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Feb 15, 2018

Pilgrim’s Pride Ends Fiscal Year 2017 with Net Sales of $10.77 Billion, Operating Income of 10% and Record GAAP EPS of $2.79

GREELEY, Colo., Feb. 14, 2018 (GLOBE NEWSWIRE) -- Pilgrim’s Pride Corporation (NASDAQ:PPC) reports fourth quarter and year-end 2017 financial results.

2017 Highlights

  • Adjusted Operating Income margins of 11.8% in U.S., 10.6% in Mexico and 3.9% in Europe operations, respectively.
  • Adjusted EBITDA of $1.39 billion (or a 12.9% margin and +54.3% versus last year, excluding Moy Park).
  • Acquisition of Moy Park positions us as the global leader in chicken and chicken-based Prepared Foods, and aligns with our strategic priorities while providing a strong platform for future growth.
  • GNP integration is progressing well; operations and profitability significantly improved with synergies captured ahead of plan, and are already on par with legacy operations.
  • Completion of $141MM in strategic capital investments, including the Sanford, NC organic tray-pack facility and Prepared Foods Line, further increasing product portfolio differentiation, strengthening key customer relationships, and improving margin profile.

Fourth Quarter Results

  • Consolidated numbers reflect Moy Park for the entire quarter and year, including historical data in accordance to U.S. GAAP.
  • Net Sales of $2.74 billion (+43.5% versus same quarter last year of $1.91 billion, excluding Moy Park).
  • Net Income of $134.3 million and GAAP EPS of $0.54.
  • Adjusted Operating Income margins of 7.3% in U.S., 4.0% in Mexico and 5.0% in Europe operations, respectively, adjusted for non-recurring items related to weather events, Moy Park acquisition and Exchange Rate fluctuations.
  • Adjusted EBITDA of $241.0 million (or an 8.8% margin).

 

Unaudited (2), In Millions, Except Per Share and Percentages
 
  Fourteen
Weeks
Ended
  Thirteen
Weeks
Ended
      Fifty-Three
Weeks
Ended
  Fifty-Two
Weeks
Ended
   
  Dec 31, 2017   Dec 25, 2016   Y/Y
Change
  Dec 31, 2017   Dec 25, 2016   Y/Y
Change
Net Sales $2,742.4    $2,370.9   +15.7%   $10,767.9   $9,878.6   +9.0%
GAAP EPS $0.54    $0.28    +92.9%   $2.79   $1.73   +61.3%
Operating Income $155.0    $147.0    +5.4%   $1,072.3   $792.1   +35.4%
Adjusted EBITDA (1) $241.0    $205.4   +17.3%   $1,388.0   $1,029.7   +34.8%
Adjusted EBITDA Margin (1)  8.8%    8.7%   +0.1pts    12.9%   10.4%   +2.5pts
 
(1) Reconciliations for non-GAAP measures are provided in subsequent sections within this release.
(2) Figures have been adjusted to include full-quarter and year of Moy Park, in accordance to U.S. GAAP.
 

 

“We generated strong, well-balanced consolidated performance in 2017. Our U.S. and Mexico operations were solid despite logistical challenges in Q4 due to the after-effects from natural events in Puerto Rico, Mexico and the U.S., while our newly acquired U.K. and continental Europe operations were consistent. The performance once again demonstrated the strength and diversity of our portfolio of bird sizes, and is what fundamentally differentiates us from the competition, giving us the potential to reduce volatility and generate higher margins over time. While small-bird and tray-pack have remained strong during Q4, conditions in the commodity markets declined in-line with seasonality but are already recovering well in the new year, indicating the continuation of chicken demand as the protein of choice in domestic and international markets. Facing significant challenges, we are very proud of our team members who had worked tirelessly to continue the operations of our facilities while assisting with rebuilding the local communities,” stated Bill Lovette, Chief Executive Officer of Pilgrim's.

