Pilgrim's Pride Corporation
Jul 27, 2016

Pilgrim's Pride Reports Operating Income of $237 Million with an Operating Margin of 11.7% for the Second Quarter of 2016

GREELEY, Colo., July 27, 2016 (GLOBE NEWSWIRE) -- Pilgrim's Pride Corporation (NASDAQ:PPC) reports second quarter 2016 financial results.

Second Quarter Highlights

Unaudited, In Millions, Except Per Share and Percentages
 Thirteen Weeks Ended
 June 26, 2016  June 28, 2015 Change
Net Sales$2,028.3  $2,053.9   -1.2%
GAAP EPS$0.60  $0.93   -35.5%
Operating Income$236.6  $378.4   -37.5%
Adjusted EBITDA (1)$282.7  $425.8   -33.6%
Adjusted EBITDA Margin (1) 13.9%  20.7% -6.8pts
      

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

"During Q2, our results further improved sequentially compared to the last two quarters. While our portfolio strategy of a well-balanced exposure to different bird sizes was an important factor, the diversity of our product and broad customer mix, as well as geographic exposure were also important contributors. We structured our portfolio to capture the strong commodity markets while lessening the impact of weaker markets to generate lower volatility and higher margins over the mid to long-term. We are generating the intended results and created a unique and meaningful advantage over competitors with less breadth in their portfolio," stated Bill Lovette, Chief Executive Officer of Pilgrim's.

"To demonstrate our commitment to growing our Prepared Foods operations and to further leverage our leadership in the ABF market as well as our recent announcement to enter into organic Fresh Chicken, we will launch new ABF veg-fed artisanal chicken sausages. These products will be fully cooked, minimally processed using all natural and no artificial ingredients or nitrites. Similar to our ABF veg-fed and organic Fresh Chicken programs, this represents our effort to better resonate with new consumer trends for more natural products while adding further value to our portfolio. While the announced investments in our Moorefield, WV plant, and the operational improvements we are promoting in our other facilities pose an impact to volumes in the short run, they signify our commitment to Prepared Foods as an important source of future earnings growth while lessening the impact of volatile commodity markets in the long run."

"Our operations in Mexico were a strong contributor to the Q2 results driven by an improved supply/demand environment, better operating performance, and increased synergies with the newly acquired assets. We are continuing to close and have meaningfully narrowed the gap in performance between our legacy and the newly acquired Northern Mexico operations. To further diversify our Mexico operations and grow our value-added segment, we are initiating a strategy to leverage our premium Pilgrim's name while continuing to pursue opportunities through the popular Del Dia brand."

Conference Call Information

A conference call to discuss Pilgrim's quarterly results will be held tomorrow, July 28, 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/ppc160728 

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 October 28, 2016.

About Pilgrim's Pride

Pilgrim's employs approximately 37,700 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
 
  June 26, 2016 December 27, 2015
  (Unaudited)  
   (In thousands)
Cash and cash equivalents $41,047  $439,638 
Trade accounts and other receivables, less allowance for doubtful accounts 343,255  348,994 
Account receivable from related parties 1,797  2,668 
Inventories 832,565  801,357 
Income taxes receivable 88,358  71,410 
Prepaid expenses and other current assets 95,420  75,602 
Assets held for sale 6,549  6,555 
Total current assets 1,408,991  1,746,224 
Other long-lived assets 15,954  15,672 
Identified intangible assets, net 42,503  47,453 
Goodwill 125,607  156,565 
Property, plant and equipment, net 1,414,895  1,352,529 
Total assets $3,007,950   $3,318,443 
     
Notes payable to banks $  $28,726 
Accounts payable 466,783  482,954 
Account payable to related parties 4,053  7,000 
Accrued expenses and other current liabilities 314,925  314,966 
Income taxes payable 38,771  13,228 
Current maturities of long-term debt 90  86 
Total current liabilities 824,622  846,960 
Long-term debt, less current maturities 1,117,979  985,509 
Deferred tax liabilities 144,876  131,882 
Other long-term liabilities 101,780  92,282 
Total liabilities 2,189,257   2,056,633 
Common stock 2,597  2,597 
Treasury stock (106,561) (99,233)
Additional paid-in capital 1,677,543  1,675,674 
Accumulated deficit (689,910) (261,252)
Accumulated other comprehensive loss (67,726) (58,930)
Total Pilgrim's Pride Corporation stockholders' equity 815,943  1,258,856 
Noncontrolling interest 2,750  2,954 
Total stockholders' equity 818,693  1,261,810 
Total liabilities and stockholders' equity $3,007,950  $3,318,443 


