Pilgrim's(PPC) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents Pilgrim's Pride Corporation's unaudited condensed consolidated financial statements and detailed notes for Q1 2025 Item 1. Condensed Consolidated Financial Statements Provides Pilgrim's Pride Corporation's unaudited condensed consolidated financial statements and detailed notes for Q1 2025 Condensed Consolidated Balance Sheets Presents the company's financial position, including assets, liabilities, and equity, for Q1 2025 Condensed Consolidated Balance Sheets (March 30, 2025 vs. December 29, 2024) | Indicator | March 30, 2025 (In thousands) | December 29, 2024 (In thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | $10,963,759 | $10,650,576 | 2.9% | | Total Liabilities | $7,816,312 | $6,397,180 | 22.2% | | Total Stockholders' Equity | $3,147,447 | $4,253,396 | -26.0% | | Current Liabilities | $3,989,749 | $2,552,133 | 56.3% | - The significant increase in Total Liabilities and Current Liabilities is primarily driven by the declaration of a special cash dividend, resulting in $1,495,382 thousand in dividends payable[10] Condensed Consolidated Statements of Income Details the company's revenues, expenses, and net income for Q1 2025 and comparative periods Condensed Consolidated Statements of Income (Three Months Ended March 30, 2025 vs. March 31, 2024) | Indicator | March 30, 2025 (In thousands) | March 31, 2024 (In thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $4,463,009 | $4,361,934 | 2.3% | | Gross profit | $554,873 | $383,909 | 44.5% | | Operating income | $404,482 | $250,274 | 61.6% | | Net income attributable to Pilgrim's Pride Corporation | $296,033 | $174,421 | 69.7% | | Diluted EPS | $1.24 | $0.73 | 69.9% | Condensed Consolidated Statements of Comprehensive Income Reports net income and other comprehensive income components for Q1 2025 and comparative periods Condensed Consolidated Statements of Comprehensive Income (Three Months Ended March 30, 2025 vs. March 31, 2024) | Indicator | March 30, 2025 (In thousands) | March 31, 2024 (In thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Net income | $296,343 | $174,938 | 69.4% | | Total other comprehensive income (loss), net of tax | $86,067 | $(29,881) | N/A | | Comprehensive income attributable to Pilgrim's Pride Corporation | $382,100 | $144,540 | 164.4% | - The significant increase in total other comprehensive income (loss) is primarily due to foreign currency translation gains of $84,972 thousand in Q1 2025, compared to losses of $(32,490) thousand in Q1 2024[13] Condensed Consolidated Statements of Stockholders' Equity Outlines changes in stockholders' equity, including retained earnings and comprehensive loss, for the period Condensed Consolidated Statements of Stockholders' Equity (March 30, 2025 vs. December 29, 2024) | Indicator | December 29, 2024 (In thousands) | March 30, 2025 (In thousands) | Change (In thousands) | | :--- | :--- | :--- | :--- | | Retained Earnings | $3,157,511 | $1,958,162 | $(1,199,349) | | Accumulated Other Comprehensive Loss | $(370,300) | $(284,233) | $86,067 | | Total Stockholders' Equity | $4,253,396 | $3,147,447 | $(1,105,949) | - Total Stockholders' Equity decreased significantly, primarily due to a special cash dividend of $1,495,382 thousand paid from retained earnings[15] Condensed Consolidated Statements of Cash Flows Summarizes cash flows from operating, investing, and financing activities for Q1 2025 Condensed Consolidated Statements of Cash Flows (Three Months Ended March 30, 2025 vs. March 31, 2024) | Cash Flow Activity | March 30, 2025 (In thousands) | March 31, 2024 (In thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Cash provided by operating activities | $126,891 | $271,027 | -53.2% | | Cash used in investing activities | $(97,089) | $(106,212) | 8.6% | | Cash provided by (used in) financing activities | $(3,553) | $1,256 | N/A | | Increase in cash, cash equivalents, restricted cash and restricted cash equivalents | $34,309 | $163,660 | -79.0% | Notes to Condensed Consolidated Financial Statements Provides detailed explanations of significant accounting policies and financial statement line items 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Describes company operations, geographic presence, ownership, and key accounting policy changes - Pilgrim's Pride Corporation is a major food company operating in the U.S., U.K., Mexico, France, Puerto Rico, Netherlands, and Republic of Ireland, primarily producing chicken, with pork and lamb operations in the U.K[21] - JBS S.A. beneficially owned 82.3% of the Company's outstanding common stock as of March 30, 2025[21] - The Company changed the functional currency of its Mexico operations from U.S. dollar to Mexican peso on April 1, 2024, due to the sustained strengthening of the Mexican peso and a shift in proportional spend, which did not have a material impact on consolidated financial statements[26][27] 2. REVENUE RECOGNITION Explains revenue recognition policies, including control transfer timing and disaggregated revenue