UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 29, 2011
PILGRIM'S PRIDE CORPORATION
(Exact Name of registrant as specified in its charter)
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Delaware
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1-9273
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75-1285071
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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1770 Promontory Circle
Greeley, CO
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80634-9038
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(Address of principal executive offices)
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(Zip Code)
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Registrant's telephone number, including area code: (970) 506-8000
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
q Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
q Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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q
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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q
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 2.02
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Results of Operations and Financial Condition
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The information in this Item 2.02 and the Exhibit attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
On July 29, 2011 Pilgrim's Pride Corporation reported a net loss of $128.1 million, or $0.60 per share, on net sales of $1.9 billion for the second quarter ended June 26, 2011. For the comparable quarter a year ago, the company reported net earnings of $32.9 million, or $0.15 per share, on total sales of $1.7 billion.
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Item 9.01
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Financial Statements and Exhibits
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The press release is furnished as Exhibit 99.1 to this Form 8−K.
(c) Exhibits
Exhibit
Number Description
99.1 Press Release dated July 29, 2011.
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 hereunto duly authorized.
PILGRIM'S PRIDE CORPORATION
Date: July 29, 2011 By: /s/ Fabio Sandri
Fabio Sandri
Chief Financial Officer
Exhibit Index
Exhibit
Number Description
99.1 Press Release dated April 29, 2011.
Exhibit 99.1
PILGRIM'S PRIDE REPORTS FINANCIAL RESULTS FOR SECOND QUARTER OF FISCAL 2011
GREELEY, CO, July 29, 2011 – Pilgrim's Pride Corporation (NYSE: PPC) today reported a net loss of $128.1 million, or $0.60 per share, on net sales of $1.9 billion for the second quarter ended June 26, 2011. For the comparable quarter a year ago, the company reported net earnings of $32.9 million, or $0.15 per share, on total sales of $1.7 billion.
“Our second-quarter financial results reflect the significant challenges facing our industry this year from the combination of record-high feed costs, weaker-than-expected consumer demand and an oversupply of chicken,” said Bill Lovette, president and chief executive officer. “Pilgrim’s total feed-ingredient purchases through the first six months of 2011 were more than $400 million higher than a year ago. At this time of year we are usually benefitting from stronger market pricing and increased demand from both foodservice and retail, but to date neither that demand nor pricing has materialized.”
Market prices for some key chicken products were down sharply compared to a year ago. Boneless skinless breast meat in the second quarter averaged $1.34 per pound versus $1.61 a year ago, while the market price for wings was $0.77, compared to $1.23/lb. last year. The average market price for leg quarters was $0.46/pound, up $0.10 from a year ago, while Georgia Dock prices stayed essentially flat at $0.865/lb.
At the same time, feed-ingredient costs climbed dramatically. Market prices for corn averaged $6.99 per bushel, up 92.5% from a year ago, while soybean meal averaged $361.15 per ton, a 29.4% increase. Feed ingredient purchases, which represent the largest component of Pilgrim’s cost of goods sold, were nearly $255 million higher during the quarter than the year-ago period. The company recognized $5.7 million in net mark-to-market losses related to changes in the fair value of its derivatives during the second quarter, as corn prices dropped sharply in late June as the quarter closed.
Lovette said that Pilgrim’s is making structural changes in its book of business in order to share the cost burden from higher grain prices. The company is in discussion with customers to move toward a more viable business model that ties pricing for chicken products closer to the market, such as through a combination of market- and cost-based pricing.
During the second quarter, Pilgrim’s sales and volume in foodservice and retail rose slightly. Export demand remained very strong during the quarter, with sales, volume and pricing hitting all-time highs for the period. Year-to-date export sales are up 65% and volumes have climbed 50% -- far outpacing growth in overall U.S. chicken exports.
“Our partnership with JBS USA is helping us enter new markets and increase our penetration in many existing markets,” Lovette explained, noting that Pilgrim’s share of the U.S. export market for chicken has climbed from 17% to 24%.
He said the company is making good improvement toward its target of $400 million annualized improvement in plant costs and yield improvements by end of 2011. Through the first six months of the year, Pilgrim’s had achieved an estimated $270 million in annualized improvement. In addition, Pilgrim’s is moving closer to its goal of performing in the top 25% of chicken companies as measured by Agristats, an industry benchmarking service.
“This is a clear sign that we are focused on the right things that can move the needle for us, including improving the mix impact. We need to capture every opportunity to improve our business and maximize the sales mix from each bird that comes through our plants,” he said.
