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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 29, 1996
Commission File No. 2-59958
GOLD KIST INC.
(Exact name of registrant as specified in its charter)
Georgia 58-0255560
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification
No.)
244 Perimeter Center Parkway, N.E.
Atlanta, Georgia 30346
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(770) 393-5000
Securities registered pursuant to Section 12(b) of the
Act: None
Securities registered pursuant to Section 12(g) of the
Act: None
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 l934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES X . NO .
DOCUMENTS INCORPORATED BY REFERENCE
Not Applicable.
TABLE OF CONTENTS
Item Page
1. Business (and Properties) . . . . . . . . . . 1
2. Properties . . . . . . . . . . . . . . . . 10
3. Legal Proceedings . . . . . . . . . . . . 11
4. Submission of Matters to a Vote of Security Holders 11
5. Market for Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . 11
6. Selected Financial Data . . . . . . . . . . . 12
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . 13
8. Financial Statements and Supplementary Data . . . 18
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . 37
10. Directors and Executive Officers of the Registrant 37
11. Executive Compensation . . . . . . . . . . . 39
12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . .. . . . . . . 42
13. Certain Relationships and Related Transactions. . 42
14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K . . . . . . . . . . . . . . . . 43
GOLD KIST INC.
ANNUAL REPORT FOR THE FISCAL YEAR ENDED JUNE 29, 1996
PART I
Item 1. Business (and Properties).
Gold Kist Inc. ("Gold Kist" or the "Association")
is a diversified agricultural membership cooperative
association, headquartered in Atlanta, Georgia. It was
incorporated without capital stock in 1936 under the Georgia
Cooperative Marketing Act. The name of the Association was
changed in 1970 from Cotton Producers Association to Gold Kist
Inc. In April 1985, the Articles of Incorporation and By-Laws
of the Association were amended to provide for a class of
common stock and a class of preferred stock as authorized by
the Georgia Cooperative Marketing Act. Each member is issued
one share of common stock only, as evidence of membership and
the right to one vote as long as the member maintains status
as an active member. Only members may hold the common stock,
which is nontransferable and receives no dividends.
Gold Kist serves approximately 29,000 active
farmer members located principally in Alabama, Florida,
Georgia, and South Carolina. In addition, other cooperative
associations are members of Gold Kist. Any person engaged in
the production of farm commodities and any firm or corporation
whose members or stockholders are persons so engaged and any
cooperative association organized under the cooperative
marketing laws of any state, which enters into a marketing
and/or purchasing agreement with the Association, is eligible
for membership.
Gold Kist offers both cooperative marketing and
cooperative purchasing services to its member patrons. Farm
commodities are marketed by Gold Kist on behalf of members.
Similarly, Gold Kist manufactures or processes many products
purchased for its members. The standard Membership,
Marketing, and/or Purchasing Agreement which is entered into
between each member and Gold Kist does not require the member
to market his agricultural products or to purchase farm
supplies through Gold Kist. Under the agreement, Gold Kist
undertakes to market for the member agricultural products
delivered which are of a type marketed by Gold Kist and to
purchase or manufacture and sell to the member such farm
supplies as the member requires, provided it is advantageous
for Gold Kist to handle such supplies in the interest of the
membership. The Association also does business with non-
members and engages in non-cooperative activities through
subsidiaries and partnerships. AgraTrade Financing, Inc., a
wholly-owned subsidiary of Gold Kist, provides financing to
members and non-members doing business with Gold Kist and its
subsidiaries and partnerships. Financing is extended for
poultry and pork housing construction and for certain farm
commodity crop production.
Agriculture is generally cyclical in nature.
Commodities marketed by Gold Kist on behalf of its members are
subject to wide fluctuations in price, based on supply of the
farm commodities and demand for the raw or processed products.
Commodity prices are also sensitive to interest rates, with
high rates generally tending to depress market prices. In
addition, a portion of Gold Kist's business is dependent on
the demand of farmers for the purchase of products, which is
influenced by the general farm economy and the success of
particular crops.
Gold Kist's business is conducted in two industry
segments. See Note 10 of Notes to Consolidated Financial
Statements. The Poultry segment conducts broiler and pork
production operations, providing both marketing and purchasing
services to its cooperative patrons. The Agri-Services
segment purchases or manufactures feed, seed, fertilizers,
pesticides, animal health products and other farm supply items
for sale at wholesale and retail. Additionally, that segment
serves as a contract procurement agent for, and storer of,
farm commodities such as soybeans and grain and is engaged in
the purchase, sale, processing and storage of cotton. Gold
Kist is also a partner in a major peanut processing and
marketing business and in a pecan processing and marketing
business.
POULTRY
Broilers
Gold Kist conducts its poultry operations through
six Gold Kist cooperative broiler divisions, through its 73%
majority-owned public subsidiary, Golden Poultry Company, Inc.
("Golden Poultry"), and through its partnership interest in
Carolina Golden Products Company ("Carolina Golden").
Gold Kist's cooperative broiler operation is
organized into six broiler divisions, each encompassing one of
Gold Kist's decentralized broiler complexes. Each Gold Kist
decentralized broiler complex operates within a separate
geographical area and includes within that area broiler
flocks, pullet and breeder (hatching egg) flocks, one or more
hatcheries, a feed mill, poultry processing plant(s) and
management, sales and accounting office(s), and transportation
facilities. The six complexes are headquartered in Boaz and
Cullman, Alabama; Athens, Ellijay and Carrollton, Georgia; and
Live Oak, Florida. The broiler growers for each complex are
members of Gold Kist. The facilities and operations of each
complex are designed to furnish the growers flocks of chicks,
feed and medicines, and processing and marketing services for
the broilers grown.
The principal products marketed by the broiler
divisions are whole chickens, cut-up chickens, segregated
chicken parts and further processed products packaged in
various forms, including fresh bulk ice pack, chill pack and
frozen. Ice pack chicken is packaged in ice or dry ice and
sold primarily to distributors, grocery stores and fast food
chains. Chill pack chicken is packaged for retail sale and
kept chilled by mechanical refrigeration from the packing
plant to the store counter. Frozen chicken is marketed
primarily to school systems, the military services, fast food
chains and in the export market. Further processed products,
which include preformed breaded chicken nuggets and patties
and deboned, skinless and marinated products are sold
primarily to fast food and grocery store chains. Chill pack
chicken is sold in certain localities under the Gold Kist
Farms and Young 'n Tender labels; however, some is sold
under customers' private labels. Most of the frozen chicken
carries the Gold Kist or Early Bird label. Cornish game
hens are marketed in frozen form primarily to hotels,
restaurants and grocery stores under the Gold Kist Farms,
Young 'n Tender and Medallion labels. Medallion, Big Value ,
Gold Kist Farms, Young 'n Tender and Early Bird are registered
trademarks of Gold Kist Inc.
Broiler products are marketed directly from the
processing plant in each broiler complex. Some packaged
products are marketed from the Atlanta headquarters. The
plants at Athens, Carrollton, Boaz, and Live Oak have special
distribution facilities, and there are six separate
distribution facilities located in Florida, Tennessee, Ohio
and Kentucky. Cornish game hens are processed at facilities
in Trussville, Alabama and marketed from the Atlanta
headquarters.
Golden Poultry owns and operates integrated
poultry processing complexes in Russellville, Alabama,
Douglas, Georgia, and Sanford and Siler City, North Carolina.
Each of these complexes contracts for poultry production with
nonmembers and includes a hatchery, feed mill, processing
plant and management, sales and accounting office, and
transportation facilities. Golden Poultry operates two
separate distribution facilities in Durham, North Carolina,
and Pompano Beach, Florida.
Carolina Golden is a general partnership
consisting of general partners AgriGolden, Inc., a wholly-
owned subsidiary of Gold Kist, and Golden Poultry Company,
Inc. Carolina Golden operates an integrated poultry
processing complex located in Sumter, South Carolina, for the
production of value-added and further processed poultry
products. This complex contracts for poultry production with
nonmembers and includes a hatchery, feed mill, processing
plant and management, sales and accounting office, and
transportation facilities.
Gold Kist is one of the largest poultry processors
in the United States. It competes with other large processors
and with smaller companies. Competition is based upon price,
quality and service. While Management believes that the
pricing and quality of its products are competitive with other
processors, it believes that Gold Kist's service to its
customers is a principal factor that has established Gold Kist
as one of the largest United States poultry processors. Gold
Kist's ability to deliver broilers and other poultry products
cut-up or otherwise produced to order is an important service
to customers.
The poultry industry, just as many other commodity
industries, has historically been cyclical. Prices of
perishable commodities, such as broilers, react directly to
changes in supply and demand. Furthermore, broilers are
typically a high volume, low margin product so that small
increases in costs, such as feed ingredient costs, or small
decreases in price, can produce losses. As an integral part
of its feed ingredient purchasing strategy, Gold Kist attempts
to limit the effects and risk of fluctuations in feed
ingredient costs (i.e., corn and soy) through varying amounts
of commodity trading transactions in the agricultural
commodity futures and options market. Commodity trading
transactions, which are a common industry practice, have
inherent risk, such that changes in the commodities futures
and options prices as a result of favorable or unfavorable
changes in the weather, crop conditions or government policy
may have an adverse effect on Gold Kist's net feed ingredient
cost as compared to the cost in cash markets. Likewise, Gold
Kist could benefit from reduced net feed ingredient cost as a
result of these changes as compared to cost in the cash
market. Gold Kist places limitations on the volume of futures
and options trading positions based on projected usage of
these commodities. Results of hedging and commodity options
transactions are reflected as an adjustment to feed ingredient
cost in the Association's consolidated financial statements.
See Note l (c) of Notes to Consolidated Financial Statements.
The poultry industry has also traditionally been
subject to seasonality in demand and pricing. Generally, the
price and demand for poultry products peaks during the summer
months and declines to lower levels during the winter months
of November, December and January. Gold Kist broiler prices
and sales volume follow the general seasonality of the
industry.
The following table shows the amount and
percentage of Gold Kist's net sales volume contributed by
sales of broiler products for each of the years indicated.
Fiscal Year Ended (000's Omitted)
June 25, July 1, June 29,
1994 1995 1996
Broiler Products
Volume $1,152,252 $1,226,104 $1,380,649
Percentage (%) 73.8 72.6 70.6
Pork
Gold Kist markets hogs raised by producers in Alabama,
Georgia and North Carolina. Feeder pigs are furnished to
members who raise them, using Gold Kist feed and medicines, to
produce hogs for marketing. Feeder pigs are either raised by
Gold Kist members and marketed through Gold Kist to the market
hog growers, raised for Gold Kist by non-member independent
contractors or purchased by Gold Kist in the marketplace.
Live market hogs are marketed by Gold Kist in the
Southeastern United States to processors of pork products,
primarily on a competitive bid basis in the states of Alabama,
Georgia, Mississippi, North Carolina, and South Carolina.
Management believes that customers are favorably impressed by
the quality of its market hogs which is principally due to
superior breeding stock and management grow-out techniques
employed by Gold Kist. Gold Kist competes with other major
national producers and smaller individual producers, primarily
on a regional basis in the Southeastern United States.
AGRI-SERVICES
Gold Kist purchases, manufactures and processes fertilizers,
agricultural chemicals, seed, pet foods, feed, animal health
products and other farm supply items for distribution and sale
at wholesale and retail. These products are distributed
through approximately 96 Gold Kist retail stores and at
wholesale to national accounts and independent dealers. Gold
Kist serves as a contract procurement agent for, and storer
of, farm commodities such as soybeans and grain.
Retail Stores
The Gold Kist retail store operation is conducted in Alabama,
Arkansas, Florida, Georgia, Louisiana, Mississippi, South
Carolina and Texas.
The typical Gold Kist store is a complete farm supply center
offering for sale many types of feeds, animal health products,
fertilizers, pesticides, seeds, farm supplies and equipment.
It also offers services such as customized fertilizer
spreading, field mapping, soil testing, insect scouting, and
agronomic and animal nutrition advice.
The competition for retail sales faced by Gold Kist stores
varies greatly from locality to locality. Some compete with
other purchasing cooperatives, hardware and farm supply
stores, and retail outlets owned or affiliated with major
fertilizer, agricultural chemical and feed manufacturers. In
some areas these competing manufacturers sell directly to
farmers. Price competition is important for many items. The
Gold Kist stores emphasize service to the customer.
Gold Kist purchases most of the farm supplies distributed
from various manufacturers. Steel equipment, such as poultry
processing equipment, storage bins, elevators and conveyor
systems, are manufactured by Luker Inc., a steel fabrication
company located in Augusta, Georgia, and a wholly-owned
subsidiary of Gold Kist.
Gold Kist operates a system of receiving and storage
facilities for handling unprocessed farm commodities such as
soybeans, corn and other grains. Approximately 98% of Gold
Kist's storage facilities are licensed by the federal or state
government and can issue negotiable warehouse receipts.
Pursuant to a five-year grain handling agreement which
terminates in 2000, Gold Kist utilizes these facilities and
assets exclusively as independent buying points operating on a
commission basis for the Archer Daniels Midland Company.
Fertilizers and Chemicals
Gold Kist distributes granular, blended and liquid
fertilizers and fertilizer materials. Each type is purchased
or produced in varying compositions depending upon the
ultimate use of the product as a plant food. The Association
owns and operates five fertilizer plants in addition to other
blending facilities at certain Gold Kist stores where
fertilizer ingredients are physically mixed to a custom
formula. Gold Kist leases or owns terminal facilities at
which fertilizer materials are warehoused for resale through
Gold Kist stores and private dealers. Granular fertilizers
are purchased and distributed in bagged and bulk form. In
addition to traditional agricultural customers, Gold Kist
markets fertilizers and chemicals to, and provides application
services for, forestry, turf and industrial customers.
Gold Kist is a member of CF Industries, Inc., a cooperative
owned by regional cooperatives, which produces and supplies
fertilizer materials to its members. For the fiscal year
ended June 29, 1996, Gold Kist purchased approximately 32% of
its fertilizer materials and products at market prices from CF
Industries. The remaining fertilizer materials and products
were purchased from more than 50 other suppliers.
Gold Kist competes for fertilizer sales with the major
fertilizer manufacturers, wholesalers and brokers.
Competition is largely on the basis of price and service.
Gold Kist markets premium grade fertilizers under its
trademarks Growers Pride , Living Lawn , and Garden Gold .
Gold Kist also markets a premium growing medium composed of
soil materials and fertilizer nutrients under its trademark
Garden on the Spot .
Gold Kist distributes agricultural and specialty chemicals,
including pesticides, growth regulators and surfactants which
it purchases from approximately 50 chemical manufacturers.
Competition for sales of agricultural chemicals is primarily
on the basis of price and service since most retailers have
access to the same inventory of products produced by the major
manufacturers. Gold Kist also provides aerial application of
fertilizer for forestry customers and ground application of
fertilizer and chemicals for turf customers.
The following table shows the amount and percentage of Gold
Kist's net sales volume contributed by sales of fertilizer and
chemical products for each of the years indicated.
Fiscal Year Ended (000's Omitted)
June 25, July 1, June 29,
1994 1995 1996
Fertilizer
and Chemicals
Volume $211,218 $268,625 $306,247
Percentage (%) 13.5 15.9 15.7
Pet Food and Animal Products
Gold Kist operates four major feed mills for its
pet food and animal products operations. The mills produce
feeds distributed at wholesale or at retail through the Gold
Kist stores and independent dealers. All of the mills are
batch process mills in which ingredients are weighed. This
type of mill is capable of precision feed mixing, which is
especially important to the poultry industry. Feeds are
distributed in bagged and bulk form.
In the fiscal year ended June 29, 1996, Gold
Kist's feed mills produced substantially all of the feed it
distributed at wholesale or retail. Gold Kist produces and
markets approximately 200 different feeds, including custom
blended feeds and feeds containing various medications. Pro
Balanced is a dairy feed sold through a special program which
includes survey and analysis of feed ingredients needed for a
particular herd. Gold Kist also markets dog food under the
Pay Day , Pro Balanced and Performance Plus trademarks
through independent dealers, under the Gold Kist and Pro
Balanced trademarks through Gold Kist retail stores, and under
the Gold Kist and Top Notch trademarks through grocery
wholesalers and retail chain stores. Pro Balanced, Pay Day,
Gold Kist, Top Notch, and Performance Plus are registered
trademarks of Gold Kist. Aquaculture feed products, primarily
feed for commercial fish farming operations, also form a
significant portion of Gold Kist's feed business. Gold Kist
purchases all animal health products that it distributes.
Feed ingredients are purchased in the marketplace
from many sources, including major grain companies. Feed
formulation is based on the cost of various alternative
ingredients in a given week. Feed ingredients are normally
purchased for one week's production and, accordingly, only
five to seven days' ingredient storage capacity is needed at
the mills.
Approximately one-half of the feed sold is
delivered in bulk form directly from the feed mill to the
farm; the remainder is sold in bag form. Gold Kist operates a
fleet of trucks, including feed tankers, for the delivery of
feed.
Competition for sales of feed is based on quality
and service, as well as price. Gold Kist competes with major
feed manufacturers and local feed mills. The major feed
manufacturers distribute through independent retailers, owned
retail stores and direct to farmers. Gold Kist sells through
its own retail stores and directly to large farmers, private
dealers, independent cooperatives, wholesale grocers, and
retail grocery chains.
