SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended JUNE 29, 1996
Commission file number 1-9273
PILGRIM'S PRIDE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-1285071
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 SOUTH TEXAS, PITTSBURG, TX 75686-0093
(Address of principal executive offices) (Zip code)
(903) 855-1000
(Telephone number of principle executive offices)
NOT APPLICABLE
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter periods that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
COMMON STOCK $.01 PAR VALUE 27,589,250 SHARES AS OF AUGUST 12, 1996
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INDEX
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited):
Condensed consolidated balance sheets:
June 29, 1996 and September 30, 1995
Consolidated statements of income:
Three months and nine months ended June 29, 1996 and July 1,
1995
Consolidated statements of cash flows:
Nine months ended June 29, 1996 and July 1, 1995
Notes to condensed consolidated financial statements--June 29, 1996
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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PART I. FINANCIAL INFORMATION
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PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ITEM 1: FINANCIAL STATEMENTS (UNAUDITED):
June 29, 1996 September 30, 1995
(in thousands)
ASSET
Current Assets:
Cash and cash equivalents $ 7,809 $ 11,892
Trade accounts and other receivables,
less allowance for doubtful accounts 63,704 60,031
Inventories 140,403 110,404
Deferred income taxes 10,359 9,564
Prepaid expenses 1,369 526
Other current assets 725 953
Total Current assets 224,369 193,370
19,150 20,918
466,680 442,781
Less accumulated depreciation 177,941 159,465
288,739 283,316
$ 532,258 $ 497,604
Notes payable to banks $ 27,000 $ 13,000
Accounts payable 60,071 55,658
Accrued expenses 35,790 31,130
Current maturities of long-term debt 7,872 5,187
Total Current Liabilities 130,733 104,975
199,817 182,988
53,067 56,725
842 842
Common stock; $.01 par value 276 276
Additional paid-in capital 79,763 79,763
Retained earnings 67,760 72,035
Total Stockholders' Equity 147,799 152,074
$ 532,258 $ 497,604
See notes to condensed consolidated financial
statements.
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PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
Three Months Ended Nine Months Ended
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
(in thousands, except share and
per share data)
Net sales $ 294,339 $ 230,297 $ 833,818 $ 674,127
Costs and expenses:
Cost of sales 276,955 206,471 779,415 621,959
Selling, general and administrative 11,930 11,983 36,440 36,245
288,885 218,454 815,855 658,204
Operating income 5,454 11,843 17,963 15,923
Other expense (income):
Interest expense, net 5,526 4,359 15,857 12,714
Foreign exchange (gain) loss (59) (177) 1,163 5,438
Miscellaneous, net (600) (761) (1,177) 128
4,867 3,421 15,843 18,280
Income (loss) before income taxes
and extraordinary charge 587 8,422 2,120 (2,357)
Income tax (benefit) expense (420) 2,279 2,372 7,248
Net loss before extraordinary charge 1,007 6,143 (252) (9,605)
Extraordinary charge-early repayment of
debt,net of tax - - (2,780) -
Net income (loss) $ 1,007 $ 6,143 $ (3,032) $ (9,605)
Net income (loss) per common share
before extraordinary charge $ 0.04 $ 0.22 $ (0.01) $ (0.35)
Extraordinary charge per common share - - (0.10) -
Net income (loss) per common share $ 0.04 $ 0.22 $ (0.11) $ (0.35)
Dividends per common share $ 0.015 $ 0.015 $ 0.045 $ 0.045
Weighted average shares outstanding
shares outstanding 27,589,250 27,589,250 27,589,250 27,589,250
See notes to condensed consolidated
financial statements.
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PILGRIM'S PRIDE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
June 29, 1996 July 1, 1995
(in thousands)
Cash Flows From Operating Activities:
Net loss $ (3,032) $ (9,605)
Adjustments to reconcile net income to cash
Provided by operating activities:
Depreciation and amortization 21,993 19,160
Gain on property disposals (262) (191)
Provision for losses on accounts receivable 669 -
Deferred income tax liability (4,453) 3,446
Extraordinary charge 4,587 -
Changes in operating assets and liabilities:
Accounts and other receivable (4,342) 3,435
Inventories (28,368) (2,711)
Prepaid expenses and other current assets (1,033) 222
Accounts payable and accrued expenses 9,073 12,025
Other (171) 11
Net Cash Flows (Used In) Provided By Operating (5,339) 25,792
Activities
Investing Activities:
Acquisitions of property, plant and equipment (28,655) (25,011)
Business acquisitions - (918)
Proceeds from property disposals 1,378 304
Other, net 294 (481)
Net Cash Used In Investing Activities (26,983) (26,106)
Financing Activities:
Proceeds from notes payable to banks 70,500 -
Repayments on notes payable to banks (56,500) -
Proceeds from long-term debt 50,029 15,030
Payments on long-term debt (30,600) (15,216)
Extraordinary charge, cash items (3,920) -
Cash dividends paid (1,241) (1,242)
Cash Provided By (Used In) Financing Activities 28,268 (1,428)
Effect of exchange rate changes on cash and cash (29) (189)
equivalents
Decrease in cash and cash equivalents (4,083) (1,931)
Cash and cash equivalents at beginning of year 11,892 11,244
Cash and cash equivalents at end of period $ 7,809 $ 9,313
Supplemental disclosure information:
Cash paid during the period for
Interest (net of amount capitalized) $ 12,229 $ 9,755
Income Taxes $ 4,844 $ 3,683
See notes to condensed consolidated financial
statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
______________________________________________________________________________
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. The
balance sheet at September 30, 1995, has been derived from the audited
financial statements at that date. Operating results for the period ended
June 29, 1996 are not necessarily indicative of that results that may be
expected for the year ended September 28, 1996. For further information,
refer to the consolidated financial statements and footnotes thereto
included in Pilgrim's annual report on Form 10-K for the year ended
September 30, 1995.
