SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the three months ended June 30, 1994
Commission File Number 0-17039
AMERICAN RICE, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Texas 76-0231626
- - ------------------------------- ------------------------------------
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
16825 Northchase, Suite 1500
Houston, Texas 77060
--------------------------------------- -------
(Address of Principal Executive Offices) (Zip Code)
(713) 873-8800
-------------------------------------------------
Registrant's Telephone Number, Including Area Code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the registrant's common stock, $1 par
value, as of August 1, 1994 is 12,219,461 shares.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN RICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of Dollars)
(Unaudited)
Three Months
Ended June 30,
1994 1993
--------- ---------
Net sales $105,706 $36,783
Cost of sales 94,383 33,104
--------- ---------
Gross profit 11,323 3,679
Selling, general and
administrative expenses 5,272 2,065
--------- ---------
Operating income 6,051 1,614
Interest expense 2,898 1,824
Interest income (171) (267)
Minority interest 61 (1)
Other expense 73 448
Earnings on equity investment 0 (426)
--------- ---------
Earnings before income taxes
and extraordinary item 3,190 36
Provision for income taxes 1,180 148
--------- ---------
Earnings (loss) before
extraordinary item 2,010 (112)
Extraordinary item
Gain on debt restructuring,
net of taxes 0 9,318
--------- ---------
Net earnings $2,010 $9,206
========= =========
Preferred stock dividend requirements (1,483) (494)
--------- ---------
Net earnings applicable
to common stock $527 $8,712
========= =========
Continued on next page
See Notes to Consolidated Financial Statements
Page 1<PAGE>
AMERICAN RICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(Unaudited)
Three Months
Ended June 30,
1994 1993
--------- ---------
Primary earnings (loss) per
applicable common and
common equivalent share (Note 3):
Earnings before
extraordinary item $0.03 ($0.04)
Extraordinary item $0.00 0.58
--------- ---------
Net earnings $0.03 $0.54
========= =========
Fully diluted earnings (loss)
per applicable common and
common equivalent share (Note 3):
Earnings before
extraordinary item $0.03 ($0.01)
Extraordinary item $0.00 0.35
--------- ---------
Net earnings $0.03 $0.34
========= =========
See Notes to Consolidated Financial Statements
Page 2<PAGE>
AMERICAN RICE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
June 30, March 31,
1994 1994
--------- ---------
(Unaudited)
ASSETS
Current assets:
Cash $2,336 $1,721
Accounts receivable 20,912 22,222
Inventories
Raw materials 15,213 26,273
Finished goods 21,478 31,935
Prepaid expenses 819 606
Deferred income taxes 2,843 3,691
--------- ---------
Total current assets 63,601 86,448
Net assets of Houston properties held for sale 18,764 18,764
Other assets 17,172 17,635
Receivable from related party 10,657 10,499
Property, plant and equipment, net 42,380 41,724
--------- ---------
Total assets $152,574 $175,070
========= =========
Continued on next page
See Notes to Consolidated Financial Statements
Page 3<PAGE>
AMERICAN RICE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Thousands of Dollars)
June 30, March 31,
1994 1994
--------- ---------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $21,514 $32,876
Accounts payable and accrued expenses 19,508 31,292
Income taxes payable 1,300 1,456
Current portion of long-term debt 6,160 6,060
--------- ---------
Total current liabilities 48,482 71,684
Long-term debt 54,648 56,148
Deferred income taxes 7,005 6,870
Minority interest 130 69
Stockholders' equity:
Preferred stock, $1.00 par value; 20,000,000
shares authorized;
Series A- 3,888,889 convertible shares issued
and outstanding, liquidation preference
of $5.14 per share 3,889 3,889
Series B- 14,000,000 convertible shares issued
and outstanding 14,000 14,000
Series C- 1,500,000 shares issued
