<PAGE>
- - -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JANUARY 28, 1995
--------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from____________-_____________to___________-__________
Commission File Number 1-6071
RYMER FOODS INC.
Incorporated in the State of Delaware IRS Employer Identification
No. 36-1343930
4600 South Packers Avenue
Suite 400
Chicago, Illinois 60609
312/927-7777
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
------- -------
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
------- -------
Registrant had 10,747,748 shares of common stock outstanding as of March 10,
1995.
- - -------------------------------------------------------------------------------
This report consists of 15 pages.
1.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
RYMER FOODS INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
January 28, October 29,
1995 1994
---------- ------------
(in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - $ 2,492
Receivables, net 11,713 11,847
Inventories 24,394 16,951
Other 793 724
-------- -------
TOTAL CURRENT ASSETS 36,900 32,014
PROPERTY, PLANT AND EQUIPMENT:
Buildings and improvements 1,195 1,195
Machinery and equipment 6,236 6,173
-------- -------
7,431 7,368
Less accumulated depreciation and amortization 5,550 5,399
-------- -------
1,881 1,969
OTHER:
Goodwill, net of accumulated amortization of
$35,678,000 in 1995 and $35,386,000 in 1994 21,252 21,544
Assets held for sale 1,600 1,600
Other 1,057 1,365
-------- -------
$ 62,690 $ 58,492
-------- -------
-------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt:
Banks $ 13,813 $ 5,844
Senior Notes - 2,250
Other 26 26
Accounts payable 3,619 2,953
Accrued liabilities 3,382 4,961
-------- -------
TOTAL CURRENT LIABILITIES 20,840 16,034
LONG-TERM DEBT:
Senior Notes 18,133 18,133
Other, including amounts to related parties 719 710
-------- -------
Total long-term debt 18,852 18,843
OTHER NON-CURRENT LIABILITIES 1,153 1,151
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY:
Common stock, $1 par - 20,000,000 shares
authorized; 10,746,344 shares outstanding
in 1995 and 10,741,451 shares outstanding
in 1994 after deducting treasury shares of
232,773 in 1995 and 237,666 in 1994 10,746 10,741
Additional paid-in capital 44,355 44,344
Retained deficit (32,868) (32,239)
Notes receivable from sale of common shares
to related parties (388) (382)
------- -------
TOTAL STOCKHOLDERS' EQUITY 21,845 22,464
------- -------
$ 62,690 $ 58,492
------- -------
------- -------
<FN>
See accompanying notes.
</TABLE>
2.
<PAGE>
RYMER FOODS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
---------------------------
January 28, January 29,
1995 1994
---------- -----------
(in thousands, except per share data)
<S> <C> <C>
Net sales $ 35,881 $ 37,522
Cost of sales 33,044 33,904
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Gross profit 2,837 3,618
Selling, general and administrative expenses 2,636 2,676
------- -------
Operating income 201 942
Interest expense 1,011 1,016
Other income (181) (152)
------- -------
Income (loss) from continuing operations before
income taxes (629) 78
Provision for income taxes - 2
------- -------
Income (loss) from continuing operations (629) 76
Loss from discontinued operations, net
of income taxes - (466)
Gain on dispositions of discontinued operations,
net of income taxes - 4,474
------- -------
Net income (loss) $ (629) $ 4,084
------- -------
------- -------
Per common share data:
Primary:
Income (loss) from continuing operations $ (.06) $ .01
------- -------
------- -------
Loss from discontinued operations,
net of income taxes $ - $ (.04)
------- -------
------- -------
Gain on dispositions of discontinued operations,
net of income taxes $ - $ .42
------- -------
------- -------
Net income (loss) $ (.06) $ .38
------- -------
------- -------
Fully diluted:
Income (loss) from continuing operations $ (.06) $ .01
------- -------
------- -------
Loss from discontinued operations,
net of income taxes $ - $ (.04)
------- -------
------- -------
Gain on dispositions of discontinued operations,
net of income taxes $ - $ .42
------- -------
------- -------
Net income (loss) $ (.06) $ .38
------- -------
------- -------
<FN>
See accompanying notes.
</TABLE>
3.
