# Pilgrims Pride Corp: Form 10-Q for the period ended Mar 31, 2024

- Company: [Pilgrims Pride Corp](/companies/ppc.md) (CIK 802481)
- Form: 10-Q
- Filed: 2024-05-02
- Accepted by EDGAR: May 1, 2024, 20:33 ET
- Period: 2024-03-31
- Accession: 0000802481-24-000036
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/802481/000080248124000036/ppc-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/802481/000080248124000036/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $4.36bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $3.98bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-01-01 to 2024-03-31 | $383.9m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-01-01 to 2024-03-31 | $119.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | $250.3m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $41.2m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $52.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | $174.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.73 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.74 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 237,491,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | $271.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $99.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-03-31 | $870.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-31 | $4.17bn | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $9.77bn | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $2.28bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $6.27bn | us-gaap:Liabilities |
| Current portion of debt | at 2024-03-31 | $650.0k | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-03-31 | $3.48bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 35,705 characters.

### Executive Summary

### Overview

Pilgrim’s Pride Corporation (referred to herein as “Pilgrim’s,” “PPC,” “the Company,” “we,” “us,” “our,” or similar terms) is one of the largest chicken producers in the world, with operations in the United States (“U.S.”), the United Kingdom (“U.K.”), Mexico, France, Puerto Rico, the Netherlands and the Republic of Ireland. We reported net income attributable to Pilgrim’s of $174.4 million, or $0.73 per diluted common share, and income before tax totaling $227.0 million, for the three months ended March 31, 2024. These operating results included net sales of $4.4 billion, gross profit of $383.9 million and $271.0 million of cash provided by operating activities. We generated a consolidated operating margin of 5.7%. For the three months ended March 31, 2024, we generated EBITDA and Adjusted EBITDA of $361.2 million and $371.9 million, respectively. A reconciliation of net income to EBITDA and Adjusted EBITDA is included below.

### Global Economic Conditions

During the first quarter of 2024, global inflation levels declined, but remain above historical averages, in commodity, labor and other operating costs leading to reduced costs from these inputs across all our businesses. The global energy market continues to be impacted by the Russia-Ukraine war, driving up prices as supply out of the Black Sea region is disrupted and future production is at risk. The global feed ingredient market is less impacted by the Russia-Ukraine war in 2024 as global supply in other growing areas has developed and grain exports from the Black Sea region have remained steady throughout the first quarter of 2024. The U.K. and E.U. region saw a decrease in inflation and increased demand, leading to cost recovery for our business and price reductions for customers, though labor costs continue to be a challenge for our Europe operations. We have and will continue to invest in our people and implement supply chain solutions to mitigate global economic impacts in our Europe operations. Inflation in Mexico has decreased and there has been a slight strengthening of the peso in the first quarter of 2024 against the U.S. dollar, however, Mexico remains a relatively volatile market given continuing inflationary pressures, an evolving global protein industry, and overall business seasonality.

### Russia-Ukraine War Impacts

The Russia-Ukraine war began in February 2022. The impact of the ongoing war and sanctions has not been limited to businesses that operate in Russia and Ukraine and has negatively impacted and will likely continue to negatively impact other global economic markets including where we operate. The impacts have included and may continue to include, but are not limited to, higher prices for commodities, such as food products, ingredients and energy products, increasing inflation in some countries, and disrupted trade and supply chains. The conflict has disrupted shipments of grains, vegetable oils, fertilizer and energy products. Russia’s suspension of the Black Sea Grain Initiative, which allowed Ukraine to export grain and other food items, may further exacerbate rising food prices and supply chain issues if not reinstated.

The impact on the agriculture markets falls into two main categories: (1) the effect on Ukrainian crop production, as the region is key in global grain production; and (2) the duration of the disruption in trade flows. Safety and financing concerns in the region are restricting export execution, which is in turn forcing grain and oil demand to find alternative supply. The duration of the war and related volatility makes global markets extremely sensitive to growing-season weather in other global grain producing regions and has led to a large risk premium in futures prices. The continued volatility in the global markets as a result of the war has adversely impacted our costs by driving up prices, raising inflation and increasing pressure on the supply of feed ingredients and energy products throughout the global markets. In the first quarter of 2024, Ukraine grain export volumes remained steady despite the ongoing conflict. Any remaining conflict-related supply constraints did not have a material impact on our costs during the first quarter.

In addition, the U.S. government and other governments in jurisdictions in which we operate have imposed sanctions and export controls against Russia, Belarus and interests therein and threatened additional sanctions and controls. The impact of these measures, now and in the future, could adversely affect our business, supply chain or customers.

### Raw Materials and Pricing

Our U.S. and Mexico segments use corn and soybean meal as the main ingredients for feed production, while our Europe segment uses wheat, soybean meal and barley as the main ingredients for feed production.

U.S. commodity market prices for chicken products trended in line with the historical five-year average during the first half of the first quarter of 2024 before accelerating during the seasonal climb in the second half of the quarter. Prices as of the end of the first quarter of 2024 were above the historical five-year average. Per the April 2024 U.S. Department of

Agriculture (or “USDA”) report on poultry slaughter, estimated industry ready-to-cook production declined relative to prior year levels by 1.0%. The decrease is due to fewer head counts while average liveweights ended the first quarter in line with the prior year.

