SEC Filing | Pilgrim's Pride Corporation

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PROSPECTUS Filed pursuant to Rule 424(b)(4)
JULY 22, 1997 Registration No. 333-29163

4,500,000 SHARES

[LOGO OF PILGRIM'S PRIDE APPEARS HERE]

COMMON STOCK

All of the shares of common stock, par value $0.01 per share ("Common
Stock"), offered hereby (the "Offering") are being sold by certain
stockholders (the "Selling Stockholders") of Pilgrim's Pride Corporation (the
"Company"). The Company will not receive any part of the proceeds from the
sale of the shares by the Selling Stockholders. See "Principal and Selling
Stockholders."

The Common Stock is traded on the New York Stock Exchange under the symbol
"CHX." The last reported sale price of the Common Stock on the New York Stock
Exchange on July 22, 1997 was $11 5/8 per share. See "Price Range of Common
Stock and Dividends."

SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

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PRICE TO UNDERWRITING PROCEEDS TO
THE DISCOUNTS AND THE SELLING
PUBLIC COMMISSIONS(1) STOCKHOLDERS(2)
- -----------------------------------------------------------------------------

Per Share........................ $11.625 $0.58 $11.045
Total(3)......................... $52,312,500 $2,610,000 $49,702,500
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(1) See "Underwriting" for indemnification arrangements with the Underwriters.
(2) Before deducting expenses estimated at $250,000 payable by the Selling
Stockholders.
(3) Archer-Daniels-Midland Company, a Selling Stockholder, has granted the
Underwriters a 30-day option to purchase up to 675,000 additional shares
of Common Stock, on the same terms as set forth above, solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to the Public, Underwriting Discounts and Commissions and Proceeds
to the Selling Stockholders will be $60,159,375, $3,001,500 and
$57,157,875, respectively. See "Underwriting."

The shares of Common Stock are being offered in the Offering by the several
Underwriters when, as and if delivered to and accepted by the Underwriters and
subject to various prior conditions, including their right to reject orders in
whole or in part. It is expected that delivery of the shares will be made in
New York, New York on or about July 28, 1997.

DONALDSON, LUFKIN & JENRETTE A.G. EDWARDS & SONS, INC.
SECURITIES CORPORATION

[TWO PLATES WITH CHICKEN ENTREES.]

Fully cooked grilled breast filets and ready-to-serve buffalo wings are two
examples of Pilgrim's Pride further-processed products that are sold to both our
foodservice and retail customers.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act of
1933, as amended (the "Securities Act"), of which this Prospectus is a part,
with respect to the Common Stock offered hereby. This Prospectus omits certain
information contained in the Registration Statement, and reference is made to
the Registration Statement for further information with respect to the Company
and the Common Stock offered hereby. Statements contained herein concerning
the provisions of documents are necessarily summaries of such documents and
when any such document is an exhibit to the Registration Statement, each such
statement is qualified in its entirety by reference to the copy of such
document filed with the Commission. Copies of the Registration Statement may
be obtained upon payment of the prescribed fees or examined without charge at
the public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Commission. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at the following Regional Offices of the Commission: Seven
World Trade Center, 13th Floor, New York, New York 10048 and Northwest Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
can also be obtained at prescribed rates from the Public Reference Section of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, such materials filed electronically by the Company with
the Commission are available at the Commission's World Wide Web Site at
http://www.sec.gov.

The Common Stock is listed on the New York Stock Exchange. Reports, proxy
statements and other information concerning the Company can be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York 10005.

REFERENCE DATA

Industry, market and market share information contained herein is based on
information appearing in publicly available reports. The Company has not
independently verified such information.

FORWARD-LOOKING INFORMATION

This Prospectus contains certain forward-looking statements that involve
substantial risks and uncertainties. When used in this Prospectus, the words
"anticipate," "believe," "estimate," "expect" and similar expressions as they
relate to the Company or its management are intended to identify such forward-
looking statements. Actual results, performance or achievements could differ
materially from the results expressed in, or implied by, these forward-looking
statements. Factors that could cause or contribute to such differences include
those discussed in "Risk Factors."

----------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING
AND MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by and should be read in
conjunction with the more detailed information and Consolidated Financial
Statements and notes thereto included in this Prospectus. Investors should
carefully consider the information set forth under "Risk Factors." Unless
otherwise indicated herein, the information contained in this Prospectus
assumes that the Underwriters' over-allotment option will not be exercised. The
term the "Company" or "Pilgrim's Pride" refers to Pilgrim's Pride Corporation
and its subsidiaries, unless the context otherwise requires.

THE COMPANY

Pilgrim's Pride is one of the largest producers of prepared and fresh chicken
products in North America and has one of the best known brand names in the
chicken industry. The Company is the fourth largest producer of chicken in the
United States and one of the two largest in Mexico. Through vertical
integration, the Company controls the breeding, hatching and growing of
chickens and the processing, preparation, packaging and sale of its product
lines. In fiscal 1996, approximately 80% of the Company's net sales were from
its U.S. operations, including U.S. produced chicken products sold for export
to Canada, Eastern Europe, the Far East and other world markets, with the
remaining 20% arising from the Company's Mexico operations.

The U.S. chicken industry has grown from 9.0 billion pounds produced in 1976
to 26.1 billion pounds in 1996, a compounded annual growth rate of 5.5%. This
growth was in response to both domestic and international demand. In the U.S.,
annual per capita consumption of chicken grew from 42.5 pounds in 1976 to 71.7
pounds in 1996 while per capita consumption of beef and pork declined. Per
capita consumption of chicken in the U.S. surpassed that of pork in 1982 and
beef in 1992. Exports of U.S. produced chicken have also increased from 3.2% of
production in 1976 to 16.9% in 1996. Management believes these trends will
continue in the foreseeable future.

In the U.S., the Company is the second largest full-line supplier of chicken
products to the foodservice market, which is principally comprised of chain
restaurant operations, frozen entree producers, institutions and distributors.
The majority of the Company's sales to this market consists of prepared food
products, which include portion-controlled breast fillets, tenderloins and
strips, formed nuggets and patties and bone-in chicken parts. These products
are sold frozen and may be either fully cooked or uncooked. Primarily as a
result of growth in the Company's sales of prepared food products to this
market, Company sales to the foodservice market from fiscal 1992 through fiscal
1996 grew at a compounded annual growth rate of 10.2%. Based on industry data,
the Company estimates that total industry dollar sales to the foodservice
market during this same period grew at a compounded annual growth rate of 7.6%.
The Company also sells fresh chicken products to the foodservice market and the
retail market, the latter consisting primarily of grocery store chains and
retail distributors.

In Mexico, the Company has made significant capital investments to modernize
its production technology, completed strategic acquisitions and transferred
experienced management personnel in order to be a low-cost producer of chicken.
Management believes that this low-cost producer strategy has resulted in
increased market share and higher profit margins relative to most other Mexican
chicken producers and has positioned the Company to participate in the
anticipated growth in Mexican chicken demand. According to an industry source,
annual per capita consumption of chicken in Mexico increased from an estimated
22 pounds in 1982 to an estimated 34 pounds in 1996. Management anticipates
that Mexican chicken consumption will grow as the Mexican economy continues to
strengthen.

the Mexico market and (iii) through greater utilization of the Company's
existing assets. Key elements of the Company's strategy to achieve these
objectives are to:

. Focus U.S. growth on prepared foods. In recent years the Company has
focused on increasing its sales of prepared foods to the foodservice
market, particularly to chain restaurants and frozen entree producers.
The market for prepared food products has experienced greater growth and
higher margins than fresh chicken products, and the Company's sales of
prepared food products to the foodservice market have grown from $178.2
million in fiscal 1992 to $303.9 million in fiscal 1996, a compounded
annual growth rate of 14.3%. Additionally, the production and sale of
prepared foods reduces the impact of feed grain costs on the Company's
profitability. As further processing is performed, feed grain costs
become a decreasing percentage of a product's total production cost. The
Company is now the largest supplier of chicken to Wendy's and Jack-in-
the-Box chain restaurants and to Stouffer's frozen entree operations.
Other major prepared foods customers include KFC and Taco Bell. Prepared
foods constituted 44.9% of the Company's U.S. chicken sales in fiscal
1996.

. Focus on customer driven research & development and technology. Much of
the Company's growth in prepared foods has been the result of customer-
driven research & development focused on designing new products to meet
customers' changing needs. The Company's research & development personnel
often work directly with institutional customers in developing
proprietary products. Approximately $110.9 million of the Company's sales
to foodservice customers in fiscal 1996 consisted of new products which
were not sold by the Company in fiscal 1992. The Company is also a leader
in utilizing advanced processing technology, which enables the Company to
better meet its customers' needs for product innovation, consistent
quality and cost efficiency.

. Enhance the U.S. fresh chicken product mix through value-added, branded
products. The Company's fresh chicken business is an important component
of its sales and has grown from sales of $232.1 million in fiscal 1992 to
$286.2 million in fiscal 1996. In addition to maintaining its sales of
mature, traditional fresh chicken products, the Company's strategy is to
shift the mix of its U.S. fresh chicken products by continuing to
increase sales of higher margin, faster growing products, such as
marinated chicken and chicken parts. As a result of this strategy, the
Company's compounded annual growth rate of fresh chicken sales from
fiscal 1992 to fiscal 1996 exceeded 5.3% while total U.S. industry sales
of fresh chicken increased less than 2.0%.

. Maintain operating efficiencies and increase capacity on a cost-effective
basis. As production and sales have grown, the Company has maintained
operating efficiencies by investing in state-of-the-art technology,
processes and training and by making cost-effective acquisitions both in
the U.S. and Mexico. As a result, according to industry data, since 1993
the Company has consistently been one of the lowest cost producers of
chicken. In addition, in two recent studies of 16 production facilities
of various large chicken producers, the Company's prepared foods plant
ranked as either the first or second lowest cost producer of deboned
meat, which is the major cost component of prepared foods. Continuing
this strategy, the Company acquired additional chicken producing assets
in the U.S. in April 1997, to replace chicken purchased from third
parties, at a cost that management believes is significantly less than
the cost required to construct a new chicken production complex with
similar capacity.

. Capitalize on international demand for U.S. chicken. Due to U.S.
consumers' preference for chicken breast meat, the Company has targeted
international markets to generate sales of leg quarters. The Company has
also begun selling prepared food products for export to the international
divisions of its U.S. chain restaurant customers. As a result of these
efforts, sales for these markets have grown from less than 1% of the
Company's total U.S. chicken sales in fiscal 1992 to more than 6% in
fiscal 1996. Management believes that (i) U.S. chicken exports will
continue to grow as worldwide demand for high grade, low cost protein
sources increases and (ii) worldwide demand for higher margin prepared
food products will increase over the next five years; and accordingly,
the Company is well positioned to capitalize on such growth.

. Capitalize on investments and expertise in Mexico. The Company's strategy
in Mexico is focused on (i) being one of the most cost-efficient
producers and processors of chicken in Mexico by applying technology and
expertise utilized in the U.S. and (ii) increasing distribution of its
higher margin, value added products to national retail stores and
restaurants. This strategy has resulted in the Company obtaining a market
leadership position, with its estimated market share in Mexico increasing
from 10.5% in 1992 to 18.8% in 1996.

THE OFFERING

Common Stock offered by the Selling Stockholders:
Archer-Daniels-Midland Company................... 3,753,518 shares
Other non-management stockholders................ 746,482 shares
----------------
Total....................................... 4,500,000 shares

Common Stock to be outstanding after the Offering... 27,589,250 shares

Use of Proceeds..................................... The Company will not receive any of
the proceeds of the Offering.

New York Stock Exchange symbol...................... CHX

Dividend Policy..................................... $0.015 per share per quarter. See "Price
Range of Common Stock and Dividends."

SUMMARY FINANCIAL AND OPERATING DATA

FISCAL YEAR ENDED SIX MONTHS ENDED
--------------------------------------------------------------- -----------------------
SEPTEMBER 26, OCTOBER 2, OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28, MARCH 30, MARCH 29,
1992 1993(A) 1994 1995(B) 1996 1996 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)

INCOME STATEMENT DATA:
Net sales.............. $817,361 $887,843 $922,609 $931,806 $1,139,310 $539,479 $601,207
Gross profit........... 32,802 106,036 110,827 74,144 70,640 37,019 53,352
Operating income
(loss)................ (12,739) 56,345 59,698 24,930(c) 21,504 (c) 12,509 (c) 25,974
Foreign exchange (gain)
loss.................. 736 243 (257) 5,605(c) 1,275 (c) 1,222 (c) 536
Income (loss) before
income taxes and
extraordinary charge.. (33,712) 32,838 42,448 2,091 47 1,533 17,611(d)
Income tax expense
(benefit)(e).......... (4,048) 10,543 11,390 10,058 4,551 2,792 2,552
Income (loss) before
extraordinary charge.. (29,664) 22,295 31,058 (7,967) (4,504) (1,259) 15,059(d)
Net income (loss)...... (29,664) 21,009 31,058 (7,967) (7,284) (4,039) 15,059(d)
Income (loss) per
common share before
extraordinary charge.. $ (1.24) $ 0.81 $ 1.13 $ (0.29) $ (0.16) $ (0.05) $ 0.55(d)
Net income (loss) per
common share.......... $ (1.24) $ 0.76 $ 1.13 $ (0.29) $ (0.26) $ (0.15) $ 0.55(d)
Dividends per common
share................. $ 0.06 $ 0.03 $ 0.06 $ 0.06 $ 0.06 $ 0.03 $ 0.03
Weighted average shares
outstanding........... 23,880 27,589 27,589 27,589 27,589 27,589 27,589
OTHER DATA:
EBITDA(f).............. $ 10,955 $ 79,222 $ 83,658 $ 49,811 $ 47,767 $ 25,948 $ 39,735
Capital expenditures... 14,813 11,511 23,572 71,589 32,534 22,262 12,090

AT
MARCH 29,
1997

BALANCE SHEET DATA:
Working capital...................................................... $ 98,526
Total assets......................................................... 531,579
Notes payable and current maturities of long-term debt............... 33,645
Long-term debt, less current maturities.............................. 193,546
Total stockholders' equity........................................... 157,366

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(a) Fiscal 1993 had 53 weeks.
(b) On July 5, 1995, the Company acquired certain assets of a group of five
chicken companies located near Queretaro, Mexico for approximately $35.3
million. The acquisition has been accounted for as a purchase, and the
results of operations for this acquisition have been included in the
Company's consolidated results of operations since the acquisition date.
(c) In addition to foreign exchange losses, the peso decline and the related
economic recession in Mexico contributed significantly to the operating
losses experienced by the Company's Mexican operations of $17.0 million,
$8.2 million and $3.2 million for fiscal years 1995 and 1996 and the six
months ended March 30, 1996, respectively. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(d) Reflects $2.2 million (or $1.3 million or $0.05 per share net of tax
effect) of income arising from the final settlement of claims resulting
from a January 1992 fire at the Company's prepared foods plant.
(e) The Company does not include income or losses from its Mexican operations
in its determination of taxable income for U.S. income tax purposes based
upon its determination that such earnings will be indefinitely reinvested
in Mexico. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Note D of the Consolidated Financial
Statements of the Company.
(f) "EBITDA" is defined as the sum of operating income (loss) and depreciation
and amortization (excluding amortization of capitalized financing costs).
EBITDA should not be considered as an alternative to, or more meaningful
than, net income as a measure of the Company's operating performance or
cash flows as a measure of the Company's liquidity. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
EBITDA is presented here not as an alternative measure of operating results
or liquidity, but rather to provide additional information related to the
Company's debt service ability. Certain restrictive covenants contained in
agreements relating to the Company's indebtedness are based on the
Company's EBITDA, subject to certain adjustments.

RECENT FINANCIAL INFORMATION

The following table sets forth certain unaudited summary financial
information of the Company for the three and nine months ended June 29, 1996
and June 28, 1997.

THREE MONTHS ENDED NINE MONTHS ENDED
------------------- ------------------
JUNE 29, JUNE 28, JUNE 29, JUNE 28,
1996 1997 1996 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Net sales................................ $ 294,339 $ 335,168 $833,818 $936,375
Operating income......................... 5,454 12,627 17,963 38,602
Net income (loss)........................ 1,007 7,286 (3,032) 22,346
Net income (loss) per common share...... $ 0.04 $ 0.26 $ (0.11) $ 0.81
Weighted average shares outstanding...... 27,589 27,589 27,589 27,589

The increases in consolidated net sales between the three and nine months
ended June 28, 1997 and the three and nine months, respectively, ended June
29, 1996 primarily resulted from increases in U.S. chicken sales of $28.3
million to $227.1 million and $63.4 million to $624.4 million, respectively;
and increases in Mexican chicken sales of $13.0 million to $74.4 million and
$31.9 million to $201.9 million, respectively. The increases in U.S. chicken
sales for the three and nine months ended June 28, 1997 when compared to the
three and nine months, respectively, ended June 29, 1996 resulted from
increases in dressed pounds produced of 20.9% and 12.1%, respectively, offset
by decreases in total revenue per dressed pound produced of 5.5% and 0.7%,
respectively. The decrease in total revenue per dressed pound produced in the
U.S. is primarily attributable to weakness in the leg quarter market
experienced in the third quarter of fiscal 1997. The increases in Mexican
chicken sales for the three and nine months ended June 28, 1997 when compared
to the three and nine months, respectively, ended June 29, 1996 were primarily
due to a 16.4% and 24.4% respective increase in total revenue per dressed
pound produced in Mexico. Dressed pounds produced in Mexico increased by 4.1%
for the three months ended June 29, 1996 when compared to the three months
ended June 28, 1997, but decreased by 4.5% for the nine months ended June 29,
1996 when compared to the nine months ended June 28, 1997. The increases in
operating income for the three and nine months ended June 28, 1997 when
compared to the three and nine months ended June 29, 1996 also reflect reduced
feed ingredient costs. The results for the three and nine months ended June
28, 1997 are not necessarily indicative of the results that may be expected
for the full fiscal year. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements of the Company included elsewhere in this Prospectus.

RISK FACTORS

INDUSTRY CYCLICALITY

High feed grain prices have had a material adverse effect on the Company's
operating results in recent periods. The Company periodically seeks, to the
extent available, to enter into advance purchase commitments and/or financial
hedging contracts for the purchase of feed grains in an effort to manage its
feed grain costs. There can be no assurance that the use of such instruments
by the Company will be successful. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "The Chicken Industry."

SUBSTANTIAL INDEBTEDNESS

The Company currently has a significant amount of outstanding indebtedness.
The degree to which the Company is leveraged could have important consequences
to the Company, including the following: (i) the Company's ability to obtain
additional financing in the future for working capital, capital expenditures,
acquisitions, general corporate purposes or other purposes may be impaired;
(ii) a substantial portion of the Company's cash flow from operations must be
dedicated to the payment of the principal of and interest on its existing
indebtedness; (iii) the Company is more leveraged than certain of its
competitors, which may place the Company at a competitive disadvantage; (iv)
certain of the Company's borrowings are at variable rates of interest, which
cause the Company to be vulnerable to increases in interest rates; (v) the
terms of certain of the Company's indebtedness permit its creditors to
accelerate payments or require redemption upon certain events which constitute
a change in control of the Company; and (vi) the Company's high degree of
leverage may make it more vulnerable to economic downturns and may limit its
ability to withstand competitive pressures and adverse changes in government
regulation, consummate acquisitions and capitalize on significant business
opportunities.

RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS

The terms and conditions of documents evidencing the Company's indebtedness
impose restrictions that affect, among other things, the Company's ability to
(i) incur additional indebtedness (including indebtedness incurred by means of
guarantees); (ii) create liens on assets; (iii) sell assets; (iv) engage in
mergers or consolidations; (v) make investments, acquisitions and capital
expenditures; (vi) pay dividends; and (vii) engage in certain transactions
with affiliates and subsidiaries. The Company is also required to comply with
certain specified financial ratios and tests. The Company's ability to comply
with such provisions may be affected by events beyond its control. The
Company's failure to comply with any of these covenants and restrictions could
result in defaults which in turn could cause such indebtedness (and by reason
of cross-acceleration provisions, certain other of its indebtedness) to be
declared immediately due and payable.

