Item 1. Business
The statements in this report that are forward looking are based upon current expectations and actual results may vary. See "Cautionary Statement" under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this report.
In accordance with the AICPA Statement of Position 90-7, Financial Reporting by entities in Reorganization Under the Bankruptcy Code, the Company adopted fresh-start reporting as of September 20, 1997. In accordance with fresh- start accounting, the gain on discharge of debt resulting from the bankruptcy proceedings was reflected on the predecessor Company's financial statements for the period ended September 20, 1997. In addition, the accumulated deficit of the predecessor Company at September 20, 1997, was eliminated, and at September 21, 1997, the reorganized Company's financial statements reflected no beginning retained earnings or deficit. In addition, the Company's capital structure was recast in conformity with its approved Plan.
As a result of the Company adopting fresh-start accounting, reporting for the year ended October 25, 1997 is accomplished by combining the financial results for the one-month period ended October 25, 1997 and those of the eleven-month period ended September 20, 1997. Because of the application of fresh-start reporting, the selected financial data for the periods after reorganization are not comparable in any respect to the selected financial data for the periods prior to reorganization.
General
Rymer Foods Inc. (Rymer Foods or the Company) through its subsidiary, Rymer Meat Inc. (Rymer Meat), is primarily engaged in the development and production of frozen, pre-seasoned, portion controlled meat entrees. The Company is engaged in the production of such products for restaurants and other foodservice customers and retail sales. Rymer Foods was incorporated under the laws of Delaware in 1969.
The Company announced on July 8, 1997, that it had received the necessary approvals from its creditors and stockholders for confirmation of a prepackaged plan of reorganization under Chapter 11 of the Bankruptcy Code (the Plan). Rymer Foods' operating subsidiary, Rymer Meat, was not a party to the Bankruptcy proceedings. To implement the Plan, on July 8, 1997 the Company commenced a voluntary Chapter 11 case in the United States Bankruptcy Court for the Northern District of Illinois (the Bankruptcy Court) and filed the Plan with the Bankruptcy Court. The Plan was confirmed by the Bankruptcy Court on August 21, 1997 and was consummated on October 6, 1997. Although the consummation date was October 6, 1997, fresh-start reporting was adopted on September 20, 1997. There were no fresh-start adjustments during the period of September 21, 1997 to October 6, 1997.
Immediately following consummation of the Plan, Senior Noteholders and certain creditors received 80% of the new common stock, existing holders of common stock received 10% of the new common stock, and Rymer senior management received 10% of the new common stock.
In 2000 the Company reported a loss from continuing operations of $1.9 million. During the fourth quarter of the year ended October 28, 2000 the Company incurred substantial losses relative to the disposition of slow moving inventory including raw materials, finished goods and packaging and seasonings. The change in management resulted in the Company making severance payments, bonus payments to key employees for retention, as well as legal costs associated with litigation related to former employees. The Company increased sales by $.9 million or 2.4%.
In 1999 the Company reported an income from continuing operations of $33,000.
In 1998 the Company reported a loss from continuing operations of $2.0 million.
Products, Markets and Distribution
The Company's principal products are frozen, pre-seasoned, portion controlled meat entrees. Major beef products include commercial and choice cut steaks. The Company also produces other meat products such as specialty ground and breaded products and certain cooked products (e.g., pot roast, meat loaf). The Company engages in the development and production of proprietary "signature" recipes for chain restaurant customers. The Company also offers its customers services such as menu planning, new product development and other marketing services, such as handling and cooking procedures. These programs, products and services are custom-designed for each chain restaurant customer.
The markets served by the Company include family-style restaurant chains and foodservice distributors. Products are primarily sold through the Company's own marketing staff, as well as through independent brokers and foodservice distributors.
Raw Materials
The Company's primary raw material is beef which is available in adequate supply. The Company is not dependent upon any one source for its primary raw material.
Customers
No customer represented 10% or more of the Company's sales in 2000, 1999, or 1998.
