $22,583,000 (unaudited) in
fiscal 1995 and 1994, respectively. Sales of Snelgrove manufactured products to
Dreyer's were $6,021,636 and $4,305,669 (unaudited) in fiscal 1995 and 1994,
respectively. In addition, under the distribution agreement, the Company is
reimbursed by Dreyer's for 65% of costs relating to jointly-directed consumer
promotion programs. The Company charged Dreyer's $1,874,845 and $1,098,598
(unaudited) in fiscal 1995 and 1994, respectively, for Dreyer's share of such
costs. Amounts due from and due to Dreyer's at December 30, 1995, were as
follows:
<TABLE>
<S> <C>
Accounts receivable from Dreyer's................................ $ 505,331
==========
Accounts payable to Dreyer's..................................... $1,579,544
==========
</TABLE>
9. MAJOR CUSTOMERS
The Company had four retail customers that accounted for approximately 48%
of net sales for the fiscal year ended December 30, 1995 (fiscal 1994 -- 45%,
unaudited).
24
<PAGE> 27
M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. COMMITMENTS
Leases
The Company leases its office and warehouse facilities and certain vehicles
and equipment under various leases accounted for as operating leases. Future
minimum lease payments under these leases at December 30, 1995 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER,
-----------------------------------------------------------------
<S> <C>
1996............................................................. $ 322,421
1997............................................................. 329,963
1998............................................................. 314,243
1999............................................................. 172,512
2000............................................................. 172,587
Thereafter....................................................... 694,822
----------
$2,006,548
==========
</TABLE>
Rent expense for the fiscal year ended December 30, 1995 was $478,788
(fiscal 1994 -- $491,516, unaudited).
11. SUBSEQUENT EVENT
On March 27, 1996, the stockholders, other than Dreyer's, entered into an
agreement to exchange their shares of the Company's common stock for 300,000
shares of Dreyer's common stock, distributed to such stockholders on a basis
proportionate to their ownership of the Company's common stock. One of the
stockholders received an additional 20,000 shares of Dreyer's common stock as a
finder's fee related to the transaction.
25
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------
<C> <S>
10.20 Dreyer's Grand Ice Cream, Inc. Stock Option Plan (1993), as amended May 1, 1996.
10.29 April 1996 Amendment to Commerce Lease dated April 23, 1996 between Dreyer's Grand
Ice Cream, Inc. and Smithway Associates, Inc., amending Exhibits 10.2 and 10.11.
10.30 Letter Agreement dated April 23, 1996 between Dreyer's Grand Ice Cream, Inc. and
Smithway Associates, Inc., amending Exhibits 10.2 and 10.11.
11 Computation of Net Income Per Share.
13 Those portions of the Dreyer's Grand Ice Cream, Inc. 1996 Annual Report to
Stockholders which are incorporated by reference into this Annual Report on Form
10-K.
21 Subsidiaries of Registrant.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
</TABLE>
- ---------------
<PAGE> 1
EXHIBIT 10.20
DREYER'S GRAND ICE CREAM, INC.
STOCK OPTION PLAN (1993)
AS AMENDED MAY 1, 1996
1. Purpose
The purpose of the Plan is to provide a vehicle under which a variety of
stock option awards may be granted to employees and directors of the Company and
its Subsidiaries to further the profits and prosperity of the Company and its
Subsidiaries.
2. Definitions
A. "Award" means any form of stock option granted under the Plan.
B. "Award Notice" means any written notice from the Company to a
Participant or agreement between the Company and a Participant that establishes
the terms applicable to an Award.
C. "Board of Directors" means the Board of Directors of the Company.
D. "Code" means the Internal Revenue Code of 1986, as amended.
E. "Committee" means the Compensation Committee of the Board of Directors,
or such other committee designated by the Board of Directors, which is
authorized to administer the Plan under Section 3 hereof. The Committee, and any
separate committee to which it delegates any of its authority and duties under
the Plan, shall each have membership composition which enable the Plan to
qualify under Rule 16b-3 with regard to Awards to persons who are subject to
Section 16 of the Exchange Act.
F. "Common Stock" means common stock of the Company.
G. "Company" means Dreyer's Grand Ice Cream, Inc., a Delaware corporation.
H. "Director" means a member of the Board of Directors.
I. "Exchange Act" means the Securities Exchange Act of 1934, as amended.
J. "Fair Market Value" means, as of a specified date, the mean of the high
and the low sales price of one share of Common Stock on the over-the-counter
market or the closing price on the principal stock exchange where the Company's
stock prices are officially quoted, or if not traded on that date, then on the
date last traded. If for any reason the Company's stock ceases to be traded on
the over-the-counter market or listed on a stock exchange, the Committee shall
establish the method for determining the Fair Market Value of the Common Stock.
K. "Key Employee" means any employee of the Company or a Subsidiary
responsible for the management of the business of the Company (or a Subsidiary)
who is in a position to make substantial contributions to the sound performance
of the Company (or a Subsidiary). The term "Key Employee" shall include officers
as well as other employees devoting full time to the Company (or a Subsidiary)
and shall include Directors who are also active officers or employees of the
Company (or a Subsidiary).
L. "Non-Employee Director" means a Director who is not an employee of the
Company or a Subsidiary.
M. "Participant" means any individual to whom an Award is granted under
the Plan.
N. "Plan" means this Plan, which shall be known as the Dreyer's Grand Ice
Cream, Inc. Stock Option Plan (1993).
O. "Rule 16b-3" means Rule 16b-3 issued under the Exchange Act or any
successor rule.
1
<PAGE> 2
P. "Subsidiary" means a corporation or other business entity (i) of which
the Company directly or indirectly has an ownership interest of 50% or more, or
(ii) of which it has a right to elect or appoint 50% or more of the board of
directors or other governing body.
3. Administration
A. The Plan shall be administered by the Committee. Subject to the terms
and conditions of this Plan, the Committee shall have the authority to:
(i) interpret and determine all questions of policy and expediency
pertaining to the Plan;
(ii) adopt such rules, regulations, agreements and instruments as it
deems necessary for the Plan's proper administration;
(iii) select Key Employees to receive Awards;
(iv) determine the form and terms of Awards;
(v) determine the number of shares subject to Awards;
(vi) determine whether Awards will be granted singly, in combination,
in tandem, in replacement of, or as alternatives to other grants under the
Plan or any other incentive or compensation plan of the Company, a
Subsidiary or an acquired business unit;
(vii) grant waivers of Plan or Award conditions;
(viii) accelerate the vesting of Awards;
(ix) correct any defect, supply any omission, or reconcile any
inconsistency in the Plan, any Award or any Award Notice; and
(x) take any and all other actions it deems necessary or advisable
for the proper administration of the Plan.
B. The interpretation and construction of any provision of the Plan by the
Committee shall be final, conclusive and binding on all parties, including the
Company, its Subsidiaries and stockholders, and the Participants, their estates,
executors, administrators, heirs and assigns. No member of the Committee shall
be liable for any action or determination made by him in good faith.
C. The Committee may adopt such Plan amendments, procedures, regulations,
subplans and the like as it deems are necessary to enable Key Employees and
Directors who are foreign nationals or employed outside the United States to
receive Awards.
D. The Committee may delegate its authority to grant and administer Awards
to a separate committee; however, only the Committee may grant and administer
Awards with respect to persons who are subject to Section 16 of the Exchange
Act.
4. Eligibility
A. Any Key Employee is eligible to become a Participant in the Plan.
B. Non-Employee Directors shall receive Awards in accordance with Section
7.
5. Stock Subject to the Plan
A. The aggregate number of shares of Common Stock which may be delivered
on exercise of options under this Plan shall not exceed two million two hundred
thousand (2,200,000) shares, subject to adjustment as provided hereinafter. If,
at any time during the term of this Plan, an option granted under this Plan
shall have expired or terminated for any reason without having been exercised in
full, the unpurchased shares shall become available for option to other
employees.
2
<PAGE> 3
B. In the event that (i) the number of outstanding shares of Common Stock
shall be changed by reason of split-ups, combinations or reclassifications of
shares or otherwise, (ii) any share dividends are distributed to the holders of
Common Stock or (iii) the Common Stock is converted into or exchanged for other
shares as a result of any merger, consolidation or recapitalization then, in any
such case, the number of shares for which options may thereafter be granted
under this Plan, both in the aggregate and as to any individual, and the number
of shares then subject to options theretofore granted under this Plan and the
price per share payable upon exercise of such options shall be appropriately
adjusted by the Committee so as to reflect such change.
C. The shares of Common Stock available under the Plan may be authorized
and unissued shares or treasury shares.
6. Term
This Plan shall be effective and operative, subject to approval of the
stockholders of the Company within twelve months after its adoption by the Board
of Directors, from the date that the Plan is approved by the Board of Directors
and shall remain in effect until terminated by the Board of Directors.
7. Awards to Non-Employee Directors
Non-Employee Directors shall receive awards in accordance with the
following terms:
A. On the day of adoption of this Plan by the Company's stockholders (the
"Approval Date"), each Non-Employee Director shall receive a non-qualified
option for 5000 shares of Common Stock.
B. After the Approval Date, any person who is appointed or elected a
Non-Employee Director shall receive a non-qualified stock option for 5,000
shares of Common Stock on the date such person is so appointed or elected.
C. On each anniversary of the Approval Date each Non-Employee Director
shall receive a non-qualified stock option for 1,500 shares of Common Stock.
D. Options to Non-Employee Directors shall be subject to the following
terms: (i) the exercise price shall be equal to 100% of the Fair Market Value of
the Common Stock on the date of the grant, payable in accordance with all the
alternatives stated in Section 8.B(ii); (ii) the term of the options shall be 10
years; (iii) the options shall be exercisable beginning 6 months after the date
of the grant; and (iv) the options shall be subject to Section 10.
8. Stock Options
A. Awards shall be granted in the form of stock options. Stock options may
be incentive stock options within the meaning of Section 422 of the Code or
non-qualified stock options (i.e., stock options which are not incentive stock
options).
