SEC Filing | Pilgrim's Pride Corporation

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ppc-20200628

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM			10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 28, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File number 1-9273

https://cdn.kscope.io/fe1a5761bfceab5197bad1a8b5975339-ppc-20200628_g1.jpg

PILGRIM’S PRIDE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

75-1285071

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

1770 Promontory Circle

80634-9038

Greeley

(Address of principal executive offices)

(Zip code)

Registrant’s telephone number, including area code: (970) 506-8000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of Exchange on which Registered

Common Stock, Par Value $0.01

PPC

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

Number of shares outstanding of the issuer’s common stock, $0.01 par value per share, as of July 29, 2020, was 244,031,578.

INDEX

PILGRIM’S PRIDE CORPORATION


PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements	2
	Condensed Consolidated Balance Sheets June 28, 2020 and December 29, 2019	2
	Condensed Consolidated Statements of Operations Three and Six Months Ended June 28, 2020 and June 30, 2019	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) Three and Six Months Ended June 28, 2020 and June 30, 2019	4
	Condensed Consolidated Statements of Stockholders’ Equity Three and Six Months Ended June 28, 2020 and June 30, 2019	5
	Condensed Consolidated Statements of Cash Flows Six Months Ended June 28, 2020 and June 30, 2019	7
	Notes to Condensed Consolidated Financial Statements as of June 28, 2020	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	52
Item 4.	Controls and Procedures	56
PART II. OTHER INFORMATION			57
Item 1.	Legal Proceedings	57
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61

Item 6.	Exhibits	62
SIGNATURES			63

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

	June 28, 2020		December 29, 2019

	(In thousands)
Cash and cash equivalents	$	507,442	$	260,568
Restricted cash and cash equivalents	27,031		20,009

Trade accounts and other receivables, less allowance for doubtful accounts	694,845		741,281
Accounts receivable from related parties	1,109		944
Inventories	1,347,141		1,383,535
Income taxes receivable	73,886		60,204
Prepaid expenses and other current assets	151,532		131,695

Total current assets	2,802,986		2,598,236
Deferred tax assets	4,607		4,426
Other long-lived assets	29,896		36,325
Identified intangible assets, net	558,491		596,053
Goodwill	929,518		973,750
Operating lease assets, net	282,528		301,513
Property, plant and equipment, net	2,548,555		2,592,061
Total assets	$	7,156,581	$	7,102,364


Accounts payable	$	884,423	$	993,780
Accounts payable to related parties	7,404		3,819
Revenue contract liability	39,425		41,770
Accrued expenses and other current liabilities	528,256		575,319
Income taxes payable	291		7,075

Current maturities of long-term debt	25,566		26,392
Total current liabilities	1,485,365		1,648,155
Noncurrent operating lease liability, less current maturities	213,829		235,382
Long-term debt, less current maturities	2,615,951		2,276,029
Noncurrent income taxes payable	7,731		7,731
Deferred tax liabilities	310,338		301,907
Other long-term liabilities	148,968		97,100
Total liabilities	4,782,182		4,566,304
Common stock	2,612		2,611
Treasury stock	(312,771)		(234,892)
Additional paid-in capital	1,958,727		1,955,261
Retained earnings	939,044		877,812
Accumulated other comprehensive loss	(223,427)		(75,129)
Total Pilgrim’s Pride Corporation stockholders’ equity	2,364,185		2,525,663
Noncontrolling interest	10,214		10,397
Total stockholders’ equity	2,374,399		2,536,060
Total liabilities and stockholders’ equity	$	7,156,581	$	7,102,364

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

	Three Months Ended						Six Months Ended
	June 28, 2020		June 30, 2019		June 28, 2020		June 30, 2019
	(In thousands, except per share data)
Net sales	$	2,824,023	$	2,843,085	$	5,898,951	$	5,567,760
Cost of sales	2,704,164		2,475,221		5,601,993		4,980,957
Gross profit	119,859		367,864		296,958		586,803
Selling, general and administrative expense	92,570		88,357		185,283		170,281
Administrative restructuring activity	—		(43)		—		(70)
Operating income	27,289		279,550		111,675		416,592
Interest expense, net of capitalized interest	32,323		33,594		65,011		67,156
Interest income	(1,158)		(3,444)		(2,848)		(6,784)
Foreign currency transaction loss (gain)	5,525		2,260		(12,860)		4,896
Miscellaneous, net	(45)		1,513		(34,233)		1,156

Income (loss) before income taxes	(9,356)		245,627		96,605		350,168
Income tax expense (benefit)	(2,956)		75,547		35,556		95,963
Net income (loss)	(6,400)		170,080		61,049		254,205
Less: Net income (loss) attributable to noncontrolling interests	(364)		12		(183)		126
Net income (loss) attributable to Pilgrim’s Pride Corporation	$	(6,036)	$	170,068	$	61,232	$	254,079

