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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 June 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)
TEXAS 75-2695621
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
318 Cadiz Street
Dallas, Texas 75207
(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:
Title of Class Shares Outstanding as of
-------------- June 30,2000
$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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INDEX
<S> <C> <C>
Part I - Financial Information
Item1. Financial Statements (Unaudited)
Consolidated Balance Sheet:
June 30, 2000 and December 31, 1999....................................................................4
Consolidated Statement of Operations:
Six Months Ended June 30, 2000 and 1999................................................................5
Consolidated Statement of Operations:
Three Months Ended June 30, 2000 and 1999 .............................................................6
Consolidated Statements of Cash Flows:
Six Months Ended June 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.......................................................................................12
Item 2. Change in Securities and
Use of Proceeds.......................................................................................12
Item 3. Default Upon Senior Securities..........................................................................12
Item 4. Submission of Matters to
a Vote of Security Holders............................................................................12
Item 5. Other Information.......................................................................................12
Item 6. Exhibits and Reports on Form 8-K........................................................................13
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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ALFORD REFRIGERATED WAREHOUSES, INC.
Consolidated Balance Sheets
6/30/2000 12/31/99
(Unaudited) (Audited)
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<S> <C> <C>
Assets -- Current
Cash and cash equivalents $ 3,241,386 $ 105,075
Accounts receivable 1,056,069 1,753,890
Prepaid expenses 358,373 278,498
Income tax receivable 19,500 13,000
Escrows 580,650 565,282
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Total Current Assets $ 5,255,978 $ 2,715,745
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Property, plant & equipment, net $ 14,981,306 $ 21,422,381
Due from affiliate 2,728,500 2,198,926
Other assets 489,116 600,418
Deposits 208,177 172,235
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Total Assets $ 23,663,077 $ 27,109,705
========================================================================================================================
Liabilities & Stockholders' Equity -- Current
Accounts payable $ 1,291,473 $ 930,336
Property taxes payable 400,958 549,307
Accrued charges 1,760,272 822,649
Notes payable 317,216 351,112
Current maturities of long-term debt 783,987 963,885
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Total Current Liabilities $ 4,553,906 $ 3,617,289
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Deferred revenue $ 195,940 $ 285,516
Long-term debt, less current maturities 10,947,800 16,750,318
Line of Credit 1,045,460 1,366,654
Deferred tax liability 176,039 176,039
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Total Liabilities $ 16,919,145 $ 22,195,816
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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 2,801,530 971,487
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 6,743,932 4,913,889
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Total Liabilities & Stockholders' Equity $ 23,663,077 $ 27,109,705
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<CAPTION>
ALFORD REFRIGERATED WAREHOUSES, INC.
Consolidated Statement of Operations
(Unaudited)
Six months ended June 30, 2000 1999
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<S> <C> <C>
Warehouse revenues $ 7,115,121 $ 7,314,041
Operating Costs 5,131,448 4,793,305
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Direct Profit Contribution 1,983,673 2,520,736
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General & Administrative Expenses 411,214 451,651
Depreciation, Rent & Interest Expenses:
Depreciation 457,553 406,742
Rent 300,000 404,516
Interest 864,701 733,105
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Total Depreciation, Rent & Interest Expense $ 1,622,254 $ 1,544,363
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Other Income
Gain on sale of land, building and equipment $ 2,821,838 $ 0
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Income Before Income Taxes $ 2,772,043 $ 524,722
Income Tax Expense 942,000 178,405
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Net Income $ 1,830,043 $ 346,317
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Basic Earnings Per Share
Net Income $ 0.24 $ 0.05
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Weighted Average
Common shares used in computing earnings per share 7,540,715 7,098,229
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<CAPTION>
ALFORD REFRIGERATED WAREHOUSES, INC.
