Pilgrim’s Pride Corporation (NASDAQ: PPC) reports fourth quarter and year-end 2019 financial results.

2019 Highlights

  • Operating Income margins of 6.4% in U.S., 8.9% in Mexico and 3.3% in Europe operations, respectively.
  • Net Income of $455.9 million, or an 84% increase from last year.
  • Adjusted EBITDA of $973.8 million, a 22% increase over 2018, or an 8.5% margin.
  • Portfolio strategy and geographic diversification reducing the impact of challenging specific market conditions. EBITDA outpacing the industry competition, driven by improved execution and increased operating performance across all business units, including the U.S., Mexico and Europe.
  • Operating results from legacy European business rose by 7% on better operational efficiencies and input cost mitigation. Newly acquired operations already generating positive EBITDA, and on track to achieve performance competitive with leading companies with similar portfolio in next few years.
  • We remain motivated to pursue additional growth potential and product differentiation, aligning our strategic priorities to continue to strengthen our differentiated global platforms.

Fourth Quarter

  • Net Sales of $3.06 billion.
  • Net GAAP Income of $92.1 million, including one-time asset acquisition net gain due to valuation and acquisition adjustments.
  • Operating Income margins of 3.2% in U.S., 2.5% in Mexico and 2.1% in Europe operations, respectively.
  • Adjusted EBITDA of $161.6 million (or a 5.3% margin).
Unaudited (2)Thirteen Weeks Ended Fifty-Two Weeks Ended
 December 29, 2019 December 30, 2018 Y/Y Change December 29, 2019 December 30, 2018 Y/Y Change
 (In millions, except per share and percentages)  
Net sales$3,063.5  $2,656.8  +15.3% $11,409.2  $10,937.8  +4.3%
U.S. GAAP EPS$0.37  $(0.03) +1,333.3% $1.83  $1.00  +83.0%
Operating income$85.8  $23.6  +263.6% $690.6  $495.7  +39.3%
Adjusted EBITDA(1)$161.6  $111.0  +45.6% $973.8  $798.2  +22.0%
Adjusted EBITDA margin(1)5.3% 4.2% +1.1 pts 8.5% 7.3% +1.2 pts
                  

(1) Reconciliations for non-U.S. GAAP measures are provided in subsequent sections within this release.(2) Comparisons include Tulip from 10/15/19 forward.

“While overall global market conditions including U.S. commodity chicken improved during 2019, our team members have continued to deliver on our strategy, achieving a significant increase in relative performance compared to last year and to our industry competition. Our diverse global footprint has contributed to well-balanced and more consistent results against different specific market conditions. We maintain our approach to the successful Key Customer strategy, which is the basis for our strong growth. While our product portfolio is already differentiated, we are investing to further innovate, and increase our capacities and capabilities to meet customer demand. We expect value added, specialty products to account for a meaningfully larger portion of our total results over the next few years as we continue to de-emphasize the mix of more volatile commodity sales and strengthen our margin profile,” stated Jayson Penn, Chief Executive Officer of Pilgrim's.

“In Q4, our operating performance in the U.S. has continued to improve, driven by our partnership with Key customers and the relentless focus on executing and delivering the best results possible despite changes in market conditions. Within our case-ready and small bird businesses, strong demand, especially from QSR customers, has continued to outstrip supply. The commodity sector has continued to be challenging but we experienced improved market conditions compared to 2018. Our U.S. Prepared Foods continues to evolve, reflecting the investments made over the last few years.”

“Weak macro conditions during Q4 in Mexico contributed to uncertainties in consumer spending and demand, especially in traditional markets. Although volume growth was solid, prices were below seasonal expectations. Despite the difficult market environment in Q4, our Mexican business has continued to perform well operationally versus the industry, and was able to generate an improvement in results during fiscal 2019 compared to 2018.”

“Our legacy European operations once again produced continuing improvement in results driven by increased operational efficiencies, investments in automation, focus on higher yields, and better mitigation of input costs. Joining our global team during the quarter, the newly acquired operations are off to a strong start and already generating positive EBITDA. The solid performance was driven by strong pork exports and good domestic demand, as well as from the initial implementations of operational improvements.”

