SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year ended October 25, 1997
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, $0.04 par value Over the Counter Bulletin Board
Securities Registered Pursuant to Section 12(g) of the Act:
None
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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 January 9, 1998, 4,300,000 shares of common stock were
outstanding, and the aggregate market value of the common shares held
by nonaffiliates on that date was approximately $4.4 million.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for 1998 Annual Meeting of Stockholders (Part III)
(to be filed with the Securities and Exchange Commission on or before
February 28, 1998). Certain exhibits are incorporated herein by
reference. The Index of Exhibits is on Page 31 of this document.
<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.
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.
As a result of the Company adopting fresh-start accounting, reporting
for the year ended October 25, 1997 is accomplished by combining the
financial results for the one-month period ended October 25, 1997 and
those of the eleven-month period ended September 20, 1997. Because
of the application of fresh-start reporting, the financial statements
for the periods after reorganization are not comparable in any
respect to the financial statements for the periods prior to
reorganization.
General
Rymer Foods Inc. (Rymer Foods or the Company) through its subsidiary,
Rymer Meat Inc. (Rymer Meat), is primarily engaged in the development
and production of frozen, pre-seasoned, portion controlled meat
entrees. 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.
The Company announced on July 8, 1997, that it had received the
necessary approvals from its creditors and stockholders for
confirmation of a prepackaged plan of reorganization under Chapter 11
of the Bankruptcy Code (the Plan). Rymer Foods' operating
subsidiary, Rymer Meat, was not a party to the Bankruptcy
proceedings. To implement the Plan, on July 8, 1997 the Company
commenced a voluntary Chapter 11 case in the United States Bankruptcy
Court for the Northern District of Illinois (the Bankruptcy Court)
and filed the Plan with the Bankruptcy Court. The Plan was confirmed
by the Bankruptcy Court on August 21, 1997 and was consummated on
October 6, 1997. Although the consummation date was October 6, 1997,
fresh-start reporting was adopted on September 20, 1997. There were
no fresh-start adjustments during the period of September 21, 1997 to
October 6, 1997.
Immediately following consummation of the Plan, Senior Noteholders
and certain creditors received 80% of the new common stock, existing
holders of common stock received 10% of the new common stock, and
Rymer senior management received 10% of the new common stock.
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The Company believes that consummation of the Plan strengthened its
capital structure and has thereby enhanced its ability to further
develop its businesses. Management believes that the Company's
future success is dependent in part upon reversing its sales decline,
on the containment of operating costs and on maintaining good credit
relationships with its lenders. However, there can be no assurance
of the success of these initiatives.
On a combined basis (the one-month period ended October 25, 1997, and
the eleven-month period ended September 20, 1997), the Company
reported a loss from continuing operations of $4.9 million.
In fiscal 1996, the Company reported a loss from continuing
operations of $7.1 million. 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.
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.
Products, Markets and Distribution
The Company's principal products are frozen, pre-seasoned, portion
controlled meat entrees. Major beef products include commercial and
choice cut steaks. The Company also produces other meat products
such as specialty ground and breaded products and certain cooked
products (e.g., pot roast, meat loaf). The Company engages in the
development and production of proprietary "signature" recipes for
chain restaurant customers. The Company 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 markets served by the Company include family-style restaurant
chains and foodservice distributors. Products are primarily sold
through the Company's own marketing staff, as well as through
independent brokers and foodservice distributors.
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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.
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 25, 1997 was
approximately $2.8 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 fiscal 1995. 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 two groups of the Company's other customers, Bonanza and
Ponderosa, together accounted for approximately 16.7%, 26.0%, and
23.1% of the Company's sales from continuing operations in fiscal
1997, 1996 and 1995, 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.
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 25, 1997
approximated $1.0 million.
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 25,
1997, October 26, 1996, and October 28, 1995 were not material as
compared to other operational expenses.
<PAGE>
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 16.2% of Rymer Meat sales, continued to decline during
fiscal 1997 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 in 1997 to 6.3% of total sales versus 14.6% of total sales
in 1996.
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 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 25, 1997, October 26, 1996, and October
28, 1995. 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 25, 1997, Rymer Foods had approximately 228 employees, of
whom approximately 185 were covered by union contracts. On December
19, 1997, the Company laid off 30 employees, 27 of which were union
employees.
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.
<PAGE>
Item 2. Properties
At October 25, 1997, the principal physical properties of Rymer Foods
consisted of the following:
Footage Ownership Expiration Facility Use
Chicago, Illinois 123,000 Leased Month to Offices/Production/
Month Warehouse
Plant City, Florida 42,000 Owned Not Held for sale
Applicable
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
lease on a month-to-month basis for the time being. 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
None
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
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. The new Common Stock began trading on November 5, 1997
at an opening value of $1.00 per share. The opening trading value
reflected the new Common Stock issuance and the 25 to 1 reverse stock
split as outlined in the Company's plan of reorganization.
Share prices for 1997 and 1996 have not been restated to reflect the
25 to 1 reverse stock split. On January 9, 1998, the Company's stock
price closed at $1.125 per share.
<PAGE>
The following table sets forth, for the fiscal quarters indicated,
the high and low sales prices of the Common Stock. As of January 9,
1998, there were approximately 710 holders of record of Common Stock.
