SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended MARCH 29, 1997
Commission file number 1-9273
PILGRIM'S PRIDE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-1285071
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 SOUTH TEXAS, PITTSBURG, TX 75686-0093
(Address of principal executive offices) (Zip code)
(903) 855-1000
(Telephone number of principle executive offices)
NOT APPLICABLE
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 periods
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
COMMON STOCK $.01 PAR VALUE--- 27,589,250 SHARES AS OF MAY 7, 1997
INDEX
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited):
Condensed consolidated balance sheets:
March 29, 1997 and September 28, 1996
Consolidated statements of income (loss):
Three months and six months ended March 29, 1997 and March 30, 1996
Consolidated statements of cash flows:
Six months ended March 29, 1997 and March 30, 1997
Notes to condensed consolidated financial statements--March 29, 1997
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
PART I. FINANCIAL INFORMATION
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ITEM 1: FINANCIAL STATEMENTS :
March 29, September 28,
1997 1996
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 7,717 $ 18,040
Trade accounts and other receivables,
less allowance for doubtful accounts 69,256 65,887
Inventories 137,926 136,866
Deferred income taxes 7,001 6,801
Prepaid expenses 744 907
Other current assets 211 757
Total Current Assets 222,855 229,258
Other Assets 21,801 18,827
Property, Plant and Equipment 474,699 466,672
Less accumulated depreciation 187,776 178,035
286,923 288,637
$ 531,579 $ 536,722
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to banks $ 24,000 $ 27,000
Accounts payable 57,789 71,354
Accrued expenses 32,895 33,599
Current maturities of long-term debt 9,645 8,850
Total Current Liabilities 124,329 140,803
Long-Term Debt, less current maturities 193,546 198,334
Deferred Income Taxes 55,496 53,608
Minority Interest in Subsidiary 842 842
Stockholders' Equity:
Common stock; $.01 par value 276 276
Additional paid-in capital 79,763 79,763
Retained earnings 77,327 63,096
Total Stockholders' Equity 157,366 143,135
$ 531,579 $ 536,722
See notes to condensed consolidated financial statements.
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 29, 1997 MARCH 30, 1996 MARCH 29, 1997 MARCH 30, 1996
(in thousands, except share and per share data)
Net Sales $303,401 $272,004 $601,207 $539,479
Costs and Expenses:
Cost of sales 280,316 255,957 547,855 502,460
Selling, general and
administrative
13,425 12,363 27,378 24,510
293,741 268,320 575,233 526,970
Operating income
9,660 3,684 25,974 12,509
Other Expense (Income):
Interest expense,
net 5,284 5,210 10,733 10,331
Foreign exchange
loss (gain) 99 (94) 536 1,222
Miscellaneous,
net (397) (329) (2,906) (577)
4,986 4,787 8,363 10,976
Income (loss) before income taxes
and extraordinary
charge 4,674 (1,103) 17,611 1,533
Income tax (benefit)
expense (280) (548) 2,552 2,792
Net income (loss) before extraordinary
charge 4,954 (555) 15,059 (1,259)
Extraordinary charge-early repayment of debt,
net of tax - (2,780) - (2,780)
Net income
(loss) $ 4,954 $ (3,335) $ 15,059 $ (4,039)
Net income (loss) per common share
before extraordinary
charge $ .18 $ (.02) $ .55 $ (.05)
Extraordinary charge per common
share - (.10) - (.10)
Net income (loss)
per common
share $ .18 $ (.12) $ .55 $ (.15)
Dividends
per common
share $ .015 $ .015 $ .03 $ .03
Weighted average shares
outstanding
27,589,250 27,589,250 27,589,250 27,589,250
See Notes to condensed consolidated financial statements.
