Exhibit 99.1
News release via Canada NewsWire, Toronto 416-863-9350 Attention Business/Financial Editors: CoolBrands International Inc. reports financial results for the year ended August 31, 2006 ("Fiscal 2006") MARKHAM, ON, Jan. 29 /CNW/ - CoolBrands International Inc. (TSX: COB.A) today announced its operating results for Fiscal 2006. Operating results (amounts expressed in 000's, except per share data, reported in USD) For Fiscal 2006, net revenues from continuing operations decreased to $99,348, compared to $149,710 for Fiscal 2005, a 33.6% decrease. The net loss for Fiscal 2006 was ($70,182) (($1.25) basic and diluted loss per share), compared to net loss of ($74,070) (($1.32) basic and diluted earnings per share) for Fiscal 2005. The decrease in net revenues for Fiscal 2006 from continuing operations reflects the decrease in sales generated by the frozen dessert segment, which was partially offset by the decrease in trade promotion payments and slotting fees made to customers, which are treated as a reduction in revenues, and the elimination of drayage income (which is earned by Eskimo Pie Frozen Distribution, Inc. and reclassified to discontinued operations). In Fiscal 2006, net sales declined by 32.2% to $96,936, compared with $142,873 for Fiscal 2005. The decline in sales came from most of our frozen dessert brands, but was partially offset by sales of new products introduced in 2006. Gross profit percentage for Fiscal 2006 declined to (14.2)%, compared with 0.5% for Fiscal 2005. Gross profit percentage for the periods presented has been calculated by dividing gross profit margin by net sales. Gross profit margin is calculated by subtracting cost of goods sold from net sales. The decline in gross profit percentage was primarily due to: << 1. Our inability to cover fixed overhead costs in both our manufacturing and distribution operations due to the lack of production and sales; and 2. The change in mix of frozen dessert products being sold in Fiscal 2006 with lower gross profit margins, compared with Fiscal 2005. In addition to the negative gross margins during Fiscal 2006, results were adversely affected by: 1. The loss on impairment of goodwill of $3,500 incurred with respect to the frozen dessert segment to recognize the deterioration in value of the business as a result of the declining sales or the potential abandonment or termination of various licensing agreements. 2. The loss on impairment relating to certain licenses not likely to continue, and related prepaid packaging and design costs totaling $3,609. 3. The loss on impairment of $1,890 incurred with respect to property, plant and equipment currently in storage. 4. The write-off of debt acquisition costs totaling $2,015 reflected in selling, general and administrative expenses. 5. The loss on impairment of $1,140 relating to deferred acquisition costs, prepaid royalties and net receivables from Americana Foods. 6. The loss generated by the Company's majority owned subsidiary, Americana Foods L.P., which totaled $23,542, net of minority interest, and which included the losses on impairment aggregating $11,150 relating to the reduction to estimated fair market value of accounts receivable ($1,500), inventory ($5,750), and property, plant and equipment ($3,900).
7. The recording of a loss on impairment of goodwill associated with the yogurt segment. In Fiscal 2006, the Company began to market the yogurt segment for sale and on January 2, 2007, entered into a definitive agreement to sell the yogurt segment to an unaffiliated third party. An impairment of $5,428 was recorded to recognize the difference between the carrying value of the net assets of the yogurt segment and the fair value based upon the definitive agreement. The impairment was included in loss from discontinued operations in the Fiscal 2006 statement of operations. >> The Fiscal 2005 year results were adversely affected by the non-cash pre-tax asset impairment charge of $51,141, which resulted from the impairment of goodwill and intangible assets related to our frozen dessert segment. Additionally we recognized a loss on impairment of $4,384 with respect to our franchising and licensing segment which was included in discontinued operations in Fiscal 2005. Cash and working capital Cash, investments and restricted cash decreased to $393 at August 31, 2006, compared to $41,562 at August 31, 2005. Working capital decreased to ($23,992) at August 31, 2006, compared to $28,477 at August 31, 2005. Our current ratio declined to 0.75 to 1.0 at August 31, 2006 from 1.2 to 1.0 at August 31, 2005. These changes in current assets and current liabilities are attributable primarily to continued cash operating losses, the use of cash investments and restricted cash to repay a portion of the outstanding indebtedness that existed at August 31, 2005, the classification of all bank indebtedness, which was in default at August 31, 2006, as current liabilities, and the decrease in accounts receivable and inventory due to the overall decline of the business, which was greater than the decrease to accounts payable and accrued liabilities. Because the Company had a negative working capital position and the business continues to decline, the Company may not be able to continue as a going concern without the consummation of the sale of assets and/or businesses. On January 24, 2007, the Company's subsidiaries, Eskimo Pie Corporation and Integrated Brands Inc., sold their Eskimo Pie and Chipwich Brands and Real Fruit trademark, along with Eskimo Pie soft serve brands and related foodservice business segment to Dreyer's Grand Ice Cream Holdings, Inc. ("Dreyer's"), and utilized a portion of the proceeds to repay the amounts outstanding under the Corporate Credit Facility. Filing Default Further to the Corporation's press release dated October 4, 2006 in which CoolBrands stated that it would not meet the statutory filing deadline for its audited annual financial statements, related management's discussion and analysis and annual information form for its financial year ended August 31, 2006, the Company announces that it has today filed its audited annual financial statements and related management's discussion and analysis with the applicable Canadian securities regulators. CoolBrands did not file its annual information form, its certifications required pursuant to National Instrument 52-109 or its Fiscal 2007 first quarter financial statements and therefore does not expect that the management cease trade order related to CoolBrands' securities and imposed against all of the directors and certain officers of CoolBrands will be lifted at the present time.