and outstanding 1,500 1,500
Common stock, $1.00 par value; 50,000,000
shares authorized; 12,219,461 shares
issued and outstanding 12,219 12,219
Retained earnings 11,449 9,439
Cumulative foreign currency translation
adjustments (748) (748)
--------- ---------
Total stockholders' equity 42,309 40,299
--------- ---------
Total liabilities and stockholders' equity $152,574 $175,070
======== =======
See Notes to Consolidated Financial Statements
Page 4<PAGE>
AMERICAN RICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
Three Months
Ended June 30,
1994 1993
--------- ---------
OPERATING ACTIVITIES:
Net earnings $2,010 $9,206
Adjustments to reconcile net income to net cash
provided by (used in) in operating activities:
Depreciation and amortization 1,424 693
Loss on sale of property 6 352
Gain on debt restructuring 0 (9,318)
Earnings from equity investment 0 (426)
Deferred income taxes, net 983 0
Changes in assets and liabilities that
provided (used) cash:
Accounts receivable 1,310 (1,435)
Inventories 21,517 5,003
Prepaid expenses (213) 715
Other assets 2 (2,929)
Receivable from related party (158) 1,869
Accounts payable and accrued expenses (11,784) (8,515)
Income taxes payable (156) 400
--------- ---------
Net cash provided by (used in)
operating activities 14,941 (4,385)
INVESTING ACTIVITIES:
Property, plant and equipment additions (1,625) (122)
Proceeds from sales of assets 1 2,900
Cash acquired in acquisition of
American Rice, Inc. 0 12,608
--------- ---------
Net cash provided by (used in)
investing activities (1,624) 15,386
FINANCING ACTIVITIES:
Decrease in notes payable (11,362) (23,196)
Proceeds from issuance of long-term debt 0 65,300
Repayment of long-term debt (1,400) (54,595)
Other, net 60 0
--------- ---------
Net cash used in
financing activities (12,702) (12,491)
--------- ---------
NET INCREASE (DECREASE) IN CASH 615 (1,490)
CASH:
Beginning of the period 1,721 2,740
--------- ---------
End of the period $2,336 $1,250
========= =========
See Notes to Consolidated Financial Statements
Page 5<PAGE>
<TABLE>
AMERICAN RICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Months Ended June 30, 1994
(Thousands of Dollars)
(Unaudited)
<CAPTION>
Foreign Total
Retained Currency Stock -
Preferred Common Earnings Translation Holders'
Stock Stock (Deficit) Adjustments Equity
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance March 31, 1994 $19,389 $12,219 $9,439 ($748) $40,299
Net earnings 0 0 2,010 0 2,010
Foreign currency
translation adjustments 0 0 0 0 0
--------- --------- --------- --------- ---------
Balance June 30, 1994 $19,389 $12,219 $11,449 ($748) $42,309
========= ========= ========= ========= =========
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
Page 6<PAGE>
AMERICAN RICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation:
The consolidated financial statements presented herein at June 30, 1994 and
for each of the three month periods ended June 30, 1994 and 1993 are
unaudited; however, all adjustments which are, in the opinion of management
necessary for a fair presentation of the financial position, results of
operations and cash flows for the periods covered have been made and are of a
normal, recurring nature. The results of the interim period are not
necessarily indicative of results for the full year. The consolidated balance
sheet at March 31, 1994 is derived from the March 31, 1994 audited
consolidated financial statements but does not include all disclosures
required by generally accepted accounting principles. Although management
believes the disclosures are adequate, certain information and disclosures
normally included in the notes to the financial statements has been condensed
or omitted as permitted by the rules and regulations of the Securities and
Exchange Comission. These financial statements should be read in conjunction
with the audited financial statements and notes thereto included in American
Rice, Inc.'s ("ARI") Annual Report on Form 10-K for the fiscal year ended
March 31, 1994.
