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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number: 33-15962
WHITEFORD PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 76-0222842
(State or other jurisdiction of (I.R.S. Identification No.)
incorporation or organization)
770 North Center Street, Versailles, Ohio 45380
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(Address of principal executive offices) (Zip Code)
1-800-225-6328
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
- ------------------- -------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
1,306,890 Units Outstanding
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of 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.
Yes [X] No [ ]
At March 29, 2000, 1,306,890 Class A units had been subscribed for and
issued.
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INDEX
Item
No. Description
Page
PART I
1. Business 3
2. Properties 4
3. Legal Proceedings 5
4. Submission of Matters to a Vote of Security Holders 5
PART II
5. Market for Registrant's Common Equity and
Related Stockholder Matters 5
6. Selected Financial Data 6
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
7A. Market Risk 8
8. Financial Statements and Supplementary Data 9
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 9
PART III
10. Directors and Executive Officers of the Registrant 9
11. Executive Compensation 9
12. Security Ownership of Certain Beneficial Owners and Management 10
13. Certain Relationships and Related Transactions 10
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 10
PART I
ITEM 1. BUSINESS
A. GENERAL DEVELOPMENT OF BUSINESS
Whiteford Partners, L.P. (the "Partnership") was formed on June 30, 1987,
as a Delaware limited partnership. The Partnership consists of a General
Partner, Gannon Group, Inc., and Limited Partners. The offering period of the
Partnership terminated on November 10, 1989, with $13,557,550 of Limited Partner
gross subscriptions received in the form of Class A Units. Pursuant to the terms
of the Prospectus, offering proceeds in the amount of $140,365 were returned to
certain Ohio residents when the Partnership's business acquisition program was
not substantially completed by December, 1989. The Partnership was organized
principally to form, acquire, own and operate businesses engaged in the
development, production, processing, marketing, distribution and sale of food
and related products (the "Food Businesses").
In the first quarter of 1990, the Partnership entered into a limited
partnership, Whiteford Foods Venture, L.P. ("Whiteford's") which was formerly
named Granada/Whiteford Foods Venture, L.P., with a wholly-owned subsidiary of
the former General Partner, G/W Foods, Inc., for the purpose of acquiring the
assets, certain liabilities and the operations of Whiteford's Inc., a further
processor and distributor of beef products to major fast food restaurants and
regional chains, which was located in Versailles, Ohio. The acquisition, which
was made with Partnership funds, was closed March 26, 1990, with the
Partnership's resultant equity interest in Whiteford's being in excess of 99%.
On April 23, 1990, all outstanding and contingent items were resolved and
completed, and the acquisition of the assets was funded on April 24, 1990.
On May 4, 1992, the outstanding shares of G/W Foods, Inc. were assigned by
the former General Partner to Gannon Group, Inc., a corporation owned by Kevin
T. Gannon, a Director and Vice President of G/W Foods, Inc. At that time, Mr.
Gannon was also a former Vice President of Granada Corporation and certain of
its affiliates. Also on May 4, 1992, Granada Management Corporation assigned its
sole general partnership interest in the Partnership to Gannon Group, Inc. The
effect of these assignments is for Gannon Group, Inc. to have general
partnership authority and responsibility with respect to the Partnership and,
through G/W Foods, Inc., of Whiteford's.
Subject to the availability of capital resources and/or financing, the
Partnership Agreement permits the acquisition of additional Food Businesses that
produce, process or distribute specialty food products including businesses that
possess technology or special processes which could increase the productivity or
processing capability of the Partnership's current Food Business or which
enhance the marketability or resale value of the Partnership's Food Business
products. At the present time, no acquisitions are contemplated.
B. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Partnership operates principally in the food processing and
distribution business.
C. DESCRIPTION OF BUSINESS
The Partnership was organized to form, acquire, own and operate
businesses engaged in the development, production, processing, marketing,
distribution and sale of food and related products. The Partnership presently
operates further processing and meat production operations at one
location--Versailles, Ohio.
Versailles, Ohio Plant Operation
Whiteford's is a further processor and distributor of meat products to
major fast food restaurants and regional chains. It serves major metropolitan
areas such as Chicago, Cincinnati, Cleveland, Columbus, Detroit, Indianapolis,
Louisville and St. Louis. Whiteford's principal products are fresh frozen
hamburger patties; precooked and uncooked ground beef, taco meat and roast beef;
marinated beef entrees; and other items processed to customers' specifications.
Major food chains served include Burger King and Rally's.
Whiteford's purchases products principally from major domestic packers and
regional distributors. However, it also utilizes imported beef. The General
Partner believes its sources of supply are adequate for the foreseeable future.
For the years ended December 31, 1999, 1998 and 1997, Whiteford's
processed and sold 55.9 million pounds of products ($51.5 million), 70.0 million
pounds of products ($62.4 million), and 66.7 million pounds of products ($62.2
million) respectfully, through its further processing and distribution
operations.
3
Marketing and Sales
Whiteford's customers consist primarily of major national and regional
fast food retail chains in addition to HRI (Hotel, Restaurant, Institutional)
customers and food products distributors. Sales operations are conducted locally
by sales representatives from the Versailles location and through unaffiliated
food products distributors and food brokers.
The following customers contributed more than 10% of Whiteford's revenues
for the fiscal year ended December 31, 1999: Gordon Food Service, 26.7%; Maines
Paper and Food Service, 25.3%; and Prosource 11.2%.
Historically, a significant portion of Whiteford's business has been
lodged with relatively few major national and regional accounts. Whiteford's
believes that its relationships with its current significant customers are
satisfactory. In the past, Whiteford's has been able to obtain additional orders
for products from existing accounts or obtain orders for products from new
accounts when a significant account diminishes or terminates its purchases with
Whiteford's.
All of Whiteford's sales are to customers in the United States and Canada.
Regulatory Matters
All of Whiteford's meat production operations are subject to ongoing
inspection and regulation by the United States Department of Agriculture
("USDA"). Whiteford's plant and facilities are subject to periodic or continuous
inspection, without advance notice, by USDA employees to ensure compliance with
USDA standards of sanitation, product composition, packaging and labeling. All
producers of meat and other food products must comply with substantially similar
standards. Compliance with these standards is not expected to have a significant
effect on Whiteford's competitive position.
Whiteford's is subject to federal, state and local laws and regulations
governing environmental protection, compliance with which has required capital
and operating expenditures. The General Partner believes Whiteford's is in
substantial compliance with such laws and regulations and does not anticipate
making additional capital expenditures for such compliance in 2000. The General
Partner is not aware of any violations of, or pending changes in such laws and
regulations that are likely to result in material penalties or material
increases in compliance costs. Changes in the requirements or mode of
enforcement of certain of these laws and regulations, however, could impose
additional costs upon Whiteford Foods, which could materially and adversely
affect its cost of doing business.
Whiteford Foods is subject to various other federal, state and local
regulations, none of which imposes material restrictions on its operations.
Employees
The Partnership's operations have been managed by its general partner,
Gannon Group, Inc. since May 4, 1992, and Granada Management Corporation from
inception to May 4, 1992. Directly, the Partnership has no employees. The
Partnership has utilized the services of employees of the General Partner and
the former General Partner as needed for certain administrative services.
The Whiteford's operation at Versailles, Ohio employed 171 personnel at
December 31, 1999. The General Partner believes there will be sufficient
personnel available to adequately manage the Partnership's business affairs.
ITEM 2. PROPERTIES
Properties Utilized by the Partnership
The Partnership's executive offices are those of the General Partner,
located at 770 North Center Street, Versailles, Ohio 45380.
The following table sets forth Whiteford's operational facilities and
approximate capacities as of December 31, 1999.
