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 December 31, 1999
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 -
December 31, 1999 and June 26, 1999 1
Consolidated Statements of Operations
Three Months and Six Months Ended
December 31, 1999 and December 26, 1998 2
Consolidated Statements of Cash Flows -
Six Months Ended December 31, 1999
and December 26, 1998 3
Notes to Consolidated Financial
Statements 4 - 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial
Condition 7 - 11
Part II. Other Information
Item 6. Exhibits and reports on Form 8-K 12
<TABLE>
Page 1
Item 1. Financial GOLD KIST INC.
Statements CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
(Unaudited)
<CAPTION>
Dec. 31, June 26,
1999 1999
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,992 20,810
Receivables, principally trade,
less allowance for doubtful
accounts of $3,269 at
Dec. 31, 1999 and $3,261
at June 26, 1999 112,962 109,060
Inventories (note 3) 185,138 182,799
Deferred income taxes 18,585 17,842
Other current assets 22,661 28,999
Total current assets 349,338 359,510
Investments (note 4) 180,234 106,199
Property, plant and equipment, net 238,168 248,016
Other assets 91,035 87,499
$858,775 801,224
LIABILITIES AND EQUITY
Current liabilities:
Notes payable and current maturities of
long-term debt:
Short-term borrowings $ 85,010 58,085
Subordinated loan certificates 184 10,095
Current maturities of long-term debt 16,399 16,820
101,593 85,000
Accounts payable 84,192 95,985
Accrued compensation and related expenses 23,824 36,165
Other current liabilities 32,036 42,212
Total current liabilities 241,645 259,362
Long-term debt, excluding current maturities 279,363 186,913
Accrued postretirement benefit costs 55,832 53,432
Other liabilities 5,628 22,150
Total liabilities 582,468 521,857
Patrons' and other equity:
Common stock, $1.00 par value - Authorized
500 shares; issued and outstanding 31 at
Dec. 31, 1999 and June 26, 1999 31 31
Patronage reserves 207,081 204,080
Accumulated other comprehensive income -
unrealized gain on marketable equity
security (note 4) 14,127 19,015
Retained earnings 55,068 56,241
Total patrons' and other equity 276,307 279,367
$858,775 801,224
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 Six Months Ended
Dec. 31, Dec. 26, Dec. 31, Dec. 26,
1999 1998 1999 1998
(14 Weeks) (13 Weeks) (27 Weeks) (26 Weeks)
<S> <C> <C> <C> <C>
Net sales volume $444,520 434,282 875,335 915,137
Cost of sales 422,654 378,766 819,696 774,499
Gross margins 21,866 55,516 55,639 140,638
Distribution, administrative
and general expenses 21,232 19,103 40,948 41,696
Net operating margins 634 36,413 14,691 98,942
Other income (deductions):
Interest income 3,152 410 3,616 1,055
Interest expense (8,613) (3,941) (15,198) (13,453)
Equity in earnings (loss) of
partnership (note 4) (1,335) 693 (2,389) 1,886
Miscellaneous, net 3,644 926 5,015 2,100
Total other deductions (3,152) (1,912) (8,956) (8,412)
Margins (loss) before income
taxes (2,518) 34,501 5,735 90,530
Income tax expense (benefit) (868) 11,606 1,950 31,805
Net margins (loss) $ (1,650) 22,895 3,785 58,725
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
Page 3
GOLD KIST INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<CAPTION>
Six Months Ended
Dec. 31, Dec. 26,
1999 1998
(27 Weeks) (26 Weeks)
<S> <C> <C>
Cash flows from operating activities:
Net margins $ 3,785 58,725
Non-cash items included in net margins:
Depreciation and amortization 21,250 20,175
Equity in (earnings) loss of partnership 2,389 (1,886)
Deferred income tax expense (benefit) (2,362) 29,366
Other (219) (921)
Changes in operating assets and liabilities:
Receivables (3,902) 683
Inventories (2,339) (264)
Other current assets 23,798 2,401
Accounts payable, accrued and other expenses (24,986) 13,622
Net cash provided by operating activities of
continuing operations 17,414 121,901
Net cash provided by operating activities of
discontinued operations - 16,820
Net cash provided by operating activities 17,414 138,721
Cash flows from investing activities:
Acquisitions of investments (98,600) -
Acquisitions of property, plant and equipment (10,003) (17,681)
Other 67 9,759
