Pilgrim’s Pride Corporation — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparison is with the three months ended March 26, 2023. Pilgrim’s Pride produces chicken and other prepared foods across the U.S., Europe and Mexico. JBS beneficially owned 82.5% of its common stock.
Financial performance
| Metric | Q1 2024 | Prior comparable period |
|---|---|---|
| Net sales | $4.362 billion | $4.166 billion |
| Gross profit / margin | $383.9 million / 8.8% | $173.0 million / 4.2% |
| Operating income / margin | $250.3 million / 5.7% | $31.3 million / 0.8% |
| Net income attributable to Pilgrim’s Pride | $174.4 million; $0.73 diluted EPS | $5.2 million; $0.02 diluted EPS |
| Cash provided by (used in) operations | $271.0 million | $(161.7) million |
| Capital expenditures | $108.4 million | $131.7 million |
| EBITDA / Adjusted EBITDA | $361.2 million / $371.9 million | Not provided in the filing text for comparison |
Revenue increased 4.7%. Gross profit more than doubled, and operating income rose from $31.3 million to $250.3 million. The U.S. segment drove most of the operating-income improvement, moving from a $28.1 million loss to $179.4 million of income. Europe operating income increased to $31.1 million from $25.3 million; Mexico increased to $39.7 million from $34.2 million.
Management attributed the improvement primarily to lower U.S. feed costs and stronger chicken pricing, alongside lower SG&A. U.S. net sales rose 6.0%, supported by improved pricing and volume. Europe sales rose 2.3%, including favorable currency translation, while lower prices partly offset volume growth. Mexico sales rose 4.2%, with currency and volume gains partly offset by lower prices.
Cash, debt and liquidity
- At March 31, 2024, cash and cash equivalents were $870.8 million; restricted cash was $24.1 million. Cash, cash equivalents and restricted cash totaled $894.9 million.
- Long-term debt, including current maturities and finance leases, was approximately $3.380 billion before financing costs. Cash less this debt implies net debt of roughly $2.51 billion, using reported cash and cash equivalents.
- The company reported $650,000 of current debt maturities and $3.343 billion of long-term debt net of financing costs.
- Available revolving capacity was $825.2 million in the U.S., $189.3 million in Europe and $67.0 million in Mexico. The U.S. facility had $24.8 million of outstanding letters of credit; there were no borrowings under the three facilities.
- Operating cash flow improved by $432.7 million year over year. Working-capital movements included cash sources from lower receivables and inventories, partly offset by a $212.8 million use from accounts payable and accrued liabilities.
- Management expects operating cash flows and credit availability to fund obligations, working capital, debt maturities and capital spending for at least the next 12 months.
Outlook, commentary and notable items
- No specific full-year earnings or revenue guidance is provided. Management describes improving U.S. chicken demand and pricing, with first-quarter prices above the historical five-year average; chicken cold-storage inventories ended the quarter 10.5% below the prior year.
- Management cites ongoing exposure to feed and energy costs, inflation, labor costs—particularly in Europe—market pricing, seasonality, foreign exchange, animal disease and geopolitical disruptions. The Russia-Ukraine conflict did not materially affect costs in the quarter, according to the company, but could continue to affect commodity prices and supply chains.
- Europe central-operations integration generated $14.5 million of restructuring expense in the quarter. The initiative is expected to incur approximately $14.5 million in total cash costs and be substantially completed by the end of 2024. Total estimated costs across disclosed restructuring initiatives are $92.4 million.
- Antitrust and other litigation remains significant. The company has accrued $537.4 million for Broiler Antitrust Litigation opt-out settlements and $6.2 million for remaining state claims. A separate poultry-worker class settlement of $29.0 million awaits final court approval. The DOJ has indicated it is likely to file a civil complaint in at least one of its investigations.
- In Mexico, the company has an accrual of $17.6 million for a 2010 tax dispute. Two assessments related to the Tyson de México acquisition are approximately $298.2 million each and remain under appeal; no provision has been recorded for those assessments.
- Management said disclosure controls were effective as of March 31, 2024, and reported no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether stronger U.S. chicken prices and demand, and the lower feed-cost environment, persist and sustain margins.
- Cash conversion in subsequent quarters, including the timing of supplier payments and other working-capital movements.
- Litigation and regulatory developments, settlement payments, and whether additional accruals or losses become necessary.
- Outcome and potential financial impact of the Mexican tax assessments for which no provision has been recorded.
- Progress, remaining costs and expected benefits of the Europe restructuring and central-operations integration.
- Debt levels, facility availability and compliance with credit-facility and senior-note covenants.