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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 September 29,1995
Commission File Number 0-4485
WESTERN BEEF, INC.
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(Exact name of registrant as specified in its charter)
Delaware 13-3266114
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
47-05 Metropolitan Avenue, Ridgewood, New York 11385
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(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
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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 October 18, 1995
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INDEX
WESTERN BEEF, INC. AND SUBSIDIARIES
PAGE
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PART I-FINANCIAL INFORMATION
Item 1. Financial statements
Condensed consolidated balance sheets as of
September 29, 1995 and December 30, 1994. 2
Condensed consolidated statements of income
for the thirty-nine weeks and the thirteen weeks
ended September 29, 1995 and September 30, 1994. 3
Condensed consolidated statements of cash flows for the
thirty-nine weeks ended September 29, 1995 and
September 30, 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 8
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WESTERN BEEF, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
<TABLE>
<CAPTION>
SEPTEMBER 29, DECEMBER 30,
1995 1994
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(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,090 $ 4,311
Accounts receivable, net of allowance for doubtful
accounts ( $532 and $142) 7,849 6,907
Inventories 15,215 13,339
Prepaid expenses and other current assets 1,760 2,390
Deferred income taxes 978 907
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Total current assets 26,892 27,854
Property, plant and equipment, net of accumulated
depreciation and amortization ($14,430 and $14,437) 30,431 25,276
Deferred income taxes 358 176
Other assets 1,948 887
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Total assets $59,629 $54,193
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,729 $ 1,563
Current portion of obligations under capital leases 109 101
Accounts payable 13,499 12,597
Accrued expenses and other liabilities 2,268 1,482
Income taxes payable 326 -
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Total current liabilities 17,931 15,743
Long-term debt, net of current portion 5,799 5,779
Obligations under capital leases, net of current portion 1,362 1,445
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Total liabilities 25,092 22,967
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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 22,748 19,437
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Total shareholders' equity 34,537 31,226
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Total liabilities and shareholders' equity $59,629 $54,193
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
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WESTERN BEEF, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED THIRTEEN WEEKS ENDED
SEPTEMBER 29, SEPTEMBER 30, SEPTEMBER 29, SEPTEMBER 30,
1995 1994 1995 1994
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<S> <C> <C> <C> <C>
Net sales $219,039 $219,626 $78,407 $73,584
Cost of sales 166,599 168,832 59,198 56,860
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Gross profit on sales 52,440 50,794 19,209 16,724
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Operating expenses:
Rent expense-affiliates 2,089 2,066 690 875
Interest expense 586 485 198 153
Selling, general and
administrative expenses 43,703 42,096 15,930 13,209
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Total operating expenses 46,378 44,647 16,818 14,237
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Income before income taxes 6,062 6,147 2,391 2,487
Provision for income taxes 2,751 2,765 1,031 1,153
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Net income $ 3,311 $ 3,382 $ 1,360 $ 1,334
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Weighted average number of
common shares outstanding 5,463 5,463 5,463 5,463
-------- -------- ------- -------
-------- -------- ------- -------
Earnings per common share $ .61 $ .62 $ .25 $ .25
-------- -------- ------- -------
-------- -------- ------- -------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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WESTERN BEEF, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
SEPTEMBER 29, SEPTEMBER 30,
1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net income $3,311 $3,382
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,998 2,167
Deferred income tax benefit (253) -
Provision for losses on accounts receivable 390 315
(Increase) decrease in assets:
Accounts receivable (1,332) (876)
Inventories (1,876) (1,145)
Prepaid expenses and other current assets 630 1,042
Prepaid income taxes - (345)
Other assets 6 (334)
(Decrease)increase in liabilities:
Accounts payable 902 (627)
Accrued expenses and other liabilities 786 1,001
Payroll and related taxes payable - (279)
Income taxes payable 326 -
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Net cash provided by operating activities 4,888 4,301
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Cash flows from investing activities:
Capital expenditures (7,153) (1,922)
Low income housing investment (907) -
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Net cash used in investing activities (8,060) (1,922)
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Cash flows from financing activities:
Net repayments under line of credit agreement - (750)
Proceeds from issuance of long-term debt 1,603 3,219
Payments on long-term debt and capital leases (1,652) (834)
Net advances to affiliates and shareholders - (254)
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Net cash provided by (used in) financing activities (49) 1,381
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Net increase (decrease) in cash and cash equivalents (3,221) 3,760
Cash and cash equivalents, beginning of period 4,311 1,080
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Cash and cash equivalents, end of period $1,090 $4,840
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Cash paid during the thirty-nine weeks for:
Interest $ 586 $ 485
Income taxes $3,311 $3,858
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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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 thirty-nine weeks ended September 29, 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) OTHER ASSETS:
Included in the caption "Other assets," are investments of approximately,
$1,067,000 which the Company made in two limited partnerships during the
year and as a result has generated qualified low income housing tax
credits. These investments are accounted for under the effective yield
method.
