UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the quarterly period ended December
30, 2006
OR
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the transition period from to
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.)
|
|
|
4845
US Hwy 271 N, Pittsburg, TX
|
75686-0093
|
|
|
(Address
of principal executive offices)
|
(Zip
code)
|
|
|
Registrant’s
telephone number, including area code: (903)
434-1000
|
||
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 period 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
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one): Large accelerated filer x
Accelerated filer ¨
Non-accelerated filer ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨
No
x
Number
of
shares outstanding of the issuer’s common stock, as of January 29, 2007, was
66,555,733.
|
PILGRIM’S
PRIDE CORPORATION AND SUBSIDIARIES
|
||
|
PART
I. FINANCIAL INFORMATION
|
||
|
Item
1.
|
Financial
Statements (Unaudited)
|
|
|
December
30, 2006 and September 30, 2006
|
||
|
Three
months ended December 30, 2006 and December 31, 2005
|
||
|
Three
months ended December 30, 2006 and December 31, 2005
|
||
|
Item
2.
|
||
|
Item
3.
|
||
|
Item
4.
|
||
|
PART
II. OTHER INFORMATION
|
||
|
Item
1.
|
||
|
Item
1A.
|
||
|
Item
6.
|
||
|
PART
I. FINANCIAL INFORMATION
|
||||||||||
|
Item
1. Financial Statements
|
||||||||||
|
Pilgrim's
Pride Corporation
|
||||||||||
|
(Unaudited)
|
||||||||||
|
December
30, 2006
|
September
30, 2006
|
|||||||||
|
Assets
|
(In
thousands, except share and per share data)
|
|||||||||
|
Current
Assets:
|
||||||||||
|
Cash
and cash equivalents
|
$
|
146,544
|
$
|
156,404
|
||||||
|
Investment
in available for sale securities
|
22,537
|
21,246
|
||||||||
|
Trade
accounts and other receivables, less allowance for doubtful
accounts
|
356,523
|
263,149
|
||||||||
|
Inventories
|
860,643
|
585,940
|
||||||||
|
Income
taxes receivable
|
27,946
|
39,167
|
||||||||
|
Current
deferred income taxes
|
23,337
|
7,288
|
||||||||
|
Other
current assets
|
50,144
|
32,480
|
||||||||
|
Total
Current Assets
|
1,487,674
|
1,105,674
|
||||||||
|
Investment
in Available for Sale Securities
|
147,141
|
115,375
|
||||||||
|
Other
Assets
|
112,308
|
50,825
|
||||||||
|
Goodwill
|
537,516
|
--
|
||||||||
|
Property,
Plant and Equipment:
|
||||||||||
|
Land
|
92,215
|
52,493
|
||||||||
|
Buildings,
machinery and equipment
|
2,292,694
|
1,702,949
|
||||||||
|
Autos
and trucks
|
54,907
|
57,177
|
||||||||
|
Construction-in-progress
|
97,363
|
63,853
|
||||||||
|
2,537,179
|
1,876,472
|
|||||||||
|
Less
accumulated depreciation
|
(744,635
|
)
|
(721,478
|
)
|
||||||
|
1,792,544
|
1,154,994
|
|||||||||
|
$
|
4,077,183
|
$
|
2,426,868
|
|||||||
|
Liabilities
and Stockholders’ Equity
|
||||||||||
|
Current
Liabilities:
|
||||||||||
|
Accounts
payable
|
$
|
371,635
|
$
|
293,685
|
||||||
|
Accrued
expenses
|
485,554
|
272,830
|
||||||||
|
Current
maturities of long-term debt
|
4,746
|
10,322
|
||||||||
|
Total
Current Liabilities
|
861,935
|
576,837
|
||||||||
|
Long-Term
Debt, Less Current Maturities
|
713,105
|
554,876
|
||||||||
|
Purchase
Obligation
|
1,057,697
|
--
|
||||||||
|
Deferred
Income Taxes
|
254,109
|
175,869
|
||||||||
|
Other
long-term liabilities
|
32,760
|
--
|
||||||||
|
Minority
Interest in Subsidiary
|
47,247
|
1,958
|
||||||||
|
Commitments
and Contingencies
|
--
|
--
|
||||||||
|
Stockholders’
Equity:
|
||||||||||
|
Preferred
stock, $.01 par value, 5,000,000 authorized shares; none
issued
|
--
|
--
|
||||||||
|
Common
stock - $.01 par value, 160,000,000 authorized shares; 66,555,733
issued
|
665
|
665
|
||||||||
|
Additional
paid-in capital
|
469,779
|
469,779
|
||||||||
|
Retained
earnings
|
636,516
|
646,750
|
||||||||
|
Accumulated
other comprehensive income
|
3,370
|
134
|
||||||||
|
Total
Stockholders’ Equity
|
1,110,330
|
1,117,328
|
||||||||
|
$
|
4,077,183
|
$
|
2,426,868
|
|||||||
|
See
notes to consolidated financial
statements.
|
||||||||||
|
Pilgrim’s
Pride Corporation and Subsidiaries
(Unaudited)
|
|||||||
|
Three
Months Ended
|
|||||||
|
December
30, 2006
|
December
31, 2005
|
||||||
|
(in
thousands, except share and per share data)
|
|||||||
|
Net
Sales
|
$
|
1,337,132
|
$
|
1,343,812
|
|||
|
Cost
of sales
|
1,271,606
|
1,225,412
|
|||||
|
Gross
Profit
|
65,526
|
118,400
|
|||||
|
Selling,
general and administrative
|
68,432
|
72,202
|
|||||
|
Operating
income (loss)
|
(2,906
|
)
|
46,198
|
||||
|
Other
Expenses (Income):
|
|||||||
|
Interest
expense
|
13,914
|
12,394
|
|||||
|
Interest
income
|
(1,309
|
)
|
(3,946
|
)
|
|||
|
Foreign
exchange (gain) loss
|
1,504
|
(620
|
)
|
||||
|
Miscellaneous,
net
|
(2,515
|
)
|
1,730
|
||||
|
11,594
|
9,558
|
||||||
|
Income
(Loss) Before Income Taxes
|
(14,500
|
)
|
36,640
|
||||
|
Income
Tax Expense (Benefit)
|
(5,764
|
)
|
10,962
|
||||
|
Net
Income (Loss)
|
$
|
(8,736
|
)
|
$
|
25,678
|
||
|
Net
Income (Loss) per Common Share- Basic and Diluted
|
$
|
(0.13
|
)
|
$
|
0.39
|
||
|
Dividends
declared per common share
|
$
|
0.0225
|
$
|
1.0225
|
|||
|
Weighted
average shares outstanding
|
66,555,733
|
66,555,733
|
|||||
|
See
notes to consolidated financial
statements.
|
|||||||
|
Pilgrim’s
Pride Corporation and Subsidiaries
(Unaudited)
|
|||||||
|
Three
Months Ended
|
|||||||
|
December
30, 2006
|
December
31, 2005
|
||||||
|
(in
thousands)
|
|||||||
|
Cash
Flows From Operating Activities:
|
|||||||
|
Net
income (loss)
|
$
|
(8,736
|
)
|
$
|
25,678
|
||
|
Adjustments
to reconcile net income (loss) to cash provided by operating
activities
|
|||||||
|
Depreciation
and amortization
|
32,697
|
30,348
|
|||||
|
Loss
on property disposals
|
1,769
|
1,096
|
|||||
|
Deferred
income taxes
|
(1,472
|
)
|
--
|
||||
|
Changes
in operating assets and liabilities
|
|||||||
|
Accounts
and other receivables
|
19,654
|
1,417
|
|||||
|
Inventories
|
(29,460
|
)
|
(34,422
|
)
|
|||
|
Other
current assets
|
(5,166
|
)
|
(3,231
|
)
|
|||
|
Accounts
payable and accrued expenses
|
9,861
|
37,085
|
|||||
|
Other
|
38
|
(1,905
|
)
|
||||
|
Cash
Provided by Operating Activities
|
19,185
|
56,066
|
|||||
|
Investing
Activities:
|
|||||||
|
Acquisitions
of property, plant and equipment
|
(39,350
|
)
|
(43,866
|
)
|
|||
|
Purchases
of investment securities
|
(140,350
|
)
|
(2,500
|
)
|
|||
|
Proceeds
from sale or maturity of investment securities
|
108,437
|
--
|
|||||
|
Business
acquisition activity, primarily cash acquired
|
34,065
|
--
|
|||||
|
Proceeds
from property disposals
|
2,557
|
731
|
|||||
|
Other,
net
|
(2,139
|
)
|
(1,026
|
)
|
|||
|
Cash
Used in Investing Activities
|
(36,780
|
)
|
(46,661
|
)
|
|||
|
Financing
Activities:
|
|||||||
|
Proceeds
from long-term debt
|
99,843
|
--
|
|||||
|
Payments
on long-term debt
|
(90,680
|
)
|
(10,291
|
)
|
|||
|
Cash
dividends paid
|
(1,498
|
)
|
(1,498
|
)
|
|||
|
Cash
Provided by (Used in) Financing Activities
|
7,665
|
(11,789
|
)
|
||||
|
Effect
of exchange rate changes on cash and cash equivalents
|
70
|
93
|
|||||
|
Decrease
in cash and cash equivalents
|
(9,860
|
)
|
(2,291
|
)
|
|||
|
Cash
and cash equivalents at beginning of year
|
156,404
|
132,567
|
|||||
|
Cash
and Cash Equivalents at End of Period
|
$
|
146,544
|
$
|
130,276
|
|||
|
See
notes to consolidated financial
statements.
|
|||||||
NOTE
A—BASIS OF PRESENTATION
The
accompanying unaudited consolidated financial statements of Pilgrim’s Pride
Corporation (referred to herein as “Pilgrim’s,” “the Company,” “we,” “us,” “our”
or similar terms) have been prepared in accordance with accounting principles
generally accepted in the United States (“U.S.”) for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X of the U.S. Securities and Exchange Commission. Accordingly, they do
not
include all of the information and footnotes required by U.S. generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal and recurring adjustments
unless otherwise disclosed) considered necessary for a fair presentation
have
been included. Operating results for the three-month period ended December
30,
2006 are not necessarily indicative of the results that may be expected for
the
fiscal year ending September 29, 2007. For further information, refer to
the
consolidated financial statements and footnotes thereto included in Pilgrim’s
Annual Report on Form 10-K for the fiscal year ended September 30,
2006.
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
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.
During
July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation
Number 48, Accounting
for Uncertainty in Income Taxes
(FIN
48). FIN 48 clarifies the accounting for income taxes by prescribing the
minimum
requirements a tax position must meet before being recognized in the financial
statements. In addition, FIN 48 prohibits the use of Statement of Financial
Accounting Standards (SFAS) Number 5, Accounting
for Contingencies,
in
evaluating the recognition and measurement of uncertain tax positions. The
Company will be required to adopt FIN 48 on September 30, 2007, and has not
yet
assessed the impact of the adoption of this standard on the Company’s financial
statements.
During
September 2006, the FASB issued SFAS Number 157, Fair
Value Measurements.
SFAS
Number 157 establishes a framework for measuring fair value within generally
accepted accounting principles clarifies the definition of fair value within
that framework and expands disclosures about the use of fair value measurements.
SFAS Number 157 does not require any new fair value measurements in generally
accepted accounting principles. However, the definition of fair value in
SFAS
Number 157 may affect assumptions used by companies in determining fair value.
The Company will be required to adopt SFAS Number 157 on September 28, 2008.
