<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 September 30, 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. 1
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 September 30, 1993, as set forth
on the pages attached hereto:
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
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: August 25, 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>
September 30, March 31,
--------------- --------------
1993 1993
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash $ 4,007,000 $ 3,872,000
Notes and accounts receivable, less
allowance for doubtful accounts of
$4,060,000 (September 30) and
$3,280,000 (March 31) 42,859,000 35,534,000
Inventories:
Raw materials 26,843,000 14,817,000
Finished goods 16,476,000 12,908,000
------------ ------------
43,319,000 27,725,000
Prepaid expenses and other
current assets 2,512,000 2,524,000
------------ ------------
Total current assets 92,697,000 69,655,000
Long-term notes receivable, net 4,891,000 6,623,000
Property, plant and equipment, net 61,521,000 30,857,000
Assets held for sale, net 23,017,000 4,210,000
Investment in American Rice, Inc. 13,104,000
Other assets 24,643,000 10,651,000
------------ ------------
$206,769,000 $135,100,000
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable, collateralized $ 51,677,000 $ 62,359,000
Accounts payable 30,648,000 20,106,000
Accrued payroll and other
current liabilities 6,632,000 7,298,000
Income taxes payable 3,750,000 1,829,000
Current portion of long-term and
subordinated debt 16,860,000 22,531,000
------------ ------------
Total current liabilities 109,567,000 114,123,000
Long-term debt 67,499,000 26,881,000
Subordinated debt 1,094,000 1,094,000
Minority interest 19,608,000 790,000
Redeemable common stock,
300,000 shares issued and outstanding 1,603,000 1,406,000
Stockholders' equity:
Common stock, par value $1 a share:
Authorized: 5,000,000 shares
Issued and outstanding:
3,253,881 shares (September 30)
and 3,186,956 (March 31) 3,254,000 3,187,000
Additional paid-in capital 12,626,000 12,687,000
Retained earnings (deficit) (7,285,000) (24,119,000)
Cumulative foreign currency
adjustments (1,197,000) (949,000)
------------ ------------
Total stockholders' equity 7,398,000 (9,194,000)
------------ ------------
$206,769,000 $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 six months ended September 30, 1993 and 1992
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
-------------------------- ---------------------------
1993 1992 1993 1992
----------- ----------- ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $96,181,000 $81,934,000 $162,000,000 $175,843,000
Cost of sales 80,643,000 67,830,000 136,367,000 147,577,000
----------- ----------- ------------ ------------
Gross profit 15,538,000 14,104,000 25,633,000 28,266,000
Selling, general and
administrative expenses 12,698,000 11,850,000 21,930,000 22,422,000
Interest expense 3,539,000 3,118,000 6,694,000 5,790,000
Interest income (218,000) (410,000) (354,000) (451,000)
Investment income (480,000) (426,000) (491,000)
Other (income) expense (45,000) (874,000) 442,000 (1,051,000)
Loss on sale of plant
(Note 5) 2,690,000 2,690,000
Gain on sale of partial
interest in subsidiary
(Note 2) (11,768,000)
Writedown of plant
facility (Note 4) 4,000,000 4,000,000
----------- ----------- ------------ ------------
18,664,000 17,204,000 19,208,000 30,219,000
Income (loss) before
taxes on income,
extraordinary items
and minority interest (3,126,000) (3,100,000) 6,425,000 (1,953,000)
Taxes on income 156,000 302,000 534,000 531,000
----------- ----------- ------------ ------------
Income (loss) before
extraordinary items
and minority interest (3,282,000) (3,402,000) 5,891,000 (2,484,000)
Extraordinary income -
gain on extinguishment
of debt (Note 4) 5,625,000 4,726,000 15,895,000 4,726,000
----------- ----------- ------------ ------------
Income before minority
interest 2,343,000 1,324,000 21,786,000 2,242,000
Minority interest in
(earnings) loss of
consolidated subsidiary
(Note 3) 156,000 (4,952,000)
----------- ----------- ------------ ------------
Net income $ 2,499,000 $ 1,324,000 $ 16,834,000 $ 2,242,000
=========== =========== ============ ============
</TABLE>
<PAGE>
<PAGE> 5
ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
-------------------------------------------------
For the three and six months ended September 30, 1993 and 1992
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
----------------------- -----------------------
1993 1992 1993 1992
------- -------- ------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net income (loss) per
