Exhibit 99.1
CoolBrands International Inc.
UNAUDITED INTERIM FINANCIAL STATEMENTS
In accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the Company discloses that its auditors have not reviewed the unaudited financial statements for the period ended November 30, 2004
CoolBrands International Inc.
Consolidated Balance Sheets
as at November 30, and August 31, 2004
(in thousands of US dollars)
November 30, 2004 (Unaudited) $ | August 31, 2004 $ | |||||||
---|---|---|---|---|---|---|---|---|
Assets | ||||||||
Current assets: | ||||||||
Cash and short term investments | 70,803 | 64,327 | ||||||
Receivables | 66,416 | 67,152 | ||||||
Receivables - affiliates | 2,934 | 3,883 | ||||||
Inventories | 50,490 | 49,076 | ||||||
Prepaid expenses | 10,472 | 5,938 | ||||||
Future income taxes | 5,060 | 4,907 | ||||||
Total current assets | 206,175 | 195,283 | ||||||
Future income taxes | 3,357 | 3,232 | ||||||
Property, plant and equipment | 30,073 | 28,730 | ||||||
License agreements | 5,716 | 5,747 | ||||||
Intangible and other assets | 6,545 | 6,433 | ||||||
Goodwill | 76,027 | 73,336 | ||||||
327,893 | 312,761 | |||||||
Liabilities and shareholders' equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | 42,274 | 37,506 | ||||||
Payables - affiliates | 399 | 850 | ||||||
Accrued liabilities | 26,086 | 20,624 | ||||||
Income taxes payable | 1,064 | 4,936 | ||||||
Future income taxes | 4,049 | 1,849 | ||||||
Current maturities of long-term debt | 20,192 | 8,492 | ||||||
Total current liabilities | 94,064 | 74,257 | ||||||
Long-term debt | 8,816 | 19,262 | ||||||
Other liabilities | 2,800 | 2,758 | ||||||
Future income taxes | 3,772 | 3,638 | ||||||
Total liabilities | 109,452 | 99,915 | ||||||
Minority interest | 7,446 | 8,088 | ||||||
Shareholders' Equity: | ||||||||
Capital stock | 97,485 | 97,485 | ||||||
Contributed surplus | 34,166 | 18,650 | ||||||
Cumulative translation adjustment | 4,224 | 672 | ||||||
Retained earnings | 75,120 | 87,951 | ||||||
Total shareholders' equity | 210,995 | 204,758 | ||||||
327,893 | 312,761 | |||||||
CoolBrands International Inc.
Consolidated Statements of Earnings
for the three months ended November 30, 2004 and 2003
(Unaudited)
(in thousands of US dollars, except share data)
2004 $ | 2003 $ | |||||||
---|---|---|---|---|---|---|---|---|
Revenues: | ||||||||
Sales | 96,320 | 91,648 | ||||||
Franchising and licensing revenues: | ||||||||
Royalty income | 437 | 448 | ||||||
Franchise and license fees | 1,162 | 213 | ||||||
Consumer products license fee | 100 | 62 | ||||||
Drayage and other income | 2,465 | 11,531 | ||||||
Total revenues | 100,484 | 103,902 | ||||||
Operating expenses: | ||||||||
Cost of goods sold | 75,824 | 68,827 | ||||||
Selling, general and administrative expenses | 20,534 | 25,054 | ||||||
Stock-based compensation expense | 80 | 1,157 | ||||||
Interest expense | 355 | 433 | ||||||
Total operating expenses | 96,793 | 95,471 | ||||||
Minority interest | (642 | ) | 216 | |||||
Earnings before income taxes | 4,333 | 8,215 | ||||||
Provision for income taxes | 1,728 | 3,210 | ||||||
Net earnings | 2,605 | 5,005 | ||||||
Earnings per share: | ||||||||
Basic and diluted | 0.05 | 0.09 | ||||||
Weighted average shares outstanding: | ||||||||
Shares used in per share calculation - basic | 55,893 | 54,413 | ||||||
Shares used in per share calculation - diluted | 56,109 | 55,891 |
CoolBrands International Inc.
