FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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: 33-15962
WHITEFORD PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0222842
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
770 NORTH CENTER STREET, VERSAILLES, OHIO 45380
(Address of principal executive offices)
(Zip Code)
937-526-5172
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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.
CLASS UNITS OUTSTANDING AT JULY 31, 1997
- ------------------------------------- -----------------------------------
LIMITED PARTNERSHIP CLASS A $10 UNITS 1,306,890
THIS DOCUMENT CONTAINS 10 PAGES
----
WHITEFORD PARTNERS, L.P.
INDEX TO FORM 10-Q
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1997
(Unaudited) and December 31, 1996 . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations and
Undistributed Income for the three months and six months
ended June 30, 1997 and 1996 (Unaudited). . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 1997 and 1996 (Unaudited) . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements (Unaudited). .6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . .7
PART II. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . .9
2 of 10
CONDENSED CONSOLIDATED BALANCE SHEETS
WHITEFORD PARTNERS, L.P.
- -------------------------------------------------------------------------------
JUNE 30, DECEMBER 31,
1997 1997
----------- ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 266,463 $ 121,163
Accounts receivable: Trade 3,027,551 3,196,376
Inventories 2,799,824 2,612,515
Prepaid expenses and other assets 402,097 479,031
--------- ----------
TOTAL CURRENT ASSETS $ 6,495,935 $ 6,409,085
PROPERTY AND EQUIPMENT - net of accumulated
depreciation of $4,676,992 and $4,154,597 in
1997 and 1996 12,094,188 12,197,731
OTHER ASSETS - net of amortization 2,896,397 2,960,144
---------- -----------
TOTAL ASSETS $ 21,486,520 $ 21,566,960
---------- -----------
---------- -----------
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 2,298,756 $2,685,099
Notes payable and current maturities on
long term debt 2,936,499 2,827,006
Accrued expenses and other liabilities 823,538 740,047
--------- ----------
TOTAL CURRENT LIABILITIES $ 6,058,793 $6,252,152
LONG-TERM DEBT 5,375,681 5,704,645
PARTNERS' CAPITAL:
General Partner:
Capital contributions 132,931 132,931
Capital transfers to Limited Partners (117,800) (117,800)
Interest in Partnership net income 20,559 16,140
Distributions (32,943) (32,943)
--------- ---------
$ 2,747 $ (1,672)
Limited Partners:
Capital Contributions - net of organization
and offering costs of $2,010,082 11,172,274 11,172,274
Capital transfers from General Partner 116,554 116,554
Interest in Partnership net income/(loss) 2,024,313 1,586,849
Distributions (3,263,842) (3,263,842)
----------- -----------
$ 10,049,299 $ 9,611,835
---------- ---------
TOTAL PARTNERS' CAPITAL $ 10,052,046 $ 9,610,163
---------- ---------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 21,486,520 $21,566,960
---------- ----------
---------- ----------
NOTE: The condensed balance sheet at December 31, 1996 has been taken from the
audited financial statements at such date.
3 of 10
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
WHITEFORD PARTNERS, L.P.
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- -----------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues
Sales of meat products $18,061,461 $14,375,693 $33,006,101 $27,563,715
Interest and other income 59,913 135,402 115,610 186,354
---------- ---------- ---------- ----------
$18,121,374 $14,511,095 $33,121,711 27,750,069
Costs and Expenses
Cost of meat products sold 16,666,622 13,236,407 30,466,970 25,244,032
Selling and administrative expenses 604,114 534,047 1,254,155 1,012,309
Depreciation and amortization 294,978 288,308 586,747 575,049
Interest 182,206 207,902 371,956 432,691
---------- ---------- ---------- ----------
$17,747,920 $14,266,664 $32,679,828 $27,264,081
---------- ---------- ---------- ----------
NET INCOME $ 373,454 $ 244,431 $ 441,883 $ 485,988
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
Summary of net income allocated to
General Partner $ 3,735 $ 2,444 $ 4,419 $ 4,860
Limited Partners 369,719 241,987 437,464 481,128
---------- ---------- ---------- ----------
$ 373,454 $ 244,431 $ 441,883 $ 485,988
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income per $10 unit
of L.P. Capital $ 0.29 $ 0.19 $ 0.34 $ 0.37
---- ---- ---- ----
---- ---- ---- ----
Average units issued and outstanding 1,306,890 1,306,890 1,306,890 1,306,890
--------- --------- --------- ---------
--------- --------- --------- ---------
4 of 10
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
WHITEFORD PARTNERS, L.P.
