Pilgrim’s Pride Corporation (NASDAQ: PPC), one of the world's largest poultry producers, reports its second quarter 2021 financial results.

Second Quarter Highlights

  • Net Sales of $3.64 billion, up 29% from prior year.
  • Consolidated GAAP Operating Income margin of (3.4)% with GAAP Operating Income margins of (10.0)% in U.S., 17.5% in Mexico and 2.3% in Europe. Adjusted U.S. Operating Income margin of 7.8%.
  • GAAP Net Loss of $(166.7) million. Adjusted Net Income of $153.8 million or adjusted EPS of $0.63.
  • Adjusted EBITDA of $371.6 million, or a 10.2% margin, 231.2% higher than a year ago.
  • Demand in the U.S. continues to recover, with our foodservice business improving year-over-year and sequentially, achieving levels higher than pre-pandemic, while Retail volumes remain strong. Our business has improved its margins, especially on the Commodity large bird deboning operation, despite higher input costs and less than optimal mix due to significant labor shortages.
  • Mexico maintained its strong momentum during the second quarter. Solid execution, improved overall economic conditions, supply/demand balance, and our increased share of non-commodity products contributed to the continued strength.
  • Our combined European business continues to achieve operational improvements and benefited in the quarter with year-over-year and sequential improvements in foodservice volumes in the UK, offset by continued increases in feed costs, which are not yet fully reflected in prices, and lower pig pricing in the region.
  • We continue to expand our ESG agenda by releasing our Pilgrim's 2020 Sustainability Report - “Eat Proudly.” The report details our global progress in key priority areas such as animal care, team members, environment, communities, customers and consumers, and suppliers.
  • Recorded an aggregate legal contingency accrual of $396 million.
  • Our liquidity position remains strong with an Adjusted EBITDA net leverage ratio at 1.6x.
  • Continued with our growth strategy the announcement of our intended acquisition of the Kerry Consumer Foods' Meats and Meals business in the U.K. and Ireland. Following the acquisition, Pilgrim's will be a leading food company with a significant value-added protein and integrated prepared foods business anchored by a portfolio of strong brands.
(Unaudited)   Three Months Ended   Six Months Ended
    June 27,2021   June 28,2020   Y/Y Change   June 27,2021   June 28,2020   Y/Y Change
    (In millions, except per share and percentages)
Net sales   $ 3,637.7     $ 2,824.0     +28.8 %   $ 6,911.1     $ 5,899.0     +17.2 %
U.S. GAAP EPS   $ (0.68 )   $ (0.02 )   +3300.0 %   $ (0.27 )   $ 0.25     (208.0 )%
Operating income   $ (123.1 )   $ 27.3     (550.9 )%   $ 35.3     $ 111.7     (68.4 )%
Adjusted EBITDA(1)   $ 371.6     $ 112.2     +231.2 %   $ 625.5     $ 277.7     +125.2 %
Adjusted EBITDA margin(1)   10.2 %   4.0 %   +6.2  pts   9.1 %   4.7 %   +4.4  pts
                                     

(1) Reconciliations for non-U.S. GAAP measures are provided in subsequent sections within this release.

“As the world emerges from the COVID-19 pandemic, more of the population gets vaccinated and activities gradually return to normal, we are optimistic that dining out, gathering with friends and family for meals and eating lunch at work or at school will once again become routine,” stated Fabio Sandri, Chief Executive Officer of Pilgrim’s. “Our second quarter results reflect a shift to more normal patterns in the U.S. as we saw a slight increase in retail store trips and more foodservice locations reopened.

“Our U.S. business turned in a solid operational performance despite higher and more volatile input costs and product mix issues resulting from continued, albeit improving, labor challenges. Our big bird business performed very well on commodity pricing that has remained consistently near or above historical ranges. Our foodservice business was stronger than anticipated as restrictions continued to ease, boosting demand back above 2019 levels. With consumers’ continued emphasis on the retail channel, we further expanded our retail branded presence. We grew our branded consumer packaged foods business in the second quarter by 215% by investing in our Just Bare® and Pilgrim’s® brands at retail and in e-commerce.

“Meanwhile, our Mexico business had another strong quarter, driven by a balanced supply/demand equation and continuous improvements in operational performance, while effectively managing higher grain pricing and supplying our customers with Fresh and Prepared Foods under the Pilgrim’s®, Del Dia® and Alamesa® brands.

