<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 March 26, 2000
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)
<TABLE>
<S> <C>
DELAWARE 11-2826129
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
500 BI-COUNTY BLVD., FARMINGDALE, NEW YORK 11735
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (631)-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 May 8, 2000, 1,000 shares of the registrant's Common Stock were outstanding.
<PAGE> 2
COLORADO PRIME CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
- ------- --------------------- --------
<S> <C>
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets 1
March 26, 2000 and December 24, 1999
Statements of Consolidated Operations 2
Thirteen weeks ended March 26, 2000 and
March 26, 1999
Statements of Consolidated Cash Flows 3
Thirteen weeks ended March 26, 2000 and
March 26, 1999
Notes to Consolidated Financial Statements 4
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 6
RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
</TABLE>
<PAGE> 3
COLORADO PRIME CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except share data)
<TABLE>
<CAPTION>
March 26, December 24,
ASSETS 2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 110 $ 754
Accounts receivable - net 50,640 51,379
Inventories - net 2,903 3,217
Prepaid expenses and other current assets 2,297 1,830
Deferred income tax benefit 7,553 7,533
--------- ---------
Total current assets 63,503 64,713
--------- ---------
Property, Plant and Equipment - net 8,583 8,792
--------- ---------
Non-current accounts receivable - net 36,074 36,380
--------- ---------
Goodwill - net 43,581 43,986
--------- ---------
Other assets 6,163 6,677
--------- ---------
Deferred income tax benefit 3,834 3,834
--------- ---------
TOTAL ASSETS $ 161,738 $ 164,382
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable $ 3,611 $ 4,868
Accrued expenses 13,678 12,084
Income and other taxes payable 666 622
Current portion of capital lease obligations 129 129
--------- ---------
Total current liabilities 18,084 17,703
--------- ---------
Revolver 37,951 40,477
--------- ---------
Senior unsecured notes, net of discount 84,221 84,155
--------- ---------
Long-term portion of capital lease obligations 3,664 3,694
--------- ---------
Other liabilities 1,887 1,978
--------- ---------
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 (9,937) (9,493)
--------- ---------
Total stockholder's equity 15,931 16,375
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 161,738 $ 164,382
========= =========
</TABLE>
1
<PAGE> 4
COLORADO PRIME CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Thirteen Weeks
Ended Ended
March 26, March 26,
2000 1999
-------- --------
<S> <C> <C>
PRODUCT SALES $ 31,560 $ 33,226
FINANCE INCOME EARNED 3,247 3,521
-------- --------
TOTAL REVENUE 34,807 36,747
COST OF GOODS SOLD 11,297 12,405
-------- --------
GROSS MARGIN 23,510 24,342
-------- --------
OTHER COST AND EXPENSES:
Selling, general and administrative 19,309 21,299
Amortization of goodwill 406 406
Interest expense 4,133 4,167
Other expense 126 148
-------- --------
Total cost and expenses 23,974 26,020
-------- --------
LOSS BEFORE BENEFIT FOR INCOME TAXES
AND EXTRAORDINARY ITEM (464) (1,678)
BENEFIT FOR INCOME TAXES (20) (434)
-------- --------
NET LOSS BEFORE EXTRAORDINARY ITEM (444) (1,244)
EXTRAORDINARY ITEM - GAIN ON
EXTINGUISHMENT OF DEBT - NET OF TAX -- 4,556
-------- --------
NET (LOSS) INCOME ($ 444) $ 3,312
======== ========
</TABLE>
2
<PAGE> 5
COLORADO PRIME CORPORATION
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Thirteen
Weeks Ended Weeks Ended
March 26, March 26,
2000 1999
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income ($ 444) $ 3,312
------- -------
Adjustments to reconcile net (loss) income to net cash provided by operating
activities:
Depreciation and amortization 714 786
Amortization of debt issuance costs 305 302
Extraordinary gain, net -- (4,556)
Deferred income taxes (20) (435)
Provision for doubtful accounts 1,570 2,350
Change in operating assets and liabilities:
Accounts receivable (525) (930)
Inventories 314 116
Prepaid expenses and other (467) (69)
Refundable income taxes -- 425
Other assets 275 138
Accounts payable (1,257) (115)
Accrued expenses 1,593 1,427
