UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 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
June 12, 2000.
This report consists of 11 pages.
1.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
RYMER FOODS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
April 29, October 30,
2000 1999
(in thousands)
------- -------
<S> <C> <C>
ASSETS
Current Assets:
Receivables, net $ 2,708 $ 2,312
Inventories 5,080 5,070
Other 180 127
------- -------
Total Current Assets 7,968 7,509
Property, Plant and Equipment:
Leasehold improvements 1,038 1,004
Machinery and equipment 1,400 1,251
------- -------
2,438 2,255
Less accumulated depreciation
and amortization 1,234 1,027
------- -------
1,204 1,228
Other 33 51
------- -------
$ 9,205 $ 8,788
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of borrowings, $ - $ -
Accounts payable 1,158 593
Accrued liabilities 1,317 1,625
------- -------
Total Current Liabilities 2,475 2,218
Line of Credit 3,789 3,514
Deferred Employee Benefits 115 119
------- -------
6,379 5,851
Commitments and Contingencies - -
Stockholders' Equity:
Common stock, $0.04 par - 20,000,000 shares
authorized; 4,300,000 shares outstanding 172 172
Additional paid-in capital 4,880 4,862
Accumulated deficit (2,226) (2,097)
------- -------
Total Stockholders' Equity 2,826 2,937
------- -------
$ 9,205 $ 8,788
======= =======
See accompanying notes.
2.
</TABLE>
<PAGE>
<TABLE>
RYMER FOODS INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
April 29, May 1, April 29, May 1,
2000 1999 2000 1999
(in thousands except per share data)
------ ------ ------- -------
<S> <C> <C> <C> <C>
Net sales $ 9,890 $11,134 $ 19,131 $ 18,237
Cost of sales 8,789 9,829 17,131 16,239
------ ------ ------- -------
Gross profit 1,101 1,305 2,000 1,998
Selling, general and
administrative expenses 986 1,086 1,952 2,006
------ ------ ------- -------
Operating income (loss) 115 219 48 (8)
Interest expense 111 83 217 150
Other (income) expense - (1) - 1
------ ------ ------- -------
Income(loss) before income taxes 4 137 (169) (159)
Tax benefit (20) - (40) -
------ ------ ------- -------
Net income(loss) $ 24 $ 137 $ (129) $ (159)
====== ====== ======= =======
Per common share data:
Basic:
Income (loss) from continuing
operations before
income taxes $ .00 $ .03 $ (.04) $ (.04)
====== ====== ======= =======
Net income (loss) $ .01 $ .03 $ (.03) $ (.04)
====== ====== ======= =======
Diluted:
Income (loss) from continuing
operations before
income taxes $ .00 $ .03 $ (.04) $ (.04)
====== ====== ======= =======
Net income (loss) $ .01 $ .03 $ (.03) $ (.04)
====== ====== ======= =======
See accompanying notes.
3.
</TABLE>
<PAGE>
<TABLE>
RYMER FOODS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
Twenty-Six Weeks Ended
April 29, 2000 May 1, 1999
(in thousands)
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATIONS
Loss from continuing operations $ (129) $ (159)
Non-cash adjustments to loss:
Depreciation and amortization 207 228
Provision for bad debts - 15
Variable stock option 18 -
Net decrease (increase) to accounts receivable (396) (992)
Net (increase) to inventories (10) (1,272)
Net (increase) to other current and
long-term assets (35) (33)
Net increase to accounts payable and
accrued expenses 257 875
------- -------
Net cash flows from operating activities of
continuing operations (88) (1,338)
Net cash flows from operating activities of
discontinued operations (4) (3)
------- -------
Net cash flows from operating activities (92) (1,341)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (183) (116)
------- -------
Net cash flows from investing activities (183) (116)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments under line-of-credit facility (18,425) (32,689)
Borrowings under line-of-credit facility 18,700 34,530
------- -------
Net cash flows from financing activities 275 1,457
Net change in cash and cash equivalents - -
Cash and cash equivalents at beginning of year - -
------- -------
Cash and cash equivalents at end of second quarter $ - $ -
======= =======
Supplemental cash flow information:
Interest paid $ 217 $ 150
======= =======
Income taxes paid, net of refunds $ - $ -
======= =======
See accompanying notes.
</TABLE>
4.
<PAGE>
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 April 29, 2000 and
October 30, 1999 was (in thousands):
April 29, 2000 October 30, 1999
------ ------
Raw material $ 3,079 $ 3,251
Finished goods 2,001 1,819
------ ------
Total $ 5,080 $ 5,070
====== ======
5.
<PAGE>
3. BORROWINGS
Current borrowings consist of the following (in thousands):
April 29, October 30,
2000 1999
------- -------
Banks, with interest of 2%
over prime in 2000 and 1999 $ 3,789 $ 3,514
Less current maturities - -
------- -------
$ 3,789 $ 3,514
======= =======
The prime rate applicable to the Company's outstanding bank notes
payable was 9.0% at April 29, 2000 and 8.25% at October 30, 1999. The
weighted average interest rate relating to these borrowings was 10.7%
during the first half of 2000 and 9.9% during fiscal 1999.
The Company's Rymer Meat subsidiary had total lines of credit
available of $4.0 million at April 29, 2000 and $3.8 million at
October 30, 1999, of which $0.2 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. On May 4, 2000 the Company amended its loan
agreement with FINOVA that 1) extended the maturity date to April 23,
2002, 2) increased the facility by $1.0 million to $5.0 million and 3)
set up a separate capital expenditure line of credit for $500,000.
