SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
/X/ Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period
ended May 31, 1996; or
/ / 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: 33-12173
AMERICOLD CORPORATION
(Exact name of registrant as specified in its charter)
OREGON 93-0295215
(State of Incorporation) (I.R.S. Employer
Identification Number)
7007 S.W. Cardinal Lane, Suite 135
Portland, Oregon 97224
(Address of principal executive offices) (Zip Code)
(503) 624-8585
(Registrant'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
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes /X/ No / /
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes /X/ No / /
Number of shares outstanding of the registrant's common stock, par
value $.01 per share, as of June 30, 1996: 4,931,194 shares.
AMERICOLD CORPORATION
Form 10-Q
TABLE OF CONTENTS
-----------------
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 4. Submission of Matters to a Vote of
Security Holders 18
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
EXHIBIT INDEX
PART I - Financial Information
Item 1. Financial Statements
AMERICOLD CORPORATION
CONSOLIDATED BALANCE SHEETS
Last day of February 1996 and May 1996
(In thousands, except share data)
Last day of Last day of
February 1996 May 1996
------------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents (note 6) $ 20,857 $ 9,021
Trade receivables, net 25,461 26,850
Other receivables, net 3,512 3,548
Prepaid expenses 4,286 3,485
Other current assets 4,181 4,206
----------- ----------
Total current assets 58,297 47,110
Property, plant and equipment, less accumulated depreciation
of $174,123 and $179,133, respectively 375,851 377,470
Cost in excess of net assets acquired, less accumulated
amortization of $22,138 and $22,764, respectively 77,255 76,629
Other noncurrent assets 15,589 20,131
----------- ----------
Total assets $ 526,992 $ 521,340
=========== ==========
LIABILITIES, PREFERRED STOCK AND COMMON STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 11,363 $ 12,292
Accrued interest 19,056 14,480
Accrued expenses 11,604 9,137
Deferred revenue 5,707 5,215
Current maturities of long-term debt 2,732 2,720
Other current liabilities 4,630 4,606
---------- ----------
Total current liabilities 55,092 48,450
Long-term debt, less current maturities (note 7) 461,667 466,231
Deferred income taxes 102,041 100,938
Other noncurrent liabilities 9,861 9,726
---------- ----------
Total liabilities 628,661 625,345
---------- ----------
Preferred stock, $100 par value; authorized 1,000,000 shares;
issued and outstanding 52,936 shares (note 5) 5,771 5,950
---------- ----------
Common stockholders' deficit (note 3):
Common stock, $.01 par value; authorized
10,000,000 shares; issued and outstanding 4,931,194 shares 49 49
Additional paid-in capital 50,173 50,173
Retained deficit (157,345) (159,860)
Equity adjustment to recognize minimum pension liability (317) (317)
---------- ----------
Total common stockholders' deficit (107,440) (109,955)
---------- ----------
Total liabilities, preferred stock and
common stockholders' deficit $ 526,992 $ 521,340
========== ==========
See accompanying notes to consolidated financial statements.
AMERICOLD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended last day of May 1995 and 1996
(In thousands, except per share data)
Three months Three months
ended last ended last
day of day of
May 1995 May 1996
------------ -----------
(Unaudited) (Unaudited)
Net sales $ 53,183 $ 79,396
----------- -----------
Operating expenses:
Cost of sales 33,574 59,465
Amortization of cost in excess of
net assets acquired 633 627
Selling and administrative expenses 6,909 7,723
----------- -----------
Total operating expenses 41,116 67,815
----------- -----------
Gross operating margin 12,067 11,581
----------- -----------
Other (expense) income:
Interest expense (14,234) (15,535)
Reorganization expenses (note 2) (3,523) -
Other, net 337 514
----------- -----------
Total other expense (17,420) (15,021)
----------- -----------
Loss before income taxes (5,353) (3,440)
Benefit for income taxes (note 4) 1,851 1,104
----------- -----------
Net loss $ (3,502) $ (2,336)
=========== ===========
Net loss per common share (note 5) $ (0.76) $ (0.51)
=========== ===========
Weighted average number of shares
outstanding 4,861 4,931
=========== ===========
See accompanying notes to consolidated financial statements.