Estimated Annual
Tons of Production
------------------
General 1999
Location Character Size Capacity Actual
-------- --------- -------------------------------------------------------- -------- ------
Versailles, Ohio Meat Two separate facilities (1) 71,400 and(1) 33,000 square 40,000 35,000
Processing feet on 20 acres of land, (8) hamburger/specialty line,
Plant (2) grinding lines, (1) precooked line, (3) smoke houses,
freezers, coolers, dry storage and office space.
All Whiteford's facilities are subject to a mortgage with two banks.
4
ITEM 3. LEGAL PROCEEDINGS
There are no material pending or threatened legal proceedings involving
the Partnership, known to either the Partnership or the General Partner.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Limited Partners of the
Partnership during 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for the Partnership's
Limited Partnership Units.
The following table sets forth the amounts and dates of distributions to
holders of Limited Partnership Units in 1998 and 1999.
Amount Per Limited
Date Aggregate Amount Partnership Unit
---- ---------------- -----------------
February 25, 1998 65,344.50 0.05
May 29, 1998 65,344.50 0.05
August 25, 1998 65,344.50 0.05
November 27, 1998 65,344.50 0.05
March 2, 1999 65,344.50 0.05
May 31, 1999 65,344.50 0.05
Certain of the Partnership's loans with its lender contain restrictive
covenants. One of the covenants restricts the Partnership from declaring or
paying any distributions to its partners without the prior consent of the bank,
except for amounts already classified as reinvested distributions in the balance
sheet.
The following table sets forth the approximate number of holders of record
of the equity securities of the Partnership as of December 31, 1999:
Title of Class Number of Record Holders
-------------- ------------------------
Limited Partnership Units 1,410
5
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction
with the consolidated financial statements, the notes thereto and other
financial information included elsewhere herein, including "Management's
Discussion and Analysis of Results of Operations and Financial Condition." The
table following reflects the results of operations of acquired businesses for
periods subsequent to their respective acquisition dates.
Year Ended December 31
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1999 1998 1997 1996 1995
---- ---- ---- ---- ----
STATEMENT OF OPERATIONS DATA:
Revenues:
Sale of meat products ....... $ 51,549,748 $ 62,431,746 $ 62,224,110 $ 59,026,632 $ 57,667,240
Interest and other .......... 166,680 338,696 256,416 339,931 159,531
------------ ------------ ------------ ------------ ------------
Total revenues .......... 51,716,428 62,770,442 62,480,526 59,366,563 57,826,771
------------ ------------ ------------ ------------ ------------
Cost of sales ................... 48,705,602 57,551,373 57,846,006 54,188,228 53,757,014
------------ ------------ ------------ ------------ ------------
Gross Profit
Meat products ............... 2,844,146 4,880,373 4,378,104 4,838,404 3,910,226
Other ....................... 166,680 338,696 256,416 339,931 159,531
------------ ------------ ------------ ------------ ------------
Total gross profit ...... 3,010,826 5,219,069 4,634,520 5,178,335 4,069,757
------------ ------------ ------------ ------------ ------------
Selling and admin expenses ...... 2,266,593 2,575,320 2,447,303 2,211,351 2,197,506
Depreciation, amortization
and interest ................ 1,915,768 1,907,188 1,932,836 1,986,149 1,851,707
Other expense ................... -- -- -- 163,157 --
------------ ------------ ------------ ------------ ------------
4,182,361 4,482,508 4,380,139 4,360,657 4,049,213
------------ ------------ ------------ ------------ ------------
Net (Loss) Income ........... $ (1,171,535) $ 736,561 $ 254,381 $ 817,678 $ 20,544
============ ============ ============ ============ ============
(Loss) Income per unit of
Limited Partners' Capital ... $ (0.90) $ 0.56 $ 0.19 $ 0.63 $ 0.02
============ ============ ============ ============ ============
Weighted average units
outstanding ..................... 1,306,890 1,306,890 1,306,890 1,306,890 1,306,890
============ ============ ============ ============ ============
BALANCE SHEET DATA (December 31):
Working capital (deficit) ... $ (1,376,913) $ (55,756) $ (397,866) $ 156,933 $ (525,037)
Total assets ................ $ 19,620,720 $ 20,986,810 $ 21,798,022 $ 21,566,960 $ 22,280,444
Long-term debt, less current
maturities .............. $ 3,522,231 $ 4,001,939 $ 4,732,167 $ 5,704,645 $ 6,754,525
Total partners' capital ..... $ 8,901,586 $ 10,205,117 $ 9,732,547 $ 9,610,163 $ 8,792,485
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's discussion and analysis set forth below should be read in
conjunction with the Consolidated Financial Statements and the notes thereto
included elsewhere herein.
Information Regarding and Factors Affecting Forward-Looking Statements:
The partnership is including the following cautionary statement in this
Annual Report on form 10-K to make applicable and take advantage of the safe
harbor provision of the Private Securities Litigation Reform Act of 1995 for any
forward looking statements made by, or on behalf of the Partnership.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance and underlying assumptions and
other statements that are other than statements of historical facts. Certain
statements contained herein are forward-looking statements and, accordingly,
involve risk and uncertainties, which could cause actual results to differ
materially from those expressed in the forward-looking statements. The
Partnership's expectations, beliefs and projection are expressed in good faith
and are believed by the Partnership to have reasonable basis, including without
limitation, Management's examination of historical operating trends, data
contained in the Partnership's records, and other data available from third
parties, but there can be no assurance that Management's expectations, beliefs,
or projections would result or be achieved or accomplished. In addition to other
factors and matters discussed elsewhere herein, important factors that, in the
view of the Partnership, could cause actual results to differ materially from
those discussed in the forward-looking statements include
6
demand for Whiteford Foods' products, the ability of Whiteford Foods to obtain
widespread market acceptance of its products, the ability of the Partnership to
obtain acceptable forms and amounts of financing, competitive factors,
regulatory approvals and developments, economic conditions, the impact of
competition and pricing, and other factors affecting the partnership and
Whiteford Foods' business that is beyond the Partnership's control. The
Partnership has no obligation to update or revise these forward-looking
statements to reflect the occurrence of future events or circumstances.
The Partnership was organized as a Limited Partnership with a maximum
operating life of twenty years ending 2007. The source of its capital has been
from the sale of Class A, $10 Limited Partnership units in a public offering
that terminated on November 10, 1989.
Results of Operations
Year Ended December 31, 1999, Compared to Year Ended December 31, 1998
Revenues for the year ended December 31, 1999 were $51,716,428 versus
$62,770,442 for the year ended December 31, 1998, a decrease of $11,054,014.
During the 1999 period, 55,948,467 pounds of meat products were sold versus
70,008,202 pounds during the 1998 period, a decrease of 14,059,735 pounds. The
decrease in pounds of meat products sold is primarily attributable to the
decrease in sales order from certain customers.
Costs of meat products sold for the year ended December 31, 1999 were
$48,705,602 versus $57,551,373 for the year ended December 31, 1998, a decrease
of $8,845,771. During the 1999 period, 55,948,467 pounds of meat products were
sold versus 70,008,202 pounds during the 1998 period. The average cost of meat
products sold for 1999 was $.871 versus $.822 in the 1998 period, an increase of
6.0%. The increase in the cost per pound is primarily attributable to general
composition of the product. The General Partner expects general commodity prices
to increase slightly during 2000.
Gross margins on meat sales were 5.5% for the year ended December 31, 1999
and 7.8% for the 1998 period. This decrease in gross margins is primarily
attributable to: i) increase in raw material costs; and ii) the semi-variable
nature of certain costs in the costs of meat products sold such as labor,
packaging, and utilities.
