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 December 31, 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 18,615,464
---------------------------------------
Outstanding at February 4, 2002
OVERHILL CORPORATION
FORM 10-Q
QUARTER ENDED DECEMBER 31, 2001
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets as of
December 31, 2001 and September 30, 2001 2
Consolidated Condensed Statements of
Operations for the Three Months Ended
December 31, 2001 and 2000 4
Consolidated Condensed Statements of
Cash Flows for the Three Months Ended
December 31, 2001 and 2000 5
Notes to Consolidated Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 14
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 16
Signature Page 17
-1-
OVERHILL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
Assets
December 31, September 30,
------------ -------------
2001 2001
------------ -------------
(Unaudited)
Current assets:
Cash $ 1,971,147 $ 686,382
Receivables, net of allowance for doubtful accounts
of $626,200
Trade accounts 2,344,744 3,399,591
Current portion of sales contracts 4,737,987 5,029,362
Related parties 2,077,022 1,927,768
Notes 3,761,378 4,191,128
Inventories 16,725,235 16,374,797
Net current assets of discontinued operations 18,373,935 17,271,667
Prepaid expenses and other 2,094,030 2,044,969
------------ ------------
Total current assets 52,085,478 50,925,664
------------ ------------
Property and equipment:
Land 432,000 432,000
Buildings and improvements 2,727,352 2,722,595
Machinery, equipment and other 3,276,558 3,053,909
------------ ------------
6,435,910 6,208,504
Less-Accumulated depreciation (2,503,454) (2,348,410)
------------ ------------
3,932,456 3,860,094
------------ ------------
Other assets:
Noncurrent receivables, net of allowance for
doubtful accounts of $1,033,671
Sales contracts 2,552,334 2,627,468
Related parties 375,928 375,928
Excess of cost over fair value of net assets
of businesses acquired 3,612,580 3,612,580
Restricted cash 520,363 522,709
Assets held for sale 1,926,264 1,926,264
Other 1,749,099 1,192,074
------------ ------------
10,736,568 10,257,023
------------ ------------
$ 66,754,502 $ 65,042,781
============ ============
The accompanying notes are an integral part
of these consolidated financial statements.
-2-
OVERHILL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
Liabilities and Stockholders' Equity
December 31, September 30,
----------- ------------
2001 2001
----------- ------------
(Unaudited)
Current liabilities:
Notes payable $ 13,708,553 $ 13,313,743
Note payable and accrued interest to related party 22,738,466 -
Accounts payable 1,740,748 2,085,200
Accrued expenses and other 1,344,908 1,066,932
------------ ------------
Total current liabilities 39,532,675 16,465,875
Notes payable and accrued interest to related party - 22,337,631
Net long-term liabilities related to discontinued operations 18,785,317 17,668,829
Reserve for credit guarantees 520,363 522,709
------------ ------------
Total liabilities 58,838,355 56,995,044
------------ ------------
Stockholders' equity:
Common stock, $.01 par value, authorized
100,000,000 shares, issued and outstanding
18,615,464 shares 186,155 186,155
Paid-in capital 28,156,204 28,156,204
Notes receivable from officers and directors (497,250) (497,250)
Accumulated deficit (19,928,962) (19,797,372)
------------ ------------
Total stockholders' equity 7,916,147 8,047,737
------------ ------------
$ 66,754,502 $ 65,042,781
============ ============
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
December 31,
--------------------------
2001 2000
----------- -----------
Net revenues $ 8,777,235 $ 8,250,086
Cost of sales 6,652,059 6,295,883
----------- -----------
Gross profit 2,125,176 1,954,203
Selling, general and administrative expenses 1,765,392 2,077,339
----------- -----------
Operating income (loss) 359,784 (123,136)
----------- -----------
Other income (expenses):
Interest expense (544,564) (626,490)
Interest income and other (64,286) 428,044
----------- -----------
Total other income (expenses) (608,850) (198,446)
----------- -----------
Loss before income taxes and discontinued operations (249,066) (321,582)
Income tax benefit 119,629 217,689
----------- -----------
Loss before discontinued operations (129,437) (103,893)
Discontinued operations, net of income taxes (2,153) 267,846
----------- -----------
Net income (loss) $ (131,590) $ 163,953
=========== ===========
Net income (loss) per share - basic and diluted:
Before discontinued operations $ (.01) $ (.01)
Discontinued operations -- .02
----------- -----------
Net income (loss) per share $ (.01) $ .01
=========== ===========
The accompanying notes are an integral part
of these consolidated financial statements.
