PPC Pilgrims Pride Corporation

Pilgrim’s Pride Corporation (NASDAQ: PPC), one of the world's largest poultry producers, reports its second quarter 2023 financial results.

Second Quarter Highlights

• Net Sales of $4.3 billion.
• GAAP Net Income of $60.9 million and GAAP EPS of $0.25. Adjusted Net Income of $105.3 million and Adjusted EPS of $0.44.
• Consolidated GAAP operating income margin of 2.3%.
• Adjusted EBITDA of $248.7 million, or a 5.8% margin, with adjusted EBITDA margins of 4.6% in the U.S., 5.2% in the U.K. & Europe, and 12.2% in Mexico.
• All regions improved financial performance relative to prior quarter given operational excellence efforts, our portfolio diversification, higher attribute programs and branded offerings, in partnership with our Key Customers.
• The diversification across bird sizes and our operational excellence efforts enabled margin growth in our U.S. Fresh business relative to prior quarter, despite continuing challenging market conditions in the commodity Big Bird business.
• Our U.S. Prepared Foods business momentum continued in branded fully cooked products as Just Bare® and Pilgrim’s® collectively grew over 56% year over year, with E-commerce remaining a driving force in their growth as sales increased 125% year over year.
• Our U.K. and Europe business continue its margin growth trajectory, given benefits from our ongoing manufacturing network optimization program, growth with Key Customers, and synergies from back office integration.
• Mexico improved as supply and demand fundamentals became increasingly balanced and challenges from live operations are reduced, while we continue to grow our value-added programs and brands.
• Our organic growth programs to support our Key Customers and our strategy of portfolio diversification remain on track.   Both our expansion project at our Athens, Georgia facility and our new protein conversion plant in South Georgia remain on track to be fully operational by the beginning of 2024.
• Our leadership journey in Sustainability continued as we completed an inventory of our GHG emissions footprint for our global supply chain and implemented a variety of programs and systems to reduce our energy usage which will be highlighted in our 2022 Sustainability Report to be published in the third quarter.

(Unaudited)		Three Months Ended										Six Months Ended
		June 25,2023				June 26,2022				Y/Y Change		June 25,2023				June 26,2022				Y/Y Change
		(In millions, except per share and percentages)
Net sales		$	4,308.1			$	4,631.6			(7.0)%		$	8,473.7			$	8,872.0			(4.5)%
U.S. GAAP EPS		$	0.25			$	1.50			(83.3)%		$	0.28			$	2.65			(89.4)%
Operating income		$	100.3			$	512.9			(80.4)%		$	131.6			$	914.9			(85.6)%
Adjusted EBITDA(1)		$	248.7			$	623.3			(60.1)%		$	400.7			$	1,125.0			(64.4)%
Adjusted EBITDA margin(1)			5.8	%			13.5	%		-7.7pts			4.7	%			12.7	%		-8.0pts
(1)   Reconciliations for non-U.S. GAAP measures are provided in subsequent sections within this release.

“Throughout the past 12 months, our consistent execution and focus on portfolio diversification, growth with Key Customers, and operational excellence has been instrumental in our ability to navigate extremely volatile market conditions.   Our business profitability increased quarter over quarter yet again despite challenges in overall protein availability and lingering inflation,” said Fabio Sandri, Chief Executive Officer.

In the U.S., margins significantly improved from the first quarter despite continuing challenges in the market conditions of the commodity Big Bird segment, given an intense focus on our operational excellence efforts.   Case Ready and Small Bird maintained steady performance while cultivating promotional activity and growth with Key Customers. Prepared Foods continues its branded momentum as Just Bare® and Pilgrim’s® sales collectively grew over 56% from last year.

“Q2 was still challenging for the commodity segment. Although market conditions have recently improved, the team is in the process of executing a variety of action items to further drive operational excellence.   We maintain our commitment to profitable growth through our continued investment in automation, expansion at our Athens, Georgia facility, and construction of a new protein conversion plant in South Georgia,” remarked Fabio Sandri.

