<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549-1004
-----------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 26, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-09559
COLORADO PRIME CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 11-2826129
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1 MICHAEL AVENUE, FARMINGDALE, NEW YORK 11735
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516)-694-1111
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
At August 7, 1998, 1,000 shares of the registrant's Common Stock were
outstanding.
<PAGE> 2
COLORADO PRIME CORPORATION
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
- ------- --------------------- --------
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets 1
June 26, 1998 and September 26, 1997
Statements of Consolidated Operations 2
Thirteen weeks ended June 26, 1998, Seven weeks
ended June 27, 1997 and Six weeks ended May 9,
1997
Statements of Consolidated Operations 3
Thirty-nine weeks ended June 26, 1998, Seven weeks
ended June 27, 1997 and Thirty-two weeks ended
May 9, 1997
Statements of Consolidated Cash Flows 4
Thirty-nine weeks ended June 26, 1998, Seven weeks
ended June 27, 1997 and Thirty-two weeks ended
May 9, 1997
Notes to Consolidated Financial Statements 5
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 7
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
- -------- -----------------
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
<PAGE> 3
COLORADO PRIME CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C> <C>
June 26, September 26,
1998 1997
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash $ 631 $ 972
Accounts receivable--net 58,241 57,482
Inventories--net 4,428 4,538
Prepaid expenses and other current assets 1,683 1,399
Refundable income taxes -- 2,483
Deferred income tax benefit 6,992 6,992
-------- --------
Total current assets 71,975 73,866
-------- --------
PROPERTY, PLANT AND EQUIPMENT--NET 5,535 5,905
NONCURRENT ACCOUNTS RECEIVABLE--NET 37,235 36,503
GOODWILL--NET 48,059 44,744
OTHER ASSETS--NET 8,697 8,755
-------- --------
TOTAL ASSETS $171,501 $169,773
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,384 $ 5,998
Accrued expenses 13,622 15,191
Income and other taxes payable 1,750 1,184
Current portion of capital lease obligations 61 258
-------- --------
Total current liabilities 19,817 22,631
-------- --------
REVOLVER 25,134 20,339
-------- --------
SENIOR UNSECURED NOTES, NET OF DISCOUNT 98,208 98,059
-------- --------
LONG-TERM PORTION OF CAPITAL LEASE OBLIGATIONS 9 19
-------- --------
OTHER LIABILITIES 3,258 3,100
-------- --------
STOCKHOLDER'S EQUITY
Common Stock; $.01 per share par value;
1,000 shares authorized, issued and outstanding -- --
Paid-in capital 25,868 25,873
Accumulated deficit (793) (248)
-------- --------
Total stockholder's equity 25,075 25,625
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $171,501 $169,773
======== ========
</TABLE>
1
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COLORADO PRIME CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(DOLLARS IN THOUSAND)
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Seven Weeks | Six Weeks
Ended Ended | Ended
June 26, June 27, | May 9,
1998 1997 | 1997
-------------- ----------- | ---------
<S> <C> <C> | <C>
|
PRODUCT SALES $36,047 $19,704 | $14,994
FINANCE INCOME EARNED 3,362 2,009 | 1,625
------- ------- | -------
TOTAL REVENUE 39,409 21,713 | 16,619
|
COST OF GOODS SOLD 13,417 7,672 | 5,866
------- ------- | -------
|
GROSS MARGIN 25,992 14,041 | 10,753
------- ------- | -------
|
OTHER COSTS AND EXPENSES: |
Selling, general and administrative 22,198 10,867 | 8,988
Amortization of goodwill 399 188 | 131
Interest expense 4,008 2,153 | 1,047
Other expense 82 101 | 130
------- ------- | -------
Total costs and expenses 26,687 13,309 | 10,296
------- ------- | -------
|
(LOSS) INCOME BEFORE PROVISION (BENEFIT) |
FOR INCOME TAXES (695) 732 | 457
|
(BENEFIT) PROVISION FOR |
INCOME TAXES (300) -- | 425
------- ------- | -------
|
NET (LOSS) INCOME $ (395) $ 732 | $ 32
======= ======= | =======
</TABLE>
2
<PAGE> 5
