<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal year ended December 31, 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 (I.R.S. Employer Identification No.)
of incorporation or organization)
770 NORTH CENTER STREET, VERSAILLES, OHIO 45380
- --------------------------------------------- --------------------------------
(Address of principal executive offices) (Zip Code)
1-800-225-6328
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
LIMITED PARTNERSHIP UNITS
1,306,890 UNITS OUTSTANDING
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 by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
Yes X No
--- ---
At March 22, 1999, 1,306,890 Class A units had been subscribed for
and issued.
<PAGE>
INDEX
<TABLE>
<CAPTION>
ITEM
NO. DESCRIPTION PAGE
- ------ --------------------------------------------------------------------- ------
<S> <C> <C>
PART I
1. Business 3
2. Properties 5
3. Legal Proceedings 5
4. Submission of Matters to a Vote of Security Holders 5
PART II
5. Market for Registrant's Common Equity and Related Stockholder 5
Matters
6. Selected Financial Data 6
7. Management's Discussion and Analysis of Results of Operations 7
and Financial Condition
8. Financial Statements and Supplementary Data 10
9. Changes in and Disagreements with Accountants on Accounting and 10
Financial Disclosure
PART III
10. Directors and Executive Officers of the Partnership 10
11. Executive Compensation 11
12. Security Ownership of Certain Beneficial Owners and Management 12
13. Certain Relationships and Related Transactions 12
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 12
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
A. GENERAL DEVELOPMENT OF BUSINESS
Whiteford Partners, L.P. (the "Partnership") was formed on June 30,
1987, as a Delaware limited partnership. The Partnership consists of a
General Partner, Gannon Group, Inc., and Limited Partners. The offering
period of the Partnership terminated on November 10, 1989, with $13,557,550
of Limited Partner gross subscriptions received in the form of Class A Units.
Pursuant to the terms of the Prospectus, offering proceeds in the amount of
$140,365 were returned to certain Ohio residents when the Partnership's
business acquisition program was not substantially completed by December,
1989. The Partnership was organized principally to form, acquire, own and
operate businesses engaged in the development, production, processing,
marketing, distribution and sale of food and related products (the "Food
Businesses").
In the first quarter of 1990, the Partnership entered into a limited
partnership, Whiteford Foods Venture, L.P. ("Whiteford's") which was formerly
named Granada/Whiteford Foods Venture, L.P., with a wholly-owned subsidiary
of the former General Partner, G/W Foods, Inc., for the purpose of acquiring
the assets, certain liabilities and the operations of Whiteford's Inc., a
further processor and distributor of beef products to major fast food
restaurants and regional chains, which was located in Versailles, Ohio. The
acquisition, which was made with Partnership funds, was closed March 26,
1990, with the Partnership's resultant equity interest in Whiteford's being
in excess of 99%. On April 23, 1990, all outstanding and contingent items
were resolved and completed, and the acquisition of the assets was funded on
April 24, 1990.
On May 4, 1992, the outstanding shares of G/W Foods, Inc. were assigned
by the former General Partner to Gannon Group, Inc., a corporation owned by
Kevin T. Gannon, a Director and Vice President of G/W Foods, Inc. At that
time, Mr. Gannon was also a former Vice President of Granada Corporation and
certain of its affiliates. Also on May 4, 1992, Granada Management
Corporation assigned its sole general partnership interest in the Partnership
to Gannon Group, Inc. The effect of these assignments is for Gannon Group,
Inc. to have general partnership authority and responsibility with respect to
the Partnership and, through G/W Foods, Inc., of Whiteford's.
Subject to the availability of capital resources and/or financing, the
Partnership Agreement permits the acquisition of additional Food Businesses
that produce, process or distribute specialty food products including
businesses that possess technology or special processes which could increase
the productivity or processing capability of the Partnership's current Food
Business or which enhance the marketability or resale value of the
Partnership's Food Business products. At the present time, no acquisitions
are contemplated.
B. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Partnership operates principally in the food processing and
distribution business.
C. DESCRIPTION OF BUSINESS
The Partnership was organized to form, acquire, own and operate
businesses engaged in the development, production, processing, marketing,
distribution and sale of food and related products. The Partnership presently
operates further processing and meat production operations at one
location--Versailles, Ohio.
3
<PAGE>
VERSAILLES, OHIO PLANT OPERATION
Whiteford's is a further processor and distributor of meat products to
major fast food restaurants and regional chains. It serves major metropolitan
areas such as Chicago, Cincinnati, Cleveland, Columbus, Detroit,
Indianapolis, Louisville and St. Louis. Whiteford's principal products are
fresh frozen hamburger patties; precooked and uncooked ground beef, taco meat
and roast beef; marinated beef entrees; and other items processed to
customers' specifications. Major food chains served include Burger King and
Rally's.
Whiteford's purchases products principally from major domestic packers
and regional distributors. However, it also utilizes imported beef. The
General Partner believes its sources of supply are adequate for the
foreseeable future.
For the years ended December 31, 1998, 1997 and 1996 Whiteford's
processed and sold 70.0 million pounds of product ($62.4 million), 66.7
million pounds of products ($62.2 million) and 64.8 million pounds of
products ($59.0 million) respectfully, through its further processing and
distribution operations.
MARKETING AND SALES
Whiteford's customers consist primarily of major national and regional
fast food retail chains in addition to HRI (Hotel, Restaurant, Institutional)
customers and food products distributors. Sales operations are conducted
locally by sales representatives from the Versailles location and through
unaffiliated food products distributors and food brokers.
The following customers contributed more than 10% of Whiteford's
revenues for the fiscal year ended December 31, 1998; Gordon Food Service,
20.17%; ProSource, 18.25%; Maines Paper and Food Service, 17.81%, and Kings
Provision, 13.00%.
Historically, a significant portion of Whiteford's business has been
lodged with relatively few major national and regional accounts. Whiteford's
believes that its relationships with its current significant customers are
satisfactory. In the past, Whiteford's has been able to obtain additional
orders for products from existing accounts or obtain orders for products from
new accounts when a significant account diminishes or terminates its
purchases with Whiteford's.
All of Whiteford's sales are to customers in the United States and
Canada.
REGULATORY MATTERS
All of Whiteford's meat production operations are subject to ongoing
inspection and regulation by the United States Department of Agriculture
("USDA"). Whiteford's plant and facilities are subject to periodic or
continuous inspection, without advance notice, by USDA employees to ensure
compliance with USDA standards of sanitation, product composition, packaging
and labeling. All producers of meat and other food products must comply with
substantially similar standards. Compliance with these standards is not
expected to have a significant effect on Whiteford's competitive position.
Whiteford's is subject to federal, state and local laws and regulations
governing environmental protection, compliance with which has required
capital and operating expenditures. The General Partner believes Whiteford's
is in substantial compliance with such laws and regulations and does not
anticipate making additional capital expenditures for such compliance in
1999. The General Partner is not aware of any violations of, or pending
changes in such laws and regulations that are likely to result in material
penalties or material increases in compliance costs. Changes in the
requirements or mode of enforcement of certain of these laws and regulations,
however, could impose additional costs upon Whiteford's which could
materially and adversely affect its cost of doing business.
Whiteford's is subject to various other federal, state and local
regulations, none of which imposes material restrictions on its operations.
4
<PAGE>
EMPLOYEES
The Partnership's operations have been managed by its general partner,
Gannon Group, Inc. since May 4, 1992, and Granada Management Corporation from
inception to May 4, 1992. Directly, the Partnership has no employees. The
Partnership has utilized the services of employees of the General Partner and
the former General Partner as needed for certain administrative services.
The Whiteford's operation at Versailles, Ohio employed 261 personnel at
December 31, 1998. The General Partner believes there will be sufficient
personnel available to adequately manage the Partnership's business affairs.
ITEM 2. PROPERTIES
PROPERTIES UTILIZED BY THE PARTNERSHIP
The Partnership's executive offices are those of the General Partner,
located at 770 North Center Street, Versailles, Ohio, 45380.
The following table sets forth Whiteford's operational facilities and
approximate capacities as of December 31, 1998.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL
TONS OF PRODUCTION
-------------------
GENERAL 1998
LOCATION CHARACTER SIZE CAPACITY ACTUAL
- ------------------- ------------- -------------------------------------------------- --------- --------
<S> <C> <C> <C> <C>
Versailles, Ohio Meat Two separate facilities (1) 71,400 and (1) 33,000 40,000 35,000
Processing square feet on 20 acres of land, (8)
Plant hamburger/specialty lines, (2) grinding lines, (1)
precooked line, (3) smoke houses, freezers,
coolers, dry storage and office space.
</TABLE>
All Whiteford's facilities are subject to a mortgage with two banks.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending or threatened legal proceedings involving
the Partnership, known to either the Partnership or the General Partner.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Limited Partners of the
Partnership during 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There is no established public trading market for the Partnership's
Limited Partnership Units.
The following table sets forth the amounts and dates of distributions
to holders of Limited Partnership Units in 1997 and 1998.
5
<PAGE>
<TABLE>
<CAPTION>
Amount Per Limited
Date Aggregate $ Amount Partnership Unit
---- ------------------ ----------------
<S> <C> <C>
August 29, 1997 65,344.50 0.05
November 28, 1997 65,344.50 0.05
February 25, 1998 65,344.50 0.05
May 29, 1998 65,344.50 0.05
August 25, 1998 65,344.50 0.05
November 27, 1998 65,344.50 0.05
</TABLE>
Certain of the Partnership's loans with its lender contain restrictive
covenants. One of the covenants restricts the Partnership from declaring or
paying any distributions to its partners without the prior consent of the
bank, except for amounts already classified as reinvested distributions in
the balance sheet.
