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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 MARCH 31, 1999
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)
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 MAY 4, 1999
- ------------------------------------- --------------------------------
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
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
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PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1999
(Unaudited) and December 31, 1998.............................. 3
Condensed Consolidated Statements of Operations
for the three months ended
March 31, 1999 and 1998 (Unaudited)............................ 4
Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 1999 and 1998 (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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MARCH 31, DECEMBER 31,
1999 1998
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ASSETS (UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents $ 291,282 $ 416,143
Accounts receivable: Trade 2,935,864 3,332,971
Inventories:
Finished products 1,254,659 844,612
Raw materials 777,842 645,847
Packaging supplies & other 1,099,222 1,075,096
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3,131,723 2,565,555
Prepaid expenses and other assets 302,967 409,329
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TOTAL CURRENT ASSETS $ 6,661,836 $ 6,723,998
PROPERTY AND EQUIPMENT - net of accumulated depreciation
of $6,535,920 and $6,249,629 in 1999 and 1998 11,781,528 11,557,655
OTHER ASSETS - net of amortization 2,673,284 2,705,157
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TOTAL ASSETS $ 21,116,648 $ 20,986,810
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LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 3,142,685 $ 2,454,354
Notes payable and current maturities on long term debt 3,682,868 3,434,967
Accrued expenses and other liabilities 718,560 890,433
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TOTAL CURRENT LIABILITIES $ 7,544,113 $ 6,779,754
LONG-TERM DEBT 3,837,172 4,001,939
PARTNERS' CAPITAL:
General Partner:
Capital contributions 132,931 132,931
Capital transfers to Limited Partners (117,800) (117,800)
Interest in Partnership net income 22,012 26,050
Distributions (37,516) (36,864)
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$ (373) $ 4,317
Limited Partners:
Capital Contributions - net of organization and offering costs
of $2,010,082 11,172,274 11,172,274
Capital transfers from General Partner 116,554 116,554
Interest in Partnership net income 2,168,162 2,567,881
Distributions (3,721,254) (3,655,909)
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$ 9,735,736 $ 10,200,800
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TOTAL PARTNERS' CAPITAL $ 9,735,363 $ 10,205,117
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TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 21,116,648 $ 20,986,810
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
WHITEFORD PARTNERS, L.P.
(UNAUDITED)
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THREE MONTHS ENDED
MARCH 31,
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1999 1998
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Revenues
Sales of meat products $ 13,968,250 $ 15,883,910
Interest and other income 83,418 104,918
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$ 14,051,668 15,988,828
Costs and Expenses
Cost of meat products sold 13,308,066 14,888,689
Selling and administrative expenses 672,964 594,615
Depreciation and amortization 318,164 303,457
Interest 156,231 175,415
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NET (LOSS) INCOME $ (403,757) $ 26,652
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Summary of net (loss) income allocated to
General Partner $ (4038) $ 267
Limited Partners (399,719) 26,385
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$ (403,757) $ 26,652
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Net (loss) income per $10 unit of L.P. Capital $ (0.31) $ 0.02
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Weighted average units issued and outstanding 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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THREE MONTHS ENDED
MARCH 31,
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1999 1998
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NET CASH PROVIDED IN OPERATING ACTIVITIES $ 368,166 $ 559,722
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CASH FLOW USED IN INVESTING ACTIVITIES:
Purchase of property and equipment $ (510,164) $ (160,818)
Proceeds from disposal of property and equipment 0 15,500
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NET CASH USED IN INVESTING ACTIVITIES $ (510,164) $ (145,318)
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CASH PROVIDED/(USED) IN FINANCING ACTIVITIES:
Proceeds from notes payable $ 5,811,446 $ 5,619,654
Payments on notes payable (5,728,311) (6,048,615)
Distributions to Limited and General Partners (65,998) (65,998)
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NET CASH PROVIDED/(USED) IN FINANCING ACTIVITIES $ 17,137 $ (494,959)
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DECREASE IN CASH AND CASH EQUIVALENTS $ (124,861) $ (80,555)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 416,143 264,247
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 291,282 $ 183,692
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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) $ 156,000 $ 177,947
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
WHITEFORD PARTNERS, L.P.
MARCH 31, 1999
(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 currently operates in The Food
Business Segment only.
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.
At March 31, 1999 and December 31, 1998, 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. While the Partnership believes that the disclosures presented are
adequate to make the information not misleading, it is suggested that these
condensed consolidated financial statements be read in conjunction with the
financial statements and notes included in the Partnership's most recent annual
report for the year ended December 31, 1998. A summary of the Partnership's
significant accounting policies is presented on page F-5 of the Partnership's
most recent annual report. There have been no material changes in the accounting
policies followed by the Partnership during 1999.
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 March 31,
1999 and the condensed consolidated results of its operations for the three
months ending March 31, 1999 and 1998 and the condensed consolidated cash flows
for the three months ending March 31, 1999 and 1998. Operating results for the
period ending March 31, 1999, are not necessarily indicative of the results that
may be expected for the entire year ending December 31, 1999.
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.
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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
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
Revenues for the three months ended March 31, 1999 were $14,051,668 versus
$15,988,828 for the comparable period in 1998, a decrease of 12.1%. During the
1999 period 15,900,123 pounds of meat products were sold versus 17,038,197
pounds during the 1998 period, a decrease of 1,138,074 pounds or 6.7%. The
decrease in sales of meat products sold is primarily attributable to a reduction
in orders by customers.