AMERICOLD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended last day of May 1995 and 1996
(In thousands)
Three months Three months
ended last ended last
day of day of
May 1995 May 1996
----------- -----------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss $ (3,502) $ (2,336)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation 4,720 5,010
Amortization and other noncash expenses 1,415 1,028
Changes in assets and liabilities 2,750 (7,279)
Provision for deferred taxes (1,851) (1,103)
----------- -----------
Net cash provided (used) by operating activities 3,532 (4,680)
----------- -----------
Cash flows from investing activities:
Net expenditures for property, plant
and equipment (16,878) (6,053)
Other items, net 852 (424)
----------- -----------
Net cash used by investing activities (16,026) (6,477)
----------- -----------
Cash flows from financing activities:
Principal payments under capitalized
lease and other debt obligations (622) (696)
Proceeds from sale of senior subordinated notes - 120,000
Retirement of senior subordinated debentures - (115,000)
Debt issuance costs - (5,035)
Release of escrowed funds 15,954 52
----------- -----------
Net cash provided (used) by financing activities 15,332 (679)
----------- -----------
Net increase (decrease) in cash and cash equivalents 2,838 (11,836)
Cash and cash equivalents at beginning of period 33,163 20,857
----------- -----------
Cash and cash equivalents at end of period $ 36,001 $ 9,021
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid year-to-date for interest,
net of amounts capitalized $ 11,392 $ 20,112
=========== ===========
Capital lease obligations incurred to lease new equipment $ - $ 248
=========== ===========
Cash paid for income taxes $ 324 $ 24
=========== ===========
See accompanying notes to consolidated financial statements.
AMERICOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPLES OF CONSOLIDATION
---------------------------
The consolidated balance sheet as of the last day of May 1996;
the related consolidated statements of operations for the
three months ended the last day of May 1995 and May 1996; and
the related consolidated statements of cash flows for the
three months ended the last day of May 1995 and May 1996 are
unaudited. In the opinion of management, all adjustments
necessary for a fair presentation of such financial statements
have been included. Such adjustments consisted of normal
recurring items. Interim results are not necessarily
indicative of results for a full year. The financial
information presented herein should be read in conjunction
with the financial statements included in the registrant's
Annual Report on Form 10-K for the year ended the last day of
February 1996.
2. PLAN OF REORGANIZATION UNDER CHAPTER 11
---------------------------------------
On May 9, 1995, the Company filed a prepackaged plan of
reorganization (the "Plan") under Chapter 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court
for the District of Oregon (the "Court"). The principal
purpose of the Plan was to reduce the Company's short-term
cash requirements with respect to payments due on its
subordinated indebtedness and to adjust certain restrictive
financial covenants and certain other provisions contained in
the Amended and Restated Investment Agreement, dated March 2,
1993, between the Company and Metropolitan Life Insurance
Company. On June 19, 1995, the Court approved the Company's
Disclosure Statement dated April 14, 1995 and the Company's
solicitation of votes to accept or reject the Plan, and
confirmed the Plan. On June 30, 1995, the Plan became
effective.
In addition, the Company has rejected certain lease agreements
relating to four warehouse facilities at Watsonville, Oakland
and San Francisco, California; and Chicago, Illinois. In
February 1996, the Company settled all lease rejection issues
with the lessor of three properties located in Watsonville,
Oakland and San Francisco, California. Such settlement did
not involve the payment of any damages by the Company. The
outcome of any damage claim resulting from the remaining lease
rejection related to the Chicago warehouse facility cannot be
predicted at this time, but the Company does not believe the
resolution of such claim will be material.
The Company has expensed all professional fees and similar
expenditures incurred related to the prepackaged bankruptcy as
"reorganization expenses."
3. COMMON STOCKHOLDERS' DEFICIT
----------------------------
The Company has reserved 300,000 shares of common stock for
issuance under a stock option plan established in 1987. Under
the plan, options are granted by the compensation committee of
the Board of Directors to purchase common stock at a price not
less than 85% of the fair market value on the date the option
is granted.
