<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, 1996 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 (I.R.S. 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 January 31, 1997 there were 4,740,415 shares of the Registrant's
common stock outstanding.
<PAGE>
<PAGE> 2
ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
------------- ------------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 5,070,000 $ 3,819,000
Notes and accounts receivable, less
allowance for doubtful accounts of
$2,094,000 (December 31) and
$1,715,000 (March 31) 89,941,000 56,665,000
Inventories:
Raw materials 57,821,000 47,883,000
Finished goods 61,963,000 30,121,000
---------- ----------
119,784,000 78,004,000
Prepaid expenses and other
current assets 1,143,000 2,020,000
Properties held for sale, net -- 13,535,000
----------- -----------
Total current assets 215,938,000 154,043,000
Restricted cash and investments 10,472,000 --
Long-term notes receivable, net 1,574,000 1,574,000
Property, plant and equipment, net 71,917,000 56,360,000
Other assets 23,849,000 23,158,000
------------ ------------
$323,750,000 $235,135,000
============ ============
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable, collateralized $ 74,868,000 $ 27,413,000
Accounts payable 68,726,000 48,670,000
Accrued payroll and other
current liabilities 34,533,000 16,497,000
Income taxes payable 3,983,000 3,757,000
Current portion of long-term
and subordinated debt 1,501,000 1,163,000
---------- ----------
Total current liabilities 183,611,000 97,500,000
Long-term debt 101,363,000 100,113,000
Subordinated debt 4,665,000 5,665,000
Minority interest 10,347,000 11,811,000
Redeemable common stock warrants -- 2,512,000
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01 a share:
Authorized: 15,000,000 shares
Issued and outstanding:
4,739,180 shares (December 31)
and 4,284,985 shares (March 31) 47,000 43,000
Additional paid-in capital 27,526,000 23,879,000
Retained earnings (deficit) (2,536,000) (5,046,000)
Cumulative foreign currency
adjustments (1,273,000) (1,342,000)
------------ ------------
Total stockholders' equity 23,764,000 17,534,000
------------ ------------
$323,750,000 $235,135,000
============ ============
</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, 1996 and 1995
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
--------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $171,930,000 $123,384,000 $452,487,000 $347,914,000
Cost of sales 143,763,000 107,766,000 386,656,000 299,927,000
------------ ------------ ------------ ------------
Gross profit 28,167,000 15,618,000 65,831,000 47,987,000
Selling, general and
administrative expenses 18,182,000 12,474,000 43,467,000 33,836,000
Interest expense 6,259,000 5,432,000 17,517,000 14,430,000
Interest income (145,000) (139,000) (377,000) (393,000)
Other (income) expense (205,000) (12,000) 60,000 (165,000)
Provision for loss on
disposal of property
(Note 3) 7,200,000 7,200,000
---------- ---------- ---------- ----------
24,091,000 24,955,000 60,667,000 54,908,000
Income (loss) before
taxes on income
and minority interest 4,076,000 (9,337,000) 5,164,000 (6,921,000)
Taxes on income (benefit) 244,000 (74,000) 562,000 632,000
--------- --------- --------- ---------
Income (loss) before
minority interest 3,832,000 (9,263,000) 4,602,000 (7,553,000)
Minority interest* (1,280,000) 4,826,000 1,463,000 6,280,000
----------- ---------- ---------- ----------
Net income (loss) $ 2,552,000 ($4,437,000) $6,065,000 ($1,273,000)
=========== ========== ========== ==========
Net income (loss) per share
of common and common
stock equivalents**:
Primary $ .53 ($ .94) $1.19 ($ .27)
===== ===== ===== =====
Fully diluted $ .50 ($ .94) $1.13 ($ .27)
===== ===== ===== =====
Weighted average common and
common stock equivalents**:
Primary 4,841,000 4,704,000 5,096,000 4,704,000
Fully diluted 5,178,000 4,704,000 5,433,000 4,704,000
</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 10% stock dividend in September
1996.
