<PAGE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the three months ended December 31, 1995 Commission file number 1-7894
ERLY INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
California 95-2312900
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10990 Wilshire Boulevard, 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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
As of December 31, 1995, there were 4,275,685 shares of the registrant's
common stock, par value $.01 per share, outstanding.
<PAGE>
<PAGE> 2
ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1995 1995
------------ ------------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 3,954,000 $ 3,718,000
Notes and accounts receivable, less
allowance for doubtful accounts of
$1,769,000 (December 31) and
$1,831,000 (March 31) 66,706,000 53,432,000
Inventories:
Raw materials 34,198,000 35,615,000
Finished goods 37,560,000 20,407,000
---------- ----------
71,758,000 56,022,000
Prepaid expenses and other
current assets 1,824,000 1,382,000
Assets held for sale, net (Note 2) 13,535,000
----------- -----------
Total current assets 157,777,000 114,554,000
Long-term notes receivable, net 1,668,000 1,668,000
Property, plant and equipment, net 56,629,000 54,520,000
Assets held for sale, net (Note 2) 18,767,000
Other assets 22,402,000 17,549,000
------------ ------------
$238,476,000 $207,058,000
============ ============
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable, collateralized $ 46,418,000 $ 41,883,000
Accounts payable 31,065,000 31,172,000
Accrued payroll and other
current liabilities 17,552,000 13,739,000
Income taxes payable 3,974,000 4,058,000
Current portion of long-term
and subordinated debt 1,160,000 7,810,000
----------- ----------
Total current liabilities 100,169,000 98,662,000
Long-term debt 99,881,000 61,511,000
Subordinated debt 5,666,000 6,670,000
Minority interest 12,798,000 19,104,000
Commitments and contingencies
Redeemable common stock
and common stock warrants 2,512,000 4,312,000
Stockholders' equity:
Common stock, par value $.01 a share:
Authorized: 15,000,000 shares
Issued and outstanding:
4,275,685 shares (December 31)
and 3,418,272 shares (March 31) 43,000 34,000
Additional paid-in capital 23,843,000 16,407,000
Retained earnings (deficit) (5,170,000) 1,750,000
Cumulative foreign currency
adjustments (1,266,000) (1,392,000)
------------ ------------
Total stockholders' equity 17,450,000 16,799,000
------------ ------------
$238,476,000 $207,058,000
============ ============
</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, 1995 and 1994
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
---------------------------- ----------------------------
1995 1994 1995 1994
------------ ------------ ------------ -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $123,384,000 $126,397,000 $347,914,000 $359,525,000
Cost of sales 107,766,000 109,044,000 299,927,000 308,476,000
------------ ------------ ------------ ------------
Gross profit 15,618,000 17,353,000 47,987,000 51,049,000
Selling, general and
administrative expenses 12,474,000 10,456,000 33,836,000 29,353,000
Interest expense 5,432,000 4,670,000 14,430,000 12,518,000
Interest income (139,000) (131,000) (393,000) (276,000)
Other (income) expense (12,000) 535,000 (165,000) 752,000
Provision for loss on disposal
of property (Note 2) 7,200,000 7,200,000
---------- ---------- ---------- ----------
24,955,000 15,530,000 54,908,000 42,347,000
---------- ---------- ---------- ----------
Income (loss) before taxes on
income and minority interest (9,337,000) 1,823,000 (6,921,000) 8,702,000
Taxes on income (benefit) (74,000) (166,000) 632,000 1,343,000
--------- --------- --------- ---------
Income (loss) before
minority interest (9,263,000) 1,989,000 (7,553,000) 7,359,000
Minority interest* 4,826,000 382,000 6,280,000 431,000
----------- ----------- ----------- -----------
Net income (loss) ($ 4,437,000) $ 2,371,000 ($ 1,273,000) $ 7,790,000
=========== =========== =========== ===========
Net income (loss) per share
of common and common stock
equivalents**:
Primary ($ 1.04) $ .48 ($ .30) $1.57
====== ===== ===== ====
Fully diluted ($ 1.04) $ .45 ($ .30) $1.49
====== ===== ===== =====
Weighted average common and
common stock equivalents**:
Primary 4,276,000 4,969,000 4,276,000 4,953,000
Fully diluted 4,276,000 5,276,000 4,276,000 5,260,000
</TABLE>
* Represents minority interest in net earnings or loss of American Rice, Inc.
applicable to common stock, after preferred stock dividend requirements
(see Note 1).
