##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended July 1, 2006

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from 
to

Commission File Number: 000-50925



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GOLD KIST INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 20-1163666                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                                     |  |           
|---------------------------------------------------- |  | ----------
|244 Perimeter Center Parkway, N.E., Atlanta, Georgia |  | 30346     
|(Address of principal executive offices)             |  | (Zip Code)

(770) 393-5000

(Registrants telephone number, including area code)



(Former name, former address and former fiscal year, if changed since last report)



---

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act:



|                         |  |                      |  |                       
|------------------------ |  | -------------------- |  | ----------------------
|Large accelerated filer ̈ |  | Accelerated filer  x |  | Non-accelerated filer ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).    Yes ̈No  x

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.



|                                        |  |                              
|--------------------------------------- |  | -----------------------------
|Class                                   |  | Outstanding at August 9,
2006
|Common Stock, $0.01 par value per share |  | 51,036,806 shares            



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##### Table of Contents

GOLD KIST INC.

INDEX



|         |  |                       |  |                                                                                                         |  |         
|-------- |  | --------------------- |  | ------------------------------------------------------------------------------------------------------- |  | --------
|         |  |                       |  |                                                                                                         |  | Page No.
|Part I.  |  | Financial Information |  |                                                                                                        
|         |  |                       | 
|         |  | Item 1.               |  | Financial Statements                                                                                    |  |         
|         |  |                       | 
|         |  |                       |  | Consolidated Balance Sheets - October 1, 2005 and July 1, 2006                                          |  | 1       
|         |  |                       | 
|         |  |                       |  | Consolidated Statements of Operations -Three Months and Nine Months Ended July 2, 2005 and July 1, 2006 |  | 2       
|         |  |                       | 
|         |  |                       |  | Consolidated Statements of Cash Flows -Nine Months Ended July 2, 2005 and July 1, 2006                  |  | 3       
|         |  |                       | 
|         |  |                       |  | Notes to Consolidated Financial Statements                                                              |  | 4       
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                   |  | 19      
|         |  |                       | 
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosure About Market Risks                                              |  | 28      
|         |  |                       | 
|         |  | Item 4.               |  | Controls and Procedures                                                                                 |  | 28      
|         |  |                      
|Part II. |  | Other Information     |  |                                                                                                        
|         |  |                       | 
|         |  | Item 1.               |  | Legal Proceedings                                                                                       |  | 29      
|         |  |                       | 
|         |  | Item 1A.              |  | Risk Factors                                                                                            |  | 30      
|         |  |                       | 
|         |  | Item 5.               |  | Other Information                                                                                       |  | 35      
|         |  |                       | 
|         |  | Item 6.               |  | Exhibits                                                                                                |  | 36      



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##### Table of Contents

Item 1. Financial Statements

GOLD KIST INC.

CONSOLIDATED BALANCE SHEETS

(Amounts, Except Share Amounts, in Thousands)

(Unaudited)



|                                                                                                                                                                                                                    |  |                 |         |   |              |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ------- | - | ------------ | - | ------- | -
|                                                                                                                                                                                                                    |  | October 1, 2005 |         |   | July 1, 2006 |  
|ASSETS                                                                                                                                                                                                              |  |                 |         |   |              |   |         |  
|Current assets:                                                                                                                                                                                                     |  |                 |         |   |              |   |         |  
|Cash and cash equivalents                                                                                                                                                                                           |  | $               | 153,561 |   |              | $ | 95,554  |  
|Receivables, net                                                                                                                                                                                                    |  |                 | 125,389 |   |              |   | 102,493 |  
|Inventories, net                                                                                                                                                                                                    |  |                 | 233,681 |   |              |   | 227,339 |  
|Deferred income taxes, net                                                                                                                                                                                          |  |                 | 11,506  |   |              |   | 12,277  |  
|Other current assets                                                                                                                                                                                                |  |                 | 26,873  |   |              |   | 29,407  |  
|                                                                                                                                                                                                                    |  |                 |         |   |              |   |         |  
|Total current assets                                                                                                                                                                                                |  |                 | 551,010 |   |              |   | 467,070 |  
|Investments                                                                                                                                                                                                         |  |                 | 10,747  |   |              |   | 10,819  |  
|Property, plant and equipment, net                                                                                                                                                                                  |  |                 | 286,515 |   |              |   | 324,132 |  
|Deferred income taxes, net                                                                                                                                                                                          |  |                 | 25,133  |   |              |   | 25,133  |  
|Other assets                                                                                                                                                                                                        |  |                 | 52,284  |   |              |   | 63,143  |  
|                                                                                                                                                                                                                    |  |                 |         |   |              |   |         |  
|                                                                                                                                                                                                                    |  | $               | 925,689 |   |              | $ | 890,297 |  
|                                                                                                                                                                                                                    |  |                 |         |   |              |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                |  |                 |         |   |              |   |         |  
|Current liabilities:                                                                                                                                                                                                |  |                 |         |   |              |   |         |  
|Notes payable and current maturities of long-term debt                                                                                                                                                              |  | $               | 1,518   |   |              | $ | 2,017   |  
|Accounts payable                                                                                                                                                                                                    |  |                 | 87,486  |   |              |   | 74,092  |  
|Accrued compensation and related expenses                                                                                                                                                                           |  |                 | 27,292  |   |              |   | 16,147  |  
|Income taxes payable                                                                                                                                                                                                |  |                 | 34,850  |   |              |   | 7,093   |  
|Accrued insurance costs                                                                                                                                                                                             |  |                 | 39,458  |   |              |   | 40,838  |  
|Other current liabilities                                                                                                                                                                                           |  |                 | 36,105  |   |              |   | 39,797  |  
|                                                                                                                                                                                                                    |  |                 |         |   |              |   |         |  
|Total current liabilities                                                                                                                                                                                           |  |                 | 226,709 |   |              |   | 179,984 |  
|Long-term debt, less current maturities                                                                                                                                                                             |  |                 | 143,714 |   |              |   | 142,127 |  
|Accrued postretirement benefit costs                                                                                                                                                                                |  |                 | 58,411  |   |              |   | 67,688  |  
|Accrued insurance costs                                                                                                                                                                                             |  |                 | 32,600  |   |              |   | 50,699  |  
|Other liabilities                                                                                                                                                                                                   |  |                 | 13,527  |   |              |   | 15,513  |  
|                                                                                                                                                                                                                    |  |                 |         |   |              |   |         |  
|Total liabilities                                                                                                                                                                                                   |  |                 | 474,961 |   |              |   | 456,011 |  
|Commitments and contingencies (note 10)                                                                                                                                                                             |  |                 |         |   |              |   |         |  
|Stockholders equity:                                                                                                                                                                                               |  |                 |         |   |              |   |         |  
|Preferred stock, authorized 100,000,000 shares                                                                                                                                                                      |  |                 |        |   |              |   |        |  
|Common stock, $.01 par value and authorized 900,000,000 shares; issued and outstanding 51,082,157 and 51,052,104 shares as of October 1,
2005 and 51,095,012 and 51,036,806 shares as of July 1, 2006, respectively |  |                 | 511     |   |              |   | 511     |  
|Additional paid-in capital                                                                                                                                                                                          |  |                 | 399,619 |   |              |   | 404,527 |  
|Accumulated other comprehensive loss                                                                                                                                                                                |  |                 | (61,265 | ) |              |   | (61,265 | )
|Retained earnings                                                                                                                                                                                                   |  |                 | 112,246 |   |              |   | 91,308  |  
|Common stock held in treasury  30,053 and 58,206 shares as of October 1, 2005 and July 1, 2006, respectively                                                                                                       |  |                 | (383    | ) |              |   | (795    | )
|                                                                                                                                                                                                                    |  |                 |         |   |              |   |         |  
|Total stockholders equity                                                                                                                                                                                          |  |                 | 450,728 |   |              |   | 434,286 |  
|                                                                                                                                                                                                                    |  |                 |         |   |              |   |         |  
|                                                                                                                                                                                                                    |  | $               | 925,689 |   |              | $ | 890,297 |  
|                                                                                                                                                                                                                    |  |                 |         |   |              |   |         |  

See Accompanying Notes to Consolidated Financial Statements.



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##### Table of Contents

GOLD KIST INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in Thousands, Except Per Share Amounts)

(Unaudited)



|                                                                    |  |                    |         |   |                   |   |         |              |  |   |              |   |  |   |           |  
|------------------------------------------------------------------- |  | ------------------ | ------- | - | ----------------- | - | ------- | ------------ |  | - | ------------ | - |  | - | --------- | -
|                                                                    |  | Three Months Ended |         |   | Nine Months Ended |  
|                                                                    |  | July 2, 2005       |         |   | July 1, 2006      |   |         | July 2, 2005 |  |   | July 1, 2006 |  
|Net sales                                                           |  | $                  | 598,835 |   |                   | $ | 505,338 |              |  | $ | 1,721,602    |   |  | $ | 1,583,063 |  
|Cost of sales                                                       |  |                    | 497,040 |   |                   |   | 490,961 |              |  |   | 1,478,716    |   |  |   | 1,539,141 |  
|                                                                    |  |                    |         |   |                   |   |         |              |  |   |              |   |  |   |           |  
|Gross profit                                                        |  |                    | 101,795 |   |                   |   | 14,377  |              |  |   | 242,886      |   |  |   | 43,922    |  
|Distribution, administrative and general expenses                   |  |                    | 28,852  |   |                   |   | 26,667  |              |  |   | 86,894       |   |  |   | 78,571    |  
|Conversion expenses                                                 |  |                    |        |   |                   |   |        |              |  |   | 1,418        |   |  |   |          |  
|                                                                    |  |                    |         |   |                   |   |         |              |  |   |              |   |  |   |           |  
|Net operating income (loss)                                         |  |                    | 72,943  |   |                   |   | (12,290 | )            |  |   | 154,574      |   |  |   | (34,649   | )
|                                                                    |  |                    |         |   |                   |   |         |              |  |   |              |   |  |   |           |  
|Other income (expenses):                                            |  |                    |         |   |                   |   |         |              |  |   |              |   |  |   |           |  
|Interest and dividend income                                        |  |                    | 1,106   |   |                   |   | 1,396   |              |  |   | 3,821        |   |  |   | 4,346     |  
|Interest expense                                                    |  |                    | (5,063  | ) |                   |   | (3,835  | )            |  |   | (18,366      | ) |  |   | (12,102   | )
|Debt prepayment interest and write-off of related fees and discount |  |                    |        |   |                   |   |        |              |  |   | (10,016      | ) |  |   |          |  
|Miscellaneous, net                                                  |  |                    | 1,164   |   |                   |   | 1,227   |              |  |   | 4,150        |   |  |   | 3,828     |  
|                                                                    |  |                    |         |   |                   |   |         |              |  |   |              |   |  |   |           |  
|Total other expenses, net                                           |  |                    | (2,793  | ) |                   |   | (1,212  | )            |  |   | (20,411      | ) |  |   | (3,928    | )
|                                                                    |  |                    |         |   |                   |   |         |              |  |   |              |   |  |   |           |  
|Income (loss) before income taxes                                   |  |                    | 70,150  |   |                   |   | (13,502 | )            |  |   | 134,163      |   |  |   | (38,577   | )
|Income tax expense (benefit)                                        |  |                    | 25,737  |   |                   |   | (6,248  | )            |  |   | 46,888       |   |  |   | (17,639   | )
|                                                                    |  |                    |         |   |                   |   |         |              |  |   |              |   |  |   |           |  
|Net income (loss)                                                   |  | $                  | 44,413  |   |                   | $ | (7,254  | )            |  | $ | 87,275       |   |  | $ | (20,938   | )
|                                                                    |  |                    |         |   |                   |   |         |              |  |   |              |   |  |   |           |  
|Net income (loss) per common share:                                 |  |                    |         |   |                   |   |         |              |  |   |              |   |  |   |           |  
|Basic                                                               |  | $                  | .89     |   |                   | $ | (.14    | )            |  | $ | 1.75         |   |  | $ | (.42      | )
|Diluted                                                             |  | $                  | .87     |   |                   | $ | (.14    | )            |  | $ | 1.72         |   |  | $ | (.42      | )
|Weighted average common shares outstanding:                         |  |                    |         |   |                   |   |         |              |  |   |              |   |  |   |           |  
|Basic                                                               |  |                    | 50,012  |   |                   |   | 50,122  |              |  |   | 49,985       |   |  |   | 50,093    |  
|Diluted                                                             |  |                    | 50,808  |   |                   |   | 50,122  |              |  |   | 50,602       |   |  |   | 50,093    |  

See Accompanying Notes to Consolidated Financial Statements.



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##### Table of Contents

GOLD KIST INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in Thousands)

(Unaudited)



|                                                                                           |  |                   |          |   |             |   |         |  
|------------------------------------------------------------------------------------------ |  | ----------------- | -------- | - | ----------- | - | ------- | -
|                                                                                           |  | Nine Months Ended |         
|                                                                                           |  | July 2, 2005      |          |   | July 1,2006 |  
|Cash flows from operating activities:                                                      |  |                   |          |   |             |   |         |  
|Net income (loss)                                                                          |  | $                 | 87,275   |   |             | $ | (20,938 | )
|Adjustments to reconcile net income (loss) to cash provided by operating activities:       |  |                   |          |   |             |   |         |  
|Depreciation and amortization                                                              |  |                   | 31,982   |   |             |   | 33,297  |  
|Amortization of share-based compensation                                                   |  |                   | 8,917    |   |             |   | 4,875   |  
|Postretirement and other retirement benefit plans expense in excess of (less than) funding |  |                   | (17,200  | ) |             |   | 10,980  |  
|Deferred income tax benefit                                                                |  |                   | (2,261   | ) |             |   | (771    | )
|Income from joint venture                                                                  |  |                   | (2,739   | ) |             |   | (1,499  | )
|Other                                                                                      |  |                   | 2,726    |   |             |   | 341     |  
|Changes in operating assets and liabilities:                                               |  |                   |          |   |             |   |         |  
|Receivables                                                                                |  |                   | (4,373   | ) |             |   | 22,896  |  
|Inventories                                                                                |  |                   | 9,454    |   |             |   | 6,342   |  
|Other current assets                                                                       |  |                   | 9,491    |   |             |   | (1,015  | )
|Income taxes payable                                                                       |  |                   | 29,470   |   |             |   | (27,757 | )
|Accounts payable, accrued and other expenses                                               |  |                   | (13,407  | ) |             |   | (9,884  | )
|                                                                                           |  |                   |          |   |             |   |         |  
|Net cash provided by operating activities                                                  |  |                   | 139,335  |   |             |   | 16,867  |  
|                                                                                           |  |                   |          |   |             |   |         |  
|Cash flows from investing activities:                                                      |  |                   |          |   |             |   |         |  
|Acquisitions of property, plant and equipment                                              |  |                   | (61,417  | ) |             |   | (70,384 | )
|Dispositions of investments                                                                |  |                   | 3,334    |   |             |   | 1,535   |  
|Proceeds from termination of life insurance policies                                       |  |                   | 2,790    |   |             |   |        |  
|Acquisitions of internal use software                                                      |  |                   | (27      | ) |             |   | (3,243  | )
|Other                                                                                      |  |                   | 3,972    |   |             |   | (32     | )
|                                                                                           |  |                   |          |   |             |   |         |  
|Net cash used in investing activities                                                      |  |                   | (51,348  | ) |             |   | (72,124 | )
|                                                                                           |  |                   |          |   |             |   |         |  
|Cash flows from financing activities:                                                      |  |                   |          |   |             |   |         |  
|Principal repayments of long-term debt                                                     |  |                   | (95,736  | ) |             |   | (1,237  | )
|Payment of deferred financing costs                                                        |  |                   |         |   |             |   | (1,134  | )
|Patronage refunds and other equity paid in cash                                            |  |                   | (3,165   | ) |             |   |        |  
|Proceeds from initial public offering, net of expenses                                     |  |                   | 138,859  |   |             |   |        |  
|Cash distributions to members and equity holders                                           |  |                   | (105,963 | ) |             |   |        |  
|Treasury stock acquired                                                                    |  |                   | (275     | ) |             |   | (411    | )
|Other                                                                                      |  |                   |         |   |             |   | 32      |  
|                                                                                           |  |                   |          |   |             |   |         |  
|Net cash used in financing activities                                                      |  |                   | (66,280  | ) |             |   | (2,750  | )
|                                                                                           |  |                   |          |   |             |   |         |  
|Net change in cash and cash equivalents                                                    |  |                   | 21,707   |   |             |   | (58,007 | )
|Cash and cash equivalents at beginning of period                                           |  |                   | 175,289  |   |             |   | 153,561 |  
|                                                                                           |  |                   |          |   |             |   |         |  
|Cash and cash equivalents at end of period                                                 |  | $                 | 196,996  |   |             | $ | 95,554  |  
|                                                                                           |  |                   |          |   |             |   |         |  
|Supplemental disclosure of cash flow information:                                          |  |                   |          |   |             |   |         |  
|Cash paid during the periods for:                                                          |  |                   |          |   |             |   |         |  
|Interest (net of amounts capitalized)                                                      |  | $                 | 21,831   |   |             | $ | 6,112   |  
|                                                                                           |  |                   |          |   |             |   |         |  
|Income taxes, net                                                                          |  | $                 | 19,558   |   |             | $ | 11,787  |  
|                                                                                           |  |                   |          |   |             |   |         |  

See Accompanying Notes to Consolidated Financial Statements.



