Exhibit 99.1
News release via Canada NewsWire, Toronto 416-863-9350 Attention Business/Financial Editors: CoolBrands International Inc. reports financial results for the three and six months ended February 28, 2007 MARKHAM, ON, May 3 /CNW/ - CoolBrands International Inc. (TSX: COB.A) (the "Company") today announced its operating results for the second quarter of fiscal 2007 ended February 28, 2007. Operating results (amounts expressed in U.S. dollars) The Company reported a net loss of $(10,300,000), or $(0.18) per basic and fully diluted share for the three months ended February 28, 2007 compared to a loss of $(7,952,000), or $(0.14) per basic and fully diluted share in the prior year period. For the first six months of fiscal 2007, the Company had a loss of $(15,145,000), or $(0.27) per basic and fully diluted share, compared to a loss of $(12,356,000), or $(0.22) per share in the prior year. The net loss in the second quarter was comprised of a net loss from continuing operations of $(7,627,000), or $(0.13) per basic and fully diluted share, and a loss from discontinued operations of $(2,673,000), or $(0.05) per basic and fully diluted share, which included a gain on sale of discontinued operations of $970,000. Contributing to the loss in the second quarter of fiscal 2007 were severance and other salary related payments and accruals of $4,200,000 relating to the termination of staff as a result of the shutdown of the Company's New York office at the end of March 2007. For the second quarter of fiscal 2007, revenue from continuing operations decreased to $13,659,000, compared to $15,479,000 in the prior year quarter. The decrease was attributable to the closing of the Americana Foods L.P. plant (the Company's 50.1% subsidiary that accounted for $50,745 in annual net sales in Fiscal 2006 but was generating significant operating losses) in October 2006 and a overall reduction in volume from its continuing operations. Cash and working capital Cash increased to $55,102,000 at February 28, 2007, compared to $393,000 at August 31, 2006, principally due to the proceeds from sales of businesses after reducing debt and paying related expenses. Working capital was $26,420,000 an increase of $50,412,000 compared to a working capital deficit of $(23,992,000) at August 31, 2006. Business update During the second quarter of fiscal 2007, the Company completed the sale of its subsidiary company, CoolBrands Dairy, Inc. (its yogurt segment), and its food service segment generating proceeds of approximately $69,000,000, including cash of approximately $63,000,000, a note receivable of $5,000,000 and funds placed into escrow of approximately $1,000,000. At February 28, 2007 the Company operated only in the frozen dessert segment. On March 30, 2007, the Company sold its Whole Fruit and Fruit-a-Freeze assets (part of its frozen dessert operations) for cash proceeds of approximately $4,600,000. As a result of the sale of a majority of its businesses, the Company has provided notice to certain licensors of product brands of its intention to terminate the license agreements with those licensors. The ability of the Company to effect these terminations is uncertain. As reported in the press release issued by the Company on its first quarter results, the Company was served notice on March 12, 2007 by Godiva Chocolatier, Inc. and Godiva Brands, Inc. alleging that the Company has breached its license agreement and the licensor has filed a claim in the Supreme Court of the State of New York for damages of $14 million for breach of contract plus additional damages. The outcome and resolution of such claim is uncertain at this time. In October 2006, the Company, through certain of its subsidiaries, as creditors of Americana Foods, a 50.1% owned subsidiary of the Company, filed an involuntary petition of bankruptcy against Americana Foods. An independent
trustee was appointed to oversee the liquidation of assets and liabilities of Americana Foods and has now sold or liquidated the assets of Americana Foods and is completing his accounting. As a result of its ownership position, the consolidated financial statements of the Company reflect the assets and liabilities of Americana Foods. Once the bankruptcy proceedings are finalized, the Company will remove these assets and liabilities from its balance sheet and anticipates reporting a gain in its income at that time. The Company's Board of Directors is currently evaluating the future direction of the Company. Other In the Management's Discussion and Analysis of financial results accompanying the Company's annual financial statements for the year ended August 31, 2006, management identified certain material weaknesses and deficiencies in internal controls over financial reporting. As noted above, the Company has undergone a significant downsizing and has disposed of or closed down substantially all of its businesses. Accordingly, the Company no longer owns the businesses where the material weaknesses in internal controls over financial reporting had been identified. The Company expects that its financial reporting will become less complicated and management is designing processes and procedures to reflect the size of the organization. However, as a result of the identified deficiencies in internal controls over financial reporting, the Chief Executive Officer and the Chief Financial Officer have not provided the required certifications to the Canadian Securities Commissions on the filing of the financial statements. 