Consolidated Statements of Shareholders’ Equity
For the three months ended November 30, 2004
(in thousands of US dollars, except share data)
Capital Stock | Contributed surplus | Cumulative translation adjustment | Retained earnings | ||||||||||||||||||||
Class A Subordinate voting shares # | Class B Multiple voting shares # | Warrants # | Amount $ | $ | $ | $ | |||||||||||||||||
Balance at August 31, 2004 | 49,863 | 6,030 | — | 97,485 | 18,650 | 672 | 87,951 | ||||||||||||||||
Net earnings | 2,605 | ||||||||||||||||||||||
Retroactive adjustment for | |||||||||||||||||||||||
stock-based compensation expense | 15,436 | (15,436 | ) | ||||||||||||||||||||
Stock-based compensation expense | 80 | ||||||||||||||||||||||
Foreign currency translation | |||||||||||||||||||||||
adjustment | 3,552 | ||||||||||||||||||||||
Balance at November 30, 2004 | 49,863 | 6,030 | — | 97,485 | 34,166 | 4,224 | 75,120 | ||||||||||||||||
CoolBrands International Inc.
Consolidated Statements of Cash Flows
for the three months ended November 30, 2004 and 2003
(Unaudited)
(in thousands of US dollars)
2004 $ | 2003 $ | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Cash and short term investments provided by (used in): | |||||||||||
Operating activities: | |||||||||||
Net earnings | 2,605 | 5,005 | |||||||||
Items not affecting cash: | |||||||||||
Depreciation and amortization | 1,194 | 1,096 | |||||||||
Stock-based compensation expense | 80 | 1,157 | |||||||||
Future income taxes | 2,056 | (1,881 | ) | ||||||||
Minority interest | (642 | ) | 216 | ||||||||
Changes in current assets and liabilities: | |||||||||||
Receivables | 711 | (3,930 | ) | ||||||||
Receivables - affiliates | 949 | (441 | ) | ||||||||
Allowance for doubtful accounts | 25 | 457 | |||||||||
Inventories | (1,414 | ) | (939 | ) | |||||||
Prepaid expenses | (4,534 | ) | 1,925 | ||||||||
Accounts payable | 4,768 | (4,456 | ) | ||||||||
Payables - affiliates | (451 | ) | (65 | ) | |||||||
Accrued liabilities | 5,462 | 5,945 | |||||||||
Income taxes payable | (3,872 | ) | (2,445 | ) | |||||||
Other assets | (146 | ) | (76 | ) | |||||||
Other liabilities | 42 | (75 | ) | ||||||||
Cash provided by operating activities | 6,833 | 1,493 | |||||||||
Investing activities: | |||||||||||
Purchase of leasehold improvements and equipment | (2,152 | ) | (2,255 | ) | |||||||
Purchase of license agreements | (14 | ) | |||||||||
Repayment of notes receivable | 4 | 2 | |||||||||
Cash used in investing activities | (2,162 | ) | (2,253 | ) | |||||||
Financing activities: | |||||||||||
Proceeds from issuance of Class A and B shares | 12,100 | ||||||||||
Capital contributions from Partnership's minority partner | 8,907 | ||||||||||
Change in revolving line of credit, secured | 2,223 | ||||||||||
Repayment of long-term debt | (969 | ) | (3,752 | ) | |||||||
Cash provided by financing activities | 1,254 | 17,255 | |||||||||
Increase (decrease) in cash flow due to changes in foreign | |||||||||||
exchange rates | 551 | (123 | ) | ||||||||
Increase in cash and short term investments | 6,476 | 16,372 | |||||||||
Cash and short-term investments - beginning of period | 64,327 | 21,760 | |||||||||
Cash and short-term investments - end of period | 70,803 | 38,132 | |||||||||
CoolBrands International Inc.