In addition, Pilgrim’s cost-reduction efforts are continuing, as Selling, General & Administrative (SG&A) expense as a percent of sales was 2.7%, down from 3.7% a year ago. The company also continues to realize synergies from its integration with JBS USA. To date, the two companies have captured an estimated $258 million in combined synergies through areas such as transportation and logistics, purchasing, information technology and insurance.
On June 24, Pilgrim’s announced an amendment to the financial covenants in its credit facility. The amendment suspends the existing fixed-charge coverage covenant and the senior secured debt covenant until the fourth quarter of fiscal 2012 and sets certain financial covenant levels at terms more favorable to the company. In support of that agreement, JBS USA provided a $50 million loan to Pilgrim’s.
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“This is an unprecedented time for our industry,” Lovette said. “But industry production cuts are accelerating, with egg sets so far in July declining 6% when compared to a year ago. At the same time, we remain focused on the fundamentals of our business – improving yields and sales mix, reducing costs and operating more efficiently. We have attracted new talent in key leadership positions, and we are showing good improvement in those areas of our business that we can control. We have ample liquidity and the amendment to our financial covenants gives us runway to significantly improve our business and to position Pilgrim’s as a much leaner and better managed company for 2012.”
For the first six months of fiscal 2011, Pilgrim’s reported a net loss of $248.9 million, or $1.16 per share, on sales of $3.8 billion. This compares to a net loss of $12.6 million, or $0.06 per share for the comparable period in 2010. The year-ago results included net reorganization expenses of $18.5 million and administrative restructuring expenses of $52.7 million.
Conference Call Information
A conference call to discuss the company's quarterly results will be held today at 11 a.m. Eastern. To listen live via telephone, call toll-free 800-441-0022, passcode 8443047. International callers should dial 719-325-2431, passcode 8443047. The presentation will be broadcast live over the Internet at http://www.videonewswire.com/event.asp?id=80734. (Please copy and paste the link into the browser.)
Additionally, the company will post a slide presentation on its website at http://www.pilgrims.com which may be viewed by listeners in connection with today’s conference call. The webcast will be available for replay within approximately two hours of the conclusion of the call. A toll-free telephone replay will be available that same day beginning at approximately noon Mountain time by calling 888-203-1112, passcode 8443047. International callers may dial 719-457-0820, passcode 8443047. The replay will be available for 30 days.
About Pilgrim’s Pride
Pilgrim's employs approximately 42,000 people and operates chicken processing plants and prepared-foods facilities in 12 states, Puerto Rico and Mexico. The Company's primary distribution is through retailers and foodservice distributors. For more information, please visit http://www.pilgrims.com.
Forward-Looking Statements
Statements contained in this press release that state the intentions, plans, hopes, beliefs, anticipations, expectations or predictions of the future of Pilgrim's Pride Corporation and its management are forward-looking statements. It is important to note that the actual results could differ materially from those projected in such forward-looking statements. Factors that could cause actual results to differ materially from those projected in such forward-looking statements include: matters affecting the poultry industry generally; the ability to execute the company’s business plan to achieve desired cost savings and profitability; the ability of the company to achieve the anticipated synergistic gains from the sale of 64% of its common stock to JBS USA Holdings, Inc; the ability of the company to re-open its idled facilities in the manner and on the time schedule planned due to, among other things, the company’s dependence on commodity prices and economic conditions; future pricing for feed ingredients and the company’s products; additional outbreaks of avian influenza or other diseases, either in Pilgrim’s Pride’s flocks or elsewhere, affecting its ability to conduct its operations and/or demand for its poultry products; contamination of Pilgrim’s Pride’s products, which has previously and can in the future lead to product liability claims and product recalls; exposure to risks related to product liability, product recalls, property damage and injuries to persons, for which insurance coverage is expensive, limited and potentially inadequate; management of cash resources, particularly in light of Pilgrim’s Pride’s substantial leverage; restrictions imposed by, and as a result of, Pilgrim’s Pride’s substantial leverage; changes in laws or regulations affecting Pilgrim’s Pride’s operations or the application thereof; new immigration legislation or increased enforcement efforts in connection with existing immigration legislation that cause the costs of doing business to increase, cause Pilgrim’s Pride to change the way in which it does business, or otherwise disrupt its operations; competitive factors and pricing pressures or the loss of one or more of Pilgrim’s Pride’s largest customers; currency exchange rate fluctuations, trade barriers, exchange controls, expropriation and other risks associated with foreign operations; disruptions in international markets and distribution channel, including exports into Russia, the anti-dumping proceeding in Ukraine and the anti-dumping and countervailing duty proceeding in China; and the impact of uncertainties of litigation as well as other risks described under "Risk Factors" in the Company’s Annual Report on Form 10-K and subsequent filings with the Securities and Exchange Commission. Pilgrim's Pride Corporation undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
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PILGRIM'S PRIDE CORPORATION
Consolidated Statements of Operations
(Unaudited)
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Thirteen Weeks Ended
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Twenty-Six Weeks Ended
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June 26,
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June 27,
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June 26,
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June 27,
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2011
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2010
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2011
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2010
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(In thousands, except per share data)
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Net sales
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$ | 1,922,690 | $ | 1,707,568 | $ | 3,815,166 | $ | 3,350,486 | ||||||||
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Cost of sales
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1,968,918 | 1,575,077 | 3,914,504 | 3,165,976 | ||||||||||||
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Gross profit (loss)
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(46,228 | ) | 132,491 | (99,338 | ) | 184,510 | ||||||||||
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Selling, general and administrative expense
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52,478 | 63,718 | 106,144 | 112,319 | ||||||||||||
