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 September 30, 1997
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)
411 North Sam Houston Parkway East
Houston, Texas 77060
(Address of Principal Executive Offices) (Zip Code)
(281) 272-8800
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 November 13, 1997 is 2,443,859 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 Six Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
----------------------------------------
Net sales $93,196 $121,513 $206,581 $218,920
Cost of sales 80,504 106,346 182,433 197,210
----------------------------------------
Gross profit 12,692 15,167 24,148 21,710
Selling, general and
administrative expenses 9,430 8,442 18,309 14,867
----------------------------------------
Operating income 3,262 6,725 5,839 6,843
Interest expense 6,571 5,569 12,692 10,188
Interest income (604) (600) (1,278) (1,166)
Other (income) and expense 82 231 141 352
----------------------------------------
Earnings (loss) before
income taxes (2,787) 1,525 (5,716) (2,531)
Provision for
income taxes (benefit) (1,051) 549 (2,193) (911)
----------------------------------------
Net earnings (loss) ($1,736) $976 ($3,523) ($1,620)
========================================
Preferred stock dividend
requirements 1,483 1,483 2,965 2,965
----------------------------------------
Net loss applicable
to common stock ($3,219) ($507) ($6,488) ($4,585)
========================================
Loss per applicable
common and common equivalent
share:
Primary ($1.32) ($.21) ($2.65) ($1.88)
========================================
Fully diluted ($1.32) ($.21) ($2.65) ($1.88)
========================================
See Notes to Consolidated Financial Statements
Page 1<PAGE>
AMERICAN RICE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
September 30, March 31,
1997 1997
----------------------
ASSETS (Unaudited)
Current assets:
Cash $2,923 $3,235
Accounts receivable, net 62,832 64,062
Inventories
Finished goods 68,423 75,969
Raw materials 46,633 46,289
Prepaid expenses 4,554 2,441
Deferred income taxes 2,791 2,791
----------------------
Total current assets 188,156 194,787
Other assets 21,313 21,216
Receivable from ERLY 24,755 24,166
Property, plant and equipment, net 58,429 57,959
----------------------
Total assets $292,653 $298,128
======================
Continued on next page
See Notes to Consolidated Financial Statement
Page 2<PAGE>
AMERICAN RICE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Thousands of Dollars, except share amounts)
September 30, March 31,
1997 1997
----------------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 73,387 $ 77,616
Accounts payable 53,649 57,845
Accrued expenses 18,718 18,733
Current portion of long-term debt 1,454 438
----------------------
Total current liabilities 147,208 154,632
Long-term debt 103,971 96,144
Deferred income taxes 3,676 5,905
Commitments and contingencies (Note 5) - -
Stockholders' equity:
Preferred stock, $1.00 par value; 4,000,000
shares authorized;
Series A- 777,777 convertible shares issued
and outstanding, liquidation preference
of $19,989 778 778
Series B- 2,800,000 convertible shares issued
and outstanding, liquidation preference
of $14,000 2,800 2,800
Series C- 300,000 shares issued
and outstanding, liquidation preference
of $1,500 300 300
Common stock, $1.00 par value; 10,000,000
shares authorized; 2,443,892 shares
issued and outstanding 2,444 2,444
Paid-in capital 25,286 25,286
Retained earnings 7,710 11,233
Cumulative foreign currency translation
adjustments (1,520) (1,394)
----------------------
Total stockholders' equity 37,798 41,447
----------------------
Total liabilities and stockholders' equity $292,653 $298,128
======================
See Notes to Consolidated Financial Statement
Page 3<PAGE>
AMERICAN RICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
Six Months
Ended September 30,
1997 1996
----------------------
OPERATING ACTIVITIES:
Net earnings ($3,523) ($1,620)
Adjustments to reconcile net earnings to net cash
provided by (used in) in operating activities:
Depreciation and amortization 3,755 3,237
Mortgage note discount accretion 328 284
(Gain) loss on sales of property (150) 138
Deferred income taxes, net (2,229) (1,141)
Changes in assets and liabilities that
provided (used) cash:
Accounts receivable 1,230 (12,410)
Inventories 7,202 9,266
Prepaid expenses (2,113) (643)
Other assets (949) (1,537)
Receivable from ERLY (589) 374
Accounts payable (4,196) (1,548)
Accrued expenses (15) 4,414
----------------------
Net cash provided by
operating activities (1,249) (1,186)
INVESTING ACTIVITIES:
Property, plant and equipment additions (3,373) (1,998)
Campbell olive acquisition - (33,952)
Proceeds from sales of assets 150 2,299
----------------------
Net cash used in
investing activities (3,223) (33,651)
FINANCING ACTIVITIES:
Increase (decrease) in notes payable (4,229) 34,646
Proceeds from issuance of long-term debt 9,080 233
Repayment of long-term debt (565) (137)
Other, net (126) 3
----------------------
Net cash provided by (used in)
financing activities 4,160 34,745
----------------------
NET INCREASE IN CASH (312) (92)
CASH:
Beginning of the period 3,235 2,803
----------------------
End of the period $2,923 $2,711
======================
See Notes to Consolidated Financial Statement
Page 4<PAGE>
<TABLE>
AMERICAN RICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Six Months Ended September 30, 1997
(Thousands of Dollars)
(Unaudited)
<CAPTION>
Foreign Total
Additional Currency Stock -
Preferred Common Paid-in Retained Translation Holders'
Stock Stock Capital Earnings Adjustments Equity
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance April 1, 1997 $3,878 $2,444 $25,286 $11,233 ($1,394) $41,447
Net loss - - - (3,523) - (3,523)
Foreign currency
translation - - - - (126) (126)
--------- --------- --------- --------- --------- ---------
Balance September 30, 1997 $3,878 $2,444 $25,286 $7,710 ($1,520) $37,798
========= ========= ========= ========= ========= =========
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
Page 5<PAGE>
AMERICAN RICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The consolidated financial statements presented herein at September 30, 1997
and for each of the three and six month periods ended September 30, 1997 and
1996 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 periods are
not necessarily indicative of results for the full year. The consolidated
balance sheet at March 31, 1997 is derived from the March 31, 1997 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 Commission. These financial statements should be read in conjunction
with the audited financial statements and notes thereto included in American
Rice, Inc.'s ("ARI" or the "Company") Annual Report on Form 10-K for the
fiscal year ended March 31, 1997.
