<PAGE>
Filed pursuant to Rule 424(B)(3)
Registration Statement No.33-55563
GOLD KIST INC.
$ 4,664,479--8.50%, FIFTEEN YEAR SUBORDINATED CAPITAL CERTIFICATES
OF INTEREST (SERIES D)
$ 5,389,516--8.25%, TEN YEAR SUBORDINATED CAPITAL CERTIFICATES OF
INTEREST (SERIES D)
$11,050,139--8.00%, SEVEN YEAR SUBORDINATED CAPITAL CERTIFICATES
OF INTEREST (SERIES A)
$13,010,402--6.75%, FIVE YEAR SUBORDINATED CAPITAL CERTIFICATES OF
INTEREST (SERIES C)
$13,470,942--6.25%, THREE YEAR SUBORDINATED CAPITAL CERTIFICATES
OF INTEREST (SERIES A)
$13,484,192--6.00%, TWO YEAR SUBORDINATED CAPITAL CERTIFICATES OF
[LOGO OF INTEREST (SERIES A)
GOLD KIST $29,096,776--5.65%, ONE YEAR SUBORDINATED LOAN CERTIFICATES
INC. (SERIES C)
APPEARS $29,027,573--5.75%, ONE YEAR SUBORDINATED LARGE DENOMINATION LOAN
HERE] CERTIFICATES (SERIES A)
$13,233,694--5.25%, SIX MONTH SUBORDINATED LARGE DENOMINATION LOAN
CERTIFICATE (SERIES A)
- -------------------------------------------------------------------------------
The Subordinated Capital Certificates of Interest, Subordinated Loan
Certificates and Subordinated Large Denomination Loan Certificates are
unsecured obligations of Gold Kist. The certificates of each series are
redeemable, subject to certain limitations, by the holders, and the Five,
Seven, Ten and Fifteen Year Certificates are subject to redemption at the call
of Gold Kist. The Certificates of each series are subordinated, in case of
liquidation of Gold Kist, to "Superior Indebtedness." As of June 25, 1994,
Superior Indebtedness (as defined in the indenture under which each series
will be issued) amounted to approximately $301,948,000. See Description of
Subordinated Capital Certificates of Interest and Description of Subordinated
Loan Certificates and Subordinated Large Denomination Loan Certificates.
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SEE "INVESTMENT CONSIDERATIONS."
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND
PRICE TO COMMISSIONS PROCEEDS TO GOLD
PUBLIC (1)(2) KIST (2)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUBORDINATED CAPITAL CERTIFICATES
OF INTEREST
Fifteen Year (Series D)--Per Unit (3)............................... $ 500
Total............................................................... $ 4,664,479 $186,579 $ 4,477,900
Ten Year (Series D)--Per Unit (3)................................... $ 500
Total............................................................... $ 5,389,516 $161,685 $ 5,227,831
Seven Year (Series A)--Per Unit (3)................................. $ 500
Total............................................................... $11,050,139 $276,253 $10,773,886
Five Year (Series C)--Per Unit (3).................................. $ 500
Total............................................................... $13,010,402 $260,208 $12,750,194
Three Year (Series A)--Per Unit (3)................................. $ 500
Total............................................................... $13,470,942 $134,709 $13,336,233
Two Year (Series A)--Per Unit (3)................................... $ 500
Total............................................................... $13,484,192 $101,131 $13,383,061
SUBORDINATED LOAN CERTIFICATES
One Year (Series C)--Per Unit (3)................................... $ 500
Total............................................................... $29,096,776 $145,485 $28,951,291
SUBORDINATED LARGE DENOMINATION
LOAN CERTIFICATES
One Year (Series A)--Per Unit (4)................................... $ 50,000
Total............................................................... $29,027,573 $145,139 $28,882,434
Six Month (Series A)--Per Unit (5).................................. $ 20,000
Total............................................................... $13,233,694 $ 33,084 $13,200,610
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Agvestments, Inc. ("Agvestments"), a wholly-owned subsidiary of Gold
Kist, has been engaged by Gold Kist to solicit from the public on a best
efforts basis offers to purchase the securities described herein. All offers
to purchase are subject to acceptance by Gold Kist. Gold Kist has agreed to
pay all of the expenses and disbursements of Agvestments, including the
commissions of its associated persons and to furnish all facilities, financing
and accounting, clerical and recordkeeping services necessary for the conduct
of Agvestments' business. Gold Kist has also agreed to pay all liabilities
incurred by Agvestments, including liabilities under the Securities Act of
1933. The commissions to be paid to Agvestments' associated persons will be
established by Agvestments from time to time within the following ranges of
percentage of the sales price of the certificates: Six Month Certificates--
1/8- 1/4%; One Year Certificates-- 1/4- 1/2%; Two Year Certificates-- 1/2-
1/4%; Three Year Certificates-- 1/4-1%; Five Year Certificates--1-2%; Seven
Year Certificates--1.5-2.5%; Ten Year Certificates--2-3%; and Fifteen Year
Certificates--2-4%. Agvestments offers cash bonuses to its associated persons
under an incentive program, but in no event can the total compensation to any
associated person exceed 5% of the sales price of certificates. Assuming that
all registered certificates are sold and that the maximum incentive bonuses
are earned by Agvestments' associated persons on such sales, the maximum
compensation to be paid to Agvestments on the sale of $132,427,713 in face
amount of certificates would total $1,471,823.
Agvestments is a registered broker-dealer under the Securities Exchange Act
of 1934 and a member of the National Association of Securities Dealers, Inc.
("NASD"). Agvestments' principal office is located at 244 Perimeter Center
Parkway, N.E., Post Office Box 2210, Atlanta, Georgia 30301. This offering is
being made in compliance with the terms of a partial exemption from the
requirements of Schedule E of the NASD By-Laws. As a condition of this partial
exemption, a minimum of 80 percent of the dollar amount of aggregate sales
made in this offering must be to members, equity holders, producer-suppliers,
non-member patrons or employees of Gold Kist, a subsidiary, franchisee or
member association, or to holders of securities thereof within the past three
years who were in one of the above categories at the time of purchase of such
securities, or to family members or affiliates of one of the above.
(2) The proceeds to Gold Kist of $130,955,890 are before deducting the
expenses to be borne by Gold Kist of an estimated amount of $110,190. The
certificates are offered on a best efforts basis for an indeterminate period
of time, not expected to be in excess of two years. There is no requirement
that the minimum amount of the securities of any series offered hereby must be
sold.
(3) All certificates are offered at par in minimum denominations of $500;
however, certificates will be issued in any amount which is $500 or larger.
(4) All certificates are offered at par in minimum denominations of $50,000;
however, certificates will be issued in any amount which is $50,000 or larger.
(5) All certificates are offered at par in minimum denominations of $20,000;
however, certificates will be issued in any amount which is $20,000 or larger.
---------------
AGVESTMENTS, INC.
The Date of this Prospectus is October 25, 1994
<PAGE>
AVAILABLE INFORMATION
Gold Kist is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission").
Reports and other information filed by Gold Kist can be inspected and copied at
the public reference facilities of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its regional
offices located at 75 Park Place, 14th Floor, New York, New York 10007; and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material can be obtained by mail from the
Public Reference Section of the Commission, 450 Fifth Street N.W., Washington,
D.C. 20549 at prescribed rates.
Gold Kist has filed with the Securities and Exchange Commission Registration
Statements under the Securities Act of 1933 with respect to the securities
offered hereby. This Prospectus does not contain all information set forth in
the Registration Statements, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to Gold Kist and the securities offered hereby,
reference is made to the Registration Statements, including the exhibits,
consolidated financial statements and schedules filed as a part thereof. The
Registration Statements may be inspected without charge at the principal
offices of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. Copies of the Registration Statements, or any part
thereof, may be obtained from the Commission's principal office in Washington,
D.C. upon payment of the fees prescribed by the Commission.
The summaries or descriptions of documents in this Prospectus do not purport
to be complete, and where any such document is an exhibit to the Registration
Statement, each such statement is qualified in all respects by the provisions
of such exhibit, to which reference is hereby made for a full statement of its
provisions.
INFORMATION INCORPORATED BY REFERENCE
The Annual Report on Form 10-K for the fiscal year ended June 25, 1994, which
was filed by Gold Kist with the Securities and Exchange Commission, is
incorporated into this Prospectus by reference.
Gold Kist will furnish without charge to each person to whom this Prospectus
is delivered, on the request of such person, a copy of any and all of the
information that has been incorporated by reference in the Registration
Statement (not including exhibits to the information that is incorporated by
reference unless such exhibits are specifically incorporated by reference into
the information that the Registration Statement incorporates). Such request
should be directed to Jack L. Lawing, Corporate Secretary, Gold Kist Inc., 244
Perimeter Center Parkway, N.E., Atlanta, Georgia 30346, whose telephone number
is (404) 393-5000.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary highlights certain information about Gold Kist Inc. and
is qualified in its entirety by the detailed information and financial
statements and related notes appearing elsewhere in this Prospectus.
THE ASSOCIATION
Gold Kist Inc. is a diversified agricultural membership cooperative
association, headquartered in Atlanta, Georgia. Gold Kist serves approximately
25,000 active farmer members and other cooperative associations located
principally in the southeastern United States. Gold Kist both markets products
and purchases supplies and equipment for its members. See Business.
THE OFFERING
The various classes of securities described below are offered for sale.
SECURITIES OFFERED
<TABLE>
<CAPTION>
AGGREGATE
DESCRIPTION OF SECURITIES FACE AMOUNT
------------------------- -----------
<S> <C>
Subordinated Capital Certificates of Interest
15 year maturity, Series D (Interest as indicated on the front
cover of this Prospectus)......................................... $ 4,664,479
10 year maturity, Series D (Interest as indicated on the front
cover of this Prospectus)......................................... $ 5,389,516
7 year maturity, Series A (Interest as indicated on the front cover
of this Prospectus)............................................... $11,050,139
5 year maturity, Series C (Interest as indicated on the front cover
of this Prospectus)............................................... $13,010,402
3 year maturity, Series A (Interest as indicated on the front cover
of this Prospectus)............................................... $13,470,942
2 year maturity, Series A (Interest as indicated on the front cover
of this Prospectus)............................................... $13,484,192
Subordinated Loan Certificates
1 year maturity, Series C (Interest as indicated on the front cover
of this Prospectus)............................................... $29,096,776
Subordinated Large Denomination Loan Certificates
1 year maturity, Series A (Interest as indicated on the front cover
of this Prospectus)............................................... $29,027,573
6 month maturity, Series A (Interest as indicated on the front
cover of this Prospectus)......................................... $13,233,694
</TABLE>
Equivalent Subordination
The Subordinated Capital Certificates of Interest, the Subordinated Loan
Certificates and the Subordinated Large Denomination Loan Certificates of each
class rank equally under their respective subordination provisions. See
Description of Subordinated Capital Certificates of Interest--Subordination,
and Description of Subordinated Loan Certificates and Subordinated Large
Denomination Loan Certificates--Subordination.
Redemption at Request of Certificateholder
The certificates of each class may be redeemed prior to maturity upon the
death of a certificateholder or, subject to quarterly amount limitations except
in the case of the Subordinated Loan Certificates and Subordinated Large
Denomination Loan Certificates, at any time. Redemption prior to maturity,
other than upon the death of a certificateholder, requires a substantial
redemption penalty which, under certain circumstances, could exceed the amount
of interest paid or accrued on the certificate to the date of
3
<PAGE>
redemption, thus resulting in a redemption price which is less than the
principal amount of the certificate. See Description of Subordinated Capital
Certificates of Interest--Redemption at the Request of Certificateholder, and
Description of Subordinated Loan Certificates and Subordinated Large
Denomination Loan Certificates--Redemption at the Request of Certificateholder.
The indentures governing the Subordinated Capital Certificates of Interest,
the Subordinated Loan Certificates and the Subordinated Large Denomination Loan
Certificates of each series do not contain additional redemption provisions
requiring Gold Kist to repurchase the certificates at the request of the
certificateholder upon the occurrence of a change in control of Gold Kist, nor
do the indentures contain any provisions designed to afford protection to
certificateholders in the event of a highly leveraged transaction involving
Gold Kist.
Redemption at the Option of Gold Kist
In addition to redemptions at the request of the certificateholder, Gold Kist
may, at its option, redeem all or, from time to time, any part of the
certificates of five, seven, ten and fifteen year maturity on any date prior to
maturity. In such event, the redemption price would be 100% of the principal
amount redeemed, plus accrued but unpaid interest on that amount, plus a
substantial redemption premium. See Description of Subordinated Capital
Certificates of Interest--Redemption at the Option of Gold Kist.
METHOD OF SALE
The securities are offered for sale by Agvestments, Inc. on a best efforts
basis.
SELLING PRICE
The securities are offered at par.
