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Pilgrim’s Pride Reports Fourth Quarter and Year-End 2022 Results
Press Releases

Pilgrim’s Pride Reports Fourth Quarter and Year-End 2022 Results






GREELEY, Colo., Feb. 08, 2023 (GLOBE NEWSWIRE) — Pilgrim’s Pride Corporation (NASDAQ: PPC), one of the world’s largest poultry producers, reports its fourth quarter and year-end 2022 financial results.

2022 Highlights

  • Net Sales of $17.5 billion, up 18.2% from prior year.
  • Consolidated GAAP Operating Income margin of 6.7% with GAAP operating income margins of 10.2% in U.S., 4.5% in Mexico, and break-even in Europe.
  • GAAP Net Income of $745.9 million. Adjusted Net Income of $803.6 million, or adjusted EPS of $3.34.
  • Adjusted EBITDA of $1.6 billion, or an 9.4% margin, 27.9% higher than prior year.
  • Sales and Adjusted EBITDA growth despite historically high market volatility and significant inflationary headwinds throughout the year.
  • Our U.S. business portfolio delivered strong results in the face of extreme volatility in the commodity markets and persistent inflation though its diversified portfolio across bird sizes and branded offerings and operation excellence initiatives to support our key customers.   
  • Our Prepared Foods business continued its momentum in branded fully cooked products as Just Bare® and Pilgrim’s® collectively grew 70% year over year.   E-commerce grew 48% and now accounts for over 23% of branded sales.
  • Our U.K. and Europe business continued efforts to further optimize its manufacturing network and consolidate its back-office operations, enhancing the foundation to drive operational efficiencies and future growth with Key Customers. The team achieved three consecutive quarters of margin improvement.
  • After a strong 1st half, our Mexico business strove to mitigate the impacts of challenges in its live operations and weakened market fundamentals throughout the second half of 2022 through its strong service levels with Key Customers.
  • Pilgrim’s was externally recognized for its progress in Sustainability as all ESG scores improved throughout the year. We have reduced our natural gas usage intensity and electrical usage intensity ahead of our targets.
  • We also continue in our growth and margin enhancing strategy with our investments in Athens, GA to support Key Customer growth, the construction of our new protein conversion plant and further investments in automation.

Fourth Quarter

  • Net Sales of $4.1 billion.
  • GAAP Net Loss of $155.0 million and negative GAAP EPS of $0.66. Adjusted Net Loss of $115.7 million and negative adjusted EPS of $0.49.
  • Consolidated GAAP Operating Loss margin of 1.9%.
  • Adjusted EBITDA of $62.9 million, or a 1.5% margin.
  • Adjusted EBITDA margins of 0.6% in the U.S., negative 3.4% in Mexico, and 5.1% in Europe.
  • Our U.S. business was able to generate positive EBITDA results, despite unprecedented decline in commodity cutout values that were offset by our diversified portfolio and Key Customer partnerships in Case Ready, Small Bird, and Prepared.
  • Our U.K. and Europe business benefited from ongoing operational excellence efforts in manufacturing and back office integration, resulting in the consistent growth in adjusted EBITDA throughout the year.
  • Our Mexico business saw improvement throughout the quarter, as market conditions sequentially improve and our operations recover from the live challenges.
Unaudited   Three Months Ended   Year Ended
    December 25,
2022
  December 26,
2021
  Y/Y Change   December 25,
2022
  December 26,
2021
  Y/Y Change
    (In millions, except per share and percentages)    
Net sales   $ 4,127.4     $ 4,038.8     +2.2 %   $ 17,468.4     $ 14,777.5     +18.2 %
U.S. GAAP EPS   $ (0.66 )   $ 0.15     +100.0 %   $ 3.11     $ 0.13     NM(2)  
Operating income   $ (77.5 )   $ 55.1     (240.8 )%   $ 1,176.6     $ 211.2     +457.1 %
Adjusted EBITDA(1)   $ 62.9     $ 316.7     (80.1 )%   $ 1,648.4     $ 1,289.0     +27.9 %
Adjusted EBITDA margin(1)     1.5 %     7.8 %   (6.3)pts       9.4 %     8.7 %   +0.7pts  

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

Throughout the year, commodity cutout values experienced record volatility as markets reached all-time highs in the first half of the year and then suffered an unprecedented decline in value in the second half. Inflation also remained persistent with input costs, including grain, utilities, and labor.  