2. Olive Business Acquisition
On July 5, 1996, the Company acquired the domestic and foreign olive business
from Campbell Soup Company ("CSC Olives") for approximately $38 million (the
"Olive Acquisition"). Assets acquired include domestic inventories and fixed
assets, all of the outstanding common stock of Compania Envasadora Loreto,
S.A., a Spanish company which comprises the foreign olive business and fifty-
one percent of the stock of Sadrym California, a marketer of olive processing
machinery. The purchase was funded primarily from ARI's credit facilities. The
Olive Acquisition was accounted for as a purchase, and the results of
operations of the acquired business are included in ARI's consolidated
financial statements after July 5, 1996.
Operating results reflected in the accompanying financial statements do not
include CSC Olives operating activities before July 5, 1996. The following
summarized unaudited pro forma information assumes the Olive Acquisition
occurred on the first day of the operating period presented (thousands of
dollars, except per share):
Three Months Six Months
Ended September 30, Ended September 30,
1996 1996
-------- --------
Net Sales $122,314 $237,943
Net Earnings (loss) 865 (4,254)
Earnings (loss) per share:
Primary $(.25) $(2.95)
Fully diluted (.25) (2.95)
3. Notes Payable
ARI has an $85 million revolving credit line with Harris Trust and Savings
Bank ("Harris"). Funds available for borrowing (including letters of credit of
up to $20.0 million) under this revolving credit loan at any time may not
exceed 85% of eligible accounts receivable (or 90% of accounts receivable
backed by acceptable letters of credit from customers), 75% of eligible rough
Page 6<PAGE>
rice inventory, and 70% of eligible finished goods inventory. The line is
collateralized by substantially all of ARI's accounts receivable and
inventory. In addition, this facility contains restrictive covenants which,
among other things, require the attainment of certain financial ratios and
provide limitations on capital expenditures, lease obligations, and prohibit
dividend payments. As of September 30, 1997, ARI was not in compliance with
certain of the covenants related to interest coverage, adjusted funded debt
and adjusted tangible net worth. Subsequently, the Company obtained waivers
from compliance with these covenants from Harris covering the period up
to and including November 29, 1997.
The line also contains certain cross default provisions with
the indenture for the 13.0% mortgage notes due 2002. The Harris revolving
credit line bears interest at ARI's option at either the prime rate or the
London Interbank Offered Rate plus an applicable margin based upon ARI's
adjusted funded debt ratio as defined, with outstanding principal and interest
due upon termination of the agreement, which continues in full force and
effect until May 31, 1999 or until terminated with five days written notice
from ARI subsequent to May 31, 1997. At September 30, 1997 and March 31, 1997
respectively, the outstanding balances on this loan were $69.1 million and
$71.5 million, bearing interest at the prime rate of 8.5%.
4. Statement of Cash Flows
Borrowings under the revolving credit line in the six months ended September
30, 1997 and 1996 totaled $96.7 million and $166.3 million, respectively, and
repayments during the same periods totaled $100.9 million and $131.7 million,
respectively. ARI made cash payments for interest and financing fees of
approximately $10.9 million and $9.3 million during the six months ended
September 30, 1997 and 1996, respectively. ARI did not pay any federal or
state income taxes during the six months ended September 30, 1997 and paid
$230 thousand during the six months ended September 30, 1996.
5. Commitments and Contingencies
In April 1995, a lawsuit was filed in the district court of Harris County,
Texas by Kingwood Lakes South, L.P. and Tenzer Company, Inc., as plaintiffs
against Gerald D. Murphy and Douglas A. Murphy. The Company and ERLY were
named as defendants in the lawsuit by amendment to the original petition in
September 1995. This lawsuit is a dispute between the general partner of a
proposed real estate development and Gerald D. Murphy and Douglas A. Murphy
over their contractual obligations, if any, to the partnership. The Company
and ERLY were named as defendants in the lawsuit allegedly because of their
efforts to obtain restraining orders to prevent threatened foreclosures on the
ERLY Common Stock pledged as collateral by Gerald D. Murphy, which threatened
ARI's Note financing. The lawsuit also alleges certain other activities by the
Company and ERLY, including knowing participation in breaches of fiduciary
duties, fraud, and civil conspiracy with Gerald D. Murphy and Douglas A.
Murphy. A restraining order was issued preventing foreclosure on the shares
pledged by Mr. Murphy but such restraining order was subsequently terminated.
The plaintiffs then obtained 333,333 shares of the pledged stock which was
thereafter sold. In order to minimize legal expenses, the Company, ERLY,
Gerald D. Murphy and Douglas A. Murphy are using common legal counsel in this
matter. Gerald D. Murphy has agreed to pay up to 50% of such expenses after
any insurance recoveries as determined by the members of the board of
directors not a party to the lawsuit. On September 9, 1997, the jury in this
litigation returned two alternative verdicts in favor of the plaintiffs and
the plaintiffs were required to elect between those verdicts. The plaintiffs
elected the jury's tort claim verdict in the amount of $9,657,000, rendered
jointly and severally against Gerald D. Murphy, Douglas A. Murphy, the
Company, and ERLY, along with separate awards of punitive damages against
Gerald D. Murphy of $3,000,000, Douglas A. Murphy of $500,000, the Company of
$100,000, and ERLY of $100,000. The defendants have filed motions before the
Page 7<PAGE>
trial court for judgment in defendants' favor not withstanding the verdict and
for a reduction of the amounts awarded by the jury based, in part, on the
absence of evidence to support those amounts. In the event any judgment is
entered against the Company or ERLY, the Company and ERLY intend to appeal
that judgment. At this time, prior to the trial court's rulings on the
defendants' expected motions to set aside or reduce the verdicts, the Company
cannot state whether or not the outcome of this litigation may have a material
impact on its or ERLY's financial condition. It may be some time before an
actual final judgment is entered.