Cotton
Cotton ginning and storage facilities are operated
at Statesboro, Morven, Byromville and DeSoto, Georgia, and
Bishopville, South Carolina. A central storage warehouse is
operated in Moultrie, Georgia. The Association provides
ginning and storage services to members and markets cotton
purchased from members to domestic and foreign textile mills.
Seed Marketing
AgraTech Seeds, Inc. ("AgraTech Seeds"), a wholly-
owned subsidiary of Gold Kist, owns and operates a seed
business, which consists of the development, contract
production, processing and sale primarily of proprietary seed
varieties. AgraTech Seeds distributes approximately 230
varieties of seeds. Seed is marketed by AgraTech Seeds at
wholesale to seed retailers, including Gold Kist stores and
independent seed retail outlets in the Southeast and the
Midwest. AgraTech Seeds licenses certain seed dealers,
including Golden Peanut Company, to sell its proprietary
peanut varieties "GK 7", "VC 1", "AgraTech 108" and "AgraTech
127", and receives a royalty on licensed sales. AgraTech
Seeds contracts with farmers for the production of seed.
Careful control is required to maintain the purity of
varieties. Quality and name recognition play a large role in
competition for sales of seed.
AgraTech Seeds processes or contracts for the
processing of approximately 95% of the seeds it distributes.
AgraTech Seeds owns and operates seed processing facilities in
McCordsville, Indiana, St. Joseph, Illinois, and Mason City,
Illinois. A seed research farm is located at Ashburn,
Georgia, which conducts research into the breeding of peanuts,
soybeans and sorghum, including the development of improved
seed varieties. The McCordsville and Mason City facilities
conduct research into the breeding of corn. Proprietary corn,
soybean, sorghum and peanut seed varieties are marketed under
the trademark AgraTech .
As a function of its retail sales operations, Gold
Kist operates a commodity seed procurement plant at Dublin,
Georgia for the cleaning, grading, treatment and processing of
commodity seeds. Seed products from its Dublin operations are
marketed primarily through the Gold Kist retail stores.
Pecans
Gold Kist is a partner in Young Pecan Company, a
pecan processing and marketing business headquartered in
Florence, South Carolina, in which the Association holds a 25%
equity interest and a 35% earnings (loss) allocation. See
Note 8 of Notes to Consolidated Financial Statements.
PARTNERSHIP INTEREST
Gold Kist, Archer Daniels Midland Company and
Alimenta Processing Corporation are partners in Golden Peanut
Company, a partnership formed to operate a peanut procuring,
processing, and marketing business. The partners lease peanut
facilities, equipment and fixed assets to the partnership.
Gold Kist, as a general partner, participates in all
partnership allocations in proportion to its 33 1/3%
partnership interest. See Note 9(b) of Notes to Consolidated
Financial Statements.
The peanut facilities leased to Golden Peanut
Company pursuant to the general partnership agreement include
receiving stations, shelling plants, cold storage facilities
and warehouses located in the three major peanut producing
areas of the United States (Southeast, Southwest and
Virginia/Carolinas).
Golden Peanut Company procures, processes and
markets peanuts and peanut by-products in each of the three
peanut producing areas of the United States. Golden Peanut
Company is a major processor of edible peanuts and is active
in both domestic and international markets. The principal
peanut product is shelled edible peanuts. Shelled edible
peanuts are marketed domestically primarily to manufacturers
of peanut butter, candy and salted nuts and are sold in the
export market. Golden Peanut Company also processes peanuts
for sale in the shell or for processing by others into oil and
meal.
EXPORT SALES
Gold Kist owns no physical facilities overseas and
has no overseas employees. Product sales managers maintain
sales networks overseas through contacts with independent
dealers and customers. During the fiscal year ended June 29,
1996, the approximate export sales volume of the primary
export product line (poultry) was $89.3 million. During that
period, export sales of poultry were mainly to customers in
Russia, Eastern Europe, the Far East, South Africa, Central
and South America and the Caribbean area.
Export sales involve an additional element of
transportation and credit risk to the shipper beyond that
normally encountered in domestic sales.
Gold Kist faces competition for export sales from
both domestic and foreign suppliers. In export poultry sales,
Gold Kist faces competition from other major United States
producers as well as companies in France, Thailand, and
Brazil. Tariff and non-tariff barriers to United States
poultry established by the European Economic Community (EEC)
since 1962 have virtually excluded Gold Kist and other United
States poultry exporters from the EEC market. In addition,
EEC exporters are aided in price competition with United
States exporters in certain markets by subsidies from their
governments.
Gold Kist and a group of other North American and
foreign farm cooperatives and agribusiness firms, acting
through companies formed for this purpose, own 50% of a
trading company engaged in international merchandising of
grains and other agricultural commodities. Gold Kist is a
minority shareholder and deals with the trading company on an
arm's length basis.
PROPERTIES
Gold Kist corporate headquarters building,
completed in 1975 and containing approximately 260,000 square
feet of office space, is located on fifteen acres of land at
244 Perimeter Center Parkway, N.E., Atlanta, Georgia. The
land and building are owned by a partnership of Gold Kist and
Cotton States Mutual Insurance Company in which partnership
Gold Kist owns 54% of the equity. Gold Kist leases
approximately 120,000 square feet of the building from the
partnership.
The Association's principal operating facilities
are operated by its two industry segments, the Poultry segment
and the Agri-Services segment.
Poultry
Gold Kist owns and operates seven poultry
processing plants which are located at Boaz, Trussville and
Guntersville, Alabama; Athens, Ellijay and Carrollton,
Georgia; and Live Oak, Florida. These plants have an
aggregate weekly processing capacity of approximately
8,370,000 broilers and 415,000 cornish game hens. The plants
are supported by hatcheries located at Albertville,
Crossville, Cullman, Curry, Ranburne and Scottsboro, Alabama;
Live Oak, Florida; and Blaine, Bowdon, Calhoun, Commerce,
Carrollton, and Talmo, Georgia. These hatcheries have an
aggregate weekly capacity (assuming 85% hatch) of
approximately 9,700,000 chicks. Additionally, Gold Kist
operates seven feed mills to support its poultry operations;
the mills have an aggregate annual capacity of approximately
3.3 million tons and are located in Guntersville and Jasper,
Alabama; Calhoun, Cartersville, Commerce, and Waco, Georgia;
and Live Oak, Florida.
The Association's majority-owned subsidiary,
Golden Poultry owns and operates four poultry processing
plants in Douglas, Georgia, Sanford and Siler City, North
Carolina, and Russellville, Alabama. The Douglas plant has a
weekly processing capacity of approximately 1,300,000 broilers
on two shifts; the Sanford and Russellville plants have weekly
processing capacities of approximately 850,000 broilers on two
processing shifts; and the Siler City plant has a weekly
processing capacity of 630,000 chickens on two shifts. These
plants are supported by hatcheries in Siler City and Staley,
North Carolina (with a hatch capacity of 1,505,000 chicks per
week), Douglas, Georgia (with a hatch capacity of
approximately 1,350,000 chicks per week), and Russellville,
Alabama (approximately 875,000 chicks per week).
Additionally, Golden Poultry owns and operates poultry feed
mills at Ambrose, Georgia, Bonlee and Staley, North Carolina,
and Pride, Alabama, which have an aggregate annual capacity of
1,268,000 tons.
Carolina Golden owns and operates a processing
plant in Sumter, South Carolina with a weekly processing
capacity of 1,400,000 broilers on two processing shifts. The
Sumter plant is supported by a hatchery in Sumter, South
Carolina with a hatch capacity of approximately 1,400,000
chicks per week. Carolina Golden operates a poultry feed mill
at Sumter, South Carolina with an annual capacity of 338,000
tons.
The Association utilizes six separate distribution
facilities in its sales and distribution of poultry products:
Tampa and Crestview, Florida; Chattanooga and Nashville,
Tennessee; Mt. Sterling, Kentucky; and Cincinnati, Ohio.
Golden Poultry operates distribution facilities in Pompano
Beach, Florida, and Durham, North Carolina.
Also within its Poultry segment, Gold Kist
operates five pork production centers. These production
facilities include a pork production center at Cartersville,
Georgia; a gilt production center in Stephens, Georgia; two
gilt and pork production centers located at Kingston, Georgia;
and a boar and pork production center headquartered in
Hillsborough, North Carolina.
Agri-Services
In its retail store operations, Gold Kist operates
Gold Kist stores at 23 locations in Alabama, one location in
Arkansas, 6 locations in Florida, 44 locations in Georgia, one
location in Louisiana, 5 locations in Mississippi, 14
locations in South Carolina and 4 locations in Texas.
For its fertilizer and chemicals business, the
Association operates five fertilizer plants at Clyo and
Cordele, Georgia, Athens and Hanceville, Alabama, and
Greenville, Mississippi, and bulk chemical storage facilities
at Moultrie, Georgia and Bishopville, South Carolina. Gold
Kist utilizes chemical storage and distribution facilities at
Alcolu, South Carolina, Lawrenceville and Sylvester, Georgia,
Hanceville, Alabama, Greenville, Mississippi, and Carrollton
and Buda, Texas and fertilizer distribution terminal
facilities at Pine Bluff, Arkansas, Bainbridge and Brunswick,
Georgia; Fayetteville, Morehead City, and Wilmington, North
Carolina; Charleston, South Carolina; and Victoria, Texas.
Forestry fertilizer application headquarters facilities are
maintained at Tifton, Georgia.
For its pet food, feed and animal health
operations, Gold Kist operates four feed mills with an
aggregate annual capacity of approximately 470,000 tons. The
mills are located at Guntersville, Alabama; Flowery Branch and
Valdosta, Georgia; and Gaston, South Carolina.
Cotton ginning and storage facilities are operated
at Statesboro, Morven, Byromville and DeSoto, Georgia, and
Bishopville, South Carolina. A central storage warehouse is
operated in Moultrie, Georgia.
The Association operates a seed processing plant
at Dublin, Georgia, which can clean, grade and treat
approximately 100,000 bags of seeds annually (when operating
on one shift). AgraTech Seeds operates seed processing plants
in McCordsville, Indiana, and Mason City and St. Joseph,
Illinois, which can clean, grade and treat approximately
350,000 bags, 150,000 bags and 100,000 bags, respectively, of
seeds annually (when operating on one shift). AgraTech Seeds
also operates a 100 acre seed research farm located at
Ashburn, Georgia.
For its grain procurement and storage operations,
Gold Kist operated 30 owned facilities and 2 leased facilities
in Alabama, Florida, Georgia and South Carolina in fiscal
1994. The facilities have an aggregate storage capacity of
approximately 7 million bushels.
Gold Kist owns peanut procuring, processing and
marketing facilities which are leased to Golden Peanut Company
pursuant to the general partnership agreement executed by Gold
Kist with ADM and Alimenta. The lease is for a 20-year term,
beginning in 1988; however, the lease is subject to the terms
of the partnership agreement which is terminable upon 18
months prior written notice. These facilities include 37
peanut receiving stations located in the three major peanut
producing areas of the United States (Southeast, Southwest,
and Virginia/Carolinas) and four peanut shelling plants
located in Ashburn, Georgia; Graceville, Florida; Anadarko,
Oklahoma; and Comyn, Texas. Gold Kist also owns and leases to
Golden Peanut Company two cold storage facilities located at
Anadarko, Oklahoma and Suffolk, Virginia with an aggregate
storage capacity of 11,000 tons, and 48 warehouses located at
30 of the leased receiving stations with an aggregate storage
capacity of approximately 133,000 tons.
The Association holds all of the facilities in fee
except for the corporate headquarters building (lease expires
June 30, 2004); poultry distribution facilities at Tampa,
Florida (lease expires May 14, 2000) and Nashville (lease
expires December 31, 1996) and Chattanooga (terminable upon 30
days notice) Tennessee; Crossville, Alabama, poultry hatchery
facility (lease expires February 23, 2088); Athens, Georgia,
poultry processing plant vehicle parking area (lease expires
February 29, 2001); Anadarko, Oklahoma peanut facility (lease
expires November 30, 1996; subleased to Golden Peanut
Company); and retail store facilities at Athens (lease expires
December 7, 1996), Byromville (lease expires March 15, 1999),
Camilla (terminable upon 30 days' notice), DeSoto (lease
expires March 15, 1999), and Oglethorpe (lease expires March
15, 1999), Georgia; Brundidge (terminable upon 30 days
notice), Danville (lease expires January 31, 1997), Geraldine
(lease expires January 31, 1998) and Jasper (lease expires May
31, 2002) Alabama; Columbia (lease expires March 31, 1997),
Newberry (lease continues on a month-to-month basis) and
Sumter (lease expires March 22, 1997) South Carolina; and
Gainesville (lease expires December 7, 1996), Florida.
Forestry fertilizer application headquarters facilities are
leased at Tifton, Georgia (lease expires October 1, 1997).
Chemical storage and distribution facilities are leased at
Greenville, Mississippi (lease expires September 30, 1997);
Buda (lease expires February 1, 1999) and Carrollton (lease
expires March 31, 1999), Texas, and fertilizer storage and
distribution space is also leased on a continuing as needed
basis at terminals in Pine Bluff, Arkansas; Bainbridge and
Brunswick, Georgia; Fayetteville, Morehead City, and
Wilmington, North Carolina; Charleston, South Carolina; and
Victoria, Texas.
ENVIRONMENTAL AND REGULATORY MATTERS
Processing plants such as those operated by Gold
Kist are potential sources of emissions into the atmosphere
and, in some cases, of effluent emissions into streams and
rivers. Presently, management does not know of any material
capital expenditures for environmental control facilities that
will be necessary for the remainder of the current fiscal year
and the next fiscal year in order to comply with current
statutes and regulations. On January 29, 1992, the United
States Environmental Protection Agency ("EPA") sent General
Notice Letters designating Gold Kist and several other
companies as potentially responsible parties (PRP's) for
alleged environmental contamination at an Albany, Georgia site
previously owned by Gold Kist. Gold Kist has responded to the
General Notice Letter denying liability for the contamination.
EPA has not indicated to Gold Kist how it intends to proceed
with regard to the site. Gold Kist is unable to estimate at
this time the cost of compliance, if any, to be required of
Gold Kist for the location. Management believes that the
potential cost of compliance for Gold Kist would not have a
material effect on Gold Kist's financial condition or results
of operations.
The regulatory powers of various federal and state
agencies, including the federal Food and Drug Administration,
apply throughout the agricultural industry, and many of Gold
Kist's products and facilities are subject to the regulations
of such agencies.
HUMAN RESOURCES
Gold Kist has approximately 16,500 employees
during the course of a year. Gold Kist's processing
facilities operate year round without significant seasonal
fluctuations in manpower requirements. Gold Kist has
approximately 3,100 employees who are covered by collective
bargaining agreements. Employee relations are considered to
be generally satisfactory.
PATRONAGE REFUNDS
The By-Laws of Gold Kist provide that Gold Kist
shall operate on a cooperative basis. After the close of each
fiscal year, the net taxable margins of Gold Kist for that
year from business done with or for member patrons (patronage
margins) are computed and, after certain adjustments, these
margins are distributed to members as patronage refunds on the
basis of their respective patronage (business done with or
through the Association) during that year. Upon the
determination of the total patronage refund for any fiscal
year, this amount is allocated among the several operations of
Gold Kist or one or more groups of such operations, as
determined by the Board of Directors in light of each
operation's or group's contribution for the year.
Patronage refunds are distributed in the form of
either qualified or nonqualified written notices of allocation
(as defined for purposes of Subchapter T of the Internal
Revenue Code). If qualified notices are used, at least 20% of
each patronage refund is distributed in cash or by qualified
check (as defined in the Internal Revenue Code) with the
remainder distributed in patronage dividend certificates or
written notices of allocated reserves, or any combination of
these forms. A distribution to a patron made in the form of a
qualified notice must be included in his gross income, at its
stated dollar amount, for the taxable year in which he
receives the distribution. If nonqualified notices are
distributed, less than 20% of the refund can be distributed in
cash or by qualified check and the patron is not required to
include in gross income the noncash portion of the allocation.
See Notes 1(f) and 6 of Notes to Consolidated Financial
Statements.
The retention of allocated reserves provides a
means whereby the current and active members of Gold Kist may
finance the Association's continuing operations. Each fiscal
year, the members are notified by Gold Kist of the amounts, if
any, by which their equity accounts have been credited to
reflect their allocated, but undistributed, portion of the
patronage refunds. Allocated reserves may be retired and
distributed to members only at the discretion of the Board of
Directors in the order of retention by years, although the
Board may authorize the retirement of small aggregate amounts
(not in excess of $100.00) of reserves or the retirement of
reserves in individual cases without regard to how long they
have been outstanding. Allocated reserves bear no interest
and are subordinate in the event of insolvency of the
Association to outstanding patronage dividend certificates and
to all indebtedness of Gold Kist.
INCOME TAXATION
As a cooperative association entitled to the
provisions of Subchapter T of the Internal Revenue Code, Gold
Kist does not pay tax on net margins derived from member
patronage transactions which are distributed to the members by
check or in the form of qualified written notices of
allocation within 8-l/2 months of the close of each fiscal
year. To the extent that Gold Kist distributes nonqualified
written notices of allocation, has income from transactions
with nonmembers or has income from non-patronage sources, it
will be taxed at the corporate rate. See Notes l (f) and 6 of
Notes to Consolidated Financial Statements.
Gold Kist has subsidiaries which are not
cooperatives, and all the income of these subsidiaries is
subject to corporate income taxes.
Item 2. Properties.
