<PAGE>
FILED PURSUANT TO
RULE 424 (b) (3)
FILE NO: 333-12397
GOLD KIST INC.
$ 5,440,842--8.00%, FIFTEEN YEAR SUBORDINATED CAPITAL CERTIFICATES
OF INTEREST (SERIES D)
LOGO $ 6,118,384--7.75%, TEN YEAR SUBORDINATED CAPITAL CERTIFICATES OF
INTEREST (SERIES D)
$11,431,494--7.50%, SEVEN YEAR SUBORDINATED CAPITAL CERTIFICATES
OF INTEREST (SERIES A)
$10,611,399--7.25%, FIVE YEAR SUBORDINATED CAPITAL CERTIFICATES OF
INTEREST (SERIES C)
$13,150,887--6.40%, THREE YEAR SUBORDINATED CAPITAL CERTIFICATES
OF INTEREST (SERIES A)
$15,557,746--6.25%, TWO YEAR SUBORDINATED CAPITAL CERTIFICATES OF
INTEREST (SERIES A)
$19,159,388--6.00%, ONE YEAR SUBORDINATED LOAN CERTIFICATES
(SERIES C)
$30,656,736--6.10%, ONE YEAR SUBORDINATED LARGE DENOMINATION LOAN
CERTIFICATES (SERIES A)
$13,203,694--5.60%, SIX MONTH SUBORDINATED LARGE DENOMINATION LOAN
CERTIFICATES (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 29, 1996,
Superior Indebtedness (as defined in the indenture under which each series will
be issued) amounted to approximately $519,254,000. 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 "RISK FACTORS" ON
PAGE 5.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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............................ $ 5,440,842 $217,634 $ 5,223,208
Ten Year (Series D)--Per Unit
(3)............................. $ 500
Total............................ $ 6,118,384 $ 183,552 $ 5,934,832
Seven Year (Series A)--Per Unit
(3)............................. $ 500
Total............................ $ 11,431,494 $ 285,787 $ 11,145,707
Five Year (Series C)--Per Unit
(3)............................. $ 500
Total............................ $ 10,611,399 $ 212,228 $ 10,399,171
Three Year (Series A)--Per Unit
(3)............................. $ 500
Total............................ $ 13,150,887 $ 131,509 $ 13,019,378
Two Year (Series A)--Per Unit
(3)............................. $ 500
Total............................ $ 15,557,746 $ 116,683 $ 15,441,063
SUBORDINATED LOAN CERTIFICATES
One Year (Series C)--Per Unit
(3)............................. $ 500
Total............................ $ 19,159,388 $ 95,797 $ 19,063,591
SUBORDINATED LARGE DENOMINATION
LOAN CERTIFICATES
One Year (Series A)--Per Unit
(4)............................. $ 50,000
Total............................ $ 30,656,736 $ 153,284 $ 30,503,452
Six Month (Series A)--Per Unit
(5)............................. $ 20,000
Total............................ $ 13,203,694 $ 33,009 $ 13,170,685
</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-
3/4%; Three Year Certificates-- 3/4-1%; 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 $125,330,570 in face
amount of certificates would total $1,454,182.
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 $123,876,388 are before deducting the
expenses to be borne by Gold Kist of an estimated amount of $106,180. 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 a
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 28, 1996
<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 the following
regional offices of the Commission: Northeast Regional Office, 7 World Trade
Center, Suite 1300, New York, N.Y. 10008; and Midwest Regional Office, 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.
In addition, the Commission maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
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 29, 1996,
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 (770) 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. ("Gold Kist" or the "Association") is a diversified
agricultural membership cooperative association, headquartered in Atlanta,
Georgia. Gold Kist serves approximately 29,000 active farmer members and other
cooperative associations located principally in the southeastern United States.
Gold Kist 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)........................................ $ 5,440,842
10 year maturity, Series D (Interest as indicated on the front
cover of this Prospectus)........................................ $ 6,118,384
7 year maturity, Series A (Interest as indicated on the front
cover of this Prospectus)........................................ $ 11,431,494
5 year maturity, Series C (Interest as indicated on the front
cover of this Prospectus)........................................ $ 10,611,399
3 year maturity, Series A (Interest as indicated on the front
cover of this Prospectus)........................................ $ 13,150,887
2 year maturity, Series A (Interest as indicated on the front
cover of this Prospectus)........................................ $ 15,557,746
Subordinated Loan Certificates
1 year maturity, Series C (Interest as indicated on the front
cover of this Prospectus)........................................ $ 19,159,388
Subordinated Large Denomination Loan Certificates
1 year maturity, Series A (Interest as indicated on the front
cover of this Prospectus)........................................ $ 30,656,736
6 month maturity, Series A (Interest as indicated on the front
cover of this Prospectus)........................................ $ 13,203,694
</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 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.
3
<PAGE>
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 Risk Factors.
SUMMARY OF SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FOR FISCAL YEARS ENDED (000'S OMITTED)
---------------------------------------------------
JUNE 27, JUNE 26, JUNE 25, JULY 1, JUNE 29,
1992 1993 1994 1995 1996
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Net sales volume......... $1,300,906 1,400,566 1,561,034 1,688,537 1,955,569
Net margins (loss)(A).... $ (20,614) 27,238 39,404 11,751 37,032
Ratio of net margins
(loss) to fixed
charges(B).............. 1.4 3.2 3.7 2.0 3.2
<CAPTION>
AS OF (000'S OMITTED)
---------------------------------------------------
JUNE 27, JUNE 26, JUNE 25, JULY 1, JUNE 29,
1992 1993 1994 1995 1996
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet
Data:
Total assets............. $ 676,698 665,102 716,432 821,637 975,960
Total liabilities........ $ 382,789 354,889 394,754 482,675 621,378
Patrons' and other
equity(A)............... $ 271,456 285,620 296,662 314,990 326,410
</TABLE>
- --------
A. See Note 6 and Note 9(a) of Notes to Consolidated Financial Statements.
B. See Selected Consolidated Financial Data, Note C.
4
<PAGE>
RISK FACTORS
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 29, 1996, Superior Indebtedness (as defined in the indentures) amounted
to approximately $519,254,000 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 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.
AGRICULTURE AND AGRIBUSINESS INDUSTRY
Gold Kist's business is principally composed of operations in agriculture
and related agribusiness industries. The nature of agribusiness industry in
general, including poultry processing and marketing, is such that supply and
demand market forces exert significant influence upon the operations of firms
engaged in these businesses. Demand for the products produced, processed and
marketed by Gold Kist is often influenced by supplies and prices of
alternative products. Historically, weather has also had a significant impact
on the farm economy and the operating results of agribusinesses such as Gold
Kist. Additionally, as is common with other businesses involving perishable
commodities, the poultry and other operations of Gold Kist have demonstrated a
cyclical nature with varying levels of profits, and to a lesser extent losses,
over periods of years. Management is unable to predict whether, and to what
extent, such factors and conditions will affect the Association's operating
results in the future.
PENDING LITIGATION
In January 1993, certain Alabama member patrons of the Association filed a
lawsuit, subsequently certified as a class action, in the Circuit Court of
Jefferson County, Alabama, Tenth Judicial Circuit, against the Association and
Golden Poultry Company, Inc. ("Golden Poultry") and certain directors and
officers of the companies. (Ronald Pete Windham and Windham Enterprises, Inc.
on their behalf and on behalf of and for the
5
<PAGE>
use and benefit of Gold Kist, Inc. and its shareholders/members v. Harold O.
Chitwood, individually in his capacity as an officer of Gold Kist and a
Director of Golden Poultry; et al). After a jury verdict in favor of the
plaintiffs, the Court entered a Final Judgment and Decree on September 13,
1996, under which Gold Kist was directed to acquire the Golden Poultry stock
held by any current officers or directors of Gold Kist and their spouses and
minor children. The Court also ordered Gold Kist to cause the surrender of all
Golden Poultry stock options held by Gold Kist officers and directors or the
exercise of such options and purchase by Gold Kist of the resultant stock, to
redeem from eligible members approximately $21.2 million of notified equity of
Gold Kist, to pay $4.2 million in attorney's fees to the plaintiffs attorneys
and to establish a policy prohibiting officers and directors of Gold Kist from
future ownership of Golden Poultry stock. An appeal of the Final Judgment may
be filed by the parties, which could have the effect of staying the Final
Judgment pending the outcome of any appeal. See Note 8 of Notes to
Consolidated Financial Statements.
GOLD KIST INC.
Gold Kist Inc. is a diversified agricultural membership cooperative
association, headquartered in Atlanta, Georgia. Gold Kist serves approximately
29,000 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 is engaged in the processing, storage and marketing of cotton,
serves as a contract procurement agent for, and stores, farm commodities such
as soybeans and grain, and is a partner in a major peanut processing and
marketing business and in a pecan processing and marketing business.
The Association's principal office is located at 244 Perimeter Center
Parkway, N.E., Atlanta, Georgia 30346, and its telephone number is (770) 393-
5000.
USE OF PROCEEDS
The maximum net proceeds to Gold Kist from the sale of the certificates
offered hereby are estimated to be $123,876,388 before deduction of expenses
estimated to be $106,180. The proceeds will be used in the following order of
priority. Approximately $41,321,000 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, 1997. 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
6
<PAGE>
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.
7
<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 29, 1996 and "Consolidated Balance Sheet Data" as of
June 27, 1992, June 26, 1993, June 25, 1994, July 1, 1995, and June 29, 1996
are derived from the consolidated financial statements of Gold Kist Inc. and
subsidiaries, which consolidated financial statements have been audited by
KPMG Peat Marwick LLP, independent auditors. The consolidated financial
statements as of July 1, 1995 and June 29, 1996 and for each of the years in
the three-year period ended June 29, 1996, and the report thereon of KPMG Peat
Marwick LLP, which is based partially upon the report of other auditors, are
included elsewhere herein. The information set forth below should be read in
conjunction with Management's Discussion and Analysis of Consolidated Results
of Operations and Financial Condition and the aforementioned consolidated
financial statements, the related notes and the audit report, which refers to
changes in accounting for income taxes and for certain investments in debt and
equity securities, included elsewhere herein.
