<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q/A
Amendment No. 1
/X/ Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period
ended November 30, 1995; 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 December 31, 1995: 4,860,934 shares.
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 thus far in fiscal 1996. The Company has made
proposals to offer similar services to certain other potential
customers by emphasizing its logistics expertise and warehouse
industry position which enable customers to obtain services in
support of distribution of frozen food products from a single
provider.
The maintenance and continued growth of transportation
management services revenues is dependent upon meeting
customer expectations. Transportation management services
require substantial coordination and the implementation of
complex systems. The Company encountered start-up
difficulties with respect to the introduction of certain
transportation management services for customers in the latter
part of fiscal 1996. The Company believes that it has
overcome such difficulties, but there can be no assurance that
the Company will not encounter difficulties in the future, or
that such difficulties, if encountered, would not adversely
affect operating income. There can also be no assurance that
difficulties, if encountered, would not adversely affect
customer relationships. The Company believes, however, that
its transportation management activities may lead to increased
revenues in the higher-margin warehousing business.
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. Since August
1994 (mid-fiscal 1995), the Company has added approximately
16.1 million cubic feet of storage capacity in five locations.
Two of such facilities became operational in fiscal 1995 and
one in the second quarter and two in the third quarter of
fiscal 1996. The increase, net of warehouse closures
discussed below, represents a 1.8% increase in available
warehouse space. The Company is currently working toward the
development of several new warehouses which include the
acquisition of 2.1 million cubic feet and the construction of
13 million cubic feet of new refrigerated warehouse space.
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."
Since August 1994, the Company has reduced the amount of
available refrigerated warehouse space by approximately 12
million cubic feet due to the sale of one property,
termination of four operating leases in the prepackaged
bankruptcy in the third quarter of fiscal 1996 and the
non-renewal of three other operating leases. The Company
expects that the effects of the closure or disposition of such
non-strategic facilities will have a positive effect on future
gross operating margin as a percentage of net sales.
PREPACKAGED BANKRUPTCY - On May 9, 1995, the Company filed a
prepackaged plan of reorganization (the "Plan") under Chapter
11 of the Bankruptcy Code (the "Prepackaged Bankruptcy"). 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 by extending the maturity of
such indebtedness and to adjust certain restrictive financial
covenants and other provisions contained in an agreement with
one of its principal investors. The bankruptcy court approved
the Plan as filed and it became effective on June 30, 1995.
The Plan as approved provided, among other things, that each
holder of the Company's then outstanding 11% Senior
Subordinated Debentures due 1997 (the "11% Debentures") was
entitled to receive a corresponding amount of the Company's
new 15% Senior Subordinated Debentures due 2007 (the "15%
Debentures"), plus accrued but unpaid interest; that the
Company's 11.45% First Mortgage Bonds, Series A, due 2002 (the
"Series A Bonds") and its 11.5% First Mortgage Bonds, Series
B, due 2005 (the "Series B Bonds", and together with the
Series A Bonds, the "First Mortgage Bonds") were unaffected by
the Prepackaged Bankruptcy; and that the prior Amended and
Restated Investment Agreement dated as of March 2, 1993 (the
"Investment Agreement") was superseded by the Second Amended
and Restated Investment Agreement dated as of May 5, 1995 (the
"Second Investment Agreement") with Metropolitan Life
Insurance Company (the "Institutional Investor"). See "Legal
Proceedings." The Company believes the Prepackaged Bankruptcy
has not adversely affected the holders of its senior debt or
its relationships with its customers, suppliers or
shareholders. See "-- Liquidity and Capital Resources --
Liquidity -- Effect of Prepackaged Bankruptcy."
Through the third quarter of fiscal 1996, the Company incurred
approximately $6.7 million in reorganization expenses related
to the Prepackaged Bankruptcy. In addition, the write-off of
unamortized original issue discount and unamortized issuance
costs related to the exchange of the 11% Debentures and the
redemption of $10.0 million of the Series A Bonds in the
Prepackaged Bankruptcy resulted in an extraordinary loss, net
of taxes, of approximately $1.8 million in the same period.
RESULTS OF OPERATIONS
- ---------------------
THIRD QUARTER RESULTS
---------------------
Net sales increased 44.4% from $60.2 million for the
third quarter of fiscal 1995 to $86.9 million for the
third quarter of fiscal 1996. The increase is
principally related to an increase in transportation
management services. Transportation management sales in
the quarter have increased 510.2% from the corresponding
quarter in fiscal 1995 due to the outsourcing to the
Company of additional transportation management
responsibilities by three customers. Warehousing sales
have increased 3.5% from the corresponding quarter in
fiscal 1995.