The Company believes that it has satisfactory ongoing relationships with its current customers. There can be no assurances, however, that such relationships can be preserved, especially if the Company's financial condition and results of operation do not improve.
Trademarks, Patents and Research Activities
Rymer Meat sells and markets its products under the "Rymer" trademark label. The Company considers this trademark important in its marketing efforts.
Research and development expenses are charged to operations as incurred. Expenditures for the three fiscal years ending October 28, 2000, October 30, 1999, and October 31, 1998 were not material as compared to other operational expenses.
Competitive Conditions
The Company's business is highly competitive, with a substantial number of competitors. A large number of companies process and sell meat products to the foodservice industry. Every year new companies are formed and enter the meat industry, some becoming sizeable competitors in a short period of time.
Some of the competitors in the Company's markets are larger than the Company and have greater resources. The Company believes that in the markets it serves it provides its customers with a broader line of quality products and services than many of its competitors. Competition in the markets served by the Company is based primarily on quality, service and price. Management believes that the Company's primary bases for competing are its reputation for quality, service, broad menu of products, willingness to develop proprietary recipes for specific customers and competitive pricing.
Environmental Matters
The Company believes that it is in compliance with all applicable federal, state and local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment. No significant costs were incurred by the Company to comply with environmental regulations during the three fiscal years ended October 28, 2000, October 30, 1999, and October 31, 1998. The Company has not received notice of, and is not aware of any claims arising under any federal or state environmental laws.
Employees
At October 28, 2000, Rymer Foods had approximately 190 employees, of whom approximately 160 were covered by union contracts. The Company believes it currently enjoys stable relations with its employees.
Seasonality
The quarterly results of the Company are affected by seasonal factors. Sales are usually lower in the fall and winter primarily due to consumers' dining preferences.
Item 2.
Item 2. Properties
At October 28, 2000, the principal physical property of Rymer Foods consisted of the following:
Footage Ownership Expiration Facility Use ------- --------- ---------- ------------------ Chicago, Illinois 123,000 Leased Month To Office/Production/ Month Warehouse
Arlington Heights, Illinois 482 Leased Aug. 31, 2001 Sales Office
The Chicago facility is considered suitable and adequate to meet the needs of the Company. The long term lease for the Chicago meat processing facility expired in July 1996. A new lease has not been finalized. Management expects to lease on a month-to-month basis for the time being. See Note 7 to the Consolidated Financial Statements for a summary of the Company's rental expense for leased facilities and for production and office equipment.
Item 3.
Item 3. Legal Proceedings
From time to time, the Company is involved in routine legal proceedings in the normal course of its business. The Company believes that no currently pending legal proceeding will have a materially adverse effect on the financial condition or results of operations of the Company.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
The Company's common stock currently trades under the symbol RFDS.
On January 26, 2001, the Company's stock price closed at $0.50 per share.
The following table sets forth, for the fiscal quarters indicated, the high and low sales prices of the Common Stock. As of January 26, 2001, there were approximately 300 holders of record of Common Stock.
