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 DECEMBER 28, 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 FEBRUARY 6, 1997 INDEX PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES PART I. FINANCIAL INFORMATION Item 1: Financial Statements (Unaudited): Condensed consolidated balance sheets: December 28, 1996 and September 28, 1996 Consolidated statements of income: Three months ended December 28, 1996 and December 30, 1995 Consolidated statements of cash flows: Three months ended December 28, 1996 and December 30, 1995 Notes to condensed consolidated financial statements--December 28, 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
PART I. FINANCIAL INFORMATION PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ITEM 1: FINANCIAL STATEMENTS: December 28, 1996 September 28, (UNAUDITED) 1996 (in thousands) ASSETS Current Assets: Cash and cash equivalents $ 17,428 $ 18,040 Trade accounts and other receivables, less allowance for doubtful accounts 69,856 65,887 Inventories 119,324 136,866 Deferred income taxes 9,309 6,801 Prepaid expenses 1,621 907 Other current assets 211 757 Total Current Assets 217,749 229,258 Other Assets 21,815 18,827 Property, Plant and Equipment 467,444 466,672 Less accumulated depreciation 181,380 178,035 286,064 288,637 $ 525,628 $ 536,722 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes payable to banks $ 16,000 $ 27,000 Accounts payable 57,006 71,354 Accrued expenses 34,254 33,599 Current maturities of long-term debt 9,564 8,850 Total Current Liabilities 116,824 140,803 Long-Term Debt, less current maturities 195,957 198,334 Deferred Income Taxes 59,179 53,608 Minority Interest in Subsidiary 842 842 Stockholders' Equity: Common stock; $.01 par value 276 276 Additional paid-in capital 79,763 79,763 Retained earnings 72,787 63,096 Total Stockholders' Equity 152,826 143,135 $ 525,628 $ 536,722 See notes to condensed consolidated financial statements. PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) THREE MONTHS ENDED December 28, December 30, 1996 1995 (in thousands, except share and per share data) Net Sales $ 297,806 $ 267,475 Costs and Expenses: Cost of sales 267,539 246,503 Selling, general and administrative 13,953 12,147 281,492 258,650 Operating Income 16,314 8,825 Other Expense (Income): Interest expense, net 5,449 5,121 Foreign exchange loss 437 1,316 Miscellaneous, net [2,509] [248] 3,377 6,189 Income Before Income Taxes 12,937 2,636 Income tax expense 2,832 3,340 Net Income (Loss) $ 10,105 $ [704] Net income (loss) per common share $ .37 $ [.03] Dividends per common share $ .015 $ .015 Weighted average shares outstanding 27,589,250 27,589,250 See Notes to condensed consolidated financial statements.
PILGRIM'S PRIDE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) THREE MONTHS ENDED December 28, December 30, 1996 1995 (in thousands) Cash Flows From Operating Activities: Net income (loss) $ 10,105 $ [704] Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation and amortization 7,135 7,131 Gain on property disposals 7 [112] Provision for doubtful accounts [321] 305 Deferred income taxes 3,064 342 Changes in operating assets and liabilities: Accounts and other receivable [6,843] [10,297] Inventories 17,542 8,712 Prepaid expenses [170] [495] Accounts payable and accrued expenses [13,693] 19,785 Other [171] [152] Net Cash Flows Provided By Operating Activities: 16,655 24,515 Investing Activities: Acquisitions of property, plant and equipment [4,195] [12,447] Proceeds from property disposals 77 936 Other, net [34] 106 Net Cash Used In Investing Activities [4,152] [11,405] Financing Activities: Proceeds from notes payable to banks 10,500 6,500 Repayments of notes payable to banks [21,500] [12,500] Proceeds from long-term debt 0 28 Payments on long-term debt [1,702] [2,299] Cash dividends paid [414] [414] Cash Used In Financing Activities [13,116] [8,685] Effect of Exchange Rate Changes on Cash and Cash Equivalents 1 [47] (Decrease) Increase in cash and cash equivalents [612] 4,378 Cash and cash equivalents at beginning of year 18,040 11,891 Cash and cash equivalents at end of period $ 17,428 $ 16,269 Supplemental disclosure information: Cash paid during the period for: Interest (net of amount capitalized) $ 2,983 $ 2,398 Income Taxes $ 333 $ 1,792 See notes to condensed consolidated financial statements.
