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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 27, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM
------------------ TO
------------------.
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)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (510) 652-8187
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Not applicable Not applicable
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $1.00 Par Value
Preferred Stock Purchase Rights
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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value (based on the average of the high and low sales
prices on March 19, 1998, as reported by NASDAQ) of the Common Stock held by
non-affiliates was approximately $466,172,928. (Such amount excludes the
aggregate market value of shares beneficially owned by the executive officers
and members of the Board of Directors of the registrant.)
As of March 19, 1998, the latest practicable date, 27,087,949 shares of
Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Dreyer's Grand Ice Cream, Inc. Annual Report to Stockholders
for the fiscal year ended December 27, 1997, filed as Exhibit 13 to this Annual
Report on Form 10-K, are incorporated by reference into Part IV of the Annual
Report on Form 10-K. With the exception of those portions which are specifically
incorporated by reference in this Annual Report on Form 10-K, the Dreyer's Grand
Ice Cream, Inc. Annual Report to Stockholders for the fiscal year ended December
27, 1997 is not to be deemed filed as part of this Report.
Portions of the Dreyer's Grand Ice Cream, Inc. Proxy Statement for the 1998
Annual Meeting of Stockholders to be filed with the Commission on or before
April 26, 1998 are incorporated by reference into Part III of this Annual Report
on Form 10-K. With the exception of those portions which are specifically
incorporated by reference in this Annual Report on Form 10-K, the Dreyer's Grand
Ice Cream, Inc. Proxy Statement for the 1998 Annual Meeting of Stockholders is
not to be deemed filed as part of this Report.
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PART I
ITEM 1. BUSINESS
GENERAL
Dreyer's Grand Ice Cream, Inc. and its consolidated subsidiaries are,
unless the context otherwise requires, sometimes referred to herein as
"Dreyer's" or the "Company." The Company, successor to the original Dreyer's
Grand Ice Cream business, was originally incorporated in California on February
23, 1977 and reincorporated in Delaware on December 28, 1985.
Dreyer's manufactures and distributes premium ice cream and other frozen
dessert products. Since 1977, Dreyer's has developed from a specialty ice cream
sold principally in selected San Francisco Bay Area grocery and ice cream stores
to a broad line of frozen dairy and other frozen desserts sold under the
Dreyer's and Edy's brand names in retail outlets serving more than 86% of the
households in the United States. The Dreyer's line of products are available in
the thirteen western states, Texas and certain markets in the Far East. The
Company's products are sold under the Edy's brand name generally throughout the
remaining regions of the United States. The Dreyer's and Edy's line of products
are distributed through a direct-store-delivery system further described below
under the caption "Marketing, Sales and Distribution." The Company also
distributes and, in certain instances, manufactures branded ice cream and frozen
dessert products of other companies. The Dreyer's and Edy's line of ice cream
and related products is relatively expensive and is sold by the Company and its
independent distributors to grocery stores, convenience stores, club stores, ice
cream parlors, restaurants, hotels and certain other accounts. The Dreyer's and
Edy's brands enjoy strong consumer recognition and loyalty.
MARKETS
Ice cream was traditionally supplied by dairies as an adjunct to their
basic milk business. Accordingly, ice cream was marketed like milk, as a
fungible commodity, and manufacturers competed primarily on the basis of price.
This price competition motivated ice cream producers to seek economies in their
formulations. The resulting trend to lower quality ice cream created an
opportunity for the Company and other producers of premium ice creams, whose
products can be differentiated on the basis of quality, technological
sophistication and brand image, rather than price. Moreover, the market for all
packaged ice creams was influenced by the steady increase in market share of
"private label" ice cream products owned by the major grocery chains and the
purchase or construction by the chains of their own milk and ice cream plants.
The resulting reduction in the market for milk and the "regular" ice cream
brands produced by the independent dairies has caused many such dairies to
withdraw from the market. Manufacturing and formulation complexities, broader
flavor requirements, consumer preference and brand identity, however, make it
more difficult for the chains' private label brands to compete effectively in
the premium market segment. As a result, independent premium brands such as the
Company's are normally stocked by major grocery chains.
While many foodservice operators, including hotels, schools, hospitals and
other institutions, buy ice cream primarily on the basis of price, there are
also those in the foodservice industry who purchase ice cream based on its
quality. Operators of ice cream shops wanting to feature a quality brand,
restaurants that include an ice cream brand on their menu and clubs or chefs
concerned with the quality of their fare are often willing to pay for Dreyer's
quality, image and brand identity.
PRODUCTS
The Company and its predecessors have always been innovators of flavor,
package development and formulation. William A. Dreyer, the creator of Dreyer's
Grand Ice Cream, is credited with inventing many popular flavors including Rocky
Road. Dreyer's was among the first ice creams in the West packaged in round
containers with window lids that allow consumers to see the actual product they
are buying. The Company was also the first to produce an ice cream lower in
calories. The Company's Grand Light(R) formulation was a precursor to the
reduced fat, reduced sugar and low cholesterol products in the Company's current
product line.
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The Company uses only the highest quality ingredients in its products. The
Company's management philosophy is to resist changes in its formulations or
production processes that compromise quality for cost even though the industry
in general may adopt such new formulation or process compromises.
Dreyer's and Edy's Grand Ice Cream is the Company's flagship product which
utilizes traditional formulations with all natural flavorings and is
characterized by premium quality taste and texture, and diverse flavor
selection. The flagship product is complimented by the Company's successful
reduced fat, low cholesterol products such as Frozen Yogurt; Grand Light; No
Sugar Added and Fat Free ice creams; and the Company's Sherbet and Whole Fruit
Sorbet products. The Company believes these products are well positioned in the
segments of the market where products are characterized by lower levels of fat,
sugar and cholesterol than those of regular ice cream. During 1997, the Company
introduced Homemade Ice Cream on a nationwide basis. The Company produces
Portofino(R) brand Italian style ice cream which is distributed in selected
western markets, and manufactures and distributes Starbucks(R) Ice Cream
products for its joint venture with Starbucks Coffee Company. The Company also
produces a premium soft serve product, Grand Soft(R), which is available as ice
cream or frozen yogurt. The Company's novelty line features Dreyer's and Edy's
Ice Cream Bars, Fruit Bars, and Sundae Cones. The Company redesigned its 1997
packaging for the novelty products to reposition these products to target the
family segment of the market. The Company also distributes and, in some
instances, manufactures selected branded frozen dessert products of other
companies.
The Company's product lines now include over 100 flavors that are selected
both on the basis of general popularity and on the intensity of consumer
response. Some flavors are seasonal and are produced only as a featured flavor
during particular months. The Company operates a continuous flavor development
and evaluation program.
The Company holds registered trademarks on many of its products. Dreyer's
believes that consumers associate the Company's trademarks, distinctive
packaging and trade dress with its high quality products. The Company does not
own any patents that are material to its business. Research and development
expenses are not a significant expense of the Company, nor have they been a
significant expense historically.
MARKETING, SALES AND DISTRIBUTION
The Company's marketing strategy is based upon management's belief that a
significant number of people prefer a quality product and quality image in ice
cream just as they do in other product categories. A quality image is
communicated in many ways -- taste, packaging, flavor selection, price and often
through advertising and promotion. If consistency in the product's quality and
image are strictly maintained, a brand can develop a clearly defined and loyal
consumer following. It is the Company's goal to develop such a consumer
following in each major market in which it does business.
