SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One) FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-19867
ESKIMO PIE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 54-0571720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
901 Moorefield Park Drive, Richmond, VA 23236
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (804) 560-8400
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of April 30, 1995.
Class Outstanding at April 30, 1996
----- -----------------------------
Common Stock, $1.00 Par Value 3,479,183
<PAGE>
ESKIMO PIE CORPORATION
Index
Page Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balanced Sheets
March 31, 1996 and December 31, 1995 1
Consolidated Condensed Statements of Income
Three Months Ended March 31, 1996 and 1995 2
Consolidated Condensed Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995 3
Notes to Consolidated Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 8
<PAGE>
Eskimo Pie Corporation
Consolidated Condensed Balance Sheets ( Unaudited )
<TABLE>
<CAPTION> March 31, December 31,
1996 1995
(In thousands)
______ _______
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $767 $717
Receivables 13,207 8,695
Inventories 6,939 5,323
Prepaid expenses 1,342 1,375
----- -----
Total current assets 22,255 16,110
Property, plant and equipment - net 8,881 9,055
Goodwill and other intangibles 18,601 18,864
Other assets 1,740 1,843
----- -----
$51,477 $45,872
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term borrowings $3,900 $1,200
Accounts payable 4,591 3,592
Accrued advertising and promotion 1,466 975
Accrued compensation and related amounts 245 430
Other accrued expenses 342 542
Income taxes 975 178
--- ---
Total current liabilities 11,519 6,917
Long term debt 6,000 6,000
Convertible subordinated notes 3,800 3,800
Postretirement benefits and other 3,520 3,468
Stockholders' equity:
Common stock 3,478 3,475
Additional capital 4,671 4,620
Retained earnings 18,489 17,592
------ ------
Total stockholders' equity 26,638 25,687
------ ------
$51,477 $45,872
======= =======
</TABLE>
<PAGE>
Eskimo Pie Corporation
Consolidated Condensed Statements of Income ( Unaudited )
Three months ended
March 31,
1996 1995
------ -------
(In thousands, except share data)
Net sales $19,769 $18,953
Cost of products sold 12,008 11,152
------ ------
Gross profit 7,761 7,801
Advertising and sales promotion 3,270 3,581
General and administrative 2,595 2,356
----- -----
Operating income 1,896 1,864
Interest income 29 61
Interest expense and other (182) (216)
---- ----
Income before income taxes 1,743 1,709
Income taxes 672 674
--- ---
Net income $1,071 $1,035
====== ======
Per common share
Primary
Weighted average number of
common shares outstanding 3,476,221 3,474,585
--------- ---------
Net income $0.31 $0.30
===== =====
Fully diluted
Weighted average number of
common shares outstanding 3,638,788 3,637,152
Net income $0.30 $0.29
===== =====
Cash dividend $0.05 $0.05
===== =====
2
<PAGE>
Eskimo Pie Corporation
Consolidated Condensed Statements of Cash Flows ( Unaudited )
<TABLE>
<CAPTION>
Three months ended
March 31,
1996 1995
( In thousands )
<S> <C> <C>
Operating activities
Net income $1,071 $1,035
Adjustments to reconcile net income to net cash provided by operating
activities :
Depreciation and amortization 615 600
Deferred income taxes and other (123) (49)
Increase in receivables (4,512) (3,396)
Increase in inventories (1,333) (1,389)
Increase in accounts payable
and accrued expenses 1,901 1,220
----- -----
Net cash used in operating activities (2,381) (1,979)
Investing activities
Acquisition of business and
intangible assets - net of cash acquired (78) (6,124)
Capital expenditures (167) (274)
Sale of short term investments -- 195
Other 150 (348)
--- ----
Net cash used in investing activities (95) (6,551)
Financing activities
Payment of cash dividends (174) (173)
Borrowings 2,700 5,425
Principal payment on long-term debt -- (44)
----- ------
Net cash provided by financing activities 2,526 5,208
----- -----
Increase (decrease) in cash and cash equivalents 50 (3,322)
Cash and cash equivalents at beginning of period 717 4,797
--- -----
Cash and cash equivalents at end of period $767 $1,475
==== ======
</TABLE>
3
ESKIMO PIE CORPORATION
Notes to Consolidated Condensed financial statements
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements reflect all adjustments (consisting of only
normal recurring accruals) necessary for a fair presentation of the Company's
financial position as of March 31, 1996, and its results of operations for the
three months ended March 31, 1996 and 1995. The results of operations for any
interim period are not necessarily indicative of results for the full year.
These financial statements should be read in conjunction with the financial
statements and notes thereto contained in the Company's 1995 Annual Report to
Stockholders.
NOTE B-INVENTORIES
Classifications of inventories are as follows:
March 31, December 31,
1996 1995
(In thousands)
Finished goods $4,403 $3,802
Raw materials and packaging supplies 3,757 2,631
------- -------
Total FIFO inventories 8,160 6,433
LIFO reserves (1,221) (1,110)
------- -------
$6,939 $5,323
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Company markets, primarily through a national network of
licensed manufacturers, a broad range of frozen novelty, frozen yogurt, ice
cream and sorbet products under the ESKIMO PIE, Welch's, Weight Watchers,
SnackWell's, OREO and RealFruit brand names. The Company also manufactures and
markets ingredients and packaging to the dairy industry.
