Pilgrim's Pride (PPC) 8-K Pilgrim’s Pride Reports Operating Income of $164 Million with an Operating Margin of 8.1% for the Third Quarter of 2016

Pilgrim’s Pride Reports Operating Income of $164 Million with an Operating Margin of 8.1% for the Third Quarter of 2016

GREELEY, Colo., October 26, 2016 (GLOBE NEWSWIRE) - Pilgrim’s Pride Corporation (NASDAQ: PPC) reports third quarter 2016 financial results.

Third Quarter Highlights

• Net Sales of $2.03 billion.

• Net Income of $98.7 million, GAAP EPS of $0.39.

• Operating Income margins of 8.2% in U.S. and 7.4% in Mexico operations, respectively.

• Adjusted EBITDA of $210.8 million (or a 10.4% margin).

• Cash Flow From Operations of $242.1 million.

• Conversion of a commodity markets facility into USDA-certified organic production on schedule to begin in Q1 2017.

• Planned conversion of an additional case-ready facility to ABF, veg-fed production to support growth of key customers and further enhance portfolio differentiation, to put us more than half way to our 25% ABF target by 2018.

• On-going ramp up of largest Prepared Foods facility to full capacity, with a target completion by end of Q1 2017, together with start-up of a new fully cooked line to strengthen and grow Prepared Foods Operations.

Unaudited, In Millions, Except Per Share and Percentages
	Thirteen Weeks Ended
	Sep 25, 2016	Sep 27, 2015	Change
Net Sales	$2,031.7	$2,112.5	-3.8%
GAAP EPS	$0.39	$0.53	-26.4%
Operating Income	$163.8	$231.1	-29.1%
Adjusted EBITDA (1)	$210.8	$274.3	-23.1%
Adjusted EBITDA Margin (1)	10.4%	13.0%	-2.6pts

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

“During Q3, our Fresh business continued to perform well driven by our differentiated portfolio strategy of having presence in all three bird sizes and strong relationships with key customers. Retail demand for our birds remained robust despite concerns about greater availability of other competing proteins. Within exports, volumes are also improving from a year ago, which improves value for the back half of the bird, and supportive of the overall cutout,” stated Bill Lovette, Chief Executive Officer of Pilgrim's.

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“The conversion of our existing facility to certified USDA organic chicken production is proceeding well and we plan to have the first chicken to market in Q1 of 2017. Additionally, we are starting work on converting one of our case-ready plants to produce ABF, veg-fed chicken. Together with our prior announcements on organic and ABF Fresh chicken as well as further processed products, we believe the latest conversion reinforces our strategy to better resonate with new consumer trends for more natural products while adding further value to our portfolio and supporting the growth of key customers. Furthermore, these investments signify our commitment to look for new sources of potential earnings driver while lessening the impact of volatile commodity markets in the long run.”

“Market environment in Mexico during Q3 followed its normal seasonality and our team members were relentless and continued to improve on the operating performance of the legacy business as well as implement synergies with the newly acquired assets. Despite the impact of unfavorable grain cost and exchange rate, our profitability in Mexico has remained steady compared to last year, which is a positive sign of the potential leverage we have within our operations. The outlook for Mexico remains very strong and we will continue to grow our offerings in the region, together with leveraging our strong fresh brand to leverage the growth of our Prepared Foods business.”

Conference Call Information

A conference call to discuss Pilgrim’s quarterly results will be held tomorrow, October 27, 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/ppc161027.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 January 27, 2017.

About Pilgrim’s Pride

Pilgrim’s employs approximately 38,200 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

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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

