<PAGE>
<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT TO QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the three months ended December 31, 1993
Commission file number 1-7894
ERLY INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
California 95-2312900
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
10990 Wilshire Boulevard, #1800 90024-3955
Los Angeles, California (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number, including area code (213) 879-1480
AMENDMENT NO. 2
The undersigned registrant hereby amends the following items,
financial statements, exhibits or other portions of its Quarterly Report
on Form 10-Q for the three months ended December 31, 1993, as set forth on
the pages attached hereto:
Part I
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
<PAGE> 2
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf
by the undersigned, thereunto duly authorized.
ERLY Industries Inc.
-----------------------------
Registrant
Date: September 1, 1994 By /s/ Richard N. McCombs
------------------------------
Richard N. McCombs
Vice President and
Chief Financial Officer
<PAGE>
<PAGE> 3
ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
December 31, March 31,
1993 1993
------------ -----------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash $ 2,507,000 $ 3,872,000
Notes and accounts receivable, less
allowance for doubtful accounts of
$4,516,000 (December 31) and
$3,280,000 (March 31) 44,472,000 35,534,000
Inventories:
Raw materials 38,864,000 14,817,000
Finished goods 28,313,000 12,908,000
------------ ------------
67,177,000 27,725,000
Prepaid expenses and other current assets 1,144,000 2,524,000
Assets of discontinued business
held for disposition (Note 3) 3,985,000
------------ ------------
Total current assets 119,285,000 69,655,000
Long-term notes receivable, net 1,091,000 6,623,000
Property, plant and equipment, net 56,626,000 30,857,000
Assets held for sale, net (Note 6) 23,037,000 4,210,000
Investment in American Rice, Inc. 13,104,000
Other assets 18,128,000 10,651,000
------------ ------------
$218,167,000 $135,100,000
============ =============
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable, collateralized $ 51,241,000 $ 62,359,000
Accounts payable 42,866,000 20,106,000
Accrued payroll and other
current liabilities 13,292,000 7,298,000
Income taxes payable 3,525,000 1,829,000
Current portion of long-term and
subordinated debt 9,096,000 22,531,000
------------ ------------
Total current liabilities 120,020,000 114,123,000
Long-term debt (Note 7) 62,104,000 26,881,000
Subordinated debt (Note 7) 8,407,000 1,094,000
Minority interest 19,331,000 790,000
Redeemable common stock,
300,000 shares issued and outstanding 1,701,000 1,406,000
Stockholders' equity:
Common stock, par value $.01
a share (December 31) and $1.00
a share (March 31):
Authorized: 5,000,000 shares
Issued and outstanding:
3,305,963 shares (December 31)
and 3,186,956 shares (March 31) 33,000 3,187,000
Additional paid-in capital 15,954,000 12,687,000
Retained earnings (deficit) (8,228,000) (24,119,000)
Cumulative foreign currency
adjustments (1,155,000) (949,000)
------------ ------------
Total stockholders' equity 6,604,000 (9,194,000)
------------ ------------
$218,167,000 $135,100,000
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
<PAGE>
<PAGE> 4
ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
For the three and nine months ended December 31, 1993 and 1992
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
-------------------------- ---------------------------
1993 1992** 1993 1992**
----------- ----------- ------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $99,573,000 $41,579,000 $235,323,000 $173,343,000
Cost of sales 87,813,000 36,225,000 203,530,000 154,061,000
----------- ----------- ------------ ------------
Gross profit 11,760,000 5,354,000 31,793,000 19,282,000
Selling, general and
administrative expenses 8,339,000 5,305,000 22,661,000 13,968,000
Interest expense 3,241,000 1,800,000 8,671,000 5,823,000
Interest income (116,000) (192,000) (511,000) (619,000)
Investment income (1,349,000) (426,000) (1,840,000)
Other (income) expense (43,000) (316,000) 260,000 (822,000)
Gain on sale of partial
interest in subsidiary
(Note 2) (11,768,000)
Writedown of plant
facility (Note 5) 4,000,000
----------- ----------- ------------ ------------
11,421,000 5,248,000 18,887,000 20,510,000
Income (loss) before
taxes on income,
discontinued operations,
extraordinary items
and minority interest 339,000 106,000 12,906,000 (1,228,000)
Taxes on income (benefit) (40,000) (61,000) 480,000 452,000
----------- ----------- ------------ ------------
Income (loss) before
discontinued operations,
extraordinary items
and minority interest 379,000 167,000 12,426,000 (1,680,000)
Discontinued operations
(Note 3):
Loss from discontinued
operations (1,638,000) (2,123,000) (5,104,000) (2,760,000)
Loss on disposal of
discontinued operations (872,000) (3,562,000)
----------- ----------- ------------ ------------
Income (loss) before
extraordinary items and
minority interest (2,131,000) (1,956,000) 3,760,000 (4,440,000)
Extraordinary income -
gain on extinguishment
of debt (Note 5) 897,000 16,792,000 4,726,000
----------- ----------- ------------ ------------
Income (loss) before
minority interest (1,234,000) (1,956,000) 20,552,000 286,000
</TABLE>
<PAGE>
<PAGE> 5
ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
-------------------------------------------------
For the three and nine months ended December 31, 1993 and 1992
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
-------------------------- ---------------------------
1993 1992** 1993 1992**
----------- ----------- ------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Minority interest in
(earnings) loss of
consolidated subsidiary
(Note 4) 291,000 (4,661,000)
----------- ----------- ------------ ------------
Net income (loss) ($ 943,000) ($ 1,956,000) $ 15,891,000 $ 286,000
=========== =========== ============ ============
Net income (loss) per
common and common
share equivalents:
Primary:
Continuing operations $ .19 $ .05 $ 3.20 * ($ .49)
Discontinued operations (.70) (.62) (2.42) (.80)
Extraordinary items .25 3.66 * 1.37
------ ------ ------ ------
($ .26) ($ .57) $ 4.44 $ .08
====== ====== ====== ======
Fully diluted:
Continuing operations $ .19 $ .05 $ 2.99 * ($ .44)
Discontinued operations (.70) (.62) (2.25) (.75)
Extraordinary items .25 3.40 * 1.28
------ ------ ------ ------
($ .26) ($ .57) $ 4.14 $ .09
====== ====== ====== ======
Weighted average common
shares outstanding:
Primary 3,563,000 3,438,000 3,580,000 3,433,000
Fully diluted 3,563,000 3,438,000 3,847,000 3,700,000
</TABLE>
* Net of applicable minority interest ($1.0 million relating to
continuing operations and $3.7 million relating to extraordinary
item).
