UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 29, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from - to -
Commission File Number 1-6071
RYMER FOODS INC.
Incorporated in the State of Delaware IRS Employer Identification
No. 36-1343930
4600 South Packers Avenue
Suite 400
Chicago, Illinois 60609
773/927-7777
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes X No
Registrant had 4,300,000 shares of common stock outstanding as of
March 13, 2000.
This report consists of 11 pages.
1.
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
RYMER FOODS INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
January 29, October 30,
2000 1999
------- -------
ASSETS (in thousands)
<S> <C> <C>
Current Assets:
Receivables, net $ 2,147 $ 2,312
Inventories 5,584 5,070
Other 152 127
------- -------
Total Current Assets 7,883 7,509
Property, Plant and Equipment:
Leasehold improvements 1,040 1,004
Machinery and equipment 1,284 1,251
------- -------
2,324 2,255
Less accumulated depreciation
and amortization 1,127 1,027
------- -------
1,197 1,228
Other 42 51
------- -------
$ 9,122 $ 8,788
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of borrowings, $ - $ -
Accounts payable 1,131 593
Accrued liabilities 1,584 1,625
------- -------
Total Current Liabilities 2,715 2,218
Line of Credit 3,488 3,514
Deferred Employee Benefits 117 119
------- -------
6,320 5,851
Commitments and Contingencies
Stockholders' Equity:
Common stock, $.04 par, 20,000,000 shares
authorized; 4,300,000 shares outstanding 172 172
Additional paid-in capital 4,880 4,862
Accumulated deficit (2,250) (2,097)
------- -------
Total Stockholders' Equity 2,802 2,937
------- -------
$ 9,122 $ 8,788
======= =======
See accompanying notes.
2.
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RYMER FOODS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Thirteen Weeks Ended
January 29, January 30,
2000 1999
------ ------
(in thousands, except per share data)
<S> <C> <C>
Net sales $ 9,241 $ 7,103
Cost of sales 8,342 6,410
------ ------
Gross profit 899 693
Selling, general and
administrative expenses 966 920
------ ------
Operating loss (67) (227)
Interest expense 106 67
Other expense - 2
------ ------
Loss before income taxes (173) (296)
Provision for income taxes (20) -
------ ------
Net loss $ (153) $ (296)
====== ======
Per common share data:
Basic:
Loss from continuing operations
before income taxes $ (.04) $ (.07)
====== ======
Net loss $ (.04) $ (.07)
====== ======
Diluted:
Loss from continuing operations
before income taxes $ (.04) $ (.07)
====== ======
Net loss $ (.04) $ (.07)
====== ======
See accompanying notes.
3.
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RYMER FOODS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Thirteen Weeks Ended
Jan. 29, 2000 Jan. 30, 1999
------- -------
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATIONS
Loss from continuing operations $ (153) $ (296)
Non-cash adjustments to loss:
Depreciation and amortization 100 113
Provision for bad debts - 15
Variable stock option 18 -
Net decrease to accounts receivable 165 250
Net (increase) to inventories (514) (348)
Net (increase) to other current and
long-term assets (16) (16)
Net increase to accounts payable and
accrued expenses 148 294
------- -------
Net cash flows from operating activities of
continuing operations (252) 12
Net cash flows from operating activities of
discontinued operations (2) 2
------- -------
Net cash flows from operating activities (254) 14
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (69) (39)
------- -------
Net cash flows from investing activities (69) (39)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in cash overdraft 349 (437)
Repayments under line-of-credit facility (9,726) (6,562)
Borrowings under line-of-credit facility 9,700 7,024
------- -------
Net cash flows from financing activities 323 25
Net change in cash and cash equivalents - -
Cash and cash equivalents balance at
beginning of year - -
------- -------
Cash and cash equivalents balance at
end of first quarter $ - $ -
======= =======
Supplemental cash flow information:
Interest paid $ 105 $ 60
======= =======
Income taxes paid, net of refunds $ - $ -
======= =======
See accompanying notes.
4.
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RYMER FOODS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with the instructions
to Form 10-Q and therefore do not include all information and
footnotes necessary for a fair presentation of financial position,
results of operations, and cash flows in conformity with generally
accepted accounting principles. The year-end condensed balance
sheet data was derived from audited financial statements, but does
not include all disclosures required by generally accepted
accounting principles. The Company operates on a fiscal year
which ends on the last Saturday in October. References in the
following notes to years and quarters are references to fiscal
years and fiscal quarters. For further information refer to the
Consolidated Financial Statements and footnotes thereto included
in Rymer Foods Inc.'s (the Company's or Rymer's) Annual Report on
Form 10-K for the fiscal year ended October 30, 1999.
