x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Delaware
|
75-1285071
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
|
4845
US Hwy 271 N, Pittsburg, TX
|
75686-0093
|
|
(Address
of principal executive offices)
|
(Zip
code)
|
|
Registrant’s
telephone number, including area code: (903)
434-1000
|
PILGRIM’S
PRIDE CORPORATION AND SUBSIDIARIES
|
||
PART
I. FINANCIAL INFORMATION
|
||
Item
1.
|
Financial
Statements (Unaudited)
|
|
July
1, 2006 and October 1, 2005
|
||
Three
months and nine months ended July 1, 2006 and July 2,
2005
|
||
Nine
months ended July 1, 2006 and July 2, 2005
|
||
Item
2.
|
||
Item
3.
|
||
Item
4.
|
||
PART
II. OTHER INFORMATION
|
||
Item
1.
|
||
Item
1A.
|
||
Item
6.
|
||
PART
I. FINANCIAL INFORMATION
|
|||||||
Item
1. Financial Statements
|
|||||||
Pilgrim’s
Pride Corporation
|
|||||||
(Unaudited)
|
|||||||
|
July 1, 2006 |
October
1, 2005
|
|||||
|
(In thousands, except share and per share data) | ||||||
Assets
|
|||||||
Current
Assets:
|
|||||||
Cash
and cash equivalents
|
$
|
44,069
|
$
|
132,567
|
|||
Investments
in available for sale securities
|
54,322
|
--
|
|||||
Trade
accounts and other receivables, less allowance for doubtful
accounts
|
197,028
|
288,528
|
|||||
Income
taxes receivable
|
42,764
|
--
|
|||||
Inventories
|
602,120
|
527,329
|
|||||
Current
deferred income taxes
|
17,153
|
25,107
|
|||||
Other
current assets
|
35,166
|
25,884
|
|||||
Total
Current Assets
|
992,622
|
999,415
|
|||||
Investment
in Available for Sale Securities
|
148,123
|
304,593
|
|||||
Other
Assets
|
47,139
|
53,798
|
|||||
Property,
Plant and Equipment:
|
|||||||
Land
|
52,750
|
51,887
|
|||||
Buildings,
machinery and equipment
|
1,655,935
|
1,612,739
|
|||||
Autos
and trucks
|
56,694
|
55,202
|
|||||
Construction-in-progress
|
77,157
|
58,942
|
|||||
1,842,536
|
1,778,770
|
||||||
Less
accumulated depreciation
|
(694,849
|
)
|
(624,673
|
)
|
|||
1,147,687
|
1,154,097
|
||||||
$
|
2,335,571
|
$
|
2,511,903
|
||||
Liabilities
and Stockholders’ Equity
|
|||||||
Current
Liabilities:
|
|||||||
Accounts
payable
|
$
|
275,892
|
$
|
281,909
|
|||
Accrued
expenses
|
270,106
|
288,106
|
|||||
Income
taxes payable
|
--
|
16,196
|
|||||
Current
maturities of long-term debt
|
7,768
|
8,603
|
|||||
Total
Current Liabilities
|
553,766
|
594,814
|
|||||
Long-Term
Debt, Less Current Maturities
|
484,970
|
518,863
|
|||||
Deferred
Income Taxes
|
169,970
|
173,232
|
|||||
Minority
Interest in Subsidiary
|
2,004
|
1,396
|
|||||
Commitments
and Contingencies
|
|||||||
Stockholders’
Equity:
|
|||||||
Preferred
stock, $.01 par value, 5,000,000 authorized shares; none
issued
|
--
|
--
|
|||||
Common
stock, $.01 par value, 160,000,000 authorized shares; 66,826,833
issued
|
668
|
668
|
|||||
Additional
paid-in capital
|
471,344
|
471,344
|
|||||
Retained
earnings
|
655,729
|
753,527
|
|||||
Accumulated
other comprehensive loss
|
(1,312
|
)
|
(373
|
)
|
|||
Less
treasury stock, 271,100 shares
|
(1,568
|
)
|
(1,568
|
)
|
|||
Total
Stockholders’ Equity
|
1,124,861
|
1,223,598
|
|||||
$
|
2,335,571
|
$
|
2,511,903
|
See
notes to consolidated financial
statements.