Selling and administrative expenses decreased to $2,266,593 during the year
ended December 31, 1999 versus $2,575,320 for the same period in 1998. The
decrease is primarily attributable to reduction in volume.
Depreciation and amortization expense for the year ended December 31, 1999
was $1,263,659 versus $1,227,791 for the same period in 1998, an increase of
2.9%.
Interest expense for the year ended December 31, 1999 was $652,109 versus
interest expense of $679,397 for the same period in 1998. This decrease of
$27,288 primarily relates to the decrease in the average debt outstanding during
1999.
The Partnership reported net loss of $1,171,535 for the year ended December
31, 1999 versus a net income of $736,561 for the 1998 period.
Year Ended December 31, 1998, Compared to Year Ended December 31, 1997
Revenues for the year ended December 31, 1998 were $62,770,442 versus
$62,480,526 for the year ended December 31, 1997, an increase of $289,916.
During the 1998 period, 70,008,202 pounds of products were sold versus
66,752,355 pounds during the 1997 period, an increase of 3,255,847 pounds. This
increase in pounds of meat products sold is primarily attributable to the
increased sales effort and the production capabilities at the Versailles plant.
Cost of meat products sold for the year ended December 31, 1998 were
$57,551,373 versus $57,846,006 for the year ended December 31, 1997, a decrease
of $294,633.
Gross margins on meat sales were 7.8% for the year ended December 31, 1998
and 7.0% for the 1997 period. This increase in gross margins is primarily
attributable to: i) decrease in raw material cost and decrease in sales price;
and ii) the semi-variable nature of certain costs of meat products sold such as
labor, packaging and utilities.
Selling and administrative expenses increased to $2,575,320 during the year
ended December 31, 1998 verses $2,447,303 for the same period in 1997. This is
primarily attributable to normal expense increases and volume.
Depreciation and amortization expense for the year ended December 31,1998
was $1,227,791 versus $1,204,975 for the same period in 1997, an increase of
1.9%.
Interest expense for the year ended December 31, 1998 was $679,397 versus
interest expense of $727,861 for the same period in 1997. The decrease of
$48,464 primarily relates to the decrease in the average debt outstanding during
1998.
The Partnership reported a net income of $736,561 for the year ended
December 31, 1998 versus $254,381 for 1997 period.
7
Liquidity and Capital Resources
At December 31, 1999, the Partnership had a negative working capital
position of $1,376,913, versus a negative working capital of $55,756 at December
31, 1998.
Cash provided by operating activities was $532,143 for the year ended
December 31, 1999 reflecting net loss of $1,171,535, depreciation and
amortization of $1,263,659, offset by net decreases in other assets of $440,019.
Cash provided by operating activities for the year ended December 31, 1998 was
$1,764,155, with a net income of $736,561, depreciation and amortization of
$1,227,791,and a decrease in other net operating assets of $200,197.
Cash used in investing activities was $797,578 for 1999 versus $627,382 for
1998. Cash provided by financing activities for 1999 consisted of net increases
in bank debt of $262,504 and distributions.
The Limited Partnership Agreement provides for the General Partner to
receive an annual administrative fee. The fee is equal to 2% (adjusted for
changes in the Consumer Price Index after 1989) of net business investment
(defined as $8.50 multiplied by Partnership units outstanding). However, such
amounts payable to the General Partner are limited to 10% of aggregate
distributions to all Partners from "Cash Available for Distributions." As
defined in the Limited Partnership Agreement, that portion of the management fee
in excess of such 10% limitation is suspended, and future payment is contingent.
The Administrative Management Fees paid to the General Partner and recorded
by the Partnership were $13,069 in 1999, $26,138 in 1998, $13,069 in 1997,$-0-
in 1996, $10,455 in 1995, $13,069 in 1994, $2,614 in 1993, and $-0- in 1992.
Suspended fees during 1999, 1998, 1997, 1996, 1995, 1994, 1993 and 1992
respectively, are $287,000, $274,000, $287,000, $300,000, $290,000, $222,000,
$229,000, and $228,000.
Whiteford's working capital and equipment requirements are primarily met by
(a) a revolving credit agreement with Whiteford's principal lender based on a
percentage of eligible accounts receivables and inventories plus an overadvance
amount of $900,000 through April 30, 2000, reduced to $800,000 through May 31,
2000 and reduced to $700,000 thereafter (with $3,547,623 outstanding at December
31, 1999), (the "Principal Revolver"); (b) a commercial mortgage note of
$4,165,000 (with $3,271,972 outstanding at December 31, 1999) (the "Principal
Mortgage Loan"); (c) an equipment note of $2,200,000 (with $793,502 outstanding
at December 31, 1999) (the "Principal Term Loan");and, (d) a credit facility of
$500,000, (with $56,312 outstanding at December 31, 1999) (the "Third Term
Loan"), (collectively, the "Loans").
The Principal Revolver bears interest at prime plus 1% on the first
$2,500,000 and prime plus 2% on amounts outstanding over $2,500,000. The
Principal Mortgage Loan and the Principal Term Loan bear interest at prime plus
1%. The Third Term Loan bears interest at 9.42%. The Loans require the
Partnership to meet certain financial covenants and restrict the ability of the
Partnership to make distributions to Limited Partners without the consent of the
principal lenders. The Principal Revolver , Principal Mortgage Loan and the
Principal Term Loan provided by the principal lender are secured by real
property, fixed assets, equipment, inventory, receivables and intangibles of the
Partnership.
The Partnership's 2000 capital budget calls for the expenditure of
approximately $200,000 for building, plant, and equipment modifications and
additions. The General Partner believes Whiteford's is in compliance with
environmental protection laws and regulations, and does not anticipate making
additional capital expenditures for such compliance in 2000. Such amounts are
expected to be funded by internally generated cash flow. The General Partner
believes that the above credit facilities along with cash flow from operations
will be sufficient to meet the Partnerships' working capital and credit
requirements for 2000.
The nature of the Partnership's business activities (primarily meat
processing) are such that should annual inflation rates increase materially in
the foreseeable future, the Partnership would experience increased costs for
personnel and raw materials; however, it is believed that increased costs could
substantially be passed on in the sales prices of its products.
Impact of Year 2000
Whiteford Foods has completed the changes required to ensure that all of
its software, hardware and operating equipment will function properly with
respect to dates in the Year 2000 and thereafter. The total cost of these
changes was not material and has been expensed as incurred. The majority of the
Year 2000 costs were incurred during fiscal year 1998 with substantially all of
the remaining costs expensed in fiscal year 1999. As of the date of this report,
Whiteford Foods' ability to provide services has not been adversely affected by
Year 2000 issues.
ITEM 7A. MARKET RISK
In the normal operation, the Company has market risk exposure to interest
rates. At December 31, 1999, the Company had $7,699,409 in interest bearing debt
obligations that are subject to market risk exposure to change in interest
rates. At December 31, 1999, $4,341,125 of outstanding debt is at variable rates
with a weighted average interest rate of 8.59% and $3,358,284 is at fixed rates
with a weighted-average interest rate of 9.21%. As the Company amended its bank
agreements on December 31, 1999, effective on January 1, 2000, $7,613,097 of
outstanding debt is at variable rates with a weighted-average interest rate of
10.14% and $86,312 is at fixed rates with a weighted-average interest rate of
9.42%. The interest rate on the variable rate outstanding maturing in 2000 of
$4,172,281 is primarily based on the annual rate of interest equal to the sum of
the prime rate plus one hundred (100) basis points per annum. The rate at
December 31, 1999 was 10.25%. The interest rate on the variable rate outstanding
maturing in 2001 and thereafter is 10.00%. The interest rate on the fixed rate
outstanding debt maturing in 2000 and thereafter is 9.42%. The estimated fair
value on the Company's debt at December 31, 1999 is equal to its carrying
amount.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data of the Partnership are
included in this report after the signature page.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
Management
The Partnership has no officers or directors. The affairs of the
Partnership are managed by the Gannon Group, Inc., the General Partner. The
directors, executive officers and key employees of the General Partner as of
December 31, 1999, are as follows:
Kevin T. Gannon, age 43, sole director, President and sole stockholder of
Gannon Group, Inc.