** Restated for discontinued operations.
See accompanying Notes to Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
<PAGE>
<PAGE> 6
ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
For the three and nine months ended December 31, 1993 and 1992
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
------------------------- -------------------------
1993 1992 1993 1992
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net income (loss) ($ 943,000) ($ 1,956,000) $15,891,000 $ 286,000
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Minority interest in
earnings (loss) of
consolidated subsidiary (291,000) 4,661,000
Gain on sale of partial
interest in Comet Rice (11,768,000)
Extraordinary income on
extinguishment of debt (897,000) (16,792,000)
Extraordinary income on
disposal of rice facility (4,726,000)
Writedown of rice facility 4,000,000
Depreciation and amortization 1,902,000 1,125,000 4,869,000 3,014,000
Provision for loss on
receivables 456,000 (112,000) 1,236,000 (112,000)
Undistributed earnings
of investment in
American Rice, Inc. (1,349,000) (426,000) (1,840,000)
Loss on disposition of
juice business 872,000 3,562,000
Loss on disposition of
rice subsidiary 880,000
Change in assets and liabilities:
Decrease (increase) in
receivables (2,919,000) 4,631,000 (6,039,000) 9,987,000
Decrease (increase) in
inventories (27,058,000) 1,681,000 (19,586,000) 17,821,000
Decrease (increase) in
prepaid expenses and
other current assets 420,000 (69,000) 717,000 (788,000)
Increase (decrease) in
accounts payable and other
current liabilities 15,977,000 4,239,000 10,116,000 (5,793,000)
Increase (decrease) in
taxes payable (225,000) (220,000) 1,696,000 148,000
Other, net (637,000) (369,000) 474,000 (968,000)
----------- ----------- ----------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (13,343,000) 7,601,000 (10,509,000) 21,029,000
</TABLE>
<PAGE>
<PAGE> 7
ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
-------------------------------------------------
For the three and nine months ended December 31, 1993 and 1992
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
------------------------- -------------------------
1993 1992 1993 1992
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INVESTING ACTIVITIES:
Disposition of
juice business 8,400,000 14,499,000
Acquisition of American
Rice, Inc. 12,608,000
Proceeds from disposition
of rice subsidiary 2,092,000
Purchase of property, plant
and equipment (293,000) (689,000) (940,000) (1,981,000)
Disposition of property,
plant and equipment 202,000 427,000 405,000 883,000
------------ ----------- ----------- -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 8,309,000 (262,000) 28,664,000 (1,098,000)
FINANCING ACTIVITIES:
Increase (decrease) in
notes payable 4,443,000 (3,998,000) 4,277,000 (13,963,000)
Proceeds from notes and
long-term debt 79,458,000 159,000
Repayment of notes and term
debt on rice refinancing (93,736,000)
Principal payments on
long-term debt (909,000) (2,242,000) (9,519,000) (4,423,000)
Principal payments on
subordinated debt (1,360,000) (1,361,000)
Proceeds from sales of stock 131,000 131,000
----------- ----------- ----------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 3,534,000 (7,469,000) (19,520,000) (19,457,000)
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN CASH
DURING THE PERIOD (1,500,000) (130,000) (1,365,000) 474,000
CASH, BEGINNING OF PERIOD 4,007,000 4,446,000 3,872,000 3,842,000
----------- ----------- ----------- -----------
CASH, END OF PERIOD $ 2,507,000 $ 4,316,000 $ 2,507,000 $ 4,316,000
=========== =========== =========== ===========
Supplemental Cash
Flow Information:
Interest paid $1,922,000 $1,741,000 $6,502,000 $5,262,000
Income taxes paid 196,000 2,000 561,000 675,000
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
<PAGE>
<PAGE> 8
ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
----------------------------------------------
For the nine months ended December 31, 1993
(Unaudited)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Cumulative
Common Stock Additional Retained Foreign Total
----------------------- Paid-in Earnings Currency Stockholders'
Shares Dollars Capital (Deficit) Adjustments Equity
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance
April 1, 1993
Restated 3,186,956 $3,187,000 $12,687,000 ($24,119,000) ($949,000) ($9,194,000)
Net income
for the period 15,891,000 15,891,000
Reclassification
to reflect
reduction in
par value of
ERLY common
stock (3,213,000) 3,213,000 -
Common stock
issued 119,007 59,000 349,000 408,000
Foreign currency
adjustments (206,000) (206,000)
Accretion of
redeemable
common stock (295,000) (295,000)
--------- ----------------------------------------------------------------
Balance
December 31,
1993
(unaudited) 3,305,963 $ 33,000 $15,954,000 ($8,228,000) ($1,155,000) $ 6,604,000
========= ================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
<PAGE>
<PAGE> 9
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
For the three and nine months ended December 31, 1993 and 1992
Basis of Presentation:
The information furnished is unaudited but reflects all adjustments which
are, in the opinion of management, necessary for a fair statement of
results for the interim periods. Results for interim periods are not
necessarily indicative of results to be expected for the entire year.
Reference should be made to the Notes To Consolidated Financial Statements
in the Company's 1993 Form 10-K for a discussion of accounting policies
and other significant matters.
Certain reclassifications have been made to prior period consolidated
financial statements to conform to current year presentation.
The accompanying consolidated financial statements include the accounts of
ERLY Industries Inc. and its subsidiaries (the "Company" or "ERLY"). All
significant intercompany accounts, intercompany profits and intercompany
transactions are eliminated. As discussed in Note 1, substantially all of
the assets and liabilities of ERLY's wholly owned subsidiary, Comet Rice,
Inc. ("Comet"), were acquired by American Rice, Inc. ("ARI") on May 26,
1993, in a transaction accounted for as a reverse acquisition by its
subsidiary, Comet. Prior to the transaction, ERLY owned 48% of the voting
rights of ARI, and its investment in ARI was accounted for using the
equity method. ERLY's equity in ARI's net results of operations was
reflected as investment income or loss in ERLY's consolidated statements
of operations. As a result of the transaction, ERLY's ownership increased
to 81% of the voting rights of ARI and therefore, beginning in June 1993,
ARI's balance sheet and results of operations are consolidated with
ERLY's, with appropriate adjustments to reflect minority interest.
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
Deferred income taxes and liabilities are computed for differences between
the financial statement basis and tax basis of assets and liabilities that
will result in taxable or deductible amounts in the future. Valuation
allowances have been established to reduce deferred tax assets to the
amount expected to be realized. At March 31, 1993, the Company had net
operating loss carryforwards for federal tax reporting purposes of
approximately $48 million which can be used to offset future taxable
income. Tax expense reflected in the consolidated statements of
operations represents estimated federal and state tax expense on pre-tax
earnings reduced by the utilization of deferred tax assets relating to net
operating loss carryforwards that had previously been reserved.
