<PAGE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
---------------------------
For the three months ended December 31, 1994 Commission File number 1-7894
ERLY INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
California 95-2312900
(State of Incorporation) (I.R.S. Employer
Identification No.)
10990 Wilshire Boulevard, #1800, Los Angeles, California 90024-3955
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (213) 879-1480
---------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
As of December 31, 1994, there were 3,695,547 shares of the Registrant's
common stock outstanding (including redeemable common stock).
<PAGE>
<PAGE> 2
ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------
<TABLE>
<CAPTION>
December 31, March 31,
1994 1994
--------------- -------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash $ 4,041,000 $ 3,065,000
Notes and accounts receivable, less
allowance for doubtful accounts of
$2,093,000 (December 31) and
$1,865,000 (March 31) 48,803,000 34,894,000
Inventories:
Raw materials 18,262,000 28,182,000
Finished goods 22,471,000 35,114,000
----------- -----------
40,733,000 63,296,000
Prepaid expenses and other
current assets 1,708,000 1,522,000
----------- -----------
Total current assets 95,285,000 102,777,000
Long-term notes receivable, net 1,573,000 1,792,000
Property, plant and equipment, net 54,368,000 55,034,000
Assets held for sale, net (Note 6) 21,195,000 22,546,000
Other assets 15,498,000 17,001,000
------------ ------------
$187,919,000 $199,150,000
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable, collateralized $23,731,000 $ 49,273,000
Accounts payable 28,863,000 37,000,000
Accrued payroll and other
current liabilities 14,364,000 2,724,000
Income taxes payable 4,217,000 3,339,000
Current portion of long-term
and subordinated debt 7,743,000 8,946,000
------------ ------------
Total current liabilities 78,918,000 101,282,000
Long-term debt (Note 7) 65,078,000 60,592,000
Subordinated debt (Note 7) 6,625,000 7,313,000
Minority interest (Note 5) 19,316,000 19,769,000
Redeemable common stock,
300,000 shares issued and outstanding 1,800,000 1,800,000
Stockholders' equity:
Common stock, par value $.01 a share:
Authorized: 5,000,000 shares
Issued and outstanding:
3,395,547 shares (December 31) and
3,374,765 shares (March 31) 34,000 34,000
Additional paid-in capital 16,211,000 16,157,000
Retained earnings (deficit) 1,340,000 (6,450,000)
Cumulative foreign currency
adjustments (1,403,000) (1,347,000)
------------ ------------
Total stockholders' equity 16,182,000 8,394,000
------------ ------------
$187,919,000 $199,150,000
============ ============
</TABLE>
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 OPERATIONS
- --------------------------------------------------------------
For the three and nine months ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
------------------------- --------------------------
1994 1993 1994 1993
--------- ---------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $126,397,000 $99,573,000 $359,525,000 $235,323,000
Cost of sales 109,816,000 87,813,000 309,248,000 203,530,000
------------- ------------ ------------ ------------
Gross profit 16,581,000 11,760,000 50,277,000 31,793,000
Selling, general and
administrative expenses 10,470,000 8,339,000 29,367,000 22,661,000
Interest expense 3,865,000 3,241,000 11,713,000 8,671,000
Interest income (131,000) (116,000) (276,000) (511,000)
Other (income) expense 554,000 (43,000) 771,000 260,000
Investment income (426,000)
Gain on sale of partial
interest in subsidiary
(Note 2) (11,768,000)
------------ ----------- ------------ ------------
14,758,000 11,421,000 41,575,000 18,887,000
Income before taxes on income,
discontinued operations,
extraordinary items and
minority interest 1,823,000 339,000 8,702,000 12,906,000
Taxes on income (benefit) (166,000) (40,000) 1,343,000 480,000
------------ ----------- ------------ -----------
Income before discontinued
operations, extraordinary
items and minority interest 1,989,000 379,000 7,359,000 12,426,000
Discontinued operations
(Note 3):
Loss from discontinued
operations (1,638,000) (5,104,000)
Loss on disposal of
discontinued operations (872,000) (3,562,000)
---------- ---------- ---------- -----------
Income (loss) before
extraordinary items and
minority interest 1,989,000 (2,131,000) 7,359,000 3,760,000
Extraordinary income -
gain on extinguishment
of debt (Note 4) 897,000 16,792,000
----------- ----------- ----------- -----------
Income (loss) before
minority interest 1,989,000 (1,234,000) 7,359,000 20,552,000
Minority interest in
(earnings) loss of
consolidated subsidiary
(Note 5) 382,000 291,000 431,000 (4,661,000)
----------- ----------- ----------- -----------
Net income (loss) $2,371,000 ($943,000) $7,790,000 $15,891,000
