-----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, Bs78SyyRbaGd39e/PO2XIe+dFdIbUSsp74rHdT5g99ofEwUqqHWwcCJ2vwAMocMj 3EvrByMGTNngpR5+NWoW4g== 0000930661-01-501543.txt : 20010813 0000930661-01-501543.hdr.sgml : 20010813 ACCESSION NUMBER: 0000930661-01-501543 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OVERHILL CORP CENTRAL INDEX KEY: 0000748212 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-CONSTRUCTION & MINING (NO PETRO) MACHINERY & EQUIP [5082] IRS NUMBER: 232708876 STATE OF INCORPORATION: NV FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09083 FILM NUMBER: 1704955 BUSINESS ADDRESS: STREET 1: 4800 BROADWAY SUITE A CITY: ADDISON STATE: TX ZIP: 75001 BUSINESS PHONE: 9723860101 MAIL ADDRESS: STREET 1: 4800 BROADWAY SUITE A CITY: ADDISON STATE: TX ZIP: 75001 FORMER COMPANY: FORMER CONFORMED NAME: KAPPA NETWORKS INC DATE OF NAME CHANGE: 19910721 FORMER COMPANY: FORMER CONFORMED NAME: POLYPHASE CORP DATE OF NAME CHANGE: 19920703 10-Q 1 d10q.txt FORM 10-Q U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number: 1-9083 OVERHILL CORPORATION (Exact name of registrant as specified in its charter) Nevada 23-2708876 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4800 Broadway, Suite A Addison, Texas 75001 (Address of principal executive offices) (972) 386-0101 (Registrants'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 Exchange Act during the past 12 months ( or for such shorter period 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 --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.01 par value 17,827,464 ----------------------------- Outstanding at August 6, 2001 OVERHILL CORPORATION FORM 10-Q QUARTER ENDED JUNE 30, 2001 - -------------------------------------------------------------------------------- TABLE OF CONTENTS ----------------- PART I. FINANCIAL INFORMATION Page No. - ----------------------------- -------- Item 1. Financial Statements Consolidated Condensed Balance Sheets as of June 30, 2001 and September 30, 2000 2 Consolidated Condensed Statements of Operations for the Three Months Ended June 30, 2001 and 2000 4 Consolidated Condensed Statements of Operations for the Nine Months Ended June 30, 2001 and 2000 5 Consolidated Condensed Statements of Cash Flows for the Nine Months Ended June 30, 2001 and 2000 7 Notes to Consolidated Condensed Financial Statements 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Item 3. Quantitative and Qualitative Disclosures about Market Risk 16 PART II - OTHER INFORMATION - --------------------------- Item 1. Legal Proceedings 17 Item 6. Exhibits and Reports on Form 8-K 17 Signature Page 18 -1- OVERHILL CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS Assets
June 30, September 30, ------------ ------------ 2001 2000 ------------ ------------ (Unaudited) Current assets: Cash $ 1,145,049 $ 1,522,347 Receivables, net of allowance for doubtful accounts of $403,358 and $433,359 Trade accounts 18,990,666 20,399,265 Current portion of sales contracts 3,855,959 4,145,318 Notes 4,041,037 3,642,112 Inventories 36,159,511 36,120,187 Prepaid expenses and other 3,480,200 3,062,932 ------------ ------------ Total current assets 67,672,422 68,892,161 ------------ ------------ Property and equipment: Land 432,000 432,000 Buildings and improvements 3,840,128 3,792,009 Machinery, equipment and other 13,090,640 11,986,465 ------------ ------------ 17,362,768 16,210,474 Less-Accumulated depreciation (8,985,957) (8,281,568) ------------ ------------ 8,376,811 7,928,906 ------------ ------------ Other assets: Noncurrent receivables, net of allowance for doubtful accounts of $1,200,000 Sales contracts 2,318,745 2,094,718 Related parties 2,039,374 1,202,183 Excess of cost over fair value of net assets of businesses acquired, net of accumulated amortization of $5,522,522 and $4,687,461 16,079,292 16,881,886 Other intangible assets 1,302,993 1,734,858 Restricted cash 518,688 633,124 Assets held for sale 1,926,264 1,926,264 Other 3,377,676 3,338,653 ------------ ------------ 27,563,032 27,811,686 ------------ ------------ $103,612,265 $104,632,753 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. -2- OVERHILL CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (continued) Liabilities and Stockholders' Equity
June 30, September 30, ------------ ------------- 2001 2000 ------------ ------------- (Unaudited) Current liabilities: Notes payable $ 8,611,179 $ 7,674,131 Accounts payable 17,988,892 14,903,684 Accrued expenses and other 3,184,337 4,004,971 Current maturities of long-term debt 2,880,763 3,891,579 ------------ ------------- Total current liabilities 32,665,171 30,474,365 Long term debt, less current maturities 35,156,299 40,859,613 Note payable and accrued interest to related party 21,936,796 20,746,384 Reserve for credit guarantees 518,688 633,124 ------------ ------------- Total liabilities 90,276,954 92,713,486 ------------ ------------- Warrants to purchase common stock in subsidiary 3,104,972 2,806,175 Stockholders' equity: Common stock, $.01 par value, authorized 100,000,000 shares, issued and outstanding 17,827,464 and 17,812,464 shares 178,275 178,125 Paid-in capital 27,612,146 27,650,734 Accumulated deficit (17,560,082) (18,715,767) ------------ ------------- Total stockholders' equity 10,230,339 9,113,092 ------------ ------------- $103,612,265 $ 104,632,753 ============ =============