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, 1996 and 1995
<TABLE>
<CAPTION>
Nine months ended
December 31,
---------------------------
1996 1995
------------ ----------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $6,065,000 ($1,273,000)
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Minority interest in ARI (1,463,000) (6,280,000)
Depreciation and amortization 6,448,000 5,438,000
Provision for loss on disposal
of property (see Note 3) 7,200,000
Provision for loss on receivables 379,000 (62,000)
Gain on redemption of warrant
repurchase obligation (387,000)
Change in assets and liabilities,
excluding effect from acquisition
of olive business:
(Increase) in receivables (31,777,000) (13,212,000)
(Increase) in inventories (20,425,000) (15,736,000)
(Increase) decrease in prepaid
expenses and other current assets 930,000 (442,000)
Increase in accounts
payable, other current
liabilities and taxes payable 32,346,000 1,816,000
Other, net (997,000) 483,000
--------- ----------
NET CASH (USED IN) OPERATING ACTIVITIES (8,881,000) (22,068,000)
INVESTING ACTIVITIES:
Acquisition of olive business (33,952,000)
Purchases of property, plant and equipment (3,571,000) (6,352,000)
Dispositon of property held for sale 2,647,000
Disposition of property, plant and equipment 80,000 25,000
--------- ---------
NET CASH (USED IN) INVESTING ACTIVITIES (34,796,000) (6,327,000)
FINANCING ACTIVITIES:
Proceeds from issuance of mortgage notes 94,000,000
Mortgage notes issuance cost (5,000) (6,620,000)
Increase in notes payable 47,455,000 4,535,000
Increase in long-term debt 560,000
(Decrease) in long-term
and subordinated debt (1,057,000) (63,284,000)
Redemption of redeemable
common stock warrants (2,125,000)
Proceeds from sale of stock 100,000
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 44,928,000 28,631,000
---------- ----------
INCREASE IN CASH DURING THE PERIOD 1,251,000 236,000
CASH, BEGINNING OF PERIOD 3,819,000 3,718,000
----------- -----------
CASH, END OF PERIOD $ 5,070,000 $ 3,954,000
=========== ===========
Supplemental cash flow information:
Net cash paid during the period for:
Interest expense $13,866,000 $ 8,815,000
Income taxes $ 260,000 $ 648,000
</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, 1996
(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, 1996 4,284,985 $43,000 $23,879,000 ($ 5,046,000) ($1,342,000) $17,534,000
Net income
for the period 6,065,000 6,065,000
Foreign currency
adjustments 69,000 69,000
10% Stock
dividend 430,417 4,000 3,547,000 (3,551,000) --
Cash payments
in lieu of
fractional
shares (4,000) (4,000)
Common stock
issued 13,944 62,000 62,000
Exercise of
stock options 9,834 38,000 38,000
--------- -------- ----------- ---------- ----------- ------------
Balance
December 31,
1996
(unaudited) 4,739,180 $47,000 $27,526,000 ($2,536,000) ($1,273,000) $23,764,000
========= ======= =========== =========== =========== ============
</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, 1996 and 1995
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. Quarterly results
are affected by certain seasonal factors. Olive sales increase
during holiday periods, most notably in the third fiscal quarter.
Forest fire retardant products are applied during forest fire
seasons, principally the second fiscal quarter.
Reference should be made to the Notes To Consolidated Financial
Statements in the Company's 1996 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,
1996, the Company had net operating loss carryforwards for
federal tax reporting purposes of approximately $47 million,
which expire at various dates, primarily in years 2002 through
2011. 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 anti-dilutive.
All calculations have been retroactively adjusted to give effect
to a 10% stock dividend in September 1996 (see Note 7).
<PAGE>
<PAGE> 7
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.
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, liquidation preferences of $5.00 per share 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 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.
<PAGE>
<PAGE> 8
Note 1 - Minority Interest (continued)
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. The current ARI loan agreements
prohibit the payment of any dividends. 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 $514,000 and
($953,000) for the three and nine months ended December 31,
1996 and 1995, respectively. ERLY also earned Series B
preferred dividends of $1,295,000 for each of the three month
periods ended December 31, 1996 and 1995, and $3,885,000 for
each of the nine month periods ended December 31, 1996 and
1995. As of December 31, 1996, ARI Series B Preferred Stock
dividends accumulated, but not declared, total $18.6 million.
Note 2 - Olive Business Acquisition
On July 5, 1996, the Company's subsidiary, ARI, acquired the
domestic and foreign olive business of Campbell Soup Company
("CSC Olives") for approximately $36 million (the "Acquisition").