Information with regard to the plan as of the last day of May
1996 follows:
Number of Shares Exercise Number of Shares Expiration
Subject to Option Price Exercisable Date
----------------- -------- ---------------- ----------
89,656 $10.00 89,656 May 1998
100,000 $18.95 100,000 June 2000
30,000 $21.88 18,000 May 2003
30,000 $20.40 12,000 December 2003
4. PROVISION FOR INCOME TAXES
--------------------------
The provision for income taxes was computed using a tax rate
of 39.2%. The tax rate was applied to loss before income
taxes, after adjusting for amortization of cost in excess of
net assets acquired.
5. LOSS PER COMMON SHARE
---------------------
Loss per common share is computed by dividing net loss, less
preferred dividend requirements, by the weighted average
number of common shares outstanding. See Exhibit 11,
Statement Regarding Computation of Per Share Earnings.
6. CASH AND CASH EQUIVALENTS
-------------------------
Cash and cash equivalents includes highly liquid instruments,
with original maturities of three months or less when
purchased. There were cash equivalents totaling $15.4 million
and $6.0 million as of the last day of February 1996 and May
1996, respectively.
7. LONG-TERM DEBT
--------------
On April 9, 1996, the Company sold $120.0 million aggregate
principal amount of the Company's 12.875% Senior Subordinated
Notes due 2008. The Company used $115.0 million of the
proceeds to redeem at par on May 9, 1996 the Company's 15%
Senior Subordinated Debentures due 2007. The remaining
proceeds were used to pay transaction costs. The interest
rate on the notes could be increased to 13.875% if the notes
are not rated B3 or higher by Moody's Investors Service and B-
or higher by Standard & Poor's by November 1, 1997.
8. NEW ACCOUNTING STANDARDS
------------------------
Effective March 1, 1996, the Company adopted Financial
Accounting Standards Board Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of."
This statement generally requires assessment of recoverability
of an asset after events or circumstances that indicate an
impairment to the asset and its future cash flows. Any
impairment loss would be recognized as a one-time charge to
earnings affecting results of operations, but would not affect
the cash flow of the Company. There was no impairment loss to
report.
Effective March 1, 1996, the Company adopted Financial
Accounting Standards Board Statement No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123"). SFAS No. 123
requires that, except for transactions with employees that are
within the scope of Accounting Principles Board Opinion No. 25
("APB No. 25"), all transactions in which goods or services
are the consideration received for the issuance of equity
instruments are to be accounted for based on the fair value of
the consideration received or the fair value of the equity
instrument issued, whichever is more reliably measurable.
However, it also allows an entity to continue to measure
compensation costs for those plans using the intrinsic value
based method of accounting prescribed by APB No. 25. Entities
electing to follow the accounting methods of APB No. 25 must
make pro forma disclosures of net income and, if presented,
earnings per share, as if the fair value method of accounting
defined in SFAS No. 123 had been applied.
Pro forma disclosures required for entities that elect to
continue to measure compensation cost using APB No. 25 must
include the effects of all awards granted in fiscal years that
begin after December 15, 1994. The Company has elected to
continue using APB No. 25 and make the necessary SFAS No. 123
pro forma disclosures. There is no such disclosure necessary
at this time since no options have been granted after
February 28, 1995.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
INTRODUCTION - Americold provides integrated logistics
services for the frozen food industry consisting of
warehousing and transportation management. These services are
provided through the Company's network of 49 refrigerated
warehouses and its refrigerated transportation management
unit. The Company's fiscal year ends on the last day of
February.
DEVELOPMENT OF TRANSPORTATION MANAGEMENT SERVICES - In recent
quarters, the Company has experienced increased interest by
customers in procuring transportation management services from
the Company. In this regard, the Company entered into
arrangements in the first half of fiscal 1996 pursuant to
which it is providing such services to three subsidiaries of
one large customer. Transportation management services
provided to these three customers account for substantially
all of the increase in the Company's transportation management
revenues. The Company has made proposals to offer similar
services to certain other potential customers by emphasizing
its full-service logistics expertise and warehouse industry
position which enable customers to obtain services in support
of distribution of frozen food products from a single
provider.
