UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: Commission File Number:
March 25, 2000 0-13544
BEN & JERRY'S HOMEMADE, INC.
(Exact name of registrant as specified in its charter)
VERMONT 03-0267543
(State of incorporation) (I.R.S. Employer Identification No.)
30 Community Drive
South Burlington, Vermont 05403-6828
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code:
(802) 846-1500
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 shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
-------- --------
Indicate the number of shares outstanding of each of the classes of common stock
outstanding as of the latest practicable date. 6,148,031 shares of Class A
Common Stock and 791,098 shares of Class B Common Stock outstanding as of May 2,
2000.
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BEN & JERRY'S HOMEMADE, INC.
Form 10-Q for quarter ended March 25, 2000
INDEX
PART I: FINANCIAL INFORMATION PAGE NO.
Consolidated Balance Sheets as of
March 25, 2000 and December 25, 1999...........................................1
Consolidated Statements of Income for the
Thirteen weeks ended March 25, 2000
and March 27, 1999.............................................................2
Consolidated Statements of Cash Flows for the
Thirteen weeks ended March 25, 2000
and March 27, 1999.............................................................3
Notes to Consolidated Financial Statements.................................4 - 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................................6 - 14
PART II: OTHER INFORMATION
Item 6-Exhibits and Reports on Form 8-K.......................................15
Signatures....................................................................16
Exhibit 11....................................................................17
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<TABLE>
<CAPTION>
BEN & JERRY'S HOMEMADE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except per share amounts)
<S> <C> <C>
March 25, December 25,
2000 1999
----------- ------------
(Unaudited) (Note)
ASSETS
Current assets:
Cash and cash equivalents $ 15,375 $ 25,260
Short-term investments 21,297 21,331
Trade accounts receivable
(less allowance of $1,002 in 2000
and $966 in 1999 for doubtful accounts) 25,348 18,833
Inventories 19,870 13,937
Deferred income taxes 5,272 5,609
Prepaid expenses and other current assets 3,588 2,377
--------- -----------
Total current assets 90,750 87,347
Property, plant and equipment, net 56,724 56,557
Investments 200 200
Deferred income taxes 1,085 656
Other assets 6,004 5,842
--------- -----------
$154,763 $ 150,602
========= ===========
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 42,047 $ 38,915
Current portion of long-term debt and
obligations under capital leases 5,686 5,627
--------- -----------
Total current liabilities 52,733 44,542
Long-term debt and obligations under capital leases 16,363 16,669
Stockholders' equity:
$1.20 noncumulative Class A preferred stock - par
value $1.00 per share,redeemable at $12.00 per
share; 900 shares authorized, issued and outstanding;
aggregated preference on liquidation - $9,000 1 1
Class A common stock - $.033 par value; authorized
20,000,000 shares; issued: 6,775,188 at March 25,
2000 and 6,759,276 at December 25, 1999 224 223
Class B common stock - $.033 par value; authorized
3,000,000 shares; issued: 794,821 at March 25, 2000
and 801,813 at December 25, 1999 26 27
Additional paid-in-capital 53,157 52,961
Retained earnings 50,047 48,713
Accumulated other comprehensive loss (935) (460)
Treasury stock, at cost: 632,841 Class A and 1,092
Class B shares at March 25, 2000 and 644,606 Class
A and 1,092 Class B shares at December 25, 1999 (11,853) (12,074)
--------- ----------
Total stockholders' equity 90,667 89,391
--------- ----------
$154,763 $ 150,602
========= ==========
Note: The balance sheet at December 25, 1999 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
BEN & JERRY'S HOMEMADE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands except per share amounts)
<S> <C> <C>
For the Thirteen weeks ended
-----------------------------------------
March 25, March 27,
2000 1999
-------- --------
Net sales $54,179 $50,066
Cost of sales 32,173 31,977
------- -------
Gross profit 22,006 18,089
Selling, general and
administrative expenses 20,339 16,646
Other income (expense):
Interest income 577 498
Interest expense (599) (390)
Other income, net 407 290
------- -------
385 398
------- -------
Income before income taxes 2,052 1,841
Income taxes 718 644
------- -------
Net income $ 1,334 $ 1,197
======= =======
Shares used to compute net income
per common share
Basic 6,929 7,110
Diluted 7,285 7,552
Net income per common share
