UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM			10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 26,~~September 25, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File number 1-9273

PILGRIM’S PRIDE CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		75-1285071
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1770 Promontory Circle		80634-9038
Greeley	CO
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code: (970) 506-8000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of Exchange on which Registered

Common Stock, Par Value $0.01

PPC

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

Number of shares outstanding of the issuer’s common stock, $0.01 par value per share, as of ~~July 27,~~October 26, 2022, was ~~239,045,969~~236,469,365.

INDEX

PILGRIM’S PRIDE CORPORATION


PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements	2
	Condensed Consolidated Balance Sheets ~~June 26,~~September 25, 2022 and December 26, 2021	2
	Condensed Consolidated Statements of Income Three and ~~Six~~Nine Months Ended ~~June 26,~~September 25, 2022 and ~~June 27,~~September 26, 2021	3
	Condensed Consolidated Statements of Comprehensive Income Three and ~~Six~~Nine Months Ended ~~June 26,~~September 25, 2022 and ~~June 27,~~September 26, 2021	4
	Condensed Consolidated Statements of Stockholders’ Equity Three and ~~Six~~Nine Months Ended ~~June 26,~~September 25, 2022 and ~~June 27,~~September 26, 2021	5
	Condensed Consolidated Statements of Cash Flows ~~Six~~Nine Months Ended ~~June 26,~~September 25, 2022 and ~~June 27,~~September 26, 2021	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3335
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4547
Item 4.	Controls and Procedures	4951
PART II. OTHER INFORMATION		5052
Item 1.	Legal Proceedings	5052
Item 1A.	Risk Factors	5052
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5053

Item 6.	Exhibits	5154
SIGNATURES		5255

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PILGRIM’S PRIDE CORPORATION	PILGRIM’S PRIDE CORPORATION					PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS	CONDENSED CONSOLIDATED BALANCE SHEETS					CONDENSED CONSOLIDATED BALANCE SHEETS

		(Unaudited)					(Unaudited)
		June 26, 2022		December 26, 2021			September 25, 2022		December 26, 2021
		(In thousands)					(In thousands)
Cash and cash equivalents	Cash and cash equivalents	$	682,126	$	427,661	Cash and cash equivalents	$	654,213	$	427,661
Restricted cash and restricted cash equivalents	Restricted cash and restricted cash equivalents	40,498		22,460		Restricted cash and restricted cash equivalents	29,880		22,460

Trade accounts and other receivables, less allowance for credit losses	Trade accounts and other receivables, less allowance for credit losses	1,184,225		1,013,437		Trade accounts and other receivables, less allowance for credit losses	1,115,156		1,013,437
Accounts receivable from related parties	Accounts receivable from related parties	1,696		1,345		Accounts receivable from related parties	9,855		1,345
Inventories	Inventories	1,840,462		1,575,658		Inventories	1,934,698		1,575,658
Income taxes receivable	Income taxes receivable	32,675		27,828		Income taxes receivable	61,684		27,828
Prepaid expenses and other current assets	Prepaid expenses and other current assets	217,537		237,565		Prepaid expenses and other current assets	227,434		237,565
Total current assets	Total current assets	3,999,219		3,305,954		Total current assets	4,032,920		3,305,954
Deferred tax assets	Deferred tax assets	5,020		5,314		Deferred tax assets	4,637		5,314
Other long-lived assets	Other long-lived assets	32,009		32,410		Other long-lived assets	31,935		32,410
Operating lease assets, net	Operating lease assets, net	315,014		351,226		Operating lease assets, net	293,564		351,226
Intangible assets, net	Intangible assets, net	874,248		963,243		Intangible assets, net	779,621		963,243
Goodwill	Goodwill	1,243,536		1,337,252		Goodwill	1,124,286		1,337,252
Property, plant and equipment, net	Property, plant and equipment, net	2,853,886		2,917,806		Property, plant and equipment, net	2,812,049		2,917,806
Total assets	Total assets	$	9,322,932	$	8,913,205	Total assets	$	9,079,012	$	8,913,205

