<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
/X/ Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal year ended
February 28, 1997; 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 Id. No.)
7007 S. W. Cardinal Lane, Suite 135,
Portland, Oregon 97224
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code: (503) 624-8585
------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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.
/X/ Yes / / No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. /X/
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.
/X/ Yes / / No
Aggregate market value of voting stock held by non-affiliates on
May 1, 1997: $24,752,312 (based upon the last known transaction in
the voting stock of the Company).
Number of shares outstanding of the registrant's common stock, par
value $.01 per share, as of May 1, 1997: 4,995,556 shares.
DOCUMENTS INCORPORATED BY REFERENCE
None
Exhibit Index located at page 84.<PAGE>
AMERICOLD CORPORATION
FORM 10-K
TABLE OF CONTENTS
-----------------
Part I Page
- ---------- ----
Item 1. Business 4
Item 2. Properties 12
Item 3. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of 16
Security Holders
Part II
- -------
Item 5. Market for Registrant's Common Equity 16
and Related Stockholder Matters
Item 6. Selected Financial Data 17
Item 7. Management's Discussion and Analysis of 18
Financial Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data 30
Item 9. Changes in and Disagreements with Accountants 30
on Accounting and Financial Disclosure
Part III
- --------
Item 10. Directors and Executive Officers of the 31
Registrant
Item 11. Executive Compensation 33
Item 12. Security Ownership of Certain Beneficial 42
Owners and Management
Item 13. Certain Relationships and Related Transactions 44
Part IV
- -------
Item 14. Exhibits, Financial Statement Schedules and 44
Reports on Form 8-K
SIGNATURES 53
SUPPLEMENTAL INFORMATION 54
EXHIBIT INDEX 84
<PAGE>
PART I
Item 1. Business
GENERAL
- -------
Americold Corporation ("Americold" or the "Company"), the nation's
largest supplier of public refrigerated warehouse space, provides
integrated logistics services for the frozen food industry. These
services, consisting of warehousing and transportation management,
are provided through the Company's network of 49 refrigerated
warehouses in 17 states and through the Company's refrigerated
transportation management unit.
Americold, an Oregon corporation, was founded in 1911,
reincorporated in 1931 and, prior to 1984, operated as The Terminal
Ice and Cold Storage Company and, subsequently, Termicold
Corporation. In December 1982, Americold was acquired by Beatrice
Companies, Inc., which combined its public refrigerated warehouse
facilities, operating under various names, with Americold. In
December 1986, Americold was purchased (the "Acquisition") by a
private group consisting of affiliates of Kelso & Company, Inc.
("Kelso"), certain institutional investors, and certain key
employees and members of Americold's management (the "Management
Group").
As used herein, the terms "Americold" or the "Company" refer to
Americold Corporation and its subsidiary unless the context
indicates otherwise. All references to the fiscal year of the
Company refer to the year ended the last day of February.
COMPANY SERVICES
- ----------------
The Company provides frozen food manufacturers with refrigerated
warehousing and transportation management services. Integration of
these services allows frozen food manufacturers to contract on an
outsource basis with a single entity, the Company, for the
following services to coordinate and manage the distribution of
frozen food products:
Americold's Logistics Services
<TABLE>
<CAPTION>
Refrigerated Warehousing Services Transportation Management Services
- --------------------------------- ----------------------------------
<S> <C>
Storage Freight Optimization
Handling Freight Routing
Order Assembly Dispatching
Order Management Freight Rate Negotiation
Cross-Docking Backhaul Coordination
Blast Freezing/Tempering Freight Payment
Facility Leasing Freight Bill Auditing
Facility Operation Network Flow Management
Inventory Status Information Local/Store Door Delivery
Product Assembly/Packaging/Labeling Order Consolidation
Product Recalls Claims Management
Distribution Channel Assessment
</TABLE>
The Company offers these services both on a separate and an
integrated basis.
REFRIGERATED WAREHOUSING SERVICES
---------------------------------
Since its founding in 1911, the Company has grown to become the
largest owner and operator of refrigerated warehouses in the United
States. The Company supplies approximately 16% of the total
publicly-available freezer storage space in the country, based on
the most recent data (October 1995) published by the United States
Department of Agriculture and the data most recently prepared by
the International Association of Refrigerated Warehouses (the
"IARW").
Approximately 94% of the storage space operated by the Company is
freezer space (zero degrees Fahrenheit and below), with the
remaining space comprised of cooler space (28 degrees Fahrenheit
and above) and unrefrigerated dry storage space. Most of the
Company's warehouses may be classified as combination production
and distribution facilities, although some provide solely
production or distribution services. Production facilities differ
from distribution facilities in that they typically serve one or a
small number of customers located nearby. These customers store
large quantities of processed or partially processed products in
the facility until they are further processed or shipped to the
next stage of production or distribution. Distribution facilities
primarily serve customers of the Company's production warehouses
and other customers who store a wide variety of finished products
to support shipment to end-users, such as food retailers and food
service companies, in a specific geographic market.
The Company has implemented management operating systems and
performance standards in its warehouses. The Company's IBM AS400
warehouse management information system ties together into a single
network with common services all of the Company's locations. To
further integrate the Company's services, the Company also utilizes
a transportation management system which is fully integrated with
the Company's warehouse management system. The Company also offers
electronic data interchange to receive customer orders and to
transmit product flow and status information to its customers.
The Company has developed several services ancillary to its
warehouse freezer operations and intends to continue developing and
promoting such services as well as adding incremental freezer,
cooler or dry space. Ancillary services include product assembly/
packaging, palletizing, labeling and SUPERCOLD [registered
trademark symbol] freezer storage provided at 11 of Americold's
facilities for the preservation of products, such as ice cream,
which require storage at temperatures as low as 20 degrees below
zero (Fahrenheit).
TRANSPORTATION MANAGEMENT
-------------------------
Over the past several years, the Company has experienced increased
interest by customers in procuring transportation management
services from the Company. As a result, the Company has expanded
its focus to provide integrated warehousing and transportation
management services to the frozen food industry.
Transportation management services offered by the Company include
freight routing, dispatching, freight rate negotiation, backhaul
coordination, freight bill auditing, network flow management,
local/store door delivery, order consolidation and distribution
channel assessment. The Company also offers services that enable
customers to assess the most economical means to store and ship
frozen food products. The Company believes that its temperature-
controlled logistics expertise and access to both frozen food
warehouses and distribution channels will enable its customers to
respond quickly and efficiently to time-sensitive orders from
distributors and retailers using the Company's systems.
Since fiscal 1996, the Company has provided a broad range of
transportation management services to three subsidiaries of H. J.
Heinz Co. ("Heinz"). For each of the subsidiaries, the Company
manages the distribution of frozen food products from manufacturing
plants through distribution channels to the subsidiaries'
customers. In addition, for one of these subsidiaries, the Company
also manages the in-bound transportation of over 200 non-frozen
ingredients to the subsidiary's manufacturing plants.
In providing transportation management services, the actual freight
transportation is performed by carriers who have negotiated rates
with the Company. The Company does not own and does not intend to
own significant transportation equipment.
REVENUES AND CUSTOMERS
- ----------------------
Americold's net sales by services provided for fiscal 1995, 1996
and 1997 are detailed below by activity:
<TABLE>
<CAPTION>
NET SALES BY SERVICES PROVIDED
(Dollars in Millions)
Fiscal 1995 Fiscal 1996 Fiscal 1997
--------------- --------------- ---------------
Amount % Amount % Amount %
--------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Logistics
Warehousing
Storage $103.4 48.0% $107.6 38.5% $104.6 33.7%
Handling 70.7 32.9% 76.2 27.2% 80.5 25.9%
Leasing 7.0 3.3% 7.0 2.5% 6.3 2.0%
Freezing and other 11.4 5.3% 10.6 3.8% 9.8 3.1%
------ ------ ------ ------ ------ ------
192.5 89.5% 201.4 72.0% 201.2 64.7%
Transportation management services 18.0 8.3% 74.2 26.5% 104.6 33.7%
------ ------ ------ ------ ------ ------
Total logistics 210.5 97.8% 275.6 98.5% 305.8 98.4%
Other non-logistics 4.7 2.2% 4.2 1.5% 5.0 1.6%
------ ------ ------ ------- ------- -------
Total net sales $215.2 100.0% $279.8 100.0% $310.8 100.0%
====== ====== ====== ====== ====== ======
</TABLE>
Americold's customers consist primarily of national, regional and
local frozen food manufacturers, distributors, retailers and food
service organizations. Although the Company provides services to
approximately 2,500 customers, in fiscal 1997 the ten largest
customers accounted for approximately 72% of total net sales. One
customer of the Company, Heinz and subsidiaries, accounted for
approximately 48% or $149.9 million of the Company's net sales in
fiscal 1997. Substantially all of the Company's transportation
management services sales are attributable to Heinz. Subsequent to
the end of fiscal 1997, Heinz announced that Ore-Ida Foods, Inc.
("Ore-Ida"), a subsidiary, had entered into negotiations to sell
several of its plants to McCain Foods, Inc. ("McCain"). At certain
of these plants, the Company has long-term contracts with Ore-Ida
relating to the storage of product. While the Company is not able
to estimate the extent to which sales to McCain will replace sales
to Heinz, the Company expects the total percentage of the Company's
net sales to Heinz to decrease in fiscal 1998. See Item 7,
"Management's Discussion and Analysis of Financial Condition and
Results of Operations".
The Company believes that the risk to the Company of losing its
largest customers has been reduced in several cases through long-
term storage and operating agreements and by the fact that services
are provided to certain large customers in multiple locations. At
a number of facilities, particularly those located adjacent to
customers' processing facilities, a majority of, and in some cases
virtually all, business is attributable to a single user of the
facility. Management has observed in the past that to the extent
products produced at locations adjoining the Company's facilities
are commodities grown in the surrounding area, demand for the
products has been more significant to the long-term sales and
profitability of the facility than has been the viability of a
single producer.
SEASONALITY
- -----------
Warehousing sales are seasonal, depending upon the timing and
availability of crops grown for frozen food production and the
seasonal build-up of certain products for holiday consumption. The
third quarter, ending each November 30, normally represents the
strongest sales quarter. Capacity utilization at the Company's
facilities varies from season to season, with an average annual
capacity utilization of approximately 72%. The Company generally
keeps sufficient space available at individual warehouses to meet
peak season demand. The Company has experienced similar
seasonality in its transportation management business.
COMPETITION
- -----------
Americold operates in an environment in which breadth of service,
warehouse locations, customer mix, warehouse size, service
performance and price are the principal competitive factors. Since
frozen food manufacturers and distributors incur transportation
costs which typically are significantly greater than warehousing
costs, breadth of total logistics services and warehouse location
are major competitive factors. In addition, in certain locations,
customers depend upon pooling shipments, which involves combining
their products with the products of others destined for the same
markets. In these cases, the mix of customers in a warehouse can
significantly influence the cost of delivering products to markets.
The size of a warehouse is important because large customers prefer
to have all of the products needed to serve a given market in a
single location and to have the flexibility to increase storage at
that single location during seasonal peaks. The Company believes
that customers generally will select a warehouse facility based
upon the types of services available, service performance and
price, if there are several warehouse locations which satisfy its
transportation, customer mix and size requirements.
Competition is national, regional and local in nature. There are
no significant barriers to entry, permitting a relatively large
number of smaller competitors to enter the Company's markets. On
the national level, Americold competes with URS Logistics, Inc.
("URS"), Millard Refrigerated Services, United States Cold Storage,
Inc., and Carmar Freezers, which, according to statistics compiled
by the IARW in 1996, accounted for approximately 7.7%, 6.0%, 5.8%
and 3.2% of public freezer space, respectively, in calendar 1996.
On the regional and local level, there are many smaller warehouse
operators that compete with the Company. According to data
prepared by the IARW, warehouse operators who own or control less
than 35 million cubic feet each of refrigerated space or freezer
space accounted for approximately 65% of all public refrigerated
storage space in calendar 1996. The Company believes that
competition from these local and regional competitors is
significant because national competitors often do not compete in
the same markets as the Company.
The Company believes that if its strategy of providing fully
integrated warehousing and transportation management services is
successful, the ability to reduce customer's distribution costs
resulting from the economies of scale attendant to the movement of
large quantities of diverse products through its national network
of warehouses will create a marketing advantage not available to
smaller competitors. Other companies, such as GATX Corporation and
Exel Logistics, Inc., provide transportation management services
predominately to non-refrigerated shippers. URS provides services
similar to those provided by the Company, but the Company believes
that its position in the public refrigerated warehousing industry
combined with its combination of transportation management tools
and warehouse integration are unique.
Kelso holds approximately 57% of the common equity of URS and,
therefore, owns a controlling interest in both the Company and URS.
Kelso has implemented procedures intended to address possible
conflicts of interest that might arise from its investment in both
URS and the Company. Kelso had considered on a preliminary basis
the possibility of a business combination between the Company and
URS. However, there currently are no discussions between Americold
and URS. See Item 12, "Security Ownership of Certain Beneficial
Owners and Management."
ORGANIZATION
- ------------
The Company's operations are headquartered in Portland, Oregon.
The Company's warehouse facilities are organized into four
districts. Each district is managed by a District Manager to whom
the respective General Managers report. General Managers are
responsible for one to five warehouses and are supported at the
district and corporate levels by certain logistics, accounting,
marketing, engineering, data processing and operational functions.
The Company's transportation management services are managed from
the Company's headquarters.
SALES AND MARKETING
- -------------------
Sales responsibility at the Company resides primarily with district
and local management who are supported at the national level by the
Company's executive and sales and marketing staff. Marketing is
principally a corporate management function.
Local sales efforts are supplemented by the national corporate
sales, marketing and logistics departments, which supply sales
support, logistics analysis, account pricing guidance and
advertising, and monitor relationships with large district and
national accounts. The Company employs two sales managers and a
sales representative, all reporting to a director of sales in
Portland, Oregon. The sales managers are based in California and
Colorado, while the sales representative is based in Massachusetts.
The Company also employs a Senior Vice President, Logistics, based
in Portland.
In addition, a primary account manager and pricing contact is
assigned to each of the Company's top 100 accounts in order to
facilitate services for such customers. Certain customers storing
product in multiple facilities, but who are not among the Company's
top 100 accounts, are also offered similar contacts. It is the
responsibility of each warehouse's or group's management to
understand and be responsive to the needs of its individual
marketplace and to adapt sales efforts accordingly. Each General
Manager actively engages in the sales effort. Although the Company
operates nationally, prices charged by the Company tend to reflect
local market conditions.
The Company has promoted its logistics services to existing and
potential customers through consultations during which the Company
presents a range of potential logistics services to that customer.
Although the Company has primarily focused on its existing large
frozen food manufacturer customers, the Company is also currently
approaching retailers, distributors and smaller manufacturers to
offer the Company's network of warehouses and transportation
management services, which such customers may find more attractive
than developing their own logistics resources. The Company intends
to continue to emphasize integrated warehousing and transportation
management services and to pursue other customers who may wish to
outsource significant logistics responsibilities to Americold.
The majority of the Company's customers are billed on a monthly
basis for warehousing charges. Handling and first period storage
is billed upon receipt of the product. Recognition of one-half of
the handling revenue is deferred until the product is released.
Transportation management customers are generally billed on a
shipment by shipment basis.
EMPLOYEES
- ---------
The Company had approximately 2,117 employees as of February 28,
1997. A breakdown of employees by function is set forth below:
Employee Breakdown by Function
Number of Percentage
Function Employees of Total
- -------- --------- ----------
Warehousing Services 1,655 78.2%
Transportation Management Services 48 2.3%
Sales and Marketing 4 0.2%
Non-Logistics 28 1.3%
Administration (Warehouse and
Corporate) 382 18.0%
----- -----
Total 2,117 100.0%
===== =====
Approximately 706 of the Company's employees are covered by union
contracts. Currently, 21 facilities employ unionized labor, while
28 facilities are non-unionized. Union contracts for individual
locations are with the local chapters of national unions,
principally the International Brotherhood of Teamsters, and
generally have staggered expiration dates. During the past three
years, there has been one strike at one warehouse which lasted for
approximately four days. The Company believes its relationships
with its employees are satisfactory.
As a result of the anticipated continued expansion in
transportation management services, the transportation management
staff is expected to increase in fiscal 1998.
PATENTS, LICENSES AND TRADEMARKS
- --------------------------------
The Company's operations are not dependent upon any single or
related group of patents, licenses, franchises or concessions. The
Company's operations are also not dependent upon a single trademark
or service mark, although the Company has registered the Americold
[registered trademark symbol], SUPERCOLD [registered trademark
symbol] and FLOW-THRU [registered trademark symbol] service marks
with the United States Patent and Trademark Office.
RESEARCH AND DEVELOPMENT
- ------------------------
The Company believes that the refrigerated warehouse industry is
not one in which research and development has traditionally played
a significant role. The Company, however, has made significant
expenditures in developing its integrated warehousing and
transportation management services, including installing its
computer data processing support system which integrates modern
transportation management systems with the Company's warehouse
management system. The Company also continues to pursue methods of
reducing energy costs at its facilities.
ENVIRONMENTAL COMPLIANCE
- ------------------------
The Company's capital expenditures, earnings and competitive
position are not materially affected by compliance with federal,
state and local provisions which have been enacted or adopted to
regulate or otherwise protect the environment.
ITEM 2. PROPERTIES
As of the last day of February 1997, the Company's network of 49
refrigerated warehouse facilities in 17 states provided a total
storage capacity of approximately 245.0 million cubic feet
(compared to approximately 228.9 million cubic feet of storage
capacity as of the last day of February 1996). Included in the
Company's total storage capacity at February 28, 1997 is
approximately 4.2 million cubic feet of storage capacity added in
Pasco, Washington in September 1996; 2.9 million cubic feet of
storage capacity added in Burley, Idaho in October 1996; and 7.6
million cubic feet added in Fogelsville, Pennsylvania in February
1997. In addition, the Company completed in November 1996 the
construction of a new warehouse facility in Park Rapids, Minnesota,
which added approximately 1.9 million cubic feet. The Company is
also leasing 1.9 million cubic feet of warehouse space at Park
Rapids. Although negotiations for a joint venture ownership
structure for the Park Rapids property are underway, the Company
will continue to act as the operator of the facility. At the end
of their respective leases, the Company vacated in February 1997
its Chicago (S. Blue Island Avenue), Illinois facility and, in
March 1997, subsequent to the end of the fiscal year, its Kent,
Washington facility. The facilities totaled approximately 3.8
million cubic feet and were marginally profitable.