The principal facilities used in the Association's
business are described in Item 1. Business (and Properties).
Management believes that the facilities are adequate and
suitable for their respective uses and the Association's
current intended operations. The properties owned by the
Association are not subject to any material lien or
encumbrance.
Item 3. Legal Proceedings.
In January 1993, certain Alabama member patrons of
the Association filed a lawsuit in the Circuit Court of
Jefferson County, Alabama, Tenth Judicial Circuit, against the
Association and Golden Poultry and certain directors and
officers of the companies. (Ronald Pete Windham and Windham
Enterprises, Inc. on their behalf and on behalf of and for the
use and benefit of Gold Kist, Inc. and its
shareholders/members v. Harold O. Chitwood, individually in
his capacity as an officer of Gold Kist and a Director of
Golden Poultry; et al). The lawsuit alleges that the named
defendants violated their fiduciary duties by diverting
corporate opportunities from the Association to Golden Poultry
and Carolina Golden Products Company in connection with the
creation of Golden Poultry and Carolina Golden Products
Company and by permitting their continued operations. In
March 1994, the Court certified the Windham litigation as a
class action. In September 1995, Golden Poultry and Carolina
Golden Products Company were dismissed from the litigation.
On October 25, 1995, the jury in the Windham case returned
verdicts in favor of the plaintiffs in the litigation. On
July 2, 1996, the Jefferson County, Alabama Circuit Court
Judge entered a memorandum opinion and non-final judgment in
the case directing Gold Kist to acquire the approximately 27%
of Golden Poultry shares currently owned by investors so that
all of the issued and outstanding stock of Golden Poultry
becomes owned by Gold Kist or a wholly owned subsidiary,
either through a merger or a tender offer for the minority
shares of Golden Poultry stock outstanding. The Court denied
the plaintiffs' demands for additional allocations and cash
distributions to the class members. Upon motions for
reconsideration filed by both parties to the action, the Court
modified its memorandum opinion in a Final Judgment and Decree
entered upon September 13, 1996, under which Gold Kist was
relieved of the Court's requirement to acquire all of the
shares of Golden Poultry common stock not owned by Gold Kist
and was directed to acquire only that Golden Poultry stock
held by any current officers or directors of Gold Kist and
their spouses and minor children. The Court also ordered Gold
Kist to cause the surrender of all Golden Poultry stock
options held by Gold Kist officers and directors or the
exercise of such options and purchase by Gold Kist of the
resultant stock, to redeem from eligible members approximately
$21.2 million of notified equity of Gold Kist, to pay $4.2
million in attorney's fees to the plaintiffs attorneys and to
establish a policy prohibiting officers and directors of Gold
Kist from future ownership of Golden Poultry stock. An appeal
of the Final Judgment may be filed on or before October 25,
1996, and could have the effect of staying the Final Judgment
pending the outcome of any appeal.
In February 1994, other Alabama member patrons of
Gold Kist filed a lawsuit in the Circuit Court of Walker
County, Alabama, against the Association alleging short-weight
deliveries of feed from the Gold Kist Guntersville, Alabama
feed mill. (Garry Rowland on behalf of himself and a class of
others similarly situated v. Gold Kist Inc.) In June 1994,
the Court certified the litigation as a class action. The
Association intends to defend the litigation vigorously.
The Association is also party to various legal and
administrative proceedings, all of which management believes
constitute ordinary routine litigation incident to the
business conducted by the Association, or are not material in
amount.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter
of the fiscal year covered by this report to a vote of
security holders.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
There is no market for Gold Kist equity.
Item 6. Selected Financial Data.
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below under the
captions "Consolidated Statement of Operations Data" for each of the years in
the five-year period ended June 29, 1996 and "Consolidated Balance Sheet Data"
as of June 27, 1992, June 26, 1993, June 25, 1994, July 1, 1995 and June 29,
1996 are derived from the consolidated financial statements of Gold Kist Inc.
and subsidiaries, which consolidated financial statements have been audited by
KPMG Peat Marwick LLP, independent auditors. The consolidated financial
statements as of July 1, 1995 and June 29, 1996 and for each of the years in
the three-year period ended June 29, 1996, and the report thereon of KPMG Peat
Marwick LLP, which is based partially upon the report of other auditors, are
included elsewhere herein. The information set forth below should be read in
conjunction with Management's Discussion and Analysis of Consolidated Results
of Operations and Financial Condition and the aforementioned consolidated
financial statements, the related notes and the audit report, which refers to
changes in accounting for income taxes and for certain investments in debt and
equity securities, included elsewhere herein.
For Fiscal Years Ended (000's omitted)
June 27, June 26, June 25, July 1, June 29,
Consolidated Statement of Operations Data: 1992 1993 1994 1995 1996
Net sales volume. . . . . . . . . . . $1,300,906 1,400,566 1,561,034 1,688,537 1,955,569
Interest expense . . . . . . . . . . . $ 18,545 17,163 13,924 17,525 21,065
Margins (loss) before cumulative effect
of accounting changes . . . . . . . $ (1,643) 27,238 34,065 11,751 37,032
Cumulative effect of changes in
accounting:
Income taxes (A) . . . . . . . . . . $ - - 5,339 - -
Postretirement benefits other than
pensions (net of $10,698 income
tax benefit) . . . . . . . . . . . (18,971) - - - -
Net margins (loss) . . . . . . . . . . $ (20,614) 27,238 39,404 11,751 37,032
As of (000's omitted)
June 27, June 26, June 25, July 1, June 29,
Consolidated Balance Sheet Data: 1992 1993 1994 1995 1996
Working capital . . . . . . . . . . . . $ 108,045 140,629 139,847 146,585 184,457
Total assets . . . . . . . . . . . . . $ 676,698 665,102 716,432 821,637 975,960
Long-term liabilities . . . . . . . . . $ 159,449 152,792 144,992 178,777 233,291
Total liabilities . . . . . . . . . . . $ 382,789 354,889 394,754 482,675 621,378
Patrons' and other equity (B) . . . . . $ 271,456 285,620 296,662 314,990 326,410
Current ratio . . . . . . . . . . . . . 1.48 1.70 1.56 1.48 1.48
Ratio of long-term liabilities to
total capitalization . . . . . . . . % 37.00 34.85 32.83 36.21 41.68
NOTE:
A.See Note 6 of Notes to Consolidated Financial Statements.
B.See Note 9(a) of Notes to Consolidated Financial Statements.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The nature of the poultry industry and the agriculture (agribusiness)
industry in general is such that supply and demand market forces exert a
significant amount of influence over the operations of firms engaged in these
businesses. Prices of commodities react directly to supply and demand.
Additionally, demand for poultry and other agricultural products produced,
processed and marketed by Gold Kist is often influenced by supplies and prices
of alternative products.
As with other perishable commodity businesses, the integrated poultry
industry has demonstrated a cyclical nature with varying levels of profits,
and to a lesser extent, losses over its thirty-six year history. Although the
industry has been profitable since 1983 with the exception of a brief period
during 1992 and 1996, net margins have varied from year to year in response to
market fundamentals. The following addresses the various factors that have
influenced poultry industry profitability during the past five years. Low
broiler market prices were experienced throughout 1992 as a result of the
economic recession affecting the United States, the decline in poultry exports
and excess industry supply. Improved market prices in 1993 and 1994 were the
result of a general economic recovery in the United States and increased
demand for poultry products. During 1995, broiler market prices declined due
to the large supply of competing meats, such as beef and pork, and the
continuation of broiler industry expansion. During 1996, broiler market
prices increased approximately 10% as compared to 1995 as a result of hot, dry
weather conditions that reduced meat production in the summer of 1995, as well
as lower than expected industry expansion and increased exports. According to
USDA estimates, the supply of broilers is expected to increase at a 5.5% rate
in 1996 and a 5.7% rate in 1997 as compared to the 6.7% average annual
increase between 1992 and 1995. In 1992, market prices increased for corn and
soybean meal as supplies came in balance with world demand. The record 1992
domestic corn harvest brought lower feed ingredient prices in 1993. In 1994,
feed ingredient prices increased substantially as a result of the reduced corn
harvest in 1993. As a result of the increase in planted corn and soybean
acreage and favorable growing conditions in the summer of 1994, market prices
for feed ingredients declined in 1995. Average cash market prices for corn
and soybean meal increased 59% and 30%, respectively, during 1996 as compared
to 1995 due to the weather reduced 1995 harvest and strong export demand.
Historically, weather has had a significant impact on the farm economy and
the operating results of the Association. Generally, favorable weather
conditions throughout 1992 provided for a near perfect planting season in the
Southeast, which contributed to improved 1992 operating results in the Agri-
Services segment. Wet weather conditions in the Southeast during the 1993
spring planting season reduced corn and peanut acreage and were followed by
early summer drought conditions. These inclement weather factors had a
negative impact on 1993 Agri-Services operating results. Flooding in the
Midwestern United States during the summer of 1993 severely impacted the
domestic grain harvest and boosted feed ingredient prices to near record
levels. Hot, dry weather conditions in the late summer of 1993 damaged
pastures in the Southeast, which resulted in increased sales of agricultural
products in 1994. In addition, favorable spring weather conditions
contributed to increased planting activity in 1994. In 1995, generally
favorable spring weather conditions in the Southeast contributed to increased
sales of agricultural inputs in the Association's primary retail sales area.
However, wet weather conditions in the Delta and Midwest regions of the U.S.
negatively impacted market prices for corn, seed and certain fertilizers in
areas where these products are sold through independent dealers and four of
the Association's retail stores. Inclement weather conditions in the summer
of 1995 reduced the Southeastern cotton, peanut and corn harvest, which
impacted farm income. The weather reduced 1995 grain harvest in the
Midwestern U.S. boosted farm commodity prices; thus contributing to increased
spring 1996 plantings in the Southeast and Delta regions. Also, favorable
spring weather contributed to the increase in sales of agricultural inputs in
1996.
Export sales for 1994, 1995 and 1996 were $37.7 million, $70.1 million and
$100.1 million, respectively. In 1995 and 1996, export sales increased
primarily as a result of the demand for poultry from Russia and the Far East.
Export sales of poultry products will be influenced by credit availability to
foreign countries, political and economic stability, particularly in Russia,
Eastern European nations and Mexico, and the United States government's
willingness to support the industry through export enhancements.
The Association's operations are classified into two reportable business
segments. See Note 10 of Notes to Consolidated Financial Statements. The
discussion of results of operations relates the effects of these significant
economic factors on those segments for each of the years in the three-year
period ended June 29, 1996.
Results of Operations
Fiscal 1995 Compared to Fiscal 1994
The Association's accounting cycle resulted in 53 weeks of operations in
1995 and 52 weeks in 1994.
Net sales volume for 1995 was $1.7 billion, which represented an 8.2%
increase over the prior fiscal year. Net margins from operations, before
general corporate expenses and other deductions, were $42.5 million as
compared to $60.6 million for 1994. The decline in net margins from
operations was due primarily to lower market prices for poultry products.
The Poultry segment's net sales volume of $1.3 billion was up 6.0% from
1994 as a result of increased pounds of poultry sold, which was partially
offset by lower average selling prices. The decline in average selling prices
contributed to a 35% decline in net margins from operations to $34.1 million.
The 4.9% decline in average selling prices for 1995 was due to excessive
supplies of competing meats and increased broiler industry production. The
impact of the decline in selling prices on net sales was offset by an 11.0%
increase in poultry pounds sold. The decline in poultry net margins from
operations was partially offset by an 8.6% decline in feed ingredient costs.
Due to lower pork market prices, the poultry segment's Pork Division incurred
a net loss of $3.7 million as compared to a net margin of $775,000 for 1994.
In the Agri-Services segment, net sales volume for 1995 of $433.4 million
increased 14.9% as compared to 1994 due to increased sales of agricultural
production inputs, including fertilizer, chemicals and farm supplies sold
through the Association's farm supply stores and independent dealers. The net
sales increase for 1995 was due to increased sales prices for fertilizer,
increased application in the Southeast related to the increase in cotton
acreage and the addition of five retail outlets primarily in the Mississippi
Delta region. Net margins from operations for 1995 were $8.4 million. Net
margins from operations for 1995 were negatively affected by lower margins on
seed corn sold in the Midwest, reduced gross margins on retail fertilizer
sales and expenses related to the closing of four suburban retail stores.
However, the impact of these items on 1995 net margins from operations was
partially offset by $3.9 million in patronage refunds from other cooperatives.
Distribution, administrative and general expenses for 1995 and 1994 were
$131.4 million and $121.4 million, respectively, which represent 7.8% of net
sales volume. The $10.0 million increase reflects the growth in the Agri-
Services operations, which was partially offset by lower incentive
compensation expenses related to the decrease in net operating margins.
The various components included in other income (deductions) represented a
deduction of $9.5 million for 1995 as compared to $4.3 million for 1994.
Interest income of $8.8 million for 1995 increased $2.0 million as a result of
increased crop financing for patrons and other customers. Interest expense
for 1995 was $17.5 million as compared to $13.9 million in 1994 due to
increased average borrowings of approximately 10.0% and higher interest rates
on short-term borrowings. In 1995, interest expense includes $1.6 million
related to income tax litigation. The Association's $9.6 million pro rata
share of the Golden Peanut Company's 1995 loss (equity in loss of partnership)
represented a significant portion of other income (deductions) for 1995. The
decline in Golden Peanut Company's 1995 operating results was primarily the
result of low peanut selling prices resulting from the general oversupply
situation that exists for domestic and export peanuts, reduced U.S.
consumption of peanut products and the increase of peanut based foods imported
into the United States. See Note 9(b) of Notes to Consolidated Financial
Statements. The $3.1 million gain on sale of investments represents the sale
of common stock in two agricultural related entities. Miscellaneous, net for
1995 includes the Association's $1.7 million pro rata share in the loss of a
partially-owned foreign affiliate whose principal business activities include
the marketing, purchasing and resale of edible peanuts. In 1994, the
Association recognized income of $250,000 on this investment. Miscellaneous,
net for 1995 includes $1.7 million representing the Association's equity in
the earnings of a pecan processing and marketing enterprise in South Carolina.
Net rental income of approximately $2.0 million and $1.8 million,
respectively, was included in miscellaneous, net for 1995 and 1994.
In 1995 and 1994, the Association's combined federal and state effective
tax rates were 51% and 30%, respectively. The effective tax rate for 1995
reflects $5.5 million of additional tax related to an adverse tax court
decision. See Note 6 of Notes to Consolidated Financial Statements.
Fiscal 1996 Compared to Fiscal 1995
Net sales volume of approximately $2.0 billion for 1996 represented a 15.8%
or $267.0 million increase as compared to 1995. Net margins from operations,
before general corporate expenses and other deductions, were $80.3 million in
1996 as compared to $42.5 million in 1995. The increase in net margins from
operations was due primarily to increased margins in the Poultry segment.
The Poultry segment had net sales of $1.4 billion for 1996, an increase of
12.5% or $157.0 million as compared to 1995. The increase in net sales was
due primarily to a 5.0% increase in average selling prices and a 7.5% increase
in pounds of poultry sold. Market prices for poultry products strengthened in
1996 as a result of lower-than-expected U.S. broiler production and strong
export demand for poultry products. The increase in pounds sold was due to
changes in product mix requiring larger broilers for the production of deboned
poultry products. Poultry segment's net margins from operations for 1996 were
$70.2 million as compared to $34.1 million for 1995. The increase in net
margins was due primarily to higher selling prices for poultry products, which
was partially offset by increased feed ingredient costs. Although average
cash commodity prices for feed grains, such as corn and soybean meal increased
59% and 30%, respectively, from a year ago, the Association's forward
purchasing and hedging strategies resulted in a relatively modest 8% increase
in feed ingredient costs for 1996. The Pork Division had a net operating
margin of $240,000 for 1996 as compared to a $3.7 million net loss for 1995.
The Agri-Services segment's 1996 net sales volume of $543.5 million
increased 25.4% or $110.0 million as compared to 1995. The increase in net
sales volume was due primarily to the marketing of Southeast cotton, as well
as increased sales of fertilizers, chemicals and seeds through the
Association's retail stores. A substantial portion of the agricultural sales
increase was attributed to facilities acquired in the Mississippi-Delta region
in 1995. The Agri-Services segment's net margins from operations for 1996
were $10.1 million as compared to $8.4 million for 1995. The increase was due
primarily to patronage refunds from other cooperatives that totaled $9.3
million for 1996 as compared to $3.9 million in 1995. A substantial portion
of the patronage refunds were distributed by a major fertilizer cooperative.
The Retail Store Division had lower net operating margins in 1996 as a result
of losses in the Mississippi-Delta operations acquired in 1995. The Agri-
Services segment's net margins from operations reflects a $2.1 million net
loss from an agricultural equipment manufacturing operation that was sold in
1996.
Distribution, administrative and general expenses for 1996 and 1995 were
$155.7 million and $131.4 million, respectively. The $24.3 million increase
reflects the growth in operations, as well as increased incentive compensation
expenses related to the increase in margins before income taxes. Increased
litigation related expenses also contributed to the overall increase in
distribution, administrative and general expenses.
The various components included in other income (deductions) represented a
deduction of $6.3 million for 1996 as compared to $9.5 million for 1995.
