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 Commission File No. 0-14960
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
GOLDEN POULTRY COMPANY, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 58-1492075
(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) 393-5050
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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
OUTSTANDING AS OF
CLASS May 13, 1996
Common Stock, No
Par Value 14,533,017
GOLDEN POULTRY COMPANY, INC. AND SUBSIDIARY
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
Item 2. Management's Discussion and Analysis of
Consolidated Results of Operations and
Financial Condition . . . . . . . . 5 - 7
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . 8
Item 6. Exhibits and Reports on Form 8-K . . . 8
<TABLE>
Page 1
GOLDEN POULTRY COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
<CAPTION>
Mar. 30, 1996 July 1, 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,377 2,720
Trade accounts receivable less allowance
for doubtful accounts of $55 at
Mar. 30, 1996 and $264 at July 1, 1995 21,250 21,632
Inventories (note 3) 51,686 46,781
Other 4,427 1,635
Total current assets 80,740 72,768
Property, plant and equipment, net 73,945 79,573
Other assets 3,934 3,263
$158,619 155,604
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 585 1,036
Short-term borrowings from Gold Kist
(note 4) 9,593 9,221
Accounts payable 23,719 19,325
Due to Gold Kist 1,855 5,075
Income taxes payable - 485
Accrued compensation and related expenses 6,066 4,688
Total current liabilities 41,818 39,830
Long-term debt, excluding current portion 4,875 12,425
Other liabilities 4,512 4,509
Total liabilities 51,205 56,764
Minority interest in consolidated partnership 8,821 9,954
Shareholders' equity:
Preferred stock, $1.00 par value.
Authorized 1,000 shares; no shares issued - -
Common stock, no stated par value.
Authorized 20,000 shares; issued 14,881
shares at Mar. 30, 1996 and 14,866 at
July 1, 1995 65,464 65,363
Retained earnings 35,259 25,653
100,723 91,016
Less treasury stock, at cost, 348 shares
at Mar. 30, 1996 and July 1, 1995 2,130 2,130
Total shareholders' equity 98,593 88,886
Contingency (note 5)
$158,619 155,604
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
Page 2
GOLDEN POULTRY COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(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 $153,496 119,931 441,362 365,033
Cost of sales 147,838 114,750 410,085 350,990
Gross profit 5,658 5,181 31,277 14,043
Selling, administrative and
general expenses 4,743 4,568 15,294 12,087
Operating income 915 613 15,983 1,956
Other (expense) income:
Interest expense (352) (401) (1,131) (1,180)
Miscellaneous, net 32 83 187 333
(320) (318) (944) (847)
Earnings before minority
interest and income taxes 595 295 15,039 1,109
Minority interest in partnership
loss 828 500 1,133 854
Earnings before income taxes 1,423 795 16,172 1,963
Income tax expense 483 142 6,130 504
Net earnings $ 940 653 10,042 1,459
Net earnings per share $ .06 .04 .69 .10
Weighted average outstanding
shares 14,529 14,714 14,522 14,746
Cash dividends per share $ .01 .01 .03 .03
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
Page 3
GOLDEN POULTRY COMPANY, INC. AND SUBSIDIARY
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 earnings $10,042 1,459
Non-cash items included in net earnings:
Depreciation 12,199 12,659
Minority interest in partnership loss (1,133) (854)
Deferred taxes (636) (1,015)
Other 236 13
Changes in operating assets and liabilities:
Trade accounts receivable 382 515
Inventories (4,905) (1,881)
Accounts payable and accrued compensation and
related expenses 5,773 1,482
Due to Gold Kist (3,220) (1,462)
Income taxes (1,853) (242)
Other (1,451) (1,723)
Net cash provided by operating activities 15,434 8,951
Cash flows from investing activities:
Acquisitions of property, plant and equipment (6,796) (4,049)
Other 84 122
Net cash used in investing activities (6,712) (3,927)
Cash flows from financing activities:
Capital contributed to partnership by Gold Kist - 2,940
Repayment of long-term debt, payable to Gold Kist - (8,240)
Short-term borrowings (repayments), net, payable
to Gold Kist 372 4,591
Principal payments of long-term debt (8,001) (3,001)
Purchases of treasury stock - (912)
Dividends paid (436) (443)
Net cash used in financing activities (8,065) (5,065)
Net change in cash and cash equivalents 657 (41)
Cash and cash equivalents at beginning of period 2,720 3,912
Cash and cash equivalents at end of period $ 3,377 3,871
Supplemental disclosure of cash flow information:
Cash paid during the periods for:
Interest (net of amounts capitalized) $ 1,123 1,201
Income taxes $ 8,618 2,162
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
Page 4
GOLDEN POULTRY COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
(Unaudited)
1. The accompanying unaudited consolidated financial statements
reflect the accounts of Golden Poultry Company, Inc. and its
subsidiary and a majority owned partnership, Carolina Golden
Products Company (collectively, "the Company"). These
consolidated financial statements should be read in
conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Notes
to Consolidated Financial Statements on pages 11 through 14
and pages 21 through 29, respectively, of the Company'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, results of operations,
and cash flows. Results of operations for interim periods
are not necessarily indicative of results for the entire
year.
