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Oct 26, 2022

Pilgrim’s Pride Reports Third Quarter 2022 Results with $4.47 Billion in Net Sales and Operating Income Margin of 7.6%

GREELEY, Colo., Oct. 26, 2022 (GLOBE NEWSWIRE) -- Pilgrim’s Pride Corporation (NASDAQ: PPC), one of the world's largest poultry producers, reports its third quarter 2022 financial results.

Third Quarter Highlights

  • Net Sales of $4.47 billion, up 16.8% from prior year.
  • Consolidated GAAP operating income margin of 7.6% with GAAP operating income margins of 11.9% in U.S., (3.2)% in Mexico and 1.2% in Europe.
  • GAAP Net Income of $259.0 million and GAAP EPS of $1.08. Adjusted Net Income of $260.7 million or adjusted EPS of $1.09.
  • Adjusted EBITDA of $460.5 million, or a 10.3% margin, 32.7% higher than a year ago.
  • We are extremely proud of the agility of our teams in their relentless pursuit of operational excellence in the face of extensive inflationary headwinds.
  • Our diversified U.S. portfolio across bird sizes and our Key Customers strategy proved a differentiating factor during changing market conditions. Strengthening in our Case Ready and Small Bird businesses, combined with Prepared Foods momentum mitigated significant volatility in Big Bird Debone.
  • Our brand momentum continues throughout U.S. retail as Just Bare® and Pilgrim’s® prepared products grew over 45% year over year. E-commerce across our U.S. branded portfolio grew more than 65%.
  • Despite a challenging consumer environment and extensive cost escalation, our U.K. and Europe business drove sequential quarter-over-quarter profit improvement through continued focus on Key Customer partnerships and operational efficiencies.
  • Our Mexico business experienced a decline in overall sales and profitability given seasonality, weakened market conditions, and significant challenges in live operations at our locations.
  • In building on our commitment to corporate responsibility, we issued our 2021 Sustainability Report in August which demonstrated our progress to becoming an industry champion in the ESG arena.
  • Our liquidity position remains strong with an adjusted EBITDA net leverage ratio at 1.33; providing us the ability to further progress on our growth strategy, while we remain on-track with our previously announced organic growth projects.
(Unaudited) Three Months Ended   Nine Months Ended
  September 25
2022
  September 26
2021
  Y/Y Change   September 25
2022
  September 26
2021
  Y/Y Change
  (In millions, except per share and percentages)
Net sales $ 4,469.0     $ 3,827.6     +16.8 %   $ 13,341.0     $ 10,738.7     +24.2 %
U.S. GAAP EPS $ 1.08     $ 0.25     +332.0 %   $ 3.73     $ (0.02 )   NM(2)  
Operating income (loss) $ 339.2     $ 120.8     +180.8 %   $ 1,254.1     $ 156.1     +703.4 %
Adjusted EBITDA(1) $ 460.5     $ 346.9     +32.7 %   $ 1,585.5     $ 972.4     +63.1 %
Adjusted EBITDA margin(1)   10.3 %     9.1 %   +1.2pts       11.9 %     9.1 %   +2.8pts  

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

“During the third quarter, we experienced significant changes in market fundamentals. To navigate these challenges, our team members maintained their determination and focus on our operations.   As a result, third quarter sales grew almost 17% and Adjusted EBITDA nearly 33% from prior year,” said Fabio Sandri, Chief Executive Officer of Pilgrim’s.  

Throughout the quarter, commodity cutout values in the U.S. declined from five-year highs while inflationary pressures continued to mount.   Nonetheless, the U.S. business achieved an adjusted EBITDA margin over 14%.  

“Our strong performance in the U.S. highlights the strength and effectiveness of our strategy.   Our diversified portfolio offerings across multiple bird sizes helps mitigate volatility, whereas our Key Customer relationships cultivated profitable growth for all involved.   When these factors are combined with our relentless focus on operational excellence, we demonstrated our ability to drive strong performance throughout a challenging environment,” remarked Fabio Sandri.  

Despite continued inflationary headwinds and a challenging consumer environment, our U.K. and Europe business improved its adjusted EBITDA from the previous quarter and previous year.   In addition, the team announced additional steps to mitigate further headwinds via optimization of our network and increasing innovation.

“Although I am pleased with our improvement to date, I am even more impressed by the team’s ability to work together to further optimize our manufacturing footprint, to engage with Key Customers to mitigate continued cost escalation, and to develop strategies to minimize potential commodity challenges. These combined efforts will strengthen our foundation for profitable growth,” said Fabio Sandri.