<TABLE>
<CAPTION>
FOR FISCAL YEARS ENDED (000'S OMITTED)
---------------------------------------------------
JUNE 27, JUNE 26, JUNE 25, JULY 1, JUNE 29,
1992 1993 1994 1995 1996
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales volume.......................... $1,300,906 1,400,566 1,561,034 1,688,537 1,955,569
========== ========= ========= ========= =========
Interest expense.......................... $ 18,545 17,163 13,924 17,525 21,065
========== ========= ========= ========= =========
Margins (loss) before cumulative effect of
accounting changes....................... $ (1,643) 27,238 34,065 11,751 37,032
Cumulative effect of changes in
accounting:
Income taxes (A)........................ $ -- -- 5,339 -- --
Postretirement benefits other than
pensions (net of $10,698 income tax
benefit)............................... $ (18,971) -- -- -- --
---------- --------- --------- --------- ---------
Net margins (loss)........................ $ (20,614) 27,238 39,404 11,751 37,032
========== ========= ========= ========= =========
Ratio of net margins (loss) to fixed
charges (C).............................. 1.4 3.2 3.8 2.0 3.2
========== ========= ========= ========= =========
<CAPTION>
AS OF (000'S OMITTED)
---------------------------------------------------
JUNE 27, JUNE 26, JUNE 25, JULY 1, JUNE 29,
1992 1993 1994 1995 1996
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital........................... $ 108,045 140,629 139,847 146,585 184,457
========== ========= ========= ========= =========
Total assets.............................. $ 676,698 665,102 716,432 821,637 975,960
========== ========= ========= ========= =========
Long-term liabilities..................... $ 159,449 152,792 144,992 178,777 233,291
========== ========= ========= ========= =========
Total liabilities......................... $ 382,789 354,889 394,754 482,675 621,378
========== ========= ========= ========= =========
Patrons' and other equity (B)............. $ 271,456 285,620 296,662 314,990 326,410
========== ========= ========= ========= =========
Current ratio............................. 1.48 1.70 1.56 1.48 1.48
========== ========= ========= ========= =========
Ratio of long-term liabilities to total
capitalization........................... % 37.00 34.85 32.83 36.21 41.68
========== ========= ========= ========= =========
</TABLE>
- --------
Note:
(A) See Note 6 of Notes to Consolidated Financial Statements.
(B) See Note 9(a) 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 certain partially-owned
affiliates, 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 $8,151,
$9,126, $10,113, $15,249 and $10,290 for 1991, 1992, 1993, 1994, 1995, and
1996, respectively.
8
<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 thirty-six year history. Although the
industry has been profitable since 1983 with the exception of a brief period
during 1992 and 1996, net margins have varied from year to year in response to
market fundamentals. The following addresses the various factors that have
influenced poultry industry profitability during the past five years. Low
broiler market prices were experienced throughout 1992 as a result of the
economic recession affecting the United States, the decline in poultry exports
and excess industry supply. Improved market prices in 1993 and 1994 were the
result of a general economic recovery in the United States and increased
demand for poultry products. During 1995, broiler market prices declined due
to the large supply of competing meats, such as beef and pork, and the
continuation of broiler industry expansion. During 1996, broiler market prices
increased approximately 10% as compared to 1995 as a result of hot, dry
weather conditions that reduced meat production in the summer of 1995, as well
as lower than expected industry expansion and increased exports. According to
USDA estimates, the supply of broilers is expected to increase at a 5.5% rate
in 1996 and a 5.7% rate in 1997 as compared to the 6.7% average annual
increase between 1992 and 1995. In 1992, market prices increased for corn and
soybean meal as supplies came in balance with world demand. The record 1992
domestic corn harvest brought lower feed ingredient prices in 1993. In 1994,
feed ingredient prices increased substantially as a result of the reduced corn
harvest in 1993. As a result of the increase in planted corn and soybean
acreage and favorable growing conditions in the summer of 1994, market prices
for feed ingredients declined in 1995. Average cash market prices for corn and
soybean meal increased 59% and 30%, respectively, during 1996 as compared to
1995 due to the weather reduced 1995 harvest and strong export demand.
Historically, weather has had a significant impact on the farm economy and
the operating results of the Association. Generally, favorable weather
conditions throughout 1992 provided for a near perfect planting season in the
Southeast, which contributed to improved 1992 operating results in the Agri-
Services segment. Wet weather conditions in the Southeast during the 1993
spring planting season reduced corn and peanut acreage and were followed by
early summer drought conditions. These inclement weather factors had a
negative impact on 1993 Agri-Services operating results. Flooding in the
Midwestern United States during the summer of 1993 severely impacted the
domestic grain harvest and boosted feed ingredient prices to near record
levels. Hot, dry weather conditions in the late summer of 1993 damaged
pastures in the Southeast, which resulted in increased sales of agricultural
products in 1994. In addition, favorable spring weather conditions contributed
to increased planting activity in 1994. In 1995, generally favorable spring
weather conditions in the Southeast contributed to increased sales of
agricultural inputs in the Association's primary retail sales area. However,
wet weather conditions in the Delta and Midwest regions of the U.S. negatively
impacted market prices for corn, seed and certain fertilizers in areas where
these products are sold through independent dealers and four of the
Association's retail stores. Inclement weather conditions in the summer of
1995 reduced the Southeastern cotton, peanut and corn harvest, which impacted
farm income. The weather reduced 1995 grain harvest in the Midwestern U.S.
boosted farm commodity prices; thus contributing to increased spring 1996
plantings in the Southeast and Delta regions. Also, favorable spring weather
contributed to the increase in sales of agricultural inputs in 1996.
Export sales for 1994, 1995 and 1996 were $37.7 million, $70.1 million and
$100.1 million, respectively. In 1995 and 1996, export sales increased
primarily as a result of the demand for poultry from Russia and the Far East.
Export sales of poultry products will be influenced by credit availability to
foreign countries, political and
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<PAGE>
economic stability, particularly in Russia, Eastern European nations and
Mexico, and the United States government's willingness to support the industry
through export enhancements.
The Association's operations are classified into two reportable business
segments. See Note 10 of Notes to Consolidated Financial Statements. The
discussion of results of operations relates the effects of these significant
economic factors on those segments for each of the years in the three-year
period ended June 29, 1996.
RESULTS OF OPERATIONS
Fiscal 1995 Compared to Fiscal 1994
The Association's accounting cycle resulted in 53 weeks of operations in
1995 and 52 weeks in 1994.
Net sales volume for 1995 was $1.7 billion, which represented an 8.2%
increase over the prior fiscal year. Net margins from operations, before
general corporate expenses and other deductions, were $42.5 million as
compared to $60.6 million for 1994. The decline in net margins from operations
was due primarily to lower market prices for poultry products.
The Poultry segment's net sales volume of $1.3 billion was up 6.0% from 1994
as a result of increased pounds of poultry sold, which was partially offset by
lower average selling prices. The decline in average selling prices
contributed to a 35% decline in net margins from operations to $34.1 million.
The 4.9% decline in average selling prices for 1995 was due to excessive
supplies of competing meats and increased broiler industry production. The
impact of the decline in selling prices on net sales was offset by an 11.0%
increase in poultry pounds sold. The decline in poultry net margins from
operations was partially offset by an 8.6% decline in feed ingredient costs.
Due to lower pork market prices, the poultry segment's Pork Division incurred
a net loss of $3.7 million as compared to a net margin of $775,000 for 1994.
In the Agri-Services segment, net sales volume for 1995 of $433.4 million
increased 14.9% as compared to 1994 due to increased sales of agricultural
production inputs, including fertilizer, chemicals and farm supplies sold
through the Association's farm supply stores and independent dealers. The net
sales increase for 1995 was due to increased sales prices for fertilizer,
increased application in the Southeast related to the increase in cotton
acreage and the addition of five retail outlets primarily in the Mississippi
Delta region. Net margins from operations for 1995 were $8.4 million. Net
margins from operations for 1995 were negatively affected by lower margins on
seed corn sold in the Midwest, reduced gross margins on retail fertilizer
sales and expenses related to the closing of four suburban retail stores.
However, the impact of these items on 1995 net margins from operations was
partially offset by $3.9 million in patronage refunds from other cooperatives.
Distribution, administrative and general expenses for 1995 and 1994 were
$131.4 million and $121.4 million, respectively, which represent 7.8% of net
sales volume. The $10.0 million increase reflects the growth in the Agri-
Services operations, which was partially offset by lower incentive
compensation expenses related to the decrease in net operating margins.
The various components included in other income (deductions) represented a
deduction of $9.5 million for 1995 as compared to $4.3 million for 1994.
Interest income of $8.8 million for 1995 increased $2.0 million as a result of
increased crop financing for patrons and other customers. Interest expense for
1995 was $17.5 million as compared to $13.9 million in 1994 due to increased
average borrowings of approximately 10.0% and higher
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interest rates on short-term borrowings. In 1995, interest expense includes
$1.6 million related to income tax litigation. The Association's $9.6 million
pro rata share of the Golden Peanut Company's 1995 loss (equity in loss of
partnership) represented a significant portion of other income (deductions)
for 1995. The decline in Golden Peanut Company's 1995 operating results was
primarily the result of low peanut selling prices resulting from the general
oversupply situation that exists for domestic and export peanuts, reduced U.S.
consumption of peanut products and the increase of peanut based foods imported
into the United States. See Note 9(b) of Notes to Consolidated Financial
Statements. The $3.1 million gain on sale of investments represents the sale
of common stock in two agricultural related entities. Miscellaneous, net for
1995 includes the Association's $1.7 million pro rata share in the loss of a
partially-owned foreign affiliate whose principal business activities include
the marketing, purchasing and resale of edible peanuts. In 1994, the
Association recognized income of $250,000 on this investment. Miscellaneous,
net for 1995 includes $1.7 million representing the Association's equity in
the earnings of a pecan processing and marketing enterprise in South Carolina.
Net rental income of approximately $2.0 million and $1.8 million,
respectively, was included in miscellaneous, net for 1995 and 1994.