Net cash used in investing activities of
continuing operations (108,536) (7,922)
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
Net cash used in investing activities (134,266) 210,391
Cash flows from financing activities:
Short-term borrowings (repayments), net 17,015 (150,812)
Proceeds from long-term debt 125,000 83,891
Principal repayments of long-term debt (32,971) (282,950)
Patronage refunds and other equity paid in cash (3,010) (2,017)
Net cash provided by (used in) financing activities 106,034 (351,888)
Net change in cash and cash equivalents (10,818) (2,776)
Cash and cash equivalents at beginning of period 20,810 11,789
Cash and cash equivalents at end of period $ 9,992 9,013
Supplemental disclosure of cash flow data:
Cash paid during the periods for:
Interest (net of amounts capitalized) $ 16,119 22,500
Income taxes $ 1,573 -
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. As a result, the
Association's quarter ended December 31, 1999 included
14 weeks, while the quarter ended December 26, 1998 had
13 weeks. Accordingly, the six months ended December
31, 1999 included 27 weeks, while the six months ended
December 26, 1998 had 26 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>
Dec. 31, 1999 June 26, 1999
<S> <C> <C>
Live poultry and hogs $ 90,729 93,999
Marketable products 58,062 56,097
Raw materials and supplies 36,347 32,703
$185,138 182,799
</TABLE>
4. (a) At December 31, 1999, the Association's marketable
equity security was carried at its fair value of $42.5
million, which includes an unrealized gain of $21.7 million.
At December 31, 1999, the unrealized gain, net of
deferred taxes of $7.6 million, has been reflected as a
separate component of patrons' and other equity. 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 separate
component of patrons' and other equity.
Page 5
(b)Gold Kist has a 33% interest in Golden Peanut Company,
a Georgia general partnership. Gold Kist's investment in
the partnership was $17.3 million at December 31, 1999
and $19.7 million at June 26, 1999.
Summarized operating statement information of Golden
Peanut Company is shown below:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Dec. 31, Dec. 26, Dec. 31, Dec. 26,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales and other
operating income $96,540 116,266 179,494 210,315
Costs and expenses 99,789 114,187 185,291 204,657
Net earnings (loss) $(3,249) 2,079 (5,797) 5,658
</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.
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
Page 6
periods ended December 31, 1999 and December 26, 1998,
the Association's consolidated comprehensive (loss) income
was $(1.4) million and $24.2 million, respectively. For
the six month periods ended December 31, 1999 and
December 26, 1998, the Association's consolidated
comprehensive (loss) income was $(1.1) million and $55.8
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 14 weeks and 27
weeks of operations, respectively, in the three and six month
periods ended December 31, 1999 as compared to 13 weeks and 26
weeks of operations, respectively, in the three and six month
periods ended December 26, 1998.
Net Sales Volume
Gold Kist net sales volume of $444.5 million for the three
months ended December 31, 1999 increased 2.4% or $10.2 million
as compared to the three months ended December 26, 1998.
Average poultry selling prices declined approximately 9.7% for
the three months ended December 31, 1999 as compared to the
three months ended December 26, 1998. Pounds processed and
marketed for the three months ended December 31, 1999
increased approximately 12.0% as compared to the three months
ended December 26, 1998. Net sales volume of $875.3 million
for the six months ended December 31, 1999 decreased 4.4% or
$39.8 million as compared to the six months ended December 26,
1998. The net sales volume decrease for the six months ended
December 31, 1999 was primarily the result of a 11.1% decrease
in average selling prices, which was partially offset by a
8.3% 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
production of live broilers by approximately 6% during the
quarter ended December 31, 1999.
