<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
November 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 December 29, 1995 7,875,553
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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 4. Submission of matters to a vote of security
holders 8
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
NOVEMBER 26, 1995 AND MAY 28, 1995
($000's)
<TABLE>
<CAPTION>
November 26, 1995 May 28, 1995
----------------- ------------
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 1,916 $ 386
Accounts and notes receivable 7,067 11,026
Inventories 14,624 13,028
Prepaid expenses 5,703 4,906
Other assets 1,713 1,772
------- -------
Total current assets 31,023 31,118
Property and equipment, net 52,825 52,512
Other assets 2,994 3,047
------- -------
Total assets $86,842 $86,677
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 5,751 $ 8,818
Accrued expenses and other liabilities 5,878 7,719
------- -------
Total current liabilities 11,629 16,537
Long-term debt and other long-term obligations 20,250 20,150
Deferred income taxes 4,325 3,800
Commitments and contingencies
Stockholders' equity
Common stock and additional paid-in capital 5,283 4,204
Other stockholders' equity 45,355 41,986
------- -------
Total liabilities and stockholders' equity $86,842 $86,677
======= =======
</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 26 WEEK PERIODS ENDED
NOVEMBER 26, 1995 AND NOVEMBER 27, 1994
(000's)
<TABLE>
<CAPTION>
13 Weeks Ended 26 Weeks Ended
------------------- -------------------
Nov. 26, Nov. 27, Nov. 26, Nov. 27,
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $43,538 $44,493 $89,811 $87,900
Cost of goods sold 28,567 26,917 57,250 53,104
------- ------- ------- -------
Gross profit 14,971 17,576 32,561 34,796
Selling, general, and
administrative expenses 12,447 12,765 25,523 25,178
------- ------- ------- -------
Income from operations 2,524 4,811 7,038 9,618
Interest and other net expense (income) 389 (117) 639 122
------- ------- ------- -------
Income before income taxes 2,135 4,928 6,399 9,496
Income taxes 862 1,853 2,406 3,571
------- ------- ------- -------
Net income $ 1,273 $ 3,075 $ 3,993 $ 5,925
======= ======= ======= =======
Earnings per common share-primary
and fully diluted $ 0.16 $ 0.38 $ 0.49 $ 0.74
======= ======= ======= =======
Average shares outstanding-primary 8,152 8,023 8,124 7,983
======= ======= ======= =======
Average shares outstanding-fully diluted 8,155 8,043 8,139 8,041
======= ======= ======= =======
Dividends per share $ 0.04 $ 0.03 $ 0.08 $ 0.06
======= ======= ======= =======
</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 26 WEEK PERIODS ENDED
NOVEMBER 26, 1995 AND NOVEMBER 27, 1994
($000's)
<TABLE>
<CAPTION>
26 Weeks Ended
--------------------------------
Nov. 26, 1995 Nov. 27, 1994
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income $3,993 $5,925
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,946 2,348
Amortization of deferred expense 8 -
Provision for deferred income taxes 499 343
(Gain) loss on disposal of fixed assets (3) 260
Changes in assets and liabilities:
Net (increase) decrease in assets 2,061 (4,184)
Net increase (decrease) in liabilities (5,213) 403
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,291 5,095
------ ------
Cash flows used in investing activities:
Capital expenditures, net of proceeds from
disposal of fixed assets (2,993) (10,773)
Increase in other assets (13) (16)
------ ------
NET CASH USED IN INVESTING ACTIVITIES (3,006) (10,789)
------ ------
Cash flows from (used in) financing activities:
Proceeds from issuance of long-term debt 29,450 16,200
Principal payments on long-term debt and
other long-term obligations (29,350) (8,931)
Common stock issued under dividend reinvestment plan 30 16
Stock options exercised 740 48
Cash dividends paid (625) (463)
------ ------
NET CASH PROVIDED BY FINANCING ACTIVITIES 245 6,870
------ ------
Net increase in cash and cash equivalents 1,530 1,176
Cash and cash equivalents at beginning of period 386 522
------ ------
Cash and cash equivalents at end of period $1,916 $1,698
====== ======
</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 28, 1995 as
incorporated in Form 10-K filed with the Securities and Exchange
Commission on August 25, 1995 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. Certain reclassifications have been made
to prior year's financial statements to conform to the
classifications used in 1996.
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>
11/26/95 5/28/95
-------- -------
<S> <C> <C>
Raw materials $5,874 $5,324
Work-in-process 723 1,269
Finished goods 8,354 6,762
Less LIFO reserve (327) (327)
------- -------
Inventories, net $14,624 $13,028
======= =======
</TABLE>
4) Interest and other net expense (income) consisted of the following in
thousands of dollars:
<TABLE>
<CAPTION>
13 Weeks Ended 26 Weeks Ended
----------------- ------------------
11/26/95 11/27/94 11/26/95 11/27/94
-------- -------- -------- --------
<S> <C> <C>
Interest expense $308 $1 $638 $18
Interest income (24) (22) (44) (48)
Other expense (income) 105 (96) 45 152
----- ----- ----- -----
Other expense (income), net $389 ($117) $639 $122
===== ===== ===== =====
</TABLE>
Interest expense for the second quarter and first half of fiscal 1995
excludes $95 and $136, 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 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 second quarter and first half of fiscal 1996 include 324,051 and
321,285, respectively, of equivalent shares from options. Weighted
average shares oustanding under the fully diluted earnings per share
calculation for the second quarter and first half of fiscal 1996
include 327,283 and 335,562, respectively, of equivalent shares from
options.