In 1995 and 1994, the Association's combined federal and state effective tax
rates were 51% and 30%, respectively. The effective tax rate for 1995 reflects
$5.5 million of additional tax related to an adverse tax court decision. See
Note 6 of Notes to Consolidated Financial Statements.
Fiscal 1996 Compared to Fiscal 1995
Net sales volume of approximately $2.0 billion for 1996 represented a 15.8%
or $267.0 million increase as compared to 1995. Net margins from operations,
before general corporate expenses and other deductions, were $80.3 million in
1996 as compared to $42.5 million in 1995. The increase in net margins from
operations was due primarily to increased margins in the Poultry segment.
The Poultry segment had net sales of $1.4 billion for 1996, an increase of
12.5% or $157.0 million as compared to 1995. The increase in net sales was due
primarily to a 5.0% increase in average selling prices and a 7.5% increase in
pounds of poultry sold. Market prices for poultry products strengthened in
1996 as a result of lower-than-expected U.S. broiler production and strong
export demand for poultry products. The increase in pounds sold was due to
changes in product mix requiring larger broilers for the production of deboned
poultry products. Poultry segment's net margins from operations for 1996 were
$70.2 million as compared to $34.1 million for 1995. The increase in net
margins was due primarily to higher selling prices for poultry products, which
was partially offset by increased feed ingredient costs. Although average cash
commodity prices for feed grains, such as corn and soybean meal increased 59%
and 30%, respectively, from a year ago, the Association's forward purchasing
and hedging strategies resulted in a relatively modest 8% increase in feed
ingredient costs for 1996. The Pork Division had a net operating margin of
$240,000 for 1996 as compared to a $3.7 million net loss for 1995.
The Agri-Services segment's 1996 net sales volume of $543.5 million
increased 25.4% or $110.0 million as compared to 1995. The increase in net
sales volume was due primarily to the marketing of Southeast cotton, as well
as increased sales of fertilizers, chemicals and seeds through the
Association's retail stores. A substantial portion of the agricultural sales
increase was attributed to facilities acquired in the Mississippi-Delta region
in 1995. The Agri-Services segment's net margins from operations for 1996 were
$10.1 million as compared to $8.4 million for 1995. The increase was due
primarily to patronage refunds from other cooperatives that totaled $9.3
million for 1996 as compared to $3.9 million in 1995. A substantial portion of
the patronage refunds were distributed by a major fertilizer cooperative. The
Retail Store Division had lower net operating margins in 1996 as a result of
losses in the Mississippi-Delta operations acquired in 1995. The Agri-Services
segment's net margins from operations reflects a $2.1 million net loss from an
agricultural equipment manufacturing operation that was sold in 1996.
11
<PAGE>
Distribution, administrative and general expenses for 1996 and 1995 were
$155.7 million and $131.4 million, respectively. The $24.3 million increase
reflects the growth in operations, as well as increased incentive compensation
expenses related to the increase in margins before income taxes. Increased
litigation related expenses also contributed to the overall increase in
distribution, administrative and general expenses.
The various components included in other income (deductions) represented a
deduction of $6.3 million for 1996 as compared to $9.5 million for 1995.
Interest income of $9.9 million for 1996 increased $1.2 million as a result of
increased crop financing for patrons and other customers. Interest expense for
1996 was $21.1 million as compared to $17.5 million in 1995. The increase was
due to a 55% increase in average borrowings, which was partially offset by
lower interest rates on short-term borrowings. Interest expense for 1995
included $1.6 million related to income tax litigation. Equity in loss of
partnership represents the Association's 33 1/3% pro rata share of the Golden
Peanut Company's 1996 loss. See Note 9(b) of Notes to Consolidated Financial
Statements. Miscellaneous, net for 1996 includes the Association's $422,000
pro rata share in the earnings of a partially-owned foreign affiliate whose
principal business activities include the marketing, purchasing and resale of
edible peanuts. In 1995, the Association recognized a loss of $1.7 million on
this investment. Miscellaneous, net for 1996 and 1995 includes $1.0 million
and $1.7 million, respectively, representing the Association's equity in the
earnings of a pecan processing and marketing enterprise in South Carolina. Net
rental income of approximately $1.8 million and $2.0 million, respectively,
was included in miscellaneous, net for 1996 and 1995.
In 1996 and 1995, the Association's combined federal and state effective
income tax rates were 33% and 51%, respectively. The effective tax rate for
1995 reflects $5.5 million of additional income tax related to an adverse tax
court decision. See Note 6 of Notes to Consolidated Financial Statements.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Association's liquidity is dependent upon funds from operations and
external sources of financing. The principal sources of external short-term
financing are proceeds from the continuous offering of Subordinated Loan
Certificates, an unsecured committed credit facility with a group of banks and
uncommitted letters and lines of credit. In August 1996, the Association
entered into a $250 million unsecured committed credit facility with nine
commercial banks. The new facility includes a five-year $125 million revolving
credit commitment and a $125 million 364-day line of credit commitment.
Subsequently, the Association had unused loan commitments of $140.0 million
and additional unused uncommitted facilities to provide loans and letters of
credit from banks aggregating approximately $83.1 million. The primary sources
of external long-term financing are a note agreement with an insurance
company, proceeds from the continuous offering of Subordinated Capital
Certificates of Interest and revolving credit agreements. See Note 4 of Notes
to Consolidated Financial Statements.
Covenants under the terms of the loan agreements with lenders include
conditions that could limit short-term and long-term financing available from
various external sources. The terms require a ratio of current assets to
current liabilities of not less than 1.20:1, the ratio of senior funded debt
to total capitalization not to exceed 40% and total funded debt to total
capitalization not to exceed 50%. At June 29, 1996, Gold Kist's current ratio,
senior funded debt to total capitalization and total funded debt to
capitalization, determined under the loan agreements, were 1.40:1, 31% and
44%, respectively. The loan agreements apply to the Association and its
subsidiaries, excluding Golden Poultry. At June 29, 1996, the Association was
in compliance with the agreements. See Note 4 of Notes to Consolidated
Financial Statements.
In 1994, existing cash balances, proceeds from long-term debt and short-term
borrowings, and net cash provided by operations of $36.8 million were used for
capital expenditures, repayments of long-term debt, patronage refunds and
other equity payments. Capital expenditures in 1994 included $32.7 million
related to expansion and improvements in poultry operations, as well as $3.8
million for improvements to retail stores and
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<PAGE>
other agricultural operations. During 1994, the Association had cash payments
of approximately $22.7 million for patronage refunds and other equity
payments. These payments included $10.2 million representing the redemption of
Revolving Fund Certificates and Cumulative Preferred Capital Certificates of
Interest with no fixed maturities. Accounts receivable increased during 1994
primarily as a result of increased crop loans to patrons and financing
provided to independent agricultural products distributors, as well as
increased poultry sales. Inventories during 1994 increased as a result of
increased broiler production, higher poultry selling prices and increased
cotton production in the Southeast.
During 1995, uses of cash included capital expenditures of $61.8 million,
$36.7 million for repayments of long-term debt and patronage refunds and other
equity distributions of $19.5 million. The funds for these investing and
financing activities were provided primarily by borrowings of approximately
$110.0 million and to a lesser extent, cash provided by operating activities
of $7.2 million and the sale of investments in marketable securities totaling
$8.9 million. Capital expenditures for 1995 included $43.4 million related to
expansion and improvements in poultry operations, as well as $18.0 million for
the acquisition of Agri-Services operations, improvements to retail stores and
the construction of cotton facilities. Increases in accounts receivable and
inventories during 1995 reflected the growth in poultry production and sales,
the expansion of Agri-Services retail operations in the Mississippi Delta and
the increase in Southeast cotton production.
During 1996, the uses of cash included capital expenditures of $74.3 million
and $28.6 million for repayments of long-term debt, as well as increases in
operating assets. Increases in inventories reflected the impact of higher feed
ingredient prices on raw materials and live poultry and hog inventories and
the increase in poultry prices on marketable products inventories. Increased
receivables were primarily the result of increases in crop financing provided
to producers and the growth in retail store sales. The Association's expansion
into cotton procurement and marketing contributed to the increase in operating
assets. The funds for these activities were provided by borrowings of $131.5
million. Capital expenditures for 1996 included $54.9 million for expansion
and improvements in the poultry operations and $18.6 million in expenditures
to acquire retail operations and construct cotton ginning and warehousing
facilities.
The Association, including its non-cooperative subsidiaries, plans capital
expenditures of approximately $140.0 million in 1997 that primarily include
expenditures for expansion and technological advances in poultry production
and processing and to a lesser extent, Agri-Services segment improvements. In
addition, planned capital expenditures include other asset improvements and
necessary replacements. Management intends to finance the planned 1997 capital
expenditures with existing cash balances and net margins adjusted for non-cash
items and additional long-term borrowings, as needed. In 1997, management
expects cash expenditures to approximate $28.0 million for equity
distributions. The Association believes cash on hand and cash equivalents at
June 29, 1996 and cash expected to be provided from operations, in addition to
borrowings available under existing credit arrangements and proceeds from the
sale of Subordinated Capital Certificates of Interest, will be sufficient to
maintain cash flows adequate for the Association's projected growth and
operational objectives during 1997.
EFFECTS OF INFLATION
The major factor affecting the Association's net sales volume and cost of
sales is the change in commodity market prices for broilers, hogs, feed
grains, fertilizers and cotton. The prices of these commodities are affected
by world market conditions and are volatile in response to supply and demand,
as well as political and economic events. The price fluctuations of these
commodities do not necessarily correlate with the general inflation rate.
Inflation has, however, affected operating costs such as labor, energy and
material costs.
FUTURE ACCOUNTING REQUIREMENTS
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which must
be applied by fiscal 1997. Management believes SFAS 121 will not have a
significant impact upon adoption.
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
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<PAGE>
purchase or manufacture and sell to the member farm supplies, provided
handling such supplies is advantageous for Gold Kist. The Association also is
engaged in the purchase, sale, processing and storage of cotton, 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 and in a pecan processing and marketing 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 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.