Mr. Gannon is a Managing Director of Robert A. Stanger & Co., Inc., a New
Jersey based investment banking, investment research and consulting firm. Mr.
Gannon was formerly a Vice President - Corporate Development of Granada
Corporation and Director and Vice President of Granada BioSciences, Inc. and
Granada Foods Corporation, former affiliate of the Partnership. Mr. Gannon is a
Certified Public Accountant.
No director or officer of the General Partner was, during the last five (5)
years, the subject (directly, or indirectly as a general partner of a
partnership or as an executive officer of a corporation) of a bankruptcy or
insolvency petition, of any criminal proceeding (excluding traffic violations
and other minor offenses), or restrictive orders, judgments or decrees enjoining
him from or otherwise limiting him from acting as a futures commission merchant,
introducing broker, commodity trading advisor, commodity pool operator, floor
broker, leverage transaction merchant, any other person regulated by the
Commodity Futures Trading Commission, or an associated person of any of the
foregoing, or as an investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee of any investment
company, bank, savings and loan association or insurance company, or engaging in
or continuing any conduct or practice in connection with such activity, engaging
in any business activity, or engaging in any activity in connection with the
purchase or sale of any security or commodity or in connection with any
violation of Federal or State securities laws or Federal commodities laws, or
was the subject of any existing order of a federal or state authority barring or
suspending for more than sixty (60) days the right of such person to be engaged
in such activity.
ITEM 11. EXECUTIVE COMPENSATION
Current Year Remuneration
The Partnership has no officers or directors. Accordingly, no direct
remuneration was paid to officers and directors of the Partnership for the year
ended December 31, 1999. Remuneration to the General Partner is pursuant to
Articles VI of the LIMITED PARTNERSHIP AGREEMENT (filed as Exhibit A to the
Prospectus included in the Partnership's Registration Statement on Form S-1
[File No. 2-98273]) and incorporated herein by reference.
Pursuant to Section 6.4(c) of the Limited Partnership Agreement, the
General Partner is entitled to receive a management fee of approximately
$300,000 for the calendar year 1999. However, Section 6.4(c)(v) limits all
amounts payable to the General Partner pursuant to Section 6.4(c) to an amount
which does not exceed 10% of aggregate distributions to Partners from "Cash
Available for Distributions". Under the Limited Partnership Agreement, Cash
Available for Distributions is comprised of cash funds from operations (after
all expenses, debt repayments, capital improvements and replacements, but before
depreciation) less amounts set aside for restoration or reserves. That portion
of the management fee in excess of such 10% limitation is suspended, and future
payment is delayed until such payment may be made without exceeding such limit.
On dissolution of the Partnership, Section 15.3(a)(ii) of the Limited
Partnership Agreement generally provides for the payment of creditors, and then
pro rata payment to record holders for loans or other amounts owed to them by
the Partnership, including without limitation any amounts owed to the General
Partner pursuant to Section 6.4. Any amounts payable to the General Partner
under Section 15.3(a)(ii) will be dependent upon the funds available for
distribution on the dissolution of the Partnership.
Section 6.4(e) of the Limited Partnership Agreement also provides the
General Partner a subordinated special allocation equal to 15% of any gain on
the sale of partnership assets or food businesses. Among other things, this
special allocation is subordinated to payments to the limited partners for
certain distributions. Any payment pursuant to Section 6.4(e) will be dependent
upon the ultimate sale price of such partnership assets or food businesses.
9
During calendar year 1999, the Partnership made aggregate distributions of
$130,689 to the Limited Partners. During calendar year 1998, the Partnership
made aggregate distributions of $261,378. As a result in 1999, the Partnership
paid the General Partner 10% of such amount or $13,069, and suspended payment of
approximately $287,000 of such management fee. The cumulative amount of annual
management fees that have been suspended is $2,117,000.
Other Compensation Arrangements
There is no plan provided for or contributed to by the Partnership or the
General Partner which provides annuity, pension or retirement benefits for the
General Partner or the officers and directors of the General Partner. There is
no existing plan provided for or contributed to by the General Partner which
provides annuity, pension or benefits for its officers or directors. There are
no arrangements for remuneration covering services as a director between the
Partnership and any director of the General Partner. No options to purchase any
securities of the General Partner were granted or exercised during its fiscal
year ended December 31, 1999. No options were held to purchase securities of the
Partnership as of December 31, 1999, and as of the date hereof.
After the Partnership acquired the assets of Whiteford's, Inc., Whiteford's
entered into a Services Agreement with Greenaway Consultant, Inc. ("GCI") under
which GCI managed Whiteford's. GCI is owned by one of Whiteford's, Inc.'s former
principal shareholders. This agreement has been extended to December 31, 2002.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Security Holders
The General Partner owns the entire general partnership interest, which
interest controls the Partnership. The General Partner does not beneficially
own, either directly or indirectly, any equity security in the Partnership,
other than the general partner interest.
Contractual Arrangements Affecting Control
On May 4, 1992, the outstanding shares of G/W Foods, Inc. were assigned by
Granada Management Corporation to Gannon Group, Inc., a corporation owned by
Kevin T. Gannon, a Director and Vice President of G/W Foods, Inc. and also a
former Vice President of Granada Corporation and certain of its affiliates. Also
on May 4, 1992, Granada Management Corporation assigned its sole general
partnership interest in the Partnership to Gannon Group, Inc. The effect of
these assignments is for Gannon Group, Inc. to have general partnership
authority and responsibility with respect to the Partnership and, through G/W
Foods, Inc., of Whiteford's.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
None.
10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Whiteford Partners L.P.
-----------------------
(Registrant)
By Gannon Group, Inc.
Its General Partner
Date: March 29, 2000 /s/ Kevin T. Gannon
- ------------------------- -------------------
Chief Executive Officer
And President
Pursuant to the requirements of the Securities Act of 1934, this Report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
Signatures Title Date
- ---------- ----- ----
/s/ Kevin T. Gannon Chief Executive officer, President, March 29, 2000
- -------------------- Chairman of the Board --------------
Kevin T. Gannon and Sole Director (Principal Executive Officer),
Chief Financial Officer, and Chief Accounting Officer
11
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) AND (2), (c) and (d)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CERTAIN EXHIBITS
YEAR ENDED DECEMBER 31, 1999
WHITEFORD PARTNERS, L.P.
12
FORM 10-K -- Item 8, Item 14 (a) (1) and (2), (c) and (d)
The following financial statements and financial statement schedules
of the Partnership are included as part of this report at Item 8:
(a) 1. Financial Statements
Consolidated Balance Sheets - December 31, 1999, and 1998.
Consolidated Statements of Operations - for the years ended December
31, 1999, 1998, and 1997.
Consolidated Statements of Changes in Partners' Capital - for the
years ended December 31, 1999, 1998, and 1997.
Consolidated Statements of Cash Flows - for the years ended December
31, 1999, 1998, and 1997.
Notes to Consolidated Financial Statements
Report of Independent Auditors
(a) 2. See Index to Exhibits immediately following the financial statement
schedules.
13
Whiteford Partners, L.P.
