<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 April 27, 1996
-------------------------------------------------
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 10,754,086 shares of common stock outstanding as of June 10,
1996.
- --------------------------------------------------------------------------------
This report consists of 20 pages.
1.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
RYMER FOODS INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
April 27, October 28,
1996 1995
--------- -----------
(in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Receivables, net $ 2,688 $ 4,678
Inventories 4,965 12,119
Assets held for sale, net 2,531 2,531
Other 449 766
-------- --------
TOTAL CURRENT ASSETS 10,633 20,094
-------- --------
PROPERTY, PLANT AND EQUIPMENT:
Buildings and improvements 1,735 1,441
Machinery and equipment 6,661 6,555
-------- --------
8,396 7,996
Less accumulated depreciation and amortization 6,529 6,008
-------- --------
1,867 1,988
-------- --------
OTHER:
Assets held for sale or lease 1,600 1,600
Other 713 920
-------- --------
$ 14,813 $ 24,602
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt:
Banks $ 3,230 $ 8,127
Senior Notes 19,765 18,133
Other, primarily amounts to related parties 186 673
Accounts payable 480 829
Accrued liabilities 2,939 4,328
-------- --------
TOTAL CURRENT LIABILITIES 26,600 32,090
-------- --------
LONG-TERM DEBT:
Other 70 70
OTHER NON-CURRENT LIABILITIES 731 772
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $1 par - 20,000,000 shares
authorized; 10,754,086 shares outstanding
in 1996 and 10,753,934 shares outstanding
in 1995 after deducting treasury shares of
225,031 in 1996 and 225,183 in 1995 10,754 10,754
Additional paid-in capital 44,363 44,363
Retained deficit (67,705) (63,041)
Notes receivable from sale of common shares
to related parties - (406)
-------- --------
TOTAL STOCKHOLDERS' DEFICIT (12,588) (8,330)
-------- --------
$ 14,813 $ 24,602
-------- --------
-------- --------
</TABLE>
See accompanying notes.
2.
<PAGE>
RYMER FOODS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
---------------------- ----------------------
April 27, April 29, April 27, April 29,
1996 1995 1996 1995
---------- ---------- ---------- ----------
(Restated) (Restated)
(in thousands except per share data)
<S> <C> <C> <C> <C>
Net sales $10,689 $19,521 $22,668 $41,500
Cost of sales 10,918 17,436 22,917 37,274
------- ------- ------- -------
Gross profit (loss) (229) 2,085 (249) 4,226
Selling, general and
administrative expenses 1,189 2,677 2,513 4,876
------- ------- ------- -------
Operating loss (1,418) (592) (2,762) (650)
Interest expense 1,051 957 2,061 1,776
Other income - (129) (6) (313)
------- ------- ------- -------
Loss from continuing operations (2,469) (1,420) (4,817) (2,113)
Income from discontinued operations 121 312 153 376
------- ------- ------- -------
Net loss $(2,348) $(1,108) $(4,664) $(1,737)
------- ------- ------- -------
------- ------- ------- -------
Per common share data:
Primary:
Loss from continuing operations $ (.23) $ (.13) $ (.45) $ (.19)
------- ------- ------- -------
------- ------- ------- -------
Net loss $ (.22) $ (.10) $ (.43) $ (.16)
------- ------- ------- -------
------- ------- ------- -------
Fully diluted:
Loss from continuing operations $ (.23) $ (.13) $ (.45) $ (.19)
------- ------- ------- -------
------- ------- ------- -------
Net loss $ (.22) $ (.10) $ (.43) $ (.16)
------- ------- ------- -------
------- ------- ------- -------
Average shares outstanding
Primary 10,754,000 10,895,000 10,754,000 10,975,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Fully diluted 10,754,000 10,895,000 10,754,000 10,975,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes.
3.
<PAGE>
RYMER FOODS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
------------------------------
April 27, 1996 April 29, 1995
-------------- --------------
(Restated)
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss from continuing operations $(4,817) $ (2,113)
Non-cash adjustments to income (loss):
Depreciation 521 295
Amortization of other assets 100 892
Other non-cash expense (income) - (15)
Provision for bad debts 166 540
Payment-in-kind interest on Senior Notes 1,730 -
Net decrease (increase) to accounts receivable 1,824 (439)
Net decrease (increase) to inventories 7,155 (9,346)
Net decrease to other current and long-term assets 423 142
Net decrease to accounts payable and accrued expenses (1,834) (1,680)
------- --------
Net cash flows from operating activities of
continuing operations 5,268 (11,724)
Net cash flows from operating activities of
discontinued operations 3,278 (403)
------- --------
NET CASH FLOWS FROM OPERATING ACTIVITIES 8,546 (12,127)
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (400) (344)
Other (34) (9)
Net cash flows from investing activities of discontinued operations (5) (24)
------- --------
NET CASH FLOWS FROM INVESTING ACTIVITIES (439) (377)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under line-of-credit facilities (4,897) 13,492
Principal payments on debt (81) (2,270)
Proceeds from borrowings - 25
Proceeds from issuance of common stock - 22
Net cash flows from financing activities
of discontinued operations (3,129) (606)
------- --------
NET CASH FLOWS FROM FINANCING ACTIVITIES (8,107) 10,663
------- --------
Net change in cash and cash equivalents - (1,841)
Cash and cash equivalents balance at beginning of year - 1,841
------- --------
Cash and cash equivalents balance at end of second quarter $ - $ -
------- --------
------- --------
Supplemental cash flow information:
Interest paid $ 316 $ 1,596
------- --------
------- --------
Income taxes paid, net of refunds $ 15 $ 632
------- --------
------- --------
</TABLE>
See accompanying notes.
