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 April 1, 1995
Commission file number 1-9273
PILGRIM'S PRIDE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-1285071
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 South Texas, Pittsburg, TX 75686-0093
(Address of principal executive offices) (Zip code)
(903) 855-1000
(Telephone number of principle executive offices)
Not Applicable
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock $.01 Par Value-- 27,589,250 shares as of May 16, 1994
INDEX
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited):
Condensed consolidated balance sheets:
April 1, 1995 and October 1, 1994
Consolidated statements of income:
Three months and six months ended April 1, 1995 and April 2, 1994
Consolidated statements of cash flows:
Six months ended April 1, 1995 and April 2, 1994
Notes to condensed consolidated financial statements--April 1, 1995
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):
April 1, 1995
(Unaudited) Oct 1, 1994
ASSETS
Current Assets:
Cash and cash equivalents $ 11,294,000 $ 11,244,000
Trade accounts and notes
receivable, net 46,039,000 53,264,000
Inventories 89,007,000 100,749,000
Deferred income taxes 8,102,000 6,459,000
Prepaid expenses 1,827,000 1,280,000
Other current assets 1,141,000 1,249,000
Total Current
Assets 157,410,000 174,245,000
Other Assets 20,973,000 20,891,000
Property, Plant and Equipment 397,790,000 379,752,000
Less accumulated
depreciation
and amortization 149,184,000 136,205,000
248,606,000 243,547,000
$426,989,000 $438,683,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable - banks $ - $ -
Accounts payable 40,866,000 38,675,000
Accrued expenses 27,285,000 31,353,000
Current portion of
long-term debt 4,585,000 4,493,000
Total Current
Liabilities 72,736,000 74,521,000
Long-Term Debt,
less current portion 155,021,000 152,631,000
Minority Interest in Subsidiary 843,000 -
Deferred Income Taxes 53,269,000 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 65,081,000 81,657,000
Total Stockholders'
Equity 145,120,000 161,696,000
$426,989,000 $438,683,000
See notes to condensed consolidated financial statements.
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
Three Months Ended Six Months Ended
April 1, 1995 April 2, 1994 April 1, 1995 April 2, 1994
Net sales $216,830,000 $223,167,000 $443,830,000 $445,018,000
Costs and expenses:
Cost of sales 209,253,000 198,483,000 415,488,000 390,980,000
Selling, general and
administrative 12,239,000 12,070,000 24,262,000 25,022,000
221,492,000 210,553,000 439,750,000 416,002,000
Operating income
(loss) (4,662,000) 12,614,000 4,080,000 29,016,000
Other expense (income):
Interest expense 4,028,000 4,967,000 8,355,000 9,917,000
Foreign exchange
(gain) loss 3,270,000 (18,000) 5,615,000 (124,000)
Miscellaneous 1,136,000 (244,000) 889,000 (716,000)
Total other
expense, net 8,434,000 4,705,000 14,859,000 9,077,000
Income (loss) before income
taxes (13,096,000) 7,909,000 (10,779,000) 19,939,000
Income tax
expense (benefit) 3,208,000 (11,000) 4,969,000 3,598,000
Net income
(loss) $(16,304,000) $ 7,920,000 $(15,748,000) $16,341,000
Net income (loss)
per share $ (.59) $ .29 $ (.57) $ 0.59
Dividends per
common share $ .015 $ .015 $ .03 $ .03
Weighted average
shares
outstanding 27,589,250 27,589,250 27,589,250 27,589,250
See Notes to condensed consolidated financial statements.
