PILGRIM'S PRIDE CORPORATION
110 SOUTH TEXAS STREET
PITTSBURG, TEXAS 75686
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY, JANUARY 30, 2002
The Annual Meeting of Stockholders of Pilgrim's Pride Corporation (the
"Company") will be held at the Company's headquarters building, 110 South
Texas Street, Pittsburg, Texas, on Wednesday, January 30, 2002, at 11:00
a.m., local time, to consider the following matters:
1.The election of ten Directors for the ensuing year;
2.The appointment of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending September 28, 2002; and
3.To transact such other business as may be properly brought before the
meeting or any adjournment. No other matters are expected to be voted on
at the meeting.
The Board of Directors has fixed the close of business on December 10,
2001, as the record date for determining stockholders of record entitled to
notice of, and to vote at, the meeting.
/s/ Richard A. Cogdill
RICHARD A. COGDILL
Pittsburg, Texas EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER
December 17, 2001 SECRETARY AND TREASURER
YOUR VOTE IS IMPORTANT!
PLEASE SIGN AND RETURN THE ACCOMPANYING PROXY.
PILGRIM'S PRIDE CORPORATION
110 SOUTH TEXAS STREET
PITTSBURG, TEXAS 75686
PROXY STATEMENT
GENERAL INFORMATION
The Board of Directors of Pilgrim's Pride Corporation (the "Company")
solicits stockholders' proxies in the accompanying form for use at the
Annual Meeting of Stockholders to be held on Wednesday, January 30, 2002,
at 11:00 a.m., local time, at the Company's headquarters at 110 South Texas
Street, Pittsburg, Texas and at any adjournments thereof (the "Meeting").
This Proxy Statement, the accompanying proxy card and the Company's
2001 Annual Report to Stockholders are being mailed, beginning on or
about December 17, 2001, to all stockholders entitled to receive notice
of, and to vote at, the Meeting.
The principal executive offices of the Company are located at 110 South
Texas Street, Pittsburg, Texas 75686. Any writing required to be sent to
the Company should be mailed to this address.
OUTSTANDING VOTING SECURITIES
Each stockholder of record at the close of business on December 10, 2001
(the "Record Date"), will be entitled to one vote for each share of the
Company's Class A common stock, $.01 par value per share, and twenty votes
for each share of the Company's Class B common stock, $.01 par value per
share, held on the Record Date. The accompanying proxy card indicates the
number of shares to be voted. On December 10, 2001, there were 13,523,429
shares of the Company's Class A common stock issued and outstanding and
there were 27,589,250 shares of the Company's Class B common stock issued
and outstanding. For all proposals at the Meeting, the votes of holders of
Class A common stock and Class B common stock will be counted together as a
single class.
VOTING OF PROXIES
Because many of the Company's stockholders are unable to attend the
Meeting, the Board of Directors solicits proxies by mail to give each
stockholder an opportunity to vote on all items of business scheduled to
come before the Meeting. Each stockholder is urged to:
(1) read carefully the material in this Proxy Statement;
(2) specify his or her voting instructions on each item by marking the
appropriate boxes on the accompanying proxy card; and
(3) sign, date and return the proxy card in the enclosed, postage
prepaid envelope.
The accompanying proxy card provides a space, with respect to the
election of Directors, for a stockholder to withhold voting for any or all
nominees for the Board of Directors, but does not permit a stockholder to
vote for any nominee not named on the proxy card. The card also allows a
stockholder to abstain from voting on any other item if the stockholder
chooses to do so.
When the accompanying proxy card is properly executed and returned
with voting instructions with respect to any of the items to be voted upon,
the shares represented by the proxy will be voted in accordance
with the stockholder's directions by the persons named on the proxy card as
proxies of the stockholder. If a proxy card is signed and returned, but no
specific voting instructions are given, the shares represented by the proxy
card will be voted for the election of the ten nominees for Directors named
on the accompanying proxy card and for the appointment of Ernst & Young LLP
as the Company's independent auditors.
Unless otherwise indicated by the stockholder, returned proxy cards
also confer upon the persons named on the card, as proxies for the
stockholder, discretionary authority to vote all shares of stock
represented by the proxy card on any item of business that is properly
presented for action at the Meeting, even if not described in this Proxy
Statement. If any of the nominees for Director named below should be
unable or unwilling to accept nomination, the proxies will be voted for the
election of such other person as may be recommended by the Board of
Directors. The Board of Directors, however, has no reason to believe that
any item of business not set forth in this Proxy Statement will come before
the Meeting or that any of the nominees for Director will be unavailable
for election.
