Supplemental Guarantor Financial Information

9 Months Ended

Sep. 25, 2011

Supplemental Guarantor Financial Information

Supplemental Guarantor Financial Information

20. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

On December 15, 2010, the Company closed on the sale of $500.0 million of 7 ⁷/8% Senior Notes due in 2018 (the "2018 Notes"). The 2018 Notes are unsecured obligations of the Company and are fully and unconditionally guaranteed on a senior unsecured basis by Pilgrim's Pride Corporation of West Virginia, Inc., a wholly owned subsidiary of the Company (the "Guarantor"). In accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act of 1933, the following condensed consolidating financial statements present the financial position, results of operations and cash flows of the Company (referred to as "Parent" for the purpose of this note only) on a Parent-only basis, the Guarantor on a Guarantor-only basis, the combined non-Guarantor subsidiaries and elimination entries necessary to arrive at the information for the Parent, the Guarantor and non-Guarantor subsidiaries on a consolidated basis. Investments in subsidiaries are accounted for by the Company using the equity method for this presentation.

The tables below present the condensed consolidating balance sheets as of September 25, 2011 and December 26, 2010, the condensed consolidating statements of operations for the thirteen and thirty-nine weeks ended September 25, 2011 and September 26, 2010 and the condensed consolidating statements of cash flows for the thirty-nine weeks ended September 25, 2011 and September 26, 2010 based on the guarantor structure.

CONDENSED CONSOLIDATING BALANCE SHEETS

September 25, 2011

(In thousands)

	Parent		Subsidiary Guarantor		Subsidiary Non-Guarantors		Eliminations/ Adjustments			Consolidation
Cash and cash equivalents	$	17,424	$	—	$	29,480	$	—		$	46,904
Restricted cash and cash equivalents		—		—		57,308		—			57,308
Investment in available-for-sale securities		—		—		52		—			52
Trade accounts and other receivables, less allowance for doubtful accounts		303,671		1,832		49,846		—			355,349
Account receivable from JBS USA, LLC		6,021		—		—		—			6,021
Inventories		782,253		22,403		114,894		—			919,550
Income taxes receivable		61,736		—		—		(3,840	)		57,896
Current deferred tax assets		—		6,025		4,699		(7,548	)		3,176
Prepaid expenses and other current assets		27,905		192		16,890		—			44,987
Assets held for sale		30,205		—		16,015		—			46,220
Total current assets		1,229,215		30,452		289,184		(11,388	)		1,537,463
Investment in available-for-sale securities		—		—		1,797		—			1,797
Intercompany receivable		72,837		21,261		—		(94,098	)
Investment in subsidiaries		340,214		—		—		(340,214	)
Deferred tax assets		39,505		—		—		(4,414	)		35,091
Other long-lived assets		59,577		—		182,547		(180,000	)		62,124
Identified intangible assets, net		32,366		—		13,153		—			45,519
Property, plant and equipment, net		1,159,396		50,093		112,091		(3,888	)		1,317,692
Total assets	$	2,933,110	$	101,806	$	598,772	$	(634,002	)	$	2,999,686
Accounts payable	$	258,697	$	9,556	$	58,055	$	—		$	326,308
Account payable to JBS USA, LLC		16,257		—		—		—			16,257
Accrued expenses and other current liabilities		229,161		13,885		69,109		—			312,155
Income taxes payable		—		—		5,499		(3,840	)		1,659
Current deferred tax liabilities		46,292		—		—		(7,548	)		38,744
Current maturities of long-term debt		15,609		—		—		—			15,609
Total current liabilities		566,016		23,441		132,663		(11,388	)		710,732
Long-term debt, less current maturities		1,483,890		—		—		(25,000	)		1,458,890
Note payable to JBS USA Holdings, Inc.		50,000		—		—		—			50,000
Intercompany payable		—		—		94,098		(94,098	)
Deferred tax liabilities		—		4,117		5,048		(4,414	)		4,751
Other long-term liabilities		264,884		—		1,507		(155,000	)		111,391
Total liabilities		2,364,790		27,558		233,316		(289,900	)		2,335,764
Total Pilgrim's Pride Corporation stockholders' equity		568,320		74,248		362,930		(344,102	)		661,396
Noncontrolling interest		—		—		2,526		—			2,526
Total stockholders' equity		568,320		74,248		365,456		(344,102	)		663,922
Total liabilities and stockholders' equity	$	2,933,110	$	101,806	$	598,772	$	(634,002	)	$	2,999,686

CONDENSED CONSOLIDATING BALANCE SHEETS

December 26, 2010

(In thousands)