The
Company has not completed its evaluation of the impact of adoption SFAS Number
157 on the Company’s financial statements, but currently believes the impact of
the adoption of SFAS Number 157 will not require material modification of
the
Company’s fair value measurement and will be substantially limited to expanded
disclosures in the notes to the Company’s consolidated financial
statements.
Total
comprehensive income (loss) was ($5.5) million and $25.6 million for the
three
months ended December 30, 2006 and December 31, 2005, respectively.
NOTE
B—BUSINESS ACQUISITION
On
December 27, 2006, through a tender offer we acquired 45,343,812 shares of
Gold
Kist Inc. (“Gold Kist”) common stock representing 88.87% of all outstanding
shares, the cost of which has been included in Purchase Obligation on our
December 30, 2006 balance sheet. While title to the shares was obtained on
December 27, 2006, the purchase obligation was not funded untl January 3,
2007.
Subsequent to December 30, 2006, we completed the purchase of all remaining
shares and on January 9, 2007, Gold Kist became a wholly owned subsidiary
of the
Company. The acquired assets and assumed liabilities are included in our
December 30, 2006 balance sheet using a preliminary allocation of the purchase
price. However, we have not completed certain appraisals and other purchase
price adjustments. It was determined that the net operations of Gold Kist
from
December 27 to December 30, 2006 were not material and have not been included
in
the accompanying statement of income (loss).
The
purchase price for Gold Kist was $21.00 per share for all outstanding common
shares plus the assumption of approximately $143.5 million of Gold Kist’s debt.
Subsequent to December 30, 2006, we retired the Gold Kist 10 1/4% Senior
Notes
due 2014 with a book value of $128.5 million at a cost of $149.8 million
plus
accrued interest and have notified the holders of the Gold Kist Subordinated
Capital Certificates of Interest that the certificates will be redeemed promptly
at a premium of one year’s interest. The Company also paid transaction costs.
This acquisition was initially funded by (1) $780 million borrowed under
our
revolving-term secured credit facility, and (2) $450 million borrowed under
our
$450 million Senior Unsecured Term Loan Agreement (“Bridge Loan”) (see Note D
below).
In
connection with the acquisition, the Company determined that certain of the
Gold
Kist benefit plans will be frozen immediately with the intent to ultimately
terminate. As a result, the Company recorded an additional purchase price
adjustment of $52.5 million representing the current estimated incremental
cost
of termination. We do not anticipate any material net periodic benefit cost
(income) related to these plans in fiscal 2007. Additionally, we have recorded
allowances for doubtful accounts of $5.0 million and accrued legal costs
of
$20.0 million to conform Gold Kist's accounting policies to the Company's
accounting policies and provided for deferred income taxes on all related
purchase adjustments.
The
following summarizes our purchase obligation at December 30, 2006, based
upon
the 88.87% of the outstanding shares tendered and accepted at that date (in
thousands):
|
Purchase
45,343,812 shares at $21.00 per share
|
$
|
952,220
|
||
|
Premium
to be paid on retirement of debt
|
24,834
|
|||
|
Retirement
of various share-based comp awards
|
25,677
|
|||
|
Various
costs and fees
|
54,966
|
|||
|
Total
purchase obligation at December 30, 2006
|
$
|
1,057,697
|
||
The
following table summarizes our current estimates of the fair value of the
assets
acquired and liabilities assumed at the date of acquisition of Gold Kist.
The
purchase price allocation is preliminary and will be finalized after completion
of the independent appraisal of certain of the assets
acquired and additional analysis of the liabilities assumed, which is currently
underway.
Upon
completion of our analysis, significant adjustments may be
required.
Purchase
price allocation:
(In
thousands):
|
Current
Assets
|
$
|
416,696
|
||
|
Plant,
Property & Equipment
|
633,889
|
|||
|
Goodwill
|
537,516
|
|||
|
Other
assets
|
57,944
|
|||
|
Total
assets acquired
|
1,646,045
|
|||
|
Current
liabilities
|
243,375
|
|||
|
Long-term
debt, less current maturities
|
143,044
|
|||
|
Deferred
income taxes
|
74,667
|
|||
|
Other
long-term liabilities
|
82,049
|
|||
|
Minority
interest
|
45,213
|
|||
|
Total
liabilities assumed
|
588,348
|
|||
|
Total
purchase price
|
$
|
1,057,697
|
||
|
|
Goodwill
represents the purchase price in excess of the value assigned to identifiable
tangible and intangible assets. The value assigned to goodwill is supported
by
expected benefits gained by consolidating the two companies.
The
following unaudited pro forma financial information has been presented as
if the
acquisition had occurred at the beginning of each period presented.
|
In
thousands, except share and per share data
|
Three
Months Ended
|
||||||
|
|
December
30, 2006
|
December
31, 2005
|
|||||
|
Net
sales
|
$
|
1,864,942
|
$
|
1,884,953
|
|||
|
Depreciation
and amortization
|
$
|
53,818
|
$
|
49,522
|
|||
|
Operating
income (loss)
|
$
|
(29,355
|
)
|
$
|
46,867
|
||
|
Interest
expense, net
|
$
|
38,427
|
$
|
30,000
|
|||
|
Income
(loss) before taxes
|
$
|
(65,332
|
)
|
$
|
16,911
|
||
|
Net
income (loss)
|
$
|
(40,294
|
)
|
$
|
13,213
|
||
|
Net
income (loss) per common share
|
$
|
(0.61
|
)
|
$
|
0.20
|
||
|
Weighted
average shares outstanding
|
66,555,733
|
66,555,733
|
|||||
NOTE
C—INVENTORIES
|
December
30,
|
September
30,
|
||||||
|
(In
thousands)
|
2006
|
2006
|
|||||
|
Chicken:
|
|||||||
|
Live
chicken and hens
|
$
|
314,100
|
$
|
196,284
|
|||
|
Feed
and eggs
|
214,544
|
132,309
|
|||||
|
Finished
chicken products
|
294,279
|
201,516
|
|||||
|
822,923
|
530,109
|
||||||
|
Turkey:
|
|||||||
|
Live
turkey and hens
|
$
|
7,763
|
$
|
7,138
|
|||
|
Feed
and eggs
|
3,641
|
4,740
|
|||||
|
Finished
turkey products
|
9,113
|
26,685
|
|||||
|
20,517
|
38,563
|
||||||
|
Other
Products:
|
|||||||
|
Commercial
feed, table eggs, retail farm store and other
|
$
|
8,020
|
$
|
7,080
|
|||
|
Distribution
inventories (other than chicken & turkey products)
|
9,183
|
10,188
|
|||||
|
17,203
|
17,268
|
||||||
|
Total
Inventories
|
$
|
860,643
|
$
|
585,940
|
|||
NOTE
D—NOTES PAYABLE AND LONG-TERM DEBT
|
Final
Maturity
|
December
30, 2006
|
September
30, 2006
|
||||||||
|
Senior
unsecured notes, at 9 5/8%
|
2011
|
$
|
299,496
|
$
|
299,601
|
|||||
|
Senior
subordinated unsecured notes, at 9 1/4%
|
2013
|
82,640
|
82,640
|
|||||||
|
Secured
revolving credit facility with notes payable at LIBOR plus 1.25%
to LIBOR
plus 2.75%
|
2011
|
75,526
|
74,682
|
|||||||
|
Note
payable to an insurance company at 6.68%
|
2012
|
--
|
50,115
|
|||||||
|
Notes
payable to an insurance company at LIBOR plus 2.2075%
|
2013
|
--
|
41,333
|
|||||||
|
Senior
unsecured notes, at 10.25%
|
2014
|
128,555
|
--
|
|||||||
|
Revolving-term
secured credit facility, with notes payable at LIBOR plus a
spread
|
2016
|
--
|
--
|
|||||||
|
Term
credit facility, with notes payable at US Treasuries, plus a
spread
|
2016
|
--
|
--
|
|||||||
|
Term
loan payable at 6.84%
|
2016
|
100,000
|
--
|
|||||||
|
Subordinated
capital certificates of interest, at weighted average 8.04%
|
Various
|
13,482
|
--
|
|||||||
|
Other
|
Various
|
18,152
|
16,827
|
|||||||
|
717,851
|
565,198
|
|||||||||
|
Less
current maturities
|
(4,746
|
)
|
(10,322
|
)
|
||||||
|
Total
|
$
|
713,105
|
$
|
554,876
|
||||||
On
December 15, 2006, the Company borrowed $100 million at 6.84% under our term
credit facility using the majority of the funds to retire the notes payable
to
an insurance company maturing in 2012 and 2013.
Subsequent
to December 30, 2006, the Company borrowed (1) $780 million under our
revolving-term secured credit agreement and (2) $450 million under our Bridge
Loan agreement. On January 24, 2007, the Company closed on the sale of $400
million of 7 5/8% Senior Notes due 2015 (the “Senior Notes”) and $250 million of
8 3/8% Senior Subordinated Notes due 2017 (the “Subordinated Notes”), sold at
par. Interest is payable on May 1 and November 1 of each year, beginning
November 1, 2007. We may redeem all or part of the Senior Notes on or after
May
1, 2011. We may redeem all or part of the Subordinated Notes on or after May
1,
2012. Before May 1, 2010, we also may redeem up to 35% of the aggregate
principal amount of each of the Senior Notes and the Subordinated Notes with
the
proceeds of certain equity offerings. Each of these optional redemptions is
at a
premium as described in the indentures under which the notes were issued. The
proceeds from the sale of the notes, after underwriting discounts, were used
to
(1) retire the Bridge Loan, (2) repurchase $75.7 million of the Company’s 9 1/4%
Senior Subordinated Notes due 2013 at a premium of $7.4 million plus accrued
interest of $1.3 million and (3) reduce the balance owed under our
revolving-term secured agreement.
NOTE
E—INCOME TAXES
The
Company’s effective tax rate in fiscal 2007 is expected to be lower than
applicable statutory tax rates primarily due to the existence of tax exempt
income and certain deductions related to qualified manufacturing
activities.
NOTE
F—RELATED PARTY TRANSACTIONS
Lonnie
“Bo” Pilgrim, the Chairman and, through certain related entities, the major
stockholder of the Company (collectively, the “major stockholder”), owns an egg
laying and a chicken growing operation. In addition, at certain times during
the
year, the major stockholder may purchase from the Company live chickens and
hens
and certain feed inventories during the grow-out process and then contract
with
the Company to resell the birds at maturity using a market-based formula, with
prices subject to a ceiling price calculated at his cost plus two percent.
Purchases made by the Company under this agreement resulted in no operating
margin to the major stockholder during the fiscal quarter ended December 30,
2006 and $4,539 operating margin during the fiscal quarter ended December 31,
2005, on gross amounts paid by the Company to the major stockholder as set
forth
below in “Live chicken purchases from major stockholder”.
Transactions
with related parties are summarized as follows:
|
Three
Months Ended
|
|||||||
|
December
30, 2006
|
December
31, 2005
|
||||||
|
(in
thousands)
|
|||||||
|
Lease
payments on commercial egg property
|
$
|
188
|
$
|
188
|
|||
|
Contract
grower pay
|
$
|
199
|
$
|
234
|
|||
|
Other
sales to major stockholder
|
$
|
147
|
$
|
220
|
|||
|
Live
chicken purchases from major stockholder
|
$
|
--
|
$
|
231
|
|||
|
Loan
guaranty fees
|
$
|
336
|
$
|
410
|
|||
|
Lease
payments and operating expenses on airplane
|
$
|
119
|
$
|
131
|
|||
NOTE
G—COMMITMENTS AND CONTINGENCIES
At
December 30, 2006, the Company had $88.4 million in letters of credit
outstanding relating to normal business transactions.
