CoolBrands International Inc.
Consolidated Balance Sheets (Revised)
as at February 29, 2004 and August 31, 2003
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(in thousands of dollars)
February 29, August 31,
2004 2003
(Unaudited)
$ $
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Assets
Current assets:
Cash and short term investments 66,698 30,140
Receivables 66,404 60,807
Receivables - affiliates 3,182 3,185
Inventories 60,586 55,604
Prepaid expenses 6,162 9,722
Prepaid taxes 411
Future income taxes (note 6) 3,956 1,930
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Total current assets 207,399 161,388
Future income taxes 4,418 2,977
Property, plant and equipment 29,672 28,349
License agreements 11,863 12,357
Intangible and other assets 8,912 9,084
Goodwill 97,541 99,695
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359,805 313,850
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Liabilities and shareholders' equity
Current liabilities:
Accounts payable 30,074 27,339
Payables - affiliates 657 754
Accrued liabilities 33,313 33,530
Income taxes payable 110 5,204
Future income taxes 1,842 3,144
Revolving loan - secured 7,361
Current maturities of long-term debt 5,407 5,683
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Total current liabilities 78,764 75,654
Long-term debt 28,170 38,671
Other liabilities 3,784 3,984
Future income taxes 4,768 4,722
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Total liabilities 115,486 123,031
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Minority interest 12,317 2,968
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Shareholders' Equity:
Capital stock 138,684 122,406
Contributed surplus (note 4 and 6) 13,413
Cumulative translation adjustment (13,594) (8,904)
Retained earnings (note 6) 93,499 74,349
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Total shareholders' equity (note 6) 232,002 187,851
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359,805 313,850
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CoolBrands International Inc.
Consolidated Statements of Earnings (Revised)
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(Unaudited)
(in thousands of dollars, except share data)
For the six months ended For the three months ended
February 29, February 28, February 29, February 28,
2004 2003 2004 2003
$ $ $ $
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Revenues:
Sales 247,107 118,378 124,986 55,316
Franchising and licensing revenues:
Royalty income 1,200 1,313 603 617
Franchise and license fees 571 1,094 287 748
Consumer products license fee 233 195 150 195
Drayage and other income 27,846 371 12,481 176
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Total revenues 276,957 121,351 138,507 57,052
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Operating expenses:
Cost of goods sold 184,749 71,902 93,037 32,339
Selling, general and administrative expenses 57,102 35,680 23,717 15,884
Stock-based compensation expense (note 6) 2,026 484
Interest expense 1,098 1,078 521 530
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Total operating expenses 244,975 108,660 117,759 48,753
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Minority interest 188 (100)
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Earnings before income taxes (note 6) 31,794 12,691 20,848 8,299
Provision for income taxes (note 6) 12,644 4,780 8,367 3,111
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Net earnings (note 6) 19,150 7,911 12,481 5,188
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Earnings per share:
Basic 0.35 0.15 0.22 0.10
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Diluted 0.34 0.15 0.22 0.10
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Weighted average shares outstanding:
Shares used in per share calculation - basic 55,045 51,731 55,677 51,749
Shares used in per share calculation - diluted 56,198 53,209 56,445 53,107
CoolBrands International Inc.