COLORADO PRIME CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Thirty-nine Weeks Seven Weeks | Thirty-two Weeks
Ended Ended | Ended
June 26, June 27, | May 9,
1998 1997 | 1997
----------------- ----------- | ----------------
<S> <C> <C> | <C>
PRODUCT SALES $105,209 $19,704 | $85,510
FINANCE INCOME EARNED 10,734 2,009 | 8,637
-------- ------- | -------
TOTAL REVENUE 115,943 21,713 | 94,147
COSTS OF GOODS SOLD 39,164 7,672 | 32,949
-------- ------- | -------
GROSS MARGIN 76,779 14,041 | 61,198
-------- ------- | -------
OTHER COSTS AND EXPENSES: |
Selling, general and administrative 62,682 10,867 | 48,749
Amortization of goodwill 1,160 188 | 713
Interest expense 12,052 2,153 | 5,713
Other expense 388 101 | 426
-------- ------- | -------
Total costs and expenses 76,282 13,309 | 55,601
-------- ------- | -------
INCOME BEFORE PROVISION |
FOR INCOME TAXES 497 732 | 5,597
PROVISION FOR INCOME TAXES 631 0 | 2,414
-------- ------- | -------
NET (LOSS)/INCOME $ (134) $ 732 | $ 3,183
======== ======= | =======
</TABLE>
3
<PAGE> 6
COLORADO PRIME CORPORATION
STATEMENTS OF CONSOLIDATED CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Thirty-nine Weeks Seven Weeks | Thirty-two Weeks
Ended Ended | Ended
June 26, June 27, | May 9,
1998 1997 | 1997
----------------- ----------- | ----------------
<S> <C> <C> | <C>
CASH FLOWS FROM OPERATING ACTIVITIES: |
Net (loss)/income (134) $ 732 | $ 3,183
------ ------- | -------
Adjustments to reconcile net (loss)/income to |
net cash |
provided by (used in) operating activities: |
Depreciation and amortization 3,189 674 | 2,292
Deferred income taxes -- -- | 845
Provision for doubtful accounts 5,404 724 | 3,073
Change in operating assets and liabilities: |
Accounts receivable (6,895) (1,237) | (6,225)
Inventories 110 81 | (747)
Prepaid expenses and other (284) (105) | (77)
Recoverable income taxes 2,483 -- | --
Other assets (719) (322) | (33)
Accounts payable (1,614) 1,167 | (1,560)
Accrued expenses (5,407) (3,222) | (232)
Other liabilities (479) (561) | 37
Income and other taxes payable 566 (70) | 1,407
------ ------- | -------
Total adjustments (3,646) (2,871) | (1,220)
------ ------- | -------
Net cash provided by (used in) operating activities (3,780) (2,139) | 1,963
------ ------- | -------
CASH FLOWS FROM INVESTING ACTIVITIES: |
Investments in property, plant and equipment (733) (69) | (580)
Net assets acquired -- (2,352) | --
------ ------- | -------
Net cash used in investing activities (733) (2,421) | (580)
------ ------- | -------
CASH FLOWS FROM FINANCING ACTIVITIES: |
Borrowings (repayment) of revolver 4,795 (1,300) | --
Decrease in notes payable -- -- | (1,051)
Net proceeds from 144a notes -- 87,566 | --
Proceeds from issuance of revolver -- 24,000 | --
Capital contribution from parent -- 25,873 | --
Repayment of notes payable -- (58,707) | --
Repayment of senior notes -- (43,260) | --
Distribution to former shareholders -- (33,120) |
Decrease in capital lease obligations (207) (41) | (258)
Dividend to CPH (411) -- | --
Return of capital to CPH (5) -- | --
------ ------- | -------
Cash provided by (used in) financing activities 4,172 1,011 | (1,309)
------ ------- | -------
NET INCREASE (DECREASE) IN CASH (341) (3,549) | 74
|
CASH, BEGINNING OF PERIOD 972 5,544 | 1,716
------ ------- | -------
CASH, END OF PERIOD $ 631 $ 1,995 | $ 1,790
====== ======= | =======
</TABLE>
4
<PAGE> 7
COLORADO PRIME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(unaudited)
1. Colorado Prime Corporation (the "Company" or "CPC") is a Delaware
corporation and was incorporated in 1986. The Company is a wholly-owned
subsidiary of Colorado Prime Holdings Inc. ("CPH"), formerly KPC Holdings
Corporation ("Holdings"). On May 9, 1997, pursuant to a merger agreement
between Holdings and Thayer Equity Investors III, L.P., a private equity
investment limited partnership ("Thayer"), Colorado Prime Acquisition
Corp. ("CPAC"), a transitory acquisition company established by Thayer
prior to the consummation of the merger, merged with and into Holdings
(the "Merger") following which Holdings was the surviving corporation and
was renamed CPH.
