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CST: 19/08/2019 00:54:57   

Pilgrim’s Pride Reports Q2 Net Sales of $2.84 Billion, Operating Income of $280 Million and GAAP EPS of $0.68, a 58% increase over Q2 2018

18 Days ago

GREELEY, Colo., July 31, 2019 (GLOBE NEWSWIRE) -- Pilgrim’s Pride Corporation (NASDAQ: PPC) reports second quarter 2019 financial results.

Second Quarter Highlights

  • Net Sales of $2.84 billion.
  • Net Income of $170.1 million.
  • Operating Income margins of 9.8% in U.S., 17.5% in Mexico and 4.5% in Europe operations, respectively.
  • Adjusted EBITDA of $349.3 million (or a 12.3% margin), and Adjusted EPS of $0.69.
  • U.S. portfolio continues to deliver strong results in our differentiated segments, while more market features and promotional activity of chicken supported better demand in the commodity segment. We continue to evolve our well-balanced portfolio to further differentiate our products and brands, strengthen Key Customer relationships, and improve margin consistency.
  • Strong market recovery in Mexico as growing conditions of chicken reverted back to normal and less competing proteins, driving chicken demand and prices higher. Diversification into premium Pilgrim’s brand is gaining momentum and producing strong results while significant growth in Prepared Foods remains.
  • European operations mitigating the impact of recent input cost challenges. Along with continuous operational improvements, the implementation of our Key Customer strategy has enhanced the ability to reflect input cost changes through adjustments within our pricing models.
Unaudited, In Millions, Except Per Share and Percentages  
  Thirteen
Weeks
Ended
Thirteen
Weeks
Ended
    Twenty-Six
Weeks
Ended
Twenty-Six
Weeks
Ended
   
  June 30,
2019
  July 1, 2018   Y/Y
Change
  June 30,
2019
  July 1, 2018   Y/Y
Change
Net Sales $2,843.1
  $2,836.7
  +0.2%   $5,567.8
  $5,583.4
  -0.3%
GAAP EPS $0.68
  $0.43
  +58.1%   $1.02
  $0.91
  +12.1%
Operating Income $279.6
  $185.1
  +51.1%   $416.6
  $386.7
  +7.7%
Adjusted EBITDA (1) $349.3
  $259.3
  +34.7%   $553.8
  $531.1
  +4.3%
Adjusted EBITDA Margin (1) 12.3%   9.2%   +3.1pts   10.0%   9.5%   +0.5pts
(1) Reconciliations for non-GAAP measures are provided in subsequent sections within this release.

“After a very challenging market in Q2 of last year, we experienced a much better environment in the U.S. during Q2 2019, particularly in commodity large bird deboning, while feature activities at retailers and QSRs returned to seasonal levels. Large-bird cutout tracked much closer to the five-year average, driven by strengths in wings, leg quarters, and tenders. We remain committed to our Key Customer strategy, which is relevant to our growth. Revenues from Key Customers have more than doubled over the last eight years, reducing our relative dependency on pure commodity sales and reducing volatility. Opportunities for additional growth remain available. We will continue to invest to further differentiate our portfolio, and increase our capacities and capabilities to meet customer expectations. We expect value added, differentiated products to account for a significantly 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.

“Conditions in Mexico significantly rebounded from a counter-seasonally weak Q1. A return to much more normal growing conditions together with strong demand drove a very positive price reaction throughout the quarter. The availability of imported pork from the U.S. has also significantly diminished, and presented much less competition to demand for chicken. 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 and margin expansion.”

“Our European operations have started to overcome recent input cost challenges and generated improving results throughout Q2. While pressure from wheat prices has been reduced, increased implementation of our Key Customer strategy also enabled us to better reflect input cost increases by adjusting our pricing models compared to before. Along with additional improvements in operational efficiencies, we exited Q2 with a stronger EBIT performance than when we began, and we expect this momentum to continue into the second half of the year.”

Conference Call Information

A conference call to discuss Pilgrim’s quarterly results will be held tomorrow, August 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/ppc190801.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 November 1, 2019.