The following table sets forth the approximate number of holders of
record of the equity securities of the Partnership as of December 31, 1998:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Limited Partnership Units 1,464
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in
conjunction with the consolidated financial statements, the notes thereto and
other financial information included elsewhere herein, including
"Management's Discussion and Analysis of Results of Operations and Financial
Condition." The table following reflects the results of operations of
acquired businesses for periods subsequent to their respective acquisition
dates.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Sale of meat products $ 62,431,746 $ 62,224,110 $ 59,026,632 $ 57,667,240 $ 64,108,391
Interest and other 338,696 256,416 339,931 159,531 236,930
-------------- -------------- -------------- -------------- --------------
Total revenue 62,770,442 62,480,526 59,366,563 57,826,771 64,345,321
-------------- -------------- -------------- -------------- --------------
Cost of sales 57,551,373 57,846,006 54,188,228 53,757,014 60,428,954
-------------- -------------- -------------- -------------- --------------
Gross Profit:
Meat products 4,880,373 4,378,104 4,838,404 3,910,226 3,679,437
Other 338,696 256,416 339,931 159,531 236,930
-------------- -------------- -------------- -------------- --------------
Total gross profit 5,219,069 4,634,520 5,178,335 4,069,757 3,916,367
-------------- -------------- -------------- -------------- --------------
Selling and administrative 2,575,320 2,447,303 2,211,351 2,197,506 1,963,623
Depreciation, amortization
and interest 1,907,188 1,932,836 1,986,149 1,851,707 1,121,232
Other expense -- -- 163,157 -- --
-------------- -------------- --------------- -------------- --------------
4,482,508 4,380,139 4,360,657 4,049,213 3,084,855
-------------- -------------- -------------- -------------- --------------
Net Income $ 736,561 $ 254,381 $ 817,678 $ 20,544 $ 831,512
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
Income per unit of
Limited Partners' Capital $ 0.56 $ 0.19 $ 0.63 $ 0.02 $ 0.64
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
Weighted average units
outstanding 1,306,890 1,306,890 1,306,890 1,306,890 1,306,890
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>
6
<PAGE>
BALANCE SHEET DATA (DECEMBER 31):
<TABLE>
<S> <C> <C> <C> <C> <C>
Working (deficit) capital $ (55,756) $ (397,866) $ 156,933 $ (525,037) $ 154,050
Total assets $ 20,986,810 $ 21,798,022 $ 21,566,960 $ 22,280,444 $ 19,339,095
Long-term debt, less current
maturities $ 4,001,939 $ 4,732,167 $ 5,704,645 $ 6,754,525 $ 5,245,342
Total partners' capital $ 10,205,117 $ 9,732,547 $ 9,610,163 $ 8,792,485 $ 8,877,538
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Management's discussion and analysis set forth below should be read in
conjunction with the Consolidated Financial Statements and the notes thereto
included elsewhere herein.
INFORMATION REGARDING AND FACTORS AFFECTING FORWARD-LOOKING STATEMENTS:
The Partnership is including the following cautionary statement in this
Annual Report on Form 10-K to make applicable and take advantage of the safe
harbor provision of the Private Securities Litigation Reform Act of 1995 for
any forward-looking statements made by, or on behalf of the Partnership.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance and underlying assumptions
and other statements that are other than statements of historical facts.
Certain statements contained herein are forward-looking statements and,
accordingly, involve risk and uncertainties, which could cause actual results
to differ materially from those expressed in the forward-looking statements.
The Partnership's expectations, beliefs and projections are expressed in good
faith and are believed by the Partnership to have a reasonable basis,
including without limitation, Management's examination of historical
operating trends, data contained in the Partnership's records, and other data
available from third parties, but there can be no assurance that Management's
expectations, beliefs or projections would result or be achieved or
accomplished. In addition to other factors and matters discussed elsewhere
herein, important factors that, in the view of the Partnership, could cause
actual results to differ materially from those discussed in the
forward-looking statements include demand for Whiteford Foods' products, the
ability of Whiteford Foods to obtain widespread market acceptance of its
products, the ability of the Partnership to obtain acceptable forms and
amounts of financings, competitive factors, regulatory approvals and
developments, economic conditions, the impact of competition and pricing, and
other factors affecting the Partnership and Whiteford Foods' business that is
beyond the Partnership's control. The Partnership has no obligation to update
or revise these forward-looking statements to reflect the occurrence of
future events or circumstances.
The Partnership was organized as a Limited Partnership with a maximum
operating life of twenty years ending 2007. The source of its capital has
been from the sale of Class A, $10 Limited Partnership units in a public
offering that terminated on November 10, 1989.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998, COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenue for the year ended December 31, 1998 were $62,770,442 versus
$62,480,526 for the year ended December 31, 1997, an increase of $289,916.
During the 1998 period, 70,008,202 pounds of meat products were sold versus
66,752,355 pounds during the 1997 period, an increase of 3,255,847 pounds or
4.9%. The increase in 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 year ended December 31, 1998 were
$57,551,373 versus $57,846,006 for the year ended December 31, 1997, a
decrease of $294,633. During the 1998 period, 70,008,202 pounds of meat
products were sold versus 66,752,355 pounds during the 1997 period. The
average cost of meat products sold for 1998 was $.822 versus $.867 in the
1997 period, a decrease of 5.2%. The decrease in the cost per pound is
primarily attributable to general composition of the product. The General
Partner expects general commodity prices to increase slightly during 1999.
Gross margins on meat sales were 7.8% for the year ended December 31,
1998 and 7.0% for the 1997 period. This increase in gross margins is
primarily attributable to: i) decrease in raw material costs ; and ii) the
semi-variable nature of certain costs in the costs of meat products sold such
as labor, packaging, and utilities.
7
<PAGE>
Selling and administrative expenses increased to $2,575,320 during the
year ended December 31, 1998 versus $2,447,303 for the same period in 1997.
The increase is primarily attributable to normal expense increases and volume.
Depreciation and amortization expense for the year ended December 31,
1998 was $1,227,791 versus $1,204,975 for the same period in 1997, an
increase of 1.9%.
Interest expense for the year ended December 31, 1998 was $679,397
versus interest expense of $727,861 for the same period in 1997. This
decrease of $48,464 primarily relates to the decrease in the average debt
outstanding during 1998.
The Partnership reported net income of $736,561 for the year ended
December 31, 1998 versus $254,381 for the 1997 period. This increase in
operating profit is primarily attributable to the increased sales effort and
the production capabilities at the Versailles plant.
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
use software so that it will function with respect to dates in Year 2000 and
thereafter. Whiteford's 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.
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
the continued availability of certain resources, third party modifications
plans and other factors. However, there can be no guarantee that these
estimates will be achieved and actual results could differ materially from
those anticipated. Specific factors that may cause such material differences
include, but are not limited to, the availability of personnel trained in
this area, the ability to locate and collect all relevant computer codes and
similar uncertainties. The effect, if any, on Whiteford Foods' results of
operations if Whiteford Foods, its customers or its suppliers are not fully
Year 2000 compliant is not reasonably estimable.
YEAR ENDED DECEMBER 31, 1997, COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenues for the year ended December 31, 1997 were $62,480,526 versus
$59,366,563 for the year ended December 31, 1996, an increase of 5.2%. During
the 1997 period, 66,752,355 pounds of products were sold verses 64,788,156
pounds during the 1996 period, an increase of 1,964,199 pounds or 3.0%. The
increase in pounds of meat products sold is primarily attributable to the
increased sales effort and the production capabilities at the Versailles
plant.
Cost of meat products sold for the year ended December 31, 1997 were
$57,846,606 versus $54,188,288 for the year ended December 31, 1996, an
increase of 6.8%.
Gross margins on meat sales were 7.0% for the year ended December 31,
1997 and 8.2% for the 1996 period. This decrease in gross margins is
primarily attributable to: i) increase in raw material costs and decrease in
sales price; and ii) the semi-variable nature of certain costs in the costs
of meat products sold such as labor, packaging and utilities.
Selling and administrative expenses increased to $2,447,303 in 1997
during the year ended December 31, 1997 verses $2,211,351 for the same period
in 1996. This increase is primarily attributable to normal expense increases
and volume.
8
<PAGE>
Depreciation and amortization expense for the year ended December 31,
1997 was $1,204,975 versus $1,146,951 for the same period in 1996, an
increase of 5.1%. Such increase is primarily due to the expansion of the
freezer space and the 1400 square foot employee welfare room at the
Versailles plant.
Interest expense for the year ended December 31, 1997 was $727,861
versus interest expense of $839,198 for the same period in 1996. The decrease
of $111,337 primarily relates to the decrease in the average debt outstanding
during 1997.
The Partnership reported a net income of $254,381 for the year ended
December 31, 1997 versus $817,678 for 1996 period.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1998, the Partnership had a negative working capital
position of $55,756 versus a negative working capital of $397,866 at December
31, 1997.
Cash provided by operating activities was $1,764,155 for the year ended
December 31, 1998 reflecting net income of $736,561, depreciation and
amortization of $1,227,79l, offset by net decreases in other assets of
$200,197. Cash provided by operating activities for the year ended December
31, 1997 was $1,535,529, with a net income of $254,381, depreciation and
amortization of $1,204,975 and an increase in other net operating assets of
$76,173.
Cash used in investing activities was $627,382 for 1998 versus $886,589
for 1997. Cash provided by financing activities for 1998 consisted of net
decreases in bank debt of $720,886 and distibutions.
The Limited Partnership Agreement provides for the General Partner to
receive an annual administrative fee. The fee is equal to 2% (adjusted for
changes in the Consumer Price Index after 1989) of net business investment
(defined as $8.50 multiplied by Partnership units outstanding). However, such
amounts payable to the General Partner are limited to 10% of aggregate
distributions to all Partners from "Cash Available for Distributions." As
defined in the Limited Partnership Agreement, that portion of the management
fee in excess of such 10% limitation is suspended, and future payment is
contingent.
The Administrative Management Fees paid to the General Partner and
recorded by the Partnership were $26,138 in 1998, $13,069 in 1997, $-0- in
1996, $10,455 in 1995, $13,069 in 1994, $2,614 in 1993, and $-0- in 1992.
Suspended fees during 1998, 1997, 1996, 1995, 1994, 1993 and 1992
respectively, are $274,000, $287,000, $300,000, $290,000, $222,000, $229,000,
and $228,000.
