SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended JANUARY 2, 1999
Commission file number 1-9273
PILGRIM'S PRIDE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
75-1285071
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 SOUTH TEXAS, PITTSBURG, TX 75686-0093
(Address of principal executive offices) (Zip code)
(903) 855-1000
(Telephone number of principal executive offices)
NOT APPLICABLE
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter periods that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class B Common Stock, $0.01 Par Value---27,589,250 shares as of February
16, 1999
No Class A Common Stock was outstanding as of February 16, 1999;
Registrant issued 13,794,529 shares of the Registrant's Class A Common
Stock pursuant to a stock dividend on July 30, 1999, for which this amended
10-Q is being filed.
INDEX
PILGRIM'S PRIDE CORPORATION
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited):
Condensed consolidated balance sheets:
January 2, 1999 and September 26, 1998
Consolidated statements of income:
Three months ended January 2, 1999 and December 27, 1997
Consolidated statements of cash flows:
Three months ended January 2, 1999 and December 27, 1997
Notes to condensed consolidated financial statements--January 2,
1999
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Item 3: Quantitative and Qualitative Disclosures about Market Risk
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS:
PILGRIM'S PRIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JANUARY 2, 1999 SEPTEMBER 26, 1998
(in thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 33,666 $ 25,125
Trade accounts and other receivables,
less allowance for doubtful accounts 89,421 81,813
Inventories 130,873 141,684
Deferred income taxes 4,148 7,010
Prepaid expenses and other current assets 1,881 2,902
Total Current Assets 259,989 258,534
Other Assets 11,848 11,757
Property, Plant and Equipment 574,205 562,099
Less accumulated depreciation 238,677 230,951
335,528 331,148
$ 607,365 $ 601,439
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable 75,857 70,069
Accrued expenses 34,525 35,536
Current maturities of long-term debt 4,626 5,889
Total Current Liabilities 115,008 111,494
Long-term Debt, less current maturities 185,358 199,784
Deferred Income Taxes 59,733 58,401
Minority Interest in Subsidiary 889 889
Stockholders' Equity:
Preferred stock, $.01 par value, authorized 5,000,000
shares; none issued -- --
Common stock - Class A, $.01 par value, authorized
100,000,000 shares; none issued as of January 2, 1999 -- --
Common stock - Class B, $.01 par value, authorized
60,000,000 shares; 27,589,250 issued and outstanding in
1999 and 1998 276 276
Additional paid-in capital 79,763 79,763
Retained earnings 166,338 150,832
Total Stockholders' Equity 246,377 230,871
$ 607,365 $ 601,439
See Notes to Condensed Consolidated Financial Statements.
PILGRIM'S PRIDE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
QUARTER ENDED
January 2, December 27,
1999 1997
(14 weeks) (13 weeks)
(in thousands, except share and per share data)
Net Sales $ 336,088 $ 337,887
Costs and Expenses:
Cost of sales 292,187 308,507
Selling, general and administrative 17,715 14,009
309,902 322,516
Operating Income 26,186 15,371
Other Expense (Income):
Interest expense, net 4,733 5,036
Foreign exchange (gain) loss (92) 528
Miscellaneous, net income 88 (463)
4,729 5,101
Income before income taxes 21,457 10,270
Income tax expense (benefit) 5,537 (847)
Net income $ 15,920 $ 11,117
Net income per common share - basic and diluted $ .38 $ .27
Dividends per common share $ .01 $ .01
Weighted average shares outstanding 41,383,779 41,383,779
See Notes to Condensed Consolidated Financial Statements.