	Parent		Subsidiary Guarantor		Subsidiary Non-Guarantors		Eliminations/ Adjustments			Consolidation
Cash and cash equivalents	$	67,685	$	—	$	38,392	$	—		$	106,077
Restricted cash and cash equivalents		—		—		60,953		—			60,953
Investment in available-for-sale securities		—		—		1,554		—			1,554
Trade accounts and other receivables, less allowance for doubtful accounts		267,348		1,779		52,173		—			321,300
Account receivable from JBS USA, LLC		465		—		—		—			465
Inventories		905,215		20,668		103,371		—			1,029,254
Income taxes receivable		62,117		—		—		(3,652	)		58,465
Current deferred tax assets		—		6,025		5,176		(7,725	)		3,476
Prepaid expenses and other current assets		66,178		345		14,727		—			81,250
Assets held for sale		24,741		—		22,930		—			47,671
Total current assets		1,393,749		28,817		299,276		(11,377	)		1,710,465
Investment in available-for-sale securities		—		—		11,595		—			11,595
Intercompany receivable		60,882		23,724		—		(84,606	)		—
Investment in subsidiaries		337,762		—		—		(337,762	)		—
Deferred tax assets		27,023		—		—		(4,414	)		22,609
Other long-lived assets		64,371		—		182,772		(180,000	)		67,143
Identified intangible assets, net		35,308		—		13,642		—			48,950
Property, plant and equipment, net		1,199,495		45,872		116,657		(3,888	)		1,358,136
Total assets	$	3,118,590	$	98,413	$	623,942	$	(622,047	)	$	3,218,898
Accounts payable	$	265,940	$	7,398	$	56,442	$	—		$	329,780
Account payable to JBS USA, LLC		7,212		—		—		—			7,212
Accrued expenses and other current liabilities		185,897		26,394		85,649		—			297,940
Income taxes payable		—		—		10,466		(3,652	)		6,814
Current deferred tax liabilities		46,470		—		—		(7,725	)		38,745
Current maturities of long-term debt		58,144		—		—		—			58,144
Total current liabilities		563,663		33,792		152,557		(11,377	)		738,635
Long-term debt, less current maturities		1,306,160		—		—		(25,000	)		1,281,160
Intercompany payable		—		—		84,606		(84,606	)		—
Deferred tax liabilities		—		4,117		3,773		(4,414	)		3,476
Other long-term liabilities		269,844		—		2,187		(155,000	)		117,031
Total liabilities		2,139,667		37,909		243,123		(280,397	)		2,140,302
Total Pilgrim's Pride Corporation stockholders' equity		978,923		60,504		374,886		(341,650	)		1,072,663
Noncontrolling interest		—		—		5,933		—			5,933
Total stockholders' equity		978,923		60,504		380,819		(341,650	)		1,078,596
Total liabilities and stockholders' equity	$	3,118,590	$	98,413	$	623,942	$	(622,047	)	$	3,218,898

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Thirteen weeks Ended September 25, 2011

(In thousands)

	Parent			Subsidiary Guarantor		Subsidiary Non-Guarantors			Eliminations/ Adjustments			Consolidation
Net sales	$	1,536,794		$	110,438	$	309,764		$	(65,772	)	$	1,891,224
Cost of sales		1,583,838			105,531		330,014			(65,772	)		1,953,611
Gross profit (loss)		(47,044	)		4,907		(20,250	)		—			(62,387	)
Selling, general and administrative expense		45,240			—		5,957			—			51,197
Administrative restructuring charges, net		4,583			—		6,889			—			11,472
Total costs and expenses		1,633,661			105,531		342,860			(65,772	)		2,016,280
Operating income (loss)		(96,867	)		4,907		(33,096	)		—			(125,056	)
Other expenses (income):
Interest expense		27,845			—		85			—			27,930
Interest income		—			—		(323	)		—			(323	)
Foreign currency transaction losses		114			—		13,811			—			13,925
Miscellaneous, net		25,645			1,125		(30,653	)		155			(3,728	)
Total other expenses (income)		53,604			1,125		(17,080	)		155			37,804
Income (loss) from continuing operations before income taxes		(150,471	)		3,782		(16,016	)		(155	)		(162,860	)
Income tax expense (benefit)		(3,257	)		1,428		1,769			—			(60	)
Income (loss) before equity in earnings of consolidated subsidiaries		(147,214	)		2,354		(17,785	)		(155	)		(162,800	)
Equity in earnings of consolidated subsidiaries		(12,217	)		—		—			12,217			—
Net income (loss)		(159,431	)		2,354		(17,785	)		12,062			(162,800	)
Less: Net loss attributable to noncontrolling interest		—			—		(284	)		—			(284	)
Net income (loss) attributable to Pilgrim's Pride Corporation	$	(159,431	)	$	2,354	$	(17,501	)	$	12,062		$	(162,516	)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Thirteen Weeks Ended September 26, 2010

(In thousands)