“We completed the announced strategic capital investment improvements, including Sanford, NC and Moorefield, WV, which will diversify our portfolio by improving mix, reduce the impact of commodity markets, and further raise our margin profile. The Sanford conversion from commodity to organic tray-pack and the acquisition of GNP bring us leadership in premium-branded and NAE chickens while fulfilling our strategy of creating a portfolio of differentiated products to key customers.”

“We are continuing to improve the performance of the GNP operations. Margins have substantially increased since the acquisition just over a year ago and have reached parity with our legacy business during Q4. The integration is going well and we have extracted significant operating and product synergies, and are also preparing to expand the distribution of our premium Just Bare Brand. Combined with the success in improving the profitability of our acquired Mexican operations, we believe we have the methodology and the experienced personnel required to grow the operating and financial performance of our U.K. and continental Europe business.”

Conference Call Information

A conference call to discuss Pilgrim’s quarterly results will be held tomorrow, February 15, 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/ppc180215.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 May 15, 2018.

About Pilgrim’s Pride

Pilgrim’s employs approximately 51,300 people and operates chicken processing plants and prepared-foods facilities in 14 states, Puerto Rico, Mexico, the U.K, Ireland 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
 
    December 31, 2017   December 25, 2016
    (Unaudited)    
    (In thousands, except share and par value data)
Cash and cash equivalents   $ 581,510     $ 292,544  
Restricted cash and cash equivalents   8,021     4,979  
Trade accounts and other receivables, less allowance for doubtful accounts   565,478     445,553  
Account receivable from related parties   2,951     4,010  
Inventories   1,255,070     975,608  
Prepaid expenses and other current assets   102,550     81,932  
Assets held for sale   708     5,259  
Total current assets   2,516,288     1,809,885  
Other long-lived assets   18,165     19,260  
Identified intangible assets, net   617,163     471,591  
Goodwill   1,001,889     887,221  
Property, plant and equipment, net   2,095,147     1,833,985  
Total assets   $ 6,248,652     $ 5,021,942  
         
Accounts payable   $ 762,444     $ 790,378  
Accounts payable to related parties   2,889     4,468  
Accrued expenses   417,342     347,021  
Income taxes payable   222,073     27,578  
Current maturities of long-term debt   47,775     15,712  
Total current liabilities   1,452,523     1,185,157  
Long-term debt, less current maturities   2,635,617     1,396,124  
Deferred tax liabilities   208,492     251,807  
Other long-term liabilities   96,359     102,722  
Total liabilities   4,392,991     2,935,810  
Commitments and contingencies        
Preferred stock, $.01 par value, 50,000,000 shares authorized; no shares issued        
Common stock, $.01 par value, 800,000,000 shares authorized; 260,167,881 and
  259,682,000 shares issued at year-end 2017 and year-end 2016, respectively;
  248,752,508 and 249,046,139 shares outstanding at year-end 2017 and year-end 
  2016, respectively
  2,602     307,288  
Treasury stock, at cost, 11,415,373 shares at year-end 2017   (231,758 )   (217,117 )
Additional paid-in capital   1,932,509     3,100,332  
Retained earnings (accumulated deficit)   173,943     (782,785 )
Accumulated other comprehensive loss   (31,140 )   (329,858 )
Total Pilgrim’s Pride Corporation stockholders’ equity   1,846,156     2,077,860  
Noncontrolling interest   9,505     8,272  
Total stockholders’ equity   1,855,661     2,086,132  
Total liabilities and stockholders' equity   $ 6,248,652     $ 5,021,942  

 

