pilgrim's pride 155858_CGI_BK_WEB

Building a world-class food company

PILGRIM’S PRIDE CORPORATION 2007 ANNUAL REPORT

Corporate and Corporate Office
Shareholder Information 4845 U.S. Hwy. 271 North
P.O. Box 93
ANNUAL MEETING
Pittsburg, Texas 75686
The Annual Meeting of Shareholders of Pilgrim’s Pride
(903) 434-1000
Corporation will be held January 30, 2008, at
(903) 856-7505 (fax)
11:00 a.m., CST at the company’s headquarters building,
4845 U.S. Hwy. 271 North, Pittsburg, Texas.
National Sales Office
FORM 10-K AND CEO/CFO CERTIFICATIONS
Upon written request, we will provide without charge 2777 Stemmons Freeway
a copy of our Form 10-K for the fiscal year ended Suite 850
September 29, 2007. Requests should be directed to: Dallas, Texas 75207-2268
(214) 920-2200
Shareholder Relations Officer (800) 824-1159
4845 U.S. Hwy. 271 North (214) 920-2396 (fax)
P.O. Box 93
Pittsburg, Texas 75686
Web Site
Our Form 10-K also is available on our Web site at
www.pilgrimspride.com
www.pilgrimspride.com. The most recent certifications by
our Chief Executive Officer and Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 are filed as exhibits to our Form 10-K. We have
also filed with the New York Stock Exchange the most
recent Annual CEO Certification as required by Section
303A.12(a) of the New York Stock Exchange Listed
Company Manual.

Stock Exchange and
Shareholders of Record
STOCK EXCHANGE SYMBOLS
New York Stock Exchange: NYSE
Common Stock Ticker Symbol: PPC

SHAREHOLDERS OF RECORD
Approximately 35,000 holders of record (including
individual participants in security position listings) as of
November 19, 2007.

Independent Auditors
Ernst & Young LLP
2121 San Jacinto Street
Dallas, Texas 75201

TRANSFER AGENT AND REGISTRAR
Questions regarding stock holdings, certificate
replacements/transfer, dividends, and address changes
should be directed to:

Computershare Investor Services, LLC
2 North LaSalle Street
Chicago, Illinois 60602

by telephone: (312) 360-5463
by email: www.computershare.com/contactus
web page: www.computershare.com

DUPLICATE MAILINGS
If you receive duplicate mailings because you have more
than one account listing, you may wish to save Pilgrim’s
Pride Corporation money by consolidating your accounts.
Please phone or write to the agent at the above address.

Pilgrim’s Pride Facility Locations

Chicken Processing - Fresh Feed Mills
Aibonito, Puerto Rico Ambrose, Georgia Crossville, Alabama
Athens, Alabama Arcadia, Louisiana Cullman, Alabama
Athens, Georgia (2) Athens, Georgia De Queen, Arkansas
Batesville, Arkansas Atkins, Arkansas Douglas, Georgia
P Franconia
Boaz, Alabama Batesville, Arkansas El Dorado, Arkansas New Oxford
T
Broadway, Virginia Bonlee, North Carolina Enterprise, Alabama
Oskaloosa
D
Salt Lake City
D
Canton, Georgia Calhoun, Georgia Farmerville, Louisiana Moorefield
PC

Carrollton, Georgia Canton, Georgia Ft. Payne, Alabama Broadway
C
Cincinnati
D
Chattanooga, Tennessee Chattanooga, Tennessee Gainesville, Georgia
Clinton, Arkansas Colón, Mexico Jasper, Alabama
Dallas, Texas Commerce, Georgia Live Oak, Florida
C Siler City
Dalton, Georgia El Dorado, Arkansas Mayfield, Kentucky (2) Mayfield C Sanford
C
De Queen, Arkansas Enterprise, Alabama Moorefield, West Virginia Chicken Processing - Fresh
D Nashville C
C Marshville
P C Chattanooga
C Batesville
Douglas, Georgia Falkville, Alabama Moulton, Alabama Prepared Foods
P
C Dalton
C Clinton
C Athens C Ellijay P C Sumter
El Dorado, Arkansas Gainesville, Georgia Nacogdoches, Texas Turkey Processing - Fresh
C Guntersville C Gainesville T
C Russellville C Canton P Elberton
Ellijay, Georgia Guntersville, Alabama Nashville, Arkansas Distribution Center
P C Boaz C Athens D
C De Queen
C Carrollton
Enterprise, Alabama Harrisonburg, Virginia Natchitoches, Louisiana Phoenix
D C El Dorado
World Headquarters
D P C Mt. Pleasant
Farmerville, Louisiana Hope, Arkansas Pittsburg, Texas (3) Pittsburg P C Farmerville
C Douglas
D Arlington
Gainesville, Georgia Las Piedras, Puerto Rico Querétaro, Mexico (5) P Bossier City D Jackson
P C Dallas
C Natchitoches
El Paso C Enterprise
D
Guntersville, Alabama Live Oak, Florida Ranburne, Alabama P C Nacogdoches
P Waco
C Live Oak
C Lufkin
Live Oak, Florida Many, Louisiana Russellville, Alabama
Los Cues, Mexico Mayfield, Kentucky Saltillo, Mexico
Houston
D
Lufkin, Texas Moorefield, West Virginia San Luis Potosí, Mexico San Antonio
D
Plant City
D

Marshville, North Carolina Mt. Pleasant, Texas Siler City, North Carolina
Pompano Beach
D
Mayfield, Kentucky Nacogdoches, Texas Staley, North Carolina
Moorefield, West Virginia Nashville, Arkansas Sumter, South Carolina
Mt. Pleasant, Texas (2) Pittsburg, Texas Talking Rock, Georgia
Nacogdoches, Texas Querétaro, Mexico Talmo, Georgia Reynosa
D
Natchitoches, Louisiana Saltillo, Mexico Monterrey
Torreón D
D

Russellville, Alabama San Luis Potosí, Mexico
Distribution Centers
San Luis Potosí, Mexico Staley, North Carolina
Aguascalientes, Mexico Aibonito
Ciudad Victoria DC
D
Sanford, North Carolina Sumter, South Carolina
Aibonito, Puerto Rico
Siler City, North Carolina Teneha, Texas D C San Luis Potosí
Arlington, Texas Aguascalientes D Tampico
D
Sumter, South Carolina Tuscumbia, Alabama Salt Lake City, Utah
Cincinnati, Ohio
Tepeji del Rio, Mexico Waco, Georgia D Guadalajara D Querétaro
San Antonio, Texas
Ciudad Victoria, Mexico Puerto Vallarta C Los Cues
D D Poza Rica
Wingate, North Carolina San Luis Potosí, Mexico (2) D C Tepeji del Rio
Coatzacoalcos, Mexico
Tampico, Mexico Morelia D Veracruz
D
Prepared Foods Processing El Paso, Texas D Tlalnepantla
Tepeji del Rio, Mexico
Hatcheries
Boaz, Alabama Guadalajara, Mexico Coatzacoalcos
Tlalnepantla, Mexico (2) D
Bossier City, Louisiana Aibonito, Puerto Rico Houston, Texas
Torreón, Mexico
Chattanooga, Tennessee Albertville, Alabama Jackson, Mississippi
Veracruz, Mexico
Dallas, Texas Athens, Georgia Monterrey, Mexico
Elberton, Georgia Atkins, Arkansas Morelia, Mexico
Farmerville, Louisiana Batesville, Arkansas Mt. Pleasant, Texas Administration and Sales
Franconia, Pennsylvania Bowdon, Georgia Nashville, Tennessee Aibonito, Puerto Rico
Moorefield, West Virginia Broadway, Virginia Oskaloosa, Iowa Atlanta, Georgia
Mt. Pleasant, Texas Calhoun, Georgia Phoenix, Arizona Bentonville, Arkansas
Nacogdoches, Texas Canton, Georgia Plant City, Florida Dallas, Texas
Sumter, South Carolina Center, Texas Pompano Beach, Florida Mexico City, Mexico
Waco, Texas Choudrant, Louisiana Poza Rica, Mexico Pittsburg, Texas
Cohutta, Georgia Puerto Vallarta, Mexico Querétaro, Mexico
Commerce, Georgia Querétaro, Mexico Rockwall, Texas
Turkey Processing - Fresh
Concord, North Carolina Reynosa, Mexico Timberville, Virginia
New Oxford, Pennsylvania

Dear Fellow Shareholders:

Fscal 2007 proved to be a year of sgnfcant change for Plgrm’s Prde Corporaton as we completed
the largest acquston n our 61-year hstory and returned to proftablty on the strength of hgher
market prcng, strong export demand, cost savngs and growth n our consumer retal busness.