The accompanying notes are an integral part of these consolidated financial statements. -3- OVERHILL CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months Ended June 30, ------------------------ 2001 2000 ----------- ----------- Net revenues $53,500,367 $46,647,829 Cost of sales 43,695,938 37,509,993 ----------- ----------- Gross profit 9,804,429 9,137,836 Selling, general and administrative expenses 7,102,874 6,390,444 ----------- ----------- Operating income 2,701,555 2,747,392 ----------- ----------- Other income (expenses): Interest expense (1,980,034) (2,040,163) Interest income and other 46,519 318,144 ----------- ----------- Total other income (expenses) (1,933,515) (1,722,019) ----------- ----------- Income before income taxes and income allocable to subsidiary warrant holder 768,040 1,025,373 Income taxes - - Income allocable to subsidiary warrant holder (128,522) - ----------- ----------- Net income $ 639,518 $ 1,025,373 =========== =========== Net income per share - basic and diluted $ .04 $ .06 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. -4- OVERHILL CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
For the Nine Months Ended June 30, ---------------------------- 2001 2000 ------------ ------------ Net revenues $149,346,356 $134,578,013 Cost of sales 121,550,976 107,201,464 ------------ ------------ Gross profit 27,795,380 27,376,549 Selling, general and administrative expenses 20,659,343 18,683,658 ------------ ------------ Operating income 7,136,037 8,692,891 ------------ ------------ Other income (expenses): Interest expense (6,185,706) (6,114,518) Interest income and other 504,151 650,020 ------------ ------------ Total other income (expenses) (5,681,555) (5,464,498) ------------ ------------ Income before income taxes, income allocable to subsidiary warrant holder and extraordinary item 1,454,482 3,228,393 Income taxes - (112,442) Income allocable to subsidiary warrant holder (298,797) - ------------ ------------ Income before extraordinary item 1,155,685 3,115,951 Extraordinary item--early extinguishment of debt - (1,290,431) ------------ ------------ Net income 1,155,685 1,825,520 Gain on reacquired preferred stock - 351,457 ------------ ------------ Net income attributable to common stockholders $ 1,155,685 $ 2,176,977 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. -5- OVERHILL CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (continued) (Unaudited)
For the Nine Months Ended June 30, ---------------------------- 2001 2000 ------------ ------------ Net income per share - basic and diluted: Before extraordinary item $ .06 $ .19 Extraordinary item - (.07) ------------ ------------ Net income per share: $ .06 $ .12 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. -6- OVERHILL CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Months Ended June 30, ------------------------- 2001 2000 ----------- ----------- Cash flows provided by (used in) operating activities: Net income $ 1,155,685 $ 1,825,520 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 2,524,965 2,485,264 Provision for doubtful accounts 224,421 74,820 Income allocable to subsidiary warrant holder 298,797 - Extraordinary item - 1,290,431 Changes in: Accounts and sales contracts receivable 1,249,510 (2,531,951) Inventories (39,324) (2,675,084) Prepaid expenses and other (456,291) (1,036,006) Accounts payable 3,085,208 1,080,390 Accrued expenses and other 369,778 611,597 ----------- ----------- Net cash provided by (used in) operating activities 8,412,749 1,124,981 ----------- ----------- Cash flows provided by (used in) investing activities: Notes and other receivables (398,925) (522,146) Receivables from related parties (837,191) (218,072) Capital expenditures, net (1,307,911) (769,029) ----------- ----------- Net cash provided by (used in) investing activities $(2,544,027) $(1,509,247) ----------- -----------
The accompanying notes are an integral part of these consolidated financial statements. -7- OVERHILL CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (continued) (Unaudited)
