Markham, ON, Jan. 29 - CoolBrands International Inc. today announced its operating results for Fiscal 2006. Operating results (amounts expressed in 000's, except per share data, reported in USD)
For Fiscal 2006, net revenues from continuing operations decreased to $99,348, compared to $149,710 for Fiscal 2005, a 33.6% decrease. The net loss for Fiscal 2006 was ($70,182) (($1.25) basic and diluted loss per share), compared to net loss of ($74,070) (($1.32) basic and diluted earnings per share) for Fiscal 2005.
The decrease in net revenues for Fiscal 2006 from continuing operations reflects the decrease in sales generated by the frozen dessert segment, which was partially offset by the decrease in trade promotion payments and slotting fees made to customers, which are treated as a reduction in revenues, and the elimination of drayage income (which is earned by Eskimo Pie Frozen Distribution, Inc. and reclassified to discontinued operations). In Fiscal 2006, net sales declined by 32.2% to $96,936, compared with $142,873 for Fiscal 2005. The decline in sales came from most of our frozen dessert brands, but was partially offset by sales of new products introduced in 2006.
Gross profit percentage for Fiscal 2006 declined to (14.2)%, compared with 0.5% for Fiscal 2005. Gross profit percentage for the periods presented has been calculated by dividing gross profit margin by net sales.
Gross profit margin is calculated by subtracting cost of goods sold from net sales. The decline in gross profit percentage was primarily due to:
1. Our inability to cover fixed overhead costs in both our manufacturing and distribution operations due to the lack of production and sales; and
2. The change in mix of frozen dessert products being sold in Fiscal 2006 with lower gross profit margins, compared with Fiscal 2005.
In addition to the negative gross margins during Fiscal 2006, results were adversely affected by:
1. The loss on impairment of goodwill of $3,500 incurred with respect to the frozen dessert segment to recognize the deterioration in value of the business as a result of the declining sales or the potential abandonment or termination of various licensing agreements.
2. The loss on impairment relating to certain licenses not likely to continue, and related prepaid packaging and design costs totaling $3,609.
3. The loss on impairment of $1,890 incurred with respect to property, plant and equipment currently in storage.
4. The write-off of debt acquisition costs totaling $2,015 reflected in selling, general and administrative expenses.
5. The loss on impairment of $1,140 relating to deferred acquisition costs, prepaid royalties and net receivables from Americana Foods.
6. The loss generated by the Company's majority owned subsidiary, Americana Foods L.P., which totaled $23,542, net of minority interest, and which included the losses on impairment aggregating $11,150 relating to the reduction to estimated fair market value of accounts receivable ($1,500), inventory ($5,750), and property, plant and equipment ($3,900).
7. The recording of a loss on impairment of goodwill associated with the yogurt segment. In Fiscal 2006, the Company began to market the yogurt segment for sale and on January 2, 2007, entered into a definitive agreement to sell the yogurt segment to an unaffiliated third party. An impairment of $5,428 was recorded to recognize the difference between the carrying value of the net assets of the yogurt segment and the fair value based upon the definitive agreement. The impairment was included in loss from discontinued operations in the
Fiscal 2006 statement of operations.
The Fiscal 2005 year results were adversely affected by the non-cash pre-tax asset impairment charge of $51,141, which resulted from the impairment of goodwill and intangible assets related to our frozen dessert segment. Additionally we recognized a loss on impairment of $4,384 with respect to our franchising and licensing segment which was included in discontinued operations in Fiscal 2005.
Cash and working capital
Cash, investments and restricted cash decreased to $393 at August 31, 2006, compared to $41,562 at August 31, 2005. Working capital decreased to ($23,992) at August 31, 2006, compared to $28,477 at August 31, 2005. Our current ratio declined to 0.75 to 1.0 at August 31, 2006 from 1.2 to 1.0 at August 31, 2005. These changes in current assets and current liabilities are attributable primarily to continued cash operating losses, the use of cash investments and restricted cash to repay a portion of the outstanding indebtedness that existed at August 31, 2005, the classification of all bank indebtedness, which was in default at August 31, 2006, as current liabilities, and the decrease in accounts receivable and inventory due to the overall decline of the business, which was greater than the decrease to accounts payable and accrued liabilities. Because the Company had a negative working capital position and the business continues to decline, the Company may not be able to continue as a going concern without the consummation of the sale of assets and/or businesses. On January 24, 2007, the Company's subsidiaries, Eskimo Pie Corporation and Integrated Brands Inc., sold their Eskimo Pie and Chipwich Brands and Real Fruit trademark, along with Eskimo Pie soft serve brands and related foodservice business segment to Dreyer's Grand Ice Cream Holdings, Inc. ("Dreyer's"), and utilized a portion of the proceeds to repay the amounts outstanding under the Corporate Credit Facility.
Filing Default
Further to the Corporation's press release dated October 4, 2006 in which CoolBrands stated that it would not meet the statutory filing deadline for its audited annual financial statements, related management's discussion and analysis and annual information form for its financial year ended August 31, 2006, the Company announces that it has today filed its audited annual financial statements and related management's discussion and analysis with the applicable Canadian securities regulators. CoolBrands did not file its annual information form, its certifications required pursuant to National Instrument 52-109 or its Fiscal 2007 first quarter financial statements and therefore does not expect that the management cease trade order related to CoolBrands' securities and imposed against all of the directors and certain officers of CoolBrands will be lifted at the present time.