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Administrative restructuring charges, net
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- | 16,882 | - | 52,701 | ||||||||||||
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Operating income (loss)
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(98,706 | ) | 51,891 | (205,482 | ) | 19,490 | ||||||||||
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Interest expense
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27,426 | 26,115 | 54,933 | 54,535 | ||||||||||||
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Interest income
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(278 | ) | (627 | ) | (988 | ) | (1,174 | ) | ||||||||
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Miscellaneous, net
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(1,392 | ) | (4,504 | ) | (5,198 | ) | (6,829 | ) | ||||||||
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Income (loss) before reorganization
items and income taxes
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(124,462 | ) | 30,907 | (254,229 | ) | (27,042 | ) | |||||||||
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Reorganization items, net
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- | (2,178 | ) | - | 18,541 | |||||||||||
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Income (loss) before income taxes
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(124,462 | ) | 33,085 | (254,229 | ) | (45,583 | ) | |||||||||
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Income tax (expense) benefit
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3,470 | (1,503 | ) | (6,402 | ) | (34,807 | ) | |||||||||
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Net income (loss)
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(127,932 | ) | 34,588 | (247,827 | ) | (10,776 | ) | |||||||||
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Less: Net income attributable to
noncontrolling interests
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209 | 1,670 | 1,074 | 1,853 | ||||||||||||
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Net income (loss) attributable to
Pilgrim’s Pride Corporation
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$ | (128,141 | ) | $ | 32,918 | $ | (248,901 | ) | $ | (12,629 | ) | |||||
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Weighted average shares of common stock
outstanding:
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Basic
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214,282 | 214,282 | 214,282 | 214,282 | ||||||||||||
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Diluted
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214,282 | 214,282 | 214,282 | 214,282 | ||||||||||||
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Net income (loss) per share of common stock
outstanding:
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Basic
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$ | (0.60 | ) | $ | 0.15 | $ | (1.16 | ) | $ | (0.06 | ) | |||||
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Diluted
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$ | (0.60 | ) | $ | 0.15 | $ | (1.16 | ) | $ | (0.06 | ) | |||||
3
PILGRIM’S PRIDE CORPORATION
Consolidated Balance Sheets
(Unaudited)
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June 26,
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December 26,
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2011
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2010
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(In thousands)
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Cash and cash equivalents
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$ | 34,564 | $ | 106,077 | ||||
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Restricted cash and cash equivalents
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61,483 | 60,953 | ||||||
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Investment in available-for-sale securities
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824 | 1,554 | ||||||
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Trade accounts and other receivables, less allowance
for doubtful accounts
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364,995 | 321,300 | ||||||
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Account receivable from JBS USA, LLC
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13,708 | 465 | ||||||
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Inventories
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967,067 | 1,029,254 | ||||||
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Income taxes receivable
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57,835 | 58,465 | ||||||
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Current deferred tax assets
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3,612 | 3,476 | ||||||
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Prepaid expenses and other current assets
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96,289 | 81,250 | ||||||
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Assets held for sale
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48,162 | 47,671 | ||||||
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Total current assets
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1,648,539 | 1,710,465 | ||||||
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Investment in available-for-sale securities
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12,224 | 11,595 | ||||||
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Deferred tax assets
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32,303 | 22,609 | ||||||
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Other long-lived assets
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64,804 | 67,143 | ||||||
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Identified intangible assets, net
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46,954 | 48,950 | ||||||
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Property, plant and equipment, net
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1,358,378 | 1,358,136 | ||||||
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Total assets
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$ | 3,163,202 | $ | 3,218,898 | ||||
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Accounts payable
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$ | 335,009 | $ | 329,780 | ||||
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Account payable to JBS USA, LLC
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13,073 | 7,212 | ||||||
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Accrued expenses and other current liabilities
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315,123 | 297,940 | ||||||
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Income taxes payable
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2,292 | 6,814 | ||||||
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Current deferred tax liabilities
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38,744 | 38,745 | ||||||
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Current maturities of long-term debt
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15,607 | 58,144 | ||||||
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Total current liabilities
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719,848 | 738,635 | ||||||
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Long-term debt, less current maturities
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1,448,280 | 1,281,160 | ||||||
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Note payable to JBS USA Holdings, Inc.