Interest income of $9.9 million for 1996 increased $1.2 million as a result of
increased crop financing for patrons and other customers. Interest expense
for 1996 was $21.1 million as compared to $17.5 million in 1995. The increase
was due to a 55% increase in average borrowings, which was partially offset by
lower interest rates on short-term borrowings. Interest expense for 1995
included $1.6 million related to income tax litigation. Equity in loss of
partnership represents the Association's 33 1/3% pro rata share of the Golden
Peanut Company's 1996 loss. See Note 9(b) of Notes to Consolidated Financial
Statements. Miscellaneous, net for 1996 includes the Association's $422,000
pro rata share in the earnings of a partially-owned foreign affiliate whose
principal business activities include the marketing, purchasing and resale of
edible peanuts. In 1995, the Association recognized a loss of $1.7 million on
this investment. Miscellaneous, net for 1996 and 1995 includes $1.0 million
and $1.7 million, respectively, representing the Association's equity in the
earnings of a pecan processing and marketing enterprise in South Carolina.
Net rental income of approximately $1.8 million and $2.0 million,
respectively, was included in miscellaneous, net for 1996 and 1995.
In 1996 and 1995, the Association's combined federal and state effective
income tax rates were 33% and 51%, respectively. The effective tax rate for
1995 reflects $5.5 million of additional income tax related to an adverse tax
court decision. See Note 6 of Notes to Consolidated Financial Statements.
Financial Condition
Liquidity and Capital Resources
The Association's liquidity is dependent upon funds from operations and
external sources of financing. The principal sources of external short-term
financing are proceeds from the continuous offering of Subordinated Loan
Certificates, an unsecured committed credit facility with a group of banks and
uncommitted letters and lines of credit. In August 1996, the Association
entered into a $250 million unsecured committed credit facility with nine
commercial banks. The new facility includes a five-year $125 million
revolving credit commitment and a $125 million 364-day line of credit
commitment. Subsequently, the Association had unused loan commitments of
$140.0 million and additional unused uncommitted facilities to provide loans
and letters of credit from banks aggregating approximately $83.1 million. The
primary sources of external long-term financing are a note agreement with an
insurance company, proceeds from the continuous offering of Subordinated
Capital Certificates of Interest and revolving credit agreements. See Note 4
of Notes to Consolidated Financial Statements.
Covenants under the terms of the loan agreements with lenders include
conditions that could limit short-term and long-term financing available from
various external sources. The terms require a ratio of current assets to
current liabilities of not less than 1.20:1, the ratio of senior funded debt
to total capitalization not to exceed 40% and total funded debt to total
capitalization not to exceed 50%. At June 29, 1996, Gold Kist's current
ratio, senior funded debt to total capitalization and total funded debt to
capitalization, determined under the loan agreements, were 1.40:1, 31% and
44%, respectively. The loan agreements apply to the Association and its
subsidiaries, excluding Golden Poultry. At June 29, 1996, the Association was
in compliance with the agreements. See Note 4 of Notes to Consolidated
Financial Statements.
In 1994, existing cash balances, proceeds from long-term debt and short-
term borrowings, and net cash provided by operations of $36.8 million were
used for capital expenditures, repayments of long-term debt, patronage refunds
and other equity payments. Capital expenditures in 1994 included $32.7
million related to expansion and improvements in poultry operations, as well
as $3.8 million for improvements to retail stores and other agricultural
operations. During 1994, the Association had cash payments of approximately
$22.7 million for patronage refunds
and other equity payments. These payments included $10.2 million representing
the redemption of Revolving Fund Certificates and Cumulative Preferred Capital
Certificates of Interest with no fixed maturities. Accounts receivable
increased during 1994 primarily as a result of increased crop loans to patrons
and financing provided to independent agricultural products distributors, as
well as increased poultry sales. Inventories during 1994 increased as a
result of increased broiler production, higher poultry selling prices and
increased cotton production in the Southeast.
During 1995, uses of cash included capital expenditures of $61.8 million,
$36.7 million for repayments of long-term debt and patronage refunds and other
equity distributions of $19.5 million. The funds for these investing and
financing activities were provided primarily by borrowings of approximately
$110.0 million and to a lesser extent, cash provided by operating activities
of $7.2 million and the sale of investments in marketable securities totaling
$8.9 million. Capital expenditures for 1995 included $43.4 million related to
expansion and improvements in poultry operations, as well as $18.0 million for
the acquisition of Agri-Services operations, improvements to retail stores and
the construction of cotton facilities. Increases in accounts receivable and
inventories during 1995 reflected the growth in poultry production and sales,
the expansion of Agri-Services retail operations in the Mississippi Delta and
the increase in Southeast cotton production.
During 1996, the uses of cash included capital expenditures of $74.3
million and $28.6 million for repayments of long-term debt, as well as
increases in operating assets. Increases in inventories reflected the impact
of higher feed ingredient prices on raw materials and live poultry and hog
inventories and the increase in poultry prices on marketable products
inventories. Increased receivables were primarily the result of increases in
crop financing provided to producers and the growth in retail store sales.
The Association's expansion into cotton procurement and marketing contributed
to the increase in operating assets. The funds for these activities were
provided by borrowings of $131.5 million. Capital expenditures for 1996
included $54.9 million for expansion and improvements in the poultry
operations and $18.6 million in expenditures to acquire retail operations and
construct cotton ginning and warehousing facilities.
The Association, including its non-cooperative subsidiaries, plans capital
expenditures of approximately $140.0 million in 1997 that primarily include
expenditures for expansion and technological advances in poultry production
and processing and to a lesser extent, Agri-Services segment improvements. In
addition, planned capital expenditures include other asset improvements and
necessary replacements. Management intends to finance the planned 1997
capital expenditures with existing cash balances and net margins adjusted for
non-cash items and additional long-term borrowings, as needed. In 1997,
management expects cash expenditures to approximate $28.0 million for equity
distributions. The Association believes cash on hand and cash equivalents at
June 29, 1996 and cash expected to be provided from operations, in addition to
borrowings available under existing credit arrangements and proceeds from the
sale of Subordinated Capital Certificates of Interest, will be sufficient to
maintain cash flows adequate for the Association's projected growth and
operational objectives during 1997.
Effects of Inflation
The major factor affecting the Association's net sales volume and cost of
sales is the change in commodity market prices for broilers, hogs, feed
grains, fertilizers and cotton. The prices of these commodities are affected
by world market conditions and are volatile in response to supply and demand,
as well as political and economic events. The price fluctuations of these
commodities do not necessarily correlate with the general inflation rate.
Inflation has, however, affected operating costs such as labor, energy and
material costs.
Future Accounting Requirements
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which must
be applied by fiscal 1997. Management believes SFAS 121 will not have a
significant impact upon adoption.
Item 8. Financial Statements and Supplementary Data.
INDEX
Page
GOLD KIST INC.
CONSOLIDATED FINANCIAL STATEMENTS:
Independent Auditors' Reports . . . . . . . . . . . . . . . . . . 19
Consolidated Balance Sheets as of July 1, 1995 and June 29, 1996 21
Consolidated Statements of Operations for the years ended
June 25, 1994, July 1, 1995 and June 29, 1996 . . . . . . . . . 22
Consolidated Statements of Patrons' and Other Equity for the
years ended June 25, 1994, July 1, 1995 and June 29, 1996 . . . 23
Consolidated Statements of Cash Flows for the years ended
June 25, 1994, July 1, 1995 and June 29, 1996 . . . . . . . . . 24
Notes to Consolidated Financial Statements. . . . . . . . . . . . 25
FINANCIAL STATEMENT SCHEDULES
(Included in Part IV of this Report):
FINANCIAL STATEMENT SCHEDULE:
Valuation Reserves for the years ended June 25, 1994, July 1, 1995
and June 29, 1996 . . . . . . . . . . . . . . . . . . . . . . . 44
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Gold Kist Inc.:
We have audited the consolidated financial statements of Gold Kist Inc.
and subsidiaries as listed in the accompanying index. In connection with our
audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement
schedule based on our audits. We did not audit the combined consolidated
financial statements of Golden Peanut Company and Subsidiaries, a partnership
investment, and Alimenta Commodities, LLC, a limited liability corporation,
investments accounted for using the equity method of accounting, as described
in Note 9(b) to the consolidated financial statements. The combined
consolidated financial statements of Golden Peanut Company and Subsidiaries
and Alimenta Commodities, LLC were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to the amounts
included for Golden Peanut Company and Subsidiaries and Alimenta Commodities,
LLC, is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of the
other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Gold Kist Inc. and subsidiaries
as of July 1, 1995 and June 29, 1996, and the results of their operations and
their cash flows for each of the years in the three-year period ended June 29,
1996, in conformity with generally accepted accounting principles. Also in
our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
As discussed in notes 1, 6 and 9(a) to the consolidated financial
statements, the Company changed its method of accounting for income taxes in
1994 and for certain investments in debt and equity securities in 1995.
KPMG Peat Marwick LLP
Atlanta, Georgia
September 6, 1996, except for the
first paragraph of note 8 as to
which the date is September 13, 1996
REPORT OF INDEPENDENT AUDITORS
Partnership Committee
Golden Peanut Company and
Alimenta Commodities, LLC
We have audited the combined consolidated balance sheets of Golden Peanut
Company and Subsidiaries (the "Partnership") and Alimenta Commodities, LLC
("LLC"), (since April 1, 1996, date of inception) (collectively, the
"Companies"), as of June 30, 1996 and 1995, and the related combined
consolidated statements of operations, partners' equity, and cash flows for
each of the three years in the period ended June 30, 1996 (not presented
separately herein). These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined consolidated financial position of
Golden Peanut Company and Subsidiaries and Alimenta Commodities, LLC at June
30, 1996 and 1995, and the combined consolidated results of their operations
and their cash flows for each of the three years in the period ended June 30,
1996, in conformity with generally accepted accounting principles.
As discussed in Note 8 to the combined consolidated financial statements,
in 1994 the Partnership changed its method of accounting for postretirement
benefits other than pensions.
Ernst & Young LLP
Atlanta, Georgia
September 6, 1996
GOLD KIST INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
July 1, 1995 June 29, 1996
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 16,597 20,562
Receivables, principally trade, including notes receivable of
$43.8 million in 1995 and $68.9 million in 1996, less
allowance for doubtful accounts of $5,877 in 1995 and
$7,726 in 1996 . . . . . . . . . . . . . . . . . . . . . . . . . 189,180 242,411
Inventories (note 2) . . . . . . . . . . . . . . . . . . . . . . 226,988 270,367
Other current assets . . . . . . . . . . . . . . . . . . . . . . 17,718 39,204
Total current assets . . . . . . . . . . . . . . . . . . . . . . 450,483 572,544
Investments (note 9) . . . . . . . . . . . . . . . . . . . . . . . 93,039 104,728
Property, plant and equipment, net (note 3) . . . . . . . . . . . . 227,646 255,728
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,469 42,960
$821,637 975,960
LIABILITIES AND EQUITY
Current liabilities:
Notes payable and current maturities of long-term debt (note 4):
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . $ 70,800 112,800
Subordinated loan certificates . . . . . . . . . . . . . . . . . 27,363 30,574
Current maturities of long-term debt . . . . . . . . . . . . . . 25,834 27,089
123,997 170,463
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 117,952 126,340
Accrued compensation and related expenses . . . . . . . . . . . . 28,817 32,590
Patronage refund and other equity payable in cash . . . . . . . . 8,863 24,043
Interest left on deposit (note 4) . . . . . . . . . . . . . . . . 10,493 12,119
Other current liabilities . . . . . . . . . . . . . . . . . . . . 13,776 22,532
Total current liabilities . . . . . . . . . . . . . . . . . . . 303,898 388,087
Long-term debt, excluding current maturities (note 4) . . . . . . . 138,659 188,948
Accrued postretirement benefit costs (note 7(b)) . . . . . . . . . 36,929 40,271
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 3,189 4,072
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 482,675 621,378
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . 23,972 28,172
Patrons' and other equity (note 5):
Common stock, $1.00 par value - Authorized 500 shares;
issued and outstanding 62 in 1995 and 36 in 1996 . . . . . . . . 62 36
Patronage reserves . . . . . . . . . . . . . . . . . . . . . . . 216,854 209,140
Unrealized gain on marketable equity security (note 9(a)) . . . . 18,531 20,978
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 79,543 96,256
Total patrons' and other equity . . . . . . . . . . . . . . . . 314,990 326,410
Commitments and contingent liabilities (notes 7 and 8)
$821,637 975,960
See accompanying notes to consolidated financial statements.
GOLD KIST INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands)
Years Ended
June 25, 1994 July 1, 1995 June 29, 1996
Net sales volume . . . . . . . . . . . . . . . $1,561,034 1,688,537 1,955,569
Cost of sales . . . . . . . . . . . . . . . . . 1,385,239 1,522,063 1,731,448
Gross margins . . . . . . . . . . . . . . . 175,795 166,474 224,121
Distribution, administrative and general
expenses . . . . . . . . . . . . . . . . . . 121,417 131,410 155,664
Net operating margins . . . . . . . . . . . 54,378 35,064 68,457
Other income (deductions):
Interest income . . . . . . . . . . . . . . 6,752 8,779 9,946
Interest expense . . . . . . . . . . . . . . (13,924) (17,525) (21,065)
Equity in loss of partnership (note 9(b)) . (1,110) (9,625) (1,181)
Gain on sale of investments . . . . . . . . - 3,070 -
Miscellaneous, net . . . . . . . . . . . . . 3,978 5,823 5,962
(4,304) (9,478) (6,338)
Margins before income taxes, minority
interest and cumulative effect
of accounting change . . . . . . . . . . 50,074 25,586 62,119
Income taxes (note 6) . . . . . . . . . . . . . 14,861 13,094 20,757
Margins before minority interest and
cumulative effect of accounting change . 35,213 12,492 41,362
Minority interest . . . . . . . . . . . . . . . (1,148) (741) (4,330)
Margins before cumulative effect of accounting
change . . . . . . . . . . . . . . . . . 34,065 11,751 37,032
Cumulative effect of change in accounting for
income taxes (note 6) . . . . . . . . . . . . 5,339 - -
Net margins . . . . . . . . . . . . . . . . $ 39,404 11,751 37,032
See accompanying notes to consolidated financial statements.
GOLD KIST INC.
CONSOLIDATED STATEMENTS OF PATRONS' AND OTHER EQUITY
For the Years Ended June 25, 1994, July 1, 1995 and June 29, 1996
(Amounts in Thousands)
Revolving Unrealized
fund and gain on
cumulative marketable
Common preferred Patronage equity Retained
Total stock certificates reserves security earnings
June 26, 1993 . . . . . . . . . $285,620 79 10,253 209,514 - 65,774
Net margins for 1994 . . . . 39,404 - - 30,830 - 8,574
Nonqualified patronage refund
and other equity payable
in cash . . . . . . . . (14,588) - - (14,588) - -
Redemptions and other changes (13,774) - (10,253) (6,592) - 3,071
June 25, 1994 . . . . . . . . . 296,662 79 - 219,164 - 77,419
Net margins for 1995 . . . . 11,751 - - 12,590 - (839)
Nonqualified patronage refund
and other equity payable
in cash . . . . . . . . . . (8,941) - - (8,941) - -
Redemptions and other changes (3,013) (17) - (5,959) - 2,963
Implementation of change in
accounting for marketable
equity security (note 9(a)) 18,531 - - - 18,531 -
July 1, 1995 . . . . . . . . . 314,990 62 - 216,854 18,531 79,543
Net margins for 1996 . . . . 37,032 - - 21,700 - 15,332
Nonqualified patronage refund
and other equity payable
in cash . . . . . . . . . . (24,212) - - (24,212) - -
Redemptions and other changes (3,847) (26) - (5,202) - 1,381
Change in value of marketable
equity security (note 9(a)) 2,447 - - - 2,447 -
June 29, 1996 . . . . . . . . . $326,410 36 - 209,140 20,978 96,256
See accompanying notes to consolidated financial statements.
GOLD KIST INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
Years Ended
June 25, 1994 July 1, 1995 June 29, 1996
Cash flows from operating activities:
Net margins . . . . . . . . . . . . . . . . . $ 39,404 11,751 37,032
Non-cash items included in net margins:
Depreciation and amortization . . . . . . . 37,251 38,085 40,063
Cumulative effect of changes in accounting
principle . . . . . . . . . . . . . . . . . (5,339) - -
(Gains) losses on sales of assets . . . . . (201) (3,459) 101
Equity in loss of partnership . . . . . . . 1,110 9,625 1,181
Deferred income tax benefit . . . . . . . . (5,562) (6,650) (2,250)
Other . . . . . . . . . . . . . . . . . . . 3,208 1,943 (1,515)
Changes in operating assets and liabilities:
Receivables . . . . . . . . . . . . . . . . (26,943) (28,466) (53,231)
Inventories . . . . . . . . . . . . . . . . (23,963) (28,521) (43,379)
Other current assets . . . . . . . . . . . . 152 (3,382) (20,561)
Accounts payable and accrued expenses . . . 21,765 15,117 20,917
Interest left on deposit . . . . . . . . . . (4,052) 1,153 1,626
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . 36,830 7,196 (20,016)
Cash flows from investing activities:
Acquisitions of investments . . . . . . . . . (762) (5,093) (4,356)
Acquisitions of property, plant and equipment (37,232) (61,762) (74,262)
Proceeds from disposal of investments . . . . 1,279 8,942 200
Proceeds from sales of loans . . . . . . . . 5,040 4,925 10,052
Other . . . . . . . . . . . . . . . . . . . . (5,883) (7,179) 2,406
Net cash used in investing activities . . (37,558) (60,167) (65,960)
Cash flows from financing activities:
Short-term borrowings, net . . . . . . . . . 11,491 60,286 45,211
Proceeds from long-term debt . . . . . . . . 26,668 49,752 86,296
Principal payments of long-term debt . . . . (30,130) (36,676) (28,557)
Patronage refunds and other equity paid in
cash . . . . . . . . . . . . . . . . . . . . (22,717) (19,464) (13,009)
Net cash provided by (used in) financing
activities. . . . . . . . . . . . . . . . (14,688) 53,898 89,941
Net change in cash and cash equivalents . (15,416) 927 3,965
Cash and cash equivalents at beginning of year 31,086 15,670 16,597
Cash and cash equivalents at end of year . . . $ 15,670 16,597 20,562
Supplemental disclosure of cash flow data:
Cash paid during the years for:
Interest (net of amounts capitalized) . . . $ 18,575 18,792 18,327
Income taxes . . . . . . . . . . . . . . . . $ 23,352 21,144 20,676
See accompanying notes to consolidated financial statements.