“Although we faced remarkable challenges, our team members were constantly available to explore new opportunities to improve our business and were determined to drive results. This leadership mindset, when coupled with our strategies of portfolio diversification, Key Customer partnerships, and operational excellence, translated into strong growth in net sales and adjusted EBITDA for Pilgrim’s,” said Fabio Sandri, Chief Executive Officer.

In the U.S., the more stable Case Ready, Small Bird, and Prepared Foods businesses all improved results throughout the quarter, offsetting extraordinary declines in cutout values impacting the commodity segment.  

“Our performance in the U.S. highlights the benefits of Key Customer partnerships, diversification across bird sizes as well as branded offerings as means to mitigate dramatic market changes.   Even with an extremely challenging Q4, the U.S. grew year to date net sales and adjusted EBITDA compared to last year. To further improve our portfolio and continue our growth, our investments in expansion at our Athens, GA plant, the construction of a protein conversion plant in South Georgia and various automation projects remain on track,” remarked Fabio Sandri.

The U.K. and Europe business continued to drive operational excellence through optimization of its manufacturing footprint and further integration of back office support activities. The team also continued to work in partnership with Key Customers to mitigate increased input costs from persistent inflation and generate product innovation.  

“I’m continually impressed with the discipline and ownership of our U.K. and Europe team.   Their efforts to scale our manufacturing network and consolidate back office support activities creates a solid foundation to realize our growth aspirations and to create value with our Key Customers,” said Fabio Sandri.

“The Mexico business faced unique circumstances on live operations and unbalanced market fundamentals throughout the 2nd half of the year which negatively impacted profitability and margins.   Nonetheless, the team cultivated Key Customer relationships by maintaining strong service levels under extraordinary conditions. We continue to support the growth of the region,” remarked Fabio Sandri.

Pilgrim’s was also recognized by external agencies for its improvement in Sustainability as all ESG scores improved throughout the year.   Relative to 2021, Pilgrim’s has reduced its natural gas usage intensity and electrical usage intensity ahead of its targets.  

“I am thoroughly impressed with our progress in Sustainability in 2022, especially as the team simultaneously reduced GHG emission intensity and enhanced operating efficiencies.   As such, we can continue to reinvest in our communities, create a better future for our team members, and realize our vision of becoming the best and most respected company in our industry,” said Fabio Sandri.  

Conference Call Information

A conference call to discuss Pilgrim’s quarterly results will be held tomorrow, February 9, 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/ppc230209.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.”

Replays of the conference call will be available on Pilgrim’s website approximately two hours after the call concludes and can be accessed through the “Investor” section of www.pilgrims.com

About Pilgrim’s Pride

Pilgrim’s employs over 61,500 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

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

 
PILGRIM’S PRIDE CORPORATION
CONSOLIDATED BALANCE SHEETS

(Unaudited)
    December 25, 2022   December 26, 2021
    (In thousands, except share and par value data)
Cash and cash equivalents   $ 400,988     $ 427,661  
Restricted cash and cash equivalents     33,771       22,460  
Trade accounts and other receivables, less allowance for doubtful accounts     1,097,212       1,013,437  
Accounts receivable from related parties     2,512       1,345  
Inventories     1,990,184       1,575,658  
Income taxes receivable     155,859       27,828  
Prepaid expenses and other current assets     211,092       237,565  
Total current assets     3,891,618       3,305,954  
Deferred tax assets     1,969       5,314  
Other long-lived assets     41,574       32,410  
Operating lease assets, net     305,798       351,226  
Identified intangible assets, net     846,020       963,243  
Goodwill     1,227,944       1,337,252  
Property, plant and equipment, net     2,940,846       2,917,806  
Total assets   $ 9,255,769     $ 8,913,205  
         
