<PAGE>
<PAGE> 1
UNITED STATES
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 June 30, 1997 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 July 31, 1997, there were 5,117,701 shares of the Registrant's
common stock outstanding.
<PAGE>
<PAGE> 2
ERLY INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, March 31,
1997 1997
------------ ------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 5,865,000 $ 5,584,000
Notes and accounts receivable, less
allowance for doubtful accounts
of $1,408,000 (June 30) and
$1,326,000 (March 31) 89,139,000 85,789,000
Inventories:
Raw materials 46,781,000 49,745,000
Finished goods 78,448,000 79,950,000
---------- ----------
125,229,000 129,695,000
Prepaid expenses and other
current assets 3,626,000 3,354,000
----------- -----------
Total current assets 223,859,000 224,422,000
Long-term notes receivable, net 1,503,000 1,503,000
Property, plant and equipment, net 71,527,000 71,571,000
Other assets 23,400,000 23,222,000
------------ ------------
$320,289,000 $320,718,000
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable, collateralized $100,574,000 $ 87,740,000
Accounts payable 57,582,000 64,069,000
Accrued payroll and other
current liabilities 23,250,000 23,307,000
Income taxes payable 1,469,000 1,936,000
Current portion of long-term
and subordinated debt 1,532,000 1,502,000
----------- -----------
Total current liabilities 184,407,000 178,554,000
Long-term debt 100,738,000 100,584,000
Subordinated debt 4,665,000 4,665,000
Deferred income taxes payable 1,501,000 1,501,000
Minority interest 8,648,000 10,634,000
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01 a share:
Authorized: 15,000,000 shares
Issued and outstanding:
4,764,415 shares (June 30) and
4,740,415 shares (March 31) 48,000 47,000
Additional paid-in capital 27,731,000 27,533,000
Retained earnings (deficit) (5,942,000) (1,249,000)
Cumulative foreign currency
adjustments (1,507,000) (1,551,000)
----------- -----------
Total stockholders' equity 20,330,000 24,780,000
------------ ------------
$320,289,000 $320,718,000
============ ============
</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 months ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
Three months ended June 30,
----------------------------------
1997 1996
------------ -----------
(Unaudited)
<S> <C> <C>
Net sales $130,511,000 $124,591,000
Cost of sales 115,204,000 111,277,000
----------- -----------
Gross profit 15,307,000 13,314,000
Selling, general and
administrative expenses 15,423,000 11,660,000
Interest expense 6,524,000 5,164,000
Interest income (168,000) (86,000)
Other expense 257,000 319,000
---------- ----------
22,036,000 17,057,000
---------- ----------
Income (loss) before taxes on
income and minority interest (6,729,000) (3,743,000)
Taxes on income - 93,000
---------- ----------
Income (loss) before
minority interest (6,729,000) (3,836,000)
Minority interest* 2,036,000 2,586,000
------------ ------------
Net income (loss) ($ 4,693,000) ($ 1,250,000)
============ ============
Net income (loss) per share
of common and common stock
equivalents:
Primary** ($.99) ($.27)
===== ====
Fully diluted** ($.99) ($.27)
===== ====
Weighted average common and
common stock equivalents:
Primary** 4,753,000 4,713,000
Fully diluted** 4,753,000 4,713,000
</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).
