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FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-14190
DREYER'S GRAND ICE CREAM, INC.
(Exact name of registrant as specified in its charter)
Delaware No. 94-2967523
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5929 College Avenue, Oakland, California 94618
(Address of principal executive offices) (Zip Code)
(510) 652-8187
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Shares Outstanding
May 11, 2001
------------------
Common stock, $1 par value 28,578,000
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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DREYER'S GRAND ICE CREAM, INC.
CONSOLIDATED BALANCE SHEET
Mar. 31, 2001 Dec. 30, 2000
------------- -------------
($ in thousands, except per share amounts) (Unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 2,459 $ 2,721
Trade accounts receivable, net of allowance for doubtful
accounts of $2,611 in 2001 and 2000 107,637 77,310
Other accounts receivable 24,347 18,810
Inventories 78,356 68,801
Deferred income taxes 5,058 4,584
Prepaid expenses and other 7,001 6,950
---------- ----------
Total current assets 224,858 179,176
Property, plant and equipment, net 190,022 190,833
Goodwill, distribution rights and other intangibles, net 93,643 92,892
Other assets 4,607 5,550
---------- ----------
Total assets $ 513,130 $ 468,451
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities $ 103,312 $ 80,260
Accrued payroll and employee benefits 18,374 24,759
Current portion of long-term debt 11,643 15,043
---------- ----------
Total current liabilities 133,329 120,062
Long-term debt, less current portion 155,114 121,214
Deferred income taxes 26,235 26,263
---------- ----------
Total liabilities 314,678 267,539
---------- ----------
Commitments and contingencies
Redeemable convertible preferred stock, $1 par value - 1,008,000 shares
authorized; 1,008,000 shares issued and outstanding in 2001 and 2000 100,646 100,540
---------- ----------
Stockholders' Equity:
Preferred stock, $1 par value - 8,992,000 shares authorized;
no shares issued or outstanding in 2001 and 2000
Common stock, $1 par value - 60,000,000 shares authorized;
28,569,000 shares and 28,268,000 shares issued and
outstanding in 2001 and 2000, respectively 28,569 28,268
Capital in excess of par 62,428 58,396
Notes receivable from stockholders (2,583) (2,284)
Retained earnings 9,392 15,992
---------- ----------
Total stockholders' equity 97,806 100,372
---------- ----------
Total liabilities and stockholders' equity $ 513,130 $ 468,451
========== ==========
See accompanying Notes to Consolidated Financial Statements.
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DREYER'S GRAND ICE CREAM, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Thirteen Weeks Ended
-----------------------------
($ in thousands, except per share amounts) Mar. 31, 2001 Mar. 25, 2000
------------- -------------
Revenues:
Sales $ 272,029 $ 240,419
Other income 239 1,328
---------- ----------
272,268 241,747
---------- ----------
Costs and expenses:
Cost of goods sold 217,377 183,204
Selling, general and administrative 59,036 51,578
Interest, net of amounts capitalized 3,014 2,658
---------- ----------
279,427 237,440
---------- ----------
(Loss) income before income tax (benefit) provision (7,159) 4,307
Income tax (benefit) provision (2,727) 1,641
---------- ----------
Net (loss) income (4,432) 2,666
Accretion of preferred stock to redemption value 106 106
Preferred stock dividends 348 174
---------- ----------
Net (loss) income available to common stockholders $ (4,886) $ 2,386
========== ==========
Net (loss) income per common share:
Basic $ (.17) $ .09
========== ==========
Diluted $ (.17) $ .08
========== ==========
Dividends per common share $ .06 $ .03
========== ==========
See accompanying Notes to Consolidated Financial Statements.