High Low
1997
First Quarter $ 0.50 $ 0.25
Second Quarter 0.28 0.01
Third Quarter 0.10 0.04
Fourth Quarter 0.09 0.06
1996
First Quarter 1.50 0.63
Second Quarter 1.13 0.56
Third Quarter 0.94 0.47
Fourth Quarter 0.69 0.50
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 former
Senior Note Indenture also prohibited the payment of dividends on the
Common Stock at any time that any of the Senior Notes remained
outstanding. The Company 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)
Reorganized
Company Predecessor Company
One Eleven
Month Month
Period Period
Ended Ended Fiscal Years Ended
Oct. 25, Sept. 20, Oct. 26, Oct. 28, Oct. 29, Oct. 30,
1997 1997 1996 1995 1994 1993
Results from continuing
operations:
Net sales $ 2,796 $31,095 $ 44,329 $ 79,920 $106,252 $ 99,644
(Loss) income from
continuing operations
before extraordinary
item (113) (4,828) (7,144) (29,620) 1,883 (23,867)
(Loss) income from
discontinued operations - - (167) 290 121 777
(Loss) gain on
dispositions of
discontinued operations - (566) (1,853) - 4,474 261
Extraordinary gain on
discharge of debt - 25,603 - - - -
Net (loss) income (113) 20,209 (9,164) (29,330) 6,478 (11,441)
Working capital (deficit) 2,472 (22,623) (18,202) (10,524) 16,013 14,108
Total assets 8,266 9,070 10,563 26,074 51,506 65,627
Long-term liabilities - 1,097 806 842 19,994 45,968
Stockholders'
equity (deficit) 4,910 5,023 (15,616) (6,858) 22,464 15,590
Primary per share common
stock data:
Loss from
continuing operations $ (0.03) * * * * *
Net loss $ (0.03) * * * * *
See Notes 3 and 4 to the Consolidated Financial Statements for information
regarding the Company's Restructuring and discontinued operations.
* Earnings per share amount as it relates to the predecessor company is not
meaningful due to the reorganization.
<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.
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.
<PAGE>
As a result of the Company's adoption of fresh-start accounting,
reporting for the year ended October 25, 1997 is accomplished by
combining the financial results for the one-month period ended
October 25, 1997 and those of the eleven-month period ended September
20, 1997. Because of the application of fresh-start reporting, the
financial statements for the periods after reorganization are not
necessarily comparable to the financial statements for the periods
prior to reorganization.
The Company announced on July 8, 1997, that it had received the
necessary approvals from its creditors and stockholders for
confirmation of a prepackaged plan of reorganization under Chapter 11
of the Bankruptcy Code (the Plan). Rymer Foods' operating
subsidiary, Rymer Meat, was not a party to the Bankruptcy
proceedings. To implement the Plan, on July 8, 1997 the Company
commenced a voluntary Chapter 11 case in the United States Bankruptcy
Court for the Northern District of Illinois (the Bankruptcy Court)
and filed the Plan with the Bankruptcy Court. The Plan was confirmed
by the Bankruptcy Court on August 21, 1997 and became effective on
October 6, 1997.
Fiscal 1997 Compared with Fiscal 1996
Consolidated sales for 1997 of $33.9 million decreased from 1996 by
$10.4 million or 23.5%. Sales volume accounted for approximately 90%
of the sales decrease with lower prices and changes in the sales mix
accounting for the remaining 10% decrease.
Sales decreased primarily due to reduced unit sales to certain
national restaurant chains. This decrease was primarily due to
reduced sales volume due to increasing competition. National
restaurant chain sales declined 15.8% versus 1996.
As compared to 1996, consolidated cost of sales decreased by $11.6
million or 27.4% while total gross profit increased by $1.2 million
or 65.7%. As a percentage of sales, the consolidated gross margin
increased to 8.9% of net sales as compared to 4.1% of net sales in
1996. Gross profit increased compared to 1996 primarily due to
improvements in operational efficiencies.
Selling, general and administrative expenses decreased by $0.8
million or 17.1%. Selling expenses of $1.6 million remained the same
as 1996. Administrative expenses decreased by $0.8 million primarily
due to administrative headcount reductions.
Interest Expense
Interest expense decreased by $1.9 million or 44.4% as compared to
1996. The decrease was primarily due to decreased interest expense
on the Company's 11% Senior Notes. As permitted by the Company's
Prepackaged Bankruptcy Plan, Senior Note interest no longer accrued
effective upon the filing of the Company's Chapter 11 petition on
July 8, 1997.
<PAGE>
Discontinued Operations
On October 16, 1997, the Company entered into an agreement to sell
its Plant City, Florida facility, an asset remaining from the
discontinued Rymer Chicken operation which was disposed of in 1993.
The agreement requires a purchase price of $800,000. The terms of
the sale are as follows: 35% cash down payment, balance to be paid
over a five-year period. The sale is expected to close in the second
fiscal quarter of 1998. As a result of the pending sale of the
facility, a $566,000 loss was incurred in the eleven month period
ended September 20, 1997. This charge is included as a loss from
disposition of discontinued operations in the Company's consolidated
statement of operations. The loss is primarily attributable to a
write-down of the facility's book value to the sales price plus
estimated expenses to repair the facility.
Restructuring Charge
On July 8, 1997, the Company announced that it had received the
necessary approvals from its creditors and stockholders for
confirmation of a prepackaged plan under Chapter 11 of the Bankruptcy
Code. As a result of the Company's restructuring, the Company
incurred $1.6 million in restructuring costs. These costs included
legal fees, financial advisor costs, and other fees and expenses to
consummate the Bankruptcy Plan.
Income Taxes
In 1997, no provision for income taxes was recorded due to the
Company's loss.
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.
<PAGE>
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.
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.
<PAGE>
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 had been available
for sale or lease.
Income Taxes
In 1996, 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 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 October 25, 1997, the Company had a bank loan of $1.4
million outstanding under its line of credit with LaSalle.
Subsequent to year-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 was in compliance with its
loan covenants as of October 25, 1997. 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.