Our $1.2 bllon purchase of Gold Kst Inc. n December 2006 created the world’s largest chcken company.
Whle the ntegraton of Gold Kst has commanded a great deal of tme, attenton and resources over
the past year, we beleve the acquston has postoned us for stronger growth n the years ahead by
broadenng our geographc reach, expandng our customer base and strengthenng our product lne.

By all accounts, the process of combnng Plgrm’s Prde and Gold Kst nto one organzaton wth a
common culture and focus on the customer has been an overwhelmng success. Thanks to the hard
work and commtment of our 55,000 employees n the Unted States, Puerto Rco and Mexco, we
trpled our orgnal synergy target and delvered $150 mllon n annualzed cost savngs three months
ahead of schedule. Whle we stll have a lot of work head of us, our employees deserve a lot of credt
for achevng so much so quckly.

Those cost savngs wll be mportant n the year ahead, as hgher feed-ngredent and fuel costs pose
a sgnfcant challenge to our busness n 2008. Our costs for corn, soybean meal and other feed
ngredents rose more than $600 mllon n fscal 2007, and current projectons for 2008 call for further
ncreases. Growng demand for corn-based ethanol s fuelng much of these.

Fortunately, we were able to overcome much of those cost ncreases n 2007 through hgher market
prcng brought about by producton cutbacks by Plgrm’s Prde and several other poultry companes.
Those cutbacks helped ncrease market prcng last wnter and nto the sprng, a tme when demand
s seasonally low and prces are typcally weak. That strong prcng held nto the summer months,
helpng Plgrm’s Prde return to proftablty n the second half of the year and, for the full 2007 fscal
year, earn $47.0 mllon, or $0.71 a share, on record sales of $7.6 bllon.

There were several notable achevements n fscal 2007:

Our consumer retal segment contnued to post good growth as a result of ncreased penetraton of

supermarket meat and del cases and our growng role as a category management partner. For example,
we have seen strong demand for a number of our wng products, ncludng our consumer-preferred
Wng Dngs and Wng Zngs products, and we’re ganng busness wth customers as a result.

Plgrm’s Prde’s foodservce busness turned n another good year as a result of growth n our

Top 10 accounts and contnued progress n school foodservce accounts, health care, mltary and
other markets.

We were successful n makng mprovements to the acqured Gold Kst product mx, upgradng

some of the commodty-type meat nto hgher-margn, value-added products. Ths s a key part
of our growth strategy and an area n whch we have enjoyed good success over the years.

We realgned the reportng structure wthn the operatons group so that we can delver mproved

servce to our customers and operate more effcently.

In addton, our export busness contnues to grow, accountng for approxmately 10% of our U.S.
chcken sales. Chna emerged as an aggressve buyer of U.S. chcken and a number of smaller countres,
ncludng Cuba, ncreased ther purchases. Plgrm’s Prde has a large and growng presence n many
of these markets. And n 2007, our Mexco operatons returned to proftablty as a result of mproved
prcng.

We also faced our share of challenges over the past year. Despte favorable ndustry fundamentals and
our return to proftablty n 2007, our net earnngs for the year came n below our own expectatons.
Ths was mostly ted to operatonal neffcences, labor shortages and hgher fuel costs whch resulted
n hgher producton and freght costs. Automaton wll be a key focus of our captal nvestment program
n fscal 2008. We beleve ths nvestment, whch ncludes labor-reducng technology, wll enable us to
move more products through our plants effcently and help allevate some of the challenges we faced
n 2007 from a tght labor market and hgher nput costs.

One thng s clear: we smply must fnd ways to operate more effcently, as nearly all of our costs are rsng.
At Plgrm’s Prde, we are always huntng for ways to run our busness more cost-effectvely. In addton
to our company-wde focus on process mprovement teams snce 1992, we have cross-organzatonal
and synergy teams scourng every ste for new ways to take costs out of our busness. These teams have
drlled down nto every aspect of our operatons, from sales and logstcs to processng and renderng.

There s no queston that we are facng a tough – and volatle – operatng envronment. Lookng ahead,
we beleve that managng our busness n ths envronment of expected volatlty s the greatest challenge
facng us today, but one that we thnk s certanly achevable. It wll requre several actons.

Frst, we must be very cautous n expandng the chcken supply. At Plgrm’s Prde, we have to be
prudent n our decsons to ensure that we are able to manage our nput costs. Second, we must take
advantage of every opportunty to effectvely manage our nput costs aganst our longer-term contracts.
Thrd, we must keep open the lnes of communcaton wth our customers so they understand the
challenges we face n such a volatle envronment and the mportance of workng together to address
these ssues. And fnally, we must stay focused on drvng out costs and fndng ways to serve our
customers better so that we can poston our company for sustaned, proftable growth n the future and
create new value for our shareholders.

We apprecate your contnued support and commtment as we work toward achevng our vson of
beng a “world-class food company…better than the best” and n fulfllng our msson of provdng
“outstandng customer satsfacton…every day!”

Sncerely,

Lonne “Bo” Plgrm Lonne Ken Plgrm
Senor Charman Charman

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934
For the fiscal year ended September 29, 2007
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commsson Fle number 1-9273

PILGRIM’S PRIDE CORPORATION
(Exact name of regstrant as specfed n ts charter)

Delaware 75-1285071
(State or other jursdcton of (I.R.S. Employer Identfcaton No.)
ncorporaton or organzaton)

4845 US Hwy 271 North
Pttsburg, Texas 75686-0093
(Address of prncpal executve offces) (Zp code)

Regstrant’s telephone number, ncludng area code: (903) 434-1000

Securtes regstered pursuant to Secton 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, Par Value $0.01 New York Stock Exchange
Securtes regstered pursuant to Secton 12(g) of the Act: None

September 29, 2007
Indcate by check mark f the regstrant s a well-known seasoned ssuer, as defned n Rule 405 of the
Securtes Act. Yes  No 

Indcate by check mark f the regstrant s not requred to fle reports pursuant to Secton 13 or Secton
15(d) of the Exchange Act. Yes  No 

Indcate by check mark whether the Regstrant (1) has fled all reports requred to be fled by Secton
13 or 15(d) of the Securtes Exchange Act of 1934 durng the precedng 12 months (or for such shorter
perod that the Regstrant was requred to fle such reports), and (2) has been subject to such flng
requrements for the past 90 days. Yes  No 

Indcate by check mark f dsclosure of delnquent flers pursuant to Item 405 of Regulaton S-K s not
contaned heren, and wll not be contaned, to the best of Regstrant’s knowledge, n defntve proxy
or nformaton statements ncorporated by reference n Part III of ths Form 10-K or any amendment
to ths Form 10-K. 

Indcate by check mark whether the regstrant s a large accelerated fler, an accelerated fler, or a non-
accelerated fler. See defnton of “accelerated fler” and “large accelerated fler” n Rule 12B-2 of
the Exchange Act.

Large Accelerated Fler  Accelerated Fler  Non-accelerated Fler 

Indcate by check mark whether the regstrant s a shell company (as defned n Rule 12b-2 of the
Exchange Act). Yes  No 

The aggregate market value of the Regstrant’s Common Stock, $0.01 par value, held by non-afflates
of the Regstrant as of March 31, 2007, was $1,340,874,524. For purposes of the foregong calculaton
only, all drectors, executve offcers and 5% benefcal owners have been deemed afflates.

Number of shares of the Regstrant’s Common Stock outstandng as of November 13, 2007, was
66,555,733.

DOCUMENTS INCORPORATED BY REFERENCE

Portons of the Regstrant’s proxy statement for the annual meetng of stockholders to be held
January 30, 2008 are ncorporated by reference nto Part III.