On May 26, 1993, ARI consummated a transaction to acquire substantially all of
the assets of Comet Rice, Inc. ("Comet") and assume all of Comet's liabilities
("Transaction") in exchange for 14,000,000 shares of a newly created Series B,
$1 par value preferred stock. Comet was a wholly-owned subsidiary of ERLY
Industries Inc. ("ERLY"). The Transaction is accounted for as a reverse step
acquisition of ARI by ERLY through its subsidiary, Comet.
Because Comet is the acquirer for accounting purposes, the financial
statements presented for the period April 1, 1993 through the date of the
Transaction, May 26, 1993, are those of Comet, not ARI. Operating results
thereafter reflect the combined operations of Comet and ARI. The following
summarized pro forma information assumes the Transaction occurred on April 1,
1993 (thousands of dollars, except per share):
Three Months
Ended June 30, 1993
--------------------
Net sales $ 63,586
Earnings from continuing operations
before Extraordinary Item: $ 731
Loss from continuing operations before
extraordinary item applicable to common stock: $ (752)
Earnings (loss) per share from continuing
operations before extraordinary item:
Primary $ (.05)
Fully diluted $ .01
Page 7<PAGE>
2. Statement of Cash Flows
Borrowings under revolving notes in the three months ended June 30, 1994 and
1993 totaled $89.1 and $30.7, respectively, and repayments during the same
periods totaled $100.5 and $53.9 million, respectively. ARI made cash
payments for interest and financing fees of approximately $2.3 and $2.8
million during the three months ended June 30, 1994 and 1993, respectively.
ARI paid $300 and $149 thousand for federal and state income taxes during the
three months ended June 30, 1994 and 1993, respectively.
3. Reverse Stock Split
On October 29, 1993, ARI's Board of Directors approved, subject to
shareholders approval, a 5 to 1 reverse stock split for all issues of
preferred stock and common stock. Since ERLY owns 81% of the voting stock and
has indicated that it will vote for the proposal, it is expected to be
approved at a special meeting of shareholders to be held September 1, 1994.
Upon consummation of the reverse stock split, primary and fully diluted
earnings per common share will be retroactively restated as follows:
Three Months Ended
June 30,
------------------
1994 1993
------ ------
Primary:
Earnings (loss) before extraordinary item $ .16 $ (.19)
Extraordinary item - 2.89
------ ------
Net earnings $ .16 $ 2.70
====== ======
Fully diluted:
Earnings (loss) before extraordinary item $ .16 $ (.03)
Extraordinary item - 1.73
------ ------
Net earnings $ .16 $ 1.70
====== ======
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
On May 26, 1993, ARI consummated a transaction to acquire substantially all of
the assets of Comet and assume all of Comet's liabilities. Comet was a wholly-
owned subsidiary of ERLY. The Transaction is accounted for as a reverse step
acquisition of ARI by ERLY through its subsidiary, Comet.
Because Comet is the acquirer for accounting purposes, operating results for
the period April 1, 1993 through the date of the Transaction, May 26, 1993 are
those of Comet, not ARI. Operating results thereafter reflect the combined
operations of Comet and ARI.
Page 8<PAGE>
Results Of Operations
Three Months Ended June 30, 1994 Compared to Three Months Ended June 30, 1993
Sales for 1994 of $105.7 million increased $68.9 million from the prior year
due to $51.5 million in export sales increases and $17.4 million in domestic
sales increases. As a result of the May 26, 1993 Transaction, three months of
ARI sales are included in 1994 versus one month in the corresponding period in
1993. The estimated increase in sales as a result of the Transaction was
approximately $37 million including $13 million in domestic markets and $24
million in export markets.
Export sales increased due to higher volume and higher average prices. Total
export sales volume increased approximately 5 million equivalent rough rice
cwt. due primarily to increases in sales from ARI's Maxwell, California
facility as a result of exports to Japan and 1.6 million cwt. in increases as
a result of the Transaction. Total average milled rice prices increased 17
percent due primarily to a higher proportion of branded export sales as a
result of the Transaction.
Domestic sales increased primarily as a result of the Transaction. In addition
to sales added by the Transaction, domestic sales increased due to higher
average prices. Average domestic milled rice sales prices increased 44
percent due to the higher value-added retail sales from the ARI customer base.
