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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended January 1, 1994
Commission file number 1-9273
PILGRIM'S PRIDE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-1285071
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 South Texas, Pittsburg, TX 75686-0093
(Address of principal executive offices) (Zip code)
(903) 855-1000
(Telephone number of principle executive offices)
Not Applicable
Former name, former address and former fiscal year, if changed
since last report.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter periods that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Common Stock $.01 Par Value--27,589,250 shares
as of February 11, 1994
INDEX
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited):
Condensed consolidated balance sheets:
January 1, 1994 and October 2, 1993
Consolidated statements of income:
Three months ended January 1, 1994 and January 2, 1993
Consolidated statements of cash flows:
Three months ended January 1, 1994 and January 2, 1993
Notes to condensed consolidated financial statements--
January 1, 1994
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures
PART I. FINANCIAL INFORMATION
PILGRIM'S PRID E CORPORATION AND SUBSIDIARIES
CONDENSED CONS OLIDATED BALANCE SHEETS
Item 1: Financial Statements (Unaudited):
Jan 1, 1994
(Unaudited) Oct 2, 1993
ASSETS
Current Assets:
Cash and cash equivalents $ 4,580,000 $ 4,526,000
Trade accounts and notes
receivable, net 66,146,000 59,608,000
Inventories 88,692,000 91,794,000
Deferred income taxes 9,400,000 --
Prepaid expenses 978,000 1,260,000
Other current assets 9,952,000 9,843,000
Total Current Assets 179,748,000 167,031,000
Other Assets 12,781,000 13,114,000
Property, Plant and Equipment 372,062,000 366,221,000
Less accumulated depreciation
and amortization 128,750,000 123,520,000
243,312,000 242,701,000
$ 435,841,000 $ 422,846,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable - banks $ 5,000,000 $ 12,000,000
Accounts payable 41,126,000 38,330,000
Accrued expenses 30,382,000 30,370,000
Current portion of
long-term debt 11,959,000 13,643,000
Total Current Liabilities 88,467,000 94,343,000
Long-Term Debt, less
current portion 158,138,000 159,554,000
Deferred Income Taxes 48,936,000 36,656,000
Stockholders' Equity:
Common stock; $.01 par value 276,000 276,000
Additional paid-in capital 79,763,000 79,763,000
Retained earnings 60,261,000 52,254,000
Total Stockholders' Equity 140,300,000 132,293,000
$ 435,841,000 $ 422,846,000
See notes to condensed consolidated financial statements.
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
January 1, 1994 January 2, 1993
(13 weeks) (14 weeks)
Net sales $ 221,851,000 $ 220,453,000
Costs and expenses:
Cost of sales 190,714,000 192,118,000
Selling, general and administrative 14,979,000 14,192,000
205,693,000 206,310,000
Operating Income 16,158,000 14,143,000
Other expense (income):
Interest expense 4,950,000 6,478,000
Miscellaneous [822,000] [502,000]
Total other expense, net 4,128,000 5,976,000
Income before income taxes 12,030,000 8,167,000
Income tax expense 3,609,000 1,339,000
Net Income $ 8,421,000 $ 6,828,000
Net income per share $ .31 $ .25
Dividends declared per common share $ .015 $ --
Average shares outstanding 27,589,250 27,589,250
See Notes to condensed consolidated financial statements.
PILGRIM'S PRIDE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
January 1, 1994 January 2,1993
(13 weeks) (14 weeks)
Cash Flow From Operating Activities:
Net income $ 8,421,000 $ 6,828,000
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 6,248,000 6,767,000
Provision for losses on accounts receivable 533,000 215,000
Deferred income taxes 2,880,000 728,000
Changes in operating assets and liabilities:
Accounts and notes receivable [7,072,000] 535,000
Inventories 3,102,000 [3,071,000]
Prepaid expenses and other current assets 171,000 895,000
Accounts payable and accrued expenses 3,222,000 [5,555,000]
(Gain) loss on property disposals [120,000] [200,000]
Other [139,000] [137,000]
Cash Provided By Operating Activities: 17,246,000 7,005,000
Investing Activities:
Acquisitions of property and equipment [6,409,000] [1,471,000]
Proceeds from property disposals 249,000 435,000
Net change in other assets [35,000] 234,000
Net Cash Used In Investing Activities [6,195,000] [802,000]
Financing Activities:
Proceeds from notes payable to banks -- --
Re-payments of notes payable to banks [7,000,000] --
Proceeds from long-term debt 31,000 12,000
Payments on long-term debt [3,169,000] [5,591,000]
Cash dividends paid [828,000]
[414,000]
Cash Used In Financing Activities [10,966,000] [5,993,000]
Effect of exchange rate changes on cash
and cash equivalents [31,000] [34,000]
Increase in cash and cash equivalents 54,000 176,000
Cash and cash equivalents at beginning
of year 4,526,000 11,550,000
Cash and cash equivalents at
end of quarter $ 4,580,000 $ 11,726,000
Supplemental disclosure information:
Cash paid during the period for
Interest (net of amount capitalized) $ 5,003,000 $ 8,960,000
Income Taxes $ 3,302,000 $
255,000
See notes to condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT
(Unaudited)
_________________________________________________________________
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the period ended January 1, 1994 are not necessarily
indicative of the results that may be expected for the year ended
October 1, 1994. 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 October 2,
1993.