common and common
share equivalents:
Primary:
Continuing operations ($ .90) ($ .99) $ 1.33 * ($ .72)
Extraordinary items 1.62 1.38 3.50 * 1.37
------ ------ ------ ------
$ .72 $ .39 $ 4.83 $ .65
====== ====== ====== ======
Fully diluted:
Continuing operations ($ .83) ($ .92) $ 1.24 * ($ .67)
Extraordinary items 1.50 1.28 3.25 * 1.28
------ ------ ------ ------
$ .67 $ .36 $ 4.49 $ .61
====== ====== ====== ======
Weighted average common
shares outstanding:
Primary 3,484,000 3,430,000 3,485,000 3,430,000
Fully diluted 3,751,000 3,697,000 3,752,000 3,697,000
</TABLE>
* Net of applicable minority interest ($1.3 million relating to continuing
operations and $3.7 million relating to extraordinary item).
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 six months ended September 30, 1993 and 1992
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
------------------------- --------------------------
1993 1992 1993 1992
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net income $ 2,499,000 $ 1,324,000 $16,834,000 $ 2,242,000
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Minority interest in
earnings (loss) of
consolidated subsidiary (156,000) 4,952,000
Gain on sale of partial
interest in Comet Rice (11,768,000)
Extraordinary income on
extinguishment of debt (5,625,000) (15,895,000)
Depreciation and amortization 1,842,000 802,000 2,967,000 1,889,000
Provision for loss on
receivables 1,418,000 (42,000) 1,440,000
Equity in net income of
American Rice, Inc. (480,000) (426,000) (491,000)
Loss on sale of plant 2,690,000 2,690,000
Extraordinary income on
disposal of rice facility (4,726,000) (4,726,000)
Writedown of rice facility 4,000,000 4,000,000
Loss on disposition of
subsidiary 880,000
Change in assets and liabilities:
Decrease (increase) in
receivables (2,883,000) 5,518,000 (3,120,000) 5,376,000
Decrease in inventories 804,000 5,184,000 7,472,000 16,140,000
Decrease (increase) in
prepaid expenses (89,000) (277,000) 297,000 (719,000)
(Increase) in assets held
for sale (448,000) (448,000)
Increase (decrease) in
accounts payable and other
current liabilities 843,000 (1,863,000) (5,861,000) (10,032,000)
Increase in taxes payable 62,000 190,000 550,000 368,000
Other, net (1,349,000) (445,000) (3,469,000) (619,000)
----------- ----------- ----------- ------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (392,000) 9,185,000 (2,905,000) 13,428,000
INVESTING ACTIVITIES:
Acquisition of American
Rice, Inc. 12,608,000
Proceeds from sale of plant 11,838,000 11,838,000
Purchase of property, plant
and equipment (332,000) (949,000) (647,000) (1,292,000)
</TABLE>
<PAGE>
<PAGE> 7
ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
-------------------------------------------------
For the three and six months ended September 30, 1993 and 1992
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
------------------------- --------------------------
1993 1992 1993 1992
---------- ---------- ----------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INVESTING ACTIVITIES (continued):
Proceeds from disposition
of subsidiary 2,092,000
Disposition of property,
plant and equipment 28,000 444,000 203,000 456,000
----------- ---------- ----------- -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 11,534,000 (505,000) 26,094,000 (836,000)
FINANCING ACTIVITIES:
(Decrease) in notes payable (1,149,000) (6,954,000) (166,000) (9,965,000)
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 (7,887,000) (742,000) (8,610,000) (2,181,000)
Principal increase (decrease)
of subordinated debt 49,000 (1,000)
----------- ----------- ------------ ------------
NET CASH (USED IN)
FINANCING ACTIVITIES (9,036,000) (7,647,000) (23,054,000) (11,988,000)
INCREASE IN CASH
DURING THE PERIOD 2,106,000 1,033,000 135,000 604,000
CASH, BEGINNING OF PERIOD 1,901,000 3,413,000 3,872,000 3,842,000
----------- ----------- ----------- ------------
CASH, END OF PERIOD $ 4,007,000 $ 4,446,000 $ 4,007,000 $ 4,446,000
=========== =========== =========== ===========
</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 STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
For the six months ended September 30, 1993
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
Additional Retained Foreign Total
Common Paid-in Earnings Currency Stockholders'
Stock Capital (Deficit) Adjustments Equity
---------- ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance
April 1, 1993 - Restated $3,187,000 $12,687,000 ($24,119,000) ($949,000) ($9,194,000)
Net income
for the period 16,834,000 16,834,000
Foreign currency
