Pilgrim's(PPC) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents Pilgrim's Pride Corporation's unaudited condensed consolidated financial statements and management's discussion Item 1. Condensed Consolidated Financial Statements This section presents Pilgrim's Pride Corporation's unaudited condensed consolidated financial statements and related notes Condensed Consolidated Balance Sheets This section details the company's financial position, including assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheet Highlights (In thousands) | Metric | June 29, 2025 | December 29, 2024 | | :-------------------------------- | :------------ | :------------------ | | Total current assets | $4,257,211 | $5,120,163 | | Total assets | $10,118,666 | $10,650,576 | | Total current liabilities | $2,619,379 | $2,552,133 | | Total liabilities | $6,366,130 | $6,397,180 | | Total stockholders' equity | $3,752,536 | $4,253,396 | Condensed Consolidated Statements of Income This section presents the company's financial performance, including net sales, gross profit, operating income, and net income Condensed Consolidated Statements of Income Highlights (In thousands, except per share data) | Metric | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 29, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $4,757,365 | $4,559,314 | $9,220,374 | $8,921,248 | | Gross profit | $715,295 | $691,626 | $1,270,168 | $1,075,535 | | Operating income | $512,339 | $440,790 | $916,821 | $691,064 | | Net income attributable to Pilgrim's Pride Corporation | $355,520 | $326,303 | $651,553 | $500,724 | | Diluted EPS | $1.49 | $1.37 | $2.73 | $2.11 | Condensed Consolidated Statements of Comprehensive Income This section details the company's comprehensive income, including net income and other comprehensive income components Condensed Consolidated Statements of Comprehensive Income Highlights (In thousands) | Metric | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 29, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $356,009 | $326,523 | $652,352 | $501,461 | | Total other comprehensive income (loss), net of tax | $242,033 | $(78,026) | $328,100 | $(107,907) | | Comprehensive income attributable to Pilgrim's Pride Corporation | $597,553 | $248,277 | $979,653 | $392,817 | - The company reported a significant foreign currency translation adjustment gain of $240.9 million for the three months ended June 29, 2025, compared to a loss of $81.6 million in the prior year period, contributing to the increase in total other comprehensive income[16] Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in the company's equity, including retained earnings and accumulated other comprehensive loss Changes in Stockholders' Equity (In thousands) | Metric | Balance at Dec 29, 2024 | Net Income (6M 2025) | Other Comprehensive Income (6M 2025) | Special Cash Dividend (6M 2025) | Balance at June 29, 2025 | | :-------------------------------- | :---------------------- | :------------------- | :----------------------------------- | :------------------------------ | :----------------------- | | Retained Earnings | $3,157,511 | $651,553 | — | $(1,495,497) | $2,313,567 | | Accumulated Other Comprehensive Loss | $(370,300) | — | $328,100 | — | $(42,200) | | Total Stockholders' Equity | $4,253,396 | $652,352 | $328,100 | $(1,495,497) | $3,752,536 | - A special cash dividend of approximately $1.5 billion was paid from retained earnings on April 17, 2025[19][95] Condensed Consolidated Statements of Cash Flows This section details the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended, In thousands) | Metric | June 29, 2025 | June 30, 2024 | | :--------------------------------------- | :------------ | :------------ | | Cash provided by operating activities | $622,103 | $989,656 | | Cash used in investing activities | $(256,371) | $(208,696) | | Cash used in financing activities | $(1,588,271) | $(149,686) | | Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents | $(1,184,839) | $602,903 | | Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period | $858,319 | $1,334,126 | - Cash used in financing activities significantly increased in the six months ended June 29, 2025, primarily due to a $1.5 billion special cash dividend payment[24][214] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. Business and Summary of Significant Accounting Policies This note describes the company's global operations, key business activities, and significant accounting policies - Pilgrim's Pride Corporation is a global food company primarily producing chicken, with pork and lamb operations in the U.K., serving foodservice, retail, and