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 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 August 15, 1995
INDEX
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited):
Condensed consolidated balance sheets:
July 1, 1995 and October 1, 1994
Consolidated statements of income:
Three months and nine months ended July 1, 1995 and July 2, 1994
Consolidated statements of cash flows:
Nine months ended July 1, 1995 and July 2, 1994
Notes to condensed consolidated financial statements--July 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):
July 1, 1995
(Unaudited) October 1, 1994
ASSETS
Current Assets:
Cash and cash equivalents $9,313,000 $11,244,000
Trade accounts and other
receivables, net 50,357,000 53,264,000
Inventories 104,418,000 100,749,000
Deferred income taxes 7,590,000 6,459,000
Prepaid expenses 1,109,000 1,280,000
Other current assets 1,198,000 1,249,000
Total Current Assets 173,985,000 174,245,000
Other Assets 20,905,000 20,891,000
Property, Plant and
Equipment 408,074,000 379,752,000
Less accumulated depreciation
and amortization 155,031,000 136,205,000
253,043,000 243,547,000
$447,933,000 $438,683,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable - banks $-- $--
Accounts payable 50,403,000 38,675,000
Accrued expenses 32,278,000 31,353,000
Current maturities of
long-term debt 3,224,000 4,493,000
Total Current
Liabilities 85,905,000 74,521,000
Long-Term Debt, less current
maturities 155,930,000 152,631,000
Minority Interest in Subsidiary 837,000 --
Deferred Income Taxes 54,412,000 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 70,810,000 81,657,000
Total Stockholders'
Equity 150,849,000 161,696,000
$447,933,000 $438,683,000
See notes to condensed consolidated financial statements.
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
July 1, 1995 July 2, 1994 July 1, 1995 July 2, 1994
Net sales $230,297,000 $238,302,000 $674,127,000 $683,320,000
Costs and
expenses:
Cost of
sales 206,471,000 209,627,000 621,959,000 600,607,000
Selling,
general
and
administration 11,983,000 13,580,000 36,245,000 38,602,000
218,454,000 223,207,000 658,204,000 639,209,000
Operating
Income 11,843,000 15,095,000 15,923,000 44,111,000
Other expense
(income):
Interest
expense,
net 4,359,000 4,893,000 12,714,000 14,810,000
Foreign
exchange
(gain)
loss (177,000) 342,000 5,438,000 (351,000)
Miscellaneous,
net (761,000) (227,000) 128,000 (374,000)
Total
other
expense,
net 3,421,000 5,008,000 18,280,000 14,085,000
Income (loss)
before income
taxes 8,422,000 10,087,000 (2,357,000) 30,026,000
Income tax
expense 2,279,000 2,891,000 7,248,000 6,489,000
Net Income
(Loss) $6,143,000 $7,196,000 $(9,605,000) $23,537,000
Net income
(loss) per
share $.22 $.26 $(.35) $.85
Dividends
per common
share $.015 $.015 $.045 $.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 1, 1995 July 2, 1994
Cash Flow From Operating Activities:
Net income (loss) $ (9,605,000) $23,537,000
Adjustments to reconcile
net income to cash
provided by operating activities:
Depreciation and amortization 19,160,000 18,888,000
Provision for losses on
accounts receivable -- 1,823,000
Deferred income tax liability 3,446,000 3,867,000
Changes in operating assets
and liabilities:
Accounts and other receivable 3,435,000 1,913,000
Inventories (2,711,000) (10,922,000)
Prepaid expenses and other
current assets 222,000 (1,000)
Accounts payable and
accrued expenses 12,025,000 3,290,000
(Gain) loss on property
disposals (191,000) 92,000
Other 11,000 (100,000)
Cash Provided By Operating
Activities: 25,792,000 42,387,000
Investing Activities:
Acquisitions of property and
equipment (25,011,000) (20,988,000)
Business acquisitions (918,000) --
Proceeds from property disposals 304,000 1,242,000
Net change in other assets (481,000) 74,000
Net Cash Used In Investing
Activities (26,106,000) (19,672,000)
Financing Activities:
Proceeds from notes payable to
banks -- 7,000,000
Re-payments of notes payable to
banks -- (19,000,000)
Proceeds from long-term debt 15,030,000 31,000
Payments on long-term debt (15,216,000) (5,274,000)
Cash dividends paid (1,242,000) (1,655,000)
Cash Used In Financing
Activities (1,428,000) (18,898,000)
Effect of exchange rate changes
on cash and cash equivalents (189,000) (71,000)
Increase (decrease) in
cash and cash equivalents (1,931,000) 3,746,000
Cash and cash equivalents at
beginning of year 11,244,000 4,526,000
Cash and cash equivalents
at end of period $ 9,313,000 $8,272,000
Supplemental disclosure information:
Cash paid during the period for
Interest (net of amount
capitalized) $9,755,000 $15,060,000
Income Taxes $3,683,000 $2,740,000
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 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.
