<PAGE>
UNITED STATES
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 March 31, 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 No. 0-18222
Rica Foods, Inc.
---------------------------------------------------
(Exact name of Company as specified in its charter)
Nevada 87-0432572
------ -----------
(State or other jurisdiction (IRS 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
(Company's telephone number including area code)
Indicate by check mark whether the Company (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 Company 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 Company's common stock, par value $0.001 per
share, as of May 15, 2000 was 12,847,921 shares.
<PAGE>
RICA FOODS, INC. AND SUBSIDIARIES
INDEX
Page
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Condensed Balance Sheets
as of March 31, 2000 (Unaudited) and
September 30, 1999................................ 3
Consolidated Condensed Statements of Income
for the three and six months ended March 31,
2000 and 1999 (Unaudited)......................... 4
Consolidated Condensed Statements of Cash Flows
for the six months ended March 31, 2000
and 1999 (Unaudited).............................. 5
Notes to Consolidated Condensed Financial Statements
(Unaudited)....................................... 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 14
ITEM 3. Quantitative and Qualitative Disclosures
about Market Risk................................. 23
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings................................... 24
ITEM 2. Changes in Securities and Use of Proceeds........... 25
ITEM 6. Exhibits and Reports................................ 25
-2-
<PAGE>
RICA FOODS, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, September 30,
--------- -------------
2000 1999
---- ----
(Unaudited)
Assets
------
Current assets:
Cash and cash equivalents $ 2,791,481 $ 3,913,168
Short-term investments 34,451 32,747
Notes and accounts receivable, net 10,230,720 9,603,282
Due from related parties 2,937,077 2,954,579
Inventories, net 14,105,587 13,896,517
Prepaid expenses 819,765 366,221
------------ ------------
Total current assets 30,919,081 30,766,514
------------ ------------
Property, plant and equipment, net 42,336,704 31,923,486
Long-term notes receivable-trade 198,833 114,346
Long-term investment 4,082,118 4,260,663
Other assets 2,005,654 1,875,888
Cost in excess of net assets of acquired businesses 4,237,688 1,382,226
------------ ------------
Total assets $ 83,780,078 $ 70,323,123
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 12,371,592 $ 12,084,992
Accrued expenses 3,144,450 3,604,397
Notes payable 10,746,071 7,582,890
Current installments of long-term debt 6,274,169 1,182,184
Due to stockholders 75,408 75,108
------------ ------------
Total current liabilities 32,611,690 24,529,571
------------ ------------
Long-term debt, net of current portion 18,812,821 21,443,589
Due to stockholders 16,116 16,715
Deferred income tax liability 3,074,746 1,764,735
------------ ------------
Total liabilities 54,515,373 47,754,610
------------ ------------
Minority interest 1,330,862 9,468,206
Stockholders' equity:
Common stock 12,849 7,486
Preferred stock 2,216,072 2,216,072
Additional paid-in capital 25,726,294 12,137,326
Cumulative translation adjustment (7,870,999) (6,828,500)
Retained earnings 9,188,120 6,481,305
------------ ------------
29,272,336 14,013,689
------------ ------------
Less:
Due from stockholders (1,070,099) (644,988)
Treasury stock, at cost (268,394) (268,394)
------------ ------------
Total stockholders' equity 27,933,843 13,100,307
------------ ------------
Total liabilities and stockholders' equity
$ 83,780,078 $ 70,323,123
============ ============
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
-3-
<PAGE>
RICA FOODS, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Income
Unaudited
---------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three months ended Six months ended
------------------ ----------------
March, 31, March, 31,
---------- ----------
2000 1999 2000 1999
---- ---- ---- ----
Net sales $ 30,309,985 $ 29,908,477 $ 63,426,497 $ 61,560,272
Cost of sales 20,427,549 19,363,821 41,554,015 39,370,643
------------ ------------ ------------ ------------
Gross profit 9,882,436 10,544,656 21,872,482 22,189,629
------------ ------------ ------------ ------------
Operating expenses
Selling 4,678,825 4,149,397 9,295,025 8,215,152
General and administrative 3,412,417 2,877,716 6,592,003 5,486,158
Amortization of cost in excess
of net assets of acquired
business
266,147 106,185 421,533 196,667
------------ ------------ ------------ ------------
Total operating expenses 8,357,389 7,133,298 16,308,561 13,897,977
Income from operations 1,525,047 3,411,358 5,563,921 8,291,652
Other expenses (Income)
Interest expense 963,674 677,023 1,897,339 1,757,942
Interest income (168,038) (189,122) (346,499) (370,492)
Exchange losses 322,516 432,017 695,075 966,542
Miscellaneous, net (195,065) 21,017 (401,282) (117,856)
------------ ------------ ------------ ------------
Other expenses, net 923,087 940,935 1,844,633 2,236,136
------------ ------------ ------------ ------------
Income before income taxes and
minority interest 601,960 2,470,423 3,719,288 6,055,516
Income taxes 12,771 463,285 406,168 801,573
------------ ------------ ------------ ------------
Income before minority interest 589,189 2,007,138 3,313,120 5,253,943
Minority interest 22,066 987,182 529,433 2,706,324
------------ ------------ ------------ ------------
Net income 567,123 1,019,956 2,783,687 2,547,619
Preferred stock dividend 34,719 40,192 94,744 121,467
------------ ------------ ------------ ------------
Net income applicable to common
stockholders $ 532,404 $ 979,764 $ 2,688,943 $ 2,426,152
============ ============ ============ ============
Earnings per share:
Basic $ 0.04 $ 0.13 $ 0.25 $ 0.33
============ ============ ============ ============
Diluted $ 0.04 $ 0.13 $ 0.25 $ 0.32
============ ============ ============ ============
Weighted average number of shares
outstanding:
Basic 12,800,297 7,419,138 10,966,660 7,418,978
========== ========== ========== ==========
Diluted 12,804,993 7,582,660 10,970,738 7,536,242
========== ========== ========== ==========
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
