SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-1
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 5, 1996
American Rice, Inc.
(Exact name of registrant as specified in its charter)
Texas
(State or other jurisdiction of incorporation)
0-17039 76-0231626
(Commission File Number) (I.R.S. Employer
Identification No.)
16825 Northchase, Suite 1600
Houston, Texas 77060
(Address of Principal (Zip Code)
Executive Offices)
(713)-873-8800
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
(a) On July 5, 1996, American Rice, Inc. (the "Registrant") acquired from
Campbell Soup Company and Vlasic Foods, Inc. (the "Sellers") certain assets of
Sellers' domestic olive business including real property, machinery and
equipment, inventory, grower advances, trademark rights, books and records,
contracts, permits and intangibles (the "Assets"). Sellers have no
relationship with the Registrant, its affiliates, the officers or directors of
Registrant, or any associate of any such officer or director. Registrant paid
approximately $28,400,000 for the Assets and Registrant assumed certain
liabilities of Sellers. The purchase price, determined by arms length
negotiations between Registrant and Sellers, is subject to adjustment. The
estimated purchase price was paid in cash at the closing on July 5, 1996, with
the exception of a credit of $700,000 which was previously paid by
Registrant's parent company, ERLY Industries Inc. ("ERLY") and a $732,400 note
payable by Registrant to Campbell Soup Company. The source of funds used for
the consideration was an $85.0 million line of credit provided to Registrant
by Harris Trust and Savings Bank, Individually and as Agent.
On July 5, 1996, Registrant also purchased from Campbell Soup Company 100% of
the issued and outstanding shares of common stock of Compania Envasadora
Loreto, S.A. (the "Shares"), which is engaged in the olive business in Spain.
Registrant paid approximately $9,300,000 for the Shares. The purchase price
was based on the estimated fair market value of the Shares on the closing
date, and is subject to adjustment. The purchase price was paid in cash at
the closing on July 5, 1996. The source of funds used for the consideration
was an $85.0 million line of credit provided to Registrant by Harris Trust and
Savings Bank, Individually and as Agent.
(b) The Assets were all used in Sellers' Ripe Olive and Green Olive
Businesses and Registrant intends to continue using the Assets for such
purposes.
(This item was originally filed with the Securities and Exchange Commission on
July 22, 1996. It is reproduced here for the convenience of the user.)
Page 1<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
RIPE AND GREEN OLIVES BUSINESS
A DIVISION OF CAMPBELL SOUP COMPANY
INDEX TO THE COMBINED FINANCIAL STATEMENTS
Page
----
Report of Independent Accountants ...................... 3
Combined Financial Statements:
Statements of Net Assets to be Acquired at
April 28, 1996 and July 30, 1995 .................. 4
Statements of Earnings for the nine month period
ended April 28, 1996 and for the year ended
July 30, 1995 ..................................... 5
Notes to the Combined Financial Statements ............. 6 - 10
Page 2<PAGE>
Report of Independent Accountants
To the Board of Directors of
Campbell Soup Company
We have audited the accompanying combined statements of net assets to be
acquired of the Ripe and Green Olives Business (the "Business"), a division of
Campbell Soup Company, as of April 28, 1996 and July 30, 1995, and the
combined statements of earnings of the Business for the nine month period
ended April 28, 1996 and the year ended July 30, 1995. These financial
statements are the responsibility of Campbell Soup Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying financial statements were prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in the current report on Form 8-K of American Rice,
Inc. on the basis of presentation as described in Note 1, and are not intended
to be a complete presentation of the financial position of the Business.
In our opinion, the combined statements of net assets to be acquired as of
April 28, 1996 and July 30, 1995 and the combined statements of earnings for
the nine month period ended April 28, 1996 and the year ended July 30, 1995
present fairly, in all material respects, the net assets to be acquired and
the results of operations of the Business as described in Note 1, in
conformity with generally accepted accounting principles.