The Company embarked on a strategic plan (the Strategic Plan) during the
second quarter of 1994 to accelerate the sales of its brand throughout the
country. The key elements of this plan are: 1) to build a high margin brand with
a leading market share through effective consumer marketing activities, 2) to
expand the Company's direct-store-delivery distribution network to national
scale and leverage this capability with sophisticated information systems and 3)
to introduce innovative new products. The potential benefits of the Strategic
Plan are increased market share and future earnings above those levels that
would be attained in the absence of the Strategic Plan. The Company believes
that the benefits under the Strategic Plan will be realized in future years.
However, no assurance can be given that the expectations relative to future
market share and earnings benefits of the strategy will be achieved. The
realization of the benefits will depend upon, among other things, consumer
purchase responsiveness to the Company's new products and increased marketing
and promotion expenditures, competitors' marketing and promotion responses,
market conditions affecting the price of the Company's products, commodity costs
and efficiencies achieved in manufacturing and distribution operations. For
additional information regarding the Strategic Plan see the discussion set forth
under the caption "Results of Operations" which appears on page 31 of the
Company's 1997 Annual Report to Stockholders.
Unlike many other ice cream manufacturers, the Company uses a
direct-store-delivery system which allows distribution of the Company's products
directly to the retail ice cream cabinet by either the Company's
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own personnel or independent distributors who primarily distribute the Company's
products. This store level distribution allows service to be tailored to the
needs of each store. Dreyer's believes this service ensures proper product
handling, quality control, flavor selection and retail display. The
implementation of this system has resulted in an ice cream distribution network
capable of providing frequent direct service to grocery stores in every market
where the Company's products are sold. Under the Strategic Plan, the Company's
distribution network has been significantly expanded to where the Company's
products are available to grocery stores serving approximately 86% of the United
States. This distribution system is considerably larger than any other
direct-store-delivery system for ice cream products currently operating in the
United States.
Each distributor, whether Company-owned or independent, is primarily
responsible for sales of all products within its respective market area.
However, the Company provides sales and marketing support to its independent
distributors, including training seminars, sales aids of many kinds, point of
purchase materials, assistance with promotions and other sales support.
The distribution network in the West now includes fourteen distribution
centers operated by the Company in large metropolitan areas such as Los Angeles,
the San Francisco Bay Area, Phoenix, San Diego, Seattle and Denver. The
remaining metropolitan areas throughout the thirteen western states, Texas and
the Far East are served through independent distributors.
Distribution in the remainder of the United States is under the Edy's brand
name with most of the distribution handled through nineteen Company-owned
distribution centers, including centers in New Jersey, Chicago, Washington,
D.C., Atlanta, Tampa and Kansas City. The Company also has independent
distributors handling the Company's products in certain market areas east of the
Rocky Mountains.
Taken together, independent distributors accounted for approximately 22% of
the Company's consolidated net sales in 1997. The Company's agreements with its
independent distributors are generally terminable upon 30 days notice by either
party.
For fiscal 1997, no customer accounted for more than 10% of consolidated
net sales of the Company. The Company's export sales were about 1% of 1997
consolidated net sales.
The Company experiences a seasonal fluctuation in sales, with more demand
for its products during the spring and summer than during the fall and winter.
MANUFACTURING
The Company manufactures its products at its plants in Union City,
California; City of Commerce, California; Fort Wayne, Indiana; Houston, Texas;
and Salt Lake City, Utah. In order to serve high altitude markets and to
occasionally meet peak periods of demand, the Company has manufacturing
agreements with three ice cream manufacturers to produce Dreyer's line of
products in accordance with specifications and quality control provided by
Dreyer's. Of the approximately 90 million gallons of the Company's products sold
in 1997, approximately three million gallons were manufactured under these
arrangements. The Company also has manufacturing agreements with five different
facilities to produce the majority of its novelty products. During 1997, these
facilities produced approximately three million cases of Dreyer's and Edy's Ice
Cream Bars and Fruit Bars. In addition, the Company has agreements to produce
products for other manufacturers. In 1997, the Company manufactured
approximately 12 million gallons of product under these agreements.
The primary factor in the Company's product costs is the price of basic
dairy ingredients (cream, milk and skim milk) and sugar. The minimum prices paid
for dairy ingredients are established by the market under the Federal Milk Price
Support Program. During 1996, the Company experienced an $8,140,000 increase in
dairy raw materials costs which negatively impacted the Company's gross profit.
During 1997, dairy prices decreased to slightly lower levels resulting in a
favorable impact of $3,842,000 on gross profit when compared to 1996 price
levels.
In order to ensure consistency of flavor, each of the Company's
manufacturing plants purchases, to the extent practicable, all of its required
dairy ingredients from one local supplier. These dairy products and most
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other ingredients or their equivalents are available from multiple sources. The
Company maintains a rigorous process for evaluating qualified alternative
suppliers of its key ingredients.
COMPETITION
The Company's manufactured products compete on the basis of brand image,
quality and breadth of flavor selection. The ice cream industry is highly
competitive and most ice cream manufacturers, including full line dairies, the
major grocery chains and the other independent ice cream processors, are capable
of manufacturing and marketing high quality ice creams. Furthermore, there are
relatively few barriers to new entrants in the ice cream business. However,
reduced fat, reduced sugar and low cholesterol ice cream products generally
require technologically sophisticated formulations in comparison to standard or
"regular" ice cream products.
Much of the Company's competition comes from the "private label" brands
produced by or for the major supermarket chains and which generally sell at
prices below those charged by the Company for its products. Because these brands
are owned by the retailer, they often receive preferential treatment when the
retailers allocate available freezer space. The Company's competition also
includes premium ice creams produced by other ice cream manufacturers, some of
whom are owned by parent companies much larger than Dreyer's.
EMPLOYEES
On December 27, 1997, the Company had approximately 3,500 employees. The
Company's Union City manufacturing and distribution employees are represented by
the Teamsters Local 853, whose contract with the Company expires between
September 1999 and December 2000 for different types of employees, and the
International Union of Operating Engineers, Stationary Local No. 39, whose
contract with the Company expires in August 2001. The Sacramento distribution
employees are represented by the Chauffeurs, Teamsters and Helpers Union, Local
150 whose contract with the Company expires in August 1999. The St. Louis
distribution employees are represented by the United Food & Commercial Workers
Union, Local 655 whose contract with the Company expires in December 2000. The
Company has never experienced a strike by any of its employees.
ITEM 2. PROPERTIES
The Company owns its headquarters located at 5929 College Avenue in
Oakland, California. The headquarters buildings include 54,000 square feet of
office space utilized by the Company and 10,000 square feet of retail space
leased to third parties.
The Company owns a manufacturing and distribution facility in Union City,
California. This facility has approximately 60,000 square feet of manufacturing
and dry storage space, 40,000 square feet of cold storage warehouse space and
15,000 square feet of office space. The plant has the current production
capacity of 28 million gallons per year. During 1997, the facility produced
approximately 22 million gallons of ice cream and related products.
The Company leases an ice cream manufacturing plant with an adjoining cold
storage warehouse located in the City of Commerce, California. This facility has
approximately 76,000 square feet of manufacturing and dry storage space, 25,000
square feet of cold storage space and 19,000 square feet of office space. The
lease on this property, including renewal options, expires in 2022. The plant
has the current production capacity of 20 million gallons per year. During 1997,
the facility produced approximately 19 million gallons of ice cream and related
products.
