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ppc-20201028
PILGRIMS PRIDE CORP0000802481false00008024812020-10-282020-10-28

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): October 28, 2020
PILGRIM'S PRIDE CORPORATION
(Exact Name of registrant as specified in its charter)
Delaware1-927375-1285071
(State or other jurisdiction of
incorporation or organization)		(Commission File Number)(IRS Employer Identification No.)
1770 Promontory Circle80634-9038
GreeleyCO(Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (970) 506-8000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of Exchange on Which Registered
Common Stock, Par Value $0.01PPCThe Nasdaq Stock Market LLC
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
    Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 Emerging growth company ☐
    If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐


Item 2.02 Results of Operations and Financial Condition.
On October 28, 2020 the Registrant issued a press release, a copy of which is attached hereto as Exhibit 99.1 and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
Exhibit 99.1 Press release dated October 28, 2020.
Exhibit 104 Cover Page Interactive Data File formatted in iXBRL



SIGNATURE  
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 PILGRIM’S PRIDE CORPORATION
 
Date: October 28, 2020/s/ Fabio Sandri
 Fabio Sandri
 President and Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer
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Pilgrim’s Pride Reports Q3 Net Sales of $3.08 Billion, Operating Income of $94 Million and GAAP EPS of $0.14

GREELEY, Colo., October 28, 2020 (GLOBE NEWSWIRE) - Pilgrim’s Pride Corporation (NASDAQ: PPC) reports third quarter 2020 financial results.

Third Quarter Highlights
•Net Sales of $3.08 billion.
•Net GAAP Income of $33.4 million. Adjusted Net Income of $161.7 million or adjusted EPS of $0.66 excluding $110.5 million DOJ agreement.
•Consolidated Operating Income margin of 3% with Adjusted Operating Income margins of 6.7% in U.S. excluding DOJ agreement, 18.4% in Mexico and 3.5% in Europe.
•Adjusted EBITDA of $305.0 million, or a 9.9% margin, 18% higher than a year ago.
•Faced with the global Covid-19 pandemic, we continue to be guided by our principles of an uncompromising commitment to the safety of our team members, our duty to provide quality food globally, and our responsibility to provide continued employment opportunities and benefits for our team. To support the local communities where we operate, we initiated the “Hometown Strong” initiative, and are committed to invest $20 million in 2020.
•Strong focus in execution and dedication by our team members, supported by portfolio strategy of differentiated products, strong Key Customer relationships, and diversified global presence have helped us to counter challenging market conditions due to Covid-19 and improve the resiliency in our results.
•Demand in U.S. recovering, with our Retail and QSR business stronger than a year ago, though volatility and challenging conditions in commodity segments still remaining. Relative performance versus the industry continuing to improve, supported by our agility in adapting mix and Key Customer approach.
•Mexico experienced a significant rebound to record one of the strongest Q3 in its history despite unfavorable mix impact and added operating costs. Strong execution, higher economic activities, better supply/demand balance, a stronger Peso, and our increased share of non-commodity products contributed to the strength.
•The legacy European chicken business continued to improve its results despite Covid-19 impact, with better operational efficiencies and a commitment to innovation. Momentum of newly acquired European pork assets in generating positive EBITDA continuing, while margins also increasing on a consistent basis.
•Our liquidity position remains strong, supported by the relentless emphasis on cash flow generation, focus on working capital management, and disciplined investments in high-return projects, preserving the opportunity to maintain strategic growth priorities while strengthening our differentiated global platforms.
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Unaudited (2)
Three Months EndedNine Months Ended
September 27,
2020		September 29,
2019		Y/Y ChangeSeptember 27,
2020		September 29,
2019		Y/Y Change
(In millions, except per share and percentages)
Net sales$3,075.1 $2,778.0 +10.7 %$8,974.1 $8,345.7 +7.5 %
U.S. GAAP EPS$0.14 $0.44 (68.2)%$0.38 $1.46 (74.0)%
Operating income$94.3 $188.2 (49.9)%$206.0 $604.8 (65.9)%
Adjusted EBITDA(1)
$305.0 $258.3 +18.1 %$582.7 $812.1 (28.2)%
Adjusted EBITDA margin(1)
9.9 %9.3 %+0.6 pts6.5 %9.7 %-3.2 pts
(1)     Reconciliations for non-U.S. GAAP measures are provided in subsequent sections within this release.
(2)     Comparisons include newly acquired European pork assets (Tulip) from 10/15/19 forward.