USE OF PROCEEDS
The proceeds from this offering of securities will be used primarily to repay
a portion of the Association's other indebtedness and for general corporate
purposes. See Use of Proceeds.
MATERIAL RISKS
Reference is made to the section of this Prospectus entitled Investment
Considerations.
SUMMARY OF SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FOR FISCAL YEARS ENDED (000'S OMITTED)
---------------------------------------------------
JUNE 30, JUNE 29, JUNE 27, JUNE 26, JUNE 25,
1990 1991 1992 1993 1994
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Net sales volume......... $1,184,610 1,259,033 1,300,906 1,400,566 1,561,034
Net margins (loss)(A).... $ 42,119 32,933 (20,614) 27,238 39,404
Ratio of net margins
(loss) to fixed
charges(B).............. 3.8 2.5 1.4 3.2 3.8
<CAPTION>
AS OF (000'S OMITTED)
---------------------------------------------------
JUNE 30, JUNE 29, JUNE 27, JUNE 26, JUNE 25,
1990 1991 1992 1993 1994
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet
Data:
Total assets............. $ 616,741 671,756 676,698 665,102 716,432
Total liabilities........ $ 321,344 351,284 382,789 354,889 394,754
Patrons' and other
equity.................. $ 273,183 296,940 271,456 285,620 296,662
</TABLE>
- --------
A. See Note 6 and Note 7(b) of Notes to Consolidated Financial Statements.
B. See Selected Consolidated Financial Data, Note C.
4
<PAGE>
GOLD KIST INC.
Gold Kist Inc. ("Gold Kist" or the "Association") is a diversified
agricultural membership cooperative association, headquartered in Atlanta,
Georgia. Gold Kist serves approximately 25,000 active farmer members located
principally in the southeastern United States. In addition, other cooperative
associations are members.
Gold Kist is both a marketing and purchasing cooperative; it markets products
and commodities and purchases supplies and equipment for its members. The
Association also engages in marketing and purchasing transactions with
nonmembers. Transactions with its members are on a cooperative basis, and
members are entitled to receive patronage refunds out of net margins earned on
such business. See Business--Patronage Refunds. Patronage refunds are not paid
to nonmembers. The Association also engages in non-cooperative activities
through subsidiaries and partnerships.
Gold Kist conducts broiler and pork production operations, providing both
marketing and purchasing services to producers. Gold Kist also purchases or
manufactures feed, seed, fertilizers, pesticides, animal health products and
other farm supply items for sale at wholesale and retail. Additionally, the
Association serves as a contract procurement agent for, and stores, farm
commodities such as soybeans and grain, and is a partner in a major peanut
processing and marketing business, in a pecan processing and marketing business
and in an agricultural fertilizer and chemical production, sales and
distribution business.
The Association's principal office is located at 244 Perimeter Center
Parkway, N.E., Atlanta, Georgia 30346, and its telephone number is (404) 393-
5000.
INVESTMENT CONSIDERATIONS
LACK OF ESTABLISHED MARKET FOR SECURITIES OFFERED
There is no established market for the Subordinated Capital Certificates of
Interest, Subordinated Loan Certificates and Subordinated Large Denomination
Loan Certificates presently outstanding, and it is unlikely that a market will
be available in which the certificates offered by this Prospectus can be sold.
SUBORDINATION OF SECURITIES OFFERED
Payment of the principal and interest on the Subordinated Capital
Certificates of Interest, Subordinated Loan Certificates and Subordinated Large
Denomination Loan Certificates of each series offered hereby is subordinated in
right of payment, in case of liquidation of Gold Kist, to the prior payment in
full of the principal of and interest on "Superior Indebtedness," as set forth
in the indentures under which each series of Subordinated Capital Certificates
of Interest, Subordinated Loan Certificates and Subordinated Large Denomination
Loan Certificates will be issued. As of June 25, 1994, Superior Indebtedness
(as defined in the indentures) amounted to approximately $301,948,000 and
additional Superior Indebtedness, without limitation, may be created from time
to time. See Description of Subordinated Capital Certificates of Interest--
Subordination, and Description of Subordinated Loan Certificates and
Subordinated Large Denomination Loan Certificates--Subordination.
AFFILIATED UNDERWRITER
Agvestments, Inc. is a wholly-owned subsidiary of Gold Kist. Under the terms
of an agreement with Gold Kist, Agvestments' business is restricted to the
offering and sale of securities issued by Gold Kist. This offering is being
made in compliance with the terms of a partial exemption from the requirements
of Schedule E of the NASD By-Laws; no persons other than associated persons of
Gold Kist or Agvestments participated in determining the price and other terms
of the securities offered hereby. The rate of interest borne by certificates of
each series is determined from time to time by the Board of Directors of Gold
Kist or its
5
<PAGE>
delegates, who are officers of Gold Kist, but no change in the rate affects any
certificates theretofore issued. The rates are reexamined weekly by officers of
Gold Kist and Agvestments, and a pricing determination is made based upon the
yields offered on debt securities of comparable maturities issued by the United
States Government and other market factors.
USE OF PROCEEDS
The maximum net proceeds to Gold Kist from the sale of the certificates
offered hereby are estimated to be $130,955,890 before deduction of expenses
estimated to be $110,190. The proceeds will be used in the following order of
priority. Approximately $34,976,000 of the proceeds will be used for the
repayment or redemption of outstanding Gold Kist Certificates of Interest, Loan
Certificates and Large Denomination Loan Certificates which will mature during
the twelve-month period ending October 31, 1995. The rates of interest borne by
such indebtedness are set forth in Note 4 of Notes to Consolidated Financial
Statements. Any remaining proceeds will be used for general corporate purposes,
including additional production and processing plant capacity expansion and
additional working capital.
The Subordinated Capital Certificates of Interest, Subordinated Loan
Certificates and Subordinated Large Denomination Loan Certificates are being
offered as a continuous offering on a "best efforts" basis by Agvestments, Inc.
Consequently, no assurance can be given as to the amount of Subordinated
Capital Certificates of Interest, Subordinated Loan Certificates or
Subordinated Large Denomination Loan Certificates that will be sold or as to
the amount of net proceeds therefrom which will be available to Gold Kist from
time to time. If substantially less than the maximum proceeds are obtained, to
the extent that cash flow from future operations is not sufficient, Gold Kist
would borrow necessary additional funds from banks and other lenders. See Note
4 of Notes to Consolidated Financial Statements.
6
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below under the captions
"Consolidated Statement of Operations Data" for each of the years in the five-
year period ended June 25, 1994 and "Consolidated Balance Sheet Data" as of
June 30, 1990, June 29, 1991, June 27, 1992, June 26, 1993, and June 25, 1994
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 26, 1993 and June 25, 1994 and for each of the years in the three-
year period ended June 25, 1994, 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 postretirement benefits other than pensions, included
elsewhere herein.
<TABLE>
<CAPTION>
FOR FISCAL YEARS ENDED (000'S OMITTED)
---------------------------------------------------
JUNE 30, JUNE 29, JUNE 27, JUNE 26, JUNE 25,
1990 1991 1992 1993 1994
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net sales volume........... $1,184,610 1,259,033 1,300,906 1,400,566 1,561,034
========== ========= ========= ========= =========
Interest expense........... $ 18,106 18,437 18,545 17,163 13,924
========== ========= ========= ========= =========
Margins (loss) before
cumulative effect of
accounting changes........ $ 42,119 32,933 (1,643) 27,238 34,065
Cumulative effect of
changes in accounting:
Income taxes (A)......... $ -- -- -- -- 5,339
Postretirement benefits
other than pensions (net
of $10,698 income tax
benefit) (B)............ $ -- -- (18,971) -- --
---------- --------- --------- --------- ---------
Net margins (loss)......... $ 42,119 32,933 (20,614) 27,238 39,404
========== ========= ========= ========= =========
Ratio of net margins (loss)
to fixed charges (C)...... 3.8 2.5 1.4 3.2 3.8
========== ========= ========= ========= =========
<CAPTION>
AS OF (000'S OMITTED)
---------------------------------------------------
JUNE 30, JUNE 29, JUNE 27, JUNE 26, JUNE 25,
1990 1991 1992 1993 1994
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Working capital............ $ 123,888 114,652 108,045 140,629 139,847
========== ========= ========= ========= =========
Total assets............... $ 616,741 671,756 676,698 665,102 716,432
========== ========= ========= ========= =========
Long-term liabilities...... $ 130,709 146,183 159,449 152,792 144,992
========== ========= ========= ========= =========
Total liabilities.......... $ 321,344 351,284 382,789 354,889 394,754
========== ========= ========= ========= =========
Patrons' and other equity.. $ 273,183 296,940 271,456 285,620 296,662
========== ========= ========= ========= =========
Current ratio.............. 1.65 1.56 1.48 1.70 1.56
========== ========= ========= ========= =========
Long-term liabilities to
total capitalization...... % 32.36 32.99 37.00 34.85 32.83
========== ========= ========= ========= =========
</TABLE>
- --------
Note:
(A) See Note 6 of Notes to Consolidated Financial Statements.
(B) See Note 7(b) of Notes to Consolidated Financial Statements.
(C) The ratio is calculated by dividing the sum of margins (loss) before
cumulative effect of change in accounting principle, income tax expense
(benefit), equity in the earnings (loss) of a partially-owned affiliate,
minority interest in earnings (loss) of subsidiary, adjusted to exclude
earnings not distributed of partially-owned affiliates, interest
capitalized and fixed charges by fixed charges. Fixed charges consist of
interest charges on all indebtedness and that portion of rentals considered
to be the interest factor. The ratio computation does not include interest
charges incurred by Golden Peanut Company of $10,803, $10,684, $8,151,
$9,126 and $10,113 for 1990, 1991, 1992, 1993, and 1994, respectively.
7
<PAGE>
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 35 year history. With the exception of a
brief period during 1992, the past eleven years have been a period of continued
profitability. The following addresses the various factors that have influenced
poultry industry profitability during the past several years. After a year of
weak broiler market prices in 1989, market prices increased during the winter
of 1990 as a result of increased exports to the former Soviet Union. Broiler
market prices declined again 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. According to USDA estimates, the
supply of broilers is expected to increase at a 5.6% rate in 1994 and a 4.7%
rate in 1995 as compared to the 6.5% average annual increase between 1991 and
1993. In 1990 and 1991, feed grain prices, which represent approximately 50% of
total broiler production costs, moderated as a result of the favorable United
States grain harvests for those two years. The record 1992 United States 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.
Flooding in the Midwestern United States during the summer of 1993 severely
impacted the 1993 United States grain harvest and boosted feed ingredient
prices to near record levels. 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 are expected to decrease substantially in 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. Hot, dry weather conditions in the Southeast during
the summer of 1990 negatively affected yields on row crop production of corn,
soybeans and peanuts, thus lowering Southeastern farm income. 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. 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.
Export sales for 1992, 1993 and 1994 were $29.8 million, $27.5 million and
$37.7 million, respectively. In the two year period ending in 1993, export
sales declined as a result of reduced sales activity with the former Soviet
Union. However, in 1994, export sales increased as a result of a demand for
poultry from the Commonwealth of Independent States, Far East and Mexico.
Export sales of poultry products will be influenced by credit availability to
foreign countries, particularly the Commonwealth of Independent States, Eastern
European nations and the Far East, and the United States government's
willingness to support the industry through export enhancements.
8
<PAGE>
The Association's operations are classified into two reportable business
segments. See Note 10 of Notes to Consolidated Financial Statements. The
discussion of results of operations relates the effects of these significant
economic factors on those segments for each of the years in the three-year
period ended June 25, 1994.
RESULTS OF OPERATIONS
Fiscal 1993 Compared to Fiscal 1992
Net sales volume of $1.4 billion for 1993 increased 7.7% or $99.7 million
from the prior fiscal year primarily due to increased sales of fresh and
further-processed chicken products. The Association posted net margins from
operations, before general corporate expenses and other income, of $45.1
million for 1993 as compared to net losses from operations, before general
corporate expenses and other income, of $7.8 million for 1992. The
Association's return to profitability was primarily due to improved operating
margins in the Poultry segment resulting from higher market prices for poultry
products and lower field production costs. The Association's margins before
cumulative effect of change in accounting principle were $27.2 million for 1993
as compared to a $1.6 million loss before cumulative effect of accounting
change for 1992.
In 1993, the Poultry segment had net sales volume of $1.1 billion as compared
to $963.1 million for 1992. Net margins from operations were $43.3 million for
1993 as compared to a net loss from operations of $8.1 million for 1992. The
increase in net sales volume and net margins was due to a 6% increase in pounds
of broilers marketed, as well as a 5% increase in average selling prices. The
sales tonnage increases resulted from production and processing expansion at
three poultry complexes located in Alabama, South Carolina and Florida. In
addition to the previous discussion regarding poultry market prices, average
selling prices were positively influenced by reduced supplies of competing
meats. The increase in operating margins during 1993 was also influenced by the
decline in production costs related to a 5% decrease in poultry feed ingredient
costs. The Pork production operation's 1993 net margins from operations were
$1.2 million as compared to a net loss from operations of $121,000 for 1992.
