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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JULY 1, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NO. 2-62681
GOLD KIST INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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GEORGIA 58-0255560
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
244 PERIMETER CENTER PARKWAY, N.E. 30346
ATLANTA, GEORGIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (404) 393-5000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (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
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DOCUMENTS INCORPORATED BY REFERENCE
NOT APPLICABLE.
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TABLE OF CONTENTS
Item Page
---- ----
1. Business (and Properties) . . . . . . . . . . . . . . . . . . . 1
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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 . . . . . . . . . . . . . . . . . . . 36
10. Directors and Executive Officers of the Registrant . . . . . . 36
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . 38
12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . . 41
13. Certain Relationships and Related Transactions. . . . . . . . . 41
14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . 42
- i -
GOLD KIST INC.
ANNUAL REPORT FOR THE FISCAL YEAR ENDED JULY 1, 1995
PART 1
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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 25,000 active farmer members located
principally in Alabama, Florida, Georgia, North Carolina 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 Young 'n Tender(R) label; however, some is sold
under customers' private labels. Most of the frozen chicken carries the Gold
Kist(R) or Early Bird(R) label. Cornish game hens are marketed in frozen form
primarily to hotels, restaurants and grocery stores under the Young 'n Tender
and Medallion(R) labels. Medallion, Big Value(R), 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 three integrated poultry processing
complexes in Russellville, Alabama, Douglas, Georgia, and Sanford, 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
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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 cast 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 and have not been significant in relation to the total product cost.
See Note 1 (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 26, June 25, July 1,
1993 1994 1995
-------- -------- -------
Broiler Products
----------------
Volume $1,041,175 $1,152,252 $1,226,104
Percentage (%) 74.3 73.8 72.6
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.
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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 92 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 soybean 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 manufactures. 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 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. Cross Equipment
Company, Inc., a wholly owned subsidiary of Gold Kist, also manufactures and
fabricates farm equipment, principally spreader and sprayer bodies for material
application by vehicles.
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
reginal cooperatives, which produces and supplies fertilizer materials to its
members. For the fiscal year ended July 1, 1995, 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
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trademarks Growers Pride(R), Living Lawn(R), and Garden Gold(R), Gold Kist
also markets a premium growing medium composed of soil materials and fertilizer
nutrients under its trademark Garden on the Spot(R).
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. See Note 10 of Notes to Consolidated Financial
Statements.
Fiscal Year Ended (000's Omitted)
---------------------------------
June 26, June 25, July 1,
1993 1994 1995
Fertilizer
and Chemicals
-------------
Volume $173,778 $211,218 $268,625
Percentage (%) 12.4 13.5 15.9
Pet Food, Feed and Animal Health
Gold Kist operates four major feed mills for its pet food, feed and animal
health 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 July 1, 1995, Gold Kist's feed mills produced
substantially all of the feed it distributed at wholesale or retail. Gold Kist
produces and markets approximately 135 different feeds, including customer
blended feeds and feeds containing various medications. Pro Balanced(R) is a
dairy feed sold through a special program which includes survey and analysis of
feed ingredients needed for a particular herd. Gold Kist offers a similar
program for swine feed. Pro Balanced is a registered trademark of Gold Kist.
Gold Kist also markets dog food under the Pro Balanced and Performance Plus(R)
trademarks through independent dealers and under the Gold Kist and Pro Balanced
and Performance Plus(R) trademarks through Gold Kist retail stores. Aquaculture
feed products, primarily feed for commercial fish farming operations, also form
a portion of Gold Kist's feed business. Gold Kist purchases all animal health
products that it distribute.
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.
Rail transportation is used occasionally for long hauls.
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
In fiscal 1995, the Association began cotton ginning and storage
operations in Georgia. Cotton ginning facilities are operated at Byromville
and DeSoto, Georgia. New ginning and storage facilities are under construction
at Statesboro, Georgia and a central storage warehouse is under construction in
Moultrie, Georgia. The Association will provide ginning and storage services to
members and will market 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(R).
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 ("ADM") and Alimenta Processing
Corporation ("Alimenta") 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
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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
July 1, 1995, the approximate export sales volume of the primary export product
line (poultry) was $70.1 million. During that period, export sales of poultry
were mainly to customers in the Commonwealth of Independent States, Eastern
Europe, the Far East, Mexico 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 squares feet of the building from the
partnership. See Note 3 of Notes to Consolidated Financial Statements.
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 Guntorsville, 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 six
feed mills to support its poultry operations; the mills have an aggregate annual
capacity of 2,715,000 tons
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and are located in Guntersville and Jasper, Alabama; Calhoun, Cartersville, and
Commerce, Georgia; and Live Oak, Florida.
The Association's majority-owned subsidiary, Golden Poultry owns and
operates three poultry processing plants in Douglas, Georgia, Sanford, 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. These plants are supported by hatcheries in
Siler City, North Carolina (with a hatch capacity of 870,000 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, North Carolina, and Pride, Alabama, which have an aggregate
annual capacity of 1,060,800 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 1,350,000 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 four pork production
centers. These production facilities include a pork production center at
Cartersville, 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, 2 locations in Mississippi, 14
locations in South Carolina and one location 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 and Carrollton and Buda, Texas and fertilizer
distribution terminal facilities at Bainbridge and Brunswick, Georgia;
Fayetteville, Morehead City, and Wilmington, North Carolina; Charleston, South
Carolina; and Victoria, Texas.
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 facilities are operated at Byromville and DeSoto, Georgia.
New gin and storage facilities are under construction at Statesboro, Georgia and
a central storage warehouse is under construction in Moultrie, Georgia.
The Association operates a seed processing plant at Dublin, Georgia, which
can clean, grade and treat approximately 537,000 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
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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, 1995) and Chattanooga (terminable upon 30 days notice)
Tennessee: Crossville, Alabama, poultry hatchery facility (lease expires
February 23, 2088); Athens, Georgia, poultry processing plan vehicle parking
area (lease expires February 29, 2001); pet food, feed and animal health product
storage and distribution facilities in Lawrenceville, Georgia (lease expires
November 13, 1996); Anadarko, Oklahoma peanut facility (lease expires November
30, 1996; subleased to Golden Peanut Company); grain procurement and storage
facilities at Jackson, Tennessee (lease expires January 1, 1996); and retail
store facilities at Albany (lease expires December 7, 1996), Athens (lease
expires December 7, 1996), Byromville (lease expires March 15, 1999), Camilla
(terminable upon 30 days' notice), DeSoto (lease expires March 15, 1999),
Lafayette (lease expires March 14, 1996), 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, 1988) and
Jasper (lease expires May 31, 2002) Alabama; Columbia (leases renewable annually
are currently scheduled to expire March 31, 1996 and October 30, 1996), Newberry
(lease expires January 31, 1996) and Sumter (lease expires March 22, 1997) South
Carolina; and Gainesville (lease expires December 7, 1996), Florida. Chemical
storage and distribution facilities are leased at Buda (lease expires February
1, 1999) and Carrollton (lease expires March 31, 1996), Texas, and fertilizer
storage and distribution space is also leased on a continuing as needed basis at
terminals in 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. Management believes that all major Gold Kist facilities
and operations are adequately equipped to maintain compliance with current
environmental and regulatory standards. 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. The
State of South Carolina has designated as a CERCLA-South Carolina Hazardous
Waste Management Site a landfill property near Bennettsville, South Carolina
upon which residue from a January 1977 fire at the former Bennettsville, South
Carolina Farmers Mutual Exchange warehouse was deposited. The Farmers Mutual
Exchange of Bennettsville ("FMX") was merged into Gold Kist in April 1977.
Investigations of this landfill have indicated insignificant contamination.
Pursuant to a consent agreement with the State of South Carolina, Gold Kist will
perform a site assessment to investigate potential sources of
9
contamination and a feasibility study for remedial actions, if necessary, to
address the results of the assessment activities. Gold Kist is unable to
estimate at this time the cost of compliance, if any, to be required of Gold
Kist for either 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 15,700 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 that 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 8-1/2
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
10
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 1994, certain Alabama member patrons of Gold Kist filed a
lawsuit in the Circuit Court of Jefferson County, Alabama, Tenth Judicial
Circuit, against the Association and Golden Poultry and certain directors,
officers and employees 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 officers, directors and
--------------
employees violated their fiduciary duties by diverting corporate opportunities
from Gold Kist to Golden Poultry and Carolina Golden in connection with the
creation of Golden Poultry and Carolina Golden and by permitting their continued
operations. In March 1994, the Court certified the Windham litigation as a
-------
class action. Among the remedies requested are the transfer of Golden Poultry
operations to Gold Kist as well as unspecified actual damages. The Association
intends to defend the litigation vigorously.
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.
11
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 July 1, 1995 and "Consolidated Balance Sheet Data" as of June
29, 1991, June 27, 1992, June 26, 1993, June 25, 1994 and July 1, 1995 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 June 25, 1994 and July 1, 1995 and for each of the years in the three-year
period ended July 1, 1995, and the report thereon of KPMG Peat Marwick LLP,
which is based partially upon the report of other auditors, are included
elsewhere. 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 29, JUNE 27, JUNE 26, JUNE 25, JULY 1,
CONSOLIDATED STATEMENT OF OPERATIONS DATA: 1991 1992 1993 1994 1995
---------- -------- ------- -------- --------
Net sales volume.............................. $1,259,033 1,300,906 1,400,566 1,561,034 1,688,537
========== ========= ========= ========= =========
Interest expense.............................. $ 18,437 18,545 17,163 13,924 17,525
========== ========= ========= ========= =========
Margins (loss) before cumulative effect
of accounting changes...................... $ 32,933 (1,643) 27,238 34,065 11,751
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)............................ $ 32,933 (20,614) 27,238 39,404 11,751
========== ========= ========= ========= =========
AS OF (000'S OMITTED)
---------------------------------------------------------
JUNE 29, JUNE 27, JUNE 26, JUNE 25, JULY 1,
CONSOLIDATED BALANCE SHEET DATA: 1991 1992 1993 1994 1995
------ ------- ------- ------- -------
Working capital............................... $ 114,652 108,045 140,629 139,847 146,585
========= ======== ======== ======== ========
Total assets.................................. $ 671,756 676,698 665,102 716,432 821,637
========= ======== ======== ======== ========
Long-term liabilities......................... $ 146,183 159,449 152,792 144,992 178,777
========= ======== ======== ======== ========
Total liabilities............................. $ 351,284 382,789 354,889 394,754 482,675
========= ======== ======== ======== ========
Patrons' and other equity (B)................. $ 296,940 271,456 285,620 296,662 314,990
========= ======== ======== ======== ========
Current ratio................................. 1.56 1.48 1.70 1.56 1.48
========= ======== ======== ======== ========
Ratio of long-term liabilities to
total capitalization...................... % 32.99 37.00 34.85 32.83 36.21
========= ======== ======== ======== ========
NOTE:
A. See Note 6 of Notes to Consolidated Financial Statements.
B. See Note 9(a) of Notes to Consolidated Financial Statements.
12
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 36 year history. Although the past twelve
years have been a period of continued profitability with the exception of a
brief period during 1992, 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 several years. Broiler
market prices declined in 1991 and remained at low levels 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. According to USDA estimates, the
supply of broilers is expected to increase at a 6.6% rate in 1995 and a 6.2%
rate in 1996 as compared to the 6.5% average annual increase between 1991 and
1994. In 1991, feed grain prices, which represent approximately 50% of total
broiler production costs, moderated as a result of the favorable United States
grain harvests. In 1992, market prices for corn and soybean meal increased 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. Feed ingredient prices are expected to increase in 1996 due to
poor spring planting conditions in the Midwest and difficult growing conditions
during the summer of 1995. Management is unable to predict whether such
conditions will continue in the future or to what extent cyclical pressures will
affect the Association's operations.