|
Pilgrim’s
Pride Corporation and Subsidiaries
(Unaudited)
|
|||||||||||||
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||
|
July
1, 2006
|
July
2, 2005
|
July
1, 2006
|
July
2, 2005
|
|||||||||
(in
thousands, except share and per share data)
|
|||||||||||||
Net
Sales
|
$
|
1,287,646
|
$
|
1,440,039
|
$
|
3,897,167
|
$
|
4,183,607
|
|||||
Cost
of sales
|
1,244,950
|
1,220,818
|
3,698,870
|
3,639,213
|
|||||||||
Gross
profit
|
42,696
|
219,221
|
198,297
|
544,394
|
|||||||||
Selling,
general and administrative
|
69,433
|
83,228
|
216,772
|
228,431
|
|||||||||
Operating
income (loss)
|
(26,737
|
)
|
135,993
|
(18,475
|
)
|
315,963
|
|||||||
Other
Expense (Income):
|
|||||||||||||
Interest
expense
|
12,736
|
13,602
|
38,402
|
37,436
|
|||||||||
Interest
income
|
(1,268
|
)
|
(1,280
|
)
|
(8,429
|
)
|
(3,572
|
)
|
|||||
Foreign
exchange loss (gain)
|
1,822
|
(94
|
)
|
1,012
|
(420
|
)
|
|||||||
Miscellaneous,
net
|
(2,053
|
)
|
88
|
(1,025
|
)
|
(11,659
|
)
|
||||||
Total
other expenses, net
|
11,237
|
12,316
|
29,960
|
21,785
|
|||||||||
Income
(loss) before income taxes
|
(37,974
|
)
|
123,677
|
(48,435
|
)
|
294,178
|
|||||||
Income
tax (benefit) expense
|
(17,501
|
)
|
38,324
|
(21,686
|
)
|
103,928
|
|||||||
Net
income (loss)
|
$
|
(20,473
|
)
|
$
|
85,353
|
$
|
(26,749
|
)
|
$
|
190,250
|
|||
Net
income (loss) per common share
-
basic and diluted
|
$
|
(0.31
|
)
|
$
|
1.28
|
$
|
(0.40
|
)
|
$
|
2.86
|
|||
Dividends
declared per common share
|
$
|
0.0225
|
$
|
0.0150
|
$
|
1.0675
|
$
|
0.0450
|
|||||
Weighted
average shares outstanding
|
66,555,733
|
66,555,733
|
66,555,733
|
66,555,733
|
|||||||||
See
notes to consolidated financial
statements.
|
Pilgrim’s
Pride Corporation and Subsidiaries
(Unaudited)
|
|||||||
|
Nine
Months Ended
|
||||||
|
July
1, 2006
|
July
2, 2005
|
|||||
(in
thousands)
|
|||||||
Cash
Flows From Operating Activities:
|
|||||||
Net
income (loss)
|
$
|
(26,749
|
)
|
$
|
190,250
|
||
Adjustments
to reconcile net income (loss) to cash provided by operating
activities
|
|||||||
Depreciation
and amortization
|
100,052
|
94,263
|
|||||
Impairment
of assets
|
3,767
|
--
|
|||||
Loss
on property disposals
|
988
|
2,952
|
|||||
Deferred
income taxes
|
(8,065
|
)
|
830
|
||||
Changes
in operating assets and liabilities
|
|||||||
Accounts
and other receivables
|
97,242
|
57,909
|
|||||
Income
taxes receivable
|
(30,007
|
)
|
--
|
||||
Inventories
|
(74,792
|
)
|
36,737
|
||||
Other
current assets
|
(9,280
|
)
|
(3,220
|
)
|
|||
Accounts
payable and accrued expenses
|
(40,214
|
)
|
(17,115
|
)
|
|||
Other
|
(2,421
|
)
|
299
|
||||
Cash
provided by operating activities
|
10,521
|
362,905
|
|||||
Investing
Activities:
|
|||||||
Acquisitions
of property, plant and equipment
|
(101,314
|
)
|
(90,148
|
)
|
|||
Purchases
of investment securities
|
(238,763
|
)
|
--
|
||||
Proceeds
from sale/maturity of investment securities
|
343,120
|
--
|
|||||
Proceeds
from property disposals
|
3,709
|
4,278
|
|||||
Other,
net
|
295
|
196
|
|||||
Cash
provided by (used for) investing activities
|
7,047
|
(85,674
|
)
|
||||
Financing
Activities:
|
|||||||
Proceeds
from notes payable to banks
|
226,000
|
--
|
|||||
Repayments
on notes payable to banks
|
(226,000
|
)
|
--
|
||||
Payments
on long-term debt
|
(34,728
|
)
|
(14,655
|
)
|
|||
Cash
dividends paid
|
(71,048
|
)
|
(2,995
|
)
|
|||
Cash
used for financing activities
|
(105,776
|
)
|
(17,650
|
)
|
|||
Effect
of exchange rate changes on cash and cash equivalents
|
(290
|
)
|
75
|
||||
Increase
(decrease) in cash and cash equivalents
|
(88,498
|
)
|
259,656
|
||||
Cash
and cash equivalents at beginning of year
|
132,567
|
38,165
|
|||||
Cash
and Cash Equivalents at End of Period
|
$
|
44,069
|
$
|
297,821
|
|||
|
|||||||
See
notes to consolidated financial
statements.
