<PAGE>
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 June 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
Los Angeles, California 90024-3955
------------------------------- --------------------
(Address of principal (Zip Code)
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 June 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>
Pursuant to the requirement 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 17, 1994 By /s/ Richard N. McCombs
-------------------------
Richard N. McCombs
Vice President and
Chief Financial Officer
<PAGE>
<PAGE> 1 ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
June 30, March 31,
1993 1993
------------ -------------
(Unaudited) (Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash $ 1,901,000 $ 3,872,000
Notes and accounts receivable, less
allowance for doubtful accounts of
$2,642,000 (June 30) and $3,280,000
(March 31) 41,394,000 35,534,000
Inventories:
Raw materials 24,469,000 14,817,000
Finished goods 19,654,000 12,908,000
------------- ---------------
44,123,000 27,725,000
Prepaid expenses and other
current assets 2,423,000 2,524,000
------------- -------------
Total current assets 89,841,000 69,655,000
Long-term notes receivable, net 4,891,000 6,623,000
Property, plant and equipment, net 75,764,000 30,857,000
Assets held for sale, net 23,003,000 4,210,000
Investment in American Rice, Inc. 13,104,000
Other assets 24,624,000 10,651,000
------------ ------------
$218,123,000 $135,100,000
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable, collateralized $ 52,826,000 $ 62,359,000
Accounts payable 31,704,000 20,106,000
Accrued payroll and other
current liabilities 5,343,000 7,298,000
Income taxes payable 3,692,000 1,829,000
Current portion of long-term and
subordinated debt 28,143,000 22,531,000
------------ ------------
Total current liabilities 121,708,000 114,123,000
Long-term debt 69,103,000 26,881,000
Subordinated debt 1,094,000 1,094,000
Minority interest 19,762,000 790,000
Redeemable common stock,
300,000 shares issued and outstanding 1,505,000 1,406,000
Stockholders' equity:
Common stock, par value $1 a share:
Authorized: 5,000,000 shares
Issued and outstanding:
3,183,123 shares (June 30), and
3,186,956 shares (March 31) 3,183,000 3,187,000
Additional paid-in capital 12,569,000 12,687,000
Retained earnings (deficit) (9,784,000) (24,119,000)
Cumulative foreign currency
adjustments (1,017,000) (949,000)
------------ ------------
Total stockholders' equity 4,951,000 (9,194,000)
------------ ------------
$218,123,000 $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> 2 ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
For the three months ended June 30, 1993 and 1992
<TABLE>
<CAPTION>
Three months ended June 30,
-------------------------------------
1993 1992
--------------------------------------
(Unaudited)
<S> <C> <C>
Net Sales $ 65,819,000 $ 93,909,000
Cost of sales 55,724,000 75,612,000
------------ ------------
Gross profit 10,095,000 18,297,000
Selling, general and
administrative expenses 9,232,000 14,613,000
Interest expense 3,155,000 2,672,000
Interest income (136,000) (41,000)
Investment income (426,000) (11,000)
Other (income) expense 487,000 (83,000)
Gain on sale of partial
interest in subsidiary (11,768,000)
----------- -----------
544,000 17,150,000
Income before taxes on income,
extraordinary item and
minority interest 9,551,000 1,147,000
Taxes on income 378,000 229,000
------------ ----------
Income before extraordinary item
and minority interest 9,173,000 918,000
Extraordinary item 10,270,000
------------ -----------
Income before minority interest 19,443,000 918,000
Minority interest in earnings of
consolidated subsidiary (5,108,000)
------------ -------------
Net income $ 14,335,000 $ 918,000
============ ===========
Net income per common and
common share equivalents:
Primary:
Continuing operations $2.23 * $ .27
Extraordinary item 1.88 *
----- -----
$4.11 $ .27
===== =====
Fully diluted:
Continuing operations $2.07 * $ .25
Extraordinary item 1.75 *
----- -----
$3.82 $ .25
===== =====
Weighted average common
shares outstanding:
Primary 3,487,000 3,430,000
Fully diluted 3,754,000 3,697,000
</TABLE>
* Net of applicable minority interest ($1.4 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> 3 ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
For the three months ended June 30, 1993 and 1992
<TABLE>
<CAPTION>
Three months ended June 30,