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 $2,752,099 outstanding at December 31,
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 Loan") and (d) a five year credit
facility of $500,000, (the "Third Term Loan"), (the "Third Term
Loan")(collectivley, the "Loans"). The final payment on the two year credit
facility of $700,000 (the Second Term Loan) was made in December 1998.
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
an interest rate of 8.99%. The Third Term Loan 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 1999 capital budget calls for the expenditure of
approximately $880,000 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 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 Partnerships' 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 prices of its products.
9
<PAGE>
MARKET RISK
In the normal operation, the Company has market risk exposure to
interest rates. At December 31, 1998, the Company had $7,436,906 in interest
bearing debt obligations that are subject to market risk exposure to changes
in interest rates. At December 31, 1998, $2,752,099 of outstanding debt is at
variable rates with a weighted average interest rate of 8.83% and $4,684,807
is at fixed rates with a weighted average interest rate of 8.95%. The
interest rate on the variable rate outstanding debt maturing in 1999 of
$2,752,099 is 8.25%. The interest rate on the fixed rate outstanding debt
maturing in 1999 of $682,868 is 9.04% and in 2000 of $4,001,939 is 9.04%. The
estimated fair value of the Company's debt at December 31, 1998 is equal to
its carrying amount.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data of the Partnership are
included in this report after the signature page.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
MANAGEMENT
The Partnership has no officers or directors. The affairs of the
Partnership are managed by the Gannon Group, Inc., the General Partner. The
directors, executive officers and key employees of the General Partner as of
December 31, 1998, are as follows:
KEVIN T. GANNON, age 42, sole director, President and sole stockholder
of Gannon Group, Inc.
Mr. Gannon is a Managing Director of Robert A. Stanger & Co., Inc., a
New Jersey based investment banking, investment research and consulting firm.
Mr. Gannon was formerly a Vice President - Corporate Development of Granada
Corporation and Director and Vice President of Granada BioSciences, Inc. and
Granada Foods Corporation, former affiliate of the Partnership. From August
1983 to April 1988, Mr. Gannon was employed by Robert A. Stanger & Co. Ltd.
Mr. Gannon is a Certified Public Accountant.
No director or officer of the General Partner was, during the last five
(5) years, the subject (directly, or indirectly as a general partner of a
partnership or as an executive officer of a corporation) of a bankruptcy or
insolvency petition, of any criminal proceeding (excluding traffic violations
and other minor offenses), or restrictive orders, judgments or decrees
enjoining him from or otherwise limiting him from acting as a futures
commission merchant, introducing broker, commodity trading advisor, commodity
pool operator, floor broker, leverage transaction merchant, any other person
regulated by the Commodity Futures Trading Commission, or an associated
person of any of the foregoing, or as an investment adviser, underwriter,
broker or dealer in securities, or as an affiliated person, director or
employee of any investment company, bank, savings and loan association or
insurance company, or engaging in or continuing any conduct or practice in
connection with such activity, engaging in any business activity, or engaging
in any activity in connection with the purchase or sale of any security or
commodity or in connection with any violation of Federal or State securities
laws or Federal commodities laws, or was the subject of any existing order of
a federal or state authority barring or suspending for more than sixty (60)
days the right of such person to be engaged in such activity.
10
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
CURRENT YEAR REMUNERATION
The Partnership has no officers or directors. Accordingly, no direct
remuneration was paid to officers and directors of the Partnership for the
year ended December 31, 1998. Remuneration to the General Partner is pursuant
to Articles VI of the LIMITED PARTNERSHIP AGREEMENT (filed as Exhibit A to
the Prospectus included in the Partnership's Registration Statement on Form
S-1 [File No. 2-98273]) and incorporated herein by reference.
Pursuant to Section 6.4(c) of the Limited Partnership Agreement, the
General Partner is entitled to receive a management fee of approximately
$300,000 for the calendar year 1998. However, Section 6.4(c)(v) limits all
amounts payable to the General Partner pursuant to Section 6.4(c) to an
amount which does not exceed 10% of aggregate distributions to Partners from
"Cash Available for Distributions". Under the Limited Partnership Agreement,
Cash Available for Distributions is comprised of cash funds from operations
(after all expenses, debt repayments, capital improvements and replacements,
but before depreciation) less amounts set aside for restoration or reserves.
That portion of the management fee in excess of such 10% limitation is
suspended, and future payment is delayed until such payment may be made
without exceeding such limit.
On dissolution of the Partnership, Section 15.3(a)(ii) of the Limited
Partnership Agreement generally provides for the payment of creditors, and
then pro rata payment to record holders for loans or other amounts owed to
them by the Partnership, including without limitation any amounts owed to the
General Partner pursuant to Section 6.4. Any amounts payable to the General
Partner under Section 15.3(a)(ii) will be dependent upon the funds available
for distribution on the dissolution of the Partnership.
Section 6.4(e) of the Limited Partnership Agreement also provides the
General Partner a subordinated special allocation equal to 15% of any gain on
the sale of partnership assets or food businesses. Among other things, this
special allocation is subordinated to payments to the limited partners for
certain distributions. Any payment pursuant to Section 6.4(e) will be
dependent upon the ultimate sale price of such partnership assets or food
businesses.
During calendar year 1998, the Partnership made aggregate distributions
of $261,378 to the Partners. During calendar year 1997, the Partnership made
aggregate distributions of $130,869. No distributions were made to the
Partners in 1996. As a result in 1998, the Partnership paid the General
Partner 10% of such amount or $26,138, and suspended payment of approximately
$274,000 of such management fee. The cumulative amount of annual management
fees that have been suspended is $1,830,000.
OTHER COMPENSATION ARRANGEMENTS
There is no plan provided for or contributed to by the Partnership or
the General Partner which provides annuity, pension or retirement benefits
for the General Partner or the officers and directors of the General Partner.
There is no existing plan provided for or contributed to by the General
Partner which provides annuity, pension or benefits for its officers or
directors. There are no arrangements for remuneration covering services as a
director between the Partnership and any director of the General Partner. No
options to purchase any securities of the General Partner were granted or
exercised during its fiscal year ended December 31, 1998. No options were
held to purchase securities of the Partnership as of December 31, 1998, and
as of the date hereof.
After the Partnership acquired the assets of Whiteford's, Inc.,
Whiteford's entered into a Services Agreement with Greenaway Consultant, Inc.
("GCI") under which GCI managed Whiteford's. GCI is owned by one of
Whiteford's, Inc.'s former principal shareholders. This agreement has been
extended to December 31, 2002.
Subsequent to the Services Agreement, Whiteford's determined that it was
desirable to lessen the cash flow burden resulting from the Installment Loan and
the tax payment obligation. Whiteford's determined it was in a position to
refinance $250,000 of the Installment Loan on a more favorable amortization
basis and at a more favorable interest rate. As a result, Whiteford's consulted
with GCI about GCI's willingness to accept a partial payment of the Installment
Loan, extend the payments under the Installment Loan and to accept a right to
receive payments in the future in lieu of being awarded part of the limited
partnership units. As a result, Whiteford's and GCI entered into a "1993
Services Agreement" which (i) rescinds the original Services Agreement and the
Letter Agreement, (ii) reaffirms the covenant not to compete for GCI and its
shareholder, (iii) provides for the remaining principal balance of the
Installment Loan ($420,000) to be payable over a four year period with quarterly
principal payments of $26,250 plus interest, (the first quarterly payment
beginning March 31, 1994), (iv) restricts GCI's equity interest in the limited
partnership units to 1.00% (all of which has been delivered to GCI effective
January 1, 1994, (v) provides Whiteford's payment to GCI of approximately
$250,000 per year for its management services,
11
<PAGE>
and $500,000 upon a change of control or the sale of substantially all
Whiteford's assets. The final payment of the Installment Loan with GCI was
made in December 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SECURITY HOLDERS
The General Partner owns the entire general partnership interest, which
interest controls the Partnership. The General Partner does not beneficially
own, either directly or indirectly, any equity security in the Partnership,
other than the general partner interest.
CONTRACTUAL ARRANGEMENTS AFFECTING CONTROL
On May 4, 1992, the outstanding shares of G/W Foods, Inc. were assigned
by Granada Management Corporation to Gannon Group, Inc., a corporation owned
by Kevin T. Gannon, a Director and Vice President of G/W Foods, Inc. and also
a former Vice President of Granada Corporation and certain of its affiliates.
Also on May 4, 1992, Granada Management Corporation assigned its sole general
partnership interest in the Partnership to Gannon Group, Inc. The effect of
these assignments is for Gannon Group, Inc. to have general partnership
authority and responsibility with respect to the Partnership and, through G/W
Foods, Inc., of Whiteford's.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
None.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
--------------------------------------------
(Registrant)
By Gannon Group, Inc.
Its General Partner
Date: March 22, 1999 /s/ Kevin T. Gannon
------------------ --------------------------------------------
Chief Executive Officer
and President
Pursuant to the requirements of the Securities Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------ ------------------------------------------------------ ----------------
<S> <C> <C>
/s/ Kevin T. Gannon Chief Executive Officer, President, Chairman of the March 22, 1999
- ------------------------------ Board and Sole Director (Principal Executive Officer),
Kevin T. Gannon Chief Financial Officer, and Chief Accounting Officer
</TABLE>
13
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) AND (2), (c) AND (d)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CERTAIN EXHIBITS
YEAR ENDED DECEMBER 31, 1998
WHITEFORD PARTNERS, L.P.
14
<PAGE>
FORM 10-K -- ITEM 8, ITEM 14 (a) (1) AND (2), (c) AND (d)
The following financial statements and financial statement schedules
of the Partnership are included as part of this report at Item 8:
(a) 1. Financial Statements
CONSOLIDATED BALANCE SHEETS - December 31, 1998, and 1997.
CONSOLIDATED STATEMENTS OF INCOME - for the years ended December 31,
1998, 1997, and 1996.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL - for the
years ended December 31, 1998, 1997, and 1996.
CONSOLIDATED STATEMENTS OF CASH FLOWS - for the years ended December
31, 1998, 1997, and 1996.
Notes to Consolidated Financial Statements
Independent Auditors' Report
(a) 2. See Index to Exhibits immediately following the financial statement
schedules.