adjustments (248,000) (248,000)
Common stock issued 67,000 136,000 203,000
Accretion of redeemable
common stock (197,000) (197,000)
--------------------------------------------------------------
Balance
September 30, 1993
(unaudited) $3,254,000 $12,626,000 ($7,285,000) ($1,197,000) $ 7,398,000
==============================================================
</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 six months ended September 30, 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; 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 antidilutive.
<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"). The Transaction also involved refinancing the combined
indebtedness of ARI and Comet.
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.
In connection with the 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. 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. In connection with the Transaction, 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. As part of the
Transaction, 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 1 - Acquisition of Comet Rice, Inc. by American Rice, Inc.
(continued)
- - --------------------------------------------------------------
ARI and Comet have capitalized $5.6 million of costs associated with the
Transaction. These costs are included in "Other Assets" in the
consolidated balance sheets and are being amortized over the respective
terms of the new ARI debt.
ERLY's management believes the Transaction 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 dividend payments are declared by ARI to
ERLY.
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
<PAGE>
<PAGE> 12
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
Note 2 - Gain on Sale of Partial Interest in Subsidiary (continued)
- - -------------------------------------------------------------------
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 - 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> 13
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
Note 3 - 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> 14
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
Note 4 - Extraordinary Income
- - ------------------------------
The Company had the following extraordinary items for the three and six
months ended September 30, 1993 and 1992:
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
----------------------- ------------------------
1993 1992 1993 1992
---------- --------- ----------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Gain on extinguishment
of debt related to
ERLY Juice $5,625,000 $ - $ 5,625,000 $ -
Gain on debt discount
in conjunction with
Comet Rice and ARI
refinancing 10,270,000
Gain on extinguishment
of debt on rice
facility 4,726,000 4,726,000
---------- ---------- ----------- ----------
$5,625,000 $4,726,000 $15,895,000 $4,726,000
========== ========== =========== ==========
</TABLE>
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."
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
<PAGE>
<PAGE> 15
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
Note 4 - Extraordinary Income (continued)
- - -----------------------------------------
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 5 - Sale of Plant Facility
- - -------------------------------
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 continues to
use the facility to co-pack for its retail and food service business.
This sale is part of a restructuring of ERLY Juice to reduce operating
losses. In conjunction with this restructuring, 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 4.
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 September 30, 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> 16
ERLY INDUSTRIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- - ---------------------------------------------
For the three and six months ended September, 1993 and 1992
Results of Operations - Three months ended September 30, 1993 and 1992
- - ----------------------------------------------------------------------
For the quarter ended September 30, 1993, the Company reported net income
of $2.5 million on sales of $96 million, as compared to net income of $1.3
million on sales of $82 million for the second quarter of the prior fiscal
year. Sales for the second quarter of fiscal 1994 were up $14 million
from the second quarter of fiscal 1993, due to an increase of $41 million
as a result of the Transaction described in Note 1, partially offset by a
$13 million decrease and an $11 million decrease in sales by Comet Rice
and ERLY Juice, respectively.