NOTE B--NET INCOME PER COMMON SHARE
Earnings per share for the periods ended July 1, 1995 and July 2, 1994
are based on the weighted average shares outstanding for the periods.
NOTE C--INVENTORIES
Inventories consist of the following:
July 1, 1995 Oct 1, 1994
Live broilers and hens $47,510,000 $47,743,000
Feed, eggs and other 29,660,000 30,477,000
Finished poultry products 27,248,000 22,529,000
$104,418,000 $100,749,000
NOTE D--IMPACT OF MEXICAN PESO DEVALUATION
Included in results of operations for the three and nine months ended
July 1, 1995 are foreign exchange gains of $177,000 and losses of $5.4
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 July 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.
NOTE E--SUBSEQUENT EVENT
On July 5, 1995 the Company completed the acquisition of substantially
all of the assets of Union de Queretaro, et al, a group of five chicken
companies located near Queretaro, Mexico for approximately $32 million.
The transaction was financed using existing long-term credit
facilities.
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 1, 1995 July 2, 1994 July 1, 1995 July 2, 1994
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 89.7% 88.0% 92.3% 87.9%
Gross profit 10.3% 12.0% 7.7% 12.1%
Selling, general and
administrative 5.2% 5.7% 5.4% 5.6%
Operating Income 5.1% 6.3% 2.4% 6.5%
Interest expense 1.9% 2.1% 1.9% 2.2%
Income (loss) before
income taxes 3.7% 4.2% (.4)% 4.4%
Net Income (loss) 2.7% 3.0% (1.4)% 3.4%
Third Quarter 1995, Compared to
Third Quarter 1994
Consolidated net sales were $230.3 million for the third quarter of
fiscal 1995, a decrease of $8.0 million, or 3.4%, over the third
quarter of fiscal 1994. The decrease in consolidated net sales
resulted from a $13.4 million decrease in Mexican chicken sales to
$34.4 million offset partially by a $4.6 million increase in domestic
chicken sales to $171.4 million and a $.8 million increase in sales of
other domestic products to $24.4 million. The decrease in Mexican
chicken sales was primarily due to a 28.1% decrease in total revenue
per dressed pound produced caused primarily by the devaluation of the
Mexican peso offset by a .7% increase in dressed pounds produced. The
increase in domestic chicken sales was primarily due to a 7.8% increase
in dressed pounds produced offset by a 4.7% decrease in total revenue
per dressed pound.
Consolidated cost of sales was $206.5 million in the third quarter of
fiscal 1995, a decrease of $3.2 million, or 1.5% over the third quarter
of fiscal 1994. The decrease primarily resulted from an $11.8 million
decrease in the cost of sales in Mexican operations offset by an $8.6
million increase in cost of sales of domestic operations.
The $11.8 million cost of sales decrease in Mexican operations was
primarily due to decreased cost of sales per dressed pound primarily
resulting from the Mexican peso devaluation offset by increased dressed
pounds produced. See Impact of Mexican Peso Devaluation discussed
below.
The cost of sales increase in domestic operations of $8.6 million was
due primarily to a 7.8% 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
8.6% decrease in feed ingredient cost.