<PAGE>
Previously, in conjunction with its sale of Rymer Seafood, the
Company, on August 28, 1996, had entered into a revised loan
agreement with LaSalle. The revised agreement provided 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. At October 26, 1996, the Company
had a bank loan of $211,000 outstanding under its line of credit with
LaSalle.
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 was
also required to make an interest payment on June 15, 1997 of
approximately $1.3 million in respect to the Senior Notes. As part
of the Company's restructuring, its 11% Senior Notes were converted
into equity.
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 working capital of $2.5 million at October 25, 1997
and a net working deficit at October 26, 1996 of $18.2 million which
was principally due to the 11% Senior Notes being classified as a
current liability.
The Company had total lines of credit available based on borrowing
base calculations of $2.4 million at October 25, 1997 and $2.6
million at October 26, 1996, of which $1.0 million and $2.4 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 $2.8
million at October 25, 1997. The Company also has agreements with
certain of its suppliers to purchase raw materials. The agreements
extend for up to one year and provide the price and quantity of
materials to be supplied. The Company had purchase commitments of
approximately $1.0 million as of October 25, 1997.
The Company anticipates spending approximately $600,000 for capital
expenditures in 1998. The expenditures are primarily for planned
improvements. 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 similar normal business activities.
<PAGE>
Based on a recent assessment, the Company has determined that it will
need to modify a significant portion of its software so that its
computer system will properly utilize data beyond December 31, 1999.
The Company plans on completing its Year 2000 modifications by the
end of its third 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.
There can be no assurances that this time frame will be achieved and
actual results could differ materially from these plans. Specific
factors that might cause such material differences include, but are
not limited to, the availability and cost of personnel trained in
this area, the ability to locate and correct all relevant computer
codes and similar uncertainties.
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.
Fourth Quarter Adjustments
1997
On October 16, 1997, the Company entered into an agreement to sell
its Plant City, Florida facility. As a result of the pending sale, a
$566,000 loss was incurred. This charge is included as a loss from
disposition of discontinued operations in the Company's consolidated
statement of operations. The loss is primarily attributable to a
write-down of the facility's book value to the agreed contract price
plus estimated expenses to repair the facility.
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.
<PAGE>
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 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.
<PAGE>
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements and Supplementary
Financial Data
Pages
Reports of Independent Accountants 13-14
Financial Statements:
Consolidated Statements of Operations for the fiscal years
ended October 25, 1997, October 26, 1996 and October 28, 1995 15
Consolidated Balance Sheets as of October 25, 1997 and
October 26, 1996 16
Consolidated Statements of Cash Flows for the fiscal years
ended October 25, 1997, October 26, 1996 and October 28, 1995 17
Consolidated Statements of Stockholders' Equity (Deficit)
for the fiscal years ended October 25, 1997,
October 26, 1996 and October 28, 1995 18
Notes to Consolidated Financial Statements 19-28
Supplementary Financial Data:
Schedule II - Valuation and Qualifying Accounts and Reserves 31
Note: Reporting for the year ended October 25, 1997 is accomplished
by combining the financial results for the one-month period ended
October 25, 1997 and those of the eleven-month period ended September
20, 1997.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
Rymer Foods Inc.
We have audited the consolidated balance sheet of
Rymer Foods Inc. and subsidiaries as of October 25,
1997, and the consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the
one-month period ended October 25, 1997 and the
eleven-month period ended September 20, 1997. These
financial statements are the responsibility of the
Company's management. Our responsibility is to
express an opinion on these financial statements.
We conducted our audit 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 audit provides 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 25, 1997, and the
consolidated results of their operations and their
cash flows for the one-month period ended October 25,
1997 and the eleven-month period ended September 20,
1997, in conformity with generally accepted
accounting principles. We have also audited Schedule
II of Rymer Foods Inc. and subsidiaries for the year
ended October 25, 1997. In our opinion, this
schedule presents fairly, in all material respects,
the information required to be set forth therein.
As more fully described in Notes 1 and 5 to the
consolidated financial statements, effective October
6, 1997, the Company emerged from bankruptcy. In
accordance with an American Institute of Certified
Public Accountants' Statement of Position, the
Company has adopted "fresh start" reporting whereby
its assets, liabilities and new capital structure
have been adjusted to reflect estimated fair values
as of September 20, 1997. As a result, the
consolidated financial statements for periods
subsequent to September 20, 1997, reflect this basis
of reporting and are not necessarily comparable to
the Company's pre-reorganization consolidated
financial statements.
<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 7 to the consolidated financial statements, the
Company's credit facility extends through April 1998.
Subsequent to year end, the Company was in violation
of certain loan covenants. This could result in
termination of the Company's credit agreements,
raising substantial doubt about its ability to
continue as a going concern. Management's plans in
regard to these matters are also described in Note 2.
The financial statements do not include any
adjustments that might result from the outcome of
this uncertainty.
Chicago, Illinois Grant Thornton LLP
December 12, 1997
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
Rymer Foods Inc.
We have audited the consolidated balance sheet of Rymer Foods Inc. and
subsidiaries as of October 26, 1996, and the consolidated statements of
operations, stockholders' deficit and cash flows for each of the two
years in the period ended October 26, 1996. We have also audited the
financial statement Schedule II of Rymer Foods Inc. and subsidiaries for
the years ended October 26, 1996 and October 28, 1995. 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 the
consolidated results of their operations and their cash flows for each
of the two years in the period ended October 26, 1996, in conformity
with generally accepted accounting principles. Also, in our opinion,
the financial statement schedule, for the years ended October 26, 1996
and October 28, 1995, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects,
the information set forth therein.