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PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
	September 25, 2016			December 27, 2015
	(Unaudited)
	(In thousands)
Cash and cash equivalents	$	85,994		$	439,638
Trade accounts and other receivables, less allowance for doubtful accounts	350,810			348,994
Account receivable from related parties	3,491			2,668
Inventories	796,808			801,357
Income taxes receivable	51,057			71,410
Prepaid expenses and other current assets	75,686			75,602
Assets held for sale	6,049			6,555
Total current assets	1,369,895			1,746,224
Other long-lived assets	15,887			15,672
Identified intangible assets, net	40,548			47,453
Goodwill	125,607			156,565
Property, plant and equipment, net	1,450,352			1,352,529
Total assets	$	3,002,289		$	3,318,443
Notes payable to banks	$	—		$	28,726
Accounts payable	494,076			482,954
Account payable to related parties	9,689			7,000
Accrued expenses and other current liabilities	297,214			314,966
Income taxes payable	43,258			13,228
Current maturities of long-term debt	92			86
Total current liabilities	844,329			846,960
Long-term debt, less current maturities	1,004,840			985,509
Deferred tax liabilities	144,423			131,882
Other long-term liabilities	91,890			92,282
Total liabilities	2,085,482			2,056,633
Common stock	2,597			2,597
Treasury stock	(119,566		)	(99,233		)
Additional paid-in capital	1,681,005			1,675,674
Accumulated deficit	(591,253		)	(261,252		)
Accumulated other comprehensive loss	(65,848		)	(58,930		)
Total Pilgrim’s Pride Corporation stockholders’ equity	906,935			1,258,856
Noncontrolling interest	9,872			2,954
Total stockholders’ equity	916,807			1,261,810
Total liabilities and stockholders’ equity	$	3,002,289		$	3,318,443

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PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	September 25, 2016			September 27, 2015			September 25, 2016			September 27, 2015
	(In thousands, except per share data)
Net sales	$	2,031,721		$	2,112,529		$	6,022,973		$	6,219,324
Cost of sales	1,821,504			1,827,985			5,289,063			5,125,640
Gross profit	210,217			284,544			733,910			1,093,684
Selling, general and administrative expense	46,116			52,620			144,424			150,961
Administrative restructuring charges	279			792			279			5,605
Operating income	163,822			231,132			589,207			937,118
Interest expense, net of capitalized interest	11,959			10,501			35,540			26,870
Interest income	(125		)	(319		)	(1,501		)	(3,086		)
Foreign currency transaction loss (gain)	4,142			12,773			(837		)	23,806
Miscellaneous, net	(1,741		)	(2,071		)	(5,637		)	(7,135		)
Income before income taxes	149,587			210,248			561,642			896,663
Income tax expense	51,060			73,153			192,062			313,751
Net income	98,527			137,095			369,580			582,912
Less: Net income (loss) attributable to noncontrolling interests	(130		)	33			(334		)	146
Net income attributable to Pilgrim’s Pride Corporation	$	98,657		$	137,062		$	369,914		$	582,766
Weighted average shares of common stock outstanding:
Basic	254,460			259,280			254,607			259,540
Effect of dilutive common stock equivalents	460			223			430			225
Diluted	254,920			259,503			255,037			259,765
Net income attributable to Pilgrim's Pride Corporation per share of      common stock outstanding:
Basic	$	0.39		$	0.53		$	1.45		$	2.25
Diluted	$	0.39		$	0.53		$	1.45		$	2.24

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PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Thirty-Nine Weeks Ended
	September 25, 2016			September 27, 2015
	(In thousands)
Cash flows from operating activities:
Net income	$	369,580		$	582,912
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	134,455			116,485
Impairment expense	—			4,813
Gain on property disposals	(7,315		)	(9,817		)
Loss on equity method investments	194			—
Share-based compensation	5,404			2,132
Deferred income tax benefit	(1,285		)	(7,214		)
Changes in operating assets and liabilities:
Trade accounts and other receivables	(2,639		)	40,694
Inventories	4,548			17,162
Prepaid expenses and other current assets	(83		)	(1,415		)
Accounts payable, accrued expenses and other current liabilities	(7,812		)	92,159
Income taxes	45,220			17,836
Long-term pension and other postretirement obligations	(8,294		)	(2,668		)
Other operating assets and liabilities	(864		)	3,235
Cash provided by operating activities	531,109			856,314
Cash flows from investing activities:
Acquisitions of property, plant and equipment	(173,440		)	(129,848		)
Business acquisition	—			(373,532		)
Proceeds from property disposals	10,316			13,553
Cash provided by (used in) investing activities	(163,124		)	(489,827		)
Cash flows from financing activities:
Proceeds from note payable to bank	36,838			5,869
Payments on note payable to bank	(65,564		)	—
Proceeds from revolving line of credit	515,292			1,680,000
Payments on revolving line of credit, long-term borrowings and capital lease obligations	(498,124		)	(683,742		)
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
Equity contribution to subsidiary by noncontrolling interest	7,252			—
Payment of capitalized loan costs	(693		)	(12,322		)
Purchase of common stock under share repurchase program	(20,333		)	(45,080		)
Purchase of common stock from retirement plan participants	(73		)	—
Cash dividends	(699,915		)	(1,498,470		)
Cash used in financing activities	(721,629		)	(545,911		)
Increase (decrease) in cash and cash equivalents	(353,644		)	(179,424		)
Cash and cash equivalents, beginning of period	439,638			576,143
Cash and cash equivalents, end of period	$	85,994		$	396,719

