UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of
report (Date of earliest event reported): July 25, 2007
PILGRIM'S
PRIDE CORPORATION
(Exact
Name of Registrant as Specified in its Charter)
Delaware 1-9273 &#
160; 75-1285071
(State or Other
Jurisdiction (Commission (IRS
Employer
of
Incorporation) File
Number) Identification
No.)
4845
US
Highway 271 N.
Pittsburg,
Texas
75686-0093
(Address
of Principal
Executive
Offices) (ZIP
Code)
Registrant's
telephone number, including area code: (903)
434-1000
Not
Applicable
(Former
Name or Former Address, if Changed Since Last Report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
q Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
q Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
q
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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q
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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Item
5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
On
July
25, 2007, the Board of Directors of Pilgrim's Pride Corporation (the "Company")
elected Lonnie Ken Pilgrim to succeed his father, co-founder Lonnie "Bo"
Pilgrim, as chairman of the Company. The elder Mr. Pilgrim has been named senior
chairman and continues to be an employee of the Company and a member of its
board of directors.
Ken
Pilgrim, 49, has been
employed by the Company since 1977 and has been Executive Vice President,
Assistant to Chairman since November 2004. He served as Senior Vice
President, Transportation from August 1997 to November 2004. Prior to
that he served the Company as its Vice President, Director of
Transportation. He has been a member of the board of directors since
March 1985.
Ken
Pilgrim receives an annual base
salary of $310,059. He is also eligible to participate in the
Pilgrim's Pride Corporation Senior Executive Performance Bonus Plan (the "Bonus
Plan") and the Employee Stock Investment Plan, and he is eligible to participate
in the Company’s broad-based programs including health, disability and life
insurance programs and the Company's 401(k) Salary Deferral Plan. The
Bonus Plan provides for five percent of the Company's U.S. income before income
taxes to be allocated among certain key members of management. Such
amount is generally allocated among all plan participants based upon the ratio
of each participant's eligible salary to the aggregate salaries of all
participants. Participants may generally be added to or removed from
the plan at the discretion of the compensation committee. Bonuses are
typically paid during the January following the fiscal year with respect to
which the bonus has been granted. Compensation under the Employee
Stock Investment Plan includes Company contributions in an amount equal to
33
1/3% of the participant's payroll deductions, which deductions are limited
to 7
1/2% of the participant's base salary, overtime pay and
bonuses. Compensation under the Company's 401(k) Salary Deferral Plan
includes mandatory contributions by the Company of one dollar per week and
matching contributions of up to five dollars per week and additional matching
contributions of up to four percent of a participant's compensation subject
to
an overall Company contribution limit of five percent of domestic income before
taxes.
The
Company has been and continues to
be a party to certain transactions with members of Ken Pilgrim's family,
including his father, Lonnie "Bo" Pilgrim, and his siblings. These transactions,
along with all other transactions between the Company and affiliated persons,
require the prior approval of the audit committee of the board of
directors. Set forth below is a summary of these
transactions:
At
certain times during previous years,
the Company has entered into risk transfer transactions with Lonnie "Bo" Pilgrim
whereby Mr. Pilgrim purchased certain amounts of the Company's live chickens
and
hens, feed inventory and veterinary and technical services during the grow-out
process and then contracted with the Company to resell the birds at maturity.
Chicks, feed and services were purchased from the Company for their fair market
value, and the Company purchased the mature chickens from Mr. Pilgrim at a
market-based formula price subject to a ceiling price calculated at Lonnie
"Bo"
Pilgrim's cost plus 2 percent. No purchases have been made by the Company under
this agreement since the first quarter of fiscal 2006, when Lonnie "Bo" Pilgrim
recognized an operating margin of $4,539 on the gross amount paid by the Company
of $231,476.
The
Company has entered into chicken
grower contracts involving farms owned by certain of the Company's officers,
providing the placement of Company-owned flocks on their farms during the
grow-out phase of production. These contracts are on terms substantially the
same as contracts entered into by the Company with unaffiliated parties and
can
be terminated by either party upon completion of the grow-out of each flock.
The
aggregate amount paid by the Company to Lonnie "Bo" Pilgrim under these grower
contracts was $976,273 during fiscal 2006 and $651,035 during the first three
quarters of fiscal 2007.
