04-4c_three_little_pigs_inc

04-4c_three_little_pigs_inc - Case 04-4 Three Little Pigs...

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Case 04-4 Three Little Pigs, Inc. Three Little Pigs, Inc. (PIGS), a public entity, is a vertically-integrated provider of pork products to the wholesale and retail food service and institutional markets in the United States. The Company produces approximately 4.1 million hogs per year and processes the majority of the hogs in its own facilities. The Company also sells a portion of the hogs produced (live hogs) to outside third parties. PIGS does not have any firm commitments to sell live hogs to third parties, nor does it hedge its live hogs through commodity futures contracts. There are essentially three major categories of hog inventory—live hogs ready for sale, developing animals, and processed pork products. Farmer Joe, CEO of the Company, has represented that the processed pork product prices are sufficient to cover the costs of producing such products, i.e., the wholesale prices of processed pork products, such as loins, hams, and bacon exceed the cost to bring such products to market. As a result, management believes that there is no lower of cost or market issue related to live hogs ready for sale or developing animals that will be internally processed and sold as processed pork products. However, there are live hogs in other locations that cannot be easily transported and processed at the Company’s main processing plants. As a result, these live hogs must be sold to third parties at spot market prices, which have declined, as further discussed below. During the Company’s fiscal year 2003 (the Company’s year-end is March 31), lean hog
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04-4c_three_little_pigs_inc - Case 04-4 Three Little Pigs...

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