INVESTOR RELATIONS
<< Back
Oct 31, 2018

Pilgrim’s Pride Reports Net Sales of $2.70 Billion, Operating Income of $85 Million and GAAP EPS of $0.12 for the Third Quarter of 2018

GREELEY, Colo., Oct. 31, 2018 (GLOBE NEWSWIRE) -- Pilgrim’s Pride Corporation (NASDAQ: PPC) reports third quarter 2018 financial results.

Third Quarter Highlights

  • Net Sales of $2.70 billion, -3.2% vs same quarter last year. Net Income of $29.3 million.
  • Operating Income margins of 4.0% in U.S., -4.0% in Mexico and 5.4% in Europe operations, respectively.
  • Adjusted EBITDA of $156.0 million (or a 5.8% margin) and Adjusted EPS of $0.21, for one-time tax and currency translation.
  • Our diverse portfolio of differentiated products and Key Customer strategy have continued to generate a more resilient performance and moderate margin impact compared to peers despite one of the most difficult pricing environment ever in U.S. commodity chicken, a slowdown in Mexico and feed cost pressures in Europe. Non-commodity U.S. chicken, including organic and small-birds, continues to perform relatively better to help mitigate the results of our U.S. business.
  • Integration of European business is tracking better than expectations and ahead of our $50 million synergy target for the next two years, supporting a margin increase of 130bps over last year while still retaining its consistency and offsetting the volatility of the other businesses.
  • Very challenging market environment during the quarter in Mexico, but is already starting to recover and we remain focused on operational excellence and offering customized products to satisfy growing demand for chicken. Investments into premium Pilgrim’s brand is gaining pace and producing better than expected results.
Unaudited, In Millions, Except Per Share and Percentages
  Thirteen Weeks  Ended
  Thirteen Weeks Ended
      Thirty-Nine Weeks Ended
  Thirty-Nine Weeks Ended
   
  Sep 30, 2018   Sep 24, 2017   Y/Y Change   Sep 30, 2018   Sep 24, 2017   Y/Y Change
Net Sales $2,697.6   $2,793.9   -3.4%   8,281.0   $8,025.5   +3.2%
GAAP EPS $0.12   $0.93   -87.1%   1.03   $2.25   -54.2%
Operating Income $85.3   $372.2   -77.1%   472.1   $917.3   -48.5%
Adjusted EBITDA (1) $156.0   $463.6   -66.3%   687.1   $1,147.0   -40.1%
Adjusted EBITDA Margin (1) 5.8%   16.6%   -10.8pts   8.3   14.3%   -6.0pts

(1)  Reconciliations for non-GAAP measures are provided in subsequent sections within this release.

“During Q3 conditions in the U.S. markets continued to be mixed, with the commodity segment experiencing counter seasonal and weak pricing whereas the less commodity businesses better balanced. Despite challenging market conditions in commodity chicken, the investments we made over the past few years, the recent acquisitions and our capture of operational improvements, are adding diversification and differentiation to the evolution of our portfolio to deliver more resilient performance regardless of specific market conditions,” stated Bill Lovette, Chief Executive Officer of Pilgrim's.

“In Europe, the integration is tracking better than expectations and we are slightly ahead of our $50 million synergy target for the next two years, supporting a margin increase of 130bps over last year. The results, given the adverse scenario of feed inputs, are a proof of our more stable business model, while our team members improved the operations and contributed to the strong performance by continuing to focus on cost optimization, cost control, excellent customer relationships, synergy capture and a culture of constant innovation while still maintaining a consistent margin performance of the business. As part of the integration activities, our team is driving for an increased focus on utilization of the whole chicken by opening up more opportunities and diversifying into new markets to improve the cutout.”

“Supply in Mexico Q3 grew more than expected as a reaction to strong prices in the first half and also as a result of outstanding growing conditions, impacting market prices. Prices are already recovering and while Mexico can be volatile quarter to quarter, historically our operations have produced very good margin performance on a full-year basis and we expect this trend to continue in the future. 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 expanded margins.”

Conference Call Information

A conference call to discuss Pilgrim’s quarterly results will be held tomorrow, November 1, 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/ppc181101.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 February 1, 2019.