<< CoolBrands International Inc. Consolidated Balance Sheets as at August 31, 2006 and 2005 ------------------------------------------------------------------------- (Amounts expressed in thousands of dollars) 2006 2005 Assets Current Assets: Cash $ 393 $ 24,062 Investments - 7,500 Restricted cash - 10,000 Receivables, net 12,780 22,833 Receivables - affiliates - 1,780 Inventories 9,131 29,918 Current assets of discontinued operations held for sale 38,142 52,719 Income taxes recoverable 11,000 9,767 Prepaid expenses 819 1,490 Deferred income taxes, net of valuation allowance - 5,148 ----------- ----------- Total current assets 72,265 165,217 Non-current assets of discontinued operations held for sale 51,927 64,453 Deferred income taxes, net of valuation allowance - 14,799 Property, plant and equipment 23,051 31,976 Intangible and other assets 1,515 5,857 Goodwill 11,790 15,543 ----------- ----------- $160,548 $297,845 ----------- ----------- ----------- ----------- Liabilities and Shareholders' Equity Current Liabilities: Notes payable in default $ 10,077 $ - Notes payable of majority owned subsidiary in default 23,501 - Accounts payable 20,462 28,198 Accrued liabilities 14,900 21,106 Payables - affiliates - 620 Income taxes payable 140 - Deferred income taxes, net of valuation allowance - 93 Current liabilities of discontinued operations held for sale 22,890 34,009 Short term borrowings - 34,553 Current maturities of long-term debt - 18,161 Other liabilities 4,287 - ----------- ----------- Total current liabilities 96,257 136,740
Other liabilities - 2,442 Non-current liabilities of discontinued operations held for sale 825 684 Long-term debt, including obligations under capital leases 348 8,248 Deferred income taxes 2,000 6,140 ----------- ----------- Total liabilities 99,430 154,254 ----------- ----------- Minority interest - 5,185 ----------- ----------- Commitments and contingencies Shareholders' Equity: Capital stock 97,804 97,578 Additional paid-in capital 38,812 46,376 Accumulated other comprehensive losses (1,464) (1,696) Accumulated deficit (74,034) (3,852) ----------- ----------- Total shareholders' equity 61,118 138,406 ----------- ----------- $160,548 $297,845 ----------- ----------- ----------- ----------- CoolBrands International Inc. Consolidated Statements of Operations ------------------------------------------------------------------------- (Amounts expressed in thousands of dollars, except for per share data) 2006 Pro Forma 2006 (Unaudited) 2005 Net revenues: Net sales $ 96,936 $ 46,191 $142,873 Other income 2,412 2,267 6,837 ------------------------------------- Total net revenues 99,348 48,458 149,710 Cost of goods sold 110,718 49,424 142,181 Selling, general and administrative expenses 40,101 34,527 37,530 Interest expense 2,000 401 1,687 Asset impairment 21,289 10,139 51,141 Gain on sale of building - - (3,515) ------------------------------------- Loss from continuing operations before income taxes and minority interest (74,760) (46,033) (79,314) Minority interest 5,185 - 2,700 ------------------------------------- Loss from continuing operations before income taxes (69,575) (46,033) (76,614) -------------------------------------
(Recovery of) Provision for income taxes: Current (11,100) (11,100) (8,439) Deferred 5,145 5,145 841 ------------------------------------- (5,955) (5,955) (7,598) ------------------------------------- Net loss from continuing operations (63,620) (40,078) (69,016) ------------------------------------- Discontinued operations: Loss from operations of discontinued operations (6,972) (6,972) (5,054) Gain on sale of franchising segment 410 410 Loss generated by majority owned subsidiary, net of minority interest - (23,542) - Net loss from discontinued operations (6,562) (30,104) (5,054) ------------------------------------- Net loss $(70,182) $(70,182) $ (74,070) ------------------------------------- ------------------------------------- Per share data: Loss per share (basic and diluted): Continuing operations $(1.13) $(0.71) $(1.23) Discontinued operations (0.12) (0.54) (0.09) ------------------------------------- $(1.25) $(1.25) $(1.32) ------------------------------------- ------------------------------------- Weighted average shares outstanding: Shares used in per share calculation - basic and diluted 56,047 56,047 55,924 ------------------------------------- ------------------------------------- CoolBrands International Inc. Consolidated Statements of Cash Flows for the years ended August 31, 2006 and 2005 ------------------------------------------------------------------------- (Amounts expressed in thousands of dollars) 2006 2005 Cash and short-term investments provided by (used in): Operating activities: Net loss $(70,182) $(74,070) Adjustments to reconcile net loss to net cash flows from operating activities Depreciation and amortization 5,026 4,466 Asset impairment 21,289 51,141 Stock-based compensation expense 443 1,918 Deferred income taxes 5,145 493 Gain on sale of building and other assets - (3,634) Minority interest (5,185) (2,696) Net loss from discontinued operations 6,972 5,054 Gain on sale of franchising segment (410) - Cash effect of changes from continuing operations Receivables 9,304 22,487 Receivables - affiliates 1,569 1,831 Allowance for doubtful accounts (537) (110) Inventories 15,037 6,261 Prepaid expenses 676 (2,000) Income taxes recoverable (1,046) (9,767) Accounts payable (7,736) 10,848 Payables - affiliates (620) (230) Accrued liabilities (4,753) 1,665 Income taxes payable - (5,240) Other assets 1,022 (559) Other liabilities 694 124 ----------- ----------- Cash (used in) provided by operating activities (23,292) 7,982 ----------- -----------