The Company owns a cold storage warehouse facility located in the City of
Industry, California. This facility includes 52,000 square feet of cold and dry
storage warehouse space and 13,000 square feet of office space. This facility
supplements the cold storage warehouse and office space leased in the City of
Commerce.
The Company owns a manufacturing plant with an adjoining cold storage
warehouse in Fort Wayne, Indiana. This facility has approximately 112,000 square
feet of manufacturing and storage space and 9,000 square feet of office space.
In January 1998, the Company completed construction of an additional
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warehouse on land adjacent to the Ft. Wayne manufacturing facility. The newly
constructed warehouse has cold storage space of 76,000 square feet and office
space of 13,000 square feet. Until its lease expires in March 1998, the Company
leases approximately 50,000 square feet of cold storage and 2,000 square feet of
office space near the Fort Wayne facility. The newly constructed warehouse
facility replaces the leased warehouse facility. The plant has the current
production capacity of 54 million gallons per year, with projected future
production capacity of 64 million gallons in 1999 achieved through machinery and
equipment purchases to increase efficiency. During 1997, the facility produced
approximately 46 million gallons of ice cream and related products. The
Company's original purchase and development of the Fort Wayne facility was
financed by industrial development bonds and the property is pledged as
collateral to secure payment of the Company's obligations to the issuer of the
irrevocable letter of credit established for the benefit of the bondholders.
The Company owns a manufacturing and distribution facility in Houston,
Texas. This facility was recently renovated and has approximately 69,000 square
feet of manufacturing and dry storage space, 46,000 square feet of cold storage
warehouse space and 20,000 square feet of office space. The plant has the
current production capacity of approximately 26 million gallons per year. During
1997, this facility produced approximately 15 million gallons of ice cream and
related products.
The Company owns a manufacturing and distribution facility in Salt Lake
City, Utah. This facility has approximately 12,000 square feet of manufacturing
and dry storage space, 13,000 square feet of cold storage space and 1,000 square
feet of office space. The plant has the current production capacity of 5 million
gallons per year. During 1997, the facility produced approximately 4 million
gallons of ice cream and related products.
The Company intentionally acquires, designs and constructs its
manufacturing and distribution facilities with a capacity greater than current
needs require. This is done to facilitate growth and expansion and minimize
future capital outlays. The cost of carrying this excess capacity is not
significant.
The Company also leases or rents various local distribution and office
facilities with leases expiring through the year 2022 (including options to
renew).
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The information set forth under the caption "Item 4. Submission of Matters
to a Vote of Security Holders" in the Company's Form 10-Q for the period ended
September 27, 1997 filed with the Commission on November 11, 1997, is
incorporated herein by reference.
EXECUTIVE OFFICERS OF THE REGISTRANT
The Company's executive officers and their ages are as follows:
NAME POSITION AGE
---- -------- ---
T. Gary Rogers......... Chairman of the Board and Chief Executive Officer 55
William F. Cronk, III.. President 55
Edmund R. Manwell...... Secretary 55
Thomas M. Delaplane.... Vice President -- Sales 53
J. Tyler Johnston...... Vice President -- Marketing 44
Timothy F. Kahn........ Vice President -- Finance and Administration and
Chief Financial Officer 44
William R. Oldenburg... Vice President -- Operations 51
All officers hold office at the pleasure of the Board of Directors. There
is no family relationship among the above officers.
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Mr. Rogers has served as Dreyer's Chairman of the Board and Chief Executive
Officer since its incorporation in February 1977.
Mr. Cronk has served as a director of the Company since its incorporation
in February 1977 and has been the Company's President since April 1981.
Mr. Manwell has served as Secretary of the Company since its incorporation
and as a director of the Company since April 1981. Since March 1982, Mr. Manwell
has been a partner in the law firm of Manwell & Milton, general counsel to the
Company.
Mr. Delaplane has served as Vice President -- Sales of the Company since
May 1987.
Mr. Johnston has served as Vice President -- Marketing of the Company since
March 1996. From September 1995 to March 1996, he served as the Company's Vice
President -- New Business. From May 1988 to August 1995, he served as the
Company's Director of Marketing.
Mr. Kahn has served as Vice President -- Finance and Administration and
Chief Financial Officer since March 1998. From August 1996 until October 1997,
he served as Senior Vice President, Finance and Development for the PepsiCo
Restaurant Services division of PepsiCo, Inc., which included Taco Bell, Pizza
Hut and KFC restaurants. From January 1995 until July 1996, Mr. Kahn was Senior
Vice President and Chief Financial Officer of Pizza Hut Inc. and had
responsibility for finance, strategic planning, information technology, real
estate, construction and facility management, purchasing and refranchising. From
March 1993 until January 1995, he served as Vice President and Chief Financial
Officer of Pizza Hut International, a restaurant division with 4,000 restaurants
in 80 countries and 18 regional offices. Prior to March 1993, Mr. Kahn held the
position of Vice President, Corporate Strategic Planning with PepsiCo, Inc.
Mr. Oldenburg has served as Vice President -- Operations of the Company
since September 1986.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information set forth in Note 15 under the caption "Price Range
(NASDAQ)" which appears on page 28 of the Company's 1997 Annual Report is
incorporated herein by reference. The bid and asked quotations for the Company's
Common Stock are as reported by NASDAQ.
On March 19, 1998, the number of holders of record of the Company's common
stock was 5,199.
On November 18, 1997, the Company issued shares of common stock to holders
of record on October 30, 1997 to effect a two-for-one common stock split. All
share information appearing in this report has been restated to reflect this
stock split on a retroactive basis.
The Company paid a regular quarterly dividend of $.03 per share of common
stock for each quarter of 1997. On March 3, 1998, the Board of Directors,
subject to compliance with law, contractual restrictions and future review of
the condition of the Company, declared its intention to issue regular quarterly
dividends of $.03 per share of common stock for each quarter of 1998. Also on
March 3, 1998, the Board of Directors declared a dividend of $.03 per share of
common stock for the first quarter of 1998 for stockholders of record on March
27, 1998.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Five Year Summary of
Significant Financial Data" which appears on page 30 of the Company's 1997
Annual Report to Stockholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements contained in this report are forward-looking statements
that are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are subject to
uncertainties that could cause actual results to differ materially from those
anticipated in the forward-looking statements. Factors that might cause such a
difference include, but are not limited to, the following: consumer purchase
responsiveness to the Company's new products and increased marketing and
promotion expenditures, competitors' marketing and promotion responses, market
conditions affecting the price of the Company's products, commodity costs and
efficiencies achieved in manufacturing and distribution operations.
