<PAGE>
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 December 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 -
December 24, 1994 and June 25, 1994 1
Consolidated Statements of Operations -
Three Months and Six Months Ended
December 24, 1994 and
December 25, 1993 . . . . . . . . . 2
Consolidated Statements of Cash Flows -
Six Months Ended December 24, 1994
and December 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 - 8
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . 9
Item 6. Exhibits and Reports on Form 8-K . . . 9
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<TABLE>
Page 1
Item 1. Financial GOLD KIST INC. AND SUBSIDIARIES
Statements CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
(Unaudited)
<CAPTION>
Dec. 24, 1994 June 25, 1994
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 14,111 15,670
Receivables, principally trade, including
notes receivable of $27.3 million at
Dec. 24, 1994 and $42.8 million
at June 25, 1994, less allowance for
doubtful accounts of $6,841 at
Dec. 24, 1994 and $5,369 at June 25,
1994 117,996 160,714
Inventories (note 3) 204,094 198,467
Other current assets 20,881 14,758
<PAGE>
Total current assets 357,082 389,609
Investments (note 5) 102,709 72,105
Property, plant and equipment, net 201,122 204,783
Other assets 44,177 49,935
$705,090 716,432
LIABILITIES AND EQUITY
Current liabilities:
Notes payable and current maturities of
long-term debt:
Short-term borrowings $ 1,900 12,798
Subordinated loan certificates 25,724 25,079
Current maturities of long-term debt 27,214 35,405
54,838 73,282
Accounts payable 103,755 117,926
Accrued compensation and related expenses 35,770 26,431
Patronage refunds and equity payable 4,474 14,588
Interest left on deposit 8,990 9,340
Other current liabilities 2,973 8,195
Total current liabilities 210,800 249,762
Long-term debt, excluding current maturities 106,568 109,817
Accrued postretirement benefit costs 34,488 34,488
Other liabilities 6,354 687
Total liabilities 358,210 394,754
Minority interest 25,023 25,016
Patrons' and other equity:
Common stock, $1.00 par value - Authorized
500 shares; issued and outstanding 79 at
Dec. 24, 1994 and June 25, 1994 79 79
Patronage reserves 214,159 213,798
Unrealized gain on marketable equity
security (net of deferred income taxes
of $14.3 million) (note 5) 22,921 -
Retained earnings 84,698 82,785
Total patrons' and other equity 321,857 296,662
Contingent liabilities (note 7)
$705,090 716,432
</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 Six Months Ended
Dec. 24, Dec. 25, Dec. 24, Dec. 25,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales volume $362,384 348,075 760,346 706,854
Cost of sales 332,020 307,819 689,951 626,128
Gross margins 30,364 40,256 70,395 80,726
<PAGE>
Distribution, administrative
and general expenses 32,571 30,052 62,450 58,163
Net operating margins (2,207) 10,204 7,945 22,563
Other income (deductions):
Interest income 2,117 1,634 4,345 3,415
Interest expense (3,421) (3,116) (7,161) (6,862)
Equity in earnings (loss) of
partnership (note 4) (1,463) 227 (5,541) (2,544)
Gain on sale of investment - - 2,014 -
Miscellaneous, net 1,427 1,966 4,610 3,017
(1,340) 711 (1,733) (2,974)
Margins (loss) before
income taxes, minority
interest and cumulative
effect of change in
accounting principle (3,547) 10,915 6,212 19,589
Income tax expense (benefit) (1,401) 4,110 2,015 6,542
Margins (loss) before
minority expense and
cumulative effect of
change in accounting
principle (2,146) 6,805 4,197 13,047
Minority interest 10 (344) (227) (960)
Margins (loss) before
cumulative effect of
change in accounting
principle (2,136) 6,461 3,970 12,087
Cumulative effect of change in
accounting for income taxes
(note 6) - - - 5,339
Net margins (loss) $ (2,136) 6,461 3,970 17,426
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
Page 3
GOLD KIST INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
<CAPTION>
Six Months Ended
Dec. 24, Dec. 25,
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net margins $ 3,970 17,426
Non-cash items included in net margins:
Depreciation and amortization 18,836 18,117
Cumulative effect of change in accounting
principle - (5,339)
Equity in loss of partnership 5,541 2,544
Gain on sale of investment (2,014) -
<PAGE>
Deferred income tax benefit (2,488) (2,539)
Other (704) (431)
Changes in operating assets and liabilities:
Receivables 42,718 17,623
Inventories (5,627) (8,343)
Other current assets (4,211) (3,695)
Accounts payable and accrued expenses (10,053) 14,729
Interest left on deposit (350) (4,697)
Net cash provided by operating activities 45,618 45,395
Cash flows from investing activities:
Acquisitions of property, plant and equipment (15,172) (18,818)
Proceeds from disposal of investments 3,550 1,770
Other, net (1,830) (1,759)
Net cash used in investing activities (13,452) (18,807)
Cash flows from financing activities:
Short-term borrowings (repayments), net (10,253) 1,458
Proceeds from long-term debt 8,380 10,666
Principal payments of long-term debt (19,820) (15,248)
Patronage refunds and other equity paid in cash (12,032) (16,780)
Net cash used in financing activities (33,725) (19,904)
Net change in cash and cash equivalents (1,559) 6,684
Cash and cash equivalents at beginning of period 15,670 31,086
Cash and cash equivalents at end of period $ 14,111 37,770
Supplemental disclosure of cash flow data:
Cash paid during the periods for:
Interest (net of amounts capitalized) $ 6,229 12,677
Income taxes $ 8,918 8,152
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
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Page 4
GOLD KIST INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED 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
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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>
Dec. 24, 1994 June 25, 1994
<S> <C> <C>
Merchandise for sale $ 70,991 65,795
Live poultry and hogs 68,953 75,600
Marketable products 33,055 30,090
Raw materials and supplies 31,095 26,982
$204,094 198,467
</TABLE>
4. Gold Kist has a 33% interest in Golden Peanut Company, a
Georgia general partnership. Gold Kist's investment in the
partnership was $14.6 million at December 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 Six Months Ended
Dec. 24, Dec. 25, Dec. 24, Dec. 25,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales and other
operating income $107,225 96,836 200,980 198,167
Costs and expenses 111,856 96,170 217,603 205,813
Net earnings (loss) (4,631) 666 (16,623) (7,646)
</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>
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
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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 December
24, 1994 was $58.7 million, which represented a gross
unrealized gain of $37.2 million. The gross unrealized gain
for the six month period ended December 24, 1994 was $16.7
million, which has been included as a separate component of
patron's and other equity in the accompanying balance sheet
net of deferred income taxes.
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
<PAGE>
The Association's net sales for the three and six month periods
ended December 24, 1994 increased 4.1% and 7.6%, respectively, as
compared to the same periods a year ago. The Poultry segment had
net sales increases of 4.6% and 7.6%, respectively, for the three
and six months ended December 24, 1994. The sales increase for
the current quarter resulted from a 10.5% increase in pounds of
broilers sold, which was partially offset by a 7.2% decrease in
average selling prices. For the six months ended December 24,
1994, average selling prices declined approximately 3.7% from the
comparable period last year and sales volume was up 12.6%.
The increase in pounds of broilers sold in the current fiscal
year was the result of additional processing capacity that came
on line in the prior fiscal year. The decline in average selling
prices for the current periods presented was due primarily to
increased supplies of competing meats; particularly pork and to a
lesser extent beef, and an estimated 7% increase in U.S. broiler
production.
The Agri-Services segment had net sales increases of
approximately 2.2% for the current quarter and 7.2% for the six
months ended December 24, 1994. The current quarter's sales
increase resulted from increased chemical sales, which was
partially offset by reduced sales of animal feeds due to
favorable fall pasture conditions. Sales growth was hampered by
the closing of four suburban retail stores at the end of the
preceding quarter. The year-to date net sales increase reflected
the increase in sales of crop protection chemicals related to the
increase in Southeast cotton production and higher fertilizer
sales prices.
Net Operating Margins
The Association had a net operating loss of $2.2 million for the
three months ended December 24, 1994 as compared to a net
operating margin of $10.2 million for the comparable period last
fiscal year. For the six months ended December 24, 1994, net
operating margins were $7.9 million as compared to $22.6 million
in the same period a year ago. For the three and six month
periods ended December 24, 1994, the Poultry segment had net
operating margins of $4.9 million and $21.6 million,
respectively, as compared to $14.1 million and $32.4 million,
respectively, in the comparable periods a year ago. The decline
in Poultry margins for the current quarter was the result of
lower average selling prices and slightly higher processing costs
related to a plant expansion program completed last fiscal year.
The impact of the decline in market prices was partially offset
by lower feed ingredient costs. Feed ingredient costs for the
current quarter declined about 8.5% as compared to the same
quarter last fiscal year. In addition, the Poultry segment's net
operating margin for the current quarter included a $2.0 million
loss in its pork grow-out operation due to lower prices for
market hogs.
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Page 7
The Agri-Services segment had net operating losses of
approximately $5.4 million and $10.5 million, respectively, for
the three and six month periods ended December 24, 1994 as
compared to $2.6 million and $6.8 million, respectively, in the
<PAGE>
same periods a year ago. The increase in the net operating loss
for the quarter ended December 24, 1994, as compared to the same
quarter in the prior year, was due primarily to closed retail
store expenses and increases to the segment's allowance for
doubtful accounts. In addition, the segment incurred increased
operating expenses related to the expansion of its forestry
fertilizer application operation.
