UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FEBRUARY 4, 2003
(Date of Earliest Event Reported)
DREYER'S GRAND ICE CREAM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-14190 94-2967523
(State or other (Commission File (IRS Employer
jurisdiction Number) Identification
of incorporation) No.)
5929 COLLEGE AVENUE, OAKLAND, CALIFORNIA 94618
(Address of principal executive offices, including Zip Code)
(510) 652-8187
(Registrant's telephone number, including area code)
TABLE OF CONTENTS
Item 5 Other Events and Regulation FD Disclosure...................1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..........................................2
REPORT OF INDEPENDENT ACCOUNTANTS....................................9
CONSOLIDATED STATEMENT OF INCOME....................................10
CONSOLIDATED BALANCE SHEET..........................................11
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY...........12
CONSOLIDATED STATEMENT OF CASH FLOWS................................13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..........................14
Item 7 Exhibits....................................................27
SIGNATURES..........................................................28
CERTIFICATIONS......................................................29
EXHIBIT INDEX.......................................................31
EX-23.1 Consent of Independent Accountants.........................32
ITEM 5 OTHER EVENTS AND REGULATION FD DISCLOSURE.
Effective December 30, 2001, Dreyer's Grand Ice Cream, Inc. (the Company)
adopted the provisions of Issue 01-9 of the Emerging Issues Task Force of the
Financial Accounting Standards Board, "Accounting for Consideration Given by a
Vendor to a Customer (Including a Reseller of the Vendor's Products)" (EITF
01-9) and Statement of Financial Accounting Standards (SFAS) No. 142 "Goodwill
and Other Intangible Assets" (SFAS No. 142). EITF 01-9 requires that discounts
(off-invoice promotion and coupons), amounts paid to retailers to advertise a
company's products (fixed trade promotion) and fees paid to retailers to obtain
shelf space (slotting fees) be recorded as a reduction of revenue. Previously,
the Company classified these expenses as selling, general and administrative
expenses.
On June 16, 2002, the Company entered into an Agreement and Plan of Merger
and Contribution, by and among the Company, New December, Inc., December Merger
Sub, Inc., Nestle Holdings, Inc. and NICC Holdings, Inc., as amended on October
25, 2002, and in connection therewith, New December, Inc. is planning to file a
Form S-4 Registration Statement (Registration Statement).
In connection with the filing of the Registration Statement, the Company
is required to include, or incorporate by reference, in such Registration
Statement the Company's financial statements that give effect to the adoption of
the provisions of EITF 01-9 and the transition provisions of paragraph 61 of
SFAS No. 142. As a result, the Current Report on Form 8-K filed on November 5,
2002 includes the information in Item 7-Management's Discussion and Analysis of
Financial Condition and Results of Operations and Item 8-Financial Statements
and Supplementary Data appearing in the Company's Form 10-K for the fiscal year
ended December 29, 2001 giving effect to the adoption of the provisions of EITF
01-9 and the transition provisions of paragraph 61 of SFAS No. 142. In
accordance with the provisions of EITF 01-9, all periods presented have been
reclassified on a retroactive basis.
This Current Report on Form 8-K/A amends the Current Report on Form 8-K
filed on November 5, 2002 to add additional information regarding revenue and
expense line items included from Item 7-Management's Discussion and Analysis of
Financial Condition and Results of Operations. It should be read in conjunction
with the Company's 2001 Annual Report on Form 10-K/A filed immediately before
this Form 8-K/A.
- 1 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
FORWARD-LOOKING STATEMENTS
The Company may from time to time make written or oral forward-looking
statements. Written or oral forward-looking statements may appear in documents
filed with the Securities and Exchange Commission, and in press releases,
conference calls and webcasts (whether live or recorded), and in reports to
stockholders. The Private Securities Litigation Reform Act of 1995 contains a
"safe harbor" for forward-looking statements upon which the Company relies in
making such disclosures. In accordance with this "safe harbor" provision, we
have determined that forward-looking statements are contained in this Annual
Report on Form 10-K. Also, in connection with this "safe harbor" provision, the
Company identifies important factors that could cause the Company's actual
results to differ materially from those contained in any forward-looking
statement made by or on behalf of the Company. Those factors include, but are
not limited to, those discussed in the "Risks and Uncertainties" section below.
Any such statement is qualified by reference to the cautionary statements set
forth below and in this and other filings with the Securities and Exchange
Commission. The Company undertakes no obligation to publicly revise these
forward-looking statements to reflect subsequent events or circumstances. Such
forward-looking statements involve known and unknown risks and uncertainties,
which may cause the Company's actual actions or results to differ materially
from those contained in any forward-looking statement made by or on behalf of
the Company.
THE STRATEGIC PLAN
In 1994, the Company adopted a strategic plan to accelerate sales of its
brands throughout the country (the Strategic Plan). The objective of this plan
was to build high-margin brands with leading market shares, through investments
in effective consumer marketing activities, and through expansion and
improvement of the Company's direct-store-distribution network to national
scale. The potential benefits of the Strategic Plan are increased market share
and future earnings above levels that would have been attained in the absence of
the Strategic Plan.
In accordance with the Strategic Plan, the Company embarked on an
aggressive national expansion, involving the entry into new markets throughout
the country, the opening of new manufacturing and warehouse facilities, and the
introduction of several new products. As part of this expansion, the Company
also acquired various regional distribution companies and the Grand Soft
equipment manufacturing business. The Company made substantial investments in
physical infrastructure, information systems, brand-building activities, and
selling capabilities, which substantially increased the Company's cost
structure.
While the Strategic Plan places primary emphasis on expanding sales of the
Company's own brands, the Company also increased its business of distributing
products for other manufacturers (partner brands). Ben & Jerry's is one of the
Company's more significant partner brands. In 1999, Ben & Jerry's transferred
slightly more than half of its distribution business with the Company to another
distributor. In March 2001, the Company resumed distribution for Ben & Jerry's
in all of the original markets, as well as additional markets, under a new
long-term agreement.
The Company continues to pursue the benefits of the Strategic Plan through
four long-term initiatives. These initiatives are as follows: (1) growth in
sales of the Company's premium ice cream brands; (2) growth in sales of the
Company's superpremium ice cream brands; (3) accelerated development of the
Company's business in a wider number of retail channels, especially
mass-merchandisers, convenience stores and foodservice outlets; and (4) a focus
on improved productivity through a reduction in total delivered costs, meaning
the per-unit costs of manufacturing, selling and distribution and support
activities.
- 2 -
RISKS AND UNCERTAINTIES
The Company believes that the benefits under the Strategic Plan will be
realized in future years, although no assurance can be given that the
expectations relative to future market share and earnings benefits of the
strategy will be achieved. Specific factors that might cause such a difference
include, but are not limited to, the Company's ability to achieve efficiencies
in its manufacturing and distribution operations without negatively affecting
sales, the cost of dairy raw materials and other commodities used in the
Company's products, competitors' marketing and promotion responses, market
conditions affecting the price of the Company's products, the Company's ability
to increase sales of its own branded products, and responsiveness of the trade
and consumers to the Company's new products and increased marketing and trade
promotion expenses.
The Company distributes products as "partner brands" for several key
competitors such as ConAgra Foods, Inc. (Healthy Choice(TM) products), Nestle
(Haagen-Dazs(R) and Nestle products), and Unilever United States, Inc. (Ben &
Jerry's(R) and Good Humor(R)-Breyers(R) products). In most of these cases, the
Company only provides distribution services while maintaining a competitive
selling effort for its own brands with key retail accounts. The distribution of
these partner brand products provides profits for the Company, and the Company
believes that the parent companies of the partner brands realize substantial
sales benefits from this program.
The Company has negotiated long-term contracts with each of its key
partner brands. However, because the manufacturers of these partner brands are
also key competitors of the Company, there can be no guarantee that such
relationships will continue. The Company believes that the quality of its
distribution services, and the resulting incremental sales, will continue to
provide a strong rationale for the partner brand program for all parties.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions. The Company believes that the
following critical accounting policies, which the Company's senior management
has discussed with the audit committee of the board of directors, represent the
most significant judgments and estimates used in the preparation of the
consolidated financial statements:
O The Company assesses the recoverability of trade accounts receivable based on
estimated losses resulting from the inability of customers to make required
payments. The Company's estimates are based on the aging of accounts
receivable balances and historical write-off experience, net of recoveries.
The Company reviews trade accounts receivable for recoverability regularly
and whenever events or circumstances, such as deterioration in the financial
condition of a customer, indicate that additional allowances might be
required. Changes in the financial condition of the Company's major customers
could result in significant accounts receivable write-offs.
O The Company records a valuation allowance related to deferred tax assets if,
based on the weight of the available evidence, the Company concludes that it
is more likely than not that some portion or all of the deferred tax assets
will not be realized. While the Company has considered future taxable income
and prudent and feasible tax planning strategies in assessing the need for
the valuation allowance, should the Company determine that it would not be
able to realize all or part of its net deferred tax assets in the future, an
adjustment to the carrying value of the deferred tax assets would be charged
to income in the period in which such determination is made.
