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Jul 27, 2022

Pilgrim’s Pride Reports Second Quarter 2022 Results with $4.63 Billion in Net Sales and Operating Income Margin of 11.1%

GREELEY, Colo., July 27, 2022 (GLOBE NEWSWIRE) -- Pilgrim’s Pride Corporation (NASDAQ: PPC), one of the world's largest poultry producers, reports its second quarter 2022 financial results.

Second Quarter Highlights

  • Net Sales of $4.63 billion, up 27.3% from prior year.
  • Consolidated GAAP operating income margin of 11.1% with GAAP operating income margins of 15.6% in U.S., 10.7% in Mexico and 0.6% in Europe.
  • GAAP Net Income of $362.0 million and GAAP EPS of $1.50. Adjusted Net Income of $370.7 million or adjusted EPS of $1.54.
  • Adjusted EBITDA of $623.3 million, or an 13.5% margin, 67.7% higher than a year ago.
  • We are extremely proud of the dedication and outstanding efforts of our global team members, which supported all of our business units’ top line growth through excellent service levels to our Key Customers that drove significant sequential profit improvement for the overall business.
  • Our US retail and foodservice business remained resilient despite additional cost recovery from inflationary challenges. Margins improved given enhanced market fundamentals in Big Bird Debone and continued operational improvements.
  • Our brand momentum continues throughout US retail as Just Bare® and Pilgrim’s® Prepared products grew over 96% year over year. E-commerce across our US branded portfolio more than doubled.
  • Our combined European business drove bottom line improvement from accelerated implementation of operational efficiencies, focus on Key Customer partnerships to recover inflationary costs, and further diversification of product offerings.
  • Demand in Mexico was solid and our team’s focus and continued operational improvements overcame seasonal challenges in live operations at our locations.
  • Continuing our commitment to corporate responsibility, our Board of Directors has approved the formation of an ESG Committee to further enrich our efforts on environmental, social and governance matters, including our Hometown Strong program and our Net Zero commitment.
  • Our liquidity position remains strong with an adjusted EBITDA net leverage ratio at 1.5x.
  • In driving for profitable growth, we are committing to an expansion in our fresh operations, a new protein conversion plant, and a new state-of-the-art prepared foods plant.
(Unaudited) Three Months Ended   Six Months Ended
  June 26
2022
  June 27
2021
  Y/Y Change   June 26
2022
  June 27
2021
  Y/Y Change
  (In millions, except per share and percentages)
Net sales $ 4,631.6     $ 3,637.7     +27.3%   $ 8,872.0     $ 6,911.1     +28.4%
U.S. GAAP EPS $ 1.50     $ (0.68 )   +320.6%   $ 2.65     $ (0.27 )   NM(2)
Operating income (loss) $ 512.9     $ (123.1 )   +516.7%   $ 914.9     $ 35.3     NM(2)
Adjusted EBITDA(1) $ 623.3     $ 371.6     +67.7%   $ 1,125.0     $ 625.5     +79.9%
Adjusted EBITDA margin(1)   13.5 %     10.2 %   +3.3pts     12.7 %     9.1 %   +3.6pts

(1) Reconciliations for non-U.S. GAAP measures are provided in subsequent sections within this release.
(2) These Y/Y changes are designated not meaningful (or “NM”) due to significant one-time items recognized in prior year.

“Throughout the second quarter, we emphasized discipline and ownership throughout all aspects of our strategy and organization,” said Fabio Sandri, Chief Executive Officer of Pilgrim’s. “As a result, second quarter sales grew over 27% and Adjusted EBITDA was up almost 68% from last year. I am continually impressed with our team’s determination to drive operational excellence to mitigate inflationary headwinds and work with Key Customers to profitably grow our business.

“Our results continue to reflect the benefits of our diversified US portfolio. Investments in automation and in our hourly team members and their communities led to significant progress in net staffing levels, enabling our operations to realize the benefits of strong market fundamentals. Moreover, our overall demand in retail and foodservice remained robust given our emphasis on Key Customers and our diversified product portfolio. In addition, our retail branded business maintained its momentum, as Just Bare® and Pilgrim’s® continued their strong growth trajectory.