The proxy does not affect a stockholder's right to vote in person at
the Meeting. If a stockholder executes a proxy, he or she may revoke it at
any time before it is voted by submitting a new proxy card, or by
communicating his or her revocation in writing to the Secretary of the
Company or by voting by ballot at the Meeting.
VOTES REQUIRED
The holders of at least a majority of the combined voting power of the
Company's Class A common stock and Class B common stock outstanding on the
Record Date must be present in person or by proxy at the Meeting for the
Meeting to be held. Abstentions and broker non-votes are counted in
determining whether at least a majority of the voting power of the
Company's Class A common stock and Class B common stock outstanding on the
Record Date are present at the Meeting.
Directors will be elected by a plurality of the votes cast at the
Meeting. The affirmative vote of a majority of the voting power of the
Company's Class A common stock and Class B common stock represented and
entitled to vote at the Meeting is required for the appointment of the
Company's independent auditors and approval of any other item of business
to be voted upon at the Meeting. Abstentions from voting on any matter will
be included in the voting tally. Abstentions will have no effect on the
election of Directors. Abstentions will have the same effect as votes
against the proposal to appoint the Company's independent auditors. Broker
non-votes are shares held by a broker or nominee which are represented at
the Meeting, but with respect to which such broker or nominee is not
empowered to vote on a particular proposal. Broker non-votes will have no
effect on the election of Directors or the proposal to appoint the
Company's independent auditors. Lonnie "Bo" Pilgrim owned or controlled
8,350,313 shares (61.8%) of the Company's Class A common stock and
16,774,320 shares (60.8%) of the Company's Class B common stock on the
Record Date, or 60.8% of the combined voting power of both classes of
stock, and thus will be able to elect all of the nominees for Directors and
approve Ernst & Young LLP as independent auditors for the Company.
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
The Company's Amended and Restated Corporate Bylaws state that a
stockholder must give the Secretary of the Company written notice, at the
Company's principal executive offices, of its intent to
present a proposal at the Company's 2003 Annual Meeting of Stockholders by
October 2, 2002, but not before May 5, 2002. Additionally, in order for
stockholder proposals which are submitted pursuant to Rule 14a-8 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to be
considered by the Company for inclusion in the Company's proxy materials
for the 2003 Annual Meeting of Stockholders, they must be received by the
Secretary of the Company no later than the close of business on August 17,
2002.
COST OF PROXY SOLICITATION
The Company will bear the cost of the Meeting and the cost of
soliciting proxies in the accompanying form, including the cost of mailing
the proxy material. In addition to solicitation by mail, Directors,
officers and other employees of the Company may solicit proxies by
telephone or otherwise. They will not be specifically compensated for such
services. The Company will request brokers and other custodians, nominees
and fiduciaries to forward proxies and proxy soliciting material to the
beneficial owners of the Company's Class A common stock and Class B common
stock and to secure their voting instructions, if necessary. The Company
will reimburse them for the expenses in so doing.
BOARD OF DIRECTORS
The Board of Directors has the responsibility for establishing broad
corporate policies and for the overall performance of the Company.
However, it is not involved in day-to-day operating details. Members of
the Board are kept informed of the Company's business through discussions
with the Chairman and other officers, by reviewing analyses and reports
sent to them each month, as well as by participating in Board and committee
meetings.
BOARD COMMITTEES
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 Charles L. Black, S. Key Coker, Vance C. Miller,
Sr., James G. Vetter, Jr., and Donald L. Wass, Ph.D. The members of the
Compensation Committee are Lonnie "Bo" Pilgrim, Vance C. Miller, Sr.,
Lonnie Ken Pilgrim, James G. Vetter, Jr., and Charles L. Black. The
Compensation Committee also has a subcommittee made up of Charles L. Black
and Vance C. Miller, Sr. 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, 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. The
Compensation Committees' subcommittee is responsible for administering
certain aspects of the Senior Executive Performance Bonus Plan dealing with
compensation for designated Section 162(m) participants, currently Mr.
Lonnie "Bo" Pilgrim and Mr. David Van Hoose.