** Retroactively adjusted to give effect to a 15% stock dividend in September
1995.
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 CASH FLOWS
For the nine months ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Nine months ended
December 31,
-------------------------
1995 1994
---------- -----------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ($1,273,000) $7,790,000
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Minority interest in ARI (6,280,000) (431,000)
Depreciation 4,064,000 3,765,000
Amortization 1,374,000 1,931,000
Provision for loss on disposal
of property (Note 2) 7,200,000
Write-down of plant facility 1,000,000
Provision for loss on receivables (62,000) 228,000
Change in assets and liabilities:
(Increase) in receivables (13,212,000) (14,137,000)
(Increase) decrease in inventories (15,736,000) 22,563,000
(Increase) in prepaid expenses
and other current assets (442,000) (186,000)
Increase in accounts payable,
other current liabilities
and taxes payable 1,816,000 4,381,000
Other, net 483,000 118,000
---------- ----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (22,068,000) 27,022,000
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (6,352,000) (3,115,000)
Disposition of property, plant and equipment 25,000 16,000
--------- ---------
NET CASH (USED IN) INVESTING ACTIVITIES (6,327,000) (3,099,000)
FINANCING ACTIVITIES:
Proceeds from issuance of mortgage notes 94,000,000
Mortgage notes issuance cost (6,620,000)
Increase (decrease) in notes payable 4,535,000 (25,542,000)
Principal payments on long-term
and subordinated debt (63,284,000) (1,000,000)
Increase in long-term debt 3,595,000
---------- ----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 28,631,000 (22,947,000)
---------- ----------
INCREASE IN CASH DURING THE PERIOD 236,000 976,000
CASH, BEGINNING OF PERIOD 3,718,000 3,065,000
----------- -----------
CASH, END OF PERIOD $ 3,954,000 $ 4,041,000
=========== ===========
Supplemental cash flow information:
Net cash paid during the period for:
Interest expense $ 8,815,000 $ 9,480,000
Income taxes $ 648,000 $ 450,000
</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 STATEMENT OF STOCKHOLDERS' EQUITY
For the nine months ended December 31, 1995
(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, 1995 3,418,272 $34,000 $16,407,000 $ 1,750,000 ($1,392,000) $16,799,000
Net income (loss)
for the period (1,273,000) (1,273,000)
Foreign currency
adjustments 126,000 126,000
15% stock
dividend 512,314 5,000 5,639,000 (5,644,000) --
Cash payments
in lieu of
fractional
shares (3,000) (3,000)
Reclassification
from
redeemable
common stock
(Note 4) 345,000 4,000 1,796,000 1,800,000
Common stock
issued 99 1,000 1,000
--------- ------- ----------- ---------- ---------- -----------
Balance
December 31,
1995
(unaudited) 4,275,685 $43,000 $23,843,000 ($5,170,000) ($1,266,000) $17,450,000
========= ======= =========== ========== ========== ===========
</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 and nine months ended December 31, 1995 and 1994
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 1995 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.
Deferred income tax assets and liabilities are computed annually 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. Such deferred income tax asset and liability computations are
based on enacted tax laws and rates applicable to periods in which the
differences are expected to affect taxable income. Valuation allowances
are established when necessary to reduce deferred tax assets to the amount
expected to be realized. At March 31, 1995, the Company had net operating
loss carryforwards for federal tax reporting purposes of approximately $44
million, which expire at various dates, primarily in years 2002 through
2008. 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 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. All
calculations have been retroactively adjusted to give effect to a 15%
stock dividend in September 1995 (see Note 6).
Certain reclassifications have been made to prior period consolidated financial
statements to conform to current year presentation.
Note 1 - Minority Interest
In May 1993, substantially all of the assets and liabilities of ERLY's
wholly owned subsidiary, Comet Rice, Inc. ("Comet"), were acquired by
American Rice, Inc. ("ARI"), 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. As a result of the transaction,
ERLY's ownership increased to 81% of the voting rights of ARI.
<PAGE>
<PAGE> 7
ERLY's 81% voting interest in ARI consists of the following securities of
ARI:
* 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.
ARI has also issued a Series C Preferred Stock to third parties which 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, for a total of 19% of the voting interest in
ARI on a fully converted basis.
ARI's earnings or losses are allocated between ERLY 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 ERLY.
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 or loss 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. These dividends are allocated
even if not declared as the dividends are cumulative. 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%).