PILGRIM'S PRIDE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
April 1, 1995 April 2, 1994
Cash Flow From Operating Activities:
Net income $(15,748,000) $ 16,341,000
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 12,738,000 12,599,000
Provision for losses on accounts receivable(2,315,000) 1,414,000
Deferred income tax liability 1,791,000 2,690,000
Changes in operating assets and liabilities:
Accounts and notes receivable 10,068,000 1,002,000
Inventories 12,700,000 (12,330,000)
Prepaid expenses and other current assets (436,000) (106,000)
Accounts payable and accrued expenses (2,505,000) 3,898,000
Gain on property disposals (126,000) (278,000)
Other 983,000 (114,000)
Cash Provided By Operating Activities 17,150,000 25,116,000
Investing Activities:
Acquisitions of property and equipment (14,397,000) (14,975,000)
Business Acquisitions (918,000) -
Proceeds from property disposals 193,000 605,000
Net change in other assets (300,000) 1,000
Net Cash Used In Investing Activities (15,422,000) (14,369,000)
Financing Activities:
Proceeds from notes payable to banks - 6,000,000
Re-payments of notes payable to banks - (11,000,000)
Proceeds from long-term debt 15,030,000 31,000
Payments on long-term debt (14,726,000) (4,149,000)
Cash dividends paid (828,000) (1,242,000)
Cash Used In Financing Activities (524,000) (10,360,000)
Effect of exchange rate changes on cash
and cash equivalents (1,154,000) (57,000)
Increase in cash and cash equivalents 50,000 330,000
Cash and cash equivalents at beginning of year 11,244,000 4,526,000
Cash and cash equivalents at
end of period $ 11,294,000 $ 4,856,000
Supplemental disclosure information:
Cash paid during the period for
Interest (net of amount capitalized) 8,100,000 10,076,000
Income Taxes $ 2,805,000 $ 1,455,000
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 April 1, 1995 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 Pride Corporation's annual report on Form 10-K for the year ended
October 1, 1994.
The consolidated financial statements include the accounts of Pilgrim's Pride
Corporation and its wholly and majority 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 resulting foreign
exchange adjustments are reflected in the statements of operations.
NOTE B--NET INCOME PER COMMON SHARE
Earnings per share for the periods ended April 1, 1995 and April 2, 1994 are
based on the weighted average shares outstanding for the periods.
NOTE C--INVENTORIES
Inventories consist of the following:
April 1, 1995 Oct 1, 1994
Live broilers and hens $ 43,197,000 $ 47,743,000
Feed, eggs and other 25,619,000 22,529,000
Finished poultry products 20,191,000 30,477,000
$ 89,007,000 $100,749,000
NOTE D--IMPACT OF MEXICAN PESO DEVALUATION
Included in results of operations for the three and six months ended April 1,
1995 are foreign exchange losses of $3.3 million and $5.6 million,
respectively, resulting from the devaluation of the Mexican peso against the
U.S. dollar. Also, as of the end of this period, the carrying value of
inventories were adjusted to end-of-period exchange rates as was necessary to
record inventories at the lower of cost or market. These adjustments are
presented in the April 1, 1995 Condensed Consolidated Balance Sheet and
Consolidated Statement of Cash Flows as components of the specific line items
affected with the exception that the exchange rate effect on cash and cash
equivalents has been separately stated in the Consolidated Statement of Cash
Flows. See Management's Discussion and Analysis of Financial Condition and
Results of Operations - Impact of Mexican 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 Percentage of Net Sales
Three Months Ended Six Months Ended
April 1, 1995 April 2, 1994 April 1, 1995 April 2, 1994
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 96.5% 88.9% 93.6% 87.9%
Gross profit 3.5% 11.1% 6.4% 12.1%
Selling, general
and administrative 5.6% 5.4% 5.5% 5.6%
Operating income (loss) (2.2%) 5.7% .9% 6.5%
Interest expense 1.9% 2.2% 1.9% 2.2%
Income (loss) before
income taxes (6.0%) 3.5% (2.4%) 4.5%
Net Income (loss) (7.5%) 3.5% (3.5%) 3.7%
Second Quarter 1995, Compared to
Second Quarter 1994
Consolidated net sales were $216.8 million for the second quarter of fiscal
1995, a decrease of $6.3 million, or 2.8%, over the second quarter of fiscal
1994. The decrease in consolidated net sales resulted from a $16.1 million
decrease in Mexican chicken sales to $28.6 million and a $2.5 million decrease
in sales of other domestic products to $24.4 million offset substantially by a
$12.3 million increase in domestic chicken sales to $163.8 million. The
decrease in Mexican chicken sales was primarily due to a 42.8% decrease in
total revenue per dressed pound produced caused primarily by the devaluation
of the Mexican peso offset by an 11.9% increase in dressed pounds produced.
