Dreyer's Reports First-Quarter Shortfall

Dairy Foods, May, 2001

OAKLAND, Calif. -- Despite a strong resurgence in March sales, Dreyer's Grand Ice Cream, announced recently that earnings for the first quarter of 2001 will be below current estimates. The shortfall is due largely to the effect of high commodity and energy costs, particularly for dairy ingredients. The company currently estimates that it is likely to record a loss for the first quarter in the range of ($.17) to ($.19) cents per share.

Price increases on premium ice cream implemented in the fourth quarter of 2000 dampened sales from December through February, especially in the West.

However, sales recovered in March. Dollar sales grew in March by about 17% versus prior year, and total sales grew by about 20%.

The cost of cream, the company's primary ingredient, rose sharply during the first quarter due to a variety of short-term factors, including lower U.S. fluid milk production in February and March, and concerns over the European cattle problems.

The market price of butter, which is the benchmark used by the government to determine cream prices, has consequently spiked from roughly $1.13 per pound at the beginning of the quarter to over $1.60 currently, compared with average prices of roughly $1.10 per pound during the first quarter of 2000. The company is also incurring higher prices for other ingredients, including vanilla.

In general, a $.10 change in the average annual cost of butter would result in about a $.09 impact on the-company's full-year earnings per share.