UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 25, 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
May 21, 1998.
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
(Unaudited)
ITEM 1. Financial Statements
RYMER FOODS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
April 25, October 25,
1998 1997
(in thousands)
<S> <C> <C>
ASSETS
Current Assets:
Receivables, net $ 1,743 $ 1,406
Inventories 3,209 4,304
Other 153 193
Total Current Assets 5,105 5,903
Property, Plant and Equipment:
Leasehold improvements 958 958
Machinery and equipment 832 811
1,790 1,769
Less accumulated depreciation and amortization 315 44
1,475 1,725
Other:
Assets held for sale or lease - 800
Other 103 43
$ 6,683 $ 8,471
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Bank borrowings $ 1,149 $ 1,394
Accounts payable 260 368
Accrued liabilities 1,571 1,669
Total Current Liabilities 2,980 3,431
Deferred Employee Benefits 128 130
$ 3,108 $ 3,561
Commitments and Contingencies
Stockholders' Equity:
Common stock, $0.04 par - 20,000,000 shares
authorized; 4,300,000 shares outstanding
172 172
Additional paid-in capital 4,851 4,851
Accumulated deficit (1,448) ( 113)
Total Stockholders' Equity
3,575 4,910
</TABLE> $ 6,683 $ 8,471
See accompanying notes.
<PAGE>
<TABLE>
RYMER FOODS INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
Predecessor Predecessor
Company Company
April 25, April 26, April 25, April 26,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
(in thousands except per share data)
Net sales $ 7,530 $ 9,438 $ 13,529 $ 17,716
Cost of sales 7,061 8,383 12,900 15,958
Gross profit 469 1,055 629 1,758
Selling, general and
administrative expenses 999 1,143 1,928 2,200
Operating loss (530) (88) (1,299) (442)
Interest expense 43 710 83 1,589
Other income (24) (8) (47) (18)
Net loss $ (549) $( 790) $ (1,335) $ (2,013)
Per common share data:
Basic:
Net loss $ ( .13) $ * $ (.31) $ *
Diluted:
Net loss $ ( .13) $ * $ (.31) $ *
* Earnings per share as it relates to the predecessor company is
not meaningful due to the Company's reorganization.
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
RYMER FOODS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Twenty-Six Weeks Ended
Predecessor
Company
April 25, 1998 April 26, 1997
<S> <C> <C>
(in thousands)
CASH FLOWS FROM OPERATIONS
Loss from continuing operations $ (1,335) $ (2,013)
Non-cash adjustments to loss:
Depreciation and amortization 273 344
Amortization of other assets - 58
Provision for bad debts 30 60
Payment-in-kind interest on Senior Notes - 523
Net (increase) decrease to accounts receivable (367) 997
Net decrease (increase) to inventories 1,095 (434)
Net (increase) to other current and long-term assets (31) (164)
Net (decrease)increase to accounts payable and
accrued expenses (128) 936
Net cash flows from operating activities of
continuing operations (463) 307
Net cash flows from operating activities of
discontinued operations (120) (166)
Net cash flows from operating activities (583) 141
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (23) (322)
Repayment on Note from the sale of Rymer Seafood - 950
Proceeds from the sale of Plant City 800 -
Other - (34)
Net cash flows from investing activities 777 616
CASH FLOWS FROM FINANCING ACTIVITIES
Change in cash overdraft 51 (348)
Repayments under line-of-credit facility (16,443) (13,168)
Borrowings under line-of-credit facility 16,198 12,958
Net cash flows from financing activities (194) (558)
Net change in cash and cash equivalents - 199
Cash and cash equivalents at beginning of year - -
Cash and cash equivalents at end of second quarter $ - $ 199
Supplemental cash flow information:
Interest paid $ 83 $ 44
Income taxes paid, net of refunds $ - $ 10
See accompanying notes.
</TABLE>
<PAGE>
RYMER FOODS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements
have been prepared in accordance with the instructions to Form
10-Q and therefore do not include all information and
footnotes necessary for a fair presentation of financial
position, results of operations, and cash flows in conformity
with generally accepted accounting principles. The year-end
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 consolidated financial statements
include all normal recurring adjustments which the Company
considers necessary for a fair presentation of the results for
the period. Operating results for the fiscal period presented
are not necessarily indicative of the results that may be
expected for the entire fiscal year.