Net Operating Margins
The Association had net operating margins of $634 thousand for
the three months ended December 31, 1999 as compared to net
operating margins of $36.4 million for the three months ended
December 26, 1998. Net operating margins for the six months
ended December 31, 1999 were $14.7 million as compared to net
operating margins of $98.9 million for the six month period
ended December 26, 1998. 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 six months ended December 31, 1999 declined 3.0% and
8.1%, respectively, as compared to the three and six months
ended December 26, 1998. 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 operating
losses of $463 thousand and $1.2 million, respectively, for
the three and six month periods ended December 31, 1999 as
compared to operating losses of $2.6 million and $3.4 million,
respectively, for the three and six month periods ended
December 26, 1998. The decrease in distribution,
administrative and general expenses for the six months ended
December 31, 1999 reflected the decrease in incentive
compensation expenses related to the decline in net margins.
Page 8
Other Income (Deductions)
Interest expense of $8.6 million for the three months ended
December 31, 1999 increased $4.7 million as compared to $3.9
million for the three months ended December 26, 1998. Interest
expense for the six months ended December 31, 1999 was $15.2
million as compared to $13.5 million for the six months ended
December 26, 1998. The increases 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).
Equity in loss of partnership of approximately $1.3 million
and $2.4 million represented the Association's pro rata share
of Golden Peanut Company's loss for the three and six month
periods ended December 31, 1999, respectively, in accordance
with the partnership agreement. This compared to $693
thousand and $1.9 million, respectively, pro rata share of the
partnership's earnings for the three and six month periods
ended December 26, 1998. The partnerships loss for the fiscal
2000 periods resulted from litigation related expenses.
Miscellaneous, net was $3.6 million for the three months ended
December 31, 1999 as compared to $926 thousand for the three
months ended December 26, 1998. Miscellaneous, net for the
three months ended December 31, 1999 includes a $3.9 million
insurance recovery that represents losses from the theft of
chicken at the Association's South Carolina complex in 1997
and 1998. During the three months ended December 31, 1999,
the Association recorded a $406 thousand gain on the sale of a
portion of its investment in an international trading company.
For the three months ended December 31, 1999, miscellaneous,
net included a $158 thousand gain from the Association's
ownership interest in a pecan processing and marketing company
as compared to a $301 thousand gain for the three months ended
December 26, 1998. Miscellaneous, net for the three month
period ended December 31, 1999 reflects a $1.3 million loss
accrual related to an indemnification agreement for cotton
sales contracts that were sold to an unrelated third party in
1998. Miscellaneous, net for the three months ended December
31, 1999 includes losses of $426 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 six months ended
December 31, 1999 was $5.0 million as compared to $2.1 million
for the same period a year ago.
For the three months ended December 31, 1999 and December 26,
1998, the Association's combined federal and state effective
income tax rates were 34.5% and 33.6%, respectively. For the
six months ended December 31, 1999 and December 26, 1998, the
Association's combined federal and state effective income tax
rates were 34.0% and 35.1%, respectively. Income tax expense
for the periods presented reflects income taxes at statutory
rates adjusted for available tax credits and deductible
patronage refunds.
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
Page 9
million 364-day line of credit commitment. In December 1999,
the Association amended the loan covenants associated with
this facility. As of December 31, 1999, outstanding
borrowings under the revolving credit and the 364-day line-of-
credit commitments were $100 million and $42.1 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
inventory 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.
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%. Also,
the terms require a minimum tangible net worth (as adjusted
for accumulated other comprehensive income (loss)) of $255.0
million, which is adjusted quarterly based upon net margins.
At December 31, 1999, the Association's current ratio, ratio
of total funded debt to capitalization and tangible net worth,
determined under the loan agreements, were 1.45:1, 52% and
$262.2 million, respectively. The terms of the $200 million
credit facility require specific quarterly fixed charge
coverage ratios during fiscal 2000 and a fixed charge ratio
(eight quarter average) for fiscal 2000 of 175%. 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 December 31, 1999, the
Association was in compliance with the agreements.