As for the U.K. and Europe business, momentum continued as profitability grew for the fifth straight quarter given benefits from recent network optimization, continued cost recovery efforts, and growth with Key Customers through innovation and strong service levels.

“Throughout the past year, the team has been exceptionally diligent in driving cost efficiencies throughout our manufacturing network, recovery of inflationary impacts, and synergies from back office integration.   We are pleased with the remarkable progress over the past year, we will continue to explore opportunities to profitably grow our business,” said Fabio Sandri.

Mexico results improved relative to both first quarter and prior year as supply and demand fundamentals became progressively balanced, overall live performance improved, and interest in our branded offerings increased.  

“Throughout the past several quarters, Mexico maintained strong service levels to Key Customers and grew its branded presence despite challenges in live operations.   We commend the team for their rapid response and operational excellence efforts to alleviate these issues.   Our continued investments in this region will further lessen future potential concerns and provide the foundation for additional profitable growth,” remarked Fabio Sandri.

Pilgrim’s continues to make progress in Sustainability as it recently completed an inventory of its GHG emissions footprint.   These efforts have been further amplified by energy audits, installation of metering systems, and training at its US locations.     

“The completion of our GHG inventory strengthens the foundation to reduce our emissions footprint throughout our supply chain. Equally important, we have implemented a variety of tools and management processes to evaluate our progress and identify additional opportunities in our production facilities,” said Fabio Sandri.  

Conference Call Information

A conference call to discuss Pilgrim’s quarterly results will be held tomorrow, July 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/ppc230727.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 approximately 62,000 people and operates protein processing plants and prepared-foods facilities in 14 states, Puerto Rico, Mexico, the U.K, the Republic of Ireland and continental Europe. The Company’s primary distribution is through retailers and foodservice distributors. For more information, please visit www.pilgrims.com.

Forward-Looking Statements

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

Contact:	Andrew Rojeski
	Head of Strategy, Investor Relations, & Net Zero Programs
	IRPPC@pilgrims.com
	www.pilgrims.com

PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
		(Unaudited)
		June 25, 2023				December 25, 2022
		(In thousands)
Cash and cash equivalents		$	730,980			$	400,988
Restricted cash and restricted cash equivalents			46,030				33,771
Trade accounts and other receivables, less allowance for credit losses			1,163,425				1,097,212
Accounts receivable from related parties			1,697				2,512
Inventories			2,047,817				1,990,184
Income taxes receivable			133,747				155,859
Prepaid expenses and other current assets			241,138				211,092
Total current assets			4,364,834				3,891,618
Deferred tax assets			17,949				1,969
Other long-lived assets			21,989				41,574
Operating lease assets, net			281,159				305,798
Intangible assets, net			868,095				846,020
Goodwill			1,282,946				1,227,944
Property, plant and equipment, net			3,085,539				2,940,846
Total assets		$	9,922,511			$	9,255,769
Accounts payable		$	1,515,540			$	1,587,939
Accounts payable to related parties			14,718				12,155
Revenue contract liabilities			61,233				34,486
Accrued expenses and other current liabilities			934,396				850,899
Income taxes payable			15,487				58,411
Current maturities of long-term debt			985				26,279
Total current liabilities			2,542,359				2,570,169
Noncurrent operating lease liabilities, less current maturities			213,350				230,701
Long-term debt, less current maturities			3,699,607				3,166,432
Deferred tax liabilities			336,579				364,184
Other long-term liabilities			58,028				71,007
Total liabilities			6,849,923				6,402,493
Common stock			2,619				2,617
Treasury stock			(544,687	)			(544,687	)
Additional paid-in capital			1,973,498				1,969,833
Retained earnings			1,815,142				1,749,499
Accumulated other comprehensive loss			(187,342	)			(336,448	)
Total Pilgrim’s Pride Corporation stockholders’ equity			3,059,230				2,840,814
Noncontrolling interest			13,358				12,462
Total stockholders’ equity			3,072,588				2,853,276
Total liabilities and stockholders’ equity		$	9,922,511			$	9,255,769

PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
		Three Months Ended								Six Months Ended
		June 25, 2023				June 26, 2022				June 25, 2023				June 26, 2022
		(In thousands, except per share data)
Net sales		$	4,308,091			$	4,631,648			$	8,473,719			$	8,872,043
Cost of sales			4,029,666				3,954,877				8,022,247				7,653,292
Gross profit			278,425				676,771				451,472				1,218,751
Selling, general and administrative expense			148,436				163,867				282,114				303,834
Restructuring activities			29,718				—				37,744				—
Operating income			100,271				512,904				131,614				914,917
Interest expense, net of capitalized interest			47,152				38,112				89,814				74,408
Interest income			(7,628	)			(1,010	)			(11,228	)			(2,284	)
Foreign currency transaction losses			16,395				2,758				34,538				14,294
Miscellaneous, net			(1,331	)			(1,688	)			(23,984	)			(2,012	)
Income before income taxes			45,683				474,732				42,474				830,511
Income tax expense (benefit)			(15,225	)			112,711				(24,065	)			187,930
Net income			60,908				362,021				66,539				642,581
Less: Net income (loss) attributable to noncontrolling interests			452				(95	)			896				27
Net income attributable to Pilgrim’s Pride Corporation		$	60,456			$	362,116			$	65,643			$	642,554
Weighted average shares of Pilgrim's Pride Corporation common stock outstanding:
Basic			236,733				240,366				236,659				242,018
Effect of dilutive common stock equivalents			476				607				527				619
Diluted			237,209				240,973				237,186				242,637
Net income attributable to Pilgrim's Pride Corporation per share of common stock outstanding:
Basic		$	0.26			$	1.51			$	0.28			$	2.65
Diluted		$	0.25			$	1.50			$	0.28			$	2.65

PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
		Six Months Ended
		June 25, 2023				June 26, 2022
		(In thousands)
Cash flows from operating activities:
Net income		$	66,539			$	642,581
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization			203,114				201,996
Deferred income tax benefit			(56,151	)			(35,538	)
Loss (gain) on property disposals			(9,316	)			2,718
Loan cost amortization			4,733				2,827
Asset impairment			4,011				—
Stock-based compensation			3,300				4,346
Accretion of discount related to Senior Notes			980				859
Loss on equity-method investments			328				4
Changes in operating assets and liabilities:
Trade accounts and other receivables			(54,971	)			(216,523	)
Inventories			(45,242	)			(309,360	)
Prepaid expenses and other current assets			(27,754	)			13,173
Accounts payable, accrued expenses and other current liabilities			5,139				96,083
Income taxes			9,933				21,959
Long-term pension and other postretirement obligations			944				(1,717	)
Other operating assets and liabilities			(16,246	)			(2,189	)
Cash provided by operating activities			89,341				421,219
Cash flows from investing activities:
Acquisitions of property, plant and equipment			(286,630	)			(196,205	)
Proceeds from insurance recoveries			20,681				—
Proceeds from property disposals			15,008				2,362
Purchase of acquired business, net of cash acquired			—				(4,847	)
Cash used in investing activities			(250,941	)			(198,690	)
Cash flows from financing activities:
Proceeds from revolving line of credit and long-term borrowings			1,078,032				351,065
Payments on revolving line of credit, long-term borrowings and finance lease obligations			(565,658	)			(170,022	)
Payments of capitalized loan costs			(10,353	)			(3,052	)
Payment of equity distribution under Tax Sharing Agreement between JBS USA Holdings and Pilgrim’s Pride Corporation			(1,592	)			(1,961	)
Purchase of common stock under share repurchase program			—				(119,989	)
Cash provided by financing activities			500,429				56,041
Effect of exchange rate changes on cash and cash equivalents			3,422				(6,067	)
Increase in cash, cash equivalents and restricted cash			342,251				272,503
Cash, cash equivalents and restricted cash, beginning of period			434,759				450,121
Cash, cash equivalents and restricted cash, end of period		$	777,010			$	722,624