<PAGE>
RYMER FOODS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
------------------------------
Jan. 28, 1995 Jan. 29, 1994
------------- -------------
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATIONS
Income (loss) from continuing operations $ (629) $ 76
Non-cash adjustments to income (loss):
Depreciation and amortization 151 186
Amortization of other assets 466 462
Other non-cash expense (income) (6) 18
Provision for bad debts 256 49
Net increase to accounts receivable (123) (1,929)
Net increase to inventories (7,443) (8,089)
Net decrease to other current and long-term assets 65 149
Net decrease to accounts payable and accrued expenses (680) (1,406)
------- -------
Net cash flows from operating activities of
continuing operations (7,943) (10,484)
Net cash flows from operating activities of
discontinued operations (226) (289)
------- -------
NET CASH FLOWS FROM OPERATING ACTIVITIES (8,169) (10,773)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of Rymer Chicken assets - 24,323
Proceeds from the sale of Mendelson stock - 750
Capital expenditures (63) (289)
Other (5) (6)
Net cash flows from investing activities of discontinued operations - (628)
------- -------
NET CASH FLOWS FROM INVESTING ACTIVITIES (68) 24,150
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) under line-of-credit facilities 7,970 (7,847)
Principal payments on debt (2,255) (5,533)
Proceeds from borrowings 14 -
Proceeds from issuance of common stock 16 3
------- -------
NET CASH FLOWS FROM FINANCING ACTIVITIES 5,745 (13,377)
Net change in cash and cash equivalents (2,492) -
Cash and cash equivalents balance at beginning of year 2,492 -
-------- --------
Cash and cash equivalents balance at end of first quarter $ - $ -
-------- --------
-------- --------
Supplemental cash flow information:
Interest paid $ 1,401 $ 1,771
-------- --------
-------- --------
Income taxes paid, net of refunds $ 183 $ 4
-------- --------
-------- --------
<FN>
See accompanying notes.
</TABLE>
4.
<PAGE>
RYMER FOODS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and
therefore do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations, and cash flows
in conformity with generally accepted accounting principles. The Company
operates on a fiscal year which ends on the last Saturday in October.
References in the following notes to years and quarters are references to
fiscal years and fiscal quarters. For further information refer to the
Consolidated Financial Statements and footnotes thereto included in Rymer
Foods Inc.'s (the Company's or Rymer's) Annual Report on Form 10-K for the
fiscal year ended October 29, 1994.
In management's opinion, the condensed consolidated financial statements
include all normal recurring adjustments which the Company considers
necessary for a fair presentation of the results for the period. Operating
results for the fiscal period presented are not necessarily indicative of
the results that may be expected for the entire fiscal year.
2. RECEIVABLES
Receivables are net of allowances for doubtful accounts of $993,000 at
January 28, 1995 and $731,000 at October 29, 1994.
3. INVENTORIES
Inventories are stated principally at the lower of first-in, first-out cost
or market. The composition of inventories at January 28, 1995 and October
29, 1994 was:
<TABLE>
<CAPTION>
January 28, 1995 October 29, 1994
---------------- ----------------
(in thousands)
<S> <C> <C>
Raw materials $15,423 $ 5,339
Work in process 33 -
Finished goods 8,938 11,612
------ ------
Total $24,394 $16,951
------ ------
------ ------
</TABLE>
4. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
The accompanying condensed consolidated financial statements reflect the
operations of the Company's chicken subsidiary as discontinued operations
for accounting purposes.
RYMER CHICKEN - VAN BUREN
In July 1993, the management of the Company designed a plan to sell the Van
Buren, Arkansas chicken processing operation. On December 10, 1993,
substantially all of the assets of Rymer Chicken were sold (the Sale of
Rymer Chicken) to Simmons Poultry Farms, Inc., Siloam Springs, Arkansas
(Simmons) pursuant to an Asset Purchase Agreement, dated as of November 19,
1993, among the Company, Rymer Chicken, Simmons and Simmons Industries,
Inc., an affiliate of Simmons, as amended (the Asset Purchase Agreement).