2

September 29, 2007
FORM 10-K
TABLE OF CONTENTS

PART I Page
Item 1. Busness 4
Item 1A. Rsk Factors 21
Item 1B. Unresolved Staff Comments 30
Item 2. Propertes 30
Item 3. Legal Proceedngs 32
Item 4. Submsson of Matters to a Vote of Securty Holders 34

PART II
Item 5. Market for Regstrant’s Common Equty, Related Stockholder Matters and Issuer
Purchases of Equty Securtes 35
Item 6. Selected Fnancal Data 40
Item 7. Management’s Dscusson and Analyss of Fnancal Condton and Results
of Operatons 43
Item 7A. Quanttatve and Qualtatve Dsclosures about Market Rsk 62
Item 8. Fnancal Statements and Supplementary Data (see Index to Fnancal Statements and
Schedules below) 63
Item 9. Changes n and Dsagreements wth Accountants on Accountng and Fnancal
Dsclosure 63
Item 9A. Controls and Procedures 63
Item 9B. Other Informaton 68

PART III
Item 10. Drectors and Executve Offcers and Corporate Governance 68
Item 11. Executve Compensaton 68
Item 12. Securty Ownershp of Certan Benefcal Owners and Management and Related
Stockholder Matters 68
Item 13. Certan Relatonshps and Related Transactons, and Drector Independence 68
Item 14. Prncpal Accountng Fees and Servces 69

PART IV
Item 15. Exhbts and Fnancal Statement Schedules 69
Sgnatures 76

INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Report of Independent Regstered Publc Accountng Frm 79
Consoldated Balance Sheets as of September 29, 2007 and September 30, 2006 80
Consoldated Statements of Operatons for each of the three years ended
September 29, 2007 81
Consoldated Statements of Stockholders’ Equty for each of the three years ended
Consoldated Statements of Cash Flows for each of the three years ended
Notes to Consoldated Fnancal Statements 84
Schedule II - Valuaton and Qualfyng Accounts for each of the three years ended

3

September 29, 2007
PART I

Item 1. Business

(a) General Development of Business

Overview

The Company, whch was ncorporated n Texas n 1968 and rencorporated n Delaware n 1986, s
the successor to a partnershp founded n 1946 as a retal feed store. Over the years, the Company grew
through both nternal growth and varous acqustons of farmng operatons and poultry processors
ncludng the sgnfcant acqustons n fscal 2004 and 2007 dscussed below. We are the world’s
largest chcken company and have one of the best known brand names n the chcken ndustry. In
the U.S., we produce both prepared and fresh chcken and fresh turkey; whle n Mexco and Puerto
Rco, we exclusvely produce fresh chcken. Through vertcal ntegraton, we control the breedng,
hatchng and growng of chckens. We also control the processng, preparaton, packagng and sale
of our product lnes, whch we beleve has made us one of the hghest-qualty, lowest-cost producers
of chcken n North Amerca. We have consstently appled a long-term busness strategy of focusng
our growth efforts on the hgher-value, hgher-margn prepared foods products and have become a
recognzed ndustry leader n ths market segment. Accordngly, our sales efforts have tradtonally
been targeted to the foodservce ndustry, prncpally chan restaurants and food processors, and have
more recently been targeted to retalers seekng value-added products. We have contnually made
nvestments to ensure our prepared foods capabltes reman state-of-the-art and have complemented
these nvestments wth a substantal and successful research and development effort. In fscal 2007, we
sold 7.7 bllon pounds of dressed chcken and 151.7 mllon pounds of dressed turkey and generated
net sales of $7.6 bllon. In fscal 2007, our U.S. operatons, ncludng Puerto Rco, accounted for
93.3% of our net sales, wth the remanng 6.7% arsng from our Mexco operatons.

Recent Business Acquisition Activities

On December 27, 2006, we acqured a majorty of the outstandng common stock of Gold Kst
Inc. (“Gold Kst”) through a tender offer. We subsequently acqured all remanng Gold Kst shares
and, on January 9, 2007, Gold Kst became our wholly owned subsdary. We sometmes refer to ths
acquston as the “fscal 2007 acquston.” For fnancal reportng purposes, we have not ncluded the
operatng results and cash flows of Gold Kst n our consoldated fnancal statements for the perod
from December 27, 2006 through December 30, 2006. The operatng results and cash flows of Gold
Kst from December 27, 2006 through December 30, 2006 were not materal. Gold Kst operated a
fully-ntegrated chcken producton busness that ncluded lve producton, processng, marketng and
dstrbuton. Ths acquston has postoned us as the world’s leadng chcken producer, and that poston
has provded us wth enhanced abltes to compete more effcently and provde even better customer
servce, expand our geographc reach and customer base, further pursue value-added and prepared
foods opportuntes, and offer long-term growth opportuntes for our stockholders, employees and
growers. We are also better postoned to compete n the ndustry both nternatonally and n the U.S.
as consoldatons occur.

4

September 29, 2007
On November 23, 2003, we completed the purchase of all the outstandng stock of the corporatons
represented as the ConAgra Foods, Inc. chcken dvson (“ConAgra chcken dvson”). We sometmes
refer to ths acquston as the “fscal 2004 acquston.” The acqured busness has been ncluded n our
results of operatons snce the date of the acquston. The acquston provded us wth addtonal lnes
of specalty prepared chcken products, well-known brands, well-establshed dstrbutor relatonshps
and Southeastern U.S. processng facltes. The acquston also ncluded the largest dstrbutor of
chcken products n Puerto Rco.

Strategy

Our objectves are (1) to ncrease sales, proft margns and earnngs and (2) to outpace the growth
of, and mantan our leadershp poston n, the chcken ndustry. To acheve these goals, we plan to
contnue pursung the followng strateges:

Capitalize on significant scale with leading industry position and brand recognition. We are
-
the largest producer of chcken products n the U.S. We estmate that our U.S. market share, based
on the total annual chcken producton n the U.S., s approxmately 25%, whch s approxmately
20% hgher than the second largest compettor n the chcken ndustry. The complementary ft
of markets, dstrbutor relatonshps and geographc locatons are a few of the many benefts we
realzed from our fscal 2004 and 2007 acqustons prevously dscussed. We beleve the acqured
busnesses’ establshed relatonshps wth broad-lne natonal dstrbutors and retalers have enabled
us to expand our customer base and provde natonwde dstrbuton capabltes for all of our
product lnes. As a result, we beleve we are one of only two U.S. chcken producers that can supply
the growng demand for a broad range of prce compettve standard and specalzed products wth
well-known brand names on a natonwde bass from a sngle source suppler.

Capitalize on attractive U.S. prepared foods market. We focus our U.S. growth ntatves on
-
sales of prepared foods to the foodservce and value-added retal markets because they contnue to
be two of the fastest growng and most proftable segments n the poultry ndustry. Products sold
to these market segments requre further processng, whch enables us to charge a premum for
our products, reducng the mpact of feed ngredent costs on our proftablty and mprovng and
stablzng our proft margns. Feed ngredent costs typcally decrease from approxmately 33%-
49% of total producton cost for fresh chcken products to approxmately 17%-24% for prepared
chcken products. Due to ncreased demand from our customers and our fscal 2004 and 2007
acqustons, our sales of prepared chcken products grew from $921.1 mllon n fscal 2003 to
$2,492.4 mllon n fscal 2007, a compounded annual growth rate of 28.3%. Prepared foods sales
represented 39.5% of our total U.S. chcken revenues n fscal 2007, whch we beleve provdes
us wth a sgnfcant compettve advantage and reduces our exposure to feed prce fluctuatons.
The addton of well-known brands, ncludng Perce® and Easy-Entree®, from our fscal 2004

acquston sgnfcantly expanded our already szeable prepared foods chcken offerngs. Smlarly,
our acquston of hghly customzed cooked chcken products, ncludng breaded cutlets, szzle
strps and Wng-Dngs®, for restaurants and specalty foodservce customers from ths acquston
complemented our exstng lnes of pre-cooked breast fllets, tenderlons, burgers, nuggets, salads
and other prepared products for nsttutonal foodservce, fast-food and retal customers.

5

September 29, 2007
Emphasize customer-driven research and technology. We have a long-standng reputaton for
-
customer-drven research and development n desgnng new products and mplementng advanced
processng technology. Ths enables us to better meet our customers’ changng needs for product
nnovaton, consstent qualty and cost effcency. In partcular, customer-drven research and
development s ntegral to our growth strategy for the prepared foods market n whch customers
contnue to place greater mportance on value-added servces. Our research and development
personnel often work drectly wth customers n developng products for them, whch we beleve
helps promote long-term relatonshps.

