Pilgrim’s Pride Reports Operating Income of $359 Million and Operating Margin of 16.0% for the Second Quarter of 2017

GREELEY, Colo., Aug. 02, 2017 (GLOBE NEWSWIRE) -- Pilgrim’s Pride Corporation (NASDAQ:PPC) reports second quarter 2017 financial results.

Second Quarter Highlights

  • Net Sales of $2.25 billion.
  • Net Income of $233.6 million, GAAP EPS of $0.94.
  • Operating Income margins of 14.8% in U.S. and 22.1% in Mexico operations, respectively.
  • Adjusted EBITDA of $420.6 million (or an 18.7% margin).
  • Cash Flow from Operations of $254.7 million.
  • With our announced capital projects already completed, our quarterly performance reflected our well-balanced portfolio strategy, designed to capture the upside from strong markets while reducing overall volatility.
  • Integration of newly acquired assets in Mexico has been completed with margins at the same level as legacy business. GNP integration is on track and synergy capture is currently above expectations.

Unaudited, In Millions, Except Per Share and Percentages
Thirteen Weeks Ended
June 25, 2017 June 26, 2016 Change
Net Sales$2,251.6 $2,028.3 +11.0%
GAAP EPS$0.94 $0.60 +56.7%
Operating Income$359.4 $236.6 +51.9%
Adjusted EBITDA (1)$420.6 $282.7 +48.8%
Adjusted EBITDA Margin (1)18.7% 13.9% +4.8pts
(1) Reconciliations for non-GAAP measures are provided in subsequent sections within this release.

“Our Q2 results materially improved from last quarter as well as from a year ago driven by much stronger results at our U.S. operations while Mexico continued to perform very well. Demonstrating the diversity of our portfolio of bird sizes; while small bird and tray-pack remained robust during the period, our team captured the strength in the large bird deboning environment, which significantly rebounded after a slower than expected start earlier in the year, driven by stronger exports and very good domestic demand as the grilling season kicked off. This portfolio approach is working well and is what fundamentally differentiates us from the competition, giving us the potential to reduce volatility and generate higher margins over time. This summer has brought strong demand for grilling season and we see continuation of chicken as a choice protein in domestic and international markets,” stated Bill Lovette, Chief Executive Officer of Pilgrim's.

“We continue to search for solutions in delivering more differentiated customized products that are innovative to satisfy our key customers’ needs. We currently have market leading positions in USDA-certified organic and NAE, two segments that resonate very well with new consumer trends for more natural products while adding more value to our portfolio. We also have the potential to expand into new segments with our broad channel approach using the Gold’n Plump brand as well as the new premium Just BARE chicken in the “better for you” category.”

Conference Call Information

A conference call to discuss Pilgrim’s quarterly results will be held tomorrow, August 3, at 7:00 a.m. MT (9 a.m. ET). Participants are encouraged to pre-register for the conference call using the link below. Callers who pre-register will be given a unique PIN to gain immediate access to the call and bypass the live operator. Participants may pre-register at any time, including up to and after the call start time.

To pre-register, go to: http://services.choruscall.com/links/ppc170803.html

You may also reach the pre-registration link by logging in through the investor section of our website at www.pilgrims.com and clicking on the link under “Upcoming Events.”

For those who would like to join the call but have not pre-registered, access is available by dialing +1 (844) 883-3889 within the US, or +1 (412) 317-9245 internationally, and requesting the “Pilgrim’s Pride Conference.” Please note that to submit a question to management during the call, you must be logged in via telephone.

Replays of the conference call will be available on Pilgrim’s website approximately two hours after the call concludes and can be accessed through the “Investor” section of www.pilgrims.com. The webcast will be available for replay through November 3, 2017.

About Pilgrim’s Pride

Pilgrim’s employs approximately 42,000 people and operates chicken processing plants and prepared-foods facilities in 14 states, Puerto Rico and Mexico. The Company’s primary distribution is through retailers and foodservice distributors. For more information, please visit www.pilgrims.com.