Accounts payable   $ 1,587,939     $ 1,378,077  
Accounts payable to related parties     12,155       22,317  
Revenue contract liability     34,486       22,321  
Accrued expenses and other current liabilities     850,899       859,885  
Income taxes payable     58,411       81,977  
Current maturities of long-term debt     26,279       26,246  
Total current liabilities     2,570,169       2,390,823  
Noncurrent operating lease liability, less current maturities     230,701       271,366  
Long-term debt, less current maturities     3,166,432       3,191,161  
Noncurrent income taxes payable            
Deferred tax liabilities     364,184       369,185  
Other long-term liabilities     71,007       101,736  
Total liabilities     6,402,493       6,324,271  
Common stock, $.01 par value, 800,000,000 shares authorized; 261,610,518 and
261,348,030 shares issued at year-end 2022 and year-end 2021, respectively;
236,469,365 and 243,675,522 shares outstanding at year-end 2022 and year-end
2021, respectively
    2,617       2,614  
Treasury stock, at cost, 25,141,153 shares year-end 2022 and 17,672,508 shares at year-end 2021     (544,687 )     (345,134 )
Additional paid-in capital     1,969,833       1,964,028  
Retained earnings     1,749,499       1,003,569  
Accumulated other comprehensive loss     (336,448 )     (47,997 )
Total Pilgrim’s Pride Corporation stockholders’ equity     2,840,814       2,577,080  
Noncontrolling interest     12,462       11,854  
Total stockholders’ equity     2,853,276       2,588,934  
Total liabilities and stockholders’ equity   $ 9,255,769     $ 8,913,205  

 
 
PILGRIM’S PRIDE CORPORATION
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(Unaudited)
 
    Three Months Ended   Year Ended
    December 25,
2022
  December 26,
2021
  December 25,
2022
  December 26,
2021
    (In thousands, except per share data)
Net sales   $ 4,127,365     $ 4,038,769     $ 17,468,377     $ 14,777,458  
Cost of sales     4,031,583       3,686,269       15,656,574       13,411,631  
Gross profit     95,782       352,500       1,811,803       1,365,827  
Selling, general and administrative expense     142,840       291,644       604,742       1,148,861  
Restructuring activities     30,466       5,802       30,466       5,802  
Operating income (loss)     (77,524 )     55,054       1,176,595       211,164  
Interest expense, net of capitalized interest     41,369       34,974       152,672       145,792  
Interest income     (4,071 )     (1,604 )     (9,028 )     (6,056 )
Foreign currency transaction losses (gains)     16,469       (18,400 )     30,817       (9,382 )
Gain on bargain purchase                        
Miscellaneous, net     (1,505 )     (1,575 )     (23,339 )     (11,580 )
Income before income taxes     (129,786 )     41,659       1,025,473       92,390  
Income tax expense     25,256       5,191       278,935       61,122  
Net income (loss)     (155,042 )     36,468       746,538       31,268  
Less: Net income (loss) attributable to noncontrolling Interests     (66 )     (286 )     608       268  
Net income (loss) attributable to Pilgrim’s Pride Corporation   $ (154,976 )   $ 36,754     $ 745,930     $ 31,000  
                 
Weighted average shares of common stock outstanding:                
Basic     236,469       243,652       239,766       243,652  
Effect of dilutive common stock equivalents           477       628       477  
Diluted     236,469       244,129       240,394       244,129  
                 
Net income (loss) attributable to Pilgrim’s Pride Corporation per share of common stock outstanding:                
Basic   $ (0.66 )   $ 0.15     $ 3.11     $ 0.13  
Diluted   $ (0.66 )   $ 0.15     $ 3.11     $ 0.13  

 
 
PILGRIM’S PRIDE CORPORATION
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
 