Primary earnings per share are based on the weighted average number of:
(1) common shares, and (2) dilutive common share equivalents (consisting
of stock options and warrants) outstanding during each period presented.
Fully diluted earnings per share assumes conversion of a $1 million
convertible note payable, unless conversion would be anti-dilutive.
<PAGE>
<PAGE> 10
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - -------------------------------------------
Note 1 - Acquisition of Comet Rice, Inc. by American Rice, Inc.
On May 26, 1993, ARI consummated a transaction to acquire substantially
all of the assets of Comet and assume all of Comet's liabilities (the
"Transaction").
In exchange for the assets acquired (and liabilities assumed) from Comet,
ARI issued to ERLY 14,000,000 shares of a newly created Series B Preferred
Stock, $1 par value. Each share of Series B Preferred Stock provides for
annual cumulative, non-participating dividends of $.37, is convertible
into two shares of ARI common stock, is entitled to two votes, and has a
liquidation preference of $1.00 per share. The Series B Preferred Stock
issued to ERLY carries an aggregate dividend of approximately $5.2 million
per year. Applicable loan agreements contain various restrictions on the
ability of ARI to pay such dividends and ARI is currently precluded from
paying the dividends. The Comet assets acquired by ARI did not include
the ARI stock previously held by Comet. In connection with the
Transaction, Comet transferred the ARI stock held by it to ERLY. Comet's
combined holdings of ARI common stock and ARI Series A Preferred Stock
prior to the Transaction, represented approximately 48% of the voting
rights of the outstanding ARI stock. As a result of the Transaction, ERLY
holds 81% of the combined voting rights and common stock equivalents of
ARI stock outstanding after the Transaction.
ARI also refinanced the combined indebtedness of ARI and Comet
("Refinancing"). Under the Refinancing, ARI received $47.5 million in
credit lines from a new revolving credit lender and loans from new term
lenders for $65.3 million. In addition, ERLY is a guarantor for all of
the new ARI debt and the loan agreements contain certain restrictive
covenants applicable to ERLY. These agreements also provide the lenders
with the option of accelerating repayment of the ARI debt and terminating
the agreements under certain conditions related to ERLY's ability to meet
its obligations as they come due, and to remain in compliance with its
debt agreements. As additional consideration, 13 million shares of ARI
Series B Preferred Stock, $1 par value, were pledged by ERLY for the
benefit of the new term lenders. ARI and Comet have capitalized
approximately $4 million of costs associated with the Refinancing. These
costs will be amortized over the respective terms of the new ARI debt.
ARI's indebtedness to its former lenders was partially satisfied by ARI's
issuance to the former lenders of a combined aggregate of 1,500,000 shares
of a newly created Series C Preferred Stock, which carries annual
cumulative, non-participating dividends of $.50 per share, is non-
convertible and non-voting, has a liquidation preference of $1.00 per
share, and is callable by ARI at any time at a price of $5.27 per share
less aggregate dividend payments per share. Applicable loan agreements
with the new lenders contain various restrictions on the ability of ARI to
pay these dividends and ARI is currently precluded from paying the
dividends. ARI's former lenders agreed to a debt discount of
approximately $10.3 million. As additional consideration for the
satisfaction of the existing indebtedness of ARI, ERLY issued notes of
$3 million and pledged one million shares of ARI Series B Preferred Stock
for the benefit of the former lenders. This $3 million was offset by ARI
against its receivable from ERLY.
<PAGE>
<PAGE> 11
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
Note 2 - Gain on Sale of Partial Interest in Subsidiary
In conjunction with the May 26, 1993 Transaction, ERLY received an
additional 33% interest in ARI in exchange for all of the assets (except
for the ARI stock owned by Comet) and assumed all of the liabilities of
ERLY's wholly owned subsidiary, Comet Rice, Inc.
Since ERLY, the sole shareholder of Comet at the time of the Transaction,
owned the larger portion of the voting rights in the surviving
corporation, the Transaction was accounted for as a reverse step
acquisition of ARI by ERLY through its subsidiary, Comet, reflecting the
change of control that occurred. The Transaction was accounted for under
the guidelines of APB Opinion No. 16, "Business Combinations" and Emerging
Issues Task Force ("EITF") Issue No. 90-13, "Accounting for Simultaneous
Common Control Mergers."
The accounting consists of three steps: Step one consists of a
recognition by ARI of ERLY's historical cost of its original 48% interest.
When ERLY purchased 48% of ARI in 1988 for $20 million, the purchase price
was greater than 48% of ARI stockholders' equity. ERLY attributed the
excess to ARI's Houston property and thus the excess (which was $5.2 million
at March 31, 1993) was added to the book value of the Houston property.
Step two recognizes the acquisition by ERLY of an additional equity
interest in ARI of approximately 33% in exchange for substantially all of
the assets of Comet and all of Comet's liabilities. ARI's assets are
valued at fair market value to the extent acquired.
Step three, in accordance with EITF 90-13, the fair value of Comet's net
assets was determined. ERLY accounted for the Transaction as a partial
sale of 19% of Comet Rice (19% is the percentage ownership of ARI by
minority shareholders), and a step acquisition of ARI, increasing its
ownership from 48% to 81%. Under EITF 90-13, a gain of $11.8 million was
recognized by ERLY in the quarter ended June 30, 1993, to the extent of
the 19% of Comet Rice sold.
In accordance with EITF 90-13, Comet's net assets were revalued in ERLY's
consolidated financial statements to the extent that Comet was acquired by
the minority shareholders of ARI. This resulted in an $11.6 million
increase in the carrying value of Comet assets. This increase was
attributed to Comet's Maxwell, California facility, now owned by ARI. It
is being depreciated over 30 years (buildings and improvements) and 15
years (machinery and equipment).
Note 3 - Discontinued Operations - Disposition of Juice Business
On December 21, 1993, Eau Claire Packing Company, a wholly owned
subsidiary of ERLY Industries Inc. operating in the juice business, sold
its manufacturing facility located in Eau Claire, Michigan, together with
the inventory, accounts receivable and certain trademarks associated with
the plant facility, to Seneca Foods Corporation ("Seneca"). Seneca paid
approximately $5.1 million for the plant facility and the related assets.
ERLY Juice Inc., a wholly owned subsidiary of ERLY Industries, also sold
trademarks, inventory and accounts receivable to Seneca for approximately
$3.3 million. The purchase price was paid in cash at the closing. The
net proceeds from both sales were used to pay down the State of Michigan
Retirement System ("SMRS") and ING Capital as required by each Company's
respective secured loan agreements.
