-----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, Ne3+Y10HZTF/n5kovYsYCdNHFbCptE9nxVWm6ywpyxxj9uwMiT948J9wmRe6rubh r0rRQWr+Bg4l059pkSyqDg== 0000912057-97-026662.txt : 19970811 0000912057-97-026662.hdr.sgml : 19970811 ACCESSION NUMBER: 0000912057-97-026662 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970627 FILED AS OF DATE: 19970808 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTERN BEEF INC /DE/ CENTRAL INDEX KEY: 0000081942 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 133266114 STATE OF INCORPORATION: DE FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-04485 FILM NUMBER: 97654442 BUSINESS ADDRESS: STREET 1: 47 05 METROPOLITAN AVE CITY: RIDGEWOOD STATE: NY ZIP: 11385 BUSINESS PHONE: 7188210011 FORMER COMPANY: FORMER CONFORMED NAME: QUAREX INDUSTRIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: RANCHERS PACKING CORP DATE OF NAME CHANGE: 19830713 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended June 27,1997 ------------ Commission File Number 0-4485 ------ WESTERN BEEF, INC. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-3266114 - ---------------------------------------------- ---------------- (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 47-05 Metropolitan Avenue, Ridgewood, New York 11385 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (718)417-3770 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 12 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months 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 close of the period covered by this report. As of August 5, 1997, 5,465,530 shares of Common Stock, par value $.05 per share, were issued and outstanding. INDEX WESTERN BEEF, INC. AND SUBSIDIARIES PAGE -------- CAUTIONARY STATEMENT RELEVANT TO FORWARD - LOOKING INFORMATION......................................... 2 PART I-FINANCIAL INFORMATION - ---------------------------- Item 1. Financial statements (Unaudited) Condensed consolidated balance sheets as of June 27, 1997 and January 3, 1997....................... 3 Condensed consolidated statements of income for the twenty-five weeks ended June 27, 1997 and the twenty-six weeks ended June 28, 1996 and the thirteen weeks ended June 27, 1997 and June 28, 1996........................................... 4 Condensed consolidated statements of cash flows for the twenty-five weeks ended June 27, 1997 and the twenty-six weeks ended June 28, 1996............ 5 Notes to the condensed consolidated financial statements...................................... 6 Item 2. Management discussion and analysis of financial condition and results of operations............ 7 PART II-OTHER INFORMATION.................................... 9 - ------------------------- Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K SIGNATURES................................................... 10 - ---------- CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. The Private Securities Litigation Reform Act of 1995 provides a "Safe Harbor" for forward-looking statements. Certain information included in this quarterly report on Form 10-Q contains or may contain forward-looking statements such as those statements pertaining to the renovation of the Company's existing stores, the continued availability of credit lines for capital expansion, and the successful outcome of the legal proceedings detailed in Part II (Other Information on page nine of this quarterly report). Such forward-looking information involves important risks and uncertainties that could significantly affect expected results in the future from those expressed in any forward-looking statements made by, or on behalf of, the Company. These risks and uncertainties include, but are not limited to, uncertainties relating to economic conditions; delays and other hazards inherent in building and construction; competition in both the retail and wholesale markets and government and regulatory policies and certifications (in particular those relating to the United States Department of Agriculture Food Stamp Program). -2- ITEM I FINANCIAL STATEMENTS -------------------- WESTERN BEEF, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value) JUNE 27, JANUARY 3, 1997 1997 ------------ ----------- (Unaudited) ASSETS - ------ Current assets: Cash and cash equivalents.................. $3,680 $ 2,634 Accounts receivable, net of allowance for doubtful accounts ( $636 and $386)....... 8,015 8,434 Inventories................................ 18,332 17,668 Prepaid expenses and other current assets.. 2,948 1,461 Deferred income taxes...................... 1,301 1,253 --------- -------- Total current assets................... 34,276 31,450 Property, plant and equipment, net of accumulated depreciation and amortization ($18,666 and $16,935)...................... 43,126 41,276 Other assets................................. 