-4-
<PAGE>
RICA FOODS, INC. and Subsidiaries
Consolidated Condensed Statements of Cash Flows
For the six months ended March 31, 2000 and 1999
Unaudited
---------
<TABLE>
<CAPTION>
<S> <C> <C>
2000 1999
---- ----
Cash flows from operating activities:
Net income $ 2,783,687 $ 2,547,619
----------- -----------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,705,689 1,660,392
Production poultry 1,087,390 1,048,124
Amortization of cost in excess of net assets
of acquired businesses 421,533 196,667
Stock options and grants issued to employees 125,336 -
Allowance for inventory obsolescence 13,419 14,730
Amortization of software costs 98,201 71,399
Allowance for doubtful accounts 188,073 398,243
Gain on sale of productive assets (33,054) (33,719)
Deferred income tax benefit (126,064) (104,836)
Minority interest 529,433 2,706,324
Changes in operating assets and liabilities:
Notes and accounts receivable (852,605) (463,562)
Due from related parties (1,457,149) (931,505)
Inventories (1,275,132) (601,206)
Prepaid expenses (453,544) (597,094)
Accounts payable 355,649 3,803,638
Accrued expenses (459,946) (191,529)
Long-term notes receivable, trade 15,750 (105,848)
----------- -----------
Cash provided by operating activities 2,666,666 9,417,837
----------- -----------
Cash flows from investing activities:
Short-term investments (1,704) 63,938
Investment in subsidiaries (23,198) -
Additions to property, plant and equipment (8,989,941) (3,408,318)
Proceeds from sale of productive assets 223,639 121,741
Increase in other assets 195,843 133,763
----------- -----------
Cash used in investing activities (8,595,361) (3,088,876)
----------- -----------
Cash flows from financing activities:
Increase (decrease) in notes payable 3,156,411 (2,417,968)
Preferred stock cash dividends (139,949) (173,250)
Long-term financing:
New loans 2,928,433 328,843
Payments (458,222) (1,988,784)
Due to related party (389,439) (103,611)
----------- -----------
Cash provided by (used in) financing activities 5,097,234 (4,354,770)
----------- -----------
(Continued on next page)
</TABLE>
-5-
<PAGE>
RICA FOODS, INC. and Subsidiaries
Consolidated Condensed Statements of Cash Flows
For the six months ended March 31, 2000 and 1999
Unaudited
---------
(Continued)
<TABLE>
<CAPTION>
<S> <C> <C>
2000 1999
---- ----
Effect of exchange rate changes on cash and
cash equivalents (290,226) 323,508
----------- -----------
Increase (decrease) in cash and cash equivalents (1,121,687) 2,297,699
Cash and cash equivalents at beginning of period
3,913,168 3,973,017
----------- -----------
Cash and cash equivalents at end of period $ 2,791,481 $ 6,270,716
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 2,121,259 $ 1,555,584
=========== ===========
Income taxes $ 224,921 $ 95,972
=========== ===========
Supplemental schedule of non-cash financing
activities:
Acquisition of treasury stock through
financial agreement $ - $ 826,100
=========== ===========
Pipasa's preferred stock repurchased in
exchange for outstanding receivables $ 2,143,626 $ -
=========== ===========
As de Oros' preferred stock repurchased in
exchange for outstanding receivables $ 1,983,327 $ -
=========== ===========
Common stock dividends paid as preferred shares:
From Pipasa $ 2,143,626 $ 826,100
=========== ===========
From As de Oros $ 1,983,327 $ -
=========== ===========
</TABLE>
The accompanying notes to consolidated condensed financial statements are
an integral part of these statements.
-6-
<PAGE>
RICA FOODS, INC. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 1 - GENERAL
Management is responsible for the preparation of the financial statements and
related information of Rica Foods, Inc. and its 100% owned subsidiaries:
Corporacion Pipasa, S.A. and Subsidiaries ("Pipasa") and Corporacion As de Oros,
S.A. and Subsidiaries ("As de Oros") (collectively the "Company") that appear in
this Form 10-Q report. Management believes that the financial statements fairly
reflect 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 of America
("United States" or "U.S."). The accompanying interim financial statements have
been prepared in accordance with the instructions to the Quarterly Report on
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, 1999, which are
included in the Annual Report on Form 10-K. Management has included in the
Company's financial statements amounts that are based on estimates and
judgements, which it believes are reasonable under the circumstances. In the
opinion of Management, all adjustments necessary for the fair presentation of
the financial information for the interim periods reported have been made.
Results of the three and six months ended March 31, 2000 are not necessarily
indicative of the results to be expected for the entire fiscal year ending
September 30, 2000. 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 Management's
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
10-K for the fiscal year ended September 30, 1999.
NOTE 2 - Reclassifications
Certain prior period balances have been reclassified to conform to the current
year presentation.
-7-
<PAGE>
RICA FOODS, INC. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(Continued)
NOTE 3 - ACQUISITIONS
On November 22, 1999 and December 7, 1999, the Company acquired the remaining
43.62% and 40.44% minority interest of As de Oros and Pipasa, respectively, in
exchange for the issuance of 1,670,921 and 3,683,595 restricted shares of common
stock of the Company. The Company designated November 30, 1999 as the date of
acquisition for accounting purposes and as such, has consolidated 100% of
earnings for the month ended December 31, 1999 and the three months ended March
31, 2000. The acquisition of Pipasa was accounted for at the value of the
minority interest as of the acquisition date, on the basis that the owner of the
minority interest of Pipasa is a major shareholder of the Company. The
acquisition of As de Oros was accounted for under the purchase method of
accounting. The excess of the purchase price of the minority interest of As de
Oros over the fair market value of net assets acquired was approximately $3.3
million which is being amortized over 5 years. The Financial statements include
results of operations for Pipasa and As de Oros for the three and six months
ended March 31, 2000.
