SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarter ended January 1, 1994 Commission file number 1-9273 PILGRIM'S PRIDE CORPORATION (Exact name of registrant as specified in its charter) Delaware 75-1285071 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 110 South Texas, Pittsburg, TX 75686-0093 (Address of principal executive offices) (Zip code) (903) 855-1000 (Telephone number of principle executive offices) Not Applicable Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common Stock $.01 Par Value--27,589,250 shares as of February 11, 1994
<PAGE> INDEX PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited): Condensed consolidated balance sheets: January 1, 1994 and October 2, 1993 Consolidated statements of income: Three months ended January 1, 1994 and January 2, 1993 Consolidated statements of cash flows: Three months ended January 1, 1994 and January 2, 1993 Notes to condensed consolidated financial statements-- January 1, 1994
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
PART I. FINANCIAL INFORMATION PILGRIM'S PRID E CORPORATION AND SUBSIDIARIES CONDENSED CONS OLIDATED BALANCE SHEETS
Item 1: Financial Statements (Unaudited): Jan 1, 1994 (Unaudited) Oct 2, 1993 ASSETS Current Assets: Cash and cash equivalents $ 4,580,000 $ 4,526,000 Trade accounts and notes receivable, net 66,146,000 59,608,000 Inventories 88,692,000 91,794,000 Deferred income taxes 9,400,000 -- Prepaid expenses 978,000 1,260,000 Other current assets 9,952,000 9,843,000 Total Current Assets 179,748,000 167,031,000 Other Assets 12,781,000 13,114,000 Property, Plant and Equipment 372,062,000 366,221,000 Less accumulated depreciation and amortization 128,750,000 123,520,000 243,312,000 242,701,000 $ 435,841,000 $ 422,846,000 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes payable - banks $ 5,000,000 $ 12,000,000 Accounts payable 41,126,000 38,330,000 Accrued expenses 30,382,000 30,370,000 Current portion of long-term debt 11,959,000 13,643,000 Total Current Liabilities 88,467,000 94,343,000 Long-Term Debt, less current portion 158,138,000 159,554,000 Deferred Income Taxes 48,936,000 36,656,000 Stockholders' Equity: Common stock; $.01 par value 276,000 276,000 Additional paid-in capital 79,763,000 79,763,000 Retained earnings 60,261,000 52,254,000 Total Stockholders' Equity 140,300,000 132,293,000 $ 435,841,000 $ 422,846,000 See notes to condensed consolidated financial statements.
<PAGE> PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended January 1, 1994 January 2, 1993 (13 weeks) (14 weeks) Net sales $ 221,851,000 $ 220,453,000 Costs and expenses: Cost of sales 190,714,000 192,118,000 Selling, general and administrative 14,979,000 14,192,000 205,693,000 206,310,000 Operating Income 16,158,000 14,143,000 Other expense (income): Interest expense 4,950,000 6,478,000 Miscellaneous [822,000] [502,000] Total other expense, net 4,128,000 5,976,000 Income before income taxes 12,030,000 8,167,000 Income tax expense 3,609,000 1,339,000 Net Income $ 8,421,000 $ 6,828,000 Net income per share $ .31 $ .25 Dividends declared per common share $ .015 $ -- Average shares outstanding 27,589,250 27,589,250 See Notes to condensed consolidated financial statements.
<PAGE> PILGRIM'S PRIDE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended January 1, 1994 January 2,1993 (13 weeks) (14 weeks) Cash Flow From Operating Activities: Net income $ 8,421,000 $ 6,828,000 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 6,248,000 6,767,000 Provision for losses on accounts receivable 533,000 215,000 Deferred income taxes 2,880,000 728,000 Changes in operating assets and liabilities: Accounts and notes receivable [7,072,000] 535,000 Inventories 3,102,000 [3,071,000] Prepaid expenses and other current assets 171,000 895,000 Accounts payable and accrued expenses 3,222,000 [5,555,000] (Gain) loss on property disposals [120,000] [200,000] Other [139,000] [137,000] Cash Provided By Operating Activities: 17,246,000 7,005,000 Investing Activities: Acquisitions of property and equipment [6,409,000] [1,471,000] Proceeds from property disposals 249,000 435,000 Net change in other assets [35,000] 234,000 Net Cash Used In Investing Activities [6,195,000] [802,000] Financing Activities: Proceeds from notes payable to banks -- -- Re-payments of notes payable to banks [7,000,000] -- Proceeds from long-term debt 31,000 12,000 Payments on long-term debt [3,169,000] [5,591,000] Cash dividends paid [828,000] [414,000] Cash Used In Financing Activities [10,966,000] [5,993,000] Effect of exchange rate changes on cash and cash equivalents [31,000] [34,000] Increase in cash and cash equivalents 54,000 176,000 Cash and cash equivalents at beginning of year 4,526,000 11,550,000 Cash and cash equivalents at end of quarter $ 4,580,000 $ 11,726,000 Supplemental disclosure information: Cash paid during the period for Interest (net of amount capitalized) $ 5,003,000 $ 8,960,000 Income Taxes $ 3,302,000 $ 255,000 See notes to condensed consolidated financial statements.
