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FILE NO. 0-7277
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
ANNUAL REPORT
Pursuant to Section 13 of the Securities Exchange Act of 1934
For the Fiscal Year Ended February 28, 1997
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WSMP, INC.
Incorporated in North Carolina
CLAREMONT, NORTH CAROLINA 28610 56-0945643
(704) 459 - 7626 (I.R.S. Employer Identification No.)
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Securities filed pursuant to Section 12(g) of
the Securities Exchange Act of 1934:
COMMON STOCK, PAR VALUE $1 PER SHARE
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 twelve months (or for such shorter period that the
registrant was required to file such report(s), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulations S-K is not contained herein and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The number of shares of WSMP, Inc. Common Stock outstanding as of May 7,
1997 was 3,247,074. The aggregate market value of WSMP, Inc. Common Stock held
by nonaffiliates of WSMP, Inc. as of May 7, 1997 was $ 20,069,310.
DOCUMENTS OF WHICH PORTIONS PARTS OF FORM 10-K INTO WHICH PORTIONS
ARE INCORPORATED BY REFERENCE OF DOCUMENTS ARE INCORPORATED
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Annual Report to Shareholders for the
Fiscal Year Ended February 28, 1997 I, II
Proxy Statement for WSMP, Inc.'s Annual
Meeting of Shareholders to be held
on June 26, 1997 III
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PART I
ITEM 1. BUSINESS
BUSINESS SEGMENTS
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The Company operates in three principal business segments: restaurant
franchising, restaurant operations and food processing. Information as to
revenue, operating profit, identifiable assets, depreciation and amortization
expense, and capital expenditures, for each of the Company's business segments
for fiscal 1997 is contained on page 22 of the Company's Annual Report to
Shareholders for the fiscal year ended February 28, 1997, under the caption
"Lines of Business," and is incorporated herein by reference.
RESTAURANT FRANCHISING
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RESTAURANT FRANCHISING - WESTERN STEER. The most significant segment of the
Company's franchising operations currently centers around the Western Steer
chain of restaurants, which includes the Western Steer Family Restaurant concept
and the Western Steer - Steaks, Buffet & Bakery concept. The Western Steer
Family Restaurant concept originated in 1975 as a family oriented, reasonably
priced steakhouse restaurant, and featured a rustic western-style design, steaks
and other entrees cooked to order, and an "all-you-can-eat" buffet food bar.
Beginning in 1992, the Company began an extensive program of renovation of this
concept which included updating the buffet food bar, adding an in-house bakery
and changing the store appearance to highlight a new format. Restaurants
updated to this new format have been renamed "Western Steer - Steaks, Buffet &
Bakery."
At February 28, 1997, the Company had 53 franchised Western Steer restaurants
located in North Carolina (23), Kentucky (7), West Virginia (5), Georgia (4),
South Carolina (4), Florida (2), Virginia (4), Maryland (2) and Tennessee (2).
Of this total, 28 were operated as Western Steer - Steaks, Buffet & Bakery
restaurants, and 25 as Western Steer Family Restaurants. The Company no longer
offers the Western Steer Family Restaurant franchise, and believes that many of
the existing units will eventually elect to convert to the Western Steer -
Steaks, Buffet & Bakery format. Although the decision regarding whether to
renovate and the timing thereof rests with the franchisee, the Company
encourages its franchisees to renovate franchised restaurants and provides
assistance in doing so, primarily through consulting with franchisees regarding
the renovations and subsequent operational changes and training of franchisee
personnel. The primary costs of renovating franchised restaurants are borne by
the franchisees.
The average weekly sales volume during the fiscal year ended February 28,
1997 for franchised Western Steer - Steaks, Buffet & Bakery restaurants that
have been open for one year or more was $23,400. This represents a slight
decrease from the fiscal 1996 weekly average of $23,700. The average weekly
sales volume for fiscal 1997 for Western Steer Family Restaurant units that have
been open for one year or more was $19,900, representing an increase of 4.7%
from the average for fiscal 1996 which totaled $19,000.
The Company granted five franchises during fiscal 1997 for Western Steer -
Steaks, Buffet & Bakery restaurants which opened in North Carolina(2),
Virginia(1), and Maryland(2). The two franchise units opened in Maryland
represent units previously owned by the Company that were sold during fiscal
1997. Management anticipates the opening of approximately three additional new
franchise units during fiscal 1998.
At February 28, 1997, major shareholders of the Company had ownership
interests in 17 of the 53 franchised restaurants. See Item 13, "Certain
Relationships and Related Transactions."
