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 September 30, 2005
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)
Sebaly Shillito & Dyer, 1900 Kettering Tower, Dayton, Ohio 45423
(Address of principal executive offices)
(Zip Code)
732-389-3600 (x274)
(Registrant's telephone number, including area code)
770 North Center Street, Versailles, Ohio 45380
(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 November 10, 2004
- -------------------------------------
Limited Partnership Class A $10 Units 1,306,890
This document contains 12 pages
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WHITEFORD PARTNERS, L.P.
INDEX TO FORM 10-Q
SIX MONTHS ENDED SEPTEMBER 30, 2005 and 2004
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Page Number
Part I. FINANCIAL INFORMATION
Item 1.Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2005
(Unaudited) and December 31, 2004 ............................ 3
Condensed Consolidated Statements of Operations for the three and
nine months ended September 30, 2005 and 2004 (Unaudited)..... 4
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 2005 and 2004 (Unaudited).......... 5
Notes to Condensed Consolidated Financial Statements (Unaudited).. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 8
Item 3. Quantitative and Qualitative Discussions About Market Risk.. 9
Item 4. Controls and Procedures...................................... 9
PART II. OTHER INFORMATION.................................................. 9
Item 1. Legal Proceeding............................................. 9
Item 2. Change in Securities......................................... 9
Item 3. Defaults Upon Senior Securities.............................. 9
Item 4. Submission of Matters to a Vote of Security Holders.......... 9
Item 5. Other Materially Important Events............................ 9
Item 6. Form 8Ks..................................................... 9
Signatures ....................................................... 10
Exhibit 31.0 ....................................................... 11
Exhibit 32.0 ....................................................... 12
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Whiteford Partners, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2005 2004
(unaudited)
------------ -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 445,178 $ 427,675
Interest receivable 0 10,688
------------ ------------
TOTAL CURRENT ASSETS 445,178 438,363
SUBORDINATED NOTE RECEIVABLE 1,000,000 1,350,000
------------ ------------
TOTAL ASSETS $ 1,445,178 $ 1,788,363
============ ============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accrued expenses and other liabilities $ 42,773 $ 43,152
------------ ------------
TOTAL CURRENT LIABILITIES 42,773 43,152
SUBORDINATED CONSULTING FEE PAYABLE 0 183,903
PARTNERS' CAPITAL:
General Partner:
Capital contributions 132,931 132,931
Capital transfers to Limited Partners (117,800) (117,800)
Interest in net (loss) (50,855) (49,266)
Distributions (38,171) (38,171)
------------ ------------
(73,895) (72,306)
------------ ------------
Class A Limited Partners:
Capital contributions, net of organization and
Offering costs of $2,010,082 11,172,274 11,172,274
Capital transfers from the General Partner 116,554 116,554
Interest in net (loss) (5,045,762) (4,888,448)
Distributions (4,766,766) (4,766,766)
------------ ------------
1,476,300 1,633,614
------------ ------------
TOTAL PARTNERS' CAPITAL 1,402,405 1,561,308
------------ ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 1,445,178 $ 1,788,363
============ ============
See notes to consolidated financial statements.
Note: The Condensed Balance Sheet at December 31, 2004, has been taken from the
audited financial statements at such date.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
WHITEFORD PARTNERS, L.P.
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2005 2004 2005 2004
------------ ------------ ----------- ------------
Revenues:
Interest and other income $ 3,058 $ 33,174 $ 70,897 $ 98,094
----------- ----------- ----------- -----------
3,058 33,174 70,897 98,094
Costs and Expenses:
Selling and administrative expenses (23,037) (33,174) (63,703) (98,094)
Change in Estimate on:
Subordinated Consulting Fee -- -- 183,903 --
Subordinated Note Receivable -- -- (350,000) --
----------- ----------- ----------- -----------
NET INCOME OPERATIONS $ (19,979) $ 0 $ (158,903) $ 0
=========== =========== =========== ===========
Summary of net income allocated to:
General Partner $ (200) $ 0 $ (1,589) $ 0
Limited Partners (19,779) 0 (157,314) 0
----------- ----------- ----------- -----------
$ (19,979) $ 0 $ (158,903) $ 0
=========== =========== =========== ===========
Net income per $10 unit of L.P. Capital $ 0.02 $ 0.00 $ .12 $ 0.00
=========== =========== =========== ===========
Weighted average units issued and outstanding 1,306,890 1,306,890 1,306,890 1,306,890
=========== =========== =========== ===========
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
WHITEFORD PARTNERS, L.P.
