FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
(Mark One)
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF | |
| THE SECURITIES EXCHANGE ACT OF 1934 | ||
For the quarterly period ended June 28, 2003
OR
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF | |
| THE SECURITIES EXCHANGE ACT OF 1934 | ||
Commission file number 000-50325
| DREYER’S GRAND ICE CREAM HOLDINGS, INC. |
| Delaware | No. 02-0623497 | |
| (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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)
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 at August 14, 2003 | |||||
Class A Callable Puttable Common Stock, $.01 par value |
25,649,554 | ||||
Class B Common Stock, $.01 par value |
64,564,315 | ||||
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
DREYER’S GRAND ICE CREAM HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
| June 28, 2003 | Dec. 31, 2002 | |||||||||
| ($ in thousands, except per share amounts) | (Unaudited) | |||||||||
Assets |
||||||||||
Current Assets: |
||||||||||
Cash and cash equivalents |
$ | 5,907 | $ | 2,435 | ||||||
Trade accounts receivable, net of allowance for doubtful accounts of
$5,372 in 2003 and $3,104 in 2002 |
198,227 | 51,643 | ||||||||
Other accounts receivable |
19,680 | 4,754 | ||||||||
Inventories |
176,390 | 52,711 | ||||||||
Income
taxes refundable |
6,979 | |||||||||
Taxes receivable due from affiliates |
23,793 | 16,943 | ||||||||
Prepaid expenses and other |
51,091 | 2,811 | ||||||||
Deferred income taxes |
37,694 | 7,890 | ||||||||
Total current assets |
519,761 | 139,187 | ||||||||
Employee loans |
3,279 | |||||||||
Property, plant and equipment, net |
405,826 | 211,248 | ||||||||
Goodwill |
2,017,832 | 381,215 | ||||||||
Other intangibles, net |
392,191 | 525 | ||||||||
Other assets |
29,973 | 18,682 | ||||||||
Total assets |
$ | 3,365,583 | $ | 754,136 | ||||||
Liabilities and Stockholders’ Equity |
||||||||||
Current Liabilities: |
||||||||||
Accounts payable and accrued liabilities |
$ | 200,604 | $ | 46,581 | ||||||
Accrued payroll and employee benefits |
76,154 | 15,603 | ||||||||
Current portion of long-term debt |
2,143 | 73,142 | ||||||||
Total current liabilities |
278,901 | 135,326 | ||||||||
Long-term debt, less current portion |
274,286 | |||||||||
Long-term stock option liability |
372,095 | |||||||||
Long-term benefit obligations |
3,376 | 2,813 | ||||||||
Deferred income taxes |
191,280 | 7,332 | ||||||||
Total liabilities |
1,119,938 | 145,471 | ||||||||
Commitments and contingencies |
||||||||||
Class A callable puttable common stock, $.01 par
value – 31,830,332 shares authorized; 25,539,418 issued and
outstanding in 2003, and none in 2002 |
255 | |||||||||
Class A
capital in excess of par |
1,481,985 | |||||||||
Notes receivable from stockholders |
(1,932 | ) | ||||||||
| 1,480,308 | ||||||||||
Stockholders’ Equity: |
||||||||||
Class B common stock, $.01 par value – 96,394,647 shares authorized;
64,564,315 shares issued and
outstanding in 2003, and none in 2002 |
646 | |||||||||
Class B
capital in excess of par |
968,113 | |||||||||
Investment from member |
750,252 | |||||||||
Accumulated deficit |
(203,422 | ) | (141,587 | ) | ||||||
Total stockholders’ equity |
765,337 | 608,665 | ||||||||
Total liabilities and stockholders’ equity |
$ | 3,365,583 | $ | 754,136 | ||||||
See accompanying Notes to Consolidated Financial Statements.
2
DREYER’S GRAND ICE CREAM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
| Quarter Ended | Half Year Ended | |||||||||||||||||
| June 28, 2003 | June 30, 2002 | June 28, 2003 | June 30, 2002 | |||||||||||||||
| ($ in thousands, except per share amounts) | ||||||||||||||||||
Net
sales to external customers |
$ | 175,815 | $ | 196,491 | $ | 289,789 | $ | 315,256 | ||||||||||
Net
sales to affiliates |
981 | 1,487 | 1,804 | 2,150 | ||||||||||||||
Net sales |
176,796 | 197,978 | 291,593 | 317,406 | ||||||||||||||
Costs and expenses: |
||||||||||||||||||
Cost of goods sold |
144,596 | 149,141 | 237,307 | 250,632 | ||||||||||||||
Selling, general and administrative |
35,246 | 33,440 | 62,670 | 59,891 | ||||||||||||||
Interest, net of amounts capitalized |
428 | 629 | 758 | 993 | ||||||||||||||
Royalty expense to affiliates |
7,193 | 8,222 | 12,132 | 12,925 | ||||||||||||||
Other (income) expense, net |
(77 | ) | 896 | (77 | ) | 998 | ||||||||||||
Severance and retention expense |
38,324 | 40,824 | ||||||||||||||||
In-process research and development |
11,495 | 11,495 | ||||||||||||||||
Impairment
of distribution assets held for sale |
8,715 | 8,715 | ||||||||||||||||
Dreyer’s Nestlé Transaction expenses |
139 | 139 | ||||||||||||||||
| 246,059 | 192,328 | 373,963 | 325,439 | |||||||||||||||
(Loss)
income before income tax (benefit) provision |
(69,263 | ) | 5,650 | (82,370 | ) | (8,033 | ) | |||||||||||
Income
tax (benefit) provision |
(23,348 | ) | 2,265 | (27,182 | ) | (2,674 | ) | |||||||||||
Net (loss) income |
(45,915 | ) | 3,385 | (55,188 | ) | (5,359 | ) | |||||||||||
Accretion of class A callable puttable common
stock |
1,241 | 1,241 | ||||||||||||||||
Net (loss) income available to common
stockholders |
$ | (47,156 | ) | $ | 3,385 | $ | (56,429 | ) | $ | (5,359 | ) | |||||||
Net (loss) income per common share: |
||||||||||||||||||
Basic |
$ | (.72 | ) | $ | .05 | $ | (.87 | ) | $ | (.08 | ) | |||||||
Diluted |
$ | (.72 | ) | $ | .05 | $ | (.87 | ) | $ | (.08 | ) | |||||||
Dividends
declared per common share: |
||||||||||||||||||
Class
A callable puttable |
$ | .06 | $ | .06 | ||||||||||||||
Class B |
$ | .06 | $ | .06 | ||||||||||||||
See accompanying Notes to Consolidated Financial Statements.