15
<PAGE>
WHITEFORD PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------------
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 416,143 $ 264,247
Accounts receivable - trade 3,332,971 3,558,557
Inventories 2,565,555 3,024,597
Prepaid expenses 409,329 88,041
------------ ------------
TOTAL CURRENT ASSETS 6,723,998 6,935,442
PROPERTY AND EQUIPMENT:
Land and improvements 86,700 86,700
Buildings 7,253,443 7,162,424
Machinery and equipment 10,467,141 9,985,864
Accumulated depreciation (6,249,629) (5,205,058)
------------ ------------
TOTAL PROPERTY AND EQUIPMENT 11,557,655 12,029,930
OTHER ASSETS - NET OF AMORTIZATION 2,705,157 2,832,650
------------ ------------
TOTAL ASSETS $ 20,986,810 $ 21,798,022
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable - trade $ 2,454,354 $ 3,249,121
Notes payable and current maturities on long-term debt 3,434,967 3,425,625
Accrued expenses and other liabilities 890,433 658,562
------------ ------------
TOTAL CURRENT LIABILITIES 6,779,754 7,333,308
LONG-TERM DEBT 4,001,939 4,732,167
PARTNERS' CAPITAL:
General Partner:
Capital contributions 132,931 132,931
Capital transfers to Limited Partners (117,800) (117,800)
Interest in net income 26,050 18,684
Distributions (36,864) (34,251)
------------ ------------
4,317 (436)
Class A Limited Partners: Capital contributions, net of organization
and offering costs of $2,010,082 11,172,274 11,172,274
Capital transfers from the General Partner 116,554 116,554
Interest in net income 2,567,881 1,838,686
Distributions (3,655,909) (3,394,531)
------------ ------------
10,200,800 9,732,983
------------ ------------
TOTAL PARTNERS' CAPITAL 10,205,117 9,732,547
------------ ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 20,986,810 $ 21,798,022
------------ ------------
------------ ------------
</TABLE>
See notes to consolidated financial statements.
F - 1
<PAGE>
WHITEFORD PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
REVENUE
Sales of meat products $ 62,431,746 $ 62,224,110 $ 59,026,632
Interest and other 338,696 256,416 339,931
---------- ---------- ----------
62,770,442 62,480,526 59,366,563
COST AND EXPENSES
Cost of meat products sold 57,551,373 57,846,006 54,188,228
Selling and administrative 2,549,182 2,434,234 2,211,351
Administrative fee -- General Partner 26,138 13,069 --
Depreciation and amortization 1,227,791 1,204,975 1,146,951
Interest 679,397 727,861 839,198
Other -- -- 163,157
---------- ---------- ----------
62,033,881 62,226,145 58,548,885
---------- ---------- ----------
NET INCOME $ 736,561 $ 254,381 $ 817,678
---------- ---------- ----------
---------- ---------- ----------
Summary of net income allocated to:
General Partner $ 7,366 $ 2,544 $ 8,177
Class A Limited Partners 729,195 251,837 809,501
---------- --------- ----------
$ 736,561 $ 254,381 $ 817,678
---------- ---------- ----------
---------- ---------- ----------
Net income per unit of Limited Partner Capital $ 0.56 $ 0.19 $ 0.63
---------- ---------- ----------
---------- ---------- ----------
Weighted average units issued and outstanding 1,306,890 1,306,890 1,306,890
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
F - 2
<PAGE>
WHITEFORD PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL PARTNER
------------------------------------------------------------------
CAPITAL
CAPITAL TRANSFERS INTEREST
CONTRI- TO LIMITED IN NET DISTRI-
BUTION PARTNERS INCOME BUTIONS
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Balances, December 31, 1995 $ 132,931 $ (117,800) $ 7,963 $ (32,943)
Net Income 8,177
Distributions
-------------- -------------- -------------- --------------
Balances, December 31, 1996 132,931 (117,800) 16,140 (32,943)
Net Income 2,544
Distributions (1,308)
-------------- -------------- -------------- --------------
Balances, December 31, 1997 132,931 (117,800) 18,684 (34,251)
Net Income 7,366
Distributions (2,613)
-------------- -------------- -------------- --------------
Balances, December 31, 1998 $ 132,931 $ (117,800) $ 26,050 $ (36,864)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
LIMITED PARTNERS
-----------------------------------------------------------------
CAPITAL CONTRIBUTIONS
------------------------------
FROM FROM INTEREST
LIMITED GENERAL IN NET DISTRI-
PARTNERS PARTNER INCOME BUTIONS
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Balances, December 31, 1995 $ 11,172,274 $ 116,554 $ 777,348 $ (3,263,842)
Net Income 809,501
Distributions
-------------- -------------- -------------- --------------
Balances, December 31, 1996 11,172,274 116,554 1,586,849 (3,263,842)
Net Income 251,837
Distributions (130,689)
-------------- -------------- -------------- --------------
Balances, December 31, 1997 11,172,274 116,554 1,838,686 (3,394,531)
Net Income 729,195
Distributions (261,378)
-------------- -------------- -------------- --------------
Balances, December 31, 1998 $ 11,172,274 $ 116,554 $ 2,567,881 $ (3,655,909)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
$.10 weighted average outstanding units of Limited Capital in 1998, 1997 and
1996 respectively.
See notes to consolidated financial statements.
F - 3
<PAGE>
WHITEFORD PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 736,561 $ 254,381 $ 817,678
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,227,791 1,204,975 1,146,951
(Gain) Loss on sale of fixed assets (641) (23,091) 103,157
Changes in operating assets and liabilities:
Accounts receivable - trade 225,586 (362,181) (651,207)
Inventories 459,042 (412,082) (193,049)
Prepaid expenses (321,288) 390,990 276,484
Accounts payable - trade (794,767) 564,022 (15,345)
Accrued expenses and other liabilities 231,871 (81,485) (194,964)
-------------- -------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,764,155 1,535,529 1,289,705
INVESTING ACTIVITIES:
Purchase of property and equipment (642,882) (928,913) (443,036)
Proceeds from disposal of property and equipment 15,500 42,324 107,100
-------------- -------------- --------------
NET CASH USED IN INVESTING ACTIVITIES (627,382) (886,589) (335,936)
FINANCING ACTIVITIES:
Proceeds from notes payable and long-term debt 18,604,404 22,894,939 18,795,383
Payments on notes payable (19,325,290) (23,268,798) (20,116,236)
Distributions to Limited and General Partners (263,991) (131,997) --
-------------- -------------- --------------
NET CASH USED IN
FINANCING ACTIVITIES (984,877) (505,856) (1,320,853)
-------------- -------------- --------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 151,896 143,084 (367,084)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 264,247 121,163 488,247
-------------- -------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 416,143 $ 264,247 $ 121,163
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
See notes to consolidated financial statements.
F - 4
<PAGE>
WHITEFORD PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
- -------------------------------------------------------------------------------
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,
(Whiteford's) 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
Partnership and Whiteford's currently operate in The Food Business segment
only. The Partnership's interest in the operations and equity of Whiteford's
is greater than 99.9%. 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. The final installment was paid
in July, 1997.
At December 31, 1998 and at December 31, 1997, the Partnership had
1,306,890 Class A limited partnership units issued and outstanding.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements
include the Partnership and Whiteford's, from the date of acquisition (March
26, 1990). Significant intercompany account balances and transactions have
been eliminated in consolidation.
INVENTORIES. Inventories of meat, meat products and packaging supplies
are stated at the lower of first-in, first-out (FIFO) cost or market. The
major components of inventories are as follows at December 31:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Finished products $ 844,612 $ 722,300
Raw materials 645,847 1,145,188
Packaging supplies and other 1,075,096 1,157,109
---------- ----------
$2,565,555 $3,024,597
---------- ----------
---------- ----------
</TABLE>
F - 5
<PAGE>
PROPERTY AND EQUIPMENT. Property and equipment is stated at cost.
Depreciation, computed using the straight-line method on the basis of the
estimated useful lives of the depreciable assets, was $1,100,298, $1,077,482
and $1,019,458 in years 1998, 1997 and 1996, respectively. The costs of
ordinary repairs and maintenance are charged to expense, while betterment and
major replacements are capitalized.
The carrying value of property and equipment and other long lived assets
is reviewed if the facts and circumstances suggest it may be impaired. If
this review indicates the carrying value of the assets may not be
recoverable, based on estimates of their undiscounted cash flows, the
carrying value will be reduced to the asset's fair market value.
OTHER ASSETS. Goodwill associated with the acquisition of Whiteford's
Inc. is being amortized on a straight-line basis over a thirty-year period.
Related accumulated amortization at December 31, 1998 and 1997 was $1,081,083
and $960,214 respectively.
DISTRIBUTIONS. 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
determination. Distributions of $261,378 and $130,689 to Limited Partners
were recorded in 1998 and 1997 respectively. No distributions were paid in
1996.
INCOME TAXES. The Partnership files an information tax return. The items
of income and expense are 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. At December
31, 1998, the book basis of assets exceeds the tax basis of such assets by
approximately $53,551 primarily due to the use of accelerated depreciation
methods utilized for tax reporting purposes.
CASH AND CASH EQUIVALENTS AND CASH FLOWS. Cash and cash equivalent
amounts approximate fair value. For the purpose of the statement of cash
flows, the Partnership considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents. Total
interest paid was $690,506, $733,733 and $859,393 for 1998, 1997 and 1996,
respectively.
NET INCOME PER UNIT OF LIMITED PARTNERS CAPITAL. The net income per unit
of limited partners capital is calculated by dividing the net income
allocated to limited partners by the weighted average units outstanding.
CONCENTRATIONS. Financial instruments which potentially expose the
Partnership to concentrations of credit risk, as defined by Statement of
Financial Accounting Standards No. 105, DISCLOSURE OF INFORMATION ABOUT
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FINANCIAL INSTRUMENTS
WITH CONCENTRATIONS OF CREDIT RISKS, consist primarily of accounts
receivable. The Partnership's accounts receivable are concentrated in major
fast food restaurants and regional chains.