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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					Thirty-Nine Weeks Ended
	September 25, 2016			September 27, 2015		September 25, 2016			September 27, 2015
	(In thousands)
Net income	$	98,527		$	137,095	$	369,580		$	582,912
Add:
Interest expense, net	11,834			10,182		34,039			23,784
Income tax expense (benefit)	51,060			73,153		192,062			313,751
Depreciation and amortization	45,772			41,415		134,455			116,485
Minus:
Amortization of capitalized financing costs	970			1,119		2,859			2,708
EBITDA	206,223			260,726		727,277			1,034,224
Add:
Foreign currency transaction losses (gains)	4,142			12,773		(837		)	23,806
Restructuring charges	279			792		279			5,605
Minus:
Net income (loss) attributable to noncontrolling interest	(130		)	33		(334		)	146
Adjusted EBITDA	$	210,774		$	274,258	$	727,053		$	1,063,489

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The summary unaudited consolidated income statement data for the twelve months ended September 25, 2016 (the LTM Period) have been calculated by subtracting the applicable unaudited consolidated income statement data for the nine months ended September 27, 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 nine months ended September 25, 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
		December 27, 2015			March 27, 2016			June 26, 2016			September 25, 2016			September 25, 2016
	(In thousands)
Net income		$	63,050		$	118,011		$	153,042		$	98,527		$	432,630
Add:
Interest expense, net		10,091			11,340			10,865			11,834			44,130
Income tax expense (benefit)		33,045			62,604			78,398			51,060			225,107
Depreciation and amortization		42,490			42,391			46,293			45,772			176,946
Minus:
Amortization of capitalized financing costs		930			928			962			970			3,790
EBITDA		147,746			233,418			287,636			206,223			875,023
Add:
Foreign currency transaction losses (gains)		2,134			(235		)	(4,744		)	4,142			1,297
Restructuring charges		—			—			—			279			279
Minus:
Net income (loss) attributable to noncontrolling interest		(98		)	(360		)	156			(130		)	(432		)
Adjusted EBITDA		$	149,978		$	233,543		$	282,736		$	210,774		$	877,031

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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					Thirty-Nine Weeks Ended					Thirteen Weeks Ended						Thirty-Nine Weeks Ended
		September 25, 2016			September 27, 2015		September 25, 2016			September 27, 2015		September 25, 2016			September 27, 2015			September 25, 2016			September 27, 2015
	(In thousands)
Net income from continuing operations		$	98,527		$	137,095	$	369,580		$	582,912	4.85		%	6.49		%	6.14		%	9.37		%
Add:
Interest expense, net		11,834			10,182		34,039			23,784		0.58		%	0.48		%	0.57		%	0.38		%
Income tax expense (benefit)		51,060			73,153		192,062			313,751		2.51		%	3.46		%	3.19		%	5.04		%
Depreciation and amortization		45,772			41,415		134,455			116,485		2.25		%	1.96		%	2.23		%	1.87		%
Minus:
Amortization of capitalized financing costs		970			1,119		2,859			2,708		0.05		%	0.05		%	0.05		%	0.04		%
EBITDA		206,223			260,726		727,277			1,034,224		10.15		%	12.34		%	12.08		%	16.63		%
Add:
Foreign currency transaction losses (gains)		4,142			12,773		(837		)	23,806		0.20		%	0.60		%	(0.01		)%	0.38		%
Restructuring charges		279			792		279			5,605		0.01		%	0.04		%	—		%	0.09		%
Minus:
Net income (loss) attributable to noncontrolling interest		(130		)	33		(334		)	146		(0.01		)%	—		%	(0.01		)%	—		%
Adjusted EBITDA		$	210,774		$	274,258	$	727,053		$	1,063,489	10.37		%	12.98		%	12.07		%	17.10		%
Net Revenue:		$	2,031,721		$	2,112,529	$	6,022,973		$	6,219,324	$	2,031,721		$	2,112,529		$	6,022,973		$	6,219,324