“In Q2, although challenged by increasing grain costs, Moy Park improved EBIT by 7% vs. the first quarter 2021. Moy Park continue to deliver operational efficiencies, better agricultural performance and improved yields to help offset grain cost and labor challenges. Pilgrim’s UK has been affected by low hog prices and rising grain costs. Despite similar labor challenges, the Pilgrim’s UK operations have also improved its margins from the same period last year.”

Conference Call Information

A conference call to discuss Pilgrim’s quarterly results will be held tomorrow, July 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-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/ppc210729.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 October 28, 2021.

About Pilgrim’s Pride

Pilgrim’s employs approximately 54,700 people and operates protein processing plants and prepared-foods facilities in 14 states, Puerto Rico, Mexico, the U.K. and continental Europe. The Company’s primary distribution is through retailers and foodservice distributors. For more information, please visit www.pilgrims.com.

Forward-Looking Statements

Statements contained in this press release that state the intentions, plans, hopes, beliefs, anticipations, expectations or predictions of the future of Pilgrim’s Pride Corporation and its management are considered forward-looking statements. Without limiting the foregoing, words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “should,” “targets,” “will” and the negative thereof and similar words and expressions are intended to identify forward-looking statements. It is important to note that actual results could differ materially from those projected in such forward-looking statements. Factors that could cause actual results to differ materially from those projected in such forward-looking statements include: the impact of the COVID-19 pandemic, efforts to contain the pandemic and resulting economic downturn on our operations and financial condition, including the risk that our health and safety measures at Pilgrim’s Pride production facilities will not be effective, the risk that we may be unable to prevent the infection of our employees at these facilities, and the risk that we may need to temporarily close one or more of our production facilities; the risk that we may experience decreased production and sales due to the changing demand for food products; the risk that we may face a significant increase in delayed payments from our customers; and additional risks related to COVID-19 set forth in our most recent Form 10-K and Form 10-Q filed with the SEC; matters affecting the poultry industry generally; the ability to execute the Company’s business plan to achieve desired cost savings and profitability; future pricing for feed ingredients and the Company’s products; outbreaks of avian influenza or other diseases, either in Pilgrim’s Pride’s flocks or elsewhere, affecting its ability to conduct its operations and/or demand for its poultry products; contamination of Pilgrim’s Pride’s products, which has previously and can in the future lead to product liability claims and product recalls; exposure to risks related to product liability, product recalls, property damage and injuries to persons, for which insurance coverage is expensive, limited and potentially inadequate; management of cash resources; restrictions imposed by, and as a result of, Pilgrim’s Pride’s leverage; changes in laws or regulations affecting Pilgrim’s Pride’s operations or the application thereof; new immigration legislation or increased enforcement efforts in connection with existing immigration legislation that cause the costs of doing business to increase, cause Pilgrim’s Pride to change the way in which it does business, or otherwise disrupt its operations; competitive factors and pricing pressures or the loss of one or more of Pilgrim’s Pride’s largest customers; currency exchange rate fluctuations, trade barriers, exchange controls, expropriation and other risks associated with foreign operations; disruptions in international markets and distribution channel, including anti-dumping proceedings and countervailing duty proceedings; the risk of cyber-attacks, natural disasters, power losses, unauthorized access, telecommunication failures, and other problems on our information systems; and the impact of uncertainties of litigation and other legal matters described in our most recent Form 10-K and Form 10-Q, including the In re Broiler Chicken Antitrust Litigation, as well as other risks described under “Risk Factors” in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and subsequent filings with the Securities and Exchange Commission. The forward-looking statements in this release speak only as of the date hereof, and the Company undertakes no obligation to update any such statement after the date of this release, whether as a result of new information, future developments or otherwise, except as may be required by applicable law.

Contact:      Julie Kegley – Financial ProfilesInvestor RelationsIRPPC@pilgrims.comwww.pilgrims.com
     
PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
         
    (Unaudited)    
    June 27, 2021   December 27, 2020
    (In thousands)
Cash and cash equivalents   $ 391,805     $ 547,624  
Restricted cash and cash equivalents   98,212     782  
Trade accounts and other receivables, less allowance for doubtful accounts   866,476     741,992  
Accounts receivable from related parties   868     1,084  
Inventories   1,530,014     1,358,793  
Income taxes receivable   51,351     69,397  
Prepaid expenses and other current assets   190,574     183,039  
Total current assets   3,129,300     2,902,711  
Deferred tax assets   5,494     5,471  
Other long-lived assets   26,837     24,780  
Operating lease assets, net   295,391     288,886  
Identified intangible assets, net   589,536     589,913  
Goodwill   1,024,900     1,005,245  
Property, plant and equipment, net   2,677,387     2,657,491  
Total assets   $ 7,748,845     $ 7,474,497  
         