B. Subject to Section 8.C relating to incentive stock options, options
shall be in such form and contain such terms as the Committee deems appropriate.
While the terms of options need not be identical, each option shall be subject
to the following terms:
(i) The exercise price shall be the price set by the Committee
but may not be less than 100% of the Fair Market Value of the Common
Stock on the date of the grant.
(ii) The exercise price shall be paid in cash (including
check, bank draft, or money order), or all or part of the purchase price
may be paid by delivery of the optionee's delivery of Common Stock,
already owned by the Participant for at least six (6) months and valued
at its Fair Market Value, or any combination of the foregoing methods of
payment.
(iii) An option shall be treated as exercised on the later of
(i) the date that proper notice of exercise accompanied by the aggregate
exercise price is received by the Company, or (ii) such exercise date as
may be specified in such proper notice when accompanied by such
aggregate exercise price.
3
<PAGE> 4
(iv) The term of an option may not be greater than 10 years
from the date of the grant.
(v) Neither a person to whom an option is granted nor his
legal representative, heir, legatee or distributee shall be deemed to be
the holder of, or to have any of the rights of a holder with respect to,
any shares subject to such option unless and until he has exercised his
option.
C. The following special terms shall apply to grants of incentive stock
options:
(i) No incentive stock option shall be granted after the tenth
(10th) anniversary of the date the Plan is adopted by the Board of
Directors.
(ii) Subject to Section 8.C.(iii), the exercise price under
each incentive stock option shall not be less than 100% of the Fair
Market Value of the Common Stock on the date of the grant.
(iii) No incentive stock option shall be granted to any
employee who directly or indirectly owns stock possessing more than 10%
of the total combined voting power of all classes of stock of the
Company, unless the exercise price is at least 110% of the Fair Market
Value of the Common Stock on the date of the grant and such option is
not exercisable after the expiration of 5 years from the date of the
grant.
(iv) No incentive stock option shall be granted to a person in
his capacity as a Key Employee of a Subsidiary if the Company has less
than a 50% ownership interest in such Subsidiary.
(v) Incentive stock options shall contain such other terms as
may be necessary to qualify the options granted therein as incentive
stock options pursuant to Section 422 of the Code, or any successor
statute.
9. Reload Options
A. Concurrently with the award of options to any Participant, the
Committee may authorize reload options ("Reload Options") to purchase for cash
or shares a number of shares of the Common Stock. The number of Reload Options
shall equal:
(i) the number of shares of Common Stock used to exercise the
underlying options; and
(ii) the number of shares of Common Stock used to satisfy any
tax withholding requirement incident to the exercise of the underlying
option, including shares withheld from those that would otherwise be
issuable to the optionee pursuant to exercise of the subject option. The
grant of a Reload Option will become effective upon the exercise of the
underlying options or Reload Options through the use of shares of Common
Stock held by the optionee for at least six (6) months.
B. Notwithstanding the fact that the underlying option may be an Incentive
Stock Option, a Reload Option is not intended to qualify as an "incentive stock
option" within the meaning of Section 422 of the Code.
C. Each Award Notice shall state whether the Committee has authorized
Reload Options with respect to the underlying options. Upon the exercise of an
underlying option or other Reload Option, the Reload Option will be evidenced by
an amendment to the underlying Award Notice.
D. The option price per share of Common Stock deliverable upon the
exercise of a Reload Option shall be the Fair Market Value of a share of Common
Stock on the date the grant of the Reload Option becomes effective.
E. Each Reload Option is fully exercisable six (6) months from the
effective date of grant. The term of each Reload Option shall be equal to the
remaining option term of the underlying option.
F. No additional Reload Options shall be granted when options or Reload
Options are exercised pursuant to the terms of this Plan following cessation of
the optionee's employment with the Company for any reason.
4
<PAGE> 5
10. Exercise of Stock Option Upon Termination of Employment or Services
A. Options granted under Section 7 shall be exercisable upon the
Participant's termination of service within the following periods only. Subject
to Section 17, stock options to other Participants may permit the exercise of
options upon the Participant's termination of employment within the following
periods, or such shorter periods as determined by the Committee at the time of
grant:
(i) if on account of death, within 24 months of such event by
the person or persons to whom the Participant's rights pass by will or
the laws of descent or distribution.
(ii) if on account of disability (as defined in Section
22(e)(3) of the Code or any successor statute), non-qualified stock
options may be exercised within 24 months of such termination and
incentive stock options within 12 months.
(iii) if on account of retirement (as defined from time to
time by Company policy), non-qualified stock options may be exercised
within 24 months of such termination and incentive stock options within
3 months.
(iv) if for any reason other than death, disability or
retirement (as defined from time to time by Company policy), options may
be exercised within 3 months of such termination.
B. An unexercised option shall be exercisable only to the extent that such
option was exercisable on the date the Participant's employment or service
terminated. However, terms relating to the exercisability of options may be
amended by the Committee before or after such termination, except in respect to
options granted under Section 7.
C. In no case may an unexercised option be exercised to any extent by
anyone after expiration of its term.
11. Acceleration of Vesting of Options
A. In the event of a Change in Control (as defined below), death of an
optionee or retirement of an optionee (as defined from time to time by Company
policy), all options which have not yet vested shall vest, mature and become
exercisable in whole or in part immediately prior to the event constituting the
Change of Control, or immediately upon the death or retirement of such optionee.
B. A Change of Control for these purposes shall be defined as, (i) the
acquisition by any person of beneficial ownership of forty percent (40%) or more
of the combined voting power of the Company's outstanding securities immediately
after such acquisition (which forty percent (40%) shall be calculated after
including the dilutive effect of the conversion or exchange of any outstanding
securities of the Company convertible into or exchangeable for voting
securities), or (ii) a change in the composition of majority membership of the
Board of Directors over any two-year period beginning with the date of adoption
of this Plan by the Board of Directors, or (iii) a change in ownership of the
Company such that the Company becomes subject to the delisting of its Common
Stock from the NASDAQ National Market System, or (iv) the approval by the Board
of Directors of the sale of all or substantially all of the assets of the
Company, or (v) the approval by the Board of Directors of any merger,
consolidation, issuance of securities or purchase of assets, the result of which
would be the occurrence of any event described in clause (i), (ii) or (iii)
above. Notwithstanding anything to the contrary in this Section 11.B,
acquisitions by any person (or any group of which such a person is a member) who
is as of the date of adoption of this Plan by the Board of Directors, a member
of the Board of Directors, of beneficial ownership of forty percent (40%) or
more of the combined voting power of the Company's outstanding securities
immediately after such acquisition (calculation of such forty percent (40%)
being made as described above), shall not be deemed a Change of Control for
purposes of this Plan.
5
<PAGE> 6
12. Nonassignability
The rights of a Participant under the Plan shall not be assignable by such
Participant, by operation of law or otherwise, except by will or the laws of
descent and distribution. During the lifetime of the person to whom a stock
option is granted, he or she alone may exercise it.
13. Payment of Withholding Taxes
A. As a condition to receiving or exercising an Award, as the case may be,
the Participant shall pay to the Company the amount of all applicable federal,
state, local and foreign taxes required by law to be paid or withheld relating
to receipt or exercise of the Award.
B. An optionee may satisfy such withholding requirements in whole or in
part by directing the Company to withhold shares from those that would otherwise
be issuable to the Participant or by otherwise tendering other shares of Common
Stock owned by the Participant. The withheld shares and other tendered shares
will be valued at the Fair Market Value as of the date that the tax withholding
obligation arises.
14. Amendments
The Board of Directors may amend the Plan at any time and from time to
time, provided however that the Board shall not amend the terms of the Plan more
frequently than permitted under Rule 16b-3 in regard to provisions that affect
persons receiving Awards under Section 7. Rights and obligations under any Award
granted before amendment of the Plan shall not be materially altered or impaired
adversely by such amendment, except with consent of the person to whom the Award
was granted.
15. Regulatory Approvals and Listings
Notwithstanding any other provision in the Plan, the Company shall have no
obligation to issue or deliver certificates of Common Stock under the Plan prior
to (A) obtaining approval from any governmental agency which the Company
determines is necessary or advisable, (B) admission of such shares to listing on
the stock exchange on which the Common Stock may be listed and (C) completion of
any registration or other qualification of such shares under any state or
federal law or ruling of any governmental body which the Company determines to
be necessary or advisable.
16. No Right to Continued Employment or Grants
Participation in the Plan shall not give any Key Employee any right to
remain in the employ of the Company or any Subsidiary. Further, the adoption of
this Plan shall not be deemed to give any Key Employee or other individual the
right to be selected as a Participant or to be granted an Award.
17. Special Provision Pertaining to Persons Subject to Section 16
Notwithstanding any other term of this Plan, the following shall apply to
persons subject to Section 16 of the Exchange Act, except in the case of death
or disability:
A. No stock option granted pursuant to the Plan may be exercisable for at
least 6 months after the date of grant.
18. Limitations on Awards Under the Plan
No one Participant shall receive in the aggregate Awards granting him more
than fifty percent (50%) of the aggregate number of shares (1,200,000) which may
be delivered on exercise of options under the Plan.
6
<PAGE> 1
EXHIBIT 10.29
APRIL 1996 AMENDMENT TO
COMMERCE LEASE
This Amendment is dated April 23, 1996 and effective as of March 1, 1996 by
and between Dreyer's Grand Ice Cream, Inc. ("Tenant") and Smithway Associates,
Inc. ("Landlord").
RECITALS
A. On or about January 1, 1982, Tenant entered into a lease agreement with Jack
and Tillie Marantz, predecessors of Landlord, with respect to certain improved
real property located at 5743 East Smithway Street, Commerce California (the
"Original Lease"). The Original Lease was subsequently amended several times. By
that certain Assignment of Lease dated March 31, 1989, Wilsey, Bennett Co.
