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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, 1996
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)
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
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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 OCTOBER 31, 1996
- ------------------------------------- --------------------------------------
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
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
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Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1996 (Unaudited) and December 31, 1995 . . . . .3
Condensed Consolidated Statements of Operations and
Undistributed Income for the three months and nine months
ended September 30, 1996 and 1995 (Unaudited). . . . . . . . .4
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 1996 and 1995 (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.
<TABLE>
<CAPTION>
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SEPTEMBER 30 DECEMBER 31
1996 1995
<S> <C> <C>
ASSETS (UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents $ 220,380 $ 488,247
Accounts receivable: Trade 2,917,280 2,545,169
Inventories 2,781,702 2,419,466
Prepaid expenses and other assets 693,076 755,515
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TOTAL CURRENT ASSETS $ 6,612,438 $ 6,208,397
PROPERTY AND EQUIPMENT - net of accumulated depreciation
of $4,086,160 and $3,315,265 in 1996 and 1995 12,691,288 12,984,410
OTHER ASSETS - net of amortization 2,992,017 3,087,637
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TOTAL ASSETS $ 22,295,743 $ 22,280,444
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LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 2,985,725 $ 2,700,444
Notes payable and current maturities on long term debt 2,991,913 3,097,979
Accrued expenses and other liabilities 689,586 935,011
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TOTAL CURRENT LIABILITIES $ 6,667,224 $ 6,733,434
LONG-TERM DEBT 6,055,327 6,754,525
PARTNERS' CAPITAL:
General Partner:
Capital contributions 132,931 132,931
Capital transfers to Limited Partners (117,800) (117,800)
Interest in Partnership net income 15,770 7,963
Distributions (32,943) (32,943)
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$ (2,042) $ (9,849)
Limited Partners:
Capital Contributions - net of organization and offering costs
of $2,010,082 11,172,274 11,172,274
Capital transfers from General Partner 116,554 116,554
Interest in Partnership net income/(loss) 1,550,248 777,348
Distributions (3,263,842) (3,263,842)
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$ 9,575,234 $ 8,802,334
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TOTAL PARTNERS' CAPITAL $ 9,573,192 $ 8,792,485
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TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 22,295,743 $ 22,280,444
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</TABLE>
NOTE: The condensed balance sheet at December 31, 1995 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)
<TABLE>
<CAPTION>
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THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
1996 1995 1996 1995
______ ______ _______ _______
<S> <C> <C> <C> <C>
Revenues
Sales of meat products $ 15,430,077 $ 16,024,425 $ 42,993,792 $ 43,576,009
Interest and other income 64,104 39,997 250,458 108,409
---------- ---------- ---------- ----------
$ 15,494,181 $ 16,064,422 $ 43,244,250 43,684,418
Costs and Expenses
Cost of meat products sold 14,120,679 14,745,965 39,364,711 41,136,548
Selling and administrative expenses 583,105 517,699 1,595,414 1,521,481
Depreciation and amortization 291,466 279,114 866,515 768,509
Interest 204,212 226,489 636,903 562,967
---------- ---------- ---------- ----------
$ 15,199,462 $ 15,769,267 $ 42,463,543 $ 43,989,505
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 294,719 $ 295,155 $ 780,707 $ (305,087)
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Summary of net income allocated to
General Partner $ 2,947 $ 2,951 $ 7,807 $ (3,051)
Limited Partners 291,772 292,204 772,900 (302,036)
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$ 294,719 $ 295,155 $ 780,707 $ (305,087)
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Net income per $10 unit of L.P. Capital $ 0.23 $ 0.23 $ 0.60 $ (0.23)
----- ---- ----- -----
----- ---- ----- -----
Average units issued and outstanding 1,306,890 1,306,890 1,306,890 1,306,890
---------- ---------- ---------- ----------
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</TABLE>
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
WHITEFORD PARTNERS, L.P.
