SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A1
Amendment to Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year ended October 26, 1996
Commission File Number 1-6071
RYMER FOODS INC.
(Exact Name of Registrant as Specified in its Charter)
Incorporated in the State of Delaware
IRS Employer Identification No. 36-1343930
4600 South Packers Avenue, Suite 400
Chicago, Illinois 60609 (773) 927-7777
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $1.00 par value New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
None
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; and (2) has been subject to
such filing requirement for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
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 Sections 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
As of December 16, 1996, 10,754,093 shares of common stock were
outstanding, and the aggregate market value of the common shares held by
nonaffiliates on that date was approximately $3,023,794.
<PAGE>
PART I
Item 1. Business
The statements in this report that are forward looking are based upon
current expectations and actual results may vary. See "Cautionary
Statement" under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in this report.
General
Rymer Foods Inc. (Rymer Foods or the Company) through its subsidiaries,
Rymer Meat Inc. (Rymer Meat) and Rymer International Seafood Inc. (Rymer
Seafood) is primarily engaged in the development and production of
frozen, pre-seasoned, portion controlled meat entrees and the importing
and distribution of various seafood products. The Company is engaged in
the production of such products for restaurants and other foodservice
customers and retail sales. Rymer Foods was incorporated under the laws
of Delaware in 1969.
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 BGL I, Inc., an entity formed by the then current
President of Rymer Seafood who is also the son of one of the Company's
Board members. On August 28, 1996, the Company completed the sale of
substantially all of the assets of its Seafood subsidiary to BGL I, Inc.
The Company's shareholders approved the transaction at a special meeting
on August 28, 1996. Consummation of the sale was subject to certain
conditions, including approval by the holders of 66 2/3% of the
outstanding Common Stock of the Company and approval from the holders of
Rymer's outstanding 11% Senior Notes. Senior noteholder approval was
received prior to the shareholder meeting of August 28, 1996. The sales
price was approximately $8.5 million, consisting of $1.5 million in
cash, $1.0 million in a ten year subordinated note from the buyer and
the assumption by the buyer of $5.1 million in bank debt and $0.9
million of other current liabilities. The Company recorded a loss on
the sale of Rymer Seafood of approximately $1.9 million, which was
recorded as of the measurement date (August 28, 1996) in the fourth
quarter of fiscal 1996. The Consolidated Statements of Operations treat
the operating results of Rymer Seafood as income (loss) from
discontinued operations for accounting purposes.
In fiscal 1996, the Company reported a loss from continuing operations
of $7.1 million. The Company has made improvements in operating income
since the first two quarters of fiscal 1996, however, there can be no
assurances that such trend will continue. The Company achieved
reductions in operating expenses of $5.0 million or 51% as compared to
fiscal 1995 due to primarily ongoing cost reductions at its meat
processing facility and corporate office. Management believes that the
Company's future success is dependent in part upon reversing the sales
decline experienced in fiscal 1996 and fiscal 1995, on the containment
of operating costs and on the success of negotiations with its lenders.
However, there can be no assurance of the success of these initiatives.
<PAGE>
The Company also plans to restructure its 11% Senior Notes in an effort
to improve its liquidity and capital structure. This restructuring
could involve the conversion of some or all of the Company's Senior
Notes into equity. Such conversion could result in substantial
ownership dilution of current shareholders. There can be no assurances
that such a restructuring will occur.
In fiscal 1995, the Company reported a loss from continuing operations
of $29.6 million, of which $20.4 million resulted from the writedown of
goodwill. This writedown eliminated all remaining goodwill of the
Company. The goodwill was determined to have been impaired because of
the financial condition of the Company and the Company's inability to
generate future operating income without substantial sales volume
increases which were uncertain. Moreover, anticipated future cash flows
of the Company indicated that the recoverability of the asset was not
reasonably assured.
As discussed in Note 2 to the Consolidated Financial Statements, there
is substantial doubt about the Company's ability to continue as a going
concern.
In November 1995, the Company hired P. E. (Ed) Schenk as its President
and Chief Executive Officer, replacing the former Chairman and
President. Mr. Schenk has over twenty-two years of experience in meat
processing businesses.
Products, Markets and Distribution
Rymer Meat's principal products are frozen, pre-seasoned, portion
controlled meat entrees. Major beef products include
commercial and choice cut steaks. Rymer Meat also produces other meat
products such as specialty ground and breaded products and certain
cooked products (e.g., pot roast, meat loaf). Rymer Meat engages in the
development and production of proprietary "signature" recipes for chain
restaurant customers. Rymer Meat also offers its customers services
such as menu planning, new product development and other marketing
services, such as handling and cooking procedures. These programs,
products and services are custom-designed for each chain restaurant
customer.
The primary product of Rymer Seafood consisted of shrimp purchased in
bulk quantities and sold to specifically targeted customers. Rymer
Seafood also supplied processed seafood products to chain restaurants,
foodservice distributors and retail outlets. In some cases, Rymer
Seafood arranged for seafood processing to be performed by third parties
offshore where it could be done more promptly and more cost effectively
than in the United States.
The markets served by the Company include family-style restaurant chains
and distributors. Products are primarily sold through the Company's own
marketing staff, as well as through independent brokers and
distributors.
Raw Materials
The Company's primary raw material is beef which is available in
adequate supply. The Company is not dependent upon any one source for
its primary raw material.
<PAGE>
The Company has agreements with certain of its suppliers to purchase raw
materials. These agreements extend for up to one year and specify the
price and quantity of materials to be purchased. The aggregate
commitment for future purchases as of October 26, 1996 was approximately
$2.0 million.
Customers
The Company's customers consist primarily of family-style restaurants,
restaurant chains and foodservice distributors. Sales to three
restaurant chains owned by Darden (formerly General Mills) comprised
approximately 14% of the Company's revenues from continuing operations
in both fiscal 1995 and 1994. During the first quarter of 1996, the
Company was informed by Darden that its supply contracts would not be
renewed for fiscal 1996.
Sales to one of the Company's retail customers, Country Fed Meat
Company, Inc. (CFM), accounted for approximately 12.2% of the Company's
revenues from continuing operations in fiscal 1994. At the end of the
first quarter of fiscal 1995, certain issues between the Company and CFM
resulted in certain lawsuits being filed. On June 28, 1995, the Company
announced that it had reached a settlement with CFM of the litigation
pending between the two companies. As a result of the settlement, all
lawsuits between the companies were dismissed and no further actions
will be taken by either company on these matters. The allowance for
doubtful accounts established prior to and during the Company's 1995
second quarter contained sufficient reserves to resolve the matters in
dispute. All terms of the settlement are confidential. The Company
does not expect to have a supply relationship in the future with CFM.
Unit sales to two groups of the Company's other customers, Bonanza and
Ponderosa, together accounted for approximately 28.6%, 23.1% and 16.3%
of the Company's unit sales from continuing operations in fiscal 1996,
1995 and 1994, respectively. Franchise rights for both Bonanza and
Ponderosa restaurants are owned by Metromedia, Inc. The Bonanza and
certain of the Ponderosa restaurants are independently owned and
operated.
The loss of any of the Company's major customers, or a substantial
portion of these accounts, could have a material adverse effect on the
Company. The Company is pursuing new sales opportunities. However,
there can be no assurance of the success of these sales efforts.
The Company believes that it has satisfactory ongoing relationships with
its current customers. There can be no assurances, however, that such
relationships can be preserved, especially if the Company's financial
condition and results of operation do not improve or its Senior Notes
restructuring effort is not successful.
The Company has agreements with certain of its customers to sell
products over the next year for specified prices. The Company's
aggregate commitments under sales agreements at October 26, 1996
approximated $420,000.
<PAGE>
Trademarks, Patents and Research Activities
Rymer Meat sells and markets its products under the "Rymer" trademark
label. The Company considers this trademark important in its marketing
efforts.
Research and development expenses are charged to operations as incurred.
Expenditures for the three fiscal years ending October 26, 1996, October
28, 1995 and October 29, 1994 were not material as compared to other
operational expenses.
Competitive Conditions
The Company's business is highly competitive, with a substantial number
of competitors. A large number of companies process and sell meat
products to restaurants. Every year new companies are formed and enter
the meat industry, some becoming sizeable competitors in a short period
of time. Steakhouse sales, which now comprise approximately 31% of
Rymer Meat sales, continued to decline during fiscal 1996 due to the
ongoing consolidation within that segment of the restaurant market along
with increasing competitive pressures. The segment of retail sales
which represents home delivery sales declined significantly in 1996 to
16% of total sales, due primarily to the loss of CFM.
Some of the competitors in the Company's markets are larger than the
Company and have greater resources. The Company believes that in the
markets it serves it provides its customers with a broader line of
quality products and services than many of its competitors. Competition
in the markets served by the Company is based primarily on quality,
service and price. Management believes that the Company's primary bases
for competing are its reputation for quality, service, broad menu of
products, willingness to develop proprietary recipes for specific
customers and competitive pricing.
Environmental Matters
The Company believes that it is substantially in compliance with all
applicable federal, state and local provisions regulating the discharge
of materials into the environment, or otherwise relating to the
protection of the environment. No significant costs were incurred by
the Company to comply with environmental regulations during the three
fiscal years ended October 26, 1996, October 28, 1995 and October 29,
1994. The Company has not received notice of, and is not aware of any
claims arising under any federal or state environmental laws.
Employees
At October 26, 1996, Rymer Foods had approximately 257 employees, of
whom approximately 214 were covered by union contracts. In January
1995, the Company and its union reached agreement on a new four year
labor contract effective retroactively to December 1, 1994.
The Company has not received notice of, and is not aware of, any claims
of a material nature arising under any federal or state labor laws.
<PAGE>
Seasonality
The quarterly results of the Company are affected by seasonal factors.
Sales are usually lower in the fall and winter primarily due to
consumers' dining preferences.
Item 2. Properties
At October 26, 1996, the principal physical properties of Rymer Foods
consisted of the following:
Footage Ownership Expiration Facility Use
Chicago, Illinois 123,000 Leased July 1996 Offices/Prod/
Warehouse
Plant City, Florida 42,000 Owned Not Held for sale
Applicable or Lease
The Chicago facility is considered suitable and adequate to meet the
needs of the Company. The owned facility is used as collateral for the
Company's bank credit agreement. The lease for the Chicago meat
processing facility expired in July 1996. The Company has subsequently
negotiated for revised lease space and lower rental costs. However, a
new lease has not been finalized. Management expects to have a one year
agreement signed with its lessor in the near future. See Note 7 to the
Consolidated Financial Statements for a summary of the Company's rental
expense for leased facilities and for production and office equipment.
Item 3. Legal Proceedings
See Note 14 to the Consolidated Financial Statements.
Item 4. Submission of Matters to a Vote of Security Holders
On August 28, 1996, the Company held a special meeting of its
stockholders. At that meeting, the shareholders approved the sale of
substantially all of the assets of Rymer Seafood Inc., an indirect
wholly-owned subsidiary of Rymer Foods Inc. to BGL I, Inc. by the
requisite vote as previously reported in the Company's 3rd quarter 1996
report on Form 10-Q. The transaction was closed immediately after the
meeting.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters
The Common Stock is listed on the New York Stock Exchange (the NYSE)
(Symbol: RYR). The following table sets forth, for the fiscal quarters
indicated, the high and low sales prices of the Common Stock as reported
on the NYSE-Composite Tape. As of December 16, 1996, there were
approximately 725 holders of record of Common Stock.