The consolidated financial statements include the accounts of
Pilgrim's and its wholly owned subsidiaries. Significant
intercompany accounts and transactions have been eliminated.
The assets and liabilities of the foreign subsidiaries are
translated at end-of-period exchange rates, except for non-current
assets which are translated at equivalent dollar costs at dates of
acquisition using historical rates. Operations of foreign
subsidiaries are translated at average exchange rates in effect
during the period. The translation adjustments are reflected in
the statements of operations.
NOTE B--NET INCOME PER COMMON SHARE
Earnings per share for the periods ended January 1, 1994 and
January 2, 1993 are based on the weighted average shares
outstanding for the periods.
NOTE C--INVENTORIES
Inventories consist of the following:
Jan 1, 1994 Oct 2, 1993
Live broilers and hens $ 39,276,000 $ 44,417,000
Feed, eggs and other 27,555,000 25,473,000
Finished poultry products 21,861,000 21,904,000
$ 88,692,000 $ 91,794,000
NOTE D--INCOME TAXES
Effective October 3, 1993, the Company adopted the provisions of
FAS Statement No. 109, "Accounting for Income Taxes." As permitted
under the new rules, prior years' financial statements have not
been restated.
The cumulative effect of adopting Statement 109 as of October 3,
1993 resulted in no change to the reported net income amounts for
the quarter ended January 1, 1994.
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 United
States deferred tax liabilities and assets as of October 3, 1993
are as follows (no significant foreign deferred tax assets or
liabilities exist):
Deferred tax liabilities:
Tax over book depreciation $ 23,004
Prior use of cash accounting 32,758
Total deferred tax liabilities 55,762
Deferred tax assets:
AMT credit carryforward 3,967
General business carryforward 2,462
Net operating loss carryforwards 6,589
Other 6,088
Total deferred tax assets 19,106
Net deferred tax liabilities $ 36,656
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
_________________________________________________________________
The following table presents certain items as a percentage of net
sales for the periods indicated.
Percentage of Net Sales
Three Months Ended
Jan 1, 1994 Jan 2, 1993
(13 weeks) (14 weeks)
Net sales 100.0% 100.0%
Costs and expenses:
Cost of sales 86.0% 87.1%
Gross profit 14.0% 12.9%
Selling, general and administrative 6.8% 6.4%
Operating Income 7.3% 6.4%
Interest expense 2.2% 2.9%
Income before income taxes 5.4% 3.7%
Net Income 3.8% 3.1%
First Quarter 1994, Compared to First Quarter 1993
The accounting cycle of Pilgrim's Pride Corporation, the "Company",
consisted of 13 weeks of operations during the first quarter of
fiscal 1994 compared to 14 weeks during the first quarter of fiscal
1993, an operating cycle reduction of 7.7%.
Consolidated net sales were $221.9 million for the first quarter of
fiscal 1994, an increase of $1.4 million, or .6%, over the first
quarter of fiscal 1993. The increase in consolidated net sales
resulted from a $1.5 million increase in Mexican chicken sales to
$48.9 million and a $.2 million increase in domestic chicken sales
to $147.1 million offset by a $.3 million decrease in sales of
other domestic products to $25.8 million. The increase in Mexican
chicken sales was primarily due to a 3.1% increase in the total
revenue per dressed pound produced offset by a 9.3% decrease in
dressed pounds produced. The increase in domestic chicken sales
was primarily due to a 7.4% increase in total revenue per dressed
pound produced offset by a 6.8% decrease in dressed pounds
produced.
Consolidated cost of sales was $190.7 million in the first quarter
of fiscal 1994, a decrease of $1.4 million, or .7%, over the first
quarter of fiscal 1993. The decrease primarily resulted from a
$7.0 million decrease in cost of sales of Mexican operations,
offset by a $5.6 million increase in the cost of sales in domestic
operations.
