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 28, 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 January 27, 1997
Common Stock, No
Par Value 14,623,813
GOLDEN POULTRY COMPANY, INC. AND SUBSIDIARY
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
December 28, 1996 and June 29, 1996 . . 1
Consolidated Statements of Operations -
Three Months and Six Months
Ended December 28, 1996 and
December 30, 1995 . . . . . . . . . . . 2
Consolidated Statements of Cash Flows -
Six Months Ended December 28, 1996
and December 30, 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 5. Other Information . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . 11
<TABLE>
Page 1
GOLDEN POULTRY COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
<CAPTION>
Dec. 28,1996 June 29, 1996
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalent $ 3,395 2,599
Trade accounts receivable less allowance
for doubtful accounts of $33 at
Dec. 28, 1996 and $31 at June 29, 1996 27,102 23,654
Inventories (note 3) 63,002 54,903
Other 5,443 2,468
Total current assets 98,942 83,624
Property, plant and equipment, net 94,974 73,738
Other assets 4,843 6,617
$198,759 163,979
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 599 585
Short-term borrowings from Gold Kist
(note 4) 7,282 -
Accounts payable 33,185 26,292
Due to Gold Kist 5,260 1,207
Income taxes payable 289 2,705
Accrued compensation and related expenses 6,692 8,300
Total current liabilities 53,307 39,089
Long-term debt, excluding current portion 17,754 4,840
Other liabilities 5,495 5,495
Total liabilities 76,556 49,424
Minority interest in consolidated partnership 11,582 10,198
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 14,886
shares at Dec. 28, 1996 and 14,882 at
June 29, 1996 65,507 65,464
Retained earnings 47,333 41,112
112,840 106,576
Less treasury stock, at cost, 358 shares
at Dec. 28, 1996 and June 29, 1996 2,219 2,219
Total shareholders' equity 110,621 104,357
Contingency (note 5)
$198,759 163,979
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 Six Months Ended
Dec. 28, Dec. 30, Dec. 28, Dec. 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $182,004 144,242 357,704 287,866
Cost of sales 169,637 129,926 334,326 262,247
Gross profit 12,367 14,316 23,378 25,619
Selling, administrative and
general expenses 5,617 5,449 10,923 10,551
Operating income 6,750 8,867 12,455 15,068
Other (expense) income:
Interest expense (362) (324) (618) (779)
Miscellaneous, net (65) 79 58 155
(427) (245) (560) (624)
Earnings before minority
interest and income taxes 6,323 8,622 11,895 14,444
Minority interest in partnership
(gain)loss (1,114) (258) (1,385) 305
Earnings before income taxes 5,209 8,364 10,510 14,749
Income tax expense 1,995 3,264 3,998 5,647
Net earnings $ 3,214 5,100 6,512 9,102
Net earnings per share $ .22 .35 .45 .63
Weighted average outstanding
shares 14,526 14,522 14,525 14,519
Cash dividends per share $ .01 .01 .02 .02
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>
Six Months Ended
Dec. 28, Dec. 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 6,512 9,102
Non-cash items included in net earnings:
Depreciation 6,423 8,720
Minority interest in partnership gain (loss) 1,385 (305)
Deferred taxes (866) (388)
Other 99 74
Changes in operating assets and liabilities:
Trade accounts receivable (3,447) (105)
Inventories (8,099) (2,410)
Accounts payable and accrued compensation and
related expenses 5,286 7,655
Due to Gold Kist 3,380 (2,855)
Income taxes (2,416) 456
Other (2,843) (2,456)
Net cash provided by operating activities 5,414 17,488
Cash flows from investing activities:
Acquisitions of property, plant and equipment (25,271) (4,110)
Other 61 55
Net cash used in investing activities (25,210) (4,055)
Cash flows from financing activities:
Short-term borrowings (repayments), net, payable
to Gold Kist 7,954 (3,877)
Principal payments of long-term debt (72) (7,372)
Proceeds from long-term debt 13,000 -
Dividends paid (290) (290)
Net cash provided by (used in)
financing activities 20,592 (11,539)
Net change in cash and cash equivalents 796 1,894
Cash and cash equivalents at beginning of period 2,599 2,720
Cash and cash equivalents at end of period $ 3,395 4,614
Supplemental disclosure of cash flow information:
Cash paid during the periods for:
Interest (net of amounts capitalized) $ 618 772
Income taxes $ 7,280 5,578
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 15
and pages 22 through 29, respectively, of the Company's
Annual Report in the previously filed Form 10-K for the year
ended June 29, 1996.
