UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 24, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from - to -
Commission File Number 1-6071
RYMER FOODS INC.
Incorporated in the State of Delaware
IRS Employer Identification No. 36-1343930
4600 South Packers Avenue
Suite 400
Chicago, Illinois 60609
773/927-7777
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes X No
Registrant had 4,300,000 shares of common stock outstanding as of
March 4, 1998.
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<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
RYMER FOODS INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
January 24, October 25,
1998 1997
(in thousands)
ASSETS
<S> <C> <C>
Current Assets:
Receivables, net $ 1,284 $ 1,406
Inventories 3,502 4,304
Other 199 193
Total Current Assets 4,985 5,903
Property, Plant and Equipment:
Leasehold improvements 958 958
Machinery and equipment 815 811
1,773 1,769
Less accumulated depreciation
and amortization 180 44
1,593 1,725
Other:
Assets held for sale or lease 800 800
Other 43 43
$ 7,421 $ 8,471
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of borrowings, $ 1,220 $ 1,394
Accounts payable 218 368
Accrued liabilities 1,731 1,669
Total Current Liabilities 3,169 3,431
Deferred Employee Benefits 128 130
3,297 3,561
Commitments and Contingencies
Stockholders' Equity:
Common stock, $.04 par, 20,000,000 shares
authorized; 4,300,000 shares outstanding 172 172
Additional paid-in capital 4,851 4,851
Accumulated deficit (899) (113)
Total Stockholders' Equity 4,124 4,910
$ 7,421 $ 8,471
See accompanying notes.
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<TABLE>
RYMER FOODS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Predecessor
Company
Thirteen Weeks Ended
January 24, January 25,
1998 1997
(in thousands, except per share data)
<S> <C> <C>
Net sales $ 5,999 $ 8,278
Cost of sales 5,839 7,575
Gross profit 160 703
Selling, general and
administrative expenses 929 1,057
Operating loss (769) (354)
Interest expense 40 879
Other income (23) (10)
Net loss $ (786) $(1,223)
Per common share data:
Basic:
Loss from continuing operations $ (.18) *
Net loss $ (.18) *
Diluted:
Loss from continuing operations $ (.17) *
Net loss $ (.17) *
See accompanying notes.
* Earnings per share as it relates to the predecessor company is
not meaningful due to the Company's reorganization.<PAGE>
</TABLE>
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<TABLE>
RYMER FOODS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Predecessor
Company
Thirteen Weeks Ended
Jan. 24, 1998 Jan. 25, 1997
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATIONS
Loss from continuing operations $ (786) $ (1,223)
Non-cash adjustments to loss:
Depreciation and amortization 136 177
Amortization of other assets - 58
Provision for bad debts 15 30
Payment-in-kind interest on Senior Notes - 523
Net decrease to accounts receivable 107 1,041
Net decrease (increase) to inventories 802 (533)
Net (increase) decrease to other current
and long-term assets (6) (33)
Net (increase) decrease to accounts
payable and accrued expenses 56 337
Net cash flows from operating activities of
continuing operations 324 377
Net cash flows from operating activities of
discontinued operations (17) (93)
Net cash flows from operating activities 307 284
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (4) (84)
Proceeds from the sale of Rymer Seafood - 950
Other - (6)
Net cash flows from investing activities
of discontinued operations - -
Net cash flows from investing activities (4) 860
CASH FLOWS FROM FINANCING ACTIVITIES
Change in cash overdraft (129) (348)
Repayments under line-of-credit facility (6,909) (3,485)
Borrowings under line-of-credit facility 6,735 3,275
Principal payments on debt - -
Net cash flows from financing activities
of discontinued operations - -
Net cash flows from financing activities (303) (558)
Net change in cash and cash equivalents - 586
Cash and cash equivalents balance at
beginning of year - -
Cash and cash equivalents balance at end
of first quarter $ - $ 586
Supplemental cash flow information:
Interest paid $ 40 $ 20
Income taxes paid, net of refunds $ - $ 4
See accompanying notes.
</TABLE>
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RYMER FOODS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial
s t a t e ments have been prepared in accordance with the
instructions to Form 10-Q and therefore do not include all
information and footnotes necessary for a fair presentation of
financial position, results of operations, and cash flows in
conformity with generally accepted accounting principles. The
year-end condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures
required by generally accepted accounting principles. The
Company operates on a fiscal year which ends on the last
Saturday in October. References in the following notes to years
and quarters are references to fiscal years and fiscal quarters.
For further information refer to the Consolidated Financial
Statements and footnotes thereto included in Rymer Foods Inc.'s
(the Company's or Rymer's) Annual Report on Form 10-K for the
fiscal year ended October 25, 1997.