<PAGE>
<PAGE> 12
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
Note 3 - Discontinued Operations - Disposition of Juice Business
(continued)
In connection with the payment on the ING Capital debt and the issue of
stock purchase warrants to obtain up to 10% of ERLY's stock at $.01 per
share, ING Capital agreed to a $6 million write-down in the amount of
total debt. In exchange, ERLY also guaranteed the remaining balance of
the obligations owed by ERLY Juice Inc. to ING Capital. The amount of the
ERLY Juice obligation to ING Capital immediately prior to the transaction
was approximately $17.1 million and, after application of the write down
and amounts paid, the current amount of the debt is approximately $8.4
million (which is included in notes payable in the Company's consolidated
balance sheets). Under the terms of the guarantee, ERLY is required to
pay down the remaining $8.4 million of debt within one year (by December
21, 1994) or ING Capital may declare a default with the right to foreclose
on ERLY's subsidiary, Chemonics Industries, Inc.
As a result of the sale of the above assets, ERLY has no operating assets
remaining in the packaging, sales and marketing of citrus beverage
products. It is ERLY's intention to liquidate the remaining assets of
ERLY Juice for the benefit of the ERLY Juice creditors.
In July 1993, ERLY Juice sold its primary orange juice processing plant in
Lakeland, Florida to Florida Juice, Inc. for $11.9 million. This
transaction resulted in a loss of $2.7 million. ERLY Juice had access to
the facility for processing and packaging its retail and food service
business through December 1993 under a co-pack agreement. This sale was
intended in part to reduce operating losses. One of ERLY Juice's primary
creditors agreed to discount term debt and accounts payable obligations in
exchange for cash. This resulted in a gain of $5.6 million which is
reflected as extraordinary income as described in Note 5.
The results of ERLY Juice have been reported separately as discontinued
operations in the consolidated statements of operations. Prior period
consolidated financial statements have been restated to present ERLY Juice
as a discontinued operation. Summarized results of ERLY Juice for the
three and nine month periods ended December 31, 1993 and 1992 are as
follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
-------------------------- -------------------------
1993 1992 1993 1992
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $5,025,000 $23,016,000 $31,275,000 $67,095,000
Costs and expenses (6,229,000) (24,223,000) (34,603,000) (67,153,000)
Interest expense (434,000) (916,000) (1,776,000) (2,702,000)
---------- ----------- ----------- -----------
Loss from discontinued
operations ($1,638,000) ($ 2,123,000) ($ 5,104,000) ($ 2,760,000)
========== =========== =========== ===========
Loss on disposal
of discontinued
operations ($ 872,000) $ - ($ 3,562,000) $ -
========== =========== =========== ===========
</TABLE>
<PAGE>
<PAGE> 13
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
Note 3 - Discontinued Operations - Disposition of Juice Business
(continued)
At December 31, 1993, remaining ERLY Juice assets of $4.0 million have
been classified as "assets of discontinued business held for disposition"
in the consolidated balance sheet. In addition, the December 31, 1993,
consolidated balance sheet includes liabilities of the juice business as
follows:
<TABLE>
<CAPTION>
<S> <C>
Current liabilities:
Notes payable $ 8,397,000
Accounts payable 7,464,000
Other current liabilities 662,000
Income taxes payable 28,000
Current portion of long-term debt 484,000
-----------
$17,035,000
===========
Note 4 - Minority Interest
ERLY owns 81% of ARI's voting interests. Parent companies often hold
interests in subsidiaries by ownership of the common stock of the
subsidiary. ERLY's ownership of ARI is more complex, including both
common stock and convertible preferred stock. ERLY's 81% interest in ARI
consists of the following securities of ARI:
* 3,888,888 shares of ARI common stock which represent 32% of ARI's
total outstanding common stock and 9% of ARI's common shares on a
fully converted basis.
* 3,888,888 shares of ARI Series A Preferred Stock, which is
convertible one for one, has voting rights, liquidation
preferences of $5.14 per share, but has no stated dividend. These
shares represent 9% of ARI's common shares on a fully converted
basis.
* 14,000,000 shares of ARI Series B Preferred Stock, which is
convertible into 28,000,000 common shares, has voting rights and
an annual cumulative dividend of approximately $5.2 million.
These shares represent 63% of ARI's common shares on a fully
converted basis.
In addition to the preferred stocks issued to ERLY, ARI issued a Series C
Preferred Stock to third parties. This Series C Preferred Stock does not
have voting or conversion rights but does have an annual cumulative
dividend of $750,000. The Series A, Series B and Series C Preferred
Stocks are unique securities with preferential rights which are superior
to common stock rights.
The Minority Interest of ARI in ERLY's consolidated financial statements
represents the 68% of the common stock of ARI which ERLY does not own and
the Series C Preferred Stock.
<PAGE>
<PAGE> 14
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
Note 4 - Minority Interest (continued)
In the situation where ownership of a subsidiary is represented entirely
by common stock, the minority interest in the earnings or losses of the
subsidiary is the percentage ownership by the minority interest in the
common stock. However, in the case where ownership of a subsidiary
involves complex securities like convertible preferred stocks in addition
to common stocks, specific rules under generally accepted accounting
principles (APB Opinion No. 18, "The Equity Method of Accounting
for Investments in Common Stock") require that earnings or losses of the
subsidiary be allocated between the parent and the minority interest in
accordance with the underlying terms of the various securities, rather
than allocation based on voting ownership of the subsidiary. No
conversion is assumed in the case of convertible preferred stocks for
purposes of this calculation, even though conversion may occur at any time
at the option of the holder.
ARI's cumulative annual dividends of $5.2 million related to the Series B
Preferred Stock and $750,000 related to the Series C Preferred Stock are
deducted from ARI earnings to yield earnings or loss to be allocated to
common stock. The Series B Preferred Stock dividend is allocated entirely
to ERLY, while the Series C Preferred Stock dividend is allocated entirely
to Minority Interest.
The Series B and Series C Preferred Stock dividends are allocated to ERLY
and to the Minority Interest, respectively, even if this allocation
results in a loss being attributed to the common stock as these preferred
stock dividends are based on the underlying terms of the securities.
Similarly, these dividends are allocated even if not declared as the
dividends are cumulative. However, dividends are allocated only if
determined to be ultimately recoverable.
The remaining earnings or losses to be allocated to common stock after
deduction of the preferred stock dividends is allocated in accordance with
the relative common stock ownership of ERLY (32%) and the Minority
Interest (68%).