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 and 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.
NOTE B--NET INCOME PER COMMON SHARE
Earnings per share for the periods ended June 29, 1996 and July 1, 1995 are
based on the weighted average shares outstanding for the periods.
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NOTE C--INVENTORIES
Inventories consist of the following:
JUNE 29, 1996 SEPTEMBER 30, 1995
(in thousands)
Live broilers and hens $ 68,491 $ 55,353
Feed, eggs and other 47,377 32,087
Finished poultry products 24,535 22,964
$ 140,403 $ 110,404
NOTE D--IMPACT OF MEXICAN PESO DEVALUATION
Included in results of operations for the three and nine months ended June
29, 1996 are foreign exchange (gains) losses of $(.1) million and $1.2
million, respectively, compared with $(.2) million and $5.4 million for
three and nine months ended July 1, 1995, respectively. These (gains)
losses result from the (appreciation) devaluation of the Mexican peso
against the U.S. dollar. Also, for the period ended July 1, 1995, the
carrying value of inventories was adjusted to end-of-period exchange rates
as was necessary to record inventories at the lower of cost or market. See
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Impact of Mexican Peso Devaluation.
NOTE E--EARLY REPAYMENT OF DEBT AND REVOLVING CREDIT EXTENSION AND
MODIFICATION
On February 16, 1996 the Company completed a refinancing of two issues of
Senior Secured debt of $22.0 million and $3.4 million with interest rates
of 10.49% and 9.55%, respectively, payable to an insurance company maturing
on September 21, 2002 and October 1, 1998, respectively, by borrowing $50
million pursuant to a new 10-year term loan bearing interest at 7.21%
payable in 120 fixed monthly installments of $455,305 beginning on April 1,
1996 and a final balloon payment of $22.9 million due on February 28, 2006.
The additional proceeds from this refinancing was used primarily to finance
expansions of the Company's domestic production facilities.
The extraordinary charge of $2.8 million, net of $1.8 million tax benefit,
is the result of the early repayment of the above mentioned debt
obligations.
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On June 6, 1996 the Company completed an extension and amendment of its
credit facility with various banks. The amendment increased the facility
from $75 million to $100 million at interest rates of approximately one and
three quarter percent above LIBOR and extended the facility's term to May
31, 1999. Inventories and trade accounts receivable of the Company are
pledged as collateral on this facility.
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table presents certain items as a percentage of net sales for
the periods indicated.
Percentage of Net Sales Percentage of Net Sales
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 29, 1996 JULY 1, 1995 JUNE 29, 1996 JULY 1, 1995
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 94.1% 89.7% 93.5% 92.3%
Gross profit 5.9% 10.3% 6.5% 7.7%
Selling, general and
administrative 4.1% 5.2% 4.4% 5.4%
Operating income (loss) 1.9% 5.1% 2.2% 2.4%
Interest expense 1.9% 1.9% 1.9% 1.9%
Income (loss) before
income taxes and
extraordinary charge .2% 3.7% .3% (.4)%
Net Income (loss) .3% 2.7% (.4%) (1.4)%
THIRD QUARTER 1996, COMPARED TO
THIRD QUARTER 1995
Consolidated net sales were $294.3 million for the third quarter of fiscal
1996, an increase of $64.0 million, or 27.8%, over the third quarter of
fiscal 1995. The increase in consolidated net sales resulted from a $27.4
million increase in domestic chicken sales to $198.8 million, a $26.9
million increase in Mexican chicken sales to $61.4 million and a $9.7
million increase in sales of other domestic products to $34.1 million. The
increase in domestic chicken sales was primarily due to a 12.5% increase in
total revenue per dressed pound produced and 3.1% increase in dressed
pounds produced. The increase in Mexican chicken sales was primarily due
to 39.3% increase in dressed pounds produced and by a 28.0% increase in
total revenue per dressed pound produced. The increase in dressed pounds
produced resulted primarily from the July 5, 1995 acquisition of five
chicken companies located near Queretaro, Mexico. The increase in sales to
other domestic products was primarily the result of increased sales of the
Company's poultry by-products group and higher sales prices for table eggs.
