<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1995
-------------
Commission File Number 0-4485
------
WESTERN BEEF, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3266114
------------------------ ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
47-05 Metropolitan Avenue, Ridgewood, New York 11385
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (718)-417-3770
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 12 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months 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 close of the period covered by
this report.
5,463,317 shares of Common Stock, $.05 par value as of July 7, 1995.
--------------------------------------------------------------------------------
<PAGE>
INDEX
WESTERN BEEF, INC. AND SUBSIDIARIES
PAGE
----
PART I-FINANCIAL INFORMATION
Item 1. Financial statements
Condensed consolidated balance sheets as of
June 30, 1995 and December 30, 1994. 2
Condensed consolidated statements of income and
retained earnings for the twenty-six weeks and the
thirteen weeks ended June 30, 1995 and July 1, 1994. 3
Condensed consolidated statements of cash flows for the
twenty-six weeks ended June 30, 1995 and July 1, 1994. 4
Notes to the condensed consolidated financial statements. 5
Item 2. Management's discussion and analysis of financial
condition and results of operations. 6
PART II-OTHER INFORMATION 7
-------------------------
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 9
---------
<PAGE>
WESTERN BEEF, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
<TABLE>
<CAPTION>
June 30, 1995 December 30, 1994
------------- -----------------
ASSETS (Unaudited)
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,316 $ 4,311
Accounts receivable, net of allowance for doubtful
accounts ( $402 and $142) 7,556 6,907
Inventories 16,383 13,339
Prepaid expenses and other current assets 2,100 2,390
Deferred income taxes 1,029 907
--------- ---------
Total current assets 28,384 27,854
Property, plant and equipment, net of accumulated
depreciation and amortization ($15,529 and $14,437) 28,734 25,276
Deferred income taxes 223 176
Investment in low income housing tax credit 907 -
Other assets 897 887
--------- ---------
Total assets $ 59,145 $ 54,193
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable-bank $ 391 $ -
Current portion of long-term debt 1,565 1,563
Current portion of obligations under capital leases 106 101
Accounts payable 15,163 12,597
Accrued expenses and other liabilities 1,786 1,482
Income taxes payable 497 -
--------- ---------
Total current liabilities 19,508 15,743
Long-term debt, net of current portion 5,070 5,779
Obligations under capital leases, net of current portion 1,390 1,445
--------- ---------
Total liabilities 25,968 22,967
--------- ---------
Shareholders' equity:
Preferred stock, $.05 par value; shares authorized
2,000; none issued - -
Common stock, $.05 par value; 15,000 shares
authorized; 5,463 shares issued and outstanding 273 273
Capital in excess of par value 11,516 11,516
Retained earnings 21,388 19,437
--------- ---------
Total shareholders' equity 33,177 31,226
--------- ---------
Total liabilities and shareholders' equity $ 59,145 $ 54,193
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements
-2-
<PAGE>
WESTERN BEEF, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended Thirteen Weeks Ended
------------------------ ----------------------
June 30, 1995 July 1, 1994 June 30, 1995 July 1, 1994
<S> <C> <C> <C> <C>
Net sales $140,632 $146,042 $73,058 $74,954
Cost of sales 107,401 111,973 55,353 57,561
--------- --------- -------- ---------
Gross profit on sales 33,231 34,069 17,705 17,393
--------- --------- -------- ---------
Operating expenses:
Rent expense-affiliates 1,399 1,191 701 596
Interest expense 388 331 193 148
Selling, general and
administrative expenses 27,773 28,888 14,654 14,427
--------- --------- -------- --------
Total operating expenses 29,560 30,410 15,548 15,171
--------- --------- -------- --------
Income before income taxes 3,671 3,659 2,157 2,222
Provision for income taxes 1,720 1,611 1,003 986
--------- --------- -------- --------
Net income 1,951 2,048 1,154 1,236
Retained earnings
-beginning of period 19,437 14,664 20,234 15,476
--------- --------- -------- --------
Retained earnings
-end of period $ 21,388 $16,712 $21,388 $16,712
--------- --------- -------- --------
--------- --------- -------- --------
Weighted average number of
common shares outstanding 5,463 5,463 5,463 5,463
--------- --------- -------- --------
--------- --------- -------- --------
Earnings per common share $ .36 $ .37 $ .21 $ .23
--------- --------- -------- --------
--------- --------- -------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE>
WESTERN BEEF, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
---------------------------------
June 30, 1995 July 1, 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $1,951 $2,048
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,213 1,410
Deferred income tax benefit (169) -