For the Nine Months Ended June 30, -------------------------- 2001 2000 ----------- ------------ Cash flows provided by (used in) financing activities: Net borrowings (principal payments) on line of credit arrangements $(2,850,462) $ 2,586,035 Borrowings on other notes payable and long-term debt 185,205 28,282,602 Principal payments on long-term debt (3,542,325) (1,534,372) Repayment of subordinated debt - (22,675,000) Exercise of common stock options 7,500 - Repurchase of stock purchase warrants (45,938) - Redemption of Overhill Farms warrants - (3,700,000) Deferred financing costs - (1,832,907) Repurchase of preferred stock - (450,000) ----------- ------------ Net cash provided by (used in) financing activities (6,246,020) 676,358 ----------- ------------ Net increase (decrease) in cash (377,298) 292,092 Cash - beginning of period 1,522,347 375,408 ----------- ------------ Cash - end of period $ 1,145,049 $ 667,500 =========== ============ Supplemental schedule of cash flow information: Cash paid during the period for : Interest $ 4,499,417 $ 4,465,218 Income taxes $ 78,764 $ 19,858
Supplemental schedule of noncash investing and financing activities: In November 1999, in connection with the Overhill Farms refinancing, warrants were issued having an estimated fair market value of $2,370,000. The accompanying notes are an integral part of these consolidated financial statements. -8- OVERHILL CORPORATION AND SUBSIDIARIES Notes to Consolidated Condensed Financial Statements June 30, 2001 1. NATURE OF BUSINESS Overhill Corporation, formerly Polyphase Corporation, (the "Company") is a diversified holding company that, through its subsidiaries, operates in two industry segments: the food segment and the forestry segment. The food segment (the "Food Group"), which consists of the Company's 99% owned subsidiary, Overhill Farms, Inc. ("Overhill"), produces high quality entrees, plated meals, soups, sauces and poultry, meat and fish specialities. The Company's ownership of Overhill is subject to warrants outstanding to purchase a minority position in Overhill. The forestry segment (the "Forestry Group"), which consists of the Company's wholly-owned subsidiary Texas Timberjack, Inc. ("Timberjack" or "TTI") and its majority-owned subsidiaries Southern Forest Products LLC ("SFP") and Wood Forest Products LLC ("WFP"), distributes, leases and provides financing for industrial and commercial timber equipment and is also engaged in certain related timber and sawmill operations. 2. BASIS OF PRESENTATION The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and its majority-owned subsidiaries. All material intercompany accounts and transactions have been eliminated. Certain prior year amounts have been reclassified to conform to the current year presentation. The financial statements included herein have been prepared by the Company, without an audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The Company believes that the disclosures are adequate to make the information presented not misleading. The information presented reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods when read in conjunction with the financial statements and the notes thereto included in the Company's latest financial statements filed as part of Form 10-K for the year ended September 30, 2000. -9- 3. INVENTORIES Inventories are summarized as follows: June 30, September 30, 2001 2000 ----------- ------------ Finished goods $25,919,170 $ 26,179,043 Raw materials 10,310,077 10,091,144 Inventory reserve (69,736) (150,000) ----------- ------------ Total $36,159,511 $ 36,120,187 =========== ============ As of June 30, 2001 and September 30, 2000, finished goods inventories consisted of approximately $9,356,000 and $9,655,000 in inventories at the Food Group, $15,800,000 and $15,690,000 in timber and logging related equipment, and $763,000 and $834,000 in finished wood products, respectively. As of June 30, 2001 and September 30, 2000, raw materials inventories consisted of approximately $9,090,000 and $9,289,000 in inventories at the Food Group and $1,220,000 and $802,000 in both unharvested and harvested but unprocessed timber, respectively. 4. TAXES For the nine months ended June 30, 2001, the actual income tax expense attributable to income from continuing operations differed from the net amounts recorded by the Company. The Company's subsidiaries recorded a provision for income taxes of approximately $1,200,000, based upon their effective tax rates determined as if they were separate taxpayers; the Company then applied a like amount of its existing valuation allowance as a reduction of this amount, resulting in a net income tax provision for the period of zero. The Company continues to maintain a valuation allowance against a portion of its deferred tax assets due to uncertainty with respect to the future recoverability of all such amounts. 