UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended April 1, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 2-62681
GOLD KIST INC.
(Exact name of registrant as specified in its charter)
GEORGIA 58-0255560
(State or other jurisdiction of (I.R.S. Employer
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
N/A
(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
GOLD KIST INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
April 1, 2000 and June 26, 1999 1
Consolidated Statements of Operations
Three Months and Nine Months Ended
April 1, 2000 and March 27, 1999 2
Consolidated Statements of Cash Flows -
Nine Months Ended April 1, 2000
and March 27, 1999 3
Notes to Consolidated Financial
Statements 4 - 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial
Condition 7 - 11
Item 3. Quantitative and Qualitative Disclosure About
Market Risks 11 - 12
Part II. Other Information
Item 6. Exhibits and reports on Form 8-K 13
<TABLE>
Page 1
Item 1. Financial GOLD KIST INC.
Statements CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
(Unaudited)
<CAPTION>
Apr. 1, June 26,
2000 1999
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 14,021 20,810
Receivables, principally trade,
less allowance for doubtful
accounts of $4,556 at
April 1, 2000 and $3,261
at June 26, 1999 112,921 109,060
Inventories (note 3) 177,247 182,799
Deferred income taxes 19,473 17,842
Other current assets 27,981 28,999
Total current assets 351,643 359,510
Investments (note 4) 168,848 106,199
Property, plant and equipment, net 236,468 248,016
Other assets 102,862 87,499
$859,821 801,224
LIABILITIES AND EQUITY
Current liabilities:
Notes payable and current maturities of
long-term debt:
Short-term borrowings $112,910 58,085
Subordinated loan certificates 40 10,095
Current maturities of long-term debt 15,687 16,820
128,637 85,000
Accounts payable 92,337 95,985
Accrued compensation and related expenses 23,532 36,165
Other current liabilities 24,285 42,212
Total current liabilities 268,791 259,362
Long-term debt, excluding current maturities 276,803 186,913
Accrued postretirement benefit costs 57,032 53,432
Other liabilities 4,572 22,150
Total liabilities 607,198 521,857
Patrons' and other equity:
Common stock, $1.00 par value - Authorized
500 shares; issued and outstanding 31 at
April 1, 2000 and June 26, 1999 31 31
Patronage reserves 200,116 204,080
Accumulated other comprehensive income -
unrealized gain on marketable equity
security (notes 4 and 6) 10,021 19,015
Retained earnings 42,455 56,241
Total patrons' and other equity 252,623 279,367
$859,821 801,224
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
Page 2
GOLD KIST INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
April 1, March 27, April 1, March 27,
2000 1999 2000 1999
(13 Weeks) (13 Weeks) (40 Weeks) (39 Weeks)
<S> <C> <C> <C> <C>
Net sales volume $413,471 421,405 1,288,806 1,336,542
Cost of sales 411,564 395,913 1,231,260 1,170,412
Gross margins 1,907 25,492 57,546 166,130
Distribution, administrative
and general expenses 20,871 18,902 61,819 60,598
Net operating margins (loss) (18,964) 6,590 (4,273) 105,532
Other income (deductions):
Interest and dividend income 2,392 1,315 6,008 2,370
Interest expense (8,428) (7,010) (23,626) (20,463)
Equity in earnings (loss) of
partnership (note 4) (4,312) 339 (6,701) 2,225
Miscellaneous, net 741 1,016 5,756 3,116
Total other deductions (9,607) (4,340) (18,563) (12,752)
Margins (loss) before income
taxes (28,571) 2,250 (22,836) 92,780
Income tax expense (benefit) (9,956) 543 (8,006) 32,348
Net margins (loss) $(18,615) 1,707 (14,830) 60,432
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
Page 3
GOLD KIST INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
Apr. 1, Mar. 27,
2000 1999
(40 Weeks) (39 Weeks)
<S> <C> <C>
Cash flows from operating activities:
Net margins (loss) $(14,830) 60,432
Non-cash items included in net margins (loss):
Depreciation and amortization 32,471 30,474
Equity in (earnings) loss of partnership 6,701 (2,225)
Deferred income tax expense (benefit) (5,602) 26,943
Other (2,503) (354)
Changes in operating assets and liabilities:
Receivables (3,861) 5,184
Inventories 5,552 (6,506)
Other current assets 1,312 (2,692)
Income taxes receivable - 14,652