“Our UK and European business continued to recover through enhanced partnerships with Key Customers, improved cost recovery, and accelerated implementation of supply chain solutions. The team will continue to identify ways to leverage our diverse portfolio of offerings and further optimize our production capabilities to alleviate continual cost escalation and consistently innovate to drive profitable growth in a difficult economic environment.

“Our Mexican operations were impacted by seasonal diseases that reduced our efficiency on the live production at our locations. Nonetheless, the team leveraged our diverse geographic footprint to ensure sufficient supply, driving superior service for Key Customers. Moving forward, the team will continue to monitor conditions and adjust accordingly to grow the business.

“Given our market momentum and focus on profitable growth, we are announcing a number of new investments in the US. These investments include an expansion of our Athens, Georgia facility, which will enhance our service levels and support growth for a Key Customer. It also includes funding for operational excellence improvements via automation throughout our US footprint and construction of a protein conversion plant for pet food ingredients in Georgia. Also, we are committing to the development of a Prepared Foods facility in the Southeast USA to cultivate our branded growth, further diversifying our portfolio. Taken together, these investments will simultaneously enable sufficient capacity for top line growth with our Key Customers, enhance operating margins, create value for our shareholders, and provide opportunities for a better future for our team members.

“We remain focused on being the best and most respected company in our industry and I am confident our team will continue to drive disciplined execution of our strategy and cultivate robust growth throughout this volatile environment.”

Conference Call Information

A conference call to discuss Pilgrim’s quarterly results will be held tomorrow, July 28, at 7 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/ppc220728.html

You may also reach the pre-registration link by logging in through the investor section of our website at https://ir.pilgrims.com in the “Events & Presentations” section.

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.

About Pilgrim’s Pride

Pilgrim’s employs over 60,000 people and operates protein processing plants and prepared-foods facilities in 14 states, Puerto Rico, Mexico, the U.K, the Republic of 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. 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 channels, including, but not limited to, the impacts of the Russia-Ukraine conflict; 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: Andrew Rojeski
  Head of Strategy, Investor Relations, & Net Zero Programs
  IRPPC@pilgrims.com
  www.pilgrims.com


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
       
  (Unaudited)    
  June 26, 2022   December 26, 2021
  (In thousands)
Cash and cash equivalents $ 682,126     $ 427,661  
Restricted cash and restricted cash equivalents   40,498       22,460  
Trade accounts and other receivables, less allowance for credit losses   1,184,225       1,013,437  
Accounts receivable from related parties   1,696       1,345  
Inventories   1,840,462       1,575,658  
Income taxes receivable   32,675       27,828  
Prepaid expenses and other current assets   217,537       237,565  
Total current assets   3,999,219       3,305,954  
Deferred tax assets   5,020       5,314  
Other long-lived assets   32,009       32,410  
Operating lease assets, net   315,014       351,226  
Intangible assets, net   874,248       963,243  
Goodwill   1,243,536       1,337,252  
Property, plant and equipment, net   2,853,886       2,917,806  
Total assets $ 9,322,932     $ 8,913,205  
       
Accounts payable $ 1,481,640     $ 1,378,077  
Accounts payable to related parties   11,250       22,317  
Revenue contract liabilities   28,188       22,321  
Accrued expenses and other current liabilities   811,999       859,885  
Income taxes payable   111,624       81,977  
Current maturities of long-term debt   26,260       26,246  
Total current liabilities   2,470,961       2,390,823  
Noncurrent operating lease liabilities, less current maturities   238,955       271,366  
Long-term debt, less current maturities   3,371,373       3,191,161  
Deferred tax liabilities   315,983       369,185  
Other long-term liabilities   53,576       101,736  
Total liabilities   6,450,848       6,324,271  
Common stock   2,616       2,614  
Treasury stock   (465,123 )     (345,134 )
Additional paid-in capital   1,968,562       1,964,028  
Retained earnings   1,646,123       1,003,569  
Accumulated other comprehensive loss   (291,975 )     (47,997 )
Total Pilgrim’s Pride Corporation stockholders’ equity   2,860,203       2,577,080  
Noncontrolling interest   11,881       11,854  
Total stockholders’ equity   2,872,084       2,588,934  
Total liabilities and stockholders’ equity $ 9,322,932     $ 8,913,205  