O The Company has goodwill and distribution rights related to business
acquisitions. The Company tests goodwill for impairment on an annual basis
and between annual tests if an event occurs or circumstances change that
would more likely than not reduce the fair value of a reporting unit below
its carrying value. If the fair value of a reporting unit is less than its
carrying value, then an impairment loss would be recognized equal to the
excess of the carrying value of the reporting unit goodwill over the fair
value of that goodwill. The fair value of goodwill is based on estimates that
carry a degree of uncertainty.
- 3 -
O The Company's liabilities for self-insured health, workers compensation and
vehicle plans are developed from actuarial valuations that rely on various
key assumptions. Changes in key assumptions may occur in the future, which
would result in changes to related self-insurance costs.
O The Company's liabilities for employee bonuses and profit-sharing plan
contributions are based primarily on estimated full-year profitability at the
end of each quarter. Changes in the performance of the business and in
estimated full-year profitability could result in significant interim
adjustments to the cost of these programs.
These estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
FINANCIAL SUMMARY
The Company reported net income available to common stockholders of
$8,269,000, or $.24 per diluted common share, for the 52 weeks ended December
29, 2001, compared to net income available to common stockholders of
$24,220,000, or $.72 per diluted common share, for the 53 weeks ended December
30, 2000. Consolidated net sales increased 16 percent over 2000 to
$1,211,245,000. The results for 2001 primarily reflect strong growth in sales,
largely offset by the impact of unfavorable dairy raw material costs.
RESULTS OF OPERATIONS
52 WEEKS ENDED 2001 COMPARED WITH 53 WEEKS ENDED 2000
Consolidated net sales for 2001 increased $170,457,000, or 16 percent, to
$1,211,245,000 from $1,040,788,000 for 2000.
Net sales of the Company's branded products, including licensed and joint
venture products (company brands), increased $16,002,000, or two percent, to
$707,873,000 from $691,871,000 for 2000. Company brands represented 58 percent
of consolidated net sales in 2001 compared with 66 percent in 2000. The increase
in dollar net sales of company brands resulted from higher unit sales and higher
average wholesale prices. Gallon sales of the Company's branded products
increased 3,000,000 gallons, or three percent, to approximately 112,000,000
gallons. The products that led this volume increase were premium Dreyer's and
Edy's Grand Ice Cream and Whole Fruit(TM) Bars. These products contributed
approximately 3,900,000 gallons and 600,000 gallons, respectively, to the volume
increase, although these increases were partially offset by decreased gallon net
sales of various other company brands. The average price for the Company's
branded products decreased approximately one percent after the effect of
increased trade promotion expenses of $34,855,000. This decrease in average
price was due to a shift in mix to lower-priced products, partially offset by
the effect of higher wholesale prices. The Company's portfolio of branded
products held an 18.6 percent dollar share of all packaged ice cream sold in the
grocery channel in 2001 compared to 18.6 percent in 2000.
Net sales of products distributed for other manufacturers (partner brands)
increased $154,455,000, or 44 percent, to $503,372,000 from $348,917,000 for
2000. Net sales of partner brands represented 42 percent of consolidated net
sales in 2001 compared with 34 percent in 2000. The increase in dollar sales was
primarily attributable to a 91 percent increase in net sales of Ben & Jerry's(R)
superpremium products (Ben & Jerry's(R)) over 2000. The Company began
distributing Ben & Jerry's(R) to a larger distribution territory in March 2001
and distributes Ben & Jerry's(R) for the grocery channel in all of the Company's
company-owned markets across the country. In addition, the acquisition of
independent distributors in 2000, excluding net sales of Ben & Jerry's(R),
contributed $41,454,000 to the increase. The average price for partner brands
increased approximately eight percent, while unit sales increased 9,400,000
gallons, or 33 percent.
Cost of goods sold increased $194,937,000, or 22 percent, as compared with
2000, while the gross margin decreased to 11 percent from 15 percent. The impact
of the increase in dairy raw material costs unfavorably impacted gross profit in
2001 by approximately $30,000,000 as compared to 2000.
- 4 -
Other income decreased $1,353,000, or 36 percent, to $2,405,000 from
$3,758,000 for 2000 primarily due to a decrease in earnings from joint ventures
accounted for under the equity method.
Selling, general and administrative expenses increased $2,714,000, or
three percent, to $108,345,000 from $105,631,000 for 2000. Selling, general and
administrative expenses, as a percentage of consolidated net sales, decreased
slightly to nine percent in 2001 compared to ten percent in 2000. The dollar
increase in selling, general and administrative expenses primarily reflects a
net increase in administrative expenses of $5,365,000, partially offset by a
decrease in marketing spending of $3,556,000.
Interest expense decreased $1,519,000, or 12 percent, as compared with
2000, primarily due to lower interest rates.
The income tax provision decreased $10,479,000, or 69 percent, as compared
with 2000, due to a correspondingly lower pre-tax income in 2001 and, to a
lesser extent, a lower effective tax rate. The effective tax rate decreased to
35 percent from 37.5 percent for 2000 due primarily to the utilization of income
tax credits. The Company's income tax provisions for 2001 and 2000 differ from
tax provisions calculated at the federal statutory tax rate primarily due to tax
credits and state income taxes.
53 WEEKS ENDED 2000 COMPARED WITH 52 WEEKS ENDED 1999
Consolidated net sales for 2000 increased $79,677,000, or eight percent,
to $1,040,788,000 from $961,111,000 for 1999.
Net sales of the Company's branded products, including licensed and joint
venture products (company brands), increased $87,718,000, or 15 percent, to
$691,871,000 from $604,153,000 for 1999. Company brands represented 66 percent
of consolidated net sales in 2000 compared with 63 percent in 1999. The increase
in net sales of company brands resulted from higher unit sales, particularly
sales of higher-priced products, and from higher average wholesale prices.
Gallon sales of the Company's branded products increased 9,000,000 gallons, or
nine percent, to approximately 109,000,000 gallons. The products that led this
volume increase were the co-branded M&M/Mars line, superpremium Dreamery(TM) Ice
Cream, premium Dreyer's and Edy's Grand Ice Cream(R) and Whole Fruit(R) Bars.
These products contributed approximately 5,300,000 gallons, 1,700,000 gallons,
1,500,000 gallons and 400,000 gallons, respectively, to the volume increase. The
average price for the Company's branded products increased approximately five
percent after the effect of increased trade promotion expenses of $14,900,000.
This increase in average price was due to the effect of higher wholesale prices
and a shift in mix to higher-priced products. The Company's portfolio of branded
products held an 18.6 percent dollar share of all packaged ice cream sold in the
grocery channel in 2000 compared to 17.1 percent in 1999.
Net sales of products distributed for other manufacturers (partner brands)
decreased $8,041,000, or two percent, to $348,917,000 from $356,958,000 for
1999. Net sales of partner brands represented 34 percent of consolidated net
sales in 2000 compared with 37 percent in 1999. The primary cause of the
decrease in net sales of partner brands for 2000 was that the Company began
distributing Ben & Jerry's(R) products in a smaller geographic area during
September 1999. Net sales of Ben & Jerry's products decreased 39 percent over
1999. This decrease was partially offset by increases in net sales of various
other partner brands. Average prices for partner brands increased approximately
four percent, while unit sales decreased approximately 1,800,000 gallons, or six
percent.
Cost of goods sold increased $49,747,000, or six percent, as compared with
1999, while the gross margin increased to 15 percent from 13 percent. The gross
profit improvement of $29,930,000 was primarily the result of higher unit sales
of the Company's established brands, increased sales of higher-margin products,
comparatively lower dairy raw material costs and higher average prices. The
gross profit improvement attributable to higher net unit sales of the Company's
established brands was $21,200,000. Sales of higher-margin products improved
gross profit by $14,700,000. The impact of the decrease in dairy raw material
costs favorably impacted gross profit in 2000 by approximately $9,300,000 as
compared to 1999. The effect of these positive factors more than offset the loss
of distribution gross profit of $10,700,000 from Ben & Jerry's(R) net sales (see
The Strategic Plan above).
Other income increased $1,668,000, or 80 percent, to $3,758,000 from
$2,090,000 for 1999 due to an increase in brokerage income partially offset by a
decrease in earnings from joint ventures accounted for under the equity method.
- 5 -
Selling, general and administrative expenses increased $7,489,000, or
eight percent, to $105,631,000 from $98,142,000 for 1999. Selling, general and
administrative expenses as a percentage of consolidated net sales remained
relatively unchanged at 10 percent for both 2000 and 1999. This dollar increase
primarily reflects increased marketing spending of $5,731,000 and, to a lesser
extent, a net increase in administrative expenses. The net increase in
administrative expenses was primarily attributable to an increase in
professional fees of $1,833,000, the majority of which consisted of costs
associated with the Company's earlier bid to acquire Ben & Jerry's Homemade,
Inc. and the subsequent negotiations of the national distribution agreement.
Interest expense increased $902,000, or eight percent, as compared with
1999, primarily due to higher average borrowings required for funding
acquisitions.
