SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended JANUARY 2, 1999
Commission file number 1-9273
PILGRIM'S PRIDE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-1285071
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 SOUTH TEXAS, PITTSBURG, TX 75686-0093
(Address of principal executive offices) (Zip code)
(903) 855-1000
(Telephone number of principle executive offices)
NOT APPLICABLE
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
COMMON STOCK $.01 PAR VALUE---27,589,250 SHARES AS OF FEBRUARY 16, 1999
INDEX
PILGRIM'S PRIDE CORPORATION
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited):
Condensed consolidated balance sheets:
January 2, 1999 and September 26, 1998
Consolidated statements of income:
Three months ended January 2, 1999 and December 27, 1997
Consolidated statements of cash flows:
Three months ended January 2, 1999 and December 27, 1997
Notes to condensed consolidated financial statements--January 2, 1999
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
PILGRIM'S PRIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<S> <C> <C>
JANUARY 2, 1999 SEPTEMBER 26, 1998
(in thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 33,666 $ 25,125
Trade accounts and other receivables,
less allowance for doubtful accounts 89,421 81,813
Inventories 130,873 141,684
Deferred income taxes 4,148 7,010
Prepaid expenses
and other current assets 1,881 2,902
Total Current Assets 259,989 258,534
Other Assets 11,848 11,757
Property, Plant and Equipment 574,205 562,099
Less accumulated depreciation 238,677 230,951
335,528 331,148
$ 607,365 $ 601,439
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable 75,857 70,069
Accrued expenses 34,525 35,536
Current maturities of long-term debt 4,626 5,889
Total Current Liabilities 115,008 111,494
Long-term Debt, less current maturities 185,358 199,784
Deferred Income Taxes 59,733 58,401
Minority Interest in Subsidiary 889 889
Stockholders' Equity:
Preferred stock, $.01 par value, authorized 5,000,000
shares; none issued -- --
Common stock - Class A, $.01 par value, authorized
100,000,000 shares; none issued -- --
Common stock - Class B, $.01 par value, authorized
60,000,000 shares; 27,589,250 issued and outstanding in
1999 and 1998 276 276
Additional paid-in capital 79,763 79,763
Retained earnings 166,338 150,832
Total Stockholders' Equity 246,377 230,871
$ 607,365 $ 601,439
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
1
<PAGE>
PILGRIM'S PRIDE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
January 2, December 27,
1999 1997
(14 weeks) (13 weeks)
(in thousands, except share and per share data)
<S> <C> <C>
Net Sales $ $ 336,088 $ 337,887
Costs and Expenses:
Cost of sales 292,187 308,507
Selling, general and administrative 17,715 14,009
309,902 322,516
Operating Income 26,186 15,371
Other Expense (Income):
Interest expense, net 4,733 5,036
Foreign exchange (gain) loss (92) 528
Miscellaneous, net income 88 (463)
4,729 5,101
Income before income taxes 21,457 10,270
Income tax expense (benefit) 5,537 (847)
Net income $ 15,920 $ 11,117
Net income per common share - basic and diluted $ .58 $ .40
Dividends per common share $ .015 $ .015
Weighted average shares outstanding 27,589,250 27,589,250
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
PILGRIM'S PRIDE CORPORATION
JANUARY 2, 1999
PILGRIM'S PRIDE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
January 2, December 27,
1999 1997
(14 weeks) (13 weeks)
(in thousands)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 15,920 $ 11,117
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 8,653 8,052
Loss on property disposals 76 10
Provision for doubtful accounts 334 667
Deferred income taxes 4,195 (1,796)
Changes in operating assets and liabilities:
Accounts and other receivable (7,942) (2,228)
Inventories 10,811 20,815
Prepaid expenses 1,021 (3,474)
Accounts payable and accrued expenses 4,777 (643)
Other (396) (91)
Net Cash Flows Provided By Operating Activities: 37,449 32,429
Investing Activities:
Acquisitions of property, plant and equipment (12,833) (15,352)
Proceeds from property disposals 235 348
Other, net (340) (459)
Net Cash Used In Investing Activities (12,938) (15,463)
Financing Activities:
Proceeds from long-term debt -- 1,117
Payments on long-term debt (15,780) (23,895)
Cash dividends paid (414) (414)
Cash Used In Financing Activities (16,194) (23,192)
Effect of Exchange Rate Changes
on Cash and Cash Equivalents 224 (81)
Increase (Decrease) in cash and cash equivalents 8,541 (6,307)
Cash and cash equivalents at beginning of year 25,125 20,339
Cash and cash equivalents at end of period $ 33,666 $ 14,032
Supplemental disclosure information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 1,930 $ 2,890
Income Taxes $ 4,779 $ 413
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
PILGRIM'S PRIDE CORPORATION
JANUARY 2, 1999
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT
(Unaudited)
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Pilgrim's Pride Corporation ("Pilgrim's" or "the Company") 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
Condensed Consolidated Balance Sheet as of September 26, 1998 has been
derived from the audited financial statements as of that date. Operating
results for the period ended January 2, 1999 are not necessarily
indicative of the results that may be expected for the year ended October
2, 1999. 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 26, 1998.