The information set forth under the caption "Management's Discussion and
Analysis" which appears on pages 31-34 of the Company's 1997 Annual Report to
Stockholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, together with the report thereon of
Price Waterhouse LLP dated February 19, 1998 appearing on pages 16-29 of the
Company's 1997 Annual Report to Stockholders, are incorporated herein by
reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the captions "Board of
Directors -- Nominees for Director -- Continuing Directors," "Matters Submitted
to the Vote of Stockholders -- Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Company's Proxy Statement for
the 1998 Annual Meeting of Stockholders to be filed with the Commission on or
before April 26, 1998, and the information contained in Part I of this Annual
Report on Form 10-K under the caption "Executive Officers of the Registrant," is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation" in the
Company's Proxy Statement for the 1998 Annual Meeting of Stockholders to be
filed with the Commission on or before April 26, 1998 is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Company's Proxy Statement for the 1998
Annual Meeting of Stockholders to be filed with the Commission on or before
April 26, 1998 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the captions "Compensation Committee
Interlocks and Insider Participation" and "Other Relationships" in the Company's
Proxy Statement for the 1998 Annual Meeting of Stockholders to be filed with the
Commission on or before April 26, 1998 is incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES:
The following documents are filed as part of this report:
PAGE(S) IN
ANNUAL REPORT*
--------------
1. Financial Statements:
Consolidated Statement of Income for the three years ended
December 27, 1997......................................... 16
Consolidated Balance Sheet at December 27, 1997 and December
28, 1996.................................................. 17
Consolidated Statement of Changes in Stockholders' Equity
for the three years ended December 27, 1997............... 18
Consolidated Statement of Cash Flows for the three years
ended December 27, 1997................................... 19
Notes to Consolidated Financial Statements.................. 20-28
Report of Independent Accountants........................... 29
PAGE(S)
-------
2. Financial Statement Schedules:
Report of Independent Accountants on Financial Statement
Schedule for the three years ended December 27, 1997........ 17
II. Valuation and Qualifying Accounts..................... 18
M-K-D Distributors, Inc. and Subsidiary Consolidated
Financial Statements:
Report of Independent Accountants......................... 19
Consolidated Balance Sheet at December 30, 1995........... 20
Consolidated Statement of Income and Retained Earnings for
the fiscal year ended December 30, 1995................. 21
Consolidated Statement of Cash Flows for the fiscal year
ended December 30, 1995................................. 22
Notes to Consolidated Financial Statements................ 23-27
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* Incorporated by reference to the indicated pages of the Company's 1997 Annual
Report to Stockholders.
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes
thereto.
Financial statements of any other 50% or less owned company have been
omitted because the Registrant's proportionate share of income from
continuing operations before income taxes and cumulative effect of
change in accounting principle, and total assets is less than 20% of the
respective consolidated amounts, and the investment in and advances to
any such company is less than 20% of consolidated total assets.
3. List of Management Compensation Agreements
(i) Dreyer's Grand Ice Cream, Inc. Incentive Stock Option Plan (1982)
referenced in Exhibit 10.3 herein.
(ii) Indemnification Agreements by and between Dreyer's Grand Ice Cream,
Inc. and each of its directors, executive officers and certain
other officers referenced in Exhibit 10.10 herein.
(iii) Dreyer's Grand Ice Cream, Inc. Stock Option Plan (1992) referenced
in Exhibit 10.16 herein.
(iv) Dreyer's Grand Ice Cream, Inc. Incentive Bonus Plan referenced in
Exhibit 10.19 herein.
(v) Dreyer's Grand Ice Cream, Inc. Stock Option Plan (1993) referenced
in Exhibit 10.20 herein.
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(vi) Dreyer's Grand Ice Cream, Inc. Income Swap Plan referenced in
Exhibit 10.21 herein.
(b) REPORTS ON FORM 8-K
Not applicable.
(c) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
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2.1 Securities Purchase Agreement dated June 24, 1993 by and
among Dreyer's Grand Ice Cream, Inc., Trustees of General
Electric Pension Trust, GE Investment Private Placement
Partners, I and General Electric Capital Corporation
(Exhibit 2.1(11)).
2.2 Amendment to Securities Purchase Agreement dated May 6, 1994
by and among Dreyer's Grand Ice Cream, Inc., Trustees of
General Electric Pension Trust, GE Investment Private
Placement Partners, I and General Electric Capital
Corporation, amending Exhibit 2.1 (Exhibit 2.1(14)).
2.3 Stock and Warrant Purchase Agreement dated as of May 6, 1994
by and between Dreyer's Grand Ice Cream, Inc. and Nestle
Holdings, Inc. (Exhibit 2.1(15)).
2.4 First Amendment to Stock and Warrant Purchase Agreement
dated as of June 14, 1994 by and between Dreyer's Grand Ice
Cream, Inc. and Nestle Holdings, Inc., amending Exhibit 2.3
(Exhibit 2.1(16)).
2.5 Second Amendment to Securities Purchase Agreement dated July
28, 1995 and effective as of June 1, 1995 by and among
Dreyer's Grand Ice Cream, Inc., Trustees of General Electric
Pension Trust, GE Investment Private Placement Partners, I
and General Electric Capital Corporation, amending Exhibit
2.1 (Exhibit 10.2(18)).
2.6 Third Amendment to Securities Purchase Agreement dated
October 30, 1995 and effective as of September 30, 1995 by
and among Dreyer's Grand Ice Cream, Inc., Trustees of
General Electric Pension Trust, GE Investment Private
Placement Partners, I and General Electric Capital
Corporation, amending Exhibit 2.1 (Exhibit 10.1(19)).
2.7 Amended and Restated Fourth Amendment to Securities Purchase
Agreement dated March 12, 1996 and effective as of October
1, 1995 by and among Dreyer's Grand Ice Cream, Inc.,
Trustees of General Electric Pension Trust, GE Investment
Private Placement Partners, I and General Electric Capital
Corporation, amending Exhibit 2.1 (Exhibit 2.8(20)).
3.1 Certificate of Incorporation of Dreyer's Grand Ice Cream,
Inc., as amended, including the Certificate of Designation
of Series A Convertible Preferred Stock, as amended, setting
forth the Powers, Preferences, Rights, Qualifications,
Limitations and Restrictions of such series of Preferred
Stock and the Certificate of Designation of Series B
Convertible Preferred Stock, as amended, setting forth the
Powers, Preferences, Rights, Qualifications, Limitations and
Restrictions of such series of Preferred Stock (Exhibit
3.1(16)).
3.2 Certificate of Designation, Preferences and Rights of Series
A Participating Preference Stock (Exhibit 3.2(17)).
3.3 By-laws of Dreyer's Grand Ice Cream, Inc., as last amended
May 2, 1994 (Exhibit 3.2(16)).
4.1 Amended and Restated Rights Agreement dated March 4, 1991
between Dreyer's Grand Ice Cream, Inc. and Bank of America,
NT & SA (Exhibit 10.1(6)).
4.2 Registration Rights Agreement dated as of June 30, 1993
among Dreyer's Grand Ice Cream, Inc., Trustees of General
Electric Pension Trust, and GE Investment Private Placement
Partners, I and General Electric Capital Corporation
(Exhibit 4.1(12)).
10
12
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4.3 Amendment to Registration Rights Agreement dated May 6, 1994
by and among Dreyer's Grand Ice Cream, Inc., Trustees of
General Electric Pension Trust, GE Investment Private
Placement Partners, I and General Electric Capital
Corporation, amending Exhibit 4.2 (Exhibit 4.1(14)).
4.4 First Amendment to Amended and Restated Rights Agreement
dated as of June 14, 1994 between Dreyer's Grand Ice Cream,
Inc. and First Interstate Bank of California (as successor
Rights Agent to Bank of America NT & SA), amending Exhibit
4.1 (Exhibit 4.1(16)).
4.5 Registration Rights Agreement dated as of June 14, 1994
between Dreyer's Grand Ice Cream, Inc. and Nestle Holdings,
Inc. (Exhibit 4.2(16)).
4.6 Warrant Agreement dated as of June 14, 1994 between Dreyer's
Grand Ice Cream, Inc. and Nestle Holdings, Inc. (Exhibit
4.3(16)).