data - Revenue is recognized when control of products transfers to the customer, typically upon destination or customer pick-up, with performance obligations usually fulfilled within days to weeks of order acceptance[33] Disaggregated Revenue by Geographic Region and Product Type (Three Months Ended March 30, 2025) | Region | Fresh (In thousands) | Prepared (In thousands) | Export (In thousands) | Other (In thousands) | Total (In thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | | U.S. | $2,214,885 | $323,909 | $109,165 | $95,230 | $2,743,189 | | Europe | $322,054 | $758,678 | $123,861 | $26,936 | $1,231,529 | | Mexico | $411,895 | $50,415 | $— | $25,981 | $488,291 | | Total net sales | $2,948,834 | $1,133,002 | $233,026 | $148,147 | $4,463,009 | Revenue Contract Liabilities (December 29, 2024 vs. March 30, 2025) | Indicator | Amount (In thousands) | | :--- | :--- | | Balance as of December 29, 2024 | $48,898 | | Revenue recognized | $(40,671) | | Cash received, excluding amounts recognized as revenue during the period | $34,193 | | Effect of exchange rates | $(8) | | Balance as of March 30, 2025 | $42,412 | 3. DERIVATIVE FINANCIAL INSTRUMENTS Details the company's use of derivative instruments to manage commodity price and foreign currency risks - The Company uses exchange-traded futures and options to mitigate price risk for commodity inputs (corn, soybean meal, wheat, natural gas, etc.) and foreign currency forward contracts to manage foreign exchange risk in its international operations[42][43] Fair Values of Derivative Instruments (March 30, 2025 vs. December 29, 2024) | Instrument Type | March 30, 2025 (In thousands) | December 29, 2024 (In thousands) | | :--- | :--- | :--- | | Commodity derivative assets | $5,552 | $6,598 | | Commodity derivative liabilities | $(11,912) | $(2,494) | | Foreign currency derivative assets | $1,246 | $755 | | Foreign currency derivative liabilities | $(237) | $(1,397) | | Sales contract derivative assets | $1,652 | $— | | Sales contract derivative liabilities | $— | $(778) | | Cash collateral posted with brokers | $10,685 | $2,324 | Gains and Losses from Undesignated Derivative Instruments (Three Months Ended March 30, 2025 vs. March 31, 2024) | Contract Type | March 30, 2025 (In thousands) | March 31, 2024 (In thousands) | Affected Line Item | | :--- | :--- | :--- | :--- | | Commodity derivatives | $(7,185) | $(10,048) | Cost of sales | | Sales contract derivatives | $2,430 | $2,095 | Net sales | | Total | $(4,755) | $(7,953) | | 4. TRADE ACCOUNTS AND OTHER RECEIVABLES Provides a breakdown of trade accounts and other receivables, including allowance for credit losses Trade Accounts and Other Receivables (March 30, 2025 vs. December 29, 2024) | Indicator | March 30, 2025 (In thousands) | December 29, 2024 (In thousands) | | :--- | :--- | :--- | | Trade accounts receivable | $1,081,950 | $973,820 | | Receivables, net | $1,105,991 | $1,004,334 | | Allowance for credit losses | $(8,448) | $(8,474) | - The Company may sell eligible trade receivables under an uncommitted facility with a maximum capacity of $415.0 million, with transfers recorded as sales[54] 5. INVENTORIES Presents the composition of inventories, including raw materials, finished products, and operating supplies Inventories (March 30, 2025 vs. December 29, 2024) | Inventory Type | March 30, 2025 (In thousands) | December 29, 2024 (In thousands) | | :--- | :--- | :--- | | Raw materials and work-in-process | $1,128,190 | $1,069,170 | | Finished products | $538,784 | $527,364 | | Operating supplies | $75,339 | $77,146 | | Maintenance materials and parts | $113,992 | $109,808 | | Total inventories | $1,856,305 | $1,783,488 | 6. INVESTMENTS IN SECURITIES Details the company's available-for-sale securities and related interest income Investments in Available-for-Sale Securities (March 30, 2025 vs. December 29, 2024) | Security Type | March 30, 2025 Fair Value (In thousands) | December 29, 2024 Fair Value (In thousands) | | :--- | :--- | :--- | | Fixed income securities (Cash equivalents) | $1,812,058 | $1,702,697 | | Fixed income securities (Short-term investments) | $— | $10,220 | - Interest income from available-for-sale securities totaled $23.6 million for the three months ended March 30, 2025[57] 7. GOODWILL AND INTANGIBLE ASSETS Provides a breakdown of goodwill by segment and intangible assets, net of amortization Goodwill by Segment (March 30, 2025 vs. December 29, 2024) | Segment | December 29, 2024 (In thousands) | Currency Translation (In thousands) | March 30, 2025 (In thousands) | | :--- | :--- | :--- | :--- | | U.S. | $41,936 | $— | $41,936 | | Europe | $1,097,643 | $32,822 | $1,130,465 | | Mexico | $99,494 | $(205) | $99,289 | | Total | $1,239,073 | $32,617 | $1,271,690 | Intangible Assets, Net (March 30, 2025 vs. December 29, 2024) | Indicator | December 29, 2024 (In thousands) | Amortization (In thousands) | Currency Translation (In thousands) | March 30, 2025 (In thousands) | | :--- | :--- | :--- | :--- | :--- | | Intangible assets, net | $806,234 | $(7,990) | $22,031 | $820,275 | 8. PROPERTY, PLANT AND EQUIPMENT Details property, plant, and equipment, including depreciation and capital expenditures Property, Plant and Equipment, Net (March 30, 2025 vs. December 29, 2024) | Indicator | March 30, 2025 (In thousands) | December 29, 2024 (In thousands) | | :--- | :--- | :--- | | PP&E, gross | $7,238,160 | $7,094,938 | | Accumulated depreciation | $(4,076,846) | $(3,957,047) | | PP&E, net | $3,161,314 | $3,137,891 | - Depreciation expense was $96.5 million for the three months ended March 30, 2025, and the Company incurred $98.8 million on capital projects during the same period[59][60] - An additional impairment loss of $0.6 million on PP&E was recognized due to restructuring activities in the Europe reportable segment[62] 9. CURRENT LIABILITIES Presents the composition of current liabilities, including accounts payable and dividends payable Current Liabilities (March 30, 2025 vs. December 29, 2024) | Indicator | March 30, 2025 (In thousands) | December 29, 2024 (In thousands) | | :--- | :--- | :--- | | Total accounts payable | $1,410,879 | $1,411,519 | | Dividends payable | $1,495,382 | $— | | Accrued expenses and other current liabilities | $919,606 | $1,015,504 | | Total (excluding income taxes and current maturities of long-term debt) | $3,895,559 | $2,491,178 | - The substantial increase in current liabilities is primarily due to the $1.5 billion special cash dividend declared, creating a significant 'Dividends payable' balance[64] 10. SUPPLIER FINANCE PROGRAMS Discusses the outstanding balance of confirmed invoices under supplier finance programs Outstanding Balance of Confirmed Invoices (March 30, 2025 vs. December 29, 2024) | Indicator | March 30, 2025 (In millions) | December 29, 2024 (In millions) | | :--- | :--- | :--- | | Outstanding balance of confirmed invoices | $202.8 | $152.8 | - The outstanding balance of confirmed invoices under supplier finance programs increased by $50.0 million, and these balances are included in Accounts Payable[65] 11. INCOME TAXES Provides details on income tax expense, effective tax rate, and tax sharing agreements Income Tax Expense and Effective Tax Rate (Three Months Ended March 30, 2025 vs. March 31, 2024) | Indicator | March 30, 2025 | March 31, 2024 | | :--- | :--- | :--- | | Income tax expense | $94.1 million | $52.1 million | | Effective tax rate | 24.1% | 22.9% | - The increased income tax expense in 2025 resulted primarily from the increase of profit before income taxes[67] - The Company entered into a tax sharing agreement with JBS USA effective December 30, 2024, and is monitoring Pillar II legislation but has not yet accrued any top-up taxes[71][72] 12. DEBT Outlines the company's long-term debt, including senior notes and available borrowing capacity Long-Term Debt (March 30, 2025 vs. December 29, 2024) | Debt Type | March 30, 2025 (In thousands) | December 29, 2024 (In thousands) | | :--- | :--- | :--- | | Senior notes payable, net of discount, at 6.875% | $491,560 | $491,329 | | Senior notes payable, net of discount, at 6.25% | $972,976 | $974,381 | | Senior notes payable at 3.50% | $900,000 | $900,000 | | Senior notes payable, net of discount, at 4.25% | $848,568 | $850,342 | | Long-term debt, less current maturities, net of capitalized financing costs | $3,199,746 | $3,206,113 | - The Board approved a bond repurchase program on May 1, 2024, authorizing repurchases up to $200.0 million of outstanding senior notes[74] - To date, $146.3 million of Senior Notes due 2031 and $21.6 million of Senior Notes due 2033 have been repurchased[74] Available Borrowing Capacity (March 30, 2025) | Credit Facility | Loan Commitment (In millions) | Available (In millions) | | :--- | :--- | :--- | | U.S. Credit Facility | $850.0 | $825.8 | | Europe Credit Facility | $194.1 | $194.1 | | Mexico Credit Facility | $54.0 | $54.0 | 13. STOCKHOLDERS' EQUITY Details changes in stockholders' equity, including accumulated comprehensive loss and special dividends Changes in Accumulated Other Comprehensive Loss (Three Months Ended March 30, 2025 vs. December 29, 2024) | Component | December 29, 2024 (In thousands) | March 30, 2025 (In thousands) | | :--- | :--- | :--- | | Losses Related to Foreign Currency Translation | $(337,243) | $(252,271) | | Losses on Derivative Financial Instruments Classified as Cash Flow Hedges | $(2,007) | $(357) | | Losses Related to Pension and Other Postretirement Benefits | $(31,028) | $(31,564) | | Losses on Available-for-Sale Securities | $(22) | $(41) | | Total Accumulated Other Comprehensive Loss | $(370,300) | $(284,233) | - Accumulated Other Comprehensive Loss decreased by $86.067 million, primarily due to foreign currency translation gains of $84.972 million during the period[80] - On March 13, 2025, the Company declared a special dividend of $6.30 per share, totaling approximately $1.5 billion, which was paid on April 17, 2025, using cash on hand[84] 14. PENSION AND OTHER POSTRETIREMENT BENEFITS Reports net periodic benefit costs, pension plan terminations, and