Dreyer’s Grand Ice Cream, Inc. (NNM:DRYR) today announced results for the third quarter ended September 23, 2000 that reflect continued improvements in its profit performance. The Company earned $.31 per diluted common share in the quarter, a 19 percent improvement over earnings of $.26 per diluted common share for the third quarter of 1999. The results reflect strong sales growth of the Company’s premium and superpremium products and significant improvements in operating margins.
The Company also detailed in a separate release that it has entered into a new long-term distribution agreement with Ben & Jerry’s Homemade, Inc., and that it has made acquisitions of regional ice cream distributors to expand the Company’s penetration in both the grocery and non-grocery channels.
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Operating Results
Consolidated sales for the thirteen-weeks ended September 23, 2000 were $345,017,000, an increase of seven percent over sales of $322,410,000 in the third quarter of 1999. Net income for the third quarter was $10,990,000, or $.31 per diluted common share, a $2,254,000 or a 26 percent improvement over net income of $8,736,000, or $.26 per diluted common share, in the third quarter of 1999.
Consolidated sales for the first thirty-nine weeks of 2000 were $909,256,000, an increase of six percent over sales of $857,657,000 in the same period last year. The Company earned year-to-date net income of $26,172,000, or $.75 per diluted common share, a 101 percent increase over net income of $13,036,000, or $0.39 per diluted common share in the same period of 1999. Results in 1999 included the cumulative effect of adopting a change in accounting principle that required the Company to expense pre-operating “start-up” costs as incurred. Without this after-tax charge of ($595,000), or ($.02) per common share, the Company would have reported year-to-date net earnings of $13,631,000, or $.41 per diluted common share in the first thirty-nine weeks of 1999.
Sales of the Company’s branded products increased 12 percent in the quarter, led by strong sales of the new co-branded M&M/Mars line, superpremium Dreamery(TM) brand ice cream, and substantial increases in the sales of premium Dreyer’s and Edy’s Grand Ice Cream and Whole Fruit Bars. While the industry “better for you” segment continued to decline in the quarter, sales of the Company’s portfolio of “better for you” products, including Dreyer’s and Edy’s Grand Light, Frozen Yogurt, Sugar Free and Fat Free brands, increased six percent. Unit volumes for the Company’s branded products, excluding novelties, were approximately 30,400,000 gallons in the quarter, an eight percent improvement over last year.
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By GlobalDataSales of partner brands, products distributed for other manufacturers, decreased four percent in the quarter, driven almost entirely by lower sales of Ben & Jerry’s Homemade, Inc. superpremium products. As previously disclosed, the Company began distributing Ben & Jerry’s products in a smaller geographic area in September, 1999. The Company has separately announced today that it has signed a new agreement with Ben & Jerry’s to resume national distribution of their superpremium product line to the grocery channel and to work together to expand Dreyer’s distribution of Ben & Jerry’s products in non-grocery channels. Partner brand sales accounted for 31 percent of sales in the quarter, down from 34 percent of sales for the third quarter of 1999.
The Company’s gross profit increased by $7,274,000 to $93,240,000, representing a 27 percent gross margin for the third quarter, roughly equal to the gross margin in the same quarter of 1999. The increase in gross profit was primarily the result of continued strong sales of both superpremium Dreamery(TM)and premium Dreyer’s & Edy’s Grand Ice Cream, sales of the new co-branded M&M/Mars line, and higher wholesale prices. The effect of these positive factors more than offset the loss of distribution gross profit from lower Ben & Jerry’s sales. The impact of the change in dairy raw material costs for the quarter was a $0.9 million pre-tax benefit versus the same period last year.
Selling, general and administrative expenses increased slightly in the third quarter to $72,596,000, or 21 percent of sales, but represented a one percentage point decrease as a percentage of sales from the same quarter of 1999. During the quarter, the Company completed the acquisition of several independent distributors, which are detailed under a separate press release. These acquisitions and the new and broader distribution agreement with Ben & Jerry’s mark an acceleration of the Company’s strategy to expand the scope of its distribution system into non-grocery channels. Spending on these initiatives, including staff additions and legal and administrative costs associated with the Ben & Jerry’s distribution agreement, acquisitions and related matters, accounted for approximately $1,250,000 of expense increase in the quarter. The aggregate increase in SG&A spending also reflected the ongoing support of Dreamery(TM), Godiva®, and the Dreyer’s and Edy’s premium portfolio.
Chairman’s Comments
T. Gary Rogers, Chairman of Dreyer’s, had the following comments on the quarterly results: “We are very pleased to report financial improvements over last year driven in large part by continued double digit growth of our Company branded portfolio of products. While we are happy with our overall performance this summer, we are particularly enthusiastic about the newest addition to our product family, our co-branded M&M/Mars line of premium ice creams, which is gaining rapid consumer recognition and trial as we enter the Fall season.”
