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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549-1004
------------------------
FORM 10-Q
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED DECEMBER 25, 1998
COMMISSION FILE NUMBER 1-09559
COLORADO PRIME CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 11-2826129
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
500 BI-COUNTY BLVD., FARMINGDALE, NEW YORK 11735
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(516)-694-1111
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
At February 8, 1999, 1,000 shares of the registrant's Common Stock were
outstanding.
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COLORADO PRIME CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets
December 25, 1998 and September 25, 1998.................... 1
Statements of Consolidated Operations
Thirteen weeks ended December 25, 1998 and December 26,
1997........................................................ 2
Statements of Consolidated Cash Flows
Thirteen weeks ended December 25, 1998 and December 26,
1997........................................................ 3
Notes to Consolidated Financial Statements.................. 4
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................... 6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................ 10
SIGNATURES............................................................. 11
</TABLE>
i
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COLORADO PRIME CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 25, SEPTEMBER 25,
1998 1998
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash........................................................ $ 994 $ 713
Accounts receivable -- net.................................. 54,237 53,698
Inventories................................................. 4,695 4,559
Prepaid expenses and other current assets................... 1,823 1,931
Refundable income tax....................................... 926 926
Deferred income tax benefit................................. 12,419 9,357
-------- --------
Total current assets.............................. 75,094 71,184
-------- --------
Property, Plant and Equipment -- Net........................ 9,354 9,356
-------- --------
Non-current accounts receivable -- net...................... 36,847 37,022
-------- --------
Goodwill.................................................... 45,609 46,015
-------- --------
Other assets................................................ 8,055 8,450
-------- --------
TOTAL ASSETS................................................ $174,959 $172,027
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable............................................ $ 4,926 $ 4,938
Accrued expenses............................................ 18,772 16,415
Income and other taxes payable.............................. 320 255
Current portion of capital lease obligations................ 147 145
-------- --------
Total current liabilities......................... 24,165 21,753
-------- --------
Revolver.................................................... 30,635 23,416
-------- --------
Senior unsecured notes, net of discount..................... 98,318 98,263
-------- --------
Long-term portion of capital lease obligations.............. 3,782 3,776
-------- --------
Other liabilities........................................... 2,746 3,154
-------- --------
STOCKHOLDER'S EQUITY
Common Stock -- par value, $.01, per share; 1,000 shares
authorized issued and outstanding......................... -- --
Paid-in capital............................................. 25,868 25,868
Accumulated deficit......................................... (10,555) (4,203)
-------- --------
Total stockholder's equity........................ 15,313 21,665
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY.................. $174,959 $172,027
======== ========
</TABLE>
1
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COLORADO PRIME CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS THIRTEEN WEEKS
ENDED ENDED
DECEMBER 25, DECEMBER 26,
1998 1997
-------------- --------------
<S> <C> <C>
PRODUCT SALES............................................... $35,056 $34,378
FINANCE INCOME EARNED....................................... 2,745 3,684
------- -------
TOTAL REVENUE............................................... 37,801 38,062
COST OF GOODS SOLD.......................................... 13,446 12,685
------- -------
GROSS MARGIN................................................ 24,355 25,377
------- -------
OTHER COST AND EXPENSES:
Selling, general and administrative......................... 23,568 19,795
Restructuring charge (Note 5)............................... 5,343 --
Amortization of goodwill.................................... 406 377
Interest expense............................................ 4,327 4,050
Other expense............................................... 125 138
------- -------
Total cost and expenses........................... 33,769 24,360
------- -------
INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES... (9,414) 1,017
(BENEFIT) PROVISION FOR INCOME TAXES........................ (3,062) 539
------- -------
NET (LOSS)/INCOME........................................... $(6,352) $ 478
======= =======
</TABLE>
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COLORADO PRIME CORPORATION
STATEMENTS OF CONSOLIDATED CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS THIRTEEN WEEKS
ENDED ENDED
DECEMBER 25, DECEMBER 26,
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income........................................... $(6,352) $ 478
------- -------
Adjustments to reconcile net (loss)/income to net cash used
in operating activities:
Depreciation and amortization............................. 1,086 1,054
Deferred income taxes..................................... (3,062) --
Provision for doubtful accounts........................... 2,850 1,256
Change in operating assets and liabilities:
Accounts receivable.................................... (3,214) (2,885)
Inventories............................................ (136) 64
Prepaid expenses and other............................. 108 (241)
Other assets........................................... 142 (381)
Accounts payable....................................... (12) (1,936)
Accrued expenses....................................... 2,365 (4,418)
Other liabilities...................................... (408) (117)
Income and other taxes payable......................... 65 464
------- -------
Total adjustments........................................... (216) (7,140)
------- -------
Net cash used in operating activities....................... (6,568) (6,662)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in property, plant and equipment................ (370) (116)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolver............................... 7,219 6,731
Increase (decrease) in capital lease obligations............ -- (65)
Net return of capital to CPH................................ -- (416)
------- -------
Net cash provided by financing activities................... 7,219 6,250
------- -------
NET INCREASE (DECREASE) IN CASH............................. 281 (528)
CASH, BEGINNING OF PERIOD................................... 713 972
------- -------
CASH, END OF PERIOD......................................... $ 994 $ 444
======= =======
</TABLE>
3
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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.
