-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SQ/Nl/GI8y1ZmjgvUZloWFhLQhXsC+tfc1YqfmQcb8N0+b6Sn2yAKnk9R67NdLdr W4+gzAX0lo0YA1Obw25iJw== 0000760775-96-000017.txt : 19970310 0000760775-96-000017.hdr.sgml : 19970310 ACCESSION NUMBER: 0000760775-96-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960928 FILED AS OF DATE: 19961108 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WLR FOODS INC CENTRAL INDEX KEY: 0000760775 STANDARD INDUSTRIAL CLASSIFICATION: POULTRY SLAUGHTERING AND PROCESSING [2015] IRS NUMBER: 541295923 STATE OF INCORPORATION: VA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17060 FILM NUMBER: 96656908 BUSINESS ADDRESS: STREET 1: P O BOX 7000 CITY: BROADWAY STATE: VA ZIP: 22815 BUSINESS PHONE: 7038674001 MAIL ADDRESS: STREET 1: 800 CO OP DRIVE CITY: TIMBERVILLE STATE: VA ZIP: 22853 FORMER COMPANY: FORMER CONFORMED NAME: WAMPLER LONGACRE ROCKINGHAM INC DATE OF NAME CHANGE: 19881114 FORMER COMPANY: FORMER CONFORMED NAME: WAMPLER LONGACRE INC DATE OF NAME CHANGE: 19880209 10-Q 1 QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the quarterly period ended September 28, 1996 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 0-17060 WLR FOODS, INC. (Exact name of Registrant as specified in its charter) Virginia 54-1295923 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.) P.O. Box 7000 Broadway, Virginia 22815 (Address including Zip Code of Registrant's principal executive offices) (540) 896-7001 (Registrant's telephone number, including area code) Indicate by cross 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 () The number of shares outstanding of Registrant's Common Stock, no par value, at November 6, 1996 was 17,728,556 shares. PART 1. FINANCIAL INFORMATION Item 1. Financial Statements WLR FOODS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) Thirteen Weeks Ended In thousands, except per share data September 28, September 30, 1996 1995 Net sales $272,135 $250,798 Cost of sales 258,514 215,811 ------- -------- Gross profit 13,621 34,987 Selling, general and administrative expenses 23,242 26,040 ------- -------- Operating income (loss) (9,621) 8,947 Other expense: Interest expense 3,080 2,085 Miscellaneous expense (income) 25 (141) ------- -------- Other expense 3,105 1,944 ------- -------- Earnings (loss) before income taxes and minority interest (12,726) 7,003 Income tax expense (benefit) (4,644) 2,691 Minority interest in net earnings of consolidated subsidiary 13 16 ------- -------- NET EARNINGS ($8,095) $4,296 ======= ======== NET EARNINGS PER COMMON SHARE (0.46) $0.25 AVERAGE COMMON SHARES OUTSTANDING 17,697 17,235 DIVIDENDS DECLARED PER COMMON SHARE (Note 3) - $0.06 See accompanying Notes to Consolidated Financial Statements.
2 WLR FOODS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
In thousands September 28, June 29, 1996 1996 (unaudited) ASSETS Current assets Cash and cash equivalents $438 $724 Accounts receivable, less allowance for doubtful accounts of $710 and $708 79,979 79,932 Inventories (Note 2) 161,948 171,946 Income taxes receivable 8,676 10,802 Other current assets 3,993 4,275 -------- -------- Total current assets 255,034 267,679 Property, plant and equipment, net 171,966 176,691 Other assets 6,675 6,751 -------- -------- TOTAL ASSETS $433,675 $451,121 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes payable to banks $32,767 $30,776 Current maturities of long-term debt 7,895 7,983 Excess checks over bank balances 18,340 14,788 Trade accounts payable 32,241 31,989 Accrued expenses 23,656 23,887 Deferred income taxes 12,054 12,574 Other current liabilities - 1,061 -------- -------- Total current liabilities 126,953 123,058 Long-term debt, excluding current maturities 125,302 138,510 Deferred income taxes 8,406 8,849 Minority interest in consolidated subsidiary 565 552 Other liabilities and deferred credits 3,472 3,392 Common stock subject to repurchase 17,750 17,750 Shareholders' equity Common stock, no par value 61,719 61,407 Additional paid-in capital 2,974 2,974 Retained earnings 86,534 94,629 -------- -------- Total shareholders' equity 151,227 159,010 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $433,675 $451,121 ======== ======== See accompanying Notes to Consolidated Financial Statements.
