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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2000 Commission File No. 1-6663
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COLONIAL COMMERCIAL CORP.
-------------------------
(Exact Name of Registrant as Specified in Its Charter)
New York 11-2037182
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
3601 Hempstead Turnpike, Levittown, New York 11756-1315
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 516-796-8400
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Securities Registered Pursuant to Section 12(b) of the Act:
Title of Class Name of Exchange On Which Registered
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None None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.05 Per Share
Convertible Preferred Stock, Par Value $.05 Per Share
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(Title of Class)
Indicate by check mark whether 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 Registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
Registrant's best knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (x)
The aggregate market value of voting stock held by non-affiliates of the
Registrant was approximately $5,232,861 as of March 23, 2001.
The number of shares outstanding of Registrant's Common Stock and Convertible
Preferred Stock as of March 23, 2001.
Outstanding
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Common Stock $.05 par value 1,601,610
Convertible Preferred Stock $.05 par value 1,466,436
Documents Incorporated by Reference
Document PART
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Registrant's 2000 Proxy Statement for Annual Meeting
of Shareholders on June 13, 2001 III
Registrant's 2000 Annual Report to Shareholders I, II
PART I.
Item 1 Business
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(a) General Development of Business
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Colonial Commercial Corp. (the "Company" or "Registrant" or "Colonial")
is a New York corporation, which was incorporated on October 28, 1964. Unless
otherwise indicated, the term "Registrant," "Company" or "Colonial" refers to
Colonial Commercial Corp. and its consolidated subsidiaries.
On March 24, 2000, the Company acquired all of the stock of Well-Bilt
Steel Products, Inc. ("Well-Bilt") (formerly BRS Products, Inc. ("BRS")), a
manufacturer of hollow metal doors and frames, pursuant to its prior agreement
to fund BRS' plan of reorganization, which was confirmed by the U.S. Bankruptcy
Court on February 8, 2000. The Company paid $3,384,094 (including advances of
$2,324,732).
In January 2001, the Board of Directors approved a plan to dispose of
the Well-Bilt operations. The Well-Bilt operations represented the Company's
entire door and doorframe manufacturing segment. The disposal was completed on
February 1, 2001. Well-Bilt agreed to surrender possession of certain of its
assets to its secured lender (the "Bank"), for the sole purpose of effecting a
private sale of such assets to a third party for $1,000,000. Of the $1,000,000
sales price, $700,000 was payable at closing and $300,000 was in the form of a
note payable. As payments are made to the Bank by the third party, the Bank will
release the Company from its outstanding obligation. As such, at closing the
outstanding obligation of the Company to the Bank was reduced by $700,000. The
balance of the sales price of $300,000 will remain an outstanding liability of
the Company until payment is made to the Bank by the third party. A loss from
operations of discontinued segment of $3,212,152 and a loss on disposal of
$3,731,654 are reflected in the consolidated statement of income (loss) for the
year ended December 31, 2000.
On June 25, 1999, the Company purchased all of the assets, subject to
all of the liabilities of Universal Supply Group, Inc. ("Universal") for
approximately $10.9 million in cash. In connection with the acquisition,
Colonial entered into a $16 million secured lending facility with the Bank,
which was subsequently increased to $18 million. Colonial financed the
acquisition with $4.0 million of existing cash and a $6.5 million borrowing
under the new facility. The borrowings are secured by substantially all of the
assets of Universal and Atlantic Hardware and Supply Corporation ("Atlantic"), a
wholly-owned subsidiary of Colonial, as well as the corporate guarantee of the
Company.
In June 1998, the Company sold all of its shares of Monroc, Inc.
("Monroc") common stock for proceeds of $3,533,653 and realized a gain of
$2,101,853. In October 1998, the Company sold its last parcel of Utah real
estate for net proceeds of $1,001,023 and realized a gain of $826,797.
On January 13, 1998, shareholders approved a five-to-one reverse stock
split, which the Registrant made effective January 30, 1998. In addition,
shareholders also approved a proposal to amend the Registrant's Certificate of
Incorporation immediately following the amendment effecting the reverse stock
split to increase the amount of authorized common stock to 20,000,000 shares
with a par value of $.05 per share.
(b) Financial Information About Industry Segments
---------------------------------------------
The Company's continuing industry segments are as follows (i) door
hardware and door distribution and (ii) heating, ventilation and air
conditioning. Net sales, operating income (loss), net income (loss) from
continuing operations and total assets attributable to each segment for each of
the last three years are set forth in Note 15 of the Company's consolidated
financial statements included herein.