PILGRIM'S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
  Thirteen Weeks Ended Twenty-Six Weeks Ended
  June 26, 2016 June 28, 2015 June 26, 2016 June 28, 2015
  (In thousands, except per share data)
Net sales $2,028,315  $2,053,876  $3,991,252  $4,106,795 
Cost of sales 1,742,184  1,621,856  3,467,559   3,297,655 
Gross profit 286,131  432,020  523,693  809,140 
Selling, general and administrative expense 49,520  48,834  98,308  98,341 
Administrative restructuring charges   4,813    4,813  
Operating income 236,611  378,373  425,385  705,986 
Interest expense, net of capitalized interest 11,548  11,514  23,581  16,369 
Interest income (683) (1,277) (1,376) (2,767)
Foreign currency transaction loss (gain) (4,744) 2,059  (4,979) 11,033 
Miscellaneous, net (950) (4,651) (3,896) (5,064)
Income before income taxes 231,440  370,728  412,055  686,415 
Income tax expense 78,398  129,104  141,002  240,598 
Net income 153,042  241,624  271,053  445,817 
Less: Net income (loss) attributable to noncontrolling interests 156  135  (204) 113 
Net income attributable to Pilgrim's Pride Corporation $152,886  $241,489  $271,257  $445,704 
         
Weighted average shares of common stock outstanding:         
Basic 254,554  259,685  254,681  259,669 
Effect of dilutive common stock equivalents 390  212  364  226 
Diluted 254,944  259,897  255,045  259,895 
         
Net income attributable to Pilgrim's Pride Corporation per share of
  common stock outstanding:
        
Basic $0.60  $0.93  $1.07  $1.72 
Diluted $0.60  $0.93  $1.06  $1.71 


PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
  Twenty-Six Weeks Ended
  June 26, 2016 June 28, 2015
  (In thousands)
Cash flows from operating activities:     
Net income $271,053  $445,817 
Adjustments to reconcile net income to cash provided by operating activities:    
Depreciation and amortization 88,683  75,070 
Impairment expense   4,813 
Loss (gain) on property disposals (6,755) (1,331)
Share-based compensation 1,869  1,268 
Deferred income tax benefit (700) (4,781)
Changes in operating assets and liabilities:    
Trade accounts and other receivables 6,610  35,014 
Inventories (31,208) 3,192 
Prepaid expenses and other current assets (19,817) 7,236 
Accounts payable, accrued expenses and other current liabilities (23,028) 53,960 
Income taxes 6,967  (35,554)
Long-term pension and other postretirement obligations (3,952) 966 
Other operating assets and liabilities (738) 2,433 
Cash provided by operating activities 288,984  588,103 
Cash flows from investing activities:    
Acquisitions of property, plant and equipment (93,978) (87,694)
Proceeds from property disposals 8,097  2,115 
Cash provided by (used in) investing activities (85,881) (85,579)
Cash flows from financing activities:    
Proceeds from note payable to bank 36,838   
Payments on note payable to bank (65,564)  
Proceeds from revolving line of credit 351,089  1,680,000 
Payments on revolving line of credit, long-term borrowings and capital lease obligations (219,812) (683,705)
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 
Payment of capitalized loan costs (693) (10,132)
Purchase of treasury stock (7,328)  
Cash dividends (699,915) (1,498,470)
Cash used in financing activities (601,694) (504,473)
Increase (decrease) in cash and cash equivalents (398,591) (1,949)
Cash and cash equivalents, beginning of period 439,638  576,143 
Cash and cash equivalents, end of period $41,047  $574,194 


PILGRIM'S PRIDE CORPORATION

Selected Financial Information

(Unaudited)