Accounts payable	Accounts payable	$	1,481,640	$	1,378,077	Accounts payable	$	1,539,752	$	1,378,077
Accounts payable to related parties	Accounts payable to related parties	11,250		22,317		Accounts payable to related parties	17,055		22,317
Revenue contract liabilities	Revenue contract liabilities	28,188		22,321		Revenue contract liabilities	35,734		22,321
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	811,999		859,885		Accrued expenses and other current liabilities	857,189		859,885
Income taxes payable	Income taxes payable	111,624		81,977		Income taxes payable	131,816		81,977
Current maturities of long-term debt	Current maturities of long-term debt	26,260		26,246		Current maturities of long-term debt	26,269		26,246
Total current liabilities	Total current liabilities	2,470,961		2,390,823		Total current liabilities	2,607,815		2,390,823
Noncurrent operating lease liabilities, less current maturities	Noncurrent operating lease liabilities, less current maturities	238,955		271,366		Noncurrent operating lease liabilities, less current maturities	221,514		271,366
Long-term debt, less current maturities	Long-term debt, less current maturities	3,371,373		3,191,161		Long-term debt, less current maturities	3,183,951		3,191,161

Deferred tax liabilities	Deferred tax liabilities	315,983		369,185		Deferred tax liabilities	278,143		369,185
Other long-term liabilities	Other long-term liabilities	53,576		101,736		Other long-term liabilities	47,340		101,736
Total liabilities	Total liabilities	6,450,848		6,324,271		Total liabilities	6,338,763		6,324,271
Common stock	Common stock	2,616		2,614		Common stock	2,617		2,614
Treasury stock	Treasury stock	(465,123)		(345,134)		Treasury stock	(544,687)		(345,134)
Additional paid-in capital	Additional paid-in capital	1,968,562		1,964,028		Additional paid-in capital	1,970,310		1,964,028
Retained earnings	Retained earnings	1,646,123		1,003,569		Retained earnings	1,904,475		1,003,569
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(291,975)		(47,997)		Accumulated other comprehensive loss	(604,994)		(47,997)
Total Pilgrim’s Pride Corporation stockholders’ equity	Total Pilgrim’s Pride Corporation stockholders’ equity	2,860,203		2,577,080		Total Pilgrim’s Pride Corporation stockholders’ equity	2,727,721		2,577,080
Noncontrolling interest	Noncontrolling interest	11,881		11,854		Noncontrolling interest	12,528		11,854
Total stockholders’ equity	Total stockholders’ equity	2,872,084		2,588,934		Total stockholders’ equity	2,740,249		2,588,934
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	9,322,932	$	8,913,205	Total liabilities and stockholders’ equity	$	9,079,012	$	8,913,205

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


PILGRIM’S PRIDE CORPORATION	PILGRIM’S PRIDE CORPORATION									PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME	CONDENSED CONSOLIDATED STATEMENTS OF INCOME									CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)	(Unaudited)									(Unaudited)

		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021			September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
		(in thousands, except per share data)									(in thousands, except per share data)
Net sales	Net sales	$	4,631,648	$	3,637,698	$	8,872,043	$	6,911,123	Net sales	$	4,468,969	$	3,827,566	$	13,341,012	$	10,738,689
Cost of sales	Cost of sales	3,954,877		3,257,457		7,653,292		6,269,639		Cost of sales	3,971,699		3,455,723		11,624,991		9,725,362
Gross profit	Gross profit	676,771		380,241		1,218,751		641,484		Gross profit	497,270		371,843		1,716,021		1,013,327
Selling, general and administrative expense	Selling, general and administrative expense	163,867		503,372		303,834		606,151		Selling, general and administrative expense	158,068		251,066		461,902		857,217