2. Reference is made to the notes to consolidated financial statements
contained within the Company's audited financial statements for the period
ended September 25, 1998 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.
Certain prior period balances have been reclassified to conform with the
current period presentation.
3. The Company has approved a change in its fiscal year from the last Friday in
September to a January through December period. The new 1999 fiscal year
will begin on December 26, 1998 and end on December 24, 1999. Fiscal 2000
will be a 53 week year and end on December 29, 2000.
4. 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:
<TABLE>
<CAPTION>
DECEMBER 25, 1998
----------------------------
KAL-MAR CONCORD PRIME
------- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current assets......................................... $ 35 $ 59,648 $ 12
Non-current assets..................................... 1,039 36,935 --
Current liabilities.................................... (92) (2,778) (711)
Non-current liabilities................................ -- (51,067) --
------ -------- -----
Net assets (liabilities)............................... $ 982 $ 42,738 $(699)
====== ======== =====
</TABLE>
<TABLE>
<CAPTION>
FOR THE THIRTEEN WEEKS ENDED
DECEMBER 25, 1998
------------------------------
KAL-MAR CONCORD PRIME
-------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net revenues.............................................. $40 $4,244 $0
Gross profit.............................................. 40 4,244 0
Income before provision for income tax.................... 15 486 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
4
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data in separate financial statements other than that presented above would not
be material to the investors of the Notes.
5. During the period ended December 25, 1998, management authorized and
committed the Company to undertake three significant restructurings and
recorded a combined restructuring charge of $5.3 million. The restructuring
plan involves (i) outsourcing the production and fulfillment of its food
products to a third party and the closing of its Farmingdale, New York
processing plant, (ii) the consolidation of certain of its leased facilities
and (iii) the involuntary termination of certain employees at its
Farmingdale, New York corporate headquarters.
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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. 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, currently serving 32 states through 83 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.
RESULTS OF OPERATIONS
Thirteen Weeks Ended December 25, 1998 Compared to Thirteen Weeks Ended
December 26, 1997.
Total revenue for the thirteen weeks ended December 25, 1998 decreased by
$0.3 million or 0.7%, to $37.8 million from $38.1 million for the thirteen weeks
ended December 26, 1997. Food revenue for the thirteen weeks ended December 25,
1998 increased by $0.5 million or 2.6% to $21.4 million from $20.9 million for
the thirteen weeks ended and December 26, 1997. Non-food revenue for the
thirteen weeks ended December 25, 1998 increased by $0.2 million or 1.0%, to
$13.7 million from $13.5 million for the thirteen weeks ended December 26, 1997.
The increase in food and non-food revenue was due to higher sales to new
customers. Finance income for the thirteen weeks ended December 25, 1998
decreased by $1.0 million or 25.5%, to $2.7 million from $3.7 million for the
thirteen weeks ended December 26, 1997. The decrease resulted primarily from a
one-time charge of $0.7 million due to a reduction in the balance of interest
eligible accounts.