Other Income (Deductions)
Interest income was $2.1 million for the quarter ended December
24, 1994, which represented an increase of $483,000 as compared
to the same quarter last year. The increase resulted primarily
from increased crop loans and extended terms provided to retail
patrons and customers of the Association. Interest expense was
$3.4 million for the quarter ended December 24, 1994, up $305,000
from the comparable quarter last year as a result of higher
interest rates.
Equity in loss of partnership totaling $1.5 million represented
the Association's prorata share of Golden Peanut Company's net
loss for the quarter ended December 24, 1994. This compared to a
gain of $227,000 for the same quarter a year ago. The net losses
for the current periods were due to weak domestic market prices
for peanuts resulting from the large carryover of 1993 crop
peanuts and the large 1994 peanut harvest. In addition, 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 in fiscal 1995
represents the sale of common stock in a regional fertilizer
cooperative that converted to a publicly traded stock company.
Miscellaneous, net was $1.4 million for the three months ended
December 24, 1994 as compared to approximately $2.0 million for
the three months ended December 25, 1993. Miscellaneous, net
includes patronage refunds in which the Association is a member
and other dividends of $568,000, as well as a net loss of
$544,000 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. The Association recorded a
$900,000 gain related to these equity participations in the
comparable quarter last fiscal year. Rental income of $653,000
was included in miscellaneous, net for the current quarter.
Patronage refunds and rental income totaled $516,000 for the
comparable quarter in the prior fiscal year.
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 December 24 1994, the Association had
unused available loan commitments to borrow additional amounts of
$44.2 million and additional uncommitted facilities to provide
loans and letters of credit of approximately $133.6 million. The
primary sources of external long-term financing are a note
agreement with an insurance company and proceeds from the
<PAGE>
continuous offering of Subordinated Capital Certificates of
Interest.
<PAGE>
Page 8
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 December 24, 1994.
Working capital and the current ratio were $146.3 million and
1.69 to 1, respectively, at December 24, 1994, as compared to
$139.8 million and 1.56 to 1, respectively, at June 25, 1994.
Patrons' equity at December 24, 1994 was $321.9 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 $22.9 million, net of $14.3 million in
deferred income taxes (see Note 5 of Notes to Consolidated
Financial Statements). Cash and cash equivalents during the
current six months decreased $1.6 million to $14.1 million at
December 24, 1994. The decrease was primarily the result of
expenditures for the acquisition of property, plant and
equipment, repayments of long-term debt, and patronage refunds
and other equity payments. Patronage refunds and other equity
payments included the redemption of 1974 notified equity of
approximately $10.4 million. These items were substantially
funded by net cash provided by operations of $45.6 million.
For the six months ended December 24, 1994, the Association's
investment activities included $15.2 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
December 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>
Page 9
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
The information set forth in Item 1. "Legal Proceedings"
of Part II of the Company's Quarterly Report on Form 10-Q
for the Quarterly Period ended September 24, 1994 is
incorporated herein by reference.
<PAGE>
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 December 24,
1994.
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 February 7, 1995
Peter J. Gibbons
Vice President, Finance
(Chief Financial Officer)
Date February 7, 1995
W. F. Pohl, Jr.
Controller
(Chief Accounting Officer)
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Page 9
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
The information set forth in Item 1. "Legal Proceedings"
of Part II of the Company's Quarterly Report on Form 10-Q
for the Quarterly Period ended September 24, 1994 is
incorporated herein by reference.
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 December 24,
1994.
<PAGE>
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 February 7, 1995 /s/ Peter J. Gibbons
Peter J. Gibbons
Vice President, Finance
(Chief Financial Officer)
Date February 7, 1995 /s/ W. F. Pohl, Jr.
W. F. Pohl, Jr.
Controller
(Chief Accounting Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-01-1995
<PERIOD-END> DEC-24-1994
<CASH> 14,111
<SECURITIES> 0
<RECEIVABLES> 124,837
<ALLOWANCES> 6,841
<INVENTORY> 204,094
<CURRENT-ASSETS> 357,082
<PP&E> 511,124
<DEPRECIATION> 310,002
<TOTAL-ASSETS> 705,090
<CURRENT-LIABILITIES> 210,800
<BONDS> 0
<COMMON> 79
0
0
<OTHER-SE> 321,778
<TOTAL-LIABILITY-AND-EQUITY> 705,090
<SALES> 760,346
<TOTAL-REVENUES> 771,315
<CGS> 689,951
<TOTAL-COSTS> 689,951
<OTHER-EXPENSES> 5,541
<LOSS-PROVISION> 2,311
<INTEREST-EXPENSE> 7,161
<INCOME-PRETAX> 6,212
<INCOME-TAX> 2,015
<INCOME-CONTINUING> 3,970
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,970
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
