-----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, Il4HOpe5j4q/R71q3o2COTKggvvZA7OzwALgAFxK6Gi7SdgWfovGHxivgcll62x+ cPYVcEvyTdfs/V78tWVzbA== 0000760775-97-000161.txt : 19971114 0000760775-97-000161.hdr.sgml : 19971114 ACCESSION NUMBER: 0000760775-97-000161 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970927 FILED AS OF DATE: 19971112 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: SEC FILE NUMBER: 000-17060 FILM NUMBER: 97714734 BUSINESS ADDRESS: STREET 1: P O BOX 7000 CITY: BROADWAY STATE: VA ZIP: 22815 BUSINESS PHONE: 5408967001 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 27, 1997 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, 1997 was 16,290,095 shares. PART I. 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 27, SEPTEMBER 28, 1997 1996 Net sales $251,552 $272,135 Cost of sales 229,324 258,503 -------- -------- Gross profit 22,228 13,632 Selling, general and administrative expenses 25,269 23,242 -------- -------- Operating loss (3,041) (9,610) Other expense (income): Interest expense 4,367 3,080 Miscellaneous expense (income) (554) 36 -------- -------- Other expense 3,813 3,116 -------- -------- Loss before income taxes and minority interest (6,854) (12,726) Income tax benefit (2,468) (4,644) Minority interest in net earnings of consolidated subsidiary 66 13 -------- -------- NET LOSS ($4,452) ($8,095) ====== ====== NET LOSS PER COMMON SHARE ($0.27) ($0.46) AVERAGE COMMON SHARES OUTSTANDING 16,242 17,697 CASH DIVIDENDS DECLARED PER COMMON SHARE (Note 5) -- -- See accompanying Notes to Consolidated Financial Statements.
2 WLR FOODS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
Dollars in thousands September 27, June 28, 1997 1997 ASSETS (unaudited) Current Assets Cash and cash equivalents $260 $283 Accounts receivable, less allowance for doubtful accounts of $1,237 and $708 68,389 72,462 Inventories (Note 2) 160,010 165,551 Income taxes receivable - 4,567 Other current assets 2,248 2,301 -------- -------- Total current assets 230,907 245,164 Property, plant and equipment, net 155,952 159,426 Deferred income taxes 7,202 4,996 Other assets 6,386 7,142 ------- ------- TOTAL ASSETS $400,447 $416,728 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Notes payable to banks -- $4,031 Current maturities of long-term debt $196,370 186,391 Excess checks over bank balances 6,165 12,118 Trade accounts payable 32,603 35,005 Accrued expenses 24,521 26,657 Deferred income taxes 10,229 12,359 -------- -------- Total current liabilities 269,888 276,561 Long-term debt, excluding current maturities 4,631 5,040 Minority interest in consolidated subsidiary -- 592 Other liabilities and deferred credits 3,607 3,539 Common stock subject to repurchase -- 4,438 Shareholders' equity: Common stock, no par value 65,379 64,206 Additional paid-in capital 2,974 2,974 Retained earnings 53,968 59,378 -------- -------- Total shareholders' equity 122,321 126,558 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $400,447 $416,728 ======== ======== 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 27, September 28, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ($4,452) ($8,095) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 6,658 7,203 Gain on sale of property, plant and equipment (305) (92) Deferred income taxes (4,336) (963) Other, net (159) 208 Change in operating assets and liabilities: Decrease(increase) in accounts receivable 4,073 (47) Decrease in inventories 5,541 9,998 Decrease in other current assets 4,620 2,408 (Decrease)increase in accounts payable (2,402) 252 Decrease in accrued expenses and other (2,068) (151) ------ ------ Net Cash Provided by Operating Activities 7,170 10,721 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (3,994) (2,441) Proceeds from sales of property, plant and equipment 1,115 55 (Investments in) disposals of other assets 323 (119) ------ ------ Net Cash Used in Investing Activities (2,556) (2,505) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of long-term and revolver debt, net of principal payments on long-term debt 9,570 (13,296) Notes payable to banks (net of principal payments) (4,031) 1,991 Increase (decrease) in checks drawn not presented (5,953) 3,552 Issuance of common stock 215 312 Repurchase of common stock (4,438) -- Dividends paid -- (1,061) ------ ------ Net Cash Used in Financing Activities (4,637) (8,502) ------ ------ Decrease in Cash and Cash Equivalents (23) (286) Cash and Cash Equivalents at Beginning of Fiscal Year 283 724 ------ ------ Cash and Cash Equivalents at End of Period $260 $438 ====== ====== Supplemental cash flow information: Cash paid (refunded) for: Interest $3,105 $1,659 Income taxes refunded (3,310) (3,899) The Company considers all highly liquid investments with maturities of 3 months or less at purchase to be cash equivalents. 