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) costs related to litigation settlements, (3) restructuring activities losses, (4) transaction costs related to acquisitions, (5) property insurance recoveries for Mayfield, Kentucky tornado property damage losses, 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								Six Months Ended
	June 25, 2023				June 26, 2022				June 25, 2023				June 26, 2022
	(In thousands)
Net income	$	60,908			$	362,021			$	66,539			$	642,581
Add:
Interest expense, net(a)		39,524				37,102				78,586				72,124
Income tax expense (benefit)		(15,225	)			112,711				(24,065	)			187,930
Depreciation and amortization		104,857				99,854				203,114				201,996
EBITDA		190,064				611,688				324,174				1,104,631
Add:
Foreign currency transaction losses(b)		16,395				2,758				34,538				14,294
Litigation settlements(c)		13,000				8,482				24,200				8,982
Restructuring activities losses(d)		29,718				—				37,744				—
Transaction costs related to acquisitions(e)		—				255				—				972
Minus:
Property insurance recoveries for Mayfield tornado losses(f)		—				—				19,086				3,815
Net income (loss) attributable to noncontrolling interest		452				(95	)			896				27
Adjusted EBITDA	$	248,725			$	623,278			$	400,674			$	1,125,037

(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)	This represents expenses recognized in anticipation of probable settlements in ongoing litigation.
(d)	Restructuring activities losses are primarily related to restructuring initiatives at multiple production facilities throughout our U.K. and Europe reportable segment.
(e)	Transaction costs related to acquisitions includes those charges that are incurred in conjunction with business acquisitions.
(f)	This represents property insurance recoveries for the property damage losses incurred as a result of the tornado in Mayfield, KY in December 2021.

The summary unaudited consolidated income statement data for the twelve months ended June 25, 2023 (the LTM Period) have been calculated by subtracting the applicable unaudited consolidated income statement data for the six months ended June 26, 2022 from the sum of (1) the applicable audited consolidated income statement data for the year ended December 25, 2022 and (2) the applicable unaudited consolidated income statement data for the six months ended June 25, 2023.

PILGRIM'S PRIDE CORPORATION
Reconciliation of LTM Adjusted EBITDA
(Unaudited)
		Three Months Ended															LTM Ended
		September 25,2022			December 25,2022				March 26,2023				June 25,2023				June 25,2023
		(In thousands)
Net income (loss)		$	258,999		$	(155,042	)		$	5,631			$	60,908			$	170,496
Add:
Interest expense, net			34,222			37,298				39,062				39,524				150,106
Income tax expense (benefit)			65,749			25,256				(8,840	)			(15,225	)			66,940
Depreciation and amortization			98,966			102,148				98,257				104,857				404,228
EBITDA			457,936			9,660				134,110				190,064				791,770
Add:
Foreign currency transaction losses			54			16,469				18,143				16,395				51,061
Litigation settlements			19,300			5,804				11,200				13,000				49,304
Restructuring activities losses			—			30,466				8,026				29,718				68,210
Transaction costs related to acquisitions			—			(24	)			—				—				(24	)
Minus:
Property insurance recoveries for Mayfield tornado losses			16,182			(417	)			19,086				—				34,851
Net income (loss) attributable to noncontrolling interest			647			(66	)			444				452				1,477
Adjusted EBITDA		$	460,461		$	62,858			$	151,949			$	248,725			$	923,993

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 25, 2023				June 26, 2022				June 25, 2023				June 26, 2022			June 25, 2023				June 26, 2022				June 25, 2023				June 26, 2022
		(In thousands)
Net income		$	60,908			$	362,021			$	66,539			$	642,581			1.41	%			7.82	%			0.79	%			7.24	%
Add:
Interest expense, net			39,524				37,102				78,586				72,124			0.92	%			0.80	%			0.93	%			0.81	%
Income tax expense (benefit)			(15,225	)			112,711				(24,065	)			187,930		(0.35)        %					2.43	%		(0.28)        %					2.12	%
Depreciation and amortization			104,857				99,854				203,114				201,996			2.43	%			2.15	%			2.39	%			2.27	%
EBITDA			190,064				611,688				324,174				1,104,631			4.41	%			13.20	%			3.83	%			12.44	%
Add:
Foreign currency transaction losses			16,395				2,758				34,538				14,294			0.38	%			0.05	%			0.40	%			0.16	%
Litigation settlements			13,000				8,482				24,200				8,982			0.30	%			0.18	%			0.29	%			0.10	%
Restructuring activities losses			29,718				—				37,744				—			0.69	%			—	%			0.45	%			—	%
Transaction costs related to business acquisitions			—				255				—				972			—	%			0.01	%			—	%			0.01	%
Minus:
Property insurance recoveries for Mayfield tornado losses			—				—				19,086				3,815			—	%			—	%			0.23	%			0.04	%
Net income attributable to noncontrolling interest			452				(95	)			896				27			0.01	%			—	%			0.01	%			—	%
Adjusted EBITDA		$	248,725			$	623,278			$	400,674			$	1,125,037			5.77	%			13.44	%			4.73	%			12.67	%
Net sales		$	4,308,091			$	4,631,648			$	8,473,719			$	8,872,043		$	4,308,091			$	4,631,648			$	8,473,719			$	8,872,043