Although most of the facilities are owned by the Company, nine
facilities comprising approximately 7.8% of the Company's total
cubic feet of storage space are leased or subleased by the Company
under operating-type lease arrangements. In addition, four
facilities representing approximately 5.0% of the total cubic feet
of storage space are leased, in whole or in part, under
capitalized-type lease arrangements. Five facilities, or portions
thereof, representing approximately 8.2% of the total cubic feet of
storage space, are situated on leased land.
Capacity utilization at the Company's facilities varies from season
to season, with an average annual capacity utilization of
approximately 72%. All but seven of the Company's owned warehouses
are currently encumbered as security for the senior secured debt of
the Company.
The Company's facilities are typically single-story concrete or
insulated panel buildings constructed at dock height elevation,
with very heavy insulation and vapor barrier protection.
Refrigeration is generally supplied by screw-type compressors in
ammonia-based cooling systems. All facilities are served by truck
and all but seven are served by rail. Many facilities also have
room for expansion.
The following table lists the 49 refrigerated warehouse properties
owned or leased by the Company as of February 28, 1997. It also
shows the 31 facilities that presently secure the Company's first
mortgage bonds, and two facilities that presently secure the
mortgages payable.<PAGE>
<TABLE>
<CAPTION>
REFRIGERATED WAREHOUSE FACILITIES
Total
Storage Space Type of Owned or
(Cubic Ft./Mil) Facility<F1> Leased
--------------- -------- --------
<S> <C> <C> <C>
Burbank (W. Magnolia Blvd.), California 0.8 P/D Owned
Fullerton (S. Raymond Ave.), California 4.0 P/D Leased<F2>
Los Angeles (Corona St.), California 0.7 D Leased<F2>
Los Angeles (Jesse St.), California 2.7 P/D Owned<F5>
Pajaro (Salinas Rd.), California 0.7 P/D Leased<F2>
Turlock (5th St.), California 2.5 P/D Owned<F5>
Turlock (S. Kilroy Rd.), California 3.0 P/D Owned<F5>
Watsonville (W. Riverside Dr.), California 5.4 P/D Owned<F3><F5>
Watsonville (Second St.), California 1.4 P/D Leased<F2>
Denver (E. 50th St.), Colorado 2.8 P/D Owned<F3>/Leased<F4><F5>
Denver (N. Washington St.), Colorado 0.5 P/D Leased<F2>
Bartow (U. S. Highway 17), Florida 1.2 P/D Owned<F3><F5>
Plant City (S. Alexander St.), Florida 0.8 P/D Owned
Tampa (N. 50th St.), Florida 4.1 P/D Owned/Leased<F4>
Tampa (S. Lois Ave.), Florida 0.4 D Owned
Tampa (Shoreline Dr.), Florida 1.3 D Owned<F3>
Burley (U.S. Highway 30), Idaho 10.7 P/D Owned<F3><F6>
Nampa (4th St. N.), Idaho 8.0 P Owned<F5>
Rochelle (Americold Drive), Illinois 6.0 D Owned<F5>
Bettendorf (State St.), Iowa 8.9 P/D Owned<F5>
Fort Dodge (Maple Dr.), Iowa 3.7 D Owned<F5>
Kansas City (Inland Dr.), Kansas 35.2 P/D Owned<F5>
Portland (Read St.), Maine 1.8 P/D Owned
Boston (Widett Ci.), Massachusetts 3.1 P/D Owned<F5>
Gloucester (E. Main St.), Massachusetts 1.9 P/D Owned<F5>
Gloucester (Railroad Ave.), Massachusetts 0.3 P/D Owned<F5>
Gloucester (Rogers St.), Massachusetts 2.8 P/D Owned<F5>
Gloucester (Rowe Sq.), Massachusetts 2.4 P/D Owned<F5>
Watertown (Pleasant St.), Massachusetts 4.7 P/D Owned<F5>
Park Rapids (U. S. Hwy 71 S), Minnesota 3.8 P Owned/Leased<F2>
Grand Island (E. Roberts St.), Nebraska 2.2 P/D Leased<F2>
Brooks (Brooklake Rd.), Oregon 4.8 P Owned<F5>
Hermiston (Westland Rd.), Oregon 4.0 P Owned<F5>
Milwaukie (S. E. McLoughlin Blvd.), Oregon 4.7 D Owned<F5>
Ontario (N. E. First St.), Oregon 8.1 P Leased<F4><F6>
Salem (Portland Rd. N.E.), Oregon 12.5 P/D Owned<F5>
Woodburn (Silverton Rd.), Oregon 6.3 P/D Owned<F5>
Fogelsville (Mill Rd.), Pennsylvania 21.6 D Owned/Leased<F4><F5>
Murfreesboro (Stephenson Dr.), Tennessee 2.9 P/D Owned<F5>
Clearfield (South St.), Utah 8.6 P/D Owned<F5>
Burlington (S. Walnut), Washington 4.7 P/D Owned<F5>
Connell (W. Juniper St.), Washington 5.7 P Owned
Kent (S. 190th St.), Washington 1.0 D Leased<F2><F7>
Moses Lake (Wheeler Rd.), Washington 7.3 P/D Owned<F5>
Pasco (Industrial Way), Washington 6.7 P Leased<F2>
Walla Walla (4-14th Ave. S.), Washington 3.1 P Owned<F5>
Wallula (Dodd Rd.), Washington 1.2 P/D Owned<F5>
Plover (110th St.), Wisconsin 9.4 P/D Owned<F5>
Tomah (Route 2), Wisconsin 4.6 P Owned<F5>
-----
245.0
=====
- ----------------------
<FN>
<F1> "P" designates a production facility.
"D" designates a distribution facility.
"P/D" designates a facility that is used for both production and distribution.
<F2> Operating lease.
<F3> Building owned by the Company; land is leased.
<F4> Capitalized lease.
<F5> Security for Company's first mortgage bonds. See Note 7 to Consolidated Financial Statements as of
the last day of February 1996 and 1997.
<F6> Security for mortgage payable.
<F7> Lease expired March 1997.
/TABLE
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
In a declaratory judgment action brought against Non-Stop Logistics
Corporation ("Non-Stop") by the Company, the Company sought certain
rights to software pursuant to a letter agreement with Non-Stop,
and Non-Stop asserted various claims for damages to its business,
lost business opportunities and lost profits, and asserted breaches
of the letter agreement and a confidentiality agreement. On
February 27, 1997, the Bankruptcy Judge (the "Judge") filed an
order deciding certain of the claims at issue.
The Judge ruled that the Company did not breach the letter
agreement with Non-Stop, but that Non-Stop breached the exclusivity
provisions of the agreement by offering licenses to persons in the
United States. Under the ruling, the Company was excused from
further performance under the letter agreement. The Judge also
ruled that while the Company had the conditional exclusive right to
use Non-Stop's services as they apply to frozen and refrigerated
foods in the United States, the Company did not have the right to
obtain Non-Stop's computer software source codes or object codes.
Furthermore, the Judge rejected all but one of Non-Stop's claims
that the Company breached the confidentiality agreement.
The Judge has enjoined one Company executive from working on any
third-party logistics system for the Company that competes with
Non-Stop's system. Non-Stop's request for an injunction preventing
the Company from developing an alternative logistics forecasting
system was denied. The Company does not believe Non-Stop's claim
for damages for the Company's breach of the confidentiality
agreement, which is being tried separately in the Bankruptcy Court
in May 1997, is material.
Non-Stop's counterclaim for intentional interference with
prospective business relations has been severed and reserved for a
later jury trial in District Court. Non-Stop has not yet specified
what damages it will seek on this claim. In earlier phases of the
dispute, however, Non-Stop has claimed damages to its business
ranging from $6.0 million to $33.0 million. Asserting that it
would bring a claim in connection with the trial on its
interference claim, Non-Stop withdrew a claim for damages of more
than $4.0 million from the damages trial related to the
confidentiality agreement. Trial on Non-Stop's claim for
intentional interference will not take place before the fall of
calendar 1997. The Company believes that the interference claim is
without merit and will vigorously defend that claim.
Americold Services Corporation ("ASC"), a wholly owned subsidiary
of the Company, has been sued by Beatrice Associates ("Beatrice")
in the United States District Court for the Northern District of
Illinois. Beatrice owns the building at 1550 South Blue Island
Avenue, Chicago, Illinois, that ASC leased until January 1997.
Beatrice claims that ASC breached the lease by failing to return
the building in the condition required by the lease. Although
Beatrice's complaint does not state the damages it is seeking, it
has since indicated that its damages exceed $5.0 million.
Discovery is ongoing. No trial date has been set. ASC intends to
defend this action vigorously.
From time to time, the Company has been involved in litigation
relating to claims arising out of its operations in the regular
course of business. As of May 1, 1997, the Company was not a party
to any legal proceedings, the outcome of which would, in
management's opinion, have a material adverse effect on the
Company's results of operations or financial position.
The Company maintains property, liability and warehouseman's legal
liability insurance in amounts which it believes are consistent
with industry practice and adequate for its operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted by the Company to a vote of stockholders
during the fourth quarter of fiscal 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MARKET INFORMATION
- ------------------
The Company's common stock is not listed on a securities exchange
or traded through an inter-dealer quotation system. There is no
established public trading market for the Company's common stock.
However, there are occasional trades through certain
broker/dealers.
STOCKHOLDERS
- ------------
As of May 1, 1997, there were 4,995,556 shares of the Company's
common stock outstanding, held by approximately 82 stockholders of
record. See also Part III, Item 12, "Security Ownership of Certain
Beneficial Owners and Management".
DIVIDENDS
- ---------
No dividends have been declared by the Company on its common stock
since the Acquisition. The Company's credit agreements restrict
the payment of dividends on common stock, and it is the present
policy of the Board of Directors that all available cash be used
for the reduction of debt and for reinvestment in the Company's
business.
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected historical financial
information. The information should be read in conjunction with
the Company's Consolidated Financial Statements and related Notes,
and Management's Discussion and Analysis of Financial Condition and
Results of Operations as furnished below in Part II, Item 8 and
Item 7, respectively. Dollars are in thousands, except per share
data.
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
last day last day last day last day last day
of of of of of
February February February February February
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales $ 196,130 $ 198,887 $ 215,207 $ 279,788 $ 310,767
Income (loss) before extraordinary
item and cumulative effect of
accounting principle changes (8,150) (11,039) 5,564 (8,080) (6,540)
Extraordinary item, net of income
tax benefit - (1,848) - (1,794) -
Cumulative effect of accounting
principle changes - (64,234) - - -
Net income (loss) (8,150) (77,121) 5,564 (9,874) (6,540)
Income (loss) per share:
Income (loss) before extraordinary
item (1.80) (2.39) 1.00 (1.80) (1.46)
Extraordinary item - (.38) - (.37) -
Cumulative effect of accounting
principle changes - (13.23) - - -
Net income (loss) per common share (1.80) (16.00) 1.00 (2.17) (1.46)
Cash dividends declared per
common share - - - - -
Balance Sheet Data:
Total assets $ 490,151 $ 528,703 $ 544,595 $ 526,992 $ 531,034
Long-term debt 443,003 467,337 442,912 461,667 465,834
Preferred stock 4,773 5,348 5,789 5,771 5,753
Common stockholders' deficit (25,175) (102,577) (97,747) (107,440) (113,709)
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
- ------------
This document contains certain "forward-looking" statements as such
term is defined in the Private Securities Litigation Reform Act of
1995 relating to the Company that are based on the beliefs of the
Company's management as well as assumptions made by and information
currently available to the Company's management. When used in this
document, the words "expect", "believe", "estimate", "intend" and
"anticipate" and words or phrases of similar import, as they relate
to the Company or Company's management, are intended to identify
"forward-looking" statements. Such statements should be considered
in the context of the current risks, uncertainties and assumptions
related to certain factors including, without limitation,
substantial leverage, net losses, restrictions imposed by debt
agreements, substantial payment obligations, dependence on
significant customers, expansion of transportation management
services, dependence on agricultural markets and frozen foods and
competitive factors, as well as the factors discussed in Exhibit 99
hereto, which is incorporated herein by reference. Should any one
or more of these risks or uncertainties materialize, or should any
underlying assumptions prove incorrect, actual results may vary
materially from those described herein as expected, believed,
estimated, intended or anticipated.
OVERVIEW
- --------
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.
DEVELOPMENT OF TRANSPORTATION MANAGEMENT SERVICES - Over the
past several years, the Company has experienced increased interest
by customers in procuring transportation management services. In
this regard, the Company entered into arrangements in the first
half of fiscal 1996 pursuant to which it provides such services to
three subsidiaries of one large customer. Transportation
management services provided to these three customers account for
substantially all of the Company's transportation management
revenues in fiscal 1996 and 1997. The Company has made proposals
to offer similar services to certain other potential customers by
emphasizing its full-service logistics expertise and warehouse
industry position which enable customers to obtain services to
support the distribution of frozen food products from a single
provider. The Company believes that its transportation management
activities may lead to stronger customer relationships and
increased revenues in the higher-margin warehousing business.
As the Company does not invest in or own transportation equipment,
the Company has entered into contracts with independent carriers to
provide freight transportation at negotiated rates. Accordingly,
the margins that the Company earns in providing transportation
management services are lower than for its warehousing services.
DEVELOPMENT OF REFRIGERATED 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 33.7 million
cubic feet of storage capacity in six locations. Two of such
facilities became operational in fiscal 1995, three in fiscal 1996
and one in fiscal 1997. Three additional facilities were expanded
in fiscal 1997. The 33.7 million cubic feet increase, net of
warehouse closures discussed below, represents an 7.1% increase in
available warehouse space.
Since August 1994, the Company has reduced the amount of available
refrigerated warehouse space by approximately 17.7 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 four other operating leases. The
Company expects that the effects of the closure of these
facilities, which are considered non-strategic, will have a
positive effect on future gross operating margin as a percentage of
net sales.
PREPACKAGED BANKRUPTCY - During the first quarter of fiscal
1996, the Company solicited acceptance of 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 on such indebtedness from May 1997 to
November 2007 and to adjust certain restrictive financial covenants
and certain other provisions contained in an agreement with one of
its principal lenders. Each holder of the Company's 11% Senior
Subordinated Debentures due 1997 ("11% Debentures") received a
corresponding amount of the Company's new 15% Senior Subordinated
Debentures due 2007 ("15% Debentures") at par, plus accrued but
unpaid interest. 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.
For fiscal 1996 and 1997, the Company incurred approximately $7.3
million and $0.8 million, respectively, in reorganization fees and
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 repurchase of $10.0 million in principal amount of the
Company's 11.45% First Mortgage Bonds, Series A due 2002 (the
"Series A Bonds") in the Prepackaged Bankruptcy resulted in an
extraordinary loss, net of taxes, of approximately $1.8 million in
fiscal 1996.
OFFERING OF SENIOR SUBORDINATED NOTES - On April 9, 1996, the
Company sold $120.0 million aggregate principal amount of the
Company's 12.875% Senior Subordinated Notes due 2008 (the "12.875%
Notes"). The Company used $115.0 million of the proceeds to redeem
at par on May 9, 1996 all of the 15% Debentures.
EFFECT OF THE ACQUISITION - In December 1986, Kelso, certain
institutional investors and the Management Group purchased the
Company. The Company's operating results and cash flow have been
and will continue to be materially affected by the indebtedness
incurred to finance the Acquisition. For fiscal 1996 and 1997,
interest expense, principally related to debt incurred to finance
the Acquisition, totaled $56.6 million and $56.7 million,
respectively.
HISTORICAL INCOME STATEMENT INFORMATION
- ---------------------------------------
The following table sets forth, for the fiscal years ended the last
day of February 1995, 1996 and 1997, respectively, certain
consolidated financial data for the Company, expressed as a
percentage of net sales, and the percentage changes in the dollar
amount as compared to the prior period.
<TABLE>
<CAPTION>
Percentage of Net Sales Period-to-Period
Change
Last Day of February -------------------
----------------------------- 1995 to 1996 to
1995 1996 1997 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 30.0% 11.1%
Cost of sales 64.2% 69.7% 73.6% 41.1% 17.4%
Amortization of cost in excess
of net assets acquired 1.2% 1.0% 0.8% 9.4% (9.6)%
Selling and administrative
expenses 12.1% 10.2% 10.0% 9.9% 9.2%
Employee stock ownership plan
expense 0.3% 0.3% 0.2% 0.0% (33.3)%
Gross operating margin 22.2% 18.8% 15.4% 10.4% (9.4)%
Interest expense 25.7% 20.2% 18.2% 2.3% 0.1%
Amortization of debt issuance
costs 0.6% 0.3% 0.4% (24.5)% 22.9%
Income (loss) before income taxes
and extraordinary item 5.0% (4.1)% (2.9)% (206.6)% 20.5%
Provision (benefit) for income taxes 2.4% (1.2)% (0.8)% (165.5)% 24.0%
Income (loss) before extraordinary
item 2.6% (2.9)% (2.1)% (245.2)% 19.1%
Extraordinary item, net
of income tax benefit (0.0)% (0.6)% (0.0)% N/M N/M
Net income (loss) 2.6% (3.5)% (2.1)% (277.5)% 33.8%
N/M = Not meaningful
</TABLE>
RESULTS OF OPERATIONS
- ---------------------
NET SALES - The Company's net sales increased 11.1% from
$279.8 million for fiscal 1996 to $310.8 million for fiscal 1997,
reflecting a substantial increase in transportation management
sales as well as a 0.1% decrease in warehousing sales.