MEETINGS
During the Company's fiscal year ended September 29, 2001, there were
seven meetings of the Board of Directors, three meetings of the Audit
Committee, one meeting of the Compensation Committee and one meetings of
the Compensation subcommittee. During fiscal 2001, each member of the Board
of Directors attended at least 75% of the aggregate number of meetings of
the Board and Board Committees on which the Director served.
ELECTION OF DIRECTORS
At the Meeting, ten Directors are to be elected, each to hold office
for one year or until his successor is duly elected and qualified. Unless
otherwise specified on the proxy card, the shares represented by the enclosed
proxy will be voted for the election of the ten nominees named below. The
Board of Directors has no reason to believe that any nominee will be unable
to serve if elected. In the event any nominee shall become unavailable for
election, it is intended that such shares will be voted for the election of
a substitute nominee selected by the Board of Directors.
NOMINEES FOR DIRECTOR
LONNIE "BO" PILGRIM, 73, has served as Chairman of the Board since the
organization of the Company in July 1968. He was previously Chief
Executive Officer from July 1968 to June 1998. 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, 59, serves as Vice Chairman of the Board. 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, became Executive President in January
1997 and served in such capacity through July 1998.
DAVID VAN HOOSE, 60, serves as Chief Executive Officer, President and
Chief Operating Officer (the Company's Principal Executive Officer) of the
Company. He became a Director in July 1998. He was named Chief Executive
Officer and Chief Operating Officer in June 1998 and President in July
1998. He was previously President of Mexico Operations from April 1993 to
June 1998 and Senior Vice President, Director General, Mexico 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, 41, has served as Executive Vice President, Chief
Financial Officer, Secretary and Treasurer (the Company's Principal
Financial and Accounting Officer) since January 1997. He became a Director
in September 1998. 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 a Senior Manager with Ernst & Young LLP. He
is a Certified Public Accountant.
LONNIE KEN PILGRIM, 43, has been employed by the Company since 1977 and
has been Senior Vice President, Transportation since August 1997. Prior to
that he served the Company as its Vice President, Director of
Transportation. He has been a member of the Board of Directors since March
1985. He is a son of Lonnie "Bo" Pilgrim.
CHARLES L. BLACK, 72, 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.
S. KEY COKER, 44, has served as Executive Vice President of Compass Bank
since October 2000, a $20 billion dollar bank with offices throughout the
southern United States. Previously, he served as Senior Vice President from
June 1995 through September 2000 and had been employed by Compass Bank
since 1992. He is a career banker with 21 years of experience in banking.
He was appointed a Director in September 2000, following the resignation of
Robert Hilgenfeld on August 2, 2000.
VANCE C. MILLER, SR., 67, 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., 67, has practiced law in Dallas, Texas, since
1966. He is a shareholder of the Dallas law firm of Godwin, White & Gruber,
P.C. (formerly 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., 69, 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.
REPORT OF THE AUDIT COMMITTEE
Pursuant to the Audit Charter updated by the Board of Directors and
attached to the Company's proxy statement within the last three years, the
Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility
for the financial statements and the reporting process, including the
systems of internal controls. In fulfilling its oversight responsibilities,
the committee reviewed and discussed the audited financial statements in
the Annual Report with management, including a discussion of the quality,
not just the acceptability, of the accounting principles, the
reasonableness of significant judgments and the clarity of disclosures in
the financial statements.
The committee reviewed with the independent auditors who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments
as to the quality, not just the acceptability, of the Company's accounting
principles and such other matters as are required to be discussed with the
committee under generally accepted auditing standards. In addition, the
committee has discussed with independent auditors the auditor's
independence from management and the Company, including the matters in the
written disclosures required by the Independence Standards Board.
The committee discussed with the Company's internal and independent
auditors the overall scope and plans for their respective audits. The
committee meets with the internal and independent auditors, with and
without management present, to discuss the results of their examinations,
their evaluations of the Company's internal controls and the overall
quality of the Company's financial reporting. In reliance on the reviews
and discussions referred to above, the committee recommended to the Board
of Directors (and the Board has approved) that the audited financial
statements be included in the Annual Report on Form 10-K for the year ended
September 29, 2001 for filing with the Securities and Exchange Commission.
The committee and the Board have also recommended, subject to stockholder
approval, the selection of the Company's independent auditors.
The members of the Audit committee are independent as defined in
Sections 303.01(B)(2)(a) and (3) of the New York Stock Exchange's listing
standards.
AUDIT COMMITTEE
James G. Vetter, Jr.