Assets acquired include domestic inventories and fixed assets,
all of the outstanding common stock of a Spanish company which
comprises the foreign olive business, and 51% of the stock of
Sadrym California, a manufacturer of olive processing machinery.
The purchase was funded primarily from ARI's credit facilities.
The Acquisition was accounted for as a purchase and the results
of operations of the acquired business have been included in the
Company's consolidated financial statements after July 5, 1996.
The olive business is operated as the Early California Foods
division of ARI.
Operating results reflected in the accompanying financial
statements do not include CSC Olives' operating activities
before July 5, 1996. The following summarized pro forma
information assumes the Acquisition occurred on the first day
of the current fiscal year (in thousands, except per share data):
Nine months ended
December 31, 1996
-----------------
Net sales $471,510
Net income $ 4,418
Earnings per share:
Primary $ .87
Fully diluted $ .81
<PAGE>
<PAGE> 9
Note 3 - Property Held for Sale
The consolidated balance sheet at March 31, 1996 included
properties held for sale of $13.5 million which primarily
represented 39 acres of land in Houston, Texas, held for sale
by ARI. In the prior fiscal year, ARI entered into an
agreement to sell this property and reduced the carrying value
of the property to its approximate net realizable value (after
the accrual of certain costs) by a non-recurring charge of $7.2
million in the quarter ended December 31, 1995. In September
1996, ARI completed the sale of the property and received gross
proceeds of approximately $13.1 million. The terms of ARI'S
$100 million mortgage notes (see Note 4) provide that proceeds
are to be held in a segregated account pledged to the trustee
of the notes. Such proceeds may be used by ARI for investment
in a related business, for capital expenditures, and under
certain circumstances to redeem the notes. At December 31,
1996, net proceeds from the sale (after expenses) amounting to
$10.5 million are classified as "Restricted Cash and
Investments" in the consolidated balance sheet.
Note 4 - 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 the balance of ARI's existing term debt, to make
a $10.5 million 15% loan to ERLY due 2002, and to reduce
borrowings outstanding under ARI's revolving credit loan.
ERLY utilized a portion of the proceeds to repay the remaining
$9.5 million bank debt of its subsidiary, ERLY Juice Inc.,
which ERLY had guaranteed (see Note 5).
<PAGE>
<PAGE> 10
Note 5 - Redeemable 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. In
conjunction with the repayment of the ERLY Juice debt in August
1995 described in Note 4, the Company had the right to call the
warrants prior to September 30, 1996 for $2,512,000 and,
accordingly, the warrants were classified as redeemable common
stock warrants at March 31, 1996.
In August 1996, the Company exercised its call option and
redeemed all of the outstanding common stock warrants in
exchange for a payment of $2,125,000, resulting in a gain of
$387,000 which is included in other income for the nine months
ended December 31, 1996.
Note 6 - Commitments and Contingencies
The Company and ARI have been named as codefendants in a
lawsuit filed in the district court of Harris County, Texas.
This is a dispute between the general partner of a proposed
real estate development and G.D. Murphy and D.A. Murphy,
Chairman and President, respectively, of the Company and ARI.
Damages sought are in the range of $10 million, plus attorneys'
fees and punitive damages. The Company and ARI were named as
defendants in the lawsuit because of their actions to obtain
restraining orders to prevent threatened foreclosures on ERLY
common stock pledged as collateral by G.D. Murphy and to stop
interference by the plaintiff in the lawsuit, with ARI's
mortgage note financing described in Note 4, as well as certain
other alleged activities. The Company and ARI believe they
have valid defenses in this case and that damages, if any, will
not have a material effect on the Company's financial
condition; however, as with any litigation, the ultimate
outcome is unknown. Accordingly, no provision for any
liability that might result has been made in the accompanying
consolidated financial statements.
Note 7 - Stockholders' Equity
In September 1996, the Company declared a 10% stock dividend to
shareholders of record at the close of business on September
23, 1996.