<PAGE> NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT (Unaudited) _________________________________________________________________ NOTE A--BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the period ended January 1, 1994 are not necessarily indicative of the results that may be expected for the year ended October 1, 1994. For further information, refer to the consolidated financial statements and footnotes thereto included in Pilgrim's annual report on Form 10-K for the year ended October 2, 1993. The consolidated financial statements include the accounts of Pilgrim's and its wholly 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 non-current 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. The translation adjustments are reflected in the statements of operations. NOTE B--NET INCOME PER COMMON SHARE Earnings per share for the periods ended January 1, 1994 and January 2, 1993 are based on the weighted average shares outstanding for the periods.
<PAGE> NOTE C--INVENTORIES Inventories consist of the following: Jan 1, 1994 Oct 2, 1993 Live broilers and hens $ 39,276,000 $ 44,417,000 Feed, eggs and other 27,555,000 25,473,000 Finished poultry products 21,861,000 21,904,000 $ 88,692,000 $ 91,794,000 NOTE D--INCOME TAXES Effective October 3, 1993, the Company adopted the provisions of FAS Statement No. 109, "Accounting for Income Taxes." As permitted under the new rules, prior years' financial statements have not been restated. The cumulative effect of adopting Statement 109 as of October 3, 1993 resulted in no change to the reported net income amounts for the quarter ended January 1, 1994. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's United States deferred tax liabilities and assets as of October 3, 1993 are as follows (no significant foreign deferred tax assets or liabilities exist): Deferred tax liabilities: Tax over book depreciation $ 23,004 Prior use of cash accounting 32,758 Total deferred tax liabilities 55,762 Deferred tax assets: AMT credit carryforward 3,967 General business carryforward 2,462 Net operating loss carryforwards 6,589 Other 6,088 Total deferred tax assets 19,106 Net deferred tax liabilities $ 36,656
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations _________________________________________________________________ The following table presents certain items as a percentage of net sales for the periods indicated. Percentage of Net Sales Three Months Ended Jan 1, 1994 Jan 2, 1993 (13 weeks) (14 weeks) Net sales 100.0% 100.0% Costs and expenses: Cost of sales 86.0% 87.1% Gross profit 14.0% 12.9% Selling, general and administrative 6.8% 6.4% Operating Income 7.3% 6.4% Interest expense 2.2% 2.9% Income before income taxes 5.4% 3.7% Net Income 3.8% 3.1% First Quarter 1994, Compared to First Quarter 1993 The accounting cycle of Pilgrim's Pride Corporation, the "Company", consisted of 13 weeks of operations during the first quarter of fiscal 1994 compared to 14 weeks during the first quarter of fiscal 1993, an operating cycle reduction of 7.7%. Consolidated net sales were $221.9 million for the first quarter of fiscal 1994, an increase of $1.4 million, or .6%, over the first quarter of fiscal 1993. The increase in consolidated net sales resulted from a $1.5 million increase in Mexican chicken sales to $48.9 million and a $.2 million increase in domestic chicken sales to $147.1 million offset by a $.3 million decrease in sales of other domestic products to $25.8 million. The increase in Mexican chicken sales was primarily due to a 3.1% increase in the total revenue per dressed pound produced offset by a 9.3% decrease in dressed pounds produced. The increase in domestic chicken sales was primarily due to a 7.4% increase in total revenue per dressed pound produced offset by a 6.8% decrease in dressed pounds produced. Consolidated cost of sales was $190.7 million in the first quarter of fiscal 1994, a decrease of $1.4 million, or .7%, over the first quarter of fiscal 1993. The decrease primarily resulted from a $7.0 million decrease in cost of sales of Mexican operations, offset by a $5.6 million increase in the cost of sales in domestic operations. The $7.0 million cost of sales decrease in Mexican operations was primarily due to decreased dressed pounds produced and the effects of the change in Mexican operations sales mix towards lower cost products and decreased average cost of sales per dressed pound due to increased efficiencies when compared to the same period in 1993. The cost of sales increase in domestic operations of $5.6 million occurring while dressed pounds produced decreased was due to slightly increased feed ingredient and production costs and a sales mix change in the Company's further processing and prepared foods operation to higher cost products. Feed