Gross profit for the thirteen weeks ended December 25, 1998 decreased by
$1.0 million or 4.0% to $24.4 million from $25.4 million for the thirteen weeks
ended December 26, 1997. Gross profit, before the one time charge to finance
income discussed above, for the thirteen weeks ended December 25, 1998 decreased
by $0.3 million, or 1.3%, to $25.1 million from $25.4 million for the thirteen
weeks ended December 26, 1997. The gross profit margin before the one-time
charge to finance income, decreased to 66.3% for the thirteen weeks ended
December 25, 1998 from 66.7% for the thirteen weeks ended December 26, 1997. The
decrease in the gross profit margin was due to an increase in the reserve for
appliance returns as the Company experienced a slightly higher return rate as
compared to the previous quarter from the PC product line. The Company believes
the current reserve levels are sufficient.
SG&A expenses are principally comprised of selling, telemarketing, delivery
and general and administrative expenses. For the thirteen weeks ended December
25, 1998, these expenses increased by $3.8 million or 19.1%, to $23.6 million
from $19.8 million for the thirteen weeks ended December 26, 1997. The increase
was primarily due to $1.6 million higher bad debt costs due to an increase in
the age and rate of delinquent accounts and is consistent with the quarterly
expense for the previous two quarters, $0.6 million higher incentive and
recruiting costs for sales personnel, $0.2 million of new sales office operating
cost and a $1.0 million increase in telemarketing costs, primarily related to
higher costs for new telemarketing centers supporting the startup of three new
sales offices opened during the thirteen weeks ended December 25, 1998 and
higher telephone costs for existing telemarketing centers due to certain fees
and taxes enacted in
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January 1998. As a percentage of total revenues, SG&A expenses increased to
62.3% for the thirteen weeks ended December 25, 1998 from 52.0% for the thirteen
weeks ended December 26, 1997.
Restructuring
During the period ended December 25, 1998, management authorized and
committed the Company to undertake three significant restructurings and recorded
a combined restructuring charge of $5.3 million. The restructuring plan involves
(i) outsourcing the production and fulfillment of its food products to a third
party and the closing of its Farmingdale, New York processing plant, (ii) the
consolidation of certain of its leased facilities and (iii) the involuntary
termination of certain employees at its Farmingdale, New York corporate
headquarters, each is described more fully below.
Plant Restructuring
In order to reduce operating costs, the Company plans to close its
processing plant and outsource to one or more third parties. The Company expects
to complete the transition of all operations by the end of the new fiscal year.
The Company recorded a $2.6 million restructuring charge to recognize severance
and benefits for the plant employees to be terminated, estimated incremental
operating costs during the transition period and an asset write-down to reflect
the net realizable value of certain plant assets.
Operational Restructuring
In order to improve productivity and asset utilization, the Company plans
to reduce the costs associated with certain of its leased facilities. The
Company has begun negotiations with several parties to extricate itself from the
lease agreements and expects to conclude the negotiations by the end of the
fiscal year. The Company has recorded a $1.7 million restructuring charge to
recognize obligations for unused space, asset write-downs to reflect the net
realizable value of certain assets within the closed facilities, other
move-related costs and severance and benefits for the employees to be
terminated.
Headquarters Restructuring
In order to reduce operating costs, the Company plans to restructure
certain of its support functions at its corporate headquarters which will result
in the elimination of over 15% of the headquarters positions. The Company
recorded a restructuring charge of $1.0 million to recognize severance and
benefits for employees to be terminated.
Interest expense for the thirteen weeks ended December 25, 1998 increased
to $4.3 million from $4.1 million for the thirteen weeks ended December 26,
1997. The increase was attributable to a greater level of borrowing at a higher
rate of interest as compared to the financing in effect during the previous
period.
Other expense for the thirteen weeks ended December 25, 1998 and December
26, 1997 was $0.1 million.
Provision (Benefit) for income taxes for the thirteen weeks ended December
25, 1998 decreased by $3.6 million to a benefit of $3.1 million as compared to a
provision of $0.5 million for the thirteen weeks ended December 26, 1997. The
decrease was due to a pre-tax loss in the current period and pre-tax income in
the prior period.
Net loss for the thirteen weeks ended December 25, 1998 was $6.4 million as
compared to net income of $0.5 million for the thirteen weeks ended December 26,
1997 for the reasons discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the thirteen weeks ended December
25, 1998 was $6.6 million, primarily comprised of a net loss of $6.4 million, an
increase in accounts receivable of $3.2 million and a decrease in other
liabilities of $0.4 million partially offset by non-cash charges of $0.9 and an
increase in accrued expenses of $2.4 million.