Accounts payable, accrued and other expenses (20,978) 17,130
Net cash provided by (used in) operating activities
of continuing operations (1,738) 143,038
Net cash provided by operating activities of
discontinued operations - 15,385
Net cash provided by (used in) operating activities (1,738) 158,423
Cash flows from investing activities:
Acquisitions of investments (98,605) -
Acquisitions of property, plant and equipment (19,735) (21,816)
Other 2,046 10,608
Net cash used in investing activities of
continuing operations (116,294) (11,208)
Net cash used in investing activities of
discontinued operations:
Repurchase of accounts and crop notes receivable (25,730) -
Proceeds from sale of the Agri-Services segment - 218,313
Other 8,629 -
Net cash provided by (used in) investing
activities (133,395) 207,105
Cash flows from financing activities:
Short-term borrowings (repayments), net 44,770 (148,401)
Proceeds from long-term debt 100,000 83,891
Principal repayments of long-term debt (11,243) (288,608)
Patronage refunds and other equity paid in cash (5,183) (4,575)
Net cash provided by (used in) financing activities 128,344 (357,693)
Net change in cash and cash equivalents (6,789) 7,835
Cash and cash equivalents at beginning of period 20,810 11,789
Cash and cash equivalents at end of period $ 14,021 19,624
Supplemental disclosure of cash flow data:
Cash paid during the periods for:
Interest (net of amounts capitalized) $ 23,428 21,200
Income taxes $ 2,665 12,400
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
Page 4
GOLD KIST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in Thousands)
(Unaudited)
1. The accompanying unaudited consolidated financial
statements reflect the accounts of Gold Kist Inc. and
its subsidiaries ("Gold Kist" or the "Association").
These consolidated financial statements should be read
in conjunction with Management's Discussion and Analysis
of Consolidated Results of Operations and Financial
Condition and the Notes to Consolidated Financial
Statements on pages 12 through 18 and pages 22 through
37, respectively, of Gold Kist's Annual Report in the
previously filed Form 10-K for the year ended June 26,
1999.
The Association employs a 52/53 week fiscal year. Fiscal
2000 will be a 53 week year. Accordingly, the nine
months ended April 1, 2000 included 40 weeks, while the
nine months ended March 27, 1999 had 39 weeks.
2. In the opinion of management, the accompanying
unaudited consolidated financial statements contain all
adjustments (consisting of normal recurring accruals)
necessary to present fairly the financial position, the
results of operations, and the cash flows. All
significant intercompany balances and transactions have
been eliminated in consolidation. Results of operations
for interim periods are not necessarily indicative of
results for the entire year.
3. Inventories consist of the following:
<TABLE>
<CAPTION>
April 1, 2000 June 26, 1999
<S> <C> <C>
Live poultry and hogs $ 94,372 93,999
Marketable products 45,967 56,097
Raw materials and supplies 36,908 32,703
$177,247 182,799
</TABLE>
4. (a) At April 1, 2000, the Association's marketable
equity security was carried at its fair value of $36.2
million, which includes an unrealized gain of $15.4
million. At April 1, 2000, the unrealized gain, net
of deferred taxes of $5.4 million, has been reflected
as a component of other comprehensive income. At June 26,
1999, the Association's marketable equity security was
carried at its fair value of $50.0 million, which
includes an unrealized gain of $29.3 million. At June
26, 1999, the unrealized gain, net of deferred taxes of
$10.2 million, has been reflected as a component of
other comprehensive income.
(b) As a result of a restructuring on March 30, 2000, the
Golden Peanut Company, a Georgia general partnership, was
converted to a Georgia limited liability company. The
restructuring included the admittance of the Cargill, Inc.
peanut operations as a fourth equal member of Golden Peanut
Company. As part of the restructuring, Gold Kist contributed
property, plant and equipment with a carrying value of $1.2
million to the limited liability company and received a $2.3
million cash distribution, which represented a return of
capital.