4.7 Second Amendment to Amended and Restated Rights Agreement
dated March 17, 1997 between Dreyer's Grand Ice Cream, Inc.
and ChaseMellon Shareholder Services, LLC, as Rights Agent,
amending Exhibit 4.1 (Exhibit 10.1 (24)).
4.8 Third Amendment to Amended and Restated Rights Agreement
dated May 15, 1997 between Dreyer's Grand Ice Cream, Inc.
and ChaseMellon Shareholder Services, LLC, as Rights Agent,
amending Exhibit 4.1 (Exhibit 10.1 (25)).
10.1 Agreement dated September 18, 1978 between Dreyer's Grand
Ice Cream, Inc. and Kraft, Inc. (Exhibit 10.8(1)).
10.2 Agreement and Lease dated as of January 1, 1982 and
Amendment to Agreement and Lease dated as of January 27,
1982 between Jack and Tillie Marantz and Dreyer's Grand Ice
Cream, Inc., as amended (Exhibit 10.2(17)).
10.3 Dreyer's Grand Ice Cream, Inc. Incentive Stock Option Plan
(1982), as amended. (Exhibit 10.6(13)).
10.4 Loan Agreement between Edy's and City of Fort Wayne, Indiana
dated September 1, 1985 and related Letter of Credit, Letter
of Credit Agreement, Mortgage, Security Agreement, Pledge
and Security Agreement and General Continuing Guaranty of
Dreyer's Grand Ice Cream, Inc. (Exhibit 10.33(2)).
10.5 Distribution Agreement between Dreyer's Grand Ice Cream,
Inc. and Ben & Jerry's Homemade, Inc. dated January 6, 1987
(Exhibit 10.1(3)).
10.6 Amendment and Waiver dated July 17, 1987 between Dreyer's
Grand Ice Cream, Inc. and Security Pacific National Bank,
amending the General Continuing Guaranty referenced in
Exhibit 10.4 (Exhibit 10.44(7)).
10.7 Amendment and Waiver dated December 24, 1987 between
Dreyer's Grand Ice Cream, Inc. and Security Pacific National
Bank, amending the General Continuing Guaranty referenced in
Exhibit 10.4 (Exhibit 10.45(7)).
10.8 Agreement for Amendments to Distribution Agreement dated as
of January 20, 1989 among Dreyer's Grand Ice Cream, Inc.,
Edy's Grand Ice Cream, Edy's of New York, Inc., and Ben &
Jerry's Homemade, Inc., amending Exhibit 10.5 (Exhibit 10.46
(4)).
10.9 Amendment to the Distribution Agreement dated as of April
11, 1989 by and among Dreyer's Grand Ice Cream, Inc., Edy's
Grand Ice Cream, Edy's of New York, Inc., and Ben & Jerry's
Homemade, Inc., amending Exhibit 10.5 (Exhibit 10.46(5)).
10.10 Form of Indemnification Agreement between Dreyer's Grand Ice
Cream, Inc. and each officer and director of Dreyer's Grand
Ice Cream, Inc. (Exhibit 10.47(4)).
10.11 Assignment of Lease dated as of March 31, 1989 among
Dreyer's Grand Ice Cream, Inc., Smithway Associates, Inc.
and Wilsey Foods, Inc. (Exhibit 10.52(5)).
11
13
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.12 Amendment of Lease dated as of March 31, 1989 between
Dreyer's Grand Ice Cream, Inc. and Smithway Associates,
Inc., as amended by letter dated April 17, 1989 between
Dreyer's Grand Ice Cream, Inc. and Wilsey Foods, Inc.,
amending Exhibit 10.11 (Exhibit 10.53(5)).
10.13 Third Amendment to General Continuing Guaranty and Waiver
dated January 29, 1991 between Dreyer's Grand Ice Cream,
Inc. and Security PacificNational Bank, amending the General
Continuing Guaranty referenced in Exhibit 10.4 (Exhibit
10.46(7)).
10.14 $25,000,000 9.3% Senior Notes: Form of Note Agreement dated
as of March 15, 1991, and executed on April 12, 1991 between
Dreyer's Grand Ice Cream, Inc. and each of Massachusetts
Mutual Life Insurance Company, Massachusetts Mutual Life
Pension Insurance Company, Connecticut Mutual Life Insurance
Company, the Equitable Life Assurance Society of the United
States, and Transamerica Occidental Life Insurance Company
(Exhibit 19.1(8)).
10.15 Second Amendment to Distribution Agreement dated as of
August 31, 1992 between Dreyer's Grand Ice Cream, Inc. and
Ben & Jerry's Homemade, Inc., amending Exhibit 10.5 (Exhibit
19.6(9)).
10.16 Dreyer's Grand Ice Cream, Inc., Stock Option Plan (1992)
(Exhibit 10.35(13)).
10.17 Agreement of Amendment and Waiver, dated as of September 30,
1992, between Dreyer's Grand Ice Cream, Inc. and each of
Massachusetts Mutual Life Insurance Company, MML Pension
Insurance Company, the Connecticut Mutual Life Insurance
Company, the Equitable Life Assurance Society of the United
States, and Transamerica Occidental Life Insurance Company
(together, the "Lenders") regarding the Note Agreements
dated as of March 15, 1991 between Dreyer's Grand Ice Cream,
Inc. and each of the Lenders, which Note Agreements are
referenced in Exhibit 10.14 (Exhibit 19.5(9)).
10.18 Second Amendment to Note Agreements dated as of September
30, 1992, between Dreyer's Grand Ice Cream, Inc. and each of
Massachusetts Mutual Life Insurance Company, MML Pension
Insurance Company, the Connecticut Mutual Life Insurance
Company, the Equitable Life Assurance Society of the United
States, and Transamerica Occidental Life Insurance Company
(together, the "Lenders") regarding the Note Agreements
dated as of March 15, 1991 between Dreyer's Grand Ice Cream,
Inc. and each of the Lenders, which Note Agreements are
referenced in Exhibit 10.14 (Exhibit 10.58(10)).
10.19 Description of Dreyer's Grand Ice Cream, Inc. Incentive
Bonus Plan (Exhibit 10.57(10)).
10.20 Dreyer's Grand Ice Cream, Inc. Stock Option Plan (1993), as
amended May 1, 1996.
10.21 Dreyer's Grand Ice Cream, Inc. Income Swap Plan (Exhibit
10.38(13)).
10.22 Amendment to Distribution Agreement dated April 18, 1994,
and Letter Agreement modifying such Amendment to
Distribution Agreement dated April 18, 1994 between Dreyer's
Grand Ice Cream, Inc. and Ben & Jerry's Homemade, Inc.,
amending Exhibit 10.5 (Exhibit 10.3(14)).
10.23 Amendment to Distribution Agreement dated December 12, 1994
between Dreyer's Grand Ice Cream, Inc. and Ben & Jerry's
Homemade, Inc., amending Exhibit 10.5 (Exhibit 10.27(17)).
10.24 Third Amendment to Note Agreement dated as of June 5, 1995
between Dreyer's Grand Ice Cream, Inc. and each of
Massachusetts Mutual Life Insurance Company, MML Pension
Insurance Company, the Connecticut Mutual Life Insurance
Company, the Equitable Life Assurance Society of the United
States, and Transamerica Occidental Life Insurance Company
(together, the "Lenders"), regarding the Note Agreements
dated as of March 15, 1991 between Dreyer's Grand Ice Cream,
Inc. and each of the Lenders, which Note Agreements are
referenced in Exhibit 10.14 (Exhibit 10.3(18)).