5. LONG-TERM DEBT In November 1999, Overhill Farms, Inc. refinanced substantially all its existing debt. The new facility amounted to $44 million, consisting of a $16 million line of credit provided by Union Bank of California, N.A. ("Union Bank"), together with $28 million in the form of a five-year term loan provided by Levine Leichtman Capital Partners II, L.P. ("LLCP"). The line of credit with Union Bank expires in November 2002 and provides for borrowings limited to the lesser of $16 million or an amount determined by a defined borrowing base consisting of eligible receivables and inventories. Borrowings under the line bear interest at a rate, as selected by Overhill at the time of borrowing, of prime plus .25% or LIBOR plus 2.75%. The agreement contains various covenants including restrictions on capital expenditures, requirements to maintain specified net worth levels and debt service ratios, and generally prohibits loans, advances or dividends from Overhill to the Company and limits payments of taxes and other expenses to the parent company to specified levels. The line of credit is guaranteed by the Company and collateralized by certain assets of Overhill and the Overhill common stock owned by the Company. -10- The term loan with LLCP is a secured senior subordinated note bearing interest at 12% per annum, with interest payable monthly until maturity in October 2004. Principal payments in an amount equal to 50% of the excess cash flow, as defined, for Overhill's previous fiscal year are also payable annually; such payment in the amount of $2,020,000 was paid in January 2001. Voluntary principal payments are permitted after October 31, 2001, subject to certain prepayment penalties. The agreement contains various covenants including restrictions on capital expenditures, minimum EBITDA and net worth levels, and specified debt service and debt to equity ratios. In addition, the terms of the agreement restrict changes in control, generally prohibit loans, dividends or advances by Overhill to the Company and limit payments of taxes and other expenses to the parent company to specified levels. The term loan with LLCP is guaranteed by the Company and collateralized by certain assets of Overhill. The agreement also requires Overhill to pay to LLCP, during each January, annual consulting fees of $180,000. In connection with the agreement, LLCP was issued warrants to purchase 17.5% of the common stock of Overhill, exercisable immediately at a nominal exercise price. During the first two years following the date of the agreement, Overhill has the right to repurchase 5% of Overhill's shares from LLCP for $3 million and/or to repurchase all 17.5% of the Overhill shares subject to the LLCP warrant within five days of the term loan being repaid at their then determined fair market value. If such shares are not purchased, LLCP will be entitled under the agreement to receive a cash payment of $500,000 from Overhill. At the date of issuance, the warrants granted to LLCP were estimated to have a fair value of $2.37 million. As a result of the transactions, Overhill repaid in full the $22.7 million senior subordinated notes and the $9.7 million balance of its revolving line of credit with previous lenders. Additionally, Overhill repurchased, for $3.7 million, the warrants held by a previous lender to purchase 30% of Overhill's common stock; the excess of such repurchase amount over the carrying value of the warrant amounted to approximately $2.3 million and was recorded as goodwill. In connection with the refinancing, Overhill was permitted to make a one-time advance of $1.25 million to the Company for working capital and other specified purposes. Overhill incurred costs and expenses in connection with the refinancing totaling approximately $1.9 million, substantially all of which has been, or will be, paid to the lenders. The early extinguishment of the previous indebtedness resulted in an extraordinary loss of approximately $1.3 million (net of a $500,000 refund for early payment of the senior subordinated notes) during the nine months ended June 30, 2000. -11- 6. EARNINGS PER SHARE The following tables set forth the computations of basic and diluted earnings per share: For the Three Months Ended June 30, --------------------------- 2001 2000 ----------- ----------- Numerator: Net income $ 639,518 $ 1,025,373 =========== =========== Denominator: Denominator for basic earnings per share- weighted average shares 17,827,464 17,812,464 ----------- ----------- Effect of dilutive securities: Stock options 44,576 75,329 Warrants - - ----------- ----------- Dilutive potential common shares 44,576 75,329 ----------- ----------- Denominator for diluted earnings per share 17,872,040 17,887,793 =========== =========== Net income per share - basic and diluted $ .04 $ .06 =========== =========== -12-
For the Nine Months Ended June 30, ---------------------------- 2001 2000 ----------- ----------- Numerator: Income before extraordinary item $ 1,155,685 $ 3,115,951 Gain on reacquired preferred stock - 351,457 ----------- ----------- 1,155,685 3,467,408 Extraordinary item - (1,290,431) ----------- ----------- Net income attributable to common stockholders $ 1,155,685 $ 2,176,977 =========== =========== Denominator: Denominator for basic earnings per share- weighted average shares 17,826,090 17,812,464 ----------- ----------- Effect of dilutive securities: Convertible preferred stock - 358,618 Stock options 52,541 6,019 Warrants - - ----------- ----------- Dilutive potential common shares 52,541 364,637 ----------- ----------- Denominator for diluted earnings per share 17,878,631 18,177,101 =========== =========== Net income per share - basic and diluted: Before extraordinary item $ .06 $ .19 Extraordinary item - (.07) ----------- ----------- Net income per share $ .06 $ .12 =========== ===========