3 WLR FOODS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) Thirteen Weeks Ended Dollars in thousands September 28, September 30, 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss) $(8,095) $4,296 Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization 7,203 6,631 (Gain) on sale of property, plant and equipment (92) (26) Deferred income taxes (963) 125 Other, net 195 102 Change in operating assets and liabilities: (net of acquired assets) Increase in accounts receivable (47) (7,106) Decrease in inventories 9,998 2,578 Decrease in other current assets 2,408 1,817 Increase in accounts payable 252 2,327 Decrease in accrued expenses and other (151) (1,471) ------- ------- Net cash provided by operating activities 10,708 9,273 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (2,441) (5,856) Cash used in acquisition, (including costs) - (10,535) Proceeds from sales of property, plant and equipment 55 46 (Investment in) disposal of other assets (119) 63 Minority interest in net earnings of consolidated subsidiary 13 16 ------- ------- Net cash used in investing activities (2,492) (16,266) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term debt (13,296) (9,197) Notes payable to banks (net of principal payments) 1,991 7,300 Increase in checks drawn not presented 3,552 11,075 Issuance of common stock 312 259 Repurchase of common stock - (1,733) Dividends paid (1,061) (1,034) ------- ------- Net cash provided by (used in) financing activities (8,502) 6,670 ------- ------- Decrease in cash and cash equivalents (286) (323) Cash and cash equivalents at beginning of fiscal year 724 706 ------- ------- Cash and cash equivalents at end of period $438 $383 ======= ======= Supplemental cash flow information: Cash paid (received) for Interest $1,659 $1,140 Income taxes refunded (3,899) (1,494) The Company considers all highly liquid investments with an original maturity of 3 months or less at purchase to be cash equivalents. Non cash transactions: The Company issued 411,216 shares of common stock valued at $5.4 million, for the acquisition of New Hope Feeds, Inc. on September 29, 1995. See accompanying Notes to Consolidated Financial Statements.
4 Notes to Consolidated Financial Statements WLR Foods, Inc. and Subsidiaries 1. Accounting Policies The consolidated financial statements presented herein, include the accounts of WLR Foods, Inc. and its wholly-owned and majority-owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. The consolidated balance sheet as of September 28, 1996, and the consolidated statements of operations and cash flows for the thirteen weeks ended September 28, 1996 and September 30, 1995 are unaudited. In the opinion of management, all adjustments necessary for fair presentation of such consolidated financial statements have been included. Such adjustments consisted only of normal recurring accruals and the use of estimates. Interim results are not necessarily indicative of results for the entire fiscal year. The consolidated financial statements and notes are presented in conformity with the requirements of Form 10-Q and do not contain certain information included in the Company s annual consolidated financial statements and notes. The Company s unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Annual Report to Shareholders for the fiscal year ended June 29, 1996. In both, the accounting policies and principles used are consistent in all material respects. Certain fiscal 1996 amounts have been reclassified to conform with fiscal 1997 presentations. 2. Inventories A summary of inventories at September 28, 1996 and June 29, 1996 follows: (unaudited) Dollars in thousands September 28, June 29, 1996 1996 Live poultry and breeder flocks $71,945 $71,263 Processed poultry and meat products 58,543 66,895 Packaging supplies, parts and other 17,340 18,046 Feed, grain and eggs 14,120 15,742 -------- -------- Total inventories $161,948 $171,946 ======== ======== 3. Subsequent Event On September 30, 1996, the Board of Directors declared the regular quarterly dividend of $0.06 cents per share payable on November 1, 1996 to shareholders of record on October 11, 1996. 4. Debt Refinancing and Modification The Company is in negotiations with its lenders to refinance the revolving credit facility and expects to conclude such negotiations shortly. The Company is also negotiating with its senior note holders to restructure the financial covenants of those debt agreements. 5 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations General WLR Foods, Inc. (the Company) is a fully integrated poultry production, processing and marketing business with operations in Virginia, West Virginia, Pennsylvania and North Carolina. For the third consecutive quarter, the Company experienced challenging business conditions. Grain costs in the poultry processed during the quarter remained high, up approximately $30 million as compared to the same quarter last year after adjusting for changes in volume. Furthermore, grain costs were over $10 million higher as compared to prices in the fourth quarter of fiscal 1996. Prices for corn and soybean meal have decreased substantially since the end of the quarter, the result of improving expectations for the fall harvest of these grains. In early September, severe weather from Hurricane Fran disrupted operations and damaged facilities in North Carolina, Virginia and West Virginia. However, out-of-pocket costs after anticipated insurance settlements are not expected to be material. Results of operations Net sales rose $21.3 million or 8.5%, while overall sales volumes increased 5.1% for the quarter ended September 28, 1996 compared to the same period last year. Chicken sales volume was up 18 %, largely due to the Goldsboro acquisition which was not reflected in the results of operations in the first quarter last year. Additionally, the Company s export volume was up 46% over the same period last year. The average realized sales price for chicken was about the same compared to the first quarter last year. Commodity turkey sales volume increased nearly 8%, and average realized sales prices increased about 2%. Further processed sales volume declined nearly 19% compared to the same period last year, while average realized sales prices rose almost 12%. Costs of sales increased $42.7 million or 20% this quarter largely due to the $30 million in higher grain costs discussed above. Delivered costs for corn and soybean meal averaged 53% and 51% higher, respectively, than last year s first quarter. Prices of both commodities have decreased substantially from this summer s record highs in response to positive