As the Company does not invest in or own transportation
equipment, the Company has entered into contracts with
independent carriers to provide freight transportation at
negotiated rates. Accordingly, the margins that the Company
earns in providing transportation management services are
lower than for its warehousing services.
DEVELOPMENT OF WAREHOUSE PROPERTIES - The Company continually
evaluates the need for warehouse space and intends to pursue
growth of its refrigerated warehouse business both by
expanding its network of warehouses and by expanding existing
facilities in response to customer requirements. The Company
is currently adding capacity at both the Burley, Idaho, and
Pasco, Washington facilities, which will result in a total of
5.9 million cubic feet of new space. In addition, the Company
has plans to add 13 million cubic feet by the middle of fiscal
1998. The Company intends to finance such expansion primarily
through operating leases pursuant to an existing commitment
and from other financing sources. See "--Liquidity and
Capital Resources--Capital Resources" and "--Capital Resources
--Capital Expenditures."
COMPARISON OF THREE-MONTHS PERIODS ENDED MAY 31, 1995 AND 1996
--------------------------------------------------------------
NET SALES - The Company's net sales increased 49.2% from $53.2
million for the first three months of fiscal 1996 to $79.4
million for the first three months of fiscal 1997, reflecting
a substantial increase in transportation management sales as
well as a 5.0% increase in warehousing sales.
Americold's net sales for the first three months of fiscal
1996 and the first three months of fiscal 1997 are detailed in
the table below, by activity:
NET SALES
(Dollars in Millions)
Three Months Ended Three Months Ended
May 31, 1995 May 31, 1996
------------ ------------ % Change
Amount % Amount % FY96 to FY97
------ --- ------ --- ------------
Logistics
Warehousing
Storage $ 24.7 46.4% $ 24.7 31.1% 0.0 %
Handling 18.0 33.8% 19.7 24.8% 9.4 %
Leasing 1.7 3.2% 1.8 2.3% 5.9 %
Freezing
and other 1.8 3.4% 2.3 2.9% 27.8 %
------ ----- ------ ----- ------
46.2 86.8% 48.5 61.1% 5.0 %
Transportation
management
services 6.1 11.5% 29.6 37.3% 385.2 %
----- ----- ----- ----- -----
Total logistics 52.3 98.3% 78.1 98.4% 49.3 %
Other non-
logistics .9 1.7% 1.3 1.6% 44.4 %
----- ----- ----- ----- -----
Total net sales $ 53.2 100.0% $ 79.4 100.0% 49.2 %
====== ===== ====== ===== =====
Warehousing sales increased from $46.2 million for the first
three months of fiscal 1996 to $48.5 million for the first
three months of fiscal 1997, principally due to a 9.4%
increase in handling revenue. Storage revenue remained
unchanged, as storage volume remained stable at approximately
1.37 billion pounds stored on average per month in each of the
two periods.
The 9.4% increase in handling revenue resulted primarily from
a 10.0% increase in volume of product handled, further
affected by price increases and changes in product mix. For
the first three months of fiscal 1996, 4.9 billion pounds of
product were handled by the Company compared with 5.4 billion
pounds during the same period in fiscal 1997.
The Company anticipates the remainder of fiscal 1997 will
reflect relatively flat storage volume and revenue with higher
handling volume and revenue, as its customers attempt to
reduce levels of inventory in certain product categories,
especially vegetables, while increasing product turns.
Transportation management sales increased 385.2% from $6.1
million for the first three months of fiscal 1996 to $29.6
million for the first three months of fiscal 1997, due to the
outsourcing to the Company of additional transportation
management responsibilities by three customers commencing in
May 1995.
Other non-logistics sales (quarry sales) increased 44.4% from
$0.9 million for the first three months of fiscal 1996 to $1.3
million for the first three months of fiscal 1997.
COST OF SALES - Cost of sales increased 77.1% from $33.6
million for the first three months of fiscal 1996 to $59.5
million for the first three months of fiscal 1997. The
increased volume of transportation management services, which
required increases in transportation capacity purchased from
carriers and the addition of new employees, resulted in an
approximately $23.7 million increase in cost of sales. In
addition, cost of sales increased by approximately $2.1
million, resulting from increased warehouse labor and related
fringe benefits due to the increased handling volume.
