Pilgrim's Pride Cuts, Sells, Promotes
Rivers had been chief operating officer. He takes on the top job after the unexpected death in December of O.B. Goolsby Jr., the previous chief executive.
"Clint has the right combination of experience and skills necessary to lead Pilgrim's Pride into the future," Ken Pilgrim, son of the company's co-founder and chairman of the Pilgrim's Pride board, said in a prepared statement.
Pilgrim headed the subcommittee that conducted the search.
Dr. Morgan Farnell, assistant professor of poultry science at Texas A&M University, said increased ethanol production has pushed up the cost of chicken feed. "It's a big problem," he said.
In his statement, Pilgrim called the challenges facing the company and the industry unprecedented.
Of the new CEO, he said, "Throughout his career at Pilgrim's Pride, Clint has played a pivotal role in positioning the company for operational growth, leading the integration of several large acquisitions."
In 2006, Pilgrim's Pride acquired Gold Kist Inc., creating the world's leading chicken company in terms of production and the fourth-largest U.S. meat processor by revenue.
Rivers joined Pilgrim's in 1986 as quality assurance manager. He was named chief operating officer in 2004.
No decision has been made about who will fill Mr. Rivers' old post, the company said.
On March 12, Pilgrim's Pride announced it will close a chicken processing complex and six of its 13 distribution centers in the U.S. in response to the crisis facing the U.S. chicken industry from soaring feed-ingredient costs resulting from corn-based ethanol production. These actions are part of a plan to curtail losses amid record-high costs for corn, soybean meal and other feed ingredients and an oversupply of chicken in the United States. The closings, expected to begin immediately and to be completed by June, will result in the elimination of approximately 1,100 jobs. Additionally, the company announced it is in the process of reviewing other production facilities for potential mix changes, closure and/or consolidation in response to current negative industry fundamentals.
Under the plan, the company will close its chicken processing complex in Siler City, N.C., which employs approximately 830 people. Pilgrim's Pride also plans to shut down distribution centers in Oskaloosa, Iowa; Plant City and Pompano Beach, Fla.; Jackson, Miss.; Nashville, Tenn.; and Cincinnati, Ohio. Pilgrim's Pride will provide transition programs to employees to assist them in securing new employment, filing for unemployment and other applicable benefits. No decision has been made about the future use of the Siler City facility; however, when industry fundamentals improve, portions of the live production capabilities associated with the Siler City operation may be redeployed to supply other company facilities in that region of the country. The company expects to record asset impairment and other charges related to the facility closures of approximately $35 million, $21.7 million net of tax, or $0.33 per share.
"Our company and industry are struggling to cope with unprecedented increases in feed-ingredient costs this year due largely to the U.S. government's ill-advised policy of providing generous federal subsidies to corn-based ethanol blenders," said Clint Rivers, president and chief executive officer. "The cost burden is already enormous, and it's growing even larger. Based on current commodity futures markets, our company's total costs for corn and soybean meal to feed our flocks in fiscal 2008 would be more than $1.3 billion higher than what they were two years ago. We simply must find ways to pass along these higher costs. Additionally, we believe that the recent impact of food-based inflation, coupled with the need for food producers to continue to increase prices for their products, will further stimulate inflation, weaken consumer confidence and negatively affect demand for products in certain market channels. This will require that the industry adjust its production output to levels commensurate with a reduced demand, at higher and necessary prices, sufficient to sustain the industry as a whole."
Rivers added, "While the decision to close a facility is always very difficult, we believe the actions we are announcing today are absolutely necessary to help bring supply and demand into better balance. That portion of the demand for our products that exists solely at pricing levels below the cost of production is no longer a demand that this industry can continue to supply."
On March 10, Pilgrim's Pride announced the sale of its turkey production facility and distribution center in New Oxford, Pa., to New Oxford Foods LLC, a subsidiary of Hain Pure Protein Corp. Financial terms were not disclosed, and there was no material gain or loss as a result of this transaction. As a result of this sale, which is effective immediately, Pilgrim's Pride is no longer a producer of turkey, a business it entered in 2001 with the purchase of WLR Foods Inc.
Pilgrim's Pride reported total U.S. turkey sales of $122.3 million for fiscal 2007. The New Oxford facility processes 175,000 turkeys per week and employs approximately 530 workers, including the distribution center.
"The sale of the New Oxford complex will allow Pilgrim's Pride to focus on our long-term strategy of building our core chicken business," said Rivers. "Despite the positive improvements made in our turkey business over the past few years, we found that our small size and scale in this segment made it difficult to achieve acceptable levels of profitability on a consistent basis."
He said the sale of the New Oxford complex is not expected to have any significant short-term impact on Pilgrim's Pride's current turkey customers. As part of the sale agreement, New Oxford Foods will continue to co-pack product for Pilgrim's Pride through the end of September, and Pilgrim's Pride will work closely with customers to avoid unexpected interruptions in delivery of frozen turkeys through Thanksgiving.
Under the terms of the agreement, New Oxford Foods will offer positions to all New Oxford employees and will honor all current contracts with Pilgrim's Pride turkey growers.
"We believe the New Oxford turkey operation will present an excellent opportunity for New Oxford Foods to concentrate its resources on building its all-natural business for the long term and unlocking its true growth potential in this unique market segment," Rivers said.
From the March 17, 2008, Prepared Foods e-Flash