    Year Ended
    December 25, 2022   December 26, 2021
    (In thousands)
Cash flows from operating activities:        
Net income   $ 746,538     $ 31,268  
Adjustments to reconcile net income to cash provided by operating activities:        
Depreciation and amortization     403,110       380,824  
Deferred income tax expense (benefit)     21,295       (86,391 )
Gain on property disposals     (18,908 )     (1,476 )
Share-based compensation     6,985       11,655  
Loan cost amortization     4,753       5,095  
Asset impairment     3,559        
Accretion of bond discount     1,717       1,533  
Gain on equity method investments     (2 )     (16 )
Loss on early extinguishment of debt recognized as a component of interest expense           24,654  
Amortization of bond premium           (167 )
Changes in operating assets and liabilities:        
Trade accounts and other receivables     (149,599 )     (259,377 )
Inventories     (472,224 )     (177,864 )
Prepaid expenses and other current assets     18,264       (53,797 )
Accounts payable and accrued expenses     263,288       359,589  
Income taxes     (142,455 )     115,216  
Long-term pension and other postretirement obligations     (4,128 )     (18,461 )
Other operating assets and liabilities     (12,330 )     (5,826 )
     Cash provided by operating activities     669,863       326,459  
Cash flows from investing activities:        
Acquisitions of property, plant and equipment     (487,110 )     (381,671 )
Proceeds from property disposals     35,516       24,724  
Proceeds from insurance recoveries     16,034        
Purchase of acquired businesses, net of cash acquired     (9,692 )     (966,766 )
     Cash used in investing activities     (445,252 )     (1,323,713 )
Cash flows from financing activities:        
Payments on revolving line of credit and long-term borrowings     (388,299 )     (2,006,195 )
Proceeds from revolving line of credit and long-term borrowings     362,540       2,951,707  
Purchase of common stock under share repurchase program     (199,553 )      
Payment of capitalized loan costs     (4,741 )     (22,293 )
Distribution of capital under the TSA     (1,961 )     (650 )
Payment on early extinguishment of debt           (21,258 )
     Cash provided by (used in) financing activities     (232,014 )     901,311  
Effect of exchange rate changes on cash and cash equivalents     (7,959 )     (2,342 )
Decrease in cash and cash equivalents     (15,362 )     (98,285 )
Cash and cash equivalents, beginning of year     450,121       548,406  
Cash and cash equivalents, end of year   $ 434,759     $ 450,121  
Supplemental Disclosure Information:        
Interest paid (net of amount capitalized)   $ 156,292     $ 119,328  
Income taxes paid     385,585       20,863  
                 

PILGRIM’S PRIDE CORPORATION

Selected Financial Information

(Unaudited)

“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) foreign currency transaction losses (gains), (2) transaction costs related to business acquisitions, (3) DOJ agreement and litigation settlements, (4) restructuring activities losses, (5) Hometown Strong initiative expenses, (6) charge for fair value markup of acquired inventory, (7) property insurance recoveries for Mayfield, Kentucky tornado property damage losses, (8) deconsolidation of subsidiary, and (9) net income (loss) 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   Year Ended
    December 25,
2022
  December 26,
2021
  December 25,
2022
  December 26,
2021
    (In thousands)
Net income (loss)   $ (155,042 )   $ 36,468     $ 746,538   $ 31,268  
Add:                
Interest expense, net(a)     37,298       33,370       143,644     139,736  
Income tax expense     25,256       5,191       278,935     61,122  
Depreciation and amortization     102,148       106,488       403,110     380,824  
EBITDA     9,660       181,517       1,572,227     612,950  
Add:                
Foreign currency transaction losses (gains)(b)     16,469       (18,400 )     30,817     (9,382 )
Transaction costs related to acquisitions(c)     (24 )     9,540       948     18,858  
DOJ agreement and litigation settlements(d)     5,804       131,940       34,086     656,225  
Restructuring activities losses(e)     30,466       5,802       30,466     5,802  
Hometown Strong commitment(f)           1,000           1,000  
Charge for fair value markup of acquired inventory(g)           4,974           4,974  
Minus:                
Property insurance recoveries on Mayfield tornado losses(h)     (417 )           19,580      
Deconsolidation of subsidiary(i)                     1,131  
Net income (loss) attributable to noncontrolling interest     (66 )     (286 )     608     268  
Adjusted EBITDA   $ 62,858     $ 316,659     $ 1,648,356   $ 1,289,028  

(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 (gains) in the 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, Pilgrim’s announced that we entered into a plea Agreement (the "Plea Agreement") with the DOJ. As a result of the Plea Agreement, we recognized a fine of $110.5 million. On February 23, 2021, the Colorado Court approved the Plea Agreement and assessed a fine of $107.9 million. The difference between the original accrual and the payment is recorded in DOJ agreement and litigation settlements in the year ended December 26, 2021. The expense adjustment recognized in the year ended December 26, 2021 was offset by amounts recognized in anticipation of probable settlements in ongoing litigation.
(e) Restructuring charges is primarily related to restructuring initiatives at multiple production facilities throughout our U.K. and Europe reportable segment.
(f) The Hometown Strong initiative was developed to help communities in which we operate respond to unexpected challenges.
(g) This amount represents the flow-through of the value to step-up inventory to fair value at the acquisition date in accordance with business combination accounting rules recorded as part of the Pilgrim’s Food Masters transaction.
(h) This represents property insurance recoveries for the property damage losses incurred as a result of the tornado in Mayfield, KY in December 2021.
(i) This represents a gain recognized as a result of deconsolidation of a subsidiary.

