PILGRIMS PRIDE CORP - Quarter Report: 2008 July (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
For
the quarterly period ended June 28,
2008
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 1-9273
![LOGO](https://www.sec.gov/Archives/edgar/data/0000802481/000080248108000061/seclogo.jpg)
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.)
|
|
4845 US Hwy
271 N, Pittsburg, TX
|
75686-0093
|
|
(Address
of principal executive offices)
|
(Zip
code)
|
|
Registrant’s
telephone number, including area code: (903)
434-1000
|
Not
Applicable
(Former
name, former address and former fiscal year, if changed since last
report.)
PILGRIM’S
PRIDE CORPORATION
June 28,
2008
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, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer”,
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one): Large accelerated filer x Accelerated
filer ¨ Non-accelerated
filer ¨ (Do not
check if a smaller reporting company) Smaller reporting company ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No x
Number of
shares outstanding of the issuer’s common stock, as of July 29, 2008, was
74,055,733.
1
PILGRIM’S
PRIDE CORPORATION
June 28,
2008
PILGRIM’S
PRIDE CORPORATION AND SUBSIDIARIES
|
||
PART I. FINANCIAL INFORMATION
|
||
Item
1.
|
Financial
Statements (Unaudited)
|
|
June
28, 2008 and September 29, 2007
|
||
Three
months and nine months ended June 28, 2008 and June 30,
2007
|
||
Nine
months ended June 28, 2008 and June 30, 2007
|
||
Notes to Consolidated Financial Statements as of June
28, 2008
|
||
Item
2.
|
||
Item
3.
|
||
Item
4.
|
||
PART II. OTHER INFORMATION
|
||
Item
1.
|
||
Item
1A.
|
||
Item
6.
|
||
|
PART
I. FINANCIAL INFORMATION
|
||||||||
ITEM
1. FINANCIAL STATEMENTS
|
||||||||
PILGRIM’S
PRIDE CORPORATION
|
||||||||
(Unaudited)
|
||||||||
June
28,
2008
|
September
29,
2007
|
|||||||
Assets:
|
(In
thousands)
|
|||||||
Cash
and cash equivalents
|
$ | 54,071 | $ | 66,168 | ||||
Investment
in available-for-sale securities
|
10,790 | 8,153 | ||||||
Trade
accounts and other receivables, less allowance for doubtful
accounts
|
110,490 | 114,678 | ||||||
Inventories
|
1,103,168 | 925,340 | ||||||
Income
taxes receivable
|
22,990 | 61,901 | ||||||
Current
deferred income taxes
|
25,532 | 8,095 | ||||||
Other
current assets
|
82,331 | 47,959 | ||||||
Assets
held for sale
|
3,900 | 15,534 | ||||||
Assets
of discontinued business
|
40,731 | 53,232 | ||||||
Total
current assets
|
1,454,003 | 1,301,060 | ||||||
Investment
in available-for-sale securities
|
54,342 | 46,035 | ||||||
Other
assets
|
123,544 | 138,546 | ||||||
Goodwill
|
499,669 | 505,166 | ||||||
Property,
plant and equipment, net
|
1,715,627 | 1,783,429 | ||||||
$ | 3,847,185 | $ | 3,774,236 | |||||
Liabilities
and stockholders’ equity:
|
||||||||
Accounts
payable
|
466,056 | 398,512 | ||||||
Accrued
expenses
|
444,338 | 497,262 | ||||||
Current
maturities of long-term debt
|
2,295 | 2,872 | ||||||
Liabilities
of discontinued business
|
5,648 | 6,556 | ||||||
Total
current liabilities
|
918,337 | 905,202 | ||||||
Long-term
debt, less current maturities
|
1,518,979 | 1,318,558 | ||||||
Deferred
income taxes
|
178,102 | 326,570 | ||||||
Other
long-term liabilities
|
84,721 | 51,685 | ||||||
Commitments
and contingencies
|
— | — | ||||||
Preferred
stock
|
— | — | ||||||
Common
stock
|
741 | 665 | ||||||
Additional
paid-in capital
|
646,923 | 469,779 | ||||||
Retained
earnings
|
486,557 | 687,775 | ||||||
Accumulated
other comprehensive income
|
12,825 | 14,002 | ||||||
Total
stockholders’ equity
|
1,147,046 | 1,172,221 | ||||||
$ | 3,847,185 | $ | 3,774,236 | |||||
See
notes to consolidated financial statements.
|
PILGRIM’S
PRIDE CORPORATION AND SUBSIDIARIES
(Unaudited)
|
||||||||||||||||
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
June
28,
2008
|
June
30,
2007
|
June
28,
2008
|
June
30,
2007
|
|||||||||||||
(In
thousands, except share and per share data)
|
||||||||||||||||
Net
sales
|
$ | 2,207,476 | $ | 2,104,499 | $ | 6,355,623 | $ | 5,383,641 | ||||||||
Cost
of sales
|
2,154,265 | 1,869,674 | 6,220,688 | 5,002,528 | ||||||||||||
Asset
impairment
|
— | — | 12,022 | — | ||||||||||||
Gross
profit
|
53,211 | 234,825 | 122,913 | 381,113 | ||||||||||||
Selling,
general and administrative expenses
|
92,291 | 97,929 | 299,283 | 259,792 | ||||||||||||
Restructuring
charges
|
3,451 | — | 9,120 | — | ||||||||||||
Operating
income (loss)
|
(42,531 | ) | 136,896 | (185,490 | ) | 121,321 | ||||||||||
Other
expense (income):
|
||||||||||||||||
Interest
expense
|
35,500 | 40,018 | 99,212 | 92,309 | ||||||||||||
Interest
income
|
(646 | ) | (198 | ) | (1,600 | ) | (3,191 | ) | ||||||||
Loss
on early extinguishment of debt
|
— | — | — | 14,475 | ||||||||||||
Miscellaneous,
net
|
(590 | ) | (2,869 | ) | (4,614 | ) | (7,548 | ) | ||||||||
Total
other expense
|
34,264 | 36,951 | 92,998 | 96,045 | ||||||||||||
Income
(loss) from continuing operations before income taxes
|
(76,795 | ) | 99,945 | (278,488 | ) | 25,276 | ||||||||||
Income
tax expense (benefit)
|
(28,451 | ) | 36,668 | (85,477 | ) | 10,844 | ||||||||||
Income
(loss) from continuing operations
|
(48,344 | ) | 63,277 | (193,011 | ) | 14,432 | ||||||||||
Loss
from operation of discontinued business, net of tax
|
(4,437 | ) | (636 | ) | (4,450 | ) | (603 | ) | ||||||||
Gain
on sale of discontinued business,
net
of tax
|
— | — | 903 | — | ||||||||||||
Net
income (loss)
|
$ | (52,781 | ) | $ | 62,641 | $ | (196,558 | ) | $ | 13,829 | ||||||
Income
(loss) per common share—basic and diluted:
|
||||||||||||||||
Continuing
operations
|
$ | (0.69 | ) | $ | 0.95 | $ | (2.85 | ) | $ | 0.22 | ||||||
Discontinued
business
|
(0.06 | ) | (0.01 | ) | (0.05 | ) | (0.01 | ) | ||||||||
Net
income (loss)
|
$ | (0.75 | ) | $ | 0.94 | $ | (2.90 | ) | $ | 0.21 | ||||||
Dividends
declared per common share
|
$ | 0.0225 | $ | 0.0225 | $ | 0.0675 | $ | 0.0675 | ||||||||
Weighted
average shares outstanding
|
70,182,107 | 66,555,733 | 67,764,524 | 66,555,733 | ||||||||||||
Reconciliation
of net income (loss) to comprehensive income (loss):
|
||||||||||||||||
Net
income (loss)
|
$ | (52,781 | ) | $ | 62,641 | $ | (196,558 | ) | $ | 13,829 | ||||||
Unrealized
gain (loss) on securities
|
(491 | ) | 44 | (1,177 | ) | 3,370 | ||||||||||
Comprehensive
income (loss)
|
$ | (53,272 | ) | $ | 62,685 | $ | (197,735 | ) | $ | 17,199 | ||||||
See
notes to consolidated financial statements.
|
PILGRIM’S
PRIDE CORPORATION AND SUBSIDIARIES
(Unaudited)
|
||||||||
Nine
Months Ended
|
||||||||
June
28,
2008
|
June
30,
2007
|
|||||||
(In
thousands)
|
||||||||
Cash
flows from operating activities:
|
||||||||
Net
income (loss)
|
$ | (196,558 | ) | $ | 13,829 | |||
Adjustments
to reconcile net income (loss) to cash provided by (used in) operating
activities:
|
||||||||
Depreciation
and amortization
|
176,802 | 145,678 | ||||||
Asset
impairment
|
12,022 | — | ||||||
Loss
on early extinguishment of debt
|
— | 7,099 | ||||||
Gain
on property disposals
|
(4,141 | ) | (492 | ) | ||||
Deferred
income tax expense (benefit)
|
(87,489 | ) | 1,395 | |||||
Changes
in operating assets and liabilities, net of effect of business
acquired:
|
||||||||
Accounts
and other receivables
|
12,106 | (58,066 | ) | |||||
Inventories
|
(175,458 | ) | (112,353 | ) | ||||
Other
current assets
|
(30,196 | ) | (7,984 | ) | ||||
Accounts
payable and accrued expenses
|
(37,661 | ) | (15,984 | ) | ||||
Income
taxes, net
|
(5,089 | ) | 32,474 | |||||
Other
|
(16,107 | ) | 9,012 | |||||
Cash
provided by (used in) operating activities
|
(351,769 | ) | 14,608 | |||||
Cash
flows for investing activities:
|
||||||||
Acquisitions
of property, plant and equipment
|
(97,641 | ) | (134,951 | ) | ||||
Purchases
of investment securities
|
(25,491 | ) | (360,485 | ) | ||||
Proceeds
from sale or maturity of investment securities
|
18,770 | 441,987 | ||||||
Business
acquisitions
|
— | (1,108,817 | ) | |||||
Proceeds
from property disposals
|
19,217 | 5,184 | ||||||
Cash
used in investing activities
|
(85,145 | ) | (1,157,082 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from sale of common stock
|
177,220 | — | ||||||
Borrowing
for acquisition
|
— | 1,230,000 | ||||||
Proceeds
from long-term debt
|
1,217,020 | 774,791 | ||||||
Payments
on long-term debt
|
(1,016,983 | ) | (982,723 | ) | ||||
Change
in outstanding cash management obligations
|
57,678 | 41,450 | ||||||
Debt
issue costs
|
(5,457 | ) | (15,565 | ) | ||||
Cash
dividends paid
|
(4,661 | ) | (4,493 | ) | ||||
Cash
provided by financing activities
|
424,817 | 1,043,460 | ||||||
Decrease
in cash and cash equivalents
|
(12,097 | ) | (99,014 | ) | ||||
Cash
and cash equivalents at beginning of period
|
66,168 | 156,404 | ||||||
Cash
and cash equivalents at end of period
|
$ | 54,071 | $ | 57,390 | ||||
See
notes to consolidated financial statements.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
A—BASIS OF PRESENTATION
The
accompanying unaudited consolidated financial statements of Pilgrim’s Pride
Corporation (referred to herein as “Pilgrim’s,” “the Company,” “we,” “us,” “our”
or similar terms) have been prepared in accordance with accounting principles
generally accepted in the United States (“US”) for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the
US Securities and Exchange Commission. Accordingly, they do not include all of
the information and footnotes required by US generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal and recurring adjustments unless otherwise
disclosed) considered necessary for a fair presentation have been included.
Operating results for the three and nine months ended June 28, 2008 are not
necessarily indicative of the results that may be expected for the fiscal year
ending September 27, 2008. For further information, refer to the consolidated
financial statements and footnotes thereto included in Pilgrim’s Current Report
on Form 8-K dated May 12, 2008.
The
consolidated financial statements include the accounts of Pilgrim’s and its
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 any 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.
Certain
reclassifications have been made to prior periods to conform to current period
presentations.
The
Company and certain retirement plans that it sponsors invest in a variety of
financial instruments. In response to the continued turbulence in global
financial markets, we have analyzed our portfolios of investments and, to the
best of our knowledge, none of our investments, including money market funds
units, commercial paper and municipal securities, have been downgraded because
of this turbulence, and neither we nor any fund in which we participate hold
significant amounts of structured investment vehicles, mortgage backed
securities, collateralized debt obligations, auction-rate securities, credit
derivatives, hedge funds investments, fund of funds investments or perpetual
preferred securities.