Increased revenues per dressed pound produced both domestically and in
Mexico were primarily the result of higher sales prices caused primarily
by the chicken markets adjusting to the higher feed ingredient
cost.
Consolidated cost of sales was $277.0 million in the third quarter of
fiscal 1996, an increase of $70.5 million, or 34.1%, over the third quarter
of fiscal 1995. The increase primarily resulted from a $43.3 million
increase in cost of sales of domestic operations, and a $27.2 million
increase in the cost of sales in Mexican operations.
The cost of sales increase in domestic operations of $43.3 million was due
to a 53.5% increase in feed ingredient costs, a 3.1% increase in dressed
pounds produced and increased production of higher cost and margin products
in prepared foods. Since year end, feed ingredient costs increased
substantially due to lower crop yields in the 1995 harvest season. In July
1996, feed ingredient prices have stabilized and dropped slightly due to
favorable crop harvest reports and growing conditions in the Midwest,
however, the Company anticipates that feed ingredient prices will remain
above 1995 levels at least through the fourth fiscal quarter.
The $27.2 million cost of sales increase in Mexican operations was
primarily due to a 38.8% increase in average costs of sales per pound and a
39.3% increase in dressed pounds produced. The increase in average costs
of sales per pound was primarily the result of a 50.2% increase in feed
ingredient costs resulting from the above discussed reasons.
Gross profit as a percentage of sales decreased to 5.9% in the third
quarter of fiscal 1996 from 10.3% in the third quarter of 1995. The
decreased gross profit resulted mainly from increased costs of sales due to
higher feed ingredient prices experienced in fiscal 1996 third quarter
partially offset from improved results from the Company's Mexican
operations.
Consolidated selling, general and administrative expenses remained
basically flat at $11.9 million for both the third quarter of fiscal 1996
and fiscal 1995. Consolidated selling, general and administrative expenses
as a percentage of sales decreased in the third quarter of fiscal 1996 to
4.1% compared to 5.2% in the third quarter of fiscal 1995 due to higher
sales volume with consolidated selling, general and administrative expenses
remaining relatively stable.
Consolidated operating income was $5.5 million for the third quarter of
fiscal 1996 a decrease of $6.4 million, when compared to the third quarter
of fiscal 1995 resulting primarily from higher feed ingredient prices.
Consolidated net interest expense was $5.5 million in the third quarter of
fiscal 1996 an increase of $1.2 million, or 26.8%, when compared to the
third quarter of fiscal 1995. This increase was due to higher outstanding
debt levels resulting primarily from the prior year acquisitions in Mexico,
offset slightly by lower interest rates when compared to the third quarter
of fiscal 1995.
NINE MONTHS ENDED JUNE 29, 1996, COMPARED TO
NINE MONTHS ENDED JULY 1, 1995
Consolidated net sales were $833.8 million for the first nine months of
fiscal 1996, an increase of $159.7 million, or 23.7%, over the first nine
months of fiscal 1995. The increase in consolidated net sales resulted
from a $69.4 million increase in domestic chicken sales to $561.0 million,
a $61.0 million increase in Mexican chicken sales to $169.9 million and a
$29.3 million increase in sales of other domestic products to $102.9
million. The increase in domestic chicken sales was primarily due to an
8.6% increase in total revenue per dressed pound produced and 5.1% increase
in dressed pounds produced. The increase in Mexican chicken sales was
primarily due to 36.5% increase in dressed pounds produced and by a 14.3%
increase in total revenue per dressed pound. The increase in dressed pounds
produced resulted primarily from the July 5, 1995 acquisition of five
chicken companies located near Queretaro, Mexico. The increase in sales of
other domestic products was primarily the result of increased sales of the
Company's poultry by-products group and higher sales prices for table
eggs. Increased revenues per dressed pound produced both domestically and
in Mexico were primarily the result of higher sales prices caused by the
chicken markets adjusting to higher feed ingredient cost.
Consolidated cost of sales was $779.4 million in the first nine months of
fiscal 1996, an increase of $157.5 million, or 25.3%, over the first nine
months of fiscal 1995. The increase primarily resulted from a $108.6
million increase in cost of sales of domestic operations, and a $48.9
million increase in the cost of sales in Mexican operations.
The cost of sales increase in domestic operations of $108.6 million was due
to a 42.4% increase in feed ingredient costs, a 5.1% increase in dressed
pounds produced and increased production of higher margin products in
prepared foods. Since year end, feed ingredient costs increased
substantially due to lower crop yields in the 1995 harvest season. In July
1996 feed ingredient prices have stabilized and dropped slightly due to
favorable crop harvest reports and growing conditions in the Midwest,
however, the Company anticipates that feed ingredient prices will remain
above 1995 levels at least through the fourth quarter.
The $48.9 million cost of sales increase in Mexican operations was
primarily due to a 36.5% increase in dressed pounds produced and a 4.8%
increase in average costs of sales per pound. The increase in average
costs of sales per pound was primarily the result of a 28.1% increase in
feed ingredient costs resulting from the above discussed reasons.
