-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, IWU01RHH+KOqZkpwbNFE/r0bdALlt9LfLkh5KjTfSXY7BG+Y0VHNUxH+Y1HK+OYd oTI7dMrBdt3kYV2ftGZgBQ== 0000760775-94-000010.txt : 19940520 0000760775-94-000010.hdr.sgml : 19940520 ACCESSION NUMBER: 0000760775-94-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940404 FILED AS OF DATE: 19940516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WLR FOODS INC CENTRAL INDEX KEY: 0000760775 STANDARD INDUSTRIAL CLASSIFICATION: 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: 94528806 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 10-Q TEXT 1 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 April 2, 1994 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) (703) 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 May 12, 1994 was 10,971,776 shares. Total Number of Sequentially Numbered Pages is 13 2 WLR FOODS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (unaudited) Thirteen Weeks Ended Dollars in thousands, April 2, 1994 March 27, 1993 except per share data ______________________________________________________________________ Net sales $171,090 $149,575 Cost of sales 152,559 133,432 _______ _______ Gross profit 18,531 16,143 Selling, general & administrative expenses 15,360 13,262 _______ _______ Operating income 3,171 2,881 Other expense: Interest expense 1,273 1,088 Miscellaneous expense (income) (225) (262) _______ ______ Other expense 1,048 826 _______ ______ Earnings before income taxes and minority interest 2,123 2,055 Income tax expense 817 781 Minority interest in net earnings (loss) 3 5 of consolidated subsidiaries _______ ______ NET EARNINGS $1,303 $1,269 LESS PREFERRED DIVIDENDS DECLARED --- 357 ______ ______ NET EARNINGS AVAILABLE TO COMMON SHAREHOLDERS $1,303 $ 912 ====== ====== NET EARNINGS PER COMMON SHARE $ 0.12 $ 0.10 ====== ====== DIVIDENDS DECLARED PER COMMON SHARE $ .08 $ 0.08 AVERAGE COMMON SHARES OUTSTANDING 10,967,244 9,228,258 See accompanying Notes to Consolidated Financial Statements. 3 WLR FOODS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (unaudited) Thirty-Nine Weeks Ended Dollars in thousands, April 2, 1994 March 27, 1993 except per share data _______________________________________________________________________________ Net sales $532,433 $436,942 Cost of sales 468,369 380,792 _______ _______ Gross profit 64,064 56,150 Selling, general & administrative expenses 45,699 40,377 _______ _______ Operating income 18,365 15,773 Other expense: Interest expense 3,775 2,579 Miscellaneous expense (income) (443) (444) _______ ______ Other expense 3,332 2,135 _______ ______ Earnings before income taxes and minority interest 15,033 13,638 Income tax expense 5,788 5,149 Minority interest in net earnings of consolidated subsidiary 25 18 _____ ______ NET EARNINGS $9,220 $8,471 LESS PREFERRED DIVIDENDS DECLARED --- 1,389 ______ ______ NET EARNINGS AVAILABLE TO COMMON SHAREHOLDERS $9,220 $7,082 ====== ====== NET EARNINGS PER COMMON SHARE $ 0.84 $ 0.81 ====== ====== DIVIDENDS DECLARED PER COMMON SHARE $ 0.24 $ 0.24 AVERAGE COMMON SHARES OUTSTANDING 10,962,059 8,763,675 4 WLR FOODS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Dollars in thousands (unaudited) April 2, 1994 July 3, 1993 __________________________________________________________________________ ASSETS Current Assets Cash and cash equivalents $ 411 $ 680 Accounts receivable, less allowance for 42,266 41,090 doubtful accounts of $367 and $363, respectively Inventories (Note 2) 82,905 76,728 Other current assets 10,292 1,309 _______ _______ Total current assets 135,874 119,807 Investments 1,025 720 Property, plant and equipment, net 139,892 140,540 Other assets 4,069 4,559 _______ _______ TOTAL ASSETS $280,860 $265,626 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Notes payable to banks $ 10,600 $ 12,900 Current maturities of long-term debt 6,275 6,381 Excess checks over bank balances 7,623 7,213 Trade accounts payable 20,396 18,451 Accrued expenses 12,891 15,687 Federal and state income taxes --- 790 Current deferred taxes 9,097 --- Other current liabilities 878 876 ______ ______ Total current liabilities 67,760 62,298 Long-term debt, excluding current maturities 51,813 52,253 Deferred income taxes 9,597 6,190 Minority interest in consolidated subsidiary 464 441 Other liabilities and deferred credits 2,015 2,189 ______ ______ TOTAL LIABILITIES 131,649 123,371 Shareholders' equity: Common stock, no par value. Authorized 60,920 60,552 100,000,000 shares; issued and outstanding 10,970,248 and 10,951,069 shares, respectively. Additional paid-in capital 3,253 3,253 Retained earnings 85,038 78,450 _______ _______ Total shareholders' equity 149,211 142,255 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $280,860 $265,626 ======= ======= See accompanying Notes to Consolidated Financial Statements. 