Charles L. Black
Vance C. Miller, Sr.
Donald L. Wass, Ph.D.
S. Key Coker
AUDIT FEES, FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
AND ALL OTHER FEES
Fees for the last annual audit were approximately $404,000. In fiscal
2001,there were no financial information systems design and implementation
fees and all other fees payable to the Company's auditors were
approximately $1,209,954, including audit related services of approximately
$379,511 and nonaudit services of approximately $830,443. Audit related
services generally include fees for statutory audits, information systems
audits, business acquisitions and accounting consultations. Representatives
of the firm of Ernst & Young LLP are expected to be present at the Annual
Meeting and will have an opportunity to make a statement if they so desire
and will be available to respond to questions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2001, the members of the Company's Compensation
Committee were Lonnie "Bo" Pilgrim, Chairman of the Board of the Company,
Vance C. Miller, Sr., Lonnie Ken Pilgrim, Senior Vice President,
Transportation of the Company, James G. Vetter, Jr., and Charles L. Black.
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 which management believes are not less favorable to the Company
than could have been arranged with unaffiliated persons. Since 1985,
Lonnie "Bo" Pilgrim, has engaged in chicken grow-out operations with the
Company which involve the purchase of chicks, feed and veterinary and
technical services from the Company and the growing-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 not less favorable to the Company than
those which could be arranged with unaffiliated persons. During fiscal year
2001, the Company paid Mr. Pilgrim, doing business as Pilgrim Poultry G.P.
("PPGP"), $39,784,000 for chickens produced in his grow-out operations, and
PPGP paid the Company $38,771,000 for chicks, feed and services. Lonnie
"Bo" Pilgrim is the sole proprietor of PPGP.
PPGP also rents facilities to the Company for the production of eggs.
On January 1, 2001 the Company entered into an agreement with PPGP to rent
its egg production facilities for a monthly amount of $62,500. During
fiscal year 2001, the Company paid rental on the facilities of $562,500 to
PPGP. Prior to January 1, 2001, the Company had contracted with PPGP to use
the egg production facilities to house and care for Company flocks and paid
egg grower fees based on actual production. During fiscal year 2001, the
Company paid contract egg grower's fees to PPGP of $1,537,000. Management
of the Company believes that the terms of the agreements with PPGP are
substantially similar to, and contain terms not less favorable to the
Company than, agreements obtainable from unaffiliated parties.
Since 1985, the Company has leased an airplane from Lonnie "Bo"
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 2001 the Company had lease expenses of $396,000 and
operating expenses of $234,000 associated with the use of this airplane.
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 .25% of the average aggregate
outstanding balance of such guaranteed debt. During fiscal 2001, the
Company incurred $3,142,000 for such guarantees and paid $2,324,000 to
Pilgrim Interests, Ltd.
Godwin, White & Gruber, P.C., represents the Company in connection with
a variety of legal matters. James G. Vetter, Jr., is a Director of the
Company and is a shareholder of Godwin, White & Gruber, P.C. During fiscal
year 2001, the Company paid Godwin, White & Gruber, P.C., legal fees of
$158,467 in connection with such matters.
COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth a summary of compensation paid to the
Company's Chief Executive Officer and its four other most highly
compensated executive officers.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
Other All
Fiscal Annual Other
NAME AND PRINCIPAL Year Salary Bonus COMPENSATION COMPENSATION(1)
POSITION
Lonnie "Bo" Pilgrim..... 2001 $1,071,200 $566,942 $24,081 $12,066
Chairman of the Board 2000 1,070,600 532,921 30,057 10,096
1999 717,191 748,417 22,594 8,349
David Van Hoose......... 2001 535,300 465,796 13,381 11,500
Chief Executive Officer, 2000 517,923 404,231 12,947 7,659
President and Chief 1999 419,468 503,921 10,486 9,689
Operating Officer
Clifford E. Butler...... 2001 388,868 111,133 9,720 2,061
Vice Chairman of the 2000 388,870 120,492 10,015 2,053
Board 1999 395,819 386,722 9,868 3,032
Richard A. Cogdill...... 2001 308,828 300,000 7,720 1,357
Executive Vice President, 2000 285,441 248,673 7,496 1,262
Chief Financial Officer, 1999 220,328 310,000 5,489 1,075
Secretary and Treasurer
Robert L. Hendrix....... 2001 292,084 183,226 7,301 7,454
Executive Vice President- 2000 283,576 120,492 7,089 4,364
Growout and Processing 1999 280,364 336,813 6,987 6,570
(1) Includes the following items of compensation:
a. Company's contributions to the named individual under its 401(k)
Salary Deferral Plan in the following amounts: Lonnie "Bo" Pilgrim,
$52 (2001, 2000 & 1999); David Van Hoose, $312 (2001), $312 (2000),
$318 (1999); Clifford E. Butler, $312 (2001), $312 (2000), $318
(1999); Richard A. Cogdill, $312 (2001), $312 (2000), $318 (1999); and
Robert L. Hendrix, $312 (2000), $312 (2000), $318 (1999).