The $7.0 million cost of sales decrease in Mexican operations was
primarily due to decreased dressed pounds produced and the effects
of the change in Mexican operations sales mix towards lower cost
products and decreased average cost of sales per dressed pound due
to increased efficiencies when compared to the same period in 1993.
The cost of sales increase in domestic operations of $5.6 million
occurring while dressed pounds produced decreased was due to
slightly increased feed ingredient and production costs and a sales
mix change in the Company's further processing and prepared foods
operation to higher cost products. Feed ingredient prices continue
to be influenced by floods that occurred in the midwestern United
States in 1993.
Gross profit as a percentage of sales increased to 14.0% in the
first quarter of fiscal 1994 from 12.9% in the first quarter of
fiscal 1993. The increased gross profit of the Company's Mexican
operations was primarily the result of a 3.1% increase in total
revenue per dressed. The decrease in gross profit for domestic
chicken operations was a result of increased average cost of sales
per dressed pound offset partially by an increase in total revenues
per dressed pound.
Consolidated selling, general and administrative expenses were
$15.0 million for the first quarter of fiscal 1994, an increase of
$.8 million, or 5.5%, when compared to the first quarter of fiscal
1993. Consolidated selling, general and administrative expenses as
a percentage of sales increased in the first quarter of fiscal 1994
to 6.8% compared to 6.4% in the first quarter of fiscal 1993; these
increases were primarily due to increased accruals for employment
taxes in the Company's Mexican operation and accrued retirement and
bonuses costs which are dependent upon consolidated profits offset
partially by reduced selling and administrative cost in the
Company's domestic operation.
Consolidated operating income was $16.2 million for the first
quarter of fiscal 1994 an increase of $2.0 million, or 14.2%, when
compared to the first quarter of 1993. The increase was due
primarily to higher margins in Mexican operations described
previously.
Consolidated net interest expense was $5.0 million in the first
quarter of fiscal 1994 a decrease of $1.5 million, or 23.6%, when
compared to the first quarter of fiscal 1993. This decrease was
due to lower outstanding debt, lower interest rates, and an
reduction of amortization of fees and expenses incurred for
refinancing when compared to the first quarter of fiscal 1993.
Consolidated income tax expense as a percentage of income before
income taxes increased in the first quarter of fiscal 1994 to 30%
compared to 16.4% in the first quarter of fiscal 1993. This
increase is due primarily to the increase in United States income
tax rates and deferred foreign income tax reversals of $1.1 million
during the first quarter of fiscal 1993.
Liquidity and Capital Resources
The Company's liquidity in first quarter 1994 showed marked
improvement from the previous year end due to record first quarter
net income. The Company's working capital at January 1994
increased to $91.3 million ($81.9 million excluding current
deferred income taxes recorded in connection with the adoption of
FAS 109) from $72.7 million at October 2, 1993. The current ratio
at January 1, 1994 increased to 2.14 to 1 (1.93 to 1 excluding
current deferred income taxes recorded in connection with the
adoption of FAS 109) from 1.77 to 1 at October 2, 1993 and the
Company's stockholder's equity increased to $140.3 at January 1,
1994 million from $132.3 million at October 2, 1993. The Company
reduced its ratio of total debt to capitalization to 55.5% at
January 1, 1994 from 58.3% at October 2, 1993. The Company
maintains a $75 million revolving credit facility with available
unused lines of credit of $53 million at February 14, 1994.
Trade accounts and other accounts receivable were $66.1 million at
January 1, 1994, a $6.5 million increase from October 2, 1993.
This 11.0% increase was due primarily to an increase in the amounts
of property insurance claims receivable at January 1, 1994 and
slower collections experienced in the quarter when compared to the
year ended October 2, 1993.
Accounts payable were $41.1 million at January 1, 1994, a 7.3%
increase from October 2, 1993, primarily due to increases in feed
ingredient costs.
Deferred tax assets recorded in accordance with FAS 109 were $19.1
million as of October 3, 1993. The Company believes that all of
these deferred tax assets will be realized through the reversal of
existing temporary differences and anticipated future taxable
earnings.
Capital expenditures for the first three months of 1994 were $6.4
million and were primarily incurred to improve efficiencies and for
the routine replacement of equipment. The Company anticipates that
it will spend $25.0 million or less for capital expenditures in
fiscal year 1994 and expects to finance such expenditures with
available operating cash flow and leases.
PART II
Other Information
Item 6. Exhibits and Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three
months ended January 1, 1994.
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 February 15, 1994 /s/ Clifford E. Butler
Clifford E. Butler
Vice Chairman of the Board,
Chief Financial Officer and
Secretary and Treasurer
in his respective capacity
as such