("Wilsey") assigned and transferred, and Tenant assumed, all the provisions of
that certain Agreement and Lease dated August 1, 1986 between Wilsey and Tillie
Marantz, as Trustee of the Tillie Marantz Revocable Trust, dba TJ Investments
(the "Wilsey Lease"). Tenant and Landlord subsequently amended the Wilsey Lease
to, among other things, make it coterminous with the Original Lease. Landlord
and Tenant have also entered into certain other amendments, the most recent
being dated December 1, 1995, prior to this Amendment. The Wilsey Lease, as
amended to date, and the Original Lease, as amended to date, taken together
shall be referred to herein as the "Commerce Lease".
B. Tenant now desires to lease additional space from Landlord for a term of one
(1) year and Landlord desires to lease such space to Tenant for such term.
Now, therefore, the parties agree as follows:
1. Rental of Additional Space. Landlord hereby leases to Tenant, and
Tenant hereby leases from Landlord, as additional demised premises under the
Commerce Lease (except with regard to the term of the lease of such additional
demised premises), those areas identified below and which are more particularly
described in the attached Exhibit A (the "Dock Offices"), which shall be leased
subject to the following rental obligation:
<TABLE>
<CAPTION>
MONTHLY
AREA SQ. FT. RATE RENTAL
- ------------- ------- ---- -------
<C> <C> <C> <S>
Dock Offices 960 .25 $250
</TABLE>
The parties agree that the monthly rental set out above is a negotiated
rate and in the event of any variation in the square footage of the Dock
Offices, if measured, there shall be no adjustment in the monthly rental.
2. Rental Commencement Date for Dock Offices. The obligation to pay rental
on the Dock Offices shall commence on March 1, 1996, resulting in an aggregate
monthly rental due under the Commerce Lease of fifty-nine thousand two hundred
fifty dollars ($59,250) through February, 1997.
3. Term of Lease of Dock Offices. The term of the lease of the Dock
Offices shall commence effective as of March 1, 1996 and shall continue until
February 28, 1997.
4. Common Area Maintenance Expenses. Tenant shall pay common area
maintenance expenses ("CAM") related to the Dock Offices in accordance with the
formula provided in the amendment letter dated as of August 4, 1995 between
Landlord and Tenant, which document amended the Commerce Lease.
5. Effect of Amendment. The existing terms and conditions of the Commerce
Lease shall remain in full force and effect except as such terms and conditions
are modified and amended as expressly set out in this Amendment.
6. Full Understanding. This Amendment contains the full understanding of
the parties with respect to the subject matter hereof.
1
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized representative as of the date and year first
above written.
<TABLE>
<S> <C>
LANDLORD: TENANT:
Smithway Associates, Inc. Dreyer's Grand Ice Cream, Inc.
By: By:
- ----------------------------------------- --------------------------------------
Title: President
------------------------------------ Title: Treasurer
------------------------------------
</TABLE>
2
<PAGE> 1
EXHIBIT 10.30
DREYER'S
GRAND
ICE CREAM
April 23, 1996
Smithway Associates, Inc.
5743 Smithway Street #106
Commerce, CA 90040
Attn: Mr. Aaron Cohen
Re: Dreyer's Grand Ice Cream, Inc./Smithway Associates, Inc.
Gentlemen:
Except for leasehold rights to the spaces described in the documents
identified in the second paragraph of this letter, Dreyer's Grand Ice Cream,
Inc. ("Dreyer's") hereby surrenders any leasehold rights it may hold to spaces
described in the agreements set out on Schedule 1 attached hereto and
incorporated herein by reference (all such agreements collectively referred to
as the "Lease") relating to the premises at 5743 East Smithway Street,
Commerce, California 90040 (the "Premises"), and Smithway Associates, Inc.
("Smithway") hereby acknowledges and agrees that Dreyer's has no obligations or
liabilities under the Lease with regard to such surrendered spaces, excepting
only the obligation to make the repairs described on Schedule 2 attached
hereto.
The following documents accurately describe the spaces currently
occupied by Dreyer's at the Premises:
1. Amendment Letter between Smithway and Dreyer's dated as of
August 4, 1995;
2. Sublease Agreement between Dreyer's and JAA Corporation dated
as of October 4, 1995;
3. Letter of Smithway to Dreyer's dated December 1, 1995; and
4. April 1996 Amendment between Smithway and Dreyer's dated April
23, 1996.
Very truly yours,
Dreyer's Grand Ice Cream, Inc.
By:
------------------------------
Title: Treasurer
-------------------------
Enclosure
Acknowledged and Agreed this 23rd day of April, 1996:
Smithway Associates, Inc.
By:
-------------------------------
Title: President
--------------------------
<PAGE> 2
SCHEDULE 1 TO LETTER DATED APRIL 23, 1996
The Original Lease has been amended by the following documents:
<TABLE>
<CAPTION>
Title Date
----- ----
<S> <C>
Amendment to Agreement and Lease between Dreyer's
and Jack and Tillie Marantz January 27, 1982
*Second Amendment to Agreement and Lease between
Dreyer's and Jack and Tillie Marantz July 16, 1982
Third Amendment to Agreement and Lease, including
exhibits 29-35, between Dreyer's and Mrs. Tillie Marantz,
dba TJ Investments January 1, 1985
Letter Agreement between Dreyer's and Mrs. Tillie Marantz,
dba TJ Investments October 25, 1985
Rental Agreement between Dreyer's and Mrs. Tillie Marantz,
dba TJ Investments May 1, 1987
Agreement between Dreyer's and Tillie Marantz, Trustee of the
Tillie Marantz Revocable Trust, dba TJ Investments May 31, 1988
Assignment of Lease among Wilsey Foods, Inc., Dreyer's,
Smithway, and Greyhound Real Estate Finance Company March 31, 1989
Amendment of (Wilsey) Lease between Dreyer's and Smithway March 31, 1989
*Amendment of Lease between Dreyer's and Smithway March 31, 1989
*Option exercise letter between Dreyer's and Smithway October 4, 1990
Amendment Letter between Smithway and Dreyer's August 4, 1995
Sublease Agreement between Dreyer's and JAA Corporation October 4, 1995
Letter of Smithway to Dreyer's December 1, 1995
April 1996 Amendment between Smithway and Dreyer's April 23, 1996
</TABLE>
*These amendments have been superseded or are fully performed and
retain no continuing obligation of either party.
<PAGE> 3
Schedule 2
To Letter Dated April 23, 1996
Foremost Maintenance Shop
* Replace doors leading into warehouse
* Repair/replace sink (cost to be split between Dreyer's and
Smithway)
* Repair holes in warehouse wall
Dry Storage
* Floor repairs
Truck shop
* Repair rollup door
* Remove phone
* Repair hanging electrical conduit
* Remove bell/speaker
* Repair sink/water supply
* Replace metal plate cover at canopy entry
* Remove hanging phone lines to left of garage
* Re-lag conduit on cinder block fence
* Remove barrels and trash
* Repair concrete
Other
* Meter changes our #53 and #54
<PAGE> 1
EXHIBIT 11
DREYER'S GRAND ICE CREAM, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) DEC. 28, 1996 DEC. 30, 1995 DEC. 31, 1994
- ------------------------------------------------ ------------- ------------- -------------
<S> <C> <C> <C>
PRIMARY
Net income (loss) applicable to common stock $ 2,000 $(3,496) $ 1,001
Weighted average number of shares of common
stock outstanding 13,248 13,285 14,731
------- ------- -------
Net income (loss) per common share, as reported $ .15 $ (.26) $ .07
======= ======= =======
Weighted average number of shares of common
stock outstanding 13,248 13,285 14,731
Common stock equivalent -- assumed exercise of
common stock options and warrants 122 334 99
------- ------- -------
Weighted average number of shares of common
stock outstanding, including common stock
equivalents 13,370 13,619 14,830
======= ======= =======
Net income (loss) per common share $ .15(1) $ (.26)(1) $ .07(1)
======= ======= =======
</TABLE>
Continued on following page
<PAGE> 2
COMPUTATION OF NET INCOME PER COMMON SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) DEC. 28, 1996 DEC. 30, 1995 DEC. 31, 1994
- ------------------------------------------------ ------------- ------------- -------------
<S> <C> <C> <C>
FULLY DILUTED
Net income (loss) applicable to common stock $ 2,000 $(3,496) $ 1,001
Add preferred dividends on redeemable
convertible Series B preferred stock, due June
2001, and accretion of preferred stock to
redemption value 4,997 1,972
Add interest expense on convertible subordinated
debentures issued June 1993 and amortization
of related issuance costs, net of tax 2,571 4,103
------- ------- -------
Adjusted net income $ 6,997 $ 1,047 $ 5,104
======= ======= =======
Weighted average number of shares of common
stock outstanding 13,248 13,285 14,731
Common stock equivalent--assumed exercise of
common stock options and warrants 122 412 105
Assumed conversion of debentures 2,900
Assumed conversion of preferred stock 2,900 2,900
------- ------- -------
Adjusted shares 16,270 16,597 17,736
======= ======= =======
Net income per common share $ .43(2) $ .06(2) $ .29(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.
<PAGE> 1
Exhibit 13
CONSOLIDATED STATEMENT OF INCOME
Dreyer's Grand Ice Cream, Inc.
1996 Annual Report
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------------
($ in thousands, except per share amounts) Dec. 28, 1996 Dec. 30, 1995 Dec. 31, 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Net sales $791,841 $ 678,797 $564,372
Other income 4,354 2,255 2,230
- -------------------------------------------------------------------------------------------------------
796,195 681,052 566,602
- -------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of goods sold 619,574 530,561 428,779
Selling, general and administrative 155,714 143,090 126,945
Interest, net of interest capitalized 9,548 9,912 9,243
- -------------------------------------------------------------------------------------------------------
784,836 683,563 564,967
- -------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 11,359 (2,511) 1,635
Income tax provision (benefit) 4,362 (987) 634
- -------------------------------------------------------------------------------------------------------
Net income (loss) 6,997 (1,524) 1,001
- -------------------------------------------------------------------------------------------------------
Accretion of preferred stock to redemption value 424 168
Preferred stock dividends 4,573 1,804
- -------------------------------------------------------------------------------------------------------
Net income (loss) applicable to common stock $ 2,000 $ (3,496) $ 1,001
=======================================================================================================
Net income (loss) per common share $ .15 $ (.26) $ .07
=======================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Dreyer's Grand Ice Cream, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position
of Dreyer's Grand Ice Cream, Inc. and its subsidiaries at December 28, 1996 and
December 30, 1995, and the results of their operations and their cash flows for
each of the three years in the period ended December 28, 1996, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
San Francisco, California
March 12, 1997
16
<PAGE> 2
CONSOLIDATED BALANCE SHEET
Dreyer's Grand Ice Cream, Inc.