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 25, 1994, July 1, 1995 and June 29, 1996
(Dollar Amounts in Thousands)
(1) Summary of Significant Accounting Policies
Gold Kist Inc. ("Gold Kist" or "Association") is a diversified agricultural
membership cooperative association, headquartered in Atlanta, Georgia. Gold
Kist serves approximately 29,000 active farmer members and other cooperative
associations located principally in the southeastern United States. Gold Kist
operates broiler and pork production facilities providing both marketing and
purchasing services to producers. Gold Kist also purchases or manufactures
feed, seed, fertilizers, pesticides, animal health products and other farm
supply items for sale at wholesale and retail. Additionally, the Association
is engaged in the processing, storage and marketing of cotton, serves as a
contract procurement agent for, and stores, farm commodities such as soybeans
and grain, and is a partner in a major peanut processing and marketing
business and in a pecan processing and marketing business.
The accounting and reporting policies of Gold Kist Inc. and subsidiaries
conform to generally accepted accounting principles and to general practices
among agricultural cooperatives. The following is a summary of the
significant accounting policies.
(a) Basis of Presentation
The accompanying consolidated financial statements include the
accounts of Gold Kist Inc. and its wholly and majority owned
subsidiaries (Gold Kist or Association). All significant intercompany
balances and transactions have been eliminated in consolidation.
Certain reclassifications have been made to the 1995 consolidated
financial statements to conform to the presentation in the 1996
consolidated financial statements.
(b) Cash and Cash Equivalents
Gold Kist's policy is to invest cash in excess of operating
requirements in highly liquid interest bearing debt instruments, which
include commercial paper and reverse repurchase agreements. These
investments are stated at cost which approximates market. For purposes
of the consolidated statements of cash flows, Gold Kist considers all
highly liquid debt instruments purchased with original maturities of
three months or less to be cash equivalents.
(c) Inventories
Merchandise for sale includes feed, fertilizer, seed, pesticides,
equipment and general farm supplies purchased or manufactured by Gold
Kist for sale to agricultural producers and consumers. These
inventories are stated, generally, on the basis of the lower of cost
(first-in, first-out or average) or market.
Live poultry and hogs consist of broilers, breeding stock and market
hogs. The broilers and market hogs are stated at the lower of average
cost or market. The breeding stock is stated at average cost, less
accumulated amortization.
Raw materials and supplies consist of feed and fertilizer
ingredients, uncleaned seed, hatching eggs, packaging materials and
operating supplies. These inventories are stated, generally, on the
basis of the lower of cost (first-in, first-out or average) or market.
Gold Kist hedges varying amounts of its feed ingredient purchases to
minimize the risk of adverse price fluctuations. Futures contracts are
accounted for as hedges and option contracts are accounted for at
market. Gains or losses on futures and options transactions are
included as a part of product cost.
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
Marketable products consist primarily of dressed and further
processed poultry and cotton. These inventories are stated,
principally, on the basis of selling prices, less estimated brokerage,
freight and certain other selling costs where applicable (estimated net
realizable value).
(d) Property, Plant and Equipment
Property, plant and equipment is recorded at cost. Depreciation of
plant and equipment is calculated by the straight-line method over the
estimated useful lives of the respective assets.
(e) Investments
Investments in other cooperatives are recorded at cost and include
the amount of patronage refund certificates and patrons' equities
allocated, less distributions received. These investments are not
readily marketable and quoted market prices are not available. The
equity method of accounting is used for investments in other companies
in which Gold Kist's voting interest is 20 to 50 percent. Investments
in less than 20 percent owned companies which are not readily
marketable are stated at cost. For years prior to fiscal 1995, the
investment in the marketable equity security was stated at the lower of
cost or market.
Effective June 26, 1994, Gold Kist adopted the provisions of
Statement of Financial Accounting Standards No. 115 (SFAS 115),
"Accounting for Certain Investments in Debt and Equity Securities."
Pursuant to the provisions of SFAS 115, the Association has classified
its marketable equity security and collateralized loans as "available-
for-sale." "Available-for-sale" securities are those the Association
intends to hold for a period of time and are not acquired with the
intent of selling them in the near term. Unrealized gains and losses
on "available-for-sale" securities are included as a separate component
of patrons' and other equity in the accompanying 1995 and 1996
financial statements, net of deferred income taxes. Upon initial
application of SFAS 115, Gold Kist recorded an increase to investments
of $20.5 million and to patrons' and other equity of $12.9 million (net
of deferred income taxes of $7.6 million) related to the marketable
equity security (see note 9(a)). Management believes the carrying
value of the collateralized loans approximate market value and,
accordingly, no adjustment has been recognized in the accompanying
financial statements.
Gold Kist's investment in the Golden Peanut Company partnership is
accounted for using the equity method (see note 9(b)). Other
investments accounted for under the equity method are not significant.
(f) Income Taxes
Gold Kist operates as an agricultural cooperative not exempt from
Federal income taxes. Aggregate margins not refunded in cash to
members or allocated in the form of qualified written notices are
subject to income taxes.
The bylaws of Gold Kist provide for the issuance of either qualified
or nonqualified patronage refunds (as defined for purposes of
Subchapter T of the Internal Revenue Code). Gold Kist utilized
nonqualified patronage refunds in 1994, 1995 and 1996, which are
deductible for income tax purposes only to the extent paid or redeemed
in cash.
Effective June 27, 1993, Gold Kist adopted the provisions of
Statement of Financial Accounting Standards No. 109 (SFAS 109),
"Accounting for Income Taxes" and reported the cumulative effect of
that change in the method of accounting for income taxes in the 1994
consolidated statement of operations. SFAS 109 requires an asset and
liability approach in accounting for income taxes and, therefore,
required a change from the deferred method Gold Kist previously used.
Under the asset and liability method,
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered
or settled. Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized as income or expense
in the period that includes the enactment date.
(g) Fair Value of Financial Instruments
Gold Kist's financial instruments include cash and cash equivalents,
accounts receivables and payables and accrued expenses, notes
receivable and debt. Because of the short maturity of cash
equivalents, accounts receivables and payables and accrued expenses,
certain short-term debt which matures in less than one year and long-
term debt with variable interest rates, the carrying value approximates
fair value. All financial instruments are considered to have an
estimated fair value which approximates carrying value at July 1, 1995
and June 29, 1996 unless otherwise specified (see notes 1(e) and 4).
(h) Fiscal Year
Gold Kist employs a 52/53 week fiscal year. The consolidated
financial statements for 1994, 1995 and 1996 reflect 52, 53 and 52
weeks, respectively. Fiscal 1997 will be a 52 week year.
(i) Use of Estimates
Management of Gold Kist has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from these estimates.
(2) Inventories
Inventories are summarized as follows:
1995 1996
Merchandise for sale . . . . . $ 85,054 83,886
Live poultry and hogs . . . . . 76,211 95,682
Marketable products - poultry . 30,532 40,047
Marketable products - cotton . - 11,258
Raw materials and supplies . . 35,191 39,494
$226,988 270,367
(3) Property, Plant and Equipment
Property, plant and equipment is summarized as follows:
1995 1996
Land and land improvements . . $ 31,809 33,268
Buildings . . . . . . . . . . . 166,806 188,845
Machinery and equipment . . . . 325,270 368,118
Construction in progress . . . 27,812 16,833
551,697 607,064
Less accumulated depreciation . 324,051 351,336
$227,646 255,728
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
(4) Notes Payable and Long-Term Debt
At June 29, 1996, Gold Kist had a $150 million unsecured committed credit
facility with five commercial banks. The facility included a five-year $50
million revolving credit commitment, a $50 million 364-day line of credit
commitment, and a $50 million seasonal line of credit commitment. As of June
29, 1996, borrowings of $50 million and $40 million, respectively, were
outstanding under the revolving credit and 364-day line-of-credit commitments.
At June 29, 1996, Gold Kist had other borrowings of $112.8 million outstanding
under uncommitted
loans and letters of credit facilities. At June 29, 1996, the Company
classified $50 million of borrowings under the $50 million revolving credit
and borrowings of $40 million under the uncommitted loan facilities as long-
term debt. On August 9, 1996, Gold Kist refinanced these loans under a five-
year $125 million revolving credit commitment.
On August 9, 1996, the Association entered into a $250 million unsecured
committed credit facility with nine commercial banks. The new facility
includes a five-year $125 million revolving credit commitment and a $125
million 364-day line of credit commitment. The five-year revolving credit
agreement expires on August 9, 2001, but may be extended twice for successive
one-year periods with the consent of the banks. The revolving credit facility
fee and the commitment fees on the unused portion of the revolving credit will
be computed quarterly based on the Association's ratio of funded debt to total
capital and will not exceed .20% per annum. The 364-day line of credit
provides short-term financing that will expire in August 1997 and may be
extended with the consent of the banks. The 364-day line of credit is subject
to a .16% per annum facility fee. Borrowings under the $250 million facility
will bear variable interest rates at or below prime. Also, the facility
permits competitive bid interest rates by the participating banks.
At June 29, 1996, Gold Kist had other unused long-term loan commitments of
$20 million and additional uncommitted facilities to provide loans and letters
of credit from banks aggregating approximately $94 million. These unsecured
borrowings bear interest at rates below prime.
Subordinated loan certificates of $27.4 million at July 1, 1995 bore
interest at rates of 3.5% to 6.7% with terms of one year and were unsecured.
At June 29, 1996, subordinated loan certificates outstanding were $30.6
million bearing interest at rates of 5.5% to 6.4%.
Interest left on deposit represents amounts of interest payable, which at
the option of the holders of various classes of certificates, is left on
deposit with Gold Kist. Additional interest on these amounts accrues at the
same rates as the related certificates.
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
Long-term debt is summarized as follows:
1995 1996
Unsecured senior notes payable:
9.375% interest notes, due in semi-annual installments of $5,500
with interest payable semiannually . . . . . . . . . . . . . . . . . . $ 16,500 11,000
9.90% interest notes, due in semi-annual installments of $1,539
with interest payable semiannually . . . . . . . . . . . . . . . . . . 10,766 9,230
9.35% interest note, due in a single installment in June 2001 with
interest payable quarterly . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000
Other long term debt:
Subordinated capital certificates of interest with interest rates ranging
from 4.50% to 16.50% and with fixed maturities ranging from two to
fifteen years, unsecured (weighted average interest rate of 7.7% at
July 1, 1995 and 7.2% at June 29, 1996) . . . . . . . . . . . . . . . 60,417 59,431
Revolving credit agreements with commercial banks (weighted average
rate of 6.5% at July 1, 1995 and 5.7% at June 29, 1996) . . . . . . . 37,000 50,000
Borrowings under uncommitted lines of credit (weighted average rate of
5.8% at June 29, 1996). . . . . . . . . . . . . . . . . . . . . . . . - 40,000
Tax exempt industrial revenue bonds with varying interest rates due in
quarterly and annual installments through 2016, secured by property,
plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . 12,701 18,500
Pro rata share of mortgage loan, at 8.47% interest, due in monthly
installments to June 30, 2004, secured by a building (note 3) . . . . 2,497 2,306
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,612 5,570
164,493 216,037
Less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . 25,834 27,089
$138,659 188,948
Based upon discounted cash flows of future payments, assuming interest
rates available to Gold Kist for issuance of debt with similar terms and
remaining maturities, the estimated fair value of the unsecured senior notes
payable at July 1, 1995 and June 29, 1996 was approximately $51.7 million and
$43.0 million, respectively.
The terms of debt agreements specify minimum working capital, net worth
and current ratio requirements. The debt agreements also place a limitation
on equity distribution, cash patronage refunds and additional loans, advances
or investments. The limitation provides for a carryover to 1997 of unused
amounts, $4.6 million as of June 29, 1996, and is increased by 50% of Gold
Kist's net margins (or minus 100% of a net loss) before any gains or losses on
disposals of capital assets or equity in unremitted earnings of any affiliate.
Annual required principal repayments on long-term debt for the five
fiscal years subsequent to June 29, 1996 are as follows:
Fiscal year:
1997 . . . . . . . . . . . . . . . . . . . . . . . . . $27,089
1998 . . . . . . . . . . . . . . . . . . . . . . . . . 14,744
1999 . . . . . . . . . . . . . . . . . . . . . . . . . 12,147
2000 . . . . . . . . . . . . . . . . . . . . . . . . . 5,927
2001 . . . . . . . . . . . . . . . . . . . . . . . . . 25,187
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
(5) Patrons' and Other Equity
Gold Kist's Articles of Incorporation provide for a class of common stock
and a class of preferred stock pursuant to the provisions of the Georgia
Cooperative Marketing Act. Each member is allocated one share of common
stock, $1.00 par value. The common shares are not marketable or transferable
and no dividends will be declared on these common shares. No issuance of
preferred stock has been authorized by Gold Kist.
Patronage reserves represent allocated undistributed member margins less
taxes paid on nonqualified equity. Patronage reserves do not bear interest
and are subordinated to all certificates outstanding and indebtedness of Gold
Kist. Patronage reserves may be revolved and paid at the discretion of the
Board of Directors.
Retained earnings include the cumulative net margins (losses) resulting
from nonmember and nonpatronage transactions, including noncooperative
subsidiaries. Also included are amounts related to the early redemption of
notified equity, representing the difference between the face value and the
redemption amounts.
(6) Income Taxes
As discussed in Note 1(f), Gold Kist adopted SFAS 109 as of June 27, 1993.
The cumulative effect of this change in accounting for income taxes, which
resulted in a tax benefit of $5.3 million, was determined as of June 27, 1993
and was reflected in the consolidated statement of operations for the year
ended June 25, 1994.
The provisions for income tax expense, principally Federal, consist of the
following:
1994 1995 1996
Current expense . . . . . . . . . . . . . . . $20,423 19,744 23,007
Deferred benefit . . . . . . . . . . . . . . . (5,562) (6,650) (2,250)
$14,861 13,094 20,757
The deferred income tax effect of the unrealized gain on marketable equity
security has been charged as a component of patrons' and other equity for 1995
and 1996.
Gold Kist's combined federal and state effective tax rates from operations
for 1994, 1995 and 1996 were 30%, 51% and 33%, respectively. A reconciliation
of income tax expense from operations computed by applying the Federal
corporate income tax rate of 35% in 1994, 1995 and 1996 to margins before
income taxes, minority interest and cumulative effect of accounting changes
for the applicable year follows:
1994 1995 1996
Computed expected income tax expense . . . . . . . . . $17,526 8,955 21,742
Increase (decrease) in income tax expense
resulting from:
Income tax litigation . . . . . . . . . . . . . . . - 5,520 -
Cash portion of nonqualified patronage refund . . . (1,420) (1,031) (986)
Effect of state income taxes, net of Federal benefit 1,050 447 970
Nonqualified equity redemptions . . . . . . . . . . (525) (490) (886)
Target jobs credits . . . . . . . . . . . . . . . . (607) (499) (11)
Other, net . . . . . . . . . . . . . . . . . . . . . (1,163) 192 (72)
$14,861 13,094 20,757
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at July 1,
1995 and June 29, 1996 are as follows:
1995 1996
Deferred tax assets:
Postretirement benefits . . . . . . . . . . . . . $14,410 15,589
Insurance accruals . . . . . . . . . . . . . . . . 7,903 8,059
Equity in partnerships . . . . . . . . . . . . . . 4,175 2,618
Bad debt reserves . . . . . . . . . . . . . . . . 2,573 3,156
State tax operating loss carryforwards . . . . . . 1,984 1,406
Other . . . . . . . . . . . . . . . . . . . . . . - 1,426
Total gross deferred tax assets . . . . . . . . 31,045 32,254
Less valuation allowance . . . . . . . . . . . . . (1,984) (1,406)
Net deferred tax assets . . . . . . . . . . . . 29,061 30,848
Deferred tax liabilities:
Unrealized gain on marketable equity security . . (11,587) (13,116)
Accelerated depreciation . . . . . . . . . . . . . (969) (1,245)
Deferred compensation . . . . . . . . . . . . . . (3,990) (3,371)
Other . . . . . . . . . . . . . . . . . . . . . . (118) -
Total deferred tax liabilities . . . . . . . . . (16,664) (17,732)
Net deferred tax assets . . . . . . . . . . . . $ 12,397 13,116
The net change in the total valuation allowance for the years ended 1995
and 1996 was an increase of $71 and a decrease of $578, respectively. The
Association's management believes the existing net deductible temporary
differences comprising the total net deferred tax assets will reverse during
periods in which the Association generates net taxable income.
