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Oct 30, 2019

CORRECTION - Pilgrim’s Pride Reports Q3 Net Sales of $2.78 Billion, Operating Income of $188 Million and GAAP EPS of $0.44, a 267% increase over the $0.12 in Q3 2018

In a release issued under the same headline earlier today by Pilgrim's Pride Corporation (NASDAQ: PPC), please note that in the second table of the release under Cash and cash equivalents, the September 29, 2019 column should read "598,054" and the December 30, 2018 column should read "338,386" instead of "338,386" and "598,054" as previously stated. The corrected release follows:

GREELEY, Colo., Oct. 30, 2019 (GLOBE NEWSWIRE) --  Pilgrim’s Pride Corporation (NASDAQ: PPC) reports third quarter 2019 financial results.

Third Quarter Highlights

  • Net Sales of $2.78 billion.
  • Net Income of $109.8 million.
  • Operating Income margins of 6.5% in U.S., 11.5% in Mexico and 4.9% in Europe operations, respectively.
  • Adjusted EBITDA of $258.4 million (or a 9.3% margin), and Adjusted EPS of $0.45.
  • U.S portfolio generated an improved performance due to our differentiated strategy. Demand in less commoditized segment remained strong while pure commodity was significantly better year on year but weaker than last quarter. We continue to evolve our well-balanced portfolio to further differentiate our products and brands, strengthen Key Customer relationships, and deliver operational improvements.
  • Q3 in Mexico was in-line with normal seasonality and stronger than last year. Growth in our branded products and prepared foods continue to create portfolio differentiation in the region.
  • European operations continuing to mitigate the impact of input cost challenges and already achieved better results than last year. Addition of Tulip team will further enhance our position as a leading global player by expanding our portfolio of prepared foods and brands in the UK, and present opportunities for synergies.
 
Unaudited, In Millions, Except Per Share and Percentages
 
                       
  Thirteen
Weeks
Ended
  Thirteen
Weeks
Ended
      Thirty-
Nine Weeks
Ended
  Thirty-
Nine Weeks
Ended
   
                       
  Sep 29, 2019   Sep 30, 2018   Y/Y
Change
  Sep 29, 2019   Sep 30, 2018   Y/Y
Change
Net Sales $2,778.0   $2,697.6   +3.0%   $8,345.7   $8,281.0   +0.8%
GAAP EPS $0.44   $0.12   +266.7%   $1.46   $1.03   +41.7%
Operating Income $188.2   $85.3   +120.6%   $604.8   $472.1   +28.1%
Adjusted EBITDA (1) $258.4   $156.0   +65.6%   $812.2   $687.1   +18.2%
Adjusted EBITDA Margin (1) 9.3%   5.8%   +3.5pts   9.7%   8.3%   +1.4pts
(1) Reconciliations for non-GAAP measures are provided in subsequent sections within this release.
 

“After a challenging Q3 2018 within the U.S. pure commodity market, conditions during Q3 of this year were much improved. The environment in non-commodity chicken was in-line with seasonality and remained strong, driven by demand from retailers and QSRs. We remain committed to our Key Customer strategy, which is the basis for our growth. Revenues from Key Customers have more than doubled over the past eight years, and we will continue to support their growth. We are investing 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 our mix of more volatile commodity sales and improve our margin profile,” stated Jayson Penn, Chief Executive Officer of Pilgrim's.

“Mexico was in-line with normal seasonality and significantly better than last year. We expect to generate improved performance for the remainder of 2019 as demand continues to grow. Our Prepared Foods have continued to increase 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 continued to make progress in mitigating input cost challenges, and are already generating better results throughout Q3. Despite seasonally cooler weather, improvements in operational efficiencies, and better integration of input costs into customer pricing models drove the improvement in performance. We expect a continuation of the momentum into Q4.”

“The addition of the Tulip team further enhances our position as a leading global player by expanding our portfolio of prepared foods and brands while strengthening our leadership position in the UK market. It aligns with our strategic priorities as we continue growing our geographical footprint and extending our global reach into attractive new markets.”

Conference Call Information

A conference call to discuss Pilgrim’s quarterly results will be held tomorrow, October 31, 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/ppc191031.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 February 1, 2020.