Accounts payable   $ 1,092,164     $ 1,028,710  
Accounts payable to related parties   8,595     9,650  
Revenue contract liabilities   36,275     65,918  
Accrued expenses and other current liabilities   1,051,546     807,847  
Income taxes payable   30,681      
Current maturities of long-term debt   25,453     25,455  
Total current liabilities   2,244,714     1,937,580  
Noncurrent operating lease liability, less current maturities   221,345     217,432  
Long-term debt, less current maturities   2,270,298     2,255,546  
Deferred tax liabilities   318,159     339,831  
Other long-term liabilities   99,817     148,761  
Total liabilities   5,154,333     4,899,150  
Common stock   2,614     2,612  
Treasury stock   (345,134 )   (345,134 )
Additional paid-in capital   1,959,558     1,954,334  
Retained earnings   906,090     972,569  
Accumulated other comprehensive income (loss)   59,354     (20,620 )
Total Pilgrim’s Pride Corporation stockholders’ equity   2,582,482     2,563,761  
Noncontrolling interest   12,030     11,586  
Total stockholders’ equity   2,594,512     2,575,347  
Total liabilities and stockholders’ equity   $ 7,748,845     $ 7,474,497  
                 
PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
                 
    Three Months Ended   Six Months Ended
    June 27, 2021   June 28, 2020   June 27, 2021   June 28, 2020
    (In thousands, except per share data)
Net sales   $ 3,637,698     $ 2,824,023     $ 6,911,123     $ 5,898,951  
Cost of sales   3,257,457     2,704,164     6,269,639     5,601,993  
Gross profit   380,241     119,859     641,484     296,958  
Selling, general and administrative expense   503,372     92,570     606,151     185,283  
Operating income   (123,131 )   27,289     35,333     111,675  
Interest expense, net of capitalized interest   50,651     32,323     80,985     65,011  
Interest income   (842 )   (1,158 )   (3,208 )   (2,848 )
Foreign currency transaction loss (gain)   4,145     5,525     6,659     (12,860 )
Miscellaneous, net   (770 )   (45 )   (8,614 )   (34,233 )
Income before income taxes   (176,315 )   (9,356 )   (40,489 )   96,605  
Income tax expense   (9,812 )   (2,956 )   25,546     35,556  
Net income   (166,503 )   (6,400 )   (66,035 )   61,049  
Less: Net income attributable to noncontrolling interests   184     (364 )   444     (183 )
Net income attributable to Pilgrim’s Pride Corporation   $ (166,687 )   $ (6,036 )   $ (66,479 )   $ 61,232  
                 
Weighted average shares of Pilgrim's Pride Corporation common stock outstanding:                
Basic   243,675     246,687     243,627     248,017  
Effect of dilutive common stock equivalents               291  
Diluted   243,675     246,687     243,627     248,308  
                 
Net income attributable to Pilgrim's Pride Corporation per share of common stock outstanding:                
Basic   $ (0.68 )   $ (0.02 )   $ (0.27 )   $ 0.25  
Diluted   $ (0.68 )   $ (0.02 )   $ (0.27 )   $ 0.25  
                                 
PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
    Six Months Ended
    June 27, 2021   June 28, 2020
    (In thousands)
Cash flows from operating activities:        
Net income   $ (66,035 )   $ 61,049  
Adjustments to reconcile net income to cash provided by operating activities:        
Depreciation and amortization   182,260     164,376  
Loss on early extinguishment of debt recognized as a component of interest expense   24,254      
Deferred income tax expense   (32,809 )   25,255  
Stock-based compensation   5,168     3,467  
Gain on property disposals   (5,057 )   (1,587 )
Loan cost amortization   2,279     2,422  
Accretion of discount related to Senior Notes   675     491  
Amortization of premium related to Senior Notes   (167 )   (334 )
Loss (gain) on equity-method investments   (8 )   304  
Negative adjustment to previously recognized gain on bargain purchase       1,740  
Changes in operating assets and liabilities:        
Trade accounts and other receivables   (117,610 )   29,920  
Inventories   (173,947 )   16,350  
Prepaid expenses and other current assets   (6,027 )   (22,072 )
Accounts payable, accrued expenses and other current liabilities   266,487     (122,191 )
Income taxes   46,638     (27,350 )
Long-term pension and other postretirement obligations   (9,507 )   (1,908 )
Other operating assets and liabilities   (1,642 )   10,794  
Cash provided by operating activities   114,952     140,726  
Cash flows from investing activities:        
Acquisitions of property, plant and equipment   (183,744 )   (148,175 )
Proceeds from property disposals   21,385     9,894  
Purchase of acquired business, net of cash acquired       (4,216 )
Cash used in investing activities   (162,359 )   (142,497 )
Cash flows from financing activities:        
Proceeds from revolving line of credit and long-term borrowings   1,540,133     356,547  
Payments on revolving line of credit, long-term borrowings and finance lease obligations   (1,522,416 )   (20,105 )
Payment on early extinguishment of debt   (21,258 )    
Payment of capitalized loan costs   (8,650 )    
Payment of equity distribution under Tax Sharing Agreement between JBS USA Food Company Holdings and Pilgrim’s Pride Corporation   (650 )    
Purchase of common stock under share repurchase program       (77,879 )
Cash provided by financing activities   (12,841 )   258,563  
Effect of exchange rate changes on cash and cash equivalents   1,859     (2,896 )
Increase in cash, cash equivalents and restricted cash   (58,389 )   253,896  
Cash, cash equivalents and restricted cash, beginning of period   548,406     280,577  
Cash, cash equivalents and restricted cash, end of period   $ 490,017     $ 534,473  
                 

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 loss (gain), (2) transaction costs from business acquisitions, (3) DOJ agreement & litigation settlements, (4) negative adjustment to previously recognized gain on bargain purchase, (5) shareholder litigation settlement, (6) deconsolidation of a subsidiary and (7) net income attributable to noncontrolling interest. EBITDA is presented because it is used by management and we believe it is frequently used by securities analysts, investors and other interested parties, in addition to and not in lieu of results prepared in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”), to compare the performance of companies. We believe investors would be interested in our Adjusted EBITDA because this is how our management analyzes EBITDA applicable to continuing operations. The Company also believes that Adjusted EBITDA, in combination with the Company’s financial results calculated in accordance with U.S. GAAP, provides investors with additional perspective regarding the impact of certain significant items on EBITDA and facilitates a more direct comparison of its performance with its competitors. EBITDA and Adjusted EBITDA are not measurements of financial performance under U.S. GAAP. EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as substitutes for an analysis of our results as reported under U.S. GAAP. In addition, other companies in our industry may calculate these measures differently limiting their usefulness as a comparative measure. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as an alternative to net income as indicators of our operating performance or any other measures of performance derived in accordance with U.S. GAAP. These limitations should be compensated for by relying primarily on our U.S. GAAP results and using EBITDA and Adjusted EBITDA only on a supplemental basis.

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted EBITDA
(Unaudited)
               
  Three Months Ended   Six Months Ended
  June 27, 2021   June 28, 2020   June 27, 2021   June 28, 2020
  (In thousands)
Net income $ (166,503 )   $ (6,400 )   $ (66,035 )   $ 61,049  
Add:              
Interest expense, net(a) 49,809     31,165     77,777     62,163  
Income tax expense (9,812 )   (2,956 )   25,546     35,556  
Depreciation and amortization 95,728     84,603     182,260     164,376  
EBITDA (30,778 )   106,412     219,548     323,144  
Add:              
Foreign currency transaction loss (gain)(b) 4,145     5,525     6,659     (12,860 )
Transaction costs related to acquisitions(c) 2,545     (81 )   2,545     134  
DOJ agreement & litigation settlements(d) 395,886         398,285      
Minus:              
Negative adjustment to previously recognized gain on bargain purchase(e)             (1,740 )
Shareholder litigation settlement(f)             34,643  
Deconsolidation of subsidiary(g)         1,131      
Net income attributable to noncontrolling interest 184     (364 )   444     (183 )
Adjusted EBITDA $ 371,614     $ 112,220     $ 625,462     $ 277,698  
                               

(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 loss (gain) 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 have entered into a plea agreement (the “Plea Agreement”) with the DOJ. As a result of the Plea Agreement, we recognized a fine of $110,524,140. On February 23, 2021, the Colorado Court approved the Plea Agreement and assessed a fine of $107.9 million. The difference from prior accrual to updated amount was recognized during the three months ended March 28, 2021. This difference recognized in the three and six months ended June 28, 2021 was offset by amounts recognized in anticipation of probable settlements in ongoing litigation.(e) The gain on bargain purchase was recognized as a result of the PPL acquisition in October 2019. The amount shown above represents a working capital adjustment to the previously recorded gain on bargain purchase.(f) Shareholder litigation settlement is income received as a result of a settlement in the first quarter of 2020. (g) 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 27, 2021 (the LTM Period) have been calculated by subtracting the applicable unaudited consolidated income statement data for the six months ended June 28, 2020 from the sum of (1) the applicable audited consolidated income statement data for the year ended December 27, 2020 and (2) the applicable unaudited consolidated income statement data for the six months ended June 27, 2021.