The summary unaudited consolidated income statement data for the 12 months ended December 25, 2022 (the LTM Period) have been calculated by summing each of the unaudited three month periods within the audited year ended December 25, 2022.

 
PILGRIM’S PRIDE CORPORATION
Reconciliation of LTM Adjusted EBITDA
(Unaudited)
    Three Months Ended    
    March 27, 2022   June 26, 2022   September 25,
2022
  December 25,
2022
  LTM Ended
December 25,
2022
  (In thousands)    
Net income (loss)   $ 280,560   $ 362,021     $ 258,999   $ (155,042 )   $ 746,538
Add:                    
Interest expense, net     35,022     37,102       34,222     37,298       143,644
Income tax expense     75,219     112,711       65,749     25,256       278,935
Depreciation and amortization     102,142     99,854       98,966     102,148       403,110
EBITDA     492,943     611,688       457,936     9,660       1,572,227
Add:                    
Foreign currency transaction losses (gains)     11,536     2,758       54     16,469       30,817
Transaction costs related to acquisitions     717     255           (24 )     948
DOJ agreement and litigation settlements     500     8,482       19,300     5,804       34,086
Restructuring activities losses                   30,466       30,466
Minus:                    
Property insurance recoveries for Mayfield tornado losses     3,815           16,182     (417 )     19,580
Net income (loss) attributable to noncontrolling interest     122     (95 )     647     (66 )     608
Adjusted EBITDA   $ 501,759   $ 623,278     $ 460,461   $ 62,858     $ 1,648,356
 

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 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 EBITDA Margin
(Unaudited)
    Three Months Ended   Year Ended   Three Months Ended   Year Ended
    December
25, 2022
  December
26, 2021
  December
25, 2022
  December
26, 2021
  December
25, 2022
  December
26, 2021
  December
25, 2022
  December
26, 2021
  (In thousands, except percent of net sales)
Net income (loss)   $ (155,042 )   $ 36,468     $ 746,538   $ 31,268     (3.76)        %     0.90 %     4.27 %     0.21 %
Add:                                
Interest expense, net     37,298       33,370       143,644     139,736       0.90 %     0.83 %     0.82 %     0.95 %
Income tax expense     25,256       5,191       278,935     61,122       0.61 %     0.13 %     1.60 %     0.41 %
Depreciation and amortization     102,148       106,488       403,110     380,824       2.47 %     2.64 %     2.31 %     2.58 %
EBITDA     9,660       181,517       1,572,227     612,950       0.22 %     4.50 %     9.00 %     4.15 %
Add:                                            
Foreign currency transaction losses (gains)     16,469       (18,400 )     30,817     (9,382 )     0.41 %     (0.46 )%     0.19 %     (0.06 )%
Transaction costs related to acquisitions     (24 )     9,540       948     18,858       %     0.24 %     0.01 %     0.13 %
DOJ agreement and litigation settlements     5,804       131,940       34,086     656,225       0.14 %     3.27 %     0.18 %     4.43 %
Restructuring activities losses     30,466       5,802       30,466     5,802       0.74 %     0.14 %     0.17 %     0.04 %
Hometown Strong commitment           1,000           1,000       %     0.02 %     %     0.01 %
Charge for fair value markup of acquired inventory           4,974           4,974       %     0.12 %     %     0.03 %
Minus:                                
Proceeds of property insurance on Mayfield tornado losses     (417 )           19,580           (0.01 )%     %     0.11 %     %
Deconsolidation of a subsidiary                     1,131       %     %     %     0.01 %
Net income (loss) attributable to noncontrolling interest     (66 )     (286 )     608     268       %   (0.01)        %     %     %
Adjusted EBITDA   $ 62,858     $ 316,659     $ 1,648,356   $ 1,289,028       1.52 %     7.84 %     9.44 %     8.72 %
                                 
 Net sales   $ 4,127,365     $ 4,038,769     $ 17,468,377   $ 14,777,458     $ 4,127,365     $ 4,038,769     $ 17,468,377     $ 14,777,458  
                                                               

