File No. 0-7277
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED MAY 19, 1995
WSMP, INC.
Incorporated in North Carolina
CLAREMONT, NORTH CAROLINA 28610 56-0945643
(704) 459 - 7626 (I.R.S. Employer Identification No.)
WSMP, Inc. 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 and has been
subject to such filing requirements for the past 90 days.
The number of shares of WSMP, Inc. Common Stock outstanding as of June 20, 1995
was 2,710,338.
WSMP, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information:
---------------------------------------
Page No.
--------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
May 19, 1995 and February 24, 1995 ..................... 1-2
Consolidated Condensed Statements of
Operations and Retained Earnings -
Quarters Ended May 19, 1995 and
May 20, 1994 ........................................... 3
Consolidated Condensed Statements of Cash
Flows - Quarters Ended May 19, 1995 and
May 20, 1994. .......................................... 4
Notes to Consolidated Condensed Financial
Statements ............................................. 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations ............................................ 6-7
Part II. Other Information:
-----------------------------------------
Item 6. Exhibits and Reports on Form 8-K ............... 8
Signatures .............................................. 8
Index to Exhibits ....................................... 9
Exhibit 11 - Computation of Earnings (Loss) per
Common and Common Equivalent Share ..................... 10
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WSMP, INC. AND SUBSIDIARIES
-----------------------------------------------------
Consolidated Condensed Balance Sheets
(Unaudited)
May 19, February 24,
1995 1995
------------ ------------
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 1,349,997 $ 940,120
Marketable equity securities 130,582 120,564
Accounts receivable and current portion of notes
receivable, net:
Trade and other 3,537,431 4,809,950
Related party 1,221,708 1,178,213
Inventories 4,963,974 5,126,335
Income taxes refundable, prepaid expenses and other 267,726 238,657
Deferred income taxes 256,379 259,821
------------ ------------
Total current assets 11,727,797 12,673,660
------------ ------------
Property, plant and equipment, net 26,567,861 27,157,884
------------ ------------
Other assets:
Properties held for sale 3,322,372 3,322,372
Excess of cost over fair value of net assets
of businesses acquired, net 688,579 696,456
Noncurrent notes receivable 351,265 368,181
Noncurrent related party notes receivable 626,049 833,110
Investment in affiliates 1,042,155 742,633
Other 934,213 927,105
------------ ------------
Total other assets 6,964,633 6,889,857
------------ -----------
Total assets $ 45,260,291 $46,721,401
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Notes payable $ 4,000,000 $ 3,000,000
Current installments of long-term debt 2,841,575 2,939,844
Trade accounts payable 2,119,126 3,016,776
Income taxes payable 5,180 46,737
Other accrued liabilities 2,522,574 2,766,415
------------ -----------
Total current liabilities 11,488,455 11,769,772
Deferred Franchise Fees 5,000 30,000
Deferred Income Taxes 1,749,957 1,749,957
Long-term debt, excluding current installments 14,220,746 15,533,554
------------ ------------
Total liabilities 27,464,158 29,083,283
------------ ------------
Commitments and Contingencies
Shareholders' Equity:
Common stock - par value $1, authorized
10,000,000 shares; issued 2,710,388 shares
at May 19, 1995 and 2,660,338 at February
24, 1995 2,710,338 2,660,338
Capital in excess of par value 6,484,347 6,389,347
Unrealized gain/(loss) on securities
available for sale,net of deferred
income taxes of $91 at May 19, 1995
and $3,351 at February 24, 1995 142 (5,214)
Retained earnings 8,601,306 8,593,647
------------ -----------
Total shareholders' equity 17,796,133 17,638,118
------------ -----------
Total liabilities and shareholders' equity $45,260,291 $46,721,401
============ ============
See accompanying notes to unaudited consolidated condensed financial statements.