Cost of sales increased 66.5% from $37.4 million for the third
quarter of fiscal 1995 to $62.2 million for the third quarter
of fiscal 1996. The increase is principally related to
increased volume of transportation management services, which
required increases in transportation capacity purchased from
carriers and the addition of new employees.
COMPARISON OF NINE-MONTHS PERIODS ENDED NOVEMBER 30, 1994 AND
1995
-------------------------------------------------------------
NET SALES - The Company's net sales increased 23.2% from
$162.2 million for the first nine months of fiscal 1995 to
$199.9 million for the first nine months of fiscal 1996,
reflecting a substantial increase in transportation management
sales as well as a 3.7% increase in warehousing sales. The
Company's third fiscal quarter is typically its strongest
sales quarter.
Americold's net sales for the first nine months of fiscal 1995
and the first nine months of fiscal 1996 are detailed in the
table below, by activity:
NET SALES
(Dollars in Millions)
Nine Months Nine Months
Ended Ended % Change
November 30, 1994 November 30, 1995 FY95 to FY96
----------------- ----------------- ------------
Amount % Amount %
------ --- ------ ---
Logistics
Warehousing
Storage $ 77.4 47.7% $ 79.9 40.0% 3.2 %
Handling 53.1 32.7% 56.8 28.4% 6.7 %
Leasing 5.3 3.3% 5.1 2.6% (3.8)%
Freezing
and other 9.4 5.8% 8.7 4.3% (7.4)%
------ ----- ------ ----- ------
145.2 89.5% 150.5 75.3% 3.7%
Transportation
management
services 12.9 8.0% 46.0 23.0% 256.6 %
------ ---- ------ ----- ------
Total logistics 158.1 97.5% 196.5 98.3% 24.3 %
Other non-
logistics 4.1 2.5% 3.4 1.7% (17.1)%
------ ----- ------ ----- ------
Total net sales $162.2 100.0% $199.9 100.0% 23.2 %
====== ===== ====== ===== ======
Warehousing sales increased 3.7% from $145.2 million for the
first nine months of fiscal 1995 to $150.5 million for the
first nine months of fiscal 1996, principally due to a 3.2%
increase in storage revenue and a 6.7% increase in handling
revenue. The increase in storage revenue is primarily due to
price increases and changes in product mix, as storage volume
remained stable at approximately 1.56 billion pounds stored on
average per month in each of the two periods.
The Company is aware that a portion of the revenue derived
from one warehouse location and reflected in the first nine
months of fiscal 1996 will be directed to another company's
warehouse, which is expected to be constructed and operational
by mid- to late fiscal 1997. Unless mitigated by the
Company's efforts to obtain replacement business, the effect
on operating earnings from this relocation will be a reduction
of approximately $2.0 million per year. The Company believes
that it will locate replacement business to recover some
portion of such revenues and operating earnings by fiscal
1998.
The 6.7% increase in handling revenue resulted primarily from
a 3.7% increase in volume of product handled, with the
remaining increase due to price increases and changes in
product mix. For the first nine months of fiscal 1995, 15.2
billion pounds of product were handled by the Company compared
with 15.7 billion pounds during the same period in fiscal
1996.
Transportation management sales increased 256.6% from $12.9
million for the first nine months of fiscal 1995 to $46.0
million for the first nine months of fiscal 1996, due to the
outsourcing to the Company of additional transportation
management responsibilities by three customers.
Other non-logistics sales (quarry sales) decreased 17.1% from
$4.1 million for the first nine months of fiscal 1995 to $3.4
million for the first nine months of fiscal 1996. The Company
has entered into a letter of intent with respect to the sale
of the quarry. See "--Liquidity and Capital
Resources--Capital Resources--Capital Expenditures."
COST OF SALES - Cost of sales increased 30.4% from $104.2
million for the first nine months of fiscal 1995 to $135.9
million for the first nine months of fiscal 1996. 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 $32.1 million increase in cost of sales. In
addition, the cost of sales decreased as a result of warehouse
additions and closures, as discussed above, in the net amount
of $1.6 million.