During October 1999, Pipasa merged with "Karpatos, S.A.," ("Karpatos"), a Costa
Rican corporation, which is in the business of converting waste material from
the slaughtering poultry plants into fertilizers. The transaction was accounted
for under the purchase method of accounting. The Company recorded all assets
with a fair market value with approximately $700,000 and assumed liabilities for
an equivalent amount. The Company did not issue any shares of Company stock or
cash for this transaction. The acquisition of Karpatos is not material to these
financial statements.
During April 2000, the Company announced its intent to acquire 75% of total
outstanding stock of a Nicaraguan poultry and animal feed concentrate company,
"INDAVINSA, S.A.". The Company will be carrying out a due diligence process
expected to be concluded by next quarter, after which, the terms and conditions
of the acquisition will be determined. In addition, the Company has also
communicated its interest in entering the Brazilian poultry market by means of
an acquisition or a joint partnership. The Company will continue in the future
to seek new opportunities to acquire other companies in other countries as a
growth strategy.
-8-
<PAGE>
RICA FOODS, INC. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(Continued)
NOTE 4 - INVENTORIES AND 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 lives
of the hens. Production poultry or amortization of the hens, is determined based
on the estimated poultry reproductive period.
Inventories consist of the following:
March 31, September 30,
--------- -------------
2000 1999
---- ----
Finished products $ 3,268,398 $ 3,029,269
Poultry 3,418,468 3,035,678
Production poultry 3,154,177 3,329,784
Materials and supplies 1,943,023 2,165,074
Raw materials 2,410,885 1,757,125
In transit 927,275 1,469,056
------------ ------------
15,122,226 14,785,986
------------ ------------
Production poultry (952,726) (836,849)
Allowance for obsolescence (63,913) (52,620)
------------ ------------
Inventories, net $ 14,105,587 $ 13,896,517
============ ============
NOTE 5 - COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards No. 130 ("SFAS
130"), "Reporting Comprehensive Income", effective January 1, 1998. SFAS 130
establishes standards for reporting and display of comprehensive income and its
components in financial statements. The components of the Company's
comprehensive income are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three months ended Six months ended
------------------ ----------------
March 31, March 31,
--------- ---------
2000 1999 2000 1999
---- ---- ---- ----
Net income $ 567,123 $ 1,019,956 $ 2,783,687 $ 2,547,619
Foreign currency
translation adjustment (289,947) (391,571) (1,042,499) (621,946)
---------- ----------- ----------- -----------
Total comprehensive income $ 277,176 $ 628,385 $ 1,741,188 $ 1,925,673
========== =========== =========== ===========
</TABLE>
-9-
<PAGE>
RICA FOODS, INC. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(Continued)
NOTE 6 - EARNINGS PER SHARE
Earnings per share are 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 in accordance with Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share". SFAS
128 provides guidance for the computation, presentation and disclosure of
earnings per share. The minority interest in the income of subsidiaries and
dividends on preferred stock have been excluded from income available to common
stockholders.
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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three months ended Six months ended
------------------ ----------------
March 31, March 31,
--------- ---------
2000 1999 2000 1999
---- ---- ---- ----
Numerator:
Net income applicable to
common stockholders $ 532,404 $ 979,764 $ 2,688,943 $ 2,426,152
=========== =========== =========== ===========
Denominator:
Denominator for basic
income per share 12,800,297 7,419,138 10,966,660 7,418,978
Effect of dilutive
securities:
Options to purchase common
stock 4,696 163,522 4,078 117,264
----------- ----------- ----------- -----------
Denominator for diluted
earnings per share 12,804,993 7,582,660 10,970,738 7,536,242
=========== =========== =========== ===========
Earnings per share from
continuing operations:
Basic $ 0.04 $ 0.13 $ 0.25 $ 0.33
=========== =========== =========== ===========
Diluted $ 0.04 $ 0.13 $ 0.25 $ 0.32
=========== =========== =========== ===========
</TABLE>
The Company did not have any anti-dilutive securities outstanding as of March
31, 2000 and 1999.
-10-
<PAGE>
RICA FOODS, INC. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(Continued)
NOTE 7 - STOCK OPTION PLAN
The Company has a Stock Option Plan (the "Plan"), under which certain directors,
officers, employees and entities who provide services to the Company and
Subsidiaries are participants. In October 1999, the Company granted to
seventy-four (74) officers and employees 7,400 shares of the Company's common
stock, which vested upon issuance. Officers and employees are restricted from
selling the shares granted and exercised for a period of one year. In addition,
7,400 options to purchase shares of common stock of the Company were issued on
the same date to those same officers and employees, at an exercise price of
$6.00 with a vesting period of one year, after which, the officers and employees
are restricted from selling such shares of common stock for one additional year.
Market price per share on the date of the grant and issuance of the stock
options was $11.20.
The Company applied Accounting Principles Board ("APB") Opinion No. 25 in
accounting for its stock options, and accordingly, compensation costs for the
shares and stock options have been expensed during the six months ended March
31, 2000.
