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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 28, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from
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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. [ ]
The aggregate market value (based on the average of the high and low sales
prices on March 24, 1997, as reported by NASDAQ) of the Common Stock held by
non-affiliates was approximately $342,683,981. (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 24, 1997, the latest practicable date, 13,400,607 shares of
Common Stock were outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Dreyer's Grand Ice Cream, Inc. Proxy Statement for the 1997
Annual Meeting of Stockholders to be filed with the Commission on or before
April 27, 1997 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 1997 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 Grand Ice Cream 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 85% 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. This
brand of ice cream 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 1996, the Company
introduced Portofino(TM) brand Italian style ice cream in selected western
markets. The Company also began manufacturing and distributing Starbucks(TM) Ice
Cream products during 1996 for its joint venture with Starbucks Coffee Company.
The Company also produces a premium soft serve product, Grand Soft(TM), 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. Historically, research and
development expenses have not been significant.
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 five year 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 a national
scale and enhance this capability with sophisticated information and logistics
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
anticipates that the earnings benefits expected under the Strategic Plan will be
achieved in 1997 and future years. However, no assurance can be given that these
expectations relative to future market share and earnings benefits of the
strategy will be achieved. The success of the strategy will depend upon, among
other things, consumer purchase responsiveness to the increased marketing
expenditures, competitors' marketing 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 "Management's
Discussion and Analysis" which appears on pages 30-32 of the Company's 1996
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 85% 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 York, Chicago, Washington, D.C.,
Atlanta, Tampa and Milwaukee. 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 23% of
consolidated net sales in 1996. The Company's agreements with its independent
distributors are generally terminable upon 30 days notice by either party.
For fiscal 1996, no customer accounted for more than 10% of consolidated
net sales of the Company. The Company's export sales were about 2% of 1996
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, the Company
has manufacturing agreements with an ice cream manufacturer to produce Dreyer's
line of products in accordance with specifications and quality control provided
by Dreyer's. Of the approximately 71 million gallons of the Company's products
sold in 1996, approximately 2 million gallons were manufactured under these
arrangements. The Company also has manufacturing agreements with two different
facilities to produce a portion of its novelty products. During 1996, these
facilities produced approximately 3 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 1996, the Company manufactured
approximately 13 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.
However, these higher costs were offset by price increases and productivity
gains.
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 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.
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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 28, 1996, the Company had approximately 2,900 employees. The
Company's Union City manufacturing and distribution employees are represented by
the Teamsters Local 853, whose contract with the Company expires between March
1998 and December 2001 for different types of employees, and the International
Union of Operating Engineers, Stationary Local No. 39, whose contract with the
Company expired in August 1996 and is currently under negotiation. 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 1997. 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 1996, the facility produced
approximately 19 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 1996,
the facility produced approximately 18 million gallons of ice cream and related
products.
In 1994, the Company completed construction of a cold storage warehouse
facility located on property acquired 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 116,000 square
feet of manufacturing and storage space and 6,000 square feet of office space.
In addition, the Company leases approximately 55,000 square feet of cold storage
and 8,000 square feet of office space near the Fort Wayne facility. The plant
has the current production
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capacity of 50 million gallons per year. During 1996, the facility produced
approximately 40 million gallons of ice cream and related products.
The Company owns a manufacturing and distribution facility in Houston,
Texas. This facility is being renovated and, upon completion, will have
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. At that time the plant's production capacity will be approximately 26
million gallons per year. During 1996, this facility produced approximately 7
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 1996, the facility produced approximately 3 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
Not applicable.
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 54
William F. Cronk, III President 54
Edmund R. Manwell Secretary 54
Thomas M. Delaplane Vice President - Sales 52
J. Tyler Johnston Vice President - Marketing 43
William R. Oldenburg Vice President - Operations 50
Paul R. Woodland Vice President - Finance and Administration,
Chief Financial Officer & Assistant Secretary 46
All officers hold office at the pleasure of the Board of Directors. There
is no family relationship among the above officers.
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.
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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. Oldenburg has served as Vice President - Operations of the Company
since September 1986.
Mr. Woodland has served as Vice President - Finance and Administration and
Chief Financial Officer of the Company since September 1981 and as Assistant
Secretary since December 1985.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information set forth in Note 16 under the caption "Price Range
(NASDAQ)" which appears on page 28 of the Company's 1996 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 24, 1997, the number of holders of record of the Company's common
stock was 4,023.