Cost of sales as a percentage of net sales increased from
64.2% for the first nine months of fiscal 1995 to 68.0% for
the first nine months of fiscal 1996, as handling and
transportation management sales, which each have high variable
cost requirements, increased from 40.7% of net sales in the
prior period to 51.4% in the more recent period.
As the Company does not 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 its
warehousing services.
SELLING AND ADMINISTRATIVE EXPENSES - Selling and
administrative expenses increased 8.5% from $19.5 million for
the first nine months of fiscal 1995 to $21.2 million for the
first nine months of fiscal 1996. The increase primarily
reflects an increase of approximately $1.0 million in salaries
and related fringe benefits. Selling and administrative
expenses as a percentage of net sales decreased from 12.0% in
the first nine months of fiscal 1995 to 10.6% in the first
nine months of fiscal 1996 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 factors discussed
above, gross operating margin increased 11.1% from $36.6
million for the first nine months of fiscal 1995 to $40.7
million for the first nine months of fiscal 1996.
INTEREST EXPENSE - Interest expense increased from $41.3
million for the first nine months of fiscal 1995 to $42.1
million for the first nine months of fiscal 1996 as a result
of slightly higher overall interest rates partially offset by
slightly lower overall borrowings. The increase in interest
rates resulted from the exchange in the Prepackaged Bankruptcy
of the Company's 11% Debentures for the new 15% Debentures.
REORGANIZATION EXPENSES - Reorganization expenses of
approximately $6.7 million reflect the expenses incurred for
professional services related to the Prepackaged Bankruptcy
including investment banking, accounting and legal fees,
through the third quarter of fiscal 1996.
INCOME (LOSS) - The Company's income before income taxes and
extraordinary item for the first nine months of fiscal 1995
was $13.0 million, compared to a loss of $8.5 million in the
first nine months of fiscal 1996. The decrease in income
between the two periods is due to the approximately $6.7
million of reorganization expenses incurred during the first
nine months of fiscal 1996 and the recognition by the Company
of an approximately $17.0 million gain from the insurance
settlement related to the Kansas City, Kansas fire in the
first nine months of fiscal 1995. These two factors were
offset in part by improved earnings from operations.
EXTRAORDINARY ITEM - In connection with the exchange of the
Company's 11% Debentures for the 15% Debentures and the
repurchase of the $10.0 million of Series A Bonds in the
Prepackaged Bankruptcy, unamortized original issue discount of
approximately $2.0 million and unamortized issuance costs of
approximately $1.0 million were written off, resulting in an
extraordinary loss, net of taxes, of approximately $1.8
million.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company believes it has sufficient liquidity and capital
resources to meet its needs related to payment of interest
expense, continued operation and maintenance of its
warehouses, operation and planned expansion of its
transportation management business and limited growth in
warehouse investment. 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 facilities
from a finance company (the "Lease Line"). See "--Capital
Resources." The Company plans to finance its warehouse
expansion program principally through such lease financing
and the Company believes it has the ability to finance all of
its fiscal 1997 expansion projects from the Lease Line, other
than with respect to one project for which the Company is
seeking additional 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 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 $4.4 million for the first nine months of
fiscal 1995 to a negative $0.9 million for the first nine
months of fiscal 1996. The decrease is due to the
reorganization expenses associated with the Prepackaged
Bankruptcy and changes in certain working capital items. The
Company's operating cash flow would have been $5.8 million for
the first nine months of fiscal 1996 without reorganization
costs of $6.7 million. Net cash flow from operating
activities in fiscal years 1993, 1994 and 1995 was $17.7
million, $18.5 million and $12.7 million, respectively.
WORKING CAPITAL - The Company's working capital position as of
the last day of the nine-month period ended November 30, 1995
was a negative $1.1 million. This position compares to a
negative $14.9 million at fiscal 1995 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 the construction of the Grand Island, Nebraska
warehouse facility discussed below, but was increased by the
effects of the Prepackaged Bankruptcy. Under the Plan,
approximately $28.8 million of senior subordinated debt
payments were postponed from May 1995 until fiscal 2008, which
reduced the current portion of long-term debt. Partially
offsetting this decrease in the current portion of long-term
debt, as part of the reorganization proceedings, the Company
repurchased for cash $10.0 million of long-term Series A
Bonds.
The Company's historical negative working capital position has
not affected its ability to meet its cash operating needs.
