SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 26, 1999
Commission File No. 2-59958
GOLD KIST INC.
(Exact name of registrant as specified in its charter)
Georgia 58-0255560
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
244 Perimeter Center Parkway, N. E.
Atlanta, Georgia 30346
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(770) 393-5000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of l934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES X . NO .
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained to the best of Registrant's
knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X].
DOCUMENTS INCORPORATED BY REFERENCE
Not Applicable.
TABLE OF CONTENTS
Item Page
1. Business (and Properties) 1
2. Properties 10
3. Legal Proceedings 10
4. Submission of Matters to a Vote of
Security Holders 10
5. Market for Registrant's Common
Equity and Related
Stockholder Matters 10
6. Selected Financial Data . 11
7. Management's Discussion and
Analysis of Financial
Condition and Results of Operations. 12
7A. Quantitative and Qualitative
Disclosure about Market Risk 18
8. Financial Statements and
Supplementary Data 19
9. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure 38
10. Directors and Executive
Officers of the Registrant 38
11. Executive Compensation 41
12. Security Ownership of Certain
Beneficial Owners and Management 44
13. Certain Relationships and Related
Transactions. 44
14. Exhibits, Financial Statement
Schedules, and Reports
on Form 8-K 45
- i -
GOLD KIST INC.
ANNUAL REPORT FOR THE FISCAL YEAR ENDED JUNE 26, 1999
This Report contains statements which to the extent they
are not recitations of historical fact, may constitute
"forward looking statements" within the meaning of applicable
federal securities law. All forward looking statements in
this Report are intended to be subject to the safe harbor
protection provided by the Private Securities Litigation
Reform Act of 1995 and Section 21E of the Securities Exchange
Act of 1934, as amended. For a discussion identifying some
important factors that could cause actual results to vary
materially from those anticipated in the forward looking
statements made by the Company, see Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
PART I
Item 1. Business (and Properties).
Gold Kist Inc. ("Gold Kist" or the "Association") is an
agricultural membership cooperative association, headquartered
in Atlanta, Georgia. It was incorporated without capital
stock in 1936 under the Georgia Cooperative Marketing Act.
The name of the Association was changed in 1970 from Cotton
Producers Association to Gold Kist Inc. In April 1985, the
Articles of Incorporation and By-Laws of the Association were
amended to provide for a class of common stock and a class of
preferred stock as authorized by the Georgia Cooperative
Marketing Act. Each member is issued one share of common
stock only, as evidence of membership and the right to one
vote as long as the member maintains status as an active
member. Only members may hold the common stock, which is
nontransferable and receives no dividends.
The membership of Gold Kist consists of approximately
31,000 active farmer members located principally in Alabama,
Florida, Georgia, Mississippi, South Carolina and Texas. In
addition, other cooperative associations are members of Gold
Kist. Any person engaged in the production of farm
commodities and any firm or corporation whose members or
stockholders are persons so engaged and any cooperative
association organized under the cooperative marketing laws of
any state, which enters into a marketing and/or purchasing
agreement with the Association, is eligible for membership.
Gold Kist offers cooperative marketing services to its
member patrons. Farm commodities are marketed by Gold Kist on
behalf of members. Under the standard Membership, Marketing,
and/or Purchasing Agreement which is entered into between each
member and Gold Kist, Gold Kist undertakes to market for the
member agricultural products delivered which are of a type
marketed by Gold Kist. The Association also does business
with non-members and engages in non-cooperative activities
through subsidiaries and partnerships. AgraTrade Financing,
Inc., a wholly-owned subsidiary of Gold Kist, provides
financing to members and non-members doing business with Gold
Kist and its subsidiaries and partnerships. Financing is
extended for poultry and pork housing construction.
Prior to October 1998, Gold Kist's business was conducted
in two industry segments. The Poultry segment conducts
broiler production operations, providing both marketing and
purchasing services to its cooperative patrons. Until October
1998 the Agri-Services segment purchased or manufactured feed,
seed, fertilizers, pesticides, animal health products and
other farm supply items for sale at wholesale and retail.
Additionally, that segment served as a contract procurement
agent for, and storer of, farm commodities such as soybeans
and grain and was engaged in the purchase, sale, processing
and storage of cotton. Essentially all of the assets of the
AgriServices segment were sold, pursuant to, and the
operations of that segment terminated after, the
transaction with Southern States Cooperative, Incorporated
("Southern States") hereinafter described. Gold Kist also
continues to conduct pork production and aquaculture research
operations, is a partner in a major peanut processing and
marketing business and in a pecan processing and marketing
business, and participates as a member of limited liability
companies which are engaged in the production and sale of hogs
and of fertilizer ingredients.
In October 1998, Gold Kist consummated an Asset Purchase
Agreement (the "Agreement"), dated as of July 23, 1998, with
Southern States, pursuant to which the Association sold and
assigned, and Southern States purchased and assumed, the
assets and certain of the obligations of the Association's
agricultural inputs business. The affected assets included
substantially all of the assets of the Association's
AgriServices segment (including the retail stores division,
the fertilizer and chemicals division, and the pet food and
animal products division), as well as certain crop notes
receivable of AgraTrade Financing, Inc. The Association's
poultry, pork, aquaculture, seed marketing and other
operations and businesses were not affected by this
transaction. The consideration received by the Association in
connection with the sale was $218.3 million. Upon the
consummation of this transaction, the Association was no
longer engaged in the business operated by the affected
segment. See Note 11 of Notes to Consolidated Financial
Statements.
In addition, in September 1998, the Association sold
certain assets of its cotton marketing business. As a result
of that transaction, and the conveyance of certain cotton
ginning and storage facilities operated by the Association to
Southern States pursuant to the Agreement described above, the
Association terminated its cotton operations (other than the
Moultrie, Georgia cotton warehouse activities) in the first
quarter of fiscal 1999.
POULTRY
Broilers
Gold Kist's cooperative broiler operation is organized
into broiler divisions, each encompassing one or more of Gold
Kist's decentralized broiler complexes. Each Gold Kist
decentralized broiler complex operates within a separate
geographical area and includes within that area broiler
flocks, pullet and breeder (hatching egg) flocks, one or more
hatcheries, a feed mill, poultry processing plant(s) and
management, sales and accounting office(s), and transportation
facilities. The complexes operated by Gold Kist throughout
fiscal 1999 are headquartered in Boaz, Cullman, and
Russellville, Alabama; Athens, Douglas, Ellijay and
Carrollton, Georgia; Live Oak, Florida; Sanford and Siler
City, North Carolina; and Sumter, South Carolina. The broiler
growers for each complex are members of Gold Kist. The
facilities and operations of each complex are designed to
furnish the growers flocks of chicks, feed and medicines, and
to provide processing and marketing services for the broilers
grown.
The principal products marketed by the broiler divisions
are whole chickens, cut-up chickens, segregated chicken parts
and further processed products packaged in various forms,
including fresh bulk ice pack, chill pack and frozen. Ice
pack chicken is packaged in ice or dry ice and sold primarily
to distributors, grocery stores and fast food chains. Chill
pack chicken is packaged for retail sale and kept chilled by
mechanical refrigeration from the packing plant to the store
counter. Frozen chicken is marketed primarily to school
systems, the military services, fast food chains and in the
export market. Further processed products, which include
preformed breaded chicken nuggets and patties and deboned,
skinless and marinated products are sold primarily to fast
food and grocery store chains. Chill pack chicken is sold in
certain localities under the Gold Kist Farmsr and Young 'n
Tenderr labels; however, some is sold under customers' private
labels. Most of the frozen chicken carries the Gold Kistr or
Early Birdr label. Cornish game hens are marketed in frozen
form primarily to hotels, restaurants and grocery stores under
the Gold Kist Farms, Young 'n Tender and Medallionr labels.
Medallion, Big Valuer, Gold Kist Farms, Young 'n Tender and
Early Bird are registered trademarks of Gold Kist Inc.
Broiler products were marketed in fiscal 1999 directly
from the processing plant in each broiler complex. Some
packaged and other products were marketed in fiscal 1999 from
the Atlanta headquarters. The plants at Athens, Carrollton,
Boaz, and Live Oak have special distribution facilities, and
there are seven separate distribution facilities located in
Florida, Tennessee, North Carolina, Ohio and Kentucky.
Cornish game hens are processed at facilities in Trussville,
Alabama and marketed from the Atlanta headquarters.
Gold Kist is one of the largest poultry processors in the
United States. It competes with other large processors and
with smaller companies. Competition is based upon price,
quality and service. While Management believes that the
pricing and quality of its products are competitive with other
processors, it believes that Gold Kist's service to its
customers is a principal factor that has established Gold Kist
as one of the largest United States poultry processors. Gold
Kist's ability to deliver broilers and other poultry products
cut-up or otherwise produced to order is an important service
to customers.
The poultry industry, just as many other commodity
industries, has historically been cyclical. Prices of
perishable commodities, such as broilers, react directly to
changes in supply and demand. Furthermore, broilers are
typically a high volume, low margin product so that small
increases in costs, such as feed ingredient costs, or small
decreases in price, can produce losses. As an integral part
of its feed ingredient purchasing strategy, Gold Kist attempts
to limit the effects and risk of fluctuations in feed
ingredient costs (i.e., corn and soybean meal) through varying
amounts of commodity trading transactions in the agricultural
commodity futures and options market. Commodity trading
transactions, which are a common industry practice, have
inherent risk, such that changes in the commodities futures
and options prices as a result of favorable or unfavorable
changes in the weather, crop conditions or government policy
may have an adverse effect on Gold Kist's net feed ingredient
cost as compared to the cost in cash markets. Likewise, Gold
Kist could benefit from reduced net feed ingredient cost as a
result of these changes as compared to cost in the cash
market. Results of hedging and commodity options transactions
are reflected as an adjustment to feed ingredient cost in the
Association's consolidated financial statements. See Item 7A
- - Quantitative and Qualitative Disclosure About Market Risks
and Note l (c) of Notes to Consolidated Financial Statements.
The poultry industry has also traditionally been subject
to seasonality in demand and pricing. Generally, the price
and demand for poultry products peaks during the summer months
and declines to lower levels during the winter months of
November, December, January and February. Gold Kist broiler
prices and sales volume follow the general seasonality of the
industry.
The following table shows the amount and percentage of
Gold Kist's net sales volume from continuing operations
contributed by sales of broiler products for each of the years
indicated. See Note 11 of Notes to Consolidated Financial
Statements.
<TABLE>
<CAPTION>
Fiscal Year Ended (000's Omitted)
June 28, June 27, June 26,
1997 1998 1999
<S> <C> <C> <C>
Broiler Products
Volume $1,629,705 $1,630,437 $1,746,946
Percentage (%) 98.3 98.7 98.9
</TABLE>
AGRI-SERVICES
Prior to the transaction with Southern States described
below, Gold Kist purchased, manufactured and processed
fertilizers, agricultural chemicals, seed, pet foods, feed,
animal health products and other farm supply items for
distribution and sale at wholesale and retail. These products
were distributed through approximately 100 Gold Kist retail
stores and at wholesale to national accounts and independent
dealers. Gold Kist also formerly served as a contract
procurement agent for, and storer of, farm commodities such as
soybeans and grain.
In October 1998, Gold Kist consummated an Asset Purchase
Agreement (the "Agreement"), dated as of July 23, 1998, with
Southern States, pursuant to which the Association sold and
assigned, and Southern States purchased and assumed, the
assets and certain of the obligations of the Association's
agricultural inputs business. The affected assets included
substantially all of the assets of the Association's Agri-
Services segment (including the retail stores division, the
fertilizer and chemicals division, and the pet food and animal
products division), as well as certain crop notes receivable
of AgraTrade Financing, Inc., the Association's wholly-owned
finance subsidiary. The Association's poultry, pork,
aquaculture, seed marketing and other operations and
businesses are not affected by this transaction. The
consideration received by the Association in connection with
the sale was $218.3 million. See Note 11 of Notes to
Consolidated Financial Statements. Upon the consummation of
this transaction, the Association no longer engaged in the
business operated by the affected segment.
In addition, in September 1998, the Association sold
certain assets of its cotton marketing business. As a result
of that transaction, and the conveyance of certain cotton
ginning and storage facilities operated by the Association to
Southern States pursuant to the Agreement described above, the
Association terminated its cotton operations (other than the
Moultrie, Georgia cotton warehouse activities) in the first
quarter of fiscal 1999.
Retail Stores
The Gold Kist retail store operation was conducted until
October 1998 in Alabama, Arkansas, Florida, Georgia,
Louisiana, Mississippi, South Carolina and Texas.
The typical Gold Kist store was a complete farm supply
center offering for sale many types of feeds, animal health
products, fertilizers, pesticides, seeds, farm supplies and
equipment. It also offered services such as precision
farming, customized fertilizer spreading, field mapping, soil
testing, insect scouting, and agronomic and animal nutrition
advice. Gold Kist purchased most of the farm supplies
distributed from various manufacturers.
The competition for retail sales faced by Gold Kist stores
varied greatly from locality to locality. Some competed with
other purchasing cooperatives, hardware and farm supply
stores, and retail outlets owned or affiliated with major
fertilizer, agricultural chemical and feed manufacturers. In
some areas these competing manufacturers sold directly to
farmers. Price competition was important for many items. The
Gold Kist stores emphasized service to the customer.
Gold Kist formerly operated a system of receiving and
storage facilities for handling unprocessed farm commodities
such as soybeans, corn and other grains. Approximately 98% of
Gold Kist's storage facilities were licensed by the federal or
state government and could issue negotiable warehouse
receipts. Pursuant to a former grain handling agreement, Gold
Kist utilized these facilities and assets exclusively as
independent buying points operating on a commission basis for
the Archer Daniels Midland Company.
Fertilizers and Chemicals
Gold Kist distributed granular, blended and liquid
fertilizers and fertilizer materials until October 1998. Each
type was purchased or produced in varying compositions
depending upon the ultimate use of the product as a plant
food. The Association owned and operated five fertilizer
plants in addition to other blending facilities at certain
Gold Kist stores where fertilizer ingredients were physically
mixed to a custom formula. Gold Kist leased or owned terminal
facilities at which fertilizer materials were warehoused for
resale through Gold Kist stores and private dealers. Granular
fertilizers were purchased and distributed in bagged and bulk
form. In addition to traditional agricultural customers, Gold
Kist marketed fertilizers and chemicals to, and provided
application services for, forestry, turf and industrial
customers.
Gold Kist was a member of CF Industries, Inc., a
cooperative owned by regional cooperatives, which produces and
supplies fertilizer materials to its members. Prior to
October 1998, Gold Kist purchased its fertilizer materials and
products from CF Industries and from more than 50 other
suppliers.
Gold Kist competed for fertilizer sales with the major
fertilizer manufacturers, wholesalers and brokers.
Competition was largely on the basis of price and service.
Gold Kist marketed premium grade fertilizers under its
trademarks Growers Prider, Living Lawnr, and Garden Goldr.
Gold Kist also marketed a premium growing medium composed of
soil materials and fertilizer nutrients under its trademark
Garden on the Spotr.
Gold Kist also formerly distributed agricultural and
specialty chemicals, including pesticides, growth regulators
and surfactants which it purchased from approximately 50
chemical manufacturers. Competition for sales of agricultural
chemicals was primarily on the basis of price and service
since most retailers had access to the same inventory of
products produced by the major manufacturers. Gold Kist also
provided aerial application of fertilizer for forestry
customers and ground application of fertilizer and chemicals
for turf customers.
Pet Food and Animal Products
Prior to the Southern States transaction, Gold Kist
operated four major feed mills for its pet food and animal
products operations. The mills produced feeds distributed at
wholesale or at retail through the Gold Kist stores and
independent dealers. All of the mills were batch process
mills in which ingredients were weighed. This type of mill
was capable of precision feed mixing, which is especially
important to the poultry industry. Feeds were distributed in
bagged and bulk form.
Prior to discontinuation of operation in fiscal 1999, Gold
Kist's feed mills produced substantially all of the feed it
distributed at wholesale or retail. Gold Kist produced and
marketed approximately 300 different feeds, including custom
blended feeds and feeds containing various medications. Pro
Balancedr was a dairy feed sold through a special program
which included survey and analysis of feed ingredients needed
for a particular herd. Gold Kist also marketed dog food under
the Pay Dayr, Pro Balanced and Performance Plusr trademarks
through independent dealers, under the Gold Kist and Pro
Balanced trademarks through Gold Kist retail stores, and under
the Gold Kist and Top Notchr trademarks through grocery
wholesalers and retail chain stores. Pro Balanced cat food
was also marketed through independent dealers, Gold Kist
stores and grocery wholesalers and retail chain stores.
Aquaculture feed products, primarily feed for commercial fish
farming operations, also formed a significant portion of Gold
Kist's feed business.
Feed ingredients were purchased in the marketplace from
many sources, including major grain companies. Feed
formulation is based on the cost of various alternative
ingredients in a given week. Feed ingredients were normally
purchased for several weeks' production; corn was purchased in
fifteen rail car units.
Approximately forty percent of the feed sold was delivered
in bulk form directly from the feed mill to the farm; the
remainder was sold in bag form. Gold Kist formerly operated a
fleet of trucks, including feed tankers, for the delivery of
feed.
Competition for sales of feed was based on quality and
service, as well as price. Gold Kist competed with major feed
manufacturers and local feed mills. The major feed
manufacturers distribute through independent retailers, owned
retail stores and direct to farmers. Gold Kist sold through
its own retail stores and directly to large farmers, private
dealers, independent cooperatives, wholesale grocers, and
retail grocery chains.
Cotton
Cotton ginning and storage facilities were operated at
Statesboro, Morven, Byromville and DeSoto, Georgia, and
Bishopville, South Carolina. A central storage warehouse is
operated in Moultrie, Georgia. The Association provided
ginning and storage services to members and non-members and
marketed cotton purchased from members and non-members to
domestic and foreign textile mills.
While operations of the Moultrie storage warehouse
continue to service cotton currently stored in that facility,
the cotton ginning and storage operations and the cotton
marketing operations were terminated in the first quarter of
1999.
PORK AND AQUACULTURE
Gold Kist markets hogs raised by producers in Alabama and
Georgia. Feeder pigs are furnished to members who raise them,
using Gold Kist feed and medicines, to produce hogs for
marketing. Feeder pigs are either raised by Gold Kist members
and marketed through Gold Kist to the market hog growers,
raised for Gold Kist by non-member independent contractors or
purchased by Gold Kist in the marketplace. The Association
also has a joint venture arrangement with another regional
cooperative association in the form of a limited liability hog
sales and production company. Gold Kist raises and provides
young pigs for the venture.
Live market hogs are marketed by Gold Kist in the
Southeastern United States to processors of pork products,
primarily on a competitive bid basis in the states of Alabama,
Georgia and Mississippi. Management believes that customers
are favorably impressed by the quality of its market hogs
which is principally due to superior breeding stock and
management grow-out techniques employed by Gold Kist. Gold
Kist competes with other major national producers and smaller
individual producers, primarily on a regional basis in the
Southeastern United States.
Gold Kist also conducts aquaculture research operations
at its aquaculture research facilities in Indianola,
Mississippi. Research has been focused on the development of
superior breeding lines for catfish production. Sales of
proprietary lines of improved catfish breeding stock are made
to catfish producers primarily in Mississippi and Alabama.
SEED MARKETING
AgraTech Seeds is operated as a division of Gold Kist and
conducts a seed business, which consists of the development,
contract production, processing and sale primarily of
proprietary seed varieties. AgraTech Seeds distributes
approximately 50 varieties of seeds. Seed is marketed by
AgraTech Seeds at wholesale to seed retailers in the Southeast
and the Midwest. AgraTech Seeds licenses certain seed
dealers, including Golden Peanut Company, to sell its
proprietary peanut varieties "GK 7", "GK 7 Hi-Oleic",
"AgraTech 108", "AgraTech 120" and ViruGard"T, and receives a
royalty on licensed sales. AgraTech Seeds contracts with
farmers for the production of seed. Careful control is
required to maintain the purity of varieties. Quality and
name recognition play a large role in competition for sales of
seed.
AgraTech Seeds contracts for the processing of the seeds
it distributes. Proprietary soybean, sorghum and peanut seed
varieties are marketed under the trademark AgraTechr.
PECANS
Gold Kist is a partner in Young Pecan Company, a pecan
processing and marketing business headquartered in Florence,
South Carolina, in which the Association holds a 25% equity
interest and a 35% earnings (loss) allocation. See Note 9 of
Notes to Consolidated Financial Statements.
LUKER INC.
Luker Inc., a steel fabrication company located in
Augusta, Georgia, and a wholly-owned subsidiary of Gold Kist,
manufactures steel equipment such as poultry processing
equipment, storage bins, elevators and conveyor systems.
PARTNERSHIP INTEREST
Gold Kist, Archer Daniels Midland Company and Alimenta
Processing Corporation are partners in Golden Peanut Company,
a partnership formed to operate a peanut procuring,
processing, and marketing business. The partners lease peanut
facilities, equipment and fixed assets to the partnership.
Gold Kist, as a general partner, has a 33 1/3% partnership
interest and participates in all partnership allocations in
accordance with the partnership agreement. See Note 10(b) of
Notes to Consolidated Financial Statements.
The peanut facilities leased to Golden Peanut Company
pursuant to the general partnership agreement include
receiving stations, shelling plants, cold storage facilities
and warehouses located in the three major peanut producing
areas of the United States (Southeast, Southwest and
Virginia/Carolinas).
Golden Peanut Company procures, processes and markets
peanuts and peanut by-products in each of the three peanut
producing areas of the United States. Golden Peanut Company
is a major processor of edible peanuts and is active in both
domestic and international markets. The principal peanut
product is shelled edible peanuts. Shelled edible peanuts are
marketed domestically primarily to manufacturers of peanut
butter, candy and salted nuts and are sold in the export
market. Golden Peanut Company also processes peanuts for sale
in the shell or for processing by others into oil and meal.
EXPORT SALES
Gold Kist owns no physical facilities overseas and has no
overseas employees. Product sales managers maintain sales
networks overseas through contacts with independent dealers
and customers. During the fiscal year ended June 26, 1999,
the approximate export sales volume of poultry was $40.9
million. During that period, export sales were mainly to
customers in Russia, Eastern Europe, the Far East, South
Africa, Central and South America and the Caribbean.
Export sales involve an additional element of
transportation and credit risk to the shipper beyond that
normally encountered in domestic sales.
Gold Kist faces competition for export sales from both
domestic and foreign suppliers. In export poultry sales, Gold
Kist faces competition from other major United States
producers as well as companies in France, Thailand, and
Brazil. Tariff and non-tariff barriers to United States
poultry established by the European Economic Community (EEC)
since 1962 have virtually excluded Gold Kist and other United
States poultry exporters from the EEC market. In addition,
EEC exporters are aided in price competition with United
States exporters in certain markets by subsidies from their
governments.
Gold Kist and a group of other North American and foreign
farm cooperatives and agribusiness firms, acting through
companies formed for this purpose, own 50% of a trading
company engaged in international merchandising of grains and
other agricultural commodities. Gold Kist is a minority
shareholder and deals with the trading company on an arm's
length basis.
PROPERTIES
Gold Kist corporate headquarters building, completed in
1975 and containing approximately 260,000 square feet of
office space, is located on fifteen acres of land at 244
Perimeter Center Parkway, N. E., Atlanta, Georgia. The land
and building are owned by a partnership of Gold Kist and
Cotton States Mutual Insurance Company in which partnership
Gold Kist owns 54% of the equity. Gold Kist leases
approximately 120,000 square feet of the building from the
partnership.
Poultry
The poultry processing plants operated as Gold Kist
facilities in fiscal 1999 are located at Boaz, Russellville,
Trussville and Guntersville, Alabama; Athens, Douglas, Ellijay
and Carrollton, Georgia; Live Oak, Florida; Sumter, South
Carolina; and Sanford and Siler City, North Carolina. These
plants have an aggregate weekly processing capacity of
approximately 15 million broilers and 415,000 cornish game
hens. The plants are supported by hatcheries located at
Albertville, Crossville, Cullman, Curry, Ranburne,
Russellville, and Scottsboro, Alabama; and Blaine, Bowdon,
Calhoun, Commerce, Carrollton, Douglas, and Talmo, Georgia;
Live Oak, Florida; Siler City and Staley, North Carolina; and
Sumter South Carolina. These hatcheries have an aggregate
weekly capacity (assuming 85% hatch) of approximately 16
million chicks. Additionally, Gold Kist operates twelve feed
mills to support its poultry operations; the mills have an
aggregate annual capacity of approximately 5.25 million tons
and are located in Guntersville, Pride, and Jasper, Alabama;
Ambrose, Calhoun, Cartersville, Commerce, and Waco, Georgia;
Live Oak, Florida; Sumter, South Carolina; and Bonlee and
Staley, North Carolina.
The Association operated six separate distribution centers
in fiscal 1999 in its sales and distribution of poultry
products: Tampa, Pompano Beach; and Crestview, Florida;
Nashville, Tennessee; Mt. Sterling, Kentucky; and Cincinnati,
Ohio.
Gold Kist operates four pork production centers. These
production facilities include a gilt production center in
Stephens, Georgia; two gilt and pork production centers
located at Kingston, Georgia; and a boar and pork production
center headquartered in Stephens, Georgia.
Gold Kist owns peanut procuring, processing and marketing
facilities which are leased to Golden Peanut Company pursuant
to the general partnership agreement executed by Gold Kist
with ADM and Alimenta. The lease is for a 20-year term,
beginning in 1988; however, the lease is subject to the terms
of the partnership agreement which is terminable upon 18
months prior written notice. These facilities include 37
peanut receiving stations located in the three major peanut
producing areas of the United States (Southeast, Southwest,
and Virginia/Carolinas) and four peanut shelling plants
located in Ashburn, Georgia; Graceville, Florida; Anadarko,
Oklahoma; and Comyn, Texas. Gold Kist also owns and leases to
Golden Peanut Company two cold storage facilities located at
Anadarko, Oklahoma and Suffolk, Virginia with an aggregate
storage capacity of 11,000 tons, and 48 warehouses located at
30 of the leased receiving stations with an aggregate storage
capacity of approximately 133,000 tons.
The Association holds all of the facilities in fee except
for the corporate headquarters building (lease expires June
30, 2004); poultry distribution facilities at Tampa, Florida
(lease expires May 14, 2000) and Nashville (lease expires
December 31, 1998) Tennessee; Crossville, Alabama, poultry
hatchery facility (lease expires February 23, 2088); and the
Anadarko, Oklahoma peanut cold storage facility (lease expires
April 30, 2010) subleased to Golden Peanut Company).
ENVIRONMENTAL AND REGULATORY MATTERS
Processing plants such as those operated by Gold Kist are
potential sources of emissions into the atmosphere and, in
some cases, of effluent emissions into streams and rivers.