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 28, 1995.
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. GOING CONCERN
The accompanying condensed consolidated financial statements have been
prepared assuming the Company will continue as a going concern.
In the first half of 1996, the Company reported a decrease in net sales
from continuing operations as compared to the first half of 1995 of 45%
principally due to the loss of certain major customers and increased
competition. In 1995, the Company reported a net loss from continuing
operations of $29.6 million, its fourth loss from continuing operations
before extraordinary item in the last five years. In the first quarter of
1996, the Company was informed that its supply contracts with restaurants
owned by Darden Restaurants would not be renewed. Sales to these
restaurant chains comprised approximately 21.5% and 15.7% of net sales from
continuing operations in the first half of 1996 and 1995, respectively. At
April 27, 1996, the Company had a stockholders' deficit of $12.6 million.
As explained more fully in Note 6, the Company was not in compliance at
July 29, 1995, October 28, 1995 and January 27, 1996 with certain covenants
contained in the loan agreement between the Company and LaSalle National
Bank (LaSalle). It is likely that in 1996, the Company will continue to be
in violation of certain covenants contained in the loan agreement, unless
such covenants are modified or waived. The Company is renegotiating
certain of these covenants, but there is no assurance that it will be
successful in this regard. In addition, an event of default under the
LaSalle Agreement and a cross-default under the Senior Note Indenture
existed at January 27, 1996 and October 28, 1995 due to the non-payment of
certain notes to former affiliates in January 1996 (See Note 6). The
Company received a waiver of such event of default under the Indenture in
March 1996 with an effective date as of February 8, 1996. The payment
terms of these notes were revised during the second quarter of 1996.
These conditions raise substantial doubt about the Company's ability to
continue operating as a going concern. The accompanying condensed
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Management believes that the Company's future success is dependent upon
reversing the sales decline experienced in 1995 and the first half of 1996
and the continued reduction of operating costs. The Company is pursuing
new sales opportunities while continuing to streamline its production
process and reduce other costs. Significant expense and personnel
reductions implemented during the fourth quarter of 1995, including an
approximate 20% reduction of the Company's work force, are expected to
reduce wage, salary and other expenses by approximately $4.0 million in
1996.
5.
<PAGE>
3. RECEIVABLES
Receivables are net of allowances for doubtful accounts of $519,000 at
April 27, 1996 and $353,000 at October 28, 1995.
4. INVENTORIES
Inventories are stated principally at the lower of first-in, first-out cost
or market. The composition of inventories at April 27, 1996 and October
28, 1995 was:
<TABLE>
<CAPTION>
April 27, 1996 October 28, 1995
-------------- ----------------
(in thousands)
<S> <C> <C>
Raw materials $2,353 $ 6,415
Finished goods 2,612 5,704
------ -------
Total $4,965 $12,119
------ -------
------ -------
</TABLE>
5. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE OR LEASE
The accompanying consolidated financial statements reflect the operations
of the Company's Seafood subsidiary as a discontinued operation for
accounting purposes.
RYMER INTERNATIONAL SEAFOOD
On January 5, 1996, the Company announced that it had signed an agreement
in principle to sell the assets of Rymer Seafood (Sale of Rymer Seafood) to
an entity to be formed by the current President of Rymer Seafood. The
agreement specifies that the sales price for the assets, based on balances
as of April 27, 1996, will be approximately $9.5 million, consisting of
$1.5 million in cash, $1.5 million in a ten year subordinated note of the
buyer and the assumption by the buyer of approximately $5.1 million in bank
debt and $1.4 million of other current liabilities. During the fourth
quarter of 1995, the Company recorded a loss of $1.5 million to reduce the
carrying value of the net assets of Rymer Seafood to their estimated net
realizable value of $2.5 million. Consummation of the transaction is
subject to a variety of conditions, including negotiation of definitive
documentation and approval by the holders of 66 2/3% of the outstanding
Common Stock of the Company and the holders of a majority of Rymer's
outstanding 11% Senior Notes. The Company plans to proceed with
solicitation of these approvals and, if obtained, to complete the Sale of
Rymer Seafood during the third quarter of 1996.
RYMER CHICKEN - PLANT CITY
During 1992, the Company decided to place its idle Plant City chicken
facility and equipment for sale.
In January 1996, the Company entered into an agreement to lease the Plant
City facility for a period of ten years. The lease of the property has
not been finalized and there can be no assurances in this regard.
The present value of the cash flows under the lease agreement supports
the carrying value of the property of $1.6 million. Rymer Chicken-Plant
City assets are classified as assets held for sale or lease at both
April 27, 1996 and October 28, 1995.
Reserves established in 1992 and 1993 are considered adequate to maintain
the idle facility. The Company incurred costs related to maintaining the
idle facility of approximately $25,000 during the first half of 1996 and
$34,000 during the first half of 1995 which were charged to the reserve
established for such losses during fiscal 1992 and 1993.
6.
<PAGE>
<TABLE>
<CAPTION>
April 27, October 28,
1996 1995
--------- -----------
(in thousands)
Current Assets Held for Sale
----------------------------
<S> <C> <C>
RYMER INTERNATIONAL SEAFOOD:
Receivables $ 4,661 $ 6,537
Inventories 5,696 6,866
Other current assets 12 8
------- -------
Total current assets 10,369 13,411
Net property, plant and
equipment 37 43
------- -------
Total assets 10,406 13,454
Less: current liabilities (6,403) (9,451)
------- -------
Net current assets held for sale
before loss on disposition 4,003 4,003
Less: reserve for loss on dis-
position of assets held for sale (1,472) (1,472)
------- -------
Net current assets held for sale $ 2,531 $ 2,531
------- -------
------- -------
</TABLE>
Sales for the discontinued Rymer International Seafood operation reflected
in the accompanying condensed Consolidated Statements of Operations were
$31.4 million in the first half of 1996 and $30.6 million in the first half
of 1995.