Basic $ 0.19 $ 0.17
Diluted $ 0.18 $ 0.16
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
BEN & JERRY'S HOMEMADE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<S> <C> <C>
Thirteen weeks ended
-----------------------------------------
March 25, March 27,
2000 1999
-------- --------
Cash flows from operating activities:
Net income $ 1,334 $ 1,197
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,165 2,177
Provision for bad debts 40 50
Deferred income taxes (92) (746)
Stock compensation 250
Loss on disposition of property, plant & equipment 6 3
Changes in operating assets and liabilities:
Accounts receivable (7,786) (10,686)
Inventories (5,933) (3,834)
Prepaid expenses 20 357
Accounts payable and accrued expenses 1,903 5,124
Income taxes payable 1,229 1,166
-------- --------
Net cash used for operating activities (6,864) (5,192)
Cash flows from investing activities:
Additions to property, plant and equipment (2,193) (1,606)
Proceeds from sale of property, plant & equipment 11 5
Changes in other assets 12 2
Increase in investments (126) (3,575)
Acquisitions, net of cash acquired (330) (142)
-------- --------
Net cash used for investing activities (2,626) (5,316)
Cash flows from financing activities:
Repayments of long-term debt and capital leases (247) (82)
Repurchase of common stock (1,524)
Proceeds from issuance of common stock 167 364
-------- --------
Net cash used for financing activities (80) (1,242)
Effect of exchange rate changes on cash (315) 2
-------- --------
Decrease in cash and cash equivalents (9,885) (11,748)
Cash and cash equivalents at beginning of period 25,260 25,111
-------- --------
Cash and cash equivalents at end of period $15,375 $13,363
======== ========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All numbers in tables in thousands except per share data)
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the thirteen weeks ended March 25, 2000 are
not necessarily indicative of the results that may be expected for the year
ending December 30, 2000. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 25, 1999.
2. INVENTORIES
Inventories consist of the following:
March 25, December 25,
2000 1999
---- ----
Ice cream and ingredients $17,657 $12,245
Paper goods 973 659
Food, beverage and gift items 1,240 1,033
----- --------
Total $19,870 $13,937
======= =======
3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
March 25, December 25,
2000 1999
---- ----
Trade accounts payable $11,962 $10,079
Accrued expenses 13,498 13,838
Accrued payroll and related costs 3,178 3,392
Accrued promotional costs 6,392 5,467
Accrued marketing costs 2,069 1,322
Accrued insurance expense 951 537
Income taxes payable 2,444 1,215
Deferred revenue 1,553 3,065
------- -------
$42,047 $38,915
======= =======
4. COMPREHENSIVE INCOME
Total comprehensive income for the thirteen weeks ended March 25, 2000 amounted
to $859,000 compared to $1,206,000 for the same period in 1999. Other
comprehensive income consisted of adjustments for net foreign currency
translation gains (losses) in the
<PAGE>
amounts of ($315,000) and $9,000 for the periods ended March 25, 2000 and March
27, 1999, respectively, and unrealized losses on available for sale securities
in the amount of $160,000 for the period ended March 25, 2000.
5. SEGMENT INFORMATION
Ben & Jerry's Homemade, Inc. has one reportable segment: ice cream manufacturing
and distribution. The Company manufactures super premium ice cream, frozen
yogurt, sorbet and various ice cream novelty products. These products are
distributed throughout the United States primarily through independent
distributors and in certain foreign countries.
Information concerning operations by geographic area are as follows:
March 25, March 27,
2000 1999
------- --------
Sales to Unaffiliated Customers
United States $47,244 $46,593
Foreign 6,935 3,473
------- -------
$54,179 $50,066
======= =======
Net Income (Loss)
United States $ 1,158 $ 770
Foreign 176 427
------- -------
$ 1,334 $ 1,197
======= =======
Long-Lived Assets
United States $58,002 $64,194
Foreign 4,926 5,166
------- -------
$62,928 $69,360
======= =======
Note: Foreign operations include the United Kingdom, France, Canada, The
Netherlands, Belgium, Israel and Japan.
6. BUSINESS ACQUISITION
Effective January 18, 2000, the Company purchased the assets of one of its
franchisees for approximately $330,000. The acquisition was accounted for using
the purchase method of accounting. The acquisition was for a scoop shop located
in Shelburne, Vermont. The excess of the acquisition cost over the fair value of
the net assets acquired was $198,000 and has been recorded as goodwill, which is
being amortized on a straight-line basis over five years.
7. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities (FAS 133). FAS 133 will require the Company to record all
derivatives on the balance sheet at fair value. For derivatives that are hedges,
changes in the fair value of derivatives will be offset by changes in the
underlying hedged item in earnings in the same period. In June 1999, the
Financial Accounting Standards Board delayed the
<PAGE>
effective date of FAS 133 to the first quarter of fiscal years beginning after
June 15, 2000. The Company expects to adopt FAS 133 in the first quarter of
fiscal year 2001.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) 101, Revenue Recognition in Financial Statements. SAB
101 clarifies the SEC staff's views on applying generally accepted accounting
principles to revenue recognition in financial statements. In March 2000, the
SEC issued an amendment, SAB 101A, which deferred the effective date of SAB 101.
The Company will adopt SAB 101 in the second quarter of 2000 in accordance with
the amendment. The adoption of this SAB is not expected to have a significant
impact on the Company's financial statements.
8. SUBSEQUENT EVENT
On April 11, 2000 the Board approved an Agreement and Plan of Merger between the
Company and Conopco, Inc. and Vermont All Natural Expansion Company dated as of
April 11, 2000(the "Merger Agreement") under which each share of Common Stock of
Ben & Jerry's would be converted into cash at $43.60 per share. On April 18,
2000 Vermont All Natural Expansion Company, a wholly-owned subsidiary of
Conopco, Inc., a subsidiary of Unilever N.V. commenced a Tender Offer for all
shares of Common Stock of Ben & Jerry's for cash at $43.60 per share. This
Tender Offer is in process at the date of this report on Form 10-Q.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
The following table sets forth certain items as a percentage of net sales which
are included in the Company's Consolidated Statements of Income and the
percentage increase of such items as compared to the prior period.
Percentage of Net Sales Period-to-Period
Thirteen Weeks Ended Increase
March 25, March 27, Thirteen Weeks 2000
2000 1999 Compared to 1999
---- ---- ----------------
Net sales 100.0% 100.0% 8.2%
Cost of sales 59.4 63.9 .6
----- ----- -----
Gross profit 40.6 36.1 21.7
Selling, general and
Administrative expenses 37.5 33.2 22.2
Other Income .7 .8 (3.3)
----- ----- -----
Income before income taxes 3.8 3.7 11.5
Income taxes 1.3 1.3 11.5
----- ----- -----
Net income 2.5% 2.4% 11.4%
===== ===== =====
<PAGE>
Thirteen Weeks Ended March 25, 2000 and March 27, 1999
Net Sales
Net sales for the thirteen weeks ended March 25, 2000 increased 8.2% to $54.2
million compared to $50.1 million for the same period in 1999. The increase in
net sales for the first quarter was driven by continued domestic growth in the
Company's core pint and bulk business as well as an increase in net sales in
both the United Kingdom and Japan in comparison to the prior year. Total pint
volume increased 4% compared to the same period in 1999, which was primarily
attributable to the Company's original line of products. Total unit volume of 2
1/2-gallon bulk container products increased 18.8% compared to the same period
in 1999.
Packaged sales (primarily pints) represented approximately 86% of total net
sales in the first quarter of 2000 and 88% of total net sales in the first
quarter of 1999. Net sales of 2 1/2-gallon bulk containers represented
approximately 7% of total net sales in the first quarters of 2000 and 1999. Net
sales of novelty products (including single servings) accounted for
approximately 5% of total net sales in the first quarter of 2000, compared to 4%
in 1999. Net sales from the Company's retail stores represented 2% of total net
sales in the first quarter of 2000 compared to 1% for the same period in 1999.
International sales were $6.9 million for the first quarter of 2000,
representing 12.8% of net sales, as compared to $3.5 million in 1999, or 6.9% of
net sales. The increase in 2000 was primarily due to higher sales in the United
Kingdom and Japan.