Enhance U.S. fresh chicken profitability through value-added, branded products. Our U.S.
-
fresh chcken sales accounted for $3,255.7 mllon, or 51.4%, of our U.S. chcken sales for fscal
2007. In addton to mantanng the sales of tradtonal fresh chcken products, our strategy
s to shft the mx of our U.S. fresh chcken products by contnung to ncrease sales of hgher
margn, faster growng products, such as fxed weght packaged products and marnated chcken
and chcken parts, and to contnually shft portons of ths product mx nto the hgher value and
margn prepared chcken products. Much of our fresh chcken products are sold under the Plgrm’s
Prde® brand name, whch s a well-known brand n the chcken ndustry.

Improve operating efficiencies and increase capacity on a cost-effective basis. As producton
-
and sales grow, we contnue to focus on mprovng operatng effcences by nvestng n state-of-
the-art technology and processes, tranng and our total qualty management program. Specfc
ntatves nclude:

- standardzng lowest-cost producton processes across our varous facltes;

- centralzng purchasng and other shared servces; and

- standardzng and upgradng technology where approprate.

In addton, we have a proven hstory of ncreasng capacty whle mprovng operatng effcences
at acqured propertes n both the U.S. and Mexco. As a result, accordng to ndustry data, snce
1993 we have consstently been one of the lower-cost producers of chcken.

Continue to seek strategic acquisitions. We have pursued opportuntes to expand through
-
acqustons n the past. We expect to contnue to pursue acquston opportuntes n the future that
would complement our exstng busnesses, broaden our producton capabltes and/or mprove
our operatng effcences.

Capitalize on export opportunities. We ntend to contnue to focus on nternatonal opportuntes
-
to complement our U.S. chcken operatons and captalze on attractve export markets. Accordng
to the USDA, the export of U.S. chcken products ncreased 9.7% from 2002 through 2006. We
beleve U.S. chcken exports wll contnue to grow as worldwde demand ncreases for hgh-grade,
low-cost meat proten sources. Accordng to USDA data, the export market for chcken s expected
to grow at a compounded annual growth rate of 1.8% from 2006 to 2011. Hstorcally, we have
targeted nternatonal markets to generate addtonal demand for our dark chcken meat, whch s a

6

September 29, 2007
natural by-product of our U.S. operatons gven our concentraton on prepared foods products and
the U.S. customers’ general preference for whte chcken meat. As part of ths ntatve, we have
created a sgnfcant nternatonal dstrbuton network nto several markets, ncludng Mexco,
whch we now utlze not only for dark chcken meat dstrbuton, but also for varous hgher margn
prepared foods and other poultry products. We employ both a drect nternatonal sales force and
export brokers. Our key nternatonal markets nclude Eastern Europe, ncludng Russa; the Far
East, ncludng Chna; and Mexco. We beleve that we have substantal opportuntes to expand our
sales to these markets by captalzng on drect nternatonal dstrbuton channels supplemented
by our exstng export broker relatonshps. Our export sales accounted for approxmately 10.1%
and 21.1% of our U.S. chcken sales and pounds, respectvely, for fscal 2007.

(b) Financial Information About Segments

We operate n three reportable busness segments as (1) a producer and seller of chcken products,
(2) a producer and seller of turkey products and (3) a seller of other products. See a dscusson of our
busness segments n Item 7. “Management’s Dscusson and Analyss of Fnancal Condton and
Results of Operatons.”

(c) Narrative Description of Business

Products and Markets

Our chcken products consst prmarly of:

(1) Prepared chcken products, whch are products such as porton-controlled breast fllets,
tenderlons and strps, delcatessen products, salads, formed nuggets and pattes and bone-n
chcken parts. These products are sold ether refrgerated or frozen and may be fully cooked,
partally cooked or raw. In addton, these products are breaded or non-breaded and ether pre-
marnated or non-marnated.

(2) Fresh chcken, whch s refrgerated (non-frozen) whole or cut-up chcken sold to the foodservce
ndustry ether pre-marnated or non-marnated. Fresh chcken also ncludes prepackaged case-
ready chcken, whch ncludes varous combnatons of freshly refrgerated, whole chckens and
chcken parts n trays, bags or other consumer packs labeled and prced ready for the retal grocer’s
fresh meat counter.

(3) Export and other chcken products, whch are prmarly parts and whole chcken, ether
refrgerated or frozen for U.S. export or domestc use, and chcken prepared foods products for
U.S. export.

Our turkey products consst prmarly of fresh and frozen whole turkeys.

7

September 29, 2007
Our chcken and turkey products are sold prmarly to:

(1) Foodservce customers, whch are customers such as chan restaurants, food processors,
foodservce dstrbutors and certan other nsttutons. We sell products to our foodservce
customers rangng from porton-controlled refrgerated poultry parts to fully-cooked and frozen,
breaded or non-breaded poultry parts or formed products.

(2) Retal customers, whch are customers such as grocery store chans, wholesale clubs and other
retal dstrbutors. We sell to our retal customers branded, pre-packaged, cut-up and whole poultry,
and fresh refrgerated or frozen whole poultry and poultry parts n trays, bags or other consumer
packs.

(3) Export and other product customers, who purchase chcken products for export to Eastern
Europe, ncludng Russa; the Far East, ncludng Chna; Mexco; and other world markets. Our
export and other chcken products, wth the excepton of our exported prepared foods products,
consst of whole chckens and chcken parts sold prmarly n bulk, non-branded form, ether
refrgerated to dstrbutors n the U.S. or frozen for dstrbuton to export markets.

Our other products consst of:

(1) Other types of meat along wth varous other staples purchased and sold by our dstrbuton
centers as a convenence to our chcken customers who purchase through the dstrbuton centers.

(2) The producton and sale of table eggs, commercal feeds and related tems, lve hogs and
protens.

The followng table sets forth, for the perods begnnng wth fscal 2003, net sales attrbutable
to each of our prmary product lnes and markets served wth those products. Consstent wth our
long-term strategy, we emphaszed our U.S. growth ntatves on sales of prepared foods products,
prmarly to the foodservce market. Ths product and market segment has experenced, and we beleve
wll contnue to experence, greater growth than fresh chcken products. We based the table on our
nternal sales reports and ther classfcaton of product types and customers.

8

September 29, 2007

Fiscal Year Ended
(a)
Oct. 2, 2004(a)
Sept. 29, 2007 Sept. 30, 2006 Oct. 1, 2005 Sept. 27, 2003
(52 weeks) (52 weeks) (52 weeks) (53 weeks) (52 weeks)
U.S. Chicken Sales: (In thousands)
Prepared Foods:
Foodservce $ 1,897,643 $ 1,567,297 $ 1,622,901 $ 1,647,904 $ 731,331
Retal 511,470 308,486 283,392 213,775 163,018
Total Prepared Foods 2,409,113 1,875,783 1,906,293 1,861,679 894,349

Fresh Chcken:
Foodservce 2,280,057 1,388,451 1,509,189 1,328,883 474,251
Retal 975,659 496,560 612,081 653,798 257,911
Total Fresh Chcken 3,255,716 1,885,011 2,121,270 1,982,681 732,162

Export and Other:
Export:
Prepared Foods 83,317 64,338 59,473 34,735 26,714
Chcken 559,429 257,823 303,150 212,611 85,087
Total Export(b) 642,746 322,161 362,623 247,346 111,801
Other Chcken By-Products 20,779 15,448 21,083 (b) (b)
Total Export and Other 663,525 337,609 383,706 247,346 111,801
Total U.S. Chcken 6,328,354 4,098,403 4,411,269 4,091,706 1,738,312

Mexico Chicken Sales: 488,466 418,745 403,353 362,442 349,305
Total Chcken Sales 6,816,820 4,517,148 4,814,622 4,454,148 2,087,617

U.S. Turkey Sales:
Foodservce 14,025 30,269 73,908 120,676 138,405
Retal 104,239 96,968 125,741 154,289 154,552
118,264 127,237 199,649 274,965 292,957
Export and Other(b) 4,100 3,664 5,189 11,287 12,721
Total U.S. Turkey Sales 122,364 130,901 204,838 286,252 305,678

Other Products:
Unted States 638,738 570,510 626,056 600,091 207,284
Mexco 20,677 17,006 20,759 23,232 18,766
Total Other Products 659,415 587,516 646,815 623,323 226,050

Total Net Sales $ 7,598,599 $ 5,235,565 $ 5,666,275 $ 5,363,723 $ 2,619,345

Total Chcken Prepared Foods $ 2,492,430 $ 1,940,121 $ 1,965,766 $ 1,896,414 $ 921,063

(a) The fscal 2007 acquston on December 27, 2006 and fscal 2004 acquston on November 23, 2003 have been
accounted for as purchases. For fnancal reportng purposes, we have not ncluded the operatng results and cash
flows of the fscal 2007 acquston n our consoldated fnancal statements for the perod from December 27, 2006
through December 30, 2006. The operatng results and cash flows of the fscal 2007 acquston from December 27,
2006 through December 30, 2006 were not materal. The results of operatons for the fscal 2004 acquston have
been ncluded n our consoldated results of operatons snce the acquston date.