CONSOLIDATED BALANCE SHEETS
December 31,
----------------------------
1999 1998
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................... $ 281,216 $ 416,143
Accounts Receivable - trade ................................. 2,068,428 3,332,971
Inventories ................................................. 3,378,687 2,565,555
Prepaid expenses ............................................ 91,659 409,329
------------ ------------
TOTAL CURRENT ASSETS .......................... 5,819,990 6,723,998
PROPERTY AND EQUIPMENT:
Land and improvements ....................................... 86,700 86,700
Buildings ................................................... 7,298,645 7,253,443
Machinery and equipment ..................................... 11,203,772 10,467,141
Accumulated depreciation .................................... (7,366,051) (6,249,629)
------------ ------------
TOTAL PROPERTY AND EQUIPMENT .................. 11,223,066 11,557,655
OTHER ASSETS - NET OF AMORTIZATION ................................ 2,577,664 2,705,157
------------ ------------
TOTAL ASSETS ........................... $ 19,620,720 $ 20,986,810
============ ============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable - trade .................................... $ 2,287,987 $ 2,454,354
Notes payable and current maturities on long-term debt ...... 4,172,281 3,434,967
Accrued expenses and other liabilities ...................... 731,738 890,433
------------ ------------
TOTAL CURRENT LIABILITIES .................... 7,192,006 6,779,754
LONG-TERM DEBT - NET OF CURRENT MATURITIES ........................ 3,527,128 4,001,939
PARTNERS' CAPITAL:
General Partner:
Capital contributions ................................. 132,931 132,931
Capital transfers to Limited Partners ................. (117,800) (117,800)
Interest in net income (loss) ......................... 14,335 26,050
Distributions ......................................... (38,171) (36,864)
------------ ------------
(8,705) 4,317
Class A Limited Partners:
Capital contributions, net of organization and
offering costs of $2,010,082 ....................... 11,172,274 11,172,274
Capital transfers from the General Partner ............ 116,554 116,554
Interest in net income (loss) ......................... 1,408,061 2,567,881
Distributions ......................................... (3,786,598) (3,655,909)
------------ ------------
8,910,291 10,200,800
------------ ------------
TOTAL PARTNERS' CAPITAL .................... 8,901,586 10,205,117
------------ ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 19,620,720 $ 20,986,810
============ ============
See notes to consolidated financial statements.
F-1
Whiteford Partners, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31
-------------------------------------------
1999 1998 1997
---- ---- ----
REVENUE
Sales of meat products ......................... $ 51,549,748 $ 62,431,746 $ 62,224,110
Interest and other ............................. 166,680 338,696 256,416
51,716,428 62,770,442 62,480,526
COST AND EXPENSES
Cost of meat products sold ..................... 48,705,602 57,551,373 57,846,006
Selling and administrative ..................... 2,253,524 2,549,182 2,434,234
Administrative fee - General Partner ........... 13,069 26,138 13,069
Depreciation and amortization .................. 1,263,659 1,227,791 1,204,975
Interest ....................................... 652,109 679,397 727,861
------------ ------------ ------------
52,887,963 62,033,881 62,226,145
------------ ------------ ------------
NET (LOSS) INCOME ..................... $ (1,171,535) $ 736,561 $ 254,381
============ ============ ============
Summary of net (loss) income allocated to:
General Partner ................................ $ (11,715) $ 7,366 $ 2,544
Class A Limited Partners ....................... (1,159,820) 729,195 251,837
------------ ------------ ------------
$ (1,171,535) $ 736,561 $ 254,381
Net (loss) income per unit of Limited Partner Capital $ (0.90) $ 0.56 $ 0.19
============ ============ ============
Weighted average units issued and outstanding ....... 1,306,890 1,306,890 1,306,890
See notes to consolidated financial statements.
F-2
Whiteford Partners, L.P.
Consolidated Statements of Changes in Partners' Capital
General Partner Class A Limited Partners
-------------------------------------------------------------------------------------------------------
Capital
Interest in Transfers Interest in
Capital Net Income from Net Income
Capital Transfers to or Capital General or
Contributions Limited Partners (Loss) Distribution Contributions Partners (Loss) Distributions
------------- ---------------- ------- ------------ ------------- --------- ------ -------------
Balance, December 31, 1996 $ 132,931 $ (117,800) $ 16,140 $ (32,943) $11,172,274 $116,554 $ 1,586,849 $ (3,263,842)
Net Income 2,544 251,837
Distributions (1,308) (130,689)
-----------------------------------------------------------------------------------------------------
Balance, December 31, 1997 $ 132,931 $ (117,800) $ 18,684 $ (34,251) $11,172,274 $116,554 $ 1,838,686 $ (3,394,531)
Net Income 7,366 729,195
Distributions (2,613) (261,378)
-----------------------------------------------------------------------------------------------------
Balance, December 31, 1998 $ 132,931 $ (117,800) $ 26,050 $ (36,864) $11,172,274 $116,554 $ 2,567,881 $ (3,655,909)
Net Loss (11,715) (1,159,820)
Distributions (1,307) (130,689)
-----------------------------------------------------------------------------------------------------
Balance, December 31, 1999 $ 132,931 $ (117,800) $ 14,335 $ (38,171) $11,172,274 $116,554 $ 1,408,061 $ (3,786,598)
=====================================================================================================
See notes to consolidated financial statements.
F-3
Whiteford Partners, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
--------------------------------------------
1999 1998 1997
--------------------------------------------
OPERATING ACTIVITIES:
Net (loss) Income .................................... $ (1,171,535) $ 736,561 $ 254,381
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization .................... 1,263,659 1,227,791 1,204,975
(Gain) loss on sale of fixed assets .............. (4,000) (641) (23,091)
Changes in operating assets and liabilities:
Accounts receivable - trade .................... 1,264,543 225,586 (362,181)
Inventories .................................... (813,132) 459,042 (412,082)
Prepaid expenses ............................... 317,670 (321,288) 390,990
Accounts Payable - trade ....................... (166,367) (794,767) 564,022
Accrued expenses and other liabilitites ........ (158,695) 231,871 (81,485)
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ............... 532,143 1,764,155 1,535,529
INVESTING ACTIVITIES:
Purchase of property and equipment ................... (801,577) (642,882) (928,913)
Proceeds from disposal of property and equipment ..... 4,000 15,500 42,324
------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES ................... (797,577) (627,382) (886,589)
FINANCING ACTIVITIES:
Proceeds from notes payable and long-term debt ........ 18,610,233 18,604,404 22,894,939
Payments on notes payable and long-term debt .......... (18,347,730) (19,325,290) (23,268,798)
Distributions to Limited and General Partners ......... (131,996) (263,991) (131,997)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES .................................. 130,507 (984,877) (505,856)
------------ ------------ ------------
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS ......................................... (134,927) 151,896 143,084
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD ................................... 416,143 264,247 121,163
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .............. $ 281,216 $ 416,143 $ 264,247
============ ============ ============
See notes to consolidated financial statements.
F-4
WHITEFORD PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
NOTE A - ORGANIZATION, BUSINESS AND ACQUISITIONS
Whiteford Partners, L.P., (the Partnership), formerly Granada Foods, L.P.,
was formed on June 30, 1987, as a Delaware limited partnership. Prior to May 4,
1992, the Partnership consisted of a General Partner, Granada Management
Corporation, (Granada), and the Limited Partners. On May 4, 1992, Granada
assigned its sole general partner interest in the Partnership to Gannon Group,
Inc. and the Partnership was renamed Whiteford Partners, L.P.
The operational objectives of the Partnership are to own and operate
businesses engaged in the development, production, processing, marketing,
distribution and sale of food and related products (Food Businesses) for the
purpose of providing quarterly cash distributions to the partners while
providing capital appreciation through the potential appreciation of the
Partnership's Food Businesses. The Partnership expects to operate for twenty
years from inception, or for such shorter period as the General Partner may
determine is in the best interest of the Partnership, or for such shorter period
as determined by the majority of the Limited Partners.
