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SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended Decenber 31, 1998
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File No. 0-18222
RICA FOODS, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Nevada 87-0432572
------ ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization Identification No.)
95 Merrick Way, Suite 507, Coral Gables, FL 33134
- --------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(305) 476-1757 or (305) 476-1758
(Registrant's telephone number including area code)
Indicate by check mark whether the Registrant (1) had 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 / /
The number of shares outstanding of the Registrant's common stock, as of the
latest practicable date, February 19, 1999, was 7,418,818.
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RICA FOODS, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1998
(Unaudited) and September 30, 1998 ............................... 2
Consolidated Statements of Income for the three months ended
December 31, 1998 and 1997 (Unaudited) .......................... 3
Consolidated Statements of Cash Flows for the three months ended
December 31, 1998 and 1997 (Unaudited)............................. 4
Notes to Consolidated Financial Statements (Unaudited)............. 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ......................................... 11
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk ......... 20
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings .................................................. 22
ITEM 2. Changes in Securities and use of Proceeds .......................... 22
ITEM 4. Submission of matters to a vote of Security Holders ................ 23
ITEM 5. Other Information .................................................. 23
ITEM 6. Exhibits and Reports ............................................... 23
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RICA FOODS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, September 30,
------------ ------------
1998 1998
---- ----
(Unaudited)
Assets
------
Current assets:
Cash and cash equivalents .................. $ 6,010,631 $ 3,290,757
Short-term investments ..................... 40,184 101,892
Notes and accounts receivable, net ......... 10,448,527 8,290,021
Due from related parties ................... 741,469 656,904
Inventories, net ........................... 12,240,035 12,862,456
Prepaid expenses ........................... 558,946 648,918
---------- ----------
Total current assets ..................... 30,039,792 25,850,948
---------- ----------
Property, plant and equipment, net ............. 27,901,696 28,494,233
Long-term notes receivable-trade ............... 250,978 119,229
Long-term investment ........................... 4,587,995 4,720,335
Other assets ................................... 1,747,005 2,039,443
Cost in excess of acquired business, net ....... 1,601,501 1,781,147
---------- ----------
Total assets ............................. $ 66,128,967 $ 63,005,335
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable ........................... $ 9,303,248 $ 7,510,750
Accrued expenses ........................... 3,308,518 3,035,951
Notes payable .............................. 7,925,813 8,463,052
Current installments of long-term debt ..... 1,772,578 1,940,073
Due to stockholders ........................ 77,939 75,671
---------- ----------
Total current liabilities ................ 22,388,096 21,025,497
---------- ----------
Long-term debt, net of current portion ......... 21,578,281 22,559,425
Due to stockholders ............................ 18,009 18,526
Deferred income tax liability .................. 1,921,989 1,974,407
---------- ----------
Total liabilities ........................ 45,906,375 45,577,855
---------- ----------
Minority interest .............................. 7,512,959 6,078,595
Stockholders' equity:
Common stock ............................. 7,419 7,419
Preferred stock .......................... 4,323,025 4,323,025
Additional paid-in capital ............... 11,987,393 11,987,393
Cumulative translation adjustment ........ (5,860,411) (5,630,035)
Retained earnings ........................ 4,971,760 3,370,982
---------- ----------
15,429,186 14,058,784
---------- ----------
Less:
Due from stockholders .................... (180,067) (170,413)
Treasury stock, at cost .................. (2,539,486) (2,539,486)
---------- ----------
Total Stockholders' equity ..................... 12,709,633 11,348,885
---------- ----------
Total liabilities and
Stockholders' equity ..................... $ 66,128,967 $ 63,005,335
============ ============
The accompanying notes to consolidated financial statements are an integral part
of these statements.
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RICA FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Income
For the three months ended December 31, 1998 and 1997
Unaudited
---------
1998 1997
==== ====
Sales, net ................................. $31,651,795 $20,826,028
Cost of sales .............................. 20,006,822 15,610,098
----------- -----------
Gross profit .......................... 11,644,973 5,215,930
----------- -----------
Operating expenses:
Selling ............................... 4,246,218 1,859,410
General and administrative ............ 2,608,442 1,468,710
Amortization of cost in excess of
net assets of acquired business ..... 90,482 --
----------- -----------
Total operating expenses .............. 6,945,142 3,328,120
Income from operations ................. 4,699,831 1,887,810
Other expenses (income):
Interest expense ....................... 1,080,919 631,960
Interest income ........................ (181,370) (127,517)
Exchange losses (gains), net ........... 534,525 48,763
Miscellaneous, net ..................... (319,336) (69,164)
----------- -----------
Other expenses, net .................. 1,114,738 484,042
----------- -----------
Income before income taxes and
minority interest ...................... 3,585,093 1,403,768
Income taxes ............................... 338,288 248,196
----------- -----------
Income before minority interest ............ 3,246,805 1,155,572
Minority interest .......................... 1,612,220 495,847
----------- -----------
Net income ................................. 1,634,585 659,725
Preferred stock dividend ................... 133,058 38,900
Net income applicable to common stock....... $ 1,501,527 $ 620,825
=========== ===========
Earnings per share:
Basic ................................. $ 0.20 $ 0.09
=========== ===========
Diluted ............................... $ 0.20 $ 0.09
=========== ===========
Weighted average number of
common shares outstanding:
Basic ................................. 7,418,818 6,603,132
=========== ===========
Diluted ............................... 7,489,824 6,626,286
=========== ===========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
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RICA FOODS, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
For the three months ended December 31, 1998 and 1997
Unaudited
---------
1998 1997
==== ====
Cash flows from operating activities:
Net income ................................... $ 1,634,585 $ 659,725
----------- ----------
Adjustments to reconcile net income to
net cash provided by (used for) operating
activities:
Depreciation and amortization ............... 775,154 370,648
Renewal for production poultry .............. 516,160 237,531
Amortization of cost in excess of net
assets of acquired business ................ 90,482 --