On July 24, 1997, The Powell Group, a diversified holding company based in
Baton Rouge, Louisiana (the "Powell Group"), through its wholly owned
subsidiary, Farmers Rice Milling Company, Inc., a Louisiana corporation
("Farmers Rice") filed a shareholder derivative complaint purportedly on
behalf of the Company and ERLY against Gerald D. Murphy, Douglas A. Murphy,
the Company, and ERLY in the United States District Court, Central District of
California. Farmers Rice recently amended the complaint to add all the other
directors of the Company and ERLY as defendants. In the complaint, Farmers
Rice alleges (1) breach of fiduciary duty, (2) waste of corporate assets and
(3) illegal corporate loan. The derivative complaint further requests
injunctive relief prohibiting the Company and ERLY from making allegedly
ongoing litigation defense payments on behalf of Gerald D. Murphy and Douglas
A. Murphy and requiring ongoing indemnification by such individuals to the
Company and ERLY. Both the Company and ERLY are nominal defendants with the
lawsuit being brought on behalf of the Company and ERLY against Gerald D.
Murphy and Douglas A. Murphy. The complaint principally challenges certain
litigation expenditures incurred by the Company in connection with litigation
to which the Company, ERLY, Gerald D. Murphy, and Douglas A. Murphy are
parties, which is described in the immediately preceding paragraph. While the
complaint alleges that such expenditures were improperly incurred, in fact,
all expenditures and the involvement of the Company in the underlying
litigation were fully authorized by the Company's Board of Directors. The
Company filed a motion to dismiss the lawsuit due to the Powell Group's
failure to either make a demand on the board of directors to take action with
respect to the wrongs alleged or to very specifically allege the facts which
demonstrate why a demand on the board would be futile. The Company also argued
that the issues in the derivative action were issues which the disinterested
directors in pre-litigation resolutions had taken steps to resolve, such that
these issues were properly dealt with in the first instance by the boards
themselves. The Court agreed and dismissed the complaint without prejudice.
The Company does not expect the Powell Group to re-file the lawsuit.
The Company was named as a co-defendant with Messrs. John M. Howland and
George E. Prchal in a lawsuit filed in February 1997 in the U.S. District
Court for the Southern District of Texas by Rice Milling & Trading
Investments, LTD., an Isle of Man Company ("RMTI"). In 1994, ARI entered into
an agreement with RMTI for processing the Company's rice through RMTI's
facility in Jeddah, Saudi Arabia. Messrs. Howland and Prchal were officers of
RMTI through January 1997, and prior to October 1993 they were officers of
ARI. Messrs. Howland and Prchal were directors of ARI from October 1993
through October 1997. In January 1997, RMTI ceased shipping ARI's rice through
its Jeddah facility and terminated the employment of Messrs. Howland and
Prchal. The lawsuit alleges among other things ARI failed to perform under the
terms of the agreement and Messrs. Howland and Prchal breached their fiduciary
duties to RMTI. On April 21, 1997, ARI obtained a preliminary injunction from
the U.S. District Court for the Southern District of Texas ordering RMTI to
desist and refrain from purchasing rice of U.S. or Vietnam origin from any
supplier other than ARI and from introducing and/or marketing rice of U.S. and
Vietnam origin in Saudi Arabia targeted against ARI's U.S. origin and Vietnam
origin rice. In October 1997, ARI voluntarily terminated this injunction. RMTI
Page 8<PAGE>
has added claims of fraud, participation in breach of duty, and tortuous
interference against ARI. The date for the trial has not been set.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results Of Operations
Overview
The Company purchases and processes rough rice into branded and commodity rice
for sale in both international and domestic markets. Demand for branded rice
products is relatively constant and margins are typically higher than those
for commodity rice products. Demand for commodity rice products is relatively
constant globally, but demand for U.S. grown commodity rice is dependent upon
supply and cost relative to other sources of supply. Supply and costs for both
branded and commodity products depend on many factors including governmental
actions, crop yields and weather, and such factors can persist through one or
more fiscal years.
In general, management believes that it is insulated from many of the effects
of rough rice price fluctuations for the following reasons: (i) the Company's
net sales are proportionately weighted toward the relatively higher margin
branded products, (ii) approximately one-half of the Company's rough rice
purchases, excluding rough rice milled under contract for others, are made as
spot market purchases and matched against commodity orders at prices providing
a favorable margin to costs, (iii) the Company's high rice inventory turnover
rate of approximately five times per year reduces the Company's exposure to
seasonal price fluctuations, and (iv) the Company's diversity of rice sources
and rice customers increases the ability of the Company to take advantage of
supply and demand imbalances.
On July 5, 1996, the Company acquired the domestic and foreign olive business
of Campbell Soup Company for approximately $38 million. Assets acquired
include domestic inventories and fixed assets, all of the outstanding common
stock of Compania Envasadora Loreto, S.A., a Spanish company which comprises
the foreign olive business, and fifty-one percent of the stock of Sadrym
California, a marketer of olive processing machinery. The purchase was funded
primarily from ARI's credit facilities. The Olive Acquisition is accounted for
as a purchase, and the results of operations of the acquired business are
included in the Company's consolidated financial statements after July 5,
1996.
Historically, sales of olives have pronounced seasonal elements, with higher
sales occurring in conjunction with holiday consumption. Accordingly, because
the quarterly period ending December 31 contains both the Thanksgiving and
Christmas holidays, the two holidays of highest consumption, it will have
significantly higher sales than the other three quarters of the fiscal year.
Margins normally follow the seasonal pattern of sales.
Three Months Ended September 30, 1997 Compared to
Three Months Ended September 30, 1996
Net Sales. Net sales decreased $28.3 million, or 23.3%, from $121.5 million in
the September quarter of fiscal 1997 to $93.2 million in the September quarter
of fiscal 1998. The sales decrease was composed of $33.3 million and $3.1
million in declines in export and U.S. rice sales, respectively, partially
offset by $8.1 million in increases in sales of olives. Export sales declines
were experienced in four Middle East markets and in Africa.
Gross Profit. Gross profit was 13.6% of sales in the fiscal 1998 quarter and
Page 9<PAGE>
12.5% for the same period in 1997. Gross profit declined $2.5 million from
$15.2 million in the fiscal 1997 quarter to $12.7 million in fiscal 1998 due
primarily to lower sales.
Selling, general and administrative expense. Selling, general and
administrative expense increased $1.0 million to $9.4 million in the fiscal
1998 quarter due primarily to higher advertising and promotional expenses.