In management's opinion, the condensed consolidated financial
statements include all normal recurring adjustments which the
Company considers necessary for a fair presentation of the results
for the period. Operating results for the fiscal period presented
are not necessarily indicative of the results that may be expected
for the entire fiscal year.
2. INVENTORIES
Inventories are stated principally at the lower of first-in,
first-out cost or market. The composition of inventories at
January 29, 2000 and October 30, 1999 was (in thousands):
January 29, 2000 October 30, 1999
------ ------
Raw material $ 3,277 $ 3,251
Finished goods 2,307 1,819
------ ------
Total $ 5,584 $ 5,070
====== ======
5.
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3. BORROWINGS
Current borrowings consist of the following (in thousands):
January 29, October 30,
2000 1999
------- -------
Banks, with interest of 2%
over prime in 2000 and 1999 $ 3,488 $ 3,514
Less current maturities - -
------- -------
$ 3,488 $ 3,514
======= =======
The prime rate applicable to the Company's outstanding bank notes
payable was 8.25% at both January 29, 2000 and October 30, 1999.
The weighted average interest rate relating to these borrowings
was 10.25% during the first quarter of 2000 and 9.9% during fiscal
1999.
The Company's Rymer Meat subsidiary had total lines of credit
available of $3.8 million at January 29, 2000 and $3.8 million at
October 30, 1999, of which $0.3 million and $0.3 million,
respectively, was unused.
The Company on April 23, 1998 entered into a loan agreement with
FINOVA. The credit facility provides up to $4 million for the
Company through April 23, 2001. The FINOVA agreement contains
loan covenants that the Company must meet. At January 29, 2000
and October 30, 1999 the Company was in compliance with the loan
covenants.
Substantially all of the Company's property, plant and equipment
and certain current assets are pledged as collateral under bank
agreements.
4. INCOME TAXES
The Company provides for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109). The Company's deferred
tax asset is related primarily to its operating loss carryforward
for tax reporting purposes which approximated $21.0 million at
January 29, 2000 and October 30, 1999. The Company recorded a
valuation allowance amounting to the entire deferred tax asset
balance because the Company's financial condition, its lack of a
history of consistent earnings, possible limitations on the use of
carryforwards, and the expiration dates of certain of the net
operating loss carryforwards give rise to uncertainty as to
whether the deferred tax asset is realizable. Additional
restrictions under Section 382 may apply to limit the amount of
net operating loss carryforward which can be utilized in the
future.
6.
<PAGE>
RYMER FOODS INC. AND SUBSIDIARIES
Cautionary Statement
The statements in this Form 10-Q, included in this Management's
Discussion and Analysis, that are forward looking are based upon
current expectations and actual results may differ materially.
Therefore, the inclusion of such forward looking information should not
be regarded as a representation by the Company that the objectives or
plans of the Company will be achieved. Such statements include, but
are not limited to, the Company's expectations regarding the operations
and financial condition of the Company. Forward looking statements
contained in this Form 10-Q included in this 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-Q. Assumptions relating to budgeting, marketing, product
development and other management decisions are subjective in many
respects and thus susceptible to interpretations and periodic revisions
based on actual experience and business developments, the impact of
which may cause the Company to alter its marketing, capital expenditure
or other budgets, which may in turn affect the Company's financial
position and results of operations.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
The Company's consolidated results from operations are generated by its
meat processing operation. The Company's common stock currently trades
under the symbol RFDS (OTCBB).
First Quarter of 2000 versus First Quarter of 1999
Consolidated sales for the first quarter of 2000 of $9.2 million
increased from the first quarter of 1999 by $2.1 million or 30.1%.
Sales increased primarily due to the Company's expansion of its
customer base.
As compared to 1999, consolidated cost of sales increased by $1.9
million or 30.1%. As a percentage of sales, the gross margin decreased
to 9.7% as compared to 9.8% in 1999.
Gross profit increased compared to 1999 by $0.2 million mainly due to
the higher volume. The Company's hourly work force has remained
constant from 1999 to 2000.
Selling, general and administrative expenses increased by $45,000 in
2000 as compared to 1999 due to higher sales related expenses
associated with higher sales revenue.