The increase was related to the strengthening of overall meat selling prices.
Net sales volume in the Agri-Services segment for 1993 was $322.6 million,
down approximately 4.5% from $337.8 million in 1992, as a result of reduced
fertilizer and animal feed sales. The Agri-Services segment had net margins
from operations of $1.9 million as compared to $253,000 for 1992. Although the
year to year net margin comparison was favorable, results of operations for
1992 included a $2.8 million loss associated with closed operations. The
results of operations in 1993 were negatively affected by wet weather
conditions in the early spring and late spring drought conditions that hampered
and reduced planting activity in the Southeast.
In 1993, the Association's distribution, administrative and general expenses
were $111.5 million as compared to $103.7 million in 1992, an increase of 7.5%.
The increase reflects higher incentive compensation expense related to the
increase in margins and general expense increases related to expansion in the
Poultry segment. Distribution, general and administrative expenses as a
percentage of net sales were 8.0% for 1992 and 1993.
Other income (deductions) totaling $4.2 million for 1993 decreased $5.5
million from $9.7 million for 1992. The reduction of $6.7 million in the
Association's pro rata share of Golden Peanut Company's net income accounted
for the overall decline in other income (deductions). See Note 9(b) of Notes to
Consolidated Financial Statements. The decline in Golden Peanut Company's net
income in 1993 was the result of lower market prices for shelled peanuts
related to the large crop harvested in 1992. Interest income of $7.5 million
declined approximately $3.6 million for 1993. The 1992 year included $3.1
million in interest received on income tax refunds for the 1984 through 1986
years. Miscellaneous, net in 1993 includes income of $1.6 million that
represents the Association's equity in the earnings of a partially-owned
foreign affiliate as
9
<PAGE>
compared to equity in the loss of the affiliate in 1992 of $2.7 million. The
affiliate's principal activities include marketing, purchasing and resale of
edible peanuts. The 1992 operating loss sustained by the affiliate was
primarily due to low market prices for foreign sourced peanuts and the poor
quality of a significant portion of the peanuts traded. In addition,
miscellaneous, net for 1992 and 1993 includes patronage refunds from other
cooperatives and dividends of $3.8 million and $2.9 million, respectively, and
rental income of $1.9 million and $1.7 million, respectively.
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 operating margins
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.
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
10
<PAGE>
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.
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, a revolving credit facility with a group of banks and uncommitted
lines of credit. The Association had unused loan commitments of $37.4 million
and additional unused uncommitted facilities to provide loans and letters of
credit from banks aggregating approximately $122.6 million at June 25, 1994.
The primary sources of external long-term financing are a note agreement with
an insurance company and proceeds from the continuous offering of Subordinated
Capital Certificates of Interest. See Note 4 of Notes to Consolidated Financial
Statements.
Covenants under the terms of the loan agreements with lenders include
conditions that could limit short-term and long-term financing available from
various external sources. The terms require a ratio of current assets to
current liabilities of not less than 1.20:1, the ratio of senior funded debt to
total capitalization not to exceed 40% and total funded debt to total
capitalization not to exceed 50%. At June 25, 1994, Gold Kist's current ratio,
senior funded debt to total capitalization and total funded debt to
capitalization, determined under the loan agreements, were 1.51:1, 23% and 37%,
respectively. The loan agreements apply to the Association and its
subsidiaries, excluding Golden Poultry. The Association was in compliance with
all applicable conditions in loan agreements with all lenders at June 25, 1994.
See Note 4 of Notes to Consolidated Financial Statements.
In 1992, the principal sources of cash used to fund capital expenditures and
other investments totaling $52.8 million, as well as the $21.8 million net
increase in operating assets and liabilities, were proceeds from the
distribution of Golden Peanut Company's 1991 partnership earnings and the
disposal of investments totaling $34.7 million, income tax refunds of $21.0
million and increased short-term borrowings from commercial banks of $15.8
million. Capital expenditures of $46.0 million and the increase in inventories
and receivables during 1992 were primarily related to poultry production and
processing expansion at three poultry complexes. Increased sales of the
Association's Subordinated Capital Certificates were used primarily for the
repayment of long-term borrowings and redemptions of Subordinated Loan
Certificates. The Association's use of cash in 1992 included $8.8 million for
cash patronage refunds and other equity payments.
In 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. During 1993, the Association and its consolidated subsidiaries
investment activities 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.
11
<PAGE>
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 to
fund capital expenditures, repayment 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 and Cumulative Preferred
Certificates.
The Association, including its non-cooperative subsidiaries, plans capital
expenditures of approximately $76.0 million in 1995 that primarily include
expenditures for expansion and technological advances in poultry production and
processing. In addition, planned capital expenditures include other asset
improvements and necessary replacements. Management intends to finance the
planned 1995 capital expenditures with existing cash balances and cash provided
by operating activities and additional long-term borrowings as needed. In 1995,
management expects cash expenditures to approximate $17.7 million for equity
redemptions. The Association believes cash on hand at June 25, 1994 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 1995.
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, feed grains,
fertilizers and hogs. The prices of these commodities are based on 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 No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" (SFAS 115), which must be applied by fiscal
1995. SFAS 115 will require a change in the accounting for investments in
equity securities with determinable fair value and for all investments in debt
securities. Implementation of SFAS 115 will increase total assets and patrons'
equity by approximately $12 million, net of deferred income taxes, based
principally on the quoted market price as of June 25, 1994 of the available for
sale marketable equity security. See Note 9(a) of Notes to Consolidated
Financial Statements.
BUSINESS
Gold Kist offers both cooperative marketing and cooperative purchasing
services to its member patrons. The standard Membership, Marketing and/or
Purchasing Agreement between each member and Gold Kist does not require the
member to market agricultural products or to purchase farm supplies through
Gold Kist. The Association undertakes to market for the member agricultural
products of a type marketed by Gold Kist and to purchase or manufacture and
sell to the member farm supplies, provided handling such supplies is
advantageous for Gold Kist. The Association also serves as a contract
procurement agent for, and storer of, farm commodities such as soybeans and
grain and is a partner in a major peanut processing and marketing business, in
a pecan processing and marketing business and in an agricultural fertilizer and
chemical production, sales and distribution business.
Agriculture is generally cyclical in nature. Agricultural commodities are
subject to wide fluctuations in price, based on supply of the farm commodities
and demand for the raw or processed products. 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. The cyclical nature of Gold
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<PAGE>
Kist's operations related to various commodities causes variations from year to
year in sales, costs, and prices which has resulted in net margins in certain
years and losses in others.
Gold Kist follows the general practice of hedging varying amounts of its feed
ingredients by buying or selling options or contracts for future delivery in
the commodity markets. While hedging is designed to reduce the risk of
fluctuations in the market prices of commodities, hedging itself involves
substantial risks and can result in losses. Gold Kist's activities related to
commodities futures hedging strategies have not been significant to its feed
grain requirements, and the results of commodities options transactions have
not been material to results of operations.
For information relating to Gold Kist's industry segments, see Note 10 of
Notes to Consolidated Financial Statements.
POULTRY
Gold Kist provides cooperative purchasing and marketing services to its
members who are producers under its integrated broiler or pork production
programs. Six broiler complexes operating on a cooperative basis and
encompassing broiler, pullet and breeder flocks, hatcheries, feed mills,
poultry processing plants and transportation facilities, are located in
Alabama, Florida and Georgia. Golden Poultry, a subsidiary owned 72% by Gold
Kist, owns and operates integrated broiler complexes on a non-cooperative
basis, in Alabama, Georgia and North Carolina. Carolina Golden Products
Company, a general partnership consisting of Golden Poultry and AgriGolden,
Inc., a wholly-owned subsidiary of Gold Kist, operates a poultry processing
complex on a non-cooperative basis in South Carolina.
The principal poultry products marketed are whole chickens, cut-up chickens,
segregated chicken parts and further processed products packaged in various
forms, i.e., bulk fresh ice pack, chill pack and frozen. Ice pack chicken is
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 marketed 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 volume is sold under customer's 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.
Broiler products are marketed directly from the processing plant in each
broiler complex, from the Association's headquarters in Atlanta and from
separate distribution facilities located near major metropolitan areas. Gold
Kist is one of the largest poultry processors in the United States. It competes
with other large processors and with smaller companies on the basis of price,
quality and service.
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.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED (000'S OMITTED)
-----------------------------------
JUNE 27, JUNE 26, JUNE 25,
1992 1993 1994
---------- ---------- -----------
<S> <C> <C> <C>
Broiler Products
Volume...................................... $930,311 $1,041,175 $1,152,252
Percentage (%).............................. 71.5 74.3 73.8
</TABLE>
Gold Kist also markets hogs raised by members and non-members in Alabama,
Georgia and North Carolina.
13
<PAGE>
AGRI-SERVICES
Gold Kist purchases, manufactures and processes fertilizers, agricultural
chemicals, seed, pet food, feed, animal health products and other farm supply
items for distribution and sale at wholesale and retail. These products are
distributed through approximately 87 Gold Kist retail stores and at wholesale
to national accounts and independent dealers. The Gold Kist stores are located
in Alabama, Florida, Georgia and South Carolina. A typical 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. Urban
locations offer turf and garden supplies, consumer items and houseware
products.
The Association operates a system of receiving and storing facilities for
unprocessed commodities located principally in Alabama, Florida, Georgia and
South Carolina. The principal farm commodities handled are soybeans, corn and
other grains. Gold Kist has aggregate storage capacity of approximately seven
million bushels. Approximately 98% of Gold Kist storage facilities are licensed
by the federal or state government and can issue negotiable warehouse receipts.
Pursuant to a renewable five year grain handling agreement which terminates in
August 1995, Gold Kist utilizes these facilities and assets exclusively as
independent buying points operating on a commission basis for the Archer
Daniels Midland Company.
Gold Kist distributes granular, blended and liquid fertilizers and fertilizer
materials in bagged and bulk form. Gold Kist is a member of CF Industries,
Inc., a cooperative owned by regional cooperatives, which produces and supplies
fertilizer materials to its members. For the fiscal year ended June 25, 1994,
Gold Kist purchased approximately 27% percent of its total volume of 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 is also a 50% general partner with Scott Petroleum
Corporation in FarmKist Enterprises, an agricultural fertilizer and chemical
production, sales and distribution business based in Greenville, Mississippi.
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.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED (000'S
OMITTED)
--------------------------
JUNE 27, JUNE 26, JUNE 25,
1992 1993 1994
-------- -------- --------
<S> <C> <C> <C>
Fertilizer and Chemicals
Volume............................................. $174,850 $173,778 $211,218
Percentage (%)..................................... 13.4 12.4 13.5
</TABLE>
Gold Kist's four AgriServices feed mills produce feeds distributed at
wholesale or at retail through the Gold Kist stores and independent dealers.
Approximately one-half of the feed distributed through the stores is delivered
in bulk form directly from the feed mill to the farm; the remainder is sold in
bag form.
AgraTech Seeds, Inc., 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. Seed
is marketed by AgraTech Seeds at wholesale to seed retailers, including Gold
Kist stores and independent seed retail outlets, in the Southeast and Midwest.
AgraTech Seeds contracts with farmers for the production of seed and processes
or contracts for the processing of approximately 95% of the seeds it
distributes. Proprietary corn, soybean, sorghum and peanut seed varieties are
marketed under the trademark AgraTech (R).
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<PAGE>
PARTNERSHIP INTEREST
Gold Kist, the Archer Daniels Midland Company ("ADM") and Alimenta Processing
Corporation ("Alimenta") are partners in Golden Peanut Company, a general
partnership formed to operate a peanut procuring, processing, and marketing
business. Each partner leases 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.
Golden Peanut Company procures, processes and markets peanuts and peanut by-
products in each of the three peanut producing areas of the United States
(Southeast, Southwest and Virginia/Carolina). Golden Peanut Company is a major
processor of edible peanuts and is active in domestic and international
markets.
The principal peanut product is shelled edible peanuts. Shelled edible peanuts
are marketed primarily to manufacturers of peanut butter, candy and salted nuts
and are sold in the export market. Golden Peanut also processes peanuts for
sale in the shell or for processing by others into oil and meal.
EXPORT SALES
Gold Kist owns no physical facilities overseas and has no overseas employees.
Product sales managers maintain sales networks overseas through contacts with
independent dealers and customers. During the fiscal year ended June 25, 1994,
the approximate export sales volume of the primary export product (poultry) was
$37.7 million. During that period, export sales of poultry were mainly to
customers in the former Soviet Union, Poland, Far East and the Caribbean area.