During the first quarter of 2024, the U.S. chicken market experienced robust volume demand, supported by growth in both the retail and foodservice distribution channels throughout the quarter. Export volume in shipments were lower than the five-year historical average, but relatively flat compared to prior year. Chicken cold storage inventories ended the quarter 10.5% below prior year levels after declining 12.8% from year-end 2023 levels due to growth in domestic demand and despite lower export volumes.

Domestic volume demand growth in foodservice distribution and retail were sufficient to absorb broiler production and reduce cold storage inventories of chicken at rates that allowed for U.S. chicken market pricing to see strong seasonal improvements ending the first quarter of 2024 above the historical five-year average.

During the first quarter of 2024, the U.K. chicken market volume was higher than in same quarter prior year while stagnant compared to fourth quarter of 2023. European supplies into U.K. are increasing slightly as other markets for the E.U. are declining. Our utilities and feed ingredient costs are lower relative to first quarter of 2023. We continue to focus on managing costs, including labor and yield efficiencies, agricultural performance and increasing operational efficiency through investments in capital projects.

Commodity prices for chicken in Mexico were above prior year prices throughout the quarter, but steadily declining and ended the quarter below end of 2023 levels.

Prices for the remainder of the year will depend on (1) the evolution of foodservice, retail and export meat demand and (2) factors such as government regulation, the ongoing Russia-Ukraine war, feed production input costs, further spread of avian influenza both domestically and abroad, uncertainty surrounding the general economy and overall protein supply.

U.K. market prices for pork products are flat to slightly higher than first quarter of 2023, while declining slightly from fourth quarter of 2023 per normal seasonal trends. The slight increase from prior continues the upward trend from 2022, reflecting pig reduction from a 15% reduction of the English sow herd since 2022. As the level of pigs stabilized, the pig prices have started to wear off and the E.U. pig price ended the quarter at 5% below the U.K. standard pig price. The pig supply is still shrinking and the first quarter of 2024 U.K. headkill is 5% below first quarter of 2023. U.K. pig farming became profitable in the second quarter of 2023 and remained profitable through the end of 2023.

U.K. prices for prepared foods have remained at elevated levels from inflationary pressure, primarily from increased pork prices. We continue to focus on partnering with our Key Customers and increasing operational efficiency.

### Reportable Segments

We operate in three reportable segments: U.S., Europe (formerly known as “U.K. and Europe”), and Mexico. We measure segment profit as operating income. Certain corporate expenses are allocated to the Mexico and Europe reportable segments based upon various apportionment methods for specific expenditures incurred related thereto with the remaining amounts allocated to the U.S. For additional information, see “Note 18. Reportable Segments” of our Condensed Consolidated Financial Statements included in this quarterly report.

### Results of Operations

### Three Months Ended March 31, 2024 Compared to the Three Months Ended March 26, 2023

*Net sales.* Net sales generated in the three months ended March 31, 2024 increased $196.3 million, or 4.7%, from net sales generated in the three months ended March 26, 2023. The following table provides net sales information:

*(In thousands, except percent data)*

| Sources of net sales Amount | Three Months Ended March 31, 2024 Percent | Change from Three Months Ended March 26, 2023 |  |
| --- | ---: | ---: | ---: |
| U.S. | $2,579,332 | $146,764 | 6.0% |
| Europe | 1,267,903 | 28,639 | 2.3% |
| Mexico | 514,699 | 20,903 | 4.2% |
| Total net sales | $4,361,934 | $196,306 | 4.7% |

*U.S. Reportable Segment.* U.S. net sales generated in the three months ended March 31, 2024 increased $146.8 million, or 6.0%, from U.S. net sales generated in the three months ended March 26, 2023 primarily due to an increase in net sales per pound of $102.3 million, or 4.2 percentage points, and an increase in sales volume of $44.5 million, or 1.8 percentage points. The increase in net sales per pound was driven primarily by favorable market pricing conditions. The first quarter average commodity chicken market prices were above both prior year and the historical five-year average.

*Europe Reportable Segment.* Europe net sales generated in the three months ended March 31, 2024 increased $28.6 million, or 2.3%, from Europe net sales generated in the three months ended March 26, 2023 primarily due to a favorable impact of foreign currency translation of $55.6 million, or 4.5 percentage points, and an increase in sales volume of $10.5 million, or 0.8 percentage points, partially offset by a decrease in net sales per pound of $37.5 million, or 3.0 percentage points. The decrease in net sales per pound was driven by mechanisms for cost recovery from feed ingredients, labor, utilities and other operating costs leading to a decrease in sales prices.

*Mexico Reportable Segment.* Mexico net sales generated in the three months ended March 31, 2024 increased $20.9 million, or 4.2%, from Mexico net sales generated in the three months ended March 26, 2023 primarily due to an increase from the impact of foreign currency remeasurement of $48.7 million, or 9.9 percentage points, and an increase in sales volume of $16.0 million, or 3.2 percentage points, partially offset by a decrease in net sales per pound of $43.8 million, or 8.9 percentage points. The increase in sales volume was due to a shift in product mix related to market demands, primarily due to increases in live chicken volume and imports volume. The decrease in net sales per pound resulted from a decrease in commodity prices.