Cost of sales as a percentage of net sales increased from
63.1% for the first three months of fiscal 1996 to 74.9% for
the first three months of fiscal 1997, as handling and
transportation management sales, which each have high variable
cost requirements, increased from 45.3% of net sales in the
prior period to 62.1% in the more recent period.
SELLING AND ADMINISTRATIVE EXPENSES - Selling and
administrative expenses increased 11.8% from $6.9 million for
the first three months of fiscal 1996 to $7.7 million for the
first three months of fiscal 1997. The increase primarily
reflects an increase of approximately $0.4 million in salaries
and related fringe benefits. Selling and administrative
expenses as a percentage of net sales decreased from 13.0% in
the first three months of fiscal 1996 to 9.7% in the first
three months of fiscal 1997 due to the increase in
transportation management sales which did not require a
corresponding increase in selling and administrative expenses.
GROSS OPERATING MARGIN - As a result of the increase in
transportation management sales along with increased handling
revenues, gross operating margin decreased 4.0% from $12.1
million for the first three months of fiscal 1996 to $11.6
million for the first three months of fiscal 1997.
INTEREST EXPENSE - Interest expense increased from $14.2
million for the first three months of fiscal 1996 to $15.5
million for the first three months of fiscal 1997 as a result
of higher overall interest rates and higher overall borrowings
which resulted from the issuance of $120.0 million of the
Company's 12.875% Senior Subordinated Notes due 2008 in April
1996, which were used to redeem at par in May 1996 all $115.0
million of the Company's 15% Senior Subordinated Debentures
due 2007. As a result of the defeasance requirements, both
issues were outstanding for the period April 9, 1996 to May 8,
1996.
INCOME (LOSS) - The Company's income before income taxes for
the first three months of fiscal 1996 was a loss of $5.4
million, compared to a loss of $3.4 million in the first three
months of fiscal 1997. The decrease in loss between the two
periods is due to the approximately $3.5 million of
reorganization expenses incurred during the first three months
of fiscal 1996, offset in part by the higher interest expense
and lower gross operating margin in fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company believes it has sufficient liquidity and capital
resources to meet its needs related to the payment of interest
expense, the continued operation and maintenance of its
warehouses, the continued operation and planned expansion of
its transportation management business and the funding of
limited growth in warehouse capacity. Anticipated growth in
the volume of transportation management services is not
expected to consume significant capital resources. Although
the Company's internal resources for new warehouse acquisition
or construction are limited, the Company has arranged for up
to $25.0 million in lease financing for new warehouse capacity
from a finance company (the "Lease Line"), of which
approximately $19.3 million is still available. See "--
Capital Resources." The Company has also arranged mortgage
financing for the expansion of one warehouse facility in
fiscal 1997. The Company plans to finance its warehouse
expansion program principally through lease financing, and the
Company believes it has the ability to finance all of its
fiscal 1997 expansion projects from the Lease Line, similar
lease financing, available cash or mortgage financing. In
light of the significant debt obligations due between fiscal
2000 and fiscal 2008, the Company continues to need to
increase operating cash flow and seek external sources for
refinancing. To the extent such operating cash flow growth
will result from warehouse capacity growth, the Company will
also be required to obtain additional sources of financing.
LIQUIDITY
---------
OPERATING CASH FLOW - Net cash flow from operating
activities, representing cash provided from operations, is
used to fund capital expenditures and meet debt service
requirements. Operating cash flow reported for any one period
is sensitive to the timing of the collection of receivables
and the payment of payables.
Net cash flow from operating activities as reported in the
Company's consolidated financial statements decreased from
$3.5 million for the first three months of fiscal 1996 to a
negative $4.7 million for the first three months of fiscal
1997. The decrease is due principally to the postponement of
interest payments associated with the prepackaged bankruptcy
in fiscal 1996 and changes in certain working capital items
such as trade receivables. Net cash flow from operating
activities in fiscal years 1994, 1995 and 1996 was $18.5
million, $12.7 million and $12.6 million, respectively. Funds
provided from operations (gross operating margin plus
depreciation, amortization and employee stock ownership plan
expense) was $17.5 million for the first three months of
fiscal 1996 and $17.4 million for the first three months of
fiscal 1997. Funds provided from operations in fiscal years
1994, 1995 and 1996 were $65.9 million, $71.6 million and
$76.6 million, respectively.
