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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, 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.
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CLASS UNITS OUTSTANDING AT OCTOBER 31, 1998
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LIMITED PARTNERSHIP CLASS A $10 UNITS 1,306,890
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THIS DOCUMENT CONTAINS 10 PAGES
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WHITEFORD PARTNERS, L.P.
INDEX TO FORM 10-Q
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 1998
(Unaudited) and December 31, 1997 ................................3
Condensed Consolidated Statements of Operations and
Undistributed Income for the three months and nine months
ended September 30, 1998 and 1997 (Unaudited) ....................4
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 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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SEPTEMBER 30, DECEMBER 31,
1998 1997
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(UNAUDITED)
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 426,016 $ 264,247
Accounts receivable: Trade 2,665,565 3,558,557
Inventories 3,502,269 3,024,597
Prepaid expenses and other assets 138,198 88,041
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TOTAL CURRENT ASSETS $ 6,732,048 $ 6,935,442
PROPERTY AND EQUIPMENT - net of accumulated depreciation
of $5,994,551 and $5,205,058 in 1998 and 1997 11,612,752 12,029,930
OTHER ASSETS - net of amortization 2,737,031 2,832,650
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TOTAL ASSETS $ 21,081,831 $ 21,798,022
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LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 2,252,623 $ 3,249,121
Notes payable and current maturities on long term debt 3,724,998 3,425,625
Accrued expenses and other liabilities 743,480 658,562
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TOTAL CURRENT LIABILITIES $ 6,721,101 $ 7,333,308
LONG-TERM DEBT 4,220,796 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 24,738 18,684
Distributions (36,211) (34,251)
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$ 3,658 $ (436)
Limited Partners:
Capital Contributions - net of organization and offering costs
of $2,010,082 11,172,274 11,172,274
Capital transfers from General Partner 116,554 116,554
Interest in Partnership net income/(loss) 2,438,013 1,838,686
Distributions (3,590,565) (3,394,531)
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$ 10,136,276 $ 9,732,983
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TOTAL PARTNERS' CAPITAL $ 10,139,934 $ 9,732,547
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TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 21,081,831 $ 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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
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1998 1997 1998 1997
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Revenues
Sales of meat products $15,317,692 $16,314,380 $47,415,371 $49,320,481
Interest and other income 60,777 65,757 236,763 181,367
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$15,378,469 $16,380,137 $47,652,134 49,501,848
Costs and Expenses
Cost of meat products sold 13,848,639 14,988,485 43,735,823 45,455,455
Selling and administrative expenses 670,091 676,753 1,875,737 1,930,908
Depreciation and amortization 307,539 308,253 917,021 895,000
Interest 170,783 178,894 518,172 550,850
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$14,997,052 $16,152,385 $47,046,753 $48,832,213
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Net Income - Operations $ 381,417 $ 227,752 $ 605,381 $ 669,635
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Other Income
Gain on Sale of Assets $ -- $ 23,091 $ -- $ 23,091
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NET INCOME $ 381,417 $ 250,843 $ 605,381 $ 692,726
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Summary of net income allocated to
General Partner $ 3,814 $ 2,508 $ 6,054 $ 6,927
Limited Partners 377,603 248,335 599,327 685,799
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$ 381,417 $ 250,843 $ 605,381 $ 692,726
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---------- ---------- ---------- ----------
Net income per $10 unit of L.P. Capital $ 0.29 $ 0.19 $ 0.46 $ 0.53
---- ---- ---- ----
---- ---- ---- ----
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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NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 975,231 $ 1,853,206
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CASH FLOW USED IN INVESTING ACTIVITIES:
Purchase of property and equipment $ (418,970) $ (1,036,969)
Proceeds from Disposal of property and equipment 15,500 18,595
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NET CASH USED IN INVESTING ACTIVITIES $ (403,470) $ (1,018,374)
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CASH PROVIDED/(USED) IN FINANCING ACTIVITIES:
Proceeds from notes payable $ 15,163,943 $ 16,974,365
Payments on notes payable (15,375,941) (17,582,385)
Distributions to Limited and General Partners (197,994) (65,998)
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NET CASH PROVIDED/(USED) IN FINANCING ACTIVITIES $ (409,992) $ (674,018)
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INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS $ 161,769 $ 160,814
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 264,247 121,163
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 426,016 $ 281,977
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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) $ 523,945 $ 555,414
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NOTES TO CONDENSED FINANCIAL STATEMENTS
WHITEFORD PARTNERS, L.P.
