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Feb 09, 2022

Pilgrim’s Pride Reports Fourth Quarter and Year-End 2021 Results with Solid Growth in Sales and Adjusted EBITDA

GREELEY, Colo., Feb. 09, 2022 (GLOBE NEWSWIRE) -- Pilgrim’s Pride Corporation (NASDAQ: PPC), one of the world's largest poultry producers, reports its fourth quarter and year-end 2021 financial results.

2021 Highlights

  • Net Sales of $14.8 billion, up 22% from prior year.
  • Consolidated GAAP Operating Income margin of 1.4% with Adjusted U.S. Operating Income margin of 7.1%.
  • GAAP Net Income of $31.0 million. Adjusted Net Income of $557.4 million, or adjusted EPS of $2.28.
  • Adjusted EBITDA of $1.3 billion, or an 8.7% margin, 64% higher than prior year.
  • Our strategy and our portfolio continue to mitigate the impact of volatile market conditions.   Demand in the U.S. continued its recovery.   Our food service business improved year over year, while Retail sales were above pre-pandemic levels. Our margins improved year over year, especially on the Commodity large bird deboning operation, despite high input and operating costs and less than optimal mix due to the labor shortages during the year.
  • Prepared foods continues to improve, and the Pilgrim’s® and Just Bare® brands grew significantly in both the retail and e-commerce channels.
  • Mexico achieved a solid year through excellent execution of its strategy and through the growth of our Pilgrim’s®, Del Dia® and Alamesa® brands in the retail and food service channels.
  • Our legacy European business was significantly affected by unprecedented cost inflation, labor shortages and pig pricing not yet reflected into pricing models; however, our newly acquired Pilgrim’s Food Masters meats and meals business performed well and the integration is in line with expectations.
  • While labor shortages were a significant challenge in the U.S. and Europe throughout 2021, we are starting to see signs of improvement in staffing levels.
  • We made significant strides in our ESG metrics, and are ahead of expectations in our greenhouse gas emission targets.
  • Our liquidity position remains strong with an Adjusted EBITDA to net leverage ratio of less than 2.2x.
  • Pilgrim's is positioned for future growth with synergies and scale in the U.S., Mexico and Europe.

Fourth Quarter

  • Net Sales of $4.0 billion.
  • GAAP Net Income of $36.8 million.
  • Consolidated GAAP Operating Income margin of 1.4%. Adjusted U.S. Operating Income margin of 8.4%.
  • Adjusted EBITDA of $316.7 million, or a 7.8% margin, 54.2% higher than last year.
Unaudited (2)   Three Months Ended   Year Ended
    December 26, 2021   December 27, 2020   Y/Y Change   December 26, 2021   December 27, 2020   Y/Y Change
    (In millions, except per share and percentages)    
Net sales   $ 4,038.8     $ 3,117.8     +29.5 %   $ 14,777.5     $ 12,091.9     +22.2 %
U.S. GAAP EPS   $ 0.15     $     +100.0 %   $ 0.13     $ 0.38     (65.8 )%
Operating income   $ 55.1     $ 39.5     +39.4 %   $ 211.2     $ 245.5     (14.0 )%
Adjusted EBITDA(1)   $ 316.7     $ 205.4     +54.2 %   $ 1,289.0     $ 788.1     +63.6 %
Adjusted EBITDA margin(1)     7.8 %     6.6 %   +1.3 pts       8.7 %     6.5 %   +2.2 pts  
                                         

(1)         Reconciliations for non-U.S. GAAP measures are provided in subsequent sections within this release.
(2)         Comparisons include newly acquired European prepared foods business from 09/24/21 forward.

“The Pilgrim’s Pride team was relentless in the face of input cost inflation and volatility, supply chain disruptions, labor shortages and a global pandemic. They managed through these challenges to deliver a strong performance in the fourth quarter and the fiscal year,” said Fabio Sandri, Chief Executive Officer of Pilgrim’s. “By staying focused on our Key Customer strategy, on the safety of our employees and on producing high-quality food products, our diversified portfolio delivered improved results over last year as well as 2019 pre-COVID baselines.