|
July
1,
|
October
1,
|
||||||
(In
thousands)
|
2006
|
2005
|
|||||
Chicken:
|
|||||||
Live
chicken and hens
|
$
|
198,286
|
$
|
196,406
|
|||
Feed
and eggs
|
134,796
|
114,091
|
|||||
Finished
chicken products
|
208,531
|
164,412
|
|||||
541,613
|
474,909
|
||||||
Turkey:
|
|||||||
Live
turkey and hens
|
$
|
6,645
|
$
|
7,209
|
|||
Feed
and eggs
|
3,664
|
4,924
|
|||||
Finished
turkey products
|
32,737
|
23,072
|
|||||
43,046
|
35,205
|
||||||
Other
Products:
|
|||||||
Commercial
feed, table eggs, and retail farm store
|
$
|
7,515
|
$
|
4,866
|
|||
Distribution
inventories (other than chicken & turkey products)
|
9,946
|
12,349
|
|||||
17,461
|
17,215
|
||||||
Total
Inventories
|
$
|
602,120
|
$
|
527,329
|
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||
July
1, 2006
|
July
2, 2005
|
July
1, 2006
|
July
2, 2005
|
||||||||||
(in
thousands)
|
|||||||||||||
Lease
payments on commercial egg property
|
$
|
188
|
$
|
188
|
$
|
563
|
$
|
563
|
|||||
Chick,
feed and other sales to major stockholder, including
advances
|
$
|
223
|
$
|
368
|
$
|
596
|
$
|
50,854
|
|||||
Live
chicken purchases and other payments to major stockholder
|
$
|
276
|
$
|
602
|
$
|
979
|
$
|
53,664
|
|||||
Loan
guaranty fees
|
$
|
468
|
$
|
452
|
$
|
1,245
|
$
|
1,350
|
|||||
Lease
payments and operating expenses on airplane
|
$
|
129
|
$
|
133
|
$
|
380
|
$
|
409
|
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||
|
July
1, 2006
|
July
2, 2005(a)
|
|
July
1, 2006
|
July
2, 2005(a)
|
|
|||||||
(In
thousands)
|
|||||||||||||
Net
Sales to Customers:
|
|||||||||||||
Chicken:
|
|||||||||||||
United
States
|
$
|
1,019,918
|
$
|
1,123,096
|
$
|
3,039,292
|
$
|
3,248,716
|
|||||
Mexico
|
106,996
|
114,377
|
303,430
|
302,202
|
|||||||||
Sub-total
|
1,126,914
|
1,237,473
|
3,342,722
|
3,550,918
|
|||||||||
Turkey
|
15,753
|
37,538
|
94,772
|
154,640
|
|||||||||
Other
Products:
|
|||||||||||||
United
States
|
137,997
|
159,285
|
445,610
|
462,471
|
|||||||||
Mexico
|
6,982
|
5,743
|
14,063
|
15,578
|
|||||||||
Sub-total
|
144,979
|
165,028
|
459,673
|
478,049
|
|||||||||
Total
|
$
|
1,287,646
|
$
|
1,440,039
|
$
|
3,897,167
|
$
|
4,183,607
|
|||||
Operating
Income (Loss):
|
|||||||||||||
Chicken:
|
|||||||||||||
United
States
|
$
|
(20,158
|
)
|
$
|
121,214
|
$
|
(4,012
|
)
|
$
|
291,897
|
|||
Mexico
|
(4,951
|
)
|
17,823
|
(10,177
|
)
|
31,897
|
|||||||
Sub-total
|
(25,109
|
)
|
139,037
|
(14,189
|
)
|
323,794
|
|||||||
Turkey(b)
|
(3,598
|
)
|
(6,354
|
)
|
(15,956
|
)
|
(16,603
|
)
|
|||||
Other
Products:
|
|||||||||||||
United
States
|
1,597
|
2,215
|
10,501
|
5,284
|
|||||||||
Mexico
|
373
|
1,095
|
1,169
|
3,488
|
|||||||||
Sub-total
|
1,970
|
3,310
|
11,670
|
8,772
|
|||||||||
Total
|
$
|
(26,737
|
)
|
$
|
135,993
|
$
|
(18,475
|
)
|
$
|
315,963
|
|||
Depreciation
and Amortization(c)
|
|||||||||||||
Chicken:
|
|||||||||||||
United
States
|
$
|
29,400
|
$
|
25,174
|
$
|
79,911
|
$
|
78,607
|
|||||
Mexico
|
2,752
|
2,996
|
8,470
|
9,100
|
|||||||||
Sub-total
|
32,152
|
28,170
|
88,381
|
87,707
|
|||||||||
Turkey
|
705
|
846
|
6,025
|
2,389
|
|||||||||
Other
Products:
|
|||||||||||||
United
States
|
2,060
|
1,352
|
5,527
|
4,023
|
|||||||||
Mexico
|
43
|
53
|
119
|
144
|
|||||||||
Sub-total
|
2,103
|
1,405
|
5,646
|
4,167
|
|||||||||
Total
|
$
|
34,960
|
$
|
30,421
|
$
|
100,052
|
$
|
94,263
|
(a)
|
Certain
historical amounts have been reclassified to conform to current
year
presentation.
|
(b)
|
Included
in the operating losses for the turkey segment for the nine months
ended
July 1, 2006 are charges of $3.8 million to write certain assets
down to
estimated realizable value. These assets are held for sale and
are related
to the Franconia, Pennsylvania turkey cooking facility at which
the
Company ceased production of certain products in March 2006. Also
included
in the operating losses for the turkey segment for the same nine
month
period are accrued severance expenses totaling $0.2 million and
charges of
$2.5 million to reduce certain packaging and supplies, bringing
the total
charges for the nine months ended July 1, 2006 to $6.5 million.