-------------------------------------
1993 1992
-------------------------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $14,335,000 $ 918,000
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Minority interest in earnings
of consolidated subsidiary 5,108,000
Gain on sale of partial interest
in subsidiary (11,768,000)
Extraordinary income - debt discount (10,270,000)
Depreciation and amortization 1,125,000 1,087,000
Provision for loss on receivables 22,000 42,000
Equity in net income of American Rice, Inc. (426,000) (11,000)
Loss on disposition of subsidiary 880,000
Other, net 66,000
Change in assets and liabilities:
(Increase) in receivables (237,000) (142,000)
Decrease in inventories 6,668,000 10,956,000
(Increase) decrease in prepaid expenses
and other current assets 386,000 (442,000)
(Decrease) in accounts payable
and other current liabilities (6,704,000) (8,169,000)
Increase in taxes payable 488,000 178,000
------------ ------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (393,000) 4,483,000
INVESTING ACTIVITIES:
Purchases of property, plant and
equipment (315,000) (343,000)
Disposition of property, plant
and equipment 175,000 12,000
Acquisition of American Rice, Inc. 12,608,000
Proceeds from disposition of subsidiary 2,092,000
Other, net (2,120,000) (240,000)
------------ -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 12,440,000 (571,000)
FINANCING ACTIVITIES:
Increase (decrease) in notes payable 983,000 (3,011,000)
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 (723,000) (1,439,000)
Principal payments on subordinated debt (50,000)
------------ -----------
</TABLE>
<PAGE>
<PAGE> 4 ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
------------------------------------------------
For the three months ended June 30, 1993 and 1992
<TABLE>
<CAPTION>
Three months ended June 30,
-------------------------------------
1993 1992
-------------------------------------
(Unaudited)
<S>
NET CASH (USED IN) <C> <C>
FINANCING ACTIVITIES (14,018,000) (4,341,000)
------------- ------------
INCREASE (DECREASE) IN CASH
DURING THE QUARTER (1,971,000) (429,000)
CASH, BEGINNING OF QUARTER 3,872,000 3,842,000
------------ ------------
CASH, END OF QUARTER $ 1,901,000 $ 3,413,000
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
<PAGE>
<PAGE> 5 ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
For the three months ended June 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 $3,187,000 $12,687,000 ($24,119,000) ($949,000) ($9,194,000)
Net income
for the period 14,335,000 14,335,000
Common stock issued 6,000 26,000 32,000
Common stock retired (10,000) (46,000) (56,000)
Foreign currency
adjustments (68,000) (68,000)
Accretion of redeemable
common stock (98,000) (98,000)
---------- ----------- ----------- ---------- ----------
Balance
June 30, 1993
(unaudited) $3,183,000 $12,569,000 ($ 9,784,000) ($1,017,000) $4,951,000
========== =========== =========== ========== ==========
</TABLE>
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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
For the three months ended June 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.
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> 7
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 (except the ARI capital stock owned by 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 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> 8
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 approximately $5 million of costs
associated with the Transaction at the date of closing. These costs will
be 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.
Supplemental Pro Forma Financial Information (Unaudited)
The Transaction has been accounted for by ERLY as an acquisition, using
the purchase method of accounting, under which the assets acquired and the
liabilities assumed are recorded at their fair value.
The results of operations from American Rice, Inc. have been consolidated
with ERLY Industries beginning June 1993. The following unaudited
supplemental pro forma quarterly results of operations, however, have been
prepared assuming the Transaction had occurred on April 1, 1993 and April
1, 1992.
The unaudited supplemental pro forma results of operations is not
necessarily indicative of the results of operations that would have
resulted had the Transaction actually occurred on the assumed dates and
should not be used to predict future results.