*Gross profit and cost of sales.* Gross profit increased by $210.9 million, or 121.9%, from $173.0 million generated in the three months ended March 26, 2023 to $383.9 million generated in the three months ended March 31, 2024. The following tables provide information regarding gross profit and cost of sales information:

*(In thousands, except percent data)*

| Components of gross profit Amount | Three Months Ended March 31, 2024 Three Months Ended Percent | Change from Three Months Ended March 26, 2023 March 31, 2024 | March 26, 2023 | Percent of Net Sales |  |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net sales | $4,361,934 | $196,306 | 4.7% | 100.0% | 100.0% |
| Cost of sales | 3,978,025 | (14,556) | (0.4)% | 91.2% | 95.8% |
| Gross profit | $383,909 | $210,862 | 121.9% | 8.8% | 4.2% |

*(In thousands, except percent data)*

| Sources of gross profit Amount | Three Months Ended March 31, 2024 Percent | Change from Three Months Ended March 26, 2023 |  |
| --- | ---: | ---: | ---: |
| U.S. | $237,292 | $198,963 | 519.1% |
| Europe | 92,165 | 7,972 | 9.5% |
| Mexico | 54,452 | 3,940 | 7.8% |
| Elimination | — | (13) | (100.0)% |
| Total gross profit | $383,909 | $210,862 | 121.9% |

32

*(In thousands, except percent data)*

| Sources of cost of sales Amount | Three Months Ended March 31, 2024 Percent | Change from Three Months Ended March 26, 2023 |  |
| --- | ---: | ---: | ---: |
| U.S. | $2,342,040 | $(52,199) | (2.2)% |
| Europe | 1,175,738 | 20,667 | 1.8% |
| Mexico | 460,247 | 16,963 | 3.8% |
| Elimination | — | 13 | (100.0)% |
| Total cost of sales | $3,978,025 | $(14,556) | (0.4)% |

*U.S. Reportable Segment.* Cost of sales incurred by our U.S. operations during the three months ended March 31, 2024 decreased $52.2 million, or 2.2%, from cost of sales incurred by our U.S. segment during the three months ended March 26, 2023. The decrease in cost of sales was primarily driven by a decrease in cost per pound sold of $96.0 million, or 4.0 percentage points, partially offset by an increase in sales volume of $43.8 million, or 1.8 percentage points. The decrease in cost per pound sold was driven by a decrease in live operations costs of $122.8 million, which resulted primarily from decreased feed ingredient costs. Prices for both corn and soy, our main ingredients in feed, were down versus prior year. The decrease in live operations costs within cost per pound sold was partially offset by an increase in cost of sales related to the prior year one-time recognition of business interruption insurance income of $25.9 million.

*Europe Reportable Segment.* Cost of sales incurred by our Europe operations during the three months ended March 31, 2024 increased $20.7 million, or 1.8%, from cost of sales incurred by our Europe segment during the three months ended March 26, 2023. The increase in cost of sales was primarily driven by the unfavorable impact of foreign currency translation of $51.6 million, or 4.5 percentage points, and an increase in sales volume of $9.6 million, or 0.8 percentage points, partially offset by a decrease in cost per pound sold of $40.3 million, or 3.5 percentage points. The decrease in cost per pound sold was driven by cost recovery from feed ingredients, labor, utilities and other operating costs and was partially offset by an increase related to the prior year one-time recognition of business interruption insurance income.

*Mexico Reportable Segment.* Cost of sales incurred by our Mexico operations during the three months ended March 31, 2024 increased $17.0 million, or 3.8%, from cost of sales incurred by our Mexico segment during the three months ended March 26, 2023. This increase was driven by an unfavorable impact of foreign currency remeasurement and an increase in volume of $43.6 million, or 9.8 percentage points, and $14.4 million, or 3.2 percentage points, respectively. These increases in cost of sales were partially offset by a decrease in cost per pound sold of $41.0 million, or 9.2 percentage points. The increase in sales volume was due to a shift in product mix related to market demands, primarily due to increases in live chicken volume and imports volume. The decrease in cost per pound sold resulted primarily from a decrease in commodity prices.

*Operating income and SG&A expense.* Operating income increased by $218.9 million, or 698.5%, from income of $31.3 million generated in the three months ended March 26, 2023 to income of $250.3 million generated in the three months ended March 31, 2024. The following tables provide information regarding operating income and selling, general and administrative (“SG&A”) expense:

*(In thousands, except percent data)*

| Components of operating income Three Months Ended Amount | Three Months Ended March 31, 2024 Percent | Change from Three Months Ended March 26, 2023 March 31, 2024 | March 26, 2023 | Percent of Net Sales |  |
| --- | ---: | ---: | ---: | ---: | ---: |
| Gross profit | $383,909 | $210,862 | 121.9% | 8.8% | 4.2% |
| SG&A expense | 119,076 | (14,602) | (10.9)% | 2.7% | 3.2% |
| Restructuring activities | 14,559 | 6,533 | 81.4% | 0.3% | 0.2% |
| Operating income | $250,274 | $218,931 | 698.5% | 5.7% | 0.8% |