The purchase price was $24 million (subject to certain adjustments) plus
the assumption of substantially all of Rymer Chicken's obligations and
liabilities other than its obligations under its senior bank facility. The
Asset Purchase Agreement was approved by the Company's stockholders on
December 6, 1993.
Upon consummation of the Asset Purchase Agreement, the Company received
proceeds of $24.3 million and recorded a gain before income taxes of $4.0
million in the first quarter of 1994. The calculation of such gain
reflects all actual expenses and estimated future expenses associated with
the Sale of Rymer Chicken. Such gain is net of the writeoff of $5.4
million of goodwill related to Rymer Chicken.
5.
<PAGE>
RYMER CHICKEN - PLANT CITY
During 1992, the Company decided to place its idle Plant City chicken
facility and equipment for sale because chicken sales volume was not
expected to increase significantly in the near future.
The Company is actively pursuing the sale of the Plant City, Florida
property at an amount in excess of its net book value of $1.6 million.
Reserves established in 1992 and 1993 are considered adequate to maintain
the idle facility for at least two years.
The Company incurred costs related to operation of the idle facility of
approximately $44,000 during the first quarter of 1995 and $28,000 during
the first quarter of 1994 which were charged to the reserve established for
such losses during fiscal 1992 and 1993.
SALE OF MURRY'S STOCK
In July 1989, the Company received voting and non-voting shares of common
stock in The Mendelson Holding Company, Ltd. (Mendelson Holding)
representing approximately a 12.5% interest in Mendelson Holding as partial
consideration for the sale of an indirect, wholly-owned subsidiary,
Murry's, Inc. (Murry's).
On November 17, 1993 (the Mendelson Closing Date), the Company sold its
stock in Mendelson Holding to Murry's for $750,000 in cash. The Company
used these proceeds to pay down debt and recorded a gain on the sale before
income taxes of $670,000 during the first quarter of 1994. In connection
with the sale, Murry's and Mendelson Holding, on the one hand, and the
Company, on the other, released all claims against each other (stipulating
to the dismissal of a pending lawsuit brought by Mendelson Holding against
the Company in Delaware Chancery Court). In addition, Murry's engaged the
Company as a consultant for three years for fees aggregating $800,000.
Consulting fees for 1994 totalling $250,000 were paid to the Company by
Murry's on the Mendelson Closing Date and fees of $300,000 were paid to the
Company during the first quarter of 1995. For the period ended January 28,
1995 and January 29, 1994, the Company recorded consulting income of
$75,000 and $63,000, respectively, from Murry's. The remaining $225,000
received from Murry's during the 1995 first quarter is classified as an
accrued liability on the balance sheet at January 28, 1995 and will be
recorded by the Company as consulting income over the remainder of 1995.
The following summarizes the results of the various discontinued operations
reflected in the accompanying Condensed Consolidated Statements of
Operations:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
---------------------
1/28/95 1/29/94
------- -------
<S> <C> <C>
Sales:
-----
Rymer Chicken $ - $ 9,468
------- ------
------- ------
Loss from discontinued operations:
---------------------------------
Rymer Chicken $ - $ (492)
Credit equivalent to benefit for income tax - 26
------- ------
Loss from discontinued operations,
net of income taxes $ - $ (466)
------- ------
------- ------
Gain on dispositions of discontinued operations:
-----------------------------------------------
Rymer Chicken $ - $ 4,017
Murry's - 670
------- ------
Total gain on dispositions of discontinued
operations before income taxes - 4,687
Provision for income taxes - 213
------- ------
Gain on dispositions of discontinued
operations, net of income taxes $ - $ 4,474
------- ------
------- ------
</TABLE>
Income (loss) from discontinued operations includes an allocation of
interest expense on debt not attributable to specific operations of the
Company which amounted to approximately $185,000 for the thirteen weeks
ended January 29, 1994. The allocation was based on the proportion of net
assets for sale to total net assets of the
6.
<PAGE>
Company. This treatment is in accordance with current accounting
pronouncements regarding allocation of interest to discontinued operations.
In addition, the above discontinued operations also include a charge for
interest expense which specifically related to the operations of the
discontinued segment.
