10-K 1 gk10k02edg.txt FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D. C. FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 29, 2002 Commission File No. 2-59958 GOLD KIST INC. (Exact name of registrant as specified in its charter) Georgia 58-0255560 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 244 Perimeter Center Parkway, N. E. Atlanta, Georgia 30346 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (770) 393-5000 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of l934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X . NO . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of Registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10- K or any amendment to this Form 10-K [X]. DOCUMENTS INCORPORATED BY REFERENCE Not Applicable. TABLE OF CONTENTS Item Page 1. Business (and Properties) . . . . . . . . . . . . . . . . . . . 1 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 6 4. Submission of Matters to a Vote of Security Holders . . . . . . 7 5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . 7 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . 8 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . . . 9 7A. Quantitative and Qualitative Disclosure about Market Risk . 15 8. Financial Statements and Supplementary Data . . . . . . . . . . 16 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . 35 10. Directors and Executive Officers of the Registrant . . . . . . 35 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . 37 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . 40 13. Certain Relationships and Related Transactions. . . . . . . . . 40 14. Controls and Procedures. . . . . . . . . . . . . . . . . . 40 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . 41 GOLD KIST INC. ANNUAL REPORT FOR THE FISCAL YEAR ENDED JUNE 29, 2002 This Report contains statements which to the extent they are not recitations of historical fact, may constitute "forward looking statements" within the meaning of applicable federal securities law. All forward looking statements in this Report are intended to be subject to the safe harbor protection provided by the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended. For a discussion identifying some important factors that could cause actual results to vary materially from those anticipated in the forward looking statements made by the Company, see Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations. PART I Item 1. Business (and Properties). Gold Kist Inc. ("Gold Kist" or the "Association") is an agricultural membership cooperative association, headquartered in Atlanta, Georgia. It was incorporated without capital stock in 1936 under the Georgia Cooperative Marketing Act. The name of the Association was changed in 1970 from Cotton Producers Association to Gold Kist Inc. In April 1985, the Articles of Incorporation and By-Laws of the Association were amended to provide for a class of common stock and a class of preferred stock as authorized by the Georgia Cooperative Marketing Act. Each member is issued one share of common stock only, as evidence of membership and the right to one vote as long as the member maintains status as an active member. Only members may hold the common stock, which is nontransferable and receives no dividends. The membership of Gold Kist consists of approximately 2,500 farmer members located principally in Alabama, Florida, Georgia, North Carolina and South Carolina. Any person engaged in the production of farm commodities and any firm or corporation whose members or stockholders are persons so engaged and any cooperative association organized under the cooperative marketing laws of any state, which enters into a marketing and/or purchasing agreement with the Association, is eligible for membership. Gold Kist offers cooperative marketing services to its member patrons. Farm commodities, principally poultry, are marketed by Gold Kist on behalf of members. Under the standard Membership, Marketing, and/or Purchasing Agreement which is entered into between each member and Gold Kist, Gold Kist undertakes to market for the member agricultural products delivered which are of a type marketed by Gold Kist. The Association also does business with non- members and engages in non-cooperative activities through subsidiaries and partnerships. Gold Kist conducts broiler production operations, providing both marketing and purchasing services to its cooperative patrons. The Association also conducts pork production operations, is a partner in a pecan processing and marketing business, and participates as a member of limited liability company which is engaged in the production and sale of hogs. POULTRY Broilers Gold Kist's cooperative broiler operation is organized into broiler divisions, each encompassing one or more of Gold Kist's broiler complexes. Each Gold Kist broiler complex operates within a separate geographical area and includes within that area broiler flocks, pullet and breeder (hatching egg) flocks, one or more hatcheries, a feed mill, poultry processing plant(s) and management, and accounting office(s), and transportation facilities. The complexes operated by Gold Kist in fiscal 2002 are headquartered in Boaz, Cullman, and Russellville, Alabama; Athens, Douglas, Ellijay and Carrollton, Georgia; Live Oak, Florida; Sanford and Siler City, North Carolina; and Sumter, South Carolina. The broiler growers, pullet producers and hatching egg producers for each complex are members of Gold Kist. The facilities and operations of each complex are designed to furnish the growers flocks of chicks, feed and medicines, and to provide processing services for the broilers grown. The principal products marketed by Gold Kist are whole chickens, cut-up chickens, segregated chicken parts and further processed products packaged in various forms, including fresh bulk ice pack, chill pack and frozen. Ice pack chicken is packaged in ice or dry ice and sold primarily to distributors, grocery stores and fast food chains. Chill pack chicken is packaged for retail sale and kept chilled by mechanical refrigeration from the packing plant to the store counter. Frozen chicken is marketed primarily to school systems, the military services, fast food chains and in the export market. Further processed products, which include preformed breaded chicken nuggets and patties and deboned, skinless and marinated products are sold primarily to fast food and grocery store chains. Chill pack chicken is sold in certain localities under the Gold Kist Farmsr and Young 'n Tenderr labels; however, some is sold under customers' private labels. Most of the frozen chicken carries the Gold Kistr or Early Birdr label. Cornish game hens are marketed in fresh and frozen form primarily to hotels, restaurants and grocery stores under the Gold Kist Farms, Young 'n Tender and Medallionr labels. Medallion, Big Valuer, Gold Kist Farms, Young 'n Tender and Early Bird are registered trademarks of Gold Kist Inc. Principal raw materials utilized by Gold Kist for the production of poultry include agricultural commodities such as corn and soybeans utilized as feed ingredients in the production of poultry feed by the Association. The principal source of these commodities has been domestic U.S. production, principally in the Midwestern United States. The availability of feed ingredients at reasonable to low prices has been favorable for the Association because of the increased stocks of such commodities generated by large domestic crops in the last five years. The Association believes that the availability of such commodities shall continue in the next fiscal year but at potentially increased prices due to a reduced domestic harvest in 2002. Poultry products were marketed in fiscal 2002 directly from the Association's corporate headquarters in Atlanta. The plants at Athens, Carrollton, Boaz, and Live Oak have special distribution facilities, and there are six separate distribution facilities located in Florida, Tennessee, Ohio and Kentucky. Cornish game hens are processed at facilities in Trussville, Alabama and marketed from the Atlanta headquarters. Gold Kist is one of the largest poultry processors in the United States. It competes with other large processors and with smaller companies. Competition is based upon price, quality and service. While Management believes that the pricing and quality of its products are competitive with other processors, it believes that Gold Kist's service to its customers is a principal factor that has established Gold Kist as one of the largest United States poultry processors. Gold Kist's ability to deliver poultry products produced to order is an important service to customers. The poultry industry, just as many other commodity industries, has historically been cyclical. Prices of perishable commodities, such as broilers, react directly to changes in supply and demand. Furthermore, broilers are typically a high volume, low margin product so that small increases in costs, such as feed ingredient costs, or small decreases in price, can produce losses. Gold Kist is a purchaser of certain agricultural commodities used for the manufacture of poultry feeds. Gold Kist uses commodity futures and options for economic hedging purposes to reduce the effect of changing commodity prices and to ensure supply of a portion of its commodity inventories and related purchase and sale contracts. Feed ingredients futures and options contracts have inherent risk, such that changes in the commodities futures and options prices as a result of favorable or unfavorable changes in the weather, crop conditions or government policy may have an adverse effect on Gold Kist's net feed ingredient cost as compared to the cost in cash markets. Likewise, Gold Kist could benefit from reduced net feed ingredient cost as a result of these changes as compared to cost in the cash market. Results of hedging and commodity options transactions are reflected as an adjustment to feed ingredient cost in the Association's consolidated financial statements. See Item 7A - Quantitative and Qualitative Disclosure About Market Risks and Note l (c) of Notes to Consolidated Financial Statements. The poultry industry has also traditionally been subject to seasonality in demand and pricing. Generally, the price and demand for poultry products peaks during the summer months and declines to lower levels during the winter months of November, December, January and February. Gold Kist poultry prices and sales volume follow the general seasonality of the industry. The following table shows the amount and percentage of Gold Kist's net sales volume from continuing operations contributed by sales of broiler products for each of the years indicated. See Notes 1 and 11 of Notes to Consolidated Financial Statements.