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 73% 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 Gold Kist Farms(R) and
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 Gold Kist Farms(R) and 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 25, JULY 1, JUNE 29,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Broiler Products
Volume.................................... $1,152,252 $1,226,104 $1,380,649
Percentage (%)............................ 73.8 72.6 70.6
</TABLE>
Gold Kist also markets hogs raised by members and non-members in Alabama,
Georgia and North Carolina.
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<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 96 Gold Kist retail stores and at wholesale
to national accounts and independent dealers. The Gold Kist stores are located
in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, South Carolina
and Texas. 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 July 2000, 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 29, 1996, Gold Kist purchased approximately 32% 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.
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 25, JULY 1, JUNE 29,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Fertilizer and Chemicals
Volume............................................. $211,218 $268,625 $306,247
Percentage (%)..................................... 13.5 15.9 15.7
</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.
In fiscal 1996, the Association conducted cotton ginning and storage
operations in Georgia. Cotton ginning and storage facilities are operated at
Statesboro, Marven, Byromville and DeSoto, Georgia. A central storage
warehouse is operated in Moultrie, Georgia. The Association provides ginning
and storage services to members and markets cotton purchased from members to
domestic and foreign textile mills.
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).
PARTNERSHIP INTEREST
Gold Kist, the Archer Daniels Midland Company and Alimenta Processing
Corporation are partners in Golden Peanut Company, a general partnership
formed to operate a peanut procuring, processing, and marketing
15
<PAGE>
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 29, 1996, Gold Kist had export sales of $100.1 million of which the
primary export product (poultry) was $89.3 million. During that period, export
sales of poultry were mainly to customers in Russia, Eastern Europe, the Far
East, South Africa, Central and South America and the Caribbean area.
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. All
material export sales transactions are denominated in United States dollars.
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 SunTrust Bank, Atlanta, 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 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
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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 Indentures.) Certificates of previous series
have been issued and are outstanding under certain of the Indentures governing
the certificates. As of June 29, 1996, there were the following aggregate
principal amounts of the series offered hereby outstanding: Fifteen Year--
$10,194,000; Ten Year--$8,902,000; Seven Year--$11,446,000; Five Year--
$12,693,000; Three Year--$6,538,000; and Two Year--$8,335,000. 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.
17
<PAGE>
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, 1997, 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, 1997 and ending on June
30, 1997. (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 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 7.25%, purchased on January 1, 1997, and redeemed at the request
of the holder on June 15, 1997, the redemption price would equal:
<TABLE>
<C> <C> <S>
$1,000.00 (Principal amount)
plus 32.77 (165 days' accrued interest at 7.25% per annum)
---------
$1,032.77
less 72.50 (1 year's simple interest at 7.25% per annum)
---------
$ 960.27 (Total Redemption Price)
</TABLE>
18
<PAGE>
B. For a Five Year Certificate in the principal amount of $5,000, bearing
interest at 7.25% (paid quarterly at the election of the holder), purchased on
January 1, 1997 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)
(75 days' accrued interest at 7.25% per annum. Interest
plus 74.49 previously paid on April 1, 1996 equals $84.38)
---------
$5,074.49
less 362.50 (1 year's simple interest at 7.25% per annum)
---------
$4,711.99 (Total Redemption Price)
</TABLE>
C. For a Five Year Certificate in the principal amount of $5,000 bearing
interest at 7.25% (accumulated quarterly at the election of the holder),
purchased on January 1, 1997, and redeemed at the request of the holder on
June 15, 1999, the redemption price would equal:
<TABLE>
<C> <C> <S>
$5,000.00 (Principal amount)
(2 1/4 years, 75 days' accrued interest at 7.25% per annum
plus 956.23 accumulated and compounded quarterly)
---------
$5,956.23
less 362.50 (1 year's simple interest at 7.25% per annum)
---------
$5,593.73 (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 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
19
<PAGE>
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 29, 1996, Superior
Indebtedness amounted to approximately $519,254,000, 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 and (ii) 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 Notes 8 and 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
SunTrust Bank, Atlanta 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 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.)
20
<PAGE>
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 $19,000,000 revolving credit line and a $19,000,000
committed 364 day credit line both of which can be used for seasonal advances,
and a $5,000,000 letter of credit facility with the SunTrust Bank, Atlanta,
under which varying amounts are outstanding from time to time. Any such
indebtedness to the SunTrust Bank, Atlanta would constitute Superior
Indebtedness as defined in the Indenture. Gold Kist also maintains deposit
accounts with the SunTrust Bank, Atlanta, and from time to time the Bank
provides other banking and trust services to Gold Kist in the ordinary course
of its business. SunTrust Bank, Atlanta serves as trustee under indentures
governing certain previously issued series of Subordinated Capital
Certificates of Interest and Subordinated Loan Certificates.
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 SunTrust Bank, Atlanta, 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 SunTrust Bank, Atlanta, 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.
21
<PAGE>
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 29, 1996, there were the following aggregate principal amounts of the
series offered hereby outstanding: One Year Loan Certificates -- $13,539,000,
One Year Jumbo Loan Certificates -- $17,035,000, and Six Month Jumbo Loan
Certificates -- $-0-. The Indentures do not limit the amount of 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.
22
<PAGE>
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 6.00%, purchased on January 1, 1997, and redeemed at
the request of the holder on February 15, 1997, the redemption price would
equal:
<TABLE>
<C> <C> <S>
$1,000.00 (Principal amount)
plus 7.40 (45 days' accrued interest at 6.00% per annum)
---------
$1,007.40
less 15.00 (3 month's simple interest at 6.00% per annum)
---------
$ 992.40 (Total Redemption Price)
</TABLE>
B. For a One Year Loan Certificate in the principal amount of $5,000,
bearing interest at 6.00% (paid quarterly at the election of the holder),
purchased on January 1, 1997 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)
(75 days' accrued interest at 6.00% per annum. Interest
plus 61.64 previously paid on April 1, 1997 equals $75.00)
---------
$5,061.64
less 75.00 (3 month's simple interest at 6.00% per annum)
---------
$4,986.64 (Total Redemption Price)
</TABLE>
Total redemption price ($4,986.64) plus interest previously paid ($75.00)
equals $5,061.64.
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.
23
<PAGE>
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 29, 1996, Superior Indebtedness amounted to
approximately $519,254,000, 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, 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 Notes 8 and 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
SunTrust Bank, Atlanta 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.)
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
24
<PAGE>
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 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 $19,000,000 revolving credit line and a $19,000,000
committed 364 day credit line both of which can be used for seasonal advances,
and a $5,000,000 letter of credit facility with the SunTrust Bank, Altanta,
under which varying amounts are outstanding from time to time. Any such
indebtedness to the SunTrust Bank, Atlanta would constitute Superior
Indebtedness as defined in the Indenture. Gold Kist also maintains deposit
accounts with the SunTrust Bank, Atlanta, and from time to time the Bank
provides other banking and trust services to Gold Kist in the ordinary course
of its business. SunTrust Bank, Atlanta 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 schedule of Gold Kist Inc. as of
July 1, 1995, and June 29, 1996, and for each of the years in the three-year
period ended June 29, 1996 included herein or incorporated by
25
<PAGE>
reference herein and in the registration statement have been included herein
or incorporated by reference herein and 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 and July 1, 1995 consolidated
financial statements refer to changes in accounting for income taxes and for
certain investments in debt and equity securities.
The combined consolidated financial statements of Golden Peanut Company and
Subsidiaries and Alimenta Commodities, LLC at June 30, 1996 and 1995, and for
each of the three years in the period ended June 30, 1996 (not included
separately herein), have been audited by Ernst & Young LLP, independent
auditors, 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 combined 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 29, 1996 and July 1, 1995 and for each of the three years in
the period ended June 29, 1996, in reliance upon such 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.
26
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of DirectorsGold Kist Inc.:
We have audited the accompanying consolidated balance sheets of Gold Kist
Inc. and subsidiaries as of July 1, 1995 and June 29, 1996, 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 29, 1996.
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
combined consolidated financial statements of Golden Peanut Company and
Subsidiaries, a partnership investment, and Alimenta Commodities, LLC, a
limited liability corporation, investments accounted for using the equity
method of accounting, as described in Note 9(b) to the consolidated financial
statements. The combined consolidated financial statements of Golden Peanut
Company and Subsidiaries and Alimenta Commodities, LLC, were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for Golden Peanut Company and Subsidiaries and
Alimenta Commodities, LLC, is based solely on the report of the other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of the other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Gold Kist Inc. and subsidiaries
as of July 1, 1995 and June 29, 1996, and the results of their operations and
their cash flows for each of the years in the three-year period ended June 29,
1996, in conformity with generally accepted accounting principles.
As discussed in notes 1, 6 and 9(a) to the consolidated financial
statements, the Company changed its method of accounting for income taxes in
1994 and for certain investments in debt and equity securities in 1995.
KPMG PEAT MARWICK LLP
Atlanta, Georgia
September 6, 1996, except
for the first paragraph
of note 8 as to which
the date is September 13, 1996
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Partnership Committee
Golden Peanut Company and
Alimenta Commodities, LLC
We have audited the combined consolidated balance sheets of Golden Peanut
Company and Subsidiaries (the "Partnership") and Alimenta Commodities, LLC
("LLC") (since April 1, 1996, date of inception), (collectively, the
"Companies"), as of June 30, 1996 and 1995, and the related combined
consolidated statements of operations, partners' equity, and cash flows for
each of the three years in the period ended June 30, 1996 (not presented
separately herein). These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined consolidated financial position of
Golden Peanut Company and Subsidiaries and Alimenta Commodities, LLC at June
30, 1996 and 1995, and the combined consolidated results of their operations
and their cash flows for each of the three years in the period ended June 30,
1996, in conformity with generally accepted accounting principles.
As discussed in Note 8 to the combined consolidated financial statements, in
1994 the Partnership changed its method of accounting for postretirement
benefits other than pensions.
