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 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) (770)
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 -
December 30, 1995 and July 1, 1995 . . . 1
Consolidated Statements of Operations -
Three Months and Six Months
Ended December 30, 1995 and
December 24, 1994 . . . . . . . . . . . 2
Consolidated Statements of Cash Flows -
Six Months Ended December 30, 1995
and December 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>
<TABLE>
Page 1
Item 1. Financial GOLD KIST INC. AND SUBSIDIARIES
Statements CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
(Unaudited)
<CAPTION>
December 30, July 1,
1995 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 25,219 16,597
Receivables, principally trade, including
notes receivable of $33,000 at December
30, 1995 and $43,777 at July 1, 1995,
less allowance for doubtful accounts of
$8,631 at December 30, 1995 and $5,877
at July 1, 1995 158,976 189,180
Inventories (note 3) 290,586 226,988
Other current assets 15,575 17,718
Total current assets 490,356 450,483
Investments 99,521 93,039
Property, plant and equipment, net 247,427 227,646
Other assets 38,560 50,469
$875,864 821,637
LIABILITIES AND EQUITY
Current liabilities:
Notes payable and current maturities of
long-term debt:
Short-term borrowings $ 79,200 70,800
Subordinated loan certificates 28,825 27,363
Current maturities of long-term debt 27,144 25,834
135,169 123,997
Accounts payable 128,135 117,952
Accrued compensation and related expenses 36,039 28,817
Patronage refunds and equity payable 4,309 8,863
Interest left on deposit 11,481 10,493
Other current liabilities 13,152 13,776
Total current liabilities 328,285 303,898
Long-term debt, excluding current maturities 147,634 138,659
Accrued postretirement benefit costs 38,150 36,929
Other liabilities 3,508 3,189
Total liabilities 517,577 482,675
Minority interest 26,374 23,972
<PAGE>
Patrons' and other equity:
Common stock, $1.00 par value - Authorized
500 shares; issued and outstanding 62 at
December 30, 1995 and July 1, 1995 62 62
Patronage reserves 224,505 216,854
Unrealized gain on marketable equity
security (net of deferred income taxes
of $11,875 at December 30, 1995 and
$11,586 at July 1, 1995) 18,993 18,531
Retained earnings 88,353 79,543
Total patrons' and other equity 331,913 314,990
Contingent liabilities (note 5)
$875,864 821,637
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Page 2
GOLD KIST INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
Dec. 30, Dec. 24, Dec. 30, Dec. 24,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales volume $430,201 362,384 869,015 760,346
Cost of sales 373,030 332,020 759,559 689,951
Gross margins 57,171 30,364 109,456 70,395
Distribution, administrative
and general expenses 39,727 32,571 74,972 62,450
Net operating margins (loss) 17,444 (2,207) 34,484 7,945
Other income (deductions):
Interest income 2,644 2,117 5,211 4,345
Interest expense (4,781) (3,421) (9,759) (7,161)
Equity in loss of partnership
(note 4) (44) (1,463) (1,013) (5,541)
Gain on sales of investments - - - 2,014
Miscellaneous, net 2,244 1,427 4,124 4,610
63 (1,340) (1,437) (1,733)
Margins (loss) before
income taxes and minority
interest 17,507 (3,547) 33,047 6,212
Income taxes expense (benefit) 6,103 (1,401) 11,524 2,015
Margins (loss) before
minority expense 11,404 (2,146) 21,523 4,197
Minority interest (1,378) 10 (2,457) (227)
Net margins (loss) $ 10,026 (2,136) 19,066 3,970
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>
Six Months Ended
Dec. 30, Dec. 24,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net margins $ 19,066 3,970
Non-cash items included in net margins:
Depreciation and amortization 19,837 18,836
Equity in loss of partnership 1,013 5,541
Gain on sale of investments - (2,014)
Deferred income tax expense (benefit) 70 (2,488)
Other 738 (704)
Changes in operating assets and liabilities:
Receivables 30,204 42,718
Inventories (63,598) (5,627)
Other current assets 1,639 (4,211)
Accounts payable and accrued expenses 16,171 (10,053)
Interest left on deposit 988 (350)
Net cash provided by operating
activities 26,128 45,618
Cash flows from investing activities:
Acquisitions of property, plant and equipment (40,593) (15,172)
Proceeds from disposal of investments - 3,550
Other, net 6,951 (1,830)
Net cash used in investing activities (33,642) (13,452)
Cash flows from financing activities:
Short-term borrowings (repayments), net 9,862 (10,253)
Proceeds from long-term debt 25,865 8,380
Principal payments of long-term debt (12,432) (19,820)
Patronage refunds and other equity paid in cash (7,159) (12,032)
Net cash provided by (used in) financing
activities 16,136 (33,725)
Net change in cash and cash equivalents 8,622 (1,559)
Cash and cash equivalents at beginning of period 16,597 15,670
Cash and cash equivalents at end of period $ 25,219 14,111
Supplemental disclosure of cash flow data:
Cash paid during the periods for:
Interest (net of amounts capitalized) $ 7,177 6,229
Income taxes $ 10,208 8,918
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
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>
Dec. 30, 1995 July 1, 1995
<S> <C> <C>
Merchandise for sale $ 99,495 85,054
Live poultry and hogs 86,558 76,211
Marketable products - poultry 34,367 35,191
Marketable products - cotton 31,675 -
Raw materials and supplies 38,491 30,532
$290,586 226,988
</TABLE>
4. Gold Kist has a 33% interest in Golden Peanut Company, a
Georgia general partnership. Gold Kist's investment in the
partnership was $17.3 million at December 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.