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##### Table of Contents

GOLD KIST INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



|1. | Basis of Presentation
|-- | ---------------------

The accompanying unaudited
consolidated financial statements reflect the accounts of Gold Kist Inc. and its subsidiaries (Gold Kist or the Company) as of July 1, 2006 and for the three and nine months ended July 1, 2006. These consolidated
financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. These statements should be read in
conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations and the Notes to Consolidated Financial Statements in the previously filed Annual Report on Form 10-K for the fiscal year ended
October 1, 2005.

The Company employs a 52/53-week fiscal year. Fiscal 2006 will be a 52-week year beginning October 2, 2005 and
ending September 30, 2006. The three-month and nine-month periods ended July 1, 2006 and the three-month and nine-month periods ended July 2, 2005 each consisted of thirteen weeks and thirty-nine weeks, respectively.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring
accruals) necessary to present fairly the financial position, the results of operations, and the cash flows of the Company. All significant intercompany balances and transactions have been eliminated in consolidation. Results of operations for
interim periods are not necessarily indicative of results for the entire fiscal year.

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 as of the balance sheet date and the reporting of revenue and expenses during the period to prepare these
consolidated financial statements in conformity with U.S. generally accepted accounting principles. Actual results could differ from these estimates.



|2. | Conversion and Initial Public Offering
|-- | --------------------------------------

On
October 13, 2004, Gold Kist converted from a cooperative marketing association to a for-profit business corporation. The conversion was accounted for using historical carrying values of the assets and liabilities of Gold Kist. Pursuant to the
conversion, approximately 36.4 million shares of common stock and $106.0 million in cash were issued and distributed in December 2004 to members and former member equity holders. Costs of the conversion were expensed as incurred. Also on
October 13, 2004, Gold Kist completed an initial public offering of 12 million shares of common stock, par value $0.01 per share, at an initial public offering price of $11.00 per share. In November 2004, the underwriters exercised their
overallotment option to purchase an additional 1.6 million shares at the offering price of $11.00 per share. After underwriting discounts and other expenses, net proceeds from the common stock offering were approximately $137.2 million.



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##### Table of Contents

|3. | Receivables
|-- | -----------

Receivables, net, are principally
trade and are stated net of an allowance for doubtful accounts of $1.1 million as of October 1, 2005 and July 1, 2006.



|4. | Comprehensive Income (Loss)
|-- | ---------------------------

Comprehensive income
(loss) was $44.4 million and $(7.3) million for the three months ended July 2, 2005 and July 1, 2006, respectively, and $87.4 million and $(20.9) million for the nine months ended July 2, 2005 and July 1, 2006, respectively.
Comprehensive income (loss) consists of net income (loss) and, if applicable, pension liability adjustments, net of tax.



|5. | Inventories
|-- | -----------

Inventories consist of the following
(amounts in thousands):



|                           |  |             |         |             |   |        
|-------------------------- |  | ----------- | ------- | ----------- | - | -------
|                           |  | Oct. 1,2005 |         | July 1,2006
|Live poultry and hogs      |  | $           | 99,935  |             | $ | 96,110 
|Raw materials and supplies |  |             | 52,243  |             |   | 54,105 
|Marketable products        |  |             | 81,503  |             |   | 77,124 
|                           |  |             |         |             |   |        
|                           |  | $           | 233,681 |             | $ | 227,339
|                           |  |             |         |             |   |        

Live poultry and hogs consist of broilers, market hogs and breeding stock. Broilers are stated at
the lower of cost or market and breeders are stated at cost, less accumulated amortization. Costs include live production costs (principally feed, chick cost, medications and other raw materials), labor and production overhead. Breeder costs include
acquisition of chicks from parent stock breeders, feed, medication, labor and production costs that are accumulated up to the production stage and then amortized over their estimated useful life of thirty-six weeks. Market hogs include costs of
feed, medication, feeder pigs, labor and production overhead. Pork breeder herds include cost of breeder gilts acquired from parent stock breeders, feed, medications and production costs that are accumulated up to production stage and then amortized
over twenty-four months. When market prices for inventories move below carrying value, the Company records adjustments to write down the carrying values of these inventories.

Raw materials and supplies consist of feed ingredients, hatching eggs, packaging materials and operating supplies. These inventories are stated at the
lower of cost (first-in, first-out or average) or market. Gold Kist engages in forward purchase contracts and commodity futures and options transactions to secure a portion of its feed ingredient requirements and manage the risk of adverse price
fluctuations with regard to its feed ingredient purchases. Changes in the fair value of these derivatives, except for forward purchase contracts, have been recorded through current period operating expenses.

Marketable products consist primarily of dressed and further processed poultry. The Company accounts for its marketable products inventory at the lower of
cost or market.



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##### Table of Contents

|6. | Property, Plant and Equipment
|-- | -----------------------------

Property, plant and
equipment is summarized as follows (amounts in thousands):



|                              |  |             |         |             |   |        
|----------------------------- |  | ----------- | ------- | ----------- | - | -------
|                              |  | Oct. 1,2005 |         | July 1,2006
|Land and land improvements    |  | $           | 35,962  |             | $ | 36,010 
|Buildings                     |  |             | 243,263 |             |   | 254,451
|Machinery and equipment       |  |             | 467,678 |             |   | 479,512
|Construction in progress      |  |             | 23,913  |             |   | 62,106 
|                              |  |             |         |             |   |        
|                              |  |             | 770,816 |             |   | 832,079
|Less accumulated depreciation |  |             | 484,301 |             |   | 507,947
|                              |  |             |         |             |   |        
|                              |  | $           | 286,515 |             | $ | 324,132
|                              |  |             |         |             |   |        

Depreciation and amortization included in cost of sales in the accompanying consolidated
statements of operations was $28.2 million and $30.7 million for the nine months ended July 2, 2005 and July 1, 2006, respectively. Depreciation and amortization included in cost of sales for the three months ended July 2, 2005 and
July 1, 2006 was $9.7 million and $10.4 million, respectively.



|7. | Long-Term Debt
|-- | --------------

Long-term debt is summarized as
follows (amounts in thousands):



|                                                                                                                                                                                                          |  |             |         |             |   |        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | ------- | ----------- | - | -------
|                                                                                                                                                                                                          |  | Oct. 1,2005 |         | July 1,2006
|Senior notes, due 2014                                                                                                                                                                                    |  | $           | 128,307 |             | $ | 128,456
|Subordinated capital certificates of interest with original fixed maturities ranging from seven to fifteen years, unsecured (weighted average
interest rate of 8.06% at October 1, 2005 and July 1, 2006) |  |             | 14,945  |             |   | 14,021 
|Mortgage loans due in monthly installments to January 2010, secured by an office building                                                                                                                 |  |             | 1,980   |             |   | 1,667  
|                                                                                                                                                                                                          |  |             |         |             |   |        
|                                                                                                                                                                                                          |  |             | 145,232 |             |   | 144,144
|Less current maturities                                                                                                                                                                                   |  |             | 1,518   |             |   | 2,017  
|                                                                                                                                                                                                          |  |             |         |             |   |        
|Total long-term debt                                                                                                                                                                                      |  | $           | 143,714 |             | $ | 142,127
|                                                                                                                                                                                                          |  |             |         |             |   |        

The stated interest rate on the senior notes is 10.25%, with interest payable semi-annually on
March 15 and September 15. The senior notes are reflected net of discount in the accompanying consolidated balance sheets. The discount amount is being amortized to interest expense over the ten-year term of the senior notes under the
interest method, yielding an effective interest rate of approximately 10.50%.

The Company repaid $70.0 million of principal of the senior
notes, plus $7.2 million in prepayment interest, in November 2004 with a portion of the proceeds from Gold Kists initial public offering completed in October 2004 (see Note 2). In connection with this prepayment, $1.0 million of the discount
and $1.8 million of deferred financing costs were written off and recognized in the consolidated statement of operations for the quarter ended January 1, 2005.

In December 2005, the Company amended and restated the senior credit facility to increase the revolving line of credit to an aggregate principal amount of $250.0 million and eliminate the sub-limit for letters of
credit. The term of the facility is five years and is secured by a security interest in substantially all of Gold Kists assets.



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Borrowings under the senior credit facility bear interest at Gold Kists option either at London
Interbank Offered Rate (LIBOR) or the alternate base rate (which is equal to the greater of the rate announced by the agent bank as its base rate or its federal funds rate plus 0.5%), in each case subject to an applicable margin based upon Gold
Kists ratio of total debt to Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA). The margin is between 1.00% and 2.00% for LIBOR loans and between 0.00% and 0.75% for alternate base rate loans.

As of July 1, 2006, there was approximately $183.2 million available for borrowing under this facility. Approximately $66.8 million of letters of
credit are outstanding under the facility.

Gold Kist is subject to certain covenants contained in the senior credit facility, including,
but not limited to, covenants that restrict, subject to specified exceptions, dividends and certain other restricted payments; the incurrence of additional indebtedness and other obligations and the granting of additional liens; loans; extension of
credit and guarantees; mergers, acquisitions, investments, and disposition of assets or stock; capital expenditures; and use of proceeds from borrowings under the senior credit facility and excess cash flow. In addition, the credit facility contains
financial covenants, including, but not limited to, a fixed charge coverage ratio (1.25 to 1.00 minimum) and a total debt coverage ratio (3.25 to 1.00 maximum), as each such ratio is defined in the senior credit facility.

On May 8, 2006, the Company amended its Fixed Charge Coverage Ratio (FCCR) through the addition of a minimum availability calculation as defined in
the agreement. Under the amendment, the Company does not have to maintain the FCCR at greater than 1.25 to 1.00 so long as availability under the senior credit facility is greater than $75 million, and the amount of collateral coverage as defined in
the credit agreement, less the aggregate amount of all outstanding Letter of Credit Obligations, Swing Line Advances and Revolving Loans outstanding for each day during such period under the senior credit facility, is greater than $75 million.

The terms of the Companys senior notes and senior credit facility also include an excess cash flow provision, which under certain
conditions could require the Company to deposit funds in a restricted cash account to be used for future scheduled or mandatory principal payments of senior debt.

At July 1, 2006, the Company was in compliance with all applicable loan covenants under its senior notes and senior credit facility.



|8. | Employee Benefits
|-- | -----------------

Pension Plans

Gold Kist has noncontributory defined benefit pension plans covering substantially all of its employees, as well as former directors from the former
Gold Kist Cooperative Association with ten years of service (participants). The plan provisions covering the salaried participants provide pension benefits that are based on the employees compensation and service before retirement or other
termination of employment. The plan provisions covering the hourly participants provide pension benefits that are based on years of credited 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 U.S. Government and Agency obligations.



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Medical and Life Insurance Plans

In October 2002, the Company substantially curtailed its postretirement life insurance plans and in April 2003, the Company substantially curtailed its
postretirement medical plan for existing retirees. Retired employees eligible under the plan between the ages of 55 and 65 could continue their coverage at rates above the average cost of the medical insurance plan for active employees.

Components of net periodic benefit cost (income) for the three months ended July 2, 2005 and July 1, 2006 are as follows (amounts in
thousands):



|                                          |  |                  |        |   |                                  |   |        |          |  |   |          |   |  |   |        |  
|----------------------------------------- |  | ---------------- | ------ | - | -------------------------------- | - | ------ | -------- |  | - | -------- | - |  | - | ------ | -
|                                          |  | Pension Benefits |        |   | PostretirementInsurance Benefits |  
|                                          |  | 7/2/2005         |        |   | 7/1/2006                         |   |        | 7/2/2005 |  |   | 7/1/2006 |  
|Service cost                              |  | $                | 1,167  |   |                                  | $ | 1,631  |          |  | $ |         |   |  | $ |       |  
|Interest cost                             |  |                  | 2,499  |   |                                  |   | 2,530  |          |  |   | 54       |   |  |   | 40     |  
|Estimated return on plan assets           |  |                  | (2,872 | ) |                                  |   | (2,857 | )        |  |   |         |   |  |   |       |  
|Amortization of prior service cost (gain) |  |                  | 120    |   |                                  |   | 119    |          |  |   | (2,586   | ) |  |   | (2,561 | )
|Amortization of net loss                  |  |                  | 1,023  |   |                                  |   | 2,258  |          |  |   | 1,759    |   |  |   | 2,207  |  
|                                          |  |                  |        |   |                                  |   |        |          |  |   |          |   |  |   |        |  
|Net periodic benefit cost (income)        |  | $                | 1,937  |   |                                  | $ | 3,681  |          |  | $ | (773     | ) |  | $ | (314   | )
|                                          |  |                  |        |   |                                  |   |        |          |  |   |          |   |  |   |        |  

Components of net periodic benefit cost (income) for the nine months ended July 2, 2005 and
July 1, 2006 are as follows (amounts in thousands):



|                                          |  |                  |        |   |                                  |   |        |          |  |   |          |   |  |   |        |  
|----------------------------------------- |  | ---------------- | ------ | - | -------------------------------- | - | ------ | -------- |  | - | -------- | - |  | - | ------ | -
|                                          |  | Pension Benefits |        |   | PostretirementInsurance Benefits |  
|                                          |  | 7/2/2005         |        |   | 7/1/2006                         |   |        | 7/2/2005 |  |   | 7/1/2006 |  
|Service cost                              |  | $                | 3,511  |   |                                  | $ | 4,892  |          |  | $ |         |   |  | $ |       |  
|Interest cost                             |  |                  | 7,501  |   |                                  |   | 7,589  |          |  |   | 163      |   |  |   | 119    |  
|Estimated return on plan assets           |  |                  | (8,617 | ) |                                  |   | (8,573 | )        |  |   |         |   |  |   |       |  
|Amortization of prior service cost (gain) |  |                  | 359    |   |                                  |   | 359    |          |  |   | (7,760   | ) |  |   | (7,684 | )
|Amortization of net loss                  |  |                  | 3,069  |   |                                  |   | 6,775  |          |  |   | 5,277    |   |  |   | 6,623  |  
|                                          |  |                  |        |   |                                  |   |        |          |  |   |          |   |  |   |        |  
|Net periodic benefit cost (income)        |  | $                | 5,823  |   |                                  | $ | 11,042 |          |  | $ | (2,320   | ) |  | $ | (942   | )
|                                          |  |                  |        |   |                                  |   |        |          |  |   |          |   |  |   |        |  

During the first quarter of fiscal 2006, the Company changed its method of accounting for
amortization of unrecognized net actuarial losses related to its postretirement medical plan accounted for in accordance with Statement of Financial Accounting Standards No. 106, Employers Accounting for Postretirement Benefits
Other Than Pensions. The Company changed from recognizing amortization over the average period during which benefits are expected to be paid to a method recognizing the cost over the next year. The Company believes that the newly adopted
expense recognition method is preferable in these circumstances as the change will allow amortization of the unrecognized net actuarial losses to be recognized on an accelerated basis which will approximate the recognition period for the
unrecognized prior service cost (gain). Such change results in a more systematic and rational manner of recognizing net periodic benefit cost, particularly since the plan is now closed and all benefits are expected to be paid by 2010. The effect of
the change was to increase the net loss by $0.6 million, or $.01 per diluted share, and $1.9 million, or $.04 per diluted share, for the three and nine-month periods ended July 1, 2006, respectively.



