<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 25, 1996 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 1, 1996 7,591,669
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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 8
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 25, 1996 AND MAY 28, 1995
($000's)
<TABLE>
<CAPTION>
February 25, 1996 May 28, 1995
----------------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $598 $386
Accounts and notes receivable 9,079 11,026
Inventories 14,600 13,028
Prepaid expenses 5,528 4,906
Other assets 1,141 1,772
------- -------
Total current assets 30,946 31,118
Property and equipment, net 52,830 52,512
Other assets 2,881 3,047
------- -------
Total assets $86,657 $86,677
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $5,576 $8,818
Accrued expenses and other liabilities 6,632 7,719
------- -------
Total current liabilities 12,208 16,537
Long-term debt and other long-term obligations 20,050 20,150
Deferred income taxes 4,589 3,800
Commitments and contingencies
Stockholders' equity
Common stock and additional paid-in capital 5,308 4,204
Other stockholders' equity 44,502 41,986
------- -------
Total liabilities and stockholders' equity $86,657 $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 39 WEEK PERIODS ENDED
FEBRUARY 25, 1996 AND FEBRUARY 26, 1995
(000's)
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
------------------- -------------------
Feb. 25, Feb. 26, Feb. 25, Feb. 26,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C>
Net sales $42,737 $41,150 $132,548 $129,050
Cost of goods sold 26,897 25,922 84,147 79,026
------- ------- -------- --------
Gross profit 15,840 15,228 48,401 50,024
Selling, general, and
administrative expenses 12,973 12,125 38,496 37,303
------- ------- -------- --------
Income from operations 2,867 3,103 9,905 12,721
Interest and other net expense (income) 302 (25) 941 97
------- ------- -------- --------
Income before income taxes 2,565 3,128 8,964 12,624
Income taxes 965 1,175 3,371 4,746
------- ------- -------- --------
Net income $ 1,600 $ 1,953 $ 5,593 $ 7,878
------- ------- -------- --------
Earnings per common share-primary
and fully diluted $ 0.20 $ 0.24 $ 0.69 $ 0.98
======= ======= ======== ========
Average shares outstanding-primary 8,085 8,042 8,111 8,004
======= ======= ======== ========
Average shares outstanding-fully diluted 8,085 8,049 8,112 8,045
======= ======= ======== ========
Dividends per share $ 0.04 $ 0.03 $ 0.12 $ 0.09
======= ======= ======== ========
</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 25, 1996 AND FEBRUARY 26, 1995
($000's)
<TABLE>
<CAPTION>
39 Weeks Ended
--------------------------------
Feb. 25, 1996 Feb. 26, 1995
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income $5,593 $7,878
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,382 3,528
Amortization of deferred expense 33 -
Provision for deferred income taxes 924 514
Loss on disposal of fixed assets 18 260
Changes in assets and liabilities:
Net (increase) decrease in assets 229 (6,934)
Net increase (decrease) in liabilities (4,594) 3,237
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,585 8,483
------ ------
Cash flows used in investing activities:
Capital expenditures, net of proceeds from
disposal of fixed assets (3,759) (19,686)
Increase in other assets (224) (22)
------ ------
NET CASH USED IN INVESTING ACTIVITIES (3,983) (19,708)
------ ------
Cash flows from (used in) financing activities:
Proceeds from issuance of long-term debt 36,850 34,760
Principal payments on long-term debt and
other long-term obligations (36,950) (23,457)
Repurchase of common stock (2,144) -
Common stock issued under dividend reinvestment plan 43 25
Stock options exercised 747 70
Cash dividends paid (936) (695)
------ ------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (2,390) 10,703
------ ------
Net increase (decrease) in cash and cash equivalents 212 (522)
Cash and cash equivalents at beginning of period 386 522
------ ------
Cash and cash equivalents at end of period $ 598 $ 0
====== ======
</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>
2/25/96 5/28/95
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<S> <C> <C>
Raw materials $ 5,119 $ 5,324
Work-in-process 962 1,269
Finished goods 8,835 6,762
Less LIFO reserve (316) (327)
------- -------
Inventories, net $14,600 $13,028
======= =======
</TABLE>
4) Interest and other net expense (income) consisted of the
following in thousands of dollars:
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
----------------- ------------------
2/25/96 2/26/95 2/25/96 2/26/95
------- ------- ------- -------
<S> <C> <C> <C>
Interest expense $319 $ 1 $957 $19
Interest income (22) (19) (66) (67)
Other expense (income) 5 (7) 50 145
----- ----- ----- -----
Other expense (income), net $302 ($25) $941 $97
===== ===== ===== =====
</TABLE>
Interest expense for the third quarter and year-to-date periods of
fiscal 1995 excludes $189 and $325, 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 third quarter and
year-to-date periods of fiscal 1996 include 317,650 and 320,112,
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 1996 include
317,650 and 320,978, respectively, of equivalent shares from options.
