-----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, N4v26VW5sbQZ05oguEen6duX+lm/VV1dQbj5LJWZxAtUL9/oiADl4QrvhFAaS0rA 6tK/48YPJ6MWjuHzOeePQQ== 0001005477-98-003209.txt : 19981118 0001005477-98-003209.hdr.sgml : 19981118 ACCESSION NUMBER: 0001005477-98-003209 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981002 FILED AS OF DATE: 19981116 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: SEC FILE NUMBER: 000-04485 FILM NUMBER: 98750200 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 October 2, 1998 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 (I.R.S. Employer incorporation 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 preceeding 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. 5,475,153 shares of Common Stock, $.05 par value, as of November 9, 1998. - -------------------------------------------------------------------------------- WESTERN BEEF, INC. AND SUBSIDIARIES INDEX PAGE ---- CAUTIONARY STATEMENT RELEVANT TO FORWARD - LOOKING INFORMATION 2 PART I-FINANCIAL INFORMATION Item 1. Financial Statements (unaudited): Condensed consolidated balance sheets as of October 2, 1998 and January 2, 1998. 3 Condensed consolidated statements of income for the thirty-nine weeks ended October 2, 1998 and October 3, 1997, the thirteen weeks ended October 2, 1998 and the fourteen weeks ended October 3, 1997. 4 Condensed consolidated statements of cash flows for the thirty-nine weeks ended October 2, 1998 and October 3, 1997. 5 Notes to the condensed consolidated financial statements. 6 Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations 7-8 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 construction or acquisition of new stores, the recoverability of deferred tax assets, the continued availability of credit lines for capital expansion, the suitability of facilities, access to suppliers, implementation of technological improvement programs and year 2000 issues relating to computer applications. 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); the pricing and availability of the products the Company sells and distributes, including Western Beef label brand products; potential delays in the implementation of the Company's technological improvement programs; and the effectiveness of such programs upon the implementation of, and the Company's ability to resolve, any and all year 2000 computer applications. -2- ITEM 1. FINANCIAL STATEMENTS WESTERN BEEF, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value) October 2, January 2, 1998 1998 -------- -------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 9,938 $ 7,527 Accounts receivable, net of allowance for doubtful accounts ( $661 and $573) 5,313 6,275 Inventories 16,204 14,113 Deferred income taxes 1,209 1,235 Prepaid expenses and other current assets 3,140 2,933 -------- -------- Total current assets 35,804 32,083 Property, plant and equipment, net of accumulated depreciation and amortization ($23,532 and $20,526) 45,843 42,258 Other assets 2,007 1,913 -------- -------- Total assets $ 83,654 $ 76,254 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 1,714 $ 1,571 Current portion of obligations under capital leases 676 1,090 Accounts payable 11,809 8,903 Accrued liabilities 6,184 4,834 Accounts payable-related party 3,040 1,997 -------- -------- Total current liabilities 23,423 18,395 Deferred income taxes payable 2,144 2,059 Long-term debt, net of current portion 6,428 5,707 Obligations under capital leases, net of current portion 2,616 3,130 Other non-current liabilities 1,243 1,834 -------- -------- Total liabilities 35,854 31,125 -------- -------- Stockholders' equity: Preferred stock, $.05 par value; 2,000 shares authorized; none issued -- -- Common stock, $.05 par value; 15,000 shares authorized; 5,475 and 5,466 shares issued and outstanding 273 273 Capital in excess of par value 11,408 11,390 Retained earnings 36,190 33,563 Deferred compensation (71) (97) -------- -------- Total stockholders' equity 47,800 45,129 -------- -------- Total liabilities and stockholders' equity $ 83,654 $ 76,254 ======== ======== 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)
Thirteen Fourteen Thirty-Nine Weeks Ended Weeks Ended Weeks Ended October 2, October 3, October 2, October 3, 1998 1997 1998 1997 -------- -------- ------- ------- Net sales $221,285 $241,048 $75,031 $86,372 Cost of sales 161,637 181,362 54,711 64,767 -------- -------- ------- ------- Gross profit 59,648 59,686 20,320 21,605 Selling, general and administrative expenses 55,444 55,232 19,012 20,025 -------- -------- ------- ------- Income before income taxes 4,204 4,454 1,308 1,580 Provision for income taxes 1,577 1,995 487 713 -------- -------- ------- ------- Net income $ 2,627 $ 2,459 $ 821 $ 867 ======== ======== ======= ======= Net income per share of common stock-basic and diluted $ .48 $ .45 $ .15 $ .16 ======== ======== ======= ======= Weighted average shares outstanding-basic 5,473 5,465 5,475 5,466 ======== ======== ======= ======= Weighted average shares outstanding-diluted 5,499 5,504 5,501 5,501 ======== ======== ======= =======
