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THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 902(G) OF REGULATION S-T
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 July 2, 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 August 16, 1994
INDEX
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited):
Condensed consolidated balance sheets:
July 2, 1994 and October 2, 1993
Consolidated statements of income:
Three months and nine months ended July 2, 1994 and July 3, 1993
Consolidated statements of cash flows:
Nine months ended July 2, 1994 and July 3, 1993
Notes to condensed consolidated financial statements--July 2, 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
Signatures
PART I. FINANCIAL INFORMATION
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Item 1: Financial Statements (Unaudited):
July 2, 1994
(Unaudited) Oct 2, 1993
ASSETS
Current Assets:
Cash and cash equivalents $ 8,272,000 $ 4,526,000
Trade accounts and notes
receivable, net 55,872,000 59,608,000
Inventories 102,756,000 91,794,000
Deferred income taxes 10,282,000 --
Prepaid expenses 564,000 1,260,000
Other current assets 1,509,000 9,843,000
Total Current Assets 179,255,000 167,031,000
Other Assets 20,923,000 13,114,000
Property, Plant and Equipment 375,505,000 366,221,000
Less accumulated depreciation
and amortization 130,646,000 123,520,000
244,859,000 242,701,000
$ 445,037,000 $ 422,846,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable - banks $ -- $12,000,000
Accounts payable 39,913,000 38,330,000
Accrued expenses 31,663,000 30,370,000
Current portion of long-term debt 8,345,000 13,643,000
Total Current Liabilities 79,921,000 94,343,000
Long-Term Debt, less current portion 159,723,000 159,554,000
Deferred Income Taxes 50,804,000 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 74,550,000 52,254,000
Total Stockholders' Equity 154,589,000 132,293,000
$ 445,037,000 $ 422,846,000
See notes to condensed consolidated financial statements.
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
July 2, 1994 July 3, 1993 July 2, 1994 July 3, 1993
(13 weeks) (13 weeks) (39 weeks) (40 weeks)
Net sales $238,302,000 $220,645,000 $683,320,000 $668,769,000
Costs and expenses:
Cost of sales 207,854,000 195,930,000 595,330,000 583,163,000
Selling, general
and administrative 15,211,000 13,186,000 44,541,000 41,023,000
223,065,000 209,116,000 639,871,000 624,186,000
Operating Income 15,237,000 11,529,000 43,449,000 44,583,000
Other expense (income):
Interest expense 4,893,000 6,233,000 14,810,000 20,749,000
Miscellaneous 257,000 128,000 (1,387,000) (656,000)
Total other
expense, net 5,150,000 6,361,000 13,423,000 20,093,000
Income before income
taxes and
extraordinary
charge 10,087,000 5,168,000 30,026,000 24,490,000
Income tax expense 2,891,000 1,550,000 6,489,000 6,236,000
Net income before
extraordinary
charge 7,196,000 3,618,000 23,537,000 18,254,000
Extraordinary
charge-early
repayment of debt -- (1,286,000) -- (1,286,000)
Net Income $ 7,196,000 $ 2,332,000 $ 23,537,000 $ 16,968,000
========= ========= ========== ==========
Net income per share
before extraordinary
charge $ .26 $ .14 $ 0.85 $ 0.67
Extraordinary charge
per share $ -- $ (.05) $ -- $ (.05)
Net income per share $ .26 $ .09 $ .85 $ .62
Dividends per
common share $ .015 $ -- $ .045 $ --
Weighted average shares
outstanding 27,589,250 27,589,250 27,589,250 27,589,250
See Notes to condensed consolidated financial statements.