Historically, weather has had a significant impact on the farm economy and
the operating results of the Association. Favorable weather conditions
contributed to normal grain production in the United States, which contributed
to lower commodity prices resulting in lower broiler production costs in 1991.
Wet weather conditions in the Southeast during the 1991 spring planting season
contributed to reduced planting of corn and soybean acreage. However, planted
acreage of peanuts and cotton, although delayed by wet weather, increased in
1991 as compared to the prior year. 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.
13
Export sales for 1993, 1994 and 1995 were $27.5 million, $37.7 million and
$70.1 million, respectively. In 1994 and 1995, export sales increased primarily
as a result of the demand for poultry from the Commonwealth of Independent
States and the Far East. Export sales of poultry products will be influenced by
credit availability to foreign countries, political and economic stability,
particularly in the Commonwealth of Independent States, 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 July 1, 1995.
RESULTS OF OPERATIONS
Fiscal 1994 Compared to Fiscal 1993
Net sales volume of $1.6 billion for 1994 increased 11.5% or $160.5 million
from the prior fiscal year as a result of increased sales of poultry products,
as well as increased sales of agricultural production inputs. The Association
had net margins from operations, before general corporate expenses and other
deductions, of $60.6 million for 1994 as compared to $45.1 million in 1993. The
34.3% increase resulted primarily from higher selling prices for poultry
products and increased sales of agricultural products in the Southeast. The
Association's margins before the cumulative effect of accounting changes were
$34.1 million for 1994 as compared to $27.2 million in 1993.
The Poultry segment had record setting net sales volume of $1.2 billion for
1994, which represented a 9.8% increase from the previous fiscal year. Net
margins from operations for 1994 were $52.2 million, a 20.6% increase as
compared to 1993. The increase in net sales volume resulted from an 6.7%
increase in pounds of poultry marketed and a 6.3% increase in average selling
prices. The impact of these factors on net sales volume was partially offset by
lower sales of non-poultry items. As previously discussed, the increase in
market prices for poultry products reflected the general economic recovery in
the United States and the increase in poultry exports during 1994. The increase
in poultry net margins was partially offset by increased feed ingredient prices
which averaged approximately 10.0% above the prior year. Market prices for corn
and soybean meal increased 21.0% and 8.7%, respectively, over the prior year due
to the weather reduced crop in 1993. Market prices for competing meats in late
1994 declined as a result of heavy cattle and pork processing. As a result, net
margins in the pork production operation declined to $775,000 for 1994 as
compared to $1.2 million in 1993.
Net sales volume in the Agri-Services segment for 1994 was $377.3 million,
an increase of $54.7 million or 16.9% as compared to 1993. Net margins from
operations for 1994 were $8.5 million which represented a $6.6 million increase
from 1993. The improvements were due primarily to increased sales of
agricultural production inputs such as fertilizers, chemicals, seed and animal
feeds through the Association's farm supply stores and independent dealers. Hot,
dry weather conditions in 1993 damaged pastures in the Southeast, which resulted
in increased sales of animal feeds in the fall and winter and led to increased
plantings necessary to reestablish pastures. Also, contributing to these
improvements was the increase in cotton acreage and generally favorable weather
conditions for planting during the late winter and spring of 1994.
In 1994, the Association's distribution, administrative and general
expenses were $121.4 million as compared to $111.5 million for 1993, an increase
of 8.9%. The increase reflects higher incentive compensation expense related to
the increase in margins and general expense increases related to expansion in
the Poultry segment and increased net sales volume in the Agri-Services segment.
Distribution, general and administrative expenses as a percentage of net sales
were 7.8% for 1994 and 8.0% for 1993.
14
The various components included in other income (deductions) represented a
deduction of $4.3 million for 1994 as compared to income of $4.2 million for
1993. Interest income of $6.8 million for 1994 declined approximately $788,000
from 1993 due primarily to the sale of collateralized loans to an insurance
company. See Note 8 of Notes to Consolidated Financial Statements. Interest
expense for 1994 was $13.9 million as compared to $17.2 million in 1993. The
$3.2 million decline was due primarily to an 11% reduction in average borrowings
and lower interest rates. The Association's $1.1 million pro rata share of the
Golden Peanut Company's 1994 loss (equity in loss of partnership) represented a
significant portion of the decrease in other income (deductions) for 1994.
Golden Peanut Company adopted Statement of Financial Accounting Standards No.
106 (SFAS 106) "Employers' Accounting for Postretirement Benefits other Than
Pensions," resulting in a charge of $3.9 million to earnings in 1994. Also, the
decline in Golden Peanut Company's 1994 operating results was related to the
general oversupply situation that exists in the United States for domestic
peanuts and the increase of peanut based foods imported into the United States.
See Note 9(b) of Notes to Consolidated Financial Statements. Miscellaneous, net
includes the Association's equity in the earnings of a partially-owned foreign
affiliate whose principal business activities include the marketing, purchasing
and resale of edible peanuts. The Association recognized income for 1994 and
1993 of $250,000 and $1.6 million, respectively. The decline in the affiliate's
net earnings was the result of lower market prices for foreign sourced peanuts.
Miscellaneous, net for 1994 includes patronage refunds from other cooperatives
and other dividends totaling $710,000 as compared to $2.9 million for 1993.
Rental income of approximately $1.8 million was included in miscellaneous, net
for 1994 and 1993.
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 $38.7 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. Net
margins from operations for 1995 were $4.6 million, down $3.9 million from 1994.
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. The decline in net margins from operations for 1995
was due primarily to 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.
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.
15
The various components included in other income (deductions) represented a
deduction of $5.6 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. Miscellaneous, net for
1994 includes patronage refunds from other cooperatives and other dividends of
$4.4 million as compared to $710,000 for 1994. 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.
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. The Association had unused loan
commitments of $53.0 million and additional unused uncommitted facilities to
provide loans and letters of credit from banks aggregating approximately $15.1
million at July 1, 1995. A $50.0 million unsecured line of credit is available
beginning December 1, 1995 through May 31, 1996. 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 July 1, 1995, Gold Kist's current ratio,
senior funded debt to total capitalization and total funded debt to
capitalization, determined under the loan agreements, were 1.41:1, 21% and 36%,
respectively. The loan agreements apply to the Association and its
subsidiaries, excluding Golden Poultry. At July 1, 1995, the Association was in
compliance with the agreements. See Note 4 of Notes to Consolidated Financial
Statements.
During 1993, net cash provided by operations and proceeds from long-term
debt were used primarily to repay short-term and long-term borrowings of $76.7
million. The Association and its consolidated subsidiaries investment activities
for 1993 included $23.3 million in expenditures for property, plant and
equipment. The Association's use of cash included $4.8 million for cash
patronage refunds and other equity payments as compared to $8.8 million in 1992.
The expenditures for property, plant and equipment during 1993 included $17.5
million related to expansion and improvements in the poultry operations, as well
as $5.5 million for the acquisition of retail stores, agricultural chemical
distribution facilities, and a chemical application equipment manufacturer and
distributor.
16
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.
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 in 1995 included $43.3 million related to
expansion and improvement 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.
The Association, including its non-cooperative subsidiaries, plans capital
expenditures of approximately $90.0 million in 1996 that primarily include
expenditures for expansion and technological advances in poultry production and
processing and expansion into cotton ginning and warehousing. In addition,
planned capital expenditures include other asset improvements and necessary
replacements. Management intends to finance the planned 1996 capital
expenditures with existing cash balances and cash provided by operating
activities and additional long-term borrowings as needed. In 1996, management
expects cash expenditures to approximate $12.0 million for equity redemptions.
The Association believes cash on hand at July 1, 1995 and cash expected to be
provided from operations, in addition to borrowings available under existing
credit arrangements, will be sufficient to maintain cash flows adequate for the
Association's projected growth and operational objectives during 1996.
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
and fertilizers. 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 May 1993, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 114, "Accounting by
Creditors for Impairment of a Loan" and in October 1994, the FASB issued SFAS
No. 118, "Accounting by Creditors for Impairment of a Loan-Income Recognition
and Disclosures," which must be applied by fiscal 1996. SFAS 114 and 118 are not
expected to have a significant impact upon adoption.
In March 1995, 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. SFAS 121 is not expected to have a significant impact
upon adoption.
17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX
PAGE
GOLD KIST INC.
CONSOLIDATED FINANCIAL STATEMENTS:
Independent Auditors' Report............................................................. 19
Consolidated Balance Sheets as of June 25, 1994 and July 1, 1995......................... 20
Consolidated Statements of Operations for the years ended June 26, 1993, June 25, 1994
and July 1, 1995........................................................................ 21
Consolidated Statements of Patrons' and Other Equity for the years ended June 26, 1993,
June 25, 1994 and July 1, 1995.......................................................... 22
Consolidated Statements of Cash Flows for the years ended June 26, 1993, June 25, 1994
and July 1, 1995........................................................................ 23
Notes to Consolidated Financial Statements............................................... 24
FINANCIAL STATEMENT SCHEDULES
(INCLUDED IN PART IV OF THIS REPORT):
FINANCIAL STATEMENT SCHEDULE:
Valuation Reserves for the years ended June 26, 1993, June 25, 1994 and
July 1, 1995............................................................................ 43
GOLDEN PEANUT COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Auditors........................................................... 44
Consolidated Balance Sheets as of June 30, 1995 and 1994................................. 45
Consolidated Statements of Operations for the years ended June 30, 1995, 1994 and 1993... 46
Consolidated Statements of Partners' Equity for the years ended June 30, 1995,
1994 and 1993........................................................................... 47
Consolidated Statements of Cash Flows for the years ended June 30, 1995,
1994 and 1993........................................................................... 48
Notes to Consolidated Financial Statements............................................... 49
FINANCIAL STATEMENT SCHEDULE:
Valuation and Qualifying Accounts for the years ended June 30, 1995, 1994 and 1993....... 60
18
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 consolidated financial statements of Golden Peanut
Company, a partnership investment accounted for using the equity method of
accounting, as described in Note 9(b) to the consolidated financial statements.
The consolidated financial statements of Golden Peanut Company 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, 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 other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of 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 June 25, 1994 and July 1, 1995, and the results of their operations and their
cash flows for each of the years in the three-year period ended July 1, 1995, 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 1, 1995
19
GOLD KIST INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
JUNE 25, 1994 JULY 1, 1995
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 15,670 16,597
Receivables, principally trade, including notes receivable of
$42.8 million in 1994 and $43.8 million in 1995, less
allowance for doubtful accounts of $5,369 in 1994 and
$5,877 in 1995................................................ 160,714 189,180
Inventories (note 2)........................................... 198,467 226,988
Other current assets........................................... 14,758 17,718
-------- -------
Total current assets.......................................... 389,609 450,483
Investments (note 9)............................................ 72,105 93,039
Property, plant and equipment, net (note 3)..................... 204,783 227,646
Other assets.................................................... 49,935 50,469
-------- -------
$716,432 821,637
======== =======
LIABILITIES AND EQUITY
Current liabilities:
Notes payable and current maturities of long-term debt (note 4):
Short-term borrowings.......................................... $ 12,798 70,800
Subordinated loan certificates................................. 25,079 27,363
Current maturities of long-term debt........................... 35,405 25,834
-------- -------
73,282 123,997
Accounts payable................................................ 117,926 117,952
Accrued compensation and related expenses....................... 26,431 28,817
Patronage refund and other equity payable in cash............... 14,588 8,863
Interest left on deposit (note 4)............................... 9,340 10,493
Other current liabilities....................................... 8,195 13,776
-------- -------
Total current liabilities...................................... 249,762 303,898
Long-term debt, excluding current maturities (note 4)............ 109,817 138,659
Accrued postretirement benefit costs (note 7(b))................. 34,488 36,929
Other liabilities................................................ 687 3,189
-------- -------
Total liabilities.............................................. 394,754 482,675
-------- -------
Minority interest................................................ 25,016 23,972
Patrons' and other equity (note 5):
Common stock, $1.00 par value - Authorized 500 shares;
issued and outstanding 79 in 1994 and 62 in 1995............... 79 62
Patronage reserves.............................................. 219,164 216,854
Unrealized gain on marketable equity security (net of deferred
income taxes of $11.6 million (note 9(a))...................... - 18,531
Retained earnings............................................... 77,419 79,543
-------- -------
Total patrons' and other equity................................ 296,662 314,990
Commitments and contingent liabilities (notes 7 and 8)
-------- -------
$716,432 821,637
======== =======
See accompanying notes to consolidated financial statements.