Cost of Sales and Gross Profit
Cost of sales in the first quarter of 2000 increased approximately $196,000 or
0.6% over the same period in 1999 and overall gross profit as a percentage of
net sales was 40.6% in the first quarter of 2000 as compared to 36.1% in the
comparable period last year. The higher gross profit as a percentage of net
sales resulted from decreases in dairy prices as compared to the higher dairy
prices experienced in the first quarter of 1999, increased sales volumes and
favorable manufacturing variances resulting from better plant utilization due to
higher production volumes.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 22.2% to $20.3 million in
the first quarter of 2000 from $16.6 million in 1999. Selling, general and
administrative expenses as a percentage of net sales increased from 33.2% in
1999 to 37.5% in 2000. The $3.7 million increase primarily reflects increased
advertising and promotion expenses and professional fees in connection with the
proposed acquisition by Unilever (NYSE: UN; NYSE: UL) and exploration of
alternative transactions in the first quarter of 2000. In addition, the Company
is continuing to invest more heavily in its international operations, most
notably in the United Kingdom, Japan and Israel, in order to capitalize on
further opportunities to grow its ice cream sales outside the United States.
Other Income
Other income in the first quarter of 2000 was $407,000 compared to $290,000 for
<PAGE>
the same period in 1999. This increase is primarily related to realized gains on
foreign currency exchange contracts. Interest income increased to $577,000 for
the first quarter of 2000 compared to $498,000 for the same period in the prior
year. Interest expense increased to $599,000 during the first quarter of 2000
compared to $390,000 for the same period in the prior year due. This increase is
primarily due to interest expense from debt acquired through the Company's 60%
ownership interest in its Israeli licensee and an offset related to the $5
million Senior Notes principal payment made in October 1999.
Income Taxes
The Company's recorded income tax expense during the first quarter of 2000 was
$718,000, compared to $644,000 in the first quarter of 1999. The Company's
effective tax rate in the first quarters of 2000 and 1999 was 35%. Management
expects 2000's effective income tax rate to remain at approximately 35% based
upon the expected geographic mix of earnings.
Net Income
Net income for the first quarter of 2000 was $1.3 million compared to $1.2
million in 1999. Net income as a percentage of net sales was 2.5% in the first
quarter of 2000 compared to net income of 2.4% of net sales in the first quarter
of 1999. Diluted net income per share was $.18 per common share for the first
quarter of 2000 compared to a diluted net income per common share of $.16 for
the first quarter of 1999.
During the first quarter of 2000, the Company incurred significant expenditures
(classified within S,G&A) for services of its investment banker, consultants and
legal counsel, including separate legal counsel for various directors, in
connection with the investigations and deliberations of the Board with respect
to the various Indications of Interest to acquire the Company and Alternative
Transactions under consideration by the Board.
The Company expects to face increased domestic competition in 2000, which will
require increased selling and marketing expenditures, and may result in a slower
rate of growth in net sales and may well have an adverse effect on future
results, as compared with results for the Year 1999. See "Risk Factors".
Liquidity and Capital Resources
As of March 25, 2000, the Company had $36.7 million of cash, cash equivalents,
and short term investments ($15.4 million of cash and cash equivalents and $21.3
million of short term investments), a $9.9 million decrease since December 25,
1999. Net cash used for operations in the first quarter of 2000 was
approximately $6.9 million. Uses of cash included increases in accounts
receivable and inventories of $7.8 million and $5.9 million respectively, and
additions to property, plant and equipment, primarily for equipment upgrades at
the Company's manufacturing facilities, of $2.2 million. Partially offsetting
these uses of cash was an increase in accounts payable and accrued expenses of
$1.9 million and an increase in income taxes payable of $1.2 million. The
increase in accounts receivable is due to higher domestic net sales in March
2000 compared to December 1999 combined with increased sales in the United
Kingdom which has slower collections.
<PAGE>
Inventories have increased from $13.9 million at December 1999 to $19.9 million
as of March 25, 2000. This increase reflects seasonally higher raw material
inventories and increased finished goods inventories. The increase in accounts
payable and accrued expenses reflect the seasonality of the Company's business,
increased sales and marketing expenses and professional fees.
The Company anticipates capital expenditures in the remainder of 2000 of
approximately $6.8 million. Most of these projected capital expenditures relate
to equipment upgrades and enhancements at the Company's manufacturing facilities
and computer-related expenditures.
The Company's short and long-term debt includes $20 million aggregate principal
amount of Senior Notes issued in 1993 and 1994. The second principal payment of
$5 million was paid in October 1999 and the remaining principal is payable in
annual installments through 2003. These Senior Note Agreements contain certain
restrictive covenants requiring maintenance of minimum levels of working
capital, net worth and debt to capitalization ratios. As of March 25, 2000 the
Company was in default of its working capital requirement. The Company received
a waiver of compliance related to its working capital requirements from one of
the two Senior Note Agreement holders. The Company has not received a waiver of
compliance relating to its working capital requirements from its second Senior
Note Agreement holder, however, the default was cured within the Cure Period
provided under the Senior Note Agreement.