-11-
<PAGE>
RICA FOODS, INC. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(Continued)
NOTE 8 - SEGMENT INFORMATION:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the three months ended For the six months ended
-------------------------- ------------------------
March 31, 2000 March 31, 1999 March 31, 2000 March 31, 1999
-------------- -------------- -------------- --------------
Business Net Income from Net Income from Net Income from Net Income from
-------- --- ----------- --- ----------- --- ----------- --- -----------
Segments Sales Operations Sales Operations Sales Operations Sales Operations
-------- ----- ---------- ----- ---------- ----- ---------- ----- -----------
Broiler chicken $ 18.25 $1.99 $ 18.50 $2.98 $ 38.33 $4.42 $ 37.42 $6.11
Animal feed 5.46 (0.16) 5.23 0.14 10.85 (0.06) 11.11 0.58
By products 3.01 0.73 2.20 0.61 5.96 1.65 4.78 1.13
Restaurants 0.93 (0.12) 0.33 (0.11) 2.15 0.70 1.52 0.61
Exports 1.90 (0.23) 2.29 0.10 4.65 (0.24) 5.14 0.18
Other 0.76 (0.03) 1.36 0.02 1.49 0.12 1.59 0.10
Corporate - (0.65) - (0.33) - (1.02) - (0.42)
------- ----- ------- ----- ------- ----- ------- -----
$ 30.31 $1.53 $ 29.91 $3.41 $ 63.43 $5.57 $ 61.56 $8.29
======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
The Company operates in the production and marketing of poultry products, animal
feed and quick service chicken restaurants. The Company's subsidiaries
distribute these products primarily throughout Costa Rica and in El Salvador and
Honduras, through subsidiaries whose activities are included in the "Exports"
segment. The Company also exports to other countries in Central America and the
Caribbean. The basis for determining the Company's operating segments is the
manner in which Management uses financial information in its operations.
Management operates and organizes the financial information according to the
types of products offered to its customers.
NOTE 9 - COMMON STOCK DIVIDENDS
On December 23, 1999, the Board of Directors of Pipasa declared a dividend of
637,000 series "TCA" shares of preferred stock of Pipasa valued at $2,143,626 to
common stockholders of record as of September 30, 1999. Pipasa distributed
379,398 shares to the Company and 257,602 to Inversiones La Ribera, S.A. in
accordance with common stock ownership as of September 30, 1999. The dividends
distributed correspond to earnings pertaining to the year ended September 30,
1999.
Immediately after the issuance of the preferred shares, Pipasa repurchased these
shares for an equivalent amount with stockholders, using the proceeds to cancel
outstanding debt. Accordingly, Pipasa paid off outstanding debts from
Inversiones La Ribera, S.A. and the Company for a total of $1,276,743 and
$866,882, respectively.
On December 23, 1999, the Board of Directors of As de Oros declared a dividend
of 590,000 series "TCA" shares of preferred stock of As de Oros valued at
$1,983,327 to common stockholders of record as
-12-
<PAGE>
RICA FOODS, INC. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(Continued)
of September 30, 1999. As de Oros distributed 332,642 shares to the Company and
257,358 shares to Comercial Angui, S.A. in accordance with common stock
ownership as of September 30, 1999. The dividends distributed correspond to
earnings pertaining to fiscal period 1999.
Immediately after the issuance of the preferred shares, As de Oros repurchased
part of these shares for an equivalent amount with stockholders, using the
proceeds to cancel outstanding debts. As de Oros cancelled outstanding debts
from Inversiones La Ribera, S.A. and the Company for a total of $537,896 and
$343,377, respectively.
NOTE 10 - LITIGATION
Pipasa is a defendant in a lawsuit brought in Costa Rica in which the plaintiff
seeks $3.6 million and Pipasa was served with prejudgment liens for $1.5
million. These liens were placed on some of Pipasa's cash accounts, which were
substituted for land owned by Pipasa with the approval of a Costa Rican court.
Such approval was subsequently appealed by the plaintiff, however, the Superior
Court ratified such substitution of collateral on November 11, 1999. As a
result, the prejudgment liens on cash accounts, have been released and Pipasa
has received the funds originally attached. The same Plaintiff, relying on the
same cause(s) of action, has sued Pipasa in the United States of America in the
State of California and the State of Florida, respectively. Pipasa has moved to
dismiss the lawsuit in the State of Florida by filing a motion for lack of
personal jurisdiction in the State of Florida. Subsequently, the California
lawsuit has been suspended until the Florida court rules on such motion. The
plaintiff has filed in the Florida case requests for the production of
documents, for admissions and interrogatories, which have been scheduled for May
25, 2000. While Pipasa still has time to answer the complaints, the basis of the
claim or the relief sought cannot be ascertained. Pipasa believes the lawsuits
are 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 other legal proceedings of a material nature exist to which the Company or
the Subsidiaries are a party, or were pending during the six months ended March
31, 2000. The Company knows of no legal proceedings of a material nature pending
or threatened or judgments entered against any director or officer of the
Company in his capacity as such.
-13-
<PAGE>
RICA FOODS, INC. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(Continued)
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. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company's operations are largely conducted through its 100% owned
subsidiaries, Corporacion Pipasa, S.A. and Subsidiaries ("Pipasa") and
Corporacion As de Oros, S.A. and Subsidiaries ("As de Oros"). The Company,
through its subsidiaries, represents the largest poultry company in Costa Rica
with a market share of approximately 70% of the chicken meat market. The
Company's subsidiaries' primary business is derived from the production and sale
of broiler chickens, processed chicken by-products, commercial eggs, and
premixed feed and concentrate for livestock and domestic animals. Pipasa,
founded in 1969, is the largest poultry Company in Costa Rica with a market
share of approximately 50% of the chicken meat market in Costa Rica. As de Oros,
founded in 1954, is Costa Rica's second largest poultry producer with a market
share of approximately 20% of the country's chicken meat market and is one of
the leaders in the Costa Rican animal feed market with a 27% market share. The
Company's subsidiaries own 58 urban and rural outlets throughout Costa Rica,
three modern processing plants and three animal feed plants. Due to similar
business activities, the combined operations of the subsidiaries permit the
Company to achieve operational efficiencies. As de Oros also owns and operates a
chain of 36 quick service Restaurants in Costa Rica called "Restaurantes As de
Oros."
On November 22, 1999 and December 7, 1999, the Company acquired the remaining
43.62% and 40.44% minority interest of As de Oros and Pipasa, respectively, in
exchange for the issuance of 1,670,921 and 3,683,595 restricted shares of common
stock of the Company. The Company designated November 30, 1999 as the date of
acquisition for accounting purposes and as such, has consolidated 100% of
earnings for the month ended December 31, 1999 and the three months ended March
31, 2000. The acquisition of Pipasa was accounted for at the value of the
minority interest as of the acquisition date, on
-14-
<PAGE>
the basis that the owner of the minority interest of Pipasa is a major
shareholder of the Company. The acquisition of As de Oros was accounted for
under the purchase method of accounting.