1996 Annual Report
<TABLE>
<CAPTION>
($ in thousands, except per share amounts) Dec. 28, 1996 Dec. 30, 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
CURRENT ASSETS:
Cash and cash equivalents $ 4,134 $ 3,051
Trade accounts receivable, net of allowance for doubtful accounts
of $755 in 1996 and $698 in 1995 73,053 59,298
Other accounts receivable 13,638 19,072
Inventories 40,760 33,201
Prepaid expenses and other 13,652 12,487
- ---------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 145,237 127,109
Property, plant and equipment, net 225,038 182,757
Goodwill and distribution rights, net of accumulated amortization
of $16,616 in 1996 and $13,414 in 1995 92,010 86,812
Other assets 16,622 17,427
- ---------------------------------------------------------------------------------------------------------
TOTAL ASSETS $478,907 $414,105
=========================================================================================================
Liabilities and Stockholders' Equity
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 48,391 $ 35,514
Accrued payroll and employee benefits 18,198 18,634
Current portion of long-term debt 8,512 3,600
- ---------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 75,101 57,748
Long-term debt, less current portion 163,135 134,000
Deferred income taxes 37,802 31,712
- ---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 276,038 223,460
- ---------------------------------------------------------------------------------------------------------
Commitments and contingencies
Redeemable convertible Series B preferred stock, $1 par value - 1,008,000 shares
authorized; 1,008,000 shares issued
and outstanding in 1996 and 1995 98,806 98,382
- ---------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value - 8,992,000 shares authorized; no shares issued
or outstanding in 1996 and 1995
Common stock, $1 par value - 30,000,000 shares authorized; 13,345,000 shares
and 12,929,000 shares issued and
outstanding in 1996 and 1995, respectively 13,345 12,929
Capital in excess of par 51,956 39,370
Retained earnings 38,762 39,964
- ---------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 104,063 92,263
- ---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $478,907 $414,105
========================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements
17
<PAGE> 3
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Dreyer's Grand Ice Cream, Inc.
1996 Annual Report
<TABLE>
<CAPTION>
Capital
Common Stock in Excess Retained
(In thousands) Shares Amount 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 for 1994 1,001 1,001
Common stock dividends declared (3,619) (3,619)
Common stock and warrants
issued to an affiliate of
Nestle USA, Inc. 3,000 3,000 99,487 102,487
Repurchases and retirements
of common stock (3,753) (3,753) (85,608) (89,361)
Employee stock plans and other 146 146 2,233 2,379
- --------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 14,064 14,064 75,257 46,600 135,921
Net loss for 1995 (1,524) (1,524)
Accretion of preferred stock to
redemption value (168) (168)
Preferred stock dividends declared (1,804) (1,804)
Common stock dividends declared (3,140) (3,140)
Repurchases and retirements
of common stock (1,319) (1,319) (39,202) (40,521)
Employee stock plans and other 184 184 3,315 3,499
- --------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 30, 1995 12,929 12,929 39,370 39,964 92,263
Net income for 1996 6,997 6,997
Accretion of preferred stock to
redemption value (424) (424)
Preferred stock dividends declared (4,573) (4,573)
Common stock dividends declared (3,202) (3,202)
Common stock issued in acquisition
of M-K-D Distributors, Inc. 320 320 10,480 10,800
Repurchases and retirements
of common stock (9) (9) (253) (262)
Employee stock plans and other 105 105 2,359 2,464
- --------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 28, 1996 13,345 $ 13,345 $ 51,956 $ 38,762 $104,063
==============================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements
18
<PAGE> 4
CONSOLIDATED STATEMENT OF CASH FLOWS
Dreyer's Grand Ice Cream, Inc.
1996 Annual Report
<TABLE>
<CAPTION>
Year Ended
-------------------------------------------
($ in thousands) Dec. 28, 1996 Dec. 30, 1995 Dec. 31, 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 6,997 $ (1,524) $ 1,001
Adjustments to reconcile net income (loss) to cash flows
from operations:
Depreciation and amortization 27,549 20,568 18,986
Deferred income taxes 2,364 2,058 (420)
Changes in assets and liabilities, net of amounts acquired:
Trade accounts receivable (7,664) (11,779) (711)
Other accounts receivable 809 (12,829) (917)
Inventories (5,389) (4,120) (684)
Prepaid expenses and other 3,116 (1,998) 1,237
Accounts payable and accrued liabilities 6,555 5,470 882
Accrued payroll and employee benefits (1,077) 2,833 6,547
- -------------------------------------------------------------------------------------------------------------------
33,260 (1,321) 25,921
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (58,470) (39,437) (31,568)
Retirement of property, plant and equipment 2,152 590 547
Increase in goodwill and distribution rights (772) (1,959) (556)
Purchase of distribution rights of Sunbelt Distributors, Inc. (11,321)
Increase in other assets (3,600) (6,104) (1,128)
- -------------------------------------------------------------------------------------------------------------------
(60,690) (46,910) (44,026)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 76,000 91,500 20,200
Reductions in long-term debt (43,858) (4,500) (10,160)
Net proceeds from issuance of common stock and warrants
to an affiliate of Nestle USA, Inc. 102,487
Issuance of common stock under employee stock plans 2,464 3,499 2,379
Repurchases of common stock (262) (40,521) (89,361)
Cash dividends paid (5,831) (5,030) (3,638)
- -------------------------------------------------------------------------------------------------------------------
28,513 44,948 21,907
- -------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,083 (3,283) 3,802
Cash and cash equivalents, beginning of year 3,051 6,334 2,532
- -------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 4,134 $ 3,051 $ 6,334
===================================================================================================================
Supplemental Cash Flow Information
Cash paid (refunded) during the year for:
Interest (net of amounts capitalized) $ 8,856 $ 9,738 $ 10,810
Income taxes (net of refunds) 398 2,172 (2,264)
Non-cash transactions:
Acquisition of M-K-D Distributors, Inc. 10,800
Conversion of convertible subordinated debentures
into redeemable convertible Series B preferred stock 100,752
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
19
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dreyer's Grand Ice Cream, Inc.
1996 Annual Report
NOTE 1 OPERATIONS
Dreyer's Grand Ice Cream, Inc. and its subsidiaries (the Company) is a single
segment industry company engaged primarily in the business of manufacturing and
selling premium ice cream and other frozen dessert products to grocery and
convenience stores, foodservice accounts and independent distributors in the
United States.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of Dreyer's Grand Ice
Cream, Inc. and its subsidiaries. All intercompany transactions have been
eliminated.
FISCAL YEAR
The Company's fiscal year is a fifty-two or fifty-three week period ending on
the last Saturday in December. Fiscal years 1996 and 1995 each consisted of
fifty-two weeks and fiscal year 1994 consisted of fifty-three weeks.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
These estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company classifies financial instruments as cash equivalents if the
original maturity of such investments is three months or less.
INVENTORIES
Inventories are stated at the lower of cost (determined by the first-in,
first-out method) or market. Cost includes materials, labor and manufacturing
overhead.
PROPERTY, PLANT AND EQUIPMENT
The cost of additions and major improvements and repairs are capitalized, while
maintenance and minor repairs are charged to expense as incurred. Depreciation
of fixed assets is computed using the straight-line method over the assets'
estimated useful lives, generally ranging from three to thirty-five years.
Interest costs relating to capital assets under construction are capitalized.
GOODWILL AND DISTRIBUTION RIGHTS
Goodwill and distribution rights are amortized using the straight-line method
over thirty to thirty-six years.
PREOPERATING COSTS
Preoperating costs incurred during the construction and start-up of new
manufacturing and distribution facilities are capitalized and amortized over
three years. During 1996, the Company capitalized $2,710,000 of preoperating
costs associated with the start-up of its Houston, Texas manufacturing facility.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets and certain identifiable intangibles,
including goodwill and distribution rights, for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. The assessment of impairment is based on the estimated
undiscounted future cash flows from operating activities compared with the
carrying value of the assets. If the undiscounted future cash flows of an asset
are less than the carrying value, a write-down would be recorded measured by the
amount of the difference between the carrying value of the asset and the fair
value of the asset.
20
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dreyer's Grand Ice Cream, Inc.
1996 Annual Report
ADVERTISING COSTS
The Company defers production costs for media advertising and expenses these
costs in the period the advertisement is first run. All other advertising
costs are expensed in the period incurred. Advertising expense, including
consumer promotion spending, was $28,770,000, $39,971,000 and $40,287,000 in
1996, 1995 and 1994, respectively.
INCOME TAXES
Income taxes are accounted for using the liability method. Under this method,
deferred tax liabilities and assets are recognized for the tax consequences of
temporary differences between the financial reporting and tax basis of assets
and liabilities.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company measures compensation cost for employee stock options and similar
equity instruments using the intrinsic value-based method of accounting
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB No. 25).
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed using the weighted average number
of shares of common stock outstanding during the period which were 13,248,000,
13,285,000 and 14,731,000, in 1996, 1995 and 1994, respectively. The potentially
dilutive effect of the Company's redeemable convertible preferred stock,
convertible subordinated debentures, and other common stock equivalents was
anti-dilutive for each fiscal year. Accordingly, fully diluted earnings per
share for 1996, 1995 and 1994 are not presented.