	Parent			Subsidiary Guarantor		Subsidiary Non-Guarantors			Eliminations/ Adjustments			Consolidation
Net sales	$	1,414,025		$	122,898	$	286,708		$	(103,781	)	$	1,719,850
Costs and expenses:
Cost of sales		1,274,527			116,189		273,096			(103,781	)		1,560,031
Operational restructuring charges, net		2,525			—		—			—			2,525
Gross profit		136,973			6,709		13,612			—			157,294
Selling, general and administrative expense		49,782			—		(4,686	)		—			45,096
Administrative restructuring charges, net		(1,006	)		—		—			—			(1,006	)
Total costs and expenses		1,325,828			116,189		268,410			(103,781	)		1,606,646
Operating income		88,197			6,709		18,298			—			113,204
Other expenses (income):
Interest expense		26,329			—		163			—			26,492
Interest income		(14	)		—		(632	)		—			(646	)
Foreign currency transaction losses (gains)		144			—		(424	)		—			(280	)
Miscellaneous, net		20,157			995		(23,753	)		1,205			(1,396	)
Total other expenses		46,617			995		(24,647	)		1,205			24,170
Income (loss) from continuing operations before income taxes		41,580			5,714		42,945			(1,205	)		89,034
Income tax expense		21,017			2,157		7,338			—			30,512
Income (loss) before equity in earnings of consolidated subsidiaries		20,563			3,557		35,607			(1,205	)		58,522
Equity in earnings of consolidated subsidiaries		13,662			—		—			(13,662	)		—
Net income (loss)		34,225			3,557		35,607			(14,867	)		58,522
Less: Net income attributable to noncontrolling interest		—			—		596			—			596
Net income (loss) attributable to Pilgrim's Pride Corporation	$	34,225		$	3,557	$	35,011		$	(14,867	)	$	57,926

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Thirty-Nine Weeks Ended September 25, 2011

(In thousands)

	Parent			Subsidiary Guarantor		Subsidiary Non-Guarantors			Eliminations/ Adjustments			Consolidation
Net sales	$	4,628,071		$	340,098	$	954,918		$	(216,697	)	$	5,706,390
Cost of sales		4,758,734			314,542		1,011,536			(216,697	)		5,868,115
Gross profit (loss)		(130,663	)		25,556		(56,618	)		—			(161,725	)
Selling, general and administrative expense		135,332			—		22,009			—			157,341
Administrative restructuring charges, net		4,583			—		6,889			—			11,472
Total costs and expenses		4,898,649			314,542		1,040,434			(216,697	)		6,036,928
Operating income (loss)		(270,578	)		25,556		(85,516	)		—			(330,538	)
Other expenses (income):
Interest expense		82,344			—		519			—			82,863
Interest income		(354	)		—		(957	)		—			(1,311	)
Foreign currency transaction losses (gains)		(59	)		—		11,294			—			11,235
Miscellaneous, net		77,401			3,477		(87,701	)		587			(6,236	)
Total other expenses (income)		159,332			3,477		(76,845	)		587			86,551
Income (loss) from continuing operations before income taxes		(429,910	)		22,079		(8,671	)		(587	)		(417,089	)
Income tax expense (benefit)		(19,229	)		8,335		4,432			—			(6,462	)
Income (loss) before equity in earnings of consolidated subsidiaries		(410,681	)		13,744		(13,103	)		(587	)		(410,627	)
Equity in earnings of consolidated subsidiaries		685			—		—			(685	)		—
Net income (loss)		(409,996	)		13,744		(13,103	)		(1,272	)		(410,627	)
Less: Net income attributable to noncontrolling interest		—			—		790			—			790
Net income (loss) attributable to Pilgrim's Pride Corporation	$	(409,996	)	$	13,744	$	(13,893	)	$	(1,272	)	$	(411,417	)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Thirty-Nine Weeks Ended September 26, 2010

(In thousands)