6. LONG-TERM DEBT AND LINES OF CREDIT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
April 27, October 28,
1996 1995
--------- -----------
<S> <C> <C>
Banks, with interest of 1/2% over
prime in 1996 and 1995 $ 3,230 $ 8,127
Senior Notes due December 15, 2000,
with interest at 18% 19,765 18,133
Other, including capitalized leases
and amounts to related parties
Due to former executives under restructured
employment and consulting agreements 186 656
Other 70 87
------- -------
23,251 27,003
Less amounts classified as current 23,181 26,933
------- -------
$ 70 $ 70
------- -------
------- -------
</TABLE>
As of January 27, 1996, October 28, 1995 and July 29, 1995, the Company was
in violation of certain covenants under its Loan and Security Agreement
with LaSalle. LaSalle agreed to waive these covenant violations for the
third quarter of 1995. The Company was charged a financing fee in
connection with execution of this waiver.
On January 5, 1996, LaSalle and the Company entered into the Forbearance
Agreement and Amendment. Under this agreement, which was subsequently
amended, LaSalle agreed to temporarily forbear from exercising its remedies
under the Loan and Security Agreement. In addition, the Loan Agreement was
amended to, among other things, reduce advance rates for inventories and,
for purposes of computing interest, loan payments are applied by the bank
on the second business day after available funds are received.
7.
<PAGE>
On February 7, 1996, LaSalle and the Company entered into an Amendment to
the Forbearance Agreement (Letter Agreement). In the Letter Agreement,
LaSalle agreed to waive certain financial covenant violations and the
resulting events of default as of October 28, 1995. The Forbearance
Agreement and the Letter Agreement were executed on the assumption that no
other events of default existed under the loan agreement. As discussed
below, the Company subsequently determined that another event of default
under the loan agreement existed at the time of the execution of these
agreements. This event of default related to the non-payment of certain
notes payable to former executives of the Company (the Affiliate Debt
default). On February 22, 1996, the Company received a letter from LaSalle
confirming that the waiver as of October 28, 1995 contained in the Letter
Agreement was valid for the events of default specified in the Forbearance
Agreement despite the subsequent determination of the Affiliate Debt
default. As discussed below, the Company has negotiated revised payment
terms for the Affiliate Debt. Accordingly, the Company's indebtedness
under the LaSalle agreement may not be accelerated due to non-payment of
the Affiliate Debt.
In the Letter Agreement, LaSalle also agreed to amend the Loan and Security
Agreement in order to revise the next test date for the financial covenants
to be as of February 24, 1996. On March 12, 1996, the Company and LaSalle
entered into an Amendment to Loan Agreement that modified certain
provisions of the Loan and Security Agreement between the Company and
LaSalle, including covenants relating to financial amounts and ratios. The
Company was in compliance with such modified financial covenants, as of
April 27, 1996. However, there is no assurance that the Company will
remain in compliance with the covenants, as modified. LaSalle has the
right, upon the occurrence of an event of default, to terminate the credit
facility and declare all loans due and payable on demand. The Company's
bank indebtedness and indebtedness under the Senior Notes have been
classified as current liabilities at both April 27, 1996 and October 28,
1995.
In January 1996, the Company did not make required payments of $255,000
under notes payable due to former executives (Affiliate Debt). The
Affiliate Debt is related to certain amended employment and consulting
agreements between the Company and former executives (See Note 11 to the
Consolidated Financial Statements in the Company's Annual Report on Form
10-K for the year ended October 28, 1995). The Company deferred payment of
this debt in order to conserve cash for use in operation of its business.
The Company has continued to accrue interest on the debt at 9.5%. The
non-payment of the Affiliate Debt caused cross-defaults under the Loan and
Security Agreement with LaSalle and under the Senior Note Indenture. While
LaSalle did not waive this default, no action was taken by LaSalle as a
result of the default. In March and April 1996, the Company made partial
payments to the former executives. The Company has negotiated revised
payment terms with the former executives whereby the remaining debt due to
them will be paid in installments.
In March of 1996, the Company entered into Supplement No. 1 to the
Indenture (Supplemental Indenture) with Continental Stock Transfer and
Trust Company as Trustee for the Senior Notes which was dated as of
February 8, 1996. The Supplemental Indenture, which received the approval
of a majority of the Senior Note holders, amended the Indenture to exclude
the non-payment of the Affiliate Debt, and the resulting cross-default
under any other debt that arises by reason of non-payment of the Affiliate
Debt, from the definition of events of default under the Indenture. If
another event of default occurs and continues under the Company's bank
agreement with LaSalle, however, it would constitute an event of default
under the Indenture, enabling the Trustee or the holders of 25% in
aggregate principal amount of the Notes to declare the Notes to be
immediately due and payable.
The Senior Notes were issued pursuant to the Indenture between the Company
and Continental Stock Transfer and Trust Company, as Trustee (the
Indenture). The Senior Notes bear interest at 11% payable semi-annually in
arrears on June 15 and December 15. Through December 15, 1996, the Company
may issue additional Senior Notes in payment of interest to the extent that
the Company lacks sufficient available cash (as defined in the Indenture)
to pay the interest in cash. For interest paid by the issuance of
additional Senior Notes after June 15, 1993, and through December 15, 1996,
the interest rate will be increased to 18% per annum.