=========== ========== ========== ===========
(Continued)
</TABLE>
<PAGE>
<PAGE> 4
ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
- ---------------------------------------------------------------------------
For the three and nine months ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
--------------------------- ---------------------------
1994 1993 1994 1993
--------- -------- ------- -------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net income (loss) per
common and common
share equivalents:
Primary:
Continuing operations $ .55 $ .19 $1.82 $ 3.20 *
Discontinued operations (.70) (2.42)
Extraordinary items .25 3.66 *
----- ----- ----- ------
$ .55 ($ .26) $1.82 $ 4.44
===== ===== ===== ======
Fully diluted:
Continuing operations $ .53 $ .19 $1.73 $ 2.99 *
Discontinued operations (.70) (2.25)
Extraordinary items .25 3.40 *
----- ------ ----- ------
$ .53 ($ .26) $1.73 $ 4.14
===== ====== ===== ======
Weighted average common
shares outstanding:
Primary 4,286,000 3,563,000 4,272,000 3,580,000
Fully diluted 4,553,000 3,563,000 4,539,000 3,847,000
</TABLE>
* Net of applicable minority interest ($1.0 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> 5
ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------
For the nine months ended December 31, 1994 and 1993
<TABLE>
<CAPTION> Nine months ended
December 31,
--------------------------------
1994 1993
------ -------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $7,790,000 $15,891,000
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Minority interest in earnings (loss) of consolidated subsidiary (431,000) 4,661,000
Gain on sale of partial interest in Comet Rice (11,768,000)
Extraordinary income on extinguishment of debt (16,792,000)
Depreciation and amortization 5,696,000 4,869,000
Write-down of plant facility 1,000,000
Provision for loss on receivables 228,000 1,236,000
Undistributed earnings of investment in American Rice, Inc. (426,000)
Loss on disposition of juice business 3,562,000
Change in assets and liabilities:
Decrease (increase) in receivables (14,137,000) (6,039,000)
Decrease (increase) in inventories 22,563,000 (19,586,000)
Decrease (increase) in prepaid expenses and other current assets (186,000) 717,000
Increase (decrease) in accounts payable and other current liabilities 3,503,000 10,116,000
Increase (decrease) in taxes payable 878,000 1,696,000
Other, net 118,000 474,000
------------ -------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 27,022,000 (11,389,000)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (3,115,000) (940,000)
Disposition of property, plant and equipment 16,000 405,000
Disposition of juice business 14,499,000
Acquisition of American Rice, Inc. 12,608,000
Proceeds from disposition of rice subsidiary 2,972,000
----------- -------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (3,099,000) 29,544,000
FINANCING ACTIVITIES:
Increase (decrease) in notes payable (25,542,000) 4,277,000
Increase (decrease) in long-term debt 3,595,000 (9,519,000)
Principal payments on subordinated debt (1,000,000)
Proceeds from notes and long-term debt 79,458,000
Repayment of notes and term debt on rice refinancing (93,736,000)
----------- ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (22,947,000) (19,520,000)
------------ ------------
INCREASE (DECREASE) IN CASH DURING THE PERIOD 976,000 (1,365,000)
CASH, BEGINNING OF PERIOD 3,065,000 3,872,000
------------ ------------
CASH, END OF PERIOD $4,041,000 $ 2,507,000
=========== ============
Supplemental Cash
Flow Information:
Interest paid $9,480,000 $6,502,000
Income taxes paid 450,000 561,000
</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
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------
For the nine months ended December 31, 1994 (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, 1994 3,374,765 $ 34,000 $16,157,000 ($6,450,000) ($1,347,000) $8,394,000
Net income
for the period 7,790,000 7,790,000
Common stock
issued 20,782 54,000 54,000
Foreign currency
adjustments (56,000) (56,000)
------------ ------------- ----------- ----------- ----------- -----------
Balance
December 31,
1994
(unaudited) 3,395,547 $ 34,000 $16,211,000 $1,340,000 ($1,403,000) $16,182,000
========= ========== =========== =========== =========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
<PAGE>
<PAGE> 7
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
For the three and nine months ended December 31, 1994
Basis of Presentation:
The information furnished is unaudited; however, all adjustments which are, in
the opinion of management, necessary for a fair presentation of results for the
interim periods have been made and are of a normal, recurring nature. Results
for interim periods are not necessarily indicative of results for the entire
year.