“Along with the strong operating performance in the quarter, we are also very pleased to announce several advances made in the quarter against our strategic growth strategies. Our new distribution agreement with Ben & Jerry’s Homemade, Inc. will add significant volume onto our nationwide distribution system serving the grocery channel beginning next year. And importantly, under the new agreement Dreyer’s and Ben & Jerry’s will work together to expand Dreyer’s role as a Ben & Jerry’s distributor in other non-grocery channels, such as convenience stores. In addition, the strategic acquisitions we announced will increase our penetration in both the grocery and non-grocery channels. Our business model has truly never looked stronger as we look towards 2001 and beyond.”
Dreyer’s Grand Ice Cream, Inc. manufactures and distributes a full spectrum of premium and superpremium ice creams. The Company’s product lines are marketed under the Dreyer’s brand name throughout the thirteen western states, Texas and certain markets in the Far East, and under the Edy’s name throughout the remainder of the United States. Taken together, Dreyer’s and Edy’s is the best-selling brand of packaged ice cream and other premium frozen dairy dessert products in the country. Brands currently manufactured and distributed by Dreyer’s include Homemade, Whole Fruit Sorbet, Starbucks®, Godiva®, Dreamery(TM), M&M/Mars and Healthy Choice®. For more information on the Company and its products, please visit our website at www.icecream.com.
Forward Looking Statements
Certain statements contained in this press release and the forthcoming conference call are forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties, which may cause the Company’s actual actions or results to differ materially from those contained in the forward-looking statements. Specific factors that might cause such a difference include, but are not limited to: the Company’s ability to achieve efficiencies in its manufacturing and distribution operations without negatively affecting sales; the cost of dairy raw materials and other commodities used in the Company’s products; competitors’ marketing and promotion responses; market conditions affecting the prices of the Company’s products; the Company’s ability to increase sales of its own branded products; and responsiveness of the trade and consumers to the Company’s new products and marketing and promotional programs.
Condensed Consolidated Statement of Income
(In thousands, except per share amounts -- unaudited)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
Sept. Sept. Sept. Sept.
23, 2000 25, 1999 23, 2000 25, 1999
--------- --------- --------- ---------
Revenues:
Sales $ 345,017 $ 322,410 $ 909,256 $ 857,657
Other income 531 1,034 3,660 1,875
--------- --------- --------- ---------
345,548 323,444 912,916 859,532
--------- --------- --------- ---------
Costs and expenses:
Cost of goods sold 251,777 236,444 669,780 654,721
Selling, general and
administrative 72,596 70,051 191,801 173,577
Interest, net of
amounts capitalized 3,420 2,604 9,053 8,851
--------- --------- --------- ---------
327,793 309,099 870,634 837,149
--------- --------- --------- ---------
Income before income
tax provision 17,755 14,345 42,282 22,383
Income tax provision 6,765 5,609 16,110 8,752
--------- --------- --------- ---------
Income before cumulative
effect of change in
accounting principle 10,990 8,736 26,172 13,631
Cumulative effect of
change in accounting
principle, net of tax -- -- -- 595
--------- --------- --------- ---------
Net income 10,990 8,736 26,172 13,036
Preferred dividends and
accretion 280 280 840 840
--------- --------- --------- ---------
Net income available
to common stockholders $ 10,710 $ 8,456 $ 25,332 $ 12,196
========= ========= ========= =========
Weighted average common
shares outstanding
-- diluted 35,407 34,125 35,092 33,636
========= ========= ========= =========
Net income
per common share
-- diluted $ .31 $ .26 $ .75 $ .39
========= ========= ========= =========
Dividends per common
share $ .03 $ .03 $ .09 $ .09
========= ========= ========= =========
Condensed Consolidated Balance Sheet
(In thousands)
Sept. 23, 2000 Dec. 25, 1999
------------ ------------
(unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 2,107 $ 3,158
Receivables, net 147,460 92,779
Inventories 71,446 54,669
Prepaid expenses and other 12,477 18,207
------------ ------------
Total current assets 233,490 168,813
Property, plant and equipment, net 194,470 197,392
Goodwill, distribution rights,
and other intangibles, net 77,816 67,125
Other assets 3,420 5,914
------------ ------------
Total assets $ 509,196 $ 439,244
============ ============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued
liabilities $ 134,752 $ 118,758
Current portion of long-term debt 10,543 18,721
------------ ------------
Total current liabilities 145,295 137,479
Long-term debt, less current portion 138,414 104,257
Deferred income taxes 24,096 23,736
------------ ------------
Total liabilities 307,805 265,472
Redeemable convertible preferred
stock 100,396 100,078
Stockholders' equity 100,995 73,694
------------ ------------
Total liabilities and
stockholders' equity $ 509,196 $ 439,244
============ ============
