Gold Kist Inc. Reports Second Quarter and First Half Fiscal 2006 Results
Gold Kist Inc. (NASDAQ:GKIS) today reported financial results for the second quarter and six months ended April 1, 2006. For the second quarter of fiscal 2006, the Company reported a net loss of $16.2 million, or $(0.32) per diluted share, compared with net income of $38.7 million, or $0.76 per diluted share, for the second quarter of fiscal 2005. Net sales for the second quarter of 2006 declined 6.7 percent to $532.4 million compared with net sales of $570.8 million reported for the second quarter of fiscal 2005.
For the first six months of fiscal 2006, the Company reported a net loss of $13.7 million, or $(0.27) per diluted share, compared with net income of $42.9 million, or $0.85 per diluted share, earned in the first six months of fiscal 2005. Net sales for the six months ended April 1, 2006, declined 4.0 percent to $1.08 billion compared with $1.12 billion reported for the six months ended April 2, 2005.
Commenting on the results, John Bekkers, president and chief executive officer, said, “The trends established in the first quarter of fiscal 2006 continued during the second quarter. Average broiler prices declined 9.4 percent in the second quarter and 5.7 percent for the first half of fiscal 2006 compared with the same periods in fiscal 2005. A drop in consumption in export markets due to avian influenza concerns contributed to greater domestic supply and lower prices.
“Processing costs increased due to additional pounds processed and on a per-pound basis due to higher utilities, freight and packaging costs. Feed costs for the six months ended April 1, 2006, were slightly higher than in the comparable period of fiscal 2005 due to the additional pounds produced, partially offset by lower soybean meal ingredient costs. Average prices for corn for the first half of fiscal 2006 were 1.3 percent higher and soybean meal was 5.8 percent lower compared with the first half of fiscal 2005.
“We will continue to focus on increasing the percentage of value-added products we sell, which accounted for 57 percent of our total sales for the six months ended April 1, 2006. We also will continue to focus on growing our private-label business, and will continue to work on becoming more efficient, improving our performance and containing our costs. While we do not expect our strategies to completely offset the effects of the oversupply of protein and lower market prices, we believe our strategies and the strength of our balance sheet, will serve to lessen the impact and position the Company to recover more quickly and to be stronger when conditions improve.”
Gold Kist Inc. will hold a conference call to discuss this press release today, May 9, 2006, at 11 a.m. Eastern time. 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 and continue through June 9, 2006. If Internet access is unavailable, you may participate on the live call by telephone by dialing (800) 257-2101. The confirmation number for this call is 11059894.
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 provides processing, purchasing and marketing services. Gold Kist’s production operations include nine complexes located in Alabama, Florida, Georgia, North Carolina and South Carolina. For more information, visit our Web site at www.goldkist.com.
GOLD KIST INC. CONSOLIDATED BALANCE SHEETS (Amounts in Thousands) (Unaudited) October 1, April 1, 2005 2006 ——— ——— ASSETS Current assets: Cash and cash equivalents $ 153,561 $ 125,184 Receivables, net 125,389 109,714 Inventories, net 233,681 205,265 Deferred income taxes, net 11,506 12,442 Other current assets 26,873 38,365 ——— ——— Total current assets 551,010 490,970 Investments 10,747 11,262 Property, plant and equipment, net 286,515 317,581 Deferred income taxes, net 25,133 25,133 Other assets 52,284 60,969 ——— ——— $ 925,689 $ 905,915 ========= ========= LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Notes payable and current maturities of long-term debt $ 1,518 $ 1,446 Accounts payable 87,486 83,072 Accrued compensation and related expenses 27,292 17,406 Income taxes payable 34,850 13,897 Accrued insurance costs 39,458 49,253 Other current liabilities 36,105 33,022 ——— ——— Total current liabilities 226,709 198,096 Long-term debt, less current maturities 143,714 142,927 Accrued pension costs 54,450 61,472 Accrued postretirement benefit costs 3,961 3,181 Accrued insurance costs 32,600 44,654 Other liabilities 13,527 15,188 ——— ——— Total liabilities 474,961 465,518 Stockholders’ equity: Preferred stock — — Common stock 511 510 Additional paid-in capital 399,619 403,384 Accumulated other comprehensive loss (61,265) (61,265) Retained earnings 112,246 98,562 Common stock held in treasury (383) (794) ——— ——— Total stockholders’ equity 450,728 440,397 ——— ——— $ 925,689 $ 905,915 ========= ========= GOLD KIST INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in Thousands, Except Per Share Amounts) (Unaudited) Three Months Ended Six Months Ended ——————— ———————– April 2, April 1, April 2, April 1, 2005 2006 2005 2006 ——— ——— ———- ———- Net sales volume $ 570,809 $ 532,365 $1,122,767 $1,077,725 Cost of sales 477,554 535,217 981,676 1,048,180 ——— ——— ———- ———- Gross profit (loss) 93,255 (2,852) 141,091 29,545 Distribution, administrative and general expenses 33,076 24,891 58,042 51,904 Conversion expenses — — 1,418 — ——— ——— ———- ———- Net operating income (loss) 60,179 (27,743) 81,631 (22,359) ——— ——— ———- ———- Other income (expenses): Interest and dividend income 1,890 1,379 2,715 2,950 Interest expense (6,213) (3,878) (13,303) (8,267) Debt prepayment interest and write-off of fees and discount — — (10,016) — Miscellaneous, net 1,284 1,446 2,986 2,601 ——— ——— ———- ———- Total other expenses, net (3,039) (1,053) (17,618) (2,716) ——— ——— ———- ———- Income (loss) before income taxes 57,140 (28,796) 64,013 (25,075) Income tax expense (benefit) 18,471 (12,569) 21,151 (11,391) ——— ——— ———- ———- Net income (loss) $ 38,669 $ (16,227) $ 42,862 $ (13,684) ========= ========= ========== ========== Net income (loss) per common share: Basic $ 0.77 $ (0.32) $ 0.86 $ (0.27) ========= ========= ========== ========== Diluted $ 0.76 $ (0.32) $ 0.85 $ (0.27) ========= ========= ========== ========== Weighted average common shares outstanding: Basic 49,972 50,116 49,972 50,079 ========= ========= ========== ========== Diluted 50,749 50,116 50,470 50,079 ========= ========= ========== ==========