Operating income (loss)		512,904		(123,131)		914,917		35,333
Operating income										Operating income	339,202		120,777		1,254,119		156,110
Interest expense, net of capitalized interest	Interest expense, net of capitalized interest	38,112		50,651		74,408		80,985		Interest expense, net of capitalized interest	36,895		29,833		111,303		110,818
Interest income	Interest income	(1,010)		(842)		(2,284)		(3,208)		Interest income	(2,673)		(1,244)		(4,957)		(4,452)
Foreign currency transaction losses	Foreign currency transaction losses	2,758		4,145		14,294		6,659		Foreign currency transaction losses	54		2,359		14,348		9,018
Miscellaneous, net	Miscellaneous, net	(1,688)		(770)		(2,012)		(8,614)		Miscellaneous, net	(19,822)		(1,391)		(21,834)		(10,005)

Income (loss) before income taxes		474,732		(176,315)		830,511		(40,489)
Income tax expense (benefit)		112,711		(9,812)		187,930		25,546
Income before income taxes										Income before income taxes	324,748		91,220		1,155,259		50,731
Income tax expense										Income tax expense	65,749		30,385		253,679		55,931
Net income (loss)	Net income (loss)	362,021		(166,503)		642,581		(66,035)		Net income (loss)	258,999		60,835		901,580		(5,200)
Less: Net income (loss) attributable to noncontrolling interests		(95)		184		27		444
Less: Net income attributable to noncontrolling interests										Less: Net income attributable to noncontrolling interests	647		110		674		554
Net income (loss) attributable to Pilgrim’s Pride Corporation	Net income (loss) attributable to Pilgrim’s Pride Corporation	$	362,116	$	(166,687)	$	642,554	$	(66,479)	Net income (loss) attributable to Pilgrim’s Pride Corporation	$	258,352	$	60,725	$	900,906	$	(5,754)

Weighted average shares of Pilgrim’s Pride Corporation common stock outstanding:	Weighted average shares of Pilgrim’s Pride Corporation common stock outstanding:									Weighted average shares of Pilgrim’s Pride Corporation common stock outstanding:
Basic	Basic	240,366		243,675		242,018		243,627		Basic	238,559		243,675		240,865		243,643
Effect of dilutive common stock equivalents	Effect of dilutive common stock equivalents	607		—		619		—		Effect of dilutive common stock equivalents	649		520		629		—
Diluted	Diluted	240,973		243,675		242,637		243,627		Diluted	239,208		244,195		241,494		243,643

Net income (loss) attributable to Pilgrim’s Pride Corporation per share of common stock outstanding:	Net income (loss) attributable to Pilgrim’s Pride Corporation per share of common stock outstanding:									Net income (loss) attributable to Pilgrim’s Pride Corporation per share of common stock outstanding:
Basic	Basic	$	1.51	$	(0.68)	$	2.65	$	(0.27)	Basic	$	1.08	$	0.25	$	3.74	$	(0.02)
Diluted	Diluted	$	1.50	$	(0.68)	$	2.65	$	(0.27)	Diluted	$	1.08	$	0.25	$	3.73	$	(0.02)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


PILGRIM’S PRIDE CORPORATION	PILGRIM’S PRIDE CORPORATION									PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME									CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)	(Unaudited)									(Unaudited)

		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021			September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
		(In thousands)									(In thousands)
Net income (loss)	Net income (loss)	$	362,021	$	(166,503)	$	642,581	$	(66,035)	Net income (loss)	$	258,999	$	60,835	$	901,580	$	(5,200)
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Foreign currency translation adjustment:	Foreign currency translation adjustment:									Foreign currency translation adjustment:
Gains (losses) arising during the period	Gains (losses) arising during the period	(199,328)		15,847		(257,530)		49,138		Gains (losses) arising during the period	(314,600)		(36,003)		(572,130)		13,135

Derivative financial instruments designated as cash flow hedges:	Derivative financial instruments designated as cash flow hedges:									Derivative financial instruments designated as cash flow hedges:
Gains (losses) arising during the period	Gains (losses) arising during the period	(851)		741		(323)		2,209		Gains (losses) arising during the period	(1,919)		(1,030)		(2,242)		1,179
Income tax effect	Income tax effect	—		25		—		32		Income tax effect	—		9		—		41
Reclassification to net earnings for losses (gains) realized	Reclassification to net earnings for losses (gains) realized	1,162		(1,080)		1,319		(1,248)		Reclassification to net earnings for losses (gains) realized	1,342		102		2,661		(1,146)
Income tax effect	Income tax effect	18		(40)		(24)		(72)		Income tax effect	—		(43)		(24)		(115)