Although Management believes that the disclosures contained herein are adequate
to make the information presented not misleading, these consolidated 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, 1999.
Acquisitions
During April 2000, the Company has announced its intent to acquire 75% of total
outstanding stock of a Nicaraguan poultry and animal feed concentrate company,
"INDAVINSA, S.A.". The Company will be carrying out a due diligence process
expected to be concluded by next quarter, after which terms and conditions of
the acquisition will be determined. In addition, the Company has also
communicated its interest in entering the Brazilian poultry market by means of
an acquisition or a joint partnership. The Company will continue in the future
to seek new opportunities to acquire other companies in other countries as a
growth strategy.
Seasonality
The Company's subsidiaries have historically experienced and have come to expect
seasonal fluctuations in net sales and results of operations. The Company's
subsidiaries have generally experienced higher sales and operating results in
the first and second quarters of the fiscal period. This variation is primarily
the result of holiday celebrations during this time of year, in which Costa
Ricans prepare traditional meals, which include dishes with chicken as the main
ingredient. The Company expects this seasonal trend to continue for the
foreseeable future.
Year 2000 Update
As described in the Annual Report on Form 10-K for the year ended September 30,
1999, the Company had developed plans to address the possible exposures related
to the impact on its computer systems of the Year 2000. Since entering the year
2000, the Company has not experienced any major disruptions to its business nor
is it aware of any significant Year 2000 related disruptions impacting its
customers and suppliers. Furthermore, the Company did not experience any
material impact on inventories as of March 31, 2000. The Company will continue
to monitor its critical systems over the next several months but does not
anticipate any significant impact due to Year 2000 exposures from its internal
systems as well as from the activities of its suppliers and customers. Costs
incurred to achieve Year 2000 readiness, which include contractor costs to
modify existing systems and costs of internal resources dedicated to achieving
Year 2000
-15-
<PAGE>
compliance, were charged to expense as incurred. The Company has not experienced
any material change in total costs related to Year 2000 remediation efforts
since entering the year 2000.
Environmental Compliance
At the present time, 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, the Company could become subject to material costs to
comply with new environmental laws or environmental regulations in jurisdiction
in which it might conduct business. At the present time, the Company cannot
assess the potential impact of any such potential environmental regulations.
During the six months ended March 31, 2000, the Company has invested
approximately $1.35 million to remodel and expand its recycling and waste
treatment facilities.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000
COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1999.
The Company's operations resulted in $0.04 diluted earnings per share for the
three months ended March 31, 2000, compared to $0.13 during the comparative
period for fiscal year 1999.
Net sales generated by the Company's operations for the three months ended March
31, 2000 increased by 1.34%, compared to the three months ended March 31, 1999.
Cost of sales for the three months ended March 31, 2000 increased by 5.53%
compared to the three months ended March 31, 1999. Gross profit margin for the
three months ended March 31, 2000 decreased by 7.52% compared to the three
months ended March 31, 1999.
The following table presents sales amounts and distribution by business segment
in millions, for the three months ended March 31:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
2000 1999 Increase (Decrease)
---- ---- -------------------
Sales Sales
----- -----
Segments Amount Distribution Amount Distribution Amount %
-------- ------ ------------ ------ ------------ ------ -
Broiler Chicken $ 18.25 60.21% $ 18.50 61.85% $ (0.25) (1.35)%
Animal feed 5.46 18.02% 5.23 17.49% 0.23 4.40 %
By products 3.01 9.92% 2.20 7.36% 0.81 36.82 %
Exports 0.93 3.07% 0.33 1.10% 0.60 181.82 %
Restaurants 1.90 6.27% 2.29 7.66% (0.39) (17.03)%
Others 0.76 2.51% 1.36 4.55% (0.60) (44.12)%
-------- ------ -------- ------ -------- -----
$ 30.31 100.00% $ 29.91 100.00% $ 0.40 1.34 %
======== ====== ======== ====== ======== =====
</TABLE>
-16-
<PAGE>
Broiler chicken: Sales of broiler chicken decreased by 1.35% for the three
months ended March 31, 2000, compared to the three months ended March 31, 1999.
The decrease is primarily due to a 1.43% increase in tonnage offset by a
decrease in the consumption of chicken by the consumer whose income was affected
by economic factors. There was also an increase in the cost of soybean meal, one
of the main components of the raw material, resulting in a decrease in the gross
profit margin by 6.85%
Animal Feed: Sales for commercial animal feed for the three months ended March
31, 2000 increased by 4.40% compared to the three months ended March 31, 1999.
The increase is mainly due to a decrease in tonnage of 4.48%, offset by higher
sales of pet food products due to an aggressive marketing strategy. During this
quarter, consumers for commercial animal feed had low operating results due to
climate factors, resulting in lower sales of this product. During fiscal 1999,
the Company lowered its sales prices, as a strategy to maintain its market
share, and has continued this strategy for this quarter, by maintaining its
sales prices. The Company plans to open new distributing outlets, promote some
of its products and introduce new brands as a marketing strategy to increase
sales. Cost of sales for animal feed for the three months ended March 31, 2000,
increased by 8.42%. Gross profit margin for the three months ended March 31,
2000 decreased by 12.99% compared to the three months ended March 31, 1999. This
variation is mainly due to the lower sales prices, and an increase in the cost
of soybean meal.
By-products: Total sales for this segment for the three months ended March 31,
2000 increased by 36.82% compared to the three months ended March 31, 1999. This
increase is mainly due to a 26.83% increase in tonnage, in addition to sales to
new clients. Cost of sales for this segment increased by 39.13% mainly due to
higher costs of raw materials. Gross profit margin for the three months ended
March 31, 1999 decreased by 3.47% compared to the three months ended March 31,
2000.