To date, the Partnership has relied on a limited number of customers for
a substantial portion of its total sales. The Partnership expects that a
significant portion of its future revenues will continue to be generated by a
limited number of customers. The failure to obtain new customers, the loss of
existing customers or the reduction in sales from existing customers could
materially adversely affect the Partnership's operating results (see Note G).
The Partnership currently buys its meat and necessary supplies from a
few vendors. Although there are a limited number of vendors capable of
supplying these items, management believes that other suppliers could provide
the products on comparable terms. A change in suppliers, however, could cause
delay in delivery and a possible loss of sales, which would adversely affect
operating results.
USE OF ESTIMATES. The preparation of the financial statements in
accordance with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those results.
F - 6
<PAGE>
NOTE C - RELATED PARTY TRANSACTIONS
The Limited Partnership Agreement provides for the General Partner to
receive an annual administrative fee. The fee is equal to 2% (adjusted for
changes in the consumer price index after 1989) of net business investment
(defined as $8.50 multiplied by Partnership units outstanding). However, such
amounts payable to the General Partner are limited to 10% of aggregate
distributions to all Partners from "Cash Available for Distributions". As
defined in the Limited Partnership Agreement, that portion of the management
fee in excess of such 10% limitation is suspended, and future payment is
contingent.
The Administrative Management Fees paid to the General Partner and
recorded by the Partnership were $26,138 in 1998 and $13,069 in 1997. There
were no administrative fees paid to the General Partner in 1996. Suspended
fees as of December 31, 1998, for which no accrual has been recorded, total
$1,830,000 ($1,556,000 as of December 31, 1997). This only becomes an
obligation of the Partnership upon a change of control or sale of
substantially all of the assets of the Partnership. The Partnership also has
a service agreement with Greenaway Consultant, Inc. (GCI), which provides for
the former principal owner of Whiteford's to provide consulting services to
the Partnership. The agreement has been extended for five years expiring
December 31, 2002, and provides minimum consulting fees of approximately
$250,000 per annum. During 1998, 1997, and 1996 the minimum was paid. GCI
will receive payment of $500,000 upon a change of control or sale of
substantially all of the assets of the Partnership.
NOTE D - LONG TERM DEBT
The following schedule summarizes long-term debt at December 31:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Notes payable to bank due March, 2000,
interest at 8.99% at December 31, 1998 $ 3,495,678 $ 3,700,149
Notes payable to bank due July, 2000,
interest at 8.717% at December 31, 1998 988,570 1,302,561
Revolving credit agreement with a bank, due
July 1999, interest at prime plus 1/2% at December 31, 1998 2,752,099 2,600,000
Note payable to bank due January, 1999,
interest at prime plus 1.25% at December 31, 1998 -0- 250,000
Note payable to bank due May, 2000
interest at 9.42% at December 31, 1998 170,559 274,454
Other 30,000 30,628
----------- -----------
$ 7,436,906 $ 8,157,792
Less portion classified as current 3,434,967 3,425,625
----------- -----------
$ 4,001,939 $ 4,732,167
----------- -----------
----------- -----------
</TABLE>
The carrying value of the long term debt approximates fair value. The
notes payable and the revolving credit agreement with the bank contain
restrictive covenants. The covenants restrict the Partnership from declaring
or paying any distributions to its partners without the prior written consent
of the bank, except for amounts already classified as reinvested
distributions in the balance sheet; limit the level of capital expenditures
the Partnership may make in any fiscal year and require the Partnership to
maintain certain financial ratios. In addition, the Partnership must maintain
a monthly average of $100,000 on deposit with the bank as a compensating
balance.
The revolving credit agreement permits borrowing of up to $3,000,000.
Long-term debt and borrowings under the revolving credit agreement are
collateralized by substantially all of the Partnership's property and
equipment, inventory and accounts receivable.
F - 7
<PAGE>
The aggregate annual maturities on the long-term debt for the
Partnership for the year subsequent to 1999 is $4,001,939.
During 1998, 1997 and 1996, the weighted average interest rate on
short-term borrowing was 9.1%, 9.1% and 9.1% respectively, while the weighted
average month end amount outstanding was $3,504,626, $3,179,441 and
$3,145,390 respectively. The largest outstanding month end balance was
$3,779,814 in 1998, $3,425,625 during 1997 and $3,285,690 during 1996.
NOTE E - LEASES
LEASE COMMITMENTS. The Partnership's leases, buildings and
equipment, are under various noncancelable operating lease agreements. Lease
rental expense for 1998, 1997 and 1996 was $766,494, $724,984 and $749,132,
respectively. The future minimum lease payments under the leases are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1999 $ 661,871
2000 646,082
2001 555,927
2002 190,464
----------
$2,054,344
</TABLE>
NOTE F - EMPLOYEE BENEFIT PLAN
The Partnership has a 401K Plan which covers substantially all employees
who have completed one year of service. The Partnership matches a percentage
up to 25% of the participant's contributions up to 6% of employee eligible
compensation. Contributions to the Plan were $29,483 in 1998, $24,368 in
1997, and $12,152 in 1996.
NOTE G - MAJOR CUSTOMERS
Whiteford's facility, located in Versailles, Ohio, operates as a further
processor and distributor of beef products to major fast food restaurants and
regional chains in the Midwest of the United States. Whiteford's principal
products are fresh frozen hamburger patties; precooked and uncooked ground
beef taco meat and roast beef, marinated beef entrees; and other items
processed to the customers' specifications. Major food chains served include
Burger King and Rally's.
Sales of meat products to major customers are summarized as follows for
the fiscal years ended December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
CUSTOMER 1998 1997 1996
-------- ----------- ----------- -----------
<S> <C> <C> <C>
A $12,662,467 $12,933,020 $12,280,924
B 11,456,004 11,958,749 11,163,393
C 11,181,287 10,550,602 9,133,022
D 8,161,942 7,048,837 8,307,416
E 4,854,235 7,010,712 8,140,374
F 2,869,691 3,629,905 1,893,490
----------- ----------- -----------
$51,185,626 $53,131,825 $50,918,619
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The total amounts receivable from these customers on December 31, 1998,
1997 and 1996 were $2,800,657, $3,112,082 and $2,460,860, respectively.
F - 8
<PAGE>
[LETTERHEAD]
Report of Independent Auditor's
Limited and General Partners
Whiteford Partners, L.P.
We have audited the accompanying consolidated balance sheets of Whiteford
Partners, L.P. (a Delaware limited partnership) and subsidiary as of December
31, 1998 and 1997 and the related consolidated statements of operations,
changes in partners' capital, and cash flows for each of the three years in
the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Whiteford Partners, L.P. and subsidiary at December 31, 1998 and 1997 and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31,1998, in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
March 22, 1999
F - 9
<PAGE>
INDEX TO ATTACHED EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
- ----------- -----------------------------------------------------------------
<S> <C>
3. & 4. Limited Partnership Agreement of the Partnership
incorporated by reference to Exhibit "A" to Prospectus
(pages A 1 - A 40) included in the Partnership's
Registration Statement on Form S-1 (File No. 33-15962).
10.1 Consulting Agreement between the Partnership and Granada
Acquisitions, Inc. incorporated by reference to Exhibit 10.2
to the Partnership's Registration Statement on Form S-1
(File No. 33-15962).
10.2 Asset Purchase Agreement between Granada/Whiteford Foods
Venture, L.P., Whiteford's Inc. and Albert D. Greenaway,
incorporated by reference to Exhibit 2 to the Partnership's
Form 8-K filing dated May 10, 1990, as amended (File No. 33-
15962).
10.3 Services Agreement between Granada/Whiteford Foods Venture,
L.P., Granada Cincinnati Multifoods, Inc. and Greenaway
Consultants, Inc. to engage Greenaway Consultants, Inc. to
perform management services for the operations of
Granada/Whiteford Foods Venture, L.P. and CMF, a joint
venture, incorporated by reference to Exhibit 10.3 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1990.
10.4 Agreement of Limited Partnership dated March 27, 1990,
between the Registrant as limited partner, and G/W Foods,
Inc. as General Partner, to acquire the assets, certain
liabilities, and meat purveying operations of Whiteford's
Inc., incorporated by reference to Exhibit 10.4 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1990.
10.5 Joint Venture Agreement dated July 1, 1990, between
Granada/Whiteford Foods Venture, L.P., North American
Agrisystems, Inc. and Cincinnati Multifoods, Inc. for the
formation of a joint venture for Granada/Whiteford Foods
Venture, L.P. to operate meat production facilities of North
American Agrisystems, Inc., incorporated by reference to
Exhibit 10.5 to the Partnership's Annual Report on Form 10K
for the year ended December 31, 1990.
10.6 Promissory Note payable by Granada/Whiteford Foods Venture
to Fifth Third Bank of Miami Valley, N.A. in the face amount
of $3,000,000, dated July 19, 1991, together with
Hypothecation Agreement, incorporated by reference to
Exhibit 10.6 to the Partnership's Annual Report on Form 10K
for the year ended December 31, 1990.
10.7 Promissory Note payable by Granada/Whiteford Foods Venture
to Fifth Third Bank of Miami Valley, N.A. in the face amount
of $280,000 dated June 21, 1991, together with Hypothecation
Agreement, incorporated by reference to Exhibit 10.7 to the
Partnership's Annual Report on form 10K for the year ended
December 31, 1990.
10.8 Agreement dated November 6, 1991, between G/W Foods, Inc.
and Fifth Third Bank of Miami Valley, N.A. amending terms of
Promissory Note dated July 19, 1991, incorporated by
reference to Exhibit 10.8 to the Partnership's Annual Report
on Form 10K for the year ended December 31, 1990.
</TABLE>
F - 10
<PAGE>
INDEX TO ATTACHED EXHIBITS (CONT.)
<TABLE>
<S> <C>
10.9 Memorandum of Agreement-- Dissolution of CMF (a Texas joint
venture) effective October 1, 1991, stipulating terms and
conditions of dissolution and wind- up of operations of
CMF., incorporated by reference to Exhibit 10.9 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1990.
