-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Suo1rMkmY7o5we7cdutUyQ57sBJuAi25huRrow6wnfv0y4wWK972TD0aSUKWXm84 B1CdOUYCdCOAirk9sNfPCg== 0000030966-96-000015.txt : 19961118 0000030966-96-000015.hdr.sgml : 19961118 ACCESSION NUMBER: 0000030966-96-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ERLY INDUSTRIES INC CENTRAL INDEX KEY: 0000030966 STANDARD INDUSTRIAL CLASSIFICATION: GRAIN MILL PRODUCTS [2040] IRS NUMBER: 952312900 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07894 FILM NUMBER: 96665154 BUSINESS ADDRESS: STREET 1: 10990 WILSHIRE BLVD STREET 2: STE 1800 CITY: LOS ANGELES STATE: CA ZIP: 90024 BUSINESS PHONE: 2138791480 MAIL ADDRESS: STREET 1: 10990 WILSHIRE BOULEVARD STREET 2: SUITE 1800 CITY: LOS ANGELES STATE: CA ZIP: 90024 FORMER COMPANY: FORMER CONFORMED NAME: EARLY CALIFORNIA INDUSTRIES INC DATE OF NAME CHANGE: 19851202 FORMER COMPANY: FORMER CONFORMED NAME: EARLY CALIFORNIA FOODS INC DATE OF NAME CHANGE: 19700114 10-Q 1 FORM 10-Q FOR QUARTER ENDED 9/30/96 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the three months ended September 30, 1996 Commission file number 1-7894 ERLY INDUSTRIES INC. (Exact name of registrant as specified in its charter) California 95-2312900 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 10990 Wilshire Boulevard, Los Angeles, California 90024-3955 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (213) 879-1480 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 ------- ------ As of October 31, 1996 there were 4,739,180 shares of the Registrant's common stock outstanding. 2 ERLY INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30, March 31, 1996 1996 ------------- ------------ (Unaudited) Assets Current Assets: Cash and cash equivalents $ 5,247,000 $ 3,819,000 Notes and accounts receivable, less allowance for doubtful accounts of $1,889,000 (September 30) and $1,715,000 (March 31) 73,505,000 56,665,000 Inventories: Raw materials 42,564,000 47,883,000 Finished goods 47,932,000 30,121,000 ---------- ---------- 90,496,000 78,004,000 Prepaid expenses and other current assets 1,842,000 2,020,000 Properties held for sale, net -- 13,535,000 ----------- ----------- Total current assets 171,090,000 154,043,000 Restricted cash and investments 10,863,000 -- Long-term notes receivable, net 1,574,000 1,574,000 Property, plant and equipment, net 72,792,000 56,360,000 Other assets 24,332,000 23,158,000 ------------ ------------ $280,651,000 $235,135,000 ============ ============ Liabilities and Stockholders' Equity Current Liabilities: Notes payable, collateralized $ 66,297,000 $ 27,413,000 Accounts payable 51,950,000 48,670,000 Accrued payroll and other current liabilities 19,905,000 16,497,000 Income taxes payable 3,789,000 3,757,000 Current portion of long-term and subordinated debt 1,487,000 1,163,000 ---------- ---------- Total current liabilities 143,428,000 97,500,000 Long-term debt 101,254,000 100,113,000 Subordinated debt 5,665,000 5,665,000 Minority interest 9,068,000 11,811,000 Redeemable common stock warrants -- 2,512,000 Commitments and contingencies Stockholders' equity: Common stock, par value $.01 a share: Authorized: 15,000,000 shares Issued and outstanding: 4,739,180 shares (September 30) and 4,284,985 shares (March 31) 47,000 43,000 Additional paid-in capital 27,526,000 23,879,000 Retained earnings (deficit) (5,088,000) (5,046,000) Cumulative foreign currency adjustments (1,249,000) (1,342,000) ------------ ------------ Total stockholders' equity 21,236,000 17,534,000 ------------ ------------ $280,651,000 $235,135,000 ============ ============
See accompanying Notes to Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations. 3 ERLY INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the three and six months ended September 30, 1996 and 1995
Three months ended Six months ended September 30, September 30, --------------------------- --------------------------- 1996 1995 1996 1995 ------------ ------------ ------------ ------------ (Unaudited) (Unaudited) Net sales $155,966,000 $111,641,000 $280,557,000 $224,530,000 Cost of sales 131,616,000 95,986,000 242,893,000 192,161,000 ------------ ------------ ------------ ------------ Gross profit 24,350,000 15,655,000 37,664,000 32,369,000 Selling, general and administrative expenses 13,625,000 10,861,000 25,285,000 21,362,000 Interest expense 6,094,000 4,798,000 11,258,000 8,998,000 Interest income (146,000) (135,000) (232,000) (254,000) Other (income) expense (54,000) (40,000) 265,000 (153,000) ---------- ---------- ---------- ---------- 19,519,000 15,484,000 36,576,000 29,953,000 Income before taxes on income and minority interest 4,831,000 171,000 1,088,000 2,416,000 Taxes on income 225,000 160,000 318,000 706,000 --------- --------- --------- --------- Income before minority interest 4,606,000 11,000 770,000 1,710,000 Minority interest* 157,000 889,000 2,743,000 1,454,000 ----------- ---------- ---------- ---------- Net income $ 4,763,000 $ 900,000 $3,513,000 $3,164,000 =========== ========== ========== ========== Net income per share of common and common stock equivalents**: Primary $ .94 $ .16 $ .67 $ .56 ===== ===== ===== ===== Fully diluted $ .89 $ .16 $ .64 $ .53 ===== ===== ===== ===== Weighted average common and common stock equivalents**: Primary 5,041,000 5,561,000 5,225,000 5,691,000 Fully diluted 5,378,000 5,898,000 5,562,000 6,028,000