<PAGE>
Summarized operating statement information of Golden Peanut
Company is shown below:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Dec. 30, Dec. 24, Dec. 30, Dec. 24,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales and other
operating income $99,248 107,225 202,321 200,980
Costs and expenses 99,380 111,856 205,361 217,603
Net loss $ (132) (4,631) (3,040) (16,623)
</TABLE>
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, and
additional allocations and distributions of notified equity
to the class. 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. 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 $430.2 million for the
quarter ended December 30, 1995 increased 18.7% as compared to
the same period a year ago. Net sales volume for the six months
ended December 30, 1995 increased 14.3% or $108.7 million as
compared to the same period last year. The Poultry segment's net
sales volume was $339.4 million for the quarter ended December
30, 1995 an increase of 12% as compared to the same quarter last
fiscal year. The Poultry segment's increase in net sales volume
for the current three month period was primarily the result of a
5% increase in pounds of broiler products marketed and a 7%
increase in average broiler selling prices. Higher seasonal
broiler prices continued in the October-November period as a
result of lower than expected broiler production. Hatching egg
production was reduced by the late summer heat, which contributed
to lower broiler supplies. The Poultry segment's net sales
volume for the six months ended December 30, 1995 was $688.9
million, an increase of 12% from the same period last year.
The Agri-Services segment's net sales volume of $90.8 million for
the three month period ended December 30, 1995 increased
approximately 32% or $22.2 million as compared to the same period
a year ago. Net sales volume of $180.0 million for the six
months ended December 30, 1995 increased 24% as compared to the
same period last fiscal year. The increase was due to increased
retail and wholesale sales primarily as a result of increased
fertilizer tonnage, 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 contributed to the
net sales volume increase. During the current quarter, Agri-
Services began marketing cotton on behalf of its members. Net
sales volume for the quarter ended December 30, 1995 includes
revenues of $10.0 million associated with cotton marketing.
Net Operating Margins
The Association had net operating margins of $17.4 million for
the quarter ended December 30, 1995 as compared to a net
operating loss of $2.2 million for the quarter ended December 24,
1994. The increase in net operating margins was primarily the
result of higher margins in the Poultry segment that resulted
from increased selling prices and feed ingredient forward
purchasing strategies. The Poultry segment had net operating
margins of $24.1 million for the three months ended December 30,
1995 as compared to net operating margins of $4.9 million in the
same period last fiscal year. Despite significant increases in
commodity market prices for feed grains, the Company's forward
purchasing strategies resulted in a slight decline in average
<PAGE>
feed ingredient costs for the quarter ended December 30, 1995 as
compared to the same period last fiscal year. Although
management has utilized various risk management strategies to
reduce the impact of further increases in feed grain costs over
the next eight months, feed ingredient costs for the remainder of
fiscal 1996 are expected to trend higher.
<PAGE>
Page 7
Increased market prices for feed grains have resulted from the
weather reduced grain harvest in the Fall of 1995. The Poultry
segment's net operating margins for the six months ended December
30, 1995 were $49.7 million as compared to $21.6 million in the
same period last year.
The Agri-Services segment had a net operating loss of
approximately $4.3 million for the three month period ended
December 30, 1995 as compared to a net operating loss of $5.4
million in the same period a year ago. The decline in the net
operating loss for the current quarter was primarily due to
increased margins on sales of fertilizers and animal feeds. The
operating loss in the comparable quarter a year ago reflected
expenses related to the closing of four suburban retail stores.
