PITTSBURG, TEXAS — As a part of its ongoing reorganization strategy to become a more market-driven company, Pilgrim's Pride Corporation said on Feb. 27 it will idle three underperforming chicken processing plants -- from its total of 32 U.S. chicken processing plants --by mid-May. The plants are located in Douglas, Ga.; El Dorado, Ark.; and Farmerville, La. and they employ approximately 3,000 people - or roughly 7% of the company's total U.S. workforce.
Approximately 430 independent contract growers who supply birds to these three plants also will be affected. The company also intends to consolidate its protein salad production from Franconia, Pa. to its further-processing facility in Moorefield, W. Va.
Idling the three plants is a painful reflection of the unprecedented challenges facing the company and industry from an excess supply of chicken and weakening consumer demand resulting from a crippled economy, said Don Jackson, president and chief executive officer.
"Simply put, we are producing too much commodity chicken in what is a very weak market," he added. "The actions announced will reduce our production of low-value, commodity meat that is a financial drain on the company without affecting any of our core business lines or customers."
Idling these plants will result in a reduction of 9%-to-10% in total lbs. of chicken produced by Pilgrim’s Pride.
There will not be any disruption in the supply of product to retail, foodservice and industrial customers as a result of the idling of these plants since this will only eliminate production of excess commodity chicken, the company claimed. The plants will remain idle until Pilgrim’s Pride believes additional production capacity is needed.
As a result of this move, Pilgrim's Pride expects to generate annualized net savings of approximately $110 million and to incur one-time, pre-tax restructuring charges of approximately $35 million, before any potential asset impairment charges, primarily in the second quarter of fiscal 2009. This includes approximately $8 million of estimated non-cash restructuring costs.
Transition programs for employees whose positions are eliminated will be provided by the company to assist them in securing new employment, filing for unemployment and obtaining other applicable benefits.
"We recognize the pain and uncertainty that the idling of these plants will have on our employees and growers at these locations, as well as on the surrounding communities," Dr. Jackson said. "It is a devastating situation, and we sincerely wish that such actions were not necessary. But the reality is that our country is arguably facing the most significant financial crisis since the Great Depression, with consumer spending on food dropping at its steepest rate in more than 60 years. We are taking decisive steps now to protect the greatest number of jobs and growers in order to restructure our business and ultimately emerge from Chapter 11 as a stronger, more efficient competitor."
On Dec. 1, 2008, the company filed voluntary Chapter 11 petitions. The company's operations in Mexico and certain operations in the United States were not included in the filing and continue to operate as usual outside of the Chapter 11 process.
For more information about the restructuring, visitwww.pilgrimspride.com.
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