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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 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
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INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
CLASS UNITS OUTSTANDING AT AUGUST 4, 1999
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LIMITED PARTNERSHIP CLASS A $10 UNITS 1,306,890
THIS DOCUMENT CONTAINS 10 PAGES
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WHITEFORD PARTNERS, L.P.
INDEX TO FORM 10-Q
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
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PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1999
(Unaudited) and December 31, 1998.............................................. 3
Condensed Consolidated Statements of Operations
for the three months and six months
ended June 30, 1999 and 1998 (Unaudited)....................................... 4
Condensed Consolidated Statements of Cash Flows for the six
months ended June 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
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CONDENSED CONSOLIDATED BALANCE SHEETS
WHITEFORD PARTNERS, L.P.
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JUNE 30, DECEMBER 31,
1999 1998
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ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 414,353 $ 416,143
Accounts receivable: Trade 2,441,967 3,332,971
Inventories:
Finished product 1,011,303 844,612
Raw materials 556,273 645,847
Packaging supplies and other 1,096,843 1,075,096
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2,664,419 2,565,555
Prepaid expenses and other assets 200,160 409,329
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TOTAL CURRENT ASSETS $ 5,720,899 $ 6,723,998
PROPERTY AND EQUIPMENT - net of accumulated depreciation
of $6,829,244 and $6,249,629 in 1999 and 1998 11,680,848 11,557,655
OTHER ASSETS - net of amortization 2,641,410 2,705,157
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TOTAL ASSETS $ 20,043,157 $ 20,986,810
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LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 2,456,044 $ 2,454,354
Notes payable and current maturities on long term debt 3,943,000 3,434,967
Accrued expenses and other liabilities 902,218 890,433
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TOTAL CURRENT LIABILITIES $ 7,301,262 $ 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 15,483 26,050
Distributions (38,171) (36,864)
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$ (7,557) $ 4,317
Limited Partners:
Capital Contributions - net of organization and offering costs
of $2,010,082 11,172,274 11,172,274
Capital transfers from General Partner 116,554 116,554
Interest in Partnership net income 1,521,724 2,567,881
Distributions (3,786,598) (3,655,909)
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$ 9,023,954 $ 10,200,800
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TOTAL PARTNERS' CAPITAL $ 9,016,397 $ 10,205,117
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TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 20,043,157 $ 20,986,810
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
WHITEFORD PARTNERS, L.P.
(UNAUDITED)
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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
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1999 1998 1999 1998
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Revenues
Sales of meat products $ 13,901,529 $ 16,213,769 $ 27,869,779 $ 32,097,679
Interest and other income 31,145 71,068 114,563 175,986
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$ 13,932,674 $ 16,284,837 $ 27,984,342 32,273,665
Costs and Expenses
Cost of meat products sold 13,497,873 14,998,495 26,805,939 29,887,184
Selling and administrative expenses 601,924 611,031 1,274,888 1,205,646
Depreciation and amortization 325,197 306,025 643,361 609,482
Interest 160,647 171,974 316,878 347,389
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NET (LOSS) INCOME $ (652,967) $ 197,312 $ (1,056,724) $ 223,964
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Summary of net (loss) income allocated to
General Partner $ (6,529) $ 1,973 $ (10,567) $ 2,240
Limited Partners (646,438) 195,339 (1,046,157) 221,724
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$ (652,967) $ 197,312 $(1,056,724) $ 223,964
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Net (loss) income per $10 unit of L.P. Capital $ (0.50) $ 0.15 $ (0.81) $ 0.17
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Weighted average units issued and outstanding 1,306,890 1,306,890 1,306,890 1,306,890
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
WHITEFORD PARTNERS, L.P.
