UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from . . . . . . . . . . . . . . . . . . . . . . . . .
. to . . . . . . . . . . . . . . . . . . . . . . .
For the Quarter Ended March 31, 2000 Commission file number 000-25351
ALFORD REFRIGERATED WAREHOUSES, INC.
(Exact name of Registrant as specified in charter)
75-2695621
TEXAS (I.R.S. Employer
(State or other jurisdiction of Identification No.)
incorporation or organization)
75207
318 Cadiz Street, Dallas, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (214) 426-5151
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 [X]
No [ ]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practical date:
Shares Outstanding as of
Title of Class March 31, 2000
-------------- --------------
$0.01 Par Value Common Stock 7,540,715
Transitional Small Business Disclosure Format (check one): Yes No X
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INDEX
<S> <C>
Part I: Financial Information
Item1: Financial Statements (Unaudited)
Consolidated Balance Sheet:
March 31, 2000 and December 31, 1999...................................................................3
Consolidated Statement of Operations:
Three Months Ended March 31, 2000 and 1999.............................................................4
Consolidated Statements of Cash Flows:
Three Months Ended March 31, 2000 and 1999 ............................................................5
Notes to Consolidated Financial Statements ..............................................................6
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations ........................................................................................7
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<CAPTION>
ALFORD REFRIGERATED WAREHOUSES, INC.
Consolidated Balance Sheets
<S> <C> <C>
3/31/2000 12/31/99
(Unaudited) (Audited)
- ---------------------------------------------------------------------------------- ------------------ ------------------
Assets -- Current
Cash and cash equivalents $ 88,245 $ 105,075
Accounts receivable 1,448,417 1,753,890
Prepaid expenses 380,317 278,498
Income tax receivable 19,500 13,000
Escrows 389,659 565,282
Total Current Assets $ 2,326,138 $ 2,715,745
- ---------------------------------------------------------------------------------- ------------------ ------------------
Property, plant & equipment, net $ 21,321,870 $ 21,422,381
Due from affiliate 2,505,969 2,198,926
Other assets 583,531 600,418
Deposits 153,183 172,235
Total Assets $ 26,890,691 $ 27,109,705
- ---------------------------------------------------------------------------------- ------------------ ------------------
Liabilities & Stockholders' Equity -- Current
Accounts payable $ 1,100,486 $ 930,336
Property taxes payable 341,626 549,307
Accrued charges 838,753 822,649
Notes payable 391,180 351,112
Current maturities of long-term debt 961,309 963,885
- ---------------------------------------------------------------------------------- ------------------ ------------------
Total Current Liabilities $ 3,633,354 $ 3,617,289
- ---------------------------------------------------------------------------------- ------------------ ------------------
Deferred revenue $ 231,571 $ 285,516
Long-term debt, less current maturities 16,568,174 16,750,318
Line of Credit 1,324,083 1,366,654
Deferred tax liability 176,039 176,039
Total Liabilities $21,933,221 $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 1,015,068 971,487
Stock subscriptions and note receivables (940,000) (940,000)
Treasury stock at cost (500,000 shares) (1,750,000) (1,750,000)
Total Stockholders' Equity 4,957,470 4,913,889
- ---------------------------------------------------------------------------------- ------------------ ------------------
Total Liabilities & Stockholders' Equity $ 26,890,691 $ 27,109,705
- ---------------------------------------------------------------------------------- ------------------ ------------------
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<CAPTION>
ALFORD REFRIGERATED WAREHOUSES, INC.
Consolidated Balance Sheets
(Unaudited)
<S> <C> <C>
Three months ended March 31, 2000 1999
- ----------------------------------------------------------------------------- -------------------- ------------------
Warehouse revenues $ 3,747,601 $ 3,588,702
Operating Costs 2,618,923 2,497,410
Direct Profit Contribution 1,128,678 1,091,292
- ----------------------------------------------------------------------------- -------------------- ------------------
General & Administrative Expenses 205,528 262,033
Depreciation, Rent & Interest Expenses:
Depreciation 241,514 200,757
Rent 175,844 217,500
Interest 440,211 356,537
Total Depreciation, Rent & Interest Expense $ 857,569 $ 774,794
- ----------------------------------------------------------------------------- -------------------- ------------------
Income Before Income Taxes $ 65,581 $ 54,465
Income Tax Expense 22,000 16,666
Net Income $ 43,581 $ 37,799
- ----------------------------------------------------------------------------- -------------------- ------------------
Basic Earnings Per Share
Net Income $ 0.01 $ 0.01
- ----------------------------------------------------------------------------- -------------------- ------------------
Weighted Average
Common shares used in computing earnings per share 7,540,715 7,000,715
- ----------------------------------------------------------------------------- -------------------- ------------------
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<CAPTION>
ALFORD REFRIGERATED WAREHOUSES, INC.
