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 30, 1995
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
<PAGE>
GOLD KIST INC. AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
September 30, 1995 and July 1, 1995 . . 1
Consolidated Statements of Operations -
Three Months Ended September 30, 1995
and September 24, 1994 . . . . . . . . . 2
Consolidated Statements of Cash Flows -
Three Months Ended September 30, 1995
and September 24, 1994. . . . . . . . . 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
<PAGE>
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Page 1
Item 1. Financial GOLD KIST INC. AND SUBSIDIARIES
Statements CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
(Unaudited)
<CAPTION>
September 30, July 1,
1995 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16,455 16,597
Receivables, principally trade, including
notes receivable of $45,060 at September
30, 1995 and $43,777 at July 1, 1995,
less allowance for doubtful accounts of
$5,982 at September 30, 1995 and $5,877
at July 1, 1995 166,662 189,180
Inventories (note 3) 239,472 226,988
Other current assets 21,976 17,718
Total current assets 444,565 450,483
Investments 89,129 93,039
Property, plant and equipment, net 240,618 227,646
Other assets 53,420 50,469
$827,732 821,637
LIABILITIES AND EQUITY
Current liabilities:
Notes payable and current maturities of
long-term debt:
Short-term borrowings $ 85,500 70,800
Subordinated loan certificates 28,515 27,363
Current maturities of long-term debt 27,466 25,834
141,481 123,997
Accounts payable 101,467 117,952
Accrued compensation and related expenses 32,226 28,817
Patronage refunds and equity payable 9,397 8,863
Interest left on deposit 10,882 10,493
Other current liabilities 16,356 13,776
Total current liabilities 311,809 303,898
Long-term debt, excluding current maturities 131,011 138,659
Accrued postretirement benefit costs 37,539 36,929
Other liabilities 3,664 3,189
Total liabilities 484,023 482,675
<PAGE>
Minority interest 25,013 23,972
Patrons' and other equity:
Common stock, $1.00 par value - Authorized
500 shares; issued and outstanding 62 at
September 30, 1995 and July 1, 1995 62 62
Patronage reserves 221,237 216,854
Unrealized gain on marketable equity
security (net of deferred income taxes
of $8,980 at September 30, 1995 and
$11,586 at July 1, 1995) 14,362 18,531
Retained earnings 83,035 79,543
Total patrons' and other equity 318,696 314,990
Contingent liabilities (note 5)
$827,732 821,637
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
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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. 30, Sept. 24,
1995 1994
<S> <C> <C>
Net sales volume $438,814 397,962
Cost of sales 386,529 357,931
Gross margins 52,285 40,031
Distribution, administrative and general
expenses 35,245 29,879
Net operating margins 17,040 10,152
Other income (deductions):
Interest income 2,567 2,228
Interest expense (4,978) (3,740)
Equity in loss of partnership (note 4) (969) (4,078)
Gain on sale of investment - 2,014
Miscellaneous, net 1,880 3,183
(1,500) (393)
Margins before income taxes and
minority interest 15,540 9,759
Income taxes 5,421 3,416
Margins before minority interest 10,119 6,343
Minority interest (1,079) (237)
Net margins $ 9,040 6,106
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE> Page 3
GOLD KIST INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
<CAPTION>
Three Months Ended
Sept. 30, Sept. 24,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net margins $ 9,040 6,106
Non-cash items included in net margins:
Depreciation and amortization 9,805 9,497
Equity in loss of partnership 969 4,078
Gain on sale of investments - (2,014)
Deferred income tax expense (benefit) 445 (1,543)
Other (948) (399)
Changes in operating assets and liabilities:
Receivables 22,518 8,451
Inventories (12,484) 2,993
Other current assets (4,899) (5,542)
Accounts payable and accrued expenses (10,496) (3,803)
Interest left on deposit 389 (936)
Net cash provided by operating activities 14,339 16,888
Cash flows from investing activities:
Acquisitions of property, plant and equipment (23,605) (7,424)
Other, net (1,537) (803)
Net cash used in investing activities (25,142) (8,227)
Cash flows from financing activities:
Short-term borrowings (repayments), net 15,852 139
Proceeds from long-term debt 4,494 4,187
Principal payments of long-term debt (9,017) (13,604)
Patronage refunds and other equity paid in cash (668) (640)
Net cash provided by (used in) financing
activities 10,661 (9,918)
Net change in cash and cash equivalents (142) (1,257)
Cash and cash equivalents at beginning of period 16,597 15,670
Cash and cash equivalents at end of period $ 16,455 14,413
Supplemental disclosure of cash flow data:
Cash paid during the periods for:
Interest (net of amounts capitalized) $ 3,821 4,457
Income taxes $ 524 985
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
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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 24 through 35,
respectively, of Gold Kist's Annual Report in the previously
filed Form 10-K for the year ended July 1, 1995.
