<PAGE> 1
United States Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 28, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission File Number 0-21677
PROSOURCE, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 65-0335019
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1500 San Remo Avenue, Coral Gables, FL 33146
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305)740-1000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ( X ) No ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT MAY 11, 1998
<S> <C>
Class A Common Stock, $.01 par value 3,557,655 shares
Class B Common Stock, $.01 par value 5,856,756 shares
</TABLE>
<PAGE> 2
PROSOURCE, INC.
FORM 10-Q
QUARTERLY PERIOD ENDED MARCH 28, 1998
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets - March 28, 1998 and December 27, 1997......................3
Consolidated Statements of Operations - For the periods ended March 28, 1998 and
March 29, 1997..........................................................................4
Consolidated Statements of Comprehensive Loss -
For the periods ended March 28, 1998 and March 29, 1997................................5
Consolidated Statements of Cash Flows - For the periods ended March 28, 1998 and
March 29, 1997.........................................................................6
Notes to Consolidated Financial Statements.............................................7
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations..........10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..............................................................................13
Item 5. Other Information..............................................................................13
Item 6. Exhibits and Reports on Form 8-K...............................................................13
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PROSOURCE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 28, DECEMBER 27,
1998 1997
--------- -----------
(UNAUDITED) *
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,137 $ 12,501
Accounts receivable, net 217,534 222,247
Inventories 152,488 160,621
Deferred income taxes, net 7,498 7,190
Prepaid expenses and other current assets 8,001 8,434
--------- ---------
Total current assets 397,658 410,993
Property and equipment, net 66,506 59,961
Intangible assets, net 39,495 39,883
Deferred income taxes, net 30,036 28,802
Other assets 8,243 8,462
--------- ---------
Total assets $ 541,938 $ 548,101
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 261,680 $ 277,953
Accrued liabilities 26,863 27,012
--------- ---------
Total current liabilities 288,543 304,965
Long-term debt 185,300 174,200
Other noncurrent liabilities 5,093 4,521
--------- ---------
Total liabilities 478,936 483,686
--------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $.01 par value -- --
Class A common stock, $.01 par value 36 35
Class B common stock, $.01 par value 58 58
Additional paid-in capital 105,127 104,934
Accumulated deficit (42,216) (40,580)
Accumulated other comprehensive loss (3) (32)
--------- ---------
Total stockholders' equity 63,002 64,415
--------- ---------
Total liabilities and stockholders' equity $ 541,938 $ 548,101
========= =========
</TABLE>
* Note: The balance sheet at December 27, 1997 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
PROSOURCE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
------------------------------
MARCH 28, MARCH 29,
1998 1997
------------------------------
<S> <C> <C>
Net sales $ 989,764 $ 1,017,062
Cost of sales 911,564 936,404
----------- -----------
Gross profit 78,200 80,658
Operating expenses 77,978 78,098
----------- -----------
Income from operations 222 2,560
Interest expense, net (3,377) (2,115)
----------- -----------
(Loss) income before income taxes
and extraordinary charge (3,155) 445
Income tax benefit (provision) 1,519 (197)
----------- -----------
(Loss) income before extraordinary
charge (1,636) 248
Extraordinary charge, net of income
tax benefit of $4,073 in 1997 -- (6,262)
----------- -----------
Net loss $ (1,636) $ (6,014)
=========== ===========
NET LOSS PER COMMON SHARE - BASIC AND DILUTED:
(Loss) income before extraordinary
charge $ (0.18) $ 0.03
Extraordinary charge, net -- (0.67)
----------- -----------
Net loss per common share $ (0.18) $ (0.64)
=========== ===========
Weighted average number of
shares outstanding: basic 9,349,924 9,337,519
Weighted average number of
shares outstanding: diluted 9,349,924 9,417,137
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
PROSOURCE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
-------------------------
MARCH 28, MARCH 29,
1998 1997
-------------------------
<S> <C> <C>
Net loss $(1,636) $(6,014)
Other comprehensive income (loss):
Foreign-currency translation
adjustments 29 (20)
------- -------