The income tax provision increased $8,101,000, or 114 percent, over 1999,
due to a correspondingly higher pre-tax income in 2000. The effective tax rate
decreased slightly to 37.5 percent from 38.1 percent for 1999. The Company's
income tax provisions for 2000 and 1999 differ from tax provisions calculated at
the federal statutory tax rate primarily due to state income taxes and tax
credits.
SEASONALITY
The Company experiences more demand for its products during the spring and
summer than during the fall and winter. The Company's inventory is maintained at
the same general level relative to sales throughout the year by adjusting
production and purchasing schedules to meet demand. The ratio of inventory to
sales typically does not vary significantly from year to year.
EFFECTS OF INFLATION AND CHANGING PRICES
The largest component of the Company's cost of production is raw
materials, principally dairy products and sugar. During 2001, dairy raw material
costs increased which unfavorably impacted gross profit by approximately
$30,000,000 as compared to 2000. During 2000, dairy raw material costs declined
which favorably impacted gross profit by approximately $9,300,000 as compared to
1999. During 1999, dairy raw material costs declined which favorably impacted
gross profit by approximately $15,000,000 as compared to 1998 (a year of
extremely high dairy costs). Dairy raw material costs have been favorable thus
far during 2002 as compared to 2001.
Other cost increases, such as labor and general and administrative costs,
have in the past been partially offset by productivity gains and other operating
efficiencies.
NEW ACCOUNTING PRONOUNCEMENTS
ACCOUNTING FOR CONSIDERATION GIVEN BY A VENDOR TO A CUSTOMER
(INCLUDING A RESELLER OF THE VENDOR'S PRODUCTS)
In November 2001, the Emerging Issues Task Force of the Financial
Accounting Standards Board (EITF) issued EITF 01-9, "Accounting for
Consideration Given by a Vendor to a Customer (Including a Reseller of the
Vendor's Products)" (EITF 01-9). This pronouncement requires that discounts
(off-invoice promotion and coupons), amounts paid to retailers to advertise a
company's products (fixed trade promotion) and fees paid to retailers to obtain
shelf space (slotting fees) be recorded as a reduction of revenue.
The Company adopted EITF 01-9 at the beginning of fiscal 2002. The Company
retroactively reclassified expenses of $188,453,000, $153,568,000 and
$138,706,000 in 2001, 2000 and 1999, respectively, in accordance with this
pronouncement. The retroactive reclassification of these expenses resulted in a
decrease in total sales and gross profit, along with a corresponding decrease in
selling, general and administrative expenses with no effect on net income (loss)
as previously reported.
- 6 -
ACCOUNTING FOR GOODWILL AND OTHER INTANGIBLE ASSETS
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets" (SFAS No. 142). This pronouncement requires recognition of goodwill and
other unidentifiable intangible assets with indeterminate lives (these assets)
as long-term assets. Amortization as previously required by Accounting
Principles Board Opinion No. 17, "Intangible Assets," is no longer permitted. In
lieu of amortization, these assets are now tested for impairment on an annual
basis and between annual tests if an event occurs or circumstances change that
would more likely than not reduce the fair value of a reporting unit below its
carrying amount. The Company adopted SFAS No. 142 at the beginning of fiscal
2002 and completed its transitional impairment test during the first quarter of
2002; the Company has not recorded any impairment charges under SFAS No. 142.
The following table summarizes and reconciles reported net income and net
income per common share, adjusted for the exclusion of amortization of goodwill
and other indefinite lived intangible assets that are no longer amortized of
$4,655,000, $3,796,000 and $2,534,000 in 2001, 2000 and 1999, respectively.
($ IN THOUSANDS, EXCEPT PER DEC. 29, DEC. 30, DEC. 25,
SHARE AMOUNTS) 2001 2000 1999(1)
-------- -------- --------
Reported income before
cumulative effect of change
in accounting principle........... $8,829 $25,378 $11,587
Goodwill amortization, net of tax.... 3,026 2,372 1,569
------ ------ ------
Adjusted income before
cumulative effect of change
in accounting principle........... $11,855 $27,750 $13,156
======= ======= =======
Reported net income.................. $8,829 $25,378 $10,992
Goodwill amortization, net of tax.... 3,026 2,372 1,569
------ ------ ------
Adjusted net income.................. $11,855 $27,750 $12,561
======= ======= =======
Net income per common share:
Reported basic.................... $ .26 $ .86 $ .36
Goodwill amortization, net of
tax............................... .10 .08 .06
-------- -------- --------
Adjusted basic.................... $ .36 $ .94 $ .42
======== ======== ========
Reported diluted.................. $ .24 $ .72 $ .33
Goodwill amortization, net of
tax............................... .08 .07 .05
-------- -------- --------
Adjusted diluted.................. $ .32 $ .79 $ .38
======== ======== ========
(1) The impact of the cumulative effect of a change in accounting principle for
the year ended December 25, 1999 is a decrease to basic (reported and adjusted)
and diluted (reported and adjusted) net income per common share of $.02.
ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS
In October 2001, the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No.
144). This pronouncement clarifies certain issues related to SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" and develops a single accounting model for long-lived assets to
be disposed of. The Company will be implementing SFAS No. 144 in the first
quarter of 2002. The Company expects that the implementation of this
pronouncement will not have a significant impact on its financial position,
results of operations or cash flow.
-7-
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities of $32,672,000 for 2001 consisted
primarily of net income of $8,829,000 and depreciation and amortization of
$35,974,000 which were partially offset by a $14,297,000 increase in the amount
of cash required to fund working capital. Cash flows from operating activities
of $44,761,000 for 2000 consisted primarily of net income of $25,378,000 and
depreciation and amortization of $37,479,000 which were partially offset by a
$28,647,000 increase in the amount of cash required to fund working capital.
Cash flows from operating activities of $77,302,000 for 1999 consisted primarily
of net income of $10,992,000, depreciation and amortization of $35,515,000 and a
$25,407,000 decrease in the amount of cash required to fund working capital.
Cash outflows from investing activities of $43,652,000 for 2001 primarily
consisted of capital expenditures totaling $40,598,000. Cash outflows from
investing activities of $56,548,000 for 2000 primarily consisted of capital
expenditures totaling $24,513,000, the purchase of certain assets of Specialty
Frozen Products, L.P. (Specialty) for $18,922,000, and the purchase of the
common stock of Cherokee Cream Company, Inc. (Cherokee) for $7,651,000 (purchase
price of $7,855,000 net of $204,000 cash acquired). Specialty was the leading
independent direct-store-delivery ice cream distributor in the Pacific
Northwest. Cherokee, the parent of Sunbelt Distributors, Inc., was the leading
independent direct-store-delivery ice cream distributor in Texas. Cash flows
from investing activities of $22,227,000 for 1999 primarily consisted of capital
expenditures of $23,756,000.
Cash provided by financing activities of $9,909,000 for 2001 primarily
consisted of proceeds from long-term debt totaling $34,600,000, partially offset
by repayments of $22,186,000. Cash provided by financing activities of
$11,350,000 for 2000 primarily consisted of proceeds from long-term debt
totaling $160,095,000, partially offset by repayments of $149,421,000 under the
former revolving line of credit. On July 25, 2000, the Company entered into a
new credit agreement with various banks for a revolving line of credit of
$240,000,000 with an expiration date of July 25, 2005. Offshore borrowings under
the line bear interest at LIBOR plus a margin ranging from 0.75 percent to 2.375
percent. Base borrowings under the line bear interest at PRIME plus a margin
ranging from zero percent to 1.375 percent. The interest rate on all borrowings
under the revolving line of credit was 3.85 percent at December 29, 2001. Cash
used in financing activities of $53,088,000 for 1999 primarily reflected
repayments of long-term debt of $55,058,000.
Working capital increased by $26,012,000 from 2000 to 2001. This increase
was primarily caused by increases in trade accounts receivable and inventories
and a decrease in the current portion of long-term debt, partially offset by
increases in accounts payable and accrued liabilities. Excluding the change in
the current portion of long-term debt, the working capital changes are primarily
the result of the additional Ben & Jerry's(R) business and on-going growth in
company brand sales.
During 2002, the Company plans to make capital expenditures totaling
approximately $41,000,000. It is anticipated that these expenditures will be
largely financed through internally-generated funds and borrowings.
The Company paid a regular quarterly dividend of $.06 per share of common
stock for each quarter of 2001 and $.03 per share of common stock for each
quarter of 2000 and 1999.
On October 3, 1997, the Series B preferred stock was converted into a
total of 1,008,000 shares of redeemable convertible Series A preferred stock
(Series A) redeemable on June 30, 2001. The Series A preferred stock was
converted by the holder into 5,800,000 shares of common stock during the second
quarter of 2001.
At December 29, 2001, the Company had $1,650,000 in cash and cash
equivalents, and an unused revolving line of credit of $119,900,000. The Company
believes that its revolving line of credit, along with its liquid resources,
internally-generated cash, and financing capacity, will be adequate to meet both
short-term and long-term operating and capital requirements.
- 8 -
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Dreyer's Grand Ice Cream, Inc.