The Partnership Agreement provides that a maximum of 7,500,000 Class A, $10
partnership units can be issued to Limited Partners. Generally, Class A units
have a preference as to cumulative quarterly cash distributions of $.25 per
unit. The sharing of income and loss from the Partnership operations is 99% to
the Class A and 1% to the General Partner. Amounts and frequency of
distributions are determinable by the General Partner.
On March 26, 1990, the Partnership, through Whiteford Foods Venture,
(Whiteford's) L.P. (formerly Granada/Whiteford Foods Venture, L.P.), a joint
venture with an affiliate of the then General Partner, acquired the business
assets of Whiteford's Inc., a meat processing and distribution company. The
Partnership and Whiteford's currently operate in The Food Business segment only.
The Partnership's interest in the operations and equity of Whiteford's is
greater than 99.9%. The cash purchase price of the assets was $8,275,000 with
liabilities of $3,776,806 assumed. The excess of the purchase price over the
estimated fair value of the net tangible assets acquired of approximately
$3,825,000 was recorded as goodwill. The acquisition was accounted for using the
purchase method of accounting and, accordingly, the financial statements include
the operations of Whiteford's from the date of acquisition.
At December 31, 1999 and at December 31, 1998, the Partnership had
1,306,890 Class A limited partnership units issued and outstanding.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation. The consolidated financial statements include
the Partnership and Whiteford's, from the date of acquisition (March 26, 1990).
Significant intercompany account balances and transactions have been eliminated
in consolidation.
Inventories. Inventories of meat, meat products and packaging supplies are
stated at the lower of first-in, first-out (FIFO) cost or market. The major
components of inventories are as follows at December 31:
1999 1998
----------- -----------
Finished products $ 1,531,532 $ 844,612
Raw materials 834,763 645,847
Packaging supplies and other 1,012,392 1,075,096
----------- -----------
$ 3,378,687 $ 2,565,555
=========== ===========
Property and Equipment. Property and equipment is stated at cost.
Depreciation, computed using the straight-line method on the basis of the
estimated useful lives of the depreciable assets, was $1,136,166, $1,100,298,
and $1,077,482 in years 1999, 1998 and 1997, respectively. The costs of ordinary
repairs and maintenance are charged to expense, while betterment and major
replacements are capitalized.
The carrying value of property and equipment and other long-lived assets is
reviewed if the facts and circumstances suggest it may be impaired. If this
review indicates the carrying value of the assets may not be recoverable, based
on estimates of their undiscounted cash flows, the carrying value will be
reduced to the asset's fair market value.
Other Assets. Goodwill associated with the acquisition of Whiteford's Inc.
is being amortized on a straight-line basis over a thirty-year period. Related
accumulated amortization at December 31, 1999 and 1998, was $1,208,576 and
$1,081,083 respectively.
Distributions. The Partnership records distributions of income and/or
return of capital to the General Partner and Limited Partners when paid. Special
transfers of equity, as determined by the General Partner, from the General
Partner to the Limited Partners are recorded in the period of determination.
Distributions of $130,689 and $261,378 to Limited Partners were recorded in 1999
and 1998 respectively.
F-5
Income Taxes. The Partnership files an information tax return. The items of
income and expense are allocated to the partners pursuant to the terms of the
Partnership Agreement. Income taxes applicable to the Partnership's results of
operations are the responsibility of the individual partners and have not been
provided for in the accounts of the Partnership. At December 31, 1999, the book
basis of assets exceeds the tax basis of such assets by approximately $60,175
primarily due to the use of accelerated depreciation methods utilized for tax
reporting purposes.
Cash, Cash Equivalents and Cash Flows. Cash and cash equivalent amount
approximate fair value. For the purpose of the statement of cash flows, the
Partnership considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. Total interest paid was
$647,953, $690,506 and $733,733 for 1999, 1998 and 1997, respectively.
Net Income Per Unit of Limited Partners Capital. The net income per unit of
limited partners capital is calculated by dividing the net income allocated to
limited partners by the weighted average units outstanding.
Concentrations. Financial instruments which potentially expose the
Partnership of credit risk, as defined by Statement of Financial Accounting
Standards No. 105, Disclosure of Information about Financial Instruments with
Off-Balance Sheet Risk and Financial with Concentrations of Credit Risk, consist
primarily of accounts receivable. The Partnership's accounts receivable are
concentrated in major fast food restaurants and regional chains.
To date, the Partnership has relied on a limited number of customers for a
substantial portion of its total sales. The Partnership expects that a
significant portion of its future revenues will continue to be generated by a
limited number of customers. The failure to obtain new customers or the
reduction in sales from existing customers could materially adversely affect the
Partnership's operating results (see Note G).
The Partnership currently buys its meats and necessary supplies from a few
vendors. Although there are a limited number of vendors capable of supplying
these items, management believes that the other suppliers could provide the
products on comparable terms. A change in suppliers, however, could cause delay
in delivery and possible loss of sales, which would adversely affect operating
results.
Use of Estimates. The preparation of the financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
results.
NOTE C - RELATED PARTY TRANSACTIONS
The Limited Partnership Agreement provides for the General Partner to
receive an annual administrative fee. The fee is equal to 2% (adjusted for
changes in the consumer price index after 1989) of net business investment
(defined as $8.50 multiplied by Partnership units outstanding). However, such
amounts payable to the General Partner are limited to 10% of aggregate
distributions to all Partners from "Cash Available for Distributions". As
defined in the Limited Partnership Agreement, that portion of the management fee
in excess of such 10% limitation is suspended, and future payment is contingent.
The Administrative Management Fees paid to the General Partner and recorded
by the Partnership were $13,069 in 1999, $26,138 in 1998 and $13,069 in 1997.
Suspended fees as of December 31, 1999, for which no accrual had been recorded,
total $2,117,000 ($1,830,000 as of December 31, 1998). This only becomes an
obligation of the Partnership upon a change of control or sale of substantially
all of the assets of the Partnership. The Partnership also has a service
agreement with Greenaway Consultant, Inc. (GCI), which provides for the former
principal owner of Whiteford's to provide consulting services to the
Partnership. The agreement has been extended for five years expiring December
31, 2002, and provides minimum consulting fees of approximately $250,000 per
annum. During 1999, 1998 and 1997 the minimum was paid. GCI will receive payment
of $500,000 upon a change of control or sale of substantially all of the assets
of the Partnership.
F-6
NOTE D - LONG TERM DEBT
NOTE D - LONG TERM DEBT
The following schedule summarizes long-term debt at December 31:
1999 1998
---------- ----------
Notespayable to bank with monthly payments of $20,000 through January 1, 2001
and balance due on January 31, 2001, interest at 8.99% at December 31, 1999
and 1998 and interest at prime plus
1% as of January 1, 2000 .................................................. $3,271,972 $3,495,678
Notespayable to bank with monthly payments of $27,362 through December 1, 2001
and balance due on January 2, 2002, interest 9.50% and 8.72% at December
31, 1999 and 1998, respectively and interest at
prime plus 1% as of January 1, 2000 ....................................... 793,502 988,570
Revolving credit agreement with a bank, due June 30, 2000, interest at 9.00%
at December 31, 1999 and 1998 and interest at prime plus 1% on first
$2,500,000 and prime plus 2% on amounts outstanding over $2,500,000
as of January 1, 2000 ..................................................... 3,547,623 2,752,099
Note payable to bank due May 1, 2000
interest at 9.42% at December 31, 1999 and 1998 ........................... 56,312 170,559
Other .......................................................................... 30,000 30,000
---------- ----------
$7,699,409 $7,436,906
Less portion classified as current ............................................. 4,172,281 3,434,967
---------- ----------
$3,527,128 $4,001,939
========== ==========
The carrying value of the long-term debt approximates fair value. The notes
payable and the revolving credit agreement with the bank contain restrictive
covenants. The covenants restrict the Partnership from declaring or paying any
distributions to its partners without the prior written consent of the bank,
except for amounts already classified as reinvested distributions in the balance
sheet; limit the level of capital expenditures the Partnership may make in any
fiscal year; and, require the Partnership to maintain certain financial ratios.