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 subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. The consolidated balance sheet as of September 27, 1997, and the consolidated statements of operations for the thirteen weeks ended September 27, 1997 and September 28, 1996, and the consolidated statements of cash flows for the thirteen weeks ended September 27, 1997 and September 28, 1996 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. 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 for Form 10-Q and accordingly, 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 28, 1997. In both, the accounting policies and principles used are consistent in all material respects. Certain fiscal 1997 amounts have been reclassified to conform with fiscal 1998 presentations. 2. Inventories A summary of inventories at September 27, 1997 and June 28, 1997 follows: (unaudited) Dollars in thousands September 27, June 28, 1997 1997 ------------- -------- Live poultry and breeder flocks $68,427 $74,984 Processed poultry and meat products 56,296 53,981 Packaging supplies, parts and other 16,052 17,188 Feed, grain and eggs 19,235 19,398 -------- ------- Total inventories $160,010 $165,551 ======== ======== 3. Acquisition of Common Stock The Company completed the final repurchase of stock from Cuddy Farms, Inc. early in this quarter by purchasing approximately 446,000 shares of stock for $10 per share. 4. Debt Refinancing and Modification The Company's credit agreements contain covenants which require the maintenance of minimum tangible net worth, as defined, and certain other financial ratios. The Company has classified $192 million of debt under these agreements as current liabilities since the waivers, related to certain covenants, which were obtained previously granted 5 the Company relief only for the year ended June 28, 1997. As expected, as of the quarter ended September 27, 1997, the Company was not in compliance with the financial covenants in its credit agreements. In the absence of waivers, the lenders have the right to increase interest rates and/or require the repayments of such debt prior to normal maturity. Since the Company is negotiating amendments to the revolving credit facility and is actively exploring a refinancing to replace a portion of its existing debt, it has not requested waivers covering the period ended September 27, 1997. 5. Stock Dividend On June 24, 1997, the Company's Board of Directors declared a stock dividend that was distributed on August 1, 1997 to shareholders of record on July 11, 1997. In lieu of the regular cash dividend, the dividend was paid in stock with .0064 shares being distributed for each share of common stock outstanding. Item 2. Management s Discussion and Analysis of Financial Condition and Results of Operations 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. Despite a reduction in revenues for the quarter versus the same quarter last year, the Company reported a $6.6 million reduction in its operating loss. Improved performance for the first quarter was the result of lower feed costs, better live performance and an improved mix of products sold in chicken, and stronger earnings from the Company s Cassco Ice & Cold Storage subsidiary. The Company has continued to be negatively impacted by higher than normal feed costs since the third quarter of fiscal year 1996. Although feed costs decreased by approximately $18 million this quarter as compared to the same quarter last year, feed costs remained significantly above the more normal levels last seen in fiscal year 1995. Corn prices decreased, but were offset by higher soybean meal costs. Results of Operations Net sales for the quarter decreased 7.5% to $251.6 million as compared to $272.1 million for the same quarter last year. Chicken revenues for the quarter increased as compared to last year s first quarter primarily due to an increase in volume sold. This was partially offset by a decline in prices this quarter in comparison to strong pricing last year. Turkey revenues were down as prices and volume each declined from the same quarter last year. Gross profit for the first quarter was $22.2 million or 8.8% of sales, an increase of $8.6 million, as compared to $13.6 million or 5.0% of sales in the first quarter of fiscal year 1997. This improvement was primarily attributable to a decrease of approximately $18 million in feed costs offset by sales price decreases in both chicken and turkey. Selling, general and administrative expenses increased $2.0 million or 8.7% compared to the first quarter last year, or from 8.5% to 10.0% as a percent of sales. The increase was due to higher program costs related to sales of further processed products and increased freight costs driven by larger volumes of turkey export sales. 