Provision for losses on accounts receivable 260 211
(Increase)decrease in assets:
Accounts receivable (909) (232)
Inventories (3,044) (2,623)
Prepaid expenses and other current assets 290 (349)
Prepaid income taxes - 444
Other assets (10) (54)
(Decrease) increase in liabilities:
Accounts payable 2,566 7,196
Accrued expenses and other liabilities 304 1,014
Payroll and related taxes payable - 160
Income taxes payable 497 -
-------- --------
Net cash provided by operating activities 2,949 2,745
Cash flows from investing activities:
Capital expenditures (4,671) (1,244)
Low income housing investment (907) -
-------- --------
Net cash used in investing activities (5,578) (1,244)
-------- -------
Cash flows from financing activities:
Net borrowings (repayments) under line of credit agreement 391 (750)
Payments on long-term debt and capital leases (757) (493)
Net advances (to) from affiliates and shareholders - (401)
-------- --------
Net cash used in financing activities (366) (1,644)
-------- --------
Net decrease in cash and cash equivalents (2,995) (143)
Cash and cash equivalents, beginning of period 4,311 1,080
-------- --------
Cash and cash equivalents, end of period $1,316 $ 937
-------- --------
-------- --------
Cash paid during the twenty-six weeks for:
Interest $ 388 $ 331
Income taxes $1,233 $1,168
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-4-
<PAGE>
WESTERN BEEF, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting solely of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the twenty-six weeks ended June 30, 1995,
are not necessarily indicative of the results that may be expected for the
year ending December 29, 1995. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 30, 1994.
(2) INVESTMENT IN LOW INCOME HOUSING TAX CREDITS:
At the end of the second quarter, 1995, the Company invested in low income
housing credits. The investments will be accounted for utilizing the
effective-yield method.
-5-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net sales for the second fiscal quarter of 1995 were $73,058,000 a 2.53%
decrease from the comparable quarter of 1994. On a year-to-date basis,
net sales were $140,632,000 a decrease of 3.70% from 1994. The sales
decline results from a decrease in same store sales of 6.55% and 7.27%
respectively, for the three months, and six months ended June 30, 1995,
and the closing of a small wholesale produce business in the second
quarter of 1995. Management's efforts of resetting stores, better
advertising and merchandising are having a positive effect on slowing the
decline in same store sales that result from competitive pressures.
The two new stores which were opened for two and six weeks respectively,
had total sales of $2,138,000, a portion of which helped cause the decline
in same store sales. For the remainder of the year, total sales should
increase as a result of the new stores.
Gross profit, as a percentage of sales, increased to 24.23% in the
second fiscal quarter of 1995 from 23.20% in the same quarter of 1994. On
a year-to-date basis, gross profit increased to 23.63% as compared with
23.33%, last year. The increase in gross profit is attributable to higher
sales of Western Beef brand products and purchasing efficiencies.
Selling, general and administrative expenses, including rent
expense-affiliates and interest expense, as a percentage of sales,
increased to 21.28% in the second fiscal quarter of 1995 from
20.24% in the same quarter of 1994. On a year-to-date basis, selling,
general and administrative expenses, including rent expense-affiliates and
interest expense, increased to 21.02% as compared with 20.82% in 1994. The
selling, general and administrative cost category includes payroll,
bonuses and operating costs. These increases are primarily due to 1995
store opening costs of approximately $600,000 of which $500,000 was
incurred in the second quarter.
Liquidity and Capital Resources
Cash flows from operations were $2,949,000 for the twenty-six weeks ended
June 30, 1995 as compared to $2,745,000 for the comparable period of 1994.
The increases in accounts receivable and inventory were offset by
increases in accounts payable, accrued expenses and taxes payable. The
increases in inventory and accounts payable resulted from the two new
stores that opened in the second quarter of 1995. Cash flow from
operations plus cash on hand were sufficient to pay for capital
expenditures and long-term debt requirements.
Most of the capital expenditures incurred were made in connection with the
three new stores under construction, two of which were opened by the end
of June 1995, and the upgrading of point-of-sale equipment in three
stores. The Company believes that cash on hand and its $3,000,000 bank
line of credit which expires on July 31, 1996, will be sufficient to meet
its operational needs and to fund the remaining costs to open the third
new store. The Company also has several financial institutions that would
be available to refinance new store equipment, usually over a five year
period.