RESTAURANT FRANCHISING - PRIME SIRLOIN. In 1987, the Company acquired Prime
Sirloin, Inc., a regional franchised steakhouse chain composed of seven units
and headquartered in Morristown, Tennessee. This concept, although similar to
Western Steer, was slightly more upscale, with larger building designs, building
interiors, and a higher average ticket price. Due to the success of the Western
Steer redesign, management has offered its Prime Sirloin franchise operators a
remodel and redesign program similar to the Western Steer reformat. As of
February 28, 1997, one of the original franchised units has been remodeled and
changed to "Prime Sirloin - Buffet, Bakery & Steaks."
During fiscal 1995, management of the Company introduced a new Prime Sirloin
prototype designed to capitalize on the industry's success with larger buffet
style formats. This "megasized" prototype centers around a budget steak and
buffet concept with seating for over 400 patrons. Significant alterations from
the original Prime Sirloin design include a panoramic entry, which gives
customers a view of the buffet and dining area, a "double-line" system,
directing guests to the buffet floor quickly, and a "scatter-bar" buffet design
which allows guests to visit different areas for different phases of their meal.
The new Prime Sirloin design costs approximately $2.1 million per unit, and each
unit is anticipated to gross approximately $2.3 million to $2.7 million in first
year sales. The first prototype Prime Sirloin franchise was opened in
Spartanburg, South Carolina in August of 1994. During fiscal 1996 two
additional prototype franchises were opened in Bristol, Tennessee and
Greenville, South Carolina. No new Prime Sirloin franchises were sold or
opened during fiscal 1997, and no new prototype franchise units are planned
for fiscal 1998. However, it is anticipated that a franchised Western Steer
in Maryland will convert to a franchised Prime Sirloin early in fiscal 1998.
At February 28, 1997, there were 10 franchised Prime Sirloin restaurants
located in Tennessee (5), South Carolina (2), Virginia (1), Florida (1), and
Georgia (1). Six of these are operated in the "Prime Sirloin - Buffet, Bakery
& Steaks" remodeled format. Of these, the Bristol, Tennessee location, which
opened during fiscal 1996, is operated through a joint venture in which the
Company owns 50%. See Item 13, "Certain Relationships and Related
Transactions." Major shareholders of the Company have an ownership interest in
two of the franchised Prime Sirloin restaurants.
During fiscal 1997, the average weekly sales volume for Prime Sirloin -
Buffet, Bakery & Steaks franchises open for one year or more was $35,000. This
represents a decrease from the fiscal 1996 average of $39,400.
RESTAURANT FRANCHISING - BENNETT'S SMOKEHOUSE & SALOON. In 1990, WSMP became a
subfranchisor of Denver based Bennett's Bar-B-Que, Inc., with development rights
exclusively for Tennessee, North Carolina and Virginia, and expansion rights
elsewhere in the United States, except for Colorado, Texas, and metropolitan
Atlanta, Georgia. As a sub-franchiser, the Company pays royalty fees to the
franchiser equal to 1% of revenues for each Bennett's restaurant owned or sub-
franchised by the Company.
In 1994, management redesigned the Bennett's Bar-B-Que concept into Bennett's
Smokehouse & Saloon, a Texas roadhouse theme concept merging steaks and barbecue
in a 186-seat casual dinner house. This concept represents the Company's entry
into the rapidly expanding, casual dining market. At February 28, 1997, the
Company had three franchised Bennett's restaurants, located in Tennessee (2) and
West Virginia (1).
One new West Virginia franchise was opened during fiscal 1997. Management
does not intend to actively pursue franchise expansion during fiscal 1998,
but instead, intends to focus efforts on improving operations in existing units.
RESTAURANT FRANCHISING - OTHER. WSMP has created the "Mom 'n' Pop's Buffet and
Bakery" restaurant concept, to fit existing Western Steer buildings in areas in
which competition has grown, or in which past performance necessitates other
market approaches. This restaurant concept consists of food bars from which
customers make selections. At fiscal year end, there were two franchised units
under this concept, both located in Georgia. At the present time, the Company
does not consider these restaurants or their franchising as being significant to
its overall operations.
RESTAURANT FRANCHISING - ACQUISITION OF FRANCHISED UNITS. On March 1, 1997,
WSMP entered into agreements to reacquire 15 franchised restaurants from seven
franchisees, six of which (operating 14 restaurants) were affiliated with Cecil
R. Hash, a former president of the Company. On April 26, 1997, two additional
restaurants were reacquired from a separate franchisee. The seventeen
restaurants consist of eleven Western Steer - Steaks, Buffet & Bakery
restaurants, five Western Steer Family Restaurants, and one Prime Sirloin -
Buffet, Bakery & Steaks. These restaurants are located in North Carolina (14),
Virginia (2) and Tennessee (1).