Among
the
claims presently pending against the Company are claims brought by current
and
former employees seeking compensation for the time spent donning and doffing
work equipment. We are aware of an industry-wide investigation by the Wage
and
Hour Division of the U.S. Department of Labor to ascertain compliance with
various wage and hour issues, including the compensation of employees for the
time spent on such activities such as donning and doffing work equipment. Due,
in part, to the government investigation and the recent U.S. Supreme Court
decision in IBP,
Inc. v. Alvarez,
it is
possible that we may be subject to additional employee claims. We intend to
assert vigorous defenses to the litigation. Nonetheless, there can be no
assurances that other similar claims may not be brought against the Company.
Currently we do not expect these cases to have a material impact on our
financial position or results of operations.
On
December 31, 2003, we were served with a purported class action complaint styled
“Angela Goodwin, Gloria Willis, Johnny Gill, Greg Hamilton, Nathan Robinson,
Eddie Gusby, Pat Curry, Persons Similarly Situated v. ConAgra Poultry Company
and Pilgrim’s Pride, Incorporated” in the United States District Court, Western
District of Arkansas, El Dorado Division, alleging racial and age discrimination
at one of the facilities we acquired from ConAgra. Two of the named plaintiffs,
Greg Hamilton and Gloria Willis, were voluntarily dismissed from this action.
We
believe we have meritorious defenses to the class certification as well as
the
individual claims and we intend to vigorously oppose class certification and
defend these claims. After considering our available resources, we do not expect
these cases to have a material impact on our financial position or results
of
operations.
We
are
subject to various other legal proceedings and claims which arise in the
ordinary course of our business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect
the
financial position or results of operations of the Company.
NOTE
H—BUSINESS SEGMENTS
We
operate in three reportable business segments as (1) a producer and seller
of
chicken products, (2) a producer and seller of turkey products and (3) and
seller of other products.
The
following table presents certain information
regarding our segments:
|
Three
Months Ended
|
|||||||
|
December
30, 2006
|
December
31, 2005
|
||||||
|
(In
thousands)
|
|||||||
|
Net
Sales to Customers:
|
|||||||
|
Chicken:
|
|||||||
|
United
States
|
$
|
1,030,949
|
$
|
1,034,166
|
|||
|
Mexico
|
122,909
|
92,403
|
|||||
|
Sub-total
|
1,153,858
|
1,126,569
|
|||||
|
Turkey
|
51,850
|
61,904
|
|||||
|
Other
Products:
|
|||||||
|
United
States
|
128,975
|
153,530
|
|||||
|
Mexico
|
2,449
|
1,809
|
|||||
|
Sub-total
|
131,424
|
155,339
|
|||||
|
Total
|
1,337,132
|
1,343,812
|
|||||
|
Operating
Income (Loss):
|
|||||||
|
Chicken:
|
|||||||
|
United
States
|
$
|
(11,446
|
)
|
$
|
53,862
|
||
|
Mexico
|
1,329
|
(7,070
|
)
|
||||
|
Sub-total
|
(10,117
|
)
|
46,792
|
||||
|
Turkey
|
2,506
|
(5,642
|
)
|
||||
|
Other
Products:
|
|||||||
|
United
States
|
4,138
|
4,590
|
|||||
|
Mexico
|
567
|
458
|
|||||
|
Sub-total
|
4,705
|
5,048
|
|||||
|
Total
|
$
|
(2,906
|
)
|
$
|
46,198
|
||
|
Depreciation
and Amortization:(a)
|
|||||||
|
Chicken:
|
|||||||
|
United
States
|
$
|
27,445
|
$
|
25,560
|
|||
|
Mexico
|
2,806
|
2,594
|
|||||
|
Sub-total
|
30,251
|
28,154
|
|||||
|
Turkey
|
374
|
781
|
|||||
|
Other
Products:
|
|||||||
|
United
States
|
2,028
|
1,377
|
|||||
|
Mexico
|
44
|
36
|
|||||
|
Sub-total
|
2,072
|
1,413
|
|||||
|
Total
|
$
|
32,697
|
$
|
30,348
|
|||
|
(a)
|
Includes
amortization of capitalized financing costs of approximately $0.7
million
and $0.6 million for each of the three month periods ending December
30,
2006 and December 31, 2005, respectively.
|
Description
of the Company
The
Company is the largest producer of chicken in the United States, the second
largest producer and seller of chicken in Mexico, the largest producer and
seller of chicken in Puerto Rico and has one of the best known brand names
in
the chicken industry. In the U.S., we produce both prepared and fresh chicken
and fresh turkey, while in Mexico and Puerto Rico we exclusively produce fresh
chicken. Through vertical integration we control the breeding, hatching and
growing of chickens. We operate in three business segments and two geographical
areas.
Business
Acquisition
On
December 27, 2006, we acquired 88.87% of all outstanding shares of common stock
of Gold Kist which was the third largest chicken company in the U.S., accounting
for approximately 8.8% of chicken produced in the U.S. in 2005. On January
9,
2007, we acquired all remaining shares of Gold Kist common stock, making Gold
Kist a wholly owned subsidiary of the Company. We determined that the net
operations of Gold Kist from December 27 to December 30, 2006 were not material
and therefore have not included them in the operations of the Company. The
assets and liabilities of Gold Kist have been included in the accompanying
balance sheet using an allocation based on preliminary valuations and purchase
price adjustments. See Note B - “Business Acquisition” of the notes to our
consolidated financial statements, included elsewhere in this Quarterly
Report.
We
are in
the process of fully integrating the operations of Gold Kist into the Company.
We intend to do this as rapidly as possible without interrupting the business.
We expect the acquisition and its integration will result in significant cost
saving opportunities and enhanced growth. We are currently preparing an
optimization plan for all production and distribution facilities and determining
and implementing a “best practice” approach across all operations.
Executive
Summary
During
most of the first quarter of fiscal 2007, industry chicken prices were generally
lower than in the fourth quarter of fiscal 2006, while the average price of
corn
during our first quarter of fiscal 2007 was approximately 38% higher than in
our
fourth quarter of fiscal 2006. Although chicken prices have risen somewhat
in
recent weeks, the increase lags higher grain prices, continuing the negative
operating margins experienced in the first quarter of fiscal 2007.
The
net
loss of $8.7 million for the first quarter of fiscal 2007 is $34.4 million
lower
than the net income of $25.7 million for the first quarter of fiscal 2006.
This
decrease is primarily driven by:
| § |
Increased
cost of sales due to increased feed costs between the two periods,
higher
feed ingredient costs rose 28.8% in the U.S. and 28.1% in Mexico,
due
primarily to corn and soybean meal
prices.
|
| § |
Our
average chicken selling prices in the U.S. were down 5.0% over the
same
period last year, due to overall unfavorable market trends, but total
pounds sold were up an equal 4.9%.
|
Business
Environment
Profitability
in the poultry industry is materially affected by the commodity prices of
feed
ingredients, chicken and turkey, which are determined by supply and demand
factors. As a result, the chicken and turkey industries are subject to cyclical
earnings fluctuations. Cyclical earnings fluctuations can be mitigated somewhat
by:
-
Business strategy;
-
Product
mix;
-
Sales
and marketing plans; and
-
Operating efficiencies.
In
an
effort to reduce price volatility and to generate higher, more consistent
profit
margins, we have concentrated on the production and marketing of prepared
foods
products. Prepared foods products generally have higher profit margins than
our
other products. Also, the production and sale in the U.S. of prepared foods
products reduces the impact of the costs of feed ingredients on our
profitability. Feed ingredient purchases are the single largest component
of our
cost of sales, representing
approximately 31% of our consolidated cost of sales in the first three months
of
fiscal 2007. The production of feed ingredients is positively or negatively
affected primarily by weather patterns throughout the world, the global level
of
supply inventories and demand for feed ingredients, and the agricultural
policies of the U.S. and foreign governments. As further processing is
performed, feed ingredient costs become a decreasing percentage of a product’s
total production cost, thereby reducing their impact on our profitability.
Products sold in this form enable us to charge a premium, reduce the impact
of
feed ingredient costs on our profitability and improve and stabilize our
profit
margins.
As
a
significant portion of the U.S. chicken production is exported, the commodity
prices of chicken and turkey can be, and in the first and second quarters
of
fiscal 2006 were, adversely affected by disruptions in export markets.
Disruptions in the first and second quarters of fiscal 2006 included the
effects
focus and concern over avian influenza had on international demand for poultry
products and the need to reroute products in transit to locations other than
those intended as these concerns materialized. Disruptions at times may also
be
caused by restrictions on imports of U.S.-produced poultry products imposed
by
foreign governments for a variety of reasons, including the protection of
their
domestic poultry producers and allegations of consumer health issues. For
example, Russia and Japan have restricted the importation of U.S.-produced
poultry for both of these reasons in recent periods. In July 2003, the U.S.
and
Mexico entered into a safeguard agreement with regard to imports into Mexico
of
chicken leg quarters from the U.S. Under this agreement, a tariff rate for
chicken leg quarters of 98.8% of the sales price was established. This tariff
rate was reduced on January 1, 2007 to 19.8% and is scheduled to be eliminated
on January 1, 2008. The tariff was imposed due to concerns that the duty-free
importation of such products as provided by the North American Free Trade
Agreement would injure Mexico’s chicken industry. As such tariffs are reduced,
we expect greater amounts of chicken to be imported into Mexico from the
U.S.,
which could negatively affect the profitability of Mexican chicken producers
and
positively affect the profitability of U.S. exporters of chicken to
Mexico. Although
this could have a negative impact on our Mexican chicken operations, we believe
that this will be mitigated by the close proximity of our U.S. operations
to the
Mexico border. We have the largest U.S. production and distribution capacities
near the Mexican border, which gives us a strategic advantage to capitalize
on
exports of U.S. chicken to Mexico. Because these disruptions in chicken export
markets are often political, no assurances can be given as to when the existing
disruptions will be alleviated or that new ones will not
arise.
Business
Segments
We
operate in three reportable business segments as (1) a producer and seller
of
chicken products, (2) a producer and seller of turkey products and (3) and
seller of other products.