The Minority Interest reflected on the balance sheets represents: (1)
original investment in the equity of ARI on a historical cost basis on the
part of the Minority Interest, (2) an entry to record the acquisition by
the Minority Interest of a partial interest in Comet Rice, Inc. as of May
26, 1993 in accordance with EITF 90-13 as described in Note 2, and (3) the
effects of the allocation of ARI's earnings and losses from May 26, 1993
based on the ownership terms of the various equity securities of ARI as
previously described.
Minority Interest does not represent amounts distributable to minority
shareholders. Amounts, if any, ultimately distributable to minority
shareholders will depend on the ownership interests which exist at such
time as distributions are made, including the potential conversions of
convertible securities and potential issuance or retirement of other
securities. The timing of distributions and conversions, if any, is at
the discretion of ERLY, since ERLY owns 81% of the voting interest in ARI.
<PAGE>
<PAGE> 15
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
Note 5 - Extraordinary Income
The Company had the following extraordinary items for the three and nine
months ended December 31, 1993 and 1992:
</TABLE>
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
-------------------------- ---------------------------
1993 1992 1993 1992
----------- ----------- ------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Gain on extinguishment
of debt related to
State of Michigan
Retirement System $ 897,000 $ - $ 897,000 $ -
Gain on extinguishment
of debt related to
ERLY Juice 5,625,000
Gain on extinguishment
of debt related
to ARI 10,270,000
Gain on extinguishment
of debt on rice
facility 4,726,000
---------- ---------- ----------- ----------
$ 897,000 $ - $16,792,000 $4,726,000
========== ========== =========== ==========
</TABLE>
In December 1993, the Company exchanged various debt obligations to the
State of Michigan Retirement System for a note receivable with a net book
value of $3.8 million, 60,000 shares of ERLY Industries common stock,
$100,000 cash and a new note for approximately $800,000. This resulted in
extraordinary income on debt extinguishment of $897,000 in the quarter
ended December 31, 1993.
During the quarter ended September 30, 1993, ERLY Juice settled
approximately $6.3 million of term debt and trade payables with a primary
creditor in exchange for $650,000. This resulted in a gain of $5,625,000
which is reflected as extraordinary income.
Results for the first quarter ended June 30, 1993 included extraordinary
income of $10.3 million which represents debt discounts by ARI's former
lenders in conjunction with the refinancing of Comet and ARI discussed in
Note 1.
Due to continuing operating losses resulting from low margins and
uncertainty about future U.S. rice exports, Comet ceased payments in
January 1992 on a $16 million non-recourse obligation secured by its rice
plant in Greenville, Mississippi. In July 1992, the facility was sold
through foreclosure sale and in conjunction therewith, the Company
eliminated debt of $16 million and the related property, plant and
equipment. The disposition of the facility was accounted for in
accordance with: (1) Statement of Financial Accounting Standards No. 15,
"Accounting by Debtors and Creditors for Troubled Debt Restructurings,"
and (2) Emerging Issues Task Force Issue No. 91-2, "Debtor's Accounting
for Forfeiture of Real Estate Subject to a Nonrecourse Mortgage."
<PAGE>
<PAGE> 16
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
Note 5 - Extraordinary Income (continued)
These guidelines require a two-step approach in accounting for the
disposition. Prior to the disposition, the plant was written down by
$4,000,000 to its estimated fair market value. This writedown is included
in results of operations prior to taxes on income and extraordinary items
in the consolidated statements of operations for the quarter ended
September 30, 1992. Secondly, the difference between the estimated fair
market value of the facility and the amount of debt extinguished (net of
estimated shut-down and relocation expenses) resulted in a gain of
$4,726,000 on the extinguishment of debt which was recorded as
extraordinary income in the second quarter of the prior fiscal year.
Note 6 - Assets Held for Sale - Long-term
The consolidated balance sheets include assets held for sale classified as
long-term of $23 million at December 31, 1993. This includes ARI property
held for sale in Houston, Texas ($19 million) and the remaining net assets
of the Company's discontinued winery operations ($4 million) which
management intends to dispose of in an orderly manner.
ARI's Board of Directors previously adopted a resolution authorizing its
management to sell 39 acres of land in Houston. Management has had
conversations with developers interested in the property, however, no
decision has yet been made about how to market the property. Management's
intention is an orderly, outright sale to a third party rather than to
develop the property. However, ARI might consider some form of joint
venture with a developer in order to maximize the property's value. ARI
has the ability and intent to hold the property over a normal marketing
period. The proceeds of any such sale, when and if it occurs, are
required by the terms of ARI's debt agreements to be used to reduce debt.
<PAGE>
<PAGE> 17
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
Note 7 - Long-term and Subordinated Debt
A schedule of outstanding long-term and subordinated debt at December 31,
1993 follows:
<TABLE>
<CAPTION>
December 31, 1993
-----------------
<S> <C>
Long-term debt:
Term loan due 1997, interest
at bank prime rate plus 3% $32,000,000
Term loan due 1997, interest
at bank prime rate plus 5% 17,200,000
Term loan due 1996, interest
at bank prime rate plus 3% 13,300,000
Notes payable due 2008, interest
at 6% 3,000,000
Term loan due 1993, interest
at bank prime rate plus 2.25% 1,000,000
Convertible note payable to
officer, due 1994, interest
at bank prime rate plus 2% 1,000,000
Various obligations with maturities
to 2000, interest rates ranging from
10% to 15% 2,133,000
Less current portion of
long-term debt (7,529,000)
------------
$ 62,104,000
============
Subordinated debt:
12-1/2% subordinated sinking fund
debentures, maturities through 2002 $8,880,000
Note payable on rice facility,
maturities through 1997,
non-interest bearing 1,094,000
Less current portion of
subordinated debt (1,567,000)
------------
$ 8,407,000
============
</TABLE>
The Company's 12-1/2% Subordinated Sinking Fund Debentures (the "Old
Debentures") with an outstanding principal balance of $8,880,000 matured
on December 1, 1993. The Company has offered to exchange $8,880,000 12-
1/2% Subordinated Sinking Fund Debentures due 2002 (the "New Debentures")
for the Old Debentures. As of April 8, 1994, holders of approximately 94%
of the Old Debentures have agreed to the exchange. The Company expects
that most of the remaining debentureholders (having debentures with a face
value of approximately $567,000) will also agree to exchange and has left
open the exchange offer until April 29, 1994 for the remaining
debentureholders to do so. The Company is in the process of paying the
December 1, 1993 interest to all of the debentureholders. The Company
does not currently have adequate cash reserves to redeem the principal
amount of all of the Old Debentures which have not agreed to the exchange
but is exploring ways to deal with those debentureholders who will not
exchange.