Consolidated Notes to Interim Financial Statements
(Unaudited)
November 30, 2004 and 2003
(Tabular amounts are expressed in thousands)
1. | Significant accounting policies |
The financial statements of the Company have been prepared by management in accordance with generally accepted accounting principles in Canada for interim financial statements. The financial statements have, in management’s opinion, been properly prepared using judgment within reasonable limits of materiality. These interim financial statements do not include all the note disclosures required for annual financial statements and therefore they should be read in conjunction with the company’s audited financial statements for the year ended August 31, 2004. The significant accounting policies follow those disclosed in the most recently reported annual financial statements. |
2. | Accounting estimates |
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimated. |
3. | Changes in accounting policy |
The Company adopted the U.S dollar as its functional and reporting currency effective September 1, 2004, the commencement of fiscal 2005. The Company adopted the U.S. dollar for its financial reporting since the majority of its business is conducted in the United States and to make comparisons between current and prior periods more meaningful to investors. For comparative purposes, historical financial statements and notes have been restated into U.S. dollars in accordance with generally accepted accounting principals. |
The Company adopted, on a retroactive basis without restatement, the recommendation of CICA Handbook Section 3870, “Stock-based compensation and other stock-based payments”, which now requires companies to adopt the fair value based method for all stock-based awards granted on or after September 1, 2002. Previously, the Company was required to disclose only the pro-forma effect of stock options issued to employees and employee directors in the notes to the financial statements. The effect of this change in accounting policy reduced retained earnings at September 1, 2004 by $15,436,000 with a corresponding increase to reported contributed surplus. |
CoolBrands International Inc.
Consolidated Notes to Interim Financial Statements
(Unaudited)
November 30, 2004 and 2003
(Tabular amounts are expressed in thousands of US dollars except share data)
4. | Segment information |
Prepackaged consumer products $ | Foodservice $ | Dairy components $ | Franchising and licensing $ | Corporate $ | Consolidated $ | |||||||||||||||
For the three months ended November 30, 2004 | ||||||||||||||||||||
Revenue, external | 87,598 | 4,611 | 5,065 | 3,166 | 44 | 100,484 | ||||||||||||||
Intersegment revenue | 11,794 | 115 | 597 | 44 | 12,550 | |||||||||||||||
Segment earnings before income taxes | 2,979 | 386 | 818 | 226 | (76 | ) | 4,333 | |||||||||||||
For the three months ended November 30, 2003 | ||||||||||||||||||||
Revenue, external | 91,411 | 3,914 | 5,615 | 2,943 | 19 | 103,902 | ||||||||||||||
Intersegment revenue | 14,268 | 137 | 1,189 | 41 | 15,635 | |||||||||||||||
Segment earnings before income taxes | 7,043 | 348 | 933 | 95 | (204 | ) | 8,215 |
5. | Capital stock |
The Company had the following equity securities and stock options outstanding as of January 12, 2005: |
Class A Subordinate Voting Shares | Class B Multiple Voting Shares | Stock Options | ||||||
49,891 | 6,030 | 3,740 | ||||||
6. | Subsequent event |
December 22, 2004, CoolBrands announced that it entered into an agreement to acquire the yogurt business of Kraft Foods, Inc. (NYSE: KFT) for approximately US$ 59,000,000. The acquired brands include Breyers Fruit on the Bottom, Light and Creme Savers cup yogurt varieties and Creme Savers Smoothie drinkable yogurts. Pursuant to the agreement, CoolBrands’ wholly owned subsidiary, Integrated Brands, Inc., will purchase substantially all of Kraft’s assets related to its yogurt business, including a license for the Breyers trademark, a license for the Creme Savers trademark, a license for the Light ‘n Lively trademark and Kraft’s manufacturing facility in North Lawrence, New York. The transaction, which is subject to regulatory approval, is expected to be completed in the first calendar quarter of 2005. CoolBrands expects to finance approximately U.S.$ 45,000,000 in bank debt and utilize cash to pay for the remainder of the purchase price. CoolBrands estimates that this acquisition will contribute approximately U.S.$ 40,000,000 to U.S.$ 45,000,000 in revenues and net earnings of approximately U.S.$2,000,000 to U.S.$2,500,000 in the last half of fiscal 2005. |