Interest. Interest expense increased $1.0 million from $5.6 million in the
fiscal 1997 period to $6.6 million in fiscal 1998 due primarily to higher
average balances outstanding. Interest expense in both periods includes
amortization of capitalized debt issuance costs and accretion of the $6
million original issue discount on the $100 million in principal amount of
13.0% mortgage notes due 2002.
Six Months Ended September 30, 1997 Compared to
Six Months Ended September 30, 1996
Net Sales. Net sales decreased $12.3 million, or 5.6%, from $218.9 million in
fiscal 1997 to $206.6 million in fiscal 1998. The sales decrease was composed
of $32.6 million and $4.0 million in declines in export and U.S. rice sales,
respectively, partially offset by and $24.3 million in increases in sales of
olives. Export sales declines were experienced primarily in Middle East
markets and in Africa.
Gross Profit. Gross profit was 11.7% of sales in fiscal 1998 and
9.9% for the same period in 1997. Gross profit increased $2.4 million from
$21.7 million in fiscal 1997 to $24.1 million in fiscal 1998, due primarily to
the Olive Acquisition.
Selling, general and administrative expense. Selling, general and
administrative expense increased $3.4 million to $18.3 million in fiscal 1998
due primarily to higher advertising and promotional expenses associated with
the Olive Acquisition.
Interest. Interest expense increased $2.5 million to $12.7 million in fiscal
1998 due primarily to higher average balances outstanding.
Liquidity and Capital Resources
ARI requires liquidity and capital primarily for the purchase of raw materials
and to invest in property, plant and equipment necessary to support
operations. Historically, ARI has financed both working capital and capital
expenditures through internally generated funds and by funds provided by
credit lines.
ARI has an $85 million revolving credit line with Harris Trust and Savings
Bank ("Harris"). Funds available for borrowing (including letters of credit of
up to $20.0 million) under this revolving credit loan at any time may not
exceed 85% of eligible accounts receivable (or 90% of accounts receivable
backed by acceptable letters of credit from customers), 75% of eligible rough
rice inventory, and 70% of eligible finished goods inventory. The line is
collateralized by substantially all of ARI's accounts receivable and
inventory. In addition, this facility contains restrictive covenants which,
among other things, require the attainment of certain financial ratios and
provide limitations on capital expenditures, lease obligations, and prohibit
dividend payments. As of September 30, 1997, ARI was not in compliance with
certain of the covenants related to interest coverage, adjusted funded debt
and adjusted tangible net worth. Subsequetly, the Company obtained waivers
from compliance with these covenants from Harris covering the period up to
and including November 29, 1997.
Page 10<PAGE>
The line also contains certain cross default provisions with
the indenture for the 13.0% mortgage notes due 2002. The Harris revolving
credit line bears interest at ARI's option at either the prime rate or the
London Interbank Offered Rate plus an applicable margin based upon ARI's
adjusted funded debt ratio as defined, with outstanding principal and interest
due upon termination of the agreement, which continues in full force and
effect until May 31, 1999 or until terminated with five days written notice
from ARI subsequent to May 31, 1997. At September 30, 1997 and March 31, 1997
respectively, the outstanding balances on this loan were $69.1 million and
$71.5 million, bearing interest at the prime rate of 8.5%. The borrowing base
under this line of credit at September 30, 1997 was $79.6 million and the
maximum borrowing during the six months ended September 30, 1997 was $84.7
million. The Company has requested a $10 million increase in the line of
credit.
In July, 1997 ARI completed a sale and leaseback transaction with for
substantially all of its olive processing machinery and equipment located in
Visalia, California (the "Visalia Lease"). ARI realized proceeds from the sale
of approximately $8.9 million which were used for operating purposes. ARI has
leased these assets from for a seven year term with a two year extension
option. The transaction is being accounted for as a capital lease with the
proceeds recorded as a liability that is reduced by lease payments over the
lease term.
In August, 1997 ARI reached an agreement with Aqaba Packaging Company ("APC")
whereby APC will purchase, receive, store, process, and bag rice shipped in
bulk to APC's Rice Terminal at Aqaba, Jordan. Additionally, the agreement
provides that ARI can purchase rice from this facility for delivery to ARI's
customers in the Middle East, primarily Saudi Arabia. The Company is currently
discussing various financing arrangements to insure that sufficient levels of
inventories are maintained by APC to meet ARI's and APC's sales requirements
in Middle East markets.
In the quarter ended June 30 and currently, the liquidity of the Company has
been impaired primarily as a result of the loss of financing associated with
the RMTI agreement (see Note 5 to the Financial Statements and Part II - Legal
Proceedings). Without the RMTI agreement, the general corporate financing
required for the Company's sales and marketing in Saudi Arabia is
significantly greater. The Company has had to utilize its credit lines to
maintain the inventory position for its Saudi Arabia sales and has thus
reduced the availability for its domestic activities. In addition to
increasing the use of the Company's credit lines, the Company has also
experienced an increase in its accounts payable. In addition to the Visalia
Lease and the APC agreement discussed above, management is exploring several
other opportunities to improve liquidity. However, no assurances can be given
the Company can conclude the other arrangements being considered.
The Mortgage Notes provide for interest payments semiannually on February 28th
and August 31st, accruing fixed interest at an annual rate of 13.0%, an
effective yield rate of 14.4%. In addition to fixed interest, the Mortgage
Notes bear contingent interest of 4.0% of consolidated cash flow (as defined)
up to a limit of $40.0 million of consolidated cash flow during the fiscal
year in which such interest accrues. Contingent interest accrues in each
semiannual period (as defined) in which consolidated cash flow in such period
and the immediately preceding semiannual period is equal to or greater than
$20.0 million. Contingent interest is payable semiannually, but ARI may elect
to defer all or a portion of any such payment to the extent that (a) the
payment of such portion of contingent interest will cause ARI's adjusted fixed
charge coverage ratio (as defined) for the two consecutive applicable
semiannual periods to be less than 2.0:1 and (b) the principal of the Mortgage
Notes corresponding to such contingent interest has not then matured and
Page 11<PAGE>
become due and payable. The consolidated cash flow for the quarter ended
September 30, 1997 was $5.0 million. Contingent interest of $376.5 thousand
was accrued during the quarter. The total contingent interest accrued and
unpaid at September 30, 1997 was $1.4 million. Additional contingent interest
of $445.5 thousand will accrue over the period from October 1, 1997 to
February 28, 1998. To date, no contingent interest has been paid because the
applicable fixed cost coverage ratio permits deferral of payment.