<PAGE>
<PAGE> 18
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
Note 7 - Long-term and Subordinated Debt (continued)
There is no assurance that the Company will be able to satisfactorily
refinance the remaining debentures. Management, however, believes that
the exchange offer can be completed.
In accordance with Statement of Financial Accounting Standards No. 6,
"Classification of Short-Term Obligations Expected to be Refinanced", the
classification of the 12-1/2% Subordinated Debentures in the consolidated
balance sheet at December 31, 1993, reflects the payment schedule of the
New Debentures which have agreed to the exchange described above.
Certain of the Company's and subsidiaries' long-term debt agreements
require maintenance of minimum amounts or ratios related to working
capital, long-term debt and net worth, in addition to the observance of
other covenants. These restrictions also preclude the payment of cash
dividends. The Company's Chemonics subsidiary is in violation of certain
debt covenants and did not make the final $1.0 million principal payment
on its long-term debt. This is included in "current portion of long-term
debt" in the consolidated balance sheets at December 31, 1993.
Negotiations are in process with Chemonics' lender, ING Capital, to
provide a waiver to allow the Company additional time to make the final
payment on its term debt. This negotiation is expected to be completed
during the next 90 days.
As part of the Comet and ARI Transaction, ARI received $47.5 million in
credit lines from a new revolving credit lender and loans from new term
lenders for $65.3 million. The $47.5 million credit line expires in May
1995, carries an interest rate of prime plus 2%, and is collateralized by
receivables, inventory, cash and junior liens on ARI assets pledged to the
new term lenders.
The $65.3 million term loans mature on December 31, 1997 with annual
principal repayments required of $4.2 million, $5.9 million, $5.9 million,
$5.9 million and $43.4 million in 1994, 1995, 1996, 1997 and 1998,
respectively. Interest rates range from prime plus 3% to prime plus 5%
through May 1995, increasing to a range of prime plus 6% to prime plus 8%
by 1997. Terms of the loans restrict dividend payments, investments,
capital expenditures and require maintenance of certain working capital
levels, leverage and net worth. These loans are collateralized by
substantially all of ARI's fixed assets and trademarks and have junior
liens on collateral for the credit lines. At December 31, 1993, ARI was
not in compliance with certain of the required financial ratios included
in the original debt covenants. Due to the unexpected 58 percent increase
in raw product inventory costs of rice during the third quarter, working
capital leverage (current liabilities divided by working capital) exceeded
the requirement in the financial covenants. Subsequent to the end of the
quarter, the term lenders agreed to a waiver of the existing default and
adjusted the working capital leverage covenant upward.
<PAGE>
<PAGE> 19
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
Note 7 - Long-term and Subordinated Debt (continued)
A comparison of the current ARI financial covenants and ARI's actual
financial ratios is presented below:
<TABLE>
<CAPTION>
Actual as of
Financial Covenant December 31, 1993
------------------ -----------------
<S> <C> <C>
Net book value (greater than) $25,546,000 $38,497,000
Working capital (greater than) $ 7,986,000 $13,284,000
Financial leverage (less than) 4.8 to 1 3.95 to 1
Working capital leverage (less than) 8.0 to 1 6.52 to 1
Coverage ratio (greater than) 1.0 to 1 1.21 to 1
</TABLE>
These loans are collateralized by substantially all of ARI's fixed assets
and trademarks, and have junior liens on collateral for the credit lines.
In addition, ERLY is a guarantor for all of the new ARI debt and the loan
agreements contain certain restrictive covenants applicable to ERLY.
Consequently, the new ARI debt contains cross default provisions with the
debt of ERLY. ARI has capitalized approximately $4 million of costs in
connection with the Refinancing.
Principal maturities on ERLY's long-term and subordinated debt are as
follows: 1994--$9,096,000; 1995--$8,255,000; 1996--$20,417,000;
1997--$32,724,000; 1998--$1,231,000; thereafter--$7,884,000.
<PAGE>
<PAGE> 20
ERLY INDUSTRIES INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- - ------------------------------------------------------
For the three and nine months ended December 31, 1993 and 1992
Results of Operations - Three months ended December 31, 1993 and 1992
For the quarter ended December 31, 1993, the Company reported a net loss
of $943,000 compared to a net loss of $2.0 million for the comparable
quarter of the prior fiscal year. Results for the quarter include income
on continuing operations of $379,000, losses of $2,510,000 related to the
Company's Juice business which was discontinued in December 1993, and
extraordinary income of $897,000.
Continuing Operations
For the quarter ended December 31, 1993, the Company reported income on
continuing operations of $379,000 on sales of $100 million compared to
income from continuing operations of $167,000 on sales of $42 million for
the comparable period last year. Consolidated sales for the third quarter
were up by $58 million from the third quarter of the prior fiscal year due
to increased sales by the Company's Rice Division.
Prior to the May 1993 combination of Comet Rice, Inc. and American Rice,
Inc. ("ARI"), the Company owned 48% of the voting rights of ARI, and its
investment in ARI was accounted for using the equity method of accounting.
ERLY's equity in ARI's net results for the quarter ended December 31, 1992
resulted in income of $1,349,000. ERLY's equity in ARI's net results was
reflected as investment income in the consolidated statements of
operations. Subsequent to the May 1993 combination, ERLY owned 81% of the
voting interest in the combined rice operations and its results from that
time are therefore consolidated with ERLY's, with appropriate adjustments
for minority interest.
Rice Operations
Sales for the three months ended December 31, 1993 of $89.1 million
increased $58.1 million or 188 percent from the prior year due to $30.6
million in export sales increases and $27.5 in domestic sales increases.
Estimated ARI sales included in 1993 as a result of the Transaction
amounted to $43.2 million, including $21.3 million export sales and $21.9
million domestic sales.
Export sales increased due to higher volume and higher average prices.
Total export sales volume increased approximately 2.4 million equivalent
rough rice hundredweight ("cwt."), a 56 percent increase, due to increases
of 1.6 million cwt. as a result of the Transaction and higher export
volume from the Stuttgart, Arkansas facility. Total average milled rice
prices increased 24 percent due to a higher proportion of branded sales as
a result of the Transaction and higher prices on unbranded commodity
sales.
In addition to sales added by the Transaction, domestic sales increased
due to higher average prices. Average domestic milled rice sales prices
increased 55 percent due to the higher retail sales from the ARI
customers.
<PAGE>
<PAGE> 21
ERLY INDUSTRIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- - ---------------------------------------------
Results of Operations - Three Months Ended December 31, 1993 and 1992
(continued)
Rice Operations (continued)
Market prices of rough rice approximately doubled in the three month
period ended December 31, 1993. In response to this increase in raw
material costs, ARI increased prices in some markets during the quarter.