High Low
1996
First Quarter $1-1/2 $ 5/8
Second Quarter 1-1/8 9/16
Third Quarter 15/16 15/32
Fourth Quarter 11/16 1/2
1995
First Quarter 4 2-3/4
Second Quarter 3-1/8 1-3/4
Third Quarter 2-3/8 1-1/2
Fourth Quarter 2-1/2 1-1/4
Rymer Foods is required by the Indenture governing its Senior Notes (the
Indenture) to use reasonable efforts to maintain its listing on the NYSE
or obtain a listing on the National Association of Securities Dealers
Automated Quotation System National Market System (the NASDAQ/NMS) and
continue to maintain its status as a reporting company under the
Securities Exchange Act of 1934, as amended. However, there can be no
assurance that it will continue to be listed on the NYSE or meet the
listing requirements of the NASDAQ/NMS.
Dividends
No dividends have been paid on the Common Stock since prior to 1983.
The ability of Rymer Foods to pay dividends on the Common Stock is
substantially limited by its bank credit agreements. The Indenture also
prohibits the payment of dividends on the Common Stock at any time that
any of the Senior Notes remain outstanding. Rymer Foods does not
anticipate that it will be able to pay any dividend on the Common Stock
in the foreseeable future.
<PAGE>
Item 6. Selected Financial Data
(in thousands, except per share data)
Fiscal Years Ended
Oct.26, Oct.28, Oct.29, Oct.30, Oct. 31,
1996 1995 1994 1993 1992
(Restated) (Restated) (Restated) (Restated)
Results from continuing operations:
Net sales $ 44,329 $ 79,920 $ 106,252 $ 99,644 $ 92,665
(Loss) income from continuing
operations before extraordinary
item (7,144) (29,620) 1,883 (23,867) (4,729)
(Loss) income from discontinued
operations (167) 290 121 777 (5,094)
(Loss) gain on dispositions of
discontinued operations (1,853) - 4,474 261 400
Net (loss) income (9,164) (29,330) 6,478 (11,441) (9,423)
Working (deficit) capital (18,202) (10,524) 16,013 14,108 (41,898)
Total assets 10,563 26,074 51,506 65,627 81,820
Long-term liabilities 806 842 19,994 45,968 2,462
Stockholders' (deficit) equity(15,616) (6,858) 22,464 15,590 18,109
Primary per share common
stock data:
(Loss) income from continuing
operations $ (.66) $ (2.72) $ .18 $ (3.50) $ (2.20)
Net (loss) income $ (.85) $ (2.69) $ .61 $ (1.68) $ (3.80)
Cash dividends - - - - -
See Notes 3 and 4 to the Consolidated Financial Statements for
information regarding the Company's Restructuring and discontinued
operations.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Cautionary Statement
The statements in this Form 10-K, included in this Management's
Discussion and Analysis, that are forward looking are based upon current
expectations and actual results may differ materially. Therefore, the
inclusion of such forward looking information should not be regarded as
a representation by the Company that the objectives or plans of the
Company will be achieved. Such statements include, but are not limited
to, the Company's expectations regarding the operations and financial
condition of the Company. Forward looking statements contained in this
Form 10-K included in this Management's Discussion and Analysis, involve
numerous risks and uncertainties that could cause actual results to
differ materially including, but not limited to, the effect of changing
economic conditions, business conditions and growth in the meat
industry, the Company's ability to maintain its lending arrangements, or
if necessary, access external sources of capital, implementing current
restructuring plans and accurately forecasting capital expenditures. In
addition, the Company's future results of operations and financial
condition may be adversely impacted by various factors including,
primarily, the level of the Company's sales. Certain of these factors
are described in the description of the Company's business, operations
and financial condition contained in this Form 10-K. Assumptions
relating to budgeting, marketing, product development and other
management decisions are subjective in many respects and thus
susceptible to interpretations and periodic revisions based on actual
experience and business developments, the impact of which may cause the
Company to alter its marketing, capital expenditure or other budgets,
which may in turn affect the Company's financial position and results of
operations.
General
The Company's consolidated results from continuing operations are
generated by its Meat processing operation.
Rymer Seafood, which comprised the Seafood Importing and Distribution
segment is now classified as a discontinued operation for accounting
purposes. Results for all years presented have been restated to reflect
the results of Rymer Seafood as discontinued operations.
<PAGE>
Fiscal 1996 Compared with Fiscal 1995
Consolidated sales for 1996 of $44.3 million decreased from 1995 by
$35.6 million or 45%. Sales volume accounted for approximately 92% of
the sales decrease with lower prices and changes in the sales mix
accounting for the remaining decrease.
Sales decreased primarily due to the loss of sales to certain major
customers during the second quarter of 1995 and the first quarter of
1996. The Company also experienced a significant decline of
approximately 69% in unit sales to national restaurant chains. This
decrease was primarily due to reduced sales volume due to 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. The
Company experienced a decline of 7.8% in the average selling price
primarily due to a lower priced mix of products sold in 1996 as compared
to 1995.
As compared to 1995, consolidated cost of sales decreased by $33.5
million or 44.1% while total gross profit decreased by $2.1 million or
53.2%. As a percentage of sales, the consolidated gross margin
decreased to 4.1% as compared to 4.8% in 1995.
Gross profit decreased compared to 1995 primarily due to decreased unit
sales along with mix changes in sales to national restaurant chain
accounts and higher raw material costs. In addition, the Company
experienced inefficiencies in production related to changes in
personnel.
Selling, general and administrative expenses decreased by $4.2 million
or 47%. Selling expenses decreased by $1.4 million primarily due to
reduced sales personnel and lower expenses related to the Company's
retail products sold in grocery and wholesale club stores.
Administrative expenses decreased by $2.8 million primarily due to
administrative headcount reductions.
Interest Expense
Interest expense increased by $412,000 or 10.9% as compared to 1995.
This increase was primarily attributable to increased interest expense
on the Company's 11% Senior Notes. On December 15, 1995 and June 15,
1996, 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 and June 15, 1996 interest payments 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 has also announced that, as permitted by the terms of its
11% Senior Notes, the December 15, 1996 interest payment was made by
issuing additional Senior Notes in a principal amount equal to the
interest payment due.
<PAGE>
Discontinued Operations
On January 5, 1996, the Company announced that it had signed an
agreement in principle to sell the assets of Rymer Seafood to BGL I,
Inc., an entity formed by the then current President of Rymer Seafood
who is also the son of one of the Company's Board members. On August
28, 1996, the Company completed the sale of substantially all of the
assets of its Seafood subsidiary to BGL I, Inc. The Company's
shareholders approved the transaction at a special meeting on August 28,
1996. Consummation of the sale was subject to certain conditions,
including approval by the holders of 66 2/3% of the outstanding Common
Stock of the Company and approval from the holders of Rymer's
outstanding 11% Senior Notes. Senior noteholder approval was received
prior to the shareholder meeting of August 28, 1996. The sales price
was approximately $8.5 million, consisting of $1.5 million in cash, $1.0
million in a ten year subordinated note from the buyer and the
assumption by the buyer of $5.1 million in bank debt and $0.9 million of
other current liabilities. The Company recorded a loss on the sale of
Rymer Seafood of approximately $1.9 million, which was recorded as of
the measurement date (August 28, 1996) in the fourth quarter of 1996.
On November 11, 1996, the Company received a payment of $950,000 in full
settlement on its ten year subordinated note from the buyer of its
Seafood operation. The proceeds from the note were used to pay down the
Company's then existing loan balance with LaSalle Bank.
The Company recorded income related to its discontinued seafood
operation during 1996 of $283,000 compared to income of $290,000 in
1995.
In December 1996, the Company had an independent appraisal performed of
its Plant City, Florida facility, an asset remaining from the
discontinued Rymer Chicken operation which was disposed of in December
1993. As a result of the appraisal, the carrying value of the facility
and land was written down by $450,000 to the appraised value of
approximately $1.2 million. The $450,000 writedown is included as a
loss from discontinued operations in the Company's consolidated
statement of operations. In January 1996, the Company entered into a
preliminary agreement to lease the Plant City facility for a period of
ten years. The preliminary lease agreement was cancelled in June 1996.
As a result, the facility remains available for sale or lease.
Income Taxes
In 1996, no provision for income taxes was recorded due to the Company's
loss.
Fiscal 1995 Compared With Fiscal 1994
Consolidated sales for 1995 of $79.9 million decreased from 1994 by
$26.3 million or 25%. Reduction in sales volume accounted for
approximately 90% of the sales decrease with lower prices and changes in
the sales mix accounting for the remaining decrease.
<PAGE>
Sales decreased primarily due to the loss of sales to a major customer
during the second quarter of 1995. The Company also experienced a
significant decline of approximately 22% in unit sales to national
restaurant chains. This decrease was primarily due to reduced sales
volume due to 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.
The sales decrease to national restaurant chains was partially offset by
an increase of 29% in unit sales volume to distributors.
The Company experienced a decline of 3.2% in the average selling price
primarily due to a lower priced mix of products sold in 1995 as compared
to 1994.
As compared to 1994, consolidated cost of sales decreased by $15.9
million or 17.3% while total gross profit decreased by $10.4 million or
73%. As a percentage of sales, the consolidated gross profit margin
decreased to 4.8% as compared to 13.5% in 1994.
Gross profit decreased compared to 1994 primarily due to decreased unit
sales along with mix changes in sales to national restaurant chain
accounts and higher raw material costs. In addition, the Company
experienced inefficiencies in production related to changes in
personnel.
Selling, general and administrative expenses decreased by $575,000 or
6%. Administrative expenses remained approximately equal to 1994 as
decreases in salaries and related expenses were offset by increased bad
debt and legal expenses. Selling expenses decreased primarily due to a
reduction in expenses related to the Company's retail products sold in
grocery and wholesale club stores which were partially offset by
increased salary expenses.
At the end of the first quarter of 1995, certain issues between the
Company and CFM resulted in certain lawsuits being filed. On June 28,
1995, the Company announced that it had reached a settlement with CFM
relating to the litigation pending between the two companies. As a
result of the settlement, all lawsuits between the companies were
dismissed and no further actions will be taken by either company on
these matters. The allowance for doubtful accounts established prior to
and during the Company's 1995 second quarter contained sufficient
reserves to resolve the matters in dispute. All terms of the settlement
are confidential. The Company does not expect to have a supply
relationship with CFM in the future. CFM had been one of the Company's
major customers, and during its 1994 fiscal year CFM accounted for
approximately 12.2% of the Company's sales. During fiscal 1995, CFM
accounted for approximately 3.5% of the Company's sales.
<PAGE>
Restructuring Charge
On October 5, 1995, the Company announced that it had retained the
financial advisory and turnaround firm of Kirkland Messina, Inc. (KM) to
assist the Company in developing a comprehensive financial and operating
plan designed to return the Company to profitability. KM was engaged
for a three month period for a monthly fee plus expenses. In addition,
as part of KM's compensation, the Company issued KM 500,000 warrants to
purchase common stock of the Company at an exercise price in cash of
$1.675 per share.
The Company announced on October 10, 1995 that it had begun
implementation of a comprehensive reorganization plan of its operations
and personnel in order to return to profitability. As part of the
reorganization, the Company announced an approximate 20 percent
reduction of its work force.
During the fourth quarter of 1995, the Company recorded a restructuring
charge of $761,000 for severance payments and fees and expenses of the
financial advisory firm of KM.
Interest Expense
Interest expense increased by $443,000 or 13.3% as compared to 1994. In
connection with the reclassification of the operating results of the
Company's chicken processing operations to discontinued operations in
the first quarter of 1994, $185,000 of interest expense was allocated to
the loss from discontinued operations. After giving effect to this
allocation, interest expense increased by $258,000 compared to 1994.
This increase was primarily 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 accrueits
interest at a rate of 18% versus the 11% rate applicable if the
interest is 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. This increase in
Senior Note interest was partially offset by a reduction in Senior Note
interest of approximately $289,000 related to reductions in the
outstanding principal amount of the Company's 11% Senior Notes. The
Company redeemed $1,050,000 of thesenotes in June 1994 and $2,250,000
in December 1994. After considering the increase in Senior Note interest
of approximately $181,000, interest expense increased by approximately
$77,000 compared to 1994 due primarily to higher borrowings under bank
lines of credit and increases in the prime lending rate charged by banks
as compared to 1994.