Increase in provision for vacation
accrual .................................... 52,505 --
Allowance for inventory obsolescence ........ 7,467 --
Amortization of software development
costs ...................................... 22,296 24,726
Provision for doubtful receivables .......... 158,354 55,066
Gain on sale of productive assets............ (83,342) (22,490)
Deferred income tax benefit ................. (52,418) --
Minority interest ........................... 1,612,220 495,847
Changes in operating assets and
liabilities:
Notes and accounts receivable ............. (1,540,528) (1,308,816)
Due from related party .................... (130,452) (92,399)
Inventories ............................... 124,028 (604,423)
Prepaid expenses .......................... (218,723) (38,409)
Accounts payable .......................... 1,759,871 (267,230)
Accrued expenses .......................... 295,801 (510,670)
Long-term notes receivable-trade .......... (134,805) 24,367
--------- ---------
Cash provided by (used for)
operating activities ..................... 4,888,655 (976,527)
--------- ---------
Cash flows from investing activities:
Short-term investments .................... 61,709 (530,113)
Additions to property, plant
and equipment ............................ (803,176) (654,547)
Proceeds from sale of productive assets ... 119,854 77,127
Increase (decrease) in other assets ..... 216,611 (200,089)
----------- -----------
Cash used for investing activities ...... (405,002) (1,307,622)
----------- -----------
continued on next page
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Cash flows from financing activities:
Increase (decrease) in notes payable ....... (542,458) 2,137,632
Preferred stock cash dividends ............. (133,058) (38,900)
Long-term financing:
New loans ................................. (137,859) 487,223
Payments .................................. (1,212,803) (287,456)
Due to shareholders ....................... (43,196) (151)
Due from related party .................... -- (175,094)
Cash provided by (used for) ----------- ---------
financing activities ..................... (2,069,374) 2,123,254
----------- ---------
Effect of exchange rate changes on cash and
cash equivalents ............................ 305,594 (7,437)
Increase (decrease) in cash and cash
equivalents .............................. 2,719,873 (168,331)
Cash and cash equivalents at beginning of
period ................................... 3,290,758 1,388,290
----------- -----------
Cash and cash equivalents at end of
period ................................... $ 6,010,631 $ 1,219,959
=========== ===========
Supplemental disclosures of cash flow
information:
Cash paid for the period for:
Interest ................................. $ 275,836 $ 214,637
=========== ===========
Income taxes ............................. $ 182,109 $ 25,369
=========== ===========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
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RICA FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE 1 - GENERAL
Management is responsible for preparing Rica Foods, Inc. and subsidiaries
(collectively the "Company") financial statements and related information that
appear in this Form 10-Q report. Management believes that the financial
statements reflect fairly the form and substance of transactions and reasonably
present the Company's financial condition and results of operations in
conformity with generally accepted accounting principles in the United States.
The accompanying interim financial statements have been prepared in accordance
with the instructions to Form 10-Q and, therefore, omit or condense certain
footnotes and other information normally included in the financial statements
prepared in accordance with generally accepted accounting principles. The
accounting policies followed for interim financial reporting are the same as
those disclosed in Note 1 of the Notes to Consolidated Financial Statements
included in the Company's audited financial statements for the fiscal year ended
September 30, 1998 which are included in Form 10-K. Management has included in
the Company's financial statements amounts that are based on estimates and
judgments, which it believes are reasonable under the circumstances. In the
opinion of Management, all adjustments necessary for a fair presentation of the
financial information for the interim periods reported have been made. Results
of the three months ended December 31, 1998 are not necessarily indicative of
the results to be expected for the entire fiscal year ending September.30, 1999.
The Company maintains a system of internal accounting policies, procedures and
controls intended to provide reasonable assurance, at appropriate cost, that
transactions are executed in accordance with Company authorization and are
properly recorded and reported in the financial statements, and that assets are
adequately safeguarded.
Although Management believes that the disclosures are adequate to make the
information presented not misleading, these unaudited consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's annual report on Form 10K
for the fiscal year ended September 30, 1998.
NOTE 2 - RECLASSIFICATIONS
Certain prior period balances have been reclassified to conform to the 1997
presentation.
NOTE 3 - INVENTORIES AND RENEWAL OF PRODUCTION POULTRY
Inventories are stated at the lower of cost or market. Cost is determined
using the weighted-average method, except for inventories in transit, which are
valued at specific cost. Costs pertaining to the growth period of reproductive
hens are capitalized and are subsequently amortized over the expected
reproductive life of the hen ("renewal of production poultry"). Renewal of
production poultry is determined based on the estimated poultry reproductive
period.
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RICA FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
Inventories, net consist of the following:
December 31, September 30,
1998 1998
-------- ------
Finished products ..................... $ 2,398,435 $ 3,038,319
Poultry ............................... 2,829,692 2,713,040
Production poultry .................... 3,003,041 3,141,980
Materials and supplies ................ 1,867,030 1,710,071
Raw materials ......................... 1,925,260 2,849,126
In transit ............................ 1,205,229 204,681
--------- ---------
13,228,687 13,657,217
========== ==========
Renewal of production poultry (954,046) (766,736)
Allowance for obsolescence (34,606) (28,025)
---------- ----------
Inventories, net ......... ........... $ 12,240,035 $ 12,862,456
========== ==========
NOTE 4 - COMPREHENSIVE INCOME
Total comprehensive income consists of the following:
Three months ended
------------------
December 31,
------------
1998 1997
---- ----
Net income $ 1,501,527 $ 620,825
Foreign currency translation
adjustment (230,375) (253,755)
--------- --------
Total comprehensive income $ 1,271,152 $ 367,070
========= ========
NOTE 5 - EARNINGS PER SHARE
Earnings per share is computed on the basis of the weighted average number
of common shares outstanding plus the effect of outstanding warrants and stock
options using the treasury stock method according to SFAS No. 128 "Earnings per
Share". Earnings per share pertaining to the three months ended December 31,
1997 have been restated to comply with this standard and to reflect the reverse
stock split effective on December 29, 1998.
Following is a reconciliation of the weighted average number of shares
currently outstanding with the number of shares used in the computations of
fully diluted earnings per share.