3
DREYER’S GRAND ICE CREAM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
| Class B | |||||||||||||||||||||||||||||
| Common Stock | Investment | Accumulated | |||||||||||||||||||||||||||
| Capital in | Accumulated | From | Net Loss to | ||||||||||||||||||||||||||
| Shares | Amount | Excess of Par | Deficit | Member | Member | Total | |||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
|
Balances at December 31, 2001
|
$ | 735,383 | $ | (54,700 | ) | $ | 680,683 | ||||||||||||||||||||||
|
Capital contributions
|
2,166 | 2,166 | |||||||||||||||||||||||||||
|
Tax sharing adjustment
|
(10,539 | ) | (10,539 | ) | |||||||||||||||||||||||||
|
Net loss to member
|
(5,359 | ) | (5,359 | ) | |||||||||||||||||||||||||
|
Balances at June 30, 2002
|
$ | 737,549 | $ | (70,598 | ) | $ | 666,951 | ||||||||||||||||||||||
|
Balances at December 31, 2002
|
$ | $ | $ | $ | 750,252 | $ | (141,587 | ) | $ | 608,665 | |||||||||||||||||||
|
Capital contributions
|
17,317 | 17,317 | |||||||||||||||||||||||||||
|
Reclass capital contributions to the class B
capital in excess of par of DGICH |
17,317 | (17,317 | ) | ||||||||||||||||||||||||||
|
Reclass NICC investment from members to the
capital in excess of par of DGICH
|
750,252 | (750,252 | ) | ||||||||||||||||||||||||||
|
Reclass NICC accumulated net loss to DGICH
|
(141,587 | ) | 141,587 | ||||||||||||||||||||||||||
|
Net loss
|
(55,188 | ) | (55,188 | ) | |||||||||||||||||||||||||
|
Common stock dividends declared
|
(5,406 | ) | (5,406 | ) | |||||||||||||||||||||||||
|
Accretion of class A callable puttable
common stock
|
(1,241 | ) | (1,241 | ) | |||||||||||||||||||||||||
|
Conversion of DGIC common stock to DGICH class B common stock |
9,563 | 96 | 200,544 | 200,640 | |||||||||||||||||||||||||
|
Issuance of class B common stock in
connection with the Dreyer’s Nestlé Transaction |
55,001 | 550 | 550 | ||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||
|
Balances at June 28, 2003
|
64,564 | $ | 646 | $ | 968,113 | $ | (203,422 | ) | $ | $ | $ | 765,337 | |||||||||||||||||
See accompanying Notes to Consolidated Financial Statements.
4
DREYER’S GRAND ICE CREAM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
| Half Year Ended | ||||||||||||
| June 28, 2003 | June 30, 2002 | |||||||||||
| ($ in thousands) | ||||||||||||
Cash flows from operating activities: |
||||||||||||
Net
(loss) |
$ | (55,188 | ) | $ | (5,359 | ) | ||||||
Adjustments
to reconcile net loss to cash flows from operations, net of amounts acquired: |
||||||||||||
Depreciation and amortization |
13,843 | 12,079 | ||||||||||
In-process research and development |
11,495 | |||||||||||
Impairment
of distribution assets held for sale |
8,715 | |||||||||||
Accrued
divestiture expenses |
2,893 | |||||||||||
Loss
on disposal of fixed assets |
785 | |||||||||||
Severance and retention expense |
35,981 | |||||||||||
Provision
for retail freezer retirements |
7,650 | |||||||||||
Accretion
of long term stock option liability |
47 | |||||||||||
Write-off
of employee loans |
3,279 | |||||||||||
Tax-sharing adjustment |
(10,539 | ) | ||||||||||
Deferred income taxes |
(20,478 | ) | 8,153 | |||||||||
Changes in assets and liabilities, net of amounts acquired: |
||||||||||||
Trade accounts receivable |
(34,141 | ) | (35,481 | ) | ||||||||
Other accounts receivable |
1,167 | |||||||||||
Inventories |
(15,486 | ) | (39,851 | ) | ||||||||
Taxes
receivable due from affiliates |
(6,850 | ) | ||||||||||
Prepaid expenses and other |
1,758 | 3,443 | ||||||||||
Accounts payable and accrued liabilities |
12,475 | 26,274 | ||||||||||
Accrued payroll and employee benefits |
(2,980 | ) | 1,238 | |||||||||
Long-term benefit obligations |
563 | </ | ||||||||||