INVESTOR RELATIONS
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May 01, 2019

Pilgrim’s Pride Reports Q1 Net Sales of $2.72 Billion, Operating Income of $137 Million and GAAP EPS of $0.34

GREELEY, Colo., May 01, 2019 (GLOBE NEWSWIRE) -- Pilgrim’s Pride Corporation (NASDAQ: PPC) reports first quarter 2019 financial results.

First Quarter Highlights

  • Net Sales of $2.72 billion.
  • Net Income of $84.0 million.
  • Operating Income margins of 6.1% in U.S., 2.9% in Mexico and 2.5% in Europe operations, respectively.
  • Adjusted EBITDA of $204.4 million (or a 7.5% margin), and Adjusted EPS of $0.35.
  • Significant sequential rebound in U.S. operations vs. Q4, driven by stronger markets as feature activities tracked much closer to seasonality. Our balanced portfolio has continued to evolve, realizing the results of investments made over the past few years to further widen our products and brands, strengthen key customer relationships, and improve margin consistency.
  • Weaker than seasonal markets in Mexico impacted results but conditions are already improving in Q2. Diversification into premium Pilgrim’s brand is gaining momentum and producing strong results, together with significant growth in Prepared Foods.
  • In-line with the industry, Europe continued to be impacted by a substantial increase in input costs. We are offsetting the increase through capture of synergies and adjustments in pricing models.
Unaudited, In Millions, Except Per Share and Percentages
  Thirteen Weeks Ended
  Mar 31, 2019   Apr 1, 2018   Change
Net Sales $ 2,724.7     $ 2,746.7     -0.8 %
GAAP EPS $ 0.34     $ 0.48     -29.2 %
Operating Income $ 137.0     $ 201.6     -32.0 %
Adjusted EBITDA (1) $ 204.4     $ 271.8     -24.8 %
Adjusted EBITDA Margin (1)   7.5 %     9.9 %   -2.4pts  
           
  1. Reconciliations for non-GAAP measures are provided in subsequent sections within this release.

“After a very challenging market in 2018, we experienced a much better environment within our U.S. operations during Q1 particularly in commodity large bird deboning, with demand from retailers and QSR operators rebounding as they recognized the value of chicken. Feature activities normalized to seasonal levels throughout the quarter and the momentum has been sustained into early Q2. Commodity boneless prices have already surpassed levels from a year ago and are close to the five-year average, while wing prices are near historical highs. We have been heavily investing in further differentiating our portfolio to increase our capacities and capabilities to meet customer expectations. The investments in the operations and the focus of our people have yielded an increase in performance, and further growth prospects remain available. We are driving growth while continuing to pursue future opportunities by intensifying our efforts in innovation and marketing. We expect value added, differentiated products to account for a larger portion of our total results over the next few years as we continue to reduce the volatility of our commodity sales mix,” stated Jayson Penn, Chief Executive Officer of Pilgrim's.

“Market balance dynamics in Mexico were weaker than seasonal in Q1. Better than expected growing conditions and softer demand have impacted prices. Chicken demand was also affected by more availability of imported pork from the U.S. during the quarter but we believe chicken demand can continue to grow in-line with historical rates longer term. The environment has already started to recover in Q2 and prices have begun to react positively, with growing conditions reverting back to normal, demand improving, and competition from pork imports declining. Our Prepared Foods have continued to grow at a double digit rate and are generating great results under both premium Pilgrim’s and Del Dia brands to drive the evolution of our Mexican portfolio towards more differentiated, higher-value products giving us a clear path to margin expansion.”

“In-line with the whole industry, our European operations continued to be impacted by a substantial increase in input costs, including feed ingredients, higher utilities, labor and packaging. These increases were partially offset by cost reduction initiatives, synergies and price adjustments some of which have taken slightly longer than expected to be passed on and reflected in customer contracts. Despite the impact in results, we expect an improvement month over month as we adjust our prices based on key customer’s contracts and expect the full recovery within our pricing models.”