ARI's Preferred B and C stock carries annual cumulative, non-participating
dividends of $5.2 million and $750 thousand respectively. No dividends have
been declared or paid as of September 30, 1997. As of September 30, 1997, the
Preferred B dividends accumulated but not declared are $22.5 million and the
Preferred C dividends accumulated but not declared are $3.3 million.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In April 1995, a lawsuit was filed in the district court of Harris County,
Texas by Kingwood Lakes South, L.P. and Tenzer Company, Inc., as plaintiffs
against Gerald D. Murphy and Douglas A. Murphy. The Company and ERLY were
named as defendants in the lawsuit by amendment to the original petition in
September 1995. This lawsuit is a dispute between the general partner of a
proposed real estate development and Gerald D. Murphy and Douglas A. Murphy
over their contractual obligations, if any, to the partnership. The Company
and ERLY were named as defendants in the lawsuit allegedly because of their
efforts to obtain restraining orders to prevent threatened foreclosures on the
ERLY Common Stock pledged as collateral by Gerald D. Murphy, which threatened
ARI's Note financing. The lawsuit also alleges certain other activities by the
Company and ERLY, including knowing participation in breaches of fiduciary
duties, fraud, and civil conspiracy with Gerald D. Murphy and Douglas A.
Murphy. A restraining order was issued preventing foreclosure on the shares
pledged by Mr. Murphy but such restraining order was subsequently terminated.
The plaintiffs then obtained 333,333 shares of the pledged stock which was
thereafter sold. In order to minimize legal expenses, the Company, ERLY,
Gerald D. Murphy and Douglas A. Murphy are using common legal counsel in this
matter. Gerald D. Murphy has agreed to pay up to 50% of such expenses after
any insurance recoveries as determined by the members of the board of
directors not a party to the lawsuit. On September 9, 1997, the jury in this
litigation returned two alternative verdicts in favor of the plaintiffs and
the plaintiffs were required to elect between those verdicts. The plaintiffs
elected the jury's tort claim verdict in the amount of $9,657,000, rendered
jointly and severally against Gerald D. Murphy, Douglas A. Murphy, the
Company, and ERLY, along with separate awards of punitive damages against
Gerald D. Murphy of $3,000,000, Douglas A. Murphy of $500,000, the Company of
$100,000, and ERLY of $100,000. The defendants have filed motions before the
trial court for judgment in defendants' favor not withstanding the verdict and
for a reduction of the amounts awarded by the jury based, in part, on the
absence of evidence to support those amounts. In the event any judgment is
entered against the Company or ERLY, the Company and ERLY intend to appeal
that judgment. At this time, prior to the trial court's rulings on the
defendants' expected motions to set aside or reduce the verdicts, the Company
cannot state whether or not the outcome of this litigation may have a material
impact on its or ERLY's financial condition. It may be some time before an
actual final judgment is entered.
On July 24, 1997, The Powell Group, a diversified holding company based in
Baton Rouge, Louisiana (the "Powell Group"), through its wholly owned
subsidiary, Farmers Rice Milling Company, Inc., a Louisiana corporation
("Farmers Rice") filed a shareholder derivative complaint purportedly on
behalf of the Company and ERLY against Gerald D. Murphy, Douglas A. Murphy,
Page 12<PAGE>
the Company, and ERLY in the United States District Court, Central District of
California. Farmers Rice recently amended the complaint to add all the other
directors of the Company and ERLY as defendants. In the complaint, Farmers
Rice alleges (1) breach of fiduciary duty, (2) waste of corporate assets and
(3) illegal corporate loan. The derivative complaint further requests
injunctive relief prohibiting the Company and ERLY from making allegedly
ongoing litigation defense payments on behalf of Gerald D. Murphy and Douglas
A. Murphy and requiring ongoing indemnification by such individuals to the
Company and ERLY. Both the Company and ERLY are nominal defendants with the
lawsuit being brought on behalf of the Company and ERLY against Gerald D.
Murphy and Douglas A. Murphy. The complaint principally challenges certain
litigation expenditures incurred by the Company in connection with litigation
to which the Company, ERLY, Gerald D. Murphy, and Douglas A. Murphy are
parties, which is described in the immediately preceding paragraph. While the
complaint alleges that such expenditures were improperly incurred, in fact,
all expenditures and the involvement of the Company in the underlying
litigation were fully authorized by the Company's Board of Directors. The
Company filed a motion to dismiss the lawsuit due to the Powell Group's
failure to either make a demand on the board of directors to take action with
respect to the wrongs alleged or to very specifically allege the facts which
demonstrate why a demand on the board would be futile. The Company also argued
that the issues in the derivative action were issues which the disinterested
directors in pre-litigation resolutions had taken steps to resolve, such that
these issues were properly dealt with in the first instance by the boards
themselves. The Court agreed and dismissed the complaint without prejudice.
The Company does not expect the Powell Group to re-file the lawsuit.
The Company was named as a co-defendant with Messrs. John M. Howland and
George E. Prchal in a lawsuit filed in February 1997 in the U.S. District
Court for the Southern District of Texas by Rice Milling & Trading
Investments, LTD., an Isle of Man Company ("RMTI"). In 1994, ARI entered into
an agreement with RMTI for processing the Company's rice through RMTI's
facility in Jeddah, Saudi Arabia. Messrs. Howland and Prchal were officers of
RMTI through January 1997, and prior to October 1993 they were officers of
ARI. Messrs. Howland and Prchal were directors of ARI from October 1993
through October 1997. In January 1997, RMTI ceased shipping ARI's rice through
its Jeddah facility and terminated the employment of Messrs. Howland and
Prchal. The lawsuit alleges among other things ARI failed to perform under the
terms of the agreement and Messrs. Howland and Prchal breached their fiduciary
duties to RMTI. On April 21, 1997, ARI obtained a preliminary injunction from
the U.S. District Court for the Southern District of Texas ordering RMTI to
desist and refrain from purchasing rice of U.S. or Vietnam origin from any
supplier other than ARI and from introducing and/or marketing rice of U.S. and
Vietnam origin in Saudi Arabia targeted against ARI's U.S. origin and Vietnam
origin rice. In October 1997, ARI voluntarily terminated this injunction. RMTI
has added claims of fraud, participation in breach of duty, and tortuous
interference against ARI. The date for the trial has not been set.