NOTE 3 INVENTORIES
Inventories at December 28, 1996 and December 30, 1995 consisted of the
following:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- -----------------------------------------
<S> <C> <C>
Raw materials $ 5,361 $ 3,291
Finished goods 35,399 29,910
- -----------------------------------------
$40,760 $33,201
=========================================
</TABLE>
NOTE 4 PROPERTY, PLANT AND EQUIPMENT
The cost and accumulated depreciation of property, plant and equipment at
December 28, 1996 and December 30, 1995 were as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- ----------------------------------------------------------
<S> <C> <C>
Buildings and improvements $ 84,732 $ 67,626
Machinery and equipment 185,880 145,023
Office furniture and fixtures 7,778 5,629
- ----------------------------------------------------------
278,390 218,278
Accumulated depreciation (88,342) (77,453)
- ----------------------------------------------------------
190,048 140,825
Land 12,190 11,019
Construction in progress 22,800 30,913
- ----------------------------------------------------------
$225,038 $182,757
==========================================================
</TABLE>
At December 28, 1996, property, plant and equipment included assets under
capital leases of $17,463,000. Amortization expense and accumulated amortization
related to capital lease assets was $2,260,000 in 1996.
Interest capitalized was $2,627,000, $2,288,000 and $1,788,000 in 1996, 1995
and 1994, respectively.
Depreciation expense for property, plant and equipment was $21,250,000,
$16,412,000 and $13,194,000, in 1996, 1995 and 1994, respectively.
Construction in progress at December 30, 1995 included $19,046,000 of costs
associated with the enhancement of management information systems.
NOTE 5 GOODWILL AND DISTRIBUTION RIGHTS
DISTRIBUTION RIGHTS
On January 4, 1994, the Company entered into a long-term distribution agreement
with Sunbelt Distributors, Inc. (Sunbelt), the leading independent
direct-store-delivery ice cream distributor in Texas. Under the agreement, the
Company paid Sunbelt $10,970,000 in cash to secure the long-term exclusive right
to have its products distributed by Sunbelt in Texas and certain parts of
Louisiana and Arkansas. In conjunction with this transaction, the Company
recorded $11,321,000 in distribution rights, including $351,000 in transaction
costs.
21
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dreyer's Grand Ice Cream, Inc.
1996 Annual Report
ACQUISITIONS
On March 27, 1996, the Company acquired the remaining 50.3% of the outstanding
common stock of M-K-D Distributors, Inc. (M-K-D) for 320,000 newly issued
shares of the Company's common stock having a value of $10,800,000. The
acquisition was accounted for as a purchase and the amount by which the purchase
price exceeded the fair value of the net identifiable assets acquired of
$7,892,000 has been recorded as goodwill and distribution rights. The Company
has consolidated the results of operations of M-K-D since the beginning of
fiscal 1996. That portion of M-K-D's 1996 pre-acquisition earnings before
income taxes which was attributable to the former shareholders' interest,
approximately $148,000, was recorded as a charge to selling, general and
administrative expenses.
Prior to 1996, the Company accounted for its 49.7% ownership of M-K-D using
the equity method. The investment, included in other assets, was stated at cost,
adjusted for the Company's equity in undistributed earnings, and was $5,517,000
at December 30, 1995. The Company's equity in the earnings of M-K-D was $779,000
and $1,063,000 in 1995 and 1994, respectively. The Company's sales of its
branded products to M-K-D were $25,174,000 and $22,583,000, in 1995 and 1994,
respectively.
Summarized financial information for M-K-D follows:
<TABLE>
<CAPTION>
(In thousands) Dec. 30, 1995
- -----------------------------------------
<S> <C>
Current assets $ 7,756
Non-current assets 9,688
- -----------------------------------------
$17,444
=========================================
Current liabilities $ 3,960
Non-current liabilities 2,084
Stockholders' equity 11,400
- -----------------------------------------
$17,444
=========================================
</TABLE>
<TABLE>
<CAPTION>
(In thousands) 1995 1994
- --------------------------------------------
<S> <C> <C>
Net sales $74,219 $62,817
Gross profit 15,316 14,492
Net income 1,687 2,146
</TABLE>
NOTE 6 INCOME TAXES
The provision (benefit) for federal and state income taxes consisted of the
following:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
- ----------------------------------------
<S> <C> <C> <C>
Current:
Federal $1,683 $(3,045) $ 890
State 315 164
- ----------------------------------------
1,998 (3,045) 1,054
- ----------------------------------------
Deferred:
Federal 2,003 2,127 (422)
State 361 (69) 2
- ----------------------------------------
2,364 2,058 (420)
- ----------------------------------------
$4,362 $ (987) $ 634
========================================
</TABLE>
The deferred income tax liability of December 28, 1996 and December 30, 1995
consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- -------------------------------------------------------------
<S> <C> <C>
Intangible assets and related
amortization $16,124 $12,855
Depreciation 16,897 14,671
Deferred costs 3,401 2,621
Other 1,380 1,565
- -------------------------------------------------------------
$37,802 $31,712
=============================================================
</TABLE>
The federal statutory income tax rate is reconciled to the Company's effective
income tax rate as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ---------------------------------------------------------
<S> <C> <C> <C>
Federal statutory income
tax rate 35.0% (35.0)% 35.0%
State income taxes, net of
federal tax benefit 3.9 (1.7) 6.6
Reversal of income taxes
provided in prior periods (3.7) (5.8)
Other 3.2 3.2 (2.8)
- ---------------------------------------------------------
38.4% (39.3)% 38.8%
=========================================================
</TABLE>
22
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dreyer's Grand Ice Cream, Inc.
1996 Annual Report
NOTE 7 LONG-TERM DEBT
Long-term debt at December 28, 1996 and December 30, 1995 consisted of the
following:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- ------------------------------------------------------------------
<S> <C> <C>
Revolving line of credit with banks
due 1999 with interest payable
at three different rate options $ 75,700 $111,700
Senior notes with principal due
through 2008 and interest
payable semiannually at
three different interest rates 50,000
Capital lease obligation with
payments due through 2000
and interest payable quarterly
at a floating rate 23,563
Senior notes with principal due
through 2001 and interest
payable semiannually at 9.3% 17,800 21,400
Industrial revenue bonds with
principal due through 2001
and interest payable quarterly
at a floating rate based upon
a tax-exempt note index 4,500 4,500
Other 84
- -------------------------------------------------------------------
171,647 137,600
Less - current portion 8,512 3,600
- -------------------------------------------------------------------
$163,135 $134,000
===================================================================
</TABLE>
The aggregate annual maturities of long-term debt, including capital lease
obligation, as of December 28, 1996 are as follows:
<TABLE>
<CAPTION>
(In thousands)
- -----------------------------------------
<S> <C>
Year ending:
1997 $ 8,512
1998 8,522
1999 84,175
2000 19,680
2001 15,043
Later years 35,715
- -----------------------------------------
Total $171,647
=========================================
</TABLE>
LINE OF CREDIT
During 1995, the Company entered into a new credit agreement with certain banks
for a total revolving line of credit of $175,000,000. This agreement replaced
the Company's previous revolving line of credit agreement. The total available
line of credit decreases by $25,000,000 on December 31, 1997 and December 31,
1998, and expires on December 31, 1999. This line is available at three
different interest rate options which are defined as the agent bank's offshore
rate, same day funding rate, plus an applicable margin, or the bank's reference
rate. The interest rate on the line of credit was 6.13% at December 28, 1996. At
December 28, 1996, there was $75,700,000 outstanding under the line.
SENIOR NOTES
On June 6, 1996, the Company completed a private placement of $50,000,000 of
senior notes, due 2000 through 2008. Proceeds from the senior notes were used to
repay a portion of existing bank borrowings and to fund capital expenditures.
Interest on the notes ranges from 7.68% to 8.34% and is payable semi-annually.
LEASE TRANSACTION
On March 29, 1996, the Company entered into a lease transaction involving a
large majority of its direct-store-delivery truck fleet. The $26,000,000
proceeds received by the Company from the lease transaction were used to repay a
portion of existing bank borrowings and to fund capital expenditures. The
interest rate on the capital lease obligation was 6.52% at December 28, 1996.
The four-year lease has been classified as a capital lease and the related
assets are recorded in property, plant and equipment.
The excess of the lease transaction proceeds over the
carrying value of the fleet of approximately $9,095,000 was deferred and netted
against the carrying value of the capital leased assets. This deferred gain is
being credited to income in proportion to the amortization of the capital leased
assets.
FAIR VALUE OF FINANCIAL INSTRUMENTS
As of December 28, 1996 and December 30, 1995, the fair value of the Company's
long-term debt was determined to
23
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dreyer's Grand Ice Cream, Inc.
1996 Annual Report
approximate the carrying amount. The fair value was based on quoted market
prices for the same or similar issues or on the current rates offered to the
Company for a term equal to the same remaining maturities. It is not practicable
to estimate the fair value of the redeemable convertible Series B preferred
stock due to the unique terms and conditions of these securities.
The Company is subject to the requirements of various financial covenants,
including dividend restrictions, under its long-term debt obligations and the
redeemable convertible Series B preferred stock.
NOTE 8 LEASING ARRANGEMENTS
The Company conducts certain of its operations from leased facilities, which
include land and buildings, production equipment, and certain vehicles. All of
these leases expire over a period of twenty-six years including renewal options.
Certain of these leases include non-bargain purchase options.
The minimum rental payments required under non-cancelable leases at December
28, 1996 are as follows:
<TABLE>
<CAPTION>
(In thousands) OPERATING CAPITAL
- -----------------------------------------------------
<S> <C> <C>
Year ending:
1997 $ 4,078 $ 6,217
1998 2,995 5,888
1999 2,190 5,560
2000 1,520 9,068
2001 1,079 -
Later years 4,465 -
- ----------------------------------------------------
$16,327 26,733
=======
Less - amounts representing interest 3,170
- -----------------------------------------------------
Present value of minimum lease payments 23,563
Less - current portion 4,875
- -----------------------------------------------------
$ 18,688
=====================================================
</TABLE>
Rental expense for operating leases was $11,665,000, $12,824,000 and
$11,474,000 in 1996, 1995 and 1994, respectively.