On
December 27, 2006, we acquired a majority of the outstanding common stock of
Gold Kist Inc. (“Gold Kist”) through a tender offer. We subsequently acquired
all remaining Gold Kist shares and, on January 9, 2007, Gold Kist became our
wholly owned subsidiary. For financial reporting purposes, we have not included
the operating results and cash flows of Gold Kist in our consolidated financial
statements for the period from December 27, 2006 through December 30, 2006.
The operating results and cash flows of Gold Kist from December 27, 2006
through December 30, 2006 were not material. The following unaudited financial
information has been presented as if the acquisition had occurred at the
beginning of fiscal 2007.
Nine
Months Ended
June
30, 2007
Pro
forma
|
||||
(In
thousands, expect per share amounts and shares
outstanding)
|
||||
Net
sales
|
$
|
5,911,451 | ||
Depreciation
and amortization
|
$ | 169,722 | ||
Operating
income
|
$ | 90,769 | ||
Interest
expense, net
|
$ | 114,940 | ||
Loss
from continuing operations before taxes
|
$ | (29,659 | ) | |
Loss
from continuing operations
|
$ | (19,752 | ) | |
Net
loss
|
$ | (20,355 | ) | |
Loss
from continuing operations per common share
|
$ | (0.30 | ) | |
Net
loss per common share
|
$ | (0.31 | ) | |
Weighted
average shares outstanding
|
66,555,733 |
In
December 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 141(R), Business Combinations. This
Statement improves the relevance, representational faithfulness, and
comparability of the information that a reporting entity provides in its
financial reports about a business combination and its effects by establishing
principles and requirements for how the acquirer (a) recognizes and measures in
its financial statements the identifiable assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree, (b) recognizes and
measures the goodwill acquired in the business combination or a gain from a
bargain purchase, and (c) determines what information to disclose to enable
users of the financial statements to evaluate the nature and financial effects
of the business combination. The Company must apply prospectively SFAS No.
141(R) to business combinations for which the acquisition date occurs during or
subsequent to the first quarter of fiscal 2010. The impact that adoption of SFAS
No. 141(R) will have on the Company’s financial condition, results of operations
and cash flows is dependent upon many factors. Such factors would include, among
others, the fair values of the assets acquired and the liabilities assumed in
any applicable business combination, the amount of any costs the Company would
incur to effect any applicable business combination, and the amount of any
restructuring costs the Company expected but was not obligated to incur as the
result of any applicable business combination. Thus, we cannot accurately
predict the effect SFAS No. 141(R) will have on future acquisitions at this
time.
In
December 2007, the FASB also issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51. This
Statement improves the relevance, comparability, and transparency of the
financial information that a reporting entity provides in its consolidated
financial statements by establishing accounting and reporting standards for how
that reporting entity (a) identifies, labels and presents in its consolidated
statement of financial position the ownership interests in subsidiaries held by
parties other than itself, (b) identifies and presents on the face of its
consolidated statement of operations the amount of consolidated net income
attributable to itself and to the noncontrolling interest, (c) accounts for
changes in its ownership interest while it retains a controlling financial
interest in a subsidiary, (d) initially measures any retained noncontrolling
equity investment in a subsidiary that is deconsolidated, and (e) discloses
other information about its interests and the interests of the noncontrolling
owners. The Company must apply prospectively the accounting requirements of
SFAS No. 160 in the first quarter of fiscal 2010. The Company should also
apply retroactively the presentation and disclosure requirements of the
Statement for all periods presented at that time. The Company does not expect
the adoption of SFAS No. 160 will have a material impact on its financial
position, financial performance or cash flows.
In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No.
133. This Statement changes the disclosure requirements for derivative
instruments and hedging activities. Entities are required to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments,
(b) how derivative instruments and related hedged items are accounted for
under Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. The Company must apply the requirements
of SFAS No. 161 in the first quarter of fiscal 2010. The Company does not
expect the adoption of SFAS No. 161 will have a material impact on its
financial position, financial performance or cash flows.
NOTE
B—DISCONTINUED BUSINESS
The
Company sold certain assets of its turkey business for $18.6 million and
recorded a gain of $1.5 million ($0.9 million, net of tax) in Gain on sale of discontinued business, net of tax in the
consolidated statement of operations during the second quarter of fiscal 2008.
This business was composed of substantially all of our former turkey segment.
The results of this business are included in Income (loss) from operation of
discontinued business, net of tax for all periods presented.
For a
period of time, we will continue to incur cash flow activities that are
associated with our former turkey business. These activities are transitional in
nature. We have entered into a short-term co-pack agreement with the acquirer of
the former turkey business under which they will process turkeys for sale to our
customers through the end of fiscal 2008. For the period of time until we have
collected funds on the sale of these turkeys, we will continue to incur cash
flow activity and to report operating activity in Income (loss) from operation of
discontinued business, net of tax, although at a substantially reduced
level. Upon completion of these activities, the cash flows and the operating
activity reported in Income
(loss) from operation of discontinued business, net of tax will be
eliminated.
Neither
our continued involvement in the distribution and sale of these turkeys or the
co-pack agreement confers upon us the ability to influence the operating and/or
financial policies of the turkey business under its new ownership.
The
following amounts related to our turkey business have been segregated from
continuing operations and included in Income (loss) from operation of
discontinued business, net of tax and Gain on sale of discontinued business, net of tax in the
consolidated statements of operations:
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
June
28,
2008
|
June
30,
2007
|
June
28,
2008
|
June
30,
2007
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Net
sales
|
$ | 14,779 | $ | 13,887 | $ | 70,791 | $ | 65,842 | ||||||||
Loss
from operation of discontinued business before income
taxes
|
$ | (7,127 | ) | $ | (1,022 | ) | $ | (7,149 | ) | $ | (968 | ) | ||||
Income
tax benefit
|
(2,690 | ) | (386 | ) | (2,699 | ) | (365 | ) | ||||||||
Loss
from operation of discontinued business, net of tax
|
$ | (4,437 | ) | $ | (636 | ) | $ | (4,450 | ) | $ | (603 | ) | ||||
Gain
on sale of discontinued business before income taxes
|
$ | — | $ | — | $ | 1,450 | $ | — | ||||||||
Income
tax expense
|
— | — | 547 | — | ||||||||||||
Gain
on sale of discontinued business, net of tax
|
$ | — | $ | — | $ | 903 | $ | — |
Property,
plant and equipment related to our turkey business has been segregated and
included in Assets held for
sale in the consolidated balance sheet as of September 29, 2007. The
following assets and liabilities related to our turkey business have been
segregated and included in Assets of discontinued
business and Liabilities of discontinued
business, as appropriate, in the consolidated balance sheets as of June
28, 2008 and September 29, 2007.
June
28,
2008
|
September
29,
2007
|
|||||||
(In
thousands)
|
||||||||
Trade
accounts and other receivables, less allowance for doubtful
accounts
|
$ | 7,599 | $ | 16,687 | ||||
Inventories
|
33,132 | 36,545 | ||||||
Assets
of discontinued business
|
$ | 40,731 | $ | 53,232 | ||||
Accounts
payable
|
$ | 3,965 | $ | 3,804 | ||||
Accrued
expenses
|
1,683 | 2,752 | ||||||
Liabilities
of discontinued business
|
$ | 5,648 | $ | 6,556 |
NOTE
C—RESTRUCTURING ACTIVITIES
Results
of operations for the three and nine months ended June 28, 2008 include
restructuring charges related to the Company’s decision to close a processing
complex in Siler City, North Carolina, an administrative office in Duluth,
Georgia and distribution centers in Plant City and Pompano Beach, Florida;
Oskaloosa, Iowa; Jackson, Mississippi; Cincinnati, Ohio; and Nashville,
Tennessee. In March 2008, the Company’s Board of Directors approved the closings
as part of a plan intended to curtail losses amid record-high costs for corn,
soybean meal and other feed ingredients and an oversupply of chicken in the
United States. The closings began in March 2008 and were completed in June 2008.
The affected processing complex and distribution centers employed approximately
1,100 individuals. Virtually all of these individuals were impacted by the
decision to close these facilities.
The
Company incurred all anticipated restructuring costs during the second and third
quarters of fiscal 2008. Almost all of these costs will result in cash
expenditures. The Company recognized $3.4 million of lease commitment costs in
the third quarter of fiscal 2008. The Company recognized $3.0 million of
employee retention and severance costs and $2.7 million of miscellaneous closing
costs in the second quarter of fiscal 2008. The Company also recorded a non-cash
asset impairment of $12.0 million in the second quarter of fiscal 2008 to reduce
the carrying amounts of certain assets to their estimated fair
values.
NOTE
D—ACCOUNTS RECEIVABLE
In
connection with the Receivables Purchase Agreement dated June 26, 1998, as
amended (the “Agreement”), the Company sells, on a revolving basis, certain of
its trade receivables (the “Pooled Receivables”) to a special purpose entity
(“SPE”) wholly owned by the Company, which in turn sells a percentage ownership
interest to third parties. The SPE is a separate
corporate entity and its assets will be available first and foremost to satisfy
the claims of its creditors. The aggregate amount of Pooled Receivables
sold plus the remaining Pooled Receivables available for sale under this
Agreement declined from $300.0 million at September 29, 2007 to $271.7
million at June 28, 2008. The outstanding amount of Pooled Receivables
sold and the remaining Pooled Receivables available for sale under this
Agreement at June 28, 2008 were $269.0 million and $2.7 million,
respectively. The loss recognized on the sold receivables during the nine months
ended June 28, 2008 was not material.
NOTE
E—INVENTORIES
June
28,
2008
|
September
29,
2007
|
|||||||
(In
thousands)
|
||||||||
Chicken:
|
||||||||
Live
chicken and hens
|
$ | 407,894 | $ | 343,185 | ||||
Feed
and eggs
|
258,589 | 223,631 | ||||||
Finished
chicken products
|
417,154 | 337,052 | ||||||
Total
chicken inventories
|
1,083,637 | 903,868 | ||||||
Other
products:
|
||||||||
Commercial
feed, table eggs, retail farm store and other
|
$ | 13,717 | $ | 11,327 | ||||
Distribution
inventories (other than chicken products)
|
5,814 | 10,145 | ||||||
Total
other products inventories
|
19,531 | 21,472 | ||||||
Total
inventories
|
$ | 1,103,168 | $ | 925,340 |
NOTE
F—PROPERTY, PLANT AND EQUIPMENT
June
28,
2008
|
September
29,
2007
|
|||||||
(In
thousands)
|
||||||||
Land
|
$ | 108,946 | $ | 114,365 | ||||
Buildings,
machinery and equipment
|
2,438,491 | 2,366,418 | ||||||
Autos
and trucks
|
64,185 | 59,489 | ||||||
Construction-in-progress
|
118,904 | 123,001 | ||||||
Property,
plant and equipment, gross
|
2,730,526 | 2,663,273 | ||||||
Accumulated
depreciation
|
(1,014,899 | ) | (879,844 | ) | ||||
Property, plant
and equipment, net
|
$ | 1,715,627 | $ | 1,783,429 |
NOTE
G—NOTES PAYABLE AND LONG-TERM DEBT
Maturity
|
June
28,
2008
|
September
29,
2007
|
|||||||
(In
thousands)
|
|||||||||
Senior
unsecured notes, at 7 5/8%
|
2015
|
$ | 400,000 | $ | 400,000 | ||||
Senior
subordinated notes, at 8 3/8%
|
2017
|
250,000 | 250,000 | ||||||
Secured
revolving credit facility with notes payable at LIBOR plus 1.25% to LIBOR
plus 2.75%
|
2013
|
— | — | ||||||
Secured
revolving credit facility with notes payable at LIBOR plus 1.65% to LIBOR
plus 3.125%
|
2011
|
54,120 | 26,293 | ||||||
Secured
revolving/term credit facility with four notes payable at LIBOR plus a
spread, one note payable at 7.34% and one note payable at
7.56%
|
2016
|
795,775 | 622,350 | ||||||
Other
|
Various
|
21,379 | 22,787 | ||||||
Notes
payable and long-term debt
|
1,521,274 | 1,321,430 | |||||||
Current
maturities of long-term debt
|
(2,295 | ) | (2,872 | ) | |||||
Notes
payable and long-term debt, less current maturities
|
$ | 1,518,979 | $ | 1,318,558 |
At June
28, 2008, $213.4 million was available for borrowing under the Company’s
secured revolving credit facility expiring in 2013, $375.0 million was
available for borrowing under the revolving portion of the Company’s secured
revolving/term credit facility expiring in 2016 and no funds were available for
borrowing under the Company’s secured revolving credit facility expiring in
2011.