5 WLR FOODS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Thirty-nine Weeks Ended Dollars in thousands April 2, 1994 March 27, 1993 __________________________________________________________________________ CASH FLOWS FROM OPERATING ACTIVITIES: Net Earnings $ 9,220 $ 8,471 Adjustments to reconcile net earnings to net cash Provided by operating activities: Depreciation and amortization 15,901 12,544 Gain on sale of property, plant and equipment (46) (2) Deferred income taxes 10,494 103 Other, net 676 166 Change in operating assets and liabilities: (Increase) decrease in accounts receivable (1,176) 4,166 (Increase) in inventories (6,177) (6,488) (Increase) in other current assets (8,983) (35) Increase in accounts payable 1,945 142 Decrease in accrued expenses and other (2,841) (1,285) ________ _______ Net Cash Provided by Operating Activities 19,013 17,782 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (13,700) (26,701) Proceeds from sale of property, plant and equipment 83 80 Cash used in acquisition --- (1,214) Investments in other assets (491) (680) Minority interest in net earnings of consolidated subsidiary 23 14 ______ ______ Net Cash Used in Investing Activities (14,085) (28,501) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term debt (1,044) (677) Proceeds from long-term debt --- 10,200 Notes payable to banks (net of principal (2,300) (6,068) payments Increase in checks drawn not presented 410 (116) Issuance of stock 368 41,441 Repurchase of preferred stock --- (29,507) Dividends paid (2,631) (4,433) _______ _______ Net Cash Provided by (Used in) Financing Activities (5,197) 10,840 _______ _______ Increase (Decrease) in Cash and Cash Equivalents 269 121 Cash and Cash Equivalents at Beginning of Fiscal Year 680 361 _______ _______ Cash and Cash Equivalents at End of Period $ 411 $ 482 ======= ======= 6 Supplemental cash flow information: Cash paid for: Interest $ 2,907 $ 2,537 Income taxes 2,193 6,104 The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The adoption of SFAS 109 necessitated the reclassification of certain amounts of deferred tax which had been previously netted with the related assets and liabilities under APB Opinion 11. The following is a summary of those reclassifications: Fixed assets $1,589 Long-term debt 498 Current taxes payable (857) Current deferred taxes 413 Long-term deferred taxes 1,535 These reclassifications are only reported to reconcile the Statement of Cash Flows for the period ended April 2, 1994. See accompanying Notes to Consolidated Financial Statements. 7 WLR FOODS, INC. Notes to Consolidated Financial Statements 1. Accounting Policies The consolidated financial statements include the accounts of WLR Foods, Inc. and its wholly-owned and majority-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. The consolidated balance sheet as of April 2, 1994, the consolidated statements of earnings for the thirteen week and thirty-nine week periods ended April 2, 1994 and March 27, 1993, and the consolidated statements of cash flows for the thirty-nine week periods ended April 2, 1994 and March 27, 1993 are unaudited. In the opinion of management, all adjustments necessary for a 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 as permitted by Form 10Q 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 July 3, 1993. In both, the accounting policies and principles used are consistent in all material respects except for the accounting change discussed in Note 3 below. Certain fiscal 1993 amounts have been reclassified to conform with fiscal 1994 presentations. 2. Inventories A summary of inventories at April 2, 1994 and July 3, 1993 follows: Dollars in thousands (unaudited) April 2, 1994 July 3, 1993 ____________________________ Live poultry and breeder flocks $41,339 $34,588 Processed poultry and meat products 20,411 23,057 Packaging supplies, parts and other 13,249 12,439 Feed, grain and eggs 7,906 6,644 ______________________________ Total inventories $82,905 $76,728 =============================== 3. Change in Accounting Principle Effective July 4, 1993, the Company adopted Statement of Financing Accounting Standards (SFAS) No. 109 using the cumulative effect of a change in accounting principle. There was no cumulative effect adjustment necessary on the consolidated statement of earnings as a result of SFAS 109 for periods prior to July 4, 1993. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General Information WLR Foods, Inc. (the Company) is a fully-integrated poultry production, processing and marketing business with operations in Virginia, West Virginia and Pennsylvania. On April 29, 1994, the Company paid an $0.08 per common share dividend to shareholders of record of April 15, 1994. On March 9, 1994, Tyson Foods, Inc. through its wholly-owned subsidiary, WLR Acqui-sition Corp. commenced a tender offer to purchase all the outstanding shares of WLR Foods, Inc. for $30 per share. The Board of Directors of WLR Foods determined that the offer was inadequate and recommended that the Company's shareholders not tender their shares to Tyson Foods, Inc. This position is detailed in the Company's Schedule 14D-9 filed with the Securities and Exchange Commission on March 14, 1994 as amended. To further their takeover efforts, on April 14, 1994 Tyson Foods, Inc. requested a special meeting of WLR Foods shareholders under the Virginia Control Share Acquisition Statute. The Board of Directors scheduled this meeting for 1:00 p.m. on May 21, 1994, at Turner Ashby High School, 800 North Main Street, Bridgewater, Virginia. At that time, the Company's shareholders will vote upon a proposal by Tyson Foods, Inc. and its associates to grant them voting rights in connection with shares of WLR Foods stock they have acquired or may acquire in connection with their offer to buy the Company. The Company adopted SFAS No. 109, "Accounting for Income Taxes" in the first quarter of fiscal 1994. As noted in the financial statements provided and the accompanying notes, there was no impact on the statement of earnings for the cumulative effect of the accounting change. The table of Changes in Results of Operations shows dollars and percentage changes in the components of operating results over the past thirteen weeks and thirty-nine weeks compared to the corresponding periods of the previous year. Changes in Results of Operations Thirteen Weeks Ended Thirty-Nine Weeks Ended 4/2/94 vs. 3/27/93 4/2/94 vs. 3/27/93 In millions except $Increase %Change $Increase %Change per share data (Decrease) (Decrease) ______________________________________________________________________ Net sales $21.5 14.4% $95.5 21.9% Cost of sales 19.2 14.3 87.6 23.0 ---- ---- ---- ---- Gross margin 2.3 14.8 7.9 14.1 Selling, general and administrative expenses 2.1 15.8 5.3 13.2 ---- ---- ---- ---- Operating income .2 10.1 2.6 16.4 Other expense .2 26.9 1.2 56.1 ---- ---- ---- ---- Earnings before income taxes and minority interest -- -- 1.4 10.2 Income tax expense and minority interest -- -- .6 12.5 ---- ---- ---- ---- Net earnings -- -- $0.8 8.8% Preferred dividends (.4) (100.0) (1.4) (100.0%) 9 Net earnings available to common shareholders $0.4 44.4% $2.2 31.0% ==== ======= ==== ====== Net earnings per share $0.02 20.0% $0.03 3.7% Results of Operations for the Thirteen and Thirty-nine Weeks Ended April 2, 1994 as Compared to the Thirteen and Thirty-nine Weeks Ended March 27, 1993 Net sales increased $21.5 million to $171.1 million for the thirteen weeks ended April 2, 1994 compared to $149.6 million for the same period last year. Sales pounds increases of 11.0% and higher average quoted market prices for whole turkeys and chickens of 4.2% and 4.8%, respectively, were the main factors increasing sales. Sales volumes increased 4.9% for turkeys and 16.7% for chickens, the latter increase a result of the final volume increases at the recently-expanded Moorefield complex. Sales for the thirty-nine weeks of fiscal 1994 were $532.4 million compared to $436.9 million for the comparable period ended March 27, 1993. This increase of $95.5 million, or 21.9%, was the result of an increase of 21.1% in sales pounds and higher average quoted market prices. On a year-to-date basis, turkey sales volume was up 19.4%, primarily due to the Round Hill acquisition. Chicken sales volume increased 22.8% during the same period because of the Moorefield complex expansion. Additionally, on a year-to-date basis, average quoted market prices for whole turkeys and chickens were up 6.1% and 4.6%, respectively. Although not a major factor impacting total net sales, the Company's Cassco subsidiary has increased its sales over 40% for the thirteen weeks and 48% for the