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|9. | Share-Based Compensation
|-- | ------------------------

Effective January 2,
2005, the Company adopted Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based Payment (SFAS No. 123(r)) and utilized the modified prospective method of adoption. Prior to January 2, 2005, the
Company accounted for its stock compensation grants in accordance with the SFAS No. 123 exception, which allowed it to utilize APB No. 25 to account for its stock-based compensation grants and required certain supplemental disclosures.
There was no cumulative effect upon adoption of SFAS No. 123(r).

In connection with the conversion of the Company into a for-profit
corporation and the completion of its initial public offering, the Company implemented the Gold Kist Long-Term Incentive Plan (LTIP). The Company reserved up to four million shares for issuance upon the exercise of awards under the LTIP.

A grant of nonvested stock to employees was authorized by the Board of Directors and effective as of the closing of the initial public
offering (IPO) on October 13, 2004 (IPO stock grants). In addition, on October 20, 2004, the Board of Directors authorized the issuance of the stock portion of their fiscal 2005 annual retainer in nonvested shares,
which vested in July 2005. Total grants of 705,197 and 24,456 shares were issued to employees and directors, respectively. The IPO stock grants issued to employees vest on the third anniversary of the date of grant. However, the shares vest
immediately upon (i) the employees termination of employment by reason of death, disability or retirement, or (ii) the occurrence of a change in control. Retirement is defined under the LTIP as voluntarily leaving employment after
attaining any normal or early retirement age specified in the Companys benefit plans.

Prior to the adoption of SFAS No. 123(r),
the Companys policy for recognizing compensation expense was to amortize the fair value of the IPO stock grants over the stated vesting period, even though that stated vesting period may not be substantive. As a result, during the quarter
ended January 1, 2005, the Company recognized compensation expense of $0.7 million for IPO stock grants made during that period. Had the Company applied SFAS No. 123(r) to the IPO stock grants, and, as a result, recognized the fair value
of the grants over the requisite service period as opposed to the stated vesting period of three years, the amount expensed for the grants would have totaled approximately $5.3 million in the quarter ended January 1, 2005. The Company will
continue to recognize the compensation expense for the IPO stock grants by amortizing the fair value over the stated three-year vesting period.

The compensation expense recorded in the three and nine-month periods ended July 1, 2006 that would not have been recognized had SFAS No. 123(r) been applied to the IPO stock grants issued in the quarter ended January 1, 2005
was approximately $0.4 million and $1.2 million, respectively.

In January 2005, the Board of Directors approved replacement employment
agreements with the Chief Executive Officer and the Senior Vice President, Planning and Administration and replacement change in control (CIC) agreements with the other officers. Equity grants to the Companys officers under the
Companys LTIP, consisting of 355,722 shares of nonvested stock (CIC stock grants), stock-settled stock appreciation rights with respect to 173,860 shares (stock-settled SARS) and 96,558 performance share awards
(performance shares), were approved and awarded in January 2005. The CIC stock grants vest as to 25% of the shares on each anniversary of the date of grant, beginning January 24, 2006, provided, however, that the shares will vest
immediately upon (i) the executives termination of employment by reason of death, disability or retirement, or (ii) the occurrence of a change in control. Additional equity grants for other management participants, consisting of
stock-settled SARS with respect to 86,954 shares and 88,553 performance shares, were also approved and awarded with the same vesting periods as discussed below.



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The stock-settled SARS vest 50% in the third year and 50% in the fourth year after the grant date;
provided, however, that the stock-settled SARS vest and become immediately exercisable upon (i) the participants termination of employment by reason of death, disability or retirement, or (ii) the occurrence of a change in control.

The performance shares provide the participant the opportunity to earn a number of shares of the Companys common stock at the end of
a three-year performance cycle. The performance condition is based upon the Companys profitability in relation to a defined peer group within the broiler industry as measured by an independent benchmarking company. The performance cycle will
be shortened and a pro rata number of shares issued if a participants employment is terminated by reason of the participants death, disability or retirement prior to the end of the three-year period and the performance conditions have
been met. If there is a change in control, then the performance conditions shall be deemed to have been met at the 100% level and the participant will receive a pro rata number of shares depending on the amount of time that has lapsed in the
performance period.

Stock-settled SARS and performance share grants of 240,778 and 166,721 shares, respectively, were awarded to plan
participants in November 2005 as part of the Companys incentive compensation payments for fiscal 2005.

Deferred stock units are
issued to directors who elect to receive the quarterly cash portion of their retainer in stock units in lieu of cash. The stock units shall be converted to shares of stock on the earlier of six months after the directors service on the Board
is terminated or at a date as designated by the participating director. In February 2006, the stock portion of directors fiscal 2006 annual retainer was paid in vested shares.

The equity grants and awards are summarized as follows (share and dollar amounts in thousands):



|                                 |  |               |  |        |  |            |        |                       |          
|-------------------------------- |  | ------------- |  | ------ |  | ---------- | ------ | --------------------- | ---------
|                                 |  | Grant Date    |  | Shares |  | Fair Value |        | Stated Vesting Period
|IPO stock grants                 |  | October 2004  |  |        |  |            |        |                       |          
|Employees                        |  |               |  | 705    |  | $          | 7,757  |                       | 36 months
|Directors                        |  |               |  | 25     |  |            | 280    |                       | 9 months 
|                                 |  |               |  |       
|CIC stock grants                 |  | January 2005  |  | 356    |  |            | 4,863  |                       | 48 months
|                                 |  |               |  |       
|Stock-settled SARS               |  | January 2005  |  | 261    |  |            | 1,795  |                       | 48 months
|                                 |  | November 2005 |  | 241    |  |            | 2,003  |                       | 48 months
|                                 |  |               |  |       
|Performance Shares               |  | January 2005  |  | 185    |  |            | 2,288  |                       | 33 months
|                                 |  | November 2005 |  | 167    |  |            | 2,654  |                       | 35 months
|                                 |  |               |  |       
|Director stock units             |  | Quarterly     |  | 5      |  |            | 88     |                       | Various  
|                                 |  |               |  |       
|Directors stock annual retainer |  | February 2006 |  | 19     |  |            | 280    |                       |         
|                                 |  |               |  |        |  |            |        |                       |          
|Total                            |  |               |  | 1,964  |  | $          | 22,008 |                       |          
|                                 |  |               |  |        |  |            |        |                       |          



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The Company determined that all of the above grants were equity-classified awards under SFAS
No. 123(r). As a result, the fair value of the awards has been measured at grant date and is being recognized as compensation expense over the vesting periods, except as noted below. The fair value of the IPO stock grants, CIC stock grants and
performance shares was the quoted public market price of the shares on the date of the grant. The fair value of the stock-settled SARS was determined under the Black-Scholes-Merton valuation method. The SARS issued January 2005 had a calculated term
of 6.75 years, as determined under the simplified method, a risk free rate of 3.93% and a volatility of 45%, based on data from a peer group of similar profile companies. The SARS issued in November 2005 were valued with the same assumptions, except
the risk free rate used was 4.47%. The contractual term of the stock-settled SARS is ten years.

The grants previously described, with the
exception of the performance shares, vest fully at retirement, which is defined as attaining any normal or early retirement age (fifty-five) specified in the Companys benefit plans. A significant number of grant recipients were fifty-five or
older at the time of the grant and therefore have the option to retire early under the Companys benefit plans, at which time the grants would vest. In accordance with SFAS No. 123(r), because the employee is eligible to retire at the
grant date, the awards explicit service condition is nonsubstantive and the entire amount of compensation cost was recognized at the grant date except for the IPO stock grants as previously discussed.

The amount of the share-based compensation expense under the stock-settled SARS granted in November 2005 related to those recipients aged 55 or over was
$1.3 million at the grant date and represented 139,683 shares.

Total share-based compensation expense was $1.1 million and $8.9 million for
the three and nine-month periods ended July 2, 2005, respectively, and $1.1 million and $4.9 million for the three and nine-month periods ended July 1, 2006, respectively, and is reflected within distribution, general and administrative
expense in the accompanying consolidated statements of operations.

A summary of the status of the Companys nonvested stock grants is
as follows (shares in thousands):



|                               |  |        |   |  |                                                 |      
|------------------------------ |  | ------ | - |  | ----------------------------------------------- | -----
|                               |  | Shares |   |  | Weighted AverageGrant Date Fair Value Per Share
|Outstanding at October 1, 2005 |  | 1,460  |   |  | $                                               | 11.11
|                               |  |       
|Changes during period:         |  |        |   |  |                                                 |      
|Granted                        |  | 429    |   |  |                                                 | 11.61
|Vested                         |  | (107   | ) |  |                                                 | 13.25
|Forfeited                      |  | (19    | ) |  |                                                 | 11.59
|                               |  |        |   |  |                                                 |      
|Outstanding at July 1, 2006    |  | 1,763  |   |  | $                                               | 11.10
|                               |  |        |   |  |                                                 |      

At July 1, 2006, the total share-based compensation cost related to nonvested grants and
awards not yet recognized is approximately $7.3 million. The weighted average period over which the remaining share-based compensation expense is to be recognized is approximately nineteen months.



|10. | Contingent Liabilities
|--- | ----------------------

Four female employees of
the Companys Corporate Office Information Services (I/S) Department filed an Equal Employment Opportunity Commission (EEOC) sex discrimination suit against the Company in the United States District Court for the Northern District
of Georgia asserting gender based claims



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##### Table of Contents

about employment and promotion decisions in the Corporate Office I/S Department. One of the employees continues to be employed by the Company. After its
administrative consideration of the claims, the EEOC issued Right to Sue letters to the four complainants in these claims, meaning that the EEOC would not sue or participate in a suit against the Company on behalf of the parties in these
actions nor would it pursue a systemic discrimination charge in this matter. The letter provided that the individuals could pursue their claims and litigation on their own should they so desire. The four complainants filed an action in federal
district court on March 19, 2003, seeking class certification for their claims of gender discrimination, unspecified monetary damages and injunctive relief. The U.S. District Court, in an Order entered June 13, 2005, denied the motion of
the plaintiffs to certify the litigation as a class action. The Courts ruling, for which the plaintiffs did not seek an interlocutory appeal, means that the litigation will not proceed as a class action and will be litigated as individual
claims of the four named plaintiffs. The Company intends to defend the litigation vigorously. The Company believes that this lawsuit will not have a material adverse effect on its financial condition or results of operations.

The Company was sued by one of the Companys hourly workers in the U.S. District Court for the Northern District of Alabama. The complaint sought
injunctive relief and damages under the Fair Labor Standards Act (FLSA) and contended that the employee was not compensated appropriately for time spent donning and doffing certain clothing for his job. The case was settled on
April 3, 2006 for an insignificant amount.

The Department of Labor has recently contacted many members of the U.S. poultry industry,
including Gold Kist, who were included in a wage and hour audit initiated by the U.S. Department of Labor in 2000. The Department of Labor has been of the opinion that many poultry companies have not been accurately compensating employees for the
time spent on such activities as donning and doffing work equipment. Following the recent Supreme Court decision in the IBP/Alvarez case, the Department of Labor has reasserted its audit concerns in this area. The Company has been reviewing its
operations and pay practices to determine the appropriate response to the Department of Labor. Prior to being contacted by the Department of Labor, the Company designed plans which were implemented on May 1st to modify practices at its
facilities to address concerns described in the IBP/Alvarez case and the Department of Labor audit. As of July 1, 2006, the Company has not reserved any amounts in this matter because a loss is not considered probable or estimable.

Gold Kist is a party to various other legal, environmental and administrative proceedings, which management believes constitute ordinary routine
litigation incidental to the business conducted by Gold Kist. Potential liability with respect to such proceedings is either accrued or not expected to be significant.



|11. | Income (Loss) Per Share
|--- | -----------------------

The net income for both
the basic and diluted income per share computations was $44.4 million and $87.3 million for the three and nine months ended July 2, 2005, respectively, and a net loss of $7.3 million and $20.9 million for the three and nine months ended
July 1, 2006, respectively. The following is a reconciliation of weighted average common shares  basic to weighted average common shares  diluted (share amounts in thousands).



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##### Table of Contents

|                                                   |  |                    |  |                   |  |          |  |         
|-------------------------------------------------- |  | ------------------ |  | ----------------- |  | -------- |  | --------
|                                                   |  | Three Months Ended |  | Nine Months Ended
|                                                   |  | 7/2/2005           |  | 7/1/2006          |  | 7/2/2005 |  | 7/1/2006
|Weighted average common shares  basic             |  | 50,012             |  | 50,122            |  | 49,985   |  | 50,093  
|Dilutive impact of share-based compensation grants |  | 796                |  |                  |  | 617      |  |        
|                                                   |  |                    |  |                   |  |          |  |         
|Weighted average common shares - diluted           |  | 50,808             |  | 50,122            |  | 50,602   |  | 50,093  
|                                                   |  |                    |  |                   |  |          |  |         

Due to the net loss for the three and nine months ended July 1, 2006, the basic shares are
used for calculating both basic and diluted loss per share.



|12. | Supplemental Combining Condensed Financial Statements (amounts in thousands)
|--- | ----------------------------------------------------------------------------

The Companys senior notes are jointly and severally guaranteed by the Companys domestic subsidiaries, which are 100% owned by Gold Kist (the Parent), except for GK Insurance Inc., a wholly
owned captive insurance company domiciled in the State of Vermont.