WSMP, INC. AND SUBSIDIARIES
-----------------------------------------------------
<TABLE>
Consolidated Condensed Statements of Operations and Retained Earnings
Quarters Ended May 19, 1995 and May 20, 1994
(Unaudited)
1995 1994
---- ----
<S> <C> <C>
Operating revenues:
Food sales $ 17,600,764 $ 20,419,296
Franchise, royalty and other fees (includes related
party transactions totaling $255,399 in 1995
and $245,984 in 1994) 711,769 680,488
----------- -----------
Total operating revenues 18,312,533 21,099,784
----------- -----------
Costs and expenses:
Cost of goods sold (includes related party
transactions totaling $103,290 in 1995
and $123,958 in 1994 12,375,271 14,523,187
Operating expenses (includes related party
transactions totaling $223,804 in 1995 and
$246,429 in 1994) 3,070,682 3,483,523
Selling, general and administrative expenses
(includes related party transactions totaling
$505,041 in 1995 and $583,341 in 1994) 1,854,930 1,967,389
Depreciation and amortization 611,049 696,787
----------- -----------
Total costs and expenses 17,911,932 20,670,886
------------ ------------
Operating income 400,601 428,898
----------- -----------
Other income (expense):
Net gain (loss) on disposition and write-downs
of assets (includes gain on sale of assets to
related parties totaling $128,320 in 1994) (460) 567,511
Other income (including interest)(includes
related party transactions totaling $22,500
in 1995 and in 1994) 96,249 89,057
Interest expense (485,289) (458,958)
------------- ------------
Net other income (expense) (389,500) 197,610
------------- ------------
Earnings before income taxes 11,101 626,508
Provision for income taxes 3,442 265,508
----------- -----------
Net earnings $ 7,659 $ 361,000
=========== ===========
Retained earnings:
Balance at beginning of period $ 8,593,647 $ 8,030,604
Net earnings 7,659 361,000
----------- -----------
Balance at end of period $ 8,601,306 $ 8,391,604
=========== ===========
Net earnings per common and common
equivalent share $ .00 $ .13
=========== ===========
See accompanying notes to unaudited consolidated condensed financial statements.
</TABLE>
WSMP, INC. AND SUBSIDIARIES
---------------------------------------------------
<TABLE>
Consolidated Condensed Statements of Cash Flows
Quarters Ended May 19, 1995 and May 20, 1994
(Unaudited)
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 7,659 $ 361,000
------------ -----------
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 611,048 696,787
Depreciation of properties leased to others 69,915 111,165
Provision for losses on receivables 40,107 68,939
Net (gain)/loss on disposition of assets 460 (567,511)
Other non-cash adjustments to earnings (24,778) (101,923)
Changes in operating assets and liabilities (net of
effects from purchase of restaurant companies providing
(using) cash:
Receivables 738,160 (542,635)
Inventories 162,361 (1,040,939)
Income taxes refundable, prepaid expenses and other (29,069) (181,881)
Trade accounts payable and other accrued liabilities (1,183,048) 544,720
Other (46,082)
------------ ------------
Total adjustments 385,156 (1,059,360)
------------ -----------
Net cash provided by (used in) operating activities 392,815 (698,360)
------------ -----------
Cash flows from investing activities:
Decrease (increase) in marketable equity securities (1,220) 4,766
Proceeds from sale of assets to related parties 623,734
Proceeds from sales of assets to others 347,214 1,567,144
Decrease in related party notes receivables 214,307 205,551
Decrease (increase) in other notes receivable 256,282 (40,130)
Deposits, net of refunds (25,117) (10,067)
Capital expenditures to related parties (95,199) (52,015)
Capital expenditures - others (130,606) (144,501)
Other investing activities (282,522) 29,388
------------ ------------
Net cash provided by investing activities 283,139 2,183,870
------------ -----------
Cash flows from financing activities:
Principal payments on long-term debt (1,411,077) (1,470,110)
Net proceeds under short-term borrowing agreements 1,000,000 (375,000)
Proceeds from exercise of stock options 145,000
------------ -----------
Net cash used in financing activities (266,077) (1,845,110)
------------ ------------
Net increase (decrease) in cash and cash equivalents 409,877 (359,600)
Cash and cash equivalents at beginning of period 940,120 1,235,089
------------ -----------
Cash and cash equivalents at end of period $ 1,349,997 $ 875,489
============ ===========
See accompanying notes to unaudited consolidated condensed financial statements.
</TABLE>
WSMP, INC. AND SUBSIDIARIES
-------------------------------
Notes to Consolidated Condensed Financial Statements
(Unaudited)
1.In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial position
as of May 19, 1995 and February 24, 1995 and the results of operations and
the cash flows for the fiscal quarters ended May 19, 1995 and May 20, 1994.
2.The results of operations for the fiscal quarters ended May 19, 1995 and May
20, 1994 are not necessarily indicative of the results to be expected for the
full year.
3.Financial statements for 1994 have been reclassified, where applicable, to
conform to financial statement presentation used in 1995.
4.Earnings per share are based on the weighted average number of common shares
and dilutive common equivalent shares outstanding during each fiscal quarter.
Common equivalent shares relate to outstanding stock options. The weighted
average number of shares used in the calculations are 2,903,484 and 2,839,679
in 1995 and 1994, respectively. Amounts for 1994 have been restated to
reflect a five-for-four stock split, effected in the form of a stock dividend
declared on February 22, 1995.
5.The Company reports the results of its operations using a 52-53 week basis.
In line with this, reports for interim fiscal periods are prepared on the
basis of 12-12-12-16 week periods. The Company follows this policy
consistently.