<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, 1996 AND 1995
--------------------------------------------------------------
RESULTS OF OPERATIONS - THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
Consolidated Results
For the quarter ended December 31, 1996, the Company reported
net income of $2.6 million on sales of $172 million, as
compared to a net loss of $4,437,000 on sales of $123 million
for the third quarter of the prior fiscal year. Sales for the
third quarter of fiscal 1997 reflect a $52 million increase in
sales by American Rice over the third quarter of last year,
plus a $380,000 increase in sales by Chemonics Fire-Trol,
partially offset by a $3.0 million decrease in revenues by
Chemonics International.
Results for last year's third quarter ended December 31, 1995
included a $7.2 million provision for loss on disposal of
property held for sale (see Note 3). Excluding this non-recurring
item, the Company had a net loss of $384,000 for the quarter ended
December 31, 1995.
Gross profit for the quarter ended December 31, 1996 was $28.2
million, an increase of $12.5 million from the quarter ended
December 31, 1995 as a result of increases by American Rice of
$14.7 million, partially offset by decreases at Chemonics
International ($882,000) and Chemonics Fire-Trol ($195,000).
American Rice
Sales for the quarter ended December 31, 1996 increased $52.3
million, or 52%, from $101.4 million in fiscal 1996 to $153.7
million in fiscal 1997. The sales increase for the quarter
reflects sales of $35.7 million from the olive business
acquired in the previous quarter, $12.2 million from increased
sales of exported rice and $4.4 million in increased sales of
rice in the United States and Canada.
Export rice sales increased due to higher prices and higher
volume. The export sales volume increase accounted for a $9.4
million sales increase. Average export rice prices increased
approximately 4%, accounting for $2.8 million in sales increases.
In late January 1997, ARI experienced a disruption of shipments
to its customers in Saudi Arabia due to contractual difficulties
with a third-party processing facility in Saudi Arabia, and
alternative processing and distribution means may be employed.
Domestic rice sales were higher as a result of higher average
prices and higher volume.
<PAGE>
<PAGE> 12
Gross profit was 15% of sales for the quarter ended December
31, 1996 compared to 8% last year. Gross profit increased
$14.7 million, or 177%, from $8.3 million in the third quarter
last year to $23.0 million in the third quarter of this year,
due primarily to the acquisition of the Early California Foods
olive business.
ARI's selling, general and administrative expenses of $13.0
million increased $6.8 million, or 111%, from $6.2 million last
year. The increase is due primarily to higher advertising and
promotional expenses associated with the olive business, acquired
in the previous quarter of fiscal 1997. Selling, general and
administrative expenses as a percentage of net sales were 8% in
the third quarter of the current year compared to 6% last year.
Chemonics International - Consulting
For the quarter ended December 31, 1996, revenues for
International were $16.8 million, a decrease of $3.0 million,
or 15%, from revenues of $19.8 million for the comparable
period last year. The decrease in revenues from last year is
primarily attributed to some projects winding down in the
current quarter, with the next phases not yet completely
started. Gross profit was $4.8 million (28% of revenues) for
the quarter compared to gross profit of $5.6 million (28% of
revenues) for the third quarter of last year.
Chemonics Industries - Fire-Trol
Fire-Trol reported sales of $1.5 million for the quarter
compared to sales of $1.1 million reported last year, an
increase of $380,000 or 35%. Fire-Trol sales drop off during
the third quarter each year as the fire season winds down. The
current year experienced a near record level of forest fire
activity resulting in significant demand for the Company's
forest fire retardant products, especially in the Western
United States. Last year's sales reflected a more normal level
of forest fire activity. Gross profit for the quarter was
$415,000, down slightly from $610,000 last year.
General
Consolidated interest expense totaled $6.3 million for the
quarter ended December 31, 1996, compared to $5.4 million for
the same quarter of last year. This increase reflects increased
borrowings from a year ago due to the acquisition of the olive
business in July 1996 and the issuance of $100 million of
mortgage notes by ARI in August 1995. Interest expense in both
periods includes amortization of capitalized debt issuance costs.
Consolidated income tax expense (benefit) was $244,000 and ($74,000)
for the quarters ended December 31, 1996 and 1995, respectively. This
represents estimated federal, state and foreign tax expense on pre-tax
earnings (loss) reduced by the utilization of applicable net operating
loss carryforwards.
<PAGE>
<PAGE> 13
RESULTS OF OPERATIONS - NINE MONTHS ENDED DECEMBER 31, 1996 AND 1995
Consolidated Results
For the nine months ended December 31, 1996, the Company
reported net income of $6.1 million on sales of $452 million,
as compared to a net loss of $1.3 million on sales of $348
million for the first nine months of the prior fiscal year.