Included
in the three months ended July 2, 2005 is $0.8 million and in the
nine
months ended July 2, 2005 is $5.2 million in proceeds from the
final
resolution of our 2004 turkey restructuring activities.
|
(c)
|
Includes
amortization of capitalized financing costs of approximately $0.5
million
and $0.6 million for the three month periods and $2.0 million and
$1.7
million for the nine month periods ending July 1, 2006 and July
2, 2005,
respectively.
|
·
|
First,
we have delayed one-half of our planned expansion in the Fresh
Food
Service Division of our Mayfield, Kentucky plant from early July
until
mid-September of this year, and the other half of this expansion
from
early July 2006 until April 2007.
|
·
|
Third,
we reduced our planned capital investments for the year by $30-$50
million. Our original capital investment projection for the year had
been in the range of $180-$200 million. Our
new estimated range for the year is $140-$150 million. We are
focusing only on those projects we deem critically necessary to our
business or those in which our immediate investment is judged by
us to be in our best long-term interests.
|
·
|
Fourth,
we have sharpened our focus on reducing costs and operating more
efficiently. For example, in order to eliminate holiday and overtime
premiums, we cut egg placements for Memorial Day and the Fourth
of July as
well as other previously planned Saturday productions.
|
· |
Reduced
selling prices for chicken created by market disruptions caused by
the
avian influenza scares in other parts of the world. Reduced selling
prices
for our Mexico produced chicken partially offset by an increase in
pounds
sold in Mexico.
|
· |
Increased
cost of sales due to higher freight delivery costs, as well as the
cost of
fuel in other areas.
|
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||
|
July
1, 2006
|
July
2, 2005(a)
|
|
July
1, 2006
|
July
2, 2005(a)
|
|
|||||||
(In
thousands)
|
|||||||||||||
Net
Sales to Customers:
|
|||||||||||||
Chicken:
|
|||||||||||||
United
States
|
$
|
1,019,918
|
$
|
1,123,096
|
$
|
3,039,292
|
$
|
3,248,716
|
|||||
Mexico
|
106,996
|
114,377
|
303,430
|
302,202
|
|||||||||
Sub-total
|
1,126,914
|
1,237,473
|
3,342,722
|
3,550,918
|
|||||||||
Turkey
|
15,753
|
37,538
|
94,772
|
154,640
|
|||||||||
Other
Products:
|
|||||||||||||
United
States
|
137,997
|
159,285
|
445,610
|
462,471
|
|||||||||
Mexico
|
6,982
|
5,743
|
14,063
|
15,578
|
|||||||||
Sub-total
|
144,979
|
165,028
|
459,673
|
478,049
|
|||||||||
Total
|
$
|
1,287,646
|
$
|
1,440,039
|
$
|
3,897,167
|
$
|
4,183,607
|
|||||
Operating
Income (Loss):
|
|||||||||||||
Chicken:
|
|||||||||||||
United
States
|
$
|
(20,158
|
)
|
$
|
121,214
|
$
|
(4,012
|
)
|
$
|
291,897
|
|||
Mexico
|
(4,951
|
)
|
17,823
|
(10,177
|
)
|
31,897
|
|||||||
Sub-total
|
(25,109
|
)
|
139,037
|
(14,189
|
)
|
323,794
|
|||||||
Turkey(b)
|
(3,598
|
)
|
(6,354
|
)
|
(15,956
|
)
|
(16,603
|
)
|
|||||
Other
Products:
|
|||||||||||||
United
States
|
1,597
|
2,215
|
10,501
|
5,284
|
|||||||||
Mexico
|
373
|
1,095
|
1,169
|
3,488
|
|||||||||
Sub-total
|
1,970
|
3,310
|
11,670
|
8,772
|
|||||||||
Total
|
$
|
(26,737
|
)
|
$
|
135,993
|
$
|
(18,475
|
)
|
$
|
315,963
|
|||
Depreciation
and Amortization(c)
|
|||||||||||||
Chicken:
|
|||||||||||||
United
States
|
$
|
29,400
|
$
|
25,174
|
$
|
79,911
|
$
|
78,607
|
|||||
Mexico
|
2,752
|
2,996
|
8,470
|
9,100
|
|||||||||
Sub-total
|
32,152
|
28,170
|
88,381
|
87,707
|
|||||||||
Turkey
|
705
|
846
|
6,025
|
2,389
|
|||||||||
Other
Products:
|
|||||||||||||
United
States
|
2,060
|
1,352
|
5,527
|
4,023
|
|||||||||
Mexico
|
43
|
53
|
119
|
144
|
|||||||||
Sub-total
|
2,103
|
1,405
|
5,646
|
4,167
|
|||||||||
Total
|
$
|
34,960
|
$
|
30,421
|
$
|
100,052
|
$
|
94,263
|
(a)
|
Certain
historical amounts have been reclassified to conform to current
year
presentation.
