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 EXCHANGE ACT OF 1934
For the Quarter Ended September 24, 1994
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: 2-62681
GOLD KIST INC.
(Exact name of registrant as specified in its charter)
GEORGIA 58-0255560
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
244 Perimeter Center Parkway, N.E., Atlanta, Georgia 30346
(Address of principal executive offices) (Zip
Code)
(Registrant's telephone number, including area code) (404) 393-
5000
N/A
(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
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GOLD KIST INC. AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
September 24, 1994 and June 25, 1994 . 1
Consolidated Statements of Operations -
Three Months Ended September 24, 1994
and September 25, 1993 . . . . . . . . 2
Consolidated Statements of Cash Flows -
Three Months Ended September 24, 1994
and September 25, 1993. .. . . . . . . 3
Notes to Consolidated Financial
Statements . . . . . . . . . . . . . . 4 - 5
Item 2. Management's Discussion and Analysis of
Consolidated Results of Operations and
Financial Condition. . . . . . . . . . 6 - 7
Part II. Other Information
Item 3. Legal Proceedings . . . . . . . . . . . . 8
Item 6. Exhibits and Reports on Form 8-K. . . . . 8
PAGE
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<TABLE>
Page 1
Item 1. Financial GOLD KIST INC. AND SUBSIDIARIES
Statements CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
(Unaudited)
<CAPTION>
Sept. 24, 1994 June 25, 1994
-------------- -------------
ASSETS
Current assets: <C> <C>
Cash and cash equivalents $ 14,413 15,670
Receivables, principally trade, including
notes receivable of $45.7 million at
Sept. 24, 1994 and $42.8 million
at June 25, 1994, less allowance for
doubtful accounts of $5,047 at
Sept. 24, 1994 and $5,369 at June 25,
1994 152,263 160,714
Inventories (note 3) 195,474 198,467
Other current assets 21,621 14,758
------- -------
Total current assets 383,771 389,609
Investments (note 5) 93,672 72,105
Property, plant and equipment, net 202,695 204,783
Other assets 46,248 49,935
------- -------
$726,386 716,432
======= =======
LIABILITIES AND EQUITY
Current liabilities:
Notes payable and current maturities of
long-term debt:
Short-term borrowings $ 12,800 12,798
Subordinated loan certificates 25,216 25,079
Current maturities of long-term debt 27,143 35,405
------- -------
65,159 73,282
Accounts payable 102,731 117,926
Accrued compensation and related expenses 34,645 26,431
Patronage refunds and equity payable 15,061 14,588
Interest left on deposit 8,404 9,340
Other current liabilities 11,373 8,195
------- -------
Total current liabilities 237,373 249,762
Long-term debt, excluding current maturities 108,662 109,817
Accrued postretirement benefit costs 34,488 34,488
Other liabilities 2,437 687
------- -------
Total liabilities 382,960 394,754
------- -------
Minority interest 25,211 25,016
Patrons' and other equity:
Common stock, $1.00 par value - Authorized
500 shares; issued and outstanding 79 at
Sept. 24, 1994 and June 25, 1994 79 79
Patronage reserves 217,751 213,798
Unrealized gain on marketable equity
security (net of deferred income taxes
of $9.8 million) (note 5) 16,505 -
Retained earnings 83,880 82,785
------- -------
Total patrons' and other equity 318,215 296,662
------- -------
Contingent liabilities (note 7)
$726,386 716,432
======= =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
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<TABLE>
Page 2
GOLD KIST INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands)
(Unaudited)
<CAPTION>
Three Months Ended
------------------
Sept. 24, Sept. 25,
--------- ---------
1994 1993
---- ----
<C> <C>
Net sales volume $397,962 358,779
Cost of sales 357,931 318,041
------- -------
Gross margins 40,031 40,738
Distribution, administrative and general
expenses 29,879 28,111
------- -------
Net operating margins 10,152 12,627
------- -------
Other income (deductions):
Interest income 2,228 1,781
Interest expense (3,740) (3,746)
Equity in loss of partnership (note 4) (4,078) (2,771)
Gain on sale of investment 2,014 -
Miscellaneous, net 3,183 783
------- -------
(393) (3,953)