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., 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
(Unaudited)
 
    September 30, 2018   December 31, 2017
    (In thousands)
Cash and cash equivalents   $ 401,306     $ 581,510  
Restricted cash   14,534     8,021  
Trade accounts and other receivables, less allowance for doubtful accounts   559,559     565,478  
Accounts receivable from related parties   652     2,951  
Inventories   1,182,962     1,255,070  
Income taxes receivable   4,568      
Prepaid expenses and other current assets   116,536     102,550  
Assets held for sale   2,616     708  
Total current assets   2,282,733     2,516,288  
Deferred tax assets   3,167      
Other long-lived assets   17,162     18,165  
Identified intangible assets, net   581,119     617,163  
Goodwill   971,611     1,001,889  
Property, plant and equipment, net   2,120,646     2,095,147  
Total assets   $ 5,976,438     $ 6,248,652  
         
Accounts payable   $ 817,927     $ 733,027  
Accounts payable to related parties   6,795     2,889  
Revenue contract liability   28,873     36,607  
Accrued expenses and other current liabilities   403,146     410,152  
Income taxes payable   42,369     222,073  
Current maturities of long-term debt   24,026     47,775  
Total current liabilities   1,323,136     1,452,523  
Long-term debt, less current maturities   2,302,194     2,635,617  
Noncurrent income taxes payable   7,731      
Deferred tax liabilities   205,604     208,492  
Other long-term liabilities   70,230     96,359  
Total liabilities   3,908,895     4,392,991  
Common stock   2,604     2,602  
Treasury stock   (231,758 )   (231,758 )
Additional paid-in capital   1,941,766     1,932,509  
Retained earnings   429,212     173,943  
Accumulated other comprehensive income (loss)   (83,548 )   (31,140 )
Total Pilgrim’s Pride Corporation stockholders’ equity   2,058,276     1,846,156  
Noncontrolling interest   9,267     9,505  
Total stockholders’ equity   2,067,543     1,855,661  
Total liabilities and stockholders’ equity   $ 5,976,438     $ 6,248,652  


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(Unaudited)
                 
    Thirteen Weeks Ended   Thirty-Nine Weeks Ended
    September 30, 2018   September 24, 2017   September 30, 2018   September 24, 2017
    (In thousands, except per share data)
Net sales   $ 2,697,604     $ 2,793,885     $ 8,280,995     $ 8,025,511  
Cost of sales   2,527,863     2,315,301     7,549,367     6,815,701  
Gross profit   169,741     478,584     731,628     1,209,810  
Selling, general and administrative expense   84,138     102,191     257,396     284,009  
Administrative restructuring charges   257     4,147     2,181     8,496  
Operating income   85,346     372,246     472,051     917,305  
Interest expense, net of capitalized interest   35,334     24,636     125,901     66,315  
Interest income   (4,241 )   (2,128 )   (10,665 )   (3,600 )
Foreign currency transaction losses (gains)   (6,711 )   (888 )   (2,802 )   (2,500 )
Miscellaneous, net   653     (1,083 )   (1,781 )   (5,198 )
Income before income taxes   60,311     351,709     361,398     862,288  
Income tax expense   30,848     113,396     106,367     278,046  
Net income   29,463     238,313     255,031     584,242  
Less: Net income from Granite Holdings Sàrl prior to acquisition by Pilgrim's Pride Corporation       6,093         23,486  
Less: Net income (loss) attributable to noncontrolling interests   153     (460 )   (238 )   514  
Net income attributable to Pilgrim’s Pride Corporation   $ 29,310     $ 232,680     $ 255,269     $ 560,242  
                 
Weighted average shares of common stock outstanding:                
Basic   248,981     248,753     248,933     248,732  
Effect of dilutive common stock equivalents   198     235     143     230  
Diluted   249,179     248,988     249,076     248,962  
                 
Net income attributable to Pilgrim's Pride Corporation per share of
  common stock outstanding:
               
Basic   $ 0.12     $ 0.94     $ 1.03     $ 2.25  
Diluted   $ 0.12     $ 0.93     $ 1.03     $ 2.25  


PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
 
    Thirty-Nine Weeks Ended
    September 30, 2018   September 24, 2017
    (In thousands)
Cash flows from operating activities:        
Net income   $ 255,031     $ 584,242  
Adjustments to reconcile net income to cash provided by operating activities:        
Depreciation and amortization   211,450     204,625  
Noncash loss on early extinguishment of debt   6,037      
Foreign currency transaction loss related to borrowing arrangements   4,221     6,830  
Amortization of premium related to Senior Notes   (501 )    
Accretion of discount related to Senior Notes   567      
Impairment expense   884     4,947  
Loss (gain) on property disposals   (452 )   (540 )
Gain on equity method investment   (48 )   (44 )
Share-based compensation   9,259     2,454  
Deferred income tax expense (benefit)   (2,147 )   25,768  
Changes in operating assets and liabilities:        
Trade accounts and other receivables   (3,437 )   (146,477 )
Inventories   64,787     (149,806 )
Prepaid expenses and other current assets   (15,428 )   (15,377 )
Accounts payable, accrued expenses and other current liabilities   78,107     (36,105 )
Income taxes   (175,569 )   149,063  
Long-term pension and other postretirement obligations   (9,087 )   (9,660 )
Other operating assets and liabilities   1,606     (1,429 )
Cash provided by operating activities   425,280     618,491  
Cash flows from investing activities:        
Acquisitions of property, plant and equipment   (231,875 )   (258,364 )
Business acquisition       (658,520 )
Proceeds from property disposals   2,707     2,585  
Cash used in investing activities   (229,168 )   (914,299 )
Cash flows from financing activities:        
Proceeds from revolving line of credit and long-term borrowings   703,090     1,013,662  
Payments on revolving line of credit, long-term borrowings and capital lease obligations   (1,071,441 )   (609,678 )
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   (11,081 )   (4,550 )
Purchase of common stock under share repurchase program       (14,641 )
Cash provided by (used in) financing activities   (373,874 )   389,831  
Effect of exchange rate changes on cash and cash equivalents   4,071     15,084  
Increase (decrease) in cash, cash equivalents and restricted cash   (173,691 )   109,107  
Cash, cash equivalents and restricted cash, beginning of period   589,531     297,523  
Cash, cash equivalents and restricted cash, end of period   $ 415,840     $ 406,630  

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   Thirty-Nine Weeks Ended
  September 30, 2018   September 24, 2017   September 30, 2018   September 24, 2017
  (In thousands)
Net income $ 29,463     $ 238,313     $ 255,031     $ 584,242  
Add:              
Interest expense, net 31,093     22,508     115,236     62,715  
Income tax expense (benefit) 30,848     113,396     106,367     278,046  
Depreciation and amortization 71,971     71,763     211,450     204,625  
Minus:              
Amortization of capitalized financing costs 944     1,181     4,337     3,129  
EBITDA 162,431     444,799     683,747     1,126,499  
Add:              
Foreign currency transaction losses (gains) (6,711 )   (888 )   (2,802 )   (2,500 )
Acquisition charges 16     15,039     320     15,039  
Restructuring charges 257     4,147     2,181     8,496  
Non-recurring expense 164         3,462      
Minus:              
Net income (loss) attributable to noncontrolling interest 153     (460 )   (238 )   514  
Adjusted EBITDA $ 156,004     $ 463,557     $ 687,146     $ 1,147,020  


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   Thirty-Nine Weeks Ended   Thirteen Weeks Ended   Thirty-Nine Weeks Ended
    September 30, 2018   September 24, 2017   September 30, 2018   September 24, 2017   September 30, 2018   September 24, 2017   September 30, 2018   September 24, 2017
    (In thousands)
Net income   $ 29,463     $ 238,313     $ 255,031     $ 584,242     1.09 %   8.53 %   3.08 %   7.28 %
Add:                                
Interest expense, net   31,093     22,508     115,236     62,715     1.15 %   0.81 %   1.39 %   0.78 %
Income tax expense   30,848     113,396     106,367     278,046     1.14 %   4.06 %   1.28 %   3.46 %
Depreciation and amortization   71,971     71,763     211,450     204,625     2.67 %   2.57 %   2.55 %   2.55 %
Minus:                                
Amortization of capitalized financing costs   944     1,181     4,337     3,129     0.03 %   0.04 %   0.05 %   0.04 %
EBITDA   162,431     444,799     683,747     1,126,499     6.02 %   15.92 %   8.25 %   14.03 %
Add:                                
Foreign currency transaction losses (gains)   (6,711 )   (888 )   (2,802 )   (2,500 )   (0.25 )%   (0.03 )%   (0.03 )%   (0.03 )%
Acquisition charges   16     15,039     320     15,039     %   0.54 %   %   0.19 %
Restructuring charges   257     4,147     2,181     8,496     0.01 %   0.15 %   0.03 %   0.11 %
Non-recurring expense   164         3,462         0.01 %   %   0.04 %   %
Minus:                                
Net income (loss) attributable to noncontrolling interest   153     (460 )   (238 )   514     0.01 %   (0.02 )%   %   0.01 %
Adjusted EBITDA   $ 156,004     $ 463,557     $ 687,146     $ 1,147,020     5.78 %   16.59 %   8.30 %   14.28 %
                                 