FOREIGN OPERATIONS

The Company has substantial operations and assets located in Mexico. Foreign
operations are subject to a number of special risks, including currency
exchange rate fluctuations, trade barriers, exchange controls, expropriation,
changes in laws and policies, including those governing foreign-owned
operations, and other risks. Currency exchange rate fluctuations have
adversely affected the Company in the past and there can be no assurance that
currency exchange rate fluctuations or one or more of such other risks will
not have a material adverse effect on the Company in the future.

The Company's operations in Mexico are conducted through subsidiaries of the
Company organized under the laws of Mexico. The Company may rely in part on
intercompany loans and distributions from such

subsidiaries to meet its obligations. Claims of creditors of the Company's
subsidiaries, including trade creditors, will generally have priority as to
the assets of such subsidiaries over the claims of the Company. Additionally,
the ability of the Company's Mexican subsidiaries to make payments and
distributions to the Company will be subject to, among other things, Mexican
law. Although such laws have not had, and the Company does not anticipate such
laws having, a material adverse effect on the ability of the Company's Mexican
subsidiaries to make such payments and distributions, no assurances can be
given that such laws will not have such a material adverse effect.

REGULATION

The chicken industry is subject to federal, state and local governmental
regulation, including in the health and environmental areas by the Centers for
Disease Control, the United States Department of Agriculture ("USDA"), the
Food and Drug Administration ("FDA") and the Environmental Protection Agency
(the "EPA") in the United States and by similar governmental agencies in
Mexico. The Company anticipates increased regulation by the USDA concerning
food safety, by the FDA concerning the use of medications in feed and by the
Texas Natural Resources and Conservation Commission (the "TNRCC"), the
Arkansas State Veterinarian Office (the "ASVO") and the EPA concerning the
disposal of chicken by-products and wastewater discharges. Although the
Company does not anticipate any such regulation having a material adverse
effect upon the Company, there can be no assurance that currently unknown
matters, new laws and regulations, or stricter interpretations of existing
laws or regulations will not materially affect the Company's business or
operations in the future. See "Business--Regulation."

VOTING CONTROL BY PRINCIPAL STOCKHOLDER

Lonnie "Bo" Pilgrim has voting control of 60.8% of the Company's outstanding
Common Stock and is therefore in a position to control the outcome of all
actions requiring stockholder approval, including the election of Directors,
thereby insuring his ability to control the future direction and management of
the Company. If Mr. Pilgrim and certain members of his family cease to own at
least a majority of the outstanding Common Stock of the Company, it will
constitute an event of default under certain agreements relating to the
Company's indebtedness and will entitle certain other holders of indebtedness
to the prepayment of such indebtedness. See "--Potential Payment of Deferred
Taxes" and "Principal and Selling Stockholders."

POTENTIAL PAYMENT OF DEFERRED TAXES

During taxable periods ending on or before July 2, 1988, the Company used
the cash method of accounting for income tax purposes. Pursuant to certain
provisions enacted by the Revenue Act of 1987, the Company was required to
change its method of accounting for federal income tax purposes from the cash
method to the accrual method. As a consequence of such change in accounting
method, the Company was permitted to create a "suspense account" in the amount
of approximately $89.7 million, which represents deferred income arising from
the Company's prior use of the cash method of accounting. If certain events
occur, which events are not necessarily within the control of the Company,
then the Company will be required to include all or a portion of the amount in
the suspense account in its taxable income.

The suspense account is includable in the taxable income of the Company in
either of two circumstances. First, the full amount of the suspense account
would be included in the Company's taxable income if the Company ceases to
qualify as a "family farm corporation" during any taxable period. The Company
ceases to qualify as a family farm corporation if less than 50% of the total
combined voting power of all classes of stock entitled to vote, or less than
50% of all other classes of stock of the Company, are owned by members of the
Lonnie "Bo" Pilgrim family. Lonnie "Bo" Pilgrim and his family currently own
in excess of 60% of the outstanding Common Stock. Second, a portion of the
Company's suspense account must be reported as taxable income if the Company's
gross receipts from the Company's chicken operations for any taxable year
("Current Year Receipts") are less than the Company's gross receipts from such
operations for the taxable year ending July 2, 1988 (or the gross receipts of
any subsequent year in which a portion of the suspense account must be

reported as income) ("Base Year Receipts"). The amount of the suspense account
includable in income would be the product of (i) the amount in the suspense
account times (ii) the ratio of (A) the excess of Base Year Receipts over
Current Year Receipts to (B) Base Year Receipts.

While currently there exists no plan or intention on the part of Lonnie "Bo"
Pilgrim to transfer sufficient stock of the Company so that the Company ceases
to qualify as a family farm corporation, and while management believes that in
all likelihood gross receipts from its chicken operations in future years will
exceed gross receipts from such operations for the fiscal year ending July 2,
1988, there can be no assurance that this will be the case and that the
suspense account will not be required to be included in whole or in part in
the taxable income of the Company.

Proposed tax legislation passed by both houses of Congress and currently
before a conference committee includes a provision which, if enacted, would
require the Company to include its approximately $89.7 million suspense
account in taxable income, generally spread over a twenty year period
beginning with its first taxable year ending after June 8, 1997. The above
described rules requiring the inclusion of all or a part of the suspense
account in taxable income in certain circumstances would continue to apply
under the proposed legislation, except that the version of the bill passed by
the Senate would repeal the requirement that a portion of the suspense account
be restored into income based on certain declines in the Company's gross
receipts from its chicken operations. The Clinton Administration has proposed
similar legislation which would require that the suspense account be included
in taxable income generally spread over a ten year period. It is not possible
to predict whether such legislation will be enacted into law, and if so, the
form or effective date thereof (including the period of time over which the
suspense account would be required to be spread and reported as taxable
income).

COMPETITION

The chicken industry is highly competitive and certain of the Company's
competitors have greater financial and marketing resources than the Company.
In both the United States and Mexico, the Company competes principally with
other vertically integrated chicken companies.

In general, the competitive factors in the U.S. chicken industry include
price, product quality, brand identification, breadth of product line and
customer service. Competitive factors vary by major market. In the foodservice
market, competition is based on consistent quality, product development,
service and price. In the U.S. retail market, management believes that product
quality, brand awareness and customer service are the primary bases of
competition. There is some competition with non-vertically integrated further
processors in the U.S. prepared food business.

In Mexico, where product differentiation is limited, product quality and
price are the most critical competitive factors. Additionally, the North
American Free Trade Agreement ("NAFTA"), which went into effect on January 1,
1994, requires annual reductions in tariffs for chicken and chicken products
in order to eliminate such tariffs by January 1, 2003. As such tariffs are
reduced, there can be no assurance that increased competition from chicken
imported into Mexico from the U.S. will not have a material adverse effect on
the Mexican chicken industry in general, or the Company's Mexican operations
in particular.

There can be no assurance that the results of any such competition will not
have a material adverse effect on the Company's business or operations.

THE COMPANY

The Company, which was incorporated in Texas in 1968 and reincorporated in
Delaware in 1986, is the successor to a partnership founded in 1946 as a
retail feed store. Over the years, the Company grew through both internal
growth and various acquisitions of farming operations and chicken processors.
In addition to domestic growth, the Company initially expanded into Mexico
through the acquisition of several smaller chicken producers in 1988.

The Company's principal executive offices are located at 110 South Texas
Street, Pittsburg, Texas 75686 and its telephone number at such address is
(903) 855-1000.

USE OF PROCEEDS

The Company will not receive any of the proceeds from the sale of the Common
Stock offered hereby.

PRICE RANGE OF COMMON STOCK AND DIVIDENDS

The Common Stock is listed on the New York Stock Exchange under the trading
symbol "CHX." The following table sets forth the high and low sale prices for
the Common Stock as reported by the New York Stock Exchange and the dividends
declared during the quarters indicated.

PRICE RANGE OF
COMMON STOCK
-------------- DIVIDENDS
HIGH LOW PER SHARE

FISCAL YEAR ENDED SEPTEMBER 30, 1995:
1st Quarter......................................... $10 3/8 $ 9 3/8 $0.015
2nd Quarter......................................... 9 3/4 7 3/4 0.015
3rd Quarter......................................... 8 3/8 7 1/2 0.015
4th Quarter......................................... 8 3/4 7 5/8 0.015
FISCAL YEAR ENDED SEPTEMBER 28, 1996:
1st Quarter......................................... $ 8 3/8 $ 6 5/8 $0.015
2nd Quarter......................................... 7 5/8 6 3/4 0.015
3rd Quarter......................................... 9 6 3/4 0.015
4th Quarter......................................... 9 7 1/2 0.015
FISCAL YEAR ENDED SEPTEMBER 27, 1997:
1st Quarter......................................... $ 9 $ 7 3/4 $0.015
2nd Quarter......................................... 12 1/8 8 5/8 0.015
3rd Quarter......................................... 12 3/4 9 3/8 0.015
4th Quarter (through July 22)....................... 12 1/4 11 1/2 ---

On July 22, 1997, the reported last sale price of the Common Stock was $11
5/8 per share. The Company believes that as of July 22, 1997 there were
approximately 12,500 holders of Common Stock of record or through nominee or
street name accounts with brokers.

With the exception of two quarters in fiscal 1993, the Company's Board of
Directors has declared cash dividends of $0.015 per share of Common Stock
every fiscal quarter since the Company's initial public offering in 1986.
Payment of future dividends will depend upon the Company's financial
condition, results of operations and other factors deemed relevant by the
Company's Board of Directors, as well as any limitations imposed by lenders
under the Company's credit facilities. The Company's revolving credit facility
currently limits dividends to a maximum of $1.7 million per year. See Note C
to the Consolidated Financial Statements of the Company.

SELECTED CONSOLIDATED FINANCIAL DATA

The following table presents summary historical financial data of the
Company as of and for the fiscal years ended 1992, 1993, 1994, 1995 and 1996
and as of and for the six months ended March 30, 1996, and March 29, 1997. The
income statement and balance sheet data are derived from the Consolidated
Financial Statements of the Company which (except for the six months ended
March 30, 1996, and March 29, 1997) have been audited by Ernst & Young LLP,
independent auditors. The Consolidated Financial Statements as of September
30, 1995, and September 28, 1996, and for each of the fiscal years in the
three-year period ended September 28, 1996, and the report of Ernst & Young
LLP thereon, are included elsewhere in this Prospectus. The Consolidated
Financial Statements as of and for the six months ended March 30, 1996, and
March 29, 1997, are unaudited, but, in the opinion of management, have been
prepared on the same basis as the audited Consolidated Financial Statements
and include all adjustments, consisting of normal recurring accruals,
considered necessary for a fair presentation of such data. The results for the
six months ended March 29, 1997, are not necessarily indicative of the results
that may be expected for the full fiscal year. The information set forth below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements of the Company included elsewhere in this Prospectus.

FISCAL YEAR ENDED SIX MONTHS ENDED
--------------------------------------------------------------- ----------------------
SEPTEMBER 26, OCTOBER 2, OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28, MARCH 30, MARCH 29,
1992 1993(A) 1994 1995(B) 1996 1996 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)

INCOME STATEMENT DATA:
Net sales.............. $817,361 $887,843 $922,609 $931,806 $1,139,310 $539,479 $601,207
Cost of sales.......... 784,559 781,807 811,782 857,662 1,068,670 502,460 547,855
Gross profit........... 32,802 106,036 110,827 74,144 70,640 37,019 53,352
Selling, general and
administrative
expense............... 45,541 49,691 51,129 49,214 49,136 24,510 27,378
Operating income
(loss)................ (12,739) 56,345 59,698 24,930(c) 21,504(c) 12,509(c) 25,974
Interest expense, net.. 22,502 25,719 19,173 17,483 21,539 10,331 10,733
Foreign exchange (gain)
loss.................. 736 243 (257) 5,605(c) 1,275(c) 1,222(c) 536
Income (loss) before
income taxes and
extraordinary charge.. (33,712) 32,838 42,448 2,091 47 1,533 17,611(d)
Income tax expense
(benefit)(e).......... (4,048) 10,543 11,390 10,058 4,551 2,792 2,552
Income (loss) before
extraordinary charge.. (29,664) 22,295 31,058 (7,967) (4,504) (1,259) 15,059(d)
Extraordinary charge-
early repayment of
debt, net of tax...... -- (1,286) -- -- (2,780) (2,780) --
Net income (loss)...... (29,664) 21,009 31,058 (7,967) (7,284) (4,039) 15,059(d)
Income (loss) per
common share before
extraordinary charge.. $ (1.24) $ 0.81 $ 1.13 $ (0.29) $ (0.16) $ (0.05) $ 0.55(d)
Net income (loss) per
common share.......... $ (1.24) $ 0.76 $ 1.13 $ (0.29) $ (0.26) $ (0.15) $ 0.55(d)
Dividends per common
share................. $ 0.06 $ 0.03 $ 0.06 $ 0.06 $ 0.06 $ 0.03 $ 0.03
Weighted average shares
outstanding........... 23,880 27,589 27,589 27,589 27,589 27,589 27,589
OTHER DATA:
EBITDA(f).............. $ 10,955 $ 79,222 $ 83,658 $ 49,811 $ 47,767 $ 25,948 $ 39,735
Capital expenditures... 14,813 11,511 23,572 71,589 32,534 22,262 12,090
BALANCE SHEET DATA (END OF PERIOD):
Working capital........ $ 11,277 $ 72,688 $ 99,724 $ 88,395 $ 88,455 $ 90,816 $ 98,526
Total assets........... 434,566 422,846 438,683 497,604 536,722 526,703 531,579
Notes payable and
current maturities of
long-term debt........ 86,424 25,643 4,493 18,187 35,850 33,121 33,645
Long-term debt, less
current maturities.... 131,534 159,554 152,631 182,988 198,334 202,128 193,546
Total stockholders'
equity................ 112,112 132,293 161,696 152,074 143,135 147,206 157,366

(footnotes on next page)

- --------
(a) Fiscal 1993 had 53 weeks.
(b) On July 5, 1995, the Company acquired certain assets of a group of five
chicken companies located near Queretaro, Mexico for approximately $35.3
million. The acquisition has been accounted for as a purchase, and the
results of operations for this acquisition have been included in the
Company's consolidated results of operations since the acquisition date.
(c) In addition to foreign exchange losses, the peso decline and the related
economic recession in Mexico contributed significantly to the operating
losses experienced by the Company's Mexican operations of $17.0 million,
$8.2 million and $3.2 million for fiscal years 1995 and 1996 and the six
months ended March 30, 1996, respectively. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
(d) Reflects $2.2 million (or $1.3 million or $0.05 per share net of tax
effect) of income arising from the final settlement of claims resulting
from a January 1992 fire at the Company's prepared food plant.
(e) The Company does not include income or losses from its Mexican operations
in its determination of taxable income for U.S. income tax purposes based
upon its determination that such earnings will be indefinitely reinvested
in Mexico. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note D of the Consolidated
Financial Statements of the Company.
(f) "EBITDA" is defined as the sum of operating income (loss) and depreciation
and amortization (excluding amortization of capitalized financing costs).
EBITDA should not be considered as an alternative to, or more meaningful
than, net income as a measure of the Company's operating performance or
cash flows as a measure of the Company's liquidity. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
EBITDA is presented here not as an alternative measure of operating
results or liquidity, but rather to provide additional information related
to the Company's debt service ability. Certain restrictive covenants
contained in agreements relating to the Company's indebtedness are based
on the Company's EBITDA, subject to certain adjustments.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

GENERAL

Profitability in the chicken industry can be materially affected by the
commodity prices of feed grains and the commodity prices of chicken and
chicken parts, each of which are determined largely by supply and demand. As a
result, the chicken industry as a whole has been characterized by cyclical
earnings. Cyclical fluctuations in earnings of individual chicken companies
can be mitigated somewhat by (i) business strategy; (ii) product mix; (iii)
sales and marketing plans; and (iv) operating efficiencies. See "The Chicken
Industry." In an effort to reduce price volatility and to generate higher,
more consistent profit margins, the Company has concentrated on the production
and marketing of prepared food products, which generally have higher margins
than the Company's other products. Additionally, the production and sale in
the U.S. of prepared food products reduces the impact of feed grain costs on
the Company's profitability. As further processing is performed, feed grain
costs become a decreasing percentage of a product's total production costs.

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 3, 1994 to a low of 8.16 to 1 U.S.
dollar at November 14, 1995. The decline in the Mexican peso exchange rate
affected the Company's operations directly and indirectly as a result of the
related economic recession in Mexico in fiscal 1995. Similarly, the Company's
results of operations were adversely affected by (i) the continuation of the
economic recession in Mexico in fiscal 1996, as well as (ii) significantly
higher feed grain costs in fiscal 1996 (which included record high corn
prices), and the first quarter of fiscal 1997 when compared with fiscal 1995
and the first quarter of fiscal 1996, respectively.

Since July 1996, feed ingredient prices have decreased significantly from
the fiscal 1996 high and the Mexican economy has shown improvement. See "The
Chicken Industry." Accordingly, the Company's operating results have improved
significantly during the first six months of fiscal 1997 as compared with the
first six months of fiscal 1996.

The following table presents certain information regarding the Company's
U.S. and Mexican operations.

FISCAL YEAR ENDED SIX MONTHS ENDED
-------------------------------------- --------------------
OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28, MARCH 30, MARCH 29,
1994 1995 1996 1996 1997
(IN THOUSANDS)

SALES TO UNAFFILIATED
CUSTOMERS:
United States......... $733,865 $772,315 $911,181 $430,952 $473,761
Mexico................ 188,744 159,491 228,129 108,527 127,446
OPERATING INCOME (LOSS):
United States......... 46,421 41,923 29,705 15,709 14,401
Mexico................ 13,277 (16,993) (8,201) (3,200) 11,573

The following table presents certain items as a percentage of net sales for
the periods indicated.

PERCENTAGE OF NET SALES
----------------------------------------------------------
FISCAL YEAR ENDED SIX MONTHS ENDED
-------------------------------------- -------------------
OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28, MARCH 30, MARCH 29,
1994 1995 1996 1996 1997

Net sales............... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........... 88.0 92.0 93.8 93.1 91.1
Gross profit............ 12.0 8.0 6.2 6.9 8.9
Selling, general and
administrative expense. 5.5 5.3 4.3 4.5 4.6
Operating income........ 6.5 2.7 1.9 2.3 4.3
Interest expense........ 2.1 1.9 1.9 1.9 1.8
Income before income
taxes and extraordinary
charge................. 4.6 2.2 0.0 0.3 2.9
Net income (loss)....... 3.4 (8.6) (0.6) (0.7) 2.5

RESULTS OF OPERATIONS

Six Months Ended March 29, 1997 Compared to Six Months ended March 30, 1996

Net Sales. Consolidated net sales were $601.2 million for the first six
months of fiscal 1997, an increase of $61.7 million, or 11.4%, over the first
six months of fiscal 1996. The increase in consolidated net sales resulted
from a $35.1 million increase in U.S. chicken sales to $397.3 million, an
$18.9 million increase in Mexican chicken sales to $127.4 million and a $7.7
million increase of sales of other domestic products to $76.5 million. The
increase in U.S. chicken sales was primarily due to a 7.5% increase in dressed
pounds produced and a 2.1% increase in total revenue per dressed pound
produced. The increase in Mexican chicken sales was primarily due to a 28.3%
increase in total revenue per dressed pound, offset slightly by an 8.5%
decrease in dressed pounds produced resulting from management's decision in
fiscal 1996 to reduce production due to the recession in Mexico. The increase
in sales of other U.S. products was primarily the result of increased sales of
the Company's chicken by-products group and higher average prices for
commercial eggs for the period. Increased revenues per dressed pound produced
both in the United States and in Mexico were primarily the result of higher
sales prices as well as generally improved economic conditions in Mexico
compared to the prior year period.