ERLY's share of ARI's net earnings (loss) applicable to common stock after
preferred dividend requirements was ($2,359,000) and ($3,220,000) for the
three and nine months ended December 31, 1995, respectively, and
($269,000) and ($468,000) for the three and nine months ended December 31,
1994, respectively. ERLY also earned Series B preferred dividends of
$1,295,000 for each of the three month periods ended December 31, 1995 and
1994, and $3,885,000 for each of the nine month periods ended December 31,
1995 and 1994. As of December 31, 1995, ARI Series B Preferred Stock
dividends accumulated, but not declared, total $13.4 million.
<PAGE>
<PAGE> 8
Note 2 - Assets Held for Sale - Short-term
At March 31, 1995 the consolidated balance sheet included assets held for
sale classified as long-term of approximately $19 million. This represented
properties in Houston, Texas held for sale by ARI.
ARI has entered into agreements to sell its properties in Houston, Texas.
The terms of the agreements require that certain conditions be met prior to
consummation of the sales including demolition of structures on the properties
and updated environmental studies. A provision for loss on disposal
was recorded in the amount of $7.2 million in the quarter ended December 31,
1995 to reduce the carrying value of the properties to the net realizable
value based on the current agreements, and the properties were reclassified
from long-term to current. The transactions are expected to close in the
third quarter of calendar 1996.
Note 3 - 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.
In a public offering completed in August 1995, ARI issued $100 million
principal amount of 13.0% mortgage notes due 2002 (the "Notes"). Portions
of the net proceeds of $94 million were used to repay $53.8 million of
ARI's existing long-term debt, to make a $10.5 million 15% loan to ERLY
due 2002, and to reduce borrowings outstanding under ARI's $47.5 million
revolving credit loan.
The Notes provide for interest payments semiannually, mature on July 31,
2002 and are non-callable by ARI prior to July 31, 1999, after which date
the Notes are callable at the option of ARI, in whole or in part, at any
time upon not less than 30 nor more than 60 days notice, at 107.0% of the
principal amount, declining ratably to par on or after July 31, 2001.
Except under certain changes of control, upon remarketing of industrial
revenue bonds, or asset sales, as defined in the related indenture, ARI is
not required to make mandatory redemption payments on the Notes. The
Notes accrue fixed interest at an annual rate of 13.0%, an effective yield
rate of 14.4%.
In addition to fixed interest, the Notes bear contingent interest of 4.0%
of consolidated cash flow (as defined) up to a limit of $40 million of
consolidated cash flow during the fiscal year in which such interest
accrues. Contingent interest accrues in each semiannual period (as
defined) in which consolidated cash flow in such period and the
immediately preceding semiannual period is equal to or greater than $20
million. Contingent interest is payable semiannually, but ARI may elect
to defer all or a portion of any such payment to the extent that (a) the
payment of such portion of contingent interest will cause ARI's adjusted
fixed charge coverage ratio (as defined) for the two consecutive
applicable semiannual periods to be less than 2.0:1 and (b) the principal
of the Notes corresponding to such contingent interest has not then
matured and become due and payable. For the quarter ended December 31,
<PAGE>
<PAGE> 9
1995, the consolidated cash flow was $3.1 million compared to $4.8 million
for the prior quarter ended September 30, 1995 and the contingent interest
accrued at December 31, 1995 was $309,000.
The Notes are secured by (a) a first or second priority security interest
in substantially all of ARI's property, plant and equipment (including
related leasehold interests), (b) a first priority security interest in 39
acres of land in Houston, Texas held for sale, (c) a pledge agreement creating
first priority security interests in the capital stock of ARI held by ERLY
(other than 200,000 shares of ARI's Series B Preferred Stock pledged to the
holders of ARI's Series C Preferred Stock), (d) notes receivable from ERLY
(as defined), and (e) a security agreement creating a first priority security
interest in all registered U.S. trademarks and a security interest in all
other registered trademarks owned or licensed by ARI.
The Notes rank senior in right of payment to all subordinated indebtedness
and pari passu in right of payment with all existing and future senior
indebtedness of ARI, including borrowings under the revolving credit loan.