ERNST & YOUNG LLP
Atlanta, Georgia
September 6, 1996
F-2
<PAGE>
GOLD KIST INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
JULY 1, 1995 JUNE 29, 1996
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 16,597 20,562
Receivables, principally trade, including notes
receivable of $43.8 million in 1995 and $68.9
million in 1996, less allowance for doubtful
accounts of $5,877 in 1995 and $7,726 in 1996..... 189,180 242,411
Inventories (note 2)............................... 226,988 270,367
Other current assets............................... 17,718 39,204
-------- -------
Total current assets.............................. 450,483 572,544
Investments (note 9)................................ 93,039 104,728
Property, plant and equipment, net (note 3)......... 227,646 255,728
Other assets........................................ 50,469 42,960
-------- -------
$821,637 975,960
======== =======
LIABILITIES AND EQUITY
Current liabilities:
Notes payable and current maturities of long-term
debt (note 4):
Short-term borrowings............................. $ 70,800 112,800
Subordinated loan certificates.................... 27,363 30,574
Current maturities of long-term debt.............. 25,834 27,089
-------- -------
123,997 170,463
Accounts payable................................... 117,952 126,340
Accrued compensation and related expenses.......... 28,817 32,590
Patronage refund and other equity payable in cash.. 8,863 24,043
Interest left on deposit (note 4).................. 10,493 12,119
Other current liabilities.......................... 13,776 22,532
-------- -------
Total current liabilities......................... 303,898 388,087
Long-term debt, excluding current maturities (note
4).................................................. 138,659 188,948
Accrued postretirement benefit costs (note 7(b)).... 36,929 40,271
Other liabilities................................... 3,189 4,072
-------- -------
Total liabilities................................. 482,675 621,378
-------- -------
Minority interest................................... 23,972 28,172
Patrons' and other equity (note 5):
Common stock, $1.00 par value--Authorized 500
shares; issued and outstanding 62 in 1995 and 36
in 1996........................................... 62 36
Patronage reserves................................. 216,854 209,140
Unrealized gain on marketable equity security (note
9(a)).............................................. 18,531 20,978
Retained earnings.................................. 79,543 96,256
-------- -------
Total patrons' and other equity................... 314,990 326,410
Commitments and contingent liabilities (notes 7 and
8)
-------- -------
$821,637 975,960
======== =======
</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 25, 1994 JULY 1, 1995 JUNE 29, 1996
------------- ------------ -------------
<S> <C> <C> <C>
Net sales volume...................... $1,561,034 1,688,537 1,955,569
Cost of sales......................... 1,385,239 1,522,063 1,731,448
---------- --------- ---------
Gross margins........................ 175,795 166,474 224,121
Distribution, administrative and
general expenses...................... 121,417 131,410 155,664
---------- --------- ---------
Net operating margins................ 54,378 35,064 68,457
---------- --------- ---------
Other income (deductions):
Interest income...................... 6,752 8,779 9,946
Interest expense..................... (13,924) (17,525) (21,065)
Equity in loss of partnership (note
9(b))................................ (1,110) (9,625) (1,181)
Gain on sale of investments.......... -- 3,070 --
Miscellaneous, net................... 3,978 5,823 5,962
---------- --------- ---------
(4,304) (9,478) (6,338)
---------- --------- ---------
Margins before income taxes, minority
interest and cumulative effect of
accounting change................... 50,074 25,586 62,119
Income taxes (note 6)................. 14,861 13,094 20,757
---------- --------- ---------
Margins before minority interest and
cumulative effect of accounting
change.............................. 35,213 12,492 41,362
Minority interest..................... (1,148) (741) (4,330)
---------- --------- ---------
Margins before cumulative effect of
accounting change.................... 34,065 11,751 37,032
Cumulative effect of change in
accounting for income taxes (note 6).. 5,339 -- --
---------- --------- ---------
Net margins.......................... $ 39,404 11,751 37,032
========== ========= =========
</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 25, 1994, JULY 1, 1995 AND JUNE 29, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
REVOLVING UNREALIZED
FUND AND GAIN ON
CUMULATIVE MARKETABLE
COMMON PREFERRED PATRONAGE EQUITY RETAINED
TOTAL STOCK CERTIFICATES RESERVES SECURITY EARNINGS
-------- ------ ------------ --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
June 26, 1993........... $285,620 79 10,253 209,514 -- 65,774
Net margins for 1994... 39,404 -- -- 30,830 -- 8,574
Nonqualified patronage
refund and other
equity payable in
cash.................. (14,588) -- -- (14,588) -- --
Redemptions and other
changes............... (13,774) -- (10,253) (6,592) -- 3,071
-------- --- ------- ------- ------ ------
June 25, 1994........... 296,662 79 -- 219,164 -- 77,419
Net margins for 1995... 11,751 -- -- 12,590 -- (839)
Nonqualified patronage
refund and other
equity payable in
cash.................. (8,941) -- -- (8,941) -- --
Redemptions and other
changes............... (3,013) (17) -- (5,959) -- 2,963
Implementation of
change in accounting
for marketable equity
security (note 9(a)).. 18,531 -- -- -- 18,531 --
-------- --- ------- ------- ------ ------
July 1, 1995............ 314,990 62 -- 216,854 18,531 79,543
Net margins for 1996... 37,032 -- -- 21,700 -- 15,332
Nonqualified patronage
refund and other
equity payable in
cash.................. (24,212) -- -- (24,212) -- --
Redemptions and other
changes............... (3,847) (26) -- (5,202) -- 1,381
Change in value of
marketable equity
security (note 9(a)).. 2,447 -- -- -- 2,447 --
-------- --- ------- ------- ------ ------
June 29, 1996........... $326,410 36 -- 209,140 20,978 96,256
======== === ======= ======= ====== ======
</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 25, 1994 JULY 1, 1995 JUNE 29, 1996
------------- ------------ -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net margins.......................... $ 39,404 11,751 37,032
Non-cash items included in net
margins:
Depreciation and amortization....... 37,251 38,085 40,063
Cumulative effect of changes in
accounting principle................ (5,339) -- --
(Gains) losses on sales of assets... (201) (3,459) 101
Equity in loss of partnership....... 1,110 9,625 1,181
Deferred income tax benefit......... (5,562) (6,650) (2,250)
Other............................... 3,208 1,943 (1,515)
Changes in operating assets and
liabilities:
Receivables......................... (26,943) (28,466) (53,231)
Inventories......................... (23,963) (28,521) (43,379)
Other current assets................ 152 (3,382) (20,561)
Accounts payable and accrued
expenses............................ 21,765 15,117 20,917
Interest left on deposit............ (4,052) 1,153 1,626
-------- ------- -------
Net cash provided by (used in)
operating activities............... 36,830 7,196 (20,016)
-------- ------- -------
Cash flows from investing activities:
Acquisitions of investments.......... (762) (5,093) (4,356)
Acquisitions of property, plant and
equipment............................ (37,232) (61,762) (74,262)
Proceeds from disposal of
investments.......................... 1,279 8,942 200
Proceeds from sales of loans......... 5,040 4,925 10,052
Other................................ (5,883) (7,179) 2,406
-------- ------- -------
Net cash used in investing
activities......................... (37,558) (60,167) (65,960)
-------- ------- -------
Cash flows from financing activities:
Short-term borrowings, net........... 11,491 60,286 45,211
Proceeds from long-term debt......... 26,668 49,752 86,296
Principal payments of long-term
debt................................. (30,130) (36,676) (28,557)
Patronage refunds and other equity
paid in cash......................... (22,717) (19,464) (13,009)
-------- ------- -------
Net cash provided by (used in)
financing activities............... (14,688) 53,898 89,941
-------- ------- -------
Net change in cash and cash
equivalents........................ (15,416) 927 3,965
Cash and cash equivalents at beginning
of year............................... 31,086 15,670 16,597
-------- ------- -------
Cash and cash equivalents at end of
year.................................. $ 15,670 16,597 20,562
======== ======= =======
Supplemental disclosure of cash flow
data:
Cash paid during the years for:
Interest (net of amounts
capitalized)........................ $ 18,575 18,792 18,327
======== ======= =======
Income taxes........................ $ 23,352 21,144 20,676
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 25, 1994, JULY 1, 1995 AND JUNE 29, 1996
(DOLLAR AMOUNTS IN THOUSANDS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Gold Kist ("Gold Kist" or "Association") Inc. is a diversified agricultural
membership cooperative association, headquartered in Atlanta, Georgia. Gold
Kist serves approximately 29,000 active farmer members and other cooperative
associations located principally in the southeastern United States. Gold Kist
operates broiler and pork production facilities providing both marketing and
purchasing services to producers. Gold Kist also purchases or manufactures
feed, seed, fertilizers, pesticides, animal health products and other farm
supply items for sale at wholesale and retail. Additionally, the Association
is engaged in the processing, storage and marketing of cotton, serves as a
contract procurement agent for, and stores, farm commodities such as soybeans
and grain, and is a partner in a major peanut processing and marketing
business and in a pecan processing and marketing business.
The accounting and reporting policies of Gold Kist Inc. and subsidiaries
conform to generally accepted accounting principles and to general practices
among agricultural cooperatives. The following is a summary of the significant
accounting policies.
(a)Basis of Presentation
The accompanying consolidated financial statements include the
accounts of Gold Kist Inc. and its wholly and majority owned
subsidiaries (Gold Kist or Association). All significant intercompany
balances and transactions have been eliminated in consolidation. Certain
reclassifications have been made to the 1995 consolidated financial
statements to conform to the presentation in the 1996 consolidated
financial statements.
(b)Cash and Cash Equivalents
Gold Kist's policy is to invest cash in excess of operating
requirements in highly liquid interest bearing debt instruments, which
include commercial paper and reverse repurchase agreements. These
investments are stated at cost which approximates market. For purposes
of the consolidated statements of cash flows, Gold Kist considers all
highly liquid debt instruments purchased with original maturities of
three months or less to be cash equivalents.
(c)Inventories
Merchandise for sale includes feed, fertilizer, seed, pesticides,
equipment and general farm supplies purchased or manufactured by Gold
Kist for sale to agricultural producers and consumers. These inventories
are stated, generally, on the basis of the lower of cost (first-in,
first-out or average) or market.