contributions to retirement programs Net Periodic Benefit Costs (Three Months Ended March 30, 2025 vs. March 31, 2024) | Component | March 30, 2025 (In thousands) | March 31, 2024 (In thousands) | | :--- | :--- | :--- | | Pension Benefits Net Costs (income) | $(354) | $19 | | Other Benefits Net Costs (income) | $8 | $9 | | Total expenses recognized under all retirement plans | $9,700 | $11,200 | - During 2024, the Company terminated its two U.S. pension plans, settling obligations amounting to $99.6 million[86] - The Company contributed $1.0 million to its pension programs during the three months ended March 30, 2025, and anticipates making additional contributions of approximately $3.2 million during the remainder of 2025[89] 15. FAIR VALUE MEASUREMENT Presents assets and liabilities measured at fair value, including derivatives and debt obligations Assets and Liabilities Measured at Fair Value on a Recurring Basis (March 30, 2025 vs. December 29, 2024) | Instrument Type | March 30, 2025 (In thousands) | December 29, 2024 (In thousands) | | :--- | :--- | :--- | | Fixed income securities (Level 1) | $1,812,058 | $1,712,917 | | Commodity derivative assets (Level 1) | $5,552 | $6,598 | | Commodity derivative liabilities (Level 1) | $(11,912) | $(2,494) | | Foreign currency derivative assets (Level 1) | $1,246 | $755 | | Foreign currency derivative liabilities (Level 1) | $(237) | $(1,397) | Fair Values of Debt Obligations (March 30, 2025 vs. December 29, 2024) | Debt Type | March 30, 2025 Carrying Amount (In thousands) | March 30, 2025 Fair Value (In thousands) | December 29, 2024 Carrying Amount (In thousands) | December 29, 2024 Fair Value (In thousands) | | :--- | :--- | :--- | :--- | :--- | | Fixed-rate senior notes payable at 3.50% (Level 2) | $(900,000) | $(792,684) | $(900,000) | $(777,033) | | Fixed-rate senior notes payable at 4.25% (Level 2) | $(848,568) | $(804,235) | $(850,342) | $(789,304) | | Fixed-rate senior notes payable at 6.25% (Level 2) | $(972,976) | $(1,015,239) | $(974,381) | $(1,001,178) | | Fixed-rate senior notes payable at 6.875% (Level 2) | $(491,560) | $(538,600) | $(491,329) | $(533,650) | 16. RESTRUCTURING-RELATED ACTIVITIES Details restructuring initiatives in Europe, including estimated and incurred costs - The Company is undertaking restructuring initiatives in its Europe reportable segment to integrate central operations and reallocate processing capacities, resulting in facility closures[102] Estimated and Incurred Restructuring Costs (In thousands) | Cost Type | Total Estimated Costs | Costs Incurred Since Earliest Implementation Date | | :--- | :--- | :--- | | Employee-related costs | $68,962 | $59,904 | | Asset impairment costs | $12,695 | $12,695 | | Contract termination costs | $2,602 | $2,602 | | Other exit and disposal costs | $14,213 | $14,213 | | Total exit and disposal costs | $98,472 | $89,414 | Restructuring Expenses and Cash Outlays (Three Months Ended March 30, 2025) | Initiative | Expenses (In thousands) | Cash Outlays (In thousands) | | :--- | :--- | :--- | | Pilgrim's Food Masters 2024 | $1,331 | $2,951 | | Pilgrim's Europe Central | $14,655 | $1,813 | | Prior programs substantially complete | $626 | $621 | | Total | $16,612 | $5,385 | 17. RELATED PARTY TRANSACTIONS Reports sales, purchases, and accounts payable with related parties for Q1 2025 Sales to Related Parties (Three Months Ended March 30, 2025 vs. March 31, 2024) | Related Party | March 30, 2025 (In thousands) | March 31, 2024 (In thousands) | | :--- | :--- | :--- | | JBS Toledo N.V. | $10,115 | $— | | JBS USA Food Company | $4,817 | $5,374 | | Other related parties | $293 | $1,757 | | Total | $15,225 | $7,131 | Cost of Goods Purchased from Related Parties (Three Months Ended March 30, 2025 vs. March 31, 2024) | Related Party | March 30, 2025 (In thousands) | March 31, 2024 (In thousands) | | :--- | :--- | :--- | | JBS USA Food Company | $36,492 | $40,324 | | Seara Meats B.V. | $26,670 | $5,395 | | Penasul UK LTD | $9,658 | $3,530 | | JBS Asia Co Limited | $2,268 | $863 | | Other related parties | $711 | $498 | | Total | $75,799 | $50,610 | Accounts Payable to Related Parties (March 30, 2025 vs. December 29, 2024) | Related Party | March 30, 2025 (In thousands) | December 29, 2024 (In thousands) | | :--- | :--- | :--- | | Seara Meats B.V. | $19,381 | $4,861 | | JBS USA Food Company | $3,198 | $5,424 | | JBS Asia Co Limited | $2,160 | $4,023 | | Other related parties | $2,541 | $949 | | Total | $27,280 | $15,257 | 18. REPORTABLE SEGMENTS Provides financial data by segment (U.S., Europe, Mexico), including sales and operating income - The Company operates in three reportable segments: U.S., Europe, and Mexico, with segment profit primarily measured by operating income[113] Net Sales by Reportable Segment (Three Months Ended March 30, 2025 vs. March 31, 2024) | Segment | March 30, 2025 (In thousands) | March 31, 2024 (In thousands) | Change (%) | | :--- | :--- | :--- | :--- | | U.S. | $2,743,189 | $2,579,332 | 6.4% | | Europe | $1,231,529 | $1,267,903 | -2.9% | | Mexico | $488,291 | $514,699 | -5.1% | | Total net sales | $4,463,009 | $4,361,934 | 2.3% | Operating Income by Reportable Segment (Three Months Ended March 30, 2025 vs. March 31, 2024) | Segment | March 30, 2025 (In thousands) | March 31, 2024 (In thousands) | Change (%) | | :--- | :--- | :--- | :--- | | U.S. | $318,806 | $179,417 | 77.7% | | Europe | $49,071 | $31,116 | 57.7% | | Mexico | $36,605 | $39,741 | -7.9% | | Total operating income | $404,482 | $250,274 | 61.6% | Capital Expenditures by Reportable Segment (Three Months Ended March 30, 2025 vs. March 31, 2024) | Segment | March 30, 2025 (In thousands) | March 31, 2024 (In thousands) | | :--- | :--- | :--- | | U.S. | $71,927 | $78,631 | | Europe | $21,664 | $17,141 | | Mexico | $5,199 | $3,296 | | Total capital expenditures | $98,790 | $99,068 | 19. COMMITMENTS AND CONTINGENCIES Discusses various legal proceedings, claims, and tax assessments, including antitrust litigation - The Company is subject to various legal proceedings and claims, including the 'Broiler Antitrust Litigation,' Hogan v. Pilgrim's Pride Corporation et al., and tax assessments in Mexico and the U.K[127][128] - Motions to dismiss Phase 2 of the Broiler Antitrust Litigation were denied on February 11, 2025, and PPC will seek reasonable settlements[129] - Expenses incurred to date for this litigation are $583.8 million[129] - A settlement agreement for Hogan v. Pilgrim's Pride Corporation et al. received preliminary court approval on February 5, 2025, with an accrued unpaid expense of $41.5 million[130] - The Mexican Tax Administration Service's tax assessment of approximately $269.5 million (including penalties and interest) related to the 2015 acquisition of Tyson de México is under appeal, with no expense recorded yet[131][132] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's perspective on the company's financial condition and operational results for Q1 2025 Executive Summary Highlights key financial performance metrics for the three months ended March 30, 2025 - Pilgrim's Pride Corporation reported net income attributable to Pilgrim's of $296.0 million, or $1.24 per diluted common share, on net sales of $4.5 billion for the three months ended March 30, 2025[134] - The Company generated a consolidated operating margin of 9.1% and Adjusted EBITDA of $533.2 million for the quarter[134] Global Economic Conditions Discusses global inflation trends and the company's strategies to mitigate economic challenges - Global inflation levels declined in Q1 2025, with U.S. inflation decreasing due to lower gasoline prices and continued decreases in the U.K. and E.U. regions[135] - Mexico experienced a slight increase in inflation, partially driven by increased food prices, and the peso weakened slightly against the U.S. dollar[135] - The Company is responding to economic challenges by continuing negotiations with customers to mitigate extraordinary costs and focusing on operational initiatives for labor efficiencies, better agricultural performance, and improved yields[136] Raw Materials and Pricing Analyzes commodity market prices for chicken, pork, and feed ingredients across key regions - U.S. commodity market prices for chicken products trended above the historical five-year average and prior year average in Q1 2025, primarily driven by rapid increases in boneless breast pricing[138] - U.S. estimated industry ready-to-cook production increased 1.1% year-over-year, supported by firm volume demand in retail and steady foodservice channels[138][139] - U.K. chicken market volume was higher, with stable prices due to stable grain prices, despite some production constraints from switching to higher welfare birds[141] - U.K. pork product prices faced downward pressure due to lower E.U. pork prices, while U.K. pig production rose by approximately 6.4%[143][144] - Mexico chicken commodity prices decreased in Q1 2025 but remained above prior year averages, while market corn prices were higher year-over-year[142] Special Cash Dividend Reports the declaration and payment of a significant special cash dividend to shareholders - On March 13, 2025, the Company declared a special dividend of $6.30 per share, totaling approximately $1.5 billion, which was paid on April 17, 2025, using cash on hand[147] Reportable Segments Defines the company's operating segments and the allocation of corporate expenses - The Company operates in three reportable segments: U.S., Europe, and Mexico, with segment profit measured as operating income[148] - Corporate expenses are allocated to Mexico and Europe segments, with remaining amounts allocated to the U.S[148] Three Months Ended March 30, 2025 Compared to the Three Months Ended March 31, 2024 Compares financial performance indicators for the current and prior year's first fiscal quarters Net sales Analyzes changes in net sales by segment, attributing variations to volume, pricing, and currency Net Sales by Segment (Three Months Ended March 30, 2025 vs. March 31, 2024) | Segment | March 30, 2025 (In thousands) | March 31, 2024 (In