** 1996 amounts have been restated for 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 three months ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
Three months ended June 30,
-----------------------------
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ($ 4,693,000) ($ 1,250,000)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,380,000 1,851,000
Minority interest (2,036,000) (2,586,000)
Provision for loss on receivables 82,000 60,000
Change in assets and liabilities:
(Increase) in receivables (3,432,000) (5,248,000)
Decrease in inventories 4,466,000 6,426,000
(Increase) decrease in prepaid
expenses and other current assets (272,000) 123,000
(Decrease) in accounts payable,
other current liabilities and
taxes payable (7,011,000) (3,774,000)
Other, net (309,000) (536,000)
--------- ---------
NET CASH (USED IN)
OPERATING ACTIVITIES (10,825,000) (4,934,000)
INVESTING ACTIVITIES:
Additions to property, plant
and equipment (1,912,000) (1,354,000)
Disposition of property, plant
and equipment - 20,000
--------- ---------
NET CASH (USED IN)
INVESTING ACTIVITIES (1,912,000) (1,334,000)
FINANCING ACTIVITIES:
Increase in notes payable 12,834,000 8,280,000
Increase in long-term debt 184,000 235,000
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 13,018,000 8,515,000
--------- ---------
INCREASE IN CASH
DURING THE QUARTER 281,000 2,247,000
CASH, BEGINNING OF QUARTER 5,584,000 3,819,000
----------- -----------
CASH, END OF QUARTER $ 5,865,000 $ 6,066,000
=========== ===========
Supplemental cash flow information -
Net cash paid for the quarter for:
Interest expense $ 2,582,000 $ 2,541,000
Income taxes $ 184,000 $ 194,000
</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 three months ended June 30, 1997
(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, 1997 4,740,415 $47,000 $27,533,000 ($1,249,000) ($1,551,000) $24,780,000
Net income (loss)
for the period ( 4,693,000) (4,693,000)
Common stock
issued 24,000 1,000 198,000 199,000
Foreign currency
adjustments 44,000 44,000
--------- ------- ----------- ----------- ----------- -----------
Balance
June 30, 1997
(unaudited) 4,764,415 $48,000 $27,731,000 ($5,942,000) ($1,507,000) $20,330,000
========= ======= =========== =========== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
<PAGE>
<PAGE> 6
ERLY INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended June 30, 1997 and 1996
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 1997 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,
1997, the Company had net operating loss carryforwards for
federal tax reporting purposes of approximately $34 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.
<PAGE>
<PAGE> 7
In February 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No.
128, "Earnings Per Share" ("SFAS 128") which is effective for
periods ending after December 15, 1997 and specifies the
computation, presentation and disclosure requirements of
earnings per share ("EPS"). SFAS 128 requires a dual
presentation of basic and diluted EPS. Basic EPS, which
excludes the impact of common stock equivalents, replaces
primary EPS. Diluted EPS, which utilizes the average market
price per share as opposed to the greater of the average market
price per share or ending market price per share when applying
the treasury stock method in determining common stock
equivalents, replaces fully diluted EPS. Pro forma basic and
diluted EPS for all historical periods presented, assuming SFAS
No. 128 was effective at the beginning of each such historical
period, would not be materially different from the primary and
fully diluted EPS presented.
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income," and SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information." SFAS No.
130 establishes standards for reporting and displaying of
comprehensive income and its components. SFAS No. 131
establishes standards for the way that public business
enterprises report information about operating segments and
related information in interim and annual financial statements.
SFAS No. 130 and 131 are effective for periods beginning after
December 15, 1997. These three statements will not have any
effect on the Company's 1997 financial statements, however,
management is evaluating what, if any, additional disclosure
may be required when these statements are implemented.
<PAGE>
<PAGE> 8
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 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.
<PAGE>
<PAGE> 9
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 ($1,046,000) and ($1,305,000) for the
three months ended June 30, 1997 and 1996, respectively. ERLY
also earned Series B preferred dividends of $1,295,000 for each
of the three month periods ended June 30, 1997 and 1996.
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 "Olive
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 marketer of olive
processing machinery. The purchase was funded primarily from
ARI's credit facilities. The Olive 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 Olive Acquisition occurred on the first
day of the prior fiscal year (in thousands, except per share
data):
Three months ended
June 30, 1996
------------------
Net sales $142,813
Net income (loss) ($ 3,870)
Earnings (loss) per share:
Primary ($ .81)
Fully diluted ($ .81)
<PAGE>
<PAGE> 10
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. As
of June 30, 1997, ARI was not in compliance with a covenant
under its $85 million line of credit relating to the attainment
of a certain interest coverage ratio. ARI has obtained a
waiver from the bank to this covenant as of June 30, 1997.