Comprehensive loss $(1,607) $(6,034)
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
PROSOURCE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
---------------------------
MARCH 28, MARCH 29,
1998 1997
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,636) $ (6,014)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 3,014 2,958
Bad debt expense 453 380
Loss on early retirement of debt -- 10,335
Deferred income tax benefit (1,542) (3,889)
Changes in operating assets and liabilities:
Decrease in accounts receivable 4,260 6,053
Decrease (increase) in inventories 8,133 (4,649)
Decrease (increase) in prepaid expenses and other assets 445 (1,228)
(Decrease) increase in accounts payable (16,273) 5,816
Increase (decrease) in accrued and other noncurrent liabilities 617 (7,034)
--------- ---------
Net cash (used in) provided by operating activities (2,529) 2,728
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (8,964) (6,553)
--------- ---------
Net cash used in investing activities (8,964) (6,553)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on long-term debt 133,300 282,517
Repayments of long-term debt (122,200) (266,101)
Fees incurred in conjunction with long-term debt -- (4,181)
Payments to acquire and retire treasury stock -- (510)
--------- ---------
Net cash provided by financing activities 11,100 11,725
--------- ---------
Effect of exchange rate changes on cash 29 (20)
--------- ---------
Net (decrease) increase in cash and cash equivalents (364) 7,880
Cash and cash equivalents at beginning of period 12,501 2,763
--------- ---------
Cash and cash equivalents at end of period $ 12,137 $ 10,643
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH PAID DURING THE PERIOD FOR:
Interest $ 3,527 $ 2,640
Income taxes, net of refunds $ 123 $ 207
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In January 1998, the Company issued 30,336 Class A common shares to employees
under the 1997 Employee Stock Purchase Plan at $6.035 per share in exchange for
accrued compensation totaling $184.
For the period ended March 28, 1998, the Company recognized $10 of compensation
expense associated with the Directors Stock Option Plan.
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
PROSOURCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. These consolidated financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
the ProSource Inc. (the "Company") Annual Report on Form 10-K/A for the fiscal
year ending December 27, 1997.
The Company operates on a 52- to 53-week accounting year ending on the last
Saturday of each calendar year. Operating results for the thirteen weeks ended
March 28, 1998 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 26, 1998 due, in part, to seasonal
fluctuations in the Company's business, the potential addition or loss of
customers, and changes in economic conditions.
Certain amounts previously presented in the financial statements of prior
periods have been reclassified to conform to the current period's presentation.
(2) EXTRAORDINARY CHARGE
In March, 1997, the Company entered into two five-year loan agreements
aggregating $225 million with a group of financial institutions to replace its
previous credit facility. In connection with this early retirement of long-term
debt, the Company recorded a pre-tax extraordinary charge of $10.3 million ($6.3
million net of taxes) in the first quarter of fiscal 1997. This charge reflected
the write-off of deferred financing costs of $6.3 million, prepayment penalties
of $2.7 million and $1.3 million in costs associated with the termination of
interest-rate protection agreements.
(3) IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 130, "Reporting Comprehensive Income," which establishes standards
for reporting and display of comprehensive income and its components. The
Company adopted this statement in the first quarter of fiscal 1998 and has
reflected the components of its comprehensive loss in the accompanying
consolidated statements of comprehensive loss.
In June 1997, the FASB also issued Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information." This statement establishes
standards for reporting information about a company's operating segments and
related disclosures about its products, services, geographic areas of operations
and major customers. The Company plans to adopt this statement in the fourth
quarter of fiscal 1998 and does not believe the adoption will materially impact
the Company's results of operations, cash flows or financial position.
(4) CONTINGENCIES
The Company and its subsidiaries are parties to various legal actions
arising in the ordinary course of business. Management believes that the outcome
of such cases will not have a material adverse effect on the consolidated
results of operations or the financial position of the Company.