thousands) | Change (Amount, In thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | U.S. | $2,743,189 | $2,579,332 | $163,857 | 6.4% | | Europe | $1,231,529 | $1,267,903 | $(36,374) | -2.9% | | Mexico | $488,291 | $514,699 | $(26,408) | -5.1% | | Total net sales | $4,463,009 | $4,361,934 | $101,075 | 2.3% | - U.S. net sales increased primarily due to an increase in net sales per pound (4.5 percentage points) driven by favorable market pricing and a shift to higher value products, and an increase in sales volume (1.9 percentage points)[150] - Europe net sales decreased due to lower sales volume (2.1 percentage points) and unfavorable foreign currency translation (0.7 percentage points)[151] - Mexico net sales decreased primarily due to unfavorable foreign currency translation (19.3 percentage points), partially offset by increased net sales per pound (13.8 percentage points)[152] Gross profit and cost of sales Examines the drivers of gross profit and cost of sales changes across operating segments Gross Profit and Cost of Sales (Three Months Ended March 30, 2025 vs. March 31, 2024) | Indicator | March 30, 2025 (In thousands) | March 31, 2024 (In thousands) | Change (Amount, In thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Gross profit | $554,873 | $383,909 | $170,964 | 44.5% | | Gross profit margin | 12.4% | 8.8% | 3.6 pp | N/A | | Cost of sales | $3,908,136 | $3,978,025 | $(69,889) | -1.8% | - U.S. gross profit increased by $150.3 million (63.4%) due to increased sales volume and a decrease in cost per pound sold, primarily from declining soybean meal costs[154] - Europe gross profit increased by $24.1 million (26.2%) due to a decrease in cost of sales, driven by lower labor costs, feed ingredients, utilities, and other operating costs, partly from restructuring initiatives[155] - Mexico gross profit decreased by $3.5 million (6.4%) due to unfavorable foreign currency translation, partially offset by an increase in cost per pound sold from higher commodity ingredient prices[156] Operating income and SG&A expense Discusses changes in operating income and selling, general, and administrative expenses by segment Operating Income and SG&A Expense (Three Months Ended March 30, 2025 vs. March 31, 2024) | Indicator | March 30, 2025 (In thousands) | March 31, 2024 (In thousands) | Change (Amount, In thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Operating income | $404,482 | $250,274 | $154,208 | 61.6% | | SG&A expense | $133,779 | $119,076 | $14,703 | 12.3% | - U.S. operating income increased by $139.4 million (77.7%), while SG&A expense increased by $10.9 million (18.9%) due to higher legal settlement, incentive compensation, and legal defense costs[158] - Europe operating income increased by $18.0 million (57.7%), with SG&A expense increasing by $4.1 million (8.9%) due to incentive compensation and software license fees[159] - Mexico operating income decreased by $3.1 million (7.9%), and SG&A expense decreased by $0.4 million (2.5%) due to favorable foreign currency translation, partially offset by increased payroll and marketing costs[160] Restructuring activities Reports costs incurred from restructuring initiatives, primarily within the Europe segment - Restructuring activities costs of $16.6 million were recognized in the three months ended March 30, 2025, primarily in the Europe reportable segment, due to severance and warehouse closure costs[161] Net interest expense Explains the change in net interest expense, primarily due to increased interest income Net Interest Expense (Three Months Ended March 30, 2025 vs. March 31, 2024) | Indicator | March 30, 2025 (In millions) | March 31, 2024 (In millions) | | :--- | :--- | :--- | | Net interest expense | $16.8 | $30.9 | - The decrease in net interest expense resulted primarily from an increase in interest income on higher cash balances[162] Income taxes Details the increase in income tax expense and the effective tax rate Income Tax Expense and Effective Tax Rate (Three Months Ended March 30, 2025 vs. March 31, 2024) | Indicator | March 30, 2025 | March 31, 2024 | | :--- | :--- | :--- | | Income tax expense | $94.1 million | $52.1 million | | Effective tax rate | 24.1% | 22.9% | - The increase in income tax expense resulted primarily from the increase in profit before income taxes[163] Liquidity and Capital Resources Assesses the company's ability to meet financial obligations and fund operations - The Company expects cash flows from operations, combined with availability under its credit facilities, to provide sufficient liquidity to fund current obligations, working capital, debt maturities, and capital spending for at least the next twelve months[167] Available Sources of Liquidity (March 30, 2025) | Source | Amount (In millions) | | :--- | :--- | | Cash and cash equivalents | $2,066.8 | | U.S. Credit Facility (available) | $825.8 | | Mexico Credit Facility (available) | $54.0 | | Europe Credit Facility (available) | $194.1 | Historical Flow of Funds Reviews cash flows from operating, investing, and