The indenture includes covenants that in certain instances restrict, among
other things, (a) the payment of dividends, (b) the redemption of equity
interests of ARI, (c) the payment on or redemption of indebtedness
subordinate to the Notes, (d) certain investments (as defined), (e) the
incurrence of certain indebtedness and issuance of preferred stock, (f)
certain transactions with affiliates, and (g) certain mergers,
consolidations or sales of assets. In addition, the indenture contains
certain limitations on capital expenditures, operating lease obligations
and rice contract polices and procedures.
ARI used a portion of the proceeds from the $100 million notes to make a
$10.5 million, 15% loan to ERLY, due 2002. ERLY utilized the loan to
repay a remaining $9.5 million obligation to ING Capital, the lender to
the Company's subsidiary ERLY Juice, which ERLY had guaranteed (see Note
4).
Note 4 - Redeemable Common Stock and Common Stock Warrants
In connection with the discontinuation of the Company's juice business in
December 1993, the Company issued warrants to acquire up to 10% of ERLY's
common stock at $.01 per share. Warrants for 5% of ERLY's stock became
exercisable in April 1994 and warrants for the other 5% became exercisable
in April 1995. All of these warrants expire on April 30, 1998. The
warrants are subject to a redemption provision at the option of the holder
at the current market value of ERLY's stock. This provision is subject to
amendments described below.
In conjunction with an extension of approximately $9.5 million of
remaining ERLY Juice debt in February 1995, the Company issued additional
warrants to the lender, ING Capital, to purchase 5% of ERLY's common stock
at $.01 per share. These additional warrants were canceled upon the
repayment of the ERLY Juice debt in August 1995 (see Note 3). In
connection with the extension in February 1995, the warrants issued in
1993 were amended to include a call feature, under which the Company could
repurchase the warrants at a price of $8.75 per share, assuming the ERLY
Juice debt was repaid before April 1, 1996, the expiration date of the
<PAGE>
<PAGE> 10
call feature. The call feature also eliminates the redemption provision,
until the call period expires. In June 1995, the February extension was
amended to reduce the $8.75 call price per share to $4.78 per share (as
adjusted for a 15% stock dividend) if the ERLY Juice debt was repaid
before September 30, 1995. In such event, the call feature would be
extended through September 30, 1996. The Company repaid the ERLY Juice
debt in August 1995 (as discussed in Note 3), and intends to exercise its
call option prior to September 30, 1996 and, accordingly, the warrants are
classified as redeemable common stock warrants at the net obligation of
$2,512,000 at December 31, 1995. If the call option is not exercised, the
Company would have outstanding warrants to purchase approximately 525,000
shares of common stock at $.01 per share, all of which would be subject to
redemption at the current market price of ERLY's stock.
In fiscal 1992, ERLY issued 345,000 shares (as adjusted for a 15% stock
dividend) of ERLY common stock in exchange for $5.4 million of debt. In
conjunction with this transaction, ERLY entered into an agreement to
repurchase all of such stock at a price of $5.22 per share, as adjusted
($1,800,000 total obligation), at the option of the stockholder, through
December 31, 1997. These shares were classified as redeemable common
stock in the consolidated balance sheets. In October 1995, the stockholder
sold the shares which were subject to the repurchase agreement to a third
party, thereby canceling the repurchase agreement between ERLY and the
stockholder. Accordingly, these shares and the related $1.8 million
obligation, were transferred to common stock and paid-in capital in the
quarter ended December 31, 1995.
Note 5 - Commitments and Contingencies
The Company has made a $700,000 non-refundable deposit towards the
purchase price of a foreign and domestic green olive business which had an
expiration date of August 18, 1995. ERLY has entered into negotiations
to acquire the seller's ripe olive business in addition to its green olive
business and will apply the deposit to the total purchase price if the
transaction is completed.
Note 6 - Stockholders' Equity
In September 1995, the Company declared a 15% stock dividend to
shareholders of record at the close of business on September 15, 1995.
In addition, in September 1995 ERLY's shareholders approved an amendment
to the Company's articles of incorporation which increased the number of
authorized shares of the Company's common stock, $.01 par value, from
5,000,000 shares to 15,000,000 shares.
<PAGE>
<PAGE> 11
Item 2. ERLY INDUSTRIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 1995 AND 1994
--------------------------------------------------------------
RESULTS OF OPERATIONS - THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
Consolidated Results
For the quarter ended December 31, 1995, the Company reported a net loss
of $4,437,000 on sales of $123 million, as compared to net income of $2.4
million on sales of $126 million for the third quarter of the prior fiscal
year. Results for the quarter include a $7.2 million provision for loss
on disposal of property held for sale (see Note 2). Excluding this
non-recurring item, the Company had a net loss of $384,000 for the quarter
ended December 31, 1995.