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
1996 1995
----------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 784,552 $ 600,426
----------- ----------
CASH FLOW USED IN INVESTING ACTIVITIES:
Purchase of property and equipment $ (419,902) $ (267,606)
Proceeds from Disposal of property and equipment 120 ---
----------- ----------
NET CASH USED IN INVESTING ACTIVITIES $ (419,782) $ (267,606)
----------- ----------
CASH PROVIDED/(USED) IN FINANCING ACTIVITIES:
Proceeds from notes payable $ 10,365,493 $8,123,406
Payments on notes payable (10,584,963) (8,670,617)
----------- ----------
NET CASH PROVIDED/(USED) IN FINANCING ACTIVITIES $ (219 470) $ (547,211)
------------ ----------
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS $ 145,300 $ (214,391)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 121,163 488,247
------------ ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 266,463 $ 273,856
------------ ----------
------------ ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (excluding amount capitalized
to fixed assets and inventory) $ 376,148 $ 450,162
------------ ----------
------------ ----------
5 of 10
NOTES TO CONDENSED FINANCIAL STATEMENTS
WHITEFORD PARTNERS, L.P.
JUNE 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE A - ORGANIZATION, BUSINESS AND ACQUISITIONS
Whiteford Partners, L.P., (the Partnership), formerly Granada Foods, L.P., was
formed on June 30, 1987, as a Delaware limited partnership. Prior to May 4,
1992, the Partnership consisted of a General Partner, Granada Management
Corporation, (Granada), and the Limited Partners. On May 4, 1992, Granada
assigned its sole general partner interest in the Partnership to Gannon Group,
Inc. and the Partnership was renamed Whiteford Partners, L.P.
The operational objectives of the Partnership are to own and operate businesses
engaged in the development, production, processing, marketing, distribution and
sale of food and related products (Food Businesses) for the purpose of providing
quarterly cash distributions to the partners while providing capital
appreciation through the potential appreciation of the Partnership's Food
Businesses. The Partnership expects to operate for twenty years from inception,
or for such shorter period as the General Partner may determine is in the best
interest of the Partnership, or for such shorter period as determined by the
majority of the Limited Partners.
The Partnership Agreement provides that a maximum of 7,500,000 Class A, $10
partnership units can be issued to Limited Partners. Generally, Class A units
have a preference as to cumulative quarterly cash distributions of $.25 per
unit. The sharing of income and loss from the Partnership operations is 99% to
the Class A and 1% to the General Partner. Amounts and frequency of
distributions are determinable by the General Partner.
On March 26, 1990, the Partnership, through Whiteford Foods Venture, L.P.
"Whiteford's",(formerly Granada/Whiteford Foods Venture, L.P.), a joint venture
with an affiliate of the then General Partner, acquired the business assets of
Whiteford's Inc., a meat processing and distribution company. The cash purchase
price of the assets was $8,275,000 with liabilities of $3,776,806 assumed. The
excess of the purchase price over the estimated fair value of the net tangible
assets acquired of approximately $3,825,000 was recorded as goodwill. The
acquisition was accounted for using the purchase method of accounting and,
accordingly, the financial statements include the operations of Whiteford's from
the date of acquisition.
In 1993, the Partnership entered into a settlement agreement with certain
participants in the Partnership's Distribution Reinvestment and Unit Acquisition
Plan under which the Partnership repurchased 33,165 Class A Units for a total
purchase price of $218,194 payable over a five year period. The first
installment in the amount of $62,049 was paid in 1993 with four subsequent
annual installments of $39,036.25.
At June 30, 1997 and December 31, 19956 the Partnership had 1,306,890 Class A
limited partnership units issued and outstanding.
The Partnership records distributions of income and/or return of capital to the
General Partner and Limited Partners when paid. Special transfers of equity, as
determined by the General Partner, from the General Partner to the Limited
Partners are recorded in the period of determinations.
The accompanying unaudited financial statements have been prepared in accordance
with the instructions of Form 10-Q and therefore do not include all information
and footnotes for a fair presentation of financial position, results of
operations and cash flows in conformity with generally accepted accounting
principles.
6 of 10
In the opinion of management, the unaudited information includes all adjustments
(consisting of normal accruals) which are necessary for a fair presentation of
the condensed consolidated financial position of the Partnership at June 30,
1997 and the condensed consolidated results of its operations for the six months
ending June 30, 1997 and 1996 and the condensed consolidated cash flows for the
six months ending June 30, 1997 and 1996. Operating results for the period
ended June 30, 1997, are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 1997.
NOTE B - INCOME TAXES
The Partnership files an information tax return, the items of income and expense
being allocated to the partners pursuant to the terms of the Partnership
Agreement. Income taxes applicable to the Partnership's results of operations
are the responsibility of the individual partners and have not been provided for
in the accounts of the Partnership.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management's discussion and analysis set forth below should be read in
conjunction with the accompanying condensed consolidated financial statements.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Revenues for the six months ended June 30, 1997 were $33,121,711 versus
$27,750,069 for the comparable period in 1996, an increase of 19.4%. This
increase in sales is primarily attributable to the increase in pounds sold along
with increases in meat prices during the first six months of 1997 as compared to
the same period in 1996. During the 1997 period 34,855,936 pounds of meat
products were sold versus 30,489,489 pounds during the 1996 period, an increase
of 4,366,447 pounds or 14.3%. The increase is pounds of meat products sold is
primarily attributable to the increased sales effort and production capabilities
at the Versailles plant.