33

*(In thousands, except percent data)*

| Sources of operating income Amount | Three Months Ended March 31, 2024 Percent | Change from Three Months Ended March 26, 2023 |
| --- | ---: | ---: |
| U.S. | $179,417 | $207,523 738.4% |
| Europe | 31,116 | 5,855 23.2% |
| Mexico | 39,741 | 5,566 16.3% |
| Eliminations | — | (13) (100.0)% |
| Total operating income | $250,274 | $218,931 698.5% |
| **Sources of SG&A expense** | **Three Months Ended March 31, 2024** | **Change from Three Months Ended March 26, 2023** |
| **Amount** | **Percent** |  |
|  | **(In thousands, except percent data)** |  |
| U.S. | $57,875 | $(8,560) (12.9)% |
| Europe | 46,490 | (4,416) (8.7)% |
| Mexico | 14,711 | (1,626) (10.0)% |
| Total SG&A expense | $119,076 | $(14,602) (10.9)% |

*U.S. Reportable Segment.* SG&A expense incurred by our U.S. reportable segment during the three months ended March 31, 2024 decreased $8.6 million, or 12.9%, from SG&A expense incurred by our U.S. reportable segment during the three months ended March 26, 2023. The decrease in SG&A expense resulted primarily from lower legal settlements and legal defense costs. Other factors affecting U.S. SG&A expense were individually immaterial.

*Europe Reportable Segment.* SG&A expense incurred by our Europe reportable segment during the three months ended March 31, 2024 decreased $4.4 million, or 8.7%, from SG&A expense incurred by our Europe segment during the three months ended March 26, 2023. The decrease in SG&A expense was primarily due to a decrease in salaries expense related to the Pilgrim's Europe central restructuring initiative. Other factors affecting Europe SG&A expense were individually immaterial.

*Mexico Reportable Segment.* SG&A expense incurred by our Mexico reportable segment during the three months ended March 31, 2024 decreased approximately $1.6 million, or 10.0%, from SG&A expense incurred by our Mexico segment during the three months ended March 26, 2023. The primary driver of the decrease in SG&A expense was a decrease in marketing spend and labor costs. Other factors affecting Mexico SG&A expense were individually immaterial.

*Restructuring activities.* Losses on restructuring activities of $14.6 million were recognized in the three months ended March 31, 2024. These losses were incurred by our Europe reportable segment as a result of the beginning phases of the Pilgrim's Europe integration plan.

*Net interest expense.* Net interest expense decreased to $30.9 million recognized in the three months ended March 31, 2024 from $39.1 million recognized in the three months ended March 26, 2023. The decrease in net interest expense resulted primarily from an increase in interest income earned from investments in available-for-sale securities, and a decrease in interest expense.

*Income taxes.* Income tax expense increased to $52.1 million, a 22.9% effective tax rate, for the three months ended March 31, 2024 compared to an income tax benefit of $8.8 million, a 275.5% effective tax rate, for the three months ended March 26, 2023. The change from an income tax benefit to an income tax expense in 2024 resulted primarily from the increase in profit before income taxes.

### Liquidity and Capital Resources

The following table presents our available sources of liquidity as of March 31, 2024:

*(In millions)*

| Sources of Liquidity | Facility Amount | Amount Outstanding | Amount Available |
| --- | ---: | ---: | ---: |
| Cash and cash equivalents |  |  | $870.8 |
| Borrowing arrangements: |  |  |  |
| U.S. Credit Facility(a) | $850.0 | $— | 825.2 |
| Mexico Credit Facility(b) | 67.0 | — | 67.0 |
| Europe Credit Facility(c) | 189.3 | — | 189.3 |

(a) Availability under the U.S. Credit Facility is also reduced by our outstanding standby letters of credit. Standby letters of credit outstanding at March 31, 2024 totaled $24.8 million.

(b) The U.S. dollar-equivalent of the facility amount under the Mexico Credit Facility is $67.0 million (Mex$1.1 billion).

(c) The U.S. dollar-equivalent of the facility amount under the Europe Credit Facility is $189.3 million (£150 million).

We expect cash flows from operations, combined with availability under our credit facilities, to provide sufficient liquidity to fund current obligations, projected working capital requirements, maturities of long-term debt and capital spending for at least the next twelve months.

### Historical Flow of Funds

*(In millions)*

| Cash Flows from Operating Activities | Three Months Ended March 31, 2024 | March 26, 2023 |
| --- | ---: | ---: |
| Net income | $174.9 | $5.6 |
| Net noncash expenses | 127.3 | 65.4 |
| Changes in operating assets and liabilities: |  |  |
| Trade accounts and other receivables | 72.4 | (132.8) |
| Inventories | 114.5 | (30.3) |
| Prepaid expenses and other current assets | (27.6) | (20.3) |
| Accounts payable, accrued expenses and other current liabilities | (212.8) | (43.6) |
| Income taxes | 35.8 | 3.2 |
| Long-term pension and other postretirement obligations | (1.3) | 1.0 |
| Other operating assets and liabilities | (12.2) | (9.9) |
| Cash provided by operating activities | $271.0 | $(161.7) |

### Net Noncash Expenses

Items necessary to reconcile from net income to cash flow provided by operating activities included net noncash expenses of $127.3 million for the three months ended March 31, 2024. Net noncash expense items included depreciation and amortization of $103.4 million, deferred income tax expense of $15.5 million, stock-based compensation costs of $4.7 million, losses on property disposals of $1.8 million, loan cost amortization of $1.3 million, and accretion of discounts related to Senior Notes of $0.6 million. Other net noncash items were immaterial.