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 Company reports on the basis of a 52/53-week fiscal year, which ends
on the Saturday closest to September 30. As a result, the Company's
first quarter of fiscal year 1999 ended on January 2, 1999, and included
14 weeks, while the Company's first quarter of fiscal 1998, which ended
on December 27, 1997, had 13 weeks.
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.
NOTE B--COMPREHENSIVE INCOME AND NET INCOME PER COMMON SHARE
Comprehensive income is the same as net income for all periods presented.
Basic and diluted earnings per share for the periods ended January 2,
1999 and December 27, 1997 are based on the weighted average shares
outstanding for the periods.
NOTE C--INVENTORIES
<TABLE>
<CAPTION>
Inventories consist of the following:
JANUARY 2,1999 SEPTEMBER 26, 1998
(in thousands)
<S> <C> <C> <C> <C>
Live chickens and hens $ 36,491 $ 61,295
Feed, eggs and other 44,788 46,199
Finished chicken products 49,594 34,190
$ 130,873 $ 141,684
</TABLE>
3
<PAGE>
PILGRIM'S PRIDE CORPORATION
JANUARY 2, 1999
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Profitability in the chicken industry can be materially affected by
the commodity prices of chicken and chicken parts, each of which are
determined largely by supply and demand. As a result, the chicken
industry as a whole has been characterized by cyclical earnings.
Cyclical fluctuations in earnings of individual chicken companies can be
mitigated somewhat by (i) business strategy; (ii) product mix; (iii)
sales and marketing plans; and (iv) operating efficiencies. In an effort
to reduce price volatility and to generate higher, more consistent profit
margins, the Company has concentrated on the production and marketing of
prepared food products, which generally have higher margins than the
Company's other products. Additionally, the production and sale in the
U.S. of prepared foods products reduces the impact of feed grain costs on
the Company's profitability. As further processing is performed, feed
grain costs become a decreasing percentage of a product's total
production costs.
As discussed in Note A to the Condensed Consolidated Financial
Statements, the Company's accounting cycle resulted in 14 weeks of
operations in the first quarter of fiscal 1999 compared to 13 weeks in
the first fiscal quarter of 1998.
The following table presents certain information regarding the
Company's U.S. and Mexican operations.
<TABLE>
<CAPTION>
Quarter Ended
January 2, December 27,
1999 1997
(14 weeks) (13 weeks)
<S> <C> <C> <C> <C>
Net Sales to Unaffiliated Customers:
United States 266,954 259,576
Mexico 69,134 78,311
Operating Income:
United States 18,741 2,472
Mexico 7,445 12,899
</TABLE>
The following table presents certain items as a percentage of net sales
for the periods indicated.