Interest Expense
Interest expense increased by $39,000 or 58.2% as compared to 1999.
This increase is due to the Company's higher borrowings on the
Company's line of credit, due primarily for raw materials and to
accommodate Company growth.
Income Taxes
In both 2000 and 1999, no provision for income taxes was recorded due
to the loss from operations. In 2000 the Company reduced the income
tax liability by $20,000 thereby resulting in a tax benefit in the
first quarter of 2000.
7.
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Liquidity and Capital Resources
The Company makes sales primarily on a seven to thirty day balance due
basis. Purchases from suppliers have payment terms generally ranging
from wire transfer at time of shipment to fourteen days.
On April 23, 1998, the Company entered into a loan agreement with
FINOVA. The credit facility provides up to $4 million for the Company
through April 23, 2001. The agreement contains loan covenants that the
Company must meet. At January 29, 2000, the Company was in compliance
with the loan covenants.
The Company had total lines of credit available of $3.8 million at
January 29, 2000 and $3.8 million at October 30, 1999, of which $0.3
million and $0.3 million, respectively, was unused. The Company
anticipates that the existing line of credit will supply sufficient
cash to meet the Company's requirements.
The Company anticipates spending approximately $350,000 for capital
expenditures in 2000. The expenditures are primarily for planned
improvements at the meat operation. There are no specific commitments
outstanding related to these planned expenditures. Such capital
expenditures will be financed with cash from operations and/or bank
borrowings.
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.
8.
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EXHIBIT 11
COMPUTATION OF EARNINGS (LOSS) PER SHARE
BASIC DILUTED BASIC DILUTED
Thirteen Weeks Thirteen Weeks Thirteen Weeks Thirteen Weeks
January 29, January 29, January 30, January 30,
2000 2000 1999 1999
----- ----- ----- -----
(In thousands, except per share amounts) (In thousands, except per share amounts)
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING
1 Average shares outstanding 4,300 4,300 4,300 4,300
2 Net additional shares outstanding
assuming exercise of stock options - 426 - 348
3 Average number of common shares
outstanding 4,300 4,726 4,300 4,648
EARNINGS (LOSSES)
4 Loss from continuing
operations $ (173) $ (173) $ (295) $ (295)
5 Net loss $ (153) $ (153) $ (295) $ (295)
PER SHARE AMOUNTS
Loss from continuing
operations (line 4 / line 3) $ (.04) $ (.04) $ (.07) $ (.07)
Net loss
(line 5 / line 3) $ (.04) $ (.04) $ (.07) $ (.07)
NOTE - Earnings per share have been calculated using the treasury
stock method. Since there is a net loss for the quarters ending
January 29, 2000 and January 30, 1999 common stock equivalents are
excluded from the diluted earnings per share calculations since they
would be antidilutive.
9.
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RYMER FOODS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed:
11 Computations of earnings per share are included in the Notes
to Condensed Consolidated Financial Statements included in
Item 1 of this Form 10-Q.
Exhibits incorporated by reference:
13.1 Annual Report on Form 10-K of Rymer Foods Inc. for the fiscal
year ended October 30, 1999 (Incorporated by reference).
21.1 Subsidiaries of the Company. (Incorporated by reference to
Exhibit 22 to the Annual Report of Form 10-K of Rymer Foods
Inc. for the fiscal year ended October 30, 1999.)
27 Financial Data Schedule (EDGAR filing)
(b) Reports on Form 8-K:
None
10.
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RYMER FOODS INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
RYMER FOODS INC.
(Registrant)
By /s/ Edward M. Hebert
----------------------------
Edward M. Hebert, President,
Chief Financial Officer, Secretary
and Treasurer
Date: March 13, 2000
11.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-28-2000
<PERIOD-END> JAN-29-2000
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 2,298
<ALLOWANCES> 151
<INVENTORY> 5,584
<CURRENT-ASSETS> 7,883
<PP&E> 2,324
<DEPRECIATION> 1,127
<TOTAL-ASSETS> 9,122
<CURRENT-LIABILITIES> 2,715
<BONDS> 0
0
0
<COMMON> 172
<OTHER-SE> 2,630
<TOTAL-LIABILITY-AND-EQUITY> 9,122
<SALES> 9,241
<TOTAL-REVENUES> 9,241
<CGS> 8,342
<TOTAL-COSTS> 966
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 106
<INCOME-PRETAX> (173)
<INCOME-TAX> (20)
<INCOME-CONTINUING> (153)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (153)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