"EBITDA" is defined as the sum of net income (loss) plus interest, taxes, depreciation and amortization.  "Adjusted EBITDA" is calculated by adding to EBITDA certain items of expense and deducting from EBITDA certain items of income that we believe are not indicative of our ongoing operating performance consisting of: (i) income (loss) attributable to non-controlling interests, (ii) restructuring charges, (iii) reorganization items, (iv) losses on early extinguishment of debt and (v) foreign currency transaction losses (gains). EBITDA is presented because it is used by management and we believe it is frequently used by securities analysts, investors and other interested parties, in addition to and not in lieu of results prepared in conformity with accounting principles generally accepted in the US ("GAAP"), to compare the performance of companies.  We believe investors would be interested in our Adjusted EBITDA because this is how our management analyzes EBITDA.  The Company also believes that Adjusted EBITDA, in combination with the Company's financial results calculated in accordance with GAAP, provides investors with additional perspective regarding the impact of certain significant items on EBITDA and facilitates a more direct comparison of its performance with its competitors.  EBITDA and Adjusted EBITDA are not measurements of financial performance under GAAP.  They should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net income as indicators of our operating performance or any other measures of performance derived in accordance with GAAP.


PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted EBITDA
 
(Unaudited)Thirteen Weeks Ended Twenty-Six Weeks Ended
 June 26, 2016 June 28, 2015 June 26, 2016 June 28, 2015
 (In thousands)
Net income$153,042  $241,624  $271,053  $445,817 
Add:       
Interest expense, net10,865  10,237  22,205  13,602 
Income tax expense (benefit)78,398  129,104  141,002  240,598 
Depreciation and amortization46,293  38,918  88,683  75,070 
Minus:       
Amortization of capitalized financing costs962  864  1,889  1,589 
EBITDA287,636  419,019  521,054  773,498 
Add:        
Foreign currency transaction losses (gains)(4,744) 2,059  (4,979)  11,033 
Restructuring charges  4,813    4,813 
Minus:       
  Net income (loss) attributable to noncontrolling interest156  135  (204) 113 
Adjusted EBITDA$282,736  $425,756  $516,279  $789,231 


The summary unaudited consolidated income statement data for the twelve months ended June 26, 2016 (the LTM Period) have been calculated by subtracting the applicable unaudited consolidated income statement data for the six months ended June 28, 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 six months ended June 26, 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
  September 27,
 2015
 December 27,
 2015
 March 27,
 2016
 June 26,
 2016
 June 26,
 2016
 (In thousands)
Net income $137,095  $63,050  $118,011  $153,042  $471,198 
Add:          
Interest expense, net 10,182  10,091  11,340  10,865  42,478 
Income tax expense (benefit) 73,153  33,045  62,604  78,398  247,200 
Depreciation and amortization 41,415  42,490  42,391  46,293  172,589 
Minus:          
Amortization of capitalized financing costs 1,119  930  928  962  3,939 
EBITDA 260,726  147,746  233,418  287,636  929,526 
Add:          
Foreign currency transaction losses (gains) 12,773  2,134  (235) (4,744) 9,928 
Restructuring charges 792        792 
Minus:          
  Net income (loss) attributable to noncontrolling interest 33  (98)  (360) 156  (269)
Adjusted EBITDA $274,258  $149,978  $233,543  $282,736  $940,515 


EBITDA margins have been calculated by taking the relevant unaudited EBITDA figures, then dividing by Net Revenue for the applicable period.


PILGRIM'S PRIDE CORPORATION
Reconciliation of EBITDA Margin
                 
(Unaudited) Thirteen Weeks Ended Twenty-Six Weeks Ended Thirteen Weeks Ended Twenty-Six Weeks Ended
  June 26,
2016
 June 28,
2015
 June 26,
2016
 June 28,
2015
 June 26,
2016
 June 28,
2015
 June 26,
2016
 June 28,
2015
 (In thousands)
Net income from continuing operations $153,042  $241,624  $271,053  $445,817  7.55%  11.76% 6.79% 10.86%
Add:                
Interest expense, net 10,865  10,237  22,205  13,602  0.54% 0.50% 0.56% 0.33%
Income tax expense (benefit) 78,398  129,104  141,002  240,598  3.87% 6.29% 3.53% 5.86%
Depreciation and amortization 46,293  38,918  88,683  75,070  2.28% 1.89% 2.22% 1.83%
Minus:                
Amortization of capitalized financing costs 962  864  1,889  1,589  0.05% 0.04% 0.05% 0.04%
EBITDA 287,636  419,019  521,054  773,498  14.18% 20.40% 13.05% 18.83%
Add:                 
Foreign currency transaction losses (gains) (4,744) 2,059  (4,979) 11,033  (0.23)% 0.10% (0.12)% 0.27%
Restructuring charges   4,813    4,813  % 0.23% % 0.12%
Minus:                
  Net income (loss) attributable to noncontrolling interest 156  135  (204) 113  0.01% 0.01% (0.01)% %
Adjusted EBITDA $282,736  $425,756  $516,279  $789,231  13.94% 20.73% 12.94% 19.22%
                 
