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 March 30, 1996
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
GOLD KIST INC. AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
March 30, 1996 and July 1, 1995 . . . . . 1
Consolidated Statements of Operations -
Three Months and Nine Months
Ended March 30, 1996 and
March 25, 1995 . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows -
Nine Months Ended March 30, 1996
and March 25, 1995. . . . . . . . . . . . 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
<TABLE>
Page 1
Item 1. Financial GOLD KIST INC. AND SUBSIDIARIES
Statements CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
(Unaudited)
<CAPTION>
March 30, July 1,
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16,273 16,597
Receivables, principally trade, including
notes receivable of $35,443 at March
30, 1996 and $43,777 at July 1, 1995,
less allowance for doubtful accounts of
$9,177 at March 30, 1996 and $5,877
at July 1, 1995 171,433 189,180
Inventories (note 3) 327,182 226,988
Other current assets 30,053 17,718
Total current assets 544,941 450,483
Investments 102,938 93,039
Property, plant and equipment, net 253,532 227,646
Other assets 38,287 50,469
$939,698 821,637
LIABILITIES AND EQUITY
Current liabilities:
Notes payable and current maturities of
long-term debt:
Short-term borrowings $134,400 70,800
Subordinated loan certificates 29,858 27,363
Current maturities of long-term debt 27,062 25,834
191,320 123,997
Accounts payable 144,627 117,952
Accrued compensation and related expenses 31,937 28,817
Patronage refunds and equity payable 1,166 8,863
Interest left on deposit 11,850 10,493
Other current liabilities 8,500 13,776
Total current liabilities 389,400 303,898
Long-term debt, excluding current maturities 149,724 138,659
Accrued postretirement benefit costs 38,760 36,929
Other liabilities 3,793 3,189
Total liabilities 581,677 482,675
Minority interest 26,666 23,972
Patrons' and other equity:
Common stock, $1.00 par value - Authorized
500 shares; issued and outstanding 62 at
March 30, 1996 and July 1, 1995 62 62
Patronage reserves 221,814 216,854
Unrealized gain on marketable equity
security (net of deferred income taxes
of $12,289 at March 30, 1996 and
$11,586 at July 1, 1995) 19,655 18,531
Retained earnings 89,824 79,543
Total patrons' and other equity 331,355 314,990
Contingent liabilities (note 5)
$939,698 821,637
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
Page 2
GOLD KIST INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
Mar. 30, Mar. 25, Mar. 30, Mar. 25,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales volume $494,586 389,770 1,363,601 1,150,116
Cost of sales 464,665 353,027 1,224,224 1,042,978
Gross margins 29,921 36,743 139,377 107,138
Distribution, administrative
and general expenses 36,885 32,642 111,857 95,092
Net operating margins (loss) (6,964) 4,101 27,520 12,046
Other income (deductions):
Interest income 1,847 1,662 7,058 6,007
Interest expense (5,382) (3,670) (15,141) (10,831)
Equity in loss of partnership
(note 4) (127) (402) (1,140) (5,943)
Gain on sales of investments - 1,056 - 3,070
Miscellaneous, net 9,248 3,515 13,372 8,125
5,586 2,161 4,149 428
Margins (loss) before
income taxes and minority
interest (1,378) 6,262 31,669 12,474
Income tax expense (benefit) (1,114) 2,319 10,410 4,154
Margins (loss) before
minority interest (264) 4,123 21,259 8,320
Minority interest (259) (235) (2,716) (462)
Net margins (loss) $ (523) 3,888 18,543 7,858
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
Page 3
GOLD KIST INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
<CAPTION>
Nine Months Ended
Mar. 30, Mar. 25,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net margins $ 18,543 7,858
Non-cash items included in net margins:
Depreciation and amortization 29,529 28,386
Equity in loss of partnership 1,140 5,943
Gain on sale of investments - (3,070)
Patronage refunds (3,969) (1,391)
Deferred income tax expense (benefit) (784) (2,430)
Other 1,043 4,313
Changes in operating assets and liabilities:
Receivables 17,747 27,607
Inventories (100,194) (47,828)
Other current assets (8,378) (3,675)
Accounts payable and accrued expenses 20,682 7,577
Interest left on deposit 1,357 994
Net cash (used in) provided by
operating activities (23,284) 24,284
Cash flows from investing activities:
Acquisitions of property, plant and equipment (57,333) (35,128)
Proceeds from disposal of investments 193 8,884
Proceeds from sale of poultry grow-out loans 10,052 -
Other, net (2,174) (1,198)
Net cash used in investing activities (49,262) (27,442)
Cash flows from financing activities:
Short-term borrowings (repayments), net 66,095 34,265
Proceeds from long-term debt 41,797 10,698
Principal payments of long-term debt (24,671) (23,398)
Patronage refunds and other equity paid in cash (10,999) (17,918)
Net cash provided by financing
activities 72,222 3,647
Net change in cash and cash equivalents (324) 489
Cash and cash equivalents at beginning of period 16,597 15,670
Cash and cash equivalents at end of period $ 16,273 16,159