Page 13<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.3 By-Laws of American Rice, Inc., as amended
11.1 Computation of Earnings Per Share
27 Financial Data Schedule
(b) During the quarter ended September 30, 1997, Registrant did not file any
Form 8-K Reports.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
American Rice, Inc.
-------------------
Registrant
By: /S/ Joseph E. Westover
---------------------------
Joseph E. Westover
Vice-President / Controlle
Page 14<PAGE>
Exhibit 4.3
BY-LAWS
OF
AMERICAN RICE, INC.
(AS AMENDED THROUGH SEPTEMBER 9, 1992)
ARTICLE I
OFFICES
1.1 The principal office of the corporation shall be located in Houston,
Texas.
1.2 The corporation may also have offices at such other places both within
and without the State of Texas as the board of directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 Meetings of shareholders for any purpose may be held at such time and
place as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
2.2 Annual meetings of shareholders, commencing with the year 1992 shall be
held on the date scheduled at the discretion of the board of directors which
shall be no later than October 30th, to begin at 10:00 a.m., at which the
shareholders shall elect a board of directors and transact such other business
as may properly be brought before the meeting (As amended September 9, 1992.)
2.3 Special meetings of the shareholders for any purpose or purposes may be
called by the president and shall be called by the president or secretary at
the request in writing of a majority of the board of directors, or at the
request in writing of shareholders owning one-tenth of all the shares entitled
to vote at the meetings. A request for a special meeting shall state the
purpose or purposes of the proposed meeting, and business transacted at any
special meeting of shareholders shall be limited to the purposes stated in the
notice.
2.4 Written notice stating the place, day and hour of the meeting and, in
the case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than ten nor more than fifty days
before the date of the meeting, either personally or by mail, by or at the
direction of the president, the secretary, or the officer or persons calling
the meeting, to each shareholder of record entitled to vote at such meeting.
2.5 The holders of a majority of the shares issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the shareholders for the transaction of
business except as otherwise provided by statute or by the articles of
incorporation. If, however, a quorum shall not be present or represented at
any meeting of the shareholders, the shareholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting, provided a quorum shall be present or represented thereat, any
business may be transacted which might have been transacted if the meeting had
been held in accordance with the original notice thereof.
2.6 If a quorum is present at any meeting, the vote of the holders of a
majority of the shares entitled to vote, present in person or represented by
proxy, shall decide any question brought before such meeting, unless the
question is one upon which a different vote is required by law or by the
articles of incorporation.
2.7 Each outstanding share having voting power shall be entitled to one vote
on each matter submitted to a vote at a meeting of shareholders. A
shareholder may vote either in person or by proxy executed in writing by the
shareholder or by his duly authorized attorney-in-fact.
2.8 Any action required or which may be taken at a meeting of the
shareholders may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all the shareholders entitled to
vote with respect to the subject matter thereof.
ARTICLE III
DIRECTORS
3.1 The number of directors that shall constitute the whole board of
directors shall be not less than one. Such number of directors shall from
time to time be fixed and determined by the directors and shall be set forth
in the notice of any meeting of shareholders held for the purpose of electing
directors. The directors shall be elected at the annual meeting of
shareholders, except as provided in Section 3.2, and each director elected
shall hold office until his successor shall be elected and qualify. Directors
need not be residents of Texas or shareholders of the corporation.
3.2 Any vacancy occurring in the board of directors may be filled by a
majority of the remaining directors though less than a quorum of the board of
directors. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office.
3.3 The number of directors may be increased or decreased from time to time
as provided in these bylaws but no decrease shall have the effect of
shortening the term of any incumbent director. Any directorship to be filled
by reasons of an increase in the number of directors may be
filled by election at any annual or special meeting of shareholders called for
that purpose or by the board of directors for a term of office continuing only
until the next election of one or more directors by the shareholders; provided
that the board of directors may not fill more than two such directorships
during the period between any two successive annual meetings of shareholders.
(As amended June 26, 1989.)
3.4 Any director may be removed either for or without cause at any special
meeting of shareholders duly called and held for such purpose.
MEETINGS OF THE BOARD OF DIRECTORS
3.5 Meetings of the board of directors, regular or special, may be held at
such time and place as shall be stated in the notice of meeting or in a duly
executed waiver of notice thereof.
3.6 The first meeting of each newly elected board of directors shall be held
at such time and place as shall be fixed by the vote of the shareholders at
the annual meeting and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present. In the event that the shareholders fail to fix the
time and place of such first meeting, it shall be held without notice
immediately following the annual meeting of shareholders, and at the same
place, unless by the unanimous consent of the directors then elected and
serving such time or place shall be changed.
3.7 Regular meetings of the board of directors may be held upon such notice,
or without notice, and at such time and at such place as shall from time to
time be determined by the board.
3.8 Special meetings of the board of directors may be called by the chairman
of the board of directors or the president and shall be called by the
secretary on the written request of two directors. Notice of each special
meeting of the board of directors shall be given to each director at least two
days before the date of the meeting.
3.9 Attendance of a director at any meeting shall constitute a waiver of
notice of such meeting, except where a director attends for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened. Except as may be otherwise
provided by law or by the articles of incorporation or by the bylaws, neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the board of directors need be specified in the notice or waiver of
notice of such meeting.
3.10 At all meetings of the board of directors a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, unless otherwise specifically
provided by law, the articles of incorporation or the bylaws. If a quorum
shall not be present at any meeting of directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
3.11 The board of directors, by resolution passed by a majority of the full
board, may from time to time designate a member or members of the board to
constitute committees, including an executive committee, which shall in each
case consist of one or more directors and shall have and may exercise such
powers, as the board may determine and specify in the respective resolutions
appointing them. A majority of all the members of any such committee may
determine its action and fix the time and place of its meetings, unless the
board of directors shall otherwise provide. The board of directors shall have
power at any time to change the number, subject as aforesaid, and members of
any such committee, to fill vacancies and to discharge any such committee.
3.12 Any action required or permitted to be taken at a meeting of the board
of directors or any committee may be taken without a meeting if a consent in
writing, setting forth the action so taken, is signed by all the members of
the board of directors or committee, as the case may be.