The Agri-Services segment had a net operating loss of $11.2
million for the six months ended December 30, 1995 as compared to
a net operating loss of $10.5 million in the comparable period a
year ago.
Other Income (Deductions)
Interest income was $2.6 million for the quarter ended December
30, 1995, which represented an increase of $527,000 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
$4.8 million for the quarter ended December 30, 1995, up $1.4
million from the comparable quarter last year as a result of
increased borrowings necessary to fund capital expenditures and
increased inventories. The impact of increased borrowings on
interest expense was partially offset by lower interest rates.
Equity in loss of partnership of $44,000 represented the
Association's prorata share of Golden Peanut Company's net loss
for the quarter ended December 30, 1995. This compared to a loss
of $1.5 million 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 in the six month
period ended December 24, 1994 represents the sale of common
stock in a regional fertilizer cooperative.
Miscellaneous, net was $2.2 million for the quarter ended
December 30, 1995 as compared to $1.4 million for the quarter
ended December 24, 1994. Miscellaneous, net for the current
quarter includes patronage refunds in which the Association is a
member and other dividends of $365,000, as well as income of $1.3
million 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 $506,000 was included in
miscellaneous, net for the current quarter.
<PAGE>
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
<PAGE>
Page 8
Loan Certificates, an unsecured committed credit facility with a
group of banks, and uncommitted letters and lines of credit. At
December 30, 1995, the Association had unused available loan
commitments to borrow additional amounts of $60.0 million and
additional uncommitted facilities to provide loans and letters of
credit of approximately $31.7 million. A $50.0 million unsecured
line of credit is available beginning December 1, 1995 through
May 31, 1996 of which $10.0 million was outstanding at December
30, 1995. 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 December 30, 1995.
Working capital and the current ratio were $162.1 million and
1.49 to 1, respectively, at December 30, 1995, as compared to
$146.6 million and 1.48 to 1, respectively, at July 1, 1995. At
December 30, 1995, the Association's senior funded debt to total
capitalization and total funded debt to total capitalization,
determined under the loan agreements, were 24% and 38%,
respectively. Patrons' equity at December 30, 1995 was $331.9
million as compared to $315.0 million at July 1, 1995. Cash and
cash equivalents increased to $25.2 million at December 30, 1995
as a result of advanced payments received from retail patrons for
Spring 1996 crop production inputs. Net cash provided by
operations was reduced by a $63.6 million increase in inventories
related to higher market prices for feed grains and the
procurement of cotton inventories held for resale. Receivables
decreased $30.2 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 $26.1
million and short-term borrowings. In December 1995, the
Association sold $10.1 million of its poultry contract grower
loans to an insurance company.
For the six months ended December 30, 1995, the Association's
investment activities included $40.6 million in expenditures for
property, plant and equipment, which were primarily related to
expansion and improvements in the poultry operations and the
construction of cotton ginning and warehousing facilities. 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
December 30, 1995 and cash expected to be provided from
<PAGE>
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, and additional
allocations and distributions of notified equity to the
class. 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. 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
December 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 February 13, 1996
Gaylord O. Coan
Chief Executive Officer
(Principal Executive Officer)
Date February 13, 1996
Peter J. Gibbons
Vice President, Finance
(Chief Financial 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 February 13, 1996 /s/ Gaylord O. Coan
Gaylord O. Coan
Chief Executive Officer
(Principal Executive Officer)
Date February 13, 1996 /s/ Peter J. Gibbons
Peter J. Gibbons
Vice President, Finance
(Chief Financial Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER>1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-29-1995
<PERIOD-END> DEC-30-1995
<CASH> 25,219
<SECURITIES> 0
<RECEIVABLES> 167,607
<ALLOWANCES> 8,631
<INVENTORY> 290,586
<CURRENT-ASSETS> 490,356
<PP&E> 586,676
<DEPRECIATION> 339,249
<TOTAL-ASSETS> 875,864
<CURRENT-LIABILITIES> 328,285
<BONDS> 147,634
0
0
<COMMON> 62
<OTHER-SE> 331,851
<TOTAL-LIABILITY-AND-EQUITY> 875,864
<SALES> 869,015
<TOTAL-REVENUES> 878,350
<CGS> 759,559
<TOTAL-COSTS> 759,559
<OTHER-EXPENSES> 1,013
<LOSS-PROVISION> 3,500
<INTEREST-EXPENSE> 9,759
<INCOME-PRETAX> 33,047
<INCOME-TAX> 11,524
<INCOME-CONTINUING> 19,066
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,066
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<PAGE>
</TABLE>