Gross profit was 11% and 10% of sales for the three months ended June 30,
1994, and June 30, 1993, respectively, increasing $7.6 million. ARI sales
included as a result of the Transaction contributed approximately $800
thousand of the increase. Gross profit on other export sales increased $6.6
million.
Selling, general and administrative expense of $5.3 million increased 3.2
million due primarily to advertising and selling expenses associated with the
higher value-added sales from the ARI customer base.
Interest expense of $2.9 million increased $1.1 million due to higher balances
and higher average rates as a result of the Transaction. Interest expenses in
both periods include legal and other expenses directly associated with the
debt.
The earnings on equity investment in the period ending June 30, 1993
represents Comet's income from it's investment in ARI prior to the
Transaction.
The extraordinary item in the period ended June 30, 1993 represents a debt
discount (net of income tax provision) from ARI's former lenders when ARI
refinanced the combined indebtedness of ARI and Comet in May, 1993.
Page 9<PAGE>
Liquidity and Capital Resources
The following amounts and ratios are indicative of ARI's liquidity and ability
to meet future funding needs and debt service requirements:
June 30, March 31,
1994 1994
------- --------
Working capital (in millions) 15.1 14.8
Current ratios 1.31 1.21
(current assets / current liabilities)
Debt ratios .54 .54
(total debt / total assets)
ARI is required by its lenders to maintain a minimum net book value, working
capital, and certain financial ratios. ARI is in compliance with such
financial ratio requirements as of June 30, 1994.
Cash increased by $615 thousand during the three months ended June 30, 1994 as
a result of positive operating results and inventory reductions partially
offset by repayment of debt and capital expenditures. Cash decreased by $1.5
million during the three months ended June 30, 1993, as a result of payables
and debt reductions partially offset by cash received as a result of the
Transaction.
Capital expenditures were approximately $1.6 million and $122 thousand for the
three months ended June 30, 1994 and 1993, respectively. Future capital
expenditures are expected to be funded from internally generated funds.
During the three months ended June 30, 1994, ARI's maximum borrowing under its
$47.5 million line of credit was $34.5 million. At July 3, 1994, the
borrowing base under the line of credit was $27 million. ARI is intending to
refinance the existing revolver loan in the next twelve months either by
renewing the line with the existing lenders, or obtaining a new revolving
credit line from a new lender.
ARI's term and revolving debt agreements require ERLY to guarantee the debt of
ARI even though ARI management believes that ERLY will not be a source of
additional financing to ARI. These agreements also provide the lenders with
the option of accelerating repayment of the ARI debt and terminating the
agreements under certain conditions related to ERLY's ability to meet its
obligations as they come due, and to remain in compliance with its debt
agreements. Consequently, the ARI debt contains cross default provisions with
the debt of ERLY.
For several years prior to fiscal 1994, ERLY incurred substantial operating
losses. In addition, ERLY has certain obligations due in fiscal 1995 which it
will be unable to meet without selling assets or refinancing such
indebtedness. ERLY management has told ARI management it believes that it can
meet its obligations as they become due.
ARI's management does not believe that the new lenders will accelerate
repayment of the outstanding loans or terminate the agreements based on ERLY's
financial condition or ERLY's ability to comply with its debt covenants.
However, if the new lenders were to take such actions, ARI's management
Page 10<PAGE>
believes that ARI would be able to repay and/or replace such debt and
borrowing capacity as these obligations become due.
ARI's Board of Directors previously adopted a resolution authorizing its
management to sell 39 acres of land in Houston. Management believes that the
net realizable value of this property exceeds its carrying value. During the
fiscal year ended March 31, 1993, ARI took the property off the market until
after the Transaction occurred in order to allow ARI to market the property in
a more deliberate fashion. Management has had conversations with developers
interested in the property however, no decision has yet been made about how to
remarket the property. Management's intention is an orderly, outright sale to
a third party rather than to develop the property. However, ARI might
consider some form of joint venture with a developer in order to maximize the
property's value. ARI has the ability and intent to hold the property over a
normal marketing period. The proceeds of any such sale, when and if it
occurs, are required by the terms of ARI's debt agreements to be used to
reduce debt.