During 1993, the Internal Revenue Service (IRS) concluded its examination
of Gold Kist's 1987 through 1989 Federal income tax returns and issued a
notice of deficiency. In April 1994, the remaining issue, whether Gold Kist
must recognize taxable income related to the redemption of its qualified
notified equity at less than face amount, was litigated before the United
States Tax Court. An adverse decision was received from the Tax Court on June
26, 1995. The Association has appealed the decision to the Eleventh Circuit
Court of Appeals. The accompanying financial statements reflect the impact of
the Tax Court decision through June 29, 1996.
(7) Employee Benefits
(a) Pension Plans
Gold Kist has noncontributory defined benefit pension plans covering
substantially all of its employees and directors and an affiliate's
employees (participants). The plan covering the salaried participants
provides pension benefits that are based on the employees' compensation
during the years before retirement or other termination of employment.
The plan covering the hourly participants provides pension benefits
that are based on years of service. Gold Kist's funding policy is to
contribute within the guidelines prescribed by Federal regulations.
Plan assets consist principally of corporate equities and bonds, and
United States Government and Agency obligations.
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
Net periodic pension expense for 1994, 1995 and 1996 included the
following components:
1994 1995 1996
Service cost - benefits earned during the year $ 3,720 3,429 4,092
Interest cost on projected benefit obligations 6,479 6,949 7,426
Actual return on plan assets . . . . . . . . . (3,236) (11,393) (27,724)
Net amortization and deferral . . . . . . . . (5,989) 1,208 16,799
Net periodic pension expense . . . . . . . . $ 974 193 593
The following table sets forth the plans' funded status, amounts
recognized in the consolidated balance sheets at July 1, 1995 and June
29, 1996 and economic assumptions:
1995 1996
Actuarial present value of benefit obligations:
Vested participants . . . . . . . . . . . . $ 74,529 88,287
Nonvested . . . . . . . . . . . . . . . . . 6,630 7,088
Total accumulated benefit obligations . $ 81,159 95,375
Projected benefit obligations for services
rendered to date . . . . . . . . . . . . . $ 96,559 111,251
Plan assets for benefits:
Plan assets at fair value . . . . . . . . . $118,268 145,148
Prepaid pension cost included in other assets in
consolidated balance sheets . . . . . . . (16,556) (18,179)
Net plan assets . . . . . . . . . . . . $101,712 126,969
Plan assets in excess of projected benefit
obligations . . . . . . . . . . . . . . . . $ 5,153 15,718
Consisting of:
Unrecognized net asset existing at the date of
adoption . . . . . . . . . . . . . . . $ 9,721 8,318
Unrecognized net gain/(loss) from past
experience different from that assumed
and effects of changes in assumptions . (1,136) 13,824
Prior service cost not yet recognized in
net periodic pension cost . . . . . . . (3,432) (6,424)
$ 5,153 15,718
Actuarial assumptions:
Weighted-average discount rate . . . . . . 8.00% 8.00%
Weighted-average expected long-term rate of return on
plan assets . . . . . . . . . . . . . . . 9.25% 9.50%
Weighted-average rate of compensation increase 5.50% 5.50%
The unrecognized net asset existing at the date of adoption of
Statement of Financial Accounting Standards No. 87 is being amortized
over the remaining service lives of the participants.
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
(b) Other Postretirement Benefits
Gold Kist provides health care and death benefits to substantially
all retired employees, covered dependents and their beneficiaries.
Generally, employees who have attained age 55 and who have 10 years of
service are eligible for these benefits. In addition, employees with
less than 10 years of service who retired before July 1, 1992 are
eligible for these benefits. The health care and death benefit plans
are contributory and coverages increase with increased years of
service.
Postretirement health and death benefit expense for 1994, 1995 and
1996 included the following components:
1994 1995 1996
Service cost - benefits earned during the year . . $1,728 1,742 2,029
Interest cost . . . . . . . . . . . . . . . . . . 2,530 2,645 2,998
Net amortization and deferral . . . . . . . . . . - (18) 80
Net postretirement health and death benefit
expense . . . . . . . . . . . . . . . . . . . . $4,258 4,369 5,107
Gold Kist's postretirement benefit plans are not funded. The status
of the plans at July 1, 1995 and June 29, 1996 was as follows:
1995 1996
Actuarial present value of accumulated postretirement
benefit obligation:
Retirees . . . . . . . . . . . . . . . . . . $15,528 18,010
Fully eligible active plan participants . . . 7,821 10,188
Other active plan participants . . . . . . . 14,016 16,571
37,365 44,769
Unrecognized net gain (loss) from experience
differences . . . . . . . . . . . . . . 1,341 (2,737)
$38,706 42,032
The health care cost trend rate used to determine the accumulated
postretirement benefit obligation at July 1, 1995 was 9%, declining
ratably to 5% by the year 2001 and remaining at that level thereafter.
The health care cost trend rate used to determine the accumulated
postretirement benefit obligation at June 29, 1996 was 8%, declining
ratably to 5% by the year 2001 and remaining at that level thereafter.
The discount rate used to determine the accumulated postretirement
benefit obligation was 8.00% at July 1, 1995 and June 29, 1996,
respectively. A 1% increase in the health care cost trend rate for
each year would increase the accumulated postretirement benefit
obligation for health care benefits at June 29, 1996 by approximately
12% and net postretirement health care cost by 14%.
(8) Contingent Liabilities and Commitments
In January 1993, certain Alabama member patrons of the Association filed a
lawsuit in the Circuit Court of Jefferson County, Alabama, Tenth Judicial
Circuit against the Association and Golden Poultry and certain directors and
officers of the companies. (Ronald Pete Windham and Windham Enterprises, Inc.
on their behalf and on behalf of and for the use and benefit of Gold Kist,
Inc. and its shareholders/members v. Harold O. Chitwood, individually in his
capacity as an officer of Gold Kist and a Director of Golden Poultry; et al).
The lawsuit alleged that the named defendants violated their fiduciary duties
by diverting corporate opportunities from the Association to Golden Poultry
and Carolina Golden Products Company in connection with the creation of Golden
Poultry and Carolina
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
Golden Products Company and by permitting their continued operations. In
March 1994, the Court certified the Windham litigation as a class action. In
September 1995, Golden Poultry and Carolina Golden Products Company were
dismissed from the litigation. On October 25, 1995, the jury in the Windham
case returned verdicts in favor of the plaintiffs in the litigation. On July
2, 1996, the Jefferson County, Alabama Circuit Court Judge entered an Order in
the case directing Gold Kist to acquire the approximately 27% of Company
shares currently owned by investors so that all of the issued and outstanding
stock of the Company would be owned by Gold Kist. The Court denied the
plaintiffs' demands for additional allocations and cash distributions to the
class members. On September 13, 1996, subsequent to Motions for
Reconsideration filed by the plaintiffs and Gold Kist, the Court entered a
Final Judgment and Decree amending its July 2, 1996 Order. The Final Judgment
and Decree relieves Gold Kist of the requirement to acquire the 27% of Golden
Poultry common stock not already owned by Gold Kist. This Final Judgment and
Decree requires Gold Kist to acquire or redeem all Golden Poultry common stock
and/or stock options held or issued to Gold Kist officers and directors. Gold
Kist is further ordered, with its consent, to revolve $21.2 million of
notified equity for the years 1976 through 1983 within four calendar months of
the date of the Order and requires Gold Kist to pay $4.2 million in fees and
expenses to the plaintiffs' attorneys. An appeal of the Final Judgment may be
filed on or before October 25, 1996, and could have the effect of staying the
Final Judgment pending the outcome of any appeal. The redemption of notified
equity and the fees and expenses awarded to plaintiffs' attorneys
have been reflected in the accompanying consolidated financial statements.
Gold Kist is also party to other various legal and administrative
proceedings, all of which management believes constitute ordinary routine
litigation incident to the business conducted by Gold Kist, or are not
material in amount.
Gold Kist received proceeds of $20.0 million, $5.0 million, $4.9 million
and $10.2 million during 1993, 1994, 1995 and 1996, respectively, for
collateralized loans sold with recourse to an insurance company, of which
$26.4 million was outstanding at June 29, 1996. No gain or loss was
recognized on the sale of these loans. A $264 thousand allowance has been
recognized in the accompanying consolidated financial statements for potential
losses that may occur. As of June 29, 1996, there have been no credit losses
related to the loans guaranteed under this agreement.
Gold Kist is a guarantor of amounts outstanding under a $65.0 million
secured loan agreement between a commercial bank and Young Pecan Company, a
pecan processing and marketing partnership in which Gold Kist holds a 25%
equity interest and 35% earnings (loss) allocation. At June 29, 1996, the
amounts outstanding under this facility were $60.6 million.
(9) Investments
(a) Marketable Equity Security
As discussed in Note 1(e), Gold Kist adopted SFAS 115 at June 26,
1994, changing the method of accounting for its marketable equity
security from a historical cost basis to a fair value approach.
Pursuant to the provisions of SFAS 115, the Association has classified
its marketable equity security as "available-for-sale." At June 29,
1996, the Association's marketable equity security was carried at its
fair value of $54.8 million, which represents a gross unrealized gain
of $34.1 million. The 1996 gross unrealized gain, net of deferred
income taxes of $13.1 million, has been reflected as a separate
component of patrons' and other equity. At July 1, 1995, the
marketable equity security was carried at its fair value of $50.1
million, which represents a gross unrealized gain of $30.1 million.
The 1995 gross unrealized gain, net of deferred income taxes of $11.6
million, has been reflected as a separate component of patrons' and
other equity.
Gains realized on sales and dividends totaled $170 thousand, $1.3
million and $494 thousand and are included in miscellaneous, net for
the years ended June 25, 1994, July 1, 1995 and June 29, 1996,
respectively.
(b) Golden Peanut Company
Gold Kist has a 33 1/3% interest in Golden Peanut Company, a Georgia
general partnership. Gold Kist's investment in the partnership
amounted to $15.5 million and $17.2 million at July 1, 1995 and June
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
29, 1996, respectively. In July 1995, Gold Kist made an additional
investment of $2.8 million. The partnership has a $450.0 million
commercial paper facility supported by lines of credit with various
banks totaling $220.0 million. At June 30, 1996, borrowings of $105.0
million were outstanding under the commercial paper facility.
Summarized financial information of Golden Peanut Company, excluding
Alimenta Commodities, LLC, is shown below:
Condensed Consolidated Balance Sheets
1995 1996
Current assets . . . . . . . . . . . . . . $233,133 154,587
Property, plant and equipment, net . . . . 34,385 31,071
Total assets . . . . . . . . . . . . . . $267,518 185,658
Current liabilities . . . . . . . . . . . $220,954 128,892
Accrued postretirement benefit costs . . . 5,103 5,308
Partners' equity . . . . . . . . . . . . . 41,461 51,458
Total liabilities and partners' equity . $267,518 185,658
Condensed Consolidated Statements of Operations
1994 1995 1996
Net sales and other operating income . . . $ 456,937 429,067 411,938
Costs and expenses . . . . . . . . . . . . 460,291 457,942 415,479
Net loss . . . . . . . . . . . . . . . . $ (3,354) (28,875) (3,541)
Golden Peanut Company's 1994 net loss includes a $3.9 million charge
resulting from the adoption of SFAS 106. Gold Kist has included its
proportionate share of Golden Peanut Company's adoption of SFAS 106 in
equity in loss of partnership in the accompanying 1994 consolidated
statement of operations since the amount is not significant.
In 1994, 1995 and 1996, Gold Kist received $2.1 million in rental
income from Golden Peanut Company under an operating lease agreement
for peanut shelling and procurement facilities. Gold Kist received
procurement commissions, royalties and administrative service fees of
$2.7 million, $3.9 million and $3.1 million in 1994, 1995 and 1996,
respectively. In addition, Gold Kist purchased $5.4 million, $3.1
million and $2.6 million of inventory from Golden Peanut Company in
1994, 1995 and 1996, respectively.
(10) Major Business Segments
Gold Kist is an agricultural cooperative, with operations located
primarily in the southeastern United States, engaged in marketing products and
purchasing supplies and equipment for its patrons. Gold Kist also operates
non-cooperative businesses engaged in broiler operations, farm and home
retailing, and crop and equipment financing. Gold Kist's operations are
classified into industry segments as follows:
The Poultry segment includes cooperative integrated broiler production,
processing and marketing operations, as well as subsidiary broiler operations.
This segment has decentralized broiler, pork production and cornish game hen
facilities.
The Agri-Services segment purchases or manufactures feed, seed,
fertilizers, agricultural chemicals, animal health products, and other farm
supply and equipment items for sale through Gold Kist retail outlets and
independent dealers. The segment conducts cotton procurement, ginning,
storage and marketing operations, as well as other crop procurement services.
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
The following table presents certain financial information as to industry segments:
Agri- Intersegment
Poultry Services Eliminations Consolidated
Year ended June 25, 1994
Net sales volume . . . . . . . . . $1,183,729 377,305 - 1,561,034 (a)
Net margins from operations . . . . $ 52,177 8,471 - 60,648
General corporate expenses . . . . (6,270)
Other deductions, net . . . . . . . (4,304)
Margins before income taxes,
minority interest
and cumulative
effect of accounting
change . . . . . . . . . . . . $50,074
Depreciation and amortization
expense . . . . . . . . . . . . $ 31,234 5,134 883 (b) 37,251
Capital expenditures . . . . . . . $ 32,655 3,772 805 (b) 37,232
Identifiable assets at
June 25, 1994 . . . . . . . . . $ 375,389 218,111 122,932 (b) 716,432
Year ended July 1, 1995
Net sales volume . . . . . . . . . $1,255,087 433,450 - 1,688,537 (a)
Net margins from operations . . . . $ 34,095 8,420 - 42,515
General corporate expenses . . . . (7,451)
Other deductions, net . . . . . . . (9,478)
Margins before income taxes and
minority interest . . . . . . . $25,586
Depreciation and amortization
expense . . . . . . . . . . . . $ 31,551 5,582 952 (b) 38,085
Capital expenditures . . . . . . . $ 43,423 17,959 380 (b) 61,762
Identifiable assets at July 1,
1995 . . . . . . . . . . . . $ 418,790 258,461 144,386 (b) 821,637
Year ended June 29, 1996
Net sales volume . . . . . . . . . $1,412,083 543,486 - 1,955,569 (a)
Net margins from operations . . . . $ 70,191 10,077 - 80,268
General corporate expenses . . . . (11,811)
Other deductions, net . . . . . . . (6,338)
Margins before income taxes and
minority interest . . . . . . . $ 62,119
Depreciation and amortization
expense . . . . . . . . . . . . $ 32,303 7,124 636 (b) 40,063
Capital expenditures . . . . . . . $ 54,899 18,582 781 (b) 74,262
Identifiable assets at June 29,
1996 . . . . . . . . . . . . $ 498,722 300,827 176,411 (b) 975,960
(a) Net sales volume includes export sales amounting to $37,731, $70,113 and $100,089 in 1994, 1995 and 1996,
respectively, which have no significant geographical concentration.
(b) Amounts relate to unallocated corporate assets.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not Applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Directors of Gold Kist are:
Years
Term Served as
Name Age Office Expires Director
(as of
8/30/96)
W. P. Smith, Jr.* 67 Chairman of the Board & 1998 23
Director (District 1)
Herbert A. Daniel, Jr. 44 Director (District 2) 1998 1
Fred K. Norris, Jr.* 68 Director (District 3) 1997 19
James E. Brady, Jr. 61 Director (District 4) 1996 12
W. Kenneth Whitehead 52 Director (District 5) 1996 3
Dan Smalley* 47 Director (District 6) 1996 11
A. Jack Nally 53 Director (District 7) 1997 5
M. Michael Davis 45 Director (District 8) 1997 2
Phil Ogletree, Jr. 63 Director (District 9) 1998 19
* Member of Board of Directors Executive Committee.
The Directors of Gold Kist are elected on a
district representation basis. The districts are redrawn from
time to time by the Board of Directors, under provisions of
the By-Laws of Gold Kist, to provide for equitable
representation of members in the territory served by Gold
Kist. During the past five years, each of the Directors has
owned and managed substantial farming operations, producing
such agricultural products as peanuts, cotton, soybeans, corn,
other grains, peaches, vegetable crops, cattle, poultry and
dairy products. While the size of products produced on, and
personnel employed at, each of the Director's farms varies,
each Director's business activities have been related
primarily to small agribusiness enterprises. There are no
family relationships among any of the Directors and executive
officers.
The Executive Officers of Gold Kist are:
Years Years
Served Served
In that with
Name Age Office Office Gold Kist
(as of
8/30/96)
G. O. Coan* 60 Chief Executive Officer, 1 37
and Chairman of the
Management Executive
Committee
John Bekkers* 51 President and Chief 1 11
Operating Officer
M. A. Stimpert 52 Senior Vice President, 5 months 13
Planning and Administration
Kenneth N. Whitmire 58 Group Vice President, 8 35
Poultry Group
Jack L. Lawing 58 General Counsel, Vice 20 20
President and Secretary
Peter J. Gibbons 59 Vice President, Finance 17 20
Paul G. Brower 57 Vice President, 17 17
Communications
W. A. Epperson 60 Vice President, 17 21
Human Resources
Jerry L. Stewart 56 Vice President - 15 33
Marketing, Poultry Group
John K. McLaughlin 58 Vice President, Pet Food 12 12
and Animal Products Division
Allen C. Merritt 50 Vice President, Fertilizer 13 24
and Chemical Division
Stanley C. Rogers 50 Vice President, 6 18
AgriServices Division
Michael F. Thrailkill 48 Vice President, 4 23
Information Services
Stephen O. West 50 Treasurer 13 16
W. F. Pohl, Jr. 46 Controller 14 20
*Member of Management Executive Committee
The officers serve for terms of one year and until
their successors are elected by the Board of Directors.