<TABLE>
<CAPTION>
Three months Three months
ended ended
June 30, 1993 June 30, 1992
-------------------- -------------------
Actual ProForma Actual ProForma
------ -------- ------ --------
(in thousands)
<S> <C> <C> <C> <C>
Net sales $65,819 $92,622 $93,909 $131,828
Income (loss) before
extraordinary item
and minority interest (2,595)* (1,853) 918 720
Income (loss) per common
share before extraordinary
item and minority interest:
Primary ($ .74) ($ .53) $ .27 $ .21
Fully diluted ( .74) ( .53) .25 .19
</TABLE>
* Excluding one-time gain on sale of partial interest in subsidiary of
$11,768,000.
<PAGE>
<PAGE> 9
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 - 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:
<PAGE>
<PAGE> 10
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
Note 3 - Minority Interest (continued)
* 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.
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.
<PAGE>
<PAGE> 11
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
Note 3 - Minority Interest (continued)
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.
Note 4 - Assets Held for Sale - Long-term
The consolidated balance sheets include assets held for sale classified as
long-term of $23 million at June 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> 12
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
Note 5 - Subsequent Event
In July 1993, ERLY Juice sold its primary orange juice processing plant in
Lakeland, Florida to Florida Juice, Inc for $11.9 million. ERLY Juice
continues to use the facility as a co-packer 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. The combined effect of both
transactions did not result in a loss and will be accounted for in the
second quarter of fiscal year 1994. The sale of the plant facility
resulted in a loss of $2.7 million before tax effects while the related
gain from debt forgiveness (which will be reflected as an extraordinary
item) amounted to $5.6 million before tax.
<PAGE>
<PAGE> 13
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
Note 6 - Long-term and Subordinated Debt
A schedule of outstanding long-term and subordinated debt at June 30, 1993
follows:
<TABLE>
<CAPTION>
June 30, 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% 20,000,000
Term loan due 1996, interest
at bank prime rate plus 3% 13,300,000
Term loan due 1993, interest
at bank prime rate plus 2% 6,493,000
Note payable on juice facility,
interest at 10%, maturities based
on volume 3,100,000
Note payable due 2008, interest
at 6% 3,000,000
Note payable on juice facility,
interest at 13.5%, maturities
through 1999 1,101,000
Term loan due 1993, interest
at bank prime rate plus 2.25% 1,000,000
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% 2,397,000
Deferred trade payables to supplier 5,000,000
Less current portion of
long-term debt (19,288,000)
------------
$ 69,103,000
============
Subordinated debt:
12-1/2% subordinated sinking fund
debentures, net of unamortized
discount of $25,000 (June 30)
and $89,000 (March 31), due 1993 $8,855,000
Note payable on rice facility,
maturities through 1997,
non-interest bearing 1,094,000
Less current portion of
subordinated debt (8,855,000)
------------
$ 1,094,000
============
</TABLE>
Bond discount related to the 12 1/2% subordinated sinking fund debentures
issued in 1978 is being amortized over the 15-year life of the debentures.
<PAGE>
<PAGE> 14
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
Note 6 - Long-term and Subordinated Debt (continued)
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 subsidiaries were in violation of certain debt
covenants at March 31, 1993. However, the combination of Comet Rice and
American Rice in May 1993 and associated refinancing eliminated the
violations at Comet Rice and ARI (See Note 1). Negotiations are in
process with the Company's lenders to restructure ERLY Juice's debt and to
provide a temporary increased working capital facility for Chemonics.
Both negotiations are expected to be completed in fiscal year 1994.
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 loan 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.
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 $5 million of costs in
connection with the loan restructure.
Principal maturities on ERLY's long-term and subordinated debt are as
follows: 1994--$28,143,000; 1995--$7,433,000; 1996--$19,765,000;
1997--$6,173,000; 1998--$29,164,000; thereafter--$7,662,000.
<PAGE>
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
-------------------------
For the three months ended June 30, 1993 and 1992
Results of Operations - Three months ended June 30, 1993 and 1992
- - -----------------------------------------------------------------
For the quarter ended June 30, 1993, the Company reported net income of
$14.3 million on sales of $66 million, as compared to net income of
$918,000 on sales of $94 million for the first quarter of the prior fiscal
year. Sales for the first quarter of fiscal 1994 were down $28 million
from the first quarter of fiscal 1993, primarily due to a decrease of $35
million at Comet Rice (as discussed below) offset by an increase of $12
million as a result of the Transaction.