At April 27, 1996 and October 28, 1995, the Company had a bank loan of $3.2
million and $8.1 million, respectively, outstanding under its line of
credit with LaSalle for Rymer Meat. In addition, as of April 27, 1996
8.
<PAGE>
and October 28, 1995, $5.1 million and $8.2 million, respectively, was
outstanding under the LaSalle line of credit for Rymer Seafood. According
to the proposed agreement to sell Rymer Seafood, the loan balance for Rymer
Seafood is to be assumed by the buyers of Rymer Seafood.
The Company's continuing Rymer Meat subsidiary had total lines of credit
available under notes payable of $3.7 million at April 27, 1996 and $11.7
million at October 28, 1995 of which $0.5 million and $3.6 million,
respectively, was unused.
The Company's discontinued Seafood subsidiary had total lines of credit
available under notes payable of $9 million at April 27, 1996 and $10.8
million at October 28, 1995 of which $1.5 million and $1.1 million,
respectively, was unused.
Total availability under credit lines is reduced by the amount of letters
of credit outstanding. Letters of credit are used primarily for purchases
of seafood inventory from foreign sources. Rymer Seafood had letters of
credit outstanding totalling approximately $2.4 million and $1.5 million at
April 27, 1996 and October 28, 1995, respectively.
The following table summarizes the activity of the Company's Senior Notes
(in thousands):
<TABLE>
<S> <C>
Senior Notes originally issued in connection
with the 1993 Restructuring $19,977
Interest payment-in-kind on June 15, 1993 1,456
Mandatory redemptions:
June 1994 (1,050)
December 1994 (2,250)
-------
Senior Note principal outstanding at October 28, 1995 18,133
Interest payment-in-kind on December 15, 1995 1,632
-------
Senior Note principal outstanding at April 27, 1996 $19,765
-------
-------
</TABLE>
On December 15, 1995, the Company announced that, as permitted by the terms
of its 11% Senior Notes due December 15, 2000, it had elected to make its
December 15, 1995 interest payment on its Senior Notes by issuing
additional Senior Notes in a principal amount equal to the interest payment
due of $1,632,000. According to the Senior Note Indenture, such an
election requires the Company to pay its interest at a rate of 18% versus
the 11% rate applicable if the interest was paid in cash. Accordingly, the
Company recorded an additional interest charge of approximately $470,000 in
the fourth quarter of 1995 related to this interest payment. The Company
does not expect to have funds available to pay its June 15, 1996 or
December 15, 1996 Senior Note interest payments in cash. Accordingly, the
Company is accruing interest expense on the Senior Notes at a rate of 18%
for fiscal 1996.
The Company may seek to restructure the terms of its 11% Senior Notes in an
effort to improve its liquidity. This restructuring could involve the
conversion of some or all of the Company's senior notes into equity. There
can be no assurances, however, that such a restructuring will occur.
The notes payable to former executives under the restructured employment
and consulting agreements were amended in connection with the Restructuring
(See Note 11 to the Consolidated Financial Statements in the Company's
Annual Report on Form 10-K for the year ended October 28, 1995). At
October 28, 1995, the balance consisted of unsecured notes totalling
$406,000 which bore interest at 9.5% per annum and matured on January 2,
1996 and non-interest bearing notes with a face value of $255,000 which
were due and payable on January 2, 1996. As discussed previously, the
Company did not make the required payments under these notes on January 2,
1996. However, the Company negotiated revised payment terms and made
partial payments under these notes in March and April of 1996.
The interest bearing notes payable were equal to, and were offset on
January 2, 1996 against, notes receivable
9.
<PAGE>
owed to the Company by the executives under stock purchase agreements. The
notes receivable also bore interest at 9.5% per annum and were due January
1, 1996.
7. INCOME TAXES
In both 1996 and 1995, no provision for income taxes was recorded due to
the loss from operations. The components of the net deferred tax asset
recorded in the accompanying balance sheet as of April 27, 1996 has not
changed significantly from balances as of October 28, 1995. The Company
did not record any income tax benefit during the first half of 1996 because
of the uncertainty of the utilization of the benefit. The Company
continues to record a full valuation allowance for its deferred tax asset
so that the balance of the net deferred tax asset at both April 27, 1996
and October 28, 1995 is zero.
8. 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 $1.7 million
and $4.1 million at April 27, 1996 and October 28, 1995, 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 $1.6 million and $2.9 million at April 27,
1996 and October 28, 1995, respectively.
10.
<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 meat
processing operation.
GOING CONCERN
The accompanying condensed consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note 2
to the condensed consolidated financial statements, certain conditions raise
substantial doubt about the Company's ability to continue operating as a going
concern. The accompanying condensed consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
FIRST HALF OF 1996 VERSUS FIRST HALF OF 1995
Consolidated sales for the first half of 1996 of $22.7 million decreased from
the first half of 1995 by $18.8 million or 45%. Sales decreased primarily due
to reduced sales volume due to increased competition. A significant portion of
the sales volume decrease resulted from the termination of sales to a major
customer during the second quarter of 1995.
The Company experienced a decline in unit sales of approximately 43% primarily
due to the loss of certain major customers and increased competition. In
addition, sales decreased partially as a result of the Company's customers
experiencing sales declines. Many restaurant chains have experienced sales
declines due to ever-increasing competitive pressures in the casual dining
segment of the foodservice market and due to adverse weather conditions in
certain areas of the country during the first quarter of 1996. The Company
experienced a decrease of 4.3% in the average selling price primarily due to
price reductions.