PILGRIM'S PRIDE CORPORATION
Reconciliation of LTM Adjusted EBITDA
(Unaudited)
                     
    Three Months Ended   LTM Ended
    September 27,2020   December 27,2020   March 28,2021   June 27,2021   June 27,2021
    (In thousands)
Net income   $ 33,691     $ 330     $ 100,468     $ (166,503 )   $ (32,014 )
Add:                    
Interest expense, net   28,801     27,849     27,968     49,809     134,427  
Income tax expense   22,344     8,855     35,358     (9,812 )   56,745  
Depreciation and amortization   84,265     88,463     86,532     95,728     354,988  
EBITDA   169,101     125,497     250,326     (30,778 )   514,146  
Add:                    
Foreign currency transaction losses   9,092     4,528     2,514     4,145     20,279  
Transaction costs related to acquisitions               2,545     2,545  
DOJ agreement & litigation settlements   110,524     75,000     2,399     395,886     583,809  
Restructuring charges       123             123  
Hometown Strong commitment   14,506     494             15,000  
Minus:                    
Negative adjustment to previously recognized gain on bargain purchase   (2,006 )               (2,006 )
Deconsolidation of subsidiary           1,131         1,131  
Net income (loss) attributable to noncontrolling interest   245     251     260     184     940  
Adjusted EBITDA   $ 304,984     $ 205,391     $ 253,848     $ 371,614     $ 1,135,837  
                                         

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 27, 2021   June 28, 2020   June 27, 2021   June 28, 2020   June 27, 2021   June 28, 2020   June 27, 2021   June 28, 2020
    (In thousands)
Net income   $ (166,503 )   $ (6,400 )   $ (66,035 )   $ 61,049     (4.58 )%   (0.23 )%   (0.96 )%   1.03 %
Add:                                
Interest expense, net   49,809     31,165     77,777     62,163     1.37 %   1.10 %   1.13 %   1.05 %
Income tax expense   (9,812 )   (2,956 )   25,546     35,556     (0.27 )%   (0.10 )%   0.37 %   0.60 %
Depreciation and amortization   95,728     84,603     182,260     164,376     2.63 %   2.99 %   2.63 %   2.78 %
EBITDA   (30,778 )   106,412     219,548     323,144     (0.85 )%   3.76 %   3.17 %   5.46 %
Add:                                
Foreign currency transaction losses (gains)   4,145     5,525     6,659     (12,860 )   0.11 %   0.19 %   0.09 %   (0.21 )%
Transaction costs related to business acquisitions   2,545     (81 )   2,545     134     0.07 %   %   0.04 %   %
DOJ agreement & litigation settlements   395,886         398,285         10.88 %   %   5.76 %   %
Minus:                                
Negative adjustment to previously recognized gain on bargain purchase               (1,740 )   %   %   %   (0.03 )%
Shareholder litigation settlement               34,643     %   %   %   0.59 %
Deconsolidation of subsidiary           1,131         %   %   0.02 %   %
Net income attributable to noncontrolling interest   184     (364 )   444     (183 )   0.01 %   (0.01 )%   0.01 %   %
Adjusted EBITDA   $ 371,614     $ 112,220     $ 625,462     $ 277,698     10.20 %   3.96 %   9.03 %   4.69 %
                                 
Net sales   $ 3,637,698     $ 2,824,023     $ 6,911,123     $ 5,898,951     $ 3,637,698     $ 2,824,023     $ 6,911,123     $ 5,898,951  
                                                                 

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 27, 2021   June 28, 2020   June 27, 2021   June 28, 2020
  (In thousands)
GAAP operating income (U.S. operations) $ (224,171 )   $ 39,448     $ (156,046 )   $ 124,500  
Transaction costs related to acquisitions 2,545     (81 )   2,545     134  
DOJ agreement & litigation settlements 395,886         398,285      
Adjusted operating income (U.S. operations) $ 174,260     $ 39,367     $ 244,784     $ 124,634  
               