In addition, the Partnership must maintain a monthly average of $100,000 on
deposit with the bank as a compensating balance.
The revolving credit agreement permits borrowings based on a percentage of
eligible accounts receivables and inventories plus an overadvance amount of
$900,000 through April 30, 2000, reduced to $800,000 through May 31, 2000 and
reduced to $700,000 thereafter. Long-term debt and borrowing under the revolving
credit agreement are collateralized by substantially all of the Partnership's
property and equipment, inventory and accounts receivable.
The aggregate annual maturities on the long-term debt for the Partnership
for the years subsequent to 2000 is $3,390,317 in 2001 and $136,811 in 2002.
During 1999, 1998 and 1997, the weighted average interest rate on
short-term borrowing was 8.9%, 9.1% and 9.1% respectively, while the
weighted-average month-end amount outstanding was $3,993,868, $3,504,626 and
$3,179,441 respectively. The largest outstanding month-end balance was
$4,182,868 during 1999, $3,779,814 during 1998 and $3,425,625 during 1997.
NOTE E - LEASES
Lease Commitments. The Partnership's leases, buildings and
equipment, are under various noncancelable operating lease agreements. Lease
rental expense for 1999, 1998 and 1997 was $663,423, $766,494 and $724,984,
respectively. The future minimum lease payments under the leases are as follows:
2000 $ 608,435
2001 548,183
2002 190,464
----------
$1,347,082
==========
NOTE F - EMPLOYEE BENEFIT PLAN
The Partnership has a 401(k) Plan which covers substantially all employees
who have completed one year of service. The Partnership matches a percentage up
to 25% of the participant's contributions up to 6% of employee eligible
compensation. Contributions to the Plan were $32,887 in 1999, $29,483 in 1998,
and $24,368 in 1997.
F-7
NOTE G - MAJOR CUSTOMERS
Whiteford's facility, located in Versailles, Ohio, operates as a further
processor and distributor of beef products to major fast food restaurants and
regional chains in the Midwest of the United States. Whiteford's principal
products are fresh frozen hamburger patties; precooked and uncooked ground beef
taco meat and roast beef, marinated beef entrees; and other items processed to
the customers' specifications. Major food chains served include Burger King and
Rally's.
Sales of meat products to major customers are summarized as follows for the
fiscal years ended December 31, 1999, and 1998 and 1997.
CUSTOMER 1999 1998 1997
-------- ---- ---- ----
A $13,762,901 $12,662,467 $12,933,020
B 13,044,177 11,456,004 11,958,749
C 5,749,151 11,181,287 10,550,602
D 4,630,998 8,161,942 7,048,837
E 4,486,046 4,854,235 7,010,712
F 2,364,608 2,869,691 3,629,905
----------- ----------- -----------
$44,037,881 $51,185,626 $53,131,825
=========== =========== ===========
The total amounts receivable from these customers on December 31, 1999, 1998,
and 1997 and were $1,657,929 and $2,800,657 and $3,112,082, respectively.
F - 8
Report of Independent Auditors
Limited and General Partners
Whiteford Partners, L.P.
We have audited the accompanying consolidated balance sheets of Whiteford
Partners, L.P. (a Delaware limited partnership) and subsidiary as of December
31, 1999 and 1998 and the related consolidated statements of operations, changes
in partners' capital, and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Whiteford Partners, L.P. and subsidiary at December 31, 1999 and 1998 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31,1999, in conformity with accounting
principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Dayton, Ohio
March 24, 2000
F-9
INDEX TO ATTACHED EXHIBITS
Exhibit
-----------------------------------------------------------------
3. & 4. Limited Partnership Agreement of the Partnership incorporated by
reference to Exhibit "A" to Prospectus (pages A 1 - A 40)
included in the Partnership's Registration Statement on Form S-1
(File No. 33-15962).
10.1 Consulting Agreement between the Partnership and Granada
Acquisitions, Inc. incorporated by reference to Exhibit 10.2 to
the Partnership's Registration Statement on Form S-1 (File No.
33-15962).
10.2 Asset Purchase Agreement between Granada/Whiteford Foods Venture,
L.P., Whiteford's Inc. and Albert D. Greenaway, incorporated by
reference to Exhibit 2 to the Partnership's Form 8-K filing dated
May 10, 1990, as amended (File No. 33-15962).
10.3 Services Agreement between Granada/Whiteford Foods Venture, L.P.,
Granada Cincinnati Multifoods, Inc. and Greenaway Consultants,
Inc. to engage Greenaway Consultants, Inc. to perform management
services for the operations of Granada/Whiteford Foods Venture,
L.P. and CMF, a joint venture, incorporated by reference to
Exhibit 10.3 to the Partnership's Annual Report on Form 10K for
the year ended December 31, 1990.
10.4 Agreement of Limited Partnership dated March 27, 1990, between
the Registrant as limited partner, and G/W Foods, Inc. as General
Partner, to acquire the assets, certain liabilities, and meat
purveying operations of Whiteford's Inc., incorporated by
reference to Exhibit 10.4 to the Partnership's Annual Report on
Form 10K for the year ended December 31, 1990.
10.5 Joint Venture Agreement dated July 1, 1990, between
Granada/Whiteford Foods Venture, L.P., North American
Agrisystems, Inc. and Cincinnati Multifoods, Inc. for the
formation of a joint venture for Granada/Whiteford Foods Venture,
L.P. to operate meat production facilities of North American
Agrisystems, Inc., incorporated by reference to Exhibit 10.5 to
the Partnership's Annual Report on Form 10K for the year ended
December 31, 1990.
10.6 Promissory Note payable by Granada/Whiteford Foods Venture to
Fifth Third Bank of Miami Valley, N.A. in the face amount of
$3,000,000, dated July 19, 1991, together with Hypothecation
Agreement, incorporated by reference to Exhibit 10.6 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1990.
10.7 Promissory Note payable by Granada/Whiteford Foods Venture to
Fifth Third Bank of Miami Valley, N.A. in the face amount of
$280,000 dated June 21, 1991, together with Hypothecation
Agreement, incorporated by reference to Exhibit 10.7 to the
Partnership's Annual Report on form 10K for the year ended
December 31, 1990.
10.8 Agreement dated November 6, 1991, between G/W Foods, Inc. and
Fifth Third Bank of Miami Valley, N.A. amending terms of
Promissory Note dated July 19, 1991, incorporated by reference to
Exhibit 10.8 to the Partnership's Annual Report on Form 10K for
the year ended December 31, 1990.
10.9 Memorandum of Agreement -- Dissolution of CMF (a Texas joint
venture) effective October 1, 1991, stipulating terms and
conditions of dissolution and wind-up of operations of CMF,
incorporated by reference to Exhibit 10.9 to the Partnership's
Annual Report on Form 10K for the year ended December 31, 1990.
10.10 Amendment to Certificate of Limited Partnership of
Granada/Whiteford Foods Venture, L.P., State of Ohio Certificate
of Amendment of Foreign Limited Partnership and Trade Name
Registration, all dated April 30, 1992, and amending Name of
Granada/Whiteford Foods Venture, L.P. to Whiteford Foods Venture,
L.P., incorporated by reference to Exhibit 10.10 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1990.