“Once again we are grateful to our team for their continued commitment, dedication and hard work, in supporting our ability to keep our team members safe and healthy, and allowing us the capability to maintain production and supply to our customers during this unprecedented crisis. Although conditions have been improving, the markets have remained volatile and challenging in Q3 as a result of Covid-19. However, our diversified strategy has continued to mitigate the tough environment and produce the expected results in relative performance to industry competition, and deliver more resilient performance regardless of changes in specific market conditions. For Q3, the U.S. and Mexico rebounded from a difficult first half, with Mexico recording one of the strongest Q3 in its history, while Europe also continuing to improve despite the increase in operating costs related to Covid-19. We remain agile and are continuing to adapt our operations to changes in market conditions,” stated Fabio Sandri, Chief Executive Officer of Pilgrim's.

“During the third quarter, in the U.S. we are continuing to see demand recovering at our fresh operations, including from some sectors within foodservice, with more states gradually loosening travel and movement restrictions. Our Retail and QSR businesses have been especially strong, and demand from our customers has been outperforming the industry. Commodity large bird deboning was once again the most challenged this quarter. Operationally however, we continue to improve our relative performance versus the industry across all our business units, including commodity segments. We also continue to adapt quickly to changes in channel demand by adjusting the mix of our production capabilities, supported by our close partnerships with Key Customers, strong focus in execution by our team members, the geographical diversity of our footprint, and our presence across all bird size categories.”

“After a very difficult first half in 2020, our Mexican operations delivered great results in Q3, and we generated one of the strongest Q3 in the company's history in Mexico despite the unfavorable mix impact and added operating costs relative to the same period last year. A normalization in economic activities, an improved supply/demand balance in the market, a stronger Peso, and a very good operational performance, all contributed to the strength. We are continuing to invest in our Del Dia and premium Pilgrim’s brands (both prepared and fresh), as well as seeking more market share in the modern channel, which will bring more stable margins to our operations.”

“Our legacy European chicken operations are continuing to improve, driven by exposure to retail as well as a recovery in foodservice demand, particularly from QSR, despite the significant impact of Covid-19 on the operations. In addition, our strong internal operating performance and commitment to innovation have helped in mitigating the difficult environment. The positive momentum in improvement from the newly acquired European pork assets has been maintained, with positive EBITDA and margins continuing to increase. The performance was driven by strong demand at retail partially offset by a reduction in foodservice, continuing strength in pork exports especially to China, as well as the implementations of operational improvements and synergy capture.”

Conference Call Information

A conference call to discuss Pilgrim’s quarterly results will be held tomorrow, October 29, 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-
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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/ppc201029.html

You may also reach the pre-registration link by logging in through the investor section of our website at www.pilgrims.com and clicking on the link under “Upcoming Events.”

For those who would like to join the call but have not pre-registered, access is available by dialing +1 (844) 883-3889 within the US, or +1 (412) 317-9245 internationally, and requesting the “Pilgrim’s Pride Conference.” Please note that to submit a question to management during the call, you must be logged in via telephone.

Replays of the conference call will be available on Pilgrim’s website approximately two hours after the call concludes and can be accessed through the “Investor” section of www.pilgrims.com. The webcast will be available for replay through January 29, 2021.