9

September 29, 2007
(b) The Export and Other category hstorcally ncluded the sales of certan chcken by-products sold n nternatonal
markets, as well as the export of chcken and turkey products. Pror to fscal 2005, by-product sales were not
specfcally dentfable from the Export and Other category. Accordngly, a detal breakout s not avalable pror to
such tme; however, the Company beleves that the relatve splt between these categores as shown n fscal 2005
would not be dssmlar n the pror fscal perods. Export tems nclude certan poultry parts that have greater
value n some overseas markets than n the U.S.

The followng table sets forth, begnnng wth fscal 2003, the percentage of net U.S. chcken and
turkey sales attrbutable to each of our prmary product lnes and the markets servced wth those
products. We based the table and related dscusson on our nternal sales reports and ther classfcaton
of product types and customers.

Fiscal Year Ended
(a)
Oct. 2, 2004(a)
Sept. 29, 2007 Sept. 30, 2006 Oct. 1, 2005 Sept. 27, 2003
U.S. Chicken Sales:
Prepared Foods:
Foodservce 30.1 % 38.2 % 36.8 % 40.3 % 42.1 %
Retal 8.1 % 7.5 % 6.4 % 5.2 % 9.4 %
Total Prepared Foods 38.2 % 45.7 % 43.2 % 45.5 % 51.5 %

Fresh Chcken:
Foodservce 36.0 % 33.9 % 34.2 % 32.5 % 27.3 %
Retal 15.4 % 12.1 % 13.9 % 16.0 % 14.8 %
Total Fresh Chcken 51.4 % 46.0 % 48.1 % 48.5 % 42.1 %

Export and Other:
Export:
Prepared Foods 1.3 % 1.6 % 1.3 % 0.8 % 1.5 %
Chcken 8.8 % 6.3 % 6.9 % 5.2 % 4.9 %
Total Export(b) 10.1 % 7.9 % 8.2 % 6.0 % 6.4 %
Other Chcken By-Products 0.3 % 0.4 % 0.5 % (b) % (b) %
Total Export and Other 10.4 % 8.3 % 8.7 % 6.0 % 6.4 %
Total U.S. Chcken 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

Total Chcken Prepared Foods as
a percentage of U.S. Chcken 39.5 % 47.3 % 44.5 % 46.3 % 53.0 %

U.S. Turkey Sales:
Foodservce 11.4 % 23.1 % 36.0 % 42.1 % 45.3 %
Retal 85.2 % 74.1 % 61.4 % 53.9 % 50.5 %
96.6 % 97.2 % 97.4 % 96.0 % 95.8 %
Export and Other(b) 3.4 % 2.8 % 2.6 % 4.0 % 4.2 %
Total U.S. Turkey 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

(a) The fscal 2007 acquston on December 27, 2006 and fscal 2004 acquston on November 23, 2003 have been
accounted for as purchases. For fnancal reportng purposes, we have not ncluded the operatng results and
cash flows of the fscal 2007 acquston n our consoldated fnancal statements for the perod from December
27, 2006 through December 30, 2006. The operatng results and cash flows of the fscal 2007 acquston from
December 27, 2006 through December 30, 2006 were not materal. The results of operatons for the fscal 2004
acquston have been ncluded n our consoldated results of operatons snce the acquston date.

10

September 29, 2007
(b) The Export and Other category hstorcally ncluded the sales of certan chcken by-products sold n nternatonal
markets as well as the export of chcken and turkey products. Pror to fscal 2005, by-product sales were not
specfcally dentfable from the Export and Other category. Accordngly, a detal breakout s not avalable pror to
such tme; however, the Company beleves that the relatve splt between these categores as shown n fscal 2005
would not be dssmlar n the pror fscal perods. Export tems nclude certan poultry parts that have greater
value n some overseas markets than n the U.S.

UNITED STATES

Product Types

Chicken Products

Prepared Foods Overview. Durng fscal 2007, $2,409.1 mllon of our U.S. chcken sales were n
prepared foods products to foodservce customers and retal dstrbutors, as compared to $894.3 mllon
n fscal 2003. These numbers reflect the strategc focus for our growth and our fscal 2004 and 2007
acqustons. The market for prepared chcken products has experenced, and we beleve wll contnue
to experence, greater growth, hgher average sales prces and hgher margns than fresh chcken
products. Also, the producton and sale n the U.S. of prepared foods products reduce the mpact of the
costs of feed ngredents on our proftablty. Feed ngredent costs are the sngle largest component
of our total U.S. cost of sales, representng approxmately 35.8% of our U.S. cost of sales for fscal
2007. The producton of feed ngredents s postvely or negatvely affected prmarly by weather
patterns throughout the world, the global level of supply nventores, demand for feed ngredents and
the agrcultural polces of the U.S. and foregn governments. As further processng s performed, feed
ngredent costs become a decreasng percentage of a product’s total producton cost, thereby reducng
ther mpact on our proftablty. Products sold n ths form enable us to charge a premum, reduce the
mpact of feed ngredent costs on our proftablty and mprove and stablze our proft margns.

We establsh prces for our prepared chcken products based prmarly upon perceved value to the
customer, producton costs and prces of competng products. The majorty of these products are sold
pursuant to agreements wth varyng terms that ether set a fxed prce for the products or set a prce
accordng to formulas based on an underlyng commodty market, subject n many cases to mnmum
and maxmum prces.

Fresh Chicken Overview. Our fresh chcken busness s an mportant component of our sales and
accounted for $3,255.7 mllon, or 51.4%, of our total U.S. chcken sales for fscal 2007. In addton to
mantanng sales of mature, tradtonal fresh chcken products, our strategy s to shft the mx of our
U.S. fresh chcken products by contnung to ncrease sales of hgher margn, faster growng products,
such as marnated chcken and chcken parts, and to contnually shft portons of ths product mx nto
the hgher value and margn prepared foods category.

Most fresh chcken products are sold to establshed customers, based upon certan weekly or
monthly market prces reported by the USDA and other publc prce reportng servces, plus a markup,
whch s dependent upon the customer’s locaton, volume, product specfcatons and other factors. We
beleve our practces wth respect to sales of fresh chcken are generally consstent wth those of our

11

September 29, 2007
compettors. The majorty of these products are sold pursuant to agreements wth varyng terms that
ether set a fxed prce for the products or set a prce accordng to formulas based on an underlyng
commodty market, subject n many cases to mnmum and maxmum prces.

Export and Other Chicken Products Overview. Our export and other products consst of whole
chckens and chcken parts sold prmarly n bulk, non-branded form, ether refrgerated to dstrbutors
n the U.S. or frozen for dstrbuton to export markets, and branded and non-branded prepared foods
products for dstrbuton to export markets. In fscal 2007, approxmately $663.5 mllon, or 10.4%, of
our total U.S. chcken sales were attrbutable to U.S. chcken export and other products. These exports
and other products, other than the prepared foods products, have hstorcally been characterzed by
lower prces and greater prce volatlty than our more value-added product lnes.

Turkey Products

Turkey Overview. Our turkey busness accounted for $122.4 mllon of sales n fscal 2007. As s
typcal for the ndustry, a sgnfcant porton of the sales of fresh and frozen whole turkeys s seasonal
n nature, wth the heght of sales occurrng durng the Thanksgvng and Chrstmas holdays.

Most turkey products are sold to establshed customers pursuant to agreements wth varyng terms
that ether set a fxed prce or are subject to a market drven formula wth some agreements based upon
market prces reported by the USDA and other publc prce reportng servces, plus a markup, subject
n many cases to mnmum and maxmum prces. Ths s dependent upon the customer’s locaton,
volume, product specfcatons and other factors. We beleve our practces wth respect to sales of fresh
turkey are generally consstent wth those of our compettors wth smlar programs.

