10-Q 1 whiteford-10q_033106.txt FORM 10-Q 03/31/06 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2006 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: 33-15962 WHITEFORD PARTNERS, L.P. (Exact name of registrant as specified in its charter) Delaware 76-0222842 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Sebaly Shillito & Dyer 1900 Kettering Tower, Dayton, Ohio 45423 (Address of principal executive offices) (Zip Code) 303-705-6199 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check 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 --- --- Indicate by checkmark whether the registrant is a large accelerated filer or a non-accelerated filer. Large accelerated filer Accelerated filer Non-Accelerated filer X --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Units Outstanding at May 2,2006 ------------------------------------- Limited Partnership Class A $10 Units 1,306,890 This document contains 12 pages WHITEFORD PARTNERS, L.P. INDEX TO FORM 10-Q THREE MONTHS ENDED MARCH 31, 2006 and 2005 -------------------------------------------------------------------------------- Page Number Part I. FINANCIAL INFORMATION Item 1.Financial Statements Condensed Consolidated Balance Sheets as of March 31, 2006 (Unaudited) and December 31, 2005 .............................3 Condensed Consolidated Statements of Operations for the three months ended March 31, 2006 and 2005 (Unaudited)...............4 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2006 and 2005 (Unaudited)...............5 Notes to Condensed Consolidated Financial Statements (Unaudited)...6 Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations...................................8 Item 3. Quantitative and Qualitative Disclosure About Market Risk ...9 Item 4. Control and Procedures ......................................9 PART II. OTHER INFORMATION...................................................9 Item 1. Legal Proceedings ...........................................9 Item 1a Risk Factors...........................................9 Item 6. Exhibits and Reports on Form 8K .............................9 2 of 12 Whiteford Partners, L.P. CONDENSED CONSOLIDATED BALANCE SHEETS

~~Three~~March ~~Months~~31, ~~Ended~~2006 ~~Six~~December ~~Months Ended June 30~~31, ~~June~~2005 ~~30,~~ -------- -------- ~~2004 2003 2004 2003~~ ---- ---- ---- ----- ~~Revenues~~Unaudited ~~Interest~~ASSETS ~~and~~CURRENT ~~other~~ASSETS: ~~income~~Cash $and ~~32,294~~cash $equivalents ~~32,471~~ $ 64391,~~920~~247 $ 65424,~~922~~797 ---------- --~~--------~~ ---------- --~~--------~~ ~~32,294~~TOTAL ~~32,471~~CURRENT 64ASSETS 391,~~920~~247 65424,~~922~~797 ~~Costs~~SUBORDINATED ~~and~~NOTE ~~Expenses~~RECEIVABLE ~~Selling and administrative expenses 32~~550,~~294~~000 8550,~~245~~000 ~~64,920 15,863~~ ---------- --~~--------~~ ---------- --~~--------~~ ~~NET~~TOTAL ~~INCOME~~ASSETS ~~OPERATIONS~~ $ ~~0 $ 24~~941,~~226~~247 $ ~~0 $ 50~~974,~~059~~797 ========== ==~~========~~ ========== ==~~========~~ ~~Summary~~LIABILITIES ofAND ~~net~~PARTNERS' ~~income~~CAPITAL ~~allocated~~CURRENT toLIABILITIES: ~~General~~Accrued ~~Partner~~expenses $and 0other liabilities $ ~~242~~130,749 $ 066,380 $------------ ~~500~~------------ TOTAL CURRENT LIABILITIES 130,749 66,380 PARTNERS' CAPITAL: General Partner: Capital contributions 132,931 132,931 Capital transfers to Limited Partners 0(117,800) 23(117,~~984~~800) 0Interest 49in net (loss) (56,~~559~~775) (55,796) Distributions (38,171) (38,171) ------------ ------------ (79,815) (78,836) ------------ ------------ $Class 0A $Limited ~~24,226~~Partners: $Capital ~~0 $ 50~~contributions,~~059~~ ~~==========~~net ~~==========~~of ~~==========~~organization ~~==========~~and ~~Net~~offering ~~income~~costs ~~per~~of $102,010,082 ~~unit~~11,172,274 of11,172,274 ~~L.P.~~ Capital $transfers ~~0.00~~from $the ~~0.02~~General $Partner ~~0.00~~116,554 $116,554 ~~0.04~~Interest ~~==========~~in ~~==========~~net ~~==========~~(loss) ~~==========~~(5,631,749) ~~Weighted~~(5,534,809) ~~average~~Distributions ~~units~~(4,766,766) ~~issued~~(4,766,766) ~~and~~------------ ~~outstanding~~------------ 1890,~~306~~313 987,~~890~~253 1------------ ------------ TOTAL PARTNERS' CAPITAL 810,~~306~~498 908,~~890~~417 1------------ ------------ TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 941,~~306,890~~247 1$ 974,~~306,890~~797 ========== ==~~========~~ ========== ==~~========~~

See notes to consolidated financial statements. Note: The Condensed Balance Sheet at December 31, 2005, has been taken from the audited financial statements at such date. 3 OF 12 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS WHITEFORD PARTNERS, L.P. (Unaudited) -------------------------------------------------------------------------------- Three Months Ended March 31, ---------------------------------- 2006 2005 ---- ---- Revenue Interest and other income $ 4,177 33,438 ----------- ----------- 4,177 33,438 Costs and Expenses General and administrative expenses 102,096 33,438 ----------- ----------- NET LOSS $ (97,919) $ 0 =========== =========== Summary of net loss allocated to General Partner $ (979) $ 0 Limited Partners (96,940) 0 ----------- ----------- $ (97,919) $ 0 =========== =========== Net Loss per $10 unit of L.P. Capital $ (0.07) $ 0.00 =========== =========== Average units issued and outstanding $ 1,306,890 1,306,890 =========== =========== 4 OF 12 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS WHITEFORD PARTNERS, L.P. (Unaudited) -------------------------------------------------------------------------------- Three Months Ended March 31, -------------------------- 2005 2006 -------------------------- NET CASH (USED)/PROVIDED BY OPERATING ACTIVITIES $ (33,550) $ (5,118) --------- --------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (33,550) (5,118) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 424,797 427,675 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 391,247 $ 422,557 ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 0 $ 0 ========= ========= 5 of 12 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS WHITEFORD PARTNERS, L.P. March 31, 2005 (Unaudited) -------------------------------------------------------------------------------- NOTE A - ORGANIZATION, BUSINESS AND ACQUISITIONS Whiteford Partners, L.P., (the "Partnership"), formerly Granada Foods, L.P., was formed on June 30, 1987, as a Delaware limited partnership. Prior to May 4, 1992, the Partnership consisted of a General Partner, Granada Management Corporation, ("Granada"), and the Limited Partners. On May 4, 1992, Granada assigned its sole general partner interest in the Partnership to Gannon Group, Inc. and the Partnership was renamed Whiteford Partners, L.P. The operational objectives of the Partnership are to own and operate businesses engaged in the development, production, processing, marketing, distribution and sale of food and related products ("Food Businesses") for the purpose of providing quarterly cash distributions to the partners while providing capital appreciation through the potential appreciation of the Partnership's Food Businesses. The Partnership expects to operate for twenty years from inception, or for such shorter period as the General Partner may determine is in the best interest of the Partnership, or for such shorter period as determined by the majority of the Limited Partners. The Partnership Agreement provides that a maximum of 7,500,000 Class A, $10 partnership units can be issued to Limited Partners. Generally, Class A units have a preference as to cumulative quarterly cash distributions of $.25 per unit. The sharing of income and loss from the Partnership operations is 99% to the Class A and 1% to the General Partner. Amounts and frequency of distributions are determinable by the General Partner. On March 26, 1990, the Partnership, through Whiteford Foods Venture, ("Whiteford's L.P.") (formerly Granada/Whiteford Foods Venture, L.P.), a joint venture with an affiliate of the then General Partner, acquired the business assets of Whiteford's Inc., a meat processing and distribution company. The Partnership and Whiteford's have operated in the food business segment only. The cash purchase price of the assets was $8,275,000 with liabilities of $3,776,806 assumed. The excess of the purchase price over the estimated fair value of the net tangible assets acquired of approximately $3,825,000 was recorded as goodwill. The acquisition was accounted for using the purchase method of accounting and, accordingly, the financial statements include the operations of Whiteford's from the date of acquisition. At March 31, 2006 and at December 31, 2005, the Partnership had 1,306,890 Class A limited partnership units issued and outstanding. The Partnership sold (the "Sale Transaction") substantially all of its assets on November 11, 2001 to Whiteford Food Products, Inc., a wholly owned subsidiary of JNR Corporation, an unaffiliated company. The purchase price was $7,950,000, including the assumption or payment of certain liabilities. The purchase price was paid $1,500,000 in cash and the issuance of a subordinated note (the "Subordinated Note") due June 30, 2007 in the principal amount of $1,350,000 (as adjusted) with the balance of the purchase price paid by the assumption of certain liabilities net of other assets. The Subordinated Note bears interest at 9.5% and is prepayable under certain conditions. Additionally, the principal balance of the Subordinated Note may be adjusted downward under certain conditions. The Partnership has received accrued interest on the Subordinated Note through June 30, 2005 at the rate of 9.5% annually. No payments of interest accrued on the Subordinated Note subsequent to June 30, 2005 have been received. On August 3, 2005, the Partnership was advised that Whiteford Foods Products, Inc. noticed its employees of the possibility of the closure of the facility in Versailles, Ohio, due to losses at such facility. Furthermore, U.S. Bank, the lender to Whiteford Food Products, Inc. and Rochester Meat Company, a subordinated guarantor of the Subordinated Note, declared a default on loans to Whiteford Food Products, Inc. which resulted in the suspension of payments to the Partnership under the Subordinated Note. On September 26, 2005, the Partnership was advised that Whiteford Food Products, Inc. filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code, due to losses arising from processing activities. Whiteford Food Products, Inc. conducted an auction of equipment during December 2005 and filed a reorganization plan (the "Plan") on January 24, 2006, which was approved and confirmed in April 2006. Based upon the above, the General Partner has assessed the financial impact of such matters on the financial condition of the Partnership and established a reserve in the amount of $800,000 against the $1,350,000 owed to the Partnership and ceased the accrual of interest income on such note as of June 30, 2005. The General Partner anticipates that the Partnership will receive $550,000 during the second or third quarter of 2006 from Whiteford Food Products, Inc. and its affiliates pursuant to the Plan. 6 OF 12 In connection with the transaction with Whiteford Food Products, Inc., the Partnership was obligated to pay up to $500,000 to Greenaway Consultants, Inc. pursuant to a consulting agreement. Greenaway Consultants, Inc. acquired the right to such payment in connection with its provision of management services and financing to the Partnership. The Partnership and Greenaway Consultants, Inc. agreed to: (i) a $50,000 payment made in January 2002, (ii) subordinate $300,000 of such payment to the distribution by the Partnership of $2.00 per limited partner unit (an aggregate of $2,613,780) and (iii) forgive $150,000 of such payment. Greenaway Consultants, Inc. is wholly owned by Albert Greenaway. Neither Mr. Greenaway nor Greenaway Consultants, Inc. owns any interest in the general partner of the Partnership. Based upon the General Partner's estimate of the value of the Subordinated Note Receivable, the General Partner has revised its estimate of amounts due Greenaway Consultants Inc. to $0 and has reversed amounts previously accrued. The Partnership records distributions of income and/or return of capital to the General Partner and Limited Partners when paid. Special transfers of equity, as determined by the General Partner, from the General Partner to the Limited Partners are recorded in the period of determinations. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions of Form 10-Q and therefore do not include all information and footnotes for a fair presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States. While the Partnership believes that the disclosures presented are adequate to make the information not misleading, it is suggested that these condensed consolidated financial statements be read in conjunction with the condensed consolidated financial statements and notes included in the Partnership's most recent annual report for the year ended December 31, 2005. A summary of the Partnership's significant accounting policies is presented on page F-5 of the Partnership's most recent annual report. There have been no material changes in the accounting policies followed by the Partnership during 2006. In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments (all of which are of a normal recurring nature) which are necessary for a fair presentation of the condensed consolidated financial position of the Partnership at March 31, 2006 and the condensed consolidated results of its operations for the three months ending March 31, 2006 and 2005 and the condensed consolidated cash flows for the three months ending March 31, 2006 and 2005. Operating results for the period ending March 31, 2006 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2006. 7 OF 12 NOTE B - Income Taxes The Partnership files an information tax return, the items of income and expense being allocated to the partners pursuant to the terms of the Partnership Agreement. Income taxes applicable to the Partnership's results of operations are the responsibility of the individual partners and have not been provided for in the accounts of the Partnership. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Partnership is including the following cautionary statement in this Report on Form 10Q to make applicable and take advantage of the safe harbor provision of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of the Partnership. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are other than statements of historical facts. Certain statements contained herein are forward-looking statements and, accordingly, involve risk and uncertainties, which could cause actual results to differ materially from those expressed in the forward-looking statements. The Partnership's expectations, beliefs and projections are expressed in good faith and are believed by the Partnership to have reasonable basis, including without limitation, Management's examination of historical operating trends, data contained in the Partnership's records, and other data available from third parties, but there can be no assurance that Management's expectations, beliefs, or projections would result or be achieved or accomplished. In addition to other factors and matters discussed elsewhere herein, important factors that, in the view of the Partnership, could cause actual results to differ materially from those discussed in the forward-looking statements include demand for Rochester Meats (as the guarantor on the Subordinated Note) products, the ability of Rochester Meats to obtain widespread market acceptance of its products, the ability of Rochester Meats to obtain acceptable forms and amounts of financing, competitive factors, regulatory approvals and developments, economic conditions, the impact