(UNAUDITED)
<TABLE>
<CAPTION>
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NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
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<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,015,170 $ 155,149
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CASH FLOW USED IN INVESTING ACTIVITIES:
Purchase of property and equipment $ (477,773) $ (3,046,571)
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NET CASH USED IN INVESTING ACTIVITIES $ (477,773) $ (3,046,571)
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CASH PROVIDED/(USED) IN FINANCING ACTIVITIES:
Proceeds from notes payable $ 12,886,680 $ 15,638,619
Payments on notes payable (13,691,944) (12,758,489)
Distributions to Limited and General Partners --- (105,597)
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NET CASH PROVIDED/(USED) IN FINANCING ACTIVITIES $ (805 264) $ 2,774,533
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INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS $ (267,867) $ (116,889)
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 488,247 429,457
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 220,380 $ 312,568
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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) $ 661,661 $ 562,967
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NOTES TO CONDENSED FINANCIAL STATEMENTS
WHITEFORD PARTNERS, L.P.
SEPTEMBER 30, 1996
(UNAUDITED)
________________________________________________________________________________
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.
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, the most recent of which was paid in July 1996.
At September 30, 1996 and December 31, 1995, 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, 1996 and the condensed consolidated results of its operations for
the nine months ending September 30, 1996 and 1995 and the condensed
consolidated cash flows for the nine months ending September 30, 1996 and 1995.
Operating results for the period ended September 30, 1996, are not necessarily
indicative of the results that may be expected for the entire year ending
December 31, 1996.
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, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
Revenues for the nine months ended September 30, 1996 were $43,244,250 versus
$43,684,418 for the comparable period in 1995, a decrease of 1.0%. This
decrease in sales is primarily attributable to the decline in meat prices during
the first nine months of 1996 as compared to the same period in 1995. During
the 1996 period 47,278,530 pounds of meat products were sold versus 44,448,998
pounds during the 1995 period, an increase of 2,829,532 pounds or 6.4%. The
increase is pounds of meat products sold is primarily attributable to the
increased sales effort and production capabilities at the Versailles plant.
Costs of meat products sold for the nine months ended September 30, 1996 were
$39,364,711 versus $41,136,548 for the comparable period ended September 30,
1995, a decrease of 4.5%. The decline in the cost per pound is primarily
attributable to general commodity price declines. The General Partner expects
general commodity prices to decline slightly during the remainder of 1996.
Gross margins on meat sales were 9.0% for the nine months ended September 30,
1996 and 5.8% for the 1995 period. This increase in gross margins is primarily
attributable to: i) the semi-variable nature of certain costs in the costs of
meat products sold such as labor, packaging, and utilities and ii) the increased
efficiencies associated with the recently renovated Versailles plant whereby
lower labor and utilities costs are realized in the manufacture and warehousing
of products.
Selling and administrative expenses increased to $1,595,414 from $1,521,481, a
4.9% increase. Selling and administration expenses represented 3.7% of revenue
for the nine months ended September 30, 1996 and 3.5% the period ended September
30, 1995.
Depreciation and amortization expense for the nine months ended September 30,
1996 was $866,515 versus $768,509 for the same period in 1995, an increase of
12.8%. Such increase is primarily due to the expansion of the freezer space at
the Versailles plant. Such construction project was completed during 1995 and
the property was placed in service in March 1995.
Interest expense for the nine months ended September 30, 1996 was $636,903
versus interest expense of $562,967 for the same period in 1995. This increase
of $73,936 primarily relates to the increase in the average debt outstanding
primarily due to the expansion of the Versailles plant.
7 of 10
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A net gain of $780,707 was realized in the 1996 period compared to a net loss of
$305,087 in the comparable period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996 the Partnership had a net working capital deficit of
$54,786 versus a working capital deficit of $525,037 at December 31, 1995.
Cash provided by operating activities was $1,015,170 in 1996 versus $155,149 in
the 1995 period.
Cash used in investing activities was $477,773 in 1996 as compared to $3,046,571
in 1995. This decrease is attributable to the completion of the freezer
expansion in 1995.
The Partnership used $805,264 from financing activities during 1996 representing
net repayment of debt outstanding. For the comparable period in 1995, the
Partnership provided $2,774,533 in financing activities due to the increase in
borrowing.
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 $2,306,222 outstanding at September 30, 1996),(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 Loan"); (d) a two year credit facility of $700,000,(the
"Second Term Loan"); (e) a five year credit facility of $500,000, (the "Third
Term Loan") and (f) a credit facility with Greenaway Consultant, Inc. of
$420,000, with $131,250 outstanding as of September 30, 1996 (the "GCI
Loan"),(collectively, the "Loans").
The Principal Revolver bears interest at a rate equal to prime plus .5%. 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 1.00%. 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 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, fixed assets, equipment inventory and intangibles and is subordinated
to the Principal Revolver, the Principal Term Loan, the Principal Mortgage Loan.