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of income, of changes in stockholders' equity
and of cash flows present fairly, in all material respects, the financial
position of Dreyer's Grand Ice Cream, Inc. and its subsidiaries at December 29,
2001 and December 30, 2000, and the results of their operations and their cash
flows for each of the three years in the period ended December 29, 2001 in
conformity with accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
As discussed in Note 2 of the consolidated financial statements, the
Company changed its method of accounting for start-up costs in the first quarter
of 1999.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
San Francisco, California
February 13, 2002, except for Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- - GOODWILL, DISTRIBUTION RIGHTS AND OTHER INTANGIBLES AND ACCOUNTING FOR
CONSIDERATION GIVEN BY A VENDOR TO A CUSTOMER (INCLUDING A RESELLER OF THE
VENDOR'S PRODUCTS) which are as of September 20, 2002
- 9 -
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED
------------------------------------
($ IN THOUSANDS, EXCEPT PER SHARE DEC. 29, DEC. 30, DEC. 25,
AMOUNTS) 2001 2000 1999
----------- ---------- ----------
Net sales........................ $1,211,245 $1,040,788 $961,111
---------- ---------- --------
COSTS AND EXPENSES:
Cost of goods sold............ 1,080,889 885,952 836,205
Selling, general and
administrative............... 108,345 105,631 98,142
Reversal of restructuring
charges...................... (1,315)
Interest, net of amounts
capitalized.................. 10,833 12,352 11,450
Other income.................. (2,405) (3,758) (2,090)
---------- ---------- --------
1,197,662 1,000,177 942,392
---------- ---------- --------
Income before income tax
provision and cumulative
effect of change in
accounting principle.......... 13,583 40,611 18,719
Income tax provision............. 4,754 15,233 7,132
---------- ---------- --------
Income before cumulative effect
of change in accounting
principle..................... 8,829 25,378 11,587
Cumulative effect of change in
accounting principle.......... 595
---------- ---------- --------
Net income....................... 8,829 25,378 10,992
Accretion of preferred stock to
redemption value.............. 212 462 424
Preferred stock dividends........ 348 696 696
---------- ---------- --------
Net income available to common
stockholders.................. $ 8,269 $ 24,220 $ 9,872
========== ========== ========
PER COMMON SHARE-BASIC:
Income available to common
stockholders before
cumulative effect of change
in accounting principle...... $ .26 $ .86 $ .38
Cumulative effect of change in
accounting principle......... .02
Net income available to common ---------- --------- --------
stockholders................. $ .26 $ .86 $ .36
========== ========= ========
PER COMMON SHARE-DILUTED:
Income available to common
stockholders before
cumulative effect of change
in accounting principle...... $ .24 $ .72 $ .35
Cumulative effect of change in
accounting principle......... .02
---------- ---------- --------
Net income available to common
stockholders................. $ .24 $ .72 $ .33
========== ========== ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
- 10 -
CONSOLIDATED BALANCE SHEET
DEC. 29, DEC. 30,
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2001 2000
-------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................... $ 1,650 $ 2,721
Trade accounts receivable, net of allowance
for doubtful accounts
of $1,024 in 2001 and $2,611 in 2000........ 89,721 77,310
Other accounts receivable...................... 16,116 17,702
Inventories.................................... 81,298 68,801
Deferred income taxes.......................... 3,547 4,584
Prepaid expenses and other..................... 8,849 6,950
-------- --------
TOTAL CURRENT ASSETS............................ 201,181 178,068
Property, plant and equipment, net................. 198,565 190,833
Goodwill, distribution rights and other
intangibles, net............................... 94,468 92,892
Other assets...................................... 4,475 6,658
-------- --------
TOTAL ASSETS...................................... $498,689 $468,451
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities....... $ 91,794 $ 80,260
Accrued payroll and employee benefits.......... 25,369 24,759
Current portion of long-term debt.............. 15,043
-------- --------
TOTAL CURRENT LIABILITIES...................... 117,163 120,062
Long-term debt, less current portion.............. 148,671 121,214
Deferred income taxes............................. 24,490 26,263
-------- --------
TOTAL LIABILITIES................................. 290,324 267,539
-------- --------
Commitments and contingencies.....................
Redeemable convertible preferred stock,
$1 par value - no shares and 1,008,000
shares authorized, issued and outstanding
in 2001 and 2000, respectively................. 100,540
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value - 10,000,000
shares and 8,992,000 shares authorized,
no shares issued or outstanding in 2001
and 2000, respectively......................
Common stock, $1 par value - 60,000,000
shares authorized; 34,461,000 shares
and 28,268,000 shares issued and
outstanding in 2001 and 2000,
respectively................................ 34,461 28,268
Capital in excess of par....................... 160,103 58,396
Notes receivable from stockholders............. (2,546) (2,284)
Retained earnings.............................. 16,347 15,992
------- -------
TOTAL STOCKHOLDERS' EQUITY........................ 208,365 100,372
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $498,689 $468,451
======== ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
- 11 -
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
CAPITAL (ACCUMU-
IN NOTES LATED)
COMMON STOCK EXCESS RECEIVABLE DEFICIT)
-------------- OF FROM RETAINED
(IN THOUSANDS) SHARES AMOUNT PAR STOCKHOLDERS EARNINGS TOTAL
------ ------ ------- ------------ --------- -----
BALANCES AT DECEMBER 26,
1998....................... 27,312 $27,312 $46,722 $(1,459) $(11,401) $61,174
Net income for 1999..... 10,992 10,992
Accretion of preferred
stock to redemption
value................. (424) (424)
Preferred stock
dividends declared.... (696) (696)
Common stock dividends
declared.............. (3,319) (3,319)
Issuance of common
stock under employee
stock plans, net...... 579 579 6,671 (1,042) 6,208
Repurchases and
retirements of
common stock.......... (20) (20) (221) (241)
------ ------ ------ ------ -------- ------
BALANCES AT DECEMBER 25,
1999....................... 27,871 27,871 53,172 (2,501) (4,848) 73,694
Net income for 2000..... 25,378 25,378
Accretion of preferred
stock to redemption
value................. (462) (462)
Preferred stock
dividends declared.... (696) (696)
Common stock dividends
declared.............. (3,380) (3,380)
Issuance of common
stock under employee
stock plans, net...... 457 457 5,785 (171) 6,071
Repurchases and
retirements of
common stock.......... (60) (60) (1,485) 388 (1,157)
Tax benefits from
employee stock
option plans.......... 924 924
------ ------ ------ ------ -------- ------
BALANCES AT DECEMBER 30,
2000....................... 28,268 28,268 58,396 (2,284) 15,992 100,372
Net income for 2001..... 8,829 8,829
Accretion of preferred
stock to redemption
value................. (212) (212)
Preferred stock
dividends declared.... (348) (348)
Common stock dividends
declared.............. (7,914) (7,914)
Conversion of
redeemable
convertible
preferred stock....... 5,800 5,800 94,952 100,752
Issuance of common
stock under employee
stock plans, net...... 550 550 8,207 (1,292) 7,465
Repurchases and
retirements of
common stock.......... (157) (157) (3,801) 1,030 (2,928)
Tax benefits from
employee stock
option plans.......... 2,349 2,349
------ ------ ------ ------ -------- ------
BALANCES AT DECEMBER 29,
2001..................... 34,461 $34,461 $160,103 $(2,546) $16,347 $208,365
====== ======= ======== ======= ======= ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
- 12 -
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED
--------------------------------
($ IN THOUSANDS) DEC. 29, DEC. 30, DEC. 25,
2001 2000 1999
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................ $8,829 $25,378 $10,992
Adjustments to reconcile net income to
cash flows from operations:
Depreciation and amortization........... 35,974 37,479 35,515
Deferred income taxes................... (183) 6,665 4,305
Loss on disposal of property, plant
and equipment......................... 1,360 1,803
Tax benefits from employees to option
plans................................. 2,349 924
Provision for losses on trade accounts
receivable............................ 1,602
Reversal of restructuring charges....... (1,315)
Cumulative effect of change in
accounting principle.................. 595
Changes in assets and liabilities, net
of amounts acquired:
Trade accounts receivable............. (12,411) 6,607 3,802
Other accounts receivable............. 1,586 (3,963) 15,637
Inventories........................... (12,497) (11,044) (5,197)
Prepaid expenses and other............ (1,899) (236) (2,113)
Accounts payable and accrued
liabilities.......................... 10,314 (14,832) 2,910
Accrued payroll and employee
benefits............................. 610 (5,179) 10,368
-------- --------- ---------
32,672 44,761 77,302
-------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and
equipment................................ (40,598) (24,513) (23,756)
Retirement of property, plant and
equipment................................ 2,181 515 726
Purchase of certain assets of Specialty
Frozen Products, L.P.................... (18,922)
Purchase of common stock of Cherokee
Cream Company, Inc....................... (7,651)
Purchase of independent distributors and
distribution rights...................... (7,067) (1,564) (1,000)
Decrease (increase) in other assets....... 1,832 (4,413) 1,803
-------- -------- --------
(43,652) (56,548) (22,227)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt.............. 34,600 160,095
Repayments of long-term debt.............. (22,186) (149,421) (55,058)
Issuance of common stock under employee
stock plans, net......................... 7,465 6,071 6,208
Repurchases and retirements of common
stock.................................... (2,928) (1,157) (241)
Cash dividends paid....................... (7,042) (4,238) (3,997)
-------- -------- --------
9,909 11,350 (53,088)
-------- -------- --------
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS............................... (1,071) (437) 1,987
Cash and cash equivalents, beginning of
year...................................... 2,721 3,158 1,171
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR...... $ 1,650 $ 2,721 $ 3,158
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest (net of amounts capitalized).... $ 11,407 $ 12,853 $ 11,346
======== ========= =========
Income taxes (net of refunds)............ $ 1,925 $ 6,400 $ 843
======== ======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Fair value of assets acquired............. $39,934
Cash paid in connection
with acquisitions....................... (26,777)
--------
Liabilities assumed....................... $ 13,157
========
Conversion of redeemable convertible
preferred stock to common stock.......... $ 100,752
==========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
- 13 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 DESCRIPTION OF BUSINESS
Dreyer's Grand Ice Cream, Inc. and its subsidiaries (the Company) are engaged
primarily in the business of manufacturing and distributing premium and
superpremium ice cream and other frozen dessert products to grocery and
convenience stores, foodservice accounts and independent distributors in the
United States.