Items necessary to reconcile from net income to cash flow provided by or used in operating activities included net noncash expenses of $65.4 million for the three months ended March 26, 2023. Net noncash expense items included depreciation and amortization of $98.3 million, loan cost amortization of $1.3 million, stock-based compensation of $1.2 million and accretion of discounts related to Senior Notes of $0.4 million. These expense items were partially offset by a deferred income tax benefit of $26.3 million and gains on property disposals of $9.3 million.

### Changes in Operating Assets and Liabilities

The change in trade accounts and other receivables represented a $72.4 million source of cash related to operating activities for the three months ended March 31, 2024. This change primarily resulted from a decrease in trade accounts receivable and receivables from insurance recoveries. The change in trade accounts and other receivables represented a $132.8 million use of cash related to operating activities for the three months ended March 26, 2023. This change primarily resulted from an increase in trade accounts receivable and receivables from insurance recoveries recognized in March 2023.

The change in inventories represented a $114.5 million source of cash related to operating activities for the three months ended March 31, 2024. This change resulted primarily from decreased raw materials and work-in-process and finished goods inventories primarily due to lower feed ingredient costs. The change in inventories represented a $30.3 million use of cash related to operating activities for the three months ended March 26, 2023. This change resulted primarily from increased raw material costs, such as feed ingredients, and increased finished goods inventories.

The change in prepaid expenses and other current assets represented a $27.6 million use of cash related to operating activities for the three months ended March 31, 2024. This change resulted primarily from an increase in prepaid indirect taxes in our Mexico and Europe reportable segments. The change in prepaid expenses and other current assets represented a $20.3 million use of cash related to operating activities for the three months ended March 26, 2023. This change resulted primarily from a net increase in VAT refund receivables.

The change in accounts payable, accrued expenses and other current liabilities represented a $212.8 million use of cash related to operating activities for the three months ended March 31, 2024. This change resulted primarily from timing of payments to our suppliers and a reduction in grain input costs. The change in accounts payable, revenue contract liabilities, accrued expenses and other current liabilities represented a $43.6 million use of cash related to operating activities for the three months ended March 26, 2023. This change resulted primarily from the payment of bonuses accrued in 2022.

The change in income taxes, which includes income taxes receivable, income taxes payable, deferred tax assets, deferred tax liabilities, reserves for uncertain tax positions, and the tax components within accumulated other comprehensive loss, represented a $35.8 million and $3.1 million source of cash for the three months ended March 31, 2024 and March 26, 2023, respectively.

*(In millions)*

| Cash Flows from Investing Activities | Three Months Ended March 31, 2024 | March 26, 2023 |
| --- | ---: | ---: |
| Acquisitions of property, plant and equipment | $(108.4) | $(131.7) |
| Proceeds from property disposals | 2.2 | 12.6 |
| Proceeds from property insurance recoveries | — | 1.6 |
| Cash used in investing activities | $(106.2) | $(117.5) |

Capital expenditures were incurred for growth projects, such as the South Georgia protein conversion plant, and to improve operational efficiencies, system enhancement projects, and reduce costs for the three months ended March 31, 2024.

Capital expenditures for the three months ended March 26, 2023 were primarily incurred to improve operational efficiencies and reduce costs and also included investments in the Athens, GA plant expansion, the South Georgia protein conversion plant and other automation projects. Proceeds from property disposals for the three months ended March 26, 2023 were primarily for the sale of a farm in Mexico. Proceeds from property insurance recoveries for the three months ended March 26, 2023 reflects cash received on insurance claims related to the losses incurred from the Mayfield, Kentucky tornado that occurred in December 2021.

*(In millions)*

| Cash Flows from Financing Activities | Three Months Ended March 31, 2024 | March 26, 2023 |
| --- | ---: | ---: |
| Proceeds (distribution) from Tax Sharing Agreement with JBS USA Holdings | $1.4 | $(1.6) |
| Payments on revolving line of credit, long-term borrowings and finance lease obligations | (0.1) | (6.5) |
| Proceeds from revolving line of credit and long-term borrowings | — | 35.0 |
| Cash provided by financing activities | $1.3 | $26.9 |

The proceeds from the Tax Sharing Agreement with JBS USA Holdings were a payment of net tax incurred during the tax year 2023. Payments on revolving line of credit, long-term borrowings and finance lease obligations are primarily related to payments on finance lease obligations.

For the three months ended March 26, 2023, proceeds from revolving line of credit and long-term borrowings include the borrowing on the revolver under the U.S. Credit Facility of $35.0 million. Payments on revolving line of credit, long-term borrowings and finance lease obligations include a principal payment of $6.3 million on the U.S. term loan and payments of $0.2 million on finance leases. The Distribution from Tax Sharing Agreement with JBS USA Holdings is payment of net tax incurred during the tax year 2022 under the tax sharing agreement.