Working capital and patrons equity were $107.7 million and
$276.3 million, respectively, at December 31, 1999 as compared
to $100.1 million and $279.4 million, respectively, at June
26, 1999. The increase in working capital reflected the
repurchase of accounts and crop notes receivable from Southern
States. The decline in patrons equity at December 31, 1999,
as compared to June 26, 1999, reflected the $4.9 million
unrealized holding loss on a marketable equity security and
equity redemptions of $1.9 million. Net cash provided by
operating activities reflected net margins and non-cash items,
which were partially offset by increases in marketable products
and raw material and supplies inventories and receivables,
as well as, lower accrued compensation and related liabilities.
Existing cash balances and additional short-term and long-term
borrowings were used to repurchase accounts and crop notes
receivable, fund acquisitions of property, plant and equipment
and redeem subordinated loan certificates.
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-
Page 10
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 $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 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 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. The Association believes cash on hand and
cash equivalents at December 31, 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.
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 February 14, 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.
Page 11
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 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. Management has not determined the effect of
adopting this statement on the Association's financial
statements in fiscal 2001.
Page 12
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)(6) Fifth Amendment dated as of
November 29, 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(i)(7) Sixth Amendment dated as of
December 21, 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-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 December
31, 1999.
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 February 14, 2000
Gaylord O. Coan
Chief Executive Officer
(Principal Executive Officer)
Date February 14, 2000
Walter F. Pohl, Jr.
Controller
(Principal Accounting Officer)
Page 12
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)(6) Fifth Amendment dated as of
November 29, 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(i)(7) Sixth Amendment dated as of
December 21, 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-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 December
31, 1999.
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 February 14, 2000 /s/ Gaylord O. Coan
Gaylord O.Coan
Chief Executive Officer
(Principal Executive Officer)
Date February 14, 2000 /s/ Walter F. Pohl, Jr.
Walter F. Pohl, Jr.
Controller
(Principal Accounting Officer)
Exhibit B-10(i)(6)
FIFTH AMENDMENT TO
CREDIT AGREEMENT
This Fifth Amendment to Credit Agreement (this
"Amendment"), dated as of November 29, 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, as amended by Third
Amendment dated December 3, 1998, and as amended by Fourth
Amendment dated as of April 30, 1999,(the "Credit Agreement");
and
WHEREAS, the Borrower has requested that the Lenders
permit the Borrower to guarantee up to $8,000,000 of the
indebtedness of S.G. Williams Company, LLC ;
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:
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 $8,000,000;".
Section 2. Conditions Precedent. This Fifth 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 Fifth 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
[Signatures continued on following page]
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:
Name:
Title:
SUNTRUST BANK, ATLANTA
By: /s/ Michel A. Odermatt
Name: Michel A. Odermatt
Title: Vice President
By: /s/ Gregory L. Cannon
Name: Gregory L. Cannon
Title: Vice President
WACHOVIA BANK, N.A.
By: /s/ Thomas L. Gleason
Name: Thomas L. Gleason
Title: Senior Vice President
[Signatures continued on following page]
COBANK, ACB
By: /s/ Greg E. Somerhalder
Name: Greg E. Somerhalder
Title: Vice President
HARRIS TRUST AND SAVINGS BANK
By:
Name:
Title:
U.S. BANCORP AG CREDIT, INC.
By: /s/ Harold Nelson
Name: Harold Nelson
Title: Vice President
By:
Name:
Title:
DG BANK DEUTSCHE
GENOSSENCHAFTSBANK AG,
CAYMAN ISLANDS BRANCH
By: /s/ Kurt A. Morris
Name: Kurt A. Morris
Title: Vice President
By: /s/ Eric K. Zimmerman
Name: Eric K. Zimmerman
Title: Assistant Vice President
[Final page of signatures]
SIXTH AMENDMENT TO
CREDIT AGREEMENT
This Sixth Amendment to Credit Agreement (this
"Amendment"), dated as of December 21, 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
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, and as amended by
the Fifth Amendment dated as of November 29, 1999 (the "Credit
Agreement"); and
WHEREAS, the Borrower has requested that the Lenders
reduce the Revolving Credit Commitment from $125,000,000 to
$100,000,000, reduce the 364-Day Line of Credit Commitment
from $125,000,000 to $100,000,000, modify certain of the
financial covenants, and make certain other changes to the
Credit Agreement;
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) Amendments to Section 1.1. Section 1.1 of the
Credit Agreement is amended by deleting therefrom the defined
terms "Revolving Credit Commitment" and 364-Day Line of Credit
Commitment" and substituting the following therefor:
"Revolving Credit Commitment" shall mean, at
any time for any Lender, the amount set forth opposite
such Lender's name on the signature pages to the Sixth
Amendment to Credit Agreement under the heading
"Revolving Credit Commitment", as the same may be
increased or decreased from time to time as a result of
any reduction thereof pursuant to Section 3.3 of this
Agreement, any assignment thereof pursuant to Section
10.5 of this Agreement or any amendment thereof pursuant
to Section 10.2 of this Agreement.