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.
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 since the fiscal year
end date. Long term debt and obligations were 29% of total capitalization at
February 25, 1996 compared to 30% at May 28, 1995. The current ratio was 2.5
compared to 1.9 at May 28, 1995.
Material Changes in Results of Operations for the Third Fiscal Quarter and
Nine Months
Sales for the third quarter of fiscal 1996 were 4% favorable to last year's
third quarter. Snack sales were up by 4%. Our branded snack sales increased
8% for the third quarter, partially offset by a 25% decline in private label
volume. Packaged meats sales (which account for approximately 11% of total
sales) were even with last year.
For the first nine months, total sales were up 3%. Snack sales were 3% over
last year while packaged meats sales were flat.
Third quarter gross profit margin rate was 37% which was the same as last
year's third quarter. For the first nine months, the gross profit margin
rate was 37% versus 39% last year.
Selling, general, and administrative expenses were 30% of sales for the third
quarter, same as last year's third quarter. For the first nine months,
selling, general, and administrative expenses were 29% of sales, same as last
year's first nine months.
Net income for the third quarter was $1,600, or $.20 per share compared to
$1,953 or $.24 per share, for last year's third quarter. Net income for the
first nine months was $5,593, or $.69 per share versus $7,878, or $.98 per
share, in the year-earlier period. 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 5. OTHER INFORMATION
ON March 22, 1996, the Board of Directors declared a regular quarterly cash
dividend of $.04 per share. The dividend is payable May 1, 1996 to
shareholders of record as of the close of business on April 15, 1996.
During the third quarter the Company repurchased 250,000 shares of its
common stock on the open market at an average price of $16.12 per share. 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.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: Exhibit 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 25, 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.
GoodMark Foods, Inc.
(Registrant)
Date: April 10, 1996 /s/ Ron E. Doggett
-----------------------
Ron E. Doggett
Chairman and
Chief Executive Officer
Date: April 10, 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 THIRD
QUARTER ENDED FEBRUARY 25, 1996 FOR GOODMARK FOODS, INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-26-1996
<PERIOD-START> MAY-29-1995
<PERIOD-END> FEB-25-1996
<EXCHANGE-RATE> 1
<CASH> 598
<SECURITIES> 0
<RECEIVABLES> 9,070
<ALLOWANCES> 0
<INVENTORY> 14,600
<CURRENT-ASSETS> 30,946
<PP&E> 52,830
<DEPRECIATION> 0
<TOTAL-ASSETS> 86,657
<CURRENT-LIABILITIES> 12,208
<BONDS> 20,050
0
0
<COMMON> 77
<OTHER-SE> 50,501
<TOTAL-LIABILITY-AND-EQUITY> 87,658
<SALES> 132,548
<TOTAL-REVENUES> 132,548
<CGS> 84,147
<TOTAL-COSTS> 84,147
<OTHER-EXPENSES> 50
<LOSS-PROVISION> 75
<INTEREST-EXPENSE> 891
<INCOME-PRETAX> 8,964
<INCOME-TAX> 3,371
<INCOME-CONTINUING> 5,593
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,593
<EPS-PRIMARY> .69
<EPS-DILUTED> .69
</TABLE>