As a result of the merger, a new basis of accounting under the "push down"
method was adopted effective May 9, 1997. Under the method, the assets and
liabilities of the Company were revalued to reflect CPH's new cost basis
in the Company, which is based on the fair values of such assets and
liabilities on May 9, 1997. Financial data for the period subsequent to
May 9, 1997 reflects the adoption of this new basis of accounting and,
accordingly, data for all fiscal periods presented herein may not be
comparable with the data presented which includes the period subsequent to
May 9, 1997.
2. Reference is made to the notes to consolidated financial statements
contained within the Company's audited financial statements for the period
ended September 26, 1997 included in the Company's Annual Report on Form
10-K. In the opinion of management, the interim unaudited financial
statements included herein reflect all adjustments necessary, consisting
of normal recurring adjustments, for a fair presentation of such data on
a basis consistent with that of the audited data presented therein. The
results of operations for interim periods are not necessarily indicative
of the results to be expected for a full year.
3. The consolidated financial statements include the accounts of the
"Company" and its wholly-owned subsidiaries; Kal-Mar Properties Corp.
("Kal-Mar"), Concord Financial Services, Inc. ("Concord") and Prime Foods
Development Corporation ("Prime"). In connection with the Merger discussed
in Note 1, the Company issued $100,000 of Senior Unsecured Notes (the
"Notes"), which bear interest at 12.5% per annum and mature in 2004. (See
the Company's Annual Report on Form 10-K for a further discussion of the
Notes.) The Notes are guaranteed on a senior unsecured basis by all
existing subsidiaries (there are no non-guarantor subsidiaries) and any
future U.S. subsidiaries of the Company. The guarantees of the
subsidiaries are full, unconditional, joint and several. Summary financial
data for Kal-Mar, Concord and Prime are as follows:
5
<PAGE> 8
<TABLE>
<CAPTION>
June 26, 1998
(Dollars in Thousands)
Kal-Mar Concord Prime
------- ------- -----
<S> <C> <C> <C>
Current assets $210 63,340 12
Non-current assets 831 37,633 --
Current liabilities (88) (2,778) (711)
Non-current liabilities -- (56,900) --
---- ------- -----
Net assets (liabilities) $953 $41,295 $(699)
==== ======= =====
</TABLE>
<TABLE>
<CAPTION>
For the thirty-nine weeks ended
June 26, 1998
(Dollars in Thousands)
Kal-Mar Concord Prime
------- ------- -----
<S> <C> <C> <C>
Net revenues $120 $15,161 $0
Gross profit 120 15,161 0
Income before provision for
income taxes 41 7,002 0
</TABLE>
Separate financial statements of the Company's subsidiaries are not presented,
as the Company's management has determined that (i) the data presented above
provides meaningful information and (ii) the date in separate financial
statements other than that presented above would not be material to the
investors of the Notes.
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Certain information set forth herein contains forward-looking statements, as
such term is defined in Section 27A of the Securities Act of 1933, as amended
and Section 21 E of the Securities Exchange Act of 1934, as amended. Such
statements are subject to certain risks and uncertainties discussed herein,
which could cause actual results to differ materially from those in the
forward-looking statements.