Page 5
Subsequent to the restructuring, Gold Kist's interest in
Golden Peanut Company declined to 25%. Gold Kist's
investment in the limited liability company was $11.9
million at April 1, 2000. Gold Kist's investment in the
partnership was $19.7 million at June 26, 1999. In
addition to Gold Kist's reduced ownership interest, the
decline in the carrying value of the investment reflects
Golden Peanut losses for the nine months ended March 31,
2000.
Summarized operating statement information of Golden
Peanut Company is shown below:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Mar. 31, Mar. 31, Mar. 31, Mar.31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales and other
operating income $ 98,209 92,382 282,304 303,376
Costs and expenses 110,363 91,366 298,781 296,702
Net earnings (loss) $(12,154) 1,016 (16,477) 6,674
</TABLE>
5. In October 1998, the Association completed the sale
of assets of the Inputs business to Southern States
Cooperative, Inc. (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 order to resolve the post-closing
valuation process, the Association agreed in September
1999 to repurchase from Southern States approximately
$25.7 million of accounts and crop notes receivable. The
agreement resulted 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 was unable to market the securities to
other purchasers. In October 1999, the Company purchased
for $98.6 million the $100 million principal amount of
preferred securities as required under the commitment.
The preferred securities carry an initial weighted
average dividend rate of 7.8%. 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 preferred securities
owned by the Association shall be reduced correspondingly
on a dollar-for-dollar basis. If not repurchased, Gold
Kist must hold the 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 to third parties.
Page 6
6. Effective June 28, 1998, the Association adopted SFAS No.
130, "Reporting Comprehensive Income." This statement
establishes items that are required to be recognized under
accounting standards as components of comprehensive income.
SFAS No. 130 requires, among other things that an enterprise
report a total for comprehensive income in condensed financial
statements of interim periods. For the three month periods
ended April 1, 2000 and March 27, 1999, the Association's
consolidated comprehensive loss was $(22.7) million and $(4.5)
million, respectively. For the nine month periods ended April
1, 2000 and March 27, 1999, the Association's consolidated
comprehensive (loss) income was $(23.8) million and $51.3
million, respectively. The difference between consolidated
comprehensive (loss) income, as disclosed here, and
traditionally-determined consolidated net margins (loss), as
set forth on the accompanying Condensed Consolidated
Statements of Operations, results from unrealized holding
gains (losses) on the marketable security less applicable
income taxes.
Page 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The Association's accounting cycle resulted in 13 weeks and 40
weeks of operations, respectively, in the three and nine month
periods ended April 1, 2000 as compared to 13 weeks and 39
weeks of operations, respectively, in the three and nine month
periods ended March 27, 1999.
Net Sales Volume
Gold Kist net sales volume of $413.5 million for the three
months ended April 1, 2000 decreased approximately 1.9% or
$7.9 million as compared to the three months ended March 27,
1999. The decrease in net sales for the three months ended
April 1, 2000 as compared to the three months ended March 27,
1999 was due primarily to lower average selling prices. Net
sales volume of approximately $1.3 billion for the nine months
ended April 1, 2000 decreased 3.6% or $47.7 million as
compared to the nine months ended March 27, 1999. The net
sales volume decrease for the nine months ended April 1, 2000
was primarily the result of a 7.1% decrease in average selling
prices, which was partially offset by a 3.7% increase in
pounds of poultry sold. Management believes the decline in
sales prices is a result of an increase in industry poultry
production and the weakness in export markets due to the poor
economic conditions in Russia. Also, large supplies of
competing meats (pork and beef) have contributed to the
decline in market prices for chicken. In response to these
market conditions, the Association reduced its per head
production of live broilers by approximately 3.5% during the
quarter ended April 1, 2000 as compared to the same quarter a
year ago.
Net Operating Margins
The Association had a net operating loss of approximately
$19.0 million for the three months ended April 1, 2000 as
compared to net operating margins of $6.6 million for the
three months ended March 27, 1999. The net operating loss for
the nine months ended April 1, 2000 was $4.3 million as
compared to net operating margins of $105.5 million for the
nine month period ended March 27, 1999. The decline in
operating margins was due primarily to the decrease in broiler
sales prices discussed above and increases in field production
and processing costs. These increases were partially offset
by lower feed ingredient costs. Feed ingredient costs for the
three and nine months ended April 1, 2000 declined 2.8% and
6.4%, respectively, as compared to the three and nine months
ended March 27, 1999. Management believes lower feed
ingredient prices reflect the continuation of weak U.S. grain
exports and favorable grain harvests during the past three
years. The Association's pork division posted an operating
margin of $134 thousand and an operating loss of $1.0 million,
respectively, for the three and nine month periods ended April
1, 2000 as compared to operating losses of $2.2 million and
$5.7 million, respectively, for the three and nine month
periods ended March 27, 1999. The increase in distribution,
administrative and general expenses for the three months ended
April 1, 2000 reflected additions to the allowance for
doubtful accounts resulting from a customer bankruptcy.