Conference Call Information

A conference call to discuss Pilgrim’s quarterly results will be held tomorrow, February 21, 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/ppc200221.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 May 21, 2020.

About Pilgrim’s Pride

Pilgrim’s employs approximately 58,500 people and operates protein processing plants and prepared-foods facilities in 14 states, Puerto Rico, Mexico, the U.K, 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
 Investor Relations
 IRPPC@pilgrims.com
 (970) 506-8192
 www.pilgrims.com
  

PILGRIM’S PRIDE CORPORATION
CONSOLIDATED BALANCE SHEETS
 
  December 29, 2019 December 30, 2018
  (In thousands, except share and par value data)
Cash and cash equivalents $260,568  $338,386 
Restricted cash and cash equivalents 20,009  23,192 
Trade accounts and other receivables, less allowance for doubtful accounts 741,281  561,549 
Accounts receivable from related parties 944  1,331 
Inventories 1,383,535  1,159,519 
Income taxes receivable 60,204  38,479 
Prepaid expenses and other current assets 131,695  112,201 
Total current assets 2,598,236  2,234,657 
Deferred tax assets 4,426  4,248 
Operating lease assets, net 301,513   
Other long-lived assets 36,325  16,717 
Identified intangible assets, net 596,053  564,128 
Goodwill 973,750  949,750 
Property, plant and equipment, net 2,592,061  2,161,702 
Total assets $7,102,364  $5,931,202 
     
Accounts payable $996,484  $827,825 
Accounts payable to related parties 3,819  7,269 
Revenue contract liability 41,770  33,328 
Accrued expenses and other current liabilities 572,615  389,175 
Income taxes payable 7,075  8,221 
Current maturities of long-term debt 26,392  30,405 
Total current liabilities 1,648,155  1,296,223 
Long-term debt, less current maturities 2,276,029  2,295,190 
Noncurrent operating lease liability, less current maturities 235,382   
Noncurrent income taxes payable 7,731  7,731 
Deferred tax liabilities 301,907  237,422 
Other long-term liabilities 97,100  75,051 
Total liabilities 4,566,304  3,911,617 
Common stock, $.01 par value, 800,000,000 shares authorized; 261,119,064 and 260,396,032 shares issued at year-end 2019 and year-end 2018, respectively; 249,572,119 and 248,965,081 shares outstanding at year-end 2019 and year-end 2018, respectively 2,611  2,604 
Treasury stock, at cost, 11,546,945 shares and 11,430,951 shares at year-end 2019 and year-end 2018, respectively (234,892) (231,994)
Additional paid-in capital 1,955,261  1,945,136 
Retained earnings 877,812  421,888 
Accumulated other comprehensive loss (75,129) (127,834)
Total Pilgrim’s Pride Corporation stockholders’ equity 2,525,663  2,009,800 
Noncontrolling interest 10,397  9,785 
Total stockholders’ equity 2,536,060  2,019,585 
Total liabilities and stockholders' equity $7,102,364  $5,931,202 
         

PILGRIM’S PRIDE CORPORATION
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(Unaudited)
 
  Thirteen Weeks Ended Fifty-Two Weeks Ended
  December 29, 2019 December 30, 2018 December 29, 2019 December 30, 2018
  (In thousands, except per share data)
Net sales $3,063,489  $2,656,789  $11,409,219  $10,937,784 
Cost of sales 2,862,094  2,544,941  10,338,825  10,094,308 
Gross profit 201,395  111,848  1,070,394  843,476 
Selling, general and administrative expense 115,597  85,629  379,910  343,025 
Administrative restructuring activities 6  2,584  (84) 4,765 
Operating income 85,792  23,635  690,568  495,686 
Interest expense, net of capitalized interest 33,446  36,911  132,630  162,812 
Interest income (2,796) (3,146) (14,277) (13,811)
Foreign currency transaction loss (gain) (1,006) 19,962  6,917  17,160 
Gain on bargain purchase (56,880)   (56,880)  
Miscellaneous, net 2,112  (921) 4,633  (2,702)
Income before income taxes 110,916  (29,171) 617,545  332,227 
Income tax expense (benefit) 18,681  (20,944) 161,009  85,423 
Net income 92,235  (8,227) 456,536  246,804 
Less: Net income (loss) attributable to noncontrolling interests 155  (903) 612  (1,141)
Net income (loss) attributable to Pilgrim’s Pride Corporation $92,080  $(7,324) $455,924  $247,945 
         