* Represents minority interest in net earnings or loss of American Rice, Inc. applicable to common stock, after preferred stock dividend requirements (see Note 1). ** Retroactively adjusted to give effect to a 10% stock dividend in September 1996. See accompanying Notes to Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations. 4 ERLY INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the six months ended September 30, 1996 and 1995
Six months ended September 30, --------------------------- 1996 1995 ------------ ---------- (Unaudited) OPERATING ACTIVITIES: Net income $3,513,000 $3,164,000 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Minority interest in ARI (2,743,000) (1,454,000) Depreciation and amortization 4,107,000 3,678,000 Provision for loss on receivables 174,000 326,000 Gain on redemption of warrant repurchase obligation (387,000) Change in assets and liabilities, excluding effect from acquisition of olive business: (Increase) decrease in receivables (15,136,000) 2,181,000 (Increase) decrease in inventories 8,863,000 (6,469,000) (Increase) decrease in prepaid expenses and other current assets 231,000 (817,000) Increase (decrease) in accounts payable, other current liabilities and taxes payable 748,000 (2,149,000) Other, net (1,000,000) 404,000 --------- ---------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (1,630,000) (1,136,000) INVESTING ACTIVITIES: Acquisition of olive business (33,952,000) Disposition of property held for sale 2,255,000 Purchases of property, plant and equipment (2,552,000) (4,213,000) Disposition of property, plant and equipment 71,000 8,000 --------- --------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (34,178,000) (4,205,000) FINANCING ACTIVITIES: Proceeds from issuance of mortgage notes -- 94,000,000 Mortgage notes issuance cost (3,000) (5,425,000) Increase (decrease) in notes payable 38,884,000 (19,391,000) Increase (decrease) in long-term and subordinated debt 380,000 (64,822,000) Redemption of redeemable common stock warrants (2,125,000) Proceeds from sale of stock 100,000 ---------- ---------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 37,236,000 4,362,000 ---------- ---------- INCREASE (DECREASE) IN CASH DURING THE PERIOD 1,428,000 (979,000) CASH, BEGINNING OF PERIOD 3,819,000 3,718,000 ----------- ----------- CASH, END OF PERIOD $ 5,247,000 $ 2,739,000 =========== =========== Supplemental cash flow information: Net cash paid during the period for: Interest expense $10,289,000 $ 7,203,000 Income taxes $ 719,000 $ 406,000
See accompanying Notes to Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations. 5 ERLY INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY For the six months ended September 30, 1996 (Unaudited)
Cumulative Common Stock Additional Retained Foreign Total ------------------- Paid-in Earnings Currency Stockholders' Shares Dollars Capital (Deficit) Adjustments Equity --------- -------- ----------- ---------- ------------ ----------- Balance April 1, 1996 4,284,985 $43,000 $23,879,000 ($ 5,046,000) ($1,342,000) $17,534,000 Net income for the period 3,513,000 3,513,000 Foreign currency adjustments 93,000 93,000 10% stock dividend 430,417 4,000 3,547,000 (3,551,000) -- Cash payments in lieu of fractional shares (4,000) (4,000) Common stock issued 13,944 62,000 62,000 Exercise of stock options 9,834 38,000 38,000 --------- -------- ----------- ---------- ----------- ------------ Balance September 30, 1996 (unaudited) 4,739,180 $47,000 $27,526,000 ($5,088,000) ($1,249,000) $21,236,000 ========= ======= =========== =========== =========== ============