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 Note 2 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 1. The consolidated
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ Coopers & Lybrand L.L.P.
Chicago, Illinois Coopers & Lybrand L.L.P.
December 16, 1996
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
For the fiscal years ended October 25, 1997, October 26, 1996 and
October 28, 1995 (in thousands except share data)
Reorganized
Company Predecessor Company
One Eleven
Month Month
Period Period
Ended Ended Fiscal Years Ended
Oct. 25, Sept. 20, Oct. 26, Oct. 28,
1997 1997 1996 1995
<S> <C> <C> <C> <C>
Net sales $ 2,796 $ 31,095 $ 44,329 $ 79,920
Cost of sales 2,562 28,324 42,516 76,048
Gross profit 234 2,771 1,813 3,872
Selling, general and
administrative expenses 333 3,793 4,794 9,042
Restructuring charge - 1,608 - 761
Goodwill writedown - - - 20,377
Operating loss (99) (2,630) (2,981) (26,308)
Interest expense 15 2,318 4,198 3,786
Other income (1) (120) (35) (474)
Loss from
continuing operations
before income taxes (113) (4,828) (7,144) (29,620)
Provision for income taxes - - - -
Loss from
continuing operations (113) (4,828) (7,144) (29,620)
(Loss) income from discontinued
operations, net - - (167) 290
Loss on dispositions of
discontinued operations, net - (566) (1,853) -
Net loss before
extraordinary item (113) (5,394) (9,164) (29,330)
Extraordinary gain on discharge
of debt - 25,603 - -
Net (loss) income $ (113)$ 20,209 $ (9,164) $(29,330)
Per common share:
Primary:
Loss from
continuing operations $ (0.03) * * *
Net loss before
extraordinary item $ (0.03) *
Net loss $ (0.03) * * *
Fully diluted:
Loss from
continuing operations $ (0.03) * * *
Net loss before
extraordinary item $ (0.03) * * *
Net loss $ (0.03) * * *
Weighted average shares of
common stock outstanding:
Primary 4,300,000 * * *
Fully diluted 4,300,000 * * *
See accompanying notes.
* Earnings per share amount as it relates to the predecessor
company is not meaningful due to the reorganization.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
October 25, 1997 and October 26, 1996
ASSETS 1997 1996
Reorganized Predecessor
Company Company
(in thousands)
<S> <C> <C>
Current assets:
Receivables, net of allowance for doubtful
accounts of $141,000 in 1997 and $200,000
in 1996 $ 1,406 $ 2,729
Inventories 4,304 3,272
Other 193 1,170
Total current assets 5,903 7,171
Property, plant and equipment:
Leasehold improvements 958 1,785
Machinery and equipment 811 6,735
1,769 8,520
Less accumulated depreciation and amortization 44 6,899
1,725 1,621
Assets held for sale or lease 800 1,150
Other 43 621
$ 8,471 $ 10,563
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of borrowings $ 1,394 $ 21,754
Accounts payable 368 558
Accrued interest 15 1,421
Accrued liabilities 1,654 1,640
Total current liabilities 3,431 25,373
Long term debt - 70
Deferred employee benefits 130 736
3,561 26,179
Commitments and contingencies (Note 14)
Stockholders' equity (deficit)
Preferred stock, none outstanding - -
Common stock, $.04 par, 20,000,000 shares
authorized, 4,300,000 shares outstanding
in 1997 and $1.00 par, 20,000,000 shares
authorized, 10,754,093 shares outstanding
in 1996 172 10,754
Additional paid-in capital 4,851 44,363
Accumulated deficit (113) (70,733)
Total stockholders' equity (deficit) 4,910 (15,616)
$ 8,471 $ 10,563
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the fiscal years ended October 25, 1997, October 26, 1996 and October 28, 1995
Reorganized Predecessor Company
Company Eleven
One Period Period
Month Month
Ended Ended Fiscal Years Ended
Oct. 25, Sept. 20, Oct. 26, Oct. 28,
1997 1997 1996 1995
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
(Loss) income from continuing operations $ (113) $ (4,828) $ (7,144) $ (29,620)
Non-cash adjustments to loss:
Depreciation and amortization 44 579 1,077 2,340
Writedown of goodwill - - - 20,377
Restructuring charge - 1,608 - 761
(Gain) loss on disposal of properties - - 3 (3)
Deferred compensation expense - - (26) (24)
Provision for bad debts 10 110 53 675
Payment in kind interest on Senior Notes - - 3,621 1,206
Changes in assets and liabilities:
Net decrease to accounts receivable 179 1,024 1,896 1,752
Net (increase) decrease to inventories 58 (1,090) 8,847 (2,230)
Net (increase) decrease to other current
and other long-term assets (17) 95 660 (20)
Net (decrease) increase to accounts
payable and accrued expenses 40 1,127 (1,385) (2,996)
Net cash flows from operating activities
of continuing operations 201 (1,375) 7,602 (7,782)
Net cash flows from operating activities
of discontinued operations (7) (196) 3,077 (1,082)
Net cash flows from operating activities 194 (1,571) 10,679 (8,864)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of Rymer Seafood - 950 1,500 -
Capital expenditures (6) (609) (529) (815)
Other - 1 1 (21)
Net cash flows from investing activities
of discontinued operations - - (5) (33)
Net cash flows from investing activities (6) 342 967 (869)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in cash overdraft 38 (181) (348) (425)
Repayments under line-of-credit facility (3,051) (27,021) (49,991) (88,170)
Borrowings under line-of-credit facility 2,825 28,431 42,075 96,297
Principal payments on debt - - (267) (2,292)
Proceeds from borrowings - - - 48
Proceeds from employee stock purchases - - - 32
Net cash flows from financing activities
of continuing operations (188) 1,229 (8,531) 5,490
Net cash flows from financing activities of
discontinued operations - - (3,115) 2,402
Net cash flows from financing activities (188) 1,229 (11,646) 7,892
Net change in cash - - - (1,841)
Cash and cash equivalents balance at
beginning of fiscal year - - - 1,841
Cash and cash equivalents balance at end
of fiscal year $ - $ - $ - $ -
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the fiscal years ended October 25, 1997, October 26, 1996 and
October 28, 1995
Notes
Additional Receivable Total
Common Paid-In Accumulated from Sale Stockholders'
Stock Capital Deficit of Common Equity
Stock (Deficit)
<S> <C> <C> <C> <C> <C>
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)
Net income for the eleven
month period ended
September 20, 1997 20,209 20,209
Effect of reorganization and
fresh start accounting:
Cancellation of predecessor
deficit (10,599)(39,925) 50,524 0
Issuance of new shares
pursuant to plan of
reorganization 17 413 430
Balance at September 20, 1997 172 4,851 5,023
Net loss for one month
period ended October 25, 1997 (113) (113)
Balance at October 25, 1997 $ 172 $4,851 $ (113) $ - $ 4,910
See accompanying notes.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Fiscal Year and Basis of Presentation
The fiscal year of the Company ends the last Saturday in October.