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
               
  Three Months Ended   Six Months Ended
  June 26, 2022   June 27, 2021   June 26, 2022   June 27, 2021
  (In thousands, except per share data)
Net sales $ 4,631,648     $ 3,637,698     $ 8,872,043     $ 6,911,123  
Cost of sales   3,954,877       3,257,457       7,653,292       6,269,639  
Gross profit   676,771       380,241       1,218,751       641,484  
Selling, general and administrative expense   163,867       503,372       303,834       606,151  
Operating income (loss)   512,904       (123,131 )     914,917       35,333  
Interest expense, net of capitalized interest   38,112       50,651       74,408       80,985  
Interest income   (1,010 )     (842 )     (2,284 )     (3,208 )
Foreign currency transaction losses   2,758       4,145       14,294       6,659  
Miscellaneous, net   (1,688 )     (770 )     (2,012 )     (8,614 )
Income (loss) before income taxes   474,732       (176,315 )     830,511       (40,489 )
Income tax expense (benefit)   112,711       (9,812 )     187,930       25,546  
Net income (loss)   362,021       (166,503 )     642,581       (66,035 )
Less: Net income (loss) attributable to noncontrolling interests   (95 )     184       27       444  
Net income (loss) attributable to Pilgrim’s Pride Corporation $ 362,116     $ (166,687 )   $ 642,554     $ (66,479 )
               
Weighted average shares of Pilgrim's Pride Corporation common stock outstanding:              
Basic   240,366       243,675       242,018       243,627  
Effect of dilutive common stock equivalents   607             619        
Diluted   240,973       243,675       242,637       243,627  
               
Net income (loss) attributable to Pilgrim's Pride Corporation per share of common stock outstanding:              
Basic $ 1.51     $ (0.68 )   $ 2.65     $ (0.27 )
Diluted $ 1.50     $ (0.68 )   $ 2.65     $ (0.27 )


PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
  Six Months Ended
  June 26, 2022   June 27, 2021
  (In thousands)
Cash flows from operating activities:      
Net income (loss) $ 642,581     $ (66,035 )
Adjustments to reconcile net income to cash provided by operating activities:      
Depreciation and amortization   201,996       182,260  
Deferred income tax benefit   (35,538 )     (32,809 )
Stock-based compensation   4,346       5,168  
Loan cost amortization   2,827       2,279  
Loss (gain) on property disposals   2,718       (5,057 )
Accretion of discount related to Senior Notes   859       675  
Loss (gain) on equity-method investments   4       (8 )
Loss on early extinguishment of debt recognized as a component of interest expense         24,254  
Amortization of premium related to Senior Notes         (167 )
Changes in operating assets and liabilities:      
Trade accounts and other receivables   (216,523 )     (117,610 )
Inventories   (309,360 )     (173,947 )
Prepaid expenses and other current assets   13,173       (6,027 )
Accounts payable, accrued expenses and other current liabilities   96,083       266,487  
Income taxes   21,959       46,638  
Long-term pension and other postretirement obligations   (1,717 )     (9,507 )
Other operating assets and liabilities   (2,189 )     (1,642 )
Cash provided by operating activities   421,219       114,952  
Cash flows from investing activities:      
Acquisitions of property, plant and equipment   (196,205 )     (183,744 )
Purchase of acquired business, net of cash acquired   (4,847 )      
Proceeds from property disposals   2,362       21,385  
Cash used in investing activities   (198,690 )     (162,359 )
Cash flows from financing activities:      
Proceeds from revolving line of credit and long-term borrowings   351,065       1,540,133  
Payments on revolving line of credit, long-term borrowings and finance lease obligations   (170,022 )     (1,522,416 )
Purchase of common stock under share repurchase program   (119,989 )      
Payments of capitalized loan costs   (3,052 )     (8,650 )
Payment of equity distribution under Tax Sharing Agreement between JBS USA Holdings and Pilgrim’s Pride Corporation   (1,961 )     (650 )
Payments on early extinguishment of debt         (21,258 )
Cash provided by financing activities   56,041       (12,841 )
Effect of exchange rate changes on cash and cash equivalents   (6,067 )     1,859  
Increase in cash, cash equivalents and restricted cash   272,503       (58,389 )
Cash, cash equivalents and restricted cash, beginning of period   450,121       548,406  
Cash, cash equivalents and restricted cash, end of period $ 722,624     $ 490,017  