Restaurants: The restaurant segment decreased sales by 17.03% for the three
months ended March 31, 2000 compared to the three months ended March 31, 1999.
The decrease in sales is a result of strong market competition in this segment.
During the fiscal period under analysis, the Company has invested in remodeling
some of its restaurants and has invested in new cooking equipment, which has
improved the flavor of the product and has reduced food preparation costs. Cost
of sales for the restaurant segment for the period under analysis increased by
39.13% compared to the three months ended March 31, 1999. Gross profit margin
has decreased by 7.44%
Exports: The Company's exports for the three months ended March 31, 2000
increased by 181.82% compared to the three months ended March 31, 1999. This
increase was primarily due to an increase of 148.26% in tonnage mainly in
Pipasa's subsidiary in Honduras and higher sales of
-17-
<PAGE>
pet food products and Broiler chicken. Cost of sales for the three months ended
March 31, 2000 increased by 230.43% compared to the three months ended March 31,
1999. Gross profit margin decreased by 32.97% mainly due to sales promotions of
some products.
Other: Sales of other for the three months ended March 31, 2000 decreased by
42.96%. Sales for the three months under analysis increased due to the inclusion
of sales of recycling material, which the Company has begun to market during
this fiscal year. This is offset by a non-recurrent sale of fertile eggs carried
out during the comparable period in 1999. Sale of other items includes
commercial eggs, raw materials and baby chicks and these sales comprise 2.54%
and 4.52% of total sales for the three months ended March 31, 2000 and 1999,
respectively. Cost of sales for others for the three months ended March 31, 2000
decreased by 42.06% compared to March 31, 1999. Gross profit margin for the
three months ended March 31, 2000 decreased by 9.31% compared to the three
months ended March 31, 1999, which is mainly the result in variations in the
sales mix to less profitable products.
OPERATING EXPENSES
Operating expenses increased from $7.13 million to $8.36 million, an increase of
$1.23 or 17.25% during the three months ended March 31, 2000 as compared with
the three months ended March 31, 1999. The increase is primarily attributable to
increases in payroll expenses to improve the executive organizational structure
of the Company for further international expansion in addition to a general
increase in employee's payroll in accordance with the Company's policy. There
are also increases in vehicle fleet leasing costs and professional services, and
an increase in the amortization of cost in excess of net assets of acquired
business associated with the acquisition of the minority interest of As de Oros.
As a percentage of sales, operating expenses were 27.57% and 23.85% of sales for
the three months ended March 31, 2000 and 1999, respectively.
OTHER EXPENSES
Non-operating expenses decreased from $940,000 during the three months ended
March 31, 1999 to $920,000 for the comparable period in 2000, a decrease of
$20,000 or 2.13%. This decrease is mainly attributable to lower foreign
exchange losses due to a decrease in liabilities in foreign currency. In
addition, the Company recorded dividends received from investments made in other
companies. As a percentage of net sales, non-operating expenses were 3.05% and
3.15% for the three months ended March 31, 2000 and 1999, respectively.
PROVISION FOR INCOME TAXES
Provision for income taxes were approximately $13,000 and $460,000 for the three
months ended March 31, 2000 and 1999, respectively. The decrease is mainly due
to lower taxable income for the period under analysis.
-18-
<PAGE>
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2000 COMPARED TO THE
SIX MONTHS ENDED MARCH 31, 1999.
The Company's operations resulted in $0.25 diluted earnings per share for the
six months ended March 31, 2000, compared to $0.32 during the comparative period
for 1999.
Net sales generated by the Company's operations for the six months ended March
31, 2000 increased by 3.03%, compared to the six months ended March 31, 1999.
Cost of sales for the three months ended March 31, 2000 increased by 5.54%
compared to the six months ended March 31, 1999. Gross profit margin for the
three months ended March 31, 2000 decreased by 4.36% compared to the three
months ended March 31, 1999.
The following table shows sales amounts and distribution by business segment in
millions, for the six months ended March 31:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
2000 1999 Increase (Decrease)
---- ---- -------------------
Sales Sales
----- -----
Segments Amount Distribution Amount Distribution Amount %
-------- ------ ------------ ------ ------------ ------ -
Broiler Chicken $ 38.33 60.43% $ 37.42 60.79% $ 0.91 2.43 %
Animal Feed 10.85 17.11% 11.11 18.05% (0.26) (2.34)%
By Products 5.96 9.40% 4.78 7.76% 1.18 24.69 %
Exports 2.15 3.39% 1.52 2.47% 0.63 41.45 %
Restaurants 4.65 7.33% 5.14 8.35% (0.49) (9.53)%
Others 1.49 2.35% 1.59 2.58% (0.10) (6.29)%
-------- ------ -------- ------ -------- -----
TOTAL $ 63.43 100.00% $ 61.56 100.00% $ 1.87 3.04 %
======== ====== ======== ====== ======== =====
</TABLE>
Broiler chicken: Sales of broiler chicken for the six months ended March 31,
2000 increased by 2.43%. The increase of 2.43% is primarily due to a 6.20%
increase in tonnage offset by variations in sales mix to lower priced products
and sales promotions due to strong competition. Cost of sales for Broiler
chicken for the six months ended March 31, 2000 increased by 6.12% compared to
the six months ended March 31, 1999. Gross profit margin for this segment for
the six months ended March 31, 2000 decreased by 6.36% compared to the six
months ended March 31, 1999, mainly due to increases in costs of raw material
and variations in sales mix to less profitable products.