Cost of Sales. Consolidated cost of sales was $547.9 million in the first
six months of fiscal 1997, an increase of $45.4 million, or 9.0%, over the
first six months of fiscal 1996. The increase primarily resulted from a $41.5
million increase in cost of sales of U.S. operations, and a $3.9 million
increase in the cost of sales in Mexican operations. The cost of sales
increase in U.S. operations of $41.5 million was due to a 7.5% increase in
dressed pounds produced, increased production of higher cost and margin
products in prepared foods, and increased feed ingredient costs experienced
primarily during the first three months of such period. The $3.9 million cost
of sales increase in Mexican operations was primarily due to a 13.3% increase
in average costs of sales per pound offset partially by an 8.5% decrease in
dressed pounds produced. The increase in average costs of sales per pound was
primarily the result of increased production of higher value and cost
products.

Gross Profit. Gross profit as a percentage of sales increased to 8.9% in the
first six months of fiscal 1997 from 6.9% in the first six months of fiscal
1996. The increased gross profit as a percentage of sales resulted mainly from
higher sales prices as mentioned above and significantly higher margins in
Mexico.

Selling, General and Administrative Expenses. Consolidated selling, general
and administrative expenses were $27.4 million in the first six months of
fiscal 1997 and $24.5 million in the first six months of fiscal 1996.
Consolidated selling, general and administrative expenses as a percentage of
sales increased slightly in the first six months of fiscal 1997 to 4.6%
compared to 4.5% in the first six months of fiscal 1996.

Operating Income. Consolidated operating income was $26.0 million for the
first six months of fiscal 1997, an increase of $13.5 million, or 107.6%, when
compared to the first six months of fiscal 1996, resulting primarily from
higher margins experienced in the Mexican operations.

Interest Expense. Consolidated net interest expense was $10.7 million in the
first six months of fiscal 1997, an increase of $0.4 million, or 3.9%, when
compared to the first six months of fiscal 1996. This increase was due to
slightly higher interest rates and higher average outstanding debt amounts
when compared to the first six months of fiscal 1996.

Miscellaneous Expense. Consolidated miscellaneous, net, a component of Other
Expense (Income), was $2.9 million in the first six months of fiscal 1997 and
includes a $2.2 million final settlement of claims resulting from the January
8, 1992 fire at the Company's prepared foods plant in Mt. Pleasant, Texas.

Income Tax Expense. Consolidated income tax expense in the first six months
of fiscal 1997 decreased to $2.5 million compared to an expense of $2.8
million in the first six months of fiscal 1996. The lower consolidated income
tax expense in contrast to higher consolidated income resulted from increased
Mexican earnings that are not currently subject to income taxes. See Note D of
the Consolidated Financial Statements of the Company.

Fiscal 1996 Compared to Fiscal 1995

Net Sales. Consolidated net sales were $1.14 billion for fiscal 1996, an
increase of $207.5 million, or 22.3%, over fiscal 1995. The increase in
consolidated net sales resulted from a $102.6 million increase in U.S chicken
sales to $773.7 million, a $68.6 million increase in Mexican chicken sales to
$228.1 million and a $36.3 million increase in sales of other domestic
products to $137.5 million. The increase in U.S. chicken sales was primarily
due to a 7.7% increase in total revenue per dressed pound produced and a 7.0%
increase in dressed pounds produced. The increase in Mexican chicken sales was
primarily due to a 35.6% increase in Mexican dressed pounds produced and a
5.5% increase in total revenue per dressed pound. The increase in Mexican
dressed pounds produced resulted primarily from the July 5, 1995 acquisition
of five chicken companies located near Queretaro, Mexico. The increase in
sales of other domestic products was primarily the result of increased sales
of the Company's chicken by-products group and higher sales prices for table
eggs. Increased revenues per dressed pound produced both in the U.S. and in
Mexico were primarily the result of higher sales prices caused by the chicken
markets adjusting to higher feed ingredient cost.

Cost of Sales. Consolidated cost of sales was $1.07 billion in fiscal 1996,
an increase of $211.0 million, or 24.6%, over fiscal 1995. The increase
primarily resulted from a $150.8 million increase in cost of sales of U.S.
operations, and a $60.2 million increase in the cost of sales in Mexican
operations. The cost of sales increase in U.S. operations of $150.8 million
was due to a 41.5% increase in feed ingredient costs, a 7.0% increase in
dressed pounds produced and increased production of higher cost and margin
products in prepared foods. Since the fiscal 1995 year end, feed ingredient
costs increased substantially due to lower crop yields in the 1995 harvest
season. Beginning in July 1996, feed ingredient prices declined significantly
due to a favorable crop harvest. The $60.2 million cost of sales increase in
Mexican operations was primarily due to a 35.6% increase in dressed pounds
produced and a 7.0% increase in average costs of sales per pound. The increase
in average costs of sales per pound was primarily the result of a 37.2%
increase in feed ingredient costs resulting from the reasons discussed above.

Gross Profit. Gross profit as a percentage of sales decreased to 6.2% in
fiscal 1996 from 8.0% in fiscal 1995. The decreased gross profit as a
percentage of sales resulted mainly from increased costs of sales due to
higher feed ingredient prices experienced in fiscal 1996.

Selling, General and Administrative Expenses. Consolidated selling, general
and administrative expenses were $49.1 million in fiscal 1996 and $49.2
million in fiscal 1995. Consolidated selling, general and administrative
expenses as a percentage of sales decreased in fiscal 1996 to 4.3% compared to
5.3% in fiscal 1995.

Operating Income. Consolidated operating income was $21.5 million for fiscal
1996, a decrease of $3.4 million when compared to fiscal 1995, resulting
primarily from higher feed ingredient cost.

Interest Expense. Consolidated net interest expense was $21.5 million in
fiscal 1996, an increase of $4.1 million, or 23.2%, when compared to fiscal
1995. This increase was due to higher outstanding debt levels resulting
primarily from expansions in the U.S. and the prior year acquisitions in
Mexico, offset slightly by lower interest rates when compared to fiscal 1995.

Income Tax Expense. Consolidated income tax expense in fiscal 1996 was $4.6
million compared to a consolidated income tax expense of $10.1 million in
fiscal 1995. Consolidated income tax expense is significantly in excess of the
amount computed at the statutory U.S. income tax rate due to the non-
deductibility of Mexican losses in the U.S. in both fiscal 1996 and fiscal
1995. The decrease in consolidated income tax expense in fiscal 1996 compared
to fiscal 1995 primarily resulted from the $13.6 million decrease in income
before income taxes and extraordinary charges for domestic operations in
fiscal 1996 compared to fiscal 1995.

Extraordinary Charge. The extraordinary charge-early repayment of debt in
the amount of $2.8 million, net of tax, was incurred while refinancing certain
debt at a lower interest rate, which will result in long-term interest expense
reductions. See Note C to the Consolidated Financial Statements of the
Company.

Fiscal 1995 Compared to Fiscal 1994

Net Sales. Consolidated net sales were $931.8 million for fiscal 1995, an
increase of $9.2 million, or 1.0%, over fiscal 1994. The increase in
consolidated net sales resulted from a $36.0 million increase in U.S. chicken
sales to $671.1 million and a $2.5 million increase in sales of other domestic
products to $101.2 million offset partially by a $29.3 million decrease in
Mexican chicken sales to $159.5 million. The increase in U.S. chicken sales
was due primarily to a 3.6% increase in dressed pounds produced and a 2.0%
increase in the total revenue per dressed pound produced. The decrease in
Mexican chicken sales resulted from a 21.9% decrease in the total revenue per
dressed pound produced caused primarily by the devaluation of the Mexican peso
and the resulting recession, offset by an 8.1% increase in dressed pounds
produced. See "--Impact of Mexican Peso Devaluation."

Cost of Sales. Consolidated cost of sales was $857.7 million in fiscal 1995,
an increase of $45.9 million, or 5.7%, over fiscal 1994. The increase
primarily resulted from a $39.2 million increase in cost of sales of U.S.
operations and a $6.7 million increase in the cost of sales from Mexican
operations. The cost of sales increase in U.S. operations of $39.2 million was
due primarily to a 3.6% increase in dressed pounds produced and increased
production of higher cost and margin products in prepared foods, offset
partially by a 6.1% decrease in feed ingredient cost. The $6.7 million cost of
sales increase in Mexican operations was due primarily to an 8.1% increase in
dressed pounds produced offset partially by a 3.6% decrease in average cost of
sales per dressed pound resulting from the devaluation of the Mexican peso.
See "--Impact of Mexican Peso Devaluation."

Gross Profit. Gross profit as a percentage of sales decreased to 8.0% in
fiscal 1995 from 12.0% in fiscal 1994. The decreased gross profit resulted
mainly from the Company's Mexican operations and was primarily the result of
the Mexican peso devaluation having 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 sold.

Selling, General and Administrative Expenses. Consolidated selling, general
and administrative expenses were $49.2 million for fiscal 1995, a decrease of
$1.9 million, or 3.7%, when compared to fiscal 1994. Consolidated selling,
general and administrative expenses as a percentage of sales decreased in
fiscal 1995 to 5.3% from 5.5% in fiscal 1994.

Operating Income. Consolidated operating income for fiscal 1995 was $24.9
million compared to $59.7 million in fiscal 1994. The decrease was due
primarily to lower margins in Mexican chicken operations which resulted
primarily from the effects of the Mexican peso devaluation as described above.

Interest Expense. Consolidated net interest expense was $17.5 million in
fiscal 1995, a decrease of $1.7 million, or 8.8%, when compared to fiscal
1994. This decrease was due to lower average amounts of outstanding debt when
compared to fiscal 1994.

Income Tax Expense. Consolidated income tax expense decreased to $10.1
million in fiscal 1995 compared to $11.4 million in fiscal 1994. The high
effective tax rate is due to the Company having positive taxable income in the
United States offset by losses in Mexico, which results in no current tax
benefit under current Mexican tax laws.

LIQUIDITY AND CAPITAL RESOURCES

At March 29, 1997, the Company's working capital was $98.5 million and its
current ratio was 1.79 to 1 compared with working capital of $88.5 million and
a current ratio of 1.63 to 1 at September 28, 1996, and working capital of
$88.4 million and a current ratio of 1.84 to 1 at September 30, 1995. The
increase in working capital from September 28, 1996 to December 28, 1996 was
due primarily to income from operations.

Trade accounts and other receivables were $69.3 million at March 29, 1997,
compared to $65.9 million at September 28, 1996, and $60.0 million at
September 30, 1995. The $3.4 million or 5.1% increase from September 28, 1996
to March 29, 1997 was due primarily to increased sales volume. The $5.9
million or 9.8%

increase from September 30, 1995 to September 28, 1996 was primarily due to
increased average selling prices and volumes. Allowances for doubtful
accounts, as a percentage of trade accounts and notes receivable, were 4.6% at
March 29, 1997 compared to 5.7% at September 28, 1996 and 6.7% at September
30, 1995. The decrease is due to increased net sales resulting in a
corresponding increase in trade accounts and other receivables with the dollar
amount of allowances for doubtful accounts remaining relatively stable.

Inventories were $137.9 million at March 29, 1997, compared to $136.9
million at September 28, 1996, and $110.4 million at September 30, 1995. The
$1.0 million increase between September 28, 1996 and March 29, 1997 was due
primarily to higher finished poultry products inventories offset partially by
the reduction of feed costs in inventories. The $26.5 million increase between
September 30, 1995 and September 28, 1996 was due primarily to the higher feed
ingredient costs affecting the carrying value of feed on hand and feed cost in
the live chickens and finished products.

Accounts payable were $57.8 million at March 29, 1997 compared to $71.4
million at September 28, 1996, and $55.7 million at September 30, 1995. The
$13.6 million or 19.0% decrease from September 28, 1996 to March 29, 1997 was
due primarily to the reduction in feed ingredient costs. The $15.7 million or
28.2% increase from September 30, 1995 to September 28, 1996 was due primarily
to higher production levels and feed ingredient costs.

Capital expenditures were $12.2 million and $34.3 million for the six months
ended March 29, 1997 and fiscal 1996, respectively, and were incurred
primarily to expand production capacities in the U.S., improve efficiencies,
reduce costs and for the routine replacement of equipment. The Company
anticipates that it will spend a total of approximately $55 million for
capital expenditures, including the purchase of certain assets of Green Acre
Foods, Inc., in fiscal 1997 for these same purposes. The Company expects to
finance such expenditures with available operating cash flows and long-term
financing. On April 15, 1997, the Company completed its acquisition of certain
chicken producing assets of Green Acre Foods, Inc., an integrated chicken
producer located in the Center and Nacogdoches area of East Texas. These
assets are capable of producing 650,000 chickens per week.

Cash flows provided by (used in) operating activities were $9.7 million,
$(10.7) million, $11.4 million, $32.7 million and $60.7 million in the six
month periods ended March 29, 1997 and March 30, 1996 and the fiscal years
1996, 1995 and 1994, respectively. The significant increase in cash flows
provided from operating activities for the six months ended March 29, 1997
compared to the six months ended March 30 ,1996 was due primarily to net
income for the six months ended March 29, 1997 compared to net losses incurred
for the six months ended March 30, 1996. The decrease in cash flows provided
by operating activities between fiscal 1996 and fiscal 1995 was primarily
caused by increased inventories resulting from higher feed costs in fiscal
1996. The decrease in cash flows provided by operating activities between
fiscal 1995 and fiscal 1994 was primarily caused by changes in net income.

Cash provided by (used in) financing activities was $(7.9) million, $29.3
million, $27.3 million, $40.2 million and $(30.3) million in the six months
ended March 29, 1997 and March 30, 1996 and in the fiscal years 1996, 1995 and
1994, respectively. The cash provided by (used in) financing activities
primarily reflects the net proceeds from notes payable and long-term
financings and debt retirements.

Total debt to capitalization decreased to 59.1% at March 29, 1997 compared
to 62.1% at September 28, 1996. The Company maintains $110 million in
revolving credit facilities with available unused lines of credit of $77
million at June 11, 1997. The facilities expire in or after May 1999. On April
15, 1997, the Company secured an additional $35 million in secured term
borrowing capacity from an existing lender at rates of 2.0% over LIBOR, with
monthly principal and interest payments, maturing on February 28, 2006. As of
June 11, 1997, $20 million had been borrowed under such facility, and the
Company may borrow the remaining $15 million at any time on or before April 1,
1999. Additionally, on June 9, 1997, the Company secured an additional $10
million in secured term borrowing capacity from a group of existing lenders at
rates currently equal to LIBOR plus 1 3/8%, with interest only payments
monthly, maturing on June 9, 1999. As of June 11, 1997, nothing had been
borrowed under this facility.

The Company's deferred income taxes have resulted primarily from the
Company's change from the cash method of accounting to the accrual method of
accounting for taxable periods beginning after July 2, 1988. The Company's
deferred income taxes arising from such change in method of accounting will
continue to be deferred as long as (i) at least 50% of the voting stock and at
least 50% of all other classes of stock of the Company continue to be owned by
the Lonnie "Bo" Pilgrim family and (ii) the Company's net sales from its
agricultural operation in a taxable year equal or exceed the Company's net
sales from such operations in its taxable year ending July 2, 1988. Failure of
the first requirement will cause all of the deferred taxes attributable to the
change in accounting method to be due. Failure of the second requirement will
cause a portion of such deferred taxes to be due based upon the amount of the
relative decline in net sales from the agricultural operations. The family of
Lonnie "Bo" Pilgrim currently owns in excess of 60% of the stock of the
Company. Management believes that likelihood of the (i) Pilgrim family
ownership falling below 50%, or (ii) gross receipts from agricultural
activities falling below the 1988 level, is remote. See "Risk Factors--
Potential Payment of Deferred Taxes."

IMPACT OF MEXICAN PESO DEVALUATION

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. The Company adopted
SFAS No. 121 effective September 29, 1996. The adoption of SFAS No. 121 did
not have a material effect on the Company's consolidated financial statement.

IMPACT OF INFLATION

Due to moderate inflation and the Company's rapid inventory turnover rate,
the results of operations have not been adversely affected by inflation during
the past three-year period.

THE CHICKEN INDUSTRY

The Company produces chicken in both the United States and Mexico.
Substantially all of the Company's U.S. production is sold in the United
States and all of the Company's Mexican production is sold in Mexico. In
fiscal 1996, approximately 80% of the Company's net sales were attributable to
its U.S. operations. The Company expects these levels of relative contribution
to continue in the foreseeable future.

UNITED STATES

General

Prior to 1960, the U.S. chicken industry was highly fragmented with numerous
small, independent breeders, growers and processors. The industry has
consolidated during the last 35 years resulting in a relatively small number
of larger, more vertically integrated companies. In general, vertical
integration of the U.S. chicken industry has led to lower profit margins at
each independent production stage. Such lower profit margins have had a
disproportionately adverse effect on less vertically integrated chicken
producers which are unable to realize the synergies benefiting their more
integrated competitors.

The following table sets forth the annualized average pounds of chicken
produced by, and the market share of, the ten largest U.S. producers of
chicken. This table reflects annualized respective volumes derived from
average weekly data reported by Broiler Industry in January 1997, with the
Company's volume adjusted to include 135.2 million additional pounds of
production capacity acquired from Green Acre Foods, Inc. in April 1997.

ESTIMATED
ANNUAL
PRODUCTION
(IN MILLIONS MARKET
OF POUNDS) SHARE

Tyson Foods, Inc................................. 6,474.0 21.7%
Gold Kist, Inc................................... 2,568.8 8.6
Perdue Farms, Inc................................ 2,441.9 8.2
PILGRIM'S PRIDE CORPORATION...................... 1,695.2 5.7
Con-Agra, Inc.................................... 1,648.4 5.5
Hudson Foods, Inc................................ 1,573.5 5.3
Wayne Poultry Division........................... 1,185.1 4.0
Cagle's, Inc..................................... 833.6 2.8
Seaboard Farms, Inc.............................. 738.4 2.5
Foster Farms..................................... 700.4 2.3
-------- -----
Ten Largest Producers.......................... 19,859.3 66.6
All Others....................................... 9,965.8 33.4
-------- -----
Total.......................................... 29,825.1 100.0%
======== =====

- --------
Source: Broiler Industry, January 1997. Broiler Industry compiled the
information from its 1996 survey of the largest 48 integrated U.S. chicken
companies in 1996, which, according to Broiler Industry, represent
approximately 99% of the production of the U.S. chicken industry.

Chicken Consumption

In the U.S., annual per capita consumption of chicken grew from 42.5 pounds
in 1976 to 71.7 pounds in 1996 while per capita consumption of beef and pork
declined. The following chart illustrates, for the periods indicated, per
capita consumption of chicken in the United States relative to beef and pork.

[LINE GRAPH APPEARS HERE]

Per Capita

Per Capita Chicken Pork Beef

1976 42.5 45.5 94.2
43.4 47 91.4
45.6 47 87.2
48.9 53.7 78
48.8 57.3 76.4
1981 50.2 54.7 77.1
50.5 49.1 76.8
50.8 51.6 78.2
52.2 51.3 78.1
54 51.7 78.8
1986 55.5 48.8 78.3
58.4 49 73.3
58.9 52.2 72.3
60.3 52 69.3
63 49.8 67.8
1991 65.3 50.4 66.8
68.2 53.1 66.5
70.3 52.4 65.1
71.6 53.1 67
71.3 52.5 67.5
1996 71.7 49.1 67.7

- --------
Source: USDA data, as reported by the National Broiler Council

Consumer awareness of the health and nutritional characteristics of chicken
is a major factor influencing this growth in consumption. Such health and
nutritional characteristics include lower levels of fat, cholesterol and
calories per pound relative to beef and pork.