PILGRIM'S PRIDE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
July 2, 1994 July 3, 1993
(39 weeks) (40 weeks)
Cash Flow From Operating Activities:
Net income $ 23,537,000 $ 16,968,000
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 18,888,000 20,422,000
Provision for losses on accounts receivable 1,823,000 324,000
Deferred income tax liability 3,867,000 3,667,000
Changes in operating assets and liabilities:
Accounts and notes receivable 1,913,000 (7,241,000)
Inventories (10,922,000) (1,503,000)
Prepaid expenses and other current assets (1,000) 1,916,000
Accounts payable and accrued expenses 3,290,000 (14,952,000)
(Gain) loss on property disposals 92,000 (229,000)
Other (100,000) (88,000)
Cash Provided By Operating Activities: 42,387,000 19,284,000
Investing Activities:
Acquisitions of property and equipment (20,988,000) (6,584,000)
Proceeds from property disposals 1,242,000 577,000
Net change in other assets 74,000 649,000
Net Cash Used In Investing Activities (19,672,000) (5,358,000)
Financing Activities:
Proceeds from notes payable to banks 7,000,000 24,363,000
Re-payments of notes payable to banks (19,000,000) (64,979,000)
Proceeds from long-term debt 31,000 126,468,000
Payments on long-term debt (5,274,000) (97,789,000)
Cost of refinancing debt -- (5,177,000)
Cash dividends paid (1,655,000) (414,000)
Cash Used In Financing Activities (18,898,000) (17,528,000)
Effect of exchange rate changes on cash and cash
equivalents (71,000) (41,000)
Increase (decrease) in cash and cash
equivalents 3,746,000 (3,643,000)
Cash and cash equivalents at beginning of year 4,526,000 11,550,000
Cash and cash equivalents at end of period $ 8,272,000 $ 7,907,000
Supplemental disclosure information:
Cash paid during the period for
Interest (net of amount capitalized) $ 15,060,000 $ 21,006,000
Income Taxes $ 2,740,000 $ 978,000
See notes to condensed consolidated financial statements.
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 July 2, 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 July 2, 1994 and July 3, 1993 are
based on the weighted average shares outstanding for the periods.
NOTE C--INVENTORIES
Inventories consist of the following:
July 2, 1994 Oct 2, 1993
Live broilers and hens $ 51,238,000 $ 44,417,000
Feed, eggs and other 29,385,000 25,473,000
Finished poultry products 22,133,000 21,904,000
$102,756,000 $ 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 nine months ended
July 2, 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 $ 23,004,000
Prior use of cash accounting 32,758,000
Total deferred tax liabilities 55,762,000
Deferred tax assets:
AMT credit carryforward 3,967,000
General business carryforward 2,462,000
Net operating loss carryforwards 6,589,000
Other 6,088,000
Total deferred tax assets 19,106,000
Net deferred tax liabilities $ 36,656,000
==========
During the second quarter of fiscal 1994, pursuant to an organizational
restructuring of activities completed by the Company's Mexican subsidiaries
which significantly reduced Mexican taxes, the Company changed to computing
its income tax provision on a separate jurisdiction versus consolidated basis.
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following table presents certain items as a percentage of net sales for
the periods indicated.
Percentage of Net Sales Percentage of Net Sales
Three Months Ended Nine Months Ended
July 2, 1994 July 3, 1993 July 2, 1994 July 3, 1993
(13 weeks) (13 weeks) (39 weeks) (40 weeks)
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 87.2% 88.8% 87.1% 87.2%
Gross profit 12.8% 11.2% 12.9% 12.8%
Selling, general and
administrative 6.4% 6.0% 6.5% 6.1%
Operating Income 6.4% 5.2% 6.4% 6.7%
Interest expense 2.1% 2.8% 2.2% 3.1%
Income before income
taxes and
extraordinary charge 4.2% 2.3% 4.4% 3.7%
Net Income before
extraordinary charge 3.0% 1.6% 3.4% 2.7%
Extraordinary
charge-early
repayment of debt 0% .6% 0% .2%
Net Income 3.0% 1.1% 3.4% 2.5%
Third Quarter 1994, Compared to
Third Quarter 1993
Consolidated net sales were $238.3 million for the third quarter of fiscal
1994, an increase of $17.7 million, or 8.0%, over the third quarter of fiscal
1993. The increase in consolidated net sales resulted from a $14.8 million
increase in domestic chicken sales to $166.9 million, a $4.0 million increase
in Mexican chicken sales to $47.9 million offset partially by a $1.1 million
decrease in sales of other domestic chicken products to $23.6 million. The
increase in domestic chicken sales was primarily due to a 7.3% increase in
the total revenue per dressed pound produced and a 2.3% increase in dressed
pounds produced. The increase in Mexican chicken sales was primarily due to
a 13.8% increase in the total revenue per dressed pound produced offset
partially by a 4.2% decrease in dressed pounds produced. The increased net
chicken sales both domestically and in Mexico were caused primarily by
stronger demand for chicken products resulting in higher sales prices. The
decrease in sales of other domestic products was primarily due to lower sales
of commercial eggs due to lower prices offset partially by increased sales of
retail feed products.
Consolidated cost of sales was $207.9 million in the third quarter of fiscal
1994, an increase of $11.9 million or 6.1%, over third quarter of fiscal 1993.