“Strong U.S. consumer demand for chicken supported fresh meat pricing throughout 2021, and we expect this pricing environment to continue into the near future with the USDA projecting supply growth of only 1.6% for 2022. Chicken remains a great value relative to the other major proteins, and we continue to grow and improve our portfolio in partnerships with Key Customers and to grow our Prepared Foods business while supporting our differentiated Pilgrim’s® and Just Bare® brands within retail and e-commerce.

“Our business in Mexico dealt with elevated feed grain pricing for much of the year but executed well and delivered results surpassing last year with Fresh and Prepared Foods offerings in our Pilgrim’s®, Del Dia® and Alamesa® brands.

“Our legacy European businesses faced rising input costs and overall inflation, labor disruptions due to Brexit and very challenging market conditions. Through continued execution of our operational excellence strategy and pricing model actions, we are confident in our legacy UK businesses returning to expected results. At the end of September, we welcomed Pilgrim’s Food Masters with its value-added branded products that strengthened our portfolio in Europe and created a differentiated platform for growth.

“Overall, I am extremely pleased with our team members and the execution of our strategy under difficult conditions. We are committed to being the best and most respected company in our industry, and we will continue to perform to the best of our ability to serve our Key Customers and create a better future for our team members.”

Conference Call Information

A conference call to discuss Pilgrim’s quarterly results will be held tomorrow, February 10, 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/ppc220209.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.”

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 10, 2022.

About Pilgrim’s Pride

Pilgrim’s employs approximately 59,400 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. Without limiting the foregoing, words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “should,” “targets,” “will” and the negative thereof and similar words and expressions are intended to identify 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: the impact of the COVID-19 pandemic, efforts to contain the pandemic and resulting economic downturn on our operations and financial condition, including the risk that our health and safety measures at Pilgrim’s Pride production facilities will not be effective, the risk that we may be unable to prevent the infection of our employees at these facilities, and the risk that we may need to temporarily close one or more of our production facilities; the risk that we may experience decreased production and sales due to the changing demand for food products; the risk that we may face a significant increase in delayed payments from our customers; and additional risks related to COVID-19 set forth in our most recent Form 10-K and Form 10-Q filed with the SEC; 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; the risk of cyber-attacks, natural disasters, power losses, unauthorized access, telecommunication failures, and other problems on our information systems; and the impact of uncertainties of litigation and other legal matters described in our most recent Form 10-K and Form 10-Q, including the In re Broiler Chicken Antitrust Litigation, as well as other risks described under “Risk Factors” in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and subsequent filings with the Securities and Exchange Commission. The forward-looking statements in this release speak only as of the date hereof, and the Company undertakes no obligation to update any such statement after the date of this release, whether as a result of new information, future developments or otherwise, except as may be required by applicable law.

Contact:     Julie Kegley - Financial Profiles
Investor Relations
IRPPC@pilgrims.com
www.pilgrims.com
     


PILGRIM’S PRIDE CORPORATION
CONSOLIDATED BALANCE SHEETS
 
    December 26, 2021   December 27, 2020
    (In thousands, except share and par value data)
Cash and cash equivalents   $ 427,661     $ 547,624  
Restricted cash and cash equivalents     22,460       782  
Trade accounts and other receivables, less allowance for doubtful accounts     1,013,437       741,992  
Accounts receivable from related parties     1,345       1,084  
Inventories     1,575,658       1,358,793  
Income taxes receivable     27,828       69,397  
Prepaid expenses and other current assets     237,565       183,039  
Total current assets     3,305,954       2,902,711  
Deferred tax assets     5,314       5,471  
Other long-lived assets     32,410       24,780  
Operating lease assets, net     351,226       288,886  
Identified intangible assets, net     963,243       589,913  
Goodwill     1,337,252       1,005,245  
Property, plant and equipment, net     2,917,806       2,657,491  
Total assets   $ 8,913,205     $ 7,474,497  
         