The
Company is required, by certain provisions of its debt agreements, to maintain
certain levels of working capital and net worth, to limit dividends to a maximum
of $26.0 million per year, and to maintain various fixed charge, leverage,
current and debt-to-equity ratios. The Company’s debt agreements are also
generally cross-defaulted with one another, and the Company’s leases are
generally cross-defaulted with the credit agreements. At June 28, 2008, the
Company has fully complied with these covenants. In April 2008, the Company and
its lenders amended certain covenants in its credit facilities and receivables
purchase facility effective through the end of fiscal 2009 to levels the Company
believes it can comply with in the near-term despite the current economic issues
facing the chicken industry.
NOTE
H—INCOME TAXES
We
recorded an income tax benefit of $85.5 million for the nine months ended June
28, 2008 resulting from a loss from continuing operations before taxes of
$278.5 million. The difference between the effective rate reflected in the
provision for income taxes and the amounts determined by applying the applicable
statutory United States tax rate for the nine months ended June 28, 2008 is
primarily due to an increase in the valuation allowance on net operating loss
carryforwards in Mexico recorded in the first quarter of fiscal
2008.
On
September 30, 2007, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes—an interpretation of FASB Statement No. 109 (“FIN 48”). This
Interpretation required us to develop a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. Adoption of FIN 48 had
no significant effect on the Company’s financial condition. The net
unrecognized tax benefits of $32.9 million include $26.3 million that, if
recognized, would benefit our effective income tax rate and $6.6 million that,
if recognized, would reduce goodwill.
The
Company files numerous consolidated and separate income tax returns in the
United States Federal jurisdiction, the Mexico Federal jurisdiction and in
many state jurisdictions. With few exceptions, the Company is no longer subject
to US Federal, state or local income tax examinations for years before 2003 and
is no longer subject to Mexico income tax examinations by tax authorities for
years before 2005. We are currently under audit by the Internal Revenue Service
for the tax years ended September 26, 2003 to September 30, 2006. It is likely
that the examination phase of the audit will conclude in 2008, and it is
reasonably possible adjustments to our FIN 48 liability may occur; however,
quantification of an estimated range cannot be made at this time.
Our
continuing practice is to recognize interest and/or penalties related to income
tax matters in income tax expense. During the nine months ended June 28, 2008,
we recognized $2.3 million in interest and penalties related to uncertain
tax positions. As of June 28, 2008, we have accrued $14.1 million of
interest and penalties related to uncertain tax positions.
In
October 2007, Mexico enacted a new minimum corporation tax assessed on companies
doing business in that country after January 1, 2008 (“IETU”). While the Company
does not anticipate paying any significant taxes under IETU, the new law will
affect the Company’s tax planning strategies to fully realize its deferred tax
assets under Mexico’s regular income tax. The Company evaluated the impact of
IETU on its Mexico operations and, because of the treatment of net operating
losses under the new law, established a valuation allowance for net operating
losses it believes do not meet the more likely than not realization criteria of
SFAS No. 109, Accounting for
Income Taxes; this valuation allowance resulted in a $12.7 million charge
to tax expense in the first quarter of fiscal 2008.
NOTE
I—COMMON STOCK
In May
2008, the Company completed a public offering of 7.5 million shares of its
common stock for total consideration of approximately $177.4 million ($177.2
million, net of costs incurred to complete the sale). The Company used the net
proceeds of the offering to reduce outstanding indebtedness under two of its
revolving credit facilities and for general corporate purposes.
NOTE
J—RELATED PARTY TRANSACTIONS
Lonnie
“Bo” Pilgrim, the Senior Chairman and, through certain related entities, the
major stockholder of the Company (collectively, the “major stockholder”), owns
an egg laying and a chicken growing operation.
Certain
transactions with related parties are summarized as follows:
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
June
28, 2008
|
June
30, 2007
|
June
28, 2008
|
June
30, 2007
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Lease
payments on commercial egg property
|
$ | 188 | $ | 188 | $ | 563 | $ | 563 | ||||||||
Contract
grower pay
|
$ | 259 | $ | 250 | $ | 779 | $ | 651 | ||||||||
Other
sales to major stockholder
|
$ | 205 | $ | 148 | $ | 557 | $ | 460 | ||||||||
Loan
guaranty fees
|
$ | 1,304 | $ | 1,081 | $ | 3,431 | $ | 2,582 | ||||||||
Lease
payments and operating expenses on airplane
|
$ | 116 | $ | 121 | $ | 351 | $ | 371 |
NOTE
K—COMMITMENTS AND CONTINGENCIES
We are a
party to many routine contracts in which we provide general indemnities in the
normal course of business to third parties for various risks. Among other
considerations, we have not recorded a liability for any of these indemnities as
based upon the likelihood of payment, the fair value of such indemnities would
not have a material impact on our financial condition, results of operations and
cash flows.
At June
28, 2008, the Company had $86.6 million in letters of credit outstanding
relating to normal business transactions.
The
Company is subject to various legal proceedings and claims which arise in the
ordinary course of business. Below is a summary of the most significant claims
outstanding against the Company. In the Company’s opinion, it has made
appropriate and adequate accruals for claims where necessary, and the Company
believes the probability of material losses beyond the amounts accrued to be
remote; however, the ultimate liability for these matters is uncertain, and if
significantly different than the amounts accrued, the ultimate outcome could
have a material effect on the financial condition or results of operations of
the Company. The Company believes it has substantial defenses to the claims made
and intends to vigorously defend these cases.
Among the
claims presently pending against the Company are claims seeking unspecified
damages brought by current and former employees seeking compensation for the
time spent donning and doffing clothing and personal protective equipment. We
are aware of an industry-wide investigation by the Wage and Hour Division of the
US Department of Labor to ascertain compliance with various wage and hour
issues, including the compensation of employees for the time spent on such
activities such as donning and doffing clothing and personal protective
equipment. Due, in part, to the government investigation and the recent US
Supreme Court decision in IBP,
Inc. v. Alvarez, it is possible that we may be subject to additional
employee claims. We intend to assert vigorous defenses to the litigation.
Nonetheless, there can be no assurances that other similar claims may not be
brought against the Company.
US
Immigration and Customs Enforcement has recently been investigating identity
theft within our workforce. With our cooperation, during the past eight months
US Immigration and Customs Enforcement has arrested approximately 350 of our
employees believed to have engaged in identity theft at five of our
facilities. No assurances can be given that further enforcement
efforts by governmental authorities against our employees or the Company will
not disrupt a portion of our workforce or our operations at one or more of our
facilities, thereby negatively impacting our business.
NOTE
L—BUSINESS SEGMENTS
Subsequent
to the sale of our turkey operations, we operate in two reportable business
segments as (1) a producer and seller of chicken products and (2) a seller of
other products. The following table presents certain information regarding our
segments:
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
June
28, 2008
|
June
30,
2007
|
June
28, 2008(a)
|
June
30,
2007(a)
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Net
sales to customers
|
||||||||||||||||
Chicken:
|
||||||||||||||||
United
States
|
$ | 1,829,163 | $ | 1,809,317 | $ | 5,280,272 | $ | 4,523,729 | ||||||||
Mexico
|
154,165 | 131,636 | 402,475 | 365,591 | ||||||||||||
Total
chicken
|
1,983,328 | 1,940,953 | 5,682,747 | 4,889,320 | ||||||||||||
Other
Products:
|
||||||||||||||||
United
States
|
214,135 | 157,794 | 648,431 | 482,114 | ||||||||||||
Mexico
|
10,013 | 5,752 | 24,445 | 12,207 | ||||||||||||
Total
other products
|
224,148 | 163,546 | 672,876 | 494,321 | ||||||||||||
$ | 2,207,476 | $ | 2,104,499 | $ | 6,355,623 | $ | 5,383,641 | |||||||||
Operating
income (loss)
|
||||||||||||||||
Chicken:
|
||||||||||||||||
United
States
|
$ | (65,425 | ) | $ | 116,749 | $ | (241,081 | ) | $ | 101,155 | ||||||
Mexico
|
6,964 | 14,427 | (848 | ) | 3,151 | |||||||||||
Total
chicken
|
(58,461 | ) | 131,176 | (241,929 | ) | 104,306 | ||||||||||
Other
products:
|
||||||||||||||||
United
States
|
18,366 | 4,872 | 74,601 | 15,080 | ||||||||||||
Mexico
|
1,015 | 848 | 2,980 | 1,935 | ||||||||||||
Total
other products
|
19,381 | 5,720 | 77,581 | 17,015 | ||||||||||||
Asset
impairment
|
— | — | (12,022 | ) | — | |||||||||||
Restructuring
charges
|
(3,451 | ) | — | (9,120 | ) | — | ||||||||||
$ | (42,531 | ) | $ | 136,896 | $ | (185,490 | ) | $ | 121,321 | |||||||
Depreciation
and amortization(b)(c)(d)
|
||||||||||||||||
Chicken:
|
||||||||||||||||
United
States
|
$ | 54,292 | $ | 53,629 | $ | 158,624 | $ | 130,120 | ||||||||
Mexico
|
2,587 | 2,754 | 7,831 | 8,306 | ||||||||||||
Total
chicken
|
56,879 | 56,383 | 166,455 | 138,426 | ||||||||||||
Other
products:
|
||||||||||||||||
United
States
|
3,565 | 1,160 | 9,465 | 5,917 | ||||||||||||
Mexico
|
62 | 58 | 187 | 156 | ||||||||||||
Total
other products
|
3,627 | 1,218 | 9,652 | 6,073 | ||||||||||||
$ | 60,506 | $ | 57,601 | $ | 176,107 | $ | 144,499 | |||||||||
(a)
|
The
Company acquired Gold Kist on December 27, 2006 for $1.139
billion.
|
|||||||||||||||
(b)
|
Includes
amortization of capitalized financing costs of $1.7 million, $1.1 million,
$3.8 million and $2.9 million recognized in the third quarter of fiscal
2008, the third quarter of fiscal 2007, the first nine months of fiscal
2008 and the first nine months of fiscal 2007,
respectively.
|
|||||||||||||||
(c)
|
Includes
amortization of intangible assets of $2.5 million recognized in the third
quarter of fiscal 2008 and $7.6 million recognized in the first nine
months of fiscal 2008 related to the Gold Kist
acquisition.
|
|||||||||||||||
(d)
|
Excludes
depreciation costs incurred by our discontinued turkey business of $0.4
million, $0.7 million and $1.2 million during the third quarter of fiscal
2007, the first nine months of fiscal 2008 and the first nine months of
fiscal 2007, respectively. Our discontinued turkey business did not incur
depreciation costs during the third quarter of fiscal
2008.
|
NOTE
M—SUBSEQUENT EVENTS
In July
2008, the Company announced plans to consolidate the tray-pack chicken business
from its El Dorado, Arkansas processing complex into six other case-ready
facilities within 60 days. Approximately 600 hourly positions will be eliminated
by September 2008 because of this action.
In July
2008, the Company announced plans to close its distribution center in El Paso,
Texas within 60 days. The distribution center currently employs 34
people.
Description
of the Company
Pilgrim’s
Pride is the world’s largest chicken company and has one of the best known brand
names in the chicken industry. In the United States (“US”), we produce both
prepared and fresh chicken. In Mexico and Puerto Rico, we exclusively produce
fresh chicken. Through vertical integration we control the breeding, hatching
and growing of chickens. Our products are sold to foodservice, retail and frozen
entrée customers primarily through foodservice distributors, retailers and
restaurants throughout the US and Puerto Rico and in the northern and central
regions of Mexico. We operate in two business segments and two geographical
areas.
Executive
Summary
Feed
ingredient prices increased substantially between the first quarter of fiscal
2007 and the date of this report, with nearby futures reaching a high of
$7.54 per bushel for corn and $427.90 per ton for soybean meal in June
2008 and remaining $5.77 per bushel and $374.70 per ton, respectively, on July
25, 2008. While chicken selling prices have generally improved over the same
period, chicken selling prices have not improved sufficiently to offset the
higher costs of feed ingredients, which, along with the interest expense
recognized on borrowings incurred due to the acquisition of Atlanta-based Gold
Kist Inc. (“Gold Kist”) and to fund operating losses, were the primary
contributors to our $52.8 million net loss for the third quarter of fiscal
2008. These same factors, along with deferred income tax valuation
allowances recognized in Mexico in the first quarter of fiscal 2008, were the
primary contributors to our $196.6 million net loss for the first nine months of
fiscal 2008. Although we continue to focus substantial efforts on
increasing our sales prices in order to cover these increased costs, there
can be no assurances as to if or when we will be able to raise our
prices sufficiently to offset these incremental costs or return to
profitability.