Management believes it is in the best interest of the Company to proceed
with disposition of the property in an expeditious manner due to the
improvement in liquidity it will provide and to a covenant to the $100
million note indenture requiring sale of the property within eighteen months
of the date of issuance of the notes to avoid certain penalties. Management
expects to invest the proceeds in other projects.
Sales for the third quarter of fiscal 1996 reflect a $3.8 million decrease
in rice sales and a $.4 million sales decrease by Chemonics Fire-Trol,
partially offset by a $1.2 million increase in consulting revenues over
the third quarter of last year.
Gross profit for the quarter ended December 31, 1995 was $15.6 million, a
decrease of $1.7 million from the quarter ended December 31, 1994
primarily as a result of decreases by Fire-Trol ($1.6 million) and rice
($.5 million), partially offset by a $.4 million increase from consulting.
American Rice
Sales for the quarter ended December 31, 1995 decreased $4.9 million, or
4.6%, from $106.3 million in fiscal 1995 to $101.4 million in fiscal 1996.
Export sales were $65.5 million, a decrease of $7.0 million, or 9.7%, from
last year, while sales in the United States and Canada increased $2.1
million, or 6.3%, to $35.9 million.
Export sales declined due to lower volume partially offset by higher
average prices. Total export sales volume declined approximately 1.7
million equivalent rough rice hundredweight ("cwt."), or 26%, accounting
for an $18.7 million sales decrease. Average export prices increased
approximately 22%, accounting for $11.7 million in sales increases.
Export volume was lower primarily due to decreased volume in the Middle
East and the Caribbean as a result of generally weak demand for unbranded
products. Partially offseting these declines, sales to Japan were higher
than the third quarter of the prior year, although shipment levels in the
quarter were not as high as expected due to port congestion and unfavorable
weather conditions. Sales to Japan pursuant to Japan's commitment under the
General Agreement on Tariffs and Trade ("GATT") treaty began in November 1995.
<PAGE>
<PAGE> 12
Domestic sales were higher as a result of higher average prices partially
offset by lower volume.
Gross profit was 8% of sales for the quarter ended December 31, 1995
compared to 9% last year. Gross profit decreased $1.6 million, or 16%,
from $9.9 million in the third quarter last year to $8.3 million in the
third quarter of this year, due primarily to declines in gross profit from
sales in the Western Hemisphere and Middle East as a result of lower volume,
partially offset by higher gross profits from sales to Japan.
ARI's selling, general and administrative expenses were $6.2 million for
the quarter ended December 31, 1995 compared to $6.1 million last year.
Selling, general and administrative expenses as a percentage of net sales
increased from 5.8% in the third quarter of last year to 6.1% this year.
Chemonics International - Consulting
For the quarter ended December 31, 1995, revenues for International were
$19.8 million, an increase of $1.2 million, or 6%, from revenues of $18.6
million for the comparable period last year. Gross profit was $5.6
million (28% of revenues) for the quarter compared to gross profit of $5.2
million (28% of revenues) for the third quarter of last year.
Chemonics Industries - Fire-Trol
Fire-Trol reported sales of $1.1 million for the quarter compared to sales
of $1.4 million reported last year, a decrease of $359,000, or 25%. The
previous year experienced a record level of forest fire activity resulting
in significant demand for the Company's forest fire retardant products.
The decrease in sales from last year reflects a more normal level of
forest fire activity for the third quarter when the forest fire season
winds down. Gross profit for the quarter was $610,000 compared to $2.3
million last year (which included favorable inventory adjustments recorded
to reflect over-absorption related to the record sales level for the
year).
General
Consolidated interest expense totaled $5.4 million for the quarter ended
December 31, 1995, compared to $4.7 million for the same quarter of last
year. This increase reflects increased borrowings and the increase in
interest rates from a year ago due to increases in the prime rate. Interest
expense in both periods includes amortization of capitalized debt issuance
costs. Other expense for the quarter ended December 31, 1994 included a $1.0
million reserve for impairment relating to the Company's remaining assets of
its wine operations included in other assets.