Presently, management does not know of any material capital
expenditures for environmental control facilities that will be
necessary for the remainder of the current fiscal year and the
next fiscal year in order to comply with current statutes and
regulations. On January 29, 1992, the United States
Environmental Protection Agency ("EPA") sent General Notice
Letters designating Gold Kist and several other companies as
potentially responsible parties ("PRP's") for alleged
environmental contamination at an Albany, Georgia site
previously owned by Gold Kist. Gold Kist has responded to the
General Notice Letter denying liability for the contamination.
Gold Kist is unable to estimate at this time the cost of
compliance, if any, to be required of Gold Kist for the
location. Management believes that the potential cost of
compliance for Gold Kist would not have a material effect on
Gold Kist's financial condition or results of operations.
The Georgia Environmental Protection Division ("GEPD") has
issued a request for submittal of a Compliance Status Report
("CSR") for the former Gold Kist chemical blending facility in
Cordele, Georgia. Gold Kist sold this facility in 1985. The
site of this facility has been listed on Georgia's Hazardous
Sites Inventory list under the State's Hazardous Sites
Response Act due to the presence of pesticide residue above
regulatory standards. Completion of the CSR will require
assessment and delineation of the extent of the pesticide
residue conditions, which are present both on and off-site.
Remediation may be required in the future to meet regulatory
clean-up standards. Since the extent of the conditions at the
site have not been defined at this time, Gold Kist is unable
to estimate cost of the compliance to be required of Gold Kist
for this location. Management believes that the potential
cost of compliance for Gold Kist would not have a material
effect on Gold Kist's financial condition or results of
operations.
The regulatory powers of various federal and state
agencies, including the federal Food and Drug Administration,
apply throughout the agricultural industry, and many of Gold
Kist's products and facilities are subject to the regulations
of such agencies.
HUMAN RESOURCES
Gold Kist has approximately 17,500 employees during the
course of a year. Gold Kist's processing facilities operate
year round without significant seasonal fluctuations in
manpower requirements. Gold Kist has approximately 3,200
employees who are covered by collective bargaining agreements.
Employee relations are considered to be generally
satisfactory.
PATRONAGE REFUNDS
The By-Laws of Gold Kist provide that Gold Kist shall
operate on a cooperative basis. After the close of each
fiscal year, the net taxable margins of Gold Kist for that
year from business done with or for member patrons (patronage
margins) are computed and, after deductions for a reasonable
reserve for permanent non-allocated equity and after certain
adjustments, these margins are distributed to members as
patronage refunds on the basis of their respective patronage
(business done with or through the Association) during that
year. Upon the determination of the total patronage refund
for any fiscal year, this amount is allocated among the
several operations of Gold Kist or one or more groups of such
operations, as determined by the Board of Directors in light
of each operation's or group's contribution for the year.
Patronage refunds are distributed in the form of either
qualified or nonqualified written notices of allocation (as
defined for purposes of Subchapter T of the Internal Revenue
Code). If qualified notices are used, at least 20% of each
patronage refund is distributed in cash or by qualified check
(as defined in the Internal Revenue Code) with the remainder
distributed in patronage dividend certificates or written
notices of allocated reserves, or any combination of these
forms. A distribution to a patron made in the form of a
qualified notice must be included in his gross income, at its
stated dollar amount, for the taxable year in which he
receives the distribution. If nonqualified notices are
distributed, less than 20% of the refund can be distributed in
cash or by qualified check and the patron is not required to
include in gross income the noncash portion of the allocation.
See Notes 1(f) and 6 of Notes to Consolidated Financial
Statements.
The deduction for unallocated reserves and retention of
allocated reserves provide means whereby the current and
active members of Gold Kist may finance the Association's
continuing operations. Each fiscal year, the members are
notified by Gold Kist of the amounts, if any, by which their
equity accounts have been credited to reflect their allocated,
but undistributed, portion of the patronage refunds.
Allocated reserves may be retired and distributed to members
only at the discretion of the Board of Directors in the order
of retention by years, although the Board may authorize the
retirement of small aggregate amounts (not in excess of
$100.00) of reserves or the retirement of reserves in
individual cases without regard to how long they have been
outstanding. Allocated reserves bear no interest and are
subordinate in the event of insolvency of the Association to
outstanding patronage dividend certificates and to all
indebtedness of Gold Kist.
INCOME TAXATION
As a cooperative association entitled to the provisions of
Subchapter T of the Internal Revenue Code, Gold Kist does not
pay tax on net margins derived from member patronage
transactions which are distributed to the members by check or
in the form of qualified written notices of allocation within
8-l/2 months of the close of each fiscal year. To the extent
that Gold Kist distributes nonqualified written notices of
allocation, has income from transactions with nonmembers or
has income from non-patronage sources, it will be taxed at the
corporate rate. See Notes l (f) and 7 of Notes to
Consolidated Financial Statements.
Gold Kist has subsidiaries which are not cooperatives, and
all the income of these subsidiaries is subject to corporate
income taxes.
Item 2. Properties.
The principal facilities used in the Association's
business are described in Item 1. Business (and Properties).
Management believes that the facilities are adequate and
suitable for their respective uses and the Association's
current intended operations. There are no material liens or
encumbrances on the properties owned by the Association except
for mortgages on the Association's Marshall County, Alabama
and Sumter County, South Carolina facilities to secure certain
credit facilities with the Association's lenders. See Note 11
of Notes to Consolidated Financial Statements.
Item 3. Legal Proceedings.
The Association is a party to various legal and
administrative proceedings, all of which management believes
constitute ordinary routine litigation incident to the
business conducted by the Association, or are not material in
amount.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the
fiscal year covered by this report to a vote of security
holders.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
There is no market for Gold Kist equity.
Item 6. Selected Financial Data.
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below
under the captions "Consolidated Statement of Operations Data"
for each of the years in the five-year period ended June 26,
1999 and "Consolidated Balance Sheet Data" as of July 1, 1995,
June 29, 1996, June 28, 1997, June 27, 1998 and June 26, 1999
are derived from the consolidated financial statements of Gold
Kist Inc. and subsidiaries. The consolidated financial
statements as of June 27, 1998 and June 26, 1999 and for each
of the years in the three-year period ended June 26, 1999, and
the report thereon of KPMG 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.
<TABLE>
<CAPTION>
For Fiscal Years Ended (000's omitted)
Consolidated Statement of July 1, June 29, June 28, June 27, June 26,
Operations Data: 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net sales volume $1,255,087 1,420,281 1,658,191 1,651,115 1,766,104
Margins (loss) from
continuing operations $ 9,875 33,706 10,870 (57,036) 69,361
As of (000's omitted)
Consolidated Balance Sheet July 1, June 29, June 28, June 27, June 26,
Data: 1995 1996 1997 1998 1999
Total assets $ 768,415 914,161 1,051,813 1,080,655 801,224
Long-term liabilities $ 176,259 224,183 301,190 376,553 262,495
Patrons' and other equity
(A) $ 314,990 326,410 346,075 234,006 279,367
</TABLE>
NOTE:
A.See Note 10(a) of Notes to Consolidated Financial Statements.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The nature of the poultry industry 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 worldwide
supply and demand. Additionally, demand for poultry and costs
of other agricultural products utilized by Gold Kist are often
influenced by supplies and prices of alternative products.
Agriculture is generally cyclical in nature. Commodities
marketed by Gold Kist on behalf of its members are subject to
fluctuations in price, based on supply of the farm commodities
and demand for the raw or processed products. Commodity
prices are also sensitive to interest rates, with high rates
generally tending to depress market prices, and to worldwide
economic and political factors.
As with other perishable commodity businesses, the
integrated poultry industry has demonstrated varying levels of
profitability, and to a lesser extent, losses over its thirty-
six year history. Although the industry has been profitable
since 1983 with the exception of brief periods 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. 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. Average market prices for broilers during
1997 remained at relatively high levels as compared to
historical averages. However, during the May-June 1997
period, market prices declined below 1996 levels as a result
of the increase in industry production. Export prices for
broiler leg-quarters declined substantially in 1997 as a
result of disruptions in the Russian markets. Although market
prices for broiler products strengthened in the fourth quarter
of 1998, average market prices for 1998 were approximately
4.0% lower than in 1997. Favorable broiler market prices
continued during the first half of fiscal 1999 as a result of
industry-wide live production problems that restricted broiler
supplies. Broiler prices weakened in the second half of 1999
as a result of a cessation of the live production problems.
Market prices for poultry dark meat were weak during 1999 as a
result of the Russian and Asian economic crises that began
during the summer of 1998. According to USDA estimates, the
supply of broilers is expected to increase at a 5.7% rate in
1999 and a 5.3% rate in 2000 as compared to the 4.2% average
annual increase between 1995 and 1998.
Generally, the cost of feed grains, primarily corn and
soybean meal, represent approximately fifty percent of total
broiler production costs. Market prices for feed ingredients
declined in 1995 as a result of the increase in planted corn
and soybean acreage and favorable growing conditions in the
summer of 1994. 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 grain
harvest and strong export demand. During 1997, average cash
market prices for corn declined 14% as a result of the
favorable 1996 harvest. However, soybean meal average cash
market prices increased approximately 26% for 1997 as compared
to 1996 as a result of strong demand and lower carryover
stocks. Average cash market prices for corn and soybean meal
declined 18% and 20%, respectively, during 1998 as a result of
the favorable 1997 harvest and reduced exports of agricultural
commodities. In 1999, average cash market prices for corn and
soybean meal declined 20% and 34%, respectively, as a result
of favorable U.S. grain production and the decline in world
demand for feed grains.
Historically, weather has had a significant impact on the
agricultural economy and the operating results of the
Association. Favorable spring weather conditions contributed
to increased planting activity and a favorable grain harvest
in 1994. The weather reduced 1995 grain harvest in the
Midwestern U.S. resulted in higher grain prices in 1996.
Favorable weather conditions during the summer of 1996
contributed to plentiful grain harvests in the United States.
Favorable growing conditions in the summer of 1997 contributed
to a slight increase in the 1997 grain harvest as compared to
1996. Favorable growing conditions in the summer of 1998
contributed to the second largest grain harvest on record in
the United States resulting in cash market prices for feed
grains at levels significantly less that those experienced
over the past five years.
Poultry export sales for 1997, 1998 and 1999 were $81.7
million, $61.6 million and $40.9 million, respectively. During
1997, 1998 and 1999, export sales declined as a result of
lower market prices for poultry and the economic crises in
Southeast Asia and Russia. Export sales of poultry products
will be influenced by credit availability to foreign
countries, political and economic stability, particularly in
Russia, Eastern Europe and Mexico.
In May 1998, the Association's Board of Directors adopted a
plan to discontinue operations of the Agri-Services segment.
Accordingly, the operating results of the Agri-Services
segment, including provisions for losses during the phase out
period, have been segregated from continuing operations and
reported separately in the Statements of Operations. See
Notes 1 and 11 of Notes to Consolidated Financial Statements.
The Association's continuing operations include the
Association's poultry and pork operations. The discussion and
analysis of results of operations that follows relates solely
to the continuing operations of the Association for each of
the years in the three-year period ended June 26, 1999.
Results of Operations
Fiscal 1998 Compared to Fiscal 1997
The Association's net sales volume was approximately $1.7
billion for 1998 and 1997. The loss from continuing
operations for 1998 was $57.0 million as compared to margins
from continuing operations of $10.9 million for 1997. The
loss from continuing operations for 1998 was the result of
lower market prices for poultry and live hogs and higher feed
ingredient costs. Net sales volume for 1998 reflected lower
broiler market prices, which were partially offset by a 3.0%
increase in broiler pounds sold. Average selling prices for
poultry products for 1998 declined 3.0% as compared to 1997 as
a result of excess industry supply, an increase in pork and
beef supplies and instability in export markets. Poultry
sales to Russia were affected by disruptions in the market
related to tariffs and custom regulations resulting in lower
than expected net margins. Poultry sales to the Southeast
Asia markets were affected by the financial crisis in that
region. Pork net sales volume for 1998 declined 39% as
compared to 1997 due to head reduction and lower market prices
for live hogs.
Cost of sales for 1998 increased $76.3 million or 4.8% as
compared to 1997 primarily due to higher field production and
processing costs. Although corn and soybean meal cash market
prices declined significantly in 1998, the Association's feed
ingredient costs for 1998 were comparable to 1997 as a result
of the Association's forward purchasing and commodity trading
activities. Feed ingredient costs reflected losses realized
on commodities futures and options transactions of $85.2
million for 1998. As a percent of net sales volume, cost of
sales was 100.7% of net sales volume for 1998 as compared to
95.7% in 1997.
Distribution, administrative and general expenses of $66.7
million for 1998 increased 2.8% as compared to 1997. As a
percent of net sales volume, distribution, administrative and
general expenses were 4.0% of net sales volume for 1998 as
compared to 3.9% for 1997.
The components included in other income (deductions)
represent a $14.2 million deduction for 1998 as compared to
income of $1.4 million for 1997. Interest income of $2.0
million for 1998 declined $2.8 million as compared to 1997.
Interest income for 1997 reflected interest income related to
a favorable tax litigation decision. Interest expense for
1998 was $26.9 million as compared to $10.7 million for 1997,
which reflected the increase in borrowings to support higher
asset levels, the acquisition of minority interest in Golden
Poultry and the 1998 operating losses. Also, interest expense
for 1998 reflected an increase in borrowing costs related to
the decline in the Association's financial condition. Equity
in the earnings of the partnership represents the
Association's 33 1/3% pro rata share of the Golden Peanut
Company's 1998 earnings. See Note 10(b) of Notes to
Consolidated Financial Statements. Miscellaneous, net for
1998 includes a $192,000 loss representing the Association's
equity in the loss of a pecan processing and marketing
enterprise. The Association recorded a $992,000 loss on this
investment in 1997. Net rental income of $2.1 million and
$1.9 million, respectively, was included in miscellaneous, net
for 1998 and 1997. Miscellaneous, net for 1998 includes $2.0
million of income related to a poultry grower agreement.
Miscellaneous, net for 1997 reflects a $1.2 million loss on
the purchase of subsidiary common stock.
In 1998 and 1997, the Association's combined federal and
state effective income tax rates for continuing operations
were (38)% and (48)%, respectively. The effective tax rate
for 1997 reflects a $5.2 million income tax benefit resulting
from a Circuit Court of Appeals decision in the Association's
favor. See Note 7 of Notes to Consolidated Financial
Statements.
Fiscal 1999 Compared to Fiscal 1998
Net sales volume for 1999 was approximately $1.77 billion,
which represented a 7.0% increase over net sales volume of
$1.65 billion for 1998. Margins from operations for 1999 were
approximately $69.4 million as compared to a loss from
continuing operations of $57.0 million for 1998. The overall
increase in net sales volume was the result of a 5.2% increase
in pounds of poultry sold and a 2.0% increase in average
selling prices. The impact of these factors on net sales
volume was partially offset by lower average selling prices
for live hogs. Increased domestic poultry market prices for
1999, as compared to 1998, were attributable to a reduction in
industry-wide broiler production. The decline in production
was due to problems in the breeder flocks that restricted live
production, as well as hot weather in the summer of 1998 that
reduced growth rates. In late 1999, the impact of these
factors on poultry market prices lessened as a result of the
weakness in export sales and a cessation of the field
production problems. During 1999, market prices for dark
chicken meat declined substantially as a result of the Russian
and Asian economic crises that began in late summer of 1998.
Cost of sales for 1999 declined $94.5 million or 5.7% as
compared to 1998. The decrease in cost of sales for 1999, as
compared to 1998, was due primarily to lower feed ingredient
costs. Raw feed ingredient costs for 1999 decreased 22.8% as
compared to 1998. Corn and soybean meal cash market prices
decreased substantially as a result of the favorable 1998
grain harvest and reduced foreign demand for grains. The
impact of the decline in feed ingredient costs on cost of
sales was partially offset by the increase in pounds of
poultry produced and marketed. Cost of sales for 1998
included losses realized on commodities futures and options
transactions of $85.2 million. As a percent of net sales
volume, cost of sales was 88.8% of net sales volume for 1999
as compared to 100.7% for 1998.
Distribution, administrative and general expenses of $76.3
million for 1999 increased 14.3% as compared to 1998. As a
percent of net sales volume, distribution, administrative and
general expenses were 4.3% of net sales volume for 1999 as
compared to 4.0% for 1998. The increase in the percentage
relationship for 1999 was due primarily to the increase in
incentive compensation expense related to the improvement in
operating results.
The components included in other income (deductions)
represent a $18.4 million deduction for 1999 as compared to
$14.2 million for 1998. Interest income was $2.2 million for
1999 as compared to $2.0 million for 1998. Interest expense
for 1999 was $26.0 million as compared to $26.9 million for
1998. Equity in the earnings of the partnership represents
the Association's pro rata share of the Golden Peanut
Company's 1999 and 1998 earnings in accordance with the
partnership agreement. See Note 10(b) of Notes to
Consolidated Financial Statements. Miscellaneous, net for
1999 includes a $824,000 gain representing the Association's
equity in the earnings of a pecan processing and marketing
enterprise. The Association recorded a $192,000 loss on this
investment in 1998. Miscellaneous, net for 1999 includes a
$2.3 million gain on the sale of a portion of an investment in
a trading company engaged in international merchandising of
grains and other agricultural commodities. Miscellaneous, net
for 1998 includes $2.0 million of income related to a poultry
grower agreement and net rental income of $2.1 million.
In 1999 and 1998, the Association's combined federal and
state effective income tax rates for continuing operations
were 33% and (38)%, respectively. See Note 7 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, a
secured committed credit facility with a commercial bank. At
June 26, 1999, the Company had a $250 million secured
committed credit facility with eight commercial banks. The
facility included a three-year $125 million revolving credit
commitment and a $125 million 364-day line of credit
commitment. As of June 26, 1999, there were no outstanding
borrowings under the revolving credit and the 364-day line-of-
credit commitments.
In August 1998, the Association refinanced its $440 million
secured committed credit facility with a $500 million credit
agreement with a commercial bank that included a secured $125
million 364-day line of credit commitment, a secured $125
million three-year revolving credit facility and a $250
million three-year unsecured bridge facility. Upon the
consummation of the sale of certain assets of the Agri-
Services segment, the loan agreement provided that proceeds be
applied to the $250 million bridge loan and that the remaining
balance be paid. The bridge loan was paid in October 1998.
See Notes 1 and 11 of Notes to Consolidated Financial
Statements. In 1998, the Association obtained a $50 million
term loan from an agricultural credit bank and a $69.9 million
rolling four-month equity swap arrangement with a commercial
bank. The equity swap was refinanced in 1999 for $58.1
million. At June 26, 1999, the Association had unused loan
commitments of $250.0 million and additional letters of credit
from banks aggregating $107.4 million. The letters of credit
include a $100 million irrevocable direct pay letter of credit
to secure the Association's contingent obligation to purchase
certain preferred securities from Southern States. The $100
million letter of credit reduces the funds available under the
$125 million revolving credit facility. The primary source of
external long-term financing are proceeds from the revolving
credit facility. See Notes 4 and 11 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 1.25:1 and the ratio of total
funded debt to total capitalization not to exceed 65%. At
June 26, 1999, the Association's current ratio and ratio of
total funded debt to capitalization, determined under the loan
agreements, were 1.39:1 and 52%, respectively. The terms of
the $250 million credit facility require specific quarterly
fixed charge coverage ratios during fiscal 2000 and a fixed
charge ratio for fiscal 2000 of 150%. In addition, the terms
place a limitation on capital expenditures, equity
distribution, cash patronage refunds and commodity hedging
contracts that include cash forward purchases, as well as
futures and options contracts. At June 26, 1999, the
Association was in compliance with the agreements. See Note 4
of Notes to Consolidated Financial Statements.
In 1997, the uses of cash in the Association's continuing
operations included $67.5 million for capital expenditures,
$55.7 million for long-term debt repayments and $30.0 million
for patronage refunds and other equity payments. In addition,
cash uses included the funding of increases in operating
assets, such as inventories, receivables and commodities
margin deposits. During 1997, increases in inventories and
receivables primarily reflected the expansion in poultry
operations. The increase in commodities margin deposits was
the result of corn and soybean futures contracts and the
related unrealized losses associated with these positions at
June 28, 1997. See Note 1(c) of Notes to Consolidated
Financial Statements. During 1997, net cash used in operating
and investing activities of discontinued operations totaled
$26.8 million. The funds for these activities were provided
by borrowings of $182.8 million.
During 1998, the primary uses of cash in continuing
operations included $54.4 million in capital expenditures and
$53.1 million for the acquisition of the remaining 3.7 million
shares of Golden Poultry Company, Inc. common stock that the
Association did not already own. See Note 12 of Notes to
Consolidated Financial Statements. During 1998, net cash used
in operating and investing activities of discontinued
operations totaled $58.8 million. The funds for these
activities were provided by net borrowings of $173.3 million.
Borrowings and repayments of long-term debt during 1998
reflected the replacement of Golden Poultry Company, Inc.'s
debt subsequent to the merger and the replacement of the
Association's $250 million unsecured committed credit facility
with the $440 million secured committed credit facility.
In October 1998, the Association completed the sale of
assets of the Agri-Services segment to Southern States.
Proceeds of $218.3 million from the sale represented an amount
equal to $39.9 million plus 100% of estimated net current
asset value less the remaining obligations under an industrial
development bond, a lease obligation assumed by Southern
States and a $10.0 million hold back deduction provided for in
the asset purchase agreement. In connection with the sale of
assets transaction, Southern States delivered to the
Association a post-closing statement of net asset value (the
"post-closing valuation") prepared pursuant to the terms of
the purchase agreement. The Association subsequently objected
to Southern States' post-closing valuation principally with
regard to the valuation of accounts and crop notes receivable.
In order to resolve the post-closing valuation, the
Association agreed in September 1999 to repurchase from
Southern States approximately $34.5 million of accounts and
crop notes receivable. The agreement will result in a final
settlement payment to Southern States of approximately $21.2
million in September 1999. See Note 11 of Notes to
Consolidated Financial Statements.
In order to complete the transaction with Southern States,
the Association committed to purchase, subject to certain
terms and conditions, from Southern States up to $100 million
principal amount of preferred securities if Southern States is
unable to market the securities to other purchasers. The
Association has established a $100 million irrevocable direct
pay letter of credit to secure its contingent obligation.
Gold Kist must hold any purchased preferred securities for a
period of at least nine months from the purchase date. In Augu
st 1999, Southern States notified the Company that it does not
expect to place capital and/or equity securities with other
purchasers by October 5, 1999. As a result, the Company
anticipates purchasing the $100 million principal amount of
preferred securities in October 1999 as required under the
commitment. See Note 11 of Notes to Consolidated Financial
Statements.
In 1999, the operating activities of continuing operations
provided $156.2 million in cash as a result of the improvement
in poultry operating margins. Net cash from investing
activities reflected proceeds of $218.3 million from the sale
of the Agri-Services segment. Cash flow from investing
activities included $14.1 million from the sale of loans and
disposals of investments. The proceeds from these activities
were used to repay short-term borrowings and long-term debt,
which included maturing Subordinated Certificates. In
addition, cash uses included the funding of capital
expenditures of $31.9 million and redemptions of equity.
The Association plans capital expenditures of approximately
$45.0 million in 2000 that primarily include expenditures for
expansion and technological advances in poultry production and
processing. In addition, planned capital expenditures include
other asset improvements and necessary replacements.
Management intends to finance planned 1999 capital
expenditures and related working capital needs with existing
cash balances and net margins adjusted for non-cash items and
additional long-term borrowings, as needed. In 2000,
management expects cash expenditures to approximate $7.0
million for patronage refunds and equity distributions less
insurance proceeds. In connection with the sale of assets of
the Agri-Services segment to Southern States Cooperative,
Incorporated during 1999, Gold Kist discontinued the sale of
Subordinated Certificates. The Association believes cash on
hand and cash equivalents at June 26, 1999 and cash expected
to be provided from operations, in addition to borrowings
available under existing credit arrangements, will be
sufficient to maintain cash flows adequate for the
Association's projected growth and operational objectives
during 2000 and to fund the repayment of outstanding
Subordinated Certificates as
they mature.
Year 2000 Disclosure Statement
The year 2000 problem is the result of computer programs
written using two digits (rather than four) to define the
applicable year. Any of the Association's programs that have
time-sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000, which could result in
miscalculations or system failures.
The Association has completed its identification of
information technology systems that are not year 2000
compliant and is in the process of implementing a
comprehensive initiative to make its information technology
systems ("IT" systems) and its non-information technology
systems ("non-IT" systems), including embedded microprocessors
in equipment, refrigeration systems, feed mills, hatcheries
and environmental controls, year 2000 compliant. The
initiative covers the following three phases: (1)
identification of all IT and non-IT systems and an assessment
of repair requirements, (2) repair of the identified IT and
non-IT systems, and (3) testing of the IT and non-IT systems
repaired to determine correct manipulation of dates and date-
related data. As of September 1, 1999, the Association has
completed phase (1) of its initiative and substantially
completed phase (2). The Association is scheduled to complete
phase (2) by the end of October 1999. The Association expects
the final testing phase to be complete by the end of November
1999. The Association believes that it has allocated
sufficient resources to resolve all significant year 2000
issues in the above time frame.
As part of its year 2000 initiative, the Association is also
contacting key suppliers and business partners to evaluate
their year 2000 compliance plans and state of readiness and
determine whether a year 2000 problem will impede the ability
of such suppliers and business partners to provide goods and
services as the year 2000 is approached and reached. The
Association has received responses from a majority of its key
trading partners and is currently assessing their state of
compliance. As a general matter, the Association is
vulnerable to key suppliers' inability to remedy their own
year 2000 issues and there can be no assurance that all date-
handling problems in the IT systems of those suppliers will be
identified in advance of their occurrence.
The Association estimates that its cost of repairing the IT
systems and non-IT systems will range from $750,000 to $1.0
million. The Association believes such costs will not have a
material effect on liquidity or its financial condition or
results of operations.
To date, the Association has not identified any IT or non-IT
system that presents a material risk of not being year 2000
ready or for which a suitable alternative cannot be
implemented. However, as the Association completes the
testing phase, it is possible that the Association may
identify potential risks of year 2000 disruption. It is also
possible that such a disruption could have a material adverse
effect on the financial condition and results of operations.
In addition, if any third parties who provide goods or
services that are critical to the Association's business
activities fail to appropriately address their year 2000
issues, there could be a material adverse effect on the
Association's financial condition and results of operations.