PRICE WATERHOUSE LLP
Philadelphia, PA
September 11, 1996
Page 3<PAGE>
Ripe and Green Olives Business
A Division of Campbell Soup Company
Combined Statements of Net Assets to be Acquired
(dollars in thousands)
April 28, 1996 July 30, 1995
-------------- -------------
Cash and cash equivalents $ 461 $ 9,823
Accounts receivable, net of allowances
of $123 and $132, respectively 1,567 3,824
Accounts receivable - related parties 264 201
Receivable from growers 169 609
Inventories 39,418 35,109
Other current assets 296 287
-------------- -------------
Total current assets 42,175 49,853
Plant assets, net of depreciation 16,837 20,428
Intangible assets, net of amortization 44 42
-------------- -------------
Total assets $ 59,056 $ 70,323
-------------- -------------
Notes payable $ 2,752 $ -
Payable to suppliers and others 1,203 4,277
Payable to growers 536 10
Accrued liabilities 2,103 1,473
-------------- -------------
Total liabilities $ 6,594 $ 5,760
-------------- -------------
Net assets to be acquired $ 52,462 $ 64,563
============== =============
The accompanying notes are an integral part of the combined financial
statements
Page 4<PAGE>
Ripe and Green Olives Business
A Division of Campbell Soup Company
Combined Statements of Earnings
(dollars in thousands)
Nine Month
Period Ended Year Ended
April 28, 1996 July 30, 1995
-------------- -------------
Net Sales $ 58,527 $ 85,030
Cost and expenses
Cost of products sold 45,523 72,210
Marketing and selling expenses 10,525 13,180
Administrative expenses 1,713 3,044
Research and development expenses 576 1,143
Other expenses 652 897
-------------- -------------
Total costs and expenses 58,989 90,474
-------------- -------------
Loss Before Interest and Taxes (462) (5,444)
Interest expense 44 7
Interest income 367 472
-------------- -------------
Loss Before Taxes (139) (4,979)
-------------- -------------
Income taxes (409) -
-------------- -------------
Net Loss $ (548) $ (4,979)
============== =============
The accompanying notes are an integral part of the combined financial
statements
Page 5<PAGE>
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands)
1. BASIS OF PRESENTATION
On June 11, 1996, Campbell Soup Company ("Campbell") entered into agreements
to sell its Ripe and Green Olives Business (the "Business"), a Division of
Campbell Soup Company, to American Rice, Inc. ("ARI"). The Business processes,
distributes and markets ripe and green olives, primarily to retail consumers
in the United States. Ancillary agreements for transition services provided to
ARI were also negotiated. The closing date to complete the sale was July 5,
1996.
In order to consummate the transaction Campbell entered into an Asset Purchase
and Sale Agreement and a Share Purchase Agreement with ARI. Under the Asset
Purchase and Sale Agreement, ARI acquired certain assets and assumed certain
liabilities of Campbell's ripe and green olives business in the United States
("U.S. Business"). Under the Share Purchase Agreement, ARI acquired 100% of
the issued shares of Compania Envasadora de Loreto, S.A. ("CENLO"), a
manufacturer and exporter of green olives domiciled in Spain. CENLO was a
wholly owned subsidiary of Campbell.
Throughout the periods covered by the Combined Financial Statements, the
Business' operations were conducted and accounted for as part of Campbell's
Meal Enhancement Group ("MEG"). These Combined Financial Statements have been
carved out from Campbell's historical accounting records. All material
transactions between the U.S. Business and CENLO have been eliminated.
Under Campbell's centralized cash management system, cash requirements of the
U.S. Business were generally provided directly by Campbell, and cash generated
by the U.S. Business was generally remitted directly to Campbell. The
transaction systems (e.g., payroll, employee benefits, accounts payable) used
to record and account for cash disbursements for the U.S. Business were
provided by centralized Campbell organizations outside the defined scope of
the Business. Most of these corporate systems are not designed to track
assets/liabilities and receipts/payments on a business specific basis. In
addition, CENLO maintained separate transaction systems to record and account
for cash disbursements. Given these constraints and the fact that only certain
assets of the U.S. Business were sold, statements of financial position and
cash flows were not prepared.
The distribution operations of the Business are conducted at sites where other
Campbell manufacturing and distribution operations not included in the
Business are present. In addition, certain non-manufacturing operations of the
Business share facilities and space with other Campbell operations. At these
shared sites, only the assets of the Business (principally inventories) are
included in the Combined Statements of Assets to be Acquired.
The Combined Statements of Earnings include all revenues and costs directly
attributable to the Business, including costs for facilities, functions and
services used by the Business at shared sites. Costs for certain functions and
services performed by centralized Campbell organizations outside the defined
Page 6<PAGE>
scope of the Business are directly charged to the Business based on usage,
sales or the number of employees of the Business, as appropriate. The results
of operations also include allocations of 1) costs for administrative
functions and services performed on behalf of the Business by centralized
staff groups within Campbell, 2) research and development expense and 3)
Campbell's general corporate expenses and pension and certain other
postretirement benefit costs (See Note 2 for a description of the allocation
methodologies employed).