Markets for Chicken Products

Foodservice. The foodservce market prncpally conssts of chan restaurants, food processors,
broad-lne dstrbutors and certan other nsttutons located throughout the contnental U.S. We supply
chcken products rangng from porton-controlled refrgerated chcken parts to fully cooked and frozen,
breaded or non-breaded chcken parts or formed products.

We beleve the Company s well-postoned to be the prmary or secondary suppler to many natonal
and nternatonal chan restaurants who requre multple supplers of chcken products. Addtonally,
we beleve we are well suted to be the sole suppler for many regonal chan restaurants. Regonal
chan restaurants often offer better margn opportuntes and a growng base of busness.

We beleve we have sgnfcant compettve strengths n terms of full-lne product capabltes,
hgh-volume producton capactes, research and development expertse and extensve dstrbuton and
marketng experence relatve to smaller and non-vertcally ntegrated producers. Whle the overall
chcken market has grown consstently, we beleve the majorty of ths growth n recent years has
been n the foodservce market. Accordng to the Natonal Chcken Councl, from 2002 through 2006,
sales of chcken products to the foodservce market grew at a compounded annual growth rate of
approxmately 7.9%, versus 4.9% growth for the chcken ndustry overall. Foodservce growth s
antcpated to contnue as food-away-from-home expendtures contnue to outpace overall ndustry

12

September 29, 2007
rates. Accordng to Technomc Informaton Servces, food-away-from-home expendtures grew at a
compounded annual growth rate of approxmately 5.5% from 2002 through 2006 and are projected to
grow at a 4.8% compounded annual growth rate from 2007 through 2012. Due to nternal growth and
our fscal 2004 and 2007 acqustons, our sales to the foodservce market from fscal 2003 through
fscal 2007 grew at a compounded annual growth rate of 36.4% and represented 66.1% of the net sales
of our U.S. chcken operatons n fscal 2007.

Foodservice – Prepared Foods. Our prepared chcken products sales to the foodservce market
were $1,897.6 mllon n fscal 2007 compared to $731.3 mllon n fscal 2003, a compounded annual
growth rate of approxmately 26.9%. In addton to the sgnfcant ncrease n sales created by the
fscal 2004 and 2007 acqustons, we attrbute ths growth n sales of prepared chcken products to the
foodservce market to a number of factors:

First, there has been sgnfcant growth n the number of foodservce operators offerng chcken on
ther menus and n the number of chcken tems offered.

Second, foodservce operators are ncreasngly purchasng prepared chcken products, whch allow
them to reduce labor costs whle provdng greater product consstency, qualty and varety across
all restaurant locatons.

Third, there s a strong need among larger foodservce companes for a sngle-source suppler n
the prepared chcken products market. A vable suppler must be able to ensure supply, demonstrate
nnovaton and new product development and provde compettve prcng. We have been successful
n our objectve of becomng a suppler of choce by beng the prmary or secondary prepared
chcken products suppler to many large foodservce companes because:

- We are vertcally ntegrated, gvng us control over our supply of chcken and chcken parts;

- Our further processng facltes, wth a wde range of capabltes, are partcularly well suted
to the hgh-volume producton as well as low-volume custom producton runs necessary to meet
both the capacty and qualty requrements of the foodservce market; and

- We have establshed a reputaton for dependable qualty, hghly responsve servce and excellent
techncal support.

Fourth, as a result of the experence and reputaton developed wth larger customers, we have
ncreasngly become the prncpal suppler to md-szed foodservce organzatons.

Fifth, our n-house product development group follows a customer-drven research and development
focus desgned to develop new products to meet customers’ changng needs. Our research and
development personnel often work drectly wth nsttutonal customers n developng products for
these customers.

Sixth, we are a leader n utlzng advanced processng technology, whch enables us to better meet
our customers’ needs for product nnovaton, consstent qualty and cost effcency.

13

September 29, 2007
Foodservice – Fresh Chicken. We produce and market fresh, refrgerated chcken for sale to U.S.
quck-servce restaurant chans, delcatessens and other customers. These chckens have the gblets
removed, are usually of specfc weght ranges and are usually pre-cut to customer specfcatons.
They are often marnated to enhance value and product dfferentaton. By growng and processng to
customers’ specfcatons, we are able to assst quck-servce restaurant chans n controllng costs and
mantanng qualty and sze consstency of chcken peces sold to the consumer.

Retail. The retal market conssts prmarly of grocery store chans, wholesale clubs and other
retal dstrbutors. We concentrate our efforts n ths market on sales of branded, prepackaged cut-up
and whole chcken and chcken parts to grocery store chans and retal dstrbutors. For a number of
years, we have nvested n both trade and retal marketng desgned to establsh hgh levels of brand
name awareness and consumer preferences.

We utlze numerous marketng technques, ncludng advertsng, to develop and strengthen
trade and consumer awareness and ncrease brand loyalty for consumer products marketed under
the Plgrm’s Prde® brand. Our co-founder, Lonne “Bo” Plgrm, s the featured spokesperson n
our televson, rado and prnt advertsng, and a trademark cameo of a person wearng a Plgrm’s
hat serves as the logo on all of our prmary branded products. As a result of ths marketng strategy,
Plgrm’s Prde® s a well-known brand name n a number of markets. We beleve our efforts to acheve
and mantan brand awareness and loyalty help to provde more secure dstrbuton for our products.
We also beleve our efforts at brand awareness generate greater prce premums than would otherwse
be the case n certan markets. We also mantan an actve program to dentfy consumer preferences.
The program prmarly conssts of dscoverng and valdatng new product deas, packagng desgns
and methods through sophstcated qualtatve and quanttatve consumer research technques n key
geographc markets.

Retail – Prepared Foods. We sell retal-orented prepared chcken products prmarly to grocery
store chans located throughout the U.S. Our prepared chcken products sales to the retal market
were $511.5 mllon n fscal 2007 compared to $163.0 mllon n fscal 2003, a compounded annual
growth rate of approxmately 33.1%. We beleve that our growth n ths market segment wll contnue
as retalers concentrate on satsfyng consumer demand for more products that are quck, easy and
convenent to prepare at home.

Retail – Fresh Chicken. Our prepackaged retal products nclude varous combnatons of freshly
refrgerated, whole chckens and chcken parts n trays, bags or other consumer packs labeled and
prced ready for the retal grocer’s fresh meat counter. Our retal fresh chcken products are sold n
the mdwestern, southwestern, southeastern and western regons of the U.S. Our fresh chcken sales
to the retal market were $975.7 mllon n fscal 2007 compared to $257.9 mllon n fscal 2003, a
compounded annual growth rate of approxmately 39.5% resultng prmarly from our fscal 2004 and
2007 acqustons. We beleve the retal prepackaged fresh chcken busness wll contnue to be a large
and relatvely stable market, provdng opportuntes for product dfferentaton and regonal brand
loyalty.

14

September 29, 2007
Export and Other Chicken Products. Our export and other chcken products, wth the excepton
of our exported prepared foods products, consst of whole chckens and chcken parts sold prmarly
n bulk, non-branded form ether refrgerated to dstrbutors n the U.S. or frozen for dstrbuton to
export markets. In the U.S., prces of these products are negotated daly or weekly and are generally
related to market prces quoted by the USDA or other publc prce reportng servces. We sell U.S.-
produced chcken products for export to Eastern Europe, ncludng Russa; the Far East, ncludng
Chna; Mexco; and other world markets.

Hstorcally, we have targeted nternatonal markets to generate addtonal demand for our dark
chcken meat, whch s a natural by-product of our U.S. operatons gven our concentraton on prepared
foods products and the U.S. customers’ general preference for whte chcken meat. We have also begun
sellng prepared chcken products for export to the nternatonal dvsons of our U.S. chan restaurant
customers. We beleve that U.S. chcken exports wll contnue to grow as worldwde demand ncreases
for hgh-grade, low-cost meat proten sources. We also beleve that worldwde demand for hgher
margn prepared foods products wll ncrease over the next several years. Accordngly, we beleve
we are well postoned to captalze on such growth. Also ncluded n ths category are chcken by-
products, whch are converted nto proten products and sold prmarly to manufacturers of pet foods.