5. INCOME TAXES
In 1995, no provision for income taxes was recorded due to the loss from
operations. The 1994 provision for income taxes amounted to $.2 million.
The components of the net deferred tax asset recorded in the accompanying
balance sheets as of January 28, 1995 and October 29, 1994 are as follows:
<TABLE>
<CAPTION>
Non-Current
Deferred Tax Asset
------------------
(in thousands)
<S> <C>
Deferred tax asset $15,701
Valuation allowance 15,701
-------
Net deferred tax asset $ -
-------
-------
</TABLE>
The Company did not record any change in its deferred tax asset during the
first quarter of 1995 because estimated taxable income is not expected to
result in any significant change to the deferred tax asset. The following
table accounts for the difference between the actual tax provision
attributable to income before income taxes and the amounts obtained by
applying the statutory U.S. Federal income tax rate of 34% to the loss from
continuing operations before income taxes.
<TABLE>
<CAPTION>
Thirteen Weeks Ended
January 28, 1995
--------------------
(in thousands)
<S> <C>
Loss from continuing operations
before income taxes $ (629)
------
------
Total credit equivalent to benefit for
income taxes computed by applying
the U.S. statutory rate (34%) $ (214)
Increases in taxes due to:
Goodwill amortization ($292,000 x 34%) 99
Other differences, net 115
------
Actual tax provision $ -
------
------
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
The Company has agreements with certain of its customers to sell
merchandise over the next year for specified prices. The Company's
aggregate commitment under sales agreements was approximately $21.4 million
and $14.0 million at January 28, 1995 and October 29, 1994, respectively.
The Company also has agreements with certain of its suppliers to purchase
raw materials. The agreements extend for up to one year and provide the
price and quantity of materials to be supplied. The Company had purchase
commitments of approximately $13.6 million and $15.8 million at January 28,
1995 and October 29, 1994, respectively.
On January 27, 1995, Country Fed Meat Company, Inc. (CFM) initiated a
lawsuit against Rymer Foods Inc. d/b/a/ Rymer Meat Inc. (Rymer) in the
Superior Court of Fayette County, Georgia, essentially alleging that Rymer
was in breach of contract to supply certain meat products to CFM. In March
1995, this case was removed to the United States District Court for
Georgia. The complaint seeks damages in an as yet undetermined amount.
Rymer has not yet filed a responsive pleading.
7.
<PAGE>
On February 21, 1995, Rymer Meat Inc. sued CFM in the United States
District Court for the Northern District of Illinois, seeking damages in
the amount of $1,716,360 for meat products sold to CFM from April 1994
through January 1995, but not paid for. At the same time, Rymer
International Seafood Inc. also sued CFM in the same court, but in a
separate action, seeking damages of $242,775 for seafood products sold to
CFM during January and February of 1995, but not paid for. CFM has not
filed a responsive pleading to either of these lawsuits.
In the opinion of Rymer's management, Rymer is not in default under any
agreement with CFM, and, if the negotiations described below do not result
in a settlement of these lawsuits, Rymer intends to contest CFM's complaint
in federal court in Georgia and to vigorously pursue the lawsuits brought
by Rymer Meat and Rymer Seafood (together, the Rymer Entities) in federal
court in Illinois.
The Rymer Entities are currently negotiating with CFM for the purpose of
settling all outstanding lawsuits. Although no final agreement of
settlement has yet been reached, and there can be no assurance that such an
agreement will be reached, Rymer's management believes that the Company's
allowance for doubtful accounts contains sufficient reserves without
additional charges to earnings to resolve these items. Also, there is a
high probability that CFM will cease to be a customer of the Rymer
Entities. CFM has been one of Rymer's major customers and during its 1994
fiscal year accounted for approximately 8% of its sales. During the first
quarter of 1995, CFM accounted for approximately 7% of the Company's sales.
8.
<PAGE>
Notes to Financial Statements (unaudited) -- cont'd.