Costs of meat products sold for the three months ended March 31, 1999 were
$13,308,066 versus $14,888,689 for the comparable period ended March 31, 1998, a
decrease of 10.6%. The decrease in the cost of meat products sold is primarily
attributable to a decline in pounds produced and sold.
Gross margins on sales were 4.7% for the three months ended March 31, 1999 and
6.3% for the 1998 period. This decrease in gross margins is primarily
attributable to the semi-variable nature of certain costs of meats products sold
such as labor, packaging and utilities.
Selling and administrative expenses increased to $672,964 from $594,615, an
increase of $78,349. Selling and administration expenses represented 4.8% of
revenue for the three months ended March 31, 1999 compared to 3.7% for the
comparable period in 1998.
Depreciation and amortization expense for the three months ended March 31, 1999
was $318,164 versus $303,457 for the same period in 1998, an increase of 4.8%.
Interest expense for the three months ended March 31, 1999 was $156,231 versus
interest expense of $175,415 for the same period in 1998. This decrease of
$19,184 primarily relates to the decrease in the average outstanding debt.
A net loss of $403,757 was realized in the 1999 period compared to a net profit
of $26,652 in the comparable period in 1998.
IMPACT OF YEAR 2000
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. Any of Whiteford
Foods' internal use computer programs and its software products that are date
sensitive may recognize a date using "00" as the Year 1900 rather than the Year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions or engage in normal business activities.
Whiteford Foods has modified/upgraded and replaced some of its internal software
so that it will function with respect to dates in Year 2000 and thereafter.
Whiteford Foods presently believes that with such modifications to its software
and conversions to new internal use software, the Year 2000 issue will not pose
significant operational problems for Whiteford Foods or its customers. Whiteford
Foods has and will continue to utilize both internal and external resources to
reprogram, replace and test its software for the Year 2000 modifications.
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Whiteford Foods is also in contact with its customers and major suppliers
regarding whether they are Year 2000 compliant. Whiteford Foods anticipates
completing its Year 2000 project as soon as practical but not later than June,
1999, which is prior to any anticipated impact. The total cost of the Year 2000
project has currently not been determined, but will be funded through operating
cash flows. The requirements for the correction of Year 2000 issue and the date
on which Whiteford Foods believes it will complete the Year 2000 modifications
are based on Management's best estimates which were derived utilizing numerous
assumptions of future events including continued availability of certain
resources, third party modification plans and other factors. However, there can
be no guarantee that these estimates will be achieved and actual results could
differ from those anticipated. Specific factors that may cause such material
differences include, but are not limited to, the availability of personnel
trained to locate and collect all relevant computer codes and similar
uncertainties. The effect, if any, on Whiteford Foods' result of operations if
Whiteford Foods, its customers or its suppliers are not fully Year 2000
compliant is not reasonably estimable.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, the Partnership had a negative working capital of $882,277
versus a negative working capital of $55,756 at December 31, 1998.
Cash provided by operating activities was $368,166 in 1999 versus $559,722 in
the first quarter of 1998.
Cash used in investing activities was $510,164 in 1999 as compared to $145,318
in 1998.
The Partnership provided $17,137 from financing activities during 1999. During
the comparable period in 1998, the Partnership used $494,959 from financing
activities, which represents net repayment of debt outstanding and
distributions.
Whiteford Foods working capital and equipment requirements are primarily met by
(a) a revolving credit agreement with Whitefords' principal lender in the
maximum amount of $3,000,000 (with $3,000,000 outstanding at March 31, 1999),
(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"); and (d) a five year credit facility of
$500,000, (the "Third Term Loan") (collectively, the "Loans").
The Principal Revolver bears interest at 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 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 Foods.
The Partnership's 1999 capital budget calls for the expenditure of $800,000
for building, plant and equipment modifications and additions. The General
Partner believes Whiteford Foods is in compliance with environmental
protection laws and regulations, and does not anticipate making additional
capital expenditures for such compliance in 1999. 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 1999.
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.
MARKET RISK
There have been no significant changes in market risk since December 31, 1998.
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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 May 4, 1999 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>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> MAR-31-1999 MAR-31-1998
<CASH> 291,282 416,143
<SECURITIES> 0 0
<RECEIVABLES> 2,935,864 3,332,971
<ALLOWANCES> 0 0
<INVENTORY> 3,131,723 2,565,555
<CURRENT-ASSETS> 6,661,836 6,723,998
<PP&E> 18,317,448 17,807,284
<DEPRECIATION> 6,535,920 6,249,629
<TOTAL-ASSETS> 21,116,648 20,986,810
<CURRENT-LIABILITIES> 7,544,113 6,779,754
<BONDS> 3,837,172 4,001,939
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 9,735,363 10,205,117
<TOTAL-LIABILITY-AND-EQUITY> 21,116,648 20,986,810
<SALES> 13,968,250 15,883,910
<TOTAL-REVENUES> 14,051,668 15,988,828
<CGS> 13,308,066 14,888,689
<TOTAL-COSTS> 14,455,425 15,962,176
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 156,231 175,415
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (403,757) 26,652
<EPS-PRIMARY> 0 0
<EPS-DILUTED> (0.31) 0.02
</TABLE>