PILGRIM'S PRIDE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
QUARTER ENDED
January 2, December 27,
1999 1997
(14 weeks) (13 weeks)
(in thousands)
Cash Flows From Operating Activities:
Net income $ 15,920 $ 11,117
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 8,653 8,052
Loss on property disposals 76 10
Provision for doubtful accounts 334 667
Deferred income taxes 4,195 (1,796)
Changes in operating assets and liabilities:
Accounts and other receivable (7,942) (2,228)
Inventories 10,811 20,815
Prepaid expenses 1,021 (3,474)
Accounts payable and accrued expenses 4,777 (643)
Other (396) (91)
Net Cash Flows Provided By Operating Activities: 37,449 32,429
Investing Activities:
Acquisitions of property, plant and equipment (12,833) (15,352)
Proceeds from property disposals 235 348
Other, net (340) (459)
Net Cash Used In Investing Activities (12,938) (15,463)
Financing Activities:
Proceeds from long-term debt -- 1,117
Payments on long-term debt (15,780) (23,895)
Cash dividends paid (414) (414)
Cash Used In Financing Activities (16,194) (23,192)
Effect of Exchange Rate Changes on Cash and Cash Equivalents 224 (81)
Increase (Decrease) in cash and cash equivalents 8,541 (6,307)
Cash and cash equivalents at beginning of year 25,125 20,339
Cash and cash equivalents at end of period $ 33,666 $ 14,032
Supplemental disclosure information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 1,930 $ 2,890
Income Taxes $ 4,779 $ 413
See Notes to Condensed Consolidated Financial Statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT
(Unaudited)
______________________________________________________________________________
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Pilgrim's Pride Corporation ("Pilgrim's" or "the Company") have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. The
Condensed Consolidated Balance Sheet as of September 26, 1998 has been
derived from the audited financial statements as of that date. Operating
results for the period ended January 2, 1999 are not necessarily indicative
of the results that may be expected for the year ended October 2, 1999.
For further information, refer to the consolidated financial statements and
footnotes thereto included in Pilgrim's annual report on Form 10-K for the
year ended September 26, 1998.
The consolidated financial statements include the accounts of Pilgrim's and
its wholly and majority owned subsidiaries. Significant intercompany
accounts and transactions have been eliminated.
The Company reports on the basis of a 52/53-week fiscal year, which ends on
the Saturday closest to September 30. As a result, the Company's first
quarter of fiscal year 1999 ended on January 2, 1999, and included 14
weeks, while the Company's first quarter of fiscal 1998, which ended on
December 27, 1997, had 13 weeks.
The assets and liabilities of the foreign subsidiaries are translated at
end-of-period exchange rates, except for any non-monetary assets, which are
translated at equivalent dollar costs at dates of acquisition using
historical rates. Operations of foreign subsidiaries are translated at
average exchange rates in effect during the period.
NOTE B--COMPREHENSIVE INCOME AND NET INCOME PER COMMON SHARE
Comprehensive income is the same as net income for all periods presented.
Basic and diluted earnings per share for the periods ended January 2, 1999
and December 27, 1997 are based on the weighted average shares outstanding
for the periods, as adjusted for the stock dividend referred to in Note D.
NOTE C--INVENTORIES
Inventories consist of the following:
JANUARY 2,1999 SEPTEMBER 26, 1998
(in thousands)
Live chickens and hens $ 36,491 $ 61,295
Feed, eggs and other 44,788 46,199
Finished chicken products 49,594 34,190
$ 130,873 $ 141,684
NOTE D-- COMMON STOCK
On July 2, 1999, the Company's board of directors declared a stock dividend
of the Company's Class A common stock. Stockholders of record on July 20,
1999 received one share of the Company's Class A common stock for every two
shares of the Company's Class B common stock held as of that date. The
additional shares were issued on July 30, 1999. Historical per share and
weighted average shares outstanding amounts have been restated to give
effect to the stock dividend.
ITEM 2: 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 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. 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 foods
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.
As discussed in Note A to the Condensed Consolidated Financial Statements,
the Company's accounting cycle resulted in 14 weeks of operations in the
first quarter of fiscal 1999 compared to 13 weeks in the first fiscal
quarter of 1998.
The following table presents certain information regarding the
Company's U.S. and Mexican operations.
Quarter Ended
January 2, 1999 December 27, 1997
(14 weeks) (13 weeks)
Net Sales to Unaffiliated
Customers:
United States 266,954 259,576
Mexico 69,134 78,311
Operating Income:
United States 18,741 2,472
Mexico 7,445 12,899
The following table presents certain items as a percentage of net sales for
the periods indicated.