The
following table presents certain information regarding our
segments:
|
Three
Months Ended
|
|||||||
|
December
30, 2006
|
December
31, 2005
|
||||||
|
(In
thousands)
|
|||||||
|
Net
Sales to Customers:
|
|||||||
|
Chicken:
|
|||||||
|
United
States
|
$
|
1,030,949
|
$
|
1,034,166
|
|||
|
Mexico
|
122,909
|
92,403
|
|||||
|
Sub-total
|
1,153,858
|
1,126,569
|
|||||
|
Turkey
|
51,850
|
61,904
|
|||||
|
Other
Products:
|
|||||||
|
United
States
|
128,975
|
153,530
|
|||||
|
Mexico
|
2,449
|
1,809
|
|||||
|
Sub-total
|
131,424
|
155,339
|
|||||
|
Total
|
1,337,132
|
1,343,812
|
|||||
|
Operating
Income (Loss):
|
|||||||
|
Chicken:
|
|||||||
|
United
States
|
$
|
(11,446
|
)
|
$
|
53,862
|
||
|
Mexico
|
1,329
|
(7,070
|
)
|
||||
|
Sub-total
|
(10,117
|
)
|
46,792
|
||||
|
Turkey
|
2,506
|
(5,642
|
)
|
||||
|
Other
Products:
|
|||||||
|
United
States
|
4,138
|
4,590
|
|||||
|
Mexico
|
567
|
458
|
|||||
|
Sub-total
|
4,705
|
5,048
|
|||||
|
Total
|
$
|
(2,906
|
)
|
$
|
46,198
|
||
|
Depreciation
and Amortization:(a)
|
|||||||
|
Chicken:
|
|||||||
|
United
States
|
$
|
27,445
|
$
|
25,560
|
|||
|
Mexico
|
2,806
|
2,594
|
|||||
|
Sub-total
|
30,251
|
28,154
|
|||||
|
Turkey
|
374
|
781
|
|||||
|
Other
Products:
|
|||||||
|
United
States
|
2,028
|
1,377
|
|||||
|
Mexico
|
44
|
36
|
|||||
|
Sub-total
|
2,072
|
1,413
|
|||||
|
Total
|
$
|
32,697
|
$
|
30,348
|
|||
|
(a)
|
Includes
amortization of capitalized financing costs of approximately $0.7
million
and $0.6 million for each of the three month periods ending December
30,
2006 and December 31, 2005, respectively.
|
The
following table presents certain items as a percentage of net sales for the
periods indicated:
|
December
30, 2006
|
December
31, 2005
|
||||||
|
Net
sales
|
100.0
|
%
|
100.0
|
%
|
|||
|
Cost
and Expenses
|
|||||||
|
Cost
of sales
|
95.1
|
91.2
|
|||||
|
Gross
profit
|
4.9
|
8.8
|
|||||
|
Selling,
general and administrative expense
|
5.1
|
5.4
|
|||||
|
Operating
income
|
(0.2
|
)
|
3.4
|
||||
|
Interest
expense
|
1.0
|
0.9
|
|||||
|
Interest
income
|
(0.1
|
)
|
(0.3
|
)
|
|||
|
Income
(loss) before income taxes
|
(1.1
|
)
|
2.7
|
||||
|
Net
income (loss)
|
(0.7
|
)
|
1.9
|
||||
Results
of Operations
Fiscal
First Quarter 2007 Compared to Fiscal First Quarter 2006
Net
Sales. Net
Sales
for the first quarter of fiscal 2007 decreased $6.7 million, or 0.5%, over
the
first quarter of fiscal 2006. The following table provides additional
information regarding net sales (in millions):
|
Fiscal
Quarter Ended
|
Change
from
First
Quarter Ended
|
||||||||||||
|
December
30,
|
December
31,
|
Percentage
|
|||||||||||
|
Source
|
2006
|
2005
|
Change
|
||||||||||
|
Chicken-
|
|||||||||||||
|
United
States
|
$
|
1,031.0
|
$
|
(3.2
|
)
|
(0.3
|
)%
|
(a
|
)
|
||||
|
Mexico
|
122.9
|
30.5
|
33.0
|
%
|
(b
|
)
|
|||||||
|
$
|
1,153.9
|
$
|
27.3
|
2.4
|
%
|
||||||||
|
Turkey
|
$
|
51.9
|
$
|
(10.0
|
)
|
(16.2
|
)%
|
(c
|
)
|
||||
|
1,205.8
|
17.3
|
1.5
|
%
|
||||||||||
|
Other
Products-
|
|||||||||||||
|
United
States
|
$
|
128.9
|
$
|
(24.6
|
)
|
(16.0
|
)%
|
(d
|
)
|
||||
|
Mexico
|
2.4
|
0.6
|
33.3
|
%
|
|||||||||
|
$
|
131.3
|
$
|
(24.0
|
)
|
(15.5
|
)%
|
(d
|
)
|
|||||
|
$
|
1,337.1
|
$
|
(6.7
|
)
|
(0.5
|
)%
|
|||||||
|
(a)
|
U.S.
chicken sales were consistent between periods, but reflected a
5.0%
decline in revenue per pound sold during the quarter ended December
30,
2006 as compared to the prior year period being substantially offset
by a
4.9% increase in pounds sold over the same period.
|
|
(b)
|
Mexico
chicken sales increased 33.0% in the current quarter, with a 26.4%
increase in revenue per pound sold as compared to the prior year
quarter
and a 5.2% increase in pounds sold over the same
period.
|
|
(c)
|
U.S.
turkey sales were comparably lower in the current quarter, due
primarily
to a 74.1% decline in further processed turkey product sales attributable
to the discontinuance of our turkey prepared foods operations,
offset
partially by a 12.1% increase in fresh turkey sales.
|
|
(d)
|
Net
sales of other products declined in the current quarter primarily
due to
the divestiture of three distribution centers whose sales included
a
significant portion of non-poultry
products.
|
Gross
Profit.
Gross
profit decreased $52.9 million, or 44.7%, in the first quarter of fiscal
2007
compared to the first quarter of fiscal 2006.
The
following table provides gross profit information (in millions):
|
Fiscal
Quarter
|
Change
From
|
Percentage
of
|
Percentage
|
||||||||||||||||
|
Ended
|
Quarter
Ended
|
Net
Sales
|
of
Net Sales
|
||||||||||||||||
|
December
30,
|
December
31,
|
Percentage
|
First
Quarter
|
First
Quarter
|
|||||||||||||||
|
Components
|
2006
|
2005
|
Change
|
Fiscal
2007
|
Fiscal
2006
|
||||||||||||||
|
Net
sales
|
$
|
1,337.1
|
$
|
(6.7
|
)
|
(0.5
|
)%
|
100.0
|
%
|
100.0
|
%
|
||||||||
|
Cost
of sales
|
1,271.6
|
46.2
|
3.8
|
%
|
95.1
|
%
|
91.2
|
%
|
(a
|
)
|
|||||||||
|
Gross
profit
|
$
|
65.5
|
$
|
(52.9
|
)
|
(44.7
|
)%
|
4.9
|
%
|
8.8
|
%
|
(b
|
)
|
||||||
|
(a)
|
Cost
of sales increased $77.6 million due primarily to a 28.8% increase
in feed
ingredient pricing, particularly corn, and increased sales volume
when
compared to the prior year, which was negatively impacted by disruptions
in export markets over avian influenza concerns. These increases
are
offset by a $45.3 million reduction in expenses attributable to
our
discontinued prepared turkey products operations and our divestiture
of
three distribution centers in the later half of fiscal 2006 whose
sales
included a significant portion of non-poultry products.
|
|
(b)
|
Gross
profit decreased $52.9 million primarily due to increased feed
ingredient
costs offset by improved pricing of Mexico chicken products and
a more
profitable product mix in our turkey
operations.
|
Operating
Income.
Operating income for the first quarter of fiscal 2007 decreased $49.1 million,
when compared to the first quarter of fiscal 2006.
The
following tables provide operating income information (in
millions):
|
Change
from
|
||||||||||
|
Quarter
Ended
|
Quarter
Ended
|
|||||||||
|
December
30,
|
December
31,
|
Percentage
|
||||||||
|
Source
|
2006
|
2005
|
Change
|
|||||||
|
Chicken
|
||||||||||
|
United
States
|
$
|
(11.4
|
)
|
$
|
(65.3
|
)
|
(121.2
|
)%
|
||
|
Mexico
|
1.3
|
8.4
|
118.8
|
%
|
||||||
|
$
|
(10.1
|
)
|
$
|
(56.9
|
)
|
(121.6
|
)%
|
|||
|
Turkey
|
$
|
2.5
|
$
|
8.1
|
144.4
|
%
|
||||
|
Other
Products
|
||||||||||
|
United
States
|
$
|
4.1
|
$
|
(0.5
|
)
|
(9.8
|
)%
|
|||
|
Mexico
|
0.6
|
0.2
|
24.8
|
%
|
||||||
|
$
|
4.7
|
$
|
(0.3
|
)
|
(6.8
|
)%
|
||||
|
Operating
Income
|
$
|
(2.9
|
)
|
$
|
(49.1
|
)
|
(106.3
|
)%
|
||
|
Change
from
|
Percentage
|
Percentage
|
|||||||||||||||||
|
Quarter
Ended
|
Quarter
Ended
|
of
Net Sales
|
of
Net Sales
|
||||||||||||||||
|
December
30,
|
December
31,
|
Percentage
|
First
Quarter
|
First
Quarter
|
|||||||||||||||
|
Components
|
2006
|
2005
|
Change
|
Fiscal
2007
|
Fiscal
2006
|
||||||||||||||
|
Gross
profit
|
$
|
65.5
|
$
|
(52.9
|
)
|
(44.7
|
)%
|
4.9
|
%
|
8.8
|
%
|
||||||||
|
Selling,
general and administrative expense
|
68.4
|
(3.8
|
)
|
(5.2
|
)%
|
5.1
|
%
|
5.4
|
% |
(a
|
)
|
||||||||
|
Operating
income
|
$
|
(2.9
|
)
|
$
|
(49.1
|
)
|
(106.3
|
)%
|
(0.2
|
)%
|
3.4
|
% |
(b
|
)
|
|||||
|
(a)
|
Decrease
is primarily due to reduced incentive based compensation as a result
of
declining operating results.
|
|
(b)
|
Decrease
in operating income is primarily due to items discussed above under
gross
profit, offset by reduced selling, general and administrative
expenses.
|
Interest
Expense. Interest
expense increased 12.3% to $13.9 million in the first quarter of fiscal 2007,
when compared to $12.4 million for the first quarter of fiscal 2006, due
primarily to an increased average interest rate and a decrease in amounts of
interest capitalized during the quarter. As a percentage of sales, interest
expense in the first quarter of fiscal 2007 increased to 1.0% from 0.9% in
the
first quarter of fiscal 2006. Interest expense will increase substantially
in
future periods as a result of our borrowings in connection with our acquisition
of Gold Kist. See Note B - “Business Acquisition” of the notes to our
consolidated financial statements included elsewhere in this Quarterly
Report.
Interest
Income.
Interest
income decreased from $3.9 million in the first quarter of fiscal 2006 to $1.3
million in the first quarter of fiscal 2007 due a reduced level of investment
in
available for sale securities.
Miscellaneous,
Net.
Consolidated miscellaneous, net income of $2.5 million, consisted mainly of
investment income of $1.8 million.
Income
Tax Expense.
Consolidated income tax benefit in the first quarter of fiscal 2007 was $5.8
million, compared to an income tax expense of $11.0 million in the first quarter
of fiscal 2006.
Liquidity
and Capital Resources
Subsequent
to December 30, 2006, to finance the acquisition of Gold Kist, the Company
borrowed (1) $780 million under our revolving-term secured credit agreement
and
(2) $450 million under our Bridge Loan agreement. On January 24, 2007, the
Company closed on the sale of $400 million of 7 5/8% Senior Notes due 2015
(the
“Senior Notes”) and $250 million of 8 3/8% Senior Subordinated Notes due 2017
(the “Subordinated Notes”), sold at par. Interest is payable on May 1 and
November 1 of each year beginning November 1, 2007. We may redeem all or part
of
the Senior Notes on or after May 1, 2011. We may redeem all or part of the
Subordinated Notes on or after May 1, 2012. Before May 1, 2010, we also may
redeem up to 35% of the aggregate principal amount of each of the Senior Notes
and the Subordinated Notes with the proceeds of certain equity offerings. Each
of these optional redemptions is at a premium as described in the indentures
under which the notes were issued. The proceeds after underwriting discounts
were used to (1) retire the Bridge Loan, (2) repurchase $75.7 million of the
Company’s 9 ¼% Senior Subordinated Notes due 2013 at a premium of $7.4 million
plus accrued interest of $1.3 million and (3) reduce the balance owed under
our
revolving-term secured credit agreement. The covenants required by these new
notes are substantially the same as under our existing notes.