### Long-Term Debt and Other Borrowing Arrangements

Our long-term debt and other borrowing arrangements consist of senior notes, revolving credit facilities and other term loan agreements. For a description, refer to “Note 12. Debt.”

### Obligor Group Summarized Financial Information

All of the senior unsecured registered notes (collectively, the “Pilgrim’s Senior Notes”) issued by Pilgrim’s Pride Corporation prior to March 31, 2024 are fully and unconditionally guaranteed by Pilgrim’s Pride Corporation of West Virginia Inc., JFC LLC, Gold’n Plump Farms LLC and Gold’n Plump Poultry LLC (the “Subsidiary Guarantors”). As of the date of this report, there have been no significant changes to our senior unsecured reigstered notes from those described in “Part II, Item 8. Financial Statements and Supplementary Data-Note 13. Debt” in our annual report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2024 (the “2023 Annual Report”).

The following tables present summarized financial information for Pilgrim’s Pride Corporation parent company only (as issuer of the Pilgrim’s Senior Notes) and the Subsidiary Guarantors (together, the “Obligor Group”), on a combined basis after the elimination of all intercompany balances and transactions between Pilgrim’ Pride Corporation parent company only and the Subsidiary Guarantors and investments in any non-obligated subsidiary.

*(In millions)*

| Summarized Balance Sheets | March 31, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Current assets | $2,052 | $2,106 |
| Current assets due from non-obligated subsidiaries(a) | 193 | 192 |
| Current assets due from related parties(b) | 2 | — |
| Noncurrent assets | 2,082 | 2,063 |
| Current liabilities | 1,254 | 1,384 |
| Current liabilities due to non-obligated subsidiaries(a) | 326 | 325 |
| Current liabilities due to related parties(b) | 6 | 32 |
| Noncurrent liabilities | 3,590 | 3,578 |

(a) Represents receivables and short-term lending due from and payables and short-term lending due to non-obligated subsidiaries.

(b) Represents receivables due from and payables due to JBS affiliates.

*(In millions)*

| Summarized Income Statements | Three Months Ended March 31, 2024 |
| --- | ---: |
| Net sales | $2,596 |
| Gross profit(a) | 239 |
| Operating income | 183 |
| Net income | 106 |
| Net income attributable to Obligor Group | 106 |

(a) For the three months ended March 31, 2024, the Obligor Group recognized $46.0 million of net sales to the non-obligated subsidiaries and no purchases from the non-obligated subsidiaries.

### Pillar II Tax Initiative

Starting in 2024, Pillar II legislation has come into effect in various countries, impacting multinational companies operating in these jurisdictions. As of March 31, 2024, the Company continues to monitor the impacts of Pillar II and has yet to identify any material impacts to the Condensed Consolidated Financial Statements.

### Recent Accounting Pronouncements

See “Note 1. Business and Summary of Significant Accounting Policies” of our Condensed Consolidated Financial Statements included in this quarterly report for additional information relating to these recent accounting pronouncements.

### Critical Accounting Policies and Estimates

As of the date of this report, there have been no significant changes to our critical accounting policies and estimates from those described in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates” in our 2023 Annual Report.

### Reconciliation of Net Income to EBITDA and Adjusted EBITDA

“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 gains, (2) costs related to litigation settlements, (3) restructuring activities losses, and (4) net income attributable to noncontrolling interests. EBITDA is presented because it is used by us 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. We believe investors would be interested in our Adjusted EBITDA because this is how our management analyzes EBITDA applicable to continuing operations. We also believe that Adjusted EBITDA, in combination with our 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 our performance with our 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. Some of the limitations of these measures are:

- They do not reflect our cash expenditures, future requirements for capital expenditures or contractual commitments;
- They do not reflect changes in, or cash requirements for, our working capital needs;
- They do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our debt;
- Although depreciation and amortization are noncash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;
- They are not adjusted for all noncash income or expense items that are reflected in our statements of cash flows;
- EBITDA does not reflect the impact of earnings or charges attributable to noncontrolling interests;
- They do not reflect the impact of earnings or charges resulting from matters we consider to not be indicative of our ongoing operations; and
- They do not reflect limitations on or costs related to transferring earnings from our subsidiaries to us.

In addition, other companies in our industry may calculate these measures differently than we do, 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. You should compensate for these limitations by relying primarily on our U.S. GAAP results and using EBITDA and Adjusted EBITDA only on a supplemental basis.

*(In thousands)*

|  | Three Months Ended March 31, 2024 |
| --- | ---: |
| Net income | $174,938 |
| Add: |  |
| Interest expense, net | 30,897 |
| Income tax expense | 52,062 |
| Depreciation and amortization | 103,350 |
| EBITDA | 361,247 |
| Add: |  |
| Litigation settlements | 940 |
| Restructuring activities losses | 14,559 |
| Minus: |  |
| Foreign currency transaction gains | 4,337 |
| Net income attributable to noncontrolling interest | 517 |
| Adjusted EBITDA | $371,892 |

39

## Market risk

As filed, 11,798 characters.