2. GOING CONCERN
The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going
concern.
<PAGE>
In the fiscal year 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.
These conditions raise substantial doubt about the Company's
ability to continue operating as a going concern. The 1998
consolidated financial statements do not include any
adjustments that might result from the outcome of these
uncertainties.
During the most recent quarter, the Company has obtained a new
three-year loan agreement providing a credit facility of up to
$4 million. Management believes that the Company's future
success is dependent upon reversing its sales decline and on the
continual containment of operating costs. The Company continues
to pursue new sales opportunities while controlling its operating
costs.
3. INVENTORIES
Inventories are stated principally at the lower of first-in,
first-out cost or market. The composition of inventories at
April 25, 1998 and October 25, 1997 was (in thousands):
April 25, 1998 October 25, 1997
Raw material $ 1,730 $ 2,651
Finished goods 1,479 1,653
Total $ 3,209 $ 4,304
4. BORROWINGS
Long-term debt consists of the following (in thousands):
April 25, October 25,
1998 1997
Banks, with interest of 1 1/2%
over prime in 1997 and 2% over $ 1,149 $ 1,394
prime in 1998
Other - -
1,149 1,394
Less amounts classified as current 1,149 1,394
$ - $ -
The prime rate applicable to the Company's outstanding bank
note payable was 8.5% at both April 25, 1998 and October 25,
1997.
<PAGE>
The Company's Rymer Meat subsidiary had total lines of credit
available of $2.6 million at April 25, 1998 and $2.4 million
at October 25, 1997, of which $1.4 million and $1.0 million
respectively, was unused.
On April 23, 1998, the Company entered into a new loan
agreement with FINOVA Capital Corporation. The new agreement
provides a credit facility of up to $4 million for the Company
based on borrowing base availability calculations. The new
agreement replaces the credit facility previously outstanding
with LaSalle National Bank.
Substantially all of the Company's property, plant and
equipment and certain current assets are pledged as collateral
under the new loan agreement.
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 April 25, 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.
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
<PAGE>
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 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 general economic conditions, business conditions and
demand in the meat industry, the Company's ability to maintain its
lending arrangements, or if necessary, access external sources of
capital. In addition, the Company's future results of operations
and financial condition may be adversely impacted by various
factors 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 on the over-the-counter
bulletin board.
First Half of 1998 versus First Half of 1997
Consolidated sales for the first half of 1998 of $13.5 million
decreased from the first half of 1997 by $4.2 million or 24%.
Sales decreased primarily due to lower sales volume as a result of
increased competition and overall lower consumer consumption in the
Company's market segments.
As compared to 1997, consolidated cost of sales decreased by $3.1
million or 19%. As a percentage of sales, the gross margin
decreased to 4.6% as compared to 9.9% in 1997 due mainly to the
decline in sales.
Gross profit decreased compared to 1997 by $1.1 million mainly due
to the decrease in sales. The Company's hourly work force has
declined by approximately 12% at the end of the first half of 1998
versus 1997.
Selling, general and administrative expenses decreased by $272,000
or 12.4% in 1998 as compared to 1997. Administrative expenses
decreased by $346,000. Reductions in salaries and related expenses
due to headcount reductions contributed to the majority of the
decrease. Selling expenses increased by $74,000 primarily due to
increased marketing expenditures.
<PAGE>
During the second quarter, the Company completed the sale of its
Plant City, Florida facility. Proceeds from the sale of the
facility were used to pay down the Company's existing bank loan.
Interest Expense
Interest expense decreased by $1.5 million or 95% as compared to
1997. This decrease is due to the Company's eliminating its
Senior Notes. During the first half of 1997, the Company incurred
Senior Note interest of $1.5 million. No Senior Note interest was
recorded during 1998 as the Notes were converted into equity during
the Company's Chapter 11 bankrupty.
Income Taxes
In both 1998 and 1997, no provision for income taxes was recorded
due to the loss from continuing operations.
Second Quarter of 1998 versus Second Quarter of 1997
Consolidated sales for the second quarter of 1998 of $7.5 million
decreased from the second quarter of 1997 by $1.9 million or 20%.
Sales decreased primarily due to lower sales volume as a result of
increased competition and overall lower consumer consumption.