Gross profit as a percentage of sales decreased to 10.3% in the third
quarter of fiscal 1995 from 12.0% in the third quarter of fiscal 1994.
The decreased gross profit of the Company's domestic operations was
primarily the result of a 4.7% decrease in total revenue per dressed
pound and increased costs of sales discussed above. The decrease in
gross profit for Mexican operations was primarily a result of decreased
total revenues per dressed pound offset partially by a decrease in
average costs of sales per dressed pound. See Impact of Mexican Peso
Devaluation discussed below.
Consolidated selling, general and administrative expenses were $12.0
million for the third quarter of fiscal 1995, a decrease of $1.6
million or 11.8%, when compared to the third quarter of fiscal 1994;
these decreases were due primarily to lower selling, general and
administrative expenses in the Company's Mexican operations caused
primarily by the effects of the Mexico peso devaluation.
Consolidated operating income was $11.8 million for the third quarter
of fiscal 1995, a decrease of $3.3 million, when compared to the third
quarter of 1994. The decrease was due primarily to lower margins in
operations as previously discussed.
Consolidated net interest expense was $4.4 million in the third quarter
of fiscal 1995, a decrease of $.5 million, or 10.9% when compared to
the third quarter of fiscal 1994. This decrease was due primarily to
lower outstanding debt.
Consolidated income tax as a percentage of income remained relatively
constant in the third quarter of fiscal 1995 at 27.1% when compared to
28.7% in the same quarter of fiscal 1994.
Nine Months Ended July 1, 1995, Compared to
Nine Months Ended July 2, 1994
Consolidated net sales were $674.1 million for the first nine months of
fiscal 1995, a decrease of $9.2 million, or 1.3%, over the first nine
months of fiscal 1994. The decrease in consolidated net sales resulted
from a $32.5 million decrease in Mexican chicken sales to $109.0
million and a $2.6 million decrease in sales of other domestic products
to $73.6 million offset substantially by a $25.9 million increase in
domestic chicken sales to $491.5 million. The decrease in Mexican
chicken sales was primarily due to a 29.7% decrease in total revenue
per dressed pound produced caused primarily by the devaluation of the
Mexican peso offset by an 9.6% increase in dressed pounds produced.
The increase in domestic chicken sales was primarily due to a 5.9%
increase in dressed pounds produced offset slightly by a .3% decrease
in total revenue per dressed pound.
Consolidated cost of sales was $622.0 million in the first nine months
of fiscal 1995, an increase of $21.4 million, or 3.6% over the first
nine months of fiscal 1994. The increase primarily resulted from a
$22.2 million increase in cost of sales of domestic operations offset
slightly by a $.8 million decrease in the cost of sales in Mexican
operations.
The cost of sales increase in domestic operations of $22.2 million was
due primarily to a 5.9% 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
10.4% decrease in feed ingredient cost.
The $.8 million cost of sales decrease in Mexican operations was
primarily due to a 9.4% decrease in average cost of sales per dressed
pound resulting from the devaluation of the Mexican peso offset by a
9.6% increase in 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 7.7% in the first
nine months of fiscal 1995 from 12.1% in the first nine months of
fiscal 1994. The decreased gross profit resulted primarily from the
Company's Mexican operations and was primarily the result of a 29.7%
decrease in total revenue per dressed pound offset in part by the
Mexican operation's costs of sales decreasing 9.41% as discussed above
and by an increased gross profit from the Company's domestic
operations. Accordingly, the effects of the Mexican peso devaluation
has had a greater effect on selling prices than on cost of sales, due
primarily to the dollar based characteristics of grain prices, which is
a major component of cost of goods. The increase in gross profit for
domestic chicken operations was a result of increased volumes and
decreased average costs of sales per dressed pound offset partially by
a slight decrease in total revenues per dressed pound.
Consolidated selling, general and administrative expenses were $36.2
million for the first nine months of fiscal 1995, a decrease of $2.4
million or 6.1%, when compared to the first nine months of fiscal 1994;
these decreases were primarily due to lower selling, general and
administrative expenses in the Company's Mexican operations caused by
the effects of the Mexico peso devaluation, lower accrued retirement
and bonuses costs due to lower operating profits offset by increased
selling, general and administrative costs in the Company's domestic
operations.