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
ASSUMING PRIMARY DILUTION ASSUMING FULL DILUTION
--------------------------------------------------------
Thirteen Weeks Ended Thirteen Weeks Ended
---------------------- ----------------------
January 28, January 29, January 28, January 29,
1995 1994 1995 1994
---------- ---------- ----------- -----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING
1 Average shares outstanding 10,741 10,503 10,741 10,503
2 Net additional shares outstanding
assuming exercise of stock options 297 143 297 143
------- ------- ------- --------
3 Average number of common shares
outstanding 11,038 10,646 11,038 10,646
------- ------- ------- --------
------- ------- ------- --------
EARNINGS
4 Income (loss) from continuing
operations $ (629) $ 76 $ (629) $ 76
------- ------- ------- --------
------- ------- ------- --------
5 Loss from discontinued
operations, net of income tax $ - $ (466) $ - $ (466)
------- ------- ------- --------
------- ------- ------- --------
6 Gain on dispositions of discontinued
operations, net of income tax $ - $ 4,474 $ - $ 4,474
------- ------- ------- --------
------- ------- ------- --------
7 Net income (loss) $ (629) $ 4,084 $ (629) $ 4,084
------- ------- ------- --------
------- ------- ------- --------
PER SHARE AMOUNTS
Income (loss) from continuing
operations (line 4 / line 3) $ (.06) $ .01 $ (.06) $ .01
------- ------- ------- --------
------- ------- ------- --------
Loss from discontinued
operations, net of income tax
(line 5 / line 3) $ - $ (.04) $ - $ (.04)
------- ------- ------- --------
------- ------- ------- --------
Gain on dispositions of discontinued
operations, net of income tax
(line 6 / line 3) $ - $ .42 $ - $ .42
------- ------- ------- --------
------- ------- ------- --------
Net income (loss)
(line 7 / line 3) $ (.06) $ .38 $ (.06) $ .38
------- ------- ------- --------
------- ------- ------- --------
<FN>
NOTE 1 - Earnings per share for both years were calculated by the Treasury Stock
Method because the number of shares obtainable upon the exercise of outstanding
common stock options and similar instruments was less than 20% of the number of
common shares outstanding at the end of the period.
</TABLE>
9.
<PAGE>
RYMER FOODS INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company's consolidated results from operations are generated by its
Processing segment and by its Seafood Importing and Distributing segment. The
Processing segment consists of the Meat processing operation. The Seafood
operation comprises the Seafood Importing and Distributing segment.
FIRST QUARTER OF 1995 VERSUS FIRST QUARTER OF 1994
Consolidated sales for the first quarter of 1995 of $35.9 million decreased from
the first quarter of 1994 by $1.6 million or 4.4%. Sales for the Meat operation
decreased by 4.7% and sales for the Seafood operation decreased by 3.9%. On a
consolidated basis, lower unit sales accounted for the majority of the sales
decrease while lower selling prices accounted for the remainder.
The Meat operation experienced a sales decrease of approximately $1.1 million
due to lower selling prices and a lower priced mix of products sold. Unit sales
for the Meat operation were approximately equal to a year ago.
The Seafood operation experienced a decrease in sales of $0.5 million primarily
due to a 14% decrease in unit sales which was partially offset by the effect of
a 12% increase in selling prices. Selling prices increased due to a supply
shortage in most shrimp producing countries and due to the weakness of the U.S.
Dollar as compared to certain foreign currencies, particularly the Japanese Yen.
As compared to the first quarter of 1994, consolidated cost of sales decreased
by $0.9 million or 2.5% while total gross profit decreased by $0.8 million. As
a percentage of sales, the consolidated gross margin decreased to 7.9% compared
to 9.6% a year ago.
Gross profit for the Meat operation decreased by $0.8 million compared to 1994
primarily due to lower selling prices for home delivery sales and mix changes in
sales to national restaurant chain accounts.
Gross profit for the Seafood operation remained approximately the same as the
first quarter of 1994.
Selling, general and administrative expenses decreased in total by $40,000 or
1.5% compared to 1994. Administrative expenses increased by $.1 million
primarily resulting from increased bad debt expense which was partially offset
by lower salary expense. Selling expenses decreased by $.2 million primarily
due to a decrease in expenses related to the Company's retail products sold in
grocery and wholesale club stores.