The increase in domestic chicken sales was primarily due to a 4.9% increase in
total revenue per dressed pound and a 3.0% increase in dressed pounds
produced.
Consolidated cost of sales was $209.3 million in the second quarter of fiscal
1995, an increase of $10.8 million, or 5.4% over the second quarter of fiscal
1994. The increase primarily resulted from a $6.0 million increase in cost of
sales of domestic operations and $4.8 million increase in the cost of sales in
Mexican operations.
The cost of sales increase in domestic operations of $6.0 million was due
primarily to a 3.0% increase in dressed pounds produced and increased
production of higher margin products in prepared foods which have higher costs
of sales associated with them offset partially by a 12.8% decrease in feed
ingredient cost.
The $4.8 million cost of sales increase in Mexican operations was primarily
due to increased dressed pounds produced and the lower of cost or market
adjustments discussed in Note D. See Impact of Mexican Peso Devaluation
discussed below.
Gross profit as a percentage of sales decreased to 3.5% in the second quarter
of fiscal 1995 from 11.1% in the second quarter of fiscal 1994. The decreased
gross profit resulted primarily from the Company's Mexican operations and was
primarily the result of a 42.8% decrease in total revenue per dressed pound
and the increased costs of sales discussed above offset partially by an
increased gross profit from the Company's domestic operations. The increase
in gross profit for domestic operations was primarily a result of increased
total revenues per dressed pound offset partially by an increase in average
costs of sales per dressed pound.
Consolidated selling, general and administrative expenses were $12.2 million
for the second quarter of fiscal 1995, an increase of $.2 million or 1.4%,
when compared to the second quarter of fiscal 1994.
Consolidated operating loss was $4.7 million for the second quarter of fiscal
1995, a decrease of $17.3 million, when compared to the second quarter of
1994. The decrease was due primarily to lower margins in Mexican operations
which resulted primarily from the effects of the Mexican peso devaluation as
previously discussed.
Consolidated net interest expense was $4.0 million in the second quarter of
fiscal 1995, a decrease of $.9 million, or 18.9% when compared to the second
quarter of fiscal 1994. This decrease was due primarily to lower outstanding
debt.
Consolidated income tax expense increased to $3.2 million in the second
quarter of fiscal 1995, compared to a $11,000 benefit in second quarter of
fiscal 1994. This increase occurring when the Company experienced a loss
before income taxes is due primarily to the effects resulting from having
positive taxable income in the United States offset by losses in Mexico which
result in no tax benefit under current Mexican tax laws for Mexican income tax
reporting.
Six Months Ended April 1, 1995, Compared to
Six Months Ended April 2, 1994
Consolidated net sales were $443.8 million for the first six months of fiscal
1995, a decrease of $1.2 million, or .3%, over the first six months of fiscal
1994. The decrease in consolidated net sales resulted from a $19.1 million
decrease in Mexican chicken sales to $74.5 million and a $3.5 million decrease
in sales of other domestic products to $49.2 million offset substantially by a
$21.4 million increase in domestic chicken sales to $320.1 million. The
decrease in Mexican chicken sales was primarily due to a 30.2% decrease in
total revenue per dressed pound produced caused primarily by the devaluation
of the Mexican peso offset by an 14.2% increase in dressed pounds produced.
The increase in domestic chicken sales was primarily due to a 7.1% increase in
total revenue per dressed pound and a 4.9% increase in dressed pounds
produced.