3. Inventories consist of the following:
<TABLE>
<CAPTION>
March 30, 1996 July 1, 1995
<S> <C> <C>
Live poultry $31,667 26,234
Feed, eggs, and supplies 12,258 11,512
Marketable products 7,761 9,035
$51,686 46,781
</TABLE>
4. The amounts outstanding represent borrowings by Carolina
Golden Products under a $15.0 million Revolving Credit
Agreement with Gold Kist.
5. In January 1993, certain Alabama member patrons of Gold Kist
Inc. filed a lawsuit in the Circuit Court of Jefferson
County, Alabama, Tenth Judicial Circuit against the Company
and Gold Kist Inc. 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 Gold Kist to the Company and Carolina Golden Products
Company in connection with the creation of the Company and
Carolina Golden Products Company and by permitting their
continued operations. Among the remedies requested are the
transfer of the Company's operations to Gold Kist. In March
1994, the Court certified the Windham litigation as a class
action. In September 1995, the Company 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 Gold Kist could have an
effect on the business and operation of the Company. The
Company 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 the Company, or are not material in
amount.
Page 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net sales
Net sales for the three and nine months ending March 30, 1996
increased 28.0% and 20.9%, respectively, as compared to the
comparable periods a year ago. The net sales increase for the
quarter ended March 30, 1996 was due primarily to a 10% increase
in average selling prices and a 17% increase in pounds of poultry
products sold. Higher seasonal broiler market prices continued
in the current quarter as compared to the quarter ended March 25,
1995 due to lower than expected broiler production and the
continuation of strong export demand. The increase in pounds
sold was due primarily to improvements in plant processing
yields and changes in product mix. For the three months ended
March 30, 1996, the Company processed an average of 3.8 million
broilers per week.
Consolidated net sales include the net sales of Carolina Golden
Products Company, a consolidated partnership, which had net sales
of $42.5 million and $123.4 million, respectively, for the three
months and nine months ended March 30, 1996 as compared to $30.8
million and $98.5 million for the comparable periods a year ago.
The Company's food distribution facility in South Florida had net
sales of $9.0 million and $25.2 million, respectively, for the
three and nine months ended March 30, 1996 as compared to $8.4
million and $22.7 million for the same periods last fiscal year.
Cost of sales
Cost of sales, as a percentage of net sales, for the three and
nine months ended March 30, 1996 were 96.3% and
92.9%,respectively, as compared to 95.7% and 96.2%, respectively,
for the comparable periods a year ago. The decreases in the
percentage relationships for the quarter ended March 30, 1996
were the result of increased average selling prices and improved
plant processing efficiency. These factors were partially offset
by higher feed ingredient costs in the quarter ended March 30,
1996. The 18% increase in pounds sold during the current quarter
contributed to the dollar increase in cost of sales. Although
cash commodity prices for corn have increased over 80% above a
year ago, the Company's forward purchasing strategies resulted in
a 22.2% increase in feed ingredient costs, net for the quarter
ended March 30, 1996 as compared to the same period last fiscal
year.
Although management has employed 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 likely to trend higher. Market
prices for feed grains continued to increase to record highs due
to the weather reduced 1995 crop, export demand and the
reluctance of U.S. livestock and poultry producers to
significantly reduce animal numbers.
Page 6
Selling, administrative, and general expenses
Selling, administrative and general expenses, as a percentage of
net sales, were 3.1% and 3.5%, respectively, for the three and
nine months ended March 30, 1996 as compared to 3.8% and 3.3% for
the comparable periods last fiscal year. The increases in the
percentage relationships were the result of higher incentive
compensation expense related to the increase in earnings before
income taxes and litigation related expenses.
Interest and other income
Interest expense for the three months ended March 30, 1996 was
$352,000 as compared to $401,000 in the comparable period a year
ago. The decrease was due primarily to lower average
borrowings, which was partially offset by higher interest rates.
Minority interest in partnership loss
Minority interest in partnership loss of $828,000 for the three
months ended March 30, 1996 represents Gold Kist Inc.'s 49%
prorata share of the Carolina Golden Products Company's quarterly
gain. For the comparable period last fiscal year, Gold Kist's
prorata share of the loss was $500,000. The loss for the quarter
ended March 30, 1996 was due to operating losses in its fresh
poultry operations. During the current quarter, Carolina
Golden's deboning and further processing operations were
profitable.
Earnings (loss) before income taxes
The Company had earnings before income taxes of $1.4 million for
the three months ended March 30, 1996 as compared to $795,000 for
the comparable quarter last fiscal year. The increase was due
primarily to higher average selling prices and improved
processing efficiency, which was partially offset by increased
feed ingredient costs.