Supplemental disclosure of cash flow data:
Cash paid during the periods for:
Interest (net of amounts capitalized) $ 12,165 11,130
Income taxes $ 18,936 16,009
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
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>
Mar. 30, 1996 July 1, 1995
<S> <C> <C>
Merchandise for sale $129,264 85,054
Live poultry and hogs 92,520 76,211
Marketable products - poultry 33,315 35,191
Marketable products - cotton 30,585 -
Raw materials and supplies 41,498 30,532
$327,182 226,988
</TABLE>
4. Gold Kist has a 33% interest in Golden Peanut Company, a
Georgia general partnership. Gold Kist's investment in the
partnership was $17.2 million at March 30, 1996 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 Nine Months Ended
Mar. 30, Mar. 25, Mar. 30, Mar. 25,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales and other
operating income $99,551 101,518 301,872 302,498
Costs and expenses 99,931 102,724 305,292 320,327
Net loss $ (380) (1,206) (3,420) (17,829)
</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 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. 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. Among the remedies requested are the
purchase of the minority interest in Golden Poultry common
stock and the subsequent merger of Golden Poultry into the
Association, and additional allocations and distributions of
approximately $134.2 million to the class members, plus
substantial attorneys' fees. After the Court has rendered
its final judgement, the Association will consider an
appeal.
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 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 $494.6 million for the
quarter ended March 30, 1996 increased 26.9% as compared to the
same period a year ago. Net sales volume for the nine months
ended March 30, 1996 increased 18.6% or $213.5 million as
compared to the same period last year. The Poultry segment's net
sales volume was $352.8 million for the quarter ended March 30,
1996 an increase of 20.7% 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
17.8% increase in pounds of broiler products marketed and a 2.1%
increase in average broiler selling prices. The increase in
broiler pounds sold reflected changes in product mix and improved
processing yields. The Poultry segment's net sales volume for
the nine months ended March 30, 1996 was $1.0 billion, an
increase of 14.9% from the same period last year.
The Agri-Services segment's net sales volume of $141.8 million
for the three month period ended March 30, 1996 increased
approximately 45.4% or $44.3 million as compared to the same
period a year ago. Net sales volume of $321.8 million for the
nine months ended March 30, 1996 increased 32.3% as compared to
the same period last fiscal year. In the fall of 1995, Agri-
Services began marketing cotton on behalf of its members. Cotton
marketing net sales volume for the three and nine months ended
March 30, 1996 was $29.5 million and $39.5 million, respectively.
In addition, the net sales volume 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.
Net Operating Margins
The Association had a net operating loss of approximately $7.0
million for the quarter ended March 30, 1996 as compared to net
operating margins of $4.1 million for the quarter ended March 25,
1995. The decline in net operating margins was due primarily to
lower margins in the Poultry segment resulting from higher feed
ingredient costs. The Poultry segment had a net operating loss
of $6.0 million for the three month period ended March 30, 1996
as compared to net operating margins of $4.4 million in the same
period last fiscal year. As a result of increases in commodity
market prices for feed grains, feed ingredient costs increased
approximately 22% for the quarter ended March 30, 1996 as
compared to the same quarter a year ago. Although management has
utilized various risk management strategies to reduce the impact
of further increases in feed grain costs over the next six
months, feed ingredient costs for the remainder of fiscal 1996
are expected to trend higher than in the prior fiscal year.
Page 7
Increased market prices for feed grains have resulted from the
weather reduced grain harvest in the Fall of 1995 and increased
U.S. grain exports. The Poultry segment's net operating margins
for the nine months ended March 30, 1996 were $43.7 million as
compared to $26.0 million in the same period last year.
The Agri-Services segment had net operating margins of
approximately $1.1 million for the three month period ended March
30, 1996 as compared to $1.5 million for the same period a year
ago. The decline in net operating margins reflects increased
retail store operating losses, which was primarily the result of
higher operating costs, and to a lesser extent, reduced gross
margins. The Agri-Services segment had a net operating loss of
$10.1 million for the nine months ended March 30, 1996 as
compared to a net operating loss of $9.0 million in the
comparable period a year ago.
