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.
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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
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