b. 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, $12,014 (2001), $10,044 (2000), $8,296 (1999); David Van
Hoose, $11,187 (2001), $7,347 (2000), $9,371 (1999); Clifford E.
Butler, $1,749 (2001), $1,741 (2000), $2,714 (1999); Richard A.
Cogdill, $1,045 (2001), $950 (2000), $757 (1999); and Robert L.
Hendrix, $7,142 (2001), $4,052 (2000), $6,252 (1999).
DIRECTORS' FEES
The Company pays its Directors who are not employees of the Company
$5,000 per meeting attended in person, plus expenses, and Directors who are
not employees of the Company also receive $2,500 and $1,250 per telephonic
meeting that they participate in that last at least 45 minutes or less than
45 minutes, respectively.
REPORT OF COMPENSATION COMMITTEE
The Compensation Committee establishes executive compensation and
oversees the administration of the bonus plan for key members of management
and the Company's employee benefit plans.
The following is a report submitted by the Compensation Committee
members in their capacity as the Board's Compensation Committee, addressing
the Company's compensation policy as it related to the named executive
officers for fiscal 2001.
PERFORMANCE MEASURES
The Compensation Committee's establishment of annual executive
compensation is a subjective process in which the Committee considers many
factors including the Company's performance as measured by earnings for the
year, each executive's specific responsibilities, the contribution to the
Company's profitability by each executive's specific areas of
responsibility, the level of compensation believed necessary to motivate
and retain qualified executives and the executive's length of time with the
Company.
FISCAL COMPENSATION
For fiscal 2001, the Company's executive compensation program
consisted of (a) base salary, (b) a discretionary bonus based upon the
factors described above, (c) the bonus plan described below, (d) Company
contributions to the Company's 401(k) salary deferral plan which are made
up of mandatory contributions of one dollar per week and matching
contributions of up to five dollars per week and additional matching
contributions of up to four percent of an executive's compensation subject
to an overall Company contribution limit of five percent of domestic income
before taxes and (e) Company contributions to the Employee Stock Investment
Plan in an amount equal to 33 1/3% of the officers' payroll deduction for
purchases of the Company's common stock under the plan, which deductions
are limited to 7 1/2% of the officer's base salary, overtime pay and
bonuses.
In establishing the fiscal 2001 compensation for Lonnie "Bo" Pilgrim,
the Company's Chairman of the Board, the Compensation Committee made no
change to Mr. Pilgrim's annual base salary. Mr. Pilgrim's bonus for fiscal
2001 consisted of a bonus awarded pursuant to the bonus plan discussed
below.
In establishing the fiscal 2001 compensation for David Van Hoose as
the Company's Chief Executive Officer, President and Chief Operating
Officer, the Compensation Committee adjusted Mr. Van Hoose's annual base
salary from $517,923 to $535,300 to reflect changes in the cost of living.
Mr. Van Hoose's bonus for fiscal 2001 consisted of a bonus awarded pursuant
to the bonus plan discussed below, plus a discretionary bonus of $130,000.
This discretionary bonus was made in response to the Compensation
Subcommittee's subjective assessment of Mr. Van Hoose's contribution to the
Company's performance in fiscal 2001.
The Company's objective is to obtain financial performance that
achieves increased return on equity, sales volume, earnings per share and
net income. The Compensation Committee believes that linking executive
compensation to corporate performance results in a better alignment of
compensation with corporate goals and stockholder interests.
The Company maintains a bonus plan for certain key members of
management. The description below outlines the plan:
The Company's Senior Executive Performance Bonus Plan (the "Plan"),
provides for five percent of the Company's U.S. income before income taxes
to be allocated among certain key members of management. Such amount is
allocated among all plan participants based upon the ratio of each
participant's eligible salary to the aggregate salaries of all participants
and the number of months of the fiscal year the participant was approved
for participation. The Plan also provides for a Subcommittee to administer
the plan provisions dealing with certain designated Section 162(m)
participants, currently Mr. Lonnie "Bo" Pilgrim and Mr. David Van Hoose.