|
(b)
|
Included
in the operating losses for the turkey segment for the nine months
ended
July 1, 2006 are charges of $3.8 million to write certain assets
down to
estimated realizable value. These assets are held for sale and
are related
to the Franconia, Pennsylvania turkey cooking facility at which
the
Company ceased production of certain products in March 2006. Also
included
in the operating losses for the turkey segment for the same nine
month
period are accrued severance expenses totaling $0.2 million and
charges of
$2.5 million to reduce certain packaging and supplies, bringing
the total
charges for the nine months ended July 1, 2006 to $6.5 million.
Included
in the three months ended July 2, 2005 is $0.8 million and in the
nine
months ended July 2, 2005 is $5.2 million in proceeds from the
final
resolution of our 2004 turkey restructuring activities.
|
(c)
|
Includes
amortization of capitalized financing costs of approximately $0.5
million
and $0.6 million for the three month periods and $2.0 million and
$1.7
million for the nine month periods ending July 1, 2006 and July
2, 2005,
respectively.
|
|
Percentage
of Net Sales
|
||||||||||||
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||
July
1, 2006
|
July
2, 2005
|
July
1, 2006
|
July
2, 2005
|
||||||||||
Net
Sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
|||||
Costs
and Expenses:
|
|||||||||||||
Cost
of sales
|
96.7
|
%
|
84.8
|
%
|
94.9
|
%
|
87.0
|
%
|
|||||
Gross
profit
|
3.3
|
%
|
15.2
|
%
|
5.1
|
%
|
13.0
|
%
|
|||||
Selling,
general and administrative
|
5.4
|
%
|
5.8
|
%
|
5.6
|
%
|
5.5
|
%
|
|||||
Operating
Income (Loss)
|
(2.1
|
)%
|
9.4
|
%
|
(0.5
|
)%
|
7.5
|
%
|
|||||
Interest
expense
|
1.0
|
%
|
0.9
|
%
|
1.0
|
%
|
0.9
|
%
|
|||||
Interest
income
|
(0.1
|
)%
|
(0.1
|
)%
|
(0.2
|
)%
|
(0.1
|
)%
|
|||||
Income
(loss) before income taxes
|
(2.9
|
)%
|
8.6
|
%
|
(1.2
|
)%
|
7.0
|
%
|
|||||
Net
income (loss)
|
(1.6
|
)%
|
5.9
|
%
|
(0.7
|
)%
|
4.5
|
%
|
Fiscal
Quarter Ended
|
Change
from
Fiscal
Quarter Ended
|
||||||||||||
July
1,
|
July
2,
|
Percentage
|
|||||||||||
Source
|
2006
|
2005
|
Change
|
||||||||||
Chicken-
|
|||||||||||||
United
States
|
$
|
1,019.9
|
$
|
(103.2
|
)
|
(9.2
|
)%
|
(a
|
)
|
||||
Mexico
|
107.0
|
(7.4
|
)
|
(6.5
|
)%
|
(b
|
)
|
||||||
$
|
1,126.9
|
$
|
(110.6
|
)
|
(8.9
|
)%
|
|||||||
Turkey
|
$
|
15.8
|
$
|
(21.7
|
)
|
(58.0
|
)%
|
(c
|
)
|
||||
Other
Products-
|
|||||||||||||
United
States
|
$
|
137.9
|
$
|
(21.4
|
)
|
(13.4
|
)%
|
(d
|
)
|
||||
Mexico
|
7.0
|
1.3
|
21.6
|
%
|
|||||||||
$
|
144.9
|
$
|
(20.1
|
)
|
(12.1
|
)%
|
|||||||
$
|
1,287.6
|
$
|
(152.4
|
)
|
(10.6
|
)%
|
(a)
|
U.S.
chicken sales for the quarter declined compared to the same quarter
last
fiscal year due to an 11.3% decrease in net revenue per pound sold
partially offset by a 2.4% increase in the number of pounds sold.
Excess
inventories created by the lack of demand for export products in
prior
quarters created downward pressure on pricing.
|
(b)
|
Mexico
chicken sales decreased compared to the third quarter last fiscal
year
because of a 13.0% decrease in revenue per pound sold partially
offset by
a 7.6% increase in pounds sold.
|
(c)
|
Turkey
sales declined due to our decision in the first quarter of fiscal
2006 to
cease production of certain products at our Franconia, Pennsylvania
turkey
cooking operation.
|
(d)
|
U.S.
other product sales decreased primarily due to the divestiture
of
non-poultry related distribution
facilities.