Page 8
Other Income (Deductions)
Interest and dividend income of $2.4 million and $6.0 million,
respectively, for the three and nine months ended April 1,
2000 reflected interest and dividends on the preferred
securities purchased from Southern States in October 1999.
Interest and dividends on the preferred securities were $1.9
million and $3.8 million, respectively, for the three and nine
months ended April 1, 2000.
Interest expense was $8.4 million for the three months ended
April 1, 2000 as compared to $7.0 million for the three
months ended March 27, 1999. Interest expense for the nine
months ended April 1, 2000 was $23.6 million as compared to
$20.5 million for the nine months ended March 27, 1999. The
increases primarily reflected higher average borrowings
necessary to fund the purchase of Southern States preferred
securities for $98.6 million in October 1999 and $25.7 million
of accounts and crop notes receivable that were purchased from
Southern States in September 1999. (See Note 5 of Notes to
Consolidated Financial Statements). In addition, borrowings
increased during the quarter ended April 1, 2000 as a result
of cash used to fund operating losses.
Equity in loss of partnership of approximately $4.3 million
and $6.7 million represented the Association's pro rata share
of Golden Peanut Company's loss for the three and nine month
periods ended April 1, 2000, respectively, in accordance with
the partnership agreement. This compared to $339 thousand and
$2.2 million, respectively, pro rata share of the
partnership's earnings for the three and nine month periods
ended March 27, 1999. The partnership's loss for the fiscal
2000 periods resulted from litigation related expenses and
inventory write-downs.
Miscellaneous, net was $741 thousand for the three months
ended April 1, 2000 as compared to $1.0 million for the three
months ended March 27, 1999. For the three months ended April
1, 2000, miscellaneous, net included a $47 thousand gain from
the Association's ownership interest in a pecan processing and
marketing company as compared to a $62 thousand gain for the
three months ended March 27, 1999. Miscellaneous, net for the
three months ended April 1, 2000 includes losses of $234
thousand from the Association's ownership interest in a
company engaged in the manufacture and distribution of
fertilizer additives for the farm industry. Miscellaneous,
net for the nine months ended April 1, 2000 was $5.8 million
as compared to $3.1 million for the same period a year ago.
Miscellaneous, net for the nine months ended April 1, 2000
includes a $3.9 million insurance recovery that represents
losses from the theft of product at the Association's South
Carolina complex in 1997 and 1998.
For the three months ended April 1, 2000 and March 27, 1999,
the Association's combined federal and state effective income
tax rates were 34.8% and 24.1%, respectively. For the nine
months ended April 1, 2000 and March 27, 1999, the
Association's combined federal and state effective income tax
rates were 35.1% and 34.9%, respectively. Income tax expense
for the periods presented reflects income taxes at statutory
rates adjusted for available tax credits and deductible
patronage refunds, if applicable.
Page 9
LIQUIDITY AND CAPITAL RESOURCES
The Association's liquidity is dependent upon funds from
operations and external sources of financing. The principal
source of external short-term financing is a secured committed
credit facility with a commercial bank. In December 1999, the
Association reduced its $250 million secured committed credit
facility with seven commercial banks to $200 million. The
facility includes a three-year $100 million revolving credit
commitment and a $100
million 364-day line of credit commitment. As of April 1,
2000, outstanding borrowings under the revolving credit and
the 364-day line-of-credit commitments were $100 million and
$70.0 million, respectively.
The 364-day line of credit and the three year revolving credit
facility, as well as the Association's senior notes payable,
term loan with agricultural credit bank, interest rate swap
agreements and any letters of credit are secured by all
inventories and accounts receivable of the Association and
mortgages on the Association's facilities in Marshall County,
Alabama and Sumter County, South Carolina.