Reference should be made to the Notes To Consolidated Financial Statements in
the Company's 1994 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 Notes 1 and 2, 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 ERLY's
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 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, 1994, the Company had net operating loss carryforwards
for federal tax reporting purposes of approximately $32 million which can be
used to offset future taxable income. Tax expense reflected in the
consolidated statements of operations represents estimated federal, state and
foreign tax expense on pre-tax earnings reduced by the utilization of net
operating loss carryforwards.
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.
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.
The operating results reflected in the accompanying financial statements do not
include ARI's operating activities prior to May 26, 1993, the date of the
Transaction. The following consolidated unaudited pro forma results relating
to the nine months ended December 31, 1993, however, have been prepared
assuming the Transaction had occurred at the beginning of the fiscal year,
April 1, 1993.
<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)
Nine months
ended
December 31, 1993
-----------------------
Pro Forma
Net sales $262,126,000
Income from continuing
operations before discontinued
operations, extraordinary items
and minority interest* $ 1,262,000*
Income per common share
from continuing operations*:
Primary $.30
Fully diluted $.28
* Excluding one-time gain on sale of partial interest in subsidiary of
$11,768,000.
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 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 reflect the 19% of Comet Rice sold.
<PAGE>
<PAGE> 9
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------
Note 2 - Gain on Sale of Partial Interest in Subsidiary (continued)
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 and is being depreciated over
30 years (buildings and improvements) and 15 years (machinery and equipment).
Note 3 - Discontinued Operations
In December 1993, the Company sold its juice manufacturing facility located in
Eau Claire, Michigan, plus inventory, accounts receivable and trademarks. As
a result of these dispositions, ERLY has no operating assets or continuing
operations remaining in the juice business. It is ERLY's intention to
liquidate the remaining assets of ERLY Juice for the benefit of the ERLY Juice
creditors.
The results of ERLY's juice business have been reported separately as
discontinued operations in the consolidated statements of operations.
Summarized results of ERLY Juice for the three and nine months ended December
31, 1993 were as follows:
<TABLE>
<CAPTION>
Three months Nine Months
ended ended
December 31, 1993 December 31, 1993
----------------------- -----------------------
<S> <C> <C>
Net sales $5,025,000 $31,275,000
Costs and expenses (6,229,000) (34,603,000)
Interest expense (434,000) (1,776,000)
------------- ------------
Loss from discontinued
operations ($1,638,000) ($5,104,000)
============ ============
Loss on disposal of
discontinued operations ($ 872,000) ($3,562,000)
============ ============
</TABLE>
At December 31, 1994, ERLY's remaining juice business assets of $466,000 are
included in prepaid expenses and other current assets in the consolidated
balance sheet. In addition, the December 31, 1994 consolidated balance sheet
includes liabilities of the juice business as follows:
Current liabilities:
Accounts payable $4,050,000
Other current liabilities 787,000
Current portion of long-term debt 245,000
------------
5,082,000
Long-term debt:
Notes payable to ING Capital 8,578,000
------------
$13,660,000
===========
<PAGE>
<PAGE> 10
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------
Note 4 - Extraordinary Items
The Company had the following extraordinary items for the three and nine months
ended December 31, 1993:
<TABLE>
<CAPTION>
Three months Nine Months
ended ended
December 31, 1993 December 31, 1993
----------------------- -------------------------
<S> <C> <C>
Gain on 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
----------- -----------
$897,000 $16,792,000
========== ==========
</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 (before applicable minority interest) relating to debt
discounts by ARI's former lenders.
Note 5 - 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 (as adjusted for a one-for-five reverse stock split for all
issues of preferred and common stock effective September 1994):
* 777,777 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.
* 777,777 shares of ARI Series A Preferred Stock, which is convertible
one for one, has voting rights, liquidation preferences of $25.70 per
share, but has no stated dividend. These shares represent 9% of ARI's
common shares on a fully converted basis.