Net cash used in investing activities for the thirteen weeks ended December
25, 1998 of $0.4 million was for capital expenditures.
7
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Net cash provided by financing activities for the thirteen weeks ended
December 25, 1998 was $7.2 million, comprised of additional borrowings under the
revolver.
The Company had working capital of $50.9 million as of December 25, 1998
compared to $49.4 million as of September 25, 1998.
The Company has a $50.0 million working capital revolver, with $19.4
million of unused capacity as of December 25, 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.
In December 1998, the Company negotiated an agreement with its banks to
fund up to $8.0 million under its existing working capital revolver to
repurchase certain of its Senior Notes for a period of time ending January 31,
1999. During January 1999, the Company repurchased in aggregate $14.7 million
(face value) of its Senior Notes at a cost of $6.3 million. The purchase was
funded by additional borrowings under its working capital revolver and will
generate approximately $1.4 million in annual cash interest savings.
The Company is subject to certain market risk factors related to its fixed
rate senior unsecured notes and its variable rate working capital revolver. The
Company does not believe the interest rate risk to be material and has disclosed
the factors in its Annual Report on Form 10-K for the year ended September 25,
1998.
INFLATION
The Company believes that inflation has not had a material impact on its
results of operations for the thirteen weeks ended December 25, 1998.
OTHER YEAR 2000
The Company has developed a comprehensive plan to address Year 2000 issues.
The plan addresses three main areas: (a) information systems; (b) embedded
chips; and (c) supply chain readiness. To oversee the process, the Company has
established an oversight committee which reports to the Board of Directors and
the Audit Committee.
The Company has identified potential deficiencies related to Year 2000 in
its information systems, both hardware and software, and is in the process of
addressing them through upgrades and other remediation. The Company expects to
complete remediation and testing of its internal systems in the summer of 1999.
With respect to other equipment with date-sensitive operating controls such as
manufacturing equipment, HVAC, security and other similar systems, the Company
is near completion in the process of identifying those items which may require
remediation or replacement. The Company expects to complete remediation or
replacement and testing of these systems in the summer of 1999. As for the third
parties, the Company is in the process of identifying and contacting both
inventory and non-inventory suppliers. This process includes the solicitation of
written responses to questionnaires. The Company has the right to terminate its
agreement with
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its major beef suppliers if documentation as to the supplier's Year 2000
readiness is not provided. The Company expects to have a better understanding of
the Year 2000 readiness of these third parties over the next several months.
Based upon the Company's current estimates, incremental out-of-pocket costs
of its Year 2000 program are not expected to be material.
At this stage of the process, the Company believes that it is difficult to
specifically identify the cause of the most reasonable worst case Year 2000
scenario. As with all manufacturers and distributors of products such as those
sold by the Company, a reasonable worst case scenario would be the result of
failures of third parties (including, without limitation, governmental entities
and entities with which the Company has no direct involvement) that continue for
more than several days in various geographic areas where the Company's products
are produced or sold or in areas from which the Company's raw materials and
products are sourced. In connection with the production of products and
suppliers of raw materials the Company is considering various contingency plans.
Continuing failures that limit consumers' ability to purchase would most likely
have a material adverse effect on the Company's results of operations. The
extent of such lost revenue cannot be estimated at this time; however, the
Company is considering contingency plans to limit, to the extent possible, the
effect of such lost revenue on the Company's results of operations. Any such
plans would necessarily be limited to matters over which the Company can
reasonably control.
The Company's Year 2000 efforts are ongoing and its overall plan, as well
as the consideration of contingency plans, will continue to evolve, as new
information becomes available. While the Company anticipates continuity of its
business activities, that continuity will be dependent upon its ability, and the
ability of third parties with whom the company relies on directly, or
indirectly, to be Year 2000 compliant.