Accounts payable   $ 1,378,077     $ 1,028,710  
Accounts payable to related parties     22,317       9,650  
Revenue contract liability     22,321       65,918  
Accrued expenses and other current liabilities     859,885       807,847  
Income taxes payable     81,977        
Current maturities of long-term debt     26,246       25,455  
Total current liabilities     2,390,823       1,937,580  
Noncurrent operating lease liability, less current maturities     271,366       217,432  
Long-term debt, less current maturities     3,191,161       2,255,546  
Noncurrent income taxes payable            
Deferred tax liabilities     369,185       339,831  
Other long-term liabilities     101,736       148,761  
Total liabilities     6,324,271       4,899,150  
Common stock, $.01 par value, 800,000,000 shares authorized; 261,184,998 and 255,059,435 shares issued at year-end 2021 and year-end 2020, respectively; 243,512,490 and 243,512,490 shares outstanding at year-end 2021 and year-end 2020, respectively     2,614       2,612  
Treasury stock, at cost, 17,672,508 shares and 11,546,945 shares at year-end 2020 and year-end 2019, respectively     (345,134 )     (345,134 )
Additional paid-in capital     1,964,028       1,954,334  
Retained earnings     1,003,569       972,569  
Accumulated other comprehensive loss     (47,997 )     (20,620 )
Total Pilgrim’s Pride Corporation stockholders’ equity     2,577,080       2,563,761  
Noncontrolling interest     11,854       11,586  
Total stockholders’ equity     2,588,934       2,575,347  
Total liabilities and stockholders' equity   $ 8,913,205     $ 7,474,497  
                 


PILGRIM’S PRIDE CORPORATION
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(Unaudited)
 
    Three Months Ended   Year Ended
    December 26, 2021   December 27, 2020   December 26, 2021   December 27, 2020
    (In thousands, except per share data)
Net sales   $ 4,038,769     $ 3,117,829     $ 14,777,458     $ 12,091,901  
Cost of sales     3,686,269       2,890,433       13,411,631       11,253,705  
Gross profit     352,500       227,396       1,365,827       838,196  
Selling, general and administrative expense     291,644       187,773       1,148,861       592,610  
Administrative restructuring activities     5,802       123       5,802       123  
Operating income     55,054       39,500       211,164       245,463  
Interest expense, net of capitalized interest     34,974       30,543       145,792       126,118  
Interest income     (1,604 )     (2,694 )     (6,056 )     (7,305 )
Foreign currency transaction loss (gain)     (18,400 )     4,528       (9,382 )     760  
Gain on bargain purchase                       3,746  
Miscellaneous, net     (1,575 )     (2,062 )     (11,580 )     (39,681 )
Income before income taxes     41,659       9,185       92,390       161,825  
Income tax expense     5,191       8,855       61,122       66,755  
Net income     36,468       330       31,268       95,070  
Less: Net income (loss) attributable to noncontrolling interests     (286 )     251       268       313  
Net income attributable to Pilgrim’s Pride Corporation   $ 36,754     $ 79     $ 31,000     $ 94,757  
                 
Weighted average shares of common stock outstanding:                
Basic     243,676       243,557       243,652       245,944  
Effect of dilutive common stock equivalents     665       244       477       180  
Diluted     244,341       243,801       244,129       246,124  
                 
Net income attributable to Pilgrim's Pride Corporation per share of common stock outstanding:                
Basic   $ 0.15     $     $ 0.13     $ 0.39  
Diluted   $ 0.15     $     $ 0.13     $ 0.38  
                                 


PILGRIM’S PRIDE CORPORATION
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
 