High Low ---- ---- First Quarter $0.85 $0.41 Second Quarter 1.13 0.50 Third Quarter 1.06 0.25 Fourth Quarter 0.31 0.15
First Quarter $0.47 $0.09 Second Quarter 0.50 0.19 Third Quarter 1.87 0.28 Fourth Quarter 1.28 0.66
Dividends
No dividends have been paid on the Common Stock since prior to 1983. The ability of Rymer Foods to pay dividends on the Common Stock is substantially limited by its bank credit agreements. The Company does not anticipate that it will be able to pay any dividend on the Common Stock in the foreseeable future.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement
The statements in this Form 10-K, included in this Management's Discussion and Analysis, that are forward looking are based upon current expectations and actual results may differ materially. Therefore, the inclusion of such forward looking information should not be regarded as a representation by the Company that the objectives or plans of the Company will be achieved. Such statements include, but are not limited to, the Company's expectations regarding the operations and financial condition of the Company. Forward looking statements contained in this Form 10-K included in this Management's Discussion and Analysis, involve numerous risks and uncertainties that could cause actual results to differ materially including, but not limited to, the effect of changing economic conditions, business conditions and growth in the meat industry, the Company's ability to maintain its lending arrangements, or if necessary, access external sources of capital, implementing current restructuring plans and accurately forecasting capital expenditures. In addition, the Company's future results of operations and financial condition may be adversely impacted by various factors including, primarily, the level of the Company's sales. Certain of these factors are described in the description of the Company's business, operations and financial condition contained in this Form 10-K. Assumptions relating to budgeting, marketing, product development and other management decisions are subjective in many respects and thus susceptible to interpretations and periodic revisions based on actual experience and business developments, the impact of which may cause the Company to alter its marketing, capital expenditure or other budgets, which may in turn affect the Company's financial position and results of operations.
General
The Company's consolidated results from continuing operations are generated by its Meat processing operation.
The Company incurred a significant operating loss in fiscal 2000 and has a deficit retained earnings since emerging from Chapter 11 in 1997. As of October 28, 2000, the Company was in violation of certain financial covenants of their line of credit. The Company had approximately $100,000 available for borrowings under its line of credit as of October 28, 2000.
Management believes that the Company's future success is dependent on containing and reducing operating costs, changing its sales mix to include more cooked product which generates higher margins, and being able to "forward buy" more inventory to reduce its material costs.
In February 2001 the Company amended their line of credit with new financial covenants which management believes the Company will he able to meet.
During the fourth quarter of fiscal 2000, management took several steps to restructure operations, including significantly reducing the number of employees and reducing other administrative expenses. Management has also changed the focus of marketing efforts in an attempt to increase sales of higher margin products. Management believes that the Company will be able to generate sufficient cash from operations to ensure the Company will continue operations in the near term.
Fiscal 2000 Compared with Fiscal 1999
Consolidated sales for 2000 of $39.9 million increased from 1999 by $.9 million or 2.4%. A change in sales mix accounted for the increase. As compared to 1999, consolidated cost of sales increased by $2.6 million or 7.5% while gross profit decreased by $1.6 million or 36.5%. As a percentage of sales, the consolidated gross profit decreased to 7.2% as compared to 11.5% in 1999.
Gross profit decreased compared to 1999 primarily due to higher raw material costs, sales mix changes and substantial loses relating to the disposition of slow moving inventory, including raw materials, finished good and packaging and seasoning.
Selling, general and administrative expenses increased by $.2 million or 4.8%, primarily due to the restructuring in management resulting in the Company making severance payments, bonus payments to key employees for retention as well as legal cost associated with litigation related to former employees.
Interest expense increased by $.1 million or 36% from 1999. This increase is due to the Company's higher borrowings, primarily to accommodate Company growth, finance current year losses and higher prime rate on the Company's line of credit.
In both 2000 and 1999, no provision for income taxes was recorded due to the loss from operations. However, in 2000 the Company reduced the income tax liability by $80,000 thereby resulting in a tax benefit for the year.
Fiscal 1999 Compared with Fiscal 1998
Consolidated sales for 1999 of $38.9 million increased from 1998 by $8.7 million or 28.8%. Sales volume accounted for 87.9% of this increase and 12.1% due to sales mix changes. Sales increased mainly due to expansion of the Company's customer base through the acquired line of business and growth in major customers.
As compared to 1998 consolidated cost of sales increased by $6.3 million or 22.6% while total gross profit increased by $2.4 million or 111.5%. As a percentage of sales, the consolidated gross profit margin increased to 11.5% from 7% in 1998.
Gross profit increased compared to 1998 due to increased unit sales combined with increases of volume and mix changes. The Company experienced efficiencies associated with the volume and mix changes.
Selling, general and administrative expenses remained approximately the same as compared to 1998. Both selling and administrative remained constant from year to year.