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
    December 25, 2022   December 26, 2021
    U.S.   U.K. &
Europe
  Mexico   Total   U.S.   U.K. &
Europe
  Mexico   Total
    (In thousands)   (In thousands)
Net income (loss)   $ (86,893 )   $ (22,193 )   $ (45,956 )   $ (155,042 )   $ 45,854     $ (23,454 )   $ 14,068     $ 36,468  
Add:                                
Interest expense, net(a)     38,094       633       (1,429 )     37,298       34,367       362       (1,359 )     33,370  
Income tax expense (benefit)     (22,097 )     20,673       26,680       25,256       8,508       (8,085 )     4,768       5,191  
Depreciation and amortization     63,370       32,899       5,879       102,148       63,934       36,331       6,223       106,488  
EBITDA     (7,526 )     32,012       (14,826 )     9,660       152,663       5,154       23,700       181,517  
Add:                                
Foreign currency transaction losses (gains)(b)     17,060       442       (1,033 )     16,469       (20,794 )     (657 )     3,051       (18,400 )
Transaction costs related to acquisitions(c)           (24 )           (24 )     157       9,383             9,540  
DOJ agreement & litigation settlements(d)     5,804                   5,804       131,940                   131,940  
Restructuring activities(e)           30,466             30,466             5,802             5,802  
Hometown Strong commitment(f)                             1,000                   1,000  
Charge for fair value markup of acquired inventory(g)                                   4,974             4,974  
Minus:                                
Property insurance recoveries for Mayfield tornado losses(h)     (417 )                 (417 )                        
Net income attributable to noncontrolling interest                 (66 )     (66 )                 (286 )     (286 )
Adjusted EBITDA   $ 15,755     $ 62,896     $ (15,793 )   $ 62,858     $ 264,966     $ 24,656     $ 27,037     $ 316,659  

(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 (gains) in the 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, Pilgrim’s announced that we entered into a plea Agreement (the "Plea Agreement") with the DOJ. As a result of the Plea Agreement, we recognized a fine of $110.5 million. On February 23, 2021, the Colorado Court approved the Plea Agreement and assessed a fine of $107.9 million. The difference between the original accrual and the payment is recorded in DOJ agreement and litigation settlements in the year ended December 26, 2021. The expense adjustment recognized in the year ended December 26, 2021 was offset by amounts recognized in anticipation of probable settlements in ongoing litigation.
(e) Restructuring charges is primarily related to restructuring initiatives at multiple production facilities throughout our U.K. and Europe reportable segment.
(f) The Hometown Strong initiative was developed to help communities in which we operate respond to unexpected challenges.
(g) This amount represents the flow-through of the value to step-up inventory to fair value at the acquisition date in accordance with business combination accounting rules recorded as part of the Pilgrim’s Food Masters transaction.
(h) 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)
                                 
    Year Ended   Year Ended
    December 25, 2022   December 26, 2021
    U.S.   U.K. &
Europe
  Mexico   Total   U.S.   U.K. &
Europe
  Mexico   Total
    (In thousands)   (In thousands)
Net income (loss)   $ 706,704   $ (3,642 )   $ 43,476     $ 746,538   $ (103,502 )   $ (23,254 )   $ 158,024     $ 31,268  
Add:                                
Interest expense, net(a)     143,941     2,126       (2,423 )     143,644     142,975       1,509       (4,748 )     139,736  
Income tax expense (benefit)     220,245     8,290       50,400       278,935     (38,424 )     28,908       70,638       61,122  
Depreciation and amortization     244,617     134,374       24,119       403,110     242,991       113,248       24,585       380,824  
EBITDA     1,315,507     141,148       115,572       1,572,227     244,040       120,411       248,499       612,950  
Add:                                
Foreign currency transaction losses (gains)(b)     35,702     (3,008 )     (1,877 )     30,817     (14,991 )     (1,634 )     7,243       (9,382 )
Transaction costs related to acquisitions(c)     847     101             948     9,475       9,383             18,858  
DOJ agreement & litigation settlements(d)     34,086                 34,086     656,225                   656,225  
Restructuring activities losses(e)         30,466             30,466           5,802             5,802  
Hometown Strong commitment(f)                         1,000                   1,000  
Charge for fair value markup of acquired inventory (g)                               4,974             4,974  
Minus:                                
Property insurance recoveries for Mayfield tornado losses(h)     19,580                 19,580                        
Deconsolidation of subsidiary(i)                               1,131             1,131  
Net income attributable to noncontrolling interest               608       608                 268       268  
Adjusted EBITDA   $ 1,366,562   $ 168,707     $ 113,087     $ 1,648,356   $ 895,749     $ 137,805     $ 255,474     $ 1,289,028  