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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				Thirty-Nine Weeks Ended
	September 25, 2016		September 27, 2015		September 25, 2016			September 27, 2015
	(In thousands, except per share data)
Net income (loss) attributable to Pilgrim's Pride Corporation	$	98,657	$	137,062	$	369,914		$	582,766
Loss on early extinguishment of debt	—		—		—			68
Foreign currency transaction losses (gains)	4,142		12,773		(837		)	23,806
Income (loss) before loss on early extinguishment of debt and foreign currency transaction losses (gains)	102,799		149,835		369,077			606,640
Weighted average diluted shares of common stock outstanding	254,920		259,503		255,037			259,765
Income (loss) before loss on early extinguishment of debt and foreign currency transaction losses (gains)      per common diluted share	$	0.40	$	0.58	$	1.45		$	2.34

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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				Thirty-Nine Weeks Ended
	September 25, 2016		September 27, 2015		September 25, 2016		September 27, 2015
	(In thousands, except per share data)
GAAP EPS	$	0.39	$	0.53	$	1.45	$	2.24
Loss on early extinguishment of debt	—		—		—		—
Foreign currency transaction losses (gains)	0.02		0.05		—		0.09
Adjusted EPS	$	0.40	$	0.58	$	1.45	$	2.34
Weighted average diluted shares of common stock outstanding	254,920		259,503		255,037		259,765

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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		September 27, 2015		September 25, 2016
	(In thousands)
Long term debt, less current maturities	$	501,999	$	3,980		$	985,509	$	1,000,398	$	1,004,840
Add:  Current maturities of long term debt and notes payable	410,234		262			28,812		5,971		92
Minus:  Cash and cash equivalents	508,206		576,143			439,638		396,719		85,994
Minus:  Available-for-sale securities	96,902		—			—		—		—
Net debt (cash position)	$	307,125	$	(571,901	)	$	574,683	$	609,650	$	918,938

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PILGRIM'S PRIDE CORPORATION
Supplementary Selected Segment and Geographic Data
	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	September 25, 2016			September 27, 2015			September 25, 2016			September 27, 2015
	(Unaudited)
	(In thousands)
Sources of net sales by country of origin:
US:	$	1,724,625		$	1,798,375		$	5,072,351		$	5,479,992
Mexico:	307,096			314,154			950,622			739,332
Total net sales:	$	2,031,721		$	2,112,529		$	6,022,973		$	6,219,324
Sources of cost of sales by country of origin:
US:	$	1,545,163		$	1,552,282		$	4,470,387		$	4,511,158
Mexico:	276,365			275,727			818,748			614,554
Elimination:	(24		)	(24		)	(72		)	(72		)
Total cost of sales:	$	1,821,504		$	1,827,985		$	5,289,063		$	5,125,640
Sources of gross profit by country of origin:
US:	$	179,462		$	246,093		$	601,964		$	968,836
Mexico:	30,731			38,427			131,874			124,777
Elimination:	24			24			72			71
Total gross profit:	$	210,217		$	284,544		$	733,910		$	1,093,684
Sources of operating income by country of origin:
US:	$	141,194		$	203,755		$	480,278		$	833,193
Mexico:	22,604			27,353			108,857			103,854
Elimination:	24			24			72			71
Total operating income:	$	163,822		$	231,132		$	589,207		$	937,118

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