Consolidated Statements of Cash Flows (Revised)
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(in thousands of dollars)
For the six months ended For the three months ended
February 29, February 28, February 29, February 28,
2004 2003 2004 2003
$ $ $ $
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Cash and short term investments
provided by (used in) :
Operating activities:
Net earnings 19,150 7,911 12,481 5,188
Items not affecting cash:
Depreciation and amortization 2,931 2,530 1,471 1,248
Stock-based compensation expense (note 6) 2,026 484
Future income taxes (note 6) (3,114) 667 (608) 1,843
Minority interest 188 (100)
Contributed surplus 11,387 11,387
Changes in current assets and liabilities:
Receivables (5,956) 6,198 (5,634) (2,830)
Receivables - affiliates 3 727 384 (472)
Allowance for doubtful accounts 408 (552) 59 (643)
Inventories (4,918) (8,109) (7,289) (3,786)
Prepaid income taxes (406) (406) 215
Prepaid expenses 3,515 (1,198) 318 (3,846)
Accounts payable 2,700 2,154 10,423 947
Payables - affiliates (96) (330) 40 (203)
Accrued liabilities (214) (1,682) (6,094) 1,797
Income taxes payable (5,024) (6,781) (1,428) 611
Other assets 152 37 225 38
Other liabilities (198) (500) 161 (613)
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Cash provided by (used in) operating
activities 22,534 1,072 15,874 (506)
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Investing activities:
Increase in notes receivable (20) (1)
Repayment of notes receivable 24 264 21 156
Purchase of intangible assets (49) (49)
Purchase of license agreements (397) (397)
Purchase of leasehold improvements and
equipment (6,055) (2,883) (3,050) (1,586)
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Cash used in investing activities (6,477) (2,639) (3,475) (1,431)
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Financing activities:
Expenses for special warrants (144)
Proceeds from issuance of Class A and B shares 16,279 64 582 36
Capital contributions from (repayment to)
Partnership's minority partner 8,909 (2,645)
Change in revolving loan - secured 3,338 4,344
Repayment of long-term debt (5,286) (4,150) (1,292) (2,572)
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Cash provided by (used in) financing
activities 23,240 (4,230) 989 (2,536)
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(Decrease) increase in cash flow due to
changes in foreign exchange rates (2,739) (2,364) 3,842 (2,553)
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Increase (decrease) in cash and
short-term investments 36,558 (8,161) 17,230 (7,026)
Cash and short-term investments -
beginning of period 30,140 47,086 49,468 45,951
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Cash and short-term investments -
end of period 66,698 38,925 66,698 38,925
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CoolBrands I nternational Inc.
Consolidated Notes to Interim Financial Statements (Revised)
(Unaudited)
February 29, 2004 and February 28, 2003
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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 six months ended February 29, 2004
Revenue,
external 246,073 9,715 13,543 7,571 55 276,957
Intersegment
revenue 34,976 372 3,407 96 38,851
Segment earnings
before income taxes 29,242 609 2,173 574 (804) 31,794
For the six months ended February 28, 2003
Revenue,
external 80,778 11,086 20,298 9,168 21 121,351
Intersegment
revenue 39 453 1,369 97 1,958
Segment earnings
before income taxes 10,219 593 2,183 857 (1,161) 12,691
CoolBrands I nternational Inc.
Consolidated Notes to Interim Financial Statements (Revised)
(Unaudited)
February 29, 2004 and February 28, 2003
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(Tabular amounts are expressed in thousands of dollars)
3. Segment information (cont'd)
Prepackaged Foodservice Dairy Franchising Corporate Consoli-
consumer components and dated
products licensing
$ $ $ $ $ $
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For the three months ended February 29, 2004
Revenue,
external 124,268 4,499 6,061 3,650 29 138,507
Intersegment
revenue 15,964 190 1,823 41 18,018
Segment earnings
before income taxes 19,858 145 930 447 (532) 20,848
For the three months ended February 28, 2003
Revenue,
external 37,662 5,291 9,462 4,628 9 57,052
Intersegment
revenue 37 221 752 45 1,055
Segment earnings
before income taxes 7,210 204 936 516 (567) 8,299
4. Contributed surplus
Contributed surplus represents the reduction in income taxes payable
resulting from the exercise of non-qualified stock options by employees
of a U.S. subsidiary and 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 April 16, 2004:
Class A Class B Multiple Stock Options
Subordinate Voting Shares
Voting Shares
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49,715 6,031 3,933
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CoolBrands International Inc.
Consolidated Notes to Interim Financial Statements (Revised)
(Unaudited)
February 29, 2004 and February 28, 2003
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(Tabular amounts are expressed in thousands of dollars)
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 second 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 for the three and six months ended February 29, 2004 of
$484,000 and $2,026,000, respectively. Such expense reduced net
earnings by for the three and six months ended February 29, 2004 by
$290,000 ($0.01 per share basic and diluted) and $1,212,000 ($0.02 per
share basic and diluted), respectively.