-4-
OVERHILL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended
December 31,
----------------------------
2001 2000
------------ -------------
Cash flows provided by (used in) operating activities:
Net income (loss) $ (131,590) $ 163,953
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 120,912 228,137
Provision for doubtful accounts 5,577 96,976
Interest accrual on notes to related party 400,835 400,835
(Income) loss on investment in limited
liability company 248,778 (11,076)
(Income) loss from discontinued operations (145,761) (267,846)
Changes in:
Accounts and sales contracts receivable 1,415,779 300,297
Inventories (350,438) (1,684,061)
Prepaid expenses and other 100,939 1,104,719
Accounts payable (334,471) 926,398
Accrued expenses and other (279,049) (1,393,258)
----------- -----------
Net cash provided by (used in)
operating activities 1,051,511 (134,926)
----------- -----------
Cash flows provided by (used in)
investing activities:
Notes and other receivables 429,750 (451,674)
Receivables from related parties (398,032) (28,457)
Capital expenditures, net (193,274) (279,299)
----------- -----------
Net cash provided by (used in)
investing activities $ (161,556) $ (759,430)
----------- -----------
The accompanying notes are an integral part
of these consolidated financial statements.
-5-
OVERHILL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
For the Three Months Ended
December 31,
----------------------------
2001 2000
------------ -------------
Cash flows provided by (used in) financing activities:
Net borrowings (principal payments) on line
of credit arrangements $ 394,810 $ 842,370
Borrowings on other notes payable and long-term debt - 185,205
Principal payments on long-term debt - (344,150)
Exercise of common stock options - 7,500
Repurchase of stock purchase warrants - (45,938)
------------ ----------
Net cash provided by (used in)
financing activities 394,810 644,987
------------ ----------
Net increase (decrease) in cash 1,284,765 (249,369)
Cash - beginning of period 686,382 963,387
------------ ----------
Cash - end of period $ 1,971,147 $ 714,018
============ ==========
Supplemental schedule of cash flow information:
Cash paid during the period for :
Interest $ 129,650 $ 186,173
Income taxes $ 58,000 $ 50,000
The accompanying notes are an integral
part of these consolidated financial statements.
-6-
OVERHILL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
December 31, 2001
1. NATURE OF BUSINESS
Overhill Corporation, formerly Polyphase Corporation, (the "Company") is a
holding company that, through its subsidiaries, currently operates in
forestry and timber related businesses. These operations are conducted
through the Company's wholly-owned subsidiary Texas Timberjack, Inc.
("Timberjack" or "TTI") and TTI's majority-owned subsidiaries Southern Forest
Products LLC ("SFP") and Wood Forest Products LLC ("WFP"). Through these
entities, the Company distributes, leases and provides financing for
construction and timber equipment and is also engaged in certain timber and
sawmill operations.
The Company's Board of Directors, in August 2001, approved a plan to spin off
all of its shares of Overhill Farms, Inc. ("Overhill Farms") to the holders
of the Company's common stock. Overhill Farms, a producer of high quality
entrees, plated meals, meal components, soups, sauces and poultry, meat and
fish specialties, previously comprised the Company's food segment. Overhill
Farms has been accounted for as discontinued operations in the accompanying
financial statements.
2. BASIS OF PRESENTATION
The consolidated financial statements include the continuing operations and
related accounts of the Company, its wholly-owned subsidiaries and its
majority-owned subsidiaries. All material intercompany accounts and
transactions are 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 its Form 10-K for the year ended
September 30, 2001.
The balance sheet at September 30, 2001 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the
United States for complete financial statements.
-7-
3. INVENTORIES
Inventories are summarized as follows: December 31, September 30,
2001 2001
---------------- ---------------
Timber and construction equipment $ 14,101,433 $ 14,469,372
Finished wood products 1,359,828 1,050,468
Unharvested and harvested but unprocessed timber 1,263,974 854,957
---------------- ---------------
Total $ 16,725,235 $ 16,374,797
================ ===============
4. TAXES
For the quarter ended December 31, 2001, the Company recorded a tax benefit
to the extent that current and prior year operating losses reduce the income
taxes attributable to the discontinued operations of Overhill Farms. This
benefit amounted to approximately $120,000 for the current quarter and the
results of operations of Overhill Farms included in the accompanying
financial statements are presented net of income tax expense of the same
amount. The Company continues to maintain a valuation allowance against all
net deferred tax assets that relate to its continuing operations due to
uncertainty with respect to the future recoverability of all such amounts.