frozen entrée customers across the U.S., U.K., Mexico, France, Puerto Rico, the Netherlands, and the Republic of Ireland[27] - As of June 29, 2025, the company had approximately 62,200 employees and processed about 41.3 million birds and 42,750 pigs per 5-day work week[27] - On April 1, 2024, the functional currency of Mexico operations changed from U.S. dollar to Mexican peso due to sustained strengthening of the peso and a shift in proportional spend denominated in peso, with no material impact on consolidated financial statements[33] - The company is assessing the impact of new FASB ASUs 2023-09 (Income Tax Disclosures, effective after Dec 15, 2024) and 2024-03 (Expense Disaggregation Disclosures, effective after Dec 15, 2026) on its financial statements[36][37] Note 2. Revenue Recognition This note details the company's policies for recognizing revenue from customer contracts, including product transfer and contract liabilities - Revenue is primarily derived from customer orders, recognized when control of products transfers to the customer, typically upon destination or customer pick-up[38][39] Net Sales by Product Type and Region (Three Months Ended, In thousands) | Region | Fresh | Prepared | Export | Other | Total Net Sales | | :------- | :-------- | :--------- | :------- | :------ | :-------------- | | U.S. | $2,328,944 | $308,479 | $99,638 | $83,324 | $2,820,385 | | Europe | $415,124 | $794,844 | $146,287 | $15,015 | $1,371,270 | | Mexico | $481,575 | $55,914 | — | $28,221 | $565,710 | | Total (June 29, 2025) | $3,225,643 | $1,159,237 | $245,925 | $126,560 | $4,757,365 | | Total (June 30, 2024) | $2,997,295 | $1,187,712 | $229,268 | $145,039 | $4,559,314 | Net Sales by Sales Channel and Region (Three Months Ended, In thousands) | Region | Retail | Foodservice | Export | Other | Total Net Sales | | :------- | :--------- | :---------- | :------- | :------ | :-------------- | | U.S. | $1,529,945 | $1,094,791 | $99,638 | $96,011 | $2,820,385 | | Europe | $850,374 | $230,723 | $146,287 | $143,886 | $1,371,270 | | Mexico | $141,941 | $257,543 | — | $166,226 | $565,710 | | Total (June 29, 2025) | $2,522,260 | $1,583,057 | $245,925 | $406,123 | $4,757,365 | | Total (June 30, 2024) | $2,354,248 | $1,546,082 | $229,268 | $429,716 | $4,559,314 | Revenue Contract Liabilities (In thousands) | Metric | Amount | | :-------------------------------------------------- | :------- | | Balance as of December 29, 2024 | $48,898 | | Revenue recognized | $(47,706) | | Cash received, excluding amounts recognized as revenue during the period | $47,745 | | Effect of exchange rates | $227 | | Balance as of June 29, 2025 | $49,164 | Note 3. Derivative Financial Instruments This note describes 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, etc.) and foreign currency derivatives for translational foreign exchange risk, primarily in Europe[48][49][53] Fair Values of Derivative Instruments (In thousands) | Instrument Type | June 29, 2025 | December 29, 2024 | | :-------------------------- | :------------ | :------------------ | | Commodity derivative assets | $6,543 | $6,598 | | Commodity derivative liabilities | $(18,664) | $(2,494) | | Foreign currency derivative assets | $3,108 | $755 | | Foreign currency derivative liabilities | $(389) | $(1,397) | | Sales contract derivative assets | $2,449 | — | | Sales contract derivative liabilities | — | $(778) | | Cash collateral posted with brokers | $9,283 | $2,324 | Gains and Losses from Undesignated Derivative Instruments (In thousands) | Contract Type | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 29, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Commodity derivatives | $(14,819) | $(6,146) | $(22,004) | $(16,194) | | Sales contract derivatives | $798 | $1,438 | $3,228 | $3,533 | | Total | $(14,021) | $(4,708) | $(18,776) | $(12,661) | - A $1.0 million pre-tax deferred net gain on foreign currency derivatives recorded in AOCI is expected to be reclassified to the Condensed Consolidated Statements of Income within the next twelve months[63] Note 4. Trade Accounts and Other Receivables This note provides details on the company's trade accounts and other receivables, including the allowance for credit losses Trade Accounts and Other Receivables (In thousands) | Metric | June 29, 2025 | December 29, 2024 | | :--------------------------------------- | :------------ | :------------------ | | Trade accounts receivable | $1,104,162 | $973,820 | | Receivables, gross | $1,139,643 | $1,012,808 | | Allowance for credit losses | $(8,309) | $(8,474) | | Receivables, net | $1,131,334 | $1,004,334 | | Accounts receivable from related