Because the Association has not completed the testing phase
of its initiative, and, accordingly, has not fully assessed
its risks from potential year 2000 failures, the Association
has not yet fully developed year 2000 specific contingency
plans. These plans will be developed as appropriate, if the
results of testing identify a material business function that
is substantially at risk. The Association expects to complete
a contingency plan by October 1999.
Important Considerations Related to Forward-Looking Statements
It should be noted that this discussion contains forward-
looking statements which are subject to substantial risks and
uncertainties. There are many factors which could cause
actual results to differ materially from those anticipated by
statements made herein. Such factors include, but are not
limited to, changes in general economic conditions, weather,
the growth rate of the market for the Company's products and
services, the availability of raw inputs, global political
events, the ability of the Association to implement changes in
sales strategies and organization on a timely basis, the
affect of competitive products and pricing, seasonal revenues,
as well as a number of other risk factors which could effect
the future performance of the Association.
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 and feed grains. 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 June 1998, the Financial Accounting Standards Board
(FASB) issued Statement No. 133 "Accounting for Derivative
Instruments and Hedging Activities." The Statement requires
the recognition of all derivatives on the balance sheet at
fair value. The Company's derivatives, which include
agricultural related futures and options, are specifically
designated as hedges. Changes in the fair value of these
derivatives will either be offset against the change in fair
value of the corresponding hedged assets, liabilities, or firm
commitments through earnings or reflected as other
comprehensive income until the hedged item is recognized in
earnings. The disclosure requirements of the Standard will be
reflected in the Association's 2001 consolidated financial
statements. If the Association were to adopt the new
Statement as of June 26, 1999, the effect of adoption would
not be significant to the financial statements.
Item 7A. Quantitative And Qualitative Disclosure About
Market Risks.
Market Risk
The principal market risks affecting the Association are
exposure to changes in commodity prices and interest rates on
borrowings. Although the Company has international net sales
volume and related accounts receivable for foreign customers,
there is no foreign currency exchange risk as all sales are
denominated in United States dollars.
Interest Rate Risk
The Association uses interest rate swaps to hedge interest
rate changes on a portion of its borrowings. At June 26, 1999,
the Association had $100.0 million notional amount interest
rate swaps outstanding. In
September 1999, the Association terminated two $25.0 million
notional amount interest rate swaps. The remaining interest
rate swaps effectively change the average interest rates on
$50.0 million of borrowings to a 5.86% fixed rate from LIBOR.
See Note 4 of Notes to Consolidated Financial Statements.
Assuming year-end fiscal 1999 variable rates and borrowings at
June 26, 1999, a one-hundred-basis-point change in interest
rates would impact the Association's net interest expense by
approximately $190,000, net of the effect of the swaps.
Commodities Risk
The Association is a purchaser of certain agricultural
commodities used for the manufacture of poultry feeds. The
Association uses commodity futures and options for hedging
purposes to reduce the effect of changing commodity prices on a
portion of its commodity inventories and related purchase and
sale contracts. Feed ingredients futures contracts, primarily
corn and soybean meal, are recognized when closed and option
contracts are accounted for at market. Gains and losses on the
transactions are recorded as a component of product cost.
Terms of the Association's committed secured credit facility
limit the use of cash forward contracts and commodities futures
and options to hedge no more than twenty-six weeks of the
Association's soybean meal and corn requirements. At June 26,
1999, the fair value of the Association's outstanding commodity
futures and options positions was not material and there were
no significant deferred gains or losses.
Item 8. Financial Statements and Supplementary Data.
INDEX
Page
GOLD KIST INC.
CONSOLIDATED FINANCIAL STATEMENTS:
Independent Auditors' Reports 20
Consolidated Balance Sheets as of June 27, 1998 and
June 26, 1999 22
Consolidated Statements of Operations for the years
ended June 28, 1997, June 27, 1998
and June 26, 1999 23
Consolidated Statements of Patrons' and Other
Equity and Comprehensive Income (Loss) for the years
ended June 28, 1997, June 27, 1998 and June 26, 1999 24
Consolidated Statements of Cash Flows for the years
ended June 28, 1997, June 27, 1998 and June 26, 1999 25
Notes to Consolidated Financial Statements 26
FINANCIAL STATEMENT SCHEDULES
(Included in Part IV of this Report):
Valuation Reserves for the years ended
June 28, 1997, June 27, 1998 and June 26, 1999 46
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Gold Kist Inc.:
We have audited the accompanying consolidated balance sheets of
Gold Kist Inc. and subsidiaries as of June 27, 1998 and June 26, 1999,
and the related consolidated statements of operations, patrons' and
other equity and comprehensive income (loss), and cash flows for each
of the years in the three-year period ended June 26, 1999 as listed in
the accompanying index. In connection with our audits of the
consolidated financial statements, we also have audited the financial
statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements and
financial statement schedule based on our audits. We did not audit
the consolidated financial statements of Golden Peanut Company and
Subsidiaries, a partnership investment accounted for using the equity
method of accounting, as described in Note 10(b) to the consolidated
financial statements. The consolidated financial statements of Golden
Peanut Company and Subsidiaries 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, 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 June 27, 1998 and June 26, 1999,
and the results of their operations and their cash flows for each of
the years in the three-year period ended June 26, 1999, in conformity
with generally accepted accounting principles. Also in our opinion,
the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
KPMG LLP
Atlanta, Georgia
September 16, 1999
REPORT OF INDEPENDENT AUDITORS
Partnership Committee
Golden Peanut Company
We have audited the accompanying consolidated balance sheets of
Golden Peanut Company and Subsidiaries (the "Partnership") as of June
30, 1999 and 1998, and the related consolidated statements of income,
partners' equity, and cash flows for each of the three years in the
period ended June 30, 1999 (not presented separately herein). These
financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Golden Peanut Company and Subsidiaries at June 30, 1999 and 1998,
and the consolidated results of their operations and their cash flows
for each of the three years in the period ended June 30, 1999, in
conformity with generally accepted accounting principles.
Ernst & Young LLP
Atlanta, Georgia
September 1, 1999, except the
third paragraph of Note 6, as to
which the date is September 16, 1999
<TABLE>
GOLD KIST INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
<CAPTION>
June 27, 1998 June 26, 1999
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 11,789 20,810
Receivables, principally trade, less
allowance for doubtful accounts of
$3,113 in 1998 and $3,261 in 1999 107,957 109,060
Inventories (note 2) 174,204 182,799
Deferred income taxes 45,431 17,842
Other current assets 32,673 18,599
Net assets of discontinued operations
(note 11) 247,621 10,400
Total current assets 619,675 359,510
Investments (note 10) 125,623 106,199
Property, plant and equipment, net
(note 3) 255,791 248,016
Other assets 79,566 87,499
$1,080,655 801,224
LIABILITIES AND EQUITY
Current liabilities:
Notes payable and current maturities of
long-term debt (note 4):
Short-term borrowings $201,939 58,085
Subordinated loan certificates 35,005 10,095
Current maturities of long-term debt 93,248 16,820
330,192 85,000
Accounts payable 85,188 95,985
Accrued compensation and related
expenses 24,444 36,165
Interest left on deposit (note 4) 11,451 10,487
Other current liabilities 18,821 31,725
Total current liabilities 470,096 259,362
Long-term debt, excluding current
maturities (note 4) 320,600 186,913
Accrued postretirement benefit costs
(note 8(b)) 48,678 53,432
Other liabilities 7,275 22,150
Total liabilities 846,649 521,857
Patrons' and other equity (note 6):
Common stock, $1.00 par value -
Authorized 500 shares; issued and
outstanding 33 in 1998 and 31 in 1999 33 31
Patronage reserves 198,517 204,080
Accumulated other comprehensive income -
unrealized gain on marketable equity
security (note 10(a)) 27,099 19,015
Retained earnings 8,357 56,241
Total patrons' and other equity 234,006 279,367
Commitments and contingencies
(notes 4, 8, 9 and 10(b))
$1,080,655 801,224
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
GOLD KIST INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands)
<CAPTION>
Years Ended
June 28, 1997 June 27, 1998 June 26, 1999
<S> <C> <C> <C>
Net sales volume $1,658,191 1,651,115 1,766,104
Cost of sales 1,586,110 1,662,376 1,567,906
Gross margins (loss) 72,081 (11,261) 198,198
Distribution, administrative and
general expenses 64,885 66,695 76,258
Net operating margins (loss) 7,196 (77,956) 121,940
Other income (deductions):
Interest income 4,804 1,955 2,177
Interest expense (10,666) (26,910) (26,050)
Equity in earnings of partnership
(note 10(b)) 5,807 4,369 188
Miscellaneous, net (note 10(a)) 1,464 6,383 5,316
Total other income
(deductions) 1,409 (14,203) (18,369)
Margins (loss) from continuing
operations before income taxes
and minority interest 8,605 (92,159) 103,571
Income tax expense (benefit)-(note 7) (4,108) (35,123) 34,210
Margins (loss) from continuing
operations before minority
interest 12,713 (57,036) 69,361
Minority interest (1,843) - -
Margins (loss) from continuing
operations 10,870 (57,036) 69,361
Discontinued operations
(notes 7 and 11):
Margins (loss) from operations of
discontinued Agri-Services
segment (less applicable income
taxes of $.7 million for 1997
and $(8.6) million for 1998) 1,020 (15,130) -
Loss on disposal of Agri-Services
segment including provision
of $20.4 million accrued in
1998 for operating losses
during phase out period (less
applicable income taxes of
$(16.5) million for 1998 and
$(4.3) million for 1999). - (30,622) (8,034)
Net margins (loss) $ 11,890 (102,788) 61,327
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
GOLD KIST INC.
CONSOLIDATED STATEMENTS OF PATRONS' AND OTHER EQUITY
AND COMPREHENSIVE INCOME (LOSS)
For the Years Ended June 28, 1997, June 27, 1998 and June 26, 1999
(Amounts in Thousands)
<CAPTION>
Accumulated other
comprehensive
income - unrealized
gain (loss) on
Common Patronage marketable equity Retained
stock reserves security earnings Total
<S> <C> <C> <C> <C> <C>
June 29, 1996 $ 36 209,140 20,978 96,256 326,410
Comprehensive income:
Net margins for 1997 - - - 11,890 11,890
Change in value of
marketable equity
security, net of
tax (note 10(a)) - - 11,771 - 11,771
Total comprehensive
income 23,661
Redemptions and other
changes (4) (5,152) - 1,160 (3,996)
June 28, 1997 32 203,988 32,749 109,306 346,075
Comprehensive loss:
Net loss for 1998 - - - (102,788)(102,788)
Change in value of
marketable equity
security, net of
tax (note 10(a)) - - (5,650) - (5,650)
Total comprehensive
loss (108,438)
Redemptions and other
changes 1 (5,471) - 1,839 (3,631)
June 27, 1998 33 198,517 27,099 8,357 234,006
Comprehensive income:
Net margins for 1999 - 14,990 - 46,337 61,327
Change in value of
marketable equity
security, net of
tax (note 10(a)) - - (8,084) - (8,084)
Total comprehensive
income 53,243
Cash portion of
nonqualified
patronage refund - (2,263) - - (2,263)
Redemptions and other
changes (2) (7,164) - 1,547 (5,619)
June 26, 1999 $ 31 204,080 19,015 56,241 279,367
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
GOLD KIST INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<CAPTION>
Years Ended
June 28, 1997 June 27, 1998 June 26, 1999
<S> <C> <C> <C>
Cash flows from operating activities:
Margins (loss) from continuing
operations $ 10,870 (57,036) 69,361
Non-cash items included in margins
(loss) from continuing
operations:
Depreciation and amortization 32,801 37,547 40,979
Equity in earnings of partnership (5,807) (4,369) (188)
Deferred income tax expense (benefit) (1,718) (14,486) 10,460
Other 2,265 8,549 (988)
Changes in operating assets and
liabilities:
Receivables (5,278) (8,225) (1,103)
Inventories (6,853) 5,285 (8,595)
Other current assets (42,570) 28,539 14,072
Accounts payable and accrued
expenses 11,513 (5,919) 33,159
Interest left on deposit (723) 56 (964)
Net cash provided by (used in)
operating activities of
continuing operations (5,500) (10,059) 156,193
Net cash provided by (used in)
operating activities of
discontinued operations (17,400) (52,400) 34,083
Net cash provided by (used in)
operating activities (22,900) (62,459) 190,276
Cash flows from investing activities:
Acquisitions of property, plant and
equipment (67,547) (54,360) (31,887)
Acquisition of subsidiary minority
interest (note 12) - (53,104) -
Proceeds from disposal of
investments......... 104 1,305 6,028
Proceeds from sale of loans. - - 8,191
Other (509) (792) 2,598
Net cash used in investing
activities of continuing
operations (67,952) (106,951) (15,070)
Net cash provided by (used in)
investing activities of
discontinued operations:
Acquisitions of property, plant
and equipment (9,375) (6,385) -
Proceeds from sale of the Agri-
Services segment (note 11).. - - 218,313
Net cash provided by (used in)
investing activities (77,327) (113,336) 203,243
Cash flows from financing activities:
Short-term borrowings, net 71,992 21,578 (168,764)
Proceeds from long-term debt 110,846 272,116 85,699
Principal payments of long-term
debt (55,656) (120,400) (295,814)
Patronage refunds and other equity
paid in cash (29,596) (3,631) (5,619)
Net cash provided by (used in)
financing activities. 97,586 169,663 (384,498)
Net change in cash and cash
equivalents (2,641) (6,132) 9,021
Cash and cash equivalents at
beginning of year 20,562 17,921 11,789
Cash and cash equivalents at
end of year $ 17,921 11,789 20,810
Supplemental disclosure of cash
flow data:
Cash paid during the years for:
Interest (net of amounts
capitalized) $ 25,761 45,577 28,512
Income taxes $ 11,173 - 12,465
See accompanying notes to consolidated financial statements.
</TABLE>
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 28, 1997, June 27, 1998 and June 26, 1999
(Dollar Amounts in Thousands)
(1) Summary of Significant Accounting Policies
Gold Kist Inc. is an agricultural membership cooperative
association, headquartered in Atlanta, Georgia. Gold Kist Inc.
has approximately 31,000 farmer members and other cooperative
associations located principally in the southeastern United
States. Gold Kist Inc. operates fully integrated broiler
production, processing and marketing operations, as well as
pork production facilities. These operations provide marketing
and purchasing services to approximately 2,400 breeder, broiler
and pork producers.
Gold Kist Inc. and Southern States Cooperative, Incorporated
("Southern States") entered into an Asset Purchase Agreement
(the "Agreement"), dated as of July 23, 1998, pursuant to which
Gold Kist Inc. agreed to sell and assign, and Southern States
agreed to purchase and assume, the assets and certain of the
liabilities of Gold Kist Inc.'s agricultural inputs business.
In October 1998, Gold Kist Inc. completed the sale of assets
and certain liabilities to Southern States. The affected
assets included substantially all of the assets of the Agri-
Services segment, as well as certain crop notes receivable of
AgraTrade Financing, Inc., a wholly-owned finance subsidiary
(see note 11).
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 (collectively "Gold Kist" or
"Company" or "Association"). All significant
intercompany balances and transactions have been
eliminated in consolidation.
(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
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
ingredients, 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 engages in
commodity futures and options transactions to manage the
risk of adverse price fluctuations with regard to its
feed ingredient purchases. 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. At June 27, 1998 and June 26, 1999, there were no
significant unrealized commodity futures positions.
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
Marketable products consist primarily of dressed and
further processed poultry. These inventories are stated,
principally, on the basis of selling prices, less
estimated brokerage, freight and certain other selling
costs where applicable (estimated net realizable value).
(d) Property, Plant and Equipment
Property, plant and equipment is recorded at cost.
Depreciation of plant and equipment is calculated using
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. Accordingly, it is not practical to determine
these investments' fair value. 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.
Gold Kist applies 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 Company has classified its marketable equity
security as "available-for-sale." "Available-for-sale"
securities are those the Company intends to hold for a
period of time and are not acquired with the intent of
selling them in the near term. Accumulated other
comprehensive income - unrealized gains and losses on
"available-for-sale" securities are included as a
separate component of patrons' and other equity in the
accompanying consolidated financial statements, net of
deferred income taxes. Management believes the carrying
value of the collateralized loans approximate market
value and, accordingly, no adjustment has been recognized
in the accompanying consolidated financial statements.
Gold Kist's investment in the Golden Peanut Company
partnership is accounted for using the equity method (see
note 10(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 utilizes nonqualified patronage
refunds which are deductible for income tax purposes only
to the extent paid or redeemed in cash.
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
Income taxes are accounted for under the asset and
liability method. Deferred tax assets and liabilities
are recognized for the future tax consequences
attributable to differences between the financial
statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered
or settled. 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, receivables and accounts payables and
accrued expenses, interest left on deposit, notes
receivable and debt. Because of the short maturity of
cash equivalents, receivables and accounts payables and
accrued expenses, interest left on deposit, certain short-
term debt which matures in less than one year, long-term
debt with variable interest rates and interest rate swap
agreements, the carrying value approximates fair value.
All financial instruments are considered to have an
estimated fair value which approximates carrying value at
June 27, 1998 and June 26, 1999 unless otherwise
specified (see notes 1(e) and 4).
(h) Impairment of Long-Lived Assets and Long-Lived Assets to
Be Disposed Of
Gold Kist adopted the provisions of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of" (SFAS 121), on
June 30, 1996. SFAS 121 requires that long-lived assets
and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and
used is measured by a comparison of the carrying amount
of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured
by the amount by which the carrying amount of the assets
exceed the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. Adoption of
SFAS 121 has not had a material impact on Gold Kist's
financial position, results of operations or liquidity.
(i) Comprehensive Income
In 1999, Gold Kist adopted SFAS No. 130, "Reporting
Comprehensive Income" (SFAS 130). SFAS 130 establishes
rules for reporting of comprehensive income and its
components. Comprehensive income consists of net margins
and unrealized gains and losses on marketable security and
is presented in the consolidated statements of patrons'
and other equity and comprehensive income (loss). The
adoption of SFAS 130 had no impact on total patrons'
equity. Prior year financial statements have been
reclassified to conform to the SFAS 130 requirements.
(j) Fiscal Year
Gold Kist employs a 52/53 week fiscal year. The
consolidated financial statements for 1997, 1998 and 1999
reflect 52 weeks. Fiscal 2000 will be a 53 week year.
(k) 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 consolidated
financial statements in conformity with generally
accepted accounting principles. Actual results could
differ from these estimates.
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
(2) Inventories
Inventories are summarized as follows:
<TABLE>
<CAPTION>
1998 1999
<S> <C> <C>
Live poultry and hogs $ 94,005 93,999
Marketable products 45,081 56,097
Raw materials and supplies 35,118 32,703
$174,204 182,799
</TABLE>
(3) Property, Plant and Equipment
Property, plant and equipment is summarized as follows:
<TABLE>
<CAPTION>
1998 1999
<S> <C> <C>
Land and land improvements $ 33,412 33,406
Buildings 182,735 186,635
Machinery and equipment 369,441 397,655
Construction in progress 8,569 1,134
594,157 618,830
Less accumulated depreciation 338,366 370,814
$255,791 248,016
</TABLE>
(4) Notes Payable and Long-Term Debt
Short-term borrowings at June 26, 1999 include $58.1 million
under a rolling four-month secured agreement with a commercial
bank entered into in April 1998. The commercial bank holds a
marketable equity security owned by Gold Kist as collateral
(see note 9(a)). The Company is required to maintain funds
with the bank to account for volatility in the market price of
the security held as collateral. Interest on the borrowings
are at one-month LIBOR plus .75% per annum. The Company earns
interest on the collateral funds at rates that approximate the
federal funds rate.
In February 1997, an insurance company purchased $30 million
of Series A Senior Notes and $25 million of Series B Senior
Notes. The interest rates on the senior promissory notes, as
well as the previously issued $20.0 million single installment
interest note, are adjusted quarterly in accordance with the
Company's overall financial condition. As of June 26, 1999,
interest rates on the single installment interest notes, the
Series A Senior Notes and the Series B Senior Notes were 9.60%,
7.85% and 8.19%, respectively.
In August 1998, the Company refinanced its $440 million
secured committed credit facility with a $500 million credit
agreement with a commercial bank. The new credit facility
included a secured $125 million 364-day line of credit
commitment, a secured $125 million three-year revolving credit
facility and a $250 million three-year unsecured bridge
facility. The 364-day line of credit and three-year revolving
credit facility are secured by all inventory and receivables of
the Company and by mortgages on the Company's facilities in
Marshall County, Alabama and Sumter County, South Carolina.
Upon the consummation of the Agreement with Southern States,
the loan provisions required that proceeds be applied to the
$250 million bridge facility and that the remaining balance be
paid (see note 1). The credit agreement contains provisions
that require accelerated payments in accordance with certain
terms and conditions, including the sale of facilities and
excess cash flow as defined. The 364-day line of credit
provides short-term financing that will expire on August 1,
2000 and may be extended with the consent of the bank. The 364-
day line of credit is subject to a .30% per annum facility fee.
The three-year revolving credit agreement expires on August 3,
2001, but may be extended for a one-year period with the
consent of the bank. The revolving credit facility fee will be
computed quarterly based on the Association's ratio of funded
debt to total capital and will not exceed .35% per annum.
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
Borrowings under the $250 million facility will bear variable
interest rates below prime. As of June 26, 1999, there were no
balances outstanding under the revolving credit and 364-day
line of credit loan commitments. The $125 million revolving
credit facility is reduced by a $100 million irrevocable direct
pay letter of credit established by the Association to secure
its contingent obligation to Southern States (see note 11).
Subordinated loan certificates of $35.0 million and $10.1
million at June 27, 1998 and June 26, 1999, respectively, bore
interest at rates of 6.3% to 6.4% with terms of one year and
were unsecured.
Interest left on deposit represents amounts of interest
payable, which at the option of the holders of various classes
of certificates, is left on deposit with Gold Kist. Additional
interest on these amounts accrues at the same rates as the
related certificates.
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
1998 1999
<S> <C> <C>
Senior notes payable:
9.90% interest notes, due in semi-annual installments
of $1,539 with interest payable semiannually $ 3,077 -
Single installment note due in June 2001 with
interest payable quarterly 20,000 20,000
Series A senior notes, due in annual installments of
$2,727 beginning in February 2002 with interest
payable quarterly 30,000 30,000
Series B senior notes, due in annual installments of
$2,272 beginning in May 2002 with interest payable
quarterly 25,000 25,000
Other long term debt:
Subordinated capital certificates of interest with
fixed maturities ranging from two to fifteen years,
unsecured (weighted average interest rate of 7.6% at
June 27, 1998 and June 26, 1999) 73,407 66,905
Term loan agreement with banks (interest rate of 8.2%
at June 27, 1998) 176,000 -
Term loan agreement with agricultural credit bank, due
in semi-annual installments of $1,785 with interest
payable quarterly (weighted average interest rate of
8.7% at June 27, 1998 and 7.7% at June 26, 1999) 50,000 48,215
Revolving credit agreements with commercial banks
(weighted average rate of 8.1% at June 27, 1998) 21,500 -
Tax exempt industrial revenue bonds with varying
interest rates, due in quarterly and annual
installments through 2016, secured by property,
plant and equipment 10,900 10,450
Pro rata share of mortgage loan, at 8.47% interest, due
in monthly installments to June 30, 2004, secured by a
building 1,873 1,627
Other 2,091 1,536
413,848 203,733
Less current maturities 93,248 16,820
$320,600 186,913
</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 senior notes payable at June 27, 1998 and June 26,
1999 was approximately $83.1 million and $72.4 million,
respectively.
In June 1997, Gold Kist entered into two $25 million notional
amount interest rate swap agreements with a commercial bank.
Under the five-year interest rate swap, the Company paid
interest at a fixed rate of 6.48% and received interest at the
three-month London Interbank Offered Rate (LIBOR). Under the
ten year interest rate swap, the Company paid interest at the
three-month LIBOR and received interest at a fixed rate of
7.44%. In June 1998, the commercial bank exercised its
option to terminate the $25 million notional amount ten-year
interest rate swap. In September 1999, the Company terminated
the $25 million notional amount five-year interest rate swap.
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
In September 1997, Gold Kist entered into a $25 million
notional amount five-year interest rate swap agreement with a
commercial bank. Under the agreement, the Company paid
interest at a fixed rate of 5.90% and received interest at the
three-month LIBOR. In September 1999, the Company terminated
the $25 million notional amount five-year interest rate swap.
In October 1997, Gold Kist entered into three $25 million
notional amount five-year interest rate swap agreements with
two commercial banks. Under the agreements, the Company paid
interest at a weighted average fixed rate of 5.98% and
received interest at the three-month LIBOR. In June 1999,
Gold Kist terminated one of the $25 million notional amount
five-year interest rate swaps. Under the two remaining $25
million notional amount swap agreements, the Company pays
interest at a weighted average fixed rate of 5.86% and
receives interest at the three-month LIBOR. In October 2000,
the commercial bank has the option to cancel the two remaining
$25 million notional amount interest rate swaps.
In January 1998, the Company entered into a $25
million notional amount five-year interest rate swap agreement
with a commercial bank. Under the agreement the Company paid
interest at a fixed rate of 5.51% and received interest at the
three-month LIBOR. In June 1999, Gold Kist terminated the $25
million notional amount five-year interest rate swap.
The terms of debt agreements specify minimum working
capital, consolidated tangible net worth, current ratio and
fixed charge coverage ratio requirements, as well as a
limitation on the funded debt to total capital ratio. The debt
agreements place a limitation on capital expenditures, equity
distributions, cash patronage refunds, commodity hedging
contracts and additional loans, advances or investments. Annual
required principal repayments on long-term debt for the five
years subsequent to June 26, 1999 are as follows:
Year:
2000 $16,820
2001 33,950
2002 23,046
2003 16,636
2004 22,242
(5) Leases
Gold Kist leases vehicles, transportation and processing
equipment and certain facilities from third parties under
operating leases, many of which contain renewal options. Rent
expense from continuing operations for 1997, 1998 and 1999 was
$11.4 million, $12.8 million and $13.4 million, respectively.
Commitments for minimum rentals under non-cancelable operating
leases at the end of 1999 are as follows:
2000 $7,913
2001 5,870
2002 4,337
2003 1,757
2004 842
(6) 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.
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
Patronage reserves represent undistributed allocated member
margins less income taxes paid on undistributed nonqualified
equity. Upon redemption, the face value of nonqualified
notified equity is deductible for federal income tax purposes.
At June 26, 1999, there was approximately $248.5 million of
nonqualified notified equity outstanding. The redemption of
qualified and nonqualified notified equity is subject to the
discretion of the Board of Directors. Patronage reserves do
not bear interest and are subordinated to all certificates
outstanding and indebtedness of Gold Kist.
Retained earnings include an allocation of member margins
based on financial ratios, as well as 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.