The Company accounts for its operations geographically for management
reporting purposes. These geographic segments have been aggregated for financial
reporting purposes due to similarities in the economic characteristics of the
geographic segments and the nature of the products, production processes,
customer types and distribution methods throughout the United States.
The Company's products are also segregated between net sales of company
branded products, including our licensed and joint venture products (company
brands), and net sales of products distributed for other manufacturers (partner
brands) for management reporting purposes. Net sales of company brands were
$707,873,000, $691,871,000 and $604,153,000 in 2001, 2000 and 1999,
respectively. Net sales of partner brands were $503,372,000, $348,917,000 and
$356,958,000 in 2001, 2000 and 1999, respectively.
Three customers each accounted for ten percent or more of 2001 sales.
Gross sales to each of these three customers were $167,052,000, $159,941,000 and
$150,060,000. Accounts receivable balances for each of these three customers
were $8,209,000, $12,052,000 and $5,840,000, respectively, at December 29, 2001.
Three customers each accounted for ten percent or more of 2000 sales. Gross
sales to each of these three customers were $135,178,000, $121,731,000 and
$119,817,000. Accounts receivable balances for each of these three customers
were $13,315,000, $10,948,000 and $5,960,000, respectively, at December 30,
2000. Three customers each accounted for ten percent or more of 1999 sales.
Gross sales to each of these three customers were $127,573,000, $126,075,000 and
$114,843,000.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of Dreyer's
Grand Ice Cream, Inc. and its subsidiaries. All intercompany transactions have
been eliminated.
FISCAL YEAR
The Company's fiscal year is a 52-week or 53-week period ending on the
last Saturday in December. Fiscal years 2001 and 1999 each consisted of 52
weeks. Fiscal year 2000 consisted of 53 weeks.
SIGNIFICANT ACCOUNTING ASSUMPTIONS AND ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions. These estimates include assessing
the recoverability of accounts receivable, the adequacy of the valuation
allowance for deferred tax assets, the recoverability of goodwill and
distribution rights, and the adequacy of the Company's liabilities for
self-insured health, workers compensation and vehicle plans, among others. These
estimates and assumptions affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
- 14 -
FINANCIAL STATEMENT PRESENTATION
Certain reclassifications have been made to prior year financial
statements to conform to the current year presentation.
CASH EQUIVALENTS
The Company classifies financial instruments as cash equivalents if the
original maturity of such investments is three months or less.
INVENTORIES
Inventories are stated at the lower of cost (determined by the first-in,
first-out method) or market. Cost includes materials, labor, manufacturing
overhead, and certain warehouse and distribution expenses.
BUTTER INVESTMENTS
Under current Federal and State regulations and industry practice, the
price of cream, a primary ingredient in ice cream, is linked to the price of
butter. In an effort to mitigate the effects of butter price volatility, the
Company will periodically purchase butter or butter futures contracts with the
intent of reselling or settling its positions in order to lower its cream cost
and overall exposure to the volatility of this market. The Company has elected
to not treat its investment in butter as a hedge for accounting purposes.
Consequently, it "marks to market" its investment at the end of each quarter and
records any resulting gain or loss as a decrease or increase in other income
(expense). During 2001, the Company made no investments in butter.
PROPERTY, PLANT AND EQUIPMENT
The cost of additions, along with major repairs and improvements, are
capitalized, while maintenance and minor repairs are charged to expense as
incurred. Property, plant and equipment is depreciated using the straight-line
method over the assets' estimated useful lives, generally ranging from two to 35
years. Interest costs relating to capital assets under construction are
capitalized.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets and certain identifiable
intangibles, including goodwill and distribution rights, for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The assessment of impairment is based on the estimated
undiscounted future cash flows from operating activities compared with the
carrying value of the assets. If the undiscounted future cash flows of an asset
are less than the carrying value, a write-down will be recorded, measured by the
amount of the difference between the carrying value and the fair value of the
asset. Assets to be disposed of are recorded at the lower of carrying value or
fair value less costs to sell. Such assets are not depreciated while held for
sale.
In October 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets" (SFAS No. 144). This pronouncement clarifies
certain issues related to SFAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" and develops a single
accounting model for long-lived assets to be disposed of. The Company will be
implementing SFAS No. 144 in the first quarter of 2002. The Company expects that
the implementation of this pronouncement will not have a significant impact on
its financial position, results of operations or cash flows.
GOODWILL, DISTRIBUTION RIGHTS AND OTHER INTANGIBLES
During 2001, 2000 and 1999, goodwill and distribution rights were
amortized using the straight-line method over their estimated useful lives,
ranging from 20 to 36 years. Other intangibles are amortized using the
straight-line method over their estimated useful lives, ranging from three to
eight years.
- 15 -
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets" (SFAS No. 142). This pronouncement requires recognition of goodwill and
other unidentifiable intangible assets with indeterminate lives ("these assets")
as long-term assets. Amortization as previously required by Accounting
Principles Board Opinion No. 17, "Intangible Assets," is no longer permitted. In
lieu of amortization, these assets are now tested for impairment on an annual
basis and between annual tests if an event occurs or circumstances change that
would more likely than not reduce the fair value of a reporting unit below its
carrying amount. The Company adopted SFAS No. 142 at the beginning of fiscal
2002 and completed its transitional impairment test during the first quarter of
2002; the Company has not recorded any impairment charges under SFAS No. 142.
The following table summarizes and reconciles reported net income and net
income per common share, adjusted for the exclusion of amortization of goodwill
and other indefinite lived intangible assets that are no longer amortized of
$4,655,000, $3,796,000 and $2,534,000 in 2001, 2000 and 1999, respectively.
DEC. 29, DEC. 30, DEC. 25,
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2001 2000 1999(1)
- ------------------------------------------------------------------------------
Reported income before cumulative
effect of change in accounting
principle............................. $8,829 $25,378 $11,587
Goodwill amortization, net of tax....... 3,026 2,372 1,569
------ ------- -------
Adjusted income before cumulative
effect of change in accounting
principle............................. $11,855 $27,750 $13,156
======= ======= =======
Reported net income..................... $8,829 $25,378 $10,992
Goodwill amortization, net of tax....... 3,026 2,372 1,569
------- ------- -------
Adjusted net income..................... $11,855 $27,750 $12,561
======= ======= =======
Net income per common share:
Reported basic........................ $ .26 $ .86 $ .36
Goodwill amortization, net of tax..... .10 .08 .06
------- ------- -------
Adjusted basic........................ $ .36 $ .94 $ .42
======= ======= =======
Reported diluted...................... $ .24 $ .72 $ .33
Goodwill amortization, net of tax..... .08 .07 .05
------- ------- -------
Adjusted diluted...................... $ .32 $ .79 $ .38
======= ======= =======
(1) The impact of the cumulative effect of a change in accounting principle for
the year ended December 25, 1999 is a decrease to basic (reported and adjusted)
and diluted (reported and adjusted) net income per common share of $.02.
REVENUE RECOGNITION
Revenue is recognized when title and risk of loss have transferred to the
customer, the collection of the resulting receivable is reasonably assured, and
all significant Company obligations have been satisfied. Revenue from
consignment sales is recognized upon purchase of the product by retail
customers. The Company provides appropriate provisions for uncollectible
accounts.
SHIPPING AND HANDLING COSTS
The Company classifies shipping and handling expenses related to product
sales as a cost of goods sold.
ADVERTISING COSTS
The Company defers production costs for media advertising and expenses
these costs in the period the advertisement is first run. All other advertising
costs are expensed as incurred. At December 29, 2001 and December 30, 2000,
deferred advertising, including consumer promotion spending, in the Consolidated
Balance Sheet totaled $1,388,000 and $1,076,000, respectively. Advertising
expense, including consumer promotion spending, was $30,113,000, $30,139,000 and
$22,982,000 in 2001, 2000 and 1999, respectively.