Other Income
The Company earned other income of $474,000 in 1995 which was comprised
primarily of consulting fees.
<PAGE>
Goodwill Writedown
During the fourth quarter of 1995, the Company recorded a goodwill
writedown of $20,377,000. (See Note 1 to the Consolidated Financial
Statements.)
This writedown eliminated all remaining goodwill of the Company. The
goodwill was determined to have been impaired because of the financial
condition of the Company and the Company's inability to generate future
operating income without substantial sales volume increases which were
uncertain. Moreover, anticipated future cash flows of the Company
indicated that the recoverability of the asset was not reasonably
assured.
Income Taxes
In 1995, no provision for income taxes was recorded due to the Company's
loss.
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 at time of shipment to fourteen days.
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 Balance Sheet.
In conjunction with its sale of Rymer Seafood, the Company, on August
28, 1996, entered into a revised loan agreement with LaSalle. The
revised agreement provides a credit facility of up to $5 million for the
Company through April 1997 based on borrowing base availability
calculations. The Company believes that its credit facility is adequate
for its foreseeable working capital needs. The agreement revised
certain loan covenants and waived all prior events of default as of the
quarter ended July 27, 1996. At October 26, 1996, the Company had a
bank loan of $211,000 outstanding under its line of credit with LaSalle.
<PAGE>
The Company has also announced that, as permitted by the terms of its
11% Senior Notes, the December 15, 1996 interest payment was made by
issuing additional Senior Notes in a principal amount equal to the
interest payment due. The Company is required to make an interest
payment on June 15, 1997 of approximately $1.3 million in respect to the
Senior Notes. The Company does not expect to have sufficient available
cash to make this required interest payment. Failure to make the June
1997 payment within 30 days of the due date constitutes an event of
default under the terms of the indenture at which time the 11% Senior
Notes will become due and payable. Accordingly, the Senior Notes have
been classified as a current liability on the Company's consolidated
balance sheet. An event of default under the indenture is an event of
default under the Company's bank agreement with LaSalle also. Therefore,
the Company is investigating various alternatives to restructure 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. Such conversion could result in substantial
ownership dilution of current shareholders. There can be no assurances
that such a restructuring will occur.
The Company had a net working deficit at October 26, 1996 of $18.2
million which is principally due to the 11% Senior Notes being
classified as a current liability.
As discussed in Note 2 to the Consolidated Financial Statements, there
is substantial doubt about the Company's ability to continue as a going
concern.
The Company had total lines of credit available of $2.6 million at
October 26, 1996 and $11.7 million at October 28, 1995, of which $2.4
million and $3.6 million, respectively, was unused.
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 $420,000
at October 26, 1996. 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 $2.0
million as of October 26, 1996.
The Company anticipates spending approximately $800,000 for capital
expenditures in 1997. The expenditures are primarily for planned
improvements at the Rymer Meat operation. There are no specific
commitments outstanding related to these planned expenditures. Such
capital expenditures will be financed with cash from operations and/or
bank borrowings.
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.
<PAGE>
Fourth Quarter Adjustments
1996
In December 1996, the Company had an independent appraisal performed of
the Plant City facility, an asset remaining from the discontinued Rymer
Chicken operation which was disposed of in December 1993. As a result
of the appraisal, the carrying value of the facility and land was
written down by $450,000 to the appraised value of approximately $1.2
million. The $450,000 writedown is included as a loss from discontinued
operations in the Company's consolidated statement of operations.
1995
During the fourth quarter of 1995, the Company recorded a goodwill
writedown of $20.4 million. (See Note 1 to the Consolidated Financial
Statements.) This writedown eliminated all remaining goodwill of the
Company.
During the fourth quarter of 1995, the Company recorded a restructuring
charge of $761,000 related to the restructuring plan commenced in
October of 1995 to reduce operating costs, improve efficiencies, and<PAGE>
return the Company to profitability. (See Note 3 to the Consolidated
Financial Statements.)
During the fourth quarter of 1995, the Company recorded an additional
interest charge of approximately $470,000. This charge 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 accrue its interest at a rate of 18% versus the
11% rate applicable if the interest is paid in cash.
1994
None
Item 8. Financial Statements and Supplementary Data
<PAGE>
Index to Consolidated Financial Statements and Supplementary
Financial Data Pages
Report of Independent Accountants 14
Financial Statements:
Consolidated Statements of Operations for the fiscal years
ended October 26, 1996, October 28, 1995 and October 29, 1994 15
Consolidated Balance Sheets as of October 26, 1996 and
October 28, 1995 16
Consolidated Statements of Cash Flows for the fiscal years
ended October 26, 1996, October 28, 1995 and October 29, 1994 17
Consolidated Statements of Stockholders' Equity (Deficit) for
the fiscal years ended October 26, 1996, October 28, 1995
and October 29, 1994 18
Notes to Consolidated Financial Statements 19-29
Supplementary Financial Data:
Schedule II - Valuation and Qualifying Accounts and Reserves 32
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
Rymer Foods Inc.
We have audited the consolidated financial statements and the financial
statement schedule of Rymer Foods Inc. and subsidiaries listed in the
index on page 13 of this Form 10-K. These financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and the financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Rymer Foods Inc. and subsidiaries as of October 26, 1996 and October 28,
1995 and the consolidated results of their operations and their cash
flows for each of the three years in the period ended October 26, 1996,
in conformity with generally accepted accounting principles. Also, in
our opinion, the financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
<PAGE>
The accompanying consolidated financial statements and financial
statement schedule have been prepared assuming that Rymer Foods Inc.
will continue as a going concern. As more fully described in Notes 2
and 6 to the Consolidated Financial Statements, the Company has reported
recurring losses from continuing operations, has experienced a
significant decrease in net sales in 1996 and 1995, and at October 26,
1996 has a stockholders' deficit of $15.6 million. Additionally, the
Company does not expect to have sufficient available cash in fiscal 1997
to make the June 15, 1997 11% Senior Note interest payment. This will
result in an event of default at which time the Senior Notes will become
due and payable. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans
regarding these matters are also described in Note 2. The consolidated
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
December 16, 1996
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
For the fiscal years ended October 26, 1996, October 28, 1995 and
October 29, 1994
(in thousands except share data)
1996 1995 1994
(Restated) (Restated)
<S> <C> <C> <C>
Net sales $ 44,329 $ 79,920 $ 106,252
Cost of sales 42,516 76,048 91,952
Gross profit 1,813 3,872 14,300
Selling, general and administrative expenses 4,794 9,042 9,617
Restructuring charge - 761 -
Goodwill writedown - 20,377 -
Operating (loss) income (2,981) (26,308) 4,683
Interest expense 4,198 3,786 3,343
Other income (35) (474) (618)
(Loss) income from continuing operations
before income taxes (7,144) (29,620) 1,958
Provision for income taxes - - 75
(Loss) income from continuing operations (7,144) (29,620) 1,883
(Loss)income from discont. operations, net (167) 290 121
(Loss) gain on dispositions of discontinued
operations, net (1,853) - 4,474
Net (loss) income $ (9,164) $ (29,330) $ 6,478
Per common share:
Primary:
(Loss) income from continuing operations $ (.66) $ (2.72) $ .18
Net (loss) income $ (.85) $ (2.69) $ .61
Fully diluted:
(Loss) income from continuing operations $ (.66) $ (2.72) $ .17
Net (loss) income $ (.85) $ (2.69) $ .60
Weighted average shares of common stock outstanding:
Primary 10,754,000 10,888,000 10,662,000
Fully diluted 10,754,000 10,888,000 10,782,000
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
October 26, 1996 and October 28, 1995
ASSETS
1996 1995
(Restated)
(in thousands)
<S> <C> <C>
Current assets:
Receivables, net of allowance for doubtful accounts
of $200,000 in 1996 and $353,000 in 1995 $ 2,729 $ 4,678
Inventories 3,272 12,119
Assets held for sale, net - 4,003
Other 1,170 766
Total current assets 7,171 21,566
Property, plant and equipment:
Leasehold improvements 1,785 1,441
Machinery and equipment 6,735 6,555
Total Property, plant and equipment 8,520 7,996
Less accumulated depreciation and amortization 6,899 6,008
1,621 1,988
Assets held for sale or lease 1,150 1,600
Other 621 920
Total Assets $ 10,563 $ 26,074
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of borrowings,
including amounts to related parties $ 21,754 $ 26,933
Accounts payable 558 829
Accrued interest 1,421 1,367
Accrued liabilities 1,640 2,961
Total current liabilities 25,373 32,090
Long term debt 70 70
Deferred employee benefits 736 772
26,179 32,932
Commitments and contingencies (Note 13)
Stockholders' deficit
Preferred stock, none outstanding - -
Common stock, $1 par, 20,000,000 shares authorized;
10,754,093 and 10,753,934 shares outstanding in 1996 and
1995 after deducting treasury shares of 225,024 in 1996
and 225,183 in 1995 10,754 10,754
Additional paid-in capital 44,363 44,363
Accumulated deficit (70,733) (61,569)
Notes receivable from sale of common shares
to related parties - (406)
Total stockholders' deficit (15,616) (6,858)
Total Liabilities and Stockholders' Deficit $ 10,563 $ 26,074
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the fiscal years ended October 26, 1996, October 28, 1995 and
October 29, 1994
1996 1995 1994
(Restated) (Restated)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
(Loss) income from continuing operations $ (7,144) $ (29,620) $ 1,883
Non-cash adjustments to (loss) income:
Depreciation and amortization 1,077 2,340 2,434
Writedown of goodwill - 20,377 -
Restructuring charge - 761 -
(Gain) loss on disposal of properties 3 (3) 20
Deferred compensation expense (26) (24) (8)
Provision for bad debts 53 675 363
Payment in kind interest on Senior Notes 3,621 1,206 -
Changes in assets and liabilities:
Net decrease (increase) to accounts receivable 1,896 1,752 (1,808)
Net decrease (increase) to inventories 8,847 (2,230) (1,095)
Net decrease (increase) to other current
and other long-term assets 660 (20) 7
Net (decrease) increase to accounts payable
and accrued expenses (1,385) (2,996) 413
Net cash flows from operating activities of
continuing operations 7,602 (7,782) 2,209
Net cash flows from operating activities of
discontinued operations 3,077 (1,082) (3,098)
Net cash flows from operating activities 10,679 (8,864) (889)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the Sale of Rymer Chicken assets - - 24,323
Proceeds from the sale of Mendelson stock - - 750
Proceeds from the sale of Rymer Seafood 1,500 - -
Capital expenditures (529) (815) (478)
Other 1 (21) (14)
Net cash flows from investing activities of
discontinued operations (5) (33) (654)
Net cash flows from investing activities 967 (869) 23,927
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in cash overdraft (348) (425) -
Repayments under line-of-credit facility (49,991) (88,170) (71,595)
Borrowings under line-of-credit facility 42,075 96,297 55,719
Principal payments on debt (267) (2,292) (6,679)
Proceeds from borrowings - 48 45
Proceeds from employee stock purchases - 32 17
Net cash flows from financing activities
of continuing operations (8,531) 5,490 (22,493)
Net cash flows from financing activities of
discontinued operations (3,115) 2,402 1,296
Net cash flows from financing activities (11,646) 7,892 (21,197)
<PAGE>
Net change in cash - (1,841) 1,841
Cash and cash equivalents balance at beginning
of fiscal year - 1,841 -
Cash and cash equivalents balance at end of
fiscal year $ - $ - $ 1,841
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the fiscal years ended October 26, 1996, October 28, 1995 and
October 29, 1994
Total
Note Stock-
Additional Receivable Holders'
Common Paid-in Accum. From Sale of Equity/
Stock Stock Deficit Common Stock (Deficit)
<S> <C> <C> <C> <C> <C>
Balance at October 30, 1993 $10,502 $44,188 $(38,717) $(383) $15,590
Net income 6,478 6,478
Shares issued from conversion
of note payable 233 146 379
Shares issued under employee
stock purchase plan 6 10 16
Other 23 23
Interest charged on notes
receivable (22) (22)
Balance at October 29, 1994 10,741 44,344 (32,239) (382) 22,464
Net loss (29,330) (29,330)
Shares issued under employee
stock purchase plan 13 19 32
Interest charged on notes
receivable (24) (24)
Balance at October 28, 1995 10,754 44,363 (61,569) (406) (6,858)
Net loss (9,164) (9,164)
Repayment of notes
receivable 406 406
Balance at October 26, 1996 $10,754 $44,363 $(70,733) $ - $(15,616)
See accompanying notes.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Fiscal Year
The fiscal year of the Company ends the last Saturday in October. For
all years presented, the fiscal year was 52 weeks.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and all of its subsidiaries after elimination of all significant
intercompany accounts and transactions. The Company is now engaged in
the development and production of frozen, pre-seasoned, portion
controlled meat entrees for restaurants and other foodservice customers,
primarily in the United States.