For all years presented, the fiscal year was 52 weeks.
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.
As a result of the Company adoption of fresh-start accounting,
reporting for the year ended October 25, 1997 is accomplished by
combining the financial results for the one-month period ended
October 25, 1997 and those of the eleven-month period ended September
20, 1997. Because of the application of fresh-start reporting, the
financial statements for the periods after reorganization are not
comparable in any respect to the financial statements for the periods
prior to reorganization.
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 purchased with
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.
<PAGE>
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 generally from 3 years to 7 years.
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.
Revenue Recognition
The Company recognizes sales revenues at the time of shipment.
Income Taxes
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.
Earnings (Loss) Per Share
Earnings (loss) per share is calculated using the treasury stock
method. Primary and fully diluted per share data was calculated
using weighted average outstanding shares for the one month period
ended October 25, 1997. There were no common stock equivalents as of
October 25, 1997.
Amounts for the predecessor company are not presented as the data is
not meaningful due to the Company's reorganization.
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 25, 1997 and October 26, 1996, and the reported amounts of
revenues and expenses during the three year period ended October 25,
1997. Actual results could differ from those estimates.
<PAGE>
2. Going Concern
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern.
In 1997, the Company reported a decrease in net sales from continuing
operations as compared to 1996 of 23.5% principally due to lower
sales to certain national restaurant chains. Also in 1997, the
Company reported a loss from continuing operations of $4.9 million,
the fifth loss from continuing operations before extraordinary item
in the last six years.
Subsequent to year 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 1997 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 its sales decline, 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.
3. Restructuring and Restructuring Charges
During the 1997 fiscal year, the Company recorded a Restructuring
charge of $1.6 million related to its Senior Note restructuring plan.
These costs included legal fees, financial consultants, and other
costs associated with the conversion process of the Company's Senior
Notes to equity.
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.
<PAGE>
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 then 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.
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.
During the final quarter of 1997,the Company entered into
an agreement to sell its Plant City, Florida facility.
The contract calls for a purchase
price of $800,000. The terms of the selling agreement are as
follows: 35% down payment, balance to be paid over a five-year note.
The sale is expected to close in the second fiscal quarter of 1998.
As a result of the pending sale of the facility, a $566,000 loss was
incurred. This charge is included as a loss from disposition of
discontinued operations in the Company's consolidated statement of
operations prior to the reorganization. The loss is primarily
attributable to a write-down of the plant's book value to the agreed
contract price plus estimated expenses to repair the facility.
<PAGE>
Other Discontinued Operations
The following summarizes the results of the various discontinued
operations reflected in the accompanying Consolidated Statements of
Operations:
Reorganized
Company Predecessor Company
One Eleven
Month Month
Period Period
Ended Ended Fiscal Years Ended
Oct. 25, Sept. 20, Oct. 26, Oct. 28,
1997 1997 1996 1995
(in thousands)
Sales:
Rymer Seafood $ - $ - $ 52,547 $ 70,377
Rymer Chicken - - - -
Total sales $ - $ - $ 52,547 $ 70,377
Income (loss) from
discontinued operations:
Rymer Seafood $ - $ - $ 283 $ 290
Rymer Chicken - - (450) -
$ - $ - $ (167) $ 290
Loss on
dispositions of
discontinued
operations:
Rymer Seafood $ - $ - $ (1,853) $ -
Rymer Chicken - (566) - -
$ - $ (566) $ (1,853) $ -
5. Reorganization Plan
The Company adopted "fresh-start reporting" on September 20, 1997 in
accordance with Statement of Position ("SOP") 90-7 issued by the
American Institute of Certified Public Accountants. SOP 90-7 calls
for the adoption of "fresh-start reporting" if the reorganization
value of the emerging entity immediately before the date of
confirmation is less than the total of all postpetition liabilities
and prepetition allowed claims, and if holders of existing
voting shares immediately before confirmation receive less than
50 percent of the voting shares of the emerging entity, both
conditions of which were satisfied by the Company. Although the
consummation date was October 6, 1997, fresh-start reporting was
adopted on September 20, 1997. There were no fresh-start related
adjustments during the period September 21, 1997 to October 6, 1997.