9
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit
No
10.14.2 Amendment No. 5 and waiver to Credit Agreement among CPC, the
institutions party thereto as Lenders and Dresdner AG, New
York and Cayman Branches, as the Agents, dated December 1998
10.14.3 Amendment No. 6 and waiver to Credit Agreement among CPC, the
institutions party thereto as Lenders and Dresdner AG, New
York and Cayman Branches, as the Agents, dated December 25,
1998
(b) There were no form 8-K's filed during the period
10
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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)
By: /s/ MATTHEW BURRIS
------------------------------------
Chief Financial Officer, Vice
President
and Director
Dated: February 12, 1999
11
<PAGE> 1
AMENDMENT NO. 5 AND WAIVER
This Amendment No. 5 and Waiver (this "Amendment") amends certain
provisions and waives certain covenants of that certain Credit Agreement dated
as of May 9, 1997 (as amended, modified and supplemented from time to time, 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, acting as the Agents for itself and the other
Lenders ("Administrative Agent"), and is entered into as of December , 1998
among Borrower, the Administrative Agent and the Lenders executing the signature
pages hereof.
RECITALS
WHEREAS, Borrower is prohibited pursuant to Section 8.7(b) of the Credit
Agreement from repurchasing its Senior Notes, which currently are trading at a
discount;
WHEREAS, Borrower has requested that the Lenders consent in advance to its
repurchase of up to $8,000,000 in fair market value of its Senior Notes to
enable Borrower to have the benefit of such discount; and
WHEREAS, Borrower and Lenders desire to amend certain other provisions of
the Credit Agreement:
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: Section 8.7(b). Notwithstanding the terms of Section
8.7(b) of the Credit Agreement to the contrary, Required Lenders hereby
consent to Borrower repurchasing Senior Notes for an aggregate purchase
price not to exceed $8,000,000, provided, that such repurchase or
repurchases be completed on or before January 31, 1999 and that the
purchase price not exceed fifty-five (55%) of the face value of the Senior
Notes purchased.
3. Fee. Each time the Lenders advance Loans to the Borrower for the
repurchase of Senior Notes pursuant to the waiver granted in Section 3
hereof, Borrower shall pay Lenders a fee equal to the principal amount of
such Loans multiplied by 0.025.
4. Amendments. The Credit Agreement is hereby amended by:
(a) amending the definition of "Borrowing Base" in Section 1.1 by:
(i) changing the percentage of Eligible Food-Related Accounts and
Eligible Non-Food Accounts in subsections (a) and (b), respectively,
from eighty percent (80%) to seventy-percent (70%), and (ii) deleting
subsection (c) in its entirety and the words "or inventory" in the fifth
line of the proviso to such definition.
(b) deleting the current version of Exhibit C and replacing it with
the version of Exhibit C attached to this Amendment.
(c) amending Section 1.1 by deleting the definition of "Eligible
Inventory" therefrom.
(d) amending Section 4.7(a) by deleting the second sentence thereof
and replacing it with the following: "Borrower shall deliver to such
Monitoring Agent, if any, and the Disbursing Agent, a Borrowing Base
Certificate at the times required under Section 7.2(a)."
<PAGE> 2
(e) amending Section 4.7(e) by: (i) deleting in its entirety the
phrase "Upon the occurrence and during the continuance of an Event of
Default" at the beginning of both the first and second sentences and
inserting in lieu thereof the phrase "At any time", and (ii) deleting
the "." at the end of the second sentence and inserting in lieu thereof
the phrase ", such Lockbox to be established within sixty (60) days of
the Administrative Agent's request or such longer period of time as the
Administrative Agent may allow.".
(f) amending Section 7.2(a) by: (i) deleting the word "Monthly"
from the title of the subsection; (ii) deleting in its entirety the
phrase "On or before each date required under Section 4.7(a)" at the
beginning of the subsection; and (iii) inserting in lieu thereof the
phrase "On the first Business Day of each week".
(g) amending Annex III, Pricing Grid, by adding 25 basis points
(0.25%) to each number in the columns headed "Revolver Applicable
Margin."
5. Lockboxes: Cash Dominion. The Borrower shall, and shall cause
each other Credit Party to, within sixty (60) days after the date hereof:
(a) enter into one or more Lockbox Agreements with the Disbursing Agent and
establish Lockboxes and Collection Accounts with the Disbursing Agent (to
the extent not already done); and (b) to notify all account debtors of each
Credit Party to remit all payments on the Accounts only through such
Lockboxes. The Administrative Agent hereby directs the Disbursing Agent to
take control of the Collection Accounts of the Credit Parties and to
perform the other functions specified for the Disbursing Agent in Section
4.7(c) of the Credit Agreement.