Our Mexico business experienced a decline in sales and profitability relative to prior year and the prior quarter given seasonal changes in demand and continued issues with bird mortality due to disease. “The Mexico business has historically experienced significant quarter-over-quarter earnings volatility.   Nonetheless, we remain confident in the business and its long-term prospects,” commented Mr. Sandri.

Pilgrim’s also built additional momentum for its 2040 Net Zero Program with approved investments of nearly $40 million in plant level improvements that both enhanced overall operational efficiency and reduced greenhouse gas emissions.   In addition, Pilgrim’s published its 2021 Sustainability Report in August illustrating the downward trajectory of its greenhouse gas emissions intensity.  

“I am proud of our progress to date in sustainability and look forward to continuing our journey towards Net Zero, especially as it simultaneously strengthens our business and creates a better future for all of our team members and their communities.   I am very confident that these efforts, when combined with our team’s ability to consistently execute our strategy, will help drive our vision of becoming the best and most respected company in our industry, even under the most difficult circumstances,” remarked Fabio Sandri.

Conference Call Information

A conference call to discuss Pilgrim’s quarterly results will be held tomorrow, October 27, at 7:00 a.m. MT (9 a.m. ET). Participants are encouraged to pre-register for the conference call using the link below. Callers who pre-register will be given a unique PIN to gain immediate access to the call and bypass the live operator. Participants may pre-register at any time, including up to and after the call start time.
To pre-register, go to: https://services.choruscall.com/links/ppc221027.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)    
  September 25, 2022   December 26, 2021
  (In thousands)
Cash and cash equivalents $ 654,213     $ 427,661  
Restricted cash and restricted cash equivalents   29,880       22,460  
Trade accounts and other receivables, less allowance for credit losses   1,115,156       1,013,437  
Accounts receivable from related parties   9,855       1,345  
Inventories   1,934,698       1,575,658  
Income taxes receivable   61,684       27,828  
Prepaid expenses and other current assets   227,434       237,565  
Total current assets   4,032,920       3,305,954  
Deferred tax assets   4,637       5,314  
Other long-lived assets   31,935       32,410  
Operating lease assets, net   293,564       351,226  
Intangible assets, net   779,621       963,243  
Goodwill   1,124,286       1,337,252  
Property, plant and equipment, net   2,812,049       2,917,806  
Total assets $ 9,079,012     $ 8,913,205  
       
Accounts payable $ 1,539,752     $ 1,378,077  
Accounts payable to related parties   17,055       22,317  
Revenue contract liabilities   35,734       22,321  
Accrued expenses and other current liabilities   857,189       859,885  
Income taxes payable   131,816       81,977  
Current maturities of long-term debt   26,269       26,246  
Total current liabilities   2,607,815       2,390,823  
Noncurrent operating lease liabilities, less current maturities   221,514       271,366  
Long-term debt, less current maturities   3,183,951       3,191,161  
Deferred tax liabilities   278,143       369,185  
Other long-term liabilities   47,340       101,736  
Total liabilities   6,338,763       6,324,271  
Common stock   2,617       2,614  
Treasury stock   (544,687 )     (345,134 )
Additional paid-in capital   1,970,310       1,964,028  
Retained earnings   1,904,475       1,003,569  
Accumulated other comprehensive loss   (604,994 )     (47,997 )
Total Pilgrim’s Pride Corporation stockholders’ equity   2,727,721       2,577,080  
Noncontrolling interest   12,528       11,854  
Total stockholders’ equity   2,740,249       2,588,934  
Total liabilities and stockholders’ equity $ 9,079,012     $ 8,913,205  


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
               
  Three Months Ended   Nine Months Ended
  September 25,
2022
  September 26,
2021
  September 25,
2022
  September 26,
2021
  (In thousands, except per share data)
Net sales $ 4,468,969     $ 3,827,566     $ 13,341,012     $ 10,738,689  
Cost of sales   3,971,699       3,455,723       11,624,991       9,725,362  
Gross profit   497,270       371,843       1,716,021       1,013,327  
Selling, general and administrative expense   158,068       251,066       461,902       857,217  
Operating income   339,202       120,777       1,254,119       156,110  
Interest expense, net of capitalized interest   36,895       29,833       111,303       110,818  
Interest income   (2,673 )     (1,244 )     (4,957 )     (4,452 )
Foreign currency transaction losses   54       2,359       14,348       9,018  
Miscellaneous, net   (19,822 )     (1,391 )     (21,834 )     (10,005 )
Income before income taxes   324,748       91,220       1,155,259       50,731  
Income tax expense   65,749       30,385       253,679       55,931  
Net income (loss)   258,999       60,835       901,580       (5,200 )
Less: Net income attributable to noncontrolling interests   647       110       674       554  
Net income (loss) attributable to Pilgrim’s Pride Corporation $ 258,352     $ 60,725     $ 900,906     $ (5,754 )
               