Sales for the current year were up $105 million from last year,
primarily due to a $94 million increase in sales by American
Rice plus a $7.3 million increase by Chemonics Fire-Trol, and
a $3.9 million increase by Chemonics International.
Results for the nine months ended December 31, 1995 included a
$7.2 million provision for loss on disposal of property held
for sale (see Note 3). Excluding this non-recurring item, the
Company had net income of $2.8 million for the nine months
ended December 31, 1995.
Gross profit for the nine months ended December 31, 1996 was
$65.8 million compared to $48.0 million for the comparable
period of last year, primarily due to increases by American
Rice and Chemonics Fire-Trol.
American Rice
Sales for the nine months ended December 31, 1996 increased $94
million, or 34%, from $278.2 million in fiscal 1996 to $372.6
million in fiscal 1997. The increase in sales was composed of
$54.2 million in sales from the olive business acquired in July
1996, $25.4 million in increased export rice sales, and $14.8
million in increased sales of rice in the United States and
Canada.
Export rice sales increased due to higher prices and higher
volume. Average export rice prices increased approximately 9%,
accounting for $14.5 million in sales increases. The export
sales volume increase accounted for a $10.9 million sales increase.
Domestic rice sales were higher as a result of higher average
prices, partially offset by lower volume.
Gross profit was 12% of sales for the nine month period ended
December 31, 1996, compared to 10% in fiscal 1996. Gross
profit increased $17.1 million, or 62%, from $27.6 million in
the first nine months of last year to $44.7 million in the
first nine months of this year, due primarily to the Early
California Foods acquisition.
ARI's selling, general and administrative expenses of $27.9
million increased $9.9 million, or 54%, from $18.0 million
last year. The increase is primarily due to higher advertising
and promotional expenses associated with the olive business,
acquired in July 1996. Selling, general and administrative
expenses as a percentage of net sales increased slightly from
6% in the first nine months of last year to 7% this year.
<PAGE>
<PAGE> 14
Chemonics International - Consulting
For the nine months ended December 31, 1996, revenues for
International were $59.2 million, an increase of $3.9 million,
or 7%, from revenues of $55.2 million for the comparable period
last year. Gross profit was $15.1 million (26% of revenues)
for the period compared to gross profit of $15.7 million (28%
of revenues) for the comparable period last year. The decrease
in gross profit from last year reflects a higher use of
subcontractors, which contribute less to gross profit.
Chemonics Industries - Fire-Trol
Fire-Trol reported net sales of $20.7 million for the nine
months ended December 31, 1996, compared to sales of $13.4
million reported last year, an increase of $7.3 million, or
54%. The current year experienced a near record level of
forest fire activity resulting in significant demand for the
Company's forest fire retardant products, especially in the
Western United States. The increase in sales from last year
reflects an increased level of forest fire activity this year
compared to a more normal level of forest fire activity last
year. Gross profit for the nine months was $6.0 million, or
29% of sales, compared to $3.6 million, or 27% of sales last
year.
General
Consolidated interest expense totaled $17.5 million for the
nine months ended December 31, 1996, compared to $14.4 million
for the same period of last year. This increase reflects
increased average borrowings due to the acquisition of the
olive business in July 1996 and the issuance of $100 million of
mortgage notes by ARI in August 1995. Interest expense in both
periods includes amortization of capitalized debt issuance
costs.
Results for the nine months ended December 31, 1996 include a
$387,000 gain on settlement of the liability recorded for the
redemption of common stock warrants (see Note 5).
Consolidated income tax expense was $562,000 and $632,000 for the
nine months ended December 31, 1996 and 1995, respectively. This
represents estimated federal, state and foreign tax expense on pre-tax
earnings reduced by the utilization of applicable net operating
loss carryforwards.
<PAGE>
<PAGE> 15
Liquidity And Capital Resources
At December 31, 1996, consolidated working capital was $32.3
million, compared to $56.5 million at March 31, 1996, a
decrease of $24.2 million. This decrease was primarily due to
the acquisition of the olive business in July 1996 and the
related increase in short-term borrowings used to finance the
acquisition.