Available-for-sale securities:										Available-for-sale securities:
Losses arising during the period										Losses arising during the period	(28)		—		(28)		—
Income tax effect										Income tax effect	7		—		7		—
Reclassification to net earnings for gains realized										Reclassification to net earnings for gains realized	—		—		—		—
Income tax effect										Income tax effect	—		—		—		—
Defined benefit plans:	Defined benefit plans:									Defined benefit plans:
Gains arising during the period		7,502		9,876		16,153		39,103
Gains (losses) arising during the period										Gains (losses) arising during the period	2,472		(7,073)		18,625		32,030
Income tax effect	Income tax effect	(1,837)		(3,588)		(4,009)		(9,918)		Income tax effect	(555)		1,412		(4,564)		(8,506)
Reclassification to net earnings of losses realized	Reclassification to net earnings of losses realized	345		384		577		955		Reclassification to net earnings of losses realized	346		613		923		1,568
Income tax effect	Income tax effect	(84)		(90)		(141)		(225)		Income tax effect	(84)		(143)		(225)		(368)
Total other comprehensive income (loss), net of tax	Total other comprehensive income (loss), net of tax	(193,073)		22,075		(243,978)		79,974		Total other comprehensive income (loss), net of tax	(313,019)		(42,156)		(556,997)		37,818
Comprehensive income (loss)	Comprehensive income (loss)	168,948		(144,428)		398,603		13,939		Comprehensive income (loss)	(54,020)		18,679		344,583		32,618
Less: Comprehensive income (loss) attributable to noncontrolling interests		(95)		184		27		444
Less: Comprehensive income attributable to noncontrolling interests										Less: Comprehensive income attributable to noncontrolling interests	647		110		674		554
Comprehensive income (loss) attributable to Pilgrim’s Pride Corporation	Comprehensive income (loss) attributable to Pilgrim’s Pride Corporation	$	169,043	$	(144,612)	$	398,576	$	13,495	Comprehensive income (loss) attributable to Pilgrim’s Pride Corporation	$	(54,667)	$	18,569	$	343,909	$	32,064

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


PILGRIM’S PRIDE CORPORATION	PILGRIM’S PRIDE CORPORATION																	PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY																	CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)	(Unaudited)																	(Unaudited)

Six Months Ended June 26, 2022		Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total
Nine Months Ended September 25, 2022																		Nine Months Ended September 25, 2022	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total
		Shares	Amount		Shares	Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total			Shares	Amount		Shares	Amount
		(In thousands)																	(In thousands)
Balance at December 26, 2021	Balance at December 26, 2021	261,347	$	2,614	(17,673)	$	(345,134)	$	1,964,028	$	1,003,569	$	(47,997)	$	11,854	$	2,588,934	Balance at December 26, 2021	261,347	$	2,614	(17,673)	$	(345,134)	$	1,964,028	$	1,003,569	$	(47,997)	$	11,854	$	2,588,934
Net income	Net income	—	—		—	—		—		642,554		—		27		642,581		Net income	—	—		—	—		—		900,906		—		674		901,580
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—	—		—	—		—		—		(243,978)		—		(243,978)		Other comprehensive loss, net of tax	—	—		—	—		—		—		(556,997)		—		(556,997)
Stock-based compensation plans:	Stock-based compensation plans:																	Stock-based compensation plans:
Common stock issued under compensation plans	Common stock issued under compensation plans	231	2		—	—		(2)		—		—		—		—		Common stock issued under compensation plans	262	3		—	—		(3)		—		—		—		—
Requisite service period recognition	Requisite service period recognition	—	—		—	—		4,536		—		—		—		4,536		Requisite service period recognition	—	—		—	—		6,285		—		—		—		6,285
Common stock purchased under share repurchase program	Common stock purchased under share repurchase program	—	—		(4,632)	(119,989)		—		—		—		—		(119,989)		Common stock purchased under share repurchase program	—	—		(7,469)	(199,553)		—		—		—		—		(199,553)
Balance at June 26, 2022		261,578	$	2,616	(22,305)	$	(465,123)	$	1,968,562	$	1,646,123	$	(291,975)	$	11,881	$	2,872,084
Balance at September 25, 2022																		Balance at September 25, 2022	261,609	$	2,617	(25,142)	$	(544,687)	$	1,970,310	$	1,904,475	$	(604,994)	$	12,528	$	2,740,249