Gross profit for the quarter ended September 30, 1993 increased $1.4
million from the quarter ended September 30, 1992 as a result of a $7
million increase in gross profit of the Rice Division (which consists of
Comet Rice through May 26, 1993 and the combined operations of Comet and
ARI thereafter), partially offset by a $4 million decrease in gross profit
by ERLY Juice.
Included in results for the quarter ended September 1993, is extraordinary
income of $5.6 million. This represents a debt discount on the settlement
of ERLY Juice term debt and trade payables of approximately $6.3 million
for $650,000 as discussed in Note 4. Results for the second quarter of
fiscal 1994 also include a $2.7 million loss on the sale of the ERLY Juice
plant facility discussed in Note 5.
The Rice Division reported an operating profit (before interest expense
and corporate overhead) of $3.9 million on sales of $70 million for the
current quarter, compared with an operating profit of $1.3 million on
sales of $42 million for the comparable quarter of last year.
If the Transaction which combined Comet and ARI had occurred at the
beginning of the earliest period presented, ERLY's pro forma consolidated
sales would have been $106 million for the quarter ended September 30,
1992.
ERLY Juice, the Company's juice processing business, reported sales for
the second quarter of fiscal 1994 which were down $11 million (49%) from
last year. Gross profit decreased by $4.4 million to $2.7 million in the
most recent quarter due to increased costs of product without
corresponding increases in sales prices due to competitive conditions.
For the current quarter, ERLY Juice reported an operating loss of $902,000
compared with operating income of $44,000 for the quarter ended September
1992.
Interest expense totalled $3.5 million for the quarter ended September 30,
1993, compared with $3.1 million for the same quarter of last year. This
increase reflects the increase in ERLY's consolidated debt due to the
combination of Comet Rice and American Rice in May 1993.
<PAGE>
<PAGE> 17
ERLY INDUSTRIES INC. AND SUBSIDIARIES
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- - ------------------------------------------------
Results of Operations - Six months ended September 30, 1993 and 1992
- - --------------------------------------------------------------------
For the six months ended September 30, 1993, ERLY has recorded net income
of $16.8 million on sales of $162 million, as compared to net income of
$2.2 million on sales of $176 million for the comparable period last year.
Sales for the first six months of fiscal 1994 were down $14 million from
the first six months of fiscal 1993, reflecting a $53 million increase due
to the Transaction offset by a $48 million decrease and an $18 million
decrease in sales of Comet Rice and ERLY Juice, respectively.
Results for the first six months of the current fiscal year include
extraordinary income of $12.2 million on debt discounts (net of minority
interest). Of this amount, $6.6 million (net of minority interest)
relates to ERLY's interest in debt discounts from ARI's former lenders in
conjunction with the May 1993 refinancing of Comet and ARI discussed in
Note 1. The balance of the $5.6 extraordinary income represents a
discount by a significant ERLY Juice creditor of term debt and trade
payables.
Net results for the six months ended September 30, 1993 also include a
$2.7 million loss on the sale of the ERLY Juice plant facility discussed
in Note 5.
Net income for the comparable period of last year includes extraordinary
income of $4.7 million and a $4 million plant write-down, both relating to
the July 1992 disposition of Comet's Greenville, Mississippi facility
discussed in Note 4.
Gross profit for the six months ended September 30, 1993 decreased by $2.6
million from the prior year as a result of an $8.7 million reduction in
gross profit by ERLY Juice partially offset by a $7.4 million increase by
the Rice Division.
The Rice Division reported operating profit (before interest expense and
corporate overhead) of $5.4 million on sales of $107 million for the
current six months compared to operating profit of $3.6 million on sales
of $102 million last year.
If the transaction which combined Comet and ARI had occurred at the
beginning of the earliest period presented, ERLY's pro forma consolidated
sales would have been $189 million and $237 million for the six month
periods ended September 30, 1993 and 1992, respectively.