OVERVIEW
The Company is a leading direct marketer of high quality, value-added food
programs and products related to in-home dining and entertainment. Using a
combination of telemarketing and in-home selling, Colorado Prime Corporation
believes that it is the only company to offer this type of in-home shopping
service on a broad scale, serving 31 states through 79 sales offices. The
Company sells individually packaged, top quality meats and poultry, seafood,
assorted pasta dishes and a wide selection of prepared entrees for direct
delivery to consumer households. The Company's food products are of a quality
generally found only in specialty gourmet shops and high-end restaurants and
require simple preparation using a microwave, conventional oven or grill. As a
complement to its food products, the Company also sells food-related and home
entertainment appliances and accessories with unique features not generally
available in traditional retail channels. The purchase of non-food items
enables customers to earn a lifetime discount on food purchases.
PRESENTATION OF DATA FOR COMBINED PERIODS
The pro forma results of operations for the thirteen and thirty-nine weeks ended
June 27, 1997 are presented for comparative purposes only, and not as combined
or consolidated results of operations in accordance with Generally Accepted
Accounting Principles ("GAAP") nor as a replacement for the separate period
results of operations presented in the Company's consolidated financial
statements presented elsewhere in this report.
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED JUNE 26, 1998 COMPARED TO THIRTEEN WEEKS ENDED JUNE 27,
1997.
Total revenue for the thirteen weeks ended June 26, 1998 increased by $1.1
million or 2.8%, to $39.4 million from $38.3 million for the thirteen weeks
ended June 27, 1997. Food revenue for the thirteen weeks ended June 26, 1998
and June 27, 1997 was $21.6 million. Non-food revenue for the thirteen weeks
ended June 26, 1998 increased by $1.3 million or 10.1%, to $14.5 million from
$13.2 million for the thirteen weeks ended June 27, 1997. The increase is
non-food revenue was due to higher sales from new and existing customers and
higher service policy revenue. Finance income for the thirteen weeks ended June
26, 1998 decreased by $0.2 million or 7.5%, to $3.4 million from $3.6 million
for the thirteen weeks ended June 27, 1997. The decrease in finance income
resulted from a reduction in eligible non-food interest earning accounts,
offset by higher handling fees from food transactions.
7
<PAGE> 10
Gross profit for the thirteen weeks ended June 26, 1998 increased by $1.2
million, or 4.8%, to $26.0 million from $24.8 million for the thirteen weeks
ended June 27, 1997. The gross profit margin increased to 66.0% for the
thirteen weeks ended June 26, 1998 from 64.7% for the thirteen weeks ended June
27, 1997. The increase in the gross profit margin was primarily due to a
favorable mix of total revenues towards non-food products which have a higher
margin.
SG&A expenses are principally comprised of selling, telemarketing, delivery and
general and administrative expenses. For the thirteen weeks ended June 26, 1998,
these expenses increased by $2.3 million or 11.8%, to $22.2 million from $19.9
million for the thirteen weeks ended June 27, 1997. The increase was primarily
due to $1.5 million higher bad debt expense due to an increase in the age and
rate of delinquent accounts, $.5 million higher incentive pay to sales personnel
and a $.25 million increase in telemarketing costs, partially offset by $.25
million lower non-sales incentive costs. As a percentage of total revenues, SG&A
expenses increased to 56.3% for the thirteen weeks ended June 26, 1998 from
51.9% for the thirteen weeks ended June 26, 1997.
Interest expense for the thirteen weeks ended June 26, 1998 increased to $4.0
million from $3.2 million for the thirteen weeks ended June 27, 1997. The
increase was attributable to a greater level of borrowing at a higher rate of
interest under the new debt facilities, as compared to the financing in effect
during the previous period.
Other expense for the thirteen weeks ended June 26, 1998 was $.1 million and
$.2 million for the thirteen weeks ended June 27, 1997.
Provision (benefit) for income taxes for the thirteen weeks ended June 26, 1998
decreased by $.7 million to $(.3) million from $.4 million for the thirteen
weeks ended June 27, 1997. The increase in the effective income tax rate is due
to an increase in certain nondeductible expenses as a percentage of taxable
income.