Covenants under the amended terms of the loan agreements with
lenders include conditions that could limit short-term and
long-term financing available from various external sources.
In March 2000, the Association renegotiated the terms of the
loan agreements. The revised terms require a ratio of current
assets to current liabilities of not less than 1.10:1 and the
ratio of total funded debt to total capitalization not to
exceed 65%. Also, the terms require a minimum tangible net
worth (as adjusted for accumulated other comprehensive income
(loss)) of $240.0 million, which is adjusted quarterly based
upon net margins. At April 1, 2000, the Association's current
ratio, ratio of total funded debt to capitalization and
tangible net worth, determined under the loan agreements, were
1.31:1, 54% and $242.6 million, respectively. The terms of
the $200 million credit facility require a fixed charge ratio
(eight quarter average) for fiscal 2000 of 175%. The
Association's fixed coverage ratio for the reporting period
ended April 1, 2000 was 183%. 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 April 1, 2000, the Association was in
compliance with the agreements.
Working capital and patrons equity were $82.9 million and
$252.6 million, respectively, at April 1, 2000 as compared to
$100.1 million and $279.4 million, respectively, at June 26,
1999. The decrease in working capital reflected the increase
in short-term borrowings. The decline in patrons equity at
April 1, 2000, as compared to June 26, 1999, reflected the
$9.0 million unrealized holding loss on a marketable equity
security, equity redemptions of $2.9 million and $18.6 million
of net loss. Net cash used in operating activities reflected
the net loss adjusted for non-cash items, which were partially
offset by increased receivables, as well as, lower accrued
compensation and related liabilities. Existing cash balances
and additional short-term and long-term borrowings were used
to purchase Southern States securities, repurchase accounts
and crop notes receivable, fund acquisitions of property,
plant and equipment and redeem subordinated loan certificates.
Page 10
In order to complete the sale of assets of the Agri-Services
segment to 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 was unable to market
the securities to other purchasers. In October 1999, the
Company purchased for $98.6 million the $100 million
principal amount of preferred securities as required under
the commitment. The Association used its revolving credit
facility to fund the purchase of the preferred securities.
Gold Kist must hold the securities for a period of at least
nine months from the purchase date before initiating a sale to
a third party. (See Note 5 of Notes to Consolidated Financial
Statements).
The Association plans capital expenditures of approximately
$40.0 million in 2000 that include expenditures for
renovations, changes, additions and technological advances in
poultry production and processing. Many of these capital
projects are designed to enhance product mix and improve
product flow. In addition, planned capital expenditures
include other asset improvements and necessary replacements.
Management intends to finance planned 2000 capital
expenditures and related working capital needs with existing
cash balances and net margins adjusted for non-cash items and
additional borrowings, as needed. In 2000, management expects
cash expenditures to approximate $7.0 million for patronage
refunds and equity distributions less insurance proceeds. The
Association believes cash on hand and cash equivalents at
April 1, 2000 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.
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 computer programs that have time-
sensitive software might recognize a date using "00" as the
year 1900 rather than the year 2000, which could result in
miscalculations or system failures.
The Association completed its preparation for the year 2000
issue in November 1999 and as of May 15, 2000, there have been
no significant business interruptions related to the year 2000
issue. The Association will continue to monitor and test its
systems and those of our key vendors and develop contingency
plans, if needed, should any issues be identified. The
Association's cost of repairing the IT systems and non-IT
systems was approximately $800 thousand, of which
approximately $300 thousand was spent in fiscal 2000.
Important Considerations Related to Forward-Looking Statements
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. It should be noted that this discussion contains
forward-looking statements
Page 11
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. 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.
Management has not determined the effect of adopting this
statement on the Association's financial statements in fiscal
2001.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISKS
Commodities Risk
The Association is a purchaser of certain agricultural
commodities, primarily corn and soybean meal, 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 and as a mechanism to procure
grains. 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.
The following table provides information about the
Association's corn and soybean meal futures and options
contracts that are sensitive to changes in commodity prices.
For commodity inventories, the table presents the
Page 12
carrying amount and fair value at April 1, 2000.