As compared to 1995, consolidated cost of sales decreased by $14.4 million or
38.5% while total gross profit decreased by $4.5 million or 105.9%. As a
percentage of sales, the gross margin decreased to (1.1%) as compared to 10.2%
in 1995.
Gross profit decreased compared to 1995 primarily due to decreased unit sales.
The Company was unable to achieve reductions in certain factory expenses
proportionate to the decline in sales. Factory expenses declined by 24% as
compared to a 43% decrease in unit sales. The Company experienced increases in
maintenance and depreciation expense. Increased maintenance and building
improvements have been necessary primarily due to the age and condition of the
current Meat facility. The Company is depreciating the building improvements
over the building lease term which is through July 1996. Management is
currently negotiating a new lease for its existing facility. Management is also
pursuing the possibility of relocating in the future. Management is continuing
to streamline its operations. The hourly work force has declined by
approximately 35% at the end of the first half of 1996 versus 1995.
Selling, general and administrative expenses decreased by $2.4 million or 48.5%
in 1996 as compared to 1995. Administrative expenses decreased by $1.8 million.
A reduction in goodwill amortization of $0.6 million was experienced as compared
to the first half of 1995 due to the required writedown of goodwill recorded in
the Company's 1995 fourth quarter. Reductions in salaries and related expenses
due to headcount reductions at the meat processing operation and of corporate
personnel contributed to the majority of the remaining decrease of $1.2 million.
Selling expenses decreased by $0.6 million primarily due to a reduction in
expenses related to the Company's retail products sold in grocery and wholesale
club stores and reduced salary expenses due to decreases in personnel.
11.
<PAGE>
INTEREST EXPENSE
Interest expense increased by $285,000 or 16% as compared to 1995. This
increased was attributable to increased interest expense on the Company's 11%
Senior Notes. On December 15, 1995, the Company announced that, as permitted by
the terms of its 11% Senior Notes due December 15, 2000, it had elected to make
its December 15, 1995 interest payment on its Senior Notes by issuing additional
Senior Notes in a principal amount equal to the interest payment due. According
to the Senior Note Indenture, such an election requires the Company to pay its
interest at a rate of 18% versus the 11% rate applicable if the interest is paid
in cash. The Company does not expect to have funds available to pay its June
15, 1996 or December 15, 1996 Senior Note interest payments in cash.
Accordingly, the Company is accruing interest expense on the Senior Notes at a
rate of 18% for fiscal 1996. The Company recorded an additional Senior Note
interest of approximately $690,000 in the first half of 1996 primarily due to
the increase in the interest rate on the Senior Notes. After considering the
increase in Senior Note interest of approximately $690,000, interest expense
decreased by approximately $405,000 compared to 1995 due primarily to lower
interest rates on the credit line facility and lower interest expense related to
amortization of bank costs due to the replacement of the higher-cost former
credit facility with BA Business Credit Inc. with the LaSalle credit facility on
April 7, 1995.
The Company may also seek to restructure the terms of its 11% Senior Notes in an
effort to improve its liquidity. This restructuring could involve the
conversion of some or all of the Company's Senior Notes into equity. There can
be no assurances that such a restructuring will occur.
OTHER INCOME
The Company earned other income of $313,000 in 1995 which was comprised
primarily of consulting fees. The Company earned other income in 1996 of $6,000
consisting primarily of interest income.
SECOND QUARTER OF 1996 VERSUS SECOND QUARTER OF 1995
Consolidated sales for the second quarter of 1996 of $10.7 million decreased
from the second quarter of 1995 by $8.8 million or 45%. Sales decreased
primarily due to reduced sales volume due to increased competition. A
significant portion of the sales volume decrease resulted from the termination
of sales to a major customer during the second quarter of 1995.
The Company experienced a decline in unit sales of approximately 36% primarily
due to increased competition. The Company experienced a decrease of 14.2% in
the average selling price primarily due to price reductions and a lower priced
mix of products sold in the second quarter of 1996 versus 1995.
As compared to 1995, consolidated cost of sales decreased by $6.5 million or
37.4% while total gross profit decreased by $2.3 million or 111%. As a
percentage of sales, the gross margin decreased to (2.1%) as compared to 10.7%
in 1995.
Gross profit decreased compared to 1995 primarily due to decreased unit sales.
The Company was unable to achieve reductions in certain factory expenses
proportionate to the decline in sales. Factory expenses declined by 29% as
compared to a 36% decrease in unit sales. The Company experienced increases in
maintenance and depreciation expense. Increased maintenance and building
improvements have been necessary primarily due to the age and condition of the
current Meat facility. The Company is depreciating the building improvements
over the building lease term which is through July 1996. Management is
currently negotiating a new lease for its existing facility. Management is also
pursuing the possibility of relocating. Management is continuing to streamline
its operations. The hourly work force has declined by approximately 35% at the
end of the second quarter of 1996 versus 1995.
Selling, general and administrative expenses decreased by $1.5 million or 55.6%
as compared to 1995. Administrative expenses decreased by $1.0 million. A
reduction in goodwill amortization of $0.3 million was experienced as compared
to the second quarter of 1995 due to the required writedown of goodwill recorded
in the Company's 1995
14.
<PAGE>
fourth quarter. Reductions in salaries and related expenses due to headcount
reductions at the meat processing operation and of corporate personnel
contributed to the majority of the remaining decrease of $0.7 million. Selling
expenses decreased by $0.5 million primarily due to a reduction in expenses
related to the Company's retail products sold in grocery and wholesale club
stores and reduced salary expenses due to decreases in personnel.