 
    Year Ended
    December 26, 2021   December 27, 2020
    (In thousands)
Cash flows from operating activities:        
Net income   $ 31,268     $ 95,070  
Adjustments to reconcile net income to cash provided by operating activities:        
Depreciation and amortization     380,824       337,104  
Deferred income tax expense     (86,391 )     37,337  
Loss on early extinguishment of debt recognized as a component of interest expense     24,654        
Share-based compensation     11,655       (276 )
Loan cost amortization     5,095       4,848  
Accretion of bond discount     1,533       982  
Gain on property disposals     (1,476 )     (13,766 )
Amortization of bond premium     (167 )     (668 )
Loss (gain) on equity method investments     (16 )     291  
Adjustment to gain on bargain purchase           3,746  
Noncash loss on subsidiary dissolution           115  
Changes in operating assets and liabilities:        
Trade accounts and other receivables     (259,377 )     29,154  
Inventories     (177,864 )     26,041  
Prepaid expenses and other current assets     (53,797 )     (50,347 )
Accounts payable and accrued expenses     359,589       295,327  
Income taxes     115,216       (39,436 )
Long-term pension and other postretirement obligations     (18,461 )     (7,883 )
Other operating assets and liabilities     (5,826 )     6,608  
Cash provided by operating activities     326,459       724,247  
Cash flows from investing activities:        
Acquisitions of property, plant and equipment     (381,671 )     (354,762 )
Purchase of acquired businesses, net of cash acquired     (966,766 )     (4,216 )
Proceeds from property disposals     24,724       31,976  
Cash used in investing activities     (1,323,713 )     (327,002 )
Cash flows from financing activities:        
Payments on revolving line of credit and long-term borrowings     (2,006,195 )     (430,988 )
Proceeds from revolving line of credit and long-term borrowings     2,951,707       404,522  
Payment of capitalized loan costs     (22,293 )      
Payment on early extinguishment of debt     (21,258 )      
Distribution from equity contribution under Tax Sharing Agreement between JBS USA Food Company Holdings and Pilgrim's Pride Corporation     (650 )      
Purchase of common stock under share repurchase program           (110,242 )
Cash provided by financing activities     901,311       (136,708 )
Effect of exchange rate changes on cash and cash equivalents     (2,342 )     7,292  
Increase in cash and cash equivalents     (98,285 )     267,829  
Cash and cash equivalents, beginning of year     548,406       280,577  
Cash and cash equivalents, end of year   $ 450,121     $ 548,406  
Supplemental Disclosure Information:        
Interest paid (net of amount capitalized)   $ 119,328     $ 130,641  
Income taxes paid     20,863       51,710  
                 

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: (1) foreign currency transaction loss (gain), (2) transaction costs related to business acquisitions, (3) DOJ agreement and litigation settlements, (4) restructuring activities loss (gain), (5) Hometown Strong initiative expenses, (6) charge for fair value markup of acquired inventory, (7) gain on bargain purchase, (8) shareholder litigation settlement, (9) deconsolidation of a subsidiary and (10) net income attributable to noncontrolling interest. 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 applicable to continuing operations. 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. EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as substitutes for an analysis of our results as reported under U.S. GAAP. In addition, other companies in our industry may calculate these measures differently limiting their usefulness as a comparative measure. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as an alternative to net income as indicators of our operating performance or any other measures of performance derived in accordance with U.S. GAAP. These limitations should be compensated for by relying primarily on our U.S. GAAP results and using EBITDA and Adjusted EBITDA only on a supplemental basis.

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted EBITDA
         
(Unaudited)   Three Months Ended   Year Ended
    December 26, 2021   December 27, 2020   December 26, 2021   December 27, 2020
    (In thousands)
Net income   $ 36,468     $ 330     $ 31,268     $ 95,070  
Add:                
Interest expense, net(a)     33,370       27,849       139,736       118,813  
Income tax expense     5,191       8,855       61,122       66,755  
Depreciation and amortization     106,488       88,463       380,824       337,104  
EBITDA     181,517       125,497       612,950       617,742  
Add:                
Foreign currency transaction loss (gain)(b)     (18,400 )     4,528       (9,382 )     760  
Transaction costs related to acquisitions(c)     9,540             18,858       134  
DOJ agreement and litigation settlements(d)     131,940       75,000       656,225       185,524  
Restructuring activities loss(e)     5,802       123       5,802       123  
Hometown Strong commitment(f)     1,000       494       1,000       15,000  
Charge for fair value markup of acquired inventory(g)     4,974             4,974        
Minus:                
Adjustment to gain on bargain purchase(h)                       (3,746 )
Shareholder litigation settlement(i)                       34,643  
Deconsolidation of subsidiary(j)                 1,131        
Net income (loss) attributable to noncontrolling interest     (286 )     251       268       313  
Adjusted EBITDA   $ 316,659     $ 205,391     $ 1,289,028     $ 788,073  
                                 