Note 4 - Commitments and Contingencies
On July 24, 1997, Farmers Rice Milling Company, a Louisiana
corporation and beneficial owner of 171,933 shares of ERLY,
filed a derivative complaint on behalf of ERLY and ARI,
against Gerald D. Murphy, Douglas A. Murphy, the Company
and ARI in the U.S. District Court, Central District of
California. The complaint alleges among other things that
G.D. Murphy endangered ERLY and ARI by pledging ERLY stock
owned personally by him, as part of a proposed real estate
development (see paragraph below regarding the Tenzer
lawsuit). Both the Company and ARI are nominal defendants,
with the lawsuit being brought on behalf of the Company and
ARI. The Murphys believe they have valid defenses against the
complaint.
ARI has also been named as a codefendant with Messrs. John M.
Howland and George E. Prchal in a lawsuit filed in February
1997 in U.S. District Court in Houston, Texas by Rice Milling
& Trading Investments, LTD., an Isle of Man Company ("RMTI").
In 1994, ARI entered into an agreement with RMTI for processing
the Company's rice through RMTI's facility in Jeddah, Saudi
Arabia. Messrs. Howland and Prchal were officers of RMTI
through January 1997 and have also been directors of ARI since
October 1993 and prior to October 1993 were officers of ARI.
In January 1997, RMTI ceased shipping ARI's rice through its
Jeddah facility and terminated the employment of Messrs.
Howland and Prchal. The lawsuit alleges among other things
that ARI failed to perform under the terms of the agreement and
Messrs. Howland and Prchal breached their fiduciary duties to
RMTI. In April 1997, ARI obtained a restraining order from
the U.S. District Court of the Southern District of Texas
ordering RMTI to desist and refrain from purchasing rice of
U.S. or Vietnam origin from any supplier other than ARI and
from introducing and/or marketing rice of U.S. and Vietnam
origin in Saudi Arabia targeted against ARI's U.S. origin and
Vietnam origin rice. The Company believes that this litigation
will not have a material effect on the Company's financial
condition; however, as with any litigation, the ultimate
outcome is unknown.
<PAGE>
<PAGE> 11
In April 1995, a lawsuit was filed in the District Court of
Harris County, Texas, by Kingwood Lakes South, L.P. and Tenzer
Company, Inc., as plaintiffs, against G.D. Murphy and D.A.
Murphy, Chairman and President of the Company and ARI,
respectively. ERLY and ARI were named as codefendants in the
lawsuit by an amendment to the original petition in September
1995. This is a dispute between the general partner of a
proposed real estate development and G.D. Murphy and D.A.
Murphy. Damages sought are in the range of $10 million, plus
attorneys' fees and punitive damages. The Company and ARI were
named as codefendants 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, as well as certain other alleged
activities, including knowing participation in breaches of
fiduciary duties, civil conspiracy with the Murphys and
conversion. The plaintiff recently added a claim that ERLY and
ARI were alter egos of the Murphys. 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. In order to minimize legal
expenses, ERLY, ARI and the Murphys are utilizing common legal
counsel in this matter and have agreed to share legal expenses
ratably.
<PAGE>
<PAGE> 12
Item 2. ERLY INDUSTRIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996
-------------------------------------------------
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1997 AND 1996
Consolidated Results
For the quarter ended June 30, 1997, the Company reported a net
loss of $4.7 million on sales of $131 million, as compared to
a net loss of $1.3 million on sales of $125 million for the
first quarter of the prior fiscal year.
The increased loss over last year is due to losses reported by
the Company's Consulting and Fire-Trol subsidiaries. Both of
these entities were profitable in the first quarter last year
but had losses for the current quarter.