Warehousing sales decreased from $201.4 million for fiscal 1996 to
$201.2 million for fiscal 1997, principally due to a 2.8% decrease
in storage revenue. Storage revenue decreased due to a decrease in
storage volume from approximately 1.56 billion pounds stored on
average per month for fiscal 1996 to approximately 1.51 billion
pounds stored on average per month for fiscal 1997. Storage volume
decreased 0.04 billion pounds stored on average per month for
fiscal 1997 due to the closure of the Company's operations at four
warehouse locations during the third quarter of fiscal 1996 and
decreased 0.11 billion pounds at the continuing locations. The
increase in storage volumes at the three facilities that were added
in fiscal 1996 of 0.05 billion pounds stored on average per month
and of 0.06 billion pounds stored on average per month for the
fiscal 1997 additions helped offset such decreases. The Company's
storage levels in fiscal 1997 were affected by the wet spring
weather, primarily in the Northwest, which reduced or delayed the
receipt of product, especially fruits and vegetables. In addition,
due to the high price of fresh potatoes in late spring calendar
1996, potato processors extended their downtime, which reduced
warehouse receipts and storage volumes at certain warehouses.
Handling revenue increased 5.6% from $76.2 million for fiscal 1996
to $80.5 million for fiscal 1997, resulting primarily from a 3.5%
increase in volume of product handled, further affected by price
increases and changes in product mix. For fiscal 1996, 20.9
billion pounds of product were handled by the Company compared with
21.6 billion pounds during fiscal 1997. The three new facilities
added in fiscal 1996 handled an increase of approximately 0.4
billion pounds of product during fiscal 1997, while the continuing
locations handled an increase of approximately 0.1 billion pounds
of product. The fiscal 1997 additions handled approximately 0.6
billion pounds of product, which helped offset the approximately
0.4 billion pounds of product handled during fiscal 1996 at the
four closed facilities. The increase in handling volume relative
to storage volume is likely to continue as long as the Company's
customers are able to successfully operate with lower inventories.
The Company anticipates that vegetable processors will continue to
maintain lower inventories during early fiscal 1998. Expected
storage levels for potatoes and other items for fiscal 1998 are
also expected to be lower than the prior year. Overall, the
Company anticipates that revenues and storage volumes at the
existing facilities will be lower in the first two quarters of
fiscal 1998 as compared to the same period in fiscal 1997. The
Company expects such decrease will be offset in part by sales and
storage volumes contributed by the new warehouse properties,
including expansions, added in the third and fourth quarters of
fiscal 1997.
Transportation management sales increased 41.0% from $74.2 million
for fiscal 1996 to $104.6 million for fiscal 1997, due to the
outsourcing to the Company of additional transportation management
responsibilities by three customers in the first half of fiscal
1996.
Other non-logistics sales (quarry sales) increased 19.0% from $4.2
million for fiscal 1996 to $5.0 million for fiscal 1997.
Net sales increased 30.0% from fiscal 1995 to fiscal 1996. The
increase in warehousing sales was primarily the result of increases
in storage and handling revenue due to the increased storage prices
and changes in mix along with increased handling volumes.
Transportation management sales increased 312.2% in fiscal 1996 due
to the outsourcing to the Company of significant additional
transportation management responsibilities.
COST OF SALES - Cost of sales increased 17.4% from $194.5
million for fiscal 1996 to $228.8 million for fiscal 1997. The
increased volume of transportation management services, which
required increases in transportation capacity purchased from
carriers and the addition of new employees, resulted in an
approximately $29.8 million increase in cost of sales. In
addition, cost of sales increased by approximately $3.3 million as
a result of increased warehouse labor and related fringe benefits.
A portion of the increased cost of sales was due to the increased
handling volume offset by a decrease of approximately $2.2 million
as the net result of the new warehouse openings and closings.
During fiscal 1997, the Company also experienced operational
difficulties at two of the Company's warehouse facilities due to
higher than anticipated warehouse storage volumes and changes in
product mix, which resulted in increased labor expense. The
Company believes such difficulties have been resolved at one
location and good progress made at the other.
Cost of sales as a percentage of net sales increased from 69.7% for
fiscal 1996 to 73.6% for fiscal 1997, as handling and
transportation management sales, which each have high variable cost
requirements, increased from 53.7% of net sales in the prior period
to 59.6% in the more recent period.
As the Company does not invest in or own transportation equipment,
the Company has entered into contracts with independent carriers to
provide freight transportation at negotiated rates. Accordingly,
the margins that the Company earns in providing transportation
management services are lower than its warehousing services. The
Company believes, however, that its transportation management
activities may lead to stronger customer relationships and
increased revenues in the higher-margin warehousing business.
Cost of sales increased 41.1% from fiscal 1995 to fiscal 1996 as a
result of the increased transportation management sales.
SELLING AND ADMINISTRATIVE EXPENSES - Selling and administrative
expenses increased 9.2% from $28.5 million for fiscal 1996 to $31.1
million for fiscal 1997. The increase primarily reflects an
increase of approximately $1.3 million in salaries and related
fringe benefits and $0.8 million in professional fees. Selling and
administrative expenses as a percentage of net sales decreased from
10.2% in fiscal 1996 to 10.0% in fiscal 1997 due to the increase in
transportation management sales which did not require a
corresponding increase in selling and administrative expenses.
Selling and administrative expenses increased 9.9% from $26.0
million for fiscal 1995 to $28.5 million for fiscal 1996. The
increase primarily reflects an increase of approximately $1.4
million in salaries and related fringe benefits in the more recent
period.
GROSS OPERATING MARGIN - As a result of the factors discussed
above, gross operating margin decreased 9.4% from $52.8 million for
fiscal 1996 to $47.9 million for fiscal 1997.
Gross operating margin increased 10.4% from $47.8 million for
fiscal 1995 to $52.8 million for fiscal 1996 as a result of the
increased warehouse business and transportation management sales.
INTEREST EXPENSE - Interest expense increased slightly from
$56.6 million for fiscal 1996 to $56.7 million for fiscal 1997 as
a result of the defeasance requirements related to the issuance in
April 1996 of $120.0 million of the Company's 12.875% Notes.
Proceeds from the issue were used in May 1996 to redeem at par all
$115.0 million of the Company's outstanding 15% Debentures. Under
the terms of the applicable indenture, the 15% Debentures remained
outstanding for a period of thirty (30) days following issue of the
12.875% Notes, accounting for a major portion of the increase in
interest expense. Excluding the increased cost due to the
defeasance, interest expense decreased due to lower overall
interest rates experienced by the Company despite slightly higher
overall borrowings.
Interest expense increased from $55.3 million in fiscal 1995 to
$56.6 million for fiscal 1996 as a result of higher overall
interest rates.
GAIN ON INSURANCE SETTLEMENT - The one-time gain in fiscal
1995 of approximately $17.0 million reflects an insurance
settlement related to the Company's settlement with the Company's
insurance carriers of its first party claims for business
interruption losses, property damage and out-of-pocket expenses
incurred with respect to a fire in one of its facilities in fiscal
1992.
REORGANIZATION EXPENSES - Reorganization expenses in fiscal
1996 of approximately $7.3 million reflect the expenses incurred
for professional services related to the Prepackaged Bankruptcy
including investment banking, accounting and legal fees. The
Company incurred reorganization expenses in fiscal 1997 of
approximately $0.8 million as a result of the settlement of the
lease rejection claim related to the Chicago, Illinois facility,
and the cost of professional services related to the Non-Stop
litigation in the Prepackaged Bankruptcy. See Section 3, "Legal
Proceedings".
INCOME (LOSS) - The Company's loss before income taxes and
extraordinary item for fiscal 1996 was $11.5 million, compared to
a loss of $9.1 million for fiscal 1997. The decreased loss in
fiscal 1997 is due to the approximately $7.4 million of
reorganization expense incurred in fiscal 1996 offset in part by
the lower gross operating margin realized in fiscal 1997.
The Company's income before income taxes and extraordinary item for
fiscal 1995 was $10.8 million compared to a loss of $11.5 million
in fiscal 1996, primarily the result of the insurance settlement
and the reorganization expenses referred to above.
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 in fiscal 1996.
INFLATION - The Company's operations have not been, nor are
they expected to be, materially affected by inflation or changing
prices.
NEW ACCOUNTING STANDARDS - Effective March 1, 1996, the
Company adopted Financial Accounting Standard Board Statement of
Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." This statement generally requires assessment of
recoverability of an asset after events or circumstances that
indicate an impairment to the asset and its future cash flows. Any
impairment loss would be recognized as a one-time charge to
earnings affecting results of operations, but would not affect the
cash flow of the Company. There was no impairment loss to report
upon adoption.
Effective March 1, 1996, the Company adopted Financial Accounting
Standards Board Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS No. 123").
SFAS No. 123 requires that, except for transactions with employees
that are within the scope of Accounting Principles Board Opinion
No. 25 ("APB No. 25"), all transactions in which goods or services
are the consideration received for the issuance of equity
instruments are to be accounted for based on the fair value of the
consideration received or the fair value of the equity instrument
issued, whichever is more reliably measurable. However, it also
allows an entity to continue to measure compensation costs for
those plans using the intrinsic value based method of accounting
prescribed by APB No. 25. Entities electing to follow the
accounting methods of APB No. 25 must make pro forma disclosures of
net income and, if presented, earnings per share, as if the fair
value method of accounting defined in SFAS No. 123 had been
applied.
Pro forma disclosures required for entities that elect to continue
to measure compensation cost using APB No. 25 must include the
effects of all awards granted in fiscal years that begin after
December 15, 1994. The Company has elected to continue using APB
No. 25 and make the necessary SFAS No. 123 pro forma disclosures.
See Note 9 of Notes to Consolidated Financial Statements as of the
last day of February 1996 and 1997.
The Company has not implemented the requirements of Financial
Accounting Standards Board Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS No. 128"), although
it will be required to do so for fiscal years beginning March 1,
1997 and thereafter. This Statement establishes a different method
of computing net income per share than is currently required under
the provisions of Accounting Principles Board Opinion No. 15.
Under SFAS No. 128, the Company will be required to present both
basic net income per share and diluted net income per share. The
Company estimates that the adoption of SFAS No. 128 will not have
a material impact on its income per share.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company believes it has sufficient liquidity and capital
resources to meet its needs related to the payment of interest
expense, the continued operation and maintenance of its warehouses,
the continued operation and planned expansion of its transportation
management business and to fund limited growth in warehouse
investments. Anticipated growth in the volume of transportation
management services is not expected to consume significant capital
resources. Although the Company's internal resources for new
warehouse acquisition or construction are limited, the Company has
arranged for up to $25.0 million in lease financing for new
warehouse capacity from a finance company (the "Lease Line") of
which approximately $7.3 million remained unused at February 28,
1997. See " - Capital Resources." While the Company currently has
no projects in progress, the Company plans to finance its warehouse
expansion program principally through lease financing, and the
Company believes it has the ability to finance any fiscal 1998
expansion projects from the Lease Line, similar lease financing or
mortgage financing. In light of the significant debt obligations
due between fiscal 2000 and fiscal 2008, the Company continues to
need to increase operating cash flow and seek external sources for
refinancing. To the extent such operating cash flow growth will
result from warehouse capacity growth, the Company will also be
required to obtain additional sources of financing.
LIQUIDITY
- ---------
OPERATING CASH FLOW - Net cash flow from operating activities,
representing cash provided from operations, is used to fund capital
expenditures and meet debt service requirements. Operating cash
flow reported for any one period is sensitive to the timing of the
collection of receivables and the payment of payables.
Net cash flow from operating activities as reported in the
Company's consolidated financial statements increased from $12.6
million for fiscal 1996 to $18.9 million for fiscal 1997. The
increase is due to the reduction in reorganization fees and
expenses associated with the Prepackaged Bankruptcy. The Company's
operating cash flow would have been $19.9 million for fiscal 1996
and $19.6 for fiscal 1997 without reorganization fees and expenses
of $7.3 million and $0.8 million, respectively. Funds provided
from operations (gross operating margin plus depreciation,
amortization and employee stock ownership plan expense) for fiscal
1995, 1996 and 1997 totaled $71.6 million, $76.6 million and $72.1
million, respectively. Interest expenses, net of amortization of
original issue discount, totaled $54.0 million, $56.2 million and
$56.7 million, respectively. As a result of increased taxable
earnings and the reversal of deferred tax liabilities, the Company
anticipates that cash tax payments will increase. See Note 11 of
Notes to Consolidated Financial Statements as of the last day of
February 1996 and 1997.
WORKING CAPITAL - The Company's working capital position at
fiscal 1997 year end was a negative $12.5 million. This position
compares to $3.2 million at fiscal 1996 year end. Working capital
was reduced in fiscal 1997 due to the funding of approximately
$22.4 million of warehouse expansions.
The Company's typical negative working capital position has not
historically affected its ability to meet its cash operating needs.
The Company, however, in fiscal 1995 experienced a shortfall in
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. See " - Overview -
Prepackaged Bankruptcy".
CAPITAL RESOURCES
- -----------------
The credit agreement ("Bank 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 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 Bank Credit Agreement. The Bank
Credit Agreement, which matures on February 28, 1999, requires two
30-day resting periods (during which there may be no outstanding
borrowings) during each of fiscal 1998 and fiscal 1999. The Bank
Credit Agreement also contains certain restrictive covenants,
including financial covenants.
Based on eligible accounts receivable as of February 28, 1997, the
Company had an available credit line of $23.1 million, of which
$8.7 million was used for letters of credit, principally related to
leasing commitments and workers' compensation reserves. No cash
borrowings were outstanding.
The Lease Line was used to finance, subject to meeting certain
conditions, the construction or acquisition of new warehouses or
the expansion of existing warehouses which were not pledged as
collateral security for senior debt. While the Lease Line
commitment was originally intended to expire December 31, 1996,
based on discussions with the lender, the commitment expiration
date is expected to be extended into the second quarter of fiscal
1998. In addition, the Lease Line is expected to be increased by
approximately $10.0 million, to an available total of $17.3
million, in order to allow for the planned sale/leaseback of an
existing facility. The first funding of approximately $5.7 million
closed in late fiscal 1996 with respect to the Company's Grand
Island, Nebraska facility. The Company also funded $12.0 million
for the financing of the Pasco, Washington facility under the Lease
Line during November 1996. In October 1996, the Company financed
the Burley, Idaho facility expansion through a mortgage with its
primary bank.
The Company was notified that in December 1996, the Metropolitan
Life Insurance Company (the "Met") sold its entire $140.0 million
holdings of the Company's Series A Bonds. As a result of such
transaction, the Second Amended and Restated Investment Agreement,
dated May 9, 1995, between the Met and the Company, which included
certain financial covenants and other restrictive covenants, was
terminated.
On April 9, 1996, the Company sold $120.0 million aggregate
principal amount of the Company's 12.875% Notes. The interest rate
on the 12.875% Notes can be increased from 12.875% to 13.875% if
the 12.875% Notes are not rated "B- or higher" by Standard &
Poor's, and "B3 or higher" by Moody's Investor Services, by
November 1, 1997. The 12.875% Notes have been rated "B-" by
Standard & Poor's since they were issued, and as of May 1, 1997,
"Caa" by Moody's Investor Services.
CAPITAL EXPENDITURES - Expenditures for property, plant and
equipment for fiscal 1997 totaled $33.6 million, of which
approximately $26.1 million related to warehouse expansions. Of
the $26.1 million, all but approximately $3.7 million of the
expenditures were funded from net cash flow from operations.
The Company has no expansion projects in progress. The Company
plans to finance its warehouse expansion program principally
through lease financing or mortgage financing.
Expenditures, including capital leases, for property, plant and
equipment for fiscal years 1995, 1996 and 1997 totaled $14.3
million, $35.0 million and $33.6 million, respectively, as
summarized in the following table:
Historical Capital Expenditures
(In Millions)
<TABLE>
<CAPTION>
Fiscal Year Ended Last
Day of February
----------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Routine replacements/betterments $ 5.5 $ 3.9 $ 5.0
Revenue enhancements or cost reductions 1.9 4.4 2.7
Expansions 6.9 26.7 26.1
----- ----- -----
Total $ 14.3 $ 35.0 $ 33.8
===== ====== =====
Cash Portion of Capital Expenditures<F1> $ 13.2 $ 34.2 $ 33.6
===== ===== =====
<FN>
<F1> The cash portion of capital expenditures for all periods was funded from escrow funds available
under the Bond Indenture, mortgage payable and net cash flow from operations. The non-cash portion of
capital expenditures was funded from capital leases.
</TABLE>
SUBSEQUENT EVENT - Subsequent to the end of fiscal 1997,
Heinz announced that it had entered into negotiations to sell
several potato processing plants of Ore-Ida to McCain. The sale is
expected to close in mid-calendar 1997. While the Company is not
able to estimate the extent to which sales to McCain will replace
sales to Heinz, the Company expects the total percentage of the
Company's net sales to Heinz will decrease in fiscal 1998.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements as of the last day
of February 1996 and 1997 and related information listed below, are
set forth on pages 56 through 83 of this report.