Growth in chicken consumption has also been enhanced by new products and
packaging which increase convenience and product versatility. These products
include breast fillets, tenderloins and strips, formed nuggets and patties and
bone-in chicken parts, which are sold fresh, frozen and in various stages of
preparation, including blanched, breaded and fully-cooked. Most of these
products are targeted at the foodservice market, which is comprised of chain
restaurant operations, frozen entree producers, institutions and distributors.
According to the National Broiler Council, an industry trade association, U.S.
production of these further processed products has increased from 3.0 billion
ready to cook pounds in 1986 to an estimated 9.7 billion ready to cook pounds
in 1996, establishing this product group as the fastest growing product group
in the U.S. chicken industry. Additionally, the National Broiler Council
reported that the market share of this product group has increased from 20.9%
of U.S. chicken production in 1986 to an estimated 37.0% of such production in
1996.

A third factor influencing the growth of chicken consumption is the
significant price advantage of chicken compared with other meats, which has
increased over time. The retail price advantage of chicken relative to choice
grade beef in the United States has increased from $0.86 to $1.83 per pound
during the period from 1976 to 1996. The following chart illustrates, for the
periods indicated, the average retail price of chicken in the U.S. compared to
choice grade beef and pork.

[LINE GRAPH APPEARS HERE]

Prices

Retail Prices Chicken Pork Beef

1976 59.7 134 145.7
60.1 125.4 145.8
66.5 143.6 178.8
67.7 144.1 222.4
70.9 139.4 233.6
1981 73.2 152.4 234.7
71.4 175.4 238.4
72.5 169.8 234.1
81 162 235.5
76.3 162 228.6
1986 83.5 178.4 226.8
78.5 188.4 238.4
85.4 183.4 250.3
92.7 182.8 265.7
89.9 212.6 281
1991 88 211.9 288.3
86.9 198 284.6
89 197.6 293.4
90.1 198 282.9
91.7 194.8 284.4
1996 97.3 220.9 280.2

- --------
Source: USDA data, as reported by the National Broiler Council.

Since chickens require approximately two pounds of dry feed to produce one
pound of live weight, compared to cattle and hogs, which require approximately
six and four pounds, respectively, the chicken industry enjoys a cost
advantage that yields a price advantage relative to other competing meats. To
help sustain this price advantage, the chicken industry has implemented
improved genetic, nutritional and processing technologies in an effort to
minimize production costs. Despite the dramatic growth in U.S. chicken
consumption over the last 20 years, the USDA reports that for every $1.00
spent on chicken in 1996, consumers spent approximately $1.76 on beef and
$1.01 on pork.

Industry Profitability

For example, industry profitability is heavily influenced by feed costs and
feed costs are dependent on a number of factors unrelated to the chicken
industry. According to an industry source, feed costs have averaged
approximately 45% of total production costs of whole chickens and have
fluctuated substantially with the price of corn, milo and soybean meal.
Assuming finished product prices and other factors remain constant, very small
movements in feed costs may result in large changes in industry profits from
basic chicken products. By comparison, according to the same industry source,
feed costs typically average approximately 25% of total production costs of
further processed and prepared chicken products and, as a result, increased
emphasis on sales of such products by chicken producers reduces the
sensitivity of earnings to feed cost movements.

MEXICO

General

As compared to the United States, the Mexican chicken industry is more
fragmented with significantly more chicken producers. The Company believes
that the Mexican chicken industry is in the process of consolidating, which is
expected to result in a relatively smaller number of larger, more vertically
integrated producers. In general, the effects of vertical integration in the
Mexican chicken industry should be similar to those experienced in the past by
the U.S. chicken industry, including increased price competition and reduced
costs of production on a per unit basis. The Mexican chicken industry has
undergone consolidation in recent years with the largest producers gaining
market share through internal growth and acquisitions. The following table
sets forth for 1992 and 1996 the estimated number of chickens placed by, and
the estimated market share of, the eight largest Mexican producers, as
reported by Seccion Nacional de Productores de Pollo Mixto de Engorda de la
Union Nacional de Avicultores ("SENAPOME"), an industry association in Mexico.

ESTIMATED ESTIMATED
NUMBER OF NUMBER OF
CHICKENS ESTIMATED CHICKENS ESTIMATED
PLACED IN MARKET PLACED IN MARKET
1992 SHARE 1996 SHARE
(IN MILLIONS) (IN MILLIONS)

Bachoco........................ 90.6 13.2% 160.4 18.8%
AVICOLA PILGRIM'S PRIDE DE
MEXICO........................ 71.8 10.5 160.2 18.8
Trasgo......................... 42.0 6.1 75.5 8.9
Univasa........................ 48.0 7.0 53.8 6.3
Pasta (1)...................... -- -- 30.2 3.5
San Antonio (1)................ -- -- 23.9 2.8
Gigantes (1)................... -- -- 20.5 2.4
Nochistongo (1)................ -- -- 19.7 2.3
San Fandila (2)................ 27.5 4.0 -- --
Oscar Hidalgo (2).............. 27.1 4.0 -- --
Queretaro Group (3)............ 25.1 3.7 -- --
Cocula (2)..................... 18.4 2.7 -- --
----- ----- ----- -----
Eight Largest Producers...... 350.5 51.3 544.2 63.8
All Others..................... 333.3 48.7 309.0 36.2
----- ----- ----- -----
Total........................ 683.8 100.0% 853.2 100.0%
===== ===== ===== =====

- --------
(1) Pasta, San Antonio, Gigantes and Nochistongo were not among the eight
largest Mexican producers in 1992.
(2) San Fandila, Oscar Hidalgo and Cocula were not among the eight largest
Mexican producers in 1996.
(3) The Company acquired the Queretaro Group in July 1995. See Note I of the
Consolidated Financial Statements of the Company.

Chicken Consumption

According to an industry study, on a per capita basis, the annual
consumption of chicken in Mexico has increased from an estimated 22 pounds in
1982 to an estimated 34 pounds in 1996, versus 1996 consumption of
approximately 71.7 pounds in the U.S. According to industry sources, on an
absolute basis, production of chicken in Mexico has increased at a compounded
annual rate of over 7.6% since 1988 to approximately 3.2 billion pounds in
1996. The Company believes chicken consumption increased in Mexico due to
rapid population growth, increased disposable income (prior to the recession
that resulted from the peso decline commencing in December 1994) and the price
advantage of chicken relative to other meats.

According to an industry source, per capita chicken consumption in Mexico
fell in 1995 and 1996. This decrease was largely caused by the deterioration
of the Mexican economy resulting from the peso decline that began in December
1994. See "--Recent Events in the Mexican Economy." Management anticipates
that Mexican chicken consumption will grow as the Mexican economy continues to
strengthen.

Industry Profitability

As in the U.S. chicken industry, profitability in the Mexican chicken
industry is heavily influenced by the price of chicken and the cost of feed
grains, each of which are determined largely by balances in supply and demand.
The Company's experience has been that the industry's profitability is
cyclical with each cycle generally having a shorter duration and exhibiting
greater price fluctuations than the cycles typically experienced by the U.S.
chicken industry. The Company's experience in Mexico indicates that, in
contrast to the U.S. chicken industry, the Mexican chicken industry's peak
chicken prices occur during the winter holiday season.

Recent Events in the Mexican Economy

As a result of this decline, the Mexican economy deteriorated significantly
in 1995. The Mexican gross domestic product ("GDP") decreased 6.9% in 1995
after growing 3.5% in 1994, and inflation, as measured by the Mexican consumer
price index, averaged 52% in 1995 versus 7.9% in 1994. The Mexican economy
improved in 1996, with GDP growing 5.1% and inflation, as measured by the
Mexican consumer price index, declining to 27.7%. Mexican governmental
forecasts estimate GDP growth in 1997 of 4.5% and inflation, as measured by
the Mexican consumer price index, of 17.8%.

BUSINESS

GENERAL

Pilgrim's Pride is one of the largest producers of prepared and fresh
chicken products in North America and has one of the best known brand names in
the chicken industry. The Company is the fourth largest producer of chicken in
the United States and one of the two largest in Mexico. Through vertical
integration, the Company controls the breeding, hatching and growing of
chickens and the processing, preparation, packaging and sale of its product
lines. In fiscal 1996, approximately 80% of the Company's net sales were from
its U.S. operations, including U.S. produced chicken products sold for export
to Canada, Eastern Europe, the Far East and other world markets, with the
remaining 20% arising from the Company's Mexico operations.

The Company's objectives are to increase sales, profit margins and earnings
and outpace the growth of the chicken industry (i) by focusing on growth in
the prepared food products market, (ii) by focusing on growth in the Mexico
market and (iii) through greater utilization of the Company's existing assets.
Key elements of the Company's strategy to achieve these objectives are to:

. Focus on customer driven research & development and technology. Much of
the Company's growth in prepared foods has been the result of customer-
driven research & development focused on designing new products to meet
customers' changing needs. The Company's research & development
personnel often work directly with institutional customers in developing
proprietary products. Approximately $110.9 million of the Company's
sales to foodservice customers in fiscal 1996 consisted of new products
which were not sold by the Company in fiscal 1992. The Company is also a
leader in utilizing advanced processing technology, which enables the
Company to better meet its customers' needs for product innovation,
consistent quality and cost efficiency.

. Enhance the U.S. fresh chicken product mix through value-added, branded
products. The Company's fresh chicken business is an important component
of its sales and has grown from sales of $232.1 million in fiscal 1992
to $286.2 million in fiscal 1996. In addition to maintaining its sales
of mature, traditional fresh chicken products, the Company's strategy is
to shift the mix of its U.S. fresh chicken products by continuing to
increase sales of higher margin, faster growing products, such as
marinated chicken and chicken parts. As a result of this strategy, the
Company's compounded annual growth rate of fresh chicken sales from
fiscal 1992 to fiscal 1996 exceeded 5.3% while total U.S. industry sales
of fresh chicken increased less than 2.0%.

Continuing this strategy, the Company acquired additional chicken
producing assets in the U.S. in April 1997, to replace chicken purchased
from third parties, at a cost that management believes is significantly
less than the cost required to construct a new chicken production
complex with similar capacity.

. Capitalize on international demand for U.S. chicken. Due to U.S.
consumers' preference for chicken breast meat, the Company has targeted
international markets to generate sales of leg quarters. The Company has
also begun selling prepared food products for export, to the
international divisions of its U.S. chain restaurant customers. As a
result of these efforts, sales for these markets have grown from less
than 1% of the Company's total U.S. chicken sales in fiscal 1992 to more
than 6% in fiscal 1996. Management believes that (i) U.S. chicken
exports will continue to grow as worldwide demand for high grade, low
cost protein sources increases and (ii) worldwide demand for higher
margin prepared food products will increase over the next five years;
and accordingly, the Company is well positioned to capitalize on such
growth.

. Capitalize on investments and expertise in Mexico. The Company's
strategy in Mexico is focused on (i) being one of the most cost-
efficient producers and processors of chicken in Mexico by applying
technology and expertise utilized in the U.S. and (ii) increasing
distribution of its higher margin, value added products to national
retail stores and restaurants. This strategy has resulted in the Company
obtaining a market leadership position, with its estimated market share
in Mexico increasing from 10.5% in 1992 to 18.8% in 1996.

The Company's chicken products consist primarily of (i) prepared foods,
which include portion-controlled breast fillets, tenderloins and strips,
formed nuggets and patties and bone-in chicken parts, which are sold frozen
and may be either fully cooked or raw; (ii) fresh chicken, which includes
refrigerated (non-frozen), whole or cut-up chicken sold to the foodservice
industry either pre-marinated or non-marinated and prepackaged chicken, which
includes various combinations of freshly refrigerated, whole chickens and
chicken parts in trays, bags or other consumer packs labeled and priced ready
for the retail grocer's fresh meat counter; and (iii) export and other, which
includes parts and whole chicken, either refrigerated or frozen for U.S.
export or domestic use. The Company's Mexican products consist of live,
uneviserated and eviserated chicken.

The following table sets forth, for the periods since fiscal 1992, net sales
attributable to each of the Company's primary product lines and markets served
with such products. The table is based on the Company's internal sales reports
and its classification of product types and customers.

FISCAL YEAR ENDED SIX MONTHS ENDED
------------------------------------------------------ ---------------------
SEPT. 26, OCT. 2, OCT. 1, SEPT. 30, SEPT. 28, MARCH 30, MARCH 29,
1992 1993 1994 1995 1996 1996 1997
(52 WEEKS) (53 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) (26 WEEKS) (26 WEEKS)
(IN THOUSANDS)

U.S. CHICKEN SALES:
Prepared Foods:
Foodservice............ $178,185 $183,165 $205,224 $240,456 $ 303,939 $140,390 $162,129
Retail................. 85,700 89,822 61,068 38,683 42,946 20,896 19,476
-------- -------- -------- -------- ---------- -------- --------
Total Prepared Foods... 263,885 272,987 266,292 279,139 346,885 161,286 181,605
Fresh Chicken:
Foodservice............ 126,472 149,197 155,294 140,201 145,052 65,937 69,568
Retail................. 105,636 100,063 125,133 138,368 141,135 65,568 75,601
-------- -------- -------- -------- ---------- -------- --------
Total Fresh Chicken.... 232,108 249,260 280,427 278,569 286,187 131,505 145,169
Export and Other........ 72,724 77,709 88,437 113,414 140,614 69,351 70,501
-------- -------- -------- -------- ---------- -------- --------
Total U.S. Chicken..... 568,717 599,956 635,156 671,122 773,686 362,142 397,275
MEXICO.................. 160,620 188,754 188,744 159,491 228,129 108,527 127,466
-------- -------- -------- -------- ---------- -------- --------
Total Chicken Sales.... 729,337 788,710 823,900 830,613 1,001,815 470,669 524,741
SALES OF OTHER U.S.
PRODUCTS............... 88,024 99,133 98,709 101,193 137,495 68,810 76,466
-------- -------- -------- -------- ---------- -------- --------
Total Net Sales........ $817,361 $887,843 $922,609 $931,806 $1,139,310 $539,479 $601,207
======== ======== ======== ======== ========== ======== ========

UNITED STATES

The following table sets forth, since fiscal 1992, the percentage of net
U.S. chicken sales attributable to each of the Company's primary products
lines and markets serviced with such products. The table and related
discussion are based on the Company's internal sales reports and its
classification of product types and customers.

FISCAL YEAR ENDED SIX MONTHS ENDED
--------------------------------------------- -------------------
SEPT. 26, OCT. 2, OCT. 1, SEPT. 30, SEPT. 28, MARCH 30, MARCH 29,
1992 1993 1994 1995 1996 1996 1997

U.S. CHICKEN SALES:
Prepared Foods:
Foodservice............ 31.3% 30.5% 32.3% 35.8% 39.3% 38.8% 40.8%
Retail................. 15.1 15.0 9.6 5.8 5.6 5.8 4.9
----- ----- ----- ----- ----- ----- -----
Total Prepared Foods... 46.4 45.5 41.9 41.6 44.9 44.6 45.7
----- ----- ----- ----- ----- ----- -----
Fresh Chicken:
Foodservice............ 22.2 24.9 24.5 20.9 18.7 18.2 17.5
Retail................. 18.6 16.7 19.7 20.6 18.2 18.1 19.0
----- ----- ----- ----- ----- ----- -----
Total Fresh Chicken.... 40.8 41.6 44.2 41.5 36.9 36.3 36.5
----- ----- ----- ----- ----- ----- -----
Export and Other........ 12.8 12.9 13.9 16.9 18.2 19.1 17.8
----- ----- ----- ----- ----- ----- -----
Total U.S. Chicken Sales
Mix.................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ===== ===== =====

Product Types

U.S. Prepared Foods Overview. During fiscal 1996, $346.9 million of the
Company's net U.S. chicken sales were in prepared food products to foodservice
and retail customers, as compared to $263.9 million in fiscal 1992, which
reflects the strategic focus for growth of the Company. The market for
prepared food products has experienced, and management believes that this
market will continue to experience, greater growth and higher margins than
fresh chicken products. Additionally, the production and sale of prepared
foods reduces the impact of feed grain costs on the Company's profitability.
As further processing is performed, feed grain costs becomes a decreasing
percentage of a product's total production cost.

The Company establishes prices for its prepared food products based
primarily upon perceived value to the customer, production costs and prices of
competing products. The majority of these products are sold pursuant to
agreements with varying terms that either set a fixed price for the products
or set a price according to formulas based on an underlying commodity market,
subject in many cases to minimum and maximum prices.

U.S. Fresh Chicken Overview. The Company's fresh chicken business is an
important component of its sales and has grown from sales of $232.1 million in
fiscal 1992 to $286.2 million in fiscal 1996. In addition to maintaining its
sales of mature, traditional fresh chicken products, the Company's strategy is
to shift the mix of its U.S. fresh chicken products by continuing to increase
sales of higher margin, faster growing products, such as marinated chicken and
chicken parts. As a result of this strategy, the Company's compounded annual
growth rate of fresh chicken sales from fiscal 1992 to fiscal 1996 exceeded
5.3% while total U.S. industry sales of fresh chicken increased less than
2.0%.

Most fresh chicken products are sold to established customers based upon
certain weekly or monthly market prices reported by the USDA and other public
price reporting services, plus a markup, which is dependent upon the
customer's location, volume, product specifications and other factors. The
Company believes its practices with respect to sales of its fresh chicken are
generally consistent with those of its competitors. Prices of these products
are negotiated daily or weekly and are generally related to market prices
quoted by the USDA or other public price reporting services.

Export and Other Overview. The Company's export and other products consist
of whole chickens and chicken parts sold primarily in bulk, non-branded form
either refrigerated to distributors in the U.S. or frozen for

distribution to export markets. Sales growth in the "Export and Other"
category between fiscal 1992 and fiscal 1996 primarily reflects increased
exports of chicken products. In fiscal 1996, approximately $47 million of the
Company's sales were attributable to exports of U.S. chicken. These export and
other products have historically been characterized by lower prices and
greater price volatility than the Company's more value-added product lines.

Markets

U.S. Foodservice. The majority of the Company's U.S. chicken sales are
derived from products sold to the foodservice market which principally
consists of chain restaurants, frozen entree producers, institutions and
distributors, located throughout the continental United States. The Company
supplies chicken products ranging from portion-controlled refrigerated chicken
parts to fully cooked and frozen, breaded or non-breaded chicken parts or
formed products.

As the second largest full-line supplier of chicken to the foodservice
market, the Company believes it is well-positioned to be the primary or
secondary supplier to many national and international chain restaurants who
require multiple suppliers of chicken products. Additionally, the Company is
well suited to be the sole supplier for many regional chain restaurants that
offer better margin opportunities and a growing base of business. Due to its
comparatively large size in this market, management believes the Company has
significant competitive advantages in terms of product capability, production
capacity, research & development expertise, and distribution and marketing
experience relative to smaller and to non-vertically integrated producers. As
a result of these competitive advantages, the Company's sales to the
foodservice market from fiscal 1992 through fiscal 1996 grew at a compounded
annual growth rate of approximately 10.2%. Based on industry data, the Company
estimates that total industry dollar sales to the foodservice market during
this same period grew at a compounded annual growth rate of approximately
7.6%. The Company markets both prepared food and fresh chicken products to the
foodservice industry.

Foodservice--Prepared Foods. The majority of the Company's sales to the
foodservice market consists of prepared food products. Prepared food sales to
the foodservice market were $303.9 million in fiscal 1996 compared to $178.2
million in fiscal 1992, a compounded annual growth rate of approximately
14.3%. The Company's prepared food products include portion-controlled breast
fillets, tenderloins and strips, formed nuggets and patties and bone-in
chicken parts, which are sold frozen and in various stages of preparation,
including blanched, battered, breaded and either partially or fully-cooked.
The Company attributes this growth in sales of prepared foods to the
foodservice market to a number of factors:

First, there has been significant growth in the number of foodservice
operators offering chicken on their menus and the number of chicken items
offered.

