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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 September 30, 1995
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 (I.R.S. Employer Identification No.)
of incorporation or organization)
770 NORTH CENTER STREET, VERSAILLES, OHIO 45380
(Address of principal executive offices)
(Zip Code)
513-526-5172
(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 OCTOBER 31, 1995
- -------------------------------------- -------------------------------------
LIMITED PARTNERSHIP CLASS A $10 UNITS 1,306,890
This document contains 11 pages
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WHITEFORD PARTNERS, L.P.
INDEX TO FORM 10-Q
NINE MONTHS ENDED SEPTEMBER 30, 1995 and 1994
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Page Number
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 1995
(Unaudited) and December 31, 1994 . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations and
Undistributed Income for the three and nine months
ended September 30, 1995 and 1994 (Unaudited) . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 1995 and 1994 (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 . . . . . . . . . . . . . . . . . . . . . . .10
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CONDENSED CONSOLIDATED BALANCE SHEETS
WHITEFORD PARTNERS, L.P.
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<TABLE>
<CAPTION>
SEPT. 30 DEC. 31
1995 1994
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ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 312,568 $ 429,457
Accounts receivable: Trade 3,353,850 2,431,830
Inventories 2,281,782 2,429,353
Prepaid expenses and other assets 713,262 79,625
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TOTAL CURRENT ASSETS $ 6,661,462 $ 5,370,265
PROPERTY AND EQUIPMENT - net of accumulated
depreciation of $3,063,435 and $2,390,545
in 1995 and 1994 13,127,382 10,753,700
OTHER ASSETS - net of amortization 3,119,510 3,215,130
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TOTAL ASSETS $22,908,354 $19,339,095
----------- -----------
----------- -----------
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 3,422,347 $ 2,453,841
Note payable 3,245,939 2,136,348
Accrued expenses and other liabilities 757,333 626,026
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TOTAL CURRENT LIABILITIES $ 7,425,619 $ 5,216,215
LONG-TERM DEBT 7,015,881 5,245,342
PARTNERS' CAPITAL:
General Partner:
Capital contributions 132,931 132,931
Capital transfers to Limited Partners (117,800) (117,800)
Interest in Partnership net income 4,707 7,758
Distributions (32,943) (31,897)
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$ (13,105) $ (9,008)
Limited Partners:
Capital Contributions - net of organization
and offering costs of $2,010,082 11,172,274 11,172,274
Capital transfers from General Partner 116,554 116,554
Interest in Partnership net income 454,973 757,009
Distributions (3,263,842) (3,159,291)
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$ 8,479,959 $ 8,886,546
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TOTAL PARTNERS' CAPITAL $ 8,466,854 $ 8,877,538
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TOTAL LIABILITIES AND PARTNERS' CAPITAL $22,908,354 $19,339,095
----------- -----------
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</TABLE>
NOTE: The condensed balance sheet at December 31, 1994 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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<TABLE>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
---------------------------- ----------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues
Sales of meat products $16,024,425 $16,316,206 $43,576,009 $48,371,255
Interest and other income 39,997 68,829 108,409 188,970
------------ ------------ ------------ ------------
$16,064,422 $16,385,035 $43,684,418 $48,560,225
Costs and Expenses
Cost of meat products sold 14,745,965 15,215,241 41,136,548 45,548,137
Selling and administrative expenses 517,699 574,748 1,521,481 1,503,566
Depreciation and amortization 279,114 213,405 768,509 604,562
Interest 226,489 103,192 562,967 284,729
------------ ------------ ------------ ------------
$15,769,267 $16,106,586 $43,989,505 $47,940,994
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 295,155 $ 278,449 $ (305,087) $ 619,231
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Summary of net income allocated to
General Partner $ 2,951 $ 2,784 $ (3,051) $ 6,192
Limited Partners 292,204 275,665 (302,036) 613,039
------------ ------------ ------------ ------------
$ 295,155 $ 278,449 $ (305,087) $ 619,231
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income per $10 unit of L.P.
Capital $ 0.23 $ 0.21 $ (0.23) $ 0.47
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Average units issued and outstanding 1,306,890 1,306,890 1,306,890 1,306,890
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
WHITEFORD PARTNERS, L.P.
(UNAUDITED)
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<TABLE>
NINE MONTHS ENDED
SEPTEMBER 30
-----------------------------
1995 1994
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<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 155,149 $ 2,528,066
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CASH FLOW USED IN INVESTING ACTIVITIES:
Purchase of property and equipment (Net) $(3,046,571) $(2,138,663)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES $(3,046,571) $(2,138,663)
------------ ------------
CASH PROVIDED/(USED) IN FINANCING ACTIVITIES:
Proceeds from notes payable $15,638,619 $18,152,347
Payments on notes payable (12,758,489) (18,434,564)
Distributions to Limited and General Partners
including refunded reinvested distributions (105,597) (79,198)
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NET CASH PROVIDED/(USED) IN FINANCING ACTIVITIES $ 2,774,533 $ (361,415)
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INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS $ (116,889) $ 27,988
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 429,457 119,008
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 312,568 $ 146,996
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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) $ 562,967 $ 284,729
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Income taxes $ -- $ --
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</TABLE>
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
WHITEFORD PARTNERS, L.P.