About Pilgrim’s Pride

Pilgrim’s employs approximately 55,400 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 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; and the impact of uncertainties of litigation and other legal matters described in our Quarterly Report on 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
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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:Dunham Winoto
Investor Relations
IRPPC@pilgrims.com
(970) 506-8192
www.pilgrims.com

4


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 27, 2020December 29, 2019
 (In thousands)
Cash and cash equivalents$768,031 $260,568 
Restricted cash and cash equivalents17,105 20,009 
Trade accounts and other receivables, less allowance for doubtful accounts706,123 741,281 
Accounts receivable from related parties616 944 
Inventories1,328,704 1,383,535 
Income taxes receivable77,651 60,204 
Prepaid expenses and other current assets159,643 131,695 
Total current assets3,057,873 2,598,236 
Deferred tax assets4,126 4,426 
Other long-lived assets15,079 36,325 
Identified intangible assets, net566,696 596,053 
Goodwill955,087 973,750 
Operating lease assets, net284,820 301,513 
Property, plant and equipment, net2,585,818 2,592,061 
Total assets$7,469,499 $7,102,364 
Accounts payable$915,661 $993,780 
Accounts payable to related parties5,752 3,819 
Revenue contract liability57,221 41,770 
Accrued expenses and other current liabilities691,329 575,319 
Income taxes payable— 7,075 
Current maturities of long-term debt25,485 26,392 
Total current liabilities1,695,448 1,648,155 
Noncurrent operating lease liability, less current maturities215,924 235,382 
Long-term debt, less current maturities2,610,668 2,276,029 
Noncurrent income taxes payable7,731 7,731 
Deferred tax liabilities339,051 301,907 
Other long-term liabilities169,365 97,100 
Total liabilities5,038,187 4,566,304 
Common stock2,612 2,611 
Treasury stock(342,698)(234,892)
Additional paid-in capital1,953,969 1,955,261 
Retained earnings972,490 877,812 
Accumulated other comprehensive loss(165,520)(75,129)
Total Pilgrim’s Pride Corporation stockholders’ equity2,420,853 2,525,663 
Noncontrolling interest10,459 10,397 
Total stockholders’ equity2,431,312 2,536,060 
Total liabilities and stockholders’ equity$7,469,499 $7,102,364 

5


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 Three Months EndedNine Months Ended
 September 27, 2020September 29, 2019September 27, 2020September 29, 2019
 (In thousands, except per share data)
Net sales$3,075,121 $2,777,970 $8,974,072 $8,345,730 
Cost of sales2,761,279 2,495,773 8,363,272 7,476,731 
Gross profit313,842 282,197 610,800 868,999 
Selling, general and administrative expense219,554 94,032 404,837 264,313 
Administrative restructuring activity— (20)— (90)
Operating income94,288 188,185 205,963 604,776 
Interest expense, net of capitalized interest30,564 32,028 95,575 99,184 
Interest income(1,763)(4,698)(4,611)(11,481)
Foreign currency transaction losses (gains)9,092 3,027 (3,768)7,923 
Miscellaneous, net360 1,367 (33,873)2,521 
Income before income taxes56,035 156,461 152,640 506,629 
Income tax expense22,344 46,365 57,900 142,328 
Net income33,691 110,096 94,740 364,301 
Less: Net income (loss) attributable to noncontrolling interests245 331 62 457 
Net income attributable to Pilgrim’s Pride Corporation$33,446 $109,765 $94,678 $363,844 
Weighted average shares of common stock outstanding:
Basic244,186 249,467 246,740 249,344 
Effect of dilutive common stock equivalents190 262 158 308 
Diluted244,376 249,729 248,308 249,652 
Net income attributable to Pilgrim's Pride Corporation per share of
common stock outstanding:
Basic$0.14 $0.44 $0.38 $1.46 
Diluted$0.14 $0.44 $0.38 $1.46 

