================================================================================
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number: 33-15962
WHITEFORD PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 76-0222842
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
770 North Center Street, Versailles, Ohio 45380
(Address of principal executive offices) (Zip Code)
937-526-5172
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes _X_ No ____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Units Outstanding at November 3, 1999
- ------------------------------------- -------------------------------------
Limited Partnership Class A $10 Units 1,306,890
This document contains 10 pages
================================================================================
<PAGE>
WHITEFORD PARTNERS, L.P.
INDEX TO FORM 10-Q
NINE MONTHS ENDED SEPTEMBER 30, 1999 and 1998
- --------------------------------------------------------------------------------
Page Number
Part I. FINANCIAL INFORMATION
Item 1.Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 1999
(Unaudited) and December 31, 1998....................................3
Condensed Consolidated Statements of Operations
for the three months and nine months
ended September 30, 1999 and 1998 (Unaudited)........................4
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 1999 and 1998 (Unaudited).................5
Notes to Condensed Consolidated Financial Statements (Unaudited).........6
Item 2.Management's Discussion and Analysis of Financial Condition
and Results of Operations.........................................7
PART II. OTHER INFORMATION...................................................9
2 of 10
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
WHITEFORD PARTNERS, L.P.
- --------------------------------------------------------------------------------
September 30, December 31,
1999 1998
(Unaudited)
--------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................................ $ 299,562 $ 416,143
Accounts receivable: Trade ....................................... 1,844,824 3,332,971
Inventories:
Finished product ............................................. 1,411,707 844,612
Raw materials ................................................ 534,248 645,847
Packaging supplies and other ................................. 1,112,536 1,075,096
------------ ------------
3,058,491 2,565,555
Prepaid expenses and other assets ................................ 163,050 409,329
------------ ------------
TOTAL CURRENT ASSETS ......................................... $ 5,365,927 $ 6,723,998
PROPERTY AND EQUIPMENT - net of accumulated depreciation
of $7,124,904 and $6,249,629 in 1999 and 1998 ................ 11,456,799 11,557,655
OTHER ASSETS - net of amortization ................................... 2,609,537 2,705,157
------------ ------------
TOTAL ASSETS .......................................... $ 19,432,263 $ 20,986,810
============ ============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable ................................................. $ 2,156,265 $ 2,454,354
Notes payable and current maturities on long term debt ........... 3,736,893 3,434,967
Accrued expenses and other liabilities ........................... 765,776 890,433
------------ ------------
TOTAL CURRENT LIABILITIES .................................... $ 6,658,934 $ 6,779,754
LONG-TERM DEBT ....................................................... 3,725,498 4,001,939
PARTNERS' CAPITAL:
General Partner:
Capital contributions ........................................ 132,931 132,931
Capital transfers to Limited Partners ........................ (117,800) (117,800)
Interest in Partnership net income ........................... 15,797 26,050
Distributions ................................................ (38,171) (36,864)
------------ ------------
$ (7,243) $ 4,317
Limited Partners:
Capital Contributions - net of organization and offering costs
of $2,010,082 ............................................. 11,172,274 11,172,274
Capital transfers from General Partner ....................... 116,554 116,554
Interest in Partnership net income (loss) .................... 1,552,844 2,567,881
Distributions ................................................ (3,786,598) (3,655,909)
------------ ------------
$ 9,055,074 $ 10,200,800
------------ ------------
TOTAL PARTNERS' CAPITAL ................................... $ 9,047,831 $ 10,205,117
------------ ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL ............... $ 19,432,263 $ 20,986,810
============ ============
</TABLE>
3 of 10
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
WHITEFORD PARTNERS, L.P.