During the past five years the principal occupation of
each of the above named executive officers, with exception of
Michael A. Stimpert, has been as an officer or employee of
Gold Kist.
Mr. Michael A. Stimpert was elected Senior Vice
President, Planning and Administration, effective April 1,
1996. He previously served as Vice President from January 1,
1996 until election to his current position. From December
19, 1986 until January 1996, Mr. Stimpert served as Executive
Vice President of Golden Peanut Company, a peanut processing
and marketing company headquartered in Atlanta, Georgia. Mr.
Stimpert was employed by Gold Kist Inc. from June 1974 until
December 1986 in a variety of positions, including Group Vice
President, Agricommodities Group and Group Vice President,
AgriProducts Group.
Item 11. Executive Compensation.
Summary Compensation Table. The following table sets
forth information concerning the compensation received by the
Chief Executive Officer and for each of the four other most
highly compensated executive officers:
Annual compensation
Other
annual All other
Fiscal compensa- compensa-
year Salary Bonus tion(1) tion
ended ($) ($) ($) ($)
Gaylord O. Coan June 29, 1996 $349,058 $450,000 $1,055 $12,030(2)
Chief Executive July 1, 1995 327,000 103,000 268 12,961(2)
Officer and June 25, 1994 297,293 270,000 - 4,820(3)
Chairman of the
Management Executive
Committee
John Bekkers June 29, 1996 $210,577 $295,000 $1,110 $ 9,425(2)
President and July 1, 1995 162,453 71,200 62 8,703(2)
Chief Operating June 25, 1994 106,511 56,900 - 2,663(3)
Officer
Kenneth N. Whitmire June 29, 1996 $189,819 $240,000 $2,375 $ 9,965(2)
Group Vice President, July 1, 1995 184,373 83,000 457 9,758(2)
Poultry Group June 25, 1994 170,558 230,000 - 4,264(3)
Jerry L. Stewart June 29, 1996 $161,727 $164,000 $ 1,889 $ 9,569(2)
Vice President July 1, 1995 160,600 54,000 320 9,158(2)
Marketing, June 25, 1994 147,904 150,000 - 3,698(3)
Poultry Group
Peter J. Gibbons June 29, 1996 $149,758 $92,000 $ 158 $ 9,982(2)
Vice President July 1, 1995 148,988 29,000 30 9,775(2)
Finance June 25, 1994 137,250 75,000 - 3,431(3)
Harold O. Chitwood(4) June 29, 1996 $148,508 $123,000 $2,815 $ 8,404(2)
Chief Executive July 1, 1995 419,888 120,000 616 13,080(2)
Officer and June 25, 1994 388,483 310,000 - 4,722(3)
Chairman of the
Management Executive
Committee
_______________________________
(1) The amounts shown for the fiscal year ended June 29, 1996
set forth that portion of interest earned on voluntary
salary and bonus deferrals under non-qualified deferred
compensation plans above 120% of the applicable federal
rate. Other than such amounts, for the fiscal years
ended June 29, 1996, July 1, 1995, and June 25, 1994, no
amounts of "Other Annual Compensation" were paid to any
of the above named executive officers, except for
perquisites and other personal benefits which for each
executive officer did not exceed the lesser of $50,000 or
10% of such individual's salary plus annual bonus.
(2) The amounts set forth include the following amounts that
were contributed by the Association for fiscal years 1996
and 1995 on behalf of the named executive officers
pursuant to the Gold Kist Profit Sharing and Investment
Plan, a qualified defined contribution plan (401(K)):
Mr. Coan - $4,500 and $5,418 respectively, Mr. Bekkers -
$4,946 and $4,206 respectively; Mr. Whitmire - $4,656 and
$4,438 respectively; Mr. Stewart - $4,617 and $4,193
respectively; Mr. Gibbons - $4,500 and $4,304
respectively; and Mr. Chitwood - $0 and $4,676
respectively. In addition, the amounts set forth include
for fiscal years 1995 and 1996 the following amounts
which represent the value of the named executive
officer's benefit from premiums paid by the Association
under a split dollar life insurance plan for the named
executive officers: Mr. Coan - $7,530 and $7,543
respectively; Mr. Bekkers - $4,479 and $4,497
respectively; Mr. Whitmire - $5,309 and $5,320
respectively; Mr. Stewart - $4,952 and $4,965
respectively; Mr. Gibbons - $5,482 and $5,471
respectively; and Mr. Chitwood - $8,404 and $8,404
respectively. The Association uses the modified premium
method in determining the portion of each premium dollar
attributable to the named executive officers. The
Association will recover the cost of premium payments
from the cash value of the policies.
(3) The amounts set forth include amounts that were
contributed by the Association for the indicated fiscal
years on behalf of the named executive officers pursuant
to the Gold Kist Profit Sharing and Investment Plan, a
qualified defined contribution plan (401(K) plan).
(4) Mr. Chitwood retired from Gold Kist, effective October
27, 1995.
Retirement Plans. Gold Kist maintains two noncontributory
retirement plans, one for salaried employees and the other for
hourly employees, which together cover substantially all
employees who have served at least one year with Gold Kist,
including those employees subject to collective bargaining
agreements. The plan for salaried employees was amended in
1984 to delete the one year waiting period for credited
service. For salaried employees, the plan provides a
retirement benefit after 30 years of credited service at age
65, which, when combined with the portion of the employee's
primary Social Security benefit attributable to his/her
employer's contributions, will equal 45% of his/her average
earnings during the period of five years in which he/she had
the highest earnings in the last ten years of employment
immediately preceding attainment of age 65, or if retired
before age 65, in the last ten years immediately preceding
early retirement. This plan also provides an early retirement
benefit after age 55, with no reduction in benefit entitlement
due to age, when the sum of the employee's age and years of
service equal or exceed 90. The benefit entitlement is
reduced in either case for each year of credited service less
than 30 years. For hourly employees who work for Gold Kist
until age 65, the plan provides a monthly pension benefit
equal to $9.00 for each year of plan participation, payable at
age 65; early retirement is permitted after age 55 at reduced
benefit levels. The plans contain a death benefit for the
surviving spouse of an active employee (who had at least five
years credited service or was at least 55 years old at the
time of death) which equals 50% of the deceased employee's
accrued retirement income benefit. Accrued benefits under the
plans vest after the employee attains five years of service or
at age 55, and the minimum pension benefit at age 65 is $9.00
per month for each year of credited service. Amounts
contributed for specific individuals under Gold Kist's
retirement income plan for salaried employees cannot be
readily determined. For the plan year ended December 31,
1995, the Association made a contribution of $1,412,000 to the
pension plan for hourly employees. Due to the full funding
limitation of the Internal Revenue Service, the Association
was not permitted to make a tax-deductible contribution to the
retirement income plan for salaried employees for the plan
year ended December 31, 1995. Estimated annual benefits
payable upon retirement at normal retirement age (65 years) to
persons in specified years of service and remuneration
classifications, before offset of Social Security benefits,
are illustrated in the following table:
Estimated Annual Benefits For Years of Service Indicated
Remuneration 10 Years 15 Years 20 Years 25 Years 30 Years or More
$ 30,000 $ 7,500 $ 11,250 $ 15,000 $18,750 $ 22,500
$100,000 15,000 22,500 30,000 37,500 45,000
$150,000 22,500 33,750 45,000 56,250 67,500
$200,000 30,000 45,000 60,000 75,000 90,000
$250,000 37,500 56,250 75,000 93,750 112,500
$350,000 52,500 78,750 105,000 127,374 128,574
$500,000 75,000 112,500 126,174 127,374 128,574
$750,000 112,500 124,974 126,174 127,374 128,574
$850,000 123,774 124,974 126,174 127,374 128,574
For years after 1993, the maximum annual
amount of compensation that can be used for determining an
individual's benefit under a qualified plan is $150,000.
The plan covers the compensation set forth in the columns
entitled "Salary" and "Bonus" in the Summary Compensation Table.
The credited years of service as of December 31, 1994, under the
retirement income plan for the five executive officers listed in
the summary compensation table are as follows: Mr. Chitwood
(30); Mr. Coan (30); Mr. Bekkers (11); Mr. Whitmire (30); Mr.
Stewart (30); and Mr. Gibbons (20).
A Supplemental Executive Retirement Plan has been adopted by
the Association whereby Gold Kist makes supplemental payments to
certain employees under a non-qualified deferred compensation
plan to make up for any reduction in such employees' retirement
income under the Gold Kist salary retirement plan resulting from
restrictions placed on qualified retirement plans under Section
415 of the Internal Revenue Code of 1986, as amended. Such
restrictions limit the amount of benefits payable in qualified
retirement plans with respect to the percentage of final pay to
which such employees would be otherwise entitled upon retirement.
All vested amounts accrued under the Plan have been funded in a
trust which is secure against all contingencies except a
bankruptcy of the Association. The following table shows the
estimated annual benefits payable upon retirement at normal
retirement age (65) to persons in specified years of service and
remuneration classifications, before offset of Social Security
benefits and without restriction imposed by the Internal Revenue
Code. The amounts shown in the table would be reduced by the
amounts payable pursuant to the Gold Kist Retirement Plan for
Salaried Employees.
Estimated Annual Benefits For Years of Service Indicated
Remuneration 10 Years 15 Years 20 Years 25 Years 30 Years or More
$100,000 $ 15,000 $ 22,500 $ 30,000 $ 37,500 $ 45,000
$150,000 22,500 33,750 45,000 56,250 67,500
$200,000 30,000 45,000 60,000 75,000 90,000
$250,000 37,500 56,250 75,000 93,750 112,500
$350,000 52,500 78,750 105,000 131,250 157,500
$500,000 75,000 112,500 150,000 187,500 225,000
$750,000 112,500 168,750 225,000 281,250 337,500
$850,000 127,500 191,250 255,000 318,750 382,500
Covered compensation, computation of the average final
compensation, and credited years of service for the five
executive officers listed in the summary compensation table are
the same as that set forth in the foregoing description of the
Gold Kist Retirement Plan for Salaried Employees.
In addition to the retirement benefits provided by its
qualified and nonqualified retirement plans, Gold Kist has
contracted to provide certain key employees with compensation
benefits after normal retirement. These benefits, known as the
Management Deferred Compensation Plan, are paid monthly following
retirement in an annual amount equal to 25% of the average annual
salary for the ten year period immediately prior to retirement.
These benefits are payable, depending on the contract, for a 10
or 15 year period following retirement to a former key employee
or his designated beneficiary. All vested amounts accrued under
the plan have been funded in a trust which is secure against all
contingencies except a bankruptcy of the Association. Estimated
annual benefits payable under the Management Deferred
Compensation Plan would be based upon the following average
annual salary of the eligible named executives for the ten year
period ended as of June 29, 1999: Mr. Coan - $213,789; Mr.
Bekkers - $104,208; Mr. Whitmire - $140,954; and Mr. Chitwood -
$268,560.
Change in Control Plans. Under the Gold Kist officers
contingency plan, the Association has entered into identical
change in control agreements with each officer, including the
five executive officers named in the cash compensation table.
Each change in control agreement provides that following a change
in the control of the Association (as defined in the agreements),
if the officer's employment with the Association terminates
within two years after the change in control (but prior to the
officer's reaching age 65), the officer will be entitled to
receive a severance payment calculated by determining the "Base
Severance Amount" as follows:
(1) if the officer is age 60 or younger at the time of
termination of his employment, the amount equal to the
officer's compensation paid by the Association for the
five full calendar years ending before the date of the
change in control, or
(2) if the officer is older than age 60 at the time of his
termination of employment, the amount equal to the
officer's average annual compensation paid by the
Association for the lesser of five full calendar years
or the full calendar years of service with the
Association ending before the change in control,
multiplied by the number of years and fractions thereof
remaining until the officer's 65th birthday.
The Base Severance Amount is to be adjusted for those officers
with less than 15 years of service by prorating the Base
Severance Amount with the numerator being the number of completed
calendar years of service and the denominator being 15. However,
the minimum any terminated officer would receive would be one and
one-half times the average annual compensation paid by the
Association for the actual number of full calendar years worked,
if less than five, or the annual salary amount for an officer who
has worked less than one calendar year. The severance payment
will include an additional amount equal to any excise tax under
Section 4999 of the Internal Revenue Code of 1986 incurred by the
officer, plus all federal, state and local income taxes incurred
by the officer with respect to receipt of the additional amount.
Additionally, under such contracts, medical benefits would remain
available to current and retired officers on the same basis as is
provided at the time of a change in control. The Association has
agreed to pay all legal fees and expenses incurred by an officer
in the pursuit of the rights and benefits provided by the change
in control agreement. The Association has entered into similar
change in control agreements with each director of Gold Kist. As
of June 29, 1996, no contingencies have occurred which would
require the implementation of the provisions of the changes in
control plans, and no payments or other benefits have been
provided to the five executive officers named in the summary
compensation table or to the directors.
Director Compensation. The By-Laws of Gold Kist provide that
the Directors shall be compensated for their services and
reimbursed for their expenses, as determined by the Board of
Directors. Currently the Directors receive no compensation other
than an annual retainer paid at the rate of $20,000 per year,
with the Chairman receiving $21,500. Directors and Directors
Emeriti receive a per diem of $250 with a $500 minimum, plus
expenses incurred while traveling to and from and attending
meetings of the Board of Directors or other official meetings or
conferences. Pursuant to separate agreements, Gold Kist has
arranged to provide life benefits to qualifying directors emeriti
and to make available health insurance and other medical benefits
for Gold Kist directors and directors emeriti as are available to
employees of Gold Kist from time to time pursuant to the
Association group insurance program.
Compensation Committee Interlocks and Insider Participation.
Director W. P. Smith, Jr., Fred K. Norris, Jr. and Dan Smalley
serve as members of the Association's Compensation Committee.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Not Applicable.
Item 13. Certain Relationships and Related Transactions.
The Directors of Gold Kist are members of the Association and,
during the fiscal year ended June 29, 1996, have had dealings in
the ordinary course of business with Gold Kist as purchasing or
marketing patrons. See Business (and Properties) -- Patronage
Refunds.
GOLD KIST INC.
Schedule II - Valuation Reserves
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Additions
Balance at Charged to Charged Balance
Beginning Cost and To Other At End
Description Of Period Expenses Accounts Deductions Of Period
(amounts in thousands)
Deducted in the consolidated
balance sheets from the asset
to which it applies:
Allowance for doubtful accounts:
June 25, 1994 $5,255 1,662 - 1,548 (A) 5,369
July 1, 1995 5,369 2,382 - 1,874 (A) 5,877
June 29, 1996 5,877 4,029 - 2,180 (A) 7,726
(A) Represents accounts written off.
Allowance for deferred tax
assets valuation:
June 25, 1994 $ - 1,913 (B) - - 1,913
July 1, 1995 1,913 71 - - 1,984
June 29, 1996 1,984 - - 578 (C) 1,406
(B) Represents establishment of allowance for net operating loss deductions not available for state
income tax purposes.
(C) Represents estimate of net operating loss deductions that are deductible.
(a)3. Exhibits - Index of Exhibits
Exhibits designated as previously filed with the Commission
in the Index of Exhibits, below, are incorporated by
reference into this Report.
Designation
of Exhibit Document with Which Designation
in this Exhibit Was Previously of such Exhibit
Report Description of Exhibit Filed with Commission in thatDocument
B-2(a) Agreement and Plan of Annual Report on Form Exhibit B-2(a)
Merger, dated June 20, 10-K for the Fiscal
1986, and effective Year ended June 30,
June 30, 1986, between 1986
Carolina Golden Products,
Inc., and Golden Poultry
Company, Inc.