See accompanying Notes to Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations. 6 ERLY INDUSTRIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and six months ended September 30, 1996 and 1995 Basis of Presentation: The information furnished is unaudited but reflects all adjustments which are, in the opinion of management, necessary for a fair statement of results for the interim periods. Results for interim periods are not necessarily indicative of results to be expected for the entire year. Reference should be made to the Notes To Consolidated Financial Statements in the Company's 1996 Form 10-K for a discussion of accounting policies and other significant matters. The accompanying consolidated financial statements include the accounts of ERLY Industries Inc. and its subsidiaries (the "Company" or "ERLY"). All significant intercompany accounts, intercompany profits and intercompany transactions are eliminated. Deferred income tax assets and liabilities are computed annually for differences between the financial statement basis and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future. Such deferred income tax asset and liability computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. At March 31, 1996, the Company had net operating loss carryforwards for federal tax reporting purposes of approximately $47 million, which expire at various dates, primarily in years 2002 through 2011. Tax expense reflected in the consolidated statements of operations represents estimated federal, state and foreign tax expense on pre-tax earnings reduced by the utilization of deferred tax assets relating to net operating loss carryforwards that had previously been reserved. Primary earnings per share are based on the weighted average number of: (1) common shares, and (2) dilutive common share equivalents (consisting of stock options and warrants) outstanding during each period presented. Fully diluted earnings per share assumes conversion of a $1 million convertible note payable, unless conversion would be antidilutive. All calculations have been retroactively adjusted to give effect to a 10% stock dividend in September 1996 (see Note 7). Note 1 - Minority Interest In May 1993, substantially all of the assets and liabilities of ERLY's wholly owned subsidiary, Comet Rice, Inc. ("Comet"), were acquired by American Rice, Inc. ("ARI"), in a transaction accounted for as a reverse acquisition by its subsidiary, Comet. Prior to the transaction, ERLY owned 48% of the voting rights of ARI, and its investment in ARI was accounted for using the equity method. As a result of the transaction, ERLY's ownership increased to 81% of the voting rights of ARI. 7 Note 1 - Minority Interest (continued) ERLY's 81% voting interest in ARI consists of the following securities of ARI: * 777,777 shares of ARI common stock which represent 32% of ARI's total outstanding common stock and 9% of ARI's common shares on a fully converted basis. * 777,777 shares of ARI Series A Preferred Stock, which is convertible one for one, has voting rights, liquidation preferences of $25.70 per share, but has no stated dividend. These shares represent 9% of ARI's common shares on a fully converted basis. * 2,800,000 shares of ARI Series B Preferred Stock, which is convertible into 5,600,000 common shares, has voting rights, liquidation preferences of $5.00 per share and an annual cumulative dividend of approximately $5.2 million. These shares represent 63% of ARI's common shares on a fully converted basis. ARI also issued a Series C Preferred Stock to third parties which does not have voting or conversion rights but does have an annual cumulative dividend of $750,000. The Series A, Series B and Series C Preferred Stocks are unique securities with preferential rights which are superior to common stock rights. The Minority Interest of ARI in ERLY's consolidated financial statements represents the 68% of the common stock of ARI which ERLY does not own and the Series C Preferred Stock, for a total of 19% of the voting interest in ARI on a fully converted basis. ARI's earnings or losses are allocated between ERLY and the Minority Interest in accordance with the underlying terms of the various securities, rather than allocation based on voting ownership of the subsidiary. No conversion is assumed in the case of convertible preferred stocks for purposes of this calculation, even though conversion may occur at any time at the option of ERLY. ARI's cumulative annual dividends of $5.2 million related to the Series B Preferred Stock and $750,000 related to the Series C Preferred Stock are deducted from ARI earnings or loss to yield earnings or loss to be allocated to common stock. The Series B Preferred Stock dividend is allocated entirely to ERLY, while the Series C Preferred Stock dividend is allocated entirely to Minority Interest. The current ARI loan agreements prohibit the payment of any dividends. These dividends are allocated even if not declared as the dividends are cumulative. The remaining earnings or losses to be allocated to common stock after deduction of the preferred stock dividends is allocated in accordance with the relative common stock ownership of ERLY (32%) and the Minority Interest (68%). ERLY's share of ARI's net earnings (loss) applicable to common stock after preferred dividend requirements was ($162,000) and ($1,467,000) for the three and six months ended September 30, 1996, respectively, and ($507,000) and ($861,000) for the three and six months ended September 30, 1995, respectively. ERLY also earned Series B preferred dividends of $1,295,000 for each of the three month periods ended September 30, 1996 and 1995, and $2,590,000 for each of the six month periods ended September 30, 1996 and 1995. As of September 30, 1996, ARI Series B Preferred Stock dividends accumulated, but not declared, total $17.6 million. 