Consolidated Statement of Cash Flows
(Unaudited)
Three months ended March 31, 2000 1999
- ----------------------------------------------------------------------------- -------------------- ------------------
Operating Activities:
<S> <C> <C>
Net Income $ 43,581 $ 37,799
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation expense 241,514 200,757
Deferred income taxes 0 15,577
Changes in operating assets and liabilities:
Accounts receivable 305,473 436,788
Prepaid expenses 109,076 (10,584)
Deposits and escrows 194,675 269,428
Income tax receivable (6,500) 0
Other assets 16,887 10,451
Accounts payable 170,150 254,050
Property taxes payable (207,681) (355,532)
Accrued charges 16,104 (61,432)
Notes payable (170,827) (43,777)
Deferred revenue (53,945) 10,192
Net Cash Provided by Operating Activities $ 658,507 $ 763,717
- ----------------------------------------------------------------------------- -------------------- ------------------
Investing Activities:
Due from affiliates $ (307,043) $ (201,475)
Capital expenditures (73,462) (42,085)
Net Cash Used in Investing Activities $ (380,505) $ (243,560)
- ----------------------------------------------------------------------------- -------------------- ------------------
Financing Activities:
Principal payments on borrowings (294,832) (597,313)
Net Cash Used in Financing Activities (294,832) (597,313)
Net decrease in cash and cash equivalents (16,830) (77,156)
Cash and cash equivalents, beginning of period 105,075 109,517
Cash and cash equivalents, end of period $ 88,245 $ 32,361
- ----------------------------------------------------------------------------- -------------------- ------------------
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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 March 31, 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.
3. Subsequent to March 31, 2000, the Company received an offer to purchase its
facility in La Porte. The Company believes the offer to be one with substantial
merit, but at this time does not have a signed agreement of purchase and sale.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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.
Unless otherwise noted, all dollar amounts are rounded to the nearest
dollar. Reference to 2000 and 1999 are to the three months ended March 31 of
each year.
RESULTS OF OPERATIONS
The Company currently operates four facilities in the state of Texas.
THREE MONTHS ENDED MARCH 31, 2000,
COMPARED TO THREE MONTHS ENDED MARCH 31, 1999:
Revenues
Total revenues for 2000 were $3,747,601, an increase of $158,899, or
4.4%, compared to revenues of $3,588,702 for 1999. This increase in revenues is
due primarily to an increase in revenue at the La Porte facility of $149,198.
The Company recorded a net income of $43,581, or $.01 per share for 2000,
as compared to a net income of $37,799, or $.01 per share for 1999.
Operating Costs
Operating costs increased by $121,513, or 4.9% from 1999 to 2000. This
overall increase is generally made up of the net of the following:
- Wages and benefits increased by $108,515, due to an increase of
$77,756 at the La Porte facility and an increase of $37,613 at the
Richardson facility.
- Utilities increased by $43, 932, or 8.8% which is attributable to
increases at all the facilities.
- Insurance increased by $12,898, or 19.7% primarily due to the increase
on the renewal of the property insurance, which resulted from bad
claims experience in 1999.
- These increases in operating costs are offset by a multitude of small
decreases which on an individual basis are not material.
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General and Administrative Expenses
General and administrative expenses decreased by $56,505, or 21.6%. This
decrease was due primarily to an decrease in professional fees of $73,380. The
1999 expenses 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 $241,514 from $200,757 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. Rent
expense decreased by $41,656, or 19.2% from 1999 to 2000. This decrease was
primarily due to the purchasing the Fort Worth facility in May 1999, which was
previously leased. Interest expense was $440,211 in 2000, as compared to
$356,537 in 1999. The increase of $83,674, or 23.5% is attributed to an increase
in the interest on the mortgage in Fort Worth of $60,109.
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 three months ended
March 31, 2000 and March 31, 1999, the Company recorded income tax expense of
$22,000 and $16,666, respectively. The change from 1999 to 2000 is due primarily
to an increase in income in 2000.
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 March 31, 2000, the Company's working capital ratio was 0.6 to 1 as
compared to 0.8 to 1 at December 31, 1999. The working capital ratio decreased
primarily due to decreases in accounts receivable of $305,473 and increases in
accounts payable of $170,150, offset by an increase in prepaid expenses of
$101,819. The decrease in escrows was offset by a decrease in property tax
payable as a result of property taxes for 1999 being due and payable in January
2000.