Gross profit as a percentage of sales decreased to 6.5% in the first nine
months of fiscal 1996 from 7.7% in the first nine months of 1995. The
decreased gross profit resulted mainly from increased costs of sales due to
higher feed ingredient prices experienced in fiscal 1996 first nine months
partially offset from improved results from the Company's Mexican
operations.
Consolidated selling, general and administrative expenses were $36.4
million for the first nine months of fiscal 1996, an increase of $.2
million when compared to the first nine months of fiscal 1995.
Consolidated selling, general and administrative expenses as a percentage
of sales decreased in the first nine months of fiscal 1996 to 4.4% compared
to 5.4% in the first nine months of fiscal 1995 due to higher sales volume
with consolidated selling, general and administrative expenses remaining
relatively stable.
Consolidated operating income was $18.0 million for the first nine months
of fiscal 1996, an increase of $2.0 million, when compared to the first
nine months of fiscal 1995 resulting primarily from improved results from
the Company's Mexico operation.
Consolidated net interest expense was $15.9 million in the first nine
months of fiscal 1996 an increase of $3.1 million, or 24.7%, when compared
to the first nine months of fiscal 1995. This increase was due to higher
outstanding debt levels resulting primarily from the prior year
acquisitions in Mexico, offset slightly by lower interest rates when
compared to the first nine months of fiscal 1995.
Consolidated income tax expense in the first nine months of fiscal 1996 was
$2.4 million compared to a expense of $7.2 million in the first nine months
of fiscal 1995.
The extraordinary charge-early repayment of debt in the amount of $2.8
million, net of tax, was incurred while refinancing certain debt at a lower
interest rate, which should result in long-term interest expense
reductions. See Note E to the Condensed Consolidated Financial Statements.
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LIQUIDITY AND CAPITAL RESOURCES
Liquidity in first nine months of fiscal 1996 remained strong, however,
operating losses in Mexico resulting primarily from the Mexican peso
devaluation and higher feed ingredient costs affected most financial ratios
negatively. The Company's working capital at June 29, 1996 increased to
$93.6 million from $88.4 million at September 30, 1995, though the current
ratio at June 29, 1996 decreased to 1.72 to 1 from 1.84 to 1 at September
30, 1995 and the Company's stockholders' equity decreased to $147.8 million
at June 29, 1996 from $152.1 million at September 30, 1995. Total debt to
capitalization increased to 61.4% at June 29, 1996 from 56.9% at September
30, 1995. The Company maintains $110 million in revolving credit
facilities with available unused lines of credit of $67.3 million at August
13, 1996.
Trade accounts and other receivables were $63.7 million at June 29, 1996, a
$3.7 million increase from September 30, 1995. The 6.1% increase was due
primarily to increased consolidated sales. Allowances for doubtful
accounts, as a percentage of trade accounts and notes receivable were 6.5%
at June 29, 1996 compared to 6.7% at September 30, 1995.
Inventories were $140.4 million at June 29, 1996, an increase of $30.0
million from September 30, 1995. This 27.2% increase was due primarily to
the higher feed ingredient costs affecting the carrying value of feed on
hand and feed cost in the live birds and finished products.
Accounts payable were $60.1 million at June 29, 1996, a 7.9% increase from
September 30, 1995, due primarily to higher production levels and feed
ingredient cost.
Capital expenditures for the first nine months of fiscal 1996 were $28.7
million and were primarily incurred to expand production capacities
domestically, improve efficiencies, reduce costs and for the routine
replacement of equipment. The Company anticipates that it will spend
approximately $35 million for capital expenditures in fiscal year 1996 and
expects to finance such expenditures with available operating cash flows,
leases and long-term financing.
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IMPACT OF MEXICAN PESO DEVALUATION
In December 1994, the Mexican government changed its policy of defending
the peso against the U.S. dollar and allowed it to float freely on the
currency markets. These events resulted in the Mexican peso exchange rate
declining from 3.39 to 1 U.S. dollar at October 1, 1994 to a low of 7.91 at
November 15, 1995. On August 12, 1996 the Mexican peso closed at 7.49 to 1
U.S. dollar. No assurance can be given as to the future valuation of the
Mexican peso and further movement in the Mexican peso could affect future
earnings positively or negatively.
Adjustments resulting from changes in currency exchange rates on net
monetary assets are reflected in the Consolidated Statements of Income
(Loss). Classification of the effects in the Consolidated Statements of
Income (Loss) is dependent upon the nature of the underlying asset and, in
general, exchange rate effects on net monetary assets are reflected as
"Other expenses (income) - Foreign exchange (gain) loss."
OTHER
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF." SFAS No.
121 establishes accounting standards for the impairment of long-lived
assets to be held and used and for long-lived assets to be disposed of.
SFAS No. 121 is scheduled to become mandatory for the Company's 1997 fiscal
year. The Company has not determined the effect of adopting SFAS No. 121.
There will be no cash flow impact from this accounting change.