Cash Equivalents
The Company considers short-term investments with original maturities of
ninety days or less to be cash equivalents.
Inventories
Inventories are stated at the lower of first-in, first-out cost or
market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is
recognized on a straight-line basis over the estimated useful lives of
the related assets. Expenditures for maintenance and repairs are
charged to operations as incurred. Gains or losses on the disposition
of assets are reflected in results of operations.
Goodwill
In October of 1995, the Company recorded a goodwill writedown of $20.4
million. This writedown eliminated all remaining goodwill of the
Company. In fiscal 1994, goodwill was amortized using the straight-line
method over 20 years.
Revenue Recognition
The Company recognizes sales revenues at the time of shipment.
Income Taxes
Effective with the first quarter of 1994, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes". Adoption of this standard did not
materially impact the Company's operating results. In accordance with
this statement, deferred income taxes are recorded to reflect the tax
consequences on future years of differences between the basis of assets
and liabilities for income tax and for financial reporting purposes. In
addition, the amount of any future tax benefits is reduced by a
valuation allowance to the extent such benefits are not expected to be
fully realized.
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at October 26, 1996
and October 28, 1995, and the reported amounts of revenues and expenses
during the three year period ended October 26, 1996. Actual results
could differ from those estimates.
2. Going Concern
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern.
In 1996, the Company reported a decrease in net sales from continuing
operations as compared to 1995 of 45% principally due to the loss of
major customers. Also in 1996, the Company reported a loss from
continuing operations of $7.1 million, the fourth loss from continuing
operations before extraordinary item in the last five years. At October
26, 1996, the Company had a stockholders' deficit of $15.6 million.
Additionally, based on current forecasts, the Company does not expect to
have sufficient available cash in fiscal 1997 to make the June 15, 1997
11% Senior Notes interest payment. This will result in an event of
default at which time the Senior Notes will become due and payable. The
Company does not expect to have the funds available to repay the Senior
Notes.
These conditions raise substantial doubt about the Company's ability to
continue operating as a going concern. The fiscal 1996 consolidated
financial statements do not include any adjustments that might result
from the outcome of these uncertainties.
Management believes that the Company's future success is dependent in
part upon reversing the sales decline experienced in 1996 and 1995, on
the containment of operating costs, and on the success of negotiations
with its lenders. The Company is pursuing new sales opportunities while
continuing to streamline its production process and to reduce other
costs. Additionally, the Company is investigating various alternatives
to restructure the Senior Notes, however, there can be no assurances
that such a restructuring will occur.
<PAGE>
3. Restructuring and Restructuring Charges
During the fourth quarter of 1995, the Company recorded a Restructuring
charge of $761,000 related to the restructuring plan commenced in
October of 1995 to reduce operating costs, improve efficiencies, and
return the Company to profitability. Of this amount, approximately
$200,000 represented fees and expenses of financial and turnaround
consultants. The remaining amount represented primarily severance
payments related to the reduction of sixteen non-union employees. Four
of these employees were executive officers, six were selling and
administrative positions, and six were related to operations. In
addition, the Company eliminated approximately 80 union positions. No
severance costs were incurred related to the union reductions. In
total, the restructuring resulted in an approximate 20% reduction of the
Company's work force. The amount of actual consulting fees and
termination benefits paid and charged against the reserve was
approximately $582,000 and $179,000 in fiscal 1996 and fiscal 1995,
respectively.
4. Discontinued Operations and Assets Held for Sale
The accompanying consolidated financial statements reflect the
operations of the Company's Rymer Seafood and Rymer Chicken subsidiaries
as discontinued operations for accounting purposes.
Rymer International Seafood
On August 28, 1996, the Company completed the sale of substantially all
of the assets of its Seafood subsidiary to BGL I, Inc., an entity formed
by the then current President of Rymer Seafood who is also the son of
one of the Company's Board members. The Company's shareholders approved
the transaction at a special meeting on August 28, 1996. Consummation
of the sale was subject to certain conditions, including approval by the
holders of 66 2/3% of the outstanding Common Stock of the Company and
approval from the holders of Rymer's outstanding 11% Senior Notes.
Senior noteholder approval was received prior to the shareholder meeting
of August 28, 1996. The sales price was approximately $8.5 million,
consisting of $1.5 million in cash, $1.0 million in a ten year
subordinated note from the buyer and the assumption by the buyer of $5.1
million in bank debt and $0.9 million of other current liabilities. The
Company recorded a loss on the sale of Rymer Seafood of approximately
$1.9 million, which was recorded as of the measurement date (August 28,
1996) in the fourth quarter of 1996. On November 11, 1996, the Company
received a payment of $950,000 in full settlement of its ten year
subordinated note from the buyer of its Seafood operation. The proceeds
from the note were used to pay down the Company's then existing loan
balance with LaSalle.
<PAGE>
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 of approximately $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 assets and is net of the writeoff of
approximately $5.4 million of goodwill related to Rymer Chicken.
Rymer Chicken - Plant City
During 1992, the Company decided to place its idle Plant City, Florida
chicken facility and equipment for sale.
During 1993, the Company recognized a loss of $344,000 to reduce the
carrying value of the Plant City property to an estimated net realizable
value of $1.6 million. This loss was partially offset by income of
$272,000 from the elimination of reserves established during 1992 for
Plant City losses. In December 1996, the Company had an independent
appraisal performed of the Plant City facility. As a result of the
appraisal, the carrying value of the facility and land was written down
by $450,000 to the appraised value of approximately $1.2 million. The
$450,000 writedown is included as a loss from discontinued operations in
the Company's consolidated statement of operations.
The facility remains available for sale or lease and is currently
marketed by a local Florida real estate firm.
<PAGE>
Other Discontinued Operations
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 and the Company
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. The Company
recognized consulting income during 1995 and 1994 of $300,000 and
$250,000, respectively. No consulting income was recognized in fiscal
1996. The remaining unpaid balance is currently under litigation.
The following summarizes the results of the various discontinued
operations reflected in the accompanying Consolidated Statements of
Operations:
Fiscal Years Ended
Oct. 26, Oct. 28, Oct. 29,
1996 1995 1994
(in thousands)
Sales:
Rymer Seafood $ 52,547 $ 70,377 $ 56,004
Rymer Chicken - - 9,468
Total sales $ 52,547 $ 70,377 $ 65,472
Income (loss) from discontinued
operations:
Rymer Seafood $ 283 $ 290 $ 587
Rymer Chicken (450) - (492)
Credit equivalent to benefit
for income tax - - 26
$(167) $ 290 $ 121
Gain (loss) on dispositions of
discontinued operations:
Rymer Seafood $(1,853) $ - _
Rymer Chicken - - $ 4,017
Murry's - - 670
Provision for income taxes - - (213)
$(1,853) $ - $ 4,474
<PAGE>
The fiscal 1994 discontinued operations include a $185,000 allocation of
interest expense on debt not attributable to specific operations of the
Company. The allocation was based on the proportion of net assets sold
to total net assets of the Company.
In addition, the above discontinued operations also include interest
expense which specifically related to the operations of the discontinued
segment.
The net assets of Rymer Seafood consisted of the following (in
thousands):
October 28, 1995
Receivables $ 6,537
Inventories 6,866
Other current assets 8
Total current assets 13,411
Net property, plant and equipment 43
Total assets 13,454
Less: current liabilities (9,451)
Net current assets held for sale
before loss on disposition $ 4,003
5. Inventories
Inventories consist of the following (in thousands):
Oct. 26, Oct. 28,
1996 1995
Raw materials $ 1,619 $ 6,415
Finished goods 1,653 5,704
$ 3,272 $12,119
<PAGE>
6. Borrowings
Borrowings consisted of the following (in thousands):
October 26, October 28,
1996 1995
Banks, with interest of 1 1/2% over
prime in 1996 and 1995 $ 210 $ 8,127
Senior Notes due December 15, 2000,
with interest at 18% in 1996 and 1995 21,544 18,133
Other, including capitalized leases and
amounts to related parties:
Due to executives under restructured
employment and consulting agreements - 656
Other 70 87
21,824 27,003
Less current maturities 21,754 26,933
$ 70 $ 70
The prime rate applicable to the Company's outstanding bank notes
payable was 8.25% at October 26, 1996 and 8.75% at October 28, 1995.
The weighted average interest rate relating to these borrowings was 9.8%
and 9.3% during fiscal 1996 and 1995, respectively.
In conjunction with its sale of Rymer Seafood, the Company, on August
28, 1996, entered into a revised loan agreement with LaSalle. The
revised agreement provides a credit facility of up to $5 million for the
Company through April 1997 based on borrowing base availability
calculations. The agreement revised certain loan covenants and waived
all prior events of default as of the quarter ended July 27, 1996.
The Company's Rymer Meat subsidiary had total lines of credit available
of $2.6 million at October 26, 1996 and $11.7 million at October 28,
1995, of which $2.4 million and $3.6 million, respectively, was unused.
The Company's bank agreements contain certain restrictive covenants
which, among other things, limit the amount of indebtedness incurred by
the Company and its subsidiaries and require the maintenance of certain
financial ratios by the Company and its subsidiaries.
Substantially all of the Company's property, plant and equipment and
certain current assets are pledged as collateral under bank agreements.
The Senior Notes were issued pursuant to the Indenture between the
Company and Continental Stock Transfer & 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.
<PAGE>
The following summarizes the most restrictive covenants of the
Indenture. The Company is restricted from paying cash dividends on its
Stock. In addition, the Company is limited as to the incurrance of
additional debt and as to capital expenditures and other acquisitions.
The Indenture requires that Available Cash, as defined and under certain
circumstances, be applied to the prepayment of the outstanding principal
of the Senior Notes. The Indenture also contains certain other
covenants including limitations on liens, requirements to maintain its
status as a reporting company under the Securities Exchange Act and to
maintain a stock exchange listing, restrictions on transactions with
affiliates and related persons, and covenants to maintain assets and pay
taxes. The Indenture also contains provisions whereby the Company is
considered to be in default under the Indenture if it is in default
under the terms of any of its other debt agreements.
The following table summarizes activity of the Company's Senior Notes
(in thousands):
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)
Interest payment-in-kind on December 15, 1995 1,632
Interest payment-in-kind on June 15, 1996 1,779
Senior Note principal outstanding at October 26, 1996 $21,544
The Company has also announced that under the terms of its 11% Senior
Notes the December 15, 1996 interest payment was made by issuing
additional Senior Notes in a principal amount equal to the interest
payment due.
Based on current forecasts, the Company does not expect to have
sufficient available cash in fiscal 1997 to make the June 15, 1997 11%
Senior Notes interest payment. This will result in an event of default
at which time the Senior Notes will become due and payable. Therefore,
the Senior Notes have been classified as a current liability on the
October 26, 1996 balance sheet. The Senior Notes were classified as a
current liability on the October 28, 1995 balance sheet due to certain
loan covenant violations which existed as of that date.