Adjusted operating income margin (U.S. operations) 7.8 %   2.2 %   5.8 %   3.3 %
                       

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 27, 2021   June 28, 2020   June 27, 2021   June 28, 2020
  (In percent)
GAAP operating income margin (U.S. operations) (10.0 )%   2.2 %   (3.7 )%   3.3 %
Transaction costs related to acquisitions 0.1 %   %   0.1 %   %
DOJ agreement & litigation settlements 17.7 %   %   9.4 %   %
Adjusted operating income margin (U.S. operations) 7.8 %   2.2 %   5.8 %   3.3 %
                       

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

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted Net Income
(Unaudited)
               
  Three Months Ended   Six Months Ended
  June 27, 2021   June 28, 2020   June 27, 2021   June 28, 2020
  (In thousands, except per share data)
Net income attributable to Pilgrim's $ (166,687 )   $ (6,036 )   $ (66,479 )   $ 61,232  
Add:              
Foreign currency transaction losses (gains) 4,145     5,525     6,659     (12,860 )
Transaction costs related to acquisitions 2,545     (81 )   2,545     134  
DOJ agreement & litigation settlements 395,886         398,285      
Loss on early extinguishment of debt recognized as a component of interest expense 24,254         24,254      
Minus:              
Deconsolidation of subsidiary         1,131      
Adjusted net income attributable to Pilgrim's before tax impact of adjustments 260,143     (592 )   364,133     48,506  
Net tax impact of adjustments(a) (106,323 )   (1,356 )   (107,265 )   3,170  
Adjusted net income attributable to Pilgrim's $ 153,820     $ (1,948 )   $ 256,868     $ 51,676  
Weighted average diluted shares of common stock outstanding 243,675     246,687     243,627     248,308  
Adjusted net income attributable to Pilgrim's per common diluted share $ 0.63     $ (0.01 )   $ 1.05     $ 0.21  
                               

(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 27, 2021   June 28, 2020   June 27, 2021   June 28, 2020
  (In thousands, except per share data)
GAAP EPS $ (0.68 )   $ (0.02 )   $ (0.27 )   $ 0.25  
Add:              
Foreign currency transaction losses (gains) 0.02     0.02     0.03     (0.05 )
Transaction costs related to acquisitions 0.01         0.01      
DOJ agreement & litigation settlements 1.62         1.63      
Loss on early extinguishment of debt recognized as a component of interest expense 0.10         0.10      
Minus:              
Deconsolidation of subsidiary              
Adjusted EPS before tax impact of adjustments 1.07         1.50     0.20  
Net tax impact of adjustments(a) (0.44 )   (0.01 )   (0.45 )   0.01  
Adjusted EPS $ 0.63     $ (0.01 )   $ 1.05     $ 0.21  
               
Weighted average diluted shares of common stock outstanding 243,675     246,687     243,627     248,308  
                       

(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 27, 2021   June 28, 2020   June 27, 2021   June 28, 2020
    (In thousands)
Sources of net sales by geographic region of origin:                
U.S.   $ 2,248,470     $ 1,798,689     $ 4,248,029     $ 3,725,569  
U.K. and Europe   935,845     757,201     1,790,579     1,579,463  
Mexico   453,383     268,133     872,515     593,919  
Total net sales   $ 3,637,698     $ 2,824,023     $ 6,911,123     $ 5,898,951  
                 
Sources of cost of sales by geographic region of origin:                
U.S.   $ 2,008,122     $ 1,710,668     $ 3,874,822     $ 3,499,445  
U.K. and Europe   885,800     700,553     1,702,726     1,470,687  
Mexico   363,549     293,143     692,119     632,085  
Elimination   (14 )   (200 )   (28 )   (224 )
Total cost of sales   $ 3,257,457     $ 2,704,164     $ 6,269,639     $ 5,601,993  
                 
Sources of gross profit by geographic region of origin:                
U.S.   $ 240,348     $ 88,021     $ 373,207     $ 226,124  
U.K. and Europe   50,045     56,648     87,853     108,776  
Mexico   89,834     (25,010 )   180,396     (38,166 )
Elimination   14     200     28     224  
Total gross profit   $ 380,241     $ 119,859     $ 641,484     $ 296,958  
                 
Sources of operating income by geographic region of origin:                
U.S.   $ (224,171 )   $ 39,448     $ (156,046 )   $ 124,500  
U.K. and Europe   21,831     23,185     32,326     46,375  
Mexico   79,195     (35,544 )   159,025     (59,424 )
Elimination   14     200     28     224  
Total operating income   $ (123,131 )   $ 27,289     $ 35,333     $ 111,675  
                                 
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