In other markets, however, forward sales commitments delayed price
increases until late in the quarter.
Gross profit was 10 percent of sales for the three months ended December
31, 1993, and 5 percent of sales for 1992, increasing $7.3 million from
the prior period. ARI sales contributed approximately $4.6 million.
Gross profit on other domestic sales increased $1.2 million, while gross
profit on other export sales increased $1.5 million.
The overall effect of the increase in rough rice prices on ARI's gross
profit is thought to be small as the higher rough rice prices were
mitigated by substantial inventories acquired at lower price levels and
increases in prices in some markets offsetting the negative impact from
forward sales commitments at lower price levels in other markets.
General
Interest expense totalled $3.2 million for the quarter ended December 31,
1993 compared with $1.8 million for the same quarter of last year. The
increase reflects the increase in long-term debt resulting from the
combination of Comet Rice and ARI. Long-term and subordinated debt
(including current portion) at December 31, 1993 totalled $80 million
compared to $54 million at December 31, 1992.
Discontinued Operations
In December 1993, the Company discontinued its operations in the juice
business (see Note 3). For the quarter ended December 31, 1993, the
Company recorded a loss from discontinued operations of $1,638,000
compared to a loss of $2,123,000 for the comparable quarter of the prior
year. Revenues for the quarter were $5 million, compared to $23 million
for the third quarter of the previous fiscal year. The Company also
recorded a loss on disposal for the quarter of $872,000. This represented
a loss on the sale of trademarks, partially offset by a gain on the sale
of plant facilities, gains on settlements with trade creditors and a gain
on the discount of bank debt.
Extraordinary Income
As discussed in Note 5, the Company exchanged various debt obligations to
the State of Michigan Retirement System for a note receivable with a net
book value of $3.8 million, 60,000 shares of ERLY Industries common stock,
$100,000 cash and a new note for approximately $800,000. This resulted in
extraordinary income on debt extinguishment of $897,000 in the quarter
ended December 31, 1993.
<PAGE>
<PAGE> 22
ERLY INDUSTRIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- - ---------------------------------------------
Results of Operations - Nine Months Ended December 31, 1993 and 1992
For the nine months ended December 31, 1993 the Company reported net
income of $15.9 million compared to net income of $286,000 last year.
Results for the current nine month period include income on continuing
operations of $12,426,000, losses on the Company's discontinued juice
operations of $8,666,000 and extraordinary income of $13.1 million (net of
minority interest of $3.7 million). Sales for the nine months were $62
million higher than a year ago due to increased sales by the Rice Division
of $63 million, offset by reduced sales of $1 million by the Company's
subsidiary, Chemonics Industries.
Continuing Operations
For the nine months ended December 31, 1993, the Company reported income
on continuing operations of $12,426,000 on sales of $235 million compared
to a loss on continuing operations of $1.7 million on sales of $173
million last year. The results for the current nine month period include
a gain of $11,768,000 on the partial sale of the Company's investment in
Comet Rice, Inc. (See Note 2).
Rice Operations
Sales for 1993 of $196.2 million increased $62.9 million or 47 percent
from the prior year due to $41.1 million in export sales increases and
$21.8 million in domestic sales increases. Estimated ARI sales included
in 1993 as a result of the Transaction amounted to $89.6 million,
including $46.6 million export sales and $43 million domestic sales.
Export sales increased due to higher volume and higher average prices.
Total export sales volume increased approximately 4 million equivalent
rough rice cwt., a 62 percent increase, due primarily to increases of 3.7
million cwt. as a result of the Transaction. Total average milled rice
export prices increased 4 percent due to a higher proportion of branded
sales as a result of the Transaction partially offset by price declines of
13 percent on unbranded commodity sales.
Domestic sales added by ARI in 1993 included $2 million in rough rice
sales versus none in the prior year. The increase in domestic sales from
the Transaction is partially offset by lower sales from the Greenville,
Mississippi facility disposed of in July 1992. Average domestic milled
rice sales prices increased 24 percent due primarily to the higher sales
from the ARI customers.
Gross profit was 11 percent of sales for 1993 and 5 percent of sales for
1992. Gross profit increased $14.8 million, more than doubling the 1992
level. ARI sales contributed approximately $14.9 million. Gross profit
on other domestic sales increased $1.0 million, while gross profit on
other export sales declined $1.1 million.
<PAGE>
<PAGE> 23
ERLY INDUSTRIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- - ---------------------------------------------
Results of Operations - Nine Months Ended December 31, 1993 and 1992
(continued)
Chemonics Industries, Inc.
The Company's Chemonics Industries division reported operating profits of
$9.9 million for the nine months ended December 31, 1993, a decrease of
$2.2 million from last year. Revenues for the period were down by 12% in
Chemonics' fire retardant business and 1% in Chemonics' international
consulting business.
General
Interest expense for the nine months ended December 31, 1993 was $8.7
million compared to $5.8 million last year reflecting the increase in
long-term debt due to the combination of Comet Rice and ARI. Term debt
(both long-term and current portion) was $79.6 million at December 31,
1993 compared to $53.7 million at December 31, 1992, an increase of $25.9
million.
For the nine months ended December 31, 1993, the Company reported
investment income from ARI of $426,000 under the equity method of
accounting for April and May 1993, prior to the May 1993 transaction with
American Rice. This compares to investment income of $1.8 million for the
nine months ended December 31, 1992, which was recorded on the equity
method for the entire period.
Discontinued Operations
In December 1993, the Company discontinued its operations in the juice
business (see Note 3). For the nine months ended December 31, 1993, the
Company recorded a loss from discontinued operations of $5,104,000
compared to a loss of $2,760,000 for the comparable period of the prior
year. Revenues for the nine months ended December 31, 1993 were $31.3
million, compared to $67.1 million for the comparable period of the
previous fiscal year. The Company also recorded a loss on disposal for
the period of $3,562,000. This represented a $2.7 million loss on the
Company's Lakeland, Florida plant in the second quarter ended September
30, 1993 and a loss in the current quarter on the sale of trademarks,
partially offset by a gain on the sale of plant facilities, gains on
settlements with trade creditors and a gain on the discount of bank debt.
Extraordinary Income
For the nine months ended December 31, 1993, the Company has recorded
extraordinary income of $13.1 million (net of minority interest of $3.7
million). This consists of a gain on the discount of ARI debt ($6.6
million net of minority interest); a gain on the discount of ERLY Juice
trade payables in the second quarter of fiscal 1994 ($5,625,000); and, a
gain on discount of debt with the State of Michigan Retirement System in
December 1993 ($897,000).