The Company has available two $10 million unsecured working capital line of
credit agreements with two banks. Interest on borrowings under the agreements is
set at the banks' base rate or at LIBOR plus a margin based on a pre-determined
formula. No amounts were borrowed under these or any bank agreements during
2000. The working capital line of credit agreements expire December 23, 2001.
Management believes that internally generated funds, cash currently on hand,
investments held in marketable securities and equipment lease financing and/or
borrowings under the Company's two unsecured bank lines of credit will be
adequate to meet anticipated operating and capital requirements.
Impact of Year 2000
The Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company
expensed approximately $620,000 during 1999 in connection with remediating its
systems. The Company is not aware of any material problems resulting from Year
2000 issues, either with its products, its internal systems, or the products and
services of third parties. The Company will continue to monitor its mission
critical computer applications and those of its suppliers and vendors throughout
the year 2000 to ensure that any latent Year 2000 matters that may arise are
addressed promptly.
<PAGE>
Euro Conversion
On January 1, 1999, certain member countries of the European union established
fixed conversion rates between their existing currencies and the European
Union's common currency ("the euro"). The former currencies of the participating
countries are scheduled to remain legal tender as denominations of the euro
until January 1, 2002 when the euro will be adopted as the sole legal currency.
The Company has evaluated the potential impact on its business, including the
ability of its information systems to handle euro-denominated transactions and
the impact on exchange costs and currency exchange rate risks. The conversion to
the euro is not expected to have a material impact on the Company's operations
or financial position.
Forward-Looking Statements
This section, as well as other portions of this document, includes certain
forward-looking statements about the Company's business, new products, sales,
dairy prices, other expenditures and cost savings, effective tax rate, operating
and capital requirements and refinancing. Any such statements are subject to
risks that could cause the actual results or needs to vary materially and are
also subject to changes in connection with any potential Indications of Interest
to acquire the Company or Alternative Transactions. These risks are discussed in
"Risk Factors" below.
In addition, forward-looking statements may be included in various other Company
documents to be issued in the future and in various oral statements by Company
representatives to security analysts and investors from time to time.
Risk Factors
Dependence on Independent Ice Cream Distributors. Historically, the Company has
been dependent on maintaining satisfactory relationships with Dreyer's Grand Ice
Cream, Inc. ("Dreyer's") and the other independent ice cream distributors that
have acted as the Company's exclusive or master distributor in their assigned
territories. In 1998, Dreyer's distributed significantly more than a majority of
the sales of Ben & Jerry's products. While the Company believes its
relationships with Dreyer's and its other distributors generally have been
satisfactory and have been instrumental in the Company's growth, the Company has
at times experienced difficulty in maintaining such relationships to its
satisfaction. In August 1998 - January 1999, the Company redesigned its
distribution network, entering into a distribution agreement with The Pillsbury
Company ("Pillsbury") and a new agreement with Dreyer's. These arrangements took
effect in September 1999, except for certain territories which were effective in
April - May 1999. The Company believes the terms of the new arrangements will be
more favorable to the Company and expects that, under the distribution network
redesign, no one distributor will account for more than 40% of the Company's net
sales. The October 1999 transfer of the Haagen-Dazs unit to the recently formed
Pillsbury/Nestle ice cream joint venture has presented certain
opportunities/difficulties for the Company, which entered into an
<PAGE>
amendment with the Ice Cream Partners joint venture in December 1999, in
connection with the assignment of that agreement from Pillsbury to the joint
venture.
However, both the recently formed Pillsbury/Nestle ice cream joint venture
(through its Haagen-Dazs super premium ice cream unit), and Dreyer's with its
fall 1999 super premium ice cream market entry are direct competitors of the
Company.
Since available distribution alternatives are limited and continue to be
adversely impacted by consolidation in the industry, there can be no assurance
that difficulties in maintaining satisfactory relationships with its two
principal distributors (who are competitors) and its other distributors, some of
which are also competitors of the Company, will not have a material adverse
effect on the Company's business (See "Business - Markets and Customers").