 
PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
    Fourteen Weeks Ended   Thirteen Weeks Ended   Fifty-Three Weeks Ended   Fifty-Two Weeks Ended
    December 31, 2017   December 25, 2016   December 31, 2017   December 25, 2016
    (In thousands, except per share data)
Net sales   $ 2,742,352     $ 2,370,883     $ 10,767,863     $ 9,878,564  
Cost of sales   2,480,548     2,142,013     9,296,249     8,774,581  
Gross profit   261,804     228,870     1,471,614     1,103,983  
Selling, general and administrative expense   105,508     81,046     389,517     310,832  
Administrative restructuring charges   1,279     790     9,775     1,069  
Operating income   155,017     147,034     1,072,322     792,082  
Interest expense, net of capitalized interest   40,868     17,156     107,183     75,636  
Interest income   (4,130 )   (301 )   (7,730 )   (2,301 )
Foreign currency transaction loss (gain)   (159 )   5,824     (2,659 )   4,055  
Miscellaneous, net   (1,340 )   (2,017 )   (6,538 )   (9,344 )
Income before income taxes   119,778     126,372     982,066     724,036  
Income tax expense   (14,147 )   40,940     263,899     243,919  
Net income   133,925     85,432     718,167     480,117  
Less: Net income (loss) from Granite holdings Sarl prior to acquisition by PPC       15,283     23,486     40,388  
Less: Net income (loss) attributable to noncontrolling interests   (412 )   (469 )   102     (803 )
Net income attributable to Pilgrim’s Pride Corporation   $ 134,337     $ 70,618     $ 694,579     $ 440,532  
                 
Weighted average shares of common stock outstanding:                
Basic   248,753     250,853     248,738     253,669  
Effect of dilutive common stock equivalents   241     542     233     457  
Diluted   248,994     251,395     248,971     254,126  
                 
Net income attributable to Pilgrim's Pride Corporation per share of
  common stock outstanding:
               
Basic   $ 0.54     $ 0.28     $ 2.79     $ 1.74  
Diluted   $ 0.54     $ 0.28     $ 2.79     $ 1.73  

 

 
PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
    Fifty-Three Weeks Ended   Fifty-Two Weeks Ended
    December 31, 2017   December 25, 2016
    (In thousands)
Cash flows from operating activities:        
Net income   $ 718,167     $ 480,117  
Adjustments to reconcile net income to cash provided by operating
  activities:
       
Depreciation and amortization   277,792     231,708  
Asset impairment   5,156     790  
Foreign currency transaction gain related to borrowing arrangements   (1,387 )    
Amortization of bond premium   (180 )    
Gain on property disposals   (506 )   (8,914 )
Loss (gain) on equity method investments   (59 )   452  
Share-based compensation   3,020     6,102  
Deferred income tax expense (benefit)   (49,963 )   (5,034 )
Changes in operating assets and liabilities:        
Trade accounts and other receivables   (82,169 )   (32,428 )
Inventories   (207,399 )   (33,083 )
Prepaid expenses and other current assets   (14,827 )   19,270  
Accounts payable and accrued expenses   (22,827 )   75,893  
Income taxes   188,120     75,238  
Long-term pension and other postretirement obligations   (10,864 )   (10,165 )
Other   (753 )   (4,584 )
    Cash provided by operating activities   801,321     795,362  
Cash flows from investing activities:        
Acquisitions of property, plant and equipment   (339,872 )   (340,960 )
Business acquisition   ( 658,520 )    
Proceeds from property disposals   4,475     13,375  
Proceeds from settlement of life insurance contract   1,845      
    Cash used in investing activities   ( 992,072 )   (327,585 )
Cash flows from financing activities:        
Proceeds from notes payable to banks       36,838  
Payments on note payable to bank       (65,564 )
Payment of note payable to affiliate   (753,512 )    
Proceeds from long-term debt   1,871,818     593,015  
Payments on long-term debt   (628,677 )   (570,015 )
Proceeds from equity contribution under Tax Sharing Agreement between JBS USA Food Company Holdings and Pilgrim's Pride Corporation   5,038     3,690  
Tax benefit related to share-based compensation        
Contributions from noncontrolling interests       7,252  
Payment of capitalized loan costs   (13,631 )   (693 )
Purchase of common stock under share repurchase program   (14,641 )   (117,884 )
Purchase of common stock from retirement plan participants       (73 )
Payment of cash dividends       (714,785 )
    Cash provided by financing activities   466,395     (828,219 )
Effect of exchange rate changes on cash and cash equivalents   16,364     (38,587 )
Increase in cash and cash equivalents   292,008     (399,029 )
Cash and cash equivalents, beginning of period   297,523     696,552  
Cash and cash equivalents, end of period   $ 589,531     $ 297,523  
Supplemental Disclosure Information:        
Interest paid (net of amount capitalized)   $ 81,260     $ 69,857  
Income taxes paid   122,956     161,026  
             