------- -------
Margins before income taxes, minority
interest and cumulative effect of
change in accounting principle 9,759 8,674
------- -------
Income tax expense 3,416 2,432
------- -------
Margins before minority interest and
cumulative effect of change in
accounting principle 6,343 6,242
Minority interest (237) (616)
------- -------
Margins before cumulative effect of
change in accounting principle 6,106 5,626
Cumulative effect of change in accounting
for income taxes (note 6) - 5,339
------- -------
Net margins $ 6,106 10,965
======= =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
PAGE
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<TABLE>
Page 3
GOLD KIST INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
<CAPTION>
Three Months Ended
------------------
Sept. 24, Sept. 25,
1994 1993
--------- ---------
Cash flows from operating activities: <C> <C>
Net margins $ 6,106 10,965
Non-cash items included in net margins:
Depreciation and amortization 9,497 9,007
Cumulative effect of change in accounting
principle - (5,339)
Equity in loss of partnership 4,078 2,771
Gain on sale of investment (2,014) -
Deferred income tax benefit (1,543) (2,738)
Other (399) 415
Changes in operating assets and liabilities:
Receivables 8,451 (2,831)
Inventories 2,993 5,554
Other current assets (5,542) (2,800)
Accounts payable and accrued expenses (3,803) (411)
Interest left on deposit (936) (1,062)
------- -------
Net cash provided by operating activities 16,888 13,531
------- -------
Cash flows from investing activities:
Acquisitions of property, plant and equipment (7,424) (8,169)
Loans to poultry growers, net of repayments (4,413) -
Proceeds from disposal of investments 3,481 425
Other 129 (540)
------- -------
Net cash used in investing activities (8,227) (8,284)
------- -------
Cash flows from financing activities:
Short-term borrowings (repayments), net 139 (910)
Proceeds from long-term debt 4,187 5,232
Principal payments of long-term debt (13,604) (11,693)
Patronage refunds and other equity paid in cash (640) (977)
------- -------
Net cash used in financing activities (9,918) (8,348)
------- -------
Net change in cash and cash equivalents (1,257) (3,101)
Cash and cash equivalents at beginning of period 15,670 31,086
------- -------
Cash and cash equivalents at end of period $ 14,413 27,985
======= =======
Supplemental disclosure of cash flow data:
Cash paid during the periods for:
Interest (net of amounts capitalized) $ 4,457 5,343
======= =======
Income taxes $ 985 1,103
======= =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.<PAGE>
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Page 4
GOLD KIST IN C. AND SUBSIDIARIES
NOTES TO CON SOLIDATED FINANCIAL STATEMENTS
(Amounts in Thousands)
(Unaudited)
1. The accompanying unaudited consolidated financial statements
reflect the accounts of Gold Kist Inc. and its subsidiaries
("Gold Kist"). These consolidated financial statements
should be read in conjunction with Management's Discussion
and Analysis of Consolidated Results of Operations and
Financial Condition and the Notes to Consolidated Financial
Statements on pages 13 through 17 and pages 25 through 36,
respectively, of Gold Kist's Annual Report in the previously
filed Form 10-K for the year ended June 25, 1994.
2. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of normal recurring accruals) necessary to
present fairly the financial position, the results of
operations, and the cash flows. All significant intercompany
balances and transactions have been eliminated in
consolidation. Results of operations for interim periods are
not necessarily indicative of results for the entire year.
3. Inventories consist of the following:
<TABLE>
<CAPTION>
Sep. 24, 1994 June 25, 1994
-------------- -------------
<C> <C>
Merchandise for sale $ 60,632 65,795
Live poultry and hogs 72,502 75,600
Marketable products 30,045 30,090
Raw materials and supplies 32,295 26,982
------- -------
$195,474 198,467
======= =======
</TABLE>
4. Gold Kist has a 33% interest in Golden Peanut Company, a
Georgia general partnership. Gold Kist's investment in the
partnership was $16.0 million at September 24, 1994 and
$20.1 million at June 25, 1994.