<TABLE>
<CAPTION>
QUARTER ENDED
JANUARY 2,1999 DECEMBER 27, 1997
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0%
Costs and expenses:
Cost of sales 86.9 91.3
Gross profit 13.1 8.7
Selling, general and
administrative 5.3 4.1
Operating Income 7.8 4.6
Interest expense 1.4 1.5
Income before income taxes 6.4 3.0
Net Income 4.7 3.3
</TABLE>
Results of Operations
First Quarter 1999 Compared to First Quarter 1998:
NET SALES. Consolidated net sales were $336.1 million for the first
quarter of fiscal 1999, a decrease of $1.8 million, or .5% from the first
quarter of fiscal 1998. The decrease in consolidated net sales resulted
from a $9.2 million decrease in Mexican chicken sales to $69.1 million
offset partially by a $4.2 million increase in U.S. chicken sales to
$222.8 million and a $3.2 million increase of sales of other U.S.
products to $44.1 million. The decrease in Mexican chicken sales was
primarily due to a 19.8% decrease in total revenue per dressed pound
offset partially by a 10.0% increase in dressed pounds.
COST OF SALES. Consolidated cost of sales was $292.2 million in the
first quarter of fiscal 1999, a decrease of $16.3 million, or 5.3% over
the first quarter of fiscal 1998. The decrease resulted primarily from a
$12.3 million decrease in cost of sales of U.S. operations and by a $4.0
million decrease in the cost of sales in Mexican operations. The cost of
sales decrease in U.S. operations of $12.3 million was due to a 30.4%
decrease in feed ingredient costs per pound partially offset by a 6.6%
increase in dressed pounds produced. The $4.0 million cost of sales
decrease in Mexican operations was primarily due to a 21.5% decrease in
feed ingredient costs per pound partially offset by a 10.0% increase in
dressed pounds produced.
GROSS PROFIT. Gross profit was $43.9 million for the first quarter of
fiscal 1999, an increase of $14.5 million, or 49.4% over the same period
last year. Gross profit as a percentage of sales increased to 13.1% in
the first quarter of fiscal 1999 from 8.7% in the first quarter of fiscal
1998. The increased gross profit resulted primarily from lower feed
ingredient costs per pound and higher production volumes both in the
U.S. and Mexico.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Consolidated selling,
general and administrative expenses were $17.7 million in the first
quarter of fiscal 1999 and $14.0 million in the first quarter of fiscal
1998. Consolidated selling, general and administrative expenses as a
percentage of sales increased in the first quarter of fiscal 1999 to 5.3%
compared to 4.1% in the first quarter of fiscal 1998 due primarily to
increased accrued retirement and bonus cost which are dependent upon U.S.
profits.
Operating Income. Consolidated operating income was $26.2 million for
the first quarter of fiscal 1999, an increase of $10.8 million, or 70.4%
when compared to the first quarter of fiscal
1998, RESULTING PRIMARILY FROM LOWER FEED INGREDIENT COSTS.
Interest Expense. CONSOLIDATED NET INTEREST EXPENSE DECREASED TO $4.7
MILLION, OR 6.0% IN THE FIRST QUARTER OF FISCAL 1999, WHEN COMPARED TO
$5.0 MILLION FOR THE FIRST QUARTER OF FISCAL 1998, DUE TO LOWER
OUTSTANDING DEBT LEVELS.
Income Tax Expense. CONSOLIDATED INCOME TAX EXPENSE IN THE FIRST QUARTER
OF FISCAL 1999 INCREASED TO $5.5 MILLION COMPARED TO A BENEFIT OF $.9
MILLION IN THE FIRST QUARTER OF FISCAL 1998. THIS INCREASE RESULTED FROM
HIGHER U.S. EARNINGS IN THE FIRST QUARTER OF FISCAL 1999 THAN IN THE
FIRST QUARTER OF FISCAL 1998.
Liquidity and Capital Resources
AT JANUARY 2, 1999, THE COMPANY'S WORKING CAPITAL REMAINED RELATIVELY
STABLE AT $145.0 MILLION AND ITS CURRENT RATIO DECREASED TO 2.26 TO 1
COMPARED WITH WORKING CAPITAL OF $147.0 MILLION AND A CURRENT RATIO OF
2.32 TO 1 AT SEPTEMBER 26, 1998. STRONG PROFITS WERE PRIMARILY
RESPONSIBLE FOR THE CONTINUING STABILITY IN WORKING CAPITAL AND CURRENT
RATIO FROM SEPTEMBER 26, 1998 TO JANUARY 2, 1999.