Weighted average shares of common stock outstanding:        
Basic 249,571  248,980  249,401  248,945 
Effect of dilutive common stock equivalents 278  386  308  204 
Diluted 249,849  249,366  249,709  249,149 
         
Net income attributable to Pilgrim's Pride Corporation per share of common stock outstanding:        
Basic $0.37  $(0.03) $1.83  $1.00 
Diluted $0.37  $(0.03) $1.83  $1.00 
                 

PILGRIM’S PRIDE CORPORATION
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
 
 
  Fifty-Two Weeks Ended
  December 29, 2019 December 30, 2018
  (In thousands)
Cash flows from operating activities:    
Net income $456,536  $246,804 
Adjustments to reconcile net income to cash provided by operating activities:    
Depreciation and amortization 287,230  274,088 
Asset impairment   3,504 
Gain on bargain purchase (56,880)  — 
Foreign currency transaction losses (gains) related to borrowing arrangements (4,970) 5,267 
Loss on early extinguishment of debt recognized as a component of interest expense   15,818 
Amortization of bond premium (668) (668)
Accretion of bond discount 982  812 
Gain on property disposals (10,896) (1,889)
Gain on equity method investments (63) (63)
Share-based compensation 10,132  13,153 
Deferred income tax expense 42,478  32,540 
Changes in operating assets and liabilities:    
Trade accounts and other receivables (25,000) (10,918)
Inventories (111,748) 83,174 
Prepaid expenses and other current assets (15,490) (11,612)
Accounts payable and accrued expenses 119,892  86,834 
Income taxes (26,378) (248,470)
Long-term pension and other postretirement obligations (9,221) (6,751)
Other 5,764  4,458 
Cash provided by operating activities 666,521  491,650 
Cash flows from investing activities:    
Acquisitions of property, plant and equipment (348,120) (348,666)
Purchase of acquired business, net of cash acquired (384,694)  
Proceeds from property disposals 15,753  9,775 
Cash used in investing activities (717,061) (338,891)
Cash flows from financing activities:    
Proceeds from revolving line of credit and long-term borrowings 259,466  748,382 
Payments on revolving line of credit, long-term borrowings and capital lease obligations (289,917) (1,117,009)
Proceeds (distribution) from equity contribution under the Tax Sharing Agreement between JBS USA Food Company Holdings and Pilgrim's Pride Corporation (525) 5,558 
Payment on early extinguishment of debt   (9,781)
Capital contributions to subsidiary by noncontrolling stockholders   1,421 
Payment of capitalized loan costs (652) (12,581)
Purchase of common stock under share repurchase program (2,898) (236)
Cash used in financing activities (34,526) (384,246)
Effect of exchange rate changes on cash and cash equivalents 4,065  3,534 
Decrease in cash and cash equivalents (81,001) (227,953)
Cash and cash equivalents, beginning of period 361,578  589,531 
Cash and cash equivalents, end of period $280,577  $361,578 
Supplemental Disclosure Information:    
Interest paid (net of amount capitalized) $130,882  $154,627 
Income taxes paid 125,856  253,932 
       

PILGRIM’S PRIDE CORPORATIONSelected 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: (1) income (loss) attributable to noncontrolling interests, (2) charges or income from restructuring activities, (3) reorganization items, (4) losses on early extinguishment of debt and (5) 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 U.S. (“U.S. 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 U.S. 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 U.S. 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 U.S. GAAP.