Costs of meat products sold for the six months ended June 30, 1997 were
$30,466,970 versus $25,244,032 for the comparable period ended June 30, 1996, an
increase of $5,222,938. The average cost of meat sold for 1997 was $.874 verus
$.828 for the 1996 period. The increase in the cost per pound is primarily
attributable to general commodity price increases.
Selling and administrative expenses were $1,254,155 for the 1997 period versus
$1,012,309 for the 1996 period. Selling and administration expenses represented
3.8% of revenue for the six months ended June 30, 1997 and 3.6% the period ended
June 30, 1996.
Depreciation and amortization expense for the six months ended June 30, 1997 was
$586,747 versus $575,049 for the same period in 1996, an increase of 2.0%
Interest expense for the six months ended June 30, 1997 was $371,956 versus
interest expense of $432,691 for the same period in 1996. This decrease of
$60,735 primarily relates to the decrease in the average debt outstanding.
Net income of $441,883 was realized in the 1997 period compared to net income of
$485,988 in the comparable period in 1996.
7 of 10
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997 the Partnership had a net working capital of $437,142 versus a
working capital of $156,933 at December 31, 1996.
Cash provided by operating activities was $784,552 in 1997 versus $600,426 in
the 1996 period.
Cash used in investing activities was $419,782 in 1997 as compared to $267,606
in 1996. This increase is attributable to the addition of a 3,400 square foot
employee welfare area for a cost of $215,000.
The Partnership used $219,470 from financing activities during 1997 representing
net repayment of debt outstanding. For the comparable period in 1996, the
Partnership used $547,211.
Whiteford's working capital and equipment requirements are primarily met by (a)
a revolving credit agreement with Whiteford's principal lender in the maximum
amount of $2,600,000 (with $2,268,477 outstanding at June 30, 1997),(the
"Principal Revolver"); (b) a five year term credit facility of $2,200,000,(the
"Principal Term Loan"); (c) a five year credit facility of $4,165,000,(the
"Principal Mortgage Term Loan"); (d) a two year credit facility of $700,000,(the
"Second Term Loan"); (e) a five year credit facility of $500,000, (the "Third
Term Loan") and (f) a credit facility with Greenaway Consultant, Inc. of
$420,000, with $52,500 outstanding as of June 30, 1997 (the "GCI
Loan"),(collectively, the "Loans").
The Principal Revolver bears an interest rate of prime plus 1/2%. The Principal
Term Loan bears an interest rate of 8.717%. The Principal Mortgage Loan bears
interest of 8.99%. The Second Term Loan bears an interest rate of prime plus
1/2%. The Third Term bears an interest rate of 9.42%. The Loans require the
Partnership to meet certain financial covenants and restrict the ability of the
Partnership to make distributions to Limited Partners without the consent of the
principal lender. The Principal Revolver and the Principal Term Loan (together
with the Principal Mortgage Loan provided by the principal lender) are secured
by real property, fixed assets, equipment, inventory, receivables and
intangibles of Whiteford's.
The GCI Loan bears interest at a rate equal to 1-1/2 % above the prime rate
established from time to time by the Company's financial institution lender
having the highest outstanding credit balance. The GCI Loan is secured by real
property, fixed assets, equipment inventory and intangibles and is subordinated
to the Principal Revolver, the Principal Term Loan, the Principal Mortgage Loan.
The Partnership's 1997 capital budget calls for the expenditure of $800,000 for
building, plant and equipment modifications and additions. The General Partner
believes Whiteford's is in compliance with environmental protection laws and
regulations, and does not anticipate making additional capital expenditures for
such compliance in 1997. Such amounts are expected to be funded by internally
generated cash flow. The General Partner believes that the above credit
facilities along with cash flow from operations will be sufficient to meet the
Partnership's working capital and credit requirements for 1997.
The nature of the Partnership's business activities (primarily meat processing)
are such that should annual inflation rates increase materially in the
foreseeable future, the Partnership would experience increased costs for
personnel and raw materials; however, it is believed that increased costs could
substantially be passed on in the sales price of its products.
SUBSEQUENT EVENT
In July 1997, the General Partner obtained approval from the Partnership's
lenders to reconvene distributions. The initial distribution, payable in August
1997, has been established at $.05 per unit. Subsequent quarterly distributions
will also require the approval of the Partnership's lenders.
8 of 10
PART II. OTHER INFORMATION
Item 1. Legal Proceeding
None
Item 2. Change in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Materially Important Events
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - None
b. Reports on Form 8-K - None
9 of 10
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.
WHITEFORD PARTNERS, L.P.
Date August 8, 1997 By /s/ Kevin T. Gannon
-------------- --------------------------
Kevin T. Gannon, President
Chief Executive Officer
Chief Financial Officer
Gannon Group, Inc.
General Partner
10 of 10