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RICA FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
December 31,
------------
1998 1997
---- ----
Numerator:
Income from continuing operations $1,501,527 $ 620,825
========== ==========
Denominator:
Denominator for basic income
per share 7,418,818 6,603,132
Effect of dilutive securities:
Options to purchase common stock 71,006 23,154
---------- ----------
Denominator for diluted
earnings per share 7,489,824 6,626,286
=========== ===========
Earnings per share from
continuing operations:
Basic $ 0.20 $ 0.09
=========== ==========
Diluted $ 0.20 $ 0.09
=========== ==========
The Company did not have any anti-dilutive securities outstanding as of
December 31, 1998 and 1997.
The minority interest in the income of subsidiaries and dividends on
preferred stock have been excluded from income available to common stockholders.
NOTE 6 - PRO FORMA FINANCIAL INFORMATION
Following is pro forma financial information which presents results of
operations for the three months ended December 31, 1997 as if the acquisition of
56.38% of As de Oros, consumatted on February 26, 1998, had taken place on
October 1, 1996:
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RICA FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
Revenues $33,327,697
Net income 606,824
Basic earnings per share:
Weighted average number of shares
outstanding 7,418,818
===========
Earnings per share $0.08
=====
Diluted earnings per share
Incremental shares from assumed
conversion of warrants 23,154
----------
Adjusted weighted average shares 7,441,972
==========
Diluted earnings per share: $0.08
=====
Diluted and basic weighted average oustanding shares and earnings per share
amounts, have been restated to reflect the reverse stock split effective on
December 29, 1998.
NOTE 7 - CHANGE IN METHOD OF ACCOUNTING
For fiscal year 1998, the Company changed its method of accounting for sales and
purchases from Integrated Producers. Integrated Producers are local farmers who
raise and feed poultry on behalf of the Company. The new method adopted on
October 1, 1998 reflects chickens and its materials transferred to Integrated
Producers as inventory. The method used until September 30, 1998 reflected
transfers of chicken and its materials to the international producers as sales
at cost. The effect of the change in acccounting method for the quarter ended
December 31, 1998, was a decrease of sales and cost of sales of approximately
$2,500,000. The statement of income for the three months ended December 31, 1997
has not been restated to reflect the new method of accounting. There was no
material effect in the net income for the quarter ended December 31, 1998.
NOTE 8 - LITIGATION
Pipasa is a defendant in a lawsuit brought in Costa Rica in which it was served
with prejudgment liens. Pipasa substituted collateral for these liens with the
approval of the court, which approval is currently being appealed. Pipasa has
not yet been served with the Complaint in the case and therefore, cannot
ascertain the basis of the claim or the relief sought, but it believes the
lawsuit is without merit and intends to assert a vigorous defense. At the
present time, neither the Company nor Pipasa can evaluate the potential impact
of this lawsuit on the financial results of the Company.
No legal proceedings of a material nature to which the Company is a party were
pending during the first quarter of fiscal year 1999, nor as of the date of this
filing, and the Company knows of no legal
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RICA FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
proceedings of a material nature pending or threatened or judgments entered
against any director nor officer of the Company in his capacity as such.
The Company is involved in various other claims and legal actions arising in the
ordinary course of business. In the opinion of Management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position, results of operations or liquidity.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPANY OVERVIEW.
The Company's operations are largely conducted through Corporacion Pipasa, S.A.
("Pipasa") and Corporacion As de Oros, S.A. and Subsidiaries ("As de Oros").
Pipasa, founded in 1969, is the largest poultry company in Costa Rica with
approximately a 50% market share of the chicken meat market in Costa Rica. The
main activities of Pipasa are the production and sale of broiler chickens (whole
chickens), poultry meat, processed chicken products, commercial eggs and
premixed feed and concentrate for livestock and domestic animals. Pipasa has
been in the poultry business for more than 29 years with more than 13 years of
experience in exports. Pipasa owns 41 urban and rural outlets throughout Costa
Rica. Today, Pipasa enjoys a vertically-integrated operation, which begins with
the fertilized egg and ends with the preparation and distribution of fresh whole
chickens, fast-frozen and cooked chicken patties, and sausages.
As de Oros, founded in 1954, is Costa Rica's second largest poultry producer,
comprising approximately 20% of the country's poultry market. As de Oros
operates 13 urban and 4 rural outlets throughout Costa Rica. In addition to the
production and marketing of poultry and poultry by-products, As de Oros is one
of the leaders in the Costa Rican animal feed market with a 21% market share. As
de Oros also owns a chain of 36 fried chicken restaurants in Costa Rica called
"Restaurantes As de Oros."
The Company's operating subsidiaries, are the largest poultry companies in Costa
Rica with approximately 70% market share of the chicken meat market. The main
activities of Rica Foods, Inc. subsidiaries are the production and sales of
broiler chickens, poultry meat, processed chicken products, commercial eggs, and
premixed feed and concentrate for livestock and domestic animals.
The Company's subsidiaries own 58 urban and rural outlets throughout Costa Rica,
two modern processing plants and an animal feed plant. The combined operation of
the subsidiaries permitted Rica Foods, Inc. to obtain advantages of their
similar operations and achieve certain benefits such as plant efficiencies and
specialization.
Although Management believes that the disclosures are adequate to make the
information presented not misleading, these consolidated condensed financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's latest Form 10K for the
fiscal year ended September 30, 1998.
YEAR 2000 READINESS
The Year 2000 issue is the result of computer programs and other business system
being written using two digits rather than four to represent the year. Many of
the time sensitive applications and business systems of the Company and its
business partners may recognize a date using "00" as the year 1900 rather than
the year 2000, which could result in system failure or disruption of operations.
Although the Year 2000 problem will impact the Company and its business
partners, a preliminary assessment of the Year 2000 exposure has been made by
the Company and, primarily because the Company's major management information
systems were developed with a Year 2000 certified application, the Company
believes it will be able to achieve Year 2000 readiness for its internal systems
by mid-fiscal 1999. The Company has also developed a plan of communication with
significant business partners to obtain appropriate assurances that the
Company's operations are not
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disrupted through these relationships and that the Year 2000 issues are resolved
in a timely manner. The Company believes that it will satisfactorily resolve all
significant Year 2000 problems and that the related costs will not be material.