B-3(a) Restated and Amended Annual Report on Form Exhibit B-3(a)
Articles of Incorpo- 10-K for the Fiscal
ration of Registrant Year ended June 26, 1993
B-3(b) Current By-Laws of Annual Report on Form Exhibit B-3(b)
Registrant, as amended 10-K for the Fiscal Year
ended June 25, 1994
B-4(a)(1) Form of Indenture dated Registration filed on Exhibit 4(a)(2)
as of December 1, 1977, Form S-1 (Registration
governing the terms of No. 2-59958)
the 9% Fifteen Year
Certificates of Interest,
including therein a table
of contents and cross-
reference sheet
B-4(a)(2) Form of First Supplemental Registration filed on Exhibit 4(a)(2)
Indenture, dated as of Form S-1 (Registration
September 1, 1979, amending No. 2-69267)
the terms of the Form of
Indenture dated as of
December 1, 1977, governing
the terms of the 9% Fifteen
Subordinated Capital
Year Subordinated Capital
Certificates of Interest
B-4(a)(3) Form of Indenture, dated Registration filed on Exhibit 4(a)(2)
as of September 1, 1979, Form S-1 (Registration
governing the terms of the No. 2-65587)
Fifteen Year Subordinated
Capital Certificates of
Interest (Series B), including
therein a table of contents
and cross-reference sheet
B-4(a)(4) Form of First Supplemental Registration filed on Exhibit 4(a)(4)
Indenture, dated as of Form S-1 (Registration
September 1, 1980, governing No. 2-69267)
the terms of the Fifteen
Year Subordinated Capital
Certificates of Interest
(Series C)
B-4(a)(5) Form of Second Supplemental Registration filed on Exhibit 4(a)(5)
Indenture, dated as of Form S-2 (Registration
September 1, 1982, governing No. 2-79538)
the terms of the Fifteen
Year Subordinated Capital
Certificates of Interest
(Series D)
B-4(b)(1) Form of Indenture, dated Registration filed on Exhibit 4(b)(2)
as of December 1, 1977, Form S-1 (Registration
governing the terms of the No. 2-59958)
8-1/2% Ten Year Subordinated
Capital Certificates of
Interest, including therein
a table of contents and cross-
reference sheet
B-4(b)(2) Form of First Supplemental Registration filed on Exhibit 4(b)(2)
Indenture, dated as of Form S-1 (Registration
September 1, 1979, amending No. 2-69267)
the terms of the Form of
Indenture dated as of
December 1, 1977 governing
the terms of the 8-1/2% Ten
Year Subordinated Capital
Certificates of Interest
B-4(b)(3) Form of Indenture, dated Registration filed on Exhibit 4(b)(2)
as of September 1, 1979, Form S-1 (Registration
governing the terms of No. 2-65587)
the Ten Year Subordinated
Capital Certificates of
Interest (Series B),
including a table of contents
and cross-reference sheet
B-4(b)(4) Form of First Supplemental Registration filed on Exhibit 4(b)(4)
Indenture, dated as of Form S-1 (Registration
September 1, 1980, governing No. 2-69267)
the terms of the Ten Year
Subordinated Capital
Certificates of Interest
(Series C)
B-4(b)(5) Form of Second Supplemental Registration filed on Exhibit 4(b)(5)
Indenture, dated as of Form S-2 (Registration
September 1, 1982, governing No. 2-79538)
the terms of the Ten Year
Subordinated Capital
Certificates of Interest
(Series D)
B-4(c) Form of Indenture, dated as Registration filed on Exhibit 4(c)
of September 1, 1985, Form S-2 (Registration
governing the terms of the No. 33-428)
Seven Year Subordinated
Capital Certificates of
Interest (Series A), including
therein a table of contents,
cross-reference sheet, and
form of Seven Year Subordinated
Capital Certificates of Interest
B-4(d)(1) Form of Indenture, dated Registration filed on Exhibit 4(c)(2)
as of September 1, 1979, Form S-1 (Registration
governing the terms of the No. 2-65587)
Five Year Subordinated
Capital Certificates of
Interest (Series A),
including therein a table
of contents and cross-
reference sheet
B-4(d)(2) Form of First Supplemental Registration filed on Exhibit 4(d)(2)
Indenture, dated as of Form S-1 (Registration
September 1, 1980, governing No. 2-69267)
the terms of the Five Year
Subordinated Capital Certifi-
cates of Interest (Series B)
B-4(d)(3) Form of Second Supplemental Registration filed on Exhibit 4(d)(3)
Indenture, dated as of Form S-2 (Registration
September 1, 1982, governing No. 2-79538)
the terms of the Five Year
Subordinated Capital Certifi-
cates of Interest (Series C)
B-4(e) Form of Indenture, dated Registration filed on Exhibit 4(f)(2)
as of September 1, 1985, Form S-2 (Registration
governing the terms of No. 33-428)
the Three Year
Subordinated Capital Certifi-
cates of Interest (Series A),
including therein a table of
contents, cross-reference
sheet, and form Capital
Certificates of Interest
B-4(f) Form of Indenture, dated Registration filed on Exhibit 4(g)
September 1, 1980, governing Form S-1 (Registration
the terms of the Two Year No. 2-69267)
Subordinated Capital Certifi-
cates of Interest (Series A),
including therein a table of
contents and cross-reference
sheet
B-4(g)(1) Form of Indenture, dated as of Registration filed on Exhibit 4(h)(1)
September 1, 1985, governing Form S-2 (Registration
the terms of the One Year No. 33-428)
Subordinated Large Denomi-
nation Loan Certificate
(Series A), including therein
a table of contents, cross-
reference sheet, and form of
One Year Subordinated Large
Denomination Loan Certificates
B-4(g)(2) Form of Indenture, dated as of Registration filed on Exhibit 4(d)(2)
September 1, 1979, governing Form S-1 (Registration
the terms of the One Year No. 2-65587)
Subordinated Loan Certificates
(Series B), including therein
a table of contents and
cross-reference sheet
B-4(g)(3) Form of First Supplemental Registration filed on Exhibit 4(f)(2)
Indenture, dated as of Form S-1 (Registration
September 1, 1980, governing No. 2-69267)
the terms of the One Year
Subordinated Loan Certificates
(Series C)
B-4(h) Form of Indenture, dated as Registration filed on Exhibit 4(i)
of September 1, 1985, Form S-2 (Registration
governing the terms of the No. 33-428)
Six Month Subordinated
Large Denomination Loan
Certificate (Series A),
including therein a table of
contents, cross-reference
sheet, and form of Six Month
Subordinated Large Denomination
Loan Certificates
B-4(i)(1) Specimen of Cumulative Registration filed on Exhibit 4(f)
Preferred Capital Cer- Form S-l (Registration
tificates of Interest used No. 2-59958)
for three year (6.5%-8%),
six year (6.75%-8.5%), ten
year (7%-9%) and fifteen year
(9%) fixed-maturity cer-
tificates
B-4(i)(2) Specimen of Subordinated Annual Report on Form ExhibitB-4(h)(2)
Capital Certificates of 10-K for the Fiscal Year
Interest used for Fifteen Ended June 30, 1982
Year (Series B and C), Ten
Year (Series B and C), Five
Year (Series A and B) and Two
Year (Series A)
B-4(i)(3) Specimen of Subordinated Loan- Annual Report on Form Exhibit B-4(h)(3)
Certificates (Series B and C) 10-K for the Fiscal Year
Ended June 30, 1982
B-4(j) Specimen of 5% Cumulative Registration filed on Exhibit 4(g)
Preferred Capital Certificates Form S-l (Registration
of Interest with no fixed No. 2-59958)
maturities
B-4(k) Agreement to furnish copies Registration filed on Exhibit 4(h)
of constituent instruments Form S-1 (Registration
defining the rights of the No. 2-59958)
holders of certain industrial
revenue bonds
B-4(l)(1) Note Agreement with the Quarterly Report on Exhibit B-4(n)
Prudential Insurance Company Form 10-Q for the
of America dated as of Fiscal Quarter
December 15, 1986 ended December 31, 1986
B-4(l)(2) Amendment dated as of June 30, Registration filed Exhibit 4(l)(2)
1987, to Note Agreement with on Form S-2
the Prudential Insurance (Registration No.
Company of America 33-24623)
B-4(l)(3) Note Agreement with the Quarterly Report on Exhibit B-4(q)(1)
Prudential Insurance Form 10-Q for the
Company of America dated Fiscal Quarter ended
as of November 4, 1988 December 31, 1988
B-4(l)(4) Note Agreement with Quarterly Report on Exhibit B-4(q)(2)
Pruco Life Insurance Form 10-Q for the
Company dated as of Fiscal Quarter ended
November 4, 1988 December 31, 1988
B-4(l)(5) Amendment dated as of Registration filed on Exhibit 4(l)(5)
January 9, 1991, to Note Form S-2 (Registration
Agreements with the Prudential No. 33-42900)
Insurance Company of America
and Pruco Life Insurance
Company
B-4(l)(6) Note Agreement with the Registration filed on Exhibit 4(l)(6)
Prudential Insurance Company Form S-2 (Registration
of America, dated as of No. 33-42900)
June 3, 1991
B-4(l)(7) Amendment dated as of June 26, Registration filed on Exhibit 4(l)(7)
1992, to Note Agreements with Form S-2 (Registration
the Prudential Insurance Company No. 33-52268)
of America
B-4(l)(8) Amendment dated July 14, 1993, Registration filed on Exhibit 4(l)(8)
to Note Agreements with the Form S-2(Registration
Prudential Insurance Company of No. 33-69204)
America and Pruco Life Insurance
Company
B-10(a) Form of Deferred Compensation Registration filed on Exhibit 11(d)
Agreement between Gold Kist Form S-1(Registration
Inc. and certain executive No. 2-59958)
officers*
B-10(b)(1) Gold Kist Management Bonus Registration filed on Exhibit 10(b)
Program* Form S-1 (Registration
No. 2-69267)
B-10(b)(2) Amended Gold Kist Management Registration filed on Exhibit 10(b)(2)
Bonus Program* Form S-2 (Registration
No. 2-79538)
B-10(b)(3) Form of Gold Kist Supplemental Registration filed on Exhibit 10(b)(3)
Executive Retirement Income Form S-2 (Registration
non-qualified deferred No. 33-9007)
compensation agreement between
Gold Kist and certain execu-
tive officers and Resolution
of Gold Kist Board of Directors
authorizing the Supplemental
Executive Retirement Plan*
B-10(b)(4) Resolution of Gold Kist Board Registration filed on Exhibit 10(b)(4)
of Directors authorizing the Form S-2 (Registration
Gold Kist Special Award Plan* No. 33-9007)
B-10(b)(5) Form of Gold Kist Executive's Registration filed on Exhibit 10(b)(5)
Change in Control Agreement Form S-2 (Registration
between Gold Kist and certain No. 33-31164)
officers and resolution of
Gold Kist Board of Directors
authorizing the Officers
Contingency Plan*
B-10(b)(6) Form of Directors Change Registration filed on Exhibit 10(b)(6)
in Control Agreement Form S-2 (Registration
between Gold Kist and No. 33-36938
Directors of Gold Kist*
B-10(b)(7) Form of Director Registration filed on Exhibit 10(b)(7)
Emeritus Life Benefits Form S-2 (Registration
Agreement* No. 33-36938)
B-10(b)(8) Form of Director Emeritus Registration filed on Exhibit 10(b)(8)
Agreement for Medical Benefits* Form S-2 (Registration
No. 33-36938)
B-10(b)(9) Gold Kist Executive Savings Registration filed on Exhibit 10(b)(9)
Plan, as amended * Form S-2 (Registration
No. 33-62869)
B-10(b)(10) Gold Kist Director Savings Registration filed on Exhibit 10(b)(10)
Plan, as amended * Form S-2 (Registration
No. 33-62869)
B-10(b)(11) Gold Kist Split Dollar Life Registration filed on Exhibit 10(b)(11)
Insurance Plan * Form S-2 (Registration
No. 33-62869)
B-10(c)(l) Form of Membership, Marketing, Registration filed on Exhibit 13(b)
and/or Purchasing Agreement of Form S-1 (Registration
Gold Kist Inc., Atlanta, No. 2-59958)
Georgia
B-10(c)(2) Form of Membership, Marketing, Registration filed on Exhibit 10(c)(2)
and/or Purchasing Agreement of Form S-1 (Registration
Gold Kist Inc., Atlanta, No. 2-74205)
Georgia as revised October
17, 1980
B-10(c)(3) Form of Membership, Marketing, Registration filed on Exhibit 10(c)(3)
and/or Purchasing Agreement of Form S-2 (Registration
Gold Kist Inc., Atlanta, No. 33-428)
Georgia, as revised November
l, l984
B-10(c)(4) Form of Membership, Marketing, Registration filed on Exhibit 10(c)(4)
and/or Purchasing Agreement Form S-2 (Registration
of Gold Kist Inc., Atlanta, No. 33-24623)
Georgia, revised October
29, 1987
B-10(c)(5) Form of Membership, Marketing, Registration filed on Exhibit 10(c)(5)
and/or Purchasing Agreement of Form S-2 (Registration
Gold Kist Inc., Atlanta, Georgia, No. 33-42900)
revised August 21, 1991
B-10(d) CF Industries, Inc., Member Registration filed on Exhibit 13(j)
Product Purchase Agreement Form S-2 (Registration
No. 2-59958)
B-10(e)(1) General Partnership Agreement Registration filed on Exhibit 10(h)(1)
(GC Properties) between Gold Form S-2 (Registration
Kist Inc. and Cotton States No. 33-428)
Mutual Insurance Company,
dated as of July 1, 1984
B-10(e)(2) Lease from GC Properties, Registration filed on Exhibit 10(h)(2)
dated December 11, 1984, Form S-2 (Registration
for home office building No. 33-428)
space
B-10(f)(1) General Partnership Agreement Annual Report on Form ExhibitB-10(f)(1)
(Golden Peanut Company) 10-K for the Fiscal
between Gold Kist and Archer- Year Ended June 30, 1987
Daniels-Midland Company, dated
as of December 17, 1986
B-10(f)(2) Amended and Restated Partnership Registration filed on Exhibit 10(f)(2)
Agreement (Golden Peanut Company)Form S-2(Registration
between Gold Kist Inc., Archer- No. 33-31164)
Daniels-Midland Company and
Alimenta Processing Corporation,
dated as of March 1, 1989
B-10(f)(3) Amendment to Amended and Registration filed on Exhibit 10(f)(3)
Restated Partnership Agreement Form S-2 (Registration
(Golden Peanut Company) between No. 33-42900)
Gold Kist Inc., Archer-Daniels-
Midland Company and Alimenta
Processing Corporation, dated
as of June 30, 1991
B-10(f)(4) Master Commercial Facilities Annual Report on Form ExhibitB-10(f)(2)
Lease Agreement between Gold 10-K for the Fiscal
Kist and Golden Peanut Company Year Ended June 30, 1987
dated as of December 17, 1986
B-10(g) Agreement of Sale of Valdosta, Annual Report on Form Exhibit B-10(g)
Georgia Soy Processing Plant, 10-K for the Fiscal
between Gold Kist and Archer- Year Ended June 30, 1987
Daniels-Midland Company,
dated July 2, 1987
B-10(h) Grain Procurement Agreement Annual Report on Form Exhibit B-10(h)
between Gold Kist and Archer- 10-K for the Fiscal
Daniels-Midland Company, dated Year Ended June 30, 1987
August 31, 1987
B-10(i) General Partnership Registration filed on Exhibit 10(i)
Agreement (Carolina Golden Form S-2 (Registration
Products Company) between No. 33-42900)
AgriGolden, Inc., and
Golden Poultry Company, Inc.,
dated as of January 28, 1991
B-10(j) Credit Agreement dated as of Registration filed Exhibit 10(j)
August 9, 1996, with Various Banks September 20, 1996
and Lending Institutions, as Lenders, on Form S-2(
and SunTrust Bank, Atlanta, as agent Registration No. 33- )
B-10(k)(1) Line of Credit Agreement with Registration filed on Exhibit 4(n)
CoBank, dated as of February Form S-2 (Registration
22, 1991 No. 33-42900)
B-10(k)(2) Amendment dated as of March 1, Registration filed on Exhibit 4(n)(2)
1992, to Line of Credit Agreement Form S-2 (Registration
with CoBank No. 33-52268)
B-10(k)(3)Amendment dated as of December Registration filed on Exhibit 4(n)(3)
18, 1992, to Line of Credit Form S-2 (Registration
Agreement with CoBank No. 33-69204)
B-10(k)(4)Amendment dated as of Registration filed on Exhibit 4(n)(4)
December 13, 1993 to Form S-2 (Registration
Line of Credit Agreement No. 33-55563)
with CoBank
B-10(l) Guaranty dated December 18, Registration filed on Exhibit 4(o)
1992 by Gold Kist in favor of Form S-2 (Registration
NationsBank of Georgia, N.A. No. 33-69204)
B-21 Subsidiaries of the Registrant Registration filed on Exhibit 21
Form S-2 (Registration
No. 33-62869)
B-27 Financial Data Schedule
_________________________________
*Plans and arrangements pursuant to which executive officers and
directors of the Association receive compensation.
(b) Reports on Form 8-K. - No reports on Form 8-K
have been filed during the last quarter of the fiscal year ended
June 29, 1996.
SIGNATURES - Pursuant to the requirements of Section 13 or 15(d)
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.
GOLD KIST INC.
Date: September 19, 1996 By:/s/ G. O. Coan
G. O. Coan, Chief
Executive Officer
(Principal Executive
Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
/s/ G. O. Coan Chief Executive Officer September 19, 1996
G. O. COAN (Principal Executive Officer)
/s/ Peter J. Gibbons Vice President-Finance September 19, 1996
PETER J. GIBBONS (Principal Financial Officer)
/s/ W. F. Pohl, Jr. Controller (Principal September 19, 1996
W. F. POHL, JR. Accounting Officer)
/s/ W. P. Smith, Jr. Director September 17, 1996
W. P. SMITH, JR.
/s/ Fred K. Norris, Jr. Director September 17, 1996
FRED K. NORRIS, JR.
/s/ Dan Smalley Director September 17, 1996
DAN SMALLEY
/s/ Phil Ogletree, Jr. Director September 17, 1996
PHIL OGLETREE, JR.
/s/ James E. Brady, Jr. Director September 17, 1996
JAMES E. BRADY, JR.
/s/ A. Jack Nally Director September 17, 1996
A. JACK NALLY
/s/ W. Kenneth Whitehead Director September 17, 1996
W. Kenneth Whitehead
/s/H. Michael Davis Director September 17, 1996
H. Michael Davis
/s/ Herbert A. Daniel, Jr. Director September 17, 1996
HERBERT A. DANIEL, JR.
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description Page
B-27 -Financial Data Schedule