Stockholders' equity was $23.8 million at December 31, 1996,
compared to $17.5 million at March 31, 1996, an improvement of
$6.3 million, primarily as a result of the net income for the
nine months.
For the fiscal year ended March 31, 1996, ARI had a $47.5
million revolving credit loan with interest at the prime rate
of interest plus .5%. In June 1996, this loan was refinanced
with a new lender. The new loan bears interest at ARI's option
at either the prime rate or the London Interbank Offered Rate
plus an applicable margin based upon ARI's adjusted funded debt
ratio. The borrowing limit on the new loan was increased to
$85.0 million to provide financing for ARI's rice operations in
addition to the operations of the olive business acquired on
July 5, 1996, as discussed in Note 2. At September 30, 1996,
ARI was not in compliance with certain covenants related to
financial ratios and minimum tangible net worth. ARI has
obtained amendments to these covenants causing them to be less
restrictive. ARI is now in compliance with all such covenants.
In addition, in June 1996 Chemonics International increased its
existing line of credit from $16 million to $20 million. The
new line of credit provides financing for both Consulting and
Fire-Trol.
<PAGE>
<PAGE> 16
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders was held on September 17, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Calculation of Primary Income Per Share
11.2 Calculation of Fully Diluted Income Per Share
27 Financial Data Schedule (electronic filing)
(b) No reports on Form 8-K were filed during the quarter ended
December 31, 1996.
<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 12, 1997 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,
----------------------------- ----------------------------
1996 1995 1996 1995
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net income (loss) $ 2,552 ($ 4,437) $ 6,065 ($ 1,273)
======= ======= ======= =======
Average number of shares of
common stock and common
stock equivalents outstanding*:
Average number of shares of
common stock outstanding 4,739 4,704 4,728 4,704
Common stock equivalents*:
Dilutive effect of stock
options and warrants based
on application of treasury
stock method 102 (a) 368 (a)
----- ----- ----- -----
Total 4,841 4,704 5,096 4,704
===== ===== ===== =====
Primary income (loss)
per common share* $ .53 ($ .94) $ 1.19 ($ .27)
====== ====== ======= =======
</TABLE>
* Retroactively adjusted to give effect to a 10% stock dividend in September
1996.
(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,
----------------------------- ------------------------------
1996 1995 1996 1995
-------- --------- ---------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net income (loss) $ 2,552 ($ 4,437) $ 6,065 ($ 1,273)
Interest adjustment - convertible
note payable 26 (a) 77 (a)
------- ------- ------- -------
Net income (loss), as adjusted $ 2,578 ($ 4,437) $ 6,142 ($ 1,273)
======= ======= ======= =======
Average number of shares of
common stock and common
stock equivalents outstanding*: 4,841 4,704 5,096 4,704
Common stock equivalents:*
Dilutive effect of stock
options and warrants based
on application of treasury
stock method 337 (a) 337 (a)
----- ----- ----- -----
Total 5,178 4,704 5,433 4,704
===== ===== ===== ======
Fully diluted income (loss)
per common share* $ .50 ($ .94) $ 1.13 ($ .27)
======= ======= ======= =======
</TABLE>
* Retroactively adjusted to give effect to a 10% stock dividend in September
1996.
(a) Exercise of stock options and warrants 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-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 5,070,000
<SECURITIES> 0
<RECEIVABLES> 92,035,000
<ALLOWANCES> 2,094,000
<INVENTORY> 119,784,000
<CURRENT-ASSETS> 215,938,000
<PP&E> 106,723,000
<DEPRECIATION> 34,806,000
<TOTAL-ASSETS> 323,750,000
<CURRENT-LIABILITIES> 183,611,000
<BONDS> 104,665,000
<COMMON> 47,000
0
0
<OTHER-SE> 23,717,000
<TOTAL-LIABILITY-AND-EQUITY> 323,750,000
<SALES> 452,487,000
<TOTAL-REVENUES> 452,487,000
<CGS> 386,656,000
<TOTAL-COSTS> 386,656,000
<OTHER-EXPENSES> 60,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,517,000
<INCOME-PRETAX> 6,627,000
<INCOME-TAX> 562,000
<INCOME-CONTINUING> 6,065,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,065,000
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.13
</TABLE>