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DREYER'S GRAND ICE CREAM, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
Notes Retained
Receivable Earnings
Common Stock Capital in From (Accumulated
(In thousands) Shares Amount Excess of Par Stockholders Deficit) Total
------ ------- ------------- ------------ ------------ -------
Balances at December 25, 1999 27,871 $27,871 $53,172 $(2,501) $(4,848) $73,694
Net income 2,666 2,666
Accretion of preferred stock to
redemption value (106) (106)
Preferred stock dividends declared (174) (174)
Common stock dividends declared (844) (844)
Issuance of common stock under
employee stock plans, net 226 226 2,829 (1,382) 1,673
Repurchases and retirements of
common stock (3) (3)
------ ------- ------- -------- -------- -------
Balances at March 25, 2000 28,097 $28,097 $55,998 $(3,883) $(3,306) $76,906
====== ======= ======= ======== ======== =======
Balances at December 30, 2000 28,268 $28,268 $58,396 $(2,284) $ 15,992 $100,372
Net loss (4,432) (4,432)
Accretion of preferred stock to
redemption value (106) (106)
Preferred stock dividends declared (348) (348)
Common stock dividends declared (1,714) (1,714)
Issuance of common stock under
employee stock plans, net 347 347 4,636 (299) 4,684
Repurchases and retirements of
common stock (46) (46) (604) (650)
------ ------- ------- -------- -------- --------
Balances at March 31, 2001 28,569 $28,569 $62,428 $(2,583) $ 9,392 $ 97,806
====== ======= ======= ======== ======== ========
See accompanying Notes to Consolidated Financial Statements.
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DREYER'S GRAND ICE CREAM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Thirteen Weeks Ended
-------------------------------
(In thousands) Mar. 31, 2001 Mar. 25, 2000
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Cash flows from operating activities:
Net (loss) income $ (4,432) $ 2,666
Adjustments to reconcile net (loss) income to cash from operations:
Depreciation and amortization 9,169 8,808
Deferred income taxes (502) 549
Changes in assets and liabilities, net of amounts acquired:
Trade accounts receivable (30,327) (16,244)
Other accounts receivable (5,537) (7,035)
Inventories (9,555) (8,515)
Prepaid expenses and other (51) (1,006)
Accounts payable and accrued liabilities 22,012 22,423
Accrued payroll and employee benefits (6,385) (18,409)
--------- ---------
(25,608) (16,763)
--------- ---------
Cash flows from investing activities:
Acquisition of property, plant and equipment (7,178) (4,994)
Retirement of property, plant and equipment 372 482
Increase in goodwill, distribution rights, and other intangibles (2,000)
Purchase of common stock of Cherokee Cream Company,
Inc., net of cash acquired (7,651)
Decrease in other assets 640 1,075
--------- ---------
(8,166) (11,088)
--------- ---------
Cash flows from financing activities:
Proceeds from long-term debt, net 33,900 31,935
Repayments of long-term debt (3,400) (4,713)
Issuance of common stock under employee stock plans, net 4,684 1,673
Repurchases and retirements of common stock (650) (3)
Cash dividends paid (1,022) (1,005)
--------- ---------
33,512 27,887
--------- ---------
(Decrease) increase in cash and cash equivalents (262) 36
Cash and cash equivalents, beginning of period 2,721 3,158
--------- ---------
Cash and cash equivalents, end of period $ 2,459 $ 3,194
========= =========
Supplemental cash flow information: Cash paid during the period for:
Interest (net of amounts capitalized) $ 1,391 $ 1,648
========= =========
Income taxes (net of refunds) $ 2 $ 2
========= =========
Supplemental acquisition information:
Fair value of assets acquired $ 19,052
Cash paid for common stock (7,855)
---------
Liabilities assumed $ 11,197
=========
See accompanying Notes to Consolidated Financial Statements.
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DREYER'S GRAND ICE CREAM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - Operations and Financial Statement Presentation
Dreyer's Grand Ice Cream, Inc. and its subsidiaries (the Company) are engaged
primarily in 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 consolidated financial statements for the thirteen-week periods ended
March 31, 2001 and March 25, 2000 have not been audited by independent public
accountants, but include all adjustments, such as normal recurring accruals,
which management considers necessary for a fair presentation of the consolidated
operating results for the interim periods. The statements have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosure normally
included in financial statements prepared in conformity with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The operating results for interim periods are not necessarily
indicative of results to be expected for an entire year. The aforementioned
statements should be read in conjunction with the Consolidated Financial
Statements for the year ended December 30, 2000, appearing in the Company's 2000
Annual Report to Stockholders. Certain reclassifications have been made to prior
years' financial statements to conform to the current year presentation.