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50,000 | - | ||||||
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Deferred tax liabilities
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3,612 | 3,476 | ||||||
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Other long-term liabilities
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113,765 | 117,031 | ||||||
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Total liabilities
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2,335,505 | 2,140,302 | ||||||
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Common stock
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2,143 | 2,143 | ||||||
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Additional paid-in capital
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1,443,186 | 1,442,810 | ||||||
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Accumulated deficit
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(596,074 | ) | (348,653 | ) | ||||
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Accumulated other comprehensive loss
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(24,368 | ) | (23,637 | ) | ||||
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Total Pilgrim’s Pride Corporation stockholders’ equity
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824,887 | 1,072,663 | ||||||
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Noncontrolling interest
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2,810 | 5,933 | ||||||
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Total stockholders’ equity
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827,697 | 1,078,596 | ||||||
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Total liabilities and stockholders' equity
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$ | 3,163,202 | $ | 3,218,898 | ||||
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PILGRIM'S PRIDE CORPORATION
Selected Financial Information
(Unaudited)
Note: “EBITDA” is defined as the sum of income (loss) from continuing operations plus interest, taxes, depreciation and amortization. “Adjusted EBITDA” is defined as the sum of EBITDA plus restructuring charges, reorganization items and loss on early extinguishment of debt less net income attributable to noncontrolling interests. EBITDA is presented because it is used by us and we believe it is frequently used by securities analysts, investors and other interested parties, in addition to and not in lieu of results prepared in conformity with accounting principles generally accepted in the US (“GAAP”), to compare the performance of companies. We believe investors would be interested in our Adjusted EBITDA because this is how our management analyzes EBITDA from continuing operations. The Company also believes that Adjusted EBITDA, in combination with the Company's financial results calculated in accordance with GAAP, provides investors with additional perspective regarding the impact of certain significant items on EBITDA and facilitates a more direct comparison of its performance with its competitors. EBITDA and Adjusted EBITDA are not measurements of financial performance under GAAP. They should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net income as indicators of our operating performance or any other measures of performance derived in accordance with GAAP.
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Thirteen Weeks Ended
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Twenty-Six Weeks Ended
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June 26,
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June 27,
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June 26,
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June 27,
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2011
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2010
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2011
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2010
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(In thousands, except per share data)
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(In thousands, except per share data)
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Net loss from continuing operations
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$ | (127,932 | ) | $ | 34,588 | $ | (247,827 | ) | $ | (10,776 | ) | |||||
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Add:
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Income tax expense (benefit)
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3,470 | (1,503 | ) | (6,402 | ) | (34,807 | ) | |||||||||
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Interest expense, net
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27,148 | 25,488 | 53,945 | 53,361 | ||||||||||||
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Depreciation and amortization
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52,223 | 59,705 | 103,075 | 117,473 | ||||||||||||
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Minus:
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Amortization of capitalized loan costs
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2,250 | 3,761 | 4,493 | 7,541 | ||||||||||||
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EBITDA
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(47,341 | ) | 114,517 | (101,702 | ) | 117,710 | ||||||||||
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Add:
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Restructuring charges
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- | 16,882 | - | 52,701 | ||||||||||||
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Reorganization items, net
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- | (2,178 | ) | - | 18,541 | |||||||||||
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Minus:
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Net income attributable to noncontrolling interest
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209 | 1,670 | 1,074 | 1,853 | ||||||||||||
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Adjusted EBITDA
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$ | (47,550 | ) | $ | 127,551 | $ | (102,776 | ) | $ | 187,099 | ||||||
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