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 December 31, 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 2, 1995
INDEX
DOCUMENT NO. 1 - 10-Q
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited):
Condensed consolidated balance sheets:
December 31, 1994 and October 1, 1994
Consolidated statements of income:
Three months ended December 31, 1994 and January 1, 1994
Consolidated statements of cash flows:
Three months ended December 31, 1994 and January 1, 1994
Notes to condensed consolidated financial statements--
December 31, 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
DOCUMENT NO. 2 - EXHIBIT 27, FINANCIAL DATA SCHEDULE
PART I. FINANCIAL INFORMATION PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Item 1: Financial Statements (Unaudited):
December 31,
1994 October 1,
(Unaudited) 1994
ASSETS
Current Assets:
Cash and cash equivalents $ 26,990,000 $ 11,244,000
Trade accounts and notes receivable, net 46,528,000 53,264,000
Inventories 86,392,000 100,749,000
Deferred income taxes 6,911,000 6,459,000
Prepaid expenses 1,558,000 1,280,000
Other current assets 1,483,000 1,249,000
Total Current Assets 169,862,000 174,245,000
Other Assets 20,594,000 20,891,000
Property, Plant and Equipment 388,188,000 379,752,000
Less accumulated depreciation and amortization 141,687,000 136,205,000
246,501,000 243,547,000
$ 436,957,000 $ 438,683,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable - banks $ -- $ --
Accounts payable 35,930,000 38,675,000
Accrued expenses 31,936,000 31,353,000
Current portion of long-term debt 5,598,000 4,493,000
Total Current Liabilities 73,464,000 74,521,000
Long-Term Debt, less current portion 150,646,000 152,631,000
Deferred Income Taxes 51,009,000 49,835,000
Stockholders' Equity:
Common stock; $.01 par value 276,000 276,000
Additional paid-in capital 79,763,000 79,763,000
Retained earnings 81,799,000 81,657,000
Total Stockholders' Equity 161,838,000 161,696,000
$ 436,957,000 $ 438,683,000
See notes to condensed consolidated financial statements.
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
December 31, January 1,
1994 1994
Net sales $ 227,000,000 $ 221,851,000
Costs and expenses:
Cost of sales 206,235,000 192,497,000
Selling, general and administrative 12,023,000 12,952,000
218,258,000 205,449,000
Operating Income 8,742,000 16,402,000
Other expense (income):
Interest expense, net 4,327,000 4,950,000
Foreign exchange (gain) loss 2,345,000 [106,000]
Miscellaneous, net [247,000] [472,000]
Total other expense, net 6,425,000 4,372,000
Income before income taxes 2,317,000 12,030,000
Income tax expense 1,761,000 3,609,000
Net Income $ 556,000 $ 8,421,000
Net income per share $ .02 $ .31
Dividends declared per common share $ .015 $ .015
Average shares outstanding 27,589,250 27,589,250
See Notes to condensed consolidated financial statements.
PILGRIM'S PRIDE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
December 31, January 1,
1994 1994
Cash Flow From Operating Activities:
Net income $ 556,000 $ 8,421,000
Operating Activities:
Depreciation and amortization 6,271,000 6,248,000
Provision for losses on accounts
receivable [2,202,000] 533,000
Deferred income taxes 722,000 2,880,000
Changes in operating assets and liabilities:
Accounts and notes receivable 8,938,000 [7,072,000]
Inventories 14,358,000 3,102,000
Prepaid expenses and other current
assets [515,000] 171,000
Accounts payable and accrued
expenses [2,162,000] 3,222,000
(Gain) loss on property disposals [69,000] [120,000]
Other 876,000 [139,000]
Cash Provided By Operating
Activities: 26,773,000 17,246,000
Investing Activities:
Acquisitions of property and equipment [8,826,000] [6,409,000]
Proceeds from property disposals 113,000 249,000
Net change in other assets 66,000 [35,000]
Net Cash Used In Investing
Activities [8,647,000] [6,195,000]
Financing Activities:
Proceeds from notes payable to banks -- --
Re-payments of notes payable to banks -- [7,000,000]
Proceeds from long-term debt 30,000 31,000
Payments on long-term debt [948,000] [3,169,000]
Cash dividends paid [413,000] [828,000]
Cash Used In Financing
Activities [1,331,000] [10,966,000]
Effect of exchange rate changes on cash and cash
equivalents [1,048,000] [31,000]
Increase in cash and cash
equivalents 15,747,000 54,000
Cash and cash equivalents at beginning of year 11,244,000 4,526,000
Cash and cash equivalents at
end of quarter $ 26,991,000 $ 4,580,000
Supplemental disclosure information:
Cash paid during the period for
Interest (net of amount capitalized) $ 1,509,000 $ 5,003,000
Income Taxes $ 902,000 $ 3,302,000
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 December
31, 1994 are not necessarily indicative of the results that
may be expected for the year ended September 30, 1995.
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 1,
1994.
The consolidated financial statements include the accounts
of Pilgrim's and its wholly owned subsidiaries. Significant
intercompany accounts and transactions have been
eliminated. Certain prior year amounts have been
reclassified to conform to current year presentation.