(a)      Interest expense, net, consists of interest expense less interest income.
(b)      The Company measures the financial statements of its Mexico reportable segment as if the U.S. dollar were the functional currency. Accordingly, we remeasure assets and liabilities, other than nonmonetary assets, of the Mexico reportable segment at current exchange rates. We remeasure nonmonetary assets using the historical exchange rate in effect on the date of each asset’s acquisition. Currency exchange gains or losses resulting from these remeasurements, as well as, from our U.K. and Europe reportable segment are included in the line item Foreign currency transaction losses (gains) in the Consolidated Statements of Income.
(c)      Transaction costs related to acquisitions includes those charges that are incurred in conjunction with business acquisitions.
(d)      This line represents the DOJ fine in 2020 and other litigation settlements.
(e)      Restructuring charges is primarily related to exiting an abattoir in the U.K.
(f)      The Hometown Strong initiative was developed to help communities in which we operate respond to unexpected challenges.
(g)      This amount represents the flow-through of the value to step-up inventory to fair value at the acquisition date in accordance with business combination accounting rules recorded as part of the Pilgrim's Food Masters transaction.
(h)      The gain on bargain purchase was recognized as a result of the PPL acquisition in October 2019. The amount above represents an adjustment to the previously recorded gain on bargain purchase.
(i)      Shareholder litigation settlement is income received as a result of a settlement in the first quarter of 2020.
(j)      This represents a gain recognized as a result of deconsolidation of a subsidiary.

The summary unaudited consolidated income statement data for the 12 months ended December 26, 2021 (the LTM Period) have been calculated by summing each of the unaudited three month periods within the audited year ended December 26, 2021.

PILGRIM'S PRIDE CORPORATION
Reconciliation of LTM Adjusted EBITDA
                     
(Unaudited)   Three Months Ended   LTM Ended December 26, 2021
    March 28, 2021   June 27, 2021   September 26, 2021   December 26, 2021  
  (In thousands)
Net income (loss)   $ 100,468   $ (166,503 )   $ 60,835     $ 36,468     $ 31,268  
Add:                    
Interest expense, net     27,968     49,809       28,589       33,370       139,736  
Income tax expense     35,358     (9,812 )     30,385       5,191       61,122  
Depreciation and amortization     86,532     95,728       92,076       106,488       380,824  
EBITDA     250,326     (30,778 )     211,885       181,517       612,950  
Add:                    
Foreign currency transaction loss (gain)     2,514     4,145       2,359       (18,400 )     (9,382 )
Transaction costs related to acquisitions         2,545       6,773       9,540       18,858  
DOJ agreement and litigation settlements     2,399     395,886       126,000       131,940       656,225  
Restructuring activities                     5,802       5,802  
Hometown Strong commitment                     1,000       1,000  
Charge for fair value markup of acquired inventory                     4,974       4,974  
Minus:                    
Deconsolidation of a subsidiary     1,131                       1,131  
Net income (loss) attributable to noncontrolling interest     260     184       110       (286 )     268  
Adjusted EBITDA   $ 253,848   $ 371,614     $ 346,907     $ 316,659     $ 1,289,028  
                                       

EBITDA margins have been calculated by taking the relevant unaudited EBITDA figures, then dividing by net sales for the applicable period. EBITDA margins are presented because they are used by management and we believe they are frequently used by securities analysts, investors and other interested parties, as a supplement to our results prepared in accordance with U.S. GAAP, to compare the performance of companies.