Live poultry and hogs consist of broilers, breeding stock and market
hogs. The broilers and market hogs are stated at the lower of average
cost or market. The breeding stock is stated at average cost, less
accumulated amortization.
Raw materials and supplies consist of feed and fertilizer ingredients,
uncleaned seed, hatching eggs, packaging materials and operating
supplies. These inventories are stated, generally, on the basis of the
lower of cost (first-in, first-out or average) or market. Gold Kist
hedges varying amounts of its feed ingredient purchases to minimize the
risk of adverse price fluctuations. Futures contracts are accounted for
as hedges and option contracts are accounted for at market. Gains or
losses on futures and options transactions are included as a part of
product cost.
F-7
<PAGE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
Marketable products consist primarily of dressed and further processed
poultry and cotton. These inventories are stated, principally, on the
basis of selling prices, less estimated brokerage, freight and certain
other selling costs where applicable (estimated net realizable value).
(d)Property, Plant and Equipment
Property, plant and equipment is recorded at cost. Depreciation of
plant and equipment is calculated by the straight-line method over the
estimated useful lives of the respective assets.
(e)Investments
Investments in other cooperatives are recorded at cost and include the
amount of patronage refund certificates and patrons' equities allocated,
less distributions received. These investments are not readily
marketable and quoted market prices are not available. The equity method
of accounting is used for investments in other companies in which Gold
Kist's voting interest is 20 to 50 percent. Investments in less than 20
percent owned companies which are not readily marketable are stated at
cost. For years prior to fiscal 1995, the investment in the marketable
equity security was stated at the lower of cost or market.
Effective June 26, 1994, Gold Kist adopted the provisions of Statement
of Financial Accounting Standards No. 115 (SFAS 115), "Accounting for
Certain Investments in Debt and Equity Securities." Pursuant to the
provisions of SFAS 115, the Association has classified its marketable
equity security and collateralized loans as "available-for-sale."
"Available-for-sale" securities are those the Association intends to
hold for a period of time and are not acquired with the intent of
selling them in the near term. Unrealized gains and losses on
"available-for-sale" securities are included as a separate component of
patrons' and other equity in the accompanying 1995 and 1996 financial
statements, net of deferred income taxes. Upon initial application of
SFAS 115, Gold Kist recorded an increase to investments of $20.5 million
and to patrons' and other equity of $12.9 million (net of deferred
income taxes of $7.6 million) related to the marketable equity security
(see note 9(a)). Management believes the carrying value of the
collateralized loans approximate market value and, accordingly, no
adjustment has been recognized in the accompanying financial statements.
Gold Kist's investment in the Golden Peanut Company partnership is
accounted for using the equity method (see note 9(b)). Other investments
accounted for under the equity method are not significant.
(f)Income Taxes
Gold Kist operates as an agricultural cooperative not exempt from
Federal income taxes. Aggregate margins not refunded in cash to members
or allocated in the form of qualified written notices are subject to
income taxes.
The bylaws of Gold Kist provide for the issuance of either qualified
or nonqualified patronage refunds (as defined for purposes of Subchapter
T of the Internal Revenue Code). Gold Kist utilized nonqualified
patronage refunds in 1994, 1995 and 1996, which are deductible for
income tax purposes only to the extent paid or redeemed in cash.
Effective June 27, 1993, Gold Kist adopted the provisions of Statement
of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for
Income Taxes" and reported the cumulative effect of that change in the
method of accounting for income taxes in the 1994 consolidated statement
of operations. SFAS 109 requires an asset and liability approach in
accounting for income taxes and, therefore, required a change from the
deferred method Gold Kist previously used. Under the asset and liability
method, 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
F-8
<PAGE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS 109, the
effect on deferred tax assets and liabilities of a change in tax rates
is recognized as income or expense in the period that includes the
enactment date.
(g)Fair Value of Financial Instruments
Gold Kist's financial instruments include cash and cash equivalents,
accounts receivables and payables and accrued expenses, notes receivable
and debt. Because of the short maturity of cash equivalents, accounts
receivables and payables and accrued expenses, certain short-term debt
which matures in less than one year, and long-term debt with variable
interest rates the carrying value approximates fair value. All financial
instruments are considered to have an estimated fair value which
approximates carrying value at July 1, 1995 and June 29, 1996 unless
otherwise specified (see notes 1(e) and 4).
(h)Fiscal Year
Gold Kist employs a 52/53 week fiscal year. The consolidated financial
statements for 1994, 1995 and 1996 reflect 52, 53 and 52 weeks,
respectively. Fiscal 1997 will be a 52 week year.
(i)Use of Estimates
Management of Gold Kist has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure
of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from these estimates.
(2) INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
1995 1996
-------- -------
<S> <C> <C>
Merchandise for sale..................................... $ 85,054 83,886
Live poultry and hogs.................................... 76,211 95,682
Marketable products--poultry............................. 30,532 40,047
Marketable products--cotton.............................. -- 11,258
Raw materials and supplies............................... 35,191 39,494
-------- -------
$226,988 270,367
======== =======
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows:
<CAPTION>
1995 1996
-------- -------
<S> <C> <C>
Land and land improvements............................... $ 31,809 33,268
Buildings................................................ 166,806 188,845
Machinery and equipment.................................. 325,270 368,118
Construction in progress................................. 27,812 16,833
-------- -------
551,697 607,064
Less accumulated depreciation............................ 324,051 351,336
-------- -------
$227,646 255,728
======== =======
</TABLE>
F-9
<PAGE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
(4) NOTES PAYABLE AND LONG-TERM DEBT
At June 29, 1996, Gold Kist had a $150 million unsecured committed credit
facility with five commercial banks. The facility included a five-year $50
million revolving credit commitment, a $50 million 364-day line of credit
commitment, and a $50 million seasonal line of credit commitment. As of June
29, 1996, borrowings of $50 million and $40 million, respectively, were
outstanding under the revolving credit and 364-day line-of-credit commitments.
At June 29, 1996, Gold Kist had other borrowings of $112.8 million outstanding
under uncommitted loans and letters of credit facilities. At June 29, 1996,
the Company classified $50 million of borrowings under the $50 million
revolving credit and borrowings of $40 million under the uncommitted loan
facilities as long-term debt. On August 8, 1996, Gold Kist refinanced these
loans under a five-year $125 million revolving credit commitment.
On August 9, 1996, the Association entered into a $250 million unsecured
committed credit facility with nine commercial banks. The new facility
includes a five-year $125 million revolving credit commitment and a $125
million 364-day line of credit commitment. The five-year revolving credit
agreement expires on August 9, 2001, but may be extended twice for successive
one-year periods with the consent of the banks. The revolving credit facility
fee and the commitment fees on the unused portion of the revolving credit will
be computed quarterly based on the Association's ratio of funded debt to total
capital and will not exceed .20% per annum. The 364-day line of credit
provides short-term financing that will expire in August 1997 and may be
extended with the consent of the banks. The 364-day line of credit is subject
to a .16% per annum facility fee. Borrowings under the $250 million facility
will bear variable interest rates at or below prime. Also, the facility
permits competitive bid interest rates by the participating banks.
At June 29, 1996, Gold Kist had other unused long-term loan commitments of
$20 million and additional uncommitted facilities to provide loans and letters
of credit from banks aggregating approximately $94 million. These unsecured
borrowings bear interest at rates below prime.
Subordinated loan certificates of $27.4 million at July 1, 1995 bore
interest at rates of 3.5% to 6.7% with terms of one year and were unsecured.
At June 29, 1996, subordinated loan certificates outstanding were $30.6
million bearing interest at rates of 5.5% to 6.4%.
Interest left on deposit represents amounts of interest payable, which at
the option of the holders of various classes of certificates, is left on
deposit with Gold Kist. Additional interest on these amounts accrues at the
same rates as the related certificates.
F-10
<PAGE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Unsecured senior notes payable:
9.375% interest notes, due in semi-annual installments of
$5,500
with interest payable semiannually......................... $ 16,500 11,000
9.90% interest notes, due in semi-annual installments of
$1,539
with interest payable semiannually......................... 10,766 9,230
9.35% interest note, due in a single installment in June
2001 with
interest payable quarterly................................. 20,000 20,000
Other long term debt:
Subordinated capital certificates of interest with interest
rates ranging
from 4.50% to 16.50% and with fixed maturities ranging from
two to fifteen years, unsecured (weighted average interest
rate of 7.7% at
July 1, 1995 and 7.2% at June 29, 1996).................... 60,417 59,431
Revolving credit agreements with commercial banks (weighted
average
rate of 6.5% at July 1, 1995 and 5.7% at June 29, 1996).... 37,000 50,000
Borrowings under uncommitted lines of credit (weighted
average rate of
5.8% at June 29, 1996)..................................... -- 40,000
Tax exempt industrial revenue bonds with varying interest
rates due in
quarterly and annual installments through 2016, secured by
property,
plant and equipment........................................ 12,701 18,500
Pro rata share of mortgage loan, at 8.47% interest, due in
monthly installments
to June 30, 2004, secured by a building (note 3)........... 2,497 2,306
Other....................................................... 4,612 5,570
-------- --------
164,493 216,037
Less current maturities...................................... 25,834 27,089
-------- --------
$138,659 188,948
======== ========
</TABLE>
Based upon discounted cash flows of future payments, assuming interest rates
available to Gold Kist for issuance of debt with similar terms and remaining
maturities, the estimated fair value of the unsecured senior notes payable at
July 1, 1995 and June 29, 1996 was approximately $51.7 million and $43.0
million, respectively.
The terms of debt agreements specify minimum working capital, net worth and
current ratio requirements. The debt agreements also place a limitation on
equity distribution, cash patronage refunds and additional loans, advances or
investments. The limitation provides for a carryover to 1997 of unused
amounts, $4.6 million as of June 29, 1996, and is increased by 50% of Gold
Kist's net margins (or minus 100% of a net loss) before any gains or losses on
disposals of capital assets or equity in unremitted earnings of any affiliate.