|
Quarter
|
Change
From
|
Percentage
of
|
Percentage
|
||||||||||||||||
Ended
|
Quarter
Ended
|
Net
Sales
|
of
Net Sales
|
||||||||||||||||
July
1,
|
July
2,
|
Percentage
|
Third
Quarter
|
Third
Quarter
|
|||||||||||||||
Components
|
2006
|
2005
|
Change
|
Fiscal
2006
|
Fiscal
2005
|
||||||||||||||
Net
sales
|
$
|
1,287.6
|
$
|
(152.4
|
)
|
(10.6
|
)%
|
100.0
|
%
|
100.0
|
%
|
||||||||
Cost
of sales
|
1,244.9
|
24.1
|
2.0
|
%
|
96.7
|
%
|
84.8
|
%
|
(a
|
)
|
|||||||||
Gross
profit
|
$
|
42.7
|
$
|
(176.5
|
)
|
(80.5
|
)%
|
3.3
|
%
|
15.2
|
%
|
(b
|
)
|
||||||
(a)
|
Cost
of sales increased $24.1 million due primarily to higher energy costs
and
transportation costs created by fuel cost increases.
|
(b)
|
Gross
profit decreased $176.5 million due primarily to the combination
of
depressed selling prices in the U.S. due primarily to a decrease
in export
demand for U.S. chicken products caused by changes in buying patterns
in
foreign markets as a result of avian influenza outbreaks in those
countries and increased freight and fuel
costs.
|
Change
from
|
||||||||||
Quarter
Ended
|
Quarter
Ended
|
|||||||||
July
1,
|
July
2,
|
Percentage
|
||||||||
Source
|
2006
|
2005
|
Change
|
|||||||
Chicken
|
||||||||||
United
States
|
$
|
(20.1
|
)
|
$
|
(141.4
|
)
|
(116.6
|
)%
|
||
Mexico
|
(5.0
|
)
|
(22.8
|
)
|
(127.8
|
)%
|
||||
$
|
(25.1
|
)
|
$
|
(164.2
|
)
|
(118.1
|
)%
|
|||
Turkey
|
$
|
(3.6
|
)
|
$
|
2.8
|
43.4
|
%
|
|||
Other
Products
|
||||||||||
United
States
|
$
|
1.6
|
$
|
(0.6
|
)
|
(27.9
|
)%
|
|||
Mexico
|
0.4
|
(0.7
|
)
|
(65.9
|
)%
|
|||||
$
|
2.0
|
$
|
(1.3
|
)
|
(40.5
|
)%
|
||||
Operating
Income (Loss)
|
$
|
(26.7
|
)
|
$
|
(162.7
|
)
|
(119.7
|
)%
|
Change
from
|
Percentage
|
Percentage
|
|||||||||||||||||
Quarter
Ended
|
Quarter
Ended
|
of
Net Sales
|
of
Net Sales
|
||||||||||||||||
July
1,
|
July
2,
|
Percentage
|
Third
Quarter
|
Third
Quarter
|
|||||||||||||||
Components
|
2006
|
2005
|
Change
|
Fiscal
2006
|
Fiscal
2005
|
||||||||||||||
Gross
profit
|
$
|
42.7
|
$
|
(176.5
|
)
|
(80.5
|
)%
|
3.3
|
%
|
15.2
|
%
|
||||||||
Selling,
general and administrative expense
|
69.4
|
(13.8
|
)
|
(16.6
|
)%
|
5.4
|
%
|
5.8
|
%
|
(a
|
)
|
||||||||
Operating
income (loss)
|
$
|
(26.7
|
)
|
$
|
(162.7
|
)
|
(119.7
|
)%
|
(2.1
|
)%
|
9.4
|
%
|
(b
|
)
|
(a)
|
Selling,
general and administrative expense decreased due to the impact of
profit
based retirement and compensation plans.
|
(b)
|
Decreased
operating income is primarily due to the items discussed above under
gross
profit partially offset by the reduction in selling, general and
administrative expense discussed
above.
|
First
Nine Months Ended
|
Change
from
First
Nine Months Ended
|
||||||||||||
July
1,
|
July
2,
|
Percentage
|
|||||||||||
Source
|
2006
|
2005
|
Change
|
||||||||||
Chicken-
|
|||||||||||||
United
States
|
$
|
3,039.3
|
$
|
(209.4
|
)
|
(6.4
|
)%
|
(a
|
)
|
||||
Mexico
|
303.4
|
1.2
|
0.4
|
%
|
(b
|
)
|
|||||||
$
|
3,342.7
|
$
|
(208.2
|
)
|
(5.9
|
)%
|
|||||||
Turkey
|
$
|
94.8
|
$
|
(59.8
|
)
|
(38.7
|
)%
|
(c
|
)
|
||||
Other
Products-
|
|||||||||||||
United
States
|
$
|
445.6
|
$
|
(16.9
|
)
|
(3.6
|
)%
|
(d
|
)
|
||||
Mexico
|
14.1
|
(1.5
|
)
|
(9.7
|
)%
|
||||||||
$
|
459.7
|
$
|
(18.4
|
)
|
(3.8
|
)%
|
|||||||
$
|
3,897.2
|
$
|
(286.4
|
)
|
(6.8
|
)%
|
(a)
|
U.S.