20
GOLD KIST INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS)
YEARS ENDED
-------------------------------------------------
JUNE 26, 1993 JUNE 25, 1994 JULY 1, 1995
------------- ------------- ------------
Net sales volume...................................................... $1,400,566 1,561,034 1,688,537
Cost of sales......................................................... 1,249,509 1,385,239 1,525,924
--------- --------- ---------
Gross margins....................................................... 151,057 175,795 162,613
Distribution, administrative and general expenses..................... 111,519 121,417 131,410
--------- --------- ---------
Net operating margins............................................... 39,538 54,378 31,203
--------- --------- ---------
Other income (deductions):
Interest income..................................................... 7,540 6,752 8,779
Interest expense.................................................... (17,163) (13,924) (17,525)
Equity in earnings (loss) of partnership (note 9(b))................ 4,659 (1,110) (9,625)
Gain on sale of investments......................................... - - 3,070
Miscellaneous, net.................................................. 9,118 3,978 9,684
--------- --------- ---------
4,154 (4,304) (5,617)
--------- --------- ---------
Margins before income taxes, minority interest and
cumulative effect of accounting change............................. 43,692 50,074 25,586
Income taxes (note 6)................................................. 14,187 14,861 13,094
--------- --------- ---------
Margins before minority interest and cumulative
effect of accounting change........................................ 29,505 35,213 12,492
Minority interest..................................................... (2,267) (1,148) (741)
--------- --------- ---------
Margins before cumulative effect of accounting change............... 27,238 34,065 11,751
Cumulative effect of change in accounting for income
taxes (note 6)....................................................... - 5,339 -
--------- --------- ---------
Net margins......................................................... $ 27,238 39,404 11,751
========= ========= =========
See accompanying notes to consolidated financial statements.
21
GOLD KIST INC.
CONSOLIDATED STATEMENTS OF PATRONS' AND OTHER EQUITY
FOR THE YEARS ENDED JUNE 26, 1993, JUNE 25, 1994 AND JULY 1, 1995
(AMOUNTS IN THOUSANDS)
REVOLVING UNREALIZED
FUND AND GAIN ON
CUMULATIVE MARKETABLE
COMMON PREFERRED EQUITY PATRONAGE RETAINED
TOTAL STOCK CERTIFICATES SECURITY RESERVES EARNINGS
------- ------- ------------- --------- --------- ---------
June 27, 1992....................................... $271,456 81 10,561 - 206,992 53,822
Net margins for 1993............................... 27,238 - - - 19,107 8,131
Nonqualified patronage refund
and other equity payable in cash (8,525) - - - (8,525) -
Redemptions and other changes...................... (4,549) (2) (308) - (8,060) 3,821
-------- ------ ------ ------ ------- -------
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 - 18,531 216,854 79,543
======== ====== ====== ====== ======= =======
See accompanying notes to consolidated financial statements.
22
GOLD KIST INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
YEARS ENDED
--------------------------------------------
JUNE 26, 1993 JUNE 25, 1994 JULY 1, 1995
-------------- -------------- ------------
Cash flows from operating activities:
Net margins............................................ $ 27,238 39,404 11,751
Non-cash items included in net margins:
Depreciation and amortization......................... 36,315 37,251 38,085
Cumulative effect of changes in accounting principle.. - (5,339) -
Gains on sales of assets.............................. (703) (201) (3,459)
Equity in (earnings) loss of partnership.............. (4,659) 1,110 9,625
Deferred income tax benefit........................... (1,650) (5,562) (6,650)
Other................................................. 2,943 3,208 1,943
Changes in operating assets and liabilities:...........
Receivables........................................... (4,902) (26,943) (28,466)
Inventories........................................... (5,018) (23,963) (28,521)
Other current assets.................................. 546 152 (3,382)
Accounts payable and accrued expenses................. 16,167 21,765 15,117
Interest left on deposit.............................. 532 (4,052) 1,153
-------- ------- -------
Net cash provided by operating activities........... 66,809 36,830 7,196
-------- ------- -------
Cash flows from investing activities:
Acquisitions of investments............................ (212) (762) (5,093)
Acquisitions of property, plant and equipment.......... (23,280) (37,232) (61,762)
Proceeds from partnership earnings distribution........ 11,404 1,770 -
Proceeds from disposal of investments.................. 1,795 1,279 8,942
Proceeds from sales of loans........................... 20,084 5,040 4,925
Other.................................................. 1,498 (7,653) (7,179)
-------- ------- -------
Net cash provided by (used in) investing
activities......................................... 11,289 (37,558) (60,167)
-------- ------- -------
Cash flows from financing activities:
Short-term borrowings (repayments), net................ (48,675) 11,491 60,286
Proceeds from long-term debt........................... 22,381 26,668 49,752
Principal payments of long-term debt................... (28,056) (30,130) (36,676)
Patronage refunds and other equity paid in cash........ (4,812) (22,717) (19,464)
-------- ------- -------
Net cash provided by (used in) financing
activities......................................... (59,162) (14,688) 53,898
-------- ------- -------
Net change in cash and cash equivalents............. 18,936 (15,416) 927
Cash and cash equivalents at beginning of year.......... 12,150 31,086 15,670
-------- ------- -------
Cash and cash equivalents at end of year................ $ 31,086 15,670 16,597
======== ======= =======
Supplemental disclosure of cash flow data:
Cash paid during the years for:
Interest (net of amounts capitalized)................. $ 17,495 18,575 18,792
======== ======= =======
Income taxes.......................................... $ 12,791 23,352 21,144
======== ======= =======
See accompanying notes to consolidated financial statements.
23
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 26, 1993, JUNE 25, 1994 AND JULY 1, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 1993 and 1994
consolidated financial statements to conform to the presentation in
the 1995 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.
Marketable products consist primarily of dressed and further
processed poultry. 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.
24
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(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 1994, 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
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 1993, 1994 and 1995, 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, 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.
Pursuant to the deferred method under Accounting Principles Board
Opinion 11, which was applied in fiscal 1993 and prior years, deferred
income taxes were recognized for income and expense items that were
reported in different years for financial reporting purposes and
income tax purposes using the tax rate applicable for the year of the
calculation. Under the deferred method, deferred taxes were not
adjusted for subsequent changes in tax rates.
25
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
(g) Fair Value of Financial Instruments
Gold Kist's financial instruments include cash and cash equivalents,
accounts receivables and payables, notes receivable and debt. Because
of the short maturity of cash equivalents, accounts receivables and
payables, and certain short-term debt which matures in less than one
year, 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 unless otherwise specified
(see note 4).
(h) Fiscal Year
Gold Kist employs a 52/53 week fiscal year. The consolidated
financial statements for 1993 and 1994 reflect 52 weeks and 1995
reflects 53 weeks. Fiscal 1996 will be a 52 week year.
(2) INVENTORIES
Inventories are summarized as follows:
1994 1995
-------- -------
Merchandise for sale................... $ 65,795 85,054
Live poultry and hogs.................. 75,600 76,211
Raw materials and supplies............. 30,090 35,191
Marketable products.................... 26,982 30,532
-------- -------
$198,467 226,988
======== =======
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows:
1994 1995
-------- --------
Land and land improvements............. $ 29,757 31,809
Buildings.............................. 159,065 166,806
Machinery and equipment................ 304,535 325,270
Construction in progress............... 4,332 27,812
-------- -------
497,689 551,697
Less accumulated depreciation.......... 292,906 324,051
-------- -------
$204,783 227,646
======== =======
Gold Kist owns a 54% interest in its corporate headquarters building
through its investment in GC Properties, a general partnership formed between
Gold Kist and Cotton States Mutual Insurance Company solely for the purpose of
acquiring the corporate headquarters building and related mortgage obligation. A
former Gold Kist chief executive officer is a director of the Cotton States
Insurance Group. Gold Kist's indirect 54% interest in the aforementioned
building and related accumulated depreciation, based on historical cost, is
included in property, plant and equipment in the accompanying consolidated
financial statements.
(4) NOTES PAYABLE AND LONG-TERM DEBT
On June 30, 1995, the Association entered into a $150 million unsecured
committed credit facility with five commercial banks. The facility includes 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. The
five-year revolving credit agreement expires on June 30, 2000, but may be
extended twice for successive one-year periods with the consent
26
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
of the banks. The unused credit available under this facility at July 1, 1995
was $20 million. 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 .25%
per annum. The 364-day line of credit provides short-term financing that will
expire on June 29, 1996, of which $20 million was unused at July 1, 1995. The
$50 million seasonal line of credit becomes effective on December 1, 1995 and
expires on May 31, 1996. The 364-day and seasonal lines of credit are subject
to a .10% per annum facility fee. Borrowings under the $150 million facility
will bear variable interest rates at or below prime. Also, the facility permits
competitive bid interest rates by the participating banks.
At July 1, 1995, Gold Kist had other unused long-term loan commitments of
$13.0 million and additional uncommitted facilities to provide loans and letters
of credit from banks aggregating approximately $15.1 million. These unsecured
borrowings bear interest at rates below prime.
Subordinated loan certificates of $27.4 million at July 1, 1995 bore
interest from 3.85% to 6.70% with terms of one year and were unsecured.
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.
Long-term debt is summarized as follows:
1994 1995
-------- -------
Unsecured senior notes payable:
9.375% interest notes, due in semi-annual installments of $5,500
with interest payable semiannually........................................ $ 33,000 16,500
9.90% interest notes, due in semi-annual installments of $1,539
with interest payable semiannually........................................ 15,384 10,766
9.35% interest note, due in a single installment in June 2001 with
interest payable quarterly................................................ 20,000 20,000
Other long term debt:
Revolving credit agreements with a commercial bank (weighted average
rate of 5.0% at June 25, 1994 and 6.5% at July 1, 1995)................... 7,000 37,000
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
June 25, 1994 and July 1, 1995)........................................... 58,387 60,417
Tax exempt industrial revenue bonds with varying interest rates due in
quarterly and annual installments through 2015, secured by property,
plant and equipment....................................................... 6,263 12,701
Pro rata share of mortgage loan, at 8.47% interest, due in monthly
installments to June 30, 2004, secured by a building (note 3)............. 2,673 2,497
Other...................................................................... 2,515 4,612
-------- -------
145,222 164,493
Less current maturities.................................................... 35,405 25,834
-------- -------
$109,817 138,659
======== =======
27
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
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 was approximately $51.7 million.
The terms of debt agreements specify minimum working capital, net worth and
current ratio. 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 1996 of unused amounts,
$10.9 million as of July 1, 1995, 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 July 1, 1995 are as follows:
Fiscal year:
1996..................................................... $25,834
1997..................................................... 20,734
1998..................................................... 17,945
1999..................................................... 16,577
2000..................................................... 13,188
======
(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), the Company 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. Prior years' financial statements have not been restated to apply
the provisions of SFAS 109.