Summarized operating statement information of Golden Peanut
Company is shown below:
<TABLE>
<CAPTION>
Three Months Ended
Sept. 24, 1994 Sep. 23, 1993
-------------- --------------
Net sales and other <C> <C>
operating income $ 93,755 99,412
Costs and expenses 105,747 107,724
------- -------
Net loss $(11,992) (8,312)
======= =======
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</TABLE>
5. In May 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115). SFAS 115 requires a change in the
accounting for investments in equity securities with
determinable fair values and for all investments in debt
securities.
PAGE
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Page 5
GOLD KIST INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Amounts in Thousands)
(Unaudited)
Effective June 26, 1994, the Association adopted the
provisions of SFAS 115 and has classified its marketable
equity security as "available-for-sale." At June 26, 1994,
the cost and fair value of the marketable equity security,
based upon the quoted market price, was $21.5 million and
$42.0 million, respectively. Accordingly, the cumulative
effect of the accounting change resulted in an increase in
a separate component of patron's and other equity of $12.9
million (net of deferred income taxes of $7.6 million).
The fair value of the marketable equity security at
September 24, 1994 was $47.8 million, which represented a
gross unrealized gain of $26.3 million. The gross
unrealized gain for the three month period ended September
24, 1994 was $5.8 million, which has been included as a
separate component of patron's and other equity in the
accompanying balance sheet.
6. Effective June 27, 1993, the Association adopted the
provisions of Statement of Financial Accounting Standards
No. 109 "Accounting for Income Taxes" and has reported the
cumulative effect of that change in the method of accounting
for income taxes in the consolidated statement of operations
for the first quarter of fiscal 1994, which ended September
25, 1993.
7. In January 1994, three Alabama member patrons of Gold Kist
Inc. filed lawsuits in the Circuit Court of Jefferson
County, Alabama, Tenth Judicial Circuit and in the Circuit
Court of DeKalb County, Alabama, against the Association and
Golden Poultry and certain directors, officers and employee
of the companies. The lawsuits allege that the named
officers, directors and employees violated their fiduciary
duties by diverting corporate opportunities from Gold Kist
to Golden Poultry and Carolina Golden in connection with the
creation of Golden Poultry and Carolina Golden, by
permitting their continued operations and by selling shares
of Golden Poultry common stock to certain officers,
directors and employees of the Association and Golden
Poultry. In March 1994, the Court certified the Jefferson
County lawsuits as a class action. In July 1994, the Court
in the DeKalb County lawsuit dismissed as defendants the
employees of the companies who are not or were not directors
or officers of the companies. Among the remedies requested
are the transfer of Golden Poultry operations to Gold Kist
as well as unspecified actual and punitive damages. The
Association intends to defend the litigation vigorously.
In February 1994, other Alabama member patrons of Gold Kist
filed a lawsuit in the Circuit Court of Walker County,
Alabama, against the Association alleging short-weight
deliveries of feed from the Gold Kist Guntersville, Alabama
Feed Mill. In June 1994, the Court certified the litigation
as a class action. The Association intends to defend the
litigation vigorously.
<PAGE>
Page 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net Sales Volume
The Association's net sales volume of $398.0 million for the
three month period ended September 24, 1994 increased 10.9% as
compared to the same period a year ago. Net sales volume in the
Poultry segment increased 11% for the quarter ended September 24,
1994 as compared to the same quarter last fiscal year. The
Poultry segment's increase in net sales volume was primarily the
result of a 14% increase in pounds of broiler products marketed,
which was partially offset by slightly lower average selling
prices. Net sales volume in the Agri-Services segment for the
three month period ended September 24, 1994 increased
approximately 12% as compared to the same period a year ago. The
increase was primarily the result of increased sales of crop
protection chemicals through the retail stores.