NOTE 2 - Inventories
Inventories are stated at the lower of cost (determined by the first-in,
first-out method) or market. Inventories at March 31, 2001 and December 30, 2000
consisted of the following:
(In thousands) Mar. 31, 2001 Dec. 30, 2000
------------- -------------
Raw materials $ 11,274 $ 8,368
Finished goods 67,082 60,433
---------- ----------
$ 78,356 $ 68,801
========== ==========
NOTE 3 - Goodwill, distribution rights and other intangibles, net
On October 25, 2000, the Company announced that it signed a new, long-term
distribution agreement with Ben & Jerry's Homemade, Inc. (Ben & Jerry's), a
subsidiary of Unilever United States, Inc. Under this agreement, the Company
became the distributor of Ben & Jerry's products for the grocery channel in all
of its company-operated markets across the country. The Company and Ben &
Jerry's are expanding the Company's role as a Ben & Jerry's distributor in other
non-grocery channels, such as convenience stores. The agreement took effect on
March 5, 2001, 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
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term.
NOTE 4 - Redeemable Convertible Preferred Stock
The Company's Series A redeemable convertible preferred stock, redemption value
$100,752,000, is convertible, at the option of the holder, into 5,800,000 shares
of common stock on or before June 30, 2001. If the holder does not convert, the
Company will redeem the shares by paying $100,752,000 on June 30, 2001. The
Company anticipates that it would fund such a redemption from borrowings and/or
other financing sources.
NOTE 5 - Net (Loss) Income Per Common Share
The denominator for basic net (loss) income per share includes the number of
weighted-average common shares outstanding. The denominator for diluted net
(loss) income per share includes the number of weighted-average shares
outstanding plus the effect of potentially dilutive securities which include
stock options and redeemable convertible preferred stock.
Thirteen Weeks Ended
-----------------------------
(In thousands, except per share amounts) Mar. 31, 2001 Mar. 25, 2000
------------- -------------
Net (loss) income available to common
stockholders -- basic $ (4,886) $ 2,386
Add: preferred dividends and accretion 280
---------- ----------
Net (loss) income available to common
stockholders -- diluted $ (4,886) $ 2,666
========== ==========
Weighted-average shares-basic 28,370 27,939
Dilutive effect of options 619
Dilutive effect of preferred stock 5,800
---------- ----------
Weighted-average shares-diluted 28,370 34,358
========== ==========
Net (loss) income per common share:
Basic $ (.17) $ .09
========== ==========
Diluted $ (.17) $ .08
========== ==========
Anti-dilutive securities
Potentially dilutive securities are excluded from the calculations of
diluted net (loss) income per common share when their inclusion would have an
anti-dilutive effect. These securities, stated in absolute equivalent shares of
common stock, consisted of 1,597,000 stock options during the period ended
March 25, 2000. In addition, 5,800,000 equivalent common shares relating to the
redeemable convertible preferred stock and 2,129,000 stock options that would
have been dilutive in a period of income were excluded from the calculation of
diluted net loss per common share due to their anti-dilutive effects resulting
from the net loss during the period ended March 31, 2001.
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Dividends per common share
On February 14, 2001, the Board of Directors, subject to compliance with
applicable law, contractual provisions, and future review of the condition of
the Company, declared its intention to increase the regular quarterly dividend
from $.03 per common share to $.06 per common share starting with the first
quarter of 2001.
NOTE 6 - New Accounting Pronouncements
At its July 19-20, 2000 meeting, the Emerging Issues Task Force of the Financial
Accounting Standards Board (EITF), reached a consensus on EITF 00-14,
"Accounting for Certain Sales Incentives" (EITF 00-14). This new pronouncement
requires that discounts and other sales incentives be recorded as a reduction of
revenue at the date of sale. At the present time, the Company classifies these
incentives (including variable trade promotion expenses and coupon redemption
costs) as a selling, general and administrative expense.
At its April 18-19, 2001 meeting, the EITF reached a consensus on EITF
00-25, "Vendor Income Statement Characterization of Consideration from a Vendor
to a Retailer" (EITF 00-25). This new pronouncement requires that fees paid to
retailers to obtain space for their products on the retailer's store shelves
(slotting fees) and amounts paid to retailers to advertise the Company's
products be recorded as a reduction of revenue. At the present time, the Company
classifies these costs (including fixed trade promotion expenses and slotting
fees) as a selling, general and administrative expense.