6


PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine Months Ended
 September 27, 2020September 29, 2019
 (In thousands)
Cash flows from operating activities:
Net income$94,740 $364,301 
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization248,641 210,381 
Deferred income tax expense37,739 2,396 
Gain on property disposals(8,009)(9,546)
Negative adjustment to previously recognized gain on bargain purchase3,746 — 
Loan cost amortization3,635 3,609 
Stock-based compensation(1,291)7,322 
Accretion of discount related to Senior Notes737 737 
Amortization of premium related to Senior Notes(501)(501)
Loss (gain) on equity-method investments297 (48)
Foreign currency transaction loss related to borrowing arrangements— 1,259 
Changes in operating assets and liabilities:
Trade accounts and other receivables44,615 (46,648)
Inventories41,292 (108,117)
Prepaid expenses and other current assets(29,290)3,536 
Accounts payable, accrued expenses and other current liabilities93,114 67,308 
Income taxes(30,868)40,549 
Long-term pension and other postretirement obligations(823)(1,578)
Other operating assets and liabilities10,561 544 
Cash provided by operating activities508,335 535,504 
Cash flows from investing activities:
Acquisitions of property, plant and equipment(242,603)(258,725)
Proceeds from property disposals21,715 15,168 
Purchase of acquired business, net of cash acquired(4,216)— 
Cash used in investing activities(225,104)(243,557)
Cash flows from financing activities:
Proceeds from revolving line of credit and long-term borrowings386,696 99,638 
Purchase of common stock under share repurchase program(107,806)(2,898)
Payments on revolving line of credit, long-term borrowings and finance lease obligations(56,763)(123,276)
Payment from equity distribution under Tax Sharing Agreement between JBS USA Food Company Holdings and Pilgrim’s Pride Corporation— (525)
Payment of capitalized loan costs— (652)
Cash provided by financing activities222,127 (27,713)
Effect of exchange rate changes on cash and cash equivalents(799)(808)
Increase in cash, cash equivalents and restricted cash504,559 263,426 
Cash, cash equivalents and restricted cash, beginning of period280,577 361,578 
Cash, cash equivalents and restricted cash, end of period$785,136 $625,004 

7

PILGRIM’S PRIDE CORPORATION
Non-GAAP Financial Measures Reconciliation
(Unaudited)

This earnings release and the following financial statement tables include several supplemental non-GAAP financial measures, including EBITDA, Adjusted EBITDA, EBITDA Margin, Adjusted Operating Income, Adjusted Net Income, and Adjusted EPS, as further described below.
“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) income (loss) attributable to noncontrolling interests, (2) transaction costs related to acquisitions, (3) charges or income from restructuring activities, (4) litigation settlement income or charges, (5) gain on bargain purchase and (6) foreign currency transaction losses (gains). EBITDA is presented because it is used by management and we believe it is frequently used by securities analysts, investors and other interested parties, in addition to and not in lieu of results prepared in conformity with accounting principles generally accepted in the 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. 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. They should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net income as indicators of our operating performance or any other measures of performance derived in accordance with U.S. GAAP.

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted EBITDA
(Unaudited)
Three Months EndedNine Months Ended
September 27, 2020September 29, 2019September 27, 2020September 29, 2019
(In thousands)
Net income$33,691 $110,096 $94,740 $364,301 
Add:
Interest expense, net28,801 27,330 90,964 87,703 
Income tax expense22,344 46,365 57,900 142,328 
Depreciation and amortization84,265 71,851 248,641 210,381 
EBITDA169,101 255,642 492,245 804,713 
Add:
Foreign currency transaction losses (gains)9,092 3,027 (3,768)7,923 
Transaction costs related to acquisitions— — 134 — 
DOJ agreement110,524 — 110,524 — 
Restructuring activity— (20)— (90)
Hometown Strong commitment14,506 — 14,506 — 
Minus:
Negative adjustment to previously recognized gain on bargain purchase(2,006)— (3,746)— 
Shareholder litigation settlement— — 34,643 — 
Net income attributable to noncontrolling interest245 331 62 457 
Adjusted EBITDA$304,984 $258,318 $582,682 $812,089 

8

The summary unaudited consolidated income statement data for the twelve months ended September 27, 2020 (the LTM Period) have been calculated by subtracting the applicable unaudited consolidated income statement data for the nine months ended September 29, 2019 from the sum of (1) the applicable audited consolidated income statement data for the year ended December 29, 2019 and (2) the applicable audited consolidated income statement data for the nine months ended September 27, 2020.

