<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Thirteen Weeks Ended Commission File Number
FEBRUARY 26, 1995 0-13944
GOODMARK FOODS, INC.
(Exact name of Registrant as specified in its charter)
NORTH CAROLINA 56-1330788
(State of incorporation) (I.R.S. Employer
Identification No.)
6131 FALLS OF NEUSE ROAD, RALEIGH, NORTH CAROLINA 27609
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (919) 790-9940
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, and
(2) has been subject to such filing requirements for the past 90
days.
Yes X No
--- ---
Number of shares outstanding of Registrant's Common Stock,
$.01 par value, as of April 4, 1995 7,730,306
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GOODMARK FOODS, INC.
Form 10-Q Quarterly Report
Index
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. Financial information
Item 1. Consolidated financial statements
Consolidated balance sheets 3
Consolidated statements of income 4
Consolidated statements of cash flows 5
Notes to consolidated financial statements 6
Item 2. Management's discussion and analysis of
financial condition and results of operations 8
PART II. Other information
Item 5. Other information 9
Item 6. Exhibits and reports on Form 8-K 9
</TABLE>
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PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
GOODMARK FOODS, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
FEBRUARY 26, 1995 AND MAY 29, 1994
----------------------------------
($000's)
<TABLE>
<CAPTION>
February 26, 1995 May 29, 1994
----------------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ - $ 522
Accounts and notes receivable 9,350 8,988
Inventories 15,319 10,606
Prepaid expenses and other assets 6,935 5,157
------- -------
Total current assets 31,604 25,273
Property and equipment, net 47,012 30,671
Other assets 3,196 3,615
------- -------
Total $81,812 $59,559
======= =======
LIABLILITES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 7,143 $ 4,396
Current portion of long-term debt and other
long-term obligations - 47
Accrued expenses and other liabilities 9,477 8,987
------- -------
Total current liabilities 16,620 13,430
Long-term debt and other long-term obligations 16,850 5,500
Deferred income taxes 3,668 3,235
Commitments and contingencies
Shareholders' equity 44,674 37,394
------- -------
Total $81,812 $59,559
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
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PART I, ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- - --------------------------------------------------------------
GOODMARK FOODS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE 13 AND 39 WEEK PERIODS ENDED
FEBRUARY 26, 1995 AND FEBRUARY 27, 1994
---------------------------------------
($000's)
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
------------------- -------------------
Feb. 26, Feb. 27, Feb. 26, Feb. 27,
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $41,150 $35,069 $129,050 $115,491
Cost of goods sold 25,922 22,047 79,026 73,617
------- ------- -------- --------
Gross profit 15,228 13,022 50,024 41,874
Selling, general, and
administrative expenses 12,125 11,020 37,303 34,288
------- ------- -------- --------
Income from operations 3,103 2,002 12,721 7,586
Interest and other net expense (income) (25) 24 97 15
------- ------- -------- --------
Income before income taxes and
cumulative effect of change in
accounting for income taxes 3,128 1,978 12,624 7,571
Income taxes 1,175 744 4,746 2,847
------- ------- -------- --------
Income before cumulative effect of
change in accounting for income taxes 1,953 1,234 7,878 4,724
Cumulative effect of change in
accounting for income taxes - - - (211)
------- ------- -------- --------
Net income $ 1,953 $ 1,234 $ 7,878 $ 4,513
======= ======= ======== ========
Earnings per common share-primarily
and fully diluted:
Before cumulative effect of change
in accounting for income taxes $ 0.24 $ 0.16 $ 0.98 $ 0.57
Cumulative effect of change in
accounting for income taxes - - - (0.02)
------- ------- -------- --------
Earnings per share $ 0.24 $ 0.16 $ 0.98 $ 0.55
======= ======= ======== ========
Average shares outstanding-primary 8,042 7,702 8,004 8,154
======= ======= ======== ========
Average shares outstanding-fully diluted 8,049 7,702 8,045 8,154
======= ======= ======== ========
Dividends per share $ 0.03 $ 0.03 $ 0.09 $ 0.08
======= ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
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PART I, ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- - --------------------------------------------------------------
GOODMARK FOODS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 39 WEEK PERIODS ENDED
FEBRUARY 26, 1995 AND FEBRUARY 27, 1994
---------------------------------------
($000's)
<TABLE>
<CAPTION>
39 Weeks Ended
--------------------------------
Feb. 26, 1995 Feb. 27, 1994
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,878 $ 4,513
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,528 2,967
Cumulative effect of change in accounting principle - 211
Provision for deferred income taxes 514 347
(Gain) loss on disposal of fixed assets 260 (11)
Changes in assets and liabilities:
Net increase in assets (6,934) (2,568)
Net increase in liabilities 3,237 603
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,483 6,062
-------- --------
Cash flows from (used in) investing activities:
Proceeds from disposal of investments - 1,709
Purchase of investments - (1,709)
Capital expenditures, net of proceeds from
disposal of fixed assets (19,686) (3,529)
Increase in other assets (22) -
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (19,708) (3,529)
-------- --------
Cash flows from (used in) financing activities:
Proceeds from issuance of long-term debt 34,760 17,200
Principal payments on long-term debt (23,457) (14,435)
Stock options exercised 95 250
Cash dividends paid (695) (602)
Repurchase of common stock - (7,563)
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 10,703 (5,150)
-------- --------
Net decrease in cash and cash equivalents (522) (2,617)
Cash and cash equivalents at beginning of period $ 522 3,293
-------- --------
Cash and cash equivalents at end of period $ 0 $ 676
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
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PART I, ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- - --------------------------------------------------------------
GOODMARK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000's)
1) The Notes to Consolidated Financial Statements included in Registrant's
annual report for the fiscal year ended May 29, 1994 as incorporated in
Form 10-K filed with the Securities and Exchange Commission on August 22,
1994 should be read in conjunction with these quarterly financial
statements.
2) The financial information herein is unaudited. The information reflects
all normal recurring adjustments which are necessary in management's
opinion for a fair statement of results for the interim periods presented.
3) Inventories are stated at the lower of last-in, first-out (LIFO) cost or
market. Inventories consisted of the following in thousands of dollars:
<TABLE>
<CAPTION>
2/26/95 5/29/94
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<S> <C> <C>
Raw materials $ 5,168 $ 3,477
Work-in-process 911 1,041
Finished goods 9,727 6,970
Less LIFO reserve (487) (882)
------- -------
Inventories, net $15,319 $10,606
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</TABLE>
4) Interest and other net expense (income) consisted of the following in
thousands of dollars:
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
--------------- -----------------
2/26/95 2/27/94 2/26/95 2/27/94
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest expense $ 1 $ 67 $ 19 $127
Interest income (19) (34) (67) (65)
Other income (7) (9) 145 (47)
---- ---- ---- ----
Other expense (income), net ($25) $ 24 $ 97 $ 15
==== ==== ==== ====
</TABLE>
Interest expense for the third quarter and year-to-date periods of fiscal
1995 excludes $189,337 and $325,213, respectively, of interest that was
capitalized with the Garner plant expansion project.
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PART I, ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- - --------------------------------------------------------------
GOODMARK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
($000's)
5) The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes," effective May 31, 1993. The
cumulative effect of adopting SFAS No. 109 on the Company's financial
statements was to decrease net income by $211 ($.02 per share) for the
nine months ended February 27, 1994.
6) The computation of earnings per common and common equivalent share is
based upon the weighted average number of common shares outstanding during
the period plus (in periods in which they have a dilutive effect) the
effect of common shares contingently issuable from stock options using
the treasury stock method. Weighted average shares oustanding under the
primary earnings per share calculation for the third quarter and
year-to-date periods of fiscal 1995 include 316,345 and 283,590,
respectively, of equivalent shares from options. Weighted average shares
oustanding under the fully diluted earnings per share calculation for the
third quarter and year-to-date periods of fiscal 1995 include 323,737 and
325,083, respectively, of equivalent shares from options. In the prior
year, stock options did not impact per share data as they were either
insignificant or antidilutive.
7) Interim results are not necessarily indicative of results for the fiscal
year.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- - ------------------------------------------------------------------------
RESULTS OF OPERATIONS
- - ---------------------
($000's)
Material Changes in Financial Condition from Fiscal Year End
- - ------------------------------------------------------------
Long term debt and obligations were 27.4% of total capitalization at
February 26, 1995 compared to 12.8% at May 29, 1994. The higher long term
debt and obligations to capitalization ratio is the result of planned
conventional bank borrowing to help fund the major expansion of the Garner, NC
production facility. Net property and equipment increased to $47,012 from
$30,671 since fiscal year end due primarily to the Garner expansion project,
which is on schedule and on budget. We received USDA approval for the new
facility and started phasing in production in mid-February.
Inventories, mostly finished goods, increased $4,713, or 44%, since fiscal year
end to accommodate strong demand forecasts for the fourth quarter during which
we will be experiencing some production interruptions due to the installation
of new equipment.