The statements contained in this filing which are not historical facts,
such as future feed costs, sales prices, capital expenditures, and
movements in the exchange rate between the U.S. dollar and the Mexican peso
are forward-looking statements that are subject to risks and uncertainties
that could cause actual results to differ materially from those set forth
in the forward-looking statements. Among the factors that could cause
actual results to differ materially are competitive pressures, crop yields,
the strength of the U.S. and Mexican economies, and the demand for
Pilgrim's Pride products in the marketplace.
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
10.43 Fourth Amendment to Secured Credit Agreement dated June 6, 1996 to
the Secured Credit Agreement dated May 27, 1993, by and among the
Company and Harris Trust and Savings Bank, and FBS AG Credit, Inc.,
Internationale Nederlanden Bank N.V., Boatman's First National Bank of
Kansas City and Wells Fargo Bank Texas, N.A., successor to First
Interstate Bank of Texas, N.A.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PILGRIM'S PRIDE CORPORATION
Date 8/13/96
Clifford E. Butler
Vice Chairman of the Board,
Chief Financial Officer and
Secretary and Treasurer
in his respective capacity
as such
PILGRIM'S PRIDE CORPORATION
FOURTH AMENDMENT TO SECURED CREDIT AGREEMENT
Harris Trust and Savings Bank
Chicago, Illinois
FBS Ag Credit, Inc.
Denver, Colorado
Internationale Nederlanden (U.S)
Capital Corporation, formerly
known as Internationale
Nederlanden Bank N. V. ("ING
BANK")
New York, New York
Boatmen's First National Bank of Kansas City
Kansas City, Missouri
Wells Fargo Bank (Texas), N.A., successor to
First Interstate Bank of Texas, N.A.
Dallas, Texas
Ladies and Gentlemen:
Reference is hereby made to that certain Secured Credit Agreement
dated as of May 27, 1993, as amended (the "CREDIT AGREEMENT") among the
undersigned, Pilgrim's Pride Corporation, a Delaware corporation (the
"COMPANY"), you (the "BANKS") and Harris Trust and Savings Bank, as agent
for the Banks (the "AGENT"). All defined terms used herein shall have the
same meanings as in the Credit Agreement unless otherwise defined herein.
The Banks extend a $75,000,000 revolving credit facility to the
Company on the terms and conditions set forth in the Credit Agreement. The
Company, the Agent and the Banks now wish to amend the Credit Agreement to
increase the amount of the Revolving Credit to $100,000,000, extend the
Termination Date of the Credit Agreement, add CoBank, ACB as a party to the
Credit Agreement and amend various financial covenants and other provisions
of the Credit Agreement, all on the terms and conditions and in the manner
set forth in this Amendment.
1. AMENDMENTS.
Upon satisfaction of all of the conditions precedent set forth in Section 2
hereof, the Credit Agreement shall be amended as follows:
1.1. Section 1.1(a) of the Credit Agreement shall be amended by
replacing the date "May 31, 1998" appearing therein with the date "May 31,
1999".
1.2. Section 1.1(c) of the Credit Agreement shall be amended to read
as follows:
"(c) The respective maximum aggregate principal
amounts of the Revolving Credit at any one time
outstanding and the percentage of the Revolving Credit
available at any time which each Bank by its acceptance
hereof severally agrees to make available to the
Company are as follows (collectively, the "REVOLVING
CREDIT COMMITMENTS" and individually, a "REVOLVING
CREDIT COMMITMENT"):
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Harris Trust and Savings Bank $26,666,667 26.66666667%
FBS Ag Credit, Inc. $20,000,000 20%
CoBank, ACB $20,000,000 20%
Internationale Nederlanden $13,333,333 13.33333334%
(U.S.) Capital Corporation
Boatmen's First National Bank $13,333,333 13.33333334%
of Kansas City
Wells Fargo Bank $ 6,666,667 6.66666667%
(Texas), N.A.
Total $100,000,000 100%
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Each Bank's Revolving Credit Commitment shall be
reduced from time to time by the aggregate outstanding
principal amount of all Bid Loans made by such Bank,
and shall be increased (but in no event above the
amount set forth above for each Bank) by the aggregate
principal amount of each principal repayment of such
Bid Loans made from time to time."
1.3. Sections 4.24, 4.25 and 4.26 shall be amended to read as follows:
"4.24. Intentionally Omitted.
4.25. Intentionally Omitted.
4.26. Intentionally Omitted."
1.4. Section 4.84 shall be amended by deleting the second sentence
thereof.
1.5. Section 4.86 shall be amended to read as follows:
"4.86. Intentionally Omitted."
1.6. Section 7.8 of the Credit Agreement shall be amended to read as
follows:
.c2."SECTION 7.8. LEVERAGE RATIO;. The Company
will not permit the ratio of its Leverage Ratio at any
time during each period specified below to exceed the
ratio specified below for such period:
(a) from June 6, 1996 through the next to
last day of Fiscal Year 1997, 0.70 to 1;
(b) from the last day of Fiscal Year 1997
through the next to last day of Fiscal Year 1998,
0.675 to 1;
(c) from the last day of Fiscal Year 1998
through the next to last day of Fiscal Year 1999,
0.65 to 1; and
(d) on the last day of Fiscal Year 1999 and
thereafter, 0.625 to 1."
