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 30, 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 FEBRUARY 9, 1996
INDEX
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited):
Condensed consolidated balance sheets:
December 30, 1995 and September 30, 1995
Consolidated statements of income:
Three months ended December 30, 1995 and December 31, 1994
Consolidated statements of cash flows:
Three months ended December 30, 1995 and December 31, 1994
Notes to condensed consolidated financial statements--December 30,
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):
December 30,
1995 September 30,
(UNAUDITED) 1995
(in thousands)
ASSETS
Current Assets
Cash and cash equivalents $ 16,269 $ 11,892
Trade accounts and other receivables, less allowance
for doubtful accounts 70,023 60,031
Inventories 101,790 110,404
Deferred income taxes 5,825 9,564
Prepaid expenses 412 526
Other current assets 812 953
Total Current Assets 195,131 193,370
Other Assets 20,535 20,918
Property, Plant and Equipment 453,633 442,781
Less accumulated depreciation 164,687 159,465
288,946 283,316
$ 504,612 $ 497,604
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable to banks $ 7,000 $ 13,000
Accounts payable 71,589 55,658
Accrued expenses 34,984 31,130
Current maturities of long-term debt 8,574 5,187
Total Current Liabilities 122,147 104,975
Long-Term Debt, less current maturities 177,340 182,988
Deferred Income Taxes 53,328 56,725
Minority Interest in Subsidiary 842 842
Stockholders' Equity:
Common stock; $.01 par value 276 276
Additional paid-in capital 79,763 79,763
Retained earnings 70,916 72,035
Total Stockholders' Equity 150,955 152,074
$ 504,612 $ 497,604
See notes to condensed consolidated financial statements.
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
THREE MONTHS ENDED
December 30, December 31,
1995 1994
(in thousands, except share
and per share data)
Net Sales $ 267,475 $ 227,000
Costs and Expenses:
Cost of sales 246,503 206,235
Selling, general and administrative 12,147 12,023
258,650 218,258
Operating Income 8,825 8,742
Other Expense (Income):
Interest expense, net 5,121 4,327
Foreign exchange loss 1,316 2,345
Miscellaneous, net [248] [247]
Income Before Income Taxes 2,636 2,317
Income tax expense 3,340 1,761
Net Income (Loss) $ [704] $ 556
Net income (loss) per common share $ [.03] $ .02
Dividends per common share $ .015 $ .015
Weighted 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 30, December 31,
1995 1994
(in thousands)
Cash Flows From Operating Activities:
Net income (loss) $ [704] $ 556
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depreciation and amortization 7,131 6,271
Gain on property disposals [112] [69]
Provision for doubtful accounts 305 [958]
Deferred income taxes 342 722
Changes in operating assets and liabilities:
Accounts and other receivable [10,297] 7,694
Inventories 8,712 14,358
Prepaid expenses [495] [515]
Accounts payable and accrued expenses 19,785 [2,162]
Other [152] 876
Net Cash Flows Provided By Operating Activities: 24,515 26,773
Investing Activities:
Acquisitions of property, plant and equipment [12,447] [8,826]
Proceeds from property disposals 936 113
Other, net 106 66
Net Cash Used In Investing Activities [11,405] [8,647]
Financing Activities:
Proceeds from notes payable to banks 6,500 --
Repayments of notes payable to banks [12,500] --
Proceeds from long-term debt 28 30
Payments on long-term debt [2,299] [948]
Cash dividends paid [414] [413]
Cash Used In Financing Activities [8,685] [1,331]
Effect of Exchange Rate Changes on Cash and
Cash Equivalents [47] [1,048]
Increase in cash and cash equivalents 4,378 15,747
Cash and cash equivalents at beginning of year 11,891 11,244
Cash and cash equivalents at end of period $ 16,269 $ 26,991
Supplemental disclosure information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 2,398 $ 1,509
Income Taxes $ 1,792 $ 989
See notes to condensed consolidated financial statements.
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
December 30, 1995
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 30, 1995 are not necessarily
indicative of the results that may be expected for the year ended September
28, 1996. 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 September 30, 1995.
The consolidated financial statements include the accounts of Pilgrim's and
its wholly and majority 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 and non-monetary 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 Consolidated Statements of Income (Loss).
NOTE B--NET INCOME PER COMMON SHARE
Earnings per share for the periods ended December 30, 1995 and December 31,
1994 are based on the weighted average shares outstanding for the periods.