The Company experienced a decline in unit sales of approximately
21% primarily due to increased competition. The Company
experienced a decrease of 3.9% in its average selling price.
As compared to 1997, consolidated cost of sales decreased by $1.3
million or 15.8%. As a percentage of sales, the gross margin
decreased to 6.2% as compared to 11.2% in 1997 due mainly to the
decline in sales.
Gross profit decreased compared to 1997 primarily due to a decrease
in sales. The Company's hourly work force has declined by 12% at
the end of the second quarter of 1998 versus 1997.
Selling, general and administrative expenses decreased by $144,000
or 12.6% as compared to 1997. Administrative expenses decreased by
$177,000 due to headcount reductions versus 1997. Selling expenses
increased by $33,000 primarily due to increased marketing
expenditures.
During the second quarter, the Company completed the sale of its
Plant City, Florida facility. Proceeds from the sale of the
facility were used to pay down the Company's existing bank loan.
Interest Expense
<PAGE>
Interest expense decreased by $667,000 or 93.9% as compared to
1997. This decrease is due to the Company's restructuring of its
Senior Notes. During the second quarter of 1997, the Company
incurred Senior Note interest of $0.7 million. No senior note
interest was recorded during 1998 as the Notes were converted into
equity during the Company's restructuring.
Income Taxes
In both 1997 and 1996, no provision for income taxes was recorded
due to the loss from continuing operations.
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.
On April 23, 1998, the Company entered into a new loan agreement
with FINOVA Capital Corporation. The new agreement provides a
credit facility of up to $4 million for the Company based on
borrowing base availability calculations. The new agreement
replaces the credit facility previously outstanding with LaSalle
National Bank.
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
April 25, 1998 and $2.4 million at October 25, 1997, of which $1.4
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
improvements 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.
The Company's main computer system and software are not currently
Year 2000 compliant. The Year 2000 issue is the result of
computer programs being written using two digits rather than four to
define the applicable year. Any of the Company's computer programs
that have date sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a
system failure or miscalculations causing disruptions of operations,
including, but not limited to, a temporary inability to process
transactions, invoices or other similiar normal business activities.
Based on a recent assessment, the Company has determined that it will
need to modify a significant portion of its software so that its
compter system will properly utilize data beyond December 31, 1999.
The Company plans on completing its Year 2000 modifications by the end
of its fourth quarter of fiscal 1998 utilizing internal resources for
all program changes. As a result, the Company does not anticipate
any material costs to complete its Year 2000 program modifications.
<PAGE>
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.
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, Sr V.P.,
Chief Financial Officer & Treasurer
Date: June 9, 1998
<TABLE>
EXHIBIT 11
COMPUTATION OF EARNINGS (LOSS) PER SHARE
DILUTED
BASIC
Thirteen Twenty-Six Thirteen Twenty-Six
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
April 25, April 25, April 25, April 25,
1998 1998 1998 1998
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING
1 Average shares outstanding 4,300 4,300 4,300 4,300
2 Net additional shares outstanding
assuming exercise of stock options - - - -
3 Average number of common shares
outstanding 4,300 4,300 4,300 4,300
EARNINGS (LOSSES)
4 Net Loss
$ (549) $ (1,335) $ <549> <1,335>
PER SHARE AMOUNTS
Net loss
(line 4 / line 3) $ (.13) $ (.31) <.13> <.31>
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.
Since there is a net loss, common stock equivalents are excluded from the diluted earnings
per share calculations since they would be antidilutive.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-25-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,881
<ALLOWANCES> 138
<INVENTORY> 3,209
<CURRENT-ASSETS> 5,105
<PP&E> 1,790
<DEPRECIATION> 315
<TOTAL-ASSETS> 6,683
<CURRENT-LIABILITIES> 2,980
<BONDS> 0
0
0
<COMMON> 172
<OTHER-SE> 4,851
<TOTAL-LIABILITY-AND-EQUITY> 6,683
<SALES> 13,529
<TOTAL-REVENUES> 12,900
<CGS> 629
<TOTAL-COSTS> 1,928
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 83
<INCOME-PRETAX> (1,335)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,335)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,335)
<EPS-PRIMARY> (.31)
<EPS-DILUTED> (.31)
</TABLE>