The provisions for income tax expense, principally Federal, consist of the
following:
1993 1994 1995
------- ------ ------
Current expense................................ $15,837 20,423 19,744
------- ------ ------
Deferred benefit............................... (1,650) (5,562) (6,650)
------- ------ ------
$14,187 14,861 13,094
======= ====== ======
28
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
Gold Kist's combined federal and state effective tax rates from operations
for 1993, 1994 and 1995 were 32%, 30% and 51%, respectively. A reconciliation of
income tax expense from operations computed by applying the Federal corporate
income tax rate of 34% in 1993 and 35% in 1994 and 1995 to margins before income
taxes, minority interest and cumulative effect of accounting changes for the
applicable year follows:
1993 1994 1995
------- ------ ------
Computed expected income tax expense.................... $14,855 17,526 8,955
Increase (decrease) in income tax expense
resulting from:
Income tax litigation................................. - - 5,520
Cash portion of nonqualified patronage refund......... (1,183) (1,420) (1,031)
Effect of state income taxes, net of Federal benefit.. 1,428 1,050 447
Nonqualified equity redemptions....................... (575) (525) (490)
Target jobs credits................................... (347) (607) (499)
Other, net............................................ 9 (1,163) 192
------- ------ ------
$14,187 14,861 13,094
======= ====== ======
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June 25,
1994 and July 1, 1995 are as follows:
1994 1995
------- -------
Deferred tax assets:
Postretirement benefits........................ $13,478 14,410
Insurance accruals............................. 8,839 7,903
Equity in partnerships......................... 723 4,175
Bad debt reserves.............................. 2,386 2,573
State tax operating loss carryforwards......... 1,913 1,984
Other.......................................... 1,081 -
------- -------
Total gross deferred tax assets............... 28,420 31,045
Less valuation allowance....................... (1,913) (1,984)
------- -------
Net deferred tax assets....................... 26,507 29,061
------- -------
Deferred tax liabilities:
Unrealized gain on marketable equity security.. - (11,587)
Accelerated depreciation....................... (2,986) (969)
Deferred compensation.......................... (4,103) (3,990)
Other.......................................... - (118)
------- -------
Total deferred tax liabilities................ (7,089) (16,664)
------- -------
Net deferred tax assets....................... $19,418 12,397
======= =======
The valuation allowance for deferred tax assets as of June 25, 1994 and
July 1, 1995 was $1,913 and $1,984, respectively. The net change in the total
valuation allowance for the years ended 1994 and 1995 was an increase of $205
and $71, 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.
29
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
Deferred income taxes result from differences in the timing of reporting
income and expenses for financial statement and income tax reporting purposes.
The sources of deferred income taxes and their tax effects are as follows:
1993
-------
Depreciation expense......................... $(1,433)
Deferred compensation expense................ 167
Insurance accruals........................... (1,839)
Equity in partnerships....................... 133
Other, net................................... 1,322
-------
$(1,650)
=======
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 plans to appeal the decision. The accompanying financial statements
reflect $5.5 million in additional income tax expense and $1.6 million in
additional interest expense for the impact of the decision through July 1, 1995.
(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.
Net periodic pension expense for 1993, 1994 and 1995 included the
following components :
1993 1994 1995
------- ------ ------
Service cost - benefits earned during the year.......... $(3,422) (3,720) (3,429)
Interest cost on projected benefit obligations.......... (6,247) (6,479) (6,949)
Actual return on plan assets............................ 11,116 3,236 11,393
Net amortization and deferral........................... (1,827) 5,989 (1,208)
------- ------ ------
Net periodic pension expense $ (380) (974) (193)
======= ====== ======
30
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
The following table sets forth the plans' funded status, amounts
recognized in the consolidated balance sheets at June 25, 1994 and
July 1, 1995 and economic assumptions:
1994 1995
-------- -------
Actuarial present value of benefit obligations:
Vested participants....................................... $ 69,662 74,529
Nonvested................................................. 5,416 6,630
-------- -------
Total accumulated benefit obligations.................. $ 75,078 81,159
======== =======
Projected benefit obligations for services rendered to date.. $ 88,083 96,559
======== =======
Plan assets for benefits:
Plan assets at fair value................................. $109,874 118,268
Prepaid pension cost included in other assets in
consolidated balance sheets.............................. (15,195) (16,556)
-------- -------
Net plan assets......................................... $ 94,679 101,712
======== =======
Plan assets in excess of projected benefit obligations....... $ 6,596 5,153
======== =======
Consisting of:
Unrecognized net asset existing at the date of adoption... $ 10,972 9,721
Unrecognized net loss from past experience different
from that assumed and effects of changes in
assumptions.............................................. (351) (1,136)
Prior service cost not yet recognized in net periodic
pension cost............................................. (4,025) (3,432)
-------- -------
$ 6,596 5,153
======== =======
Economic assumptions:
Weighted-average discount rate............................ 8.25% 8.00%
Weighted-average expected long-term rate of return on
plan assets.............................................. 9.00% 9.25%
Weighted-average rate of compensation increase............ 6.00% 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.
(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.
31
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
Postretirement health and death benefit expense for 1993, 1994 and
1995 included the following components:
1993 1994 1995
---- ---- ----
Service cost - benefits earned during the year....... $1,293 1,728 1,742
Interest cost......................................... 2,305 2,530 2,645
Net amortization and deferral......................... - - (18)
----- ----- -----
$3,598 4,258 4,369
===== ===== =====
Gold Kist's postretirement benefit plans are not funded. The status
of the plans at June 25, 1994 and July 1, 1995 was as follows:
1994 1995
---- ----
Actuarial present value of accumulated postretirement
benefit obligation:
Retirees......................................................... $12,896 15,528
Fully eligible active plan participants.......................... 6,956 7,821
Other active plan participants................................... 13,029 14,016
------ ------
32,881 37,365
Unrecognized net gain from experience differences................ 3,207 1,341
------ ------
$36,088 38,706
====== ======
The health care cost trend rate used to determine the accumulated
postretirement benefit obligation at June 25, 1994 was 11%, declining
ratably to 5.5% by the year 2003 and remaining at that level
thereafter. 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 2003 and remaining at that level
thereafter. The discount rates used to determine the accumulated
postretirement benefit obligation were 8.25% and 8.00% at June 25,
1994 and July 1, 1995, 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 July 1,
1995 by approximately 15% and net postretirement health care cost by
17%.
(8) CONTINGENT LIABILITIES AND COMMITMENTS
In January 1993, two Alabama member patrons of Gold Kist filed a lawsuit in
the nature of a derivative action against Gold Kist and Golden Poultry Company,
Inc., a majority-owned subsidiary of Gold Kist, and certain directors, officers
and employees of the companies. The lawsuit alleges that the named officers,
directors and employees violated their fiduciary duties by creating Golden
Poultry Company, Inc. and Carolina Golden Products Company (Golden Poultry) and
by permitting their continued operations. Among the remedies requested are the
transfer of Golden Poultry's operations to Gold Kist, as well as unspecified
actual damages. In March 1994, the court certified that litigation as a class
action. The Association has advanced the payment of litigation expenses
incurred by the Association's directors who are defendants in the litigation.
Gold Kist intends to defend the litigation vigorously.
Gold Kist is a defendant in various legal and administrative proceedings
seeking alleged actual and punitive damages and specific performance to correct
certain alleged problems. Gold Kist management is of the opinion that the
ultimate resolution of these matters will not have a material adverse impact on
Gold Kist's financial position.
32
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
Gold Kist received proceeds of $20.0 million, $5.0 million and $4.9 million
during 1993, 1994 and 1995, respectively, for collateralized loans sold with
recourse to an insurance company, of which $20.3 million was outstanding at July
1, 1995. No gain or loss was recognized on the sale of these loans. A $207
thousand allowance has been recognized in the accompanying consolidated
financial statements for potential losses that may occur. As of July 1, 1995,
there have been no credit losses related to the loans guaranteed under this
agreement.
Gold Kist is a guarantor of amounts outstanding under a $55.0 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 July 1, 1995, the amounts
outstanding under this facility were $50.9 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 July 1, 1995, the Association's
marketable equity security was carried at its fair value of $50.1 million,
which represents a gross unrealized gain of $30.1 million. The gross
unrealized gain, net of deferred income taxes of $11.6 million, has been
reflected as a separate component of patrons' and other equity. At June 25,
1994, the marketable equity security was carried at its cost basis of $21.5
million.
Gains realized on sales and dividends totaled $169 thousand, $170
thousand and $1.3 million and are included in miscellaneous, net for the
years ended June 26, 1993, June 25, 1994 and July 1, 1995, 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 $20.1 million and $15.5 million at June 25, 1994 and July
1, 1995, respectively. In July 1995, Gold Kist made an additional
investment of $2.8 million. The partnership has a $450.0 million
commercial paper facility of which $205.0 million was outstanding at
June 30, 1995.
33
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
Summarized financial information of Golden Peanut Company is shown below:
CONDENSED CONSOLIDATED BALANCE SHEETS
1994 1995
--------- -------
Current assets............................ $258,195 233,133
Property, plant and equipment, net........ 33,465 34,385
-------- -------
Total assets............................ $291,660 267,518
======== =======
Current liabilities....................... $226,871 220,954
======== =======
Accrued postretirement benefit costs...... 4,477 5,103
Partners' equity.......................... 60,312 41,461
-------- -------
Total liabilities and partners' equity.. $291,660 267,518
======== =======
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
1993 1994 1995
--------- ------- -------
Net sales and other operating income.. $486,868 456,937 429,067
Costs and expenses.................... 472,812 460,291 457,942
-------- ------- -------
Net income (loss)................... $ 14,056 (3,354) (28,875)
======== ======= =======
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 earnings (loss) of partnership in the accompanying 1994
consolidated statement of operations since the amount is not significant.
In 1993, 1994 and 1995, 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 $2.8 million,
$2.7 million and $3.9 million in 1993, 1994 and 1995, respectively. In
addition, Gold Kist purchased $2.4 million, $5.4 million and $3.1 million
of inventory from Golden Peanut Company in 1993, 1994 and 1995,
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 also provides crop procurement services.
34
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 26, 1993
------------------------
Net sales volume....................................... $1,077,928 322,638 - 1,400,566
========= ======= ========== =========
Net margins from operations............................ $ 43,269 1,876 - 45,145
========= ======= ==========
General corporate expenses............................. (5,607)
Other income, net...................................... 4,154
---------
Margins before income taxes and minority interest...... $ 43,692
=========
Depreciation and amortization expense.................. $ 30,566 4,911 838 (c) 36,315
========= ======= ========== =========
Capital expenditures.................................. $ 17,475 5,530 275 (c) 23,280
========= ======= ========== =========
Identifiable assets at June 26, 1993.................. $ 352,562 202,219 110,321 (c) 665,102
========= ======= ========== =========
YEAR ENDED JUNE 25, 1994
------------------------
Net sales volume...................................... $1,183,729 377,305 - 1,561,034
========= ======= ========== =========
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 (c) 37,251
========= ======= ========== =========
Capital expenditures.................................. $ 32,655 3,772 805 (c) 37,232
========= ======= ========== =========
Identifiable assets at June 25, 1994.................. $ 375,389 218,111 122,932 (c) 716,432
========= ======= ========== =========
YEAR ENDED JULY 1, 1995
-----------------------
Net sales volume...................................... $1,255,087 433,450 - 1,688,537
========= ======= ========== =========
Net margins from operations........................... $ 34,095 4,559 - 38,654
========= ======= ==========
General corporate expenses............................ (7,451)
Other deductions, net................................. (5,617)
---------
Margins before income taxes and minority interest..... $ 25,586
=========
Depreciation and amortization expense................. $ 31,551 5,582 952 (c) 38,085
========= ======= ========== =========
Capital expenditures.................................. $ 43,423 17,959 380 (c) 61,762
========= ======= ========== =========
Identifiable assets at July 1, 1995................... $ 418,790 258,461 144,386 (c) 821,637
========= ======= ========== =========
(a) Net sales volume includes export sales amounting to $27,511, $37,731 and
$70,113 in 1993, 1994 and 1995, respectively, which have no significant
geographical concentration.