Other liabilities (91) (68)
Income and other taxes payable 44 (72)
------- -------
Total adjustments 2,455 (701)
------- -------
Net cash provided by operating activities 2,011 2,611
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used in investments of property, plant and equipment (99) (416)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under revolver (2,526) 4,579
Repurchase of senior notes -- (6,259)
Decrease in capital lease obligations (30) (29)
------- -------
Net cash used in financing activities (2,556) (1,709)
------- -------
NET (DECREASE) INCREASE IN CASH (644) 486
CASH, BEGINNING OF PERIOD 754 994
------- -------
CASH, END OF PERIOD $ 110 $ 1,480
======= =======
</TABLE>
3
<PAGE> 6
COLORADO PRIME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 December 24, 1999 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 end from the last
Friday to the last Sunday in December. Fiscal 2000 will be a 53 week
year and end on December 31, 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 $100.0 million 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). In January 1999, the Company
repurchased in aggregate $14.7 million (face value) of the then
outstanding 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:
4
<PAGE> 7
<TABLE>
<CAPTION>
March 26, 2000
(Dollars in Thousands)
Kal-Mar Concord Prime
------- -------- -----
<S> <C> <C> <C>
Current assets $ 13 $ 55,014 $ 12
Non-current assets 1,029 35,023 --
Current liabilities -- (2,770) (711)
Non-current liabilities -- (36,137) --
------ -------- -----
Net assets (liabilities) 1,042 51,130 (699)
====== ======== =====
</TABLE>
<TABLE>
<CAPTION>
For the Thirteen Weeks Ended
March 26, 2000
(Dollars in Thousands)
Kal-Mar Concord Prime
------- ------- -----
<S> <C> <C> <C>
Net revenues $ 27 $ 4,482 $ --
Gross profit 27 4,482 --
Income before provision for income tax -- 1,685 --
</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 data in
separate financial statements other than that presented above would not
be material to investors in the Notes.
5. During January 1999, the Company repurchased in aggregate $14.7 million
(face value) of its Notes at a cost of $6.3 million. Additionally, the
Company wrote-off approximately $0.8 million of unamortized debt
issuance cost related to the repurchased Notes. The Company realized an
extraordinary gain of $4.6 million which was net of a tax provision of
$3.0 million.
5
<PAGE> 8
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 74 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 butchers, fine 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 MARCH 26, 2000 COMPARED TO THIRTEEN WEEKS ENDED
MARCH 26, 1999.
Total revenue for the thirteen weeks ended March 26, 2000 decreased by $1.9
million or 5.3%, to $34.8 million from $36.7 million for the thirteen weeks
ended March 26, 1999. Food revenue for the thirteen weeks ended March 26, 2000
decreased by $2.4 million, or 12.5%, to $17.1 million from $19.5 million for the
thirteen weeks ended March 26, 1999. Non-food revenue for the thirteen weeks
ended March 26, 2000 increased by $0.8 million, or 5.6%, to $14.5 million from
$13.7 million for the thirteen weeks ended March 26, 1999. The reduction in food
revenue was due to lower average order size and volume for both new and existing
customers. The increase in non-food revenue was due to higher sales volume for
new and existing customers. Finance income for the thirteen weeks ended March
26, 2000 decreased by $0.3 million or 7.8% to $3.2 million from $3.5 million for
the thirteen weeks ended March 26, 1999.
Gross profit for the thirteen weeks ended March 26, 2000 decreased by $0.8
million, or 3.4%, to $23.5 million from $24.3 million for the thirteen weeks
ended March 26, 1999. The gross profit margin for the thirteen weeks ended March
26, 2000 increased to 67.5% from 66.2% for the thirteen weeks ended March 26,
1999. The increase in the gross profit margin was primarily due to a shift in
the mix of product sales to non-food items which have a more favorable margin
and
6
<PAGE> 9
the shift in production of certain of its food products from the Company owned
facility to an outside processor in connection with the December 1998
restructuring plan, partially offset by lower finance income.