10.25 Letter Agreement dated August 4, 1995 between Dreyer's Grand
Ice Cream, Inc. and Smithway Associates, Inc., amending
Exhibits 10.2 and 10.11 (Exhibit 10.29(20)).
12
14
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.26 Credit Agreement dated as of December 22, 1995 among
Dreyer's Grand Ice Cream, Inc., Bank of America NT & SA (as
a Bank and as Agent), ABN-AMRO Bank N.V. (as a Bank and as
Co-Agent), Credit Suisse and The Bank of California (Exhibit
10.30(20)).
10.27 Participation Agreement dated March 29, 1996 among Dreyer's
Grand Ice Cream, Inc., Edy's Grand Ice Cream, BA Leasing &
Capital Corporation (as Agent and as a Participant), ABN-
AMRO Bank, NV and Credit Suisse (Exhibit 10.2(21)).
10.28 First Amendment to Credit Agreement dated April 15, 1996
among Dreyer's Grand Ice Cream, Inc., Bank of America, NT &
SA (as Agent and as a Bank), ABN-AMRO Bank, NV (as Co-Agent
and as a Bank), Credit Suisse and Union Bank of California,
NA, amending Exhibit 10.26 (Exhibit 10.1(21)).
10.29 April 1996 Amendment to Commerce Lease dated April 23, 1996
between Dreyer's Grand Ice Cream, Inc. and Smithway
Associates, Inc., amending Exhibits 10.2 and 10.11 (Exhibit
10.29(23)).
10.30 Letter Agreement dated April 23, 1996 between Dreyer's Grand
Ice Cream, Inc. and Smithway Associates, Inc., amending
Exhibits 10.2 and 10.11 (Exhibit 10.30(23)).
10.31 $15,000,000 7.86% Series A Senior Notes Due 2002,
$15,000,000 8.06% Series B Senior Notes Due 2006 and
$20,000,000 8.34% Series C Senior Notes Due 2008: Form of
Note Agreement dated as of June 6, 1996 between Dreyer's
Grand Ice Cream, Inc. and each of The Prudential Insurance
Company of America, Pruco Life Insurance Company, and
Transamerica Life Insurance and Annuity Company (Exhibit
10.1(22)).
10.32 Fourth Amendment to Note Agreement dated as of June 10, 1997
between Dreyer's Grand Ice Cream, Inc. and each of
Massachusetts Mutual Life Insurance Company, MML Pension
Insurance Company, the Connecticut Mutual Life Insurance
Company, the Equitable Life Assurance Society of the United
States, and Transamerica Occidental Life Insurance Company,
(together, the "Lenders"), regarding the Note Agreements
dated as of March 15, 1991 between Dreyer's Grand Ice Cream,
Inc. and each of the Lenders, which Note Agreements are
referenced in Exhibit 10.14 (Exhibit 10.1(26)).
10.33 Second Amendment to Credit Agreement dated as of December
26, 1997 among Dreyer's Grand Ice Cream, Inc., Bank of
America, NT&SA (as Agent and as a bank), ABN-AMRO Bank, NV
(as Co-Agent and as a bank), Credit Suisse First Boston and
Union Bank of California, NA, amending Exhibit 10.26.
13 Those portions of the Dreyer's Grand Ice Cream, Inc. 1997
Annual Report to Stockholders which are incorporated by
reference into this Annual Report on Form 10-K.
21 Subsidiaries of Registrant.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
- ---------------
(1) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Registration Statement on Form S-1 and Amendment No. 1
thereto, filed under Commission File No. 2-71841 on April 16, 1981 and June
11, 1981, respectively.
(2) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Annual Report on Form 10-K and Amendment No. 1 thereto for
the fiscal year ended December 28, 1985 filed under Commission File No.
0-10259 on March 28, 1986 and April 14, 1986, respectively.
(3) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Current Report on Form 8-K filed under Commission File No.
0-10259 on January 23, 1987.
13
15
(4) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Annual Report on Form 10-K for the fiscal year ended December
31, 1988 filed under Commission File No. 0-10259 on March 31, 1989.
(5) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Annual Report on Form 10-K for the fiscal year ended December
30, 1989 filed under Commission File No. 0-10259 on March 30, 1990.
(6) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Current Report on Form 8-K filed under Commission File No.
0-10259 on March 20, 1991.
(7) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Annual Report on Form 10-K for the fiscal year ended December
29, 1990 filed under Commission File No. 0-10259 on March 29, 1991.
(8) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended
on June 29, 1991 filed under Commission File No. 0-10259 on August 13,
1991.
(9) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended
on September 26, 1992 filed under Commission File No. 0-10259 on November
10, 1992.
(10) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Annual Report on Form 10-K for the fiscal year ended December
26, 1992 filed under Commission File No. 0-10259 on March 26, 1993.
(11) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Current Report on Form 8-K filed under Commission File No.
0-10259 on June 25, 1993.
(12) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended
on June 26, 1993 filed under Commission File No. 0-10259 on August 10,
1993.
(13) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Annual Report on Form 10-K for the fiscal year ended December
25, 1993 filed under Commission File No. 0-14190 on March 25, 1994.
(14) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended
March 26, 1994 filed under Commission File No. 0-14190 on May 10, 1994.
(15) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Current Report on Form 8-K filed under Commission File No.
0-14190 on May 9, 1994.
(16) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended
June 25, 1994 filed under Commission File No. 0-14190 on August 9, 1994.
(17) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Annual Report on Form 10-K for the fiscal year ended December
31, 1994 filed under Commission File No. 0-14190 on March 30, 1995.
(18) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended
July 1, 1995 filed under Commission File No. 0-14190 on August 15, 1995.
(19) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1995 filed under Commission File No. 0-14190 on November 14,
1995.
(20) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Annual Report on Form 10-K for the fiscal year ended December
30, 1995 filed under Commission File No. 0-14190 on March 29, 1996.
14
16
(21) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended
March 30, 1996 filed under Commission File No. 0-14190 on May 14, 1996.
(22) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended
June 29, 1996 filed under Commission File No. 0-14190 on August 13, 1996.
(23) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Annual Report on Form 10-K for the fiscal year ended December
28, 1996 filed under Commission File No. 0-14190 on March 28, 1997.
(24) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Current Report on Form 8-K filed under Commission File No.
0-14190 on March 21, 1997.
(25) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Current Report on Form 8-K filed under Commission File No.
0-14190 on May 19, 1997.
(26) Incorporated by reference to the designated exhibit to Dreyer's Grand Ice
Cream, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended
September 27, 1997 filed under Commission File No. 0-14190 on November 11,
1997.