Conference Call Information

A conference call to discuss Pilgrim’s quarterly results will be held tomorrow, May 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/ppc190502.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 August 2, 2019.

About Pilgrim’s Pride

Pilgrim’s employs approximately 52,100 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
 
    March 31, 2019   December 30, 2018
    (Unaudited)    
    (In thousands)
Cash and cash equivalents   $ 378,518     $ 338,386  
Restricted cash and cash equivalents   20,373     23,192  
Trade accounts and other receivables, less allowance for doubtful accounts   564,055     561,549  
Accounts receivable from related parties   854     1,331  
Inventories   1,166,002     1,159,519  
Income taxes receivable   31,985     38,479  
Prepaid expenses and other current assets   124,265     112,023  
Assets held for sale   178     178  
Total current assets   2,286,230     2,234,657  
Deferred tax assets   4,166     4,248  
Other long-lived assets   16,275     16,717  
Identified intangible assets, net   569,870     564,128  
Goodwill   970,640     949,750  
Operating lease assets, net   330,040      
Property, plant and equipment, net   2,195,706     2,161,702  
Total assets   $ 6,372,927     $ 5,931,202  
         
Accounts payable   $ 818,482     $ 830,059  
Accounts payable to related parties   5,550     7,269  
Revenue contract liability   25,812     33,328  
Accrued expenses and other current liabilities   472,365     386,941  
Income taxes payable   7,884     8,221  
Current maturities of long-term debt   27,637     30,405  
Total current liabilities   1,357,730     1,296,223  
Noncurrent operating lease liability, less current maturities   252,281      
Long-term debt, less current maturities   2,303,735     2,295,190  
Noncurrent income taxes payable   7,731     7,731  
Deferred tax liabilities   236,931     237,422  
Other long-term liabilities   70,019     75,051  
Total liabilities   4,228,427     3,911,617  
Common stock   2,609     2,604  
Treasury stock   (231,994 )   (231,994 )
Additional paid-in capital   1,947,013     1,945,136  
Retained earnings   505,899     421,888  
Accumulated other comprehensive loss   (88,926 )   (127,834 )
Total Pilgrim’s Pride Corporation stockholders’ equity   2,134,601     2,009,800  
Noncontrolling interest   9,899     9,785  
Total stockholders’ equity   2,144,500     2,019,585  
Total liabilities and stockholders’ equity   $ 6,372,927     $ 5,931,202  


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
         
    Thirteen Weeks Ended
    March 31, 2019   April 1, 2018
         
    (In thousands, except per share data)
Net sales   $ 2,724,675     $ 2,746,678  
Cost of sales   2,505,736     2,459,013  
Gross profit   218,939     287,665  
Selling, general and administrative expense   81,924     85,283  
Administrative restructuring activity   (27 )   789  
Operating income   137,042     201,593  
Interest expense, net of capitalized interest   33,562     50,300  
Interest income   (3,340 )   (1,590 )
Foreign currency transaction losses (gains)   2,636     (1,721 )
Miscellaneous, net   (357 )   (1,617 )
Income before income taxes   104,541     156,221  
Income tax expense   20,416     36,997  
Net income   84,125     119,224  
Less: Net income (loss) attributable to noncontrolling interests   114     (194 )
Net income attributable to Pilgrim’s Pride Corporation   $ 84,011     $ 119,418  
         
Weighted average shares of common stock outstanding:        
Basic   249,167     248,838  
Effect of dilutive common stock equivalents   390     151  
Diluted   249,557     248,989  
         
Net income attributable to Pilgrim's Pride Corporation per share of
  common stock outstanding:
       
Basic   $ 0.34     $ 0.48  
Diluted   $ 0.34     $ 0.48  


PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
    Fifty-three weeks ended
    March 31, 2019   April 1, 2018
         