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>
December 28, 1996 June 29, 1996
<S> <C> <C>
Live poultry $38,182 32,255
Feed, eggs, and supplies 14,854 13,069
Marketable products 9,966 9,579
$63,002 54,903
</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 were 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. On
July 2, 1996, the Jefferson County, Alabama Circuit Court
Judge entered a memorandum opinion and non-final judgment in
the case directing Gold Kist to acquire the approximately 27%
of Company shares currently owned by investors so that all of
the issued and outstanding stock of the Company would be
owned by Gold Kist. The Court denied the plaintiffs' demands
for additional allocations and cash distributions to the
class members. On September 13, 1996, subsequent to Motions
for Reconsideration filed by the plaintiffs and Gold Kist,
the Court entered a Final Judgment and
Page 5
Decree amending its July 2, 1996 Order. The Final Judgment
and Decree, clarified and reaffirmed by order of the Court
dated November 4, 1996, relieves Gold Kist of the requirement
to acquire the 27% of Golden Poultry common stock not already
owned by Gold Kist. This Final Judgment and Decree requires
Gold Kist to acquire or redeem all Golden Poultry common
stock and/or stock options held or issued to Gold Kist
officers and directors. On December 16, 1996, the Final
Judgment and Decree became final and non-appealable.
Pursuant to the Final Judgment and Decree, Gold Kist
purchased 299,395 shares of Golden Poultry common stock owned
by Gold Kist officers and directors in December 1996 and
January 1997. 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 6
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 six months ending December 28, 1996
increased 26.2% and 24.3%, respectively, as compared to the
comparable periods a year ago. The net sales increase for the
quarter ended December 28, 1996 was due primarily to a 21%
increase in pounds of poultry products sold and a 4% increase in
average selling prices. For the three months ended December 28,
1996, broiler market prices increased as compared to the same
period a year ago as a result of strong demand, particularly in
the export markets, and the lower rate of growth in the poultry
industry. The increase in broiler pounds sold was due to the
Siler City acquisition in July 1996 and changes in product mix.
For the six months ended December 28, 1996, the Company sold
approximately 496.3 million pounds of broiler products as
compared to 424.5 million in the comparable period a year ago.
Consolidated net sales include the net sales of Carolina Golden
Products Company, a consolidated partnership, which had net sales
of $50.3 million and $98.8 million, respectively, for the three
months and six months ended December 28, 1996 as compared to
$41.4 million and $80.9 million for the comparable periods a year
ago. The Company's food distribution facility in South Florida
had net sales of $9.2 million and $18.2 million, respectively,
for the three and six months ended December 28, 1996 as compared
to $8.6 million and $16.2 million for the same periods last
fiscal year.
Cost of sales
Cost of sales, as a percentage of net sales, for the three and
six months ended December 28, 1996 were 93.2% and 93.5%,
respectively, as compared to 90.1% and 91.1%, respectively, for
the comparable periods a year ago. The increase in the
percentage relationship was primarily the result of the increase
in feed ingredient costs. The 21.0% increase in pounds sold
during the current quarter contributed to the dollar increase in
cost of sales. For the quarter ended December 28, 1996, feed
ingredient costs were approximately 42% higher than in the
comparable quarter a year ago. The increase in the percentage
relationship was partially offset by the increase in average
selling prices.
Although the Company's feed ingredient costs for the quarter
ended December 28, 1996 remained at significantly higher levels
than the same quarter last year, cash market prices for feed
grains declined substantially during the quarter ended December
28, 1996 as a result of the large 1996 U.S. grain harvest. The
impact of lower grain prices should positively impact cost of
sales in 1997.
Selling, administrative, and general expenses
Selling, administrative and general expenses, as a percentage of
net sales, were 3.1% for the three and six months ended December
28, 1996 as compared to 3.8% and 3.7%, respectively, for the
comparable periods last fiscal year. The decrease in the
percentage relationship was primarily the result of the growth in
net sales.
Page 7
Interest and other Income
Interest expense for the three months ended December 28, 1996 was
$362,000 as compared to $324,000 in the comparable period a year
ago. The increase was due primarily to increased average
borrowings.
Minority interest in partnership loss
Minority interest in partnership gain of $1.1 million for the
three months ended December 28, 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 gain was $258,000. Earnings for the
three months ended December 28, 1996 resulted from improved
performance in further-processing operations and higher average
selling prices.
Earnings (loss) before income taxes
The Company had earnings before income taxes of $5.2 million for
the three months ended December 28, 1996 as compared to $8.4
million for the comparable period last fiscal year. The decline
in earnings before income taxes was due to increased feed
ingredient costs and was partially offset by higher average
selling prices.
Income Taxes
The Company's combined Federal and state income tax rate was
38.0% for the six months ended December 28, 1996 as compared to
38.3% for the same period a year ago.