(Unaudited)
Nine Months Ended
September 30,
---------------------
2005 2004
---------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 17,503 $ 53,208
--------- ---------
CASH PROVIDED IN FINANCING ACTIVITIES 0 0
--------- ---------
NET CASH PROVIDED IN FINANCING ACTIVITIES 0 0
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 17,503 53,208
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 427,675 348,296
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 445,178 $ 401,504
========= =========
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
WHITEFORD PARTNERS, L.P.
September 30, 2005
(Unaudited)
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NOTE A - ORGANIZATION, BUSINESS AND ACQUISITIONS
Whiteford Partners, L.P. (the "Partnership"') was formed on June 30, 1987, as a
Delaware limited partnership. The Partnership consists of a General Partner,
Gannon Group, Inc., and Limited Partners. The offering period of the Partnership
terminated on November 10, 1989, with $13,557,550 of Limited Partner gross
subscriptions received in the form of Class A Units. Pursuant to the terms of
the Prospectus, offering proceeds in the amount of $140,365 were returned to
certain Ohio residents when the Partnership's business acquisition program was
not substantially completed by December, 1989. The Partnership was organized
principally to form, acquire, own and operate businesses engaged in the
development, production, processing, marketing, distribution and sale of food
and related products (the "Food Businesses"').
In the first quarter of 1990, the Partnership entered into a limited
partnership, Whiteford Foods Venture, L.P. ("Whiteford's") which was formerly
named Granada/Whiteford Foods Venture, L.P., with a wholly-owned subsidiary of
the former General Partner, G/W Foods, Inc., for the purpose of acquiring the
assets, certain liabilities and the operations of Whiteford's Inc., a further
processor and distributor of beef products to major fast food restaurants and
regional chains, which was located in Versailles, Ohio. The acquisition, which
was made with Partnership funds, was closed March 26, 1990, with the
Partnership's resultant equity interest in Whiteford's being in excess of 99%.
On April 23, 1990, all outstanding and contingent items were resolved and
completed, and the acquisition of the assets was funded on April 24, 1990.
On May 4, 1992, the outstanding shares of G/W Foods, Inc. were assigned by the
former General Partner to Gannon Group, Inc., a corporation owned by Kevin T.
Gannon, a Director and Vice President of G/W Foods, Inc. At that time, Mr.
Gannon was also a former Vice President of Granada Corporation and certain of
its affiliates. Also on May 4, 1992, Granada Management Corporation assigned its
sole general partnership interest in the Partnership to Gannon Group, Inc. The
effect of these assignments is for Gannon Group, Inc. to have general
partnership authority and responsibility with respect to the Partnership and,
through G/W Foods, Inc., of Whiteford's.
Subject to the availability of capital resources and/or financing, the
Partnership Agreement permits the acquisition of additional Food Businesses that
produce, process or distribute specialty food products including businesses that
possess technology or special processes which could increase the productivity or
processing capability of the Partnership's Food Business or which enhance the
marketability or resale value of the Partnership's Food Business products. At
the present time, no acquisitions are contemplated.
The Partnership sold (the "Sale Transaction") substantially all of its assets on
November 11, 2001 to Whiteford Food Products, Inc., a wholly owned subsidiary of
JNR Corporation, an unaffiliated company. The purchase price was $7,950,000,
including the assumption or payment of certain liabilities. The purchase price
was paid $1,500,000 in cash and the issuance of a subordinated note (the
"Subordinated Note") due June 30, 2007 in the principal amount of $1,350,000 (as
adjusted) with the balance of the purchase price paid by the assumption of
certain liabilities net of other assets. The Subordinated Note bears interest at
9.5% and is prepayable under certain conditions. Additionally, the principal
balance of the Subordinated Note may be adjusted downward under certain
conditions.
The Partnership has received accrued interest on the Subordinated Note through
June 30, 2005 at the rate of 9.5% annually. No payments of interest accrued on
the Subordinated Note subsequent to June 30, 2005 has been received. On August
3, 2005 the Partnership was advised that Whiteford Foods Products, Inc. noticed
its employees of the possibility of the closure of the facility in Versailles,
Ohio, due to losses at such facility. Furthermore, U.S. Bank, the lender to
Whiteford Food Products, Inc. and Rochester Meat Company, a subordinated
guarantor of the Subordinated Note, declared a default on loans to Whiteford
Food Products, Inc. which resulted in the suspension of payments to the
Partnership under the Subordinated Note. On September 26, 2005, the Partnership
was advised that Whiteford Food Products, Inc. filed for protection from
creditors under Chapter 11 of the U.S. Bankruptcy Code, due to losses arising
from processing activities. The General Partner has assessed the financial
impact of such matter on the financial condition of the Partnership and
established a reserve in the amount of $350,000.