(7) Income Taxes
Total income tax expense (benefit) was allocated as follows:
<TABLE>
<CAPTION>
1997 1998 1999
<S> <C> <C> <C>
Margins (loss) from continuing operations $(4,108) (35,123) 34,210
Discontinued operations 662 (8,571) -
Loss on disposal of Agri-Services
segment, including operating losses
during phase out period - (16,489) (4,326)
Patrons' and other equity - accumulated
comprehensive income - unrealized gain
on marketable equity security 4,518 (3,043) (4,353)
$ 1,072 (63,226) 25,531
</TABLE>
The provisions for income tax expense (benefit), principally
Federal, related to margins (loss) from continuing operations
consist of the following:
<TABLE>
<CAPTION>
1997 1998 1999
<S> <C> <C> <C>
Current expense (benefit) $(2,390) (20,637) 23,750
Deferred expense (benefit) (1,718) (14,486) 10,460
$(4,108) (35,123) 34,210
</TABLE>
Gold Kist's combined federal and state effective tax rate
from operations for 1997, 1998 and 1999 was (48)%, (38)% and
33%, respectively. A reconciliation of income tax expense
(benefit) allocated to margins (loss) from continuing
operations computed by applying the Federal corporate income
tax rate of 35% in 1997, 1998 and 1999 to margins (loss) from
continuing before income taxes and minority interest for the
applicable year follows:
<TABLE>
<CAPTION>
1997 1998 1999
<S> <C> <C> <C>
Computed expected income tax expense
(benefit) $ 3,012 (32,256) 36,250
Increase (decrease) in income tax
expense (benefit) resulting from:
Income tax litigation (5,207) - -
Cash portion of nonqualified patronage
refund - - (792)
Effect of state income taxes, net of
Federal benefit (531) (2,199) 1,274
Nonqualified equity redemptions (831) (1,203) (1,543)
Employment credits (344) (80) (109)
Other, net (207) 615 (870)
$(4,108) (35,123) 34,210
</TABLE>
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 June 27, 1998 and June 26, 1999 are as
follows:
<TABLE>
<CAPTION>
1998 1999
<S> <C> <C>
Deferred tax assets:
Postretirement benefits $ 18,826 20,694
Insurance accruals 7,440 10,437
Federal net operating loss carryforward 12,286 -
Federal alternative minimum tax carryforward - 1,408
Bad debt reserves 1,531 1,523
State tax operating loss carryforwards 3,950 2,111
Other 2,100 3,365
Investment reserve - 5,698
Discontinued operations 21,188 3,708
Total gross deferred tax assets 67,321 48,944
Less valuation allowance (1,136) (620)
Total net deferred tax assets 66,185 48,324
Deferred tax liabilities:
Unrealized gain on marketable equity
security (14,592)(10,239)
Accelerated depreciation (2,831) (4,229)
Deferred compensation (3,622) (7,727)
Total deferred tax liabilities (21,045)(22,195)
Net deferred tax assets $ 45,140 26,129
</TABLE>
The net change in the total valuation allowance for the years
ended 1997, 1998 and 1999 was a decrease of $328, an increase
of $58 and a decrease of $516, respectively. The Company's
management believes the existing net deductible temporary
differences comprising the total net deferred tax assets will
reverse during periods in which the Company generates net
taxable income.
At June 26, 1999, Gold Kist has an alternative minimum tax
carryforward for federal income tax purposes of $1.4 million,
which is available to offset future federal taxes.
(8) 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.
(b) Medical and Life Insurance Plans
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.
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
The following table sets forth the plans' change in benefit
obligation, change in plan assets and economic assumptions for
the years ended June 27, 1998 and June 26, 1999.
<TABLE>
<CAPTION>
Medical & Life
Pension Benefits Insurance Benefits
1998 1999 1998 1999
<S> <C> <C> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of
year $116,670 140,983 53,161 59,612
Service cost 4,484 4,953 2,917 3,181
Interest cost 8,677 9,979 4,290 4,106
Contributions by plan participants - - 880 996
Actuarial (gains) and losses 22,379 7,105 617 4,188
Benefits paid (other than
settlements) (12,803) (5,885) (2,253) (2,443)
Plan amendments 1,576 - - -
Divestitures, curtailments, or
settlements - (22,177) - (3,583)
Special termination benefits - 1,372 - -
Benefit obligation at end of year 140,983 136,330 59,612 66,057
Change in plan assets
Fair value of plan assets at
beginning of year 156,673 198,521 - -
Actual return on plan assets 47,530 20,039 - -
Contributions by employer 4,330 1,791 1,373 1,447
Contributions by plan participants - - 880 996
Benefits paid (other than settlements)(12,803) (5,885) (2,253) (2,443)
Adjustments 2,791 - - -
Settlements - (18,305) - -
Fair value of plan assets at end of
year 198,521 196,161 - -
Funded status 57,538 59,831 (59,612) (66,057)
Unrecognized transition (asset)
/obligation (5,970) (4,027) - -
Unrecognized prior service cost 5,915 4,128 606 443
Unrecognized actuarial (gain)/loss (34,743) (24,691) 8,071 9,677
Prepaid expense/(accrued liability) $ 22,740 35,241 (50,935) (55,937)
Weighted-average assumptions as of
year-end
Discount rate 7.25% 7.25% 7.25% 7.25%
Expected return on plan assets 9.50 9.50 - -
Rate of compensation increase 5.50 5.50 - -
</TABLE>
The health care cost trend rate used to determine the medical and life
insurance benefit obligation at June 27, 1998 was 6%, declining ratably to 5% by
the year 2001 and remaining at that level thereafter. The health care cost
trend rate used to determine the medical and life insurance benefit obligation
at June 26, 1999 was 6.5%, declining ratably to 5% by the year 2003 and
remaining at that level thereafter. A 1% increase in the health care cost trend
rate would increase the medical and life insurance benefit obligation as of June
26, 1999 by $7,429. A 1% decrease in the health care cost trend rate would
decrease the medical and life insurance benefit obligation as of June 26, 1999
by $6,144.
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
Medical & Life
Pension Benefits Insurance Benefits
1997 1998 1999 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic
benefit cost
Service cost $ 4,226 4,484 4,953 2,452 2,917 3,181
Interest cost 8,006 8,677 9,979 3,508 4,290 4,106
Estimated return on plan assets(11,300) (12,619) (14,865) - - -
Net amortization (691) (347) 335 80 155 130
Net periodic benefit expense $ 241 195 402 6,040 7,362 7,417
</TABLE>
A 1% increase in the health care cost trend rate would
increase the medical and life insurance service and interest
cost components as of June 26, 1999 by $1,060. A 1% decrease
in the health care cost trend rate would decrease the medical
and life insurance service and interest cost components as of
June 26, 1999 by $861.
(9) Contingent Liabilities and Commitments
Gold Kist is a party to 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 is committed to purchase from Southern States up to
$100 million principal amount of preferred securities if
Southern States is unable to market the securities to other
purchasers (see note 11).
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 $6.3 million was outstanding
at June 26, 1999. No gain or loss was recognized on the sale
of these loans.
Gold Kist is a guarantor of $65.0 million under a $75.0
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 26, 1999, the amounts
outstanding under this facility were $68.9 million.
(10) Investments
(a) Marketable Equity Security
At June 26, 1999, the Association's marketable equity
security was carried at their fair value of $50.0
million, which represents a gross unrealized gain of
$29.3 million. The 1999 gross unrealized gain, net of
deferred taxes of $10.2 million, has been reflected as
a separate component of patrons' and other equity.
At June 27, 1998, the Association's marketable equity
securities were carried at their fair value of
$62.4 million, which represents a gross unrealized
gain of $41.7 million. The 1998 gross unrealized
gain, net of deferred taxes of $14.6 million, has been
reflected as a separate component of patrons' and other
equity. At June 28, 1997, the Association's marketable
equity securities were carried at their fair value of
$71.1 million, which represents a gross unrealized
gain of $50.4 million. The 1997 gross unrealized
gain, net of deferred income taxes of $17.7 million,
has been reflected as a separate component of patrons'
and other equity.
Dividends of $595 thousand, $625 thousand and $656
thousand are included in miscellaneous, net for the years
ended June 28, 1997, June 27, 1998 and June 26, 1999,
respectively.
(b) Golden Peanut Company
Gold Kist has a 33 1/3% interest in Golden Peanut Company
and Subsidiaries, a partnership interest ("Golden Peanut
Company"). Gold Kist's investment in the Golden Peanut
Company amounted to $22.7 million and $19.7 million at
June 27, 1998 and June 26, 1999, respectively. In 1997
and 1999, Gold Kist made additional
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
investments of $1.2 million and $1.9 million,
respectively. In 1998 and 1999, Gold Kist received
distributions of $5.8 million and $5.1 million,
respectively, from Golden Peanut Company. Golden Peanut
Company has a $450.0 million commercial paper facility
supported by seasonal backup lines of credit with
various banks. At June 26, 1999, borrowings of $158.5
million were outstanding under the commercial paper
facility.
Summarized financial information of Golden Peanut Company
is shown below:
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
1998 1999
<S> <C> <C>
Current assets $182,013 221,699
Property, plant and equipment, net and
other noncurrent assets 34,036 37,246
Total assets $216,049 258,945
Current liabilities $141,031 186,324
Accrued postretirement benefit costs 6,383 7,230
Long-term capital lease obligation - 4,000
Other liabilities 530 511
Partners' equity 68,105 60,880
Total liabilities and partners'
equity $216,049 258,945
Condensed Consolidated Statements of Operations
1997 1998 1999
Net sales and other operating income $426,122 425,076 431,430
Costs and expenses 408,702 411,971 429,050
Net earnings $ 17,420 13,105 2,380
</TABLE>
In 1997 and 1998, Gold Kist received $2.1 million in
rental income from Golden Peanut Company under an
operating lease agreement for peanut shelling and
procurement facilities. Beginning in 1999 through
December 2006 annual rent payments to Gold Kist were
reduced to $1.00. Gold Kist received procurement
commissions, royalties and administrative service fees of
$4.2 million, $2.5 million and $1.2 million in 1997, 1998
and 1999, respectively. In addition, Gold Kist purchased
$2.3 million and $1.7 million of inventory from Golden
Peanut Company in 1997 and 1998, respectively.
(11) Discontinued Operations
The Company's Agri-Services segment purchased or
manufactured feed, seed, fertilizers, pesticides, animal health
products and other farm supply items for sale at wholesale and
retail. Additionally, the Agri-Services segment was engaged in
the processing, storage and marketing of cotton, served as a
contract procurement agent for, and stored, farm commodities
such as soybeans and grain. In May 1998, the Gold Kist Board
of Directors adopted a plan to discontinue operations of the
Agri-Services segment.
In July 1998, Gold Kist entered into an Asset Purchase
Agreement, pursuant to which the Company agreed to sell and
assign the assets and certain of the liabilities of the
Company's agricultural inputs businesses (see note 1). In
August 1998, the Company entered into an agreement to sell or
assign the cotton marketing operation's purchases and sales
commitments for the 1998 cotton crop.
Accordingly, the operating results of the Agri-Services
segment, including provisions for losses during the phase-out
period, have been segregated from continuing operations and
reported separately in the consolidated statements of
operations and cash flows for 1997, 1998 and 1999. Net sales
volume of the Agri-Services segment was $636.2 million, $720.0
million and $153.9 million, respectively, in 1997, 1998 and
1999. The assets and liabilities of such operations at June
27, 1998 have
GOLD KIST INC.
Notes to Consolidated Financial Statements, Continued
(Dollar Amounts in Thousands)
been reflected as a net current asset. Gold Kist has allocated
interest expense to Agri-Services segment based upon net
operating assets employed at interest rates that approximate
market. Interest expense charged to the Agri-Services segment
for 1997, 1998 and 1999 was $16.3 million, $20.8 million and
$4.5 million, respectively.
In October 1998, the Association completed the sale of
assets of the Inputs business to Southern States. Proceeds of
$218.3 million from the sale represented an amount equal to
$39.9 million plus 100% of estimated net current asset value
less the remaining obligations under an industrial development
bond and a lease obligation assumed by Southern States. Also,
the proceeds reflected a $10.0 million hold back deduction
provided for in the asset purchase agreement.
In connection with the sale of assets transaction, Southern
States delivered to the Association a post-closing statement of
net asset value (the "Post-Closing Valuation") prepared
pursuant to the terms of the purchase agreement. The
Association subsequently objected to Southern States' Post-
Closing Valuation principally with regard to the valuation of
accounts and crop notes receivable. In order to resolve the
post-closing valuation, the Association agreed in September
1999 to repurchase from Southern States approximately $34.5
million of accounts and crop notes receivable. The agreement
will result in a final settlement payment to Southern States of
approximately $21.2 million in September 1999.
In order to complete the transaction with Southern States,
the Association committed to purchase, subject to certain terms
and conditions, from Southern States up to $100 million
principal amount of preferred securities if Southern States is
unable to market the securities to other purchasers. In March
1999, the Association agreed to extend its commitment to
purchase the preferred securities until October 5, 1999. The
preferred securities, if purchased, will carry an initial
weighted average dividend rate of 7.8%. The Association will
have no obligation to purchase the preferred securities if
Southern States places with other purchasers similar capital
and/or equity securities. To the extent Southern States places
with other purchasers capital and/or equity securities similar
to the preferred securities in an amount less than $100
million, the Association's commitment to purchase preferred
securities shall be reduced correspondingly on a dollar-for-
dollar basis. The Association has established a $100 million
irrevocable direct pay letter of credit to secure its
contingent obligation. There are no assurances that Southern
States will be able to market such securities and relieve the
Association of its commitment to purchase such securities.
Gold Kist must hold any purchased preferred securities for a
period of at least nine months from the purchase date. Upon
expiration of that period, Gold Kist may give Southern States
notice of its intention to sell the preferred securities. Upon
the later of the expiration of a 120-day waiting period or the
termination of a placement of the preferred securities or
similar securities commenced by Southern States prior to the
end of the waiting period, Gold Kist will be permitted to sell
the preferred securities.
In August 1999, Southern States notified the Company that it
does not expect to place capital and/or equity securities with
other purchasers by October 5, 1999. As a result, the Company
anticipates purchasing the $100 million principal amount of
preferred securities in October 1999 as required under the
commitment.
(12) Acquisition of Minority Interest
In January 1997, the Gold Kist Board of Directors adopted a
resolution authorizing the Company's officers to negotiate with
Golden Poultry Company, Inc. ("Golden Poultry") to pursue a
transaction in which Gold Kist would acquire all of the shares
of Golden Poultry's common stock not currently owned by Gold
Kist. Gold Kist owned 10,901,802 shares or 75% of Golden
Poultry's 14,628,435 outstanding shares. The negotiations were
completed and an Agreement and Plan of Merger executed in April
1997 (the "Merger Agreement"), among Gold Kist, Golden Poultry
Company, Inc., Agri International, Inc. and Golden Poultry
Acquisition Corp.
Pursuant to the Merger Agreement, Gold Kist agreed to pay
$14.25 per share in cash for each outstanding share of common
stock not already beneficially owned by Gold Kist. The Merger
Agreement was approved by the Boards of Directors of the
Association and Golden Poultry Company, Inc. and was approved
by a majority of the owners of the Golden Poultry common stock
not owned by Gold Kist at a Special Meeting of Shareholders on
September 5, 1997. The merger became effective on September 8,
1997. The cost to acquire the outstanding shares and the fees
and expenses incurred in connection with the merger were
approximately $55.1 million. The acquisition of the minority
interest was accounted for using the purchase method of
accounting. The cost in excess over the net assets acquired
was $24.7 million, which is being amortized over 20 years. The
pro forma effect of goodwill amortization on prior years is not
significant.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not Applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Directors of Gold Kist are:
<TABLE>
<CAPTION>
Years
Term Served as
Name Age Office Expires Director
(as of
8/30/99)
<S> <C> <C> <C> <C>
W. A. Smith 40 Director (District 1) 2001 6 months
Herbert A. Daniel, Jr. 47 Director (District 2) 2001 4
Fred K. Norris, Jr.* 71 Director (District 3) 2000 22
James E. Brady, Jr.* 62 Director (District 4) 1999 15
W. Kenneth Whitehead 55 Director (District 5) 1999 6
Dan Smalley* 50 Director (District 6) 1999 14
A. Jack Nally 56 Director (District 7) 2000 8
M. Michael Davis 48 Director (District 8) 2000 5
Phil Ogletree, Jr. 66 Director (District 9) 2001 22
</TABLE>
* Member of Board of Directors Executive Committee. Mr.
Norris serves as Chairman of the Board of Directors, and Mr.
Smalley serves as Vice-Chairman of the Board.
The Directors of Gold Kist are elected on a district
representation basis. The districts are redrawn from time to
time by the Board of Directors, under provisions of the By-
Laws of Gold Kist, to provide for equitable representation of
members in the territory served by Gold Kist. During the past
five years, each of the Directors has owned and managed
substantial farming operations, producing such agricultural
products as peanuts, cotton, soybeans, corn, other grains,
peaches, vegetable crops, cattle, poultry and dairy products.
While the size and types of products produced on, and
personnel employed at, each of the Director's farms varies,
each Director's business activities have been related
primarily to small agribusiness enterprises. There are no
family relationships among any of the Directors and executive
officers.
The Executive Officers of Gold Kist are:
<TABLE>
<CAPTION>
Years Years
Served Served
In that with
Name Age Office Office Gold Kist
(as of (as of (as of
8/30/99) 8/30/99) 8/30/99)
<S> <C> <C> <C> <C>
G. O. Coan* 63 Chief Executive Officer, 4 40
and Chairman of the
Management Executive
Committee
John Bekkers* 54 President and Chief 4 14
Operating Officer
M. A. Stimpert 55 Senior Vice President, 3 16
Planning and Administration
Stephen O. West 53 Chief Financial Officer and 1 19
Treasurer
J. David Dyson 52 General Counsel, Vice 1 19
President and Secretary
Paul G. Brower 60 Vice President 20 20
Corporate Relations
Jerry L. Stewart 59 Vice President 18 36
Marketing and Sales
Donald W. Mabe 45 Vice President 2 14
Operations
Marshall Smitherman 57 Vice President 1 20
Purchasing
John K. McLaughlin 61 Vice President Pork and 1 15
Aquaculture
Allen C. Merritt 53 Vice President, Science 1 27
and Technology
Michael F. Thrailkill 51 Vice President, 7 26
Information Services
W. F. Pohl, Jr. 49 Controller 17 23
</TABLE>
*Member of Management Executive Committee
The officers serve for terms of one year and until their
successors are elected by the Board of Directors.
During the past five years the principal occupation of
each of the above named executive officers, with exception of
Michael A. Stimpert, Donald W. Mabe, and Marshall Smitherman,
has been as an officer or employee of Gold Kist.
Mr. Michael A. Stimpert was elected Senior Vice
President, Planning and Administration, effective April 1,
1996. He previously served as Vice President from January 1,
1996 until election to his current position. From December
19, 1986 until January 1996, Mr. Stimpert served as Executive
Vice President of Golden Peanut Company, a peanut processing
and marketing company headquartered in Atlanta, Georgia. Mr.
Stimpert was employed by Gold Kist Inc. from June 1974 until
December 1986 in a variety of positions, including Group Vice
President, Agricommodities Group and Group Vice President,
AgriProducts Group.
Mr. Donald W. Mabe was elected Vice President -
Operations, Poultry Group, effective July 25, 1997. He
previously served as President of Carolina Golden Products
Company from January 1991 until election to his current
position.
Mr. Marshall Smitherman was elected Vice President,
Purchasing Division, effective October 1998. He previously
served as Vice President, Cotton Division from July 1997 until
election to his current position and as Manager, Cotton
Division from February 1995 until July 1997. From 1988, until
rejoining the Association in 1995, he was a grain broker
located in Atlanta, Georgia.
Item 11. Executive Compensation.
Summary Compensation Table. The following table sets
forth information concerning the compensation received by the
Chief Executive Officer and for each of the four other most
highly compensated executive officers:
<TABLE>
<CAPTION>
Annual compensation
Other
annual All other
Fiscal compensa- compensa-
year Salary Bonus tion(1) tion(2)
ended ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
G. O. Coan June 26, 1999 $493,269 $525,000 $3,304 $8,203
Chief Exec. Officer and June 27, 1998 475,000 0 2,211 9,786
Chairman of the Manage- June 28, 1997 470,577 50,000 1,869 12,230
ment Executive Committee
John Bekkers June 26, 1999 $386,538 $450,000 $10,218 $5,253
President and Chief June 27, 1998 347,500 0 5,757 7,186
Operating Officer June 28, 1997 282,423 50,000 3,656 9,842
M. A. Stimpert June 26, 1999 $230,577 $200,000 $9,041 $5,959
Senior Vice President, June 27, 1998 204,615 0 5,812 7,518
Planning & Admin. June 28, 1997 194,488 24,000 4,497 10,020
Jerry L. Stewart June 26, 1999 $182,500 $175,000 $8,035 $5,710
Vice President June 27, 1998 182,231 0 4,767 7,270
Marketing and Sales June 28, 1997 174,981 29,000 3,434 9,353
Donald W. Mabe June 26, 1999 $151,569 $168,000 $3,505 $2,082
Vice President June 27, 1998 132,233 0 2,267 3,018
Operations June 28, 1997 117,284 7,000 1,811 1,145
</TABLE>
_______________________________
(1)The amounts shown for the fiscal years ended June 26, 1999
and June 27, 1998 set forth that portion of interest earned
on voluntary salary and bonus deferrals under non-qualified
deferred compensation plans above 120% of the applicable
federal rate. Other than such amounts, for the fiscal years
ended June 26, 1999, June 27, 1998, and June 28, 1997, no
amounts of "Other Annual Compensation" were paid to any of
the above named executive officers, except for perquisites
and other personal benefits which for each executive officer
did not exceed the lesser of $50,000 or 10% of such
individual's salary plus annual bonus.
(2)The amounts set forth include the following amounts that
were contributed by the Association for fiscal years 1999,
1998 and 1997 on behalf of the named executive officers
pursuant to the Gold Kist Profit Sharing and Investment
Plan, a qualified defined contribution plan (401(K)): Mr.
Coan - $960, $2,400, and $4,750 respectively, Mr. Bekkers -
$975, $2,814, and $5,404 respectively; Mr. Stimpert -
$1,065, $2,450, and $4,804 respectively; Mr. Stewart - $960,
$2,422, and $4,439 respectively; and Mr. Mabe $909, $1,857,
and $0 respectively. In addition, the amounts set forth
include for fiscal years 1997, 1998 and 1999, the following
amounts which represent the value of the named executive
officer's benefit from premiums paid by the Association
under a split dollar life insurance plan for the named
executive officers: Mr. Coan - $7,480, $7,386 and $7,243
respectively; Mr. Bekkers - $4,438, $4,372 and $4,278
respectively; Mr. Stimpert - $5,216, $5,068 and $4,894
respectively; Mr. Stewart - $4,914, $4,848 and $4,750
respectively; and Mr. Mabe $1,145, $1,161 and $1,173
respectively. The Association uses the modified premium
method in determining the portion of each premium dollar
attributable to the named executive officers. The
Association will recover the cost of premium payments from
the cash value of the policies.
Retirement Plans. Gold Kist maintains two noncontributory
retirement plans, one for salaried employees and the other for
hourly employees, which together cover substantially all
employees who have served at least one year with Gold Kist,
including those employees subject to collective bargaining
agreements. The plan for salaried employees was amended in
1984 to delete the one year waiting period for credited
service. For salaried employees, the plan provides a
retirement benefit after 30 years of credited service at age
65, which, when combined with the portion of the employee's
primary Social Security benefit attributable to his/her
employer's contributions, will equal 45% of his/her average
earnings during the period of five years in which he/she had
the highest earnings in the last ten years of employment
immediately preceding attainment of age 65, or if retired
before age 65, in the last ten years immediately preceding
early retirement. This plan also provides an early retirement
benefit after age 55, with no reduction in benefit entitlement
due to age, when the sum of the employee's age and years of
service equal or exceed 90. The benefit entitlement is
reduced in either case for each year of credited service less
than 30 years. For hourly employees who work for Gold Kist
until age 65, the plan provides a monthly pension benefit
equal to $9.00 for each year of plan participation, payable at
age 65; early retirement is permitted after age 55 at reduced
benefit levels. The plans contain a death benefit for the
surviving spouse of an active employee (who had at least five
years credited service or was at least 55 years old at the
time of death) which equals 50% of the deceased employee's
accrued retirement income benefit. Accrued benefits under the
plans vest after the employee attains five years of service or
at age 55, and the minimum pension benefit at age 65 is $9.00
per month for each year of credited service. Amounts
contributed for specific individuals under Gold Kist's
retirement income plan for salaried employees cannot be
readily determined. For the plan year ended December 31,
1998, the Association made a contribution of $191,000 to the
pension plan for hourly employees. Due to the full funding
limitation of the Internal Revenue Service, the Association
was not permitted to make a tax-deductible contribution to the
retirement income plan for salaried employees for the plan
year ended December 31, 1998. Estimated annual benefits
payable upon retirement at normal retirement age (65 years) to
persons in specified years of service and remuneration
classifications, before offset of Social Security benefits,
are illustrated in the following table:
<TABLE>
<CAPTION>
Estimated Annual Benefits For Years of Service Indicated
Remuneration 10 Years 15 Years 20 Years 25 Years 30 Years
or More
<S> <C> <C> <C> <C> <C>
$ 30,000 $7,500 $11,250 $15,000 $18,750 $22,500
$100,000 15,000 22,500 30,000 37,500 45,000
$150,000 22,500 33,750 45,000 56,250 67,500
</TABLE>
For years after 1993, the maximum annual amount of
compensation that can be used for determining an individual's
benefit under a qualified plan is $150,000.
The plan covers the compensation set forth in the columns
entitled "Salary" and "Bonus" in the Summary Compensation
Table. The credited years of service as of December 31, 1998,
under the retirement income plan for the five executive
officers listed in the summary compensation table are as
follows: Mr. Coan (30); Mr. Bekkers (14); Mr. Stimpert (25);
Mr. Stewart (30); and Mr. Mabe (14).
A Supplemental Executive Retirement Plan has been adopted
by the Association whereby Gold Kist makes supplemental
payments to certain employees under a non-qualified deferred
compensation plan to make up for any reduction in such
employees' retirement income under the Gold Kist salary
retirement plan resulting from restrictions placed on
qualified retirement plans under Section 415 of the Internal
Revenue Code of 1986, as amended. Such restrictions limit the
amount of benefits payable in qualified retirement plans with
respect to the percentage of final pay to which such employees
would be otherwise entitled upon retirement. All vested
amounts accrued under the Plan have been funded in a trust
which is secure against all contingencies except a bankruptcy
of the Association. The following table shows the estimated
annual benefits payable upon retirement at normal retirement
age (65) to persons in specified years of service and
remuneration classifications, before offset of Social Security
benefits and without restriction imposed by the Internal
Revenue Code. The amounts shown in the table would be reduced
by the amounts payable pursuant to the Gold Kist Retirement
Plan for Salaried Employees.