Sales for the first quarter of fiscal 1997 were up $6 million
from the first quarter of last year, primarily due to a $16
million increase in sales by American Rice, partially offset by
decreases at Chemonics International ($6.0 million) and Fire-Trol
($4.3 million).
Gross profit for the quarter ended June 30, 1997 was $15.3
million, an increase of $2.0 million from the quarter ended
June 30, 1996, primarily as a result of a $4.9 million
increase at ARI, partially offset by lower gross profit by
Chemonics International and Fire-Trol due to their lower sales.
American Rice
Sales for the quarter ended June 30, 1997 increased $16.0
million, or 16.4%, from $97.4 million in fiscal 1997 to $113.4
million in fiscal 1998. Of this increase, $16.2 million
related to olive sales from the division acquired in July 1996,
and $.7 million resulted from increased export sales of rice,
partially offset by a $.9 million decrease in sales of rice in
the United States.
Gross profit was 10.1% of sales for the quarter ended June 30,
1997 compared to 6.7% for the first quarter of last year.
Gross profit increased $4.9 million, or 75%, from $6.5 million
in the first quarter last year to $11.5 million in the first
quarter of this year, due primarily to the acquisition of the
olive business in July 1996.
ARI's selling, general and administrative expenses of $8.9
million increased $2.5 million, or 38%, from $6.4 million last
year. Selling, general and administrative expenses increased
due to higher advertising and promotional expenses associated
with the acquisition of the olive business.
<PAGE>
<PAGE> 13
Chemonics International - Consulting
For the quarter ended June 30, 1997, revenues for International
were $15.3 million, a decrease of $6.0 million, or 28%, from
revenues of $21.3 million for the comparable period last year.
During the first quarter of last year, International had
several active projects in the former Soviet Union. These
projects have since been completed or are near completion,
resulting in a decline in revenues from a year ago. Gross
profit was $3.9 million (26% of revenues) for the quarter
compared to gross profit of $5.3 million (25% of revenues) for
the first quarter of last year. This decrease of $1.4 million
in gross profit is due to the decrease in sales for the
quarter.
In order to expand its revenue base and leverage experience
gained in International Consulting, Chemonics recently formed
a new company involved in food distribution in South Africa.
This operation is in the start-up phase and is not yet
profitable, which also negatively impacted results for the
quarter.
Chemonics Industries - Fire-Trol
The forest fire season has started off very slowly this year.
Fire-Trol reported net sales of only $1.6 million for the
quarter, down significantly from the $5.9 million in sales
recorded for the first quarter last year. Last year's results
reflected a much earlier and more active forest fire season,
especially in the United States, than is currently being
experienced. Gross profit for the quarter was a negative
$283,000, compared to $1.5 million last year, a decrease of
$1.8 million as a result of the decline in sales.
General
Consolidated interest expense totaled $6.5 million for the
quarter ended June 30, 1997, compared to $5.2 million for the
same quarter of last year. This increase reflects increased
borrowings and increases in the cost of funds from a year ago.
Interest expense in both periods includes amortization of
capitalized debt issuance costs.
<PAGE>
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, consolidated working capital was $39.5
million, compared to $45.9 million at March 31, 1997, a
decrease of $6.4 million, primarily due to a $12.8 million
increase in short-term borrowings for the quarter, partially
offset by a $7.0 million reduction in payables.
Stockholders' equity was $20.3 million at June 30, 1997,
compared to $24.8 million at March 31, 1997, a decrease of $4.5
million as a result of the net loss for the quarter.
For the quarter ended June 30, 1997, cash used in operations
was $11.5 million, primarily related to the loss for the
quarter and a $7.0 million decrease in payables. Expenditures
for capital equipment were $1.9 million for the quarter. Cash
used in operations and investing activities were provided by a
$13.0 million increase from financing activities, primarily
borrowings under the Company's lines of credit.
ARI has an $85 million revolving credit loan with 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 loan provides financing for
ARI's rice and olive operations. At June 30, 1997, the
outstanding balance on this loan was $83.7 million.
