Pilgrim’s Pride Reports Second Quarter 2021 Results with Strong Growth in Sales and Adjusted EBITDA Margins

Greeley, Colorado, UNITED STATES


GREELEY, Colo., July 28, 2021 (GLOBE NEWSWIRE) -- Pilgrim’s Pride Corporation (NASDAQ: PPC), one of the world's largest poultry producers, reports its second quarter 2021 financial results.

Second Quarter Highlights

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

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

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

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

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

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

Conference Call Information

A conference call to discuss Pilgrim’s quarterly results will be held tomorrow, July 29, at 7:00 a.m. MT (9 a.m. ET). Participants are encouraged to pre-register for the conference call using the link below. Callers who pre-register will be given a unique PIN to gain immediate access to the call and bypass the live operator. Participants may pre-register at any time, including up to and after the call start time.

To pre-register, go to: https://services.choruscall.com/links/ppc210729.html

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

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

Replays of the conference call will be available on Pilgrim’s website approximately two hours after the call concludes and can be accessed through the “Investor” section of www.pilgrims.com. The webcast will be available for replay through October 28, 2021.

About Pilgrim’s Pride

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

Forward-Looking Statements

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

Contact:    Julie Kegley – Financial Profiles
Investor Relations
IRPPC@pilgrims.com
www.pilgrims.com
   


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
     
  (Unaudited)  
  June 27, 2021 December 27, 2020
  (In thousands)
Cash and cash equivalents $391,805  $547,624 
Restricted cash and cash equivalents 98,212  782 
Trade accounts and other receivables, less allowance for doubtful accounts 866,476  741,992 
Accounts receivable from related parties 868  1,084 
Inventories 1,530,014  1,358,793 
Income taxes receivable 51,351  69,397 
Prepaid expenses and other current assets 190,574  183,039 
Total current assets 3,129,300  2,902,711 
Deferred tax assets 5,494  5,471 
Other long-lived assets 26,837  24,780 
Operating lease assets, net 295,391  288,886 
Identified intangible assets, net 589,536  589,913 
Goodwill 1,024,900  1,005,245 
Property, plant and equipment, net 2,677,387  2,657,491 
Total assets $7,748,845  $7,474,497 
     
Accounts payable $1,092,164  $1,028,710 
Accounts payable to related parties 8,595  9,650 
Revenue contract liabilities 36,275  65,918 
Accrued expenses and other current liabilities 1,051,546  807,847 
Income taxes payable 30,681   
Current maturities of long-term debt 25,453  25,455 
Total current liabilities 2,244,714  1,937,580 
Noncurrent operating lease liability, less current maturities 221,345  217,432 
Long-term debt, less current maturities 2,270,298  2,255,546 
Deferred tax liabilities 318,159  339,831 
Other long-term liabilities 99,817  148,761 
Total liabilities 5,154,333  4,899,150 
Common stock 2,614  2,612 
Treasury stock (345,134) (345,134)
Additional paid-in capital 1,959,558  1,954,334 
Retained earnings 906,090  972,569 
Accumulated other comprehensive income (loss) 59,354  (20,620)
Total Pilgrim’s Pride Corporation stockholders’ equity 2,582,482  2,563,761 
Noncontrolling interest 12,030  11,586 
Total stockholders’ equity 2,594,512  2,575,347 
Total liabilities and stockholders’ equity $7,748,845  $7,474,497 
         


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
         
  Three Months Ended Six Months Ended
  June 27, 2021 June 28, 2020 June 27, 2021 June 28, 2020
  (In thousands, except per share data)
Net sales $3,637,698  $2,824,023  $6,911,123  $5,898,951 
Cost of sales 3,257,457  2,704,164  6,269,639  5,601,993 
Gross profit 380,241  119,859  641,484  296,958 
Selling, general and administrative expense 503,372  92,570  606,151  185,283 
Operating income (123,131) 27,289  35,333  111,675 
Interest expense, net of capitalized interest 50,651  32,323  80,985  65,011 
Interest income (842) (1,158) (3,208) (2,848)
Foreign currency transaction loss (gain) 4,145  5,525  6,659  (12,860)
Miscellaneous, net (770) (45) (8,614) (34,233)
Income before income taxes (176,315) (9,356) (40,489) 96,605 
Income tax expense (9,812) (2,956) 25,546  35,556 
Net income (166,503) (6,400) (66,035) 61,049 
Less: Net income attributable to noncontrolling interests 184  (364) 444  (183)
Net income attributable to Pilgrim’s Pride Corporation $(166,687) $(6,036) $(66,479) $61,232 
         