    (In thousands)
Cash flows from operating activities:        
Net income   $ 84,125     $ 119,224  
Adjustments to reconcile net income to cash provided by operating activities:        
Depreciation and amortization   67,182     67,444  
Loan cost amortization   1,201     1,757  
Noncash loss on early extinguishment of debt       3,918  
Foreign currency transaction loss related to borrowing arrangements   (1,034 )   5,745  
Amortization of premium related to Senior Notes   (167 )   (167 )
Accretion of discount related to Senior Notes   246     76  
Impairment expense       470  
Loss on property disposals   (108 )   80  
Gain on equity method investment   (16 )   (16 )
Share-based compensation   1,882     1,273  
Deferred income tax expense (benefit)   (4,089 )   (4,735 )
Changes in operating assets and liabilities:        
   Trade accounts and other receivables   2,381     (61,945 )
   Inventories   (1,368 )   19,541  
   Prepaid expenses and other current assets   (11,479 )   (20,777 )
   Accounts payable, accrued expenses and other current liabilities   (21,968 )   (29,171 )
   Income taxes   6,579     (98,784 )
   Long-term pension and other postretirement obligations   (1,315 )   (2,759 )
   Other operating assets and liabilities   (1,683 )   (534 )
Cash provided by operating activities   120,369     640  
Cash flows from investing activities:        
Acquisitions of property, plant and equipment   (87,941 )   (76,681 )
Business acquisition        
Proceeds from property disposals   539     1,021  
Cash used in investing activities   (87,402 )   (75,660 )
Cash flows from financing activities:        
Proceeds from revolving line of credit and long-term borrowings   67,193     502,341  
Payments on revolving line of credit, long-term borrowings and capital lease obligations   (62,293 )   (433,550 )
Proceeds from equity contribution under Tax Sharing Agreement between JBS USA Food Company Holdings and Pilgrim's Pride Corporation   (525 )   5,558  
Payment of capitalized loan costs   (458 )   (4,061 )
Cash provided by (used in) financing activities   3,917     70,288  
Effect of exchange rate changes on cash and cash equivalents   429     6,669  
Increase (decrease) in cash, cash equivalents and restricted cash   37,313     1,937  
Cash, cash equivalents and restricted cash, beginning of period   361,578     589,531  
Cash, cash equivalents and restricted cash, end of period   $ 398,891     $ 591,468  


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
  March 31, 2019   April 1, 2018
  (In thousands)
Net income $ 84,125     $ 119,224  
Add:      
Interest expense, net 30,222     48,710  
Income tax expense (benefit) 20,416     36,997  
Depreciation and amortization 67,182     67,444  
EBITDA 201,945     272,375  
Add:      
Foreign currency transaction losses (gains) 2,636     (1,721 )
Acquisition charges     179  
Restructuring activity (27 )   789  
Minus:      
  Net income (loss) attributable to noncontrolling interest 114     (194 )
Adjusted EBITDA $ 204,440     $ 271,816  


The summary unaudited consolidated income statement data for the twelve months ended March 31, 2019 (the LTM Period) have been calculated by subtracting the applicable unaudited consolidated income statement data for the three months ended April 1, 2018 from the sum of (1) the applicable audited consolidated income statement data for the year ended December 30, 2018 and (2) the applicable audited consolidated income statement data for the three months ended March 31, 2019.

PILGRIM'S PRIDE CORPORATION
Reconciliation of LTM Adjusted EBITDA
                     
(Unaudited)   Thirteen Weeks Ended   Thirteen Weeks Ended   Thirteen Weeks Ended   Thirteen Weeks Ended   LTM Ended
    July 1,
2018
  September 30,
2018
  December 30,
2018
  March 31,
2019
  March 31,
2019
    (In thousands)
Net income (loss)   $ 106,344     $ 29,463     $ (8,227 )   $ 84,125     $ 211,705  
Add:                    
Interest expense, net   35,433     31,093     33,765     30,222     130,513  
Income tax expense   38,522     30,848     (20,944 )   20,416     68,842  
Depreciation and amortization   70,278     71,971     68,207     67,182     277,638  
Minus:                    
Amortization of capitalized financing
  costs
  2,453     944     1,232         4,629  
EBITDA   248,124     162,431     71,569     201,945     684,069  
Add:                    
Foreign currency transaction losses
  (gains)
  5,630     (6,711 )   19,962     2,636     21,517  
Acquisition charges   125     16             141  
Restructuring activity   1,135     257     2,584     (27 )   3,949  
Other nonrecurring losses and expenses   3,298     164     16,023         19,485  
Minus:                    
  Net income (loss) attributable to
  noncontrolling interest
  (197 )   153     (903 )   114     (833 )
Adjusted EBITDA   $ 258,509     $ 156,004     $ 111,041     $ 204,440     $ 729,994  