(Unaudited)
- ------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ----------------------------
1999 1998 1999 1998
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Sales of meat products ................... $ 12,456,526 $ 15,317,692 $ 40,326,305 $ 47,415,371
Interest and other income ................ 28,948 60,777 143,511 236,763
------------ ------------ ------------ ------------
$ 12,485,474 $ 15,378,469 $ 40,469,816 47,652,134
Costs and Expenses
Cost of meat products sold ............... 11,447,683 13,848,639 38,253,622 43,735,823
Selling and administrative expenses ...... 510,250 670,091 1,785,138 1,875,737
Depreciation and amortization ............ 327,533 307,539 970,894 917,021
Interest ................................. 168,575 170,783 485,453 518,172
------------ ------------ ------------ ------------
NET INCOME (LOSS) .................... $ 31,433 $ 381,417 $ (1,025,291) $ 605,381
============ ============ ============ ============
Summary of net income (loss) allocated to
General Partner .......................... $ 314 $ 3,814 $ (10,253) $ 6,054
Limited Partners ......................... 31,119 377,603 (1,015,038) 599,327
------------ ------------ ------------ ------------
$ 31,433 $ 381,417 $ (1,025,291) $ 605,381
============ ============ ============ ============
Net income (loss) per $10 unit of L.P. Capital $ 0.02 $ 0.29 $ (0.78) $ 0.46
============ ============ ============ ============
Average units issued and outstanding ......... 1,306,890 1,306,890 1,306,890 1,306,890
============ ============ ============ ============
</TABLE>
4 of 10
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
WHITEFORD PARTNERS, L.P.
(Unaudited)
- --------------------------------------------------------------------------------------------
Nine Months Ended
September 30,
----------------------------
1999 1998
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES ..................... $ 764,348 $ 975,231
------------ ------------
CASH USED IN INVESTING ACTIVITIES:
Purchase of property and equipment ........................ $ (774,419) $ (418,970)
Proceeds from Disposal of property and equipment .......... 0 15,500
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES ......................... $ (774,419) $ (403,470)
------------ ------------
CASH PROVIDED/(USED) IN FINANCING ACTIVITIES:
Proceeds from notes payable ............................... $ 14,476,888 $ 15,163,943
Payments on notes payable ................................. (14,451,402) (15,375,941)
Distributions to Limited and General Partners ............. (131,996) (197,994)
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES ......................... $ (106,510) $ (409,992)
------------ ------------
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS .............. $ (116,581) $ 161,769
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .............. 416,143 264,247
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .................... $ 299,562 $ 426,016
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (excluding amount capitalized to $ 352,393 $ 523,945
fixed assets and inventory) ============ ============
</TABLE>
5 of 10
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
WHITEFORD PARTNERS, L.P.
September 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
NOTE A - ORGANIZATION, BUSINESS AND ACQUISITIONS
Whiteford Partners, L.P., (the Partnership), formerly Granada Foods, L.P., was
formed on June 30, 1987, as a Delaware limited partnership. Prior to May 4,
1992, the Partnership consisted of a General Partner, Granada Management
Corporation, (Granada), and the Limited Partners. On May 4, 1992, Granada
assigned its sole general partner interest in the Partnership to Gannon Group,
Inc. and the Partnership was renamed Whiteford Partners, L.P.
The operational objectives of the Partnership are to own and operate businesses
engaged in the development, production, processing, marketing, distribution and
sale of food and related products (Food Businesses) for the purpose of providing
quarterly cash distributions to the partners while providing capital
appreciation through the potential appreciation of the Partnership's Food
Businesses. The Partnership expects to operate for twenty years from inception,
or for such shorter period as the General Partner may determine is in the best
interest of the Partnership, or for such shorter period as determined by the
majority of the Limited Partners. The Partnership currently operates in the Food
Business Segment only.
The Partnership Agreement provides that a maximum of 7,500,000 Class A, $10
partnership units can be issued to Limited Partners. Generally, Class A units
have a preference as to cumulative quarterly cash distributions of $.25 per
unit. The sharing of income and loss from the Partnership operations is 99% to
the Class A and 1% to the General Partner. Amounts and frequency of
distributions are determinable by the General Partner.
At September 30, 1999 and December 31, 1998 the Partnership had 1,306,890 Class
A limited partnership units issued and outstanding.
The Partnership records distributions of income and/or return of capital to the
General Partner and Limited Partners when paid. Special transfers of equity, as
determined by the General Partner, from the General Partner to the Limited
Partners are recorded in the period of determinations.
