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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarter ended September 30, 2000
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 000-25351
ALFORD REFRIGERATED WAREHOUSES, INC.
(Exact name of Registrant as specified in charter)
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TEXAS 75-2695621
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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318 Cadiz Street
Dallas, Texas 75207
(Address of principal executive offices)
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Registrant's telephone number, including area code: (214) 426-5151
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for the
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 __ No __
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date:
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Title of Class Shares Outstanding as of
September 30, 2000
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$0.01 Par Value Common Stock 7,540,715
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Transitional Small Business Disclosure Format (check one): Yes No X
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<PAGE>
INDEX
Part I - Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet:
September 30, 2000 and December 31, 1999 4
Consolidated Statement of Operations:
Nine Months Ended September 30, 2000 and 1999 5
Consolidated Statement of Operations:
Three Months Ended September 30, 2000 and 1999 6
Consolidated Statements of Cash Flows:
Nine Months Ended September 30, 2000 and 1999 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Part II - Other Information
Item 1. Legal Proceedings 13
Item 2. Change in Securities and
Use of Proceeds 13
Item 3. Default Upon Senior Securities 13
Item 4. Submission of Matters to
a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
ALFORD REFRIGERATED WAREHOUSES, INC.
Consolidated Balance Sheets
----------------------------------------------------------------------------------------------------------------------
9/30/2000 12/31/99
(Unaudited) (Audited)
======================================================================================================================
<S> <C> <C>
Assets -- Current
Cash and cash equivalents $ 2,937,906 $ 105,075
Accounts receivable 1,333,179 1,753,890
Prepaid expenses 405,458 278,498
Income tax receivable 19,500 13,000
Escrows 604,569 565,282
----------- -----------
Total Current Assets $ 5,300,612 $ 2,715,745
======================================================================================================================
Property, plant & equipment, net $14,853,427 $21,422,381
Due from affiliate 2,376,685 2,198,926
Other assets 474,784 600,418
Deposits 115,676 172,235
----------- -----------
Total Assets $23,121,184 $27,109,705
=====================================================================================================================
Liabilities & Stockholders' Equity -- Current
Line of Credit $ 1,112,248 $ 0
Accounts payable 1,400,060 930,336
Property taxes payable 298,984 549,307
Accrued charges 1,526,429 822,649
Notes payable 249,657 351,112
Current maturities of long-term debt 2,545,269 963,885
----------- -----------
Total Current Liabilities $ 7,132,647 $ 3,617,289
=====================================================================================================================
Deferred revenue $ 178,804 $ 285,516
Long-term debt, less current maturities 9,103,808 16,750,318
Line of Credit 0 1,366,654
Deferred tax liability 176,039 176,039
----------- -----------
Total Liabilities $16,591,298 $22,195,816
=====================================================================================================================
Stockholders' Equity
Preferred stock, par value $0.01 per share; 5,000,000 shares authorized; none
issued - -
Common stock, par value $0.01 per share; 50,000,000 shares authorized; issued
7,540,715 $ 75,407 $ 75,407
Additional paid-in capital 6,556,995 6,556,995
Retained earnings 2,587,484 971,487
Stock subscriptions and note receivables (940,000) (940,000)
Treasury stock at cost (500,000 shares) (1,750,000) (1,750,000)
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Total Stockholders' Equity 6,529,886 4,913,889
----------- -----------
Total Liabilities & Stockholders' Equity $23,121,184 $27,109,705
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALFORD REFRIGERATED WAREHOUSES, INC.
Consolidated Statement of Operations
(Unaudited)
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Nine months ended September 30, 2000 1999
====================================================================================================================
<S> <C> <C>
Warehouse revenues $ 9,988,992 $ 11,641,032
Operating Costs 7,420,620 7,482,625
Direct Profit Contribution 2,568,372 4,158,407
====================================================================================================================
General & Administrative Expenses 634,916 724,012
Depreciation, Rent & Interest Expenses:
Depreciation 660,941 645,666
Rent 450,000 630,356
Interest 1,195,456 1,137,887
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Total Depreciation, Rent & Interest Expense $ 2,306,397 $ 2,413,909
Other Income
Gain on sale of land, building and equipment $ 2,821,938 $ 0
Income Before Income Taxes $ 2,448,997 $ 1,020,486
Income Tax Expense 833,000 346,965
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Net Income $ 1,615,997 $ 673,521
===================================================================================================================
Basic Earnings Per Share
Net Income $ 0.21 $ 0.09
===================================================================================================================
Weighted Average
Common shares used in computing earnings per share 7,540,715 7,247,344
===================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALFORD REFRIGERATED WAREHOUSES, INC.