Chemonics Industries, Inc. has lines of credit totaling $20
million which provide financing for both Consulting and Fire-Trol.
In July 1997, ARI completed a sale and leaseback transaction
for substantially all of its olive processing plant and
machinery located in Visalia, California. ARI realized
proceeds from the sale of approximately $9 million which were
used for operating purposes. These assets were leased for a
seven year term with a two year extension option.
ARI's liquidity in the quarter ended June 30, 1997 and currently,
has been impaired primarily as a result of the loss of financing
associated with the RMTI agreement (see Note 4 to the Consolidated
Financial Statements and Part II - Legal Proceedings). In addition
to the sale and leaseback transaction discussed above, the Company
is exploring several other opportunities to improve liquidity.
<PAGE>
<PAGE> 15
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
On July 24, 1997, Farmers Rice Milling Company, a Louisiana
corporation and beneficial owner of 171,933 shares of ERLY,
filed a derivative complaint on behalf of ERLY and ARI,
against Gerald D. Murphy, Douglas A. Murphy, the Company
and ARI in the U.S. District Court, Central District of
California. The complaint alleges among other things that
G.D. Murphy endangered ERLY and ARI by pledging ERLY stock
owned personally by him, as part of a proposed real estate
development (see paragraph below regarding the Tenzer
lawsuit). Both the Company and ARI are nominal defendants,
with the lawsuit being brought on behalf of the Company and
ARI. The Murphys believe they have valid defenses against the
complaint.
ARI has also been named as a codefendant with Messrs. John M.
Howland and George E. Prchal in a lawsuit filed in February
1997 in U.S. District Court in Houston, Texas by Rice Milling
& Trading Investments, LTD., an Isle of Man Company ("RMTI").
In 1994, ARI entered into an agreement with RMTI for processing
the Company's rice through RMTI's facility in Jeddah, Saudi
Arabia. Messrs. Howland and Prchal were officers of RMTI
through January 1997 and have also been directors of ARI since
October 1993 and prior to October 1993 were officers of ARI.
In January 1997, RMTI ceased shipping ARI's rice through its
Jeddah facility and terminated the employment of Messrs.
Howland and Prchal. The lawsuit alleges among other things ARI
failed to perform under the terms of the agreement and Messrs.
Howland and Prchal breached their fiduciary duties to RMTI. In
April 1997, ARI obtained a restraining order from the U.S.
District Court of the Southern District of Texas ordering RMTI
to desist and refrain from purchasing rice of U.S. or Vietnam
origin from any supplier other than ARI and from introducing
and/or marketing rice of U.S. and Vietnam origin in Saudi
Arabia targeted against ARI's U.S. origin and Vietnam origin
rice. The Company believes that this litigation will not have
a material effect on the Company's financial condition;
however, as with any litigation, the ultimate outcome is
unknown.
<PAGE>
<PAGE> 16
In April 1995, a lawsuit was filed in the District Court of
Harris County, Texas, by Kingwood Lakes South, L.P. and Tenzer
Company, Inc., as plaintiffs, against G.D. Murphy and D.A.
Murphy, Chairman and President of the Company and ARI,
respectively. ERLY and ARI were named as codefendants in the
lawsuit by an amendment to the original petition in September
1995. This is a dispute between the general partner of a
proposed real estate development and G.D. Murphy and D.A.
Murphy. Damages sought are in the range of $10 million, plus
attorneys' fees and punitive damages. The Company and ARI were
named as codefendants in the lawsuit because of their actions
to obtain restraining orders to prevent threatened foreclosures
on ERLY common stock pledged as collateral by G.D. Murphy and
to stop interference by the plaintiff in the lawsuit, with
ARI's mortgage note financing, as well as certain other alleged
activities, including knowing participation in breaches of
fiduciary duties, civil conspiracy with the Murphys and
conversion. The plaintiff recently added a claim that ERLY and
ARI were alter egos of the Murphys. The Company and ARI
believe they have valid defenses in this case and that damages,
if any, will not have a material effect on the Company's
financial condition; however, as with any litigation, the
ultimate outcome is unknown. In order to minimize legal
expenses, ERLY, ARI and the Murphys are utilizing common legal
counsel in this matter and have agreed to share legal expenses
ratably.