Investing activities: Purchase of property, plant and equipment (1,416) (13,500) Purchase of license agreements and other intangibles (26) Proceeds from sale of building - 5,434 Decrease(increase) in restricted cash 10,000 (10,000) Purchase of investments - (2,500) Redemption of investments 7,500 23,050 Decrease (increase) in notes receivable 15 (36) ----------- ----------- Cash provided by investing activities 16,099 2,422 ----------- ----------- Financing activities: Change in revolving line of credit, secured - 2,661 Proceeds from notes payable in default 10,077 - Proceeds from notes payable of majority owned subsidiary, in default 23,918 - Repayment of notes payable of majority owned subsidiary, in default (417) - Proceeds from short term borrowings - 44,553 Proceeds from issuance of Class A and B shares 139 57 Repayment of short term borrowings (34,553) (10,000) Repayment of long-term debt (26,409) (3,785) ----------- ----------- Cash (used in) provided by financing activities (27,245) 33,486 ----------- ----------- Decrease (increase) in cash flows due to changes in foreign exchange rates 230 (695) ----------- ----------- Cash flows provided by (used in) from discontinued operations: Net loss from discontinued operations (6,972) (5,054) Operating 8,937 8,311 Investing 8,574 (58,445) Financing - (222) ----------- ----------- Cash provided by (used in) discontinued operations 10,539 (55,410) ----------- ----------- (Decrease) in cash and cash equivalents (23,669) (12,215) Cash and cash equivalents - beginning of year 24,062 36,277 ----------- ----------- Cash and cash equivalents - end of year $ 393 $ 24,062 ----------- ----------- ----------- ----------- CoolBrands International Inc. Summary Financial Data ------------------------------------------------------------------------- (Amounts expressed in thousands of dollars, except for per share data) Year ended August 31, 2006 2005 ------------------------------------------------------------------------- Total net revenues from continuing operations $ 99,348 $149,710 ------------------------ Net loss from continuing operations (63,620) (69,016) ------------------------ Gain on sale of discontinued operations 410 - Net loss from discontinued operations (6,972) (5,054) ------------------------ Discontinued operations (6,562) (5,054) ------------------------ Net loss (70,182) (74,070) ------------------------ ------------------------ Loss per share from continuing operations: Basic and Diluted (1.13) (1.23) Loss per share from discontinued operations: Basic and Diluted (0.12) (0.09) Loss per share: Basic and Diluted (1.25) (1.32)
For the year ended August 31, August 31, 2006 2005 $ $ ------------------------------------------------------------------------- Depreciation and amortization 5,026 4,466 Interest expense 2,000 1,687 Weighted average number of shares outstanding: Shares used in per share calculation - basic 56,047 55,924 Shares used in per share calculation - diluted 56,047 55,924 >>About CoolBrands International Inc.: CoolBrands is focused on manufacturing, marketing and selling a broad range of ice creams and frozen snacks under nationally and internationally recognized brand names. For additional information please visit CoolBrands' website at www.coolbrandsinc.com. Forward-Looking Statements This press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding, among other things, statements relating to goals, plans and projections regarding CoolBrands' financial position and business strategy. These statements may be identified by the fact that they use such words as "anticipate", "estimate", "expect", "intend", "plan", "believe" and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes and results to differ materially from current expectations. These factors include, among other things, market factors, competitive product development and promotional activity, the level of consumer interest in CoolBrands' products, product costing, the weather, the performance of management, including management's ability to implement its plans as contemplated, CoolBrands' relationship with its customers, franchisees, licensees and licensors, governmental regulations and legislation and litigation. CoolBrands undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. %SEDAR: 00003887E %CIK: 0001005531 /For further information: Carla Aedo, Telephone: (905) 479-8762/ (COB.A.) CO: CoolBrands International Inc. CNW 21:00e 29-JAN-07