 

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)   Fourteen Weeks
Ended
  Thirteen Weeks
Ended
  Fifty-Three Weeks
Ended
  Fifty-Two Weeks
Ended
    December 31, 2017   December 25, 2016   December 31, 2017   December 25, 2016
    (In thousands)
Net income   $ 133,925     $ 85,432     $ 718,167     $ 480,117  
Add:                
Interest expense, net   36,738     16,855     99,453     73,335  
Income tax expense (benefit)   (14,147 )   40,940     263,899     243,919  
Depreciation and amortization   73,167     57,580     277,792     231,708  
Minus:                
Amortization of capitalized financing costs   2,839     2,465     5,968     5,324  
EBITDA   226,844     198,342     1,353,343     1,023,755  
Add:                
Foreign currency transaction losses (gains)   (159 )   5,824     (2,659 )   4,055  
Acquisition charges   4,567         19,606      
Restructuring charges   1,279     790     9,775     1,069  
Puerto Rico hurricane impact   8,066         8,066      
Minus:                
Net income (loss) attributable to noncontrolling interest   (412 )   (469 )   102     (803 )
Adjusted EBITDA   $ 241,009     $ 205,425     $ 1,388,029     $ 1,029,682  
                                 

 

 
PILGRIM'S PRIDE CORPORATION
Reconciliation of EBITDA Margin
 
(Unaudited)   Fourteen Weeks Ended   Thirteen Weeks Ended   Fifty-Three Weeks Ended   Fifty-Two Weeks Ended   Fourteen Weeks Ended   Thirteen Weeks Ended   Fifty-Three Weeks Ended   Fifty-Two Weeks Ended
    December 31, 2017   December 25, 2016   December 31, 2017   December 25, 2016   December 31, 2017   December 25, 2016   December 31, 2017   December 25, 2016
  (In thousands)
Net income   $ 133,925     $ 85,432     $ 718,167     $ 480,117     4.88 %   3.60 %   6.67 %   4.86 %
Add:                                
Interest expense, net   36,738     16,855     99,453     73,335     1.34 %   0.71 %   0.92 %   0.74 %
Income tax expense (benefit)   (14,147 )   40,940     263,899     243,919     (0.52 )%   1.73 %   2.45 %   2.47 %
Depreciation and amortization   73,167     57,580     277,792     231,708     2.67 %   2.43 %   2.58 %   2.35 %
Minus:                                
Amortization of capitalized financing costs   2,839     2,465     5,968     5,324     0.10 %   0.10 %   0.06 %   0.05 %
EBITDA   226,844     198,342     1,353,343     1,023,755     8.27 %   8.37 %   12.57 %   10.36 %
Add:                                
Foreign currency transaction losses (gains)   (159 )   5,824     (2,659 )   4,055     (0.01 )%   0.25 %   (0.02 )%   0.04 %
Acquisition charges   4,567         19,606         0.17 %   %   0.18 %   %
Restructuring charges   1,279     790     9,775     1,069     0.05 %   0.03 %   0.09 %   0.01 %
Puerto Rico hurricane impact   8,066         8,066         0.29 %   %   0.07 %   %
Minus:                                
  Net income (loss) attributable to noncontrolling interest   (412 )   (469 )   102     (803 )   (0.02 )%   (0.02 )%   %   (0.01 )%
Adjusted EBITDA   $ 241,009     $ 205,425     $ 1,388,029     $ 1,029,682     8.79 %   8.66 %   12.89 %   10.42 %
                                 