However, estimates of Year 2000 related costs are based on numerous assumptions,
including the continued availability of certain resources, the ability to
acquire accurate information regarding third party suppliers, and the ability to
correct all relevant applications and third party modification plans. There is
no guarantee that the estimates will be achieved and actual costs could differ
materially from those anticipated. Moreover, the failure of a major vendor's
systems to operate properly with respect to the Year 2000 problem on a timely
basis or a Year 2000 conversion that is incompatible with the Company's systems
could have a material adverse effect on the Company's business, financial
condition and results of operations.
YEAR 2000 ISSUE
Information Systems and Technology
Based on the analysis of the Company's subsidiaries, the following critical
applications in As de Oros' systems areas are the focus of the Company's Year
2000 compliance efforts: operational budget, statistics, accounts receivable,
animal feed billing, sales, orders, and dispatch. The Company has undergone
significant strategic upgrades in its application systems in order to improve
business processes. Merchandising, production planning, and Financial systems
were selected for improved business functionality and are vendor certified as
Year 2000 compliant. The Human Resources and Financials systems were implemented
during 1996. All critical applications will be tested to ensure the asserted
compliance. Additionally, the hardware and communications infrastructure has
been inventoried, assessed, and, where necessary, is currently being upgraded
and tested. The remediation phase is expected to be complete by mid 1999.
Testing is being performed concurrently with remediation activities and final
testing is expected to be substantially complete in the same timeframe.
The Company's operations are dependent on the Year 2000 readiness of third
parties. The Company relies on third-party suppliers for infrastructure elements
such as telephone services, electric power, water, and banking facilities, as
well as merchandise suppliers.
The vendor relations area of the project refers to the Year 2000 status
evaluation of key merchandise and service vendors. As part of the Year 2000
initiative, merchandise and service vendors have been surveyed to determine
their readiness and the Company is in the process of obtaining or negotiating to
obtain appropriate assurances from these vendors. In addition, because the
Company has a select group of merchandise vendors, the Company will conduct more
in depth assessments of certain of these mission critical vendors to further
assess such vendor's progress. Where necessary, contingency plans will be
developed to be used in the event of supplier delivery delay or failure.
Although the Company has not been put on notice that any known third party's
problem will not be resolved, the Company has limited information and no
assurance of additional information concerning the Year 2000 readiness of third
parties. The resulting risks of the Company's business are very difficult to
assess; however, the inability to obtain merchandise from one or more key
vendors on a timely basis could have material adverse effect on the Company's
results of operations.
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The Company is developing contingency plans and identifying what actions would
be required if a critical system, service provider, or merchandise were not Year
2000 compliant. The company expects these plans to be finalized by mid 1999.
To date, the Company expects to spend approximately $500,000 to $750,000 to
complete the project which amounts will be funded through operating cash flows
or external financing. Operating costs related to Year 2000 compliance projects
will be incurred over several quarters and will be expensed as incurred. Costs
associated with business system solutions for improved business processes are
not included in these amounts since they will not have a material adverse effect
on the Company's financial condition or operating results. The costs of the
project and the date on which the Company plans to complete the work are based
on Management's best estimates, which were derived from numerous assumptions
about future events, including the availability of certain resources, third
party compliance information, and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results could differ
materially from those plans. Specific factors that might cause material
differences include, but are not limited to, the availability and cost of
trained personnel, the ability to identify and correct all relevant
technologies, and the ability to acquire accurate information regarding third
party suppliers. Additionally, Year 2000 expenditures vary significantly in
project phases and vary depending on the remediation method used, and past
expenditures in relation to total estimated costs should not be considered or
relied on as a basis for estimating progress to completion for any element of
the Year 2000 project.
The Company presently believes, that upon remediation of its business software
applications, hardware, and other equipment with embedded technology, the Year
2000 issue will not present a materially adverse risk to the Company's future
consolidated results of operations, liquidity, and capital resources. However,
if such remediation is not completed in a timely manner or the level of timely
compliance by key suppliers or vendors is not sufficient, the Year 2000 issue
could have a material impact on the Company's operations including, but not
limited to, failure to or delays in delivery of merchandise resulting in loss of
the Company's business.
ENVIRONMENTAL COMPLIANCE:
The Company is not subject to any material costs for compliance with any
environmental laws in any jurisdiction in which it operates. However, in the
future, it could become subject to material costs to comply with environmental
laws in jurisdictions in which it does not now do business. At the present time,
the Company cannot assess the potential impact of any such potential
environmental regulation. The Company has implemented sustainable environmental
policies over the past several years such as reforesting approximately 500
hectares with hardwood trees, processing and recycling its wastes, producing
organic fertilizer, and building oxidation lagoons and sewage treatment plants.
GOVERNMENT REGULATION:
The poultry hatcheries and processing plants are subject to regulation under
Costa Rican law regarding cleanliness and health standards. Exports of Pipasa
poultry products are regulated in the countries in which Pipasa makes sales.
Such regulation is not considered to be a burden on Pipasa or to have a material
effect on Pipasa's ability to make a profit. Otherwise, Pipasa is not subject to
any material governmental regulation or approvals.
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RESULTS OF OPERATIONS
The following table presents information related to the Company's operation:
QUARTER ENDED
-------------
Dec 31, 1997 Dec 31, 1998
------------ ------------
Net Sales $20,826,028 $31,651,795
Income from operations 1,887,810 4,699,831
The following table presents certain items as a percentage of net sales for the
period indicated:
QUARTER ENDED
-------------
Dec 31, 1997 Dec 31, 1998
------------ ------------
Net sales 100.00% 100.00%
Cost of sales 74.95% 63.21%
Gross profit 25.05% 36.79%
Sales expenses 8.93% 13.42%
General and administrative 7.05% 8.24%
Goodwill amortization 0.00% 0.29%
Income from operations 9.06% 14.85%
Interest expense 3.03% 3.42%
Income before income taxes and
minority interest 6.74% 11.33%
Net income 3.17% 5.16%
Net income applicable to
common stock 2.98% 4.74%
Basic earnings per share $ 0.20 $ 0.09
Prior to the acquisition of As de Oros, there were transactions between As de
Oros and Pipasa, consisting of sales of raw materials, and finished products.
These transactions have been eliminated for consolidation purposes.