PILGRIM'S PRIDE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
MARCH 29, 1997 MARCH 30, 1996
Cash Flows From Operating Activities: (In thousands)
Net income (loss) $ 15,059 $ (4,039)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depreciation and amortization 14,229 14,639
(Gain) loss on property disposals 46 (221)
Provision for doubtful accounts (779) 206
Deferred income taxes 1,689 (3,214)
Extraordinary charge - 4,587
Changes in operating assets and liabilities:
Accounts and other receivable (5,783) (5,242)
Inventories (1,061) (18,845)
Prepaid expenses 703 (1,828)
Accounts payable and accrued expenses (14, 269) 3,475
Other (162) (186)
Cash Flows Provided By (Used In)
Operating Activities 9,672 (10,668)
Investing Activities:
Acquisitions of property, plant and equipment (12,162) (23,937)
Proceeds from property disposals 330 1,314
Other, net (258) 36
Net Cash Used In Investing Activities (12,090) (22,262)
Financing Activities:
Proceeds from notes payable to banks 31,500 56,500
Re-payments of notes payable to banks (34,500) (43,500)
Proceeds from long-term debt - 50,028
Payments on long-term debt (4,068) (29,001)
Extraordinary charge, cash items - (3,920)
Cash dividends paid (828) (828)
Cash (Used In) Provided By Financing Activities (7,896) 29,279
Effect of exchange
rate changes on cash and cash equivalents (9) (13)
(Decrease) Increase in cash and
cash equivalents (10,323) (3,664)
Cash and cash equivalents at beginning of year 18,040 11,892
Cash and cash equivalents at end of period $ 7,717 $ 8,228
Supplemental disclosure information:
Cash paid during the period for
Interest (net of amount capitalized) $ 10,961 $ 9,530
Income Taxes $ 1,807 $ 4,014
See notes to condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the period ended March 29, 1997 are not
necessarily indicative of the results that may be expected for the year
ended September 27, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto included in
Pilgrim's annual report on Form 10-K for the year ended September 28,
1996.
The consolidated financial statements include the accounts of Pilgrim's
and its wholly and majority owned subsidiaries. Significant intercompany
accounts and transactions have been eliminated.
The assets and liabilities of the foreign subsidiaries are translated at
end-of-period exchange rates, except for and non-monetary assets which
are translated at equivalent dollar costs at dates of acquisition using
historical rates. Operations of foreign subsidiaries are translated at
average exchange rates in effect during the period.
NOTE B--NET INCOME PER COMMON SHARE
Earnings per share for the periods ended March 29, 1997 and March 30,
1996 are based on the weighted average shares outstanding for the
periods.
NOTE C--INVENTORIES
Inventories consist of the following:MARCH 29, 1997 SEPTEMBER 28, 1996
(in thousands)
Live chickens and hens $ 64,632 $ 66,248
Feed, eggs and other 38,208 39,804
Finished chicken products 35,086 30,814
$ 137,926 $ 136,866
NOTE D-SUBSEQUENT EVENTS
On April 15, 1997 the Company secured an additional $35 million in
secured term borrowing capacity from an existing lender at rates of 2.0%
over LIBOR, with monthly principal and interest payments, maturing on
February 28, 2006. As of May 9, 1997 $20 million has been borrowed on
such facility, with the additional $15 million remaining available until
April 1, 1999.
ITEM 2:MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table presents certain items as a percentage of net sales
for the periods indicated.
Percentage of Net Sales Percentage of Net Sales
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 29, 1997 MARCH 30, 1996 MARCH 29,1997 MARCH 30, 1996
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 92.4% 94.1% 91.1% 93.1%
Gross profit 7.6% 5.9% 8.9% 6.9%
Selling, general and
administrative 4.4% 4.5% 4.6% 4.5%
Operating income 3.2% 1.4% 4.3% 2.3%
Interest expense 1.7% 1.9% 1.8% 1.9%
Income (loss) before
income taxes and
extraordinary charge 1.5% (.4%) 2.9% .3%
Extraordinary charge-early
repayment of debt,
net of tax - (1.0%) - .5%
Net Income (loss) 1.6% (1.2%) 2.5% (.7%)
SECOND QUARTER 1997, COMPARED TO SECOND QUARTER 1996
Consolidated net sales were $303.4 million for the second quarter of
fiscal 1997, an increase of $31.4 million, or 11.5%, over the second
quarter of fiscal 1996. The increase in consolidated net sales resulted
from a $23.9 million increase in domestic chicken sales to $204.1
million, a $4.9 million increase in Mexican chicken sales to $61.2
million and a $2.6 million increase of sales of other domestic products
to $38.1 million. The increase in domestic chicken sales was primarily
due to a 8.9% increase in dressed pounds produced and a 4.0% increase in
total revenue per dressed pound produced. The increase in Mexican chicken
sales was primarily due to a 8.6% increase in total revenue per dressed
pound. The increase in sales of other domestic products was primarily
the result of increased sales of the Company=s poultry by-products group.
Increased revenues per dressed pound produced both domestically and in
Mexico were primarily the result of higher sales prices as well as
generally improved economic conditions in Mexico compared to the prior
year.
Consolidated cost of sales was $280.3 million in the second quarter of
fiscal 1997, an increase of $24.4 million, or 9.5%, over the second
quarter of fiscal 1996. The increase primarily resulted from a $24.1
million increase in cost of sales of domestic operations, and a $.3
million increase in the cost of sales in Mexican operations.