-13- 7. STOCKHOLDERS' EQUITY Stock Options During the period ended June 30, 2001, options to purchase 15,000 shares of the Company's common stock, at an exercise price of $.50 per share, were exercised. Warrants During the period ended June 30, 2001, the Company repurchased warrants covering 210,000 shares of its common stock, exercisable at $1.125 per share, for total consideration of approximately $46,000. Subsidiary Warrants During the period ended June 30, 2001, warrants issued in 1997 to purchase 1% of the common stock of Overhill Farms, Inc., at an exercise price of $50,000, were exercised. Convertible Preferred Stock During November 1999, the Company and Infinity Investors Limited, the holder of a series of the Company's preferred stock, entered into an agreement whereby, among other things, the Company agreed to repurchase all remaining preferred stock owned by Infinity, including all accrued but unpaid dividends, for $450,000 cash, and Infinity agreed to the dismissal of all litigation against the Company with respect to various matters related to its ownership of the preferred stock. As a result of the settlement, the Company recorded a gain of approximately $351,000, related to the difference in the carrying value of the preferred stock plus the accrued dividends and the settlement amount. Such amount was accounted for by recording a reduction of the Company's accumulated deficit during the nine months ended June 30, 2000. 8. RECENT ACCOUNTING PRONOUNCEMENT In June 2001, the Financial Accounting Standards Board issued Statement No. 142, "Goodwill and Other Intangible Assets" (SFAS 142), which requires that goodwill will no longer be amortized but instead will be tested at least annually for impairment by reporting unit. The Company is required to adopt SFAS 142 effective as of October 1, 2002, though early adoption as of October 1, 2001 is permitted. The Company is currently in the process of evaluating the relevant provisions of SFAS 142 and has not yet determined when SFAS 142 will be adopted or whether the adoption of SFAS 142 will have an immediate effect on the financial statements. However, amortization of goodwill, which amounted to approximately $835,000 and $683,000 for the nine month periods ended June 30, 2001 and 2000, respectively, before any related tax effects, will be eliminated upon the adoption of SFAS 142. -14- Item 2. Management's Discussion and Analysis Statements contained in this Form 10-Q that are not historical facts, including, but not limited to, any projections contained herein, are forward-looking statements and involve a number of risks and uncertainties. The actual results of the future events described in such forward-looking statements in this Form 10-Q could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are: adverse economic conditions, industry competition and other competitive factors, government regulation and possible future litigation. Results of Operations Revenues for the nine months ended June 30, 2001 increased $14,768,000 (11%) to $149,346,000 from $134,578,000 during the nine months ended June 30, 2000. The increase in revenues is primarily attributable to sales gains by Overhill. Gross profits increased only $418,000 to $27,795,000 in the current year from $27,377,000 in the comparable period in 2000, due to a decrease in gross margin rates to 18.6% in the current year as compared to 20.3% in the comparable period in fiscal 2000. During the current nine month period, operating income decreased to $7,136,000 from $8,693,000 in fiscal 2000. Consolidated income before extraordinary item for the nine months ended June 30, 2001 decreased to $1,156,000 from $3,116,000 during the nine months ended June 30, 2000. After the effect in the prior year of an extraordinary expense of $1,290,000 related to the early extinguishment of debt in connection with major refinancing by Overhill Farms, and a gain of $351,000 on the reacquisition of preferred stock, net income attributable to common stockholders amounted to $1,156,000 ($.06 per share) in the current year compared to $2,177,000 ($.12 per share) in fiscal 2000. The Food Group's revenues increased $15,640,000 (15%) to $119,586,000 for the nine months ended June 30, 2001 as compared to $103,946,000 for the nine months ended June 30, 2000. Gross profits increased $1,040,000 to $21,575,000, compared to $20,535,000 in the prior year. A decrease in the gross margin rate to 18.0% in 2001 from 19.8% in 2000, as well as an increase in operating expenses, were both attributable, in part, to startup