Gross profit for the quarter ended June 30, 1993 declined $8.2 million
from the quarter ended June 30, 1992 as a result of a decline at ERLY
Juice of $4.4 million and a decline of $7.5 million at Comet Rice,
partially offset by a $3.7 million increase in gross profit as a result of
the Transaction.
Results for the first quarter ended June 30, 1993, included an $11.8
million gain on the sale of a partial interest in Comet Rice, Inc. in
conjunction with the May 1993 combination of Comet Rice and ARI (See Note
2). The results for the current quarter also included extraordinary
income of $6.6 million (net of minority interest of $3.7 million) which
represents debt discounts by ARI's former lenders recorded in conjunction
with the refinancing of Comet and ARI discussed in Note 1.
Prior to the combination discussed in Note 1, ERLY owned 48% of the voting
rights of American Rice, Inc. and accounted for its investment using the
equity method of accounting. ERLY therefore recorded its interest in
ARI's results as investment income (loss) in the consolidated statements
of operations. First quarter fiscal 1994 results include investment
income of $426,000 from ERLY's interest in ARI's net income for April and
May of 1993, compared to income on its investment in ARI of $11,000 for
the first quarter 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.
Comet sales were down $35 million from last year, primarily due to the
disposition of Comet's Greenville, Mississippi facility in July 1992 and
lower export sales of rice by Comet's California operations from last
year. Volume reduction accounted for $27 million of the decrease while $8
million resulted from average price reduction. The Rice Division (which
consists of Comet Rice through May 26, 1993 and the combined operations of
Comet and ARI thereafter) reported an operating profit (before interest
expense and corporate overhead) of $1.6 million on sales of $37 million
for the current quarter, compared with an operating profit of $2.3 million
on sales of $60 million for the comparable quarter of last year. The
$700,000 decrease in operating profit consists of a $1.7 million decrease
at Comet Rice, partially offset by a $1.0 million increase as a result of
the Transaction. An unusually slow period of export sales from California
for 1993 accounts almost entirely for the $1.7 million decrease in Comet
operating profit.
<PAGE>
<PAGE> 16
ERLY INDUSTRIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- - ---------------------------------------------
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 $93 million and $132 million for the quarters ended
June 30, 1993 and 1992, respectively.
ERLY Juice, the Company's juice processing business, reported sales for
the first quarter of fiscal 1994 which were down $6.6 million (31%) from
last year. The decline in sales was due to a 21% decline in prices on
retail sales, a higher proportion of private label sales and a 15% decline
in cases sold from the prior period. Gross profits decreased by $4.4
million to $2.9 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
$1.2 million on sales of $15 million compared with operating income of
$1,080,000 on sales of $21 million for the quarter ended June 1992. The
$2.3 million decline in operating income was a result of the $4.4 million
decline in gross profits, partially offset by a $2.1 million decline in
selling, general and administrative expenses. Competitive pressures
continue to reduce margins as prices drop faster than costs can be
reduced.
Interest expense totalled $3.2 million for the quarter ended June 30,
1993, compared with $2.7 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.
Liquidity and Capital Resources
- - -------------------------------
For the quarter ended June 30, 1993, ERLY recorded net income of $14.3
million. Cash decreased $2.0 million during the quarter due to $14
million in cash used in financing activities and $393,000 of cash used in
operating activities, only partially offset by $12.4 million cash provided
by investing activities.
Cash used in operating activities primarily reflects: (1) a $6.7 million
decrease in inventory offset by a decrease in accounts payable and other
current liabilities, and (2) income before minority interest of $19.4
million offset by non-cash gains of $11.8 million on the sale of partial
interest in subsidiary and $10.3 million on debt discounts.
Cash provided by investing activities reflected the $12.6 million
acquisition of ARI in May 1993.