Second, foodservice operators are increasingly purchasing prepared chicken
products which allow them to reduce labor costs while providing greater
product consistency, quality and variety across all restaurant locations.

Third, there is a strong need among larger foodservice companies for an
alternative or additional supplier to the Company's principal competitor in
the prepared foods market. A viable alternative supplier must be able to
ensure supply, demonstrate innovation and new product development, and provide
competitive pricing. The Company has been successful in its objective of
becoming the alternative supplier of choice by being the primary or secondary
prepared chicken supplier to many large foodservice companies because (i) it
is vertically integrated, giving the Company control over its supply of
chicken and chicken parts; (ii) its further processing facilities are
particularly well suited to the high volume production runs necessary to meet
the capacity and quality requirements of the U.S. foodservice market; and
(iii) it has established a reputation for dependable quality, highly
responsive service and excellent technical support.

Fourth, as a result of the experience and reputation developed with larger
customers, the Company has increasingly become the principal supplier to
midsized foodservice organizations.

Fifth, the Company's in-house product development group follows a customer-
driven research & development focus designed to develop new products to meet
customers' changing needs. The Company's research & development personnel
often work directly with institutional customers in developing proprietary
products. Approximately $110.9 million of the Company's sales to foodservice
customers in fiscal 1996 consisted of new products which were not sold by the
Company in fiscal 1992.

Sixth, the Company is a leader in utilizing advanced processing technology,
which enables the Company to better meet its customers' needs for product
innovation, consistent quality and cost efficiency.

Foodservice--Fresh Chicken. The Company produces and markets fresh,
refrigerated chicken for sale to U.S. quick-service restaurant chains,
delicatessens and other customers. These chickens have the giblets removed,
are usually of specific weight ranges, are usually pre-cut to customer
specifications and are often marinated to enhance value and product
differentiation. By growing and processing to customers' specifications, the
Company is able to assist quick-service restaurant chains in controlling costs
and maintaining quality and size consistency of chicken pieces sold to the
consumer.

U.S. Retail. The U.S. retail market consists primarily of grocery store
chains and retail distributors. The Company concentrates its efforts in this
market on sales of branded, prepackaged cut-up and whole chicken to grocery
chains and retail distributors in the midwestern, southwestern and western
regions of the United States. This regional marketing focus enables the
Company to develop consumer brand franchises and capitalize on proximity to
the trade customer in terms of lower transportation costs; more timely,
responsive service; and enhanced product freshness. For a number of years, the
Company has invested in both trade and retail marketing designed to establish
high levels of brand name awareness and consumer preferences within these
markets.

The Company utilizes numerous marketing techniques, including advertising,
to develop and strengthen trade and consumer awareness and increase brand
loyalty for consumer products marketed under the Pilgrim's Pride brand. The
Company's founder, Lonnie "Bo" Pilgrim, is the featured spokesman in the
Company's television, radio and print advertising, and a trademark cameo of a
person in a Pilgrim's hat serves as the logo on all of the Company's primary
branded products. As a result of this marketing strategy, the Company has
established a well-known brand name in certain southwestern markets, including
the Dallas/Fort Worth area. Management believes its efforts to achieve and
maintain brand awareness and loyalty help to provide more secure distribution
for its products and generate greater price premiums than would otherwise be
the case in certain southwestern markets. The Company also maintains an active
program to identify consumer preferences primarily by testing new product
ideas, packaging designs and methods through taste panels and focus groups
located in key geographic markets.

Retail--Prepared Foods. The Company sells retail oriented prepared foods
primarily to grocery store chains located in the midwestern, southwestern and
western regions of the U.S. where it also markets prepackaged fresh chicken.
Being a major, national competitor in retail, branded frozen foods is not a
part of the Company's current business strategy. The Company previously was a
national supplier of retail prepared chicken to the wholesale club industry,
which is now dominated by two large national operators. Due to the highly
concentrated nature of the club store business, the Company no longer serves
this market and has redirected this prepared foods capacity to a more
diversified customer base.

Retail--Fresh Chicken. The Company's prepackaged retail products include
various combinations of freshly refrigerated whole chickens and chicken parts
in trays, bags or other consumer packs, labeled and priced ready for the
grocer's fresh meat counter. Management believes the retail, prepackaged fresh
chicken business will continue to be a large and relatively stable market,
providing opportunities for product differentiation and regional brand
loyalty.

The Company concentrates its sales and marketing efforts for the above
product types to grocery chains and retail distributors in the midwestern,
southwestern and western regions of the United States. This regional marketing
focus enables the Company to develop consumer brand franchises and capitalize
on proximity to the

trade customer in terms of lower transportation costs; more timely, responsive
service; and enhanced product freshness.

Export and Other. The Company's export and other products consist of whole
chickens and chicken parts sold primarily in bulk, non-branded form either
refrigerated to distributors in the U.S. or frozen for distribution to export
markets. In recent years, the Company has de-emphasized its marketing of bulk-
packaged chicken in the U.S. in favor of more value-added products and export
opportunities. In the U.S., prices of these products are negotiated daily or
weekly and are generally related to market prices quoted by the USDA or other
public price reporting services. The Company also sells U.S. produced chicken
products for export to Canada, Eastern Europe, the Far East and other world
markets. Due to U.S. consumers' preference for chicken breast meat, the
Company has targeted international markets to generate sales of leg quarters.
The Company has also begun selling prepared food products for export to the
international divisions of its U.S. chain restaurant customers. As a result of
these efforts, the Company's sales for export have grown from less than 1% of
its total U.S. chicken sales in fiscal 1992 to more than 6% in fiscal 1996.
Management believes that (i) U.S. chicken exports will continue to grow as
worldwide demand for high grade, low cost protein sources increases; and (ii)
worldwide demand for higher margin prepared food products will increase over
the next five years; and accordingly, the Company is well positioned to
capitalize on such growth.

Other U.S. Products. The Company markets fresh eggs under the Pilgrim's
Pride brand name as well as private labels in various sizes of cartons and
flats to U.S. retail grocery and institutional foodservice customers located
primarily in Texas. The Company has a housing capacity for approximately 2.3
million commercial egg laying hens which can produce approximately 41 million
dozen eggs annually. U.S. egg prices are determined weekly based upon reported
market prices. The U.S. egg industry has been consolidating over the last few
years with the 20 largest producers accounting for more than 68% of the total
number of egg laying hens in service during 1996. The Company competes with
other U.S. egg producers, primarily on the basis of product quality,
reliability, price and customer service. According to an industry publication,
the Company is the twenty-fifth largest producer of eggs in the United States.

The Company also converts chicken by-products into protein products
primarily for sale to manufacturers of pet foods. In addition, the Company
produces and sells livestock feeds at its feed mill and farm supply store in
Pittsburg, Texas, to dairy farmers and livestock producers in northeastern
Texas.

MEXICO

Background

The Mexican market represented approximately 20% of the Company's net sales
in fiscal 1996. The Company entered the Mexican market in 1979 when it began
seasonally selling eggs to the Mexican government. Recognizing favorable long-
term demographic trends and improving economic conditions in Mexico, the
Company began exploring opportunities to produce and market chicken in Mexico.
In fiscal 1988, the Company acquired four vertically integrated chicken
production operations in Mexico for approximately $15.1 million. From fiscal
1988 through fiscal 1996, the Company made acquisitions and capital
expenditures in Mexico totaling $151.6 million to expand and improve such
operations, including a fiscal 1995 investment of $35.3 million for the
acquisition of Union de Queretaro, et al, a group of five chicken companies
located near Queretaro, Mexico. As a result of these expenditures, the Company
has increased weekly production in its Mexico operations by over 350% since
its original investment in fiscal 1988. The Company is now one of the two
largest producers of chicken in Mexico. The Company believes its facilities
are among the most technologically advanced in Mexico and that it is one of
the lowest cost producers of chicken in Mexico.

Product Types

While the market for chicken products in Mexico is less developed than in
the United States, with sales attributed to fewer, more basic products, the
market for value added products is increasing. The Company's strategy is to
lead this trend. The products currently sold by the Company in Mexico consist
primarily of basic

products such as New York dressed (whole chickens with only feathers and blood
removed), live birds and value added products such as eviscerated chicken and
chicken parts. The Company has increased its sales of value added products,
particularly through national retail chains and restaurants, and plans to
continue to do so. The Company remains opportunistic, however, utilizing its
low cost production to enter markets where profitable opportunities exist. For
example, the Company has significantly increased its sales of live birds since
1994 as many smaller producers exited this segment of the business as a result
of the recession in Mexico.

Markets

The Company sells its Mexican chicken products primarily to large
wholesalers and retailers. The Company's customer base in Mexico covers a
broad geographic area from Mexico City, the capital of Mexico with a
population estimated to be over 20 million, to Saltillo, the capital of the
State of Coahuila, about 500 miles north of Mexico City, and from Tampico on
the Gulf of Mexico to Acapulco on the Pacific, which region includes the
cities of San Luis Potosi and Queretaro, capitals of the states of the same
name.

COMPETITION

In Mexico, where product differentiation is limited, product quality and
price are the most critical competitive factors. Additionally, NAFTA, which
went into effect on January 1, 1994, requires annual reductions in tariffs for
chicken and chicken products in order to eliminate such tariffs by January 1,
2003. As such tariffs are reduced, there can be no assurance that increased
competition from chicken imported into Mexico from the U.S. will not have a
material adverse effect on the Mexican chicken industry in general, or the
Company's Mexican operations in particular.

OTHER ACTIVITIES

The Company has regional distribution centers located in Arlington, El Paso,
Mt. Pleasant and San Antonio, Texas; Phoenix and Tucson, Arizona; and Oklahoma
City, Oklahoma that distribute the Company's own poultry products along with
certain poultry and non-poultry products purchased from third parties to
independent grocers and quick service restaurants. The Company's non-poultry
distribution business is conducted as an accommodation to its customers and to
achieve greater economies of scale in distribution logistics. The store-door
delivery capabilities for the Company's own poultry products provide a
strategic service advantage in selling to quick-service, national chain
restaurants.

REGULATION

The chicken industry is subject to government regulation, particularly in
the health and environmental areas. The Company's chicken processing
facilities in the U.S. are subject to on-site examination, inspection and
regulation by the USDA. The FDA inspects the production of the Company's feed
mills in the U.S. The Company's Mexican food processing facilities and feed
mills are subject to on-site examination, inspection and regulation by a
Mexican governmental agency which performs functions similar to those
performed by the

USDA and FDA. Since commencement of operations by the Company's predecessor in
1946, compliance with applicable regulations has not had a material adverse
effect upon the Company's earnings or competitive position and such compliance
is not anticipated to have a material adverse effect in the future. Management
believes that the Company is in substantial compliance with all applicable
laws and regulations relating to the operations of its facilities.

The Company anticipates increased regulation by the USDA concerning food
safety, by the FDA concerning the use of medications in feed and by the TNRCC,
the ASVO and the EPA concerning the disposal of chicken by-products and
wastewater discharges. Although the Company does not anticipate any such
regulation having a material adverse effect upon the Company, no assurances
can be given to that effect.

EMPLOYEES AND LABOR RELATIONS

As of June 11, 1997 the Company employed approximately 9,500 persons in the
U.S. and 3,200 persons in Mexico. Approximately 2,000 employees at the
Company's Lufkin and Nacogdoches, Texas facilities are members of collective
bargaining units represented by the United Food and Commercial Workers Union
(the "UFCW"). None of the Company's other U.S. employees have union
representation. The Company's collective bargaining agreements with the UFCW
expire on August 10, 1998 with respect to the Company's Lufkin employees and
on October 5, 1998 with respect to the Company's Nacogdoches employees. The
Company believes that the terms of each of these agreements are no more
favorable than those provided to its non-union U.S. employees. In Mexico, most
of the Company's hourly employees are covered by collective bargaining
agreements as most employees are in Mexico. The Company has not experienced
any work stoppage since a two day work stoppage at the Lufkin facility in May
1993, and management believes that relations with the Company's employees are
satisfactory.

PROPERTIES

Breeding and Hatching

The Company supplies all of its chicks in the U.S. by producing its own
hatching eggs from domestic breeder flocks in the U.S. owned by the Company,
approximately 33% of which are maintained on 43 Company-operated breeder
farms. In the U.S., the Company currently owns or contracts for approximately
8.5 million square feet of breeder housing on approximately 239 breeder farms.
In Mexico, all of the Company's breeder flocks are maintained on Company-owned
farms.

The Company owns six hatcheries in the United States, located in Nacogdoches
and Pittsburg, Texas, and DeQueen and Nashville, Arkansas, where eggs are
incubated and hatched in a process requiring 21 days. Once hatched, the day-
old chicks are inspected and vaccinated against common poultry diseases and
transported by Company vehicles to grow-out farms. The Company's seven
hatcheries in the U.S. have an aggregate production capacity of approximately
8.2 million chicks per week. In Mexico, the Company owns seven hatcheries,
which have an aggregate production capacity of approximately 3.3 million
chicks per week.

Grow-out

The Company places its U.S. grown chicks on approximately 1,102 grow-out
farms located in Texas and Arkansas. These farms provide the Company with
approximately 53.5 million square feet of growing facilities. The Company
operates 33 grow-out farms in the U.S. that account for approximately 8.3% of
its total annual U.S. chicken capacity. The Company also places chicks with
farms owned by affiliates of the Company under grow-out contracts. See
"Compensation Committee Interlocks and Insider Participation" and "Certain
Relationships and Transactions." The remaining chicks are placed with
independent farms under grow-out contracts. Under such grow-out contracts, the
farmers provide the facilities, utilities and labor. The Company supplies the
chicks, the feed and all veterinary and technical services. Contract grow-out
farmers are paid based on live weight under an incentive arrangement. In
Mexico, the Company owns approximately 38% of its grow-

out farms and contracts with independent farmers for the balance of its
production. Arrangements with independent farmers in Mexico are similar to the
Company's arrangements with contractors in the United States.

Feed Mills

An important factor in the production of chicken is the rate at which feed
is converted into body weight. The Company purchases feed ingredients on the
open market. The primary feed ingredients include corn, milo and soybean meal,
which historically have been the largest component of the Company's total
production cost. The quality and composition of the feed is critical to the
conversion rate, and accordingly, the Company formulates and produces its own
feed. In the U.S., the Company operates six feed mills located in Nacogdoches,
Pittsburg and Center, Texas and Nashville and Hope, Arkansas. The Company
currently has annual feed requirements in the U.S. of approximately 2.2
million tons and the capacity to produce approximately 2.3 million tons. The
Company owns four feed mills in Mexico which produce all of the requirements
of its Mexican operations. Mexican annual feed requirements are approximately
0.7 million tons with a capacity to produce approximately 0.9 million tons. In
fiscal 1996, approximately 55% of the grain used by the Company in Mexico was
imported from the United States. However, this percentage fluctuates based on
the availability and cost of local grain supplies.

Feed grains are commodities subject to volatile price changes caused by
weather, size of harvest, transportation and storage costs and the
agricultural policies of foreign governments. Although the Company can and
sometimes does purchase grain in forward markets, it cannot eliminate the
potential adverse effect of grain price changes.

Processing

Once the chickens reach processing weight, they are transported by the
Company's trucks to the Company's processing plants. These plants utilize
modern, highly automated equipment to process and package the chickens. The
Company periodically reviews possible application of new processing
technologies in order to enhance productivity and reduce costs. The Company's
six U.S. processing plants, two of which are located in Mt. Pleasant, Texas,
and the remainder of which are located in Dallas, Nacogdoches and Lufkin,
Texas, and DeQueen, Arkansas, have the capacity, under present USDA inspection
procedures, to produce approximately 1.3 billion pounds of dressed chicken
annually. The Company's three processing plants located in Mexico, which
perform fewer processing functions than the Company's U.S. facilities, have
the capacity to process approximately 470 million pounds of dressed chicken
annually.

Prepared Foods Plant

The Company's prepared foods plant in Mt. Pleasant, Texas, was constructed
in 1986 and has been expanded significantly since such time. This facility has
deboning lines, marination systems, batter/breading systems, fryers, ovens,
both mechanical and cryogenic freezers, a variety of packaging systems and
cold storage. This plant is currently operating at the equivalent of two
shifts a day for six days a week. If necessary, the Company could add
additional shifts during the seventh day of the week.

Egg Production

The Company produces eggs at three farms near Pittsburg, Texas. One farm is
owned by the Company, while two farms are operated under contract by an entity
owned by a major stockholder of the Company. See "Compensation Committee
Interlocks and Insider Participation." The eggs are cleaned, sized, graded and
packaged for shipment at processing facilities located on the egg farms. The
farms have a housing capacity for approximately 2.3 million producing hens and
are currently housing approximately 2.0 million hens.

Other Facilities and Information

The Company operates a rendering plant located in Mt. Pleasant, Texas, that
currently processes by-products from approximately 8.2 million chickens weekly
into protein products, which are used in the manufacture of chicken and
livestock feed and pet foods. The Company operates a feed supply store in
Pittsburg, Texas, from

which it sells various bulk and sacked livestock feed products. The Company
owns an office building in Pittsburg, Texas, which houses its executive
offices, and an office building in Mexico City, which houses the Company's
Mexican marketing offices. The Company also owns approximately 15,068 acres of
farmland previously used in the Company's non- poultry farming operations. The
Company is currently in the process of disposing of such land and related
assets.

Substantially all of the Company's U.S. property, plant and equipment in the
U.S. is pledged as collateral on its secured debt.

LEGAL PROCEEDINGS

From time to time the Company is named as a defendant or co-defendant in
lawsuits arising in the course of its business. The Company does not believe
that such pending lawsuits will have a material adverse impact on the Company.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Set forth below is certain information relating to the current directors and
executive officers of the Company:

NAME AGE POSITION

Lonnie "Bo" Pilgrim (1)....... 69 Chairman of the Board and Chief Executive
Officer
Clifford E. Butler............ 55 Vice Chairman of the Board and Executive
President
Lindy M. "Buddy" Pilgrim...... 42 President, Chief Operating Officer and
Director
David Van Hoose............... 54 President, Mexican Operations
Richard A. Cogdill............ 37 Executive Vice President, Chief Financial
Officer, Secretary and Treasurer
Robert L. Hendrix............. 61 Executive Vice President, Operations and
Director
Terry Berkenbile.............. 46 Senior Vice President, Sales & Marketing,
Retail and Fresh Products
Ray Gameson................... 48 Senior Vice President, Human Resources
O.B. Goolsby, Jr.............. 49 Senior Vice President, Prepared Foods
Operations
Michael D. Martin............. 42 Senior Vice President, DeQueen, Arkansas
Complex
James J. Miner, Ph.D.......... 69 Senior Vice President, Technical Services and
Director
Michael J. Murray............. 38 Senior Vice President, Sales & Marketing,
Prepared Foods
Robert N. Palm................ 52 Senior Vice President, Lufkin, Texas Complex
Lonnie Ken Pilgrim (1)........ 38 Vice President, Director of Transportation
and Director
Charles L. Black (1).......... 67 Director
Robert E. Hilgenfeld (1)(2)... 72 Director
Vance C. Miller, Sr. (1)(2)... 63 Director
James G. Vetter, Jr. (1)(2)... 63 Director
Donald L. Wass, Ph.D (1)...... 64 Director

- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.

Lonnie "Bo" Pilgrim has served as Chairman of the Board and Chief Executive
Officer since the organization of the Company in 1968. Prior to the
incorporation of the Company, Mr. Pilgrim was a partner in the Company's
predecessor partnership business founded in 1946.