The cost of sales increase in domestic operations of $24.1 million was
due to a 8.9% increase in dressed pounds produced and increased
production of higher cost and margin products in prepared foods offset by
lower feed ingredient cost experienced in the period compared to the
prior year.
Cost of sales in the Mexican operations stayed relatively stable
increasing only $.3 million.
Gross profit as a percentage of sales increased to 7.6% in the second
quarter of fiscal 1997 from 5.9% in the second quarter of fiscal 1996.
The increased gross profit resulted mainly from higher sales prices as
mentioned above and significantly higher margins in Mexico.
Consolidated selling, general and administrative expenses were $13.4
million in the second quarter of fiscal 1997, and $12.4 million in fiscal
1996. Consolidated selling, general and administrative expenses as a
percentage of sales decreased slightly in the second quarter of fiscal
1997 to 4.4% compared to 4.5% in the second quarter of fiscal 1996 due to
higher net sales and the effect of economies of scale.
Consolidated operating income was $9.7 million for the second quarter of
fiscal 1997, an increase of $6.0 million when compared to the second
quarter of fiscal 1996, resulting primarily from higher margins
experienced in the Mexican operations.
Consolidated net interest expense was $5.3 million in the second quarter
of fiscal 1997, an increase of $.07 million, or 1.4%, when compared to
the second quarter of fiscal 1996. This increase was due to slightly
higher interest rates offset by lower outstanding debt levels when
compared to the second quarter of fiscal 1996.
Consolidated income tax benefit in the second quarter of fiscal 1997 was
$.3 million compared to benefit of $.5 million in the second quarter of
fiscal 1996.
SIX MONTHS ENDED MARCH 29, 1997, COMPARED TO
SIX MONTHS ENDED MARCH 30, 1996
Consolidated net sales were $601.2 million for the first six months of
fiscal 1997, an increase of $61.7 million, or 11.4%, over the first six
months of fiscal 1996. The increase in consolidated net sales resulted
from a $35.1 million increase in domestic chicken sales to $397.3
million, a $18.9 million increase in Mexican chicken sales to $127.4
million and a $7.7 million increase of sales of other domestic products
to $76.5 million. The increase in domestic chicken sales was primarily
due to a 7.5% increase in dressed pounds produced and a 2.1% increase in
total revenue per dressed pound produced. The increase in Mexican chicken
sales was primarily due to a 28.3% increase in total revenue per dressed
pound offset slightly by a 8.5% decrease in dressed pounds produced.
The increase in sales of other domestic products was primarily the result
of increased sales of the Company=s poultry by-products group and higher
average prices for commercial eggs for the period. Increased revenues
per dressed pound produced both domestically and in Mexico were primarily
the result of higher sales prices as well as generally improved economic
conditions in Mexico compared to the prior year.
Consolidated cost of sales was $547.9 million in the first six months of
fiscal 1997, an increase of $45.4 million, or 9.0%, over the first six
months of fiscal 1996. The increase primarily resulted from a $41.5
million increase in cost of sales of domestic operations, and a $3.9
million increase in the cost of sales in Mexican operations.
The cost of sales increase in domestic operations of $41.5 million was
due to a 7.5% increase in dressed pounds produced and increased
production of higher cost and margin products in prepared foods offset
partially by lower feed ingredient costs experienced during the period.
The $3.9 million cost of sales increase in Mexican operations was
primarily due to a 13.3% increase in average costs of sales per pound
offset partially by an 8.5% decrease in dressed pounds produced. The
increase in average costs of sales per pound was primarily the result of
increased production of higher value and cost products.
Gross profit as a percentage of sales increased to 8.9% in the first six
months of fiscal 1997 from 6.9% in the first six months of fiscal 1996.
The increased gross profit resulted mainly from higher sales prices as
mentioned above and significantly higher margins in Mexico.
Consolidated selling, general and administrative expenses were $27.4
million in the first six months of fiscal 1997, and $24.5 million in
fiscal 1996. Consolidated selling, general and administrative expenses
as a percentage of sales increased slightly in the first six months of
fiscal 1997 to 4.6% compared to 4.5% in the first six months of fiscal
1996.
Consolidated operating income was $26.0 million for the first six months
of fiscal 1997, an increase of $13.5 million when compared to the first
six months of fiscal 1996, resulting primarily from higher margins
experienced in the Mexican operations.
Consolidated net interest expense was $10.7 million in the first six
months of fiscal 1997, an increase of $.4 million, or 3.9%, when compared
to the first six months of fiscal 1996. This increase was due to
slightly higher interest rates and higher average outstanding debt
amounts when compared to the first six months of fiscal 1996.