8 Note 2 - Olive Business Acquisition On July 5, 1996, the Company's subsidiary, ARI, acquired the domestic and foreign olive business of Campbell Soup Company ("CSC Olives") for approximately $36 million (the "Acquisition"). Assets acquired include domestic inventories and fixed assets, all of the outstanding common stock of a Spanish company which comprises the foreign olive business, and 51% of the stock of Sadrym California, a manufacturer of olive processing machinery. The purchase was funded primarily from ARI's credit facilities. The acquisition was accounted for as a purchase and the results of operations of the acquired business have been included in the Company's consolidated financial statements after July 5, 1996. The olive business will be operated as the Early California Foods division of ARI. Operating results reflected in the accompanying financial statements do not include CSC Olives' operating activities before July 5, 1996. The following summarized pro forma information assumes the Acquisition occurred on the first day of each of the operating periods presented (in thousands, except per share data): Three months ended Six months ended September 30, 1996 September 30, 1996 ------------------ ------------------ Net sales $156,767 $299,580 Net income $ 4,737 $ 1,688 Earnings per share: Primary $ .94 $ .32 Fully diluted $ .89 $ .31 Note 3 - Properties Held for Sale The consolidated balance sheet included properties held for sale of $13.5 million at March 31, 1996. This primarily represented 39 acres of land in Houston, Texas, held for sale by ARI, subject to an agreement to sell after the demolition of existing structures on the property and updated environmental studies. In September 1996, ARI completed the sale of the property and received gross proceeds of approximately $13.1 million. The terms of ARI's $100 million mortgage notes (see Note 4) provide that proceeds are to be held in a segregated account pledged to the trustee of the notes. Such proceeds may be used by ARI for investment in a related business, for capital expenditures, and under certain circumstances to redeem the notes. At September 30, 1996, net proceeds from the sale (after expenses) amounting to $10.9 million are classified as "Restricted Cash and Investments" in the consolidated balance sheet. Note 4 - Long-term and Subordinated Debt Certain of the Company's and subsidiaries' long-term debt agreements require maintenance of minimum amounts or ratios related to working capital, long-term debt and net worth, in addition to the observance of other covenants. These restrictions also preclude the payment of cash dividends. 9 Note 4 - Long-term and Subordinated Debt (continued) In a public offering completed in August 1995, ARI issued $100 million principal amount of 13.0% mortgage notes due 2002 (the "Notes"). Portions of the net proceeds of $94 million were used to repay the balance of ARI's existing term debt, to make a $10.5 million 15% loan to ERLY due 2002, and to reduce borrowings outstanding under ARI's revolving credit loan. ERLY utilized a portion of the proceeds to repay the remaining $9.5 million bank debt of its subsidiary, ERLY Juice Inc., which ERLY had guaranteed (see Note 5). Note 5 - Redeemable Common Stock Warrants In connection with the discontinuation of the Company's juice business in December 1993, the Company issued warrants to acquire up to 10% of ERLY's common stock at $.01 per share. In conjunction with the repayment of the ERLY Juice debt in August 1995 described in Note 4, the Company had the right to call the warrants prior to September 30, 1996 for $2,512,000 and, accordingly, the warrants were classified as redeemable common stock warrants at March 31, 1996. In August 1996, the Company exercised its call option and redeemed all of the outstanding common stock warrants in exchange for a payment of $2,125,000, resulting in a gain of $387,000 which is included in other income. Note 6 - Commitments and Contingencies The Company and ARI have been named as codefendants in a lawsuit filed in the district court of Harris County, Texas. This is a dispute between the general partner of a proposed real estate development and G.D. Murphy and D.A. Murphy, Chairman and President, respectively, of