Gold Kist Inc. Reports Third Quarter 2006 Results
Gold Kist Inc. (NASDAQ:GKIS) today reported financial results for the third quarter and nine months ended July 1, 2006. For the third fiscal quarter, Gold Kist reported a net loss of $7.3 million, or $0.14 per diluted share, compared with net income of $44.4 million, or $0.87 per diluted share, for the third quarter of fiscal 2005. Third quarter sales were $505.3 million, compared with $598.8 million for the year-earlier period.
For the first nine months of fiscal 2006, the Company reported a net loss of $20.9 million, or $0.42 per diluted share, compared with net income of $87.3 million, or $1.72 per diluted share, for the same period in the prior year. Sales for the first nine months of fiscal 2006 declined approximately 8 percent to $1.58 billion from $1.72 billion for the year-earlier period.
Commenting on the results, John Bekkers, president and chief executive officer, said, “The decline in net sales was due primarily to a decline in average broiler prices of 15.1 percent for the third fiscal quarter and 9.3 percent for the nine months ended July 1, 2006, compared with the similar periods last year. An oversupply of broilers and competing meats and low export sales prices were the principal factors leading to the sales decline.
“Processing costs continued to increase during the third quarter due to higher utilities, freight and packaging costs caused by higher overall energy costs. Total feed costs were slightly lower for the first nine months of fiscal 2006 due to a reduction in broilers produced and lower soybean ingredient costs. For the nine months ended July 1, 2006, the average price of corn was 4.5 percent higher and soybean meal prices were 6.9 percent lower than in the comparable period last year.
“On a more positive note, a general reduction in broiler placements during the quarter and slower growth in broiler production led to a gradual strengthening in broiler prices during the latter part of the Company’s third fiscal quarter. We also continued to make progress in the growth of our value-added products. Valued-added pounds produced in the third quarter of fiscal 2006 increased 7.4 percent compared with the same quarter in fiscal 2005.
“During the fourth fiscal quarter, we are optimistic that broiler prices will gradually strengthen as export demand improves and domestic supply and demand become more balanced. Feed ingredient costs for the full fiscal year are expected to be about the same as last year. We will continue to focus on improving our product mix, containing costs and maintaining a strong balance sheet.”
Gold Kist Inc. will hold a conference call today, August 8, 2006, at 11 a.m. Eastern time to discuss financial and operational results for the third fiscal quarter and nine months ended July 1, 2006, and other matters related to the Company. Investors will have the opportunity to listen to a live Internet broadcast of the conference call through the Company’s Web site at www.goldkist.com or through www.earnings.com. To listen to the live call, please go to the Web site at least 15 minutes early to register and download and install any necessary audio software. For those who cannot listen to the live broadcast, an Internet replay will be available shortly after the call. If Internet access is unavailable, you may listen to the live call by telephone by dialing (800) 946-0782. The confirmation number for this call is 9821487.
This news release contains “forward-looking statements” as defined in the federal securities laws regarding Gold Kist’s beliefs, anticipations, expectations or predictions of the future, including statements relating to the Company’s strategy of enhancing its value-added product lines, focusing on cost controls, becoming more efficient, improving its performance and growing the Company’s private label business, and relating to pricing trends and processing costs. These forward-looking statements involve a number of risks and uncertainties. Among the important factors that could cause actual results to differ materially from those indicated in such forward-looking statements include market conditions for finished and value-added products including competitive factors and the supply and pricing of alternative meat proteins; effectiveness of our sales and marketing programs; disease outbreaks affecting broiler production, demand and/or marketability of our products; uncertainties relating to fluctuations in the cost and availability of raw materials, such as feed ingredients; risks associated with effectively executing risk management activities; changes in the availability and relative costs of labor and contract growers; effectiveness of our capital expenditures and other cost-savings measures; contamination of products, which can lead to product liability and product recalls; access to foreign markets together with foreign economic conditions; acquisition activities and the effect of completed acquisitions; pending or future litigation; the ability to obtain additional financing or make payments on our debt; regulatory developments, industry conditions and market conditions; and general economic conditions; as well as other risks described under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended October 1, 2005, and subsequently filed Quarterly Reports on Form 10-Q. Gold Kist undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
About Gold Kist
Gold Kist is the third largest chicken company in the United States, accounting for more than 9 percent of chicken produced in the United States in 2005. Gold Kist operates a fully-integrated chicken production business that includes live production, processing, marketing and distribution. Gold Kist’s operations include nine divisions located in Alabama, Florida, Georgia, North Carolina and South Carolina. For more information, visit the Company’s Web site at http://www.goldkist.com.