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(c) Narrative Description of Business
---------------------------------
Door Hardware and Door Distribution
-----------------------------------
The door hardware and door distribution segment, which accounts for
approximately 45% of the Company's net sales, operates as Atlantic. Atlantic's
primary business is the distribution of door hardware, doors and doorframes used
in new building construction, buildings being rehabilitated, interior tenant
build-outs, and building maintenance. Products sold by Atlantic include all
types of mechanical and electronic hardware, such as locks, doorknobs, door
closers, hinges and other door-related hardware, as well as hollow metal and
wood doors. Atlantic services the contract hardware market, usually as a
material supplier only, on a wide range of commercial, residential, and
institutional construction projects, such as office buildings, hospitals,
schools, hotels and high-rise apartment buildings.
Atlantic has approximately 375 customers. In 2000, one customer
accounted for approximately 15% of Atlantic's sales. Atlantic believes that the
loss of any one of its other customers would not have a material adverse effect
on its business.
As of December 31, 2000, Atlantic had $13,000,000 in firm backlog
orders. Atlantic expects that all of the backlog orders as of December 31, 2000
will be filled within the current fiscal year. Atlantic's business is not
subject to significant seasonal variations. As of December 31, 1999, Atlantic
had $13,425,000 in firm backlog orders.
Atlantic purchases products from approximately 585 suppliers. In 2000,
no supplier accounted for more than 10% of Atlantic's purchases. Atlantic
believes that the loss of any one supplier would not have a material adverse
effect on its business.
Atlantic competes primarily with other door hardware and door
distributors who are selected by the architects, owners, and/or construction
managers, on a job-to-job basis. Atlantic has its estimators evaluate plans
received from a contractor, and prepare and submit a price for the project,
which is awarded through bid or negotiation. If Atlantic is awarded the job, it
supplies the required hardware by placing orders with manufacturers or from
goods on hand, or both.
Atlantic competes, primarily, in the New York, New Jersey,
Pennsylvania, Georgia and Illinois markets. Atlantic's competition varies widely
from region to region, primarily because builders' hardware distributors are
generally local single market firms. Within each geographical market,
contractors generally limit their hardware suppliers to a few local firms. Also,
in certain markets, Atlantic competes with firms that supply the complete door
package (i.e., door, frame and hardware). Atlantic had been one of the largest
"hardware only" suppliers; however, Atlantic has changed its marketing focus
from a "hardware only" supplier to a complete door package supplier.
Heating, Ventilation and Air Conditioning
-----------------------------------------
The heating, ventilation and air conditioning segment, which accounts
for approximately 55% of the Company's net sales, operates as Universal.
Universal is a distributor of heating, ventilation and air conditioning
equipment (HVAC) and climate control systems. Universal's products are marketed
primarily to HVAC contractors, who, in turn, sell such products to residential,
commercial and industrial customers. Universal also provides technical field
support, in-house training and climate control consultation for engineers and
installers.
Universal had approximately 4,000 customers in 2000. No customer
accounted for more than 10% of consolidated net sales in 2000. Universal
believes that the loss of any one customer would not have a material adverse
effect on its business.
-3-
Universal purchases products from approximately 300 suppliers. In 2000,
two suppliers accounted for 33% of Universal's purchases. The loss of one of
these suppliers could have a material adverse effect on its business for a
short-term period. Universal believes that the loss of any one of its other
suppliers would not have a material adverse effect on its business.
Universal competes primarily with other distributors in its
geographical region. Universal believes it is one of the largest HVAC
distributors in northern New Jersey. Universal believes it maintains a
competitive edge by providing in-house training and technical field support to
its customers.
Other Matters
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As of December 31, 2000, the Registrant had 159 employees (excluding
approximately 100 Well-Bilt employees), of whom two were executive officers at
its corporate offices in Levittown, New York. Fifty-nine (59) of the employees
are employed by Atlantic and ninety-five (95) employees are employed by
Universal. The Company believes its employee relations are satisfactory.
(d) Financial Information About Geographic Areas
--------------------------------------------
The Company has no foreign operations and all sales, during the last
three years, are to customers located in the United States.
Item 2. Properties
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Registrant's principal executive offices are located at 3601 Hempstead
Turnpike, Levittown, New York 11756-1315, in leased premises (approximately
1,306 square feet).
Atlantic maintains office and warehouse space of approximately 16,000 square
feet at 5-20 54th Avenue, Long Island City, New York under a lease expiring in
2009. Atlantic also maintains leased sales offices and warehouse space in
Bensenville, Illinois; and Bensalem, Pennsylvania.
Universal maintains an office and warehouse in Hawthorne, New Jersey and
additional warehouses in Bogota, Augusta, North Brunswick, Cedar Knolls, Wharton
and Rochelle Park, New Jersey and Long Island City and New Hampton, New York,
occupying approximately 145,000 square feet.