Consolidated Statement of Operations
(Unaudited)
Three months ended June 30, 2000 1999
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<S> <C> <C>
Warehouse revenues $ 3,367,520 $ 3,725,339
Operating Costs 2,512,524 2,295,895
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Direct Profit Contribution 854,996 1,429,444
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General & Administrative Expenses 205,686 189,618
Depreciation, Rent & Interest Expenses:
Depreciation 216,039 205,985
Rent 124,156 187,016
Interest 424,490 376,568
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Total Depreciation, Rent & Interest Expense $ 764,685 $ 769,569
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Other Income
Gain on sale of land, building and equipment $ 2,821,838 $ 0
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Income Before Income Taxes $ 2,706,463 $ 470,257
Income Tax Expense 920,000 161,739
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Net Income $ 1,786,463 $ 308,518
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Basic Earnings Per Share
Net Income $ 0.24 $ 0.04
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Weighted Average
Common shares used in computing earnings per share 7,540,715 7,098,229
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</TABLE>
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<CAPTION>
ALFORD REFRIGERATED WAREHOUSES, INC.
Consolidated Statement of Cash Flows
(Unaudited)
Six months ended June 30, 2000 1999
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<S> <C> <C>
Operating Activities:
Net Income $ 1,830,043 $ 346,317
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of land, building and equipment (2,821,838) 0
Depreciation expense 457,553 406,742
Deferred income taxes 0 167,911
Changes in operating assets and liabilities:
Accounts receivable 704,130 355,218
Prepaid expenses 195,826 (780)
Deposits and escrows 9,684 194,530
Income tax receivable (6,500) (6,500)
Other assets 32,923 (228,114)
Accounts payable 337,291 454,922
Property taxes payable (72,873) (220,900)
Accrued charges 975,521 (124,113)
Notes payable (310,711) (136,306)
Deferred revenue (89,576) (14,751)
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Net Cash Provided by Operating Activities $ 1,241,473 $ 1,194,176
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Investing Activities:
Proceeds from sale of land, building and equipment $ 3,662,666 $ 0
Due from affiliates (529,574) (906,872)
Capital expenditures (112,936) (320,330)
Increase in note receivable 0 (400,000)
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Net Cash Provided by (Used in) Investing Activities $ 3,020,156 $ (1,627,202)
=======================================================================================================================
Financing Activities:
Proceeds from borrowings 0 1,866,451
Principal payments on borrowings (1,125,318) (1,545,501)
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Net increase (decrease) in cash and cash equivalents 3,136,311 (52,076)
Cash and cash equivalents, beginning of period 105,075 109,517
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Cash and cash equivalents, end of period $ 3,241,386 $ 57,441
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</TABLE>
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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 June 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.
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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 six months ended June 30 of each
year.
Six Months Ended June 30, 2000, Compared to Six Months Ended June 30, 1999:
Revenues
Total revenues for 2000 were $7,115,121, a decrease of $198,920, or 2.7%,
compared to revenues of $7,314,041 for 1999. This decrease in revenues is due
primarily to the sale of the La Porte facility on June 1, 2000.
The Company recorded a net income of $1,830,043, or $.24 per share for
2000, as compared to a net income of $346,317, or $.05 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 increased by $338,143, or 7.1% from 1999 to 2000. This
overall increase is generally made up of the net of the following:
- Wages and benefits increased by $198,305, due to an increase of
$123,567 at the Cadiz facility and an increase of $68,169 at the
Richardson facility.
- Utilities increased by $85,265, or 8.2% which is attributable to
increases at all the facilities.
- Insurance increased by $35,157, or 26.2% 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 in conjunction with other
immaterial increases are offset by a multitude of small immaterial
decreases. In addition the sale of the La Porte facility on June 1,
2000 has had a compensating effect on the increase in operating costs.
General and Administrative Expenses
General and administrative expenses decreased by $40,437, or 9.0%. This
decrease was due primarily to a decrease in professional fees of $59,045, 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.