Growth in Sales and Earnings. In the first quarter of 2000, net sales of the
Company increased 8.2% to $54.2 million from $50.1 million for the first quarter
of 1999. Total pint volume increased 4.0% compared to 1999. Based on information
provided by Information Resources, Inc., a software and marketing information
services company ("IRI"), the Company believes that the U.S. super premium and
premium plus ice cream, frozen yogurt and sorbet industry category sales
increased 10% in 1999 compared to 1998. Given these overall domestic super
premium industry trends, the successful introduction of innovative flavors on a
periodic basis has become increasingly important to sales growth by the Company.
Accordingly, the future degree of market acceptance of any of the Company's new
products, which will be accompanied by significant promotional expenditures, is
likely to have an important impact on the Company's 2000 and future financial
results. However, the Company expects that, due to increased domestic
competition, it will need to increase its selling and marketing expenses and
that its rate of growth in net sales may be slower in the current year, which
may be expected to adversely affect earnings (See "Management's Discussion and
Analysis of Financial Conditions and Results of Operations").
Competitive Environment. The super premium frozen dessert market is highly
competitive, with the distinctions between the super premium category and the
"adjoining" premium and premium plus categories less marked than in the past. As
noted above, the ability to successfully introduce innovative flavors on a
periodic basis that are accepted by the marketplace is a significant competitive
factor. In addition, the Company's principal competitors, two of which are
distributors for the Company, are large companies with resources significantly
greater than the Company's. In January and September 1999 Dreyer's launched two
lines of super premium ice cream, Godiva and Dreamery(TM), with significant
marketing programs including radio, outdoor and television advertising as well
as heavy price discounting to gain trial. The Godiva and Dreamery(TM) products
are marketed primarily in pints. Additional super premium products may be
introduced by other ice cream competitors. In October 1999, the U.S. ice cream
operations of Pillsbury (Haagen-Dazs) and Nestle were consolidated into a joint
venture, Ice Cream Partners. The Company expects strong competition to continue
and increase, including competition for the limited shelf space for the frozen
dessert category in
<PAGE>
supermarkets and other retail food outlets, the impact of consolidation in the
retail food outlets and increased competition from the Company's two principal
distributors.
Volatile Cost of Raw Materials. Management believes that the general trend of
volatility in dairy ingredient commodity costs may continue. While dairy
commodity costs for the first quarter of 2000 were lower than in 1999 it is
possible that at some future date both gross margins and earnings may not be
adequately protected by pricing adjustments, cost control programs and
productivity gains.
Reliance on a Limited Number of Key Personnel. The success of the Company is
significantly dependent on the services of Perry Odak, the Chief Executive
Officer, and a limited number of executive managers working under Mr. Odak, as
well as certain continued services of Jerry Greenfield the Chairperson of the
Board and co-founder of the Company; and Ben Cohen, Vice Chairperson and
co-founder of the Company. Loss of the services of any of these persons could
have a material adverse effect on the Company's business.
The Company's Social Mission. The Company's basic business philosophy is
embodied in a three-part "mission statement," which includes a "social mission"
to "operate the Company in a way that actively recognizes the central role that
business plays in the structure of society by initiating innovative ways to
improve the quality of life of a broad community: local, national and
international. Underlying the mission of Ben & Jerry's is the determination to
seek new and creative ways of addressing all three parts, while holding a deep
respect for individuals inside and outside the Company and for the communities
of which they are a part." The Company believes that implementation of its
social mission, which is being more integrated into the Company's business, has
been beneficial to the Company's overall financial performance. However, it is
possible that at some future date the amount of the Company's energies and
resources devoted to its social mission could have some material adverse
financial effect.
International. Total international net sales represented approximately 12.8% of
total consolidated net sales in the first quarter of 2000. The Company's
principal competitors have substantial market shares in various countries
outside the United States, principally Europe and Japan. The Company sells
product in the United Kingdom and France, and through license arrangements in
the Netherlands and Belgium. Sales were also made in Japan and Singapore and the
Company started selling in Peru and Lebanon in 1999 under license arrangements.
In 1987, the Company granted an exclusive license to manufacture and sell Ben &
Jerry's products in Israel. In 1999, the Company made an investment of $1
million in its Israeli licensee, which gave the Company a 60% ownership
interest. This subsidiary has received an additional $500,000 in the form of
loans from the Company in order to meet its current obligations and has
generated net losses in 1999 and 2000 year to date. In May 1998, the Company
signed a Licensing Agreement with Delicious Alternative Desserts, LTD to
manufacture, sell and distribute Ben & Jerry's products through the wholesale
distribution channels in Canada. The Company is investigating the possibility of
further international expansion. However, there can be no assurance that the
Company will be successful in all of its present international markets or in
<PAGE>
entering (directly, or indirectly through licensing) on a long-term profitable
basis, such additional international markets as it selects.
