CoolBrands International Inc. reports financial results for the first quarter of fiscal 2010 ended November 30, 2009 and announces settlement of Capricorn litigation
TORONTO, Dec. 21 /CNW/ - CoolBrands International Inc. (TSX: COB - News; "CoolBrands" or the "Company") today announced its financial results for the first quarter of fiscal 2010 ended November 30, 2009. The Company's consolidated financial statements and management's discussion and analysis of financial results can be found on the SEDAR website at www.sedar.com.
Financial results
CoolBrands reported a loss for the first quarter of fiscal 2010 of $(232,000), or $(0.00) per fully diluted share, compared to net income of $2,716,000, or $0.04 in the first quarter of 2009. The loss in the first quarter of fiscal 2010 was comprised of a loss from continuing operations of $(338,000), or $(0.01) per fully diluted share, offset by income from discontinued operations of $106,000, or $0.00 per fully diluted share. This compared to income from continuing operations of $2,716,000, or $0.05 per share and a loss from discontinued operations of $(248,000), or $(0.00) per share in the first quarter of fiscal 2009. Contributing to the loss in the first quarter of fiscal 2010 was a foreign exchange loss of $(181,000) as a result of the strengthening of the Canadian dollar compared to the U.S. dollar. This compares to a foreign exchange gain of $2,562,000 in the first quarter of fiscal 2009 as during that period the Canadian dollar decreased in value compared to the U.S. dollar. Also contributing to the 2010 loss was lower interest income earned on the Company's cash and short-term investments as a result of reduced interest rates prevailing in the current economic environment.
Cash and working capital
Cash and short-term investments amounted to $64,661,000 at November 30, 2009, compared to $61,898,000 at August 31, 2009. Working capital was $63,163,000 at August 31, 2009 compared to working capital of $63,149,000 at August 31, 2009. Contributing to the increase in cash and short-term investments was an amount of U.S. $4,025,000 received in November 2009 relating to a promissory note, accrued interest and warrants issued in connection with the sale of one of the Company's subsidiaries in 2007.
Settlement of Capricorn litigation
Since September 2006, CoolBrands and certain of its related entities former officers and/or directors have been defendants in a lawsuit brought by Capricorn Investors III Limited Partnership ("Capricorn") in New York State Supreme Court (the "Court"). In defending this lawsuit, CoolBrands has succeeded in having all of the claims made by Capricorn dismissed, first in June 2008 and then in July 2009, following successful pre-trial motions. Capricorn's appeal of the Court's June 2008 dismissal was affirmed in October of this year by the New York Appellate Division. In September, Capricorn filed a notice appealing the Court's July 2009 dismissal (the "Pending Appeal").
On December 21, 2009, CoolBrands and the other defendants entered into a settlement agreement with Capricorn relating to this lawsuit and all related and/or potential related claims (the "Settlement"). Under the terms of the Settlement, CoolBrands has agreed to pay Capricorn US $1,050,000, 50% of which will be contributed by CoolBrands' insurer. As a result, all of Capricorn's claims against CoolBrands and the other defendants will be dismissed with prejudice. Capricorn will also abandon the Pending Appeal. All parties to the lawsuit will exchange mutual releases.
Commenting on the settlement, Mr. Michael Serruya, Chief Executive Officer of CoolBrands, stated, "We are pleased to put this litigation behind us. We are satisfied with this excellent outcome for the Company and believe that the position we took to defend the claims made by Capricorn is validated by the modest payment we have agreed to make. We stayed the course throughout the litigation and, with the valued assistance of our legal counsel, we won several court decisions that proved instrumental in achieving this result."
Outlook
CoolBrands' management continues to receive and evaluate proposals to invest the Company's cash assets in merger and acquisition opportunities. Until a decision is made to pursue one or more investment alternatives, the Company will continue to invest the majority of its cash funds in short-term investment-grade securities |