The increase resulted from a $13.5 million increase in the cost of sales from
domestic operations offset partially by a $1.6 million decrease in cost of
sales of Mexican operations.
The cost of sales increase in domestic operations of $13.5 million was
primarily due to a 10.1% increase in feed ingredient costs, a 2.3% increase in
dressed pounds produced and increased costs of sales in the Company's sales of
other domestic products.
The cost of sales decrease in Mexican operations of $1.6 million was primarily
due to a 4.2% decrease in dressed pounds produced and lower live production
costs due to increased efficiencies.
Gross profit as a percentage of sales increased to 12.8% in the third quarter
of fiscal 1994 from 11.2% in the third quarter of fiscal 1993. The increased
gross profit of the Company's Mexican operation was primarily the result of a
13.9% increase in total revenue per dressed pound offset partially by slightly
higher average cost of sales per dressed pound. The increased gross profit in
domestic chicken operations was a result of increased total revenues per
dressed pound offset partially by increased cost of sales per dressed pound.
The decreased gross profit in other domestic products was primarily due to
lower sales prices for commercial eggs and poultry by-products.
Consolidated selling general and administrative expenses were $15.2 million
for the third quarter of fiscal 1994, an increase of $2.0 million or 15.4%,
when compared to the third quarter of fiscal 1993. Consolidated selling,
general and administrative expenses as a percentage of sales increased to 6.4%
for the third quarter of fiscal 1994 compared to 6.0% in the third quarter of
fiscal 1993; these increases were primarily due to increased provisions for
losses on accounts receivable and selling expenses in the Company's Mexican
operation, increased accrued retirement and bonuses costs due to higher
operating profits offset partially by reduced selling and administrative costs
in the Company's domestic operation.
Consolidated operating income was $15.2 million for the third quarter of
fiscal 1994 an increase of $3.7 million, or 32.2%, when compared to the third
quarter of fiscal 1993. The increase was due primarily to higher margins
which were a result of the reasons discussed above.
Consolidated net interest expense was $4.9 million in the third quarter of
fiscal 1994 a decrease of $1.3 million or 21.5%, when compared to the third
quarter of fiscal 1993. This decrease was due to a reduction of amortization
of fees and expenses incurred for refinancing, lower outstanding debt and
lower interest rates when compared to the third quarter of fiscal 1993.
Consolidated income tax as a percentage of income before income taxes
decreased in the third quarter of fiscal 1994 to 28.7% compared to 30.0% in
the third quarter of fiscal 1993 due primarily to the restructuring of Mexico
activities and the changes in computation of the tax provision as discussed
above. See Note D to the Consolidated Financial Statement.
Nine Months Ended July 2, 1994, Compared to
Nine Months Ended July 3, 1993
The accounting cycle of Pilgrim's Pride Corporation, (the "Company"),
consisted of 39 weeks of operations during the first nine months of fiscal
1994 compared to 40 weeks during the first nine months of fiscal 1993, an
operating cycle reduction of 2.5%.
Consolidated net sales were $683.3 million for the first nine months of fiscal
1994, an increase of $14.6 million, or 2.2%, over the first nine months of
fiscal 1993. The increase in consolidated net sales resulted from a $16.2
million increase in domestic chicken sales to $465.6 million, a $.2 million
increase in sales of other domestic products to $76.3 million offset partially
by a $1.9 million decrease in Mexican chicken sales to $141.4 million. The
increase in domestic chicken sales was primarily due to a 5.0% increase in the
total revenue per dressed pound produced partially offset by a 1.3% decrease
in dressed pounds produced. The increased domestic chicken sales was caused
by stronger demand for chicken products resulting in higher sales prices. The
increase in sales of other domestic products was primarily due to increased
sales of retail feed products offset partially by lower sales of commercial
eggs and poultry by-products. The decrease in Mexican chicken sales was
primarily due to a 2.0% decrease in the total revenue per dressed pound
produced due to lower prices, the effects of change in Mexican operation's
sales mix and a .7% decrease in total dressed pounds produced.
Consolidated cost of sales was $595.3 million in the first nine months of
fiscal 1994, a $12.2 million increase, or 2.1% over the first nine months of
fiscal 1993. The increase resulted from a $24.6 million increase in the cost
of sales in domestic operations offset by a $12.4 million decrease in cost of
sales of Mexican operations.
The cost of sales increase in domestic operations of $24.6 million was
primarily due to a 9.6% increase in feed ingredient costs, increased
production costs per dressed pound produced and increased costs of sales
in the Company's sales of other domestic products occurring while dressed
pounds produced decreased 1.3%.