The assets and liabilities of the foreign subsidiaries are
translated at end-of-period exchange rates, except for
inventories and 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 December 31,
1994 and January 1, 1994 are based on the weighted
average shares outstanding for the periods.
NOTE C--INVENTORIES
Inventories consist of the following:
Dec 31, 1994 Oct 1, 1994
Live broilers and hens $ 35,157,000 $ 47,743,000
Feed, eggs and other 30,635,000 22,529,000
Finished poultry products 20,600,000 30,477,000
$ 86,392,000 $ 100,749,000
NOTE D--IMPACT OF MEXICAN PESO DEVALUATION
Included in results of operations for the period ended
December 31, 1994 is a $2.3 million foreign exchange loss
resulting from the devaluation of the Mexican peso against
the U.S. dollar. Also included is a $2.0 million lower of
cost or market adjustment to inventories in Mexico
resulting from the affect of such devaluation on operations.
These adjustments are presented in the December 31, 1994
Condensed Consolidated Balance Sheetand Consolidated
Statement of Cash Flows as components of the specific line
items affected with the exception that the exchange rate
effects on cash and cash equivalents has been separately
stated on the Consolidated Statement of Cash Flows. See
Management's Discussion and Analysis of Financial
Condition and Results of Operations - Impact of Mexico
Peso Devaluation.
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
Dec 31, 1994 Jan 1, 1994
Net sales 100.0% 100.0%
Costs and expenses:
Cost of sales 90.9% 86.8%
Gross profit 9.1% 13.2%
Selling, general and administrative 5.3% 5.8%
Operating Income 3.9% 7.4%
Interest expense, net 1.9% 2.2%
Income before income taxes 1.0% 5.4%
Net Income 0.2% 3.8%
First Quarter 1995, Compared to First Quarter 1994
Consolidated net sales were $227.0 million for the first
quarter of fiscal 1995, an increase of $5.1 million, or 2.3%,
over the first quarter of fiscal 1994. The increase in
consolidated net sales resulted from a $9.1 million increase
in domestic chicken sales to $156.2 million offset by a $3.0
million decrease in Mexican chicken sales to $45.9 million
and a $1.0 million decrease in sales of other domestic
products to $24.8 million. The increase in domestic
chicken sales was primarily due to a 7.4% increase in the
dressed pounds produced offset by a 1.1% decrease in total
revenue per dressed pound produced. The decrease in
Mexican chicken sales was primarily due to a 19.4%
decrease in total revenue per dressed pound produced
caused primarily by the devaluation of the Mexican peso in
December offset by a 16.5% increase in dressed pounds
produced.
Consolidated cost of sales was $206.2 million in the first
quarter of fiscal 1995, an increase of $13.7 million, or
7.1%, over the first quarter of fiscal 1994. The increase
primarily resulted from a $7.8 million increase in cost of
sales of domestic operations, and a $5.9 million increase in
the cost of sales in Mexican operations.
The cost of sales increase in domestic operations of $7.8
million was due primarily to a 7.4% increase in dressed
pounds produced offset partially by a 8.9% decrease in feed
ingredient cost.
The $5.9 million cost of sales increase in Mexican
operations was primarily due to increased dressed pounds
produced and the effects of a $2.0 million inventory lower
of cost or market adjustment caused by the Mexican peso
devaluation in December 1994 and the effects of higher
pre-devaluation peso inventories being sold. See Impact of
Peso Devaluation discussed below.
Gross profit as a percentage of sales decreased to 9.1% in
the first quarter of fiscal 1995 from 14.0% in the first
quarter of fiscal 1994. The decreased gross profit of the
Company's Mexican operations was primarily the result of
a 19.4% decrease in total revenue per dressed pound and
the increased amounts of cost of sales resulting from the
peso devaluation discussed above. The increase in gross
profit for domestic chicken operations was a result of
decreased average cost of sales per dressed pound offset
partially by a decrease in total revenues per dressed pound.
Consolidated selling, general and administrative expenses
were $12.0 million for the first quarter of fiscal 1995, a
decrease of $.9 million, or 7.2%, when compared to the
first quarter of fiscal 1994. Consolidated selling, general
and administrative expenses as a percentage of sales
decreased in the first quarter of fiscal 1995 to 5.3%
compared to 5.8% in the first quarter of fiscal 1994; these
decreases were primarily due to decreased accrued
retirement and bonuses costs which are dependent upon
consolidated profits.
Consolidated operating income was $8.7 million for the
first quarter of fiscal 1995 a decrease of $7.7 million, or
46.7%, when compared to the first quarter of 1994. The
decrease was due primarily to lower margins in Mexican
operations described previously.
Consolidated net interest expense was $4.3 million in the
first quarter of fiscal 1995 a decrease of $.6 million, or
12.6%, when compared to the first quarter of fiscal 1994.
This decrease was due to lower outstanding debt offset
slightly by higher interest rates when compared to the first
quarter of fiscal 1994.
Consolidated income tax expense as a percentage of income
before income taxes increased in the first quarter of fiscal
1995 to 76% compared to 30% in the first quarter of fiscal
1994. This increase is due primarily to the effects resulting
from having positive taxable income in the United States
offset by losses in Mexico which are not available for tax
benefit due to the tax laws for Mexican income tax
reporting.
