-----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, NjDayY7KR5FY/KzuMBf5rkvIvCrcE8vWIOiaNzPowI6Oas/0xBQc23QoQcXE8fJj NJfc3TlQ3wyumd7zeRK3Tg== 0000760775-95-000016.txt : 19951119 0000760775-95-000016.hdr.sgml : 19951119 ACCESSION NUMBER: 0000760775-95-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 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: 95589224 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 30, 1995 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 8, 1995 was 17,583,835 shares. PART 1. FINANCIAL INFORMATION Item 1. Financial Statements WLR FOODS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (unaudited) Thirteen Weeks Ended In thousands, except per share data September 30, October 1, 1995 1994 Net sales $250,798 $210,285 Cost of sales 215,811 178,176 ------- ------- Gross profit 34,987 32,109 Selling, general and administrative expenses 26,040 20,286 ------- ------- Operating income 8,947 11,823 Other expense: Interest expense 2,085 1,330 Miscellaneous expense (income) (141) (112) ------- ------- Other expense 1,944 1,218 ------- ------- Earnings before income taxes and minority interest 7,003 10,605 Income tax expense 2,691 4,083 Minority interest in net earnings of consolidated subsidiary 16 14 ------- ------- NET EARNINGS $4,296 $6,508 ====== ====== NET EARNINGS PER COMMON SHARE $0.25 $0.38 AVERAGE COMMON SHARES OUTSTANDING 17,235 17,160 DIVIDENDS DECLARED PER COMMON SHARE $0.06 $0.05 See accompanying Notes to Consolidated Financial Statements. 2 WLR FOODS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS In thousands September July 1, 30, 1995 1995 ASSETS (unaudited) Current assets Cash and cash equivalents $383 $706 Accounts receivable, less allowance for doubtful accounts of $613 and $613. 70,455 63,194 Inventories (Note 2) 126,135 125,849 Other current assets 1,533 3,183 -------- -------- Total current assets 198,506 192,932 Investments 926 949 Property, plant and equipment, net 186,881 174,163 Other assets 5,619 4,481 -------- -------- TOTAL ASSETS $391,932 $372,525 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes payable to banks $7,300 - Current maturities of long-term debt 8,053 8,028 Excess checks over bank balances 15,023 3,948 Trade accounts payable 31,016 28,021 Accrued expenses 18,336 22,036 Federal and state income taxes 2,228 - Deferred income taxes 9,424 9,299 Other current liabilities 1,033 1,038 -------- -------- Total current liabilities 92,413 72,370 Long-term debt, excluding current maturities 97,259 106,481 Deferred income taxes 10,080 8,730 Minority interest in consolidated subsidiary 543 527 Other liabilities and deferred credits 3,324 3,323 Common stock subject to repurchase 17,750 17,750 Shareholders' equity : Common stock, no par value. Outstanding 17,605 and 17,298 60,761 56,782 Additional paid-in capital 2,992 3,014 Retained earnings 106,810 103,548 --------- -------- Total shareholders' equity 170,563 163,344 --------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $391,932 $372,525 ======== ======== 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 30 October 1, 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $4,296 $6,508 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 6,631 5,611 Gain on sale of property, plant and equipment (26) (1) Deferred income taxes 125 899 Other, net 102 172 Change in operating assets and liabilities: (net of acquired assets) (Increase) decrease in accounts receivable (7,106) 446 (Increase) decrease in inventories 2,578 (4,569) Decrease in other current assets 1,817 733 Increase (decrease) in accounts payable 2,327 (90) Increase (decrease) in accrued expenses and other (1,471) 1,505 ------ ------ Net cash provided by operating activities 9,273 11,214 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (5,856) (3,715) Cash used in acquisition, (including costs) (10,535) (43,921) Proceeds from sales of property, plant and equipment 46 9 (Investments in) disposals of other assets 63 (68) Minority interest in net earnings of consolidated subsidiary 16 14 -------- -------- Net cash used in investing activities (16,266) (47,681) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term debt (9,197) (205) Proceeds from long-term debt - 25,000 Notes payable to banks (net of principal payments) 7,300 11,300 Increase in checks drawn not presented 11,075 1,312 Issuance of common stock 259 87 Repurchase of common stock (1,733) - Dividends paid (1,034) (881) ------- ----- Net cash provided by financing activities 6,670 36,613 ------- ------ Increase (decrease) in cash and cash equivalents (323) 146 4 Cash and cash equivalents at beginning of fiscal year 706 771 ----- ----- Cash and cash equivalents at end of period $383 $917 ==== ==== Supplemental cash flow information: Cash paid (refunded) for : Interest $1,140 $530 Income taxes (1,494) 498 The Company considers all highly liquid investments of 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. (Note 3) See accompanying Notes to Consolidated Financial Statements. 5 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 balances have been eliminated in consolidation. The consolidated balance sheet as of September 30, 1995, and the consolidated statements of earnings and cash flows for the thirteen weeks ended September 30, 1995 and October 1, 1994 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 as permitted by 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 July 1, 1995. In both, the accounting policies and principles used are consistant in all material respects. Certain fiscal 1995 amounts have been reclassified to conform with fiscal 1996 presentations. 