7
<PAGE> 8
PROSOURCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(5) NET LOSS PER COMMON SHARE
For all periods presented in the accompanying consolidated statements of
operations, there are no reconciling items to the numerator of the basic and
diluted net loss per common share computations. For the period ended March 28,
1998, all stock options and other potential common shares were excluded from the
calculation of diluted loss per share, since they would produce anti-dilutive
results. As a result, there are no reconciling items to the denominator of the
basic and diluted loss per share computations for the period ended March 28,
1998.
The following table sets forth the reconciliation of the denominator of
the basic and diluted net loss per common share computation for the period ended
March 29, 1997:
<TABLE>
<CAPTION>
<S> <C>
Denominator for basic net loss
per common share -
Weighted average shares 9,337,519
Effect of dilutive securities:
Employee stock options 69,654
Stock warrants 9,964
---------
Dilutive potential common shares 79,618
---------
Denominator for diluted net
loss per common share -
adjusted weighted average
shares and assumed conversions 9,417,137
=========
</TABLE>
The following were outstanding as of March 28, 1998, but excluded from the
computation of diluted net loss per common share for the period ended March 28,
1998.
<TABLE>
<CAPTION>
Related Number of Conversion
Common Shares Price per Share Expiration
------------- --------------- ----------
<S> <C> <C> <C>
Options - 1995 Option Plan 295,150 shares - Class B $10.00 or $11.00 December 2000
Options - 1996 Option Plan 334,000 shares - Class B $14.00 November 2006 and January 2007
Options - 1997 Directors Plan 10,500 shares - Class A $ 5.25 April 2007
Stock Warrants 283,425 shares - Class B $12.35 March 2000
$0.5 million convertible 25,000 shares - Class A
subordinated note $20.00 November 1999
</TABLE>
8
<PAGE> 9
PROSOURCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(6) MERGER
On January 29, 1998, the Company signed a definitive merger agreement with
AmeriServe Food Distribution, Inc. ("AmeriServe"). Under the terms of the
agreement, AmeriServe has agreed to pay $15.00 in cash for each outstanding
share of the Company's common stock. In addition, under the agreement, all
outstanding options will be accelerated and option holders will receive $15.00
less the applicable exercise price for each share issuable upon exercise of the
options. AmeriServe has indicated that it intends to refinance all of the
Company's outstanding debt.
The merger is subject to regulatory approvals and other customary
conditions to closing. The Federal Trade Commission has informed the Company
that the waiting period under the Hart Scott Rodino Antitrust Improvements Act
of 1976 has expired. Onex Corporation and certain of its affiliates, which own
approximately 61% of the Company's outstanding stock, representing approximately
85% of the voting power, have committed to vote in favor of the merger, which
will assure the necessary shareholder approval. The special shareholder meeting
to vote on the merger is scheduled for May 20, 1998 and the merger is expected
to close by the end of May 1998.
9
<PAGE> 10
PROSOURCE, INC.
FORM 10-Q
QUARTERLY PERIOD ENDED MARCH 28, 1998
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
In the following comparisons of the results of operations, the thirteen
week periods ended March 28, 1998 and March 29, 1997 are referred to as 1998 and
1997, respectively.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the components
of the Company's consolidated statements of operations expressed as a percentage
of net sales.