Subsidized foreign competition has depressed export demand for many products.
Export sales involve an additional element of transportation and credit risk to
the shipper beyond that normally encountered in domestic sales.
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 adjustments, are distributed to
members as patronage refunds on the basis of their respective patronage during
that 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
written notices of allocated reserves. See Notes 1(f) and 6 of Notes to
Financial Statements. Allocated reserves distributed as a part of either
qualified or nonqualified notices 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. Patronage refunds
distributed by check or as qualified written notices are deductible from Gold
Kist's gross income for federal income tax purposes. 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. Gold Kist has subsidiaries which are not
cooperatives, and the income of these subsidiaries is subject to corporate
income taxes.
DESCRIPTION OF SUBORDINATED CAPITAL CERTIFICATES OF INTEREST
Gold Kist's Subordinated Capital Certificates of Interest of the six series
offered hereby are issued under indentures (the "Indentures") between Gold Kist
and Trust Company Bank, as Trustee (the "Trustee"). A separate Indenture dated
as of September 1, 1979, amended by a First Supplemental Indenture dated as of
September 1, 1980 and a Second Supplemental Indenture dated as of September 1,
1982, governs each of the following three series of certificates offered
hereby: the Fifteen Year Subordinated Capital Certificates of
15
<PAGE>
Interest (Series D), (the "Fifteen Year Certificates"); the Ten Year
Subordinated Capital Certificates of Interest (Series D), (the "Ten Year
Certificates"); and the Five Year Subordinated Capital Certificates of Interest
(Series C), (the "Five Year Certificates"). The Two Year Subordinated Capital
Certificates of Interest (Series A), (the "Two Year Certificates") are governed
by an Indenture dated as of September 1, 1980. The Seven Year Subordinated
Capital Certificates of Interest (Series A), (the "Seven Year Certificates")
and the Three Year Subordinated Capital Certificates of Interest (Series A),
(the "Three Year Certificates") are governed by separate Indentures dated as of
September 1, 1985. The forms of the Indentures and Supplemental Indentures are
filed as exhibits to Registration Statements No. 2-59948, No. 2-65587, No.
2-69267, No. 2-79538 and No. 33-428. With the exception of the maturities of
and interest rates borne by the certificates issued thereunder, the redemption
provisions, and the other exceptions indicated below, the terms of the six
Indentures, as amended, and the certificates issued thereunder and offered
hereby are identical in all material respects. The following summaries of
certain provisions of the Indentures do not purport to be complete, and where
particular provisions of the Indentures are referred to, such provisions
including definitions of certain terms, are incorporated by reference as a part
of such summaries or terms, which are qualified in their entirety by such
reference.
The certificates are unsecured obligations of Gold Kist which are
transferable on the books of Gold Kist when properly endorsed, but are not
negotiable. (Section 2.04 of the Indentures.) The certificates are issued in a
minimum amount of $500 or in any larger amount. The certificates are issued as
of the date on which payment of the purchase price is received by Gold Kist or
its agent for such purpose, except that, where payment is received by the 15th
of January, April, July or October, the certificate will be issued as of the
first of such month, and where payment is received by the 10th of any other
month, the certificate will be issued as of the first of such month. Each
Fifteen Year Certificate matures Fifteen years from the date of such
certificate; each Ten Year Certificate matures ten years from the date of such
certificate; each Seven Year Certificate matures seven years from the date of
such certificate; each Five Year Certificate matures five years from the date
of such certificate; each Three Year Certificate matures three years from the
date of such certificate; and each Two Year Certificate matures two years from
the date of such certificate. (Section 2.01 of the Indentures.)
Each certificate bears interest from the date issued at the per annum rate
stated on the face thereof. The rate of interest borne by certificates of each
series shall be determined from time to time by the Board of Directors of Gold
Kist or its delegate, but no change in the rate will affect any certificates
theretofore issued. The Five, Seven, Ten and Fifteen Year Certificates are
further subdivided and designated by subseries. Each subseries encompasses all
Certificates of the particular series issued pursuant to a single determination
of the rate of interest to be borne by Certificates of that series; more than
one subseries may bear the same rate of interest. The current rate of interest
borne by certificates of each series is set forth on the front cover of this
Prospectus. Interest is payable on July 1 of each year to holders of record as
of the preceding June 30. Holders of $5,000 or more of certificates of a given
series are entitled to payment of interest on such certificates quarterly, on
the first day in January, April, July and October of each year. (Sections 1.01
and 2.01 of the Indentures.)
Upon the written request of a holder of certificates, Gold Kist will retain
the interest otherwise payable to the holder and pay such interest (i) at the
maturity of the certificate, (ii) annually (if the interest is accumulated
quarterly and if requested by the holder), or (iii) subject to any applicable
redemption penalty, upon redemption prior to maturity, in each case together
with interest thereon at the per annum rate stated on the face of the
certificate compounded as of each Interest Payment Date. Any holder who makes
such a request may at any time, by written notice delivered to Gold Kist at its
principal office in Atlanta, Georgia, terminate such request or withdraw any
interest so retained together with accrued interest thereon through the date of
withdrawal, or both. The certificates will be paid in full, including all
principal and accrued but unpaid interest, at maturity. (Section 5.02 of the
Indentures.)
The Indentures do not limit the aggregate principal amount of certificates
which may be issued thereunder and each Indenture may be modified by Gold Kist
and the Trustee, without the consent of the certificateholders, to provide for
the issuance under the Indentures of one or more additional series of
certificates having terms different from those of the series offered hereby.
(Sections 2.01 and 10.01 of the
16
<PAGE>
Indentures.) Certificates of previous series have been issued and are
outstanding under certain of the Indentures governing the certificates. As of
June 25, 1994, there were the following aggregate principal amounts of the
series offered hereby outstanding: Fifteen Year--$8,244,000; Ten Year--
$8,162,000; Seven Year--$7,439,000; Five Year--$13,234,000; Three Year--
$9,340,000; and Two Year--$9,759,000. The Indentures do not limit the amount of
other securities, either secured or unsecured, superior or subordinate to the
certificates, which may be issued by Gold Kist.
REDEMPTION AT THE REQUEST OF CERTIFICATEHOLDER
Upon the death of a registered holder of a certificate, at the request of (a)
the personal representative of the deceased holder's estate or (b) any
surviving joint holder of a jointly held certificate, Gold Kist will redeem
certificates held by such deceased holder. In such event, redemption shall be
at the full face value of the certificate redeemed plus interest accrued and
unpaid thereon to the date of redemption only. (Section 3.01 of the
Indentures.)
Additional Redemptions at the Request of Certificateholder
In addition to redemption upon the death of a registered holder of a
certificate, Gold Kist agrees to redeem prior to maturity a limited amount of
the certificates of any series of Subordinated Capital Certificates of Interest
offered hereby at the request of the registered holders. The maximum principal
amount of certificates of any series that Gold Kist will redeem during each
calendar quarter shall be equal to five percent (5%) of the aggregate principal
amount of all certificates of that series outstanding at the end of the last
preceding calendar quarter. For example, if there were $5,000,000 in principal
amount of Fifteen Year Subordinated Capital Certificates of Interest (Series D)
outstanding on March 31, 1995, Gold Kist would redeem at the request of the
holders up to $250,000 of such Fifteen Year Certificates during the quarter
beginning on April 1, 1995 and ending on June 30, 1995. (Section 3.04 of the
Indenture governing the Fifteen Year Certificates; Section 3.03 of the
remaining Indentures.)
All such redemptions shall be only at the written request of the registered
holder(s) of the certificates redeemed delivered to the Association at its
principal office in Atlanta, Georgia. Redemptions will be made in the order
that such requests are received, and the redemption date will be a date
determined by Gold Kist which is within fifteen (15) days after such request is
received.
The redemption price of each certificate redeemed will be an amount equal to
the full principal amount of the certificate, plus interest accrued but unpaid
to the redemption date (including, if appropriate, interest compounded on
interest retained by the Association at the request of the holder) less a
redemption penalty computed in accordance with the following table.
REDEMPTION PENALTIES APPLICABLE TO VARIOUS CLASSES
<TABLE>
<C> <S>
Two and Three Year Certificates --An amount equal to six (6)
months' interest on the
principal amount of the
certificate computed at the
nominal (simple interest)
rate shown on the face of the
certificate.
Five, Seven, Ten and Fifteen Year Certificates --An amount equal to one (1)
year's interest on the
principal amount of the
certificate computed at the
nominal (simple interest)
rate shown on the face of the
certificate.
</TABLE>
The redemption penalty computed as provided above will be deducted regardless
of the length of time the certificate has been outstanding. The penalty could
exceed the amount of interest paid or accrued on the
17
<PAGE>
certificate to the redemption date, thus resulting in a redemption price which
is less than the principal amount of the certificate.
The following examples illustrate the calculation of the redemption price
assuming the stated principal amounts and interest rates. The Total Redemption
Price in each example will vary with different interest rates and amounts of
principal.
A. For a Five Year Certificate in the principal amount of $1,000 bearing
interest at 6.75%, purchased on January 1, 1995, and redeemed at the request of
the holder on June 14, 1995, the redemption price would equal:
<TABLE>
<C> <C> <S>
$1,000.00 (Principal amount)
plus 30.51 (165 days' accrued interest at 6.75% per annum)
---------
$1,030,51
less 67.50 (1 year's simple interest at 6.75% per annum)
---------
$ 963.01 (Total Redemption Price)
</TABLE>
B. For a Five Year Certificate in the principal amount of $5,000, bearing
interest at 6.75% (paid quarterly at the election of the holder), purchased on
January 1, 1995 and redeemed at the request of the holder on June 15, 1995, the
redemption price would equal:
<TABLE>
<C> <C> <S>
$5,000.00 (Principal amount)
plus 69.35 (75 days' accrued interest at 6.75% per annum. Interest
--------- previously paid on April 1, 1995 equals $84.38)
$5,069.35
less 337.50 (1 year's simple interest at 6.75% per annum)
---------
$4,731.85 (Total Redemption Price)
</TABLE>
C. For a Five Year Certificate in the principal amount of $5,000 bearing
interest at 6.75% (accumulated quarterly at the election of the holder),
purchased on January 1, 1995, and redeemed at the request of the holder on June
15, 1997, the redemption price would equal:
<TABLE>
<C> <C> <S>
$5,000.00 (Principal amount)
plus 891.98 (2 1/4 years, 75 days' accrued interest at 6.75% per annum
--------- accumulated and compounded quarterly)
$5,891.98
less 337.50 (1 year's simple interest at 6.75% per annum)
---------
$5,554.48 (Total Redemption Price)
</TABLE>
Except to the extent described above, certificates cannot be cashed by the
holder before maturity.
The indentures governing the Subordinated Capital Certificates of each series
do not contain additional redemption provisions requiring Gold Kist to
repurchase the certificates at the request of the certificateholder upon the
occurrence of a change in control of Gold Kist, nor do the indentures contain
any provisions designed to afford protection to certificateholders in the event
of a highly leveraged transaction involving Gold Kist.
REDEMPTION AT THE OPTION OF GOLD KIST
Gold Kist may, at its option, redeem all, or from time to time any part, of
the certificates of any subseries of Five, Seven, Ten or Fifteen Year
Certificates on any date prior to maturity. The redemption price of each
certificate redeemed at the option of Gold Kist will be an amount equal to the
full principal amount redeemed (whether the certificate is redeemed in whole or
in part), plus interest accrued but unpaid on the principal amount redeemed to
the redemption date (including, if appropriate, interest compounded on interest
retained by the Association at the request of the holder), plus a redemption
premium equal to one (1) year's interest on the principal amount redeemed,
computed at the nominal (simple interest) rate shown on the face of the
18
<PAGE>
certificate. Notice of redemption will be mailed to each affected
certificateholder not less than 15 nor more than 60 days before the redemption
date. Gold Kist is not required to transfer or exchange any certificates
selected for redemption in whole or in part.
Gold Kist does not have the option of redeeming Two or Three Year Certificates
prior to maturity.