RESTAURANT FRANCHISING - FRANCHISE AGREEMENTS. The Company utilizes standard
franchise agreements for its Western Steer; Western Steer-Steaks, Buffet &
Bakery; Prime Sirloin; Prime Sirloin-Buffet, Bakery & Steaks; and Bennett's
Smokehouse & Saloon restaurants. The terms of the franchise agreement are
dependent upon when the agreement was executed.
Generally, franchise agreements executed prior to 1990 are for a period of
20 years, renewable for a period of 20 years, whereas those executed after this
date are based on 10 year terms. The initial franchise fee is $25,000. In
addition, royalty fees of 3% of the franchised restaurant's gross sales
throughout the term of the agreement are also payable to the Company. Franchise
agreements executed after 1981 require the franchisee to pay the Company an
advertising fee of 2% of each franchised restaurant's gross sales. Although the
Company reserves the right to collect this total fee, it is not currently
charging an advertising fee to its franchise units. All agreements provide for
an exclusive territory and for in-term and post-term non-competition agreements.
No single franchisee or group of franchisees under common control provides
revenues equal to 10% or more of the Company's consolidated revenues.
RESTAURANT OPERATIONS.
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RESTAURANT OPERATIONS - WESTERN STEER, PRIME SIRLOIN, AND BENNETT'S RESTAURANTS.
At February 28, 1997, the Company and certain consolidated subsidiaries owned
and operated 9 Western Steer - Steaks, Buffet & Bakery restaurants. These
restaurants are located in North Carolina (7), Florida (1), and Tennessee (1).
In addition, the Company and certain consolidated subsidiaries owned and
operated five Prime Sirloin - Buffet, Bakery & Steaks in North Carolina (4) and
South Carolina (l). One Bennett's Smokehouse & Saloon restaurant is owned
by the Company and is located in North Carolina.
By an agreement dated March 1, 1997, WSMP acquired 14 restaurants from a
group of franchisees controlled by Cecil R. Hash (the "Hash Companies"). These
restaurants, located in North Carolina(11), Virginia(2) and Tennessee(1) include
eight Western Steer - Steaks, Buffet & Bakery restaurants, five Western Steer
Family Restaurants, and one Prime Sirloin - Buffet, Bakery & Steaks restaurant.
These restaurants, as well as others acquired after February 28, 1997, are not
included in the foregoing.
The Company does not intend to build or acquire any additional wholly-owned
Western Steer, Prime Sirloin, or Bennett's restaurants during fiscal 1998.
However, should such opportunities arise, the Company will evaluate each
opportunity upon its own merits.
RESTAURANT OPERATIONS - OTHER RESTAURANTS. The Company owns two Mom 'n' Pop's
Buffet & Bakery restaurants, located in Georgia and in Florida. One other
restaurant in Morganton, North Carolina is operated in a different format. The
Company does not consider these restaurants, in total, significant to its
overall operation.
RESTAURANT OPERATIONS - FRANCHISED RESTAURANTS. WSMP operates three Western
Steer - Steaks, Buffet & Bakery restaurants in Kentucky for a franchisee, and
two Prime Sirloin - Buffet, Bakery & Steaks restaurants in South Carolina for
franchisees. The Company does not consider the operation of these restaurants,
in total, significant to its overall operation.
RESTAURANT OPERATIONS - SEASONALITY. The Company considers its restaurant
segment to be somewhat seasonal in nature, with stronger sales during the
Christmas season and during Spring, and weaker sales during the mid-summer and
late winter months.
RESTAURANT OPERATIONS - OPENINGS AND CLOSINGS. The following is a summary of
all Company-owned restaurants opened and closed during the previous three years:
Fiscal Fiscal Fiscal
1995 1996 1997(1)
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Western Steer restaurants
Opened 0 0 0
Closed 3 3 3
Total at year end 15 12 9
Prime Sirloin restaurants
Opened 1 1 0
Closed 0 1 0
Total at year end 5 5 5
Bennett's Bar-B-Que restaurants
Opened 0 0 0
Closed 0 0 0
Total at year end 1 1 1
Other restaurants
Opened 0 0 1
Closed 1 0 0
Total at year end 2 2 3
Total restaurants (at year end) 26 23 18
(1) Excludes the 17 restaurants acquired after February 28, 1997.
RESTAURANT OPERATIONS - RESTAURANT MEAL PRICES. The average meal price for
Company-owned Western Steer restaurants is $5.66 and the average meal price for
Company-owned Prime Sirloin restaurants is $6.29. Meal prices vary on
geographic location, degree of renovation, and whether the restaurant is
Company-owned or franchised.
RESTAURANT OPERATIONS - SUPPLIERS. The Company has established a purchase
program with Institutional Food House, Inc. ("IFH") of Hickory, North Carolina.