In
response to this challenging environment, we have taken a number of actions,
including the closure of a processing plant, an administrative office and six
distribution centers, a 5% planned reduction of production in the second half of
fiscal 2008 when compared to the same prior-year period, and the planned
consolidation of the tray-pack chicken business from our El Dorado, Arkansas
processing complex into six other case-ready facilities and closure of a
distribution center in El Paso, Texas. See Note C—Restructuring
Activities and Note M—Subsequent Events of the notes to the consolidated
financial statements included elsewhere herein. We are also
continuing to evaluate our production facilities for potential mix changes,
closure, sale and/or consolidation in an effort to position the Company for a
return to profitability. However, there can be no assurances that we
will be successful in any of these efforts or that continuing losses will not
have a material adverse effect on our business, operations or financial
condition.
Feed
ingredient costs incurred during the third quarter of fiscal 2008 rose 44.3% in
the US and 36.1% in Mexico over the same period last year principally because of
higher corn and soybean meal prices. Our average chicken selling prices in the
US and Mexico during the third quarter of fiscal 2008 increased 0.9% and 8.2%,
respectively, over the same period last year mainly because of improved market
pricing. Total pounds sold in the US during the third quarter of fiscal 2008
were up 0.2% from the same period last year and total pounds sold in Mexico
during the third quarter of fiscal 2008 were up 8.3% from the same period last
year.
Feed
ingredient costs incurred during the first nine months of fiscal 2008 rose 32.6%
in the US and 24.9% in Mexico over the same period last year principally because
of higher corn and soybean meal prices. Our average chicken selling prices in
the US and Mexico during the first nine months of fiscal 2008 increased 3.2% and
7.6%, respectively, over the same period last year mainly because of improved
market pricing. Total pounds sold in the US during the first nine months of
fiscal 2008 were up 13.1% from the same period last year due to the Gold Kist
acquisition and total pounds sold in Mexico during the first nine months of
fiscal 2008 were up 2.3% from the same period last year.
In March
2008, the Company sold certain assets of its turkey business for $18.6 million
and recorded a gain of $1.5 million ($0.9 million, net of tax) in Gain on sale of discontinued business, net of tax in the
consolidated statement of operations for the three and nine months ended June
28, 2008. This business was composed of substantially all of our former turkey
segment. The results of this business are included in Income (loss) from operation of
discontinued business, net of tax for all periods presented. See Note
B—Discontinued Business of the notes to our consolidated financial statements
included elsewhere herein.
Results
of operations for the three and nine months ended June 28, 2008 include asset
impairment and restructuring charges related to the Company’s decision to close
a processing complex in Siler City, North Carolina, an administrative office in
Duluth, Georgia and distribution centers in Plant City and Pompano Beach,
Florida; Oskaloosa, Iowa; Jackson, Mississippi; Cincinnati, Ohio; and Nashville,
Tennessee. The Company recognized restructuring charges of $3.5 million in the
third quarter of fiscal 2008. The Company recognized non-cash asset impairment
charges of $12.0 million and restructuring charges of $5.7 million during
the second quarter of fiscal 2008. See Note C—Restructuring Activities of the
notes to our consolidated financial statements included elsewhere
herein.
On
December 27, 2006, we acquired 88.9% of all outstanding common shares of Gold
Kist. Gold Kist was the third-largest chicken company in the US, accounting for
approximately 9% of all chicken produced domestically in recent years. On
January 9, 2007, we acquired the remaining Gold Kist common shares, making Gold
Kist a wholly owned subsidiary of Pilgrim’s Pride Corporation. For financial
reporting purposes, we have not included the operating results and cash flows of
Gold Kist in our consolidated financial statements for the period spanning from
December 27, 2006 through December 30, 2006. The operating results and
cash flows of Gold Kist for that period were not material.
In May
2008, the Company completed a public offering of 7.5 million shares of its
common stock for total consideration of approximately $177.4 million ($177.2
million, net of costs incurred to complete the sale). The Company used the net
proceeds of the offering to reduce outstanding indebtedness under two of its
revolving credit facilities and for general corporate purposes.
In July
2008, the Company announced plans to consolidate the tray-pack chicken business
from its El Dorado, Arkansas processing complex into six other case-ready
facilities within 60 days. Approximately 600 hourly positions will be eliminated
by September 2008 because of this action. In July 2008, the Company also
announced plans to close its distribution center in El Paso, Texas within
60 days. The distribution center currently employs 34 people.
In
October 2007, Mexico enacted a new minimum corporation tax assessed on companies
doing business in that country after January 1, 2008 (“IETU”). While the Company
does not anticipate paying any significant taxes under IETU, the new law will
affect the Company’s tax planning strategies to fully realize its deferred tax
assets under Mexico’s regular income tax. The Company evaluated the impact of
IETU on its Mexico operations and, because of the treatment of net operating
losses under the new law, established a valuation allowance for net operating
losses it believes do not meet the more likely than not realization criteria of
SFAS No. 109, Accounting for
Income Taxes; this valuation allowance resulted in a $12.7 million charge
to tax expense in the first quarter of fiscal 2008.
Business
Environment
Profitability
in the chicken industry is materially affected by the commodity prices of
chicken and feed ingredients that, in turn, are influenced by a variety of
supply and demand factors. As a result, the chicken industry is
subject to cyclical earnings fluctuations. Cyclical earnings fluctuations can be
mitigated somewhat by (a) business strategy, (b) product mix, (c) sales and
marketing plans and (d) operating efficiencies.
Feed
ingredient purchases are the single largest component of our cost of sales. They
represented 38.3% of our consolidated cost of sales in the first nine months of
fiscal 2008. The production of feed ingredients is affected primarily by weather
patterns throughout the world, the level of supply inventories, demand for feed
ingredients, and the agricultural policies of the US and foreign governments.
The costs of corn and soybean meal, our primary feed ingredients, increased
significantly between the first quarter of fiscal 2007 and the date of this
report and there can be no assurance that the price of corn or soybean meal will
not continue to rise as a result of, among other things, increasing demand for
these products around the world and alternative uses of these products, such as
ethanol and biodiesel production.
In an
effort to reduce price volatility and to generate higher, more consistent profit
margins, we have concentrated on the production and marketing of prepared foods
products. We believe that prepared foods products will generally have higher
profit margins than our other products. In addition, we believe that the
production and sale of prepared foods products in the US will generally reduce
the impact of feed ingredient costs on our profitability. Feed ingredient costs
become a decreasing percentage of a product’s total production cost as further
processing is performed, thereby generally reducing their impact on our
profitability. However, because a significant portion of these products have
typically been sold under fixed price contracts that are only negotiated on an
annual basis, sales of these products may not generate higher, more consistent
profit margins during periods of selling price and input cost volatility. We are
often unable to pass higher costs on to our customers in periods of rapidly
escalating feed ingredient prices, such as that experienced in the past year,
until the previous negotiated contract terms have expired. Given the current
uncertainties surrounding input prices of our feed ingredient costs, to help
mitigate this issue, we have begun negotiating with customers to reduce the
contract periods to periods of less than one year whenever
possible.
Since a
significant portion of US chicken production is exported, the commodity prices
of chicken can be adversely affected by disruptions in export markets. Material
disruptions in recent years included the negative impact that concerns over
avian influenza had on international demand for poultry products. Disruptions
may also be caused by restrictions on imports of US-produced poultry products
imposed by foreign governments for a variety of reasons, including the
protection of their domestic poultry producers and allegations of consumer
health issues. Both Russia and Japan have restricted the importation of
US-produced poultry for both of these reasons in recent periods. In July 2003,
the US and Mexico entered into a safeguard agreement with regard to imports into
Mexico of chicken leg quarters from the US. Under this agreement, a tariff rate
for chicken leg quarters of 98.8% of the sales price was established. This
tariff was imposed because of concerns that the duty-free importation of such
products as provided by the North American Free Trade Agreement would injure
Mexico’s poultry industry. This tariff rate was eliminated on January 1, 2008.
As a result of the elimination of this tariff, we expect greater amounts of
chicken to be imported into Mexico from the US. This could negatively affect the
profitability of Mexican chicken producers, including our Mexico operations.
Because disruptions in poultry export markets are often political, no assurances
can be given as to when the existing disruptions will be alleviated or that new
ones will not arise.
Business
Segments
Subsequent
to the sale of our turkey operations, we operate in two reportable business
segments as (1) a producer and seller of chicken products and (2) a seller of
other products. The following table presents certain information
regarding our segments:
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
June
28, 2008
|
June
30,
2007
|
June
28, 2008(a)
|
June
30,
2007(a)
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Net
sales to customers
|
||||||||||||||||
Chicken:
|
||||||||||||||||
United
States
|
$ | 1,829,163 | $ | 1,809,317 | $ | 5,280,272 | $ | 4,523,729 | ||||||||
Mexico
|
154,165 | 131,636 | 402,475 | 365,591 | ||||||||||||
Total
chicken
|
1,983,328 | 1,940,953 | 5,682,747 | 4,889,320 | ||||||||||||
Other
Products:
|
||||||||||||||||
United
States
|
214,135 | 157,794 | 648,431 | 482,114 | ||||||||||||
Mexico
|
10,013 | 5,752 | 24,445 | 12,207 | ||||||||||||
Total
other products
|
224,148 | 163,546 | 672,876 | 494,321 | ||||||||||||
$ | 2,207,476 | $ | 2,104,499 | $ | 6,355,623 | $ | 5,383,641 | |||||||||
Operating
income (loss)
|
||||||||||||||||
Chicken:
|
||||||||||||||||
United
States
|
$ | (65,425 | ) | $ | 116,749 | $ | (241,081 | ) | $ | 101,155 | ||||||
Mexico
|
6,964 | 14,427 | (848 | ) | 3,151 | |||||||||||
Total
chicken
|
(58,461 | ) | 131,176 | (241,929 | ) | 104,306 | ||||||||||
Other
products:
|
||||||||||||||||
United
States
|
18,366 | 4,872 | 74,601 | 15,080 | ||||||||||||
Mexico
|
1,015 | 848 | 2,980 | 1,935 | ||||||||||||
Total
other products
|
19,381 | 5,720 | 77,581 | 17,015 | ||||||||||||
Asset
impairment
|
— | — | (12,022 | ) | — | |||||||||||
Restructuring
charges
|
(3,451 | ) | — | (9,120 | ) | — | ||||||||||
$ | (42,531 | ) | $ | 136,896 | $ | (185,490 | ) | $ | 121,321 | |||||||
Depreciation
and amortization(b)(c)(d)
|
||||||||||||||||
Chicken:
|
||||||||||||||||
United
States
|
$ | 54,292 | $ | 53,629 | $ | 158,624 | $ | 130,120 | ||||||||
Mexico
|
2,587 | 2,754 | 7,831 | 8,306 | ||||||||||||
Total
chicken
|
56,879 | 56,383 | 166,455 | 138,426 | ||||||||||||
Other
products:
|
||||||||||||||||
United
States
|
3,565 | 1,160 | 9,465 | 5,917 | ||||||||||||
Mexico
|
62 | 58 | 187 | 156 | ||||||||||||
Total
other products
|
3,627 | 1,218 | 9,652 | 6,073 | ||||||||||||
$ | 60,506 | $ | 57,601 | $ | 176,107 | $ | 144,499 | |||||||||
(a)
|
The
Company acquired Gold Kist on December 27, 2006 for $1.139
billion.
|
|||||||||||||||
(b)
|
Includes
amortization of capitalized financing costs of $1.7 million, $1.1 million,
$3.8 million and $2.9 million recognized in the third quarter of fiscal
2008, the third quarter of fiscal 2007, the first nine months of fiscal
2008 and the first nine months of fiscal 2007,
respectively.
|
|||||||||||||||
(c)
|
Includes
amortization of intangible assets of $2.5 million recognized in the third
quarter of fiscal 2008 and $7.6 million recognized in the first nine
months of fiscal 2008 related to the Gold Kist
acquisition.
|
|||||||||||||||
(d)
|
Excludes
depreciation costs incurred by our discontinued turkey business of $0.4
million, $0.7 million and $1.2 million during the third quarter of fiscal
2007, the first nine months of fiscal 2008 and the first nine months of
fiscal 2007, respectively. Our discontinued turkey business did not incur
depreciation costs during the third quarter of fiscal
2008.
|
The
following table presents certain items as a percentage of net sales for the
periods indicated:
Percentage
of Net Sales
|
||||||||||||||||
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
June
28, 2008
|
June
30, 2007
|
June
28, 2008
|
June
30, 2007
|
|||||||||||||
Net
sales
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost
of sales
|
97.6 | % | 88.8 | % | 97.9 | % | 92.9 | % | ||||||||
Asset
impairment
|
— | % | — | % | 0.2 | % | — | % | ||||||||
Gross
profit
|
2.4 | % | 11.2 | % | 1.9 | % | 7.1 | % | ||||||||
Selling,
general and administrative (“SG&A”) expenses
|
4.2 | % | 4.7 | % | 4.7 | % | 4.8 | % | ||||||||
Restructuring
charges
|
0.2 | % | — | % | 0.1 | % | — | % | ||||||||
Operating
income (loss)
|
(2.0 | ) % | 6.5 | % | (2.9 | ) % | 2.3 | % | ||||||||
Interest
expense
|
1.6 | % | 1.9 | % | 1.6 | % | 1.7 | % | ||||||||
Income
(loss) from continuing operations
before
income taxes
|
(3.5 | ) % | 4.7 | % | (4.4 | ) % | 0.5 | % | ||||||||
Income
(loss) from continuing operations
|
(2.2 | ) % | 3.0 | % | (3.0 | ) % | 0.3 | % | ||||||||
Net
income (loss)
|
(2.4 | ) % | 3.0 | % | (3.1 | ) % | 0.3 | % |
All
percentage of net sales ratios included above are calculated from the face of
the Consolidated Financial Statements included elsewhere herein.