NET SALES:
General. Net sales generated by the Company's operations for the quarters ended
December 31, 1997 and 1998 were $20.82 million and $31.65 million respectively,
an increase of $10.83 million or 52%. The following table shows sales amounts by
segment for each quarter:
<TABLE>
<CAPTION>
RICA FOODS, INC. AND SUBSIDIARIES
Three months ended December 31,
(thousands) Increase Increase
1998 1997 (decrease) (decrease)
---------------------------------------- ---------------
---------------------------------------------------------
Segment Pipasa As de Oros Consolidated Consolidated Consolidated Pipasa
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Animal feed $ 2.39 3.49 5.88 1.66 253.35% 43.53%
By-products 2.13 0.44 2.57 2.60 -0.92% -17.92%
Exports 1.19 0.00 1.19 0.54 121.90% 121.58%
Other 0.12 0.12 0.24 2.82 -91.64% -95.80%
Broiler 14.73 4.19 18.93 13.21 43.28% 11.54%
Restaurants - 2.85 2.85 -
----------------------------------------------------------------------------------------------------
TOTAL $20.56 $11.09 $31.65 $20.83 51.99% -1.27%
====================================================================================================
</TABLE>
-14-
<PAGE>
Animal Feed: Sales for commercial animal feed were $5.88 million and $1.66
million for the quarters ended December 31, 1998 and 1997, respectively. This
represents an increase of 253.35%. This sales increase is mainly explained by a
180% increase in tonnage, combined with a 73% effect of sales mix. Animal feed
sales is As de Oros' core business, and these subsidiary's contribution to sales
increase in this segment has been significant. Additionally, the Company's sales
of pet food has increased due to a more aggressive sales strategy.
By-products: Total sales for this segment were of $2.60 million and $2.57
million for the three months ended December 31, 1997 and 1998, respectively. The
0.92% decrease is mainly due to a 25.15% volume increase offset by exchange rate
variation and price maintenance, due to certain market characteristics, such as
competition, promotions that are necessary to acquire presence with important
clients such as supermarket chains. In general, there has been a strong price
pressure and a redistribution of sales mix toward lower price products.
Exports: The Company's exports were $0.54 million and $1.19 million during the
quarters ended December 31, 1997 and 1998 respectively, an increase of 121.90%.
This increase in exports was due to the combined result of: A 58% volume
increase in chicken by - products exports, 110% increase in broiler chicken
exports, that is explained by an slight increase in sales to Honduras and an
extraordinary export that was made to Hong Kong in the months of October and
November 1998 and a 228% increase of pet food exports in the animal feed
segment. Pet food was introduced in the Central American market at the end of
fiscal year 1997, and still presents important increase rates due to strong
introduction policies.
Others: Sales of Others, which include animal feed and baby chicks to integrated
producers, commercial eggs, raw materials and baby chicks to third parties, were
$2.82 million and $0.24 million during the three months ended December 31, 1997
and 1998 respectively, a 91.64% decrease. This decrease is mainly explained by
the variation in the way the transactions with integrated producers are being
registered (or were registered). At present, transactions are registered as an
inventory transfer, opposite to a regular sale. Additionally, there is an
important reduction in Sales of Others, due to the elimination of intercompany
sales. Prior to the acquisition of As de Oros, there were transactions between
Pipasa, and As de Oros, consisting of sales of raw materials, and finished
products. These transactions have been eliminated in the consolidated financial
statements.
Broiler Chicken: Sales of broiler chicken were $13.21 million and $14.73 million
for the three months ended December 31, 1997 and 1998 respectively. The increase
of 43.28% primarily is due to a 34.63% increase in tonnage combined with the net
effect of price increase and sales mix.
Restaurants: The restaurant segment had sales of $2.85 million during the three
months ended December 31, 1998. Comparison with same period of fiscal year of
1997 is not possible, due to the fact that the Company did not operate this
segment before the acquisition of As de Oros. Due to the holiday season in Costa
Rica, the quarters ended December 31, correspond to this segment's highest sales
season of each year.
-15-
<PAGE>
The following table shows the Company's sales distribution, for the quarters
ended December 31, 1997 and 1998 respectively:
RICA FOODS, INC. and Subsidiaries
Sales Distribution
For the three months ended
December 31,
------------
1998 1997
---- ----
Animal feed 18.57% 8.00%
By products 8.12% 12.46%
Exports 3.76% 2.58%
Others 0.74% 13.53%
Broiler chicken 59.79% 63.43%
Restaurants 9.00% 0.00%
--------------------------------------------------------------------
TOTAL 100.00% 100.00%
--------------------------------------------------------------------
COST OF SALES:
General. Cost of sales was $15.61 million and $20.00 million for the quarters
ended December 31, 1997 and 1998 respectively, a 28.17% increase. This increase
in cost of sales was due primarily to volume increase resulting from the
acquisition of the new subsidiary offset by the effect of lower cost of raw
materials, such as imported grains and the advantage of higher efficiency due to
increase in volume. As a percentage of sales, cost of sales was 74.9% for the
three months ended December 31, 1997 compared to 63.2% in the same period of
1998, for a net decrease of 11.7%.
This important reduction in cost of sales as a percentage on net sales, is the
combined result of a series of factors that improved the Company's results
during the quarter ended December 30, 1998. Among these factors, are:
o Average prices for imported grains decreased during the first quarter
of fiscal 1998 when compared to average prices in the same period of
fiscal 1997. Corn and soybean meal represent a high percentage of the
regular animal feed diet formulation.
o Higher volume, with the consequent advantage of higher capacity
utilization.
o The Company obtained the expected technical yields in comparison with
the results obtained during the same period of fiscal year 1998. The
harsh effects of results of the El Nino Weather Phenomenon during the
last year have been recuperated. This weather phenomenon affected cost
of sales in several ways: high temperatures decreased technical
yields, witch caused low reproduction and incubation rates, high
moralities and low weight gains. The combination of these low
technical yields obligated the Company to import fertile eggs and
chicken parts to cover the demand, at a high cost.
o Successful use of a standard diet formulation during the three months
ended December 30, 1998, in comparison with the high-energy diet that
was used during October 1997 due to low weight gain.