Clifford E. Butler serves as Vice Chairman of the Board and Executive
President. He joined the Company as Controller and Director in 1969, was named
Senior Vice President of Finance in 1973, became Chief Financial Officer and
Vice Chairman of the Board in July 1983 and effective January 1, 1997 he
became Executive President and continues to serve as Vice Chairman of the
Board.

Lindy M. "Buddy" Pilgrim serves as President and Chief Operating Officer of
the Company. He was elected as Director in March 1993 and began employment in
April 1993 under the title of President of U.S. Operations and Sales and
Marketing. From April 1993 to March 1994, the President and Chief Operating
Officer reported to him. After that time, the Chief Operating Officer title
and responsibilities were incorporated into his own. Up to October 1990, Mr.
Pilgrim was employed by the Company for 12 years in marketing and 9 years in
operations. From October 1990 to April 1993, he was President of Integrity
Management Services, Inc., a consulting firm to the food industry. He is a
nephew of Lonnie "Bo" Pilgrim.

David Van Hoose has been President of Mexican Operations since April 1993.
He was previously Senior Vice President, Director General, Mexican Operations
from August 1990 to April 1993. Mr. Van Hoose was employed by the Company in
September 1988 as Senior Vice President, Texas Processing. Prior to that, Mr.
Van Hoose was employed by Cargill, Inc., as General Manager of one of its
chicken operations.

Richard A. Cogdill has served as Executive Vice President, Chief Financial
Officer, Secretary and Treasurer since January 1, 1997. Previously he served
as Senior Vice President, Corporate Controller, from August 1992 through
December 1996 and as Vice President, Corporate Controller from October 1991
through August 1992. Prior to October 1991 he was as Senior Manager with Ernst
& Young LLP. He is a Certified Public Accountant.

Robert L. Hendrix has served as Executive Vice President, Operations, of the
Company since March 1994 and as a Director of the Company since March 1994.
Prior to that he served as Senior Vice President, NETEX Processing from August
1992 to March 1994 and as President and Chief of Complex Operations from
September 1988 to March 1992. He was on leave from the Company from March 1992
to August 1992. From July 1983 to March 1992, he served as a Director of the
Company. He was President and Chief Operating Officer of the Company from July
1983 to September 1988. He joined the Company as Senior Vice President in
September 1981 when the Company acquired Mountaire Corporation of DeQueen,
Arkansas, and, prior thereto, he was Vice President of Mountaire Corporation.

Terry Berkenbile was named Senior Vice President, Sales & Marketing, for
Retail and Fresh Products in July 1994. Prior to that he was Vice President,
Sales & Marketing, for Retail and Fresh Products from May 1993 to July 1994.
From February 1991 to April 1993, Mr. Berkenbile was Director Retail Sales &
Marketing at Hudson Foods. From February 1988 to February 1991, Mr. Berkenbile
was Director Plant Sales at the Company; prior thereto, he worked in the
processed red meat industry.

Ray Gameson has been Senior Vice President of Human Resources since October
1994. He previously served as Vice President of Human Resources from August
1993 to October 1994. From December 1991 to July 1993, he was employed at
Townsends, Inc. and served as Complex Human Resource, Manager. Prior to that
he was employed by the Company as Complex Human Resource, Manager, at its Mt.
Pleasant, Texas location.

O.B. Goolsby, Jr. has been Senior Vice President, Prepared Foods Operations
since August 1992. He was previously Vice President, Prepared Foods Operations
from April 1986 to August 1992 and was previously employed by the Company in
sales and processing from November 1969 to January 1981.

Michael D. Martin has been Senior Vice President, DeQueen, Arkansas Complex
Manager, of the Company since April 1993. He previously served as Plant
Manager at the Company's Lufkin, Texas operations and Vice President,
Processing, at the Company's Mt. Pleasant, Texas, operations up to April 1993.
He has served in various other operating management positions in the Arkansas
Complex since September 1981. Prior to that he was employed by Mountaire
Corporation of DeQueen, Arkansas, until it was acquired by the Company in
September 1981.

James J. Miner, Ph.D. has been Senior Vice President, Technical Services,
since April 1994. He has been employed by the Company and its predecessor
partnership since 1966 and served as Senior Vice President responsible for
live production and feed nutrition from 1968 to April 1994. He has been a
Director since the incorporation of the Company in 1968.

Michael J. Murray has been Senior Vice President, Sales & Marketing, for
Prepared Foods since October 1994. He previously served as Vice President of
Sales and Marketing, Food Service from August 1993 to October 1994. From 1990
to July 1993, he was employed by Cargill, Inc. Prior to that, from 1987 to
1990, he was employed by the Company as a Vice President for sales and
marketing and prior thereto, he was employed by Tyson Foods, Inc.

Robert N. Palm has been Senior Vice President, Lufkin, Texas, Complex
Manager of the Company, since June 1985 and was previously employed in various
operating management positions by Plus-Tex Poultry, Inc., a Lufkin, Texas
based company acquired by Pilgrim's Pride in June 1985.

Lonnie Ken Pilgrim has been employed by the Company since 1977 and has
served the Company as its Vice President, Director of Transportation and as a
member of the Board of Directors since March 1985. He is a son of Lonnie "Bo"
Pilgrim.

Charles L. Black was Senior Vice President, Branch President of NationsBank,
Mt. Pleasant, Texas, from December 1981 to his retirement in February 1995. He
previously was a Director of the Company from 1968 to August 1992 and has
served as a director since his re-election in February 1995.

Robert E. Hilgenfeld was elected a Director in September 1986. Mr.
Hilgenfeld was Senior Vice President--Marketing/Processing for the Company
from 1969 to 1972 and for seventeen years prior to that worked in various
sales and management positions for the Quaker Oats Company. From 1972 until
April 1986, he was employed by Church's Fried Chicken Company ("Church's") as
Vice President--Purchasing Group, Vice President and Senior Vice President. He
was elected a Director of Church's in 1985 and retired from Church's in April
1986. Since retirement he has served as a consultant to various companies
including the Company.

Vance C. Miller, Sr. was elected a Director in September 1986. Mr. Miller
has been Chairman of Vance C. Miller Interests, a real estate development
company formed in 1977 and has served as the Chairman of the Board and Chief
Executive Officer of Henry S. Miller Cos., a Dallas, Texas real estate
services firm since 1991. Mr. Miller also serves as a director of Resurgence
Properties, Inc.

James G. Vetter, Jr. has practiced law in Dallas, Texas, since 1966. He is a
member of the Dallas law firm of Godwin & Carlton, P.C., and has served as
general counsel and a Director since 1981. Mr. Vetter is a Board Certified-Tax
Law Specialist and serves as a lecturer and author in tax matters.

Donald L. Wass, Ph.D. was elected a Director of the Company in May 1987. He
has been President of the William Oncken Company of Texas, a time management
consulting company, since 1970.

COMMITTEES OF THE BOARD OF DIRECTORS

To assist in carrying out its duties, the Board of Directors has delegated
certain authority to the Audit and Compensation Committees. The Board of
Directors does not maintain a Nominating Committee. The members of the Audit
Committee are Robert E. Hilgenfeld, Vance C. Miller, Sr. and James G. Vetter,
Jr. The members of the Compensation Committee are Lonnie "Bo" Pilgrim, Robert
E. Hilgenfeld, Vance C. Miller, Sr., Lonnie Ken Pilgrim, James G. Vetter, Jr.,
Donald L. Wass and Charles L. Black. Each Committee meets to examine various
facets of the Company's operations and take appropriate action or make
recommendations to the Board of Directors. The Audit Committee's
responsibilities include making recommendations to the Board of Directors
regarding the selection of independent public accountants and reviewing the
plan and results of the audit performed by the public accountants of the
Company and the adequacy of the Company's systems of internal accounting
controls, and monitoring compliance with the Company's conflicts of interest
and business ethics policies. The Compensation Committee reviews the Company's
remuneration policies and practices and establishes the salaries of the
Company's officers.

COMPENSATION OF DIRECTORS

The Company pays its Directors who are not employees of the Company $4,000
per meeting attended, plus expenses.

EXECUTIVE COMPENSATION

The Summary Compensation Table below provides certain summary information
concerning compensation paid or accrued by the Company to or on behalf of the
Company's Chief Executive Officer and each of the four other most highly
compensated executive officers of the Company during fiscal 1996.

SUMMARY COMPENSATION TABLE

ANNUAL
------------------------------
NAME AND PRINCIPAL FISCAL OTHER ANNUAL ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION(1)

Lonnie "Bo" Pilgrim....... 1996 $475,065 $123,443 $26,518 $10,763
Chairman of the Board and
Chief 1995 463,016 277,530 17,591 10,359
Executive Officer 1994 452,077 477,943 -- 19,525
Clifford E. Butler........ 1996 253,368 65,836 7,505 6,204
Vice Chairman of the
Board and 1995 246,942 148,016 7,160 9,665
Executive President 1994 241,107 254,902 7,214 5,164
Lindy M. "Buddy" Pilgrim.. 1996 329,378 270,622 9,275 6,871
President and Chief
Operating Officer 1995 321,022 192,419 9,145 10,273
1994 313,440 331,374 9,173 3,974
David Van Hoose........... 1996 248,400 65,545 6,000 7,634
President, Mexican
Operations 1995 242,100 145,114 6,000 10,988
1994 162,375 171,665 3,894 3,058
Robert L. Hendrix......... 1996 248,400 64,545 10,200 7,777
Executive Vice President,
Operations 1995 242,100 145,114 8,948 11,486
1994 192,231 203,230 8,175 3,873

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(1) Includes the following items of compensation:
(i) Company's contribution to the named individual under its 401(k)
Salary Deferral Plan in the following amounts: Lonnie "Bo" Pilgrim,
$52 (1996, 1995, 1994); Clifford E. Butler $5,033 (1996), $8,543
(1995), $3,936 (1994); Lindy M. "Buddy" Pilgrim, $5,028 (1996),
$8,453 (1995), $3,974 (1994); David Van Hoose, $4,913 (1996), $8,315
(1995), $2,585 (1994); and Robert L. Hendrix, $5,028 (1996), $8,543
(1995), $2,677 (1994).
(ii) Section 79 income to the named individual due to group term life
insurance in excess of $50,000 in the following amounts: Lonnie "Bo"
Pilgrim, $10,711 (1996), $10,307 (1995), $19,473 (1994); Clifford E.
Butler, $1,171 (1996), $1,122 (1995), $1,228 (1994); Lindy M.
"Buddy" Pilgrim, $1,843 (1996), $1,820 (1995); David Van Hoose,
$2,721 (1996), $2,673 (1995), $473 (1994); and Robert L. Hendrix,
$2,749 (1996), $2,943 (1995), $1,196 (1994).

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During fiscal 1996, the members of the Company's Compensation Committee
were: Lonnie "Bo" Pilgrim, Robert E. Hilgenfeld, Vance C. Miller, Sr., James
G. Vetter, Jr., Donald L. Wass and Charles L. Black. Lonnie Ken Pilgrim was
elected to the Compensation Committee in fiscal 1997.

The Company has been and continues to be a party to certain transactions
with Lonnie "Bo" Pilgrim and a law firm affiliated with James G. Vetter, Jr.
These transactions, along with all other transactions between the Company and
affiliated persons, require the prior approval of the Audit Committee of the
Board of Directors.

The Company's transactions with Lonnie "Bo" Pilgrim have allowed the Company
to obtain the use of required production facilities and equipment on terms
that management believes are no less favorable to the Company than could have
been arranged with unaffiliated persons. Since 1985, Mr. Pilgrim has engaged
in chicken grow-out operations with the Company that involve the purchase of
chicks, feed and veterinary and technical services from the Company and the
grow-out of chickens to maturity at which time they are purchased by the
Company. Chicks, feed and services are purchased from the Company for their
fair market value, and the Company purchases the mature chickens from Mr.
Pilgrim at market-quoted prices at the time of purchase. Management of the
Company believes that this operation is conducted on terms no less favorable
than those which could be arranged with unaffiliated persons. During fiscal
years 1996, 1995 and 1994, the Company paid Mr. Pilgrim, doing business as
Pilgrim Poultry G.P. ("PPGP"), $18,112,000, $12,721,000 and $9,346,000,
respectively, for chickens produced in his grow-out operations, and PPGP paid
the Company $18,057,000, $12,478,000 and $9,373,000, respectively, for chicks,
feed and services. Mr. Pilgrim is the sole proprietor of PPGP.

PPGP also produces eggs for the Company. In addition to the chicken grow-out
operations described above, PPGP contracts with the Company to house and care
for Company flocks used for egg production and is paid an egg grower fee based
on actual production. The egg grower contract between PPGP and the Company
renews automatically as each expended flock of laying hens is replaced by a
new flock. The contract is cancelable by either party at any time prior to the
time when the then current producing flock is 48 weeks old. Flocks are
normally replaced every 14 months. Management of the Company believes that
these relationships are on terms no less favorable to the Company than those
which could be arranged with unaffiliated persons. During fiscal years 1996,
1995 and 1994, the Company paid PPGP contract egg grower's fees of $4,697,000,
$4,760,000 and $5,137,000, respectively.

Since 1985, the Company has leased an airplane from Mr. Pilgrim under a
lease agreement which provides for monthly lease payments of $33,000 plus
operating expenses, which terms management of the Company believes to be
substantially similar to those obtainable from unaffiliated parties. During
fiscal years 1996, 1995 and 1994, the Company had lease expenses of $396,000
per year and operating expenses associated with the use of this airplane of
$88,000, $149,000 and $213,000, respectively.

Historically, much of the Company's debt has been guaranteed by the major
stockholders of the Company. In consideration of such guarantees, the Company
has paid such stockholders a quarterly fee equal to 0.25% of the average
aggregate outstanding balance of such guaranteed debt. During fiscal years
1996, 1995 and 1994, the Company respectively incurred $1,027,000, $623,000,
and $526,000 for such guarantees and respectively paid $807,000, $451,000 and
$1,262,000 to Lonnie "Bo" Pilgrim and $47,500, $27,000 and $74,000 to each of
his three children (including Lonnie Ken Pilgrim, a Director of the Company,
and Patrick Wayne Pilgrim and Greta Pilgrim Owens, each of whom is a Selling
Stockholder). See "Principal and Selling Stockholders."

Godwin & Carlton, P.C., has represented and currently represents the Company
in connection with a variety of legal matters. James G. Vetter, Jr., is a
Director of the Company and is an Executive Vice President of Godwin &
Carlton, P.C. During fiscal years 1996, 1995 and 1994, the Company paid Godwin
& Carlton, P.C., legal fees of $363,385, $304,629 and $235,572, respectively,
in connection with such matters.

CERTAIN RELATIONSHIPS AND TRANSACTIONS

The Company has entered into chicken grower contracts involving farms owned
by certain of its officers, providing the placement of Company-owned flocks on
their farms during the grow-out phase of production. The contracts are on
terms substantially the same as contracts entered into by the Company with
unaffiliated parties and can be terminated by either party upon completion of
the grow-out of each flock. The aggregate amounts paid by the Company to its
officers and Directors under grower contracts during the fiscal years 1996,
1995 and 1994 were as follows: Clifford E. Butler--$177,908, $184,228 and
$183,922, respectively, and James J. Miner--$246,671, $161,968 and $190,348,
respectively. See "Compensation Committee Interlocks and Insider
Participation" for a discussion of the Company's transactions with Lonnie "Bo"
Pilgrim, Lonnie Ken Pilgrim, James G. Vetter, Jr., Patrick Wayne Pilgrim and
Greta Pilgrim Owens.

Archer-Daniels-Midland Company ("ADM") is one of several vendors selling
feed ingredients to the Company in the ordinary course of business. During
fiscal years 1996, 1995 and 1994, the Company purchased $55.2 million, $44.3
million and $56.5 million of feed ingredients from ADM, respectively. The
Company purchases such feed at prices based on the quoted market prices at the
time of purchase. See "Principal and Selling Stockholders."

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of May 31, 1997 by: (i) each person known by
the Company to own beneficially five percent or more of the outstanding Common
Stock; (ii) each of the Company's directors; (iii) each of the persons named
in the Summary Compensation Table; (iv) all directors and executive officers
of the Company as a group; and (v) each Selling Stockholder.

BENEFICIAL BENEFICIAL
OWNERSHIP PRIOR TO OWNERSHIP AFTER
OFFERING NUMBER OF OFFERING
------------------ SHARES ------------------
NUMBER OF BEING NUMBER OF
NAME OF BENEFICIAL OWNER SHARES PERCENT OFFERED SHARES PERCENT

Lonnie "Bo" Pilgrim(a)(b)...... 16,773,490 60.8% -- 16,773,490 60.8%
110 South Texas Street
Pittsburg, Texas 75686
Archer-Daniels-Midland
Company(c).................... 5,514,900 20.0 3,753,518 1,761,382 6.4
P.O. Box 1470
Decatur, Illinois
Lonnie Ken Pilgrim(b)(e)....... 529,345 1.9 -- 529,345 1.9
Clifford E. Butler(b).......... 28,823 (d) -- 28,823 (d)
Lindy M. "Buddy" Pilgrim(b).... 21,436 (d) -- 21,436 (d)
Robert L. Hendrix(b)........... 22,584 (d) -- 22,584 (d)
David Van Hoose(b)............. 3,912 (d) -- 3,912 (d)
James J. Miner(b).............. 13,034 (d) -- 13,034 (d)
James G. Vetter, Jr............ 1,550 (d) -- 1,550 (d)
Donald L. Wass................. 300 (d) -- 300 (d)
All executive officers and
directors as a group
(18) persons.................. 17,303,988 62.7 17,303,988 62.7
Patrick Wayne Pilgrim(f)....... 391,687 1.44 370,982 20,705 (d)
Greta Pilgrim Owens(g)......... 422,829 1.53 375,500 47,329 (d)

- --------
(a) Includes 60,387 shares of Common Stock held of record by Pilgrim Family
Trust I, an irrevocable trust dated June 16, 1987, for the benefit of
Lonnie "Bo" Pilgrim's surviving spouse and children, of which Lonnie Ken
Pilgrim and Patty R. Pilgrim, Lonnie "Bo" Pilgrim's wife, are co-trustees,
and 60,386 shares of Common Stock held of record by Pilgrim Family Trust
II, an irrevocable trust dated December 23, 1987, for the benefit of
Lonnie "Bo" Pilgrim and his children, of which Lonnie "Bo" Pilgrim and
Lonnie Ken Pilgrim are co-trustees. Lonnie "Bo" Pilgrim disclaims any
beneficial interest in the shares held by his children.
(b) Includes shares held in trust by the Company's 401(k) Salary Deferral
Plan.
(c) As reported in its Statement of Changes in Beneficial Ownership on Form 4
dated December 1, 1993. Archer-Daniels-Midland Company has granted the
Underwriters a 30-day option to purchase up to 675,000 additional shares
of Common Stock solely to cover overallotments, if any. If such option is
exercised in full, Archer-Daniels-Midland Company's beneficial ownership
after the Offering will be 1,086,382 shares of Common Stock, which
represents 3.9% of the outstanding Common Stock. See "Certain
Relationships and Transactions."
(d) Less than 1%.
(e) Includes 6,465 shares held by his wife, and 60,387 shares and 60,386
shares held by Pilgrim Family Trust I and Pilgrim Family Trust II,
respectively, for both of which Lonnie Ken Pilgrim serves as a co-trustee.
Also, includes 25,350 shares held in two irrevocable trusts dated December
15, 1994 and October 31, 1989 of which Lonnie Ken Pilgrim is a co-trustee
for the benefit of his children. Lonnie Ken Pilgrim disclaims any
beneficial interest in the foregoing shares.
(f) Includes 20,705 shares held in an irrevocable trust of which Patrick Wayne
Pilgrim is the co-trustee for the benefit of his child. Patrick Wayne
Pilgrim disclaims any beneficial interest in the foregoing shares. See
"Compensation Committee Interlocks and Insider Participation."
(g) Includes 8,779 shares held by her husband. Also, includes 38,550 shares
held in two irrevocable trusts dated December 15, 1989 and December 21,
1990 of which Greta Pilgrim Owens is a co-trustee for the benefit of her
children. Greta Pilgrim Owens disclaims any beneficial interest in the
foregoing shares. See "Compensation Committee Interlocks and Insider
Participation."