(b) Intersegment sales are generally priced at competitive market prices.
(c) Amounts relate to unallocated corporate assets.
35
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
8/30/95)
W. P. Smith, Jr.* 66 Chairman of the Board & 1995 22
Director (District 1)
Herbert A. Daniel, Jr.* 43 Director (District 2) 1995 5 months
Fred K. Norris, Jr.* 67 Director (District 3) 1997 18
James E. Brady, Jr. 60 Director (District 4) 1996 11
W. Kenneth Whitehead 51 Director (District 5) 1996 2
Dan Smalley* 46 Director (District 6) 1996 10
A. Jack Nally 52 Director (District 7) 1997 4
M. Michael Davis 44 Director (District 8) 1997 1
Phil Ogletree, Jr. 62 Director (District 9) 1995 18
-------------
* 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
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.
-36-
The Executive Directors of Gold Kist are:
YEARS YEARS
SERVED SERVED
IN THAT WITH
NAME AGE OFFICE EXPIRES GOLD KIST
---- --- ------ ------- -----------
(AS OF
8/30/95)
Howard O. Chitwood* 65 Chief Executive Officer, 4 38
and Chairman of the
Management Executive
Committee
G. O. Coan* 59 President and Chief 4 36
Operating Officer
John Bekkers* 50 Executive Vice President 1 10
J. K. Hogan 61 Vice President, 12 43
Administration
Kenneth N. Whitmire 57 Group Vice President, 7 34
Poultry Group
Jack L. Lawing 57 General Counsel, Vice 19 19
President and Secretary
Peter J. Gibbons 58 Vice President, Finance 16 16
Paul G. Brower 56 Vice President, 16 20
Communications
W. A. Epperson 59 Vice President, 16 20
Human Resources
Jerry L. Stewart 55 Vice President- 14 32
Marketing, Poultry Group
John K. McLaughlin 57 Vice President, Pet Food 11 11
and Annual Products Division
Allen C. Merritt 49 Vice President, Fertilizer 12 23
and Chemical Division
Stanley C. Rogers 49 Vice President, 5 17
AgriServices Division
Michael F. Thrailkill 47 Vice President, 3 22
Information Services
Stephen O. West 49 Treasurer 12 15
W. F. Pohl, Jr. 45 Controller 13 19
----------
* 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 has been as an officer or employee of Gold Kist.
-37-
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 ($) ($) ($) ($)
------ ------ ----- --------- ---------
Harold O. Chitwood July 1, 1995 $419,888 $120,000 $616 $13,080(2)
Chief Executive Officer June 25, 1994 388,483 310,000 - 4,722(3)
and Chairman of the June 26, 1993 357,150 275,000 - 932(3)
Management Executive
Committee
Gaylord O. Coan July 1, 1995 $327,000 $103,000 $268 $12,961(2)
President and Chief June 25, 1994 297,293 270,000 - 4,820(3)
Operating Officer June 26, 1993 266,500 239,300 - 865(3)
John Bekkers July 1, 1995 $162,453 $ 71,200 $ 62 $ 8,703(2)
Executive Vice President June 25, 1994 106,511 56,900 - 2,663(3)
June 26, 1993 101,915 41,500 - 510(3)
Kenneth N. Whitmire July 1, 1995 $184,373 $ 83,000 $457 $ 9,758(2)
Group Vice president, June 25, 1994 170,558 230,000 - 4,264(3)
Poultry Group June 26, 1993 162,000 210,600 - 810(3)
Jerry L. Stewart July 1, 1995 $160,600 $ 54,000 $320 $ 9,158(2)
Vice President Marketing, June 25, 1994 147,904 150,000 - 3,698(3)
Poultry Group June 26, 1993 140,500 137,900 - 702(3)
----------
(1) The amounts shown for the fiscal year ended July 1, 1995 set forth that
portion of interest earned on voluntary salary bonus deferrals under non-
qualified deferred compensation plans above 120% of the applicable federal
rate. Other than such amounts, for the fiscal years ended July 1, 1995, June
25, 1994 and June 26, 1993, 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 the indicated fiscal year 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. Chitwood - $4,676;
Mr. Coan - $5,418; Mr. Bekkers - $4,206; Mr. Whitmire - $4,438; and
Mr. Stewart - $4,193. In addition, the amounts set forth include the
following amounts which represent the value of the named executive officers:
Mr. Chitwood - $8,404; Mr. Coan - $7,543; Mr. Bekkers - $4,497;
Mr. Whitmire - $5,320; and Mr. Stewart - $4,965. 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).
-38-
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 retirement 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 credit 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, 1994, the Association made a contribution of $1,110,000 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, 1994. Estimated annual benefits payable
upon 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
[CAPTION]
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 78,750 105,000 127,374 128,574
$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
consecutive officers listed in the summary compensation table are as follows:
Mr. Chitwood (30); Mr. Coan (30); Mr. Bekkers (10); Mr. Whitmire (30); and Mr.
Stewart (30).
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 plan 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
-39-
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 July 1, 1995: Mr. Chitwood - $241,386; Mr. Coan -
$191,903; and Mr. Whitmire - $130,365.
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 that 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 if 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 denomination 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 has worked less than one calendar year. The
severance
-40-
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 July 1, 1995, 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.
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 July 1, 1995, have had dealings in the ordinary course of
business with Gold Kist as purchasing or marketing patrons. See Business (and
Properties)--Patronage Refunds.
-41-
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A)1. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Consolidated Financial Statements:
Independent Auditors' Reports
Consolidated Balance Sheets--June 25, 1994 and
July 1, 1995
Consolidated Statements of Operations--Years Ended
June 26, 1993, June 25, 1994 and July 1, 1995
Consolidated Statements of Patrons' and Other
Equity-Years Ended June 26, 1993, June 25, 1994
and July 1, 1995
Consolidated Statements of Cash Flows--Years ended
June 26, 1993, June 25, 1994 and July 1, 1995
Notes to Consolidated Financial Statements
(A)2. FINANCIAL STATEMENT SCHEDULES:
------------------------------
Gold Kist Inc.
--------------
Financial Statement Schedule:
-----------------------------
II. Valuation Reserves--Years Ended June 26, 1993,
June 25, 1994 and July 1, 1995
Golden Peanut Company and Subsidiaries
--------------------------------------
Consolidated Financial Statements:
Report of Independent Auditors
Consolidated Balance Sheets--June 30, 1995 and 1994
Consolidated Statements of Operations--Years ended
June 30, 1995, 1994 and 1993
Consolidated Statements of Partners' Equity-Years
ended June 30, 1995, 1994 and 1993
Consolidated Statements of Cash Flows--Years ended
June 30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Financial Statements Schedule:
II. Valuation and Qualifying Accounts--Years ended June 30,
1995, 1994 and 1993
All other schedules are omitted as the required information
is inapplicable or the information is presented in the
consolidated financial statements or related notes.
42
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 26, 1993 $5,097 1,495 - 1,337 (A) 5,255
June 25, 1994 5,255 1,662 - 1,548 (A) 5,369 (A)
July 1, 1995 5,369 2,382 - 1,874 (A) 5,877 (A)
(A) Represents accounts written off.
43
Report of Independent Auditors
Partnership Committee
Golden Peanut Company
We have audited the accompanying consolidated balance sheets of Golden Peanut
Company and Subsidiaries (the "Partnership") as of June 30, 1995 and 1994, and
the related consolidated statements of operations, partners' equity, and cash
flows for each of the three years in the period ended June 30, 1995. Our audits
also included the financial statement schedule of the Partnership listed in the
index at Item 14(a). These financial statements and schedule are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements and schedule 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 consolidated financial position of Golden Peanut
Company and Subsidiaries at June 30, 1995 and 1994, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended June 30, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
As discussed in Note 8 to the consolidated financial statements, in 1994 the
Partnership changed its method of accounting for postretirement benefits other
than pensions.
Ernst & Young LLP
Atlanta, Georgia
August 10, 1995
44
Golden Peanut Company and Subsidiaries
Consolidated Balance Sheets
JUNE 30
1995 1994
-------------------------
(Thousands of Dollars)
ASSETS
Current assets:
Cash and cash equivalents $ 1,047 $ 1,252
Accounts receivable, less allowances of
$1,610 in 1995 and $725 in 1994 49,300 52,075
Accounts receivable from affiliates 160 2,291
Inventories 158,163 198,940
Other current assets 4,150 1,218
Amounts due from partners 20,313 2,419
--------------------------
Total current assets 233,133 258,195
Property, plant and equipment:
Land 2,092 2,064
Buildings and improvements 10,495 9,494
Machinery and equipment 33,925 31,233
Construction in progress 3,232 1,795
--------------------------
49,744 44,586
Less accumulated depreciation (15,359) (11,121)
--------------------------
34,385 33,465
--------------------------
$267,518 $291,660
==========================
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Notes payable $205,000 $215,000
Trade accounts payable 10,207 6,552
Amounts payable to partners 830 638
Other current liabilities 4,917 4,681
--------------------------
Total current liabilities 220,954 226,871
Accrued postretirement benefits other than
pensions 5,103 4,477
Commitments and contingencies - -
Partners' equity 41,461 60,312
--------------------------
$267,518 $291,660
=========================
See accompanying notes.
45
Golden Peanut Company and Subsidiaries
Consolidated Statements of Operations
YEAR ENDED JUNE 30
1995 1994 1993
---------------------------------
(Thousands of Dollars)
Net sales and other operating income $429,067 $456,937 $486,868
Cost of products sold and other
operating costs 425,925 431,979 446,775
---------------------------------
Gross margin 3,142 24,958 40,093
Selling, general and administrative
expenses 17,795 15,133 18,040
---------------------------------
Operating income (loss) (14,653) 9,825 22,053
Other income (expense):
Interest expense (15,249) (10,113) (9,126)
Interest and other income 1,027 873 1,129
---------------------------------
Income (loss) before cumulative
effect of change in accounting
principle (28,875) 585 14,056
Cumulative effect of change in
accounting for postretirement
benefits other than pensions - (3,939) -
---------------------------------
Net income (loss) $(28,875) $ (3,354) $ 14,056
=================================
See accompanying notes.
46
Golden Peanut Company and Subsidiaries
Consolidated Statements of Partners' Equity
GOLD KIST ADM ALIMENTA TOTAL
-----------------------------------------------
(Thousands of Dollars)
Balance at June 30, 1992 $ 29,737 $ 29,737 $26,876 $ 86,350
Earnings distribution (11,404) (11,404) (8,542) (31,350)
Net income 4,659 4,659 4,738 14,056
-----------------------------------------------
Balance at June 30, 1993 22,992 22,992 23,072 69,056
Earnings distribution (1,770) (1,770) (1,850) (5,390)
Net loss (1,110) (1,110) (1,134) (3,354)
-----------------------------------------------
Balance at June 30, 1994 20,112 20,112 20,088 60,312
Capital contribution 5,000 5,000 - 10,000
Earnings distribution - - 24 24
Net loss (9,625) (9,625) (9,625) (28,875)
-----------------------------------------------
Balance at June 30, 1995 $ 15,487 $ 15,487 $10,487 $ 41,461
===============================================
See accompanying notes.