SG&A expenses are principally comprised of selling, telemarketing, delivery and
general and administrative expenses. For the thirteen weeks ended March 26,
2000, these expenses decreased by $2.0 million, or 9.3%, to $19.3 million from
$21.3 million for the thirteen weeks ended March 26, 1999. The decrease was due
to lower sales related variable cost from lower product sales, lower fixed
payroll and non-payroll cost from the cost reductions enacted in the third and
fourth quarters of fiscal 1999, lower bad debt expense from improved receivable
performance and lower telecommunication costs from the Company's new contract
with its long distance carrier.
Interest expense for the thirteen weeks ended March 26, 2000 decreased to $4.1
million from $4.2 million for the thirteen weeks ended March 26, 1999. The
decrease was due to lower indebtedness under its Senior Notes resulting from the
repurchase described below, partially offset by increased indebtedness at a
higher interest cost under its working capital revolver.
Other expense for the thirteen weeks ended March 26, 2000 and March 26, 1999 was
$0.1 million.
Benefit for income taxes for the thirteen weeks ended March 26, 2000 decreased
by $0.4 million from a benefit of $0.4 million for the thirteen weeks ended
March 26, 1999. The decrease was due to a lower pre-tax loss.
Extraordinary gain for the thirteen weeks ended March 26, 1999 resulted from the
repurchase of $14.7 million of Senior Notes at a cost of $6.3 million.
Additionally, the Company incurred $0.8 million of non-cash charges related to
the repurchase. The Company realized an extraordinary gain of $4.6 million which
was net of a tax provision of $3.0 million.
Net loss for the thirteen weeks ended March 26, 2000 was $0.4 million as
compared to net income of $3.3 million for the thirteen weeks ended March 26,
1999 for the reasons discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the thirteen weeks ended March 26,
2000 was $2.0 million, primarily comprised of a net loss of $0.4 million, non
cash charges of $2.6 million, an increase in current assets of $0.7 million and
an increase in current liabilities of $0.4 million
Net cash used in investing activities for the thirteen weeks ended March 26,
2000 of $0.1 million was for capital expenditures.
Net cash used in financing activities for the thirteen weeks ended March 26,
2000 was $2.6 million, comprised of repayments under the revolver.
7
<PAGE> 10
The Company had working capital of $45.4 million as of March 26, 2000 compared
to $47.0 million as of December 24, 1999.
The Company has a $50.0 million working capital revolver, with $7.4 million of
unused availability as of March 26, 2000. The working capital revolver contains
certain covenants requiring the Company to meet certain financial tests
including a minimum fixed charge coverage ratio, a maximum leverage ratio, 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. As of March 26, 2000, the Company
was in compliance with the provisions of the working capital revolver.
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.
Subject to market conditions and contractual requirements, the Company may
consider and effect the refinancing of a part of its indebtedness in fiscal 2000
in order to improve its debt service position and to reduce its net interest
expense.
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 December 24,
1999.
Inflation
The Company believes that inflation has not had a material impact on its results
of operations for the thirteen weeks ended March 26, 2000.
8
<PAGE> 11
PART II OTHER INFORMATION
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) There were no Exhibits filed during the period
(b) There were no Forms 8-K filed during the period
9
<PAGE> 12
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: May 8, 2000 By: /s/ Steven Lachenmeyer
--------------------------------
Vice President Finance
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> DEC-25-1999
<PERIOD-END> MAR-26-2000
<CASH> 110
<SECURITIES> 0
<RECEIVABLES> 96,000
<ALLOWANCES> 9,286
<INVENTORY> 2,903
<CURRENT-ASSETS> 63,503
<PP&E> 13,460
<DEPRECIATION> 4,877
<TOTAL-ASSETS> 161,738
<CURRENT-LIABILITIES> 18,084
<BONDS> 84,221
0
0
<COMMON> 0
<OTHER-SE> 25,868
<TOTAL-LIABILITY-AND-EQUITY> 161,738
<SALES> 31,560
<TOTAL-REVENUES> 3,247
<CGS> 11,297
<TOTAL-COSTS> 30,606
<OTHER-EXPENSES> 532
<LOSS-PROVISION> 1,570
<INTEREST-EXPENSE> 4,133
<INCOME-PRETAX> (464)
<INCOME-TAX> (20)
<INCOME-CONTINUING> (444)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (444)
<EPS-BASIC> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1>The Company does not report EPS as there is no public market for its
equity. The Company does have publicly owned debt.
</FN>
</TABLE>