About Pilgrim’s Pride

Pilgrim’s employs approximately 52,600 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
 
    June 30, 2019   December 30, 2018
    (Unaudited)
   
  (In thousands)
Cash and cash equivalents   $   538,227     $ 338,386  
Restricted cash and cash equivalents   33,379     23,192  
Trade accounts and other receivables, less allowance for doubtful accounts   582,296     561,549  
Accounts receivable from related parties   957     1,331  
Inventories   1,186,655     1,159,519  
Income taxes receivable   22,273     38,479  
Prepaid expenses and other current assets   113,409     112,023  
Assets held for sale   146     178  
Total current assets   2,477,342     2,234,657  
Deferred tax assets   4,321     4,248  
Other long-lived assets   15,289     16,717  
Identified intangible assets, net   552,922     564,128  
Goodwill   949,869     949,750  
Operating lease assets, net   317,963      
Property, plant and equipment, net   2,210,212     2,161,702  
Total assets   $ 6,527,918     $ 5,931,202  
         
Accounts payable   $ 816,126     $ 830,059  
Accounts payable to related parties   5,938     7,269  
Revenue contract liability   23,016     33,328  
Accrued expenses and other current liabilities   508,337     386,941  
Income taxes payable   8,930     8,221  
Current maturities of long-term debt   30,282     30,405  
Total current liabilities   1,392,629     1,296,223  
Noncurrent operating lease liability, less current maturities   243,661      
Long-term debt, less current maturities   2,283,847     2,295,190  
Noncurrent income taxes payable   7,731     7,731  
Deferred tax liabilities   235,487     237,422  
Other long-term liabilities   91,299     75,051  
Total liabilities   4,254,654     3,911,617  
Common stock   2,609     2,604  
Treasury stock   (234,892 )   (231,994 )
Additional paid-in capital   1,950,348     1,945,136  
Retained earnings   675,967     421,888  
Accumulated other comprehensive loss   (130,679 )   (127,834 )
Total Pilgrim’s Pride Corporation stockholders’ equity   2,263,353     2,009,800  
Noncontrolling interest   9,911     9,785  
Total stockholders’ equity   2,273,264     2,019,585  
Total liabilities and stockholders’ equity   $ 6,527,918     $ 5,931,202  


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
                 
    Thirteen Weeks ended   Twenty-Six Weeks Ended
    June 30, 2019   July 1, 2018   June 30, 2019   July 1, 2018
    (In thousands, except per share data) 
Net sales   $ 2,843,085     $ 2,836,713     $ 5,567,760     $ 5,583,391  
Cost of sales   2,475,221     2,562,491     4,980,957     5,021,504  
Gross profit   367,864     274,222     586,803     561,887  
Selling, general and administrative expense   88,357     87,975     170,281     173,258  
Administrative restructuring activities   (43 )   1,135     (70 )   1,924  
Operating income   279,550     185,112     416,592     386,705  
Interest expense, net of capitalized interest   33,594     40,267     67,156     90,567  
Interest income   (3,444 )   (4,834 )   (6,784 )   (6,424 )
Foreign currency transaction loss   2,260     5,630     4,896     3,909  
Miscellaneous, net   1,513     (817 )   1,156     (2,434 )
Income before income taxes   245,627     144,866     350,168     301,087  
Income tax expense   75,547     38,522     95,963     75,519  
Net income   170,080     106,344     254,205     225,568  
Less: Net income (loss) attributable to noncontrolling interests   12     (197 )   126     (391 )
Net income attributable to Pilgrim’s Pride Corporation   $ 170,068     $ 106,541     $ 254,079     $ 225,959  
                 
Weighted average shares of common stock outstanding:                
Basic   249,400     248,981     249,283     248,909  
Effect of dilutive common stock equivalents   236     76     320     116  
Diluted   249,636     249,057     249,603     249,025  
                 
Net income attributable to Pilgrim's Pride Corporation per share of common stock outstanding:                
Basic   $ 0.68     $ 0.43     $ 1.02     $ 0.91  
Diluted   $ 0.68     $ 0.43     $ 1.02     $ 0.91  


PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
    Twenty-Six Weeks Ended
    June 30, 2019   July 1, 2018
    (In thousands)
Cash flows from operating activities:                
Net income   $ 254,205     $ 225,568  
Adjustments to reconcile net income to cash provided by operating activities:        
Depreciation and amortization   138,530     136,087  
Share-based compensation   5,217     5,633  
Deferred income tax expense (benefit)   (3,354 )   (11,927 )
Loan cost amortization   2,401     3,392  
Accretion of discount related to Senior Notes   491     321  
Amortization of premium related to Senior Notes   (334 )   (334 )
Loss on property disposals   230     239  
Foreign currency transaction loss related to borrowing arrangements   37     4,221  
Gain on equity-method investments   (32 )   (32 )
Noncash loss on early extinguishment of debt       4,918  
Asset impairment       573  
Changes in operating assets and liabilities:        
Trade accounts and other receivables   (20,385 )   (31,913 )
Inventories   (27,212 )   60,303  
Prepaid expenses and other current assets   (1,339 )   (31,099 )
Accounts payable, accrued expenses and other current liabilities   20,664     103,991  
Income taxes   34,013     (161,571 )
Long-term pension and other postretirement obligations   (1,121 )   (5,323 )
Other operating assets and liabilities   1,353     942  
Cash provided by operating activities   403,364     303,989  
Cash flows from investing activities:        
Acquisitions of property, plant and equipment   (177,609 )   (155,188 )
Proceeds from property disposals   1,740     1,205  
Cash used in investing activities   (175,869 )   (153,983 )
Cash flows from financing activities:        
Payments on revolving line of credit, long-term borrowings and capital lease obligations   (113,079 )   (673,452 )
Proceeds from revolving line of credit and long-term borrowings   99,636     604,062  
Purchase of common stock under share repurchase program   (2,898 )    
Payment of capitalized loan costs   (596 )   (5,708 )
Proceeds (payment) from equity contribution (distribution) under Tax Sharing Agreement between JBS USA Food Company Holdings and Pilgrim's Pride Corporation   (525 )   5,558  
Cash used in financing activities   (17,462 )   (69,540 )
Effect of exchange rate changes on cash and cash equivalents   (5 )   4,030  
Increase in cash, cash equivalents and restricted cash   210,028     84,496  
Cash, cash equivalents and restricted cash, beginning of period   361,578     589,531  
Cash, cash equivalents and restricted cash, end of period   $ 571,606     $ 674,027  


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 30, 2019   July 1, 2018   June 30, 2019   July 1, 2018
  (In thousands)
Net income $ 170,080     $ 106,344     $ 254,205     $ 225,568  
Add:              
Interest expense, net 33,594     35,433     67,156     84,143  
Income tax expense 75,547     38,522     95,963     75,519  
Depreciation and amortization 71,348     68,643     138,530     136,087  
EBITDA 347,125     248,942     549,070     521,317  
Add:              
Foreign currency transaction losses 2,260     5,630     4,896     3,909  
Acquisition charges     125         304  
Derivative loss              
Restructuring activity (43 )   1,135     (70 )   1,924  
Other nonrecurring losses and expenses     3,298         3,298  
Minus:              
Net income (loss) attributable to noncontrolling interest 12     (197 )   126     (391 )
Adjusted EBITDA $ 349,330     $ 259,327     $ 553,770     $ 531,143  


The summary unaudited consolidated income statement data for the twelve months ended June 30, 2019 (the LTM Period) have been calculated by subtracting the applicable unaudited consolidated income statement data for the six months ended July 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 six months ended June 30, 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
    September 30,
 2018
  December 30,
 2018
  March 31,
 2019
  June 30,
 2019
  June 30,
 2019
  (In thousands)
Net income   $ 29,463     $ (8,227 )   $ 84,125     $ 170,080     $ 275,441  
Add:                    
Interest expense, net   31,093     33,765     30,222     30,150     125,230  
Income tax expense   30,848     (20,944 )   20,416     75,547     105,867  
Depreciation and amortization   71,027     66,975     67,182     71,348     276,532  
EBITDA   162,431     71,569     201,945     347,125     783,070  
Add:                    
Foreign currency transaction losses (gains)   (6,711 )   19,962     2,636     2,260     18,147  
Acquisition charges   16                 16  
Restructuring activities   257     2,584     (27 )   (43 )   2,771  
Other nonrecurring losses and expenses   164     16,023             16,187  
Minus:                    
Net income (loss) attributable to noncontrolling interest   153     (903 )   114     12     (624 )
Adjusted EBITDA   $ 156,004     $ 111,041     $ 204,440     $ 349,330     $ 820,815  



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 30, 2019   July 1, 2018   June 30, 2019   July 1, 2018   June 30, 2019   July 1, 2018   June 30, 2019   July 1, 2018
(In thousands)
 