<PAGE>
<PAGE> 17
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Calculation of Primary Income (Loss) Per Share
11.2 Calculation of Fully Diluted Income (Loss) Per Share
27 Financial Data Schedule (electronic filing)
(b) No reports on Form 8-K were filed during the quarter ended
June 30, 1997.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
ERLY INDUSTRIES INC.
(Registrant)
Date: August 15, 1997 By /s/ Thomas A. Whitlock
----------------------
Thomas A.Whitlock
Vice President and
Corporate Controller
<PAGE>
<PAGE> 18
EXHIBIT 11.1
ERLY INDUSTRIES INC. AND SUBSIDIARIES
CALCULATION OF PRIMARY INCOME (LOSS) PER SHARE
(In thousands except per share data)
<TABLE>
<CAPTION>
Three months ended June 30,
---------------------------
1997 1996
------- -------
(Unaudited)
<S> <C> <C>
Income (loss) before
minority interest ($ 6,729) ($ 3,836)
Minority interest 2,036 2,586
------- -------
Net income (loss) ($ 4,693) ($ 1,250)
======= =======
Average number of shares of
common stock and common
stock equivalents outstanding:
Average number of shares of
common stock outstanding 4,753 4,713*
Common stock equivalents:
Dilutive effect of stock
options and warrants based
on application of treasury
stock method (a) (a)
----- -----
Total 4,753 4,713*
===== =====
Primary income (loss)
per common share ($ .99) ($ .27)*
======= =======
</TABLE>
(a) Exercise of stock options and warrants is not assumed as the computation
would be anti-dilutive.
* Restated for a 10% stock dividend in September 1996.
<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 June 30,
---------------------------
1997 1996
------- -------
(Unaudited)
<S> <C> <C>
Income (loss) before
minority interest ($ 6,729) ($ 3,836)
Interest adjustment - convertible
note payable (a) (a)
------- -------
Income (loss) before minority interest,
as adjusted (6,729) (3,836)
Minority interest 2,036 2,586
------- -------
Net income (loss), as adjusted ($ 4,693) ($ 1,250)
======= =======
Average number of shares of
common stock and common
stock equivalents outstanding 4,753 4,713*
Other potentially
dilutive securities:
Common stock issuable upon
conversion of note payable (a) (a)
----- -----
Total 4,753 4,713*
===== =====
Fully diluted income (loss)
per common share ($ .99) ($ .27)*
======= =======
</TABLE>
(a) Exercise of stock of options, warrants and convertible note is not
assumed as the computation would be anti-dilutive.
* Restated for a 10% stock dividend in September 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<CASH> 5,865,000
<SECURITIES> 0
<RECEIVABLES> 90,547,000
<ALLOWANCES> 1,408,000
<INVENTORY> 125,229,000
<CURRENT-ASSETS> 223,859,000
<PP&E> 107,686,000
<DEPRECIATION> 36,159,000
<TOTAL-ASSETS> 320,289,000
<CURRENT-LIABILITIES> 184,407,000
<BONDS> 100,963,000
<COMMON> 48,000
0
0
<OTHER-SE> 20,282,000
<TOTAL-LIABILITY-AND-EQUITY> 320,289,000
<SALES> 130,511,000
<TOTAL-REVENUES> 130,511,000
<CGS> 115,204,000
<TOTAL-COSTS> 115,204,000
<OTHER-EXPENSES> 257,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,524,000
<INCOME-PRETAX> (4,693,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,693,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,693,000)
<EPS-PRIMARY> (.99)
<EPS-DILUTED> (.99)
</TABLE>