<TABLE>
<CAPTION>
Estimated Annual Benefits For Years of Service Indicated
Remuneration 10 Years 15 Years 20 Years 25 Years 30 Years
or More
<S> <C> <C> <C> <C> <C>
$100,000 $ 15,000 $ 22,500 $ 30,000 $ 37,500 $ 45,000
$150,000 22,500 33,750 45,000 56,250 67,500
$200,000 30,000 45,000 60,000 75,000 90,000
$250,000 37,500 56,250 75,000 93,750 112,500
$350,000 52,500 78,750 105,000 131,250 157,500
$500,000 75,000 112,500 150,000 187,500 225,000
$750,000 112,500 168,750 225,000 281,250 337,500
$850,000 127,500 191,250 255,000 318,750 382,500
</TABLE>
Covered compensation, computation of the average final
compensation, and credited years of service for the five
executive officers listed in the summary compensation table
are the same as that set forth in the foregoing description of
the Gold Kist Retirement Plan for Salaried Employees.
In addition to the retirement benefits provided by its
qualified and nonqualified retirement plans, Gold Kist has
contracted to provide certain key employees with compensation
benefits after normal retirement. These benefits, known as
the Management Deferred Compensation Plan, are paid monthly
following retirement in an annual amount equal to 25% of the
average annual salary for the ten year period immediately
prior to retirement. These benefits are payable, depending on
the contract, for a 10 or 15 year period following retirement
to a former key employee or his designated beneficiary. All
vested amounts accrued under the plan have been funded in a
trust which is secure against all contingencies except a
bankruptcy of the Association. Estimated annual benefits
payable under the Management Deferred Compensation Plan would
be based upon the following average annual salary of the
eligible named executives for the ten year period ended as of
June 26, 1999: Mr. Coan - $309,226; Mr. Bekkers - $172,905;
and Mr. Stimpert - $151,256.
Change in Control Plans. Under the Gold Kist officers
contingency plan, the Association has entered into identical
change in control agreements with each officer, including the
five executive officers named in the cash compensation table.
Each change in control agreement provides that following a
change in the control of the Association (as defined in the
agreements), if the officer's employment with the Association
terminates within two years after the change in control (but
prior to the officer's reaching age 65), the officer will be
entitled to receive a severance payment calculated by
determining the "Base Severance Amount" as follows:
(1) if the officer is age 60 or younger at the
time of termination of his employment, the amount
equal to the officer's compensation paid by the
Association for the five full calendar years ending
before the date of the change in control, or
(2) if the officer is older than age 60 at the
time of his termination of employment, the amount
equal to the officer's average annual compensation
paid by the Association for the lesser of five full
calendar years or the full calendar years of service
with the Association ending before the change in
control, multiplied by the number of years and
fractions thereof remaining until the officer's 65th
birthday.
The Base Severance Amount is to be adjusted for those officers
with less than 15 years of service by prorating the Base
Severance Amount with the numerator being the number of
completed calendar years of service and the denominator being
15. However, the minimum any terminated officer would receive
would be one and one-half times the average annual
compensation paid by the Association for the actual number of
full calendar years worked, if less than five, or the annual
salary amount for an officer who has worked less than one
calendar year. The severance payment will include an
additional amount equal to any excise tax under Section 4999
of the Internal Revenue Code of 1986 incurred by the officer,
plus all federal, state and local income taxes incurred by the
officer with respect to receipt of the additional amount.
Additionally, under such contracts, medical benefits would
remain available to current and retired officers on the same
basis as is provided at the time of a change in control. The
Association has agreed to pay all legal fees and expenses
incurred by an officer in the pursuit of the rights and
benefits provided by the change in control agreement. The
Association has entered into similar change in control
agreements with each director of Gold Kist. As of June 26,
1999, no contingencies have occurred which would require the
implementation of the provisions of the change in control
agreements, and no payments or other benefits have been
provided to the five executive officers named in the summary
compensation table or to the directors.
Director Compensation. The By-Laws of Gold Kist provide
that the Directors shall be compensated for their services and
reimbursed for their expenses, as determined by the Board of
Directors. Currently the Directors receive no compensation
other than an annual retainer paid at the rate of $20,000 per
year, with the Chairman receiving $21,500. Directors and
Directors Emeriti receive a per diem of $250 with a $500
minimum, plus expenses incurred while traveling to and from
and attending meetings of the Board of Directors or other
official meetings or conferences. Pursuant to separate
agreements, Gold Kist has arranged to provide life insurance
benefits to qualifying directors emeriti and to make available
health insurance and other medical benefits for Gold Kist
directors and directors emeriti as are available to employees
of Gold Kist from time to time pursuant to the Association
group insurance program.
Compensation Committee Interlocks and Insider
Participation. Directors Fred K. Norris, Jr., Dan Smalley,
and James E. Brady, Jr. serve as members of the Association's
Compensation Committee.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Not Applicable.
Item 13. Certain Relationships and Related Transactions.
The Directors of Gold Kist are members of the Association
and, during the fiscal year ended June 26, 1999, have had
dealings in the ordinary course of business with Gold Kist as
purchasing or marketing patrons. See Business (and
Properties) -- Patronage Refunds.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.
(a)1. Index to Consolidated Financial Statements
Consolidated Financial Statements:
Independent Auditors' Reports
Consolidated Balance Sheets--June 27, 1998 and
June 26, 1999
Consolidated Statements of Operations-Years
Ended June 28, 1997, June 27, 1998 and June 26, 1999
Consolidated Statements of Patrons' and Other
Equity-and Comprehensive Income (Loss) Years
Ended June 28, 1997, June 27, 1998 and June 26,
1999
Consolidated Statements of Cash Flows-Years
ended June 28, 1997, June 27, 1998 and June 26,
1999
Notes to Consolidated Financial Statements
(a)2. Financial Statement Schedules:
Gold Kist Inc.
Financial Statement Schedule:
II. Valuation Reserves--Years Ended June 28, 1997
June 27, 1998 and June 26, 1999
<TABLE>
<CAPTION>
GOLD KIST INC.
Schedule II - Valuation Reserves
(Dollar Amounts in Thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Additions
Balance at Charged to Charged Balance
Beginning Cost and To Other At End
Description Of Period Expenses Accounts Deductions Of Period
Deducted in the consolidated
balance sheets from the asset
to which it applies:
Allowance for doubtful accounts:
<S> <C> <C> <C> <C> <C>
June 28, 1997 $1,576 336 - 486 (A) 1,426
June 27, 1998 1,426 1,975 - 288 (A) 3,113
June 26, 1999 3,113 786 - 638 (A) 3,261
(A) Represents accounts written off.
Allowance for deferred tax
assets valuation:
June 28, 1997 $1,406 - - 328 (C) 1,078
June 27, 1998 1,078 58 (B) - - 1,136
June 26, 1999 1,136 - - 516 (C) 620
(B) Represents establishment of allowance for net operating loss deductions
not available for state income tax purposes.
(C) Represents estimate of net operating loss deductions that are realizable.
</TABLE>
a)3. Exhibits - Index of Exhibits
Exhibits designated as previously filed with the
Commission in the Index of Exhibits, below, are
incorporated by reference into this Report.
<TABLE>
<CAPTION>
Designation
of Exhibit Document with Which Designation
in this Exhibit Was Previously of such Exhibit
Report Description of Exhibit Filed with Commission in that Document
<S> <C> <C> <C>
B-2 Agreement of Merger, dated as of Amendment to Schedule Exhibit 3
April 22, 1997, among 13D filed April 25, 1997
Golden Poultry Company, Inc.,
Gold Kist Inc., Agri International,
Inc. and Golden Poultry Acquisition
Corp.
B-3(a) Restated and Amended Annual Report on Form Exhibit B-3(a)
Articles of Incorpo- 10-K for the Fiscal
ration of Registrant Year ended June 26, 1993
B-3(b) Current By-Laws of Annual Report on Form Exhibit B-3(b)
Registrant, as amended 10-K for the Fiscal
Year ended June 28, 1997
B-4(a)(1) Form of Indenture, dated Registration filed on Exhibit 4(a)(2)
as of September 1, 1979, Form S-1 (Registration
governing the terms of the No. 2-65587)
Fifteen Year Subordinated
Capital Certificates of
Interest (Series B), including
therein a table of contents
and cross-reference sheet
B-4(a)(2) Form of First Supplemental Registration filed on Exhibit 4(a)(4)
Indenture, dated as of Form S-1 (Registration
September 1, 1980, governing No. 2-69267)
the terms of the Fifteen
Year Subordinated Capital
Certificates of Interest
(Series C)
B-4(a)(3) Form of Second Supplemental Registration filed on Exhibit 4(a)(5)
Indenture, dated as of Form S-2 (Registration
September 1, 1982, governing No. 2-79538)
the terms of the Fifteen
Year Subordinated Capital
Certificates of Interest
(Series D)
B-4(b)(1) Form of Indenture, dated Registration filed on Exhibit 4(b)(2)
as of September 1, 1979, Form S-1 (Registration
governing the terms of No. 2-65587)
the Ten Year Subordinated
Capital Certificates of
Interest (Series B),
including a table of contents
and cross-reference sheet
B-4(b)(2) Form of First Supplemental Registration filed on Exhibit 4(b)(4)
Indenture, dated as of Form S-1 (Registration
September 1, 1980, governing No. 2-69267)
the terms of the Ten Year
Subordinated Capital
Certificates of Interest
(Series C)
B-4(b)(3) Form of Second Supplemental Registration filed on Exhibit 4(b)(5)
Indenture, dated as of Form S-2 (Registration
September 1, 1982, governing No. 2-79538)
the terms of the Ten Year
Subordinated Capital
Certificates of Interest
(Series D)
B-4(c) Form of Indenture, dated as Registration filed on Exhibit 4(c)
of September 1, 1985, Form S-2 (Registration
governing the terms of the No. 33-428)
Seven Year Subordinated
Capital Certificates of
Interest (Series A), including
therein a table of contents,
cross-reference sheet, and
form of Seven Year Subordinated
Capital Certificates of Interest
B-4(d)(1) Form of Indenture, dated Registration filed on Exhibit 4(c)(2)
as of September 1, 1979, Form S-1 (Registration
governing the terms of the No. 2-65587)
Five Year Subordinated
Capital Certificates of
Interest (Series A),
including therein a table
of contents and cross-
reference sheet
B-4(d)(2) Form of First Supplemental Registration filed on Exhibit 4(d)(2)
Indenture, dated as of Form S-1 (Registration
September 1, 1980, governing No. 2-69267)
the terms of the Five Year
Subordinated Capital Certifi-
cates of Interest (Series B)
B-4(d)(3) Form of Second Supplemental Registration filed on Exhibit 4(d)(3)
Indenture, dated as of Form S-2 (Registration
September 1, 1982, governing No. 2-79538)
the terms of the Five Year
Subordinated Capital Certifi-
cates of Interest (Series C)
B-4(e) Form of Indenture, dated as of Registration filed on Exhibit 4(f)(2)
September 1, 1985, governing Form S-2 (Registration
the terms of the Three Year No. 33-428)
Subordinated Capital Certifi-
cates of Interest (Series A),
including therein a table of
contents, cross-reference
sheet, and form Capital
Certificates of Interest
B-4(f) Form of Indenture, dated Registration filed on Exhibit 4(g)
September 1, 1980, governing Form S-1 (Registration
the terms of the Two Year No. 2-69267)
Subordinated Capital Certifi-
cates of Interest (Series A),
including therein a table of
contents and cross-reference
sheet
B-4(g)(1) Form of Indenture, dated as of Registration filed on Exhibit 4(h)(1)
September 1, 1985, governing Form S-2 (Registration
the terms of the One Year No. 33-428)
Subordinated Large Denomi-
nation Loan Certificate
(Series A), including therein
a table of contents, cross-
reference sheet, and form of
One Year Subordinated Large
Denomination Loan Certificates
B-4(g)(2) Form of Indenture, dated as of Registration filed on Exhibit 4(d)(2)
September 1, 1979, governing Form S-1 (Registration
the terms of the One Year No. 2-65587)
Subordinated Loan Certificates
(Series B), including therein
a table of contents and
cross-reference sheet
B-4(g)(3) Form of First Supplemental Registration filed on Exhibit 4(f)(2)
Indenture, dated as of Form S-1 (Registration
September 1, 1980, governing No. 2-69267)
the terms of the One Year
Subordinated Loan Certificates
(Series C)
B-4(h) Agreement to furnish copies Registration filed on Exhibit 4(h)
of constituent instruments Form S-1 (Registration
defining the rights of the No. 2-59958)
holders of certain industrial
revenue bonds
B-4(i)(1) Multiple Advance Term Loan
Supplement with CoBank, ACB
dated as of September 1, 1997
B-4(i)(2) Note Agreement with the Registration filed on Exhibit 4(l)(6)
Prudential Insurance Company Form S-2 (Registration
of America, dated as of No. 33-42900)
June 3, 1991
B-4(i)(3) Amendment dated as of June 26, Registration filed on Exhibit 4(l)(7)
1992, to Note Agreement with Form S-2 (Registration
the Prudential Insurance Company No. 33-52268)
of America
B-4(i)(4) Amendment dated July 14, 1993, Registration filed on Exhibit 4(l)(8)
to Note Agreement with the Form S-2 (Registration
Prudential Insurance Company of No. 33-69204)
America
B-4(i)(5) Note Purchase and Private Shelf Registration filed on Exhibit 4(j)(9)
Agreement, dated as of February Form S-2
11, 1997, with the Prudential (Registration No. 333-36291)
Insurance Company of America
B-4(i)(6) Amendment dated May 13, 1997 Registration filed on Exhibit 4(j)(10)
to Note Agreement dated Form S-2
as of June 3, 1991 with the (Registration No. 333-36291)
Prudential Insurance Company of
America; and Note Purchase and
Private Shelf Agreement with the
Prudential Insurance Company of America
B-10(a) Form of Deferred Compensation Registration filed on Exhibit 11(d)
Agreement between Gold Kist Form S-1 (Registration
Inc. and certain executive No. 2-59958)
officers*
B-10(b)(1)Gold Kist Management Bonus Registration filed on Exhibit 10(b)
Program* Form S-1 (Registration
No. 2-69267)
B-10(b)(2)Amended Gold Kist Management Registration filed on Exhibit 10(b)(2)
Bonus Program* Form S-2 (Registration
No. 2-79538)
B-10(b)(3)Form of Gold Kist Supplemental Registration filed on Exhibit 10(b)(3)
Executive Retirement Income Form S-2 (Registration
non-qualified deferred No. 33-9007)
compensation agreement between
Gold Kist and certain execu-
tive officers and Resolution
of Gold Kist Board of Directors
authorizing the Supplemental
Executive Retirement Plan*
B-10(b)(4)Resolution of Gold Kist Board Registration filed on Exhibit 10(b)(4)
of Directors authorizing the Form S-2 (Registration
Gold Kist Special Award Plan* No. 33-9007)
B-10(b)(5)Form of Gold Kist Executive's Registration filed on Exhibit 10(b)(5)
Change in Control Agreement Form S-2 (Registration
between Gold Kist and certain No. 33-31164)
officers and resolution of
Gold Kist Board of Directors
authorizing the Officers
Contingency Plan*
B-10(b)(6)Form of Directors Change Registration filed on Exhibit 10(b)(6)
in Control Agreement Form S-2 (Registration
between Gold Kist and No. 33-36938
Directors of Gold Kist*
B-10(b)(7)Form of Director Registration filed on Exhibit 10(b)(7)
Emeritus Life Benefits Form S-2 (Registration
Agreement* No. 33-36938)
B-10(b)(8)Form of Director Emeritus Registration filed on Exhibit 10(b)(8)
Agreement for Medical Benefits* Form S-2 (Registration
No. 33-36938)
B-10(b)(9)Gold Kist Executive Savings Registration filed on Exhibit 10(b)(9)
Plan, as amended * Form S-2 (Registration
No. 33-62869)
B-10(b)(10)Gold Kist Director Savings Registration filed on Exhibit 10(b)(10)
Plan, as amended * Form S-2 (Registration
No. 33-62869)
B-10(b)(11)Gold Kist Split Dollar Life Registration filed on Exhibit 10(b)(11)
Insurance Plan * Form S-2 (Registration
No. 33-62869)
B-10(c)(l)Form of Membership, Marketing, Registration filed on Exhibit 13(b)
and/or Purchasing Agreement of Form S-1 (Registration
Gold Kist Inc., Atlanta, No. 2-59958)
Georgia
B-10(c)(2)Form of Membership, Marketing, Registration filed on Exhibit 10(c)(2)
and/or Purchasing Agreement of Form S-1 (Registration
Gold Kist Inc., Atlanta, No. 2-74205)
Georgia, as revised October
17, 1980
B-10(c)(3)Form of Membership, Marketing, Registration filed on Exhibit 10(c)(3)
and/or Purchasing Agreement of Form S-2 (Registration
Gold Kist Inc., Atlanta, No. 33-428)
Georgia, as revised November
l, l984
B-10(c)(4)Form of Membership, Marketing, Registration filed on Exhibit 10(c)(4)
and/or Purchasing Agreement Form S-2 (Registration
of Gold Kist Inc., Atlanta, No. 33-24623)
Georgia, revised October
29, 1987
B-10(c)(5)Form of Membership, Marketing, Registration filed on Exhibit 10(c)(5)
and/or Purchasing Agreement of Form S-2 (Registration
Gold Kist Inc., Atlanta, Georgia, No. 33-42900)
revised August 21, 1991
B-10(c)(6)Form of Membership, Marketing, Registration filed on Exhibit 10(c)(6)
and/or Purchasing Agreement of Form S-2
Gold Kist Inc., Atlanta, Georgia (Registration No. 333-36291)
revised July 9, 1997
B-10(d) CF Industries, Inc., Member Registration filed on Exhibit 13(j)
Product Purchase Agreement Form S-2 (Registration
No. 2-59958)
B-10(e)(1)General Partnership Agreement Registration filed on Exhibit 10(h)(1)
(GC Properties) between Gold Form S-2 (Registration
Kist Inc. and Cotton States No. 33-428)
Mutual Insurance Company,
dated as of July 1, 1984
B-10(e)(2)Lease from GC Properties, Registration filed on Exhibit 10(h)(2)
dated December 11, 1984, Form S-2 (Registration
for home office building No. 33-428)
space
B-10(f)(1)General Partnership Agreement Annual Report on Form Exhibit B-10(f)(1)
(Golden Peanut Company) 10-K for the Fiscal
between Gold Kist and Archer- Year Ended June 30, 1987
Daniels-Midland Company, dated
as of December 17, 1986
B-10(f)(2)Amended and Restated Partnership Registration filed on Exhibit 10(f)(2)
Agreement (Golden Peanut Company) Form S-2 (Registration
between Gold Kist Inc., Archer- No. 33-31164)
Daniels-Midland Company and
Alimenta Processing Corporation,
dated as of March 1, 1989
B-10(f)(3)Amendment to Amended and Registration filed on Exhibit 10(f)(3)
Restated Partnership Agreement Form S-2 (Registration
(Golden Peanut Company) between No. 33-42900)
Gold Kist Inc., Archer-Daniels-
Midland Company and Alimenta
Processing Corporation, dated
as of June 30, 1991
B-10(f)(4)Master Commercial Facilities Annual Report on Form Exhibit B-10(f)(2)
Lease Agreement between Gold 10-K for the Fiscal
Kist and Golden Peanut Company Year Ended June 30, 1987
dated as of December 17, 1986
B-10(g) Grain Procurement Agreement Annual Report on Form Exhibit B-10(h)
between Gold Kist and Archer- 10-K for the Fiscal
Daniels-Midland Company, dated Year Ended June 30, 1987
August 31, 1987
B-10(h) Guaranty dated December 18, Registration filed on Exhibit 4(o)
1992 by Gold Kist in favor of Form S-2 (Registration
NationsBank of Georgia, N.A. No. 33-69204)
B-10(i)(1)Credit Agreement dated as of Annual Report on Form Exhibit B-10(i)
August 4, 1998, with various 10-K for the Fiscal Year
banks and lending institutions, ended June 27, 1998
as lendors, and Cooperatieve
Centrale Raiffeisen-Boerenleen
Bank B.A., New York Branch, as agent
B-10(i)(2)First Amendment dated as of
September 30, 1998, to
Credit Agreement dated as of
August 4, 1998, with various banks
and lending institutions, as lendors,
and Cooperatieve Centrale Raiffeisen-
Boerenleen Bank B.A., New York
Branch, as agent
B-10(i)(3)Second Amendment dated as of
October 13, 1998, to
Credit Agreement dated as of
August 4, 1998, with various banks
and lending institutions, as lendors,
and Cooperatieve Centrale Raiffeisen-
Boerenleen Bank B.A., New York
Branch, as agent
B-10(i)(4)Third Amendment dated as of
December 3, 1998, to
Credit Agreement dated as of
August 4, 1998, with various banks
and lending institutions, as lendors,
and Cooperatieve Centrale Raiffeisen-
Boerenleen Bank B.A., New York
Branch, as agent
B-10(i)(5)Fourth Amendment dated as of
April 30, 1999, to
Credit Agreement dated as of
August 4, 1998, with various banks
and lending institutions, as lendors,
and Cooperatieve Centrale Raiffeisen-
Boerenleen Bank B.A., New York
Branch, as agent
B-10(j) Asset Purchase Agreement dated Report filed on Form Exhibit 10(k)
as of July 23, 1998, between 8-K dated as of
Southern States Cooperative, July 23, 1998
Incorporated and Gold Kist Inc.
B-10(k)(1)Commitment Letter for Purchase
of Securities dated October 13, 1998
between Southern States Cooperative,
Incorporated and Gold Kist Inc.
B-10(k)(2)Amendment dated March 25, 1999 to
Commitment Letter for Purchase of
Securities between Southern States
Cooperative, Incorporated and
Gold Kist Inc.
B-21 Subsidiaries of the Registrant Annual Report on Form Exhibit B-21
10-K for the Fiscal Year
ended June 27, 1998
B-27 Financial Data Schedule
</TABLE>
_________________________________
*Plans and arrangements pursuant to which executive officers and
directors of the Association receive compensation.
(b) Reports on Form 8-K. - No reports on Form 8-K were filed
during the last quarter of the fiscal year ended June 26, 1999.
SIGNATURES - Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GOLD KIST INC.
Date: September 21, 1999 By:/s/ G. O. Coan
G. O. Coan, Chief Executive
Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ G. O. Coan Chief Executive Officer September 21, 1999
G. O. COAN (Principal Executive Officer)
/s/ Stephen O. West Chief Financial Officer September 21, 1999
STEPHEN O. WEST (Principal Financial Officer)
/s/ W. F. Pohl, Jr. Controller (Principal September 21, 1999
W. F. POHL, JR. Accounting Officer)
/s/ Fred K. Norris, Jr. Director September 21, 1999
FRED K. NORRIS, JR.
/s/ Dan Smalley Director September 21, 1999
DAN SMALLEY
/s/ James E. Brady, Jr. Director September 21, 1999
JAMES E. BRADY, JR.
/s/ Phil Ogletree, Jr. Director September 21, 1999
PHIL OGLETREE, JR.
/s/ A. Jack Nally Director September 21, 1999
A. JACK NALLY
/s/ W. Kenneth Whitehead Director September 21, 1999
W. KENNETH WHITEHEAD
/s/H. Michael Davis Director September 21, 1999
H. MICHAEL DAVIS
/s/ Herbert A. Daniel, Jr. Director September 21, 1999
HERBERT A. DANIEL, JR.
/s/ W. A. Smith Director September 21, 1999
W. A. SMITH
</TABLE>
Index to Exhibits
Sequentially
Exhibit Numbered
Number Description Page
B-4(i)(1) Multiple Advance Term Loan
Supplement with CoBank, ACB
dated as of September 1, 1997
B-10(i)(2) First Amendment dated as of
September 30, 1998, to
Credit Agreement dated as of
August 4, 1998, with various banks
and lending institutions, as lenders,
and Cooperatieve Centrale Raiffeisen-
Boerenleen Bank B.A., New York
Branch, as agent
B-10(i)(3) Second Amendment dated as of
October 13, 1998, to
Credit Agreement dated as of
August 4, 1998, with various banks
and lending institutions, as lendors,
and Cooperatieve Centrale Raiffeisen-
Boerenleen Bank B.A., New York
Branch, as agent
B-10(i)(4) Third Amendment dated as of
December 3, 1998, to
Credit Agreement dated as of
August 4, 1998, with various banks
and lending institutions, as lendors,
and Cooperatieve Centrale Raiffeisen-
Boerenleen Bank B.A., New York
Branch, as agent
B-10(i)(5) Fourth Amendment dated as of
April 30, 1999, to
Credit Agreement dated as of
August 4, 1998, with various banks
and lending institutions, as lendors,
and Cooperatieve Centrale Raiffeisen-
Boerenleen Bank B.A., New York
Branch, as agent
B-10(k)(1) Commitment Letter for Purchase
of Securities dated October 13, 1998
between Southern States Cooperative,
Incorporated and Gold Kist Inc.
B-10(k)(2) Amendment dated March 25, 1999 to
Commitment Letter for Purchase of
Securities between Southern States
Cooperative, Incorporated and
Gold Kist Inc.
B-27 Financial Data Schedule
EXHIBIT B-4(i)(1)
Loan No. E126T01
MULTIPLE ADVANCE TERM LOAN SUPPLEMENT
THIS SUPPLEMENT to the Master Loan Agreement dated August 1,
1996 (the "MLA") , is entered into as of September 1, 1997
between CoBANK, ACB ("CoBank") and GOLD KIST INC., Atlanta, GA
(the "Company").
SECTION 1. The Term Loan Commitment. On the terms and
conditions set forth in the MLA and this Supplement, CoBank
agrees to make loans to the Company from time to time during
the period set forth below in an aggregate principal amount
not to exceed $50,000,000.00 (the "Commitment"). Under the
Commitment, amounts borrowed and later repaid may not be
reborrowed.
SECTION 2. Purpose. The purpose of the Commitment is to
provide working capital to the Company and for fixed asset
expenditures or general operating purposes.
SECTION 3. Term. The term of the Commitment shall be
from September 1, 1997, up to but not including December 31,
1997, or such later date as CoBank may, in its sole
discretion, authorize in writing.