The following are the unaudited supplemental combining condensed balance
sheets as of October 1, 2005 and July 1, 2006, the supplemental combining condensed statements of operations for the three and nine-month periods ended July 2, 2005 and July 1, 2006 and the supplemental combining condensed
statements of cash flows for the nine-month periods ended July 2, 2005 and July 1, 2006. The only intercompany eliminations are the normal intercompany revenues, borrowings and investments in wholly owned subsidiaries. Separate complete
financial statements of the guarantor subsidiaries, which are 100% owned by the Parent, are not presented because the guarantors are jointly and severally, fully and unconditionally liable under the guarantees.



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##### Table of Contents

Balance Sheet:



|                                                       |  |                       |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|------------------------------------------------------ |  | --------------------- | ------- | --------------------- | - | ------ | ----------------------- |  | ------------ | ------ |  | ------------ | ------- | - |  | - | -------
|                                                       |  | As of October 1, 2005
|                                                       |  | Parent Only           |         | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiary |  | Eliminations |        |  | Consolidated
|ASSETS                                                 |  |                       |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|Current assets:                                        |  |                       |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|Cash and cash equivalents                              |  | $                     | 150,331 |                       | $ | 672    |                         |  | $            | 2,558  |  |              |        |   |  | $ | 153,561
|Receivables, net                                       |  |                       | 125,200 |                       |   | 13,147 |                         |  |              | 36,161 |  | $            | (49,119 | ) |  |   | 125,389
|Inventories, net                                       |  |                       | 233,415 |                       |   | 266    |                         |  |              |       |  |              |        |   |  |   | 233,681
|Deferred income taxes, net, and other current assets   |  |                       | 15,738  |                       |   | (683   | )                       |  |              | 23,324 |  |              |        |   |  |   | 38,379 
|                                                       |  |                       |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|Total current assets                                   |  |                       | 524,684 |                       |   | 13,402 |                         |  |              | 62,043 |  |              | (49,119 | ) |  |   | 551,010
|Investments                                            |  |                       | 34,278  |                       |   |       |                         |  |              |       |  |              | (23,531 | ) |  |   | 10,747 
|Property, plant and equipment, net                     |  |                       | 286,259 |                       |   | 256    |                         |  |              |       |  |              |        |   |  |   | 286,515
|Deferred income taxes, net, and other assets           |  |                       | 65,877  |                       |   | 2,860  |                         |  |              | 8,680  |  |              |        |   |  |   | 77,417 
|                                                       |  |                       |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|                                                       |  | $                     | 911,098 |                       | $ | 16,518 |                         |  | $            | 70,723 |  | $            | (72,650 | ) |  | $ | 925,689
|                                                       |  |                       |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY                   |  |                       |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|Current liabilities:                                   |  |                       |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|Notes payable and current maturities of long-term debt |  | $                     | 1,518   |                       | $ |       |                         |  | $            |       |  |              |        |   |  | $ | 1,518  
|Accounts payable                                       |  |                       | 135,482 |                       |   | 282    |                         |  |              | 841    |  | $            | (49,119 | ) |  |   | 87,486 
|Accrued compensation and related expenses              |  |                       | 27,277  |                       |   | 15     |                         |  |              |       |  |              |        |   |  |   | 27,292 
|Accrued insurance costs                                |  |                       | 10,248  |                       |   |       |                         |  |              | 29,210 |  |              |        |   |  |   | 39,458 
|Other current liabilities                              |  |                       | 70,518  |                       |   | (782   | )                       |  |              | 1,219  |  |              |        |   |  |   | 70,955 
|                                                       |  |                       |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|Total current liabilities                              |  |                       | 245,043 |                       |   | (485   | )                       |  |              | 31,270 |  |              | (49,119 | ) |  |   | 226,709
|Long-term debt, less current maturities                |  |                       | 143,714 |                       |   |       |                         |  |              |       |  |              |        |   |  |   | 143,714
|Accrued postretirement benefit costs                   |  |                       | 58,411  |                       |   |       |                         |  |              |       |  |              |        |   |  |   | 58,411 
|Accrued insurance costs                                |  |                       |        |                       |   |       |                         |  |              | 32,600 |  |              |        |   |  |   | 32,600 
|Other liabilities                                      |  |                       | 13,202  |                       |   | 325    |                         |  |              |       |  |              |        |   |  |   | 13,527 
|                                                       |  |                       |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|Total liabilities                                      |  |                       | 460,370 |                       |   | (160   | )                       |  |              | 63,870 |  |              | (49,119 | ) |  |   | 474,961
|                                                       |  |                       |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|Stockholders equity                                   |  |                       | 450,728 |                       |   | 16,678 |                         |  |              | 6,853  |  |              | (23,531 | ) |  |   | 450,728
|                                                       |  |                       |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|                                                       |  | $                     | 911,098 |                       | $ | 16,518 |                         |  | $            | 70,723 |  | $            | (72,650 | ) |  | $ | 925,689
|                                                       |  |                       |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        



Page 14



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##### Table of Contents

Balance Sheet:



|                                                       |  |                    |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|------------------------------------------------------ |  | ------------------ | ------- | --------------------- | - | ------ | ----------------------- |  | ------------ | ------ |  | ------------ | ------- | - |  | - | -------
|                                                       |  | As of July 1, 2006
|                                                       |  | Parent Only        |         | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiary |  | Eliminations |        |  | Consolidated
|ASSETS                                                 |  |                    |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|Current assets:                                        |  |                    |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|Cash and cash equivalents                              |  | $                  | 91,809  |                       | $ | 367    |                         |  | $            | 3,378  |  |              |        |   |  | $ | 95,554 
|Receivables, net                                       |  |                    | 102,154 |                       |   | 14,567 |                         |  |              | 47,781 |  | $            | (62,009 | ) |  |   | 102,493
|Inventories, net                                       |  |                    | 226,906 |                       |   | 433    |                         |  |              |       |  |              |        |   |  |   | 227,339
|Deferred income taxes, net, and other current assets   |  |                    | 16,750  |                       |   | (681   | )                       |  |              | 25,615 |  |              |        |   |  |   | 41,684 
|                                                       |  |                    |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|Total current assets                                   |  |                    | 437,619 |                       |   | 14,686 |                         |  |              | 76,774 |  |              | (62,009 | ) |  |   | 467,070
|Investments                                            |  |                    | 38,399  |                       |   |       |                         |  |              |       |  |              | (27,580 | ) |  |   | 10,819 
|Property, plant and equipment, net                     |  |                    | 323,890 |                       |   | 242    |                         |  |              |       |  |              |        |   |  |   | 324,132
|Deferred income taxes, net, and other assets           |  |                    | 69,354  |                       |   | 2,591  |                         |  |              | 16,331 |  |              |        |   |  |   | 88,276 
|                                                       |  |                    |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|                                                       |  | $                  | 869,262 |                       | $ | 17,519 |                         |  | $            | 93,105 |  | $            | (89,589 | ) |  | $ | 890,297
|                                                       |  |                    |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY                   |  |                    |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|Current liabilities:                                   |  |                    |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|Notes payable and current maturities of long-term debt |  | $                  | 2,017   |                       | $ |       |                         |  | $            |       |  |              |        |   |  | $ | 2,017  
|Accounts payable                                       |  |                    | 134,896 |                       |   | 210    |                         |  |              | 681    |  | $            | (61,695 | ) |  |   | 74,092 
|Accrued compensation and related expenses              |  |                    | 16,128  |                       |   | 19     |                         |  |              |       |  |              |        |   |  |   | 16,147 
|Accrued insurance costs                                |  |                    | 11,944  |                       |   |       |                         |  |              | 28,894 |  |              |        |   |  |   | 40,838 
|Other current liabilities                              |  |                    | 44,988  |                       |   | (377   | )                       |  |              | 2,593  |  |              | (314    | ) |  |   | 46,890 
|                                                       |  |                    |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|Total current liabilities                              |  |                    | 209,973 |                       |   | (148   | )                       |  |              | 32,168 |  |              | (62,009 | ) |  |   | 179,984
|Long-term debt, less current maturities                |  |                    | 142,127 |                       |   |       |                         |  |              |       |  |              |        |   |  |   | 142,127
|Accrued postretirement benefit costs                   |  |                    | 67,688  |                       |   |       |                         |  |              |       |  |              |        |   |  |   | 67,688 
|Accrued insurance costs                                |  |                    |        |                       |   |       |                         |  |              | 50,699 |  |              |        |   |  |   | 50,699 
|Other liabilities                                      |  |                    | 15,188  |                       |   | 325    |                         |  |              |       |  |              |        |   |  |   | 15,513 
|                                                       |  |                    |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|Total liabilities                                      |  |                    | 434,976 |                       |   | 177    |                         |  |              | 82,867 |  |              | (62,009 | ) |  |   | 456,011
|                                                       |  |                    |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|Stockholders equity                                   |  |                    | 434,286 |                       |   | 17,342 |                         |  |              | 10,238 |  |              | (27,580 | ) |  |   | 434,286
|                                                       |  |                    |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        
|                                                       |  | $                  | 869,262 |                       | $ | 17,519 |                         |  | $            | 93,105 |  | $            | (89,589 | ) |  | $ | 890,297
|                                                       |  |                    |         |                       |   |        |                         |  |              |        |  |              |         |   |  |   |        



Page 15



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##### Table of Contents

Statement of Operations:



|                                                  |  |                                            |           |   |                       |   |       |                         |  |   |              |   |  |              |         |   |  |   |           |  
|------------------------------------------------- |  | ------------------------------------------ | --------- | - | --------------------- | - | ----- | ----------------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | --------- | -
|                                                  |  | Three Months (13 Weeks) Ended July 2, 2005 |          
|                                                  |  | Parent Only                                |           |   | GuarantorSubsidiaries |   |       | Non-GuarantorSubsidiary |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                         |  | $                                          | 598,547   |   |                       | $ | 989   |                         |  | $ | 3,510        |   |  | $            | (4,211  | ) |  | $ | 598,835   |  
|Cost of sales                                     |  |                                            | 496,624   |   |                       |   | 920   |                         |  |   | 3,707        |   |  |              | (4,211  | ) |  |   | 497,040   |  
|                                                  |  |                                            |           |   |                       |   |       |                         |  |   |              |   |  |              |         |   |  |   |           |  
|Gross profit (loss)                               |  |                                            | 101,923   |   |                       |   | 69    |                         |  |   | (197         | ) |  |              |        |   |  |   | 101,795   |  
|Distribution, administrative and general expenses |  |                                            | 28,599    |   |                       |   | 234   |                         |  |   | 19           |   |  |              |        |   |  |   | 28,852    |  
|                                                  |  |                                            |           |   |                       |   |       |                         |  |   |              |   |  |              |         |   |  |   |           |  
|Net operating income (loss)                       |  |                                            | 73,324    |   |                       |   | (165  | )                       |  |   | (216         | ) |  |              |        |   |  |   | 72,943    |  
|Interest, income taxes and other, net             |  |                                            | (28,911   | ) |                       |   | 231   |                         |  |   | 450          |   |  |              | (300    | ) |  |   | (28,530   | )
|                                                  |  |                                            |           |   |                       |   |       |                         |  |   |              |   |  |              |         |   |  |   |           |  
|Net income (loss)                                 |  | $                                          | 44,413    |   |                       | $ | 66    |                         |  | $ | 234          |   |  | $            | (300    | ) |  | $ | 44,413    |  
|                                                  |  |                                            |           |   |                       |   |       |                         |  |   |              |   |  |              |         |   |  |   |           |  
|                                                  |  |                                            |           |   |                      
|Statement of Operations:                          |  |                                            |           |   |                       |   |       |                         |  |   |              |   |  |              |         |   |  |   |           |  
|                                                  | 
|                                                  |  | Three Months (13 Weeks) Ended July 1, 2006 |          
|                                                  |  | Parent Only                                |           |   | GuarantorSubsidiaries |   |       | Non-GuarantorSubsidiary |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                         |  | $                                          | 504,040   |   |                       | $ | 1,277 |                         |  | $ | 5,415        |   |  | $            | (5,394  | ) |  | $ | 505,338   |  
|Cost of sales                                     |  |                                            | 489,156   |   |                       |   | 1,174 |                         |  |   | 6,025        |   |  |              | (5,394  | ) |  |   | 490,961   |  
|                                                  |  |                                            |           |   |                       |   |       |                         |  |   |              |   |  |              |         |   |  |   |           |  
|Gross profit (loss)                               |  |                                            | 14,884    |   |                       |   | 103   |                         |  |   | (610         | ) |  |              |        |   |  |   | 14,377    |  
|Distribution, administrative and general expenses |  |                                            | 26,578    |   |                       |   | 62    |                         |  |   | 27           |   |  |              |        |   |  |   | 26,667    |  
|                                                  |  |                                            |           |   |                       |   |       |                         |  |   |              |   |  |              |         |   |  |   |           |  
|Net operating income (loss)                       |  |                                            | (11,694   | ) |                       |   | 41    |                         |  |   | (637         | ) |  |              |        |   |  |   | (12,290   | )
|Interest, income taxes and other, net             |  |                                            | 4,440     |   |                       |   | 179   |                         |  |   | 854          |   |  |              | (437    | ) |  |   | 5,036     |  
|                                                  |  |                                            |           |   |                       |   |       |                         |  |   |              |   |  |              |         |   |  |   |           |  
|Net income (loss)                                 |  | $                                          | (7,254    | ) |                       | $ | 220   |                         |  | $ | 217          |   |  | $            | (437    | ) |  | $ | (7,254    | )
|                                                  |  |                                            |           |   |                       |   |       |                         |  |   |              |   |  |              |         |   |  |   |           |  
|                                                  |  |                                            |           |   |                      
|Statement of Operations:                          |  |                                            |           |   |                       |   |       |                         |  |   |              |   |  |              |         |   |  |   |           |  
|                                                  | 
|                                                  |  | Nine Months (39 Weeks) Ended July 2, 2005  |          
|                                                  |  | Parent Only                                |           |   | GuarantorSubsidiaries |   |       | Non-GuarantorSubsidiary |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                         |  | $                                          | 1,720,702 |   |                       | $ | 2,608 |                         |  | $ | 10,555       |   |  | $            | (12,263 | ) |  | $ | 1,721,602 |  
|Cost of sales                                     |  |                                            | 1,477,612 |   |                       |   | 2,600 |                         |  |   | 10,767       |   |  |              | (12,263 | ) |  |   | 1,478,716 |  
|                                                  |  |                                            |           |   |                       |   |       |                         |  |   |              |   |  |              |         |   |  |   |           |  
|Gross profit (loss)                               |  |                                            | 243,090   |   |                       |   | 8     |                         |  |   | (212         | ) |  |              |        |   |  |   | 242,886   |  
|Distribution, administrative and general expenses |  |                                            | 87,678    |   |                       |   | 573   |                         |  |   | 61           |   |  |              |        |   |  |   | 88,312    |  
|                                                  |  |                                            |           |   |                       |   |       |                         |  |   |              |   |  |              |         |   |  |   |           |  
|Net operating income (loss)                       |  |                                            | 155,412   |   |                       |   | (565  | )                       |  |   | (273         | ) |  |              |        |   |  |   | 154,574   |  
|Interest, income taxes and other, net             |  |                                            | (68,137   | ) |                       |   | 660   |                         |  |   | 1,158        |   |  |              | (980    | ) |  |   | (67,299   | )
|                                                  |  |                                            |           |   |                       |   |       |                         |  |   |              |   |  |              |         |   |  |   |           |  
|Net income (loss)                                 |  | $                                          | 87,275    |   |                       | $ | 95    |                         |  | $ | 885          |   |  | $            | (980    | ) |  | $ | 87,275    |  
|                                                  |  |                                            |           |   |                       |   |       |                         |  |   |              |   |  |              |         |   |  |   |           |  
|                                                  |  |                                            |           |   |                      
|Statement of Operations:                          |  |                                            |           |   |                       |   |       |                         |  |   |              |   |  |              |         |   |  |   |           |  
|                                                  | 
|                                                  |  | Nine Months (39 Weeks) Ended July 1, 2006  |          
|                                                  |  | Parent Only                                |           |   | GuarantorSubsidiaries |   |       | Non-GuarantorSubsidiary |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                         |  | $                                          | 1,576,030 |   |                       | $ | 3,633 |                         |  | $ | 18,111       |   |  | $            | (14,711 | ) |  | $ | 1,583,063 |  
|Cost of sales                                     |  |                                            | 1,534,836 |   |                       |   | 3,277 |                         |  |   | 15,739       |   |  |              | (14,711 | ) |  |   | 1,539,141 |  
|                                                  |  |                                            |           |   |                       |   |       |                         |  |   |              |   |  |              |         |   |  |   |           |  
|Gross profit                                      |  |                                            | 41,194    |   |                       |   | 356   |                         |  |   | 2,372        |   |  |              |        |   |  |   | 43,922    |  
|Distribution, administrative and general expenses |  |                                            | 78,381    |   |                       |   | 121   |                         |  |   | 69           |   |  |              |        |   |  |   | 78,571    |  
|                                                  |  |                                            |           |   |                       |   |       |                         |  |   |              |   |  |              |         |   |  |   |           |  
|Net operating income (loss)                       |  |                                            | (37,187   | ) |                       |   | 235   |                         |  |   | 2,303        |   |  |              |        |   |  |   | (34,649   | )
|Interest, income taxes and other, net             |  |                                            | 16,249    |   |                       |   | 429   |                         |  |   | 1,082        |   |  |              | (4,049  | ) |  |   | 13,711    |  
|                                                  |  |                                            |           |   |                       |   |       |                         |  |   |              |   |  |              |         |   |  |   |           |  
|Net income (loss)                                 |  | $                                          | (20,938   | ) |                       | $ | 664   |                         |  | $ | 3,385        |   |  | $            | (4,049  | ) |  | $ | (20,938   | )
|                                                  |  |                                            |           |   |                       |   |       |                         |  |   |              |   |  |              |         |   |  |   |           |  