PORK Gold Kist currently markets hogs raised by producers in Alabama, Georgia, and Mississippi. Feeder pigs are furnished to members who raise them to produce hogs for marketing. Feeder pigs are either raised by Gold Kist members and marketed through Gold Kist to the market hog growers, raised for Gold Kist by non-member independent contractors or purchased by Gold Kist in the marketplace. The Association also has a joint venture arrangement with another regional cooperative association in the form of a limited liability hog sales and production company. Gold Kist raises and provides young pigs for the venture. Live market hogs are marketed by Gold Kist in the Southeastern United States to processors of pork products, primarily on a competitive bid basis in the states of Alabama, Georgia and Mississippi. Management believes that customers are favorably impressed by the quality of its market hogs which is principally due to superior breeding stock and management grow-out techniques employed by Gold Kist. Gold Kist competes with other major national producers and smaller individual producers, primarily on a regional basis in the Southeastern United States. AGRATECH SEEDS INC. AgraTech Seeds Inc., a wholly-owned subsidiary of Gold Kist, conducts a peanut genetics business which consists of research, development, breeding and marketing of proprietary seed varieties. AgraTech receives as its primary source of income royalties on the sale of its proprietary seed varieties by its licensed associates. Currently, its proprietary varieties include "GK 7 Hi-Oleic", "AT 108", "AT 120", "AT 120 Hi-Oleic" and "ViruGard". YOUNG PECAN COMPANY Gold Kist is a partner in Young Pecan Company, a pecan processing and marketing business headquartered in Florence, South Carolina, in which the Association holds a 25% equity interest and a 35% earnings (loss) allocation. See Note 11 of Notes to Consolidated Financial Statements. LUKER INC. Luker Inc. is a design, fabrication and installation firm primarily serving customers in the meat, poultry, chemicals and wood products businesses with a focus on wastewater treatment systems. It is a wholly- owned subsidiary of Gold Kist located in Augusta, Georgia. EXPORT SALES Gold Kist owns no physical facilities overseas and has no overseas employees. Product sales managers maintain sales networks overseas through contacts with independent dealers and customers. During the fiscal year ended June 29, 2002, the approximate export sales volume of poultry was $74.2 million. During that period, export sales were mainly to customers in Russia, Eastern Europe, the Far East, Mexico, Central and South America and the Caribbean. Export sales involve an additional element of transportation and credit risk to the shipper beyond that normally encountered in domestic sales. Gold Kist faces competition for export sales from both domestic and foreign suppliers. In export poultry sales, Gold Kist faces competition from other major United States producers as well as companies in France, China, Thailand, and Brazil. Tariff and non-tariff barriers to United States poultry established by the European Economic Community (EEC) since 1962 have virtually excluded Gold Kist and other United States poultry exporters from the EEC market. Restrictions placed by Russian authorities on the export of U.S. poultry to Russia in March 2002 adversely impacted the export sales of domestic suppliers into fiscal 2003. In addition, EEC exporters are aided in price competition with United States exporters in certain markets by subsidies from their governments. PROPERTIES Gold Kist corporate headquarters building, completed in 1975 and containing approximately 260,000 square feet of office space, is located on fifteen acres of land at 244 Perimeter Center Parkway, N. E., Atlanta, Georgia. The land and building are owned by a partnership of Gold Kist and Cotton States Mutual Insurance Company in which partnership Gold Kist owns 54% of the equity. Gold Kist leases approximately 95,000 square feet of the building from the partnership. Poultry The poultry processing plants operated as Gold Kist facilities in fiscal 2002 are located at Boaz, Russellville, Trussville and Guntersville, Alabama; Athens, Douglas, Ellijay and Carrollton, Georgia; Live Oak, Florida; Sumter, South Carolina; and Sanford and Siler City, North Carolina. These plants have an aggregate weekly processing capacity of approximately 14.4 million broilers and 400,000 cornish game hens. The plants are supported by hatcheries located at Albertville, Crossville, Cullman, Curry, Ranburne, Russellville, and Scottsboro, Alabama; and Blaine, Bowdon, Calhoun, Commerce, Carrollton, Douglas, and Talmo, Georgia; Live Oak, Florida; Siler City and Staley, North Carolina; and Sumter, South Carolina. These hatcheries have an aggregate weekly capacity (assuming 85% hatch) of approximately 15.3 million chicks. Additionally, Gold Kist operates twelve feed mills to support its poultry operations; the mills have an aggregate annual capacity of approximately 4.7 million tons and are located in Guntersville, Pride, and Jasper, Alabama; Ambrose, Calhoun, Cartersville, Commerce, and Waco, Georgia; Live Oak, Florida; Sumter, South Carolina; and Bonlee and Staley, North Carolina. The Association operated six separate distribution centers in fiscal 2002 in its sales and distribution of poultry products: Tampa, Pompano Beach, and Crestview, Florida; Nashville, Tennessee; Mt. Sterling, Kentucky; and Cincinnati, Ohio. Gold Kist currently operates four pork production centers. These production facilities include a gilt production center in Stephens, Georgia; two gilt and pork production centers located at Kingston, Georgia; and a boar and pork production center headquartered in Stephens, Georgia. The Association holds all of the facilities in fee except for the corporate headquarters building (lease expires June 30, 2004); poultry distribution facilities at Tampa, Florida (lease expires May 14, 2005) and Nashville (lease expires December 31, 2006) Tennessee; and Crossville, Alabama, poultry hatchery facility (lease expires February 23, 2088). ENVIRONMENTAL AND REGULATORY MATTERS Processing plants such as those operated by Gold Kist are potential sources of emissions into the atmosphere and, in some cases, of effluent emissions into streams and rivers. Presently, management does not know of any material capital expenditures for environmental control facilities that will be necessary for the remainder of the current fiscal year and the next fiscal year in order to comply with current statutes and regulations. On January 29, 1992, the United States Environmental Protection Agency ("EPA") sent General Notice Letters designating Gold Kist and several other companies as potentially responsible parties ("PRP's") for alleged environmental contamination at an Albany, Georgia site previously owned by Gold Kist. Gold Kist has responded to the General Notice Letter denying liability for the contamination. Gold Kist is unable to estimate at this time the cost of compliance, if any, to be required of Gold Kist for the location. Management believes that the potential cost of compliance for Gold Kist would not have a material effect on Gold Kist's financial condition or results of operations. The Georgia Environmental Protection Division ("GEPD") has listed the site of the former Gold Kist chemical blending facility in Cordele, Georgia on Georgia's Hazardous Sites Inventory list under the State's Hazardous Sites Response Act due to the presence of pesticide residue above regulatory standards. Gold Kist sold this facility in 1985. Remediation may be required in the future to meet regulatory clean-up standards. Since the extent of the conditions at the site have not been completely defined at this time, Gold Kist is unable to estimate cost of the compliance to be required of Gold Kist for this location. Management believes that the potential cost of compliance for Gold Kist would not have a material effect on Gold Kist's financial condition or results of operations. The regulatory powers of various federal and state agencies, including the federal Department of Labor and the U.S. Department of Agriculture, apply throughout the agricultural industry, and many of Gold Kist's products and facilities are subject to the regulations of such agencies. HUMAN RESOURCES Gold Kist has approximately 18,000 employees during the course of a year. Gold Kist's processing facilities operate year round without significant seasonal fluctuations in manpower requirements. Gold Kist has approximately 3,500 employees who are covered by collective bargaining agreements. Employee relations are considered to be generally satisfactory. PATRONAGE REFUNDS The By-Laws of Gold Kist provide that Gold Kist shall operate on a cooperative basis. After the close of each fiscal year, the net taxable margins of Gold Kist for that year from business done with or for member patrons (patronage margins) are computed and, after deductions for a reasonable reserve for permanent non-allocated equity and after certain adjustments, these margins are distributed to members as patronage refunds on the basis of their respective patronage (business done with or through the Association) during that year. Upon the determination of the total patronage refund for any fiscal year, this amount is allocated among the several operations of Gold Kist or one or more groups of such operations, as determined by the Board of Directors in light of each operation's or group's contribution for the year. Patronage refunds are distributed in the form of either qualified or nonqualified written notices of allocation (as defined for purposes of Subchapter T of the Internal Revenue Code). If qualified notices are used, at least 20% of each patronage refund is distributed in cash or by qualified check (as defined in the Internal Revenue Code) with the remainder distributed in patronage dividend certificates or written notices of allocated reserves, or any combination of these forms. A distribution to a patron made in the form of a qualified notice must be included in his gross income, at its stated dollar amount, for the taxable year in which he receives the distribution. If nonqualified notices are distributed, less than 20% of the refund can be distributed in cash or by qualified check and the patron is not required to include in gross income the noncash portion of the allocation. See Notes 1(g) and 6 of Notes to Consolidated Financial Statements. The deduction for unallocated reserves and retention of allocated reserves provide means whereby the current and active members of Gold Kist may finance the Association's continuing operations. Each fiscal year, the members are notified by Gold Kist of the amounts, if any, by which their equity accounts have been credited to reflect their allocated, but undistributed, portion of the patronage refunds. Allocated reserves may be retired and distributed to members only at the discretion of the Board of Directors in the order of retention by years, although the Board may authorize the retirement of small aggregate amounts (not in excess of $100.00) of reserves or the retirement of reserves in individual cases without regard to how long they have been outstanding. Allocated reserves bear no interest and are subordinate in the event of insolvency of the Association to outstanding patronage dividend certificates and to all indebtedness of Gold Kist. INCOME TAXATION As a cooperative association entitled to the provisions of Subchapter T of the Internal Revenue Code, Gold Kist does not pay tax on net margins derived from member patronage transactions which are distributed to the members by check or in the form of qualified written notices of allocation within 8-l/2 months of the close of each fiscal year. To the extent that Gold Kist distributes nonqualified written notices of allocation, has income from transactions with nonmembers or has income from non-patronage sources, it will be taxed at the corporate rate. See Notes l (g) and 7 of Notes to Consolidated Financial Statements. Gold Kist has subsidiaries which are not cooperatives, and all the income of these subsidiaries is subject to corporate income taxes. Item 2. Properties. The principal facilities used in the Association's business are described in Item 1. Business (and Properties). Management believes that the facilities are adequate and suitable for their respective uses and the Association's current intended operations. There are no material liens or encumbrances on the properties owned by the Association except for mortgages on all of the Association's poultry facilities to secure certain credit facilities with the Association's lenders. See Note 4 of Notes to Consolidated Financial Statements. Item 3. Legal Proceedings. The Association is a party to various legal and administrative proceedings, all of which management believes constitute ordinary routine litigation incident to the business conducted by the Association, or are not material in amount. Item 4. Submission of Matters to a Vote of Security Holders. No matter was submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. There is no market for Gold Kist equity. Item 6. Selected Financial Data. SELECTED CONSOLIDATED FINANCIAL DATA The selected consolidated financial data presented below under the captions "Consolidated Statement of Operations Data" for each of the years in the five-year period ended June 29, 2002 and "Consolidated Balance Sheet Data" as of June 27, 1998, June 26, 1999, July 1, 2000, June 30, 2001 and June 29, 2002 are derived from the consolidated financial statements of Gold Kist Inc. and subsidiaries. The consolidated financial statements as of June 30, 2001 and June 29, 2002 and for each of the years in the three-year period ended June 29, 2002, and the report thereon of KPMG LLP, which is based partially upon the report of other auditors, are included elsewhere herein. The information set forth below should be read in conjunction with Management's Discussion and Analysis of Consolidated Results of Operations and Financial Condition and the aforementioned consolidated financial statements, the related notes and the auditors' reports.