Consolidated operating income was $15.9 million for the first nine
months of fiscal 1995 a decrease of $28.2 million, when compared to
first nine 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 $12.7 million in the first nine
months of fiscal 1995 a decrease of $2.1 million, or 14.2% when
compared to the first nine months of fiscal 1994. This decrease was
due primarily to lower outstanding debt.
Consolidated income tax expense increased to $7.2 million in the first
nine months of fiscal 1995 compared to a $6.5 million in the first nine
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.
Liquidity and Capital Resources
Liquidity in the first nine months ended July 1, 1995 remained strong
despite operating losses in Mexico resulting primarily from the Mexican
peso devaluation. The impact of the Mexican peso devaluation and its
resulting financial statement effects did, however, cause erosion in
most financial ratios. The Company's working capital at July 1, 1995
decreased to $88.1 million from $99.7 million at October 1, 1994. The
current ratio at July 1, 1995 decreased to 2.03 to 1 from 2.34 to 1 at
October 1, 1994 and the Company's stockholder's equity decreased to
$150.8 million at July 1, 1995 from $161.7 million at October 1, 1994.
The Company's ratio of total debt to capitalization increased to 51.3%
at July 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 $54.5 million at August 15, 1995.
The Company completed a new $30 million term revolving financing
facility maturing in 2003, with $14.7 million drawn upon at July 1,
1995. At July 1, 1995, the Company held commitments for an additional
$15 million in long-term revolver financing, maturing in 2000. These
financing facilities were used to fund the July 5, 1995 acquisition of
Union de Queretaro, et al, a group of five chicken companies located
near Queretaro, Mexico area for $32 million.
Trade accounts and notes receivable were $50.4 million at July 1, 1995,
a $2.9 million decrease from October 1, 1994. This 5.5% decrease was
due primarily to the effects of the Mexican peso devaluation and faster
domestic collections experienced in the first nine 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 7.0% at July
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 $104.4 million at July 1, 1995, a $3.7 million
increase from October 1, 1994. This 3.7% increase was primarily due to
higher domestic inventories resulting from increased production offset
by lower Mexican inventories caused by the Mexican peso devaluation.
Accounts payable were $50.4 million at July 1, 1995, a $11.7 million
increase from October 1, 1994, primarily due to increases resulting
from normal increased operations and construction projects to expand
operations. Accrued expenses were $32.3 million at July 1, 1995, a
3.0% increase from October 1, 1994, due primarily to normal increased
operations.
Capital expenditures and business acquisitions for the first nine
months of fiscal 1995 were $25.0 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 approximately $35 million for capital expenditures and
approximately $30 million for business acquisition capital expenditures
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 a high of 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
August 11, 1995 the Mexican peso closed at 6.14 to 1 U.S. dollar and it
has averaged 6.12 to 1 U.S. dollar since the end of the Company's
second fiscal quarter. No assurance can be given as to the future
valuation of the Mexican peso and its resulting impact on the Company's
operations. Further movement in the Mexican peso could affect future
earnings positively or negatively.
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 nine-months ended July 1,
1995, the peso's movement resulted in foreign exchange gains of
$177,000 and losses of $5.4 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 second
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 experienced since December 31, 1994, 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. By third quarter, average
peso selling prices had rebounded and most pre-devaluation valued
inventories had been sold, 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 nine months
ended July 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 Aug 15, 1995 Clifford E. Butler
Vice Chairman of the Board,
Chief Financial Officer and
Secretary and Treasurer
in his respective capacity
as such
5
9-MOS
SEP-30-1995
JUL-01-1995
8272
0
50357
0
104418
173985
408074
155031
447933
85905
155930
276
0
0
150573
447933
674127
674127
621959
658204
0
3794
12714
(2357)
7248
(9605)
0
0
0
(9605)
(.35)
(.35)