10.10 Amendment to Certificate of Limited Partnership of
Granada/Whiteford Foods Venture, L.P., State of Ohio
Certificate of Amendment of Foreign Limited Partnership and
Trade Name Registration, all dated April 30, 1992, and
amending Name of Granada/Whiteford Foods Venture, L.P. to
Whiteford Foods Venture, L.P., incorporated by reference to
Exhibit 10.10 to the Partnership's Annual Report on Form 10K
for the year ended December 31, 1990.
10.11 Loan Agreement dated May 5, 1992, between Greenaway
Consultant, Inc. and Whiteford Foods Venture, L.P.,
providing for $750,000 revolving credit facility,
incorporated by reference to Exhibit 10.11 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1990.
10.12 Stock Purchase Agreement and Assignment of Partnership
Interest dated May 4, 1992, by and between Granada
Management Corporation and Gannon Group, Inc., incorporated
by reference to Exhibit 10.12 to the Partnership's Annual
Report on Form 10K for the year ended December 31, 1990.
10.13 Loan Agreement dated December 23, 1992 between Whiteford
Foods Venture, L.P. and The Fifth Third Bank of Western
Ohio, N.A. for a credit facility of $2,300,000, incorporated
by reference to Exhibit 10.13 to the Partnership's Annual
Report on Form 10K for the year ended December 31, 1992.
10.14 Letter of Agreement dated February 23, 1993 by and between
Greenaway Consultants, Inc. and Whiteford Foods Venture,
L.P., proceeding for (i) the termination of the revolving
credit facility, (ii) the issuance of a term promissory note
in the amount of $750,000, (iii) the termination of the
Services Agreement between Whiteford Partners, L.P. and
Greenaway Consultants, Inc., and (iv) an agreement regarding
a new Services Agreement, incorporated by reference to
Exhibit 10.14 to the Partnership's Annual Report on Form 10K
for the year ended December 31, 1993.
10.15 Loan Agreement dated August 27, 1993 between Whiteford Foods
Venture, L.P. and PNC Bank, Ohio, N.A., incorporated by
reference to Exhibit 10.15 to the Partnership's Annual
Report on Form 10K for the year ended December 31, 1993.
10.16 Services Agreement dated October 1, 1993 between Whiteford
Foods Venture, L.P., Greenaway Consultant, Inc. and Albert
D. Greenaway to engage Greenaway Consultant, Inc., to
perform management services for the operation of Whiteford
Foods Venture, L.P., incorporated by reference to Exhibit
10.16 to the Partnership's Annual Report on Form 10K for the
year ended December 31, 1993.
10.17 Loan Agreement dated October 1, 1993 between Whiteford Foods
Venture, L.P. and Greenaway Consultant, Inc. authorizing
November 8, 1993 promissory note and certain security
therefor, incorporated by reference to Exhibit 10.17 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1993.
</TABLE>
F - 11
<PAGE>
INDEX TO ATTACHED EXHIBITS (CONT.)
<TABLE>
<S> <C>
10.18 Promissory note dated November 8, 1993 between Greenaway
Consultant, Inc. and Whiteford Foods Venture, L.P.,
incorporated by reference to Exhibit 10.18 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1993.
10.19 Credit agreement dated June 13, 1994 between Whiteford Foods
Venture, L.P. and PNC Bank, Ohio, National Association and
Fifth Third Bank of Western Ohio, incorporated by reference
to Exhibit 10.19 to the Partnership's Annual Report on Form
10K for the year ended December 31, 1994.
10.20 Construction loan agreement dated June 13, 1994 between
Whiteford Foods Venture, L.P. and PNC Bank, Ohio, National
Association, incorporated by reference to Exhibit 10.20 to
the Partnership's Annual Report on Form 10K for the year
ended December 31, 1994.
10.21 Lease agreement dated December 15, 1994 between Whiteford
Foods Venture, L.P. and Star Bank, National Association,
incorporated by reference to Exhibit 10.21 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1994.
10.22 Term note B dated April 14, 1995, between Whiteford Foods
Venture, L.P. and PNC Bank, Ohio, National Association,
incorporated by reference to Exhibit 10.22 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1995.
10.23 Note payable dated September 18, 1995, between Whiteford
Foods Venture, L.P. and PNC Bank, Ohio, National
Association, incorporated by reference to Exhibit 10.23 to
the Partnership's Annual Report on Form 10K for the year
ended December 31, 1995.
10.24 Second amendment to Revolving Note dated July 11, 1995,
incorporated by reference to Exhibit 10.24 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1995.
10.25 Second amendment to Credit agreement dated July 11, 1995,
incorporated by reference to Exhibit 10.25 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1995.
10.26 Third amendment to Credit agreement dated July 11, 1995,
incorporated by reference to Exhibit 10.26 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1995.
10.27 Guarantee Compensation agreement dated September 18, 1995
between Whiteford Foods Venture, L.P. and Albert D.
Greenaway, incorporated by reference to Exhibit 10.27 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1995.
10.28 Mortgage granted to Albert D. Greenaway by Whiteford Foods
Venture, L.P., incorporated by reference to Exhibit 10.28 to
the Partnership's Annual Report on Form 10K for the year
ended December 31, 1995.
F - 12
</TABLE>
<PAGE>
INDEX TO ATTACHED EXHIBITS (CONT.)
<TABLE>
<S> <C>
10.29 Mortgage granted to Albert D. Greenaway by Whiteford Foods
Venture, L.P., incorporated by reference to Exhibit 10.29 to
the Partnership's Annual Report on Form 10K for the year
ended December 31, 1995.
10.30 Security agreement dated September 18, 1995 between
Whiteford Foods Venture, L.P. and Albert D. Greenaway,
incorporated by reference to Exhibit 10.30 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1995.
10.31 Fifth Amendment to Credit Agreement dated May 9, 1996,
incorporated by reference to Exhibit 10.31 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1996.
10.32 Lease agreement dated October 8, 1996 between Whiteford
Foods Venture, L.P. and Fifth Third Leasing, incorporated by
reference to Exhibit 10.32 to the Partnership's Annual
Report on Form 10K for the year ended December 31, 1996.
10.33 Lease agreement dated November 1, 1996 between Whiteford
Foods Venture, L.P. and PNC Leasing Corporation,
incorporated by reference to Exhibit 10.33 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1996.
10.34 Second Amendment to Term Note dated March 31, 1997,
incorporated by reference to Exhibit 10.34 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1997.
10.35 Sixth Amendment to Credit Agreement dated June 30, 1997,
incorporated by reference to Exhibit 10.35 to the
Partnership's Annual Report on Form 10k for the year ended
December 31, 1997.
10.36 Lease agreement dated December 22, 1997 between Whiteford
Foods Venture, L.P. and PNC Leasing, incorporated by
reference to Exhibit 10.36 to the Partnership's Annual
Report on Form 10k for the year ended December 31, 1997.
10.37 Seventh Admendment to Credit Agreement dated March 26, 1998.
10.38 Eighth Admendment to Credit Agreement dated July 1, 1998.
10.39 Third Admendment to Revolving Note dated July 1, 1998.
13. 1990 Annual Report to Limited Partners, incorporated by
reference to Exhibit 13 to the Partnership's Annual Report
on Form 10K for the year ended December 31, 1990.
</TABLE>
F - 13
<PAGE>
SEVENTH AMENDMENT AND WAIVER AGREEMENT
THIS SEVENTH AMENDMENT AND WAIVER AGREEMENT (this "AMENDMENT") is made as of
March 26, 1998, by and between WHITEFORD FOODS VENTURE, L.P., a Texas limited
partnership (the "BORROWER") and PNC BANK, NATIONAL ASSOCIATION, a national
banking association, successor by merger to PNC Bank, Ohio, National
Association, as Agent (the "AGENT"), for the Lenders under the below-defined
Credit Agreement.
WITNESSETH:
WHEREAS, the Borrower, the Agent and the Lenders entered into a Credit
Agreement dated June 13, 1994, which was subsequently amended by an Amendment to
Credit Agreement dated March 31, 1995, a Second Amendment to Credit Agreement
dated April 20, 1995, a Third Amendment to Credit Agreement dated July 11, 1995,
a Fourth Amendment to Credit Agreement dated November 7, 1995, a Fifth Amendment
and Waiver Agreement dated May 9, 1996, and a Sixth Amendment to Credit
Agreement dated as of June 30, 1997 (collectively, the "CREDIT AGREEMENT") which
evidences some or all of the Borrower's obligations to the Lender for one or
more loans or other extension of credit (the "OBLIGATIONS"); and
WHEREAS, the Borrower and the Agent desire to amend the Credit Agreement as
provided for below;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and intending to be legally bound hereby, the parties hereto agree as follows:
1. AMENDMENTS. The Credit Agreement is amended as follows:
1.1 Section 4.13 of the Credit Agreement is hereby deleted in its
entirety and the following inserted in its place:
"4.13. CURRENT RATIO. As of the end of each fiscal month of Borrower,
the ratio of Borrower's Current Assets to its Current Liabilities
during the time periods specified below shall equal or exceed the
following:
<TABLE>
<CAPTION>
Time Period Minimum Ratio
----------- -------------
<S> <C>
January 1, 1998 through and
including September 30, 1998 0.90:1
October 1, 1998 and thereafter 1.00:1"
</TABLE>
2. WAIVER. The Borrower's failure to comply with Section 4.9 FISCAL YEAR;
PARTNERSHIP INTERESTS; DISTRIBUTIONS of the Credit Agreement for its fiscal year
ending December 28, 1997, and Section 4.13 CURRENT RATIO of the Credit Agreement
for its fiscal months ending November 23, 1997
<PAGE>
and December 28, 1997, constitute Events of Default under Section 8.1(d) of the
Credit Agreement. The Borrower has requested that the Agent waive these Events
of Default. The Agent hereby grants a waiver of Borrower's non-compliance with
Sections 4.9 and 4.13 of the Credit Agreement and of the Events of Default that
would otherwise result from a violation of those Sections for the Borrower's
fiscal year ending December 28, 1997, and for the Borrower's fiscal months
ending November 23, 1997 and December 28, 1997. The Borrower agrees that it will
hereafter comply fully with Sections 4.9 and 4.13 of the Credit Agreement and
all related documents, instruments and agreements (collectively, the "LOAN
DOCUMENTS"), which remain in full force and effect.