Weighted average shares of Pilgrim's Pride Corporation common stock outstanding:        
Basic 243,675  246,687  243,627  248,017 
Effect of dilutive common stock equivalents       291 
Diluted 243,675  246,687  243,627  248,308 
         
Net income attributable to Pilgrim's Pride Corporation per share of common stock outstanding:        
Basic $(0.68) $(0.02) $(0.27) $0.25 
Diluted $(0.68) $(0.02) $(0.27) $0.25 
                 


PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
  Six Months Ended
  June 27, 2021 June 28, 2020
  (In thousands)
Cash flows from operating activities:    
Net income $(66,035) $61,049 
Adjustments to reconcile net income to cash provided by operating activities:    
Depreciation and amortization 182,260  164,376 
Loss on early extinguishment of debt recognized as a component of interest expense 24,254   
Deferred income tax expense (32,809) 25,255 
Stock-based compensation 5,168  3,467 
Gain on property disposals (5,057) (1,587)
Loan cost amortization 2,279  2,422 
Accretion of discount related to Senior Notes 675  491 
Amortization of premium related to Senior Notes (167) (334)
Loss (gain) on equity-method investments (8) 304 
Negative adjustment to previously recognized gain on bargain purchase   1,740 
Changes in operating assets and liabilities:    
Trade accounts and other receivables (117,610) 29,920 
Inventories (173,947) 16,350 
Prepaid expenses and other current assets (6,027) (22,072)
Accounts payable, accrued expenses and other current liabilities 266,487  (122,191)
Income taxes 46,638  (27,350)
Long-term pension and other postretirement obligations (9,507) (1,908)
Other operating assets and liabilities (1,642) 10,794 
Cash provided by operating activities 114,952  140,726 
Cash flows from investing activities:    
Acquisitions of property, plant and equipment (183,744) (148,175)
Proceeds from property disposals 21,385  9,894 
Purchase of acquired business, net of cash acquired   (4,216)
Cash used in investing activities (162,359) (142,497)
Cash flows from financing activities:    
Proceeds from revolving line of credit and long-term borrowings 1,540,133  356,547 
Payments on revolving line of credit, long-term borrowings and finance lease obligations (1,522,416) (20,105)
Payment on early extinguishment of debt (21,258)  
Payment of capitalized loan costs (8,650)  
Payment of equity distribution under Tax Sharing Agreement between JBS USA Food Company Holdings and Pilgrim’s Pride Corporation (650)  
Purchase of common stock under share repurchase program   (77,879)
Cash provided by financing activities (12,841) 258,563 
Effect of exchange rate changes on cash and cash equivalents 1,859  (2,896)
Increase in cash, cash equivalents and restricted cash (58,389) 253,896 
Cash, cash equivalents and restricted cash, beginning of period 548,406  280,577 
Cash, cash equivalents and restricted cash, end of period $490,017  $534,473 
         

PILGRIM’S PRIDE CORPORATION

Non-GAAP Financial Measures Reconciliation

(Unaudited)

“EBITDA” is defined as the sum of net income plus interest, taxes, depreciation and amortization. “Adjusted EBITDA” is calculated by adding to EBITDA certain items of expense and deducting from EBITDA certain items of income that we believe are not indicative of our ongoing operating performance consisting of: (1) foreign currency transaction loss (gain), (2) transaction costs from business acquisitions, (3) DOJ agreement & litigation settlements, (4) negative adjustment to previously recognized gain on bargain purchase, (5) shareholder litigation settlement, (6) deconsolidation of a subsidiary and (7) net income attributable to noncontrolling interest. EBITDA is presented because it is used by management and we believe it is frequently used by securities analysts, investors and other interested parties, in addition to and not in lieu of results prepared in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”), to compare the performance of companies. We believe investors would be interested in our Adjusted EBITDA because this is how our management analyzes EBITDA applicable to continuing operations. The Company also believes that Adjusted EBITDA, in combination with the Company’s financial results calculated in accordance with U.S. GAAP, provides investors with additional perspective regarding the impact of certain significant items on EBITDA and facilitates a more direct comparison of its performance with its competitors. EBITDA and Adjusted EBITDA are not measurements of financial performance under U.S. GAAP. EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as substitutes for an analysis of our results as reported under U.S. GAAP. In addition, other companies in our industry may calculate these measures differently limiting their usefulness as a comparative measure. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as an alternative to net income as indicators of our operating performance or any other measures of performance derived in accordance with U.S. GAAP. These limitations should be compensated for by relying primarily on our U.S. GAAP results and using EBITDA and Adjusted EBITDA only on a supplemental basis.

