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Pilgrim's Pride Reports Operating Income of $164 Million with an Operating Margin of 8.1% for the Third Quarter of 2016

Oct 26, 2016

GREELEY, Colo., Oct. 26, 2016 (GLOBE NEWSWIRE) -- Pilgrim's Pride Corporation (NASDAQ:PPC) reports third quarter 2016 financial results.

Third Quarter Highlights

  • Net Sales of $2.03 billion.
  • Net Income of $98.7 million, GAAP EPS of $0.39.
  • Operating Income margins of 8.2% in U.S. and 7.4% in Mexico operations, respectively.
  • Adjusted EBITDA of $210.8 million (or a 10.4% margin).
  • Cash Flow From Operations of $242.1 million.
  • Conversion of a commodity markets facility into USDA-certified organic production on schedule to begin in Q1 2017.
  • Planned conversion of an additional case-ready facility to ABF, veg-fed production to support growth of key customers and further enhance portfolio differentiation, to put us more than half way to our 25% ABF target by 2018.
  • On-going ramp up of largest Prepared Foods facility to full capacity, with a target completion by end of Q1 2017, together with start-up of a new fully cooked line to strengthen and grow Prepared Foods Operations.
 
Unaudited, In Millions, Except Per Share and Percentages
 Thirteen Weeks Ended
 Sep 25, 2016 Sep 27, 2015 Change
Net Sales$2,031.7  $2,112.5   -3.8%
GAAP EPS$0.39  $0.53   -26.4%
Operating Income$163.8  $231.1    -29.1%
Adjusted EBITDA (1)$210.8  $274.3   -23.1%
Adjusted EBITDA Margin (1) 10.4%  13.0% -2.6pts

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

"During Q3, our Fresh business continued to perform well driven by our differentiated portfolio strategy of having presence in all three bird sizes and strong relationships with key customers. Retail demand for our birds remained robust despite concerns about greater availability of other competing proteins. Within exports, volumes are also improving from a year ago, which improves value for the back half of the bird, and supportive of the overall cutout," stated Bill Lovette, Chief Executive Officer of Pilgrim's.

"The conversion of our existing facility to certified USDA organic chicken production is proceeding well and we plan to have the first chicken to market in Q1 of 2017. Additionally, we are starting work on converting one of our case-ready plants to produce ABF, veg-fed chicken. Together with our prior announcements on organic and ABF Fresh chicken as well as further processed products, we believe the latest conversion reinforces our strategy to better resonate with new consumer trends for more natural products while adding further value to our portfolio and supporting the growth of key customers. Furthermore, these investments signify our commitment to look for new sources of potential earnings driver while lessening the impact of volatile commodity markets in the long run."

"Market environment in Mexico during Q3 followed its normal seasonality and our team members were relentless and continued to improve on the operating performance of the legacy business as well as implement synergies with the newly acquired assets. Despite the impact of unfavorable grain cost and exchange rate, our profitability in Mexico has remained steady compared to last year, which is a positive sign of the potential leverage we have within our operations. The outlook for Mexico remains very strong and we will continue to grow our offerings in the region, together with leveraging our strong fresh brand to leverage the growth of our Prepared Foods business."

Conference Call Information

A conference call to discuss Pilgrim's quarterly results will be held tomorrow, October 27, 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/ppc161027.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 January 27, 2017.

About Pilgrim's Pride

Pilgrim's employs approximately 38,200 people and operates chicken processing plants and prepared-foods facilities in 12 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
 
  September 25, 2016 December 27, 2015
  (Unaudited)  
  (In thousands)
Cash and cash equivalents $85,994  $439,638 
Trade accounts and other receivables, less allowance for doubtful accounts 350,810  348,994 
Account receivable from related parties 3,491  2,668 
Inventories 796,808  801,357 
Income taxes receivable 51,057  71,410 
Prepaid expenses and other current assets 75,686  75,602 
Assets held for sale 6,049  6,555 
Total current assets 1,369,895  1,746,224 
Other long-lived assets 15,887  15,672 
Identified intangible assets, net 40,548  47,453 
Goodwill 125,607  156,565 
Property, plant and equipment, net 1,450,352   1,352,529 
Total assets $3,002,289  $3,318,443 
     