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED RESULTS OF OPERATIONS AND FINANCIAL CONDITION After two decades of rapid growth, the poultry industry is maturing and will be dependent on value added and new product development, as well as expanded export opportunities for continued revenue growth. Production and operating efficiencies will also be necessary for increased profitability. In addition, the industry is undergoing consolidation as a number of acquisitions and mergers have occurred in the last five years. The market share of the top five U.S. firms in terms of ready-to-cook broiler meat production has increased from 49% to 55% during that period and this trend is expected to continue. The industry has experienced volatility in results of operations over the last five years and the following information addresses the various factors that have influenced the results and financial condition of Gold Kist during that period. During fiscal 1998, broiler market prices were approximately 4% lower than in fiscal 1997, however market prices strengthened in the fourth quarter. Favorable broiler market prices continued during the first half of fiscal 1999 as a result of industry-wide live production problems that restricted broiler supplies. Broiler prices weakened in the second half of fiscal 1999 as the live production problems were resolved and supplies increased. Market prices for poultry dark meat were weak during fiscal 1999 as a result of the Russian and Asian economic crises that began during the summer of 1998. Depressed broiler prices continued through fiscal 2000 and most of fiscal 2001 due to increased production levels and the large supply of competing meats (pork and beef). Broiler prices strengthened during the first half of fiscal 2002 due to an improved supply/demand balance. Strong export demand, principally from Russia, favorably impacted both foreign and domestic markets and fueled higher broiler prices through the first eight months of fiscal 2002. However, on March 10, 2002, Russia banned the import of U.S. poultry. This led to downward pressure on broiler sales prices due to excess domestic supply. Export sales industry-wide declined by 20% during the fourth quarter of fiscal 2002. Although the ban was lifted in April 2002, normal shipments have not resumed as new product specifications are being developed and poultry plant recertifications are required for export eligibility to Russia. Depressed broiler prices are expected to continue into fiscal 2003 until export shipments recover or other factors impact the supply/demand imbalance. According to the U.S. Department of Agriculture's (USDA) World Agricultural Outlook Board, the forecast for calendar 2002 broiler meat production is 31.96 billion pounds, ready-to-cook weight, 3.3% above the 30.94 billion pounds produced in 2001. The estimate for calendar 2003 production is 32.65 billion pounds, 2.2% over the 2002 forecast. This rate of increase could contribute to the supply/demand imbalance until normalcy returns to the export markets. This projected increase does not consider the impact of reduced export volume and higher feed costs. Recent egg placements indicate a lower rate of increase in production. The cost of feed grains, primarily corn and soybean meal, represents approximately fifty percent of total broiler production costs. Prices of feed grain commodities fluctuate in response to worldwide supply and demand. Average cash market prices for corn and soybean meal declined 18% and 20%, respectively, during fiscal 1998 as a result of the favorable 1997 harvest and reduced exports of agricultural commodities. In 1999, average cash market prices for corn and soybean meal declined 20% and 34%, respectively, as a result of favorable U.S. grain production and the decline in world demand for feed grains. Feed grain prices generally held steady or slightly above these levels through fiscal 2002. Corn and soybean meal prices are expected to increase in 2003 due to stronger worldwide demand and a reduced U.S. crop due to weather problems in grain producing areas. Historically, higher feed prices have led to restraints on production and improved broiler prices. Poultry export sales for fiscal 2000, 2001 and 2002 were $48.8 million, $68.8 million and $74.2 million, respectively. Starting in fiscal 2000, export markets strengthened as demand from Russia increased due to changes in import tariffs and improved economic conditions due to the rise in world oil prices, which led to increased consumption. Increased demand continued through fiscal 2001 due to the ban on red meat imports from the European Union leading to the 41% increase in export sales over 2000. Export sales continued strong through the first half of fiscal 2002, increasing 49% over the same period in fiscal 2001. However, due to the Russian ban mentioned above, export sales for the last four months of fiscal 2002 decreased 57.1% as compared to the same period in fiscal 2001. A return to prior years' level of export sales of poultry products will be dependent on the resumption of normal shipments to Russia, as well as credit availability to foreign countries and political and economic stability, particularly in Russia, Eastern Europe and the Far East. In June 2002, the Association adopted a plan to withdraw from and discontinue participation in the pecan processing and marketing partnership within the 2003 fiscal year. Accordingly, the operating results of the partnership have been segregated from continuing operations and reported separately in the Statements of Operations. See Note 11 of Notes to Consolidated Financial Statements. The Association's continuing operations are principally comprised of its poultry production, processing and marketing operations. The discussion and analysis of results of operations that follows relates to the continuing operations of the Association, unless otherwise noted, for each of the years in the three-year period ended June 29, 2002. Results of Operations Fiscal 2001 Compared to Fiscal 2000 For 2001, net sales increased 2.3% from $1.77 billion in fiscal 2000 to $1.81 billion in 2001. The increase was due primarily to a 1.4% improvement in average selling prices and a 1.1% improvement in processing yield, partially offset by the additional one-week period in 2000 and a 4.6% reduction in live weight pounds processed. On a comparable per week basis, net sales increased 4.2% for 2001 as compared to 2000. Poultry selling prices continued to be depressed in 2001 by an excess supply of poultry and other competing meats such as beef and pork. A temporary reduction in broiler placements beginning in the first fiscal quarter of 2001 moderately reduced the rate of growth in broiler supplies and contributed to an improvement in selling prices. The Association had net operating margins of $65.5 million for 2001 as compared to a net operating loss of $21 million in 2000. The increase in net operating margins was due primarily to the $33.7 million gain from the curtailment of the post retirement medical benefit plan and related pension plan settlements (see Note 8(b) of Notes to Consolidated Financial Statements) and improved poultry selling prices. Lower cost of sales in 2001 reflects the one-week reduction in the reporting period from the prior year and the receipt in 2001 of $6.4 million representing Gold Kist's share as a class claimant in the vitamin antitrust class action litigation. However, a 1% increase in average feed costs and higher processing expenses and energy costs partially offset these factors. The Association's pork division posted an operating margin of $2.4 million in 2001 as compared to an operating margin of $86 thousand for 2000. The impact of cost reductions implemented in 2001, including salary freezes/reductions and benefit program changes, partially offset the increase in distribution, administrative and general expenses. The overall increase was principally due to higher incentive compensation attributable to the earnings improvement in 2001. The components in other deductions totaled $18.9 million in 2001 as compared to $27.8 million in 2000. Interest and dividend income was $11.3 million for 2001 as compared to $8.3 million for 2000. The increase was due to the receipt of the interest and dividends for the full 2001 period from the Southern States preferred securities, which were acquired in October 1999. See Note 10(a) of Notes to Consolidated Financial Statements. Interest expense was $40 million for 2001 as compared to $30.4 million for 2000, an increase of 31%. The increase was caused by higher average interest rates and loan balances, and expenses/fees related to the senior secured credit agreement established November 3, 2000. Equity in earnings of affiliate of $10 million represented the Association's share of Golden Peanut's earnings for 2001 in accordance with the membership agreement. The earnings were principally attributable to the reversal of previously accrued litigation expense, with Gold Kist's share approximating $7.3 million, due to a judgment that was vacated by the Georgia Court of Appeals in March 2001. Improved peanut market prices also contributed to the earnings improvement. These results compared to a $4.4 million share of the affiliate's loss for 2000 due principally to accrued litigation expenses related to the judgment that was vacated in 2001. See Notes 9 and 10(c) of Notes to Consolidated Financial Statements. Miscellaneous, net was a deduction of $241 thousand for 2001 as compared to a deduction of $1.3 million for 2000. Income from a hog grow-out joint venture with another regional cooperative was $2.1 million in 2001 as compared to $775 thousand in 2000. Strong increases in hog market prices gave rise to this improvement. The combined federal and state effective tax rate for 2001 was 29% compared to (46)% in 2000. Income tax expense for the periods presented reflects income taxes at statutory rates adjusted for available tax credits, dividends received deductions and deductible nonqualified equity redemptions. See Note 7 of Notes to Consolidated Financial Statements. Fiscal 2002 Compared to Fiscal 2001 For 2002, net sales increased 2.9% from $1.81 billion in the comparable period last year to $1.86 billion in the current year. The increase was due primarily to a 1% improvement in average selling prices and a 4% increase in live weight pounds processed. The increase in poultry sales prices was principally due to strong export demand, experienced industry-wide, which favorably impacted both foreign and domestic markets. The increased export demand, principally from Russia, strengthened broiler sales prices through the first half of fiscal 2002. However, on March 10, Russia banned the import of U.S. poultry. This led to downward pressure on broiler sales prices and reduced export sales industry-wide during the second half of fiscal 2002. Although the ban was lifted in April 2002, only limited shipments have resumed as new product specifications are being developed and poultry plant recertifications are required for export eligibility to Russia. Export sales only comprise approximately 4% of the Association's gross sales volume, however the increased domestic supply caused by the embargo led to a 2.7% decrease in overall broiler sales prices in the fourth quarter of fiscal 2002. The Association had net operating margins of $69.8 million for 2002 as compared to net operating margins of $65.5 million in 2001. The increase in net operating margins before the 2001 benefit curtailment gain was due primarily to the higher poultry selling prices and increased volume. These factors were partially offset by slightly higher overall total feed costs for 2002 as compared to 2001 due to the increase in pounds processed. The Association's pork division posted an operating margin of $1.3 million in 2002 as compared to an operating margin of $2.4 million in 2001. The 1.2% decrease in distribution, administrative and general expenses in 2002 as compared to 2001 was principally due to benefit program changes implemented in 2001. The components in other deductions totaled $76 thousand in 2002 as compared to an $18.9 million deduction in 2001. Interest and dividend income was $9.4 million for 2002 as compared to $11.3 million for 2001. The decrease was due to the receipt of the dividends for only the first half of 2002 from the Southern States preferred securities. No dividends were paid or declared on the preferred securities for the second half of 2002. Interest expense was $28 million for 2002 as compared to $40 million for 2001, a decrease of 30%. The decrease was due to lower average loan balances resulting from improved cash flow from operations and from the sale of investments, and lower market interest rates. See Note 4 of Notes to Consolidated Financial Statements. The sale of the marketable equity security and other investments resulted in a pretax net gain of $15.6 million in 2002. The Association withdrew as a member of Golden Peanut Company effective June 30, 2001 and therefore had no equity in the earnings of the affiliate for fiscal 2002 as compared to $10 million in fiscal 2001. Miscellaneous, net was income of $2.9 million for 2002 as compared to a deduction of $241 thousand for 2001. Income from a hog grow-out joint venture with another regional cooperative was $1.1 million in 2002 as compared to $2.1 million in 2001 due to a decrease in hog market prices. This reduction was more than offset by gains on sales of assets of approximately $1.4 million in fiscal 2002 as compared to losses of $2.7 million in 2001. The combined federal and state effective tax rate for 2002 was 32% compared to 29% in 2001. Income tax expense for the periods presented reflects income taxes at statutory rates adjusted for available tax credits, dividends received deductions and deductible nonqualified equity redemptions. See Note 7 of Notes to Consolidated Financial Statements. In June 2002, the Association adopted a plan to withdraw from and discontinue participation in the pecan processing and marketing partnership within the 2003 fiscal year. Accordingly, the operating results of the partnership have been segregated from continuing operations and reported separately in the Statements of Operations. See Note 11 of Notes to Consolidated Financial Statements. Financial Condition Liquidity and Capital Resources The Association's liquidity is dependent upon funds from operations and external sources of financing. At July 1, 2001, the principal source of external financing was a $240 million Senior Secured Credit Facility with a group of financial institutions that included a $100 million 364-day revolving line of credit, a $95 million two-year term loan, and a $45 million five-year term loan. The Association also had $41.1 million term loans with an agricultural bank and $55 million in senior notes with an insurance company. The Association's senior notes, senior secured credit facilities and term loan with an agricultural credit bank are secured by substantially all of the Association's inventories, receivables, and property, plant and equipment. On October 23, 2001, the Association refinanced its Senior Secured Credit Facility, replacing the $100 million 364-day revolving line of credit due November 3, 2001 with a $110 million revolving line of credit due October 23, 2002. The $95 million two-year term loan due November 2002 was also replaced with a $95 million two-year term loan due October 2003. Other terms and conditions of the credit facility were essentially unchanged. At June 29, 2002, the Association had unused loan commitments of $94 million. See Note 4 of Notes to Consolidated Financial Statements. On September 6, 2002, the Company received $205 million in commitments to refinance and extend the Senior Secured Credit facilities that will include a $110 million Revolving Credit Facility maturing November 2, 2004 and a $95 million Term Loan maturing November 2, 2005. The interest rates on the facility will range from 1.50% to 2.25% over LIBOR, adjusted quarterly based on the Association's financial condition. Other terms and conditions will be essentially unchanged. Covenants under the terms of the loan agreements with lenders include conditions that could limit short-term and long-term financing available from various external sources. The terms of debt agreements specify minimum consolidated tangible net worth, current ratio and coverage ratio requirements, as well as a limitation on the total debt to total capital ratio. The debt agreements place a limitation on capital expenditures, equity distributions, cash patronage refunds, commodity hedging contracts and additional loans, advances or investments. At June 29, 2002, the Association was in compliance with all applicable loan covenants. See Note 4 of Notes to Consolidated Financial Statements. In October 1998, the Association completed the sale of assets of the Agri- Services segment to Southern States. In order to complete the transaction, the Association committed to purchase from Southern States, subject to certain terms and conditions, up to $100 