All of the allocations and estimates in the Combined Statements of Earnings
are based on assumptions that Campbell management believes are reasonable
under the circumstances. However, these allocations and estimates are not
necessarily indicative of the costs and expenses that would have resulted if
the Business had been operated as a separate entity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Income Recognition - Sales and related cost of products sold are included in
income and expense, respectively, when products are shipped to the customer.
Cash and Cash Equivalents - All highly liquid debt instruments purchased with
a maturity of three months or less are classified as Cash Equivalents.
Inventories - U.S. Business inventories are priced at the lower of cost or
market, with cost determined by the last-in, first-out (LIFO) method. CENLO
inventories are priced at the lower of average cost or market.
Plant Assets - Plant assets are stated at historical cost. Alterations and
major overhauls which extend the lives or increase the capacity of plant
assets are capitalized. The amounts for property disposals are removed from
plant assets and accumulated depreciation accounts and any resultant gain or
loss is included in earnings. Ordinary repairs and maintenance are charged to
operating costs.
Depreciation - Depreciation provided in costs and expenses is calculated using
the straight-line method. Buildings and machinery and equipment are
depreciated over periods not exceeding 45 years and 15 years, respectively.
Accelerated methods of depreciation are used for income tax purposes in
certain jurisdictions.
Income Taxes - The taxable income/loss of the U.S. Business was included in
the consolidated tax returns of Campbell. In 1995, the U.S. Business had a
book loss. No tax benefit was recognized. In 1996, the U.S. Business had book
income which was taxed at an effective rate of 38%.
The taxable income/loss of CENLO was included in statutory tax returns filed
in Spain. No tax benefit has been recognized in the combined financial
statements due to CENLO's tax losses in the periods covered by these financial
statements and prior.
Pensions - Campbell has noncontributory defined benefit plans covering
substantially all U.S. employees, including substantially all of the employees
of the U.S. Business. The benefits for these plans are based primarily on
employees' years of service and employees' compensation during the last years
Page 7<PAGE>
of employment. The cost of these plans for active employees was assigned to
the U.S. Business based on the number of employees and sales of the U.S.
Business.
CENLO's employees participate in a government sponsored plan.
Other Postretirement Benefits - Campbell provides certain health care and life
insurance benefits (postretirement benefits) to substantially all retired U.S.
employees and their dependents. These benefits are accounted for as they are
earned by active employees. The postretirement costs assigned to the U. S.
Business are based on the number of employees and sales of the U.S. Business.
Use of Estimates - Generally accepted accounting principles require management
to make estimates and assumptions that affect assets and liabilities,
contingent assets and liabilities, and revenues and expenses. Actual results
could differ from those estimates.
3. RELATED PARTY TRANSACTIONS
The Combined Statements of Earnings include significant allocations from
other Campbell organizations involving functions and services (such as finance
and accounting, cash management, data processing, research and development,
legal, human resources and purchasing) that were provided to the Business by
centralized Campbell organizations outside the defined scope of the Business.
The costs of these functions and services have been allocated to the Business
using methods that Campbell management believes are reasonable. Such
allocations are not necessarily indicative of the costs that would have been
incurred if the Business had been a separate entity. Total marketing and
selling expenses include $3,505 and $4,213 in allocated costs for the nine
month period ended April 28, 1996 and the year ended July 30, 1995
respectively. Administrative and research and development expenses are
composed solely of allocated general corporate and MEG expenses to the
Business.
4. INCOME TAXES
CENLO has net operating loss carryforwards of $880 at April 28, 1996 with
expiration dates ranging from 1999 to 2003. CENLO also has deferred tax assets
relating to temporary differences of $629 and tax credit carryforwards of $817
at April 28, 1996. No tax benefit has been recorded for these deferred tax
assets. They will be recognized in the period the tax benefit is realized.
5. INVENTORIES
1996 1995
--------- ---------
Raw materials, containers and supplies $ 10,654 $ 6,769
Finished products 34,703 33,429
Adjustment to LIFO basis (5,939) (5,089)
--------- ---------
$ 39,418 $ 35,109
Page 8<PAGE>
Inventories for which the LIFO method of determining cost is used represented
approximately 79% of consolidated inventories in 1996 and 87% in 1995.
