-----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, S0yFvLK/sNWqIDiNVvZfwSClgaZ7oZnLz/sj3jj3OqcfB3z8UK6aoE76XpFozjSV 6thte9xTzNWNgsR+fzVA9w== 0001047469-97-005174.txt : 19971118 0001047469-97-005174.hdr.sgml : 19971118 ACCESSION NUMBER: 0001047469-97-005174 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971003 FILED AS OF DATE: 19971117 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: SEC FILE NUMBER: 000-04485 FILM NUMBER: 97722820 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 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 3, 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 (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. As of November 10, 1997, 5,465,930 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 3 OCTOBER 3, 1997 AND JANUARY 3, 1997. CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE 4 THIRTY-NINE WEEKS ENDED OCTOBER 3, 1997 AND SEPTEMBER 27, 1996, AND THE FOURTEEN WEEKS ENDED OCTOBER 3, 1997 AND THE THIRTEEN WEEKS ENDED SEPTEMBER 27, 1996. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR 5 THE THIRTY-NINE WEEKS ENDED OCTOBER 3, 1997 AND SEPTEMBER 27, 1996. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 6 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL 7 CONDITION AND RESULTS OF OPERATIONS. PART II-OTHER INFORMATION 8 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 eight 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 1. FINANCIAL STATEMENTS WESTERN BEEF, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PAR VALUE) (UNAUDITED)
OCTOBER 3, JANUARY 3, 1997 1997 ----------- ----------- ASSETS Current assets: Cash and cash equivalents............................................................... $ 6,732 $ 2,634 Accounts receivable, net of allowance for doubtful accounts ($1,002 and $386)........... 7,089 8,434 Inventories............................................................................. 15,050 17,668 Deferred income taxes................................................................... 1,323 1,253 Prepaid expenses and other current assets............................................... 2,669 1,461 ----------- ----------- Total current assets................................................................ 32,863 31,450 Property, plant and equipment, net of accumulated depreciation and amortization ($19,721 and $16,935)................................................................... 43,532 41,276 Other assets.............................................................................. 1,821 1,773 ----------- ----------- Total assets........................................................................ $ 78,216 $ 74,499 ----------- ----------- ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt....................................................... $ 2,237 $ 2,391 Current portion of obligations under capital leases..................................... 623 455 Accounts payable........................................................................ 13,525 11,414 Accrued expenses and other current liabilities.......................................... 5,879 5,862 ----------- ----------- Total current liabilities........................................................... 22,264 20,122 Deferred income taxes payable............................................................. 2,181 1,484 Long-term debt, net of current portion.................................................... 6,104 7,764 Obligations under capital leases, net of current portion.................................. 3,292 3,247 ----------- ----------- Total liabilities................................................................... 33,841 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 October 3, 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.......................................................... 11,387 11,379 Retained earnings....................................................................... 32,819 30,360 Deferred compensation................................................................... (104) (130) ----------- ----------- Total stockholders' equity.......................................................... 44,375 41,882 ----------- ----------- Total liabilities and stockholders' equity.......................................... $ 78,216 $ 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)
THIRTY-NINE WEEKS ENDED FOURTEEN THIRTEEN ------------------------- WEEKS ENDED WEEKS ENDED OCTOBER 3, SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27, 1997 1996 1997 1996 ---------- ------------- ------------ ------------- Net sales................................................ $ 241,048 $ 248,696 $ 86,372 $ 85,167 Cost of sales............................................ 181,362 188,413 64,767 64,487 ---------- ------------- ------------ ------------- Gross profit on sales.................................. 59,686 60,283 21,605 20,680 ---------- ------------- ------------ ------------- Operating expenses: Rent expense-affiliates................................ 2,105 1,910 725 660 Interest expense....................................... 853 733 278 252 Selling, general and administrative expenses........... 52,274 49,651 19,022 16,947 ---------- ------------- ------------ ------------- Total operating expenses................................. 55,232 52,294 20,025 17,859 ---------- ------------- ------------ ------------- Income before income taxes............................... 4,454 7,989 1,580 2,821 Provision for income taxes............................... 1,995 3,685 713 1,299 ---------- ------------- ------------ ------------- Net income............................................... $ 2,459 $ 4,304 $ 867 $ 1,522 ---------- ------------- ------------ ------------- ---------- ------------- ------------ ------------- Weighted average number of shares of common stock and equivalents outstanding................................ 5,512 5,501 5,508 5,505 ---------- ------------- ------------ ------------- ---------- ------------- ------------ ------------- Earnings per share of common stock....................... $ .45 $ .78 $ .16 $ .28 ---------- ------------- ------------ ------------- ---------- ------------- ------------ -------------