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted EBITDA
(Unaudited)
        
 Three Months Ended Six Months Ended
 June 27, 2021 June 28, 2020 June 27, 2021 June 28, 2020
 (In thousands)
Net income$(166,503) $(6,400) $(66,035) $61,049 
Add:       
Interest expense, net(a)49,809  31,165  77,777  62,163 
Income tax expense(9,812) (2,956) 25,546  35,556 
Depreciation and amortization95,728  84,603  182,260  164,376 
EBITDA(30,778) 106,412  219,548  323,144 
Add:       
Foreign currency transaction loss (gain)(b)4,145  5,525  6,659  (12,860)
Transaction costs related to acquisitions(c)2,545  (81) 2,545  134 
DOJ agreement & litigation settlements(d)395,886    398,285   
Minus:       
Negative adjustment to previously recognized gain on bargain purchase(e)      (1,740)
Shareholder litigation settlement(f)      34,643 
Deconsolidation of subsidiary(g)    1,131   
Net income attributable to noncontrolling interest184  (364) 444  (183)
Adjusted EBITDA$371,614  $112,220  $625,462  $277,698 
                

(a) Interest expense, net, consists of interest expense less interest income.
(b) The Company measures the financial statements of its Mexico reportable segment as if the U.S. dollar were the functional currency. Accordingly, we remeasure assets and liabilities, other than nonmonetary assets, of the Mexico reportable segment at current exchange rates. We remeasure nonmonetary assets using the historical exchange rate in effect on the date of each asset’s acquisition. Currency exchange gains or losses resulting from these remeasurements, as well as, from our U.K. and Europe reportable segment are included in the line item Foreign currency transaction loss (gain) in the Condensed Consolidated Statements of Income.
(c) Transaction costs related to acquisitions includes those charges that are incurred in conjunction with business acquisitions.
(d) On October 13, 2020, Pilgrims announced that we have entered into a plea agreement (the “Plea Agreement”) with the DOJ. As a result of the Plea Agreement, we recognized a fine of $110,524,140. On February 23, 2021, the Colorado Court approved the Plea Agreement and assessed a fine of $107.9 million. The difference from prior accrual to updated amount was recognized during the three months ended March 28, 2021. This difference recognized in the three and six months ended June 28, 2021 was offset by amounts recognized in anticipation of probable settlements in ongoing litigation.
(e) The gain on bargain purchase was recognized as a result of the PPL acquisition in October 2019. The amount shown above represents a working capital adjustment to the previously recorded gain on bargain purchase.
(f) Shareholder litigation settlement is income received as a result of a settlement in the first quarter of 2020.
(g) This represents a gain recognized as a result of deconsolidation of a subsidiary.

The summary unaudited consolidated income statement data for the twelve months ended June 27, 2021 (the LTM Period) have been calculated by subtracting the applicable unaudited consolidated income statement data for the six months ended June 28, 2020 from the sum of (1) the applicable audited consolidated income statement data for the year ended December 27, 2020 and (2) the applicable unaudited consolidated income statement data for the six months ended June 27, 2021.

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

EBITDA margins have been calculated by taking the relevant unaudited EBITDA figures, then dividing by net sales for the applicable period. EBITDA margins are presented because they are used by management and we believe it is frequently used by securities analysts, investors and other interested parties, as a supplement to our results prepared in accordance with U.S. GAAP, to compare the performance of companies.

