CoolBrands International Inc.
Consolidated Balance Sheets (Revised)
as at November 30, and August 31, 2003
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(in thousands of dollars)
November 30, August 31,
2003 2003
(Unaudited)
$ $
Assets
Current assets:
Cash and short term investments 49,468 30,140
Receivables 60,763 60,807
Receivables - affiliates 3,556 3,185
Inventories 53,298 55,604
Prepaid expenses 6,608 9,722
Future income taxes (note 6) 3,304 1,930
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Total current assets 176,997 161,388
Future income taxes 4,230 2,977
Property, plant and equipment 26,798 28,349
License agreements 11,381 12,357
Intangible and other assets 8,529 9,084
Goodwill 95,492 99,695
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323,427 313,850
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Liabilities and shareholders' equity
Current liabilities:
Accounts payable 19,824 27,339
Payables - affiliates 622 754
Accrued liabilities 39,115 33,530
Income taxes payable 1,703 5,204
Future income taxes 1,880 3,144
Current maturities of long-term debt 5,267 5,683
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Total current liabilities 68,411 75,654
Long-term debt 31,407 38,671
Other liabilities 3,635 3,984
Future income taxes 4,535 4,722
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Total liabilities 107,988 123,031
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Minority interest 14,614 2,968
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Shareholders' Equity:
Capital stock 138,103 122,406
Contributed surplus (note 4 and 6) 1,542
Cumulative translation adjustment (19,838) (8,904)
Retained earnings (note 6) 81,018 74,349
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Total shareholders' equity (note 6) 200,825 187,851
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323,427 313,850
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CoolBrands International Inc.
Consolidated Statements of Earnings (Revised)
for the three months ended November 30, 2003 and 2002
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(Unaudited)
(in thousands of dollars, except share data)
2003 2002
$ $
Revenues:
Sales 122,121 63,062
Franchising and licensing revenues:
Royalty income 597 696
Franchise and license fees 284 346
Consumer products license fee 83
Drayage and other income 15,365 195
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Total revenues 138,450 64,299
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Operating expenses:
Cost of goods sold 91,712 39,563
Selling, general and administrative expenses 33,385 19,796
Stock-based compensation expense (note 6) 1,542
Interest expense 577 548
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Total operating expenses 127,216 59,907
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Minority interest 288
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Earnings before income taxes (note 6) 10,946 4,392
Provision for income taxes (note 6) 4,277 1,669
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Net earnings (note 6) 6,669 2,723
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Earnings per share:
Basic and diluted 0.12 0.05
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Weighted average shares outstanding:
Shares used in per share calculation - basic 54,413 51,714
Shares used in per share calculation - diluted 55,891 53,300
CoolBrands International Inc.
Consolidated Statements of Cash Flows (Revised)
for the three months ended November 30, 2003 and 2002
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(Unaudited)
(in thousands of dollars)
2003 2002
$ $
Cash and short term investments
provided by (used in) :
Operating activities:
Net earnings 6,669 2,723
Items not affecting cash:
Depreciation and amortization 1,460 1,282
Stock-based compensation expense (note 6) 1,542
Future income taxes (note 6) (2,506) (1,176)
Minority interest 288
Changes in current assets and liabilities:
Receivables (322) 9,028
Receivables - affiliates (381) 1,199
Allowance for doubtful accounts 349 91
Inventories 2,371 (4,323)
Prepaid income taxes (215)
Prepaid expenses 3,197 2,648
Accounts payable (7,723) 1,207
Payables - affiliates (136) (127)
Accrued liabilities 5,880 (3,479)
Income taxes payable (3,596) (7,392)
Other assets (73) (1)
Other liabilities (359) 113
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Cash provided by operating activities 6,660 1,578
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Investing activities:
Increase in notes receivable (19)
Repayment of notes receivable 3 108
Purchase of leasehold improvements and
equipment (3,005) (1,297)
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Cash used in investing activities (3,002) (1,208)
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Financing activities:
Expenses for special warrants (144)
Proceeds from issuance of Class A and B shares 15,697 28
Capital contributions from Partnership's minority
partner 11,554
Repayment of long-term debt (5,000) (1,578)
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Cash provided by (used in) financing
activities 22,251 (1,694)
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(Decrease) increase in cash flow due to
changes in foreign exchange rates (6,581) 189
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Increase (decrease) in cash and
short term investments 19,328 (1,135)
Cash and short-term investments -
beginning of period 30,140 47,086
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Cash and short-term investments -
end of period 49,468 45,951
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CoolBrands International Inc.
Consolidated Notes to Interim Financial Statements (Revised)
(Unaudited)
November 30, 2003 and 2002
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(Tabular amounts are expressed in thousands)
1. Significant accounting policies
The financial statements of the Company have been prepared by
management in accordance with generally accepted accounting principles
in Canada for interim financial statements. The financial statements
have, in management's opinion, been properly prepared using judgment
within reasonable limits of materiality. These interim financial
statements do not include all the note disclosures required for annual
financial statements and therefore they should be read in conjunction
with the company's audited financial statements for the year ended
August 31, 2003. The significant accounting policies follow those
disclosed in the most recently reported annual financial statements.
2. Accounting estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements. Actual results could differ from those estimated.
3. Segment information
Prepackaged Foodservice Dairy Franchising Corporate Consoli-
consumer components and dated
products licensing
$ $ $ $ $ $
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For the three months ended November 30, 2003
Revenue,
external 121,805 5,216 7,482 3,921 26 138,450
Intersegment
revenue 19,012 182 1,584 55 20,833
Segment earnings
before income taxes 9,384 464 1,243 127 (272) 10,946
For the three months ended November 30, 2002
Revenue,
external 43,116 5,795 10,836 4,540 12 64,299
Intersegment
revenue 2 232 617 52 903
Segment earnings
before income taxes 3,009 389 1,247 341 (594) 4,392
CoolBrands International Inc.
Consolidated Notes to Interim Financial Statements (Revised)
(Unaudited)
November 30, 2003 and 2002
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(Tabular amounts are expressed in thousands of dollars)
4. Contributed surplus
Contributed surplus represents the fair value of stock options granted
to the Company's Co-CEO and Co-Chairman as discussed in note 6.
5. Capital stock
The Company had the following equity securities and stock options
outstanding as of January 19, 2004:
Class A Class B Multiple Stock Options
Subordinate Voting Shares
Voting Shares
------------- ---------------- --------------
49,610 6,033 1,936
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6. Revised financial statements
The Company has revised the financial statements to reflect stock-based
compensation expense. CoolBrands' Co-CEO and Co-Chairman, who does not
receive cash compensation directly from the Company, received stock
option grants during the first quarter of fiscal 2004 for his service
to the Company. The Company had believed that, for accounting purposes,
these stock option grants could be characterized either as option
grants to an employee or as option grants to a consultant, although the
Company had believed that accounting for them as grants to an employee
was the more appropriate accounting treatment. Under Generally Accepted
Accounting Principles for that period, an option grant to an employee
did not carry an immediate charge to earnings, while an option grant to
a consultant carried an immediate charge against earnings
Subsequently however the Company, in consultation with its independent
auditors, has determined that it is appropriate to follow CICA 3870
Stock-Based Compensation and Other Stock-Based Payments and FASB
Interpretation Number 44, Accounting for Certain Transactions Involving
Stock Compensation, and APB Opinion Number 25, and for purposes of
accounting for grants of stock options, to treat the Company's Co-CEO
and Co-Chairman as a consultant.
As a result the Company has recorded a non-cash pre tax compensation
expense of $1,542,000 which reduced net earnings by $922,000 ($0.02 per
share basic and diluted).