-16-
<PAGE>
The following table presents cost of sales information by segment, with the
correspondent increase percentage and impact of volume (In millions of dollars):
COST OF SALES BY SEGMENTS
-------------------------
Quarter ended December 31,
--------------------------
Due to
volume
SEGMENT 1998 1997 % variations
---- ---- - ----------
Animal feed 4.20 1.33 215.94% 180.02%
Chicken by products 1.50 1.32 13.64% 25.15%
Exports 0.67 0.39 70.54% 71.18%
Others 0.25 2.67 (90.73%) --
Broiler chicken 11.86 $9.91 19.72% 34.63%
Restaurants 1.63 - -- --
GROSS PROFIT:
Gross profit for the three months ended December 31, 1997 and 1998 was $5,2
million and $11.6 million respectively, an increase of $6.4 million or 123%. As
a percentage of net sales, gross profit was 25.05% and 36.79%, respectively for
the first quarters of fiscal 1997 and 1998, due to the issues discussed
above. The following table shows gross profit for each segment for the quarters
ended December 31, 1997 and 1998:
Gross Profit Margin
-------------------
Quarter ended December 31,
--------------------------
1998 1997 Variance
---- ---- --------
Animal feed 28.53% 20.07% 8.45%
By products 41.58% 49.25% -7.67%
Exports 44.08% 27.93% 16.15%
Others -5.11% 5.43% -10.54%
Broiler chicken 37.32% 24.98% 12.33%
Restaurants 46.49% - 46.49%
TOTAL 36.80% 25.04% 11.75%
OPERATING EXPENSES
Selling. Selling expenses increased by $2.3 million or 128% during the first
quarter of fiscal 1999, compared with the same period of fiscal year 1998. This
increase is due to the consolidation of a new subsidiary As de Oros and the
Restaurants segment. As a percentage of net sales, selling expenses were of
13.42% and 8.93% for the three months ended December 30, 1998 and 1997
respectively.
General and Administrative. General and Administrative expenses were $2.6
million and $1.4 million for the quarters ended December 31, 1998 and 1997
respectively, an increase of $1.1 million or 77.6%. As a percentage of net
sales, this item decreased from 7.05% during the first quarter of fiscal 1998 to
8.24% during the same period of fiscal 1999. This increase is mainly due to the
incorporation of a new subsidiary.
-17-
<PAGE>
OTHER EXPENSES (INCOME)
Other income and expenses increased by $0.63 million or 130% when comparing the
three months ended December 31, 1998 and 1997. Interest expense was $1.08
million and $0.6 million during the three months ended December 30, 1997 and
1998 respectively. This increase is mainly due to the consolidation of As de
Oros. Exchange rate losses (or gains) increased $0.44 million when compared to
the first quarter of fiscal year 1998, mainly due to restructuring of long term
debt to U.S. dollar currency. Along with these increases, revenues from
miscellaneous net increased $0.25 million or 361%.
FINANCIAL CONDITION
OPERATING ACTIVITIES:
As of December 31, 1998, working capital was $7.6 million compared to working
capital at the end of fiscal year 1998, $4.8 million for a $2.8 million
increase. The current ratios were 1.22, 1.34, as of September 30, 1998, and
December 31, 1998 respectively.
Cash provided by operating activities was $4.8 million during the three months
ended December 31, 1998 as compared to ($0.97) million used during the same
period of fiscal year 1997. This increase is mainly explained by an increase in
net income and accounts payable mainly offset by a decrease in notes and
accounts receivable.
INVESTMENT ACTIVITIES:
During the three months under analysis, the Company made short term investments
and the Company invested $0.80 million in property, plant and equipment,
compared to $0.64 million during the same period of fiscal year 1998. Management
expects to invest during the present fiscal year in improving production
equipment and to acquire an enterprise resource planning software to meet the
Company's increased need of obtaining immediate and accurate information and
process improvement.
FINANCING ACTIVITIES:
As previously mentioned in the investing activities, during 1998 the Company
used cash in capital expenditures which are related to the normal investing
activities of the Company. Indebtedness decreased from 72.34% as of September
30, 1998, to 69.42% as of December 31, 1998 mainly due to a reduction in
long-term debt and loans combined with an improvement in the Company's cash and
cash equivalents, notes and accounts receivable. Management re-financed the
Company's debt during fiscal year 1998 and improved its liquidity position.
Liabilities increase is mainly a result of an increase of accounts payable. Cash
used by financing activities was $2.06 million during the three months ended
December 31, 1998 compated to $2.1 million provided by financing activities for
the three months ended December 31, 1997. The decrease in 1998 is mainly due to
an increase in debt amortization and decrease of notes payable during the three
months ended December 31, 1998, compared to a significant increase in notes
payable during the same period of fiscal year 1998.
-18-
<PAGE>
Leverage ratio: Leverage as of September 30, 1997 was 4.01 compared to 3.61 as
of December 31, 1998. This ratio decreased due to the combined effect of stable
liabilities and the improvement of net income.
Pertaining to long-term financing the Company decreased its new loans by $0.13
million during the three months ended December 31, 1998, compared to
approximately $0.48 million new loans as of December 31, 1997.
Future payments of the Private Placement, are as follows:
YEAR
January 15, 2001 $ 4,000,000
January 15, 2002 4,000,000
January 15, 2003 4,000,000
January 15, 2004 4,000,000
January 15, 2005 4,000,000
Interest is payable each six months and started on July 14, 1998.
Management expects to continue to finance operations and capital expenditures
with its normal operating activities and external sources, and that there will
be sufficient resources available to meet the Company's cash requirements
through the rest of the fiscal year.
CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF
SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company and its representatives may from time to time make written or oral
forward-looking statements with respect to their current views and estimates of
future economic circumstances, industry conditions, company performance and
financial results. These forward-looking statements are subject to a number of
factors and uncertainties, which could cause the Company's actual results and
experiences to differ materially from the anticipated results and expectations,
expressed in such forward-looking statements. The Company cautions readers not
to place undue reliance on any forward-looking statements, which speak only as
of the date made. Among the factors that may affect the operating results of the
Company are the following: (i) fluctuations in the cost and availability of raw
materials, such as feed grain costs in relation to historical levels; (ii)
market conditions for finished products, including the supply and pricing of
alternative proteins, all of which may impact the Company's pricing power; (iii)
risks associated with leverage, including cost increases due to rising interest
rates; (iv) changes in regulations and laws, including changes in accounting
standards, environmental laws, occupational, health and safety; currency
fluctuations; and (v) the effect of, or changes in, general economic conditions.