Interest expense increased by $0.2 million or 77% from 1998 to 1999 due primarily to increased borrowing for raw material inventory and to accommodate Company growth.
In 1999 no provision for income taxes was recorded as existing net operating loss carryforwards were utilized.
Liquidity and Capital Resources
The Company makes sales primarily on a seven to thirty day balance due basis. Purchases from suppliers have payment terms generally ranging from wire transfer at time of shipment to fourteen days.
The Company's cash management techniques involve the use of zero balance disbursement accounts. Check clearings are covered by advances from the Company's credit lines. Thus, in the absence of excess funds classified as cash equivalents, the Company's cash balances are credit balance accounts representing outstanding checks. The Company classified such credit balances as accounts payable in the Consolidated Balance Sheet.
The Company on April 23, 1998 entered into a loan agreement with FINOVA. The credit facility provided up to $4.0 million for the Company through April 23, 2001. On May 4, 2000 the Company amended its loan agreement with FINOVA that 1) extended the maturity date to April 23, 2002, 2) increased the facility by $1.0 million to $5.0 million and 3) set up a separate capital expenditure line of credit for $500,000. The FINOVA agreement contains loan covenants that the Company must meet. At October 28, 2000, the Company was in violation with the loan covenants. These covenants have been reset as part of an amended loan agreement. The amended loan agreement reduces the line of credit to $4.7 million, cancels the capital expenditure line of credit and changes the maturity date to June 28, 2001.
The Company had a working capital deficit of $108,000 at October 28, 2000 and working capital of $5.3 million at October 30, 1999.
The Company had total lines of credit available of $3.8 million at October 28, 2000 and $3.8 million at October 30, 1999, of which $0.1 million and $0.3 million, respectively, was unused. The Company anticipates that the amended line of credit will supply sufficient cash to meet the Company's requirements.
The Company anticipates spending approximately $385,000 for capital expenditures in 2001. The expenditures are primarily for planned improvements in the meat operations. There are no specific commitments outstanding related to these planned expenditures.
Seasonality
The quarterly results of the Company are affected by seasonal factors. Sales are usually lower in the fall and winter.
Impact of Inflation
Raw materials are subject to fluctuations in price. However, the Company does not expect such fluctuations to materially impact its competitive position.
Fourth Quarter Adjustments
During the fourth quarter of the year ended October 28, 2000 the Company incurred substantial losses relative to the disposition of slow moving inventory including raw materials, finished goods and packaging and seasonings. The change in management resulted in the Company making severance payments, bonus payments to key employees for retention, as well as legal costs associated with litigation related to former employees.
None.
None.
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements and Supplementary Financial Data
Pages
Report of Independent Accountants 11
Financial Statements:
Consolidated Statements of Operations for the fiscal years ended October 28, 2000, October 30, 1999 and October 31, 1998 12
Consolidated Balance Sheets as of October 28, 2000 and October 30, 1999 13
Consolidated Statements of Cash Flows for the fiscal years ended October 28, 2000, October 30, 1999 and October 31, 1998 14
Consolidated Statement of Stockholders' Equity (Deficit) for the fiscal years ended October 28, 2000, October 30, 1999 and October 31, 1998 15
Notes to Consolidated Financial Statements 16-22
Supplementary Financial Data:
Schedule II - Valuation and Qualifying Accounts and Reserves 24
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors Rymer Foods Inc.
We have audited the consolidated balance sheets of Rymer Foods Inc. and subsidiaries as of October 28, 2000 and October 30, 1999, and the consolidated statements of operations, stockholders' equity (deficit) and cash flows for the years ended October 28, 2000, October 30, 1999 and October 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Rymer Foods Inc. and subsidiaries as of October 28, 2000 and October 30, 1999, and the consolidated results of their operations and their cash flows for the years ended October 28, 2000, October 30, 1999 and October 31, 1998, in conformity with accounting principles generally accepted in the United States of America. We have also audited Schedule II of Rymer Foods Inc. and subsidiaries for the years ended October 28, 2000, October 30, 1999 and October 31, 1998. In our opinion, this schedule presents fairly, in all material respects, the information required to be set forth therein.