Notes payable to banks $—  $28,726 
Accounts payable 494,076  482,954 
Account payable to related parties 9,689  7,000 
Accrued expenses and other current liabilities 297,214  314,966 
Income taxes payable 43,258  13,228 
Current maturities of long-term debt 92  86 
Total current liabilities 844,329  846,960 
Long-term debt, less current maturities 1,004,840  985,509 
Deferred tax liabilities 144,423  131,882 
Other long-term liabilities 91,890  92,282 
Total liabilities 2,085,482  2,056,633 
Common stock 2,597  2,597 
Treasury stock (119,566) (99,233)
Additional paid-in capital 1,681,005  1,675,674 
Accumulated deficit (591,253) (261,252)
Accumulated other comprehensive loss (65,848) (58,930)
Total Pilgrim's Pride Corporation stockholders' equity 906,935  1,258,856 
Noncontrolling interest 9,872  2,954 
Total stockholders' equity 916,807  1,261,810 
Total liabilities and stockholders' equity $3,002,289  $3,318,443 
         


PILGRIM'S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
  Thirteen Weeks Ended Thirty-Nine Weeks Ended
  September 25, 2016 September 27, 2015 September 25, 2016 September 27, 2015
  (In thousands, except per share data)
Net sales  $2,031,721  $2,112,529  $6,022,973  $6,219,324 
Cost of sales 1,821,504  1,827,985  5,289,063  5,125,640 
Gross profit 210,217  284,544  733,910  1,093,684 
Selling, general and administrative expense 46,116  52,620  144,424  150,961 
Administrative restructuring charges 279  792  279  5,605 
Operating income 163,822  231,132  589,207  937,118 
Interest expense, net of capitalized interest 11,959  10,501  35,540  26,870 
Interest income (125) (319) (1,501) (3,086)
Foreign currency transaction loss (gain) 4,142  12,773  (837) 23,806 
Miscellaneous, net (1,741) (2,071) (5,637) (7,135)
Income before income taxes 149,587  210,248  561,642  896,663 
Income tax expense 51,060  73,153  192,062  313,751 
Net income 98,527  137,095  369,580  582,912 
Less: Net income (loss) attributable to noncontrolling interests (130) 33  (334) 146 
Net income attributable to Pilgrim's Pride Corporation $98,657  $137,062  $369,914  $582,766 
         
Weighted average shares of common stock outstanding:         
Basic 254,460  259,280  254,607  259,540 
Effect of dilutive common stock equivalents 460  223  430  225 
Diluted 254,920  259,503  255,037  259,765 
         
Net income attributable to Pilgrim's Pride Corporation per share of
  common stock outstanding:		        
Basic $0.39  $0.53  $1.45  $2.25 
Diluted $ 0.39  $0.53  $1.45  $2.24 
                 


PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
  Thirty-Nine Weeks Ended
  September 25, 2016 September 27, 2015
  (In thousands)
Cash flows from operating activities:    
Net income $369,580  $582,912 
Adjustments to reconcile net income to cash provided by operating activities:    
Depreciation and amortization 134,455  116,485 
Impairment expense —  4,813 
Gain on property disposals  (7,315) (9,817)
Loss on equity method investments 194  — 
Share-based compensation 5,404  2,132 
Deferred income tax benefit (1,285) (7,214)
Changes in operating assets and liabilities:    
Trade accounts and other receivables (2,639) 40,694 
Inventories 4,548   17,162 
Prepaid expenses and other current assets (83) (1,415)
Accounts payable, accrued expenses and other current liabilities (7,812) 92,159 
Income taxes 45,220  17,836 
Long-term pension and other postretirement obligations (8,294) (2,668)
Other operating assets and liabilities (864) 3,235 
Cash provided by operating activities 531,109  856,314 
Cash flows from investing activities:    
Acquisitions of property, plant and equipment (173,440) (129,848)
Business acquisition —  (373,532)
Proceeds from property disposals 10,316  13,553 
Cash provided by (used in) investing activities (163,124) (489,827)
Cash flows from financing activities:    
Proceeds from note payable to bank 36,838  5,869 
Payments on note payable to bank (65,564) — 
Proceeds from revolving line of credit 515,292  1,680,000 
Payments on revolving line of credit, long-term borrowings and capital lease obligations (498,124) (683,742)
Proceeds from equity contribution under Tax Sharing Agreement between JBS USA Food Company Holdings and Pilgrim's Pride Corporation 3,691  — 
Tax benefit related to share-based compensation —  7,834 
Equity contribution to subsidiary by noncontrolling interest 7,252  — 
Payment of capitalized loan costs (693) (12,322)
Purchase of common stock under share repurchase program (20,333) (45,080)
Purchase of common stock from retirement plan participants (73) — 
Cash dividends (699,915)  (1,498,470)
Cash used in financing activities (721,629) (545,911)
Increase (decrease) in cash and cash equivalents (353,644) (179,424)
Cash and cash equivalents, beginning of period 439,638  576,143 
Cash and cash equivalents, end of period $85,994  $396,719 
         