the Company and ARI. Damages sought are in the range of $10 million, plus attorneys' fees and punitive damages. The Company and ARI were named as defendants in the lawsuit because of their actions to obtain restraining orders to prevent threatened foreclosures on ERLY common stock pledged as collateral by G.D. Murphy and to stop interference by the plaintiff in the lawsuit, with ARI's mortgage note financing described in Note 4, as well as certain other alleged activities. The Company and ARI believe they have valid defenses in this case and that damages, if any, will not have a material effect on the Company's financial condition; however, as with any litigation, the ultimate outcome is unknown. Accordingly, no provision for any liability that might result has been made in the accompanying consolidated financial statements. Note 7 - Stockholders' Equity In September 1996 the Company declared a 10% stock dividend to shareholders of record at the close of business on September 23, 1996. 10 Item 2. ERLY INDUSTRIES INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 -------------------------------------------------------------- RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 Consolidated Results For the quarter ended September 30, 1996, the Company reported net income of $4.8 million on sales of $156 million, as compared to net income of $900,000 on sales of $112 million for the second quarter of the prior fiscal year. Sales for the second quarter of fiscal 1997 reflect a $31 million increase in sales by American Rice over the second quarter of last year, plus sales increases of $7 million and $6 million by Chemonics Fire-Trol and Chemonics International, respectively. Gross profit for the quarter ended September 30, 1996 was $24.4 million, an increase of $8.7 million from the quarter ended September 30, 1995 as a result of increases by American Rice of $5.5 million, Fire-Trol of $2.4 million and Chemonics International of $842,000. American Rice Sales for the quarter ended September 30, 1996 increased $31.1 million, or 34%, from $90.4 million in fiscal 1996 to $121.5 million in fiscal 1997. The sales increase for the quarter reflects sales of $16.3 million from the olive business acquired during the quarter, $10.0 million from increased sales of exported rice and $4.8 million in increased sales of rice in the United States and Canada. Export rice sales increased due to higher prices and higher volume. Average export rice prices increased approximately 9%, accounting for $5.7 million in sales increases. The export sales volume increase accounted for a $4.3 million sales increase. There were no major sales to Japan in the quarter ended September 30, 1996 or the corresponding period of the prior year. These sales are expected to occur in the third and fourth quarters of the fiscal year, as was the case in fiscal year 1996. Domestic rice sales were higher as a result of higher average prices, partially offset by lower volume. Gross profit was 12% of sales for the quarter ended September 30, 1996 compared to 11% last year. Gross profit increased $5.5 million, or 56%, from $9.7 million in the second quarter last year to $15.2 million in the second quarter of this year, due primarily to the acquisition of the Early California Foods olive business. ARI's selling, general and administrative expenses of $8.4 million increased $2.3 million, or 39%, from $6.1 million last year. The increase is due to higher advertising and promotional expenses associated with the acquisition of the olive business in the quarter. Selling, general and administrative expenses as a percentage of net sales were 6.9% in the second quarter of the current year compared to 6.7% last year. 11 Chemonics International - Consulting For the quarter ended September 30, 1996, revenues for International were $21.1 million, an increase of $6.2 million, or 42%, from revenues of $14.9 million for the comparable period last year. The large percentage increase is primarily due to revenues being down in the second quarter of last year as some projects were winding down, and the next phases had not yet started up. Gross profit was $5.1 million (24% of revenues) for the quarter compared to gross profit of $4.3 million (28% of revenues) for the second quarter of last year. Chemonics Industries - Fire-Trol Fire-Trol reported sales of $13.3 million for the quarter compared to sales of $6.3 million reported last year, an increase of $7.0 million, or 110%. The current year experienced a near record level of forest fire activity resulting in significant demand for the Company's forest fire retardant products, especially in the Western United States. Last year's sales reflected a more normal level of forest fire activity. Gross profit for