Adjusted EBITDA by segment figures s are presented because they are used by management and we believe they are frequently used by securities analysts, investors and other interested parties, as a supplement to our results prepared in accordance with U.S. GAAP, to compare the performance of companies.

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted EBITDA
(Unaudited)
	Three Months Ended																Three Months Ended
	June 25, 2023																June 26, 2022
	U.S.				U.K. & Europe				Mexico				Total				U.S.			U.K. & Europe				Mexico				Total
	(In thousands)																(In thousands)
Net income (loss)	$	(21,335	)		$	11,929			$	70,314			$	60,908			$	308,386		$	12,111			$	41,524			$	362,021
Add:
Interest expense, net(a)		43,538				(623	)			(3,391	)			39,524				35,944			454				704				37,102
Income tax expense (benefit)		(14,026	)			(6,730	)			5,531				(15,225	)			102,557			(2,085	)			12,239				112,711
Depreciation and amortization		63,759				35,279				5,819				104,857				59,987			33,710				6,157				99,854
EBITDA		71,936				39,855				78,273				190,064				506,874			44,190				60,624				611,688
Add:
Foreign currency transaction losses (gains)(b)		28,546				(1,482	)			(10,669	)			16,395				5,272			(1,637	)			(877	)			2,758
Litigation settlements(c)		13,000				—				—				13,000				8,482			—				—				8,482
Restructuring activities losses(d)		—				29,718				—				29,718				—			—				—				—
Transaction costs related to acquisitions(e)		—				—				—				—				255			—				—				255
Minus:
Property insurance recoveries for Mayfield tornado losses(f)		—				—				—				—				—			—				—				—
Net income (loss) attributable to noncontrolling interest		—				—				452				452				—			—				(95	)			(95	)
Adjusted EBITDA	$	113,482			$	68,091			$	67,152			$	248,725			$	520,883		$	42,553			$	59,842			$	623,278

(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)	This represents expenses recognized in anticipation of probable settlements in ongoing litigation.
(d)	Restructuring activities losses are primarily related to restructuring initiatives at multiple production facilities throughout our U.K. and Europe reportable segment.
(e)	Transaction costs related to acquisitions includes those charges that are incurred in conjunction with business acquisitions.
(f)	This represents property insurance recoveries for the property damage losses incurred as a result of the tornado in Mayfield, KY in December 2021.