2.1 Except as expressly described above, this waiver shall not
constitute (a) a modification or an alteration of the terms, conditions or
covenants of the Credit Agreement or any other Loan Document or (b) a waiver,
release or limitation upon the Agent's or the Lender's exercise of any of its
rights and remedies thereunder, which are hereby expressly reserved. This
waiver shall not relieve or release the Borrower or any guarantor in any way
from any of its respective duties, obligations, covenants or agreements under
the Credit Agreement or the other Loan Documents or from the consequences of
any Event of Default thereunder, except as expressly described above. This
waiver shall not obligate the Agent or the Lenders, or be construed to
require the Agent or the Lenders, to waive any other Events of Default or
defaults, whether now existing or which may occur after the date of this
Waiver.
3. Any and all references to the Credit Agreement in any other Loan
Documents shall be deemed to refer to such Credit Agreement as amended hereby.
Any initially capitalized terms used in this Amendment without definition shall
have the meanings assigned to those terms in the Credit Agreement.
4. This Amendment is deemed incorporated into each of the Loan Documents.
To the extent that any term or provision of this Amendment is or may be deemed
expressly inconsistent with any term or provision in any Loan Document, the
terms and provisions hereof shall control.
5. The Borrower hereby represents and warrants that (a) all of its
representations and warranties in the Loan Documents are true and correct, (b)
no default or Event of Default exists under any Loan Document, and (c) this
Amendment has been duly authorized, executed and delivered and constitutes its
legal, valid and binding obligation, enforceable in accordance with its terms.
6. The Borrower hereby confirms that any collateral for the Obligations,
including but not limited to liens, security interests, mortgages, and pledges
granted by the Borrower or third parties (if applicable), shall continue
unimpaired and in full force and effect.
7. This Amendment will be binding upon and inure to the benefit of the
Borrower, the Agent and the Lenders and their respective successors and assigns.
- 2 -
<PAGE>
8. Except as amended hereby, the terms and provisions of the Loan Documents
remain unchanged and in full force and effect. Except as expressly provided
herein, this Amendment shall not constitute an amendment, waiver, consent or
release with respect to any provision of any Loan Document, a waiver of any
default or Event of Default thereunder, or a waiver or release of any of the
Agent's or the Lenders' rights and remedies (all of which are hereby reserved).
THE BORROWER EXPRESSLY RATIFIES AND CONFIRMS THE CONFESSION OF JUDGMENT AND
WAIVER OF JURY TRIAL PROVISIONS.
Executed as of the date first written above.
WHITEFORD FOODS VENTURE, L.P.,
a Texas limited partnership
By: G/W FOODS, INC., general partner,
a Texas corporation
By: /s/ A. GREENAWAY
---------------------------------------
Print Name: Albert D. Greenaway
-------------------------------
Title: President
------------------------------------
PNC BANK, NATIONAL ASSOCIATION, as Agent
a national banking association
By: /s/ Timothy E. Reilly
---------------------------------------
Print Name: TIMOTHY E. REILLY
-------------------------------
Title: VICE PRESIDENT
------------------------------------
- 3 -
<PAGE>
EIGHTH AMENDMENT TO CREDIT AGREEMENT
THIS EIGHTH AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is made as of
July 1, 1998, by and between WHITEFORD FOODS VENTURE, L.P., a Texas limited
partnership (the "BORROWER") and PNC BANK, NATIONAL ASSOCIATION, a national
banking association, successor by merger to PNC Bank, Ohio, National
Association, as Agent (the "AGENT"), for the Lenders under the below-defined
Credit Agreement, THE FIFTH THIRD BANK OF WESTERN OHIO, an Ohio state banking
corporation, and PNC BANK, NATIONAL ASSOCIATION, successor by merger to PNC
Bank, Ohio, National Association, (each individually a "Lender" and
collectively, the "Lenders").
WITNESSETH:
WHEREAS, the Borrower, the Agent and the Lenders entered into a Credit
Agreement dated June 13, 1994, which was subsequently amended by an Amendment
to Credit Agreement dated March 31, 1995, a Second Amendment to Credit
Agreement dated April 20, 1995, a Third Amendment to Credit Agreement dated
July 11, 1995, a Fourth Amendment to Credit Agreement dated November 7, 1995,
a Fifth Amendment and Waiver Agreement dated May 9, 1996, a Sixth Amendment
to Credit Agreement dated as of June 30, 1997, and a Seventh Amendment and
Waiver Agreement dated as of March 26, 1998 (collectively, the "CREDIT
AGREEMENT") which evidences the Borrower's obligations for one or more loans
or other extensions of credit (the "OBLIGATIONS"); and
WHEREAS, the Borrower, the Agent and the Lenders desire to amend the Credit
Agreement as provided for below;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and intending to be legally bound hereby, the parties hereto agree as follows:
1. AMENDMENTS. The Credit Agreement is amended as follows:
1.1 Section 2.1(a) is amended by deleting "Two Million Six Hundred
Thousand Dollars ($2,600,000.00)" from the fourth line thereof and inserting
"Three Million Dollars ($3,000,000.00)" in its place, and by deleting
"$2,600,000.00" from the ninth line thereof and inserting "3,000,000.00" in its
place.
1.2 Section 2.1(e) is amended to delete "July 1, 1998" from the first
sentence thereof and insert "July 1, 1999" in its place.
3. Any and all references to the Credit Agreement in any other Loan
Documents shall be deemed to refer to such Credit Agreement as amended hereby.
Any initially capitalized terms used in this Amendment without definition shall
have the meanings assigned to those terms in the Credit Agreement.
<PAGE>
4. This Amendment is deemed incorporated into each of the Loan Documents.
To the extent that any term or provision of this Amendment is or may be deemed
expressly inconsistent with any term or provision in any Loan Document, the
terms and provisions hereof shall control.
5. The Borrower hereby represents and warrants that (a) all of its
representations and warranties in the Loan Documents are true and correct, (b)
no default or Event of Default exists under any Loan Document, and (c) this
Amendment has been duly authorized, executed and delivered and constitutes its
legal, valid and binding obligation, enforceable in accordance with its terms.
6. The Borrower hereby confirms that any collateral for the Obligations,
including but not limited to liens, security interests, mortgages, and pledges
granted by the Borrower or third parties (if applicable), shall continue
unimpaired and in full force and effect.
7. This Amendment will be binding upon and inure to the benefit of the
Borrower, the Agent and the Lenders and their respective successors and assigns.
8. Except as amended hereby, the terms and provisions of the Loan Documents
remain unchanged and in full force and effect. Except as expressly provided
herein, this Amendment shall not constitute an amendment, waiver, consent or
release with respect to any provision of any Loan Document, a waiver of any
default or Event of Default thereunder, or a waiver or release of any of the
Agent's or the Lenders' rights and remedies (all of which are hereby reserved).
THE BORROWER EXPRESSLY RATIFIES AND CONFIRMS THE CONFESSION OF JUDGMENT AND
WAIVER OF JURY TRIAL PROVISIONS.
Executed as of the date first written above.
WHITEFORD FOODS VENTURE, L.P.,
a Texas limited partnership
By: G/W FOODS, INC., general partner,
a Texas corporation
By: /s/ ALBERT D. GREENAWAY
----------------------------------
Print Name: Albert D. Greenaway
--------------------------
Title: President
-------------------------------
- 2 -
<PAGE>
PNC BANK, NATIONAL ASSOCIATION, as Agent
a national banking association
By: /s/ TIMOTHY E. REILLY
---------------------------------------
Print Name: Timothy E. Reilly
-------------------------------
Title: Vice President
------------------------------------
THE FIFTH THIRD BANK OF WESTERN OHIO,
an Ohio state banking corporation, as
a Lender
By: /s/ K. DOUGLAS COMPTON
---------------------------------------
Print Name: K. Douglas Compton
-------------------------------
Title: VICE PRESIDENT
------------------------------------
PNC BANK, NATIONAL ASSOCIATION,
a national banking association, as
a Lender
By: /s/ TIMOTHY E. REILLY
---------------------------------------
Print Name: Timothy E. Reilly
-------------------------------
Title: Vice President
------------------------------------
STATE OF Ohio )
) SS:
COUNTY OF Darke )
The foregoing instrument was acknowledged before me this 25th day of
August, 1998 by Albert D. Greenaway President of G/W Foods, Inc., a Texas
corporation, on behalf of the corporation as general partner of Whiteford
Foods Venture, L.P., a Texas limited partnership.
/s/ SHARON K. HENRY
---------------------------------------
Notary Public
July 20, 1998
WHITELAG SHARON K. HENRY
NOTARY PUBLIC, STATE OF OHIO
My Commission Expires May 4, 2000
Recorded in Darke County
- 3 -
<PAGE>
THIRD AMENDMENT TO REVOLVING NOTE
THIS THIRD AMENDMENT TO REVOLVING NOTE (this "AMENDMENT") is made as of July
1, 1998, by and between WHITEFORD FOODS VENTURE, L.P., a Texas limited
partnership (the "BORROWER") and PNC BANK, NATIONAL ASSOCIATION, a national
banking association, successor by merger to PNC Bank, Ohio, National Association
(the "BANK").
WITNESSETH:
WHEREAS, the Borrower has executed and delivered to the Bank a Revolving
Note dated June 13, 1994, in the original principal amount of One Million One
Hundred Thousand Dollars ($1,100,000.00), as amended by an Amendment to
Revolving Note dated March 31, 1995, and a Second Amendment to Revolving Note
dated July 1, 1995 (collectively, the "NOTE"), evidencing the Borrower's
indebtedness to the Bank for such loan (the "LOAN") pursuant to the Loan
Documents;
WHEREAS, the Borrower and the Bank desire to amend the Note as provided for
below;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and intending to be legally bound hereby, the parties hereto agree as follows:
1. The Note is amended as follows:
1.1 The amount available under the Note is hereby increased by
amending the first page of the Note be deleting "$1,430,000.00" from the
upper left-hand corner thereof and inserting "$1,650,000.00" in its place.