At the end of the first quarter of 1995, certain issues between the Company and
one of its largest customers, Country Fed Meat Company, Inc. (CFM), resulted in
certain lawsuits being filed, as described more fully in Note 6 to the condensed
consolidated financial statements. The Company is currently negotiating with
CFM for the purpose of settling all outstanding lawsuits. Although no final
agreement of settlement has yet been reached, and there can be no assurance that
such an agreement will be reached, Rymer's management believes that the
Company's allowance for doubtful accounts contains sufficient reserves without
additional charges to earnings to resolve these items. Also, there is a high
probability that CFM will cease to be a customer of the Company. CFM has been
one of Rymer's major customers and during its 1994 fiscal year accounted for
approximately 8% of its sales. During the first quarter of 1995, CFM accounted
for approximately 7% of the Company's sales.
INTEREST EXPENSE
Interest expense decreased by $5,000 or 0.5% compared to a year ago. In
connection with the reclassification of the
10.
<PAGE>
operating results of the Company's chicken processing operations to discontinued
operations in the first quarter of 1994, a portion of interest expense related
to the Company's unsecured debt was allocated to discontinued operations.
Interest expense on unsecured debt allocated to the loss from discontinued
operations amounted to approximately $185,000 in the first quarter of 1994.
After giving effect to this allocation, interest expense decreased by $190,000
or 15.8% compared to 1994 reflecting primarily the effect of lower borrowings
under the Company's bank lines of credit offset partially by the effect of
increases in the prime lending rate charged by banks as compared to 1994. In
addition, approximately $50,000 of this decrease was attributable to a reduction
in the outstanding principal amount of the Company's 11% Senior Notes. The
Company redeemed $1,050,000 of these notes in June, 1994 and $2,250,000 in
December, 1994.
DISCONTINUED OPERATIONS
The Company sold its Van Buren, Arkansas chicken processing operations (Rymer
Chicken) during the first quarter of 1994 at a gain of $4 million before income
taxes. During the first quarter of 1994, the Company also sold stock (which it
had received in connection with the sale of its Murry's, Inc. subsidiary in
1989) at a gain of $0.7 million before income taxes. The Company recorded a
provision for income taxes related to these dispositions of $0.2 million which
resulted in a net gain on dispositions of discontinued operations of $4.5
million after income taxes.
The Company incurred losses related to its discontinued chicken processing
operations during the first quarter of 1994 of $0.5 million. The 1994 loss
reflects operating results through the sale date of December 10, 1993.
The Company is actively pursuing the sale of its Plant City, Florida property at
an amount in excess of its net book value of $1.6 million.
OTHER INCOME
The Company earned other income of $181,000 and $152,000 during the first
quarters of 1995 and 1994, respectively. Other income in both years is
comprised primarily of consulting fees. In connection with the Sale of Rymer
Chicken, the Company entered into a consulting agreement with Simmons. The
Company recorded income of $97,000 and $77,000 under this agreement in the first
quarters of 1995 and 1994, respectively. In connection with the sale of Murry's
stock, the Company entered into a three year consulting agreement with Murry's,
Inc. The Company earned income of $75,000 and $63,000 related to this agreement
during the first quarters of 1995 and 1994, respectively.
INCOME TAXES
In 1995 no provision for income taxes was recorded due to the loss from
operations.
The 1994 provision for income taxes amounted to $0.2 million which related
primarily to the gain arising from the Sale of Rymer Chicken in the first
quarter.
Effective with the first quarter of 1994, the Company adopted the provisions of
SFAS 109. (See Note 5 to the consolidated financial statements.)
The Company has operating loss carryforwards for tax reporting purposes which
are available to reduce Federal taxable income. Accordingly, the income tax
provision for the first quarter of 1994 of $189,000 represents the expected
Federal alternative minimum tax liability related to income earned during the
quarter. Of this amount, $2,000 related to income from continuing operations
and $187,000 related primarily to the gain on the Sale of Rymer Chicken.
LIQUIDITY AND CAPITAL RESOURCES
The Company makes sales primarily on a seven to thirty day balance due basis.
Purchases from suppliers have payment terms generally ranging from wire transfer
to fourteen days including the use of letters of credit for purchases of
imported seafood.
11.