QUARTER ENDED
JANUARY 2,1999 DECEMBER 27, 1997
Net sales 100.0% 100.0%
Costs and expenses:
Cost of sales 86.9 91.3
Gross profit 13.1 8.7
Selling, general and
administrative 5.3 4.1
Operating Income 7.8 4.6
Interest expense 1.4 1.5
Income before income taxes 6.4 3.0
Net Income 4.7 3.3
Results of Operations
First Quarter 1999 Compared to First Quarter 1998:
NET SALES. Consolidated net sales were $336.1 million for the first
quarter of fiscal 1999, a decrease of $1.8 million, or .5% from the first
quarter of fiscal 1998. The decrease in consolidated net sales resulted
from a $9.2 million decrease in Mexican chicken sales to $69.1 million
offset partially by a $4.2 million increase in U.S. chicken sales to $222.8
million and a $3.2 million increase of sales of other U.S. products to
$44.1 million. The decrease in Mexican chicken sales was due primarily to a
19.8% decrease in total revenue per dressed pound offset partially by a
10.0% increase in dressed pounds.
COST OF SALES. Consolidated cost of sales was $292.2 million in the first
quarter of fiscal 1999, a decrease of $16.3 million, or 5.3% over the first
quarter of fiscal 1998. The decrease resulted primarily from a $12.3
million decrease in cost of sales of U.S. operations and by a $4.0 million
decrease in the cost of sales in Mexican operations. The cost of sales
decrease in U.S. operations of $12.3 million was due to a 30.4% decrease in
feed ingredient costs per pound partially offset by a 6.6% increase in
dressed pounds produced. The $4.0 million cost of sales decrease in
Mexican operations was due primarily to a 21.5% decrease in feed ingredient
costs per pound partially offset by a 10.0% increase in dressed pounds
produced.
GROSS PROFIT. Gross profit was $43.9 million for the first quarter of
fiscal 1999, an increase of $14.5 million, or 49.4% over the same period
last year. Gross profit as a percentage of sales increased to 13.1% in the
first quarter of fiscal 1999 from 8.7% in the first quarter of fiscal 1998.
The increased gross profit resulted primarily from lower feed ingredient
costs per pound and higher production volumes both in the U.S. and Mexico.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Consolidated selling,
general and administrative expenses were $17.7 million in the first quarter
of fiscal 1999 and $14.0 million in the first quarter of fiscal 1998.
Consolidated selling, general and administrative expenses as a percentage
of sales increased in the first quarter of fiscal 1999 to 5.3% compared to
4.1% in the first quarter of fiscal 1998 due primarily to increased accrued
retirement and bonus cost which are dependent upon U.S. profits.
Operating Income. Consolidated operating income was $26.2 million for the
first quarter of fiscal 1999, an increase of $10.8 million, or 70.4% when
compared to the first quarter of fiscal
1998, RESULTING PRIMARILY FROM LOWER FEED INGREDIENT COSTS.
Interest Expense. CONSOLIDATED NET INTEREST EXPENSE DECREASED TO $4.7
MILLION, OR 6.0% IN THE FIRST QUARTER OF FISCAL 1999, WHEN COMPARED TO $5.0
MILLION FOR THE FIRST QUARTER OF FISCAL 1998, DUE TO LOWER OUTSTANDING DEBT
LEVELS.
Income Tax Expense. CONSOLIDATED INCOME TAX EXPENSE IN THE FIRST QUARTER
OF FISCAL 1999 INCREASED TO $5.5 MILLION COMPARED TO A BENEFIT OF $.9
MILLION IN THE FIRST QUARTER OF FISCAL 1998. THIS INCREASE RESULTED FROM
HIGHER U.S. EARNINGS IN THE FIRST QUARTER OF FISCAL 1999 THAN IN THE FIRST
QUARTER OF FISCAL 1998.
Liquidity and Capital Resources
AT JANUARY 2, 1999, THE COMPANY'S WORKING CAPITAL REMAINED RELATIVELY
STABLE AT $145.0 MILLION AND ITS CURRENT RATIO DECREASED TO 2.26 TO 1
COMPARED WITH WORKING CAPITAL OF $147.0 MILLION AND A CURRENT RATIO OF 2.32
TO 1 AT SEPTEMBER 26, 1998. STRONG PROFITS WERE PRIMARILY RESPONSIBLE FOR
THE CONTINUING STABILITY IN WORKING CAPITAL AND CURRENT RATIO FROM
SEPTEMBER 26, 1998 TO JANUARY 2, 1999.