- 16 -
ACCOUNTING FOR CONSIDERATION GIVEN BY A VENDOR TO A CUSTOMER (INCLUDING A
RESELLER OF THE VENDOR'S PRODUCTS)
In November 2001, the Emerging Issues Task Force of the Financial
Accounting Standards Board (EITF) issued EITF 01-9, "Accounting for
Consideration Given by a Vendor to a Customer (Including a Reseller of the
Vendor's Products)" (EITF 01-9). This pronouncement requires that discounts
(off-invoice promotion and coupons), amounts paid to retailers to advertise a
company's products (fixed trade promotion) and fees paid to retailers to obtain
shelf space (slotting fees) be recorded as a reduction of revenue.
The Company adopted EITF 01-9 at the beginning of fiscal 2002. The Company
retroactively reclassified expenses of $188,453,000, $153,568,000 and
$138,706,000 in 2001, 2000 and 1999, respectively in accordance with this
pronouncement. The retroactive reclassification of these expenses resulted in a
decrease in total sales and gross profit, along with a corresponding decrease in
selling, general and administrative expenses with no effect on net income (loss)
as previously reported.
Accordingly trade promotion costs, including sales discounts and
associated retail advertising are included as a reduction in sales in accordance
with EITF 01-9.
INCOME TAXES
Income taxes are accounted for using the liability method. Under this
method, deferred tax assets and liabilities are recognized for the tax
consequences of temporary differences between the financial reporting basis and
tax basis of assets and liabilities.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for its employee stock option and stock purchase
plans using the intrinsic value-based method.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
In the first quarter of 1999, the Company adopted the American Institute
of Certified Public Accountant's Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities" (SOP 98-5). SOP 98-5 requires that the costs of
start-up activities, including preoperating costs, be expensed as incurred and
that previously unamortized preoperating costs be written off and treated as a
cumulative effect of a change in accounting principle. As a result of adopting
SOP 98-5, the Company recorded an after-tax charge of $595,000, or $.02 per
common share, in the first quarter of 1999.
NET INCOME PER COMMON SHARE
Basic net income per common share is computed using the weighted-average
number of shares of common stock outstanding during the period. Diluted net
income per common share reflects the additional dilutive effect of the Company's
potentially dilutive securities, which include stock options, stock warrants and
the redeemable convertible preferred stock.
- 17 -
Net income per common share is computed as follows:
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) DEC. 29, DEC. 30, DEC. 25,
2001 2000 1999
-------- -------- --------
Income available to common
stockholders - basic..................... $8,269 $24,220 $9,872
Add: preferred dividends and accretion.. 560 1,158 1,120
------ ------- ------
Net income available to common
stockholders - diluted................... $8,829 $25,378 $10,992
====== ======= =======
Weighted-average shares-basic............ 31,633 28,119 27,559
Dilutive effect of options............... 2,023 1,370 397
Dilutive effect of preferred stock....... 2,725 5,800 5,800
------ ------- ------
Weighted-average shares-diluted.......... $36,381 $35,289 $33,756
======= ======= =======
Net income per common share:
Basic................................. $ .26 $ .86 $ .36
======= ======= =======
Diluted............................... $ .24 $ .72 $ .33
======= ======= =======
Potentially dilutive securities are excluded from the calculations of
diluted net income per common share if their inclusion would have an
anti-dilutive effect. These anti-dilutive securities, stated in equivalent
shares of common stock, consisted of the following:
(IN THOUSANDS) 2001 2000 1999
---- ---- ----
Stock options............................ 753 676 1,507
Stock warrants........................... 2,000
The redeemable convertible preferred stock was converted to common stock
in the second quarter of 2001 (Note 9).
Pursuant to a 1994 equity transaction (Note 10), an affiliate of Nestle
USA, Inc. purchased 6,000,000 newly issued shares of common stock, and warrants
to purchase 4,000,000 shares at an exercise price of $16 per share. Warrants for
2,000,000 shares expired unexercised on June 14, 1997. Warrants for the
remaining 2,000,000 shares expired unexercised on June 14, 1999.
NOTE 3 INVENTORIES
Inventories at December 29, 2001 and December 30, 2000 consisted of the
following:
(IN THOUSANDS) 2001 2000
---- ----
Raw materials........................ $9,099 $8,368
Finished goods....................... 72,199 60,433
------- -------
$81,298 $68,801
======= =======
- 18 -
NOTE 4 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 29, 2001 and December 30, 2000
consisted of the following:
(IN THOUSANDS) 2001 2000
---- ----
Machinery and equipment.................... $244,620 $237,412
Buildings and improvements................. 90,461 89,984
Office furniture and fixtures.............. 6,414 6,463
-------- --------
341,495 333,859
Less: Accumulated depreciation and
amortization............................. 183,562 165,472
-------- --------
157,933 168,387
Land....................................... 15,698 15,634
Construction in progress................... 24,934 6,812
-------- --------
$198,565 $190,833
======== ========
Interest capitalized relating to capital assets under construction was
$821,000, $527,000 and $256,000 in 2001, 2000 and 1999, respectively.
Depreciation expense for property, plant and equipment was $30,685,000,
$32,204,000 and $31,607,000 in 2001, 2000 and 1999, respectively.
NOTE 5 GOODWILL, DISTRIBUTION RIGHTS AND OTHER INTANGIBLES
Goodwill, distribution rights and other intangibles at December 29, 2001
and December 30, 2000 consisted of the following:
(IN THOUSANDS) 2001 2000
---- ----
Goodwill and distribution rights........... $134,666 $128,154
Other intangibles.......................... 5,682 5,682
-------- --------
140,348 133,836
Less: Accumulated amortization............ 45,880 40,944
-------- --------
$ 94,468 $ 92,892
======== ========
The increase in goodwill and distribution rights during 2001 resulted from
the purchase of independent distributors and distribution rights (Note 13).
Other intangibles primarily consist of trademarks, a product formulation and
noncompete covenants. Amortization expense for goodwill, distribution rights,
and other intangibles was $4,936,000, $5,070,000 and $2,994,000 in 2001, 2000
and 1999, respectively.
NOTE 6 INCOME TAX PROVISION (BENEFIT)
The income tax provision (benefit) consisted of the following:
(IN THOUSANDS) 2001 2000 1999
---- ---- ----
Current:
Federal......................... $4,155 $ 7,691 $2,601
State........................... 782 877 226
------ ------- ------
4,937 8,568 2,827
------ ------- ------
Deferred:
Federal......................... 451 6,325 3,762
State........................... (634) 340 543
------ ------- ------
(183) 6,665 4,305
------ ------- ------
$4,754 $15,233 $7,132
====== ======= ======
- 19 -
The 1999 cumulative effect of change in accounting principle of $595,000
is net of an income tax benefit of $392,000. This income tax benefit is
comprised of federal and state income taxes and is not reflected in the above
table.
The net deferred income tax liability as of December 29, 2001 and December
30, 2000 consisted of the following:
(IN THOUSANDS) 2001 2000
---- ----
Net deferred income tax assets - current:
Net operating loss carryforwards........ $ 270 $ 51
Accrued employee benefits............... 1,479 1,486
Tax credit carryforwards................ 3,027 3,346
Other................................... (1,229) (299)
-------- -------
3,547 4,584
-------- -------
Net deferred income tax liabilities -
noncurrent:
Intangible assets and related
amortization............................ (12,272) (12,227)
Depreciation............................ (13,035) (14,342)
Other................................... 817 306
-------- -------
(24,490) (26,263)
--------- --------
$(20,943) $(21,679)
========= ========
The federal statutory income tax rate is reconciled to the Company's
effective income tax rate as follows:
2001 2000 1999
---- ---- ----
Federal statutory income tax rate......... 35.0% 35.0% 35.0%
State income taxes, net of federal tax 0.7 2.0 2.7
benefit...................................
Tax credits............................... (2.5) (0.7) (1.6)
Other..................................... 1.8 1.2 2.0
---- ---- ----
35.0% 37.5% 38.1%
==== ==== ====
As of December 29, 2001, the Company had deferred tax assets relating to
alternative minimum tax and other tax credit carryforwards. The alternative
minimum tax carryforwards totaling $1,492,000 can be carried forward
indefinitely, as they do not expire. The other tax credit carryforwards totaling
$1,535,000 expire between 2014 and 2021. Utilization of the alternative minimum
tax and other tax credit carryforwards may be limited in the event of a change
in ownership of the Company. No valuation allowance for these assets has been
recorded because the Company believes that it is more likely than not that these
carryforwards will be used in future years to offset taxable income.