Animal Feed: Sales for commercial animal feed for the six months ended March 31
decreased by 2.34%. The decrease is mainly due to a decrease in tonnage of 2.22%
and lower prices of commercial animal food brands, offset by higher sales of pet
food products. The cost of sales for the six months ended March 31, 2000
increased by 0.84% compared to the six months ended March 31, 1999. The gross
profit margin for this segment for the six months ended March 31, 2000 decreased
by 9.06% compared to the six months ended March 31, 1999, primarily due to lower
sales prices and higher costs of raw material.
-19-
<PAGE>
By-products: Total sales for this segment for the six months ended March 31,
2000 increased 24.69% compared to the six months ended March 31, 1999, mainly
due to an 18.13% increase in tonnage, in additional to higher sales prices and
sales to new clients. Cost of sales for this segment for the six months ended
March 31, 2000 increased by 3.50% compared to the six months ended March 31,
1999. Gross profit margin for the six months ended March 31, 2000 increased
25.31% compared to the six months ended March 31, 1999, which is mainly due to
higher sales prices.
Restaurants: The Restaurants segment for the six months ended March 31, 2000
decreased sales by 9.34% when compared to the six months ended March 31, 1999.
The decrease in sales is a result of strong market competition in this segment.
Cost of sales for the period under analysis decreased by 10.89% compared to the
six months ended March 31, 1999. Gross profit margin for the six months ended
March 31, 2000 increased by 1.72% compared to the six months ended March 31,
1999.
Exports: The Company's exports for the six months ended March 31, 2000 increased
by 41.45% compared to the six months ended March 31, 1999. This sales increase
was primarily due to an increase of 45.58% in tonnage mainly in Pipasa's
subsidiary in Honduras and higher sales of pet food products and Broiler
chicken. Cost of sales for the six months ended March 31, 2000 increased by
57.80% compared to the six months ended March 31, 1999. Gross profit margin for
the six months ended March 31, 2000 decreased by 29.30% compared to the six
months ended March 31, 2000, mainly as a result of variations in sales mix to
less profitable products.
Other: Sales of other for the six months ended March 31, 2000 decreased by 6.29%
compared to the six months ended March 31, 1999. Sales for the six months under
analysis include sales of recycling material, which the Company has begun to
market during this fiscal year. This is offset by a non-recurrent sale of
fertile eggs carried out during the comparable period in 1999. Sale of other
items includes commercial eggs, raw materials and baby chicks and these sales
comprise 2.33% and 2.58% of total sales for the six months ended March 31, 2000
and 1999, respectively. Cost of sales for others for the six months ended March
31, 2000 increased by 23.60% compared to the six months ended March 31, 1999.
Gross profit margin for the period under analysis decreased by 41.68% to the
comparable period of fiscal 1999, which is mainly the result of variations in
the sales mix to less profitable products.
OPERATING EXPENSES
Operating expenses increased from $13.89 million to $16.31 million, an increase
of $2.42 or 17.42% during the six months ended March 31, 2000 as compared with
the comparable period in fiscal year 1999. The increase is mainly attributable
to payroll expenses to improve the executive
-20-
<PAGE>
organizational structure of the Company for further international expansion, in
addition to a general increase in employee's payroll in accordance with the
Company's policy. There are also increases in vehicle fleet leasing costs and
professional services, and the amortization of cost in excess of net assets of
acquired businesses also increases due to the minority interest acquisition of
As de Oros. As a percentage of sales, operating expenses were 25.71% and 22.58%
of sales for the six months ended March 31, 2000 and 1999, respectively.
OTHER EXPENSES
Non-operating expenses decreased from $2.24 million during the six months ended
March 31, 1999 to $1.84 million for the comparable period in fiscal year 2000, a
decrease of $400,000 or 17.86%. During the period under analysis, the Company
recorded income from dividends received from investments in other companies,
offset by higher interest expenses due to increases in debts. As a percentage of
net sales, non-operating expenses were 2.91% and 3.63% for the six months ended
March 31, 2000 and 1999, respectively.
PROVISION FOR INCOME TAXES
Provision for income taxes were approximately $400,000 and $800,000 for the six
months ended March 31, 2000 and 1999, respectively. The decrease is mainly due
to lower taxable income for the period under analysis.
FINANCIAL CONDITION
Operating activities:
As of March 31, 2000, the Company had $2.79 million in cash and cash
equivalents. The working capital deficit was $1.69 million as compared to a
positive working capital of $6.24 million at the end of fiscal year 1999, for a
$7.94 million decrease. This decrease is primarily due to an increase in
short-term liabilities. The current ratios were 0.94 and 1.25 as of March 31,
2000 and September 30, 1999, respectively.
Cash provided by operating activities was $2.66 million and $9.42 million during
the six months ended March 31, 2000 and 1999, respectively. Cash flows from
operations decreased for the period under analysis in relation to its comparable
period in 1999 primarily due to an increase in inventories and lower income.
Investing Activities:
Funds used for investing activities during the six months ended March 31, 2000
was $8.60 million compared to $3.09 million during the same period of fiscal
1999. Investing cash flows reflect capital expenditures, which are primarily
related to purchases and improvements in production equipment and facilities.
The Company is investing in the expansion of the further processing plant
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<PAGE>
to increase production, and an animal feed plant to increase production for
internal consumption. Investment in the animal feed plants will position the
Company as a leader in "pellet" animal feed production in Central America. In
addition, the Company is remodeling the waste and recycling facilities and is
also installing a communication network between different locations of the
Company's facilities. The Company anticipates that it will spend approximately
$6.5 million for capital expenditures during the rest of fiscal year 2000 and
expects to finance such expenditures mostly with long-term financing.
Financing Activities:
As of March 31, 2000, the Company had line of credit agreements with banks for a
maximum aggregate amount of $29.15 million, of which $14.44 million have already
been used. Agreements may be renewed annually and bear interest at annual rates
ranging from 8.00% to 11.98%. Property and other collateral secure those
agreements.