Net loss for the thirteen weeks ended June 26, 1998 was $.4 million as compared
to net income of $.8 million for the thirteen weeks ended June 27, 1997 for the
reasons discussed above.
THIRTY-NINE WEEKS ENDED JUNE 26, 1998 COMPARED TO THIRTY-NINE WEEKS ENDED JUNE
27, 1997.
Total Revenue for the thirty-nine weeks ended June 26, 1998 and June 27, 1997
was $115.9 million. Food revenue for the thirty-nine weeks ended June 26, 1998
decreased by $.4 million or .6%, to $64.0 million from $64.4 million for the
thirty-nine weeks ended June 27, 1997. The decrease in food revenue was due to
lower sales to existing customers partially offset by an increase in sales to
new customers. Non-food revenue for the thirty-nine weeks ended June 26, 1998
increased by $.4 million or .9%, to $41.2 million from $40.8 million for the
twenty-six weeks ended June 27, 1997. The increase in non-food revenue is due
to higher sales to new customers and higher service policy revenue, partially
offset by a decrease in sales to existing customers. Finance income for the
thirty-nine weeks ended June 26, 1998 and June 27, 1997 was $10.7 million.
8
<PAGE> 11
Gross Profit for the thirty-nine weeks ended June 26, 1998 increased by $1.5
million or 2% to $76.8 million from $75.3 million for the thirty-nine weeks
ended June 27, 1997. The gross profit margin increased to 66.2% for the
thirty-nine weeks ended June 26, 1998 from 64.9% for the thirty-nine weeks
ended June 27, 1997. The increase in the gross profit margin was primarily due
to a favorable mix within non-food sales towards products that have a higher
margin.
SG&A expenses are principally comprised of selling, delivery and general and
administrative expenses. For the thirty-nine weeks ended June 26, 1998, these
expenses increased by $3.1 million or 5.1%, to $62.7 million from $59.6 million
for the thirty-nine weeks ended June 27, 1997. The increase was primarily due
to $1.6 million higher bad debt expense due to an increase in the age and rate
of delinquent accounts, $.9 million higher incentive pay to sales personnel, $.7
million higher telemarketing costs and $.3 million higher medical insurance
costs, partially offset by $.2 million of lower non-sales incentive costs. As a
percentage of total revenues, SG&A expenses increased to 54.1% for the
thirty-nine weeks ended June 26, 1998 from 51.5% for the thirty-nine weeks
ended June 27, 1997.
Interest expense for the thirty-nine weeks ended June 26, 1998 increased to
$12.1 million from $7.9 million for the thirty-nine weeks ended June 27, 1997.
The increase was attributable to a greater level of borrowing at a higher rate
of interest under the new debt facilities, as compared to the financing in
effect during the previous period.
Other expense for the thirty-nine weeks ended June 26, 1998 was $.4 million and
$.5 million for the thirty-nine weeks ended June 27, 1997.
Provision for income taxes for the thirty-nine weeks ended June 26, 1998
decreased by $2.1 million to $0.6 million from $2.7 million for the thirty-nine
weeks ended June 27, 1997. The increase in the effective income tax rate is due
to an increase in certain nondeductible expenses as a percentage of taxable
income for the thirty-nine weeks ended June 26, 1998 and June 27, 1997. Due to
the impact of certain fixed, recurring, nondeductible expenses on the Company's
effective income tax rate, the effective rate is, in future periods, subject to
change based on the earnings achieved and the relationships of those earnings
to those fixed nondeductible expenses.
Net Loss for the thirty-nine weeks ended June 26, 1998 was $.1 million as
compared to net income of $3.6 million for the thirty-nine weeks ended June 27,
1997 for the reasons discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the thirty-nine weeks ended June 26,
1998 was $3.8 million, primarily comprised of non-cash charges of $8.6 million
and proceeds from income tax recoveries of $2.5 million offset by a $6.9 million
increase in accounts receivable, $.7 million increase in other assets and a $7.0
million decrease in accounts payable and accrued expenses.