Weighted average shares of Pilgrim's Pride Corporation common stock outstanding:              
Basic   238,559       243,675       240,865       243,643  
Effect of dilutive common stock equivalents   649       520       629        
Diluted   239,208       244,195       241,494       243,643  
               
Net income (loss) attributable to Pilgrim's Pride Corporation per share of common stock outstanding:              
Basic $ 1.08     $ 0.25     $ 3.74     $ (0.02 )
Diluted $ 1.08     $ 0.25     $ 3.73     $ (0.02 )


PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
  Nine Months Ended
  September 25,
2022
  September 26,
2021
  (In thousands)
Cash flows from operating activities:      
Net income (loss) $ 901,580     $ (5,200 )
Adjustments to reconcile net income (loss) to cash provided by operating activities:      
Depreciation and amortization   300,962       274,336  
Deferred income tax benefit   (48,611 )     (26,436 )
Stock-based compensation   5,982       8,418  
Gain on property disposals   (5,620 )     (3,605 )
Loan cost amortization   4,311       3,762  
Accretion of discount related to Senior Notes   1,288       1,104  
Loss (gain) on equity-method investments   1       (12 )
Loss on early extinguishment of debt recognized as a component of interest expense         24,654  
Amortization of premium related to Senior Notes         (167 )
Changes in operating assets and liabilities:      
Trade accounts and other receivables   (211,827 )     (138,948 )
Inventories   (455,465 )     (149,653 )
Prepaid expenses and other current assets   (3,525 )     13,718  
Accounts payable, accrued expenses and other current liabilities   297,271       274,932  
Income taxes   10,241       66,413  
Long-term pension and other postretirement obligations   (3,128 )     (13,491 )
Other operating assets and liabilities   (2,847 )     (2,330 )
Cash provided by operating activities   790,613       327,495  
Cash flows from investing activities:      
Acquisitions of property, plant and equipment   (342,588 )     (280,820 )
Proceeds from property disposals   14,607       22,896  
Purchase of acquired business, net of cash acquired   (9,692 )     (953,947 )
Proceeds from insurance recoveries   7,339        
Cash used in investing activities   (330,334 )     (1,211,871 )
Cash flows from financing activities:      
Payments on revolving line of credit, long-term borrowings and finance lease obligations   (370,332 )     (2,005,960 )
Proceeds from revolving line of credit and long-term borrowings   362,541       2,951,707  
Purchase of common stock under share repurchase program   (199,553 )      
Payments of capitalized loan costs   (3,070 )     (22,293 )
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 (used in) financing activities   (212,375 )     901,546  
Effect of exchange rate changes on cash and cash equivalents   (13,932 )     (381 )
Increase in cash, cash equivalents and restricted cash   233,972       16,789  
Cash, cash equivalents and restricted cash, beginning of period   450,121       548,406  
Cash, cash equivalents and restricted cash, end of period $ 684,093     $ 565,195  

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) property insurance recoveries for Mayfield, Kentucky tornado property damage losses, (5) deconsolidation of subsidiary and (6) net income 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   Nine Months Ended
  September 25, 2022   September 26, 2021   September 25, 2022   September 26, 2021
  (In thousands)
Net income (loss) $ 258,999   $ 60,835   $ 901,580   $ (5,200 )
Add:              
Interest expense, net(a)   34,222     28,589     106,346     106,366  
Income tax expense   65,749     30,385     253,679     55,931  
Depreciation and amortization   98,966     92,076     300,962     274,336  
EBITDA   457,936     211,885     1,562,567     431,433  
Add:              
Foreign currency transaction losses(b)   54     2,359     14,348     9,018  
Transaction costs related to acquisitions(c)       6,773     972     9,318  
DOJ agreement and litigation settlements(d)   19,300     126,000     28,282     524,285  
Minus:              
Property insurance recoveries for Mayfield tornado losses(e)   16,182         19,997      
Deconsolidation of subsidiary(f)               1,131  
Net income attributable to noncontrolling interest   647     110     674     444  
Adjusted EBITDA $ 460,461   $ 346,907   $ 1,585,498   $ 972,369  


(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 in 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 nine months ended September 26, 2021 and September 25, 2022 was offset by amounts recognized in anticipation of probable settlements in ongoing litigation.
(e) This represents property 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 September 25, 2022 (the LTM Period) have been calculated by subtracting the applicable unaudited consolidated income statement data for the nine months ended September 26, 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 nine months ended September 25, 2022.