This Management Discussion and Analysis of Financial Condition and Results of
Operations may include certain forward-looking statements, within the meaning of
Section 27E of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, including (without limitations)
statements with respect to anticipated future operations and financial
performance, growth and acquisition opportunity and other similar forecasts and
statements of expectation. Words such as expects, anticipates, intends, plans,
believes, seeks, estimates and should and various of those words and similar
expressions are intended to identify these forward-looking statements.
Forward-looking statements made by the Company
-19-
<PAGE>
and its management are based on estimates, projections, beliefs and assumptions
of management at the time of such statements and are not guarantees of future
performance. The Company disclaims any obligations to update or review any
forward-looking statements based on occurrence of future events, the receipt of
new information or otherwise.
Actual future performance outcomes and results may differ materially from those
expressed in forward-looking statements made by the Company and its management
as a result a number of risks, uncertainties and assumptions. Representatives
examples of these factors include (without limitation) general industrial and
economic conditions; cost of capital and capital requirements; shifts in
customer demands; changes in the continued availability of financial amounts and
at the terms necessary to support the Company's future business.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item is located in this report under the heading
"Exchange Rate Risk," "Foreign Competition," "Commodity Risk Management," and
"Exchange Rate Risk Management."
Exchange Rate Risk
The Company makes U.S. dollar payments for its raw materials and bank
facilities. This U.S. dollar expense component is not unique to the Company, as
all poultry producers in Central America must rely on U.S. companies for raw
materials such as corn, soybean meal and reproduction birds. Given its U.S.
dollar exposure, the Company actively manages its exchange rate risk. It uses a
financial model to determine the best strategy to mitigate against the
devaluation of the currency of Costa Rica, the colon, against the U.S. dollar.
The Company systematically increases its annual sales prices by a rate that is
consistent with the colon devaluation against the U.S. dollar. For the fiscal
years ended September 30, 1997 and 1998, the national devaluation rate was 11.6%
and 10.6%, respectively, and correspondingly, the Company increased its prices
12.6% and 13.03%, respectively. For the first quarter of the fiscal year, the
national devaluation was 4.24 % and, correspondingly, the Company increased its
prices approximately 7%. Management believes that the Company's strong market
will allow for this type of price increase without sacrificing demand and market
share. The Company has successfully passed along such increases for the last
five years. Management plans to increase its export operations in order to
increase its U.S. dollar revenues, as all export sales are made in U.S. dollars.
For the fiscal year ended September 30, 1998, exports increased 16.28% (in U.S.
dollars) compared to exports for the same period in 1997.
Foreign Competition
The Company currently does not have any significant domestic competition.
The Company's local market share, however, could potentially be threatened by
foreign competition. The Company believes that this likelihood is low for
several reasons. First, the Company has a strong reputation for producing high
quality products at a reasonable price. Secondly, Costa Ricans prefer fresh
chicken to frozen chicken. Due to transportation constraints and distance,
foreign competitors would have to sell frozen chicken if they were to sell it in
Costa Rica.
The Agriculture Ministry in Costa Rica monitors all chicken entering the
country, as it wants to prevent the spread of Newcastle Disease in Costa Rica.
The Costa Rican market currently is also protected by tariff agreements. Chicken
importers must pay duties as dictated by the General Agreement on Trade and
Tariffs ("GATT"). These agreements were reached at the Uruguay Round of the GATT
-20-
<PAGE>
negotiations and are due to expire in 2004. They provide that only 942 metric
tons ("MT") of whole chicken parts or chicken derivatives can be imported to
Costa Rica from countries outside of the Central American Common Market. This
quota is taxed 34% and amounts in excess of this quota are subject to a 170%
tariff. This tax rate was based on the additional cost of producing poultry in
Costa Rica compared to cost of production in the U.S.
Commodity Risk Management
The Company imports all of its corn, the primary ingredient in chicken
feed, from the United States. Movements in the price of corn can significantly
affect the Company's gross profit margin. The Company's greatest cost components
are corn and soybean meal, which are imported from the United States. The
Company purchases approximately $l.6 million of corn monthly through the Chicago
Board of Trade ("CBOT"). Corn and soybean meal purchases represent approximately
35% of total cost of goods sold and 70% of raw material costs. The price of corn
and soybean meal, like most grain commodities, is fairly volatile and requires
consistent and daily hedging in order to minimize the effect of price increases
on the Company's profit margin.
The Company has been actively hedging its exposure to corn since 1991. The
Company evaluates, on a daily basis, the price of corn and soybean meal. All
hedging activities are supervised by the financial department, whose employees
have been trained at the CBOT and attend regular seminars on commodities hedging
strategies.
Hedging strategies must be approved by the Company's hedging committee. The
committee consists of two analysts, the Financial Director, Financial Manager
and General Vice President. The committee meets at least once a month to
evaluate the Company's exposure in corn and soybean meal. The Company's strategy
is to hedge against price increases in corn and soybean meal. The Company is not
involved in speculative trading. Contracts range from one month to six months.
The Company will buy directly from the spot market if market conditions are
favorable, but as a general rule, it purchases at least 50% of its corn through
contracts. The Company's hedging strategy is set in its yearly budget, which
determines how much corn and soybean meal it will need and the price it must pay
in order to meet budget forecasts. The Company uses an internal pricing model to
prepare sensitivity models. The Company bases its target prices on the worst
case price assumptions (i.e. high corn prices). The prices paid by the Company
for corn were 4.72% below its budgeted prices as of September, 1998. Commodity
prices for fiscal 1998 have been below or equal to budgeted prices.
The Company has a $500,000 credit line with Futures U.S.A., Inc. ("FIMAT")
and draws upon this credit line in order to cover its initial margin deposit.
The interest rate paid on this line of credit is less than 10% on drawn amounts.
The Company is in constant contact with its brokers (at least three to four
times a day) and receives advice from the brokers' corn experts.
The Company's monthly soybean meal purchases total approximately $900,000.