million principal amount of capital trust and 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 capital trust and preferred securities as required under the commitment. The securities carry a current weighted average dividend rate of 8.5%. Gold Kist is permitted to sell the securities, which are classified as noncurrent investments in the accompanying consolidated balance sheets, pursuant to applicable securities regulations. See Note 10(a) of Notes to Consolidated Financial Statements. In 2000, the operating activities of continuing operations used $7.8 million in cash as a result of the net operating loss caused by the depressed poultry market conditions. Net cash used in investing activities included the purchase of the Southern States securities for $98.6 million and the repurchase of accounts and crop notes receivable from Southern States for a net amount of $20.5 million. In addition, cash was used to pay for capital expenditures of $29.9 million and to pay patronage refunds and net equity redemptions of $5.8 million. Existing cash balances and increases in short and long-term borrowings were used to fund these expenditures. In 2001, cash provided by operating activities was $71.9 million, a significant improvement from 2000. Operating cash flow provided by depreciation and amortization expense and reductions in current assets was partially offset by the noncash gain from the curtailment of the post retirement medical plan and related pension plan settlements, and the equity in the undistributed earnings of Golden Peanut Company. The net cash flows from operating activities, along with additional net long-term borrowings, was used to repay the single installment senior note of $20 million and short- term borrowings, which included maturing Subordinated Certificates, and to pay for capital expenditures of $33.5 million and net equity redemptions of $5.9 million. In 2002, cash provided from operating activities was $68 million as compared to $71.9 million in 2001. The cash flow from operating activities in fiscal 2002, along with the cash provided from the sale of investments of $90.9 million, was used to repay short-term and long-term borrowings, which included the equity swap loan agreement, the revolving line of credit and maturing Subordinated Certificates. Capital expenditures of $38.9 million and net equity redemptions of $4.4 million were also paid through the cash provided by operating and investing activities. Working capital and patrons' and other equity were $160 million and $283.2 million, respectively, at June 29, 2002 as compared to $121.1 million and $272.6 million, respectively, at June 30, 2001. The increase in working capital reflected the increase in inventories and other current assets, and the repayment of short-term borrowings from cash provided from operations and the sale of investments. The increase in patrons' equity reflected the improvement in net margins for fiscal 2002, net of equity redemptions. The Association plans capital expenditures approximating $55 million in 2003 that primarily include expenditures for expansion of further processing capacity and technological advances in poultry production and processing. In addition, planned capital expenditures include other asset improvements and necessary replacements. Management intends to finance planned 2003 capital expenditures and related working capital needs with existing cash balances, cash expected to be provided from operations and additional borrowings, as needed. In 2003, management expects cash expenditures to approximate $6.7 million for equity redemptions and cash patronage refunds. In addition, the Association has committed a $10 million capital contribution to the Young Pecan Company partnership subject to completion of refinancing that relieves Gold Kist of its loan guarantee commitment. Lease commitments, debt payments and loan guarantees are discussed in Notes 4, 5 and 11 of Notes to Consolidated Financial Statements. In connection with the sale of assets of the Agri-Services segment to Southern States during 1999, Gold Kist discontinued the sale of Subordinated Certificates. The Association believes cash on hand and cash equivalents at June 29, 2002 and cash expected to be provided from operations, in addition to borrowings available under committed credit arrangements, will be sufficient to maintain cash flows adequate for the Association's operational objectives during 2003, to fund the repayment of outstanding Subordinated Certificates as they mature and to meet the above 2003 obligations. Critical Accounting Policies The preparation of the Company's Consolidated Financial Statements requires the use of estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the fiscal years presented. The following is a summary of certain accounting policies considered to be critical by the Company. Other significant accounting policies are disclosed in Note 1 of Notes to the Consolidated Financial Statements. Valuation of Investments - The Company has an investment in the preferred and capital trust securities of Southern States Cooperative, Inc. (SSC). The Company has accounted for the capital trust securities as "available for sale" securities under the provisions of Statement of Financial Accounting Standards No. 115 "Accounting for Certain Debt and Equity Securities" (SFAS 115). The capital trust securities are reflected at an approximate fair value based on estimated interest rates for similar securities. As a result, changes in interest rates or credit worthiness of SSC would impact the approximate fair value. The preferred stock is an equity security that does not have a readily determinable market value and is carried at cost in accordance with the "Audit and Accounting Guide for Agricultural Cooperatives" issued by the American Institute of Certified Public Accountants. As interest rates and market conditions change, the carrying values of the securities could be reduced. Also, the proceeds from any future sale of these securities could differ from these estimates. These events could have a material impact on results of operations and financial position of the Company. Allowance for Doubtful Accounts - The Company's management estimates the allowance for doubtful accounts based on an analysis of the status of individual accounts. Factors such as current overall economic and industry conditions, historical customer performance and current financial condition, collateral position and delinquency trends are used in evaluating the adequacy of the allowance for doubtful accounts. Changes in the economy, industry and specific customer conditions may require adjustment to the allowance amount recorded by the Company. Accrued Self Insurance Costs - The Company is self-insured for certain losses related to property, fleet, product and general liability, worker's compensation and employee medical benefits. Stop loss coverage is maintained with third party insurers to limit the total exposure to the Company. Estimates of the ultimate cost of claims incurred as of the balance sheet date are accrued based on historical data and estimated future costs. While the Company believes these estimates are reasonable based on the information available, actual costs could differ and materially impact the results of operations and financial position. Discontinued Operations - During June 2002, the Company adopted a plan to dispose of its investment in a pecan processing and marketing partnership. Under the Accounting Principles Board's Opinion No. 30, the Company is required to estimate and accrue operating losses during the phase-out period, as well as any estimated loss upon final withdrawal from the partnership. As of June 29, 2002, the Company did not accrue any losses during the phase-out period or upon withdrawal, as management estimates that no further losses will be incurred in future periods. If conditions change from these estimates, there could be a material impact on results of operations and financial position. Employee Benefits - The Company incurs various employment-related benefit costs with respect to qualified and nonqualified pensions, deferred compensation plans and postretirement health care. Assumptions are made related to discount rates used to value certain liabilities, assumed rates of return on assets in the plans, compensation increases, employee turnover, mortality rates and healthcare cost trends. The Company utilizes third party actuarial firms to assist management in determining these assumptions. Different assumptions could result in the recognition of differing amounts of expense over different periods of time. Important Considerations Related to Forward-Looking Statements It should be noted that this discussion contains forward-looking statements, which are subject to substantial risks and uncertainties. There are many factors which could cause actual results to differ materially from those anticipated by statements made herein. In light of these risks and uncertainties, the Association cautions readers not to place undue reliance on any forward-looking statements. The Association undertakes no obligation to publicly update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information or otherwise. Among the factors that may affect the operating results of the Association are the following: (i) fluctuations in the cost and availability of raw materials, such as feed grain costs; (ii) changes in the availability and relative costs of labor and contract growers; (iii) market conditions for finished products, including the supply and pricing of alternative proteins; (iv) effectiveness of sales and marketing programs; (v) risks associated with leverage, including refinancing and cost increases due to rising interest rates; (vi) changes in regulations and laws, including changes in accounting standards, environmental laws and occupational, health and safety laws; (vii) access to foreign markets together with foreign economic conditions; and (viii) changes in general economic conditions. 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 The Financial Accounting Standards Board (FASB) has issued Statement of Financial Accounting Standards (SFAS) No. 143 on Accounting for Asset Retirement Obligations and SFAS No. 144 on Accounting for the Impairment or Disposal of Long-Lived Assets. These statements will be effective for the Company's fiscal year beginning June 30, 2002 and are not expected to have a material impact on the Company's consolidated financial statements. The FASB has also issued SFAS No. 145, Rescission of FASB Statements Nos. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections; and SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. These statements will be effective for the Company's fiscal year beginning June 29, 2003. The Company does not anticipate that these statements will have a material impact on the Company's consolidated financial statements. Item 7A. Quantitative And Qualitative Disclosure About Market Risks. Market Risk The principal market risks affecting the Association are exposure to changes in commodity prices and interest rates on borrowings. Although the Company has international net sales volume and related accounts receivable for foreign customers, there is no foreign currency exchange risk as all sales are denominated in United States dollars. Commodities Risk The Association is a purchaser of certain agricultural commodities used for the manufacture of poultry feeds. The Association uses commodity futures and options for economic hedging purposes to reduce the effect of changing commodity prices and to ensure supply of a portion of its commodity inventories and related purchase and sale contracts. Feed ingredients futures and option contracts, primarily corn and soybean meal, are accounted for at market. Changes in fair value on these commodity futures and options are recorded as a component of product cost in the consolidated statements of operations. Terms of the Association's secured credit facility limit the use of forward purchase contracts and commodities futures and options transactions. At June 30, 2001 and June 29, 2002, the notional amounts and fair value of the Association's outstanding commodity futures and options positions were not material. Interest Rate Risk The Association has exposure to changes in interest rates on certain debt obligations. The interest rates on the Senior Secured Credit facilities fluctuate based on the London Interbank Offered Rate (LIBOR). See Note 4 of Notes to Consolidated Financial Statements. Item 8. Financial Statements and Supplementary Data. INDEX FINANCIAL STATEMENTS: Page GOLD KIST INC. CONSOLIDATED FINANCIAL STATEMENTS: Independent Auditors' Reports 17 Consolidated Balance Sheets as of June 30, 2001 and June 29, 2002 19 Consolidated Statements of Operations for the years ended July 1, 2000, June 30, 2001 and June 29, 2002 20 Consolidated Statements of Patrons' and Other Equity and Comprehensive Income (Loss) for the years ended July 1, 2000, June 30, 2001 and June 29, 2002 21 Consolidated Statements of Cash Flows for the years ended July 1, 2000, June 30, 2001 and June 29, 2002 22 Notes to Consolidated Financial Statements 23 FINANCIAL STATEMENT SCHEDULES (Included in Part IV of this Report): FINANCIAL STATEMENT SCHEDULE: Valuation Reserves and Qualifying Accounts for the years ended July 1, 2000, June 30, 2001 and June 29, 2002 42 INDEPENDENT AUDITORS' REPORT The Board of Directors Gold Kist Inc.: We have audited the accompanying consolidated balance sheets of Gold Kist Inc. and subsidiaries as of June 30, 2001 and June 29, 2002, and the related consolidated statements of operations, patrons' and other equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended June 29, 2002, as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We did not audit the consolidated financial statements of Golden Peanut Company, LLC and Subsidiaries, an investment accounted for using the equity method of accounting, as described in Note 10(c) to the consolidated financial statements, as of June 30, 2001 and for each of the years in the two-year period ended June 30, 2001. The consolidated financial statements of Golden Peanut Company, LLC and Subsidiaries were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Golden Peanut Company, LLC and Subsidiaries as of June 30, 2001 and for each of the years in the two-year period ended June 30, 2001, is based solely on the report of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Gold Kist Inc. and subsidiaries as of June 30, 2001 and June 29, 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended June 29, 2002, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG LLP Atlanta, Georgia September 6, 2002 REPORT OF INDEPENDENT AUDITORS The Board of Directors Golden Peanut Company, LLC We have audited the accompanying consolidated balance sheet of Golden Peanut Company, LLC and subsidiaries (the "Company") as of June 30, 2001, and the related consolidated statements of operations, members' equity, and cash flows for each of the two years in the period ended June 30, 2001 (not presented separately herein). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Golden Peanut Company, LLC and subsidiaries at June 30, 2001, and the consolidated results of their operations and their cash flows for each of the two years in the period ended June 30, 2001, in conformity with accounting principles generally accepted in the United States. Ernst & Young LLP Atlanta, Georgia August 31, 2001, except for the fourth paragraph of Note 11, as to which the date is September 17, 2001 GOLD KIST INC. CONSOLIDATED BALANCE SHEETS (Amounts in Thousands)