1,807 1,773 --------- -------- Total assets........................... $79,209 $74,499 --------- -------- --------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Current portion of long-term debt.......... $2,357 $ 2,391 Current portion of obligations under capital leases................................... 608 455 Accounts payable........................... 14,943 11,414 Accrued expenses and other liabilities..... 6,076 5,862 --------- -------- Total current liabilities.............. 23,984 20,122 Deferred income taxes payable................ 1,676 1,484 Long-term debt, net of current portion....... 6,576 7,764 Obligations under capital leases, net of current portion 3,476 3,247 --------- --------- Total liabilities...................... 35,712 32,617 --------- --------- Stockholders' equity: Preferred stock, $.05 par value; shares authorized 2,000; none issued............ -- -- Common stock, $.05 par value; 15,000 shares authorized; at June 27, 1997, 5,466 shares issued and outstanding;at January 3, 1997, 5,463 shares issued and outstanding........ 273 273 Capital in excess of par value............... 11,385 11,379 Retained earnings............................ 31,952 30,360 Deferred compensation........................ (113) (130) --------- --------- Total stockholders' equity.............. 43,497 41,882 --------- --------- Total liabilities and stockholders' equity................................ $79,209 $74,499 --------- --------- --------- --------- See accompanying notes to condensed consolidated financial statements. -3- WESTERN BEEF, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data)
TWENTY-FIVE TWENTY-SIX THIRTEEN WEEKS ENDED WEEKS ENDED WEEKS ENDED ---------------------------- JUNE 27, 1997 JUNE 28, 1996 JUNE 27, 1997 JUNE 28, 1996 ------------- ------------- ------------- ------------- Net sales............................................. $ 154,676 $ 163,529 $ 81,881 $ 84,180 Cost of sales......................................... 116,595 123,926 61,942 64,166 ------------- ------------- ------------- ------------- Gross profit on sales................................. 38,081 39,603 19,939 20,014 ------------- ------------- ------------- ------------- Operating expenses: Rent expense-affiliates............................. 1,380 1,328 692 666 Selling, general and administrative expenses........ 33,252 32,626 17,572 16,239 Interest expense.................................... 575 481 294 273 ------------- ------------- ------------- ------------- Total operating expenses.............................. 35,207 34,435 18,558 17,178 ------------- ------------- ------------- ------------- Income before income taxes............................ 2,874 5,168 1,381 2,836 Provision for income taxes............................ 1,282 2,386 602 1,316 ------------- ------------- ------------- ------------- Net income............................................ $ 1,592 $ 2,782 $ 779 $ 1,520 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Weighted average number of shares of common stock and equivalents outstanding............................. 5,518 5,501 5,510 5,498 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Earnings per share of common stock.................... $ .29 $ .51 $ .14 $ .28 ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
See accompanying notes to condensed consolidated financial statements. -4- WESTERN BEEF, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
TWENTY-FIVE TWENTY-SIX WEEKS ENDED WEEKS ENDED JUNE 27, 1997 JUNE 28, 1996 ------------- ------------- Cash flows from operating activities: Net income......................................................................... $ 1,592 $ 2,782 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.................................................... 2,054 1,507 Deferred income tax.............................................................. 144 195 Provision for losses on accounts receivable...................................... 250 260 Gain on disposal of fixed assets................................................. (71) -- (Increase)decrease in assets: Accounts receivable............................................................ 169 404 Inventories.................................................................... (664) (2,298) Prepaid expenses and other current assets...................................... (1,487) (646) Other assets................................................................... (34) 31 Increase in liabilities: Accounts payable............................................................... 3,529 805 Accrued expenses and other liabilities......................................... 214 1,609 ------ ------ Net cash provided by operating activities.................................... 5,696 4,649 ------ ------ Cash flows from investing activities: Capital expenditures............................................................... (4,115) (6,777) Proceeds from sale of property, plant and equipment................................ 