Weighted average shares of Pilgrim's Pride Corporation common stock outstanding:
Basic	246,687		249,400		248,017		249,283
Effect of dilutive common stock equivalents	331		236		291		320
Diluted	247,018		249,636		248,308		249,603

Net income (loss) attributable to Pilgrim's Pride Corporation per share of common stock outstanding:
Basic	$	(0.02)	$	0.68	$	0.25	$	1.02
Diluted	$	(0.02)	$	0.68	$	0.25	$	1.02

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)

	Three Months Ended						Six Months Ended
	June 28, 2020		June 30, 2019		June 28, 2020		June 30, 2019
	(In thousands)
Net income (loss)	$	(6,400)	$	170,080	$	61,049	$	254,205
Other comprehensive income:
Foreign currency translation adjustment:
Losses arising during the period	(18,782)		(38,053)		(115,547)		(611)

Derivative financial instruments designated as cash flow hedges:
Gains (losses) arising during the period	(2,147)		1,298		1,901		400
Reclassification to net earnings for losses (gains) realized	(162)		48		580		(173)
Available-for-sale securities:
Gains arising during the period	2		172		14		194
Income tax effect	(1)		(42)		(4)		(47)
Reclassification to net earnings for gains realized	(12)		(172)		(12)		(307)
Income tax effect	3		42		3		76
Defined benefit plans:
Losses arising during the period	(34,151)		(7,171)		(44,961)		(3,971)
Income tax effect	6,459		1,877		9,164		1,098
Reclassification to net earnings of losses realized	375		328		751		656
Income tax effect	(94)		(80)		(187)		(160)
Total other comprehensive loss, net of tax	(48,510)		(41,753)		(148,298)		(2,845)
Comprehensive income (loss)	(54,910)		128,327		(87,249)		251,360
Less: Comprehensive income (loss) attributable to noncontrolling interests	(364)		12		(183)		126
Comprehensive income (loss) attributable to Pilgrim's Pride Corporation	$	(54,546)	$	128,315	$	(87,066)	$	251,234

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)

Six Months Ended June 28, 2020	Common Stock				Treasury Stock						Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests	Total
	Shares	Amount		Shares	Amount
	(In thousands)
Balance at December 29, 2019	261,119	$	2,611	(11,547)	$	(234,892)	$	1,955,261	$	877,812	$	(75,129)	$	10,397	$	2,536,060
Net income (loss)	—	—		—	—		—		61,232		—		(183)		61,049
Other comprehensive loss, net of tax	—	—		—	—		—		—		(148,298)		—		(148,298)
Stock-based compensation plans:
Common stock issued under compensation plans	66	1		—	—		(1)		—		—		—		—
Requisite service period recognition	—	—		—	—		3,467		—		—		—		3,467
Common stock purchased under share repurchase program	—	—		(4,121)	(77,879)		—		—		—		—		(77,879)

Balance at June 28, 2020	261,185	$	2,612	(15,668)	$	(312,771)	$	1,958,727	$	939,044	$	(223,427)	$	10,214	$	2,374,399

Three Months Ended June 28, 2020	Common Stock				Treasury Stock						Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest	Total
	Shares	Amount		Shares	Amount
	(In thousands)
Balance at March 29, 2020	261,185	$	2,612	(13,013)	$	(262,798)	$	1,955,936	$	945,080	$	(174,917)	$	10,578	$	2,476,491
Net loss	—	—		—	—		—		(6,036)		—		(364)		(6,400)
Other comprehensive loss, net of tax	—	—		—	—		—		—		(48,510)		—		(48,510)
Stock-based compensation plans:
Common stock issued under compensation plans				—	—		—		—		—		—		—
Requisite service period recognition	—	—		—	—		2,791		—		—		—		2,791
Common stock purchased under share repurchase program	—	—		(2,655)	(49,973)		—		—		—		—		(49,973)

Balance at June 28, 2020	261,185	$	2,612	(15,668)	$	(312,771)	$	1,958,727	$	939,044	$	(223,427)	$	10,214	$	2,374,399


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)
(Unaudited)

Six Months Ended June 30, 2019	Common Stock				Treasury Stock						Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest	Total
	Shares	Amount		Shares	Amount
	(In thousands)
Balance at December 30, 2018	260,396	$	2,604	(11,431)	$	(231,994)	$	1,945,136	$	421,888	$	(127,834)	$	9,785	$	2,019,585
Net income	—	—		—	—		—		254,079		—		126		254,205
Other comprehensive loss, net of tax	—