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>
Sept. 30, 1995 July 1, 1995
<S> <C> <C>
Merchandise for sale $ 85,071 85,054
Live poultry and hogs 77,454 76,211
Marketable products 35,040 35,191
Raw materials and supplies 41,907 30,532
$239,472 226,988
</TABLE>
4. Gold Kist has a 33% interest in Golden Peanut Company, a
Georgia general partnership. Gold Kist's investment in the
partnership was $17.4 million at September 30, 1995 and
$15.5 million at July 1, 1995. In July 1995, the
Association made an additional investment of $2.8 million in
the partnership.
Summarized operating statement information of Golden Peanut
Company is shown below:
<TABLE>
<CAPTION>
Three Months Ended
Sept. 30, 1995 Sept. 24, 1994
<S> <C> <C>
Net sales and other
operating income $103,073 93,755
Costs and expenses 105,981 105,747
Net loss $ (2,908) (11,992)
</TABLE>
<PAGE>
5. In January 1993, certain Alabama member patrons of the
Association filed a lawsuit in the Circuit Court of
Jefferson County, Alabama, Tenth Judicial Circuit against
the Association and Golden Poultry and certain directors and
officers 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). The lawsuit alleges
<PAGE>
Page 5
GOLD KIST INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Amounts in Thousands)
(Unaudited)
that the named defendants violated their fiduciary duties by
diverting corporate opportunities from the Association to
Golden Poultry and Carolina Golden Products Company in
connection with the creation of Golden Poultry and Carolina
Golden Products Company and by permitting their continued
operations. Among the remedies requested are the transfer
of Golden Poultry's operations to the Association. In March
1994, the Court certified the Windham litigation as a class
action. In September 1995, Golden Poultry and Carolina
Golden Products Company were dismissed from the litigation.
On October 25, 1995, the jury in the Windham case returned
verdicts in favor of the plaintiffs in the litigation.
Injunctive or equitable remedies will be determined at a
later date by the Jefferson County Alabama Circuit Court
judge. The remedies imposed on the Association could have
an effect on the business and operation of Golden Poultry.
Gold Kist is also party to other various legal and
administrative proceedings, all of which management believes
constitute ordinary routine litigation incident to the
business conducted by Gold Kist, or are not material in
amount.
<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 $438.8 million for the
three month period ended September 30, 1995 increased 10.3% as
compared to the same period a year ago. The Poultry segment's
net sales volume increased 8.9% for the quarter ended September
30, 1995 as compared to the same quarter last fiscal year. The
Poultry segment's increase in net sales volume was primarily the
result of a 5.5% increase in pounds of broiler products marketed
and a 3.5% increase in average broiler selling prices. Net sales
volume in the Agri-Services segment for the three month period
ended September 30, 1995 increased approximately 15.9% as
compared to the same period a year ago. The increase was due
primarily to increased sales through the retail stores as a
result of increased fertilizer and chemical usage in the
Southeast, as well as higher selling prices for nitrogen and
other fertilizers. The Association's fiscal 1995 acquisition of
five retail stores in the Mississippi Delta also contributed to
the net sales volume increase.
Net Operating Margins
The Association had net operating margins of $17.0 million for
the quarter ended September 30, 1995 as compared to $10.2 million
for the quarter ended September 24, 1994. The increase in net
operating margins was primarily the result of increased selling
prices for poultry products and lower feed ingredient costs. The
Poultry segment had net operating margins of $25.7 million for
the three months ended September 30, 1995 as compared to net
operating margins of $16.8 million in the same period last fiscal
year. Feed ingredient costs for the three months ended September
30, 1995 declined 3.0% as compared to the same three month period
a year ago. Market prices for feed ingredients are likely to
increase through the remainder of fiscal 1996 as a result of the
weather reduced 1995 grain harvest.
The Agri-Services segment had a net operating loss of
approximately $6.9 million for the three month period ended
September 30, 1995 as compared to $5.1 million in the same period
a year ago. The increase in the net operating loss for the
current quarter was primarily due to increased operating costs
associated with the recent Mississippi Delta expansion and lower
peanut procurement revenue.
<PAGE>
Other Income (Deductions)
Interest income of $2.6 million for the quarter ended September
30, 1995 increased $339,000 as compared to the same period a year
ago. The increase was due primarily to increased crop financing
provided to patrons and customers of the Association.
Interest expense for the quarter ended September 30, 1995
increased $1.2 million to $5.0 million as a result of increased
borrowings necessary to fund the Association's expansion
programs.
<PAGE>
Page 7
Equity in loss of partnership of approximately $1.0 million
represented the Association's prorata share of Golden Peanut
Company's net loss for the quarter ended September 30, 1995.
This compared to a $4.1 million share of the partnership's loss
for the same quarter a year ago. The net loss in 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 recorded in the
quarter ended September 24, 1994 represents the sale of common
stock in a regional fertilizer enterprise.