Control of the Company. The Company has two classes of common stock - the Class
A Common Stock, entitled to one vote per share, and the Class B Common Stock
(authorized in 1987), entitled, except to the extent otherwise provided by law,
to ten votes per share. Ben Cohen, Jerry Greenfield and Jeffrey Furman
(collectively the "Principal Stockholders") hold shares representing 47% of the
aggregate voting power in elections for directors, permitting them as a
practical matter to elect all members of the Board of Directors and thereby
effectively control the business, policies and management of the Company.
Because of their significant holdings of Class B Common Stock, the Principal
Stockholders may continue to exercise this control even if they sell substantial
portions of their Class A Common Stock.
In addition, the Company issued all of the authorized Class A Preferred Stock to
the Foundation in 1985. The Class A Preferred Stock gives the Foundation a class
voting right to act with respect to certain Business Combinations (as defined in
the Company's charter) and significantly limits the voting rights that holders
of the Class A Common Stock and Class B Common Stock, the owners of virtually
all of the equity in the Company, would otherwise have with respect to such
Business Combinations.
Also, in April 1998, the Legislature of the State of Vermont amended a provision
of the Vermont Business Corporation Act to provide that the directors of a
Vermont corporation may also consider, in determining whether an acquisition
offer or other matter is in the best interests of the corporation, the interests
of the corporation's employees, suppliers, creditors and customers, the economy
of the state in which the corporation is located and including the possibility
that the best interests of the corporation may be served by the continued
independence of the corporation. Also, in August 1998, following approval by its
Board of Directors, the Company put in place two Shareholder Rights Plans, one
pertaining to the Class A Common Stock and one pertaining to the Class B Common
Stock. These Plans are intended to protect stockholders by compelling someone
seeking to acquire the Company to negotiate with the Company's Board of
Directors in order to protect stockholders from unfair takeover tactics and to
assist in the maximization of stockholder value. These Rights Plans, which are
common for public companies in the United States, may also be deemed to be
"anti-takeover" provisions in that the Board of Directors believes that these
Plans will make it difficult for a third party to acquire control of the Company
on terms which are unfair or unfavorable to the stockholders.
While the Board of Directors believes that the Class B Common Stock and the
Class A Preferred Stock were important elements in keeping Ben & Jerry's an
independent, Vermont-based business focused on its three-part corporate mission,
the Class B Common Stock and the Class A Preferred Stock (which may be converted
into Class A Common Stock or redeemed in the case of the Class A Preferred
Stock, as the case may be, by the specified votes of the Board of Directors) may
be deemed to be "anti-takeover" provisions in that the Board of Directors
believes the existence of these securities has made it difficult for a third
party to acquire control of the Company on terms opposed by the holders of the
Class B Common Stock, including primarily the Principal
<PAGE>
Stockholders, or The Foundation, or for incumbent management and the Board of
Directors to be removed unless the Class B Common Stock were to be converted
into Class A Common Stock by the Board.
In addition, the 1997 amendments to the Company's Articles of Association to
classify the Board of Directors and to add certain other related provisions and
the April 1998 Vermont Legislative Amendment of the Vermont Business Corporation
Act and the Shareholder Rights Plans put in place in August, 1998 (see
"Anti-Takeover Effects of Class B Common Stock, Class A Common Stock, Class A
Preferred Stock, Classified Board of Directors, Vermont Legislation and
Shareholder Rights Plans" in Item 1) may be deemed to be "anti-takeover"
provisions in that the Board of Directors believes that these amendments and
legislation will make it difficult for a third party to acquire control of the
Company on terms opposed by the holders of the Class B Common Stock, including
primarily the Principal Stockholders and the Foundation, or for incumbent
management and the Board of Directors to be removed unless the Class B Common
Stock were to be converted into Class A Common Stock by the Board.
Indications of Interest to Acquire the Company; Alternative Transactions; Merger
Agreement with Unilever. The Company announced on December 2, 1999 that it had
received indications of interest to acquire the Company and Alternative
Transactions to acquire the Company at prices significantly above the closing
price on NASDAQ on the day before the December 2, 1999 press release ($21.00).
