<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 March 29, 1996
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Commission File Number 0-4485
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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
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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.
As of May 6, 1996, 5,463,317 shares of Common Stock par value $.05 per share,
were issued and outstanding.
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INDEX
WESTERN BEEF, INC. AND SUBSIDIARIES
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PART I-FINANCIAL INFORMATION
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Item 1. Financial statements
Condensed consolidated balance sheets as of
March 29, 1996 and December 29, 1995. 2
Condensed consolidated statements of income
for the thirteen weeks ended March 29,1996
and March 31, 1995. 3
Condensed consolidated statements of cash flows for the
thirteen weeks ended March 29, 1996 and March 31, 1995. 4
Notes to the condensed consolidated financial statements. 5
Item 2. Management 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>
MARCH 29, DECEMBER 29,
1996 1995
ASSET (Unaudited)
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,637 $ 2,431
Accounts receivable, net of allowance for doubtful
accounts ( $456 and $326) 7,730 8,754
Inventories 16,432 15,959
Prepaid expenses and other current assets 2,058 2,020
Deferred income taxes 794 702
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Total current assets 30,651 29,866
Property, plant and equipment, net of accumulated
depreciation and amortization ($14,321 and $15,026) 35,958 31,733
Other assets 1,696 1,714
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Total assets $68,305 $63,313
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Current portion of long-term debt $ 2,427 $ 1,997
Current portion of obligations under capital leases 199 193
Accounts payable 12,605 13,134
Accrued expenses and other liabilities 3,700 3,190
Income taxes payable 16 -
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Total current liabilities 18,947 18,514
Deferred income taxes payable 1,439 1,249
Long-term debt, net of current portion 9,421 6,280
Obligations under capital leases, net of current portion 1,373 1,411
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Total liabilities 31,180 27,454
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Stockholders' 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 11,379 11,379
Retained earnings 25,633 24,371
Deferred compensation (160) (164)
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Total stockholders' equity 37,125 35,859
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Total liabilities and stockholders' equity $68,305 $63,313
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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>
THIRTEEN WEEKS ENDED
MARCH 29, 1996 MARCH 31, 1995
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<S> <C> <C>
Net sales $79,349 $67,574
Cost of sales 59,760 52,048
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Gross profit on sales 19,589 15,526
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Expenses:
Rent expense-affiliates 623 698
Selling, general and administrative
expenses 16,426 13,119
Interest expense 208 195
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Total expenses 17,257 14,012
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Income before income taxes 2,332 1,514
Provision for income taxes 1,070 717
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Net income $ 1,262 $ 797
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Weighted average number of
common shares and equivalents
outstanding 5,492 5,463
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Earnings per common share $ .23 $ .15
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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 CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
MARCH 29, 1996 MARCH 31, 1995
<S> -------------- --------------
Cash flows from operating activities: <C> <C>
Net income $1,262 $ 797
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 741 596
Deferred income tax benefit 98 (13)
Provision for losses on accounts receivable 130 130
(Increase) decrease in assets:
Accounts receivable 894 (404)
Inventories (473) (628)
Prepaid expenses and other current assets (38) 136
Other assets 18 (34)
(Decrease) increase in liabilities:
Accounts payable (529) 874
Accrued expenses and other liabilities 510 414
Income taxes payable 16 391
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Net cash provided by operating activities 2,629 2,259
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Cash flows from investing activities:
Capital expenditures (5,039) (2,279)
Proceeds from sale of property, plant and equipment 77 -
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Net cash used in investing activities (4,962) (2,279)
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Cash flows from financing activities:
Proceeds from issuance of long-term debt 4,007 -
Payments on long-term debt and capital leases (468) (547)
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Net cash provided by (used in) financing activities 3,539 (547)
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Net increase (decrease) in cash and cash equivalents 1,206 (567)
Cash and cash equivalents, beginning of period 2,431 4,311
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Cash and cash equivalents, end of period $3,637 $3,744
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Cash paid during the thirteen weeks for:
Interest
Income taxes $ 208 $ 195
$ 730 $ 320
</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 thirteen weeks ended March 29, 1996 are not necessarily indicative of the
results that may be expected for the year ending January 3, 1997. 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 29, 1995.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 123 "Accounting for Stock-Based
Compensation," ("SFAS No. 123"). SFAS No. 123 established a fair value method
for accounting for stock-based compensation plans either through recognition
or disclosure. The Company adopted the employee stock-based compensation
provisions of SFAS No.123, and will disclose the pro forma net income and pro
forma net income per share amounts assuming the fair value method for fiscal
year 1996 at year end. The adoption of this standard will not impact the
Company's consolidated results of operations, financial position or cash flows.