In accordance with the AICPA Statement of Position 90-7,
Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code, the Company adopted fresh-start reporting as of
September 20, 1997. In accordance with fresh-start accounting,
the gain on discharge of debt resulting from the bankruptcy
proceedings was reflected on the predecessor Company's financial
statements for the period ended September 20, 1997. In
addition, the accumulated deficit of the predecessor Company at
September 20, 1997, was eliminated, and at September 21, 1997,
the reorganized Company's financial statements reflected no
beginning retained earnings or deficit. In addition, the
Company's capital structure was recast in conformity with its
approved Plan.
Because of the application of fresh-start reporting, the
financial statements for the periods after the reorganization
are not comparable in any respect to the financial statements
for the periods prior to reorganization.
In management's opinion, the condensed consolidated financial
statements include all normal recurring adjustments which the
Company considers necessary for a fair presentation of the
results for the period. Operating results for the fiscal period
presented are not necessarily indicative of the results that may
be expected for the entire fiscal year.
<PAGE>
2. GOING CONCERN
The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern.
In the first quarter of 1998, the Company reported a decrease in
net sales from continuing operations as compared to the first
quarter of 1997 of 28% principally due to the loss of certain
major customers. In fiscal 1997, the Company reported a net
loss from continuing operations of $4.9 million, the fifth loss
from continuing operations before extraordinary item in the last
six years.
At quarter end, the Company was in violation of certain loan
covenants. Additionally, the Company's current loan agreement
expires on April 30, 1998. If the loan agreement should not be
renewed, the Company will need to seek alternate financing.
This could result in termination of the Company's credit
agreement. This situation raises substantial doubt about the
Company's ability to continue operating as a going concern. The
fiscal 1998 consolidated financial statements do not include any
adjustments that might result from the outcome of these
uncertainties.
3. INVENTORIES
Inventories are stated principally at the lower of first-in,
first-out cost or market. The composition of inventories at
January 24, 1998 and October 25, 1997 was (in thousands):
January 24, 1998 October 25, 1997
Raw material $ 2,101 $ 2,651
Finished goods 1,401 1,653
Total $ 3,502 $ 4,304
4. BORROWINGS
Long-term debt consists of the following (in thousands):
January 24, October 25,
1998 1997
Banks, with interest of 1 1/2%
over prime in 1998 and 1997 $ 1,220 $ 1,394
Other - -
1,220 1,394
Less amounts classified as current 1,220 1,394
$ - $ -
The prime rate applicable to the Company's outstanding bank
notes payable was 8.5% at both January 24, 1998 and October 25,
1997. The weighted average interest rate relating to these
borrowings was 10% during the first quarter of 1998 and fiscal
1997.
The Company's Rymer Meat subsidiary had total lines of credit
available of $1.8 million at January 24, 1998 and $2.4 million
at October 25, 1997, of which $0.6 million and $1.0 million,
respectively, was unused.
<PAGE>
In conjunction with its bankruptcy filing, the Company, on
August 29, 1997, entered into a revised loan agreement with
LaSalle. The revised agreement provides a credit facility of up
to $4 million for the Company through April 1998 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 25, 1997. At January 24, 1998, the
Company had a bank loan of $1.2 million outstanding under its
line of credit with LaSalle. At Quarter-end, the Company was in
violation of certain loan covenants with LaSalle. LaSalle has
agreed to waive such covenants. The Company may continue to be
in violation of certain loan covenants in the future also.
While the Company believes that LaSalle will waive those
covenants going forward, there can be no assurances in that
regard. The Company's current loan agreement expires on April
30, 1998. If the loan agreement should not be renewed, the
Company will need to seek alternate financing.
Substantially all of the Company's property, plant and equipment
and certain current assets are pledged as collateral under bank
agreements.
5. INCOME TAXES
The Company provides for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (SFAS 109). The Company's
deferred tax asset is related primarily to its operating loss
carryforward for tax reporting purposes which approximated $18.0
million at January 24, 1998 and October 25, 1997. 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. Additional
restrictions under Section 382 may apply to limit the amount of
net operating loss carryforward which can be utilized in the
future.
<PAGE>
RYMER FOODS INC. AND SUBSIDIARIES
Cautionary Statement
The statements in this Form 10-Q, 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-Q included in this
Managements 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-Q.
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.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
The Company's consolidated results from operations are generated by
its meat processing operation.
The Company's common stock currently trades under the symbol RFDS.
Previously, in fiscal 1997, the Company's stock traded under the
symbols RYR (NYSE), RYMR (OTCBB), and RYMRQ (OTCBB). The current
symbol (RFDS) is a result of the Company's reorganization and
reflects the new common stock issued to previous noteholders and
shareholders.
<PAGE>
First Quarter of 1998 versus First Quarter of 1997
Consolidated sales for the first quarter of 1998 of $6.0 million
decreased from the first quarter of 1997 by $2.3 million or 28%.
Sales decreased primarily due to lower sales volume as a result of
increased competition and overall lower consumer consumption.
As compared to 1997, consolidated cost of sales decreased by $1.7
million or 23%. As a percentage of sales, the gross margin decreased
to 2.7% as compared to 8.5% in 1997.