GOLD KIST INC. CONSOLIDATED BALANCE SHEETS (Amounts in Thousands) (Unaudited) October 1, July 1, 2005 2006 ——— ——— ASSETS Current assets: Cash and cash equivalents $ 153,561 $ 95,554 Receivables, net 125,389 102,493 Inventories 233,681 227,339 Deferred income taxes, net 11,506 12,277 Other current assets 26,873 29,407 ——— ——— Total current assets 551,010 467,070 ——— ——— Investments 10,747 10,819 Property, plant and equipment, net 286,515 324,132 Deferred income taxes, net 25,133 25,133 Other assets 52,284 63,143 ——— ——— $ 925,689 $ 890,297 ========= ========= LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Notes payable and current maturities of long-term debt $ 1,518 $ 2,017 Accounts payable 87,486 74,092 Accrued compensation and related expenses 27,292 16,147 Income taxes payable 34,850 7,093 Accrued insurance costs 39,458 40,838 Other current liabilities 36,105 39,797 ——— ——— Total current liabilities 226,709 179,984 ——— ——— Long-term debt, less current maturities 143,714 142,127 Accrued pension costs 58,411 67,688 Accrued postretirement benefit costs 32,600 50,699 Other liabilities 13,527 15,513 ——— ——— Total liabilities 474,961 456,011 ——— ——— Stockholders’ equity: Preferred stock — — Common stock 511 511 Additional paid-in capital 399,619 404,527 Accumulated other comprehensive loss (61,265) (61,265) Retained earnings 112,246 91,308 Common stock held in treasury (383) (795) ——— ——— Total stockholders’ equity 450,728 434,286 ——— ——— $ 925,689 $ 890,297 ========= ========= GOLD KIST INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in Thousands, Except Per Share Amounts) (Unaudited) Three Months Ended Nine Months Ended ——————- ———————– July 2, July 1, July 2, July 1, 2005 2006 2005 2006 ——– ——– ———- ———- Net sales $598,835 $505,338 $1,721,602 $1,583,063 Cost of sales 497,040 490,961 1,478,716 1,539,141 ——– ——– ———- ———- Gross profit 101,795 14,377 242,886 43,922 Distribution, administrative and general expenses 28,852 26,667 86,894 78,571 Conversion expenses — — 1,418 — ——– ——– ———- ———- Net operating income (loss) 72,943 (12,290) 154,574 (34,649) ——– ——– ———- ———- Other income (expenses): Interest and dividend income 1,106 1,396 3,821 4,346 Interest expense (5,063) (3,835) (18,366) (12,102) Debt prepayment interest and write-off of related fees and discount — — (10,016) — Miscellaneous, net 1,164 1,227 4,150 3,828 ——– ——– ———- ———- Total other expenses, net (2,793) (1,212) (20,411) (3,928) ——– ——– ———- ———- Income (loss) before income taxes 70,150 (13,502) 134,163 (38,577) Income tax expense (benefit) 25,737 (6,248) 46,888 (17,639) ——– ——– ———- ———- Net income (loss) $ 44,413 $ (7,254) $ 87,275 $ (20,938) ======== ======== ========== ========== Net income (loss) per common share: Basic $ 0.89 $ (0.14) $ 1.75 $ (0.42) ======== ======== ========== ========== Diluted $ 0.87 $ (0.14) $ 1.72 $ (0.42) ======== ======== ========== ========== Weighted average common shares outstanding: Basic 50,012 50,122 49,985 50,093 ======== ======== ========== ========== Diluted 50,808 50,122 50,602 50,093 ======== ======== ========== ==========