Net cash used in investing activities for the thirty-nine weeks ended June 26,
1998 of $.7 million was for capital expenditures.
9
<PAGE> 12
Net cash provided by financing activities for the thirty-nine weeks ended June
26, 1998 was $4.2 million, primarily comprised of $5.0 million additional
borrowings under the revolver, partially offset by $.2 million of repayments of
capital leases and a $.4 million dividend to CPH to fund certain expenses
incurred by CPH.
The Company had working capital of $52.2 million as of June 26, 1998 compared to
$51.2 million as of September 26, 1997.
The Company has a $50.0 million working capital revolver, with $24.9 million of
unused capacity as of June 26, 1998. The working capital revolver contains
certain covenants requiring the Company to meet certain financial tests
including a minimum fixed charge coverage ratio, a minimum interest coverage
ratio, a maximum leverage ratio, the maintenance of a minimum net worth and a
limitation on capital expenditures. The working capital revolver and the senior
unsecured notes impose certain other restrictions on the Company, including
restrictions on its ability to incur indebtedness, pay dividends, make
investments, grant liens, sell its assets and engage in certain other
activities. In addition, the indebtedness of the Company under its working
capital revolver is secured by all of the assets of the Company, including the
Company's real and personal property, inventory, accounts receivable,
intellectual property and other intangibles.
Management believes that cash flow from operations, together with other
available sources of funds including the availability of borrowings under its
working capital revolver will be adequate for at least the next twelve months to
make required payments of principal and interest on the Company's indebtedness
and to fund anticipated capital expenditures and working capital requirements.
The ability of the Company to meet its debt service obligations and reduce its
total debt will be dependent, however, upon the future performance of the
Company which, in turn, will be subject to general economic conditions and to
financial, business and other factors, including factors beyond the Company's
control. Debt outstanding under the working capital revolver will bear interest
at floating rates; therefore, the Company's financial condition is and will
continue to be affected by changes in prevailing interest rates.
Inflation
The Company believes that inflation has not had a material impact on its
results of operations for the thirty-nine weeks ended June 26, 1998.
Other -- Year 2000
The Year 2000 issue exists because many computer systems and applications
currently use two-digit date fields to designate a year. As the century date
change occurs, date-sensitive systems will recognize the year 2000 as 1900, or
not at all. This inability to recognize or properly treat the Year 2000 may
cause systems to process critical financial and operational information
incorrectly. The Company has assessed and continues to assess the impact of the
Year 2000 on its operations which includes the evaluation of the measures being
undertaken by its critical suppliers to address their Year 2000 compliance. The
Company believes, based upon its internal reviews and other factors, the future
external and internal costs to be incurred relating to the modification of
internal use software for the Year 2000 will not have a material effect on the
Company's results of operations or financial position.
10
<PAGE> 13
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit No. Description
10.1 Waiver No. 1 to Credit Agreement dated May 12, 1998
10.2 Amendment No. 4 to Credit Agreement dated June 26, 1998
27.1 Financial Data Schedule
(b) There were no Forms 8-K filed during the quarter for which this report
is filed
11
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto daily authorized.
COLORADO PRIME CORPORATION
(Registrant)
Dated: August 7, 1998 By: /s/ William F. Dordelman
---------------------------------
Chief Executive Officer and
Chairman of the Board
Dated: August 7, 1998 By: /s/ Matthew Burris
---------------------------------
Chief Financial Officer, Vice
President and Director
12
<PAGE> 1
WAIVER NO. 1 AND CONSENT
This Waiver No. 1 and Consent (this "WAIVER") waives certain conditions of
that certain Credit Agreement dated as of May 9, 1997 (as amended, modified and
supplemented from time to time, including pursuant to this Waiver, the "CREDIT
AGREEMENT"), among COLORADO PRIME CORPORATION, a Delaware corporation
("BORROWER"), each institution identified as a lender on Annex I thereto (each,
together with its successors and assigns, a "LENDER"), and DRESDNER BANK AG,
NEW YORK AND GRAND CAYMAN BRANCHES, ("ADMINISTRATIVE AGENT") acting as the
Agents for itself and the other Lenders, and is entered into as of May 12, 1998
among Borrower, the Administrative Agent and the Lenders executing the
signature pages hereof.