47
Golden Peanut Company and Subsidiaries
Consolidated Statements of Cash Flows
YEAR ENDED JUNE 30
1995 1994 1993
--------------------------------
(Thousands of Dollars)
OPERATING ACTIVITIES
Net income (loss) $(28,875) $ (3,354) $ 14,056
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Cumulative effect of accounting change - 3,939 -
Depreciation 4,238 3,550 2,986
Changes in operating assets and liabilities:
Accounts receivable 2,775 818 (7,115)
Accounts receivable from affiliates 2,131 (554) 5,953
Inventories 40,777 24,040 (77,951)
Other current assets (2,632) 286 412
Amounts due from partners (17,894) (1,377) 7,072
Trade accounts payable 3,655 (2,090) 1,436
Amounts payable to partners 192 (227) 94
Other current liabilities 236 (267) (2,897)
Accrued postretirement benefits (net of
cumulative effect adjustment in 1994) 626 538 -
----------------------------------
Net cash provided by (used in) operating activities 5,229 25,302 (55,954)
INVESTING ACTIVITIES
Purchases of property, plant and equipment (5,158) (4,425) (18,691)
Purchase of Ag Tech (300) - -
----------------------------------
Net cash used in investing activities (5,458) (4,425) (18,691)
FINANCING ACTIVITIES
Earnings distribution to partners 24 (5,390) (31,350)
Capital contribution by partners 10,000 - -
Net (decrease) increase in notes payable (10,000) (15,000) 105,500
----------------------------------
Net cash (used in) provided by financing activities 24 (20,390) 74,150
----------------------------------
(Decrease) increase in cash and cash equivalents (205) 487 (495)
Cash and cash equivalents at beginning of year 1,252 765 1,260
----------------------------------
Cash and cash equivalents at end of year $ 1,047 $ 1,252 $ 765
==================================
SUPPLEMENTARY DISCLOSURE INFORMATION
Interest paid $ 15,010 $ 10,809 $ 9,492
==================================
See accompanying notes.
48
Golden Peanut Company and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 1995
1. NATURE OF BUSINESS AND PARTNERSHIP AGREEMENT
Golden Peanut Company and Subsidiaries (the "Partnership") is a general
partnership formed under the laws of the State of Georgia to operate the peanut
operations of three companies: Archer Daniels Midland Company ("ADM"), Gold
Kist, Inc. ("Gold Kist"), and Alimenta Processing Corporation ("Alimenta") on a
combined basis. The Partnership was formed specifically to procure, process and
market peanuts and peanut products. The Partnership grants credit to customers,
substantially all of whom are wholesalers of food products.
The Partnership is directed by a committee of six individuals (partnership
committee), two from each partner, and is equally owned by the partners.
The partners have agreed to maintain a minimum aggregate partners' capital of
$55,000,000. The Partnership expires at the earlier of December 31, 2006, or by
mutual consent of the partners. Any partner may withdraw from the Partnership
upon providing eighteen months written notice.
In order to maintain the minimum agreed-upon capital, contributions of
$5,000,000 were made by both Gold Kist and ADM on June 30, 1995. In July 1995,
additional contributions of $2,846,400 were made by both Gold Kist and ADM, and
a contribution of $5,000,000 was made by Alimenta. An additional contribution
of $2,846,400 is expected to be made by Alimenta in August 1995.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Golden Peanut
Company and its subsidiaries. Subsidiaries of the Partnership include: GPX,
Inc., a foreign sales corporation established to utilize tax advantages
available to exporters; and GP Blanching, Inc. and Alimentos Panamericanos,
Inc., domestic corporations involved in various aspects of procuring, processing
and marketing peanuts and peanut products. Significant intercompany accounts
and transactions have been eliminated in consolidation.
49
Golden Peanut Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
Government regulations require peanut inventories to be identified by crop year
in which the raw peanuts were harvested. Inventories are valued at the lower of
average cost (determined on crop year basis) or market. Further, each crop year
is divided into two inventory pools. All raw materials received or contracted
prior to the government support deadline (currently January 31) are considered
to be in the first pool, and raw materials received or contracted after that
date are valued separately. A first-in, first-out inventory method is used to
determine inventory on hand (on a crop year basis) at year-end. At June 30,
1995 and 1994, inventories consisted primarily of finished goods with raw
material inventory comprising 6% and 1%, respectively, of the total inventory
balance.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost. The Partnership uses the
straight-line method to provide depreciation for financial reporting purposes.
INCOME TAXES
The Partnership was formed as a general partnership; accordingly, the results of
its operations are included in the income tax returns of the partners, and no
income taxes are provided in the financial statements of the Partnership. GPX,
Inc., Alimentos Panamericanos, Inc. and GP Blanching, Inc. are subsidiaries of
the Partnership that are subject to income taxes; however, related income tax
expense is insignificant.
CASH EQUIVALENTS
The Partnership considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
3. ACQUISITIONS
In July 1992, the Partnership acquired certain assets of Dothan Oil Mill Company
("Dothan") at a purchase price of $12,540,000. The operations of Dothan are
included in the consolidated statements of income since the date of acquisition.
50
Golden Peanut Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. ACQUISITIONS (CONTINUED)
In October 1994, the Partnership acquired the remaining 50% ownership interest
in Ag Tech Company ("Ag Tech") from Virginia Mills, Inc. at a purchase price of
$500,000, including $200,000 payable upon favorable determination of a patent
lawsuit in which Ag Tech is involved.
The Partnership previously held a 50% ownership interest in Ag Tech and
accounted for its investment using the equity method. The accounts of Ag Tech
are included in the consolidated statements of income since the date Ag Tech
became wholly-owned.
4. JOINT VENTURE
The Partnership formed a wholly-owned subsidiary, GP Blanching, Inc., during
fiscal year 1993. In December 1992, GP Blanching, Inc., Universal Blanchers,
Inc. (Texas), a Texas corporation and Universal Blanchers, Inc., a Georgia
corporation, formed a general partnership, Universal Blanchers, whereby GP
Blanching acquired a 30% ownership interest in the partnership with the option
to increase this interest to 50%. GP Blanching's ownership interest in
Universal Blanchers was 39% and 36% at June 30, 1995 and 1994, respectively.
The investment is accounted for using the equity method.
5. NOTES PAYABLE
Notes payable represent borrowings under the Partnership's commercial paper
facility, which is used primarily to finance inventory and accounts receivable.
As of June 30, 1995, there was $205,000,000 outstanding with a weighted average
interest rate of 6.0%. The Partnership has a maximum facility of $450,000,000
coordinated through two national brokerage firms. The commercial paper is
supported by annual and seasonal backup lines of credit at various banks with
varying expiration dates. Available lines of credit reached a maximum of
$378,000,000 during 1995 and totaled $230,000,000 at June 30, 1995. The
commercial paper is sold at the market interest rate for comparable issues of
commercial paper at the date of placement. The partners have entered into a
support agreement whereby the partners jointly and severally agree to maintain
positive tangible net worth and sufficient liquidity in the Company to ensure
timely payment of all debts.
51
Golden Peanut Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. LEASES
The Partnership leases all the peanut processing facilities owned by ADM and
Gold Kist pursuant to Master Facilities Lease Agreements executed with each of
the partners concurrently with the original formation of the Partnership in
1986. Rental payments were fixed for the first six years of the agreements and
then may be adjusted to reflect a market rental based on the fair market value
of the premises for the remainder of the twenty-year lease term. Lease payments
under these agreements were $5,070,000 annually through calendar year 1992. In
a 1993 agreement, the initial rental payment terms were extended through
calendar year 1998. The Partnership also leases peanut processing facilities
owned by Alimenta pursuant to a Master Facilities Lease Agreement executed
concurrently with an amendment of the Partnership agreement on March 1, 1989.
After December 17, 1998, the rental payments may be adjusted to reflect a market
rental based on the fair market value of the premises for the remainder of the
eight-year lease term. These lease agreements are cancelable upon termination
of the partnership agreement or withdrawal of a partner.
The Partnership also leases a warehouse facility for the storage of shelled
peanuts in addition to leasing additional property under operating leases with
terms from 1 to 7 years. Future minimum rental commitments for these
noncancelable operating leases are as follows:
1996 $ 663,000
1997 669,000
1998 618,000
1999 605,000
2000 and thereafter 388,000
---------
$2,943,000
=========
Total rent expense was $8,072,000 in 1995, $8,459,000 in 1994, and $8,518,000 in
1993.
52
Golden Peanut Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. RELATED PARTY TRANSACTIONS
The Partnership relies on ADM, Gold Kist, and Alimenta to provide certain
administrative services. Charges for these services are on a basis consistent
with the internal cost allocation methods used by the partners.
The Partnership sold shelled goods for further processing and/or resale to ADM,
Gold Kist, and Alimenta during 1995 and 1994 and to ADM and Gold Kist during
1993. Most oil stock peanuts of the Partnership were processed by Alimenta
during 1995 and 1994 and by ADM during 1993.
The Partnership pays royalties to a subsidiary of Gold Kist for proprietary seed
used by the Partnership and also paid commissions to Gold Kist buying points
during 1995 and ADM and Gold Kist buying points in 1994 and 1993. ADM handles
the financial transactions of the Partnership and, at times during the year,
advances money to meet short-term cash needs. Alimenta manages the foreign
sales offices of the Partnership, and pays the selling, general, and
administrative expenses of those offices on behalf of the Partnership which the
Partnership reimburses. As a result of these transactions, interest-bearing
intercompany receivables and payables have arisen, resulting in interest
payments between the related parties. The Partnership also leases peanut
processing facilities owned by the general partners as described in Note 6.
53
Golden Peanut Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. RELATED PARTY TRANSACTIONS (CONTINUED)
Following is a summary of the amounts related to these transactions for the year
ended June 30, 1995:
ADM GOLD KIST ALIMENTA
-----------------------------------------
Lease payments $ 2,970,000 $2,100,000 $ 1,232,000
Administrative service fees 696,000 644,000 2,100,000
Royalties - 606,000 -
Commissions - 2,628,000 -
Interest (receipts) payments, net (91,000) 7,000 -
-------------------------------------------
Expenses paid to partners $ 3,575,000 $5,985,000 $ 3,332,000
===========================================
Inventory sales $ 44,000 $3,125,000 $12,635,000
===========================================
Amounts due from partners at June 30,
1995 $19,401,000 $ - $ 912,000
===========================================
Amounts payable to partners at June
30, 1995 $ - $ (728,000) $ (102,000)
===========================================
54
Golden Peanut Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. RELATED PARTY TRANSACTIONS (CONTINUED)
Following is a summary of the amounts related to these transactions for the year
ended June 30, 1994:
ADM GOLD KIST ALIMENTA
--------------------------------------------
Lease payments $ 2,970,000 $2,100,000 $ 1,232,000
Administrative service fees 722,000 664,000 2,175,000
Royalties - 636,000 -
Commissions 331,000 1,383,000 -
Interest (receipts) payments, net (4,000) 4,000 -
--------------------------------------------
Expenses paid to partners $ 4,019,000 $4,787,000 $ 3,407,000
============================================
Inventory sales $ 2,663,000 $5,406,000 $13,102,000
============================================
Amounts due from partners at June 30,
1994 $ 465,000 $ 139,000 $ 1,815,000
============================================
Amounts payable to partners at June
30, 1994 $ - $ (638,000) $ -
============================================
Following is a summary of the amounts related to these transactions for the year
ended June 30, 1993:
ADM GOLD KIST ALIMENTA
----------------------------------------------
Lease payments $ 2,970,000 $2,100,000 $ 1,232,000
Administrative service fees 812,000 587,000 2,548,000
Royalties - 685,000 -
Commissions 461,000 1,526,000 -
Interest payments, net 17,000 4,000 -
----------------------------------------------
Expenses paid to partners $ 4,260,000 $4,902,000 $ 3,780,000
==============================================
Inventory sales $11,856,000 $2,440,000 $ -
==============================================
Amounts due from partners at June 30,
1993 $ 1,042,000 $ - $ -
==============================================
Amounts payable to partners at June
30, 1993 $ - $ (785,000) $ (80,000)
==============================================
7. RELATED PARTY TRANSACTIONS (CONTINUED)
55
Golden Peanut Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
In connection with formation of the Partnership, the partners licensed certain
patents to the Partnership. The licensing agreements do not provide for royalty
payments.