### Market Risk-Sensitive Instruments and Positions

The risk inherent in our market risk-sensitive instruments and positions is primarily the potential loss arising from adverse changes in commodity prices, foreign currency exchange rates, interest rates and the credit quality of available-for-sale securities as discussed below. The sensitivity analyses presented do not consider the effects that such adverse changes may have on overall economic activity, nor do they consider additional actions our management may take to mitigate our exposure to such changes. Actual results may differ from those described below.

### Commodity Prices

We purchase certain commodities, primarily corn, soybean meal, soybean oil, and wheat, for use as ingredients in the feed we either sell commercially or consume in our live operations. As a result, our earnings are affected by changes in the price and availability of such feed ingredients. We have from time to time attempted to minimize our exposure to the changing price and availability of such feed ingredients using various techniques, including, but not limited to, (1) executing purchase agreements with suppliers for future physical delivery of feed ingredients at established prices and (2) purchasing or selling derivative financial instruments such as futures and options.

For this sensitivity analysis, market risk is estimated as a hypothetical 10% increase in the weighted-average cost of our primary feed ingredients as of the periods presented. The impact of this fluctuation, if realized, could be mitigated by related commodity hedging activity. However, fluctuations greater than 10% could occur.

*(In thousands)*

|  | Three Months Ended March 31, 2024 Amount | Impact of 10% Increase in Feed Ingredient Prices |
| --- | ---: | ---: |
| Feed ingredient purchases(a) | $890,817 | $89,082 |
| Feed ingredient inventory(b) | 158,418 | 15,842 |

(a) Based on our feed consumption, a 10% increase in the price of our feed ingredient purchases would have increased cost of sales for the three months ended March 31, 2024.

(b) A 10% increase in ending feed ingredient prices would have increased inventories as of March 31, 2024.

*(In thousands)*

|  | March 31, 2024 Amount | Impact of 10% Increase in Commodity Prices |
| --- | ---: | ---: |
| Net commodity derivative assets(a) | $40,762 | $4,076 |

(a) We purchase commodity derivative financial instruments, specifically exchange-traded futures and options, in an attempt to mitigate price risk related to our anticipated consumption of commodity inputs for the next 12 months. A 10% increase in corn, soybean meal, soybean oil and wheat prices would have resulted in an increase in the fair value of our net commodity derivative asset position, including margin cash, as of March 31, 2024.

### Interest Rates

*Fixed-rate debt.* Market risk for fixed-rate debt is estimated as the potential decrease in fair value resulting from a hypothetical increase in interest rates of 10%. Using a discounted cash flow analysis, a hypothetical 10% increase in interest rates would have decreased the fair value of our fixed-rate debt by $112.5 million as of March 31, 2024.

### Foreign Currency

#### Mexico Subsidiaries

Our earnings are also affected by foreign exchange rate fluctuations related to the Mexican peso net monetary position of our Mexico subsidiaries. We manage this exposure primarily by attempting to minimize our Mexican peso net monetary position. We are also exposed to the effect of potential currency exchange rate fluctuations to the extent that amounts are repatriated from Mexico to the U.S.

The Mexican peso exchange rate can directly and indirectly impact our financial condition and results of operations. For this sensitivity analysis, market risk is estimated as a hypothetical 10% change in the current exchange rate used to convert Mexican pesos to U.S. dollars as of March 31, 2024. However, fluctuations greater than 10% could occur. No assurance can be given as to how future movements in the Mexican peso could affect our future financial condition or results of operations.

*(In thousands, except for exchange rate data)*

|  | Three Months Ended March 31, 2024 Impact of 10% Deterioration in Exchange Rate | Impact of 10% Appreciation in Exchange Rate |
| --- | ---: | ---: |
| Foreign currency remeasurement gain (loss) | $(15,525) | $18,975 |
| Exchange rate of Mexican peso to the U.S. dollar: |  |  |
| As reported | 16.56 | 16.56 |
| Hypothetical 10% change | 18.21 | 14.90 |

#### Europe Foreign Investments

We are exposed to foreign exchange-related variability of investments and earnings from our Europe subsidiaries. Foreign currency market risk is the possibility that our financial results or financial position could be better or worse than planned because of changes in foreign currency exchange rates. For this sensitivity analysis, market risk is estimated as a hypothetical 10% change in exchange rates used to convert U.S. dollars to British pound and to euro, and the effect of this change on our Europe foreign investments.

*Net Assets.* As of March 31, 2024, our Europe subsidiaries that are denominated in British pounds had net assets of $4.2 billion. A 10% weakening in British pound against the U.S. dollar exchange rate would cause a decrease in the net assets of our Europe subsidiaries by $386.1 million. A 10% strengthening in the British pound against the U.S dollar exchange rate would cause an increase in the net assets of our Europe subsidiaries of $471.9 million.

*Cash flow hedging transactions.* We periodically enter into foreign currency forward contracts, which are designated and qualify as cash flow hedges, to hedge foreign currency risk on a portion of sales generated and purchases made by our Europe segment. A 10% weakening or strengthening of the U.S. dollar against the British pound and U.S. dollar against the euro would result in immaterial changes in the fair values of these derivative instruments. No assurance can be given as to how future movements in currency rates could affect our future financial condition or results of operations.