NOTE 9 REDEEMABLE CONVERTIBLE SERIES B PREFERRED STOCK
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 (Series B), redeemable on June 30, 2001. On the conversion date,
$2,538,000 of unamortized debenture issuance costs were charged against the
carrying value of the debentures to arrive at the carrying value of $98,214,000
for this preferred stock. The Company is recording accretion to increase the
carrying value to the redemption value of $100,752,000 by June 30, 2001, the
redemption date.
The Series B preferred stock is convertible, under certain conditions, into a
total of 1,008,000 shares of Series A Convertible Preferred Stock (Series A),
redeemable on June 30, 2001. Additionally, both the Series A preferred stock 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. Series B preferred stock can be called by the Company for early
redemption, subject to certain limitations.
In preference to shares of common stock, shares of both the Series A preferred
stock and the Series B preferred stock are entitled to receive cumulative cash
dividends, payable quarterly in arrears. The Company pays dividends for the
Series B preferred stock of approximately $1,143,000 per quarter. Dividends on
the Series A preferred stock are payable at a dividend rate equal to the amount
they would receive as if the shares were converted into comparable shares of
common stock.
NOTE 10 COMMON STOCK
The Company paid a regular quarterly dividend of $.06 per share for each quarter
of 1996, 1995 and 1994.
During 1987, the Board of Directors declared a dividend of one Preferred Stock
Purchase Right (the Rights) for each outstanding share of common stock. Under
certain conditions, the Rights become exercisable for the purchase of the
Company's preferred or common stock.
24
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dreyer's Grand Ice Cream, Inc.
1996 Annual Report
NESTLE EQUITY ISSUANCE
On June 14, 1994, the Company completed a transaction (the "Nestle Agreement")
with an affiliate of Nestle USA, Inc. ("Nestle"), whereby Nestle purchased
3,000,000 newly issued shares of common stock of the Company for $32 per share
and warrants to purchase an additional 2,000,000 shares at an exercise price of
$32 per share. Warrants for 1,000,000 shares will expire on June 14, 1997 and
warrants for the other 1,000,000 shares will expire on June 14, 1999. Nestle
paid an aggregate of $10,000,000 for the 2,000,000 warrants. Total proceeds from
the issuance of the initial 3,000,000 shares and the 2,000,000 warrants were
$106,000,000. In connection with the Nestle Agreement, the Company incurred
transaction costs of $3,513,000 which were recorded as a charge against capital
in excess of par.
The Company has the right to cause Nestle to exercise the warrants at $24 per
share subject to certain conditions at any time before June 14, 1997. The
Company also has the right to cause Nestle to exercise the warrants at any time
through the warrant expiration dates at $32 per share if the average trading
price of the common stock exceeds $60 during a 130 trading day period preceding
the exercise, subject to certain conditions. Furthermore, if the average trading
price of the common stock equals or exceeds $60 during a 130 trading day period
before June 14, 1999, Nestle will be required to pay an additional $2 for each
share purchased and each share purchased upon exercise of the warrants.
In connection with the Nestle Agreement, the Company entered into a
distribution agreement with Nestle Ice Cream Company to distribute Nestle's
frozen novelty and ice cream products in certain markets.
COMMON STOCK REPURCHASES
During 1994, the Company implemented a plan to repurchase up to 5,000,000 shares
of common stock through open market purchases and negotiated transactions (the
Stock Repurchase Plan). This plan was completed during 1995.
During 1995, the Company repurchased and retired 1,291,000 shares of its
common stock at prices ranging from $25.38 to $34.25 under the Stock Repurchase
Plan. In addition, the Company repurchased and retired 28,000 shares of its
common stock at prices ranging from $24.50 to $38.50 from employees who
previously acquired shares under employee stock plans.
During 1994, the Company repurchased and retired 3,709,000 shares of its
common stock at prices ranging from $21.38 to $25.75 per share under the Stock
Repurchase Plan. In addition, the Company repurchased and retired 44,000 shares
of its common stock at prices ranging from $22.00 to $28.69 per share from
employees who previously acquired shares under employee stock plans.
NOTE 11 EMPLOYEE BENEFIT PLANS
The Company maintains a defined contribution retirement plan for employees
not covered by collective bargaining agreements. The plan provides retirement
and other benefits based upon the assets of the plan held by the trustee. The
Company contributes 7% of the eligible participants' annual compensation to the
plan. The Company also maintains a salary deferral plan under which it may make
a matching contribution of a percentage of each participant's deferred salary
amount.
Pension expense and matching contributions under these plans were
approximately $7,683,000, $7,202,000 and $5,776,000, in 1996, 1995 and 1994,
respectively. The Company's liability for accrued pension contributions and
salary deferrals was $6,242,000 and $7,186,000 at December 28, 1996 and December
30, 1995, respectively.
Pension expense for employees covered by multi-employer retirement plans under
collective bargaining agreements was $956,000, $848,000 and $677,000, in 1996,
1995 and 1994, respectively.
25
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dreyer's Grand Ice Cream, Inc.
1996 Annual Report
NOTE 12 EMPLOYEE STOCK PLANS
The Company offers to certain employees various stock option plans, a Section
423 employee stock purchase plan and an employee secured stock purchase plan.
STOCK OPTION PLANS
The Company has three stock option plans under which options may be granted for
the purchase of the Company's common stock at a price not less than 100% of the
fair market value at the date of grant. The incentive stock option plan (the
1982 Plan) provides that options are not exercisable until after two years from
the date of grant and generally expire six years from the date of grant. The
non-qualified stock option plan (the 1992 Plan) provides that options are not
exercisable until after two years from the date of grant and expire upon death
or termination of employment. In 1994, the stockholders approved a new stock
option plan (the 1993 Plan) under which granted options may be either incentive
stock options or non-qualified stock options. This plan provides that options
expire no later than ten years from the date of grant. This plan also provides
that most of the terms of the options, such as vesting, are within the
discretion of the compensation committee, composed of certain members of the
Company's Board of Directors.
As prescribed by APB No. 25, no compensation cost has been recognized for
these stock option plans. If compensation cost for these plans had been
determined based on the fair value at the grant dates consistent with Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123), the Company's net income (loss) applicable to
common stock and net income (loss) per common share on a pro forma basis would
be as follows:
<TABLE>
<CAPTION>
(In thousands, except per share amounts) 1996 1995
- ------------------------------------------------------------------------
<S> <C> <S>
Net income (loss) applicable
to common stock $249 $(4,111)
Net income (loss) per
common share .02 (.31)
- ------------------------------------------------------------------------
</TABLE>
The activity in the three stock option plans for each of the three years in the
period ended December 28, 1996 is summarized below.
<TABLE>
<CAPTION>
Weighted
Options Average
Available Options Price
(In thousands, except per share amounts) for Grant Outstanding Per Share
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, DECEMBER 25, 1993 66 778 $21.39
Authorized 1,200
Granted (387) 387 24.28
Exercised (99) 9.97
Canceled 12 (12)
- -------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 891 1,054 $23.49
Authorized
Granted (446) 446 25.95
Exercised (120) 14.27
Canceled 15 (15)
- -------------------------------------------------------------------------------------------
BALANCE, DECEMBER 30, 1995 460 1,365 $25.10
Authorized 1,000
Granted (451) 451 31.50
Exercised (53) 17.73
Canceled 53 (53)
- -------------------------------------------------------------------------------------------
BALANCE, DECEMBER 28, 1996 1,062 1,710 $26.97
===========================================================================================
</TABLE>
26
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dreyer's Grand Ice Cream, Inc.
1996 Annual Report
The weighted-average fair market value of options granted in 1996 and 1995 was
$12.34 and $11.20 per share, respectively. The fair market value of each option
granted was estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted-average assumptions for 1996 and 1995,
respectively: risk-free interest rate of 5.96% and 7.01%; dividend yield of
0.75% and 0.85%; volatility of 33.62% and 34.24%; and expected term of 4.5 and
4.9 years.
Stock options exercisable were 618,000, 391,000 and 305,000 at year-end 1996,
1995 and 1994, respectively. These stock options were exercisable at a weighted
average option price of $26.12, $24.70 and $20.17 for 1996, 1995, and 1994,
respectively.
Significant option groups outstanding at December 28, 1996 and related
weighted average price per share and life information follows:
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
- ------------------------------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
----------------------- -------------------------
Weighted Weighted
Average Average Exercise
Grant Options Exercise Options Exercise Price Remaining
Plan Year Outstanding Price Exercisable Price Range Life (Years)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1982 PLAN 1991 29 $27.59 29 $27.59 $27.50-29.50 0.25
1992 75 19.99 60 19.99 19.50-24.13 1.25
1993 81 26.04 49 26.04 24.75-30.13 2.25
1992 PLAN 1992 43 26.21 35 26.21 19.50-29.25 NA
1993 242 27.67 145 27.67 24.75-29.38 NA
1993 PLAN 1994 371 24.30 209 24.66 21.75-29.38 7.25
1995 426 25.95 14 25.95 25.95 8.25
1996 443 31.50 77 31.50 31.50 9.25
- ------------------------------------------------------------------------------------------------------------------------
Total 1,710 618
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
SECTION 423 EMPLOYEE STOCK PURCHASE PLAN
Under the section 423 employee stock purchase plan, employees may authorize
payroll deductions up to 10% of their compensation for the purpose of acquiring
shares at 85% of the market price determined at the beginning of a specified
twelve month period. Under this plan, employees purchased 24,000 shares at
prices ranging from $22.00 to $32.94 per share in 1996, 40,000 shares at prices
ranging from $20.29 to $21.67 per share in 1995 and 20,000 shares at prices
ranging from $20.61 to $23.16 per share in 1994. Compensation cost based on the
fair value of the employees' purchase rights under SFAS No. 123 was not material
in 1996 and 1995.