/s/ Grant Thornton LLP ---------------------- Grant Thornton LLP
Chicago, Illinois December 22, 2000, except for Note 16 as to which the date is January 25, 2001
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Fiscal Year and Basis of Presentation
The fiscal year of the Company ends the last Saturday in October. For all years presented, the fiscal year was 52 weeks except 1998 which was 53 weeks.
In accordance with the AICPA Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code, the Company adopted fresh-start reporting as of September 20, 1997. In accordance with fresh- start accounting, the gain on discharge of debt resulting from the bankruptcy proceedings was reflected on the predecessor Company's financial statements for the period ended September 20, 1997. In addition, the accumulated deficit of the predecessor Company at September 20, 1997, was eliminated, and at September 21, 1997, the reorganized Company's financial statements reflected no beginning retained earnings or deficit. In addition, the Company's capital structure was recast in conformity with its approved Plan.
The Company incurred a significant operating loss in fiscal 2000 and has a deficit retained earnings since emerging from Chapter 11 in 1997. As of October 28, 2000, the Company was in violation of certain financial covenants of their line of credit. The Company had approximately $100,000 available for borrowings under its line of credit as of October 28, 2000.
In February 2001 the Company amended their line of credit with new financial covenants which management believes the Company will he able to meet.
During the fourth quarter of fiscal 2000, management took several steps to restructure operations, including significantly reducing the number of employees and reducing other administrative expenses. Management has also changed the focus of marketing efforts in an attempt to increase sales of higher margin products. Management believes that the Company will be able to generate sufficient cash from operations to ensure the Company will continue operations in the near term.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and all of its subsidiaries after elimination of all significant intercompany accounts and transactions. The Company is engaged in the development and production of frozen, pre-seasoned, portion controlled meat entrees for restaurants and other foodservice customers, primarily in the United States.
Cash Equivalents
The Company considers short-term investments purchased with maturities of ninety days or less to be cash equivalents.
Inventories
Inventories are stated at the lower of first-in, first-out cost or market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is recognized on a straight-line basis over the estimated useful lives of the related assets generally from 3 years to 7 years. Expenditures for maintenance and repairs are charged to operations as incurred. Gains or losses on the disposition of assets are reflected in results of operations.
Revenue Recognition
The Company recognizes sales revenues at the time of shipment.
Income Taxes
Deferred income taxes are recorded to reflect the tax consequences on future years of differences between the basis of assets and liabilities for income tax and for financial reporting purposes. In addition, the amount of any future tax benefits is reduced by a valuation allowance to the extent such benefits are not expected to be fully realized.
Earnings (Loss) Per Share
The difference between basic and dilutive weighted average common shares results from the assumption that dilutive stock option-outstanding were exercised.
Since there is a net loss for the year ended October 28, 2000 and October 31, 1998, common stock equivalents are excluded from the diluted earnings per share calculation since they would be antidilutive.
Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at October 28, 2000 and October 30, 1999, and the reported amounts of revenues and expenses during the three year period ended October 28, 2000. Actual results could differ from those estimates.
2. Discontinued Operations and Assets Held for Sale
The accompanying consolidated financial statements reflect the operations of the Company's Rymer Plant City subsidiary as discontinued operations for accounting purposes.
3. Reorganization Plan
The Company adopted "fresh-start reporting" on September 20, 1997 in accordance with Statement of Position ("SOP") 90-7 issued by the American Institute of Certified Public Accountants. SOP 90-7 calls for the adoption of "fresh-start reporting" if the reorganization value of the emerging entity immediately before the date of confirmation is less than the total of all postpetition liabilities and prepetition allowed claims, and if holders of existing voting shares immediately before confirmation receive less than 50 percent of the voting shares of the emerging entity, both conditions of which were satisfied by the Company. Although the consummation date was October 6, 1997, fresh-start reporting was adopted on September 20, 1997. There were no fresh-start related adjustments during the period September 21, 1997 to October 6, 1997.