Three Months Ended June 26, 2022		Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total
Three Months Ended September 25, 2022																		Three Months Ended September 25, 2022	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total
		Shares	Amount		Shares	Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total			Shares	Amount		Shares	Amount
		(In thousands)																	(In thousands)
Balance at March 27, 2022		261,568	$	2,616	(18,831)	$	(372,157)	$	1,966,066	$	1,284,007	$	(98,902)	$	11,976	$	2,793,606
Net income (loss)		—	—		—	—		—		362,116		—		(95)		362,021
Balance at June 26, 2022																		Balance at June 26, 2022	261,578	$	2,616	(22,305)	$	(465,123)	$	1,968,562	$	1,646,123	$	(291,975)	$	11,881	$	2,872,084
Net income																		Net income	—	—		—	—		—		258,352		—		647		258,999
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—	—		—	—		—		—		(193,073)		—		(193,073)		Other comprehensive loss, net of tax	—	—		—	—		—		—		(313,019)		—		(313,019)
Stock-based compensation plans:	Stock-based compensation plans:																	Stock-based compensation plans:
Common stock issued under compensation plans	Common stock issued under compensation plans	10	—		—	—		—		—		—		—		—		Common stock issued under compensation plans	31	1		—	—		(1)		—		—		—		—
Requisite service period recognition	Requisite service period recognition	—	—		—	—		2,496		—		—		—		2,496		Requisite service period recognition	—	—		—	—		1,749		—		—		—		1,749
Common stock purchased under share repurchase program	Common stock purchased under share repurchase program	—	—		(3,474)	(92,966)		—		—		—		—		(92,966)		Common stock purchased under share repurchase program	—	—		(2,837)	(79,564)		—		—		—		—		(79,564)
Balance at June 26, 2022		261,578	$	2,616	(22,305)	$	(465,123)	$	1,968,562	$	1,646,123	$	(291,975)	$	11,881	$	2,872,084
Balance at September 25, 2022																		Balance at September 25, 2022	261,609	$	2,617	(25,142)	$	(544,687)	$	1,970,310	$	1,904,475	$	(604,994)	$	12,528	$	2,740,249


Six Months Ended June 27, 2021		Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interest		Total
Nine Months Ended September 26, 2021																		Nine Months Ended September 26, 2021	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interest		Total
		Shares	Amount		Shares	Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interest		Total			Shares	Amount		Shares	Amount
		(In thousands)																	(In thousands)
Balance at December 27, 2020	Balance at December 27, 2020	261,185	$	2,612	(17,673)	$	(345,134)	$	1,954,334	$	972,569	$	(20,620)	$	11,586	$	2,575,347	Balance at December 27, 2020	261,185	$	2,612	(17,673)	$	(345,134)	$	1,954,334	$	972,569	$	(20,620)	$	11,586	$	2,575,347
Net income (loss)		—	—		—	—		—		(66,479)		—		444		(66,035)
Net loss																		Net loss	—	—		—	—		—		(5,754)		—		554		(5,200)
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—	—		—	—		—		—		79,974		—		79,974		Other comprehensive income, net of tax	—	—		—	—		—		—		37,818		—		37,818
Stock-based compensation plans:	Stock-based compensation plans:																	Stock-based compensation plans:
Common stock issued under compensation plans	Common stock issued under compensation plans	162	2		—	—		(2)		—		—		—		—		Common stock issued under compensation plans	162	2		—	—		(2)		—		—		—		—
Requisite service period recognition	Requisite service period recognition	—	—		—	—		5,226		—		—		—		5,226		Requisite service period recognition	—	—		—	—		8,418		—		—		—		8,418