2. Inventories A summary of inventories at September 30, 1995 and July 1, 1995 follows: (unaudited) Dollars in thousands September 30, July 1, 1995 1995 Live poultry and breeder flocks $58,523 $54,487 Processed poultry and meat products 36,683 41,262 Packaging supplies, parts and other 19,761 19,704 Feed, grain and eggs 11,168 10,396 -------- -------- Total inventories $126,135 $125,849 ======== ======== 3. Acquisition of New Hope Feeds, Inc. and an affiliated company. On September 29, 1995, the Company acquired the chicken processing and production assets of New Hope Feeds, Inc. and an affiliated company for $10.5 million in cash and 411,216 shares of common stock valued at $5.4 million. The acquisition was accounted for as a purchase, and, accordingly, the assets of New Hope Feeds are included in the 6 Company's consolidated financial statements as of the acquisition date. The purchase price is subject to post-closing audit adjustments. The transaction was recorded at the fair value of assets acquired and liabilities assumed as follows: Dollars in thousands (unaudited) Inventories $2,864 Other current assets 283 Property, plant and equipment 13,552 Other assets 1,279 ------ Total assets acquired 17,978 Cash paid ( including costs) 10,535 Issuance of common stock 5,425 ------ Total liabilities assumed $2,018 ====== Due to the immaterial size of the New Hope Feeds, Inc. historical operation, relative to WLR Foods historical results, proforma comparisons are not provided. 7 Item 2. Management's 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. On September 29, 1995, the Company acquired assets of New Hope Feeds, Inc. and an affiliated company for $10.5 million in cash and 411,216 shares of stock valued at $5.4 million. The purchase agreement provided for the issuance of additional shares of stock if required by a post closing audit. The acquisition has been accounted for as a purchase, and therefore, is reflected in the consolidated financial statements of the Company as of the date of the acquisition. The Board has authorized management to repurchase up to $30 million of the Company's common stock. Through October 1995, the Company has repurchased 1.2 million shares for $18.4 million and management anticipates continuing the program through the fiscal year, as market conditions allow. On September 22, 1995, a three judge panel of the United States Court of Appeals for the Fourth Circuit unanimously upheld the ruling of the United States District Court in favor of WLR Foods, on Tyson Foods' challenge to Virginia's anti-take over statutes. Tyson Foods has until December 23, 1995, to appeal the ruling to the United States Supreme Court. 8 Results of Operations The table of Changes in Results of Operations shows dollars and percentage changes in the components of operating results over the past thirteen weeks compared to the corresponding period in fiscal 1995. Changes in Results of Operations Thirteen Weeks Ended Sept. 30, 1995 vs. Oct. 1, 1994 In millions, except earnings $ Increase %Change per share (Decrease) Net sales $40.5 19.3% Cost of sales 37.6 21.1 ----- ---- Gross profit 2.9 9.0 Selling, general and administrative expenses 5.8 28.4 ----- ---- Operating profit (2.9) (24.3) Other expense, net .7 59.6 Earnings before income taxes and ----- ---- minority interest (3.6) (34.0) Income tax expense and minority interest (1.4) (33.9) ----- ---- Net earnings ($2.2) (34.0) ===== ==== Net earnings per common share ($0.13) (34.2) ===== ==== For the periods indicated, the following table sets forth selected information from the Company's Consolidated Statements of Earnings expressed as a percentage of sales. Operations as a Percentage of Thirteen Weeks Ended Net Sales Sept. 30, 1995 vs. Oct. 1, 1994 Net sales 100.0% 100.0% Cost of sales 86.0 84.7 ----- ----- Gross profit 14.0 15.3 Selling, general and administrative expenses 10.4 9.6 ----- ----- Operating profit 3.6 5.7 Other expense, net .8 .6 Earnings before income taxes and ----- ----- minority interest 2.8 5.1 Income tax expense and minority interest 1.1 2.0 ----- ----- Net Earnings 1.7% 3.1% ===== ===== 9 Results of operations Net sales increased $40.5 million or 19.3% due to higher volumes sold. Sales volumes were up 15.6% reflecting the incremental sales generated from the North Carolina turkey operation this year compared to last year. Export sales increased 26% over the same period last year. Chicken sales were up 7%, with volumes up 2% and average quoted commodity prices up 9% over the same period last year. Turkey sales were up 27%, due to volume increases of over 33%. Average quoted commodity whole turkey prices were up 2%, while boneless skinless breast meat was up 16% and boneless skinless thighmeat was down 20% compared to the same period last year. Lower prices for the thighmeat and other dark meat products impacted the overall performance of the turkey division for the quarter. Cost of sales increased $37.6 million, largely due to higher volumes sold. In September 1995, management announced the elimination of the second shift at the Marshville, North Carolina turkey processing plant. The production level will remain unchanged,while the facility will operate with one less shift, generating anticipated pre-tax annual savings of $3.2 million. Grain prices averaged 3.6% higher than the same period last year, with the full impact of the higher grain costs expected in the second and third quarters of fiscal 1996. Currently, grain prices are nearly 40% higher than for the same period last year. At the present time, the Company does not have any commitments to purchase grain at fixed prices beyond normal terms and there are currently no hedging contracts outstanding. Gross profits increased $2.9 million but the percent of gross profit decreased to 14% compared to 15.3% last year. Gross