INTEREST EXPENSE
Interest expense increased by $94,000 or 9.8% as compared to 1995. This
increase was attributable to increased interest expense on the Company's 11%
Senior Notes. The Company recorded additional Senior Note interest of
approximately $390,000 in the second quarter of 1996 primarily due to the
increase in the interest rate on the Senior Notes from 11% to 18% because the
Company intends to pay interest by issuing additional Senior Notes versus
payment of cash interest. After considering the increase in Senior Note
interest of approximately $390,000, interest expense decreased by approximately
$296,000 compared to 1995 due primarily to lower interest rates on the credit
line facility and lower interest expense related to amortization of bank costs
due to the replacement of the higher-cost former credit facility with BA
Business Credit Inc. with the LaSalle credit facility on April 7, 1995 and due
to lower borrowings under bank lines of credit primarily due to lower inventory
balances.
OTHER INCOME
The Company earned other income of $129,000 in the second quarter of 1995 which
was comprised primarily of consulting fees.
DISCONTINUED OPERATIONS
On January 5, 1996, the Company announced that it had signed an agreement in
principle to sell the assets of Rymer Seafood (Sale of Rymer Seafood) to an
entity to be formed by the current President of Rymer Seafood. The agreement
specifies that the sales price for the assets, based on balances as of April 27,
1996, would be approximately $9.5 million, consisting of $1.5 million in cash,
$1.5 million in a ten year subordinated note of the buyer and the assumption by
the buyer of approximately $5.1 million in bank debt and $1.4 million of other
current liabilities. The Company recorded a loss of $1.5 million during the
fourth quarter of 1995 to reduce the carrying value of the net assets of Rymer
Seafood to their estimated net realizable value of $1.5 million. The net assets
of Rymer Seafood have been classified as Assets Held For Sale on the
consolidated balance sheets. Consummation of the transaction is subject to a
variety of conditions, including negotiation of definitive documentation and
approval by the holders of 66 2/3% of the outstanding Common Stock of the
Company and the holders of a majority of Rymer's outstanding 11% Senior Notes.
The Company plans to seek these approvals and, if received, to complete the Sale
of Rymer Seafood during the third quarter of 1996.
The Company recorded income related to its discontinued seafood operation during
the first half of 1996 of $153,000 compared to income of $376,000 in 1995.
Seafood sales increased by $0.8 million or 2.5% as compared to 1995. Seafood
sales volume increased by 16.2%. Income increased at a lower rate due to higher
raw material costs along with a decrease in the average sales price per pound of
11.8%.
The Company continues to carry its idle Plant City, Florida property at its
estimated net realizable value of $1.6 million. In January 1996, the Company
entered into an agreement to lease the Plant City facility for a period of
ten years. The lease of this property has not been finalized and there can
be no assurances in this regard.
INCOME TAXES
In both 1996 and 1995, no provision for income taxes was recorded due to the
loss from operations.
15.
<PAGE>
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. Rymer Seafood uses letters of credit for purchases of
imported seafood.
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. 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 condensed consolidated financial statements as of April
27, 1996 and October 28, 1995.
On April 7, 1995, the Company replaced its credit facility of $20 million
provided by BA Business Credit, Inc. (BABC) and $12.5 million provided by
LaSalle with a $25 million credit facility provided by LaSalle. The credit line
facility, with an initial term of two years, has lower interest rates and
reduced lending restrictions as compared to the former facilities. The LaSalle
credit facility has an annual interest rate of 1/2% over Prime as compared to an
annual rate of 2% over Prime on the former BABC facility and 1% over Prime on
the former LaSalle facility.
As of January 27, 1996, October 28, 1995 and July 29, 1995, the Company was in
violation of certain financial covenants under its Loan and Security Agreement
with LaSalle. LaSalle agreed to waive these covenant violations for the third
quarter of 1995. The Company was charged a financing fee in connection with
execution of this waiver.
In response to the October 28, 1995 violations, on January 5, 1996, LaSalle and
the Company entered into a Forbearance Agreement and Amendment. Under this
agreement, which was subsequently amended, LaSalle agreed to temporarily forbear
from exercising its remedies under the Loan and Security Agreement. In
addition, the Loan Agreement was amended to, among other things, reduce advance
rates for inventories and, for purposes of computing interest, loan payments are
applied by the bank on the second business day after available funds are
received.
On February 7, 1996, LaSalle and the Company entered into an Amendment to the
Forbearance Agreement (Letter Agreement). In the Letter Agreement, LaSalle
agreed to waive certain financial covenant violations and the resulting events
of default as of October 28, 1995. The Forbearance Agreement and the Letter
Agreement were executed on the assumption that no other events of default
existed under the loan agreement. As discussed below, the Company subsequently
determined that another event of default under the loan agreement existed at the
time of the execution of these agreements. This event of default related to the
non-payment of certain notes payable to former executives of the Company (the
Affiliate Debt default). On February 22, 1996, the Company received a letter
from LaSalle confirming that the waiver as of October 28, 1995 contained in the
Letter Agreement was valid for the specified events of default despite the
subsequent determination of the Affiliate Debt default. As discussed below, the
Company has negotiated revised payment terms for the Affiliate Debt.
Accordingly, the Company's indebtedness under the LaSalle agreement may not be
accelerated due to non-payment of the Affiliate Debt.