Additionally, for futures and options contracts, the latest of
which matures or expires nine months from the reporting date,
the table presents the notional amounts in units of purchase
and the weighted average contract price or weighted average
exercise price and the fair value of the position at April 1,
2000.
Terms of the Association's committed secured credit facility
limit the use of the cash forward contracts and commodities
futures and options to hedge no more than twenty-six weeks of
the Association's corn and soybean meal requirements.
<TABLE>
(Contract volume and dollars in thousands, except per unit amounts)
<CAPTION>
Weighted
Contract Avg. Price Fair
Volume Per Unit Value
<S> <C> <C> <C>
Recorded Balance Sheet Commodity
Position:
Corn and soybean meal ingredient
inventory (carrying value - $12,000) - - $12,000
Hedging Positions:
Futures Contracts
Corn - long (buy) 7,445 bu. $ 2.40 125
Corn - short (sell) 285 bu. 2.43 (26)
Soybean meal - long (buy) 10 tons 171.95 24
</TABLE>
<TABLE>
<CAPTION>
Weighted
Contract Avg. Strike Fair
Option Contracts Volume Price Per Unit Value
<S> <C> <C> <C>
Corn puts written 12,250 bu. $ 2.23 $388
Corn calls purchased 7,250 bu. 2.41 240
Soybean meal puts written 30 tons 150.00 106
Soybean meal puts purchased 10 tons 160.00 (5)
</TABLE>
Page 13
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit
Designation of Exhibit
in this Report Description of Exhibit
B-10(i)(8) Seventh Amendment dated as of
March 20, 2000, 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-27 Financial Data Schedule
(b) Reports on Form 8-K. Gold Kist has not filed any reports on
Form 8-K during the three months ended April 1, 2000.
SIGNATURES
Pursuant to the requirements 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.
(Registrant)
Date May 15, 2000
Gaylord O. Coan
Chief Executive Officer
(Principal Executive Officer)
Date May 15, 2000
Walter F. Pohl, Jr.
Controller
(Principal Accounting Officer)
Page 13
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit
Designation of Exhibit
in this Report Description of Exhibit
B-10(i)(8) Seventh Amendment dated as of
March 20, 2000, 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-27 Financial Data Schedule
(b) Reports on Form 8-K. Gold Kist has not filed any reports
on Form 8-K during the three months ended April 1, 2000.
SIGNATURES
Pursuant to the requirements 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.
(Registrant)
Date May 15, 2000 /s/ Gaylord O. Coan
Gaylord O. Coan
Chief Executive Officer
(Principal Executive Officer)
Date May 15, 2000 /s/ Walter F. Pohl, Jr.
Walter F. Pohl, Jr.
Controller
(Principal Accounting Officer)
EXHIBIT B-10(i)(8)
SEVENTH AMENDMENT TO
CREDIT AGREEMENT
This Seventh Amendment to Credit Agreement (this
"Amendment"), dated as of March 20, 2000 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
the First Amendment dated September 30, 1998, as amended by
the Second Amendment dated October 13, 1998, as amended by the
Third Amendment dated December 3, 1998, as amended by the
Fourth Amendment dated as of April 30, 1999, as amended by
the Fifth Amendment dated as of November 29, 1999, and as
amended by the Sixth Amendment dated as of December 21,
1999(the "Credit Agreement"); and
WHEREAS, the Borrower has requested that the Lenders
modify certain of the financial covenants;
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) Amendment to Section 7.1(b). Section 7.1(b) of
the Credit Agreement is amended by deleting it in its entirety
and substituting the following therefor:
"(b) Minimum Consolidated Tangible Net Worth.
The Borrower's Consolidated Tangible Net Worth (less any
gain or loss as a result of accumulated other
comprehensive income, as defined by GAAP, or any amount
shown as "unrealized gain on marketable equity
securities" on the Borrower's financial statements
delivered pursuant to Section 6.1) will at no time be
less than $240,000,000 plus the sum of (i) 50% of the
cumulative Reported Net Income of the Borrower and its
Consolidated Subsidiaries during the period commencing
with Borrower's third quarter, 2000 (taken as one
accounting period), calculated quarterly at the end of
each Fiscal Quarter, and (ii) 100% of the cumulative Net
Proceeds of Capital Stock received during any period
after the Closing Date, but excluding from such
calculations of Reported Net Income for purposes of this
clause any Fiscal Quarter in which the Reported Net
Income of the Borrower and its Consolidated Subsidiaries
is negative."