<PAGE>
Under fresh-start accounting, all assets and liabilities are restated
to reflect their reorganization value, which approximates book value
at date of reorganization. Therefore, no reorganization value has
been allocated to the assets and liabilities. In addition, the
amount of debt forgiveness was $25.6 million and the accumulated
deficit of the predecessor company at September 20, 1997 totalling
$50.4 million was eliminated, and at September 21, 1997, the
reorganized company's financial statements reflected no beginning
retained earnings or deficit.
The effect of the plan of reorganization on the Company's
Consolidated Balance Sheet as of September 20, 1997 is as follows (in
thousands):
Pre-
Reorganization Adjustment Reorganized
Balance Sheet to Record Fresh-Start Balance Sheet
September 20, Plan of Accounting September 21,
1997 Reorganization Adjustments 1997
ASSETS
Current assets $ 5,875 $ (144) $ - $ 5,731
Non-current assets 3,363 (764) - 2,599
$ 9,238 $ (908) $ - $ 8,330
LIABILITIES
Other liabilities $ 4,645 $(1,338) $ - $ 3,307
Liabilities subject to
Chapter 11 25,603 (25,603) - -
Stockholder equity:
Common stock 10,754 17 (10,599) 172
Paid-in capital 44,363 413 (39,925) 4,851
Accumulted deficit (76,127) 25,603 50,524 -
(21,010) 26,033 - 5,023
$ 9,238 $ (908) $ - $ 8,330
6. Inventories
Inventories consist of the following (in thousands):
Oct. 25, Oct. 26,
1997 1996
Raw materials $ 2,651 $ 1,619
Finished goods 1,653 1,653
$ 4,304 $ 3,272
<PAGE>
7. Borrowings
Borrowings consisted of the following (in thousands):
October 25, October 26,
1997 1996
Banks, with interest of 1 1/2% over
prime in 1997 and 1996 $ 1,394 $ 210
Senior Notes due December 15, 2000, with
interest at 18% in 1996 - 21,544
Other - 70
1,394 21,824
Less current maturities 1,394 21,754
$ - $ 70
The prime rate applicable to the Company's outstanding bank notes
payable was 8.5% at October 25, 1997, and 8.25% at October 26, 1996.
The weighted average interest rate relating to these borrowings was
10.0% and 9.8% during fiscal 1997 and 1996, respectively.
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 October 25, 1997, the Company had a bank loan of $1.4
million outstanding under its line of credit with LaSalle.
Subsequent to year-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 was in compliance with its
loan covenants as of October 25, 1997. 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.
The Company's Rymer Meat subsidiary had total lines of credit
available of $2.4 million at October 25, 1997 and $2.6 million at
October 26, 1996, of which $1.0 million and $2.4 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 its bank
agreement.
<PAGE>
8. Leases
The Company and its subsidiaries lease certain facilities and
equipment used for offices and manufacturing. Total rental expense
from continuing operations under all operating leases was
approximately $476,000, $683,000, and $970,000, in fiscal 1997,
fiscal 1996 and fiscal 1995, 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 and leases the facility on a month-to-
month basis. The annualized rate for the Chicago lease is
approximately $476,000. Other long-term lease costs are not
significant.
Property, plant and equipment recorded under capital leases and lease
commitments under non-cancelable leases are not material.
9. Income Taxes
The Company's deferred tax asset is related primarily to its
operating loss carryforward for tax reporting purposes which
approximated $18.0 million and $38.6 million at October 25, 1997 and
October 26, 1996, 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 25, 1997 and
October 26, 1996 are as follows (in thousands):
1997 1996
Deferred tax assets:
Accounts receivable $ 48 $ 130
Inventories 88 19
Property, plant and equipment 888 670
Other liabilities and reserves 405 435
Alternative minimum tax credits 33 98
Net operating loss carryforwards 6,067 13,143
Investment tax credits 174 512
Total deferred tax assets 7,703 15,007
Less: Valuation allowance (7,703) (15,007)
Net deferred tax asset $ - $ -
<PAGE>
The following table accounts for the difference between the actual
tax provision attributable to loss before income taxes and the
amounts obtained by applying the statutory U.S. Federal income tax
rate of 34% to the loss before income taxes.
Fiscal Years Ended
October 25, October 26, October 28,
1997 1996 1995
(Loss) income before income taxes:
(Loss) income from continuing operations $ (4,941) $ (7,144) $(29,620)
(Loss) income from discontinued operations (566) (167) 290
(Loss) income on dispositions of
discontinued operations - (1,853) -
Total (loss) income before income taxes $ (5,507) $ (9,164) $(29,330)
Total (benefit) provision computed by applying
the U.S. statutory rate (34%) $ (1,872) $ (3,116) $ (9,972)
Increases (decreases) in taxes due to:
Goodwill written off - - 6,936
Goodwill amortization - - 391
Other differences, net - 64 8
Loss which provides no current tax benefit 1,872 3,052 2,637
Actual tax provision $ - $ - $ -
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 25, 1997, the Company had an operating
loss carryforward for tax reporting purposes approximating $18
million which is available to offset future Federal taxable income
which begin to expire in 2007.
Additional restrictions under Section 382 may apply to limit the
amount of net operating loss carryforward which can be utilized in
the future.
10. Stockholders' Equity
The Company has authorized 20,000,000 shares of common stock with a
par value of $0.04 per share and 400,000 shares of preferred stock
with a par value of $10 per share.
At October 25, 1997, there were no common stock shares reserved for
the exercise of stock options.
<PAGE>
11. Capital Stock, Stock Options and Warrants
In 1994, the Company adopted the 1994 Stock Plan (the 1994 Plan).
The 1994 Plan permitted the issuance to key employees and directors
options to purchase up to 580,000 shares of common stock.