<TABLE>
<CAPTION>
Thirteen Weeks Ended
March 28, March 27,
1998 1997
-------- --------
<S> <C> <C>
Net sales 100.00% 100.00%
Cost of sales 92.10 92.07
------ ------
Gross profit 7.90 7.93
Operating expenses 7.88 7.68
------ ------
Income from operations 0.02 0.25
Interest expense, net (0.34) (0.21)
------ ------
Loss (income) before income taxes
and extraordinary charge (0.32) 0.04
Income tax benefit (provision) 0.15 (0.02)
------ ------
Loss (income) before extraordinary
charge (0.17) 0.02
Extraordinary charge, net -- (0.62)
------ ------
Net loss (0.17)% (0.60)%
====== ======
</TABLE>
THIRTEEN WEEKS ENDED MARCH 28, 1998 COMPARED TO THIRTEEN WEEKS ENDED MARCH 29,
1997
Net sales declined 2.7% to 989.8 million in 1998 from $1,017.1 million in
1997. The decrease is primarily attributed to the Company's decision to
terminate its distribution contract with ARCOP, the purchasing cooperative for
Arby's restaurants, effective April 1, 1997. In 1997, sales to Arby's
restaurants (primarily franchisee-owned) accounted for approximately 9.7% of
the Company's sales. The Company has been able to offset the full impact of
this termination by increasing its sales to its current customer base, through
increased sales to existing restaurants and increasing the number of
restaurants served, and by adding new customers, such as Lone Star Steakhouse
& Saloon, Inc. (owner/franchisor of Lone Star Steakhouse Restaurants), which
the Company began servicing on March 18, 1998.
The Company's gross profit decreased by 3.0% to $78.2 million in 1998 from
$80.7 million in 1997. The gross profit percentage remained constant at 7.9%.
The reduction in gross profit dollars is due to the reduced sales caused by the
Arby's contract termination, discussed previously.
Operating expenses decreased slightly by 0.2% to $78.0 million in 1998 from
$78.1 million in 1997. However, as a percentage of net sales, operating expenses
increased to 7.9% in 1998 from 7.7% in 1997 due primarily to the impact that
certain fixed costs have on a lower sales volume.
10
<PAGE> 11
PROSOURCE, INC.
FORM 10-Q
QUARTERLY PERIOD ENDED MARCH 28, 1998
The Company reported income from operations totaling $0.2 million in 1998
compared to $2.6 million in 1997. This decrease is due to a combination of lower
gross profit dollars earned on a lower sales volume and certain fixed operating
expenses.
Net interest expense increased by $1.3 million to $3.4 million in 1998 from
$2.1 million in 1997. This increase is due primarily to increased borrowings
from the Company's credit facilities required to finance the Company's
operations, including capital expenditures. See "Liquidity and Capital
Resources".
The Company recognized an income tax benefit in 1998 of $1.5 million
compared to a provision for income taxes of $0.2 million in 1997. The effective
income tax rates for 1998 and 1997 were 48.1% and 44.3%, respectively. The
higher rate for 1998 is based on the projected pre-tax results for fiscal 1998
which are lower (on an absolute dollar basis) than the pre-tax results
originally projected for fiscal 1997. Since permanent differences have remained
approximately the same, this causes the effective tax rate to increase.
In 1997, the Company recognized an extraordinary charge of $10.3 million
($6.3 million net of taxes) associated with the early retirement of its previous
credit facility. This charge includes the write-off of deferred financing costs
($6.3 million), prepayment penalties ($2.7 million) and costs associated with
the termination of interest-rate protection agreements ($1.3 million).
Overall, the Company reported a loss in 1998 of $1.7 million, $0.18 per
share, compared to a loss of $6.0 million, $0.64 per share, in 1997. The
improvement in 1998 is due to the non-recurring extraordinary charge recognized
in 1997, discussed previously.
Restaurants owned or franchised by Burger King Corporation collectively
accounted for 44.9% and 40.2% of the Company's sales in 1998 and 1997,
respectively. In addition, sales to Darden Restaurants, Inc. (owner of Red
Lobster and Olive Garden restaurants) accounted for 23.2% and 22.8% of the
Company's sales in 1998 and 1997, respectively. No other customer or restaurant
concept accounted for more than 10% of the Company's sales in 1998 and 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company meets its liquidity needs through cash provided by operations,
normal vendor trade-credit terms, operating leases and borrowings under its
credit facilities. The Company used net cash of $2.5 million for its operating
activities in 1998. The Company generated net cash from operating activities of
$2.7 million in 1997. Cash flow in 1998 was negatively impacted primarily by a
reduction in accounts payable.
