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 March 31, 2006
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
incorporation or organization) Identification No.)
Sebaly Shillito & Dyer
1900 Kettering Tower, Dayton, Ohio 45423
(Address of principal executive offices)
(Zip Code)
303-705-6199
(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 by checkmark whether the registrant is a large accelerated filer or a
non-accelerated filer.
Large accelerated filer Accelerated filer Non-Accelerated filer X
---
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 May 2,2006
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Limited Partnership Class A $10 Units 1,306,890
This document contains 12 pages
WHITEFORD PARTNERS, L.P.
INDEX TO FORM 10-Q
THREE MONTHS ENDED MARCH 31, 2006 and 2005
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Page Number
Part I. FINANCIAL INFORMATION
Item 1.Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2006
(Unaudited) and December 31, 2005 .............................3
Condensed Consolidated Statements of Operations for the three
months ended March 31, 2006 and 2005 (Unaudited)...............4
Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 2006 and 2005 (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 Disclosure About Market Risk ...9
Item 4. Control and Procedures ......................................9
PART II. OTHER INFORMATION...................................................9
Item 1. Legal Proceedings ...........................................9
Item 1a Risk Factors...........................................9
Item 6. Exhibits and Reports on Form 8K .............................9
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Whiteford Partners, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2006 December 31, 2005
-------------- -----------------
Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 391,247 $ 424,797
------------ ------------
TOTAL CURRENT ASSETS 391,247 424,797
SUBORDINATED NOTE RECEIVABLE 550,000 550,000
------------ ------------
TOTAL ASSETS $ 941,247 $ 974,797
============ ============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accrued expenses and other liabilities $ 130,749 $ 66,380
------------ ------------
TOTAL CURRENT LIABILITIES 130,749 66,380
PARTNERS' CAPITAL:
General Partner:
Capital contributions 132,931 132,931
Capital transfers to Limited Partners (117,800) (117,800)
Interest in net (loss) (56,775) (55,796)
Distributions (38,171) (38,171)
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(79,815) (78,836)
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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) (5,631,749) (5,534,809)
Distributions (4,766,766) (4,766,766)
------------ ------------
890,313 987,253
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TOTAL PARTNERS' CAPITAL 810,498 908,417
------------ ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 941,247 $ 974,797
============ ============
See notes to consolidated financial statements.
Note: The Condensed Balance Sheet at December 31, 2005, 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)
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Three Months Ended
March 31,
----------------------------------
2006 2005
---- ----
Revenue
Interest and other income $ 4,177 33,438
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4,177 33,438
Costs and Expenses
General and administrative expenses 102,096 33,438
----------- -----------
NET LOSS $ (97,919) $ 0
=========== ===========
Summary of net loss allocated to
General Partner $ (979) $ 0
Limited Partners (96,940) 0
----------- -----------
$ (97,919) $ 0
=========== ===========
Net Loss per $10 unit of L.P. Capital $ (0.07) $ 0.00
=========== ===========
Average units issued and outstanding $ 1,306,890 1,306,890
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
WHITEFORD PARTNERS, L.P.
(Unaudited)
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Three Months Ended
March 31,
--------------------------
2005 2006
--------------------------
NET CASH (USED)/PROVIDED BY OPERATING ACTIVITIES $ (33,550) $ (5,118)
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(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (33,550) (5,118)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 424,797 427,675
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 391,247 $ 422,557
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 0 $ 0
========= =========
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
WHITEFORD PARTNERS, L.P.
March 31, 2005
(Unaudited)
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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,
("Whiteford's L.P.") (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
Partnership and Whiteford's have operated in the food business segment only. 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.
At March 31, 2006 and at December 31, 2005, the Partnership had
1,306,890 Class A limited partnership units issued and outstanding.
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 have 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. Whiteford Food Products, Inc. conducted an
auction of equipment during December 2005 and filed a reorganization plan (the
"Plan") on January 24, 2006, which was approved and confirmed in April 2006.