TRADE ACCOUNTS AND OTHER RECEIVABLES WERE $89.4 MILLION AT JANUARY 2,
1999, A $7.6 MILLION INCREASE FROM SEPTEMBER 26, 1998. THE 9.3% INCREASE
WAS PRIMARILY DUE TO INCREASED MEXICAN SALES TAX RECEIVABLES, SEASONAL
VARIATIONS AND AN INCREASE IN SALES OF PREPARED FOODS PRODUCTS, WHICH
NORMALLY HAVE LONGER CREDIT TERMS THAN FRESH CHICKEN SALES.
INVENTORIES WERE $130.9 MILLION AT JANUARY 2, 1999, COMPARED TO $141.7
MILLION AT SEPTEMBER 26, 1998. THE $10.8 MILLION, OR 7.6%, DECREASE WAS
DUE PRIMARILY TO LOWER COSTS IN THE LIVE CHICKEN AND HEN INVENTORIES
RESULTING FROM LOWER FEED INGREDIENT COSTS AND SEASONAL VARIATIONS IN
SALES OF CHICKEN AND FEED PRODUCTS TO THE COMPANY'S PRINCIPAL
STOCKHOLDER. ACCOUNTS PAYABLE WERE $75.9 MILLION AT JANUARY 2, 1999, A
$5.8 MILLION INCREASE FROM SEPTEMBER 26, 1998. THE 8.3% INCREASE WAS DUE
TO NORMAL SEASONAL VARIATIONS IN ACCOUNTS PAYABLE.
CAPITAL EXPENDITURES FOR THE FIRST QUARTER OF FISCAL 1999 WERE $12.8
MILLION AND WERE PRIMARILY INCURRED TO EXPAND CERTAIN FACILITIES, IMPROVE
EFFICIENCIES, REDUCE COSTS AND FOR THE ROUTINE REPLACEMENT OF EQUIPMENT.
THE COMPANY ANTICIPATES THAT IT WILL SPEND APPROXIMATELY $95.0 MILLION
FOR CAPITAL EXPENDITURES IN FISCAL YEAR 1999 AND EXPECTS TO FINANCE SUCH
EXPENDITURES WITH AVAILABLE OPERATING CASH FLOWS AND LONG-TERM FINANCING.
AT JANUARY 2, 1999, THE COMPANY'S STOCKHOLDERS' EQUITY INCREASED TO
$246.4 MILLION FROM $230.9 MILLION AT SEPTEMBER 26, 1998. TOTAL DEBT TO
CAPITALIZATION DECREASED TO 43.5% AT JANUARY 2, 1999 COMPARED TO 47.1% AT
SEPTEMBER 26, 1998.
THE COMPANY MAINTAINS $70 MILLION IN REVOLVING CREDIT FACILITIES AND $45
MILLION IN SECURED- TERM BORROWING FACILITIES. THE CREDIT FACILITIES
PROVIDE FOR INTEREST AT RATES RANGING FROM LIBOR PLUS ONE AND THREE-
EIGHTHS PERCENT TO LIBOR PLUS TWO PERCENT AND ARE SECURED BY INVENTORY
AND FIXED ASSETS, OR ARE UNSECURED. AS OF FEBRUARY 12, 1999, $63.3
MILLION WAS AVAILABLE UNDER THE REVOLVING CREDIT FACILITIES AND $43.0
MILLION WAS AVAILABLE UNDER THE TERM BORROWING FACILITIES.
THE COMPANY MAINTAINS AN ASSET SALE AGREEMENT WHERE IT CAN SELL UP TO $60
MILLION OF ACCOUNTS RECEIVABLE. UNDER THIS AGREEMENT, AS THE SOLD
ACCOUNTS RECEIVABLE ARE COLLECTED, NEW QUALIFYING ACCOUNTS CAN BE
SUBSTITUTED THUS MAINTAINING THE MAXIMUM BALANCE ALLOWED TO BE
OUTSTANDING AT A RATE APPROXIMATING .425% OVER COMMERCIAL PAPER. AS OF
JANUARY 2, 1999 NO ACCOUNTS RECEIVABLE HAD BEEN SOLD UNDER THIS
AGREEMENT.