During 1996 and 1995, inventory quantities were reduced. These reductions
resulted in liquidations of LIFO inventory quantities carried at lower costs
from prior years as compared with the cost of 1996 and 1995 purchases. These
liquidations resulted in decreased cost of products sold of $1,493 and $9,875,
respectively.
6. PLANT ASSETS
1996 1995
--------- ---------
Land $ 2,111 $ 2,136
Buildings 10,217 10,270
Machinery and equipment 36,208 37,547
Projects in progress - 489
Accumulated depreciation (31,699) (30,014)
--------- ---------
$ 16,837 $ 20,428
Depreciation provided in costs and expenses for all tangible assets used in
the Business, including those to be acquired, was $2,966 in 1996 and $3,893 in
1995.
7. NOTES PAYABLE
Notes payable comprises the following:
1996 1995
--------- ---------
Banks - Line of Credit $ 2,428 $ -
Other 324 -
--------- ---------
$ 2,752 $ -
The amount of the unused line of credit at April 28, 1996 was $812. The line
of credit covers loans for a period of one year at prime commercial interest
rates.
8. ACCRUED LIABILITIES
Accrued liabilities comprises the following:
1996 1995
--------- ---------
Salaries, wages and employee benefits $ 1,183 $ 1,037
Taxes payable 380 385
Other 540 51
--------- ---------
$ 2,103 $ 1,473
Page 9<PAGE>
9. COMMITMENTS AND CONTINGENCIES
The Business is currently subject to various lawsuits and claims with respect
to matters such as product liabilities, governmental regulations, and other
actions arising in the normal course of business. The ultimate liabilities, if
any, resulting from the lawsuits and claims existing at the Closing Date are
not expected to materially affect the results of the Business
Page 10<PAGE>
Item 7. Financial Statements and Exhibits (continued).
(b) Pro Forma Financial Information.
The following unaudited pro forma financial statements give effect to the
acquisition by American Rice, Inc. ("ARI") of the Ripe and Green Olive
Business of Campbell Soup Company ("CSC Olives") in a transaction accounted
for as a purchase. The total cost of the acquisition will be allocated to the
assets and liabilities of CSC Olives based on their fair market values. For
purposes of the pro forma financial statements, such allocations have been
made based upon valuations and studies that have not been finalized.
Accordingly, the allocation of the purchase price included in the pro forma
financial statements is preliminary
The unaudited pro forma balance sheet is based on the balance sheet of ARI and
a Combined Statement of Net Assets to be Acquired from CSC Olives and has been
prepared to reflect the acquisition as if it had occurred on June 30, 1996.
The unaudited pro forma statements of earnings are based on the individual
statements of earnings of ARI and CSC Olives and combine the results of
operations of the two entities for the three months ended June 30, 1996 and
the year ended March 31, 1996 as if the acquisition had occurred on April 1,
1995. These unaudited pro forma financial statements should be read in
conjunction with the historical financial statements of American Rice, Inc.
and of CSC Olives, the latter filed herein. This information is prepared for
informational purposes only and is not necessarily indicative of the actual
results that would have been achieved had the CSC Olives acquisition and the
related financing occurred on these dates, or of future results. Actual
results of CSC Olives operations will be included with ARI's results
subsequent to July 5, 1996
Page 11<PAGE>
AMERICAN RICE, INC. AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1996
(Thousands of Dollars)
(Unaudited)
Pro Forma
ARI CSC Olives Adjustments Combined
----------------------------------------------
ASSETS
Current assets:
Cash $4,229 $1,711 $5,940
Accounts receivable 34,540 1,735 36,275
Inventories 64,868 36,861 (13,316) a 88,413
Prepaid expenses 1,134 1,134
Deferred income taxes 2,982 2,982
Net assets of Houston
property held for sale 13,535 13,535
--------- --------- --------- ---------
Total current assets 121,288 40,307 (13,316) 148,279
Other assets 20,998 29 400 b 21,427
Receivable from ERLY 23,505 (700) d 22,805
Property, plant and
equipment, net 41,970 16,646 529 c 59,145
--------- --------- --------- ---------
Total assets $207,761 $56,982 ($13,087) $251,656
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $21,261 $2,512 $36,754 d $60,527
Accounts payable and
accrued expenses 51,216 3,897 55,113
Current portion of
long-term debt 103 244 d 347
--------- --------- --------- ---------
Total current liab. 72,580 6,409 36,998 115,987
Long-term debt 95,847 488 d 96,335