Liquidity and Capital Resources
Liquidity in first quarter 1995 remained strong. The
Company's working capital at January 1995 decreased
slightly to $96.4 million from $99.7 million at October 1,
1994. The current ratio at December 31, 1994 decreased
slightly to 2.31 to 1 from 2.34 to 1 at October 1, 1994 and
the Company's stockholder's equity increased to $161.8
million at December 31, 1994 million from $161.7 million
at October 1, 1994. The Company reduced its ratio of total
debt to capitalization to 49.1% at December 31, 1994 from
49.3% at October 1, 1994. The Company maintains a $75
million revolving credit facility with available unused lines
of credit of $61.7 million at February 3, 1994.
Trade accounts and other accounts receivable were $46.5
million at December 31, 1994, a $6.7 million decrease from
October 1, 1994. This 12.6% decrease was due primarily to
faster collections experienced in the quarter when
compared to the year ended October 1, 1994.
Inventories were $86.4 million at December 31, 1994, a
$14.4 million decrease for October 1, 1994. This 14.3%
decrease was due primarily to reductions in finished poultry
products due to increased sales in further processed and
prepared foods, decreased feed costs which are included in
live broiler and hen inventories, seasonal variations in sales
of poultry and feed products to the Company's principal
stockholder, and adjustments to Mexican inventories
resulting from the peso devaluation.
Accounts payable were $35.9 million at December 31,
1994, a 7.1% decrease from October 1, 1994, primarily due
to decreases in feed ingredient costs.
Deferred tax assets recorded in accordance with FAS 109
were $14.4 million as of October 1, 1994. 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 1995 were
$8.8 million and were primarily incurred to improve
efficiencies and for the routine replacement of equipment.
The Company anticipates that it will spend $29.0 million or
less for capital expenditures in fiscal year 1995 and expects
to finance such expenditures with available operating cash
flow and leases.
Impact of Mexican Peso Devaluation
On December 22, 1994, following a week of speculation in
Mexico's financial markets, the Mexican government
abandoned its policy of defending the peso against the U.S.
dollar and allowed it to float freely on the currency
markets. These events resulted in the Mexican peso
exchange rate declining from 3.39 to 1 U.S. dollar at
October 1, 1994 to 5.20 at December 31, 1994, a
devaluation of approximately 50-percent. Since December
31, 1994, the Mexican peso has continued to erode against
the U.S. dollar, closing as low as 6.33 on January 30, 1995.
On January 31, 1995, the President of the United States
finalized a $53 billion international credit arrangement for
Mexico. The result of this arrangement appears to have had
significant stabilizing effect on the Mexican peso currency
exchange rate, which was 5.46 to 1 U.S. dollar on February
2, 1995. While no assurance can be given as to the effects
the international credit arrangement will have on the results
of the Company's operations in Mexico, the Company
anticipates further stabilization of the Mexican peso as a
result.
As discussed in Note A -- Basis of Presentation, translation
adjustments resulting from changes in currency exchange
rates on net current assets are reflected in the statements of
operations. Classification of the effects in the statement of
operations is dependent upon the nature of the underlying
asset and, in general, exchange rate effects on net monetary
assets are reflected as "Other expenses (income) - Foreign
exchange (gain) loss." During the period ended December
31, 1994, the peso devaluation resulted in a $2.3 million
foreign exchange loss on net monetary assets and a $2.0
million adjustment to the carrying value of inventories.
The adjustment to the carrying value of inventories was
necessary to record inventories at amounts consistent with
the Company's valuation method which is the lower of cost
or market. While the $2.0 million adjustment was
sufficient to meet the lower of cost or market standard, it
will not sustain Mexican operating margins at pre-
devaluation levels. Accordingly, on a constant average
selling price basis, operating margins in Mexico during the
second quarter of fiscal 1995 would be lower than those
reported in the first fiscal quarter as these pre-devaluation
valued inventories are sold. Since the end of the first fiscal
quarter, however, the Company has also experienced a
decline in average peso selling prices due to a softening of
demand for its products in Mexico. The Company
attributes the decrease in demand for its products to be due
to the recessionary impacts on the Mexican economy
resulting from the peso devaluation. As a result of the
decline in average selling prices being experienced since
December 31, 1995 coupled with pre- devaluation valued
inventories being sold in Mexico, the Company is currently
experiencing significant operating losses in its Mexican
operations. The Company anticipates that losses will
continue until all pre-devaluation valued inventories are
sold and average selling prices rebound.
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 three months ended December 31, 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 2/2/95 Clifford E. Butler
Vice Chairman of the Board,
Chief Financial Officer and
Secretary and Treasurer
in his respective capacity
as such
5
3-MOS
SEP-30-1994
DEC-31-1994
26,990
0
46,528
0
86,392
169,862
388,188
141,687
436,957
73,464
150,646
276
0
0
161,562
436,957
227,000
227,000
206,235
218,258
0
3,621
4,327
2,317
1,761
556
0
0
0
556
.02
.02