Markets for Turkey Products

Most of our turkey sales are derved from products sold to the retal market. Ths market conssts
prmarly of grocery store chans, wholesale clubs and other retal dstrbutors. We concentrate our
efforts n ths market on sales of branded, prepackaged whole turkeys to grocery store chans and retal
dstrbutors n the eastern and southwestern regons of the U.S. We beleve ths regonal marketng
focus enables us to develop consumer brand franchses and captalze on proxmty to the trade
customer n terms of lower transportaton costs, more tmely and responsve servce and enhanced
product freshness.

We utlze numerous marketng technques, ncludng advertsng, to develop and strengthen trade
and consumer awareness and ncrease brand loyalty for consumer products marketed generally under
the Plgrm’s Prde® and Plgrm’s Sgnature™ brands. We beleve our efforts to acheve and mantan
brand awareness and loyalty help to provde more secure dstrbuton for our products. We also beleve
our efforts at brand awareness generate greater prce premums than would otherwse be the case n
certan markets n the eastern regons of the U.S. We also mantan an actve program to dentfy
consumer preferences. The program prmarly conssts of testng new product deas, packagng desgns
and methods through sophstcated qualtatve and quanttatve consumer research technques n key
geographc markets.

Markets for Other Products

We have regonal dstrbuton centers located n Arzona, Florda, Iowa, Msssspp, Oho,
Tennessee, Texas and Utah that are prmarly focused on dstrbutng our own chcken products;
however, the dstrbuton centers also dstrbute certan poultry and non-poultry products purchased
from thrd partes to ndependent grocers and quck servce restaurants. Our non-chcken dstrbuton
busness s conducted as an accommodaton to our customers and to acheve greater economes of scale

15

September 29, 2007
n dstrbuton logstcs. Poultry sales from our regonal dstrbuton centers are ncluded n the chcken
and turkey sales amounts contaned n the above tables; however, all non-poultry sales amounts are
contaned n the Other Products. We beleve the store-door delvery capabltes for our own poultry
products provde a strategc servce advantage n sellng to quck servce, natonal chan restaurants.

We market fresh eggs under the Plgrm’s Prde® brand name, as well as under prvate labels, n
varous szes of cartons and flats to U.S. retal grocery and nsttutonal foodservce customers located
prmarly n Texas. We have a housng capacty for approxmately 2.1 mllon commercal egg layng
hens whch can produce approxmately 42 mllon dozen eggs annually. U.S. egg prces are determned
weekly based upon reported market prces. The U.S. egg ndustry has been consoldatng over the last
few years, wth the 25 largest producers accountng for more than 74.3% of the total number of egg
layng hens n servce durng 2007. We compete wth other U.S. egg producers prmarly on the bass
of product qualty, relablty, prce and customer servce.

We market a hgh-nutrent egg called EggsPlus™. Ths egg contans hgh levels of Omega-3 and
Omega-6 fatty acds along wth Vtamn E, makng the egg a heart-frendly product. Our marketng of
EggsPlus™ has receved natonal recognton for our progress n beng an nnovator n the “functonal
foods” category.

In addton, we produce and sell lvestock feeds at our feed mll n Mt. Pleasant, Texas and at our
farm supply store n Pttsburg, Texas to dary farmers and lvestock producers n northeastern Texas.
We engage n smlar sales actvtes at our other U.S. feed mlls.

We also have a small pork operaton that we acqured through our 2007 acquston that rases and
sells lve hogs to processors.

16

September 29, 2007
MEXICO

Background

The Mexco market represented approxmately 6.7% of our net sales n fscal 2007. We are the
second-largest producer and seller of chcken n Mexco. We beleve that we are one of the lower-cost
producers of chcken n Mexco.

Product Types

Whle the market for chcken products n Mexco s less developed than n the U.S., wth sales
attrbuted to fewer, more basc products, we have been successful n dfferentatng our products
through hgh qualty clent servce and product mprovements such as dry-ar chlled evscerated
products. The supermarket chans consder us the leaders n nnovaton for fresh products. The market
for value added products s ncreasng. Our strategy s to captalze on ths trend through our vast U.S.
experence n both products and qualty and our well-known servce.

Markets

We sell our chcken products prmarly to wholesalers, large restaurant chans, fast food accounts,
supermarket chans and drect retal dstrbuton n selected markets. We have natonal presence and
are currently present n all but two of the 32 Mexcan States, whch n total represent 99% of the
Mexcan populaton.

Foreign Operations Risks

Our foregn operatons pose specal rsks to our busness and operatons. See Item 1A. “Rsk
Factors” for a dscusson of foregn operatons rsks.

17

September 29, 2007
GENERAL

Competitive Conditions

The chcken and turkey ndustres are hghly compettve and our largest U.S. compettor has
greater fnancal and marketng resources than we do. In the U.S., Mexco and Puerto Rco, we compete
prncpally wth other vertcally ntegrated poultry companes. We are the largest producer of chcken
n the U.S. and Puerto Rco, and the second largest producer n Mexco. The second largest producer
n the U.S. s Tyson Foods, Inc. The largest producer n Mexco s Industras Bachoco SA de CV.

In general, the compettve factors n the U.S. chcken and turkey ndustres nclude prce, product
qualty, product development, brand dentfcaton, breadth of product lne and customer servce.
Compettve factors vary by major market. In the foodservce market, competton s based on consstent
qualty, product development, servce and prce. In the U.S. retal market, we beleve that product
qualty, brand awareness, customer servce and prce are the prmary bases of competton. There s
some competton wth non-vertcally ntegrated further processors n the U.S. prepared food busness.
We beleve vertcal ntegraton generally provdes sgnfcant, long-term cost and qualty advantages
over non-vertcally ntegrated further processors.

In Mexco, where product dfferentaton has tradtonally been lmted, product qualty, servce
and prce have been the most crtcal compettve factors. The North Amercan Free Trade Agreement
elmnated tarffs for chcken and chcken products sold to Mexco on January 1, 2003. However,
n July 2003, the U.S. and Mexco entered nto a safeguard agreement wth regard to mports nto
Mexco of chcken leg quarters from the U.S. Under ths agreement, a tarff rate for chcken leg
quarters of 98.8% of the sales prce was establshed. The tarff rate on mport dutes was reduced on
January 1, 2007, to 19.8%, and on January 1, 2008 the tarff rate s scheduled to be reduced to zero. As
ths tarff s reduced, we expect greater amounts of chcken to be mported nto Mexco from the U.S.,
whch could negatvely affect the proftablty of Mexcan chcken producers.

We are not a sgnfcant compettor n the dstrbuton busness as t relates to products other than
chcken. We dstrbute these products solely as a convenence to our chcken customers. The broad-lne
dstrbutors do not consder us to be a factor n those markets. The competton related to our other
products such as table eggs, feed and proten are much more regonalzed and no one compettor s
domnant.

Key Customers

Our two largest customers accounted for approxmately 18% of our net sales n fscal 2007, and our
largest customer, Wal-Mart Stores Inc., accounted for 12% of our net sales.

Regulation and Environmental Matters

The chcken and turkey ndustres are subject to government regulaton, partcularly n the
health and envronmental areas, ncludng provsons relatng to the dscharge of materals nto the
envronment, by the Centers for Dsease Control, the USDA, the Food and Drug Admnstraton
(“FDA”) and the Envronmental Protecton Agency (“EPA”) n the U.S. and by smlar governmental

18

September 29, 2007
agences n Mexco. Our chcken processng facltes n the U.S. are subject to on-ste examnaton,
nspecton and regulaton by the USDA. The FDA nspects the producton of our feed mlls n the U.S.
Our Mexcan food processng facltes and feed mlls are subject to on-ste examnaton, nspecton and
regulaton by a Mexcan governmental agency, whch performs functons smlar to those performed
by the USDA and FDA. We beleve that we are n substantal complance wth all applcable laws and
regulatons relatng to the operatons of our facltes.

We antcpate ncreased regulaton by the USDA concernng food safety, by the FDA concernng
the use of medcatons n feed and by the EPA and varous other state agences concernng dscharges
to the envronment. Although we do not antcpate any regulatons havng a materal adverse effect
upon us, a materal adverse effect may occur.