Accounts receivable from affiliates represent amounts due from equity investees
and other affiliated companies. During fiscal year 1993, the Partnership wrote-
off $3,700,000 of accounts receivable from a Company jointly owned by ADM, Gold
Kist and Alimenta. This receivable was written off to selling, general and
administrative expenses.
8. EMPLOYEE BENEFITS
The Partnership participates in two Gold Kist multi-employer noncontributory
defined benefit pension plans that cover substantially all of its employees.
Benefits for salaried employees are based on average earnings before retirement,
while hourly employees' benefits are based upon years of credited service. The
Partnership's funding policy is to contribute amounts sufficient to meet minimum
funding requirements set forth in the Employee Retirement Income Security Act of
1974, plus such additional amounts as the Partnership may determine to be
appropriate from time to time.
The Partnership also participates in Gold Kist's defined contribution savings
and investment plan, which is available to substantially all salaried employees
with one year of service. Employees may contribute up to a maximum dollar
amount of their salaries established by the Internal Revenue Service with the
Partnership matching a minimum of 10% of these contributions. The Partnership
match is based upon operating results and may reach a maximum of 50% of employee
contributions. Vesting of employer contributions is graduated over a five-year
period.
Net employee benefit costs for the defined benefit plans and defined
contribution plan in 1995 were $701,000 and $492,000, respectively. For 1994,
these net employee benefit costs were $943,000 and $346,000, respectively. For
1993, these net employee benefit costs were $720,000 and $243,000, respectively.
56
Golden Peanut Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. EMPLOYEE BENEFITS (CONTINUED)
In addition to providing pension benefits, the Partnership provides health care
and life insurance benefits to certain retired employees and their dependents.
Active salaried employees and certain active hourly employees can become
eligible for retiree health care benefits at age 55 depending on years of
service, and retirees receive substantially the same health care benefits as
active employees. Employees also contribute to the cost of dependent coverage.
The Partnership adopted Statement of Financial Accounting Standards No. 106
("SFAS 106") "Employers' Accounting for Postretirement Benefits Other than
Pensions," effective July 1, 1993. This statement requires accrual of the
expected cost of providing postretirement benefits other than pensions. This
cost, for health care and life insurance benefits, had previously been
recognized as expense only when payments were made. The Partnership recognized
the entire accumulated benefit obligation at the date of adoption, resulting in
a one-time charge of $3,939,000. This amount is reported separately on the 1994
consolidated statement of income as the cumulative effect of a change in
accounting principle. In addition, the Partnership's postretirement benefit
costs increased approximately $421,000 and $393,000 in 1995 and 1994,
respectively, as a result of adopting the new standard. The Partnership intends
to continue funding the plans on a pay-as-you-go basis. Net postretirement
benefit expense for 1995 and 1994 included the following components (in
thousands of dollars):
1995 1994
----------------------------------------
HEALTH LIFE HEALTH LIFE
CARE INSURANCE CARE INSURANCE
PLANS PLANS PLANS PLANS
----------------------------------------
Service cost (benefits earned) $161 $ 73 $189 $ 30
Interest cost on accumulated
benefit obligation 214 160 221 98
Amortization of net actuarial
(gain) loss (16) 34 - -
----------------------------------------
$359 $267 $410 $128
========================================
57
Golden Peanut Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. EMPLOYEE BENEFITS (CONTINUED)
The reconciliations of the plans' funded status to the amounts reported in the
Partnership's consolidated balance sheets at June 30, 1995 and 1994 are as
follows (in thousands of dollars):
1995 1994
---------------------------------------
HEALTH LIFE HEALTH LIFE
CARE INSURANCE CARE INSURANCE
PLANS PLANS PLANS PLANS
----------------------------------------
Present value of accumulated
postretirement benefit obligation:
Retirees $ 840 $ 700 $ 711 $ 641
Fully eligible active participants 764 683 995 396
Other active participants 1,118 841 1,287 288
---------------------------------------
2,722 2,224 2,993 1,325
Unrecognized net actuarial gain (loss) 638 (633) 159 -
Other 103 49 - -
---------------------------------------
Postretirement benefit liability
included in consolidated balance
sheet $3,463 $1,640 $3,152 $1,325
=======================================
The discount rate used in determining the present value of the accumulated
postretirement benefit obligation was 8% in 1995 and 8.25% in 1994. The assumed
health care cost trend rate used in measuring the accumulated postretirement
benefit obligation was 11% in 1995, declining by 1% per year until fiscal year
2000 at which time the rate declines by 0.5% to an ultimate rate of 5.5%. If
the assumed health care cost trend rate increased 1% in all future years, the
accumulated postretirement benefit obligation would increase by $489,000 and the
annual postretirement benefit expense would increase by $75,000.
58
Golden Peanut Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
9. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Partnership was contingently liable as
of June 30, 1995 for $13,543,000 under letters of credit issued to guarantee
compliance with regulations on export peanuts as required by the Agricultural
Stabilization and Conservation Service (ASCS).
The Partnership also enters into purchase and sale commitments for raw peanuts
and shelled goods in the ordinary course of business. Management anticipates no
significant losses from satisfying these commitments.
The Company is involved in certain legal actions and claims arising in the
ordinary course of business. In the opinion of management (based on advice of
legal counsel), such litigation and claims will be resolved without material
effect on the Company's financial position and results of operations.
10. SEGMENT INFORMATION
The Partnership's business constitutes a single business segment, defined as
peanut procurement, production and wholesaling. Export sales, primarily to
Western Europe, Canada and Japan, in fiscal years 1995, 1994, and 1993
represented 17%, 18%, and 17%, respectively, of total sales.
Net sales to customers exceeding 10% of consolidated net sales were as follows
(as a percentage of consolidated net sales):
CUSTOMER 1995 1994 1993
---------------------------------------------
A 7% 13% 10%
B 11% 10% 7%
59
Golden Peanut Company and Subsidiaries
(Consolidated)
Schedule II
Valuation and Qualifying Accounts
BALANCE BALANCE
AT CHARGED AT END
BEGINNING TO OF
DESCRIPTION OF PERIOD EXPENSE OTHER PERIOD
--------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS)
YEAR ENDED JUNE 30, 1995
Allowance for doubtful accounts (a) $725 $1,846 $(961) (B) $1,610
YEAR ENDED JUNE 30, 1994
Allowance for doubtful accounts (a) $317 $ 399 $ 9 (b) $ 725
YEAR ENDED JUNE 30, 1993
Allowance for doubtful accounts (a) $507 $ 105 $(295) (b) $ 317
(a) Reflected as reduction of accounts receivable on consolidated balance
sheet.
(b) Amounts written off, net of recoveries.
60
(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 that Document
----------- ---------------------- ---------------------- ----------------
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
Registrant, as amended
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
8-4(a)(2) Form of First Supple- Registration filed on Exhibit 4(a)(2)
mental Indenture, dated Form S-1 (Registration
as of September 1, 1979, No. 2-69267)
amending the terms of
the Form of Indenture
dated as of December 1,
1977, governing the terms
of the 9% Fifteen Sub-
ordinated 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 No. 2-65587)
the Fifteen Year Sub-
ordinated Capital
Certificates of Interest
(Series B), including
therein a table of con-
tents and cross-reference
sheet
-61-
Designation
of Exhibit Document with Which Designation
in this Exhibit Was Previously of such Exhibit
Report Description of Exhibit Filed with Commission in that Document
----------- -------------------------- ---------------------- ----------------
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, govern- No. 2-69267)
ing the terms of the
Fifteen Year Subordinated
Capital Certificates of
Interest (Series C)
B-4(a)(5) Form of Second Supplemen- Registration filed on Exhibit 4(a)(5)
tal Indenture, dated as Form S-2 (Registration
of September 1, 1982, No. 2-79538)
governing the terms of
the Fifteen Year Subordi-
nated 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 No. 2-59958)
the 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, amend- No. 2-69267)
ing 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
-62-
Designation
of Exhibit Document with Which Designation
in this Exhibit Was Previously of such Exhibit
Report Description of Exhibit Filed with Commission in that Document
----------- ---------------------- ---------------------- ----------------
B-4(b)(4) Form of First Supple- Registration filed on Exhibit 4(b)(4)
mental Indenture, dated Form S-1 (Registration
as of September 1, 1980, No. 2-69267)
governing the terms of
the Ten Year Subordinated
Capital Certificates of
Interest (Series C)
B-4(b)(5) Form of Second Supple- Registration filed on Exhibit 4(b)(5)
mental Indenture, dated Form S-2 (Registration
as of September 1, 1982, No. 2-79538)
governing the terms of
the Ten Year Subordinated
Capital Certificates of
Interest (Series D)
B-4(c) Form of Indenture, dated Registration filed on Exhibit 4(c)
as of September 1, 1985, Form S-2 (Registration
governing the terms of No. 33-428)
the Seven year Sub-
ordinated 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 No. 2-65587)
the Five Year Subordi-
nated Capital Certificates
of Interest (Series A),
including therein a table
of contents and cross-
reference sheet
B-4(d)(2) Form of First Supple- Registration filed on Exhibit 4(d)(2)
mental Indenture, dated Form S-1 (Registration
as of September 1, 1980, No. 2-69267)
governing the terms of
the Five Year subor-
dinated Capital Certifi-
cates of Interest
(Series B)
-63-
Designation
of Exhibit Document with Which Designation
in this Exhibit Was Previously of such Exhibit
Report Description of Exhibit Filed with Commission in that Document
----------- ---------------------- ---------------------- ----------------
B-4(d)(3) Form of Second Supple- Registration filed on Exhibit 4(d)(3)
mental Indenture, dated Form S-2 (Registration
as of September 1, 1982, No. 2-79538)
governing the terms of
the Five Year Subordi-
nated Capital Certifi-
cates of Interest
(Series C)
B-4(e) Form of Indenture, Registration filed on Exhibit 4(f)(2)
dated as of Form S-2 (Registration
September 1, 1985, No. 33-428)
governing the terms of
the Three Year Subor-
dinated Capital Certifi-
cates of Interest
(Series A), including
therein a table of con-
tents, cross-reference
sheet, and form Capital
Certificates of Interest
B-4(f) Form of Indenture, Registration filed on Exhibit 4(g)
dated September 1, 1980, Form S-1 (Registration
governing the terms of No. 2-69267)
the Two Year Subor-
dinated Capital Certifi-
cates of Interest
(Series A), including
therein a table of
contents and cross-
reference sheet
B-4(g)(1) Form of Indenture, Registration filed on Exhibit 4(h)(1)
dated as of Form S-2 (Registration
September 1, 1985, No. 33-428)
governing the terms of
the One Year Subor-
dinated 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, Registration filed on Exhibit 4(d)(2)
dated as of Form S-1 (Registration
September 1, 1979, No. 2-65587)
governing the terms
of the One Year
Subordinated Loan
Certificates (Series B),
including therein a
table of contents and
cross-reference sheet
-64-
Designation
of Exhibit Document with Which Designation
in this Exhibit Was Previously of such Exhibit
Report Description of Exhibit Filed with Commission in that Document
----------- ---------------------- ---------------------- ----------------
B-4(g)(3) Form of First Supplemen- Registration filed on Exhibit 4(f)(2)
tal Indenture, dated as Form S-1 (Registration
of September 1, 1980, No. 2-69267)
governing the terms of the
One Year Subordinated Loan
Certificates (Series C)
B-4(h) Form of Indenture, dated Registration filed on Exhibit 4(i)
as of September 1, 1985 Form S_2 (Registration
governing the terms of No. 33-428)
the Six Month Subordin-
ated 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 Certif- Form S-1 (Registration
icates of Interest used No. 2-59958)
for three years (6.5%-8%),
six year (6.75%-8.5%), ten
year (7%-9%) and fifteen
year (9%) fixed-maturity
certificates.