The Company, however, in fiscal 1995 experienced a shortfall
in the working capital necessary to make the fiscal 1995 and
fiscal 1996 sinking fund payments required with respect to the
11% Debentures, 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 letter of credit
amounts 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, up to a maximum of
$27.5 million. 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 credit agreement also
contains certain restrictive covenants, including financial
covenants.
Based on eligible accounts receivable as of November 30, 1995,
the Company had an available credit line of $25.4 million, of
which $7.9 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 first funding
of approximately $5.7 million is expected to close in late
fiscal 1996 with respect to the Company's recently completed
Grand Island, Nebraska facility. 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 Company, as part of its Kansas City, Kansas location,
operates a limestone quarry. Subject to the resolution of
certain remaining due diligence issues, the Company expects to
dispose of this business during fiscal 1997. Net proceeds of
the sale of approximately $4.5 million must, in accordance
with the Second Investment Agreement, be reinvested in
warehouse properties within 360 days or used to satisfy, in
part, the mortgage obligation on the property. There can be
no assurance that such sale will be completed.
CAPITAL EXPENDITURES - Budgeted fiscal 1996 capital
expenditures total approximately $35.4 million, including
approximately $25.6 million for warehouse expansions.
Expenditures for property, plant and equipment for the first
nine months of fiscal 1996 totaled $29.7 million, of which
approximately $24.5 million related to warehouse expansions.
Of the $24.5 million, all but the construction of the Grand
Island facility was covered by external funds and the Company
expects to finance the Grand Island facility with funds from
the Lease Line.
The Company has completed construction of two new warehouse
facilities in Pasco, Washington and Rochelle, Illinois, funded
with approximately $18.6 million of escrow funds provided
under the Bond Indenture. As a result, the Company has
expended substantially all of the escrowed funds under the
Bond Indenture, except for approximately $4.8 million from the
insurance proceeds from the Kansas City fire. A portion of
the $4.8 million is expected to be released to the Company in
late fiscal 1996 conditioned upon the Company submitting to
the Bond Trustee under the Indenture related to the First
Mortgage Bonds (the "Bond Trustee") an accounting of
restoration expenses incurred to date at the Kansas City
warehouse facility. The Company is working with the Bond
Trustee to define its options with respect to the use of any
remaining funds held by the Bond Trustee following the
reimbursement of such restoration expenses.
The projects the Company is currently exploring for fiscal
1997 would require the expenditure of up to $34.0 million, no
portion of which is presently committed. The Company
anticipates that it will use the Lease Line to finance all but
one of such projects. Certain capital expenditures planned
for late fiscal 1996 will be deferred until early fiscal 1997,
and certain capital expenditures planned for early fiscal 1997
are expected to be deferred until late fiscal 1997, resulting
in corresponding delays in the realization of benefits from
such investments.
EFFECT OF PREPACKAGED BANKRUPTCY - The Bankruptcy Court
approved the Plan on June 19, 1995 and the Plan became
effective on June 30, 1995. The Plan as approved provided,
among other things, that each holder of the Company's then
outstanding 11% Debentures was entitled to receive a
corresponding amount of the Company's new 15% Debentures at
par, plus accrued but unpaid interest; that the holders of the
Company's Senior Debt were not adversely affected by the
Prepackaged Bankruptcy; and that the prior Investment
Agreement was superseded by the Second Investment Agreement
with the Institutional Investor.
Subsequently, the Company rejected in the Prepackaged
Bankruptcy certain operating lease agreements relating to four
warehouse facilities at Watsonville, Oakland and San
Francisco, California; and Chicago, Illinois. Properties
subject to the leases accounted for approximately $11.7
million of sales and a minimal amount of gross operating
margin in fiscal 1995. The outcome of any damage claims
resulting from the lease rejections cannot be predicted at
this time, but the Company does not believe that the
resolutions of such claims will be material.
The Company believes that the effect of the Plan has been to
improve the Company's financial position by postponing the
maturity of its subordinated debt and increasing the
likelihood that the Company will realize the benefits of its
capital expenditures and the continuing expansion of its
transportation management activities. The Company remains
highly leveraged, however, and will continue to be subject to
substantial principal and interest obligations with respect to
its indebtedness.
NEW ACCOUNTING STANDARD
-----------------------
The Company has not implemented the requirements of 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," although it will be required to do so for fiscal years
beginning March 1, 1996 and thereafter. 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. At this time, the Company does not believe there
will be an impairment loss to report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Amendment No. 1 to its
Form 10-Q filed January 16, 1996 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: January 17, 1996