thirty-nine weeks over the same periods last year, increases stemming from Cassco's late spring 1993 acquisitions. Cost of sales increased $19.2 million, or 14.3%, for the thirteen week period ended April 2, 1994 as higher volumes were sold and feed costs increased. Cost of sales for the thirteen weeks ended April 2, 1994 was $152.6 million compared to $133.4 million for the same period last year. Feed costs were up approximately 14% over the same period last year, or approximately $7 million. During the quarter, the severe winter weather also impacted the Company's operations. Cost of sales was $468.4 million--up $87.6 million--or 23.0% for the thirty-nine weeks ended April 2, 1994 compared to $380.8 million for the same period last year. Feed costs increased approximately 8.6% over last year's thirty-nine week costs representing approximately $12 million of the added cost of sales during that period. Higher cost of sales was somewhat offset by improvements in efficiency and by increased margin associated with added volume. As of the end of April, grain costs had moderated from mid-winter highs. From time to time, the Company uses cash basis purchases, forward purchasing, future contracts, and options to purchase grain for use in feed. As of the end of April, approximately 30% of the Company's soybean meal needs through August 1994 are forward purchased. The Company does not have any positions in corn. Management expects the moderation of grain prices to continue as planting in the mid-west progresses and normal seasonal weather patterns return. Though the feed costs will likely remain above last year's levels until the new crop year, management expects the impact of these costs to be offset by increased production volumes, efficient operations, and higher commodity poultry prices. Gross profit was $18.5 million, up 14.8%, or $2.3 million, over the same thirteen weeks last year. For the thirty-nine weeks, gross profit increased $7.9 million to $64.1 million. Gross margin as a percentage of sales was 10.8% for both thirteen week periods and 12.0% compared to 12.9% for the thirty-nine weeks ended April 2, 1994 and March 27, 1993, respectively. During the thirteen weeks ended April 2, 1994, selling, general and administrative expenses increased $2.1 million over the same period last year. Administrative expenses increased $0.9 million which includes nearly $1.1 million of expenses 10 associated with the Tyson Foods' tender offer. Selling and advertising expenses increased $0.5 million, a modest increase when compared to the higher sales volumes. Delivery expenses for the current quarter increased $0.7 million, or 11.8%. Total selling, general and administrative expenses as a percent of sales for the thirteen weeks this year were 9.0% (8.3% excluding the Tyson costs), compared to 8.9% for the same period last year. For the thirty-nine weeks ended April 2, 1994, selling, general and administrative expenses increased $5.3 million compared to the same period last year. This increase related primarily to a $3.6 million increase in delivery costs, with only a $0.8 million increase in selling and advertising expenses. Administrative expenses increased $0.9 million. For the current thirty-nine week period, total selling, general and administrative expenses were 8.6% of sales (8.4% excluding the Tyson costs), compared to 9.2% for the same period last year. With the merger of the Company's two poultry subsidiaries into a single entity, management expects continued improvements in efficiency from the consolidation of administrative functions. The Company will continue at least through the fourth fiscal quarter to incur costs related to the Tyson takeover attempt. Operating income increased $0.2 million for the thirteen weeks and $2.6 million for the thirty-nine weeks ended April 2, 1994. Higher volumes sold for the thirteen week period generated increased operating income. For the thirty-nine weeks, higher volumes sold and lower selling, general and administrative expenses as a percent of sales were the main factors producing the higher operating income. Operating income as a percentage of sales was 1.8% for the current period compared to 1.9% for the thirteen weeks last year, and 3.4% compared to 3.6% for the thirty-nine week periods ended April 2, 1994 and March 27, 1993, respectively. Other expense increased $0.2 million for the thirteen weeks and $1.2 million for the thirty-nine weeks due to higher debt levels and lower capitalized interest. Repayment