Results
of Operations
Fiscal
Third Quarter 2008 Compared to Fiscal Third Quarter 2007
Net sales. Net
sales for the third quarter of fiscal 2008 increased $103.0 million, or 4.9%,
over the third quarter of fiscal 2007. The following table provides net sales
information:
Change
from Three
Months
Ended June 30, 2007
|
|||||||||
Source
|
Three
Months Ended
June
28, 2008
|
Amount
|
Percentage
|
||||||
(In
millions, except percentages)
|
|||||||||
Chicken:
|
|||||||||
United
States
|
$ | 1,829.1 | $ | 19.7 | 1.1 | % |
(a)
|
||
Mexico
|
154.2 | 22.6 | 17.1 | % |
(b)
|
||||
Total
chicken
|
1,983.3 | 42.3 | 2.2 | % | |||||
Other
products:
|
|||||||||
United
States
|
214.2 | 56.5 | 35.7 | % |
(c)
|
||||
Mexico
|
10.0 | 4.2 | 74.1 | % |
(d)
|
||||
Total
other products
|
224.2 | 60.7 | 37.1 | % | |||||
Total
net sales
|
$ | 2,207.5 | $ | 103.0 | 4.9 | % | |||
(a)
|
US
chicken sales for the third quarter of fiscal 2008 increased from the same
period last year primarily as the result of a 0.9% increase in revenue per
pound sold and a 0.2% increase in pounds sold.
|
||||||||||||||
(b)
|
Mexico
chicken sales in the current quarter increased from the third quarter of
fiscal 2007 primarily because of an 8.2% increase in revenue per pound
sold and an 8.3% increase in pounds sold.
|
||||||||||||||
(c)
|
US
sales of other products increased mainly as the result of improved pricing
on commercial eggs and protein conversion products and higher sales
volumes of protein conversion products. Protein conversion is the process
of converting poultry byproducts into raw materials for grease, animal
feed, biodiesel and feed-stock for the chemical
industry.
|
||||||||||||||
(d)
|
Mexico
sales of other products increased principally because of both higher sales
volumes and higher selling prices for commercial
feed.
|
Gross profit
(loss). Gross profit decreased $181.6 million, or 77.3%, in
the third quarter of fiscal 2008 compared to the third quarter of fiscal 2007.
The following table provides gross profit (loss) information:
Percentage
of Net Sales
|
|||||||||||||||||||||
Components
|
Three
Months Ended
June 28,
2008
|
Change
From Three
Months
Ended
June
30, 2007
|
Three
Months Ended
June 28,
2008
|
Three
Months Ended
June 30,
2007
|
|||||||||||||||||
Amount
|
Percentage
|
||||||||||||||||||||
(In
millions, except percentages)
|
|||||||||||||||||||||
Net
sales
|
$ | 2,207.5 | $ | 103.0 | 4.9 | % | 100.0 | % | 100.0 | % | |||||||||||
Cost
of sales
|
2,154.3 | 284.6 | 15.2 | % | 97.6 | % | 88.8 | % |
(a)
|
||||||||||||
Gross
profit
|
$ | 53.2 | $ | (181.6 | ) | (77.3 | ) % | 2.4 | % | 11.2 | % |
(b)
|
|||||||||
(a)
|
Cost
of sales incurred in the third quarter of fiscal 2008 increased when
compared to the same period last year primarily because of increased feed
ingredients and energy costs. We also experienced in the third quarter of
fiscal 2008, and continue to experience, increased production and freight
costs related to operational inefficiencies, labor shortages at several
facilities, and higher fuel costs. We believe the labor shortages are
attributable in part to heightened publicity of governmental immigration
enforcement efforts, ongoing Company compliance efforts, and continued
changes in the Company’s employment practices in light of recently
published governmental best practices and new labor hiring regulations.
Cost of sales in our Mexico chicken operations increased mainly because of
higher feed ingredient costs.
|
(b)
|
Gross
profit as a percent of net sales generated in the third quarter of fiscal
2008 decreased 8.8 percentage points from the same period last year
primarily because of increased feed ingredient, energy, production and
freight costs partially offset by improved
pricing.
|
Operating income
(loss). Operating income for the third quarter of fiscal 2008
decreased $179.4 million, or 131.0%, compared to the third quarter of
fiscal 2007. The following tables provide operating income (loss)
information:
Three
Months Ended
|
Change
from Three Months Ended June 30, 2007
|
|||||||||||
Source
|
June
28, 2008
|
Amount
|
Percentage
|
|||||||||
(In
millions, except percentages)
|
||||||||||||
Chicken:
|
||||||||||||
United
States
|
$ | (65.4 | ) | $ | (182.2 | ) | (156.0 | ) % | ||||
Mexico
|
6.9 | (7.5 | ) | (52.1 | ) % | |||||||
Total
chicken
|
(58.5 | ) | (189.7 | ) | (144.6 | ) % | ||||||
Other
products:
|
||||||||||||
United
States
|
18.4 | 13.5 | 275.5 | % | ||||||||
Mexico
|
1.0 | 0.2 | 25.0 | % | ||||||||
Total
other products
|
19.4 | 13.7 | 240.4 | % | ||||||||
Asset
impairment
|
— | — | — | % | ||||||||
Restructuring
charges
|
(3.4 | ) | (3.4 | ) | — | % | ||||||
Total
operating loss
|
$ | (42.5 | ) | $ | (179.4 | ) | (131.0 | ) % |
Percentage
of Net Sales
|
|||||||||||||||||||||
Three
Months
Ended
June
28, 2008
|
Three
Months Ended
June
28, 2008
|
Three
Months Ended
June
30, 2007
|
|||||||||||||||||||
Change
From Quarter Ended
June
30, 2007
|
|||||||||||||||||||||
Components
|
Amount
|
Percentage
|
|||||||||||||||||||
(In
millions, except percentages)
|
|||||||||||||||||||||
Gross
profit
|
$ | 53.2 | $ | (181.6 | ) | (77.3 | ) % | 2.4 | % | 11.2 | % | ||||||||||
SG&A
expenses
|
92.3 | (5.6 | ) | (5.8 | ) % | 4.2 | % | 4.7 | % |
(a)
|
|||||||||||
Restructuring
charges
|
3.4 | 3.4 | — | 0.2 | % | — | % |
(b)
|
|||||||||||||
Operating
loss
|
$ | (42.5 | ) | $ | (179.4 | ) | (131.0 | ) % | (2.0 | ) % | 6.5 | % |
(c)
|
||||||||
(a)
|
Selling,
general and administrative expenses incurred in the third quarter of
fiscal 2008 decreased from the same period last year primarily because of
decreased insurance costs partially offset by increased costs for
intangibles amortization, outside services and brokered sales
activity.
|
||||||||||||||||||||
(b)
|
In
the third quarter of fiscal 2008, the Company recognized restructuring
charges related to continuing lease obligations for (a) distribution
centers in Nashville, Tennessee and Jackson, Mississippi and (b) an
administrative office in Duluth, Georgia.
|
||||||||||||||||||||
(c)
|
Operating
loss as a percentage of net sales generated in the third quarter of fiscal
2008 increased 8.5 percentage points when compared to the same period last
year primarily because of increased feed ingredient, energy, production
and freight costs partially offset by improved
pricing.
|
Interest expense. Interest expense
decreased 11.3% to $35.5 million in the third quarter of fiscal 2008 from $40.0
million in the third quarter of fiscal 2007 primarily because of the early
extinguishment of debt totaling $299.6 million in September 2007 and lower
interest rates on our variable-rate credit facilities partially offset by
increased debt under our credit facilities that were not extinguished. As a
percentage of sales, interest expense in the third quarter of fiscal 2008
decreased to 1.6% from 1.9% in the third quarter of fiscal 2007.
Miscellaneous,
net. Consolidated miscellaneous income decreased from $2.9
million in the third quarter of fiscal 2007 to $0.6 million in the third quarter
of fiscal 2008 primarily because of reduced amounts of both dividend income and
investment income partially offset by favorable currency exchange results due to
an increase in the average exchange rate between the Mexican peso and the US
dollar during those two periods.
Income tax expense
(benefit). Income tax benefit in the third quarter of fiscal
2008 was $28.5 million compared to income tax expense of $36.7 million in
the third quarter of fiscal 2007. The shift from income tax expense
to income tax benefit resulted primarily from a pretax loss incurred in the
third quarter of fiscal 2008 compared to pretax income generated in the same
period in fiscal 2007.
Loss from operation of discontinued
business. The Company incurred a loss from the operation of
its discontinued turkey business of $7.1 million ($4.4 million, net of tax)
during the third quarter of fiscal 2008 compared to a loss of $1.0 million ($0.6
million, net of tax) during the third quarter of fiscal 2007. Net
sales generated by the discontinued turkey business in the third quarter of
fiscal 2008 and the third quarter of fiscal 2007 were $14.8 million and $13.9
million, respectively.
First
Nine Months of Fiscal 2008 Compared to First Nine Months of Fiscal
2007
The
changes in our results of operations for the nine months ended June 28, 2008, as
compared to the same period in fiscal 2007 are impacted greatly as a result of
the acquisition of Gold Kist on December 27, 2006. The acquisition
resulted in significant increases in net sales and related costs, including
interest expense.
Net sales. Net
sales for the first nine months of fiscal 2008 increased $972.0 million, or
18.1%, over the first nine months of fiscal 2007. The following table provides
net sales information:
Change
from Nine Months Ended June 30, 2007
|
|||||||||||||||
Source
|
|
Nine
Months
Ended
June
28, 2008
|
|
Amount
|
Percentage
|
||||||||||
(In
millions, except percentages)
|
|||||||||||||||
Chicken:
|
|||||||||||||||
United
States
|
$ | 5,280.2 | $ | 756.5 | 16.7 | % |
(a)
|
||||||||
Mexico
|
402.5 | 36.9 | 10.1 | % |
(b)
|
||||||||||
Total
chicken
|
5,682.7 | 793.4 | 16.2 | % | |||||||||||
Other
products:
|
|||||||||||||||
United
States
|
648.5 | 166.4 | 34.5 | % |
(c)
|
||||||||||
Mexico
|
24.4 | 12.2 | 100.0 | % |
(d)
|
||||||||||
Total
other products
|
672.9 | 178.6 | 36.1 | % | |||||||||||
Total
net sales
|
$ | 6,355.6 | $ | 972.0 | 18.1 | % | |||||||||
(a)
|
US
chicken sales for the first nine months of fiscal 2008 increased from the
same period last year primarily as the result of a 13.1% increase in
volume resulting mainly from the acquisition of Gold Kist on December 27,
2006, increases in the average selling prices of chicken and, for legacy
Pilgrim’s Pride products, an improved product mix containing a greater
percentage of higher-margin products.
|
||||||||||||||
(b)
|
Mexico
chicken sales in the first nine months of fiscal 2008 increased from the
first nine months of fiscal 2007 primarily because of a 7.6% increase in
revenue per pound sold and a 2.3% increase in pounds
sold.
|
||||||||||||||
(c)
|
US
sales of other products increased mainly as the result of the acquisition
of Gold Kist on December 27, 2006, improved pricing on commercial eggs and
protein conversion products and higher sales volumes of protein conversion
products. Protein conversion is the process of converting poultry
byproducts into raw materials for grease, animal feed, biodiesel and
feed-stock for the chemical industry.
|
||||||||||||||
(d)
|
Mexico
sales of other products increased principally because of both higher sales
volumes and higher selling prices for commercial
feed.