In the Letter Agreement, LaSalle also agreed to amend the Loan and Security
Agreement in order to revise the next test date for the financial covenants
to be as of February 24, 1996. On March 12, 1996, the Company and LaSalle
entered into an Amendment to the Loan Agreement that modified certain
provisions of the Loan and Security Agreement between the Company and
LaSalle, including covenants relating to financial amounts and ratios. The
Company was in compliance with such modified financial covenants as of April
27, 1996. However, there is no assurance that the Company will remain in
compliance with the covenants, as modified. In particular, the Company
anticipates that it will be in violation of a covenant that limits the
Company's cumulative loss through May 30, 1996 of the current fiscal year.
The Company intends to continue its discussions with LaSalle Bank and to seek
to arrive at a mutually satisfactory arrangement with such Bank. There can be
no assurances, however, that such an arrangement will be agreed upon. LaSalle
has the right, upon the occurrence of an event of default, to terminate the
credit facility and declare all loans due and payable on demand. The
Company's bank indebtedness and indebtedness under the Senior Notes have been
classified as current liabilities at both April 27, 1996 and October 28, 1995.
In January of 1996, the Company did not make required payments of $255,000 under
notes payable due to former executives (Affiliate Debt). The Affiliate Debt is
related to certain amended employment and consulting agreements
16.
<PAGE>
between the Company and the former executives (See Note 11 to the Consolidated
Financial Statements in the Company's Annual Report on Form 10-K for the year
ended October 28, 1995). The Company deferred payment of this debt in order to
conserve cash for use in operation of its business. The Company has continued
to accrue interest on the debt at 9.5%. The non-payment of the Affiliate Debt
caused cross-defaults under the Loan and Security Agreement with LaSalle and
under the Senior Note Indenture. While LaSalle did not waive this default, no
action was taken by LaSalle as a result of the default. In March and April
1996, the Company made partial principal payments to the former executives. The
Company has negotiated revised payment terms with the former executives whereby
the remaining debt due to them will be paid in installments.
In March of 1996, the Company entered into Supplement No. 1 to the Indenture
(Supplemental Indenture) with Continental Stock Transfer and Trust Company as
Trustee for the Senior Notes which was dated as of February 8, 1996. The
Supplemental Indenture, which received the approval of a majority of the Senior
Note holders, amended the Indenture to exclude the non-payment of the Affiliate
Debt, and the resulting cross-default under any other debt that arises by reason
of non-payment of the Affiliate Debt, from the definition of events of default
under the Indenture. If another event of default occurs and continues under the
Company's bank agreement with LaSalle, however, it would constitute an event of
default under the Indenture, enabling the Trustee or the holders of 25% in
aggregate principal amount of the Notes to declare the Notes to be immediately
due and payable.
At April 27, 1996 and October 28, 1995, the Company had a bank loan of $3.2
million and $8.1 million, respectively, outstanding under its line of credit
with LaSalle for Rymer Meat. In addition, as of April 27, 1996 and October 28,
1995, $5.1 million and $8.2 million, respectively, was outstanding under the
LaSalle line of credit for Rymer Seafood. According to the proposed agreement
to sell Rymer Seafood, the loan balance for Rymer Seafood is to be assumed by
the buyers of Rymer Seafood.
The bank loan and other liabilities to be assumed by the buyer of Rymer Seafood
have been netted against the assets to be sold and are shown as Assets Held For
Sale, net in the Consolidated Balance Sheets. (See Note 5 to the condensed
consolidated financial statements.)
On December 15, 1995, the Company announced that, as permitted by the terms of
its 11% Senior Notes due December 15, 2000, it had elected to make its December
15, 1995 interest payment on its Senior Notes by issuing additional Senior Notes
in a principal amount equal to the interest payment due of $1,632,000.
According to the Senior Note Indenture, such an election requires the Company to
pay its interest at a rate of 18% versus the 11% rate applicable if the interest
is paid in cash. The Company does not expect to have funds available to pay its
June 15, 1996 or December 15, 1996 Senior Note interest payments in cash.
Accordingly, the Company is accruing interest expense on the Senior Notes at a
rate of 18% for fiscal 1996.
The Company had a net working capital deficit at April 27, 1996 of $16.0 million
which is a decrease in working capital of $4 million as compared to a working
capital deficit of $12 million at October 28, 1995. The decrease was due to a
decrease in current assets of $9.5 million partially offset by a decrease in
current liabilities of $5.5 million.
Accounts receivable decreased by $2.0 million primarily due to decreased sales.
Inventories decreased by $7.2 million due to decreased purchasing along with
efforts by the Company to reduce inventories in order to reduce debt. Other
assets decreased by $0.3 million due to the amortization of prepaid expenses.
Current liabilities decreased due to a decrease in bank loans of $4.9 million, a
decrease in accrued liabilities of $1.4 million, and decreases in accounts
payable and other long-term debt of $0.3 million and $0.5 million, respectively.
These decreases were partially offset by an increase in the principal amount of
Senior Notes of $1.6 million.
The decrease in accrued expenses is primarily attributable to the payment of
Senior Note interest of $1.6 million on December 15, 1995 by the issuance of new
Senior Notes. Other long-term debt decreased due to the offset of notes payable
of approximately $406,000 against notes receivable of approximately the same
amount on January 2, 1996. The notes receivable were classified as a reduction
of stockholders' equity as they related to stock purchase agreements. In
addition, the Company made cash payments on other notes payable of $81,000.
15.