Forward-Looking Statements

Statements contained in this press release that state the intentions, plans, hopes, beliefs, anticipations, expectations or predictions of the future of Pilgrim’s Pride Corporation and its management are considered forward-looking statements. It is important to note that actual results could differ materially from those projected in such forward-looking statements. Factors that could cause actual results to differ materially from those projected in such forward-looking statements include: matters affecting the poultry industry generally; the ability to execute the Company’s business plan to achieve desired cost savings and profitability; future pricing for feed ingredients and the Company’s products; outbreaks of avian influenza or other diseases, either in Pilgrim’s Pride’s flocks or elsewhere, affecting its ability to conduct its operations and/or demand for its poultry products; contamination of Pilgrim’s Pride’s products, which has previously and can in the future lead to product liability claims and product recalls; exposure to risks related to product liability, product recalls, property damage and injuries to persons, for which insurance coverage is expensive, limited and potentially inadequate; management of cash resources; restrictions imposed by, and as a result of, Pilgrim’s Pride’s leverage; changes in laws or regulations affecting Pilgrim’s Pride’s operations or the application thereof; new immigration legislation or increased enforcement efforts in connection with existing immigration legislation that cause the costs of doing business to increase, cause Pilgrim’s Pride to change the way in which it does business, or otherwise disrupt its operations; competitive factors and pricing pressures or the loss of one or more of Pilgrim’s Pride’s largest customers; currency exchange rate fluctuations, trade barriers, exchange controls, expropriation and other risks associated with foreign operations; disruptions in international markets and distribution channel, including anti-dumping proceedings and countervailing duty proceedings; and the impact of uncertainties of litigation as well as other risks described under “Risk Factors” in the Company’s Annual Report on Form 10-K and subsequent filings with the Securities and Exchange Commission. Pilgrim’s Pride Corporation undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
June 25, 2017 December 25, 2016
(Unaudited)
(In thousands)
Cash and cash equivalents $303,937 $120,328
Restricted cash 20,348 4,979
Trade accounts and other receivables, less allowance for doubtful accounts 406,586 317,170
Accounts receivable from related parties 4,050 3,913
Inventories 967,577 813,262
Income taxes receivable 13,659
Prepaid expenses and other current assets 66,572 57,457
Assets held for sale 5,542 5,259
Total current assets 1,788,271 1,322,368
Other long-lived assets 17,484 15,710
Identified intangible assets, net 153,855 38,593
Goodwill 175,444 125,607
Property, plant and equipment, net 1,721,948 1,505,940
Total assets $3,857,002 $3,008,218
Accounts payable $519,820 $555,097
Accounts payable to related parties 3,622 1,421
Accrued expenses and other current liabilities 324,727 290,699
Income taxes payable 93,910 20,990
Current maturities of long-term debt 40,098 94
Total current liabilities 982,177 868,301
Long-term debt, less current maturities 1,404,264 1,011,858
Deferred tax liabilities 171,042 142,651
Other long-term liabilities 89,422 88,661
Total liabilities 2,646,905 2,111,471
Common stock 2,602 2,597
Treasury stock (231,758) (217,117)
Additional paid-in capital 1,688,684 1,686,742
Accumulated deficit (193,073) (520,635)
Accumulated other comprehensive loss (66,735) (64,243)
Total Pilgrim’s Pride Corporation stockholders’ equity 1,199,720 887,344
Noncontrolling interest 10,377 9,403
Total stockholders’ equity 1,210,097 896,747
Total liabilities and stockholders’ equity $3,857,002 $3,008,218