TITLE PAGE
--------- ----
Independent Auditors' Report 55
Consolidated Balance Sheets as of the last day 56
of February 1996 and 1997
Consolidated Statements of Operations for years 58
ended the last day of February 1995, 1996 and
1997
Consolidated Statements of Common Stockholders' 59
Deficit for years ended the last day
of February 1995, 1996 and 1997
Consolidated Statements of Cash Flows for years 60
ended the last day of February 1995, 1996 and
1997
Notes to Consolidated Financial Statements as 62
of the last day of February 1996 and 1997
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of Americold as of May 1, 1997
are as follows:
NAME AGE TITLE
---- --- -----
Ronald H. Dykehouse 55 Chairman of the Board, President
and Chief Executive Officer
Joel M. Smith 53 Senior Vice President, Chief
Financial Officer and Director
John P. LeNeveu 50 Executive Vice President,
Operations and Sales
F. Stanley Sena 48 Executive Vice President,
Transportation and Distribution
Logistics
J. Roy Coxe 56 Senior Vice President,
Logistics
Ronald A. Nickerson 60 Vice President, Operations
Lon V. Leneve 40 Vice President and Treasurer
Frank Edelstein 71 Director
George E. Matelich 40 Director
James C. Pigott 60 Director
William A. Marquard 76 Director
RONALD H. DYKEHOUSE was named President of Americold
Corporation in May 1990 and Chairman of the Board and Chief
Executive Officer in June 1990. Mr. Dykehouse is a past director
of the National Frozen Foods Association and past Chairman of the
American Frozen Food Institute.
JOEL M. SMITH has been Senior Vice President and a director of
the Company since December 1986. Mr. Smith has been the Chief
Financial Officer of Americold since 1978 and a Vice President
since 1984. In April 1996, Mr. Smith was elected a director of the
IARW.
JOHN P. LENEVEU was named Executive Vice President, Operations
and Sales of Americold in July 1995. From July 1991 to 1995, he
was Senior Vice President, Operations and Sales.
F. STANLEY SENA was named Executive Vice President,
Transportation and Distribution Logistics of the Company in July
1995. From August 1991 to 1995, he was Senior Vice President,
Administration and Technical Services of the Company. Since 1994,
Mr. Sena has been a board member of the International Frozen Food
Association.
J. ROY COXE was named Senior Vice President, Logistics, of
Americold in December 1993. From 1991 to 1993, he was a management
consultant with A. T. Kearney, Inc., an international management
consulting company.
RONALD A. NICKERSON has been Vice President, Operations since
1990.
LON V. LENEVE was named Vice President in September 1992 and
has been Treasurer of Americold since July 1988.
FRANK EDELSTEIN was elected a director of the Company in 1986.
He is currently a consultant to both Kelso and the Gordon+Morris
Group, Inc., an investment banking firm. Mr. Edelstein joined
Kelso in 1987 and held the position of Vice President at Kelso
until 1992. Mr. Edelstein is also a director of Ceradyne, Inc.,
IHOP Corporation and Arkansas Best Corporation.
GEORGE E. MATELICH has been a director of the Company since
December 1986. Mr. Matelich is currently a Managing Director of
Kelso.
JAMES C. PIGOTT was elected a director of Americold in June
1987. He is President of Pigott Enterprises, Inc., a private
investment company. Mr. Pigott has been Chairman of the Board and
Chief Executive Officer of Management Reports and Services, Inc.,
an accounting consulting firm since 1987. Mr. Pigott's other
business activities include membership on the Board of Directors of
PACCAR, Inc.
WILLIAM A. MARQUARD was elected a director of Americold in
June 1987. Mr. Marquard is a director of Treadco, Inc., Mosler,
Inc., Earle M. Jorgenson Holding Company, Inc., Earle M. Jorgenson
Company, Arkansas Best Corporation and Best Holding Corporation.
He is also Vice Chairman of the Board of Directors of Kelso.
All directors hold office until the next annual meeting of
shareholders of the Company or until their successors have been
elected and qualified. The executive officers of the Company are
chosen by the Board and serve at its discretion.
For their services on the Board of Directors of the Company,
Messrs. Pigott, Marquard and Edelstein are paid $16,000 per year.
Mr. Pigott receives $1,000 per year as Chairman of the Company's
Audit Committee. Messrs. Pigott, Marquard and Edelstein also
receive $600 per meeting attended. Directors who are also officers
of the Company and Mr. Matelich do not receive additional
compensation as directors of the Company. Directors are reimbursed
for out-of-pocket expenses incurred in connection with attendance
at meetings.
The Compensation Committee for fiscal 1997 consisted of Mr.
Matelich, Mr. Marquard and Mr. Pigott. The Audit Committee for
fiscal 1997 consisted of Mr. Matelich, Mr. Edelstein and Mr.
Pigott.
On December 23, 1992, Kelso and its chief executive officer,
without admitting or denying the findings contained therein,
consented to an administrative order in respect of a Securities and
Exchange Commission (the "Commission") inquiry relating to the 1990
acquisition of a portfolio company by a Kelso affiliate. The order
found that Kelso's tender offer filing in connection with the
acquisition did not comply fully with the Commission's tender offer
reporting requirements, and required Kelso and the chief executive
officer to comply with these requirements in the future.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
- --------------------------
The following table sets forth information as to the compensation
of the Chief Executive Officer and each of the other four most
highly compensated executive officers of the Company as of the last
day of February 1997 for services in all capacities to the Company
for the years ended the last day of February 1995, 1996 and 1997.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
--------------------------------------------------- -------------------
Other Option/
Name and Annual SARs
Principal Position Year Salary Bonus Compensation<F1> (#)<F2>
- -------------------- ---- ------ -------- ------------ -----
<S> <C> <C> <C> <C> <C>
Ronald H. Dykehouse 1997 $311,616 $108,918 $ - 100,000
President, Chairman 1996 300,000 213,432 - -
& CEO 1995 300,000 231,000 - -
Joel M. Smith 1997 166,904 54,508 - -
Sr. Vice President 1996 162,373 93,243 - -
and CFO 1995 159,120 98,654 - -
John P. LeNeveu 1997 174,937 51,979 - 30,000
Exec. Vice President, 1996 166,373 92,961 - -
Operations & Sales 1995 159,120 98,654 - -
F. Stanley Sena 1997 166,904 56,965 - -
Exec. Vice President, 1996 160,667 89,773 - -
Transportation and 1995 150,320 93,403 - -
Distribution Logistics
J. Roy Coxe 1997 154,356 43,591 - 30,000
Sr. Vice President, 1996 150,000 80,558 - -
Logistics 1995 150,000 93,000 - -
_______________
<FN>
<F1> Consists of the value of automobiles and other miscellaneous
fringe benefits. For fiscal years 1995, 1996 and 1997, the
amounts did not exceed the lesser of $50,000 or 10% of the
named executive officer's annual salary and bonus.
<F2> Consists of repriced options issued in fiscal 1997 to replace
options issued in earlier fiscal years whose exercise price
substantially exceeded the market value of the underlying
stock.
</TABLE>
OPTION GRANTS TABLE
- -------------------
The following table sets forth information as to the options
granted to the Chief Executive Officer and each of the other four
most highly compensated executive officers of the Company during
fiscal 1997.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term
------------------------------------------------------ -------------------
Number of
Securities % of Total
Underlying Options Exercise
Options Granted to or Base
Granted Employees in Price Expiration
Name (#)<F1> in fiscal year ($/Sh) Date 5% ($) 10% ($)
---- ---------- -------------- ------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Ronald H. Dykehouse 100,000 62.4% $12.30 April 23, 2006 724,674 1,882,491
Joel M. Smith - - - - - -
John P. LeNeveu 30,000 18.8% 12.30 April 23, 2006 217,402 564,747
F. Stanley Sena - - - - - -
J. Roy Coxe 30,000 18.8% 12.30 April 23, 2006 217,402 564,747
- ----------------------------
<FN>
<F1> Consists of repriced options issued in fiscal 1997 to replace
options issued in earlier fiscal years whose exercise price
substantially exceeded the market value of the underlying
stock.
</TABLE>
AGGREGATED OPTION TABLE
- -----------------------
The following table sets forth information as to the options held
by the Chief Executive Officer and each of the other four most
highly compensated executive officers of the Company through the
end of fiscal 1997.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Fiscal
Shares Year-End Year-End
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- ---- ------------ -------- ------------- -----------
<S> <C> <C> <C> <C>
Ronald H. Dykehouse 0 $ 0 0/100,000 $ 0/0
Joel M. Smith 0 0 8,278/0 99,336/0
John P. LeNeveu 0 0 0/30,000 0/0
F. Stanley Sena 0 0 8,279/0 99,348/0
J. Roy Coxe 0 0 0/30,000 0/0
</TABLE>
BENEFIT PLAN AND ARRANGEMENTS
- -----------------------------
MANAGEMENT INCENTIVE PLAN - The Company has a Management
Incentive Plan (the "MIP Plan") to provide additional compensation
to participants, including executive officers, upon the achievement
of certain financial objectives of the Company and individual
personal objectives of the participants. The MIP Plan is
administered by the Compensation Committee of the Board of
Directors (the "Compensation Committee") and is applicable to
management employees of Americold and, at the option of the
President of the Company, other employees of Americold. The
financial objective award is 50% of the total award and is based on
attainment of actual operating results as compared to financial
targets. The financial targets were established and approved by
the Company based upon the annual business plan. The personal
objective award is 50% of the total award and is based on
attainment of both quantifiable and nonquantifiable goals
established at the beginning of the MIP Plan year. Incentive
compensation earned under the MIP Plan is computed as soon as
possible after the close of the Company's fiscal year and payment
is generally made following approval by the Board unless a deferred
payment election has been filed with the Company in accordance with
the terms of the Plan.
The Board of Directors authorized the payment of approximately $1.4
million in total fiscal 1997 awards pursuant to the MIP Plan.
These awards were paid in April 1997. Incentive compensation
earned by the Company's executive officers for the fiscal year
ended the last day of February 1997 is included in the Bonus column
in the above Summary Compensation Table.
RETIREMENT PLAN - Americold has a noncontributory defined
benefit retirement plan for salaried employees, including executive
officers (the "Retirement Plan"). The Retirement Plan provides
retirement benefits based on credited years of service and average
monthly compensation for the highest five calendar years of the
final 15 calendar years of employment or, if higher, the highest 60
consecutive months in the last 120 months of employment. A
participant's retirement benefits vest after the participant has
completed at least five years of Vesting Service.
The following table shows the approximate annual retirement
benefits payable to employees for life from normal retirement date
pursuant to the Retirement Plan before reduction for Social
Security payments. The actual retirement benefit to employees is
offset by Social Security benefits. Service credited under a
retirement plan of the Company's former owners will be recognized
by the Retirement Plan for purposes of determining the pension
benefits payable under the Retirement Plan.
Estimated years of credited service to date under the Retirement
Plan for the individuals named in the Summary Compensation Table
are as follows: Mr. Dykehouse, 6 years; Mr. Smith, 18 years; Mr.
LeNeveu, 5 years; Mr. Sena, 27 years; and Mr. Coxe, 3 years.
Estimated years of credited service at normal retirement date (age
65) under the Retirement Plan for the individuals named in the
Summary Compensation Table are as follows: Mr. Dykehouse, 16
years; Mr. Smith, 26 years; Mr. LeNeveu, 20 years; Mr. Sena, 45
years; and Mr. Coxe, 12 years.
Years of Service
-------------------------------------
Average Annualized
Compensation 20 30 40 50
- ------------------ -------- -------- -------- ------
$100,000 $ 30,000 $ 45,000 $ 60,000 $ 75,000
125,000 37,500 56,250 75,000 93,744
150,000 45,000 67,500 90,000 112,500
175,000 45,000 67,500 90,000 112,500
200,000 45,000 67,500 90,000 112,500
300,000 45,000 67,500 90,000 112,500
325,000 45,000 67,500 90,000 112,500
In addition to the above, certain individuals named in the Summary
Compensation Table are entitled to a benefit calculated by using
additional years of service credited under supplements to the
Retirement Plan. Years of credited service under the supplements
for the individuals named in the Summary Compensation Table as of
the last day of February 1997 are as follows: Mr. Dykehouse, 0
years; Mr. Smith, 5 years; Mr. LeNeveu, 0 years; Mr. Sena, 0 years;
and Mr. Coxe, 0 years. The annual amount to be received at normal
retirement date pursuant to the supplements is estimated to be as
follows: Mr. Dykehouse, $0 per annum; Mr. Smith, $5,906 per annum;
Mr. LeNeveu, $0 per annum; Mr. Sena, $0 per annum; and Mr. Coxe, $0
per annum.
A participant's retirement benefits (excluding any incremental
benefit earned under any supplement) under the Retirement Plan plus
50% of Social Security benefits may not exceed 60% of his
compensation at retirement after 40 years of service, subject to
maximum dollar limitations. See Note 8 of Notes to Consolidated
Financial Statements as of the last day of February 1996 and 1997.
EMPLOYEE STOCK OWNERSHIP PLAN - Americold established,
effective March 1, 1987, an Employee Stock Ownership Plan, as
amended January 1, 1994 (the "ESOP"), in which all qualifying
employees of the Company not covered by collective bargaining
arrangements are able to participate. It is contemplated that
contributions on an annual basis will not exceed 15% of the
aggregate total compensation of any participating employee. The
Company may contribute cash as well as or in lieu of its stock.
The consent of the Company's Board of Directors is required to
authorize any contribution by Americold to the ESOP. Contributions
are allocated among participants based on the ratio of each
participant's compensation to the total compensation of all such
participants, subject to certain limitations. The ESOP is intended
to provide retirement funds to participants in addition to present
pension benefits.
Benefits under the ESOP vest based upon years of service as
follows: 20% after three years of service, increased by 20% for
each of the next four years with a maximum of 100% after seven
years of service. A participant is 100% vested if employed by the
Company on or after his 65th birthday, or if the participant incurs
a total and permanent disability or dies while employed by the
Company. The ESOP has the right to repurchase previously
distributed shares from employees terminating their ESOP
participation, using funds obtained through cash contributions by
the Company. Participant forfeitures are allocated pro rata to
remaining participants.
Participants are eligible for distribution of their capital
accumulation in the ESOP at the normal retirement age of 65. The
distribution will be made in whole shares of the Company's stock,
cash or a combination of both, as determined by the Compensation
Committee, provided the participant has not elected to be paid in
stock.
Upon termination of the ESOP, the ESOP's trust will be maintained
until the capital accumulations of all participants have been
distributed.
Management anticipates recommending a $500,000 ESOP contribution
for fiscal 1997.
KEY EMPLOYEE STOCK OPTION PLAN - In 1987, Americold
established a Key Employee Stock Option Plan (the "Option Plan").
The Option Plan permits the issuance of nonstatutory options to
purchase up to 300,000 shares of common stock of the Company to
directors, officers and other key employees of the Company. Of
these, options to purchase up to 150,000 shares were reserved for
issuance to the Management Group and options to purchase the
remaining 150,000 shares are reserved for issuance to all eligible
employees (including the Management Group) of the Company.
The Option Plan is administered by the Compensation Committee. The
Compensation Committee determines the recipients of options
granted, the exercise price and the number of shares of common
stock subject to each option. Options to purchase common stock are
granted at a price not less than 85% of the fair market value on
the day that the option is granted. The Board of Directors may
amend the Option Plan from time to time. The maximum term of each
stock option is ten years. Options become exercisable at such time
or times as the Compensation Committee may determine at the time of
grant.
If the outstanding shares of common stock are changed into or
exchanged for a different number or kind of shares of the Company
or other securities of the Company, by reason of any merger,
consolidation, recapitalization, reclassification, stock split-up,
stock dividend or combination of shares, the Compensation Committee
shall make an appropriate and equitable adjustment in the number
and kind of shares as to which the unexercised portion of the
option shall be exercisable, to the extent that after such event
the optionee's right to a proportionate interest in the Company
shall be maintained as if the option had already been exercised and
the option shares were subject to such change or exchange. Such
adjustment shall be made without change in the total price
applicable to the unexercised portion of the option and with a
corresponding adjustment in the exercise price per option share.
Any such adjustment made by the Compensation Committee shall be
final and binding upon the Company, the optionee and all other
interested persons.
In the event of (i) dissolution or liquidation of the Company, (ii)
a merger in which the Company is not the surviving corporation or
(iii) a share exchange pursuant to which the outstanding shares of
common stock of the Company are acquired by another corporation,
then either (a) the Compensation Committee, upon authorization of
the Board, shall make an appropriate and equitable adjustment in
the number and kinds of securities covered by outstanding options,
and such options shall be expressly assumed by the successor
corporation, if any; or (b) in lieu of such adjustment, the Board
shall provide a 30-day period immediately prior to such an event
during which each optionee shall have the right to exercise the
optionee's outstanding options, in whole or in part, without regard
to the time the options have been outstanding or the vesting
schedule provided for in any option agreement entered into pursuant
to the Option Plan and all options not exercised shall expire at
the end of the 30-day period.
Information with regard to the grant of options as of the last day
of February 1997 under the Plan follows:
Number of Shares
Subject to Exercise Number of Shares Expiration
Option Price Exercisable Date
- ---------- ------- ----------- ----------
65,148 $10.00 65,148 May 1998
160,000 $12.30 0 April 2006
See Note 9 of Notes to Consolidated Financial Statements as of the
last day of February 1996 and 1997.
OTHER ARRANGEMENTS - In calendar 1995, the Board of Directors
authorized employment agreements for certain executive officers of
the Company.
On November 1, 1995, the Company entered into an employment
agreement with Mr. Dykehouse. The agreement expires on December
16, 1998 and may be extended for one-year periods by mutual
agreement. Pursuant to the agreement, Mr. Dykehouse agreed to
serve as Chairman of the Board, President and Chief Executive
Officer of the Company for a minimum base monthly salary of $25,000
and the right to participate in the MIP Plan (or any other senior
management incentive program offered by the Company) and receive
all customary employee benefits ("Benefits"). The agreement
provides that if during the term of the agreement Mr. Dykehouse is
terminated "without cause", as defined, the Company will pay his
base compensation through December 16, 1998, employ him as a
consultant at his base salary for 24 months beginning January 1,
1999 and provide to him all Benefits through the earlier of the
date he obtains other employment and December 16, 2006. The
Company is not required to make any such payments if the
termination is "for cause," as defined. Among other termination
provisions, the agreement provides that Mr. Dykehouse may terminate
the agreement with 30 days' written notice if such termination is
for "good reason" (as defined), and in such case, Mr. Dykehouse
will receive the same treatment as if he were terminated "without
cause." The employment agreement contains other customary terms
and conditions.