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INDEX TO ATTACHED EXHIBITS (CONT.)
10.11 Loan Agreement dated May 5, 1992, between Greenaway Consultant,
Inc. and Whiteford FoodsVenture, L.P., providing for $750,000
revolving credit facility, incorporated by reference to Exhibit
10.11 to the Partnership's Annual Report on Form 10K for the year
ended December31, 1990.
10.12 Stock Purchase Agreement and Assignment of Partnership Interest
dated May 4, 1992, by and between Granada Management Corporation
and Gannon Group, Inc., incorporated by reference to Exhibit
10.12 to the Partnership's Annual Report on Form 10K for the year
ended December 31, 1990.
10.13 Loan Agreement dated December 23, 1992 between Whiteford Foods
Venture, L.P. and The Fifth Third Bank of Western Ohio, N.A. for
a credit facility of $2,300,000, incorporated by reference to
Exhibit 10.13 to the Partnership's Annual Report on Form 10K for
the year ended December 31, 1992.
10.14 Letter of Agreement dated February 23, 1993 by and between
Greenaway Consultants, Inc. and Whiteford Foods Venture, L.P.,
proceeding for (i) the termination of the revolving credit
facility, (ii) the issuance of a term promissory note in the
amount of $750,000, (iii) the termination of the Services
Agreement between Whiteford Partners, L.P. and Greenaway
Consultants, Inc., and (iv) an agreement regarding a new Services
Agreement, incorporated by reference to Exhibit 10.14 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1993.
10.15 Loan Agreement dated August 27, 1993 between Whiteford Foods
Venture, L.P. and PNC Bank, Ohio, N.A., incorporated by reference
to Exhibit 10.15 to the Partnership's Annual Report on Form 10K
for the year ended December 31, 1993.
10.16 Services Agreement dated October 1, 1993 between Whiteford Foods
Venture, L.P., Greenaway Consultant, Inc. and Albert D. Greenaway
to engage Greenaway Consultant, Inc., to perform management
services for the operation of Whiteford Foods Venture, L.P.,
incorporated by reference to Exhibit 10.16 to the Partnership's
Annual Report on Form 10K for the year ended December 31, 1993.
10.17 Loan Agreement dated October 1, 1993 between Whiteford Foods
Venture, L.P. and Greenaway Consultant, Inc. authorizing November
8, 1993 promissory note and certain security therefor,
incorporated by reference to Exhibit 10.17 to the Partnership's
Annual Report on Form 10K for the year ended December 31, 1993.
10.18 Promissory note dated November 8, 1993 between Greenaway
Consultant, Inc. and Whiteford Foods Venture, L.P., incorporated
by reference to Exhibit 10.18 to the Partnership's Annual Report
on Form 10K for the year ended December 31, 1993.
10.19 Credit agreement dated June 13, 1994 between Whiteford Foods
Venture, L.P. and PNC Bank, Ohio, National Association and Fifth
Third Bank of Western Ohio, incorporated by reference to Exhibit
10.19 to the Partnership's Annual Report on Form 10K for the year
ended December 31, 1994.
10.20 Construction loan agreement dated June 13, 1994 between Whiteford
Foods Venture, L.P. and PNC Bank, Ohio, National Association,
incorporated by reference to Exhibit 10.20 to the Partnership's
Annual Report on Form 10K for the year ended December 31, 1994.
10.21 Lease agreement dated December 15, 1994 between Whiteford Foods
Venture, L.P. and Star Bank, National Association, incorporated
by reference to Exhibit 10.21 to the Partnership's Annual Report
on Form 10K for the year ended December 31, 1994.
10.22 Term note B dated April 14, 1995, between Whiteford Foods
Venture, L.P. and PNC Bank, Ohio, National Association,
incorporated by reference to Exhibit 10.22 to the Partnership's
Annual Report on Form 10K for the year ended December 31, 1995.
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INDEX TO ATTACHED EXHIBITS (CONT.)
10.23 Note payable dated September 18, 1995, between Whiteford Foods
Venture, L.P. and PNC Bank, Ohio, National Association,
incorporated by reference to Exhibit 10.23 to the Partnership's
Annual Report on Form 10K for the year ended December 31, 1995.
10.24 Second amendment to Revolving Note dated July 11, 1995,
incorporated by reference to Exhibit 10.24 to the Partnership's
Annual Report on Form 10K for the year ended December 31, 1995.
10.25 Second amendment to Credit agreement dated July 11, 1995,
incorporated by reference to Exhibit 10.25 to the Partnership's
Annual Report on Form 10K for the year ended December 31, 1995.
10.26 Third amendment to Credit agreement dated July 11, 1995,
incorporated by reference to Exhibit 10.26 to the Partnership's
Annual Report on Form 10K for the year ended December 31, 1995.
10.27 Guarantee Compensation agreement dated September 18, 1995 between
Whiteford Foods Venture, L.P. and Albert D. Greenaway,
incorporated by reference to Exhibit 10.27 to the Partnership's
Annual Report on Form 10K for the year ended December 31, 1995.
10.28 Mortgage granted to Albert D. Greenaway by Whiteford Foods
Venture, L.P., incorporated by reference to Exhibit 10.28 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1995
10.29 Mortgage granted to Albert D. Greenaway by Whiteford Foods
Venture, L.P., incorporated by reference to Exhibit 10.29 to the
Partnership's Annual Report on Form 10K for the year ended
December 31, 1995.
10.30 Security agreement dated September 18, 1995 between Whiteford
Foods Venture, L.P. and Albert D. Greenaway, incorporated by
reference to Exhibit 10.30 to the Partnership's Annual Report on
Form 10K for the year ended December 31, 1995.
10.31 Fifth Amendment to Credit Agreement dated May 9, 1996,
incorporated by reference to Exhibit 10.31 to the Partnership's
Annual Report on Form 10K for the year ended December 31, 1996.
10.32 Lease agreement dated October 8, 1996 between Whiteford Foods
Venture, L.P. and Fifth Third Leasing, incorporated by reference
to Exhibit 10.32 to the Partnership's Annual Report on Form 10K
for the year ended December 31, 1996.
10.33 Lease agreement dated November 1, 1996 between Whiteford Foods
Venture, L.P. and PNC Leasing Corporation, incorporated by
reference to Exhibit 10.33 to the Partnership's Annual Report on
Form 10K for the year ended December 31, 1996.
10.34 Second Amendment to Term Note dated March 31, 1997.
10.35 Sixth Amendment to Credit Agreement dated June 30, 1997.
10.36 Lease agreement dated December 22, 1997 between Whiteford Foods
Venture, L.P. and PNC Leasing.
10.37 Seventh Amendment to Credit Agreement dated March 26, 1998,
incorporated by reference to Exhibit 10.37 to the Partnership's
Annual Report on Form 10K for the year ended December 31, 1998.
10.38 Eighth Amendment to Credit Agreement dated July 1, 1998,
incorporated by reference to Exhibit 10.38 to the Partnership's
Annual Report on Form 10K for the year ended December 31, 1998.
10.39 Third Amendment to Revolving Note dated July 1, 1998,
incorporated by reference to Exhibit 10.39 to the Partnership's
Annual Report on Form 10K for the year ended December 31, 1998.
10.40 Fourth Amendment to Revolving Note dated May 3, 1999.
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INDEX TO ATTACHED EXHIBITS (CONT.)
10.41 Ninth Amendment to Credit Agreement dated May 3, 1999.
10.42 Tenth Amendment to Credit Agreement dated November 1, 1999.
13. 1990 Annual Report to Limited Partners, incorporated by reference
to Exhibit 13 to the Partnership's Annual Report on Form 10K for
the year ended December 31, 1990.
F-13