All of the individuals listed in the preceding table are officers or
directors of the Company other than Patrick Wayne Pilgrim and Greta Pilgrim
Owens.

DESCRIPTION OF CAPITAL STOCK

GENERAL

The Restated Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), of the Company authorizes the issuance of 45 million shares
of Common Stock, and 5 million shares of preferred stock, par value $0.01 per
share ("Preferred Stock").

COMMON STOCK

Holders of Common Stock are entitled to one vote for each share on each
matter submitted to a vote of stockholders. All outstanding shares of Common
Stock are fully paid, validly issued and nonassessable and the holders of
Common Stock do not have cumulative voting rights or preemptive rights to
subscribe for or to purchase any additional securities issued by the Company.
Upon liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to share ratably in the distribution of assets
remaining after payment of debts and expenses and the amounts payable upon
liquidation for any Preferred Stock then outstanding. There are no conversion,
sinking fund or redemption provisions, or any restrictions on alienability
with respect to the Common Stock.

Subject to the rights of the holders of Preferred Stock, if any, the holders
of Common Stock are entitled to receive dividends, when and if declared by the
Board of Directors of the Company, out of funds legally available therefor.
The Company's existing or future credit agreements may impose contractual
limitations on the payment of dividends on the Common Stock. See "Price Range
of Common Stock and Dividends." The declaration and payment of dividends are
at the discretion of the Board of Directors.

PREFERRED STOCK

The authorized Preferred Stock is issuable from time to time, in one or more
series, at the discretion of the Board of Directors of the Company. The Board
of Directors has authority, without further stockholder approval, to provide
for the issuance of Preferred Stock in one or more series, and to determine
the designations, rights, preferences and limitations of such series,
including the relative ranking with other series, the voting rights, if any,
the dividend rate, the redemption and liquidation rights, the conversion
rights, if any, and any other rights, preferences, qualifications, limitations
or restrictions. Although the Board of Directors has no present intention to
issue Preferred Stock, the issuance of shares of Preferred Stock, or the
issuance of rights to purchase Preferred Stock, may have the effect of
delaying, deferring, or preventing a change in control of the Company or may
increase or decrease the number of shares constituting each series.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Harris Trust and
Savings Bank.

UNDERWRITING

Subject to the terms and conditions of an underwriting agreement, dated July
22, 1997 (the "Underwriting Agreement"), the underwriters named below (the
"Underwriters"), who are represented by Donaldson, Lufkin & Jenrette
Securities Corporation and A.G. Edwards & Sons, Inc. (the "Representatives"),
have severally agreed to purchase from the Selling Stockholders the respective
number of shares of Common Stock set forth opposite their names below.

NUMBER OF
UNDERWRITERS SHARES

Donaldson, Lufkin & Jenrette Securities Corporation............. 1,861,875
A.G. Edwards & Sons, Inc. ...................................... 1,861,875
Credit Suisse First Boston Corporation.......................... 67,500
Furman Selz LLC................................................. 67,500
Merrill Lynch, Pierce, Fenner & Smith Incorporated.............. 67,500
J.P. Morgan Securities Inc. .................................... 67,500
Morgan Stanley & Co. Incorporated............................... 67,500
Prudential Securities Incorporated.............................. 67,500
George K. Baum & Company........................................ 33,750
Dain Bosworth Incorporated...................................... 33,750
First Albany Corporation........................................ 33,750
Hoak Breedlove Wesneski & Co. .................................. 33,750
Janney Montgomery Scott Inc. ................................... 33,750
Piper Jaffray Inc. ............................................. 33,750
Principal Financial Securities, Inc. ........................... 33,750
Rauscher Pierce Refsnes, Inc. .................................. 33,750
Southwest Securities, Inc. ..................................... 33,750
Stephens Inc. .................................................. 33,750
Wheat First Butcher Singer...................................... 33,750
---------
Total......................................................... 4,500,000
=========

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock
offered hereby are subject to approval by their counsel of certain legal
matters and to certain other conditions. The Underwriters are obligated to
purchase and accept delivery of all the shares of Common Stock offered hereby
(other than those shares covered by the over-allotment option described below)
if any are purchased.

The Underwriters initially propose to offer the shares of Common Stock in
part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus and in part to certain dealers (including
the Underwriters) at such price less a concession not in excess of $0.34 per
share. The Underwriters may allow, and such dealers may re-allow, to certain
other dealers a concession not in excess of $0.10 per share. After the initial
offering of the Common Stock, the public offering price and other selling
terms may be changed by the Representatives.

Archer-Daniels-Midland Company has granted to the Underwriters an option
exercisable within 30 days after the date of this Prospectus to purchase, from
time to time, in whole or in part, up to an aggregate of 675,000 additional
shares of Common Stock at the initial public offering price less underwriting
discounts and commissions. The Underwriters may exercise such option solely to
cover overallotments, if any, made in connection with the Offering. To the
extent that the Underwriters exercise such option, each Underwriter will
become obligated, subject to certain conditions, to purchase their pro rata
portion of such additional shares based on such Underwriter's percentage
underwriting commitment as indicated in the preceding table.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.

Each of the Company, its executive officers and directors and certain
stockholders of the Company (including the Selling Stockholders) has agreed,
subject to certain exceptions, (i) not to offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase or otherwise transfer
or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
(ii) enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise) for a period of 90 days after the date of this Prospectus
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation. In addition, during such period, the Company has also agreed not
to file any registration statement with respect to, and each of its executive
officers, directors and certain stockholders of the Company (including the
Selling Stockholders) has agreed not to make any demand for, or exercise any
right with respect to, the registration of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation.

The Common Stock is traded on the New York Stock Exchange under the symbol
"CHX".

Other than in the United States, no action has been taken by the Company,
the Selling Stockholders or the Underwriters that would permit a public
offering of the shares of Common Stock offered hereby in any jurisdiction
where action for that purpose is required. The shares of Common Stock offered
hereby may not be offered or sold, directly or indirectly, nor may this
Prospectus or any other offering material or advertisements in connection with
the offer and sale of any such shares of Common Stock be distributed or
published in any jurisdiction, except under circumstances that will result in
compliance with the applicable rules and regulations of such jurisdiction.
Persons into whose possession this Prospectus comes are advised to inform
themselves about and to observe any restrictions relating to the Offering and
the distribution of this Prospectus. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any shares of Common Stock
offered hereby in any jurisdiction in which such an offer or a solicitation is
unlawful.

In connection with the Offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock.
Specifically, the Underwriters may overallot the Offering, creating a
syndicate short position. In addition, the Underwriters may bid for and
purchase shares of Common Stock in the open market to cover syndicate short
positions or to stabilize the price of the Common Stock. These activities may
stabilize or maintain the market price of the Common Stock above independent
market levels. The Underwriters are not required to engage in these activities
and may end these activities at any time.

LEGAL MATTERS

The validity of the Common Stock to be offered hereby will be passed upon
for the Company by Baker & McKenzie, Dallas, Texas. Certain legal matters in
connection with the Offering will be passed upon for the Underwriters by Weil,
Gotshal and Manges LLP, Dallas, Texas.

EXPERTS

The consolidated financial statements of the Company as of September 28,
1996 and September 30, 1995, and for each of the three years in the period
ended September 28, 1996, appearing in this Prospectus and the Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.

[THIS PAGE INTENTIONALLY LEFT BLANK]

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES

Report of Independent Auditors............................................. F-2
Consolidated Balance Sheets at September 30, 1995, September 28, 1996 and
March 29, 1997 (unaudited)................................................ F-3
Consolidated Statements of Income (Loss) for the years ended October 1,
1994, September 30, 1995 and September 28, 1996 and the six months ended
March 30, 1996 (unaudited) and March 29, 1997 (unaudited)................. F-4
Consolidated Statements of Stockholders' Equity for the years ended October
1, 1994, September 30, 1995 and September 28, 1996 and the six months
ended March 29, 1997 (unaudited).......................................... F-5
Consolidated Statements of Cash Flows for the years ended October 1, 1994,
September 30, 1995 and September 28, 1996 and the six months ended March
30, 1996 (unaudited) and March 29, 1997 (unaudited)....................... F-6
Notes to Consolidated Financial Statements................................. F-7

F-1

REPORT OF INDEPENDENT AUDITORS

Stockholders and Board of Directors
Pilgrim's Pride Corporation

We have audited the accompanying consolidated balance sheets of Pilgrim's
Pride Corporation and subsidiaries at September 30, 1995 and September 28,
1996 and the related consolidated statements of income (loss), stockholders'
equity, and cash flows for each of the three years in the period ended
September 28, 1996. Our audits also included Schedule II--Valuation and
Qualifying Accounts. These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Pilgrim's
Pride Corporation and subsidiaries at September 30, 1995 and September 28,
1996, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended September 28, 1996 in
conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth herein.

ERNST & YOUNG LLP

Dallas, Texas
November 5, 1996

F-2

CONSOLIDATED BALANCE SHEETS

PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES

(UNAUDITED)
SEPTEMBER 30, SEPTEMBER 28, MARCH 29,
1995 1996 1997
------------- ------------- -----------
(IN THOUSANDS)

ASSETS
CURRENT ASSETS
Cash and cash equivalents............ $ 11,892 $ 18,040 $ 7,717
Trade accounts and other receivables,
less allowance for doubtful
accounts............................ 60,031 65,887 69,256
Inventories.......................... 110,404 136,866 137,926
Deferred income taxes................ 9,564 6,801 7,001
Prepaid expenses..................... 526 907 744
Other current assets................. 953 757 211
-------- -------- --------
Total Current Assets............... 193,370 229,258 222,855
OTHER ASSETS........................... 20,918 18,827 21,801
PROPERTY, PLANT AND EQUIPMENT
Land................................. 17,637 19,818 19,970
Buildings, machinery and equipment... 383,076 409,191 411,005
Autos and trucks..................... 32,227 32,503 32,146
Construction-in-progress............. 9,841 5,160 11,578
-------- -------- --------
442,781 466,672 474,699
Less accumulated depreciation........ 159,465 178,035 187,776
-------- -------- --------
283,316 288,637 286,923
-------- -------- --------
$497,604 $536,722 $531,579
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Notes payable to banks............... $ 13,000 $ 27,000 $ 24,000
Accounts payable..................... 55,658 71,354 57,789
Accrued expenses..................... 31,130 33,599 32,895
Current maturities of long-term debt. 5,187 8,850 9,645
-------- -------- --------
Total Current Liabilities.......... 104,975 140,803 124,329
LONG-TERM DEBT, LESS CURRENT
MATURITIES............................ 182,988 198,334 193,546
DEFERRED INCOME TAXES.................. 56,725 53,608 55,496
MINORITY INTEREST IN SUBSIDIARY........ 842 842 842
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value,
authorized 5,000,000 shares; none
issued.............................. -- -- --
Common stock, $.01 par value,
authorized 45,000,000 shares;
27,589,250 issued and outstanding in
1995, 1996 and 1997................. 276 276 276
Additional paid-in capital........... 79,763 79,763 79,763
Retained earnings.................... 72,035 63,096 77,327
-------- -------- --------
Total Stockholders' Equity......... 152,074 143,135 157,366
-------- -------- --------
Commitments and Contingencies.......... -- -- --
-------- -------- --------
$497,604 $536,722 $531,579
======== ======== ========

See Notes to Consolidated Financial Statements

F-3

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES

(UNAUDITED)
YEARS ENDED SIX MONTHS ENDED
-------------------------------------- --------------------
OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28, MARCH 30, MARCH 29,
1994 1995 1996 1996 1997
---------- ------------- ------------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

NET SALES............... $922,609 $931,806 $1,139,310 $539,479 $601,207
COSTS AND EXPENSES:
Cost of sales......... 811,782 857,662 1,068,670 502,460 547,855
Selling, general and
administrative....... 51,129 49,214 49,136 24,510 27,378
-------- -------- ---------- -------- --------
862,911 906,876 1,117,806 526,970 575,233
-------- -------- ---------- -------- --------
Operating Income.... 59,698 24,930 21,504 12,509 25,974
OTHER EXPENSES (INCOME):
Interest expense, net. 19,173 17,483 21,539 10,331 10,733
Foreign exchange
(gain) loss.......... (257) 5,605 1,275 1,222 536
Miscellaneous, net.... (1,666) (249) (1,357) (577) (2,906)
-------- -------- ---------- -------- --------
17,250 22,839 21,457 10,976 8,363
-------- -------- ---------- -------- --------
INCOME BEFORE INCOME
TAXES
AND EXTRAORDINARY
CHARGE................. 42,448 2,091 47 1,533 17,611
Income tax expense...... 11,390 10,058 4,551 2,792 2,552
-------- -------- ---------- -------- --------
Net income (loss) before
extraordinary charge... 31,058 (7,967) (4,504) (1,259) 15,059
Extraordinary charge-
early repayment of
debt, net of tax....... -- -- (2,780) (2,780) --
-------- -------- ---------- -------- --------
NET INCOME (LOSS)... $ 31,058 $ (7,967) $ (7,284) $ (4,039) $ 15,059
======== ======== ========== ======== ========
Net income (loss) per
common share before
extraordinary charge... $ 1.13 $ (0.29) $ (0.16) $ (.05) $ 0.55
Extraordinary charge per
common share........... -- -- (0.10) (0.10) --
-------- -------- ---------- -------- --------
NET INCOME (LOSS)
PER COMMON SHARE....... $ 1.13 $ (0.29) $ (0.26) $ (.15) $ 0.55
======== ======== ========== ======== ========

See Notes to Consolidated Financial Statements.

F-4

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES

NUMBER ADDITIONAL
OF COMMON PAID-IN RETAINED
SHARES STOCK CAPITAL EARNINGS TOTAL
---------- ------ ---------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Balance at October 2, 1993..... 27,589,250 $276 $79,763 $52,254 $132,293
Net income for year.......... 31,058 31,058
Cash dividends declared
($0.06 per share)........... (1,655) (1,655)
---------- ---- ------- ------- --------
Balance at October 1, 1994..... 27,589,250 276 79,763 81,657 161,696
Net loss for year............ (7,967) (7,967)
Cash dividends declared ($.06
per share).................. (1,655) (1,655)
---------- ---- ------- ------- --------
Balance at September 30, 1995.. 27,589,250 276 79,763 72,035 152,074
Net loss for year............ (7,284) (7,284)
Cash dividends declared ($.06
per share).................. (1,655) (1,655)
---------- ---- ------- ------- --------
Balance at September 28, 1996.. 27,589,250 276 79,763 63,096 143,135
Net income for six months
ended March 29, 1997
(unaudited)................. 15,059 15,059
Cash dividends declared ($.03
per share) (unaudited)...... (828) (828)
---------- ---- ------- ------- --------
Balance at March 29, 1997
(unaudited)................... 27,589,250 $276 $79,763 $77,327 $157,366
========== ==== ======= ======= ========

See Notes to Consolidated Financial Statements.

F-5

CONSOLIDATED STATEMENTS OF CASH FLOWS

PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES

(UNAUDITED)
YEARS ENDED SIX MONTHS ENDED
-------------------------------------- -------------------
OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28, MARCH 30, MARCH 29,
1994 1995 1996 1996 1997
---------- ------------- ------------- --------- ---------
(IN THOUSANDS)

CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss)....... $31,058 $(7,967) $(7,284) $(4,039) $15,059
Adjustments to reconcile
net income (loss) to
cash provided by
operating activities:
Depreciation and
amortization......... 25,177 26,127 28,024 14,639 14,229
Gain on property
disposals............ (608) (263) (211) (221) 46
Provision for doubtful
accounts............. 2,666 1,133 1,003 206 (779)
Deferred income taxes. 6,720 3,785 (354) (3,214) 1,689
Extraordinary charge.. -- -- 4,587 4,587 --
Changes in operating
assets and liabilities:
Accounts and other
receivables.......... 3,412 (3,370) (6,858) (5,242) (5,783)
Inventories........... (8,955) (4,336) (24,830) (18,845) (1,061)
Prepaid expenses...... (459) 1,066 (674) (1,828) 703
Accounts payable and
accrued expenses..... 1,742 15,249 18,165 3,475 (14,269)
Other................. (89) 1,288 (177) (186) (162)
------- ------- ------- ------- -------
Net Cash Flows Provided
by (Used in) Operating
Activities............. 60,664 32,712 11,391 (10,668) 9,672
INVESTING ACTIVITIES:
Acquisitions of
property, plant and
equipment............ (25,547) (35,194) (34,314) (23,937) (12,162)
Business acquisitions
--property, plant
and equipment...... -- (29,519) -- -- --
--other net assets.. -- (6,659) -- -- --
Proceeds from property
disposal............. 2,103 541 1,468 1,314 330
Other, net............ (128) (758) 312 361 (258)
------- ------- ------- ------- -------
Net Cash Used in
Investing Activities... (23,572) (71,589) (32,534) (22,262) (12,090)
FINANCING ACTIVITIES:
Proceeds from notes
payable to banks..... 7,000 15,000 91,000 56,500 31,500
Repayments on notes
payable to banks..... (19,000) (2,000) (77,000) (43,500) (34,500)
Proceeds from long-
term debt............ 31 45,030 51,028 50,028 --
Payments on long-term
debt................. (16,253) (16,202) (32,140) (29,001) (4,068)
Extraordinary charge,
cash items........... -- -- (3,920) (3,920) --
Cash dividends paid... (2,069) (1,655) (1,655) (828) (828)
------- ------- ------- ------- -------
Net Cash Provided by
(Used in) Financing
Activities............. (30,291) 40,173 27,313 29,279 (7,896)
EFFECT OF EXCHANGE RATE
CHANGES
ON CASH AND CASH
EQUIVALENTS............ (83) (648) (22) (13) (9)
------- ------- ------- ------- -------
Increase (decrease) in
cash and cash
equivalents.......... 6,718 648 6,148 (3,664) (10,323)
Cash and cash
equivalents at
beginning of period.. 4,526 11,244 11,892 11,892 18,040
------- ------- ------- ------- -------
CASH AND CASH
EQUIVALENTS AT END OF
PERIOD................. $11,244 $11,892 $18,040 $ 8,228 $ 7,717
======= ======= ======= ======= =======
Supplemental disclosure
information:
Cash paid during the
period for:
Interest (net of
amount
capitalized)....... $19,572 $16,764 $20,310 $ 9,530 $10,961
Income taxes........ $ 7,108 $ 5,128 $ 4,829 $ 4,014 $ 1,807

See Notes to Consolidated Financial Statements.

F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES

NOTE A--BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Pilgrim's Pride Corporation is a vertically integrated producer of chicken
products, controlling the breeding, hatching and growing of chickens and the
processing, preparation and packaging of its product lines. The Company is the
fifth largest producer of chicken in the United States, with production and
distribution facilities located in Texas, Arkansas, Oklahoma and Arizona, and
one of the two largest producers of chicken in Mexico, with production and
distribution facilities located in Mexico City and the states of Coahuila, San
Louis Potosi, Queretaro and Hidalgo. The Company's chicken products consist
primarily of prepared foods, which include portion-controlled breast fillets,
tenderloins and strips, formed nuggets and patties and bone-in chicken parts,
fresh foodservice chicken, prepackaged chicken, and bulk packaged chicken.

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of Pilgrim's Pride Corporation and its wholly and majority owned
subsidiaries (the "Company"). Significant intercompany accounts and
transactions have been eliminated.