As discussed in Note 2, the Company will seek to restructure its 11%
Senior Notes in an effort to improve its liquidity. There can be no
assurances that such a restructuring will occur.
In accordance with Statement of Financial Accounting Standards No. 107,
"Disclosures About Fair Value of Financial Instruments", the Company has
estimated the fair value of its bank debt using interest rates that are
similar to those that are currently available for issuance of debt with
similar credit risk, terms and maturities. The fair value of the
Company's Senior Notes is estimated based on recent transactions. The
estimated fair value of the Company's Senior Notes at October 26, 1996
was 40% of the face amount of the Senior Notes or approximately $8.6
million.
<PAGE>
At October 26, 1996, aggregate maturities of borrowings are as follows
(in thousands):
1997 $21,754
1998 70
Total long-term borrowing $21,824
7. Leases
The Company and its subsidiaries lease certain buildings and equipment
used for offices and manufacturing. Total rental expense from
continuing operations under all operating leases was approximately
$683,000, $970,000, and $957,000 in fiscal 1996, fiscal 1995 and fiscal
1994, respectively. The above lease costs do not include the costs of
taxes, insurance, maintenance and utilities which the Company and its
subsidiaries are required to pay.
The lease for the Chicago meat processing facility expired in July 1996.
The Company has subsequently negotiated for revised lease space and
lower rental costs. However, a new lease has not been finalized.
Management expects to have a one year agreement signed with its lessor
in the near future.
Property, plant and equipment recorded under capital leases and lease
commitments under non-cancelable leases are not material.
8. Income Taxes
Effective with the first quarter of 1994, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109). Adoption of this standard did
not materially impact the Company's operating results. The Company's
deferred tax asset is related primarily to its operating loss
carryforward for tax reporting purposes which approximated $38.6 million
and $31.2 million at October 26, 1996 and October 28, 1995,
respectively. The Company recorded a valuation allowance amounting to
the entire deferred tax asset balance because the Company's financial
condition, its lack of a history of consistent earnings, possible
limitations on the use of carryforwards, and the expiration dates of
certain of the net operating loss carryforwards give rise to uncertainty
as to whether the deferred tax asset is realizable.
The components of the net deferred tax asset recorded in the
accompanying consolidated balance sheets as of October 26, 1996 and
October 28, 1995 are as follows (in thousands):
1996 1995
Deferred tax assets:
Accounts receivable $ 130 $ 514
Inventories 19 67
Property, plant and equipment 670 846
Other liabilities and reserves 435 845
Alternative minimum tax credits 98 98
Net operating loss carryforwards 13,143 10,652
Investment tax credits 512 512
Total deferred tax assets 15,007 13,534
Less: Valuation allowance (15,007) (13,534)
Net deferred tax asset $ - $ -
<PAGE>
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 income before income taxes.
Fiscal Years Ended
October 26, October 28, October 29,
1996 1995 1994
(Loss) income before income taxes:
(Loss) income from continuing operations $(7,144) $(29,620) $1,958
(Loss) income from discontinued operations (167) 290 95
(Loss) income on dispositions of
discontinued operations (1,853) - 4,687
Total (loss) income before income taxes $(9,164) $(29,330) $6,740
Total (benefit) provision computed by applying
the U.S. statutory rate (34%) $(3,116) $ (9,972) $2,292
Increases (decreases) in taxes due to:
Goodwill written off - 6,936 1,847
Goodwill amortization - 391 411
Other differences, net 64 8 (349)
Loss which provides no current tax benefit 3,052 2,637 -
Utilization of net operating loss and
capital loss carryforwards - - (3,939)
Actual tax provision $ - $ - $ 262
The Company's Federal income tax returns are subject to review by the
Internal Revenue Service, the results of which cannot be predicted with
certainty. At October 26, 1996, the Company had an operating loss
carryforward for tax reporting purposes approximating $38,630,000;
(expiring $1,600,000 in 1997; $12,700,000 in 1998; $700,000 in 2000;
$2,800,000 in 2001; $100,000 in 2002, $100,000 in 2003; $300,000 in
2004; $2,800,000 in 2007; $130,000 in 2009; $7,500,000 in 2010; and
$9,900,000 in 2011) which is available to offset future Federal taxable
income.
9. Stockholders' Equity
The Company has authorized 400,000 shares of preferred stock with a par
value of $10 per share. The Company's Board of Directors may establish
the dividend rates, liquidation preferences, redemption, conversion and
voting rights, and any further limitations or restrictions of such a
preferred stock upon issuance.
Treasury common stock is recorded at cost and is reflected in the
accompanying balance sheet as a direct reduction of stockholders'
equity.
At October 26, 1996, 918,000 shares of common stock were reserved for
the exercise of stock options including 624,750 shares reserved for
future grants of options.
<PAGE>
10. Stock Options and Warrants
On April 7, 1993, the Company adopted the 1993 Stock Option Plan (the
1993 Plan). The 1993 Plan permitted the issuance to key employees and
directors of options to purchase shares of common stock.
Options granted under the 1993 Plan are exercisable at a price of $1.88
per share, the fair market value of the Common Stock on April 7, 1993,
the date the options were granted. The right of an optionee to exercise
options granted is dependent upon a combination of time vesting and the
price performance of the common stock.
Options generally vest, as to time, at the rate of 25% for each year of
service by the optionee following the option grant date. The number of
options within an option grant which may be exercised during any
calendar quarter will equal the lesser of: (a) the number of options
time vested or (b) the number of options determined by multiplying the
performance percentage (Performance Percentage) and the total number of
options held within such option grant by an optionee. The Performance
Percentage is based on the average trading price per share of the common
stock during the last fifteen trading days of the preceding calendar
quarter as follows: $3.00 - 40%, $4.00 - 80%, $5.00 - 100%. At October
29, 1994, 338,000 options were outstanding under the 1993 Plan. All
options expire on April 7, 1998.
In 1994, the Company adopted the 1994 Stock Plan (the 1994 Plan). The
1994 Plan succeeds the 1993 Plan. The 1994 Plan permits the issuance to
key employees and directors of options to purchase up to 580,000 shares
of common stock.
Options granted under the 1994 Plan are exercisable at the fair market
value of the Common Stock on the date the option is granted. The term
during which each option may be exercised is determined by the Company
at each grant date. In no event will the option be exercisable more
than ten years from the grant date. There is no performance vesting
aspect of the 1994 Plan. Options time vest as designated in the
individual grant. Options currently outstanding vest in one to three
years. At October 26, 1996, 293,250 options and at October 28, 1995,
527,000 options were outstanding under the 1994 Plan.
No compensation expense has been recognized by the Company as all
options were granted at the market price of the stock at the date of the
grant.
<PAGE>
A summary of stock option activity and other related information is as
follows:
1996 1995 1994
Shares under option at beginning of year 799,500 755,000 570,500
Options granted (at prices of $1.50
in 1996, at $1.63 to $3.25 in 1995,
and at $1.38 to $2.88 in 1994) 175,000 101,000 417,000
Options exercised at $1.88 in 1994 - - (1,000)
Options cancelled and expired (681,250) (56,500) (231,500)
Shares under option at the end of the year
(at prices ranging from $1.50 to $2.88) -
105,000 shares exercisable at
October 26, 1996 293,250 799,500 755,000
Shares available for option at
end of year 624,750 118,500 163,000
In October 1995, the Company engaged the financial advisory and
turnaround firm of Kirkland Messina, Inc. (KM) to assist the Company in
developing a plan to return the Company to profitability. As part of
KM's compensation, the Company issued KM 500,000 warrants to purchase
common stock of the Company at an exercise price in cash of $1.675 per
share. The warrants issued to KM expire October 1, 1998.
On November 8, 1995, the Company announced that it had hired P. E. (Ed)
Schenk as its President and Chief Executive Officer. As part of Mr.
Schenk's compensation, he was issued 750,000 warrants to purchase common
stock of the Company at an exercise price of $1.00 per share. The warrants
issued to Mr. Schenk expire November 8, 1998.
11. Stock Purchase Agreements
On April 11, 1989, the stockholders approved the sale and issuance of
180,000 shares of common stock for $9.00 per share to three former
executives for recourse promissory notes, commitments, and in one case,
to provide consulting services to the Company. The notes due the
Company bear 9.5% interest and were originally due on February 24, 1994.
In fiscal years 1991, 1992 and 1993, the Board of Directors approved
amendments to the employment, consulting and stock purchase agreements.
In these amendments, the former executives accepted annual salary
reductions and reductions in the amount of additional compensation
payable under the employment agreements. In consideration for these
reductions, the former executives received notes in settlement for all
future obligations for additional compensation under the employment and
consulting agreements. Concurrently, the contractual purchase
obligations of the former executives under the 1989 stock purchase
agreements were reduced by a total of $7.75 per share.
The notes payable and notes receivable related to these amended
agreements matured in January 1996. On January 2, 1996, notes payable
of approximately $406,000 were offset against notes receivable of
approximately the same amount. The notes receivable were classified as
a reduction of Stockholders' equity as they related to stock purchase
agreements.
<PAGE>
12. Employee Benefit Plans
The Company currently sponsors a Company-wide 401(k) savings plan. The
plan covers all salaried personnel at the Chicago processing plant and
the Company's corporate headquarters who have completed 6 months of
service. The Company makes matching contributions to the 401(k) savings
plan of up to 5% of each participants' compensation.
Contributions and costs expensed under the 401(k) savings plan for
employees relating to the Company's continuing operations amounted to
approximately $91,000 and $171,000 for fiscal 1996 and fiscal 1995,
respectively. Prior to fiscal 1995, the Company sponsored a non-
contributory profit sharing plan. Contributions and costs expensed for
fiscal 1994 amounted to approximately $202,000.
Under terms of a deferred compensation agreement with a former
officer/director of the Company, the present value of future payments
under the agreement has been included in deferred employee benefits,
amounting to $577,000 at October 26, 1996 and $603,000 at October 28,
1995.
13. Commitments and Contingencies
The amounts of liability, if any, for claims and actions against the
Company and its subsidiaries at October 26, 1996 are not determinable
but, in the opinion of management, such liability, if any, would not
have a material effect upon the Company's financial position or results
of operations.
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 is approximately $0.4
million at October 26, 1996. 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 $2.0
million as of October 26, 1996.
14. EEOC Settlement
On April 26, 1990, United States District Court for the Northern
District of Illinois, Eastern Division dismissed EEOC v Rymer Foods
Inc., No. 88 C 10680; an action brought by the Equal Employment
Opportunity Commission against the Company on December 21, 1988,
alleging certain discriminatory employment practices by the Company at
its Chicago meat processing facility.
The present value of the cost of the settlement and estimated additional
legal fees relating to such dismissal was included in the net loss for
fiscal 1990. The remaining liability related to this settlement
approximated $380,000 at October 28, 1995. The Company's final
settlement payment of approximately $547,000 was paid in April 1996.
<PAGE>
15. Supplemental Cash Flow Information
Supplemental cash flow information is as follows (in thousands):
1996 1995 1994
(Restated) (Restated)
Cash paid (received) for:
Interest $423 $2,019 $3,246
Federal, state and local
income taxes (net of tax refunds) $(32) $ 613 $ 219
Non-cash transactions:
In connection with the retirement of a note payable due to a former
Senior Note holder on October 28, 1994, by conversion into common stock,
the following non-cash transaction was recorded:
1994
Decrease in notes payable $(376)
Decrease in accrued interest payable (3)
Issuance of common shares:
Common stock at par 233
Additional paid-in capital 146
$ -
16. Concentration of Credit Risk and Supplemental Sales Information
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist principally of
accounts receivable.