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 25, 2016 September 27, 2015 September 25, 2016 September 27, 2015
 (In thousands)
Net income$98,527  $137,095  $369,580  $582,912 
Add:       
Interest expense, net11,834  10,182  34,039  23,784 
Income tax expense (benefit)51,060  73,153  192,062  313,751 
Depreciation and amortization45,772  41,415   134,455  116,485 
Minus:       
Amortization of capitalized financing costs970  1,119  2,859  2,708 
EBITDA206,223  260,726  727,277  1,034,224 
Add:       
Foreign currency transaction losses (gains)4,142  12,773  (837) 23,806 
Restructuring charges279  792  279  5,605 
Minus:       
Net income (loss) attributable to noncontrolling interest(130) 33  (334) 146 
Adjusted EBITDA$210,774  $274,258  $727,053  $ 1,063,489 
                

The summary unaudited consolidated income statement data for the twelve months ended September 25, 2016 (the LTM Period) have been calculated by subtracting the applicable unaudited consolidated income statement data for the nine months ended September 27, 2015 from the sum of (1) the applicable audited consolidated income statement data for the year ended December 27, 2015 and (2) the applicable audited consolidated income statement data for the nine months ended September 25, 2016.

 
PILGRIM'S PRIDE CORPORATION
Reconciliation of LTM Adjusted EBITDA
           
(Unaudited) Thirteen Weeks
Ended		 Thirteen Weeks
Ended		 Thirteen Weeks
Ended		 Thirteen Weeks
Ended		 LTM Ended
  December 27,
 2015		  March 27,
 2016		 June 26,
 2016		 September 25,
 2016		 September 25,
 2016
 (In thousands)
Net income $63,050  $118,011  $153,042  $98,527  $432,630 
Add:          
Interest expense, net 10,091  11,340  10,865  11,834  44,130 
Income tax expense (benefit) 33,045  62,604  78,398  51,060  225,107 
Depreciation and amortization 42,490  42,391  46,293  45,772   176,946 
Minus:          
Amortization of capitalized financing costs  930  928  962  970  3,790 
EBITDA 147,746  233,418  287,636  206,223  875,023 
Add:           
Foreign currency transaction losses (gains) 2,134  (235) (4,744) 4,142  1,297 
Restructuring charges —  —  —  279  279 
Minus:          
Net income (loss) attributable to noncontrolling interest (98) (360) 156  (130) (432)
Adjusted EBITDA $149,978  $233,543  $282,736  $210,774  $877,031 
                     

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 25, 2016 September 27, 2015 September 25, 2016 September 27, 2015 September 25, 2016 September 27, 2015 September 25, 2016 September 27, 2015
 (In thousands)
Net income from continuing operations $98,527  $137,095  $369,580  $582,912  4.85% 6.49% 6.14% 9.37%
Add:                
Interest expense, net 11,834  10,182  34,039  23,784  0.58% 0.48% 0.57% 0.38%
Income tax expense (benefit) 51,060  73,153  192,062  313,751  2.51% 3.46% 3.19% 5.04%
Depreciation and amortization 45,772  41,415  134,455   116,485  2.25% 1.96% 2.23% 1.87%
Minus:                
Amortization of capitalized financing costs 970  1,119  2,859  2,708  0.05% 0.05% 0.05% 0.04%
EBITDA 206,223  260,726  727,277  1,034,224  10.15% 12.34% 12.08% 16.63%
Add:                
Foreign currency transaction losses (gains) 4,142  12,773  (837) 23,806  0.20% 0.60% (0.01)% 0.38%
Restructuring charges 279   792  279  5,605  0.01% 0.04%  —% 0.09%
Minus:                
Net income (loss) attributable to noncontrolling interest (130) 33   (334) 146  (0.01)% —% (0.01)% —%
Adjusted EBITDA $210,774   $274,258  $727,053  $1,063,489  10.37% 12.98% 12.07% 17.10%
                 