SUBORDINATION
In case of liquidation of Gold Kist, whether voluntary or involuntary, the
payment of the principal of and interest on the certificates is subordinate to
the payment in full of the principal of and interest on any notes or accounts
payable, now due or hereafter made by Gold Kist to any bank, any other lending
agency or creditor ("Superior Indebtedness"); except that none of the
Subordinated Capital Certificates of Interest issued pursuant to the Indentures
dated as of December 1, 1977, September 1, 1979, September 1, 1980 or September
1, 1985, the One Year Subordinated Loan Certificates issued pursuant to the
indentures dated as of December 1, 1977 or September 1, 1979, the One Year or
Six Month Subordinated Large Denomination Loan Certificates issued pursuant to
the Indentures dated as of September 1, 1985, the 5% Cumulative Preferred
Capital Certificates of Interest previously issued by Gold Kist, or the
Cumulative Preferred Capital Certificates of Interest of any other series
previously issued by Gold Kist shall be Superior Indebtedness, but shall rank
equally with the certificates outstanding under each of the Indentures. As of
June 25, 1994, Superior Indebtedness amounted to approximately $301,948,000,
and additional Superior Indebtedness, without limitation, may be created from
time to time. (Article Four and Section 1.01 of the Indentures.) Gold Kist is
jointly and severally liable for (i) the obligations of Golden Peanut Company,
a general partnership in which Gold Kist has a 33 1/3% interest (ii) the
obligations of FarmKist Enterprises, a general partnership in which Gold Kist
has a 50% interest and (iii) the obligations of Young Pecan Company, a general
partnership in which Gold Kist has a 25% equity interest and a 35% earnings
(loss) allocation. Any such liability incurred would constitute additional
Superior Indebtedness. See Note 9(b) of Notes to Consolidated Financial
Statements.
Nothing contained in the subordination provisions prevents Gold Kist from
making payments of principal or interest on the certificates except during the
pendency of any dissolution or liquidation proceedings with respect to Gold
Kist.
DUTIES OF TRUSTEE
Trust Company Bank is the Trustee under each Indenture and is to perform only
such duties as are specifically set forth in the Indenture. (Section 8.01 of
the Indentures.) In the event of a default, the holders of a majority in
aggregate principal amount of the certificates outstanding at the time under
any Indenture have the right to require the Trustee to take action to remedy
such default. (Section 7.12 of the Indentures.)
MODIFICATION OF THE INDENTURE
Each Indenture contains provisions permitting Gold Kist and the Trustee, (i)
with the written consent of the holders of not less than 66 2/3% in aggregate
principal amount of all the certificates outstanding under the Indenture on a
record date set for such purpose, to execute supplemental indentures amending
the provisions of the Indenture or any supplemental indenture so as to modify
the rights of the holders of all the certificates or (ii) with the written
consent of the holders of not less than 66 2/3% in aggregate principal amount
of the certificates of a given series outstanding under the Indenture, on a
record date set for such purpose, to execute supplemental indentures amending
the provisions of the Indenture relating to certificates of such series;
provided that no such supplemental indenture shall (a) extend the maturity of
any certificate or reduce the principal amount thereof or reduce the rate or
extend the time of payment of interest, (b) reduce the 66 2/3% requirement as
to the consent of the holders of the certificates outstanding under the
Indenture or of any series of certificates outstanding thereunder, as required,
for amendment of the provisions of the Indenture, or (c) modify the provisions
of the Indenture which allow holders of not less than 75% of all certificates
outstanding under the Indenture to consent to the postponement of interest on
all certificates
19
<PAGE>
outstanding under the Indenture for a period not exceeding three (3) years from
its due date, without the consent of the holder of each certificate affected
thereby. (Section 10.02 of the Indentures.)
DEFAULTS AND NOTICE THEREOF
Each Indenture provides that any of the following shall constitute an event
of default: (a) failure to pay principal when due; (b) failure to pay interest
when due, continued for sixty (60) days; (c) certain events of bankruptcy or
insolvency; and (d) failure to perform any other covenant or agreement
contained in the Indenture, which failure continues for ninety (90) days after
notice to Gold Kist by the Trustee or holders of 10% in aggregate principal
amount of the certificates outstanding under the Indentures. (Section 7.01 of
the Indentures.)
Each Indenture provides that the Trustee shall, within ninety (90) days after
the occurrence of an event of default, give to the Certificateholders notice of
all such defaults unless such defaults have been cured, provided that, except
in the case of a default in the payment of principal of or interest on any of
the certificates outstanding under the Indenture, the Trustee shall be
protected in withholding such notice if, and so long as, the Trustee determines
that the withholding of such notice is in the interest of the
Certificateholders. (Section 8.02 of the Indentures.)
Each Indenture provides that upon the occurrence of a default, the Trustee or
the holders of not less than 25% in aggregate principal amount of the
certificates then outstanding under the Indenture may declare the principal of
all certificates outstanding under the Indenture immediately due and payable.
(Section 7.02 of the Indentures.)
SATISFACTION AND DISCHARGE OF INDENTURE
Each Indenture shall be discharged upon payment of all certificates
outstanding thereunder or upon deposit with the Trustee of funds sufficient
therefor. (Section 11.01 of the Indenture.)
AUTHENTICATION AND DELIVERY OF CERTIFICATES
The certificates may be authenticated by the Trustee in the form set forth in
each Indenture and delivered upon the written order of Gold Kist without any
further corporate action. (Section 2.03 of the Indentures.)
STATEMENTS AS TO COMPLIANCE
Each Indenture requires Gold Kist to furnish to the Trustee annually a
statement that Gold Kist has fulfilled all of its obligations throughout the
year, or specifying any default in the fulfillment of any such obligation.
(Section 5.07 of the Indentures.) In addition, upon any application or demand
by Gold Kist to the Trustee to take any action under any of the provisions of
the Indenture, Gold Kist shall first furnish to the Trustee an Officer's
Certificate stating that all such conditions precedent provided for in the
Indenture relating to the proposed action have been complied with and an
Opinion of Counsel to Gold Kist stating that in the opinion of such counsel all
such conditions precedent have been complied with. (Section 1.02 of the
Indentures.)
CONCERNING THE TRUSTEE
Gold Kist has a $6,750,000 revolving credit line and a $20,000,000
uncommitted credit facility, all of which can be used for seasonal advances,
both with the Trust Company Bank, under which varying amounts are outstanding
from time to time. Any such indebtedness to the Trust Company Bank would
constitute Superior Indebtedness as defined in the Indenture. Gold Kist also
maintains deposit accounts with the Trust Company Bank, and from time to time
the Bank provides other banking and trust services to Gold Kist in the ordinary
course of its business. Trust Company Bank serves as trustee under indentures
governing certain previously issued series of Subordinated Capital Certificates
of Interest and Subordinated Loan Certificates.
20
<PAGE>
DESCRIPTION OF SUBORDINATED LOAN CERTIFICATES
AND SUBORDINATED LARGE DENOMINATION LOAN CERTIFICATES
Gold Kist's Subordinated Loan Certificates (Series C) (the "One Year Loan
Certificates") are issued under an indenture (the "Indenture") dated as of
September 1, 1979, amended by a First Supplemental Indenture dated as of
September 1, 1980, between Gold Kist and Trust Company Bank, as Trustee (the
"Trustee"). Gold Kist's Subordinated Large Denomination Loan Certificates of
the two series offered hereby are issued under indentures (the "Indentures")
between Gold Kist and Trust Company Bank, as Trustee (the "Trustee"). Separate
Indentures dated as of September 1, 1985 govern the One Year Subordinated Large
Denomination Loan Certificates (Series A) (the "One Year Jumbo Loan
Certificates") and the Six Month Subordinated Large Denomination Loan
Certificates (Series A) (the "Six Month Jumbo Loan Certificates"). The forms of
the Indentures and Supplemental Indentures are filed as exhibits to
Registration Statements No. 2-65587, No. 2-69267, and No. 33-428. The following
summaries of certain provisions of the Indentures do not purport to be
complete, and where particular provisions of the Indentures are referred to,
such provisions, including definitions of certain terms, are incorporated by
reference as a part of such summaries or terms, which are qualified in their
entirety by such references.
The loan certificates are unsecured obligations of Gold Kist, which are
transferable on the books of Gold Kist when properly endorsed, but are not
negotiable. (Section 2.04 of the Indentures). The One Year Loan Certificates
are issued in a minimum amount of $500 or in any larger amount. The One Year
Jumbo Loan Certificates and Six Month Jumbo Loan Certificates are issued in
minimum amounts of $50,000 and $20,000, respectively, or any larger amount. The
loan certificates are issued as of the date on which payment of the purchase
price is received by Gold Kist or its agent for such purpose and mature one
year or six months, respectively, from that date.
Loan certificates bear interest from the dates issued at the per annum rate
stated on the face thereof. The rate of interest borne by loan certificates
shall be determined from time to time by the Board of Directors of Gold Kist or
its delegate, but no change in the rate will affect any loan certificates
theretofore issued. The current rates of interest borne by loan certificates
are set forth on the front cover of this Prospectus. Interest is payable on the
maturity date. Holders of $5,000 or more of the One Year Loan Certificates are
entitled to payment of interest on such loan certificates quarterly, on the
first day of January, April, July and October of each year. Holders of the One
Year Jumbo Loan Certificates and Six Month Jumbo Loan Certificates are entitled
to payment of interest on such loan certificates monthly, on the first day of
each month. (Sections 1.01 and 2.01 of the Indentures.)
Upon the written request of a holder of loan certificates entitled to
quarterly or monthly interest payments, on each Interest Payment Date Gold Kist
will retain the interest otherwise payable to the holder and pay such interest
at the maturity of the certificate, or subject to any applicable redemption
penalty, upon redemption prior to maturity, together with interest thereon at
the per annum rate stated on the face of the certificate, compounded as of each
Interest Payment Date. The holder may terminate such request or withdraw any
interest so retained together with interest accrued on such interest through
the date of withdrawal, or both, at any time by written request delivered to
Gold Kist at its principal office in Atlanta, Georgia. The loan certificates
will be paid in full, including all principal and accrued but unpaid interest,
at maturity. (Section 5.02 of the Indentures.)
The Indentures do not limit the aggregate principal amount of loan
certificates which may be issued thereunder, and each Indenture may be modified
by Gold Kist and the Trustee, without the consent of the certificateholders, to
provide for the issuance under the Indenture of one or more additional series
of loan certificates having terms different from those of the series offered
hereby. (Sections 2.01 and 10.01 of the Indentures.) As of June 25, 1994, there
were the following aggregate principal amounts of the series offered hereby
outstanding: One Year Loan Certificates -- $12,581,000, One Year Jumbo Loan
Certificates -- $12,498,000, and Six Month Jumbo Loan Certificates -- $-0-. The
Indentures do not limit the amount of
21
<PAGE>
other securities, either secured or unsecured, superior or subordinate to the
loan certificates, which may be issued by Gold Kist.
REDEMPTION AT THE REQUEST OF CERTIFICATEHOLDER
Upon the death of a registered holder of a loan certificate, at the request
of (a) the personal representative of the deceased holder's estate or (b) any
surviving joint holder of a jointly held certificate, Gold Kist will redeem
loan certificates held by such deceased holder. In such event, redemption shall
be at the full face value of the certificate redeemed plus interest accrued and
unpaid thereon to the date of redemption only. (Section 3.02 of the
Indentures.)
Additional Redemptions at the Request of Certificateholder
In addition to redemptions upon the death of a registered holder of a loan
certificate, Gold Kist agrees to redeem prior to maturity the loan certificates
of any series offered hereby at the request of the registered holders. (Section
3.03 of the Indentures.)
All such redemptions shall be only at the written request of the registered
holder(s) of the loan certificates redeemed delivered to the Association at its
principal office in Atlanta, Georgia. Redemptions will be made in the order
that such requests are received, and the redemption date will be a date
determined by Gold Kist which is within fifteen (15) days after such request is
received.
The redemption price of each loan certificate redeemed will be an amount
equal to the full principal amount of the certificate, plus interest accrued
but unpaid to the redemption date (including, if appropriate, interest
compounded on interest retained by the Association at the request of the
holder) less a redemption penalty computed in accordance with the following
table.
REDEMPTION PENALTIES APPLICABLE TO VARIOUS CLASSES
<TABLE>
<C> <S>
One Year Loan Certificates and One --An amount equal to three (3) months'
Year Jumbo Loan Certificates interest on the principal amount of the
certificate computed at the nominal
(simple interest) rate shown on the
face of the certificate.
Six Month Jumbo Loan Certificates --An amount equal to one (1) month's
interest on the principal amount of the
certificate computed at the nominal
(simple interest) rate shown on the
face of the certificate.
</TABLE>
The redemption penalty computed in this manner will be deducted regardless of
the length of time the loan certificate has been outstanding. The penalty could
exceed the amount of interest paid or accrued on the loan certificate to the
redemption date, thus resulting in a redemption price which is less than the
principal amount of the loan certificate.
The following examples illustrate the calculation of the redemption price
assuming the stated principal amounts and interest rates. The Total Redemption
Price in each example will vary with different interest rates and amounts of
principal.