This program allows Company-owned restaurants and franchisees to obtain
substantially all staple items on a regular basis from one purchasing source and
promotes the consistency and high quality of goods delivered to its restaurants
and participating franchisees. Any purchase program is voluntary for
franchisees, and franchisees are free to buy their food from IFH or elsewhere as
long as it meets the Company's specifications. The Company does not feel that
the loss of the IFH agreement would have a material adverse effect on the
Company.
FOOD PROCESSING.
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FOOD PROCESSING - MOM 'N' POS'S COUNTRY HAM. The Company produces, through its
Smokehouse division, cured hams and ham products for the retail and
institutional markets. In the Company's modern curing facilities in Claremont,
North Carolina, the atmospheric conditions of traditional air curing of pork
hams are simulated, resulting in a curing process that fully cures raw hams in a
period of approximately 80 days. The Company cured over 8.3 million pounds of
ham during fiscal 1997 in its 55,000 square foot facility.
The Company produces whole cured hams, packaged cured ham slices, pre-
portioned ham for portion control customers, and various "side meat" products.
A portion of ham production is sold directly or through distributors to retail
supermarkets under the "Mom 'n' Pop's" brand name, primarily in North Carolina,
South Carolina, Virginia, Tennessee, Alabama and Georgia. The remainder of
production is sold to institutional food distributors. One supermarket customer
accounted for 23.5% of cured ham sales during fiscal 1997. The Company is
confident, based upon historical customer demand, that numerous other outlets
exist for these products.
Raw hams are available from numerous sources, although the Company relies
mainly upon two suppliers for most of its hams. Loss of one or both of these
suppliers would not have a material adverse effect upon the Company.
Sales for the Company's Smokehouse division are seasonal in nature, with
sales volume increases occurring around Thanksgiving, Christmas and Easter.
The Company mitigates the seasonality of its sales by continuing to buy hams in
non-peak periods and storing them until peak seasons.
FOOD PROCESSING - MOM 'N' POP'S BAKERY PRODUCTS. The Company produces through
its Mom 'n' Pop's Bakery division a variety of biscuits, yeast rolls and other
flour-based products. The Company's biscuits are processed both plain and as
sandwiches filled with items such as sausage, cheese, eggs and country ham.
These frozen products are directly marketed under the "Mom 'n' Pop's" brand name
to institutional buyers, vending companies, delicatessens and supermarkets and
are also packed for several of the Company's customers under private labels.
The Company's yeast rolls are used primarily in frozen microwavable sandwiches.
The Company packs microwavable hamburger, cheeseburger, chicken, barbecue and
other sandwiches using its own fresh baked yeast rolls for two customers under
custom manufacturing agreements. In addition, similar sandwiches are produced
under the "Mom 'n' Pop's" brand name and marketed directly to supermarkets,
vending companies and institutional buyers . The Company has also developed
several pre-mixed baking products for sale to institutional customers. These
pre-mixed products include items such as cookie dough, biscuit and roll dough,
dumplings and pizza crust, most of which are prepared simply with the addition
of water.
The ingredients used in this division's products and mixes are purchased
primarily from five vendors but alternative sources are available. Three
customers accounted for approximately 84.6% of sales during fiscal 1997. One of
these customers, Hudson Foods, Inc., accounted for approximately 75.4% of bakery
sales, and the Company has entered into a contractual arrangement to supply that
company's requirements for those products. The Company believes that a loss of
this customer would have an adverse short-term effect on the Company; however,
the long-term impact would be minimal due to the demand for the Company's food
products from other customers and potential customers.
Although the Company does not consider its Bakery division to be seasonal,
its somewhat slower sales periods typically occur in the mid-summer months.
FOOD PROCESSING - HOME MEAL REPLACEMENT. Early in fiscal 1998, the Company
announced the creation of the Home Meal Replacement Division marking the
Company's entry into this rapidly growing market. The Company has developed
extensive experience in the home meal replacement field over the last two years
as a result of other research and development efforts in the Bakery Division.
The Company is using specialized trays and barrier films in modified atmoshpere
packaging of home meal replacement items, and a test of these items was launched
with a major supermarket chain shortly before the beginning of fiscal 1998. The
Company is also negotiating with other national food companies and retailers
regarding these products.
Although this division is just getting started, it is felt that the home
meal replacement category offers much potential in light of current consumer
tastes and preferences.
FOOD PROCESSING - REVENUES. Revenues for the two divisions that make up the
Food Processing segment of the Company's business, for the past three fiscal
years, are as follows:
Fiscal Year Ended Bakery Division Ham Curing Division
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1997 $ 48,200,000 $ 10,400,000
1996 $ 38,600,000 $ 12,300,000
1995 $ 49,600,000 $ 12,800,000
EMPLOYEES.