PILGRIM'S PRIDE CORPORATION
Reconciliation of LTM Adjusted EBITDA
(Unaudited)
                   
  Three Months Ended   LTM Ended
  December 26
2021
  March 27
2022
  June 26
2022
  September 25
2022
  September 25
2022
  (In thousands)
Net income $ 36,468     $ 280,560   $ 362,021     $ 258,999   $ 938,048  
Add:                  
Interest expense, net   33,370       35,022     37,102       34,222     139,716  
Income tax expense   5,191       75,219     112,711       65,749     258,870  
Depreciation and amortization   106,488       102,142     99,854       98,966     407,450  
EBITDA   181,517       492,943     611,688       457,936     1,744,084  
Add:                  
Foreign currency transaction losses (gains)   (18,400 )     11,536     2,758       54     (4,052 )
Transaction costs related to acquisitions   9,540       717     255           10,512  
DOJ agreement and litigation settlements   131,940       500     8,482       19,300     160,222  
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:                  
Property insurance recoveries for Mayfield tornado losses         3,815           16,182     19,997  
Net income (loss) attributable to noncontrolling interest   (286 )     122     (95 )     647     388  
Adjusted EBITDA $ 316,659     $ 501,759   $ 623,278     $ 460,461   $ 1,902,157  

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   Nine Months Ended   Three Months Ended   Nine Months Ended
  September 25,
2022
  September 26,
2021
  September 25,
2022
  September 26,
2021
  September 25,
2022
  September 26,
2021
  September 25,
2022
  September 26,
2021
  (In thousands)
Net income (loss) $ 258,999   $ 60,835   $ 901,580   $ (5,200 )     5.80 %     1.59 %     6.76 %     (0.05 )%
Add:                              
Interest expense, net   34,222     28,589     106,346     106,366       0.77 %     0.75 %     0.80 %     0.99 %
Income tax expense   65,749     30,385     253,679     55,931       1.47 %     0.79 %     1.90 %     0.52 %
Depreciation and amortization   98,966     92,076     300,962     274,336       2.21 %     2.40 %     2.25 %     2.55 %
EBITDA   457,936     211,885     1,562,567     431,433       10.25 %     5.53 %     11.71 %     4.01 %
Add:                              
Foreign currency transaction losses   54     2,359     14,348     9,018       %     0.06 %     0.10 %     0.08 %
Transaction costs related to business acquisitions       6,773     972     9,318       %     0.18 %     0.01 %     0.09 %
DOJ agreement and litigation settlements   19,300     126,000     28,282     524,285       0.43 %     3.29 %     0.21 %     4.88 %
Minus:                              
Property insurance recoveries for Mayfield tornado losses   16,182         19,997           0.36 %     %     0.15 %     %
Deconsolidation of subsidiary               1,131       %     %     %     0.01 %
Net income attributable to noncontrolling interest   647     110     674     554       0.01 %     %     0.01 %     0.01 %
Adjusted EBITDA $ 460,461   $ 346,907   $ 1,585,498   $ 972,369       10.31 %     9.06 %     11.87 %     9.04 %
                               
Net sales $ 4,468,969   $ 3,827,566   $ 13,341,012   $ 10,738,689     $ 4,468,969     $ 3,827,566     $ 13,341,012     $ 10,738,689  

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   Nine Months Ended
  September 25, 2022   September 26, 2021   September 25, 2022   September 26, 2021
  (In thousands)
GAAP operating income (loss), U.S. operations $ 338,548     $ 70,666     $ 1,146,821     $ (85,380 )
Transaction costs related to acquisitions         6,773       972       9,318  
DOJ agreement and litigation settlements   19,300       126,000       28,282       524,285  
Property insurance recoveries for Mayfield tornado losses   (16,182 )           (19,997 )      
Adjusted operating income, U.S. operations $ 341,666     $ 203,439     $ 1,156,078     $ 448,223  
Adjusted operating income margin, U.S. operations   12.0 %     8.2 %     13.9 %     6.7 %