The
following table presents our available sources of liquidity as of January 29,
2007, the most recent date available. See our Annual Report on Form 10-K for
the
fiscal year ended September 30, 2006 for a detailed description of each facility
discussed below.
|
Facility
|
Amount
|
|||||||||
|
Source
of Liquidity
|
Amount
|
Outstanding
|
Available
|
|||||||
|
(in
millions)
|
||||||||||
|
Cash
and cash equivalents
|
$
|
--
|
$
|
--
|
$
|
130.0
|
||||
|
Investments
in available for
sale
securities - short-term
|
--
|
--
|
142.7
|
|||||||
|
Investments
in available for sale securities
|
--
|
--
|
10.1
|
|||||||
|
Debt
Facilities:
|
||||||||||
|
Revolving
credit facilities
|
225.0
|
163.4
|
61.6
|
|||||||
|
Revolving/term
facility
|
845.0
|
675.0
|
170.0
|
|||||||
|
Term
Loan
|
430.0
|
100.0
|
330.0
|
|||||||
|
Receivables
purchase agreement
|
125.0
|
--
|
125.0
|
|||||||
At
December 30, 2006, our working capital increased $96.9 million to $625.7 million
and our current ratio decreased to 1.73 to 1, compared with working capital
of
$528.8 million and a current ratio of 1.92 to 1 at September 30, 2006, primarily
due to the working capital changes discussed below resulting from the
acquisition of Gold Kist. See Note B - “Business Acquisition” to our notes to
the consolidated financial statements included elsewhere in this Quarterly
Report.
Trade
accounts and other receivables were $356.5 million at December 30, 2006,
compared to $263.1 million at September 30, 2006, an increase of $93.4 million
or 35.5%, primarily as a result of the acquisition.
Inventories
increased $274.7 million or 46.9% to $860.6 million at December 30, 2006,
compared to $585.9 million at September 30, 2006. In addition to the
acquisition, this increase was due to higher product costs in finished chicken
products, live inventories and feed inventories as a result of higher feed
ingredient costs.
Accounts
payable increased $78.0 million, or 26.5%, to $371.6 million at December 30,
2006, compared to $293.7 million at September 30, 2006, primarily as a result
of
the acquisition.
Accrued
liabilities increased $212.8 million or 78.0% to $485.6 million at December
30,
2006, compared to $272.8 million at September 30, 2006, primarily as a result
of
the acquisition.
Capital
expenditures of $39.3 million for the three months ended December 30, 2006
were
primarily incurred to improve efficiencies, expand capacity, reduce costs and
for the routine replacement of equipment. Capital expenditures of $43.9 million
for the three months ended December 31, 2005 were primarily incurred to improve
efficiencies, reduce costs and for the routine replacement of equipment. We
anticipate spending approximately $150 million to $175 million in fiscal 2007
to
improve efficiencies, expand capacities and for the routine replacement of
equipment. We expect to finance such expenditures with cash on hand, available
operating cash flows and existing revolving/term and revolving credit
facilities.
Cash
flows provided by operating activities were $19.2 million and $56.1 million
for
the three months ended December 30, 2006 and December 31, 2005, respectively.
The decrease in cash flows provided by operating activities for the first three
months of fiscal 2007, when compared to the first three months of fiscal 2006,
was due primarily to decreased profitability and changes in working capital
items.
Cash
flows used for financing activities were $7.7 million and ($11.8) million for
the three months ended December 30, 2006 and December 31, 2005, respectively.
In
December 2006, we borrowed $100 million at 6.84% under our term credit facility
and primarily used the proceeds to retire our notes payable to an insurance
company maturing in 2012 and 2013. As described above, subsequent to December
30, 2006, we borrowed funds required to finance the acquisition of Gold
Kist.
We
are a
party to many routine contracts in which we provide general indemnities in
the
normal course of business to third parties for various risks. We have not
recorded a liability for any of these indemnities, as the likelihood of payment
in each case is considered remote.
Accounting
Pronouncements
During
July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation
Number 48, Accounting
for Uncertainty in Income Taxes
(FIN
48). FIN 48 clarifies the accounting for income taxes by prescribing the
minimum
requirements a tax position must meet before being recognized in the financial
statements. In addition, FIN 48 prohibits the use of Statement of Financial
Accounting Standards (SFAS) Number 5, Accounting
for Contingencies,
in
evaluating the recognition and measurement of uncertain tax positions. The
Company will be required to adopt FIN 48 on September 30, 2007, and has not
yet
assessed the impact of the adoption of this standard on the Company’s financial
statements.
During
September 2006, the FASB issued SFAS Number 157, Fair
Value Measurements.
SFAS
Number 157 establishes a framework for measuring fair value within generally
accepted accounting principles clarifies the definition of fair value within
that framework and expands disclosures about the use of fair value measurements.
SFAS Number 157 does not require any new fair value measurements in generally
accepted accounting principles. However, the definition of fair value in
SFAS
Number 157 may affect assumptions used by companies in determining fair value.
The Company will be required to adopt SFAS Number 157 on September 28, 2008.
The
Company has not completed its evaluation of the impact of adoption SFAS Number
157 on the Company’s financial statements, but currently believes the impact of
the adoption of SFAS Number 157 will not require material modification of
the
Company’s fair value measurement and will be substantially limited to expanded
disclosures in the notes to the Company’s consolidated financial
statements.
Feed
Ingredients
We
purchase certain commodities, primarily corn and soybean meal. As a result,
our
earnings are affected by changes in the price and availability of such feed
ingredients. As market conditions dictate, we will from time to time lock-in
future feed ingredient prices using various hedging techniques, including
forward purchase agreements with suppliers and futures contracts.
We
do not
use such financial instruments for trading purposes and are not a party to
any
leveraged derivatives. Market risk is estimated as a hypothetical 10% increase
in the weighted-average cost of our primary feed ingredients as of December
30,
2006. Based on our feed consumption during the three months ended December
30,
2006, such an increase would have resulted in an increase to cost of sales
of
approximately $39.4 million, excluding the impact of any hedging in that
period.
A 10% increase in the aggregate primary feed ingredients purchased by the
Company and Gold Kist during the three months ended December 30, 2006, would
have increased cost of sales by $56.8 million.
Interest
Rates
Our
earnings are also affected by changes in interest rates due to the impact
those
changes have on our variable-rate interest expense and the fair value of
our
fixed-rate debt instruments. During the quarter ended December 30, 2006
we
refinanced the notes payable to insurance companies through our term facility
and entered into a U.S. Treasury Note Rate Lock derivative with a notional
amount of $300 million in anticipation of the offering of Senior Notes
issued in
January 2007. The net change in fair value of the U.S. Treasury Note Rate
Lock
at December 30, 2006 was a $4.5 million gain, which was settled in January
2007
for a gain of $5.7 million. However, at December 30, 2006 we do not believe
our
interest rate risk has materially changed since September 30,
2006.
Foreign
Currency
Our
earnings are affected by foreign exchange rate fluctuations related to the
Mexico peso net monetary position of our Mexico subsidiaries. We manage this
exposure primarily by attempting to minimize our Mexico peso net monetary
position, but from time to time, we have considered executing
hedges to help minimize this exposure.
Such
instruments, however, have historically not been economically feasible. We
are
also exposed to the effect of potential exchange rate fluctuations to the
extent
that amounts are repatriated from Mexico to the United States. However, we
currently anticipate that the cash flows of our Mexico subsidiaries will
continue to be reinvested in our Mexico operations. In addition, the Mexico
peso
exchange rate can directly and indirectly impact our results of operations
and
financial position in several ways, including potential economic recession
in
Mexico resulting from a devalued peso. The impact on our financial position
and
results of operations resulting from a hypothetical change in the exchange
rate
between the U.S. dollar and the Mexico 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 our Mexico subsidiaries denominated
in Mexico pesos, was a loss of $1.5 million in the first three months of
fiscal
2007 compared to a gain of $0.6 million for the first three months of fiscal
2006. On December 30, 2006, the Mexico peso closed at 10.85 to 1 U.S. dollar,
compared to 11.01 at September 30, 2006. No assurance can be given as to
how
future movements in the peso could affect our future earnings.
There
have been no material changes from the information provided in “Item 7A
Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report
on Form 10-K for the fiscal year ended September 30, 2006, other than as
described above.
Forward
Looking Statements
Statements
of our intentions, beliefs, expectations or predictions for the future, denoted
by the words "anticipate," "believe," "estimate," "expect," "project," "imply,"
"intend," "foresee" and similar expressions, are forward-looking statements
that
reflect our current views about future events and are subject to risks,
uncertainties and assumptions. Such risks, uncertainties and assumptions
include
the following:
| · |
Matters
affecting the poultry industry generally, including fluctuations
in the
commodity prices of feed ingredients, chicken and
turkey;
|
| · |
Additional
outbreaks of avian influenza or other diseases, either in our own
flocks
or elsewhere, affecting our ability to conduct our operations and/or
demand for our poultry products;
|
| · |
Contamination
of our 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 our cash resources, particularly in light of our substantial
leverage;
|
| · |
Restrictions
imposed by, and as a result of, our substantial
leverage;
|
| · |
Changes
in laws or regulations affecting our operations or the application
thereof;
|
| · |
Competitive
factors and pricing pressures or the loss of one or more of our largest
customers;
|
| · |
Inability
to consummate, or effectively integrate, any acquisition, including
integrating our recent acquisition of Gold Kist, or realize the associated
cost savings and operating synergies;
|
| · |
Currency
exchange rate fluctuations, trade barriers, exchange controls,
expropriation and other risks associated with foreign
operations;
|
| · |
The
impact of uncertainties of litigation as well as other risks described
herein and under “Risk Factors” in our Annual Report on Form 10-K filed
with the Securities and Exchange
Commission.
|
Actual
results could differ materially from those projected in these forward-looking
statements as a result of these factors, among others, many of which are
beyond
our control.
In
making
these statements, we are not undertaking, and specifically decline to undertake,
any obligation to address or update each or any factor in future filings
or
communications regarding our business or results, and we are not undertaking
to
address how any of these factors may have caused changes to information
contained in previous filings or communications. Although we have attempted
to
list comprehensively these important cautionary risk factors, we must caution
investors and others that other factors may in the future prove to be important
and affecting our business or results of operations.
An
evaluation was performed under the supervision and with the participation
of the
Company’s management, including the Chairman, Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company’s “disclosure controls and procedures” (as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as
of the end of the period covered by this Quarterly Report on Form 10-Q. Based
on
that evaluation, the Company’s management, including the Chairman, Chief
Executive Officer and Chief Financial Officer, concluded that the Company’s
disclosure controls and procedures were effective to ensure that information
required to be disclosed by the Company in reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in Securities and Exchange Commission rules and
forms, and that information we are required to disclose in our reports
filed with the Securities and Exchange Commission is accumulated and
communicated to our management, including our Chairman, Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
On
December 27, 2006, we acquired 88.87% of the outstanding common stock of
Gold
Kist and on January 9, 2007, we acquired all remaining shares of Gold Kist.
We
believe that the internal controls and procedures of Gold Kist have a material
effect on our internal control over financial reporting. See Note B - “Business
Acquisition” to our notes to consolidated financial statements contained in this
Quarterly Report for further details of the transaction. We are currently
in the
process of assessing and integrating Gold Kist’s internal controls over
financial reporting into our financial reporting systems.
In
connection with the evaluation described above, the Company’s management,
including the Chairman, Chief Executive Officer and Chief Financial Officer,
identified no other change in the Company's internal control over financial
reporting that occurred during the Company’s fiscal quarter ended December 30,
2006, and that has materially affected, or is reasonably likely to materially
affect, the Company’s internal controls over financial reporting.