ingredient prices continue to be influenced by floods that occurred in the midwestern United States in 1993. Gross profit as a percentage of sales increased to 14.0% in the first quarter of fiscal 1994 from 12.9% in the first quarter of fiscal 1993. The increased gross profit of the Company's Mexican operations was primarily the result of a 3.1% increase in total revenue per dressed. The decrease in gross profit for domestic chicken operations was a result of increased average cost of sales per dressed pound offset partially by an increase in total revenues per dressed pound. Consolidated selling, general and administrative expenses were $15.0 million for the first quarter of fiscal 1994, an increase of $.8 million, or 5.5%, when compared to the first quarter of fiscal 1993. Consolidated selling, general and administrative expenses as a percentage of sales increased in the first quarter of fiscal 1994 to 6.8% compared to 6.4% in the first quarter of fiscal 1993; these increases were primarily due to increased accruals for employment taxes in the Company's Mexican operation and accrued retirement and bonuses costs which are dependent upon consolidated profits offset partially by reduced selling and administrative cost in the Company's domestic operation. Consolidated operating income was $16.2 million for the first quarter of fiscal 1994 an increase of $2.0 million, or 14.2%, when compared to the first quarter of 1993. The increase was due primarily to higher margins in Mexican operations described previously. Consolidated net interest expense was $5.0 million in the first quarter of fiscal 1994 a decrease of $1.5 million, or 23.6%, when compared to the first quarter of fiscal 1993. This decrease was due to lower outstanding debt, lower interest rates, and an reduction of amortization of fees and expenses incurred for refinancing when compared to the first quarter of fiscal 1993. Consolidated income tax expense as a percentage of income before income taxes increased in the first quarter of fiscal 1994 to 30% compared to 16.4% in the first quarter of fiscal 1993. This increase is due primarily to the increase in United States income tax rates and deferred foreign income tax reversals of $1.1 million during the first quarter of fiscal 1993. Liquidity and Capital Resources The Company's liquidity in first quarter 1994 showed marked improvement from the previous year end due to record first quarter net income. The Company's working capital at January 1994 increased to $91.3 million ($81.9 million excluding current deferred income taxes recorded in connection with the adoption of FAS 109) from $72.7 million at October 2, 1993. The current ratio at January 1, 1994 increased to 2.14 to 1 (1.93 to 1 excluding current deferred income taxes recorded in connection with the adoption of FAS 109) from 1.77 to 1 at October 2, 1993 and the Company's stockholder's equity increased to $140.3 at January 1, 1994 million from $132.3 million at October 2, 1993. The Company reduced its ratio of total debt to capitalization to 55.5% at January 1, 1994 from 58.3% at October 2, 1993. The Company maintains a $75 million revolving credit facility with available unused lines of credit of $53 million at February 14, 1994. Trade accounts and other accounts receivable were $66.1 million at January 1, 1994, a $6.5 million increase from October 2, 1993. This 11.0% increase was due primarily to an increase in the amounts of property insurance claims receivable at January 1, 1994 and slower collections experienced in the quarter when compared to the year ended October 2, 1993. Accounts payable were $41.1 million at January 1, 1994, a 7.3% increase from October 2, 1993, primarily due to increases in feed ingredient costs. Deferred tax assets recorded in accordance with FAS 109 were $19.1 million as of October 3, 1993. The Company believes that all of these deferred tax assets will be realized through the reversal of existing temporary differences and anticipated future taxable earnings. Capital expenditures for the first three months of 1994 were $6.4 million and were primarily incurred to improve efficiencies and for the routine replacement of equipment. The Company anticipates that it will spend $25.0 million or less for capital expenditures in fiscal year 1994 and expects to finance such expenditures with available operating cash flow and leases.
ART II Other Information
Item 6. Exhibits and Reports on Form 8-K The Company did not file any reports on Form 8-K during the three months ended January 1, 1994.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PILGRIM'S PRIDE CORPORATION Date February 15, 1994 /s/ Clifford E. Butler Clifford E. Butler Vice Chairman of the Board, Chief Financial Officer and Secretary and Treasurer in his respective capacity as such