|
Gross
profit. Gross profit decreased $258.2 million, or 67.8%, in
the first nine months of fiscal 2008 compared to the first nine months of fiscal
2007. The following table provides gross profit information:
Percentage
of Net Sales
|
|||||||||||||||||||||
Components
|
Nine
Months
Ended
June
28, 2008
|
Change
From Nine Months Ended
June
30, 2007
|
Nine
Months Ended
June 28,
2008
|
Nine
Months Ended
June 30,
2007
|
|||||||||||||||||
Amount
|
Percentage
|
||||||||||||||||||||
(In
millions, except percentages)
|
|||||||||||||||||||||
Net
sales
|
$ | 6,355.6 | $ | 972.0 | 18.1 | % | 100.0 | % | 100.0 | % | |||||||||||
Cost
of sales
|
6,220.7 | 1,218.2 | 24.4 | % | 97.9 | % | 92.9 | % |
(a)
|
||||||||||||
Asset
impairment
|
12.0 | 12.0 | — | 0.2 | % | — | % |
(b)
|
|||||||||||||
Gross
profit
|
$ | 122.9 | $ | (258.2 | ) | (67.8 | ) % | 1.9 | % | 7.1 | % |
(c)
|
|||||||||
(a)
|
Cost
of sales incurred in the first nine months of fiscal 2008 increased when
compared to the same period last year primarily because of the acquisition
of Gold Kist on December 27, 2006 and increased feed ingredients and
energy costs. We also experienced in the first nine months of fiscal 2008,
and continue to experience, increased production and freight costs related
to operational inefficiencies, labor shortages at several facilities, and
higher fuel costs. We believe the labor shortages are attributable in part
to heightened publicity of governmental immigration enforcement efforts,
ongoing Company compliance efforts, and continued changes in the Company’s
employment practices in light of recently published governmental best
practices and new labor hiring regulations. Cost of sales in our Mexico
chicken operations increased mainly because of higher feed ingredient
costs.
|
(b)
|
In
the second quarter of fiscal 2008, the Company recognized non-cash asset
impairment charges related to its announced closings of a chicken
processing complex in Siler City, North Carolina and six distribution
centers throughout the US.
|
(c)
|
Gross
profit as a percent of net sales generated in the first nine months of
fiscal 2008 decreased 5.2 percentage points from the same period last year
because of increased feed ingredients, energy, production and freight
costs partially offset by improved
pricing.
|
Operating income
(loss). Operating loss for the first nine months of fiscal
2008 increased $306.8 million, or 252.9%, compared to the first nine months
of fiscal 2007. The following tables provide operating income (loss)
information:
Nine Months
Ended
|
Change
from Nine Months Ended June 30, 2007
|
|||||||||||
Source
|
June
28, 2008
|
Amount
|
Percentage
|
|||||||||
(In
millions, except percentages)
|
||||||||||||
Chicken:
|
||||||||||||
United
States
|
$ | (241.1 | ) | $ | (342.3 | ) | (338.3 | ) % | ||||
Mexico
|
(0.9 | ) | (4.0 | ) | (125.0 | ) % | ||||||
Total
chicken
|
(242.0 | ) | (346.3 | ) | (332.0 | ) % | ||||||
Other
products:
|
||||||||||||
United
States
|
74.6 | 59.5 | 394.0 | % | ||||||||
Mexico
|
3.0 | 1.1 | 57.9 | % | ||||||||
Total
other products
|
77.6 | 60.6 | 356.5 | % | ||||||||
Asset
impairment
|
(12.0 | ) | (12.0 | ) | — | % | ||||||
Restructuring
charges
|
(9.1 | ) | (9.1 | ) | — | % | ||||||
Total
operating loss
|
$ | (185.5 | ) | $ | (306.8 | ) | (252.9 | ) % |
Percentage
of Net Sales
|
|||||||||||||||||||||
Nine Months
Ended
June
28, 2008
|
Nine Months
Ended
June
28, 2008
|
Nine
Months Ended
June
30, 2007
|
|||||||||||||||||||
Change
From Nine Months Ended
June
30, 2007
|
|||||||||||||||||||||
Components
|
Amount
|
Percentage
|
|||||||||||||||||||
(In
millions, except percentages)
|
|||||||||||||||||||||
Gross
profit
|
$ | 122.9 | $ | (258.2 | ) | (67.8 | ) % | 1.9 | % | 7.1 | % | ||||||||||
SG&A
expenses
|
299.3 | 39.5 | 15.2 | % | 4.7 | % | 4.8 | % |
(a)
|
||||||||||||
Restructuring
charges
|
9.1 | 9.1 | — | 0.1 | % | — | % |
(b)
|
|||||||||||||
Operating
loss
|
$ | (185.5 | ) | $ | (306.8 | ) | (252.9 | ) % | (2.9 | ) % | 2.3 | % |
(c)
|
||||||||
(a)
|
Selling,
general and administrative expense incurred in the first nine months of
fiscal 2008 increased from the same period last year primarily because of
the acquisition of Gold Kist on December 27, 2006.
|
||||||||||||||||||||||||||||||
(b)
|
In
the first nine months of fiscal 2008, the Company recognized restructuring
charges related to its announced closings of a chicken processing complex
in Siler City, North Carolina, an administrative office in Duluth, Georgia
and six distribution centers throughout the US.
|
||||||||||||||||||||||||||||||
(c)
|
Operating
income (loss) as a percentage of net sales generated in the first nine
months of fiscal 2008 decreased 5.2 percentage points when compared to the
same period last year primarily because of increased feed ingredients,
energy, production and freight costs partially offset by improved
pricing.
|
Interest expense. Interest expense
increased 7.5% to $99.2 million in the first nine months of fiscal 2008 from
$92.3 million for the first nine months of fiscal 2007 primarily because of
increased borrowings related to the acquisition of Gold Kist and the funding of
losses and a decrease in amounts of interest capitalized during the year
partially offset by early extinguishment of debt totaling $299.6 million in
September 2007 and lower interest rates on our variable-rate credit facilities.
As a percentage of sales, interest expense in the first nine months of fiscal
2008 decreased to 1.6% from 1.7 % in the first nine months of fiscal
2007.
Loss on early extinguishment of
debt. Loss on early extinguishment of debt of $14.5 million in
the first nine months of fiscal 2007 represents the premium paid of $7.4 million
and the elimination of $7.1 million of unamortized loan costs.
Miscellaneous,
net. Consolidated miscellaneous income decreased from $7.5
million in the first nine months of fiscal 2007 to $4.6 million in the first
nine months of fiscal 2008 primarily because of unfavorable currency exchange
results due to a decrease in the average exchange rate between the Mexican peso
and the US dollar during those two periods.
Income tax expense
(benefit). Income tax benefit in the first nine months of
fiscal 2008 was $85.5 million compared to income tax expense of $10.8 million in
the first nine months of fiscal 2007. The change in income tax expense (benefit)
resulted primarily from a pretax loss incurred in the first nine months of
fiscal 2008 compared to pretax income incurred in the same period last year
partially offset by income tax expense of $12.7 million recognized in the first
quarter of fiscal 2008 by our Mexico operations because of a valuation allowance
established for net operating loss carryforwards we believe do not meet the more
likely than not realization criteria of SFAS No. 109 due to the treatment
of the net operating losses under IETU.
Loss from operation of discontinued
business. The Company generated loss from the operation of its
discontinued turkey business of $7.2 million ($4.5 million, net of tax) during
the first nine months of fiscal 2008 compared to a loss of $1.0 million ($0.6
million, net of tax) during the first nine months of fiscal 2007. Net
sales generated by the discontinued turkey business in the first nine months of
fiscal 2008 and the first nine months of fiscal 2007 were $70.8 million and
$65.8 million, respectively.
Gain on disposal of discontinued
business. In March 2008, the Company sold certain assets of
its discontinued turkey business and recognized a gain of $1.5 million ($0.9
million, net of tax).
Liquidity
and Capital Resources
The
following table presents our available sources of liquidity as of June 28,
2008:
Facility
|
Amount
|
||||||||||||
Source
of Liquidity
|
Amount
|
Outstanding
|
Available
|
||||||||||
(In
millions)
|
|||||||||||||
Cash
and cash equivalents
|
$ | — | $ | — | $ | 54.1 | |||||||
Investments
in available-for-sale securities
|
— | — | 10.8 | ||||||||||
Receivables
purchase agreement
|
300.0 | 269.0 | 2.7 |
(a)
|
|||||||||
Debt
facilities:
|
|||||||||||||
Revolving
credit facilities
|
354.1 | 54.1 | 213.4 |
(b)(c)
|
|||||||||
Revolving/term
facility
|
550.0 | 175.0 | 375.0 |
(c)
|
|||||||||
(a)
|
The
aggregate amount of receivables sold plus the remaining receivables
available for sale declined from $300.0 million at September 29, 2007
to $271.7 million at June 28, 2008.
|
||||||||||||
(b)
|
At
June 28, 2008, the Company had $86.6 million in letters of credit
outstanding relating to normal business transactions.
|
||||||||||||
(c)
|
At
July 29, 2008, total availability under these debt facilities is $341.4
million.
|
At June
28, 2008, our working capital increased $139.8 million, or 35.3%, to $535.7
million and our current ratio increased to 1.58 to 1 compared with working
capital of $395.9 million and a current ratio of 1.44 to 1 at September 29, 2007
primarily because of the working capital changes discussed below.
Trade
accounts and other receivables decreased $4.2 million, or 3.7%, to $110.5
million at June 28, 2008 from $114.7 million at September 29, 2007. This
decrease resulted from lower sales volumes in the later portion of the third
quarter of fiscal 2008 than were generated in the later portion of the fourth
quarter of fiscal 2007.
Inventories
increased $177.8 million, or 19.2%, to $1,103.2 million at June 28, 2008 from
$925.3 million at September 29, 2007. This increase resulted from the
higher values of finished chicken products and live inventories primarily due to
higher feed ingredient prices.
Accounts
payable increased $67.5 million, or 16.9%, to $466.1 million at June 28, 2008
from $398.5 million at September 29, 2007 primarily because of the increased
cost of feed ingredients.
Accrued
liabilities decreased $52.9 million, or 10.6%, to $444.3 million at June 28,
2008 from $497.3 million at September 29, 2007 principally because of a
reduction in interest payable on notes payable due to the timing of our
semi-annual interest payments and amortization of acquisition-related
liabilities such as unfavorable sales contracts and unfavorable lease
contracts.
Cash used
in operating activities was $351.8 million for the nine months ended June 28,
2008 and cash provided by operating activities was $14.6 million for the nine
months ended June 30, 2007. The increase in cash used in operating activities
was primarily the result of an increase in the net loss incurred during the
first nine months of fiscal 2008 compared to the same period in fiscal 2007 and
changes in working capital items.
Cash used
in investing activities was $85.1 million and $1.157 billion for the first nine
months of fiscal 2008 and fiscal 2007, respectively. Capital expenditures of
$97.6 million and $135.0 million for the nine months ended June 28, 2008
and June 30, 2007, respectively, were primarily incurred for the routine
replacement of equipment and to improve efficiencies, expand capacity, and
reduce costs. We anticipate spending approximately $130.0 million to
$150.0 million in fiscal 2008 for the routine replacement of equipment,
capacity expansion and new automation to improve efficiencies. We expect to
finance such expenditures with cash on hand, operating cash flows if available,
and existing revolving/term and revolving credit facilities. Cash was used to
purchase investment securities totaling $25.5 million in the first nine months
of fiscal 2008 and $360.5 million in the first nine months of fiscal 2007. Cash
proceeds received in the first nine months of fiscal 2008 and the first nine
months of fiscal 2007 from the sale or maturity of investment securities were
$18.8 million and $442.0 million, respectively. In the first nine months of
fiscal 2007, we used cash of $1.109 billion to acquire Gold Kist. Cash
proceeds in the first nine months of fiscal 2008 and the first nine months of
fiscal 2007 from property disposals were $19.2 million and $5.2 million,
respectively.
Cash
provided by financing activities was $424.8 million and $1.043 billion for the
nine months ended June 28, 2008 and June 30, 2007, respectively. Cash proceeds
received in the first nine months of fiscal 2008 and fiscal 2007 from long-term
debt were $1.217 billion and $2.005 billion, respectively. Cash proceeds
received in the first nine months of fiscal 2008 from the sale of the Company’s
common stock was $177.2 million (net of costs incurred to complete the sale).
