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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, 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: 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
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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, 1998
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LIMITED PARTNERSHIP CLASS A $10 UNITS 1,306,890
THIS DOCUMENT CONTAINS 10 PAGES
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WHITEFORD PARTNERS, L.P.
INDEX TO FORM 10-Q
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
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Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1998
(Unaudited) and December 31, 1997....................................... 3
Condensed Consolidated Statements of Operations and
Undistributed Income for the three months and six months
ended June 30, 1998 and 1997 (Unaudited)................................ 4
Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 1998 and 1997 (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
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CONDENSED CONSOLIDATED BALANCE SHEETS
WHITEFORD PARTNERS, L.P.
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JUNE 30, DECEMBER 31,
1998 1997
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ASSETS (UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents $ 335,348 $ 264,247
Accounts receivable: Trade 3,405,296 3,558,557
Inventories 2,988,200 3,024,597
Prepaid expenses and other assets 118,424 88,041
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TOTAL CURRENT ASSETS $ 6,847,268 $ 6,935,442
PROPERTY AND EQUIPMENT - net of accumulated
depreciation of $5,718,885 and $5,205,058 in
1998 and 1997 11,760,511 12,029,930
OTHER ASSETS - net of amortization 2,768,903 2,832,650
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TOTAL ASSETS $21,376,682 $21,798,022
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LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 3,687,922 $ 3,249,121
Notes payable and current maturities on long
term debt 2,640,303 3,425,625
Accrued expenses and other liabilities 846,144 658,562
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TOTAL CURRENT LIABILITIES $ 7,174,369 $ 7,333,308
LONG-TERM DEBT 4,377,798 4,732,167
PARTNERS' CAPITAL:
General Partner:
Capital contributions 132,931 132,931
Capital transfers to Limited Partners (117,800) (117,800)
Interest in Partnership net income 20,924 18,684
Distributions (35,558) (34,251)
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$ 497 $ (436)
Limited Partners:
Capital Contributions - net of organization and
offering costs of $2,010,082 11,172,274 11,172,274
Capital transfers from General Partner 116,554 116,554
Interest in Partnership net income/(loss) 2,060,410 1,838,686
Distributions (3,525,220) (3,394,531)
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$ 9,824,018 $ 9,732,983
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TOTAL PARTNERS' CAPITAL $ 9,824,515 $ 9,732,547
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TOTAL LIABILITIES AND PARTNERS' CAPITAL $21,376,682 $21,798,022
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NOTE: The condensed balance sheet at December 31, 1997 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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
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1998 1997 1998 1997
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Revenues
Sales of meat products $ 16,213,769 $ 18,061,461 $ 32,097,679 $ 33,006,101
Interest and other income 71,068 59,913 175,986 115,610
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$ 16,284,837 $ 18,121,374 $ 32,273,665 33,121,711
Costs and Expenses
Cost of meat products sold 14,998,495 16,666,622 29,887,184 30,466,970
Selling and administrative expenses 611,031 604,114 1,205,646 1,254,155
Depreciation and amortization 306,025 294,978 609,482 586,747
Interest 171,974 182,206 347,389 371,956
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$ 16,087,525 $ 17,747,920 $ 32,049,701 $ 32,679,828
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NET INCOME $ 197,312 $ 373,454 $ 223,964 $ 441,883
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Summary of net income allocated to
General Partner $ 1,973 $ 3,735 $ 2,240 $ 4,419
Limited Partners 195,339 369,719 221,724 437,464
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$ 197,312 $ 373,454 $ 223,964 $ 441,883
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Net income per $10 unit of L.P. Capital $ 0.15 $ 0.29 $ 0.17 $ 0.34
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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)
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SIX MONTHS ENDED
JUNE 30,
1998 1997
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,618,350 $ 784,552
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CASH FLOW USED IN INVESTING ACTIVITIES:
Purchase of property and equipment $ (291,064) $ (419,902)
Proceeds from Disposal of property and equipment 15,500 120
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NET CASH USED IN INVESTING ACTIVITIES $ (275,564) $ (419,782)
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CASH PROVIDED/(USED) IN FINANCING ACTIVITIES:
Proceeds from notes payable $ 10,081,639 $10,365,493
Payments on notes payable (11,221,328) (10,584,963)
Distributions to Limited and General Partners (131,996) --
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NET CASH PROVIDED/(USED) IN FINANCING ACTIVITIES $ (1,271 685) $ (219,470)
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INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS $ 71,101 $ 145,300
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 264,247 121,163
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 335,348 $ 266,463
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (excluding amount capitalized to fixed
assets and inventory) $ 353,587 $ 376,148
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NOTES TO CONDENSED FINANCIAL STATEMENTS
WHITEFORD PARTNERS, L.P.
JUNE 30, 1998
(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, 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, 1998 and December 31, 1997 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.
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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, 1998 and the condensed consolidated results of its
operations for the six months ending June 30, 1998 and 1997 and the condensed
consolidated cash flows for the six months ending June 30, 1998 and 1997.
Operating results for the period ended June 30, 1998, are not necessarily
indicative of the results that may be expected for the entire year ending
December 31, 1998.
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, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Revenues for the six months ended June 30, 1998 were $32,273,665 versus
$33,121,711 for the comparable period in 1997, a decrease of 2.6%. This
decrease in sales is primarily attributable to the composition of pounds
sold. During the 1998 period 34,738,863 pounds of meat products were sold
versus 34,855,936 pounds during the 1997 period.
Costs of meat products sold for the six months ended June 30, 1998 were
$29,887,184 versus $30,466,970 for the comparable period ended June 30, 1997,
a decrease of 2.0%. The decrease in the cost per pound is primarily
attributable to general composition of the inventory sold and commodity
pricing.
Gross margins on sales were 7.4% for the six months ended June 30, l998 and
8.0% for the comparable period in 1997. The decrease in gross margins is
attributiable the the semi-variable nature of certain costs of meat products
sold such as labor, packaging and utilities.
Selling and administrative expenses were $1,205,646 for the 1998 period
versus $1,254,155 for the 1997 period. Selling and administration expenses
represented 3.7% of revenue for the six months ended June 30, 1998 and 3.8%
the period ended June 30, 1997.
Depreciation and amortization expense for the six months ended June 30, 1998
was $609,482 versus $586,747 for the same period in 1997, an increase of 3.9%
Interest expense for the six months ended June 30, 1998 was $347,389 versus
interest expense of $371,956 for the same period in 1997. This decrease of
$24,567 primarily relates to the decrease in the average debt outstanding.
Net income of $223,964 was realized in the 1998 period compared to net income
of $441,883 in the comparable period in 1997.
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LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998 the Partnership had a negative working capital of $327,101
versus a negative working capital of $397,866 at December 31, 1997.
Cash provided by operating activities was $1,618,350 in 1998 versus $784,552
in the 1997 period.
Cash used in investing activities was $275,564 in 1998 as compared to
$419,782 in 1997.
The Partnership used $1,271,685 from financing activities during 1998
representing net repayment of debt outstanding. For the comparable period in
1997, the Partnership used $219,470.
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 $3,000,000 (with $1,865,306 outstanding at June 30,
1998),(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"); and (e) a five year credit
facility of $500,000, (the "Third Term 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 Partnership's 1998 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 1998. 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 1998.
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.
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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
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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 July 31, 1998 By /s/ Kevin T. Gannon
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Kevin T. Gannon, President
Chief Executive Officer
Chief Financial Officer
Gannon Group, Inc.
General Partner
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