15
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ T. GARY ROGERS
------------------------------------
T. Gary Rogers
Chairman of the Board and Chief
Executive Officer and Director
(Principal Executive Officer)
Date: March 27, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ T. GARY ROGERS Chairman of the Board and March 27, 1998
- -------------------------------------------------------- Chief Executive Officer and
(T. Gary Rogers) Director (Principal
Executive Officer)
/s/ WILLIAM F. CRONK, III President and Director March 27, 1998
- --------------------------------------------------------
(William F. Cronk, III)
/s/ EDMUND R. MANWELL Secretary and Director March 27, 1998
- --------------------------------------------------------
(Edmund R. Manwell)
/s/ TIMOTHY F. KAHN Vice President -- Finance March 27, 1998
- -------------------------------------------------------- and Administration and Chief
(Timothy F. Kahn) Financial Officer (Principal
Financial Officer)
/s/ JEFFREY P. PORTER Corporate Controller March 27, 1998
- -------------------------------------------------------- (Principal Accounting
(Jeffrey P. Porter) Officer)
/s/ JAN L. BOOTH Director March 27, 1998
- --------------------------------------------------------
(Jan L. Booth)
/s/ ROBERT A. HELMAN Director March 27, 1998
- --------------------------------------------------------
(Robert A. Helman)
/s/ M. STEVEN LANGMAN Director March 27, 1998
- --------------------------------------------------------
(M. Steven Langman)
/s/ JOHN W. LARSON Director March 27, 1998
- --------------------------------------------------------
(John W. Larson)
/s/ JACK O. PEIFFER Director March 27, 1998
- --------------------------------------------------------
(Jack O. Peiffer)
/s/ TIMOTHY P. SMUCKER Director March 27, 1998
- --------------------------------------------------------
(Timothy P. Smucker)
Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered Securities
Pursuant to Section 12 of the Act:
Not applicable.
16
18
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Dreyer's Grand Ice Cream, Inc.
Our audits of the consolidated financial statements referred to in our
report dated February 19, 1998 appearing in the 1997 Annual Report to
Stockholders of Dreyer's Grand Ice Cream, Inc. (which report and consolidated
financial statements are incorporated by reference in this Annual Report on Form
10-K) also included an audit of the Financial Statement Schedule listed in Item
14(a)2 of this Form 10-K. In our opinion, this Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
San Francisco, California
February 19, 1998
17
19
SCHEDULE II
DREYER'S GRAND ICE CREAM, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END
CLASSIFICATION OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
-------------- ---------- ---------- ---------- ----------
Fiscal year ended December 30, 1995:
Allowance for doubtful accounts............. $ 635 $1,234 $1,171(1) $ 698
Amortization of goodwill and distribution
rights................................... 10,443 2,971 -- 13,414
Amortization of other assets................ 6,222 1,184 3,209(2) 4,197
------- ------ ------ -------
$17,300 $5,389 $4,380 $18,309
======= ====== ====== =======
Fiscal year ended December 28, 1996:
Allowance for doubtful accounts............. $ 698 $ 891 $ 834(1) $ 755
Amortization of goodwill and distribution
rights................................... 13,414 3,202 -- 16,616
Amortization of other assets................ 4,197 992 191(2) 4,998
------- ------ ------ -------
$18,309 $5,085 $1,025 $22,369
======= ====== ====== =======
Fiscal year ended December 27, 1997:
Allowance for doubtful accounts............. $ 755 $1,463 $1,508(1) $ 710
Amortization of goodwill and distribution
rights................................... 16,616 3,201 -- 19,817
Amortization of other assets................ 4,998 923 -- 5,921
------- ------ ------ -------
$22,369 $5,587 $1,508 $26,448
======= ====== ====== =======
- ---------------
(1) Write-off of receivables considered uncollectible.
(2) Removal of fully-amortized assets.
18
20
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of M-K-D Distributors, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position of M-K-D
Distributors, Inc. and its subsidiary at December 30, 1995, and the results of
their operations and their cash flows for the fiscal year in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
April 9, 1996
19
21
M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
ASSETS
DECEMBER 30,
1995
------------
Current Assets:
Cash...................................................... $ 46,871
Trade accounts receivable, net of allowance for doubtful
accounts of $71,303.................................... 4,784,633
Inventories............................................... 2,361,881
Prepaid expenses and other................................ 562,266
-----------
Total current assets.............................. 7,755,651
Property, plant and equipment, net.......................... 9,256,360
Notes receivable and other.................................. 432,458
-----------
Total assets...................................... $17,444,469
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities.................. $ 2,804,416
Accrued payroll and employee benefits..................... 709,343
Current portion of long-term debt......................... 446,334
-----------
Total current liabilities......................... 3,960,093
Long-term debt, less current portion........................ 1,563,263
Deferred income taxes....................................... 521,027
-----------
Total liabilities................................. $ 6,044,383
===========
Commitments
Stockholders' Equity:
Common stock, $1 par value -- 10,000 shares authorized,
issued and outstanding................................. 10,000
Capital in excess of par.................................. 40,265
Retained earnings......................................... 11,349,821
-----------
Total stockholders' equity........................ 11,400,086
-----------
Total liabilities and stockholders' equity........ $17,444,469
===========
See accompanying notes to consolidated financial statements.
20
22
M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
FISCAL YEAR ENDED
DECEMBER 30,
1995
-----------------
Revenues:
Net sales................................................. $74,218,680
Other income.............................................. 334,884
-----------
74,553,564
-----------
Costs and Expenses:
Cost of goods sold........................................ 58,902,661
Selling, general and administrative....................... 12,806,842
Interest.................................................. 119,758
-----------
71,829,261
-----------
Income before income taxes................................ 2,724,303
Income taxes.............................................. 1,037,090
-----------
Net income................................................ 1,687,213
Retained earnings, beginning of year...................... 9,662,608
-----------
Retained earnings, end of year............................ $11,349,821
===========
See accompanying notes to consolidated financial statements.
21
23
M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDED
DECEMBER 30,
1995
-----------------
Cash Flows from Operating Activities:
Net income................................................ $1,687,213
Adjustments to reconcile net income to cash provided from
operations:
Depreciation........................................... 1,191,747
Deferred taxes......................................... 129,330
Changes in assets and liabilities, net of amounts
acquired:
Trade accounts receivable......................... (156,585)
Inventories....................................... 964,040
Prepaid expenses and other........................ (318,147)
Notes receivable and other........................ (27,728)
Accounts payable and accrued liabilities.......... (1,179,772)
Accrued payroll and employee benefits............. 97,010
Income taxes payable.............................. (145,141)
----------
2,241,967
----------
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment.............. (3,135,357)
----------
Cash Flows from Financing Activities:
Proceeds from long-term debt.............................. 2,075,547
Reductions in long-term debt.............................. (1,369,700)
----------
705,847
----------
Decrease in cash............................................ (187,543)
Cash, beginning of year..................................... 234,414
----------
Cash, end of year........................................... $ 46,871
==========
Supplemental Cash Flow Information:
Cash paid during the year for:
Interest............................................... $ 101,749
Income taxes (net of refunds).......................... 1,038,500
See accompanying notes to consolidated financial statements.
22
24
M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements of M-K-D Distributors,
Inc. and subsidiary (the Company) include the accounts of M-K-D Distributors,
Inc. (MKD) and its wholly-owned subsidiary, Snelgrove Ice Cream, Inc.
(Snelgrove). All significant intercompany balances and transactions have been
eliminated. The Company reports on a fifty-two or fifty-three week fiscal year,
ending on the last Saturday in December.
Operations
MKD, a Texas corporation, was incorporated on December 14, 1979, and is
engaged in the wholesale distribution of Dreyer's Grand Ice Cream, Ben and
Jerry's, Nestle and other premium ice cream products, primarily in Washington,
Oregon and Alaska. Dreyer's Grand Ice Cream, Inc. (Dreyer's), a Delaware
corporation, holds 49.7% of MKD's outstanding common stock (see Note 11,
Subsequent Event). In 1991, MKD acquired the assets of Snelgrove Ice Cream, Inc.
(formerly known as Snelgrove Distinctive Ice Cream, Inc.), a manufacturer and
distributor of premium ice cream products, and commenced manufacturing and
distribution operations late in 1991 for Utah and other high altitude markets in
the western United States. Sales are primarily to retail grocers.