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The Company employed 1,348 persons (1,127 full time and 221 part time) in its
operations at February 28, 1997. These included 63 administrative and
accounting personnel, 565 Bakery and Smokehouse employees, and 720 restaurant
workers. The Company offers its employees various benefits, including major
medical health insurance coverage, and participation in its cafeteria plan, its
profit-sharing retirement plan and its employee stock purchase plan.
None of the Company's employees are represented by a union. The Company has
experienced no work stoppage attributed to labor disputes and considers its
employee relations to be good.
WORKING CAPITAL.
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The Company's working capital needs in its restaurant segment do not vary
appreciably on a seasonal basis or from year to year. All Company-owned and
most franchised restaurants participate in the Company's IFH purchase program
and do not carry substantial food inventories. The Company does not provide
customers or franchisees with the right to return products, other than major
grocery store chains which it may supply, except where required under contract
law. Also, the Company does not give extended payment terms to its customers or
franchisees. The Company's food production segment working capital needs vary
with the seasonality of its revenues.
The Company does provide standard Food and Drug Administration warranties to
its retailers and distributors of ham or bakery products, concerning the
unadulterated nature of its products and their introduction into interstate
commerce.
MARKETING AND ADVERTISING.
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The Company relies upon advertising to help promote its Western Steer, Prime
Sirloin, and Bennett's restaurants. Local advertising has been the
responsibility of individual restaurant operators. The Company and its Western
Steer, Prime Sirloin and Bennett's franchisees have advertised their restaurants
primarily in newspapers and billboards and with point-of-sale materials.
Most Western Steer franchisees, through franchise agreements or supplementary
agreements, are obligated to pay the Company an advertising fee of two percent
of the gross sales of each franchised restaurant. This fee is intended to
provide funds for future national, regional and local advertising of Western
Steer restaurants.
The Company actively markets its ham and bakery products to large grocery
distributors, institutional food brokers and in some cases, directly to grocery
chains. The Company utilizes a combination of direct employees and food brokers
to market these products. The Company's Chief Executive Officer and Chief
Operating Officer are also actively involved with marketing to the largest food
manufacturing customers.
In 1990, the Company entered into an Endorsement Agreement with Dale
Earnhardt, Inc. and affiliated corporations by which the Company became an
endorsement sponsor of the Dale Earnhardt automobile racing team on the NASCAR
Winston Cup Series and the NASCAR Busch Grand National Series. This agreement
has now expired, and the Company has no immediate plans to develop similar
advertising.
COMPETITION.
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The restaurant and food manufacturing businesses are highly competitive and
are often affected by changes in tastes and eating habits of the public, and
economic conditions affecting spending habits, population and traffic patterns.
Company-operated restaurants and Western Steer and Prime Sirloin restaurants
operated by franchisees generally compete with national and regional family-
oriented restaurant chains, local establishments and fast food restaurants. The
Company believes that family-oriented steakhouses compete primarily on the basis
of consistency and quality of product, price and location of restaurants. In
marketing franchises, the Company competes with numerous other family steakhouse
and restaurant franchisers, many of which have substantially greater financial
resources and higher sales volume than the Company.
In its production of retail and institutional ham products, the Company faces
strong price competition from a variety of large meat processing concerns and
smaller local and regional operations. The Company does not believe that any
one company is dominant in the sale of ham products. The principal methods of
competition in the sale of ham products are price, quality and name recognition.
In sales of biscuit and yeast roll products, the Company competes with a number
of large bakeries in various parts of the country, as well national frozen meal
manufacturers, with competition strongest for sales to institutional food
vendors. The principal methods of competition for the sale of bakery products
are price and quality.
TRADEMARKS.
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The Company has registered the Western Steer logotype and the names "Western
Steer", "Western Steer Family Restaurant", "Western Steer - Steaks, Buffet &
Bakery", "Prime Sirloin - Buffet, Bakery & Steaks", the "Prime Sirloin" logotype
and the "Mom 'n' Pop's' logotype, and variations thereof, as well as several
distinct Western Steer menu items, as trademarks and service marks with the
United States Patent and Trademark Office. The Company actively uses these
trademarks to identify its restaurants and products and believes they are
important to its business. Generally, trademarks remain valid as long as they
are used properly for identification purposes.
REGULATION.
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The Company is subject to Federal Trade Commission regulations relating to
disclosure requirements in the sale of franchises. Many states also have laws
regulating franchise operations, including registration and disclosure
requirements in the offer and sale of franchises and the application of
statutory standards regulating franchise relationships. The Company believes it
is operating in substantial compliance with applicable laws and regulations
governing its operations.