Page 16



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##### Table of Contents

Statement of Cash Flows:



|                                                       |  |                                           |          |   |                       |   |        |                         |  |   |              |   |              |   |  |   |          |  
|------------------------------------------------------ |  | ----------------------------------------- | -------- | - | --------------------- | - | ------ | ----------------------- |  | - | ------------ | - | ------------ | - |  | - | -------- | -
|                                                       |  | Nine Months (39 Weeks) Ended July 2, 2005 |         
|                                                       |  | Parent Only                               |          |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiary |  |   | Eliminations |   | Consolidated |  
|Net cash provided by (used in) operating activities    |  | $                                         | 146,687  |   |                       | $ | (1,345 | )                       |  | $ | (6,007       | ) |              |  |  | $ | 139,335  |  
|Cash flows from investing activities:                  |  |                                           |          |   |                       |   |        |                         |  |   |              |   |              |   |  |   |          |  
|Acquisitions of property, plant and equipment          |  |                                           | (61,412  | ) |                       |   | (5     | )                       |  |   |             |   |              |  |  |   | (61,417  | )
|Other                                                  |  |                                           | 8,524    |   |                       |   | 1,545  |                         |  |   |             |   |              |  |  |   | 10,069   |  
|                                                       |  |                                           |          |   |                       |   |        |                         |  |   |              |   |              |   |  |   |          |  
|Net cash provided by (used in) investing activities    |  |                                           | (52,888  | ) |                       |   | 1,540  |                         |  |   |             |   |              |  |  |   | (51,348  | )
|                                                       |  |                                           |          |   |                       |   |        |                         |  |   |              |   |              |   |  |   |          |  
|Cash flows from financing activities:                  |  |                                           |          |   |                       |   |        |                         |  |   |              |   |              |   |  |   |          |  
|Principal repayments of long-term debt                 |  |                                           | (95,736  | ) |                       |   |       |                         |  |   |             |   |              |  |  |   | (95,736  | )
|Patronage refunds and other equity paid in cash        |  |                                           | (3,165   | ) |                       |   |       |                         |  |   |             |   |              |  |  |   | (3,165   | )
|Proceeds from initial public offering, net of expenses |  |                                           | 138,859  |   |                       |   |       |                         |  |   |             |   |              |  |  |   | 138,859  |  
|Cash distributions to members and equity holders       |  |                                           | (105,963 | ) |                       |   |       |                         |  |   |             |   |              |  |  |   | (105,963 | )
|Treasury stock acquired                                |  |                                           | (275     | ) |                       |   |       |                         |  |   |             |   |              |  |  |   | (275     | )
|                                                       |  |                                           |          |   |                       |   |        |                         |  |   |              |   |              |   |  |   |          |  
|Net cash used in financing activities                  |  |                                           | (66,280  | ) |                       |   |       |                         |  |   |             |   |              |  |  |   | (66,280  | )
|                                                       |  |                                           |          |   |                       |   |        |                         |  |   |              |   |              |   |  |   |          |  
|Net change in cash and cash equivalents                |  |                                           | 27,519   |   |                       |   | 195    |                         |  |   | (6,007       | ) |              |  |  |   | 21,707   |  
|Cash and cash equivalents, beginning of period         |  |                                           | 166,430  |   |                       |   | 313    |                         |  |   | 8,546        |   |              |  |  |   | 175,289  |  
|                                                       |  |                                           |          |   |                       |   |        |                         |  |   |              |   |              |   |  |   |          |  
|Cash and cash equivalents, end of period               |  | $                                         | 193,949  |   |                       | $ | 508    |                         |  | $ | 2,539        |   |              |  |  | $ | 196,996  |  
|                                                       |  |                                           |          |   |                       |   |        |                         |  |   |              |   |              |   |  |   |          |  



Page 17



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##### Table of Contents

Statement of Cash Flows:



|                                                    |  |                                           |         |   |                       |   |      |                         |  |              |       |              |   |  |   |         |  
|--------------------------------------------------- |  | ----------------------------------------- | ------- | - | --------------------- | - | ---- | ----------------------- |  | ------------ | ----- | ------------ | - |  | - | ------- | -
|                                                    |  | Nine Months (39 Weeks) Ended July 1, 2006 |        
|                                                    |  | Parent Only                               |         |   | GuarantorSubsidiaries |   |      | Non-GuarantorSubsidiary |  | Eliminations |       | Consolidated |  
|Net cash provided by (used in) operating activities |  | $                                         | 16,616  |   |                       | $ | (569 | )                       |  | $            | 820   |              |  |  | $ | 16,867  |  
|Cash flows from investing activities:               |  |                                           |         |   |                       |   |      |                         |  |              |       |              |   |  |   |         |  
|Acquisitions of property, plant and equipment       |  |                                           | (70,374 | ) |                       |   | (10  | )                       |  |              |      |              |  |  |   | (70,384 | )
|Other                                               |  |                                           | (2,014  | ) |                       |   | 274  |                         |  |              |      |              |  |  |   | (1,740  | )
|                                                    |  |                                           |         |   |                       |   |      |                         |  |              |       |              |   |  |   |         |  
|Net cash provided by (used in) investing activities |  |                                           | (72,388 | ) |                       |   | 264  |                         |  |              |      |              |  |  |   | (72,124 | )
|                                                    |  |                                           |         |   |                       |   |      |                         |  |              |       |              |   |  |   |         |  
|Cash flows from financing activities:               |  |                                           |         |   |                       |   |      |                         |  |              |       |              |   |  |   |         |  
|Principal repayments of long-term debt              |  |                                           | (1,237  | ) |                       |   |     |                         |  |              |      |              |  |  |   | (1,237  | )
|Payment of deferred financing costs                 |  |                                           | (1,134  | ) |                       |   |     |                         |  |              |      |              |  |  |   | (1,134  | )
|Treasury stock acquired                             |  |                                           | (411    | ) |                       |   |     |                         |  |              |      |              |  |  |   | (411    | )
|Other                                               |  |                                           | 32      |   |                       |   |     |                         |  |              |      |              |  |  |   | 32      |  
|                                                    |  |                                           |         |   |                       |   |      |                         |  |              |       |              |   |  |   |         |  
|Net cash used in financing activities               |  |                                           | (2,750  | ) |                       |   |     |                         |  |              |      |              |  |  |   | (2,750  | )
|                                                    |  |                                           |         |   |                       |   |      |                         |  |              |       |              |   |  |   |         |  
|Net change in cash and cash equivalents             |  |                                           | (58,522 | ) |                       |   | (305 | )                       |  |              | 820   |              |  |  |   | (58,007 | )
|Cash and cash equivalents, beginning of period      |  |                                           | 150,331 |   |                       |   | 672  |                         |  |              | 2,558 |              |  |  |   | 153,561 |  
|                                                    |  |                                           |         |   |                       |   |      |                         |  |              |       |              |   |  |   |         |  
|Cash and cash equivalents, end of period            |  | $                                         | 91,809  |   |                       | $ | 367  |                         |  | $            | 3,378 |              |  |  | $ | 95,554  |  
|                                                    |  |                                           |         |   |                       |   |      |                         |  |              |       |              |   |  |   |         |  



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##### Table of Contents

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

After two decades of rapid growth, the broiler industry is maturing and will be dependent on new and value-added 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 approximately 49% in 1997 to approximately 57% in 2005 and this trend is expected to continue.

Gold Kist is the third largest producer of broilers and related products in the United States accounting for approximately 9% of the industrys
production. The industry has experienced volatility in results of operations over the last five years, and we expect the volatility to continue in the foreseeable future. Volatility in results of operations is generally attributable to fluctuations,
which can be substantial, in broiler sales prices and cost of feed grains. Broiler sales prices tend to fluctuate due to supply of chicken, viability of export markets, supplies and prices of competing meats and proteins, animal health factors in
the global meat sector and general economic conditions.

We are focusing our growth efforts on value added products. The contracts for the sales of these
products typically have longer terms than contracts for the sales of our minimally processed products and typically include elements of fixed pricing. As a result, we believe that increased sales of further-processed products will result in less
volatility in the prices at which we sell our products. Sales of our value added products represented approximately 58.8% of our sales for the nine months ended July 1, 2006 as compared to approximately 52.0% for the fiscal year ended
October 1, 2005.

According to the United States Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates
(WASDE), calendar 2005 U.S. broiler meat production was approximately 35.0 billion pounds, ready-to-cook weight, 3.8% above the 33.7 billion pounds produced in calendar 2004. The WASDE July estimate for calendar 2006 broiler meat
production is 35.6 billion pounds, which is a 1.8% increase from calendar 2005 and a reduction from the June estimate of 35.8 billion pounds. This is the lowest estimated annual increase since 2003. The nominal increase is principally due to heavier
bird weights. According to the USDA, the lower estimate is based on a lower level of chickens placed for growout and reduced placement of pullets into the hatching flock.

We announced in March 2006 that we were reducing broiler placements on a per head basis by 3.25%. The reduction was in place during the third quarter of fiscal 2006.

With the slower growth in broiler production overall, broiler prices have gradually strengthened in the latter part of the Companys third fiscal quarter. According
to the WASDE, tighter forecast supplies of broilers support higher broiler prices of 66¢68¢ per pound, wholesale twelve city average, for the third calendar quarter. This is improved from an average of 61¢ per pound
for the second calendar quarter of 2006, but below the 72¢ per pound average for the third calendar quarter of 2005.

Our export sales, which we
define as sales other than to customers in the United States or Canada, were $81.3 million for the nine months ended July 1, 2006 compared to $95.8 million for the nine months ended July 2, 2005. The U.S. poultry industry historically has
exported 15% to 20% of domestic production, principally dark meat products to Russia and other former Soviet Republics, Mexico, China and other countries in Asia. The Companys poultry export sales have historically been less than 10% of net
sales. However, any disruption in the export



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markets can significantly impact domestic broiler sales prices by creating excess domestic supply. Incidences of avian influenza in Asia, the Middle East and
Eastern Europe have adversely impacted year-to-date export demand and contributed to an oversupply situation in the domestic market.

The cost of feed
grains, primarily corn and soybean meal, averages approximately 55% to 60% of total live broiler production costs or approximately 30% to 35% of the Companys cost of sales. Prices of feed grains fluctuate in response to worldwide supply and
demand. Increased worldwide corn and soybean production favorably impacted feed ingredient costs in fiscal 2005 as compared to fiscal 2004. We expect feed ingredient costs in fiscal 2006 to be comparable to fiscal 2005 levels.

Energy costs represent a significant component of product and delivery costs as such costs affect transportation costs, costs to operate poultry facilities and packaging
costs. Although the spikes in energy prices during the fourth quarter of fiscal 2005 due to the effects of Hurricanes Katrina and Rita have moderated, energy costs in the nine months ended July 1, 2006 were 17.4% higher than the nine months
ended July 2, 2005. Energy costs in fiscal 2006 are expected to remain significantly above fiscal 2005 levels.

General issues such as increased
domestic and global competition in the meat industry, heightened concerns over the security of the U.S. food supply, volatility in feed grain commodity prices and export markets, increasing government regulation over animal production, animal
welfare activism and animal disease (including additional outbreaks of avian influenza) continue as significant risks and challenges to profitability and growth, both for Gold Kist and the broiler industry in general.

Avian Influenza

Gold Kist chickens are raised in enclosed poultry
houses that protect our chickens from contact with wild birds and other animals. As part of comprehensive biosecurity and disease prevention measures, poultry producers do not permit unauthorized visitors on their farms and take other appropriate
precautions designed to prevent cross contamination between farms. In addition, we participate in the National Chicken Councils enhanced avian influenza (AI) testing program, which requires testing of every flock of chickens prior
to processing. If a confirmed case of any strain of AI were to occur, additional biosecurity measures would be implemented immediately as directed by USDA and by federal and state public health officials. To prevent these chickens from entering the
food markets, Gold Kist would dispose of any infected flocks humanely and in an environmentally safe manner in total compliance with all governmental regulations. Although there are currently no reported AI cases in commercial chicken in the United
States and there has never been a reported outbreak of the H5N1 high pathogenic Asian strain of AI in the United States, confirmed cases in the U.S. commercial poultry industry could have an adverse effect on the supply of chicken, domestic and
foreign product demand and sales prices for chicken products and our results of operations and financial position. See Risk Factors  Outbreaks of livestock diseases, particularly an outbreak of avian influenza among humans, could
adversely affect our business.

