FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
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. Employer
incorporation or organization) Identification No.)
770 North Center Street, Versailles, Ohio 45380
(Address of principal executive offices)
(Zip Code)
937-526-5172
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Units Outstanding at August 13, 2002
- -------------------------------------
Limited Partnership Class A $10 Units 1,306,890
This document contains 10 pages
WHITEFORD PARTNERS, L.P.
INDEX TO FORM 10-Q
SIX MONTHS ENDED JUNE 30, 2002 and 2001
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Page Number
Part I. FINANCIAL INFORMATION
Item 1.Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2002
(Unaudited) and December 31, 2001..............................3
Condensed Consolidated Statements of Operations for the three
and six months ended June 30, 2002 and 2001 (Unaudited)........4
Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 2002 and 2001 (Unaudited)................5
Notes to Condensed Consolidated Financial Statements (Unaudited)...6
Item 2.Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................8
PART II. OTHER INFORMATION...................................................9
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CONDENSED CONSOLIDATED BALANCE SHEETS
WHITEFORD PARTNERS, L.P.
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June 30, December 31,
2002 2001
----------- ------------
(Unaudited)
Cash and Equivalents $ 270,217 $ 1,325,875
Interest Receivable 10,688 11,044
------------ ------------
Total Current Assets 280,905 $ 1,336,919
Subordinated Note Receivable 1,350,000 1,350,000
------------ ------------
TOTAL ASSETS $ 1,630,905 $ 2,686,919
============ ============
Accrued Expenses And Other Liabilities: $ 77,385 $ 146,271
Partners Capital
General Partner:
Capital Contributions 132,931 132,931
Capital Transfers to Limited Partners (117,800) (117,800)
Interest in Partnership Net Loss (49,344) (49,274)
Distributions (38,170) (38,171)
------------ ------------
(72,383) (72,314)
------------ ------------
Class A Limited Partner:
Capital Contributions (net of organization and offering costs
of $2,010,082) 11,172,274 11,172,274
Capital Transfers from General Partner 116,554 116,554
Interest in Net Loss (4,896,160) (4,889,268)
Distributions (4,766,765) (3,786,598)
------------ ------------
1,625,903 2,612,962
TOTAL PARTNERS' CAPITAL 1,553,520 2,540,648
------------ ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 1,630,905 $ 2,686,919
============ ============
NOTE: The condensed balance sheet at December 31, 2001 has been taken from the
audited financial statements at such date.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
WHITEFORD PARTNERS, L.P.
(Unaudited)
- --------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
2002 2001 2002 2001
------ ------ ------ -------
Revenues
Sales of meat products $ -- $ 8,771,881 $ -- $ 15,648,160
Interest and other income 36,118 34,720 72,077 63,269
------------ ------------ ------------ ------------
$ 36,118 $ 8,806,601 $ 72,077 15,711,429
Costs and Expenses
Cost of meat products sold -- 8,059,356 -- 14,593,628
Selling and administrative expenses 43,173 409,558 79,039 765,763
Depreciation and amortization -- 326,810 -- 664,225
Interest -- 144,022 -- 300,255
------------ ------------ ------------ ------------
NET (LOSS)INCOME OPERATIONS $ (7,055) $ (133,145) $ (6,962) $ (612,442)
------------ ------------ ------------ ------------
(LOSS) GAIN ON SALES OF ASSETS 0 (9,579) 0 (9,579)
NET (LOSS) INCOME $ (7,055) $ (142,724) $ (6,962) $ (622,021)
============ ============ ============ ============
Summary of net income (loss) allocated to
General Partner $ (71) $ (1,427) $ (70) $ (6,220)
Limited Partners (6,984) (141,297) (6,892) (615,801)
------------ ------------ ------------ ------------
$ (7,055) $ (142,724) $ (6,962) $ (622,021)
============ ============ ============ ============
Net income (loss) per $10 unit of L.P. Capital $ (0.005) $ (0.11) $ (0.005) $ (0.48)
============ ============ ============ ============
Weighted average units issued and outstanding 1,306,890 1,306,890 1,306,890 1,306,890
============ ============ ============ ============
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
WHITEFORD PARTNERS, L.P.