* 2,800,000 shares of ARI Series B Preferred Stock, which is convertible
into 5,600,000 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.
<PAGE>
<PAGE> 11
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------------
Note 5 - Minority Interest (continued)
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 an 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. As of December 31, 1994, the Preferred B dividends accumulated
but not declared are $8.2 million and the Preferred C dividends accumulated
but not declared are $1,187,500. 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> 12
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------
Note 6 - Assets Held for Sale - Long-term
The consolidated balance sheets include assets held for sale classified as
long-term of $21 million at December 31, 1994. This includes ARI property
held for sale in Houston, Texas ($19 million) and the remaining net assets of
the Company's discontinued winery operations ($2 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.
Note 7 - Long-term and Subordinated Debt
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.
As a result of the discontinuation of the juice operations, there still remains
approximately $8.5 million principal (plus accrued interest) of ERLY Juice's
obligation to ING Capital which the Company guaranteed. Under the terms of the
guarantee, ERLY was required to paydown the remaining debt within one year (by
December 21, 1994) or ING Capital could declare a default with the right to
foreclose on ERLY's subsidiary, Chemonics Industries, Inc. In February 1995,
the Company completed an agreement with ING Capital which extended the due date
to April 1996 in order to complete the sale of assets or a refinancing in order
to paydown the remaining obligations.
The Company's 12-1/2% Subordinated Sinking Fund Debentures issued in 1978 (the
"Old Debentures") matured on December 1, 1993. At that time, there was a
remaining principal balance of $8,880,000. The Company offered to exchange the
Old Debentures for $8,880,000 12-1/2% Subordinated Sinking Fund Debentures due
2002 (the "New Debentures"). As of December 31, 1994, the Company has
exchanged all but approximately $255,000 of the Old Debentures for New
Debentures. The Company is exploring ways to deal with those debentureholders
who have not agreed to the exchange and believes that it can refinance the
remaining amount.
<PAGE>
<PAGE> 13
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, 1994 and 1993
Results of Operations - Three months ended December 31, 1994 and 1993
For the quarter ended December 31, 1994, the Company reported net income of
$2.4 million on sales of $126.4 million, as compared to a net loss of $943,000
on sales of $99.6 million for the third quarter of the prior fiscal year.
Sales for the third quarter of fiscal 1995 were up $26.8 million from the
third quarter of last fiscal year due to a $17.3 million increase in sales by
ARI and a $9.5 million increase in sales by Chemonics Industries.
Gross profit for the quarter ended December 31, 1994 was $16.6 million, an
increase of $4.8 million from the quarter ended December 31, 1993, reflecting
a $3.7 million increase in gross profit by Chemonics and a $1.1 million
increase by ARI.
Because ERLY holds both common and preferred stock in ARI, ERLY's share of
ARI's net income or loss consists of ERLY's proportionate share (32%) of ARI's
earnings (loss) applicable to common stock, plus dividends earned on ARI
Series B Preferred Stock. ERLY's share of ARI's common stock earnings (loss)
was ($269,000) and ($225,000) for the quarters ended December 31, 1994 and
1993, respectively. ERLY also earned Series B Preferred dividends of
$1,295,000 and $1,295,000 for the quarters ended December 31, 1994 and 1993,
respectively.
Results for the third quarter of the prior fiscal year included extraordinary
income of $897,000 on the discount of debt and a loss of $2.5 million on the
Company's juice business which was discontinued in December 1993.
Rice Operations
Sales for the quarter ended December 31, 1994 of $106.3 million increased
$17.3 million from the prior year due to $21.4 million in export sales
increases partially offset by $4.1 million in domestic sales decreases.
Export sales increased due to generally higher volume, partially offset by
lower average sales prices. Total export sales volume increased 2.4 million
equivalent rough rice hundredweight ("cwt.") as improvements were experienced
in most of ARI's major market areas. Domestic sales decreases were primarily
due to lower prices in Grocery and Food Service markets. Volume remained
about the same as the prior year.
Gross profit was 9% and 10% of sales for the three months ended December 31,
1994 and December 31, 1993, respectively. Gross profit increased by $1.1
million as a result of higher gross profit on export sales, partially offset
by lower gross profit on domestic sales. Improvements in gross profits on
export sales were seen in most markets and on export sales from both Southern
U.S. facilities and California. Gross profit on Caribbean sales was about
the same as the prior year.
