67494--6/16/2008--PIERRE_FOODS

related topics

{debt, indebtedness, cash}

{cost, regulation, environmental}

{product, market, service}

{cost, operation, labor}

{loss, insurance, financial}

{regulation, change, law}

{capital, credit, financial}

{competitive, industry, competition}

{gas, price, oil}

{customer, product, revenue}

{tax, income, asset}

{condition, economic, financial}

{control, financial, internal}

{product, liability, claim}

{system, service, information}

{regulation, government, change}

{personnel, key, retain}

{property, intellectual, protect}

{stock, price, operating}

{acquisition, growth, future}

he Company is currently in default under its senior credit agreement and therefore may not have access to financing necessary to support its business and to satisfy its obligations as they come due. The Company s financial statements have been prepared assuming that the Company will continue as a going concern. However, the Company is currently in default under its senior credit agreement, and if the Company is unable to amend the terms of or to restructure or refinance its current outstanding indebtedness, the Company may not be able to continue as a going concern. The Company s current financial condition has adversely affected its business operations and its business prospects. The Company s ability to service its debt and meet its cash requirements depends on many factors, some of which are beyond its control. These factors could have a material adverse affect on the Company s business, financial condition and results of operations Any material changes to, cutbacks in, or termination of the USDA s Commodity Program could have a material adverse effect on the Company s sales to schools and the Company s financial condition. Restrictive covenants in the Company s debt instruments restrict or prohibit the Company s ability to engage in or enter into a variety of transactions, which could adversely affect the Company. The Company is subject to ongoing financial covenants under its Credit Agreement, and the Company is not in compliance with those covenants as of March 1, 2008. As a result, the lenders under such facility may accelerate the Company s borrowings. If the Company is unable to enter into an amendment or waiver of such financial covenants, it will be unable to borrow additional amounts and may be forced to declare bankruptcy. Changes in the Company s credit ratings may have a negative impact on the Company s financing cost, the availability of capital, and the interest rate the Company pays on borrowings on its credit facility. Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect the Company s reported results of operations or financial position. If the Company s management determines that its goodwill or other intangible assets are impaired, the Company may be required to write off part or all of such assets, which would adversely affect its financial position and results of operations. Increases in the price of raw materials, particularly beef, chicken, pork, and cheese, or increases in the cost of manufacturing, distribution, and other costs, could reduce the Company s operating margins if the Company is unable to offset such increasing costs by increasing prices to its customers. If the Company s products become contaminated or are mislabeled, the Company may be subject to product liability claims, product recalls, and increased scrutiny by regulators, any of which could adversely affect the Company and its business. The Company s insurance and indemnification agreements may be inadequate to cover all the liabilities the Company may incur and could have an adverse effect on the Company and its business. A decline in meat consumption, or in the consumption of processed food products or the Company s failure to identify or react to changing demand for its products, would have a material adverse effect on the Company s business, financial condition, and operating results. Outbreaks of disease among cattle, chicken or pigs could significantly reduce demand for the Company s products and restrict its ability to produce meat and sandwich products, adversely affecting its sales volume and financial condition. The categories of the food industry in which the Company operates are highly competitive, and the Company s inability to compete successfully could adversely affect its business, results of operations, and financial condition. The Company s top ten customers have historically accounted for a significant portion of its net revenues and its largest customer accounted for approximately 11% of net revenues for fiscal 2008. The consolidation of and market strength among the Company s retail and foodservice customers may put pressure on its operating margins. Significant increases in the cost of distribution would have an adverse effect on the Company s financial condition and operating results. The Company may not properly execute, or realize anticipated cost savings or benefits from, its SKU rationalization initiative, its inventory reduction initiative, its production cost containment initiatives, or any other ongoing initiatives. If the Company fails to implement such initiatives, anticipated cost savings and benefits would not be realized, which could adversely affect the Company s financial condition and operating results. The Company manufactures many of its products using proprietary formulations and markets its products under a variety of brand names. The termination of, or failure to renew a license agreement under which the Company sells branded products, the reduction in value of an underlying license or its inability to protect ownership of proprietary formulations, could negatively impact the Company s ability to produce and sell its products. The Company is subject to extensive governmental regulations, which require significant compliance expenditures and the Company s failure to comply with such regulations could adversely affect the Company s financial condition and results of operations. Compliance with environmental regulations may result in significant costs and the Company s failure to comply with environmental regulations may result in civil as well as criminal penalties and liability for damages. Labor disruptions or increased labor costs could adversely affect the Company s business. The Company sells a large percentage of its products to schools, which subjects its sales volumes and, thus, its operating results, to seasonal variations. The Company produces its ready-to-cook and pre-cooked protein products, compartmentalized meals, hand-held convenience sandwiches, and specialty bread products in its five manufacturing and processing facilities. A material disruption at one of these plants or an increase in demand causing inability to meet customer demands could seriously harm the Company s financial condition and operating results. The Company depends upon the continued services of certain members of its senior management team, without whom its business operations would be significantly disrupted. If the Company is unable to maintain or upgrade its information systems and software programs or if the Company is unable to convert to alternate systems in an efficient and timely manner, the Company s operations may be disrupted or become less efficient. Acquisitions by the Company and the integration of such businesses acquired by the Company could impair the Company s business, financial condition, and operating results. The Company is exposed to potential risks from legislation requiring companies to evaluate controls under Section 404 of the Sarbanes-Oxley Act of 2002, and the Company s evaluation of its internal controls only provides reasonable assurances.

Full 10-K form ▸

67494--6/16/2008--PIERRE_FOODS_INC