### Quality of Investments

Certain retirement plans that we sponsor invest in a variety of financial instruments. We have analyzed our portfolios of investments and, to the best of our knowledge, none of our investments, including money market funds units, commercial paper and municipal securities, have been downgraded, and neither we nor any fund in which we participate hold significant amounts of structured investment vehicles, auction rate securities, collateralized debt obligations, credit derivatives, hedge funds investments, fund of funds investments or perpetual preferred securities. Certain postretirement funds in which we participate hold significant amounts of mortgage-backed securities. However, none of the mortgages collateralizing these securities are considered subprime.

### Impact of Inflation

The U.S., Mexico and most of Europe continue to experience inflation at above-historical levels, though to a lesser degree than in the prior year. None of the locations in which we operate are experiencing hyperinflation. We have responded to these inflationary challenges by continuing negotiations with customers to recoup the extraordinary costs we have experienced. We also continue to focus on operational initiatives that aim to deliver labor efficiencies, better agricultural performance and improved yields.

### Forward Looking Statements

Certain written and oral statements made by our Company and subsidiaries of our Company may constitute “forward-looking statements” as defined under the Private Securities Litigation Reform Act of 1995. This includes statements made herein, in our other filings with the SEC, in press releases, and in certain other oral and written presentations. Statements of our intentions, beliefs, expectations or predictions for the future, denoted by the words “anticipate,” “believe,” “estimate,” “expect,” “project,” “plan,” “imply,” “intend,” “should,” “foresee” and similar expressions, are forward-looking statements that reflect our current views about future events and are subject to risks, uncertainties and assumptions. Such risks, uncertainties and assumptions include the following:

- Matters affecting the chicken and pork industries generally, including fluctuations in the commodity prices of feed ingredients, pigs and chicken;
- Our ability to obtain and maintain commercially reasonable terms with vendors and service providers;
- Our ability to maintain contracts that are critical to our operations;
- Our ability to retain management and other key individuals;
- Outbreaks of avian influenza or other diseases, either in our own flock or elsewhere, affecting our ability to conduct our operations and/or demand for our poultry products;
- Contamination of our 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;
- Changes in laws or regulations affecting our operations or the application thereof;
- Our ability to ensure that our directors, officers, employees, agents, third-party intermediaries and the companies to which we outsource certain of our business operations will comply with anti-corruption laws or other laws governing the conduct of business with government entities;
- New immigration legislation or increased enforcement efforts in connection with existing immigration legislation that cause our costs of business to increase, cause us to change the way in which we do business or otherwise disrupt our operations;
- Competitive factors, inflation and pricing pressures, or the loss of one or more of our largest customers;
- Inability to consummate, or effectively integrate, any acquisition or to realize the associated anticipated cost savings and operating synergies;
- Currency exchange rate fluctuations, trade barriers, exchange controls, expropriation and other risks associated with foreign segments, including risks associated with Brexit;
- Restrictions imposed by, and as a result of, Pilgrim’s leverage;
- Disruptions in international markets and distribution channels for various reasons, including, but not limited to, the ongoing Russia-Ukraine or Israel-Hamas wars;
- The impact of cyber-attacks, natural disasters, power losses, unauthorized access, telecommunication failures, and other problems on our information systems;
- Our ability to maintain favorable labor relations with our employees and our compliance with labor laws;
- Extreme weather or natural disasters;
- The impact of uncertainties in litigation; and
- Other risks described herein and under “Risk Factors” in our 2023 Annual Report.

Actual results could differ materially from those projected in these forward-looking statements as a result of these factors, among others, many of which are beyond our control.

The Company’s forward-looking statements speak only as of the date of this report or as of the date they are made. In making these statements, we are not undertaking, and specifically decline to undertake, any obligation to address or update each or any factor in future filings or communications regarding our business or results, and we are not undertaking to address how any of these factors may have caused changes to information contained in previous filings or communications. Although we have attempted to list comprehensively these important cautionary risk factors, we must caution investors and others that other factors may in the future prove to be important and affect our business or results of operations.

## Controls and procedures

As filed, 2,524 characters.

### Disclosure Controls and Procedures

Under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), “disclosure controls and procedures” means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As of March 31, 2024, the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation and subject to the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2024, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information we are required to disclose in our reports filed with the SEC is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

### Changes in Internal Control over Financial Reporting

The Company’s management, including the Chief Executive Officer and Chief Financial Officer, identified no change in the Company’s internal control over financial reporting that occurred during the three months ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

During 2024, the Company will begin the first phase of a multi-year implementation of an enterprise resource planning (“ERP”) system. The implementation is not expected to materially affect our internal control over financial reporting.

## Risk factors

As filed, 419 characters.

For a discussion of our potential risks and uncertainties, please see “ Part I—Item 1A—Risk Factors” and “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 Annual Report and “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein, in each case as updated by the Company’s periodic filings with the SEC.

Filed May 2, 2024.
Source: SEC EDGAR, the filing index for accession 0000802481-24-000036. Last ingested by Listed: Oct 29, 2026, 06:16 ET. No prices; not investment advice.