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted EBITDA
     
(Unaudited) Thirteen Weeks Ended Fifty-Two Weeks Ended
  December 29, 2019 December 30, 2018 December 29, 2019 December 30, 2018
  (In thousands)
Net income (loss) $92,235  $(8,227) $456,536  $246,804 
Add:        
Interest expense, net 30,650  33,765  118,353  149,001 
Income tax expense (benefit) 18,681  (20,944) 161,009  85,423 
Depreciation and amortization 76,849  66,975  287,230  274,088 
EBITDA 218,415  71,569  1,023,128  755,316 
Add:        
Foreign currency transaction loss (gain) (1,006) 19,962  6,917  17,160 
Transaction costs related to acquisitions 1,239    1,302  320 
Restructuring activities loss (gain) 6  2,584  (84) 4,765 
Other nonrecurring losses   16,023    19,485 
Minus:        
Gain on bargain purchase 56,880    56,880   
Net income (loss) attributable to noncontrolling interest 155  (903) 612  (1,141)
Adjusted EBITDA $161,619  $111,041  $973,771  $798,187 
                 

The summary unaudited consolidated income statement data for the twelve months ended December 29, 2019 (the LTM Period) have been calculated by summing each of the unaudited thirteen week periods within the audited fifty-two week period ended December 29, 2019.

PILGRIM'S PRIDE CORPORATION
Reconciliation of LTM Adjusted EBITDA
           
(Unaudited) Thirteen Weeks Ended LTM Ended December 29, 2019
  March 31, 2019 June 30, 2019 September 29, 2019 December 29, 2019 
 (In thousands)
Net income $84,125  $170,080  $110,096  $92,235  $456,536 
Add:          
Interest expense, net 30,222  30,150  27,330  30,650  118,352 
Income tax expense 20,416  75,547  46,365  18,681  161,009 
Depreciation and amortization 67,182  71,348  71,851  76,849  287,230 
EBITDA 201,945  347,125  255,642  218,415  1,023,127 
Add:          
Foreign currency transaction loss (gain) 2,636  2,260  3,027  (1,006) 6,917 
Transaction costs related to acquisitions     63  1,239  1,302 
Restructuring activities loss (gain) (27) (43) (20) 6  (84)
Minus:          
Gain on bargain purchase       56,880  56,880 
Net income attributable to noncontrolling interest 114  12  331  155  612 
Adjusted EBITDA $204,440  $349,330  $258,381  $161,619  $973,770 
                     

PILGRIM'S PRIDE CORPORATION
Reconciliation of EBITDA Margin
 
(Unaudited) Thirteen Weeks Ended Fifty-Two Weeks Ended Thirteen Weeks Ended Fifty-Two Weeks Ended
  Dec 29, 2019 Dec 30, 2018 Dec 29, 2019 Dec 30, 2018 Dec 29, 2019 Dec 30, 2018 Dec 29, 2019 Dec 30, 2018
 (In thousands, except percent of net sales)
Net income (loss) $92,235  $(8,227) $456,536  $246,804  3.01% (0.31)% 4.00% 2.26%
Add:                
Interest expense, net 30,650  33,765  118,353  149,001  1.00% 1.27% 1.04% 1.36%
Income tax expense (benefit) 18,681  (20,944) 161,009  85,423  0.61% (0.79)% 1.41% 0.78%
Depreciation and amortization 76,849  66,975  287,230  274,088  2.51% 2.52% 2.52% 2.51%
EBITDA 218,415  71,569  1,023,128  755,316  7.13% 2.69% 8.97% 6.91%
Add:                
Foreign currency transaction loss (gain) (1,006) 19,962  6,917  17,160  (0.03)% 0.75% 0.06% 0.16%
Transaction costs related to acquisitions 1,239    1,302  320  0.04% % 0.01% %
Restructuring activities loss (gain) 6  2,584  (84) 4,765  % 0.10% % 0.04%
Other nonrecurring losses   16,023    19,485  % 0.60% % 0.18%
Minus:                
Gain on bargain purchase 56,880    56,880    1.86% % 0.50% %
Net income (loss) attributable to noncontrolling interest 155  (903) 612  (1,141) 0.01% (0.03)% 0.01% (0.01)%
Adjusted EBITDA $161,619  $111,041  $973,771  $798,187  5.28% 4.18% 8.53% 7.30%
                 
Net sales $3,063,489  $2,656,789  $11,409,219  $10,937,784         
                         

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

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted Net Income
(Unaudited)
        