The Compensation Committee retains the right, in its sole discretion, to
reduce, increase or eliminate, prior to payment thereof, the amount of any
bonus that would otherwise be due under the Plan to non-Section 162(m)
participants, and the Compensation Subcommittee retains these same rights,
except for the right to increase bonus amounts, for designated Section
162(m) participants. Participants may generally be added or removed from
the plan at the discretion of the Compensation Committee. Participants
must continue to be employed by the Company on January 1 following the end
of a fiscal year in order to be paid a bonus with respect to that year.
Bonuses are typically paid during the January following the fiscal year
with respect to which the bonus has been granted.
COMPENSATION COMMITTEE
Lonnie "Bo" Pilgrim
Charles L. Black
Vance C. Miller, Sr.
Lonnie Ken Pilgrim
James G. Vetter, Jr.
COMPENSATION SUBCOMMITTEE
Charles L. Black
Vance C. Miller, Sr.
COMPANY PERFORMANCE
The following graph shows a five-year comparison of cumulative total
returns for the Company, the Russell 2000 composite index and a peer group
selected by the Company.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, THE RUSSELL 2000 INDEX AND A PEER GROUP
Cumulative Total Return
------------------------------------------------
9/28/96 9/27/97 9/26/98 10/02/99 9/30/00 9/29/01
PILGRIM'S PRIDE CORPORATION- - - 100 38 36 67
CLASS A{(1)
PILGRIM'S PRIDE CORPORATION- 100 179 225 101 81 164
CLASS B(1)
PEER GROUP 100 152 171 99 72 141
RUSSELL 2000 100 120 110 128 159 125
- -------
* $100 invested on 9/28/96 in stock or index including reinvestment of
dividends.
(1) On July 30, 1999, the Company issued a stock dividend of one share
of Class A common stock for every two shares of Class B common stock held
to stockholders of record on June 30, 1999. This was the first issuance of
the Company's Class A common stock. The above results for the Company's
Class B common stock were adjusted for the Class A common stock dividend.
The Company's Class A common stock was not outstanding at the beginning of
fiscal 1999 and is presented on a separate line of the graph.
The total cumulative return on investment (change in the year-end
stock price plus reinvested dividends) for each of the periods for the
Company, the Russell 2000 composite index and the peer group is based on
the stock price or composite index at the end of fiscal 1996.
The above graph compares the performance of the Company with that of
the Russell 2000 composite index and a group of peer companies with the
investment weighted on market capitalization. Companies in the peer group
are Sanderson Farms, Inc., Cagle's, Inc, and the Company. These companies
were selected because of their similar operations and market
capitalizations relative to the Company and were approved by the
Compensation Committee. In prior years the peer group included WLR Foods,
Inc. and Seaboard Corporation. On January 28, 2001, WLR Foods, Inc. was
acquired by the Company and Seaboard Corporation's chicken operations were
acquired by ConAgra, Inc. on January 3, 2000.
CERTAIN OTHER 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 year 2001 were as follows: David Van Hoose-$304,384, Clifford E.
Butler--$227,311, O.B. Goolsby--$159,220, and James J. Miner--$214,268.
See "Compensation Committee Interlocks and Insider Participation" for a
discussion of the Company's transactions with Lonnie "Bo" Pilgrim and James
G. Vetter, Jr.
SECURITY OWNERSHIP
The following table sets forth, as of December 1, 2001, certain
information with respect to the beneficial ownership of the Company's Class
A common stock and Class B common stock by (a) each stockholder
beneficially owning at least 5% of the Company's outstanding Class A common
stock or Class B common stock; (b) each Director of the Company who is a
stockholder of the Company; (c) each of the executive officers listed in
the executive compensation table who is a stockholder of the Company; and
(d) all executive officers and Directors of the Company as a group.