PART
II. OTHER INFORMATION
On
July
1, 2002, three individuals, on behalf of themselves and a putative class
of
chicken growers, filed their original class action complaint against the
Company
in the United States District Court for the Eastern District of Texas, Texarkana
Division, styled “Cody Wheeler, et al. vs. Pilgrim’s Pride Corporation.” In
their lawsuit, plaintiffs initially alleged that the Company violated the
Packers and Stockyards Act (7 U.S.C. Section 192) and breached fiduciary
duties
allegedly owed to the plaintiff growers. The plaintiffs also brought individual
actions under the Packers and Stockyards Act alleging, among other things,
breach of fiduciary duties and breach of contract. On September 30, 2005,
plaintiffs amended their lawsuit to join Tyson Foods, Inc. as a co-defendant.
Two additional former chicken growers were also added as plaintiffs to the
lawsuit. This amendment, which occurred 38 months after the lawsuit’s initial
filing, virtually re-wrote most of the allegations. Now the plaintiffs contend
that the Company and Tyson are involved in a conspiracy to violate federal
antitrust laws. The plaintiffs’ initial allegations, although still contained in
the amended lawsuit, are no longer the sole focus of the case. On January
3,
2006, the Court entered an Order severing the plaintiffs’ Packers and Stockyards
Act and antitrust claims. The Court ordered that the plaintiffs may proceed
with
their Packers and Stockyards Act claims as set forth in Plaintiffs’ Third
Amended Complaint. The Court also ordered that the plaintiffs may proceed
with
their respective antitrust claims asserted against the Company and Tyson
in a
separate cause of action styled “Cody Wheeler, et al vs. Pilgrim’s Pride
Corporation, et al.” On March 6, 2006, the plaintiffs filed their motion for
class certification in the original lawsuit. Pilgrim’s Pride attacked the
plaintiffs’ class certification brief on several grounds, and ultimately the
plaintiffs voluntarily withdrew their Motion for Class Certification on May
26,
2006. As a result, the Court canceled the class certification hearing and
on
June 2, 2006 the Court entered an Order withdrawing Plaintiffs’ Motion for Class
Certification and prohibiting the plaintiffs from filing any additional
class-action claims against Pilgrim’s Pride in this lawsuit. Additionally, the
two former growers who joined the lawsuit on September 30, 2005 withdrew
from
the case. The lawsuit is currently proceeding with individual claims by the
three original individual plaintiffs against Pilgrim’s Pride. The Company
intends to defend vigorously against the plaintiffs’ individual claims. The
Company does not expect this matter to have a material impact on its financial
position, operations or liquidity.
On
January 3, 2006, an action styled "Cody Wheeler, et al. vs. Pilgrim's Pride
Corporation, et al.," arising out of the original Wheeler litigation described
above, was filed in the United States District Court for the Eastern District
of
Texas, Texarkana Division. The lawsuit was filed by the three original
plaintiffs and a former grower, both in their individual capacities and on
behalf of a putative class of chicken growers. In the lawsuit, the four
plaintiffs allege that the Company and Tyson are involved in a conspiracy
to
violate federal antitrust laws. A Docket Control Order has been entered by
the
Court and a class certification hearing is currently scheduled for February
8,
2007. The proceedings are currently in the early stages of discovery. The
Company intends to defend vigorously both the certification of the case as
a
class action and the merits of the four plaintiffs’ individual claims. The
Company does not expect this matter to have a material impact on its financial
position, operations or liquidity.
On
December 31, 2003, we were served with a purported class action complaint
styled
“Angela Goodwin, Gloria Willis, Johnny Gill, Greg Hamilton, Nathan Robinson,
Eddie Gusby, Pat Curry, Persons Similarly Situated v. ConAgra Poultry Company
and Pilgrim’s Pride, Incorporated” in the United States District Court, Western
District of Arkansas, El Dorado Division, alleging racial and age discrimination
at one of the facilities we acquired from ConAgra. Two of the named plaintiffs,
Greg Hamilton and Gloria Willis, were voluntarily dismissed from this action.
We
believe we have meritorious defenses to the class certification as well as
the
individual claims and intend to vigorously oppose class certification and
defend
these claims. The ultimate liability with respect to these claims cannot
be
determined at this time; however, we do not expect this matter to have a
material impact on our financial position, operations or liquidity.
On
October 12, 2006, a complaint styled “Gold Kist Inc. v. Pilgrim’s Pride
Corporation, Protein Acquisition Corporation, et al.” was filed in the United
States District Court for the Northern District of Georgia, Atlanta Division,
alleging that the election of our President’s and Chief Executive Officer’s
nominees to the Gold Kist Board of Directors would violate Section 8 of the
Clayton Act and seeking to enjoin our solicitation of the Gold Kist stockholders
to elect such persons to the Gold Kist Board. The complaint also alleges
that we
violated the proxy and tender offer rules by failing to disclose such alleged
violation of the Clayton Act.
Pursuant
to the Agreement and Plan of Merger by and among Gold Kist, the Company and
a
wholly-owned subsidiary of the Company dated as of December 3, 2006, Gold
Kist
agreed that it would dismiss with prejudice the pending litigation upon the
occurrence of the “payment date” referenced therein. On January 3, 2007, the
“payment date” occurred and accordingly, Gold Kist filed a stipulation of
dismissal with prejudice under Rule 41 of the Federal Rules of Civil Procedure.
On January 8, 2007, the Court clerk notified the parties that the case had
been
formally dismissed with prejudice pursuant to the stipulation filed by Gold
Kist.
The
Wage
and Hour Division of the U.S. Department of Labor conducted an industry wide
investigation to ascertain compliance with various wage and hour issues,
including the compensation of employees for the time spent on such activities
such as donning and doffing work equipment. Due, in part, to the government
investigation and the recent U.S. Supreme Court decision in IBP,
Inc. b. Alvarez,
employees have brought claims against the Company. The claims filed against
us
as of the date of this report include: “Juan Garcia, et al. v. Pilgrim’s Pride
Corporation, a/k/a Wampler Foods, Inc.”, filed in Pennsylvania state court on
January 27, 2006 and subsequently removed to the U.S. District Court for
the
Eastern District of Pennsylvania; “Esperanza Moya, et al. v. Pilgrim’s Pride
Corporation and Maxi Staff, LLC”, filed March 23, 2006 in the Eastern District
of Pennsylvania; “Barry Antee, et al. v. Pilgrim’s Pride Corporation” filed
April 20, 2006 in the Eastern District of Texas; “Stephania Aaron, et al. v.
Pilgrim’s Pride Corporation” filed August 22, 2006 in the Western District of
Arkansas; “Salvador Aguilar, et al. v. Pilgrim’s Pride Corporation” filed August
23, 2006 in the Northern District of Alabama; “Benford v. Pilgrim’s Pride
Corporation” filed November 2, 2006 in the Northern District of Alabama; and
“Porter v. Pilgrim’s Pride Corporation” filed December 7, 2006 in the Eastern
District of Tennessee. Several similar cases have also been filed against
Gold
Kist. The plaintiffs generally purport to bring a collective action for unpaid
wages, unpaid overtime wages, liquidated damages, costs, attorneys' fees,
and
declaratory and/or injunctive relief and generally allege that they are not
paid
for the time it takes to either clear security, walk to their respective
workstations, don and doff protective clothing, and/or sanitize clothing
and
equipment. As of the date of this report, the following suits have been
filed against Gold Kist, which
make one or more of the allegations referenced above:
Merrell
v. Gold Kist, Inc., in the U.S. District Court for the Northern District
of
Georgia, Gainesville Division, filed on December 21, 2006; Harris v. Gold
Kist,
Inc., in the U.S. District Court for the Northern District of Georgia, Newnan
Division, filed on December 21, 2006; Blanke v. Gold Kist, Inc., in the U.S.
District Court for the Southern District of Georgia, Waycross Division, filed
on
December 21, 2006; Clarke v. Gold Kist, Inc., in the U.S. District Court
for the
Middle District of Georgia, Athens Division, filed on December 21, 2006;
Atchison v. Gold Kist, Inc., in the U.S. District Court for the Northern
District of Alabama, Middle Division, filed on October 3, 2006; Carlisle
v. Gold Kist, Inc., in the U.S. District Court for the Northern District
of
Alabama, Middle Division, filed on October 2, 2006; Benbow v. Gold Kist,
Inc.,
in the U.S. District Court for the District of South Carolina, Columbia
Division, filed on October 2, 2006; Bonds v. Gold Kist, Inc., in the U.S.
District Court for the Northern District of Alabama, Northwestern Division,
filed on October 2, 2006. Neither the likelihood of an unfavorable outcome
nor
the amount of ultimate liability, if any, with respect to any of these cases
can
be determined at this time. These cases are in various stages of litigation
which we intend to vigorously defend.
We
are
subject to various other legal proceedings and claims, which arise in the
ordinary course of our business. In the opinion of management, the amount
of
ultimate liability with respect to these actions will not materially affect
our
financial position or results of operations.
In
addition to the other information set forth in this Quarterly Report, you
should
carefully consider the risks discussed in our 2006 Annual Report on Form
10-K,
including under the heading "Item 1A. Risk Factors", which risks could
materially affect the Company’s business, financial condition or future results.
The risk factors below update, and should be read in conjunction with, the
risk
factors disclosed in the 2006 Annual Report. These risks are not the only
risks
facing the Company. Additional risks and uncertainties not currently known
to
the Company or that it currently deems to be immaterial also may materially
adversely affect the Company's business, financial condition or future
results.
Cyclicality
and Commodity Prices. Industry
cyclicality can affect our earnings, especially due to fluctuations in commodity
prices of feed ingredients, chicken and turkey.
Profitability
in the chicken and turkey industries is materially affected by the commodity
prices of feed ingredients, chicken and turkey, which are determined by supply
and demand factors. As a result, the chicken and turkey industries are subject
to cyclical earnings fluctuations.
The
production of feed ingredients is positively or negatively affected primarily
by
weather patterns throughout the world, the global level of supply inventories
and demand for feed ingredients, and the agricultural policies of the U.S.
and
foreign governments. In particular, weather patterns often change agricultural
conditions in an unpredictable manner. A sudden and significant change in
weather patterns could affect supplies of feed ingredients, as well as both
the
industry’s and our ability to obtain feed ingredients, grow chickens and turkeys
or deliver products.
The
cost
of corn, our primary feed ingredient, increased significantly from August
2006
to the date of this Quarterly Report, and there can be no assurance that
the
price of corn will not continue to rise as a result of, among other things,
increasing demand for corn products around the world and alternative uses
of
corn, such as ethanol production.
High
feed
ingredient prices have had a material adverse effect on our operating results.
We periodically seek, to the extent available, to enter into advance purchase
commitments or financial hedging contracts for the purchase of feed ingredients
in an effort to manage our feed ingredient costs. The use of such instruments
may not be successful.
We
also
seek to adjust our operations in response to high feed prices and other cyclical
factors. On October 29, 2006, we announced that we would reduce weekly
chicken processing by 5.0% year-over-year, or approximately 1.3 million
head per week by January 2007, as part of our continuing effort to better
balance supply and demand amid declining chicken prices and sharply higher
costs
for corn. Although industry chicken prices have risen somewhat in recent weeks,
during most of the first quarter of fiscal 2007, industry chicken prices were
generally lower than the fourth quarter of fiscal 2006, even though the average
price of corn in the first quarter of fiscal 2007 was 38.0% higher than in
the
fourth quarter of fiscal 2006. As a result, we operated at a negative margin
in
the first quarter of fiscal 2007. There can be no assurance that corn prices
will not continue to rise or when chicken prices will rise enough to offset
the
increased corn prices.
Substantial
Leverage. Our
substantial indebtedness could adversely affect our financial
condition.