5. DISCONTINUED OPERATIONS
In August 2001, the Company's Board of Directors approved a plan to spin
off all of the Company's shares of Overhill Farms to the holders of the
Company's common stock. The transaction to effect the spin-off will result
in the issuance, expected to be a tax free dividend to the Company's
stockholders, of one share of Overhill Farms common stock for every two
shares of the Company's common stock owned on the record date as
established by the Board. The Company is currently in the process of
completing the various steps necessary to effect the spin-off transaction.
These steps include, among other things, obtaining final lender approvals,
making necessary changes to Overhill Farms' capital structure to effect the
distribution of the dividend, the updating and refiling of information with
the Securities and Exchange Commission and finalizing a possible decision
by management to eliminate all, or a part, of the intercompany receivable
and payable accounts between the Company and Overhill Farms prior to the
spin-off, which may include eliminating the contractualization previously
anticipated for all or a part of such amounts.
-8-
The operating results of Overhill Farms have been classified as
discontinued operations in the accompanying financial statements for the
periods ended December 31, 2001 and 2000 and are summarized as follows:
For the Three Months Ended
December 31,
--------------------------
2001 2000
------------ ------------
Net revenues $ 33,357,719 $ 38,478,489
Gross profit 5,184,865 6,646,054
Operating income 1,642,431 2,151,114
Income before income taxes 298,036 542,351
Net income $ 178,407 $ 324,662
6. EARNINGS PER SHARE
The following table sets forth the computations of basic and diluted
earnings per share:
For the Three Months Ended
--------------------------
December 31,
------------ ------------
2001 2000
------------ ------------
Numerator:
Income (loss) before discontinued operations $ (129,437) $ (103,893)
Discontinued operations (2,153) 267,846
------------ ------------
Net income (loss) attributable to common stockholders $ (131,590) $ 163,953
============ ============
Denominator:
Denominator for basic earnings
per share - weighted average shares 18,615,464 17,823,387
------------ ------------
Effect of dilutive securities:
Stock options - 50,290
Warrants - -
------------ ------------
Dilutive potential common shares - 50,290
------------ ------------
Denominator for diluted earnings per share 18,615,464 17,873,677
============ ============
Net income (loss) per share - basic and diluted:
Before discontinued operations $ (.01) $ (.01)
Discontinued operations - .02
------------ ------------
Net income per share $ (.01) $ .01
============ ============
-9-
7. STOCKHOLDERS' EQUITY
Stock Options-
During the three months ended December 31, 2000, options to purchase 15,000
shares at an exercise price of $.50 per share were exercised.
Warrants-
During the three months ended December 31, 2000, the Company repurchased
warrants covering 210,000 shares exercisable at $1.125 per share for total
consideration of approximately $46,000.
8. INVESTMENT IN LIMITED LIABILITY COMPANY
TTI has a 49.9% ownership in a construction related limited liability
company (the "LLC"), which is accounted for under the equity method. TTI
does not exercise control over this minority investment. TTI's initial
capital investment in the LLC was nominal and its investment in the LLC is
comprised primarily of related party receivables arising from operating
advances and financed equipment sales to the LLC, with such sales being
transacted primarily at Texas Timberjack's cost of acquiring the related
equipment. During the quarter ended December 31, 2001, the net related
party receivables from the LLC increased approximately $429,000 from
September 30, 2001. Additionally, upon obtaining updated financial
information from the LLC, the Company recorded a loss of approximately
$249,000 relating to TTI's investment in the LLC during the quarter ended
December 31, 2001.
9. RECENT ACCOUNTING PRONOUNCEMENTS
In June, 2001, the Financial Accounting Standards Board issued Statement
No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), which
requires that goodwill no longer be amortized, but instead will be tested
at least annually for impairment by reporting unit. The Company has elected
to early adopt SFAS 142 as of October 1, 2001. The Company is currently
reviewing the relevant provisions of SFAS 142 and has not yet determined
whether the adoption will have an immediate effect on the carrying value of
goodwill. However, amortization of goodwill, which amounted to
approximately $71,000 for the three months ended December 31, 2000, before
any related tax effects, was eliminated upon the adoption of SFAS 142.
-10-
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
Net Revenues - For the three months ended December 31, 2001, revenues increased
$527,000 (6.4%) to $8,777,000 from $8,250,000 during the three months ended
December 31, 2000. This increase in revenues during the first quarter is due to
increased sales of $709,000 in the Company's equipment segment, while revenues
from the timber segment decreased by $182,000.
Gross Profits - For the quarter ended December 31, 2001, gross profits increased
$171,000 to $2,125,000 in the current year from $1,954,000 in the prior year,
due primarily to the increase in volume, as gross margin rates remained
generally unchanged between years.