3.13 By resolution of the board of directors, the directors may be paid
their expenses, if any, of attendance at each meeting of the board of
directors and may be paid a fixed sum for attendance at each meeting of the
board of directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor.
ARTICLE IV
NOTICES
4.1 Any notice to directors or shareholders shall be in writing and shall be
delivered personally or mailed to the directors or shareholders at their
respective addresses appearing on the books of the corporation. Notice by
mail shall be deemed to be given at the time when the same shall be deposited
in the United States mail, postage prepaid. Notice to directors may also be
given by telegram.
4.2 Whenever any notice is required to be given under the provisions of the
statutes or of the articles of incorporation or of these bylaws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
ARTICLE V
OFFICERS
5.1 The officers of the corporation shall be elected by the board of
directors and shall consist of a president, a vice-president, a secretary and
a treasurer. The board of directors may also elect a chairman of the board,
an assistant president, additional vice presidents, and one or more assistant
secretaries and assistant treasurers. Two or more offices may be held by the
same person, except that the offices of president and secretary may not be
held by the same person.
5.2 The board of directors shall elect a president, one or more vice
presidents, a secretary and a treasurer, none of whom need be a member of the
board. The board of directors shall have the power to enter into contracts
for the employment and compensation of officers for such terms
as the board deems advisable.
5.3 The board of directors may appoint such other officers and assistant
officers and agents as it shall deem necessary, who shall hold their offices
for such terms and shall have such authority and exercise such powers and
perform such duties as shall be determined from time to time by the board of
directors by resolution not inconsistent with these bylaws.
5.4 The salaries of all officers of the corporation shall be fixed by the
board of directors.
5.5 The officers of the corporation shall hold office until their successors
are elected or appointed and qualify, or until their death or until their
resignation or removal from office. Any officer elected or appointed by the
board of directors may be removed at any time by the board, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not of itself
create contract rights. Any vacancy occurring in any office of the
corporation by death, resignation, removal or otherwise shall be filled by the
board of directors.
THE CHAIRMAN OF THE BOARD
5.6 The chairman of the board, if one be elected, shall preside at all
meetings of the board of directors and shall have such other powers and duties
as may from time to time be prescribed by the board of directors, upon written
directions given to him pursuant to resolutions duly adopted by the board of
directors.
THE PRESIDENT
5.7 The president shall be the chief executive officer of the corporation,
shall have general and active management of the business of the corporation
and shall see that all orders and resolutions of the board of directors are
carried into effect. He shall preside at all meetings of the shareholders.
THE VICE PRESIDENT
5.8 The vice presidents in the order of their seniority, unless otherwise
determined by the board of directors, shall, in the absence or disability of
the president, perform the duties and have the authority and exercise the
powers of the president. They shall perform such other duties and have such
other authority and powers as the board of directors may from time to time
prescribe or as the president may from time to time delegate.
THE SECRETARY AND ASSISTANT SECRETARIES
5.9 The secretary shall attend all meetings of the board of directors and
all meetings of shareholders and record all of the proceedings of the meetings
of the board of directors and of the shareholders in a minute book to be kept
for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the shareholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall keep in safe custody
the seal of the corporation and, when authorized by the board of directors,
shall affix the same to any instrument requiring it and, when so affixed, it
shall be attested by his signature or by the signature of an assistant
secretary or of the treasurer.
5.10 The assistant secretaries in the order of their seniority, unless
otherwise determined by the board of directors, shall, in the absence or
disability of the secretary, perform the duties and exercise the powers of the
secretary. They shall perform such other duties and have such other powers as
the board of directors may from time to time prescribe or as the president may
from time to time delegate.
THE TREASURER AND ASSISTANT TREASURERS
5.11 The treasurer shall have custody of the corporate funds and securities
and shall keep full and accurate accounts and records of receipts,
disbursements and other transactions in books belonging to the corporation,
and shall deposit all moneys and other valuable effects in the name and to the
credit of the corporation in such depositories as may be designated by the
board of directors.
5.12 Treasurer shall disburse the funds of the corporation as may be ordered
by the board of directors, taking proper vouchers for such disbursements, and
shall render to the president and the board of directors, at its regular
meetings, or when the president or board of directors so requires, an account
of all his transactions as treasurer and of the financial condition of the
corporation.
5.13 If required by the board of directors, the treasurer shall give the
corporation a bond of such type, character and amount as the board of
directors may require.
5.14 The assistant treasurers in the order of their seniority, unless
otherwise determined by the board of directors, shall, in the absence or
disability of the treasurer, perform the duties and exercise the powers of the
treasurer. They shall perform such other duties and have such other powers as
the board of directors may from time to time prescribe or the president may
from time to time delegate.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
6.1 The shares of the corporation shall be represented by certificates
signed by the president or a vice president and the secretary or an assistant
secretary of the corporation, and may be sealed with the seal of the
corporation or a facsimile thereof.
6.2 The signatures of the president or vice president and the secretary or
assistant secretary upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent, or registered by a registrar, other than
the corporation itself or an employee of the corporation. In case any officer
who has signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer at the date of its issue.
LOST CERTIFICATES
6.3 The board of directors may direct a new certificate to be issued in
place of any certificate theretofore issued by the corporation alleged to have
been lost or destroyed. When authorizing such issue of a new certificate, the
board of directors, in its discretion and as a
condition precedent to the issuance thereof, may prescribe such terms and
conditions as it deems expedient and may require such indemnities as it deems
adequate to protect the corporation from any claim that may be made against it
with respect to any such certificate alleged to have been lost or destroyed.
6.4 Upon surrender to the corporation or the transfer agent of the
corporation of a certificate representing shares duly endorsed or accompanied
by proper evidence of succession, assignment or authority to transfer, a new
certificate shall be issued to the person entitled thereto and the old
certificate canceled and the transaction recorded upon the books of the
corporation.
CLOSING OF TRANSFER BOOKS
6.5 For the purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders, or any adjournment thereof, or entitled
to receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the board of directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, fifty days. If the stock transfer books shall be closed
for the purpose of determining shareholders entitled to notice of or to vote
at a meeting of shareholders, such books shall be closed for at least ten days
immediately preceding such meeting. In lieu of closing the stock transfer
books, the board of directors may fix in advance a date as the record date for
any such determination of shareholders, such date in any case to be not more
than fifty days and, in case of a meeting of shareholders, not less than ten
days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the board of
directors declaring such dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall be applied to any
adjournment thereof except where the determination has been made through the
closing of the stock transfer books and the stated period of closing has
expired.