Net Revenue:   $ 2,742,352     $ 2,370,883     $ 10,767,863     $ 9,878,564     $ 2,742,352     $ 2,370,883     $ 10,767,863     $ 9,878,564  
                                                                 

 

A reconciliation of GAAP operating income to adjusted operating income is as follows:

 
PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted Operating Income
(Unaudited)
               
  Fourteen Weeks Ended   Thirteen Weeks Ended   Fifty-Three Weeks Ended   Fifty-Two Weeks Ended
  December 31, 2017   December 25, 2016   December 31, 2017   December 25, 2016
  (In thousands)
GAAP operating income (US operations) $ 122,370     $ 92,279     $ 841,491     $ 572,559  
Administrative restructuring charges 529     790     9,025     1,069  
Acquisition charges 4,567         19,606      
Puerto Rico hurricane impact 8,066         8,066      
Adjusted operating income (US operations) $ 135,532     $ 93,069     $ 878,188     $ 573,628  
               
Adjusted operating income margin (US operations) 7.19 %   5.82 %   11.80 %   8.60 %
               
GAAP operating income (Mexico operations) $ 7,390     $ 32,000     $ 153,631     $ 140,856  
Foreign exchange 6,100         (13,000 )    
Adjusted operating income (Mexico operations) $ 13,490     $ 32,000     $ 140,631     $ 140,856  
               
Adjusted operating income margin (Mexico operations) 4.04 %   10.35 %   10.59 %   11.18 %
               
GAAP operating income (Europe operations) $ 25,231     $ 22,731     $ 77,105     $ 78,572  
Administrative restructuring charges 750         750      
Adjusted operating income (Europe operations) $ 25,981     $ 22,731     $ 77,855     $ 78,572  
               
Adjusted operating income margin (Europe operations) 4.97 %   4.91 %   3.90 %   4.03 %
                       

 

 
PILGRIM'S PRIDE CORPORATION
Supplementary Selected Segment and Geographic Data
                 
    Fourteen Weeks
Ended
  Thirteen Weeks
Ended
  Fifty-Three Weeks
Ended
  Fifty-Two Weeks
Ended
    December 31, 2017   December 25, 2016   December 31, 2017   December 25, 2016
    (Unaudited)            
    (In thousands)
Sources of net sales by country of origin:                
US:   $ 1,886,133     $ 1,599,052     $ 7,443,222     $ 6,671,403  
Europe:   522,465     462,733     1,996,319     1,947,441  
Mexico   333,754     309,098     1,328,322     1,259,720  
Total net sales:   $ 2,742,352     $ 2,370,883     $ 10,767,863     $ 9,878,564  
                 
Sources of cost of sales by country of origin:                
US:   $ 1,691,586     $ 1,458,670     $ 6,348,411     $ 5,929,318  
Europe:   472,016     414,576     1,808,139     1,757,818  
Mexico   316,972     268,791     1,139,794     1,087,540  
Elimination:   (26 )   (24 )   (95 )   (95 )
Total cost of sales:   $ 2,480,548     $ 2,142,013     $ 9,296,249     $ 8,774,581  
                 
Sources of gross profit by country of origin:                
US:   $ 194,549     $ 140,382     $ 1,094,811     $ 742,085  
Europe:   50,446     48,157     188,180     189,623  
Mexico   16,783     40,306     188,528     172,180  
Elimination:   26     25     95     95  
Total gross profit:   $ 261,804     $ 228,870     $ 1,471,614     $ 1,103,983  
                 
Sources of operating income by country of origin:                
US:   $ 122,370     $ 92,279     $ 841,491     $ 572,559  
Europe:   25,231     22,731     77,105     78,572  
Mexico   7,390     32,000     153,631     140,856  
Elimination:   26     24     95     95  
Total operating income:   $ 155,017     $ 147,034     $ 1,072,322     $ 792,082  

 

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Source: Pilgrim's Pride Corporation