Selling, General and Administrative Expenses - Selling, general and
administrative expenses for the three months ended December 31, 2001 decreased
$312,000 to $1,765,000 from $2,077,000 during the three months ended December
31, 2000, due to reductions in personnel costs in both the equipment and timber
segments of TTI, together with the adoption by TTI of SFAS 142 effective October
1, 2001, thereby eliminating the amortization of goodwill which amounted to
approximately $71,000 during the three months ended December 31, 2000.
Other Expenses - For the three months ended December 31, 2001, net other
expenses increased $411,000 to $609,000 in the current year from $198,000 for
the three months ended December 31, 2000. This decrease is largely attributable
to recorded losses related to Timberjack's 49.9% investment in a construction
company accounted for on the equity method. See "Management's Discussion and
Analysis--Related and Certain Other Parties."
Income Taxes - The Company records a tax benefit to the extent that current and
prior year operating losses reduce the income taxes attributable to the
discontinued operations of Overhill Farms. Accordingly, the results of
operations of Overhill Farms are presented within the consolidated financial
statements net of income tax expense of $120,000 for the three months ended
December 31, 2001 and $218,000 for the same period in 2000.
Liquidity and Capital Resources
Principal sources of liquidity for the Company are cash flow from operations,
cash balances and additional financing capacity. The Company's cash and cash
equivalents increased $1,285,000 to $1,971,000 at December 31, 2001 as compared
to $686,000 at September 30, 2001.
-11-
During the three months ended December 31, 2001, the Company's operating
activities resulted in a source of cash of approximately $1,052,000, compared to
a use of cash of $135,000 during the comparable period in the previous year. The
source of cash during the current year is related primarily to decreases in
trade accounts and sales contracts receivable, offset somewhat by increases in
inventories and by reductions in accounts payable and accrued expenses.
During the three months ended December 31, 2001, the Company's investing
activities resulted in a use of cash of approximately $162,000, compared to a
use of cash of $759,000 during the comparable period in the previous year. The
Company's use of cash during the current year resulted primarily from capital
expenditures by TTI, with decreases in notes and other receivables being
somewhat offset by increases in related party receivables.
During the three months ended December 31, 2001, the Company's financing
activities resulted in cash provided of approximately $395,000, compared to cash
provided of approximately $645,000 during the comparable period in the previous
year. The cash provided resulted from additional borrowings under Timberjack's
lines of credit.
The Company's note payable to Mr. Harold Estes has a current balance at December
31, 2001 of approximately $21.2 million, including accrued interest, and is
collateralized by the stock and certain assets of Texas Timberjack and matures
in October 2002. Since the note's inception in 1994, Mr. Estes and the Company
have agreed to a number of extensions of the maturity date and related terms of
this note. The Company intends to seek further extension of the maturity date
from Mr. Estes prior to its maturity. There can be no assurance, however, that
the maturity date of the note can be successfully extended on favorable terms,
or at all.
SFP's Quantum Fuel & Refining, Inc. subsidiary ("Quantum") has a note payable to
Mr. Estes. As of December 31, 2001, the note had a total unpaid balance,
including accrued interest, of approximately $1.5 million, bearing interest at
12%, with maturity in October 2002 and collateralized by the assets of Quantum.
Mr. Estes has agreed to previous extensions of the maturity date with Quantum,
including one extension since Quantum's acquisition by SFP. Timberjack intends
to seek further extension of the maturity date from Mr. Estes prior to its
maturity. There can be no assurance, however, that the maturity date of the note
can be successfully extended on favorable terms, or at all.
Texas Timberjack and SFP's notes payable to Bank of America, N.A. have a current
balance at December 31, 2001 of approximately $8.3 million and mature in March
2002. In each of the past several years, Texas Timberjack and SFP have
successfully renewed these notes with Bank of America, N.A. Timberjack intends
to renew these lines of credit prior to their maturity in March 2002. There can
be no assurance, however, that these lines of credit can be successfully renewed
on favorable terms, or at all.
Texas Timberjack guarantees on behalf of various customers certain lines of
credit and secured borrowings with banks and financial institutions, primarily
related to customer purchases of its equipment products. The portion of the
credit lines or secured borrowings guaranteed ranges from zero to 100% on a
customer-by-customer basis. Funds held in escrow by the lenders, amounting to
approximately $520,000 at December 31, 2001, are included in the consolidated
balance sheet as restricted cash and are fully offset by the Company's reserve
for credit guarantees. Historically, amounts held in escrow by lenders have been
sufficient to cover any losses incurred by Texas Timberjack as a result of these
guarantees. However, losses on
-12-
guarantees significantly in excess of amounts held in escrow by the
lenders could have a material impact on the Company's liquidity position and
results of operations.