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 25, 2017 June 26, 2016 June 25, 2017 June 26, 2016
(In thousands, except per share data)
Net sales $2,251,604 $2,028,315 $4,272,096 $3,991,252
Cost of sales 1,826,217 1,742,184 3,631,504 3,467,559
Gross profit 425,387 286,131 640,592 523,693
Selling, general and administrative expense 61,636 49,520 124,489 98,308
Administrative restructuring charges 4,349 4,349
Operating income 359,402 236,611 511,754 425,385
Interest expense, net of capitalized interest 15,935 11,548 28,321 23,581
Interest income (1,044) (683) (1,346) (1,376)
Foreign currency transaction gain (1,810) (4,744) (1,191) (4,979)
Miscellaneous, net (970) (950) (3,685) (3,896)
Income before income taxes 347,291 231,440 489,655 412,055
Income tax expense 113,218 78,398 161,119 141,002
Net income 234,073 153,042 328,536 271,053
Less: Net income (loss) attributable to noncontrolling interests 432 156 974 (204)
Net income attributable to Pilgrim’s Pride Corporation $233,641 $152,886 $327,562 $271,257
Weighted average shares of common stock outstanding:
Basic 248,753 254,554 248,722 254,681
Effect of dilutive common stock equivalents 220 390 228 364
Diluted 248,973 254,944 248,950 255,045
Net income attributable to Pilgrim's Pride Corporation per share of
common stock outstanding:
Basic $0.94 $0.60 $1.32 $1.07
Diluted $0.94 $0.60 $1.32 $1.06


PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Twenty-Six Weeks Ended
June 25, 2017 June 26, 2016
(In thousands)
Cash flows from operating activities:
Net income $328,536 $271,053
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization 107,671 88,683
Foreign currency transaction loss related to borrowing arrangements 5,634
Impairment expense 3,534
Gain on property disposals (768) (6,755)
Gain on equity method investments (30)
Share-based compensation 1,947 1,869
Deferred income tax expense (benefit) 26,904 (700)
Changes in operating assets and liabilities:
Trade accounts and other receivables (73,684) 6,610
Inventories (97,857) (31,208)
Prepaid expenses and other current assets (5,702) (19,817)
Accounts payable, accrued expenses and other current liabilities (34,565) (23,028)
Income taxes 60,695 6,967
Long-term pension and other postretirement obligations (3,916) (3,952)
Other operating assets and liabilities (2,265) (738)
Cash provided by operating activities 316,134 288,984
Cash flows from investing activities:
Acquisitions of property, plant and equipment (174,150) (93,978)
Business acquisition (359,698)
Proceeds from property disposals 1,466 8,097
Cash used in investing activities (532,382) (85,881)
Cash flows from financing activities:
Proceeds from note payable to bank 36,838
Payments on note payable to bank (65,564)
Proceeds from revolving line of credit and long-term borrowings 1,013,662 351,089
Payments on revolving line of credit, long-term borrowings and capital lease obligations (586,056) (219,812)
Proceeds from equity contribution under Tax Sharing Agreement between JBS USA Food Company Holdings and Pilgrim's Pride Corporation 5,038 3,691
Payment of capitalized loan costs (2,777) (693)
Purchase of common stock under share repurchase program (14,641) (7,328)
Cash dividends (699,915)
Cash provided by (used in) financing activities 415,226 (601,694)
Increase (decrease) in cash, cash equivalents and restricted cash 198,978 (398,591)
Cash, cash equivalents and restricted cash, beginning of period 125,307 439,638
Cash, cash equivalents and restricted cash, end of period $324,285 $41,047

PILGRIM’S PRIDE CORPORATION

Selected Financial Information

(Unaudited)

“EBITDA” is defined as the sum of net income (loss) plus interest, taxes, depreciation and amortization. “Adjusted EBITDA” is calculated by adding to EBITDA certain items of expense and deducting from EBITDA certain items of income that we believe are not indicative of our ongoing operating performance consisting of: (i) income (loss) attributable to non-controlling interests, (ii) restructuring charges, (iii) reorganization items, (iv) losses on early extinguishment of debt and (v) foreign currency transaction losses (gains). EBITDA is presented because it is used by management and we believe it is frequently used by securities analysts, investors and other interested parties, in addition to and not in lieu of results prepared in conformity with accounting principles generally accepted in the US (“GAAP”), to compare the performance of companies. We believe investors would be interested in our Adjusted EBITDA because this is how our management analyzes EBITDA. The Company also believes that Adjusted EBITDA, in combination with the Company’s financial results calculated in accordance with GAAP, provides investors with additional perspective regarding the impact of certain significant items on EBITDA and facilitates a more direct comparison of its performance with its competitors. EBITDA and Adjusted EBITDA are not measurements of financial performance under GAAP. They should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net income as indicators of our operating performance or any other measures of performance derived in accordance with GAAP.