On August 1, 1995, the Company entered into two-year employment
agreements with Messrs. Smith, LeNeveu, Sena and Coxe. Each
employee agreed to serve in the position and at the minimum base
monthly salary as follows: Mr. Smith, Senior Vice President and
Chief Financial Officer, $13,666.66; Mr. LeNeveu, Executive Vice
President, $14,166.66; Mr. Sena, Executive Vice President,
$13,666.67; and Mr. Coxe, Senior Vice President, Logistics,
$12,500.00. The agreements provide, among other conditions, that
if during the term of the employment agreement the employee is
terminated "without cause," as defined, the Company will pay the
employee any unpaid base compensation, any benefits accrued to the
date of termination and, for 24 months, a monthly amount equal to
the last monthly salary amount received. The Company is not
required to make any such payment if the termination is "for
cause," as defined. The employee may terminate employment upon 30
days' written notice, and the Company will pay such employee an
amount equal to either 12 months' salary if such termination is
without "good reason," as defined, or 24 months' salary if such
termination is for "good reason." The employment agreements
contain other customary terms and conditions.
On June 30, 1996, the Company and Messrs. Smith, LeNeveu, Sena and
Coxe each entered into an Addendum to Employment Agreement whereby,
unless a party provides notice of intent not to renew prior to the
July 31 preceding the July 31 on which the employment agreement is
scheduled to terminate, the term of such agreement is automatically
extended for an additional year beyond the former termination date.
For example, if neither party gives notice not to renew on or
before July 31, 1997, the term of the employment agreement will
extend to July 31, 1999.
Concurrently with the entering into of the employment agreements,
Messrs. Dykehouse, Smith, LeNeveu, Sena and Coxe each also entered
into a covenant not to compete and consulting and non-disclosure
agreement with the Company. Under these agreements, each
individual has agreed not to compete with the Company during the
term of his employment with the Company, under the terms of an
employment contract or otherwise. Mr. Dykehouse has agreed not to
compete with the company for a period of 24 months following
termination of employment or until October 31, 2000, whichever is
earlier, while the other officers have agreed not to compete with
the Company (1) for a 24-month period following termination of his
employment or until July 31, 2000, whichever is earlier, if the
termination is "for cause," as defined in the employment agreement,
or (ii) for a 12-month period or until July 31, 2000, whichever is
earlier, if the employee terminates employment with or without
"good reason," as defined in the employment agreement. Subject to
certain exceptions, each individual has further agreed to be
available for employment as a consultant to the Company following
termination of employment.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information regarding the
beneficial ownership of common stock as of May 1, 1997 by (i) each
person known by the Company to own more than five percent of its
common stock, (ii) each director of the Company, (iii) each named
executive officer, (iv) all directors and officers as a group and
(v) the Management Group:
<TABLE>
<CAPTION>
Percent of
Number of Outstanding
Name and Address Shares Shares
- ---------------- --------- -----------
<S> <C> <C>
KIA III-Americold, Inc., L.P. 2,000,000 40.0%
("KIA III")
c/o Kelso & Company
320 Park Avenue, 24th Floor
New York, NY 10022
Kelso Investment Associates II, L.P. 500,000 10.0%
("KIA II")
c/o Kelso & Company
320 Park Avenue, 24th Floor
New York, NY 10022
Kelso Equity Partners, L.P. 70,000 1.4%
("Kelso Equity")
c/o Kelso & Company
320 Park Avenue, 24th Floor
New York, NY 10022
Joseph S. Schuchert<F1> 2,593,600 51.9%
320 Park Avenue, 24th Floor
New York, NY 10022
Frank T. Nickell<F1> 2,593,600 51.9%
320 Park Avenue, 24th Floor
New York, NY 10022
George E. Matelich<F1> 2,593,600 51.9%
320 Park Avenue, 24th Floor
New York, NY 10022
Frank K. Bynum, Jr.<F1> 2,593,600 51.9%
320 Park Avenue, 24th Floor
New York, NY 10022
Michael B. Goldberg<F1> 2,593,600 51.9%
320 Park Avenue, 24th Floor
New York, NY 10022
David I. Wahrhaftig<F1> 2,593,600 51,9%
320 Park Avenue, 24th Floor
New York, NY 10022
Thomas R. Wall, IV<F1> 2,593,600 51.9%
320 Park Avenue, 24th Floor
New York, NY 10022
New York Life Insurance Company 330,000 6.6%
51 Madison Avenue
New York, NY 10010
New York Life Insurance and Annuity Corporation 250,000 5.0%
51 Madison Avenue
New York, NY 10010
Percent of
Number of Outstanding
Name and Address Shares Shares
- ---------------- --------- -----------
Salkeld & Company 462,100 9.3%
c/o Bankers Trust Company
P. O. Box 704
Church Street Station
New York, NY 10008
Ronald H. Dykehouse<F2> 37,900 0.8%
7007 S. W. Cardinal Lane, Suite 135
Portland, OR 97224
Joel M. Smith<F2> 38,278 0.8%
7007 S. W. Cardinal Lane, Suite 135
Portland, OR 97224
John P. LeNeveu <F2> 8,000 0.2%
7007 S. W. Cardinal Lane, Suite 135
Portland, OR 97224
F. Stanley Sena <F2> 38,279 0.8%
7007 S. W. Cardinal Lane, Suite 135
Portland, OR 97224
J. Roy Coxe <F2> 6,000 0.1%
7007 S. W. Cardinal Lane, Suite 135
Portland, OR 97224
Frank Edelstein -- --
The Gordon+Morris Group, Suite 1400
620 Newport Center Drive
Newport Beach, CA 92660
James C. Pigott -- --
1405 - 42nd Avenue East
Seattle, WA 98112
William A. Marquard -- --
600 Walnut Grove
Carlisle, KY 40311
All directors and officers as a group (11 persons)<F1><F2> 198,095 3.9%
Management Group (21) persons<F2> 351,358 6.9%
_____________________
<FN>
<F1> Messrs. Schuchert, Nickell, Matelich, Bynum, Goldberg,
Wahrhaftig and Wall may be deemed to share beneficial ownership of
shares owned of record by KIA III, KIA II, Kelso Equity and Kelso
& Company (Kelso & Company owns 23,600 shares) by virtue of their
status as the general partners of Kelso Partners III, L.P. (the
general partner of KIA III), Kelso Partners II, L.P. (the general
partner of KIA II), and Kelso Equity and the controlling
stockholders and officers of Kelso & Company. Messrs. Schuchert,
Nickell, Matelich and Wall share investment and voting powers with
respect to securities owned by the foregoing entities. Messrs.
Schuchert, Nickell, Matelich, Bynum, Goldberg, Wahrhaftig and Wall
disclaim beneficial ownership of such securities (other than the
23,600 shares owned by Kelso & Company).
<F2> Includes the following numbers of shares of common stock that
may be acquired within 60 days after May 1, 1997 through the
exercise of stock options granted pursuant to the Company's Option
Plan: 20,000 shares for Mr. Dykehouse; 8,278 shares for Mr. Smith;
6,000 shares for Mr. LeNeveu; 8,279 shares for Mr. Sena; 6,000
shares for Mr. Coxe; 59,595 for all directors and officers as a
group; and 96,458 shares for the Management Group.
</TABLE>
The shareholders of the Company listed above hold approximately 78%
of the voting power of the Company's common stock and are able to
elect all of the members of the Board of Directors and thereby
control the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In April 1997, in consideration for certain assistance provided by
Kelso in connection with the Prepackaged Bankruptcy and the
issuance of the 12.875% Notes, the Company paid Kelso a financial
advisory fee of $500,000. Mr. Matelich and Mr. Marquard, directors
of the Company, are a Managing Director and the Vice Chairman of
the Board of Directors, respectively, of Kelso.
Pursuant to the Stockholders' Agreement dated December 24, 1986
among the Company, Kelso and certain management shareholders (the
"Stockholders' Agreement"), Kelso and such shareholders have the
right, subject to certain limitations, to include shares of the
Company owned by them in any public registration of the Company's
securities. Other relevant provisions of the Stockholders'
Agreement expired on December 24, 1996.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) The following documents are filed as part of this report.
1. FINANCIAL STATEMENTS PAGE
-------------------- ----
Reference is made to Part II, Item 8 30
for a listing of the required financial
statements filed with this report
2. FINANCIAL STATEMENT SCHEDULES
-----------------------------
Schedule II - Valuation and Qualifying 83
Accounts for years ended the last day of
February 1995, 1996 and 1997
All other schedules are omitted because they are not
applicable, or are not required, or because the
required information is included in the Company's
consolidated financial statements as of the last
day of February 1996 and 1997 or notes thereto.
3. EXHIBITS
--------
(2) Plan of Reorganization, dated April 14, 1995
(filed as Exhibit (2) to the Form 10-K, dated
May 30, 1995, for the fiscal year ended
February 28, 1995, and incorporated herein by
reference)
(3) Articles of Incorporation and Bylaws
(i) Second Restated Articles of Incorporation, as
amended (filed as Exhibit (3)(i) to the Form
10-Q, dated July 14, 1995, for the quarter
ended May 31, 1995, and incorporated herein by
reference)
(ii) Restated Bylaws, as amended (filed as Exhibit
(3)(ii) to the Form 10-K, dated May 30, 1995,
for the fiscal year ended February 28, 1995,
and incorporated herein by reference)
(iii) Articles of Amendment, dated June 20, 1996, to
the Second Restated Articles of Incorporation,
as amended (filed as Exhibit 3.1 to the Form
10-Q, dated July 12, 1996, for the quarter
ended May 31, 1996, and incorporated herein by
reference)
(4) Instruments defining the rights of security
holders, including indentures
(i) Articles IV, V and VI of the Second Restated
Articles of Incorporation as amended (see
Exhibit (3)(i))
(ii) Articles I, II, V, VII and X of the Restated
Bylaws as amended (see Exhibit (3)(ii))
(iii) Second Restated Stockholders' Agreement dated
as of December 24, 1986, as amended as of
April 15, 1987 and June 22, 1987 (filed as
Exhibit (4)(iv) to the Form 10-K, dated May
27, 1988, for the fiscal year ended February
29, 1988, and incorporated herein by
reference)
(iv) Third Amendment dated May 22, 1990 to
Stockholders' Agreement dated as of December
24, 1986, as amended as of June 22, 1987
(filed as Exhibit (4) to the Form 10-Q dated
July 12, 1990, for the quarter ended May 31,
1990, and incorporated herein by reference)
(v) Amended and Restated Indenture dated March 9,
1993, relating to the First Mortgage Bonds
(filed as Exhibit (4)(vi) to the Registration
Statement on Form S-1 (Registration No. 33-
53584) filed with the Commission on March 2,
1993, and incorporated herein by reference)
(vi) Stock Pledge Agreement dated as of February
28, 1989, between Registrant and The
Connecticut National Bank (filed as Exhibit
(19)(iii) to the Form 10-Q, dated October 14,
1992, for the quarter ended August 31, 1992,
and incorporated herein by reference)
(vii) Stock Pledge Agreement dated as of February
28, 1989 between Registrant and United States
National Bank of Oregon, acting as agent
pursuant to Article IX of the Credit
Agreement, as amended, dated as of April 30,
1987 (filed as Exhibit (19)(iv) to the Form
10-Q, dated October 14, 1992, for the quarter
ended August 31, 1992, and incorporated herein
by reference)
(viii) Form of Amended and Restated Security
Agreement relating to the First Mortgage Bonds
(filed as Exhibit (4)(xiv) to the Registration
Statement on Form S-1 (Registration No. 33-
53584) filed with the Commission on March 2,
1993, and incorporated herein by reference)
(ix) Form of Series A Bond (included as part of
Exhibit (4)(v))
(x) Form of Series B Bond (included as part of
Exhibit (4)(v))
(xi) Form of Amended and Restated Cash Collateral
Pledge Agreement relating to the First
Mortgage Bonds (filed as Exhibit (4)(xix) to
the Registration Statement on Form S-1
(Registration No. 33-53584) filed with the
Commission on March 2, 1993, and incorporated
herein by reference)
(xii) Form of Amended Stock Pledge Agreement
relating to the First Mortgage Bonds (filed as
Exhibit (4)(xx) to the Registration Statement
on Form S-1 (Registration No. 33-53584) filed
with the Commission on March 2, 1993, and
incorporated herein by reference)
(xiii) Form of Amended Mortgage, Assignment of Rents
and Security Agreement relating to the First
Mortgage Bonds (filed as Exhibit (4)(xxi) to
the Registration Statement on Form S-1
(Registration No. 33-53584) filed with the
Commission on March 2, 1993, and incorporated
herein by reference)
(xiv) First Supplemental Indenture relating to the
First Mortgage Bonds (filed as Exhibit 4.1 to
the Form 10-Q, dated July 14, 1995 for the
quarter ended May 31, 1995, and incorporated
herein by reference)
(xv) Indenture dated as of June 30, 1995 between
Registrant and United States Trust Company of
New York, as Trustee (filed as Exhibit 4.2 to
the Form 10-Q, dated July 14, 1995 for the
quarter ended May 31, 1995, and incorporated
herein by reference)
(xvi) Form of 15% Senior Subordinated Debentures due
2007 (included as part of Exhibit 4(xv))
(xvii) Form of Indenture relating to the 12.875%
Senior Subordinated Notes due 2008, between
Registrant and Fleet Bank, as Trustee (filed
as Exhibit (4)(xviii) to the Registration
Statement on Form S-1 (Registration No. 333-
541) filed with the Commission on April 1,
1996, and incorporated herein by reference)
(xviii) Form of 12.875% Senior Subordinated Notes due
2008 (included as part of Exhibit 4(xviii))
(xix) Fourth Amendment dated March 14, 1996 to
Stockholders Agreement dated as of December
24, 1986, as amended as of May 22, 1990 (filed
as Exhibit 4.1(1) to the Form 10-K, dated May
29, 1996, for the fiscal year ended February
29, 1996, and incorporated herein by
reference)
(10) Material Contracts
*(i) Americold Corporation Key Employee Stock
Option Plan, as amended, effective July 12,
1988 (filed as Exhibit (4)(i) to the Form 10-Q
dated October 14, 1988, for the quarter ended
August 31, 1988, and incorporated herein by
reference)
*(ii) Form of Nonstatutory Stock Option Agreement,
as amended, entered into between Registrant
and certain employees pursuant to the
Americold Corporation Key Employee Stock
Option Plan (filed as Exhibit (4)(ii) to the
Form 10-Q dated October 14, 1988, for the
quarter ended August 31, 1988, and
incorporated herein by reference)
(iii) Form of Amended and Restated Security
Agreement relating to the First Mortgage Bonds
(see Exhibit (4)(viii))
(iv) Stock Pledge Agreement dated as of February
28, 1989, between Registrant and The
Connecticut National Bank (see Exhibit
(4)(vi))
(v) Stock Pledge Agreement dated as of February
28, 1989, between Registrant and United States
National Bank of Oregon, a national banking
association, acting as agent pursuant to
Article IX of the Credit Agreement, as
amended, dated as of April 30, 1987 (see
Exhibit (4)(vii))
*(vi) Americold Corporation Management Incentive
Plan (filed as Exhibit (10)(iii) to the Form
10-K, dated May 27, 1988, for the fiscal year
ended February 29, 1988, and incorporated
herein by reference)
(vii) Form of Indemnity Agreement entered into
between the Company and each of its officers
and directors (filed as Exhibit (4)(x) to Form
10-K dated May 29, 1992 for the fiscal year
ended February 29, 1992, and incorporated
herein by reference)
(viii) Second Restated Stockholders' Agreement, dated
as of December 24, 1986, as amended as of June
22, 1987 (see Exhibit (4)(iii))
(ix) Third Amendment dated May 22, 1990 to
Stockholders' Agreement dated as of December
24, 1986, as amended as of June 22, 1987 (see
Exhibit (4)(iv))
(x) Amended and Restated Indenture relating to the
First Mortgage Bonds (see Exhibit (4)(v))
(xi) Form of Amended and Restated Cash Collateral
Pledge Agreement relating to the First
Mortgage Bonds (see Exhibit (4)(xi))
(xii) Form of Amended Stock Pledge Agreement
relating to the First Mortgage Bonds (see
Exhibit (4)(xii))
(xiii) Indemnification Agreement dated October 31,
1991 between the Company and The First Boston
Corporation (included as Exhibit (10)(xx) to
the Registration Statement on Form S-2
(Registration No. 33-41963) filed with the
Commission on July 31, 1991 and incorporated
herein by reference)
(xiv) Master Lease Agreement dated February 28,
1989, between Registrant and Americold
Services Corporation (filed as Exhibit
(19)(vi) to the Form 10-Q, dated October 14,
1992, for the quarter ended August 31, 1992,
and incorporated herein by reference)
*(xv) Americold Stock Incentive Plan effective March
1, 1991 (filed as Exhibit(10)(xviii) to the
Form 10-K dated May 29, 1992 for the fiscal
year ended February 29, 1992, and incorporated
herein by reference)
(xvi) Americold Transportation Systems Purchase of
Joint Venture Interest, effective November 1,
1991, between Registrant and Superior
Transportation Systems, Inc. (filed as Exhibit
(19)(vii) to the Form 10-Q, dated October 14,
1992, for the quarter ended August 31, 1992,
and incorporated herein by reference)
(xvii) Lease dated May 15, 1992, between Registrant
and Oregon Warehouse Partners, a Texas general
partnership (lease agreement for Ontario,
Oregon facility) (filed as Exhibit (19)(viii)
to the Form 10-Q, dated October 14, 1992, for
the quarter ended August 31, 1992, and
incorporated herein by reference)
(xviii) Form of First Amendment to Master Lease
Agreement between Registrant and Americold
Services Corporation (filed as Exhibit
(10)(xxxi) to the Registration Statement on
Form S-1 (Registration No. 33-53584) filed
with the Commission on March 2, 1993, and
incorporated hereby by reference)
*(xix) Nonstatutory Stock Option Agreement dated May
19, 1993 between the Company and John P.
