GREELEY, Colo., Aug. 01, 2018 (GLOBE NEWSWIRE) -- Pilgrim’s Pride Corporation (NASDAQ:PPC) reports second quarter 2018 financial results.

Second Quarter Highlights

  • Net Sales of $2.84 billion, +3.1% vs same quarter last year (+26.0% if excluding the Moy Park numbers from last year). Net Income of $106.5 million.
  • Adjusted Operating Income of $212.4 million (or a 7.5% margin), excluding the impact of grain derivative loss and one-time expense. Adjusted Operating Income margins of 6.5% in U.S., 16.6% in Mexico and 4.8% in Europe operations, respectively.
  • Adjusted EBITDA of $282.5 million (or a 10.0% margin) and Adjusted EPS of $0.53.
  • Portfolio strategy along with history of acquisitions and investments, with our international operations now accounting for about 30% of sales. The increased diversification and addition of differentiated products with Key Customer approach has continued to generate growth while moderating margin compression in any specific market.
  • Mexican operations continue to deliver solid results with EBITDA margins of 19.6%, driven by strong operating performance and growing demand for chicken. Investments into premium Pilgrim’s brand is gaining momentum and producing great results.
  • New U.S. credit facility was substantially oversubscribed and received strong support from lending partners with favorable terms for future benefits, solidifying our capital structure to pursue strategic intent.
Unaudited (2), In Millions, Except Per Share and Percentages 
 Thirteen
Weeks
Ended
 Thirteen
Weeks
Ended 		 Twenty-Six
Weeks
Ended
 Twenty-Six
Weeks
Ended 
 July 1, 2018
 June 25, 2017
 Y/Y
Change
 July 1, 2018
 June 25, 2017
 Y/Y
Change
Net Sales$2,836.7 $2,752.3 +3.1% $5,583.4 $5,231.6 +6.7%
GAAP EPS$0.43 $0.94 -54.3% $0.91 $1.32 -31.1%
Operating Income$185.1 $378.3 -51.1% $386.7 $545.1 -29.1%
Adjusted EBITDA (1)$282.5 $448.9 -37.1% $547.9 $680.2 -19.5%
Adjusted EBITDA Margin (1)10.0% 16.3% -6.3pts 9.8% 13.0% -3.2pts

(1) Reconciliations for non-GAAP measures are provided in subsequent sections within this release.
(2) Figures have been adjusted to include full-quarter of Moy Park, in accordance to U.S. GAAP.

“During Q2 market conditions within our U.S. operations were mixed, with the commodity segment counter seasonal and weak whereas the less commodity businesses continued to be strong and well balanced. Despite some volatility in feed and less than ideal market conditions in the commodity chicken sector, the investments we made over the past few years, the recent acquisitions and our capture of operational improvements, and the strength of our small bird and case-ready businesses helped us to offset some of the impact from the commodity markets and contribute to the evolution of our portfolio in supporting our vision to become the best and most respected company in our industry,” stated Bill Lovette, Chief Executive Officer of Pilgrim's.

“Mexico once again delivered strong results during the quarter as we had strong operating performance as well as very good demand for chicken. Our volumes increased during the quarter, driving a robust EBITDA performance of 19.6% which together with our differentiated strategy and dedication of our team members, extended the outperformance over the main competition over the past few years. Our Prepared Foods are growing at a double digit rate and are generating strong results under both premium Pilgrim’s and Del Dia to drive the evolution of our Mexican portfolio towards more differentiated, higher-value products, and ultimately margin expansion.”

“In Europe, we are already recording an improvement in performance and are seeing expected results from the integration, with significant share gained at a key customer and several other projects to further optimize our relationships, highlighting how our newly acquired operations are already benefiting from our team’s enhanced focus on Key Customer strategy. The operational improvements initiatives are also going well and we are slightly ahead of our $50 million synergy target for the next two years, supporting a margin increase of 70bps. We are innovating in the market in Europe by continuing to develop exciting products to satisfy a growing consumer demand for chicken and alternative forms of protein, which can be easily adapted to other markets we participate in.”

Conference Call Information

A conference call to discuss Pilgrim’s quarterly results will be held tomorrow, August 2, 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: https://services.choruscall.com/links/ppc180802.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 2, 2018.

About Pilgrim’s Pride

Pilgrim’s employs approximately 51,400 people and operates chicken processing plants and prepared-foods facilities in 14 states, Puerto Rico, Mexico, the U.K., and continental Europe. 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.