As of October 26, 1996, the Company had uncollateralized receivables
with one customer approximating $407,000 which represents 14% of the
Company's receivables.
The Company routinely assesses the financial strength of its customers
and, as a consequence, believes that its trade accounts receivable
credit risk exposure is limited. The Company establishes an allowance
for doubtful accounts based upon factors surrounding the credit risk of
specific customers, historical trends, and other information.
Sales to customers outside the United States were less than 10% of
consolidated sales in each year presented. Sales to three restaurant
chains owned by Darden (formerly General Mills) comprised approximately
14% of the Company's revenues from continuing operations in both 1995
and 1994. During the first quarter of 1996, Darden informed the Company
that certain supply contracts would not be renewed for 1996.
<PAGE>
Sales to one of the Company's retail customers, Country Fed Meat
Company, Inc. (CFM), accounted for approximately 12.2% of the Company's
revenues from continuing operations in fiscal 1994. At the end of the
first quarter of 1995, certain issues between the Company and CFM
resulted in certain lawsuits being filed. On June 28, 1995, the Company
announced that it had reached a settlement with CFM of the litigation
pending between the two companies. As a result of the settlement, all
lawsuits between the companies were dismissed and no further actions
will be taken by either company on these matters. The allowance for
doubtful accounts established prior to and during the Company's 1995
second quarter contained sufficient reserves to resolve the matters in
dispute without additional charges to operations during the third
quarter of 1995. All terms of the settlement are confidential. The
Company does not expect to have a supply relationship with CFM in the
future.
Unit sales to two groups of the Company's other customers, Bonanza and
Ponderosa, together accounted for approximately 28.6%, 23.1%, and 16.3%
of the Company's consolidated unit sales from continuing operations in
fiscal 1996, 1995 and 1994, respectively. Franchise rights for both
Bonanza and Ponderosa are owned by Metromedia, Inc. The Bonanza and
certain of the Ponderosa restaurants are independently owned and
operated.
The loss of any of the Company's major customers, or a substantial
portion of these accounts, could have a material adverse effect on the
Company.
17. Earnings (Loss) Per Share
Earnings (loss) per share are calculated by the treasury stock method.
Primary earnings per share are based on the weighted average number of
shares outstanding during each year plus the assumed exercise of
dilutive common stock equivalents using the average market price. The
fully diluted per share computation reflects the effect of common shares
contingently issuable upon the exercise of warrants in periods in which
such exercise would cause dilution. Fully diluted earnings per share
also reflect additional dilution related to stock options due to the use
of the market price at the end of the period, when higher than the
average price for the period.
<PAGE>
18. Fourth Quarter Adjustments
1996
In December 1996, the Company had an independent appraisal performed of
the Plant City facility, an asset remaining from the discontinued Rymer
Chicken operation which was disposed of in December 1993. As a result
of the appraisal, the carrying value of the facility and land was
written down by $450,000 in the fourth quarter of fiscal 1996 to the
appraised value of approximately $1.2 million. The $450,000 writedown
is included as a loss from discontinued operations in the Company's
consolidated statement of operations.
1995
During the fourth quarter of 1995, the Company recorded a goodwill
writedown of $20.4 million. (See Note 1). This writedown eliminated
all remaining goodwill of the Company. The asset of goodwill was
determined to have been impaired because of the current financial
condition of the Company and the Company's inability to generate future
operating income without substantial sales volume increases which are
uncertain. Moreover, anticipated future cash flows of the Company
indicated that the recoverability of the asset was not reasonably
assured.
During the fourth quarter of 1995, the Company recorded a Restructuring
charge of $761,000 related to the restructuring plan commenced in
October of 1995 to reduce operating costs, improve efficiencies, and
return the Company to profitability. (See Note 3). Of this amount,
approximately $200,000 represents fees and expenses of financial and
turnaround consultants while the remaining amount represents primarily
severance payments.
During the fourth quarter of 1995, the Company recorded an additional
interest charge of approximately $470,000. This charge 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.
1994
None
<PAGE>
19. New Accounting Pronouncements
The Company will implement the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of" in fiscal
1997. Management believes that the adoption of these provisions will
not have a material impact on the financial conditions or results of the
operations of the Company.
The Company will implement the provisions of Statement of Financial
Accounting Standards No. 123 "Accounting for Stock-Based Compensation"
(SFAS #123) in fiscal 1997. The Company is currently reviewing its
implementation options under SFAS #123.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
<PAGE>
PART III
Item 10. Directors and Executive Officers
Class 1 Directors (Term of Office Expiring in 1999)
P.E. SCHENK (age 59; Director since November 1995).
Mr. Schenk was named to the Board of Directors of the Company on
November 8, 1995 as a Class 1 Director t o fill a vacancy therein
created by a resignation. Mr. Schenk has served as President and
Chief Executive Officer of the Company since November 1995. In
1994 and 1995, Mr. Schenk operated Schenk & Associates, Inc., a
consulting practice. Mr. Schenk was Executive Vice President of
Lykes Processed Meats Group from December 1993 to November 1994,
and from August 1993 to December 1993 he served as Senior Vice
President of Sales & Marketing. From 1986 to 1993, Mr. Schenk was
employed by Smithfield Foods, Inc. as President and Chief Operating
Officer of various meat processing subsidiaries.
DAVID E. JACKSON (age 38; Director since 1993). Mr. Jackson
is a Managing Director of Contrarian Capital Management, LLC, a
money management firm, and has served as such since May 1995.
Prior to May 1995, Mr. Jackson was a Managing Director of
Oppenheimer & Co., Inc. and a Portfolio Manager at such firm since
September 1990. From November 1989 through August 1990,
Mr. Jackson managed a portfolio for EBF & Associates, a
management firm based in Minneapolis, Minnesota.
HANNAH H. STRASSER (age 37; Director since 1993).
Ms. Strasser is a Managing Director of Cardinal Capital LLC, a
money management firm, and has been such since April 1995. Prior
to such date, Ms. Strasser was a Senior Vice President of Deltec
Asset Management Corporation, an investment firm, since 1989, and a
Vice President at such firm prior to 1989. Ms. Strasser is also a
current director of Gantos Inc. Ms. Strasser has also been a
director and member of the compensation committee of Equitable Bag
Co., Inc. from December 1994 to august 1995. Ms. Strasser has also
served as a director of Deltec International S.A. Equitable Bag
Co., Inc. filed a petition for relief under Chapter 11 of the
United States Bankruptcy Doe on May 19, 1995, in United States
Bankruptcy Court for the District of Delaware.
JOSEPH COLONNETTA (age 36; Director since 1996).
Mr. Colonnetta is co-managing partner of The RMP Group, Inc. Prior
to joining the RMP Group, Mr. Colonnetta was the Chief Financial
Officer of TRC, a Chicago-based holding company. Mr. Colonnetta is
also a director of Back Yard Burgers, Sfuzzi, Starmark Foods and
Wingate Hospitality.
Class 2 Directors (Term of Office Expiring in 1998)
SAMUEL I. BAILIN (age 66; Director since 1993). Mr. Bailin
has been President of Samuel I. Bailin Inc., a consultant to the
food industry, since 1977.
<PAGE>
Class 3 Directors (Term of Office Expiring in 1997)
Both Class 3 Directorships are vacant.
During fiscal 1996, there were 10 meetings of the Board. Each
director then in office attended more than 75% of the combined
meetings of the Board of Directors and the Committees on which he
or she served held during the year while he or she served as
director.
The Executive Committee, consisting of David E. Jackson,
Chairman, did not meet in fiscal 1996. Except for certain mattes,
the duties of the Executive Committee include the exercise of all
of the powers and authority of the Board of Directors and the
management of the business and affairs of the company, except for
any powers and authority granted to another committee. The
authority of the Executive Committee is generally limited to
acquisitions and dispositions of assets and negotiations to
accomplish the same; personnel matters; guidance to senior
management on policy matters; negotiations, review and analysis of
financial needs; litigation mattes; and public or private stock
placement or other equity or debt offerings.
The Audit Committee, consisting of Mr. Schenk, Mr. Jackson and
Ms. Strasser held 1 meeting during fiscal 1996. The Audit
Committee reviews the proposed scope of audit and non-audit
services to be performed by the Company's independent public
accountants; reviews, and reports on audits and the Company's
accounting policies and controls; and annually recommends
independent public accountants for selection as auditors of the
Company. The Audit Committee also monitors the administration of
the Company's business ethics and conflicts of interest policies.
The Compensation Committee, consulting of Samuel I. Bailin,
Chairman, David E. Jackson and Hannah H. Strasser, did not meet in
fiscal 1996. The Compensation Committee reviews the compensation
policies of the Company, determines compensation of the Company's
executive officers, determines general compensation and benefit
levels for all officers, and recommends to the full Board future
compensation of executive officers. The Compensation Committee
administers the Company's employee benefit plans presently in
effect.
EXECUTIVE OFFICERS
The following is a list of the names and ages of the current
executive officers of the Company, the period during which each has
served as such and their respective position:
Name and Age Position(s)
P.E. Schenk (59) Chairman, President and Chief
Executive Officer
<PAGE>
Edward M. Hebert (46) Senior Vice President Finance,
Treasurer and Chief Financial Officer
Jose Muguerza (34) Vice President of Operations and
Technical Services
Barbara McNicholas (61) Secretary (since 1988)
See Directors and Executive Officers as to Mr. Schenk's
business experience.
Edward M. Hebert. Mr. Hebert was appointed Chief Financial
Officer on October 6, 1995. Mr. Hebert has been Senior Vice
President Finance of the Company since January 1990 and Treasurer
of the Company since January 1993. Prior thereto, Mr. Hebert was
Controller of the Company since December 1988. Prior to that time,
Mr. Hebert was employed by Arco Metals Company in various financial
positions.
Jose Muguerza. Mr. Muguerza was elected Vice President of
Operations and Technical Services in December 1995. Prior to such
election, Mr. Muguerza was Vice President-Technical Services of a
subsidiary of the Company.
Barbara McNicholas. Ms. McNicholas was elected Secretary in
1988 and has been employed by the Company since 1953 in various
office staff capacities.
All of the executives officers are citizens of the United
States of America. Edward M. Hebert and Barbara McNicholas served
as either executive officers and/or directors of the Company during
its 1993 Restructuring.
Item 11. Executive Compensation
Compensation Committee Report
In fiscal 1996, the Company's philosophy on executive
compensation was to attempt to provide a compensation package
competitive with comparable companies in the food industry and
which linked the amount of compensation provided to the achievement
of business objectives while recognizing the economic factors then
affecting the Company. In this regard, individual base salaries
were established for the Chief Executive Officer and others based
generally on the Board of Directors' perception of competitive,
industry-wide salaries, the executive's experience and seniority,
as well as his or her performance, while considering the overall
level of spending which the Board deemed appropriate for officers'
salaries in light of these economic factors.
In fiscal 1996 there were two programs of direct executive
officer compensation: the Base Salary Program and the Incentive
Compensation Program. In addition, executives were awarded stock
options as part of a compensation package.
<PAGE>
Base Salary Program
Base salary for fiscal 1996 for the executive officers named
in the Summary Compensation Table was determined based on their
respective employment agreements. See "Certain Transactions and
Related Transactions."
Incentive Compensation Program
The Incentive Compensation Program provides opportunities for
executives to receive incentive compensation if specific
performance goals, proposed by management and approved by the
Board, are met. No awards of incentive compensation to executive
officers were made with respect to fiscal 1996 since objectives for
such year were not achieved. Awards for prior years were based
primarily on achievement of corporate goals and individual
performance.
Stock Options
In fiscal 1996, under the Stock Option Plan, options to
purchase 175,000 shares of the Common Stock were granted. See
"Security Ownership of Certain Beneficial Owners and Management".