Our
acquisition of Gold Kist increased our indebtedness significantly. We currently
have a substantial amount of indebtedness. Our substantial indebtedness could
adversely affect our financial condition which could have important consequences
to you. For example, it could:
| · |
Make
it more difficult for us to satisfy our obligations under our debt
securities;
|
| · |
Increase
our vulnerability to general adverse economic
conditions;
|
| · |
Limit
our ability to obtain necessary financing and to fund future working
capital, capital expenditures and other general corporate
requirements;
|
| · |
Require
us to dedicate a substantial portion of our cash flow from operations
to
payments on our indebtedness, thereby reducing the availability of
our
cash flow to fund working capital, capital expenditures and for other
general corporate purposes;
|
| · |
Limit
our flexibility in planning for, or reacting to, changes in our business
and the industry in which we
operate;
|
| · |
Place
us at a competitive disadvantage compared to our competitors that
have
less debt;
|
| · |
Limit
our ability to pursue acquisitions and sell assets;
and
|
| · |
Limit,
along with the financial and other restrictive covenants in our
indebtedness, our ability to borrow additional funds. Failing to
comply
with those covenants could result in an event of default or require
redemption of indebtedness. Either of these events could have a material
adverse effect on us.
|
Our
ability to make payments on and to refinance our indebtedness will depend
on our
ability to generate cash in the future, which is dependent on various factors.
These factors include the commodity prices of feed ingredients, chicken and
turkey and general economic, financial, competitive, legislative, regulatory
and
other factors that are beyond our control.
Additional
Borrowings Available. Despite
our substantial indebtedness, we may still be able to incur significantly
more
debt; this could intensify the risks described above.
Despite
our significant indebtedness, we are not prohibited from incurring additional
indebtedness in the future. If additional debt is added to our current
substantial debt levels, the related risks that we now face could intensify.
Integration
of Gold Kist.
There
can be no assurance that Gold Kist can be combined successfully with our
business.
In
evaluating the terms of our acquisition of Gold Kist, we analyzed the respective
businesses of Pilgrim’s Pride and Gold Kist and made certain assumptions
concerning their respective future operations. A principal assumption was
that
the acquisition will produce operating results better than those historically
experienced or presently expected to be experienced in the future by us in
the
absence of the acquisition. There can be no assurance, however, that this
assumption is correct or that the businesses of Pilgrim’s Pride and Gold Kist
will be successfully integrated in a timely manner.
Synergies
of Gold Kist. There
can
be no assurance that we will achieve anticipated synergies from our acquisition
of Gold Kist.
We
consummated the Gold Kist acquisition with the expectation that it will result
in beneficial synergies, such as cost savings and enhanced growth. Any success
in realizing these benefits and the timing of this realization, if any, depend
upon the successful integration of the operations of Gold Kist into Pilgrim’s
Pride, and upon general and industry-specific economic factors. The integration
of two independent companies is a complex, costly and time-consuming process.
The difficulties of combining the operations of the companies include, among
others:
| · |
Transitioning
and preserving Gold Kist’s customer, contractor, supplier and other
important third party
relationships;
|
| · |
Integrating
corporate and administrative
infrastructures;
|
| · |
Coordinating
sales and marketing functions;
|
| · |
Minimizing
the diversion of management’s attention from ongoing business
concerns;
|
| · |
Coordinating
geographically separate organizations;
and
|
| · |
Retaining
key employees.
|
Even
if
Pilgrim’s Pride and Gold Kist are able to integrate their operations and
economic conditions remain stable, there can be no assurance that the
anticipated synergies will be achieved.
|
3.1
|
Certificate
of Incorporation of the Company, as amended (incorporated by
reference
from Exhibit 3.1 of the Company’s Annual Report on Form 10-K for the
fiscal year ended October 2, 2004 filed on November 24, 2004).
|
|
|
3.2
|
Amended
and Restated Corporate Bylaws of the Company (incorporated by
reference
from Exhibit 4.4 of the Company’s Registration Statement on Form S-8 (No.
333-111929) filed on January 15, 2004).
|
|
|
4.1
|
Senior
Debt Securities Indenture dated as of January 24, 2007, by and
between the
Company and Wells Fargo Bank, National Association, as trustee
(incorporated by reference from Exhibit 4.1 to the Company’s Current
Report on Form 8-K filed on January 24, 2007).
|
|
|
4.2
|
First
Supplemental Indenture to the Senior Debt Securities Indenture
dated as of
January 24, 2007, by and between the Company and Wells Fargo
Bank,
National Association, as trustee (incorporated by reference from
Exhibit
4.2 to the Company’s Current Report on Form 8-K filed on January 24,
2007).
|
|
|
4.3
|
Form
of 7 5/8% Senior Note due 2015 (included in Exhibit 4.2 to the
Company’s
Current Report on Form 8-K filed on January 24, 2007 and incorporated
by
reference from Exhibit 4.3 to the Company’s Current Report on Form 8-K
filed on January 24, 2007).
|
|
|
4.4
|
Senior
Subordinated Debt Securities Indenture dated as of January 24,
2007, by
and between the Company and Wells Fargo Bank, National Association,
as
trustee (incorporated by reference from Exhibit 4.4 to the Company’s
Current Report on Form 8-K filed on January 24, 2007).
|
|
|
4.5
|
First
Supplemental Indenture to the Senior Subordinated Debt Securities
Indenture dated as of January 24, 2007, by and between the Company
and
Wells Fargo Bank, National Association, as trustee (incorporated
by
reference from Exhibit 4.5 to the Company’s Current Report on Form 8-K
filed on January 24, 2007).
|
|
|
4.6
|
Form
of 8 3/8% Subordinated Note due 2017 (included in Exhibit 4.5
to the
Company’s Current Report on Form 8-K filed on January 24, 2007 and
incorporated by reference from Exhibit 4.6 to the Company’s Current Report
on Form 8-K filed on January 24, 2007).
|
|
|
10.1
|
Credit
Agreement by and among the Borrower, Company, Subsidiary Guarantors,
ING
Capital LLC, and Lenders dated as of September 25, 2006 (incorporated
by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K
filed on September 28, 2006).
|
|
|
10.2
|
Credit
Agreement by and among CoBank, ACB, Agriland, FCS and the Company
dated as
of September 21, 2006 (incorporated by reference from Exhibit 10.2 of
the Company’s Current Report on Form 8-K filed on September 28, 2006).
|
|
10.3
|
Pilgrim’s
Pride Corporation $450,000,000 Senior Unsecured Increasing Rate
Bridge
Facility Commitment Letter from Lehman Brothers to the Company
dated as of
September 27, 2006 (incorporated by reference from Exhibit 10.3 of
the Company’s Current Report on Form 8-K filed on September 28,
2006).
|
|
|
10.4
|
Term
Loan Agreement dated as of November 29, 2006, by and among the
Company,
Lehman Commercial Paper Inc., as the administrative agent, Lehman
Brothers
Inc., as joint lead arranger and joint bookrunner, Credit Suisse
Securities (USA) LLC, as joint lead arranger and joint bookrunner,
Credit
Suisse Cayman Islands Branch, as syndication agent and a lender,
and
Lehman Brothers Commercial Bank, as a lender (incorporated by reference
from Exhibit 99.(B)(4) to Amendment No. 10 to the Company’s Tender Offer
Statement on Schedule TO filed on November 30, 2006).
|
|
|
10.5
|
Consent
and Amendment to Term Loan Agreement dated as of December 3, 2006,
by and
among the Company, Lehman Commercial Paper Inc., as the administrative
agent, Lehman Brothers Inc., as joint lead arranger and joint bookrunner,
Credit Suisse Securities (USA) LLC, as joint lead arranger and
joint
bookrunner, Credit Suisse Cayman Islands Branch, as syndication
agent and
a lender, and Lehman Brothers Commercial Bank, as a lender (incorporated
by reference from Exhibit 99.(B)(5) to Amendment No. 11 to the
Company’s
Tender Offer Statement on Schedule TO filed on December 5,
2006).
|
|
|
10.6
|
First
Amendment to the Pilgrim’s Pride Corporation Amended and Restated 2005
Deferred Compensation Plan Trust, dated as of November 29, 2006
(incorporated by reference from Exhibit 10.03 of the Company’s Current
Report on Form 8-K filed on December 05, 2006).
|
|
|
10.7
|
Agreement
and Plan of Merger dated as of December 3, 2006, by and among the
Company,
the Purchaser and Gold Kist Inc. (incorporated by reference from
Exhibit
99.(D)(1) to Amendment No. 11 to the Company’s Tender Offer Statement on
Schedule TO filed on December 5, 2006).
|
|
|
10.8
|
First
Amendment to Credit Agreement, dated as of December 13, 2006, by
and among
the Company, as borrower, CoBank, ACB, as lead arranger and co-syndication
agent, and sole book runner, and as administrative, documentation
and
collateral agent, Agriland, FCS, as co-syndication agent, and as
a
syndication party, and the other syndication parties signatory
thereto
(incorporated by reference from Exhibit 10.01 to the Company’s Current
Report on Form 8-K filed on December 19, 2006).
|
|
|
10.9
|
Second
Amendment to Credit Agreement, dated as of January 4, 2007, by
and among
the Company, as borrower, CoBank, ACB, as lead arranger and co-syndication
agent, and sole book runner, and as administrative, documentation
and
collateral agent, Agriland, FCS, as co-syndication agent, and as
a
syndication party, and the other syndication parties signatory
thereto
(incorporated by reference from Exhibit 10.01 to the Company’s Current
Report on Form 8-K filed on January 9,
2007).
|
|
12
|
Computation
of Ratio of Earnings to Fixed Charges.
|
|
|
31.1
|
Certification
of Co-Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|
|
|
31.2
|
Certification
of Co-Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|
|
|
31.3
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.*
|
|
|
32.1
|
Certification
of Co-Principal Executive Officer of Pilgrim's Pride Corporation
pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
|
32.2
|
Certification
of Co-Principal Executive Officer of Pilgrim's Pride Corporation
pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
|
32.3
|
Certification
of Chief Financial Officer of Pilgrim's Pride Corporation pursuant
to
Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
|
*
Filed herewith
|
||
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
|
|||
|
/s/
Richard A. Cogdill
|
|||
|
Date:
|
January
30, 2007
|
Richard
A. Cogdill
|
|
|
Chief
Financial and Accounting Officer
|
|||
|
3.1
|
Certificate
of Incorporation of the Company, as amended (incorporated by reference
from Exhibit 3.1 of the Company’s Annual Report on Form 10-K for the
fiscal year ended October 2, 2004 filed on November 24, 2004).
|
|
|
3.2
|
Amended
and Restated Corporate Bylaws of the Company (incorporated by reference
from Exhibit 4.4 of the Company’s Registration Statement on Form S-8 (No.