<PAGE>
The Company's cash management techniques involve the use of zero balance
disbursement accounts. Check clearings are covered by advances from the
Company's credit lines. Thus, in the absence of excess funds classified as cash
equivalents, the Company's cash balances are credit balance accounts
representing outstanding checks. The Company classified such credit balances as
accounts payable in the consolidated financial statements as of January 28,
1995.
At October 29, 1994, there was no loan outstanding under the Company's primary
credit line with BA Business Credit, Inc. (BABC) and the Company had a balance
of cash and cash equivalents of $2.5 million. The Company had a bank loan
outstanding at October 29, 1994 of $5.8 million under its line of credit at
LaSalle National Bank LaSalle) for Rymer International Seafood. The Company's
excess funds were not used to reduce this loan due to restrictions under the
Company's bank agreements.
The Company's net working capital at January 28, 1995 was $16.1 million compared
to $16.0 million at October 29, 1994. Cash decreased by $2.5 million and
accounts receivable decreased by $0.1 million while inventories increased by
$7.4 million, other current assets increased by $0.1 million, and current
liabilities increased by $4.8 million.
Inventories of Rymer Meat increased by $9.1 million while inventories of Rymer
Seafood decreased by $1.7 million. Meat inventories increased primarily due to
seasonal factors. The Meat operation purchased inventories needed to fulfill
future sales commitments during the first quarter while market conditions were
favorable. Seafood inventories declined primarily due to decreases in
inventories related to supply contracts with certain customers. As certain
contracts have not yet been finalized, inventories have not been replenished to
fulfill such sales commitments.
Accounts receivable decreased for the Seafood operation by $0.1 million
primarily due to seasonal sales fluctuations. Receivables for the Meat
operation remained approximately the same as at October 29, 1994.
Current liabilities increased primarily due to an increase of $8.0 million in
amounts outstanding under bank lines of credit which was partially offset by a
decrease in current maturities of Senior Notes of $2,250,000. The Company
redeemed these notes in December 1994 using funds available under bank lines of
credit. The Company's bank debt is classified as current at both January 28,
1995 and October 29, 1994 due to the maturity of credit agreements with BABC and
LaSalle on April 7, 1995.
The Company is negotiating to replace its current credit facilities of $20
million provided by BABC and $12.5 million provided by LaSalle with a $35
million credit facility to be provided principally by LaSalle. The proposed
credit line facility, with an initial term of two years, has lower interest
rates and reduced lending restrictions as compared to the existing facilities.
On February 1, 1995, Rymer Seafood entered into the Seventh Amendment to its
credit agreement with LaSalle which extended the agreement until April 7, 1995.
In addition, the amendment decreased the annual interest rate charged from 1%
over prime to 1/2% over prime. The Company expects to replace the existing
credit facilities on April 7, 1995.
Availability under these facilities and replacement facilities currently being
negotiated are expected by management to provide sufficient resources to meet
the Company's working capital needs through the next year. In future years, the
Company expects to utilize cash flows from operations to retire the Senior Notes
which mature on December 15, 2000 and to meet other long-term capital
requirements.
Accounts payable increased by $0.7 million primarily due to the classification
of credit balance accounts representing outstanding checks as accounts payable
at January 28, 1995 and as a reduction to cash balances at October 29, 1994.
Accrued liabilities decreased by $1.6 million primarily due to the semi-annual
payment of interest on the Company's Senior Notes on December 15, 1994.
At January 28, 1995, the Company had $24.2 million in total credit lines
available, $7.7 million of which was unused. At October 29, 1994, the Company
had $20.1 million in total credit lines available, $12.5 million of which was
unused.
Unused availability under credit lines reflects a reduction for letters of
credit outstanding of approximately $2.7 million and $1.7 million at January 28,
1995 and October 29, 1994, respectively.
Under its Senior Note Indenture, the Company made a mandatory redemption of its
Senior Notes of $2,250,000 on December 29, 1994.
12.
