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Pilgrim's Pride Sells Plant, Reports Better Results

by 5m Editor
8 May 2009, at 9:52a.m.

US - Pilgrim's Pride has signed an agreement to sell to Foster Farms its chicken complex at Farmerville, Louisiana. The company has also reported that its second quarter loss has narrowed as costs have dropped.

Sale of Farmerville plant to Foster Farms

Pilgrim's Pride Corporation has announced that it has signed a definitive agreement to sell its chicken complex in Farmerville, Louisiana, to Foster Farms for $80 million, subject to a price adjustment for associated inventory and other reimbursements.

Completion of the transaction is contingent upon customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott Rodino Improvements Act and approval by the US Bankruptcy Court. The transaction is also subject to Foster Farms' receipt of $40 million from the State of Louisiana in order to fund a portion of the purchase price. The sale is expected to be completed within 30 days.

The US Bankruptcy Court has approved procedures for the sale of the Farmerville complex assets. The sale will be completed via an auction in accordance with Section 363 of the US Bankruptcy Code. The Court set 15 May 2009, at 12:00 p.m. Central as the deadline for the submission of qualified bid packages, and scheduled an auction for 18 May 2009, at 10:00 a.m. Central at the offices of Weil, Gotshal & Manges LLP, 200 Crescent Court, Suite 300, Dallas, Texas 75201. At that time, the company will sell its assets to Foster Farms or another qualified bidder, if such bidder makes the highest and best offer for the assets. A hearing to approve the sale has been scheduled for 19 May 2009, at 10:30 a.m. Central.

The Farmerville complex includes a processing facility, a cook plant, two hatcheries, a feed mill, a protein conversion plant and any associated inventory.

"We thank Foster Farms, Governor Bobby Jindal and the State of Louisiana for their commitment to this sale," said Don Jackson, president and chief executive officer. "We believe it is in the best interest of all parties involved, including our employees, growers, the Farmerville community and our creditors."

As previously announced, the company and certain subsidiaries filed voluntary Chapter 11 petitions on 1 December 2008. The Chapter 11 cases are being jointly administered under case number 08-45664. The company's operations in Mexico and certain operations in the United States were not included in the filing and continue to operate as usual outside of the Chapter 11 process.

Second quarter (Q2) loss narrows as costs drop

San Francisco Chronicle reports that Pilgrim's Pride said in a filing with the Securities and Exchange Commission on 7 May that it lost $58.8 million, or 79 cents a share, in the three-month period that ended on 28 March. That is about half of the company's year-ago reported loss of $111.4 million, or $1.67 a share.

Sales fell 19 per cent to $1.7 billion from $2.1 billion last year. The company has been curbing production to balance inventory, pricing and demand.

The company's cost of sales – including prices for key ingredients like corn and fuel oil – fell in the quarter, giving Pilgrim's Pride's chicken business a gross profit of $97.7 million. Last year in the second quarter, when costs were higher, the company's chicken business lost $35.4 million.

Pilgrim's Pride filed for bankruptcy protection late last year, saddled by debt and hurt by volatile input costs that have caused widespread weakness in the industry.

Like other food producers, Pilgrim's Pride has been hurt by an over-supply of chicken, which has depressed retail prices, in addition to high costs for animal feed made from expensive corn and soybeans. The producers have been cutting production and shedding inventory to help bolster pricing.

Pilgrim's Pride's inventories are shrinking, according to the filing. At the end of March, the company had $825.5 million in inventory, down 20 percent from $1 billion last year. The company has also been selling assets and trimming jobs to cut costs, according to San Francisco Chronicle.

Pilgrim's Pride Corporation employs approximately 47,000 people and operates chicken processing plants and prepared-foods facilities in 14 states, Puerto Rico and Mexico. The Company's primary distribution is through retailers and foodservice distributors.

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