PILGRIM'S PRIDE CORPORATION
Reconciliation of LTM Adjusted EBITDA
(Unaudited)
Three Months EndedLTM Ended
December 29,
2019		March 29,
2020		June 28,
2020		September 27,
2020		September 27,
2020
(In thousands)
Net income$92,235 $67,449 $(6,400)$33,691 $186,975 
Add:
Interest expense, net30,650 30,998 31,165 28,801 121,614 
Income tax expense18,681 38,512 (2,956)22,344 76,581 
Depreciation and amortization76,849 79,773 84,603 84,265 325,490 
EBITDA218,415 216,732 106,412 169,101 710,660 
Add:
Foreign currency transaction losses
(gains)		(1,006)(18,385)5,525 9,092 (4,774)
Transaction costs related to acquisitions1,239 215 (81)— 1,373 
DOJ agreement— — — 110,524 110,524 
Restructuring activity6 — — — 6 
Hometown Strong commitment— — — 14,506 14,506 
Minus:
Gain on bargain purchase56,880 (1,740)— (2,006)53,134 
Shareholder litigation settlement— 34,643 — — 34,643 
Net income attributable to
      noncontrolling interest
155 181 (364)245 217 
Adjusted EBITDA$161,619 $165,478 $112,220 $304,984 $744,301 

9

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 EndedNine Months EndedThree Months EndedNine Months Ended
September 27, 2020September 29, 2019September 27, 2020September 29, 2019September 27, 2020September 29, 2019September 27, 2020September 29, 2019
(In thousands)
Net income$33,691 $110,096 $94,740 $364,301 1.10 %3.96 %1.06 %4.37 %
Add:
Interest expense, net28,801 27,330 90,964 87,703 0.94 %0.98 %1.01 %1.05 %
Income tax expense22,344 46,365 57,900 142,328 0.73 %1.67 %0.65 %1.71 %
Depreciation and amortization84,265 71,851 248,641 210,381 2.74 %2.59 %2.77 %2.53 %
EBITDA169,101 255,642 492,245 804,713 5.51 %9.20 %5.49 %9.66 %
Add:
Foreign currency transaction losses (gains)9,092 3,027 (3,768)7,923 0.29 %0.11 %(0.04)%0.10 %
Acquisition charges— — 134 — — %— %— %— %
DOJ agreement110,524 — 110,524 — 3.59 %— %1.23 %— %
Restructuring activity— (20)— (90)— %— %— %— %
Hometown Strong commitment14,506 — 14,506 — 0.47 %— %0.16 %— %
Minus:
Negative adjustment to previously recognized gain on bargain purchase(2,006)— (3,746)— (0.07)%— %(0.04)%— %
Shareholder litigation settlement— — 34,643 — — %— %0.39 %— %
Net income (loss) attributable to noncontrolling interest245 331 62 457 0.01 %0.01 %— %0.01 %
Adjusted EBITDA$304,984 $258,318 $582,682 $812,089 9.92 %9.30 %6.49 %9.75 %
Net sales$3,075,121 $2,777,970 $8,974,072 $8,345,730 $3,075,121 $2,777,970 $8,974,072 $8,345,730 

10

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 EndedNine Months Ended
September 27, 2020September 29, 2019September 27, 2020September 29, 2019
(In thousands)
GAAP operating income (U.S. operations)$2,451 $125,168 $126,951 $426,968 
DOJ agreement110,524 — 110,524 — 
Hometown Strong commitment14,506 — 14,506 — 
Adjusted operating income (U.S. operations)$127,481 $125,168 $251,981 $426,968 
Adjusted operating income margin (U.S. operations)6.7 %6.5 %4.5 %7.4 %