PILGRIM’S PRIDE CORPORATION

Non-GAAP Financial Measures Reconciliation

(Unaudited)

“EBITDA” is defined as the sum of net income 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 losses, (2) transaction costs related to business acquisitions, (3) costs related to the DOJ agreement and litigation settlements, (4) initial insurance recoveries for Mayfield, Kentucky tornado property damage losses, (5) deconsolidation of subsidiary and (6) net income (loss) attributable to noncontrolling interests. 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   Six Months Ended
  June 26, 2022   June 27, 2021   June 26, 2022   June 27, 2021
  (In thousands)
Net income (loss) $ 362,021     $ (166,503 )   $ 642,581   $ (66,035 )
Add:              
Interest expense, net(a)   37,102       49,809       72,124     77,777  
Income tax expense (benefit)   112,711       (9,812 )     187,930     25,546  
Depreciation and amortization   99,854       95,728       201,996     182,260  
EBITDA   611,688       (30,778 )     1,104,631     219,548  
Add:              
Foreign currency transaction losses(b)   2,758       4,145       14,294     6,659  
Transaction costs related to acquisitions(c)   255       2,545       972     2,545  
DOJ agreement and litigation settlements(d)   8,482       395,886       8,982     398,285  
Minus:              
Insurance recoveries for Mayfield tornado losses(e)             3,815      
Deconsolidation of subsidiary(f)                   1,131  
Net income (loss) attributable to noncontrolling interest   (95 )     184       27     444  
Adjusted EBITDA $ 623,278     $ 371,614     $ 1,125,037   $ 625,462  


(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 itemForeign currency transaction lossesin the Condensed Consolidated Statements of Income.
(c) Transaction costs related to acquisitions includes those charges that are incurred in conjunction with business acquisitions.
(d) On October 13, 2020, Pilgrims announced that we entered into a plea agreement (the “Plea Agreement”) with the DOJ. As a result of the Plea Agreement, we recognized a fine of $110.5 million. On February 23, 2021, the Colorado Court approved the Plea Agreement and assessed a fine of $107.9 million. The difference between the original accrual and the payment is recorded in DOJ agreement and litigation settlements in the three months ended March 28, 2021. The additional expense recognized in the three and six months ended June 27, 2021 and June 26, 2022 was offset by amounts recognized in anticipation of probable settlements in ongoing litigation.
(e) This represents initial insurance recoveries for the property damage losses incurred as a result of the tornado in Mayfield, KY in December 2021.
(f) This represents a gain recognized as a result of deconsolidation of a subsidiary.

The summary unaudited consolidated income statement data for the twelve months ended June 26, 2022 (the LTM Period) have been calculated by subtracting the applicable unaudited consolidated income statement data for the six months ended June 27, 2021 from the sum of (1) the applicable audited consolidated income statement data for the year ended December 26, 2021 and (2) the applicable unaudited consolidated income statement data for the six months ended June 26, 2022.

PILGRIM'S PRIDE CORPORATION
Reconciliation of LTM Adjusted EBITDA
(Unaudited)
                   
  Three Months Ended   LTM Ended
  September 26
2021
  December 26
2021
  March 27
2022
  June 26
2022
  June 26
2022
  (In thousands)
Net income $ 60,835   $ 36,468     $ 280,560   $ 362,021     $ 739,884  
Add:                  
Interest expense, net   28,589     33,370       35,022     37,102       134,083  
Income tax expense   30,385     5,191       75,219     112,711       223,506  
Depreciation and amortization   92,076     106,488       102,142     99,854       400,560  
EBITDA   211,885     181,517       492,943     611,688       1,498,033  
Add:                  
Foreign currency transaction losses (gains)   2,359     (18,400 )     11,536     2,758       (1,747 )
Transaction costs related to acquisitions   6,773     9,540       717     255       17,285  
DOJ agreement and litigation settlements   126,000     131,940       500     8,482       266,922  
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:                  
Insurance recoveries for Mayfield tornado losses             3,815           3,815  
Net income (loss) attributable to noncontrolling interest   110     (286 )     122     (95 )     (149 )
Adjusted EBITDA $ 346,907   $ 316,659     $ 501,759   $ 623,278     $ 1,788,603  