The expenses defined in EITF 00-14 and EITF 00-25 totaled approximately
$31,200,000 and $26,400,000, for the thirteen-weeks ended March 31, 2001 and
March 25, 2000, respectively. The reclassification of these expenses will
result in a decrease in total sales, company brand sales and gross profit,
along with a corresponding decrease in selling, general and administrative
expenses and will, therefore, have no effect on net income (loss) as previously
reported. The Company plans on implementing EITF 00-14 and EITF 00-25 as
required in the first quarter of 2002. Reclassification of prior period
financial statements is required.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Unaudited)
Forward-Looking Statements
The Company may from time to time make written or oral forward-looking
statements. Written forward-looking statements may appear in documents filed
with the Securities and Exchange Commission, in press releases, 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 identified that forward-looking statements are contained in this
Management's Discussion and Analysis of Consolidated Financial Condition and
Results of Operations. The Company undertakes no obligation to publicly revise
these forward-looking statements to reflect subsequent events or circumstances.
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. Any such statement is qualified by reference to the
cautionary statements set forth in this and other filings with the Securities
and Exchange Commission.
This Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with Management's Discussion
and Analysis for the year ended December 30, 2000, appearing in the Company's
2000 Annual Report to Stockholders.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percent which the
items in the Consolidated Statement of Operations bear to sales and the
percentage change of such items compared to the indicated prior period:
Period-to-Period
Variance
Percentage of Sales Favorable (Unfavorable)
------------------------------ ----------------------
Thirteen Weeks Ended
------------------------------ Thirteen Weeks Ended
Mar. 31, 2001 Mar. 25, 2000 2001 Compared to 2000
------------- ------------- ----------------------
Revenues:
Sales 100.0% 100.0% 13.1 %
Other income 0.1 0.5 (82.0)
---------- ----------
100.1 100.5 12.6
---------- ----------
Costs and expenses:
Cost of goods sold 79.9 76.2 (18.7)
Selling, general and administrative 21.7 21.5 (14.5)
Interest, net of amounts capitalized 1.1 1.1 (13.4)
---------- ----------
102.7 98.8 (17.7)
---------- ----------
(Loss) income before income tax (benefit) provision (2.6) 1.7 (266.2)
Income tax (benefit) provision (1.0) 0.6 266.2
---------- ----------
Net (loss) income (1.6) 1.1 (266.2)
Accretion of preferred stock to redemption value 0.1 0.1 0.0
Preferred stock dividends 0.1 0.1 (100.0)
---------- ----------
Net (loss) income available to common stockholders (1.8)% 0.9% (304.8)%
========== ========== ==========
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THIRTEEN WEEKS ENDED MARCH 31, 2001 COMPARED WITH THIRTEEN WEEKS ENDED MARCH 25,
2000
Consolidated sales for the first quarter of 2001 increased $31,610,000, or 13
percent, to $272,029,000 from $240,419,000 for the same quarter last year (see
"New Accounting Pronouncements").
Sales of the Company's branded products, including licensed and joint
venture products (company brands), increased $5,697,000 or three percent, to
$178,032,000 from $172,335,000 for the same quarter last year. Company brands
represented 65 percent of consolidated sales in 2000 compared with 72 percent in
the same quarter last year. Gallon sales of the Company's branded products,
including novelties, increased approximately 400,000 gallons, or two percent, to
approximately 22,900,000 gallons. The products that led this increase were the
co-branded M&M/Mars line, the Dreyer's and Edy's Grand Ice Cream, and Whole
Fruit Bars. The average price of the Company's branded products increased two
percent before the effect of increased trade promotion expenses, which are
presently classified as selling, general and administrative expenses (see "New
Accounting Pronouncements"). The increase is attributable to price increases on
premium ice cream which were implemented in the fourth quarter of 2000.
Sales of products distributed for other manufacturers (partner brands),
including Ben & Jerry's Homemade, Inc. (Ben & Jerry's), increased $25,913,000,
or 38 percent, to $93,997,000 from $68,084,000 for the same quarter last year.