PILGRIM'S PRIDE CORPORATION
Reconciliation of EBITDA Margin
 
(Unaudited)   Three Months Ended   Year Ended   Three Months Ended   Year Ended
    December 26, 2021   December 27, 2020   December 26, 2021   December 27, 2020   December 26, 2021   December 27, 2020   December 26, 2021   December 27, 2020
  (In thousands, except percent of net sales)
Net income   $ 36,468     $ 330     $ 31,268     $ 95,070       0.90 %     0.01 %     0.21 %     0.79 %
Add:                                
Interest expense, net     33,370       27,849       139,736       118,813       0.83 %     0.89 %     0.95 %     0.98 %
Income tax expense     5,191       8,855       61,122       66,755       0.13 %     0.28 %     0.41 %     0.55 %
Depreciation and amortization     106,488       88,463       380,824       337,104       2.64 %     2.84 %     2.58 %     2.79 %
EBITDA     181,517       125,497       612,950       617,742       4.50 %     4.02 %     4.15 %     5.11 %
Add:                                
Foreign currency transaction loss (gain)     (18,400 )     4,528       (9,382 )     760       (0.46 )%     0.15 %     (0.06 )%     0.01 %
Transaction costs related to acquisitions     9,540             18,858       134       0.24 %     %     0.13 %     %
DOJ agreement and litigation settlements     131,940       75,000       656,225       185,524       3.27 %     2.41 %     4.43 %     1.53 %
Restructuring activities     5,802       123       5,802       123       0.14 %     %     0.04 %     %
Hometown Strong commitment     1,000       494       1,000       15,000       0.02 %     0.02 %     0.01 %     0.12 %
Charge for fair value markup of acquired inventory     4,974             4,974             0.12 %     %     0.03 %     %
Minus:                                
Adjustment to gain on bargain purchase                       (3,746 )     %     %     %     (0.03 )%
Shareholder litigation settlement                       34,643       %     %     %     0.29 %
Deconsolidation of a subsidiary                 1,131             %     %     0.01 %     %
Net income (loss) attributable to noncontrolling interest     (286 )     251       268       313       (0.01 )%     0.01 %     %     %
Adjusted EBITDA   $ 316,659     $ 205,391     $ 1,289,028     $ 788,073       7.84 %     6.59 %     8.72 %     6.51 %
                                 
Net sales   $ 4,038,769     $ 3,117,829     $ 14,777,458     $ 12,091,901     $ 4,038,769     $ 3,117,829     $ 14,777,458     $ 12,091,901  
                                                                 

Adjusted Operating Income is calculated by adding to Operating Income certain items of expense and deducting from Operating Income certain items of income. Management believes that presentation of Adjusted Operating Income provides useful supplemental information about our operating performance and enables comparison of our performance between periods because certain costs shown below are not indicative of our current operating performance. A reconciliation of GAAP operating income to adjusted operating income as follows:

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted U.S. Operating Income
(Unaudited)
               
  Three Months Ended   Year Ended
  December 26, 2021   December 27, 2020   December 26, 2021   December 27, 2020
  (In thousands)
GAAP operating income (U.S. operations) $ 68,344     $ (57,574 )   $ (17,036 )   $ 69,377  
DOJ agreement & litigation settlements(a)   131,940       75,000       656,225       185,524  
Transaction costs related to acquisitions(b)   157             9,476       134  
Hometown Strong commitment(c)   1,000       494       1,000       15,000  
Adjusted operating income (U.S. operations) $ 201,441     $ 17,920     $ 649,665     $ 270,035  
               
Adjusted operating income margin (U.S. operations)   8.4 %     1.0 %     7.1 %     3.6 %
                               

(a)      This line represents the DOJ fine in 2020 and other litigation settlements.
(b)      These costs represent charges incurred related to the acquisition of Pilgrim's Food Masters (formerly, Kerry Consumer Foods' Meats and Meals businesses).
(c)      The Hometown Strong initiative was developed to help communities in which we operate respond to unexpected challenges. For the year ended December 27, 2020, we recorded $15.0 million in incremental donations expense relating to this initiative. For the year ended December 26, 2021, we recorded $1.0 million in incremental donations expense relating to this initiative.