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 3, 1997 SEPTEMBER 27, 1996 --------------- ------------------ Cash flows from operating activities: Net income.................................................................... $ 2,459 $ 4,304 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............................................... 3,122 2,337 Deferred income tax......................................................... 627 280 Provision for losses on accounts receivable................................. 790 430 Gain on disposal of fixed assets............................................ (80) -- (Increase)decrease in assets: Accounts receivable..................................................... 555 24 Inventories............................................................. 2,618 (2,607) Prepaid expenses and other current assets............................... (1,208) 493 Other assets............................................................ (48) (2) Increase in liabilities: Accounts payable........................................................ 2,111 5,033 Accrued expenses and other liabilities.................................. 17 287 ------- ------- Net cash provided by operating activities............................. 10,963 10,579 ------- ------- Cash flows from investing activities: Capital expenditures........................................................ (5,577) (9,975) Proceeds from sale of property, plant and equipment......................... 305 -- ------- ------- Net cash used in investing activities................................. (5,272) (9,975) ------- ------- Cash flows from financing activities: Proceeds from issuance of long-term debt and capital leases................. 647 4,224 Payments on long-term debt and capital leases............................... (2,248) (1,715) Proceeds from issuance of common stock...................................... 8 -- ------- ------- Net cash provided by (used in) financing activities................... (1,593) 2,509 ------- ------- Net increase in cash and cash equivalents..................................... 4,098 3,113 Cash and cash equivalents, beginning of period................................ 2,634 2,431 ------- ------- Cash and cash equivalents, end of period...................................... $ 6,732 $ 5,544 ------- ------- ------- ------- Cash paid during the thirty-nine weeks for: Interest.................................................................... $ 853 $ 733 Income taxes................................................................ $ 2,294 $ 3,103
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 3, 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. 6 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. For the fourteen week period ended October 3, 1997, Western Beef, Inc. (the "Company") achieved net income of $867,000 or $.16 per share on net sales of $86,372,000 as compared to net income of $1,522,000 or $.28 per share on net sales of $85,167,000 for the same period in 1996. For the thirty-nine weeks ended October 3, 1997, the Company achieved net income of $2,459,000 or $.45 per share on net sales of $241,048,000 as compared to net income of $4,304,000 or $.78 per share on net sales of $248,696,000 for the comparable thirty-nine week period ended September 27, 1996. As a result of the extra week, net sales for the period ended October 3, 1997 were 1.4% higher than sales for the quarter ended September 27, 1996. For the comparable thirty-nine week period, net sales declined 3.1%. Same store sales were 4.5% and 4.2% lower for the fourteen and thirty-nine weeks ended October 3, 1997 as compared with sales for the thirteen and thirty-nine weeks ended September 27, 1996. Reduction in redemptions of United States Department of Agriculture Food Stamps and low food price inflation account for a significant portion of the decline in same store sales. Gross profit, as a percentage of sales increased to 25.0% for the fourteen weeks ended October 3, 1997 from 24.3% in the quarter ended September 27, 1996. On a year-to-date basis, gross profit increased to 24.8% for the thirty-nine weeks ended October 3, 1997 as compared to 24.2% for the thirty-nine weeks ended September 27, 1996. The increase in the gross profit for the third fiscal quarter and the thirty-nine weeks ended October 3, 1997 resulted from the increased ratio of retail to wholesale sales, as well as the capital expansion program, which 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 were 23.2% and 22.9%, respectively for the fourteen and thirty-nine weeks ended October 3, 1997 as compared to 21.0% for the thirteen and thirty-nine weeks ended September 27, 1996. The increase in the 1997 operating expense ratios over the prior year is reflective of certain occupancy costs such as utilities, rent and depreciation which do not vary directly with sales declines. Additionally, 1997 operating expenses include those costs incurred at the Company's Roosevelt N.Y. store which did not open until late September 1996. LIQUIDITY AND CAPITAL RESOURCES Cash flows from operations were $4,098,000 for the thirty-nine weeks ended October 3, 1997 as compared to $3,113,000 for the thirty-nine weeks ended September 27, 1996. To improve inventory and receivable cash flows and operating efficiencies, the Company consolidated its internal warehouse and distribution operations and has increased its purchases from White Rose Food, its primary wholesale supplier. Cash flows from operations plus cash on hand were sufficient to pay for capital expenditures and long-term debt requirements. 7 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED). The capital expenditures of $5,577,000 related to equipment purchases for, and renovations of, several of the Company's supermarkets as well as construction of the Company's twentieth store which is expected to be completed before the end of the Company's fiscal year. In September 1997 the Company renewed its $3,000,000 line of credit which provides for borrowings at the bank's prime rate through June 30, 1998. The Company also has several financial institutions that it believes would be available to finance expenditures for new store equipment usually over a five to seven year period. As of October 3, 1997 there were no material commitments for capital expenditures. 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 January 12, 1998. 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 8 PART II OTHER INFORMATION (CONTINUED) Item 4. Submission of Matters to a Vote of Security-Holders. The Company held its Annual Meeting of Stockholders on July 11, 1997, and transacted the following business: (a) Election of Directors:
NOMINEE VOTES FOR % FOR VOTES WITHHELD -------------------------------------- ---------- --------- --------------- Joseph Castellana..................... 4,729,032 99.85% 6,885 Peter Castellana, Jr.................. 4,728,732 99.85% 7,185 Stephen R. Bokser..................... 4,728,632 99.85% 7,285 Arnold B. Becker...................... 4,729,032 99.85% 6,885
(b) Selection of BDO Seidman, LLP as Independent Auditors:
VOTES FOR % FOR VOTES AGAINST ABSTENTIONS ---------- --------- --------------- ------------- 4,731,576.. 99.91% 2,208 2,133
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 filed a report on Form 8-K in September, 1997 pertaining to the engagement of Price Waterhouse LLP to replace BDO Seidman, LLP as independent auditors for the Company's 1997 fiscal audit. 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 10, 1997 10 EX-27 2 EX-27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WESTERN BEEF, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE FOURTEEN WEEKS ENDED OCTOBER 3, 1997. 9-MOS JAN-02-1998 JUN-28-1997 OCT-03-1997 6,732 0 8,091 1,002 15,050 32,863 63,253 19,721 78,216 22,264 9,396 0 0 273 44,102 78,216 241,048 241,048 181,362 181,362 54,379 0 853 4,454 1,995 2,459 0 0 0 2,459 .45 .45
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