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

Adjusted Operating Income is calculated by adding to Operating Income certain items of expense and deducting from Operating Income certain items of income. Management believes that presentation of Adjusted Operating Income provides useful supplemental information about our operating performance and enables comparison of our performance between periods because certain costs shown below are not indicative of our current operating performance. A reconciliation of GAAP operating income to adjusted operating income as follows:

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted Operating Income
(Unaudited)
        
 Three Months Ended Six Months Ended
 June 27, 2021 June 28, 2020 June 27, 2021 June 28, 2020
 (In thousands)
GAAP operating income (U.S. operations)$(224,171) $39,448  $(156,046) $124,500 
Transaction costs related to acquisitions2,545  (81) 2,545  134 
DOJ agreement & litigation settlements395,886    398,285   
Adjusted operating income (U.S. operations)$174,260  $39,367  $244,784  $124,634 
        
Adjusted operating income margin (U.S. operations)7.8% 2.2% 5.8% 3.3%
            

Adjusted Operating Income Margin for the U.S. is calculated by dividing Adjusted operating income by Net Sales. Management believes that presentation of Adjusted Operating Income Margin provides useful supplemental information about our operating performance and enables comparison of our performance between periods because certain costs shown below are not indicative of our current operating performance. A reconciliation of GAAP operating income margin for the U.S. to adjusted operating income margin for the U.S. is as follows:

PILGRIM'S PRIDE CORPORATION
Reconciliation of GAAP Operating Income Margin to Adjusted Operating Income Margin
(Unaudited)
        
 Three Months Ended Six Months Ended
 June 27, 2021 June 28, 2020 June 27, 2021 June 28, 2020
 (In percent)
GAAP operating income margin (U.S. operations)(10.0)% 2.2% (3.7)% 3.3%
Transaction costs related to acquisitions0.1% % 0.1% %
DOJ agreement & litigation settlements17.7% % 9.4% %
Adjusted operating income margin (U.S. operations)7.8% 2.2% 5.8% 3.3%
            

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

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted Net Income
(Unaudited)
        
 Three Months Ended Six Months Ended
 June 27, 2021 June 28, 2020 June 27, 2021 June 28, 2020
 (In thousands, except per share data)
Net income attributable to Pilgrim's$(166,687) $(6,036) $(66,479) $61,232 
Add:       
Foreign currency transaction losses (gains)4,145  5,525  6,659  (12,860)
Transaction costs related to acquisitions2,545  (81) 2,545  134 
DOJ agreement & litigation settlements395,886    398,285   
Loss on early extinguishment of debt recognized as a component of interest expense24,254    24,254   
Minus:       
Deconsolidation of subsidiary    1,131   
Adjusted net income attributable to Pilgrim's before tax impact of adjustments260,143  (592) 364,133  48,506 
Net tax impact of adjustments(a)(106,323) (1,356) (107,265) 3,170 
Adjusted net income attributable to Pilgrim's$153,820  $(1,948) $256,868  $51,676 
Weighted average diluted shares of common stock outstanding243,675  246,687  243,627  248,308 
Adjusted net income attributable to Pilgrim's per common diluted share$0.63  $(0.01) $1.05  $0.21 
                

(a) Net tax expense (benefit) of adjustments represents the tax impact of all adjustments shown above.

Adjusted EPS is calculated by dividing the adjusted net income attributable to Pilgrim's stockholders by the weighted average number of diluted shares. Management believes that Adjusted EPS provides useful supplemental information about our operating performance and enables comparison of our performance between periods because certain costs shown below are not indicative of our current operating performance. A reconciliation of U.S. GAAP to non-U.S. GAAP financial measures is as follows:

PILGRIM'S PRIDE CORPORATION
Reconciliation of GAAP EPS to Adjusted EPS
(Unaudited)
        
 Three Months Ended Six Months Ended
 June 27, 2021 June 28, 2020 June 27, 2021 June 28, 2020
 (In thousands, except per share data)
GAAP EPS$(0.68) $(0.02) $(0.27) $0.25 
Add:       
Foreign currency transaction losses (gains)0.02  0.02  0.03  (0.05)
Transaction costs related to acquisitions0.01    0.01   
DOJ agreement & litigation settlements1.62    1.63   
Loss on early extinguishment of debt recognized as a component of interest expense0.10    0.10   
Minus:       
Deconsolidation of subsidiary       
Adjusted EPS before tax impact of adjustments1.07    1.50  0.20 
Net tax impact of adjustments(a)(0.44) (0.01) (0.45) 0.01 
Adjusted EPS$0.63  $(0.01) $1.05  $0.21 
        
Weighted average diluted shares of common stock outstanding243,675  246,687  243,627  248,308 
            

(a) Net tax impact of adjustments represents the tax impact of all adjustments shown above.

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