About Pilgrim’s Pride

Pilgrim’s employs approximately 58,850 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
 
    September 29, 2019   December 30, 2018
    (Unaudited)    
    (In thousands)
Cash and cash equivalents   $ 598,054     $ 338,386  
Restricted cash and cash equivalents   26,950     23,192  
Trade accounts and other receivables, less allowance for doubtful accounts   602,038     561,549  
Accounts receivable from related parties   1,573     1,331  
Inventories   1,261,362     1,159,519  
Income taxes receivable   16,143     38,479  
Prepaid expenses and other current assets   107,398     112,201  
Total current assets   2,613,518     2,234,657  
Deferred tax assets   4,286     4,248  
Other long-lived assets   15,211     16,717  
Identified intangible assets, net   533,733     564,128  
Goodwill   924,766     949,750  
Operating lease assets, net   300,495      
Property, plant and equipment, net   2,211,124     2,161,702  
Total assets   $ 6,603,133     $ 5,931,202  
         
Accounts payable   $ 846,200     $ 830,059  
Accounts payable to related parties   5,157     7,269  
Revenue contract liability   39,743     33,328  
Accrued expenses and other current liabilities   494,247     386,941  
Income taxes payable   25,762     8,221  
Current maturities of long-term debt   26,636     30,405  
Total current liabilities   1,437,745     1,296,223  
Noncurrent operating lease liability, less current maturities   231,018      
Long-term debt, less current maturities   2,279,871     2,295,190  
Noncurrent income taxes payable   7,731     7,731  
Deferred tax liabilities   235,357     237,422  
Other long-term liabilities   81,307     75,051  
Total liabilities   4,273,029     3,911,617  
Common stock   2,611     2,604  
Treasury stock   (234,892 )   (231,994 )
Additional paid-in capital   1,952,451     1,945,136  
Retained earnings   785,732     421,888  
Accumulated other comprehensive loss   (186,040 )   (127,834 )
Total Pilgrim’s Pride Corporation stockholders’ equity   2,319,862     2,009,800  
Noncontrolling interest   10,242     9,785  
Total stockholders’ equity   2,330,104     2,019,585  
Total liabilities and stockholders’ equity   $ 6,603,133     $ 5,931,202  


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
                 
    Thirteen Weeks ended   Thirty-Nine Weeks Ended
    September 29,
2019
  September 30,
2018
  September 29,
2019
  September 30,
2018
                 
    (In thousands, except per share data)
Net sales   $ 2,777,970     $ 2,697,604     $ 8,345,730     $ 8,280,995  
Cost of sales   2,495,773     2,527,863     7,476,731     7,549,367  
Gross profit   282,197     169,741     868,999     731,628  
Selling, general and administrative expense   94,032     84,138     264,313     257,396  
Administrative restructuring activities   (20 )   257     (90 )   2,181  
Operating income   188,185     85,346     604,776     472,051  
Interest expense, net of capitalized interest   32,028     35,334     99,184     125,901  
Interest income   (4,698 )   (4,241 )   (11,481 )   (10,665 )
Foreign currency transaction loss (gain)   3,027     (6,711 )   7,923     (2,802 )
Miscellaneous, net   1,367     653     2,521     (1,781 )
Income before income taxes   156,461     60,311     506,629     361,398  
Income tax expense   46,365     30,848     142,328     106,367  
Net income   110,096     29,463     364,301     255,031  
Less: Net income (loss) attributable to noncontrolling interests   331     153     457     (238 )
Net income attributable to Pilgrim’s Pride Corporation   $ 109,765     $ 29,310     $ 363,844     $ 255,269  
                 
Weighted average shares of common stock outstanding:                
Basic   249,467     248,981     249,344     248,933  
Effect of dilutive common stock equivalents   262     198     308     143  
Diluted   249,729     249,179     249,652     249,076  
                 
Net income attributable to Pilgrim's Pride Corporation per share of common stock outstanding:                
Basic   $ 0.44     $ 0.12     $ 1.46     $ 1.03  
Diluted   $ 0.44     $ 0.12     $ 1.46     $ 1.03  


PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
    Thirty-Nine Weeks Ended
    September 29, 2019   September 30, 2018
         