Cash was used to repay long-term debt totaling $1.017 billion in the first nine
months of fiscal 2008 and $982.7 million in the first nine months of fiscal
2007. Cash provided in the first nine months of fiscal 2008 and fiscal 2007
because of an increase in outstanding cash management obligations totaled $57.7
million and $41.5 million, respectively. Cash was used to pay debt issue and
amendment costs in the amount of $5.5 million and $15.6 million in the
first nine months of fiscal 2008 and fiscal 2007, respectively. Cash was also
used to pay dividends of $4.7 million and $4.5 million to holders of the
Company’s common stock in the first nine months of fiscal 2008 and fiscal 2007,
respectively.
The
Company is required, by certain provisions of its debt agreements, to maintain
certain levels of working capital and net worth, to limit dividends to a maximum
of $26.0 million per year, and to maintain various fixed charge, leverage,
current and debt-to-equity ratios. The Company’s debt agreements are also
generally cross-defaulted with one another, and the Company’s leases are
generally cross-defaulted with the credit agreements. At June 28, 2008, the
Company has fully complied with these covenants. In April 2008, the Company and
its lenders amended certain covenants in its credit facilities and receivables
purchase facility effective through the end of fiscal 2009 to levels the Company
believes it can comply with in the near-term despite the current economic issues
facing the chicken industry.
We are a
party to many routine contracts in which we provide general indemnities in the
normal course of business to third parties for various risks. We have not
recorded a liability for any of these indemnities as the likelihood of payment
in each case is considered remote.
There
were no material changes during the nine months ended June 28, 2008, outside the
ordinary course of business, in the specified contractual obligations presented
in the Company’s Annual Report on Form 10-K for fiscal 2007.
Off-Balance
Sheet Arrangements
In
connection with the Receivables Purchase Agreement dated June 26, 1998, as
amended (the “Agreement”), the Company sells, on a revolving basis, certain of
its trade receivables (the “Pooled Receivables”) to a special purpose entity
(“SPE”) wholly owned by the Company, which in turn sells a percentage ownership
interest to third parties. The SPE is a separate
corporate entity and its assets will be available first and foremost to satisfy
the claims of its creditors. The aggregate amount of Pooled Receivables
sold plus the remaining Pooled Receivables available for sale under this
Agreement declined from $300.0 million at September 29, 2007 to $271.7
million at June 28, 2008. The outstanding amount of Pooled Receivables
sold and the remaining Pooled Receivables available for sale under this
Agreement at June 28, 2008 were $269.0 million and $2.7 million,
respectively. The loss recognized on the sold receivables during the nine months
ended June 28, 2008 was not material.
Accounting
Pronouncements
Discussion regarding our
pending adoption of Statement of Financial Accounting Standards (“SFAS”)
No. 141(R), Business
Combinations, SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51, and SFAS
No. 161, Disclosures about
Derivative Instruments and Hedging Activities—an amendment of FASB Statement No.
133, is
included in Note A of the notes to our consolidated financial statements
included elsewhere in this Quarterly Report.
Critical
Accounting Policies
During
the nine months ended June 28, 2008:
§
|
We
did not change any of our existing critical accounting
policies;
|
§
|
No
existing accounting policies became critical accounting policies because
of an increase in the materiality of associated transactions or changes in
the circumstances to which associated judgments and estimates relate;
and
|
§
|
There
were no significant changes in the manner in which critical accounting
policies were applied or in which related judgments and estimates were
developed, except for the required adoption of Financial Accounting
Standards Board Interpretation No. 48, Accounting for Uncertainty in
Income Taxes—an interpretation of FASB Statement No. 109,
effective September 30, 2007.
|
Feed
Ingredients
We
purchase certain commodities, primarily corn and soybean meal, for use as
ingredients in the feed we either sell commercially or consume in our live
operations. As a result, our earnings are affected by changes in the price and
availability of such feed ingredients. We will from time to time lock in future
feed ingredient prices using a variety of natural hedges and derivative
instruments such as forward purchase agreements with suppliers and futures
contracts.
Market
risk is estimated as a hypothetical 10% increase in the weighted-average cost of
our primary feed ingredients as of June 28, 2008. Based on our feed consumption
during the nine months ended June 28, 2008, such an increase would have resulted
in an increase to cost of sales of approximately $249.2 million, excluding the
impact of any feed ingredients derivative contracts in that period. A 10% change
in ending feed ingredient inventories at June 28, 2008 would be $7.8 million,
excluding any potential impact on the production costs of our chicken
inventories.
Interest
Rates
Our
earnings are affected by changes in interest rates due to the impact those
changes have on our variable-rate debt instruments and the fair value of our
fixed-rate debt instruments. During the nine months ended June 28, 2008, the
Company borrowed $1.322 billion and repaid $1.122 billion under its three
variable-rate revolving credit facilities. Our variable-rate debt instruments
represented approximately 42.3% of our long-term debt at June 28, 2008. Holding
other variables constant, including levels of indebtedness, a 25-basis-points
increase in interest rates would have increased our interest expense by $1.2
million for the first nine months of fiscal 2008. These amounts are determined
by considering the impact of the hypothetical interest rates on our
variable-rate long-term debt at June 28, 2008.
Foreign
Currency
Our
earnings are also affected by foreign currency exchange rate fluctuations
related to the Mexican peso net monetary position of our Mexico subsidiaries. We
manage this exposure primarily by attempting to minimize our Mexican peso net
monetary position. We are also exposed to the effect of potential currency
exchange rate fluctuations to the extent that amounts are repatriated from
Mexico to the US. However, we currently anticipate that the cash flows of our
Mexico subsidiaries will be reinvested in our Mexico operations. In addition,
the Mexican peso exchange rate can directly and indirectly impact our financial
condition and results of operations in several ways, including potential
economic recession in Mexico because of devaluation in their
currency.
The
impact on our financial condition and results of operations resulting from a
hypothetical change in the exchange rate between the US dollar and the Mexican
peso cannot be reasonably estimated. Foreign currency exchange gains and losses,
representing the change in the US dollar value of the net monetary assets of our
Mexico subsidiaries denominated in Mexican pesos, was a gain of $0.7 million in
the first nine months of fiscal 2008 compared to a loss of $1.3 million for the
first nine months of fiscal 2007. The average exchange rate for the first nine
months of fiscal 2008 was 10.71 Mexican pesos to 1 US dollar. The average
exchange rate for the first nine months of fiscal 2007 was 10.94 Mexican pesos
to 1 US dollar. No assurance can be given as to how future movements in the
Mexican peso could affect our future financial condition or results of
operations.
Investment
Quality
The
Company and certain retirement plans that it sponsors invest in a variety of
financial instruments. In response to the continued turbulence in global
financial markets, we have analyzed our portfolios of investments and, to the
best of our knowledge, none of our investments, including money market funds
units, commercial paper and municipal securities, have been downgraded because
of this turbulence, and neither we nor any fund in which we participate hold
significant amounts of structured investment vehicles, mortgage backed
securities, collateralized debt obligations, auction-rate securities, credit
derivatives, hedge funds investments, fund of funds investments or perpetual
preferred securities.
Forward
Looking Statements
Statements
of our intentions, beliefs, expectations or predictions for the future, denoted
by the words "anticipate," "believe," "estimate," "expect," "project," “plan,”
"imply," "intend," "foresee" and similar expressions, are forward-looking
statements that reflect our current views about future events and are subject to
risks, uncertainties and assumptions. Such risks, uncertainties and assumptions
include the following:
§
|
Matters
affecting the poultry industry generally, including fluctuations in the
commodity prices of feed ingredients and
chicken;
|
§
|
Additional
outbreaks of avian influenza or other diseases, either in our own flocks
or elsewhere, affecting our ability to conduct our operations and/or
demand for our poultry products;
|
§
|
Contamination
of our products, which has previously and can in the future lead to
product liability claims and product
recalls;
|
§
|
Exposure
to risks related to product liability, product recalls, property damage
and injuries to persons, for which insurance coverage is expensive,
limited and potentially inadequate;
|
§
|
Management
of our cash resources, particularly in light of our substantial
leverage;
|
§
|
Restrictions
imposed by, and as a result of, our substantial
leverage;
|
§
|
Changes
in laws or regulations affecting our operations or the application
thereof;
|
§
|
New
immigration legislation or increased enforcement efforts in connection
with existing immigration legislation that cause our costs of business to
increase, cause us to change the way in which we do business or otherwise
disrupt our operations;
|
§
|
Competitive
factors and pricing pressures or the loss of one or more of our largest
customers;
|
§
|
Inability
to consummate, or effectively integrate, any acquisition or realize the
associated cost savings and operating
synergies;
|
§
|
Currency
exchange rate fluctuations, trade barriers, exchange controls,
expropriation and other risks associated with foreign
operations;
|
§
|
Disruptions
in international markets and distribution channels;
and
|
§
|
The
impact of uncertainties of litigation as well as other risks described
herein and under “Risk Factors” in our Annual Report on Form 10-K for the
year ended September 29, 2007 and subsequent reports filed with the
Securities and Exchange Commission.
|
Actual
results could differ materially from those projected in these forward-looking
statements as a result of these factors, among others, many of which are beyond
our control.
In making
these statements, we are not undertaking, and specifically decline to undertake,
any obligation to address or update each or any factor in future filings or
communications regarding our business or results, and we are not undertaking to
address how any of these factors may have caused changes to information
contained in previous filings or communications. Although we have attempted to
list comprehensively these important cautionary risk factors, we must caution
investors and others that other factors may in the future prove to be important
and affect our business or results of operations.
An
evaluation was performed under the supervision and with the participation of the
Company’s management, including the Senior Chairman of the Board of Directors,
the Chief Executive Officer and the Chief Financial Officer, of the
effectiveness of the design and operation of the Company’s “disclosure controls
and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the
period covered by this Quarterly Report on Form 10-Q. Based on that evaluation,
the Company’s management, including the Senior Chairman of the Board of
Directors, the Chief Executive Officer and the Chief Financial Officer,
concluded that the Company’s disclosure controls and procedures were effective
to ensure that information required to be disclosed by the Company in reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms, and that information we are required to
disclose in our reports filed with the Securities and Exchange Commission
is accumulated and communicated to our management, including our Senior Chairman
of the Board of Directors, the Chief Executive Officer and the Chief
Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.
In
connection with the evaluation described above, the Company’s management,
including the Senior Chairman of the Board of Directors, the Chief Executive
Officer and the Chief Financial Officer, identified no change in the Company's
internal control over financial reporting that occurred during the Company’s
fiscal quarter ended June 28, 2008, and that has materially affected, or is
reasonably likely to materially affect, the Company’s internal controls over
financial reporting.
PART
II. OTHER INFORMATION
ITEM
1. LEGAL
PROCEEDINGS
The Wage
and Hour Division of the U.S. Department of Labor conducted an industry wide
investigation to ascertain compliance with various wage and hour issues,
including the compensation of employees for the time spent on activities such as
donning and doffing clothing and personal protective equipment. Due, in part, to
the government investigation and the recent U.S. Supreme Court decision in IBP, Inc. v. Alvarez,
employees have brought claims against the Company. The claims filed against the
Company as of the date of this report include: “Juan Garcia, et al. v.
Pilgrim’s Pride Corporation, a/k/a Wampler Foods, Inc.”, filed in Pennsylvania
state court on January 27, 2006 and subsequently removed to the U.S. District
Court for the Eastern District of Pennsylvania; “Esperanza Moya, et al. v.
Pilgrim’s Pride Corporation and Maxi Staff, LLC”, filed March 23, 2006 in the
Eastern District of Pennsylvania; “Barry Antee, et al. v. Pilgrim’s Pride
Corporation” filed April 20, 2006 in the Eastern District of Texas;
“Stephania Aaron, et al. v. Pilgrim’s Pride Corporation” filed August 22,
2006 in the Western District of Arkansas; “Salvador Aguilar, et al. v. Pilgrim’s
Pride Corporation” filed August 23, 2006 in the Northern District of Alabama;
“Benford v. Pilgrim’s Pride Corporation” filed November 2, 2006 in the Northern
District of Alabama; “Porter v. Pilgrim’s Pride Corporation” filed December 7,
2006 in the Eastern District of Tennessee; “Freida Brown, et al v. Pilgrim’s
Pride Corporation” filed March 14, 2007 in the Middle District of Georgia,
Athens Division; “Roy Menser, et al v. Pilgrim’s Pride Corporation” filed
February 28, 2007 in the Western District of Paducah, Kentucky; “Victor Manuel
Hernandez v. Pilgrim’s Pride Corporation” filed January 30, 2007 in the Northern
District of Georgia, Rome Division; “Angela Allen et al v. Pilgrim’s Pride
Corporation” filed March 27, 2007 in United States District Court, Middle
District of Georgia, Athens Division; Daisy Hammond and Felicia Pope v.