IMPACT OF MEXICO PESO EXCHANGE RATE
THE COMPANY'S EARNINGS ARE AFFECTED BY FOREIGN EXCHANGE RATE FLUCTUATIONS
RELATED TO THE MEXICAN PESO NET MONETARY POSITION OF ITS MEXICAN
SUBSIDIARIES. THE COMPANY PRIMARILY MANAGES THIS EXPOSURE BY ATTEMPTING
TO MINIMIZE ITS MEXICAN PESO NET MONETARY POSITION, BUT HAS ALSO FROM
TIME TO TIME CONSIDERED EXECUTING HEDGES TO HELP MINIMIZE THIS EXPOSURE.
HOWEVER, SUCH INSTRUMENTS HAVE HISTORICALLY NOT BEEN ECONOMICALLY
FEASIBLE. THE COMPANY IS ALSO EXPOSED TO THE EFFECT OF POTENTIAL
EXCHANGE RATE FLUCTUATIONS TO THE EXTENT THAT AMOUNTS ARE REPATRIATED
FROM MEXICO TO THE UNITED STATES. HOWEVER, THE COMPANY CURRENTLY
ANTICIPATES THAT THE CASH FLOWS OF ITS MEXICAN SUBSIDIARIES WILL CONTINUE
TO BE REINVESTED IN ITS MEXICAN OPERATIONS. IN ADDITION, THE MEXICAN
PESO EXCHANGE RATE CAN DIRECTLY AND INDIRECTLY IMPACT THE COMPANY'S
RESULTS OF OPERATIONS AND FINANCIAL POSITION IN SEVERAL MANNERS,
INCLUDING POTENTIAL ECONOMIC RECESSION IN MEXICO RESULTING FROM A
DEVALUED PESO. THE IMPACT ON THE COMPANY'S FINANCIAL POSITION AND RESULTS
OF OPERATIONS OF A HYPOTHETICAL CHANGE IN THE EXCHANGE RATE BETWEEN THE
U.S. DOLLAR AND THE MEXICAN 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 THE COMPANY'S MEXICAN
SUBSIDIARIES, WERE A GAIN OF $.1 MILLION IN THE FIRST QUARTER OF FISCAL
1999 AND A LOSS OF $.5 MILLION IN THE FIRST QUARTER OF FISCAL 1998. ON
FEBRUARY 12, 1999, THE MEXICAN PESO CLOSED AT 9.94 TO 1 U.S. DOLLAR, A
DECREASE FROM 10.24 AT SEPTEMBER 26, 1998. NO ASSURANCE CAN BE GIVEN AS
TO THE FUTURE VALUATION OF THE MEXICAN PESO AND HOW FURTHER MOVEMENTS IN
THE PESO COULD AFFECT FUTURE EARNINGS OF THE COMPANY.
IMPACT OF YEAR 2000
THE YEAR 2000 ISSUE IS THE RESULT OF COMPUTER PROGRAMS BEING WRITTEN
USING TWO DIGITS RATHER THAN FOUR TO DEFINE THE APPLICABLE YEAR. ANY OF
THE COMPANY'S COMPUTER PROGRAMS THAT HAVE DATE-SENSITIVE SOFTWARE MAY
RECOGNIZE A DATE USING "00" AS THE YEAR 1900 RATHER THAN THE YEAR 2000.
THIS COULD RESULT IN A SYSTEM FAILURE OR MISCALCULATIONS CAUSING
DISRUPTIONS OF OPERATIONS, INCLUDING AMONG OTHER THINGS, A TEMPORARY
INABILITY TO PROCESS TRANSACTIONS, SEND INVOICES, OR ENGAGE IN SIMILAR
NORMAL BUSINESS ACTIVITIES.
