Pilgrim's Responds to Common Stock Trading Activity, Cuts Jobs

US - Pilgrim's Pride Corporation has issued a statement in response to recent trading activity in its common stock, warning of a 'significant loss' in its fourth quarter results.
calendar icon 25 September 2008
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Pilgrim's Pride Corporation announced on 25 September that, based on preliminary results, it notified its lenders that the company expects to report a significant loss in the fiscal fourth quarter ending September 27, 2008. The company attributed the anticipated loss to high feed ingredient costs, continued weak pricing and demand for breast meat, and the significant negative impact of hedged grain positions during the quarter.

As a result of this expected loss, Pilgrim's Pride recently informed its lenders that it does not expect to be in compliance with its fixed-charge coverage ratio covenant under its principal credit facilities as of the fiscal year ending September 27, 2008, but expects to be in compliance with all other covenants as of the end of the 2008 fiscal year.

Pilgrim's Pride also announced that it believes it has reached an understanding with the agents under its credit facilities to temporarily waive the fixed-charge coverage ratio covenant through October 28, 2008, and to provide continued liquidity under these facilities during this same period. The temporary waiver will be subject to the negotiation of a definitive written agreement with the lenders, and there can be no assurance that this negotiation will result in a waiver acceptable to Pilgrim's Pride and its lenders. Failure to obtain a waiver or amendment of this covenant may preclude the company from drawing funds under these facilities and permit the lenders to declare an event of default, either of which would have a material adverse effect on the company.

More Jobs to go at El Dorado Plant

Pilgrim's Pride Corp. said on 23 September that it will cut 100 additional employees at its processing plant, El Dorado in Arkansas, according to NWA News.

The job cuts come immediately after 600 positions were eliminated by the Pittsburg, Texas-based poultry processor at the same plant.

Previous cuts were announced July 15 and the jobs ended Friday, Pilgrim’s Pride spokesman Ray Atkinson said.

The cuts will be effective about 21 November, Mr Atkinson said.

"Some have said that we made the cuts to remain profitable," he said. "We are not profitable. Hopefully, these cuts will help us to return to profitability." Shares of Pilgrim's Pride closed at $10.26, down $1.48 or 12.61 per cent on the New York Stock Exchange and well below the company's 52-week range of $11.22 to $ 35.98.

El Dorado Mayor Mike Dumas said he understood the company's position.

"It is just another step they are taking to try to get back to where they need to be," he said. "If we could absorb the 600 cuts before, we can take another 100." Poultry processors like Pilgrim's Pride have incurred heavy losses this year because of rising corn prices, which add to the expense of feeding chickens. Tyson Foods Inc. has joined with Pilgrim's Pride in exhorting the government to reverse its subsidized corn-based ethanol fuel program, which many blame for the rise in commodity grain prices.

Mr Atkinson said the company has lost $142 million this year, largely because of the increase in corn prices. In March, Pilgrim's Pride closed an entire poultry processing complex in Siler City, North Carolina, shedding 830 workers and closing contracts with chicken farmers. It also closed distribution centers in five states.

The company said in April that it intended to reduce production by 5 per cent because of rising costs. It had eliminated about 1,100 positions this year before the July cuts at El Dorado.

On 11 August, the company said it would cease production and cut 360 jobs at the Clinton processing plant and the feed mill in Atkins.

Former Pilgrim's Pride poultry farmers in Conway, Van Buren, Pope and Perry counties filed suit earlier this month claiming that the company committed fraud when it closed the Clinton processing plant and discontinued contracts.

Springdale-based Tyson announced earlier this year that it would close its Wilkesboro, North Carolina, plant, eliminating 400 jobs.

And in August, Petit Jean Poultry Inc. of Danville said it would close its chicken-processing plant in Buffalo, Missouri, with 465 jobs after that company lost its contract with Tyson. The 100 jobs will be cut from an eviscerating line at the El Dorado plant, leaving about 500 workers where last year more than 1,215 were employed. The cuts will not have additional impact on the company's contract growers in the area, Mr Atkinson said.

"We already announced company-wide cutbacks with growers earlier this year," he said. "The only thing this will mean is additional downtime for the growers, which means more time between flocks."

In Arkansas, Pilgrim's Pride operates chicken processing plants in De Queen and Batesville, and other facilities in Nashville and Hope. The company directly employs about 3,000 in the state and contracts with hundreds of poultry farmers.

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