Options granted under the 1994 Plan were exercisable at the fair
market value of the Common Stock on the date the option was granted.
At October 26, 1996, 293,250 options and at October 28, 1995,
527,000 options were outstanding under the 1994 Plan. In connection
with the Company's restructuring, the options under the 1994 Plan
were cancelled.
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.
A summary of stock option activity and other related information is
as follows:
1997 1996 1995
Shares under option at beginning of year 624,750 799,500 755,000
Options granted (at prices of $1.50
in 1996, at $1.63 to $3.25 in 1995) - 175,000 101,000
Options cancelled and expired (624,750) (681,250) (56,500)
Shares under option at the end of the year
No shares exercisable at October 25, 1997 - 293,250 799,500
Shares available for option at
end of year - 624,750 118,500
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,
however, these warrants were cancelled as the result of the Company's
restructuring.
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. These
warrants also were cancelled as the result of the Company's
restructuring.
Effective with the Company's reorganization, a new stock option plan
was put into place. As of October 25, 1997, there were no shares
granted or exercised under the new plan.
<PAGE>
In October 1995, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"). SFAS 123 provides an
alternative to APB Opinion 25, "Accounting for Stock Issued to
Employees" ("APB25") and requires additional disclosures. The
Company has elected to follow APB 25 in accounting for stock options
granted. As a result, the Company generally recognizes no
compensation expense associated with stock options. SFAS 123
requires disclosure of pro forma fair market value of options
granted, pro forma net income and pro forma earnings per share as if
the Company had accounted for its stock options granted subsequent to
October 28, 1995, under the fair value method of that statement. The
Company has not disclosed such information since no options have been
granted subsequent to the reorganization and all options previously
outstanding were cancelled in connection with the reorganization.
In connection with the reorganization, the Company issued 430,000
common shares to senior management. The estimated fair value of the
shares was recorded as expense for the eleven month period ended
September 20, 1997.
12. 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>
13. 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 $96,000, $91,000 and $171,000 for fiscal 1997, fiscal
1996, and fiscal 1995, respectively.
Under terms of a deferred compensation agreement with a former
officer/director of the Company, the present value of future payments
under the agreement had been included in deferred employee benefits,
amounting to $577,000 at October 26, 1996. No amount is included at
October 25, 1997 as the deferred compensation agreement was converted
to equity during the Company's restructuring process.
14. Commitments and Contingencies
The amounts of liability, if any, for claims and actions against the
Company and its subsidiaries at October 25, 1997 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 $1.0
million at October 25, 1997. 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
$2.8 million as of October 25, 1997.
15. Supplemental Cash Flow Information
Supplemental cash flow information is as follows (in thousands):
1997 1996 1995
Cash paid for:
Interest $128 $ 423 $2,019
Federal, state and local
income taxes (net of tax refunds) $ 10 $ (32) $ 613
<PAGE>
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.
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 1995. During the first quarter of 1996, Darden
informed the Company that certain supply contracts would not be
renewed for 1996.
Sales to two groups of the Company's other customers, Bonanza and
Ponderosa, together accounted for approximately 16.7%, 26.0%, and
23.1% of the Company's sales from continuing operations in fiscal
1997, 1996 and 1995, 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. Fourth Quarter Adjustments
1997
During the final quarter of 1997, the Company entered into
an agreement to sell
its Plant City, Florida facility. As a result of the pending sale, a
$566,000 loss was incurred. This charge is included as a loss from
disposition of discontinued operations in the Company's consolidated
statement of operations. The loss is primarily attributable to a
write-down of the facility's book value to the agreed contract price
plus estimated expenses to repair the facility.
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.
<PAGE>
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.
18. New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 128, Earnings
Per Share (FAS 128). FAS 128 is designed to improve the EPS
information provided in financial statements by simplifying the
existing computational guidelines, revising the disclosure
requirements, and increasing the comparability of EPS data on
an international basis. FAS 128 is effective for financial
statements issued for periods ending after December 15, 1997. The
Company does not anticipate any impact of FAS 128 on its financial
statements.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129, Disclosure of Information about Capital Structure
(FAS 129). FAS 129 establishes standards for disclosing information
about an entity's capital structure. This Statement is effective for
financial statements for periods ending after December 15, 1997. The
Company does not anticipate any impact from this pronouncement as it
is currently complying with the disclosure requirements.
<PAGE>
In June 1997, the FASB issued Statement of Financial Accounting
Standard No. 130, Reporting Comprehensive Income. This statement,
effective for fiscal years beginning after December 15, 1997, would
require the company to report components of comprehensive income in a
financial statement that is displayed with the same prominence as
other financial statements. Comprehensive income is defined by
Concepts Statement No. 6, Elements of Financial Statements as the
change in equity of a business enterprise during a period from
transactions and other events and circumstances from nonowner
sources. It includes all changes in equity during a period except
those resulting from investments by owners and distributions to
owners. The Company has not yet determined its comprehensive income.
Also in June 1997, the FASB issued Statement of Financial Accounting
Standard No. 131, Disclosure about Segments of an Enterprise and
Related Information. This statement, effective for financial
statements for periods beginning after December 15, 1997, requires
that a public business enterprise reports financial and descriptive
information about its reportable operating segments. Generally,
financial information is required to be reported on the basis that is
used internally for evaluating segment performance and deciding how
to allocate resources to segments. The Company is evaluating this
pronouncement and will make any segment disclosures as necessary.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The disclosure required by Item 10 is set forth in, and is
incorporated by reference to, the Company's Proxy Statement relating
to the 1997 Annual Meeting of Stockholders, which will be filed with
the Securities and Exchange Commission on or before February 28,
1998 (the 1998 Proxy Statement).