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted EBITDA
(Unaudited) Thirteen Weeks Ended Twenty-Six Weeks Ended
June 25, 2017 June 26, 2016 June 25, 2017 June 26, 2016
(In thousands)
Net income $234,073 $153,042 $328,536 $271,053
Add:
Interest expense, net 14,891 10,865 26,975 22,205
Income tax expense 113,218 78,398 161,119 141,002
Depreciation and amortization 57,281 46,293 107,671 88,683
Minus:
Amortization of capitalized financing costs 997 962 1,947 1,889
EBITDA 418,466 287,636 622,354 521,054
Add:
Foreign currency transaction gains (1,810) (4,744) (1,191) (4,979)
Restructuring charges 4,349 4,349
Minus:
Net income (loss) attributable to noncontrolling interest 432 156 974 (204)
Adjusted EBITDA $420,573 $282,736 $624,538 $516,279

The summary unaudited consolidated income statement data for the twelve months ended June 25, 2017 (the LTM Period) have been calculated by subtracting the applicable unaudited consolidated income statement data for the six months ended June 26, 2016 from the sum of (1) the applicable audited consolidated income statement data for the year ended December 25, 2016 and (2) the applicable audited consolidated income statement data for the six months ended June 25, 2017.

PILGRIM'S PRIDE CORPORATION
Reconciliation of LTM Adjusted EBITDA
(Unaudited) Thirteen Weeks
Ended
Thirteen Weeks
Ended
Thirteen Weeks
Ended
Thirteen Weeks
Ended
LTM Ended
September 25,
2016
December 25,
2016
March 26,
2017
June 25,
2017
June 25,
2017
(In thousands)
Net income $98,527 $70,149 $94,463 $234,073 $497,212
Add:
Interest expense, net 11,834 10,158 12,084 14,891 48,967
Income tax expense 51,060 40,844 47,901 113,218 253,023
Depreciation and amortization 45,772 46,059 50,390 57,281 199,502
Minus:
Amortization of capitalized financing costs 970 972 951 997 3,890
EBITDA 206,223 166,238 203,887 418,466 994,814
Add:
Foreign currency transaction losses (gains) 4,142 4,734 619 (1,810) 7,685
Restructuring charges 279 790 4,349 5,418
Minus:
Net income (loss) attributable to noncontrolling interest (130) (469) 542 432 375
Adjusted EBITDA $210,774 $172,231 $203,964 $420,573 $1,007,542

EBITDA margins have been calculated by taking the relevant unaudited EBITDA figures, then dividing by Net Revenue for the applicable period.

PILGRIM'S PRIDE CORPORATION
Reconciliation of EBITDA Margin
(Unaudited) Thirteen Weeks Ended Twenty-Six Weeks Ended Thirteen Weeks Ended Twenty-Six Weeks Ended
June 25,
2017
June 26,
2016
June 25,
2017
June 26,
2016
June 25,
2017
June 26,
2016
June 25,
2017
June 26,
2016
(In thousands)
Net income from continuing operations $234,073 $153,042 $328,536 $271,053 10.40% 7.55% 7.69% 6.79%
Add:
Interest expense, net 14,891 10,865 26,975 22,205 0.66% 0.54% 0.63% 0.56%
Income tax expense 113,218 78,398 161,119 141,002 5.03% 3.87% 3.77% 3.53%
Depreciation and amortization 57,281 46,293 107,671 88,683 2.54% 2.28% 2.52% 2.22%
Minus:
Amortization of capitalized financing costs 997 962 1,947 1,889 0.04% 0.05% 0.05% 0.05%
EBITDA 418,466 287,636 622,354 521,054 18.59% 14.19% 14.56% 13.05%
Add:
Foreign currency transaction gains (1,810) (4,744) (1,191) (4,979) (0.08)% (0.23)% (0.03)% (0.12)%
Restructuring charges 4,349 4,349 0.19% % 0.10% %
Minus:
Net income (loss) attributable to noncontrolling interest 432 156 974 (204) 0.02% 0.01% 0.02% (0.01)%
Adjusted EBITDA $420,573 $282,736 $624,538 $516,279 18.68% 13.95% 14.61% 12.94%
Net Revenue: $2,251,604 $2,028,315 $4,272,096 $3,991,252 $2,251,604 $2,028,315 $4,272,096 $3,991,252