RECITALS
WHEREAS, Colorado Prime Corporation ("BORROWER") entered into a real
property lease dated as of September 18, 1997, as amended as of November 26,
1997 and February 11, 1998, (the "LEASE") with Bi-County Associates L.P. for
the lease of approximately 29,242 square feet of office space in Farmingdale,
New York.
WHEREAS, Borrower intends to move its chief executive office to the new
office space in approximately August 1998; and
WHEREAS, Borrower has requested that the Lenders consent to the execution
of the Lease and otherwise waive certain conditions of the Credit Agreement in
connection therewith as set forth below;
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used herein without definition shall have
the meanings assigned to such terms in the Credit Agreement, and the provisions
of Section 1.2 of the credit agreement shall apply hereto as if fully set forth
herein.
2. Waiver of Restriction on Lease. Notwithstanding the terms of Sections
7.3(a)(1), 7.3(d), and 9.1(c) of the Credit Agreement to the contrary, the
Required Lenders hereby consent to the execution of the Lease, provided, that
the Lease shall not create any Lien other than a Permitted Lien.
3. Representations. To induce the Administrative Agent and the Lenders to
enter into this Waiver, Borrower hereby represents and warrants as follows:
(a) Representations and Warranties. All representations and warranties
contained in
<PAGE> 2
the Credit Agreement and the other Credit Documents are true and correct in all
material respects on and as of the date hereof as if made on the date hereof,
other than representations and warranties that expressly relate solely to an
earlier date;
(b) No Defaults. Except as waived hereby, no Default or Event of Default
has occurred and is continuing as of the date hereof; and
(c) Lease. Attached hereto as Exhibit A is a true, complete and correct
copy of the Lease, as amended as of the date hereof.
4. Counterparts. This Waiver may be executed in any number of counterparts,
each of which counterparts when executed and delivered shall be an original,
but all of which shall together constitute one and the same agreement.
[SIGNATURE PAGES FOLLOW]
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Waiver No. 1 and
Consent to be executed and delivered by their proper and duly authorized
officers as of the date set forth above.
BORROWER:
COLORADO PRIME CORPORATION,
a Delaware corporation
By: [Illegible Signature]
----------------------------------
Title: Vice President/Controller
ADMINISTRATIVE AGENT:
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES, as the
Administrative Agent
By: [Illegible Signature]
----------------------------------
By: [Illegible Signature]
----------------------------------
LENDERS:
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES, as a Lender
By: [Illegible Signature]
----------------------------------
By: [Illegible Signature]
----------------------------------
3
<PAGE> 4
BANK LEUMI USA, as a Lender
By: ILLEGIBLE SIGNATURE
----------------------------------
By: ILLEGIBLE SIGNATURE
----------------------------------
BANKBOSTON, N.A., as a Lender
By: /s/ Gregory R.D. Clark
--------------------------------
Gregory R.D. Clark
Managing Director
By:
--------------------------------
IBJ SCHRODER BANK & TRUST COMPANY,
as a Lender
By: ILLEGIBLE SIGNATURE
--------------------------------
By:
--------------------------------
4
<PAGE> 5
EXHIBIT A
Lease
5
<PAGE> 1
AMENDMENT NO. 4
This Amendment No. 4 (this "Amendment") amends that certain Credit
Agreement dated as of May 9, 1997 (as amended, modified and supplemented from
time to time, including pursuant to this Amendment, the "Credit Agreement")
among COLORADO PRIME CORPORATION (the "Borrower"), each institution identified
as a lender on Annex I thereto (each, together with its successors and assigns,
a "Lender"), and DRESDNER BANK AG. NEW YORK AND GRAND CAYMAN BRANCHES, acting as
agent for itself and the other Lenders ("Agent"), and is entered into as of June
26, 1998 among Borrower, Agent and the Lenders.