SECTION 4. Interest. The Company agrees to pay interest
on the unpaid principal balance of the loans in accordance
with one or more of the following interest rate options, as
selected by the Company:
(A) Variable Rate Option. At a rate per annum equal at
all times to the rate of interest established by CoBank from
time to time as its National Variable Rate, which Rate is
intended by CoBank to be a reference rate and not its lowest
rate. The National Variable Rate will change on the date
established by CoBank as the effective date of any change
therein and CoBank agrees to notify the Company promptly after
any such change.
(B) Treasury Option. At a fixed rate equal to 1.25% per
annum above the "U.S. Treasury Rate" (as hereinafter defined).
Under this option, balances of $1,000,000 or more may be fixed
on or before September 30, 1997 for periods ranging from one
year to the final maturity date of the loan, as selected by
the Company. Notwithstanding the foregoing, subsequent to
September 30, 1997, if the spread between CoBank's cost of
funds (as determined by CoBank in accordance with its
methodology) and the U.S. Treasury Rate should widen from the
spread in effect for the same period of time on the date
hereof, then the spread over the U.S. Treasury Rate may be
adjusted upward to reflect any such change. However, rates
may not be fixed in such a manner as to require the Company to
have to repay any fixed rate balance prior to the last day of
its fixed rate period in order to pay any installment of
principal. For purposes hereof, the "U.S. Treasury Rate"
shall mean the yield to maturity on U.S. Treasury instruments
having the same maturity date as the last day of the fixed
rate period selected by the Company, as calculated from the
bid price indicated by Telerate (page 5) at the time the rate
is fixed. If, however, no instrument is indicated for the
maturity selected, then the rate shall be interpolated based
on the bid prices quoted for the next longest and shortest
maturities so indicated. In the event Telerate ceases to
provide such quotations or materially changes the form or
substance of page 5 (as determined by CoBank), then CoBank
will notify the Company and the parties hereto will agree upon
a substitute basis for obtaining such quotations.
The Company shall select the applicable rate option at
the time it requests a loan hereunder and may, subject to the
limitations set forth above, elect to convert balances bearing
interest at the variable rate to one of the fixed rate
options. Upon the expiration of any fixed rate period,
interest shall automatically accrue at the variable rate
unless the amount fixed is repaid or fixed for an additional
period in accordance with the terms hereof. All elections
provided for herein shall be made telephonically or in writing
and must be received by 12:00 noon Company's local time.
Interest shall be calculated on the actual number of days each
loan is outstanding on the basis of a year consisting of 360
days and shall be payable quarterly in arrears by the 20th day
of the month following the calendar quarter.
SECTION 5. Promissory Note. The Company promises to
repay the loans made under the commitment in 27 consecutive
semi-annual installments of $1,785,000, and a final
installment of $1,805,000 (or such other amount to repay the
outstanding balance in full) with the first such installment
due on June 1, 1999 and the last such installment due on
December 1, 2012. If any installment due date is not a day on
which CoBank is open for business, then such installment shall
be due and payable on the next day on which CoBank is open for
business. In addition to the above, the Company promises to
pay interest on the unpaid principal balance hereof at the
times and in accordance with the provisions set forth in
Section 4 hereof.
SECTION 6. Prepayment. The loans may be prepaid in
whole or in part on one CoBank business day's prior written
notice. Unless otherwise agreed, all prepayments will be
applied to principal installments in the inverse order of
their maturity.
SECTION 7. Commitment Fee. In consideration of the
Commitment, the Company agrees to pay to CoBank a commitment
fee of $12,500 which will be due on or before September 20,
1997 and a fee of 5 basis points (.05%) on each advance
payable on the 20th of the month following the advance.
IN WITNESS WHEREOF, the parties have caused this
Supplement to be executed by their duly authorized officers as
of the date shown above.
CoBank, ACB GOLD KIST INC.
By: /s/ Porter Little By: /s/ Stephen O. West
Title: Vice President Title: Treasurer
11542/Securities/Exhibit/Mult. Adv. Term Loan Supple
EXHIBIT B-10(i)(2)
FIRST AMENDMENT TO
CREDIT AGREEMENT
This First Amendment to Credit Agreement (this
"Amendment"), dated as of September 30, 1998, is made and
entered into by and among GOLD KIST INC., a cooperative
marketing association organized and existing under the laws of
the State of Georgia (the "Borrower"), various banks and other
lending institutions as are, or may from time to time become,
parties hereto (collectively, the "Lenders" and individually,
a "Lender"), and COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK
BRANCH ("Rabobank") as Agent for the Lenders.
W I T N E S S E T H:
WHEREAS, the parties hereto are parties to that certain
Credit Agreement, dated as of August 4, 1998 (the "Credit
Agreement"); and
WHEREAS, the Borrower has requested that the Lenders
provide for a $15,000,000 Swing Line Commitment under the
Credit Agreement, such Commitment to be a sublimit of the
364-Day Commitment;
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
Section 1. Amendments. The terms of the Credit
Agreement are hereby amended as follows:
(a) Definitions. Section 1.1 of the Credit Agreement is
amended by adding thereto the following defined terms:
""Swing Line Advance" shall mean an advance made by
the Swing Line Bank pursuant to Section 2.1(d), which Advance
shall be for all purposes under this Agreement (except as
expressly provided otherwise by Sections 2.1(c), (d), or (e))
be deemed an advance under the 364-Day Line of Line of Credit
Commitment.
"Swing Line Bank" shall mean Rabobank.
"Swing Line Borrowing" shall mean a borrowing
consisting of a Swing Line Advance made by the Swing Line
Bank.
"Swing Line Maturity Date" shall mean, with respect
to any Swing Line Advance, the date that is five Business Days
prior to the 364 Day Loan Maturity Date.
"Swing Line Participation" shall mean the
participation purchased by a Lender in any Swing Line Advance
pursuant to Section 2.1(e).
"Swing Line Sublimit" has the meaning specified in
Section 2.1(d)."
(b) Swing Line Borrowings. Section 2.1 of the Credit
Agreement is amended by adding the following subsections
thereto.
"(d) The Swing Line Advances. The Borrower may
request the Swing Line Bank to make, and the
Swing Line Bank shall make, on the terms and
conditions hereinafter set forth, Swing Line
Advances to the Borrower from time to time on
any Business day during the period from the
date hereof until the Swing Line Maturity Date
in an aggregate amount not to exceed at any
time outstanding U.S. $15,000,000 (the "Swing
Line Sublimit"); provided that at such time the
outstandings under all Swing Line Advances plus
the outstandings under all 364-Day Loans, after
giving effect to such Borrowing, shall not
exceed the 364-Day Line of Credit Commitment.
Each Swing Line Advance shall bear interest at
a per annum rate equal to the Base Rate minus
1% (one percent). Within the limits of the
Swing Line Sublimit, the Borrowers may borrow
under this Section 2.1(d), repay pursuant to
Section 3.1 and reborrow under this Section
2.1(d).
(e) Each Swing Line Advance shall be made on
notice, given not later than 11:00 A.M. (New
York City time) on the date of the proposed
Swing Line Advance, by the Borrower to the
Swing Line Bank. Each such notice of a
proposed Swing Line Borrowing (a "Notice of
Swing Line Borrowing") shall be by telephone,
confirmed immediately in writing, or telex or
telecopier, specifying therein the requested
(i) date on which such Swing Line Advances to
be made and (ii) amount of such Swing Line
Advance. The Swing Line Bank, upon fulfillment
of the applicable conditions set forth in
Article II, will make the amount thereof
available, no later than 4:00 P.M. (New York
City time) on such Business Day, to the
Borrower in same day funds by crediting the
account of the Borrower set forth in the Notice
of Borrowing pursuant to which the Advance is
being made. At any time the Swing Line Bank
makes a Swing Line Advance, each Lender (other
than the Swing Line Bank) shall be deemed,
without further action by any Person, to have
purchased from the Swing Line Bank an unfunded
participation in any such Swing Line Advance in
an amount equal to the amount of such Advance
times such Lender's Pro Rata Share of the
364-Day Line of Credit Commitment (the "Swing
Line Participation") and shall be obligated to
fund such participation at such time and in the
manner provided below. Each such Lender's
obligation to participate in, purchase and fund
such Swing Line Participation shall be absolute
and unconditional and shall not be affected by
any circumstance, including, without
limitation, (i) any set-off, counterclaim,
recoupment, defense or other right which such
Lender or any other Person may have against the
Swing Line Bank or any other Person for any
reason whatsoever; (ii) the occurrence or
continuance of Default or an Event of Default
or the termination of the Commitments; (iii)
any adverse change in the condition (financial
or otherwise) of the Borrower or any other
Person; (iv) any breach of this Agreement by
any Borrower or any other Lender; or (v) any
other circumstance, happening or event
whatsoever, whether or not similar to any of
the foregoing. The Borrower hereby consents to
each such sale and assignment. Each Lender
agrees to fund any outstanding Swing Line
Participation on (i) the Business Day of which
demand therefor is made by the Swing Line Bank,
provided that such demand is made not later
than 1:00 P.M. (New York City time) on such
Business Day, or (ii) the first Business Day
next succeeding such demand is made after such
time. Upon any such assignment by the Swing
Line Bank to any other Lender of a Swing Line
Participation, the Swing Line Bank represents
and warrants to such other Lender that it is
the legal and beneficial owner of such interest
being assigned by it, but makes no other
representation or warranty and assumes no
responsibility with respect to such Swing Line
Advance or Swing Line Participation, or the
Loan Documents or the Borrower to which such
Swing Line Advance was made. If and to the
extent that any Lender shall not have so made
the amount of such Swing Line Participation
available to the Administrative Agent, such
Lender agrees to pay to the Administrative
Agent forthwith on demand such amount together
with interest thereon, for each day from the
date of the request by the Swing Line Bank
until the date such amount is paid to the
Administrative Agent, at the Federal Funds
Rate. If such Lender shall pay to the
Administrative Agent such amount for the
account of the Swing Line Bank on any Business
Day, such amount so paid in respect of
principal shall constitute a 364-Day Loan made
by such Lender on such Business Day for
purposes of the Agreement, and the outstanding
principal amount of the Swing Line Advance made
by the Swing Line Bank shall be reduced by such
amount on such Business Day.
(f) Each Notice of Borrowing and Notice of Swing
Line Borrowing shall be irrevocable and binding
on the Borrower requesting the Advances covered
by such Notice and such Borrower shall
indemnify each Lender against any loss or
expense incurred by such Lender as a result of
any failure to fulfill on or before, as
applicable, the date specified for such Advance
the applicable conditions set forth in Article
II, including, without limitation, any loss
(excluding loss of anticipated profits) or
expense incurred by reason of the liquidation
or reemployment of deposits or other funds
acquired by such Lender (and the Administrative
Agent in the case of Advances by the
Administrative Agent pursuant to Section 2.1(d)
to fund such Advance when such Advance, as a
result of such failure, is not made on such
date.
Section 2. Conditions Precedent. This First Amendment and
the obligations of the Lenders evidenced hereunder shall not
be effective until the Administrative Agent shall have
received a Certificate executed by the Chief Executive Officer
or Chief Financial Officer of the Borrower stating that, to
the best of his knowledge and based upon an examination
sufficient to enable him to make an informed statement, (i)
all of the representations and warranties made or deemed to be
made under the Credit Agreement are materially true and
correct as of the date of this First Amendment to Credit
Agreement, and (ii) no Default or Event of Default exists.
Section 3. Reference to and Effect on the Credit
Agreement and the Other Loan Documents.
(a) On and after the date hereof, each reference in the
Credit Agreement to "this Agreement," "hereunder," "hereof,"
"herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to
the "Credit Agreement," "thereunder," "thereof" or words of
like import referring to the Credit Agreement shall mean and
be a reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended by this Amendment,
the Credit Agreement and the other Loan Documents shall remain
in full force and effect and are hereby ratified and
confirmed.
(c) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein,
constitute a waiver of any provision of, or operate as a
waiver of any right, power or remedy of the Administrative
Agent or any Lender under the Credit Agreement or any of the
other Loan Documents.
Section 4. Miscellaneous.
(a) Section and Subsection Headings. Section and
Subsection headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part
of this Amendment for any other purpose or be given any
substantive effect.
(b) Governing Law. This Amendment and the rights and
obligations of the parties hereunder shall be governed by, and
shall be construed and enforced in accordance with, the laws
of the State of Georgia.
(c) Counterparts; Effectiveness. This Amendment may be
executed in any number of counterparts and by different
parties hereto and separate counterparts, each of which when
so executed and delivered shall be deemed an original, but all
such counterparts taken together shall constitute but one and
the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically
attached to the same document. This Amendment shall become
effective upon the execution of a counterpart hereof by the
Borrower and the Required Lenders and receipt by the Borrower
and the Administrative Agent of written or telephonic
notification of such execution and authorization or delivery
thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their
respective officers thereunto duly authorized as of the date
first above written.
GOLD KIST INC.
By: /s/ Stephen O. West
Name: Stephen O. West
Title: Treasurer
Attest: /s/ J. David Dyson
Name: J. David Dyson
Title: Gen. Counsel, Vice President
[CORPORATE SEAL]
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "Rabobank
Nederland", NEW YORK BRANCH,
individually and as Agent
By: /s/ R. J. Beard
Name: R. J. Beard
Title: Vice President
By: /s/ W. Jeffrey Vollack
Name: W. Jeffrey Vollack
Title: Senior Credit Officer
Senior Vice President
11561/Securities/Exhibit/1st Amendment to Credit Agmt
EXHIBIT B-10-(i)(3)
SECOND AMENDMENT TO
CREDIT AGREEMENT
This Second Amendment to Credit Agreement (this "Second
Amendment"), dated as of October 13, 1998, is made and entered
into by and among GOLD KIST INC., a cooperative marketing
association organized and existing under the laws of the State
of Georgia (the "Borrower"), various banks and other lending
institutions as are, or may from time to time become, parties
hereto (collectively, the "Lenders" and individually, a
"Lender"), and COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH ("Rabobank") as
Agent for the Lenders.
W I T N E S S E T H:
WHEREAS, the parties hereto are parties to that certain
Credit Agreement, dated as of August 4, 1998, as amended by
that First Amendment to Credit Agreement dated as of October
13, 1998 (and as may be further amended, supplemented or
otherwise modified from time to time, the "Credit Agreement");
WHEREAS, the Borrower has requested that the Agent and
the Lenders (i) permit the Borrower to sell certain assets to
Southern States Cooperative, (ii) permit the Borrower to
purchase the SSC Securities (as defined below) and (iii)
provide for the issuance of the Letter of Credit (as defined
below) to support certain obligations of the Borrower incurred
in connection with the purchase of the SSC Securities;
WHEREAS, the Agent and the Lenders are willing to permit
the foregoing actions of the Borrower and to provide for the
issuance of the Letter of Credit on the terms and conditions
set forth herein; and
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
Section 1. Amendments. The terms of the Credit
Agreement are hereby amended as follows:
(1) Additions to Section 1.1. Section 1.1 of the Credit
Agreement is amended by adding thereto the following defined
terms:
"Additional Collateral" shall have the meaning given
thereto in Section 6.17
"Additional Collateral Value" shall mean (i) prior
to the Appraisal Date, 50% of the aggregate insured value
of the Additional Collateral and (ii) after the Appraisal
Date, 70% of the Appraised Value of the Additional
Collateral; provided, however, (a) in the event that the
Borrower fails to provide the appraisals required
pursuant to Section 6.18, "Additional Collateral Value"
shall mean 0, and (b) in the event that the Appraised
Value as set forth in the appraisals required pursuant to
Section 6.18 is less than $105,000,000, "Additional
Collateral Value" shall mean 70% of such lesser Appraised
Value.
"Appraisal Date" shall mean the date which is sixty
days after the Second Amendment Closing Date
"Appraised Value" shall have the meaning given
thereto in Section 6.18.
"Authority" means any Federal, state or local
governmental authority, central bank or any agency or
instrumentality thereof.
"Borrowing Base Increase" shall mean (a) the lesser
of (i) $75,000,000 and (ii) the Additional Collateral
Value minus (b) the sum of, without duplication, (i) the
amount of all prepayments required pursuant to Section
3.1(f)(iii) plus (ii) the amount of all other prepayments
of the L/C Loan plus (iii) in the event of a termination
of the Letter of Credit (other than as a result of a draw
of the full stated amount thereunder), the remaining
amount of the Borrowing Base Increase.
"Commitment Share" means, for any Lender, the
percentage that such Lender's Revolving Credit Commitment
bears to the aggregate Revolving Credit Commitments of
all the Lenders.
"Default Rate" means a rate per annum equal to the
Base Rate plus two percent (2%).
"Issuing Bank" means Rabobank in its capacity as the
issuer of the Letter of Credit.
"L/C Loan" means the Revolving Loan made pursuant to
Section 2A.5(iii) and any refunding, continuation or
conversion thereof pursuant to Section 3.6.
"Letter of Credit" shall mean a commercial stand-by
letter of credit in the form attached to this Second
Amendment as Exhibit A issued on the Second Amendment
Closing Date by the Issuing Bank for the account of the
Borrower pursuant to Article 2A in the face amount of
$100,000,000.
"Letter of Credit Fee" shall have the meaning given
thereto in Section 2A.8.
"Letter of Credit Obligations" shall mean, at any
particular time, the sum of (a) the Reimbursement
Obligations at such time and (b) the aggregate maximum
amount available for drawing under the Letter of Credit
at such time.
"Letter of Credit Application Agreement" shall mean,
with respect to the Letter of Credit, such form of
application therefor (whether in a single or several
documents) as the Issuing Bank may employ in the ordinary
course of business for its own account.
"Reimbursement Obligations" means the reimbursement
or repayment obligations of the Borrower to the Issuing
Bank pursuant to Section 2A.5 with respect to the Letter
of Credit.
"Second Amendment Closing Date" shall mean the later
of (i) October 13, 1998 or (ii) the date as of which all
conditions precedent to the effectiveness of this Second
Amendment have been satisfied or waived by the Agent, the
Issuing Bank and the Lenders.
"Second Escrow Agreement" shall mean an escrow
agreement executed and delivered by the Borrower pursuant
to which the Agent is authorized and directed to file
Real Property Mortgages upon Real Property to satisfy the
requirements of Section 6.18.
"SSC Securities" means the $40,000,000 Series B
Cumulative Redeemable Preferred Stock and the $60,000,000
Series B Capital Securities issued by Southern States
Cooperative or Southern States Capital Trust,
respectively, and purchased by the Borrower pursuant to
the Commitment Letter between the Borrower and Southern
States Cooperative dated as of October 13, 1998.
"SSC Pledge Agreement" shall mean a pledge agreement
granting a security interest in the SSC Securities to the
Lenders, executed and delivered by the Borrower in form
and substance similar to the Pledge Agreement and
acceptable to the Agent.
(2) Amendment to Section 1.1. Section 1.1 of the Credit
Agreement is amended by deleting each of the following
existing definitions and substituting therefore the following:
"Borrowing Base" shall mean, as of the last day of
any calendar month, an amount equal to (a) the sum of
(i) 80% of all Eligible Receivables as of such date of
determination; plus (ii) 50% of Eligible Inventory as of
such date of determination; plus (iii) during any period
that the Lenders have a perfected, first priority
security interest in the ADM Shares, 80% of the Market
Value of ADM Shares as of such date of determination;
plus (iv) Borrowing Base Increase; provided however, that
prior to December 1, 1998, the Borrowing Base shall not
include any amounts attributable to the Agri Services
Assets.
"Borrowing Base Certificate" shall mean a
certificate, duly executed by the chief financial
officer, chief accounting officer or treasurer of the
Borrower, appropriately completed and substantially in
the form of Exhibit I to this Second Amendment.
"Loan Documents" shall mean and include, as the
context requires, this Agreement, the Notes, the
Collateral Documents, the Subsidiary Guaranty, the
Letter of Credit, any Letter of Credit Application
Agreement, and any and all other instruments, agreements,
documents and writings contemplated hereby or executed in
connection herewith.
"Required Lenders" shall mean, at any time, any
Lender or group of Lenders holding at least 66 2/3% of
either (a) the sum of the Commitments, whether or not
advanced, or (b) if such Commitments have terminated, 66
2/3% of the sum of the outstanding Loans and Letter of
Credit Obligations.
(3) Amendment to Section 1.1. Section 1.1 of the Credit
Agreement is amended by deleting paragraph (e) from the
definition of "Funded Debt" and adding thereto the following:
(e) obligations outstanding under the 364-Day Loans
and under any other credit facility with a maturity of
less than one year, to the extent that such obligations
exceed eighty percent (80%) of the Borrower's inventory
balance as of the date of such calculation; and
(f) Letter of Credit Obligations.
(4) Addition of Article 2A. The following Article 2A is
hereby added to the Credit Agreement:
ARTICLE 2A
LETTER OF CREDIT FACILITY
Section 2A.1. Obligation to Issue. Subject to the terms
and conditions of this Agreement, and in reliance upon the
representations and warranties of the Borrower herein set
forth, the Issuing Bank shall issue on the Second Amendment
Closing Date the Letter of Credit in accordance with this
Article 2A.
Section 2A.2. Types and Amounts. The Issuing Bank shall
have no obligation to issue the Letter of Credit:
(a) if the aggregate maximum amount then available
for drawing under the Letter of Credit, after giving
effect to the issuance of the Letter of Credit, shall
exceed any limit imposed by law or regulation upon the
Issuing Bank;
(b) if the issuance of the Letter of Credit would
violate the provisions of any Section of this Credit
Agreement, including, without limitation, Section 3.2; or
(c) with an expiration date after the Revolving
Loan Maturity Date.
Section 2A.3. Conditions. In addition to being subject
to the satisfaction of the conditions contained in Article IV,
the obligation of the Issuing Bank to issue the Letter of
Credit is subject to the satisfaction in full or waiver by the
Agent, the Issuing Bank and the Lenders of the following
conditions:
(a) the Borrower shall have delivered to the
Issuing Bank, at such times and in such manner as the
Issuing Bank may prescribe, the Letter of Credit
Application Agreement and such other documents and
materials as may be required pursuant to the terms
thereof, all satisfactory in form and substance to the
Issuing Bank and the terms of the Letter of Credit shall
be satisfactory in form and substance to the Issuing
Bank; and
(b) as of the date of issuance no order, judgment
or decree of any court, arbitrator or Authority shall
purport by its terms to enjoin or restrain the Issuing
Bank from issuing the Letter of Credit and no law, rule
or regulation applicable to the Issuing Bank and no
request or directive (whether or not having the force of
law) from any Authority with jurisdiction over the
Issuing Bank shall prohibit or request that the Issuing
Bank refrain from the issuance of letters of credit
generally or the issuance of the Letter of Credit.
(c) All Real Estate Mortgages shall have been filed
with the appropriate Authority sufficient to grant a first
priority lien in favor of the Agent against the Real
property listed on Schedule 6.17.
Section 2A.4. Issuance of the Letter of Credit.
(a) Request for Issuance. Before the issuance of the
Letter of Credit, the Borrower shall give the Issuing Bank a
written notice containing the original signature of an
authorized officer or employee of the Borrower specifying the
date on which such requested Letter of Credit is to expire and
the person for whose benefit the Letter of Credit is to be
issued.
(b) Issuance; Notice of Issuance. If the applicable
conditions set forth in this Agreement are satisfied, the
Issuing Bank shall issue the requested Letter of Credit, give
each Lender written or telex notice, or telephonic notice
confirmed promptly thereafter in writing, of the issuance of
the Letter of Credit, and deliver to each Lender in connection
with such notice a copy of the Letter of Credit issued by the
Issuing Bank.
(c) No Extension or Amendment. The Issuing Bank shall
not extend or amend the Letter of Credit without the prior
written consent of the Lenders.
Section 2A.5. Reimbursement Obligations; Duties of the
Issuing Bank.
(a) Reimbursement. Notwithstanding any provisions to
the contrary in any Letter of Credit Application Agreement:
(i) the Borrower shall reimburse the Issuing Bank
for drawings under the Letter of Credit (a "Reimbursement
Obligation") on the Business Day the payment is made by
the Issuing Bank;
(ii) any Reimbursement Obligation shall bear
interest from the date of the relevant drawing under the
Letter of Credit until the date of payment in full
thereof at a rate per annum equal to (A) prior to the
date that is 3 Business Days after the date of the
related payment by the Issuing Bank, the Base Rate and
(B) thereafter, the Default Rate; and
(iii) in order to implement the foregoing, upon
the occurrence of a draw under any Letter of Credit,
unless the Issuing Bank is reimbursed in accordance with
subsection (i) above, the Borrower irrevocably authorizes
and directs the Agent to treat such nonpayment as a
Notice of Borrowing in the amount of such Reimbursement
Obligation and to make a Revolving Loan (the "L/C Loan")
to Borrower in such amount regardless of whether (i) the
conditions precedent to the making of Loans hereunder
have been met or (ii) the making of such Loan would
violate the provision of any section of this Credit
Agreement, including without limitation, Sections 3.2(a)
and 3.2(c). The Borrower further irrevocably authorizes
and directs the Agent to credit the proceeds of such Loan
to the Issuing Bank so as to immediately eliminate the
liability of the Borrower for Reimbursement Obligations
under the Letter of Credit.
(b) Duties of the Issuing Bank. Any action taken or
omitted to be taken by the Issuing Bank in connection with the
Letter of Credit, if taken or omitted in the absence of
willful misconduct or gross negligence, shall not put the
Issuing Bank under any resulting liability to any Lender. In
determining whether to pay under the Letter of Credit, the
Issuing Bank shall have no obligation relative to the Lenders
other than to confirm that any documents required to have been
delivered under the Letter of Credit appear to comply on their
face, with the requirements of the Letter of Credit.
Section 2A.6. Participations.
(a) Purchase of Participations. Immediately upon
issuance by the Issuing Bank of the Letter of Credit, each
Lender shall be deemed to have irrevocably and unconditionally
purchased and received from the Issuing Bank, without recourse
or warranty, an undivided interest and participation, to the
extent of such Lender's Commitment Share, in the Letter of
Credit.
(b) Sharing of Letter of Credit Payments. In the event
that the Issuing Bank makes any payment under the Letter of
Credit for which the Borrower shall not have repaid such
amount to the Issuing Bank pursuant to Section 2A.7 hereof or
which cannot be paid by a Loan pursuant to subsection (iii) of
Section 2A.5, the Issuing Bank shall promptly notify each
Lender of such failure, and each Lender shall promptly and
unconditionally pay to the Issuing Bank such Lender's
Commitment Share of the amount of such payment in same day
funds. If the Issuing Bank so notifies such Lender prior to
10:00 A.M. (Atlanta, Georgia time) on any Business Day, such
Lender shall make available to the Issuing Bank its Commitment
Share of the amount of such payment on such Business Day in
same day funds. If and to the extent such Lender shall not
have so made its Commitment Share of the amount of such
payment available to the Issuing Bank, such Lender agrees to
pay to the Issuing Bank forthwith on demand such amount
together with interest thereon, for each day from the date
such payment was first due until the date such amount is paid
to the Issuing Bank at the Base Rate for the first 3 days and
thereafter at the Default Rate. The failure of any Lender to
make available to the Issuing Bank its Commitment Share of any
such payment shall neither relieve nor increase the obligation
of any other Lender hereunder to make available to the Issuing
Bank its Commitment Share of any payment on the date such
payment is to be made.