margin was impacted by disease in the North Carolina turkey operation, which decreased the number and weight of turkeys slaughtered. Management estimates the disease decreased gross margin by approximately $3.1 million in the current quarter, with an additional decrease of $2.5 million expected in the second quarter of this fiscal year. The Company adopted bio-security measures and management practices, which together with a new drug just made available, should help better avoid or control the North Carolina disease. Selling, general and administrative expenses increased $5.8 million due to higher sales volumes and increased delivery and selling costs. The growth in export sales volumes over the same period last year increased delivery costs. Additionally, costs of the North Carolina operation were included for the full quarter this year compared to only 5 weeks for last year. With additional foodservice sales, promotional costs increased. Selling expenses increased $3.1 million, while delivery costs were up $2.6 million. Advertising costs increased $0.4 million as the Company continues to support its overall marketing plan. Total administrative costs were down $0.3 million, however, excluding $1.0 million in hostile defense take-over costs from last year, administrative costs were up $0.7 million as a result of the August 1994 acquisition of the North Carolina turkey division. The Company has adopted a new approach to logistics to better utilize the refrigeration, warehousing and transportation resources. With a new management position in place, Vice 10 President of Corporate Logistics, programs and policies are being developed with goals of saving the Company $2 to $3 million per year. Operating profits were down $2.9 million due to higher incremental selling and delivery costs along with lower gross margin levels. Other expense, primarily interest, was up $0.7 million, due to higher levels of borrowing for the North Carolina turkey acquisition and repurchase of the Company's common stock. Net income decreased $2.2 million. Strong performances in chicken and the Cassco operations were not enough to offset the losses generated in the turkey operation. Financial Condition and Liquidity WLR Foods closed the first quarter of fiscal 1996 with a strong balance sheet. Working capital was $106.1 million, down from $120.6 million at July 1, 1995, due to changes in borrowing levels between short-term and long-term facilities. The current ratio remains strong at 2.1-to-1. Total assets increased to $391.9 million, reflecting the New Hope Feeds acquisition. The ratio of total debt to total capital, including common stock subject to repurchase as debt, was 43.3%. The Company's book value per common share was $10.70 as of September 30, 1995. Capital Resources Management expects the current $110 million revolving credit facilities will be adequate to meet operational needs, stock repurchases, debt service, dividends and acquisitions for the foreseeable future. As of September 30, 1995, the Company has $60.7 million available on revolving credit facilities. Capital spending for fiscal 1996 is projected at $30 million, including approximately $5 million for a new hatchery at the Goldsboro chicken complex. Normal replacements and upgrades of equipment and facilities are expected to remain at $23 million, with the remaining $2 million committed for information system upgrades and enhancements. Plans are moving ahead with the construction of a Cassco ice manufacturing facility in Richmond, Virginia. Management is currently evaluating off-balance sheet leasing options for up to $5 million of expenditures during fiscal 1996. Depreciation and amortization are projected at $27 million, including the added depreciation from the Goldsboro chicken operation. Capital spending for the first quarter was $5.9 million, all of which was for normal replacements and upgrades of existing equipment and facilities. Depreciation expense was $6.6 million, along with $0.2 million in amortization expense for the quarter. The Board of Directors declared a $0.06 per share dividend payable on November 3, 1995 to shareholders of record as of October 13, 1995. 11 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 28, 1995 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 B Directors (to serve until 1998 Annual Meeting of Shareholders) Stephen W. Custer 13,266,440 330,538 Calvin G. Germroth 13,249,987 346,991 James L. Keeler 13,295,779 301,199 #2 Ratification of Appointment of Independent Auditor 13,429,909 105,525 65,544 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule (b) Form 8-K Reporting Date September 29, 1995. Item Reported - Item 5, Other Events. WLR Foods, Inc. reported the purchase of the chicken processing and production assets of New Hope Feeds, Inc. and its affiliate of New Hope, North Carolina for a purchase price of $18 million. Reporting Date August 22, 1995. Item Reported - Item 5, Other Events. WLR Foods, Inc. reported the signing of an agreement to acquire the chicken processing plant, 12 live production assets and inventories of New Hope Feeds, Inc. and Economy Truck Leasing, Inc., both of New Hope, North Carolina. 13 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, this report is signed this 9th day of November, 1995, 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 14 EXHIBIT INDEX Exhibit No. Description 27 Financial Data Schedule 15 EX-27 2 FINANCIAL DATA SCHEDULE
5 1000 3-MOS JUN-29-1996 SEP-30-1995 383 0 70,455 613 126,135 198,506 345,349 158,468 391,932 92,413 105,312 78,511 0 0 109,802 391,932 250,798 250,798 215,811 215,811 26,040 0 2,085 7,003 2,691 4,296 0 0 0 4,296 0.25 0.25
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