	Parent			Subsidiary Guarantor			Subsidiary Non-Guarantors			Eliminations/ Adjustments			Consolidation
Net sales	$	4,160,309		$	355,148		$	857,937		$	(303,058	)	$	5,070,336
Costs and expenses:
Cost of sales		3,846,559			340,907			841,599			(303,058	)		4,726,007
Operational restructuring charges, net		2,525			—			—			—			2,525
Gross profit		311,225			14,241			16,338			—			341,804
Selling, general and administrative expense		150,145			(279	)		7,549			—			157,415
Administrative restructuring charges, net		48,115			—			3,580			—			51,695
Total costs and expenses		4,047,344			340,628			852,728			(303,058	)		4,937,642
Operating income		112,965			14,520			5,209			—			132,694
Other expenses (income):
Interest expense		79,290			—			1,737			—			81,027
Interest income		(69	)		—			(1,751	)		—			(1,820	)
Foreign currency transaction losses		187			—			690			—			877
Miscellaneous, net		66,131			3,077			(80,909	)		2,319			(9,382	)
Total other expenses		145,540			3,077			(80,234	)		2,319			70,702
Income (loss) from continuing operations before reorganization items and income taxes		(32,575	)		11,443			85,443			(2,319	)		61,992
Reorganization items, net		18,348			—			193			—			18,541
Income (loss) from continuing operations before income taxes		(50,923	)		11,443			85,250			(2,319	)		43,451
Income tax expense (benefit)		(34,689	)		4,320			26,074			—			(4,295	)
Income (loss) before equity in earnings of consolidated subsidiaries		(16,234	)		7,123			59,176			(2,319	)		47,746
Equity in earnings of consolidated subsidiaries		23,449			—			—			(23,449	)		—
Net income (loss)		7,215			7,123			59,176			(25,768	)		47,746
Less: Net income attributable to noncontrolling interest		—			—			2,449			—			2,449
Net income (loss) attributable to Pilgrim's Pride Corporation	$	7,215		$	7,123		$	56,727		$	(25,768	)	$	45,297

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

Thirty-Nine Weeks Ended September 25, 2011

(In thousands)

	Parent			Subsidiary Guarantor			Subsidiary Non-Guarantors			Eliminations/ Adjustments			Consolidation
Cash flows provided by (used in) operating activities	$	(127,437	)	$	8,249		$	(9,705	)	$	(587	)	$	(129,480	)
Cash flows from investing activities:
Acquisitions of property, plant and equipment		(106,526	)		(8,414	)		(6,929	)		—			(121,869	)
Purchases of investment securities		—			—			(4,536	)		—			(4,536	)
Proceeds from sale or maturity of investment securities		—			—			14,631			—			14,631
Proceeds from property sales and disposals		5,744			165			1,593			—			7,502
Cash provided by (used in) investing activities		(100,782	)		(8,249	)		4,759			—			(104,272	)
Cash flows from financing activities:
Proceeds from note payable to JBS USA		50,000			—			—			—			50,000
Proceeds from long-term debt		804,689			—			—			—			804,689
Payments on long-term debt		(669,832	)		—			—			—			(669,832	)
Purchase of remaining interest in subsidiary		(2,504	)		—			—			—			(2,504	)
Payment of capitalized loan costs		(4,395	)		—			—			—			(4,395	)
Other financing activities		—			—			(693	)		587			(106	)
Cash provided by (used in) financing activities		177,958			—			(693	)		587			177,852
Effect of exchange rate changes on cash and cash equivalents		—			—			(3,273	)		—			(3,273	)
Decrease in cash and cash equivalents		(50,261	)		—			(8,912	)		—			(59,173	)
Cash and cash equivalents, beginning of period		67,685			—			38,392			—			106,077
Cash and cash equivalents, end of period	$	17,424		$	—		$	29,480		$	—		$	46,904

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

Thirty-Nine Weeks Ended September 26, 2010

(In thousands)

	Parent			Subsidiary Guarantor			Subsidiary Non-Guarantors			Eliminations/ Adjustments			Consolidation
Cash flows provided by (used in) operating activities	$	(19,043	)	$	2,376		$	41,294		$	(2,319	)	$	22,308
Cash flows from investing activities:
Acquisitions of property, plant and equipment		(101,128	)		(2,376	)		(5,533	)		—			(109,037	)
Purchases of investment securities		—			—			(9,377	)		—			(9,377	)
Proceeds from sale or maturity of investment securities		—			—			9,649			—			9,649
Proceeds from property sales and disposals		6,773			—			4,808			—			11,581
Cash used in investing activities		(94,355	)		(2,376	)		(453	)		—			(97,184	)
Cash flows from financing activities:
Proceeds from long-term debt		1,652,700			—			—			—			1,652,700
Payments on long-term debt		(2,464,999	)		—			(43,550	)		—			(2,508,549	)
Proceeds from sale of common stock		800,000			—			—			—			800,000
Purchase of remaining interest in subsidiary		(7,637	)		—			—			—			(7,637	)
Payment of capitalized loan costs		(49,981	)		—			—			—			(49,981	)
Other financing activities		—			—			(2,672	)		2,319			(353	)
Cash provided by (used in) financing activities		(69,917	)		—			(46,222	)		2,319			(113,820	)
Effect of exchange rate changes on cash and cash equivalents		—			—			(1,391	)		—			(1,391	)
Decrease in cash and cash equivalents		(183,315	)		—			(6,772	)		—			(190,087	)
Cash and cash equivalents, beginning of period		183,315			—			52,985			—			236,300
Cash and cash equivalents, end of period	$	—		$	—		$	46,213		$	—		$	46,213