THE COMPANY HAS DETERMINED THAT IT WILL BE REQUIRED TO MODIFY OR REPLACE
PORTIONS OF ITS SOFTWARE SO THAT ITS COMPUTER SYSTEMS WILL FUNCTION
PROPERLY WITH RESPECT TO DATES IN THE YEAR 2000 AND THEREAFTER. TO DATE,
THE COMPANY HAS UPDATED SUBSTANTIALLY ALL OF ITS COMPUTER SYSTEMS IN THE
U.S. AND IS IN PROGRESS OF UPDATING ITS SYSTEMS IN MEXICO. THE COMPANY
ANTICIPATES COMPLETING THE REMAINING PORTION OF ITS YEAR 2000 PROJECT BY
MID-1999. THE COMPANY PRESENTLY BELIEVES THAT WITH THESE MODIFICATIONS
AND REPLACEMENTS, THE YEAR 2000 ISSUE WILL NOT POSE SIGNIFICANT
OPERATIONAL PROBLEMS FOR ITS COMPUTER SYSTEMS.
SYSTEMS ASSESSMENTS AND MINOR SYSTEM MODIFICATIONS WERE COMPLETED USING
EXISTING INTERNAL RESOURCES AND, AS A RESULT, INCREMENTAL COSTS WERE
MINIMAL. SYSTEM REPLACEMENTS, CONSISTING PRIMARILY OF CAPITAL PROJECTS,
WERE INITIATED FOR OTHER BUSINESS PURPOSES WHILE AT THE SAME TIME
ACHIEVING YEAR 2000 COMPLIANCE. SYSTEM REPLACEMENT PROJECTS WERE
COMPLETED PRIMARILY USING EXTERNAL RESOURCES. THE TOTAL COST OF THE YEAR
2000 PROJECT IS NOT EXPECTED TO HAVE A MATERIAL EFFECT ON THE COMPANY'S
RESULTS OF OPERATIONS.
ADDITIONALLY, THE COMPANY WILL BE INITIATING COMMUNICATIONS WITH ALL OF
ITS SIGNIFICANT SUPPLIERS AND LARGE CUSTOMERS TO DETERMINE THE EXTENT TO
WHICH THE COMPANY'S INTERFACE SYSTEMS ARE VULNERABLE TO THOSE THIRD
PARTIES' FAILURE TO REMEDIATE THEIR OWN YEAR 2000 ISSUES. HOWEVER, THERE
CAN BE NO ASSURANCE THAT THE SYSTEMS OF OTHER PARTIES UPON WHICH THE
COMPANY RELIES WILL BE CONVERTED ON A TIMELY BASIS. THE COMPANY'S
BUSINESS, FINANCIAL CONDITION, OR RESULTS OF OPERATIONS COULD BE
MATERIALLY ADVERSELY IMPACTED BY THE FAILURE OF ITS SYSTEMS AND
APPLICATIONS OR THOSE OPERATED BY OTHERS TO PROPERLY OPERATE OR MANAGE
DATES BEYOND 1999.
THE COMPANY BELIEVES THAT ITS INITIATIVES AND ITS EXISTING BUSINESS
RECOVERY PLANS ARE ADEQUATE TO ADDRESS REASONABLY LIKELY YEAR 2000
ISSUES; IF UNFORESEEN CIRCUMSTANCES ARISE, THE COMPANY WILL ATTEMPT TO
DEVELOP CONTINGENCY PLANS FOR THESE SITUATIONS.
IMPACT OF INFLATION
Due to moderate inflation in the U.S. and the Company's rapid inventory
turnover rate, the results of operations have not been significantly
affected by inflation during the past three-year period.
STATEMENTS REGARDING FORWARD LOOKING COMMENTS
Except for historical information contained herein, Management's
Discussion and Analysis of Results of Operations and Financial Condition
or other discussions elsewhere in this Form 10Q contains forward-looking
statements that are dependent upon a number of risks and uncertainties
that could cause actual results to differ materially from those in the
forward-looking statement. These risks and uncertainties include changes
in commodity prices of feed grain and chicken, the Company's substantial
indebtedness, risks associated with the Company's foreign operations,
including currency exchange rate fluctuations, trade barriers, exchange
controls, expropriation and changes in laws and practices, the impact of
current and future laws and regulations, and the other risks described in
the Company's SEC filings. The Company does not intend to provide
updated information about the matters referred to in these forward
looking statements, other than in the context of Management's Discussion
and Analysis of Results of Operations and Financial Condition contained
herein and other disclosures in the Company's SEC filings.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT NUMBER
*1.1Agreement dated October 15, 1998 between Pilgrim's Pride Corporation
and Pilgrim Poultry G.P.