-6-
<PAGE>
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
The Company has various outstanding litigation matters which it
considers to be in the ordinary course of business. In the opinion
of management, the outcome of these litigation matters will not
materially, adversely affect the Company's financial position.
In April 1991 in New York Supreme Court, Putnam County, an action was
commenced against the Company to prevent a scheduled foreclosure of
certain collateral held by the Company as security for its loan to
one of the plaintiffs in the original principal amount of $85,000 of
which approximately $65,000 was outstanding. Thereafter, in a
complaint served in March 1992, plaintiffs interposed three causes of
action on behalf of themselves and a previously unnamed plaintiff,
C.B. Foods, Inc., which was owned by the plaintiffs and was a
customer of the Company's wholesale business, seeking (1) a
declaration that the loan had been repaid; (2) compensatory damages
of $30,000,000 and exemplary damages of $10,000,000 for fraud
allegedly committed by the Company; and (3) compensatory damages of
$2,000,000 and exemplary damages of $10,000,000 for abuse of process
allegedly committed by the Company. In its answer, the Company
denied liability and all material allegations of the complaint.
Following a motion by the Company the court ordered plaintiffs' third
cause of action for abuse of process dismissed for failure to state a
claim and ordered all claims of C.B. Foods, Inc., struck from the
complaint on the ground that it was not a party to the action.
Plaintiffs have appealed the court's order. By order made on the
record on January 19, 1994, the court dismissed the complaint for
plaintiff's disobedience of prior court orders and their failure to
prosecute their claims. Plaintiffs have moved to modify the January
19, 1994 order. If they are not successful, an appeal is
anticipated, which the Company would vigorously defend. The Company
believes the resolution of this matter will not adversely affect its
financial position.
Item 2. Changes in Securities
None
Item 3. Default upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security holders.
The Company held its Annual Meeting of Shareholders on June 13,
1995, and transacted the following business:
(a) Election of Directors:
<TABLE>
<CAPTION>
Nominee Votes For % For Votes Withheld
-------------------- ----------- -------- --------------
<S> <C> <C> <C>
Frank Castellana 4,894,913 99.21% 39,131
Joseph Castellana 4,894,913 99.21% 39,131
Peter Castellana, Jr. 4,895,013 99.21% 39,031
Stephen R. Bokser 4,897,593 99.26% 36,451
Daniel M. Healy 4,897,593 99.26% 36,451
Arnold B. Becker 4,897,593 99.26% 36,451
</TABLE>
-7-
<PAGE>
(b) Adoption of 1995 Employee Stock Option Plan:
Votes For % For Votes Against Abstentions
-------- ------ ------------ -----------
4,302,173 97.79% 82,643 14,267
(c) Adoption of 1995 Non Employee Director Stock Option Plan:
Votes For % For Votes Against Abstentions
--------- ------ ------------ -----------
4,176,860 94.94% 210,751 11,832
(d) Election of BDO Seidman as Independent Auditors:
Votes For % For Votes Against Abstentions
--------- ------ ------------ -----------
4,912,262 99.56% 8,440 13,342
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
The registrant has not filed a report on Form 8-K during the quarter
just ended.
-8-
<PAGE>
SIGNATURE
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.
WESTERN BEEF, INC.WESTERN BEEF, INC.
By: /s/Robert C. Ludlow
-------------------
Robert C. Ludlow
Senior Vice-President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: August 14, 1995
-9-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE WESTERN
BEEF, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1995 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-29-1995
<PERIOD-START> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 1,316
<SECURITIES> 0
<RECEIVABLES> 7,958
<ALLOWANCES> 402
<INVENTORY> 16,383
<CURRENT-ASSETS> 28,384
<PP&E> 44,263
<DEPRECIATION> 15,529
<TOTAL-ASSETS> 59,145
<CURRENT-LIABILITIES> 19,508
<BONDS> 6,460
<COMMON> 273
0
0
<OTHER-SE> 32,904
<TOTAL-LIABILITY-AND-EQUITY> 59,145
<SALES> 73,058
<TOTAL-REVENUES> 73,058
<CGS> 55,353
<TOTAL-COSTS> 55,353
<OTHER-EXPENSES> 15,355
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 193
<INCOME-PRETAX> 2,157
<INCOME-TAX> 1,003
<INCOME-CONTINUING> 1,154
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,154
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
