CoolBrands International Inc.
Consolidated Balance Sheets (Revised)
as at May 31, 2004 and August 31, 2003
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(in thousands of dollars)
May 31, August 31,
2004 2003
(Unaudited)
$ $
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Assets
Current assets:
Cash and short term investments 97,486 30,140
Receivables 88,401 60,807
Receivables - affiliates 4,768 3,185
Inventories 74,584 55,604
Prepaid expenses 8,393 9,722
Future income taxes (note 6) 6,645 1,930
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Total current assets 280,277 161,388
Future income taxes 4,462 2,977
Property, plant and equipment 34,017 28,349
License agreements 11,771 12,357
Intangible and other assets 8,931 9,084
Goodwill 98,656 99,695
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438,114 313,850
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Liabilities and shareholders' equity
Current liabilities:
Accounts payable 67,842 27,339
Payables - affiliates 1,057 754
Accrued liabilities 32,425 33,530
Income taxes payable 7,248 5,204
Future income taxes 2,273 3,144
Revolving loan - secured 10,544
Current maturities of long-term debt 5,464 5,683
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Total current liabilities 126,853 75,654
Long-term debt 27,335 38,671
Other liabilities 3,769 3,984
Future income taxes 4,936 4,722
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Total liabilities 162,893 123,031
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Minority interest 13,121 2,968
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Shareholders' Equity:
Capital stock 138,883 122,406
Contributed surplus (note 4 and 6) 24,658
Cumulative translation adjustment (9,929) (8,904)
Retained earnings (note 6) 108,488 74,349
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Total shareholders' equity (note 6) 262,100 187,851
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438,114 313,850
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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 nine months ended For the three months ended
May 31, May 31, May 31, May 31,
2004 2003 2004 2003
$ $ $ $
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Revenues:
Sales 420,354 197,356 173,247 78,978
Franchising and licensing revenues:
Royalty income 1,916 2,034 716 721
Franchise and license fees 807 1,446 236 352
Consumer products license fee 350 436 117 241
Drayage and other income 40,700 1,987 12,854 1,616
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Total revenues 464,127 203,259 187,170 81,908
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Operating expenses:
Cost of goods sold 313,792 117,016 129,043 45,114
Selling, general and administrative expenses 82,296 57,843 25,194 22,163
Stock-based compensation expense (note 6) 8,938 6,912
Interest expense 1,638 1,451 540 373
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Total operating expenses 406,664 176,310 161,689 67,650
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Minority interest 765 577
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Earnings before income taxes (note 6) 56,698 26,949 24,904 14,258
Provision for income taxes (note 6) 22,559 10,081 9,915 5,301
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Net earnings (note 6) 34,139 16,868 14,989 8,957
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Earnings per share:
Basic 0.62 0.33 0.27 0.17
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Diluted 0.61 0.32 0.26 0.17
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Weighted average shares outstanding:
Shares used in per share calculation - basic 55,291 51,740 55,777 51,757
Shares used in per share calculation - diluted 56,337 53,492 56,880 53,946
CoolBrands International Inc.
Consolidated Statements of Cash Flows (Revised)
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(Unaudited)
(in thousands of dollars)
For the nine months ended For the three months ended
May 31, May 31, May 31, May 31,
2004 2003 2004 2003
$ $ $ $
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Cash and short term investments
provided by (used in) :
Operating activities:
Net earnings 34,139 16,868 14,989 8,957
Items not affecting cash:
Depreciation and amortization 4,392 3,726 1,461 1,196
Stock-based compensation expense (note 6) 8,938 6,912
Future income taxes (note 6) (5,262) 1,342 (2,148) 675
Loss of asset held for sale 403 403
Minority interest 765 577
Contributed surplus 15,720 4,333
Changes in current assets and liabilities:
Receivables (27,488) 2,554 (21,532) (3,644)
Receivables - affiliates (1,546) (2,155) (1,549) (2,882)
Allowance for doubtful accounts 514 (711) 106 (159)
Inventories (18,539) (9,839) (13,621) (1,730)
Prepaid income taxes 406
Prepaid expenses 1,299 399 (2,216) 1,597
Accounts payable 39,559 3,090 36,859 936
Payables - affiliates 296 1,458 392 1,788
Accrued liabilities (1,080) (3,456) (866) (1,774)
Income taxes payable 2,002 (7,081) 7,026 (300)
Other assets 128 659 (24) 622
Other liabilities (210) (929) (12) (429)
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Cash provided by operating activities 53,627 6,328 31,093 5,256
Investing activities:
Increase in notes receivable (1)
Repayment of notes receivable 30 305 6 60
Purchase of intangible assets (70) (21)
Purchase of license agreements (393) 4
Purchase of leasehold improvements and
equipment (10,946) (3,853) (4,891) (970)
Proceeds from the sale of asset held for sale 3,396 3,396
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Cash (used in) provided by investing
activities (11,379) (153) (4,902) 2,486
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Financing activities:
Expenses for special warrants (144)
Proceeds from issuance of Class A and B shares 16,477 64 199
Capital contributions from (repayment to)
Partnership's minority partner 8,891 (18)
Change in revolving loan - secured 6,344 2,742 3,006 2,742
Repayment of long-term debt (6,652) (7,543) (1,366) (3,393)
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Cash provided by (used in) financing
activities 25,060 (4,881) 1,821 (651)
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Increase (decrease) in cash flow due to
changes in foreign exchange rates 38 (10,418) 2,776 (8,054)
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Increase (decrease) in cash and
short-term investments 67,346 (9,124) 30,788 (963)
Cash and short-term investments -
beginning of period 30,140 47,086 66,698 38,925
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Cash and short-term investments -
end of period 97,486 37,962 97,486 37,962
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CoolBrands International Inc.
Consolidated Notes to I nterim Financial Statements (Revised)
(Unaudited)
May 31, 2004 and 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 nine months ended May 31, 2004
Revenue,
external 411,469 16,989 22,925 12,604 140 464,127
Intersegment
revenue 55,147 620 6,814 149 62,730
Segment earnings
before income taxes 51,995 1,035 3,884 794 (1,010) 56,698
For the nine months ended May 31, 2003
Revenue,
external 140,248 17,676 30,620 14,683 32 203,259
Intersegment
revenue 43 695 2,121 148 3,007
Segment earnings
before income taxes 20,479 1,471 4,462 1,822 (1,285) 26,949
CoolBrands International Inc.
Consolidated Notes to Interim Financial Statements (Revised)
(Unaudited)
May 31, 2004 and 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 May 31, 2004
Revenue,
external 165,396 7,274 9,382 5,033 85 187,170
Intersegment
revenue 20,171 248 3,407 53 23,879
Segment earnings
before income taxes 22,753 426 1,711 220 (206) 24,904
For the three months ended May 31, 2003
Revenue,
external 59,470 6,590 10,322 5,515 11 81,908
Intersegment
revenue 4 242 752 51 1,049
Segment earnings
before income taxes 10,260 878 2,279 965 (124) 14,258
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 July 09, 2004:
Class A Class B Multiple Stock Options
Subordinate Voting Shares
Voting Shares
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49,863 6,030 3,786
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CoolBrands International Inc.
Consolidated Notes to Interim Financial Statements (Revised)
(Unaudited)
May 31, 2004 and 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 third 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 nine months ended May 31, 2004 of $6,912,000
and $8,938,000, respectively. Such expense reduced net earnings for the
three and nine months ended May 31, 2004 by $4,137,000 ($0.07 per share
basic $0.08 per share diluted) and $5,349,000 ($0.09 per share basic
and diluted), respectively.