<PAGE>
<PAGE> 24
ERLY INDUSTRIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- - ---------------------------------------------
Liquidity and Capital Resources
ERLY's management believes the Transaction which combined Comet Rice and
American Rice, as described in Note 1, will allow better utilization of
both companies' operating assets, improve cash flow and working capital
through operating efficiencies, and increase the overall financial
strength of the combined rice business through debt reduction. The
intended result includes the ability of the combined rice operations to
provide sufficient cash flow to permit the payment of dividends to ERLY
in future years, which in turn will be used by ERLY to service its debt
obligations, including new debt of $3 million to former ARI term lenders
which was required as part of the Transaction. No debt service on the
$3 million debt is required unless preferred dividends are declared by
ARI to ERLY. The revolving credit agreement with Congress
Financial Corporation ("Congress") prohibits the payment of any dividends.
ARI could request a waiver of this covenant, but based on ARI's current
financial condition, there is no reason to believe such a waiver would be
granted and there are not any guidelines in the loan agreement which would
indicate on what basis Congress would approve a dividend.
At December 31, 1993 consolidated working capital amounted to a negative
$735,000 compared to a negative $44 million and negative $17 million at
March 31 and September 30, 1993, respectively. The improvement from
September 30 was due to the sale of the ERLY Juice assets and the
successful exchange of 94% of the Company's 12-1/2% subordinated
debentures. The increase from March 31 was due to those factors plus the
combination of Comet Rice and ARI in May 1993.
Inventory at December 31, 1993, was $67 million compared to $28 million at
March 31, 1993, an increase of $39 million. This increase is due
primarily to a 71 percent increase in raw product inventory costs of rice
and the increased rough rice inventory levels from the Transaction.
Stockholders' equity was $6.6 million at December 31, 1993, an improvement
of $15.8 million from March 31, 1993.
<PAGE>
<PAGE> 25
ERLY INDUSTRIES INC. AND SUBSIDIARIES
- - -------------------------------------
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders was held on November 22, 1993.
(b) At the November 22, 1993 Annual Shareholders Meeting, a vote was
passed to amend the Articles of Incorporation of the Company to
decrease the par value of Common Stock from $1.00 per share to $.01
per share. 2,450,634 votes (96%) were cast for the proposal, 73,827
votes (3%) were cast against the proposal and 34,460 abstentions (1%)
were received.
Item 6. Exhibits and Reports on Form 8-K
(a) The computations of primary and fully diluted earnings per share are
included as exhibits on Schedules I.1 and I.2.
(b) On December 29, 1993, the Company filed a Form 8-K to report the
disposition of the Company's juice business in December 1993.
<PAGE>
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ERLY INDUSTRIES INC.
Date: September 1, 1994 By /s/ Richard N. McCombs
----------------------
Richard N. McCombs
Vice President and
Chief Financial Officer
<PAGE>
<PAGE> 27
EXHIBIT I.1
ERLY INDUSTRIES INC. AND SUBSIDIARIES
CALCULATION OF PRIMARY INCOME (LOSS) PER SHARE
(In thousands except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
--------------------- ----------------------
1993 1992 1993 1992
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Income (loss) from
continuing operations $ 379 $ 167 $12,426 ($ 1,680)
Loss on discontinued
operations (2,510) (2,123) (8,666) (2,760)
Income from extraordinary
items 897 16,792 4,726
Minority interest 291 (4,661)
------- ------- ------- -------
Net income (loss) ($ 943) ($ 1,956) $15,891 $ 286
======= ======= ======= =======
Average number of shares of
common stock and common
stock equivalents outstanding:
Average number of shares of
common stock outstanding 3,563 3,438 3,511 3,433
Common stock equivalents:
Dilutive effect of stock
options and warrants
based on application of
treasury stock method (a) (a) 69 (b)
------- ------- ------- -------
Total 3,563 3,438 3,580 3,433
======= ======= ======= =======
Primary income (loss)
per common share:
Income (loss) from
continuing operations $ .19 $ .05 $ 3.20* ($ .49)
Loss on discontinued
operations (.70) (.62) (2.42) (.80)
Income from extraordinary
items .25 3.66* 1.37
------- ------- ------- -------
Primary income (loss)
per common share ($ .26) ($ .57) $ 4.44 $ .08
======= ======= ======= =======
</TABLE>
* Net of applicable minority interest ($1.0 million relating to
continuing operations and $3.7 million relating to extraordinary
item).
(a) A net loss was reported. Therefore, exercise of stock options and
warrants is not assumed as the compution would be anti-dilutive.
(b) The dilutive effect of stock options and warrants was less than 3%;
therefore none are shown above.
<PAGE>
<PAGE> 28
EXHIBIT I.2
ERLY INDUSTRIES INC. AND SUBSIDIARIES
CALCULATION OF FULLY DILUTED INCOME (LOSS) PER SHARE
(In thousands except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
--------------------- ----------------------
1993 1992 1993 1992
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Income (loss) from
continuing operations $ 379 $ 167 $12,426 ($ 1,680)
Interest adjustment -
convertible note payable (a) (a) 60 60
------- ------- ------- -------
Income (loss) from continuing
operations, as adjusted 379 167 12,486 (1,620)
Loss on discontinued
operations (2,510) (2,123) (8,666) (2,760)
Income from extraordinary
items 897 16,792 4,726
Minority interest 291 (4,661)
------- ------- ------- -------
Net income, as adjusted ($ 943) ($ 1,956) $15,951 $ 346
======= ======= ======= =======
Average number of shares of
common stock and common
stock equivalents outstanding 3,563 3,438 3,580 3,433
Other potentially
dilutive securities:
Common stock issuable upon
conversion of note payable (a) (a) 267 267
------- ------- ------- -------
Total 3,563 3,438 3,847 3,700
======= ======= ======= =======
Fully diluted income (loss)
per common share:
Income (loss) from
continuing operations $ .19 $ .05 $ 2.99* ($ .44)
Loss on discontinued
operations (.70) (.62) (2.25) (.75)
Income from extraordinary
items .25 3.40* 1.28
------- ------- ------- -------
Fully diluted income (loss)
per common share ($ .26) ($ .57) $ 4.14 $ .09
======= ======= ======= =======
</TABLE>
* Net of applicable minority interest ($1.0 million relating to
continuing operations and $3.7 million relating to extraordinary
item).
(a) A net loss was reported. Therefore, exercise of stock options,
warrants and convertible note is not assumed as the compution would
be anti-dilutive.