The current ratio at February 26, 1995 was 1.9, which is the same as it was at
May 29, 1994. Working capital increased to $14,984 from $11,843 at fiscal year
end.
Material Changes in Results of Operations for the Third Fiscal Quarter and
- - --------------------------------------------------------------------------
Nine Months
- - -----------
Sales for the third quarter of fiscal 1995 were 17% favorable to last year's
third quarter. Snack sales were up by 21%. Packaged meats sales (which
account for approximately 12% of total sales) were down by 3%. For the first
nine months, total sales were up 12%. Snack sales were up 14% while packaged
meats sales were down 4%. All our snack brands are growing. We believe our
aggressive marketing programs for meat snacks have driven category growth and
market share gains. We believe that our reduced sales of packaged meats
reflects depressed market conditions for fresh meats.
A combination of low meat costs and productivity gains continue to provide
record margins. The third quarter gross profit margin rate was 37%, same as
a year ago. For the first nine months, the gross profit margin was 39% versus
last year's 36%.
Selling, general, and administrative expenses were down as a percentage of
sales to 30% for the third quarter and 29% for the first nine months compared
to 31% in last year's third quarter and 30% in the first nine months. The
margin rate of operating income increased from 5.7% to 7.5% for the third
quarter and from 6.6% to 9.9% for the first nine months.
Net income for the third quarter increased 58% to $1,953, or $.24 per share,
from $1,234, or $.16 per share, for last year's third quarter. Net income for
the first nine months was up 75% to $7,878, or $.98 per share, from $4,513, or
$.55 per share, in the year-earlier period. Net income for the first nine
months of last year included a one-time, non-cash charge of $.02 per share to
reflect a change in accounting related to income taxes. Also, the third
quarter and first nine month's earnings per share comparisons were favorably
affected by the 1,000,000 shares of
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stock repurchased on October 5, 1993. The reduction in the number of shares
outstanding was partially offset due to the GAAP requirement to increase the
number of equivalent shares outstanding for stock options resulting from the
increase in GoodMark's stock price. See note 6 of Notes to Consolidated
Financial Statements. No options were reflected in the year-earlier periods.
All share and per share figures reflect the two-for-one stock split that was
effected August 1, 1994.
PART II - OTHER INFORMATION
---------------------------
ITEM 5. OTHER INFORMATION
- - --------------------------
On January 23, 1995, Robert B. Seidensticker (65) was elected to the Board of
Directors of the Company. Mr. Seidensticker fills the position formerly held by
Preston Townley, who passed away in September, 1994.
On March 21, 1995, the Board of Directors declared a regular quarterly cash
dividend of $.03 per share. The dividend is payable May 1, 1995 to
shareholders of record as of the close of business on April 14, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - -----------------------------------------
(a) Exhibits: EX-27 Financial Data Schedule (For SEC use only)
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the
quarter ended February 26, 1995.
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.
GOODMARK FOODS, INC.
(Registrant)
Date: April 10, 1995 /s/ Ron E. Doggett
------------------------------------
Ron E. Doggett
Chairman and
Chief Executive Officer
Date: April 10, 1995 /s/ Paul L. Brunswick
------------------------------------
Paul L. Brunswick
Vice President
Chief Financial Officer
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE THIRD
QUARTER ENDED FEBRUARY 26, 1995 FOR GOODMARK FOODS, INC. AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-28-1995
<PERIOD-START> MAY-30-1994
<PERIOD-END> FEB-26-1995
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 9,350
<ALLOWANCES> 0
<INVENTORY> 15,319
<CURRENT-ASSETS> 31,604
<PP&E> 47,012
<DEPRECIATION> 0
<TOTAL-ASSETS> 81,812
<CURRENT-LIABILITIES> 16,620
<BONDS> 16,850
<COMMON> 77
0
0
<OTHER-SE> 44,597
<TOTAL-LIABILITY-AND-EQUITY> 81,812
<SALES> 129,050
<TOTAL-REVENUES> 129,050
<CGS> 79,026
<TOTAL-COSTS> 79,026
<OTHER-EXPENSES> 145
<LOSS-PROVISION> 94
<INTEREST-EXPENSE> 82
<INCOME-PRETAX> 12,624
<INCOME-TAX> 4,746
<INCOME-CONTINUING> 7,878
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,878
<EPS-PRIMARY> .98
<EPS-DILUTED> .98
</TABLE>