Under fresh-start accounting, all assets and liabilities are restated to reflect their reorganization value, which approximates book value at date of reorganization. Therefore, no reorganization value has been allocated to the assets and liabilities. In addition, the amount of debt forgiveness was $25.6 million and the accumulated deficit of the predecessor company at September 20, 1997 totalling $50.4 million was eliminated, and at September 21, 1997, the reorganized company's financial statements reflected no beginning retained earnings or deficit.
4. Inventories
Inventories consist of the following (in thousands):
October 28, October 30, 2000 1999 ----------- ----------- Raw materials $ 1,565 $ 3,251 Finished good 1,948 1,819 ----------- ----------- $ 3,513 $ 5,070 =========== ===========
5. Borrowings
Borrowings consisted of the following (in thousands):
October 28, October 30, 2000 1999 ----------- ----------- Banks with interest of 2% over prime in 2000 and 1999 $ 3,677 $ 3,514 Less current maturities 3,677 - ----------- ----------- $ - $ 3,514 =========== ===========
The prime rate applicable to the Company's outstanding bank notes payable was 9.5% at October 28, 2000 and 8.25% at October 30, 1999. The weighted average interest rate relating to these borrowings was 11.09% and 9.9% during fiscal 2000 and 1999 respectively.
Under the agreement noted above the Company's Rymer Meat subsidiary had total lines of credit available of $3.8 million at October 28, 2000 and $3.8 million at October 30, 1999, of which $.1 million and $.3 million, respectively, was unused.
The Company's bank agreements contain certain restrictive covenants which, among other things, limit the amount of indebtedness incurred by the Company and its subsidiaries and require the maintenance of certain financial ratios by the Company and its subsidiaries. The Company was in violation of these covenants at October 28, 2000, however, these have been reset as part of an amended agreement. While the Company was in compliance with these new covenants at the amendment date there can be no assurance that they will remain in compliance. The amended loan agreement reduces the line of credit to $4.7 million, cancels the capital expenditure line of credit and changes the maturity date of June 28, 2001.
Substantially all of the Company's property, plant and equipment and certain current assets are pledged as collateral under its bank agreement.
6. Leases
The Company and its subsidiaries lease certain facilities and equipment used for offices and manufacturing. Total rental expense from continuing operations under all operating leases was approximately $560,000, $512,000, and $476,000 in fiscal 2000, fiscal 1999, and fiscal 1998 respectively. The above lease costs do not include the costs of taxes, insurance, maintenance and utilities which the Company and its subsidiaries are required to pay.
The lease for the Chicago meat processing facility expired in July 1996. The Company has subsequently negotiated for revised lease space and lower rental costs and leases the facility on a month-to-month basis.
Property, plant and equipment recorded under lease commitments under non- cancelable leases are not material.
7. Income Taxes
The Company's deferred tax asset is related primarily to its operating loss carryforward for tax reporting purposes which approximated $23.0 million at October 28, 2000 and $21.0 million at October 30, 1999 respectively. The Company recorded a valuation allowance amounting to the entire deferred tax asset balance because the Company's financial condition, its lack of a history of consistent earnings, significant limitations on the use of carryforwards, and the expiration dates of certain of the net operating loss carryforwards give rise to uncertainty as to whether the deferred tax asset is realizable.