Net Revenue: $2,028,315  $2,053,876  $3,991,252  $4,106,795  $2,028,315  $2,053,876  $3,991,252  $4,106,795 


A reconciliation of net income (loss) attributable to Pilgrim's Pride Corporation per common diluted share to adjusted net income (loss) attributable to Pilgrim's Pride Corporation per common diluted share is as follows:


PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted Earnings
(Unaudited)
         
  Thirteen Weeks Ended  Twenty-Six Weeks Ended
  June 26,
 2016
 June 28,
 2015
 June 26,
 2016
 June 28,
 2015
  (In thousands, except per share data)
Net income (loss) attributable to Pilgrim's Pride Corporation $152,886  $241,489   $271,257  $445,704 
Loss on early extinguishment of debt   68    68 
Foreign currency transaction losses (gains) (4,744) 2,059  (4,979) 11,033 
Income (loss) before loss on early extinguishment of debt and foreign currency transaction losses (gains) 148,142  243,616  266,278  456,805 
Weighted average diluted shares of common stock outstanding 254,944  259,897  255,045  259,895 
Income (loss) before loss on early extinguishment of debt and foreign currency transaction losses (gains) per common diluted share $0.58  $0.94  $1.04  $1.76 


A reconciliation of GAAP earnings per share (EPS) to adjusted earnings per share (EPS) is as follows:


PILGRIM'S PRIDE CORPORATION
Reconciliation of GAAP EPS to Adjusted EPS
(Unaudited)
        
 Thirteen Weeks Ended  Twenty-Six Weeks Ended
 June 26, 2016 June 28, 2015 June 26, 2016 June 28, 2015
 (In thousands, except per share data)
GAAP EPS$0.60  $0.93  $1.06  $1.71 
Loss on early extinguishment of debt       
Foreign currency transaction losses (gains)(0.02) 0.01  (0.02) 0.04 
Adjusted EPS$0.58  $0.94  $1.04  $1.76 
        
Weighted average diluted shares of common stock outstanding254,944  259,897  255,045  259,895 


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,
 2013
 December 28,
 2014
 December 27,
 2015
 June 28,
 2015
 June 26,
 2016
 (In thousands)
Long term debt, less current maturities$501,999  $3,980  $985,509  $1,000,420  $1,117,979 
Add:  Current maturities of long term debt and notes payable410,234  262  28,812  117  90 
Minus:  Cash and cash equivalents508,206  576,143  439,638  574,194  41,047 
Minus:  Available-for-sale securities96,902         
Net debt (cash position)$307,125  $(571,901) $574,683  $426,343  $1,077,022 


PILGRIM'S PRIDE CORPORATION
Supplementary Selected Segment and Geographic Data
         
  Thirteen Weeks Ended Twenty-Six Weeks Ended
  June 26, 2016 June 28, 2015 June 26, 2016 June 28, 2015
  (Unaudited)      
  (In thousands)
Sources of net sales by country of origin:        
US: $1,677,445  $1,838,859  $3,347,726  $3,681,617 
Mexico: 350,870  215,017  643,526  425,178 
Total net sales: $2,028,315  $2,053,876  $3,991,252  $4,106,795 
         
Sources of cost of sales by country of origin:        
US: $1,471,269  $1,454,669  $2,925,224  $2,958,876 
Mexico: 270,939  167,211  542,383  338,827 
Elimination: (24)  (24) (48) (48)
Total cost of sales: $1,742,184  $1,621,856  $3,467,559  $3,297,655 
         
Sources of gross profit by country of origin:        
US: $206,176  $384,190  $422,502  $722,742 
Mexico: 79,931  47,806  101,143  86,350 
Elimination: 24  24  48  48 
Total gross profit: $286,131  $432,020  $523,693  $809,140 
         
Sources of operating income by country of origin:         
US: $164,494  $335,783  $339,084  $629,437 
Mexico: 72,093  42,566  86,253  76,501 
Elimination: 24  24  48  48 
Total operating income: $236,611  $378,373  $425,385  $705,986 

 

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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