Pilgrim’s Pride files for protection

Pilgrim’s Pride Corp., the nation’s largest chicken producer, filed for Chapter 11 bankruptcy protection on Monday, hobbled by its debt load and volatile feed prices.

The chicken producer has been saddled by the debt from its $1.3 billion acquisition of rival Atlanta-based Gold Kist Inc. in 2007 —- what analysts cite as the primary cause of its large debt load.

The Pittsburg, Texas-based company sought bankruptcy protection in a filing with the U.S. Bankruptcy Court for the Northern District of Texas on Monday, saying that as of Sept. 27 it had $3.75 billion in assets and $2.72 billion in debts.

Pilgrim’s Pride spokesman Ray Atkinson said the company was reorganizing, not liquidating its assets, and that it will keep operating throughout the reorganization process.

Pilgrim’s Pride’s financial problems have been known for months, and it has had to extend its temporary credit line three times since September —- most recently as last week. Its third extension was set to expire Monday afternoon.

Last month, in accordance with rules set by its lenders, the company hired a chief restructuring officer, and has maintained since its credit issues surfaced in September that it wanted to avoid filing for bankruptcy.

After the market closed Friday, the poultry producer said in a filing with the Securities and Exchange Commission that it would delay filing its 2008 annual financial report, which had been due Nov. 26. It expects to post a loss of $802 million, or $10.83 per share, on sales of $2.17 billion for the fourth quarter, which ended Sept. 27. Those results include a noncash charge of $501.4 million, or $6.77 a share due to the impairment of goodwill related to its acquisition of Gold Kist, and an income tax valuation allowance of $45 million, or 47 cents a share, against net operating losses.

The nation’s meat makers, especially Pilgrim’s Pride, are hurting as their profits shrink in the wake of high commodity prices for key inputs such as corn and oil. Those prices are moderating after reaching record highs this summer, but they are still high for producers.

Further hurting the industry is weak pricing due to a drop in demand in food service and an oversupply of meat on the market.

Producers such as Pilgrim’s Pride have pledged or started to cut production, to remove supply and push prices back up. Others, such as No. 2 chicken player Tyson Foods Inc. have not. Earlier this month, the Springdale, Ark.-based company, which also makes beef and pork, said it increased its chicken volume 6 percent in the latest quarter. Some analysts said it was trying to make a permanent cut —- such as forcing the bankruptcy of Pilgrim’s Pride —- by holding off on its own production pullbacks.

Pilgrim’s Pride controls about 24 percent of the U.S. market and is a large chicken producer in Mexico. It has 48,000 employees and operates 35 chicken processing plants and 11 prepared-foods facilities.

The company said in its statement that the bankruptcy protection it is seeking does not include operations in Mexico or certain ones in the U.S., though it did not specify which ones.