6. Representations. To induce the Administrative Agent and the
Lenders to enter into this Amendment, 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
(b) No Defaults. No Default or Event of Default has occurred and
is continuing as of the date hereof.
7. Counterparts. This Amendment 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]
<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.
BORROWER:
COLORADO PRIME CORPORATION,
a Delaware corporation
By: /s/ MATTHEW BURRIS
------------------------------------
Title: VP
-----------------------------------
ADMINISTRATIVE AGENT:
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES, as the
Administrative Agent
By: /s/ PETER M. KAY
------------------------------------
Peter M. Kay
Vice President
By: /s/ STEVEN S. KERR
------------------------------------
Steven S. Kerr
Assistant Treasurer
LENDERS:
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES, as a Lender
By: /s/ PETER M. KAY
------------------------------------
Peter M. Kay
Vice President
By: /s/ STEVEN S. KERR
------------------------------------
Steven S. Kerr
Assistant Treasurer
<PAGE> 4
BANK LEUMI USA, as a Lender
By: [ILLEGIBLE]
------------------------------------
By: [ILLEGIBLE]
------------------------------------
BANKBOSTON, N.A., as a Lender
By: [ILLEGIBLE]
------------------------------------
By: /s/ ROBERT F. DUGGAN
------------------------------------
Robert F. Duggan
Managing Director
IBJ SCHRODER BANK & TRUST COMPANY,
as a Lender
By: [ILLEGIBLE]
------------------------------------
By:
------------------------------------
<PAGE> 1
Exhibit 10.14.13
EXECUTION COPY
AMENDMENT NO. 6 AND WAIVER
This Amendment No. 6 and Waiver (this "Waiver") amends a provision of and
waives certain covenants of that certain Credit Agreement dated as of May 9,
1997 (as amended, modified and supplemented from time to time, 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 December 25, 1998
among Borrower, the Administrative Agent and the Lenders executing the signature
pages hereof.
RECITALS
WHEREAS, Borrower is required pursuant to Section 8.1 of the Credit
Agreement to satisfy certain financial covenants;
WHEREAS, for the Fiscal Quarter ending on the date hereof, Borrower is out
of compliance with the financial ratios contained in Section 8.1; and
WHEREAS, Borrower has requested that the Lenders waive the Events of
Default which have resulted from Borrower's failure to comply with the
requirements of Section 8.1 for the Fiscal Quarter ending on the date hereof.
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: Section 8.1. Required Lenders waive the Events of Default which have
resulted from Borrower's failure to comply with Section 8.1 of the Credit
Agreement solely with respect to the Fiscal Quarter ending on the date hereof.
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; and
(b) No Defaults. Except as waived hereby, no Default or Event of Default
has occurred and is continuing 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 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: --------------------------------------
Title: -----------------------------------
ADMINISTRATIVE AGENT:
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES, as the
Administrative Agent
By: --------------------------------------
By: --------------------------------------
LENDERS:
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES, as a Lender
By: --------------------------------------
By: --------------------------------------
3
<PAGE> 4
BANK LEUMI TRUST COMPANY OF NEW
YORK, as a Lender
By:
---------------------------
By:
---------------------------
BANKBOSTON, N.A., as a Lender
By:
---------------------------
By:
---------------------------
IBJ SCHRODER BANK & TRUST COMPANY,
as a Lender
By:
---------------------------
By:
---------------------------
4
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-24-1999
<PERIOD-START> SEP-26-1998
<PERIOD-END> DEC-25-1998
<CASH> 994
<SECURITIES> 0
<RECEIVABLES> 99,708
<ALLOWANCES> 8,624
<INVENTORY> 4,695
<CURRENT-ASSETS> 75,094
<PP&E> 17,008
<DEPRECIATION> 7,654
<TOTAL-ASSETS> 174,959
<CURRENT-LIABILITIES> 24,165
<BONDS> 98,318
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 174,959
<SALES> 35,056
<TOTAL-REVENUES> 37,801
<CGS> 13,446
<TOTAL-COSTS> 37,014
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,850
<INTEREST-EXPENSE> 4,327
<INCOME-PRETAX> (9,414)
<INCOME-TAX> (3,062)
<INCOME-CONTINUING> (6,352)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,352)
<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>