The cost of sales decrease in Mexican operations of $12.4 million was
primarily due to lower live production costs due to increased efficiencies.
Gross profit as a percentage of sales increased to 12.9% in the first nine
months of fiscal 1994 from 12.8% in the first nine months of fiscal 1993.
The increased gross profit of the Company's Mexican operations was primarily
the result of higher margin caused by a 10.8% decrease in average cost of
sales per dressed pound offset partially by a 2.0% decrease in total revenue
per dressed pound. The decreased gross profit for domestic operations was
primarily the result of lower margins caused by higher costs offset partially
by higher sales prices.
Consolidated selling, general and administrative expenses were $44.5 million
for the first nine months of fiscal 1994, an increase of $3.5 million or 8.6%,
when compared to the first nine months of fiscal 1993. Consolidated selling,
general and administrative expenses as a percentage of sales increased in the
first nine months of fiscal 1994 to 6.5% compared to 6.1% in the first nine
months of fiscal 1993; these increases are primarily due to increased
provisions for losses on accounts receivable and selling expenses in the
Company's Mexican operation, increased accrued retirement and bonuses costs
due to higher operating profits offset partially by reduced selling and
administrative costs in the Company's domestic operations.
Consolidated operating income was $43.5 million for the first nine months of
fiscal 1994, a decrease of $1.1 million, or 2.5%, when compared to the first
nine months of 1993. The decrease was due primarily to lower margins in
domestic operations offset partially by higher margins in the Company's
Mexican operations which were a result of reasons previously discussed.
Consolidated net interest expense was $14.8 million a decrease of $5.9
million, or 28.6%, when compared to the first nine months of fiscal 1993.
This decrease was due to a reduction of amortization of fees and expenses
incurred for refinancing, and lower amounts of outstanding debt when compared
to the first nine months of fiscal 1993.
Consolidated income tax expense as a percentage of income before income taxes
decreased in the first nine months of fiscal 1994 to 21.6% compared to 25.5%
in the first nine months of 1993. This decrease was due primarily to the
restructuring of Mexico activities and the change in computation of the tax
provision as discussed above. See Note D to the Consolidated Financial
Statements.
Liquidity and Capital Resources
The Company's liquidity in the first nine months of fiscal 1994 improved from
the previous year end due to record first nine months net income. The
Company's working capital at July 2, 1994 increased to $99.3 million ($89.1
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 July 2, 1994 increased to 2.24 to 1 (2.11 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 $154.6 million at July 2, 1994 from $132.3 million at October 2,
1993. The Company reduced its ratio of total debt to capitalization to 52.1%
at July 2, 1994 from 58.3% at October 2, 1993. The Company maintains a $75
million revolving credit facility maturing in May 1997 with unused lines of
credit of $63.9 million available at August 15, 1994. In July 1994, the
Company secured $10 million in stand-by long-term financing from an existing
lender, secured by existing collateral. The facility is available through
June 20, 1995 and the Company expects to renew the facility annually unless
drawn upon.
Trade accounts and other accounts receivable were $55.9 million at July 2,
1994, a $3.7 million decrease from October 2, 1993. This 6.3% decease was due
primarily to a decrease in the amounts of property insurance claims receivable
at July 2, 1994 and improved collections experienced in the third quarter of
fiscal 1994.
Inventories were $102.8 million at July 2, 1994, a $11.0 million increase from
October 2, 1993. This 11.9% increase was primarily due to an increased
production which require higher inventories and higher feed costs which are
included in live broiler and hens and feed, eggs and other inventories until
such time as they are sold.
Other current assets were $1.5 million at July 2, 1994, a 84.7% decrease from
October 2, 1993, due primarily to the reclassification of assets held for
sale, principally farmland which had previously been used in the Company's
non-poultry related farming operation discontinued during fiscal 1992, to
other assets. The reclassification was made based on a change in the
Company's expectation of when the assets in question will in fact be sold.
Accounts payable were $39.9 million at July 2, 1994, a 4.1% 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 nine months of fiscal 1994 were $21.0
million and were primarily incurred to improve efficiencies and for the
routine replacement of equipment. The Company anticipates that it will in
total spend $27 million or less for capital expenditures in fiscal year 1994
and expects to continue to finance these expenditures with available operating
cash flow and leases.
PART 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 nine months ended
July 2, 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 August 17, 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