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In connection with the transaction with Whiteford Food Products, Inc., the
Partnership was obligated to pay up to $500,000 to Greenaway Consultants, Inc.
pursuant to a consulting agreement. Greenaway Consultants, Inc. acquired the
right to such payment in connection with its provision of management services
and financing to the Partnership. The Partnership and Greenaway Consultants,
Inc. agreed to: (i) a $50,000 payment made in January 2002, (ii) subordinate
$300,000 of such payment to the distribution by the Partnership of $2.00 per
limited partner unit (an aggregate of $2,613,780) and (iii) forgive $150,000 of
such payment. Greenaway Consultants, Inc. is wholly owned by Albert Greenaway.
Neither Mr. Greenaway nor Greenaway Consultants, Inc. owns any interest in the
general partner of the Partnership. Based upon the General Partner's estimate of
the value of Subordinated Note Receivable, the General Partner has revised its
estimate of amounts due Greenaway Consultants Inc. to $0 and has reversed
amounts previously accrued.
The Partnership records distributions of income and/or return 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 accounting principles generally
accepted in the United States. While the Partnership believes that the
disclosures presented are adequate to make the information not misleading, it is
suggested that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes included in the
Partnership's most recent annual report for the year ended December 31, 2004. A
summary of the Partnership's significant accounting policies is presented on
page F-5 of the Partnership's most recent annual report. There have been no
material changes in the accounting policies followed by the Partnership during
2005.
In the opinion of management, the unaudited information includes all adjustments
(all of which are of a normal recurring nature) which are necessary for a fair
presentation of the condensed consolidated financial position of the Partnership
at September 30, 2005 and the condensed consolidated results of its operations
for the three months and nine months ending September 30, 2005 and 2004 and the
condensed consolidated cash flows for the nine months ending September 30, 2005
and 2004. Operating results for the period ending September 30, 2005 are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 2005.
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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Partnership is including the following cautionary statement in this Report
on Form 10Q to make applicable and take advantage of the safe harbor provision
of the Private Securities Litigation Reform Act of 1995 for any forward-looking
statements made by, or on behalf of the Partnership. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, future
events or performance and underlying assumptions and other statements that are
other than statements of historical facts. Certain statements contained herein
are forward-looking statements and, accordingly, involve risk and uncertainties,
which could cause actual results to differ materially from those expressed in
the forward-looking statements. The Partnership's expectations, beliefs and
projections are expressed in good faith and are believed by the Partnership to
have reasonable basis, including without limitation, Management's examination of
historical operating trends, data contained in the Partnership's records, and
other data available from third parties, but there can be no assurance that
Management's expectations, beliefs, or projections would result or be achieved
or accomplished. In addition to other factors and matters discussed elsewhere
herein, important factors that, in the view of the Partnership, could cause
actual results to differ materially from those discussed in the forward-looking
statements include demand for Whiteford Food Products, Inc. and Rochester Meats
(as the guarantor on the Subordinated Note) products, the ability of Whiteford
Food Products and Rochester Meats to obtain widespread market acceptance of its
products, the ability of Whiteford Food Products, Inc. and Rochester Meats to
obtain acceptable forms and amounts of financing, competitive factors,
regulatory approvals and developments, economic conditions, the impact of
competition and pricing, and other factors affecting the Partnership, Whiteford
Food Products, Inc. and Rochester Meats' business that is beyond the
Partnership's control. Also, the realization of proceeds by Whiteford Food
Products, Inc. from the sale of its assets and the distribution of such proceeds
in connection with Whiteford Food Products, Inc. plan of reorganization under
the protection of Chapter 11 of the U.S. Bankruptcy Code, may have a material
impact on the proceeds received by the Partnership under the Subordinated Note
Receivable. The Partnership has no obligation to update or revise these
forward-looking statements to reflect the occurrence of future events or
circumstances.