(Unaudited)
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Six Months Ended
June 30,
----------------
2002 2001
NET CASH PROVIDED BY OPERATING ACTIVITIES $ (75,491) $ (387,287)
----------- -----------
CASH FLOW USED IN INVESTING ACTIVITIES:
Purchase of property and equipment $ 0 $ (233,482)
Proceeds from Disposal of property and equipment 0 25,000
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES $ 0 $ (208,482)
----------- -----------
CASH PROVIDED/(USED) IN FINANCING ACTIVITIES:
Proceeds from notes payable $ 0 $ 693,000
Payments on notes payable 0 (308,434)
Distributions to Limited and General Partners $ (980,167) 0
----------- -----------
NET CASH PROVIDED/(USED) IN FINANCING ACTIVITIES $ 980,167 $ 384,566
----------- -----------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS $(1,055,658) $ (211,203)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,325,875 329,311
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 270,217 $ 118,108
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (excluding amount capitalized to fixed assets and inventory) $ 0 $ 311,001
=========== ===========
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
WHITEFORD PARTNERS, L.P.
June 30, 2002
(Unaudited)
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NOTE A - ORGANIZATION, BUSINESS AND ACQUISITIONS
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 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.
The Partnership sold (the "Sale Transaction") substantially all its assets
on November 11, 2001, to an affiliate of Rochester Meat Company ("Rochester
Meat"), an unaffiliated company, pursuant to an Asset Purchase Agreement (the
"Agreement"). The purchase price was $7,950,000, including the assumption or
payment of certain liabilities. The purchase price was paid $1,500,000 in cash
and the issuance of a subordinated note the "Subordinated Note" due June 30,
2007 in the principal amount of $1,350,000 (as adjusted) with the balance of the
purchase price paid by the assumption of certain liabilities net of other
assets. The Subordinated Note bears interest at 9.5% and is prepayable under
certain conditions. Additionally, the principal balance of the Subordinated Note
may be adjusted downward under certain circumstances.
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In connection with the transaction with Rochester Meat, the Partnership was
obligated to pay up to $500,000 to Greenaway Consultants, Inc. pursuant to a
consulting agreement. Greenaway Consultants, Inc. acquired the right to such
payment in connection with its provision of management services and financing to
the Partnership. The Partnership and Greenaway Consultants, Inc. agreed to: (i)
a $50,000 payment made in January 2002, (ii) subordinate $300,000 of such
payment to the distribution by the Partnership of $2.00 per limited partner unit
(an aggregate of $2,613,780) and (iii) forgive $150,000 of such payment.
Greenaway Consultants, Inc. is wholly owned by Albert Greenaway. Neither Mr.
Greenaway nor Greenaway Consultants, Inc. owns any interest in the general
partner of the Partnership. The $300,000 obligation to Greenaway Consultants has
not been accrued as a result of its subordination to the partnership.
Upon completion of the transaction, the Partnership's assets included the net
cash proceeds and the Subordinated Note, subject to the then remaining
obligations to Greenaway Consultants, Inc. and the General Partner, other
closing costs and potential liabilities, if any, associated with pending
litigation with Ameriserve, Inc., a former customer and a major national
distributor of food and related products, which filed for protection under
bankruptcy proceedings in January, 2000. As a debtor in bankruptcy, Ameriserve
claimed that all payments made to creditors during the ninety days prior to the
bankruptcy are preference items, which Ameriserve may recover from its
creditors. As a result, Ameriserve instituted a lawsuit against the Partnership
and other suppliers to recover its estimate of the preference amounts. The
amount sought by Ameriserve in the lawsuit approximated $800,000. The
Partnership filed a response to their motion and entered into a settlement
agreement with Ameriserve in January 2002. Such settlement agreement provided
for a payment by the Partnership of $40,000, which was paid in January 2002 to
settle such claim.
At March 31, 2002 and December 31, 2001, the Partnership had 1,306,890 Class A
limited partnership units issued and outstanding.
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 determinations.
The accompanying unaudited financial statements have been prepared in accordance
with the instructions of Form 10-Q and therefore do not include all information
and footnotes for a fair presentation of financial position, results of
operations and cash flows in conformity with accounting principles generally
accepted in the United States. While the Partnership believes that the
disclosures presented are adequate to make the information not misleading, it is
suggested that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes included in the
Partnership's most recent annual report for the year ended December 31, 2001. A
summary of the Partnership's significant accounting policies is presented on
page F-5 of the Partnership's most recent annual report. There have been no
material changes in the accounting policies followed by the Partnership during
2002.