References in this report to fiscal 2006, fiscal 2005 and fiscal 2004 refer to
the Companys fiscal years ending or ended September 30, 2006, October 1, 2005 and June 26, 2004, respectively. The third quarter of fiscal 2005 was from April 3, 2005 to July 2, 2005 and the third quarter of
fiscal 2006 was from April 2, 2006 to July 1, 2006.



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RESULTS OF OPERATIONS

The following table presents certain statements of operations items as a percentage of net sales for the periods indicated:



|                                                      |  |                    |   |  |                   |    |  |                 |   |  |             |    |  |             |  
|----------------------------------------------------- |  | ------------------ | - |  | ----------------- | -- |  | --------------- | - |  | ----------- | -- |  | ----------- | -
|                                                      |  | Three Months Ended |   |  | Nine Months Ended |    |  | FiscalYearEnded |  
|                                                      |  | July 2,2005        |   |  | July 1,2006       |    |  | July 2,2005     |   |  | July 1,2006 |    |  | Oct. 1,2005 |  
|Net sales                                             |  | 100.0              | % |  | 100.0             | %  |  | 100.0           | % |  | 100.0       | %  |  | 100.0       | %
|Cost of sales                                         |  | 83.0               |   |  | 97.2              |    |  | 85.9            |   |  | 97.2        |    |  | 86.1        |  
|                                                      |  |                    |   |  |                   |    |  |                 |   |  |             |    |  |             |  
|Gross profit                                          |  | 17.0               |   |  | 2.8               |    |  | 14.1            |   |  | 2.8         |    |  | 13.9        |  
|Distribution, administrative and general expenses     |  | 4.8                |   |  | 5.2               |    |  | 5.0             |   |  | 5.0         |    |  | 4.9         |  
|Other expenses                                        |  |                   |   |  |                  |    |  | .1              |   |  |            |    |  | .1          |  
|                                                      |  |                    |   |  |                   |    |  |                 |   |  |             |    |  |             |  
|Net operating income (loss)                           |  | 12.2               |   |  | (2.4              | )  |  | 9.0             |   |  | (2.2        | )  |  | 8.9         |  
|Interest expense                                      |  | (.9                | ) |  | (.8               | )  |  | (1.6            | ) |  | (.7         | )  |  | (1.7        | )
|Other (expenses) income, net (including income taxes) |  | (3.9               | ) |  | 1.8               |    |  | (2.3            | ) |  | 1.6         |    |  | (2.3        | )
|                                                      |  |                    |   |  |                   |    |  |                 |   |  |             |    |  |             |  
|Net income (loss)                                     |  | 7.4                | % |  | (1.4              | )% |  | 5.1             | % |  | (1.3        | )% |  | 4.9         | %
|                                                      |  |                    |   |  |                   |    |  |                 |   |  |             |    |  |             |  

Net Sales

Our
net sales of $505.3 million for the quarter ended July 1, 2006 decreased 15.6% from $598.8 million for the quarter ended July 2, 2005. For the nine months ended July 1, 2006, net sales decreased 8.0% from $1.72 billion in the
comparable period last year to $1.58 billion in the current year. The decrease in net sales was due primarily to a decline of 15.1% and 9.3% in average broiler sales prices for the quarter and nine months ended July 1, 2006, respectively,
compared to the quarter and nine months ended July 2, 2005. An oversupply of broilers and competing meats were the principal factors leading to the decline of sales prices in the third fiscal quarter and nine months ended July 1, 2006
compared to the third fiscal quarter and nine months ended July 2, 2005. Average broiler sales prices for the third fiscal quarter ended July 1, 2006 were 3.3% lower than prices for the second fiscal quarter ended April 1, 2006. We
believe concerns in export markets about avian influenza were the primary cause for reduced consumption in those markets, contributing to increased domestic supply and lower sales prices in the quarter and nine months ended July 1, 2006.

Our export sales of $81.3 million for the nine months ended July 1, 2006 were 15.1% lower than the fiscal 2005 comparable period, due to lower
average prices and reduced shipments of dark meat products. Export sales were $21.8 million for the quarter ended July 1, 2006, a 43.0% decrease from $38.2 million for the quarter ended July 2, 2005 due principally to a reduction in pounds
sold to Russia. Our export sales to Russia decreased 49.4% in pounds sold and 53.9% in dollar value from $45.0 million in the nine month period ended July 2, 2005 to $20.7 million in the nine month period ended July 1, 2006. A drop in
consumption in export markets due to AI concerns and resistance to the higher prices during calendar 2005 have driven these reductions in pounds sold in the year-to-date fiscal 2006 period. The reduction was partially offset by a more than doubling
of the pounds and dollar value of product sold to China in the nine months ended July 1, 2006 as compared to the nine months ended July 2, 2005. Selling prices of our principal export product, leg quarters, have improved during the latter
part of the quarter ended July 1, 2006 as compared to the quarter ended April 1, 2006; however, it is not known whether this trend will continue.



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Net Operating Income (Loss)

We had a net operating loss of $12.3 million and $34.6 million for the three and nine months ended July 1, 2006, respectively, compared to net operating income of $72.9 million and $154.6 million in the comparable periods in 2005. The
decrease in net operating income in the nine month period ended July 1, 2006 as compared to the nine month period ended July 2, 2005 was due primarily to lower broiler selling prices and higher processing, energy and other production
costs. Processing costs increased due to higher utilities, freight and packaging costs in the nine months ended July 1, 2006. In addition, grower pay increased 7.3% due to higher seasonal energy supplemental payments. Total feed costs for the
nine months ended July 1, 2006 were slightly below the nine months ended July 2, 2005 due to a reduction in pounds produced in the third fiscal quarter and lower soybean meal ingredient costs. Average prices for corn and soybean meal for
the nine months ended July 1, 2006 were 4.6% higher and 6.9% lower, respectively, than the comparable period in 2005.

The 9.6% decrease in
distribution, administrative and general expenses during the nine months ended July 1, 2006 was due principally to the absence of cash incentive compensation accruals due to the net loss as compared to amounts accrued on the net income during
the nine months ended July 2, 2005. In addition, noncash share-based compensation expense decreased from $8.9 million for the nine months ended July 2, 2005 to $4.9 million for the nine months ended July 1, 2006. This was due
principally to the recognition of expense with respect to grants issued in January 2005 to recipients aged 55 or older and eligible for early retirement (see Note 9 of Notes to Consolidated Financial Statements).

Expenses of $1.4 million, principally advisory fees related to our conversion from a cooperative marketing association to a for-profit corporation, were incurred in the
first quarter of fiscal 2005.

Other Income (Expenses)

Other expenses, net, totaled $1.2 million and $3.9 million for the three and nine months ended July 1, 2006, respectively, compared to $2.8 million and $20.4 million of expense for the comparable periods in 2005.

Interest and dividend income was $1.4 million and $4.3 million for the three and nine months ended July 1, 2006, respectively, compared to $1.1 million and $3.8
million for the comparable periods in 2005. These amounts were principally interest income from cash balances invested in short-term interest bearing instruments. Higher average interest rates during the fiscal 2006 periods resulted in the increase
over the comparable periods in fiscal 2005, which was partially offset by the lower amounts invested.

Interest expense was $3.8 million and $12.1 million
for the three and nine months ended July 1, 2006, respectively, compared to $5.1 million and $18.4 million for the comparable periods in 2005, a decrease of 24.3% and 34.1%, respectively. Lower average long-term debt balances and higher
interest amounts capitalized into fixed asset projects during the three and nine months ended July 1, 2006 were the principal factors leading to the decrease in interest expense.

In connection with the repayment of $70 million principal amount of the senior notes with a portion of the proceeds from our initial public offering completed on October 13, 2004, the Company incurred a $7.2
million prepayment interest charge in the first quarter of fiscal 2005. In addition, deferred financing costs of $1.8 million and 35% of the unamortized discount on the issuance of the senior notes of $1.0 million were written off in the first
quarter of fiscal 2005.

Miscellaneous, net was income of $1.2 million and $3.8 million for the three and nine months ended July 1, 2006,
respectively, compared to $1.2 million and $4.2 million for the comparable periods in 2005. These amounts resulted principally from the income from a hog production joint venture of $1.5 million for the nine months ended July 1, 2006 as
compared to $2.7 million for the nine months ended July 2, 2005. Lower hog market prices due to oversupply in the animal protein industry caused this decline.



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Income Tax Expense (Benefit)

For the three and nine months ended July 1, 2006, our combined federal and state effective income tax rates used for purposes of calculating the tax benefit on the loss before income taxes were 46.3% and 45.7%, respectively. The income
tax rates reflect income taxes at statutory rates adjusted principally for available tax credits, exempt interest income and the deductibility of state income taxes for federal tax purposes. Due to the net loss, these items resulted in a higher
benefit rate as compared to the statutory rates. The income tax benefit for the nine months ended July 1, 2006 was also favorably impacted by the release of a tax contingency reserve of $0.9 million.

Other

The Company has initiated the implementation of a new
Enterprise Resource Planning (ERP) system in order to better manage the growth and increasing complexity of our business and to enhance the effectiveness and efficiency of our accounting and manufacturing processes. Certain costs that
are incurred in the procurement and development of this ERP system will be capitalized in accordance with SOP 98-1 (Accounting for the Costs of Computer Software Developed or Obtained for Internal Use). Capitalized costs to date include
fees paid for the purchase of software, fees paid to third parties to customize the software during the application development stage, and payroll and payroll related costs for employees who are directly associated with and devote time to the
software project and who are working on software development tasks such as design requirements, development, infrastructure and testing. General and administrative costs and overhead costs are not capitalized. As of July 1, 2006, total
capitalized software project costs for the ERP system were approximately $2.8 million. The total project is projected to cost approximately $5.0 million. Amortization will be recorded on a straight-line basis over the systems estimated useful
life once the project is substantially complete and ready for its intended use, which is planned for the fourth quarter of fiscal year 2006 for the accounting/financial application and in fiscal 2007 for the manufacturing application.

LIQUIDITY AND CAPITAL RESOURCES

Our primary
sources of liquidity are cash flow provided from our operations and our senior credit facility. In fiscal 2005, the Company repaid $158.3 million in long-term debt and achieved a negative net debt position whereby our cash and cash
equivalent balances exceeded outstanding long-term debt ($153.6 million in cash and cash equivalents versus $145.2 million in total long-term debt, including current maturities, as of October 1, 2005). We repaid approximately $70 million of the
$200 million principal amount of our senior notes with a portion of the proceeds from the Companys initial public offering completed in October 2004 with the other debt payments made from cash provided by operating activities in fiscal 2005.
As of July 1, 2006, cash and cash equivalents declined from $153.6 million at October 1, 2005 to $95.6 million resulting in a net debt position of $48.5 million ($144.1 million in total long-term debt, including current maturities, less
the $95.6 million in cash and cash equivalents). This compares to a net debt position of $10.7 million as of the end of the third quarter in fiscal 2005. The decline in cash and cash equivalents was principally due to operating losses and capital
expenditures.

In December 2005, we amended our senior credit facility to increase its revolving line of credit to an aggregate principal amount of $250.0
million, eliminate the sub-limit on the aggregate stated amount of letters of credit that may be issued under the senior credit facility, decrease the interest rates and fees, reduce the number of financial covenants and ratios and relax the
affirmative and negative covenants. The term of the senior credit facility is five years. The senior credit facility is secured by a security interest in substantially all of Gold Kists assets, including all present and future accounts
receivable and inventory, property, plant and equipment, intangible assets and the stock of certain subsidiaries. Borrowings under the senior credit facility are limited to the lesser of $250.0 million and an amount determined by reference to a
collateral coverage ratio that is a function of a percentage of the book value of our accounts receivable, inventory and property, plant and equipment.



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Borrowings under the senior credit facility bear interest at our option either at LIBOR or an alternate base rate (which
is equal to the greater of the rate announced by the agent bank as its base rate or its federal funds rate plus 0.5%), in each case subject to an applicable margin based upon our ratio of total debt to earnings before interest, taxes, depreciation
and amortization, or EBITDA. The margin is between 1.00% and 2.00% for LIBOR loans and between 0.00% and 0.75% for alternate base rate loans.

We are
subject to certain affirmative and negative covenants contained in the senior credit facility, including, but not limited to, covenants that restrict, subject to specified exceptions, dividends and certain other restricted payments; the incurrence
of additional indebtedness and other obligations and the granting of additional liens; loans; extension of credit and guarantees; mergers, acquisitions, investments, and disposition of assets or stock; capital expenditures; and use of proceeds from
borrowings under the senior credit facility and excess cash flow. The senior credit facility also includes covenants relating to compliance with certain laws, payments of taxes, maintenance of insurance and financial reporting.

On May 8, 2006, the Company amended its Fixed Charge Coverage Ratio (FCCR) to provide additional flexibility through the addition of a minimum
availability calculation. Under the amendment, the Company does not have to maintain the FCCR at greater than 1.25 to 1.00 so long as availability under the senior credit facility is greater than $75 million and the amount of collateral coverage as
defined in the credit agreement, less aggregate amounts outstanding under the senior credit facility, including letter of credit obligations, is greater than $75 million.

As of July 1, 2006, we had approximately $183.2 million available for borrowing and $66.8 million of letters of credit outstanding under the facility. We were in compliance with all applicable loan covenants
under our senior notes and senior credit facility at July 1, 2006.

For the nine months ended July 1, 2006, cash provided by operating activities
was $16.9 million, compared to cash provided by operating activities of $139.3 million for the nine months ended July 2, 2005. The net loss of $20.9 million for the nine months ended July 1, 2006 as compared to the net income of $87.3
million for the nine months ended July 2, 2005 was the principal factor for the $122.5 million decrease in cash provided by operating activities. Noncash expenses and reduced levels of receivables and inventories due to lower values, improved
turnover and inventory management provided $78.4 million in operating cash flow for the nine months ended July 1, 2006. This more than offset the fiscal 2006 net loss for such nine-month period, the reduction in income taxes payable due to tax
payments on fiscal 2005 earnings and the tax benefit of the loss for the first nine months of fiscal 2006, and other changes totaling $61.5 million resulting in the positive cash flow from operating activities of $16.9 million for the nine months
ended July 1, 2006.

Net cash used in investing activities for the first nine months of fiscal 2006 was $72.1 million compared to $51.3 million for
the comparable period in 2005. The $20.8 million increase in net cash used in investing activities was due to higher capital expenditures for the nine months ended July 1, 2006 as compared to the comparable period in 2005. We expect capital
expenditures to approximate $95.0 million during fiscal 2006. This includes expenditures for expansion of further processing capacity, technological advances in our poultry production and processing operations and expanded chill pack capacity. In
addition, capital expenditures include other asset improvements and necessary replacements. Management plans to fund fiscal 2006 capital expenditures and related working capital needs with existing cash balances and cash expected to be provided from
operations or borrowings from our senior credit facility.



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Cash used in financing activities for the nine months ended July 1, 2006 was $2.8 million compared to $66.3 million
for the comparable period in 2005. The cash used in financing activities in the nine months ended July 2, 2005 reflects the initial public offering transaction, the disbursement of proceeds to former members and equity holders and the repayment
of debt, principally repayment of $70.0 million of the senior notes. At July 1, 2006, the Company had cash of $83.4 million invested in short term interest-bearing instruments out of the total cash and cash equivalents of $95.6 million.