REGISTERED SHAREHOLDERS
6.6 The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends,
and to vote as such owner, and shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except
as otherwise provided by the laws of Texas.
LIST OF SHAREHOLDERS
6.7 The officer or agent having charge of the transfer books for shares
shall make, at least ten days before each meeting of shareholders, a complete
list of the shareholders entitled to vote at such meeting, arranged in
alphabetical order, with the address of each and the number of shares held by
each, which list, for a period of ten days prior to such meeting, shall be
kept on file at the registered office of the corporation and shall be subject
to inspection by any shareholder at any time during usual business hours.
Such list shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any shareholder during the
whole time of the meeting. The original share ledger or transfer book, or a
duplicate thereof, shall be prima facie evidence as to who are the
shareholders entitled to examine such list or share ledger or transfer book or
to vote at any meeting of the shareholders.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
7.1 Subject to the provisions of the articles of incorporation relating
thereto, if any, dividends may be declared by the board of directors, in its
discretion, at any regular or special meeting, pursuant to law. Dividends may
be paid in cash, in property or in the corporation's own shares, subject to
any provisions of the articles of incorporation.
7.2 Before payment of any dividend, there may be set aside out of any funds
of the corporation available for dividends such sum or sums as the directors
from time to time, in their absolute discretion, think proper as a reserve
fund for meeting contingencies, or for equalizing dividends, or for repairing
or maintaining any property of the corporation, or for such other purpose as
the directors shall think conducive to the interest of the corporation, and
the directors may modify or abolish any such reserve in the manner in which it
was created.
CHECKS
7.3 All checks or demands for money and notes of the corporation shall be
signed by such officer or officers or such other person or persons as the
board of directors may from time to time designate.
FISCAL YEAR
7.4 By resolution of the board of directors the fiscal year of the
corporation shall be March 31.
SEAL
7.5 The corporate seal shall be in such form as may be prescribed by the
board of directors. The seal may be used by causing it or a facsimile thereof
to be impressed or affixed or in any manner reproduced.
BOOKS AND RECORDS
7.6 The corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of its shareholders and
board of directors, and shall keep at its registered office or principal place
of business, or at the office of its transfer agent or registrar, a record of
its shareholders, giving the names and addresses of all shareholders and the
number and class of the shares held by each.
ARTICLE VIII
AMENDMENTS
8.1 The bylaws may be altered, amended, or repealed or new bylaws may be
adopted by a majority of the whole board of directors at any regular or
special meeting.
ARTICLE IX
INDEMNIFICATION OF DIRECTORS AND OFFICERS
9.1 Article 2.02-1 of the Texas Business Corporation Act permits the
corporation to indemnify its present and former directors and officers to the
extent and under the circumstances set forth therein. In addition, in some
instances, indemnification is required by such Article. The corporation
hereby elects to and does hereby indemnify all such persons to the fullest
extent permitted or required by such Article promptly upon request of any such
person making a request for indemnity hereunder. Such obligation to so
indemnify and to so make all necessary determinations may be specifically
enforced by resort to any court of competent jurisdiction. Further, the
corporation shall pay or reimburse the reasonable expenses of such persons
covered hereby in advance of the final disposition of any proceeding to the
fullest extent permitted by such Articles and subject to the conditions
thereof.
<PAGE>
Exhibit 11.1
AMERICAN RICE, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Thousands of Dollars Except Per Share Data)
Three Months Six Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
--------------------------------------------
PRIMARY EARNINGS (LOSS) PER SHARE
Net earnings (loss) ($1,736) $976 ($3,523) ($1,620)
Less dividends on preferred stock:
Series B (1,295) (1,295) (2,590) (2,590)
Series C (188) (188) (375) (375)
--------------------------------------------
(1,483) (1,483) (2,965) (2,965)
--------------------------------------------
Loss applicable to
common stock ($3,219) ($507) ($6,488) ($4,585)
============================================
Average common and common
equivalent shares outstanding:
Common 2,444 2,444 2,444 2,444
Preferred Series A - - - -
--------------------------------------------
2,444 2,444 2,444 2,444
============================================
Loss per share
applicable to common stock ($1.32) ($.21) ($2.65) ($1.88)
============================================
Continued on next pag
<PAGE>
Exhibit 11.1 (Continued)
AMERICAN RICE, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Thousands of Dollars Except Per Share Data)
Three Months Six Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
--------------------------------------------
FULLY DILUTED EARNINGS PER SHARE *
Net earnings (loss) ($1,736) $976 ($3,523) ($1,620)
Less dividends on preferred stock:
Series C (188) (188) (375) (375)
--------------------------------------------
Earnings (loss) applicable to
common stock ($1,924) $788 ($3,898) ($1,995)
============================================
Average common and common
equivalent shares outstanding:
Common 2,444 2,444 2,444 2,444
Preferred Series A 778 778 778 778
Preferred Series B 5,600 5,600 5,600 5,600
--------------------------------------------
8,822 8,822 8,822 8,822
============================================
Earnings (loss) per share
applicable to common stock ($.22) $.09 ($.44) ($.23)
============================================
* 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 on the income statement are the same
as primary earnings per share.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<PERIOD-TYPE> 6-MOS
<CASH> 2,923
<SECURITIES> 0
<RECEIVABLES> 64,101
<ALLOWANCES> 1,269
<INVENTORY> 115,056
<CURRENT-ASSETS> 188,156
<PP&E> 87,566
<DEPRECIATION> 29,137
<TOTAL-ASSETS> 292,653
<CURRENT-LIABILITIES> 147,208
<BONDS> 94,296
0
3,878
<COMMON> 2,444
<OTHER-SE> 31,476
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<CGS> 182,433
<TOTAL-COSTS> 182,433
<OTHER-EXPENSES> 99
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,692
<INCOME-PRETAX> (5,716)
<INCOME-TAX> (2,193)
<INCOME-CONTINUING> (3,523)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,523)
<EPS-PRIMARY> (2.65)
<EPS-DILUTED> (2.65)
</TABLE>