The conduct of the Company's businesses is subject to various other federal
and state laws, including the Food, Drug and Cosmetic Act and the Occupational
Safety and Health Act. The Company is also subject to the Fair Labor Standards
Act, which governs such matters as minimum wages, overtime and other working
conditions. A significant portion of the Company's food service personnel are
paid at rates related to the Federal minimum wage, and, accordingly, future
increases in the minimum wage will increase the Company's labor cost.
The Company believes itself to be in material compliance with federal, state
and local provisions regulating the discharge of materials into the environment
or otherwise relating to the protection of the environment, and feels that such
compliance should not have a material effect on the Company's capital
expenditures, earnings and competitive position.
EXECUTIVE OFFICERS OF THE REGISTRANT.
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Officers are elected annually by the Company's Board of Directors and serve
indefinitely at the pleasure of the Board. The following table sets forth
certain information with respect to the executive officers of the Company at May
7, 1997:
Executive
Officer
Name Position Age Since
Richard F. Howard Chairman of the Board and Secretary 47 1988
James C. Richardson, Jr. Vice Chairman of the Board 48 1988
and Chief Executive Officer
David R. Clark President and Chief Operating Officer 40 1996
James M. Templeton Senior Vice President, Real Estate 60 1988
and Assistant Secretary
Ken L. Moser Senior Vice President, Restaurants 53 1984
and Franchising
Larry D. Hefner Senior Vice President, Sales 46 1991
Matthew V. Hollifield Vice President of Finance 30 1995
and Treasurer
James T. Hood Vice President, Restaurant Operations 41 1996
Bill H. Brown Vice President of Product Development 60 1997
Ken D. Breiner Vice President of Food Service 49 1997
James W. Berry Controller and Assistant Treasurer 54 1981
Prior to joining WSMP in 1996, Mr. Clark served as Executive Vice President
and Chief Operating Officer of Bank of Granite, located in Granite Falls, North
Carolina, from 1994-1996. Mr. Clark served as an executive officer of BB&T, a
bank and trust company with headquarters in Wilson, North Carolina, prior to
joining Bank of Granite. During his 13 years with BB&T, he served in various
capacities, including President of BB&T of South Carolina, and President of the
Northwest Region of North Carolina.
Mr. Hollifield was an audit manager with the accounting firm of Deloitte &
Touche LLP prior to assuming the position of Vice President of Accounting, Chief
Accounting Officer and Assistant Secretary of the Company in 1995, and had been
employed by Deloitte & Touche since 1988. In February, 1997, he was named Vice
President of Finance and Treasurer of the Company.
Mr. Hood has been an employee of WSMP since 1984. He served as Director of
Western Steer Operations from 1991-1996, and was named Vice President in 1996.
Prior to joining WSMP in 1996, Mr. Brown served as Director of Research and
Development for Shoney's Inc. from 1994-1996. For twenty-two years prior to
that, he was Director of Culinary Development for Morrison's Restaurants, Inc.
Prior to joining the Company in 1996, Mr. Breiner was President of Foods
Spectrum, Inc., an Atlanta based concept development company, from 1994 to 1996.
In addition, from 1989 to 1994, he served as Director of Purchasing and Research
and Development for RTM Restaurant Group, Arby's largest franchisee and owner of
Mrs. Winner's Chicken and Biscuits.
All other officers have been employed by the Company in their respective
positions or similar positions for more than five years.
ITEM 2. PROPERTIES.
The Company owns its principal office, warehouse, ham-curing and bakery
facilities, which are located on a 62 acre tract in Claremont, North Carolina.
The executive offices of the Company are located in a 23,000 square foot
building. The principal ham curing plant is contained in a modern 55,000 square
foot building. The Company's bakery operations occupies buildings totaling
137,460 square feet, including 18,941 square feet of freezer and cooler space.
The Company also owns various parcels of undeveloped property in North
Carolina for future development or sale. In addition, the Company owns nine
properties which were previously operated as restaurants, four of which are
vacant, and five of which are leased to others, in North Carolina (2), South
Carolina (1), Florida (3), Georgia (1), Maryland (1) and Tennessee (1).
Of the 18 restaurants owned by the Company and its wholly owned subsidiaries
as of February 28, 1997, 12 are located on property owned by the Company or its
subsidiaries in North Carolina (9), Florida (2) and Georgia (1). The six other
restaurants operated by the Company or its subsidiaries are held under long-term
leases, in North Carolina (4) South Carolina (1) and Tennessee (1). In
addition, the 14 units acquired on March 1, 1997 from the Hash Companies, as
well as the three additional units acquired since February 28, 1997, are all
held under long-term leases.
Substantially all of the Company's restaurant properties, as well as the
Company's corporate headquarters, ham curing facility and bakery facility are
pledged as collateral under long-term debt obligations. Information as to the
Company's long-term debt is contained on page 16 of the Company's Annual Report
to Shareholders for the fiscal year ended February 28, 1997, under the caption
"Long-Term Debt" and is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS.