Adjusted Operating Income Margin for the U.S. is calculated by dividing Adjusted operating income by Net Sales. Management believes that presentation of Adjusted Operating Income Margin provides useful supplemental information about our operating performance and enables comparison of our performance between periods because certain costs shown below are not indicative of our current operating performance. A reconciliation of GAAP operating income margin for the U.S. to adjusted operating income margin for the U.S. is as follows:

PILGRIM'S PRIDE CORPORATION
Reconciliation of GAAP Operating Income Margin to Adjusted U.S. Operating Income Margin
(Unaudited)
               
  Three Months Ended   Year Ended
  December 26, 2021   December 27, 2020   December 26, 2021   December 27, 2020
  (In percent)
GAAP operating income margin (U.S. operations) 2.8 %   (3.1)%   (0.2)%   0.9 %
DOJ agreement and litigation settlements 5.6 %   4.1 %   7.2 %   2.6 %
Transaction costs related to acquisitions %   %   0.1 %   0.1 %
Hometown Strong commitment %   %   %   %
Adjusted operating income margin (U.S. operations) 8.4 %   1.0 %   7.1 %   3.6 %
                       

Adjusted net income attributable to Pilgrim's Pride Corporation ("Pilgrim's") is calculated by adding to net income attributable to Pilgrim's certain items of expense and deducting from net income attributable to Pilgrim's certain items of income, as shown below in the table. Adjusted net income attributable to Pilgrim’s Pride Corporation per common diluted share 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 U.S. GAAP, to compare the performance of companies. Management also believe that this non-U.S. GAAP financial measure, in combination with our financial results calculated in accordance with U.S. GAAP, provides investors with additional perspective regarding the impact of such charges on net income attributable to Pilgrim’s Pride Corporation per common diluted share. Adjusted net income attributable to Pilgrim’s Pride Corporation per common diluted share is not a measurement of financial performance under U.S. GAAP, has limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of our results as reported under U.S. GAAP. Management believes that presentation of adjusted net income attributable to Pilgrim’s provides useful supplemental information about our operating performance and enables comparison of our performance between periods because certain costs shown below are not indicative of our current operating performance. A reconciliation of net income attributable to Pilgrim’s Pride Corporation per common diluted share to adjusted net income attributable to Pilgrim’s Pride Corporation per common diluted share is as follows:

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted Net Income
(Unaudited)
               
  Three Months Ended   Year Ended
  December 26,
2021
  December 27,
2020
  December 26,
2021
  December 27,
2020
  (In thousands, except per share data)
Net income attributable to Pilgrim's $ 36,754     $ 79     $ 31,000     $ 94,757  
Adjustments:              
Foreign currency transaction loss (gain)   (18,400 )     4,528       (9,382 )     760  
Restructuring activities   5,802       123       5,802       123  
Transaction costs related to acquisitions   9,540             18,858       134  
DOJ agreement and litigation settlements   131,940       75,000       656,225       185,524  
Hometown Strong commitment   1,000       494       1,000       15,000  
Charge for fair value markup of acquired inventory   4,974             4,974        
Loss on early extinguishment of debt recognized as a component of interest expense               24,654        
Adjustment to gain on bargain purchase                     3,746  
Shareholder litigation settlement                     (34,643 )
Deconsolidation of a subsidiary               (1,131 )      
Net tax impact of adjustments(a)   (33,593 )     (19,841 )     (174,619 )     (14,976 )
Adjusted net income attributable to Pilgrim's $ 138,017     $ 60,383     $ 557,381     $ 250,425  
Weighted average diluted shares of common stock outstanding   244,341       243,801       244,129       246,124  
Adjusted net income attributable to Pilgrim's per common diluted share $ 0.56     $ 0.25     $ 2.28     $ 1.02  
                               

(a) Net tax impact of adjustments represents the tax impact of all adjustments shown above with the exclusion of the DOJ agreement as this item is non-deductible for tax purposes.