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   Thirteen Weeks Ended
    March 31, 2019   April 1, 2018   March 31, 2019   April 1, 2018
                 
    (In thousands)
Net income from continuing operations   $ 84,125     $ 119,224     3.09 %   4.34  %
Add:                
Interest expense, net   30,222     48,710     1.11 %   1.77  %
Income tax expense   20,416     36,997     0.75 %   1.35  %
Depreciation and amortization   67,182     67,444     2.46 %   2.46  %
EBITDA   201,945     272,375     7.41 %   9.92  %
Add:                
Foreign currency transaction losses (gains)   2,636     (1,721 )   0.09 %   (0.06 )%
Acquisition charges       179     %    %
Restructuring activity   (27 )   789     %   0.03  %
Minus:                
  Net income (loss) attributable to noncontrolling interest   114     (194 )   %   (0.01 )%
Adjusted EBITDA   $ 204,440     $ 271,816     7.50 %   9.90  %
                 
Net sales   $ 2,724,675     $ 2,746,678          


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
    March 31,
2019
  April 1,
2018
         
    (In thousands, except per share data)
Net income attributable to Pilgrim's Pride Corporation   $ 84,011     $ 119,418  
Adjustments, net of tax:        
Loss on early extinguishment of debt       12,895  
Acquisition charges and restructuring activity   (27 )   968  
Foreign currency transaction losses (gains)   2,636     (1,721 )
Income before loss on early extinguishment of debt, acquisition
  charges and restructuring activity, and foreign currency
  transaction losses (gains)
  86,620     131,560  
Weighted average diluted shares of common stock outstanding   249,557     248,989  
Income before loss on early extinguishment of debt, acquisition
  charges and restructuring activity, and foreign currency 
  transaction losses (gains) per common diluted share
  $ 0.35     $ 0.53  


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
  March 31, 2019   April 1, 2018
       
  (In thousands, except per share data)
GAAP EPS $ 0.34     $ 0.48  
Adjustments, net of tax:      
Loss on early extinguishment of debt     0.05  
Foreign currency transaction losses (gains) 0.01     (0.01 )
Adjusted EPS $ 0.35     $ 0.53  
       
Weighted average diluted shares of common stock outstanding 249,557     248,989  


PILGRIM'S PRIDE CORPORATION
Supplementary Selected Segment and Geographic Data
         
(Unaudited)   Thirteen Weeks Ended
    March 31, 2019   April 1, 2018
         
    (In thousands)
Sources of net sales by country of origin:        
US   $ 1,883,591     $ 1,841,105  
Europe   514,962     544,300  
Mexico   326,122     361,273  
Total net sales   $ 2,724,675     $ 2,746,678  
         
Sources of cost of sales by country of origin:        
US   $ 1,713,419     $ 1,658,734  
Europe   485,378     501,568  
Mexico   306,963     298,735  
Elimination   (24 )   (24 )
Total cost of sales   $ 2,505,736     $ 2,459,013  
         
Sources of gross profit by country of origin:        
US   $ 170,172     $ 182,370  
Europe   29,584     42,733  
Mexico   19,159     62,538  
Elimination   24     24  
Total gross profit   $ 218,939     $ 287,665  
         
Sources of operating income by country of origin:        
US   $ 114,840     $ 127,286  
Europe   12,714     21,413  
Mexico   9,464     52,870  
Elimination   24     24  
Total operating income   $ 137,042     $ 201,593  


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Source: Pilgrim's Pride Corporation