299 77 ------ ------ Net cash used in investing activities........................................ (3,816) (6,700) ------ ------ Cash flows from financing activities: Payments on long-term debt and capital leases...................................... (1,487) (1,104) Proceeds from issurance of long-term debt and capital leases....................... 647 4,007 Issuance of common stock........................................................... 6 -- ------ ------ Net cash provided by (used in) financing activities.......................... (834) 2,903 ------ ------ Net increase in cash and cash equivalents............................................ 1,046 852 Cash and cash equivalents, beginning of period....................................... 2,634 2,431 ------ ------ Cash and cash equivalents, end of period............................................. $ 3,680 $ 3,283 ------ ------ ------ ------ Cash paid during the twenty-five and twenty-six weeks respectively for: Interest........................................................................... $ 575 $ 481 Income taxes....................................................................... $ 1,860 $ 2,413
See accompanying notes to condensed consolidated financial statements. -5- WESTERN BEEF, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the twenty-five weeks ended June 27, 1997 are not necessarily indicative of the results that may be expected for the year ending January 2, 1998. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended January 3, 1997. In 1997, the Financial Accounting Standards Board Issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128"). SFAS No. 128 specifies the computation, presentation, and disclosure requirements for earnings per share. SFAS No. 128 is effective for periods ending after December 15, 1997. The adoption of this statement is not expected to have a material effect on the consolidated financial statements. (2) LITIGATION: There has been no material change in litigation from the year ended January 3, 1997. See Part II of this report for further disclosure. (3) RECLASSIFICATION: Certain amounts in the prior period's consolidated condensed Financial Statements have been reclassified to conform with the presentation in the current period. -6- ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. For the quarter ended June 27, 1997, Western Beef, Inc. (the "Company") achieved net income of $779,000 or $0.14 per share on net sales of $81,881,000, as compared to net income of $1,520,000 or $0.28 per share on net sales of $84,180,000 for the comparable period in 1996. On a year-to-date basis the Company achieved net income of $1,592,000, or $0.29 per share on net sales of $154,676,000 for the twenty-five week period ended June 27, 1997 as compared to net income of $2,782,000 or $0.51 per share on net sales of $163,529,000 for the twenty-six week period ended June 28, 1996. Retail sales for the quarter ended June 27, 1997 were 0.4% higher than the comparable period in 1996 resulting from the excess of sales generated by the two new stores opened by the Company in 1996 over the decline in same store sales. The decline in same store sales improved to a -2.9% in the second fiscal quarter of 1997 as compared to a -5.6% decline in same store sales for the first fiscal quarter of 1997. This improvement resulted primarily from completion of store renovations which caused customer disruptions and inconvenience at three of its existing locations. Same store sales continue to be impacted by reductions in redemptions of United States Department of Agriculture food stamps. This reduction in redemptions along with a low rate of inflation, accounted for a significant portion of the decline in same store sales. These same factors were also responsible for the $2,500,000 decline in wholesale sales during the quarter ended June 27, 1997. Gross profit, as a percentage of sales increased to 24.4% in the second quarter of 1997 from 23.8% in the same quarter of 1996. On a year-to-date basis gross profit increased to 24.6% for the twenty-five weeks ended June 27, 1997 as compared to 24.2% for the twenty-six weeks ended June 28, 1996. The increase in the gross profit for the second fiscal quarter resulted from the increased ratio of retail to wholesale sales, as well as from the capital expansion program, which has increased the selling square footage dedicated to the higher gross profit dairy, frozen and bakery merchandise categories. Operating expenses including selling, general and administrative expenses, rent expense -affiliates and interest expense, as a percentage of sales increased to 22.7% for the second quarter of 1997 from 20.4% in the comparable period in 1996. On a year- to-date basis operating expenses including selling, general