A. For a One Year Loan Certificate in the principal amount of $1,000
bearing interest at 5.65%, purchased on January 1, 1995, and redeemed at
the request of the holder on February 15, 1995, the redemption price would
equal:
<TABLE>
<C> <C> <S>
$1,000.00 (Principal amount)
plus 6.97 (45 days' accrued interest at 5.65% per annum)
----------
$1,006,.97
less 14.12 (3 month's simple interest at 5.65% per annum)
----------
$ 992.85 (Total Redemption Price)
</TABLE>
22
<PAGE>
B. For a One Year Loan Certificate in the principal amount of $5,000,
bearing interest at 5.65% (paid quarterly at the election of the holder),
purchased on January 1, 1995 and redeemed at the request of the holder on
June 15, 1995, the redemption price would equal:
<TABLE>
<C> <S>
$5,000.00 (Principal amount)
plus 58.05 (75 days' accrued interest at 5.65% per annum. Interest previously paid
----------
$5,058.05 on April 1, 1995 equals $70.62)
less 70.62 (3 month's simple interest at 5.65% per annum)
----------
$4,987.43 (Total Redemption Price)
</TABLE>
Total redemption price ($4,987.43) plus interest previously paid ($70.62)
equals $5,058.05.
The indentures governing the loan certificates of each series do not contain
additional redemption provisions requiring Gold Kist to repurchase the
certificates at the request of the certificateholder upon the occurrence of a
change in control of Gold Kist, nor do the indentures contain any provisions
designed to afford protection to certificateholders in the event of a highly
leveraged transaction involving Gold Kist.
Gold Kist does not have the option of redeeming loan certificates prior to
maturity.
SUBORDINATION
In case of liquidation of Gold Kist, whether voluntary or involuntary, the
payment of the principal of and interest on the loan certificates is
subordinate to the payment in full of the principal of and interest on any
notes or accounts payable, now due or hereafter made by Gold Kist to any bank,
any other lending agency or creditor ("Superior Indebtedness"); except that
none of the Subordinated Capital Certificates of Interest issued pursuant to
the Indentures dated as of December 1, 1977, September 1, 1979, September 1,
1980 or September 1, 1985, the One Year Subordinated Loan Certificates issued
pursuant to the Indentures dated as of December 1, 1977 or September 1, 1979,
the One Year or Six Month Subordinated Large Denomination Loan Certificates
issued pursuant to the Indentures dated as of September 1, 1985, the 5%
Cumulative Preferred Capital Certificates of Interest previously issued by Gold
Kist, or the Cumulative Preferred Capital Certificates of Interest of any other
series previously issued by Gold Kist shall be Superior Indebtedness, but shall
rank equally with the loan certificates outstanding under each of the
Indentures. As of June 25, 1994, Superior Indebtedness amounted to
approximately $301,948,000, and additional Superior Indebtedness, without
limitation, may be created from time to time. (Article Four and Section 1.01 of
the Indentures.) Gold Kist is jointly and severally liable for (i) the
obligations of Golden Peanut Company, a general partnership in which Gold Kist
has a 33 1/3% interest, (ii) the obligations of FarmKist Enterprises, a general
partnership in which Gold Kist has a 50% interest and (iii) the obligations of
Young Pecan Company, a general partnership in which Gold Kist has a 25% equity
interest and a 35% earnings (loss) allocation. Any such liability incurred
would constitute additional Superior Indebtedness. See Note 9 (b) of Notes to
Consolidated Financial Statements.
Nothing contained in the subordination provisions prevents Gold Kist from
making payments of principal or interest on the loan certificates except during
the pendency of any dissolution or liquidation proceedings with respect to Gold
Kist.
DUTIES OF TRUSTEE
Trust Company Bank is the Trustee under each Indenture and is to perform only
such duties as are specifically set forth in the Indenture. (Section 8.01 of
the Indentures.) In the event of a default, the holders of a majority in
aggregate principal amount of the loan certificates outstanding at the time
under any Indenture have the right to require the Trustee to take action to
remedy such default. (Section 7.12 of the Indentures.)
23
<PAGE>
MODIFICATION OF THE INDENTURE
Each Indenture contains provisions permitting Gold Kist and the Trustee, (i)
with the written consent of the holders of not less than 66 2/3% in aggregate
principal amount of all the loan certificates outstanding under the Indenture
on a record date set for such purpose, to execute supplemental indentures
amending the provisions of the Indenture or any supplemental indenture so as to
modify the rights of the holders of all the loan certificates or (ii) with the
written consent of the holders of not less than 66 2/3% in aggregate principal
amount of the loan certificates of a given series outstanding under the
Indenture, on a record date set for such purpose, to execute supplemental
indentures amending the provisions of the Indenture relating to loan
certificates of such series; provided that no such supplemental indenture shall
(a) extend the maturity of any loan certificate or reduce the principal amount
thereof or reduce the rate or extend the time of payment of interest, (b)
reduce the 66 2/3% requirement as to the consent of the holders of the loan
certificates outstanding under the Indenture or of any series of certificates
outstanding thereunder, as required, for amendment of the provisions of the
Indenture, or (c) modify the provisions of the Indenture which allow holders of
not less than 75% of all loan certificates outstanding under the Indenture to
consent to the postponement of interest on all loan certificates outstanding
under the Indenture for a period not exceeding three (3) years from its due
date, without the consent of the holder of each loan certificate affected
thereby. (Section 10.02 of the Indentures.)
DEFAULTS AND NOTICE THEREOF
Each Indenture provides that any of the following shall constitute an event
of default: (a) failure to pay principal when due; (b) failure to pay interest
when due, continued for sixty (60) days; (c) certain events of bankruptcy or
insolvency; and (d) failure to perform any other covenant or agreement
contained in the Indenture, which failure continues for ninety (90) days after
notice to Gold Kist by the Trustee or holders of at least 10% in aggregate
principal amount of the outstanding loan certificates under the Indenture.
(Section 7.01 of the Indentures.)
Each Indenture provides that the Trustee shall, within ninety (90) days after
the occurrence of an event of default, give to the Certificateholders notice of
all such defaults unless such defaults have been cured, provided that, except
in the case of a default in the payment of principal of or interest on any of
the loan certificates outstanding under the Indenture, the Trustee shall be
protected in withholding such notice if, and so long as, the Trustee determines
that the withholding of such notice is in the interest of the
Certificateholders. (Section 8.02 of the Indentures).
Each Indenture provides that upon the occurrence of a default, the Trustee or
the holders of not less than 25% in aggregate principal amount of the loan
certificates then outstanding under the Indenture may declare the principal of
all loan certificates outstanding under the Indenture immediately due and
payable (Section 7.02 of the Indentures.)
SATISFACTION AND DISCHARGE OF INDENTURE
Each Indenture shall be discharged upon payment of all loan certificates
outstanding thereunder or upon deposit with the Trustee of funds sufficient
therefor. (Section 11.01 of the Indentures.)
AUTHENTICATION AND DELIVERY OF CERTIFICATES
The loan certificates may be authenticated by the Trustee in the form set
forth in each Indenture and delivered upon the written order of Gold Kist
without any further corporate action. (Section 2.03 of the Indentures.)
STATEMENTS AS TO COMPLIANCE
Each Indenture requires Gold Kist to furnish to the Trustee annually a
statement that Gold Kist has fulfilled all of its obligations throughout the
year, or specifying any default in the fulfillment of any such
24
<PAGE>
obligation. (Section 5.07 of the Indentures.) In addition, upon any application
or demand by Gold Kist to the Trustee to take any action under any of the
provisions of the Indenture, Gold Kist shall first furnish to the Trustee an
Officer's Certificate stating that all such conditions precedent provided for
in the Indenture relating to the proposed action have been complied with and an
Opinion of Counsel to Gold Kist stating that in the opinion of such counsel all
such conditions precedent have been complied with. (Section 1.02 of the
Indentures.)
CONCERNING THE TRUSTEE
Gold Kist has a $6,750,000 revolving credit line and a $20,000,000
uncommitted credit facility, all of which can be used for seasonal advances,
both with the Trust Company Bank, under which varying amounts are outstanding
from time to time. Any such indebtedness to the Trust Company Bank would
constitute Superior Indebtedness as defined in the Indenture. Gold Kist also
maintains deposit accounts with the Trust Company Bank, and from time to time
the Bank provides other banking and trust services to Gold Kist in the ordinary
course of its business. Trust Company Bank serves as trustee under indentures
governing certain previously issued series of Subordinated Capital Certificates
of Interest and Subordinated Loan Certificates.
EXPERTS
The consolidated financial statements and schedules of Gold Kist Inc. as of
June 26, 1993 and June 25, 1994, and for each of the years in the three-year
period ended June 25, 1994 included herein or incorporated by reference in the
registration statement have been included herein or incorporated by reference
in the registration statement in reliance upon the reports of KPMG Peat Marwick
LLP, independent auditors, appearing elsewhere herein or incorporated by
reference, and upon the authority of said firm as experts in accounting and
auditing. The reports of KPMG Peat Marwick LLP covering the June 25, 1994
consolidated financial statements refer to changes in accounting for income
taxes and postretirement benefits other than pensions.
The consolidated financial statements of Golden Peanut Company and
Subsidiaries (not presented separately herein) have been audited by Ernst &
Young LLP, independent auditors, as of June 30, 1994 and 1993 and for each of
the years in the three-year period ended June 30, 1994 as set forth in their
report thereon (which contains an explanatory paragraph with respect to a
change in accounting for postretirement benefits other than pensions) appearing
elsewhere herein. The consolidated financial statements audited by Ernst &
Young LLP reflect certain amounts which have been included in the consolidated
financial statements of Gold Kist Inc. as of June 26, 1993 and June 25, 1994,
and for each of the three years in the period ended June 25, 1994 in reliance
on their report given upon the authority of such firm as experts in accounting
and auditing.
QUALIFIED INDEPENDENT UNDERWRITER
Interstate/Johnson Lane Corporation, a member of the NASD, has participated
as a qualified independent underwriter, for compensation paid by Gold Kist, in
the "due diligence" review with respect to the preparation of this Prospectus.
LEGAL OPINION
The legality of the securities offered hereby is being passed upon for Gold
Kist by Alston & Bird, One Atlantic Center, 1201 West Peachtree Street,
Atlanta, Georgia 30309-3424.
25
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors Gold Kist Inc.:
We have audited the accompanying consolidated balance sheets of Gold Kist
Inc. and subsidiaries as of June 26, 1993 and June 25, 1994, and the related
consolidated statements of operations, patrons' and other equity, and cash
flows for each of the years in the three-year period ended June 25, 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements 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 26, 1993 and June 25, 1994, and the results of their operations and
their cash flows for each of the years in the three-year period ended June 25,
1994, in conformity with generally accepted accounting principles.
As discussed in notes 6 and 7(b) to the consolidated financial statements,
the Company changed its method of accounting for income taxes in 1994 and its
method of accounting for postretirement benefits other than pensions in 1992.
KPMG PEAT MARWICK LLP
Atlanta, Georgia September 2, 1994
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Partnership Committee Golden Peanut Company
We have audited the consolidated balance sheets of Golden Peanut Company and
Subsidiaries (the "Partnership") as of June 30, 1994 and 1993, and the related
consolidated statements of income, partners' equity, and cash flows for each of
the three years in the period ended June 30, 1994 (not presented separately
herein). These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Golden Peanut
Company and Subsidiaries at June 30, 1994 and 1993, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended June 30, 1994, in conformity with generally accepted
accounting principles.
In 1994, the Partnership changed its method of accounting for postretirement
benefits other than pensions.
ERNST & YOUNG LLP
Atlanta, Georgia August 12, 1994
F-2
<PAGE>
GOLD KIST INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 26, 1993 JUNE 25, 1994
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 31,086 15,670
Receivables, principally trade, including notes
receivable of $32.1 million in 1993 and $42.8
million in 1994, less allowance for doubtful ac-
counts of $5,255 in 1993 and $5,369 in 1994...... 133,771 160,714
Inventories (note 2).............................. 174,504 198,467
Other current assets.............................. 3,365 14,758
-------- -------
Total current assets............................. 342,726 389,609
Investments (note 9)............................... 75,318 72,105
Property, plant and equipment, net (note 3)........ 204,481 204,783
Other assets....................................... 42,577 49,935
-------- -------
$665,102 716,432
======== =======
LIABILITIES AND EQUITY
Current liabilities:
Notes payable and current maturities of long-term
debt (note 4):
Short-term borrowings............................ $ -- 12,798
Subordinated loan certificates................... 26,386 25,079
Current maturities of long-term debt............. 28,044 35,405
-------- -------
54,430 73,282
Accounts payable.................................. 94,236 117,926
Accrued compensation and related expenses......... 23,078 26,431
Patronage refund and other equity payable in cash. 8,526 14,588
Interest left on deposit (note 4)................. 13,392 9,340
Other current liabilities......................... 8,435 8,195
-------- -------
Total current liabilities........................ 202,097 249,762
Long-term debt, excluding current maturities (note
4)................................................ 120,334 109,817
Accrued postretirement benefit costs (note 7(b))... 31,841 34,488
Other liabilities.................................. 617 687
-------- -------
Total liabilities................................ 354,889 394,754
-------- -------
Minority interest.................................. 24,593 25,016
Patrons' and other equity (note 5):
Common stock, $1.00 par value--Authorized 500
shares;
issued and outstanding 79 in 1993 and 1994....... 79 79
Revolving fund and cumulative preferred certifi-
cates............................................ 10,253 --
Patronage reserves................................ 204,148 213,798
Retained earnings................................. 71,140 82,785
-------- -------
Total patrons' and other equity.................. 285,620 296,662
Commitments and contingent liabilities (notes 7 and
8)................................................