TRADE ACCOUNTS AND OTHER RECEIVABLES WERE $89.4 MILLION AT JANUARY 2, 1999,
A $7.6 MILLION INCREASE FROM SEPTEMBER 26, 1998. THE 9.3% INCREASE WAS DUE
PRIMARILY TO INCREASED MEXICAN SALES TAX RECEIVABLES, SEASONAL VARIATIONS
AND AN INCREASE IN SALES OF PREPARED FOODS PRODUCTS, WHICH NORMALLY HAVE
LONGER CREDIT TERMS THAN FRESH CHICKEN SALES.
INVENTORIES WERE $130.9 MILLION AT JANUARY 2, 1999, COMPARED TO $141.7
MILLION AT SEPTEMBER 26, 1998. THE $10.8 MILLION, OR 7.6%, DECREASE WAS
DUE PRIMARILY TO LOWER COSTS IN THE LIVE CHICKEN AND HEN INVENTORIES
RESULTING FROM LOWER FEED INGREDIENT COSTS AND SEASONAL VARIATIONS IN SALES
OF CHICKEN AND FEED PRODUCTS TO THE COMPANY'S PRINCIPAL STOCKHOLDER.
ACCOUNTS PAYABLE WERE $75.9 MILLION AT JANUARY 2, 1999, A $5.8 MILLION
INCREASE FROM SEPTEMBER 26, 1998. THE 8.3% INCREASE WAS DUE TO NORMAL
SEASONAL VARIATIONS IN ACCOUNTS PAYABLE.
CAPITAL EXPENDITURES FOR THE FIRST QUARTER OF FISCAL 1999 WERE $12.8
MILLION AND WERE PRIMARILY INCURRED TO EXPAND CERTAIN FACILITIES, IMPROVE
EFFICIENCIES, REDUCE COSTS AND FOR THE ROUTINE REPLACEMENT OF EQUIPMENT.
THE COMPANY ANTICIPATES THAT IT WILL SPEND APPROXIMATELY $95.0 MILLION FOR
CAPITAL EXPENDITURES IN FISCAL YEAR 1999 AND EXPECTS TO FINANCE SUCH
EXPENDITURES WITH AVAILABLE OPERATING CASH FLOWS AND LONG-TERM FINANCING.
AT JANUARY 2, 1999, THE COMPANY'S STOCKHOLDERS' EQUITY INCREASED TO $246.4
MILLION FROM $230.9 MILLION AT SEPTEMBER 26, 1998. TOTAL DEBT TO
CAPITALIZATION DECREASED TO 43.5% AT JANUARY 2, 1999 COMPARED TO 47.1% AT
SEPTEMBER 26, 1998.
THE COMPANY MAINTAINS $70 MILLION IN REVOLVING CREDIT FACILITIES AND $45
MILLION IN SECURED- TERM BORROWING FACILITIES. THE CREDIT FACILITIES
PROVIDE FOR INTEREST AT RATES RANGING FROM LIBOR PLUS ONE AND THREE-EIGHTHS
PERCENT TO LIBOR PLUS TWO PERCENT AND ARE SECURED BY INVENTORY AND FIXED
ASSETS, OR ARE UNSECURED. AS OF FEBRUARY 12, 1999, $63.3 MILLION WAS
AVAILABLE UNDER THE REVOLVING CREDIT FACILITIES AND $43.0 MILLION WAS
AVAILABLE UNDER THE TERM BORROWING FACILITIES.
THE COMPANY MAINTAINS AN ASSET SALE AGREEMENT WHERE IT CAN SELL UP TO $60
MILLION OF ACCOUNTS RECEIVABLE. UNDER THIS AGREEMENT, AS THE SOLD ACCOUNTS
RECEIVABLE ARE COLLECTED, NEW QUALIFYING ACCOUNTS CAN BE SUBSTITUTED THUS
MAINTAINING THE MAXIMUM BALANCE ALLOWED TO BE OUTSTANDING AT A RATE
APPROXIMATING .425% OVER COMMERCIAL PAPER. AS OF JANUARY 2, 1999 NO
ACCOUNTS RECEIVABLE HAD BEEN SOLD UNDER THIS AGREEMENT.