333-111929) filed on January 15, 2004).
|
|
|
4.1
|
Senior
Debt Securities Indenture dated as of January 24, 2007, by and between
the
Company and Wells Fargo Bank, National Association, as trustee
(incorporated by reference from Exhibit 4.1 to the Company’s Current
Report on Form 8-K filed on January 24, 2007).
|
|
|
4.2
|
First
Supplemental Indenture to the Senior Debt Securities Indenture dated
as of
January 24, 2007, by and between the Company and Wells Fargo Bank,
National Association, as trustee (incorporated by reference from
Exhibit
4.2 to the Company’s Current Report on Form 8-K filed on January 24,
2007).
|
|
|
4.3
|
Form
of 7 5/8% Senior Note due 2015 (included in Exhibit 4.2 to the Company’s
Current Report on Form 8-K filed on January 24, 2007 and incorporated
by
reference from Exhibit 4.3 to the Company’s Current Report on Form 8-K
filed on January 24, 2007).
|
|
|
4.4
|
Senior
Subordinated Debt Securities Indenture dated as of January 24, 2007,
by
and between the Company and Wells Fargo Bank, National Association,
as
trustee (incorporated by reference from Exhibit 4.4 to the Company’s
Current Report on Form 8-K filed on January 24, 2007).
|
|
|
4.5
|
First
Supplemental Indenture to the Senior Subordinated Debt Securities
Indenture dated as of January 24, 2007, by and between the Company
and
Wells Fargo Bank, National Association, as trustee (incorporated
by
reference from Exhibit 4.5 to the Company’s Current Report on Form 8-K
filed on January 24, 2007).
|
|
|
4.6
|
Form
of 8 3/8% Subordinated Note due 2017 (included in Exhibit 4.5 to
the
Company’s Current Report on Form 8-K filed on January 24, 2007 and
incorporated by reference from Exhibit 4.6 to the Company’s Current Report
on Form 8-K filed on January 24, 2007).
|
|
|
10.1
|
Credit
Agreement by and among the Borrower, Company, Subsidiary Guarantors,
ING
Capital LLC, and Lenders dated as of September 25, 2006 (incorporated
by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K
filed on September 28, 2006).
|
|
|
10.2
|
Credit
Agreement by and among CoBank, ACB, Agriland, FCS and the Company
dated as
of September 21, 2006 (incorporated by reference from Exhibit 10.2 of
the Company’s Current Report on Form 8-K filed on September 28, 2006).
|
|
10.3
|
Pilgrim’s
Pride Corporation $450,000,000 Senior Unsecured Increasing Rate Bridge
Facility Commitment Letter from Lehman Brothers to the Company dated
as of
September 27, 2006 (incorporated by reference from Exhibit 10.3 of
the Company’s Current Report on Form 8-K filed on September 28,
2006).
|
|
|
10.4
|
Term
Loan Agreement dated as of November 29, 2006, by and among the Company,
Lehman Commercial Paper Inc., as the administrative agent, Lehman
Brothers
Inc., as joint lead arranger and joint bookrunner, Credit Suisse
Securities (USA) LLC, as joint lead arranger and joint bookrunner,
Credit
Suisse Cayman Islands Branch, as syndication agent and a lender,
and
Lehman Brothers Commercial Bank, as a lender (incorporated by reference
from Exhibit 99.(B)(4) to Amendment No. 10 to the Company’s Tender Offer
Statement on Schedule TO filed on November 30, 2006).
|
|
|
10.5
|
Consent
and Amendment to Term Loan Agreement dated as of December 3, 2006,
by and
among the Company, Lehman Commercial Paper Inc., as the administrative
agent, Lehman Brothers Inc., as joint lead arranger and joint bookrunner,
Credit Suisse Securities (USA) LLC, as joint lead arranger and joint
bookrunner, Credit Suisse Cayman Islands Branch, as syndication agent
and
a lender, and Lehman Brothers Commercial Bank, as a lender (incorporated
by reference from Exhibit 99.(B)(5) to Amendment No. 11 to the Company’s
Tender Offer Statement on Schedule TO filed on December 5,
2006).
|
|
|
10.6
|
First
Amendment to the Pilgrim’s Pride Corporation Amended and Restated 2005
Deferred Compensation Plan Trust, dated as of November 29, 2006
(incorporated by reference from Exhibit 10.03 of the Company’s Current
Report on Form 8-K filed on December 05, 2006).
|
|
|
10.7
|
Agreement
and Plan of Merger dated as of December 3, 2006, by and among the
Company,
the Purchaser and Gold Kist Inc. (incorporated by reference from
Exhibit
99.(D)(1) to Amendment No. 11 to the Company’s Tender Offer Statement on
Schedule TO filed on December 5, 2006).
|
|
|
10.8
|
First
Amendment to Credit Agreement, dated as of December 13, 2006, by
and among
the Company, as borrower, CoBank, ACB, as lead arranger and co-syndication
agent, and sole book runner, and as administrative, documentation
and
collateral agent, Agriland, FCS, as co-syndication agent, and as
a
syndication party, and the other syndication parties signatory thereto
(incorporated by reference from Exhibit 10.01 to the Company’s Current
Report on Form 8-K filed on December 19, 2006).
|
|
|
10.9
|
Second
Amendment to Credit Agreement, dated as of January 4, 2007, by and
among
the Company, as borrower, CoBank, ACB, as lead arranger and co-syndication
agent, and sole book runner, and as administrative, documentation
and
collateral agent, Agriland, FCS, as co-syndication agent, and as
a
syndication party, and the other syndication parties signatory thereto
(incorporated by reference from Exhibit 10.01 to the Company’s Current
Report on Form 8-K filed on January 9,
2007).
|
|
Computation
of Ratio of Earnings to Fixed Charges.
|
||
|
Certification
of Co-Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|
||
|
Certification
of Co-Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|
||
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.*
|
||
|
Certification
of Co-Principal Executive Officer of Pilgrim's Pride Corporation
pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
||
|
Certification
of Co-Principal Executive Officer of Pilgrim's Pride Corporation
pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
||
|
Certification
of Chief Financial Officer of Pilgrim's Pride Corporation pursuant
to
Section 906 of the Sarbanes-Oxley Act of 2002.*
|
||
|
*
Filed herewith
|
||
|
EXHIBIT
12
|
|||||||
|
PILGRIM’S
PRIDE CORPORATION
|
|||||||
|
COMPUTATION
OF RATIO OF EARNINGS TO FIXED CHARGES
|
|||||||
|
THREE
MONTHS ENDED
|
|||||||
|
December
30, 2006
|
December
31, 2005
|
||||||
|
EARNINGS:
|
(in
thousands)
|
||||||
|
Income
before income taxes
|
$
|
(14,500
|
)
|
$
|
36,640
|
||
|
Add:
Total fixed charges
|
18,073
|
16,826
|
|||||
|
Less:
Interest Capitalized
|
1,068
|
1,302
|
|||||
|
Total
Earnings
|
$
|
2,505
|
$
|
52,164
|
|||
|
FIXED
CHARGES:
|
|||||||
|
Interest
expense
|
$
|
14,982
|
$
|
13,696
|
|||
|
Portion
of rental expense representative of the interest factor
|
3,091
|
3,130
|
|||||
|
Total
fixed charges
|
$
|
18,073
|
$
|
16,826
|
|||
|
Ratio
of earnings to fixed charges
|
(1
|
)
|
3.10
|
||||
(1)
Earnings were insufficient to cover fixed charges by
$15,568.
EXHIBIT
31.1
CERTIFICATION
BY CO-PRINCIPAL EXECUTIVE OFFICER
PURSUANT
TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO SECTION 302
OF
THE
SARBANES-OXLEY ACT OF 2002
I,
Lonnie
"Bo" Pilgrim, Chairman of Pilgrim's Pride Corporation, certify
that:
|
1.
|
I
have reviewed this quarterly report on Form 10-Q for the fiscal quarter
ended December 30, 2006, of Pilgrim's Pride
Corporation;
|
||
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
||
|
3.
|
Based
on my knowledge, the financial statements and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
||
|
4.
|
The
registrant’s other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
|
||
|
a.)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
||
|
b.)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
||
|
c.)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based upon such evaluation; and
|
||
|
d.)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
|
||
|
5.
|
The
registrant’s other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent
functions):
|
||
|
a.)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
||
|
b.)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
||
|
Date:
January 30, 2007
|
/s/ Lonnie
"Bo" Pilgrim
|
|
Lonnie
"Bo" Pilgrim
|
|
|
Co-Principal
Executive Officer
|
EXHIBIT
31.2
CERTIFICATION
BY CO-PRINCIPAL EXECUTIVE OFFICER
PURSUANT
TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO SECTION 302
OF
THE
SARBANES-OXLEY ACT OF 2002
I,
O.B.
Goolsby, Jr., Chairman of Pilgrim's Pride Corporation, certify
that:
|
1.
|
I
have reviewed this quarterly report on Form 10-Q for the fiscal quarter
ended December 30, 2006, of Pilgrim's Pride
Corporation;
|
||
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
||
|
3.
|
Based
on my knowledge, the financial statements and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
||
|
4.
|
The
registrant’s other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
|
||
|
a.)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
||
|
b.)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
||
|
c.)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based upon such evaluation; and
|
||
|
d.)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
|
||
|
5.
|
The
registrant’s other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent
functions):
|
||
|
a.)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
||
|
b.)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
||
|
Date:
January 30, 2007
|
/s/ O.B.
Goolsby, Jr.
|
|
O.B.
Goolsby, Jr.
|
|
|
Co-Principal
Executive Officer
|
EXHIBIT
31.3
CERTIFICATION
BY CO-PRINCIPAL EXECUTIVE OFFICER
PURSUANT
TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO SECTION 302
OF
THE
SARBANES-OXLEY ACT OF 2002
I,
Richard A. Cogdill, Chief Financial Officer of Pilgrim's Pride Corporation,
certify that:
|
1.
|
I
have reviewed this quarterly report on Form 10-Q for the fiscal quarter
ended Dember 30., 2006, of Pilgrim's Pride Corporation;
|
||
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
||
|
3.
|
Based
on my knowledge, the financial statements and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
||
|
4.
|
The
registrant’s other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
|
||
|
a.)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
||
|
b.)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
||
|
c.)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based upon such evaluation; and
|
||
|
d.)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
|
||
|
5.
|
The
registrant’s other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent
functions):
|
||
|
a.)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
||
|
b.)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
||
|
Date: January
30, 2007
|
/s/
Richard A. Cogdill
|
|
Richard
A. Cogdill
|
|
|
Chief
Financial Officer
|
EXHIBIT
32.1
CERTIFICATION
OF CO-PRINCIPAL EXECUTIVE OFFICER
PURSUANT
TO 18
U.S.C. § 1350 ADOPTED PURSUANT TO
SECTION
906 OF
THE SARBANES-OXLEY ACT OF 2002
The
Quarterly Report on Form 10-Q for the quarter ended December 30, 2006 (the
“Form
10-Q”) of the Company fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934, and information contained in
the
Form 10-Q fairly presents, in all material respects, the financial condition
and
results of operations of the Company.
|
/s/ Lonnie “Bo”
Pilgrim
|
|
|
|
Lonnie “Bo” Pilgrim
|
|
|
Co-Principal Executive
Officer
|
|
|
|
EXHIBIT
32.2
CERTIFICATION
OF CO-PRINCIPAL EXECUTIVE OFFICER
PURSUANT
TO 18
U.S.C. § 1350 ADOPTED PURSUANT TO
SECTION
906 OF
THE SARBANES-OXLEY ACT OF 2002
The
Quarterly Report on Form 10-Q for the quarter ended December 30, 2006 (the
“Form
10-Q”) of the Company fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934, and information contained in
the
Form 10-Q fairly presents, in all material respects, the financial condition
and
results of operations of the Company.
|
/s/ O.B. Goolsby, Jr.
|
|
|
|
O.B. Goolsby, Jr.
|
|
|
Co-Principal Executive
Officer
|
|
|
|
EXHIBIT
32.3
CERTIFICATION
OF CHIEF FINANCIAL OFFICER
PURSUANT
TO 18 U.S.C. § 1350 ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant
to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b)
of
section 1350, chapter 63 of title 18, United States Code), the undersigned
officer of Pilgrim’s Pride Corporation (the “Company”), does hereby certify, to
such officer’s knowledge, that:
The
Quarterly Report on Form 10-Q for the quarter ended December
30, 2006
(the
“Form 10-Q”) of the Company fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934, and information contained
in the Form 10-Q fairly presents, in all material respects, the financial
condition and results of operations of the Company.
|
Date:
January 30, 2007
|
/s/
Richard A. Cogdill
|
|
Richard
A. Cogdill
|
|
|
Chief
Financial Officer
|
|