The accompanying unaudited financial statements have been prepared in accordance
with the instructions of Form 10-Q and therefore do not include all information
and footnotes for a fair presentation of financial position, results of
operations and cash flows in conformity with generally accepted accounting
principles. While the Partnership believes that the disclosures presented are
adequate to make the information not misleading, it is suggested that these
condensed consolidated financial statements be read in conjunction with the
financial statements and notes in the Partnership's most recent annual report
for the year ended December 31, 1998. A summary of the Partnership's significant
accounting policies is presented on page F-5 of the Partnership's most recent
annual report. There have been no material changes in the accounting policies
followed by the Partnership during 1999.
In the opinion of management, the unaudited information includes all
adjustments (consisting of normal accruals) which are necessary for a fair
presentation of the condensed consolidated financial position of the Partnership
at September 30, 1999 and the condensed consolidated results of its operations
for the three and nine months ending September 30, 1999 and 1998 and the
condensed consolidated cash flows for the nine months ending September 30, 1999
and 1998. Operating results for the period ended September 30, 1999, are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 1999.
NOTE B - Income Taxes
The Partnership files an information tax return, the items of income and expense
being allocated to the partners pursuant to the terms of the Partnership
Agreement. Income taxes applicable to the Partnership's results of operations
are the responsibility of the individual partners and have not been provided for
in the accounts of the Partnership.
6 of 10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management's discussion and analysis set forth below should be read in
conjunction with the accompanying condensed consolidated financial statements.
Results of Operations
- ---------------------
Nine months ended September 30, 1999 Compared to Nine Months ended September 30,
1998
- --------------------------------------------------------------------------------
Revenues for the nine months ended September 30, 1999 were $40,469,816 versus
$47,652,134 for the comparable period in 1998, a decrease of 15.1%. During the
1999 period 43,889,548 pounds of meat products were sold versus 51,877,277
pounds during the 1998 period. The decrease in sales of meat products sold is
primarily attributable to a reduction in orders by customers. In response to
this decline, in July 1999, the Company analyzed its operations and reduced
costs, including overhead and administration.
Costs of meat products sold for the nine months ended September 30, 1999 were
$38,253,622 versus $43,735,823 for the comparable period ended September 30,
1998, a decrease of 12.5%. The decrease in the costs is primarily attributable
to a decline in pounds produced and sold.
Gross margins on sales were 5.5% for the nine months ended September 30, l999
and 8.2% for the comparable period in 1998. The decrease in gross margins is
attributable to the semi-variable nature of certain costs of meat products sold
such as labor, packaging and utilities.
Selling and administrative expenses were $1,785,138 for the 1999 period versus
$1,875,737 for the 1998 period. Selling and administration expenses represented
4.4% of revenue for the nine months ended September 30, 1999 and 3.9% the period
ended September 30, 1998.
Depreciation and amortization expense for the nine months ended September 30,
1999 was $970,894 versus $917,021 for the same period in 1998, an increase of
5.9%.
Interest expense for the nine months ended September 30, 1999 was $485,453
versus interest expense of $518,172 for the same period in 1998. This decrease
of $32,719 primarily relates to the decrease in the average debt balance
outstanding.
A loss of $1,025,291 was realized in the 1999 period compared to net income of
$605,381 in the comparable period in 1998.
Impact of Year 2000
- -----------------------
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. Any of Whiteford
Foods' internal use computer programs and its software products that are date
sensitive may recognize a date using "00" as the Year 1900 rather than the Year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions or engage in normal business activities.
Whiteford Foods has modified/upgraded and replaced all of its internal software
so that it will function with respect to dates in Year 2000 and thereafter.
Whiteford Foods presently believes that with such modifications to its software
and conversions to new internal use software, the Year 2000 issue will not pose
any 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 has completed
its Year 2000 project. The total cost of the Year 2000 project has not been
fully determined, but has been funded through operating cash flows. The
requirements for the correction of Year 2000 modifications are based on
Management's best estimates, which were derived by utilizing numerous
assumptions of future events including availability of
7 of 10
<PAGE>
certain resources, third party modification plans and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ from those anticipated. Specific factors that may cause
such material differences include, but are not limited to, the availability of
personnel trained to locate and collect all relevant codes and similar
uncertainties. The effect, if any, on Whiteford Foods' result of operations if
Whiteford Foods, its Customers or its suppliers are not fully Year 2000
compliant is not reasonably estimable.