The components of the net deferred tax asset recorded in the accompanying consolidated balance sheets as of October 28, 2000 and October 30, 1999 are as follows (in thousands):
2000 1999 --------- --------- Deferred tax assets: Accounts receivable $ 17 $ 53 Inventories 139 137 Property, pland and equipment 439 431 Other liabilities and reserves 203 147 Alternatives minimum tax credits - 68 Net operating loss carryforward 7,806 7,182 Investments tax credits 512 512 Contribution carryover 25 27 --------- --------- Total deferred tax assets 9,141 8,557 Less: Valuation allowance (9,141) (8,557) --------- --------- Net deferred tax asset $ - $ - ========= =========
The following table accounts for the difference between the actual tax provision attributable to loss before income taxes and the amounts obtained by applying the statutory U.S. Federal income tax rate of 34% to the loss before income taxes. Fiscal Years Ended October 28, October 30, October 31, 2000 1999 1998 ------- ------- ------- Total (loss) income before income taxes $ (1,932) $ 33 $ (2,017)
Total (benefit) provision computed by applying the U.S. statutory rate (34%) (657) 11 (686) Increases (decreases) in taxes due to: Loss which provides no current tax benefit 657 - 686 Use of net operating loss carryforwards - (11) - Other differences, net (80) - - ------- ------- ------- Actual tax (benefit) provision $ (80) $ - $ - ======= ======= =======
The Company's Federal income tax returns are subject to review by the Internal Revenue Service, the results of which cannot be predicted with certainty. At October 28, 2000, the Company had an operating loss carryforward for tax reporting purposes approximating $23 million which is available to offset future Federal taxable income which begins to expire in 2007. Additional restrictions under Section 382 apply to limit the amount of net operating loss carryforward which can be utilized in the future.
8. Stockholders' Equity
The Company has authorized 20,000,000 shares of common stock with a par value of $0.04 per share and 400,000 shares of preferred stock with a par value of $10 per share.
At October 28, 2000, there were 227,000 stock shares reserved for the exercise of stock options.
9. Capital Stock, Stock Options and Warrants
A summary of stock option activity and other related information is as follows: Options Outstanding ----------------------------- Number Weighted Average Outstanding Price per share ----------------------------- Balance, October 26, 1997 Granted 348,000 $0.87 Exercised - - Canceled - - ----------------------------- Balance, October 31, 1998 348,000 $0.87
Granted 426,000 $0.25 Exercised - Canceled (348,000) $0.87 ----------------------------- Balance, October 30, 1999 426,000 $0.25
Granted 100,000 $0.16 Exercised - Canceled (299,000) $0.26 ----------------------------- Balance, October 28, 2000 227,000 $0.19 =============================
During 1998, the Company issued options to key employees and board members for the purchase of 348,000 shares of common stock. The options vest either immediately or equally over a four year period, commencing with the date of grant. The exercise price ranges from $0.44 per share to $1.00 per share, the market price on the date of grant. The options will expire five years from the date of grant. On March 12, 1999 all of the options previously issued were cancelled, and then reissued at a exercise price of $0.22 per share the market price on the date of reissuance. Compensation expense of $11,000 has been recognized by the Company for the year ended October 30, 1999 as a result of repricing some of the options.
In accordance with the provisions of SFAS No. 123, and "Accounting for Stock-Based Compensation", the Company has elected to continue to account for stock based compensation under the intrinsic value based method of accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees". Under APB Opinion 25, generally no cost is recorded for options issued to employees unless the option price is below the fair value at date options are granted.
The pro forma affect of applying the fair value based method to these options would not have a material affect on the reported net earnings (loss) and would not change the net earnings (loss) per share for the years ended October 28, 2000 and October 30, 1999 respectfully. The fair value of these options was computed by applying the following assumptions to the Black Scholes options pricing model: no dividends; risk-free interest rate of 5.95% and 5.46%; volatility of 107.8% and 26.8%; and an average term of 5 years for options issued during 2000 and 1999 respectively. The fair value of options granted for years ended October 28, 2000 and October 30, 1999 respectively were $.50 and $.08 respectively.
10. Employee Benefit Plans
The Company currently sponsors a Company-wide 401(k) savings plan. The plan covers all salaried personnel at the Chicago processing plant and the Company's corporate headquarters who have completed 6 months of service. The Company makes matching contributions to the 401(k) savings plan of up to 5% of each participants' compensation.