NOTE C--INVENTORIES
Inventories consist of the following:
DECEMBER 30, 1995 SEPTEMBER 30, 1995
(in thousands)
Live broilers and hens $ 44,815 $ 55,353
Feed, eggs and other 35,509 32,087
Finished poultry products 21,466 22,964
$ 101,790 $ 110,404
NOTE D--IMPACT OF MEXICAN PESO DEVALUATION
Included in results of operations for the period ended December 30, 1995
and December 31, 1994 is a $1.3 million and $2.3 million, respectively,
foreign exchange loss resulting from the devaluation of the Mexican peso
against the U.S. dollar. Also included in cost of sales is a $2.0 million
lower of cost or market adjustment to inventories in Mexico at December 31,
1994 resulting from the affect of such devaluation on operations. These
adjustments are presented in the 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 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.
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
December 30, 1995
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT (Unaudited) -
Continued
______________________________________________________________________________
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
December 30, December 31,
1995 1994
Net sales 100.0% 100.0%
Costs and expenses:
Cost of sales 92.2% 90.9%
Gross profit 7.8% 9.1%
Selling, general and administrative 4.5% 5.3%
Operating Income 3.3% 3.9%
Interest expense 1.9% 1.9%
Income before income taxes 1.0% 1.0%
Net Income (Loss) (0.3%) 0.2%
FIRST QUARTER 1995, COMPARED TO FIRST QUARTER 1996
Consolidated net sales were $267.5 million for the first quarter of fiscal
1996, an increase of $40.5 million, or 17.8%, over the first quarter of
fiscal 1995. The increase in consolidated net sales resulted from a $25.7
million increase in domestic chicken sales to $181.9 million, an $8.5
million increase in sales of other domestic products to $33.4 million and
by a $6.3 million increase in Mexican chicken sales to $52.2 million. The
increase in domestic chicken sales was primarily due to a 9.2% increase in
total revenue per dressed pound produced and a 6.7% increase in the
dressed pounds produced. The increase in Mexican chicken sales was
primarily due to a 46.1% increase in dressed pounds produced resulting
primarily from the July 5, 1995 acquisition of five chicken companies
located near Queretaro, Mexico, offset by a 22.2% decrease in total revenue
per dressed pound produced caused primarily by the devaluation of the
Mexican peso which began in December 1994.
Consolidated cost of sales was $246.5 million in the first quarter of
fiscal 1996, an increase of $40.3 million, or 19.5%, over the first quarter
of fiscal 1995. The increase primarily resulted from a $29.8 million
increase in cost of sales of domestic operations, and a $10.5 million
increase in the cost of sales in Mexican operations.
The cost of sales increase in domestic operations of $29.8 million was due
primarily to a 6.7% increase in dressed pounds produced, increased
production of higher margin products in prepared foods and a 30.6% increase
in feed ingredient costs. Since year end, feed costs have increased
substantially due to lower crop yields in the 1995 harvest season and if
feed costs remain at their current level and sales prices do not
correspondingly increase, future results will be negatively impacted.
The $10.5 million cost of sales increase in Mexican operations was
primarily due to a 46.1% increase in dressed pounds produced offset
partially by a 14.8% decrease in average costs of sales per dressed pound
resulting from the devaluation of the Mexican peso. See Impact of Mexican
Peso Devaluation discussed below.
Gross profit as a percentage of sales decreased to 7.8% in the first
quarter of fiscal 1996 from 9.1% in the first quarter of 1995. The
decreased gross profit resulted mainly from the Company's Mexican operation
and was primarily the result of the Mexican peso devaluation having a
greater effect on selling prices than costs of sales, due primarily to the
dollar based characteristics of grain prices, which is a major component of
costs of goods sold.
Consolidated selling, general and administrative expenses were $12.1
million for the first quarter of fiscal 1996, an increase of $.1 million,
or 1.0%, when compared to the first quarter of fiscal 1995. Consolidated
selling, general and administrative expenses as a percentage of sales
decreased in the first quarter of fiscal 1996 to 4.5% compared to 5.3% in
the first quarter of fiscal 1995.
Consolidated operating income was $8.8 million for the first quarter of
fiscal 1996 a slight increase of $.1 million, or .1%, when compared to the
first quarter of 1995.
Consolidated net interest expense was $5.1 million in the first quarter of
fiscal 1996 an increase of $.8 million, or 18.3%, when compared to the
first quarter of fiscal 1995. This increase was due to higher outstanding
debt levels resulting primarily from the prior year acquisitions in
Mexico, offset slightly by lower interest rates when compared to the
first quarter of fiscal 1995.