6 Interest expense was $1.3 million higher for the quarter due primarily to increased borrowing levels. For the quarter, the income tax benefit decreased $2.2 million from fiscal year 1997 levels due to the improved operating results. The Company had a net loss of $4.5 million or $0.27 per share compared to a net loss of $8.1 million or $0.46 per share for the same period last year. The combined effect of fewer shares outstanding and higher interest costs resulting from the acquisition of the Company s common stock held by Cuddy Farms, Inc. increased the loss per share in the most recent quarter by approximately four cents per share. Financial Condition and Liquidity Total inventory was $5.5 million lower compared to the end of fiscal year 1997. All of the decrease was in live poultry where inventories were reduced by $6.6 million. Debt levels increased during the first quarter due to the final repurchase of stock held by Cuddy Farms, Inc., and the investment in the hatchery project at the Goldsboro, NC chicken complex. The ratio of total debt to total capital, including common stock subject to repurchase as debt, was 62.2%, up from 61.2% at the end of fiscal 1997. The Company s credit agreements contain covenants which require the maintenance of minimum tangible net worth, as defined, and certain other financial ratios. The Company has classified $192 million of debt under these agreements as current liabilities since the waivers, related to certain covenants, which were obtained previously, granted the Company relief only for the year ended June 28, 1997. As expected, as of the quarter ended September 27, 1997, the Company was not in compliance with the financial covenants in its credit agreements. In the absence of waivers, the lenders have the right to increase interest rates and/or require the repayment of such debt prior to normal maturity. Since the Company is negotiating amendments to the revolving credit facility and is actively exploring a refinancing to replace a portion of its existing debt, it has not requested waivers covering the period ended September 27, 1997. Capital Resources The Company s capital spending for the quarter was $4.0 million, primarily for the normal replacement of existing equipment, safety requirements, and projects with rapid pay backs (including the new hatchery and related equipment at the Goldsboro complex). Projected capital spending for fiscal 1998 is expected to be approximately $20 to $25 million. Depreciation expense during the quarter was $6.7 million. The Company remains in material compliance with all regulatory requirements at the present time. WLR Foods will adopt FASB Statement 128, "Earnings Per Share" which serves to simplify the computation of earnings per share, during the second fiscal quarter of 1998 in the current fiscal year. The Company will also adopt FASB Statement 129, "Disclosure of Information about Capital Structure" which requires certain disclosures about capital structure. Neither statement is expected to have a material impact on the Company s operations or financial position. In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. SFAS 131 requires that companies report certain information about operating segments in complete sets of financial statements and in condensed financial statements of interim periods issued to shareholders. Both SFAS Nos. 130 and 131 are effective for fiscal years beginning after December 15, 1997. 7 The Company does not believe the adoption of these Statements of Financial Accounting Standards will have a significant impact on the Company s financial condition or results of operations. 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 which could cause actual results to differ materially from those expected. 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. 8 PART II. OTHER INFORMATION Item 1. Legal Proceedings On November 10, 1997, WLR Foods, Inc. and its wholly-owned subsidiary, WLR Poultry Products, Inc., obtained summary judgment in their pending litigation with Case Foods, Inc. and its subsidiary (Case). The complaint had alleged that the Company's 1995 acquisition of certain assets of New Hope Feeds, Inc. and its affiliates (New Hope) violated the terms of a right of first refusal previously granted by New Hope to Case. See the Company's Form 10-K for the year ended June 28, 1997, filed with the Securities and Exchange Commission on September 26, 1997. The Company anticipates that all appeal rights will be extinguished upon consummation of a pending settlement agreement among Case, the Company and other co-defendants. Item 3. Defaults Upon Senior Securities The Company s Unsecured Bank Revolving Credit Facility, 9.41% Senior Unsecured Notes and 7.47% Senior Unsecured Notes contain covenants which require the maintenance of minimum tangible net worth, as defined, and certain other financial ratios. As of September 27, 1997, the Company had outstanding debt under these agreements of approximately $195 million. As expected, as of the quarter ended September 27, 1997, the Company was not in compliance with the financial covenants in these credit agreements. In the absence of waivers, the lenders have the right to increase interest rates and/or require the repayment of such debt prior to normal maturity. Since the Company is negotiating amendments to the revolving credit facility and is actively exploring a refinancing to replace a portion of its existing debt, it has not requested waivers covering the period ended September 27, 1997. All interest and principal payments on the Company s debt have continued to be made on a timely basis. Item 4. Submission of Matters to a Vote of Security Holders The Company's annual meeting of shareholders was held on October 25, 1997 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 A Directors (to serve until the 2000 Annual Meeting of Shareholders) J. Craig Hott 12,097,209 295,807 Herman D. Mason 12,103,757 289,259 Charles W. Wampler, Jr. 12,097,517 295,499 #2 Ratification of Appointment of Independent Auditor 12,327,375 42,906 22,735 9 Item 5. Other Information James L. Mason, the President of the Company's Wampler Foods, Inc. subsidiary, has left the Company. In addition to his current responsibilities as President and Chief Executive Officer of WLR Foods, James L. Keeler will assume Mr. Mason's position. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule 99 Press Release (b) Form 8-K Reporting Date August 21, 1997. Item Reported - Item 5, Other Events. WLR Foods, Inc. reported that it had obtained waivers from its lenders for noncompliance as of June 28, 1997, of certain financial covenants. The Company also announced it is exploring the private placement of up to $150,000,000 of senior subordinated notes. Reporting Date October 9, 1997. Item Reported - Item 5, Other Events. WLR Foods, Inc. reported that it was suspending its quarterly stock dividends in response to concerns about record keeping and tax reporting issues, and that it would instead consider stock dividends on an annual basis. 10 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, this report is signed this 12th day of November, 1997, 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. 11 EXHIBIT INDEX Exhibit No. Description 27 Financial Data Schedule 99 Press Release 12 ' EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS JUN-27-1998 SEP-27-1997 260 0 68,389 1,237 160,010 230,907 351,686 195,734 400,447 269,888 201,001 0 0 65,379 56,942 400,447 251,552 251,552 229,324 229,324 25,269 0 4,367 (6,854) (2,467) (4,452) 0 0 0 (4,452) (0.27) (0.27)
EX-99 3 PRESS RELEASE Exhibit 99 FOR IMMEDIATE RELEASE Investor Contact: Robert Ritter Chief Financial Officer 540-896-7001 Media Contact: Gail Price, Director of Corporate Communication 540-896-0406 540-743-4007 (Evening) WLR FOODS ANNOUNCES ORGANIZATIONAL CHANGES Broadway, VA, November 10, 1997 -- WLR Foods, Inc. (NASDAQ:WLRF) President and Chief Executive Officer James L. Keeler today announced several management changes effective immediately. In making the announcement, Mr. Keeler stated, "As we continually improve our competitive position and strive to enhance shareholder value, we must streamline decision making and increase our effectiveness. These management changes will move us closer to these goals." At Wampler Foods, Inc., the poultry subsidiary, Walter F. Shafer, III, has been promoted to Vice President of Chicken Operations and Ronald E. Morris has been promoted to Vice President of Turkey Operations. Both will join the Operations Committee and report directly to Mr. Keeler. Separately, John J. (Jack) Broaddus has been named President of the Cassco Ice & Cold Storage, Inc. subsidiary, and will also report directly to Mr. Keeler. Neil D. Showalter has been appointed Vice President of Finance for WLR Foods. In this newly created position, Mr. Showalter will report directly to Robert T. Ritter, Chief Financial Officer. Mr. Ritter has additionally been named a vice president of WLR Foods. James L. Mason, previously President of Wampler Foods, has left his position. Mr. Keeler commended Mr. Mason "for his many years of dedicated service to Wampler Foods and the poultry industry. We appreciate the contributions Jim has made to our company through the years." In addition to Mr. Keeler s current responsibilities, he will also serve as President of Wampler Foods, Inc. WLR Foods, Inc. is the parent of Wampler Foods, Inc. and Cassco Ice and Cold Storage, Inc. Wampler Foods, the seventh largest poultry company, is a fully integrated processor and marketer of high quality turkey and chicken products sold nationally and internationally, primarily under the Wampler Foods(R) label. Cassco is a public refrigerated warehousing and retail ice company serving the mid- Atlantic region. ### -----END PRIVACY-ENHANCED MESSAGE-----