"364-Day Line of Credit Commitment" shall mean,
at any time for any Lender, the amount set forth opposite
such Lender's name on the signature pages to the Sixth
Amendment to Credit Agreement under the heading "364-Day
Line of Credit Commitment", as the same may be increased
or decreased from time to time as a result of any
reduction thereof pursuant to Section 3.3 of this
Agreement, any assignment thereof pursuant to Section
10.5 of this Agreement or any amendment thereof pursuant
to Section 10.2 of this Agreement.
(b) Amendment to Section 6.1(a). Section 6.1(a) of
the Credit Agreement is amended by deleting it in its entirety
and substituting the following therefor:
"(a) As soon as practicable and in any event
within 45 days after the end of each of the first eleven
months of each fiscal year, (i) unaudited consolidated
and consolidating and business segment statements of
sales and margins of the Borrower and its Subsidiaries
for such month and for the period from the beginning of
the current fiscal year to the end of such month and (ii)
an unaudited consolidated and consolidating balance sheet
of the Borrower and its Subsidiaries as at the end of
such month, setting forth, with respect to such
consolidated statements of sales and margins and such
consolidated balance sheet, in comparative form, figures
for the corresponding period in the preceding fiscal
year, and, as soon as practicable and in any event
within 45 days after the end of each of the first three
fiscal quarters of each fiscal year (iii) unaudited
consolidated and consolidating statements of income and
cash flow of the Borrower and its Subsidiaries for such
quarter and for the period from the beginning of the
current fiscal year to the end of such quarter and (iv)
an unaudited consolidated and consolidating balance sheet
of the Borrower and its Subsidiaries as at the end of
such quarter, setting forth, with respect to such
consolidated statements of income and cash flow and such
consolidated balance sheet, in comparative form, figures
for the corresponding period in the preceding fiscal year
all in reasonable detail and certified by the chief
financial officer or Treasurer of the Borrower as having
been prepared in accordance with GAAP;"
(c) 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 $255,000,000 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."
(d) 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 three fiscal quarters of fiscal year 2000,
quarterly for the fiscal quarter then ending and the
preceding three fiscal quarters, and (z) for the
last 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 1.35
Fourth Quarter, 2000 and
thereafter 1.75"
(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 to
(b) EBITDA, for each fiscal quarter set forth below,
calculated for the fiscal quarter then ending and the
preceding three fiscal quarters, to be more than the
ratio set forth opposite the relevant fiscal quarter in
the following table:
Fiscal Quarter Ratio
First Quarter, 1999 through
Third Quarter, 1999 3.00
Fourth Quarter, 1999 through
First Quarter, 2000 2.75
Second Quarter, 2000 through
Fourth Quarter 2000 3.50
First Quarter 2001 and
thereafter 3.00
provided that, for purposes of computing the ratio as of
the end of the First Quarter, 1999, EBITDA shall be
EBITDA for such quarter and for the preceding two
quarters, plus $3,400,000."
(f) Amendment to Section 7.4. Section 7.4 of the
Credit Agreement is amended by deleting therefrom subsections
(u) and (v) and substituting the following therefor:
"(u) purchase the assets described in Section
7.3(i) hereof;
(v) the purchase of the SSC Securities; and
(w) make or permit to remain outstanding
investments in any money market fund that invests
only in investments described in subsections (c), (d), (e),
(f), (g), or (h) of this Section 7.4."