Impact of Year 2000
THE YEAR 2000 ISSUE IS THE RESULT OF COMPUTER PROGRAMS BEING WRITTEN USING
TWO DIGITS RATHER THAN FOUR TO DEFINE THE APPLICABLE YEAR. ANY OF THE
COMPANY'S COMPUTER PROGRAMS THAT HAVE DATE-SENSITIVE SOFTWARE MAY RECOGNIZE
A DATE USING "00" AS THE YEAR 1900 RATHER THAN THE YEAR 2000. THIS COULD
RESULT IN A SYSTEM FAILURE OR MISCALCULATIONS CAUSING DISRUPTIONS OF
OPERATIONS, INCLUDING AMONG OTHER THINGS, A TEMPORARY INABILITY TO PROCESS
TRANSACTIONS, SEND INVOICES, OR ENGAGE IN SIMILAR NORMAL BUSINESS
ACTIVITIES.
THE COMPANY HAS DETERMINED THAT IT WILL BE REQUIRED TO MODIFY OR REPLACE
PORTIONS OF ITS SOFTWARE SO THAT ITS COMPUTER SYSTEMS WILL FUNCTION
PROPERLY WITH RESPECT TO DATES IN THE YEAR 2000 AND THEREAFTER. TO DATE,
THE COMPANY HAS UPDATED SUBSTANTIALLY ALL OF ITS COMPUTER SYSTEMS IN THE
U.S. AND IS IN PROGRESS OF UPDATING ITS SYSTEMS IN MEXICO. THE COMPANY
ANTICIPATES COMPLETING THE REMAINING PORTION OF ITS YEAR 2000 PROJECT BY
MID-1999. THE COMPANY PRESENTLY BELIEVES THAT WITH THESE MODIFICATIONS AND
REPLACEMENTS, THE YEAR 2000 ISSUE WILL NOT POSE SIGNIFICANT OPERATIONAL
PROBLEMS FOR ITS COMPUTER SYSTEMS.
SYSTEMS ASSESSMENTS AND MINOR SYSTEM MODIFICATIONS WERE COMPLETED USING
EXISTING INTERNAL RESOURCES AND, AS A RESULT, INCREMENTAL COSTS WERE
MINIMAL. SYSTEM REPLACEMENTS, CONSISTING PRIMARILY OF CAPITAL PROJECTS,
WERE INITIATED FOR OTHER BUSINESS PURPOSES WHILE AT THE SAME TIME ACHIEVING
YEAR 2000 COMPLIANCE. SYSTEM REPLACEMENT PROJECTS WERE COMPLETED PRIMARILY
USING EXTERNAL RESOURCES. THE TOTAL COST OF THE YEAR 2000 PROJECT IS NOT
EXPECTED TO HAVE A MATERIAL EFFECT ON THE COMPANY'S RESULTS OF OPERATIONS.
ADDITIONALLY, THE COMPANY WILL BE INITIATING COMMUNICATIONS WITH ALL OF ITS
SIGNIFICANT SUPPLIERS AND LARGE CUSTOMERS TO DETERMINE THE EXTENT TO WHICH
THE COMPANY'S INTERFACE SYSTEMS ARE VULNERABLE TO THOSE THIRD PARTIES'
FAILURE TO REMEDIATE THEIR OWN YEAR 2000 ISSUES. HOWEVER, THERE CAN BE NO
ASSURANCE THAT THE SYSTEMS OF OTHER PARTIES UPON WHICH THE COMPANY RELIES
WILL BE CONVERTED ON A TIMELY BASIS. THE COMPANY'S BUSINESS, FINANCIAL
CONDITION, OR RESULTS OF OPERATIONS COULD BE MATERIALLY ADVERSELY IMPACTED
BY THE FAILURE OF ITS SYSTEMS AND APPLICATIONS OR THOSE OPERATED BY OTHERS
TO PROPERLY OPERATE OR MANAGE DATES BEYOND 1999.