expenses related to the Chicago Brothers acquisition and increased energy costs in the California based facilities and resulted in a decrease in operating income to $7,339,000 in 2001 from $8,204,000 in 2000. Revenues for the Forestry Group for the nine months ended June 30, 2001 decreased $872,000 (2.8%) to $29,760,000 from $30,632,000 for the nine months ended June 30, 2000. Operating income for the same period decreased $403,000 to $370,000 for the nine months ended June 30, 2001 from $773,000 for the nine months ended June 30, 2000. These decreases are due to a continued softness in the East Texas timber market, affecting both the Texas Timberjack core equipment business as well as its sawmill operations. -15- Liquidity and Capital Resources During the nine months ended June 30, 2001, the Company's operating activities resulted in cash provided of approximately $8,413,000, as compared to cash provided of $1,125,000 during the comparable period in fiscal 2000. The cash provided in the current year is primarily due to the operations of Overhill Farms, with decreases in receivables and increases in trade accounts payable. During the nine months ended June 30, 2001, the Company's investing activities resulted in a use of cash of approximately $2,544,000, as compared to a use of cash of $1,509,000 during the comparable period in fiscal 2000. The Company's use of cash in the current year resulted from increases in notes and related party receivables by Texas Timberjack and from capital expenditures by both operating units. During the nine months ended June 30, 2001, the Company's financing activities resulted in a use of cash of approximately $6,246,000, as compared to cash provided of $676,000 during the comparable period in fiscal 2000. The use of cash in the current year resulted consisted primarily of principal payments on indebtedness by Overhill Farms. The Company believes that funds available to it from operations and existing capital resources will be adequate for its capital requirements for the next twelve months. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company's interest expense is affected by changes in prime and LIBOR rates as a result of its various line of credit arrangements. If these market rates increase by an average of 1%, the Company's interest expense for the next twelve months would increase by approximately $215,000, based on the outstanding line of credit balances at June 30, 2001. The Company does not own, nor does it have an interest in any other market risk sensitive instruments. -16- PART II - OTHER INFORMATION Item 1. Legal Proceedings During fiscal 1997, five substantially identical complaints were filed in the United States District Court for the District of Nevada against the Company and certain of its current and past officers and directors. The complaints each sought certification as a class action and asserted liability based on alleged misrepresentations that the plaintiffs claimed resulted in the market price of the Company's stock being artificially inflated. Without certifying the cases as class actions, the District Court consolidated the cases into a single action. In March 2000, the District Court dismissed the plaintiffs' claims against one of the Company's officers and directors and restricted the plaintiffs from pursuing a number of their claims against the other defendants. The Court also granted the remaining defendants leave to file motions for summary judgment. Motions for summary judgment were thereafter filed, pointing out that the evidence did not support the plaintiffs' claims. In November 2000, in a lengthy decision addressing the plaintiffs' claims against each of the remaining defendants, the Court granted the motions for summary judgment, thereby disposing of all of the claims asserted by the plaintiffs. The plaintiffs then filed a motion for rehearing which the Court denied in March 2001. The decision in these suits, which the Company maintained all along were without merit, has now been appealed by the plaintiffs to the United States Court of Appeals for the Ninth Circuit. The Company and its subsidiaries are involved in certain legal actions and claims arising in the ordinary course of business. However, management believes (based, in part, on advice of legal counsel) that such litigation and claims will be resolved without material effect on the Company's financial condition, results of operations or cash flows. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter ended June 30, 2001. -17- SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OVERHILL CORPORATION (Registrant) Date: August 8, 2001 By: /s/ James Rudis -------------------------------- James Rudis Chairman, President and Chief Executive Officer Date: August 8, 2001 By: /s/ William E. Shatley -------------------------------- William E. Shatley Senior Vice President and Chief Financial Officer -18- -----END PRIVACY-ENHANCED MESSAGE-----