The hedging strategies for soybean meal purchases are identical to that of corn
purchases, except that the Company purchases its soybean meal through a Costa
Rican company, Industrial de Oleaginosas, S.A. ("Inolasa"), in which the Company
holds a 10% equity ownership. In Costa Rica, there is a 5% tax for soybean meal
imports, which is not levied if purchased through Inolasa. If for any reason
Inolasa cannot deliver the soybean meal to the Company, the Company can buy its
soybean meal directly from the CBOT. Thus far, the Company has never had to go
directly to the CBOT to purchase soybean meal.
-21-
<PAGE>
Exchange Rate Risk Management
In addition to movements in the price of corn and soybean meal, the Company
has exposure to fluctuations in exchange rates, as payments for corn, soybean
meal, reproduction birds and bank facilities are in U.S. dollars. The Company
has an internal Economic Studies Division whose sole function is to follow
economic and industrial trends that influence foreign exchange levels.
-22-
<PAGE>
This division examines areas such as poultry gross national product, gross
national product ("GNP"), inflation, devaluation, export and import growth
rates, growth in real wages, unemployment and population rates.
Raw material purchases have an average payment period of 120 days, hence
exchange rate risk is for four months. During this time, accounts are paid and
costs are updated to reflect new exchange rates. In the event of a severe
devaluation of the colon, or increases in international prices, the Company can
increase sales prices to recuperate its foreign exchange losses. In addition,
all of the Company's exports are denominated in U.S. dollars (even exports
within Central America). Management expects that the strategy to increase
exports will increase the Company's U.S. dollar revenues. The Company uses a
model to determine the maximum devaluation possible before it considers taking
on U.S.-based debt. In effect, the Company borrows in U.S. dollars when
economically proven to be less expensive than borrowing in colones.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Litigation: Pipasa is a defendant in a lawsuit brought in Costa Rica in which it
was served with prejudgment liens. Pipasa substituted collateral for these liens
with the approval of the court, which approval is currently being appealed.
Pipasa has not yet been served with the Complaint in the case and therefore,
cannot ascertain the basis of the claim or the relief sought, but it believes
the lawsuit is without merit and intends to assert a vigorous defense. At the
time, neither the Company nor Pipasa can evaluate the potential impact of this
lawsuit on the financial results of the Company.
No legal proceedings of a material nature to which the Company is a party were
pending during the first quarter of fiscal year 1999, nor as of the date of this
filing, and the Company knows of no legal proceedings of a material nature
pending or threatened or judgments entered against any director nor officer of
the Company in his capacity as such.
The Company is involved in various other claims and legal actions arising in the
ordinary course of business. In the opinion of Management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position, results of operations or liquidity.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company effectuated a 1 for 3 reverse stock split (the "Split") of the
Company's common stock to be effective on December 29, 1998. In connection with
the Split, new certificates will be issued and those shareholders owning more
than five shares of common stock, post Split, shall receive one full share of
each fraction of a share to which they would be entitled. Each shareholder
holding less than five shares of common stock, post Split, shall receive the
payment for the fractional share held by them based on the mean of bad and ask
prices on the effective date of the Split.
-23-
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 4, 1998, the Company sent to its stockholders of record on November
29, 1998, a Consent solicitation Statement soliciting written consent for the
acquisitions of the remaining interest in Pipasa and As de Oros, respectively
the Final Pipasa Agreement and the Final As de Oros Agreement. As of December
28, 1998 (the "Action Date") holders of more than a majority of the Company's
issued and outstanding shares consented to these transactions. Consequently, the
transactions have been approved by the consent of the Company's shareholders
and, upon receipt by the Company of the fairness opinions with respect to the
transactions, which has not been yet received by the Company, but expects to be
received during the second quarter of fiscal year 1999. The final tabulation of
consents, as of the Action Date, was 14,368,386 consents for, 335 consents
against, and 5,441 consents abstained, for the acquisition of Pipasa, and
14,368,384 consents for, 337 consents against, and 5,441 consents abstained, for
the acquisition of As de Oros.
ITEM 5. OTHER INFORMATION
Effective on December 29, 1998, the Company amended its Articles of
Incorporation by filing Articles of Amendment with the Secretary of State of the
State of Nevada, changing the number of authorized shares of the Corporation
shall be 20,000,000 shares of common stock, with a par value a $ 0.001, and
1,000,000 shares of preferred stock with a par value of $ 0.001, In connection
with the Split, new certificates will be issued and those shareholders owning
more than five shares of common stock, post Split, shall receive one full share
of each fraction of a share to which they would be entitled. Each shareholder
holding less than five shares of common stock, post Split, shall receive the
payment for the fractional share held by them based on the mean of bid and ask
prices on the effective date of the Split.
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K
a) Exhibit No. 27 - Financial Data Schedule (filed herewith).
b) Reports on Form 8-K: One report on Form 8-K was filed on October 13, 1998 and
amended on November 18, 1998.
-24-
<PAGE>
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant that duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
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 dates indicated.
RICA FOODS, INC.
Dated: February 19, 1999 ------------------------------
Calixto Chaves
Chief Executive Officer
Dated: February 19, 1999 ------------------------------
Randall Piedra
Chief Financial Officer
Dated: February 19, 1999 ------------------------------
Monica Chaves
Secretary
-25-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RICA FOODS, INC. FOR THE QUARTER ENDED DECEMBER 31,
1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> DEC-31-1998
<CASH> 6,010,631
<SECURITIES> 40,184
<RECEIVABLES> 11,283,675
<ALLOWANCES> 835,148
<INVENTORY> 12,240,035
<CURRENT-ASSETS> 30,039,792
<PP&E> 36,963,948
<DEPRECIATION> 9,062,252
<TOTAL-ASSETS> 66,128,967
<CURRENT-LIABILITIES> 22,388,097
<BONDS> 0
0
4,323,025
<COMMON> 7,419
<OTHER-SE> 8,379,189
<TOTAL-LIABILITY-AND-EQUITY> 66,128,967
<SALES> 31,651,795
<TOTAL-REVENUES> 31,651,795
<CGS> 20,006,822
<TOTAL-COSTS> 20,006,822
<OTHER-EXPENSES> 6,945,142
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,080,919
<INCOME-PRETAX> 3,585,093
<INCOME-TAX> 338,288
<INCOME-CONTINUING> 1,634,585
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,634,585
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