Cash used for capital expenditures was $9.0 million in 1998, primarily for
distribution facilities and equipment ($5.7 million) and computer system
upgrades ($3.3 million). In 1997, the Company used $6.6 million for capital
expenditures, primarily for distribution facilities and equipment ($4.2 million)
and computer system upgrades ($1.8 million). The Company anticipates capital
expenditures of approximately $19.0 million for fiscal year 1998; however, there
can be no assurance that capital expenditures will not exceed such amount.
The Company's credit facilities consist of two five-year loan agreements
aggregating $225 million with a group of financial institutions, a $150 million
accounts receivable securitization facility and a $75
11
<PAGE> 12
million revolving-credit facility. The facilities bear interest based on either
the prime rate or LIBOR plus an additional spread based on certain financial
ratios and mature on March 14, 2002. The Company is
PROSOURCE, INC.
FORM 10-Q
QUARTERLY PERIOD ENDED MARCH 28, 1998
required to comply with various covenants, and borrowings are subject to
calculations based on accounts receivable and inventory. These agreements are
secured by liens on substantially all of the Company's assets and contain
various restrictions on, among other things, the Company's ability to pay
dividends and dispose of assets. ProSource Receivables Corporation ("PRC"), a
subsidiary of ProSource Services Corporation, the Company's principal operating
subsidiary ("PSC"), is the legal borrower for the accounts receivable
securitization facility. Pursuant to the terms of the accounts receivable
securitization facility PSC sells, on an ongoing basis and without recourse, an
undivided interest in a designated pool of trade accounts receivable to PRC. In
order to maintain the designated balance in the pool of accounts receivable
sold, PSC is obligated to sell undivided interests in new receivables as
existing receivables are collected. PSC has retained substantially the same
credit risk as if the receivables had not been sold. PSC, as agent for PRC,
retains collection and administrative responsibilities on the receivables sold
to PRC. The creditors for this facility have security interests in PRC's assets
(consisting primarily of accounts receivable purchased from PSC) and are
entitled to be satisfied by such assets prior to equity holders.
The Company borrowed a net of $11.1 million in 1998 under its credit
facilities to fund its operating and investing activities. In 1997, the Company
borrowed a net of $16.4 million under its credit facilities to fund its
investing and other financing activities and to increase its cash and cash
equivalents. The Company paid approximately $4.2 million in 1997 for fees
associated with the early extinguishment of its previous credit facility and for
loan fees on its new credit facilities, which closed in March 1997.
Approximately $0.5 million was paid in 1997 to acquire and retire treasury
stock.
The Company believes that the combination of cash flow generated from
operations and borrowings under the existing credit facilities are sufficient to
satisfy its anticipated capital expenditures and working capital needs for at
least twelve months. Management may determine that it is necessary or desirable
to obtain financing for growth through additional bank borrowings or the
issuance of new debt or equity securities.
IMPACT OF FLUCTUATION IN PRODUCT COST AND INFLATION
A significant portion of the restaurants served by the Company purchase
products from the Company based on product cost plus a negotiated fixed dollar
amount per unit of measure. As a result, the Company's gross margin percentage
may be positively or negatively impacted as the product cost per unit of measure
decreases or increases, respectively. Moreover, inflation in operating expenses
without corresponding productivity improvements can have a negative effect on
the Company's operating results as operating expenses increase while gross
profit remains constant.
INFORMATION SYSTEMS AND THE IMPACT OF THE YEAR 2000
Since 1995, the Company has been actively engaged in a program to replace
and/or upgrade its significant transaction processing systems. This effort was
initiated to effect the integration of acquired businesses. As a result of this
program, the Company believes that it will be Year 2000 compliant on all of its
significant applications by the end of 1998. The Company has engaged a firm to
conduct an outside review to ensure the Company's entire enterprise compliance
readiness. Until this review is complete, however, there can be no assurance
that significant efforts will
12
<PAGE> 13
not be required to ensure Year 2000 compliance, including with respect to its
customer and vendor relationships. For the period ended March 28, 1998, the
Company expensed approximately $0.1 million associated with Year 2000
remediation efforts.