and administrative expenses, rent expense -affiliates and interest expense increased to 22.8% for the twenty-five weeks ended June 27, 1997 from 21.1% for the twenty-six weeks ended June 28,1996. Operating expenses for 1997 include costs incurred at the Company's Roosevelt, New York store which opened in September, 1996, as well as increased expenditures for utilities, rent depreciation and interest expense pertaining to the Company's expansion and modernization of its property, plant and equipment. LIQUIDITY AND CAPITAL RESOURCES Cash flows from operations were $5,696,000 for the twenty-five weeks ended June 27, 1997 as compared to $4,649,000 for the twenty-six weeks ended June 28, 1996. Cash flow from operations improved due to an increase in non-cash expenses such as depreciation and amortization along with increased accounts payable and a reduction in the seasonal build-up of inventory partially offset by a decline in net income. -7- ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, (Continued). Cash flow from operations plus cash on hand were sufficient to pay for capital expenditures and long-term debt requirements. Capital expenditures of $4,115,000 related to equipment purchases for, and renovations of, several of the Company's supermarkets. The Company funded these expenditures with cash flow from operations. The Company is currently in the process of renewing its $3,000,000 line of credit (expiring September 1, 1997) which, along with cash on hand, is expected to be sufficient to meet its operational needs. The Company also has several financial institutions that would be available to finance new store equipment, usually over a five or seven year period. As of June 27, 1997 there were no material commitments for capital expenditures. -8- PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company has various outstanding litigation matters which it considers to be in the ordinary course of business. In the opinion of management, the outcome of these litigation matters will not adversely affect the Company's financial position materially. In April 1991 in New York Supreme Court, Putnam County, an action was commenced against the Company to prevent a scheduled foreclosure of certain collateral held by the Company as security for its loan to one of the plaintiffs in the original principal amount of $85,000 of which approximately $65,000 was outstanding. Thereafter, in a complaint served in March 1992, plaintiffs interposed three causes of action on behalf of themselves and a previously unnamed plaintiff, C.B. Foods, Inc., which was a customer of the Company's wholesale business, seeking (1) a declaration that the loan had been repaid; (2) compensatory damages of $30,000,000 and exemplary damages of $10,000,000 for fraud allegedly committed by the Company; and (3) compensatory damages of $2,000,000 and exemplary damages of $10,000,000 for abuse of process allegedly committed by the Company. In its answer, the Company denied liability and all material allegations of the complaint. Following motion practice and appeals addressed to the sufficiency and adequacy of the claims asserted, which resulted in the dismissal of plaintiffs' third claim for abuse of process, the parties engaged in extensive discovery procedures which are now completed. Plaintiffs have filed a note of issue placing this case on the trial calendar, and sought to have this action tried by a jury. On the grounds that the action sought a mixture of equitable and legal relief, the Company moved to strike the jury demand and compel a bench trial. The court granted the motion to strike the jury demand and plaintiffs have filed a notice of appeal from that order. The trial of this matter is scheduled to commence on September 9, 1997. The Company intends to continue vigorously defending this action. Although the Company believes it has meritorious defenses to this action, an evaluation of the likelihood of an unfavorable outcome cannot be made. ITEM 2. CHANGES 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 INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K The registrant has not filed a report on Form 8-K during the quarter just ended. -9- SIGNATURE 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. WESTERN BEEF, INC. BY: /s/ CHRIS DARROW ----------------------------------------- Chris Darrow CHIEF FINANCIAL OFFICER (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) DATE: AUGUST 8, 1997 -10- EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WESTERN BEEF, INC. QUARTERLY REPORT OF FORM 10-Q FOR THE QUARTER ENDED JUNE 27, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JAN-2-1998 JAN-4-1997 JUN-27-1997 3680 0 8651 636 18332 34276 61792 18666 79209 23984 10052 273 0 0 43224 79209 154676 154676 116595 116595 34632 0 575 2874 1282 1592 0 0 0 1592 .29 .29
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