(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 (gains) in the 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, Pilgrim’s announced that we entered into a plea Agreement (the "Plea Agreement") with the DOJ. As a result of the Plea Agreement, we recognized a fine of $110.5 million. On February 23, 2021, the Colorado Court approved the Plea Agreement and assessed a fine of $107.9 million. The difference between the original accrual and the payment is recorded in DOJ agreement and litigation settlements in the year ended December 26, 2021. The expense adjustment recognized in the year ended December 26, 2021 was offset by amounts recognized in anticipation of probable settlements in ongoing litigation.
(e) Restructuring charges is primarily related to restructuring initiatives at multiple production facilities throughout our U.K. and Europe reportable segment.
(f) The Hometown Strong initiative was developed to help communities in which we operate respond to unexpected challenges.
(g) This amount represents the flow-through of the value to step-up inventory to fair value at the acquisition date in accordance with business combination accounting rules recorded as part of the Pilgrim’s Food Masters transaction.
(h) This represents property insurance recoveries for the property damage losses incurred as a result of the tornado in Mayfield, KY in December 2021.
(i) This represents a gain recognized as a result of deconsolidation of a subsidiary.

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 U.S. Operating Income
(Unaudited)
                 
    Three Months Ended   Year Ended
    December 25, 2022   December 26, 2021   December 25, 2022   December 26, 2021
    (In thousands)
GAAP operating income (U.S. operations)   $ (52,796 )   $ 68,344     $ 1,094,025     $ (17,036 )
DOJ agreement & litigation settlements(a)     5,804       131,940       34,086       656,225  
Transaction costs related to acquisitions(b)           157       847       9,475  
Hometown Strong commitment(c)           1,000             1,000  
Adjusted operating income (U.S. operations)   $ (46,992 )   $ 201,441     $ 1,128,958     $ 649,664  
                 
Adjusted operating income margin (U.S. operations)     (1.9 )%     8.4 %     10.5 %     7.1 %

(a) On October 13, 2020, Pilgrim’s announced that we entered into a plea Agreement (the "Plea Agreement") with the DOJ. As a result of the Plea Agreement, we recognized a fine of $110.5 million. On February 23, 2021, the Colorado Court approved the Plea Agreement and assessed a fine of $107.9 million. The difference between the original accrual and the payment is recorded in DOJ agreement and litigation settlements in the year ended December 26, 2021. The expense adjustment recognized in the year ended December 26, 2021 was offset by amounts recognized in anticipation of probable settlements in ongoing litigation.
(b) These costs represent charges incurred related to the acquisition of Pilgrim’s Food Masters (formerly, Kerry Consumer Foods’ Meats and Meals businesses).
(c) The Hometown Strong initiative was developed to help communities in which we operate respond to unexpected challenges. For the year ended December 27, 2020, we recorded $15.0 million in incremental donations expense relating to this initiative. For the year ended December 26, 2021, we recorded $1.0 million in incremental donations expense relating to this initiative.

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 U.S. Operating Income Margin
(Unaudited)
                 
    Three Months Ended   Year Ended
    December 25, 2022   December 26, 2021   December 25, 2022   December 26, 2021
    (In percent)
GAAP operating income margin (U.S. operations)   (2.2 )%   2.8 %   10.2 %   (0.2 )%
DOJ agreement and litigation settlements   0.3 %   5.6 %   0.3 %   7.2 %
Transaction costs related to acquisitions   %   %   %   0.1 %
Hometown Strong commitment   %   %   %   %
Adjusted operating income margin (U.S. operations)   (1.9 )%   8.4 %   10.5 %   7.1 %
 