Net Operating Margins
The Association had net operating margins of $10.2 million for
the quarter ended September 24, 1994 as compared to $12.6 million
for the quarter ended September 25, 1993. The decline in net
operating margins was primarily the result of higher feed
ingredient costs and slightly lower selling prices for poultry
products. The Poultry segment had net operating margins of $16.7
million for the three months ended September 24, 1994 as compared
to net operating margins of $18.3 million in the same period last
fiscal year. Feed ingredient costs for the three months ended
September 24, 1994 were up 5% as compared to the same three month
period a year ago. Market prices for feed ingredients should
decline through the remainder of fiscal 1995 as a result of the
record 1994 corn and soybean harvest. The Agri-Services segment
had a net operating loss of approximately $5.1 million for the
three month period ended September 24, 1994 as compared to $4.2
million in the same period a year ago. Lower sales volume for
animal feeds resulting from favorable pasture conditions and
competitive pricing on chemical sales negatively impacted net
operating margins.
Other Income (Deductions)
Interest income of $2.2 million for the quarter ended September
24, 1994 increased $447,000 as compared to the same period a year
ago. The increase was due primarily to increased crop loans
provided to patrons and customers of the Association.
Equity in loss of partnership totaling $4.1 million represented
the Association's prorata share of Golden Peanut Company's net
loss for the quarter ended September 24, 1994. This compared to
a $2.8 million loss for the same quarter a year ago. The
increase in the net loss from the prior year was due to weak
market prices for domestic peanuts resulting from the large
carryover of 1993 crop peanuts. Also, the use of foreign sourced
peanut paste in U.S. manufactured food products contributed to
weak domestic prices.
The $2.0 million gain on sale of investment represents the sale
of common stock in a regional fertilizer cooperative that
converted to a publicly traded stock company.
Page 7
Miscellaneous, net was $3.2 million for the three months ended
September 24, 1994 as compared to $783,000 for the three months
ended September 25, 1993. Miscellaneous, net included a $1.2
million nonrecurring settlement received by the Association.
Miscellaneous, net also includes patronage refunds in which the
Association is a member and other dividends of $599,000, as well
as income of $638,000 related to the Association's equity
participation in various agri-business related ventures. These
businesses include a fertilizer distributor, a pecan processor
and marketer and a foreign peanut trading company. Rental income
of $461,000 was included in miscellaneous, net for the current
quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Association's liquidity is dependent upon cash from
operations and external sources of financing. The principal
sources of external short-term financing are proceeds from the
continuous offering of Subordinated Loan Certificates, a
revolving credit facility with a group of banks, and uncommitted
lines of credit. At September 24 1994, the Association had
unused available loan commitments to borrow additional amounts
of $41.6 million and additional uncommitted facilities to provide
loans and letters of credit of approximately $122.7 million. The
primary sources of external long-term financing are a note
agreement with an insurance company and proceeds from the
continuous offering of Subordinated Capital Certificates of
Interest.
Covenants under the terms of loan agreements with lenders include
conditions that could limit the short-term and long-term funds
available from various external sources. The Association was in
compliance with all applicable conditions in loan agreements with
all lenders at September 24, 1994.
Working capital and the current ratio were $146.4 million and
1.62 to 1, respectively, at September 24, 1994, as compared to
$139.8 million and 1.56 to 1, respectively, at June 25, 1994.
Patrons' equity at September 24, 1994 was $318.2 million as
compared to $296.7 million at June 25, 1994. The increase in
patrons' equity was primarily due to an accounting change for
marketable equity securities held by the Association. The
accounting change resulted in an increase in total assets and
patrons' equity of $16.5 million, net of $9.8 million in deferred
income taxes (see Note 5 of Notes to Consolidated Financial
Statements). Cash and cash equivalents during the current
quarter decreased $1.3 million to $14.4 million at September 24,
1994. The decrease was primarily the result of expenditures for
the acquisition of property, plant and equipment, and repayments
of long-term debt, which was substantially offset by net cash
provided by operations of $16.9 million.
For the three months ended September 24, 1994, the Association's
investment activities included $7.4 million in expenditures for
property, plant and equipment, which were primarily related to
expansion and improvements in the poultry operations. The
Association, including its non-cooperative subsidiaries, plans
fiscal 1995 capital expenditures of approximately $76.0 million.
These planned capital expenditures include expansion and
technological advances in poultry production and processing, as
well as other facility improvements and necessary replacements.