1.2 The first paragraph of the Note is deleted in its entirety and
the following inserted in its place:
"FOR VALUE RECEIVED, WHITEFORD FOODS VENTURE, L.P., a Texas limited
partnership (the "Borrower"), hereby promises to pay to the order of PNC
BANK, NATIONAL ASSOCIATION, a national banking association ("Bank"), in
lawful money of the United States of America in immediately available funds
at its offices located at 201 East Fifth Street, Cincinnati, Ohio 45202, or
at such other location as the Bank may designate from time to time, the
principal sum of One Million Six Hundred Fifty Thousand Dollars
($1,650,000.00) or such lesser unpaid principal amount together with accrued
and unpaid interest thereon, as may be advanced by the Bank pursuant to the
terms of the Credit Agreement dated June 13, 1994 by and among the Borrower,
the Bank, The Fifth Third Bank of Western Ohio, N.A., and the Bank, as
Agent, as same may be amended from time to time (the "AGREEMENT"). This Note
shall serve as a master note to evidence all such advances."
<PAGE>
1.3 The first sentence of the second paragraph of the Note is
deleted in its entirety and the following inserted in its place:
"The principal balance hereof outstanding from time to time shall bear
interest per annum at the applicable rate set forth in Section 2.1(c) of the
Agreement."
2. Any and all references to the Note in any document, instrument or
certificate evidencing, securing or otherwise delivered in connection with the
Loan shall be deemed to refer to the Note as amended hereby. Any initially
capitalized terms used in this Amendment without definition shall have the
meanings assigned to those terms in the Note or the Loan Documents.
3. This Amendment is deemed incorporated into the Note. To the extent that
any term or provision of this Amendment is or may be deemed expressly
inconsistent with any term or provision in the Loan Documents or the Note, the
terms and provisions hereof shall control.
4. The Borrower hereby represents and warrants that (a) all of its
representations and warranties in the Loan Documents are true and correct, (b)
no default or Event of Default exists under the Note or the Loan Documents, and
(c) this Amendment has been duly authorized, executed and delivered and
constitutes the legal, valid and binding obligation of the Borrower, enforceable
in accordance with its terms.
5. The Borrower hereby confirms that any collateral for the Loan, including
but not limited to liens, security interests, mortgages, and pledges granted by
the Borrower or third parties (if applicable), shall continue unimpaired and in
full force and effect.
6. This Amendment may be signed in any number of counterpart copies and by
the parties hereto on separate counterpart, but all such copies shall constitute
one and the same instrument.
7. This Amendment will be binding upon and inure to the benefit of the
Borrower and the Bank and their respective heirs, executors, administrators,
successors and assigns.
8. Except as amended hereby, the terms and provisions of the Note remain
unchanged and in full force and effect. Except as expressly provided herein,
this Amendment shall not constitute am amendment, waiver, consent or release
with respect to any provision of the Loan Documents or the Note, a waiver of any
default or Event of Default thereunder, or a waiver or release of any of the
Bank's rights and remedies (all of which are hereby reserved). THE BORROWER
EXPRESSLY RATIFIES AND CONFIRMS THE CONFESSION OF JUDGMENT AND WAIVER OF JURY
TRIAL PROVISIONS.
- 2 -
<PAGE>
Executed as of the date first written above.
WHITEFORD FOODS VENTURE, L.P.,
a Texas limited partnership
By: G/W FOODS, INC., a Texas corporation
as general partner
By: /s/ A. Greenaway
---------------------------------------
Print Name: Albert D. Greenaway
-------------------------------
Title: President
------------------------------------
PNC BANK, NATIONAL ASSOCIATION,
a national banking association
By: /s/ Timothy E. Reilly
---------------------------------------
Print Name: Timothy E. Reilly
-------------------------------
Title: Vice President
------------------------------------
- 3 -
<PAGE>
THIRD AMENDMENT TO REVOLVING NOTE
THIS THIRD AMENDMENT TO REVOLVING NOTE (this "AMENDMENT") is made as of July
1, 1998, by and between WHITEFORD FOODS VENTURE, L.P., a Texas limited
partnership (the "BORROWER") and THE FIFTH THIRD BANK OF WESTERN OHIO, an Ohio
state banking corporation (the "BANK").
WITNESSETH:
WHEREAS, the Borrower has executed and delivered to the Bank a Revolving
Note dated June 13, 1994, in the original principal amount of Nine Hundred
Thousand Dollars ($900,000.00), as amended by an Amendment to Revolving Note
dated March 31, 1995, and a Second Amendment to Revolving Note dated July 1,
1995 (collectively, the "NOTE"), evidencing the Borrower's indebtedness to the
Bank for such loan (the "LOAN") pursuant to the Loan Documents;
WHEREAS, the Borrower and the Bank desire to amend the Note as provided for
below;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and intending to be legally bound hereby, the parties hereto agree as follows:
1. The Note is amended as follows:
1.1 The amount available under the Note is hereby increased by
amending the first page of the Note by deleting "$1,170,000.00" from the upper
left-hand corner thereof and inserting "$1,350,000.00" in its place.
1.2 The first paragraph of the Note is deleted in its entirety and
the following inserted in its place:
"FOR VALUE RECEIVED, WHITEFORD FOODS VENTURE, L.P., a Texas limited
partnership (the "Borrower"), hereby promises to pay to the order of THE
FIFTH THIRD BANK OF WESTERN OHIO, an Ohio state banking corporation
("Bank"), in lawful money of the United States of America in immediately
available funds at its offices located at 201 East Fifth Street, Cincinnati,
Ohio 45202, or at such other location as the Bank may designate from time to
time, the principal sum of One Million Three Hundred Fifty Thousand Dollars
($1,350,000.00) or such lesser unpaid principal amount together with accrued
and unpaid interest thereon, as may be advanced by the Bank pursuant to the
terms of the Credit Agreement dated June 13, 1994 by and among the Borrower,
PNC Bank, National Association, successor by merger to PNC Bank, Ohio,
National Association, as Agent, PNC Bank, National Association, and the
Bank, as same may be amended from time to time (the "AGREEMENT"). This Note
shall serve as a master note to evidence all such advances."
<PAGE>
1.3 The first sentence of the second paragraph of the Note is
deleted in its entirety and the following inserted in its place:
"The principal balance hereof outstanding from time to time shall bear
interest per annum at the applicable rate set forth in Section 2.1(c) of the
Agreement."
2. Any and all references to the Note in any document, instrument or
certificate evidencing, securing or otherwise delivered in connection with the
Loan shall be deemed to refer to the Note as amended hereby. Any initially
capitalized terms used in this Amendment without definition shall have the
meanings assigned to those terms in the Note or the Loan Documents.
3. This Amendment is deemed incorporated into the Note. To the extent that
any term or provision of this Amendment is or may be deemed expressly
inconsistent with any term or provision in the Loan Documents or the Note, the
terms and provisions hereof shall control.
4. The Borrower hereby represents and warrants that (a) all of its
representations and warranties in the Loan Documents are true and correct, (b)
no default or Event of Default exists under the Note or the Loan Documents, and
(c) this Amendment has been duly authorized, executed and delivered and
constitutes the legal, valid and binding obligation of the Borrower, enforceable
in accordance with its terms.
5. The Borrower hereby confirms that any collateral for the Loan, including
but not limited to liens, security interests, mortgages, and pledges granted by
the Borrower or third parties (if applicable), shall continue unimpaired and in
full force and effect.
6. This Amendment may be signed in any number of counterpart copies and
by the parties hereto on separate counterparts, but all such copies shall
constitute one and the same instrument.
7. This Amendment will be binding upon and inure to the benefit of the
Borrower and the Bank and their respective heirs, executors, administrators,
successors and assigns.
8. Except as amended hereby, the terms and provisions of the Note remain
unchanged and in full force and effect. Except as expressly provided herein,
this Amendment shall not constitute an amendment, waiver, consent or release
with respect to any provision of the Loan Documents or the Note, a waiver of any
default or Event of Default thereunder, or a waiver or release of any of the
Bank's rights and remedies (all of which are hereby reserved). THE BORROWER
EXPRESSLY RATIFIES AND CONFIRMS THE CONFESSION OF JUDGMENT AND WAIVER OF JURY
TRIAL PROVISIONS.
- 2 -
<PAGE>
Executed as of the date first written above.
WHITEFORD FOODS VENTURE, L.P.,
a Texas limited partnership
By: G/W FOODS, INC., a Texas corporation
as general partner
By: /s/ A. GREENAWAY
---------------------------------------
Print Name: Albert D. Greenaway
-------------------------------
Title: President
------------------------------------
THE FIFTH THIRD BANK OF WESTERN OHIO,
an Ohio state banking corporation
By: /s/ K. D. COMPTON
---------------------------------------
Print Name: K. Douglas Compton
-------------------------------
Title: VICE PRESIDENT
------------------------------------
- 3 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1998 JAN-01-1997 JAN-01-1996
<PERIOD-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<CASH> 416,143 264,247 0
<SECURITIES> 0 0 0
<RECEIVABLES> 3,332,971 3,558,557 0
<ALLOWANCES> 0 0 0
<INVENTORY> 2,565,555 3,024,597 0
<CURRENT-ASSETS> 6,723,998 6,935,442 0
<PP&E> 17,807,284 17,234,988 0
<DEPRECIATION> 6,249,629 5,205,058 0
<TOTAL-ASSETS> 20,986,810 21,798,022 0
<CURRENT-LIABILITIES> 6,779,754 7,333,308 0
<BONDS> 4,001,939 4,732,167 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 10,205,117 9,732,547 0
<TOTAL-LIABILITY-AND-EQUITY> 20,986,810 21,798,022 0
<SALES> 62,431,746 62,224,110 59,026,632
<TOTAL-REVENUES> 62,770,442 62,480,526 59,366,563
<CGS> 57,551,373 57,846,006 54,188,228
<TOTAL-COSTS> 62,033,881 62,226,145 58,548,885
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 679,397 727,861 839,198
<INCOME-PRETAX> 0 0 0
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 736,561 254,381 817,678
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0.56 0.19 0.63
</TABLE>