<PAGE>
<PAGE> 13
RESULTS OF OPERATIONS - NINE MONTHS ENDED DECEMBER 31, 1995 AND 1994
Consolidated Results
For the nine months ended December 31, 1995, the Company reported a net
loss of $1.3 million on sales of $348 million, as compared to net income
of $7.8 million on sales of $359 million for the first nine months of the
prior fiscal year. Results for the nine months include a $7.2 million
provision for loss on disposal of property held for sale (see Note 2).
Excluding this non-recurring item, the Company had net income of $2.8 million
for the nine months ended December 31, 1995.
Sales for the current year were down $11 million from last year, primarily
due to an $11 million decrease in rice sales and a $9 million decrease by
Fire-Trol, partially offset by a $9 million increase in consulting
revenues.
Gross profit for the nine months ended December 31, 1995 was $48.0 million
compared to $51.0 million for the comparable period of last year, a
decrease of $3.0 million. This reflects decreases by Fire-Trol ($3.7
million) and rice ($1.6 million), partially offset by a $2.2 million
increase by consulting.
American Rice
Sales for the nine months ended December 31, 1995 declined $12.1 million,
or 4.2%, from $290.3 million in fiscal 1995 to $278.2 million in fiscal
1996. The decline in sales was composed of $14.7 million in decreased export
sales, partially offset by a $2.6 million increase in sales in the United
States and Canada.
Export sales declined due to lower volume partially offset by higher
average prices. Total export sales volume declined approximately 3.4
million equivalent rough rice hundredweight ("cwt."), or 18%, accounting
for a $34.5 million sales decline. Average export prices increased
approximately 12.5%, accounting for $19.8 million in sales increases.
Export volume was lower primarily due to lower sales to Japan and the
Caribbean compared to the prior year. This sales decline was partially
offset by higher sales to the Middle East.
Domestic sales were higher as a result of higher volume partially offset
by lower average prices.
Gross profit was 10% of sales for the nine month period ended December
31, 1995 compared to 10.4% for the comparable period last year. Gross
profit declined $2.7 million, or 8.9%, from $30.3 million in the first
nine months of last year to $27.6 million in the first nine months of this
year, due primarily to lower sales to Japan from ARI's Maxwell, California
facility, partially offset by increases in gross profit from Western
Hemisphere and Middle East sales.
<PAGE>
<PAGE> 14
ARI's selling, general and administrative expenses of $18.0 million
increased $1.0 million, or 5.9%, from $17.0 million last year. Selling,
general and administrative expenses as a percentage of net sales increased
from 5.9% in the first nine months of last year to 6.5% this year due
primarily to a higher proportion of branded sales in the current fiscal
year.
Chemonics International - Consulting
For the nine months ended December 31, 1995, revenues for International
were $55.2 million, an increase of $8.8 million, or 19%, from revenues of
$46.4 million for the comparable period last year. Gross profit was $15.7
million (28% of revenues) for the period compared to gross profit of $13.5
million (29% of revenues) for the comparable period last year.
Chemonics Industries - Fire-Trol
Fire-Trol reported net sales of $13.4 million for the nine months compared
to the record sales of $22.7 million reported last year, a decrease of
$9.3 million, or 41%. The previous year experienced a record level of
forest fire activity resulting in significant demand for the Company's
forest fire retardant products. The decrease in sales from last year
reflects a more normal level of forest fire activity this year. Gross
profit for the nine months was $3.6 million, or 27% of sales, compared to
$7.3 million, or 32% of sales last year.
General
Consolidated interest expense totaled $14.4 million for the nine months
ended December 31, 1995, compared to $12.5 million for the same period of
last year. This increase reflects increased borrowings and the increase
in interest rates from a year ago due to increases in the prime rate.
Interest expense in both periods includes amortization of capitalized debt
issuance costs. Other expense for the nine months ended December 31, 1994
included a $1.0 million reserve for impairment relating to the Company's
remaining assets of its wine operations included in other assets.
<PAGE>
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
Operating activities for the nine months ended December 31, 1995 used
$22.1 million of cash, primarily to support increases in inventory ($15.7
million) and accounts receivable ($13.2 million).
At December 31, 1995, consolidated working capital was $57.6 million,
compared to $15.9 million at March 31, 1995, an increase of $41.7 million.
In August 1995, the Company's subsidiary, ARI, issued $100 million
principal amount of 13.0% Mortgage Notes due in the year 2002. Portions
of the net proceeds of $94 million were used to repay $53.8 million of
existing ARI term debt and to reduce borrowings outstanding under ARI's
$47.5 million revolving credit loan (see Note 3).