THE COMPANY BELIEVES THAT ITS INITIATIVES AND ITS EXISTING BUSINESS
RECOVERY PLANS ARE ADEQUATE TO ADDRESS REASONABLY LIKELY YEAR 2000 ISSUES;
IF UNFORESEEN CIRCUMSTANCES ARISE, THE COMPANY WILL ATTEMPT TO DEVELOP
CONTINGENCY PLANS FOR THESE SITUATIONS.
Impact of Inflation
DUE TO MODERATE INFLATION IN THE U.S. AND THE COMPANY'S RAPID INVENTORY
TURNOVER RATE, THE RESULTS OF OPERATIONS HAVE NOT BEEN SIGNIFICANTLY
AFFECTED BY INFLATION DURING THE PAST THREE-YEAR PERIOD.
Statements Regarding Forward Looking Comments
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES A SAFE HARBOR
FOR FORWARD-LOOKING STATEMENTS MADE BY OR ON BEHALF OF THE COMPANY. EXCEPT
FOR HISTORICAL INFORMATION CONTAINED HEREIN, MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION OR OTHER
DISCUSSIONS ELSEWHERE IN THIS FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS
THAT ARE DEPENDENT UPON A NUMBER OF RISKS AND UNCERTAINTIES THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING
STATEMENT. THESE RISKS AND UNCERTAINTIES INCLUDE CHANGES IN COMMODITY
PRICES OF FEED GRAIN AND CHICKEN, THE COMPANY'S SUBSTANTIAL INDEBTEDNESS,
RISKS ASSOCIATED WITH THE COMPANY'S FOREIGN OPERATIONS, INCLUDING CURRENCY
EXCHANGE RATE FLUCTUATIONS, TRADE BARRIERS, EXCHANGE CONTROLS,
EXPROPRIATION AND CHANGES IN LAWS AND PRACTICES, THE IMPACT OF CURRENT AND
FUTURE LAWS AND REGULATIONS, AND THE OTHER RISKS DESCRIBED IN THE COMPANY'S
SEC FILINGS. THE COMPANY DOES NOT INTEND TO PROVIDE UPDATED INFORMATION
ABOUT THE MATTERS REFERRED TO IN THESE FORWARD LOOKING STATEMENTS, OTHER
THAN IN THE CONTEXT OF MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION CONTAINED HEREIN AND OTHER DISCLOSURES
IN THE COMPANY'S SEC FILINGS.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
IMPACT OF MEXICO PESO EXCHANGE RATE
The Company's earnings are affected by foreign exchange rate fluctuations
related to the Mexican peso net monetary position of its Mexican
subsidiaries. The company primarily manages this exposure by attempting to
minimize its Mexican peso net monetary position, but
has also from time to time considered executing hedges to help minimize
this exposure. However, such instruments have historically not been
economically feasible. The Company is also exposed to the effect of
potential exchange rate fluctuations to the extent that amounts are
repatriated from Mexico to the United States. However, the Company
currently anticipates that the cash flows of its Mexican subsidiaries will
continue to be reinvested in its Mexican operations. In addition, the
Mexican peso exchange rate can directly and indirectly impact the Company's
results of operations and financial position in several manners, including
potential economic recession in Mexico resulting from a devalued peso. The
impact on the Company's financial position and results of operations of a
hypothetical change in the exchange rate between the U.S. dollar and the
Mexican peso cannot be reasonably estimated. Foreign currency exchange
gains and losses, representing the change in the U.S. dollar value of the
net monetary assets of the Company's Mexican subsidiaries, were a gain of
$.1 million in the first quarter of fiscal 1999 and a loss of $.5 million
in the first quarter of fiscal 1998. On February 12, 1999, the Mexican
peso closed at 9.94 to 1 U.S. dollar, a decrease from 10.24 at September
26, 1998. No assurance can be given as to the future valuation of the
Mexican peso and how further movements in the peso could affect future
earnings of the Company.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT NUMBER
1.1Agreement dated October 15, 1998 between Pilgrim's Pride Corporation and
Pilgrim Poultry G.P.
The Company did not file any reports on Form 8-K during the three months
ended January 2, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PILGRIM'S PRIDE CORPORATION
Date 8/9/1999 /s/ Richard A. Cogdill
Richard A. Cogdill
Executive Vice President and
Chief Financial Officer
Secretary and Treasurer in his
respective capacity as such