(c) Sharing of Reimbursement Obligation Payments.
Whenever the Issuing Bank receives a payment on account of a
Reimbursement Obligation, including any interest thereon, as
to which the Issuing Bank has received any payments from the
Lenders pursuant to this Section 2A.6, it shall promptly pay
to each Lender which has funded its participating interest
therein an amount equal to the such Lender's Commitment Share
thereof. Each such payment shall be made by the Issuing Bank
on the Business Day on which the funds are paid to such
Person, if received prior to 10:00 am. (Atlanta, Georgia time)
on such Business Day, and otherwise on the next succeeding
Business Day.
(d) Documentation. Upon the request of any Lender, the
Issuing Bank shall furnish to such Lender copies of the Letter
of Credit, Letter of Credit Application Agreement and other
relevant documentation relating to the Letter of Credit.
(e) Obligations Irrevocable. The obligations of the
Lenders to make payments to the Issuing Bank with respect to
the Letter of Credit shall be irrevocable, not subject to any
qualification or exception whatsoever and shall be made in
accordance with, but not subject to, the terms and conditions
of this Agreement under all circumstances, including, without
limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;
(ii) the existence of any claim, set-off, defense or
other right which the Borrower may have at any time
against a beneficiary named in the Letter of Credit or
any transferee of the Letter of Credit (or any Person for
whom any such transferee may be acting), the Issuing
Bank, any Lender or any other Person, whether in
connection with this Agreement, the Letter of Credit, the
transactions contemplated herein or any unrelated
transactions;
(iii) any draft, certificate or any other
document presented under the Letter of Credit proves to
be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for
the performance or observance of any of the terms of any
of the Loan Documents;
(v) payment by the Issuing Bank under the Letter of
Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;
(vi) payment by the Issuing Bank under the Letter of
Credit against presentation of any draft or certificate
that does not comply with the terms of the Letter of
Credit, except payment resulting from the gross
negligence or willful misconduct of the Issuing Bank; or
(vii) any other circumstances or happenings
whatsoever, whether or not similar to any of the
foregoing, except circumstances or happenings resulting
from the gross negligence or willful misconduct of the
Issuing Bank.
Section 2A.7. Payment of Reimbursement Obligations.
(a) Payments to Issuing Bank. The Borrower agrees to
pay to the Issuing Bank the amount of all Reimbursement
Obligations, interest and other amounts payable to the Issuing
Bank under or in connection with the Letter of Credit
immediately when due, irrespective of:
(i) any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;
(ii) the existence of any claim, set-off, defense or
other right which the Borrower may have at any time
against a beneficiary named in the Letter of Credit or
any transferee of the Letter of Credit (or any Person for
whom any such transferee may be acting), the Issuing
Bank, any Lender or any other Person, whether in
connection with this Agreement, the Letter of Credit, the
transactions contemplated herein or any unrelated
transactions;
(iii) any draft, certificate or any other
document presented under the Letter of Credit proves to
be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for
the performance or observance of any of the terms of any
of the Loan Documents;
(v) payment by the Issuing Bank under the Letter of
Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;
(vi) payment by the Issuing Bank under the Letter of
Credit against presentation of any draft or certificate
that does not comply with the terms of the Letter of
Credit, except payment resulting from the gross
negligence or willful misconduct of the Issuing Bank; or
(vii) any other circumstances or happenings
whatsoever, whether or not similar to any of the
foregoing, except circumstances or happenings resulting
from the gross negligence or willful misconduct of the
Issuing Bank.
(b) Recovery or Avoidance of Payments. In the event any
payment by or on behalf of the Borrower received by the
Issuing Bank with respect to the Letter of Credit and
distributed by the Issuing Bank to the Lenders on account of
their participations is thereafter set aside, avoided or
recovered from the Issuing Bank in connection with any
receivership, liquidation or bankruptcy proceeding, each
Lender that received such distribution shall, upon demand by
such Issuing Bank, contribute such Lender's Commitment Share
of the amount set aside, avoided or recovered together with
interest at the rate required to be paid by the Issuing Bank
upon the amount required to be repaid by it.
Section 2A.8. Compensation for Letter of Credit.
(a) Letter of Credit Fees. The Borrower shall pay to
the Agent a letter of credit fee ("Letter of Credit Fee")
equal to the product of the face amount of the Letter of
Credit and the Applicable Percentage with respect to the
Revolving Loans, payable in arrears on the last Business Day
of each fiscal quarter of the Borrower. Letter of Credit Fees
payable hereunder shall be computed on the basis of a year of
360 days and paid for the actual number of days elapsed
(including the first day but excluding the last day). The
Agent shall promptly remit the Letter of Credit Fees, when
paid, to the Lenders in accordance with their Commitment
Shares thereof.
(b) Issuing Bank Charges. The Borrower shall pay to the
Issuing Bank, solely for its own account, the standard charges
assessed by the Issuing Bank in connection with the issuance,
administration, amendment and payment or cancellation of
Letter of Credit issued hereunder, which charges shall be
those typically charged by the Issuing Bank to its customers
generally having credit and other characteristics similar to
the Borrower, as determined in good faith by the Issuing Bank.
Section 2A.9. Indemnification; Exoneration.
(a) Indemnification. In addition to amounts payable as
elsewhere provided in this Article 2A, the Borrower shall
protect, indemnify, pay and save the Issuing Bank and each
Lender harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses
(including reasonable attorneys' fees) which the Issuing Bank,
or any Lender may incur or be subject to as a consequence of
the issuance of the Letter of Credit for the Borrower's
account other than as a result of its gross negligence or
willful misconduct, as determined by a court of competent
jurisdiction.
(b) Assumption of Risk by Borrower. As between the
Borrower, the Issuing Bank and the Lenders, the Borrower
assumes all risks of the acts and omissions of, or misuse of
the Letter of Credit by, the respective beneficiaries of the
Letter of Credit. In furtherance and not in limitation of the
foregoing, the Issuing Bank and the Lenders shall not be
responsible for (i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any
party in connection with the application for and issuance of
the Letter of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate,
fraudulent or forged, (ii) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer
or assign the Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may
prove to be invalid or ineffective for any reason, (iii)
failure of the beneficiary of the Letter of Credit to comply
duly with conditions required in order to draw upon the Letter
of Credit, (iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in
cipher, for errors in interpretation of technical terms, (vi)
any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under the Letter
of Credit or of the proceeds thereof, (vii) the misapplication
by the beneficiary of the Letter of Credit of the proceeds of
any drawing under the Letter of Credit; and (viii) any
consequences arising from causes beyond the control of the
Issuing Bank or the Lenders.
(c) Exoneration. In furtherance and extension and not
in limitation of the specific provisions hereinabove set
forth, any action taken or omitted by the Issuing Bank under
or in connection with the Letter of Credit or any related
certificates if taken or omitted in good faith and with
reasonable care, shall not put the Issuing Bank or any Lender
under any resulting liability to the Borrower or relieve the
Borrower of any of its obligations hereunder to any such
Person.
Section 2A.10. Credit Yield Protection; Capital
Adequacy. If the adoption after the date hereof of any
applicable law, statute, rule, regulation, ordinance, writ,
injunction, decree, order, judgment, guideline or decision of
any Authority ("Governmental Rule"), any change after the date
hereof in any interpretation or administration of any
applicable Governmental Rule by any Person charged with its
interpretation or administration or compliance by the Issuing
Bank or any Lender with any request or directive (whether or
not having the force of law) of any such Person:
(a) shall subject the Issuing Bank or any Lender to
any tax (other than overall net income taxation), duty or
other charge with respect to any amount drawn on the
Letter of Credit or its obligation to make any payment
under the Letter of Credit, or to maintain the Letter of
Credit, or shall change the basis of taxation (other than
overall net income taxation) of payments to the Issuing
Bank or any Lender of any amounts due under this
Agreement or any amount drawn on the Letter of Credit; or
(b) shall impose, modify or deem applicable any
reserve (including, without limitation, any imposed by
the Board of Governors of the Federal Reserve System or
any Person regulating insurance activities or insurance
companies), special deposit or similar requirements
against assets of, deposits with or for the account of,
credit extended by, Letter of Credit issued or maintained
by, or collateral subject to a lien in favor of the
Issuing Bank or any Lender, or shall impose on the
Issuing Bank or any Lender any other condition affecting
any amount drawn on the Letter of Credit, or its
obligation to make any payment under the Letter of
Credit, as the case may be, or to maintain the Letter of
Credit; then the remaining provisions of this Section
2A.10 shall apply. If the result of any of the foregoing
(without regard to whether the Issuing Bank or any Lender
shall have sold participations in its respective
obligations under this Agreement) is to increase the cost
to or to impose a cost on the Issuing Bank or any Lender
of making or maintaining any amounts payable hereunder,
of maintaining the Letter of Credit, or to reduce the
amount of any sum received or receivable by the Issuing
Bank or any Lender under the Letter of Credit, then:
(i) the Issuing Bank or such Lender shall
promptly deliver to the Borrower a certificate
stating the change which has occurred or the reserve
requirements or other conditions which have been
imposed on the Issuing Bank or such Lender or the
request, direction or requirement with which it has
complied, together with the date hereof; and
(ii) the Borrower shall pay to the Issuing
Bank or such Lender within 15 days of written
request (which request shall state the amount of
increased cost, reduction or payment and the way in
which such amount has been calculated), such amount
or amounts as will compensate the Issuing Bank or
such Lender for the additional cost, reduction of
return or payment incurred by the Issuing Bank or
such other Lender. The written request of the
Issuing Bank or such Lender as to the additional
amounts payable pursuant to this paragraph delivered
to the Borrower shall be conclusive evidence of the
amount thereof in the absence of manifest error.
(c) If any Lender shall have determined that after
the date hereof the adoption of any applicable law, rule
or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or
administration thereof, or compliance by any Lender with
any request or directive regarding capital adequacy
(whether or not having the force of law) of any
Authority, has or would have the effect of reducing the
rate of return on such Lender's capital as a consequence
of its obligations hereunder to a level below that which
such Lender could have achieved but for such adoption,
change or compliance (taking into consideration such
Lender's policies with respect to capital adequacy) by an
amount deemed by such Lender to be material, then from
time to time, within 15 days after demand by such Lender,
the Borrower shall pay to such Lender such additional
amount or amounts as will compensate such Lender for such
reduction.
(d) Each Lender will promptly notify the Borrower
and the Issuing Bank of any event of which it has
knowledge, occurring after the date hereof, which will
entitle such Lender to compensation pursuant to this
Section. A certificate of any Lender claiming
compensation under this Section and setting forth the
additional amount or amounts to be paid to it hereunder
shall be conclusive in the absence of manifest error. In
determining such amount, such Lender may use any
reasonable averaging and attribution methods.
(e) The provisions of this Section 2A.10 shall be
applicable with respect to any participant, assignee or
other transferee, and any calculations required by such
provisions shall be made based upon the circumstances of
such participant, assignee or other transferee.
(5) Section 3.1(f) of the Credit Agreement is amended by
deleting Section 3.1(f) and substituting therefore the
following:
(f) The Borrower shall make additional mandatory
prepayments to the Lenders in amounts equal to 100% of
the net proceeds from any (i) sale or other disposition,
or series of related sales or dispositions, by the
Borrower of any assets where the net proceeds exceed
$1,000,000, other than (x) the sale of assets
contemplated by the Agri Services Purchase Agreement, if
such sale is consummated on or before November 30, 1998,
(or on or before such later date as may be designated by
the Term Loan Lenders as provided in clause (d) above)
and (y) the sale of inventory in the ordinary course of
business, (ii) offering by the Borrower of equity or
subordinated debt (other than an offering which increases
the outstandings under the Borrower's existing
subordinated loan certificates or the subordinated
capital certificates), or (iii) sale by the Borrower of
any of the SSC Securities.
(6) Section 3.1(g) of the Credit Agreement is amended
and restated in its entirety as follows:
(g) The mandatory prepayments required by
subsection (f) above shall be applied first to the
outstanding Revolving Loans and then to the outstanding
364-Day Loans. The mandatory prepayments required by
subsection (f)(iii) above shall be applied first to the
L/C Loan and then to the other outstanding Revolving
Loans.
(7) Section 3.1(h) of the Credit Agreement is amended
and restated in its entirety as follows:
(h) If at any time: (A) the aggregate principal
amount of Revolving Loans, 364-Day Loans and Letter of
Credit Obligations, outstanding exceeds (B) the Borrowing
Base in effect at such time, then the Borrower shall
immediately pay to the Agent for the respective accounts
of the Lenders the amount of such excess. Such payment
shall be applied to pay first, all amounts of interest
and principal outstanding on the Revolving Loans, and
second all amounts due and owing on the 364-Day Loans.
In the event the Borrower is required to pay any
outstanding Eurodollar Borrowings by reason of this
Section prior to the end of the applicable Interest
Period therefor, the Borrower shall indemnify each Lender
against the losses, costs and expenses described in
Section 3.16 incurred by such Lender.
(8) Section 3.2 of the Credit Agreement is amended by
deleting paragraphs (a) and (c) and substituting therefore
the following:
(a) the aggregate amount of all outstanding
Revolving Loans advanced under the Revolving Credit
Commitments plus the Letter of Credit Obligations exceed
the aggregate amount of the Revolving Credit Commitments;
or
(c) the aggregate amount of all outstanding
Revolving Loans advanced under the Revolving Credit
Commitments, plus the aggregate amount of all outstanding 364-
Day Loans advanced under the 364-Day Line of Credit
Commitments, plus the Letter of Credit Obligations, exceed
the Borrowing Base in effect at such time. If such aggregate
outstanding amount does exceed the Borrowing Base, the
Borrower shall immediately repay the Revolving Loans and
364-Day Loans by an aggregate amount equal to such excess,
together with all accrued but unpaid interest on such excess
amount and any amounts due under Section 3.16 of this
Agreement.
(9) Section 3.21 of the Credit Agreement is amended by
deleting last sentence and substituting therefore the
following:
The Agent and the Lenders agree to release the Collateral
(other than the Additional Collateral and the Collateral
subject to the Second Escrow Agreement) from the liens of
the Collateral Documents at such time as all amounts
outstanding under the Term Notes have been repaid in full
and, for the prior three fiscal quarters of the Company,
(a) the Company's ratio of Consolidated Funded Debt to
Total Capital has been less than or equal to .40 to 1.00,
and (b) the Company's ratio of Indebtedness for Money
Borrowed to EBITDA has been less than or equal to 2.75 to
1.00.
(10) Section 4.2 of the Credit Agreement is amended by
deleting the initial paragraph of Section 4.2 and
substituting therefore the following:
Conditions to all Loans. At the time of the making
of all Loans and the issuance of the Letter of Credit
(before as well as after giving effect to such Loans and
to the proposed use of the proceeds thereof or the
issuance of the Letter of Credit), the following
conditions shall have been satisfied or shall exist:
(11) Section 4.2(b) of the Credit Agreement is amended by
deleting Section 4.2(b) and substituting therefore the
following:
(b) all representations and warranties by the
Borrower contained herein shall be true and correct with
the same effect as though such representations and
warranties had been made on and as of the date of such
Loans or the issuance of the Letter of Credit;
(12) Addition of Sections 6.17. The Credit Agreement is
amended by adding a new Section 6.17 thereto as follows:
Section 6.17. Real Property Collateral. So long
as any Letter of Credit Obligation remains outstanding or
any part of the L/C Loan remains unpaid, Borrower shall
grant to the Agent for the ratable benefit of the Lenders
and as collateral for the Loans and the Letter of Credit
Obligations a perfected first priority lien (in the form
of certain of the Real Estate Mortgages) on Real Property
(the "Additional Collateral") with a value equal to (i)
prior to the Appraisal Date, an insured replacement value
of $150,000,000, which property is more specifically set
forth on Schedule 6.17 to this Second Amendment, and (ii)
at all times thereafter, an appraised value (as
determined by an MAI appraiser acceptable to the Agent)
(the "Appraised Value") of $105,000,000.
(13) Addition of Sections 6.18. The Credit Agreement is
amended by adding a new Section 6.18 thereto as follows:
Sections 6.18. Delivery of Appraisals. As soon as
possible, but in no event later than the Appraisal Date,
the Borrower shall provide the Agent with appraisals
prepared by an MAI certified appraiser acceptable to the
Agent with respect to each property constituting
Additional Collateral. In the event that the Borrower
fails to provide such appraisals or the Appraised Value
as set forth therein is less than $105,000,00, the Agent
shall, notwithstanding anything to the contrary contained
in any Loan Document, including without limitation the
Escrow Agreement, be entitled to file Real Estate
Mortgages against additional Real Property.
(14) Addition of Section 6.19. The Credit Agreement is
amended by adding a new Section 6.19 thereto as follows:
Section 6.19. Delivery of SSC Securities.
Borrower will deliver to the Agent (i) all SSC Securities
purchased by the Borrower immediately upon its receipt
thereof and (ii) blank stock powers duly executed by the
Borrower for all of the SSC Securities,
(15) Addition of Section 6.20. The Credit Agreement is
amended by adding a new Section 6.20 thereto as follows:
Section 6.20. Delivery of Additional Agreements.
Within 30 days of the Second Amendment Closing Date,
Borrower will execute and deliver to the Agent the SSC
Pledge Agreement, each in form and substance acceptable
to the Agent in its sole discretion.
(16) Amendment to Section 7.4. Section 7.4 of the Credit
Agreement is amended by deleting paragraph (u) and
substituting therefor the following:
(u) purchase the assets described in Section 7.3(i)
hereof; and
(v) the purchase of the SSC Securities.
(17) Amendment to Section 8.1(a). Section 8.1(a) of the
Credit Agreement is amended by deleting Section 8.1(a) and
substituting therefore the following:
(a) The Borrower fails to pay when due (i) any
payment of principal due on any of the Notes or (ii) any
Reimbursement Obligation; or
(18) Amendment to Section 8.2. Section 8.2 of the Credit
Agreement is amended by adding a new paragraph (e) to the end
of Section 8.2 as follows:
(e) Upon the occurrence of an Event of Default, to
the extent of any existing Letter of Credit Obligations,
the Agent may immediately advance the principal amount
thereof and set aside the amounts so advanced as a
collateral reserve for payment of the Reimbursement
Obligations relating to Letter of Credit which are
subsequently funded. After the Letter of Credit has been
canceled and all Reimbursement Obligations have been
satisfied, and the Issuing Bank has been reimbursed all
amounts funded by it with respect thereto, any balance
remaining in said collateral reserve may be applied to
other amounts owed by the Borrower hereunder, and, if
none, shall be remitted to Borrower.
Section 2. Conditions Precedent. This Second Amendment
and the obligations of the Lenders evidenced hereunder shall
not be effective unless:
(a) Second Escrow Agreement. Execution and delivery by
Borrower of the Second Escrow Agreement.
(b) Opinion of the Borrower's Counsel. The Borrower
shall have delivered to the Lenders, at the Borrower's
expense, a favorable written opinion from (i) Messrs. Alston &
Bird LLP, special counsel for the Borrower, dated as of and
delivered on the date of execution of this Second Amendment,
satisfactory to the Agent, and (ii) J. David Dyson, Esq.,
General Counsel, Vice President, and Secretary of the
Borrower, dated as of and delivered on the date of execution
of this Agreement, satisfactory to the Agent.
(c) No Defaults. The Borrower shall be in full
compliance with all the terms and conditions of this
Agreement, and no Default or Event of Default shall have
occurred, and the Borrower shall have delivered to the
Lenders a certificate from an authorized officer of the
Borrower certifying such matters as the Lenders shall
reasonably request.
(d) Accuracy of Representations and Warranties. The
representations and warranties set forth herein shall be true
and correct, and the Borrower shall have delivered to the
Lenders a certificate from an authorized officer of the
Borrower certifying such matters related to the
representations and warranties as the Lenders shall reasonably
request.
(e) Corporate Action and Authority; Incumbency
Certificate. The Borrower shall have delivered to the Lenders
(i) confirmation that no change has been made to its
organizational papers, (ii) certificates from the Secretaries
of State of those states in which it is legally required to
qualify to transact business as a foreign corporation,
certifying its good standing as a corporation in such states,
and (iii) a copy of the resolutions passed by its Board of
Directors authorizing (A) its execution and delivery of and
the performance of the obligations under the Loan Documents to
which it is a party, as amended by this Second Amendment, (B)
the purchase of the SSC Securities, (C) the issuance of the
Letter of Credit on behalf of the Borrower, and (D) the pledge
of the Real Property as collateral hereunder, each certified
by its Secretary or Assistant Secretary, on behalf of and
under its seal, to be true and correct.
(f) Executed Counterparts. The execution of a
counterpart hereof by the Borrower and the Lenders and receipt
by the Borrower and the Agent of written or telephonic
notification of such execution and authorization or delivery
thereof.
(g) Guarantor Consents. Receipt by the Agent of a duly
executed Consent and Reaffirmation of Guarantors; and
(h) Payment of Fees. The Agent shall have received
payment by the Borrower of an amendment fee of $125,000 and
all fees set forth in the letter agreement dated as of October
13, 1998, between Borrower and the Agent.
Section 3. Reference to and Effect on the Credit
Agreement and the Other Loan Documents.
(1) On and after the date hereof, each reference in the
Credit Agreement to "this Agreement," "hereunder," "hereof,"
"herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to
the "Credit Agreement," "thereunder," "thereof" or words of
like import referring to the Credit Agreement shall mean and
be a reference to the Credit Agreement as amended hereby.
(2) Except as specifically amended by this Second
Amendment, the Credit Agreement and the other Loan Documents
shall remain in full force and effect and are hereby ratified
and confirmed.
(3) The execution, delivery and performance of this
Second Amendment shall not, except as expressly provided
herein, constitute a waiver of any provision of, or operate as
a waiver of any right, power or remedy of the Administrative
Agent or any Lender under the Credit Agreement or any of the
other Loan Documents.
Section 4. Miscellaneous.
(1) Section and Subsection Headings. Section and
Subsection headings in this Second Amendment are included
herein for convenience of reference only and shall not
constitute a part of this Second Amendment for any other
purpose or be given any substantive effect.
(2) Governing Law. This Second Amendment and the
rights and obligations of the parties hereunder shall be
governed by, and shall be construed and enforced in accordance
with, the laws of the State of New York.
(3) Counterparts. This Second Amendment may be executed
in any number of counterparts and by different parties hereto
and separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such
counterparts taken together shall constitute but one and the
same instrument; signature pages may be detached from multiple
separate counterparts and attached to a single counterpart so
that all signature pages are physically attached to the same
document.
IN WITNESS WHEREOF, the parties hereto have caused this
Second Amendment to be duly executed and delivered by their
respective officers thereunto duly authorized as of the date
first above written.
GOLD KIST INC.
By: /s/ Stephen O. West
Name: Stephen O. West
Title: Treasurer
Attest: /s/Barbara M. Goetz
Name: Barbara M. Goetz
Title: Assistant Secretary
[CORPORATE SEAL]
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK
B.A., "Rabobank
Nederland", NEW YORK BRANCH,
individually and as Agent
By: /s/ R. J. Beard
Name: R. J. Beard
Title: Vice President
CONSENT AND REAFFIRMATION OF GUARANTORS
Each of the undersigned (i) acknowledges receipt of
the foregoing Second Amendment to Credit Agreement (the
"Second Amendment"), (ii) consents to the execution and
delivery of the Second Amendment by the parties thereto and
(iii) reaffirms all of its obligations and covenants under the
Guaranty Agreement dated as of [August 4, 1998] executed by
it, and agrees that none of such obligations and covenants
shall be affected by the execution and delivery of the Second
Amendment.
AGRATECH SEEDS INC. (SEAL)
By:/s/ Stephen O. West
Title: Assistant Treasurer
AGRATRADE FINANCING, INC. (SEAL)
By:/s/ Stephen O. West
Title: Treasurer
CAROLINA GOLDEN PRODUCTS
COMPANY, INC. (SEAL)
By:/s/ Stephen O. West
Title: Treasurer
CROSS EQUIPMENT COMPANY, INC. (SEAL)
By:/s/ Stephen O. West
Title: Treasurer
DIXICO PET FOOD, INC. (SEAL)
By:/s/ Stephen O. West
Title: Assistant Treasurer
FARMKIST ENTERPRISES, INC. (SEAL)
By:/s/ Stephen O. West
Title: Treasurer
GK FINANCE CORPORATION SEAL)
By:/s/ Stephen O. West
Title: Treasurer
GK PEANUTS, INC. SEAL)
By:/s/ Stephen O. West
Title: Assistant Treasurer
GK PECANS, INC. SEAL)
By:/s/ Stephen O. West
Title: Treasurer
LUKER INC. SEAL)
By:/s/ Stephen O. West
Title: Assistant Treasurer
11562/Securities/Exhibit/2nd Amendment to Credit Agreement
EXHIBIT B-10(i)(4)
THIRD AMENDMENT TO
CREDIT AGREEMENT
This Third Amendment to Credit Agreement (this
"Amendment"), dated as of December 3, 1998, is made and
entered into by and among GOLD KIST INC., a cooperative
marketing association organized and existing under the laws of
the State of Georgia (the "Borrower"), various banks and other
lending institutions as are, or may from time to time become,
parties hereto (collectively, the "Lenders" and individually,
a "Lender"), and COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH
("Rabobank") as Agent for the Lenders.
W I T N E S S E T H:
WHEREAS, the parties hereto are parties to that certain
Credit Agreement, dated as of August 4, 1998, as amended by
First Amendment dated September 30, 1998, and as amended by
Second Amendment dated October 13, 1998 (the "Credit
Agreement"); and
WHEREAS, the Borrower has requested that the Lenders (i)
increase the amount of indebtedness of S.G.Williams Company,
LLC that may be guaranteed by the Borrower, and (ii) extend
the period within which the Borrower may obtain certain
required appraisals;
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
Section 1. Amendments. The terms of the Credit
Agreement are hereby amended as follows:
(a) Definitions. The defined term "Appraisal Date" is
deleted in its entirety and the following is substituted
therefor:
"Appraisal Date" shall mean January 25, 1999."