WSMP, Inc. and its subsidiaries are involved in various claims and legal
proceedings in the ordinary course of their business, the resolution of which
management believes will not have a material effect on the Company's business or
financial condition. The Company intends to prosecute or defend vigorously, as
the case may be, all such matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS.
Information on the market for the Company's common stock, the range of market
prices for and the dividends declared on common stock for each of the last two
fiscal years, and the number of record holders of common stock are contained
under the caption "Market Information" on the inside back cover of the Company's
Annual Report to Shareholders for the fiscal year ended February 28, 1997, and
is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data for each of the five fiscal years in the period ended
February 28, 1997, is contained under the caption "Selected Financial Data" on
page 28 of the Company's Annual Report to Shareholders for the fiscal year ended
February 28, 1997, and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The Company's discussion and analysis of financial condition and the results
of operations appears under the caption "Management's Discussion," on pages 4
through 7 of the Company's Annual Report to Shareholders for the fiscal year
ended February 28, 1997, and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
An index to the financial statements and supplementary data contained in the
Company's Annual Report to Shareholders for the fiscal year ended February 28,
1997, which is incorporated herein by reference is contained on page F-1 of this
Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The name, age and background information for each of the Company's
directors is contained under the caption "Election of Directors" in the
Company's Proxy Statement for its 1997 Annual Meeting of Shareholders and is
incorporated herein by reference.
The name, age and background information for each of the Company's
executive officers is contained under the caption "Executive Officers of the
Registrant" in Item 1 of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
Information on remuneration of the Company's officers and directors is
contained in the Company's Proxy Statement for its 1997 Annual Meeting of
Shareholders under the caption "Election of Directors" and is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information on security ownership of certain beneficial owners and
management is contained in the Company's Proxy Statement for its 1997 Annual
Meeting of Shareholders under the caption "Principal Shareholders and Management
Ownership" and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information on certain relationships and related transactions involving
the Company and its management or affiliates is contained in the Company's Proxy
Statement for its 1997 Annual Meeting of Shareholders under the caption
"Certain Transactions," and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
(a) 1. FINANCIAL STATEMENTS
See Index to Financial Information
2. FINANCIAL STATEMENT SCHEDULES
See Index to Financial Information
3. EXHIBITS
See Index to Exhibits
(b) REPORTS ON FORM 8-K.
A Current Report on Form 8-K was filed during the quarter ended February
28, 1997. This report, dated January 29, 1997, announced the refinancing
of the Company's Senior Note obligations, as well as the replacement of
its short-term line of credit with another financial institution.
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, WSMP, Inc. has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated May 23, 1997
WSMP, INC.
By: David R. Clark
----------------------------
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of WSMP, Inc., and in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
----------- -------------- ---------------
Richard F. Howard
- -------------------------- Chairman of the Board, May 23,1997
(Richard F. Howard) Secretary
James C. Richardson, Jr.
- -------------------------- Vice Chairman of the Board May 23,1997
(James C. Richardson, Jr.) (Principal Executive Officer)
David R. Clark
- -------------------------- President and Director May 23, 1997
(David R. Clark) (Principal Operating Officer)
Matthew V. Hollifield
- -------------------------- Vice President of Finance May 23, 1997
(Matthew V. Hollifield) and Treasurer (Principal
Accounting Officer,
Principal Financial Officer)
James M. Templeton
- -------------------------- Vice President, Real Estate, May 23, 1997
(James M. Templeton) and Director
Bobby G. Holman
- -------------------------- Director May 23, 1997
(Bobby G. Holman)
Lewis C. Lanier
- -------------------------- Director May 23, 1997
(Lewis C. Lanier)
William R. McDonald III
- -------------------------- Director May 23, 1997
(William R. McDonald III)
Richard F. Hendrickson
- -------------------------- Director May 23, 1997
(Richard F. Hendrickson)
E. Edwin Bradford
- -------------------------- Director May 23, 1997
(E. Edwin Bradford)
===============================================================================
WSMP, INC.
AND SUBSIDIARIES
__________________________________
FINANCIAL INFORMATION FOR INCLUSION
IN ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED FEBRUARY 28, 1997
===============================================================================
WSMP, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL INFORMATION
ITEM 14 (A) (1) - (2)
REFERENCE
ANNUAL REPORT
TO SHAREHOLDERS
DATA INCORPORATED BY REFERENCE FROM
ATTACHED ANNUAL REPORT TO SHAREHOLDERS
FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1997
Consolidated statements of operations for
the fiscal years ended February 28,
1997, February 23, 1996, and
February 24, 1995 8-9
Consolidated balance sheets at February
28, 1997 and February 23, 1996 10
Consolidated statements of shareholders'
equity for the fiscal years ended February
28, 1997, February 23, 1996, and February
24, 1995 11
Consolidated statements of cash flows
for the fiscal years ended February 28,
1997, February 23, 1996, and February
24, 1995 12
Notes to consolidated financial
statements 13-25
Independent auditors' report 26
All financial statement schedules have been omitted because of the absence
of conditions under which they are required.