SEPTEMBER 30, 1995
(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, 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. (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.
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 September 30, 1995 and December 31, 1994 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 September 30, 1995 and the condensed consolidated results of
its operations for the nine months ending September 30, 1995 and 1994 and the
condensed consolidated cash flows for the nine months ending September 30,
1995 and 1994. Operating results for the period ending September 30, 1995
are not necessarily indicative of the results that may be expected for the
entire year ending December 31, 1995.
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
- ---------------------
Nine Months ended September 30, 1995 Compared to Nine Months ended
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September 30, 1994
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Revenues for the nine months ended September 30, 1995 were $43,684,418
versus $48,560,225 for the comparable period in 1994, a decrease of 10.0%.
During the 1995 period, 44,448,998 pounds of meat product were sold versus
43,278,171 pounds during the same period in 1994, an increase of 1,170,827
pounds or 2.7%. The increase is primarily attributable to the increased
sales effort and production capabilities at the Versailles plant. Sales
revenue did not increase commensurately due to declining commodity prices.
Costs of meat products sold were $41,136,548 for the nine months ended
September 30, 1995 as compared to $45,548,137 for the same period in 1994, a
decrease of 9.7%. This decline is primarily attributable to declines in raw
material prices during the 1995 period versus 1994.
Gross margins on meat sales were 5.8% for the nine months ended
September 30, 1995 and 6.2% for the same period in 1994. This decline in
gross margin is primarily attributable to: i) declines in revenues and raw
material costs associated with the general decline in meat prices during the
1995 period versus the 1994 period; and ii) the semi-variable nature of
certain costs included in costs of meat products sold such as labor,
packaging and utilities. The general decline in meat prices usually results
in a decline in gross margin. The General Partner is unable to predict
whether such trends will continue.
Selling and administrative expenses were $1,521,481 for the nine months
ended September 30, 1995 as compared to $1,503,566 for the same period in
1994, a 1.2% increase. Selling and Administration expenses represented 3.5%
of sales for the nine months ended September 30, 1995 compared to 3.1% for
the same period in 1994. The increase in selling and administrative expenses
is primarily attributable to the increase in pounds sold.
Depreciation and amortization were $768,509 for the nine month period
ended September 30, 1995 as compared to $604,562 for the same period in 1994.
This increase is attributed primarily to the expansion of the Versailles,
Ohio facility and the equipment used therein.
7 of 11
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Interest expense for the nine months ended September 30, 1995 was
$562,967 versus $284,729 for the comparable period in 1994. This is the
result of additional financing in 1995.
The net loss was $305,087 in the 1995 period as compared to a net income
of $619,231 for the same period in 1994. The net loss for the 1995 period
was primarily attributable to two factors. First, the Partnership recently
completed a renovation of the fixed plant including the construction of
freezer space and the installation of new equipment. The construction and
installation disrupted the normal operations of the plant resulting in an
inefficient production process during the first six months of this period in
1995. Management estimates the loss due to the inefficiency amounted to
$400,000. Second, the overall price for meat products has undergone a
general decline during the first nine months of 1995 versus the same period
in 1994. The General Partner is unable to predict whether this trend will
continue. Such general declines in meat prices tend to lower gross margins
from operations due to i) the semi-variable nature of costs which cannot be
reduced on a percentage basis with declines in meat prices; and ii) the costs
associated with general declines in the value of ending inventory versus the
value of such inventory at the beginning of the period.
Three Months Ended September 30, 1995 Compared to Three Months Ended
- --------------------------------------------------------------------
September 30, 1994
- ------------------
Revenues for the three months ended September 30, 1995 were $16,064,422
versus $16,385,035 for the comparable period in 1994, a decrease of $320,613
or 2.0%. During the 1995 period 16,799,085 pounds of meat products were sold
versus 15,280,653 pounds during the same period in 1994, an increase of 9.9%.
This increase is primarily attributable to increased sales efforts and
production capabilities at the Versailles plant. Sales revenue did not
increase commensurately with the poundage increases due to generally lower
commodity prices in the 1995 period versus 1994.
Costs of meat products sold for the three months ended September 30,
1995 were $14,745,965 versus $15,215,241 for the same period in 1994, a
decline of $469,276 or 3.1%. This decline in cost is attributable primarily
to two factors: i) there has been a general decline in commodity prices in
the 1995 period versus the same period in 1994; and ii) the Partnership
installed certain equipment during the first six months of 1995 and such
equipment tends to lower operating costs associated with beef products. Such
equipment was not in operation during the 1994 period.