6.A summary of inventories entering into cost of goods sold is:
<TABLE>
May 19, February 24, May 20, February 25,
1995 1995 1994 1994
----------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Hams in curing process $ 1,894,799 $ 1,748,375 $ 1,833,493 $ 1,729,997
Other food (includes cured hams) 2,080,525 2,104,940 2,484,422 1,357,837
Supplies 988,650 1,273,020 1,212,477 1,401,619
----------- ------------ ----------- -----------
Totals $ 4,963,974 $ 5,126,335 $ 5,530,392 $ 4,489,453
=========== ============ =========== ===========
</TABLE>
7.The Company has certain debt obligations that contain restrictive covenants
including a restriction on payment of cash dividends. The Company was in
compliance with these covenants at May 19, 1995. However, there are no
consolidated retained earnings available for payment of dividends at that
date.
8.The Company has guaranteed a loan obligation of one of its franchisees in an
amount not to exceed $322,000. The loan is secured by certain restaurant
equipment purchased by the franchisee.
Effective December 1, 1993, the Company entered into a three year endorsement
with Richard Childress Racing Enterprises, Inc. and Dale Earnhardt, Inc. The
agreement calls for total payments of $1,200,000 over the three year period.
As of May 19, 1995, remaining payments under this agreement are $725,000.
9.Supplemental cash flow disclosures - cash paid during the period for:
Quarters Ended
-------------------
May 19, May 20,
1995 1994
------ ------
Interest $ 465,757 $ 470,669
========= ==========
Income taxes $ 45,000 $ 22,500
========= ==========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated (i) percentages
which certain items reflected in the financial data bear to operating revenue
of the Company and (ii) the percentage change of such items as compared to the
indicated prior period:
<TABLE>
Relationship to Period-to-Period
Total Revenue Increase (Decrease)
Quarters Ended Quarters Ended
--------------------- --------------
May 19, 1995 May 20, 1994 1995-94
------------ ------------ -------
<S> <C> <C> <C>
Restaurant food sales 35.9% 33.8% (7.9)
Food Processing sales 60.3 63.0 (17.0)
Franchise, royalty and other fees 3.8 3.2 4.6
-------- --------
Total operating revenue 100.0 100.0 (13.2)
Cost of goods sold 67.6 68.9 (14.8)
Operating expenses 16.8 16.5 (11.6)
Selling, general and administrative
expenses 10.1 9.3 (5.7)
Depreciation and amortization 3.3 3.3 (12.3)
-------- --------
Total operating income 2.2 2.0 (6.6)
Net other income (expense) (2.1) .9 (297.1)
--------- --------
Earnings before income taxes .1 2.9 (98.2)
Provision for income taxes .0 1.2 (98.7)
--------- ---------
Net earnings (loss) .1% 1.7% (97.9)
========= =========
</TABLE>
The Company operates in three principal lines of business. Segment information
is presented as follows:
Quarters Ended
--------------------------
May 19, 1995 May 20, 1994
------------ ------------
Operating Revenues:
- ---------------------------
Food processing $ 11,034,235 $ 13,287,849
Restaurant operations 6,566,529 7,131,447
Restaurant franchising 711,769 680,488
------------ ------------
Total operating revenues $ 18,312,533 $ 21,099,784
============ ============
Operating Profits
- -----------------------
Food processing $ 388,417 $ 795,638
Restaurant operations 532,044 301,540
Restaurant franchising 455,621 378,897
------------ ------------
1,376,082 1,476,075
Corporate expenses (975,481) (1,047,177)
Other Income 95,789 656,568
Interest expense (485,289) (458,958)
------------ ------------
Earnings before income taxes $ 11,101 $ 626,508
============ ============
RESULTS OF OPERATIONS:
- ----------------------
Consolidated food sales revenue decreased from $20,419,296 in the first
quarter of fiscal 1995 to $17,600,764 in the first quarter of fiscal 1996.
Approximately $2.3 million of the decrease occurred in the food processing
segment. This was due to the largest customer of the bakery repositioning
itself in certain of its own markets in late fiscal 1995 and, as a result,
discontinuing a line of product previously purchased from the Company. The
customer has developed a well defined marketing program to replace this
volume, and benefits from this program have begun to be realized. However,
Management feels that total replacement of this volume will continue into
the third quarter of the current fiscal year. The remaining decrease in food
sales relates to the restaurant segment which experienced a decline in
revenues totaling $565,000. Approximately $437,000 of the decrease resulted
from the closing of four stores since the beginning of the prior year. The
remaining decrease is attributable to decreases in same store sales.