WORKING CAPITAL - The Company's working capital position as of
the last day of the three-month period ended May 31, 1996 was
a negative $1.3 million. This position compares to $3.2
million at fiscal 1996 year end. Working capital was reduced
in the more recent period due to the decrease in net cash flow
from operations discussed above and the funding of
approximately $4.2 million of warehouse expansions.
The Company's historical negative working capital position
generally has not affected its ability to meet its cash
operating needs. However, in fiscal 1995, the Company
experienced a shortfall in the working capital necessary to
make certain sinking fund payments, leading to the prepackaged
bankruptcy.
CAPITAL RESOURCES
-----------------
The credit agreement with the Company's primary bank provides
an aggregate availability of $27.5 million, which may be used
for any combination of letters of credit (up to $10.0 million)
and revolving cash borrowings for general working capital
purposes, subject to borrowing base limitations. The
borrowing base for both cash borrowings and letters of credit
equals 85% of eligible accounts receivable pledged to the bank
plus, at the option of the Company, 70% of the value of all
real property mortgaged to the bank. The Company has not
mortgaged any properties under the credit agreement. The
credit agreement, which matures on February 28, 1999, requires
a 30-day resting period (during which there may be no
outstanding borrowings) in fiscal 1997, and requires two such
periods during each of fiscal 1998 and fiscal 1999. The
Company has already satisfied the resting period required for
fiscal 1997. The credit agreement also contains certain
restrictive covenants, including financial covenants.
Based on eligible accounts receivable as of May 31, 1996, the
Company had an available credit line of $22.3 million, of
which $7.5 million was used for letters of credit, principally
related to leasing commitments and worker's compensation
reserves. No cash borrowings were outstanding.
The Lease Line, for which the Company signed a commitment
letter in November 1995, is available to finance, subject to
meeting certain conditions, the construction or acquisition of
new warehouses or the expansion of existing warehouses which
are not pledged as collateral security for senior debt. The
Company intends to finance several of the planned warehouse
additions with the new Lease Line. The terms of each lease
financing will be separately established. The Lease Line
commitment expires December 31, 1996. The lease rate will be
fixed at the time of funding each property, and will be based
on a spread over seven-year Treasury Bills. The first funding
of approximately $5.7 million closed in late fiscal 1996 with
respect to the Company's recently completed Grand Island,
Nebraska facility.
CAPITAL EXPENDITURES - Budgeted fiscal 1997 capital
expenditures total approximately $43.5 million, including
approximately $30.4 million for warehouse expansion.
Expenditures for property, plant and equipment for the first
three months of fiscal 1997 totaled $6.1 million, of which
approximately $4.2 million related to warehouse expansions.
Subsequent to the end of the quarter, the Company reached an
agreement with the bond trustee under the Indenture related to
the First Mortgage Bonds under which the Company received the
entire $4.8 million of insurance proceeds held in escrow. The
reimbursement to the Company results from fire-related
restoration expenditures incurred by the Company at its Kansas
City, Kansas facility.
The projects the Company is currently exploring for fiscal
1997 would require the expenditure of up to $30.4 million, of
which $9.9 million is presently committed and of which $4.2
million has been expended. The Company anticipates that it
will use the Lease Line to finance all but one of such
projects.
NEW ACCOUNTING STANDARD
-----------------------
Effective March 1, 1996, the Company adopted Financial
Accounting Standards Board Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of."
This statement generally requires assessment of recoverability
of an asset after events or circumstances that indicate an
impairment to the asset and its future cash flows. Any
impairment loss would be recognized as a one-time charge to
earnings affecting results of operations, but would not affect
the cash flow of the Company. There was no impairment loss to
report.