Consolidated Statement of Operations
(Unaudited)
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Three months ended September 30, 2000 1999
====================================================================================================================
<S> <C> <C>
Warehouse revenues $ 2,873,871 $ 4,326,991
Operating Costs 2,289,172 2,689,320
Direct Profit Contribution 584,699 1,637,671
====================================================================================================================
General & Administrative Expenses 223,702 272,361
Depreciation, Rent & Interest Expenses:
Depreciation 203,388 238,924
Rent 150,000 225,840
Interest 330,755 404,782
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Total Depreciation, Rent & Interest Expense $ 684,143 $ 869,546
====================================================================================================================
Other Income
Gain on sale of land, building and equipment $ 100 $ 0
Income (Loss) Before Income Taxes $( 323,046) $ 495,764
Income Tax Expense (Benefit) ( 109,000) 168,560
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Net Income (Loss) $( 214,046) $ 327,204
====================================================================================================================
Basic Earnings (Loss) Per Share
Net Income $ (0.03) $ 0.05
====================================================================================================================
Weighted Average
Common shares used in computing earnings per share 7,540,715 7,247,344
====================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALFORD REFRIGERATED WAREHOUSES, INC.
Consolidated Statement of Cash Flows
(Unaudited)
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Nine months ended September 30, 2000 1999
====================================================================================================================
Operating
Activities:
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<S> <C> <C>
Net Income $1,615,997 $ 673,521
Adjustments to reconcile net income to net cash provided by operating
activities:
Gain on sale of land, building and equipment (2,821,938) 0
Depreciation expense 660,934 645,666
Deferred income taxes 0 326,555
Changes in operating assets and liabilities:
Accounts receivable 427,020 454,629
Prepaid expenses 356,502 144,129
Deposits and escrows 78,266 156,097
Income tax receivable (6,500) (6,500)
Other assets 47,255 (296,999)
Accounts payable 445,878 469,776
Property taxes payable (174,847) (136,980)
Accrued charges 741,678 923
Notes payable (586,031) (240,110)
Deferred revenue (106,712) (13,057)
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Net Cash Provided by Operating Activities $ 677,502 $ 2,177,650
====================================================================================================================
Investing Activities:
Proceeds from sale of land, building and equipment $3,662,766 $ 0
Due from affiliates (177,759) (1,465,053)
Capital expenditures (177,014) (465,580)
Increase in note receivable 0 (400,000)
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Net Cash Provided by (Used in) Investing Activities $3,307,993 $(2,330,633)
====================================================================================================================
Financing Activities:
Proceeds from borrowings 0 1,847,699
Principal payments on borrowings (1,152,664) (1,701,383)
Proceeds from sale of stock subscriptions 0 60,000
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Net Cash (Used in) Provided by Financing Activities (1,152,664) 206,316
====================================================================================================================
Net increase in cash and cash equivalents 2,832,831 53,333
Cash and cash equivalents, beginning of period 105,075 109,517
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Cash and cash equivalents, end of period $2,937,906 $ 162,850
====================================================================================================================
</TABLE>
<PAGE>
ALFORD REFRIGERATED WAREHOUSES, INC.
Notes to Consolidated Financial Statements
(unaudited)
1. The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not contain all of the information and
footnotes required by generally accepted accounting principles for year end
financial statements. It is the opinion of management that all adjustments and
eliminations (consisting only of normal, recurring entries) necessary for a fair
presentation of financial position as at September 30, 2000 and the results of
operations for the period then ended have been included. The results of
operations for any interim period are not necessarily indicative of results for
the full year. These consolidated financial statements should be read in
conjunction with the financial statements and accompanying notes, for the year
ended December 31, 1999, contained in the Company's Form 10-KSB as filed with
the Securities and Exchange Commission.