This increase was driven largely by the acquisition of independent distributors
in 2000 and by increased sales of Ben & Jerry's superpremium products. Sales of
partner brands represented 35 percent of consolidated sales compared with 28
percent in the same quarter last year. The Company began distributing Ben &
Jerry's products to a larger distribution territory during the month of March
and is now the distributor of Ben & Jerry's products for the grocery channel in
all of the Company's company-owned markets across the country. Average wholesale
prices for partner brands increased approximately nine percent. Unit sales of
partner brands increased by 27 percent over the same quarter last year.
Cost of goods sold increased $34,173,000, or 19 percent, over the same
quarter last year. The Company's gross profit decreased by $2,563,000 to
$54,652,000, representing a 20 percent gross margin for the first quarter of
2001 compared with a 24 percent gross margin for the first quarter of 2000. The
cost of cream, the Company's primary ingredient, and the cost of certain other
ingredients, including vanilla and other flavorings, rose sharply during the
quarter. During the first quarter of 2001, the increase in dairy raw material
costs unfavorably impacted gross profit by approximately $5,000,000 as compared
to the first quarter of 2000. Gross margin was also unfavorably affected by
integration and other costs associated with recent acquisitions, higher energy
costs and increased distribution expenses incurred in the rollout of additional
distribution territories for Ben & Jerry's products.
Other income decreased $1,089,000 primarily due to a decrease in earnings
from joint ventures accounted for under the equity method.
Selling, general and administrative expenses increased $7,458,000, or 14
percent, to $59,036,000 from $51,578,000. The increase primarily reflects
increased trade promotion expenses for both new and existing products (see "New
Accounting Pronouncements") and increased administrative expenses. Selling,
general and administrative expenses represented 22 percent of consolidated sales
in the first quarters of 2001 and 2000.
Interest expense increased $356,000, or 13 percent, to $3,014,000,
primarily attributable to higher average borrowings required for funding
acquisitions, slightly offset by lower interest rates.
The income tax benefit in 2001 resulted from a pre-tax loss; the income tax
provision in 2000 resulted from pre-tax income. The effective tax rate was 38.1%
for the first quarters of 2001 and 2000.
FINANCIAL CONDITION-LIQUIDITY AND CAPITAL RESOURCES
Working capital at March 31, 2001 increased $32,415,000 from year-end 2000. The
Company's cash flows used in operating activities increased to $25,608,000 from
$16,763,000 for the same period last year. These increases were primarily
comprised of increases in accounts receivable and inventories, partially offset
by increases in accounts payable and accrued liabilities, and resulted from both
seasonality and the additional Ben & Jerry's business.
Cash flows used in investing activities totaled $8,166,000 and $11,088,000,
in 2001 and 2000, respectively. Cash flows used in investing activities during
the first quarter of 2001 consisted primarily of purchases of $7,178,000 in
property, plant and equipment. Cash flows used in investing activities during
the first quarter of 2000 consisted primarily of the $7,651,000 payment for the
purchase of the remaining 84 percent of the outstanding common stock of Cherokee
Cream Company, Inc. and purchases of $4,994,000 of property, plant and
equipment.
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Cash flows from financing activities totaled $33,512,000 and $27,887,000,
in 2001 and 2000, respectively. Cash flows from financing activities for the
first quarter of 2001 primarily consisted of a net increase of $33,900,000 in
the Company's revolving line of credit, partially offset by repayments of debt
totaling $3,400,000. Cash flows from financing activities for the first quarter
of 2000 primarily consisted of a net increase of $31,935,000 in the revolving
line of credit, partially offset by repayments of debt totaling $4,713,000.
The Company's Series A redeemable convertible preferred stock, redemption
value $100,752,000, is convertible, at the option of the holder, into 5,800,000
shares of common stock on or before June 30, 2001. If the holder does not
convert, the Company will redeem the shares by paying $100,752,000 on June 30,
2001. The Company anticipates that it would fund such a redemption from
borrowings and/or other financing sources.
On February 14, 2001, the Board of Directors, subject to compliance with
applicable law, contractual provisions, and future review of the condition of
the Company, declared its intention to increase the regular quarterly dividend
from $.03 per common share to $.06 per common share starting with the first
quarter of 2001.