(b) Amendment to Section 7.1(c). Section 7.1(c) of
the Credit Agreement is amended by deleting it in its entirety
and substituting the following therefor:
"(c) Current Ratio. The Borrower shall not
permit the ratio of Consolidated Current Assets to
Consolidated Current Liabilities to be less than 1.10 to
1.0, calculated on a quarterly basis."
(c) Amendment to Section 7.1(d). Section 7.1(d) of
the Credit Agreement is amended by deleting it in its entirety
and substituting the following therefor:
"(d) Fixed Charge Coverage. The Borrower shall
not permit the ratio of (a) EBIT plus Consolidated Lease
Expense to (b) Consolidated Interest Expense plus
Consolidated Lease Expense for each fiscal quarter set
forth below, calculated (x) for the first three fiscal
quarters of fiscal year 1999, quarterly for the fiscal
quarter then ending, (y) for the last fiscal quarter of
fiscal year 1999 and the first two fiscal quarters of
fiscal year 2000, quarterly for the fiscal quarter then
ending and the preceding three fiscal quarters, and (z)
for the third fiscal quarter of fiscal year 2000 and
thereafter, quarterly for the fiscal quarter then ending
and the preceding seven fiscal quarters, to be less than
the ratio set forth opposite the relevant fiscal quarter
in the following table:
Fiscal Quarter Ratio
First Quarter, 1999 1.80
Second Quarter, 1999 .50
Third Quarter, 1999 .75
Fourth Quarter, 1999 through
Second Quarter, 2000 1.45
Third Quarter, 2000 1.75
Fourth Quarter, 2000 1.75
First Quarter, 2001
and thereafter 1.10"
(e) Amendment to Section 7.1(e). Section 7.1(e) of
the Credit Agreement is amended by deleting it in its entirety
and substituting the following therefor:
"(e) Senior Debt Coverage. The Borrower shall
not permit the ratio of (a) Consolidated Senior Debt as
of the end of any fiscal quarter to (b) the sum of EBITDA
for the fiscal quarter then ending and the preceding
seven fiscal quarters (divided by two), to be more than
the ratio set forth opposite the relevant fiscal quarter
in the following table:
Fiscal Quarter Ratio
Third Quarter 2000 through
Fourth Quarter 2000 3.00
First Quarter 2001
and thereafter 3.90"
Section 2. Conditions Precedent. This Seventh 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 Seventh 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 and
Treasurer
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "Rabobank
Nederland", NEW YORK BRANCH,
individually and as Agent
By: /s/ Michael T. Fabiano
Name: Michael T. Fabiano
Title: Vice President
By: /s/ Edward Peyser
Name: Edward Peyser
Title: Vice President
SUNTRUST BANK, ATLANTA
By: /s/ Michel A. Odermatt
Name: Michel A. Odermatt
Title: Vice President
WACHOVIA BANK, N.A.
By: /s/ Thomas L. Gleason
Name: Thomas L. Gleason
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/ Jochen Breiltgens
Name: Jochen Breiltgens
Title: Vice President
[12332]
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-01-2000
<PERIOD-END> APR-01-2000
<CASH> 14,021
<SECURITIES> 0
<RECEIVABLES> 117,477
<ALLOWANCES> 4,556
<INVENTORY> 177,247
<CURRENT-ASSETS> 351,643
<PP&E> 606,361
<DEPRECIATION> 369,893
<TOTAL-ASSETS> 859,821
<CURRENT-LIABILITIES> 268,791
<BONDS> 276,803
0
0
<COMMON> 31
<OTHER-SE> 252,592
<TOTAL-LIABILITY-AND-EQUITY> 859,821
<SALES> 1,288,806
<TOTAL-REVENUES> 1,300,570
<CGS> 1,231,260
<TOTAL-COSTS> 1,231,260
<OTHER-EXPENSES> 6,701
<LOSS-PROVISION> 1,500
<INTEREST-EXPENSE> 23,626
<INCOME-PRETAX> (22,836)
<INCOME-TAX> (8,006)
<INCOME-CONTINUING> (14,830)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,830)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