Franchise, royalty and other fees in the first three months of fiscal 1996
experienced a 4.6% increase over the comparable period in fiscal 1995,
primarily due to the opening of a franchised Western Steer restaurant and
the recognition during the current quarter of the relating deferred franchise
fees totaling $25,000. In addition, a franchised Prime Sirloin restaurant
and a Bennett's Smokehouse & Saloon restaurant were opened during the first
quarter of fiscal 1996. The Company anticipates entering into agreements to
open eight additional restaurants under the Bennett's and Prime Sirloin
concepts during the remaining three quarters of the current fiscal year.
Operating income decreased from $428,898 in the first quarter of fiscal
1995 to $400,601 in the first quarter of fiscal 1996. Although total
operating revenues decreased $2.8 million, the effect on operating income
was minimized by greater profitability in the restaurant and franchising
operations as well as reductions in corporate costs, as shown on the
preceeding page. The increase in profitability in the restaurant operations
resulted from the closing of poorly performing restaurants during fiscal
1995, as well as better management of costs and expenses in existing
restaurants. Restaurant franchising operations yielded a higher operating
profit as a result of the recognition of the deferred franchise fees mentioned
above, as well as improved management of operating costs.
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------
The Company's working capital decreased from $904,000 at February 24, 1995
to $239,000 at May 19, 1995. Two major factors contributing to this decrease
were scheduled repayments of long-term debt totaling $1.4 million, as well
as, investments made in two 50% joint ventures involving the construction of
two restaurant units totaling $328,000. Although the working capital position
of the Company decreased during the first quarter of fiscal 1996, cash and
cash equivalents increased $410,000 primarily due to $1.0 million provided
through additional short-term borrowings.
The Company is currently seeking to refinance amounts outstanding under its
Senior Notes and short-term secured note on an intermediate to long term basis
through a private placement of debt. Refinancing of these amounts will allow
the Company to replinish working capital as well as provide capital to sustain
and grow all segments of the Company. Management expects that an agreement
will be completed prior to the end of fiscal 1996.
Management anticipates an increase in the working capital position of the
Company during the coming quarter as bakery sales continue to rebuild. In
addition, Management expects the sale of excess real estate to generate
approximately $1.0 million during the second quarter of fiscal 1996.
PART II. OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8 - K
- -------------------------------------------
(a) Exhibits
See Index to Exhibits Page 9
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K for the quarter ended May 19, 1995.
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.
WSMP, INC.
----------
Date: 5-21-95 By: James C. Richardson, Jr.
------- ---------------------------
James C. Richardson, Jr.
(President and Chief Executive Officer)
Date: 5-21-95 By: Matthew V. Hollifield
------- ---------------------------
Matthew V. Hollifield
(Vice President of Accounting and
Chief Accounting Officer)
INDEX TO EXHIBITS
For inclusion in Quarterly Report on Form 10-Q Quarter Ended May 19, 1995
Exhibit No. Page No.
- ----------- --------
11 Computation of Per Common and
Common Equivalent Share 10
Exhibit 11
----------
WSMP, INC. AND SUBSIDIARIES
-------------------------------
Computation of Earnings (Loss) Per Common and Common Equivalent Share
Quarter Ended
-------------------
May 19, May 20,
1995 1994
--------- ---------
Earnings (loss) computations:
Net earnings (loss) $ 7,659 $ 361,000
---------- ---------
Weighted average shares computation:
Actual outstanding shares at
beginning of period 2,660,338 2,666,861
Add (deduct) weighted average
shares applicable to:
Common stock issued 27,753
Common stock options outstanding 215,393 172,818
---------- ---------
Weighted average shares as
adjusted
2,903,484 2,839,679
========== ==========
Earnings (loss) per common and common
equivalent share $ .00 $ .13
========== ==========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the 1995 1st
quarter 10-Q for WSMP, Inc. and is qualified in its entirety by reference to
such 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-23-1996
<PERIOD-END> MAY-19-1995
<CASH> 1,349,997
<SECURITIES> 130,582
<RECEIVABLES> 2,656,016
<ALLOWANCES> 40,000
<INVENTORY> 4,963,974
<CURRENT-ASSETS> 11,727,797
<PP&E> 45,834,091
<DEPRECIATION> 19,266,230
<TOTAL-ASSETS> 45,260,291
<CURRENT-LIABILITIES> 11,488,455
<BONDS> 17,062,321
<COMMON> 2,710,338
0
0
<OTHER-SE> 15,085,795
<TOTAL-LIABILITY-AND-EQUITY> 45,260,291
<SALES> 17,600,764
<TOTAL-REVENUES> 18,312,533
<CGS> 12,375,271
<TOTAL-COSTS> 12,375,271
<OTHER-EXPENSES> 3,070,682
<LOSS-PROVISION> 40,107
<INTEREST-EXPENSE> 485,289
<INCOME-PRETAX> 11,101
<INCOME-TAX> 3,442
<INCOME-CONTINUING> 7,659
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,659
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