Employees and Labor Relations

As of September 29, 2007, we employed approxmately 49,800 persons n the U.S. and 5,100
persons n Mexco. Approxmately 16,350 employees at varous facltes n the U.S. are members
of collectve barganng unts. In Mexco, approxmately 2,950 employees are covered by collectve
barganng agreements. We have not experenced any work stoppage at any locaton n over fve years.
We beleve our relatons wth our employees are satsfactory. At any gven tme, we wll be n some
stage of contract negotaton wth varous collectve barganng unts.

Financial Information about Foreign Operations

The Company’s foregn operatons are n Mexco. Geographc fnancal nformaton s set forth n
Item 7. “Management’s Dscusson and Analyss of Fnancal Condton and Results of Operaton.”

Available Information; NYSE CEO Certification

The Company’s Internet webste s http://www.plgrmsprde.com. The Company makes avalable,
free of charge, through ts Internet webste, the Company’s annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, Drectors and Offcers Forms 3, 4 and 5, and
amendments to those reports, as soon as reasonably practcable after electroncally flng such materals
wth, or furnshng them to, the Securtes and Exchange Commsson. The publc may read and copy
any materals that the Company fles wth the Securtes and Exchange Commsson at ts Publc
Reference Room at 100 F Street, NE, Washngton, DC 20549 and may obtan nformaton about the
operaton of the Publc Informaton Room by callng the Securtes and Exchange Commsson at 1-
800-SEC-0330.

In addton, the Company makes avalable, through ts Internet webste, the Company’s Busness
Code of Conduct and Ethcs, Corporate Governance Gudelnes and the wrtten charter of the Audt
Commttee, each of whch s avalable n prnt to any stockholder who requests t by contactng the
Secretary of the Company at 4845 U.S. Hghway 271 North, Pttsburg, Texas 75686-0093.

As requred by the rules of the New York Stock Exchange, the Company submtted ts unqualfed
Secton 303A.12(a) Co-Prncpal Executve Offcers Certfcaton for the precedng year to the New
York Stock Exchange.

19

September 29, 2007
We ncluded the certfcatons of the Co-Prncpal Executve Offcers and the Chef Fnancal
Offcer of the Company requred by Secton 302 of the Sarbanes-Oxley Act of 2002 and related rules,
relatng to the qualty of the Company’s publc dsclosure, n ths report on Form 10-K as Exhbts 31.1,
31.2 and 31.3.

Executive Officers

Set forth below s certan nformaton relatng to our current executve offcers:

Name Age Positions
Lonne “Bo” Plgrm 79 Senor Charman of the Board
Lonne Ken Plgrm 49 Charman of the Board
Clfford E. Butler 65 Vce Charman of the Board
O.B. Goolsby, Jr. 60 Presdent, Chef Executve Offcer, and Drector
Rchard A. Cogdll 47 Chef Fnancal Offcer
Secretary, Treasurer and Drector
J. Clnton Rvers 48 Chef Operatng Offcer
Robert A. Wrght 53 Executve Vce Presdent of
Sales and Marketng

Lonnie “Bo” Pilgrim has served as Senor Charman of the Board snce July 2007. He served as
Charman of the Board snce the organzaton of Plgrm’s Prde n July 1968 untl July 2007. He also
served as Chef Executve Offcer from July 1968 to June 1998. Pror to the ncorporaton of Plgrm’s
Prde, Mr. Plgrm was a partner n ts predecessor partnershp busness founded n 1946.

Lonnie Ken Pilgrim has served as Charman of the Board snce July 2007. He served as Executve
Vce Presdent, Assstant to Charman from November 2004 untl July 2007, and he served as Senor
Vce Presdent, Transportaton from August 1997 to November 2004. Pror to that, he served as Vce
Presdent. He has been a member of the Board of Drectors snce March 1985, and he has been employed
by Plgrm’s Prde snce 1977. He s a son of Lonne “Bo” Plgrm.

Clifford E. Butler serves as Vce Charman of the Board. On October 10, 2007, Clfford E. Butler
announced hs retrement from hs poston as Vce Charman of the Board effectve December 31, 2007,
and that he wll not stand for re-electon as a drector. Mr. Butler joned us as Controller and drector n
1969, was named Senor Vce Presdent of Fnance n 1973, became Chef Fnancal Offcer and Vce
Charman of the Board n July 1983, became Executve Presdent n January 1997 and served n such
capacty through July 1998.

O.B. Goolsby, Jr. has served as Presdent and Chef Executve Offcer snce September 2004. Mr.
Goolsby served as Presdent and Chef Operatng Offcer from November 2002 to September 2004.
Pror to beng named as Presdent and Chef Operatng Offcer n November 2002, Mr. Goolsby served
as Executve Vce Presdent, Prepared Foods Complexes from June 1998 to November 2002. He was
prevously Senor Vce Presdent, Prepared Foods Operatons from August 1992 to June 1998 and Vce
Presdent, Prepared Foods Operatons from September 1987 to August 1992 and was employed by the
Company n other capactes from November 1969 to January 1981.

20

September 29, 2007
Richard A. Cogdill has served as Chef Fnancal Offcer, Secretary and Treasurer snce January
1997. Mr. Cogdll became a Drector n September 1998. Prevously he served as Senor Vce Presdent,
Corporate Controller, from August 1992 through December 1996 and as Vce Presdent, Corporate
Controller from October 1991 through August 1992. Pror to October 1991, he was a Senor Manager
wth Ernst Young LLP. Mr. Cogdll s a Certfed Publc Accountant.

J. Clinton Rivers has served as Chef Operatng Offcer snce October 2004. He served as Executve
Vce Presdent of Prepared Food Operatons from November 2002 to October 2004. Mr. Rvers was
the Senor Vce Presdent of Prepared Foods Operatons from 1999 to November 2002, and was the
Vce Presdent of Prepared Foods Operatons from 1992 to 1999. From 1989 to 1992, he served as Plant
Manager of the Mount Pleasant, Texas Producton Faclty. Mr. Rvers joned Plgrm’s Prde n 1986
as the Qualty Assurance Manager, and also held postons at Perdue Farms and Golden West Foods.

Robert A. Wright has served as Executve Vce Presdent of Sales and Marketng snce June 2004.
He served as Executve Vce Presdent, Turkey Dvson from October 2003 to June 2004. Pror to
October 2003, Mr. Wrght served as Presdent of Butterball Turkey Company for fve years.

Item 1A. Risk Factors

Forward-Looking Statements

Statements of our ntentons, belefs, expectatons or predctons for the future, denoted by the words
“antcpate,” “beleve,” “estmate,” “expect,” “plan,” “project,” “mply,” “ntend,” “foresee” and smlar
expressons, are forward-lookng statements that reflect our current vews about future events and
are subject to rsks, uncertantes and assumptons. Such rsks, uncertantes and assumptons nclude
those descrbed under “Rsk Factors” below and elsewhere n ths Annual Report on Form 10-K.

Actual results could dffer materally from those projected n these forward-lookng statements as
a result of these factors, among others, many of whch are beyond our control.

In makng these statements, we are not undertakng, and specfcally declne to undertake, any
oblgaton to address or update each or any factor n future flngs or communcatons regardng our
busness or results, and we are not undertakng to address how any of these factors may have caused
changes n nformaton contaned n prevous flngs or communcatons. The rsks descrbed below
are not the only rsks we face, and addtonal rsks and uncertantes may also mpar our busness
operatons. The occurrence of any one or more of the followng or other currently unknown factors
could materally adversely affect our busness and operatng results.

Risk Factors

The followng rsk factors should be read carefully n connecton wth evaluatng our busness and
the forward-lookng nformaton contaned n ths Annual Report on Form 10-K. Any of the followng
rsks could materally adversely affect our busness, operatons, ndustry or fnancal poston or our
future fnancal performance. Whle we beleve we have dentfed and dscussed below the key rsk
factors affectng our busness, there may be addtonal rsks and uncertantes that are not presently
known or that are not currently beleved to be sgnfcant that may adversely affect our busness,
operatons, ndustry, fnancal poston and fnancal performance n the future.

21

pilgrim's pride 155858_CGI_BK_WEB

pilgrim's pride 155858_CGI_BK_WEB

Recomendados

Recomendados

Mais conteúdo relacionado

Mais procurados

Mais procurados (18)

Mais de finance30

Mais de finance30 (20)

Último

Último (20)

pilgrim's pride 155858_CGI_BK_WEB