Stock arrangements with non-employees as applicable, will be recorded at fair
value.
(2) LITIGATION:
There has been no material change in litigation from the year ended
December 29, 1995. See Part II of this report for further disclosure.
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ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For the thirteen weeks ended March 29, 1996, Western Beef, Inc., ("the
Company") achieved net income of $1,262,000 or $0.23 per share on net sales of
$79,349,000, as compared to net income of $797,000 or $0.15 per share on net
sales of $67,574,000 for the thirteen weeks ended March 31, 1995. Cost of
sales, as a percentage of net sales, decreased to 75.3% from 77% with a
resultant increase in the gross profit percentage to 24.7% from 23%.
Net sales increased $11,775,000 or 17% primarily from the sales generated by
the three new stores that were opened after the first quarter of 1995. Same
store sales were up 1.1% for the first quarter of 1996 as compared to the first
quarter of 1995. Gross profits increased because of improved buying and
merchandising and higher retail sales which produce larger gross profits than
wholesale sales.
Operating expenses including, selling, general and administrative expenses,
rent expense - affiliates and interest expense, as a percentage of sales,
increased to 21.7% for the thirteen weeks ended March 29, 1996 from 20.7% for
the same period in 1995. These additional costs of $3,245,000 are a result of
the increased payrolls and store operating costs of the three new stores. The
selling, general and administrative cost category includes payroll, bonuses and
operating costs. The ratio of such costs to retail sales is higher than is the
ratio of such costs to wholesale sales. The 1996 increase in retail sales,
therefore, brings with it a corresponding increase in selling, general and
administrative expenses as a percentage of sales.
Liquidity and Capital Resources:
Cash flows from operations were $2,629,000 for the thirteen weeks ended March
29, 1996 as compared to $2,259,000 for the comparable period of 1995. The
increase is primarily a a result of the increase in net income for the period.
Capital expenditures of $5,039,000 included the exercise of an option to
purchase for $3,000,000, funded by a 20 year mortgage at 8.25% per annum with
a balloon payment of $2,084,095 due on the tenth anniversary date of the
purchase, one of the Company's retail locations currently leased from a
non-affiliated company. The remaining capital expenditures were for equipment
and improvements at the new store in Manhattan and for the renovation of the
College Point store. The Company funded these expenditures with cash flow from
operations and by borrowing an additional $1,000,000 for five years at 7.54%
from a finance company. The Company believes that cash on hand and its
$3,000,000 bank line of credit which expires on July 31, 1996 and which is
expected to be renewed by the bank, will be sufficient to meet its operational
needs. The Company also has several financial institutions that would be
available to finance new store equipment, usually over a five year period. As
of March 31, 1996 there are no material commitments for capital expenditures.
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<PAGE>
PART II-OTHER INFORMATION
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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.
(27) Financial Data Schedule
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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: May 6, 1996
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<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE WESTERN
BEEF, INC. QUARTERLY REPORT ON FORM 10Q FOR THE QUARTER ENDED MARCH 29, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1997
<PERIOD-START> DEC-30-1995
<PERIOD-END> MAR-29-1996
<CASH> 3,637
<SECURITIES> 0
<RECEIVABLES> 7,730
<ALLOWANCES> 456
<INVENTORY> 16,432
<CURRENT-ASSETS> 30,651
<PP&E> 35,958
<DEPRECIATION> 14,321
<TOTAL-ASSETS> 68,305
<CURRENT-LIABILITIES> 18,947
<BONDS> 10,794
273
0
<COMMON> 0
<OTHER-SE> (160)
<TOTAL-LIABILITY-AND-EQUITY> 68,305
<SALES> 79,349
<TOTAL-REVENUES> 79,349
<CGS> 59,760
<TOTAL-COSTS> 59,760
<OTHER-EXPENSES> 17,257
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 208
<INCOME-PRETAX> 2,332
<INCOME-TAX> 1,070
<INCOME-CONTINUING> 1,262
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,262
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