Gross profit decreased compared to 1997 by $0.5 million mainly due to
the decrease in sales. The Company's hourly work force has declined
by approximately 24% at the end of the first quarter of 1998 versus
1997.
Selling, general and administrative expenses decreased by $128,000 or
12.2% in 1998 as compared to 1997. Administrative expenses decreased
by $169,000. Reductions in salaries and related expenses due to
headcount reductions at the meat processing operation and of
corporate personnel contributed to the majority of the decrease.
Selling expenses increased by $41,000 primarily due to increased
marketing expenditures.
Interest Expense
Interest expense decreased by $839,000 or 95% as compared to 1997.
This decrease is due to the Company's restructuring of its Senior
Notes. During the first quarter of 1997, the Company incurred Senior
Note interest of $822,000. No senior note was recorded during 1998
as the Notes were converted into equity during the Company's
restructuring.
Income Taxes
In both 1998 and 1997, no provision for income taxes was recorded due
to the loss from operations.
<PAGE>
Liquidity and Capital Resources
The Company makes sales primarily on a seven to thirty day balance
due basis. Purchases from suppliers have payment terms generally
ranging from wire transfer at time of shipment to fourteen days.
In conjunction with its bankruptcy filing, the Company, on August 29,
1997, entered into a revised loan agreement with LaSalle. The
revised agreement provides a credit facility of up to $4 million for
t h e Company through April 30, 1998 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 25, 1997. At January 24, 1998, the Company had a bank
loan of $1.2 million outstanding under its line of credit with
LaSalle. At quarter-end, the Company was in violation of certain
loan covenants with LaSalle. LaSalle has agreed to waive such
covenants. The Company may continue to be in violation of certain
loan covenants in the future also. While the Company believes that
LaSalle will waive those covenants going forward, there can be no
assurances in that regard. The Company's current loan agreement
expires on April 30, 1998. If the loan agreement should not be
renewed, the Company will need to seek alternate financing.
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 $1.8 million at
January 24, 1998 and $2.4 million at October 25, 1997, of which $0.6
million and $1.0 million, respectively, was unused.
The Company anticipates spending approximately $400,000 for capital
expenditures in 1998. The expenditures are primarily for planned
i m provements at the 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>
RYMER FOODS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed:
11 Computations of earnings per share are included in the
Notes to Condensed Consolidated Financial Statements included
in Item 1 of this Form 10-Q.
Exhibits incorporated by reference:
13.1 Annual Report on Form 10-K of Rymer Foods Inc. for the
fiscal year ended October 25, 1997 (Incorporated by reference).
21.1 Subsidiaries of the Company. (Incorporated by reference
to Exhibit 22 to the Annual Report of Form 10-K of Rymer Foods
Inc. for the fiscal year ended October 25, 1997.)
27 Financial Data Schedule (EDGAR filing)
(b) Reports on Form 8-K:
None
<PAGE>
RYMER FOODS INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
RYMER FOODS INC.
(Registrant)
By /s/ Edward M. Hebert
Edward M. Hebert,
Senior Vice President,
Chief Financial Officer and Treasurer
Date: March 10, 1998
<TABLE>
EXHIBIT 11
COMPUTATION OF EARNINGS (LOSS) PER SHARE
BASIC DILUTED
Thirteen Weeks Ended Thirteen Weeks Ended
January 24, January 24,
1998 1998
(In thousands, except per share amounts)
<S> <C> <C>
AVERAGE SHARES OUTSTANDING
1 Average shares outstanding 4,300 4,300
2 Net additional shares outstanding
assuming exercise of stock options - 268
3 Average number of common shares
outstanding 4,300 4,586
EARNINGS (LOSSES)
4 Loss from continuing
operations $ (786) $ (786)
5 Net loss $ (786) $ (786)
PER SHARE AMOUNTS
Loss from continuing
operations (line 4 / line 3) $ (.18) $ (.17)
Net loss
(line 5 / line 3) $ (.18) $ (.17)
NOTE - Earnings per share has been calculated using the treasury
stock method.
Earnings per share amounts for all other reporting periods as it
relates to the predecessor company is not meaningful due to the
Company's reorganization.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> JAN-24-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,421
<ALLOWANCES> 137
<INVENTORY> 3,502
<CURRENT-ASSETS> 4,985
<PP&E> 1,773
<DEPRECIATION> 180
<TOTAL-ASSETS> 7,421
<CURRENT-LIABILITIES> 3,169
<BONDS> 0
0
0
<COMMON> 172
<OTHER-SE> 4,851
<TOTAL-LIABILITY-AND-EQUITY> 7,421
<SALES> 5,999
<TOTAL-REVENUES> 5,999
<CGS> 5,839
<TOTAL-COSTS> 929
<OTHER-EXPENSES> 40
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (23)
<INCOME-PRETAX> (786)
<INCOME-TAX> 0
<INCOME-CONTINUING> (786)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (786)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> (.17)
</TABLE>