(UNAUDITED)
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SIX MONTHS ENDED
JUNE 30,
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1999 1998
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 601,421 $ 1,618,350
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CASH FLOW USED IN INVESTING ACTIVITIES:
Purchase of property and equipment $ (702,808) $ (291,064)
Proceeds from Disposal of property and equipment 0 15,500
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NET CASH USED IN INVESTING ACTIVITIES $ (702,808) $ (275,564)
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CASH PROVIDED/(USED) IN FINANCING ACTIVITIES:
Proceeds from notes payable $ 8,985,970 $ 10,081,639
Payments on notes payable (8,754,377) (11,221,328)
Distributions to Limited and General Partners (131,996) (131,996)
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NET CASH PROVIDED/(USED) IN FINANCING ACTIVITIES $ 99,597 $ (1,271,685)
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(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS $ (1,790) $ 71,101
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 416,143 264,247
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 414,353 $ 335,348
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (excluding amount capitalized to fixed assets and inventory) $ 284,356 $ 353,587
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
WHITEFORD PARTNERS, L.P.
JUNE 30, 1999
(UNAUDITED)
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NOTE A - ORGANIZATION, BUSINESS AND ACQUISITIONS
Whiteford Partners, L.P., (the Partnership), formerly Granada Foods, L.P., was
formed on June 30, 1987, as a Delaware limited partnership. Prior to May 4,
1992, the Partnership consisted of a General Partner, Granada Management
Corporation, (Granada), and the Limited Partners. On May 4, 1992, Granada
assigned its sole general partner interest in the Partnership to Gannon Group,
Inc. and the Partnership was renamed Whiteford Partners, L.P.
The operational objectives of the Partnership are to own and operate businesses
engaged in the development, production, processing, marketing, distribution and
sale of food and related products (Food Businesses) for the purpose of providing
quarterly cash distributions to the partners while providing capital
appreciation through the potential appreciation of the Partnership's Food
Businesses. The Partnership expects to operate for twenty years from inception,
or for such shorter period as the General Partner may determine is in the best
interest of the Partnership, or for such shorter period as determined by the
majority of the Limited Partners. The Partnership 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 June 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 included in the Partnership's most recent annual
report for the year ended December 31, 1998. A summary of the Partnership's
significant accounting policies is presented on page F-5 of the Partnership's
most recent annual report. There have been no material changes in the accounting
policies followed by the Partnership during 1999.
In the opinion of management, the unaudited information includes all adjustments
(consisting of normal accruals) which are necessary for a fair presentation of
the condensed consolidated financial position of the Partnership at June 30,
1999 and the condensed consolidated results of its operations for the six months
ending June 30, 1999 and 1998 and the condensed consolidated cash flows for the
six months ending June 30, 1999 and 1998. Operating results for the period ended
June 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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management's discussion and analysis set forth below should be read in
conjunction with the accompanying condensed consolidated financial statements.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Revenues for the six months ended June 30, 1999 were $27,984,342 versus
$32,273,665 for the comparable period in 1998, a decrease of 13.3%. During the
1999 period 30,930,680 pounds of meat products were sold versus 34,738,863
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. This positions the Company with its
future expected revenue stream.
Costs of meat products sold for the six months ended June 30, 1999 were
$26,805,939 versus $29,887,184 for the comparable period ended June 30, 1998, a
decrease of 10.3%. The decrease in the cost of meat products sold is primarily
attributable to a decline in pounds produced and sold.
Gross margins on sales were 3.8% for the six months ended June 30, l999 and 6.9%
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 $1,274,888 for the 1999 period versus
$1,205,646 for the 1998 period. Selling and administration expenses represented
4.6% of revenue for the six months ended June 30, 1999 and 3.7% the period ended
June 30, 1998.
Depreciation and amortization expense for the six months ended June 30, 1999 was
$643,361 versus $609,482 for the same period in 1998, an increase of 5.6%
Interest expense for the six months ended June 30, 1999 was $316,878 versus
interest expense of $347,389 for the same period in 1998. This decrease of
$30,511 primarily relates to the decrease in the average debt outstanding.
Net loss of $1,056,724 was realized in the 1999 period compared to net profit of
$223,964 in the comparable period in 1998.