The Partnership was organized as a Limited Partnership with a maximum operating
life of twenty years ending 2007. The source of its capital has been from the
sale of Class A, $10 Limited Partnership units in a public offering that
terminated on November 10, 1989 . Management's discussion and analysis set forth
below should be read in conjunction with the accompanying condensed consolidated
financial statements.
Results of Operations
- ---------------------
Three and Nine Months ended September 30, 2005 Compared to Three and Nine Months
- --------------------------------------------------------------------------------
Ended September 30, 2004
- ------------------------
The Partnership sold substantially all of its operating assets on November 11,
2001. For the three and nine months ended September 30, 2005, the Partnership
received net interest issued on the subordinated note and cash balances
aggregating $3,058 and $70,897, respectively and incurred operating expenses of
$23,037 and $63,703, respectively. Additionally, for the nine months ended
September 30, 2005, the Partnership accrued a $350,000 reserve associated with a
revision in its estimate for collectibility of the Subordinated Note and
reversed a $183,903 accrual of subordinated consulting fees payable. Operating
expenses include general and administrative expenses associated with audit fees,
tax return preparation fees and transfer agent fees. The Partnership has
discontinued, as of July 1, 2005, the accrual of interest income on the
Subordinated Note Receivable as collectability is uncertain.
For the three and nine months ended September 30, 2004, the Partnership received
interest income on the subordinated note receivable and cash investments
aggregating $33,174 and $98,094, respectively and incurred operating expenses of
$33,174 and $98,094, respectively. Such operating expenses include primarily
general and administrative expenses associated with audit fees, tax return
preparation fees and transfer agent fees and the accrual of subordinated
consulting fees.
The net loss for the three and nine-month periods in 2005 were ($19,979) and
($158,903), respectively versus $0 and $0 for the three-month and nine-month
periods in 2004, respectively.
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Liquidity and Capital Resources
- -------------------------------
At September 30, 2005, the Partnership had working capital of $402,405 versus
working capital of $395,211 at December 31, 2004. Subsequent to the sale of
assets to Rochester Meats, the Partnership has no interest bearing debt
outstanding.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Market Risk
- -----------
The default by Whiteford Food Products Inc. on its obligations to U.S. Bank as
the result of its losses in the meat business and the filing for protection
under Chapter 11 of the U.S. Bankruptcy Code presents a significant risk to the
Partnership. Whiteford Food Products Inc. is primarily liable on the
Subordinated Note receivable held by the Partnership.
ITEM 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this quarterly report, an evaluation was
performed by the Chairman of the General Partner of the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
on that evaluation, the Company's management concluded that the Company's
disclosure controls and procedures were effective as of September 30, 2005.
There have been no significant changes in the Company's internal controls over
financial reporting that occurred during the quarter ended September 30, 2005.
PART II. OTHER INFORMATION
Item 1. Legal Proceeding
There are no material pending or threatened legal proceedings involving the
Partnership, known to either the Partnership or the General Partner.
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
On August 3, 2005, Whiteford Food Products, Inc. noticed its employees of the
possibility of the closure of its facility in Versailles, Ohio, due to losses
arising from the processing activities at that facility. U.S. Bank, the lender
to Whiteford Food Products, Inc. and Rochester Meat Company, declared a default
under the loans to Whiteford Food Products, Inc., which resulted in the
suspension of payments to the Partnership. A default to U.S. Bank is a default
under the Subordinated Note Receivable due to the Partnership. Whiteford Food
Products Inc. filed for Chapter 11 protection in the U.S. Bankruptcy Court on
September 26, 2005. As of September 30, 2005, the General Partner has assessed
the financial impact of such matter on the financial condition of the
Partnership and has established a reserve equal to $350,000 relating to
collectibility of the Subordinated Note Receivable. The General Partner has
ceased the accrual of interest income on the Subordinated Note as of July 1,
2005 due to the uncertainty associated with collectability. Additionally, the
General Partner has reduced its estimate of amounts payable to Greenaway
Consultants Inc. to zero as no amount would be payable if the collectibility of
the Subordinated Note Receivable is so impaired.
Item 6. Form 8Ks
A form 8K was filed on each of August 3, 2005 and September 26, 2005.
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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 duly authorized.
WHITEFORD PARTNERS, L.P.
Date November 10, 2005 By /s/ Kevin T. Gannon
-------------------
Kevin T. Gannon, Chairman, President,
Chief Executive Officer and
Chief Financial Officer of
Gannon Group, Inc. its
General Partner
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