At March 31, 2001, the Company had $2,459,000 in cash and cash equivalents,
and an unused credit line of $120,600,000. The Company believes that its credit
line, along with its liquid resources, internally-generated cash and financing
capacity, are adequate to meet both short-term and long-term operating and
capital requirements.
New Accounting Pronouncements
At its July 19-20, 2000 meeting, the Emerging Issues Task Force of the Financial
Accounting Standards Board (EITF), reached a consensus on EITF 00-14,
"Accounting for Certain Sales Incentives" (EITF 00-14). This new pronouncement
requires that discounts and other sales incentives be recorded as a reduction of
revenue at the date of sale. At the present time, the Company classifies these
incentives (including variable trade promotion expenses and coupon redemption
costs) as a selling, general and administrative expense.
At its April 18-19, 2001 meeting, the EITF reached a consensus on EITF
00-25, "Vendor Income Statement Characterization of Consideration from a Vendor
to a Retailer" (EITF 00-25). This new pronouncement requires that fees paid to
retailers to obtain space for their products on the retailer's store shelves
(slotting fees) and amounts paid to retailers to advertise the Company's
products be recorded as a reduction of revenue. At the present time, the Company
classifies these costs (including fixed trade promotion expenses and slotting
fees) as a selling, general and administrative expense.
The expenses defined in EITF 00-14 and EITF 00-25 totaled approximately
$31,200,000 and $26,400,000, for the thirteen-weeks ended March 31, 2001 and
March 25, 2000, respectively. The reclassification of these expenses will
result in a decrease in total sales, company brand sales and gross profit,
along with a corresponding decrease in selling, general and administrative
expenses and will, therefore, have no effect on net income (loss) as previously
reported. The Company plans on implementing EITF 00-14 and EITF 00-25 as
required in the first quarter of 2002. Reclassification of prior period
financial statements is required.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.
The largest component of the Company's cost of production is raw materials,
principally comprised of dairy products and sugar. Historically, and over the
long-term, the Company has been able to compensate for increases in the price
level of these commodities through price increases and manufacturing and
distribution operating efficiencies. During the first quarter of 2001, the
increase in dairy raw material costs unfavorably impacted gross profit by
approximately $5,000,000 as compared to the first quarter of 2000.
The Company anticipates it will continue to experience unfavorable energy
costs, specifically for natural gas, and for electricity at its California
facilities in 2001. These California facilities accounted for approximately 30
percent of the Company's total production in 2000. The Company may also
experience an interruption in electric power in California during rolling
blackouts or at other times. To date, these blackouts have been for short time
periods and have had a minimal impact on the Company.
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PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith:
Exhibit No. Description
----------- -----------
10.1 First Amendment dated April 19, 2001 to Credit
Agreement dated as of July 25, 2000 among
Dreyer's Grand Ice Cream, Inc., the banks party
to this agreement, Bank of America, N.A. as
Agent for the Banks, as Swing Line Bank and as
Letter of Credit Issuing Bank; Union Bank of
California, N.A. as Syndication Agent and Banc
of America Securities LLC as Lead Arranger and
Book Manager.
(b) No reports on Form 8-K were filed by the Company during the quarter
ended March 31, 2001. However, a Report on Form 8-K announcing that the
Company's earnings for the first quarter of 2001 and for fiscal year
2001 would be below expectations was filed on April 2, 2001.
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SIGNATURE
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 thereunto duly authorized.
DREYER'S GRAND ICE CREAM, INC.
Dated: May 15, 2001 By: /s/ Timothy F. Kahn
-------------------------------------------------
Timothy F. Kahn
Vice President - Finance and Administration
and Chief Financial Officer
(Principal Financial Officer)
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DREYER'S GRAND ICE CREAM, INC.
INDEX OF EXHIBITS
Exhibit No. Description
- ----------- -----------
10.1 First Amendment dated April 19, 2001 to Credit
Agreement dated as of July 25, 2000 among
Dreyer's Grand Ice Cream, Inc., the banks party
to this agreement, Bank of America, N.A. as
Agent for the Banks, as Swing Line Bank and as
Letter of Credit Issuing Bank; Union Bank of
California, N.A. as Syndication Agent and Banc
of America Securities LLC as Lead Arranger and
Book Manager.
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