2. Basic earnings per share is computed based on the weighted average number of
shares outstanding during each of the periods. Diluted earnings per share
include the dilutive effect of unexercised stock options and warrants.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward Looking Statements
With the exception of historical information, the matters discussed in
this report are "forward looking statements" as that term is defined in Section
21E of the Securities Exchange Act of 1934. The Company cautions the reader that
actual results could differ materially from those expected by the Company
depending on the outcome of certain factors, including, without limitation,
adverse changes in the market for the Company's services. Readers are cautioned
not to place undue reliance on any forward-looking statement. All
forward-looking statements speak only as of the date of this filing. The Company
does not have any obligations to update or otherwise make any revisions to these
statements to reflect events or circumstances after the date of this filing,
including, without limitation, changes in the Company's business strategy or
planned capital expenditures, or to reflect the occurrence of unanticipated
events.
General
The Company currently operates three facilities in the state of Texas.
Unless otherwise noted, all dollar amounts are rounded to the nearest
dollar. Reference to 2000 and 1999 are to the nine months ended September 30 of
each year.
Nine Months Ended September 30, 2000, Compared to Nine Months Ended September
30, 1999:
Revenues
Total revenues for 2000 were $9,988,992, a decrease of $1,652,040, or
14.2%, compared to revenues of $11,641,032 for 1999. This decrease in revenues
is due primarily to the sale of the La Porte facility on June 1, 2000. In
addition revenues at the Fort Worth and Richardson facilities were lower than
1999 since the Company was negotiating a long term lease for each facility.
During this time the Company did not accept any new public warehousing business,
in order that the space would be available for the prospective tenants.
The Company recorded net income of $1,615,997, or $.21 per share for
2000, as compared to a net income of $673,521, or $.09 per share for 1999. This
increase in net income is due to the gain on the sale of the La Porte facility.
Operating Costs
Operating costs decreased by $62,005, or less than 1% from 1999 to 2000.
This overall decrease is generally made up of the net of the following:
- Wages and benefits increased by $21,871, due to an increase of $156,833
at the Cadiz facility and an increase of $130,565 at the Richardson
facility. These increases were offset by a decrease at the Fort Worth
facility of $57,168 and effect of the sale of the La Porte facility on
June 1, 2000.
- Utilities increased by $42,568, or 2.6% which is attributable to an
increase at the Cadiz facility of $111,731 offset by the effect of the
sale of the La Porte facility.
- Insurance increased by $45,458, or 22.2% primarily due to the increase on
the renewal of the property insurance, which resulted from bad claims
experience in 1999.
- Property taxes decreased by $46,722, or 11.0% which is attributable to
the sale of the La Porte facility.
- Pallet expense decreased by $124,303, or 369.3% which is attributable to
several large carriers' accounts being offset against freight costs owed
by the Company.
- The remaining increases in operating costs are immaterial and are offset
by similar immaterial decreases.
<PAGE>
General and Administrative Expenses
General and administrative expenses decreased by $89,096, or 12.3%. This
decrease was due primarily to a decrease in professional fees of $125,521,
offset by increases in other general and administrative expenses which on an
individual basis are not material. The 1999 professional fees were associated
with public company reporting requirements and an increase in computer software
costs of $44,210 associated with becoming Y2K compliant.
Depreciation, Amortization, Rent and Interest
Depreciation expense increased in 2000 to $660,941 from $645,666 in 1999.
This increase is due primarily to the effect of depreciation on assets acquired
in 1999 which included the Fort Worth facility acquired in May 1999. The
increase in depreciation expense is offset by only five months of depreciation
on the assets associated with the La Porte facility. Rent expense decreased by
$180,356, or 28.6% from 1999 to 2000. This decrease was primarily due to
purchasing the Fort Worth facility in May 1999, which was previously leased.