RECITALS
WHEREAS, the parties desire to amend the Consolidated Net Worth and
Leverage Ratio requirements in the Credit Agreement for the third Fiscal Quarter
of 1998;
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used herein without definition shall
have the meanings assigned to such terms in the Credit Agreement, and the
provisions of Section 1.2 of the Credit Agreement shall apply hereto as if
fully set forth herein.
2. Effectiveness of this Amendment. This Amendment shall become
effective upon the execution and delivery hereof by Borrower, Agent and
Required Lenders.
3. Minimum Net Worth. Clause (a) of Section 8.1 is hereby amended,
effective as of the date hereof, as follows: the minimum Consolidated Net Worth
required for the third Fiscal Quarter of Fiscal Year 1998 is 25.5 (in millions
of Dollars).
4. Leverage Ratio. Clause (d) of Section 8.1 is hereby amended,
effective as of the date hereof, as follows: the maximum permissible Leverage
Ratio for the third Fiscal Quarter of Fiscal Year 1998 is 6.70 to 1.00.
5. Representations. To induce the Agent and the Lenders to enter into
this Amendment, the Borrower hereby represents and warrants as follows:
a. Representations and Warranties. All representations and
warranties contained in the Credit Agreement and the other Credit Documents are
true and correct in all material respects on and as of the date hereof as if
made on the date hereof, other than representations and warranties that
expressly relate solely to an earlier date; and
<PAGE> 2
b. No Defaults. No Default or Event of Default has occurred which
has not been waived.
6. Miscellaneous. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Credit Document. This Amendment may be executed in
any number of counterparts and by the different parties hereto on separate
counterparts, each of which counterparts when executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. This Amendment shall be governed by, and construed in accordance
with, the law of the State of New York.
[SIGNATURE PAGES FOLLOW]
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their proper and duly authorized officers as of the
date set forth above.
BORROWERS:
----------
COLORADO PRIME CORPORATION,
a Delaware corporation
By:
---------------------------------
Title:
------------------------------
THE AGENTS:
-----------
DRESDNER BANK AG. NEW YORK AND
GRAND CAYMAN BRANCHES, as the Agents
By:
--------------------------------
By:
--------------------------------
LENDERS:
--------
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES, as a Lender
By:
--------------------------------
By:
--------------------------------
BANK LEUMI TRUST COMPANY OF NEW YORK,
as a Lender
By:
--------------------------------
By:
-------------------------------
<PAGE> 4
BANKBOSTON, N.A., as a Lender
By:
-----------------------------------
By:
-----------------------------------
IBJ SCHRODER BANK & TRUST COMPANY,
as a Lender
By:
-----------------------------------
By:
-----------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-25-1998
<PERIOD-START> SEP-27-1997
<PERIOD-END> JUN-26-1998
<EXCHANGE-RATE> 1
<CASH> 631
<SECURITIES> 0
<RECEIVABLES> 106,076
<ALLOWANCES> 10,600
<INVENTORY> 4,428
<CURRENT-ASSETS> 71,975
<PP&E> 14,382
<DEPRECIATION> 8,847
<TOTAL-ASSETS> 171,501
<CURRENT-LIABILITIES> 19,817
<BONDS> 98,208
0
0
<COMMON> 0
<OTHER-SE> 25,075
<TOTAL-LIABILITY-AND-EQUITY> 171,501
<SALES> 105,209
<TOTAL-REVENUES> 115,943
<CGS> 39,164
<TOTAL-COSTS> 101,846
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,404
<INTEREST-EXPENSE> 12,052
<INCOME-PRETAX> 497
<INCOME-TAX> 631
<INCOME-CONTINUING> (134)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (134)
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1>THE COMPANY HAS NOT DISCLOSED EPS, AS THERE IS NO PUBLIC MARKET FOR ITS
COMMON EQUITY. HOWEVER THE COMPANY DOES HAVE PUBLICLY TRADED SENIOR UNSECURED
NOTES.
</FN>
</TABLE>