Selling, general and administrative expense of $6.1 million increased $1.1
million due primarily to higher advertising and promotional expenses for
domestic markets and higher administrative expense.
Interest expense of $3.3 million increased $564,000 due to higher average
interest rates as a result of the increase in the prime interest rate over
last year, partially offset by lower average borrowings. Interest expense in
both periods include legal and other expenses directly associated with the
debt.
<PAGE>
<PAGE> 14
ERLY INDUSTRIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------
Chemonics Industries
For the quarter ended December 31, 1994, the Company's subsidiary, Chemonics
Industries, had revenues of $20.0 million, compared to $10.5 million last year,
an increase of $9.5 million. This increase is due primarily to Chemonics'
international consulting subsidiary which continues to expand with sales for
the quarter of $18.6 million compared to $10.0 million last year, an increase
of $8.6 million (86%). Chemonics' Fire-Trol division had sales of $1.4 million
for the quarter compared to $500,000 last year, reflecting higher than normal
fire activity late in the forest fire season.
Chemonics' gross profit was $6.7 million (33% of sales) for the quarter
compared to gross profit of $2.9 million (28% of sales) for the third quarter
of last year.
General
Consolidated interest expense totalled $3.9 million for the quarter ended
December 31, 1994, compared with $3.2 million for the same quarter of last
year. This increase reflects higher average interest rates as a result of the
increase in the prime interest rate over last year, partially offset by lower
average borrowings by ARI. The prime rate averaged 8.13% for the quarter
ended December 31, 1994 compared to 6.0% for the comparable quarter last year.
Other expense for the quarter includes a $1.0 million reserve for impairment
relating to the Company's remaining assets of its wine operations included in
assets held for sale.
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 reported a
loss from discontinued operations of $2.5 million.
Results of Operations - Nine months ended December 31, 1994 and 1993
For the nine months ended December 31, 1994, the Company reported net income of
$7.8 million on sales of $359.5 million, as compared to net income of $15.9
million on sales of $235.3 million for the comparable period of the prior
fiscal year. Sales for fiscal 1995 were up $124 million from fiscal 1994 due
to a $94 million increase in sales by ARI and a $30 million increase in sales
by Chemonics Industries.
Gross profit for the nine months ended December 31, 1994 was $50.3 million,
an increase of $18.5 million from the nine months ended December 31, 1993 as
a result of an $8.4 million increase at ARI and a $10.1 million increase at
Chemonics.
Because ERLY holds both common and preferred stock in ARI, ERLY's share of
ARI's net income or loss consists of ERLY's proportionate share (32%) of ARI's
earnings (loss) applicable to common stock, plus dividends earned on ARI Series
B Preferred Stock. ERLY's share of ARI's common stock earnings (loss) was
($468,000) and $2.5 million for the nine months ended December 31, 1994 and
1993, respectively. ERLY also earned Series B Preferred dividends of $3.9
million and $3.0 million for the nine months ended December 31, 1994 and 1993,
respectively.
The Company reported income on continuing operations of $12.4 million for the
first nine months of the prior fiscal year, including 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
nine months ended December 31, 1993, also included: (1) extraordinary income
of $6.6 million (net of minority interest) which represents debt discounts by
ARI's former lenders recorded in conjunction with the refinancing of Comet and
ARI, (2) extraordinary income of $5.6 million relating to debt discounts by a
trade creditor of ERLY Juice, and (3) an $8.7 million loss from discontinued
operations relating to the Company's juice business which was discontinued in
December 1993.
<PAGE>
<PAGE> 15
ERLY INDUSTRIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------
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 in the consolidated statements of operations. Results for
the first nine months of last year include investment income of $426,000 from
ERLY's interest in ARI's net income for April and May of 1993.
Subsequent to the Transaction, ARI's results of operations are consolidated
with ERLY's and are not reflected as investment income, but are now accounted
for as discussed in Note 5 - Minority Interest.