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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 EndedNine Months Ended
September 27, 2020September 29, 2019September 27, 2020September 29, 2019
(In percent)
GAAP operating income margin (U.S. operations)0.1 %6.5 %2.2 %7.4 %
DOJ agreement5.8 %— %2.0 %— %
Hometown Strong commitment0.8 %— %0.3 %— %
Adjusted operating income margin (U.S. operations)6.7 %6.5 %4.5 %7.4 %

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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. 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 per common diluted share to adjusted net income attributable to Pilgrim's per common diluted share is as follows:

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted Net Income
(Unaudited)
Three Months EndedNine Months Ended
September 27, 2020September 29, 2019September 27, 2020September 29, 2019
(In thousands, except per share data)
Net income attributable to Pilgrim's$33,446 $109,765 $94,678 $363,844 
Adjustments:
Acquisition charges and restructuring activity— 43 134(26)
DOJ agreement110,524 — 110,524 — 
Hometown Strong commitment14,506 — 14,506 — 
Foreign currency transaction losses (gains)9,092 3,027 (3,768)7,923 
Net tax expense (benefit) of adjustments(a)
(5,916)(747)(9,158)(1,923)
Adjusted net income attributable to Pilgrim's$161,652 $112,088 $206,916 $369,818 
Weighted average diluted shares of common stock outstanding244,376 249,729 248,308 249,652 
Adjusted net income attributable to Pilgrim's per common diluted share$0.66 $0.45 $0.83 $1.48 
(a)    Net tax expense (benefit) of adjustments represents the tax impact of all adjustments shown above with the exclusion of the DOJ antitrust fine as this item is non-deductible for tax purposes.
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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 EndedNine Months Ended
September 27, 2020September 29, 2019September 27, 2020September 29, 2019
(In thousands, except per share data)
GAAP EPS$0.14 $0.44 $0.38 $1.46 
Adjustments:
Acquisition charges and restructuring activity— — — — 
DOJ agreement0.45 — 0.45 — 
Hometown Strong commitment0.06 — 0.06 — 
Foreign currency transaction losses (gains)0.04 0.01 (0.02)0.03 
Net tax impact of adjustments(a)
(0.02)— (0.04)(0.01)
Adjusted EPS$0.66 $0.45 $0.84 $1.48 
Weighted average diluted shares of common stock outstanding244,376 249,729 246,898 249,652 
(a)    Net tax impact of adjustments represents the tax impact of all adjustments shown above with the exclusion of the DOJ antitrust fine as this item is non-deductible for tax purposes.
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PILGRIM'S PRIDE CORPORATION
Supplementary Selected Segment and Geographic Data
(Unaudited)
Three Months EndedNine Months Ended
September 27, 2020September 29, 2019September 27, 2020September 29, 2019
(In thousands)
Sources of net sales by geographic region of origin:
US$1,894,222 $1,931,657 $5,619,791 $5,732,201 
Europe845,677 517,531 2,425,140 1,568,396 
Mexico335,222 328,782 929,141 1,045,133 
Total net sales$3,075,121 $2,777,970 $8,974,072 $8,345,730 
Sources of cost of sales by geographic region of origin:
US$1,711,089 $1,739,474 $5,210,534 $5,123,278 
Europe785,347 474,490 2,256,034 1,452,254 
Mexico265,078 281,833 897,163 901,271 
Elimination(235)(24)(459)(72)
Total cost of sales$2,761,279 $2,495,773 $8,363,272 $7,476,731 
Sources of gross profit by geographic region of origin:
US$183,133 $192,183 $409,257 $608,923 
Europe60,330 43,041 169,106 116,142 
Mexico70,144 46,949 31,978 143,862 
Elimination235 24 459 72 
Total gross profit$313,842 $282,197 $610,800 $868,999 
Sources of operating income by geographic region of origin:
US$2,451 $125,168 $126,951 $426,968 
Europe29,949 25,325 76,324 62,233 
Mexico61,653 37,668 2,229 115,503 
Elimination235 24 459 72 
Total operating income$94,288 $188,185 $205,963 $604,776 


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