of competition and pricing, and other factors affecting the Partnership, Rochester Meats' business that is beyond the Partnership's control. Also, the realization of proceeds by Whiteford Food Products, Inc. from the sale of its assets and the distribution of such proceeds in connection with Whiteford Food Products, Inc. Plan of reorganization under the protection of Chapter 11 of the U.S. Bankruptcy Code, may have a material impact on the proceeds received by the Partnership under the Subordinated Note Receivable. The Partnership has no obligation to update or revise these forward-looking statements to reflect the occurrence of future events or circumstances. The Partnership was organized as a Limited Partnership with a maximum operating life of twenty years ending 2007. The source of its capital has been from the sale of Class A, $10 Limited Partnership units in a public offering that terminated on November 10, 1989. Management's discussion and analysis set forth below should be read in conjunction with the accompanying condensed consolidated financial statements. Results of Operations --------------------- Three Months ended March 31, 2006 Compared to Three Months ended March 31, 2005 ------------------------------------------------------------------------------- The Partnership sold substantially all of its operating assets on November 11, 2001. For the three months ended March 31, 2006, the Partnership received interest on cash balances aggregating $4,177 and incurred and accrued expenses of $102,096 including estimated expenses associated with the wind-down of the Partnership during 2006. Such expenses include general and administrative expenses, legal fees, tax return preparation fees, accounting fees, transfer agent fees, storage fees and other expenses. The Partnership expects to pay a liquidating distribution of approximately $.68 per unit during the second or third quarter of 2006 from the proceeds of the subordinated note and other cash balances. For the three months ended March 31, 2005, the Partnership received net interest issued on the subordinated note and cash balances aggregating $33,438 and incurred operating expenses of $33,438. Such operating expenses include general and administrative expenses associated with audit fees, tax return preparation fees, accrual of the subordinated consulting fee to Greenaway Consultants Inc., and transfer agent fees. 8 of 12 Liquidity and Capital Resources ------------------------------- At March 31, 2006, the Partnership had working capital of $260,498 versus working capital of $358,417 at December 31, 2005. Subsequent to the sale of assets to Rochester Meats, the Partnership has no interest bearing debt outstanding. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK In the normal operation, the Company has market risk exposure to interest rates on its cash investments of $391,247. At March 31, 2006, the Company had $1,350,000 in interest bearing investments, against which the Company has reserved $800,000 due to uncertainty of collection, that are subject to market risk exposure to change in interest rates. The Subordinated Note bears interest fixed at 9 1/2% for the life of the note that comes due June 30, 2007. However, since June 30, 2005, the Company has not accrued interest on the note. The remaining amount is subject to normal economic risk associated with fluctuating money markets as well as collection risk. Item 4. CONTROLS AND PROCEDURES The Company maintains a system of internal accounting controls designed to provide reasonable assurance that transactions are properly recorded and summarized so that reliable financial records and reports can be prepared and assets safeguarded. In addition, a system of disclosure controls is maintained to ensure that information required to be disclosed is recorded, processed, summarized and reported in a timely manner to management responsible for the preparation and reporting of the Company's financial information. Management assesses the internal control and disclosure control systems as being effective as they encompass material matters for the three months ended March 31, 2006. To the best of management's knowledge, there were no changes in the internal control and disclosure control systems during the quarter ended March 31, 2006, that would materially affect the control systems. PART II. OTHER INFORMATION Item 1. Legal Proceeding There are no other material pending or threatened legal proceedings involving the Partnership, known to either the Partnership or the General Partner. Item 1a. Risk Factors There has been no change in our risk factors that appear in Item 1a of our Form 10K on page 3. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ---------------------------------------- (a) Exhibits: Exhibit Number Description ------ ----------- 31.1 CEO certification pursuant to Section 302 of Sarbanes - Oxley Act of 2002. 32 CEO and CFO certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002. (b) Reports on Form 8K - None 9 fo 12 SIGNATURES 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. WHITEFORD PARTNERS, L.P. Date May 2, 2006 Kevin T. Gannon, President Chief Executive Officer Chief Financial Officer Gannon Group, Inc. General Partner 10 of 12

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