LeNeveu (filed as Exhibit (10)(i) to the Form
10-Q, dated January 13, 1994 for the quarter
ended November 30, 1993, and incorporated
herein by reference)
*(xx) Nonstatutory Stock Option Agreement dated
December 17, 1993 between the Company and J.
Roy Coxe (filed as Exhibit 10 (xxvii) to the
Form 10-K, dated May 26, 1994 for the fiscal
year ended February 28, 1994, and incorporated
herein by reference)
(xxi) Second Amended and Restated Credit Agreement
between the Company and United States National
Bank of Oregon dated June 19, 1995 (filed as
Exhibit 10.1 to the Form 10-Q, dated July 14,
1995 for the quarter ended May 31, 1995, and
incorporated herein by reference)
*(xxii) Employment Agreement dated November 1, 1995,
between the Company and Ronald H. Dykehouse
(filed as Exhibit 10.1 to the Form 10-Q dated
January 16, 1996 for the quarter ended
November 30, 1995, and incorporated herein by
reference)
*(xxiii) Form of Employment Agreement dated August 1,
1995, between the Company and certain named
executive officers, and schedule thereto
(filed as Exhibit 10.2 to the Form 10-Q dated
January 16, 1996 for the quarter ended
November 30, 1995, and incorporated herein by
reference)
*(xxiv) Form of Covenant Not to Compete and Consulting
and Non-Disclosure Agreement between the
Company and certain named executive officers,
and schedule thereto (filed as Exhibit 10.3 to
the Form 10-Q dated January 16, 1996 for the
quarter ended November 30, 1995, and
incorporated herein by reference)
(xxv) Fourth Amendment dated March 14, 1996 to
Stockholders' Agreement dated as of December
24, 1986, as amended as of May 20, 1990 (see
Exhibit (4)(xx))
*(xxvi) First Amendment to Americold Corporation
Management Incentive Plan, amended as of April
24, 1996 (filed as Exhibit 4.1 to the Form 10-
K, dated May 29, 1996, for the fiscal year
ended February 29, 1996, and incorporated
herein by reference)
*(xxvii) Nonstatutory Stock Option Agreement effective
April 24, 1996 between the Company and Ronald
H. Dykehouse (filed as Exhibit 10.1 to the
Form 10-Q, dated October 16, 1996, for the
quarter ended August 31, 1996, and
incorporated herein by reference)
*(xxviii) Nonstatutory Stock Option Agreement effective
April 24, 1996 between the Company and John P.
LeNeveu (filed as Exhibit 10.2 to the Form 10-
Q, dated October 16, 1996, for the quarter
ended August 31, 1996, and incorporated herein
by reference)
*(xxix) Nonstatutory Stock Option Agreement effective
April 24, 1996 between the Company and J. Roy
Coxe (filed as Exhibit 10.3 to the Form 10-Q,
dated October 16, 1996, for the quarter ended
August 31, 1996, and incorporated herein by
reference)
*(xxx) Form of Addendum to Employment Agreement dated
June 30, 1996, between the Company and certain
named executive officers, and schedule thereto
* Management contracts or compensatory plans or arrangements.
(11) Statement Regarding Computation of Per Share
Earnings
(21) Subsidiaries of the Registrant
(23) Consent of KPMG Peat Marwick LLP
(27) Financial Data Schedule
(99) Safe Harbor for Forward-Looking Statements Under
Private Securities Litigation Reform Act of 1995:
Certain Cautionary Statements
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
AMERICOLD CORPORATION
By: /s/ Ronald H. Dykehouse By: /s/ Joel M. Smith
Ronald H. Dykehouse Joel M. Smith
Chairman of the Board, President Senior Vice President and
and Chief Executive Officer Chief Financial Officer
(Principal Financial Officer)
By: /s/ Thomas R. Ferreira
Thomas R. Ferreira
Corporate Controller
(Principal Accounting Officer)
Dated: May 28, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the Company and in the capacities and on the dates
indicated.
/s/ Ronald H. Dykehouse
- ------------------------------- May 22, 1997
Ronald H. Dykehouse, Director
/s/ Joel M. Smith
- ------------------------------- May , 1997
Joel M. Smith, Director
- ------------------------------- May 27, 1997
Frank Edelstein, Director
/s/ George E. Matelich
- ------------------------------- May , 1997
George E. Matelich, Director
/s/ James C. Pigott
- ------------------------------- May 22, 1997
James C. Pigott, Director
/s/ William A. Marquard
- ------------------------------- May , 1997
William A. Marquard, Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
AMERICOLD CORPORATION
By: /s/ Ronald H. Dykehouse By: /s/ Joel M. Smith
Ronald H. Dykehouse Joel M. Smith
Chairman of the Board, President Senior Vice President and
and Chief Executive Officer Chief Financial Officer
(Principal Financial
Officer)
By: /s/ Thomas R. Ferreira
Thomas R. Ferreira
Corporate Controller
(Principal Accounting Officer)
Dated: May 28, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the Company and in the capacities and on the dates
indicated.
/s/ Ronald H. Dykehouse May 22, 1997
Ronald H. Dykehouse, Director
/s/ Joel M. Smith May 28, 1997
Joel M. Smith, Director
/s/ Frank Edelstein May 27, 1997
Frank Edelstein, Director
/s/ George E. Matelich May 27, 1997
George E. Matelich, Director
/s/ James C. Pigott May 22, 1997
James C. Pigott, Director
/s/ William A. Marquard May 27, 1997
William A. Marquard, Director
Supplemental Information to be Furnished With Reports Filed
Pursuant to Section 15(d) of the Act by Registrants Which Have Not
Registered Securities Pursuant to Section 12 of the Act.
No proxy statement with respect to any annual or other meeting of
security holders has been sent to security holders. The Company
does not solicit proxies.
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
Americold Corporation:
We have audited the consolidated balance sheets of Americold
Corporation as of the last day of February 1996 and 1997, and the
related consolidated statements of operations, common stockholders'
deficit and cash flows for each of the years in the three-year
period ended the last day of February 1997. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Americold Corporation as of the last day of February
1996 and 1997, and the results of their operations and their cash
flows for each of the years in the three-year period ended the last
day of February 1997, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Portland, Oregon
May 2, 1997
<PAGE>
AMERICOLD CORPORATION
Consolidated Balance Sheets
Last day of February 1996 and 1997
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Assets 1996 1997
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 20,857 $ 13,702
Trade receivables, less allowance for doubtful accounts
of $218 and $396, respectively 25,461 27,560
Other receivables 3,512 3,138
Prepaid expenses 4,286 3,828
Tax refund receivable 3,336 2,636
Other current assets 845 891
--------- -------
Total current assets 58,297 51,755
Net property, plant and equipment 375,851 384,484
Cost in excess of net assets acquired, less accumulated
amortization of $22,138 and $24,644, respectively 77,255 74,749
Debt issuance costs, less accumulated amortization
of $3,987 and $5,168, respectively 6,627 11,041
Other noncurrent assets 8,962 9,005
-------- --------
Total assets $ 526,992 $ 531,034
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Liabilities, Preferred Stock and Common Stockholders' Deficit 1996 1997
------------------------------------------------------------- ---- ----
<S> <C> <C>
Current liabilities:
Accounts payable $ 11,363 $ 16,116
Accrued interest 19,056 18,466
Accrued expenses 11,604 13,660
Deferred revenue 5,707 5,555
Current maturities of long-term debt 2,732 5,229
Other current liabilities 4,630 5,259
--------- ---------
Total current liabilities 55,092 64,285
Long-term debt, less current maturities 461,667 465,834
Deferred income taxes 102,041 98,524
Other noncurrent liabilities 9,861 10,347
--------- ---------
Total liabilities 628,661 638,990
--------- ---------
Preferred stock, Series A, $100 par value. Authorized 1,000,000
shares; issued and outstanding 52,936 shares 5,771 5,753
--------- ---------
Common stockholders' deficit:
Common stock, $.01 par value. Authorized 10,000,000 shares; issued
and outstanding 4,931,194 and 4,995,556 shares, respectively 49 50
Additional paid-in capital 50,173 51,182
Retained deficit (157,345) (164,580)
Adjustment for minimum pension liability (317) (361)
--------- ---------
Total common stockholders' deficit (107,440) (113,709)
Commitments and contingencies --------- ---------
Total liabilities, preferred stock and common stockholders' deficit $ 526,992 $ 531,034
========= =========
</TABLE>
<PAGE>
AMERICOLD CORPORATION
Consolidated Statements of Operations
Years ended last day of February 1995, 1996 and 1997
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Net sales $ 215,207 $ 279,788 $ 310,767
--------- --------- ---------
Operating expenses:
Cost of sales 138,132 194,936 228,762
Amortization of cost in excess of net assets acquired 2,535 2,773 2,506
Selling and administrative expenses 25,955 28,525 31,142
Employee stock ownership plan expense 750 750 500
--------- --------- ---------
Total operating expenses 167,372 226,984 262,910
--------- --------- ---------
Gross operating margin 47,835 52,804 47,857
--------- --------- ---------
Other income (expense):
Interest income 1,870 1,199 932
Interest expense (55,344) (56,610) (56,678)
Amortization of debt issuance costs (1,276) (964) (1,185)
Gain on insurance settlement 16,953 - -
Reorganization expenses - (7,344) (771)
Other, net 753 (591) 701
--------- --------- ---------
Total other expense (37,044) (64,310) (57,001)
--------- --------- ---------
Income (loss) before income taxes and extraordinary item 10,791 (11,506) (9,144)
Provision (benefit) for income taxes 5,227 (3,426) (2,604)
--------- --------- ---------
Income (loss) before extraordinary item 5,564 (8,080) (6,540)
Extraordinary item, net of income tax benefit of $1,158 - (1,794) -
--------- --------- ---------
Net income (loss) $ 5,564 $ (9,874) $ (6,540)
========= ========= =========
Income (loss) per share:
Income (loss) before extraordinary item $ 1.00 $ (1.80) $ (1.46)
Extraordinary item - (.37) -
--------- --------- ---------
Net income (loss) per common share $ 1.00 $ (2.17) $ (1.46)
========= ========= =========
Weighted average number of shares outstanding 4,864 4,867 4,952
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
AMERICOLD CORPORATION
Consolidated Statements of Common Stockholders' Deficit
Years ended last day of February 1995, 1996 and 1997
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Adjustment
for
Additional minimum Total common
Common paid-in Retained pension stockholders'
stock capital deficit liability deficit
----- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
Balance last day of February 1994 $ 49 $ 49,082 $(151,653) $ (55) $(102,577)
Purchase of common stock (3,065 shares) - (60) - - (60)
11.5% preferred stock dividend - - (190) - (190)
Undeclared cumulative preferred stock dividend - - (496) - (496)
Adjustment for minimum pension liability - - - 12 12
Net income - - 5,564 - 5,564
-------- -------- -------- -------- --------
Balance last day of February 1995 49 49,022 (146,775) (43) (97,747)
Issuance of common stock (26,685 shares) - 436 - - 436
13.5% preferred stock dividend - 715 (219) - 496
Undeclared cumulative preferred stock dividend - - (477) - (477)
Adjustment for minimum pension liability - - - (274) (274)
Net loss - - (9,874) - (9,874)
-------- -------- -------- -------- --------
Balance last day of February 1996 49 50,173 (157,345) (317) (107,440)
Issuance of common stock (64,362 shares) 1 1,009 - - 1,010
13.5% preferred stock dividend - - (237) - (237)
Undeclared cumulative preferred stock dividend - - (458) - (458)
Adjustment for minimum pension liability - - - (44) (44)
Net loss - - (6,540) - (6,540)
--------- -------- -------- -------- --------
Balance last day of February 1997 $ 50 $ 51,182 $(164,580) $ (361) $(113,709)
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
AMERICOLD CORPORATION
Consolidated Statements of Cash Flows
Years ended last day of February 1995, 1996 and 1997
(In Thousands)
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 5,564 $ (9,874) $ (6,540)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 20,140 19,682 20,697
Amortization of cost in excess of net assets acquired 2,535 2,773 2,506
Amortization of debt issuance costs 1,276 964 1,185
Amortization of original issue discount 1,369 430 -
Gain (loss) on sale of assets (286) (555) 25
Gain on insurance settlement (16,953) - -
Other amortization 302 570 570
Write-off of unamortized issuance costs - 962 -
Write-off of original issuance discount - 1,989 -
Write-off of long-term investment - 750 -
Change in assets and liabilities:
Receivables (6,952) (6,358) (1,725)
Prepaid expenses (1,268) 954 458
Tax refund receivable 1,012 (3,057) 700
Other current assets (67) (150) (46)
Accounts payable 1,291 4,622 4,753
Accrued interest 349 1,373 (590)
Accrued expenses 3,833 259 2,806
Deferred revenue 1,142 (207) (152)
Other current liabilities (1,032) 718 629
Deferred income taxes 1,540 (4,057) (3,517)
Other noncurrent liabilities (1,111) 772 (2,901)
-------- ------- --------
Net cash provided by operating activities 12,684 12,560 18,858
-------- ------- --------
See accompanying notes to consolidated financial statements.<PAGE>
AMERICOLD CORPORATION
Consolidated Statements of Cash Flows, Continued
(In Thousands)
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from investing activities:
Proceeds from sale of assets $ 1,105 $ 6,169 $ 1,658
Expenditures for property, plant and equipment (13,203) (34,183) (33,634)
Purchase of long-term investment (447) - -
Proceeds from insurance policies 26,343 - -
Expenditures for logistics software (1,650) (230) (56)
Other items, net 287 646 943
--------- -------- ---------
Net cash provided (used) by investing activities 12,435 (27,598) (31,089)
--------- -------- ---------
Cash flows from financing activities:
Principal payments under capital lease and other
debt obligations (2,087) (2,752) (2,425)
Proceeds from mortgage 13,475 - 15,222
Retirement of note and mortgage (9,044) - (11,376)
Proceeds from sale of senior subordinated notes - - 120,000
Retirement of senior subordinated debentures - - (115,000)
Retirement of mortgage bonds - (10,000) -
Release of escrow funds 2,714 20,083 4,820
Deposit of escrow funds - (4,768) -
Debt issuance costs (846) (269) (5,668)
Purchase of treasury stock (60) - -
Issuance of stock - 438 218
Preferred stock dividend - - (715)
--------- --------- ---------
Net cash provided by financing activities 4,152 2,732 5,076
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 29,271 (12,306) (7,155)
Cash and cash equivalents at beginning of year 3,892 33,163 20,857
--------- --------- ---------
Cash and cash equivalents at end of year $ 33,163 $ 20,857 $ 13,702
========= ========== =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest, net of
amounts capitalized $ 53,626 $ 54,806 $ 57,268
Cash paid during the year for income taxes 2,675 2,531 58
Supplemental schedule of noncash investing and
financing activities:
Capital lease obligations incurred to lease new
equipment 1,120 844 243
Sale proceeds placed in escrow 1,483 450 5,334
Exchange of senior subordinated debentures - 115,000 -
Employee stock ownership plan contribution made
with common stock - - 750
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements
Last day of February 1996 and 1997
(1) Summary of Significant Accounting Policies
------------------------------------------
Accounting policies and methods of their application that
significantly affect the determination of financial position,
cash flows and results of operations are as follows:
(a) Business Description
--------------------
Americold Corporation (the "Company") 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 has a wholly-owned warehousing subsidiary,
Americold Services Corporation.
In addition, the Company operates a limestone quarry. This
business is not significant to the Company as a whole and is
not required to be reported as a separate industry segment.
(b) Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of
Americold Corporation and its wholly-owned subsidiary. All
significant intercompany transactions, profits and balances
have been eliminated.
(c) Property, Plant and Equipment
-----------------------------
Property, plant and equipment are stated at cost.
Depreciation is generally provided on the straight-line method
over the estimated useful lives of the respective assets
ranging from 3 to 45 years for financial reporting purposes
and on accelerated methods for income tax purposes where
possible. Property held under capital leases (at capitalized
value) is amortized on the straight-line method over its
estimated useful life, limited generally by the lease period.
The amortization of the property held under capital leases is
included with depreciation expense. Estimated remaining
useful lives are reviewed periodically for reasonableness and
any necessary change is generally effected at the beginning of
the accounting period in which the revision is adopted.
Maintenance and repairs are expensed in the year incurred;
major renewals and betterments of equipment and refrigeration
facilities are capitalized and depreciated over the remaining
life of the asset.
(d) Cost in Excess of Net Assets Acquired
-------------------------------------
On December 24, 1986, all the outstanding capital stock of the
Company was acquired by a private group consisting of
affiliates of Kelso & Company, Inc., certain institutional
investors and certain key employees and members of the
Company's management. The acquisition of the Company was
accounted for as a purchase. An allocation of the purchase
price was made to the acquired assets and liabilities based on
their estimated fair market values at the date of acquisition.
The unallocated purchase price is the Company's estimate of
goodwill associated with the acquisition and is being
amortized using the straight-line method over a period of 40
years.
The Company assesses the recoverability of the goodwill by
determining whether the amortization of the goodwill balance
over its remaining useful life can be recovered through
projected undiscounted future net income. The amount of
goodwill impairment, if any, is measured based on projected
discounted future net income using a discount rate reflecting
the Company's current average cost of funds.
(e) Debt Issuance Costs
-------------------
Debt issuance costs incurred are amortized over the term of
the related debt.
(f) Income Taxes
------------
Income taxes are computed using the asset and liability
method. Under the asset and liability method, deferred income
tax assets and liabilities are determined based on the
differences between the financial reporting and tax bases of
assets and liabilities and are measured using the currently
enacted tax rates and laws.
(g) Management Estimates and Assumptions
------------------------------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
(h) Revenue Recognition
-------------------
The Company's revenues are primarily derived from services
provided to customers in both handling and storing frozen
products and from freight services. Handling and storage
revenue is based primarily upon the total weight of frozen
product received into and held in storage and is recognized as
earned, not as billed. Differences between revenue earned and
revenue billed are recorded as deferred revenue.