Consolidated income tax expense as a percentage of income before income
taxes increased in the first quarter of fiscal 1996 to 126.7% compared to
76.0% in the first quarter of fiscal 1995. The high effective tax rate is
due to the Company having positive taxable income in the United States
offset by losses in Mexico which result in no current tax benefit under
current Mexican tax laws.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity in first quarter 1996 remained strong. However, operating losses
in Mexico resulting primarily from the Mexican peso devaluation affected
most financial ratios. The Company's working capital at December 30, 1995
decreased to $73.0 million from $88.4 million at September 30, 1995. The
current ratio at December 30, 1995 decreased to 1.60 to 1 from 1.84 to 1 at
September 30, 1995 and the Company's stockholder's equity slightly
decreased to $151.0 million at December 30, 1995 million from $152.1
million at September 30, 1995. The Company reduced its ratio of total debt
to capitalization to 56.1% at December 30, 1995 from 56.9% at September 30,
1995. The Company maintains a $75 million revolving credit facility and
obtained a $10 million revolving credit facility in Mexico on January 31,
1996, with available unused lines of credit of $32.8 million and $10
million, respectively, at February 9, 1994.
Trade accounts and other receivables were $70.0 million at December 30,
1995, a $10.0 million increase from September 30, 1995. The 16.6% increase
was due primarily to increased domestic sales offset partially by the
effects of the Mexican peso devaluation. Allowances for doubtful accounts,
which primarily relate to receivables in Mexico, as a percentage of trade
accounts and notes receivable were 5.4% at December 30, 1995 compared to
6.7% at September 30, 1995.
Inventories were $101.8 million at December 30, 1995, a decrease of $8.6
million decrease from September 30, 1995. This 7.8% decrease was due to
reductions in finished poultry products due to increased sales, seasonal
variations in sales of poultry and feed products to the Company's principal
stockholder, and the effects on Mexican inventories resulting from the peso
devaluation.
Accounts payable were $71.6 million at December 30, 1995, a 28.6% increase
from September 30, 1995, due primarily to higher production levels, feed
ingredient costs and construction-in progress from September 30, 1995.
Capital expenditures for the first three months of 1995 were $12.4 million
and were primarily incurred to expand production capacities domestically,
improve efficiencies, reduce costs and for the routine replacement of
equipment. The Company anticipates that it will spend approximately $45.0
million for capital expenditures in fiscal year 1996 and expects to finance
such expenditures with available operating cash flows, leases and long-term
financing. The Company expects to close a $50 million long-term financing
arrangement in the second fiscal quarter which will be used to finance the
above mentioned capital expenditures and to refinance certain existing
long-term debt.
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
December 30, 1995
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT (Unaudited) -
Continued
______________________________________________________________________________
IMPACT OF MEXICAN PESO DEVALUATION
In December 1994, the Mexican government changed 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 low of 7.91 at
November 15, 1995. On February 8, 1996 the Mexican peso closed at 7.45 to
1 U.S. dollar. No assurance can be given as to the future valuation of the
Mexican peso and its resulting impact on the Company's operation. Further
movement in the Mexican peso could affect future earnings positively or
negatively.
Adjustments resulting from changes in currency exchange rates on net
monetary assets are reflected in the Consolidated Statements of
Income (Loss). Classification of the effects in the Consolidated
Statements of Income (Loss) 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 quarters ended December 30, 1995 and
December 31, 1994, the peso's devaluation resulted in foreign exchange
losses of $1.3 million and $2.3 million, respectively, on net monetary
assets.
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 three months
ended December 30, 1995.
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
December 30, 1995
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT (Unaudited) -
Continued
______________________________________________________________________________
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 02/09/96
Clifford E. Butler
Vice Chairman of the Board,
Chief Financial Officer and
Secretary and Treasurer
in his respective capacity
as such
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
December 30, 1995
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT (Unaudited) -
Continued
______________________________________________________________________________
5
3-MOS
SEP-28-1996
DEC-30-1995
16,269
0
70,023
0
101,790
195,131
453,633
164,687
504,612
122,147
177,340
276
0
0
150,679
504,612
267,475
267,475
246,503
258,650
0
305
5,121
2,636
3,340
(704)
0
0
0
(704)
(.03)
(.03)