Annual required principal repayments on long-term debt for the five fiscal
years subsequent to June 29, 1996 are as follows:
Fiscal year:
<TABLE>
<CAPTION>
1997............................................................ $ 27,089
<S> <C>
1998............................................................ 14,744
1999............................................................ 12,147
2000............................................................ 5,927
2001............................................................ 25,187
========
</TABLE>
F-11
<PAGE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
(5) PATRONS' AND OTHER EQUITY
Gold Kist's Articles of Incorporation provide for a class of common stock
and a class of preferred stock pursuant to the provisions of the Georgia
Cooperative Marketing Act. Each member is allocated one share of common stock,
$1.00 par value. The common shares are not marketable or transferable and no
dividends will be declared on these common shares. No issuance of preferred
stock has been authorized by Gold Kist.
Patronage reserves represent allocated undistributed member margins less
taxes paid on nonqualified equity. Patronage reserves do not bear interest and
are subordinated to all certificates outstanding and indebtedness of Gold
Kist. Patronage reserves may be revolved and paid at the discretion of the
Board of Directors.
Retained earnings include the cumulative net margins (losses) resulting from
nonmember and nonpatronage transactions, including noncooperative
subsidiaries. Also included are amounts related to the early redemption of
notified equity, representing the difference between the face value and the
redemption amounts.
(6) INCOME TAXES
As discussed in Note 1(f), Gold Kist adopted SFAS 109 as of June 27, 1993.
The cumulative effect of this change in accounting for income taxes, which
resulted in a tax benefit of $5.3 million, was determined as of June 27, 1993
and was reflected in the consolidated statement of operations for the year
ended June 25, 1994.
The provisions for income tax expense, principally Federal, consist of the
following:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------ ------
Current expense..................................... $20,423 19,744 23,007
<S> <C> <C> <C>
Deferred benefit.................................... (5,562) (6,650) (2,250)
------- ------ ------
$14,861 13,094 20,757
======= ====== ======
</TABLE>
The deferred income tax effect of the unrealized gain on marketable equity
security has been charged as a component of patrons' and other equity for 1995
and 1996.
Gold Kist's combined federal and state effective tax rates from operations
for 1994, 1995 and 1996 were 30%, 51% and 33%, respectively. A reconciliation
of income tax expense from operations computed by applying the Federal
corporate income tax rate of 35% in 1994, 1995 and 1996 to margins before
income taxes, minority interest and cumulative effect of accounting changes
for the applicable year follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------ ------
<S> <C> <C> <C>
Computed expected income tax expense.............. $17,526 8,955 21,742
Increase (decrease) in income tax expense
resulting from:
Income tax litigation............................ -- 5,520 --
Cash portion of nonqualified patronage refund.... (1,420) (1,031) (986)
Effect of state income taxes, net of Federal
benefit.......................................... 1,050 447 970
Nonqualified equity redemptions.................. (525) (490) (886)
Target jobs credits.............................. (607) (499) (11)
Other, net....................................... (1,163) 192 (72)
------- ------ ------
$14,861 13,094 20,757
======= ====== ======
</TABLE>
F-12
<PAGE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at July 1,
1995 and June 29, 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Postretirement benefits................................. $ 14,410 15,589
Insurance accruals...................................... 7,903 8,059
Equity in partnerships.................................. 4,175 2,618
Bad debt reserves....................................... 2,573 3,156
State tax operating loss carryforwards.................. 1,984 1,406
Other................................................... -- 1,426
-------- --------
Total gross deferred tax assets........................ 31,045 32,254
Less valuation allowance................................ (1,984) (1,406)
-------- --------
Net deferred tax assets................................ 29,061 30,848
-------- --------
Deferred tax liabilities:
Unrealized gain on marketable equity security........... (11,587) (13,116)
Accelerated depreciation................................ (969) (1,245)
Deferred compensation................................... (3,990) (3,371)
Other................................................... (118) --
-------- --------
Total deferred tax liabilities......................... (16,664) (17,732)
-------- --------
Net deferred tax assets................................ $ 12,397 13,116
======== ========
</TABLE>
The net change in the total valuation allowance for the years ended 1995 and
1996 was an increase of $71 and a decrease of $578, respectively. The
Association's management believes the existing net deductible temporary
differences comprising the total net deferred tax assets will reverse during
periods in which the Association generates net taxable income.
During 1993, the Internal Revenue Service (IRS) concluded its examination of
Gold Kist's 1987 through 1989 Federal income tax returns and issued a notice
of deficiency. In April 1994, the remaining issue, whether Gold Kist must
recognize taxable income related to the redemption of its qualified notified
equity at less than face amount, was litigated before the United States Tax
Court. An adverse decision was received from the Tax Court on June 26, 1995.
The Association has appealed the decision to the Eleventh Circuit Court of
Appeals. The accompanying financial statements reflect the impact of the Tax
Court decision through June 29, 1996.
(7) EMPLOYEE BENEFITS
(a)Pension Plans
Gold Kist has noncontributory defined benefit pension plans covering
substantially all of its employees and directors and an affiliate's
employees (participants). The plan covering the salaried participants
provides pension benefits that are based on the employees' compensation
during the years before retirement or other termination of employment.
The plan covering the hourly participants provides pension benefits that
are based on years of service. Gold Kist's funding policy is to
contribute within the guidelines prescribed by Federal regulations. Plan
assets consist principally of corporate equities and bonds, and United
States Government and Agency obligations.
F-13
<PAGE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
Net periodic pension expense for 1994, 1995 and 1996 included the following
components:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Service cost--benefits earned during the year.... $ 3,720 3,429 4,092
Interest cost on projected benefit obligations... 6,479 6,949 7,426
Actual return on plan assets..................... (3,236) (11,393) (27,724)
Net amortization and deferral.................... (5,989) 1,208 16,799
------- ------- -------
Net periodic pension expense.................... $ 974 193 593
======= ======= =======
</TABLE>
The following table sets forth the plans' funded status, amounts recognized
in the consolidated balance sheets at July 1, 1995 and June 29, 1996 and
economic assumptions:
<TABLE>
<CAPTION>
1995 1996
-------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested participants..................................... $ 74,529 88,287
Nonvested............................................... 6,630 7,088
-------- -------
Total accumulated benefit obligations.................. $ 81,159 95,375
======== =======
Projected benefit obligations for services rendered to
date..................................................... $ 96,559 111,251
======== =======
Plan assets for benefits:
Plan assets at fair value............................... $118,268 145,148
Prepaid pension cost included in other assets in
consolidated balance sheets............................ (16,556) (18,179)
-------- -------
Net plan assets........................................ $101,712 126,969
======== =======
Plan assets in excess of projected benefit obligations... $ 5,153 15,718
======== =======
Consisting of:
Unrecognized net asset existing at the date of
adoption................................................ $ 9,721 8,318
Unrecognized net gain/(loss) from past experience
different from that assumed and effects of changes in
assumptions............................................. (1,136) 13,824
Prior service cost not yet recognized in net periodic
pension cost............................................ (3,432) (6,424)
-------- -------
$ 5,153 15,718
======== =======
Actuarial assumptions:
Weighted-average discount rate.......................... 8.00% 8.00%
Weighted-average expected long-term rate of return on
plan assets............................................. 9.25% 9.50%
Weighted-average rate of compensation increase.......... 5.50% 5.50%
</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.
F-14
<PAGE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
(b)Other Postretirement Benefits
Gold Kist provides health care and death benefits to substantially all
retired employees, covered dependents and their beneficiaries.
Generally, employees who have attained age 55 and who have 10 years of
service are eligible for these benefits. In addition, employees with
less than 10 years of service who retired before July 1, 1992 are
eligible for these benefits. The health care and death benefit plans are
contributory and coverages increase with increased years of service.
Postretirement health and death benefit expense for 1994, 1995 and
1996 included the following components:
<TABLE>
<CAPTION>
1994 1995 1996
------ ----- -----
<S> <C> <C> <C>
Service cost--benefits earned during the year...... $1,728 1,742 2,029
Interest cost...................................... 2,530 2,645 2,998
Net amortization and deferral...................... -- (18) 80
------ ----- -----
Net postretirement health and death benefit
expense........................................... $4,258 4,369 5,107
====== ===== =====
</TABLE>
Gold Kist's postretirement benefit plans are not funded. The status of
the plans at July 1, 1995 and June 29, 1996 was as follows:
<TABLE>
<CAPTION>
1995 1996
------- ------
<S> <C> <C>
Actuarial present value of accumulated postretirement
benefit obligation:
Retirees.............................................. $15,528 18,010
Fully eligible active plan participants............... 7,821 10,188
Other active plan participants........................ 14,016 16,571
------- ------
37,365 44,769
Unrecognized net gain (loss) from experience
differences........................................... 1,341 (2,737)
------- ------
$38,706 42,032
======= ======
</TABLE>
The health care cost trend rate used to determine the accumulated
postretirement benefit obligation at July 1, 1995 was 9%, declining
ratably to 5% by the year 2001 and remaining at that level thereafter.
The health care cost trend rate used to determine the accumulated
postretirement benefit obligation at June 29, 1996 was 8%, declining
ratably to 5% by the year 2001 and remaining at that level thereafter.
The discount rate used to determine the accumulated postretirement
benefit obligation was 8.00% at July 1, 1995 and June 29, 1996,
respectively. A 1% increase in the health care cost trend rate for each
year would increase the accumulated postretirement benefit obligation
for health care benefits at June 29, 1996 by approximately 12% and net
postretirement health care cost by 14%.
(8) CONTINGENT LIABILITIES AND COMMITMENTS
In January 1993, certain Alabama member patrons of the Association filed a
lawsuit in the Circuit Court of Jefferson County, Alabama, Tenth Judicial
Circuit against the Association and Golden Poultry and certain directors and
officers of the companies. (Ronald Pete Windham and Windham Enterprises, Inc.
on their behalf and on behalf of and for the use and benefit of Gold Kist,
Inc. and its shareholders/members v. Harold O. Chitwood, individually in his
capacity as an officer of Gold Kist and a Director of Golden Poultry; et al).