parties | $9,761 | $2,608 | Activity in Allowance for Credit Losses (Six Months Ended, In thousands) | Metric | June 29, 2025 | | :-------------------------- | :------------ | | Balance, beginning of period | $(8,474) | | Provision charged to operating results | $(103) | | Account write-offs and recoveries | $832 | | Effect of exchange rate | $(564) | | Balance, end of period | $(8,309) | - The company has an uncommitted receivables purchase agreement with a bank, allowing it to sell eligible trade receivables for cash, with transfers recorded as sales under ASC 860[65] Note 5. Inventories This note presents a breakdown of the company's inventory categories, including raw materials, finished products, and operating supplies Inventories Breakdown (In thousands) | Category | June 29, 2025 | December 29, 2024 | | :-------------------------- | :------------ | :------------------ | | Raw materials and work-in-process | $1,146,087 | $1,069,170 | | Finished products | $601,694 | $527,364 | | Operating supplies | $79,257 | $77,146 | | Maintenance materials and parts | $113,565 | $109,808 | | Total inventories | $1,940,603 | $1,783,488 | Note 6. Investments in Securities This note details the company's available-for-sale securities and related interest income and realized gains Available-for-Sale Securities (In thousands) | Category | Amortized Cost (June 29, 2025) | Fair Value (June 29, 2025) | Amortized Cost (Dec 29, 2024) | Fair Value (Dec 29, 2024) | | :-------------------- | :----------------------------- | :------------------------- | :---------------------------- | :------------------------ | | Fixed income securities (Cash equivalents) | $559,676 | $559,636 | $1,702,493 | $1,702,697 | | Fixed income securities (Short-term investments) | — | — | $10,000 | $10,220 | - Interest income and gross realized gains from available-for-sale securities totaled $33.3 million for the six months ended June 29, 2025, up from $21.1 million in the prior year period[67] Note 7. Goodwill and Intangible Assets This note provides a breakdown of goodwill by segment and details intangible assets, including trade names and customer relationships Goodwill by Segment (Six Months Ended June 29, 2025, In thousands) | Segment | December 29, 2024 | Currency Translation | June 29, 2025 | | :-------- | :------------------ | :------------------- | :------------ | | U.S. | $41,936 | — | $41,936 | | Europe | $1,097,643 | $103,664 | $1,201,307 | | Mexico | $99,494 | $7,755 | $107,249 | | Total | $1,239,073 | $111,419 | $1,350,492 | Intangible Assets, Net (In thousands) | Category | December 29, 2024 | Amortization | Currency Translation | June 29, 2025 | | :-------------------------- | :------------------ | :------------- | :------------------- | :------------ | | Trade names not subject to amortization | $569,357 | — | $53,077 | $622,434 | | Trade names subject to amortization | $112,016 | — | $3,232 | $115,248 | | Customer relationships | $431,861 | — | $27,668 | $459,529 | | Accumulated amortization (Trade names) | $(61,527) | $(1,959) | $(658) | $(64,144) | | Accumulated amortization (Customer relationships) | $(245,473) | $(14,402) | $(13,320) | $(273,195) | | Intangible assets, net | $806,234 | $(16,361) | $69,999 | $859,872 | - The company will perform its annual recoverability tests for goodwill and non-amortized trade names in Q4 2025, with potential material impairment[68] Note 8. Property, Plant and Equipment This note presents the company's property, plant, and equipment, including depreciation expense and capital project expenditures Property, Plant and Equipment, Net (In thousands) | Category | June 29, 2025 | December 29, 2024 | | :-------------------------- | :------------ | :------------------ | | PP&E, gross | $7,510,540 | $7,094,938 | | Accumulated depreciation | $(4,212,747) | $(3,957,047) | | PP&E, net | $3,297,793 | $3,137,891 | - Depreciation expense was $201.6 million for the six months ended June 29, 2025, compared to $195.2 million in the prior year period[69] - Capital projects incurred $254.9 million during the six months ended June 29, 2025, with $126.1 million transferred from construction-in-progress to depreciable assets[70] - The carrying amount of idled assets totaled $39.8 million as of June 29, 2025, and an additional impairment loss of $0.8 million on PP&E was recognized due to restructuring activities[73] Note 9. Current Liabilities This note provides a detailed breakdown of the company's current liabilities, including accounts payable and accrued expenses Current Liabilities Breakdown (In thousands) | Category | June 29, 2025 | December 29, 2024 | | :--------------------------------------- | :------------ | :------------------ | | Total accounts payable | $1,486,008 | $1,411,519 | | Accounts payable to related parties | $53,967 | $15,257 | | Revenue contract liabilities | $49,164 | $48,898 | | Total accrued expenses and other current liabilities | $969,874 | $1,015,504 | | Total | $2,559,013 | $2,491,178 | - Accrued expenses and other current liabilities include compensation and benefits ($275.7 million), accrued sales rebates ($122.8 million), insurance and self-insured claims ($120.0 million), and litigation settlements ($97.5 million) as of June 29, 2025[74] Note 10. Supplier Finance Programs This note discloses the outstanding balance of confirmed invoices under the company's supplier finance programs - The outstanding balance of confirmed invoices under supplier finance programs was $214.7 million as of June 29, 2025, up from $152.8 million at December 29, 2024[75] Note 11. Income Taxes This note presents the company's income tax expense and effective tax rate, along with the impact of new tax rules Income Tax Expense and Effective Tax Rate (Six Months Ended) | Metric | June 29, 2025 | June 30, 2024 | | :-------------------- | :------------ | :------------ | | Income tax expense | $213.7 million | $152.7 million | | Effective tax rate | 24.7% | 23.3% | - The increased income tax expense in 2025 is primarily due to an increase in profit before income taxes[76] - The company has not identified any material tax exposure from the application of Pillar II rules, which became effective in various countries starting January 1, 2024[81] Note 12. Debt This note details the company's long-term debt components, including senior notes and credit facilities Long-Term Debt Components (In thousands) | Debt Type | Maturity | June 29, 2025 | December 29, 2024 | | :------------------------------------------------- | :------- | :------------ | :------------------ | | Senior notes payable, net of discount, at 6.875% | 2034 | $491,790 | $491,329 | | Senior notes payable, net of discount, at 6.25% | 2033 | $917,542 | $974,381 | | Senior notes payable at 3.50% | 2032 | $899,600 | $900,000 | | Senior notes payable, net of discount, at 4.25% | 2031 | $816,557 | $850,342 | | Live Oak CHP Project PACE Loan 5.15% | 2053 | $18,914 | $20,599 | | Finance lease obligations | Various | $1,533 | $1,792 | | Long-term debt, less current maturities, net of capitalized financing costs | | $3,114,302 | $3,206,113 | - The Board approved an increase of $500.0 million to the bond repurchase program on May 1, 2025. To date, the company has repurchased $178.7 million of 2031 Senior Notes, $0.4 million of 2032 Senior Notes, and $77.5 million of 2033 Senior Notes[84] - The company has an $850.0 million U.S. Credit Facility (matures Oct 2028), a £150.0 million Europe Credit Facility (matures June 2027), and a Mex$1.1 billion Mexico Credit Facility (matures Aug 2026), with no outstanding borrowings under any of these facilities as of June 29, 2025[85][87][90] Note 13. Stockholders' Equity This note provides a detailed analysis of changes in accumulated other comprehensive loss and special dividend declarations Changes in Accumulated Other Comprehensive Loss (Six Months Ended June 29, 2025, In thousands) | Component | Balance, beginning of period | Other comprehensive income (loss) before reclassifications | Amounts reclassified to net income | Currency translation | Balance, end of period | | :--------------------------------------- | :--------------------------- | :------------------------------------------------------- | :--------------------------------- | :------------------- | :--------------------- | | Losses Related to Foreign Currency Translation | $(337,243) | $325,927 | — | — | $(11,316) | | Losses (Gains) on Derivative Financial Instruments Classified as Cash Flow Hedges | $(2,007) | $1,658 | $1,282 | $86 | $1,019 | | Losses Related to Pension and Other Postretirement Benefits | $(31,028) | $141 | $(1,152) | $145 | $(31,894) | | Losses on Available-for-Sale Securities | $(22) | $(64) | $77 | — | $(9) | | Total | $(370,300) | $327,662 | $207 | $231 | $(42,200) | - The company declared a special dividend of $6.30 per share on March 13, 2025, paid on April 17, 2025, totaling approximately $1.5 billion. Another special dividend of $2.10 per share was declared on July 30, 2025, payable on September 3, 2025, for approximately $500.0 million[95][96] Note 14. Pension and Other Postretirement Benefits This note outlines the company's net periodic benefit costs for pension and other postretirement plans Net Periodic Benefit Costs (Six Months Ended, In thousands) | Metric | Pension Benefits (June 29, 2025) | Other Benefits (June 29, 2025) | Pension Benefits (June 30, 2024) | Other Benefits (June 30, 2024) | | :-------------------------- | :------------------------------- | :----------------------------- | :------------------------------- | :----------------------------- | | Interest cost | $3,068 | $22 | $4,949 | $22 | | Estimated return on plan assets | $(3,905) | — | $(5,203) | — | | Settlement gain | $(1,611) | — | — | — | | Expenses paid from assets | $230 | — | $192 | — | | Amortization of net loss | $75 | $(1) | $335 | — | | Amortization of past service cost | $9 | — | $9 | — | | Net costs | $(2,134) | $21 | $(282) | $22 | - The company completed the termination of its two U.S. pension plans in Q4 2024, settling obligations of $99.6 million[98] - Defined contribution plan expenses totaled $17.1 million for the six months ended June 29, 2025, compared to $17.5 million in the prior year period[104] Note 15. Fair Value Measurement This note explains the company's fair value measurement hierarchy and presents fair values for assets, liabilities, and debt - The company categorizes fair value measurements into Level 1 (unadjusted quoted prices in active markets), Level 2 (quoted prices for similar assets/liabilities or observable inputs), and Level 3 (unobservable inputs)[106][111] Assets and Liabilities Measured at Fair Value on a Recurring Basis (In thousands) | Category | Level 1 (June 29, 2025) | Level 2 (June 29, 2025) | Total (June 29, 2025) | Level 1 (Dec 29, 2024) | Level 2 (Dec 29, 2024) | Total (Dec 29, 2024) | | :-------------------------- | :---------------------- | :---------------------- | :-------------------- | :--------------------- | :--------------------- | :------------------- | | Fixed income securities | $559,636 | — | $559,636 | $1,712,917 | — | $1,712,917 | | Commodity derivative assets | $6,543 | — | $6,543 | $6,598 | — | $6,598 | | Foreign currency derivative assets | $3,108 | — | $3,108 | $755 | — | $755 | | Sales contract derivative assets | $2,449 | — | $2,449 | — | — | — | | Commodity derivative liabilities | $(18,664) | — | $(18,664) | $(2,494) | — | $(2,494) | | Foreign currency derivative liabilities | $(389) | — | $(389) | $(1,397) | — | $(1,397) | | Sales contract derivative liabilities | — | — | — | — | $(778) | $(778) | Fair Value of Debt Obligations (In thousands) | Debt Type | Carrying Amount (June 29, 2025) | Fair Value (June 29, 2025) | Carrying Amount (Dec 29, 2024) | Fair Value (Dec 29, 2024) | | :--------------------------------------- | :------------------------------ | :------------------------- | :----------------------------- | :------------------------ | | Fixed-rate senior notes payable at 3.50% (Level 2) | $(899,600) | $(808,803) | $(900,000) | $(777,033) | | Fixed-rate senior notes payable at 4.25% (Level 2) | $(816,557) | $(792,197) | $(850,342) | $(789,304) | | Fixed-rate senior notes payable at 6.25% (Level 2) | $(917,542) | $(971,977) | $(974,381) | $(1,001,178) | | Fixed-rate senior notes payable at 6.875% (Level 2) | $(491,790) | $(545,985) | $(491,329) | $(533,650) | | Live Oak CHP Project PACE Loan at 5.15% (Level 3) | $(18,914) | $(18,527) | $(20,599) | $(18,569) | Note 16. Restructuring-Related Activities This note details the company's restructuring initiatives in its Europe segment, including facility closures and associated costs - The company is undertaking restructuring initiatives in its Europe segment, involving central operations integration and reallocation of processing capacities, leading to facility closures[116] Restructuring Costs Incurred and Expected (In thousands) | Cost Type | Pilgrim's Food Masters 2024 | Pilgrim's Europe Central | Total | | :-------------------------- | :-------------------------- | :----------------------- | :------ | | Employee-related costs | $19,848 | $52,191 | $72,039 | | Asset impairment costs | $10,887 | $1,852 | $12,739 | | Contract termination costs | $855 | $1,747 | $2,602 | | Other exit and disposal costs | $9,869 | $4,221 | $14,090 | | Total exit and disposal costs | $41,459 | $60,011 | $101,470 | - Total restructuring expenses recognized for the six months ended June 29, 2025, were $20.1 million, with cash outlays of $22.7 million[118] Note 17. Related Party Transactions This note discloses transactions with related parties, including sales, purchases, and cost allocation agreements Related Party Transactions (Six Months Ended, In thousands) | Transaction Type | June 29, 2025 | June 30, 2024 | | :--------------------------------------- | :------------ | :------------ | | Sales to related parties | $32,166 | $16,662 | | Cost