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES December 28, 1996 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT (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. Operating results for the period ended December 28, 1996 are not necessarily indicative of the results that may be expected for the year ended September 27, 1997. 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 28, 1996. 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 December 28, 1996 and December 30, 1995 are based on the weighted average shares outstanding for the periods. NOTE C--INVENTORIES Inventories consist of the following: DECEMBER 28, 1996 SEPTEMBER 28, 1996 (in thousands) Live chickens and hens $ 46,045 $ 66,248 Feed, eggs and other 37,596 39,804 Finished chicken products 35,683 30,814 $ 119,324 $ 136,866 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 THREE MONTHS ENDED December 28, December 30, 1996 1995 Net sales 100.0% 100.0% Costs and expenses: Cost of sales 89.8% 92.2% Gross profit 10.2% 7.8% Selling, general and administrative 4.7% 4.5% Operating Income 5.5% 3.3% Interest expense 1.8% 1.9% Income before income taxes 4.3% 1.0% Net Income (Loss) 3.4% (0.3%) FIRST QUARTER 1997, COMPARED TO FIRST QUARTER 1996 Consolidated net sales were $297.8 million for the first quarter of fiscal 1997, an increase of $30.3 million, or 11.3%, over the first quarter of fiscal 1996. The increase in consolidated net sales resulted from a $14.0 million increase in Mexican chicken sales to $66.3 million, an $11.2 million increase in domestic chicken sales to $193.1 million and a $5.1 million increase of sales of other domestic products to $38.4 million. The increase in Mexican chicken sales was primarily due to a 50.6% increase in total revenue per dressed pound offset partially by a 15.8% decrease in dressed pounds produced. The increase in domestic chicken sales was primarily due to a 5.9% increase in dressed pounds produced and a .2% increase in total revenue per dressed pound produced. 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 costs experienced in fiscal 1996 as well as generally improved economic conditions in Mexico compared to the prior year. Consolidated cost of sales was $267.5 million in the first quarter of fiscal 1997, an increase of $21.0 million, or 8.5%, over the first quarter of fiscal 1996. The increase primarily resulted from a $17.5 million increase in cost of sales of domestic operations, and a $3.6 million increase in the cost of sales in Mexican operations. The cost of sales increase in domestic operations of $17.5 million was due to a 5.9% increase in dressed pounds produced and increased production of higher cost and margin products in prepared foods. The $3.6 million cost of sales increase in Mexican operations was primarily due to a 26.7% increase in average costs of sales per pound offset partially by an 15.8% decrease in dressed pounds produced. The increase in average costs of sales per pound was primarily the result of an increase in feed ingredient costs. Gross profit as a percentage of sales increased to 10.2% in the first quarter of fiscal 1997 from 7.8% in the first quarter of fiscal 1996. The increased gross profit resulted mainly from higher sales prices due to the markets adjusting to higher feed ingredient prices experienced in fiscal 1996 and significantly higher margins in Mexico. Consolidated selling, general and administrative expenses were $14.0 million in the first quarter of fiscal 1997, and $12.1 million in fiscal 1996. Consolidated selling, general and administrative expenses as a percentage of sales increased in the first quarter of fiscal 1997 to 4.7% compared to 4.5% in the first quarter of fiscal 1996. Consolidated operating income was $16.3 million for the first quarter of fiscal 1997, an increase of $7.5 million when compared to the first quarter of fiscal 1996, resulting primarily from higher margins experienced in the Mexican operations. Consolidated net interest expense was $5.5 million in the first quarter of fiscal 1997, an increase of $.3 million, or 6.4%, when compared to the first quarter of fiscal 1996. This increase was due to higher outstanding debt levels resulting primarily from domestic expansions offset slightly by lower interest rates when compared to the first quarter of fiscal 1996. Consolidated miscellaneous, net a compound of "Other Expense (Income)" was $2.5 million in the first quarter of fiscal 1997, includes a $2.2 million final settlement of claims resulting from the January 8, 1992 fire at the Company's prepared foods plant in Mt. Pleasant, Texas. Consolidated income tax expense in the first quarter of fiscal 1997 decreased to $2.8 million compared to expense of $3.3 million in the first quarter of fiscal 1996. The lower consolidated income tax expense in contrast to higher consolidated income, resulted from increased Mexican earnings which are not currently subject to income taxes. LIQUIDITY AND CAPITAL RESOURCES Strong profits improved liquidity and financial ratios in the fiscal first quarter of 1997. The Company's working capital increased to $100.9 million at December 28, 1996 compared to $88.5 million at September 28, 1996, the current ratio at December 28, 1996 improved to 1.86 to 1 compared to 1.63 to 1 at September 28, 1996 and the Company's stockholder's equity increased to $152.8 million from $143.1 million at September 28, 1996. Total debt to capitalization decreased to 59.2% at December 28, 1996 compared to 62.1% at September 28, 1996. The Company maintains $110 million in revolving credit facilities with available unused lines of credit of $85.8 million at January 31, 1997. Trade accounts and other receivables were $69.9 million at December 28, 1996, a $4.0 million increase from September 28, 1996. The 6.0% increase was due primarily to increased consolidated sales. Allowances for doubtful accounts, as a percentage of trade accounts and notes receivable were 4.8% at December 28, 1996 compared to 5.7% at September 28, 1996. This decrease is due to increased net sales resulting in a corresponding increase in trade accounts and other receivables with allowances for doubtful accounts being slightly lower. Inventories were $119.3 million at December 28, 1996, a decrease of $17.5 million from September 28, 1996. This 12.8% decrease was due primarily to seasonal variations in sales of chicken and feed products to the Company's principal stockholder. Accounts payable were $57.0 million at December 28, 1996, a 20.1% decrease from September 28, 1996, due primarily to the reduction in cost of feed ingredients. Capital expenditures for the first quarter of fiscal 1997 were $4.2 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 1997 and expects to finance such expenditures with available operating cash flows and long-term financing. The Company periodically reviews acquisition opportunities and any business acquisitions consummated in fiscal 1997 would likely be in addition to the projected capital expenditure amount listed above. PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K The Company did not file any reports on Form 8-K during the three months ended December 28, 1996. 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 Richard A. Cogdill Executive Vice President and Chief Financial Officer Secretary and Treasurer in his respective capacity as such
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES December 28, 1996