Miscellaneous, net was $1.9 million for the quarter ended
September 30, 1995 as compared to $3.2 million for the quarter
ended September 24, 1994. Miscellaneous, net for the comparable
quarter last year included a $1.2 million nonrecurring settlement
received by the Association. Miscellaneous, net for the three
months ended September 30, 1995 includes patronage refunds in
which the Association is a member and other dividends of
$580,000, as well as income of $779,000 related to the
Association's equity participation in various agri-business
related ventures. These businesses include a pecan processor and
marketer and a foreign peanut trading company. Rental income of
$486,000 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, an
unsecured committed credit facility with a group of banks, and
uncommitted letters and lines of credit. At September 30, 1995,
the Association had unused available loan commitments to borrow
additional amounts of $44.0 million and additional uncommitted
facilities to provide loans and letters of credit of
approximately $40.4 million. A $50.0 million unsecured line of
credit is available beginning December 1, 1995 through May 31,
1996. The primary sources of external long-term financing are a
note agreement with an insurance company, proceeds from the
continuous offering of Subordinated Capital Certificates of
Interest and revolving credit agreements.
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 30, 1995.
Working capital and the current ratio were $132.8 million and
1.43 to 1, respectively, at September 30, 1995, as compared to
$146.6 million and 1.48 to 1, respectively, at July 1, 1995.
Patrons' equity at September 30, 1995 was $318.7 million as
<PAGE>
compared to $315.0 million at July 1, 1995. The impact of the
increase in net margins on patrons' equity was partially offset
by a reduction in the unrealized gain on marketable equity
security. Cash and cash equivalents of approximately $16.5
million remained unchanged at September 30, 1995. Net cash
provided by operations reflected a $12.5 million increase in the
inventories related to higher market prices for
<PAGE>
Page 8
feed ingredients. Receivables decreased $22.5 million during the
current quarter reflecting the seasonal nature of the Agri-
Services segment's operations. Other uses of cash included
expenditures for the acquisition of property, plant and
equipment, repayments of long-term debt, and patronage refunds
and other equity payments. These items were substantially funded
by net cash provided by operations of $14.3 million and short-
term borrowings.
For the quarter ended September 30, 1995, the Association's
investment activities included $23.6 million in expenditures for
property, plant and equipment, which were primarily related to
expansion and improvements in the poultry operations and the
acquisition of retail and wholesale farm supply operations. The
Association plans capital expenditures of $90.0 million for 1996
that include expenditures for expansion and technological
advances in poultry production and processing and expansion of
cotton ginning and warehousing operations.
The Association believes cash and cash equivalents on hand at
September 30, 1995 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 1996.
<PAGE>
Page 9
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
In January 1993, certain Alabama member patrons of the
Association filed a lawsuit in the Circuit Court of
Jefferson County, Alabama, Tenth Judicial Circuit against
the Association and Golden Poultry and certain directors and
officers 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). The lawsuit alleges that the named
defendants violated their fiduciary duties by diverting
corporate opportunities from the Association to Golden
Poultry and Carolina Golden Products Company in connection
with the creation of Golden Poultry and Carolina Golden
Products Company and by permitting
their continued operations. Among the remedies requested
are the transfer of Golden Poultry's operations to the
Association. In March 1994, the Court certified the Windham
litigation as a class action. In September 1995, Golden
Poultry and Carolina Golden Products Company were dismissed
from the litigation. On October 25, 1995, the jury in the
Windham case returned verdicts in favor of the plaintiffs in
the litigation. Injunctive or equitable remedies will be
determined at a later date by the Jefferson County Alabama
Circuit Court judge. The remedies imposed on the
Association could have an effect on the business and
operation of Golden Poultry. Gold Kist is also party to
other various legal and administrative proceedings, all of
which management believes constitute ordinary routine
litigation incident to the business conducted by Gold Kist,
or are not material in amount.
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 30, 1995.
<PAGE>
Page 10
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 14, 1995
Peter J. Gibbons
Vice President, Finance
(Chief Financial Officer)
Date November 14,1995
W. F. Pohl, Jr.
Controller
(Chief Accounting Officer)
<PAGE>
Page 10
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 14, 1995 /s/ Peter J. Gibbons
Peter J. Gibbons
Vice President, Finance
(Chief Financial Officer)
Date November 14, 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> 3-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-END> SEP-30-1995
<CASH> 16,455
<SECURITIES> 0
<RECEIVABLES> 172,644
<ALLOWANCES> 5,982
<INVENTORY> 239,472
<CURRENT-ASSETS> 444,565
<PP&E> 573,482
<DEPRECIATION> 332,864
<TOTAL-ASSETS> 827,732
<CURRENT-LIABILITIES> 311,809
<BONDS> 131,011
<COMMON> 62
0
0
<OTHER-SE> 318,634
<TOTAL-LIABILITY-AND-EQUITY> 827,732
<SALES> 438,814
<TOTAL-REVENUES> 443,261
<CGS> 386,529
<TOTAL-COSTS> 386,529
<OTHER-EXPENSES> 969
<LOSS-PROVISION> 322
<INTEREST-EXPENSE> 4,978
<INCOME-PRETAX> 15,540
<INCOME-TAX> 5,421
<INCOME-CONTINUING> 9,040
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,040
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<PAGE>
</TABLE>