-------- -------
$665,102 716,432
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
GOLD KIST INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------
JUNE 27, 1992 JUNE 26, 1993 JUNE 25, 1994
------------- ------------- -------------
<S> <C> <C> <C>
Net sales volume..................... $1,300,906 1,400,566 1,561,034
Cost of sales........................ 1,210,961 1,249,509 1,385,239
---------- --------- ---------
Gross margins....................... 89,945 151,057 175,795
Distribution, administrative and gen-
eral expenses....................... 103,681 111,519 121,417
---------- --------- ---------
Net operating margins (loss)........ (13,736) 39,538 54,378
---------- --------- ---------
Other income (deductions):
Interest income..................... 11,124 7,540 6,752
Interest expense.................... (18,545) (17,163) (13,924)
Equity in earnings (loss) of part-
nership (note 9(b))................ 11,404 4,659 (1,110)
Miscellaneous, net.................. 5,712 9,118 3,978
---------- --------- ---------
9,695 4,154 (4,304)
---------- --------- ---------
Margins (loss) before income taxes,
minority interest and
cumulative effect of accounting
changes............................ (4,041) 43,692 50,074
Income tax expense (benefit)-(note
6).................................. (1,449) 14,187 14,861
---------- --------- ---------
Margins (loss) before minority in-
terest and cumulative
effect of accounting changes....... (2,592) 29,505 35,213
Minority interest.................... 949 (2,267) (1,148)
---------- --------- ---------
Margins (loss) before cumulative ef-
fect of accounting changes......... (1,643) 27,238 34,065
Cumulative effect of changes in ac-
counting:
Income taxes (note 6)............... -- -- 5,339
Postretirement benefits other than
pensions (net of
income tax benefit of $10,698)-
(note 7(b))........................ (18,971) -- --
---------- --------- ---------
Net margins (loss).................. $ (20,614) 27,238 39,404
========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
GOLD KIST INC.
CONSOLIDATED STATEMENTS OF PATRONS' AND OTHER EQUITY
FOR THE YEARS ENDED JUNE 27, 1992, JUNE 26, 1993 AND JUNE 25, 1994
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
REVOLVING
FUND AND
CUMULATIVE
COMMON PREFERRED PATRONAGE RETAINED
TOTAL STOCK CERTIFICATES RESERVES EARNINGS
-------- ------ ------------ --------- --------
<S> <C> <C> <C> <C> <C>
June 29, 1991................. $296,940 86 11,107 210,489 75,258
Net loss for 1992............ (20,614) -- -- -- (20,614)
Notified equity payable
in cash..................... (137) -- -- (137) -
Redemptions and other
changes..................... (4,733) (5) (546) (8,726) 4,544
-------- --- ------- ------- -------
June 27, 1992................. 271,456 81 10,561 201,626 59,188
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 10,253 204,148 71,140
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 -- 213,798 82,785
======== === ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
GOLD KIST INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------
JUNE 27, 1992 JUNE 26, 1993 JUNE 25, 1994
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net margins (loss)..................................... $(20,614) 27,238 39,404
Non-cash items included in net margins (loss):
Depreciation and amortization......................... 34,518 36,315 37,251
Cumulative effect of changes in accounting principles. 18,971 -- (5,339)
Gains on sales of assets.............................. (468) (703) (201)
Equity in (earnings) loss of partnership.............. (11,404) (4,659) 1,110
Deferred income tax benefit........................... (9,826) (1,650) (5,562)
Other................................................. (6,988) 2,943 3,208
Changes in operating assets and liabilities:
Receivables........................................... (6,818) (4,902) (26,943)
Inventories........................................... (16,627) (5,018) (23,963)
Other current assets.................................. (551) 546 152
Income tax refund (deposit)........................... 20,953 -- (5,038)
Accounts payable and accrued expenses................. 2,216 16,167 26,803
Interest left on deposit.............................. 26 532 (4,052)
-------- ------- -------
Net cash provided by operating activities............ 3,388 66,809 36,830
-------- ------- -------
Cash flows from investing activities:
Acquisitions of investments............................ (3,024) (212) (762)
Acquisitions of property, plant and equipment.......... (45,948) (23,280) (37,232)
Proceeds from partnership earnings distribution........ 22,695 11,404 1,770
Proceeds from disposal of investments.................. 12,021 1,795 1,279
Proceeds from sales of loans........................... -- 20,084 5,040
Other.................................................. (3,842) 1,498 (7,653)
-------- ------- -------
Net cash provided by (used in) investing activities.. (18,098) 11,289 (37,558)
-------- ------- -------
Cash flows from financing activities:
Short-term borrowings (repayments), net................ 15,843 (48,675) 11,491
Proceeds from long-term debt........................... 26,226 22,381 26,668
Principal payments of long-term debt................... (19,611) (28,056) (30,130)
Patronage refunds and other equity paid in cash........ (8,821) (4,812) (22,717)
-------- ------- -------
Net cash provided by (used in) financing activities.. 13,637 (59,162) (14,688)
-------- ------- -------
Net change in cash and cash equivalents.............. (1,073) 18,936 (15,416)
Cash and cash equivalents at beginning of year.......... 13,223 12,150 31,086
-------- ------- -------
Cash and cash equivalents at end of year................ $ 12,150 31,086 15,670
======== ======= =======
Supplemental disclosure of cash flow data:
Cash paid during the years for:
Interest (net of amounts capitalized)................ $ 14,258 17,495 18,575
======== ======= =======
Income taxes......................................... $ 8,721 12,791 23,352
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 27, 1992, JUNE 26, 1993 AND JUNE 25, 1994
(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). All
significant intercompany balances and transactions have been eliminated in
consolidation. Certain reclassifications have been made to the 1993
consolidated financial statements to conform to the presentation in the 1994
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, market hogs and breeding stock.
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.
F-7
<PAGE>
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 are stated at
cost. Investment in the marketable equity security is stated at the lower of
cost or market (see note 9(a)).
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 and 1994, 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 that
were reported in different years for financial reporting purposes and income
tax purposes were recognized for income and expense items 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.
(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 June 25, 1994 unless
otherwise specified.
F-8
<PAGE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
(h) Fiscal Year
Gold Kist employs a 52/53 week fiscal year. The consolidated financial
statements for 1992, 1993 and 1994 reflect 52 weeks. Fiscal 1995 will be a 53
week year.
(2) INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
1993 1994
-------- -------
<S> <C> <C>
Merchandise for sale.................................... $ 57,147 65,795
Live poultry and hogs................................... 63,616 75,600
Raw materials and supplies.............................. 30,990 30,090
Marketable products..................................... 22,751 26,982
-------- -------
$174,504 198,467
======== =======
</TABLE>
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows:
<TABLE>
<CAPTION>
1993 1994
-------- -------
<S> <C> <C>
Land and land improvements.............................. $ 28,228 29,757
Buildings............................................... 151,647 159,065
Machinery and equipment................................. 282,736 304,535
Construction in progress................................ 2,600 4,332
-------- -------
465,211 497,689
Less accumulated depreciation........................... 260,730 292,906
-------- -------
$204,481 204,783
======== =======
</TABLE>
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. One
director of Gold Kist 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
At June 25, 1994, Gold Kist had unused loan commitments of $37.4 million and
additional uncommitted facilities to provide loans and letters of credit from
banks aggregating approximately $122.6 million. These short-term, unsecured
borrowings bear interest at rates below prime.
Subordinated loan certificates of $25.1 million at June 25, 1994 bore
interest from 3.75% to 5.75% 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. Approximately $4.5 million of interest left on
deposit was redeemed as a part of the redemption of the cumulative preferred
certificates of interest during 1994 (see note 5).
F-9
<PAGE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
1993 1994
-------- -------
<S> <C> <C>
Unsecured senior notes payable:
9.375% interest notes, due in semi-annual installments of
$5,500 with interest payable semiannually................... $ 44,000 33,000
9.90% interest notes, due in semi-annual installments of
$1,539 with interest payable semiannually................... 18,462 15,384
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 agreement with a commercial bank (weighted
average rate of 5.0% at June 25, 1994)...................... -- 7,000
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 8.3% at June 26, 1993 and 7.7% at
June 25, 1994).............................................. 52,837 58,387
Tax exempt industrial revenue bonds with varying interest
rates due in quarterly and annual installments through 2002,
secured by property, plant and equipment.................... 7,325 6,263
Pro rata share of mortgage loan, at 8.47% interest, due in
monthly installments to June 30, 2004, secured by a building
(note 3).................................................... 2,832 2,673
Other........................................................ 2,922 2,515
-------- -------
148,378 145,222
Less current maturities...................................... 28,044 35,405
-------- -------
$120,334 109,817
======== =======
</TABLE>
In June 1991, Gold Kist entered into a three-year concurrent interest rate
exchange agreement on its 9.35% unsecured senior note for another party's
interest obligations on an equivalent amount of principal at a floating rate.
For the year ended June 25, 1994, the average interest rate was 5.35%. The
exchange agreement expired in June 1994 and was not renewed.
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
June 25, 1994 was approximately $71.7 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 1995 of unused amounts,
$37.2 million as of June 25, 1994, 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. At June
25, 1994, Gold Kist was in compliance with the terms of the agreements.
F-10
<PAGE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
Annual required principal repayments on long-term debt for the five fiscal
years subsequent to June 25, 1994 are as follows:
<TABLE>
<S> <C>
Fiscal year:
1995............................................................ $35,405
1996............................................................ 24,605
1997............................................................ 17,959
1998............................................................ 9,920
1999............................................................ 10,541
=======
</TABLE>
(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.
Revolving fund certificates and 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.
Revolving fund certificates and cumulative preferred capital certificates of
interest with no fixed maturities are no longer issued and were redeemed in
1994. Interest on cumulative preferred capital certificates of interest and
revolving fund certificates was charged against retained earnings. The interest
rates on these certificates were 5% during 1992, 1993 and 1994.
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 (benefit), principally Federal, consist
of the following:
<TABLE>
<CAPTION>
1992 1993 1994
------- ------ ------
<S> <C> <C> <C>
Current expense........................................ $ 8,377 15,837 20,423
Deferred benefit....................................... (9,826) (1,650) (5,562)
------- ------ ------
$(1,449) 14,187 14,861
======= ====== ======
</TABLE>
In addition, Gold Kist recognized a deferred income tax benefit of $10,698 in
1992 related to the cumulative effect of change in accounting for
postretirement benefits other than pensions.
F-11
<PAGE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
The significant components of deferred income tax benefit from operations for
the year ended June 25, 1994 are as follows:
<TABLE>
<S> <C>
Deferred tax benefit (exclusive of the effect of the other components
below)............................................................... $(5,439)
Adjustments to deferred tax assets and liabilities for enacted changes
in tax rates......................................................... (328)
Increase in beginning-of-year balance of the valuation allowance for
deferred tax assets.................................................. 205
-------
$(5,562)
=======
</TABLE>
Gold Kist's combined federal and state effective tax rates from operations
for 1992, 1993 and 1994 were 36%, 32% and 30%, respectively. A reconciliation
of income tax expense (benefit) from operations computed by applying the
Federal corporate income tax rate of 34% in 1992 and 1993 and 35% in 1994 to
margins (loss) before income taxes, minority interest and cumulative effect of
accounting changes for the applicable year follows:
<TABLE>
<CAPTION>
1992 1993 1994
------- ------ ------
<S> <C> <C> <C>
Computed expected income tax expense (benefit)....... $(1,374) 14,855 17,526
Increase (decrease) in income tax expense (benefit)
resulting from:
Cash portion of nonqualified patronage refund....... -- (1,183) (1,420)
Effect of state income taxes, net of Federal
benefit............................................ 573 1,428 1,050
Nonqualified equity redemptions..................... (616) (575) (525)
Other, net.......................................... (32) (338) (1,770)
------- ------ ------
$(1,449) 14,187 14,861
======= ====== ======
</TABLE>
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 are as
follows:
<TABLE>
<CAPTION>
1994
-------
<S> <C>
Deferred tax assets:
Postretirement benefits expense................................ $13,478
Insurance accruals............................................. 8,839
Bad debt reserves.............................................. 2,386
State tax operating loss carryforwards......................... 1,913
Other.......................................................... 1,804
-------
Total gross deferred tax assets............................... 28,420
Less valuation allowance....................................... (1,913)
-------
Net deferred tax assets....................................... 26,507
-------
Deferred tax liabilities:
Accelerated depreciation....................................... (2,986)
Deferred compensation.......................................... (4,103)
-------
Total deferred tax liabilities................................ (7,089)
-------
Net deferred tax assets....................................... $19,418
=======
</TABLE>
The valuation allowance for deferred tax assets as of June 27, 1993 was
$1,708. The net change in the total valuation allowance for the year ended June
25, 1994 was an increase of $205.