    (In thousands)
Cash flows from operating activities:                
Net income   $ 364,301     $ 255,031  
Adjustments to reconcile net income to cash provided by operating activities:        
Depreciation and amortization   210,381     207,113  
Share-based compensation   7,322     9,259  
Deferred income tax expense (benefit)   2,396     (2,147 )
Loan cost amortization   3,609     4,337  
Accretion of discount related to Senior Notes   737     567  
Amortization of premium related to Senior Notes   (501 )   (501 )
Loss on property disposals   (9,546 )   (452 )
Foreign currency transaction loss related to borrowing arrangements   1,259     4,221  
Gain on equity-method investments   (48 )   (48 )
Noncash loss on early extinguishment of debt       6,037  
Asset impairment       884  
Changes in operating assets and liabilities:        
Trade accounts and other receivables   (46,648 )   (3,437 )
Inventories   (108,117 )   64,787  
Prepaid expenses and other current assets   3,536     (15,428 )
Accounts payable, accrued expenses and other current liabilities   67,308     78,107  
Income taxes   40,549     (175,569 )
Long-term pension and other postretirement obligations   (1,578 )   (9,087 )
Other operating assets and liabilities   544     1,606  
Cash provided by operating activities   535,504     425,280  
Cash flows from investing activities:        
Acquisitions of property, plant and equipment   (258,725 )   (231,875 )
Proceeds from property disposals   15,168     2,707  
Cash used in investing activities   (243,557 )   (229,168 )
Cash flows from financing activities:        
Payments on revolving line of credit, long-term borrowings and capital lease obligations   (123,276 )   (1,071,441 )
Proceeds from revolving line of credit and long-term borrowings   99,638     703,090  
Purchase of common stock under share repurchase program   (2,898 )    
Payment of capitalized loan costs   (652 )   (11,081 )
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   (27,713 )   (373,874 )
Effect of exchange rate changes on cash and cash equivalents   (808 )   4,071  
Increase in cash, cash equivalents and restricted cash   263,426     (173,691 )
Cash, cash equivalents and restricted cash, beginning of period   361,578     589,531  
Cash, cash equivalents and restricted cash, end of period   $ 625,004     $ 415,840  
                 

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 29,
2019
  September 30,
2018
  September 29,
2019
  September 30,
2018
               
  (In thousands)
Net income $ 110,096     $ 29,463     $ 364,301     $ 255,031  
Add:                      
Interest expense, net 27,330     31,093     87,703     115,236  
Income tax expense 46,365     30,848     142,328     106,367  
Depreciation and amortization 71,851     71,026     210,381     207,113  
EBITDA 255,642     162,430     804,713     683,747  
Add:              
Foreign currency transaction losses 3,027     (6,711 )   7,923     (2,802 )
Acquisition charges 63     16     63     320  
Restructuring activity (20 )   257     (90 )   2,181  
Other nonrecurring losses and expenses     164         3,462  
Minus:              
Net income (loss) attributable to noncontrolling interest 331     153     457     (238 )
Adjusted EBITDA $ 258,381     $ 156,003     $ 812,152     $ 687,146  
                               

The summary unaudited consolidated income statement data for the twelve months ended September 29, 2019 (the LTM Period) have been calculated by subtracting the applicable unaudited consolidated income statement data for the nine months ended September 30, 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 nine months ended September 29, 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
    December 30,
2018
  March 31,
2019
  June 30,
2019
  September 29,
 2019
  September 29,
 2019
  (In thousands)
Net income   $ (8,227 )   $ 84,125     $ 170,080     $ 110,096     $ 356,074  
Add:                    
Interest expense, net   33,765     30,222     30,150     27,330     121,467  
Income tax expense   (20,944 )   20,416     75,547     46,365     121,384  
Depreciation and amortization   66,975     67,182     71,348     71,851     277,356  
EBITDA   71,569     201,945     347,125     255,642     876,281  
Add:                    
Foreign currency transaction losses (gains)   19,962     2,636     2,260     3,027     27,885  
Acquisition charges               63     63  
Restructuring activities   2,584     (27 )   (43 )   (20 )   2,494  
Other nonrecurring losses and expenses   16,023                 16,023  
Minus:                    
Net income (loss) attributable to noncontrolling interest   (903 )   114     12     331     (446 )
Adjusted EBITDA   $ 111,041     $ 204,440     $ 349,330     $ 258,381     $ 923,192  
                                         

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
29, 2019
  September
30, 2018
  September
29, 2019
  September
30, 2018
  September
29, 2019
  September
30, 2018
  September
29, 2019
  September
30, 2018
                               
  (In thousands)
Net income $ 110,096     $ 29,463     $ 364,301     $ 255,031       3.96 %   1.09 %   4.37 %   3.08 %
Add:                                              
Interest expense, net 27,330     31,093     87,703     115,236     0.98 %   1.15 %   1.05 %   1.39 %
Income tax expense 46,365     30,848     142,328     106,367     1.67 %   1.14 %   1.71 %   1.28 %
Depreciation and amortization 71,851     71,026     210,381     207,113     2.59 %   2.63 %   2.52 %   2.50 %
EBITDA 255,642     162,430     804,713     683,747     9.20 %   6.03 %   9.64 %   8.26 %
Add:                              
Foreign currency transaction losses 3,027     (6,711 )   7,923     (2,802 )   0.11 %   (0.25 )%   0.09 %   (0.03 )%
Acquisition charges 63     16     63     320     %   %   %   %
Restructuring activity (20 )   257     (90 )   2,181     %   0.01 %   %   0.03 %
Other nonrecurring losses and expenses     164         3,462     %   0.01 %   %   0.04 %
Minus:                              
Net income (loss) attributable to noncontrolling interest 331     153     457     (238 )   0.01 %   0.01 %   0.01 %   %
Adjusted EBITDA $ 258,381     $ 156,003     $ 812,152     $ 687,146     9.30 %   5.79 %   9.73 %   8.30 %
                               