EMPLOYEE SECURED STOCK PURCHASE PLAN
Under the employee secured stock purchase plan (the Secured Plan), on
specified dates, employees may purchase shares at fair market value by paying
20% of the purchase price in cash and the remaining 80% of the purchase price in
the form of a non-recourse promissory note with a term of 30 years. Under this
plan, employees purchased 28,000 shares at prices ranging from $28.50 to $31.75
per share in 1996, 23,000 shares at prices ranging from $25.28 to $39.50 per
share in 1995 and 27,000 shares at prices ranging from $24.25 to $25.13 per
share in 1994. The Secured Plan is not considered compensatory under SFAS No.
123.
27
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dreyer's Grand Ice Cream, Inc.
1996 Annual Report
NOTE 13 SIGNIFICANT CUSTOMERS
For fiscal 1996, 1995 and 1994, no customer accounted for more than 10% of
consolidated net sales.
NOTE 14 INSURANCE SETTLEMENT AND TRADEMARK SALE
In March 1996, the Company settled an insurance claim relating to the
malfunction of a refrigeration system at one of its plants. The malfunction
caused the accidental release of ammonia (refrigerant) into the plant which
contaminated the finished goods inventory. In accordance with the settlement,
the Company received the value of the finished goods inventory at its normal
selling price, plus expenses incurred recovering from the accident. This
resulted in a gain of $2,100,000, which was recorded as a reduction in cost of
goods sold in 1996.
In December 1996, the Company sold trademark rights for the People's Republic
of China, Hong Kong and Macau to its third-party independent distributor for
$2,600,000. Separately, the Company sold approximately a three to five month
supply of its products to this distributor on a volume discount basis for
$3,390,000.
These transactions had the effect of increasing net income by $3,538,000, or
$0.27 per common share.
NOTE 15 CONTINGENCIES
The Company is engaged in various legal actions as both plaintiff and defendant.
Management believes that the outcome of these actions, either individually or in
the aggregate, will not have a material adverse effect on the Company's
financial position, results of operations or cash flows.
NOTE 16 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Per Share
------------------------------------
Net Net
Income (Loss) Income (Loss)
(In thousands, except Net Gross Applicable to Applicable to Price Range
per share amounts) Sales Margin Common Stock Common Stock(1) (NASDAQ)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
1st Quarter $166,970 $ 34,438 $ 434 $ .03 $27.88 - 37.75
2nd Quarter 211,568 49,282 3,771 .28 31.50 - 37.00
3rd Quarter 234,644 54,416 2,055 .15 25.00 - 32.25
4th Quarter 178,659 34,131 (4,260) (.32) 24.00 - 30.25
- -------------------------------------------------------
$791,841 $172,267 $ 2,000 .15(2)
=======================================================
1995
1st Quarter $141,255 $ 29,025 $ 322 $ .02 $24.25 - 28.25
2nd Quarter 188,083 43,045 3,664 .27 25.50 - 37.50
3rd Quarter 205,226 50,453 893 .07 36.00 - 40.00
4th Quarter 144,233 25,713 (8,375) (.65) 30.00 - 39.00
- -------------------------------------------------------
$678,797 $148,236 $(3,496) (.26)(2)
=======================================================
</TABLE>
(1) Fully diluted net income (loss) per share for each quarter of 1996 and
1995 is equivalent to primary net income (loss) per share since the potentially
dilutive effect of the redeemable convertible Series B preferred stock,
convertible subordinated debentures and other common stock equivalents was
anti-dilutive.
(2) The number of weighted average shares outstanding used in the computation
of net income (loss) per common share increases and decreases as shares are
issued or repurchased during the year. For this reason, the sum of net income
(loss) per common share for the quarters may not be the same as the net income
(loss) per common share for the year.
28
<PAGE> 14
FIVE YEAR SUMMARY OF SIGNIFICANT FINANCIAL DATA
Dreyer's Grand Ice Cream, Inc.
1996 Annual Report
<TABLE>
<CAPTION>
Fiscal Year Ended December
-------------------------------------------------------------
(In thousands, except per share amounts) 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net sales and other income $796,195 $ 681,052 $566,602 $471,790 $407,946
Income (loss) before cumulative
effect of change in accounting principle 6,997 (1,524) 1,001 16,789 13,973
Net income (loss) 6,997 (1,524) 1,001 16,789 15,694(2)
Net income (loss) applicable to common stock 2,000 (3,496) 1,001 16,789 15,694(2)
PER COMMON SHARE:
Income (loss) before cumulative effect of
change in accounting principle .15 (.26) .07 1.15 .94
Net income (loss)(1) .15 (.26) .07 1.15 1.05(2)
Dividends declared .24 .24 .24 .24 .24
BALANCE SHEET:
Total assets 478,907 414,105 362,026 322,275 289,051
Working capital 70,136 69,361 48,403 57,397 25,768
Long-term debt, including convertible
subordinated debentures 163,135 134,000 146,852 139,627 102,160
Redeemable convertible Series B preferred stock 98,806 98,382
Stockholders' equity 104,063 92,263 135,921 123,034 107,569
==================================================================================================================
</TABLE>
(1) Fully diluted net income (loss) per share is equivalent to primary net
income (loss) per share. In 1996 and 1995 the potentially dilutive effect of the
redeemable convertible Series B preferred stock and other common stock
equivalents was anti-dilutive, in 1994 the potentially dilutive effect of the
convertible subordinated debentures and other common stock equivalents was
anti-dilutive, in 1993 the potentially dilutive effect of the convertible
subordinated debentures was anti-dilutive and in 1992 no potentially dilutive
securities were outstanding.
(2) Includes the cumulative effect of change in method of accounting for
income taxes of $1,721,000, or $.11 per share.
29
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
FISCAL 1996 COMPARED WITH FISCAL 1995
The Company embarked on a five year plan (the Strategic Plan, also referred
to as the Grand Plan) during the second quarter of 1994 to accelerate the sales
of its brand throughout the country. The key elements of this plan are: 1) to
build a high margin brand with a leading market share through effective consumer
marketing activities, 2) to expand the Company's direct-store-delivery
distribution network to a national scale and enhance this capability with
sophisticated information and logistics systems and 3) to introduce innovative
new products. The potential benefits of the Strategic Plan are increased market
share and future earnings above those levels that would be attained in the
absence of the Strategic Plan. As originally announced, the Company anticipated
that the cost of implementing the Strategic Plan would materially reduce
earnings during the fiscal years of 1994 and 1995. For fiscal 1996, earnings
improved to a net income of $6,997,000, or $0.15 per common share, from a net
loss in 1995 of $(1,524,000), or $(0.26) per common share. This improvement is
partially attributable to benefits accruing from the investments made under the
Strategic Plan during the past two and a half years.
Consolidated net sales for fiscal 1996 increased 17% to $791,841,000 from
$678,797,000 achieved in 1995. This increase includes the effect of the
acquisition of M-K-D Distributors, Inc. (M-K-D) discussed below and occurred
despite total U.S. gallon consumption decreasing in 1996. The decline in
industry gallonage growth is primarily attributable to lower sales of ice cream
products in the "better for you" segments. Dreyer's continues to be the market
share leader in this segment despite the decline. Sales of the Company's branded
products increased 11%, led by sales of Dreyer's and Edy's Grand Ice Cream and
the recently introduced Starbucks(TM) Ice Cream, developed in a joint venture
with the Starbucks Coffee Company. Market share of the Company's Dreyer's and
Edy's branded products was 13.8% at the end of 1996. Sales of branded products
purchased from other companies (partner brands) grew 28% during the year, with
Healthy Choice(R) low fat ice cream from ConAgra, Inc. providing the greatest
sales growth. Sales of partner brands represented 38% of consolidated net sales
in 1996 compared with 34% in 1995. Prices for both Company and partner brands
increased an average of 3% between 1995 and 1996.
Cost of goods sold for 1996 increased $89,013,000, or 17%, over the prior
year, while the Company's overall gross margin remained relatively unchanged at
21.8%. The benefit of distribution cost efficiencies resulting from the
implementation of new information systems, and logistics and supply chain
initiatives was offset by an $8,140,000 increase in dairy raw materials costs
and an increase in the proportion of partner brand sales, which yield a lower
gross margin.
Selling, general and administrative costs for 1996 were $12,624,000, or 9%,
higher than 1995. Accordingly, selling, general and administrative costs
decreased as a percent of sales to 20% in 1996 from 21% in 1995 due to
efficiencies resulting from investments made under the Strategic Plan. The
Company incurred $28,770,000 in advertising and consumer promotion expenses
during 1996 as compared with $39,971,000 in 1995. The approximate $11,000,000
decrease was largely offset by an increase in trade promotion expense. The
Company regularly adjusts its levels of advertising and promotion spending in an
effort to enhance long-term profitability.
Interest expense was $364,000, or 4%, lower than in 1995 due to conversion
of the convertible subordinated debentures into redeemable convertible Series B
preferred stock during the third quarter of 1995. This decrease was partially
offset by interest expenses from the issuance of senior notes, the completion of
a lease transaction and higher average borrowings on the Company's line of
credit during 1996. (See Note 7 of Notes to Consolidated Financial Statements.)
During 1996, the Company acquired the remaining 50.3% of the outstanding
common stock of M-K-D. During 1996, M-K-D's sales, cost of sales and selling,
general and administrative expenses after eliminating intercompany transactions
were $45,294,000, $26,514,000 and $15,736,000, respectively. These results have
been consolidated for the year in the Company's financial statements. (See Note
5 of Notes to Consolidated Financial Statements.)
The Company recorded certain transactions during the year which had the
effect of increasing net income by $3,538,000, or $0.27 per common share. (See
Note 14 of Notes to Consolidated Financial Statements.) These sources of income
are largely non-recurring and as such may not be available in future periods.
Furthermore, one of these transactions, the volume discount sale, will have the
effect of reducing sales and operating results in the first half of 1997.
30
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company anticipates that the earnings benefits expected under the
Strategic Plan will be achieved in 1997 and future years. However, no assurance
can be given that these expectations relative to future market share and
earnings benefits of the strategy will be achieved. The success of the strategy
will depend upon, among other things, consumer purchase responsiveness to the
increased marketing expenditures, competitors' marketing responses, market
conditions affecting the price of the Company's products, commodity costs and
efficiencies achieved in manufacturing and distribution operations.