Contributions and costs expensed under 401(k) savings plan for employees relating to the Company's continuing operations amounted to approximately $96,000, $82,000, and $86,000 for fiscal 2000, fiscal 1999, and fiscal 1998, respectively.
11. Commitments and Contingencies
The amounts of liability, if any, for claims and actions against the Company and its subsidiaries at October 28, 2000 are not determinable but, in the opinion of management, such liability, if any, would not have a material effect upon the Company's financial position or results of operations.
12. Supplemental Cash Flow Information
Supplemental cash flow information is as follows (in thousands):
2000 1999 1998 ------ ------ ------ Cash paid for Interest $ 462 $ 333 $ 190 ====== ====== ====== Federal, state and local income taxes (net of tax refunds) $ 9 $ 15 $ 10 ====== ====== ======
13. Concentration of Credit Risk and Supplemental Sales Information
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of accounts receivable.
The Company routinely assesses the financial strength of its customers and, as a consequence, believes that its trade accounts receivable credit risk exposure is limited. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information.
Sales to customers outside the United States were less than 10% of consolidated sales in each year presented.
No customer represents 10% or more of the Company's sales in 2000, 1999, or 1998.
14. Fourth Quarter Adjustments
During the fourth quarter of the year ended October 28, 2000 the Company incurred substantial losses relative to the disposition of slow moving inventory including raw materials, finished goods and packaging and seasonings. A management restructuring in 2000 resulted in the Company making severance payments, bonus payments to key employees for retention, as well as legal costs associated with litigation related to former employees.
None
None
15. New Accounting Standards
There are no currently issued but not yet effective accounting standards that adoption of would have a material impact on the Company's financial position or results of operations.
16. Subsequent Events
On January 25, 2001 the Company signed a non binding letter of intent to be acquired, via merger, by Forest Lake Partners LLC. The Company would be merged into Forest Lake Partners LLC and the stockholders of Rymer Foods would receive cash in the amount of $0.625 for each share of common stock owned.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant The disclosure required by Item 10 is set forth in, and is incorporated by reference to, the Company's Proxy Statement relating to the 2001 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission on or before February 28, 2001 (the 2001 Proxy Statement).
Item 11. Executive Compensation The disclosure required by Item 11 is set forth in, and is incorporated by reference to, the 2001 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management The disclosure required by Item 12 is set forth in, and is incorporated by reference to, the 2001 Proxy Statement.
Item 13. Certain Relationships and Related Transactions The disclosure required by Item 13 is set forth in, and is incorporated by reference to, the 2001 Proxy Statement.
PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. The following audited consolidated financial statements of the Page Company are included in Part II, Item 8:
Consolidated Statements of Operations for the fiscal years ended October 28, 2000, October 30, 1999 and October 31, 1998 12
Consolidated Balance Sheets as of October 28, 2000 and October 30, 1999 13
Consolidated Statements of Cash Flows for the fiscal years ended October 28, 2000, October 30, 1999, and October 31, 1998 14
Consolidated Statement of Stockholders' (Deficit) Equity for the fiscal years ended October 28, 2000, October 30, 1999, and October 31, 1998 15
Notes to Consolidated Financial Statements 16-23
(a) 2. Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts and Reserve 24
Schedules, other than those listed above, are omitted as they are not applicable or required or equivalent information has been included in the financial statements or notes thereto.
(a) 3. Exhibits:
11 Computation of Earnings Per Share 26
21 Subsidiaries of the Company 27
NOTE: With the exception of Exhibit 11, 21 and 27, the registrant will furnish copies of such other Exhibits upon written request to the Secretary at the address on the cover of the Form 10-K Annual Report. A reasonable copying and handling fee will be charged.
(b) Reports on Form 8K
The Company filed a report on Form 8-K dated June 22, 2000, which was amended on July 6, 2000 wherein the Company reported information under Item 6