Item 11. Executive Compensation
The disclosure required by Item 11 is set forth in, and is
incorporated by reference to, the 1998 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The disclosure required by Item 12 is set forth in, and is
incorporated by reference to, the 1998 Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The disclosure required by Item 13 is set forth in, and is
incorporated by reference to, the 1998 Proxy Statement.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. The following audited consolidated financial Page
statements of the Company are included in
Part II, Item 8:
Consolidated Statements of Operations for
the fiscal years ended October 25, 1997,
October 26, 1996 and October 28, 1995 15
Consolidated Balance Sheets as of October
25, 1997 and October 26, 1996 16
Consolidated Statements of Cash Flows for
the fiscal years ended October 25, 1997,
October 26, 1996 and October 28, 1995 17
Consolidated Statements of Stockholders'
(Deficit) Equity for the fiscal years
ended October 25, 1997, October 26, 1996
and October 28, 1995 18
Notes to Consolidated Financial Statements 19-28
Note: Reporting for the year ended October
25, 1997 is accomplished by combining the
financial results for the one-month period
ended October 25, 1997 and those of the
eleven-month period ended September 20, 1997.
(a) 2. Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts
and Reserves 31
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.
<PAGE>
(a) 3. Exhibits:
2 Plan of Reorganization *
11 Computation of Earnings Per Share 33
21 Subsidiaries of the Company 34
23 Consents of Independent Accountants 35-36
27 Financial Data Schedule (EDGAR filing version) N/A
NOTE: With the exception of Exhibit Nos. 2, 11, 21, 23 and
27, 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.
(b) Reports on Form 8K
Subsequent to the Company's fiscal year end, a Form 8-K was
filed on October 28, 1997 notfying that the Company's
audit/client relationship with Coopers and Lybrand L.L.P. had
been terminated.
* Included as an exhibit in the Company's S-4 filing;
incorporated herein by reference.
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED OCTOBER 25, 1997, OCTOBER 26, 1996 AND OCTOBER
28, 1995
RYMER FOODS INC. AND SUBSIDIARIES
Additions
Charged to
Balance at Charged to Other Balance at
Beginning Costs and Accounts Deductions end
Description of Year Expenses (describe) (describe) of Year
(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 25, 1997 $ 200 $ 120 $ 179 (a) $ 141
For the fiscal year
ended October 26, 1996 353 53 206 (a) 200
For the fiscal year
ended October 28, 1995 581 675 903 (a) 353
(restated)
(a) Accounts written off, net of recoveries
<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 23, 1998
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, 1/23/98
P. Edward Schenk Chief Executive Officer and President
(Principal Executive Officer)
/s/ Edward M. Hebert Senior Vice President, Chief Financial 1/23/98
Edward M. Hebert Officer and Treasurer
/s/ Michael Bowen Director 1/23/98
Michael Bowen
/s/ Michael J. Brinati Director 1/23/98
Michael J. Brinati
/s/ John W. Elting Director 1/23/98
John W. Elting
/s/ Barry Spector Director 1/23/98
Barry Spector
<PAGE>
Exhibit 21
RYMER FOODS INC.
SUBSIDIARIES OF THE COMPANY
OCTOBER 25, 1997
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 (3) 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.
3) Facility is currently under contract for sale. See Note 4 to the
Consolidated Financial Statements.
<TABLE>
Exhibit 11
Rymer Foods Inc.
Computation of Earnings Per Share
for the one period ended October 25, 1997
(in thousands, except per share data)
One Period
Ending Ending
Oct. 25, Oct. 25,
1997 1997
Primary Fully
Diluted Diluted
<S> <C> <C>
AVERAGE SHARES OUTSTANDING
1 Average shares outstanding 4,300 4,300
2 Net additional shares assuming stock
options and warrants exercised and
proceeds used to purchase treasury
shares - -
3 Net additional shares assuming
conversion of preferred stock not
considered a common stock
equivalent at issuance
4 Average number of common
shares outstanding 4,300 4,300
EARNINGS
5 Loss from continuing operations $ (113) $ (113)
6 Net loss $ (113) $ (113)
PER SHARE AMOUNTS
Loss from continuing operations
(line 5 / line 4) $ (0.03) $ (0.03)
Net loss
(line 6 / line 4) $ (0.03) $ (0.03)
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
reorganization.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-25-1997
<PERIOD-END> OCT-25-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,606
<ALLOWANCES> 200
<INVENTORY> 4,304
<CURRENT-ASSETS> 5,903
<PP&E> 1,769
<DEPRECIATION> 44
<TOTAL-ASSETS> 8,471
<CURRENT-LIABILITIES> 3,431
<BONDS> 0
0
0
<COMMON> 172
<OTHER-SE> 4,851
<TOTAL-LIABILITY-AND-EQUITY> 8,471
<SALES> 33,891
<TOTAL-REVENUES> 33,891
<CGS> 30,886
<TOTAL-COSTS> 5,734
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,333
<INCOME-PRETAX> 20,096
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,941)
<DISCONTINUED> (566)
<EXTRAORDINARY> 25,603
<CHANGES> 0
<NET-INCOME> 20,096
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the
registration statement of Rymer Foods Inc. 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 12, 1997, on our audits of the
consolidated financial statements and financial
statement schedule of Rymer Foods Inc. and
subsidiaries as of the one month period ended October
25, 1997 and the eleven month period ended September
20, 1997, which report is included on page 13 in this
Annual Report on Form 10-K.
/s/ Grant Thornton LLP
Chicago, Illinois GRANT THORNTON LLP
January 23, 1998
Exhibit 23.2
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 two 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 22, 1998