Other Income (Deductions)
Interest income was $1.8 million for the quarter ended March 30,
1996, which represented an increase of $185,000 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
$5.4 million for the quarter ended March 30, 1996, an increase of
$1.7 million from the comparable quarter last year. The increase
was a result of increased borrowings necessary to fund capital
expenditures and higher inventories. The impact of increased
borrowings on interest expense was partially offset by lower
interest rates.
Equity in loss of partnership of $127,000 represented the
Association's prorata share of Golden Peanut Company's net loss
for the quarter ended March 30, 1996. This compared to a loss of
$402,000 for the same quarter a year ago. The net losses have
resulted from weak market prices for domestic peanuts resulting
from the large carryover of 1993 and 1994 crop peanuts. Also,
the use of foreign sourced peanut paste in U.S. manufactured food
products contributed to weak domestic prices.
The $3.1 million gain on sale of investment in the nine month
period ended March 25, 1995 represents the sale of common stock
in a regional fertilizer cooperative.
Miscellaneous, net was $9.2 million for the quarter ended March
30, 1996 as compared to $3.5 million for the quarter ended March
25, 1995. Miscellaneous, net for the current quarter includes a
patronage refund of $8.9 million from a fertilizer cooperative.
The Association recognized $317,000 in losses related to equity
participations in various agri-business related ventures. These
businesses include a pecan processor and marketer and a foreign
peanut trading company. Rental income of $495,000 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
Page 8
Loan Certificates, an unsecured committed credit facility with a
group of banks, and uncommitted letters and lines of credit. At
March 30, 1996, the Association and its subsidiaries had unused
available loan commitments to borrow additional amounts of $20.0
million and additional uncommitted facilities to provide loans
and letters of credit of approximately $52.4 million. A $50.0
million unsecured line of credit is available beginning December
1, 1995 through May 31, 1996 of which $30.0 million was
outstanding at March 30, 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 March 30, 1996.
Working capital and the current ratio were $155.5 million and
1.40 to 1, respectively, at March 30, 1996, as compared to $146.6
million and 1.48 to 1, respectively, at July 1, 1995. At March
30, 1996, the Association's senior funded debt to total
capitalization and total funded debt to total capitalization,
determined under the loan agreements, were 25% and 38%,
respectively. Patrons' equity at March 30, 1996 was $331.4
million as compared to $315.0 million at July 1, 1995. Net cash
provided by operations for the nine months ended March 30, 1996
was reduced by a $100.2 million increase in inventories related
to higher market prices for feed grains and the procurement of
cotton inventories held for resale. Receivables decreased $17.7
million during the current nine month period 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 short-term borrowings and proceeds from
long-term debt. In December 1995, the Association sold $10.1
million of its poultry contract grower loans to an insurance
company.
For the nine months ended March 30, 1996, the Association's
investment activities included $57.3 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 has planned capital expenditures of $90.0 million for
fiscal 1996 and $78.0 million for fiscal 1997. The budgeted
expenditures include 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
March 30, 1996 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 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. 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. Among the
remedies requested are the purchase of the minority interest
in Golden Poultry common stock and the subsequent merger of
Golden Poultry into the Association, and additional
allocations and distributions of approximately $134.2
million to the class members, plus substantial attorneys'
fees. After the Court has rendered its final judgement, the
Association will consider an appeal.
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 March
30, 1996.
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 May 13, 1996
Gaylord O. Coan
Chief Executive Officer
(Principal Executive Officer)
Date May 13, 1996
Peter J. Gibbons
Vice President, Finance
(Chief Financial Officer)
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 May 13, 1996 /s/ Gaylord O. Coan
Gaylord O. Coan
Chief Executive Officer
(Principal Executive Officer)
Date May 13, 1996 /s/ Peter J. Gibbons
Peter J. Gibbons
Vice President, Finance
(Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-END> MAR-30-1996
<CASH> 16,273
<SECURITIES> 0
<RECEIVABLES> 180,610
<ALLOWANCES> 9,177
<INVENTORY> 327,182
<CURRENT-ASSETS> 544,941
<PP&E> 600,117
<DEPRECIATION> 346,585
<TOTAL-ASSETS> 939,698
<CURRENT-LIABILITIES> 389,400
<BONDS> 149,724
0
0
<COMMON> 62
<OTHER-SE> 331,293
<TOTAL-LIABILITY-AND-EQUITY> 939,698
<SALES> 1,363,601
<TOTAL-REVENUES> 1,384,031
<CGS> 1,224,224
<TOTAL-COSTS> 1,224,224
<OTHER-EXPENSES> 1,140
<LOSS-PROVISION> 9,050
<INTEREST-EXPENSE> 15,141
<INCOME-PRETAX> 31,669
<INCOME-TAX> 10,410
<INCOME-CONTINUING> 18,543
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,543
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