Effective March 1, 1996, the Company adopted Financial
Accounting Standards Board Statement No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123"). SFAS No. 123
requires that, except for transactions with employees that are
within the scope of Accounting Principles Board Opinion No. 25
("APB No. 25"), all transactions in which goods or services
are the consideration received for the issuance of equity
instruments are to be accounted for based on the fair value of
the consideration received or the fair value of the equity
instrument issued, whichever is more reliably measurable.
However, it also allows an entity to continue to measure
compensation costs for those plans using the intrinsic value
based method of accounting prescribed by APB No. 25. Entities
electing to follow the accounting methods of APB No. 25 must
make pro forma disclosures of net income and, if presented,
earnings per share, as if the fair value method of accounting
defined in SFAS No. 123 had been applied.
Pro forma disclosures required for entities that elect to
continue to measure compensation cost using APB No. 25 must
include the effects of all awards granted in fiscal years that
begin after December 15, 1994. The Company has elected to
continue using APB No. 25 and make the necessary SFAS No. 123
pro forma disclosures. There is no such disclosure necessary
at this time since no options have been granted after
February 28, 1995.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
As part of the prepackaged bankruptcy proceedings, the Company
rejected certain lease agreements relating to four warehouse
facilities. In late fiscal 1996, the Company settled all
lease rejection issues with the lessor of three properties
located in Watsonville, Oakland and San Francisco, California.
Such settlement did not involve the payment of any damages by
the Company. The outcome of any damage claim resulting from
the remaining lease rejection related to the Chicago warehouse
facility cannot be predicted at this time, but the Company
does not believe the resolution of such claim will be
material. In addition, the Company commenced an action for
declaratory judgment seeking certain rights to software
pursuant to a contract with Non-Stop Logistics Corporation
("Non-Stop"). Non-Stop has filed a counterclaim for
unspecified damages alleging, among other things, a cloud on
its title to intellectual property rights in the software,
breaches of a confidentiality agreement, lost business
opportunities and lost profits. Counsel for Non-Stop has
advised Americold's counsel that Non-Stop claims damages in
amounts ranging from approximately $6.0 million to $33.0
million. The Company believes these claims to be without
merit and intends to pursue such litigation vigorously.
Subsequent to the end of the quarter, Non-Stop indicated its
intention to amend its pleadings to seek an injunction against
the Company's development of a forecasting system.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
On June 20, 1996, subsequent to the end of the fiscal quarter,
the annual meeting of shareholders of the Company was held.
The Company did not solicit proxies. At the meeting, the
following actions were approved by the shareholders:
(a) Election of a Board of Directors for the ensuing
year consisting of Ronald H. Dykehouse, Frank
Edelstein, William A. Marquard, George E. Matelich,
James C. Pigott and Joel M. Smith.
(b) Approval of an amendment to the corporation's Articles of
Incorporation to remove the prohibition on the issuance
of non-voting stock.
(c) Approval of the selection of KPMG Peat Marwick LLP
he Company's auditors for fiscal 1997.
With respect to the election of directors, there were
2,739,000 shares voted for the election of each of the
nominees for director and no votes withheld.
With respect to the approval of the amendment to the Articles
of Incorporation, there were 2,739,000 shares voted for
approval and no shares voted against or abstaining.
With respect to the approval of the selection of auditors,
there were 2,739,000 shares voted for approval and no shares
voted against or abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
(3.1) Articles of Amendment, adopted June 20, 1996,
to the Second Restated Articles of
Incorporation amended (filed as Exhibit (3)(i)
to the Form 10-Q, dated July 14, 1995, for the
quarter ended May 31, 1995, and incorporated
herein by reference)
(11) Statement Regarding Computation of Per Share
Earnings
(27) Financial Data Schedule
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the quarter for
which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMERICOLD CORPORATION
/s/ Joel M. Smith
JOEL M. SMITH,
Senior Vice President
and Chief Financial Officer
Date: July 12, 1996
FORM 10-Q
Exhibit Index
Exhibit Page
- ------- ----
(a) Exhibits
(3.1) Articles of Amendment, adopted June 20, 1996,
to the Second Restated Articles of
Incorporation, as amended
(11) Statement Regarding Computation of Per Share
Earnings
(27) Financial Data Schedule