The consolidated financial statements listed in the above index which are
included in the Annual Report to Shareholders for the fiscal year ended February
28, 1997, are hereby incorporated by reference. With the exception of the pages
listed in the above index and the items incorporated by reference in Items 1, 2,
5, 6 and 7 in this Report, the Annual Report to Shareholders for the fiscal year
ended February 28, 1997, is not to be deemed filed as part of this Report.
WSMP, INC.
AND SUBSIDIARIES
____________________________________
EXHIBITS
FOR INCLUSION IN ANNUAL REPORT
ON FORM 10-K
FISCAL YEAR ENDED FEBRUARY 28, 1997
EXHIBITS
FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K
YEAR ENDED FEBRUARY 28, 1997 INDEX TO EXHIBITS
ITEM 14 (a) (3)
Sequential
Exhibit Page Number
3(a) Restated Charter of the Registrant, dated October 19, 1988, *
which is incorporated herein by reference to Exhibit 3(a) to
the Registrant's Annual Report on Form 10-K for the year
ended February 24, 1989.
3(b) Statement of Change of Registered Office and Registered Agent *
dated January 6, 1995 and filed with the Secretary of State of
the State of North Carolina on February 14, 1995.
3(c) By-Laws of the Registrant as amended to September 1990, *
which are incorporated herein by reference to Exhibit
3(b) to the Registrant's Annual Report on Form 10-K
for the year ended February 22, 1991.
4(a) Loan Agreement dated as of January 10, 1997, between WSMP, Inc. *
and SouthTrust Bank of North Carolina, pertaining to a term
loan not to exceed $5,000,000 in aggregate principal, which is
incorporated by reference to Exhibit 99(a) to the Registrant's
Form S-3 Registration Statement (Registration No. 333-22891)
filed on March 6, 1997.
4(b) Amendment to Loan Agreement dated as of January 17, 1997, *
between WSMP, Inc. and SouthTrust Bank of North Carolina, which
is incorporated by reference to Exhibit 99(b) to the
Registrant's Form S-3 Registration Statement (Registration
No. 33-22891) filed on March 6, 1997.
4(c) Financing and Security Agreement dated November 22, 1996, *
between WSMP, Inc. and National Bank of Canada, pertaining to
a revolving credit not to exceed $6,000,000 in aggregate
principal amount, which is incorporated by reference to Exhibit
99(c) to the Registrant's Form S-3 Registration Statement
(Registration No. 333-22891) filed on March 6,1997.
10(a) Management Services Agreement dated March 31, 1996, between *
the Registrant and HERTH Management, Inc., which is incorporated
by reference to Exhibit 10(a) to the Registrant's Annual
Report on Form 10-K for the year ended February 23, 1996.
10(b) Registrant's Special Stock Option Plan, dated January 26, *
1988, which is incorporated herein by reference to Exhibit
10(g) to the Registrant's Annual Report on Form 10-K for
the year ended February 26, 1988. Amendment to Special
Stock Option Plan, dated March 9, 1989, which is incorporated
herein by reference to Exhibit 10 (e)(2) to the Registrant's
Annual Report on Form 10-K for the year ended February 24,
1989.
10(c) Agreement of Purchase and Sale dated as of March 1, 1997, *
among WSMP, Inc., F & H Companies, Inc., Western Steer of North
Carolina, Inc., Northwest Food Systems, Inc., Davidson Food
Systems, Inc., Mocksville Food Systems, Inc. and CFR Foods,
Inc., which is incorporated by reference to Exhibit 4 to the
Registrant's Form S-3 Registration Statement(Registration
No. 333-22891) filed on March 6, 1997.
10(d) Non-Competition Agreement dated March 1, 1997, between Cecil *
R. Hash and WSMP, Inc., which is incorporated by reference to
Exhibit 99(f) to the Registrant's Form S-3 Registration
Statement (Registration No. 333-22891) filed on March 6, 1997.
11 Computation of per share earnings. Included
13 WSMP, Inc.'s Annual Report to Shareholders for the year ended Included
February 28, 1997.
21 Subsidiaries of WSMP, Inc. Included
23 Consent of Independent Auditors Included
- ----------------------
* Incorporated by reference.
The Registrant hereby agrees to provide to the Commission upon request
copies of long-term debt instruments omitted pursuant to Item 601 (b) (4)
(iii) (A) of Regulation S-K.