RESULTS OF OPERATIONS
The following table sets forth the composition of the consolidated
statements of income as a percentage of net sales:
Three Months Ended
March 31,
1996 1995
Net sales 100.0% 100.0%
Cost of sales 60.7 58.8
----- -----
Gross profit 39.3 41.2
Advertising and sales promotion 16.6 18.9
General & administrative 13.1 12.4
----- -----
Operating income 9.6 9.9
Interest and other-net (.8) (.8)
Income before income taxes 8.8 9.1
Income taxes 3.4 3.6
----- -----
Net income 5.4% 5.5%
===== =====
5
<PAGE>
NET SALES AND GROSS PROFIT
Net sales by brand or item consisted of the following:
Three Months Ended
March 31,
------------------------------------------
Brand or Item 1996 1995
------------- --------------- ---------------------
Company owned brands $ 7,855 39.7% $11,551 60.9%
Sublicensed brands 8,847 44.8 4,449 23.5
Flavors, packaging and other 3,067 15.5 2,953 15.6
------- ----- ------- -----
$19,769 100.0% $18,953 100.0%
======= ===== ======= =====
According to Information Resources, Inc., sales in the frozen desert
market were down 3% to 5% due to the severe winter weather during the quarter.
Also contributing to the decline in the sale of Company owned brands were the
continuing formulation changes and equipment installations relating to the
Reduced Fat Eskimo Pie line.
Sales of sublicensed brands almost doubled for the quarter reflecting
the introduction of the SnackWell's and OREO products and the inclusion of the
RealFruit line of products. This increase more than offset the decline in
Company owned brands, resulting in an overall increase of 4% in the sale of
branded products.
Flavors, packaging and other sales increased 3.9% during the first
quarter. As a result of the above, total sales increased 4.3% for the first
quarter.
As a percent of sales, gross profit decreased to 39.3% for the quarter
from 41.2% for the same period in 1995. The change in the gross profit margin
resulted from a change in product mix due to the aforementioned increase in
sales of sublicensed brands. The lower gross profit margins on sublicensed
brands reflect the costs associated with the the rights to utilize these brand
names.
EXPENSES AND OTHER INCOME
Contributing to the decrease in advertising and sales promotion expense
is the strength of the Nabisco brand name which has required, on a relative
basis, lower fixed introductory costs as well as a change to volume based
promotional commitments during the year.
General and administrative expenses increased from 12.4% to 13.1% of
sales for the quarter partially due to start-up costs incurred in conjunction
with the introduction and expansion of the Nabisco and Reduced Fat Eskimo Pie
lines of products.
6
<PAGE>
OPERATING OUTLOOK
Licensing sales should benefit from the introduction and expansion of
the aforementioned new products, however, the Company also anticipates a
corresponding increase in expenses. Management believes that new product
introductions, as well as recently implemented package redesigns and new
promotional activity, should stimulate sales and provide for a more favorable
mix of sales between sublicensed and Company owned brands.
LIQUIDITY AND CAPITAL RESOURCES
The following is a summary of the cash flows of the Company:
Three Months Ended
March 31,
1996 1995
Cash used in operations ($2,381) ($1,979)
Acquisition of business and intangible assets (78) (6,124)
Capital expenditures (167) (274)
Borrowings 2,700 5,425
Cash dividends paid (174) (173)
Proceeds from sale of stock and short term investments -- 229
Principal payments and other 150 (426)
------- -------
Increase (decrease) in cash and cash equivalents $ 50 ($3,322)
======= =======
The use of cash in operations is attributable to seasonal working
capital requirements.
The Company believes that the existing equity, cash generated from
operations and funds available under its borrowing arrangements provide
sufficient funds and financial flexibility to support its on going business,
strategic objectives and debt repayment requirements.
On May 1, 1996, the Board of Directors declared the Company's 14th
consecutive quarterly cash dividend of $.05 per share payable on July 3, 1996 to
shareholders of record on June 14, 1996. While the Company anticipates that a
regular quarterly dividend will continue, the amount and timing of any future
dividend will depend on the general business conditions encountered by the
Company, as well as the financial condition, earnings and capital requirements
of the Company and other factors deemed relevant by the Board of Directors.
7
<PAGE>
PART II, OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
Exhibit 27. Financial data schedule.
b. Reports on Form 8-K: None
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ESKIMO PIE CORPORATION
Date: _________________________ 1996 By ____________________________
David V. Clark
Chairman, of the Board,
President and
Chief Executive Officer
Date: _________________________ 1996 By _____________________________
Thomas M. Mishoe, Jr.
Chief Financial Officer
Date: _________________________ 1996 By _____________________________
Larry F. English
Controller
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 767
<SECURITIES> 0
<RECEIVABLES> 13,207
<ALLOWANCES> 0
<INVENTORY> 6,939
<CURRENT-ASSETS> 22,255
<PP&E> 21,172
<DEPRECIATION> 12,291
<TOTAL-ASSETS> 51,477
<CURRENT-LIABILITIES> 11,519
<BONDS> 9,800
0
0
<COMMON> 3,478
<OTHER-SE> 23,160
<TOTAL-LIABILITY-AND-EQUITY> 51,477
<SALES> 19,769
<TOTAL-REVENUES> 19,769
<CGS> 12,008
<TOTAL-COSTS> 17,873
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 195
<INCOME-PRETAX> 1,743
<INCOME-TAX> 672
<INCOME-CONTINUING> 1,071
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,071
<EPS-PRIMARY> .31
<EPS-DILUTED> .30
</TABLE>