ERLY Juice sales for the six months ended September 30, 1993 were $26
million compared to $44 million last year, a decrease of $18 million.
Gross profits decreased $8.7 million from last year due to increased costs
of product without corresponding increases in sales prices due to
competitive conditions.
For the six months, ERLY Juice reported an operating loss of $2.1 million
compared to operating income of $1.1 million last year.
<PAGE>
<PAGE> 18
ERLY INDUSTRIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- - ---------------------------------------------
Interest expense for the current six months was $6.7 million, an increase
of $904,000 from last year due to increased borrowings as a result of the
combination of Comet and ARI, partially offset by debt reductions achieved
through asset sales and debt extinguishment settlements.
Prior to the combination discussed in Note 1, ERLY had a 48% investment in
American Rice, Inc. which was accounted for using the equity method of
accounting. ERLY therefore recorded its 48% interest in ARI's results as
investment income (loss) in the consolidated statements of operations.
Results for the first six months of the current fiscal year include
investment income of $426,000 from ERLY's 48% interest in ARI's net income
for April and May of 1993, compared to income on its investment in ARI of
$491,000 for the first six months last year.
Subsequent to the Transaction, ARI's results of operations are
consolidated with ERLY's and are not reflected as investment income
(loss), but are now accounted for as discussed in Note 3 - Minority
Interest.
Liquidity and Capital Resources
- - -------------------------------
At September 30, 1993, consolidated working capital was a negative $17
million, an improvement of $27 million from March 31, 1993, as a result
of: (1) the Comet/ARI combination and the related refinancing of debt,
(2) the sale of ERLY Juice's Lakeland plant with proceeds used to pay down
bank debt, and (3) the settlement of $6.3 million of ERLY Juice term debt
and trade payables at a discount as discussed in Note 4. In addition to
the settlement discussed above, negotiations are in process with the
Company's lenders and its trade creditors to restructure ERLY Juice's
debt. Because of the continuing losses at ERLY Juice, the Company is
currently considering all of its alternatives for ERLY Juice. These
alternatives include the sale or liquidation of the business, although no
conclusions have been reached to date.
Stockholders' equity was $7,398,000 at September 30, 1993, compared to a
negative $9,194,000 at March 31, 1993, an improvement of $16.6 million as
a result of the net income for the first half of fiscal 1994.
The Company's 12-1/2% Subordinated Sinking Fund Debentures (the "Old
Debentures") with an outstanding principal balance of $8,880,000, will
mature on December 1, 1993. The Company is in the process of offering to
exchange $8,880,000 12-1/2% Subordinated Sinking Fund Debentures due 2002
(the "New Debentures") for the Old Debentures.
The Company does not, either currently or in the foreseeable future,
without the successful completion of the exchange offer, have adequate
cash reserves to redeem the principal amount of the Old Debentures.
<PAGE>
<PAGE> 19
ERLY INDUSTRIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- - ---------------------------------------------
Management of the Company is of the opinion that if the Old Debentures are
exchanged for New Debentures the Company will be able to meet its interest
and sinking fund payment obligations under the New Debentures. Holders of
the New Debentures will receive a return of the principal amount of the
debentures (pursuant to periodic sinking fund payments) either on or prior
to their maturity in 2002, and until redemption will receive an interest
rate and yield that, in the opinion of Management, is substantially above
current market rates.
If any Old Debentures are not tendered for exchange, the Trustee under the
indenture pursuant to which the Old Debentures were issued may bring an
action to collect the principal amount thereof plus any accrued but unpaid
interest. Should the Trustee fail to bring suit, the holder of any Old
Debenture that is not tendered for exchange may bring such an action.
However, the Old Debentures are unsecured and all of the assets of the
Company and its subsidiaries are pledged to secure payment of bank and
other indebtedness. Any action by the Trustee or any holder of Old
Debentures would be a default under the Company's secured debt, due to
cross default provisions; and could result in the bankruptcy of the
Company and possibly its subsidiaries. Since the Old Debentures are
subordinated to all secured debt of the Company and all trade and general
creditors, it is unlikely that if the Company were forced into bankruptcy
proceedings, the holders of the Old Debentures would realize the return of
any portion of the principal or accrued but unpaid interest, if any, that
is owed with respect to the Old Debentures.