(g) Amendment to Section 7.11. Section 7.11 of the
Credit Agreement is amended by deleting it in its entirety and
substituting the following 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 $75,000,000,
in fiscal year 2001 exceeding $45,000,000 plus the amount
(if any) by which the Borrower's Capital Expenditures
were less than $75,000,000 in fiscal year 2000, in fiscal
year 2002 exceeding $45,000,000 plus the amount (if any)
by which the Borrower's Capital Expenditures in fiscal
year 2001 were less than the amount available for Capital
Expenditures in fiscal year 2001, and in any fiscal year
thereafter exceeding $45,000,000 plus an amount up to
$15,000,000 of any funds available but not expended in
the previous fiscal year; 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 Sixth 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 Sixth 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
[Signatures continued on following page]
COOPERATIEVE CENTRALE
RAIFFEISEN-
Revolving Credit Commitment: BOERENLEENBANK B.A.,
$20,000,000 "Rabobank Nederland",
364-Day Line of Credit Commitment NEW YORK BRANCH,
$20,000,000 individually and as Agent
By:/s/ Edward Peyser
Name: Edward Peyser
Title: Vice President
By: /s/ Linda Walther
Name: Linda Walther
Title: Vice President
Revolving Credit Commitment: SUNTRUST BANK, ATLANTA
$18,000,000
364-Day Line of Credit Commitment
$18,000,000
By: /s/ Michel A. Odermatt
Name: Michel A. Odermatt
Title: Vice President
By: /s/ Kim S. Martin
Name: Kim S. Martin
Title: Vice President
Revolving Credit Commitment: WACHOVIA BANK, N.A.
$16,000,000
364-Day Line of Credit Commitment
$16,000,000
By: /s/ Thomas L. Gleason
Name: Thomas L. Gleason
Title: Senior Vice President
[Signatures continued on following page]
Revolving Credit Commitment: COBANK, ACB
$16,000,000
364-Day Line of Credit Commitment
$16,000,000
By: /s/ Casey Garten
Name: Casey Garten
Title: Vice President
Revolving Credit Commitment: HARRIS TRUST AND SAVINGS BANK
$10,000,000
364-Day Line of Credit Commitment
$10,000,000 By: /s/ John R. Carley
Name: John R. Carley
Title: Vice President
Revolving Credit Commitment: U.S. BANCORP AG CREDIT, INC.
$10,000,000
364-Day Line of Credit Commitment
$10,000,000 By: /s/ Scott Trauth
Name: Scott Trauth
Title: President
By:
Name:
Title:
Revolving Credit Commitment: DG BANK DEUTSCHE
$10,000,000 GENOSSENCHAFTSBANK AG,
364-Day Line of Credit Commitment CAYMAN ISLANDS BRANCH
$10,000,000
By: /s/ Kurt A. Morris
Name: Kurt A. Morris
Title: Vice President
By: /s/ Eric K. Zimmerman
Name: Eric K. Zimmerman
Title: Asst. Vice President
[Final page of signatures]
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-01-2000
<PERIOD-END> DEC-31-1999
<CASH> 9,992
<SECURITIES> 0
<RECEIVABLES> 116,231
<ALLOWANCES> 3,269
<INVENTORY> 185,138
<CURRENT-ASSETS> 349,338
<PP&E> 626,866
<DEPRECIATION> 388,698
<TOTAL-ASSETS> 858,775
<CURRENT-LIABILITIES> 241,645
<BONDS> 279,363
0
0
<COMMON> 31
<OTHER-SE> 276,276
<TOTAL-LIABILITY-AND-EQUITY> 858,775
<SALES> 875,335
<TOTAL-REVENUES> 883,966
<CGS> 819,696
<TOTAL-COSTS> 819,696
<OTHER-EXPENSES> 2,389
<LOSS-PROVISION> 1,387
<INTEREST-EXPENSE> 15,198
<INCOME-PRETAX> 5,735
<INCOME-TAX> 1,950
<INCOME-CONTINUING> 3,785
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,785
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