Deferred income taxes 3,575 3,575
Stockholders' equity:
Preferred stock 3,878 3,878
Common stock 2,444 2,444
Addl. paid-in capital 25,286 25,286
Retained earnings 4,151 4,151
--------- --------- --------- ---------
Stockholders' equity 35,759 - - 35,759
--------- --------- --------- ---------
Total liabilities and
stockholders' equity $207,761 $6,409 $37,486 $251,656
========= ========= ========= =========
The accompanying notes are an integral part of the combined pro forma
financial statements
Page 12<PAGE>
AMERICAN RICE, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996
(Thousands of Dollars)
(Unaudited)
Pro Forma
ARI CSC Olives Adjustments Combined
----------------------------------------------
Net sales $97,407 $18,222 - $115,629
Cost of sales 90,864 18,324 498 e
(320) f 109,366
--------- --------- --------- ---------
Gross profit (loss) 6,543 (102) (178) 6,263
Selling, general and
administrative expenses 6,425 2,523 (757) g
5 h 8,196
--------- --------- --------- ---------
Operating income (loss) 118 (2,625) 574 (1,933)
Interest expense 4,619 58 859 i 5,536
Interest income (566) (28) 28 i (566)
Other (income) expense 121 218 339
--------- --------- --------- ---------
Earnings (loss) before
income taxes (4,056) (2,873) (313) (7,242)
Provision for income taxes
(benefit) (1,460) - (1,147) j (2,607)
--------- --------- --------- ---------
Net earnings (loss) ($2,596) ($2,873) $834 ($4,635)
========= ========= ========= =========
The accompanying notes are an integral part of the combined pro forma
financial statements
Page 13<PAGE>
AMERICAN RICE, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1996
(Thousands of Dollars)
(Unaudited)
Pro Forma
ARI CSC Olives Adjustments Combined
----------------------------------------------
Net sales $393,775 $84,124 - $477,899
Cost of sales 355,725 68,969 1,991 e
(1,280) f 425,405
--------- --------- --------- ---------
Gross profit 38,050 15,155 (711) 52,494
Selling, general and
administrative expenses 24,775 15,199 (5,402) g
20 h 34,592
Provision for loss on
disposal of properties 7,200 7,200
--------- --------- --------- ---------
Operating income (loss) 6,075 (44) 4,671 10,702
Interest expense 17,438 17 3,436 i 20,891
Interest income (1,773) (603) 603 i (1,773)
Other (income) expense (381) 903 522
--------- --------- --------- ---------
Earnings (loss) before
income taxes (9,209) (361) 632 (8,938)
Provision for income taxes
(benefit) (3,315) 97 j (3,218)
--------- --------- --------- ---------
Net earnings (loss) ($5,894) ($361) $535 ($5,720)
========= ========= ========= =========
The accompanying notes are an integral part of the combined pro forma
financial statements.
Page 14<PAGE>
AMERICAN RICE, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
The adjustments to the Pro Forma Combined Balance Sheet reflect the following:
a. Finished products inventories are recorded at estimated selling prices less
the costs to sell and a reasonable profit allowance. Raw materials, containers
and supplies are recorded at current replacement costs.
b. Trademarks are recorded at estimated fair market value.
c. Property, plant and equipment is recorded at estimated current replacement
cost less estimated accumulated depreciation.
d. The transaction was financed by a combination of increases in notes
payable, a deposit by ARI's parent, ERLY Industries Inc., and seller
financing.
The adjustments to the Pro Forma Combined Statements of Operations reflect the
following:
e. The LIFO method was used by Campbell for accounting for U.S. inventories,
whereas, ARI will use the FIFO method. This adjustment eliminates estimated
LIFO liquidations recorded by CSC Olives which resulted in decreased cost of
products sold.
f. Depreciation expense is adjusted to reflect ARI's cost of property, plant
and equipment acquired.
g. Selling, general and administrative expenses of CSC Olives were reduced
for marketing and selling and administrative expenses allocated from Campbell
Soup Company and were increased by estimated increases in ARI's incremental
expenses to manage these aspects of the acquired business.
h. Trademarks are amortized over their estimated useful life.
i. CSC Olives interest expense and income is eliminated and interest
expense is added for ARI's estimated borrowing costs.
j. The provision for income taxes is adjusted to ARI's estimated effective
rate
Page 15<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: September 20, 1996 American Rice, Inc.
--------------------
(Registrant)
By: /s/ Joseph E. Westover
----------------------
Joseph E. Westover
Vice President and
Controller
Page 16<PAGE>