Interest expense was $1,195,456 in 2000, as compared to $1,137,887 in 1999. The
increase of $57,569, or 5.1% is attributed primarily to an increase in the
interest on the mortgage in Fort Worth of $100,225, offset by only five months
of interest on La Porte in 2000.
Income Tax Expense or Benefit
Income tax expense includes the current federal tax expense and the
effect of deferred taxes related primarily to the difference between book and
tax depreciation on property, plant and equipment. For the nine months ended
September 30, 2000 and September 30, 1999, the Company recorded income tax
expense of $833,000 and $346,965, respectively. The change from 1999 to 2000 is
due primarily to tax expense related to the sale of the La Porte facility.
The Company establishes valuation allowances when necessary, in
accordance with the provisions of SFAS 109, "Accounting for Income Taxes", to
reduce deferred tax assets to the amount expected to be realized. Based upon
future income projections, the Company expects to realize the net asset.
Liquidity and Capital Resources:
At September 30, 2000, the Company's working capital ratio was 0.7 to 1
as compared to 0.8 to 1 at December 31, 1999. The working capital ratio
decreased primarily due to the reclassification of the line of credit of
$1,112,248 and the long term portion of the Fort Worth mortgage of $1,773,324 to
current liabilities. In addition there was a decrease in accounts receivable of
$420,711, an increase in accounts payable of $469,724 and an increase in accrued
charges of $703,780. These factors are offset by increases in cash and cash
equivalents of $2,832,831, associated with the proceeds on the sale of the La
Porte facility, an increase in prepaid expense of $126,960, a decrease in
property taxes payable of $250,323, a decrease in notes payable of $101,455 and
a decrease in the current maturities of the remaining long-term debt of
$191,940. The decrease in accounts receivable, property taxes payable and
current maturities of long-term debt and the increase in accrued charges are
primarily related to the sale of the La Porte facility.
Net cash provided by operating activities for 2000 totaled $677,502 as
compared to $2,177,650 for the nine months ended 1999. The decrease in net cash
provided by operating activities is comprised of the following factors: there
was a net loss prior to income taxes and the gain on sale of land, building and
equipment of $372,941 in 2000 as compared to net income of $1,020,486 in 1999;
accounts receivable decreased $427,020 in 2000 as compared to a decrease of
$454,629 in 1999; deposits and escrows decreased $78,266 in 2000 as compared to
a decrease of $156,097 in 1999; accounts payable increased $445,878 in 2000 as
compared to an increase of $469,776 in 1999; property taxes payable decreased
$174,847 in 2000 as compared to a decrease of $136,980 in 1999; notes payable
decreased $586,031 in 2000 as compared to a decrease of $240,110 in 1999 and
deferred revenue decreased $106,712 in 2000 as compared to a decrease of $13,057
in 1999. The reduced cash provided by or used by these activities was partially
offset by no deferred income taxes in 2000, compared to $326,555 in 1999;
prepaid expenses increased $356,502 in 2000 as compared to $144,129 in 1999;
other assets increased $47,255 in 2000 as compared to a decrease of $296,999 in
1999 and accrued charges increased $741,678 in 2000 as compared to an increase
of $923 in 1999.
Net cash provided by investing activities was $3,307,993 in 2000 as
compared to net cash used in investing activities of $2,330,633 in 1999. Capital
expenditures for 2000 were $177,014, compared to $465,580 for 1999. The Company
made advances to Castor Capital Corporation, the majority shareholder, of
$177,759 in 2000 as compared to $1,465,053 in 1999. These uses of cash in
investing activities were offset by the proceeds provided by the sale of the La
Porte facility and other equipment of $3,662,766.
<PAGE>
The Company has a line of credit which provides up to $2,500,000, of
which the company had borrowed $910,000 at September 30, 2000. In addition to
the line of credit the Company had an unfunded overdraft in the amount of
$202,248, which is grouped for financial statement presentation with the line of
credit. The borrowing base on the line of credit fluctuates based on reports
submitted by the Company to the lender on an a monthly basis. The line of credit
which had been expected to be renewed by the lender became due on September 1,
2000. The Company has until November 13, 2000 to repay the line of credit. The
lender also provided the mortgage associated with the purchase of the Fort Worth
facility in May 1999. The line of credit and the mortgage are cross
collateralized and the lender has requested repayment of the mortgage by
December 12, 2000. As of the date of this report the Company is currently
negotiating with another lender and expects to refinance both the line of credit
and the mortgage. Under the proposed terms being negotiated with the lender,
these items will be classified under long-term liabilities.