Rice Operations
Sales for 1994 of $290.4 million increased $94.2 million from the prior year
due to $81.3 million in export sales increases and $12.9 million in domestic
sales increases. As a result of the Transaction, nine months of ARI sales are
included in 1994 versus seven months in the corresponding period in 1993. The
estimated increase in sales as a result of the Transaction was approximately
$33 million including $7 million in domestic markets and $26 million in export
markets.
Export sales increased primarily due to higher volume. Average prices were
about the same as the prior year. Total export sales volume increased
approximately 8 million equivalent rough rice cwt. due primarily to increases
in sales from ARI's California facility as a result of exports to Japan and
3.2 million cwt. in increases as a result of the Transaction.
Domestic sales increased as a result of the Transaction and higher average
prices. Average domestic milled rice sales prices increased 21% due primarily
to the higher value-added retail sales from the ARI customer base.
Gross profit was 10% and 11% of sales for the nine months ended December 31,
1994 and December 31, 1993, respectively, increasing $8.4 million, due
primarily to export sales to Japan from ARI's California facility and an
increase in sales as a result of the Transaction, partially offset by decreases
in gross profit on sales from ARI's Southern facilities.
Selling, general and administrative expense of $17.0 million increased $4.2
million due primarily to advertising and selling expenses associated with the
higher value-added sales from the ARI customer base.
Interest expense of $9.2 million increased $2.4 million due to higher average
borrowings and higher average rates as a result of the increased prime interest
rate over last year. Interest expense in both periods include legal and other
expenses directly associated with the debt.
Chemonics Industries
For the nine months ended December 31, 1994, the Company's subsidiary,
Chemonics Industries, had revenues of $69.2 million, compared to $39.1 million
last year, an increase of 77%. Chemonics' Fire-Trol division reported a sales
increase of $14.6 million (181%) over last year due to the significant forest
fire activity experienced in the United States and Canada in the summer of
1994. Chemonics' international consulting subsidiary had sales of $46.4
million for the nine months compared to $31.0 million last year, an increase of
$15.4 million (50%).
Chemonics' gross profit was $20 million (29% of sales) for the nine months
ended December 31, 1994 compared to gross profit of $9.9 million (25% of sales)
for the comparable period of last year.
<PAGE>
<PAGE> 16
ERLY INDUSTRIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------
General
Consolidated interest expense totalled $11.7 million for the nine months ended
December 31, 1994, compared with $8.7 million for the same period last year.
This increase reflects the increase in consolidated debt due to the
combination of Comet Rice and American Rice in May 1993, the higher borrowings
by ARI this year to support the increased sales and the increase in the prime
interest rate over last year. The prime rate averaged 7.5% for the nine months
ended December 31, 1994 compared to 6.0% last year. Other expense for the nine
months includes a $1.0 million reserve for impairment relating to the Company's
remaining assets of its wine operations included in assets held for sale.
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
reported a loss from discontinued operations of $8.7 million.
Liquidity and Capital Resources
At December 31, 1994, consolidated working capital was $16.4 million, an
improvement of $14.9 million from March 31, 1994 as a result of the positive
operating results for the nine months and the extension of the due date of $8.5
million of bank debt related to ERLY Juice to April 1996.
Stockholders' equity was $16.2 million at December 31, 1994, compared to $8.4
million at March 31, 1994, an improvement of $7.8 million as a result of the
net income for the nine months.
As a result of the discontinuation of the juice operations, there still remains
approximately $8.5 million principal (plus accrued interest) of ERLY Juice's
obligation to ING Capital which the Company guaranteed. Under the terms of the
guarantee, ERLY was required to paydown the remaining debt within one year
(by December 21, 1994) or ING Capital could declare a default with the right
to foreclose on ERLY's subsidiary, Chemonics Industries, Inc. In February
1995, the Company completed an agreement with ING Capital which extended the
due date to April 1996 in order to complete the sale of assets or a refinancing
in order to paydown the remaining obligations.
The Company's 12-1/2% Subordinated Sinking Fund Debentures issued in 1978 (the
"Old Debentures") matured on December 1, 1993. At that time, there was a
remaining principal balance of $8,880,000. The Company offered to exchange the
Old Debentures for $8,880,000 12-1/2% Subordinated Sinking Fund Debentures due
2002 (the "New Debentures"). As of December 31, 1994, the Company has
exchanged all but approximately $255,000 of the Old Debentures for New
Debentures. The Company is exploring ways to deal with those debentureholders
who have not agreed to the exchange and believes that it can refinance the
remaining amount.