- 20 -
NOTE 7 LONG-TERM DEBT
Long-term debt at December 29, 2001 and December 30, 2000 consisted of the
following:
(IN THOUSANDS) 2001 2000
---- ----
Revolving line of credit with banks, due 2005
with interest payable at seven different
interest rate options............................. $120,100 $85,500
Senior notes, with principal due through 2008 and
interest payable semiannually at rates ranging
from 7.68 percent to 8.34 percent................. 28,571 42,857
Senior notes, with principal due through 2001 and
interest payable semiannually at 9.30 percent..... 3,400
Industrial revenue bonds, with principal due
through 2001 and interest payable quarterly
at a floating rate based upon a tax-exempt
note index........................................ 4,500
-------- --------
148,671 136,257
Less: Current portion.............................. 15,043
-------- --------
$148,671 $121,214
======== ========
The aggregate annual maturities of long-term debt as of December 29, 2001
are as follows:
YEAR ENDING: (IN THOUSANDS)
- -----------
2002....................... $
2003....................... 2,143
2004....................... 2,143
2005....................... 122,243
2006....................... 8,810
Later years................ 13,332
--------
$148,671
========
REVOLVING LINE OF CREDIT
The Company has a credit agreement with certain banks for a total
revolving line of credit of $240,000,000. Offshore borrowings under the line
bear interest at LIBOR plus a margin ranging from 0.75 percent to 2.375 percent.
Base borrowings under the line bear interest at PRIME plus a margin ranging from
zero percent to 1.375 percent. The interest rate on the revolving line of credit
was 3.85 percent at December 29, 2001. The Company's revolving line of credit
agreement prohibits the declaration and payment of dividends in excess of
$10,000,000 and $15,000,000 in 2001 and 2002, respectively, and in excess of
$20,000,000 in each of the years 2003, 2004 and 2005. The unused portion of the
$240,000,000 revolving line of credit at December 29, 2001 was $119,900,000.
FAIR VALUE OF FINANCIAL INSTRUMENTS
As of December 29, 2001 and December 30, 2000, the fair value of the
Company's long-term debt was determined to approximate the carrying amount. The
fair value was based on quoted market prices for the same or similar issues or
on the current rates offered to the Company for a term equal to the same
remaining maturities.
Under its long-term debt obligations, the Company is subject to various
financial covenant requirements, including the dividend restrictions discussed
above.
NOTE 8 LEASING ARRANGEMENTS
The Company conducts certain of its operations from leased facilities,
which include land and buildings, production equipment, and certain vehicles.
All of these leases expire within a period of 20 years (including renewal
options) except one that has 86 years remaining (including renewal options).
Certain of these leases include non-bargain purchase options.
- 21 -
Future minimum rental payments required under noncancelable operating
leases with terms in excess of one year at December 29, 2001 are as follows:
YEAR ENDING: (IN THOUSANDS)
- -----------
2002....................... $10,980
2003....................... 7,299
2004....................... 5,459
2005....................... 3,827
2006....................... 2,837
Later years................ 4,801
-------
$35,203
=======
Rental expense under all operating leases, both cancelable and
noncancelable, was $15,546,000, $12,750,000 and $12,030,000 in 2001, 2000 and
1999, respectively.
NOTE 9 REDEEMABLE CONVERTIBLE PREFERRED STOCK
On October 3, 1997, the Series B preferred stock was converted into a
total of 1,008,000 shares of redeemable convertible Series A preferred stock
(Series A), redeemable on June 30, 2001. The Series A preferred stock was
converted by the holder into 5,800,000 shares of common stock in the second
quarter of 2001. Up to the conversion date, Series A preferred stockholders were
paid dividends at a rate equal to the amount they would receive as if the shares
were converted into comparable shares of common stock. Upon conversion, the
redeemable convertible preferred shares were cancelled and returned to the pool
of preferred shares authorized for issuance.
NOTE 10 COMMON STOCK
DIVIDENDS
The Company paid a regular quarterly dividend of $.06 per share of common
stock for each quarter of 2001 and $.03 per share of common stock for each
quarter of 2000 and 1999. During 1987, the Board of Directors declared a
dividend of one Preferred Stock Purchase Right (the Rights) for each outstanding
share of common stock. Under certain conditions, the Rights become exercisable
for the purchase of the Company's preferred or common stock.
NESTLE EQUITY ISSUANCE
Pursuant to a 1994 equity transaction (the Nestle Agreement), an affiliate
of Nestle USA, Inc. purchased 6,000,000 newly issued shares of common stock and
warrants to purchase an additional 4,000,000 shares at an exercise price of $16
per share. Warrants for 2,000,000 shares expired unexercised on June 14, 1997
and warrants for the remaining 2,000,000 shares expired unexercised on June 14,
1999.
NOTE 11 EMPLOYEE BENEFIT PLANS
The Company maintains a defined contribution retirement plan (pension
plan) for employees not covered by collective bargaining agreements. The pension
plan provides retirement and other benefits based upon the assets of the plan
held by the trustee. The Company contributed five percent of the eligible
participants' annual compensation to the plan during 2001, 2000 and 1999. The
Company also maintains a salary deferral plan (401(k) plan) under which it may
make a matching contribution of a percentage of each participant's annual
deferred salary amount.
Pension expense and 401(k) matching contributions under these plans were
approximately $8,155,000, $6,978,000 and $6,045,000 in 2001, 2000 and 1999,
respectively. The Company's liability for accrued pension contributions and
401(k) matching contributions was $8,237,000 and $6,733,000 at December 29, 2001
and December 30, 2000, respectively.
- 22-
Pension expense for employees covered by multi-employer retirement plans
under collective bargaining agreements was $1,135,000, $1,031,000 and $1,015,000
in 2001, 2000 and 1999, respectively.
NOTE 12 EMPLOYEE STOCK PLANS
The Company offers to certain employees various stock option plans, a
Section 423 Employee Stock Purchase Plan and an Employee Secured Stock Purchase
Plan.
STOCK OPTION PLANS
The Company has two stock option plans under which options may be granted
for the purchase of the Company common stock at a price not less than 100
percent of the fair market value at the date of grant, and a third plan which
has expired. The non-qualified stock option plan (the 1992 Plan) provides that
options are not exercisable until after two years from the date of grant and
expire upon death or termination of employment. In 1994, the stockholders
approved an additional stock option plan (the 1993 Plan) under which granted
options may be either incentive stock options or non-qualified stock options.
This plan provides that options expire no later than ten years from the date of
grant. This plan also provides that most of the terms of the options, such as
vesting, are within the discretion of the compensation committee, comprised of
certain members of the Company's Board of Directors. In May 1999, stockholders
approved an amendment to the 1993 Plan to increase the number of shares reserved
for issuance thereunder from 4,400,000 to 6,400,000. In May 2001, stockholders
approved an additional amendment to the 1993 Plan to increase the number of
shares reserved for issuance thereunder by 848,425 shares on the date of each
annual meeting of stockholders, beginning in 2001 and ending with the 2005
annual meeting. Options available for grant under the incentive stock option
plan (the 1982 Plan) expired during 2000.
The Company used the Black-Scholes option pricing model to estimate the
fair value per share of options granted during 2001, 2000 and 1999. The
assumptions used to compute compensation expense in the pro forma presentation
below and to estimate the weighted-average fair market value per share of
options granted are as follows:
2001 2000 1999
---- ---- ----
Risk-free interest rate................. 5.11% 6.68% 5.23%
Dividend yield.......................... .77% .68% .96%
Volatility.............................. 44.36% 39.96% 39.58%
Expected term (YEARS)................... 5.90 5.90 5.90
Weighted average fair market value...... $14.39 $8.31 $5.32
No compensation cost has been recognized for these stock option plans. If
compensation cost for these plans had been determined based on the fair value at
the grant dates, the Company's net income available to common stockholders and
net income per common share on a pro forma basis would have been as follows:
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2001 2000 1999
---- ---- ----
Net income available to common $ 2,061 $19,644 $6,314
stockholders............................
Net income per common share:
Basic................................. .07 .70 .23
Diluted............................... .07 .59 .22
Stock options exercisable were 3,427,000, 3,001,000 and 2,466,000 at
year-end 2001, 2000 and 1999, respectively. These stock options were exercisable
at weighted-average prices per share of $15.10, $14.84 and $13.98 in 2001, 2000
and 1999, respectively.