1.7. Section 7.12 of the Credit Agreement shall be amended to read as
follows:
"SECTION 7.12. FIXED CHARGE COVERAGE RATIO. The
Company will not permit, as of the last day of each
fiscal quarter of the Company ending during the periods
specified below, its Fixed Charge Coverage Ratio in the
eight consecutive fiscal quarters of the Company then
ended to be less than (a) 1.35 to 1 on the last day of
each fiscal quarter of the Company in Fiscal Year 1996,
and (b) 1.5 to 1 on the last day of each fiscal quarter
of the Company thereafter.
1.8. Section 7.14 of the Credit Agreement shall be amended to read as
follows:
"SECTION 7.14. CAPITAL EXPENDITURES;. The
Company will not, and will not permit any Subsidiary
to, make or commit to make any capital expenditures (as
defined and classified in accordance with generally
accepted accounting principles consistently applied;)
PROVIDED, HOWEVER, that if no Event of Default or
Potential Default shall exist before and after giving
effect thereto, the Company and its Subsidiaries may
make capital expenditures during Fiscal Year 1996 and
each Fiscal Year thereafter, in an aggregate amount in
each Fiscal Year not to exceed the sum of (i) an amount
equal to 115% of the Company's depreciation and
amortization charges for the preceding Fiscal Year and
(ii) the amount, if any, by which such capital
expenditures made by the Company in the immediately
preceding Fiscal Year was less than the maximum amount
of capital expenditures the Company was permitted to
make under this Section 7.14 during such Fiscal Year,
determined without regard to any carryover amount from
any prior Fiscal Year, but not to exceed $12,000,000 in
Fiscal Year 1996 and $5,000,000 in any other Fiscal
Year, PROVIDED, HOWEVER, that in no event may the
aggregate amount of all such capital expenditures made
or committed to be made during Fiscal Year 1996 exceed
$42,000,000."
1.9. Section 7.18(g) of the Credit Agreement shall be amended to read
as follows:
"(g) loans, investments (excluding retained
earnings) and advances by the Company to its
Subsidiaries located in Mexico in an aggregate
outstanding amount not to exceed $145,000,000 at any
time, PROVIDED, HOWEVER, that the Company may make
loans, investments (excluding retained earnings) and
advances to its Subsidiaries located in Mexico in an
aggregate amount equal to the aggregate amount of any
capital withdrawn from its Mexican Subsidiaries after
the date hereof but not to exceed an aggregate amount
of $25,000,000 in any Fiscal Year of the Company,
PROVIDED FURTHER that any such investments (excluding
retained earnings), loans and advances shall not cause
the aggregate outstanding amount of all such loans,
investments (excluding retained earnings) and advances
to exceed $145,000,000 at any time;"
1.10. Section 11.1 of the Credit Agreement shall be amended by deleting
the last sentence thereof.
1.11. Section 11.15 of the Credit Agreement shall be amended to read as
follows:
"SECTION 11.15. PARTICIPANTS;. Each Bank shall
have the right at its own cost to grant participations
(to be evidenced by one or more agreements or
certificates of participation) in the Loans made,
and/or Revolving Credit Commitment and participations
in L/Cs and Reimbursement Obligations held, by such
Bank at any time and from time to time, and to assign
its rights under such Loans, participations in L/Cs and
Reimbursement Obligations or the Notes evidencing such
Loans to one or more other Persons; provided that no
such participation shall relieve any Bank of any of its
obligations under this Agreement, and any agreement
pursuant to which such participation or assignment of a
Note or the rights thereunder is granted shall provide
that the granting Lender shall retain the sole right
and responsibility to enforce the obligations of the
Company under the Loan Documents, including, without
limitation, the right to approve any amendment,
modification or waiver of any provision thereof, except
that such agreement may provide that such Bank will not
agree without the consent of such participant or
assignee to any modification, amendment or waiver of
this Agreement that would (A) increase any Revolving
Credit Commitment of such Lender, or (B) reduce the
amount of or postpone the date for payment of any
principal of or interest on any Loan or Reimbursement
Obligation or of any fee payable hereunder in which
such participant or assignee has an interest or (C)
reduce the interest rate applicable to any Loan or
other amount payable in which such participant or
assignee has an interest or (D) release any collateral
security for or guarantor for any of the Company's
indebtedness, obligations and liabilities under the
Loan Documents, and provided further that no such
assignee or participant shall have any rights under
this Agreement except as provided in this Section
11.15, and the Agent shall have no obligation or
responsibility to such participant or assignee, except
that nothing herein provided is intended to affect the
rights of an assignee of a Note to enforce the Note
assigned. Any party to which such a participation or
assignment has been granted shall have the benefits of
Section 1.10, Section 9.3 and Section 9.4 hereof but
shall not be entitled to receive any greater payment
under any such Section than the Bank granting such
participation or assignment would have been entitled to
receive with respect to the rights transferred."