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Depreciation, Amortization, Rent and Interest
Depreciation expense increased in 2000 to $457,553 from $406,742 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
$104,516, or 25.8% 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 $864,701 in 2000, as compared to $733,105 in 1999. The
increase of $131,596, or 18.0% is attributed primarily to an increase in the
interest on the mortgage in Fort Worth of $87,779. The remaining increase is due
to the additional financing acquired in April 1999 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 six months ended June
30, 2000 and June 30, 1999, the Company recorded income tax expense of $942,000
and $178,405, 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 June 30, 2000, the Company's working capital ratio was 1.1 to 1 as
compared to 0.8 to 1 at December 31, 1999. The working capital ratio increased
primarily due to increases in cash and cash equivalents of $3,136,311,
associated with the proceeds on the sale of the La Porte facility, an increase
in prepaid expense of $79,875, a decrease in property taxes payable of $148,349
and a decrease in current maturities of long-term debt of $179,898, offset by a
decrease in accounts receivable of $697,821, an increase in accounts payable of
$361,137 and an increase in accrued charges of $937,623. 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 $1,241,473 as
compared to $1,194,176 for the six months ended 1999. The increase in net cash
provided by operating activities is comprised of the following factors:
depreciation increased $50,811 from 1999 to 2000; accounts receivable decreased
$704,130 in 2000 as compared to a decrease of $355,218 in 1999; prepaid expenses
decreased $195,826 in 2000 as compared to an increase of $780 in 1999; deposits
and escrows decreased only $9,684 in 2000 as compared to a decrease of $194,530
in 1999; other assets decreased $32,923 in 2000 as compared to an increase of
$228,114 in 1999; accounts payable increased $337,291 in 2000 as compared to an
increase of $454,922 in 1999; and accrued charges increased $975,521 in 2000 as
compared to a decrease of $124,113 in 1999. The cash provided by these
activities was partially offset by no deferred income taxes in 2000, compared to
$167,911 in 1999; property taxes payable decreased by $72,873 in 2000 as
compared to a decrease of $220,900 in 1999; a decrease in notes payable of
$310,711 in 2000 as compared to $136,306 in 1999; and deferred revenue decreased
$89,576 in 2000 as compared to $14,751 in 1999.
Net cash provided by investing activities was $3,020,156 in 2000 as
compared to net cash used in investing activities of $1,627,202 in 1999. Capital
expenditures for 2000 were $112,936, compared to $320,330 for 1999. The Company
made advances to Castor Capital Corporation, the majority shareholder, of
$529,574 in 2000 as compared to $906,872 in 1999. These uses of cash in
investing activities were offset by the proceeds provided by the sale of the La
Porte facility of $3,662,666.
The Company has a line of credit which provides up to $2,500,000, of
which the company had borrowed $1,020,000 at June 30, 2000. In addition to the
line of credit the Company had an unfunded overdraft in the amount of $25,460,
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 expired
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.
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Net cash used in financing activities for 2000 totaled $1,125,318 as
compared to net cash provided of $380,950 in 1999. The Company paid $321,194 on
the line of credit in 2000 as compared to $233,549 in 1999. The cash used to
make principal payments on the Company's long term debt was $1,125,318 in 2000
as compared to principal payments on long term debt of $1,545,501 in 1999. The
Company had cash provided from borrowings of $1,866,451 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 June 30, 2000.
Castor Capital Corporation had sold 490,000 shares as of June 30, 2000. Castor
held 79.0% of the Company's outstanding common stock as of June 30, 2000.
The Company guaranteed a certain obligation of its parent, Castor, this
obligation totaled $1,975,000 at June 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 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. At the date of this report the Company is finalizing financing
arrangements with a lender and expects to complete the transaction within 30
days.
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.
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.
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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 10.1 Asset Purchase Agreement, dated as of June 2, 2000 by
and among Pacific Logistics, L.P., as Buyer, P&O Cold Properties II, LLC, as
Real Property Buyer, Alford Refrigerated Warehouse, Inc. as Seller, La Porte
Properties, LLC as Real Property Seller and Castor Capital Corporation as
Shareholder.
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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
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James C. Williams, Vice President, Chief Financial Officer, Secretary,
Treasurer and Director
August 14, 2000
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