Texas Timberjack has a 49.9% investment in a construction related business which
operates as a limited liability company. As of December 31, 2001, Timberjack has
guaranteed approximately $400,000 of indebtedness of this company. See
"Management's Discussion and Analysis--Related and Certain Other Parties."
The Company has various other commitments incurred through the ordinary course
of its business, primarily noncancelable operating leases related to its
facilities and equipment in Bon Weir, Texas and inventory purchase commitments
from three companies which supply the majority of its new units and parts. There
has been no significant change in the type or amount of these commitments since
September 30, 2001.
The Company believes that funds available to it from operations and existing
capital resources will be adequate for its capital requirements, including any
cash requirements resulting from the various commitments and contingencies
described above, for the next twelve months.
Related and Certain Other Parties
TTI has a 49.9% ownership in a construction related limited liability company
(the "LLC"), which is accounted for under the equity method. TTI does not
exercise control over this minority investment. TTI's initial capital investment
in the LLC was nominal and its investment in the LLC is comprised primarily of
related party receivables arising from operating advances and financed equipment
sales to the LLC, with such sales being transacted primarily at Texas
Timberjack's cost of acquiring the related equipment. During the quarter ended
December 31, 2001, the net related party receivables from the LLC increased
approximately $429,000 from September 30, 2001. Additionally, upon obtaining
updated financial information from the LLC, the Company recorded a loss of
approximately $249,000 relating to TTI's investment in the LLC during the
quarter ended December 31, 2001.
See "Management's Discussion and Analysis--Liquidity and Capital Resources" for
discussion of notes payable to Mr. Harold Estes, former owner and current
President of Texas Timberjack and holder of approximately 4,000,000 shares of
the Company's common stock.
In connection with the acquisition of TTI, the Company acquired a note
receivable from an officer of TTI collateralized by marketable securities and a
receivable from Mr. Estes for insurance premiums paid by TTI on his behalf. As
of December 31, 2001, such receivables have remained substantially unchanged
since September 30, 2001.
The former owner of Quantum is TTI's 25% minority partner in SFP. TTI's 25%
minority partner in SFP is a guarantor of TTI's and SFP's note payable to, and
SFP's revolving line of credit with, Bank of America, N.A. The father of TTI's
25% minority partner is a former officer of SFP. The Company's outstanding
receivables from this former officer of SFP, or from companies owned or
controlled by him, have not substantially changed since September 30, 2001.
-13-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's interest expense is affected by changes in prime lending rates as
a result of its various line of credit arrangements. If these market rates were
to increase by an average of 1% in fiscal 2002, the Company's interest expense
for the next twelve months would increase by approximately $90,000, based on the
outstanding line of credit balances at December 31, 2001.
The Company's Texas Timberjack subsidiary periodically makes advances under
promissory notes to certain unrelated individuals and corporations. These notes
generally have fixed interest rates ranging from 10% to 18%, are generally due
within one year and, in a majority of cases, are collateralized by a variety of
marketable assets, primarily timber and land. The value of these notes is
subject to market risk due to changing interest rates and the condition of the
related collateral.
The Company does not own, nor does it have an interest in any other market risk
sensitive instruments.
-14-
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 officers and directors. The lawsuits 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. The defendants filed
motions to dismiss in each of the lawsuits. 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 there was no evidence to support the plaintiffs' claims. In November
2000, in a lengthy decision addressing the plaintiffs' claims against each of
the remaining defendants, the District 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 plaintiffs have appealed these decisions to the United States Court of
Appeals for the Ninth Circuit. Appellate briefs have been filed by both
sides, and oral argument in the Court of Appeals took place on February 13,
2002.
Recently, the plaintiffs requested the Ninth Circuit to enjoin the Company's
proposed spin-off of Overhill Farms. The Court of Appeals denied the
plaintiffs' request and directed them to address their request to the
District Court. The plaintiffs thereafter filed an application with the
District Court, which restrained the spin-off for a few days until a hearing
could be conducted with respect to the proposed spin-off. Following a hearing
at which counsel for all parties appeared, the District Court dissolved its
temporary restraining order, thereby allowing the Company to proceed with the
proposed spin-off. The plaintiffs have not appealed the most recent decision
by the District Court.
The Company and its subsidiaries are involved in certain legal actions and
claims arising in the ordinary course of business. Management believes
(based, in part, on the 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.
-15-
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 December 31, 2001.
-16-
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: February 18, 2002 By: /s/ James Rudis
--------------------------
James Rudis
Chairman, President and
Chief Executive Officer
Date: February 18, 2002 By: /s/ William E. Shatley
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William E. Shatley
Senior Vice President and
Chief Financial Officer
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