Liquidity and Capital Resources
- -------------------------------
At September 30, 1999 the Partnership had a negative working capital of
$1,293,007 versus a negative working capital of $55,756 at December 31, 1998.
Cash provided by operating activities was $764,348 in 1999 versus $975,231 in
the 1998 period.
Cash used in investing activities was $774,419 in 1999 as compared to $403,470
in 1998.
The Partnership used $106,510 from financing activities during 1999 representing
net repayment of debt outstanding and distributions to the General and Limited
Partners. For the comparable period in 1998, the Partnership used $409,992.
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 $3,500,000 (with $3,054,025 outstanding at September 30, 1999), (the
"Principal Revolver"); (b) a five year term credit facility of $2,200,000,(the
"Principal Term Loan"); (c) a five year credit facility of $4,165,000,(the
"Principal Mortgage Term Loan"); and (d) a five year credit facility of
$500,000, (the "Third Term Loan"), (collectively, the "Loans"). During 1999, the
Partnership amended its Credit Agreement with the Bank. In May 1999, the
Principal Revolver was increased from $3,000,000 to $3,500,000 with a maturity
of December 31, 1999. In November 1999, the Principal Term Loan was amended to
extend the maturity to January 1, 2002.
The Principal Revolver bears an interest rate of prime plus 1/2%. The Principal
Term Loan bears an interest rate of 8.717%. The Principal Mortgage Loan bears
interest of 8.99%. The Second Term Loan bears an interest rate of prime plus
1/2%. The Third Term bears an interest rate of 9.42%. The Loans require the
Partnership to meet certain financial covenants and restrict the ability of the
Partnership to make distributions to Limited Partners without the consent of the
principal lender. The Principal Revolver and the Principal Term Loan (together
with the Principal Mortgage Loan provided by the principal lender) are secured
by real property, fixed assets, equipment, inventory, receivables and
intangibles of Whiteford's.
The Partnership's 1999 capital budget calls for the expenditure of $800,000 for
building, plant and equipment modifications and additions. The General Partner
believes Whiteford's is in compliance with environmental protection laws and
regulations, and does not anticipate making additional capital expenditures for
such compliance in 1999. Such amounts are expected to be funded by internally
generated cash flow. The General Partner believes that the above credit
facilities along with cash flow from operations will be sufficient to meet the
Partnership's working capital and credit requirements for 1999.
The nature of the Partnership's business activities (primarily meat processing)
are such that should annual inflation rates increase materially in the
foreseeable future, the Partnership would experience increased costs for
personnel and raw materials; however, it is believed that increased costs could
substantially be passed on in the sales price of its products.
Market Risk
- -----------
There have been no significant changes in market risk since December 31, 1998.
8 of 10
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceeding
None
Item 2. Change in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Materially Important Events
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - None
b. Reports on Form 8-K - None
9 of 10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WHITEFORD PARTNERS, L.P.
Date November 3, 1999 By /s/ Kevin T. Gannon
------------------- -------------------------------
Kevin T. Gannon, President
Chief Executive Officer
Chief Financial Officer
Gannon Group, Inc.
General Partner
10 of 10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 299,562
<SECURITIES> 0
<RECEIVABLES> 1,844,824
<ALLOWANCES> 0
<INVENTORY> 3,058,491
<CURRENT-ASSETS> 5,365,927
<PP&E> 18,581,703
<DEPRECIATION> 7,124,904
<TOTAL-ASSETS> 19,432,263
<CURRENT-LIABILITIES> 6,658,934
<BONDS> 3,725,498
0
0
<COMMON> 0
<OTHER-SE> 9,047,831
<TOTAL-LIABILITY-AND-EQUITY> 19,432,263
<SALES> 12,456,526
<TOTAL-REVENUES> 12,485,474
<CGS> 11,447,683
<TOTAL-COSTS> 12,454,041
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 168,575
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,433
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.02
</TABLE>