SEPTEMBER 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 September 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 September 30, 1998 and the condensed consolidated results of
its operations for the nine months ending September 30, 1998 and 1997 and the
condensed consolidated cash flows for the nine months ending September 30,
1998 and 1997. Operating results for the period ended September 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
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1997
Revenues for the nine months ended September 30, 1998 were $47,652,134 versus
$49,501,848 for the comparable period in 1997, a decrease of 3.7%. This
decrease in sales is primarily attributable to the lower comodity pricing and
the product mix. During the 1998 period 51,877,277 pounds of meat products
were sold versus 52,070,790 pounds during the 1997 period.
Costs of meat products sold for the nine months ended September 30, 1998 were
$43,735,823 versus $45,455,455 for the comparable period ended September 30,
1997, a decrease of 3.8%. The decrease in the cost per pound is primarily
attributable to lower commodity pricing and the product mix.
Gross margins on sales were 8.2% for the nine months ended September 30, l998
and 8.2% for the comparable period in 1997.
Selling and administrative expenses were $1,875,737 for the 1998 period
versus $1,930,908 for the 1997 period. Selling and administration expenses
represented 3.9% of revenue for the nine months ended September 30, 1998 and
3.9% the period ended September 30, 1997.
Depreciation and amortization expense for the nine months ended September 30,
1998 was $917,021 versus $895,000 for the same period in 1997, an increase of
2.5%.
Interest expense for the nine months ended September 30, 1998 was $518,172
versus interest expense of $550,850 for the same period in 1997. This
decrease of $32,678 primarily relates to the decrease in the average debt
balance outstanding.
Net income of $605,381 was realized in the 1998 period compared to net income
of $692,726 in the comparable period in 1997.
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LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998 the Partnership had a net working capital of $10,947
versus a negative working capital of $397,866 at December 31, 1997.
Cash provided by operating activities was $975,231 in 1998 versus $1,853,206
in the 1997 period.
Cash used in investing activities was $403,470 in 1998 as compared to
$1,018,374 in 1997.
The Partnership used $409,992 from financing activities during 1998
representing net repayment of debt outstanding. For the comparable period in
1997, the Partnership used $674,018.
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 $3,000,000 outstanding at September 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 October 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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<ARTICLE> 5
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997 DEC-31-1998 DEC-31-1997
<PERIOD-START> JUL-01-1998 JUL-01-1997 JAN-01-1998 JAN-01-1997
<PERIOD-END> SEP-30-1998 SEP-30-1997 SEP-30-1998 SEP-30-1997
<CASH> 426,016 264,247 0 0
<SECURITIES> 0 0 0 0
<RECEIVABLES> 2,665,565 3,558,557 0 0
<ALLOWANCES> 0 0 0 0
<INVENTORY> 3,502,269 3,024,597 0 0
<CURRENT-ASSETS> 6,732,048 6,935,442 0 0
<PP&E> 17,607,303 17,234,988 0 0
<DEPRECIATION> 5,994,551 5,205,058 0 0
<TOTAL-ASSETS> 21,081,831 21,798,022 0 0
<CURRENT-LIABILITIES> 6,721,101 7,333,308 0 0
<BONDS> 4,220,796 4,732,167 0 0
0 0 0 0
0 0 0 0
<COMMON> 0 0 0 0
<OTHER-SE> 10,139,934 9,732,547 0 0
<TOTAL-LIABILITY-AND-EQUITY> 21,081,831 21,798,022 0 0
<SALES> 15,317,692 16,314,380 47,415,371 49,320,481
<TOTAL-REVENUES> 15,378,469 16,380,137 47,652,134 49,501,848
<CGS> 13,848,639 14,988,485 43,735,823 45,455,455
<TOTAL-COSTS> 14,997,052 16,152,385 47,046,753 48,832,213
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 170,783 178,894 518,172 550,850
<INCOME-PRETAX> 0 0 0 0
<INCOME-TAX> 0 0 0 0
<INCOME-CONTINUING> 0 0 0 0
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 381,417 250,843 605,381 692,726
<EPS-PRIMARY> 0 0 0 0
<EPS-DILUTED> 0 0 0 0
</TABLE>