There is no assurance that the Company will be able to satisfactorily
refinance the bonds. Management, however, believes that the exchange
offer can be accomplished.
<PAGE>
<PAGE> 20
Item 6.(b) Reports on Form 8-K
- - --------------------------------
No reports on Form 8-K were filed for the quarter ended September 30,
1993.
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: August 25, 1994 By: /s/ Richard N. McCombs
-------------------------
Richard N. McCombs
Vice President and
Chief Financial Officer
<PAGE>
<PAGE> 21
EXHIBIT I.1
ERLY INDUSTRIES INC. AND SUBSIDIARIES
CALCULATION OF PRIMARY INCOME PER SHARE
(In thousands except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
-------------------- -------------------
1993 1992 1993 1992
-------- ------- ------- -------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Income (loss) from
continuing operations ($ 3,282) ($ 3,402) $ 5,891 ($ 2,484)
Income from extraordinary
items 5,625 4,726 15,895 4,726
Minority interest 156 (4,952)
------- ------- ------- -------
Net income $ 2,499 $ 1,324 $16,834 $ 2,242
======= ======= ======= =======
Average number of shares of
common stock and common
stock equivalents outstanding:
Average number of shares of
common stock outstanding 3,484 3,430 3,485 3,430
Common stock equivalents:
Dilutive effect of stock
options and warrants
based on application of
treasury stock method (a) (a) (a) (a)
------- ------- ------- -------
Total 3,484 3,430 3,485 3,430
======= ======= ======= =======
Primary income per
common share:
Income (loss) from
continuing operations ($ .90) ($ .99) $ 1.33* ($ .72)
Income from extraordinary
items 1.62 1.38 3.50* 1.37
------- ------- ------- -------
Primary income per
common share $ .72 $ .39 $ 4.83 $ .65
======= ======= ======= =======
</TABLE>
* Net of applicable minority interest ($1.3 million relating to
continuing operations and $3.7 million relating to extraordinary
item).
(a) The dilutive effect of stock options and warrants was less than 3%;
therefore none are shown above.
<PAGE>
<PAGE> 22
EXHIBIT I.2
ERLY INDUSTRIES INC. AND SUBSIDIARIES
CALCULATION OF FULLY DILUTED INCOME PER SHARE
(In thousands except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
--------------------- --------------------
1993 1992 1993 1992
-------- -------- ------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Income (loss) from
continuing operations ($ 3,282) ($ 3,402) $ 5,891 ($ 2,484)
Interest adjustment -
convertible note payable 20 20 20 20
------- ------- ------- -------
Income (loss) from continuing
operations, as adjusted (3,262) (3,382) 5,911 (2,464)
Income from extraordinary
items 5,625 4,726 15,895 4,726
Minority interest 156 (4,952)
------- ------- ------- -------
Net income, as adjusted $ 2,519 $ 1,344 $16,854 $ 2,262
======= ======= ======= =======
Average number of shares of
common stock and common
stock equivalents outstanding 3,484 3,430 3,485 3,430
Other potentially
dilutive securities:
Common stock issuable upon
conversion of note payable 267 267 267 267
------- ------- ------- -------
Total 3,751 3,697 3,752 3,697
======= ======= ======= =======
Fully diluted income
per common share:
Income (loss) from
continuing operations ($ .83) ($ .92) $ 1.24* ($ .67)
Income from extraordinary
items 1.50 1.28 3.25* 1.28
------- ------- ------- -------
Fully diluted income
per common share $ .67 $ .36 $ 4.49 $ .61
======= ======= ======= =======
</TABLE>
* Net of applicable minority interest ($1.3 million relating to
continuing operations and $3.7 million relating to extraordinary
item).