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 it is 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   Six Months Ended   Three Months Ended   Six Months Ended
  June 26,
2022
  June 27,
2021
  June 26,
2022
  June 27,
2021
  June 26,
2022
  June 27,
2021
  June 26,
2022
  June 27,
2021
  (In thousands)
Net income (loss) $ 362,021     $ (166,503 )   $ 642,581   $ (66,035 )     7.82 %     (4.58 )%     7.24 %     (0.96 )%
Add:                              
Interest expense, net   37,102       49,809       72,124     77,777       0.80 %     1.37 %     0.81 %     1.13 %
Income tax expense (benefit)   112,711       (9,812 )     187,930     25,546       2.43 %     (0.27 )%     2.12 %     0.37 %
Depreciation and amortization   99,854       95,728       201,996     182,260       2.15 %     2.63 %     2.27 %     2.63 %
EBITDA   611,688       (30,778 )     1,104,631     219,548       13.20 %     (0.85 )%     12.44 %     3.17 %
Add:                              
Foreign currency transaction losses   2,758       4,145       14,294     6,659       0.05 %     0.11 %     0.16 %     0.09 %
Transaction costs related to business acquisitions   255       2,545       972     2,545       0.01 %     0.07 %     0.01 %     0.04 %
DOJ agreement and litigation settlements   8,482       395,886       8,982     398,285       0.18 %     10.88 %     0.10 %     5.76 %
Minus:                              
Insurance recoveries for Mayfield tornado losses               3,815           %     %     0.04 %     %
Deconsolidation of subsidiary                   1,131       %     %     %     0.02 %
Net income (loss) attributable to noncontrolling interest   (95 )     184       27     444       %     0.01 %     %     0.01 %
Adjusted EBITDA $ 623,278     $ 371,614     $ 1,125,037   $ 625,462       13.44 %     10.20 %     12.67 %     9.03 %
                               
Net sales $ 4,631,648     $ 3,637,698     $ 8,872,043   $ 6,911,123     $ 4,631,648     $ 3,637,698     $ 8,872,043     $ 6,911,123  

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 Operating Income
(Unaudited)
               
  Three Months Ended   Six Months Ended
  June 26, 2022   June 27, 2021   June 26, 2022   June 27, 2021
  (In thousands)
GAAP operating income (loss), U.S. operations $ 453,198     $ (224,171 )   $ 808,273     $ (156,046 )
Transaction costs related to acquisitions   255       2,545       972       2,545  
DOJ agreement and litigation settlements   8,482       395,886       8,982       398,285  
Insurance recoveries for Mayfield tornado losses               (3,815 )      
Adjusted operating income, U.S. operations $ 461,935     $ 174,260     $ 814,412     $ 244,784  
Adjusted operating income margin, U.S. operations   15.9 %     7.8 %     14.9 %     5.8 %

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 Operating Income Margin
(Unaudited)
               
  Three Months Ended   Six Months Ended
  June 26, 2022   June 27, 2021   June 26, 2022   June 27, 2021
  (In percent)
GAAP operating income margin, U.S. operations 15.6 %   (10.0 )%   14.7 %   (3.7 )%
Transaction costs related to acquisitions %   0.1 %   %   0.1 %
DOJ agreement and litigation settlements 0.3 %   17.7 %   0.3 %   9.4 %
Insurance recoveries for Mayfield tornado losses %   %   (0.1 )%   %
Adjusted operating income margin, U.S. operations 15.9 %   7.8 %   14.9 %   5.8 %