of goods purchased from related parties | $135,893 | $102,277 | | Expenditures paid by related parties | $185,381 | $42,687 | | Expenditures paid on behalf of related parties | $6,817 | $7,252 | | Accounts receivable from related parties (June 29, 2025) | $9,761 | $2,608 | | Accounts payable to related parties (June 29, 2025) | $53,967 | $15,257 | - The company has agreements with JBS USA Food Company for allocating costs related to SAP licenses and maintenance services, and for supporting business operations by a consolidated corporate team[127] Note 18. Reportable Segments This note provides financial information by reportable segment, including net sales, operating income, and capital expenditures - Pilgrim's operates in three reportable segments: U.S. (including Puerto Rico), Europe (U.K., France, Netherlands, Republic of Ireland), and Mexico, with segment profit measured by operating income[128][129][130][131] Net Sales by Reportable Segment (Six Months Ended, In thousands) | Segment | June 29, 2025 | June 30, 2024 | | :-------- | :------------ | :------------ | | U.S. | $5,563,574 | $5,243,297 | | Europe | $2,602,799 | $2,569,444 | | Mexico | $1,054,001 | $1,108,507 | | Total net sales | $9,220,374 | $8,921,248 | Operating Income by Reportable Segment (Six Months Ended, In thousands) | Segment | June 29, 2025 | June 30, 2024 | | :-------- | :------------ | :------------ | | U.S. | $673,793 | $487,405 | | Europe | $119,490 | $55,109 | | Mexico | $123,538 | $148,550 | | Total operating income | $916,821 | $691,064 | Capital Expenditures by Reportable Segment (Six Months Ended, In thousands) | Segment | June 29, 2025 | June 30, 2024 | | :-------- | :------------ | :------------ | | U.S. | $182,130 | $156,514 | | Europe | $53,751 | $35,751 | | Mexico | $23,089 | $7,741 | | Total capital expenditures | $258,970 | $200,006 | Note 19. Commitments and Contingencies This note details the company's exposure to various legal proceedings, tax assessments, and other contingent liabilities - The company is subject to various legal proceedings, including the Broiler Antitrust Litigation, Hogan v. Pilgrim's Pride Corporation, City of Miami Beach Fire and Police Pension Fund, Mexican Tax Administration Service assessments, and U.K. tax review[144][145] - In the Broiler Antitrust Litigation, motions to dismiss Phase 2 were denied, and PPC has incurred $635.0 million in expenses, including $52.5 million in the six months ended June 29, 2025, for settlements[146] - The Hogan v. Pilgrim's Pride Corporation settlement agreement received final court approval on June 27, 2025, with PPC paying $41.5 million in May 2025[147] - A stockholder derivative action, City of Miami Beach Fire and Police Pension Fund et al. v. JBS Wisconsin Properties, LLC et al., was filed on July 17, 2025, alleging breaches of fiduciary duties, with no amounts accrued for potential losses at this early stage[148][149] - The Mexican Tax Administration Service's 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[150] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, condition, and operating results Executive Summary This section provides an overview of key financial highlights and global economic conditions impacting the company's performance Key Financial Highlights (Six Months Ended June 29, 2025, In millions, except per share data) | Metric | Amount | | :--------------------------------------- | :------- | | Net income attributable to Pilgrim's | $651.6 | | Diluted common share | $2.73 | | Income before tax | $866.0 | | Net sales | $9.2 billion | | Gross profit | $1.3 billion | | Cash provided by operating activities | $622.1 | | Consolidated operating margin | 9.9% | | EBITDA | $1.1 billion | | Adjusted EBITDA | $1.2 billion | - Global economic conditions show rising inflation in the U.S. and U.K. in Q2 2025, while the E.U. saw a decrease. Mexico experienced increased inflation, and the peso strengthened against the U.S. dollar[155] - U.S. chicken market prices trended above historical and prior-year averages in Q2 2025, driven by elevated boneless breast pricing and firm volume demand in retail and foodservice, despite a decline in June[159][160][161] - The U.K. chicken market grew 2.1% year-over-year in Q2 2025, with chicken prices rising due to production capacity constraints and mandated stocking density reductions, while pork prices also grew due to market pressure[162][164] - Mexico chicken commodity prices decreased in Q2 2025 but remained above prior-year averages, with corn prices higher and soybean meal prices lower compared to the prior year[163] Results of Operations This section provides a