Coolbrands, etc.
(This is a quick email discussion of Coolbrands...just something I wanted to post. All the names have been deleted, save mine and certain, ah, details have left out.)
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From: M

I look forward to hearing your comments tomorrow boys. Its late so I gotta run.
**** send me those comments form the rest and lets hear buy/sell your case.

-----Original Message-----
From:

To: 'D

Okay, one additional thought:

i go to yogenfruz in the morning and get a coffee and a chocolate chip muffin... and every 10th coffee is free.

so i'm a little partial. except they switched from their house brand muffins to costco crap muffins.

Shamrocks,


-----Original Message-----
From: Shamrocks
To: D


D:

[part of email deleted]

thanks for the insight. It seems there has been a lot of downward movement, and i guess the key question is: is it too much? has the market over reacted? i'm almost thinking that the options thing is so new, that it might be one of those "holy geez we really have to get used to Sarbannes-Oxley, etc", although i think in Canada, it isn't necessary to report options on the I/S yet. is that right?

It just seemed that after they lost the weight watchers, the stock plummetted....It's true that the company did lose a big chunk of their earnings...but ...the company was trading at somewhere in the neighbourhood of PE of 20-1 based on their rapid growth...now they are sunk @ 7-1 partly because of the lawsuit (which is frivolous to my mind) but still..MS said something of interest:

I would be neutral to negative on this story and would reconsider this position only after the resolution of the lawsuits or the day of the first quarterly profit of the US franchise (whichever came first). this would be enough uncertainty removed for me (a risk-lover) to take a chance.

Now that's cautious, but wise. Since next quarter the full fall out of the CEO options thing will go over, and the company will have to report its potential liability in the form of the lawsuit on the financial statements if they think it is likely that they will lose...and if there is an amount that is likely to be paid out, that will also be disclosed. This is what my buddy m said:

Not familiar with the company but I would question the nature of the lawsuit from weight watchers against it. Why did they lose the contract and get a lawsuit filed against them? Keep in mind that depending on the potential liability the company could be in huge cash flow problems if they get slapped with a huge fine....

So just on the surface I could say that the market doesn't usually take well to potential lawsuits that could have huge cash affects..

....Similar to what matt said: there's high risk associated with companies that are fudging their numbers, of course...but this could be an 'honest' mistake? just thinking out loud..its just the legislation or GAAP, EIC recommendations on applying Black-Scholes options pricing to I/S is quite new. And D you are correct in stating that that would be a lame excuse. How the hell did they classify the CEO as a consultant? seems they may have known about Black-Scholes all too well to be using an argument like that..Moving on to the business itself...M said:

Nestle, one of the worlds largest food manufacturers, could not cut it in the American ice cream market... by far the most competitive market in the world and decided to pack it in. One must question the wisdom of a comparatively small (albeit highly specialised) company making such a move. One must also question their ability to fund a massive re-branding effort that will be needed in light of the loss of the weight watchers contract. Weighing in at around USD300m they are not exactly in the same league as players like Unilever USD35b or Nestle USD100b

I guess my question to M is: I thought it was from EU regulations that they cut their american operations...is that not correct? I'm seriously asking, because the way it's stated here, it seems to be less of regulatory issue and more of a 'strategy' or 'business' issue.

From the responses, I guess the idea so far is: Watch the next quarter. Can they improve? Are there more revisions to come? What about the lawsuit status? Bottom line: Is all the bad news 'in'?...and my own is: Will they ditch the CEO? Is there going to be someone accountable for the shady accounting practices?

Thanks for the responses. Please respond if you want to add any observations or if you think i'm leaving anything out...I'm sure there is a tonne of material not covered...Good stuff so far.

http://www.yogenfruz.com/investors/press/pr122.pdf



-----Original Message-----


Subject: Coolbrands
From: D



There was an article in the Post perhaps 2-3 weeks ago all about Coolbrands and its recent woes. There seem to be two main issues weighing on the company's share price.

Firstly, while past growth has been good, it is largely irrelevant in the company's share price. The important factor is future growth prospects, which seem to have been hurt due to the loss of the WeightWatchers account. The second issue is that the firm failed to misguided analysts in terms of its 2004 EPS expectations. This sort of mistake on the part of managment can be hugely detrimental to a company's market valuation, as it shows that management may be somewhat inept. If they do not even know enough enough of what is going at their company to properly guide analysts' expectations, what exaxtly is going on?

Even more crucial in this case was the reason behind the 'earnings miss'. I have attached a news release that explains that EPS was lower than management expected because they got a big option payoff and an associated adjustment in some shady accounting practices (their Auditor said they could no longer treat their CEO as a cunsultant). This looks terrible because: a) they just lost a huge account and b) how could they not be aware of something of this nature. This basically appears to be a very weak excuse for poorer-than-expected performance. Markets hate lame excuses. For example, see the punishment that Cinram has endured since management blamed the company's poor performance (as a CD manufacturer) on high oil prices. Share price comes under enormous pressure when people simply don't believe in management.

http://www.yogenfruz.com/investors/press/pr122.pdf



Hello:

I am just throwing this out there...over the last little while, coolbrands, the canadian ice cream company, has received a major price hit because of its loss of a weight watchers contract worth a third of its revenue, and a quarter of all its profit...the contract expires next year and both companies have filed lawsuits for x amounts..

My question to you (if you received this, it means I respect your opinion in these matters) is: is it justified? Previously, the company's stock price was in the stratosphere....and now, despite rapid growth (it doubled last year) and the acquisition of Nestle's american operations (disposed of for EU competition regulations) for a song the company's stock price is languishing big time.

...any opinions would be appreciated.

Here's the TSX ticker:

http://www.tse.com/HttpController?GetPage=QuotesViewPage&DetailedView=DetailedPrices&Market=T&Language=en&QuoteSymbol_1=COB.A-T&x=48&y=2