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 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 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   Year Ended
    December 25,
2022
  December 26,
2021
  December 25,
2022
  December 26,
2021
    (In thousands, except per share data)
Net income (loss) attributable to Pilgrim’s   $ (154,976 )   $ 36,754     $ 745,930     $ 31,000  
Adjustments:                
Foreign currency transaction losses (gains)     16,469       (18,400 )     30,817       (9,382 )
Transaction costs related to acquisitions     (24 )     9,540       948       18,858  
DOJ agreement and litigation settlements     5,804       131,940       34,086       656,225  
Restructuring activities losses     30,466       5,802       30,466       5,802  
Hometown Strong commitment           1,000             1,000  
Charge for fair value markup of acquired inventory           4,974             4,974  
Loss on early extinguishment of debt recognized as a component of interest expense                       24,654  
Property insurance recoveries on Mayfield tornado losses     417             (19,580 )      
Deconsolidation of a subsidiary                       (1,131 )
Net tax impact of adjustments(a)     (13,235 )     (33,593 )     (19,115 )     (174,619 )
Adjusted net income (loss) attributable to Pilgrim’s   $ (115,079 )   $ 138,017     $ 803,552     $ 557,381  
Weighted average diluted shares of common stock outstanding     236,469       244,341       240,394       244,129  
Adjusted net income attributable to Pilgrim’s per common diluted share   $ (0.49 )   $ 0.56     $ 3.34     $ 2.28  

(a) Net tax impact of adjustments represents the tax impact of all adjustments shown above with the exclusion of the DOJ agreement as this item is non-deductible for tax purposes.

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   Year Ended
    December 25,
2022
  December 26,
2021
  December 25,
2022
  December 26,
2021
    (In thousands, except per share data)
U.S. GAAP EPS   $ (0.66 )   $ 0.15     $ 3.11     $ 0.13  
Adjustments:                
Foreign currency transaction losses (gains)     0.08       (0.08 )     0.13       (0.04 )
Transaction costs related to acquisitions           0.04             0.08  
DOJ agreement and litigation settlements     0.02       0.54       0.14       2.69  
Restructuring activities losses     0.13       0.03       0.12       0.02  
Hometown Strong commitment                        
Charge for fair value markup of acquired inventory           0.02             0.02  
Loss on early extinguishment of debt recognized as a component of interest expense                       0.10  
Property insurance recoveries on Mayfield tornado losses                 (0.08 )      
Deconsolidation of a subsidiary                        
Net tax impact of adjustments(a)     (0.06 )     (0.14 )     (0.08 )     (0.72 )
Adjusted EPS   $ (0.49 )   $ 0.56     $ 3.34     $ 2.28  
                 
Weighted average diluted shares of common stock outstanding     236,469       244,341       240,394       244,129  

(a) Net tax impact of adjustments represents the tax impact of all adjustments shown above with the exclusion of the DOJ agreement as this item is non-deductible for tax purposes.

 
PILGRIM’S PRIDE CORPORATION
Supplementary Geographic Data
(Unaudited)
                 
    Three Months Ended   Year Ended
    December 25,
2022
  December 26,
2021
  December 25,
2022
  December 26,
2021
    (In thousands)
Sources of net sales by country of origin:                
U.S.   $ 2,430,343     $ 2,399,000     $ 10,748,350     $ 9,113,879  
Europe     1,234,609       1,213,043       4,874,738       3,934,062  
Mexico     462,413       426,726       1,845,289       1,729,517  
Total net sales   $ 4,127,365     $ 4,038,769     $ 17,468,377     $ 14,777,458  
                 
Sources of cost of sales by country of origin:                
U.S.   $ 2,406,386     $ 2,124,315     $ 9,312,445     $ 8,187,959  
Europe     1,154,440       1,168,996       4,634,066       3,769,838  
Mexico     470,769       392,970       1,710,117       1,453,888  
Elimination     (12 )     (12 )     (54 )     (54 )
Total cost of sales   $ 4,031,583     $ 3,686,269     $ 15,656,574     $ 13,411,631  
                 
Sources of gross profit by country of origin:                
U.S.   $ 23,957     $ 274,685     $ 1,435,905     $ 925,920  
Europe     80,169       44,047       240,672       164,224  
Mexico     (8,356 )     33,756       135,172       275,629  
Elimination     12       12       54       54  
Total gross profit   $ 95,782     $ 352,500     $ 1,811,803     $ 1,365,827  
                 
Sources of operating income (loss) by country of origin:                
U.S.   $ (52,796 )   $ 68,344     $ 1,094,025     $ (17,036 )
Europe     (1,340 )     (33,398 )     (934 )     (627 )
Mexico     (23,400 )     20,096       83,450       228,773  
Elimination     12       12       54       54  
Total operating income (loss)   $ (77,524 )   $ 55,054     $ 1,176,595     $ 211,164  

 

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