GOLD KIST INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in Thousands)

GOLD KIST INC. CONSOLIDATED STATEMENTS OF PATRONS' AND OTHER EQUITY AND COMPREHENSIVE INCOME (LOSS) For the Years Ended July 1, 2000, June 30, 2001 and June 29, 2002 (Amounts in Thousands)

GOLD KIST INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Thousands)

GOLD KIST INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 1, 2000, June 30, 2001 and June 29, 2002 (Dollar Amounts in Thousands) (1) Summary of Significant Accounting Policies Gold Kist Inc. is an agricultural membership cooperative association, headquartered in Atlanta, Georgia. Gold Kist Inc. operates fully integrated broiler production, processing and marketing operations, as well as pork production facilities. These operations provide marketing and purchasing services to approximately 2,500 breeder, broiler and pork member/producers. The accounting and reporting policies of Gold Kist Inc. and subsidiaries conform to accounting principles generally accepted in the United States of America and to general practices among agricultural cooperatives. The following is a summary of the significant accounting policies. (a) Basis of Presentation The accompanying consolidated financial statements include the accounts of Gold Kist Inc. and its subsidiaries (collectively "Gold Kist" or "Company" or "Association"). All significant intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made in fiscal 2000 and 2001 to conform to the presentation in fiscal 2002. (b) Cash and Cash Equivalents Gold Kist's policy is to invest cash in excess of operating requirements in highly liquid interest bearing debt instruments, which include commercial paper and reverse repurchase agreements or money market funds that invest in such securities. These investments are stated at cost, which approximates market. For purposes of the consolidated statements of cash flows, Gold Kist considers all highly liquid debt instruments purchased with original maturities of three months or less to be cash equivalents. (c) Inventories Live poultry and hogs consist of broilers, market hogs and breeding stock. The broilers and market hogs are stated at the lower of average cost or market. The breeding stock is stated at average cost, less accumulated amortization. Raw materials and supplies consist of feed ingredients, hatching eggs, packaging materials and operating supplies. These inventories are stated, generally, on the basis of the lower of cost (first-in, first- out or average) or market. Gold Kist engages in commodity futures and options transactions to manage the risk of adverse price fluctuations with regard to its feed ingredient purchases. Effective July 2, 2000, the Association adopted Statement of Financial Accounting Standards (SFAS) 133 as amended by SFAS 138. The Statement requires the recognition of all derivatives on the balance sheet at fair value. The Company's derivatives include agricultural related forward purchase contracts, futures and options transactions. The Company's futures transactions have historically been designated as hedges and options transactions have been marked to market. Effective in the first quarter of fiscal 2001, changes in the fair value of these derivatives, except for forward purchase contracts on which the Company takes physical delivery, have been recorded through earnings. The effect of the adoption of the new Statements was immaterial. GOLD KIST INC. Notes to Consolidated Financial Statements, Continued (Dollar Amounts in Thousands) Marketable products consist primarily of dressed and further processed poultry. These inventories are stated, principally, on the basis of selling prices, less estimated brokerage, freight and certain other selling costs where applicable (estimated net realizable value). (d) Revenue Recognition Revenue is recognized upon shipment or upon transfer of ownership of the product to the customer. (e) Property, Plant and Equipment Property, plant and equipment is recorded at cost. Depreciation of plant and equipment is calculated using the straight-line method over the estimated useful lives of the respective assets as follows. Land improvements 5-10 Years Office furniture and equipment 3-10 Years Buildings 10-25 Years Automotive equipment 3- 5 Years Machinery and equipment 5-10 Years (f) Investments Investments in other cooperatives are recorded at cost and include the amount of patronage refund certificates and patrons' equities allocated, less distributions received. These investments are not readily marketable and quoted market prices are not available. Accordingly, it is not practical to determine these investments' fair value. The equity method of accounting is used for investments in other companies in which Gold Kist's voting interest is 20 to 50 percent. Investments in less than 20 percent owned companies, which are not readily marketable, are stated at cost. Gold Kist applies the provisions of SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities." Pursuant to the provisions of SFAS 115, the Company had previously classified its marketable equity security, which was sold in December 2001, as "available-for-sale" (see Note 10(b)). Accumulated other comprehensive income - unrealized gains and losses on "available-for-sale" securities are included as a separate component of patrons' and other equity in the accompanying consolidated financial statements, net of deferred income taxes. Gold Kist's investment in Golden Peanut Company was accounted for using the equity method. On August 30, 2001, Gold Kist liquidated its investment in Golden Peanut Company at its carrying value (see note 10(c)). (g) Income Taxes Gold Kist operates as an agricultural cooperative not exempt from Federal income taxes. Aggregate margins not refunded in cash to members or allocated in the form of qualified written notices are subject to income taxes. The bylaws of Gold Kist provide for the issuance of either qualified or nonqualified patronage refunds (as defined for purposes of Subchapter T of the Internal Revenue Code). Gold Kist utilizes nonqualified patronage refunds, which are deductible for income tax purposes only to the extent paid or redeemed in cash. GOLD KIST INC. Notes to Consolidated Financial Statements, Continued (Dollar Amounts in Thousands) Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date. (h) Fair Value of Financial Instruments Gold Kist's financial instruments include cash and cash equivalents, receivables and accounts payable and accrued expenses, interest left on deposit, notes receivable and debt. Because of the short maturity of cash equivalents, receivables and accounts payable and accrued expenses, interest left on deposit, certain short-term debt, which matures in less than one year and long-term debt with variable interest rates, the carrying value approximates fair value. All financial instruments are considered to have an estimated fair value, which approximates carrying value at June 30, 2001 and June 29, 2002 unless otherwise specified (see notes 1(f) and 4). (i) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of Gold Kist applies the provisions of SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS 121 requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. (j) Comprehensive Income (Loss) In 1999, Gold Kist adopted SFAS 130, "Reporting Comprehensive Income." SFAS 130 establishes rules for reporting of comprehensive income (loss) and its components. Comprehensive income (loss) consists of net margins (loss), unrealized gains and losses on a marketable equity security and pension liability adjustments, net of tax, and is presented in the consolidated statements of patrons' and other equity and comprehensive income (loss). The adoption of SFAS 130 had no impact on total patrons' equity. (k) Goodwill In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142 on Goodwill and Other Intangible Assets. The statement requires that goodwill no longer be amortized; instead it will be periodically tested for impairment. Statement No. 142 is effective for fiscal years beginning after December 15, 2001. Early adoption was permitted for companies with fiscal years beginning after March 15, 2001, provided that the first interim period financial statements had not been issued. Effective July 1, 2001, the Association adopted SFAS No. 142. Approximately $20 million of goodwill is included in other assets in the accompanying consolidated balance sheets at June 30, 2001 and June 29, 2002. The Association has determined that the fair value of its assets in the Poultry reporting unit exceeded their carrying value, including the goodwill. Goodwill amortization expense of $1.2 million is included in distribution, administrative and general expenses in the accompanying consolidated statements of operations for the years ended July 1, 2000 and June 30, 2001, respectively, with the same impact on net margins (loss). GOLD KIST INC. Notes to Consolidated Financial Statements, Continued (Dollar Amounts in Thousands) (l) Fiscal Year Gold Kist employs a 52/53-week fiscal year. The consolidated financial statements for 2000, 2001 and 2002 reflect 53 weeks, 52 weeks and 52 weeks, respectively. Fiscal 2003 will be a 52-week year. (m) Use of Estimates Management of Gold Kist has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from these estimates. (2) Inventories Inventories are summarized as follows:

(3) Property, Plant and Equipment Property, plant and equipment is summarized as follows:

(4) Notes Payable and Long-Term Debt Short-term borrowings at June 30, 2001 included $55.2 million under a rolling four-month secured agreement with a commercial bank entered into in April 1998. The commercial bank held a marketable equity security owned by Gold Kist as collateral (see note 10(b)). The Company was required to maintain funds with the bank to account for volatility in the market price of the security held as collateral. Interest on the borrowings was at one-month London Interbank Offered Rate (LIBOR) plus .75% per annum. The Company earned interest on the collateral funds at rates that approximated the federal funds rate. The marketable equity security was sold in December 2001 and the loan was repaid. GOLD KIST INC. Notes to Consolidated Financial Statements, Continued (Dollar Amounts in Thousands) The Company's long-term debt includes the Series B Senior Exchange Notes and the Series C Senior Exchange Notes with an insurance company. The interest rates on these notes are adjusted quarterly in accordance with the Company's financial condition. As of June 29, 2002, interest rates on the Series B Senior Exchange Notes and the Series C Senior Exchange Notes were 9.0% and 9.25%, respectively. As of June 30, 2001, interest rates on the Series B Senior Exchange Notes and the Series C Senior Exchange Notes were 11.25% and 11.5%, respectively. At July 1, 2001, the Company's loan agreements included a $240 million Senior Secured Credit Facility with a group of financial institutions that includes a $100 million 364-day revolving line of credit, a $95 million two- year term loan, and a $45 million five-year term loan. The interest rates on the 364-day and two-year term facilities range from 2.25% to 3% over LIBOR, adjusted quarterly based on the Association's financial condition. The interest rate on the five-year term loan is fixed at 10.57%. The Association's senior notes, senior secured credit facilities and term loans with an agricultural credit bank are secured by substantially all of the Association's inventories, receivables, and property, plant and equipment. On October 23, 2001, the Association refinanced its Senior Secured Credit Facility, replacing the aforementioned $100 million 364-day revolving line of credit due November 3, 2001 with a $110 million revolving line of credit due October 23, 2002. The $95 million two-year term loan due November 2002 was also replaced with a $95 million two-year term loan due October 2003. Other terms and conditions of the credit facility were essentially unchanged. On September 6, 2002, the Company received $205 million in commitments to refinance and extend the Senior Secured Credit facilities that will include a $110 million Revolving Credit Facility maturing November 2, 2004 and a $95 million Term Loan maturing November 2, 2005. The interest rates on the facility will range from 1.50% to 2.25% over LIBOR, adjusted quarterly based on the Association's financial conditions. Other terms and conditions will be essentially unchanged. As of June 29, 2002 and June 30, 2001, the amounts outstanding under the 364-day line of credit were $10 million and $43 million, respectively, with weighted average interest rates of 4.09% and 6.8%, respectively. Interest left on deposit represents amounts of interest payable, which at the option of the holders of various classes of certificates, is left on deposit with Gold Kist. Additional interest on these amounts accrues at the same rates as the related certificates. Long-term debt is summarized as follows:

GOLD KIST INC. Notes to Consolidated Financial Statements, Continued (Dollar Amounts in Thousands) The terms of debt agreements specify minimum consolidated tangible net worth, current ratio and coverage ratio requirements, as well as a limitation on the total debt to total capital ratio. The debt agreements place a limitation on capital expenditures, equity distributions, cash patronage refunds, commodity hedging contracts and additional loans, advances or investments. At June 29, 2002, the Association was in compliance with all loan covenants. Annual required principal repayments on long-term debt, based on the September 6, 2002 loan commitments, for the five years subsequent to June 29, 2002 are as follows:

Based upon discounted cash flows of future payments, assuming interest rates available to Gold Kist for issuance of debt with similar terms and remaining maturities, the estimated fair value of the Series B and Series C senior exchange notes at June 30, 2001 and June 29, 2002 was approximately $56.8 million and $48.2 million, respectively. The estimated fair value of the term loans with the agricultural credit bank at June 30, 2001 and June 29, 2002 was approximately $39.7 million and $35.1 million, respectively, and the estimated fair value of the senior secured note with an insurance company was $46.7 million at June 30, 2001 and June 29, 2002. (5) Leases Gold Kist leases vehicles, transportation and processing equipment and certain facilities from third parties under operating leases, many of which contain renewal options. Rent expense from continuing operations for 2000, 2001and 2002 was $16.3 million, $19.3 million and $24.2 million, respectively. Commitments for minimum rentals under non-cancelable operating leases at the end of 2002 are as follows:

(6) Patrons' and Other Equity Gold Kist's Articles of Incorporation provide for a class of common stock and a class of preferred stock pursuant to the provisions of the Georgia Cooperative Marketing Act. Each member is allocated one share of common stock, $1.00 par value. The common shares are not marketable or transferable and no dividends will be declared on these common shares. No issuance of preferred stock has been authorized by Gold Kist. Patronage reserves represent undistributed member margins allocated as either qualified or nonqualified notified equity, less income taxes paid on undistributed nonqualified equity. Qualified notified equity is deductible for income tax purposes when allocated; whereas, nonqualified notified equity is deductible upon redemption. The redemption of qualified and nonqualified notified equity is subject to the discretion of the Board of Directors. Patronage reserves do not bear interest and are subordinated to all certificates outstanding and indebtedness of Gold Kist. Retained earnings include an allocation of member margins based on financial ratios, as well as cumulative net margins (losses) resulting from nonmember and nonpatronage transactions, including noncooperative subsidiaries, and losses from patronage operations. Also included are amounts related to the early redemption of notified equity, representing the difference between the face value and the redemption amounts. GOLD KIST INC. Notes to Consolidated Financial Statements, Continued (Dollar Amounts in Thousands) (7) Income Taxes Total income tax expense (benefit) was allocated as follows:

The provisions for income tax expense (benefit), principally Federal, related to margins (loss) from continuing operations consist of the following:

Gold Kist's combined federal and state effective tax rate from operations for 2000, 2001 and 2002 was (46)%, 29% and 32%, respectively. A reconciliation of income tax expense (benefit) allocated to margins (loss) from continuing operations computed by applying the Federal corporate income tax rate of 35% in 2000, 2001 and 2002 to margins (loss) from continuing operations before income taxes for the applicable year follows:

GOLD KIST INC. Notes to Consolidated Financial Statements, Continued (Dollar Amounts in Thousands) The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at June 30, 2001 and June 29, 2002 are as follows:

The net change in the total valuation allowance for the years ended 2000, 2001 and 2002 was a decrease of $223, $7 and an increase of $9, respectively. The Company's management believes the existing net deductible temporary differences comprising the total net deferred tax assets will reverse during periods in which the Company generates net taxable income. At June 29, 2002, Gold Kist has an alternative minimum tax credit carryforward for federal income tax purposes of $2.5 million, which is available to offset future federal income taxes, if any. (8) Employee Benefits (a) Pension Plan Gold Kist has noncontributory defined benefit pension plans covering substantially all of its employees and directors (participants). The plan provisions covering the salaried participants provide pension benefits that are based on the employees' compensation during the years before retirement or other termination of employment. The plan provisions covering the hourly participants provide pension benefits that are based on years of service. Gold Kist's funding policy is to contribute within the guidelines prescribed by Federal regulations. Plan assets consist principally of corporate equities and bonds, and United States Government and Agency obligations. GOLD KIST INC. Notes to Consolidated Financial Statements, Continued (Dollar Amounts in Thousands) (b) Medical and Life Insurance Plans Effective January 1, 2001, the Association substantially curtailed its postretirement medical benefit plan. Postretirement medical coverage will only be available to existing retirees and active employees, who as of that date, were 62 years of age or older and had 15 or more years of service. A net gain from the curtailment of $29.5 million is reflected in the accompanying 2001 consolidated statement of operations with the accompanying reduction in the accrued postretirement benefit liability in the accompanying consolidated balance sheet at June 30, 2001. The following table sets forth the plans' change in benefit obligation, change in plan assets and economic assumptions for the years ended June 30, 2001 and June 29, 2002.