The Company did not file any reports on Form 8-K during the three months
ended January 2, 1999.
<PAGE>
PILGRIM'S PRIDE CORPORATION
JANUARY 2, 1999
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 2/6/99 /s/ Richard A. Cogdill
Richard A. Cogdill
Executive Vice President and
Chief Financial Officer
Secretary and Treasurer in his
respective capacity as such
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-02-1999
<PERIOD-END> JAN-02-1999
<CASH> 33,666
<SECURITIES> 0
<RECEIVABLES> 89,421
<ALLOWANCES> 3,917
<INVENTORY> 130,873
<CURRENT-ASSETS> 259,989
<PP&E> 574,205
<DEPRECIATION> 238,677
<TOTAL-ASSETS> 607,365
<CURRENT-LIABILITIES> 115,008
<BONDS> 0
0
0
<COMMON> 276
<OTHER-SE> 246,101
<TOTAL-LIABILITY-AND-EQUITY> 607,365
<SALES> 336,088
<TOTAL-REVENUES> 336,088
<CGS> 292,187
<TOTAL-COSTS> 309,902
<OTHER-EXPENSES> (4)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,733
<INCOME-PRETAX> 21,457
<INCOME-TAX> 5,537
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,920
<EPS-PRIMARY> .58
<EPS-DILUTED> 0
</TABLE>
AMENDED
AGREEMENT
This Agreement dated October 15, 1998 amends the previous agreement
dated October 15, 1996 and is between Pilgrim's Pride corporation, a
Delaware Corporation (hereafter called "PPC") and Pilgrim Poultry, G.P.
(hereinafter called "PPGP") covering purchases of baby chicks, feed
medication, accounting and flock services from PPC at fair market value
and also covering PPGP sales of live broilers to PPC at fair market
value.
The term of this agreement is from October 15, 1998 until December
31, 1999 and is automatically renewable for each subsequent one calendar
year period thereafter unless terminated by either party in writing. The
effective date of such termination notice will be 90 days from the date
of mailing of such notice.
Fair Market Value is agreed as follows initially, but may be revised
from time to time subject to agreement between the parties in order to
more accurately arrive at Fair Market Value;
BABY CHICKS PURCHASED FROM PPC
105% of PPC average year-to-date cost using latest figures
available at the time.
BROILER FEED PURCHASED FROM PPC
$15.00 per ton above PPC Pittsburg Mill ingredient cost delivered
to farm.
MEDICATION PURCHASED FROM PPC
10% markup over PPC cost.
ACCOUNTING SERVICE FURNISHED BY PPC
$200 per month for all record keeping and monthly financial
statements.
FLOCK SERVICE
Compensation included in Broiler Feed markup.
LIVE BROILERS SOLD TO PPC
To be sold to PPC at the quoted weekly Georgia dock dressed quote
less 14.50 cents processing, hauling and catching allowance times
73% yield allowance to equal live equivalent market times good
live pounds based on farm weight less DOA's and condemned,
subject to a ceiling price of 102% of total live cost.
PAYMENT TERMS
60 days of invoice date from both parties.
In testimony whereof, the parties of this agreement have hereto set their
hands in duplicate, the day and year above written.
PILGRIM'S PRIDE CORPORATION PILGRIMS POULTRY, G.P.
/s/ Clifford E. Butler /s/ Lonnie "Bo" Pilgrim
________________________________ ________________________
Clifford E. Butler Lonnie "Bo" Pilgrim
Vice Chairman Proprietor
STATE OF TEXAS:
COUNTY OF CAMP:
Before me the undersigned authority, on this day personally appeared
Clifford E. Butler, Vice Chairman, Pilgrim's Pride Corporation and Lonnie
"Bo" Pilgrim, Proprietor, Pilgrim Poultry, G.P. known to me to be the
persons whose names are subscribed to the foregoing instrument, and
acknowledged to be and executed the same for the purpose and
consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE
On this 15th day of October, 1998
/s/ J.H. Nears, Jr.
______________________________
Notary Public Camp County, Texas