Net cash provided by operating activities for 2000 totaled $658,507 as
compared to $763,717 for the three months ended 1999. The decrease in net cash
provided by operating activities is comprised of the following factors: net
income was $43,581 in 2000, as compared to $37,799 in 1999, a marginal increase
of $5,782, depreciation increased $40,757 from 1999 to 2000; deferred income
taxes remained constant in 2000 as compared to a increase of $15,577 in 1999;
accounts receivable decreased $305,473 in 2000 as compared to an decrease of
$436,788 in 1999; prepaid expenses decreased $109,076 in 2000 as compared to an
increase of $10,584 in 1999; deposits and escrows decreased $194,675 in 2000 as
compared to a decrease of $269,428 in 1999; accounts payable increased $170,150
in 2000 as compared to a increase of $254,050 in 1999; and accrued charges
increased $16,104 in 2000 as compared to a decrease of $61,432 in 1999. The cash
provided by these activities
8
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was partially offset by a decrease in property taxes payable of $207,681 in 2000
as compared to an decrease of $355,532 in 1999; a decrease in notes payable of
$170,827 in 2000 as compared to $43,777 in 1999; and deferred revenue decreased
$53,945 in 2000 as compared to an increase of $10,192 in 1999.
Net cash used in Investing activities was $380,505 in 2000 as compared to
$243,560 in 1999. Capital expenditures for 2000 were $73,462, compared to
$42,085 for 1999. The Company made advances to Castor Capital Corporation, the
majority shareholder, of $307,043 in 2000 as compared to $201,475 in 1999.
The Company has a line of credit which provides up to $2,500,000, of
which the company had borrowed $985,000 at March 31, 2000. In addition to the
line of credit the Company had an unfunded overdraft in the amount of $339,083,
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 expires
on May 1, 2000, but as of the date of this report the expiration date has been
extended to September 1, 2000. Prior to the expiration date of the line of
credit the Company expects to renew the line of credit with its lender.
Net cash used in financing activities for 2000 totaled $294,832 as
compared to $597,313 in 1999. The Company paid $42,571 on the line of credit in
2000 as compared to $208,603 in 1999. The cash used to make principal payments
on the Company's long term debt was $252,261 in 2000 as compared to principal
payments on long term debt of $388,710 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 March 31, 2000.
Castor Capital Corporation had sold 490,000 shares as of March 31, 2000. Castor
held 79.0% of the Company's outstanding common stock as of March 31, 2000.
The Company guaranteed a certain obligation of its parent, Castor, this
obligation totaled $2,037,500 at March 31, 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 has 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 has signed an extension to the option period to
July 31, 2000 and expects to exercise the option and complete the purchase in
the second quarter of 2000.
9
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YEAR 2000:
The year 2000 issue relates to computer systems that use the last two
digits rather than four to define a year and whether such systems would properly
and accurately process information when the year changed to 2000. During fiscal
1999, the Company completed its company-wide program to prepare the Company's
computer systems for year 2000 compliance.
At the date of this report, the Company had not experienced any material
problems related to the year 2000. The Company has not become aware of any
significant year 2000 issues affecting the Company's major customers or
suppliers. The Company does not anticipate any material complaints regarding any
year 2000 issues related to its products.
Year 2000 related costs through December 31, 1999 were limited to
employees' and consultant's time and were expensed as incurred. The remaining
estimated cost to address any additional year 2000 problems is deemed
immaterial. No significant information system projects were deferred to
accommodate the year 2000 issues.
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.
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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, Vice President, Chief Financial Officer,
Secretary, Treasurer and Director
May 12, 2000
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule for Alford Refrigerated Warehouses, Inc.
</LEGEND>
<CIK> 0001078006
<NAME> Alford Refrigerated Warehouses, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 88,245
<SECURITIES> 0
<RECEIVABLES> 1,448,417
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,326,138
<PP&E> 25,607,955
<DEPRECIATION> 4,286,085
<TOTAL-ASSETS> 26,890,691
<CURRENT-LIABILITIES> 3,633,354
<BONDS> 0
0
0
<COMMON> 75,407
<OTHER-SE> 6,556,995
<TOTAL-LIABILITY-AND-EQUITY> 26,890,691
<SALES> 0
<TOTAL-REVENUES> 3,747,601
<CGS> 0
<TOTAL-COSTS> 2,824,451
<OTHER-EXPENSES> 175,844
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 440,211
<INCOME-PRETAX> 65,581
<INCOME-TAX> 22,000
<INCOME-CONTINUING> 43,581
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,581
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