Consolidated cost of sales was $415.5 million in the first six months of
fiscal 1995, an increase of $24.5 million, or 6.3% over the first six months
of fiscal 1994. The increase primarily resulted from a $13.8 million increase
in cost of sales of domestic operations and $10.7 million increase in the cost
of sales in Mexican operations.
The cost of sales increase in domestic operations of $13.8 million was due
primarily to a 4.9% increase in dressed pounds produced and increased
production of higher margin products in prepared foods which have higher costs
of sales associated with them offset partially by a 11.3% decrease in feed
ingredient cost.
The $10.7 million cost of sales increase in Mexican operations was primarily
due to increased dressed pounds produced and the lower of cost or market
adjustments discussed in Note D. See Impact of Peso Devaluation discussed
below.
Gross profit as a percentage of sales decreased to 6.4% in the first six
months of fiscal 1995 from 12.1% in the first six months of fiscal 1994. The
decreased gross profit resulted primarily from the Company's Mexican
operations and was primarily the result of a 30.2% decrease in total revenue
per dressed pound and the increased costs of sales discussed above offset
partially by an increased gross profit from the Company's domestic operations.
The increase in gross profit for domestic chicken operations was a result of
increased total revenues per dressed pound offset partially by an increase in
average costs of sales per dressed pound.
Consolidated selling, general and administrative expenses were $24.3 million
for the first six months of fiscal 1995, a decrease to $.8 million or 3.0%,
when compared to the first six months of fiscal 1994.
Consolidated operating income was $4.1 million for the first six months of
fiscal 1995 a decrease of $24.9 million, when compared to first six months of
1994. The decrease was due primarily to lower margins in Mexican operations
which resulted primarily from the effects of the Mexican peso devaluation as
previously discussed.
Consolidated net interest expense was $8.4 million in the first six months of
fiscal 1995 a decrease of $1.6 million, or 15.8% when compared to the first
six months of fiscal 1994. This decrease was due primarily to lower
outstanding debt.
Consolidated income tax expense increased to $5.0 million in the first six
months of fiscal 1995 compared to a $3.6 million in the first six months of
fiscal 1994. This increase occurring when the Company experienced a loss
before income taxes is due primarily to the effects resulting from having
positive taxable income in the United States offset by losses in Mexico which
result in no tax benefit under current Mexican tax laws for Mexican income tax
reporting.
Liquidity and Capital Resources
Liquidity in the three and six months ended April 1, 1995 remained strong
despite operating losses in Mexico resulting primarily from the Mexican peso
devaluation of $15.7 million and $16.1 million, respectively. The impact of
the Mexican peso devaluation and its resulting financial statement effects
did, however, cause an erosion in most financial ratios. The Company's
working capital at April 1, 1995 decreased to $84.7 million from $99.7 million
at October 1, 1994. The current ratio at April 1, 1995 decreased to 2.16 to 1
from 2.34 to 1 at October 1, 1994 and the Company's stockholder's equity
decreased to $145.1 million at April 1, 1995 from $161.7 million at October 1,
1994. The Company's ratio of total debt to capitalization increased to 52.4%
at April 1, 1995 from 49.3% at October 1, 1994. The Company maintains a $75
million revolving credit facility with available unused lines of credit of
$62.4 million at May 15, 1995.
On March 27, 1995 the Company refinanced two higher rate fixed debt
obligations with a lower variable rate debt obligation. The new facility
provides for up to $30 million of long-term revolver financing and matures on
April 1, 2003. As of May 15, 1995, $15 million has been drawn on this
facility. The Company also has a $10 million stand-by long-term facility
available through June 20, 1995 with an existing lender which the Company
intends to draw upon or renew prior to such date. The Company intends to use
these available facilities to pursue investment opportunities both
domestically and in Mexico.