In the opinion of management, the unaudited information includes all adjustments
(all of which are of a normal recurring nature) which are necessary for a fair
presentation of the condensed consolidated financial position of the Partnership
at June 30, 2002 and the condensed consolidated results of its operations for
the three and six months ending June 30, 2002 and 2001 and the condensed
consolidated cash flows for the six months ending June 30, 2002 and 2001.
Operating results for the period ending June 30, 2002 are not necessarily
indicative of the results that may be expected for the entire year ending
December 31, 2002.
NOTE B - Income Taxes
The Partnership files an information tax return, the items of income and expense
being 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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Partnership is including the following cautionary statement in this Report
on Form 10Q 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
projections 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 demand for Rochester Meats (as the obligor on the
Subordinated Note) products, the ability of Rochester Meats to obtain widespread
market acceptance of its products, the ability of Rochester Meats 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 Rochester Meats'
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 . Management's discussion and analysis set forth
below should be read in conjunction with the accompanying condensed consolidated
financial statements.
Results of Operations
- ---------------------
Three and Six Months ended June 30, 2002 Compared to Three and Six Months ended
- -------------------------------------------------------------------------------
June 30, 2001
- -------------
The Partnership sold substantially all of its operating assets on November 11,
2001 and as such, the three and six months ended June 30, 2002 do not include
the sale of meat products or the costs related thereto.
For the three and six months ended June 30, 2002, the Partnership received
interest income on the subordinated note receivable and cash investments
aggregating $36,118 and $72,077, respectively and incurred operating expenses of
$43,173 and $79,039, respectively. Such operating expenses include primarily
general and administrative expenses associated with audit fees, tax return
preparation fees and transfer agent fees, litigating expenses, and other general
and administrative expenses.
The net loss for the three and six month periods were $(7,055) and $(6,962),
respectively.
For the three and six months ended June 30, 2001, the Partnership was operating
a meat processing facility in Versailles, Ohio. Revenues for such period
consisted of sales of meat products of $8,771,881 and $15,648,160, respectively
and interest and other income of $34,720 and $63,269 respectively. The net loss
for the three and six months ended June 30, 2001 was $(142,724) and $(622,021),
respectively.
Liquidity and Capital Resources
- -------------------------------
At June 30, 2002, the Partnership had working capital of $203,520 versus working
capital of $1,190,648 at December 31, 2001. The Partnership paid a distribution
to limited partners aggregating $980,168 ($0.75 per unit) during June 2002.
Subsequent to the sale of assets to Rochester Meats, the Partnership has no
interest bearing debt outstanding.
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Market Risk
- -----------
There have been no significant changes in market risk since December 31, 2001.
PART II. OTHER INFORMATION
Item 1. Legal Proceeding
Ameriserve, Inc., a former customer and a major national distributor of
food and related products, filed for protection under bankruptcy proceedings in
January, 2000. As a debtor in bankruptcy, Ameriserve has claimed that all
payments made to creditors during the ninety days prior to the bankruptcy are
preference items, which Ameriserve may recover from its creditors. As a result,
Ameriserve instituted a lawsuit against the Partnership and other suppliers to
recover its estimate of the preference amounts.
The amount sought by Ameriserve in the lawsuit approximated $800,000. The
Partnership filed a response to their action. In January 2002, the Partnership
entered into a settlement agreement with Ameriserve, which required a payment of
$40,000 by the Partnership. A payment of $40,000 was made in January 2002
pursuant to the Settlement Agreement.
In December 2001, following the Sale Transaction, Ameriserve notified the
Partnership that Ameriserve discovered what it believes are overpayments to the
Partnership for prior purchases in the approximate amount of $189,000.
Ameriserve subsequently notified the Partnership that if payment of the alleged
overpayment is not received, Ameriserve will file a lawsuit to collect the
amount allegedly owing. The Partnership investigated the alleged overpayments
and the potential liability, if any, for such alleged overpayments. Subsequent
to the close of the second quarter, the Partnership entered into a settlement
agreement with Ameriserve regarding the alleged overpayment. The settlement
agreement provided for the payment to Ameriserve of $70,000. Such payment was
mailed during the third quarter.
There are no other material pending or threatened legal proceedings
involving the Partnership, known to either the Partnership or the General
Partner.
Item 2. Change in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Materially Important Events
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - None
b. Reports on Form 8-K - None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WHITEFORD PARTNERS, L.P.
Date August 14, 2002 By /s/ Kevin T. Gannon
-------------------------------
Kevin T. Gannon, President
Chief Executive Officer
Chief Financial Officer
Gannon Group, Inc.
General Partner
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