The Registrant's premises are suitable and adequate for their intended use
and are adequately covered by insurance. As of December 31, 2000, the Registrant
leases all its facilities.
Item 3. Legal Proceedings
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None
Item 4. Submission of Matters to a Vote of Security Holders
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No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 2000.
PART II
Item 5. Market for the Registrant's Common Stock, Convertible Preferred
Stock and Related Stockholder Matters
- -------------------------------------------------------------------------
The information required to be provided is incorporated by reference from
page 3 of the Registrant's 2000 Annual Report to Stockholders.
-4-
Item 6. Selected Financial Data
The information required to be provided is incorporated by reference from
page 4 of the Registrant's 2000 Annual Report to Stockholders under the caption,
"Selected Financial Data".
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
- ------------------------------------------------------------------------
The information required to be provided is incorporated by reference from
pages 6 through 9 of the Registrant's 2000 Annual Report to Stockholders under
the caption, "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
- --------------------------------------------------------------------
The information required to be provided is incorporated by reference from
page 9 of the Registrant's 2000 Annual Report to Stockholders under the caption,
"Quantitative and Qualitative Disclosures About Market Risk".
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
The consolidated financial statements of the Registrant and the independent
auditors' report thereon of KPMG LLP, independent certified public accountants,
as of December 31, 2000 and 1999 and for each of the years in the three-year
period ended December 31, 2000, are incorporated herein by reference from pages
11 through 38 of the Registrant's 2000 Annual Report to Stockholders.
Selected unaudited quarterly financial data of the Company for the years
ended December 31, 2000 and 1999 are incorporated herein by reference from page
5 of the Registrant's 2000 Annual Report to Stockholders.
Item 9. Changes in and Disagreements With Accountants On Accounting and
Financial Disclosures
- -------------------------------------------------------------------------
None
PART III
Item 10. Directors and Executive Officers of the Registrant
- -------- --------------------------------------------------
The names, ages and positions of the Registrant's executive officers are
listed below, along with a brief account of their business experience during the
last five years. Officers are appointed annually by the Board of Directors at
its first meeting following the Annual Meeting of Stockholders and from time to
time at the pleasure of the Board. There are no family relationships among these
officers, nor any arrangement or understanding between any such officers and any
other person pursuant to which any of such officers were selected as executive
officers.
Name, Age Business Experience
AND Position During Past Five Years
------------ ----------------------
Bernard Korn, 75 From prior to January 1996 to present,
Chairman of the Board, Chairman of the Board and President,
President, Chief Executive Chief Executive Officer of the Company
Officer
James W. Stewart, 54 From prior to January 1996, Executive
Executive Vice President, Vice President, Treasurer and
Secretary, Treasurer Secretary of the Company.
-5-
The remaining information required to be provided is incorporated by
reference to Registrant's 2001 definitive proxy statement to be filed with the
Commission pursuant to Regulation 14A no later than 120 days after the close of
its fiscal year.
Item 11. Executive Compensation.
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The information required to be provided is incorporated by reference to
Registrant's 2001 definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A no later than 120 days after the close of its fiscal
year.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- -------------------------------------------------------------------------
The information required to be provided is incorporated by reference to
Registrant's 2001 definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A no later than 120 days after the close of its fiscal
year.
Item 13. Certain Relationships and Related Transactions
- -------- ----------------------------------------------
The information required to be provided is incorporated by reference to the
Registrant's 2001 definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A no later than 120 days after the close of its fiscal
year.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- -------------------------------------------------------------------------
(a) See Index to Consolidated Financial Statements and Schedule included
elsewhere herein.
(b) No reports on Form 8-K were filed during the fourth quarter of 2000.