The FINOVA agreement contains loan covenants that the Company must
meet. At April 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.
5. INCOME TAXES
The Company provides for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109). The Company's deferred tax
asset is related primarily to its operating loss carryforward for tax
reporting purposes which approximated $21.0 million at April 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 Managements
Discussion and Analysis, involve numerous risks and uncertainties that
could cause actual results to differ materially including, but not limited
to, the effect of changing economic conditions, business conditions and
growth in the meat industry, the Company's ability to maintain its lending
arrangements, or if necessary, access external sources of capital,
implementing current restructuring plans and accurately forecasting capital
expenditures. In addition, the Company's future results of operations and
financial condition may be adversely impacted by various factors including,
primarily, the level of the Company's sales. Certain of these factors are
described in the description of the Company's business, operations and
financial condition contained in this Form 10-Q. Assumptions relating to
budgeting, marketing, product development and other management decisions
are subjective in many respects and thus susceptible to interpretations and
periodic revisions based on actual experience and business developments,
the impact of which may cause the Company to alter its marketing, capital
expenditure or other budgets, which may in turn affect the Company's
financial position and results of operations.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The Company's consolidated results from operations are generated by its
meat processing operation. The Company's common stock currently trades
under the symbol RFDS.OB (OTCBB).
First Half of Fiscal 2000 versus First Half of Fiscal 1999
Consolidated sales for the first half of fiscal 2000 of $19.1 million
increased from the first half of fiscal 1999 by $0.9 million or 5.0%.
Sales increased primarily due to the Company's expansion of its customer
base.
As compared to 1999, consolidated cost of sales increased by $0.9 million
or 5.5%. As a percentage of sales, the gross margin decreased to 10.5% as
compared to 11.0% in 1999.
Gross profit remained the same as 1999, as the higher sales offset lower
margins. The Company's hourly work force has remained constant from 1999
to 2000.
Selling, general and administrative expenses decreased by $54,000 in 2000
as compared to 1999 due to lower sales related expenses.
Interest Expense
Interest expense increased by $67,000 or 44.6% as compared to 1999. This
increase is due to the Company's higher borrowings, primarily to
accommodate Company growth and higher prime rate on the Company's line of
credit.
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 $40,000 thereby resulting in a tax benefit in the first half
of 2000.
7.
<PAGE>
Liquidity and Capital Resources
The Company makes sales primarily on a seven to thirty day balance due
basis. Purchases from suppliers have payment terms generally ranging from
wire transfer at time of shipment to fourteen days.
The Company on April 23, 1998 entered into a loan agreement with FINOVA.
The credit facility provides up to $4.0 million for the Company through
April 23, 2001. On May 4, 2000 the Company amended its loan agreement with
FINOVA that 1) extended the maturity date to April 23, 2002, 2) increased
the facility by $1.0 million to $5.0 million and 3) set up a separate
capital expenditure line of credit for $500,000. The FINOVA agreement
contains loan covenants that the Company must meet. At April 29, 2000 and
October 30, 1999, the Company was in compliance with the loan covenants.
The Company had total lines of credit available of $4.0 million at April
29, 2000 and $3.8 million at October 30, 1999, of which $0.2 million and
$0.3 million, respectively, was unused. The Company anticipates that the
amended line of credit will supply sufficient cash to meet the Company's
requirements.
The Company anticipates spending approximately $400,000 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 mainly from the new capital loan facility.
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.
<PAGE>
EXHIBIT 11
<TABLE>
COMPUTATION OF EARNINGS (LOSS) PER SHARE
BASIC DILUTED
----- -------
Thirteen Twenty-Six Thirteen Twenty-Six
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
April 29, April 29, April 29, April 29,
2000 2000 2000 2000
(In thousands, except per share amounts)
----- ----- ----- -----
AVERAGE SHARES OUTSTANDING
<S> <C> <C> <C> <C>
1 Average shares outstanding 4,300 4,300 4,300 4,300
2 Net additional shares outstanding
assuming exercise of stock options* - 6,500 432 -
----- ----- ----- -----
3 Average number of common shares
outstanding 4,300 4,300 4,732 4,300
===== ===== ===== =====
EARNINGS (LOSSES)
4 Income(loss) from continuing
operations $ 4 $ (169) $ 4 $ (169)
===== ===== ===== =====
5 Net income(loss) $ 24 $ (129) $ 24 $ (129)
===== ===== ===== =====
PER SHARE AMOUNTS
Loss from continuing
operations (line 4/ line 3) $ .00 $ (.04) $ .00 $ (.04)
===== ===== ===== =====
Net income(loss)
(line 5 / line 3) $ .01 $ (.03) $ .01 $ (.03)
===== ===== ===== =====
NOTE - Earnings per share have been calculated using the treasury stock
method. Since there is a net loss for the twenty six weeks ending April
29, 2000 common stock equivalents are excluded from the diluted earnings
per share calculations since they would be antidilutive.
</TABLE>
9.
<PAGE>
RYMER FOODS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed:
11 Computations of earnings per share are included in the
Notes to Condensed Consolidated Financial Statements
included in Item 1 of this Form 10-Q.
Exhibits incorporated by reference:
13.1 Annual Report on Form 10-K of Rymer Foods Inc.
for the fiscal year ended October 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.
<PAGE>
RYMER FOODS INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RYMER FOODS INC.
(Registrant)
By /s/ Edward M. Hebert
---------------------------
Edward M. Hebert, President,
Chief Financial Officer
and Treasurer
Date: June 12, 2000