A reconciliation of net income (loss) attributable to Pilgrim's Pride Corporation per common diluted share to adjusted net income (loss) attributable to Pilgrim's Pride Corporation per common diluted share is as follows:

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted Earnings
(Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 25,
2017
June 26,
2016
June 25,
2017
June 26,
2016
(In thousands, except per share data)
Net income attributable to Pilgrim's Pride Corporation $233,641 $152,886 $327,562 $271,257
Loss on early extinguishment of debt
Foreign currency transaction gains (1,810) (4,744) (1,191) (4,979)
Income before loss on early extinguishment of debt and foreign currency transaction gains 231,831 148,142 326,371 266,278
Weighted average diluted shares of common stock outstanding 248,973 254,944 248,950 255,045
Income before loss on early extinguishment of debt and foreign currency transaction gains
per common diluted share
$0.93 $0.58 $1.31 $1.04

A reconciliation of GAAP earnings per share (EPS) to adjusted earnings per share (EPS) is as follows:

PILGRIM'S PRIDE CORPORATION
Reconciliation of GAAP EPS to Adjusted EPS
(Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 25, 2017 June 26, 2016 June 25, 2017 June 26, 2016
(In thousands, except per share data)
GAAP EPS $0.94 $0.60 $1.32 $1.06
Loss on early extinguishment of debt
Foreign currency transaction gains (0.01) (0.02) (0.01) (0.02)
Adjusted EPS $0.93 $0.58 $1.31 $1.04
Weighted average diluted shares of common stock outstanding 248,973 254,944 248,950 255,045

Net debt is defined as total long term debt less current maturities, plus current maturities of long term debt and notes payable, minus cash, cash equivalents and investments in available-for-sale securities. Net debt is presented because it is used by management, and we believe it is frequently used by securities analysts, investors and other parties, in addition to and not in lieu of debt as presented under GAAP, to compare the indebtedness of companies. A reconciliation of net debt is as follows:

PILGRIM'S PRIDE CORPORATION
Reconciliation of Net Debt
(Unaudited)
June 25,
2017
June 26,
2016
December 25,
2016
December 27,
2015
December 28,
2014
(In thousands)
Long term debt, less current maturities $1,404,264 $1,117,979 $1,011,858 $985,509 $3,980
Add: Current maturities of long term debt and notes payable 40,098 90 94 28,812 262
Minus: Cash and cash equivalents 303,937 41,047 120,328 439,638 576,143
Net debt (cash position) $1,140,425 $1,077,022 $891,624 $574,683 $(571,901)


PILGRIM'S PRIDE CORPORATION
Supplementary Selected Segment and Geographic Data
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 25, 2017 June 26, 2016 June 25, 2017 June 26, 2016
(Unaudited)
(In thousands)
Sources of net sales by country of origin:
US: $1,882,142 $1,677,445 $3,618,547 $3,347,726
Mexico: 369,462 350,870 653,549 643,526
Total net sales: $2,251,604 $2,028,315 $4,272,096 $3,991,252
Sources of cost of sales by country of origin:
US: $1,547,247 $1,471,269 $3,095,346 $2,925,224
Mexico: 278,993 270,939 536,205 542,383
Elimination: (23) (24) (47) (48)
Total cost of sales: $1,826,217 $1,742,184 $3,631,504 $3,467,559
Sources of gross profit by country of origin:
US: $334,894 $206,176 $523,200 $422,502
Mexico: 90,470 79,931 117,345 101,143
Elimination: 23 24 47 48
Total gross profit: $425,387 $286,131 $640,592 $523,693
Sources of operating income by country of origin:
US: $277,602 $164,494 $411,158 $339,084
Mexico: 81,777 72,093 100,549 86,253
Elimination: 23 24 47 48
Total operating income: $359,402 $236,611 $511,754 $425,385

Contact: Dunham Winoto Director, Investor Relations IRPPC@pilgrims.com (970) 506-8192 www.pilgrims.com

Source:Pilgrim's Pride Corporation