Adjusted EPS is calculated by dividing the adjusted net income attributable to Pilgrim's stockholders by the weighted average number of diluted shares. Management believes that Adjusted EPS provides useful supplemental information about our operating performance and enables comparison of our performance between periods because certain costs shown below are not indicative of our current operating performance. A reconciliation of U.S. GAAP to non-U.S. GAAP financial measures is as follows:

PILGRIM'S PRIDE CORPORATION
Reconciliation of GAAP EPS to Adjusted EPS
(Unaudited)
               
  Three Months Ended   Year Ended
  December 26, 2021   December 27, 2020   December 26, 2021   December 27, 2020
  (In thousands, except per share data)
U.S. GAAP EPS $ 0.15     $     $ 0.13     $ 0.39  
Adjustments:              
Foreign currency transaction loss (gain)   (0.07 )     0.02       (0.04 )      
Restructuring activities   0.02             0.02        
Transaction costs related to acquisitions   0.04             0.08        
DOJ agreement and litigation settlements   0.54       0.31       2.69       0.75  
Loss on early extinguishment of debt recognized as a component of interest expense               0.10        
Hometown Strong commitment                     0.06  
Adjustment to gain on bargain purchase                     0.02  
Charge for fair value markup of acquired inventory   0.02             0.02        
Shareholder litigation settlement                     (0.14 )
Deconsolidation of a subsidiary                      
Net tax impact of adjustments(a)   (0.14 )     (0.08 )     (0.72 )     (0.06 )
Adjusted EPS $ 0.56     $ 0.25     $ 2.28     $ 1.02  
               
Weighted average diluted shares of common stock outstanding   244,341       243,801       244,129       246,124  
                               

(a) Net tax impact of adjustments represents the tax impact of all adjustments shown above with the exclusion of the DOJ agreement as this item is non-deductible for tax purposes.

PILGRIM'S PRIDE CORPORATION
Supplementary Geographic Data
(Unaudited)
                 
    Three Months Ended   Year Ended
    December 26, 2021   December 27, 2020   December 26, 2021   December 27, 2020
    (In thousands)
Sources of net sales by country of origin:                
U.S.   $ 2,399,000     $ 1,876,226     $ 9,113,879     $ 7,496,017  
Europe     1,213,043       849,152       3,934,062       3,274,292  
Mexico     426,726       392,451       1,729,517       1,321,592  
Total net sales   $ 4,038,769     $ 3,117,829     $ 14,777,458     $ 12,091,901  
                 
Sources of cost of sales by country of origin:                
U.S.   $ 2,124,315     $ 1,785,018       8,187,959     $ 6,996  
Europe     1,168,996       799,931       3,769,838       3,056  
Mexico     392,970       305,498       1,453,888       1,203  
Elimination     (12 )     (14 )     (54 )      
Total cost of sales   $ 3,686,269     $ 2,890,433     $ 13,411,631     $ 11,253,705  
                 
Sources of gross profit by country of origin:                
U.S.   $ 274,685     $ 91,208     $ 925,920     $ 500.465  
Europe     44,047       49,221       164,224       218.327  
Mexico     33,756       86,953       275,629       118.931  
Elimination     12       14       54       0.473  
Total gross profit   $ 352,500     $ 227,396     $ 1,365,827     $ 838,196  
                 
Sources of operating income by country of origin:                
U.S.   $ 68,344     $ (57,574 )   $ (17,036 )   $ 69.377  
Europe     (33,398 )     26,410       (627 )     102.734  
Mexico     20,096       70,650       228,773       72.879  
Elimination     12       14       54       473  
Total operating income   $ 55,054     $ 39,500     $ 211,164     $ 245,463  
                                 

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Source: Pilgrim's Pride Corporation