Part II - Other Information
- ------------------------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11.1) Calculation of Primary Income (Loss) Per Share
(11.2) Calculation of Fully Diluted Income (Loss) Per Share
(27) Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
December 31, 1994.
<PAGE>
<PAGE> 17
ERLY INDUSTRIES INC. AND SUBSIDIARIES
- --------------------------------------------------------
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: February 21, 1995 By /s/ Thomas A. Whitlock
-------------------------------
Thomas A. Whitlock
Vice President and
Corporate Controller
<PAGE>
<PAGE> 18
EXHIBIT 11.1
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,
------------------------- --------------------------
1994 1993 1994 1993
--------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Income from
continuing operations $1,989 $ 379 $7,359 $12,426
Loss on discontinued
operations (2,510) (8,666)
Income from extraordinary
items 897 16,792
Minority interest 382 291 431 (4,661)
------- -------- ------- --------
Net income (loss) $2,371 ($ 943) $7,790 $15,891
====== ======= ====== =======
Average number of shares of
common stock and common
stock equivalents outstanding:
Average number of shares of
common stock outstanding 3,696 3,563 3,682 3,511
Common stock equivalents:
Dilutive effect of stock
options and warrants
based on application of
treasury stock method 590 (a) 590 69
------ ------ ------ ------
Total 4,286 3,563 4,272 3,580
====== ====== ====== ======
Primary income (loss)
per common share:
Income from
continuing operations $.55 $.19 $1.82 $3.20*
Loss on discontinued
operations (.70) (2.42)
Income from extraordinary
items .25 3.66*
------ ------- ------- -------
Primary income (loss)
per common share $.55 ($.26) $1.82 $4.44
===== ====== ====== ======
</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 computation would be anti-dilutive.
<PAGE>
<PAGE> 19
EXHIBIT 11.2
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,
------------------------- ------------------------
1994 1993 1994 1993
--------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Income from
continuing operations $1,989 $ 379 $7,359 $12,426
Interest adjustment -
convertible note payable 25 (a) 71 60
------- ------- ------- -------
Income from continuing
operations, as adjusted 2,014 379 7,430 12,486
Loss on discontinued
operations (2,510) (8,666)
Income from extraordinary
items 897 16,792
Minority interest 382 291 431 (4,661)
------- ------- ------- -------
Net income (loss), as adjusted $2,396 ($ 943) $7,861 $15,951
======= ======= ====== =======
Average number of shares of
common stock and common
stock equivalents outstanding 4,286 3,563 4,272 3,580
Other potentially
dilutive securities:
Common stock issuable upon
conversion of note payable 267 (a) 267 267
------- ------- ------- -------
Total 4,553 3,563 4,539 3,847
======= ======= ======= =======
Fully diluted income (loss)
per common share:
Income from
continuing operations $.53 $ .19 $1.73 $ 2.99*
Loss on discontinued
operations (.70) (2.25)
Income from extraordinary
items .25 3.40*
------- ------- -------- -------
Fully diluted income (loss)
per common share $.53 ($ .26) $1.73 $ 4.14
======= ======= ======== =======
</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 computation would be
anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> DEC-31-1994
<CASH> 4,041,000
<SECURITIES> 0
<RECEIVABLES> 50,896,000
<ALLOWANCES> 2,093,000
<INVENTORY> 40,733,000
<CURRENT-ASSETS> 95,285,000
<PP&E> 78,108,000
<DEPRECIATION> 23,740,000
<TOTAL-ASSETS> 187,919,000
<CURRENT-LIABILITIES> 78,918,000
<BONDS> 71,703,000
<COMMON> 34,000
0
0
<OTHER-SE> 16,148,000
<TOTAL-LIABILITY-AND-EQUITY> 187,919,000
<SALES> 359,525,000
<TOTAL-REVENUES> 359,525,000
<CGS> 309,248,000
<TOTAL-COSTS> 309,248,000
<OTHER-EXPENSES> 29,431,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,713,000
<INCOME-PRETAX> 9,133,000
<INCOME-TAX> 1,343,000
<INCOME-CONTINUING> 7,790,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,790,000
<EPS-PRIMARY> 1.82
<EPS-DILUTED> 1.73
</TABLE>