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


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
 
  July 1, 2018 December 31, 2017
  (Unaudited)  
  (In thousands)
Cash and cash equivalents $640,842  $581,510 
Restricted cash 33,185  8,021 
Trade accounts and other receivables, less allowance for doubtful accounts 589,933  565,478 
Accounts receivable from related parties 1,179  2,951 
Inventories 1,190,017  1,255,070 
Prepaid expenses and other current assets 132,820  102,550 
Assets held for sale 2,904  708 
Total current assets 2,590,880  2,516,288 
Deferred tax assets 3,149  — 
Other long-lived assets 18,276  18,165 
Identified intangible assets, net 593,751  617,163 
Goodwill 982,560  1,001,889 
Property, plant and equipment, net 2,113,953  2,095,147 
Total assets $6,302,569  $6,248,652 
     
Accounts payable $815,696  $733,027 
Accounts payable to related parties 26,941  2,889 
Revenue contract liability 32,200  36,607 
Accrued expenses and other current liabilities 407,442  410,152 
Income taxes payable 60,174  222,073 
Current maturities of long-term debt 44,606  47,775 
Total current liabilities 1,387,059  1,452,523 
Long-term debt, less current maturities 2,584,486  2,635,617 
Deferred tax liabilities 196,561  208,492 
Other long-term liabilities 80,045  96,359 
Total liabilities 4,248,151  4,392,991 
Common stock 2,604  2,602 
Treasury stock (231,758) (231,758)
Additional paid-in capital 1,938,140  1,932,509 
Retained earnings 399,902  173,943 
Accumulated other comprehensive income (loss) (63,584) (31,140)
Total Pilgrim’s Pride Corporation stockholders’ equity 2,045,304  1,846,156 
Noncontrolling interest 9,114  9,505 
Total stockholders’ equity 2,054,418  1,855,661 
Total liabilities and stockholders’ equity $6,302,569  $6,248,652 
         


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(Unaudited)
         
  Thirteen Weeks Ended Twenty-Six Weeks Ended
  July 1, 2018 June 25, 2017 July 1, 2018 June 25, 2017
  (In thousands, except per share data)
Net sales $2,836,713  $2,752,286  $5,583,391  $5,231,626 
Cost of sales 2,562,491  2,277,454  5,021,504  4,500,410 
Gross profit 274,222  474,832  561,887  731,216 
Selling, general and administrative expense 87,975  92,148  173,258  181,808 
Administrative restructuring charges 1,135  4,349  1,924  4,349 
Operating income 185,112  378,335  386,705  545,059 
Interest expense, net of capitalized interest 40,267  22,567  90,567  41,679 
Interest income (4,834) (1,104) (6,424) (1,472)
Foreign currency transaction losses (gains) 5,630  (2,303) 3,909  (1,612)
Miscellaneous, net (817) (1,272) (2,434) (4,115)
Income before income taxes 144,866  360,447  301,087  510,579 
Income tax expense 38,522  115,256  75,519  164,650 
Net income 106,344  245,191  225,568  345,929 
Less: Net income from Granite Holdings Sàrl prior to
  acquisition by Pilgrim's Pride Corporation		 —  11,118  —  17,393 
Less: Net income (loss) attributable to noncontrolling interests (197) 432  (391) 974 
Net income attributable to Pilgrim’s Pride Corporation $106,541  $233,641  $225,959  $327,562 
         
Weighted average shares of common stock outstanding:        
Basic 248,981  248,753  248,909  248,722 
Effect of dilutive common stock equivalents 76  220  116  228 
Diluted 249,057  248,973  249,025  248,950 
         
Net income attributable to Pilgrim's Pride Corporation per share of
  common stock outstanding:		        
Basic $0.43  $0.94  $0.91  $1.32 
Diluted $0.43  $0.94  $0.91  $1.32 


PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
 
  Twenty-Six Weeks Ended
  July 1, 2018 June 25, 2017
  (In thousands)
Cash flows from operating activities:    
Net income $225,568  $345,929 
Adjustments to reconcile net income to cash provided by operating activities:    
Depreciation and amortization 139,479  132,613 
Noncash loss on early extinguishment of debt 4,918  — 
Foreign currency transaction loss related to borrowing
  arrangements		 4,221  5,634 
Amortization of premium related to Senior Notes (334) — 
Accretion of discount related to Senior Notes 321  — 
Impairment expense 573  3,534 
Loss (gain) on property disposals 239  (768)
Gain on equity method investment (32) (30)
Share-based compensation 5,633  1,947 
Deferred income tax expense (benefit) (11,927) 25,857 
Changes in operating assets and liabilities:    
Trade accounts and other receivables (31,913) (93,391)
Inventories 60,303  (93,901)
Prepaid expenses and other current assets (31,099) (15,323)
Accounts payable, accrued expenses and other current
  liabilities		 103,991  (46,506)
Income taxes (161,571) 73,207 
Long-term pension and other postretirement obligations (5,323) (3,916)
Other operating assets and liabilities 942  (1,337)
Cash provided by operating activities 303,989  333,549 
Cash flows from investing activities:    
Acquisitions of property, plant and equipment (155,188) (197,989)
Business acquisition —  (359,698)
Proceeds from property disposals 1,205  1,466 
Cash used in investing activities (153,983) (556,221)
Cash flows from financing activities:    
Proceeds from revolving line of credit and long-term borrowings 604,062  1,013,662 
Payments on revolving line of credit, long-term borrowings and capital lease obligations (673,452) (591,904)
Proceeds from equity contribution under Tax Sharing Agreement between JBS USA Food Company Holdings and Pilgrim's Pride Corporation 5,558  5,038 
Payment of capitalized loan costs (5,708) (2,777)
Purchase of common stock under share repurchase program —  (14,641)
Cash provided by (used in) financing activities (69,540) 409,378 
Effect of exchange rate changes on cash and cash equivalents 4,030  9,273 
Increase (decrease) in cash, cash equivalents and restricted cash 84,496  195,979 
Cash, cash equivalents and restricted cash, beginning of period 589,531  297,524 
Cash, cash equivalents and restricted cash, end of period $674,027  $493,503 
         


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
 July 1, 2018 June 25, 2017 July 1, 2018 June 25, 2017
 (In thousands)
Net income$106,344  $245,191  $225,568  $345,929 
Add:       
Interest expense, net35,433  21,463  84,143  40,207 
Income tax expense (benefit)38,522  115,256  75,519  164,650 
Depreciation and amortization70,278  69,941  139,479  132,613 
Minus:       
Amortization of capitalized financing costs2,453  1,366  4,210  4,576 
EBITDA248,124  450,485  520,499  678,823 
Add:       
Foreign currency transaction losses (gains)5,630  (2,303) 3,909  (1,612)
Acquisition charges125  —  304  — 
Derivative loss (gain)24,002  (3,236) 17,621  (344)
Restructuring charges1,135  4,349  1,924  4,349 
Non-recurring expense3,298  —  3,298  — 
Minus:       
Net income (loss) attributable to noncontrolling interest(197) 432  (391) 974 
Adjusted EBITDA$282,511  $448,863  $547,946  $680,242 
                

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
  July 1, 2018 June 25, 2017 July 1, 2018 June 25, 2017 July 1, 2018 June 25, 2017 July 1, 2018 June 25, 2017
  (In thousands)
Net income from continuing operations $106,344  $245,191  $225,568  $345,929  3.75% 8.91% 4.04% 6.61%
Add:                
Interest expense, net 35,433  21,463  84,143  40,207  1.25% 0.78% 1.51% 0.77%
Income tax expense 38,522  115,256  75,519  164,650  1.36% 4.19% 1.35% 3.15%
Depreciation and amortization 70,278  69,941  139,479  132,613  2.48% 2.54% 2.50% 2.53%
Minus:                
Amortization of capitalized financing costs 2,453  1,366  4,210  4,576  0.09% 0.05% 0.08% 0.09%
EBITDA 248,124  450,485  520,499  678,823  8.75% 16.38% 9.32% 12.98%
Add:                
Foreign currency transaction losses (gains) 5,630  (2,303) 3,909  (1,612) 0.20% (0.08)% 0.07% (0.03)%
Acquisition charges 125  —  304  —  —% —% 0.01% —%
Derivative loss (gain) 24,002  (3,236) 17,621  (344) 0.85% (0.12)% 0.32% (0.01)%
Restructuring charges 1,135  4,349  1,924  4,349  0.04% 0.16% 0.03% 0.08%
Non-recurring expense 3,298  —  3,298  —  0.12% —% 0.06% —%
Minus:                
  Net income (loss) attributable to noncontrolling interest (197) 432  (391) 974  (0.01)% 0.02% (0.01)% 0.02%
Adjusted EBITDA $282,511  $448,863  $547,946  $680,242  9.96% 16.32% 9.81% 13.00%
                 