chicken sales for the first nine months of fiscal 2006 were 6.4%
less than
the first nine months of fiscal 2005 because of a 1.3% decline in
pounds
sold and a 5.3% decline in net revenue per pound sold created by
market
disruptions caused by the avian influenza scare in other parts of
the
world.
|
(b)
|
Mexico
chicken sales increased due to a 9.1% increase in pounds sold during
the
first nine months of fiscal 2006 versus the first nine months of
fiscal
2005 substantially offset by an 8.0% decline in net revenue per pound
sold.
|
(c)
|
Turkey
sales declined because of the March 2006 discontinuation of certain
products discussed above.
|
(d)
|
U.S.
other product sales decreased primarily due to the divestiture of
non-poultry related distribution
facilities.
|
Change
From
|
Percentage
of
|
Percentage
of
|
|||||||||||||||||
First
Nine
|
First
Nine
|
Net
Sales
|
Net
Sales
|
||||||||||||||||
Months
Ended
|
Months
Ended
|
First
Nine
|
First
Nine
|
||||||||||||||||
July
1,
|
July
2,
|
Percentage
|
Months
|
Months
|
|||||||||||||||
Components
|
2006
|
2005
|
Change
|
Fiscal
2006
|
Fiscal
2005
|
||||||||||||||
Net
sales
|
$
|
3,897.2
|
$
|
(286.4
|
)
|
(6.8
|
)%
|
100.0
|
%
|
100.0
|
%
|
||||||||
Cost
of sales
|
3,698.9
|
59.7
|
1.6
|
%
|
94.9
|
%
|
87.0
|
%
|
(a
|
)
|
|||||||||
Gross
profit
|
$
|
198.3
|
$
|
(346.1
|
)
|
(63.6
|
)%
|
5.1
|
%
|
13.0
|
%
|
(b
|
)
|
||||||
(a)
|
Cost
of sales increased $59.7 million due primarily to increased feed
ingredient costs and higher energy costs and transportation costs
created
by fuel cost increases. Supplemental fuel payments to growers in
the first
nine months of fiscal 2006 were $11.7 million higher than in the
first
nine months of fiscal 2005. Included in cost of sales for the first
nine
months of fiscal 2006 was a charge of $3.8 million to impair the
carrying
value of certain equipment currently held for sale and formerly used
in
our turkey division, a charge of $2.5 million to reduce the value
of
certain packaging and supplies associated with those products and
$0.2
million for severance costs. Included in the cost of sales for the
first
nine months of fiscal 2005 were proceeds of $5.2 million from the
final
resolution of the 2004 turkey restructuring activities.
|
(b)
|
Gross
profit decreased $346.1 million due to the combination of depressed
selling prices, due primarily to a decrease in export demand for
U.S.
chicken products caused by changes in buying patterns in foreign
markets
as a result of avian influenza outbreaks in those countries, increased
feed ingredient costs and freight and fuel
costs.
|
Change
from
|
||||||||||
First
Nine
|
First
Nine
|
|||||||||
Months
Ended
|
Months
Ended
|
|||||||||
July
1,
|
July
2,
|
Percentage
|
||||||||
Source
|
2006
|
2005
|
Change
|
|||||||
Chicken
|
||||||||||
United
States
|
$
|
(4.0
|
)
|
$
|
(295.9
|
)
|
(101.4
|
)%
|
||
Mexico
|
(10.2
|
)
|
(42.1
|
)
|
(131.9
|
)%
|
||||
$
|
(14.2
|
)
|
$
|
(338.0
|
)
|
(104.4
|
)%
|
|||
Turkey
|
$
|
(16.0
|
)
|
$
|
0.6
|
3.9
|
%
|
|||
Other
Products
|
||||||||||
United
States
|
$
|
10.5
|
$
|
5.2
|
98.7
|
%
|
||||
Mexico
|
1.2
|
(2.3
|
)
|
(66.5
|
)%
|
|||||
$
|
11.7
|
$
|
2.9
|
33.0
|
%
|
|||||
Operating
Income
|
$
|
(18.5
|
)
|
$
|
(334.5
|
)
|
(105.8
|
)%
|
Change
from
|
Percentage
|
Percentage
|
|||||||||||||||||
First
Nine
|
First
Nine
|
of
Net Sales
|
of
Net Sales
|
||||||||||||||||
Months
Ended
|
Months
Ended
|
First
Nine
|
First
Nine
|
||||||||||||||||
July
1,
|
July
2,
|
Percentage
|
Months
|
Months
|
|||||||||||||||
Components
|
2006
|
2005
|
Change
|
Fiscal
2006
|
Fiscal
2005
|
||||||||||||||
Gross
profit
|
$
|
198.3
|
$
|
(346.1
|
)
|
(63.6
|
)%
|
5.1
|
%
|
13.0
|
%
|
||||||||
Selling,
general and administrative expense
|
216.8
|
(11.6
|
)
|
(5.1
|
)%
|
5.6
|
%
|
5.5
|
%
|
(a
|
)
|
||||||||
Operating
income
|
$
|
(18.5
|
)
|
$
|
(334.5
|
)
|
(105.8
|
)%
|
(0.5
|
)%
|
7.5
|
%
|
(b
|
)
|
(a)
|
Selling,
general and administrative expense decreased due to the impact of
profit
based retirement and compensation plans.