Net sales $ 2,777,970     $ 2,697,604     $ 8,345,730     $ 8,280,995     $ 2,777,970     $ 2,697,604     $ 8,345,730     $ 8,280,995  
                                                               

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 29,
2019
  September 30,
2018
  September 29,
2019
  September 30,
2018
               
  (In thousands, except per share data)
Net income attributable to Pilgrim's Pride Corporation $ 109,765     $ 29,310     $ 363,844     $ 255,269  
Adjustments, net of tax:                      
Loss on early extinguishment of debt     903         12,679  
Acquisition charges and restructuring activities 33     207     (20 )   1,893  
Foreign currency transaction losses 2,290     (5,077 )   5,994     (2,120 )
Income before loss on early extinguishment of debt, acquisition charges and restructuring activities, and foreign currency transaction losses $ 112,088     $ 25,343     $ 369,818     $ 267,721  
U.S. Tax Cuts & Jobs Act transition tax     26,400         26,400  
Adjusted net income (loss) $ 112,088     $ 51,743     $ 369,818     $ 294,121  
Weighted average diluted shares of common stock outstanding 249,729     249,179     249,652     249,076  
Income before loss on early extinguishment of debt, acquisition and restructuring activities and foreign currency transaction losses per common diluted share $ 0.45     $ 0.21     $ 1.48     $ 1.18  
                               

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 29,
2019
  September 30,
2018
  September 29,
2019
  September 30,
2018
               
  (In thousands, except per share data)
GAAP EPS $ 0.44     $ 0.12     $ 1.46     $ 1.03  
Adjustments, net of tax:                      
Loss on early extinguishment of debt             0.05  
Foreign currency transaction losses 0.01     (0.02 )   0.02     (0.01 )
  $ 0.45     $ 0.10     $ 1.48     $ 1.08  
U.S. Tax Cuts & Jobs Act transition tax     0.11         0.11  
Adjusted EPS $ 0.45     $ 0.21     $ 1.48     $ 1.18  
               
Weighted average diluted shares of common stock outstanding 249,729     249,179     249,652     249,076  


PILGRIM'S PRIDE CORPORATION
Supplementary Selected Segment and Geographic Data
(Unaudited)
               
  Thirteen Weeks Ended   Thirty-Nine Weeks Ended
  September 29,
2019
  September 30,
2018
  September 29,
2019
  September 30,
2018
               
  (In thousands)
Sources of net sales by country of origin:                              
US $ 1,931,657     $ 1,864,169     $ 5,732,201     $ 5,604,709  
Europe 517,531     526,722     1,568,396     1,634,125  
Mexico 328,782     306,713     1,045,133     1,042,161  
Total net sales $ 2,777,970     $ 2,697,604     $ 8,345,730     $ 8,280,995  
               
Sources of cost of sales by country of origin:              
US $ 1,739,474     $ 1,732,803     $ 5,123,278     $ 5,137,049  
Europe 474,490     485,435     1,452,254     1,500,994  
Mexico 281,833     309,650     901,271     911,358  
Intersegment transactions, net (24 )   (25 )   (72 )   (34 )
Total cost of sales $ 2,495,773     $ 2,527,863     $ 7,476,731     $ 7,549,367  
               
Sources of gross profit by country of origin:              
US $ 192,183     $ 131,366     $ 608,923     $ 467,660  
Europe 43,041     41,287     116,142     133,131  
Mexico 46,949     (2,937 )   143,862     130,803  
Intersegment transactions, net 24     25     72     34  
Total gross profit $ 282,197     $ 169,741     $ 868,999     $ 731,628  
               
Sources of operating income by country of origin:              
US $ 125,169     $ 74,206     $ 426,968     $ 300,960  
Europe 25,325     23,470     62,233     68,545  
Mexico 37,667     (12,355 )   115,503     102,512  
Intersegment transactions, net 24     25     72     34  
Total operating income $ 188,185     $ 85,346     $ 604,776     $ 472,051  
                               

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Source: Pilgrim's Pride Corporation