See accompanying notes to condensed consolidated financial statements. -4- WESTERN BEEF, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Thirty-Nine Weeks Ended October 2, 1998 October 3, 1997 --------------- --------------- Cash flows from operating activities: Net income $ 2,627 $ 2,459 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,094 3,122 Deferred income tax expense 111 627 Provision for losses on accounts receivable 310 790 Gain on disposal of property, plant and equipment (139) (80) (Increase)decrease in assets: Accounts receivable 652 555 Inventories (2,091) 2,618 Prepaid expenses and other current assets (207) (1,208) Other assets (94) (48) (Decrease) increase in liabilities: Accounts payable and accounts payable - related party 3,949 2,111 Accrued expenses and other liabilities 1,350 17 Non-current liabilities (591) -- ------- -------- Net cash provided by operating activities 8,971 10,963 ------- -------- Cash flows from investing activities: Capital expenditures (7,569) (5,577) Proceeds from sale of property, plant and equipment 1,055 305 ------- -------- Net cash used in investing activities (6,514) (5,272) ------- -------- Cash flows from financing activities: Proceeds from issuance of long-term debt and capital leases 2,055 647 Payments on long-term debt and capital leases (2,119) (2,248) Proceeds from issuance of common stock 18 8 ------- -------- Net cash used in financing activities (46) (1,593) ------- -------- Net increase in cash and cash equivalents 2,411 4,098 Cash and cash equivalents, beginning of period 7,527 2,634 ------- -------- Cash and cash equivalents, end of period $ 9,938 $ 6,732 ======= ======== Cash paid during the thirty-nine weeks for: Interest $ 774 $ 853 Income taxes $ 979 $ 2,294
See accompanying notes to condensed consolidated financial statements. -5- WESTERN BEEF, INC. AND SUBSIDIARIES NOTES TO THE 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 thirty-nine weeks ended October 2, 1998 are not necessarily indicative of the results that may be expected for the year ending January 1, 1999. 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 2, 1998. (2) Litigation: There has been no material change in litigation from the year ended January 2, 1998. See Part II of this report for further disclosure. -6- ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. For the thirteen week period ended October 2, 1998, the Company earned net income of $821,000 or $.15 per share on net sales of $75,031,000 as compared to net income of $867,000 or $.16 per share on net sales of $86,372,000 for the fourteen week period ended October 3, 1997. For the thirty-nine weeks ended October 2, 1998, the Company earned net income of $2,627,000 or $.48 per share on net sales of $221,285,000 as compared to net income of $2,459,000 or $.45 per share on net sales of $241,048,000 for the comparable thirty-nine week period in 1997. Net sales for the thirteen week period ended October 2, 1998 decreased 13.1% from the prior year period which included an extra week's sales as well as, incremental sales from the Fourth of July holiday period. Sales for the thirty-nine weeks ended October 2, 1998 were 8.2% lower than sales for the comparable thirty-nine week period of 1997. Comparable retail store sales were flat for the quarter and 0.2% lower for the thirty-nine week year-to-date period. Total retail store sales increased $6,311,000 or 3.6% for the thirty-nine week period as a result of the 1998 openings of two Junior's Food Outlet stores in New York and two Western Beef supermarkets in New Jersey. Overall consolidated Company sales for the 1998 third quarter and thirty-nine week period continued to be negatively impacted by a decline in the Company's meat wholesale business resulting primarily from a tightening of credit policies initiated in the fourth quarter of 1997. Gross profit, as a percentage of sales, increased to 27.1% in the third quarter of 1998 from 25.0% for the same quarter of 1997. On a year-to-date basis, gross profit increased to 27.0% for the thirty-nine weeks ended October 2, 1998 as compared to 24.8% for the thirty-nine week period in 1997. The