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Awards Payouts
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other Restricted Secur- LTPI All Other
Annual Stock ities Payouts Compensation
Name and Salary Bonus Compen- Award(s) Under- ($) ($)
Principal Year ($) ($) sation ($) lying
Position (1) ($) Options
(2) (#)
P.E. 1996 197,808 _ 6,050 - 750,000* - -
Schenk 1995 - - - - - - -
(3)
Chairman
and Chief
Executive
Officer
6,587 (4)
Edward M. 1996 135,665 - 6,000 - 50,000 - 7,500
Hebert 1995 120,975 - 6,400 - 7,000 - 13,470
Senior 1994 113,035 43,500 8,400 - 4,000 - 6,882
V.P Finance,
Treasurer
and CFO
<PAGE>
Thomas F. 1996
Bauman 1995 54,254 - 1,500 - - - 242 (4)
Senior V.P. 152,400 30,000 6,600 - 7,000 - 396
of Sales and (5)
Marketing
</TABLE>
1. For fiscal year ended on the last Saturday of October in each year.
2. Reimbursement allowance for automobile use and maintenance
3. Mr. Schenk joined the Company on November 8,1995. He was made a
Director on November 8, 1995. See "Certain Transactions and Related
Transactions."
4. Represents vested amount from the Company's 401k Plan
5. This bonus was paid pursuant to Mr. Bauman's employment agreement.
Mr. Bauman's position was eliminated on January 11, 1996.
* Mr. Schenk was issued a warrant to acquire 750,000 shares of
Common Stock for $1.00 per share. See "Certain Transactions and
Related Transactions - Employment and Consulting
Other Arrangements."
The following table sets forth selected information concerning
options granted in fiscal 1996 to the one officer named in the
Summary Compensation table who was granted option to purchase
shares of common stock:
OPTION GRANTS IN 1996 FISCAL YEAR
Individual Grants
Number
of Percent Potential
Secur- of Total Realizable Value at
ities Options Exer- Assumed Annual
Under- Granted cise Rates of Stock
Name lying to or Expira- Price Appreciation
Options Employee Base tion for Option Term
Granted s Price Date
(#) in 5% ($) 10%($)
Fiscal ($/Sh)
Year
Edward 50,000 29% $1.50 Jan 4, N/A (A) N/A (A)
Hebert 2001
A No potential realizable value has been assumed since the
option exercise price remains greater than the assumed
realizable share price for the duration of the option grant.
<PAGE>
Number of Value of
Shares Value Unexercised Unexercised
Acquir- Real- Options at In-the-Money
Name ed on ized Fiscal Options
Exer- Year-End at Fiscal
cise ($) Year-End
(#) (#)
($)
Exercisable/ Exercisable/
Un- Un-
exercisable exercisable
Edward M. -0- -0- 61,000/40,000 -0-/-0-
Hebert
Item 12. Security Ownership of Certain Beneficial Owners and
Management
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 10, 1997, the
beneficial ownership of the Common Stock by each of the directors
and each of the executive officers of the Company listed in the
Summary Compensation Table below and of all directors and executive
officers of the Company as a group, and by each person who is known
by the Company to beneficially own 5% or more of the Common Stock.
The Common Stock is the only outstanding class of equity
securities of the Company.
Amount and Percent
Name Position Nature of
of Beneficial Class
Ownership
Samuel I. Bailin Director 30,000 Direct *
(1)
David E. Jackson Director 1,827,212 In- 17.0%
direct
(2)
P.E. Schenk President, 750,000 Direct 7.0%
CEO, (3)
Director
Edward M. Hebert Senior 64,721 Direct *
Vice (4)
President,
CFO
<PAGE>
Oppenheimer & Co. 70,934 Direct *
Inc. 1,827,212 (5) 17.0%
Oppenheimer Tower In-
New York, NY 10281 direct
(6)
All directors and 900,923 Direct 9.2%
executive persons as 1,913,497 In- 17.8%
a group (8 people) direct
(7) (2)
Less than 1% of the outstanding shares *
(1) Such shares include options to purchase exercisable within 60
days from the date hereof 30,000 shares of Common Stock.
(2) Mr. Jackson disclaims beneficial ownership of all 1,827,212 of
such shares. Such shares are held by two limited
partnerships, Oppenheimer Horizon Partners, L.P. and
Oppenheimer Institutional Horizon Partners, L.P. (the
"Partnerships"), and a corporation (the "Corporation").
Mr. Jackson is a partner of Contrarian Capital Management,
LLC, a money management concern that has shared voting and
dispositive power with the Partnerships and the Corporation
with respect to such shares. See No. (9).
(3) A warrant to acquire 750,000 shares of Common Stock was issued
to Mr. Schenk in connection with his employment agreement.
The exercise price for such warrants is $1.00 per share of
Common Stock, the market value of such stock on the date of
issuance of the warrant. Such warrant became exercisable
November 8, 1996.
(4) Such shares include options to purchase exercisable within 60
days from the date hereof 61,000 shares of Common Stock.
(5) These shares are held by Oppenheimer on behalf of itself and
certain related entities.
(6) These shares are held by affiliates of Oppenheimer on behalf
of themselves and certain related entities. See Note (2).
(7) See the disclaimers of beneficial ownership set forth in
footnotes 2 and 4 above.
Pursuant to the Company's 1994 Stock Option Plan (the "Stock
Option Plan"), the company issued in 1996 options to purchase
175,000 shares of Common Stock to the following executive officers
to acquire the following number of shares of Common Stock: Edward
M. Hebert, 50,000 shares; Mark Lazare, 50,000 shares; and Jose
Muguerza, 75,000 shares. On November 8, 1995, the Company agreed
to issue to P.E. Schenk, President and Chief Executive Officer of
the Company, a warrant to acquire 750,000 shares of Common Stock
for an exercise price of $1.00 per share, the market value of the
Common Stock on the date of issuance of such amount. The warrant
issued to Mr. Schenk is exercisable commencing November 8, 1996 and
for three years thereafter.
<PAGE>
The Indenture (the "Indenture"), dated as of April 7, 1993,
between the Company and Continental Stock Transfer & Trust Company,
as Trustee (the "Trustee"), relating to the Company's 11% Senior
Notes due 2000 (the "Senior Notes"), provides for the immediate
acceleration of principal and interest due on all the Senior Notes
in the event of a "Change of Control" (as defined therein). The
Indenture defines a "Change in Control" as the acquisition by any
person or entity (a "Person") or affiliated group of at least 55%
of the aggregate voting power of all classes of capital stock of
the Company entitled to vote generally in the election of directors
of the company, excluding from such calculation shares held by any
Person that were issued to such Person in its reorganization under
Chapter 11 of the united States Bankruptcy Code completed in 1993
(the "Restructuring") to the extent that such Person is the
acquiror or a member of such affiliated acquiring group.
Item 13. Certain Relationships and Related Transactions
CERTAIN TRANSACTIONS AND RELATED TRANSACTIONS
Stock Purchase Agreements and Certain Additional Compensation
Jeffrey Rymer. On February 24, 1989, Mr. Jeffrey Rymer, then
the President, purchased 10,000 shares of Common Stock from the
Company for a purchase price of $9.00 per share paid by his
recourse 9.5% promissory note in the amount of $90,000. In
September 1991, the purchase price for these shares was reduced to
$6.00 per share, an amount which was the fair market value of the
shares at such time. Pursuant to his employment agreement then in
effect, Mr. Rymer was entitled to receive additional compensation
for Rymer Meat's fiscal years ending in 1992 and 1993 in the
aggregate amount of $188,000. As of September 18, 1991, Mr. Rymer
owed the Company $40,850 under his promissory note. As agreed upon
between Mr. Rymer and the Company, Mr. Rymer released all claims
for $188,000 in additional compensation and in exchange the Company
reduced the stock purchase price and agreed to pay him (i) $11,000
on January 4, 1993 with 9.5% annual interest and (ii) $131,000 on
April 1, 1993 without interest. Concurrently therewith, Mr.
Rymer's promissory note and interest thereon was cancelled and
extinguished and Mr. Rymer issued a promissory note due January 4,
1993 in the amount of $10,850 on the same terms as his prior note.
The Company and Mr. Rymer have rights of offset with respect to
the $10,850 note due from Mr. Rymer and the $11,000 obligation.
Mr. Rymer subsequently agreed to defer the maturity of the $11,000
and $131,000 amounts to January 1, 1996 and January 2, 1996,
respectively. In connection therewith, Mr. Rymer's promissory note
in the amount of $10,850 was cancelled and extinguished and Mr.
Rymer issued a new promissory note due January 1, 1996 on the same
terms as his prior note. These notes, plus accrued interest
thereon, were offset by the Company on January 1, 1996. The
Company did not pay the note due to Jeffrey Rymer on January 2,
<PAGE>
1996. The Company deferred payment of this debt in order to
preserve cash for use in the operation of its business. In March
1996, the Company and Jeffrey Rymer agreed on revised payment terms
whereby one-half of the principal ($65,000) and accrued interest on
the entire debt at 9.5% through March 13, 1996 (amounting to
$1,395) was paid to Jeffrey Rymer by the Company on March 13, 1996.
The Company and Jeffrey Rymer agreed that interest would be paid
on the remaining principal at a rate of 9.5% on a monthly basis and
that the remaining principal will be paid in installments. At year
end fiscal 1996, no further amounts were due to Mr. Rymer. Mr.
Jeffrey Rymer resigned as a Director and officer of the Company on
November 8, 1995.
Barry Rymer. On February 24, 1989, Mr. Barry Rymer purchased
150,000 shares of Common Stock from the Company for a purchase
price of $9.00 per share paid by his recourse 9.5% promissory note
in the amount of $1,350,000. In September 1991, the purchase price
for these shares was reduced to $6.00 per share, an amount which
was the fair market value of the shares at such time. Pursuant to
his employment and consulting agreement then in effect, Mr. Rymer
was entitled to receive additional compensation at the annual rate
of $465,000 per year for the Company's 1991 through 1995 fiscal
years and at the rate of $455,000 for the Company's 1996 fiscal
year. As of September 18, 1991, the total additional compensation
due Mr. Rymer aggregated $2,323,750, and Mr. Rymer owed the Company
$1,391,400 under his promissory note. As agreed upon between Mr.
Rymer and the Company, Mr. Rymer released all claims for $2,323,750
in additional compensation, and in exchange the Company reduced the
stock purchase price and agreed to pay him (i) $942,000 on
January 4, 1993 with 9.5% annual interest and (ii) $445,000 (which
was guaranteed by Rymer Meat) on April 1, 1993, without interest.
Mr. Rymer's note of February 24, 1989 (and interest thereon) was
cancelled and extinguished, and Mr. Rymer issued a new promissory
note due January 4, 1993 in the amount of $941,400 on the same
terms as his prior note. The Company and Mr. Rymer had rights of
offset with respect to the $941,400 note due from Mr. Rymer and the
Company's $942,000 obligation to him.
In October and December 1992, the Company agreed to further
reduce the purchase price for these shares to $1.25 per share, an
amount in excess of the fair market value of the shares at the
later date, and by reason of this reduction, Mr. Rymer
contemporaneously reduced the amount ($1,387,000) due from the
Company to (i) $229,500 bearing 9.5% annual interest from the date
of the reduction and (ii) $124,000 bearing no interest. Mr.
Rymer's note for $941,400 and interest thereon was cancelled and
extinguished, and Mr. Rymer issued a new promissory note on the
same terms as his prior note, except that it was due and payable on
January 1, 1996, in the amount of $228,900. Of the Company's note,
$229,500 was due January 1, 1996 and $124,000 was due January 2,
1996. The Company and Mr. Rymer had rights of offset with respect
to the $228,900 note due from Mr. Rymer and the Company's $229,500
obligation to him. These notes, plus accrued interest thereon,
were offset by the Company on January 1, 1996. The Company did not
pay the $124,000 note due to Barry Rymer on January 2, 1996. The
Company deferred payment of this debt in order to preserve cash for
use in operation of its business. The Company revised the payment
terms of the note such that Mr. Rymer was paid in installments. At
<PAGE>
year end fiscal 1996, no further amounts were due to Mr. Rymer.