IMPACT OF YEAR 2000
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. Any of Whiteford
Foods' internal use computer programs and its software products that are date
sensitive may recognize a date using "00" as the Year 1900 rather than the Year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including , among other things, a temporary inability
to process transactions or engage in normal business activities.
Whiteford Foods has modified/upgraded and replaced some of its internal software
so that it will function with respect to dates in Year 2000 and thereafter.
Whiteford Foods presently believes that with such modifications to its software
and conversions to new internal use software, the Year 2000 issue will not pose
significant operational problems for Whiteford Foods or its customers. Whiteford
Foods has and will continue to utilize both internal and external resources to
reprogram, replace and test it 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 August
1999, which is prior
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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 by utilizing numerous
assumptions of future events including continued availability of certain
resources, third party modification plans and other factors. However, there can
be no guarantee that these estimates will be achieved and actual results could
differ from those anticipated. Specific factors that may cause such material
differences include, but are not limited to, the availability of personnel
trained to locate and collect all relevant computer codes and similar
uncertainties. The effect, if any, on Whiteford Foods' result of operations if
Whiteford Foods, its Customers or its suppliers are not fully Year 2000
compliant is not reasonably estimable.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999 the Partnership had a negative working capital of $1,580,363
versus a negative working capital of $55,756 at December 31, 1998.
Cash provided by operating activities was $601,421 in 1999 versus $1,618,350 in
the 1998 period.
Cash used in investing activities was $702,808 in 1999 as compared to $275,564
in 1998.
The Partnership provided $99,597 from financing activities during 1999. During
the comparable period in 1998, the Partnership used $1,271,685 from financing
activities.
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 $3,260,132 outstanding at June 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"); (d) a two year credit facility of $700,000,(the
"Second Term Loan"); and (e) a five year credit facility of $500,000, (the
"Third Term Loan"), (collectively, the "Loans").
The Principal Revolver bears an interest rate of prime plus 1/2%. The Principal
Term Loan bears an interest rate of 8.717%. The Principal Mortgage Loan bears
interest of 8.99%. The Second Term Loan bears an interest rate of prime plus
1/2%. The Third Term bears an interest rate of 9.42%. The Loans require the
Partnership to meet certain financial covenants and restrict the ability of the
Partnership to make distributions to Limited Partners without the consent of the
principal lender. The Principal Revolver and the Principal Term Loan (together
with the Principal Mortgage Loan provided by the principal lender) are secured
by real property, fixed assets, equipment, inventory, receivables and
intangibles of Whiteford's.
The Partnership's 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.
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PART II. OTHER INFORMATION
Item 1. Legal Proceeding
None
Item 2. Change in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Materially Important Events
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - None
b. Reports on Form 8-K - None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WHITEFORD PARTNERS, L.P.
Date AUGUST 4, 1999 By /s/ Kevin T. Gannon
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Kevin T. Gannon, President
Chief Executive Officer
Chief Financial Officer
Gannon Group, Inc.
General Partner
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<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> APR-01-1999 APR-01-1998
<PERIOD-END> JUN-30-1999 JUN-30-1998
<CASH> 414,353 416,143
<SECURITIES> 2,441,967 3,332,971
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 2,664,419 2,565,555
<CURRENT-ASSETS> 5,720,899 6,723,998
<PP&E> 18,510,092 17,807,284
<DEPRECIATION> 6,829,244 6,249,629
<TOTAL-ASSETS> 20,043,157 20,986,810
<CURRENT-LIABILITIES> 7,301,262 6,779,754
<BONDS> 3,725,498 4,001,939
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 9,016,397 10,205,117
<TOTAL-LIABILITY-AND-EQUITY> 20,043,157 20,986,810
<SALES> 13,901,529 16,213,769
<TOTAL-REVENUES> 13,932,674 16,284,837
<CGS> 13,497,873 14,998,495
<TOTAL-COSTS> 14,585,641 16,087,525
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 160,647 171,974
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (652,967) 197,312
<EPS-BASIC> 0 0
<EPS-DILUTED> (0.50) 0.15
</TABLE>