financing activities for the period Cash Flows from Operating Activities (Three Months Ended March 30, 2025 vs. March 31, 2024) | Indicator | March 30, 2025 (In millions) | March 31, 2024 (In millions) | | :--- | :--- | :--- | | Net income | $296.3 | $174.9 | | Cash provided by operating activities | $126.9 | $271.0 | Cash Flows from Investing Activities (Three Months Ended March 30, 2025 vs. March 31, 2024) | Indicator | March 30, 2025 (In millions) | March 31, 2024 (In millions) | | :--- | :--- | :--- | | Acquisitions of property, plant and equipment | $(98.3) | $(108.4) | | Cash used in investing activities | $(97.1) | $(106.2) | Cash Flows from Financing Activities (Three Months Ended March 30, 2025 vs. March 31, 2024) | Indicator | March 30, 2025 (In millions) | March 31, 2024 (In millions) | | :--- | :--- | :--- | | Payments on revolving line of credit, long-term borrowings and finance lease obligations | $(3.6) | $(0.1) | | Cash provided by (used in) financing activities | $(3.6) | $1.3 | Net Noncash Expenses Identifies significant noncash expenses, including depreciation, amortization, and deferred income tax benefits - Net noncash expenses were $103.8 million for the three months ended March 30, 2025, including $104.5 million in depreciation and amortization and an $11.0 million deferred income tax benefit[169] Changes in Operating Assets and Liabilities Explains the impact of changes in working capital components on cash flows - The change in trade accounts and other receivables represented a $91.5 million use of cash in Q1 2025, primarily due to an increase in sales from more favorable market pricing and a decrease in the use of the discounted accounts receivable program[171] - The change in inventories represented a $64.2 million use of cash in Q1 2025, primarily from increased input costs and an increase in inventories after higher seasonal sales[172] - The change in accounts payable, accrued expenses, and other current liabilities represented a $118.7 million use of cash in Q1 2025, primarily due to the payment of incentive compensation accrued in 2024[174] Long-Term Debt and Other Borrowing Arrangements Summarizes the company's long-term debt structure and available credit facilities - The Company's long-term debt and other borrowing arrangements consist of senior notes, revolving credit facilities, and other term loan agreements, with further details provided in Note 12. Debt[180] Reconciliation of Net Income to EBITDA and Adjusted EBITDA Provides a reconciliation of net income to non-GAAP financial measures, EBITDA and Adjusted EBITDA Reconciliation of Net Income to EBITDA and Adjusted EBITDA (Three Months Ended March 30, 2025) | Indicator | Amount (In thousands) | | :--- | :--- | | Net income | $296,343 | | Add: Interest expense, net | $16,785 | | Add: Income tax expense | $94,099 | | Add: Depreciation and amortization | $104,518 | | EBITDA | $511,745 | | Add: Restructuring activities losses | $16,612 | | Add: Litigation settlements | $7,250 | | Minus: Foreign currency transaction gains | $2,053 | | Minus: Net income attributable to noncontrolling interest | $310 | | Adjusted EBITDA | $533,244 | - EBITDA and Adjusted EBITDA are non-GAAP financial measures used by management and investors to compare performance, but they have limitations and should not be considered in isolation or as substitutes for U.S. GAAP results[180][181] Item 3. Quantitative and Qualitative Disclosures about Market Risk Details the company's exposure to market risks, including commodity prices, foreign currency, and interest rates Market Risk-Sensitive Instruments and Positions Identifies the company's primary market risks, including commodity prices, foreign currency, and interest rates - The Company's primary market risks are 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[184] Commodity Prices Analyzes the sensitivity of cost of sales and inventories to hypothetical changes in feed ingredient prices - A hypothetical 10% increase in the weighted-average cost of primary feed ingredients would have increased cost of sales by $86.2 million for the three months ended March 30, 2025, and increased inventories by $17.5 million as of March 30, 2025[187][188] - A 10% increase in commodity prices would have resulted in an increase of $1.9 million in the fair value of the Company's net commodity derivative asset position[189] Interest Rates Assesses the impact of hypothetical interest rate changes on the fair value of fixed-rate debt - A hypothetical 10% increase in interest rates would have decreased the fair value of the Company's fixed-rate debt by $98.3 million as of March 30, 2025[190] Foreign Currency Evaluates the impact of foreign currency exchange rate fluctuations on net assets and derivative positions - A 10% weakening in the Mexican peso against the U.S. dollar exchange rate would cause a decrease of $75.1 million in the net assets of Mexican subsidiaries, while a 10% strengthening would cause an increase of $91.8 million[192][193] - A 10% weakening in the British pound