The Company paid a regular quarterly dividend of $.06 per share of common
stock for each quarter of 1996. On March 4, 1997, 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 $.06 per share of common stock for each quarter of 1997. Also on
March 4, 1997, the Board of Directors declared a dividend of $.06 per share of
common stock for the first quarter of 1997 for stockholders of record on March
28, 1997.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Five Year Summary of
Significant Financial Data" which appears on page 29 of the Company's 1996
Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information set forth under the caption "Management's Discussion and
Analysis" which appears on pages 30-32 of the Company's 1996 Annual Report 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 March 12, 1997, appearing on pages 16-28 of the
Company's 1996 Annual Report are incorporated herein by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
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 1997 Annual Meeting of Stockholders to be filed with the Commission on or
before April 27, 1997, 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 1997 Annual Meeting of Stockholders to be
filed with the Commission on or before April 27, 1997 is incorporated herein by
reference.
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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 1997
Annual Meeting of Stockholders to be filed with the Commission on or before
April 27, 1997 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 1997 Annual Meeting of Stockholders to be filed with the
Commission on or before April 27, 1997 is incorporated herein by reference.
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*
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1. Financial Statements:
Report of Independent Accountants 16
Consolidated Statement of Income for the three years ended
December 28, 1996 16
Consolidated Balance Sheet at December 28, 1996 and
December 30, 1995 17
Consolidated Statement of Changes in Stockholders' Equity
for the three years ended December 28, 1996 18
Consolidated Statement of Cash Flows for the three years ended
December 28, 1996 19
Notes to Consolidated Financial Statements 20-28
PAGE(S)
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2. Financial Statement Schedules:
Report of Independent Accountants on Financial Statement Schedule
for the three years ended December 28, 1996 15
II. Valuation and Qualifying Accounts 16
M-K-D Distributors, Inc. and Subsidiary Consolidated Financial
Statements:
Report of Independent Accountants 17
Consolidated Balance Sheet at December 30, 1995 18
Consolidated Statement of Income and Retained Earnings for
the fiscal years ended December 30, 1995 and December 31,
1994 (unaudited) 19
Consolidated Statement of Cash Flows for the fiscal years
ended December 30, 1995 and December 31, 1994 (unaudited) 20
Notes to Consolidated Financial Statements 21-25
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* Incorporated by reference to the indicated pages of the Company's 1996
Annual Report to Stockholders.
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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 the
income from continuing operations before income taxes, 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.
(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)).
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EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------
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)).
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)).
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)).
10
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)).
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)).
11
14
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------
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.
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.
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)).
11 Computation of Net Income Per Share.
13 Those portions of the Dreyer's Grand Ice Cream, Inc. 1996 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.
(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
15
(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.
(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.
13
16
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.
Date: March 28, 1997
DREYER'S GRAND ICE CREAM, INC.
By: /s/ PAUL R. WOODLAND
------------------------------------
(Paul R. Woodland)
Vice President - Finance and
Administration,
Chief Financial Officer and
Assistant Secretary
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 Chief March 28, 1997
- --------------------------------------------- Executive Officer and Director
(T. Gary Rogers) (Principal Executive Officer)
/s/ WILLIAM F. CRONK, III President and Director March 28, 1997
- ---------------------------------------------
(William F. Cronk, III)
/s/ EDMUND R. MANWELL Secretary and Director March 28, 1997
- ---------------------------------------------
(Edmund R. Manwell)
/s/ PAUL R. WOODLAND Vice President - Finance March 28, 1997
- --------------------------------------------- and Administration,
(Paul R. Woodland) Chief Financial Officer
and Assistant Secretary
(Principal Financial Officer)
/s/ JEFFREY P. PORTER Corporate Controller March 28, 1997
- --------------------------------------------- (Principal Accounting Officer)
(Jeffrey P. Porter)
/s/ JAN L. BOOTH Director March 28, 1997
- ---------------------------------------------
(Jan L. Booth)
/s/ TIMM F. CRULL Director March 28, 1997
- ---------------------------------------------
(Timm F. Crull)
/s/ M. STEVEN LANGMAN Director March 28, 1997
- ---------------------------------------------
(M. Steven Langman)
/s/ JOHN W. LARSON Director March 28, 1997
- ---------------------------------------------
(John W. Larson)
/s/ JACK O. PEIFFER Director March 28, 1997
- ---------------------------------------------
(Jack O. Peiffer)
/s/ TIMOTHY P. SMUCKER Director March 28, 1997
- ---------------------------------------------
(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.