increase in the gross profit percentage for the quarter and thirty-nine weeks ended October 2, 1998 is the result of the increased share of total Company sales generated by the retail store division versus sales generated by the wholesale meat division, with the retail store division having higher selling gross margins than the wholesale meat division. Selling, general and administrative expenses, as a percentage of sales, increased to 25.3% for the third quarter of 1998 from 23.2% for the fourteen week period ended October 3, 1997. On a year-to-date basis, selling, general and administrative expenses increased to 25.1% of sales for the thirty-nine weeks ended October 2, 1998 from 22.9% for the comparable thirty-nine week period in 1997. The increased quarterly and year-to-date selling, general and administrative percentage rate is similarly attributable to the increased share of total Company sales generated by the retail store division which has relatively higher selling expenses than the wholesale meat division. Incremental promotional spending and pre-opening expenses related to two newly opened New Jersey store locations also contributed to the increase in selling, general and administrative expenses. -7- ITEM 2 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources Cash flows from operations were $8,971,000 for the thirty-nine weeks ended October 2, 1998 as compared to $10,963,000 for the thirty-nine weeks ended October 3, 1997. Cash flows from operations decreased $1,992,000 primarily as a result of inventory increases associated with the four new retail locations partially offset by increased accounts payable and accrued expenses. Cash flows from operations plus cash on hand were sufficient to pay for capital expenditures and long-term debt requirements. Capital expenditures of $7,569,000 included the exercise of an option to purchase an existing store location for approximately $2,055,000 to be paid over 15 years at 6.25 percent interest per annum. The remaining capital expenditures were for equipment purchases and leasehold improvements for the new retail locations opened in 1998. The Company has a $3,000,000 line of credit (expiring July 3, 1999) 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 October 2, 1998, the Company was in contract to purchase land for future Junior's Food Outlet locations in Manhattan and Queens, NY. The acquisition prices for these locations are $640,000 and $250,000, respectively. In addition, the Company was also in contract to purchase land for $1,700,000 in the Bronx, NY upon which it intends to construct a supermarket and several satellite stores for commercial rental. Year 2000 The Company has performed an analysis and is in the process of modifying its computer systems to address year 2000 issues. The Company is also reviewing year 2000 vulnerability with respect to its major suppliers and third party service providers. Based on current information, management believes that all hardware and software modifications necessary for the Company to operate will be complete by the year 2000. Costs associated with year 2000 computer system modifications are currently estimated to be approximately $300,000 of which $150,000 is for certain front-end cash register systems. -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 materially adversely affect the Company's financial position or results of operations. Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders The Company held its Annual Meeting of Stockholders on August 7, 1998, and transacted the following business: (a) Election of Directors: Votes Nominee Votes For % For Withheld ------- --------- ----- --------- Peter Castellana, Jr. 4,616,771 99.80% 9,298 Joseph Castellana 4,616,771 99.80% 9,298 Stephen R. Bokser 4,616,371 99.79% 9,698 Arnold B. Becker 4,616,871 99.80% 9,198 (b) Selection of PricewaterhouseCoopers LLP as Independent Auditors: Votes For % For Votes Against Abstentions - --------- ----- ------------- ----------- 4,731,576 99.87% 1,146 4,765 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 None -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: November 12, 1998 -10- EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Quarterly Report on Form 10-Q for Western Beef, Inc. for the Quarter ended October 2, 1998 and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS JAN-01-1999 JUL-04-1998 OCT-02-1998 9,938 0 5,974 661 16,204 35,804 69,375 23,532 83,654 23,423 9,044 0 0 273 47,527 83,654 221,285 221,285 161,637 161,637 54,670 0 774 4,204 1,577 2,627 0 0 0 2,627 .48 .48
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