Based upon the above, the General Partner has assessed the financial impact of
such matters on the financial condition of the Partnership and established a
reserve in the amount of $800,000 against the $1,350,000 owed to the Partnership
and ceased the accrual of interest income on such note as of June 30, 2005. The
General Partner anticipates that the Partnership will receive $550,000 during
the second or third quarter of 2006 from Whiteford Food Products, Inc. and its
affiliates pursuant to the Plan.
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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 the 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 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 condensed consolidated 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 condensed consolidated
financial statements and notes included in the Partnership's most recent annual
report for the year ended December 31, 2005. 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 2006.
In the opinion of management, the unaudited condensed consolidated
financial statements include 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 March 31, 2006 and the
condensed consolidated results of its operations for the three months ending
March 31, 2006 and 2005 and the condensed consolidated cash flows for the three
months ending March 31, 2006 and 2005. Operating results for the period ending
March 31, 2006 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 2006.
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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.
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 Rochester
Meats (as the guarantor on the Subordinated Note) products, the ability of
Rochester Meats to obtain widespread market acceptance of its products, the
ability of 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, 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 Months ended March 31, 2006 Compared to Three Months ended March 31, 2005
- -------------------------------------------------------------------------------
The Partnership sold substantially all of its operating assets on
November 11, 2001. For the three months ended March 31, 2006, the Partnership
received interest on cash balances aggregating $4,177 and incurred and accrued
expenses of $102,096 including estimated expenses associated with the wind-down
of the Partnership during 2006. Such expenses include general and administrative
expenses, legal fees, tax return preparation fees, accounting fees, transfer
agent fees, storage fees and other expenses. The Partnership expects to pay a
liquidating distribution of approximately $.68 per unit during the second or
third quarter of 2006 from the proceeds of the subordinated note and other cash
balances.
For the three months ended March 31, 2005, the Partnership received net
interest issued on the subordinated note and cash balances aggregating $33,438
and incurred operating expenses of $33,438. Such operating expenses include
general and administrative expenses associated with audit fees, tax return
preparation fees, accrual of the subordinated consulting fee to Greenaway
Consultants Inc., and transfer agent fees.
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Liquidity and Capital Resources
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At March 31, 2006, the Partnership had working capital of $260,498
versus working capital of $358,417 at December 31, 2005. Subsequent to the sale
of assets to Rochester Meats, the Partnership has no interest bearing debt
outstanding.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
In the normal operation, the Company has market risk exposure to interest
rates on its cash investments of $391,247.
At March 31, 2006, the Company had $1,350,000 in interest bearing
investments, against which the Company has reserved $800,000 due to uncertainty
of collection, that are subject to market risk exposure to change in interest
rates. The Subordinated Note bears interest fixed at 9 1/2% for the life of the
note that comes due June 30, 2007. However, since June 30, 2005, the Company has
not accrued interest on the note. The remaining amount is subject to normal
economic risk associated with fluctuating money markets as well as collection
risk.
Item 4. CONTROLS AND PROCEDURES
The Company maintains a system of internal accounting controls designed to
provide reasonable assurance that transactions are properly recorded and
summarized so that reliable financial records and reports can be prepared and
assets safeguarded. In addition, a system of disclosure controls is maintained
to ensure that information required to be disclosed is recorded, processed,
summarized and reported in a timely manner to management responsible for the
preparation and reporting of the Company's financial information.
Management assesses the internal control and disclosure control systems
as being effective as they encompass material matters for the three months ended
March 31, 2006. To the best of management's knowledge, there were no changes in
the internal control and disclosure control systems during the quarter ended
March 31, 2006, that would materially affect the control systems.
PART II. OTHER INFORMATION
Item 1. Legal Proceeding
There are no other material pending or threatened legal proceedings
involving the Partnership, known to either the Partnership or the General
Partner.
Item 1a. Risk Factors
There has been no change in our risk factors that appear in Item 1a
of our Form 10K on page 3.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits:
Exhibit
Number Description
------ -----------
31.1 CEO certification pursuant to Section 302 of Sarbanes - Oxley Act
of 2002.
32 CEO and CFO certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.
(b) Reports on Form 8K - None
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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 May 2, 2006
Kevin T. Gannon, President
Chief Executive Officer
Chief Financial Officer
Gannon Group, Inc.
General Partner
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