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted EBITDA
(Unaudited)
	Six Months Ended																Six Months Ended
	June 25, 2023																June 26, 2022
	U.S.				U.K. & Europe				Mexico				Total				U.S.			U.K. & Europe				Mexico				Total
	(In thousands)																(In thousands)
Net income (loss)	$	(74,925	)		$	32,742			$	108,722			$	66,539			$	542,853		$	262			$	99,466			$	642,581
Add:
Interest expense, net(a)		84,903				(821	)			(5,496	)			78,586				71,310			1,036				(222	)			72,124
Income tax expense (benefit)		(30,848	)			(807	)			7,590				(24,065	)			173,415			(11,716	)			26,231				187,930
Depreciation and amortization		123,996				67,556				11,562				203,114				120,379			69,265				12,352				201,996
EBITDA		103,126				98,670				122,378				324,174				907,957			58,847				137,827				1,104,631
Add:
Foreign currency transaction losses (gains)(b)		48,859				(2,098	)			(12,223	)			34,538				18,573			(1,641	)			(2,638	)			14,294
Litigation settlements(c)		24,200				—				—				24,200				8,982			—				—				8,982
Restructuring activities losses(d)		—				37,744				—				37,744				—			—				—				—
Transaction costs related to acquisitions(e)		—				—				—				—				847			125				—				972
Minus:
Property insurance recoveries for Mayfield tornado losses(f)		19,086				—				—				19,086				3,815			—				—				3,815
Net income attributable to noncontrolling interest		—				—				896				896				—			—				27				27
Adjusted EBITDA	$	157,099			$	134,316			$	109,259			$	400,674			$	932,544		$	57,331			$	135,162			$	1,125,037

(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)	This represents expenses recognized in anticipation of probable settlements in ongoing litigation.
(d)	Restructuring activities losses are primarily related to restructuring initiatives at multiple production facilities throughout our U.K. and Europe reportable segment.
(e)	Transaction costs related to acquisitions includes those charges that are incurred in conjunction with business acquisitions.
(f)	This represents property insurance recoveries for the property damage losses incurred as a result of the tornado in Mayfield, KY in December 2021.

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 25, 2023				June 26, 2022				June 25, 2023				June 26, 2022
	(In thousands)
GAAP operating income, U.S. operations	$	37,265			$	453,198			$	9,159			$	808,273
Litigation settlements		13,000				8,482				24,200				8,982
Transaction costs related to acquisitions		—				255				—				847
Adjusted operating income, U.S. operations	$	50,265			$	461,935			$	33,359			$	818,102
Adjusted operating income margin, U.S. operations		2.1	%			15.9	%			0.7	%			14.9	%
	Three Months Ended								Six Months Ended
	June 25, 2023				June 26, 2022				June 25, 2023				June 26, 2022
	(In thousands)
GAAP operating income, U.K. and Europe operations	$	2,513			$	7,848			$	27,774			$	(13,792	)
Transaction costs related to acquisitions		—				—				—				125
Restructuring activities losses		29,718				—				37,744				—
Adjusted operating income, U.K. and Europe operations	$	32,231			$	7,848			$	65,518			$	(13,667	)
Adjusted operating income margin, U.K. and Europe operations		2.5	%			0.6	%			2.6	%		(0.6)		%
	Three Months Ended								Six Months Ended
	June 25, 2023				June 26, 2022				June 25, 2023				June 26, 2022
	(In thousands)
GAAP operating income, Mexico operations	$	60,719			$	51,844			$	94,894			$	120,408
No adjustments		—				—				—				—
Adjusted operating income, Mexico operations	$	60,719			$	51,844			$	94,894			$	120,408
Adjusted operating income margin, Mexico operations		11.0	%			10.7	%			9.1	%			12.6	%

Adjusted Operating Income Margin for each of our reportable segments 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 each of our reportable segments to adjusted operating income margin for each of our reportable segments 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 25, 2023			June 26, 2022			June 25, 2023			June 26, 2022
	(In percent)
GAAP operating income margin, U.S. operations	1.5	%		15.6	%		0.2	%		14.7	%
Litigation settlements	0.6	%		0.3	%		0.5	%		0.2	%
Transaction costs related to acquisitions	—	%		—	%		—	%		—	%
Adjusted operating income margin, U.S. operations	2.1	%		15.9	%		0.7	%		14.9	%
	Three Months Ended						Six Months Ended
	June 25, 2023			June 26, 2022			June 25, 2023			June 26, 2022
	(In percent)
GAAP operating income margin, U.K. and Europe operations	0.2	%		0.6	%		1.1	%		(0.6)	%
Litigation settlements	—	%		—	%		—	%		—	%
Restructuring activities losses	2.3	%		—	%		1.5	%		—	%
Adjusted operating income margin, U.K. and Europe operations	2.5	%		0.6	%		2.6	%		(0.6)	%
	Three Months Ended						Six Months Ended
	June 25, 2023			June 26, 2022			June 25, 2023			June 26, 2022
	(In percent)
GAAP operating income margin, Mexico operations	11.0	%		10.7	%		9.1	%		12.6	%
No adjustments	—	%		—	%		—	%		—	%
Adjusted operating income margin, Mexico operations	11.0	%		10.7	%		9.1	%		12.6	%