Approximately 50% of the handling revenue is deferred until
the customer's products are released. The freight services
revenues and direct costs are recognized upon delivery of
freight.
(i) Income (Loss) Per Share
-----------------------
Income (loss) per common share is computed by dividing net
income (loss) less preferred dividend requirements, by the
weighted average of common shares outstanding.
(j) Major Customers
---------------
Consolidated net sales to H. J. Heinz Company and subsidiaries
amounted to approximately $45.5 million, $108.1 million and
$149.9 million in the years ended the last day of February
1995, 1996 and 1997, respectively. No other customer
accounted for 10% or more of consolidated net sales.
(k) Cash and Cash Equivalents
-------------------------
All highly liquid investments with a maturity of three months
or less when purchased are considered to be cash equivalents.
There were cash equivalents of $15.4 million and $10.0 million
as of the last day of February 1996 and 1997, respectively.
(l) New Accounting Standards
------------------------
Effective March 1, 1996, the Company adopted Financial
Accounting Standard Board Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of."
This statement generally requires assessment of recoverability
of an asset after events or circumstances that indicate an
impairment to the asset and its future cash flows. Any
impairment loss would be recognized as a one-time charge to
earnings affecting results of operations, but would not affect
the cash flow of the Company. There was no impairment loss to
report upon adoption.
Effective March 1, 1996, the Company adopted Financial
Accounting Standards Board Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation"
("SFAS No. 123"). SFAS No. 123 requires that, except for
transactions with employees that are within the scope of
Accounting Principles Board Opinion No. 25 ("APB No. 25"), all
transactions in which goods or services are the consideration
received for the issuance of equity instruments are to be
accounted for based on the fair value of the consideration
received or the fair value of the equity instrument issued,
whichever is more reliably measurable. However, it also
allows an entity to continue to measure compensation costs for
those plans using the intrinsic value based method of
accounting prescribed by APB No. 25. Entities electing to
follow the accounting methods of APB No. 25 must make pro
forma disclosures of net income and, if presented, earnings
per share, as if the fair value method of accounting defined
in SFAS No. 123 had been applied.
Pro forma disclosures required for entities that elect to
continue to measure compensation cost using APB No. 25 must
include the effects of all awards granted in fiscal years that
begin after December 15, 1994. The Company has elected to
continue using APB No. 25 and make the necessary SFAS No. 123
pro forma disclosures.
The Company has not implemented the requirements of Financial
Accounting Standards Board Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS No. 128"),
although it will be required to do so for fiscal years
beginning March 1, 1997 and thereafter.
This Statement establishes a different method of computing net
income per share than is currently required under the
provisions of Accounting Principles Board Opinion No. 15.
Under SFAS No. 128, the Company will be required to present
both basic net income per share and diluted net income per
share. The Company estimates that the adoption of SFAS No.
128 will not have a material impact on its income per share.
(2) Net Property, Plant and Equipment
---------------------------------
Net property, plant and equipment consists of the following
(in thousands):
Last day
of February
-----------
1996 1997
---- ----
Land $ 31,911 $ 35,038
Refrigerated facilities, buildings
and land improvements 450,402 467,496
Machinery and equipment 67,661 74,599
------- -------
549,974 577,133
Less accumulated depreciation 174,123 192,649
------- -------
$375,851 $384,484
======= =======
(3) Other Noncurrent Assets
-----------------------
Other noncurrent assets consist of the following (in
thousands):
Last day
of February
-----------
1996 1997
---- ----
Restricted funds held by trustee $ 5,037 $ 5,407
Real estate owned 300 300
Security deposits 261 261
Other 3,364 3,037
------- -------
$ 8,962 $ 9,005
======= =======
(4) Leases
------
Assets under capital leases are included in net property,
plant and equipment and consist of the following (in
thousands):
Last day
of February
-----------
1996 1997
---- ----
Refrigerated facilities,
buildings and land improvements $ 7,075 $ 7,075
Machinery and equipment 4,635 3,124
------- -------
11,710 10,199
Less accumulated depreciation 4,108 3,368
------- -------
$ 7,602 $ 6,831
======= =======
Future minimum lease payments under noncancelable leases for
years ended after the last day of February 1997 are as follows
(in thousands):
Year ending the last Capital Operating
day of February leases leases
-------------------- ------- ---------
1998 $ 4,013 $ 6,298
1999 782 5,348
2000 590 4,290
2001 509 3,211
2002 350 3,072
Thereafter 742 20,540
------- -------
Total minimum lease payments $ 6,986 $ 42,759
=======
Less amounts representing
interest 1,235
-------
Present value of net minimum
lease payments $ 5,751
=======
Included in expenses for the years ended the last day of
February 1995, 1996 and 1997 are approximately $9.5 million,
$7.7 million and $7.2 million, respectively, of rental expense
net of sublease rentals for operating leases.
The Company has arranged for up to $25.0 million in lease
financing of which approximately $17.7 million was used as of
the last day of February 1997.
In November 1996, the Company entered into a sale/leaseback
transaction of its Pasco, Washington facility. Of the
approximately $6.8 million of net proceeds, the Company
received approximately $1.5 million at closing and the
remaining $5.3 million was placed in escrow with the Trustee
under the indenture governing the Company's first mortgage
bonds. The Company has until November 1997 to substitute the
unencumbered property for the total amount of cash, or any
portion thereof, held in escrow. Any escrowed funds remaining
after the one year period will be used to repurchase
outstanding mortgage bonds. The deferred gain resulting from
the sale/leaseback transaction of approximately $2.7 million
is being amortized over the approximate ten year life of the
lease.
(5) Accrued Expenses
----------------
Accrued expenses consist of the following (in thousands):
Last day
of February
-----------
1996 1997
---- ----
Accrued payroll $ 3,565 $ 3,747
Accrued vacation pay 2,462 2,831
Accrued taxes 1,022 1,163
Accrued employee stock ownership
plan contribution 750 500
Other 3,805 5,419
------- --------
$ 11,604 $ 13,660
======== ========
(6) Other Current Liabilities
-------------------------
Other current liabilities consist of the following (in
thousands):
Last day
of February
-----------
1996 1997
---- ----
Workers' compensation $ 991 $ 693
Pension 1,100 2,110
Other 2,539 2,456
-------- -------
$ 4,630 $ 5,259
======== =======
(7) Long-term Debt
--------------
Long-term debt consists of the following (in thousands):
Last day
of February
-----------
1996 1997
---- ----
Capital lease obligations (9.3% and
9.1% weighted average interest
rate, respectively) $ 6,720 $ 5,751
Senior subordinated debentures - 15%
fixed, due May 1, 2007 115,000 -
Senior subordinated notes - 12.875%
fixed, due May 1, 2008. Interest
rate may increase by 1% effective
November 1, 1997 - 120,000
First mortgage bonds, Series A - 11.45%
fixed, due June 30, 2002, interest
payments only to January 1, 1999 with
principal amortization commencing
July 1, 1999 140,000 140,000
First mortgage bonds, Series B - 11.5%
fixed, due March 1, 2005, interest
payments only to September 1, 2003
with a mandatory sinking fund payment
of $88,125 on March 1, 2004 176,250 176,250
Mortgage notes payable - various
interest rates ranging from 8.6% to
13.6% requiring monthly principal and
interest payments with maturities
ranging from 2006 to 2017 26,429 29,062
------- -------
464,399 471,063
Less current maturities of long-term
debt 2,732 5,229
------- -------
$ 461,667 $ 465,834
======== =========
The Company has issued first mortgage bonds and the bonds are
secured by mortgages or deeds of trust on 31 of the Company's
facilities. The Company entered into an indenture in
connection with the issuance of the first mortgage bonds
which, like the Company's revolving credit agreement with the
Company's primary bank, requires the Company to meet certain
affirmative and restrictive covenants. Significant
restrictive items include, among others, limitations on
additional indebtedness, liens, dividends, capital
expenditures, asset dispositions, lease commitments and
investments. Also, certain "pro forma debt service" ratios
and senior debt to net worth ratios must be maintained. At
February 28, 1997, the Company was in compliance with all such
covenants.
The Company was notified in December 1996 that the
Metropolitan Life Insurance Company (the "Met") sold its
entire $140 million holdings of the Company's Series A, 11.45%
First Mortgage Bonds. As a result of such transaction, the
Second Amended and Restated Investment Agreement, dated May 5,
1995, between the Met and the Company, which included certain
financial covenants and other restrictive covenants, was
terminated.
On April 9, 1996, the Company sold $120.0 million aggregate
principal amount of the Company's 12.875% Notes. The interest
rate on the 12.875% Notes can be increased from 12.875% to
13.875% if the 12.875% Notes are not rated "B3 or higher" by
Moody's Investor Services, and "B- or higher" by Standard &
Poor's, by November 1, 1997. The 12.875% Notes have been
rated "B-" by Standard & Poor's since they were issued, and as
of February 28, 1997, "Caa" by Moody's Investor Services.
The available amount under the Company's revolving credit
agreement was $23.1 million as of the last day of February
1997, of which $8.7 million of letters of credit were
outstanding. No cash borrowings were outstanding at February
28, 1997.
As of the last day of February 1997, aggregate annual
maturities of long-term debt are as follows (in thousands):
Year ended the last
day of February
-------------------
1998 $ 5,229
1999 2,463
2000 32,502
2001 38,642
2002 38,282
Thereafter 353,945
-------
$ 471,063
========
(8) Employee Benefit Plans
----------------------
(a) Defined Benefit Pension Plans
-----------------------------
The Company has defined benefit pension plans which cover
substantially all employees, other than union employees
covered by union pension plans under collective bargaining
agreements. Benefits under these plans are based on years of
credited service and compensation during the years preceding
retirement or on years of credited service and established
monthly benefit levels.
Pension expense for all plans, including plans jointly
administered by industry and union representatives, totaled
$1.4 million, $1.7 million and $1.9 million for years ended
the last day of February 1995, 1996 and 1997, respectively.
Actuarial valuations for defined benefit plans are performed
as of the end of the plan year. The most recent actuarial
valuations are as of the last day of February 1997.
The funded status of the Company's defined benefit pension
plans and the accrued pension expense amounts recognized in
the Company's consolidated financial statements within other
noncurrent liabilities, as of the last day of February 1996
and 1997, are as follows (in thousands):
<TABLE>
<CAPTION>
Last day of Last day of
February 1996 February 1997
--------------------------- --------------------------
Plans with Plans with Plans with Plans with
assets in accumulated assets in accumulated
excess of benefits in excess of benefits in
accumulated excess of accumulated excess of
benefits assets benefits assets
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Accumulated benefit obligations:
Vested benefits $ 19,902 $ 7,382 $ 19,805 $ 7,740
Nonvested benefits 220 128 947 316
-------- -------- -------- --------
20,122 7,510 20,752 8,056
Effect of assumed future
compensation increases 3,808 - 4,379 -
-------- -------- -------- --------
Projected benefit obligations
for services rendered to date 23,930 7,510 25,131 8,056
Plan assets at fair value 20,644 6,005 22,227 6,659
-------- -------- -------- --------
Projected benefit obligations in excess
of plan assets 3,286 1,505 2,904 1,397
Unrecognized prior service cost (119) (108) (85) (101)
Unrecognized net gain (loss) from past
experience different from that assumed
and effects of changes in assumptions 1,323 (317) 1,277 (361)
-------- -------- -------- --------
Accrued pension liability $ 4,490 $ 1,080 $ 4,096 $ 935
======== ======== ========= =========
</TABLE>
Net periodic pension expense for the years ended the last day
of February 1995, 1996 and 1997 includes the following
components (in thousands):
Last day of February
1995 1996 1997
---- ---- ----
Service cost - benefits earned
during the period $ 1,107 $ 1,165 $ 1,186
Interest cost on projected
benefit obligation 2,121 2,293 2,431
Actual return on plan assets (2,554) (4,301) (2,826)
Net amortization and deferral (143) 1,541 109
-------- -------- --------
$ 531 $ 698 $ 900
======== ======== ========
Actuarial assumptions used for determining pension liabilities
were:
Last day of February
1995 1996 1997
---- ---- ----
Discount rate for interest
cost 8.5% 8.0% 8.0%
Rate of increase in future
compensation levels 4.0% 4.0% 4.0%
Expected long-term rate of
return on plan assets 10.5% 10.5% 10.5%
Plan assets are assigned to several investment management
companies and are invested in various equity and fixed fund
investments in accordance with the Company's investment
policy.
(b) Employee Stock Ownership Plan
-----------------------------
The Company established an employee stock ownership plan,
effective March 1, 1987, which is intended to provide
qualifying employees an equity interest in the Company, as
well as potential retirement benefits. The trust established
under the plan is designed to invest primarily in the
Company's stock. Contributions by the Company, in the form of
common or preferred stock of the Company, or cash, or a
combination thereof, may be made to the trustee on behalf of
eligible participants for each plan year as determined by the
Company's Board of Directors. Participating employees with
vested benefits, upon retirement or termination, have the
option of retaining the stock or selling it back to the
Company at its fair market value.
(c) Postretirement Benefits Other Than Pensions
-------------------------------------------
In addition to providing retirement benefits, the Company
provides certain health care and life insurance benefits for
retired employees. These benefits are provided to
substantially all employees other than certain union employees
who have elected not to participate.
The total of accumulated postretirement benefits obligation
(APBO), which is an unfunded obligation, is as follows:
Last day of February
1995 1996 1997
---- ---- ----
Retirees $ 2,314 $ 2,375 $ 2,618
Active employees 1,511 1,832 2,209
-------- -------- --------
$ 3,825 $ 4,207 $ 4,827
======== ======== ========
The components of net periodic postretirement expense for the
years ended the last day of February are as follows (in
thousands):
1995 1996 1997
---- ---- ----
Service cost benefits earned
in period $ 104 $ 114 $ 123
Interest cost on APBO 313 334 383
Amortization of unamortized
prior service cost (22) (22) (8)
------- ------- -------
$ 395 $ 426 $ 498
======= ======= =======
The discount rate used to determine the APBO and net periodic
expense as of February 28, 1995 was 9.0%, and as of February
29, 1996 and February 28, 1997 was 8.5%.
For fiscal 1997, an 11% increase in the medical cost trend
rate was assumed. This rate is projected to decrease
incrementally to 5.5% after nine years. A 1% increase in the
medical trend rate would increase the APBO by $0.2 million and
increase the net periodic expense by a negligible amount.
9. Common Stockholders' Deficit
---------------------------
The Company has reserved 300,000 shares of common stock for
issuance under a stock option plan established in 1987. Under
the plan, options are granted by the Compensation Committee of
the Board of Directors to purchase common stock at a price not
less than 85% of the fair market value on the date the option
is granted.
Stock options outstanding and transactions involving the stock
option plan are summarized for the years ended the last day of
February as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------------------- -------------------- -----------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 257,934 $16.06 253,795 $16.17 249,656 $15.45
Granted - - - - 160,000 12.30
Exercised - - - - (21,748) 10.00
Cancelled - - - - (160,000) 19.77
Forfeited (4,139) 10.00 (4,139) 10.00 (2,760) 10.00
-------- ----- -------- ----- -------- -----
Outstanding at end of year 253,795 $16.17 249,656 $16.26 225,148 $11.63
======= ===== ======= ===== ======= =====
Options exercisable at
year end 185,795 $14.57 213,656 $15.45 65,148 $10.00
======= ===== ======= ===== ======= =====
Weighted average grant date
fair value of options granted
during the year $ 0 $ 0 $ 2.67
===== ===== =====
</TABLE>
The Company has computed the value of all options granted
during fiscal 1997 using the minimum value method as
prescribed under SFAS No. 123 for pro forma disclosure
purposes. The following weighted average assumptions were
used for the grants made in fiscal 1997: risk free interest
rate at 6.875%; expected life of ten years; and dividend rate
of zero percent.
The total value of options granted during fiscal 1997 was
computed at $428,000. The options granted in fiscal 1997 have
a five-year vesting schedule and compensation will be
amortized on a pro forma basis over that period.
The options granted in fiscal 1997 had not vested as of the
last day of February 1997 and therefore there would be no
compensation cost in the current year under the pro forma
disclosure provisions of SFAS No. 123.
The effects of applying SFAS No. 123 in the pro forma
disclosure are not indicative of future amounts.
As of February 28, 1997, options for 225,148 shares were
outstanding with exercise prices between $10.00 and $12.30,
and a remaining weighted average contractual life of 6.7
years.
10. Preferred Stock
---------------
The Company has contributed shares of its Series A, variable
rate, cumulative preferred stock to the Americold Employee
Stock Ownership Plan (ESOP). The preferred stock is
redeemable by participants of the plan. As of the last day of
February 1996 and 1997, dividends not declared on the
Company's cumulative preferred stock total approximately
$477,000 and $458,000, respectively.
11. Income Taxes
------------
The provision (benefit) for income taxes consists of the
following (in thousands):
1995 1996 1997
---- ---- ----
Federal:
Current $ 2,867 $ - $ 250
Deferred 1,494 (2,858) (2,422)
-------- -------- --------
4,361 (2,858) (2,172)
-------- -------- --------
State:
Current 820 - 112
Deferred 46 (568) (544)
-------- -------- --------
$ 5,227 $ (3,426) $ (2,604)
======== ======== ========
Following is a reconciliation of the difference between income
taxes computed at the federal statutory rate and the provision
for income taxes (in thousands):
1995 1996 1997
---- ---- ----
Computed income tax expense
(benefit) at federal
statutory rate $ 3,777 $ (4,027) $ (3,200)
State and local income taxes,
net of federal income tax
benefits 563 (369) (280)
Amortization of cost in
excess of net assets
acquired 887 970 876
-------- -------- --------
$ 5,227 $ (3,426) $ (2,604)
======== ======== ========
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the related
amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities as of the last day
of February 1996 and 1997 are as follows (in thousands):
1996 1997
---- ----
Deferred tax liabilities:
Property, plant and equipment, due to
differences in depreciation and
prior accounting treatment $(110,574) $(109,099)
-------- ---------
Deferred tax assets:
Receivables, due to allowance for
doubtful accounts 86 155
Employee compensation and other
benefits 1,879 3,605
Capital leases, net 1,714 1,617
Postretirement benefits other than
pensions, due to accrual for
financial reporting purposes 1,650 1,794
Alternative minimum tax credit
carryforwards 2,865 3,192
Other, net 1,659 1,532
--------- ---------
Total deferred tax assets 9,853 11,895
--------- ---------
Net deferred tax liability
before valuation allowance (100,721) (97,204)
Deferred tax asset valuation allowance (1,320) (1,320)
--------- ---------
$(102,041) $ (98,524)
========= =========
The valuation allowance for deferred tax assets as of March 1,
1995 was $1.3 million. The valuation allowance is required to
reduce the amount of deferred tax assets to an amount which
will more likely than not be realized.