F-12
<PAGE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
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.
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:
<TABLE>
<CAPTION>
1992 1993
------- ------
<S> <C> <C>
Depreciation expense.................................... $ (527) (1,433)
Deferred compensation expense........................... 1,016 167
Insurance accruals...................................... (1,751) (1,839)
Equity in partnerships.................................. (7,821) 133
Other, net.............................................. (743) 1,322
------- ------
$(9,826) (1,650)
======= ======
</TABLE>
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. A decision is not expected before fall 1995. The amount at issue,
including interest through June 25, 1994, was approximately $2.7 million. In
the event an additional assessment is made for the aforementioned issue for the
1990 through 1994 Federal income tax returns, this amount including interest
through June 25, 1994 would approximate $4.8 million.
(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 income (expense) for 1992, 1993 and 1994 included the
following components:
<TABLE>
<CAPTION>
1992 1993 1994
------- ------ ------
<S> <C> <C> <C>
Service cost--benefits earned during the year.......... $(2,592) (3,422) (3,720)
Interest cost on projected benefit obligations......... (5,585) (6,247) (6,479)
Actual return on plan assets........................... 14,020 11,116 3,236
Net amortization and deferral.......................... (4,731) (1,827) 5,989
------- ------ ------
Net periodic pension income (expense)................. $ 1,112 (380) (974)
======= ====== ======
</TABLE>
F-13
<PAGE>
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 26, 1993 and June 25, 1994 and
economic assumptions:
<TABLE>
<CAPTION>
1993 1994
-------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested participants........................................ $ 66,636 69,662
Nonvested.................................................. 5,542 5,416
-------- -------
Total accumulated benefit obligations..................... $ 72,178 75,078
======== =======
Projected benefit obligations for services rendered to date. $ 91,116 88,083
======== =======
Plan assets for benefits:
Plan assets at fair value.................................. $111,373 109,874
Prepaid pension cost included in other assets in
consolidated balance sheets............................... (15,900) (15,195)
-------- -------
Net plan assets........................................... $ 95,473 94,679
======== =======
Plan assets in excess of projected benefit obligations...... $ 4,357 6,596
======== =======
Consisting of:
Unrecognized net asset existing at the date of adoption.... $ 12,194 10,972
Unrecognized net loss from past experience different from
that assumed and effects of changes in assumptions........ (428) (351)
Prior service cost not yet recognized in net periodic
pension cost.............................................. (7,409) (4,025)
-------- -------
$ 4,357 6,596
======== =======
Economic assumptions:
Weighted-average discount rate............................. 8.00% 8.25%
Weighted-average expected long-term rate of return on plan
assets.................................................... 8.75% 9.00%
Weighted-average rate of compensation increase............. 6.00% 6.00%
</TABLE>
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
In addition to providing pension benefits, Gold Kist provides health and life
insurance benefits for retired employees. Effective June 30, 1991, Gold Kist
adopted Statement of Financial Accounting Standards No. 106 (SFAS 106),
"Employers' Accounting for Postretirement Benefits Other Than Pensions." Under
SFAS 106, the cost of postretirement benefits other than pensions must be
recognized on an accrual basis as employees perform services to earn the
benefits. Gold Kist previously expensed the cost of these benefits, which are
principally health care, as claims were incurred. Gold Kist elected to
recognize this change in accounting principle on the immediate recognition
basis. The cumulative effects as of June 30, 1991 of adopting SFAS No. 106 were
an increase in accrued postretirement benefit costs of $29.7 million and an
increase in the 1992 net loss of $19.0 million. The effects of adopting SFAS
No. 106 during 1992 increased the loss before cumulative effect of change in
accounting principle by $1.5 million.
F-14
<PAGE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
Gold Kist provides health care and death benefits to substantially all
retired employees, covered dependents and their beneficiaries. Generally,
employees who have attained age 55 and who have 10 years of service are
eligible for these benefits. In addition, employees with less than 10 years of
service who retired before July 1, 1992 are eligible for these benefits. The
health care and death benefit plans are contributory and coverages increase
with increased years of service.
Postretirement health and death benefit expense for 1992, 1993 and 1994
included the following components:
<TABLE>
<CAPTION>
1992 1993 1994
------ ----- -----
<S> <C> <C> <C>
Service cost--benefits earned during the year................ $1,100 1,293 1,728
Interest cost................................................ 2,600 2,305 2,530
------ ----- -----
$3,700 3,598 4,258
====== ===== =====
</TABLE>
Gold Kist's postretirement benefit plans are not funded. The status of the
plans at June 26, 1993 and June 25, 1994 was as follows:
<TABLE>
<CAPTION>
1993 1994
------- ------
<S> <C> <C>
Actuarial present value of accumulated postretirement benefit
obligation:
Retirees...................................................... $11,008 12,896
Fully eligible active plan participants....................... 6,186 6,956
Other active plan participants................................ 14,737 13,029
------- ------
31,931 32,881
Unrecognized net gain from experience differences............. 1,802 3,207
------- ------
$33,733 36,088
======= ======
</TABLE>
The health care cost trend rate used to determine the accumulated
postretirement benefit obligation at June 26, 1993 was 13%, declining ratably
to 5.5% by the year 2002 and remaining at that level thereafter. 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 discount rates used to determine
the accumulated postretirement benefit obligation were 8.00% and 8.25% at June
26, 1993 and June 25, 1994, respectively. A 1% increase in the health care cost
trend rate for each year would increase the accumulated postretirement benefit
obligation for health care benefits at June 25, 1994 by approximately 14% and
net postretirement health care cost by 16%.
(c) Incentive Compensation
Gold Kist has a bonus plan which provides incentive compensation to
approximately 420 management level employees. Bonuses are based on a percentage
of defined segment margins before income taxes and bonuses. An individual's
bonus is determined based upon degree of responsibility and performance. The
amounts charged to expense were $1.1 million, $5.4 million and $6.5 million in
1992, 1993 and 1994, respectively.
F-15
<PAGE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
(8) CONTINGENT LIABILITIES AND COMMITMENTS
In January 1993, three Alabama member patrons of Gold Kist filed lawsuits in
the nature of derivative actions 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 lawsuits allege that the named officers,
directors and employees violated their fiduciary duties by creating Golden
Poultry Company, Inc. and Carolina Golden Products Company (Golden Poultry), by
permitting their continued operations and by selling shares of Golden Poultry's
common stock to certain officers, directors and employees. Among the remedies
requested are the transfer of Golden Poultry's operations to Gold Kist, as well
as unspecified actual and punitive damages. In March 1994, the court certified
the litigation as a class action. In July 1994, the court dismissed the
employees as defendants in the applicable lawsuit. 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.
Gold Kist received proceeds of $20.0 million and $5.0 million during 1993 and
1994, respectively, for collateralized loans sold with recourse to an insurance
company, of which $21.5 million was outstanding at June 25, 1994. 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 June 25, 1994, 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 June 25, 1994, the amounts
outstanding under this facility were $24.1 million.
(9) INVESTMENTS
(a) Marketable Equity Security
At June 26, 1993 and June 25, 1994, investments include a noncurrent
marketable equity security with a cost of $21.5 million. The market value of
the equity security was $40.6 million and $42.0 million at June 26, 1993 and
June 25, 1994, respectively. Gains realized on sales and dividends totaled $1.6
million, $169 thousand and $170 thousand and are included in miscellaneous, net
for the years ended June 27, 1992, June 26, 1993 and June 25, 1994,
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 $23.0
million and $20.1 million at June 26, 1993 and June 25, 1994, respectively. The
partnership has a $450.0 million commercial paper facility of which $215.0
million was outstanding at June 30, 1994.
F-16
<PAGE>
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
<TABLE>
<CAPTION>
1993 1994
-------- -------
<S> <C> <C>
Current assets.......................................... $280,921 258,195
Property, plant and equipment, net...................... 32,590 33,465
-------- -------
Total assets.......................................... $313,511 291,660
======== =======
Current liabilities..................................... $244,455 226,871
Accrued postretirement benefit costs.................... -- 4,477
Partners' equity........................................ 69,056 60,312
-------- -------
Total liabilities and partners' equity................ $313,511 291,660
======== =======
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1992 1993 1994
-------- ------- -------
<S> <C> <C> <C>
Net sales and other operating income........... $461,088 486,868 456,937
Costs and expenses............................. 429,738 472,812 460,291
-------- ------- -------
Net income (loss)............................ $ 31,350 14,056 (3,354)
======== ======= =======
</TABLE>
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 1992, 1993 and 1994, Gold Kist received $2.1 million in rental income from
Golden Peanut Company under an operating lease agreement for peanut shelling
and procurement facilities. In addition, Gold Kist received procurement
commissions and royalties of $1.6 million, $2.2 million and $2.0 million in
1992, 1993 and 1994, 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. These products are primarily sold through Gold Kist
owned retail outlets and independent dealers.
F-17
<PAGE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
The following table presents certain financial information as to industry
segments:
<TABLE>
<CAPTION>
AGRI- INTERSEGMENT
POULTRY SERVICES ELIMINATIONS CONSOLIDATED
---------- -------- ------------ ------------
<S> <C> <C> <C> <C>
YEAR ENDED JUNE 27, 1992
- ------------------------
Net sales volume................ $ 963,064 337,842 -- 1,300,906
========== ======= ======= =========
Net margins (losses) from opera-
tions.......................... $ (8,058) 253 -- (7,805)
========== ======= =======
General corporate expenses...... (5,931)
Other income, net............... 9,695
---------
Loss before income taxes,
minority interest and
cumulative effect of accounting
change......................... $ (4,041)
=========
Depreciation and amortization
expense........................ $ 28,689 5,054 775(c) 34,518
========== ======= ======= =========
Capital expenditures............ $ 39,980 5,304 664(c) 45,948
========== ======= ======= =========
Identifiable assets at June 27,
1992........................... $ 353,034 208,663 115,001(c) 676,698
========== ======= ======= =========
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
========== ======= ======= =========
</TABLE>
- --------
(a) Net sales volume includes export sales amounting to $29,779, $27,511 and
$37,731 in 1992, 1993 and 1994, respectively, which have no significant
geographical concentration.
(b) Intersegment sales are generally priced at competitive market prices.
(c) Amounts relate to unallocated corporate assets.
F-18
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH
THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CON-
TAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESEN-
TATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICI-
TATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE SECURITIES COVERED BY
THIS PROSPECTUS; NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, ANY OF THE SECURITIES COVERED BY THIS PROSPECTUS BY ANYONE IN
ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALES MADE HEREUNDER SHALL, UNDER ANY CIR-
CUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE OF THIS PROSPECTUS.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Gold Kist Inc............................................................. 5
Investment Considerations................................................. 5
Use of Proceeds........................................................... 6
Selected Consolidated Financial Data...................................... 7
Management's Discussion and Analysis of Consolidated Results of Operations
and Financial Condition.................................................. 8
Business.................................................................. 12
Description of Subordinated Capital Certificates of Interest.............. 15
Description of Subordinated Loan Certificates and Subordinated Large De-
nomination Loan Certificates............................................. 21
Experts................................................................... 25
Qualified Independent Underwriter......................................... 25
Legal Opinion............................................................. 25
Independent Auditors' Reports............................................. F-1
Consolidated Financial Statements......................................... F-3
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO OF GOLD KIST INC. APPEARS HERE]
GOLD KIST INC.
FIFTEEN YEAR SUBORDINATED CAPITAL CERTIFICATES OF INTEREST (SERIES D)
TEN YEAR SUBORDINATED CAPITAL CERTIFICATES OF INTEREST (SERIES D)
SEVEN YEAR SUBORDINATED CAPITAL CERTIFICATES OF INTEREST (SERIES A)
FIVE YEAR SUBORDINATED CAPITAL CERTIFICATES OF INTEREST (SERIES C)
THREE YEAR SUBORDINATED CAPITAL CERTIFICATES OF INTEREST (SERIES A)
TWO YEAR SUBORDINATED CAPITAL CERTIFICATES OF INTEREST (SERIES A)
ONE YEAR SUBORDINATED LOAN CERTIFICATES (SERIES C)
ONE YEAR SUBORDINATED LARGE DENOMINATION LOAN CERTIFICATES (SERIES A)
SIX MONTH SUBORDINATED LARGE DENOMINATION LOAN CERTIFICATES (SERIES A)
----------------
PROSPECTUS
----------------
OCTOBER 25, 1994
----------------
AGVESTMENTS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