ARI's Preferred B and C stock carries annual cumulative, non-participating
dividends of approximately $5.2 million and $750 thousand respectively. No
dividends have been declared or paid as of June 30, 1994. As of June 30,
1994, the Preferred B dividends accumulated but not declared are $5.6 million
and the Preferred C dividends accumulated but not declared are $813 thousand.
On April 15, 1994, ARI entered into a joint venture agreement with Vinafood
II, a company owned by the Ministry of Agriculture of the government of
Vietnam. The agreement provides that ARI and Vinafood II will jointly operate
a mill in the city of Can Tho, Vietnam. The joint venture will be 55 percent
owned by ARI and 45 percent owned by Vinafood II. ARI's contribution to the
joint venture is expected to consist of management expertise, use of
tradenames, and equipment from its Freeport facility.
ARI's operations in Haiti have continued uninterrupted through a succession of
changes in Haitian governments, although there is no assurance that operations
will be allowed to continue uninterrupted. The current embargo on imports into
Haiti specifically excludes food products such as rice. ARI assets in Haiti at
June 30, 1994 were approximately $5 million.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - none
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Computation of Earnings Per Share.
(b) During the quarter ended June 30, 1994, Registrant did not file any Form
8-K Reports.
Page 11<PAGE>
Exhibit 11.1
AMERICAN RICE, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Thousands of Dollars Except Per Share Data)
Three Months
Ended June 30,
1994 1993
------- ---------
PRIMARY EARNINGS PER SHARE
Earnings (loss) before extraordinary ite $2,010 ($112)
Extraordinary item 0 9,318
------- --------
Net earnings 2,010 9,206
Less dividends on preferred stock:
Series B (1,295) (432)
Series C (188) (62)
------- --------
Earnings per share applicable to
common stock $527 $8,712
======= ========
Average common and common equivalent
shares outstanding:
Common 12,219 12,219
Preferred Series A 3,889 3,889
------- --------
16,108 16,108
======= ========
Primary earnings per share:
Earnings (loss) before
extraordinary item $0.03 ($0.04)
Extraordinary item 0.00 0.58
------- --------
Earnings per share applicable
to common stock $0.03 $0.54
======= ========
Continued on next page
<PAGE>
Exhibit 11.1 (Continued)
AMERICAN RICE, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Thousands of Dollars Except Per Share Data)
Three Months
Ended June 30,
1994 * 1993
------- ---------
FULLY DILUTED EARNINGS PER SHARE
Earnings (loss) before extraordinary ite $2,010 ($112)
Extraordinary item 0 9,318
------- ---------
Net earnings 2,010 9,206
Less dividends on preferred stock:
Series C (188) (62)
------- ---------
Earnings applicable to
common stock $1,822 $9,144
======= =========
Average common and common equivalent
shares outstanding:
Common 12,219 12,219
Preferred Series A 3,889 3,889
Preferred Series B 28,000 10,769
------- ---------
44,108 26,877
======= =========
Fully diluted earnings per share:
Earnings (loss) before
extraordinary item $0.04 ($0.01)
Extraordinary item 0.00 0.35
------- ---------
Earnings per share applicable
to common stock $0.04 $0.34
======= =========
* This calculation is presented in accordance with Regulation S-K item
601(b)(11) although it is contrary to paragraphs 14, 30, and 40 of APB
Opinion No. 15 because it produces an antidilutive result. The Opinion
provides that a computation on a fully diluted basis which results in
an improvement in earnings per share when compared to primary earnings
per share (antidilution) not be taken into account. Therefore, fully
diluted earnings per share reported in the income statement are the
same as primary earnings per share.