of funded debt began May 1, 1994. Interest expense reductions from decreased borrowing may be offset by rising interest rates. Income tax expense remained nominally the same for the thirteen week period compared to the same period last year. The effective rate was 38.5% compared to 38.0% last year. For the thirty-nine week comparison, income tax expense increased $0.6 million due to increased profits and higher federal statutory tax rates. The effective tax rate for the thirty-nine week period ended April 2, 1994 was 38.5% and was 37.8% for the comparable period last year. Net earnings were $1.3 million for both thirteen week periods ended April 2, 1994 and March 27, 1993. Net earnings available to common shareholders increased $0.4 million, or $0.02 per share, for the thirteen weeks ended April 2, 1994. For the thirty-nine weeks ended April 2, 1994, net earnings increased to $9.2 million, up from $8.4 million for the same period last year. Earnings available to common shareholders increased $2.2 million, or $0.03 per share, for the thirty-nine weeks ended April 2, 1994, com-pared to the same period last year. Liquidity The financial condition of the Company remained strong at April 2, 1994. Working capital increased to $68.1 million from $57.5 million at July 3, 1993, and the current ratio was 2.0-to-1. The total-debt- to-total-capitalization was 31.5% on April 2, 1994. The first installment of $5.25 million on the long-term debt will occur in the fourth quarter of fiscal 1994. Management believes the Company will generate sufficient internal funds to meet current levels of dividends and service existing debt. The Company has available a $35 million revolving line of credit. On April 2, 1994 the balance outstanding was $10.6 million, leaving $24.4 million available for current needs. This current line of credit facility has been extended from its original maturity date of June 30, 1994 to March 31, 1995 upon essentially the same, or better, 11 terms and rates. At April 2, 1994, the Company's book value increased to $13.60 per common share, up from $12.99 per common share at July 3, 1993. Capital Resources and Financial Condition Capital expenditures for the thirty-nine weeks were $13.7 million which include equip-ment replacements and up-grades of existing facilities along with the new Cassco cold storage warehouse. Construction is progressing on the $4.4 million Cassco cold storage warehouse project with completion expected by mid-summer 1994. Though completion was somewhat delayed by the severe winter weather, the delay will not impact total spending on the project. The original capital budget for fiscal 1994 has been revised downward because of winter weather delays and efforts to maximize internally-generated funds. Total capital spending is anticipated to be approximately $22 million and depreciation expense is projected at approximately $21.6 million. The capital budget for fiscal 1995 is expected to be approximately $15 million, a significant decrease from prior years. Capital spending will be primarily for cost improvements, replacements and regulatory compliance. Depreciation is expected to be approximately $22 million for fiscal 1995. Management will continue to evaluate further expansion and acquisition opportunities as they arise. Two statements issued by the Financial Accounting Standards Board will be adopted by the Company in fiscal 1995: SFAS 112, "Employers Accounting for Post-employment Benefits," and SFAS 115, "Accounting for Certain Investments In Debt and Equity Securities." Neither statement is expected to materially impact the Company's financial statements when adopted. In addition, SFAS 116, "Accounting for Contributions Received and Contributions Made," will be adopted by the Company no later than fiscal 1996. Again, no material effect is expected upon the adoption of this statement. The Company did not experience any material changes in its financial condition from that reported as of July 3, 1993 in the Annual Report to Shareholders. 12 PART II. OTHER INFORMATION Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, this report is signed this 16th day of May, 1994 by the Registrant's principal financial officer who is also authorized by the Registrant to sign on its behalf. WLR FOODS, INC. ___/s/ Delbert L. Seitz_________ Delbert L. Seitz, Chief Financial Officer and duly authorized signator for Registrant 13 EXHIBIT INDEX Exhibit Sequentially No. Description No. Page -----END PRIVACY-ENHANCED MESSAGE-----