Selling and administrative expenses for the three months ended September
30, 1995 were $517,699 versus $574,748 for the same period in 1994. The
decline in administrative expenses is primarily attributable to the
effeciency associated with the completion of the expansion project.
Depreciation and amortization expenses for the three months ended
September 30, 1995 was $279,114 versus $213,405 for the same period in 1994.
Such increase in depreciation expenses is primarily attributable to
depreciation associated with the freezer expansion completed during the first
six months of 1995.
Interest expense for the three months ended September 30, 1995 was
$226,489 versus $103,192 for the same period in 1994. This increase in
interest expense is primarily attributable to increased debt levels
associated with the additional financing for the freezer expansion completed
in 1995.
Net income for the three months ended September 30, 1995 was $295,155
versus $278,449 for the same period in 1994. This increase is primarily
attributable to the above factors as well as the overall increase in
efficiency resulting from the expansion of freezer capabilities in 1995 as
well as the installation of more efficient equipment.
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Liquidity and Capital Resources
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At September 30, 1995, the Partnership had a net working capital
position deficit of $(764,157) versus a working capital position of $154,050
at December 31, 1994. At September 30, 1995, the Partnership used $2,600,000
of its $2,600,000 line of credit with its lenders.
Cash provided by operating activities was $155,149 in 1995 versus
$2,528,066 in 1994.
Cash used in investing activities was $3,046,571 in 1995 as compared to
$2,138,663 in 1994. This increase is attributable to the ordinary and
necessary equipment purchases and the costs associated with the freezer
expansion.
The Partnership provided $2,774,533 from financing activities during
1995 due to the increase in borrowing. For the comparable period in 1994,
the Partnership used $361,415 in financing activities representing net
repayment of debt outstanding.
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 $2,600,000 outstanding at September 30,
1995),(the "Principal Revolver"); (b) a five year term credit facility with
the same principal lender of $2,200,000,(the "Principal Term Loan"); (c) a
fifteen year term credit facility with the same principal lender of
$4,165,000,(the "Construction and Term Loan"); and (d) a five year term note
of $500,000,(the "Term B Loan"); (e) a $700,000 term note,(the "New Term
Loan") and (f) a credit facility with Greenaway Consultant, Inc. of
$420,000,(The "GCI Loan"), with a balance of $262,500 as of September 30,
1995.
The Principal Revolver bears an interest of prime plus 1.0%. The
Principal Term Loan bears a fixed interest rate of 8.717%. The Construction
and Term Loans bears a fixed interest rate of 8.90%. The Term B Loan bears a
fixed interest rate of 9.42%. The Principal Revolver, the Principal Term
Loan, the Construction and Term Loan 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 lender. The
Principal Revolver, the Principal Term Loan, the Construction and Term Loan
provided by the principal lender are secured by real property, equipment,
inventory, receivables and intangibles of Whiteford's. The New Term Loan
provides for a term of four months or greater at an interest rate on PNC
Bank, Ohio, National Association's prime rate plus 1%. As a condition to the
New Term Loan, the banks have required the personal guarantee of Albert D.
Greenaway in the amount of $300,000. Mr. Greenaway has advised the Company
that he is willing to provide such personal guarantee to assist the Company
in obtaining the New Term Loan. The banks have further requested
distributions to Limited Partners be suspended.
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, equipment, inventory, receivables and intangibles
and is subordinated to the Principal Revolver, the Principal Term Loan, the
Construction and Term Loan.
A lease agreement has been secured to provide two mechanical freeze
tunnel systems that will replace four liquid nitrogen freeze tunnels. The
installation of these units was completed in May of 1995 and require monthly
lease payments of $12,000 through December 31, 1995, then beginning January
22, 1996, the monthly payment will become $31,119.
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 November 13, 1995 By /s/ Kevin T. Gannon
-------------------------- ---------------------------
Kevin T. Gannon, President
Chief Executive Officer
Gannon Group, Inc.
its General Partner
By /s/ Kevin T. Gannon
----------------------------
Kevin T. Gannon
Chief Financial and Accounting Officer
Gannon Group, Inc.
its General Partner
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 312,568
<SECURITIES> 0
<RECEIVABLES> 3,353,850
<ALLOWANCES> 0
<INVENTORY> 2,281,782
<CURRENT-ASSETS> 6,661,462
<PP&E> 16,190,817
<DEPRECIATION> 3,063,435
<TOTAL-ASSETS> 22,908,354
<CURRENT-LIABILITIES> 7,425,619
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 8,466,854
<TOTAL-LIABILITY-AND-EQUITY> 22,908,354
<SALES> 43,576,009
<TOTAL-REVENUES> 43,684,418
<CGS> 41,136,548
<TOTAL-COSTS> 43,989,505
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 562,967
<INCOME-PRETAX> (305,087)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (305,087)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> 0
</TABLE>