These Indications of Interest were subject to conditions and, together with
Alternative Transactions under which the Company would remain an independent
company, were considered by the Board of Directors up through April 11, 2000,
when the Board approved the Agreement and Plan of Merger between the Company,
and Conopco, Inc. and Vermont All Natural Expansion Company dated as of April
11, 2000 (The "Merger Agreement"), under which each share of Common Stock of Ben
& Jerry's would be converted into cash at $43.60 per share. On April 18, 2000,
Vermont All Natural Expansion Company, a wholly-owned subsidiary of Conopco,
Inc., a subsidiary of Unilever N.V. commenced a Tender Offer for all shares of
Common Stock of Ben & Jerry's for cash at $43.60 per share. This Tender Offer is
in process at the date of this Report on Form 10-Q.
In the event that Ben & Jerry's is acquired by Unilever pursuant to the Tender
Offer and Merger Agreement, the above description of Risk Factors, which are
applicable to the Company as an independent stand alone business, will no longer
be applicable. For information on the Merger Agreement see the Company's
Schedule 14d-9 filed with the SEC on April 18, 2000 and the Merger Agreement, a
copy of which is filed as an exhibit to the Company's Schedule 14d-9.
Market Risk
The Company is exposed to a variety of market risks, including changes in
interest rates affecting the return on its investments and foreign currency
fluctuations. The Company's exposure to market risk for a change in interest
rates relates primarily to the Company's investment portfolio. The Company has
classified all of its short-term and long-term
<PAGE>
investments as "available for sale" except for certificates of deposits which
are held to maturity. The majority of these investments are municipal bonds and
fixed income preferred stock. At March 25, 2000, unrealized losses amounted to
$484,000. The Company does not intend to hold such investments to maturity if
there is an underlying change in interest rates or the Company's cash flow
requirements. Certificates of deposits do not expose the consolidated statement
of operations or balance sheets to fluctuations in interest rates. The Company's
exposure to market risk for fluctuations in foreign currency relate primarily to
the amounts due from subsidiaries. Exchange gains and losses related to amounts
due from subsidiaries have not been material for the periods presented.
<PAGE>
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit (11) Statement Re: Computation of Per Share Earnings
Exhibit (27) Financial Data Schedule
(b) No reports on Form 8-K was filed during the quarter ended March 25, 2000,
for which this report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be duly signed on its behalf by the
undersigned thereunto duly authorized, being also its principal financial and
accounting officer.
BEN & JERRY'S HOMEMADE, INC.
BY: /s/ Frances Rathke
-------------------------------------------
Frances Rathke, Chief FinancialOfficer
(Principal Accounting and Financial Officer)
DATE: May 09, 2000
<PAGE>
<TABLE>
<CAPTION>
BEN & JERRY'S HOMEMADE, INC.
EXHIBIT 11- COMPUTATION OF NET EARNINGS PER SHARE
(In thousands except per share amounts)
<S> <C> <C>
Thirteen weeks ended
March 25, March 27,
2000 1999
------- --------
Numerator:
Net income $1,334 $1,197
Denominator:
Denominator for basic earnings per share-
weighted-average shares 6,929 7,110
Dilutive stock options 356 442
Denominator for diluted earnings per share-
adjusted weighted-average shares and
assumed conversions 7,285 7,552
Net income per common share
Basic $0.19 $0.17
Diluted $0.18 $0.16
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
See accompanying notes.
$ in thousands except per share data
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-START> DEC-26-1999
<PERIOD-END> MAR-25-2000
<EXCHANGE-RATE> 1.00
<CASH> 15,375
<SECURITIES> 0
<RECEIVABLES> 25,348
<ALLOWANCES> 0
<INVENTORY> 19,870
<CURRENT-ASSETS> 90,750
<PP&E> 56,724
<DEPRECIATION> 0
<TOTAL-ASSETS> 154,763
<CURRENT-LIABILITIES> 47,733
<BONDS> 0
0
1
<COMMON> 224
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 154,763
<SALES> 54,179
<TOTAL-REVENUES> 0
<CGS> 32,173
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (385)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 599
<INCOME-PRETAX> 2,052
<INCOME-TAX> 718
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,334
<EPS-BASIC> .19
<EPS-DILUTED> .18
</TABLE>