 Thirteen Weeks Ended Fifty-Two Weeks Ended
 December 29, 2019 December 30, 2018 December 29, 2019 December 30, 2018
 (In thousands, except per share data)
Net income (loss) attributable to Pilgrim's$92,080  $(7,324) $455,924  $247,945 
Adjustments, net of tax:       
Loss on early extinguishment of debt      12,449 
Transaction costs related to acquisitions and restructuring activities net loss920  1,919  900  3,778 
Other nonrecurring losses  11,903    14,475 
Foreign currency transaction loss (gain)(744) 14,829  5,113  12,748 
Gain on bargain purchase(56,880)   (56,880)  
 $35,376  $21,327  $405,057  $291,395 
U.S. Tax Cuts & Jobs Act transition tax      26,400 
Adjusted net income attributable to Pilgrim's$35,376  $21,327  $405,057  $317,795 
Weighted average diluted shares of common stock outstanding249,849  249,366  249,709  249,149 
Adjusted net income attributable to Pilgrim's per common diluted share$0.14  $0.09  $1.62  $1.28 
                

A reconciliation of U.S. GAAP to non-U.S. GAAP financial measures. Net income (loss) per share is calculated by dividing the net income (loss) attributable to Pilgrim's Pride Corporation stockholders by the weighted average number of diluted shares.

PILGRIM'S PRIDE CORPORATION
Reconciliation of GAAP EPS to Adjusted EPS
(Unaudited)
        
 Thirteen Weeks Ended Fifty-Two Weeks Ended
 December 29, 2019 December 30, 2018 December 29, 2019 December 30, 2018
 (In thousands, except per share data)
U.S. GAAP EPS$0.37  $(0.03) $1.83  $1.00 
Adjustments, net of tax:       
Loss on early extinguishment of debt      0.05 
Transaction costs related to acquisitions and restructuring activities loss (gain)  0.01    0.02 
Other nonrecurring losses  0.05    0.05 
Foreign currency transaction loss (gain)  0.06  0.02  0.05 
Gain on bargain purchase(0.23)   (0.23)  
 0.14  0.09  1.62  1.17 
U.S. Tax Cuts & Jobs Act transition tax      0.11 
Adjusted EPS$0.14  $0.09  $1.62  $1.28 
        
Weighted average diluted shares of common stock outstanding249,849  249,366  249,709  249,149 
            

PILGRIM'S PRIDE CORPORATION
Supplementary Geographic Data
(Unaudited)
         
  Thirteen Weeks Ended Fifty-Two Weeks Ended
  December 29, 2019 December 30, 2018 December 29, 2019 December 30, 2018
  (In thousands)
Sources of net sales by geographic region of origin:        
U.S. $1,904,515  $1,820,952  $7,636,716  $7,425,661 
Europe 815,397  514,541  2,383,793  2,148,666 
Mexico 343,577  321,296  1,388,710  1,363,457 
Total net sales $3,063,489  $2,656,789  $11,409,219  $10,937,784 
         
Sources of cost of sales by geographic region of origin:        
U.S. $1,779,959  $1,772,730  $6,903,237  $6,909,779 
Europe 759,788  476,844  2,212,042  1,977,838 
Mexico 322,371  295,465  1,223,642  1,206,823 
Elimination (24) (98) (96) (132)
Total cost of sales $2,862,094  $2,544,941  $10,338,825  $10,094,308 
         
Sources of gross profit by geographic region of origin:        
U.S. $124,556  $48,222  $733,479  $515,882 
Europe 55,609  37,697  171,751  170,828 
Mexico 21,206  25,831  165,068  156,634 
Elimination 24  98  96  132 
Total gross profit $201,395  $111,848  $1,070,394  $843,476 
         
Sources of operating income by geographic region of origin:        
U.S. $60,307  $(9,579) $487,275  $291,381 
Europe 16,949  15,979  79,182  84,524 
Mexico 8,512  17,137  124,015  119,649 
Elimination 24  98  96  132 
Total operating income $85,792  $23,635  $690,568  $495,686 
                 

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