the quarter was $4.1 million, or 31% of sales, compared to $1.7 million, or 27% of sales last year. Corporate Consolidated interest expense totaled $6.1 million for the quarter ended September 30, 1996, compared to $4.8 million for the same quarter of last year. This increase reflects increased average borrowings from a year ago due to the acquisition of the olive business and the issuance of $100 million of mortgage notes by ARI in August 1995. Interest expense in both periods includes amortization of capitalized debt issuance costs. Results for the quarter include a $387,000 gain on settlement of the liability recorded for the redemption of common stock warrants (see Note 5). RESULTS OF OPERATIONS - SIX MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 Consolidated Results For the six months ended September 30, 1996, the Company reported net income of $3.5 million on sales of $281 million, as compared to net income of $3.2 million on sales of $225 million for the first six months of the prior fiscal year. Sales for the current year were up $56 million from last year, primarily due to a $42 million increase in sales by American Rice plus a $7 million increase by Chemonics Fire-Trol, and a $7 million increase by Chemonics International. Gross profit for the six months ended September 30, 1996 was $37.7 million compared to $32.4 million for the comparable period of last year. 12 American Rice Sales for the six months ended September 30, 1996 increased $42.2 million, or 24%, from $176.8 million in fiscal 1996 to $218.9 million in fiscal 1997. The increase in sales was composed of $16.3 million in sales from the olive business acquired in July 1996, $13.2 million in increased export rice sales, and $12.7 million in increased sales of rice in the United States and Canada. Export rice sales increased due to higher prices and higher volume. Average export rice prices increased approximately 11%, accounting for $11.9 million in sales increases. The export sales volume increase accounted for a $1.3 million sales increase. Domestic rice sales were higher as a result of higher average prices, partially offset by lower volume. Gross profit was 10% of sales for the six month period ended September 30, 1996, compared to 11% in fiscal 1996. Gross profit increased $2.5 million, or 12.8%, from $19.3 million in the first six months of last year to $21.7 million in the first six months of this year, due primarily to the Early California Foods acquisition, partially offset by lower gross profit from rice sales. ARI's selling, general and administrative expenses of $14.9 million increased $3.0 million, or 26%, from $11.8 million last year. The increase is primarily due to higher advertising and promotional expenses associated with the acquisition of the olive business. Selling, general and administrative expenses as a percentage of net sales increased slightly from 6.7% in the first six months of last year to 6.8% this year. Chemonics International - Consulting For the six months ended September 30, 1996, revenues for International were $42.4 million, an increase of $7.0 million, or 20%, from revenues of $35.4 million for the comparable period last year. Gross profit was $10.3 million (24% of revenues) for the period compared to gross profit of $10.1 million (28% of revenues) for the comparable period last year. Chemonics Industries - Fire-Trol Fire-Trol reported net sales of $19.2 million for the six months ended September 30, 1996, compared to sales of $12.3 million reported last year, an increase of $6.9 million, or 56%. The current year experienced a near record level of forest fire activity resulting in significant demand for the Company's forest fire retardant products, especially in the Western United States. The increase in sales from last year reflects an increased level of forest fire activity this year compared to a more normal level of forest fire activity last year. Gross profit for the six months was $5.6 million, or 29% of sales, compared to $3.0 million, or 25% of sales last year. 13 Corporate Consolidated interest expense totaled $11.3 million for the six months ended September 30, 1996, compared to $9.0 million for the same period of last year. This increase reflects increased average borrowings due to the acquisition of the olive business and the issuance of $100 million of mortgage notes by ARI in August 1995. Interest expense in both periods includes amortization of capitalized debt issuance costs. Results for the six months include a $387,000 gain on settlement of the liability recorded for the redemption of common stock warrants (see Note 5). Liquidity and Capital Resources At September 30, 1996, consolidated working capital was $27.7 million, compared to $56.5 million at March 31, 1996, a decrease