<PAGE>
Assuming the necessary sales increases and cost improvements are achieved,
management expects LaSalle to continue to provide the Company with a credit line
facility. Availability under the LaSalle credit line, together with cash flows
from operations, are expected by management to provide sufficient resources to
meet its working capital needs through the next year. The anticipated future
cash flows of the Company may not be sufficient to retire the Senior Notes upon
maturity on December 15, 2000. Accordingly, the Company may seek to restructure
the terms of its 11% Senior Notes. There can be no assurances that such a
restructuring will occur. Furthermore, if a Senior Note restructuring should
occur, it would likely affect the equity capitalization of the Company.
The Company's continuing Rymer Meat subsidiary had total lines of credit
available under notes payable of $3.7 million at April 27, 1996 and $11.7
million at October 28, 1995 of which $.5 million and $3.6 million, respectively,
was unused. It is anticipated that proceeds from the proposed Rymer Seafood
sale will be used to repay a portion of the LaSalle bank loan.
The Company's discontinued Seafood subsidiary had total lines of credit
available under notes payable of $9 million at April 27, 1996 and $10.8 million
at October 28, 1995 of which $1.5 million and $1.1 million, respectively, was
unused.
Total availability under credit lines is reduced by the amount of letters of
credit outstanding. Letters of credit are used primarily for purchases of
seafood inventory from foreign sources. Rymer Seafood had letters of credit
outstanding totalling approximately $2.4 million and $1.5 million at April 27,
1996 and October 28, 1995, respectively.
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 $1.7 million and $4.1 million at April
27, 1996 and October 28, 1995, 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 $1.6 million as
of April 27, 1996 and $2.9 million as of October 28, 1995.
At October 28, 1995, the Company had an operating loss carryforward for tax
reporting purposes of approximately $31.2 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 28, 1995 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 a total of approximately $500,000 for capital
expenditures in 1996. 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.
16.
<PAGE>
RYMER FOODS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed:
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 28, 1995 (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. for the fiscal year ended October 28, 1995.)
(b) Reports on Form 8-K:
None
17.
<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/ Edward M. Hebert
----------------------------------------
Edward M. Hebert, Senior Vice President,
Chief Financial Officer and Treasurer
Date: June 10, 1996
18.
<PAGE>
EXHIBIT 11
----------
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
ASSUMING PRIMARY DILUTION
--------------------------------------------
Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------- ----------------------
April 27, April 29, April 27, April 29,
1996 1995 1996 1995
--------- ---------- --------- ----------
(Restated) (Restated)
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING
1 Average shares outstanding 10,754 10,748 10,754 10,746
2 Net additional shares outstanding
assuming exercise of stock options - 147 - 229
------- ------- ------- -------
3 Average number of common shares
outstanding 10,754 10,895 10,754 10,975
------- ------- ------- -------
------- ------- ------- -------
EARNINGS
4 Loss from continuing
operations $(2,469) $(1,420) $(4,817) $(2,113)
------- ------- ------- -------
------- ------- ------- -------
5 Net loss $(2,348) $(1,108) $(4,664) $(1,737)
------- ------- ------- -------
------- ------- ------- -------
PER SHARE AMOUNTS
Loss from continuing
operations (line 4 / line 3) $ (.23) $ (.13) $ (.45) $ (.19)
------- ------- ------- -------
------- ------- ------- -------
Net loss
(line 5 / line 3) $ (.22) $ (.10) $ (.43) $ (.16)
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
NOTE 1 - Loss per share for all periods was calculated using the Treasury Stock
Method.
19.
<PAGE>
EXHIBIT 11
----------
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
ASSUMING FULL DILUTION
----------------------
Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------- ----------------------
April 27, April 29, April 27, April 29,
1996 1995 1996 1995
--------- ---------- --------- ----------
(Restated) (Restated)
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING
1 Average shares outstanding 10,754 10,748 10,754 10,746
2 Net additional shares outstanding
assuming exercise of stock options - 147 - 229
------- ------- ------- -------
3 Average number of common shares
outstanding 10,754 10,895 10,754 10,975
------- ------- ------- -------
------- ------- ------- -------
EARNINGS
4 Loss from continuing
operations $(2,469) $(1,420) $(4,817) $(2,113)
------- ------- ------- -------
------- ------- ------- -------
5 Net loss $(2,348) $(1,108) $(4,664) $(1,737)
------- ------- ------- -------
------- ------- ------- -------
PER SHARE AMOUNTS
Loss from continuing
operations (line 4 / line 3) $ (.23) $ (.13) $ (.45) $ (.19)
------- ------- ------- -------
------- ------- ------- -------
Net loss
(line 5 / line 3) $ (.22) $ (.10) $ (.43) $ (.16)
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
NOTE 1 - Loss per share for all periods was calculated using the Treasury Stock
Method.
20.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-26-1996
<PERIOD-START> JAN-28-1996
<PERIOD-END> APR-27-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 3,207
<ALLOWANCES> 519
<INVENTORY> 2,531
<CURRENT-ASSETS> 10,633
<PP&E> 8,396
<DEPRECIATION> 6,529
<TOTAL-ASSETS> 14,813
<CURRENT-LIABILITIES> 26,600
<BONDS> 0
0
0
<COMMON> 10,754
<OTHER-SE> (23,342)
<TOTAL-LIABILITY-AND-EQUITY> 14,813
<SALES> 22,668
<TOTAL-REVENUES> 22,668
<CGS> 22,917
<TOTAL-COSTS> 2,513
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,061
<INCOME-PRETAX> (4,817)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,817)
<DISCONTINUED> 153
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,664)
<EPS-PRIMARY> (0.45)
<EPS-DILUTED> (0.43)
</TABLE>