Weighted average shares oustanding under the primary earnings per share
calculation for the second quarter and first half of fiscal 1995
include 302,189 and 265,141, respectively, of equivalent shares
from options. Weighted average shares oustanding under the fully
diluted earnings per share calculation for the second quarter and
first half of fiscal 1995 include 322,876 and 323,352,
respectively, of equivalent shares from options.
6) 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
There were no material changes in financial condition during the second
quarter. The current ratio at November 26, 1995 was 2.7 compared to 1.9 at May
28, 1995. Long term debt and obligations were 29% of total
capitalization versus 30% at fiscal year end.
Material Changes in Results of Operations for the Second Fiscal Quarter and
Six Months
Sales for the second quarter of fiscal 1996 were 2% below last year's second
quarter. Snack sales were down by 3%. Packaged meats sales were up by 3%.
For the first six months, total sales were up 2%. Snack sales were up 2%,
while packaged meats sales were even with last year. Product shortages and the
timing of promotional programs had a negative impact on our revenue
opportunities throughout the first six months. Operating issues related
to our plant expansion have been largely resolved. We are now capable of
meeting significantly higher volume levels. We believe demand for our
products remains strong and our distribution systems are solid.
Second quarter gross profit margin rate was 34% compared to 40% a year ago.
For the first six months, the gross profit margin rate was 36% versus 40%
last year. Gross profit margin rates are down due partly to an upward
seasonal trend in meat costs, but mostly due to the under-utilization of
increased plant production capacity with its associated higher level of fixed
expenses.
Selling, general, and administrative expenses were 29% of sales for the second
quarter and first six months, which was the same for last year's second
quarter and first six months.
Net income for the second quarter was $1,273, or $.16 per share, down from
$3,075, or $.38 per share, in last year's second quarter. Net income for
the first six months was down to $3,993, or $.49 per share, compared to
$5,925, or $.74 per share, for last year. All share and per share figures
reflect the two-for-one stock split that was effected on August 1, 1994.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 28, 1995, the Company held its Annual Meeting of
Shareholders at which the appointment of auditors was ratified and the Board
of Directors was elected. Information regarding these matters is reported in
the Company's Form 10-Q for the period ended August 27, 1995 as filed on
October 11, 1995 with the Securities and Exchange Commission.
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ITEM 5. OTHER INFORMATION
On December 11, 1995, Eric Lomas (48) was elected to the Board of
Directors of the Company. Mr. Lomas fills a new position on the Board.
On December 11, 1995, the Board of Directors declared a regular
quarterly cash dividend of $.04 per share. The dividend is payable
February 1, 1996 to shareholders of record as of the close of business on
January 15, 1996.
On December 13, 21, and 22, 1995, the Company repurchased 6,500, 7,500, and
29,000 shares of common stock, respectively, on the open market at an average
price of $16.935. On June 23, 1995, the Board of Directors authorized the
repurchase of up to 250,000 shares of the Company's common stock from
time to time in open market transactions during the current 1996 fiscal
year.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: 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 November 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
udjersigned thereunto duly authorized.
GoodMark Foods, Inc.
(Registrant)
Date: January 9, 1996 /s/ Ron E. Doggett
-----------------------
Ron E. Doggett
Chairman and
Chief Executive Officer
Date: January 9, 1996 /s/ Paul L. Brunswick
-----------------------
Paul L. Brunswick
Vice President
Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SECOND
QUARTER ENDED NOVEMBER 26, 1995 FOR GOODMARK FOODS, INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-26-1996
<PERIOD-START> MAY-29-1995
<PERIOD-END> NOV-26-1995
<CASH> 1,916
<SECURITIES> 0
<RECEIVABLES> 7,067
<ALLOWANCES> 0
<INVENTORY> 14,624
<CURRENT-ASSETS> 31,023
<PP&E> 52,825
<DEPRECIATION> 0
<TOTAL-ASSETS> 86,842
<CURRENT-LIABILITIES> 11,629
<BONDS> 20,250
0
0
<COMMON> 78
<OTHER-SE> 50,560
<TOTAL-LIABILITY-AND-EQUITY> 86,842
<SALES> 89,811
<TOTAL-REVENUES> 89,811
<CGS> 57,250
<TOTAL-COSTS> 57,250
<OTHER-EXPENSES> 45
<LOSS-PROVISION> 65
<INTEREST-EXPENSE> 638
<INCOME-PRETAX> 6,399
<INCOME-TAX> 2,406
<INCOME-CONTINUING> 3,993
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,993
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
</TABLE>