Mr. Barry Rymer resigned as a Director of the Company on
November 6, 1995.
Employment and Consulting Agreements and Other Arrangements
P.E. Schenk. On November 8, 1995, Mr. Schenk entered into a
two year employment agreement with the Company providing for annual
compensation of $200,000, subject to mandatory annual escalation in
the event of an increase in the regional Consumer Price Index
equivalent to the percentage increase of such index. Pursuant to
the employment agreement, Mr. Schenk was also issued a warrant to
acquire 750,000 shares of Common Stock at an exercise price of
$1.00 per share for a period of three years commencing November 8,
1996. Under the employment agreement, Mr. Schenk is entitled to an
automobile allowance of $550 per month, as well as other normal
executive benefits. Mr. Schenk's employment may be terminated
prior to the expiration of the two year term for "cause" only,
including conviction of a felony, intentional acts that materially
impair the business of the Company and failure to perform his
material duties.
Edward M. Hebert. The Company entered into an employment
agreement with Edward M. Hebert, the Company's Senior Vice
President Finance, Treasurer and Chief Financial Officer, on
June 1, 1991. The agreement's original one-year term that began on
June 1, 1991 automatically extends thereafter for successive one-
year periods unless either the Company or Mr. Hebert notifies the
other not later than May 1 of any year that the agreement is to be
terminated on June 1 of such year. Mr. Hebert was entitled in the
first year of the agreement to a salary of $100,000 per year with
an increase in subsequent years based on increases in the Consumer
Price Index limited to 6% of the amount in effect for the prior
year. In connection with the 1993 restructuring, Mr. Hebert's
salary was set at $112,200.
If the Company terminates his employment in breach of the
agreement, Mr. Hebert would be entitled to continue to receive his
compensation and employee benefits for the remainder of the current
one-year term of the agreement or (in the event of a change of
control), nine months, if longer. Mr. Hebert's employment is
terminated by the Company in breach of the agreement or by
expiration of the term of the agreement after the Company elects
not to extend the term of the agreement, the noncompletion
provision of the agreement will not be effective or enforceable
unless the Company elects to continue to pay the compensation and
provide the employee benefits Mr. Hebert would have received had he
continued his employ (in addition to any continuation of
compensation and employee benefits for the remainder of the term of
the agreement, if applicable) for the lesser of a period elected by
the Company not to exceed one year or the period Mr. Hebert remains
unemployed. Under such circumstances, the noncompletion provision
in his employment agreement will be effective for two months
following his termination of employment for each month the Company
elects to continue his compensation and employee benefits
regardless of when such compensation and benefits may actually be
discontinued because he has found other employment. Mr. Hebert's
employment agreement provides a death benefit equal to six months
salary to be paid to his estate.
<PAGE>
General. Executive officers of the Company and its
subsidiaries ("Subsidiaries") generally receive participation in
benefit plans, split dollar life insurance programs, an automobile
expense reimbursement allowance or use of an automobile, bonuses at
the discretion of the Board of Directors, reimbursement of
business-related expenses and certain fringe benefits.
Registration Rights Agreement
On April 7, 1993, the holders of the Senior Notes who either
(i) had designees on the Board of Directors or were otherwise
affiliates (as defined by Rule 405 promulgated under the Securities
Act of 1933, as amended (the "Securities Act")) of the Company or
(ii) received stock equal to or in excess of 5% of the Common Stock
to be outstanding upon the consummation of the Restructuring,
together with the Company's counsel in the Restructuring
(collectively, "Holders"), and the Company entered into a
registration rights agreement ("Registration Rights Agreement")
pursuant to which the Holders are entitled to a shelf registration
covering the securities issued to them in connection with the
Restructuring and, under certain circumstances if such shelf
registration shall become unavailable for use, demand registrations
under the Securities Act. Pursuant to a demand by the holders, the
Company prepared a shelf registration statement on Form S-12 (the
"Registration Statement") which was declared effective by the
Securities and Exchange Commission in December 1994. The
Registration Statement related to the offering by Deltec Asset
Management Corporation and Oppenheimer & Co., Inc. of a total of
2,242,088 shares of the Company's Common Stock and $10,617,815
aggregate principal amount of Senior Notes. The Company paid
substantially all expenses incurred in connection with the
Registration Statement, other than certain expenses including
underwriting fees, commissions and agency fees.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Exchange Act, and in accordance therewith files reports, proxy
statements, and other information with the Securities and Exchange
Commission (the "Commission"). The public may inspect and copy at
prescribed rates such reports, proxy statements, and other
information that the Company has filed with the Commission, at the
public reference facilities that the Commission maintains at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
regional offices located at 500 West Madison Street, Chicago,
Illinois 60661 and Seven World Trade Center, New York, New York
10048. In addition, the public may obtain such reports, proxy
statements and other information concerning the Company from the
Public Reference Section of the Commission, Washington, D.C. 20549
at prescribed rates.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
Page
(a) 1. The following audited consolidated financial statements of the
Page
Company are included in Part II, Item 8:
Consolidated Statements of Operations for the fiscal years
ended October 26, 1996, October 28, 1995 and October 29, 1994 15
Consolidated Balance Sheets as of October 26, 1996 and
October 28, 1995 16
Consolidated Statements of Cash Flows for the fiscal years
ended October 26, 1996, October 28, 1995 and October 29, 1994 17
Consolidated Statements of Stockholders' (Deficit) Equity for
the fiscal years ended October 26, 1996, October 28, 1995 and
October 29,1994 18
Notes to Consolidated Financial Statements 19-29
2. Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts and Reserves 32
Schedules, other than those listed above, are omitted as they are
not applicable or required or equivalent information has been
included in the financial statements or notes thereto.
3. Exhibits:
10.1 Loan and Security Agreement dated as of August 28, 1996
among Rymer Meat Inc., Rymer Foods Inc., and LaSalle
National Bank (Incorporated by reference to Exhibit 10.1
to the Quarterly Report on Form 10-Q for the period ended
July 27, 1996.)
11 Computation of Earnings Per Share 34
22 Subsidiaries of the Company 35
24 Consent of Independent Accountants 36
NOTE: With the exception of Exhibit Nos. 11, 22 and 24, the
registrant will furnish copies of such other Exhibits upon
written request to the Secretary at the address on the cover of
the Form 10-K Annual Report. A reasonable copying and handling
fee will be charged.
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED OCTOBER 26, 1996, OCTOBER 28, 1995 AND OCTOBER 29,
1994
RYMER FOODS INC. AND SUBSIDIARIES
Additions
Balance Charge Charge Balance
at to to at End of
Beginning Cost and Other Deductions Year
Description of Year Expense Accounts (describe) (Describe)
(in thousands)
Deducted in the balance
sheets from the assets
to which they apply:
Allowance for doubtful
accounts-current:
For the fiscal year
ended October 26, 1996 $ 353 $ 53 $ 206(a) $ 200
For the fiscal year
ended October 28, 1995
(restated) 581 675 903(a) 353
For the fiscal year
ended October 29, 1994 425 363 207(a) 581
(restated)
(a) Accounts written off, net of recoveries
<PAGE>
SIGNATURES
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/ P. Edward Schenk
P. Edward Schenk,
Chairman of the Board,
Chief Executive Officer,
and President
Date: January 24, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the date indicated.
/s/ P. Edward Schenk Chairman
of the Board, 1/24/97
P. Edward Schenk Chief Executive Officer
and President
(Principal Executive Officer)
/s/ Edward M. Hebert
Senior Vice President,
Chief Financial 1/24/97
Edward M. Hebert Officer and Treasurer
/s/ Samuel I. Bailin
Director 1/24/97
Samuel I. Bailin
/s/ Joseph Colonnetta
Director 1/24/97
Joseph Colonnetta
/s/ David E. Jackson
Director 1/24/97
David E. Jackson
/s/ Hannah H. Strasser
Director 1/24/97
Hannah H. Strasser
Exhibit 22
RYMER FOODS INC.
SUBSIDIARIES OF THE COMPANY
OCTOBER 26, 1996
State of Percent
Subsidiary Name Incorporation Owned Owner
Rymer Meat Inc. Illinois 100 Rymer Foods Inc.
Rymer Chicken Inc. (1) Arkansas 100 Rymer Meat Inc.
Rymer International
Seafood Inc. (2) Illinois 100 Rymer Meat Inc.
Rymer Chicken Inc.
- Plant City Florida 100 Rymer Meat Inc.
Queen City Foods Inc. Georgia 100 Rymer Meat Inc.
(1) Substantially all of the assets of Rymer Chicken Inc. were sold on
December 10, 1993. See Item 1 and Note 4 to the Consolidated
Financial Statements.
(2) Substantially all of the assets of Rymer Seafood were sold on
August 28, 1996. See Item 1 and Note 4 to the Consolidated
Financial Statements.
Exhibit 11
Rymer Foods Inc.
Computation of Earnings Per Share
for the years ended October 26, 1996,
October 28, 1995 and October 29, 1994
(in thousands, except per share data)
1996 1995 1994
(Restated) (Restated)
Fully Fully Fully
Primary Diluted Primary Diluted Primary Diluted
AVERAGE SHARES OUTSTANDING
1 Avg. shares outstanding 10,754 10,754 10,748 10,748 10,506 10,506
2 Net additional shares
assuming stock options
and warrants exercised
and proceeds used to
purchase treasury shares - - 140 140 156 276
3 Net additional shares
assuming conversion of
preferred stock not
considered a common
stock equivalent
at issuance
4 Average number of
common shares
outstanding 10,754 10,754 10,888 10,888 10,662 10,782
EARNINGS
5 (Loss)income
from continuing
operations $ (7,144) (7,144) (29,620) (29,620) 1,883 1,883
6 Net (loss)income $ (9,164) (9,164) (29,330) (29,330) 6,478 6,478
PER SHARE AMOUNTS
(Loss)income from continuing operations
(line 5 / line 4) $ (.66) $ (.66) $ (2.72) $ (2.72) $.18 $ .17
Net (loss)income
(line 6 / line 4) $ (.85) $ (.85) $ (2.69) $ (2.69) $ .61 $ .60
Note: In all years, earnings per share has been calculated using the
treasury stock method.
Exhibit 24
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement of Rymer Foods Inc. on Form S-8 (File No. 33-79346) and on
Form S-2 (File No. 33-86062) of our report which includes an explanatory
paragraph regarding the uncertainty of the Company's ability to continue
as a going concern dated December 16, 1996, on our audits of the
consolidated financial statements and financial statement schedule of
Rymer Foods Inc. and subsidiaries as of October 26, 1996 and October 28,
1995 and for each of the three years in the period ended October 26,
1996, which report is included on page 14 in this Annual Report on Form
10-K.
/s/ Coopers & Lybrand L.L.P.
Chicago, Illinois COOPERS & LYBRAND L.L.P.
January 24, 1997
Page 36
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-26-1996
<PERIOD-END> OCT-26-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 2,929
<ALLOWANCES> 200
<INVENTORY> 3,272
<CURRENT-ASSETS> 7,171
<PP&E> 8,520
<DEPRECIATION> 6,899
<TOTAL-ASSETS> 10,563
<CURRENT-LIABILITIES> 25,373
<BONDS> 0
0
0
<COMMON> 10,754
<OTHER-SE> 26,370
<TOTAL-LIABILITY-AND-EQUITY> 10,563
<SALES> 44,329
<TOTAL-REVENUES> 44,329
<CGS> 42,516
<TOTAL-COSTS> 4,794
<OTHER-EXPENSES> (35)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,198
<INCOME-PRETAX> (7,144)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,144)
<DISCONTINUED> (2,020)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,164)
<EPS-PRIMARY> (.85)
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