The Association believes cash and cash equivalents on hand at
September 24, 1994 and cash expected to be provided from
operations, in addition to proceeds from the sale of Subordinated
Capital Certificates of Interest and borrowings available under
existing credit arrangements, will be sufficient to maintain cash
flows adequate for the Association's projected growth and
operational objectives during fiscal 1995.
PAGE
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Page 8
PART II: OTHER INFORMATION
Item 3. Legal Proceedings.
In January 1994, three Alabama member patrons of Gold
Kist Inc. filed lawsuits in the Circuit Court of Jefferson
County, Alabama, Tenth Judicial Circuit and in the Circuit
Court of Dekalb County, Alabama, against the Association and
Golden Poultry and certain directors, officers and employees
of the companies. (Ronald Pete Windham and Windham
Enterprises, Inc. on their behalf and on behalf of and for
the use and benefit of Gold Kist Inc. and its
shareholders/members v. Harold O. Chitwood, individually in
his capacity as an officer of Gold Kist and a Director of
Golden Poultry; et al; and Bertie Adams, individually and
derivatively on behalf of all other shareholders and members
of Gold Kist Inc. v. Gold Kist Inc. et al.) The lawsuits
allege that the named officers, directors and employees
violated their fiduciary duties by diverting corporate
opportunities from Gold Kist to Golden Poultry and Carolina
Golden in connection with the creation of Golden Poultry and
Carolina Golden, by permitting their continued operations
and by selling shares of Golden Poultry common stock to
certain officers, directors and employees of the Association
and Golden Poultry. In March 1994, the Court certified the
Windham litigation as a class action. In July 1994, the
Court in the Adams litigation dismissed as defendants the
employees of the companies who are not or were not directors
or officers of the companies. Among the remedies requested
are the transfer of Golden Poultry operations to Gold Kist
as well as unspecified actual and punitive damages. The
Association intends to defend the litigation vigorously.
In February 1994, other Alabama member patrons of Gold Kist
filed a lawsuit in the Circuit Court of Walker County,
Alabama, against the Association alleging short-weight
deliveries of feed from the Gold Kist Guntersville, Alabama
feed mill. (Garry Rowland on behalf of himself and a class
of others similarly situated v. Gold Kist Inc. In June
1994, the Court certified the litigation as a class action.
The Association intends to defend the litigation vigorously.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit
Designation of Exhibit
in this Report Description of Exhibit
27 Financial Data Schedule
(b) Reports on Form 8-K. Gold Kist has not filed any
reports on Form 8-K during the three months ended
September 24, 1994.
PAGE
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Page 9
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.
GOLD KIST INC.
(Registrant)
Date November 8,1994
Peter J. Gibbons
Vice President, Finance
(Chief Financial Officer)
Date November 8, 1994
W. F. Pohl, Jr.
Controller
(Chief Accounting Officer)
<PAGE> Page 9
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.
GOLD KIST INC.
(Registrant)
Date November 8, 1994 /s/ Peter J. Gibbons
Peter J. Gibbons
Vice President, Finance
(Chief Financial Officer)
Date November 8, 1994 /s/ W. F. Pohl, Jr.
W. F. Pohl, Jr.
Controller
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> QTR-1
<FISCAL-YEAR-END> JUL-01-1995
<PERIOD-START> JUN-26-1994
<PERIOD-END> SEP-24-1994
<CASH> 74,413
<SECURITIES> 0
<RECEIVABLES> 157,310
<ALLOWANCES> 5,047
<INVENTORY> 195,474
<CURRENT-ASSETS> 383,771
<PP&E> 504,147
<DEPRECIATION> 301,452
<TOTAL-ASSETS> 726,386
<CURRENT-LIABILITIES> 237,373
<BONDS> 0
<COMMON> 79
0
0
<OTHER-SE> 318,136
<TOTAL-LIABILITY-AND-EQUITY> 726,386
<SALES> 397,962
<TOTAL-REVENUES> 405,388
<CGS> 357,931
<TOTAL-COSTS> 357,931
<OTHER-EXPENSES> 4,078
<LOSS-PROVISION> 375
<INTEREST-EXPENSE> 3,740
<INCOME-PRETAX> 9,759
<INCOME-TAX> 3,416
<INCOME-CONTINUING> 6,106
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,106
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