Pilgrim’s Pride Corporation, in the Gainesville Division, Northern District of
Georgia, filed on June 6, 2007; Gary Price v. Pilgrim’s Pride Corporation, in
the U.S. District Court for the Northern District of Georgia, Atlanta Division,
filed on May 21, 2007; Kristin Roebuck et al v. Pilgrim’s Pride Corporation, in
the U.S. District Court, Athens, Georgia, Middle District, filed on May 23,
2007; and Elaine Chao v. Pilgrim’s Pride Corporation, in the U.S. District
Court, Dallas, Texas, Northern District, filed on August 6, 2007. The plaintiffs
generally purport to bring a collective action for unpaid wages, unpaid overtime
wages, liquidated damages, costs, attorneys' fees, and declaratory and/or
injunctive relief and generally allege that they are not paid for the time it
takes to either clear security, walk to their respective workstations, don and
doff protective clothing, and/or sanitize clothing and equipment. The presiding
judge in the consolidated action in El Dorado issued an initial Case Management
order on July 9, 2007. Plaintiffs’ counsel filed a Consolidated Amended
Complaint and the parties filed a Joint Rule 26(f) Report. A complete scheduling
order has not been issued, and discovery has not yet commenced. On
March 13, 2008, Judge Barnes issued an opinion and order finding that plaintiffs
and potential class members are similarly situated and conditionally certifying
the class for a collective action. On May 14, 2008, the Court issued its order
modifying and approving the court-authorized notice for current and former
employees to opt into the class. Persons who choose to opt into the
class are to do so within 90 days after the date on which the first notice was
mailed. The opt-in period is open until September 17,
2008. As of July 25, 2008, approximately 10,000 plaintiffs have opted
into the class. As of the date of this report, the following suits
have been filed against Gold Kist, now merged into Pilgrim’s Pride Corporation,
which make one or more of the allegations referenced above: Merrell v. Gold
Kist, Inc., in the U.S. District Court for the Northern District of Georgia,
Gainesville Division, filed on December 21, 2006; Harris v. Gold Kist,
Inc., in the U.S. District Court for the Northern District of Georgia, Newnan
Division, filed on December 21, 2006; Blanke v. Gold Kist, Inc., in the
U.S. District Court for the Southern District of Georgia, Waycross Division,
filed on December 21, 2006; Clarke v. Gold Kist, Inc., in the U.S. District
Court for the Middle District of Georgia, Athens Division, filed on December 21,
2006; Atchison v. Gold Kist, Inc., in the U.S. District Court for the Northern
District of Alabama, Middle Division, filed on October 3, 2006; Carlisle
v. Gold Kist, Inc., in the U.S. District Court for the Northern District of
Alabama, Middle Division, filed on October 2, 2006; Benbow v. Gold Kist, Inc.,
in the U.S. District Court for the District of South Carolina, Columbia
Division, filed on October 2, 2006; Bonds v. Gold Kist, Inc., in the U.S.
District Court for the Northern District of Alabama, Northwestern Division,
filed on October 2, 2006. On April 23, 2007, Pilgrim’s filed a Motion to
Transfer and Consolidate with the Judicial Panel on Multidistrict Litigation
(“JPML”) requesting that all of the pending Gold Kist cases be consolidated into
one case. Pilgrim’s withdrew its Motion subject to the Plaintiffs’
counsel’s agreement to consolidate the seven separate actions into the pending
Benbow case by
dismissing those lawsuits and refiling/consolidating them into the Benbow action. Motions to
Dismiss have been filed in all of the pending seven cases, and all of these
cases have been formally dismissed. Pursuant to an agreement between the
parties, which was approved by Court-order on June 6, 2007, these cases have
been consolidated with the Benbow case. On
that date, Plaintiffs were authorized to send notice to individuals regarding
the pending lawsuits and were instructed that individuals had three months to
file consents to opting in as plaintiffs in the consolidated
cases. To date, there are approximately 3,100 named plaintiffs and
opt-in plaintiffs in the consolidated cases. The Court recently
ordered that Pilgrim’s can depose the named plaintiffs and 10% of the opt-in
class. The parties are attempting to reach an agreement concerning
the extent of written discovery. The Company intends to assert a vigorous
defense to the litigation. The amount of ultimate liability with respect to any
of these cases cannot be determined at this time.
We are
subject to various other legal proceedings and claims, which arise in the
ordinary course of our business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect our
financial condition, results of operations or cash flows.
ITEM
1A. RISK
FACTORS
In
addition to the other information set forth in this Quarterly Report, you should
carefully consider the risks discussed in our 2007 Annual Report on Form 10-K,
our Quarterly Report on Form 10-Q for the period ended March 29, 2008 and
subsequent reports filed with the Securities and Exchange Commission, including
under the heading "Item 1A. Risk Factors", which risks could materially affect
the Company’s business, financial condition or future results. These risks are
not the only risks facing the Company. Additional risks and uncertainties not
currently known to the Company or that it currently deems to be immaterial also
may materially adversely affect the Company's business, financial condition or
future results.
ITEM
6. EXHIBITS
3.1
|
Certificate
of Incorporation of the Company, as amended (incorporated by reference
from Exhibit 3.1 of the Company’s Annual Report on Form 10-K for the
fiscal year ended October 2, 2004 filed on November 24,
2004).
|
|
3.2
|
Amended
and Restated Corporate Bylaws of the Company (incorporated by reference
from Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on
December 4, 2007).
|
|
4.1
|
Senior
Debt Securities Indenture dated as of January 24, 2007, by and between the
Company and Wells Fargo Bank, National Association, as trustee
(incorporated by reference from Exhibit 4.1 to the Company’s Current
Report on Form 8-K filed on January 24, 2007).
|
|
4.2
|
First
Supplemental Indenture to the Senior Debt Securities Indenture dated as of
January 24, 2007, by and between the Company and Wells Fargo Bank,
National Association, as trustee (incorporated by reference from Exhibit
4.2 to the Company’s Current Report on Form 8-K filed on January 24,
2007).
|
|
4.3
|
Form
of 7 5/8% Senior Note due 2015 (included in Exhibit 4.2 to the Company’s
Current Report on Form 8-K filed on January 24, 2007 and incorporated by
reference from Exhibit 4.3 to the Company’s Current Report on Form 8-K
filed on January 24, 2007).
|
|
4.4
|
Senior
Subordinated Debt Securities Indenture dated as of January 24, 2007, by
and between the Company and Wells Fargo Bank, National Association, as
trustee (incorporated by reference from Exhibit 4.4 to the Company’s
Current Report on Form 8-K filed on January 24, 2007).
|
|
4.5
|
First
Supplemental Indenture to the Senior Subordinated Debt Securities
Indenture dated as of January 24, 2007, by and between the Company and
Wells Fargo Bank, National Association, as trustee (incorporated by
reference from Exhibit 4.5 to the Company’s Current Report on Form 8-K
filed on January 24, 2007).
|
|
4.6
|
Form
of 8 3/8% Subordinated Note due 2017 (included in Exhibit 4.5 to the
Company’s Current Report on Form 8-K filed on January 24, 2007 and
incorporated by reference from Exhibit 4.6 to the Company’s Current Report
on Form 8-K filed on January 24, 2007).
|
|
10.1
|
Eighth
Amendment to Credit Agreement, dated as of April 30, 2008, by and among
the Company as borrower, CoBank, ACB, as administrative agent, and the
other syndication parties signatory thereto (incorporated by
reference from Exhibit 10.1 to the Company's Current Report on Form 8-K
filed on May 5, 2008).
|
|
10.2
|
Second
Amendment to the Fourth Amended and Restated Secured Credit Agreement,
dated as of April 30, 2008, by and among the Company, To-Ricos, Ltd.,
To-Ricos Distribution, Ltd., Bank of Montreal, as administrative agent,
and the other lenders signatory thereto (incorporated by reference from
Exhibit 10.2 to the Company's Current Report on Form 8-K filed on May 5,
2008).
|
10.3
|
Amendment
No. 7 to Receivables Purchase Agreement, dated as of May 1, 2008, by and
among the Company, Pilgrim's Pride Funding Corporation, Fairway Finance
Company, LLC, and BMO Capital Markets Corp. (incorporated by reference
from Exhibit 10.3 to the Company's Current Report on Form 8-K filed on May
5, 2008).
|
|
10.4
|
Change
to Company Contribution Amount Under the Amended and Restated 2005
Deferred Compensation Plan of the Company. *
|
|
12
|
Computation
of Ratio of Earnings to Fixed Charges.*
|
|
31.1
|
Certification
of Co-Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|
|
31.2
|
Certification
of Co-Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|
|
31.3
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.*
|
|
32.1
|
Certification
of Co-Principal Executive Officer of Pilgrim's Pride Corporation pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
32.2
|
Certification
of Co-Principal Executive Officer of Pilgrim's Pride Corporation pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
32.3
|
Certification
of Chief Financial Officer of Pilgrim's Pride Corporation pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
*
Filed herewith
|
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
|
||
/s/
Richard A. Cogdill
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Date:
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July
29, 2008
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Richard
A. Cogdill
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Chief
Financial and Accounting Officer
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3.1
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Certificate
of Incorporation of the Company, as amended (incorporated by reference
from Exhibit 3.1 of the Company’s Annual Report on Form 10-K for the
fiscal year ended October 2, 2004 filed on November 24,
2004).
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3.2
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Amended
and Restated Corporate Bylaws of the Company (incorporated by reference
from Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on
December 4, 2007).
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4.1
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Senior
Debt Securities Indenture dated as of January 24, 2007, by and between the
Company and Wells Fargo Bank, National Association, as trustee
(incorporated by reference from Exhibit 4.1 to the Company’s Current
Report on Form 8-K filed on January 24, 2007).
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4.2
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First
Supplemental Indenture to the Senior Debt Securities Indenture dated as of
January 24, 2007, by and between the Company and Wells Fargo Bank,
National Association, as trustee (incorporated by reference from Exhibit
4.2 to the Company’s Current Report on Form 8-K filed on January 24,
2007).
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4.3
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Form
of 7 5/8% Senior Note due 2015 (included in Exhibit 4.2 to the Company’s
Current Report on Form 8-K filed on January 24, 2007 and incorporated by
reference from Exhibit 4.3 to the Company’s Current Report on Form 8-K
filed on January 24, 2007).
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4.4
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Senior
Subordinated Debt Securities Indenture dated as of January 24, 2007, by
and between the Company and Wells Fargo Bank, National Association, as
trustee (incorporated by reference from Exhibit 4.4 to the Company’s
Current Report on Form 8-K filed on January 24, 2007).
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4.5
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First
Supplemental Indenture to the Senior Subordinated Debt Securities
Indenture dated as of January 24, 2007, by and between the Company and
Wells Fargo Bank, National Association, as trustee (incorporated by
reference from Exhibit 4.5 to the Company’s Current Report on Form 8-K
filed on January 24, 2007).
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4.6
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Form
of 8 3/8% Subordinated Note due 2017 (included in Exhibit 4.5 to the
Company’s Current Report on Form 8-K filed on January 24, 2007 and
incorporated by reference from Exhibit 4.6 to the Company’s Current Report
on Form 8-K filed on January 24, 2007).
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10.1
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Eighth
Amendment to Credit Agreement, dated as of April 30, 2008, by and among
the Company as borrower, CoBank, ACB, as administrative agent, and the
other syndication parties signatory thereto (incorporated by
reference from Exhibit 10.1 to the Company's Current Report on Form 8-K
filed on May 5, 2008).
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10.2
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Second
Amendment to the Fourth Amended and Restated Secured Credit Agreement,
dated as of April 30, 2008, by and among the Company, To-Ricos, Ltd.,
To-Ricos Distribution, Ltd., Bank of Montreal, as administrative agent,
and the other lenders signatory thereto (incorporated by reference from
Exhibit 10.2 to the Company's Current Report on Form 8-K filed on May 5,
2008).
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10.3
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Amendment
No. 7 to Receivables Purchase Agreement, dated as of May 1, 2008, by and
among the Company, Pilgrim’s Pride Funding Corporation, Fairway Finance
Company, LLC, and BMO Capital Markets Corp. (incorporated by reference
from Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on May
5, 2008).
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Change
to Company Contribution Amount Under the Amended and Restated 2005
Deferred Compensation Plan of the Company. *
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Computation
of Ratio of Earnings to Fixed Charges.*
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Certification
of Co-Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
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Certification
of Co-Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
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Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.*
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Certification
of Co-Principal Executive Officer of Pilgrim's Pride Corporation pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.*
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Certification
of Co-Principal Executive Officer of Pilgrim's Pride Corporation pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.*
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Certification
of Chief Financial Officer of Pilgrim's Pride Corporation pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.*
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*
Filed herewith
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