FISCAL 1995 COMPARED WITH FISCAL 1994
In response to the Strategic Plan, dollar market share grew from 11.7% at the
end of 1994 to 13.4% for the fourth quarter of 1995. Consolidated net sales for
fiscal 1995 increased 20% (net sales increased 23% when adjusting for 52 weeks
in fiscal 1995 and 53 weeks in 1994) to $678,797,000 from the $564,372,000
achieved in 1994. Sales of the Company's branded products increased 20%. This
growth was led by Dreyer's and Edy's Fat Free Ice Cream and Grand Ice Cream as
well as the new products of Low Fat Ice Cream and the revitalized Sherbet line
introduced in 1995. Sales of partner brands increased 22%, led by sales of
frozen novelty and ice cream products from Nestle Ice Cream Company introduced
in 1995. Sales of partner brands represented 34% of consolidated net sales in
both 1995 and 1994. The effect of price increases was not significant in 1995.
During 1995, the Company expanded its direct-store-delivery system into 16
new markets. The expenses associated with this expansion effort were the primary
cause of a decrease in gross margin from 24.0% in 1994 to 21.8% for 1995,
resulting in a 24%, or $101,782,000, increase in cost of goods sold over 1994.
The gross margin was affected to a lesser extent by the Company's continued
development of its Grand Soft business, including significantly enhanced
manufacturing, equipment service and financing capabilities.
Advertising and consumer promotion spending continued at the annual rate of
approximately $40,000,000 during 1995. The Company increased its level of trade
promotion spending during 1995 by approximately $14,000,000 due principally to
the initial introduction of the Company's products in new markets. This increase
in promotion spending was the primary factor in the $16,145,000 growth in
selling, general and administrative expenses between 1994 and 1995. Interest
expense increased $669,000, or 7%, principally due to higher borrowings under
the Company's revolving line of credit.
FISCAL 1994 COMPARED WITH FISCAL 1993
In the first partial year of the implementation of the Strategic Plan, the
Company's consolidated net sales for 1994 increased 20% (net sales increased 18%
when adjusting for 53 weeks in fiscal 1994 and 52 weeks in 1993) to
$564,372,000, compared with $470,665,000 in 1993. Driven by substantially higher
advertising and consumer promotion spending under the Strategic Plan, sales of
the Company's branded products increased 22%. Dreyer's and Edy's Frozen Yogurt
and Grand Ice Cream led this increase followed by the contribution from the
Company's novelty products. The increase in sales of Healthy Choice(R) low fat
ice cream from ConAgra, Inc. was the primary factor in the partner brand sales
increase of 12% over the prior year. Partner brands represented 34% of
consolidated net sales as compared to 36% in 1993. The effect of price increases
was not significant in 1994.
Cost of goods sold increased $72,542,000, or 20%, over 1993. Gross margin,
however, decreased slightly from 24.3% to 24.0% primarily due to the additional
expenses associated with introducing the Company's product line and expansion of
the distribution system in the Texas and New England markets as well as in
several markets in the southern United States. The effect of these expenses on
gross margin was partially offset by a higher proportion of Company products,
which carry a higher margin than partner brands.
The implementation of the Strategic Plan required an increase in overall
marketing expenses of $40,501,000, leading to a 59%, or $47,166,000, increase in
selling, general and administrative expenses over those incurred in 1993.
Interest expense was $1,440,000, or 18%, higher than in 1993 due primarily to
the issuance of the convertible subordinated debentures in the second quarter of
1993.
As anticipated and announced, the implementation of the Strategic Plan
described above resulted in a net income of $1,001,000 for 1994 as compared
with $16,789,000 for 1993.
TAX PROVISIONS
The Company's income tax provisions differ from tax provisions calculated at the
federal statutory tax rate primarily due to state income taxes and the reversal
of income taxes provided in prior periods. (See Note 6 of Notes to Consolidated
Financial Statements.)
31
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
SEASONALITY
The Company experiences more demand for its products during the spring and
summer than during the fall and winter. (See Note 16 of Notes to Consolidated
Financial Statements.)
EFFECTS OF INFLATION AND CHANGING PRICES
The largest component of the Company's cost of production is raw materials,
principally dairy products and sugar. Historically, the Company has been able to
compensate for increases in the price level of these commodities through
manufacturing and distribution operating efficiencies. During 1996, unusually
high dairy raw materials costs negatively impacted gross profit by $8,140,000.
However, these costs were offset by price increases and productivity gains.
Other cost increases such as labor and general and administrative costs have
also been offset by productivity gains and other operating efficiencies.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations provided cash flow of $33,260,000 during 1996 compared
with $(1,321,000) cash used in 1995 and $25,921,000 cash provided by operations
during 1994. Working capital of the Company increased to $70,136,000 compared
with $69,361,000 and $48,403,000 during 1995 and 1994, respectively.
Refer to the Consolidated Statement of Cash Flows for the components of
increases and decreases in cash and cash equivalents for the three year period
ended December 28, 1996.
The Company continued to expand its manufacturing capacity and
direct-store-delivery distribution system through investments of $58,470,000 in
property, plant and equipment during 1996 compared with $39,437,000 and
$31,568,000 during 1995 and 1994, respectively. The Company plans to spend
approximately $30,000,000 during 1997 on property, plant and equipment primarily
for further expansion of its manufacturing capacity and construction of
distribution facilities. It is anticipated that these additions will be largely
financed through internally generated funds and borrowings.
During 1996, the Company acquired the remaining 50.3% of the outstanding
common stock of M-K-D for 320,000 newly issued shares of the Company's common
stock having a value of $10,800,000. (See Note 5 of Notes to Consolidated
Financial Statements.) During 1994, the Company entered into a long-term
distribution agreement with Sunbelt Distributors, Inc., the leading independent
direct-store-delivery ice cream distributor in Texas. (See Note 5 of Notes to
Consolidated Financial Statements.)
The Company's inventory is maintained at the same general level relative to
sales throughout the year by changing production and purchasing schedules to
meet demand. The ratio of inventory to sales typically does not vary
significantly from year to year.
The Company's cash flows from financing activities were $28,513,000 during
1996 compared with $44,948,000 and $21,907,000 during 1995 and 1994,
respectively. Proceeds from the issuance of senior notes and the completion of a
lease transaction involving a large majority of its direct-store-delivery truck
fleet for $26,000,000 provided cash used for investments in property, plant and
equipment and to reduce borrowing on the Company's long-term line of credit
during 1996. (See Note 7 of Notes to Consolidated Financial Statements.) During
1995, the Company converted $100,752,000 of convertible subordinated debentures
into 1,008,000 shares of redeemable convertible Series B preferred stock,
redeemable on June 30, 2001. (See Note 9 of Notes to Consolidated Financial
Statements.) During 1994, the Company completed a transaction with an affiliate
of Nestle USA, Inc. (Nestle), whereby Nestle purchased 3,000,000 newly issued
shares of common stock of the Company for $32 per share and warrants to purchase
an additional 2,000,000 shares at an exercise price of $32 per share. Total
proceeds from the issuance of the shares and warrants was $106,000,000. (See
Note 10 of Notes to Consolidated Financial Statements.)
During 1994, the Company implemented a plan to repurchase up to 5,000,000
shares of common stock through open market purchases and negotiated transactions
(the Stock Repurchase Plan). This plan was completed during 1995. The Company
repurchased and retired 1,291,000 and 3,709,000 of its common stock under the
Stock Repurchase Plan during 1995 and 1994, respectively.
As of year-end 1996, the Company had $4,134,000 in cash and cash
equivalents, and an unused credit line of $99,300,000. 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.
32
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF DREYER'S GRAND ICE CREAM, INC.
<TABLE>
<CAPTION>
NAME JURISDICTION
- ----------------------------------------------------------------------- ----------------------
<S> <C>
Edy's Grand Ice Cream California
*Edy's of Illinois, Inc. Illinois
Dreyer's International, Inc. U.S. Virgin Islands
Grand Soft Capital Company California
Grand Soft Equipment Company Kentucky
(formerly Polar Express Systems International, Inc.)
Portofino Company California
M-K-D Distributors, Inc. Texas
**Snelgrove Ice Cream, Inc. Utah
</TABLE>
- ---------------
* Subsidiary of Edy's Grand Ice Cream
** Subsidiary of M-K-D Distributors, Inc.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-7350, 33-8418, 33-35561, 33-36092, 33-40275,
33-56417, 33-56411, 33-56413 and 333-16701) of Dreyer's Grand Ice Cream, Inc. of
our report dated March 12, 1997 appearing in the 1996 Annual Report to
Stockholders which is incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report on the Financial
Statement Schedule, which appears on page 15 of this Form 10-K. We also consent
to the incorporation by reference of our report dated April 9, 1996 relating to
the consolidated financial statements of M-K-D Distributors, Inc. appearing on
page 17 of this Form 10-K.
PRICE WATERHOUSE LLP
San Francisco, California
March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> DEC-28-1996
<CASH> 4,134
<SECURITIES> 0
<RECEIVABLES> 73,808
<ALLOWANCES> (755)
<INVENTORY> 40,760
<CURRENT-ASSETS> 145,237
<PP&E> 313,380
<DEPRECIATION> (88,342)
<TOTAL-ASSETS> 478,907
<CURRENT-LIABILITIES> 75,101
<BONDS> 163,135
98,806
0
<COMMON> 13,345
<OTHER-SE> 90,718
<TOTAL-LIABILITY-AND-EQUITY> 478,907
<SALES> 791,841
<TOTAL-REVENUES> 796,195
<CGS> 619,574
<TOTAL-COSTS> 619,574
<OTHER-EXPENSES> 154,823
<LOSS-PROVISION> 891
<INTEREST-EXPENSE> 9,548
<INCOME-PRETAX> 11,359
<INCOME-TAX> 4,362
<INCOME-CONTINUING> 6,997
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,997
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
</TABLE>