(c) Exhibits
-6-
Incorporated by
Filed Reference From
Herewith Form Date Exhibit
-------- ---- ---- -------
3 (a) Certificate of Incorporation of
Registrant 8-K 1/5/83 1
(i ) Certificate of Amendment of
the Certificate of Incorporation
Re: Authorized Common and
Convertible Preferred Shares
(b) By-Laws of Registrant 8-K 1/5/83 1
10(a) Employment Agreement dated as of
January 1, 1998 between Registrant
and Bernard Korn 10-KSB 3/31/99 10(a)
(i) Amendment No. 1 dated April 1,
1999 to Employment Agreement
dated as of January 1, 1998
between Registrant and
Bernard Korn Yes
(ii) Amendment No. 2 dated April 1,
2000 to Employment Agreement
dated as of January 1, 1998
between Registrant and
Bernard Korn Yes
(b) Employment Agreement dated as of
January 1, 2000 between Registrant
and James W. Stewart 10-KSB 3/31/99 10(b)
(i) First Amendment dated
September 15, 2000 to Employ-
Agreement dated as of January
1, 2000 between Registrant and
James W. Stewart
Yes
(c) 1986 Stock Option Plan 10-K 3/30/88 10(c)(ii)
(d) 1996 Stock Option Plan S-8 10/2/97 28 B
(e) Purchase agreement dated March,
25, 1999 for business and assets
subject to certain liabilities of
Universal Supply Group, Inc. 10-KSB 12/31/98 10(g)
(i) Amendment No. 1 dated June
25, 1999 to Purchase Agreement
dated March 25, 1999 8-K 7/8/99 10(a)(ii)
(ii) Employment agreement dated
June 25, 1999 between Universal
Supply Group, Inc. and
William Pagano 8-K 7/8/99 10(a)(iii)
(iii) Loan and Security Agreement
dated June 24, 1999 between
LaSalle Bank National Associa-
tion and Universal Supply
Group, Inc. 8-K 7/8/99 10(a)(iv)
-7-
Incorporated by
Filed Reference From
Herewith Form Date Exhibit
-------- ---- ---- -------
(iv) Demand Note dated June 24,
1999 between LaSalle Bank
National Association and
Colonial Commercial Sub 8-K 7/8/99 10(a)(v)
Corp.
(v) Guaranty of all liabilities and
Security Agreement of Colonial
Commercial Sub Corp. by
Colonial Commercial Corp. to
LaSalle Bank National Associa-
tion dated June 24, 1999 8-K 7/8/99 10(a)(vi)
(h) Lease dated February 27, 1992 by
and between Registrant and
3601 Turnpike Associates 10-KSB 3/29/93 10(h)(iii)
(i) Renewal letter dated November
28, 2000 Yes
(j) Certain documents related to
Well-Bilt Steel Products, Inc.:
(i) Reaffirmation Agreement,
General Release Consent and
Acknowledgement of Commercial
Reasonableness of Private Sale
dated February 1, 2001, between
Atlantic Hardware & Supply
Corporation, Universal Supply
Group, Inc., Colonial Commercial
Corp., and the secured lender 8-K 2/15/01 10(a)(i)
(ii) Reaffirmation Agreement,
General Release Consent and
Acknowledgement of Commer-
cial Reasonableness of Private
Sale dated February 1, 2001
between Well-Bilt Steel Products
Inc. and the secured lender 8-K 2/15/01 10(a)(ii)
(iii) Foreclosure Agreement dated February 1, 2001 between Independent
Steel Products, LLC the secured lender, Atlantic Hardware &
Supply Corporation, Universal Supply Group, Inc.
and Well-Bilt Steel Products, Inc. 8-K 2/15/01 10(a)(iii)
(iv) Bill of and Assignment dated
February 1, 2001 made by the
secured lender in favor of
Independent Steel Products, LLC 8-K 2/15/01 10(a)(iv)
11 Statement re computation of per share
earnings (loss) (not filed since com-
putations are readily apparent from the
consolidated financial statements)
13 Annual Report of the Registrant for the fiscal year ended December 31,
2000. Such report, except for those portions which are expressly
incorporated by reference herein, is furnished for the information of the
-8-
Incorporated by
Filed Reference From
Herewith Form Date Exhibit
-------- ---- ---- -------
Commission and is not to be deemed
"filed" as part of this filing. Financial
statement schedules that are not
applicable are omitted or included in
the consolidated financial statement
footnotes. Yes
21 Subsidiaries of Registrant Yes
23 Consent of Independent Accountants Yes
-9-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, Registrant has duly caused this Report to be signed on its
behalf by the undersigned thereunto duly authorized.
COLONIAL COMMERCIAL CORP.
(Registrant)
By: /S/ BERNARD KORN
----------------
Bernard Korn, President
By: /S/ JAMES W. STEWART
--------------------
James W. Stewart
Treasurer, Chief Financial
and Accounting Officer
Dated: April 9, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been duly signed below on April 9, 2001 by the following persons on behalf
of the Registrant and in the capacities indicated:
By: /S/ BERNARD KORN
----------------
Bernard Korn, President & Director
By: /S/ JAMES W. STEWART
--------------------
Executive Vice President, Treasurer
and Secretary/Director
By: /S/ GERALD S. DEUTSCH
---------------------
Gerald S. Deutsch, Director
By: /S/ WILLIAM KOON
----------------
William Koon, Director
By: /S/ RONALD MILLER
-----------------
Ronald Miller, Director
By: /S/ WILLIAM PAGANO
------------------
William Pagano, Director
By: /S/ JACK ROSE
-------------
Jack Rose, Director
By: /S/ PAUL SELDEN
---------------
Paul Selden, Director
By: /S/ CARL L. SUSSMAN
-------------------
Carl L. Sussman, Director
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