Adjusted net income attributable to Pilgrim's Pride Corporation (“Pilgrim's”) is calculated by adding to Net income (loss) attributable to Pilgrim's certain items of expense and deducting from Net income (loss) 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 (loss) 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   Six Months Ended
  June 26, 2022   June 27, 2021   June 26, 2022   June 27, 2021
  (In thousands, except per share data)
Net income (loss) attributable to Pilgrim's $ 362,116     $ (166,687 )   $ 642,554     $ (66,479 )
Add:              
Foreign currency transaction losses   2,758       4,145       14,294       6,659  
Transaction costs related to acquisitions   255       2,545       972       2,545  
DOJ agreement and litigation settlements   8,482       395,886       8,982       398,285  
Loss on early extinguishment of debt recognized as a component of interest expense         24,254             24,254  
Minus:              
Insurance recoveries for Mayfield tornado losses               3,815        
Deconsolidation of subsidiary                     1,131  
Adjusted net income attributable to Pilgrim's before tax impact of adjustments   373,611       260,143       662,987       364,133  
Net tax impact of adjustments(a)   (2,863 )     (106,323 )     (5,090 )     (107,265 )
Adjusted net income attributable to Pilgrim's $ 370,748     $ 153,820     $ 657,897     $ 256,868  
Weighted average diluted shares of common stock outstanding   240,973       243,675       242,637       243,627  
Adjusted net income attributable to Pilgrim's per common diluted share $ 1.54     $ 0.63     $ 2.71     $ 1.05  

(a)  Net tax expense (benefit) of adjustments represents the tax impact of all adjustments shown above.

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   Six Months Ended
  June 26, 2022   June 27, 2021   June 26, 2022   June 27, 2021
  (In thousands, except per share data)
GAAP EPS $ 1.50     $ (0.68 )   $ 2.65     $ (0.27 )
Add:              
Foreign currency transaction losses   0.01       0.02       0.06       0.03  
Transaction costs related to acquisitions         0.01             0.01  
DOJ agreement and litigation settlements   0.04       1.62       0.04       1.63  
Loss on early extinguishment of debt recognized as a component of interest expense         0.10             0.10  
Minus:              
Insurance recoveries for Mayfield tornado losses               0.02        
Adjusted EPS before tax impact of adjustments   1.55       1.07       2.73       1.50  
Net tax impact of adjustments(a)   (0.01 )     (0.44 )     (0.02 )     (0.45 )
Adjusted EPS $ 1.54     $ 0.63     $ 2.71     $ 1.05  
               
Weighted average diluted shares of common stock outstanding   240,973       243,675       242,637       243,627  

(a)  Net tax impact of adjustments represents the tax impact of all adjustments shown above.

PILGRIM'S PRIDE CORPORATION
Supplementary Selected Segment and Geographic Data
(Unaudited)
               
  Three Months Ended   Six Months Ended
  June 26, 2022   June 27, 2021   June 26, 2022   June 27, 2021
  (In thousands)
Sources of net sales by geographic region of origin:              
U.S. $ 2,899,879     $ 2,248,470     $ 5,481,087     $ 4,248,029  
U.K. and Europe   1,245,052       935,845       2,437,034       1,790,579  
Mexico   486,717       453,383       953,922       872,515  
Total net sales $ 4,631,648     $ 3,637,698     $ 8,872,043     $ 6,911,123  
               
Sources of cost of sales by geographic region of origin:              
U.S. $ 2,355,243     $ 2,008,122     $ 4,514,447     $ 3,874,822  
U.K. and Europe   1,176,097       885,800       2,329,000       1,702,726  
Mexico   423,551       363,549       809,873       692,119  
Elimination   (14 )     (14 )     (28 )     (28 )
Total cost of sales $ 3,954,877     $ 3,257,457     $ 7,653,292     $ 6,269,639  
               
Sources of gross profit by geographic region of origin:              
U.S. $ 544,636     $ 240,348     $ 966,640     $ 373,207  
U.K. and Europe   68,955       50,045       108,034       87,853  
Mexico   63,166       89,834       144,049       180,396  
Elimination   14       14       28       28  
Total gross profit $ 676,771     $ 380,241     $ 1,218,751     $ 641,484  
               
Sources of operating income (loss) by geographic region of origin:              
U.S. $ 453,198     $ (224,171 )   $ 808,273     $ (156,046 )
U.K. and Europe   7,848       21,831       (13,792 )     32,326  
Mexico   51,844       79,195       120,408       159,025  
Elimination   14       14       28       28  
Total operating income $ 512,904     $ (123,131 )   $ 914,917     $ 35,333  

 


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Source: Pilgrim's Pride Corporation