Additionally,
the Company processes the
payroll for certain employees of Lonnie "Bo" Pilgrim and Pilgrim Poultry G.P.
("PPGP"), as well as performing certain administrative bookkeeping services
for
Lonnie "Bo" Pilgrim's personal businesses. Lonnie "Bo" Pilgrim is the
sole proprietor of PPGP. PPGP paid the Company for feed and the
services described above $748,964 during fiscal 2006 and $471,067 during the
first three quarters of fiscal 2007.
PPGP
also rents facilities to the
Company for the production of eggs. On December 29, 2000, the Company entered
into an agreement with PPGP to rent its egg production facilities for a monthly
amount of $62,500. During fiscal 2006, the Company paid rent on the facilities
of $750,000 to PPGP. During the first three quarters of fiscal 2007, the Company
paid rent on these facilities of $562,500. Management believes that
the terms of this agreement with PPGP are substantially similar to, and contain
terms not less favorable to the Company than, agreements obtainable from
unaffiliated parties.
The
Company also maintains depository
accounts with a financial institution of which Lonnie "Bo" Pilgrim is a major
stockholder. Fees paid to this bank in fiscal 2006 were insignificant, and
fees
paid during the first three quarters of fiscal 2007 were
insignificant. As of June 30, 2007, the Company had bank balances at
this financial institution of approximately $1.9 million.
Since
1985, the Company has leased an
airplane from Lonnie "Bo" Pilgrim under a lease agreement which provides for
monthly lease payments of $33,000 plus operating expenses, which terms the
Company's management believes to be substantially similar to those obtainable
from unaffiliated parties. During fiscal 2006, the Company had lease expenses
of
$396,000 and operating expenses of $96,480 associated with the use of this
airplane. During the first three quarters of fiscal 2007, the Company
incurred lease expenses of $264,000 and operating expenses of $74,010 associated
with the use of this airplane.
Historically,
much of the Company's
debt has been guaranteed by the Company's major stockholders. In consideration
of such guarantees, the Company has paid such stockholders a quarterly fee
equal
to .25% of the average aggregate outstanding balance of such guaranteed debt.
During fiscal 2006, the Company paid $1,676,243 to Pilgrim Interests, Ltd.,
an
affiliate of Ken Pilgrim and of Lonnie "Bo" Pilgrim that is primarily for the
benefit of them and their family. During the first three quarters of
2007, the Company paid $1,870,980 to Pilgrim Interests, Ltd.
Certain
members of the family of Ken
Pilgrim are employed by the Company, including his father, Lonnie "Bo" Pilgrim,
the Company's senior chairman, his brother, Pat Pilgrim and his sister, Greta
Pilgrim-Owens, who received total compensation of $1,424,523, $215,551 and
$215,302, respectively, in fiscal 2006, and $1,096,538, $159,638 and
$163,406, respectively, during the first three quarters of fiscal 2007. Pat
Pilgrim has also provided hauling and pumping services to the Company for which
he was paid $396,923 in fiscal 2006 and $114,332 during the first three quarters
of fiscal 2007. He also paid the Company for land he leases from the Company
in
the amount of $21,834 in fiscal 2006 and $21,834 during the first three quarters
of fiscal 2007. These transactions have terms substantially the same as
contracts entered into by the Company with unaffiliated parties.
On
November 30, 2005, the audit
committee pre-approved the Company entering into three contracts with Pat
Pilgrim and purchasing a substantially unused aerator from Pat Pilgrim for
a
purchase price of $8,000. Pat Pilgrim originally purchased the aerator in May
2005 for $9,500. The contracts pre-approved by the audit committee include
a
general services agreement, a transportation agreement and a lease of certain
land from the Company providing for lease payments of $23,263.50 per year.
The
general services agreement and the transportation agreement are intended to
document the services provided by Pat Pilgrim, as described above. Management
believes the terms of each of the contracts, the lease and the purchase of
the
aerator are substantially similar to those obtainable from unaffiliated
parties.
Signatures
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
PILGRIM'S
PRIDE
CORPORATION
Date: July
31,
2007 By:
/s/ Richard A.
Cogdill
Richard
A. Cogdill
Executive
Vice President, Chief
Financial Officer,
Secretary
and Treasurer