Net income $ 170,080     $ 106,344     $
254,205     $ 225,568     $ 5.98 %   $ 3.75 %   $ 4.57 %   $ 4.04 %
Add:                              
Interest expense, net 30,150     35,433     60,372     84,143     1.06 %   1.25 %   1.08 %   1.51 %
Income tax expense 75,547     38,522     95,963     75,519     2.66 %   1.36 %   1.72 %   1.35 %
Depreciation and amortization 71,348     68,643     138,530     136,087     2.51 %   2.42 %   2.49 %   2.44 %
EBITDA 347,125     248,942     549,070     521,317     12.21 %   8.79 %   9.86 %   9.34 %
Add:                              
Foreign currency transaction losses 2,260     5,630     4,896     3,909     0.08 %   0.20 %   0.09 %   0.07 %
Acquisition charges     125         304     %   %   %   0.01 %
Restructuring activity (43 )   1,135     (70 )   1,924     %   0.04 %   %   0.03 %
Other nonrecurring losses and  expenses     3,298         3,298     %   0.12 %   %   0.06 %
Minus:                              
Net income (loss) attributable to noncontrolling interest 12     (197 )   126     (391 )   %   (0.01 )%   %   (0.01 )%
Adjusted EBITDA $ 349,330     $ 259,327     $ 553,770     $ 531,143     12.29 %   9.15 %   9.95 %   9.51 %
                               
Net sales $ 2,843,085     $ 2,836,713     $ 5,567,760     $ 5,583,391     $ 2,843,085     $ 2,836,713     $ 5,567,760     $ 5,583,391  


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 30, 2019   July 1, 2018   June 30, 2019   July 1, 2018
  (In thousands, except per share data)
Net income attributable to Pilgrim's Pride Corporation $ 170,068     $ 106,541     $ 254,079     $ 225,959  
Adjustments, net of tax:              
Loss on early extinguishment of debt     1,513         8,823  
Acquisition charges and restructuring activities (33 )   954     (53 )   1,686  
Foreign currency transaction losses 1,710     4,260     3,704     2,957  
Income before loss on early extinguishment of debt, acquisition charges and restructuring activities, and foreign currency transaction losses $ 171,745     $ 113,268     $ 257,730     $ 239,425  
Weighted average diluted shares of common stock outstanding 249,636     249,057     249,603     249,025  
Income before loss on early extinguishment of debt, acquisition and restructuring activities and foreign currency transaction losses per common diluted share $ 0.69     $ 0.45     $ 1.03     $ 0.96  

 

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 30, 2019   July 1, 2018   June 30, 2019   July 1, 2018
  (In thousands, except per share data)
GAAP EPS $ 0.68     $ 0.43     $ 1.02     $ 0.91  
Adjustments, net of tax:              
Loss on early extinguishment of debt     0.01         0.04  
Foreign currency transaction losses 0.01     0.01     0.01     0.01  
Adjusted EPS $ 0.69     $ 0.45     $ 1.03     $ 0.96  
               
Weighted average diluted shares of common stock outstanding 249,636     249,057     249,603     249,025  

 

PILGRIM'S PRIDE CORPORATION
Supplementary Selected Segment and Geographic Data
(Unaudited)
               
  Thirteen Weeks Ended   Twenty-Six Weeks Ended
  June 30, 2019   July 1, 2018   June 30, 2019   July 1, 2018
  (In thousands)
Sources of net sales by country of origin:              
US $ 1,916,954     $ 1,899,435     $ 3,800,544     $ 3,740,540  
Europe 535,902     563,102     1,050,865     1,107,402  
Mexico 390,229     374,176     716,351     735,449  
Total net sales $ 2,843,085     $ 2,836,713     $ 5,567,760     $ 5,583,391  
               
Sources of cost of sales by country of origin:              
US $ 1,670,384     $ 1,745,511     $ 3,383,803     $ 3,404,245  
Europe 492,386     513,991     977,764     1,015,559  
Mexico 312,475     302,973     619,438     601,708  
Intersegment transactions, net (24 )   16     (48 )   (8 )
Total cost of sales $ 2,475,221     $ 2,562,491     $ 4,980,957     $ 5,021,504  
               
Sources of gross profit by country of origin:              
US $ 246,570     $ 153,924     $ 416,741     $ 336,295  
Europe 43,516     49,111     73,101     91,843  
Mexico 77,754     71,203     96,913     133,741  
Intersegment transactions, net 24     (16 )   48     8  
Total gross profit $ 367,864     $ 274,222     $ 586,803     $ 561,887  
               
Sources of operating income by country of origin:              
US $ 186,960     $ 99,469     $ 301,800     $ 226,755  
Europe 24,194     23,662     36,908     45,075  
Mexico 68,372     61,997     77,836     114,867  
Intersegment transactions, net 24     (16 )   48     8  
Total operating income $ 279,550     $ 185,112     $ 416,592     $ 386,705  

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