The Partnership leases certain equipment pursuant to a seven year lease
agreement with monthly lease payments equal to $31,118. The Partnership also
leases certain additional equipment for varying terms at a monthly rate of
approximately $10,000.
The Partnership's 1996 capital budget calls for the expenditure of $900,000 for
building, plant and equipment modifications and additions. The Partnership
anticipates that such capital expenditures will be met by internally generated
cash flow and other financing sources. 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 1996. The
General Partner also believes Whiteford's is in compliance with environmental
protection laws and regulations, and does not anticipate making additional
capital expenditures for such compliance in 1996.
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.
8 of 10
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PART II. OTHER INFORMATION
Item 1. Legal Proceeding
The Partnership has been named as a defendant in a lawsuit filed on
or about July 18, 1996, in the United States District Court for the
Southern District of Texas. The Partnership was served on or about
October 14, 1996. The Plaintiffs in the lawsuit are The Travelers
Insurance Company, The Travelers Indemnity Company of Rhode Island,
The Travelers Indemnity Company of Illinois, Charter Oak Fire
Insurance Company, and Phoenix Insurance Company. The lawsuit
alleges breach of contract and quantum meruit theories of recovery
and seeks at least $102,607, plus pre and post-judgement interest and
attorneys fees. Plaintiffs claim that this sum represents unpaid
premiums under an alleged insurance agreement. The defendants are:
Granada Corporation, G/W Foods, Inc., Granada Acquisitions, Inc.,
Granada Air Services, Inc., Granada Cincinnati Multifoods, Inc. d/b/a
Cincinnati Multifoods d/b/a Cinti-Multi Foods, Granada Financial
Services, Inc., Granada Foods, L.P. a/k/a Whiteford Partners, L.P.,
Granada Land & Cattle Co., Inc., Granada Programs, Inc., Granada
Realty Inc., Granada/Whiteford Foods Venture, L.P., One Research Park
LTD., Relle Corporation, Texas Western Beef, Inc., Granada Foods
Corporation (f/k/a American Agribusiness Corp.), ACF, Inc., Dumas
Cattle Feeders (division of ACF, Inc.), Sunday House Foods, Inc.,
Texas Meat Purveyors, Inc. (a/k/a TMP Asset Management Corporation),
Granada Biosciences, Inc., Granada Biosciences, U.K., LTD., American
Feeding Group Joint Venture, Granada Acquisitions Joint Ventures,
Granada Building Joint Venture, Granada International Corporation,
Granada Management Corporation, American Cattle Feeders (division of
ACF, Inc.), Granada Feeding Company (division of ACF, Inc.), Granada
Corporation d/b/a Agromarina de Panama, S.A., Granada Corporation
d/b/a Blancamar Realty, S.A., Granada Corporation d/b/a Kabashiki
Kaisha Granada Japan d/b/a Granada Japan Incorporated, Granada
Corporation d/b/a Wortham Ranch and Granada Corporation d/b/a
Scattered Oaks Ranch. As of October 31, 1996, the Partnership had
not filed an answer to the lawsuit and had not commenced discovery
proceedings. At this time, it is not possible to evaluate with
certainty the likelihood of an unfavorable outcome.
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 8, 1996 By /s/ Kevin T. Gannon
------------------- ------------------------------
Kevin T. Gannon, President
Chief Executive Officer
Chief Financial Officer
Gannon Group, Inc.
General Partner
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 220,380
<SECURITIES> 0
<RECEIVABLES> 2,917,280
<ALLOWANCES> 0
<INVENTORY> 2,781,702
<CURRENT-ASSETS> 6,612,438
<PP&E> 16,777,448
<DEPRECIATION> 4,086,160
<TOTAL-ASSETS> 22,295,743
<CURRENT-LIABILITIES> 6,667,224
<BONDS> 6,055,327
0
0
<COMMON> 0
<OTHER-SE> 9,573,192
<TOTAL-LIABILITY-AND-EQUITY> 22,295,743
<SALES> 42,993,792
<TOTAL-REVENUES> 43,244,250
<CGS> 39,364,711
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,098,832
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 636,903
<INCOME-PRETAX> 780,707
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 780,707
<EPS-PRIMARY> .60
<EPS-DILUTED> 0
</TABLE>