Net cash used in financing activities for 2000 totaled $1,152,664 as
compared to net cash provided of $206,316 in 1999. The Company paid $254,406 on
the line of credit in 2000 as compared to $252,301 in 1999. The cash used to
make principal payments on the Company's long term debt was $898,258 in 2000 as
compared to principal payments on long term debt of $1,701,383 in 1999. The
Company had cash provided from borrowings of $2,100,000 and the sale of shares
of $60,000 in 1999.
The Company filed a Form SB-2 registration statement to register
3,900,000 shares of the Company's common stock. Of the total shares registered,
1,000,000 shares were to be offered for sale by the Company on a best efforts
basis at a price of $4.50 per share, 2,500,000 shares were shares owned by
Castor Capital Corporation, the majority shareholder, and remaining 400,000
shares were those issued in connection with the purchase of the Fort Worth
facility. The Company had sold a total of 140,000 shares as of September 30,
2000. Castor Capital Corporation had sold 490,000 shares as of September 30,
2000. Castor held 79.0% of the Company's outstanding common stock as of
September 30, 2000.
The Company guaranteed a certain obligation of its parent, Castor, this
obligation totaled $1,912,500 at September 30, 2000. The Company believes that
the collateral pledged by its parent is adequate to cover the debt in case of a
default and has not recorded a liability in the financial statements related to
this guarantee.
The Company believes that cash flow from operations will be adequate to
fund the Company's capital requirements.
The Company had executed an "Exclusive Option Contract" for the purchase
of the Richardson facility for $6,000,000. The option period expired on February
22, 2000, however the Company had signed an extension to the option period to
July 31, 2000. At the date of this report the Company had not been able to
finalize financing arrangements with a lender and the option period has expired.
The Company completed the sale of the La Porte facility on June 1, 2000.
The assets sold included the land, building, equipment and business associated
with the La Porte facility. The sale price of $9,295,000 was paid by the
purchaser assuming the mortgage in the amount of $5,264,359 and a cash payment
of $4,030,641. After deducting fees for broker commission, title fees, survey
fees, realty taxes, mortgage interest and mortgage transfer fees the Company
netted $3,662,666 cash proceeds. The Company also placed in escrow $250,000 for
eighteen months for possible claims with respect to major repairs on the
building.
The Company signed a contract of sale on September 22, 2000 with a
prospective purchaser for the Cadiz facility for $20,000,000. The purchaser has
a due diligence period of ninety days. The closing date is currently set for
December 29, 2000.
<PAGE>
Fluctuations in Operating Results; Seasonality:
Generally sales volumes are lowest at the beginning of the fiscal year
and grow steadily to a peak in the fourth quarter.
Environmental Matters:
The Company is not aware of any environmental liability relating to its
facilities or operations that would have a material adverse effect on the
Company, its business, assets or results of operations.
Inflation:
Inflation has not historically had a material effect on the Company's
operations, and is not expected to have a material impact on the Company in the
future.
Accounting Matters:
In July 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities". This
statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In June 1999, the Financial Accounting
Standards Board issued SFAS No. 137 which delayed the effective date of SFAS No.
133 to fiscal years beginning after June 15, 2000. At this time, the Company has
not determined the impact the adoption of this standard will have on the
Company's financial statements.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
Not Applicable
ITEM 3. DEFAULT UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
Exhibit 27.1 Financial Data Schedule.
Reports on Form 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the issuer
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
ALFORD REFRIGERATED WAREHOUSES, INC.
By: /s/ James C. Williams
------------------------------------------------
James C. Williams, Chief Financial Officer,
Secretary, Treasurer and Director
November 14, 2000