Trade accounts and notes receivable were $46.0 million at April 1, 1995, a
$7.2 million decrease from October 1, 1994. This 13.6% decrease was due
primarily to the effects of the Mexican peso devaluation and faster domestic
collections experienced in the first six months of fiscal 1995 when compared
to the year ended October 1, 1994. Allowances for doubtful accounts, which
primarily relate to receivables in Mexico, as a percentage of trade accounts
and notes receivables were 7.1% at April 1, 1995 compared to 10.0% at October
1, 1994. This decrease is due primarily to the effects of the devaluation of
the Mexican peso. Had the devaluation of the peso not occurred, allowances
for doubtful accounts would have remained relatively unchanged.
Inventories were $89.0 million at April 1, 1995, a $11.7 million decrease from
October 1, 1994. This 11.7% decrease was primarily due 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, and lower of cost or market adjustments to Mexican
inventories resulting from the peso devaluation.
Accounts payable were $40.9 million at April 1, 1995, a 5.7% increase from
October 1, 1994, primarily due to increases resulting from normal increased
operations. Accrued expenses were $27.3 million at April 1, 1995, a 13.0%
decrease from October 1, 1994, primarily due to the effects of the Mexican
peso devaluation.
Capital expenditures and business acquisitions for the first six months of
fiscal 1995 were $14.4 million and $.9 million, respectively and were
primarily incurred to improve efficiencies, reduce costs and for the routine
replacement of equipment. The Company anticipates that it will spend $35
million or less for capital expenditures in addition to any business
acquisitions in fiscal year 1995 and expects to finance such expenditures with
available operating cash flow, leases and long-term financing.
Impact of Mexican Peso Devaluation
In December 1994, 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 6.8 at April 1, 1995. In
late January 1995, the President of the United States finalized a $53 billion
international credit arrangement for Mexico and on March 9, 1995 the Mexican
government announced their country's economic stabilization plan establishing
strong actions to combat inflation and strengthen the Mexican peso. The
combined result of these events appears to have had a stabilizing effect on
the Mexican peso currency exchange rate. On May 15, 1995 the Mexican peso
closed at 5.95 to 1 U.S. dollar. No assurance can be given as to the future
valuation of the Mexican peso and it's resulting impact on the Company's
operations. Further instability in the Mexican peso could affect future
earnings positively or negatively depending on subsequent Mexican peso
performance.
As discussed in Note A -- Basis of Presentation, 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 three and six-
months ended April 1, 1995, the peso devaluation resulted in foreign exchange
losses of $3.3 million and $5.6 million, respectively, on net monetary assets.
The carrying value of inventories were also adjusted to end-of-period currency
exchange rates which was necessary to record inventories at amounts consistent
with the Company's valuation method which is the lower of cost or market.
Since the end of the first fiscal quarter the Company 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 and end of period
inventories being recorded at the end of the period currency exchange rate,
the Company experienced significant operating losses in its Mexican operations
in second quarter 1995. Recently, average peso selling prices have begun to
rebound, however, no assurances can be given that current selling prices will
hold or continue to improve.
Other
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 121
establishes accounting standards for the impairment of long-lived assets to be
held and used and for long-lived assets to be disposed of. SFAS No. 121 is
scheduled to become mandatory for the Company's 1997 fiscal year. The Company
has not determined the effect of adopting SFAS No. 121. There will be no cash
flow impact from this accounting change.
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 six months ended
April 1, 1995.
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 5/16/95 /S/
Clifford E. Butler
Vice Chairman of the Board,
Chief Financial Officer and
Secretary and Treasurer
in his respective capacity
as such
5
6-MOS
SEP-30-1995
APR-1-1995
11,294
0
46,039
3,507
89,007
157,410
397,790
149,184
426,989
72,736
155,021
276
0
0
144,844
426,989
443,830
443,830
415,488
439,750
0
0
8,355
(10,779)
4,969
(15,748)
0
0
0
(15,748)
(.57)
(.57)