Income Taxes
The Company's combined federal and state income tax rate was
37.9% for the nine months ended March 30, 1996 as compared to
29.2% for fiscal 1995. The increase in the effective rate was
due to the expiration of the federal targeted jobs tax credit
program and the impact of the graduated federal income tax rate.
LIQUIDITY AND CAPITAL RESOURCES
At March 30, 1996, working capital, the current ratio, and
shareholders' equity were $38.9 million, 1.93 to 1 and $98.6
million, respectively, as compared to $32.9 million, 1.83 to 1
and $88.9 million, respectively, at July 1, 1995. The Company's
ratio of long-term debt to total capitalization was 4.7% at March
30, 1996 as compared to 12.3% at July 1, 1995. The Company has a
$20.0 million revolving credit and term loan facility with a
commercial bank. There were no outstanding borrowings under this
facility at March 30, 1996. Also, the Company has a $15.0
million short-term credit facility with Gold Kist of which $9.6
million was outstanding at March 30, 1996.
Page 7
Net cash provided by operating activities of $15.3 million for
the nine months ended March 30, 1996 resulted from net earnings
adjusted for noncash charges. Uses of cash for the current nine
month period included repayments of long-term debt totaling $8.0
million and $6.8 million in expenditures for property, plant and
equipment. The increase in other current assets at March 30,
1996, as compared to July 1, 1996, is attributable to prepaid
items, including income taxes and insurance. Accounts payable
fluctuates throughout the business cycle in response to inventory
levels and operating activities, as well as the timing of cash
payments.
Capital expansion and improvements totaling $38.2 million were
approved by the board of directors of which $35.0 million will be
used to increase the processing capacity of the Russellville,
Alabama division by 600,000 broilers per week. This project,
which includes improvements to the hatchery, feed and processing
plant, is expected to be operational by May 1997. These new
projects are in addition to the original 1996 capital
expenditures budget of $14.0 million. The Company expects
capital expenditures of approximately $15.0 million for fiscal
1996.
Approximately 19% of the Company's net sales in the current
quarter were to one customer, a major retail grocery chain.
Management is unable to predict with any degree of certainty what
effect the loss of this major customer would have on future
results of operations and liquidity. However, the loss of the
customer would, in the opinion of management, adversely affect
results of operations if sales from the customer were not
replaced by comparable sales to other customers.
Management believes existing cash, amounts available under
existing credit arrangements, and expected cash to be provided
from operations will be sufficient to maintain cash flows
adequate for the Company's growth and operational objectives
during fiscal 1996.
Page 8
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
In January 1993, certain Alabama member patrons of Gold
Kist Inc. filed a lawsuit in the Circuit Court of Jefferson
County, Alabama, Tenth Judicial Circuit against the Company
and Gold Kist Inc. 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 Gold Kist to the Company and Carolina Golden Products
Company in connection with the creation of the Company and
Carolina Golden Products Company and by permitting their
continued operations. Among the remedies requested are the
transfer of the Company's operations to Gold Kist. In March
1994, the Court certified the Windham litigation as a class
action. In September 1995, the Company 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 Gold Kist could have an
effect on the business and operation of the Company. The
Company 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 the Company, 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. Golden Poultry has not filed any
reports on Form 8-K during the three months ended March
30, 1996.
Page 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
GOLDEN POULTRY COMPANY, INC.
(Registrant)
Date May 13, 1996
Kenneth N. Whitmire
Chief Executive Officer
Date May 13, 1996
Langley C. Thomas, Jr.
Chief Financial Officer
Page 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
GOLDEN POULTRY COMPANY, INC.
(Registrant)
Date May 13, 1996 /s/ Kenneth N. Whitmire
Kenneth N. Whitmire
Chief Executive Officer
Date May 13, 1996 /s/Langley C. Thomas, Jr.
Langley C. Thomas, Jr.
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> 3,377
<SECURITIES> 0
<RECEIVABLES> 21,305
<ALLOWANCES> 55
<INVENTORY> 51,686
<CURRENT-ASSETS> 80,740
<PP&E> 171,482
<DEPRECIATION> 97,537
<TOTAL-ASSETS> 158,619
<CURRENT-LIABILITIES> 41,818
<BONDS> 4,875
0
0
<COMMON> 65,464
<OTHER-SE> 33,129
<TOTAL-LIABILITY-AND-EQUITY> 158,619
<SALES> 441,362
<TOTAL-REVENUES> 441,549
<CGS> 410,085
<TOTAL-COSTS> 410,085
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 30
<INTEREST-EXPENSE> 1,131
<INCOME-PRETAX> 16,172
<INCOME-TAX> 6,130
<INCOME-CONTINUING> 10,042
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,042
<EPS-PRIMARY> .69
<EPS-DILUTED> 0
</TABLE>