Working capital and stockholders equity were $287.1 million and $434.3 million, respectively, at July 1, 2006 as compared to $324.3 million and
$450.7 million, respectively, at October 1, 2005. The decrease in working capital was due to the lower carrying values of current assets and the cash used to fund operating losses and capital expenditures partially offset by lower levels of
current liabilities. The decrease in stockholders equity reflected the net loss for the nine months ended July 1, 2006.

It is expected that a
higher discount rate assumption will be selected during our annual actuarial review of postretirement benefit plans. This higher discount rate should result in a decrease of the accrued postretirement benefit plans liability for the year ending
September 30, 2006 as compared to the year ended October 1, 2005. Other actuarial gains and losses will also affect the accrued postretirement benefit plans liability for the year ending September 30, 2006.

We believe cash on hand, cash equivalents and cash expected to be provided from operations, in addition to borrowings available under our amended senior credit facility,
will be sufficient to maintain cash flows adequate for our operational objectives during fiscal 2006.

Important Considerations Related to
Forward-Looking Statements

The statements contained in this report regarding our future financial and operating performance and results, business
strategy, market prices, future commodity price risk management activities, plans and forecasts and other statements that are not historical facts are forward-looking statements, as defined in Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current assumptions, expectations and projections about future events.

We use the words may, will, expect, anticipate, estimate, believe, continue,
intend, should, would, could, plan, budget and other similar words to identify forward-looking statements. You should read statements that contain these words carefully because
they discuss future expectations, contain projections of results of operations or of our financial condition and/or state other forward-looking information. These statements may also involve risks and uncertainties that could cause our
actual results of operations or financial condition to materially differ from our expectations, including but not limited to:



| |  |  | market conditions for finished products (including further processed products), including competitive factors and the supply and pricing of alternative meat proteins;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | disease outbreaks, including AI, affecting broiler production and/or marketability of our products;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | fluctuations in the cost and availability of raw materials, such as feed ingredients;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | access to foreign markets together with foreign economic conditions;
| | - |  | --------------------------------------------------------------------



| |  |  | changes in the availability and relative costs of labor and contract growers;
| | - |  | -----------------------------------------------------------------------------



| |  |  | immigration legislation that could increase the costs of our doing business or cause us to change the way in which we do business;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | problems caused by the implementation of our new ERP software;
| | - |  | --------------------------------------------------------------



| |  |  | effectiveness of our sales and marketing programs;
| | - |  | --------------------------------------------------



| |  |  | effectiveness of our capital expenditures and other cost-saving measures;
| | - |  | -------------------------------------------------------------------------



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| |  |  | contamination of products, which can lead to product liability and product recalls;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | acquisition activities and the effect of completed acquisitions;
| | - |  | ----------------------------------------------------------------



| |  |  | pending or future litigation;
| | - |  | -----------------------------



| |  |  | the ability to obtain additional financing or make payments on our debt;
| | - |  | ------------------------------------------------------------------------



| |  |  | regulatory developments, industry conditions and market conditions; and
| | - |  | -----------------------------------------------------------------------



| |  |  | general economic conditions.
| | - |  | ----------------------------

A detailed discussion of these and other
risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section entitled Risk Factors in Part II, Item 1A, of this report.

Any forward-looking statements in this report are based on certain assumptions and analysis made by us in light of our experience and perception of historical trends,
current conditions, expected future developments and other factors that we believe are appropriate under the current circumstances. However, events may occur in the future that we are unable to accurately predict, or over which we have no control.
Forward-looking statements are not a guarantee of future performance and actual results or developments may differ materially from expectations. You are therefore cautioned not to place undue reliance on such forward-looking statements. We do not
intend to update any forward-looking statements contained in this document. When considering our forward-looking statements, also keep in mind the risk factors and other cautionary statements in this report and in other reports that we file with the
Securities and Exchange Commission.

Contractual Obligations

Obligations under long-term debt, non-cancelable operating leases, feed ingredient and energy purchase commitments and construction contracts at July 1, 2006 are as follows (in millions):



|                                                   |  |                        |       |                 |   |             |  |             |      |               |   |      |  |   |      
|-------------------------------------------------- |  | ---------------------- | ----- | --------------- | - | ----------- |  | ----------- | ---- | ------------- | - | ---- |  | - | -----
|                                                   |  | Payments Due by Period
|                                                   |  | Total                  |       | Less than1 year |   | 1  3 years |  | 3  5 years |      | After 5 years
|Debt obligations:                                  |  |                        |       |                 |   |             |  |             |      |               |   |      |  |   |      
|Principal payments(a)                              |  | $                      | 144.1 |                 | $ | 2.0         |  | $           | 6.4  |               | $ | 2.2  |  | $ | 133.5
|Interest payments(b)                               |  |                        | 118.1 |                 |   | 15.2        |  |             | 29.7 |               |   | 29.0 |  |   | 44.2 
|Operating leases(c)                                |  |                        | 57.1  |                 |   | 16.2        |  |             | 26.5 |               |   | 12.6 |  |   | 1.8  
|Feed ingredient and energy purchase commitments(d) |  |                        | 104.2 |                 |   | 104.2       |  |             |     |               |   |     |  |   |     
|Construction contracts(e)                          |  |                        | 16.5  |                 |   | 16.5        |  |             |     |               |   |     |  |   |     
|                                                   |  |                        |       |                 |   |             |  |             |      |               |   |      |  |   |      
|Total                                              |  | $                      | 440.0 |                 | $ | 154.1       |  | $           | 62.6 |               | $ | 43.8 |  | $ | 179.5
|                                                   |  |                        |       |                 |   |             |  |             |      |               |   |      |  |   |      

---

|(a) | Excludes $66.8 million in total letters of credit outstanding related to normal business transactions.
|--- | ------------------------------------------------------------------------------------------------------

|(b) | Interest payments include amounts for fixed rate debt as outlined in Note 7 of Notes to Consolidated Financial Statements based on the expected payment dates.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | Operating lease commitments as of October 1, 2005. There have not been significant changes during the nine months ended July 1, 2006.
|--- | -------------------------------------------------------------------------------------------------------------------------------------

|(d) | Feed ingredient purchase commitments include both priced and unpriced contracts in the ordinary course of business. Unpriced feed ingredient commitments are priced at market as of
July 1, 2006 for the month of delivery. Energy purchase commitments are priced at the contract amount.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(e) | Represents unexpended amounts on construction and related contracts.
|--- | --------------------------------------------------------------------

|(f) | We committed to invest in a joint venture with Archer-Daniels-Midland Company (ADM) for the ownership and operation of certain grain elevators. Our initial investment for a fifty
percent (50%) interest in the joint venture of $5.1 million was made on August 1, 2006. We expect to make capital expenditures in fiscal 2007 to upgrade certain of our facilities in connection with the joint venture.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(g) | We contract with broiler, breeder, pullet, layer, hog and nursery pig producers. Although these contracts are subject to acceptable grower performance on a flock-to-flock or
herd-to-herd basis, the contracts contemplate grow out activity to continue through the periods covered by the grower contracts. Annual grower pay has averaged approximately $240.0 million per year over the past two fiscal years with the actual
amounts determined by relative performance and other factors. Grower payments have not been included in the contractual obligations table due to the inherent uncertainty of the future amounts.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Critical Accounting Policies

There were no material changes in the
Companys critical accounting policies during the quarter ended July 1, 2006.

Effects of Inflation

The major factor affecting our net sales and cost of sales is the change in 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 can, however,
adversely affect our operating costs such as labor, energy and material costs.

New Accounting Pronouncements

In October 2004, the American Jobs Creation Act (AJCA) was signed into law. The AJCA allows for a federal income tax deduction for a percentage of income generated from
certain domestic production activities. The Companys production activities will qualify for the deduction. Based on the effective date of the AJCA, the Company was eligible for this deduction in the first quarter of fiscal 2006. Additionally,
in December 2004, the FASB issued FASB Staff Position 109-1, Application of SFAS No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004
(FSP 109-1). FSP 109-1, which was effective upon issuance, states the deduction under this provision of the AJCA should be accounted for as a special deduction in accordance with SFAS 109. The Companys benefit is not significant for the first
nine months of fiscal 2006 due to the net loss for the period.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections  a replacement of APB Opinion No. 20 and FASB Statement No. 3. This Statement applies to all voluntary changes in accounting principle and requires retrospective application to previously issued financial statements
as if that principle had always been used, unless it is impracticable to do so. The requirements are effective for accounting changes made in fiscal years beginning after December 15, 2005.

In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, which defines the threshold for recognizing the
benefits or liabilities of tax return positions in a companys financial statements. The Interpretation is effective as of the beginning of the first fiscal year beginning after December 15, 2006. The Company has not yet determined the
impact of this pronouncement, however, the Company will begin to assess its tax return positions in order to apply the provisions of the new Interpretation in its 2008 fiscal year beginning September 30, 2007.



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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

Market Risk

Our principal market risks are exposure to changes in broiler and commodity prices and interest rates on borrowings. Although we have international sales and related
accounts receivable from foreign customers, there is no foreign currency exchange risk, as all sales are denominated in U.S. dollars.

Commodities Risk

We are a purchaser of certain agricultural commodities used for the manufacture of poultry feeds. We use commodity futures and options for economic
hedging purposes to reduce the effect of changing commodity prices. In addition, we enter into forward purchase contracts to ensure a sufficient supply of our feed ingredient inventories. Feed ingredient futures and option contracts, primarily corn
and soybean meal, are accounted for at fair value. 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 our senior credit facility limit the
use of forward purchase contracts and commodities futures and options transactions. As of July 1, 2006, the notional amounts and fair value of our outstanding commodity futures and options positions were not material.

Feed ingredient purchase commitments for corn and soybean meal in the ordinary course of business were $101.5 million at July 1, 2006. These commitments include
both priced and unpriced contracts. Unpriced feed ingredient commitments are valued at market for the month of delivery as of July 1, 2006.

Based on
estimated annual feed usage, a 10% increase in the weighted average cost of feed ingredients would increase our annualized cost of sales by an estimated $60.0 million to $70.0 million.

Interest Rate Risk

We have exposure to changes in interest rates on certain debt obligations. The interest rates on
our amended senior credit facilities fluctuate based on the London Interbank Offered Rate (LIBOR). Assuming the $250.0 million revolver was fully drawn, a 1% increase in LIBOR would increase annual interest expense by approximately $2.5 million.

ITEM 4. CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of the
Companys management, including the President and Chief Executive Officer (CEO), and the Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Companys disclosure controls and
procedures pursuant to Exchange Act Rule 13a-15. Based on that evaluation, the Companys management, including the CEO and the CFO, concluded that as of the end of the period covered by this report the Company maintained disclosure controls and
procedures that are effective in providing reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Commissions rules
and forms, and that such information is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. There has not been any change in the Companys internal
control over financial reporting that occurred during the Companys most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting.



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We do not expect that our disclosure controls and procedures will prevent all errors and all fraud. A system of controls
and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the system are met. Because of the limitations in all such systems, no evaluation can provide absolute assurance
that all control issues and instances of fraud, if any, within the Company have been detected. Furthermore, the design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how unlikely. Because of these inherent limitations in a cost-effective system of controls and procedures,
misstatements or omissions due to error or fraud may occur and not be detected.

Part II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In addition to the matters set forth below, we are subject to various other legal proceedings
and claims which arise in the ordinary course of business. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect our financial position or results of operations.

Cody, et al v. Gold Kist et al.Four female employees of our Corporate Office Information Services Department, or Corporate I/S Department, filed a sex
discrimination suit against Gold Kist in the United States District Court for the Northern District of Georgia asserting gender based claims about employment and promotion decisions in the Corporate I/S Department. The four complainants sought class
certification for their claims of gender discrimination, unspecified monetary damages and injunctive relief. The U.S. District Court, in an order entered June 13, 2005, denied the motion of the plaintiffs to certify the litigation as a class
action. The courts ruling, for which the plaintiffs did not seek an interlocutory appeal, means that the litigation will not proceed as a class action and will be litigated as individual claims of the four named plaintiffs. We continue to
intend to defend the litigation vigorously and believe that this lawsuit will not have a material adverse effect on our financial condition or results of operations.

Nicholas Leech v. Gold Kist Inc.On November 3, 2005, an employee of the Company filed the case of Nicholas Leech v. Gold Kist Inc., in the United States District Court for the Northern District of
Alabama claiming that we had violated certain provisions of the Fair Labor Standards Act, or FLSA. The suit alleged that we failed to pay the Plaintiff for time he spent (i) waiting in line before each shift to receive certain clothing and
equipment that he wears while working, (ii) putting on that clothing and equipment, and (iii) taking off the clothing and equipment, and turning it back in, after each shift ends. This matter was settled with the plaintiff in April 2006.

The Department of Labor has recently contacted many members of the U.S. poultry industry, including Gold Kist, who were included in a wage and hour audit
initiated by the U.S. Department of Labor in 2000. The Department of Labor has been of the opinion that many poultry companies have not been accurately compensating employees for the time spent on such activities as donning and doffing work
equipment. Following the recent Supreme Court decision in the IBP/Alvarez case, the Department of Labor has reasserted its audit concerns in this area. We have been reviewing our operations and pay practices to determine the appropriate response to
the Department of Labor. Prior to being contacted by the Department of Labor, we designed plans which were implemented on May 1st to modify practices at our facilities to address concerns described in the IBP/Alvarez case and the Department of
Labor audit. As of July 1, 2006, we have not reserved any amounts in this matter because we do not believe a loss is considered probable or estimable.



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ITEM 1A. RISK FACTORS

Industry cyclicality, especially fluctuations in the supply of broiler products, affects the
prevailing market price of broiler products, our sales and our earnings.

Profitability in the broiler industry is materially affected by the prevailing
price of broiler products, which is primarily determined by supply and demand factors in the market. In recent years, the profitability of companies in the broiler industry has been adversely affected from time to time by excess supplies of broiler
products in the market. As a result of the efficiencies in the U.S. broiler market, even modest increases in the broiler supply in the United States can significantly decrease the market prices at which we can sell our broiler products. Such
increases in domestic supply can arise, and have occurred in late fiscal 2005 and in fiscal 2006 as a result of unanticipated decreases in export demand, among other reasons. Given the perishable nature of broiler products, we are unable to manage
inventories to address any short-term changes in market prices. As a result, from time to time we are forced to sell our broiler products at a loss. Because we sell a relatively small percentage of our products under fixed-price contracts, increases
in the overall supply of broiler products and any related decrease in broiler prices adversely affect our operating results. This has resulted and will continue to result in fluctuations in our earnings. Market prices for broiler products reached
their highest levels since 1999 during our 2004 fiscal year, but declined during fiscal 2005 and the nine months ended July 1, 2006.

Outbreaks of
livestock diseases, particularly an outbreak of avian influenza among humans, could adversely affect our business.

Events beyond our control, such as
the outbreak of disease, could significantly restrict our ability to conduct our operations and adversely affect our business. An outbreak of disease could result in governmental restrictions on the import and export of our fresh broiler products,
pork or other products to or from our suppliers, facilities or customers, or require us to destroy one or more of our flocks. This could result in the cancellation of orders by our customers and create adverse publicity that may have a material
adverse effect on our ability to market our products successfully and on our business, reputation and prospects. For example, because several chickens in Delaware and Texas tested positive for avian influenza in 2004, several countries imposed
import bans and the infected flocks were destroyed. If a similar outbreak were to occur in areas where our contract growers are located, we may be forced to destroy our flocks, even if those flocks were not infected. See Foreign
embargos, decreased export demand, oversupply of broiler products and competing products and bans on exported chicken and livestock would have an adverse effect on our business.