against the U.S. dollar exchange rate would cause a decrease of $76.5 million in the net assets of Europe subsidiaries, while a 10% strengthening would cause an increase of $93.6 million[195] - The Company uses foreign currency forward contracts as cash flow hedges for a portion of sales and purchases in its Europe segment, with immaterial changes expected from a 10% currency fluctuation[196] Quality of Investments Confirms the credit quality of investment portfolios and the absence of high-risk structured investments - The Company's investment portfolios, including money market funds and commercial paper, have not been downgraded, and it does not hold significant amounts of structured investment vehicles, auction rate securities, collateralized debt obligations, credit derivatives, hedge funds, or perpetual preferred securities[197] - None of the mortgages collateralizing its mortgage-backed securities are considered subprime[197] Impact of Inflation Discusses the ongoing impact of inflation and the company's strategies to mitigate its effects - The U.S., Mexico, and most of Europe continue to experience above-historical inflation, though to a lesser degree than in the prior year[198] - The Company is responding by negotiating with customers to recoup extraordinary costs and focusing on operational initiatives for labor efficiencies, agricultural performance, and improved yields[198] Forward Looking Statements Highlights the inherent risks and uncertainties associated with forward-looking statements in the report - The report contains forward-looking statements subject to various risks and uncertainties, including fluctuations in commodity prices, ability to maintain critical contracts, retention of key individuals, disease outbreaks, product contamination, regulatory changes, competitive factors, currency exchange rate fluctuations, and the impact of litigation[199][202] - The Company does not undertake any obligation to address or update each or any factor in future filings or communications regarding its business or results[201] Item 4. Controls and Procedures Confirms the effectiveness of disclosure controls and reports no material changes in internal control over financial reporting Disclosure Controls and Procedures States management's conclusion on the effectiveness of the company's disclosure controls and procedures - As of March 30, 2025, the Company's management, with the participation of the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective[204] Changes in Internal Control over Financial Reporting Reports no material changes in internal control over financial reporting and updates on ERP system implementation - No material changes in the Company's internal control over financial reporting occurred during the three months ended March 30, 2025[205] - The first phase of an enterprise resource planning (ERP) system implementation was completed in 2024, and the second phase was completed on April 21, 2025, with no expected material effects on internal control over financial reporting throughout the remainder of the implementation period[206] PART II. OTHER INFORMATION This section includes legal proceedings, risk factors, other information, and exhibits for the quarterly report Item 1. Legal Proceedings Refers to Note 19 of the financial statements for detailed information on legal proceedings and commitments - The information required for legal proceedings is incorporated by reference from Note 19. Commitments and Contingencies, in Part I, Item 1 of this quarterly report[208] Item 1A. Risk Factors Directs readers to the 2024 Annual Report and MD&A for risk factors, noting no material changes - For a discussion of potential risks and uncertainties, refer to 'Part I—Item 1A—Risk Factors' in the 2024 Annual Report and 'Part I—Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations' in this quarterly report[209] - There have been no material changes to the risk factors previously disclosed in the 2024 Annual Report[209] Item 5. Other Information Confirms no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated - None of the Company's directors or executive officers adopted or terminated a 'Rule 10b5-1 trading arrangement' or a 'non-Rule 10b5-1 trading arrangement' during the fiscal quarter ended March 30, 2025[210] Item 6. Exhibits Lists the various exhibits filed with the Form 10-Q, including corporate documents and certifications - The exhibits filed include the Amended and Restated Certificate of Incorporation, Amended and Restated Corporate Bylaws, Tax Sharing Agreement, Certifications of Principal Executive Officer and Principal Financial Officer (pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002), and Inline XBRL documents[211] SIGNATURES Contains the required signatures for the Form 10-Q, confirming its due authorization and filing - The report was signed on April 30, 2025, by Matthew Galvanoni, Chief Financial Officer and Chief Accounting Officer, as the Principal Financial Officer, Principal Accounting Officer, and Authorized Signatory[215]