2. CONDITIONS PRECEDENT.
The effectiveness of the Amendment is subject to the satisfaction of all of
the following conditions precedent:
2.1. The Company and each of the Banks shall have executed this
Amendment (such execution may be in several counterparts and the several
parties hereto may execute on separate counterparts).
2.2. Mr. and Mrs. Lonnie A. Pilgrim shall have executed and delivered
to the Banks the Guarantors' Consent in the form set forth below.
2.3. Each of the representations and warranties set forth in Section 5
of the Credit Agreement shall be true and correct.
2.4. The Company shall be in full compliance with all of the terms and
conditions of the Credit Agreement and no Event of Default or Potential
Default shall have occurred and be continuing thereunder or shall result
after giving effect to this Amendment.
2.5. All legal matters incident to the execution and delivery hereof
and the instruments and documents contemplated hereby shall be satisfactory
to the Banks.
2.6. Harris shall have received a written consent from CoBank with
respect to this Amendment in the form set forth below.
2.7. The Agent shall have received (in sufficient counterparts for
distribution to each of the Banks) all of the following in a form
satisfactory to the Agent, the Banks and their respective counsel:
(a) a Secured Revolving Credit Note of the Company payable to
the order of each of the Banks and CoBank in the principal amount
equal to each Banks' CoBank's Revolving Credit Commitment, in the form
attached hereto as Exhibit A;
(b) copies (executed or certified as may be appropriate) of all
legal documents or proceedings taken in connection with the execution
and delivery of this Amendment, and the other instruments and
documents contemplated hereby; and
(c) Opinion of counsel to the Company substantially in the form
of Exhibit B hereto and satisfactory to the Agent, the Banks and their
respective counsel.
2.8. The Agent shall have received for the ratable benefit of the
Banks an amendment fee in an amount equal to fifteen one-hundredths of one
percent (0.15%) of the maximum amount of the Revolving Credit.
SECTION 3. REPRESENTATIONS AND WARRANTIES.
SECTION 3.1. The Company, by its execution of this Amendment, hereby
represents and warrants the following:
(a) each of the representations and warranties set forth in
Section 5 of the Credit Agreement is true and correct as of the date
hereof, except that the representations and warranties made under
Section 5.3 shall be deemed to refer to the most recent annual report
furnished to the Banks by the Company; and
(b) the Company is in full compliance with all of the terms and
conditions of the Credit Agreement and no Event of Default or
Potential Default has occurred and is continuing thereunder.
4. MISCELLANEOUS.
4.1. Upon satisfaction of the conditions precedent set forth above,
the Company shall be deemed to have requested from CoBank loans in an
aggregate principal amount of $5,200,000 and CoBank will make such loans if
all conditions set forth in Section 6.3 of the Credit Agreement are
satisfied. The proceeds of such loans shall be used exclusively to pay
Loans made by Harris under the Credit Agreement and in which CoBank has
acquired a participation under the CoBank Participation, and the Company
will pay all accrued interest thereon. Upon payment in full of such amount
the CoBank Participation Agreement shall automatically terminate and CoBank
shall be a party to the Credit Agreement and shall have all of the rights
and obligations of a "Bank" thereunder and shall be deemed to have acquired
risk participations in all outstanding L/Cs and Reimbursement Obligations
pursuant to the Credit Agreement. For the convenience of the parties
Harris and CoBank may effect such loans by means of crediting the amount of
such loans to be made by CoBank against the amount payable to CoBank by
Harris under the CoBank Participation Agreement.
4.2. The Company has heretofore executed and delivered to the Agent
that certain Security Agreement Re: Accounts Receivable, Farm Products and
Inventory dated as of May 27, 1993 (the "SECURITY AGREEMENT") and the
Company hereby agrees that the Security Agreement shall secure all of the
Company's indebtedness, obligations and liabilities to the Agent and the
Banks under the Credit Agreement as amended by this Amendment, that
notwithstanding the execution and delivery of this Amendment, the Security
Agreement shall be and remain in full force and effect and that any rights
and remedies of the Agent thereunder, obligations of the Company thereunder
and any liens or security interests created or provided for thereunder
shall be and remain in full force and effect and shall not be affected,
impaired or discharged thereby. Nothing herein contained shall in any
manner affect or impair the priority of the liens and security interests
created and provided for by the Security Agreement as to the indebtedness
which would be secured thereby prior to giving effect to this Amendment.
4.3. Except as specifically amended herein the Credit Agreement and
the Notes shall continue in full force and effect in accordance with their
original terms. Reference to this specific Amendment need not be made in
any note, document, letter, certificate, the Credit Agreement itself, the
Notes, or any communication issued or made pursuant to or with respect to
the Credit Agreement or the Notes, any reference to the Credit Agreement or
Notes being sufficient to refer to the Credit Agreement or the Notes as
amended hereby.