LIQUIDITY AND CAPITAL RESOURCES
At December 28, 1996, working capital, the current ratio, and
shareholders' equity were $45.6 million, 1.86 to 1 and $110.6
million, respectively, as compared to $44.5 million, 2.14 to 1
and $104.4 million, respectively, at June 29, 1996. The
Company's ratio of long-term debt to total capitalization was
13.8% at December 28, 1996 as compared to 4.4% at June 29, 1996.
The Company has revolving credit facilities with two commercial
banks totaling $45.0 million, of which $13.0 million was
outstanding at December 28, 1996. Also, the Company has a $15.0
million short-term credit facility with Gold Kist of which $7.2
million was outstanding at December 28, 1996.
Net cash provided by operating activities of $5.4 million for the
six months ended December 28, 1996 resulted from net earnings
adjusted for noncash charges. Increased trade accounts receivable
and inventories at December 28, 1996 as compared to June 29, 1996
resulted from the acquisition of the Siler City, N.C. operation
in July 1996 and the impact of increased feed grain prices on
field inventories. Uses of cash for the six months ended
December 28, 1996 included $25.3 million in expenditures for
property, plant and equipment. Fiscal 1997 budgeted capital
expenditures are approximately $72.7 million.
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.
Page 8
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 1997.
Page 9
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 alleged 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. On
July 2, 1996, the Jefferson County, Alabama Circuit Court
Judge entered a memorandum opinion and non-final judgment in
the case directing Gold Kist to acquire the approximately
27% of the Company shares currently owned by investors so
that all of the issued and outstanding stock of the Company
would be owned by Gold Kist or a wholly owned subsidiary,
either through a merger or a tender offer for the minority
shares of the Company stock outstanding. Upon motions for
reconsideration filed by both parties to the action, the
Court modified its memorandum opinion in a Final Judgment
and Decree entered upon September 13, 1996, which was
clarified and reaffirmed by order of the Court dated
November 4, 1996, under which Gold Kist was relieved of the
Court's requirement to acquire all of the shares of Company
common stock not owned by Gold Kist and was directed to
acquire only that Company stock held by any current officers
or directors of Gold Kist and their spouses and minor
children. The Court also ordered Gold Kist to cause the
surrender of all Golden Poultry stock options held by Gold
Kist officers and directors or the exercise of such options
and purchase by Gold Kist of the resultant stock, to redeem
certain outstanding notified equity of Gold Kist, to pay
$4.2 million in attorney's fees to the plaintiffs attorneys
and to establish a policy prohibiting officers and directors
of Gold Kist from future ownership of Golden Poultry stock.
On December 16, 1996, the Final Judgment and Decree became
final and non-appealable. The Company is also party to
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 10
Item 5. Other Information
On January 23, 1997, a committee of independent directors
was appointed by the Company's board of directors to begin
discussions with Gold Kist Inc. concerning a possible merger of
Golden Poultry with a subsidiary of Gold Kist. Gold Kist owns
approximately 10,900,000 shares or 75% of Golden Poultry's
14,623,813 outstanding shares. Gold Kist Inc. completed a
Schedule 13D filing with the Securities and Exchange Commission
on January 23, 1997, reporting its intent to negotiate to acquire
the remaining shares of Golden Poultry common stock that Gold
Kist does not currently own.
Page 11
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
December 28, 1996.
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 January 27, 1997
Kenneth N. Whitmire
Chief Executive Officer
Date January 27, 1997
Langley C. Thomas, Jr.
Chief Financial Officer
Page 11
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
December 28, 1996.
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 January 27, 1997 /s/ Kenneth N. Whitmire
Kenneth N. Whitmire
Chief Executive Officer
Date January 27, 1997 /s/Langley C. Thomas, Jr.
Langley C. Thomas, Jr.
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-END> DEC-28-1996
<CASH> 3,395
<SECURITIES> 0
<RECEIVABLES> 27,135
<ALLOWANCES> 33
<INVENTORY> 63,002
<CURRENT-ASSETS> 98,942
<PP&E> 200,189
<DEPRECIATION> 105,215
<TOTAL-ASSETS> 198,759
<CURRENT-LIABILITIES> 53,307
<BONDS> 17,754
0
0
<COMMON> 65,507
<OTHER-SE> 45,114
<TOTAL-LIABILITY-AND-EQUITY> 198,759
<SALES> 182,004
<TOTAL-REVENUES> 182,069
<CGS> 169,637
<TOTAL-COSTS> 169,637
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 362
<INCOME-PRETAX> 5,209
<INCOME-TAX> 1,995
<INCOME-CONTINUING> 3,214
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,214
<EPS-PRIMARY> .22
<EPS-DILUTED> 0
</TABLE>