Net Revenue   $ 2,697,604     $ 2,793,885     $ 8,280,995     $ 8,025,511     $ 2,697,604     $ 2,793,885     $ 8,280,995     $ 8,025,511  


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 Net Income
(Unaudited)
                 
    Thirteen Weeks Ended   Thirty-Nine Weeks Ended
    September 30,
 2018
  September 24,
 2017
  September 30,
 2018
  September 24,
 2017
    (In thousands, except per share data)
Net income (loss) attributable to Pilgrim's Pride Corporation   $ 29,310     $ 232,680     $ 255,269     $ 560,242  
Adjustments, net of tax:                
Loss on early extinguishment of debt   929     113     13,050     113  
Acquisition and restructuring charges   213     11,336     1,948     14,282  
Foreign currency transaction losses (gains)   (5,226 )   (602 )   (2,182 )   (1,693 )
    $ 25,226     $ 243,527     $ 268,085     $ 572,944  
U.S. Tax Cuts & Jobs Act transition tax   26,400         26,400      
Adjusted net income (loss)   $ 51,626     $ 243,527     $ 294,485     $ 572,944  
Weighted average diluted shares of common stock outstanding   249,179     248,988     249,076     248,962  
Adjusted net income (loss) per common diluted share   $ 0.21     $ 0.98     $ 1.18     $ 2.30  


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   Thirty-Nine Weeks Ended
  September 30,
2018
  September 24,
2017
  September 30,
2018
  September 24,
2017
  (In thousands, except per share data)
GAAP EPS $ 0.12     $ 0.93     $ 1.02     $ 2.25  
Adjustments, net of tax:              
Loss on early extinguishment of debt         0.05      
Acquisition and restructuring charges     0.05     0.01     0.06  
Foreign currency transaction losses (gains) (0.02 )       (0.01 )   (0.01 )
  $ 0.10     $ 0.98     $ 1.07     $ 2.30  
U.S. Tax Cuts & Jobs Act transition tax 0.11         0.11      
Adjusted EPS $ 0.21     $ 0.98     $ 1.18     $ 2.30  
               
Weighted average diluted shares of common stock outstanding 249,179     248,988     249,076     248,962  


PILGRIM'S PRIDE CORPORATION
Supplementary Selected Segment and Geographic Data
                 
(Unaudited)   Thirteen Weeks Ended   Thirty-Nine Weeks Ended
    September 30, 2018   September 24, 2017   September 30, 2018   September 24, 2017
    (In thousands)
Sources of net sales by country of origin:                
US   $ 1,864,169     $ 1,938,542     $ 5,604,709     $ 5,557,089  
Europe   526,722     514,325     1,634,125     1,473,854  
Mexico   306,713     341,018     1,042,161     994,568  
Total net sales   $ 2,697,604     $ 2,793,885     $ 8,280,995     $ 8,025,511  
                 
Sources of cost of sales by country of origin:                
US   $ 1,732,803     $ 1,561,333     $ 5,137,049     $ 4,656,825  
Europe   485,435     467,374     1,500,994     1,336,123  
Mexico   309,650     286,617     911,358     822,822  
Elimination   (25 )   (23 )   (34 )   (69 )
Total cost of sales   $ 2,527,863     $ 2,315,301     $ 7,549,367     $ 6,815,701  
                 
Sources of gross profit by country of origin:                
US   $ 131,366     $ 377,209     $ 467,660     $ 900,262  
Europe   41,288     46,951     133,131     137,734  
Mexico   (2,938 )   54,401     130,803     171,745  
Elimination   25     23     34     69  
Total gross profit   $ 169,741     $ 478,584     $ 731,628     $ 1,209,810  
                 
Sources of operating income by country of origin:                
US   $ 74,206     $ 307,962     $ 300,960     $ 719,121  
Europe   23,470     18,569     68,545     51,874  
Mexico   (12,355 )   45,692     102,512     146,241  
Elimination   25     23     34     69  
Total operating income   $ 85,346     $ 372,246     $ 472,051     $ 917,305  

Pilgrims+Brands.png

Source: Pilgrim's Pride Corporation