Net Revenue: $2,031,721  $2,112,529  $6,022,973  $6,219,324  $2,031,721  $2,112,529  $6,022,973  $6,219,324 
                                 

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 Thirty-Nine Weeks Ended
   September 25, September 27, September 25, September 27,
2016 201520162015
  (In thousands, except per share data)
Net income (loss) attributable to Pilgrim's Pride Corporation $98,657   $137,062  $369,914  $582,766 
Loss on early extinguishment of debt —  —  —  68 
Foreign currency transaction losses (gains) 4,142  12,773  (837) 23,806 
Income (loss) before loss on early extinguishment of debt and foreign currency transaction losses (gains) 102,799  149,835  369,077  606,640 
Weighted average diluted shares of common stock outstanding 254,920  259,503  255,037  259,765 
Income (loss) before loss on early extinguishment of debt and foreign currency transaction losses (gains) per common diluted share $0.40  $0.58  $1.45  $2.34 
             

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 25, 2016 September 27, 2015 September 25, 2016 September 27, 2015
 (In thousands, except per share data)
GAAP EPS$0.39  $0.53  $1.45  $2.24 
Loss on early extinguishment of debt—  —  —  — 
Foreign currency transaction losses (gains)0.02  0.05  —  0.09 
Adjusted EPS$0.40  $0.58  $1.45  $2.34 
         
Weighted average diluted shares of common stock outstanding254,920  259,503  255,037  259,765 
  

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)
        
          
 December 29, December 28, December 27, September 27, September 25,
20132014201520152016
 (In thousands)
Long term debt, less current maturities$501,999  $3,980  $985,509  $1,000,398  $1,004,840 
Add:  Current maturities of long term debt and notes payable410,234  262  28,812  5,971  92 
Minus:  Cash and cash equivalents508,206  576,143  439,638  396,719  85,994 
Minus:  Available-for-sale securities96,902  —  —  —  — 
Net debt (cash position)$307,125  $(571,901) $574,683  $609,650  $918,938 
  


PILGRIM'S PRIDE CORPORATION
Supplementary Selected Segment and Geographic Data
         
  Thirteen Weeks Ended Thirty-Nine Weeks Ended
  September 25, 2016 September 27, 2015 September 25, 2016 September 27, 2015
  (Unaudited)      
  (In thousands)
Sources of net sales by country of origin:        
US: $1,724,625  $1,798,375  $5,072,351  $5,479,992 
Mexico: 307,096  314,154  950,622  739,332 
Total net sales: $2,031,721  $2,112,529  $6,022,973  $6,219,324 
         
Sources of cost of sales by country of origin:        
US: $1,545,163  $1,552,282  $4,470,387  $4,511,158 
Mexico: 276,365  275,727  818,748  614,554 
Elimination: (24) (24) (72) (72)
Total cost of sales: $1,821,504  $1,827,985  $5,289,063  $5,125,640 
         
Sources of gross profit by country of origin:         
US: $179,462  $246,093  $601,964  $968,836 
Mexico: 30,731  38,427  131,874  124,777 
Elimination: 24  24  72  71 
Total gross profit: $210,217  $284,544  $733,910  $1,093,684 
         
Sources of operating income by country of origin:        
US: $141,194  $203,755  $480,278  $833,193 
Mexico: 22,604  27,353  108,857  103,854 
Elimination: 24  24  72   71 
Total operating income: $163,822  $231,132  $589,207  $937,118 
  

 

 

Contact: Dunham Winoto

Director, Investor Relations

IRPPC@pilgrims.com

(970) 506-8192

www.pilgrims.com

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Source: Pilgrim's Pride Corporation

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