(b) Section 7.4(q). Section 7.4(q) of the Credit
Agreement is deleted in its entirety and the following is
substituted therefor:
"(q) guarantee or otherwise be or become liable
for obligations of S.G Williams Company, LLC, not to exceed an
aggregate amount of $6,000,000;".
Section 2. Conditions Precedent. This Third Amendment
and the obligations of the Lenders evidenced hereunder shall
not be effective until the Administrative Agent shall have
received a Certificate executed by the Chief Executive Officer
or Chief Financial Officer of the Borrower stating that, to
the best of his knowledge and based upon an examination
sufficient to enable him to make an informed statement, (i)
all of the representations and warranties made or deemed to be
made under the Credit Agreement are materially true and
correct as of the date of this Third Amendment to Credit
Agreement, and (ii) no Default or Event of Default exists.
Section 3. Reference to and Effect on the Credit
Agreement and the Other Loan Documents.
(a) On and after the date hereof, each reference in the
Credit Agreement to "this Agreement," "hereunder," "hereof,"
"herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to
the "Credit Agreement," "thereunder," "thereof" or words of
like import referring to the Credit Agreement shall mean and
be a reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended by this Amendment,
the Credit Agreement and the other Loan Documents shall remain
in full force and effect and are hereby ratified and
confirmed.
(c) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein,
constitute a waiver of any provision of, or operate as a
waiver of any right, power or remedy of the Administrative
Agent or any Lender under the Credit Agreement or any of the
other Loan Documents.
Section 4. Miscellaneous.
(a) Section and Subsection Headings. Section and
Subsection headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part
of this Amendment for any other purpose or be given any
substantive effect.
(b) Governing Law. This Amendment and the rights and
obligations of the parties hereunder shall be governed by, and
shall be construed and enforced in accordance with, the laws
of the State of Georgia.
(c) Counterparts; Effectiveness. This Amendment may be
executed in any number of counterparts and by different
parties hereto and separate counterparts, each of which when
so executed and delivered shall be deemed an original, but all
such counterparts taken together shall constitute but one and
the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically
attached to the same document. This Amendment shall become
effective upon the execution of a counterpart hereof by the
Borrower and the Required Lenders and receipt by the Borrower
and the Administrative Agent of written or telephonic
notification of such execution and authorization or delivery
thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their
respective officers thereunto duly authorized as of the date
first above written.
GOLD KIST INC.
By: /s/Stephen O. West
Name: Stephen O. West
Title: Treasurer
[CORPORATE SEAL]
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "Rabobank
Nederland", NEW YORK BRANCH,
individually and as Agent
By: /s/ W. Pieter C. Kodde
Name: W. Pieter C. Kodde
Title: Vice President
By: /s/ M. Christina Debler
Name: M. Christina Debler
Title: Vice President
SUNTRUST BANK, N.A.
By: /s/ Michel A. Odermatt
Name: Michel A. Odermatt
Title: Vice President
By: /s/ F. Steven Parrish
Name: F. Steven Parrish
Title: Vice President
WACHOVIA BANK, N.A.
By: /s/ John T. Seeds
Name: John T. Seeds
Title: Senior Vice President
COBANK, ACB
By: /s/ David W. Berry
Name: David W. Berry
Title: Assistant Vice President
HARRIS TRUST AND SAVINGS BANK
By: /s/ Greg Hennenfent
Name: Greg Hennenfent
Title: Vice President
U.S. BANCORP AG CREDIT, INC.
By: /s/ Dwayne Sharp
Name: Dwayne Sharp
Title: Vice President
DG BANK DEUTSCHE
GENOSSENCHAFTSBANK AG,
CAYMAN ISLANDS BRANCH
By: /s/ Kurt A. Morris
Name: Kurt A. Morris
Title: Vice President
By: /s/ Bobby Ryan Oliver, Jr.
Name: Bobby Ryan Oliver, Jr.
Title: Vice President
11563/Securities/Exhibit/3rd Amendment Credit Agmt
EXHIBIT B-10(i)(5)
FOURTH AMENDMENT TO
CREDIT AGREEMENT
This Fourth Amendment to Credit Agreement (this
"Amendment"), dated as of April 30, 1999, is made and entered
into by and among GOLD KIST INC., a cooperative marketing
association organized and existing under the laws of the State
of Georgia (the "Borrower"), the various banks and other
lending institutions parties hereto (collectively, the
"Lenders" and individually, a "Lender"), and COOPERATIEVE
CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH ("Rabobank") as Agent for the Lenders.
W I T N E S S E T H:
WHEREAS, the parties hereto are parties to that certain
Credit Agreement, dated as of August 4, 1998, as amended by
First Amendment dated September 30, 1998, as amended by Second
Amendment dated October 13, 1998, and as amended by Third
Amendment dated December 3, 1998 (the "Credit Agreement"); and
WHEREAS, the Borrower has requested that the Lenders (i)
permit the Borrower to enter into additional Hedging Contracts
through calendar year 2000, and (ii) increase the amount of
permitted Capital Expenditures of the Borrower during fiscal
year 2000;
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
Section 1. Amendments. The terms of the Credit
Agreement are hereby amended as follows:
(a) Section 7.9. Section 7.9 of the Credit Agreement is
deleted in its entirety and the following is substituted
therefor:
"Section 7.9. Hedging Contracts. The Borrower shall not,
and shall not permit any Subsidiary to, enter into any Hedging
Contract except: (a) bona fide hedging transactions in
commodities that represent production inputs or products to be
marketed, or in commodities needed in operations to meet
manufacturing or market demands, provided that (i) long
positions and/or options sold on corn and wheat shall, (x)
prior to December 31, 2000, in no event cover more than twenty-
six weeks of the Borrower's anticipated requirements for feed
ingredients, and (y) subsequent to December 31, 2000, in no
event cover more than thirteen weeks of the Borrower's
anticipated requirements for feed ingredients; and none of
such positions and/or options shall cover more than six and
one-half weeks of such anticipated requirements unless they
have been entered into in compliance with the Borrower's
Corporate Policy For Futures Contracts approved by the
Borrower's Board of Directors on April 24, 1998 and have been
approved by the Borrower's Hedging Committee, (ii) long
positions and/or options sold on soybean meal shall, (x) prior
to December 31, 2000, in no event cover more than twenty-six
weeks of the Borrower's anticipated requirements for feed
ingredients, and (y) subsequent to December 31, 2000, in no
event cover more than thirteen weeks of the Borrower's
anticipated requirements for feed ingredients; and none of
such positions and/or options shall cover more than six and
one-half weeks of such anticipated requirements unless they
have been entered into in compliance with the Borrower's
Corporate Policy For Futures Contracts approved by the
Borrower's Board of Directors on April 24, 1998 and have been
approved by the Borrower's Hedging Committee, (iii) short
positions on corn shall not exceed 2,000,000 bushels, and
shall at all times relate to corn owned or contracted for
purchase, and (iv) all short positions on cotton owned or
expected to be purchased by the Borrower must be reasonably
related to the expected sale dates of such cotton and to the
amounts of such cotton expected to be sold; and (b) foreign
exchange contracts, currency swap agreements, interest rate
exchange agreements, interest rate cap agreements, interest
rate collar agreements, and other similar agreements and
arrangements which are reasonably related to existing
indebtedness or to monies to be received or paid in foreign
currencies."
(b) Section 7.11. Section 7.11 of the Credit Agreement
is deleted in its entirety and the following is substituted
therefor:
"Section 7.11. Capital Expenditures. The Borrower
and its Subsidiaries shall not, on a consolidated basis,
directly or indirectly, make Capital Expenditures in the
aggregate in fiscal year 1998 exceeding $84,000,000, in fiscal
year 1999 exceeding $45,000,000, in fiscal year 2000 exceeding
$45,000,000 plus an amount up to $15,000,000 of any available
but unutilized Capital Expenditures from fiscal year 1999, and
in any fiscal year thereafter exceeding $45,000,000; provided
that, the Borrower's permitted Capital Expenditures in fiscal
year 1999 shall be reduced dollar for dollar by the amount
that Borrower's Capital Expenditures in 1998 exceed
$70,000,000."
Section 2. Conditions Precedent. This Fourth Amendment
and the obligations of the Lenders evidenced hereunder shall
not be effective until the Administrative Agent shall have
received a Certificate executed by the Chief Executive Officer
or Chief Financial Officer of the Borrower stating that, to
the best of his knowledge and based upon an examination
sufficient to enable him to make an informed statement, (i)
all of the representations and warranties made or deemed to be
made under the Credit Agreement are materially true and
correct as of the date of this Fourth Amendment to Credit
Agreement, and (ii) no Default or Event of Default exists.
Section 3. Reference to and Effect on the Credit
Agreement and the Other Loan Documents.
(a) On and after the date hereof, each reference in the
Credit Agreement to "this Agreement," "hereunder," "hereof,"
"herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to
the "Credit Agreement," "thereunder," "thereof" or words of
like import referring to the Credit Agreement shall mean and
be a reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended by this Amendment,
the Credit Agreement and the other Loan Documents shall remain
in full force and effect and are hereby ratified and
confirmed.
(c) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein,
constitute a waiver of any provision of, or operate as a
waiver of any right, power or remedy of the Administrative
Agent or any Lender under the Credit Agreement or any of the
other Loan Documents.
Section 4. Miscellaneous.
(a) Section and Subsection Headings. Section and
Subsection headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part
of this Amendment for any other purpose or be given any
substantive effect.
(b) Governing Law. This Amendment and the rights and
obligations of the parties hereunder shall be governed by, and
shall be construed and enforced in accordance with, the laws
of the State of Georgia.
(c) Counterparts; Effectiveness. This Amendment may be
executed in any number of counterparts and by different
parties hereto and separate counterparts, each of which when
so executed and delivered shall be deemed an original, but all
such counterparts taken together shall constitute but one and
the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically
attached to the same document. This Amendment shall become
effective upon the execution of a counterpart hereof by the
Borrower and the Required Lenders and receipt by the Borrower
and the Administrative Agent of written or telephonic
notification of such execution and authorization or delivery
thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their
respective officers thereunto duly authorized as of the date
first above written.
GOLD KIST INC.
By: /s/ Stephen O. West
Name: Stephen O. West
Title: Chief Financial Officer &
Treasurer
[CORPORATE SEAL]
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "Rabobank
Nederland", NEW YORK BRANCH,
individually and as Agent
By: /s/ Michiel V.M. Van Der Voort
Name: Michiel V.M. Van Der Voort
Title: Vice President
By: /s/ W. Pieter C. Kodde
Name: W. Pieter C. Kodde
Title: Vice President
SUNTRUST BANK, N.A.
By: /s/ Michel A. Odermatt
Name: Michel A. Odermatt
Title: Vice President
By: /s/ F. Steven Parrish
Name: F. Steven Parrish
Title: Vice President
WACHOVIA BANK, N.A.
By: /s/ John T. Seeds
Name: John T. Seeds
Title: Senior Vice President
COBANK, ACB
By: /s/ Greg E. Somerhalder
Name: Greg E. Somerhalder
Title: Vice President
HARRIS TRUST AND SAVINGS BANK
By: /s/ John R. Carley
Name: John R. Carley
Title: Vice President
U.S. BANCORP AG CREDIT, INC.
By: /s/ Harold Nelson
Name: Harold Nelson
Title: Vice President
DG BANK DEUTSCHE
GENOSSENCHAFTSBANK AG,
CAYMAN ISLANDS BRANCH
By: /s/ Kurt A. Morris
Name: Kurt A. Morris
Title: Vice President
By: /s/ James L. Yager
Name: James L. Yager, CPA
Title: Vice President
11564/Securities/Exhibit/4th Amendment to Credit Agmt
8
EXHIBIT B-10(k)(1)
October 13, 1998
Southern States Cooperative, Inc.
6606 West Board Street
P. O. Box 26234
Richmond, Virginia 23260
Commitment Letter
Ladies and Gentlemen:
In order to facilitate the closing of the Asset Purchase
Agreement dated July 23, 1998, between Southern States
Cooperative, Inc. ("Southern States") and Gold Kist Inc.
("Gold Kist") for the purchase of the Gold Kist Inputs
Business, and subject to the terms and conditions set out
below and on the attached Terms Sheet, Gold Kist hereby
commits to purchase under the circumstances described below
from Southern States and from a trust entity to be formed by
Southern States, $100 million principal (liquidation) amount
of preferred securities (the "Preferred Securities") in the
form described in each of Annex A and Annex B to the attached
Terms Sheet.
Approval of Gold Kist Lenders. The commitment of
Gold Kist set forth herein and on the attached Terms
Sheet is expressly subject to receipt of approvals
by (1) CoBank, ACB; (2) the Prudential Insurance
Company of America and (3) Cooperative Centrale
Raiffeisen - BoerenleenBank B.A., "Rabobank
Nederland", New York Branch, as Agent, under the
Gold Kist Credit Agreement dated August 4, 1998,
with various banks and lending institutions as
lenders.
This obligation of Gold Kist to purchase the Preferred
Securities shall be of no force and effect if, prior to the
Purchase Date (as specified in the Terms Sheet), Southern
States shall have placed with other purchasers similar capital
and/or equity in a minimum amount of $100 million. To the
extent that, prior to the Purchase Date, Southern States shall
have placed with other purchases capital and/or equity
securities similar to the Preferred Securities in an amount
less than $100 million, then the Gold Kist commitment to
purchase Preferred Securities shall be reduced correspondingly
on a dollar-for-dollar basis. For purposes of this letter and
the attachments hereto, any Southern States preferred stock or
subordinated debt will be considered similar securities to the
Preferred Securities.
This commitment is a duly authorized, irrevocable
obligation of Gold Kist Inc., enforceable in accordance with
its terms. If you are in agreement with the terms and
conditions stated above, and as set forth in the Terms Sheet
attached and the annexes thereto, please signify by executing
and returning a copy of this letter to the undersigned.
Sincerely,
/s/ M. A. Stimpert
M. A. Stimpert
Senior Vice President
Agreed to by Southern States Cooperative, Inc.
/s/ Wayne A. Boutwell
Wayne A. Boutwell
President and Chief Executive Officer
Attachment to Commitment Letter
Dated October 13, 1998
Terms Sheet for Purchase of Southern States
Preferred Securities by Gold Kist
1. Time of Purchase:
The date on which Gold Kist will purchase the Preferred
Securities (the "Purchase Date") will be 175 days after
October 9, 1998 which is the effective date of the 180-day
senior bridge facility made available to Southern States for
the purchase of the Gold Kist Inputs Business (the "Senior
Bridge Facility") in the event Southern States has not placed
a minimum of $100 million of similar securities prior to the
Purchase Date. Accordingly the Purchase Date will be April 2,
1999. The purchase of the Preferred Securities will be made
pursuant to one or more purchase agreements containing
customary terms and conditions.
2. Composition of the $100 million of Preferred Securities:
The $100 million of Preferred Securities shall be
comprised of (a) $40 million of DRD Preferred (as more
specifically described on Annex A), bearing an initial
dividend rate of 7.5% per annum and (b) $60 million of Capital
Securities (as more specifically described on Annex B),
bearing an initial distribution rate of 8.0% per annum. If
less than $100 million amount of Preferred Securities is
placed with Gold Kist, the amount of each type of Preferred
Securities sold to Gold Kist will be as determined by Southern
States, not to exceed, in the case of the DRD Preferred, $40
million liquidation amount, and in the case of the Capital
Securities, $60 million liquidation amount. Similarly, upon
any redemption of less than the entire $100 million of
Preferred Securities, Southern States shall have the right to
redeem whichever type of Preferred Securities (DRD Preferred
or Capital Securities) it wishes, in any amount up to the
entire outstanding amount held by Gold Kist. For so long as
the Preferred Securities are held by Gold Kist, the Preferred
Securities will be subject to mandatory redemption from the
net proceeds of all placements of substantially similar
securities by Southern States until the Preferred Securities
held by Gold Kist have been redeemed in their entirety.
If Southern States places securities similar to the
Preferred Securities prior to the Purchase Date, Southern
States will immediately instruct the LOC bank described in
paragraph 4 below, to issue an amendment to the LOC or a
replacement LOC reflecting a reduction in the amount of the
LOC to the extent that Gold Kist's commitment to purchase
Preferred Securities has thereby been reduced.
3. Purchase price; Fees Associated with the Placement of the
Preferred Securities with Gold Kist:
Gold Kist shall purchase the Preferred Securities at par.
Southern States shall pay to Gold Kist at the time of purchase
a placement fee equal to 2% of the liquidation amount of the
DRD Preferred and 1% of the liquidation amount of the Capital
Securities. The amount of the placement fee paid to Gold Kist
shall be refunded to Southern States on a pro rata basis upon
any redemption, in whole or in part, of the Preferred
Securities from Gold Kist.
4. Terms and Conditions of the Letter of Credit ("LOC")
Supporting the Gold Kist Purchase Agreement:
Gold Kist's obligation to purchase the Preferred
Securities shall be secured by an irrevocable direct pay bank
letter of credit ("LOC"). The LOC shall be in an amount at
least equal to the purchase price of the Preferred Securities
which Gold Kist is committed to purchase, shall have an
initial term expiring no earlier than 10 days after the
Purchase Date and shall be irrevocable and unconditional. The
LOC shall be issued by a financial institution located in the
United States (including, but not limited to, Rabobank's U.S.
branch) with a debt rating of AA/Aa2 or higher. A draft of
the LOC will be provided to Southern States not later than
October 9, 1998. Southern States also shall be furnished with
an opinion satisfactory to it from counsel for the LOC bank,
including foreign counsel if appropriate, as to the due
authorization, execution and delivery and binding effect of
the LOC.
5. Fees Associated with the LOC and Other Financing Costs:
Southern States will bear the cost, not to exceed 125
basis points per annum, payable monthly, for the LOC for its
initial term and any renewal thereof. Gold Kist will be
responsible for the costs of changes, if any, to Gold Kist's
various loan agreements. Southern States will be responsible
for all costs of its Senior Bridge Facility.
6. Provisions Relating to the Transfer of Preferred
Securities by Gold Kist:
Gold Kist shall hold any Preferred Securities purchased
by it for a period of at least nine (9) months from the
Purchase Date. Upon the expiration of that period
(contemplated to terminate in January, 2000) Gold Kist may, at
its election, give notice to Southern States of its desire to
sell the Preferred Securities, in whole or in part. Delivery
of notice shall commence a 120-day waiting period during which
Gold Kist may not sell or offer to sell the Preferred
Securities or any portion thereof without the consent of
Southern States. Within 10 business days of Gold Kist giving
notice of its desire to sell, Southern States shall advise
Gold Kist of its intentions with respect to the placement or
sale of the Preferred Securities or similar securities. If,
during the waiting period, Southern States determines not to
place the Preferred Securities or similar securities, then
Southern States shall so advise Gold Kist and Southern States
shall not unreasonably refuse to waive the remainder of the
waiting period. Upon the later of (1) expiration of the 120-
day waiting period (which could occur as early as April, 2000)
and (2) termination of a placement of the Preferred Securities
or similar securities commenced by Southern States prior to
the end of the waiting period, Gold Kist will be free to
transfer the Preferred Securities as permitted by law and
subject to the transfer restrictions described in the draft
Offering Memorandums proposed by Southern States, copies of
which have been furnished to Gold Kist. Southern States will
provide such financial and other information and assistance as
may reasonably be required by Gold Kist in its efforts to
resell the Preferred Securities.
7. Special Counsel:
Sullivan & Cromwell will serve as special counsel in
connection with the purchase of the Preferred Securities.
Southern States shall be responsible for the fees and expenses
of special counsel.
8. Southern States Obligation:
Southern States shall be obligated to continue with all
good faith reasonable efforts to place, on terms and
conditions reasonably satisfactory to Southern States, through
one or more of the markets referenced below, a minimum of $50
million of perpetual preferred stock and a minimum of $75
million of trust preferred securities substantially similar to
the Capital Securities proposed to be sold to Gold Kist.
Southern States shall pursue its efforts concurrently on three
separate "tracks":
(1) Rule 144A offerings as presently contemplated by
Southern States.
(2) Private placement market.
(3) Registered public offering of trust preferred
securities and/or preferred stock.
Annex A
Description of Preferred Stock to be Issued
to Gold Kist Inc. by Southern States Cooperative, Inc.
(Supplements Description of Series A Preferred Stock in Draft
Offering Memorandum)
1. Purchase Amount. $40 million principal (liquidation)
amount.
2. Designation and Rank. Series B Cumulative Redeemable
Preferred Stock. Ranks pari passu with other Southern
States preferred stock.
3. Dividend Rate. 7.5% per annum initial rate; subject to
increase to 8.0% per annum nine months after the Purchase
Date; and to 8.25% twenty-one months after the Purchase
Date. Dividends payable quarterly.
4. Mandatory Redemption. Mandatorily redeemable while held
by Gold Kist as described in the Terms Sheet.
5. Transferability. Preferred Stock to be transferable in
minimum principal amounts of $100,000 to QIBs or
Institutional Accredited Investors pursuant to Rule 144A
or Rule 501(a)(1), (2), (3) or (7), subject to the
conditions and restrictions on transfer set out in the
draft Offering Memorandum for the Preferred Stock.
6. Form of Certificate. Preferred Stock to be delivered as
a single physical certificate; $100,000 block limitation
on transfers. Application will be made to DTC for book-
entry transfer and trading in PORTAL if requested by Gold
Kist.
7. Other Information. Except as otherwise provided above,
the Preferred Stock will be similar in its terms and
conditions to, and subject to restrictions on transfer
similar to those applicable to, the proposed issue of
___% Series A Preferred Stock described in the draft
Offering Memorandum prepared by Southern States with
respect thereto, a copy of which has been furnished to
Gold Kist.
Annex B
Description of Capital Securities to be Issued to
Gold Kist Inc. by Southern States Capital Trust II and
Guaranteed by Southern States Cooperative, Inc.
(Supplements Description of Series A Capital Securities in
Draft Offering Memorandum)
1. Purchase Amount. $60 million liquidation amount of
Series B Capital Securities issued by Southern States Capital
Trust [ II ], a Delaware business trust (the "Trust").
2. Payment Source. Capital Securities payable solely from
payments made on 8% Adjustable Rate Junior Subordinated
Deferrable Interest Debentures of Southern States
(ranking senior to Southern States' preferred stock,
common stock and all patrons' equities; subordinated to
Senior Debt - virtually all of the Company's indebtedness
is Senior Debt). The Junior Subordinated Debentures will
have a thirty (30) year maturity. The interest rate
payable on the Junior Subordinated Debentures will be
adjustable in the same manner described in paragraph 5
below for the Capital Securities.
3. Guarantee. Capital Securities guaranteed by Southern
States to the extent of funds held by the Trust (same as
provided for in the contemplated 144A Offering).
4. Documentation. Issue to be fully documented as a Rule
144A issue of Capital Securities, substantially similar
to documentation for the Capital Securities presently
contemplated by Southern States, including:
(1) Trust Agreement (for organizational purposes).
(2) Amended and Restated Trust Agreement.
(3) Indenture.
(4) Guarantee.
(5) Purchase Agreement.
(6) Delaware Trustee - First Union Trust Company, N.A.
(7) Property Trustee, Guarantee Trustee and Debenture
Trustee - First Union National Bank.
5. Interest Rate. The initial rate of distributions on the
Capital Securities shall be 8% per annum; subject to
increase to 8.5% nine months after the Purchase Date; and
to 8.75% per annum twenty-one months after the Purchase
Date. Distributions payable semi-annually.
6. Mandatory Redemption. Mandatorily redeemable while held
by Gold Kist as described in the Terms Sheet.
7. Transferability. Capital Securities to be transferable
in minimum principal amounts of $100,000 to QIBs or
Institutional Accredited Investors pursuant to Rule 144A
or Rule 501(a)(1), (2), (3) or (7), subject to the
conditions and restrictions on transfer set out in the
draft Offering Memorandum for the Capital Securities.
8. Form of Security. Capital Securities to be delivered as
a single physical certificate; $100,000 block limitation
on transfers. Application will be made to DTC for book-
entry transfer and trading in PORTAL if requested by Gold
Kist.
9. Other Information. Except as otherwise provided above,
the Capital Securities will be similar in its terms and
conditions, and subject to restrictions on transfer
similar to those applicable, to the proposed issue of the
Capital Securities described in the draft Offering
Memorandum prepared by Southern States with respect
thereto, a copy of which has been furnished to Gold Kist.
11560/Securities/Exhibit/Commitment Letter
EXHIBIT B-10(k)(2)
March 25, 1999
Southern States Cooperative, Inc.
6606 West Broad Street
Richmond, Virginia 23230-1717
SUBJECT: Amendment to Commitment Letter ("Commitment Letter")
Dated October 13, 1998, Between Southern States
Cooperative, Inc. ("Southern States") and Gold Kist
Inc. ("Gold Kist")
Ladies and Gentlemen:
This letter shall serve to amend the above-referenced
Commitment Letter to revise the Purchase Date and for other
purposes. For purposes of this letter, the capitalized terms
used herein shall have the same definition as set forth in the
Commitment Letter, except as otherwise provided herein.
Specifically, the parties have agreed as follows:
1. The Commitment Letter and the Terms Sheet therefor shall
be amended by revising Section 1 of the Terms Sheet to provide
that the Purchase Date shall be extended from April 2, 1999 to
October 5, 1999.
2. The Commitment Letter and the Terms Sheet therefor shall
be amended by adding the following sentence at the end of
section 3 of the Terms Sheet: "The payment of the Purchase
Price by Gold Kist for the Preferred Securities purchased
shall be made directly to NationsBank, N.A. as Administrative
Agent for the account of Southern States."
3. The letter of credit issued by Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A. - "Rabobank Nederland", New
York Branch ("Rabobank") pursuant to section 4 of the Terms
Sheet is assignable and, with the consent of Rabobank,
Southern States rights thereunder shall be assigned to
NationsBank, N.A., as Administrative Agent, and payment
thereunder shall be made directly to NationsBank, N.A., as
Administrative Agent for the account of Southern States.
4. The parties agree that any costs incurred by Gold Kist in
having the LOC amended or assigned for the purposes of this
agreement shall be borne by Southern States.
5. Except as expressly amended herein, the terms and
provisions of the Commitment Letter and Terms Sheet and
Annexes thereto shall remain unchanged and in full force and
effect.
If you are in agreement with the amendment of the Commitment
Letter as stated above, please signify by executing and
returning a copy of this letter to the undersigned.
Sincerely,
/s/ Stephen O. West
Stephen O. West
Chief Financial Officer
and Treasurer
SOW:pf
Enc.
[11559/Securities/Exhibit/Amend. Commitment Ltr]
Agreed to by Southern States Cooperative, Inc.
By: /s/ Wayne A. Boutwell
Wayne A. Boutwell
President and Chief Executive Officer
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