13
<PAGE> 14
PROSOURCE, INC.
FORM 10-Q
QUARTERLY PERIOD ENDED MARCH 28, 1998
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and its subsidiaries are parties to various legal actions
arising in the ordinary course of business. Management believes that
the outcome of such cases will not have a material adverse effect on
the consolidated results of operations or the financial position of the
Company.
ITEM 5. OTHER INFORMATION
Forward Looking Statements
This quarterly report contains certain forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of
1934 that involve risks and uncertainties. Such forward-looking
statements include, among other things, statements regarding sources of
growth, the potential impact of pending litigation and Year 2000
compliance and anticipated capital expenditures and working capital
needs. Actual outcomes may be affected by unexpected developments
impacting the Company and the restaurant industry such as adverse
situations affecting the largest chains serviced by the Company or a
decision by a major customer to revoke its approval of the Company as a
distributor, and other developments such as unforeseen costs and
expenses or changes in economic conditions, including inflation. Also,
the Company is in a highly competitive business and is in the process
of implementing a strategic plan intended to expand its business and
improve its cost structure. There can be no assurance that in its
highly competitive business environment, the Company will achieve the
planned growth and cost savings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
On February 2, 1998, the Company filed a Current Report on Form 8-K
which included documents attached as exhibits relating to the Agreement
and Plan of Merger, dated as of January 29, 1998, by and among the
Company, Steamboat Acquisition Corp. and AmeriServe Food Distribution,
Inc.
14
<PAGE> 15
PROSOURCE, INC.
FORM 10-Q
QUARTERLY PERIOD ENDED MARCH 28, 1998
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 duly authorized.
PROSOURCE, INC.
Date: May 11, 1998 /s/ William F. Evans
----------------------------------------
William F. Evans
Executive Vice President, Chief
Financial Officer
Date: May 11, 1998 /s/ Norberto Garcia
----------------------------------------
Norberto Garcia
Controller
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF PROSOURCE, INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> MAR-28-1998 DEC-27-1997
<PERIOD-END> MAR-28-1998 DEC-27-1997
<CASH> 12,137,000 12,501,000
<SECURITIES> 0 0
<RECEIVABLES> 220,864,000 226,332,000
<ALLOWANCES> 3,330,000 4,085,000
<INVENTORY> 152,488,000 160,621,000
<CURRENT-ASSETS> 397,658,000 410,993,000
<PP&E> 98,275,000 89,368,000
<DEPRECIATION> 31,769,000 29,407,000
<TOTAL-ASSETS> 541,938,000 548,101,000
<CURRENT-LIABILITIES> 288,543,000 304,965,000
<BONDS> 185,300,000 174,200,000
0 0
0 0
<COMMON> 94,000 93,000
<OTHER-SE> 62,908,000 64,322,000
<TOTAL-LIABILITY-AND-EQUITY> 541,938,000 548,101,000
<SALES> 989,764,000 3,901,165,000
<TOTAL-REVENUES> 989,764,000 3,901,165,000
<CGS> 911,564,000 3,591,368,000
<TOTAL-COSTS> 911,564,000 3,591,368,000
<OTHER-EXPENSES> 77,978,000 302,080,000
<LOSS-PROVISION> 453,000 2,275,000
<INTEREST-EXPENSE> 3,377,000 9,193,000
<INCOME-PRETAX> (3,155,000) (1,476,000)
<INCOME-TAX> 1,519,000 485,000
<INCOME-CONTINUING> (1,636,000) (991,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 (6,262,000)
<CHANGES> 0 (6,426,000)
<NET-INCOME> (1,636,000) (13,679,000)
<EPS-PRIMARY> (0.18) (1.47)
<EPS-DILUTED> (0.18) (1.47)
</TABLE>