detailed analysis of the company's operating results, including net sales, gross profit, and operating income by segment Net Sales Growth by Segment (YoY % Change) | Segment | Three Months Ended June 29, 2025 | Six Months Ended June 29, 2025 | | :-------- | :------------------------------- | :----------------------------- | | U.S. | +5.9% | +6.1% | | Europe | +5.4% | +1.3% | | Mexico | -4.7% | -4.9% | | Total Net Sales | +4.3% | +3.4% | - U.S. net sales increased due to favorable market pricing and product mix shifts. Europe net sales increased due to favorable foreign currency translation and higher net sales per pound, partially offset by decreased volume. Mexico net sales decreased primarily due to unfavorable foreign currency translation (12.3% in Q2, 15.8% in H1), despite increases in net sales per pound and sales volume[169][170][171][183][184][185] Gross Profit Growth by Segment (YoY % Change) | Segment | Three Months Ended June 29, 2025 | Six Months Ended June 29, 2025 | | :-------- | :------------------------------- | :----------------------------- | | U.S. | +8.2% | +27.1% | | Europe | +9.0% | +16.7% | | Mexico | -18.7% | -15.0% | | Total Gross Profit | +3.4% | +18.1% | - U.S. cost of sales increased due to higher operating costs (fleet, grower pay, labor, packaging, utilities) but was partially offset by declining soybean meal costs. Europe cost of sales increased due to foreign currency translation and higher cost per pound (labor, repairs, utilities). Mexico cost of sales decreased due to favorable foreign currency translation but was offset by increased commodity ingredient costs and broiler health challenges[173][174][175][187][188][189] Operating Income Growth by Segment (YoY % Change) | Segment | Three Months Ended June 29, 2025 | Six Months Ended June 29, 2025 | | :-------- | :------------------------------- | :----------------------------- | | U.S. | +15.3% | +38.2% | | Europe | +193.5% | +116.8% | | Mexico | -20.1% | -16.8% | | Total Operating Income | +16.2% | +32.7% | - U.S. SG&A decreased due to lower legal settlement expense. Europe SG&A decreased due to lower payroll costs. Mexico SG&A decreased due to favorable foreign currency translation, partially offset by increased payroll and incentive compensation[177][178][179][191][192][193] - Net interest expense increased to $31.5 million (Q2 2025) and $48.2 million (H1 2025) primarily due to a prior year gain on early extinguishment of debt and lower interest income from reduced cash balances, partially offset by decreased interest expense from debt repurchases[181][195] - Income tax expense increased to $119.6 million (Q2 2025) and $213.7 million (H1 2025) due to higher profit before income taxes[182][196] Liquidity and Capital Resources This section discusses the company's available liquidity sources, cash flow activities, and capital expenditure plans Available Sources of Liquidity (As of June 29, 2025, In millions) | Source | Facility Amount | Amount Outstanding | Amount Available | | :---------------------- | :-------------- | :----------------- | :--------------- | | Cash and cash equivalents | — | — | $849.0 | | U.S. Credit Facility | $850.0 | — | $825.8 | | Mexico Credit Facility | $58.9 | — | $58.9 | | Europe Credit Facility | $205.9 | — | $205.9 | - The company expects cash flows from operations and credit facilities to provide sufficient liquidity for current obligations, working capital, debt maturities, and capital spending for at least the next twelve months, including a new prepared foods facility in Georgia[201] Cash Flows from Operating Activities (Six Months Ended, In millions) | Metric | June 29, 2025 | June 30, 2024 | | :--------------------------------------- | :------------ | :------------ | | Net income | $652.4 | $501.5 | | Net noncash expenses | $220.7 | $235.9 | | Changes in operating assets and liabilities | $(245.5) | $262.3 | | Cash provided by operating activities | $622.1 | $989.7 | - Changes in operating assets and liabilities for H1 2025 included a $75.0 million use of cash from trade accounts and other receivables, a $105.7 million use from inventories, and a $34.6 million use from accounts payable and accrued expenses[206][207][209] Cash Flows from Investing Activities (Six Months Ended, In millions) | Metric | June 29, 2025 | June 30, 2024 | | :--------------------------------------- | :------------ | :------------ | | Acquisitions of property, plant and equipment | $(259.3) | $(213.2) | | Proceeds from property disposals | $2.9 | $4.5 | | Cash used in investing activities | $(256.4) | $(208.7) | Cash Flows from Financing Activities (Six Months Ended, In