Consolidated miscellaneous, net a component of AOther Expense (Income)@
was $2.9 million in the first six months of fiscal 1997, includes a $2.2
million final settlement of claims resulting from the January 8, 1992
fire at the Company's prepared foods plant in Mt. Pleasant, Texas.
Consolidated income tax expense in the first six months of fiscal 1997
decreased to $2.5 million compared to expense of $2.8 million in the
first six months of fiscal 1996. The lower consolidated income tax
expense in contrast to higher consolidated income, resulted from
increased Mexican earnings which are not currently subject to income
taxes.
LIQUIDITY AND CAPITAL RESOURCES
Strong profits improved liquidity and financial ratios in the fiscal
first six months of 1997. The Company's working capital increased to
$98.5 million at March 29, 1997 compared to $88.5 million at September
28, 1996, the current ratio at March 29, 1997 improved to 1.79 to 1
compared to 1.63 to 1 at September 28, 1996 and the Company's
stockholder=s equity increased to $157.4 million from $143.1 million at
September 28, 1996. Total debt to capitalization decreased to 59.1% at
March 29, 1997 compared to 62.1% at September 28, 1996. The Company
maintains $110 million in revolving credit facilities with available
unused lines of credit of $72 million at May 8, 1997.
Trade accounts and other receivables were $69.3 million at March 29,
1997, a $3.4 million increase from September 28, 1996. The 5.1% increase
was due primarily to increased consolidated sales. Allowances for
doubtful accounts, as a percentage of trade accounts and notes receivable
were 4.6% at March 29, 1997 compared to 5.7% at September 28, 1996.
Inventories were $137.9 million at March 29, 1997, a increase of $1.1
million from September 28, 1996, due primarily to higher finished poultry
products inventories offset partially by the reduction of feed costs in
inventories.
Accounts payable were $57.8 million at March 29, 1997, a 19.0% decrease
from September 28, 1996, due primarily to the reduction in cost of feed
ingredients.
Capital expenditures for the six months ended March 29, 1997 were $12.2
million and were primarily incurred to expand production capacities
domestically, improve efficiencies, reduce costs and for the routine
replacement of equipment. The Company anticipates that it will spend
approximately $55 million for capital expenditures in fiscal year 1997
and expects to finance such expenditures with available operating cash
flows and long-term financing. On April 15, 1997 the Company completed
its acquisition of certain chicken producing assets of Green Acre Foods,
Inc., an integrated chicken producer located in the Nacogdoches area of
East Texas. The additional production from the acquired facilities will
help fulfill additional demand from the Company's prepared foods
customers.
On April 15, 1997 the Company secured an additional $35 million in
secured term borrowing capacity from an existing lender at rates of 2.0%
over LIBOR, with monthly principal and interest payments, maturing on
February 28, 2006. As of May 9, 1997 $20 million has been borrowed on
such facility, with the additional $15 million remaining available until
April 1, 1999.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
3.3 Amended and Restated Corporate Bylaws of Pilgrim's Pride
Corporation, a Delaware Corporation, effective December 4, 1996.
4.9 Amended and Restated Corporate Bylaws of Pilgrim's Pride
Corporation, a Delaware Corporation, effective December 4, 1996.
10.46 Note Purchase Agreement dated April 14, 1997 by and between John
Hancock MutualLife Insurance Company and Signature 1A (Cayman), Ltd. and
Pilgrim's Pride
Corporation, a Delaware Corporation.
10.47 Agreement between Pilgrim's Pride Corporation and Certain
Shareholders dated November
28, 1996.
10.48 Aircraft Lease Extension Agreement between B.P. Leasing Co., (L. A.
Pilgrim,
Individually) and Pilgrim's Pride Corporation, (formerly Pilgrim
Industries, Inc.) effective November 15, 1992.
10.49 Broiler Grower Contract dated May 6, 1997 between Pilgrim's Pride
Corporation and Lonnie "Bo" Pilgrim (Farm 30).
10.50 Commercial Egg Grower Contract dated May 7, 1997 between Pilgrim's
Pride Corporation and Pilgrim Poultry, G. P.
10.51 Agreement dated October 15, 1996 between Pilgrim's Pride
Corporation and Pilgrim Poultry, G.P.
10.52 Heavy Breeder Contract dated May 7, 1997 between Pilgrim's Pride
Corporation and Lonnie "Bo" Pilgrim (Farm 44, 45 & 46).
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.
PILGRIM'S PRIDE CORPORATION
Date MAY 7, 1997 Richard A. Cogdill
Executive Vice President and
Chief Financial Officer and
Secretary and Treasurer
in his respective capacity as such