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, the ability of CoolBrands to effectively manage the risks inherent with divestitures, mergers and acquisitions, currency risk exposure, existing and potential litigation involving the Company, 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. CoolBrands undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. << CoolBrands International Inc. Consolidated Balance Sheets As at February 28, 2007 and August 31, 2006 ------------------------------------------------------------------------- (Unaudited) (Amounts expressed in thousands of U.S. dollars) February 28, August 31, 2007 2006 Assets Current assets: Cash $ 55,102 $ 393
Restricted cash 864 - Receivables, net 1,970 9,980 Inventories 3,315 6,978 Income taxes recoverable 11,000 11,000 Prepaid expenses 336 740 Current assets of discontinued operations held for sale 8,351 43,174 --------------------------- Total current assets 80,938 72,265 Non-current assets of discontinued operations held for sale 1,272 64,498 Property, plant and equipment 2,045 3,918 Property, plant and equipment subject to bankruptcy proceeding 18,061 18,386 Intangible and other assets 386 993 Goodwill 488 488 --------------------------- $ 103,190 $ 160,548 --------------------------- --------------------------- Liabilities and Shareholders' Equity Current liabilities: Secured notes payable to a related company $ 21,674 $ - Notes payable in default - 10,077 Notes payable of majority owned subsidiary in default - 23,501 Accounts payable 11,183 18,740 Accrued liabilities 12,420 14,615 Current liabilities of discontinued operations held for sale 4,828 24,897 Income taxes payable 6 140 Other liabilities 4,407 4,287 --------------------------- Total current liabilities 54,518 96,257 Long-term debt, including obligations under capital leases 278 348 Non-current liabilities of discontinued operations held for sale - 825 Deferred income taxes 2,000 2,000 --------------------------- Total liabilities 56,796 99,430 --------------------------- Commitments and contingencies Shareholders' Equity: Capital stock 97,804 97,804 Additional paid-in-capital 40,581 38,812 Accumulated other comprehensive loss (2,812) (1,464) Accumulated deficit (89,179) (74,034) ---------------------------
Total shareholders' equity 46,394 61,118 --------------------------- $ 103,190 $ 160,548 --------------------------- --------------------------- CoolBrands International Inc. Consolidated Statements of Operations For the three and six months ended February 28, 2007 and 2006 ------------------------------------------------------------------------- (Unaudited) (Amounts expressed in thousands of U.S. dollars, except for per share data) For the three months ended For the six months ended February 28, February 28, February 28, February 28, 2007 2006 2007 2006 Net revenues: Net sales $ 12,361 $ 14,705 $ 20,116 $ 36,809 Interest, royalties, licensing and consumer products license revenue and other income 1,298 774 1,556 1,590 ------------------------------------------------------- Total net revenues 13,659 15,479 21,672 38,399 ------------------------------------------------------- Cost of goods sold 12,331 20,495 18,879 42,934 Selling, general and administrative expenses 7,708 7,620 15,163 16,445 Interest expense 1,247 313 1,658 710 Provision for impairment - - 725 - ------------------------------------------------------- Loss from continuing operations before income taxes and minority interest (7,627) (12,949) (14,753) (21,690) Minority interest - (1,890) - (3,660) ------------------------------------------------------- Loss before income taxes (7,627) (11,059) (14,753) (18,030) Recovery of income taxes - (5,179) - (8,068) ------------------------------------------------------- Net loss from continuing
operations (7,627) (5,880) (14,753) (9,962) ------------------------------------------------------- Discontinued operations: Loss from discontinued operations (3,643) (2,478) (3,041) (2,800) Gain on sale of discontinued operations 970 406 2,649 406 ------------------------------------------------------- Net income (loss) from discontinued operations (2,673) (2,072) (392) (2,394) ------------------------------------------------------- Net loss $ (10,300) $ (7,952) $ (15,145) $ (12,356) ------------------------------------------------------- ------------------------------------------------------- Per share data: (Loss) per share (basic and diluted): Continuing operations $ (0.13) $ (0.10) $ (0.26) $ (0.18) Discontinued operations (0.05) (0.04) (0.01) (0.04) ------------------------------------------------------- $ (0.18) $ (0.14) $ (0.27) $ (0.22) ------------------------------------------------------- ------------------------------------------------------- Weighted average shares outstanding: Shares used in per share calculation - basic 56,075 56,033 56,075 56,022 Shares used in per share calculation - diluted 56,075 56,033 56,075 56,022 CoolBrands International Inc. Consolidated Statements of Shareholders' Equity For the six months ended February 28, 2007 ------------------------------------------------------------------------- (Unaudited) (Amounts expressed in thousands of U.S. dollars) Accumulated other Total Additional compre- share- Capital paid-in- hensive Accumulated holders' stock capital losses deficit equity ----------------------------------------------------------- Balance at August 31, 2006 $ 97,804 $ 38,812 $ (1,464) $ (74,034) $ 61,118 Comprehensive loss:
Net loss (15,145) (15,145) Other comprehensive loss, net of income taxes: Currency translation adjustment (1,348) (1,348) ----------- Total comprehensive loss (16,493) Fair value of warrants granted for services 1,764 1,764 Stock-based compensation expense 5 5 ----------------------------------------------------------- Balance at February 28, 2007 $ 97,804 $ 40,581 $ (2,812) $ (89,179) $ 46,394 ----------------------------------------------------------- ----------------------------------------------------------- CoolBrands International Inc. Consolidated Statements of Cash Flows For the three and six months ended February 28, 2007 and 2006 ------------------------------------------------------------------------- (Unaudited) (Amounts expressed in thousands of U.S. dollars) For the three months ended For the six months ended February 28, February 28, February 28, February 28, 2007 2006 2007 2006 Cash and short term investments provided by (used in): Operating activities: Net loss $ (10,300) $ (7,952) $ (15,145) $ (12,356) Adjustments to reconcile net loss to net cash flows from operating activities Net loss from discontinued operations 3,643 2,478 3,041 2,800 Gain on sale of discontinued operations (970) (406) (2,649) (406) Provision for asset impairment - - 725 - Depreciation and amortization 349 1,781 922 3,075 Stock-based compensation
expense - 357 5 620 Fair value of warrants issued for services - - 1,764 - Expenses paid in connection with purchase of indebtedness - - 267 - Excess tax benefits from stock-based compensation - (141) - (245) Other (261) - - - Deferred income taxes - (745) - (2,038) Minority interest - (1,770) - (3,660) Cash effect of changes from continuing operations: Receivables (103) (1,832) 8,010 9,163 Inventories 754 3,164 3,663 3,837 Income taxes recoverable - (4,862) - (4,374) Prepaid expenses 525 408 404 222 Accounts payable (3,166) (9,548) (7,557) (21,128) Accrued liabilities (545) (7,975) (2,195) (8,341) Income taxes payable (132) 2,622 (134) 2,622 Other assets 1,164 11 607 (407) Other liabilities 146 (449) 120 (525) ------------- --------------------------- ------------- Cash (used in) provided by operating activities (8,896) (24,859) (8,152) (31,141) ------------- --------------------------- ------------- Investing activities: Purchase of (proceeds from sale of) property, plant and equipment 1,276 (1, 079) 1,276 (1,755) Redemption of investments - - - 7,500 Change of notes receivable - (231) - (231) ------------- --------------------------- ------------- Cash provided by investing activities 1,276 (1,310) 1,276 5,514 ------------- --------------------------- ------------- Financing activities: Proceeds from issuance of Class A and B shares - - - 92 Change in revolving line of credit, secured (696) (3,612) (10,077) (3,612) Repayment of notes payable of majority
owned subsidiary in default - - (2,094) - Repayment of long-term debt (70) (2,068) (70) (3,745) Increase in restricted cash (864) - (864) - Excess tax benefits from stock-based compensation - 141 - 245 ------------- --------------------------- ------------- Cash (used in) financing activities (1,630) (5,539) (13,105) (7,020) ------------- --------------------------- ------------- Effect of foreign currency translation on cash balances (1,316) (49) (1,348) (42) ------------- --------------------------- ------------- Cash flows provided by (used in) discontinued operations Net income (loss) from discontinued operations (3,643) (2,478) (3,041) (2,800) Operating 4,724 19,108 3,140 17,045 Investing 62,953 8,033 75,939 8,033 ------------- --------------------------- ------------- Cash provided by (used in) discontinued operations 64,034 24,663 76,038 22,278 ------------- --------------------------- ------------- Increase (decrease) in cash and cash equivalents 53,468 (7,094) 54,709 (10,411) Cash and cash equivalents - beginning of period 1,634 20,745 393 24,062 ------------- --------------------------- ------------- Cash and cash equivalents - end of period $ 55,102 $ 13,651 $ 55,102 $ 13,651 ------------- --------------------------- ------------- ------------- --------------------------- ------------- Non-cash financing activities: Purchase of indebtedness by 2118769 Ontario Inc. - - $ 21,407 - Payment of expenses in connection with purchase of indebtedness by 2118769 Ontario Inc. - - $ 267 - >> %SEDAR: 00003887E %CIK: 0001005531 /For further information: Carla Aedo, Telephone: (905) 479-8762/ (COB.A.) CO: CoolBrands International Inc. CNW 19:50e 03-MAY-07