In addition, ARI used a portion of the proceeds from the $100 million
notes to make a $10.5 million 15% loan to ERLY, due 2002. ERLY utilized
the loan to repay a remaining $9.5 million obligation to ING Capital, the
lender to the Company's subsidiary, ERLY Juice, which ERLY guaranteed in
conjunction with a $6 million write-down of ERLY Juice obligations.
As discussed in Note 2, the Company has entered into agreements to sell
ARI's Houston properties, which are carried as assets held for sale.
Net proceeds from the sales will be used to invest in other projects.
Management believes it is in the best interest of the Company to proceed with
disposition of the properties in an expeditious manner due to the improvement
in liquidity it will provide and to a covenant to the $100 million note
indenture requiring sale of the property within eighteen months of the date of
issuance of the notes to avoid certain penalties.
Stockholders' equity was $17.5 million at December 31, 1995, compared to
$16.8 million at March 31, 1995, an improvement of $.7 million as a result
of conversion of redeemable common stock to common stock, increasing
stockholders' equity by $1.8 million during the quarter (see Note 4),
offset by the $1.3 million net loss for the nine months.
The Company's subsidiary, ARI, executed an amendment to its $47.5 million
revolving credit loan effective June 30, 1995. The loan bears interest at
prime plus .5% and matures in May 1996. Previously, the interest rate on
the loan was prime plus 2.0%.
<PAGE>
<PAGE> 16
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 (electronic filing)
(b) No reports on Form 8-K were filed during the quarter ended December
31, 1995.
<PAGE>
<PAGE> 17
SIGNATURE
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.
(Registrant)
Date: February 14, 1996 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,
---------------------- ------------------------
1995 1994 1995 1994
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net income (loss) ($4,437) $ 2,371 ($ 1,273) $ 7,790
====== ======= ======= =======
Average number of shares of
common stock and common
stock equivalents outstanding*:
Average number of shares of
common stock outstanding 4,276 4,250 4,276 4,234
Common stock equivalents*:
Dilutive effect of stock
options and warrants based
on application of treasury
stock method (a) 719 (a) 719
----- ----- ----- -----
Total 4,276 4,969 4,276 4,953
===== ===== ===== =====
Primary income (loss)
per common share* ($ 1.04) $ .48 ($ .30) $ 1.57
======= ====== ======= =======
</TABLE>
* Retroactively adjusted to give effect to a 15% stock dividend in September
1995.
(a) 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,
----------------------- ------------------------
1995 1994 1995 1994
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net income (loss) ($4,437) $ 2,371 ($1,273) $ 7,790
Interest adjustment -
convertible note payable (a) 25 (a) 71
------ ------- ------- -------
Net income (loss),
as adjusted ($4,437) $ 2,396 ($ 1,273) $ 7,861
====== ======= ======= =======
Average number of shares of
common stock and common
stock equivalents outstanding* 4,276 4,969 4,276 4,953
Other potentially
dilutive securities:
Common stock issuable upon
conversion of note payable* (a) 307 (a) 307
----- ----- ----- -----
Total 4,276 5,276 4,276 5,260
===== ===== ===== =====
Fully diluted income (loss)
per common share* ($ 1.04) $ .45 ($ .30) $ 1.49
======= ======= ======= =======
</TABLE>
* Retroactively adjusted to give effect to a 15% stock dividend in September
1995.
(a) Exercise of 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-31-1996
<PERIOD-END> DEC-31-1995
<CASH> 3,954,000
<SECURITIES> 0
<RECEIVABLES> 68,475,000
<ALLOWANCES> 1,769,000
<INVENTORY> 71,758,000
<CURRENT-ASSETS> 157,777,000
<PP&E> 85,456,000
<DEPRECIATION> 28,827,000
<TOTAL-ASSETS> 238,476,000
<CURRENT-LIABILITIES> 100,169,000
<BONDS> 5,666,000
<COMMON> 43,000
0
0
<OTHER-SE> 17,407,000
<TOTAL-LIABILITY-AND-EQUITY> 238,476,000
<SALES> 347,914,000
<TOTAL-REVENUES> 347,914,000
<CGS> 299,927,000
<TOTAL-COSTS> 299,927,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7,200,000
<INTEREST-EXPENSE> 14,430,000
<INCOME-PRETAX> (641,000)
<INCOME-TAX> 632,000
<INCOME-CONTINUING> (1,273,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,273,000)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> (.30)
</TABLE>