Net Revenue: $2,836,713  $2,752,286  $5,583,391  $5,231,626  $2,836,713  $2,752,286  $5,583,391  $5,231,626 


A reconciliation of GAAP Operating Income to Adjusted Operating Income is as follows:

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted Operating Income
(Unaudited)
         
  Thirteen Weeks Ended Twenty-Six Weeks Ended
  July 1, 2018 June 25, 2017 July 1, 2018 June 25, 2017
  (In thousands)
GAAP Operating Income $185,112  $378,335  $386,705  $545,059 
Derivative loss (gain) $24,002  $(3,236) $17,621  $(344)
Non-recurring expense $3,298  $—  $3,298  $— 
Adjusted Operating Income $212,412  $375,099  $407,624  $544,715 


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
  July 1, June 25, July 1, June 25,
   2018  2017  2018  2017
         
  (In thousands, except per share data)
Net income (loss) attributable to Pilgrim's Pride Corporation $  106,541 $  233,641 $  225,959 $  327,562
Loss on early extinguishment of debt  2,000  —  11,661  —
Acquisition and restructuring charges, net of taxes  944  —  1,669  2,918
Derivative loss (gain)  17,982  (2,171)  13,201  (231)
Foreign currency transaction losses (gains)  5,630  (2,303)  3,909  (1,612)
Income (loss) before loss on early extinguishment of debt and foreign  133,097  229,167  249,990  328,480
  currency transaction losses (gains)        
Weighted average diluted shares of common stock outstanding  249,057  248,973  249,025  248,950
Income (loss) before loss on early extinguishment of debt and foreign currency transaction losses (gains) per common diluted share $  0.53 $  0.92 $  1.00 $  1.32
         

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
 July 1, 2018 June 25, 2017
 July 1, 2018
 June 25, 2017
           
 (In thousands, except per share data) 
GAAP EPS$  0.43  $  0.94  $  0.91  $  1.32 
Loss on early extinguishment of debt 0.01   —   0.05   — 
Acquisition and restructuring charges, net of taxes —   —   0.01   0.01 
Derivative loss (gain) 0.07   (0.01)  0.05   — 
Foreign currency transaction losses (gains) 0.02   (0.01)  (0.01)  (0.01)
Adjusted EPS$  0.53  $  0.92  $  1.00  $  1.32 
           
Weighted average diluted shares of common stock outstanding 249,057   248,973   249,025   248,950 
           


PILGRIM'S PRIDE CORPORATION 
Supplementary Selected Segment and Geographic Data
                 
  Thirteen Weeks Ended Twenty-Six Weeks Ended
  July 1, 2018  June 25, 2017  July 1, 2018  June 25, 2017 
  (Unaudited)              
  (In thousands) 
Sources of net sales by country of origin:                
US: $1,899,435  $1,882,142  $3,740,540  $3,618,547 
Europe:  563,102   500,681   1,107,402   959,530 
Mexico:  374,176   369,463   735,449   653,549 
Total net sales: $2,836,713  $2,752,286  $5,583,391  $5,231,626 
                 
Sources of cost of sales by country of origin:                
US: $1,745,511  $1,547,252  $3,404,245  $3,095,502 
Europe:  513,991   451,232   1,015,559   868,750 
Mexico:  302,973   278,993   601,708   536,205 
Elimination:  16   (23)  (8)  (47)
Total cost of sales: $2,562,491  $2,277,454  $5,021,504  $4,500,410 
                 
Sources of gross profit by country of origin:                
US: $153,924  $334,889  $336,295  $523,044 
Europe:  49,111   49,450   91,843   90,780 
Mexico:  71,203   90,470   133,741   117,345 
Elimination:  (16)  23   8   47 
Total gross profit: $274,222  $474,832  $561,887  $731,216 
                 
Sources of operating income by country of origin:                
US: $99,469  $277,602  $226,755  $411,159 
Europe  23,662   18,933   45,075   33,304 
Mexico:  61,997   81,777   114,867   100,549 
Elimination:  (16)  23   8   47 
Total operating income: $185,112  $378,335  $386,705  $545,059 
                 

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