(3) Income Taxes:
The Company's effective tax rate for the thirty-nine weeks ended September
29, 1995, was reduced by 1.1% as a result of the utilization of low income
housing tax credits of approximately $74,000. The Company has qualified low
income housing tax credits of $1,855,000 which are available to reduce
future regular federal income taxes for the years ending 1996 through 2005.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net sales for the third fiscal quarter of 1995 were $78,407,000, an
increase of $4,823,000 from the comparable quarter of 1994. On a
year-to-date basis, net sales were $219,039,000, a decrease of
$587,000 from 1994. The two new stores which opened at the end of the
second quarter had sales of $7,316,000 and $9,455,000 for the quarter
and year-to-date periods, respectively. Excluding sales of the two new
stores, sales declined as a result of decreases of 2.1% and 5.6% in
same store sales for the quarter and year-to-date periods ended
September 29, 1995, and the sale 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. For the third
quarter of 1995, the decline in same store sales results primarily
from the opening of our new stores. For the remainder of the year
management expects same store sales, exclusive of the effect of the
new stores, to remain comparable to the similar period in the prior
year.
Gross profit, as a percentage of sales, increased to 24.5% in the
third fiscal quarter of 1995 from 22.7% in the same quarter of 1994.
On a year-to-date basis, gross profit increased to 23.9% as compared
with 23.1%, last year. The increase in gross profit is attributable to
higher sales of Western Beef brand products and purchasing
efficiencies.
Operating expenses including, selling general and administrative
expenses, rent expense-affiliates and interest expense, as a
percentage of sales, increased to 21.5% in the third fiscal quarter of
1995 from 19.4% in the same quarter of 1994. On a year-to-date basis
operating expenses including, selling, general and administrative
expenses, rent expense-affiliates and interest expense, increased to
21.2% as compared with 20.3% 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 $900,000, of which $294,000 was incurred in the third
quarter.
Liquidity and Capital Resources
Cash flows from operations were $4,888,000 for the thirty-nine weeks
ended September 29, 1995 as compared to $4,301,000 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.
The equipment purchased and improvements made for the two new stores,
a third new store which opened on October 30, 1995 and the upgrading
of the point-of-sale equipment at three existing locations accounted
for the majority of capital expenditures. 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 another new store in early 1996, on
West End Avenue in Manhattan. The Company also has financial
institutions that would be available to refinance new store equipment,
usually over a five year period.
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<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.
None
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.
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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.
By: /s/ Robert C. Ludlow
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Robert C. Ludlow
Senior Vice-President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: October 31, 1995
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<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANICAL INFORMATION EXTRACTED FROM
THE WESTERN BEEF, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED SEPTEMBER 29, 1995
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-29-1995
<PERIOD-START> DEC-31-1994
<PERIOD-END> SEP-29-1995
<CASH> 1090
<SECURITIES> 0
<RECEIVABLES> 8381
<ALLOWANCES> 532
<INVENTORY> 15215
<CURRENT-ASSETS> 26892
<PP&E> 44861
<DEPRECIATION> 30431
<TOTAL-ASSETS> 59629
<CURRENT-LIABILITIES> 17931
<BONDS> 7161
<COMMON> 273
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<OTHER-SE> 34264
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<CGS> 59198
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</TABLE>