Revenue Recognition
Sales revenues are recognized when deliveries of products are made to
customers.
Inventories
Inventories of purchased and manufactured products are stated at the lower
of cost (first-in, first-out method) or market. Costs of purchased products
manufactured by others and of raw materials include costs of acquisition and
transportation in. Manufactured product inventories are costed based on
standards which approximate actual costs of materials, labor and production
overhead.
Property, Plant and Equipment
Depreciation and amortization are provided on property, plant and equipment
on the straight-line basis over their estimated useful lives as follows:
Building and improvements................................... 5 to 35 years
Equipment................................................... 3 to 15 years
Delivery trucks and other vehicles.......................... 5 to 8 years
Furniture and fixtures...................................... 3 to 8 years
Leasehold improvements are amortized over the life remaining in the
applicable lease (4 to 10 years).
The cost of maintenance and repairs, which neither materially add to the
value of property nor appreciably prolong its life, are expensed as incurred.
Estimates and Assumptions
Management makes estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles. These
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and the reported revenues
and expenses. Actual results could differ from those estimates.
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M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Federal and State Income Taxes
Effective for the fiscal year ended December 25, 1993, the Company adopted
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109), on a prospective basis. SFAS 109 required the Company to
change its method of accounting for income taxes from the deferred method to the
liability method. Under the liability method, deferred tax liabilities and
assets are recognized for the tax consequences of temporary differences between
the financial reporting and tax basis of assets and liabilities. The adoption of
SFAS 109 did not have a material effect on the Company's Consolidated Financial
Statements.
2. INVENTORIES
Components of inventories at December 30, 1995 were as follows:
Purchased products.......................................... $1,639,437
Raw materials............................................... 365,745
Finished goods.............................................. 356,699
----------
$2,361,881
==========
3. PROPERTY, PLANT AND EQUIPMENT
The cost and accumulated depreciation of property, plant and equipment at
December 30, 1995 were as follows:
Building and improvements................................... $2,722,371
Machinery and equipment..................................... 9,869,316
Office furniture and fixtures............................... 1,498,363
----------
14,090,050
Accumulated depreciation.................................... (5,539,341)
----------
8,550,709
Land........................................................ 705,651
----------
$9,256,360
==========
Depreciation expense for property, plant and equipment was $1,191,747 in
1995.
4. LONG-TERM NOTES RECEIVABLE
At December 30, 1995, long-term notes receivable of $144,779 are due from a
customer with payments due every year beginning in 1996 in the amount of $20,000
plus accrued interest at the prime rate plus 2%. The notes are secured by
delivery and freezer equipment and are due in December 2000.
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M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT
Long-term debt at December 30, 1995 consisted of the following:
Note payable to bank, payable in monthly installments of
$16,687 from August 1995 to June 2000, plus interest at
7.81% per annum, secured by equipment..................... $ 916,665
Note payable to bank, payable in monthly installments of
$17,335 from August 1995 to July 2000, plus interest at
7.8% per annum, secured by equipment...................... 954,475
Capital lease obligation payable in monthly minimum payments
of $1,026 from August 1995 to July 1998, including
interest at 4.9%, secured by computer equipment........... 30,457
Note payable, payable in annual installments of $27,000 from
June 1995 to June 1999, plus interest at 8.00% per annum,
secured by property and building.......................... 108,000
----------
2,009,597
Less current portion of long-term debt...................... 446,334
----------
$1,563,263
==========
Principal payments due on long-term debt for each of the years subsequent
to December 30, 1995 are as follows:
1996........................................................ $ 446,334
1997........................................................ 446,889
1998........................................................ 443,026
1999........................................................ 435,264
2000........................................................ 238,084
----------
$2,009,597
==========
At December 30, 1995, the Company had an unused secured revolving line of
credit of $2,000,000 available for working capital needs. The interest rate on
borrowings is equal to the bank's floating commercial loan reference rate or
LIBOR plus 1.5%.
6. PROFIT SHARING PLAN
The Company has a 401(k) profit sharing plan and trust covering all
employees over 21 years of age with more than one year of service. Participating
employees may make elective salary deferrals into the plan up to the maximum
qualifying amount permitted by federal income tax law. In addition, employer
matching contributions and/or profit sharing contributions are made to the plan
at the discretion of the Company's Board of Directors. Matching and profit
sharing contributions made by the Company to the plan for fiscal 1995 were
$225,440.
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M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES
The provision for income taxes for the fiscal year ended December 30, 1995
consisted of the following:
1995
----------
Current
Federal................................................... $ 825,960
State..................................................... 81,800
----------
907,760
Deferred.................................................... 129,330
----------
$1,037,090
==========
The deferred tax liability arises principally because of an accumulated
depreciation temporary difference. The effective tax rate differs from the
federal statutory income tax rate due primarily to state taxes, net of federal
benefit.
8. RELATED PARTIES
The Company purchases premium ice cream and related products from Dreyer's
under a long-term distribution agreement. In addition, the Company sells ice
cream products to Dreyer's, which are manufactured at the Snelgrove plant in
Utah. Purchases from Dreyer's were $25,174,000 in fiscal 1995. Sales of
Snelgrove manufactured products to Dreyer's were $6,021,636 in fiscal 1995. In
addition, under the distribution agreement, the Company is reimbursed by
Dreyer's for 65% of costs relating to jointly-directed consumer promotion
programs. The Company charged Dreyer's $1,874,845 in fiscal 1995, for Dreyer's
share of such costs. Amounts due from and due to Dreyer's at December 30, 1995,
were as follows:
Accounts receivable from Dreyer's........................... $ 505,331
==========
Accounts payable to Dreyer's................................ $1,579,544
==========
9. MAJOR CUSTOMERS
The Company had four retail customers that accounted for approximately 48%
of net sales for the fiscal year ended December 30, 1995.
10. COMMITMENTS
Leases
The Company leases its office and warehouse facilities and certain vehicles
and equipment under various leases accounted for as operating leases. Future
minimum lease payments under these leases at December 30, 1995 are as follows:
YEAR ENDING DECEMBER,
- ---------------------
1996........................................................ $ 322,421
1997........................................................ 329,963
1998........................................................ 314,243
1999........................................................ 172,512
2000........................................................ 172,587
Thereafter.................................................. 694,822
----------
$2,006,548
==========
Rent expense for the fiscal year ended December 30, 1995 was $478,788.
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M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. SUBSEQUENT EVENT
On March 27, 1996, the stockholders, other than Dreyer's, entered into an
agreement to exchange their shares of the Company's common stock for 300,000
shares of Dreyer's common stock, distributed to such stockholders on a basis
proportionate to their ownership of the Company's common stock. One of the
stockholders received an additional 20,000 shares of Dreyer's common stock as a
finder's fee related to the transaction.
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.33 Second Amendment to Credit Agreement dated as of December 26, 1997
among Dreyer's Grand Ice Cream, Inc., Bank of America, NT&SA (as
Agent and as a bank), ABN-AMRO Bank, NV (as Co-Agent and as a
bank), Credit Suisse First Boston and Union Bank of California,
NA, amending Exhibit 10.26.
13 Those portions of the Dreyer's Grand Ice Cream, Inc. 1997 Annual
Report to Stockholders which are incorporated by reference into
this Annual Report on Form 10-K.
21 Subsidiaries of Registrant.
23 Consent of Independent Accountants.
27 Financial Data Schedule.