millions) | Metric | June 29, 2025 | June 30, 2024 | | :--------------------------------------- | :------------ | :------------ | | Payments for dividend | $(1,495.5) | — | | Payments on revolving line of credit, long-term borrowings and finance lease obligations | $(90.7) | $(150.9) | | Payments on early extinguishment of debt | $(2.1) | $(0.2) | | Proceeds from contribution of capital under Tax Sharing Agreement with JBS USA Holdings | — | $1.4 | | Cash provided by (used in) financing activities | $(1,588.3) | $(149.7) | Reconciliation of Net Income to EBITDA and Adjusted EBITDA This section reconciles net income to non-GAAP measures, EBITDA and Adjusted EBITDA, and discusses their analytical limitations Reconciliation of Net Income to EBITDA and Adjusted EBITDA (Six Months Ended June 29, 2025, In thousands) | Metric | Amount | | :--------------------------------------- | :------- | | Net income | $652,352 | | Add: Interest expense, net | $48,236 | | Add: Income tax expense | $213,672 | | Add: Depreciation and amortization | $218,022 | | EBITDA | $1,132,282 | | Add: Foreign currency transaction losses | $2,839 | | Add: Litigation settlements | $65,714 | | Add: Restructuring activities losses | $20,111 | | Minus: Net income attributable to noncontrolling interest | $799 | | Adjusted EBITDA | $1,220,147 | - EBITDA and Adjusted EBITDA are non-GAAP measures used by management and investors to compare performance, but they have limitations as analytical tools and should not replace U.S. GAAP results[216][217] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section outlines Pilgrim's Pride Corporation's exposure to market risks, including commodity prices, interest rates, and foreign currency - The company is exposed to commodity price risk for feed ingredients (corn, soybean meal, wheat) and mitigates this through purchase agreements and derivative financial instruments[220] Sensitivity to 10% Increase in Feed Ingredient Prices (Three Months Ended June 29, 2025, In thousands) | Metric | Amount | Impact of 10% Increase | | :-------------------------- | :------- | :--------------------- | | Feed ingredient purchases | $819,287 | $81,929 | | Feed ingredient inventory | $162,967 | $16,297 | - A hypothetical 10% increase in interest rates would decrease the fair value of fixed-rate debt by $92.2 million as of June 29, 2025[225] - A 10% weakening of the Mexican peso against the U.S. dollar would decrease the net assets of Mexican subsidiaries by $73.7 million, while a 10% strengthening would increase them by $90.1 million[227][228] - A 10% weakening of the British pound against the U.S. dollar would decrease the net assets of Europe subsidiaries by $85.8 million, while a 10% strengthening would increase them by $104.9 million[230] - The U.S., Mexico, and most of Europe continue to experience above-historical inflation, to which the company responds by negotiating with customers and focusing on operational efficiencies[233] Item 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and reports no material changes in internal control over financial reporting - The company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of June 29, 2025[239] - No material changes in internal control over financial reporting occurred during the three months ended June 29, 2025, despite the completion of the second phase of ERP system implementation on April 21, 2025[240][241] PART II. OTHER INFORMATION This section provides additional information, including legal proceedings, risk factors, other disclosures, and a list of exhibits Item 1. Legal Proceedings This section incorporates by reference detailed information on legal proceedings and claims from Note 19 - Information regarding legal proceedings is incorporated by reference from Note 19, 'Commitments and Contingencies,' in Part I, Item 1[243] Item 1A. Risk Factors This section refers to potential risks and uncertainties discussed in the 2024 Annual Report, confirming 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 report[244] - There have been no material changes to the risk factors previously disclosed in the 2024 Annual Report[244] Item 5. Other Information This section states that no directors or executive officers adopted or terminated Rule 10b5-1 trading arrangements - 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 June 29, 2025[245] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including organizational documents and certifications - The exhibits include the Amended and Restated Certificate of Incorporation, Corporate Bylaws, 2019 Long-Term Incentive Plan, Section 302 and 906 certifications, and Inline XBRL documents[246]