The activity in the three stock option plans for each of the three years
in the period ended December 29, 2001 follows:
- 23 -
WEIGHTED-
OPTIONS AVERAGE
AVAILABLE OPTIONS PRICE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) FOR GRANT OUTSTANDING PER SHARE
--------- ----------- ---------
BALANCES AT DECEMBER 26, 1998......... 759 4,361 $15.41
Authorized......................... 2,000
Granted............................ (1,171) 1,171 12.47
Exercised.......................... (334) 13.18
Canceled........................... 125 (125) 14.31
------ -----
BALANCES AT DECEMBER 25, 1999......... 1,713 5,073 14.91
Granted............................ (988) 988 17.80
Exercised.......................... (162) 14.84
Canceled........................... 118 (118) 16.01
Expired............................ (253)
----- -----
BALANCES AT DECEMBER 30, 2000......... 590 5,781 15.38
Authorized......................... 848
Granted............................ (780) 780 31.02
Exercised.......................... (403) 13.50
Canceled........................... 15 (15) 20.49
----- -----
BALANCES AT DECEMBER 29, 2001......... 673 6,143 17.48
===== =====
Significant option groups outstanding at December 29, 2001 and related
weighted-average exercise price per share and life information follows:
(IN THOUSANDS, EXCEPT YEARS AND PER SHARE AMOUNTS)
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------- -------------------------
WEIGHTED-
WEIGHTED- AVERAGE
AVERAGE REMAINING
EXERCISE OPTIONS EXERCISE LIFE OPTIONS EXERCISE
PRICE RANGE OUTSTANDING PRICE (YEARS) EXERCISABLE PRICE
- ----------- ----------- --------- --------- ----------- --------
$ 9.75-13.75 2,162 $12.48 5.8 1,528 $12.52
14.09-19.75 2,537 16.12 6.1 1,490 15.48
21.44-31.13 1,444 27.36 7.9 409 23.36
----- -----
6,143 3,427
===== =====
SECTION 423 EMPLOYEE STOCK PURCHASE PLAN
Under the Section 423 Employee Stock Purchase Plan, employees may
authorize payroll deductions of up to ten percent of their compensation for the
purpose of acquiring shares of the Company's common stock at 85 percent of the
market price determined at the beginning of a specified 12-month period. Under
this plan, employees purchased 86,000 shares at prices ranging from $16.89 to
$18.81 per share in 2001, 136,000 shares at prices ranging from $10.36 to $14.50
per share in 2000 and 67,000 shares at prices ranging from $9.30 to $19.23 per
share in 1999. Compensation cost based on the fair value of the employees'
purchase rights was not material in 2001, 2000 and 1999.
EMPLOYEE SECURED STOCK PURCHASE PLAN
Under the Employee Secured Stock Purchase Plan, on specified dates
employees may purchase shares of the Company's common stock at fair market value
by paying 20 percent of the purchase price in cash and the remaining 80 percent
of the purchase price in the form of a non-recourse promissory note with a term
of 30 years. These notes have been classified as a reduction of stockholders'
equity. Under this plan, employees purchased 61,000 shares at prices ranging
from $27.40 to $32.69 per share in 2001, 125,000 shares at prices ranging from
$17.00 to $23.50 per share in 2000 and 179,000 shares at prices ranging from
$11.88 to $18.38 per share in 1999.
- 24 -
NOTE 13 ACQUISITIONS
SPECIALTY FROZEN PRODUCTS, L.P.
On September 29, 2000, the Company acquired certain assets of Specialty
Frozen Products, L.P. (Specialty), which was the leading independent
direct-store-delivery ice cream distributor in the Pacific Northwest. The cost
of this acquisition, which was accounted for as a purchase, was $20,182,000, of
which $18,922,000 was paid in 2000. The $20,182,000 was comprised of $15,550,000
for the purchase of certain assets and a total of $4,632,000 in legal and other
costs. The results of Specialty are included in the Company's Consolidated
Statement of Income from the date of acquisition. In connection with this
transaction, the Company recorded approximately $13,054,000 of goodwill,
distribution rights and other intangibles.
CHEROKEE CREAM COMPANY, INC.
On February 9, 2000, the Company acquired the remaining 84 percent of the
outstanding common stock of Cherokee Cream Company, Inc. (Cherokee), the parent
of Sunbelt Distributors, Inc., the leading independent direct-store-delivery ice
cream distributor in Texas. The Company paid $7,651,000 (purchase price of
$7,855,000 net of $204,000 cash acquired) in this transaction that has been
accounted for as a purchase. The results of Cherokee are included in the
Company's Consolidated Statement of Income from the date of acquisition. In
connection with this transaction, the Company recorded $15,269,000 of goodwill,
distribution rights, and other intangibles.
NOTE 14 NEW BEN & JERRY'S DISTRIBUTION AGREEMENT
On October 25, 2000, the Company announced that it signed a new, long-term
distribution agreement with Ben & Jerry's Homemade, Inc., a subsidiary of
Unilever United States, Inc. Under this agreement, the Company became the
distributor of Ben & Jerry's(R) products for the grocery channel in all of its
company-operated markets across the country as of March 5, 2001. The Company and
Ben & Jerry's continue to expand the Company's role as a Ben & Jerry's(R)
distributor in other non-grocery channels, such as convenience stores. The
agreement has a term of five years and automatically renews for two additional
five-year terms unless terminated by either party at the end of each five-year
term.
NOTE 15 CONTINGENCIES
The Company is engaged in various legal actions as both plaintiff and
defendant. Management believes that the outcome of these actions, either
individually or in the aggregate, will not have a material adverse effect on the
Company's financial position, results of operations or cash flows.
- 25 -
NOTE 16 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
NET INCOME (LOSS)(1)
-------------------------------------
AVAILABLE
TO PER COMMON SHARE(3)
NET GROSS COMMON --------------------
SALES(4) PROFIT(4) STOCKHOLDERS BASIC DILUTED
-------- --------- ------------ ----- -------
2001
- ----
1st Quarter..... $ 239,413 $ 22,623 $ (4,886) $(.17) $(.17)
2nd Quarter..... 335,424 42,098 6,935 $ .24 $ .20
3rd Quarter..... 361,636 40,616 6,048 $ .18 $ .17
4th Quarter..... 274,772 25,019 172 $ .00 $ .00
---------- -------- --------
$1,211,245 $130,356 $ 8,269
========== ======== ========
2000
- ----
1st Quarter..... $ 213,374 $ 30,560 $ 2,386 $ .09 $ .08
2nd Quarter..... 284,641 50,136 12,236 $ .44 $ .35
3rd Quarter..... 299,051 47,825 10,710 $ .38 $ .31
4th Quarter(2).. 243,722 26,315 (1,112) $(.04) $(.04)
---------- -------- --------
$1,040,788 $154,836 $ 24,220
========== ======== ========
(1)Net income (loss) has been reduced by preferred stock dividends and
accretion of the preferred stock to its redemption value.
(2)The fourth quarter of fiscal 2000 contained 14 weeks. All other quarterly
periods presented contained 13 weeks.
(3)The number of weighted-average shares outstanding used in the quarterly
computation of net income (loss) per common share increases and decreases as
shares are issued and repurchased during the year. In addition, the number of
weighted-average shares outstanding can also vary each quarter due to the
exclusion of securities that would have an anti-dilutive effect. For these
reasons, the sum of net income (loss) per common share for the quarters may
not be the same as the net income (loss) per common share for the year.
(4)As a result of EITF 01-9, "Accounting for Consideration Given by a Vendor to
a Customer (Including a Reseller of the Vendor's Products)," certain expenses
previously classified as selling, general and administrative expenses are now
recorded as a reduction of sales beginning in the first quarter of 2002. In
accordance with this pronouncement, the net sales and gross profit figures
reflect these retroactive reclassifications which had no effect on net income
(loss) as previously reported.
- 26 -
Item 7. Exhibits.
(c) Exhibits.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
23.1 Consent of PricewaterhouseCoopers LLP.
99.1 Chief Executive Officer Certification Pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Chief Financial Officer Certification Pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
- 27 -
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 hereunto duly authorized.
Dreyer's Grand Ice Cream, Inc.
Date: February 4, 2003 By: /s/ TIMOTHY F. KAHN
--------------------------
Name: Timothy F. Kahn
Title: Vice President of
Finance and
Administration and
Chief Financial Officer
- 28 -
CERTIFICATIONS
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, T. Gary Rogers, certify that:
1. I have reviewed this current report on Form 8-K/A of Dreyer's Grand Ice
Cream, Inc.;
2. Based on my knowledge, this current report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this current
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this current report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Corporation as of, and for, the periods presented in this current report.
/s/ T. Gary Rogers
- ------------------------------
T. Gary Rogers
Chairman of the Board of
Directors and Chief Executive
Officer
Dated: February 4, 2003
- 29 -
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Timothy F. Kahn, certify that:
1. I have reviewed this current report on Form 8-K/A of Dreyer's Grand Ice
Cream, Inc.;
2. Based on my knowledge, this current report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this current
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Corporation as of, and for, the periods presented in this current report.
/s/ Timothy F. Kahn
- --------------------------------
Timothy F. Kahn
Vice President - Finance and
Administration and Chief
Financial Officer
Dated: February 4, 2003
- 30 -
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
23.1 Consent of PricewaterhouseCoopers LLP.
99.1 Chief Executive Officer Certification Pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Chief Financial Officer Certification Pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
- 31 -
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-7350, 33-8418, 33-35561, 33-36092, 33-40275,
33-56417, 33-56411, 33-56413, 33-16701, 333-55982 and 333-90702) of Dreyer's
Grand Ice Cream, Inc. of our report dated February 13, 2002, except for Note 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- GOODWILL, DISTRIBUTION RIGHTS AND
OTHER INTANGIBLES and ACCOUNTING FOR CONSIDERATION GIVEN BY A VENDOR TO A
CUSTOMER (INCLUDING A RESELLER OF THE VENDOR'S PRODUCTS) which are as
ofSeptember 20, 2002, relating to the financial statements which appears in the
Current Report on Form 8-K/A of Dreyer's Grand Ice Cream, Inc. dated February 4,
2003.
/s/ PRICEWATERHOUSECOOPERS LLP
San Francisco, California
February 4, 2003