|
(b)
|
Decreased
operating income is primarily due to the items discussed above under
gross
profit partially offset by the decrease in selling, general and
administrative expense.
|
Facility
|
Available
|
Amount
|
Net
|
||||||||||
Source
of Liquidity
|
Amount
|
Borrowing
|
Outstanding
|
Available
|
|||||||||
(in
millions)
|
|||||||||||||
Cash
and cash equivalents
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
44,069
|
|||||
Investments
in available for sale securities
|
--
|
--
|
--
|
170,657
|
|||||||||
Debt
Facilities:
|
|||||||||||||
Revolving
credit facilities
|
168,000
|
139,317
|
--
|
139,317
|
|||||||||
Revolving/term
facility
|
500,000
|
500,000
|
--
|
500,000
|
|||||||||
Receivables
purchase
|
|||||||||||||
agreement
|
125,000
|
125,000
|
50,000
|
75,000
|
|||||||||
Total
available
|
793,000
|
764,317
|
50,000
|
$
|
929,043
|
· |
Matters
affecting the poultry industry generally, including fluctuations
in the
commodity prices of feed ingredients, chicken and
turkey;
|
· |
Additional
outbreaks of avian influenza or other diseases, either in our own
flocks
or elsewhere, affecting our ability to conduct our operations and/or
demand for our poultry products;
|
· |
Contamination
of our products, which has recently and can in the future lead to
product
liability claims and product
recalls;
|
· |
Exposure
to risks related to product liability, product recalls, property
damage
and injuries to persons, for which insurance coverage is expensive,
limited and potentially inadequate;
|
· |
Changes
in laws or regulations affecting our operations or the application
thereof;
|
· |
Competitive
factors and pricing pressures or the loss of one or more of our largest
customers;
|
· |
Currency
exchange rate fluctuations, trade barriers, exchange controls,
expropriation and other risks associated with foreign
operations;
|
· |
Management
of our cash resources, particularly in light of our leverage, and
restrictions imposed by and as a result of, our leverage;
and
|
· |
The
impact of uncertainties of litigation as well as other risks described
herein and under “Risk Factors” in our Annual Report on Form 10-K filed
with the Securities and Exchange
Commission.
|
3.1
|
Certificate
of Incorporation of the Company, as amended (incorporated by reference
from Exhibit 3.1 of the Company’s Annual Report on Form 10-K for the
fiscal year ended October 2, 2004 filed on November 24,
2004).
|
|
3.2
|
Amended
and Restated Corporate Bylaws of the Company (incorporated by reference
from Exhibit 4.4 of the Company’s Registration Statement on Form S-8 (No.
333-111929) filed on January 15, 2004).
|
|
12.1
|
Statement
regarding Computation of Ratios.*
|
|
31.1
|
Certification
of Co-Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|
|
31.2
|
Certification
of Co-Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|
|
31.3
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.*
|
|
32.1
|
Certification
of Co-Principal Executive Officer of Pilgrim's Pride Corporation
pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
32.2
|
Certification
of Co-Principal Executive Officer of Pilgrim's Pride Corporation
pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
32.3
|
Certification
of Chief Financial Officer of Pilgrim's Pride Corporation pursuant
to
Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
*
Filed herewith
|
PILGRIM’S
PRIDE CORPORATION
|
|||
/s/
Richard A. Cogdill
|
|||
Date:
|
August
1, 2006
|
Richard
A. Cogdill
|
|
Chief
Financial Officer,
|
|||
Secretary
and Treasurer
|
|||
(Principal
Financial Officer,
|
|||
Chief
Accounting Officer and
|
|||
Authorized
Signatory)
|
3.1
|
Certificate
of Incorporation of the Company, as amended (incorporated by reference
from Exhibit 3.1 of the Company’s Annual Report on Form 10-K for the
fiscal year ended October 2, 2004 filed on November 24,
2004).
|
|
3.2
|
Amended
and Restated Corporate Bylaws of the Company (incorporated by reference
from Exhibit 4.4 of the Company’s Registration Statement on Form S-8 (No.
333-111929) filed on January 15, 2004).
|
|
Statement
regarding Computation of Ratios.*
|
||
Certification
of Co-Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|
||
Certification
of Co-Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|
||
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.*
|
||
Certification
of Co-Principal Executive Officer of Pilgrim's Pride Corporation
pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
||
Certification
of Co-Principal Executive Officer of Pilgrim's Pride Corporation
pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
||
Certification
of Chief Financial Officer of Pilgrim's Pride Corporation pursuant
to
Section 906 of the Sarbanes-Oxley Act of 2002.*
|
||
*
Filed herewith
|