<PAGE>
The Company has agreements with certain of its customers to sell merchandise
over the next year for specified prices. The Company's aggregate commitments
under sales agreements were approximately $21.4 million and $14.0 million at
January 28, 1995 and October 29, 1994, respectively. The Company also has
agreements with certain of its suppliers to purchase raw materials. The
agreements extend for up to one year and provide the price and quantity of
materials to be supplied. The Company had purchase commitments of approximately
$13.6 million and $15.8 million as of January 28, 1995 and October 29, 1994,
respectively.
At October 29, 1994, the Company had an operating loss carryforward for tax
reporting purposes of approximately $33 million. See Note 8 to the consolidated
financial statements included in the Company's Annual Report on Form 10-K for
the year ended October 29, 1994 for expiration dates of the carryforwards. The
utilization of operating loss carryforwards is expected to enhance future cash
flow by reducing cash outlays which would otherwise be required for income tax
payments.
The Company anticipates spending a total of approximately $600,000 for capital
expenditures in 1995. The expenditures are primarily for planned improvements
at the Meat operation. There are no specific commitments outstanding related to
these planned expenditures.
SEASONALITY
The quarterly results of the Company are affected by seasonal factors. Sales
are usually lower in the fall and winter.
IMPACT OF INFLATION
Raw materials are subject to fluctuations in price. However, the Company does
not expect such fluctuations to materially impact its competitive position.
13.
<PAGE>
RYMER FOODS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 27, 1995, Country Fed Meat Company, Inc. (CFM) initiated a
lawsuit against Rymer Foods Inc. d/b/a/ Rymer Meat Inc. (Rymer) in the
Superior Court of Fayette County, Georgia, essentially alleging that Rymer
was in breach of contract to supply certain meat products to CFM. In March
1995, this case was removed to the United States District Court for
Georgia. The complaint seeks damages in an as yet undetermined amount.
Rymer has not yet filed a responsive pleading.
On February 21, 1995, Rymer Meat Inc. sued CFM in the United States
District Court for the Northern District of Illinois, seeking damages in
the amount of $1,716,360 for meat products sold to CFM from April 1994
through January 1995, but not paid for. At the same time, Rymer
International Seafood Inc. also sued CFM in the same court, but in a
separate action, seeking damages of $242,775 for seafood products sold to
CFM during January and February of 1995, but not paid for. CFM has not
filed a responsive pleading to either of these lawsuits.
In the opinion of Rymer's management, Rymer is not in default under any
agreement with CFM, and, if the negotiations described below do not result
in a settlement of these lawsuits, Rymer intends to contest CFM's complaint
in federal court in Georgia and to vigorously pursue the lawsuits brought
by Rymer Meat and Rymer Seafood (together, the Rymer Entities) in federal
court in Illinois.
The Rymer Entities are currently negotiating with CFM for the purpose of
settling all outstanding lawsuits. Although no final agreement of
settlement has yet been reached, and there can be no assurance that such an
agreement will be reached, Rymer's management believes that the Company's
allowance for doubtful accounts contains sufficient reserves without
additional charges to earnings to resolve these items. Also, there is a
high probability that CFM will cease to be a customer of the Rymer
Entities. CFM has been one of Rymer's major customers and during its 1994
fiscal year accounted for approximately 8% of its sales. During the first
quarter of 1995, CFM accounted for approximately 7% of the Company's sales.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed:
10.1 Seventh Amendment to Loan and Security Agreement dated as of
February 1, 1995 between Rymer International Seafood Inc. and
LaSalle National Bank.
11 Computations of earnings per share are included in the Notes to
Condensed Consolidated Financial Statements included in Item 1 of
this Form 10-Q.
Exhibits incorporated by reference:
13.1 Annual Report on Form 10-K of Rymer Foods Inc. for the fiscal year
ended October 29, 1994 (Incorporated by reference).
21.1 Subsidiaries of the Company. (Incorporated by reference to Exhibit
22 to the Annual Report of Form 10-K of Rymer Foods Inc. dated
January 28, 1995.)
(b) Reports on Form 8-K:
None
14.
<PAGE>
RYMER FOODS INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RYMER FOODS INC.
(Registrant)
By /s/ Ludwig A. Streck
-----------------------------------
Ludwig A. Streck, Senior Vice President and
Chief Financial Officer
Date: March 13, 1995
15.
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