The lawsuit alleged that the named defendants violated their fiduciary duties
by diverting corporate opportunities from the Association to Golden Poultry
and Carolina Golden Products Company in connection with the creation of Golden
Poultry and Carolina Golden Products Company and by permitting their continued
operations. In
F-15
<PAGE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
March 1994, the Court certified the Windham litigation as a class action. In
September 1995, Golden Poultry and Carolina Golden Products Company were
dismissed from the litigation. On October 25, 1995, the jury in the Windham
case returned verdicts in favor of the plaintiffs in the litigation. On July
2, 1996, the Jefferson County, Alabama Circuit Court Judge entered an Order in
the case directing Gold Kist to acquire the approximately 27% of Company
shares currently owned by investors so that all of the issued and outstanding
stock of the Company would be owned by Gold Kist. The Court denied the
plaintiffs' demands for additional allocations and cash distributions to the
class members. On September 13, 1996, subsequent to Motions for
Reconsideration filed by the plaintiffs and Gold Kist, the Court entered a
Final Judgment and Decree amending its July 2, 1996 Order. The Final Judgment
and Decree relieves Gold Kist of the requirement to acquire the 27% of Golden
Poultry common stock not already owned by Gold Kist. This Final Judgment and
Decree requires Gold Kist to acquire or redeem all Golden Poultry common stock
and/or stock options held or issued to Gold Kist officers and directors. Gold
Kist is further ordered, with its consent, to revolve $21.2 million of
notified equity for the years 1976 through 1983 within four calendar months of
the date of the Order and requires Gold Kist to pay $4.2 million in fees and
expenses to the plaintiffs' attorneys. An appeal of the Final Judgment may be
filed by the parties, which could have the effect of staying the Final
Judgment pending the outcome of any appeal. The redemption of notified equity
and the fees and expenses awarded to plaintiffs' attorneys have been reflected
in the accompanying consolidated financial statements.
Gold Kist is also party to other various legal and administrative
proceedings, all of which management believes constitute ordinary routine
litigation incident to the business conducted by Gold Kist, or are not
material in amount.
Gold Kist received proceeds of $20.0 million, $5.0 million, $4.9 million and
$10.2 million during 1993, 1994, 1995 and 1996, respectively, for
collateralized loans sold with recourse to an insurance company, of which
$26.4 million was outstanding at June 29, 1996. No gain or loss was recognized
on the sale of these loans. A $264 thousand allowance has been recognized in
the accompanying consolidated financial statements for potential losses that
may occur. As of June 29, 1996, there have been no credit losses related to
the loans guaranteed under this agreement.
Gold Kist is a guarantor of amounts outstanding under a $65.0 million
secured loan agreement between a commercial bank and Young Pecan Company, a
pecan processing and marketing partnership in which Gold Kist holds a 25%
equity interest and 35% earnings (loss) allocation. At June 29, 1996, the
amounts outstanding under this facility were $60.6 million.
(9) INVESTMENTS
(a)Marketable Equity Security
As discussed in Note 1(e), Gold Kist adopted SFAS 115 at June 26,
1994, changing the method of accounting for its marketable equity
security from a historical cost basis to a fair value approach. Pursuant
to the provisions of SFAS 115, the Association has classified its
marketable equity security as "available-for-sale." At June 29, 1996,
the Association's marketable equity security was carried at its fair
value of $54.8 million, which represents a gross unrealized gain of
$34.1 million. The 1996 gross unrealized gain, net of deferred income
taxes of $13.1 million, has been reflected as a separate component of
patrons' and other equity. At July 1, 1995, the marketable equity
security was carried at its fair value of $50.1 million, which
represents a gross unrealized gain of $30.1 million. The 1995 gross
unrealized gain, net of deferred income taxes of $11.6 million, has been
reflected as a separate component of patrons' and other equity.
F-16
<PAGE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS IN THOUSANDS)
Gains realized on sales and dividends totaled $170 thousand, $1.3
million and $494 thousand and are included in miscellaneous, net for the
years ended June 25, 1994, July 1, 1995 and June 29, 1996, respectively.
(b)Golden Peanut Company
Gold Kist has a 33 1/3% interest in Golden Peanut Company, a Georgia
general partnership. Gold Kist's investment in the partnership amounted
to $15.5 million and $17.2 million at July 1, 1995 and June 29, 1996,
respectively. In July 1995, Gold Kist made an additional investment of
$2.8 million. The partnership has a $450.0 million commercial paper
facility supported by lines-of-credit with various banks totaling $220.0
million. At June 30, 1996, borrowings of $105.0 million were outstanding
under the commercial paper facility. Summarized financial information of
Golden Peanut Company, excluding Alimenta Commodities, LLC, is shown
below:
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
1995 1996
--------- -------
<S> <C> <C>
Current assets.......................................... $ 233,133 154,587
Property, plant and equipment, net...................... 34,385 31,071
--------- -------
Total assets........................................... $ 267,518 185,658
========= =======
Current liabilities..................................... $ 220,954 128,892
Accrued postretirement benefit costs.................... 5,103 5,308
Partners' equity........................................ 41,461 51,458
--------- -------
Total liabilities and partners' equity................. $ 267,518 185,658
========= =======
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1994 1995 1996
-------- ------- -------
<S> <C> <C> <C>
Net sales and other operating income.......... $456,937 429,067 411,938
Costs and expenses............................ 460,291 457,942 415,479
-------- ------- -------
Net loss..................................... $ (3,354) (28,875) (3,541)
======== ======= =======
</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 loss of partnership in the accompanying 1994 consolidated
statement of operations since the amount is not significant.
In 1994, 1995 and 1996, Gold Kist received $2.1 million in rental
income from Golden Peanut Company under an operating lease agreement for
peanut shelling and procurement facilities. Gold Kist received
procurement commissions, royalties and administrative service fees of
$2.7 million, $3.9 million and $3.1 million in 1994, 1995 and 1996,
respectively. In addition, Gold Kist purchased $5.4 million, $3.1
million and $2.6 million of inventory from Golden Peanut Company in
1994, 1995 and 1996, respectively.
(10) MAJOR BUSINESS SEGMENTS
Gold Kist is an agricultural cooperative, with operations located primarily
in the southeastern United States, engaged in marketing products and
purchasing supplies and equipment for its patrons. Gold Kist also operates
non-cooperative businesses engaged in broiler operations, farm and home
retailing, and crop and equipment financing. Gold Kist's operations are
classified into industry segments as follows:
The Poultry segment includes cooperative integrated broiler production,
processing and marketing operations, as well as subsidiary broiler operations.
This segment has decentralized broiler, pork production and cornish game hen
facilities.
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 ELIMINATION CONSOLIDATED
---------- -------- ------------ ------------
<S> <C> <C> <C> <C>
YEAR ENDED JUNE 25, 1994
Net sales volume................ $1,183,729 377,305 -- 1,561,034(a)
========== ======= ======= =========
Net margins from operations..... $ 52,177 8,471 -- 60,648
========== ======= =======
General corporate expenses...... (6,270)
Other deductions, net........... (4,304)
---------
Margins before income taxes,
minority interest and
cumulative effect of accounting
change......................... $ 50,074
=========
Depreciation and amortization
expense......................... $ 31,234 5,134 883(b) 37,251
========== ======= ======= =========
Capital expenditures............ $ 32,655 3,772 805(b) 37,232
========== ======= ======= =========
Identifiable assets at June 25,
1994............................ $ 375,389 218,111 122,932(b) 716,432
========== ======= ======= =========
YEAR ENDED JULY 1, 1995
Net sales volume................ $1,255,087 433,450 -- 1,688,537(a)
========== ======= ======= =========
Net margins from operations..... $ 34,095 8,420 -- 42,515
========== ======= =======
General corporate expenses...... (7,451)
Other deductions, net........... (9,478)
---------
Margins before income taxes and
minority interest............... $ 25,586
========== ======= ======= =========
Depreciation and amortization
expense......................... $ 31,551 5,582 952(b) 38,085
========== ======= ======= =========
Capital expenditures............ $ 43,423 17,959 380(b) 61,762
========== ======= ======= =========
Identifiable assets at July 1,
1995............................ $ 418,790 258,461 144,386(b) 821,637
========== ======= ======= =========
YEAR ENDED JUNE 29, 1996
Net sales volume................ $1,412,083 543,486 -- 1,955,569(a)
========== ======= ======= =========
Net margins from operations..... $ 70,191 10,077 -- 80,268
========== ======= ======= =========
General corporate expenses...... (11,811)
Other deductions, net........... (6,338)
---------
Margins before income taxes and
minority interest............... $ 62,119
=========
Depreciation and amortization
expense......................... $ 32,303 7,124 636(b) 40,063
========== ======= ======= =========
Capital expenditures............ $ 54,899 18,582 781(b) 74,262
========== ======= ======= =========
Identifiable assets at June 29,
1996............................ $ 498,722 300,827 176,411(b) 975,960
========== ======= ======= =========
</TABLE>
(a) Net sales volume includes export sales amounting to $37,731, $70,113 and
$100,089 in 1994, 1995 and 1996, respectively, which have no significant
geographical concentration.
(b)Amounts relate to unallocated corporate assets.
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
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE SECURITIES COV-
ERED BY THIS PROSPECTUS; NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR A SOLICI-
TATION 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 SOLICITA-
TION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALES MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, 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
Risk Factors............................................................. 5
Gold Kist Inc............................................................ 6
Use of Proceeds.......................................................... 6
Selected Consolidated Financial Data..................................... 8
Management's Discussion and Analysis of Consolidated Results of
Operations and Financial Condition...................................... 9
Business................................................................. 13
Description of Subordinated Capital Certificates of Interest............. 16
Description of Subordinated Loan Certificates and Subordinated Large De-
nomination Loan Certificates............................................ 21
Experts.................................................................. 25
Qualified Independent Underwriter........................................ 26
Legal Opinion............................................................ 26
Independent Auditors' Reports............................................ F-1
Consolidated Financial Statements........................................ F-3
</TABLE>
- -------------------------------------------------------------------------------
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LOGO
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)
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PROSPECTUS
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OCTOBER 28, 1996
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AGVESTMENTS, INC.
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