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

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted Net Income
(Unaudited)
	Three Months Ended								Six Months Ended
	June 25, 2023				June 26, 2022				June 25, 2023				June 26, 2022
	(In thousands, except per share data)
Net income attributable to Pilgrim's	$	60,456			$	362,116			$	65,643			$	642,554
Add:
Foreign currency transaction losses		16,395				2,758				34,538				14,294
Litigation settlements		13,000				8,482				24,200				8,982
Restructuring activities losses		29,718				—				37,744				—
Transaction costs related to acquisitions		—				255				—				972
Minus:
Property insurance recoveries for Mayfield tornado losses		—				—				19,086				3,815
Adjusted net income attributable to Pilgrim's before tax impact of adjustments		119,569				373,611				143,039				662,987
Net tax impact of adjustments(a)		(14,306	)			(2,863	)			(18,729	)			(5,090	)
Adjusted net income attributable to Pilgrim's	$	105,263			$	370,748			$	124,310			$	657,897
Weighted average diluted shares of common stock outstanding		237,209				240,973				237,186				242,637
Adjusted net income attributable to Pilgrim's per common diluted share	$	0.44			$	1.54			$	0.52			$	2.71
(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 25, 2023				June 26, 2022				June 25, 2023				June 26, 2022
	(In thousands, except per share data)
GAAP EPS	$	0.25			$	1.50			$	0.28			$	2.65
Add:
Foreign currency transaction losses		0.07				0.01				0.15				0.06
Litigation settlements		0.05				0.04				0.09				0.04
Restructuring activities losses		0.13				—				0.16				—
Transaction costs related to acquisitions		—				—				—				—
Minus:
Property insurance recoveries for Mayfield tornado losses		—				—				0.08				0.02
Adjusted EPS before tax impact of adjustments		0.50				1.55				0.60				2.73
Net tax impact of adjustments(a)		(0.06	)			(0.01	)			(0.08	)			(0.02	)
Adjusted EPS	$	0.44			$	1.54			$	0.52			$	2.71
Weighted average diluted shares of common stock outstanding		237,209				240,973				237,186				242,637
(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 25, 2023				June 26, 2022				June 25, 2023				June 26, 2022
		(In thousands)
Sources of net sales by geographic region of origin:
U.S.		$	2,446,208			$	2,899,879			$	4,878,776			$	5,481,087
U.K. and Europe			1,310,750				1,245,052				2,550,014				2,437,034
Mexico			551,133				486,717				1,044,929				953,922
Total net sales		$	4,308,091			$	4,631,648			$	8,473,719			$	8,872,043
Sources of cost of sales by geographic region of origin:
U.S.		$	2,332,103			$	2,355,243			$	4,726,342			$	4,514,447
U.K. and Europe			1,223,722				1,176,097				2,378,793				2,329,000
Mexico			473,615				423,551				916,899				809,873
Elimination			226				(14	)			213				(28	)
Total cost of sales		$	4,029,666			$	3,954,877			$	8,022,247			$	7,653,292
Sources of gross profit by geographic region of origin:
U.S.		$	114,105			$	544,636			$	152,434			$	966,640
U.K. and Europe			87,028				68,955				171,221				108,034
Mexico			77,518				63,166				128,030				144,049
Elimination			(226	)			14				(213	)			28
Total gross profit		$	278,425			$	676,771			$	451,472			$	1,218,751
Sources of operating income (loss) by geographic region of origin:
U.S.		$	37,265			$	453,198			$	9,159			$	808,273
U.K. and Europe			2,513				7,848				27,774				(13,792	)
Mexico			60,719				51,844				94,894				120,408
Elimination			(226	)			14				(213	)			28
Total operating income		$	100,271			$	512,904			$	131,614			$	914,917