news about the harvest. Due to the length of the growing cycle of the Company s poultry, it takes approximately three months before the cost of birds arriving at processing facilities is significantly impacted by changes in grain costs. Gross profit decreased $21.4 million or 61%, and the gross profit margin percentage from 14.0% to 5.0%. The decrease was the result of higher grain costs mentioned above and inadequate poultry prices due to excess supplies of poultry and other competing meats. Poult Enteritis Mortality Syndrome (PEMS), a disease also referred to as spiking mortality, continues to affect the North Carolina turkey operations. The impact of PEMS in the first and second quarters of fiscal 1997 is expected to be approximately the same as last year. Selling, general and administrative expenses decreased $2.8 million compared to the first quarter last year, a drop from 10.4% to 8.5% as a percentage of sales. The cut in spending resulted from a combination of cost reductions and a decrease in volume related costs associated with the decline in further processed sales. Furthermore, sales generated by the Goldsboro acquisition without adding significantly to expenses, contributed to the decline in the ratio of selling, general and administrative costs to sales. Interest expense was up $1.0 million, due to higher levels of borrowing necessary to carry increased working capital levels. Income taxes decreased from an expense of $2.7 million in last year s first quarter to a benefit of $4.6 million due to the current first quarter loss. The tax rate decreased from 38.4% last year to 36.5% due to limitations on the use of operating losses in some states where the Company does business. 6 Net earnings decreased from a profit of $4.3 million in the first quarter of last year to a loss of $8.1 million in the first quarter of this year. Financial Condition and Liquidity WLR Foods closed the first quarter of fiscal 1997 with a strong balance sheet. Total inventory decreased $10.0 million compared to the end of fiscal 1996. Most of the decrease was in finished goods where holdings were reduced by $7.2 million. Management expects to see continued improvement in debt levels over the near-term, as a result of lower grain costs and a further reduction in finished product inventory. Net working capital was $128.1 million, down from $144.6 million at June 29, 1996, due largely to lower inventory levels and the increase in current liabilities. The ratio of total debt to total capital, including common stock subject to repurchase as debt, was 54.9% down from 55.1% at the end of fiscal 1996. Total debt decreased by $11.3 million mainly as a result of lower inventory levels at the end of the period. Capital Resources The Company's capital spending for the quarter was $2.4 million, primarily for replacements of existing equipment, safety requirements, or projects with rapid pay backs. Depreciation expense was $7.2 million. The projected capital budget for fiscal 1997 remains at $15 million, although this amount may be increased based on long-term strategic projects and industry conditions. On September 30, 1996, the Board of Directors approved the regular quarterly dividend of $0.06 per share payable on November 1, 1996. Management negotiated a waiver of the fixed charge covenant for the quarter ended September 28, 1996 from its lenders. The Company is continuing discussions to modify certain of its loan agreements and to replace the revolving credit facility with a new facility in the near future. The new revolving credit facility is expected to give the Company the flexibility necessary to meet the demands of the current difficult operating environment. The Company remains in material compliance with all regulatory requirements at the present time. WLR Foods will adopt SFAS No. 123, Accounting for Stock Based Compensation in fiscal 1997, will elect the disclosure provisions of the statement and continue to account for stock-based compensation in accordance with APB Opinion No. 25. SFAS No. 121 Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of will also be adopted in fiscal 1997. These accounting standards are not anticipated to materially impact the financial position of the Company or results of operations at the time of adoption. Company performance expectations or forward looking statements expressed from time to time are always subject to the possible material impact of any risks of the business. These risks include weather conditions impacting grain production and harvesting and live growout of poultry; feed supplies and prices; supplies and selling prices of poultry and competing meats; consumer preferences; governmental and regulatory intervention in the export/import of poultry; changes in the regulations governing production processes; and fluctuations in the general business climate. 7 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Company's annual meeting of shareholders was held on October 26, 1996 at 10:00 a.m. in Bridgewater, Virginia. The voting results were as follows: ______________________________________________________________________________ Votes Broker Proposal For Against Withheld Abstention Non-Votes ______________________________________________________________________________ #1 Election of Class C Directors (to serve until 1999 Annual Meeting of Shareholders) George E. Bryan 13,763,112 597,361 Charles L. Campbell 14,015,159 345,314 William H. Groseclose 14,014,396 346,077 William D. Wampler 14,015,436 345,037 #2 Ratification of Appointment of Independent Auditors 14,327,167 17,660 15,647 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule (b) Form 8-K Reporting Date July 26, 1996. Item Reported - Item 5, Other Events. WLR Foods, Inc. reported the change of the name of its wholly-owned subsidiary from Wampler-Longacre, Inc. to Wampler Foods, Inc. 8 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, this report is signed this 8th day of November, 1996 by the Registrant's principal financial officer who is also authorized by the Registrant to sign on its behalf. WLR FOODS, INC. __/s/ Robert T. Ritter__________ Robert T. Ritter, Chief Financial Officer and duly authorized signator for Registrant 9 EXHIBIT INDEX Exhibit No. Description 27 Financial Data Schedule 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 US DOLLARS 3-MOS JUN-28-1997 JUN-30-1996 SEP-28-1996 1 438 0 79,979 710 161,948 255,034 345,108 173,142 433,675 126,953 133,197 0 0 79,469 89,508 433,675 272,135 272,135 258,514 258,514 23,242 0 3,080 (12,726) (4,644) (8,095) 0 0 0 (8,095) (.46) (.46)
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