of $28.8 million. This decrease was primarily due to the acquistion of the olive business in July 1996 and the related increase in short-term borrowings used to finance the acquisition. Stockholders' equity was $21.2 million at September 30, 1996, compared to $17.5 million at March 31, 1996, an improvement of $3.7 million as a result of the net income for the six months. For the fiscal year ended March 31, 1996, ARI had a $47.5 million revolving credit loan with interest at the prime rate of interest plus .5%. In June 1996, this loan was refinanced with a new lender. The new loan 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. The borrowing limit on the new loan was increased to $85.0 million and will provide financing for ARI's rice operations in addition to the operations of the olive business acquired on July 5, 1996, as discussed in Note 2. At September 30, 1996, ARI was not in compliance with certain covenants related to financial ratios and minimum tangible net worth. ARI has subsequently obtained waivers from compliance with these covenants through December 30, 1996, from its lender. In addition, in June 1996 Chemonics International increased its existing line of credit from $16 million to $20 million. The new line of credit provides financing for both Consulting and Fire-Trol. 14 Part II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of Shareholders was held on September 17, 1996. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 11.1 Calculation of Primary Income Per Share 11.2 Calculation of Fully Diluted Income Per Share 27 Financial Data Schedule (electronic filing) (b) A Form 8-K was filed in July 1996 to report the acquisition on July 5, 1996 of the ripe and green olive businesses of Campbell Soup Company. This was amended by the filing of a Form 8K-A on September 26, 1996 to provide proforma financial information. 15 SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ERLY INDUSTRIES INC. (Registrant) Date: November 14, 1996 By /s/ Thomas A. Whitlock ---------------------- Thomas A. Whitlock Vice President and Corporate Controller 16 EXHIBIT 11.1 ERLY INDUSTRIES INC. AND SUBSIDIARIES CALCULATION OF PRIMARY INCOME PER SHARE (In thousands, except per share data)
Three months ended Six months ended September 30, September 30, ----------------------------- ---------------------------- 1996 1995 1996 1995 -------- -------- -------- -------- (Unaudited) (Unaudited) Income before minority interest $ 4,606 $ 11 $ 770 $ 1,710 Minority interest 157 889 2,743 1,454 ------- ------- ------- ------- Net income $ 4,763 $ 900 $ 3,513 $ 3,164 ======= ======= ======= ======= Average number of shares of common stock and common stock equivalents outstanding*: Average number of shares of common stock outstanding 4,733 4,703 4,723 4,703 Common stock equivalents*: Dilutive effect of stock options and warrants based on application of treasury stock method 308 858 502 988 ----- ----- ----- ----- Total 5,041 5,561 5,225 5,691 ===== ===== ===== ===== Primary income per common share* $ .94 $ .16 $ .67 $ .56 ====== ====== ======= =======
* Retroactively adjusted to give effect to a 10% stock dividend in September 1996. 17 EXHIBIT 11.2 ERLY INDUSTRIES INC. AND SUBSIDIARIES CALCULATION OF FULLY DILUTED INCOME PER SHARE (In thousands, except per share data)
Three months ended Six months ended September 30, September 30, ----------------------------- ------------------------------ 1996 1995 1996 1995 -------- --------- ---------- --------- (Unaudited) (Unaudited) Income before minority interest $ 4,606 $ 11 $ 770 $ 1,710 Interest adjustment - convertible note payable 25 28 51 55 Income before minority interest, ------- ------- ------- ------- as adjusted 4,631 39 821 1,765 Minority interest 157 889 2,743 1,454 ------- ------- ------- ------- Net income, as adjusted $ 4,788 $ 928 $ 3,564 $ 3,219 ======= ======= ======= ======= Average number of shares of common stock and common stock equivalents outstanding* 5,041 5,561 5,225 5,691 Other potentially dilutive securities: Common stock issuable upon conversion of note payable* 337 337 337 337 ----- ----- ----- ----- Total 5,378 5,898 5,562 6,028 ===== ===== ===== ====== Fully diluted income per common share* $ .89 $ .16 $ .64 $ .53 ======= ======= ======= =======
* Retroactively adjusted to give effect to a 10% stock dividend in September 1996. EX-27 2 ART. 5 FDS FOR 2ND QUARTER ENDED SEPTEMBER 30, 1996
5 6-MOS MAR-31-1997 SEP-30-1996 5,247,000 0 75,394,000 1,889,000 90,496,000 171,090,000 105,763,000 32,971,000 280,651,000 143,428,000 105,665,000 47,000 0 0 21,189,000 280,651,000 280,557,000 280,557,000 242,893,000 242,893,000 265,000 0 11,258,000 3,831,000 318,000 3,513,000 0 0 0 3,513,000 .67 .64
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