At February 28, 1997, the Company has an alternative minimum
tax credit carryforward of approximately $3.2 million
available to offset future regular taxes in excess of future
alternative minimum taxes.
12. Extraordinary Item
------------------
In conjunction with the exchange of the senior subordinated
debentures and the repurchase of the $10.0 million of first
mortgage bonds in fiscal 1996, as discussed in note 15,
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.
13. Disclosures About The Fair Value of Financial Instruments
---------------------------------------------------------
Cash, Trade Receivables, Other Receivables, Accounts Payable
and Accrued Expenses
------------------------------------------------------------
The carrying amount of these items approximates fair value
because of the short maturity of these instruments.
Long-Term Debt
--------------
The fair values of each of the Company's long-term debt
instruments are based on (a) the amount of future cash flows
associated with each instrument discounted using the Company's
current borrowing rate for similar debt instruments of
comparable maturity; (b) in the case of the first mortgage
bonds - Series B and senior subordinated notes, market price;
or (c) in the case of the first mortgage bonds - Series A, at
par, because there is not a market for such securities (in
thousands).
As of the last day
of February 1997
------------------
Estimated
fair
Carrying market
amount value
------ ------
Senior subordinated notes $120,000 $124,500
First mortgage bonds - Series A 140,000 140,000
First mortgage bonds - Series B 176,250 185,063
Mortgage notes payable 29,062 29,062
Limitations
-----------
Fair value estimates are made at a specific point in time,
based on relevant market information and information about the
financial instrument. These estimates are subjective in
nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the
estimates.
14. Gain on Insurance Settlement
----------------------------
Gain on insurance settlement of approximately $17.0 million
relates to the Company's settlement of its first party claims
with its insurance carriers for business interruption,
property damage and out-of-pocket expenses with respect to the
December 1991 fire at the Company's Kansas City, Kansas
warehouse facility. No previous income recognition was
determinable until the Company had settled all of the lawsuits
and claims related to the fire.
15. Plan of Reorganization Under Chapter 11
---------------------------------------
On May 9, 1995, the Company filed a prepackaged plan of
reorganization (the "Plan") under Chapter 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court
for the District of Oregon (the "Court"). The principal
purpose of the Plan was to reduce the Company's short-term
cash requirements with respect to payments due on its
subordinated indebtedness and to adjust certain restrictive
financial covenants and certain other provisions contained in
the Amended and Restated Investment Agreement, dated March 2,
1993, between the Company and the Met. On June 19, 1995, the
Court approved the Company's Disclosure Statement dated April
14, 1995 and the Company's solicitation of votes to accept or
reject the Plan, and confirmed the Plan. On June 30, 1995,
the Plan became effective.
In connection with the Plan, the Company rejected certain
lease agreements relating to four warehouse facilities at
Watsonville, Oakland and San Francisco, California; and
Chicago, Illinois. In February 1996, the Company settled all
lease rejection issues with the lessor of three properties
located in Watsonville, Oakland and San Francisco, California.
Such settlement did not involve the payment of any damages by
the Company. In September 1996, the Company settled all lease
rejection issues with the lessor of the Chicago, Illinois
property. Such settlement, representing one year's rent
recovery by the lessor as provided by the Bankruptcy Code,
required a payment of approximately $0.4 million.
The Company has expensed the settlement payment and related
professional fees and all professional fees and similar
expenditures incurred related to the prepackaged bankruptcy as
"reorganization expenses."
<PAGE>
SCHEDULE II
AMERICOLD CORPORATION
Valuation and Qualifying Accounts
Years ended the last day of
February 1995, 1996 and 1997
(In thousands)
<TABLE>
<CAPTION>
Additions
Balance at charged to Balance
beginning costs and at end
of period expenses Deductions of period
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Year ended the last day
of February 1995 -
Allowance for doubtful accounts -
other receivables $ 4,100 $ - $ 4,100 $ -
Year ended the last day
of February 1996 -
Allowance for doubtful accounts -
other receivables - - - -
Year ended the last day
of February 1997 -
Allowance for doubtful accounts -
other receivables - - - -
</TABLE>
<PAGE>
AMERICOLD CORPORATION
FORM 10-K
EXHIBIT INDEX
Exhibit Page
- -------- ----
(10) (xxx) Form of Addendum to Employment Agreement 85
dated June 30, 1996, between the Company
and certain named executive officers,
and schedule thereto
(11) Statement re Computation of Per Share 87
Earnings
(21) Subsidiary of the Registrant 88
(23) Consent of KPMG Peat Marwick LLP 89
(27) Financial Data Schedule 90
(99) Safe Harbor for Forward-Looking Statements 91
under Private Security Litigation Reform Act
of 1995: Certain Cautionary Statements
<PAGE>
EXHIBIT (10) (xxx)
FORM OF
ADDENDUM TO EMPLOYMENT AGREEMENT
--------------------------------
This is an Addendum to the Employment Agreement ("Agreement")
dated August 1, 1995 between Americold Corporation, an Oregon
corporation ("Americold") and
("Employee"). The effective date of this Addendum is June 30,
1996.
RECITALS
- --------
Americold and Employee desire to have the opportunity to
secure Employee's position as
for an extended term beyond the period set forth in the Agreement.
NOW, THEREFORE, in consideration of their mutual desire to
secure Employee's position and the mutual promises, agreements and
conditions hereinafter set forth, it is agreed as follows:
AGREEMENT
- ---------
Subject to the termination provisions in the Agreement, if by
July 31, 1996, and by each July 31 thereafter in which the
Agreement remains in effect, neither Americold nor Employee gives
the other notice, as provided in paragraph 13 of the Agreement, of
intent not to renew the Agreement upon its expiration date one year
hence, the term of the Agreement shall extend for an additional
one-year period. (E.g., if neither Americold nor Employee gives
notice of intent not to renew by July 31, 1996, the term of the
Agreement shall extend until July 31, 1998).
Except as expressly provided in this Addendum, all terms of
the Agreement, as well as the parties' Covenant Not to Compete and
Consulting and Non-Disclosure Agreement, remain in full force and
effect.
Employee Americold Corporation
By: /s/ Ronald H. Dykehouse
- ----------------------- ------------------------
[Name of Employee] Ronald H. Dykehouse
Title: Chairman & Chief Executive
Officer
<PAGE>
SCHEDULE TO EXHIBIT (10)(xxx)
Form of Addendum to Employment Agreement
The Addenda to Employment Agreement between Americold
Corporation and the employees named below (the "Addenda") are
identical in all material respects other than with respect to the
employee and the employment position, which are as follows for each
employee:
Name of Employee Position
---------------- --------
Joel M. Smith Senior Vice President and
Chief Financial Officer
John P. LeNeveu Executive Vice President
F. Stanley Sena Executive Vice President
J. Roy Coxe Senior Vice President
<PAGE>
(Exhibit 11)
AMERICOLD CORPORATION
STATEMENT REGARDING COMPUTATION OF
PER SHARE EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year ended last day of February
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net income (loss) $ 5,564 $ (9,874) $ (6,540)
Less: total accrued preferred dividend
(49.672 shares x 11.50% x 4/12 yr) (190) - -
(55.384 shares x 13.50% x 7/12 yr) (436) - -
(52.936 shares x 13.50% x 1/12 yr) (60) - -
(52.936 shares x 13.50% x 12/12 yr) - (715) -
(52.936 shares x 13.50% x 4/12 yr) - - (237)
(52.936 shares x 13.00% x 8/12 yr) - - (458)
------- ------- -------
Net income (loss) for per share calculation $ 4,878 $(10,589) $ (7,235)
======= ======= =======
Weighted average number of shares
outstanding 4,864 4,867 4,952
======= ======= =======
Net income (loss) per share $ 1.00 $ (2.17) $ (1.46)
======= ======= ========
</TABLE>
<PAGE>
(Exhibit 21)
AMERICOLD CORPORATION
List of Subsidiaries
Names
State of Under Which
Name Incorporation Conducts Business
- ---- ------------- -----------------
Americold Services Delaware Americold Services
Corporation Corporation
<PAGE>
(Exhibit 23)
Consent of Independent Auditors
-------------------------------
The Board of Directors
Americold Corporation:
We consent to incorporation by reference in the Registration
Statement (No. 33-22556) on Form S-8 of Americold Corporation of
our report dated May 2, 1997 relating to the consolidated balance
sheets of Americold Corporation as of the last day of February 1996
and 1997, and the related consolidated statements of operations,
stockholders' deficit, and cash flows and related schedule for each
of the years in the three-year period ended the last day of
February 1997, which report appears in the February 28, 1997 Annual
Report on Form 10-K of Americold Corporation.
/s/ KPMG Peat Marwick LLP
Portland, Oregon
May 28, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM AMERICOLD CORPORATION'S FINANCIAL STATEMENTS CONTAINED IN
ITS ANNUAL REPORT ON FORM 10-K FOR THE PERIOD ENDING FEBRUARY
28, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> FEB-28-1997
<CASH> 13,702
<SECURITIES> 0
<RECEIVABLES> 27,560
<ALLOWANCES> 396
<INVENTORY> 0
<CURRENT-ASSETS> 51,755
<PP&E> 577,133
<DEPRECIATION> 192,649
<TOTAL-ASSETS> 531,034
<CURRENT-LIABILITIES> 64,285
<BONDS> 465,834
<COMMON> 50
5,753
0
<OTHER-SE> (113,759)
<TOTAL-LIABILITY-AND-EQUITY> 531,034
<SALES> 310,767
<TOTAL-REVENUES> 310,767
<CGS> 228,762
<TOTAL-COSTS> 262,910
<OTHER-EXPENSES> 701
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56,678
<INCOME-PRETAX> (9,144)
<INCOME-TAX> (2,604)
<INCOME-CONTINUING> (6,540)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,540)
<EPS-PRIMARY> ($1.46)
<EPS-DILUTED> ($1.46)
</TABLE>
<PAGE>
(Exhibit 99)
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995:
CERTAIN CAUTIONARY STATEMENTS
-----------------------------
Americold Corporation and its representatives may make forward-
looking statements (as such term is defined in the Private
Securities Litigation Reform Act of 1995) from time-to-time. The
Company invokes to the fullest extent possible the protection of
the Private Securities Litigating Reform Act and the judicially
created "bespeaks caution" doctrine with respect to such
statements. Accordingly, the Company is filing this Exhibit 99,
which lists certain factors that may cause actual results to differ
materially from those contained in such forward-looking statements.
This list is not necessarily exhaustive. There can be no assurance
that this Exhibit lists all material risks to the Company at any
specific point in time.
SUBSTANTIAL LEVERAGE; NET LOSSES
- --------------------------------
The Company is highly leveraged, with a percentage of total
debt to total capitalization at February 28, 1997 of approximately
120%. In addition, the Company may, subject to certain
restrictions in its debt agreements, incur further indebtedness
from time-to-time to finance expansion either through construction,
acquisitions or capital leases, or for other purposes.
Significant payments are required to service the Company's
debt. As a result of the significant interest charges on the debt
incurred in connection with its leveraged acquisition in December
1986, the adverse effect on the Company's net sales resulting from
drought and flood conditions in the agricultural sector in the
United States in certain years, the adverse effects of a December
1991 fire at the Kansas City, Kansas warehouse; and operational
problems at certain warehouses in fiscal 1997, the Company has
experienced net losses.
The extent to which the Company is leveraged could have
important consequences, including : (a) impairment of the
Company's ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions or other
purposes; (b) impairment of the Company's ability to refinance
existing debt; (c) dedication of a substantial portion of the
Company's cash flow from operations to the payment of debt service
requirements (principal and interest) on its indebtedness; (d)
vulnerability of the Company to changes in general economic
conditions, including in the agricultural sector; and (e)
limitations on the Company's ability to capitalize on significant
business opportunities and to respond to competition, including
limitations on its ability to make capital expenditures included in
its business plan.
On April 9, 1996, the Company sold $120.0 million aggregate
principal amount of the Company's 12.875% Notes. The interest rate
on the 12.875% Notes can be increased from 12.875% to 13.875% if
the 12.875% Notes are not rated "B- or higher" by Standard &
Poor's, and "B3 or higher" by Moody's Investor Services, by
November 1, 1997. The 12.875% Notes have been rated "B-" by
Standard & Poor's since they were issued, and as of May 1, 1997,
"Caa" by Moody's Investor Services.
RESTRICTIONS IMPOSED BY DEBT AGREEMENTS
- ---------------------------------------
The Company's debt agreements contain a number of significant
financial and operating covenants that, among other things,
significantly restrict the ability of the Company and its
subsidiary to dispose of assets, incur additional indebtedness, pay
dividends, create liens on assets, enter into leases, make
investments or acquisitions, engage in mergers or consolidations,
or engage in certain transactions with subsidiaries and affiliates
and otherwise restrict corporate activities.
To remain in compliance with these covenants, the Company will
be required to achieve financial and operating results that are
better than those achieved historically. There can be no assurance
that such improved results will be achieved.
The breach of any of these covenants or restrictions could
result in a default under the Company's debt agreements. In the
event of such a default, the holders of such indebtedness could
elect to declare all such indebtedness immediately due and payable,
including accrued and unpaid interest, and to terminate their
commitments (if any) with respect to funding obligations under the
agreements related to such indebtedness. In addition, such holders
could proceed against any collateral securing their debt. The
collateral securing the Company's senior indebtedness constitutes
substantially all of the assets of the Company.
SUBSTANTIAL PAYMENT OBLIGATIONS; CONSEQUENCES OF FAILURE TO SERVICE
DEBT
- -------------------------------------------------------------------
The Company has substantial payment obligations with respect
to its indebtedness. No assurance can be given that the Company
will be able to generate sufficient cash flow from operations to
meet its debt service obligations. To make long-term debt
repayments, the Company will attempt to increase operating cash
flow through improvements in existing operations, through expansion
of its transportation management business, and through capacity
growth by pursuing viable growth opportunities, such as the
acquisition or expansion of warehouse facilities. Alternatively,
the Company may seek to refinance its debt as it matures. There
can be no assurance, however, that such improved operations,
expanded transportation management business, warehouse capacity
growth or refinancing will be accomplished successfully.
If for any reason the Company were unable to meet its debt
service obligations, it would be in default under the terms of its
indebtedness. The consequences of any such default could be the
same as a covenant default described above under "Restrictions
Imposed by Debt Agreements."
COMPANY DEPENDENCE ON SIGNIFICANT CUSTOMERS
- -------------------------------------------
A number of the Company's facilities depend to a large extent
upon one or a small number of customers. In fiscal 1997, the
Company's ten largest customers accounted for approximately 72% of
the Company's total net sales. One customer of the Company, Heinz
and its subsidiaries, accounted for approximately 48% of the
Company's net sales in fiscal 1997. Substantially all of the
Company's transportation management services sales are attributable
to Heinz. An interruption or reduction in the business received
from such customers would result in a decrease in sales at certain
facilities and in overall net sales of the Company.
EXPANSION OF TRANSPORTATION MANAGEMENT SERVICES
- -----------------------------------------------
The Company has recently expanded its transportation
management services, and its current strategy involves assuming
full responsibility for certain logistics requirements of its
customers. The maintenance and continued growth of the Company's
transportation management services responsibilities is dependent
upon meeting customer expectations. There can be no assurance that
existing transportation management services customers will continue
to use the Company's services, that the Company will be successful
in its effort to reach arrangements with additional customers for
the provision of integrated logistics services or that the Company
will not experience losses in the transportation management
business in the future. In addition, the Company procures carrier
services at negotiated prices. There is no assurance that there
will not be price increases or that the Company will be able to
bill its customers for the increased costs. Also, the demand for
or supply of carriers may change which may have an adverse effect
upon the Company.
COMPETITION
- -----------
Americold operates in a competitive environment in which
several national and regional, and many smaller, warehouse
operators compete with the Company. One important competitive
factor is the location of the Company's warehouse facilities, and,
consequently, the geographic markets in which it competes are
primarily local. Competition varies from local market to local
market, but almost all local markets are characterized by low
barriers to entry since any competitor able to obtain financing may
build a competing facility. In addition, the Company's customers,
many of which have substantially greater resources than the
Company, may divert business from the Company or build their own
private refrigerated warehouse facilities.
In the transportation management business, there are several
national and local enterprises that presently provide or may in the
future provide transportation management services to frozen food
shippers.
DEPENDENCE ON AGRICULTURAL MARKETS
- ----------------------------------
A substantial portion of the Company's warehouse sales are
derived from storage and handling of agricultural products and
foods prepared from agricultural products. The Company's operating
results, therefore, may be materially affected by weather or other
conditions affecting the agricultural sector generally.
DEPENDENCE ON FROZEN FOODS
- --------------------------
New methods for preserving or distributing food and produce
also represent potential sources of competition for the Company.
Food companies have been working to develop methods to package
fresh produce for longer shelf life without freezing. Also,
alternate methods for preserving food products are being constantly
evaluated. To the extent alternatives to frozen food are
successful, the Company's business may be adversely affected.