During the six months ended March 31, 2000, net cash provided by financing
activities was $5.10 million compared to $4.35 million required during the same
period of 1999. During the six months ended March 31, 1999, the Company
amortized $1.99 million in long-term debt and decreased $2.42 million of
short-term debt. For the period under analysis, the Company increased long-term
debt by $2.92 million and short-term debt by $3.16 million. Short-term debt
funds were used as a bridge loan to temporarily finance investment in property,
plant and equipment. The Company is in the process of completing long-term loans
for these investments.
Management expects to continue to finance operations and capital expenditures
with its normal operating activities and external sources. Management also
expects 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
-22-
<PAGE>
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 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 the financial condition and results
of operations of the Company may include certain forward-looking statements,
within the meaning of Section 27A 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, should and variations of those words
and similar expressions are intended to identify these forward-looking
statements. Forward-looking statements made by the Company 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 of a number of risks, uncertainties and assumptions. Representative
examples of these factors include (without limitation) general industrial and
economic conditions; cost of capital and capital requirement; 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
Exchange Rate Risk:
The Company makes U.S. dollar payments for its bank facilities and imported 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. During the six
months ended March 31, 2000, the Company increased its sales prices an average
of 5.72%. The National devaluation rate in Costa Rica for that same period was
3.71%. The Company plans to make
-23-
<PAGE>
additional sales price increases during the rest of fiscal year 2000.
Commodity Risk Management:
The Company imports all of its corn and soybean meal, the primary ingredients in
chicken feed, from the United States of America. The Company has been actively
hedging its exposure to corn since 1991 and its strategy is to hedge against
price increases in corn and soybean meal. The Company is not involved in
speculative trading. The average prices paid by the Company for corn and soybean
meal were approximately 3.92% below and 13.79% above its budgeted prices,
respectively, for the six months ended March 31, 2000.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
Pipasa is a defendant in a lawsuit brought in Costa Rica in which the plaintiff
seeks $3.6 million, and Pipasa was served with prejudgment liens for $1.5
million. These liens were placed on some of Pipasa's cash accounts which were
substituted for land owned by Pipasa with the approval of a Costa Rican court.
Such approval was subsequently appealed by the plaintiff, however, the Superior
Court ratified such substitution of collateral on November 11, 1999. As a
result, the prejudgment liens on cash accounts have been released and Pipasa has
received the funds originally attached. The same Plaintiff, relying on the same
cause(s) of action, has sued Pipasa in the United States of America in the State
of California and the State of Florida, respectively. Pipasa has moved to
dismiss the lawsuit in the State of Florida by filing a motion for lack of
personal jurisdiction in the State of Florida. Subsequently, the California
lawsuit has been suspended until the Florida court rules on such motion. The
plaintiff has filed in the Florida case requests for the production of
documents, for admissions and interrogatories, which have been scheduled for May
25, 2000. While Pipasa still has time to answer the complaints, the basis of the
claim or the relief sought cannot be ascertained. Pipasa believes the lawsuits
are 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 other legal proceedings of a material nature exist to which the Company or
the Subsidiaries are a party, or were pending during the six months ended March
31, 2000. The Company knows of no legal proceedings of a material nature pending
or threatened or judgments entered against any director or officer of the
Company in his capacity as such.
-24-
<PAGE>
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:
On November 22, 1999, the Company concluded the acquisition for the purchase of
the remaining interest of As de Oros from Comercial Angui, S.A. (the "Final As
de Oros acquisition"). Pursuant to the Final As de Oros acquisition, the Company
issued a total of 1,670,921 shares of the Company's stock, for the remaining
43.62% of common stock ownership in As de Oros.
On December 7, 1999, the Company concluded the acquisition for the purchase of
the remaining interest of Pipasa from Inversiones La Ribera, S.A. (the "Final
Pipasa acquisition"). Pursuant to the Final Pipasa acquisition, the Company
issued 3,683,595 shares of the Company's stock, for the remaining 40.44% of
common stock ownership in Pipasa.
As of such dates, As de Oros and Pipasa are wholly owned subsidiaries of the
Company.
The Company filed timely reports of Form 8K and 8K/A for both acquisitions.
ITEM 6. EXHIBITS AND REPORTS:
(a) Exhibits: The following exhibits are filed with this
report:
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
(b) Current Report on Form 8-K: Two current Reports on form 8-K were
filed on February 2, 2000 and February 10, 2000, respectively,
and are hereby incorporated by reference.
-25-
<PAGE>
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Company 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 Company and in
the capacities and on the dates indicated.
RICA FOODS, INC. AND SUBSIDIARIES
Dated: May 15, 2000 /s/ Calixto Chaves
----------------------------------------
Calixto Chaves
Chief Executive Officer
Dated: May 15, 2000 /s/ Randall Piedra
----------------------------------------
Randall Piedra
Chief Financial Officer
-26-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RICA FOODS, INC. FOR THE SIX MONTHS ENDED MARCH 31,
2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,791,481
<SECURITIES> 34,451
<RECEIVABLES> 13,990,789
<ALLOWANCES> (822,992)
<INVENTORY> 14,105,587
<CURRENT-ASSETS> 30,919,081
<PP&E> 50,239,348
<DEPRECIATION> (7,902,644)
<TOTAL-ASSETS> 83,780,078
<CURRENT-LIABILITIES> 32,611,690
<BONDS> 0
0
2,216,072
<COMMON> 12,849
<OTHER-SE> 25,704,922
<TOTAL-LIABILITY-AND-EQUITY> 83,780,078
<SALES> 63,426,497
<TOTAL-REVENUES> 63,426,497
<CGS> 41,554,015
<TOTAL-COSTS> 41,554,015
<OTHER-EXPENSES> 16,308,561
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,897,339
<INCOME-PRETAX> 3,719,286
<INCOME-TAX> 406,168
<INCOME-CONTINUING> 3,313,120
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,688,943
<EPS-BASIC> 0.25
<EPS-DILUTED> 0.25
</TABLE>