14
17
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 March 12, 1997 appearing in the 1996 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
March 12, 1997
15
18
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 31, 1994:
Allowance for doubtful accounts............. $ 535 $1,672 $1,572(1) $ 635
Amortization of goodwill and distribution
rights................................... 7,572 2,871 -- 10,443
Amortization of other assets................ 3,509 2,921 208(2) 6,222
------- ------ ------ -------
$ 11,616 $7,464 $1,780 $ 17,300
======= ====== ====== =======
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
======= ====== ====== =======
- ---------------
(1) Write-off of receivables considered uncollectible.
(2) Removal of fully-amortized assets.
16
19
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
17
20
M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 30,
ASSETS 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
Income taxes payable
-----------
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.
18
21
M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
FISCAL YEAR ENDED
-------------------------------
UNAUDITED
DECEMBER 30, DECEMBER 31,
1995 1994
------------- -------------
REVENUES:
Net sales....................................................... $ 74,218,680 $ 62,816,959
Other income.................................................... 334,884 64,709
----------- -----------
74,553,564 62,881,668
----------- -----------
COSTS AND EXPENSES:
Cost of goods sold.............................................. 58,902,661 48,324,932
Selling, general and administrative............................. 12,806,842 11,118,291
Interest........................................................ 119,758 86,514
----------- -----------
71,829,261 59,529,737
----------- -----------
Income before income taxes...................................... 2,724,303 3,351,931
Income taxes.................................................... 1,037,090 1,205,721
----------- -----------
Net income...................................................... 1,687,213 2,146,210
Retained earnings, beginning of year............................ 9,662,608 7,516,398
----------- -----------
Retained earnings, end of year.................................. $ 11,349,821 $ 9,662,608
=========== ===========
See accompanying notes to consolidated financial statements.
19
22
M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDED
-----------------------------
UNAUDITED
DECEMBER 30, DECEMBER 31,
1995 1994
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................ $ 1,687,213 $ 2,146,210
Adjustments to reconcile net income to cash provided from
operations:
Depreciation................................................... 1,191,747 904,440
Deferred taxes................................................. 129,330 40,013
Gain on sale of assets......................................... (10,854)
Changes in assets and liabilities, net of amounts acquired:
Trade accounts receivable...................................... (156,585) (812,342)
Inventories.................................................... 964,040 (1,102,532)
Prepaid expenses and other..................................... (318,147) 410,618
Notes receivable and other..................................... (27,728) (213,228)
Accounts payable and accrued liabilities....................... (1,179,772) 1,529,746
Accrued payroll and employee benefits.......................... 97,010 158,305
Income taxes payable........................................... (145,141)
----------- -----------
2,241,967 3,050,376
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment...................... (3,135,357) (3,214,223)
Proceeds from sale of equipment................................... 100,000
----------- -----------
(3,135,357) (3,114,223)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt...................................... 2,075,547 135,000
Reductions in long-term debt...................................... (1,369,700) (255,000)
----------- -----------
705,847 (120,000)
----------- -----------
Decrease in cash.................................................... (187,543) (183,847)
Cash, beginning of year............................................. 234,414 418,261
----------- -----------
Cash, end of year................................................... $ 46,871 $ 234,414
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest....................................................... $ 101,749 $ 107,831
Income taxes (net of refunds).................................. 1,038,500 899,000
See accompanying notes to consolidated financial statements.
20
23
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.
21
24
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.
Financial Statement Presentation
Certain reclassifications have been made to prior years' financial
statements to conform to the 1995 presentation.
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 and
$904,440 (unaudited) in 1995 and 1994, respectively.
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.
22
25
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 (fiscal 1994 -- $189,480, unaudited).
23
26
M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
The provision for income taxes for the fiscal years ended December 30, 1995
and December 31, 1994 consisted of the following:
1995 1994
---------- ----------
UNAUDITED
Current
Federal........................................... $ 825,960 $1,060,481
State............................................. 81,800 105,227
---------- ----------
907,760 1,165,708
Deferred............................................ 129,330 40,013
---------- ----------
$1,037,090 $1,205,721
========== ==========
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 and $22,583,000 (unaudited) in
fiscal 1995 and 1994, respectively. Sales of Snelgrove manufactured products to
Dreyer's were $6,021,636 and $4,305,669 (unaudited) in fiscal 1995 and 1994,
respectively. 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 and $1,098,598
(unaudited) in fiscal 1995 and 1994, respectively, 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 (fiscal 1994 -- 45%,
unaudited).
24
27
M-K-D DISTRIBUTORS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
(fiscal 1994 -- $491,516, unaudited).
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.
25
28
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------
10.20 Dreyer's Grand Ice Cream, Inc. Stock Option Plan (1993), as amended May 1, 1996.
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.
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.
11 Computation of Net Income Per Share.
13 Those portions of the Dreyer's Grand Ice Cream, Inc. 1996 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.
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