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   Nine Months Ended
  September 25, 2022   September 26, 2021   September 25, 2022   September 26, 2021
  (In percent)
GAAP operating income margin, U.S. operations 11.9 %   2.9 %   13.8 %   (1.3 )%
Transaction costs related to acquisitions %   0.2 %   %   0.1 %
DOJ agreement and litigation settlements 0.7 %   5.1 %   0.4 %   7.9 %
Property insurance recoveries for Mayfield tornado losses (0.6 )%   %   (0.3 )%   %
Adjusted operating income margin, U.S. operations 12.0 %   8.2 %   13.9 %   6.7 %

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   Nine Months Ended
  September 25, 2022   September 26, 2021   September 25, 2022   September 26, 2021
  (In thousands, except per share data)
Net income (loss) attributable to Pilgrim's $ 258,352     $ 60,725     $ 900,906     $ (5,754 )
Add:              
Foreign currency transaction losses   54       2,359       14,348       9,018  
Transaction costs related to acquisitions         6,773       972       9,318  
DOJ agreement and litigation settlements   19,300       126,000       28,282       524,285  
Loss on early extinguishment of debt recognized as a component of interest expense         400             24,654  
Minus:              
Property insurance recoveries for Mayfield tornado losses   16,182             19,997        
Deconsolidation of subsidiary                     1,131  
Adjusted net income attributable to Pilgrim's before tax impact of adjustments   261,524       196,257       924,511       560,390  
Net tax impact of adjustments(a)   (790 )     (33,761 )     (5,880 )     (141,026 )
Adjusted net income attributable to Pilgrim's $ 260,734     $ 162,496     $ 918,631     $ 419,364  
Weighted average diluted shares of common stock outstanding   239,208       244,195       241,494       243,643  
Adjusted net income attributable to Pilgrim's per common diluted share $ 1.09     $ 0.67     $ 3.80     $ 1.72  

(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   Nine Months Ended
  September 25, 2022   September 26, 2021   September 25, 2022   September 26, 2021
  (In thousands, except per share data)
GAAP EPS $ 1.08   $ 0.25     $ 3.73     $ (0.02 )
Add:              
Foreign currency transaction losses       0.01       0.06       0.04  
Transaction costs related to acquisitions       0.03             0.04  
DOJ agreement and litigation settlements   0.08     0.52       0.12       2.15  
Loss on early extinguishment of debt recognized as a component of interest expense                   0.10  
Minus:              
Property insurance recoveries for Mayfield tornado losses   0.07           0.08        
Adjusted EPS before tax impact of adjustments   1.09     0.81       3.83       2.31  
Net tax impact of adjustments(a)       (0.14 )     (0.03 )     (0.59 )
Adjusted EPS $ 1.09   $ 0.67     $ 3.80     $ 1.72  
               
Weighted average diluted shares of common stock outstanding   239,208     244,195       241,494       243,643  

(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   Nine Months Ended
  September 25, 2022   September 26, 2021   September 25, 2022   September 26, 2021
  (In thousands)
Sources of net sales by geographic region of origin:              
U.S. $ 2,836,920     $ 2,466,850     $ 8,318,007     $ 6,714,879  
U.K. and Europe   1,203,095       930,440       3,640,129       2,721,019  
Mexico   428,954       430,276       1,382,876       1,302,791  
Total net sales $ 4,468,969     $ 3,827,566     $ 13,341,012     $ 10,738,689  
               
Sources of cost of sales by geographic region of origin:              
U.S. $ 2,391,612     $ 2,188,822     $ 6,906,059     $ 6,063,644  
U.K. and Europe   1,150,626       898,116       3,479,626       2,600,842  
Mexico   429,475       368,799       1,239,348       1,060,918  
Elimination   (14 )     (14 )     (42 )     (42 )
Total cost of sales $ 3,971,699     $ 3,455,723     $ 11,624,991     $ 9,725,362  
               
Sources of gross profit by geographic region of origin:              
U.S. $ 445,308     $ 278,028     $ 1,411,948     $ 651,235  
U.K. and Europe   52,469       32,324       160,503       120,177  
Mexico   (521 )     61,477       143,528       241,873  
Elimination   14       14       42       42  
Total gross profit $ 497,270     $ 371,843     $ 1,716,021     $ 1,013,327  
               
Sources of operating income (loss) by geographic region of origin:              
U.S. $ 338,548     $ 70,666     $ 1,146,821     $ (85,380 )
U.K. and Europe   14,198       445       406       32,771  
Mexico   (13,558 )     49,652       106,850       208,677  
Elimination   14       14       42       42  
Total operating income $ 339,202     $ 120,777     $ 1,254,119     $ 156,110  

 


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Source: Pilgrim's Pride Corporation