GOLD KIST INC. Notes to Consolidated Financial Statements, Continued (Dollar Amounts in Thousands) The health care cost trend rate used to determine the medical and life insurance benefit obligation at June 30, 2001 was 10%, declining ratably to 5% by the year 2011 and remaining at that level thereafter. The health care cost trend rate used to determine the medical and life insurance benefit obligation at June 29, 2002 was 10%, declining ratably to 5% by the year 2012 and remaining at that level thereafter. A 1% increase in the health care cost trend rate would increase the medical and life insurance benefit obligation as of June 29, 2002 by $2,604. A 1% decrease in the health care cost trend rate would decrease the medical and life insurance benefit obligation as of June 29, 2002 by $2,294.

A 1% increase in the health care cost trend rate would increase the medical and life insurance service and interest cost components as of June 29, 2002 by $80. A 1% decrease in the health care cost trend rate would decrease the medical and life insurance service and interest cost components as of June 29, 2002 by $69. (9) Contingent Liabilities In August 1999, the State Court of Fulton County, Georgia entered a $22 million judgment against Golden Peanut Company (Golden Peanut) and in favor of a peanut farming company that alleged it had been underpaid for its 1990 crop. Gold Kist held a forty percent interest in Golden Peanut at the time of the events which resulted in the lawsuit. In March 2001, the Georgia Court of Appeals reversed this judgment and ordered a new trial. In April 2002, the Georgia Supreme Court affirmed this decision. In July 2002, Golden Peanut filed a petition for certiorari in the United States Supreme Court, asking the Court to reverse the trial court judgment outright and thus eliminate the need for a second trial. If this petition is denied, the parties' re-trial is tentatively scheduled to begin in November 2002. Gold Kist is contingently liable through a Litigation Sharing and Indemnification Agreement with Golden Peanut for its forty percent share of any costs related to this litigation. Gold Kist is a party to various other legal and administrative proceedings, all of which management believes constitute ordinary routine litigation incidental to the business conducted by Gold Kist, or are not material in amount. (10) Investments (a) Capital Trust and Preferred Securities In October 1998, the Association completed the sale of assets of the Agri-Services segment to Southern States Cooperative, Inc. (SSC). In order to complete the transaction, the Association committed to purchase from SSC, subject to certain terms and conditions, up to $60 million principal amount of capital trust securities and $40 million principal amount of cumulative preferred securities if SSC 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 the securities under the commitment. The securities carried a combined weighted average interest/dividend rate of 8.5% and 8.3% at June 29, 2002 and June 30, 2001, respectively. No dividends were paid on the cumulative preferred securities for the third and fourth quarters of fiscal 2002. Gold Kist is permitted to sell the securities pursuant to applicable securities regulations. The securities are classified as noncurrent investments in the accompanying consolidated balance sheets at a carrying value of $81.4 million at June 29, 2002 and June 30, 2001. GOLD KIST INC. Notes to Consolidated Financial Statements, Continued (Dollar Amounts in Thousands) (b) Marketable Equity Security At July 1, 2000, the Association's marketable equity security was carried at its fair value of $34.2 million, which represents a gross unrealized gain of $13.5 million. The 2000 gross unrealized gain, net of deferred income taxes of $4.7 million, has been reflected as a separate component of patrons' and other equity. At June 30, 2001, the Association's marketable equity security was carried at its fair value of $47.8 million, which represents a gross unrealized gain of $27 million, and has been reflected as a separate component of patrons' and other equity. During the quarter ended December 29, 2001, the Association sold its marketable equity security, its investment in an interregional fertilizer cooperative and other investments realizing total proceeds of $64.6 million and a gain before income taxes of $15.6 million. Dividends of $690 thousand, $723 thousand and $375 thousand are included in interest and dividend income for the years ended July 1, 2000, June 30, 2001 and June 29, 2002, respectively. (c) Golden Peanut Company Gold Kist had a 25% interest in Golden Peanut Company, LLC and subsidiaries (Golden Peanut). Gold Kist's investment in Golden Peanut amounted to $24.2 million at June 30, 2001. In 2000, Gold Kist received a distribution of $2.3 million from Golden Peanut. Summarized financial information of Golden Peanut is shown below: Condensed Consolidated Balance Sheet

Condensed Consolidated Statements of Operations

Gold Kist received procurement commissions, royalties and administrative service fees of $.8 million and $.9 million in 2000 and 2001, respectively. On August 30, 2001, Gold Kist withdrew as a member of Golden Peanut and liquidated the investment at its carrying value of $24.2 million as of June 30, 2001. (11) Discontinued Operations - Pecan Processing and Marketing Partnership Gold Kist holds a 25% equity interest and 35% earnings (loss) participation in a pecan processing and marketing partnership. The partners adopted a restructuring agreement in January 2002 that gave Gold Kist effective control of the partnership. As a result, Gold Kist began consolidating the partnership. GOLD KIST INC. Notes to Consolidated Financial Statements, Continued (Dollar Amounts in Thousands) Gold Kist and the other general partner are each guarantors of up to $60 million under a secured line of credit agreement between the agricultural credit bank and the partnership. At June 29, 2002, the amount outstanding under the facility was $55 million. The line of credit bears interest at the prime rate plus 2%, is secured by pecan inventories, receivables and substantially all of the partnership's property, plant and equipment, and is due on October 31, 2002. At June 29, 2002, the partnership was in compliance or had obtained waivers with respect to all applicable loan covenants. Gold Kist believes it is reasonably possible that payments could be required under the guarantee. If required, Gold Kist anticipates funding such amounts from availability under its Senior Secured Credit Facility. If payments were made under the guarantee, Gold Kist would have a security interest in the inventories, receivables and substantially all of the fixed assets of the partnership. Effective in June 2002, Gold Kist adopted a plan to withdraw from the partnership and discontinue its participation in the operations of the affiliate during 2003. Accordingly, the operating results of the partnership have been segregated from continuing operations and reported separately in the accompanying consolidated balance sheet and statements of operations and cash flows for 2002. The Company does not expect to incur additional losses during the phase-out period or upon withdrawal. Gold Kist's management believes it is the intent of the other general partner to raise additional equity and/or refinance the aforementioned secured line of credit, continue operations and relieve Gold Kist of its guaranty obligation during 2003. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not Applicable. PART III Item 10. Directors and Executive Officers of the Registrant. The Directors of Gold Kist are:

* Member of Board of Directors Executive Committee. Mr. Smalley serves as Chairman of the Board of Directors, and Mr. Whitehead serves as Vice-Chairman of the Board. The Directors of Gold Kist are elected on a district representation basis. The districts are redrawn from time to time by the Board of Directors, under provisions of the By-Laws of Gold Kist, to provide for equitable representation of members in the territory served by Gold Kist. During the past five years, each of the Directors has owned and managed substantial farming operations, producing such agricultural products as peanuts, cotton, soybeans, corn, other grains, peaches, vegetable crops, cattle, poultry and dairy products. While the size and types of products produced on, and personnel employed at, each of the Director's farms varies, each Director's business activities have been related primarily to small agribusiness enterprises. There are no family relationships among any of the Directors and executive officers. The Executive Officers of Gold Kist are:

The officers serve for terms of one year and until their successors are elected by the Board of Directors. During the past five years, the principal occupation of each of the above named executive officers, with exception of Donald W. Mabe, Harry T. McDonald and Sandra W. Kearney has been as an officer or employee of Gold Kist. Mr. Donald W. Mabe was elected Vice President - Operations, Poultry Group, effective July 25, 1997. He previously served as President of Carolina Golden Products Company from January 1991 until election to his current position. Mr. Harry T. McDonald was elected Vice President, Human Resources, effective April 2000. He previously served as director of Management Systems for the Gold Kist Poultry Group from September 1997 until election to his current position. From August 1, 1996 through August 1, 1997, he served as President of Claxton Poultry, an integrated poultry company headquartered in Claxton, Georgia. Mr. McDonald also served as president of the poultry division of Seaboard Farms, headquartered in Shawnee Mission, Kansas, from March 1990 through June 1996. Ms. Sandra W. Kearney was elected Vice President, Information Services on January 19, 2001. She previously served as CEO and Chief Technology Officer for FasTechnologies, a computer consulting company, from February, 1999 to December, 2000. Ms. Kearney also served as Vice President of Information Systems for La Quinta Inns, Inc. from February, 1995, to January, 1999. Item 11. Executive Compensation. Summary Compensation Table. The following table sets forth information concerning the compensation received by the Chief Executive Officer and for each of the four other most highly compensated executive officers:

_______________________________ (1)The amounts shown for the fiscal years ended June 30, 2001 and July 1, 2000 set forth that portion of interest earned on voluntary salary and bonus deferrals under non-qualified deferred compensation plans above 120% of the applicable federal rate. Other than such amounts, for the fiscal years ended June 29, 2002, June 30, 2001 and July 1, 2000, no amounts of "Other Annual Compensation" were paid to any of the above named executive officers, except for perquisites and other personal benefits which for each executive officer did not exceed the lesser of $50,000 or 10% of such individual's salary plus annual bonus. (2)The amounts set forth include the following amounts that were contributed by the Association for fiscal years 2002, 2001 and 2000 on behalf of the named executive officers pursuant to the Gold Kist Profit Sharing and Investment Plan (401K Plan) and the Company's Executive Defined Contribution Plan, both qualified defined contribution plans: Mr. Bekkers - $5,100, $2,550 and $5,100, respectively; Mr. Stimpert - $5,642, $2,438 and $5,349, respectively; Mr. Stewart - $4,784, $2,804 and $5,156, respectively; Mr. Mabe - $5,337, $2,511 and $5,318, respectively; and Mr. West - $5,340, $2,510 and $5,277, respectively. In addition, the amounts set forth include for fiscal years 2002, 2001 and 2000, the following amounts which represent the value of the named executive officer's benefit from premiums paid by the Association under a split dollar life insurance plan for the named executive officers: Mr. Bekkers - $3,783, $3,987 and $4,151, respectively; Mr. Stimpert - $4,204, $4,465 and $4,694, respectively; Mr. Stewart - $4,220, $4,441 and $4,616, respectively; Mr. Mabe - $1,185, $1,186 and $1,182, respectively; and Mr. West - $2,639, $2,750 and $2,836, respectively. The Association uses the modified premium method in determining the portion of each premium dollar attributable to the named executive officers. The Association will recover the cost of premium payments from the cash value of the policies. Retirement Plans. The Company maintains a noncontributory pension fund, the Gold Kist Pension Plan, with separate benefit formulas for salaried and hourly employees. The plan covers substantially all employees who have served at least one year with Gold Kist, including those employees subject to collective bargaining agreements. Effective January 1, 2000, the Company increased retirement income benefits payable to salaried retirees and hourly retirees. The Plan now provides salaried employees a pension benefit after thirty (30) years of credited service at age 65, which, when combined with a portion of the employee's primary Social Security benefit attributable to the employer's contributions, will equal fifty percent (50%) of the employee's average earnings during the period of five years in which the employee had the highest earnings in the last ten years of employment immediately preceding attainment of age 65, or if retired before age 65, in the last ten years immediately preceding early retirement. For hourly employees who work for Gold Kist until age 65, the Plan provides a monthly pension benefit equal to $11.00 per month for each year of Plan participation payable at age 65. The Plan provides early retirement benefits for salaried and hourly employees after age 55 and contains a death benefit for the surviving spouse of an active employee (who had at least five (5) years credited service or was at least age 55 at the date of death) which equals fifty percent (50%) of the deceased employee's accrued retirement income benefit. Accrued benefits under the Plans vest after the employee attains five (5) years of service or at age 55. Due to the full funding limitation of the Internal Revenue Services, the Association was not permitted to make a tax deductible contribution to the pension plan for the plan year ended December 31, 2001. Estimated annual benefits payable upon retirement at normal retirement age (65 years) to persons in specified years of service and remuneration classifications, before offset of Social Security benefits, are illustrated in the following table:

For years after 2001, the maximum annual amount of compensation that can be used for determining an individual's benefit under a qualified plan is $200,000. The plan covers the compensation in the columns entitled "Salary" and "Bonus" and the contribution to the Executive Defined Contribution Plan set forth in the Summary Compensation Table. The credited years of service as of December 31, 2001, under the retirement income plan for the five executive officers listed in the summary compensation table are as follows: Mr. Bekkers (17); Mr. Stimpert (28); Mr. Stewart (30); Mr. Mabe (23); and Mr. West (22). A Supplemental Executive Retirement Plan has been adopted by the Association whereby Gold Kist makes supplemental payments to certain employees under a non-qualified deferred compensation plan to make up for any reduction in such employees' retirement income under the Gold Kist salary retirement plan resulting from restrictions placed on qualified retirement plans under Section 415 of the Internal Revenue Code of 1986, as amended, and salary deferrals to the Executive Savings Plan. Such restrictions limit the amount of benefits payable in qualified retirement plans with respect to the percentage of final pay to which such employees would be otherwise entitled upon retirement. The following table shows the estimated annual benefits payable upon retirement at normal retirement age (65) to persons in specified years of service and remuneration classifications, before offset of Social Security benefits and without restriction imposed by the Internal Revenue Code. The amounts shown in the table would be reduced by the amounts payable pursuant to the Gold Kist Retirement Plan for Salaried Employees.

Covered compensation, computation of the average final compensation, and credited years of service for the five executive officers listed in the summary compensation table are the same as that set forth in the foregoing description of the Gold Kist Pension Plan. In addition to the retirement benefits provided by its qualified and nonqualified retirement plans, Gold Kist has contracted to provide certain key employees with compensation benefits after normal retirement. These benefits, known as the Management Deferred Compensation Plan, are paid monthly following retirement in an annual amount equal to 25% of the average annual salary for the ten year period immediately prior to retirement. These benefits are payable, depending on the contract, for a 10 or 15 year period following retirement to a former key employee or his designated beneficiary. Estimated annual benefits payable under the Management Deferred Compensation Plan would be based upon the following average annual salary of the eligible named executives for the ten year period ended as of June 29, 2002: Mr. Bekkers - $276,437; Mr. Stimpert - $197,895; and Mr. Stewart - $179,696. Executive Agreements. Mr. Bekkers and Mr. Stimpert have entered into employment agreements with the Association for a term of five years. The agreements provide for continuation of salary and medical benefits and bonus eligibility for the executives for the remaining term of the agreement in the event the executives' employment with the Association is terminated for reasons other than a "for cause" termination or in the event the employee terminates the employment for "good reasons" as defined in the agreements. Change in Control Plans. Under the Gold Kist officers contingency plan, the Association has entered into identical change in control agreements with each officer, including the five executive officers named in the cash compensation table. Each change in control agreement provides that following a change in the control of the Association (as defined in the agreements), if the officer's employment with the Association terminates within two years after the change in control (but prior to the officer's reaching age 65), the officer will be entitled to receive a severance payment calculated by determining the "Base Severance Amount" as follows: (1) if the officer is age 60 or younger at the time of termination of his employment, the amount equal to the officer's compensation paid by the Association for the five full calendar years ending before the date of the change in control, or (2) if the officer is older than age 60 at the time of his termination of employment, the amount equal to the officer's average annual compensation paid by the Association for the lesser of five full calendar years or the full calendar years of service with the Association ending before the change in control, multiplied by the number of years and fractions thereof remaining until the officer's 65th birthday. The Base Severance Amount is to be adjusted for those officers with less than 15 years of service by prorating the Base Severance Amount with the numerator being the number of completed calendar years of service and the denominator being 15. However, the minimum any terminated officer would receive would be one and one-half times the average annual compensation paid by the Association for the actual number of full calendar years worked, if less than five, or the annual salary amount for an officer who has worked less than one calendar year. The severance payment will include an additional amount equal to any excise tax under Section 4999 of the Internal Revenue Code of 1986 incurred by the officer, plus all federal, state and local income taxes incurred by the officer with respect to receipt of the additional amount. Additionally, under such contracts, medical benefits would remain available to current and retired officers on the same basis as is provided at the time of a change in control. The Association has agreed to pay all legal fees and expenses incurred by an officer in the pursuit of the rights and benefits provided by the change in control agreement. The Association has entered into similar change in control agreements with each director of Gold Kist. As of June 29, 2002, no contingencies have occurred which would require the implementation of the provisions of the change in control agreements, and no payments or other benefits have been provided to the five executive officers named in the summary compensation table or to the directors. Director Compensation. The By-Laws of Gold Kist provide that the Directors shall be compensated for their services and reimbursed for their expenses, as determined by the Board of Directors. Currently, the Directors receive no compensation other than an annual retainer paid at the rate of $20,000 per year, with the Chairman receiving $21,500. Directors receive a per diem of $250 with a $500 minimum, plus expenses incurred while traveling to and from and attending meetings of the Board of Directors or other official meetings or conferences. Pursuant to separate agreements, Gold Kist has arranged to provide life insurance benefits to qualifying directors emeriti and to make available health insurance and other medical benefits for Gold Kist directors and directors emeriti as are available to employees of Gold Kist from time to time pursuant to the Association group insurance program. Compensation Committee Interlocks and Insider Participation. Directors Dan Smalley, W. Kenneth Whitehead, and Douglas A. Reeves serve as members of the Association's Compensation Committee. Item 12. Security Ownership of Certain Beneficial Owners and Management. Not Applicable. Item 13. Certain Relationships and Related Transactions. The Directors of Gold Kist are members of the Association and, during the fiscal year ended June 29, 2002, Directors Smalley, Reeves, Henderson, Grace and Dockery had dealings in the ordinary course of business with Gold Kist as marketing patrons. See Business (and Properties) -- Patronage Refunds. Item 14. Controls and Procedures. The Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Association's disclosure controls and procedures as of September 20, 2002 (the "Evaluation Date") and have concluded that the disclosure controls and procedures were effective as of the Evaluation Date to ensure that material information relating to the Association (including its consolidated subsidiaries) was made known to such officers, particularly during the period in which this report was being prepared. Since the Evaluation Date, there have been no significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses. PART IV Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a)1. Index to Consolidated Financial Statements Consolidated Financial Statements: Independent Auditors' Reports Consolidated Balance Sheets-June 30, 2001 and June 29, 2002 Consolidated Statements of Operations--Years Ended July 1, 2000, June 30, 2001 and June 29, 2002 Consolidated Statements of Patrons' and Other Equity and Comprehensive Income (Loss)-Years Ended July 1, 2000, June 30, 2001 and June 29, 2002 Consolidated Statements of Cash Flows--Years Ended July 1, 2000, June 30, 2001 and June 29, 2002 Notes to Consolidated Financial Statements (a)2. Financial Statement Schedules: Financial Statement Schedule: II. Valuation Reserves and Qualifying Accounts--Years Ended July 1, 2000, June 30, 2001 and June 29, 2002 All other schedules are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes. GOLD KIST INC. Schedule II - Valuation Reserves and Qualifying Accounts (Dollar Amounts in Thousands)

(a)3. Exhibits - Index of Exhibits Exhibits designated as previously filed with the Commission in the Index of Exhibits, below, are incorporated by reference into this Report.

_________________________________ *Plans and arrangements pursuant to which executive officers and directors of the Association receive compensation. (b) Reports on Form 8-K. - No reports on Form 8-K were filed during the last quarter of the fiscal year ended June 29, 2002. SIGNATURES - Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GOLD KIST INC. Date: September 20, 2002 By:/s/ John Bekkers John Bekkers, Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

CERTIFICATION I, John Bekkers, Principal Executive Officer of Gold Kist Inc., certify that: 1. I have reviewed this annual report on Form 10-K of Gold Kist Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: September 20, 2002 /s/ John Bekkers [Signature] Title: Chief Executive Officer CERTIFICATION I, Stephen O. West, Principal Financial Officer of Gold Kist Inc., certify that: 1. I have reviewed this annual report on Form 10-K of Gold Kist Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: September 20, 2002 /s/ Stephen O. West [Signature] Title: Chief Financial Officer INDEX TO EXHIBITS

GOLD KIST INC 10-K