4.4. The Company agrees to pay all out-of-pocket costs and expenses
incurred by the Agent and Banks in connection with the preparation,
execution and delivery of this Amendment and the documents and transactions
contemplated hereby, including the fees and expenses of Messrs. Chapman and
Cutler.
4.5. This Amendment may be executed in any number of counterparts, and
by the different parties on different counterparts, all of which taken
together shall constitute one and the same Agreement. Any of the parties
hereto may execute this Amendment by signing any such counterpart and each
of such counterparts shall for all purposes be deemed to be an original.
4.6. (A) THIS AMENDMENT AND THE RIGHTS AND DUTIES OF THE PARTIES
HERETO, SHALL BE CONSTRUED AND DETERMINED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF ILLINOIS, EXCEPT TO THE EXTENT PROVIDED IN SECTION
4.6(b) HEREOF AND TO THE EXTENT THAT THE FEDERAL LAWS OF THE UNITED STATES
OF AMERICA MAY OTHERWISE APPLY.
(b) NOTWITHSTANDING ANYTHING IN SECTION 4.6(a) HEREOF TO THE
CONTRARY, NOTHING IN THIS AMENDMENT, THE CREDIT AGREEMENT, THE NOTES, OR
THE OTHER LOAN DOCUMENTS SHALL BE DEEMED TO CONSTITUTE A WAIVER OF ANY
RIGHTS WHICH THE COMPANY, THE AGENT OR ANY OF THE BANKS MAY HAVE UNDER THE
NATIONAL BANK ACT OR OTHER APPLICABLE FEDERAL LAW.
<PAGE>
Dated as of June 6, 1996.
PILGRIM'S PRIDE CORPORATION
By Lonnie Bo Pilgrim
Its Chief Executive Officer
Accepted and Agreed to as of the day and year last above written.
HARRIS TRUST AND SAVINGS BANK
individually and as Agent
By Carl Blackham
Its Vice President
FBS AG CREDIT, INC.
By Douglas Hoffner
Its Vice President
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, formerly known
as Internationale Nederlanden Bank N.
V.
By Sheila Greatrex
Its Vice President
BOATMEN'S FIRST NATIONAL BANK OF
KANSAS CITY
By Randal Anderes
Its Vice President
WELLS FARGO BANK (TEXAS), N.A.,
successor to First Interstate Bank
of Texas, N.A.
By Ken Taylor
Its Assistant Vice President
COBANK, ACB
By Dennis Blick
Its Vice President
<PAGE>
GUARANTORS' CONSENT
The undersigned, Lonnie A. Pilgrim and Patty R. Pilgrim, have executed and
delivered a Guaranty Agreement dated as of May 27, 1993 (the "GUARANTY") to
the Banks. As an additional inducement to and in consideration of the
Banks' acceptance of the foregoing Amendment, the undersigned hereby agree
with the Banks as follows:
1. Each of the undersigned consents to the execution of the
foregoing Amendment by the Company and acknowledges that this consent is
not required under the terms of the Guaranty and that the execution hereof
by the undersigned shall not be construed to require the Banks to obtain
the undersigneds' consent to any future amendment, modification or waiver
of any term of the Credit Agreement except as otherwise provided in said
Guaranty. Each of the undersigned hereby agrees that the Guaranty shall
apply to all indebtedness, obligations and liabilities of the Company to
the Banks, the Agent and under the Credit Agreement, as amended pursuant to
the foregoing Amendment. Each of the undersigned further agrees that the
Guaranty shall be and remain in full force and effect.
2. All terms used herein shall have the same meaning as in the
foregoing Amendment, unless otherwise expressly defined herein.
Dated as of June 6, 1996.
Lonnie A. Pilgrim
Patty R. Pilgrim
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<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> SEP-28-1996 SEP-28-1996
<PERIOD-END> JUN-29-1996 JUN-29-1996
<CASH> 7,809 0
<SECURITIES> 0 0
<RECEIVABLES> 63,704 0
<ALLOWANCES> 0 0
<INVENTORY> 140,403 0
<CURRENT-ASSETS> 224,369 0
<PP&E> 466,680 0
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<CURRENT-LIABILITIES> 130,733 0
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276 0
0 0
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<TOTAL-LIABILITY-AND-EQUITY> 532,258 0
<SALES> 294,339 833,818
<TOTAL-REVENUES> 294,339 833,818
<CGS> 276,955 779,415
<TOTAL-COSTS> 288,885 815,855
<OTHER-EXPENSES> 4,867 15,843
<LOSS-PROVISION> 669 669
<INTEREST-EXPENSE> 5,526 15,857
<INCOME-PRETAX> 587 2,120
<INCOME-TAX> (420) 2,372
<INCOME-CONTINUING> 1,007 (252)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 (2,780)
<CHANGES> 0 0
<NET-INCOME> 1,007 (3,032)
<EPS-PRIMARY> .04 (.11)
<EPS-DILUTED> .04 (.11)
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