<PAGE>
<PAGE> 17
ERLY INDUSTRIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- - ---------------------------------------------
Cash used in financing activities reflected the refinancing associated
with the Transaction with a paydown of $93.7 million of notes payable and
term debt utilizing new term debt and notes payable of $79.5 million.
At June 30, 1993, consolidated working capital was a negative $32 million,
an improvement of $12.6 million from March 31 as a result of the Comet/ARI
combination. Negotiations are in process with the Company's lenders and
its trade debtors to restructure ERLY Juice's debt. Management believes
that such restructuring will be necessary to maintain ERLY Juice's
operations. Because of the continuing losses at ERLY Juice, the Company
is considering all of its alternatives for ERLY Juice, although no
conclusions have been reached.
Stockholders' equity was $4,951,000 at June 30, 1993, compared to a
negative $9,194,000 at March 31, 1993, an improvement of $14,145,000 as a
result of the net income for the quarter.
The 12-1/2% subordinated sinking fund debentures with an outstanding
principal balance of $8.9 million, will mature on December 1, 1993. At
this time, the Company is considering a number of alternatives for
refinancing these debentures, including a request to the debenture holders
to extend the maturity date. At this time, no proposal has been offered
by the Company to the bondholders and consequently there is no assurance
that the Company will be able to satisfactorily refinance the bonds.
Management, however, believes that a refinancing can be accomplished.
For the quarter ended June 30, 1992, cash decreased $400,000 as a result
of $4.5 million of cash provided by operations offset by $600,000 of cash
used in investing activities and $4.3 million of cash used in financing
activities.
<PAGE>
<PAGE> 18
Item 6.(b) Reports on Form 8-K
In June 1993, the Company filed a Form 8-K to report the May 26, 1993
acquisition of additional stock in American Rice, Inc. and the related
increase in ERLY's voting rights in ARI from 48% to 81%.
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.
August 17, 1994 By /s/ Richard N. McCombs
----------------------------
Richard N. McCombs
Vice President and
Chief Financial Officer
<PAGE>
<PAGE> 19
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 June 30,
-----------------------------
1993 1992
---- ----
<S> <C> <C>
Income from
continuing operations $ 9,173 $ 918
Income from extraordinary item 10,270
Minority interest (5,108)
------- --------
Net income $14,335 $ 918
======= =======
Average number of shares of
common stock and common
stock equivalents outstanding:
Average number of shares of
common stock outstanding 3,487 3,430
Common stock equivalents:
Dilutive effect of stock
options and warrants based
on application of treasury
stock method (b) (b)
------- -------
Total 3,487 3,430
======= =======
Primary income per
common share:
Income from
continuing operations $ 2.23 (a) $ .27
Income from
extraordinary item 1.88 (a)
------- -------
Primary income per
common share $ 4.11 $ .27
======= =======
</TABLE>
(a) Net of applicable minority interest ($1.4 million relating to continuing
operations and $3.7 million relating to extraordinary item).
(b) The dilutive effect of stock options was less than 3%; therefore none are
shown above.
<PAGE>
<PAGE> 20
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 June 30,
-------------------------------
1993 1992
---- ----
<S> <C> <C>
Income from
continuing operations $ 9,173 $ 918
Interest adjustment - convertible
note payable 20 20
------- -------
Income from continuing operations,
as adjusted 9,193 938
Income from extraordinary item 10,270
Minority interest (5,108)
------- -------
Net income, as adjusted $14,355 $ 938
======= =======
Average number of shares of
common stock and common
stock equivalents outstanding 3,487 3,430
Other potentially
dilutive securities:
Common stock issuable upon
conversion of note payable 267 267
------- -------
Total 3,754 3,697
======= =======
Fully diluted income
per common share:
Income from
continuing operations $ 2.07 (a) $ .25
Income from
extraordinary item 1.75 (a)
------- -------
Fully diluted income
per common share $ 3.82 $ .25
======= =======
</TABLE>
(a) Net of applicable minority interest ($1.4 million relating to continuing
operations and $3.7 million relating to extraordinary item).