These risks are particularly acute if an outbreak of a livestock disease, such as avian influenza, were to occur among humans. Although avian influenza is not spread through the consumption of chicken, increased media
attention regarding the risks of avian influenza or consumer panic in the event of a serious outbreak of avian influenza among humans could result in reduced demand for our products. In fact, avian influenza that has occurred internationally in 2005
and 2006 has caused demand for exports to affected countries to decrease. In addition, the risk of an avian influenza outbreak or pandemic flu among humans or the perceived risk of such an outbreak could result in aggressive action by the
governments of the United States and the countries to which we export our products to limit the spread of such an outbreak. Government action in response to an avian influenza outbreak among humans could adversely affect our ability to export our
products and impose burdensome regulations on our operations or those of our contract growers, which would in turn increase our costs of doing business.



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Fluctuations in commodity prices of feed ingredients materially affect our earnings.

A significant portion of the cost of producing our broiler products consists of amounts spent in connection with purchasing corn and soybean meal, our primary feed
ingredients. As a result, fluctuations in feed ingredient prices materially affect our earnings. While prices of these items increase from time to time, we may not be able to pass through any increase in the cost of feed ingredients to our
customers. High feed ingredient prices have had a material adverse effect on our operating results in the past. We periodically seek, to the extent available, to enter into advance purchase commitments or commodity futures contracts for the purchase
of a portion of our feed ingredients in an effort to manage our feed ingredient costs. However, the use of such instruments may not be successful in limiting our exposure to market fluctuations in the cost of feed and may limit our ability to
benefit from favorable price movements.

Furthermore, the production of feed ingredients is positively or negatively affected by weather patterns
throughout the world, the global level of supply inventories and demand for feed ingredients, the availability and cost of transportation, as well as the agricultural policies of the United States and foreign governments. In particular, weather
patterns often change agricultural conditions in an unpredictable manner. A sudden and significant change in weather patterns could affect the supply of feed ingredients, as well as both the industrys and our ability to obtain feed
ingredients, grow broilers and deliver products. Additionally, we believe that large scale speculators in the futures markets can influence prices for feed ingredients. Any such change or influence could have a material negative impact on our
business and results of operations.

Foreign embargos, decreased export demand, oversupply of broiler products and competing products and bans on
exported chicken and livestock would have an adverse effect on our business.

We are an exporter to Russia, Eastern Europe, Commonwealth of Independent
States, Asia, the Pacific Rim, the Middle East, Africa, South and Central America, Mexico and the Caribbean Islands. Any decrease in exports to foreign countries based on embargos, decreased demand, oversupply of broiler products or competing
products or bans on exported chicken may have an adverse effect on our ability to export chicken and other products. Such occurrences would also likely increase the supply of broilers and competing products in the United States, which would likely
result in lower prices for broiler products and could adversely affect our business. For example, in 2002 and 2003, export sales to Russia declined due to an embargo on certain imported meats, leading to a domestic oversupply and a decrease in the
market price of chicken. Russia has implemented import quotas on chicken and other meats that reduce U.S. broiler imports to approximately 70% of 2002 levels. In addition, for several months in 2004, China, Japan and several smaller chicken
importing countries banned all imports of broiler products from the United States due to several chickens in Delaware and Texas testing positive for avian influenza. Also as a result of this event, Russia and Hong Kong banned the import of broiler
products from Delaware and Texas for a period of time. In 2005 and 2006, concerns regarding avian influenza have decreased export demand in many of the countries to which we export our products. Any implementation of similar bans in the future or
the implementation of quotas or other import restrictions would adversely affect our domestic and export sales and our results of operations.

Immigration legislation could cause our costs of doing business to increase or cause us to change the way in which we do business.

Legislation regarding immigration is currently being considered by the United States Congress. The legislation currently being considered by the U.S. Senate differs substantially from the legislation that was passed by the U.S. House of
Representatives. In addition to the federal legislation, some states are considering, and the State of Georgia, where we have operations, has passed, immigration legislation. While we believe the new Georgia legislation will not alter the way we
conduct our business, the details of the regulations that will implement the law have not been finalized, including the documentation required for an employee to prove he or she is eligible



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for employment. We currently participate in the United States government Basic Pilot Program for verifying a persons employment eligibility, but that
government program may not be the approved method for employment eligibility verification under the Georgia law. If proposed federal immigration legislation becomes law or if states in which we do business enact and enforce immigration laws, such
laws may contain provisions that could make it more difficult or costly for Gold Kist to hire legal immigrant workers. In such case, we may incur additional costs to run our business or may have to change the way we conduct our operations, either of
which could have a material adverse effect on our business, operating results and financial condition.

We may experience difficulties with the
implementation of our Enterprise Resource Planning (ERP) software and related manufacturing process changes.

We are implementing a new ERP
system that includes accounting, material resource planning (MRP), production planning, inventory management and certain other functions. This is a complex, multi-step implementation. If there are problems with the implementation, there could be
significant disruption in plant processes causing inefficient production, delays in financial reporting and Sarbanes-Oxley 404 compliance issues, which could adversely affect our operating results.

Significant competition in the broiler industry with other vertically integrated broiler companies, especially companies with greater resources, may make us unable to
compete successfully in this industry, which would adversely affect our business.

The broiler industry is highly competitive. Some of our competitors
have greater financial and marketing resources than we do. In general, the competitive factors in the U.S. broiler industry include price, product quality, brand identification, breadth of product line and customer service. Competitive factors vary
by major market. In the foodservice market, we believe competition is based on consistent quality, product development, customer service and price. In the U.S. retail market, we believe that competition is based on product quality, brand awareness,
customer service and price. We also face competition from non-vertically integrated further processors with regard to our further-processed products. The highly competitive conditions in the broiler industry could force us to reduce prices for our
products, which would adversely affect our results of operations and financial condition.

The loss of one of our large customers could have a material
adverse effect on our results of operations.

Sales to our top ten customers represented approximately 46.6% of our net sales during the third fiscal
quarter ended July 1, 2006 and during such period, approximately 14.9% of our net sales were to our largest customer. We do not have long-term contracts with any of our major customers and, as a result, any of our major customers could
significantly decrease or cease their business with us with limited or no notice. If we lost one or more of our major customers, or if one or more of our major customers significantly decreased its purchases from us, our business, sales and results
of operations could be materially and adversely affected.

We have been, and may in the future be, subject to claims and liabilities under
environmental, health, safety and other laws and regulations, which could be significant.

Our operations are subject to various federal, state, local
and foreign environmental, health, safety and other laws and regulations, including those governing air emissions, wastewater discharges and the use, storage, treatment and disposal of hazardous materials. The applicable requirements under these
laws are subject to amendment, to the imposition of new or additional requirements and to changing interpretations by governmental agencies or courts. In addition, we anticipate increased regulation by various governmental agencies concerning food
safety, the use of medication in feed formulations, the disposal of animal by-products and wastewater discharges. Furthermore, business operations currently conducted by us or previously conducted



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by others at real property owned or operated by us, business operations of others at real property formerly owned or operated by us and the disposal of waste
at third party sites expose us to the risk of claims under environmental, health and safety laws and regulations. For example, we have received notice letters designating us as a potentially responsible party for alleged environmental contamination
at a site that we previously owned. Other properties we own or owned in the past have been designated for cleanup under federal and state environmental remediation statutes, which could result in further liabilities to us. In addition, we are
subject to potential claims for residual environmental liabilities arising out of our sale of our Agri-Services business in 1998. The agreements related to our disposition of certain properties require that we indemnify the buyer of such properties
with regard to any associated environmental liabilities.

The Department of Labor has recently contacted many members of the U.S. poultry industry,
including Gold Kist, who were included in a wage and hour audit initiated by the U.S. Department of Labor in 2000. The Department of Labor has been of the opinion that many poultry companies have not been accurately compensating employees for the
time spent on such activities as donning and doffing work equipment. Following the recent Supreme Court decision in the IBP/Alvarez case, the Department of Labor has reasserted its audit concerns in this area. We have been reviewing our operations
and pay practices to determine the appropriate response to the Department of Labor. Prior to being contacted by the Department of Labor, we designed plans which were implemented on May 1st to modify practices at our facilities to address
concerns described in the IBP/Alvarez case and the Department of Labor audit. As of July 1, 2006, we have not reserved any amounts in this matter because we do not believe a loss is considered probable or estimable.

We could incur material costs or liabilities in connection with claims related to any of the foregoing. The discovery of presently unknown environmental conditions,
changes in environmental, health, safety and other laws and regulations, enforcement of existing or new laws and regulations and other unanticipated events could give rise to expenditures and liabilities, including fines or penalties, that could
have a material adverse effect on our business, operating results and financial condition.

If our products become contaminated, we may be subject to
product liability claims and product recalls.

Our products may be subject to contamination by disease producing organisms, or pathogens, such as
Listeria monocytogenes, Salmonella and generic E. coli. These pathogens are found generally in the environment and, therefore, there is a risk that they, as a result of food processing, could be present in our processed products. These pathogens can
also be introduced to our products as a result of improper handling at the further processing, foodservice or consumer level. These risks may be controlled, but may not be eliminated, by adherence to good manufacturing practices and finished product
testing. We have little, if any, control over proper handling procedures once our products have been shipped for distribution. Even if a product is not contaminated when it leaves our facility, illness and death may result if the pathogens are not
also eliminated at the further processing, foodservice or consumer level. Increased sales of further-processed products could lead to increased risks in this area. Even an inadvertent shipment of contaminated products is a violation of law and may
lead to increased risk of exposure to product liability claims, product recalls (which may not entirely mitigate the risk of product liability claims) and increased scrutiny by federal and state regulatory agencies and may have a material adverse
effect on our business, reputation and prospects.

Increased water, energy and gas costs would increase our expenses and reduce our profitability.

We require a substantial amount, and as we expand our business we will require additional amounts of water, electricity and natural gas to produce and
process our broiler products. The prices of water, electricity and natural gas fluctuate significantly over time, and prices for natural gas have recently been at historically high levels, partially due to supply disruptions caused by Hurricanes
Katrina and Rita. One of the primary competitive factors in the U.S. broiler market is price, and we may not be able to pass on increased costs of production to our customers. As a result, increases in the cost of water, electricity or natural gas
could substantially harm our business and results of operations.



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Increased costs of transportation would negatively affect our profitability.

Our transportation costs are a material portion of the cost of our products. We primarily ship our products and receive our inputs via truck and rail and rely on third
party transportation companies for the delivery of most of our products and inputs. The costs associated with the transportation of our products and inputs fluctuate with the price of fuel, the costs to our transportation providers of labor and the
capacity of our transportation sources. Increases in costs of transportation have and could in the future negatively affect our profitability.

We are
exposed to risks relating to product liability, product recalls, property damage and injury to persons for which insurance coverage is expensive, limited and potentially inadequate.

Our business operations entail a number of risks, including risks relating to product liability claims, product recalls, property damage and injury to persons. Insurance for these risks is expensive and difficult to
obtain, and we may not be able to maintain this insurance in the future on acceptable terms, in amounts sufficient to protect us against losses due to any such events or at all. Moreover, our insurance coverage may not adequately protect us from all
of the liabilities and expenses that we incur in connection with such events. If we were to suffer a loss that is not adequately covered by insurance, our results of operations and financial condition would be adversely affected.

Any acquisition we make could disrupt our business and harm our financial condition.

We may seek to expand our business through the acquisition of companies, technologies, products and services from others. Acquisitions may involve a number of problems, including:



| |  |  | difficulty integrating acquired technologies, operations and personnel with our existing business;
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | diversion of management attention in connection with negotiating acquisitions and integrating the businesses acquired;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | exposure to unforeseen liabilities of acquired companies; and
| | - |  | -------------------------------------------------------------



| |  |  | the need to obtain additional debt financing for any acquisition.
| | - |  | -----------------------------------------------------------------

We may
not be able to address these problems and successfully develop these acquired companies or businesses into profitable units of Gold Kist.

The loss of
key members of our management may adversely affect our business.

We believe our continued success depends on the collective abilities and efforts of
our senior management. We do not maintain key person life insurance policies on any of our employees. The loss of one or more key personnel could have a material adverse effect on our results of operations. Additionally, if we are unable to find,
hire and retain needed key personnel in the future, our results of operations could be materially and adversely affected.

The inability to maintain
good relations with our employees could adversely affect our business.

As of July 1, 2006, we had approximately 16,500 employees, approximately
2,500 of which are covered by collective bargaining agreements and approximately 575 of which are members of labor unions. We may be unable to maintain good relationships with these labor unions or to successfully negotiate new collective



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bargaining agreements on satisfactory terms in the future. If we fail to maintain good relationships with our employees generally or with such labor unions
or fail to negotiate satisfactory collective bargaining agreements, or if non-unionized operations were to become unionized, we could face labor strikes or work stoppages or other activity that could adversely affect our business and operations.

The Public Health Security and Bioterrorism Preparedness and Response Act of 2002 could increase our costs of doing business.

The Public Health Security and Bioterrorism Preparedness and Response Act of 2002, which we refer to as the Bioterrorism Act, includes a number of provisions designed to
help guard against the threat of bioterrorism, including new authority for the Secretary of Health and Human Services to take action to protect the nations food supply against intentional contamination. The U.S. Food and Drug Administration,
or FDA, is responsible for developing and implementing these food safety measures. The FDA has been in the process of issuing new rules, and it is difficult for us to predict what impact they might have on our business. Compliance with these rules
may increase our costs of doing business by increasing the amounts that we spend on plant security and product safety. If we are unable to pass these higher costs on to our customers, our results of operations and financial condition may be
adversely affected.

ITEM 5. OTHER INFORMATION

On May 8, 2006, the Company amended its Fifth Amended and Restated Credit Agreement to
provide additional flexibility to the fixed charge coverage ratio. The amendment is described in more detail in the Liquidity and Capital Resources section of Managements Discussion and Analysis of Financial Condition and Results of
Operations.



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ITEM 6. EXHIBITS

Exhibits



|                                     |  |                                                  
|------------------------------------ |  | -------------------------------------------------
|Designation of Exhibitin This Report |  | Description of Exhibit                           
|31                                   |  | Section 302, Sarbanes- Oxley Act, Certifications.
|                                     | 
|32*                                  |  | Section 906, Sarbanes- Oxley Act, Certifications.



---

|* | This exhibit is furnished to the Securities and Exchange Commission and is not deemed to be filed.
|- | --------------------------------------------------------------------------------------------------



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                    |  |                                        
|------------------- |  | ---------------------------------------
|                    |  | GOLD KIST INC.                         
|                    |  | (Registrant)                           
|                    | 
|Date August 9, 2006 |  | /s/ John Bekkers                       
|                    |  | John Bekkers                           
|                    |  | Chief Executive Officer                
|                    |  | (Principal Executive Officer)          
|                    | 
|Date August 9, 2006 |  | /s/ Stephen O. West                    
|                    |  | Stephen O. West                        
|                    |  | Chief Financial Officer, Vice President
|                    |  | (Principal Financial Officer)          



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