B-4(i)(2) Specimen of Subordinated Annual Report on Form Exhibit B-4(h)(2)
Capital Certificates of 10-K for the Fiscal
Interest used for Fifteen Year Ended June 30,
Year (Series B and C), 1982
Ten Year (Series B and C),
Five Year (Series A and B)
and Two Year (Series A)
B-4(i)(3) Specimen of Subordinated Annual Report on Form Exhibit B-4(h)(3)
Loan-Certificates (Series 10-K for the Fiscal
B and C) Year Ended June 30, 1982
B-4(j) Specimen of 5% Cumulative Registration filed on Exhibit 4(g)
Preferred Capital Certif- Form S-1 (Registration
icates of Interest with No. 2-59958)
no fixed maturities
-65-
Designation
of Exhibit Document with Which Designation
in this Exhibit Was Previously of such Exhibit
Report Description of Exhibit Filed with Commission in that Document
----------- ---------------------- ---------------------- ----------------
B-4(k) Agreement to furnish Registration filed on Exhibit 4(h)
copies of constituent Form S-1 (Registration
instruments defining the No. 2-59958)
rights of the holders of
certain industrial
revenue bonds
B-4(l)(1) Note Agreement with the Quarterly Report on Exhibit B-4(n)
Prudential Insurance Form 10-Q for the
Company of America dated Fiscal Quarter ended
as of December 15, 1986 December 31, 1986
B-4(l)(2) Amendment dated as of Registration filed on Exhibit 4(l)(2)
June 30, 1987 to Note Form S-2 (Registration
Agreement with the No. 33-24623)
Prudential Insurance
Company of America
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 No. 33-42900)
Prudential 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 Form S-2 (Registration
Company of America, No. 33-42900)
dated as of June 3, 1991
B-4(l)(7) Amendment dated as of Registration filed on Exhibit 4(l)(7)
June 26, 1992, to Note Form S-2 (Registration
Agreements with the No. 33-52268)
Prudential Insurance
Company of America
B-4(l)(8) Amendment dated July Registration filed on Exhibit 4(l)(8)
14, 1993, to Note Agree- Form S-2 (Registration
ments with the Prudential No. 33-69204)
Insurance Company of
America and Pruco Life
Insurance Company
-66-
Designation
of Exhibit Document with Which Designation
in this Exhibit Was Previously of such Exhibit
Report Description of Exhibit Filed with Commission in that Document
----------- ---------------------- ---------------------- ----------------
B-4(m)(1) Credit Agreement dated
as of June 30, 1995,
with Various Banks and
Lending Institutions,
as Lenders, and Trust
Company Bank, as agent
B-4(n)(1) Line of Credit Agreement Registration filed on Exhibit 4(n)
with CoBank, dated as of Form S-2 (Registration
February 22, 1991 No. 33-42900)
B-4(n)(2) Amendment dated as of Registration filed on Exhibit 4(n)(2)
March 1, 1992, to Line Form S-2 (Registration
of Credit Agreement with No. 33-52268)
CoBank
B-4(n)(3) Amendment dated as of Registration filed on Exhibit 4(n)(3)
December 18, 1992, to Form S-2 (Registration
Line of Credit Agreement No. 33-69204)
with CoBank
B-4(n)(4) Amendment dated as of Registration filed on Exhibit 4(n)(4)
December 13, 1993 to Line Form S-2 (Registration
of Credit Agreement with No. 33-55563)
CoBank
B-4(o) Guaranty dated December Registration filed on Exhibit 4(o)
18, 1992 by Gold Kist in Form S-2 (Registration
favor of NationsBank of No. 33-69204)
Georgia, N.A.
B-10(a) Form of Deferred Compen- Registration filed on Exhibit 11(d)
sation Agreement between Form S-1 (Registration
Gold Kist Inc. and cer- No. 2-59958)
tain executive officers*
B-10(b)(1) Gold Kist Management Registration filed on Exhibit 10(b)
Bonus Program* Form S-1 (Registration
No. 2-69267)
B-10(b)(2) Amended Gold Kist Manage- Registration filed on Exhibit 19(b)(2)
ment Bonus Program* Form S-2 (Registration
No. 2-79538)
-67-
Designation
of Exhibit Document with Which Designation
in this Exhibit Was Previously of such Exhibit
Report Description of Exhibit Filed with Commission in that Document
----------- ---------------------- ---------------------- ----------------
B-10(b)(3) Form of Gold Kist Sup- Registration filed on Exhibit 10(b)(3)
plemental Executive Form S-2 (Registration
Retirement Income non- No. 33-9007)
qualified deferred
compensation agreement
between Gold Kist and
certain executive
officers and Resolution
of Gold Kist Board of
Directors authorizing
the Supplemental
Executive Retirement
Plan*
B-10(b)(4) Resolution of Gold Kist Registration filed on Exhibit 10(b)(4)
Board of Directors auth- Form S-2 (Registration
orizing the Gold Kist No. 33-9007
Special Award Plan*
B-10(b)(5) Form of Gold Kist Execu- Registration filed on Exhibit 10(b)(5)
tive's Change in Control Form S-2 (Registration
Agreement between Gold No. 33-31164
Kist and certain 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 Form S-2 (Registration
Benefits* No. 33-36938
B-10(b)(9) Gold Kist Executive
Savings Plan, as amended*
B-10(b)(10) Gold Kist Director
Savings Plan, as amended*
B-10(b)(11) Gold Kist Split Dollar
Life Insurance Plan*
B-10(c)(1) Form of Membership, Registration filed on Exhibit 13(b)
Marketing, and/or Purch- Form S-1 (Registration
asing Agreement of Gold No. 2-59958
Kist Inc., Atlanta,
Georgia
-68-
Designation
of Exhibit Document with Which Designation
in this Exhibit Was Previously of such Exhibit
Report Description of Exhibit Filed with Commission in that Document
----------- ---------------------- ---------------------- ----------------
B-10(c)(2) Form of Membership, Registration filed on Exhibit 10(c)(2)
Marketing, and/or Form S-1 (Registration
Purchasing Agreement of No. 2-74205)
Gold Kist Inc., Atlanta,
Georgia, as revised
October 17, 1980
B-10(c)(3) Form of Membership, Registration filed on Exhibit 10(c)(3)
Marketing, and/or Form S-2 (Registration
Purchasing Agreement of No. 33-428)
Gold Kist Inc., Atlanta,
Georgia, as revised
November 1, 1984
B-10(c)(4) Form of Membership, Registration filed on Exhibit 10(c)(4)
Marketing, and/or Form S-2 (Registration
Purchasing Agreement No. 33-24623)
of Gold Kist Inc.,
Atlanta, Georgia, revised
October 29, 1987
B-10(c)(5) Form of Membership, Registration filed on Exhibit 10(c)(5)
Marketing, and/or Form S-2 (Registration
Purchasing Agreement of No. 33-42900)
Gold Kist Inc., Atlanta,
Georgia, revised August
21, 1991
B-10(d) CF Industries, Inc., Registration filed on Exhibit 13(j)
Member Product Purchase Form S-2 (Registration
Agreement No. 2-59958)
B-10(e)(1) General Partnership Registration filed on Exhibit 10(h)(1)
Agreement (GC Properties) Form S-2 (Registration
between Gold Kist Inc. No. 33-428)
and Cotton States 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 Annual Report on Form Exhibit B-10
Agreement (Golden Peanut 10-K for the Fiscal (f)(1)
Company) between Gold Year Ended June 30,
Kist and Archer-Daniels- 1987
Midland Company, dated
as of December 17, 1986
-69-
Designation
of Exhibit Document with Which Designation
in this Exhibit Was Previously of such Exhibit
Report Description of Exhibit Filed with Commission in that Document
----------- ---------------------- ---------------------- ----------------
B-10(f)(2) Amended and Restated Registration filed on Exhibit 10(f)(2)
Partnership Agreement Form S-2 (Registration
(Golden Peanut Company) No. 33-31164)
between Gold Kist Inc.,
Archer-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 Form S-2 (Registration
Agreement (Golden Peanut No. 33-42900)
Company) between Gold
Kist Inc., Archer-Daniels-
Midland Company and Ali-
menta Processing Corpora-
tion, dated as of June 30,
1991
B-10(f)(4) Master Commercial Facil- Annual Report on Form Exhibit B-10(f)(2)
ities Lease Agreement 10-K for the Fiscal
between Gold Kist and Year Ended June 30,
Golden Peanut Company 1987
dated as of December 17,
1986
B-10(g) Agreement of Sale of Annual Report on Form Exhibit B-10(g)
Valdosta, Georgia Soy 10-K for the Fiscal
Processing Plant, be- Year Ended June 30,
tween Gold Kist and Arch- 1987
er-Daniels-Midland Com-
pany, dated July 2, 1987
B-10(h) Grain Procurement Agree- Annual Report on Form Exhibit B-10(h)
ment between Gold Kist 10-K for the Fiscal
and Archer-Daniels-Mid- Year Ended June 30,
land Company, dated 1987
August 31, 1987
B-10(i) General Partnership Registration filed on Exhibit 10(i)
Agreement (Carolina Gol- Form S-2 (Registration
den Products Company) No. 33-42900)
between AgriGolden, Inc.,
and Golden Poultry
Company, Inc., dated as
of January 28, 1991
B-12 Computation of Ratio of
Net Margins to Fixed
Charges
B-21 Subsidiaries of the Regis-
trant
B-27 Financial Data Schedule
--------------------------------------
*Plans and arrangement 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 July 1, 1995.
-70-
SIGNATURES - Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has fully caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
GOLD KIST INC.
By: /s/ H.O. Chitwood
----------------------------------------
H.O. Chitwood, 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/ H.O Chitwood Chief Executive officer September 21, 1995
--------------------------- (Principal Executive Officer)
D.W. SANDS
/s/ Peter Gibbons Vice President-Finance September 21, 1995
--------------------------- (Principal Financial Officer)
PETER J. GIBBONS
/s/ W.F. Pohl,Jr. Controller (Principal September 21, 1995
--------------------------- Accounting Officer)
W.F. POHL, JR.
/s/ W.P.Smith,Jr. Director September 21, 1995
---------------------------
W.P. SMITH, JR.
/s/ Fred K. Norris, Jr. Director September 21, 1995
---------------------------
FRED K. NORRIS, JR.
/s/ Dan Smalley Director September 21, 1995
---------------------------
DAN SMALLEY
/s/ Phil Ogletree, Jr. Director September 21, 1995
---------------------------
PHIL OGLETREE, JR.
/s/ James E. Brady, Jr. Director September 21, 1995
---------------------------
JAMES E. BRADY, JR.
/s/ A. Jack Nally Director September 21, 1995
---------------------------
A. JACK NALLY
/s/ W. Kenneth Whitehead Director September 21, 1995
---------------------------
W.KENNETH WHITEHEAD
H. Michael Davis Director September 21, 1995
---------------------------
H. MICHAEL DAVIS
/s/ Herbert A. Daniel, Jr. Director September 21, 1995
---------------------------
HERBERT A.DANIEL, JR.
-71-
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description Page
------ ----------- ---------------
B-4(m)(1) -Credit Agreement dated as of June 30, 1995
with Various Banks and Lending Institutions,
as Lenders, and Trust Company Bank, as agent
B-10(b)(9) -Gold Kist Executive Savings Plan, as amended
B-10(b)(10) -Gold Kist Director Savings Plan, as amended
B-10(b)(11) -Gold Kist Split Dollar Life Insurance Plan
B-12 -Computation of Ratio of Net Margins to Fixed Charges
B-21 -Subsidiaries of the Registrant
B-27 -Financial Data Schedule