Amount and Amount and
Nature of Percent Nature of Percent
Beneficial of Beneficial of
Ownership of Class A Ownership of Class B
NAME OF BENEFICIAL Class A COMMON Class B COMMON
OWNER COMMON STOCK STOCK COMMON STOCK STOCK
Pilgrim Interests, Ltd. 7,200,474 53.2% 14,395,385 52.2%
110 South Texas Street
Pittsburg, Texas 75686
Lonnie "Bo" Pilgrim(a)(b) 8,350,313 61.8% 16,774,320 60.8%
110 South Texas Street
Pittsburg, Texas 75686
Lonnie Ken Pilgrim(a)(b)(c) 7,503,359 55.5% 14,951,466 54.2%
110 South Texas Street
Pittsburg, Texas 75686
Clifford E.Butler(b) 63,186 (d) 36,487 (d)
Robert L. Hendrix(b) 13,677 (d) 34,219 (d)
Richard A. Cogdill(b) 16,451 (d) 8,954 (d)
David Van Hoose(b) 36,903 (d) 19,238 (d)
James G. Vetter, Jr 975 (d) 2,450 (d)
Charles L. Black 500 (d)
Donald L. Wass 150 (d) 300 (d)
All executive officers and
Directors as a group
(18 persons) 8,747,566 64.7% 17,346,746 62.9%
___________________
(a) Includes 7,200,474 shares of Class A common stock and 14,395,385
shares of Class B common stock held of record by Pilgrim Interests,
Ltd., a partnership formed by Mr. Pilgrim's family of which Lonnie A.
Pilgrim and Lonnie Ken Pilgrim are managing partners. Also includes
30,193 shares of Class A common stock and 60,387 shares of Class B
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 30,193
shares of Class A common stock and 60,386 shares of Class B 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. Each of Lonnie A. Pilgrim and Lonnie Ken Pilgrim disclaim
beneficial ownership of the Company's Class A common stock and Class B
common stock held by Pilgrim Interests, Ltd., except to the extent of
their respective pecuniary interest therein.
(b) Includes shares held in trust by the Company's 401(k) Salary Deferral
Plan.
(a) Includes 7,232 shares of Class A common stock and 6,465 shares of
Class B common stock held by his wife. Also includes 20,674 shares of
Class A common stock and 25,350 shares of Class B common stock 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.
(b) Less than 1%.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
Directors, and persons who own more than ten percent of the Company's Class
A common stock and Class B common stock, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC")
and the New York Stock Exchange. Officers, Directors and greater than ten-
percent stockholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file.
Based on its review of the copies of such forms received by it, the
Company believes that all filing requirements applicable to its officers,
Directors and greater than ten-percent stockholders for fiscal 2001 were
complied with.
ITEM 2. APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors recommends the appointment of Ernst & Young LLP
as the Company's independent auditors for the 2002 fiscal year. This firm
of certified public accountants has served as independent auditors of the
Company pursuant to annual appointment by the Board of Directors since 1969
except for 1982 and 1983.
Representatives of Ernst & Young are expected to be present at the
Meeting and to be available to respond to appropriate questions. They will
be given the opportunity to make a statement if they wish to do so.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPOINTMENT OF ERNST
& YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR FISCAL YEAR 2002.
FINANCIAL STATEMENTS AVAILABLE
FINANCIAL STATEMENTS FOR THE COMPANY ARE INCLUDED IN THE ANNUAL REPORT
TO STOCKHOLDERS FOR THE YEAR 2001. ADDITIONAL COPIES OF THESE STATEMENTS,
AS WELL AS FINANCIAL STATEMENTS FOR PRIOR YEARS AND THE ANNUAL REPORT TO
THE SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K, MAY BE OBTAINED UPON
WRITTEN REQUEST WITHOUT CHARGE FROM THE SECRETARY OF THE COMPANY, 110 SOUTH
TEXAS STREET, PITTSBURG, TEXAS 75686. FINANCIAL STATEMENTS ARE ALSO ON FILE
WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C. 20549, AND
THE NEW YORK STOCK EXCHANGE.
OTHER BUSINESS
The Board of Directors is not aware of, and it is not anticipated that
there will be presented to the Meeting, any business other than the
election of the Directors and the proposal to appoint Ernst & Young
independent auditors described above. If other matters properly come
before the Meeting, the persons named on the accompanying proxy card will
vote the returned proxies as the Board of Directors recommends.
Please date, sign and return the proxy at your earliest convenience.
A prompt return of your proxy will be appreciated as it will save the
expense of further mailings.
By order of the Board of Directors,
/s/ Richard A. Cogdill
RICHARD A. COGDILL
Pittsburg, Texas EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER
December 17, 2001 SECRETARY AND TREASURER