The financial statements of the Company's Mexican subsidiaries are
remeasured as if the U.S. dollar were the functional currency. Accordingly,
assets and liabilities of the Mexican subsidiaries are translated at end-of-
period exchange rates, except for non-monetary assets which are translated at
equivalent dollar costs at dates of acquisition using historical rates.
Operations are translated at average exchange rates in effect during the
period. Foreign exchange (gains) losses are separately stated as components of
"Other expenses (income)" in the Consolidated Statement of Income (Loss). In
recent years the Company has experienced losses in Mexico primarily as a
result of currency devaluations and other economic factors. As of September
28, 1996, the Company has net Mexican assets of $139.9 million.

CASH EQUIVALENTS: The Company considers highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.

ACCOUNTS RECEIVABLE: The Company does not believe it has significant
concentrations of credit risk in its accounts receivable, which are generally
unsecured. Credit evaluations are performed on all significant customers and
updated as circumstances dictate. Allowances for doubtful accounts were $4.3
million and $4.0 million in 1995 and 1996, respectively.

INVENTORIES: Live chicken inventories are stated at the lower of cost or
market and hens at the lower of cost, less accumulated amortization, or
market. The costs associated with hens are accumulated up to the production
stage and amortized over the productive lives using the straight-line method.
Finished chicken products, feed, eggs and other inventories are stated at the
lower of cost (first-in, first-out method) or market. Occasionally, the
Company hedges a portion of its purchases of major feed ingredients using
futures contracts to minimize the risk of adverse price fluctuations. Gains
and losses on the hedge transactions are deferred and recognized as a
component of cost of sales when products are sold.

PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is stated at
cost. For financial reporting purposes, depreciation is computed using the
straight-line method over the estimated useful lives of these assets.
Depreciation expense was $23.7 million, $24.8 million and $26.8 million in
1994, 1995 and 1996, respectively.

NET INCOME (LOSS) PER COMMON SHARE: Net income (loss) per share is based on
the weighted average shares of common stock outstanding during the year. The
weighted average number of shares outstanding was 27,589,250 in all periods.

USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets

F-7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES

and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

UNAUDITED INTERIM FINANCIAL INFORMATION: The unaudited consolidated
financial statements at March 29, 1997 and for the six months ended March 30,
1996 and March 29, 1997 are unaudited; however, in the opinion of management
such financial statements include all adjustments, consisting of normal
recurring accruals, considered necessary for a fair presentation of the
Company's financial position at March 29, 1997 and results of operations and
cash flows for the six months ended March 30, 1996 and March 29, 1997.
Operating results for the six months ended March 29, 1997 are not necessarily
indicative of the results that may be expected for the year ending September
27, 1997.

On April 15, 1997, the Company secured an additional $35 million in secured
term borrowing capacity from an existing lender at rates of 2.0% over LIBOR,
with monthly principal and interest payments maturing in February 2006. On
June 9, 1997, the Company secured an additional $10 million in secured term
borrowing capacity from a group of existing lenders at rates equal to those
under its existing $100 million revolving credit facility and maturing in June
1999. As of June 11, 1997, $20 million had been borrowed under such
facilities.

NOTE B--INVENTORIES

Inventories consist of the following:

(UNAUDITED)
SEPTEMBER 30, SEPTEMBER 28, MARCH 29,
1995 1996 1997
------------- ------------- -----------
(IN THOUSANDS)

Live chickens and hens............ $ 55,353 $ 66,248 $ 64,632
Feed, eggs and other.............. 32,087 39,804 38,208
Finished chicken products......... 22,964 30,814 35,086
-------- -------- --------
$110,404 $136,866 $137,926
======== ======== ========

NOTE C--NOTES PAYABLE AND LONG-TERM DEBT

The Company maintains a $100 million domestic credit facility with various
banks providing short-term lines of credit at interest rates of approximately
one and three-quarters percent above LIBOR. Domestic inventories and trade
accounts receivable of the Company are pledged as collateral on this facility.
The Company also maintains a $10 million credit facility for its Mexican
operations with a bank providing short-term lines of credit at interest rates
of approximately two and three-quarters percent above LIBOR. The Company has a
negative pledge of Mexican inventories and accounts receivable related to this
facility. At September 28, 1996, availability under these lines totaled $73.8
million. The weighted average interest rate on the Company's short-term
borrowings as of September 28, 1996, was 7.2%. The fair value of the Company's
long-term debt was estimated using quoted market prices, where available. For
long-term debt not actively traded, fair values were estimated using
discounted cash flow analysis using current market rates for similar types of
borrowings.

F-8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES

The table below sets forth maturities on long-term debt during the next five
years.

AMOUNT
--------------
YEAR (IN THOUSANDS)
----

1997.......................... 8,850
1998.......................... 9,741
1999.......................... 9,864
2000.......................... 24,692
2001.......................... 5,930

During 1996, the Company retired certain debt prior to its scheduled
maturity. These repayments resulted in an extraordinary charge of $2.8
million, net of $1.8 million tax benefit.

The Company is required, by certain provisions of its debt agreements, to
maintain minimum levels of working capital and net worth, to limit dividends
to a maximum of $1.7 million per year, to maintain various fixed charge,
leverage, current and debt-to-equity ratios, and to limit annual capital
expenditures.

Total interest during 1994, 1995 and 1996 was $20.1 million, $19.1 million
and $23.4 million, respectively. Interest related to new construction
capitalized in 1994, 1995 and 1996 was $.5 million, $.6 million and $1.3
million, respectively.

Long-term debt and the related fair values consist of the following:

SEPTEMBER 30, 1995 SEPTEMBER 28, 1996
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNTS VALUE AMOUNTS VALUE
------------------- -------------------
(IN THOUSANDS)

Senior subordinated notes due August 1,
2003, interest at 10 7/8% (effective
rate of 11 1/8%) payable in semi-
annual installments, less discount of
$1,181,000 and $1,032,000 in 1995 and
1996, respectively.................... $ 98,819 $ 96,219 $ 98,968 $ 100,219
Notes payable to an insurance company
at 7.21%, payable in monthly
installments of $455,305 including
interest, plus one final balloon
payment at maturity on February 28,
2006.................................. -- -- 48,896 46,063
Notes payable to bank, interest at
LIBOR plus 1.8% in 1995 and 2.0% in
1996, respectively, with principal
payments of $167,000 and $950,500 in
quarterly installments, interest paid
monthly, in fiscal year 1996 and
thereafter, respectively, plus one
final balloon payment at maturity on
June 30, 2000......................... 30,233 30,233 29,732 29,732
Notes payable to an agricultural lender
at a rate approximating LIBOR plus
1.65%, payable in equal monthly
installments including interest
through April 1, 2003................. 29,119 29,119 27,080 27,080
Senior secured debt payable to an
insurance company at 10.49%, payable
in equal annual installments beginning
October 5, 1996 through September 21,
2002.................................. 22,000 23,930 -- --
Senior secured debt payable to an
insurance company, interest at 9.55%,
payable in equal annual installments
through October 1, 1998............... 4,440 4,712 -- --
Other notes payable.................... 3,564 3,745 2,508 2,547
--------- --------- --------- ---------
188,175 $ 187,958 207,184 $ 205,641
Less current maturities................ 5,187 8,850
--------- ---------
$182,988 $ 198,334
========= =========

F-9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES

Substantially all of the Company's domestic property, plant and equipment is
pledged as collateral on its long-term debt, however, Mexico's property, plant
and equipment is unencumbered.

NOTE D--INCOME TAXES

Income (loss) before income taxes and extraordinary charge after allocation
of certain expenses to foreign operations for 1994, 1995 and 1996 was $33.9
million, $29.9 million and $16.3 million, respectively, for domestic
operations, and $8.6 million, $(27.8) million and $(16.3) million,
respectively, for foreign operations. The provisions for income taxes are
based on pretax financial statement income.

The components of income tax expense (benefit) are set forth below:

YEARS ENDED
------------------------------------------
OCT. 1, 1994 SEPT. 30, 1995 SEPT. 28, 1996
------------ -------------- --------------
(IN THOUSANDS)

Current:
Federal........................... $ 4,573 $ 5,215 $3,005
Foreign........................... 423 638 817
Other............................. (326) 420 1,083
------- ------- ------
4,670 6,273 4,905
Deferred:
Reinstatement of deferred taxes
through utilization of tax
credits and net operating losses. 6,589 3,542 397
Accelerated tax depreciation...... 1,002 215 (195)
Expenses deductible in a different
year for tax and financial
reporting purposes............... (580) 411 238
Other, net........................ (291) (383) (794)
------- ------- ------
6,720 3,785 (354)
------- ------- ------
$11,390 $10,058 $4,551
======= ======= ======

The following is a reconciliation between the statutory U.S. federal income
tax rate and the Company's effective income tax rate.

YEARS ENDED
-----------------------------------------------------
OCTOBER 1, 1994 SEPTEMBER 30, 1995 SEPTEMBER 28, 1996
--------------- ------------------ ------------------

Federal income tax rate.. 35.0% 35.0% 35.0%
State tax rate, net...... 2.3 40.1 1,674.1
Effect of Mexican loss
being non-deductible in
U.S..................... -- 411.1 6,252.3
Difference in U.S.
statutory tax rate and
Mexican effective tax
rate.................... (10.7) -- --
Effect of Mexican asset
based minimum tax....... -- -- 1,649.3
Other, net............... 0.2 (5.2) 0.2
----- ----- -------
26.8% 481.0% 9,610.9%
===== ===== =======

F-10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES

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 deferred tax liabilities and assets
are as follows:

YEARS ENDED
-------------------------------------
SEPTEMBER 30, 1995 SEPTEMBER 28, 1996
------------------ ------------------
(IN THOUSANDS)

Deferred tax liabilities:
Tax over book depreciation.......... $24,221 $24,027
Prior use of cash accounting........ 33,572 33,418
Other............................... 965 930
------- -------
Total deferred tax liabilities.... 58,758 58,375
------- -------
Deferred tax assets:
AMT credit carryforward............. 2,972 4,034
General business credit
carryforward....................... 1,459 1,459
Expenses deductible in different
years.............................. 7,166 7,534
------- -------
Total deferred tax asset.......... 11,597 11,568
------- -------
Net deferred tax liabilities.... $47,161 $46,807
======= =======

On January 1, 1994, the Company completed a series of restructuring of
activities in Mexico which allowed previously nonagricultural Mexican
operations to be combined with existing agricultural operations and, as such,
qualify for taxability as agricultural operations, which are currently not
subject to taxes in Mexico. The current provision for foreign income taxes in
1995 and 1996 is the result of an asset based minimum tax. The Company has not
provided any U.S. deferred federal income taxes on the undistributed earnings
of its Mexican subsidiaries based upon its determination that such earnings
will be indefinitely reinvested. As of September 28, 1996, the cumulative
undistributed earnings of these subsidiaries were approximately $19.1 million.
If such earnings were not considered indefinitely reinvested, deferred federal
and foreign income taxes would have been provided, after consideration of
estimated foreign tax credits. (Included in this amount would be foreign taxes
resulting from earnings of the Mexican agricultural subsidiaries which would
be due upon distribution of such earnings to the U.S.) However, determination
of the amount of deferred federal and foreign income taxes is not practicable.

As of September 28, 1996, approximately $4.0 million of alternative minimum
tax credits were available to offset future taxable income. All credits have
been reflected in the financial statements as a reduction of deferred taxes.
As these credits are utilized for tax purposes, deferred taxes will be
reinstated.

NOTE E--SAVINGS PLAN

The Company maintains a Section 401(k) Salary Deferral Plan (the "Plan").
Under the Plan, eligible domestic employees may voluntarily contribute a
percentage of their compensation. The Plan provides for a contribution of up
to four percent of compensation subject to an overall Company contribution
limit of five percent of income before taxes.

Under the plan outlined above, the Company's expenses were $2.6 million,
$1.9 million and $1.8 million in 1994, 1995 and 1996, respectively.

F-11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES

NOTE F--RELATED PARTY TRANSACTIONS

The major stockholder of the Company owns an egg laying and a chicken
growing operation. Transactions with related entities are summarized as
follows:

YEARS ENDED
-----------------------------------------------------
OCTOBER 1, 1994 SEPTEMBER 30, 1995 SEPTEMBER 28, 1996
--------------- ------------------ ------------------
(IN THOUSANDS)

Contract egg grower fees
to major stockholder.... 5,137 4,760 4,697
Chick, feed and other
sales to major
stockholder............. 9,373 12,478 18,057
Live chicken purchases
from major stockholder.. 9,346 12,721 18,112
Purchases of feed
ingredients from Archer
Daniels Midland Company. 56,499 44,250 23,226

The Company leases an airplane from its major stockholder under an operating
lease agreement. The terms of the lease agreement require monthly payments of
$33,000 plus operating expenses. Lease expense was $396,000 for each of the
years 1994, 1995 and 1996. Operating expenses were $213,000, $149,000 and
$88,000 in 1994, 1995 and 1996, respectively.

Expenses incurred for the guarantee of certain debt by stockholders were
$526,000, $623,000 and $1,027,000 in 1994, 1995 and 1996, respectively.

NOTE G--COMMITMENTS AND CONTINGENCIES

The Consolidated Statements of Income (Loss) included rental expense for
operating leases of approximately $10.1 million, $9.8 million and $10.1
million in 1994, 1995 and 1996, respectively. The Company's future minimum
lease commitments under noncancelable operating leases are as follows:

AMOUNT
--------------
YEAR (IN THOUSANDS)
----

1997.......................... 8,787
1998.......................... 8,084
1999.......................... 7,323
2000.......................... 6,643
2001.......................... 5,837
Thereafter.................... 11,336

At September 28, 1996, the Company had $9.2 million letters of credit
outstanding relating to normal business transactions.

The Company is subject to various legal proceedings and claims which arise
in the ordinary course of its business. In the opinion of management, the
amount of ultimate liability with respect to these actions will not materially
affect the financial position or results of operations of the Company.

NOTE H--BUSINESS SEGMENTS

The Company operates in a single business segment as a producer of
agricultural products and conducts separate operations in the United States
and Mexico.

F-12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES

Interarea sales, which are not material, are accounted for at prices
comparable to normal trade customer sales. Identifiable assets by geographic
area are those assets which are used in the Company's operation in each area.

Information about the Company's operations in these geographic areas is as
follows:

YEARS ENDED
-----------------------------------------------------
OCTOBER 1, 1994 SEPTEMBER 30, 1995 SEPTEMBER 28, 1996
--------------- ------------------ ------------------
(IN THOUSANDS)

Sales to unaffiliated
customers:
United States......... $733,865 $772,315 $ 911,181
Mexico................ 188,744 159,491 228,129
-------- -------- ----------
$922,609 $931,806 $1,139,310
Operating income (loss):
United States......... $ 46,421 $ 41,923 $ 29,705
Mexico................ 13,277 (16,993) (8,201)
-------- -------- ----------
$ 59,698 $ 24,930 $ 21,504
Identifiable assets:
United States......... $302,911 $328,489 $ 363,543
Mexico................ 135,772 169,115 173,179
-------- -------- ----------
$438,683 $497,604 $ 536,722

NOTE I--ACQUISITIONS AND INVESTMENTS

On July 5, 1995, the Company acquired certain assets of Union de Queretaro,
et al, a group of five chicken companies located near Queretaro, Mexico for
approximately $35.3 million. These assets were integrated with the Company's
existing Mexican operation, headquartered in Queretaro, Mexico, which is one
of the two largest chicken operations in Mexico. The acquisition has been
accounted for as a purchase, and the results of operations for this
acquisition have been included in the Company's consolidated results of
operations since the acquisition date. Pro forma operating results are not
presented as they would not differ materially from actual results reported in
1994 and 1995.

F-13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES

NOTE J--QUARTERLY RESULTS--(UNAUDITED)

YEAR ENDED SEPTEMBER 30, 1995
---------------------------------------------------------------------------------------
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER FISCAL YEAR
------------------ ------------------- ------------- -------------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Net sales................... $227,000 $216,830 $230,297 $257,679 $931,806
Gross profit................ 20,765 7,577 23,826 21,976 74,144
Operating income (loss)..... 8,742 (4,662) 11,843 9,007 24,930
Net income (loss)........... 556 (16,304) 6,143 1,638 (7,967)
Per share:
Net income (loss)......... 0.02 (0.59) 0.22 0.06 (0.29)
Cash dividends............ 0.015 0.015 0.015 0.015 0.06
Market price:
High.................... 10 3/8 9 3/4 8 3/8 8 3/4 10 3/8
Low..................... 9 3/8 7 3/4 7 1/2 7 5/8 7 1/2

YEAR ENDED SEPTEMBER 28, 1996
----------------------------------------------------------------------------------------
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER FISCAL YEAR
------------------ ------------------- ------------- -------------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Net sales................... $267,475 $272,004 $294,339 $305,492 $1,139,310
Gross profit................ 20,972 16,047 17,384 16,237 70,640
Operating income (loss)..... 8,825 3,684 5,454 3,541 21,504
Extraordinary charge(a)..... -- (2,780) -- -- (2,780)
Net income (loss)........... (704) (3,335) 1,007 (4,252) (7,284)
Per share:
Net income (loss) before
extraordinary charge..... (0.03) (0.02) 0.04 (0.15) (0.16)
Extraordinary charge...... -- (0.10) -- -- (0.10)
Net income (loss)......... (0.03) (0.12) 0.04 (0.15) (0.26)
Cash dividends............ 0.015 0.015 0.015 0.015 0.06
Market price:
High.................... 8 3/8 7 5/8 9 9 9
Low..................... 6 5/8 6 3/4 6 3/4 7 1/2 6 5/8

YEAR ENDED SEPTEMBER 27, 1997
-----------------------------------------
FIRST QUARTER SECOND QUARTER
------------------ --------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Net sales................... $297,806 $303,401
Gross profit................ 30,267 23,085
Operating income (loss)..... 16,314 9,660
Net income (loss)........... 10,105 4,954
Per share:
Net income (loss)......... 0.37 0.18
Cash dividends............ 0.015 0.015
Market price:
High.................... 9 12 1/8
Low..................... 7 3/4 8 5/8

(a) The extraordinary charge of $2.8 million, net of tax, is the result of the
early repayment of 10.49% and 9.55% senior secured debt payable to an
insurance company. (See Note C).

F-14

[THIS PAGE INTENTIONALLY LEFT BLANK]

[A PLATE WITH A CHICKEN ENTREE.]

Pilgrim's Pride capabilities make possible a wide variety of menu applications

[A PLATE WITH A CHICKEN ENTREE.]

for chicken. Through our customer focused research and development,

[A PLATE WITH A CHICKEN ENTREE.]

we provide specialized solutions to meet our customer-specific needs.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE UNDERWRITERS, OR ANY OTHER
PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE COMMON STOCK TO WHICH IT
RELATES OR AN OFFER OR SOLICITATION IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE SUCH DATE.

------------

TABLE OF CONTENTS

PAGE

Available Information..................................................... 3
Reference Data............................................................ 3
Forward-Looking Information............................................... 3
Prospectus Summary........................................................ 4
Recent Financial Information.............................................. 8
Risk Factors.............................................................. 9
The Company............................................................... 12
Use of Proceeds........................................................... 12
Price Range of Common Stock and Dividends................................. 12
Selected Consolidated Financial Data...................................... 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 15
The Chicken Industry...................................................... 21
Business.................................................................. 26
Management................................................................ 36
Compensation Committee Interlocks and Insider Participation............... 40
Certain Relationships and Transactions.................................... 41
Principal and Selling Stockholders........................................ 42
Description of Capital Stock.............................................. 43
Underwriting.............................................................. 44
Legal Matters............................................................. 45
Experts................................................................... 45
Index to Consolidated Financial Statements................................ F-1

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4,500,000 SHARES

[LOGO OF PILGRIM'S PRIDE APPEARS HERE]

COMMON STOCK

----------------

PROSPECTUS

----------------

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

A.G. EDWARDS & SONS, INC.

JULY 22, 1997

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