Balance at June 27, 2021		261,347	$	2,614	(17,673)	$	(345,134)	$	1,959,558	$	906,090	$	59,354	$	12,030	$	2,594,512
Balance at September 26, 2021																		Balance at September 26, 2021	261,347	$	2,614	(17,673)	$	(345,134)	$	1,962,750	$	966,815	$	17,198	$	12,140	$	2,616,383

Three Months Ended June 27, 2021		Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Noncontrolling Interests		Total
Three Months Ended September 26, 2021																		Three Months Ended September 26, 2021	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Noncontrolling Interests		Total
		Shares	Amount		Shares	Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Noncontrolling Interests		Total			Shares	Amount		Shares	Amount
		(In thousands)																	(In thousands)
Balance at March 28, 2021		261,338	$	2,613	(17,673)	$	(345,134)	$	1,956,375	$	1,072,777	$	37,279	$	11,846	$	2,735,756
Net income (loss)		—	—		—	—		—		(166,687)		—		184		(166,503)
Other comprehensive income, net of tax		—	—		—	—		—		—		22,075		—		22,075
Balance at June 27, 2021																		Balance at June 27, 2021	261,347	$	2,614	(17,673)	$	(345,134)	$	1,959,558	$	906,090	$	59,354	$	12,030	$	2,594,512
Net income																		Net income	—	—		—	—		—		60,725		—		110		60,835
Other comprehensive loss, net of tax																		Other comprehensive loss, net of tax	—	—		—	—		—		—		(42,156)		—		(42,156)
Stock-based compensation plans:	Stock-based compensation plans:																	Stock-based compensation plans:
Common stock issued under compensation plans		9	1		—	—		(1)		—		—		—		—

Requisite service period recognition	Requisite service period recognition	—	—		—	—		3,184		—		—		—		3,184		Requisite service period recognition	—	—		—	—		3,192		—		—		—		3,192

Balance at June 27, 2021		261,347	$	2,614	(17,673)	$	(345,134)	$	1,959,558	$	906,090	$	59,354	$	12,030	$	2,594,512
Balance at September 26, 2021																		Balance at September 26, 2021	261,347	$	2,614	(17,673)	$	(345,134)	$	1,962,750	$	966,815	$	17,198	$	12,140	$	2,616,383

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


PILGRIM’S PRIDE CORPORATION	PILGRIM’S PRIDE CORPORATION					PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS					CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)	(Unaudited)					(Unaudited)

		Six Months Ended					Nine Months Ended
		June 26, 2022		June 27, 2021			September 25, 2022		September 26, 2021
		(In thousands)					(In thousands)
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income (loss)	Net income (loss)	$	642,581	$	(66,035)	Net income (loss)	$	901,580	$	(5,200)
Adjustments to reconcile net income (loss) to cash provided by operating activities:	Adjustments to reconcile net income (loss) to cash provided by operating activities:					Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	201,996		182,260		Depreciation and amortization	300,962		274,336
Deferred income tax benefit	Deferred income tax benefit	(35,538)		(32,809)		Deferred income tax benefit	(48,611)		(26,436)
Stock-based compensation	Stock-based compensation	4,346		5,168		Stock-based compensation	5,982		8,418
Gain on property disposals						Gain on property disposals	(5,620)		(3,605)
Loan cost amortization	Loan cost amortization	2,827		2,279		Loan cost amortization	4,311		3,762
Loss (gain) on property disposals		2,718		(5,057)
Accretion of discount related to Senior Notes	Accretion of discount related to Senior Notes	859		675		Accretion of discount related to Senior Notes	1,288		1,104
Loss (gain) on equity-method investments	Loss (gain) on equity-method investments	4		(8)		Loss (gain) on equity-method investments	1		(12)
Loss on early extinguishment of debt recognized as a component of interest expense	Loss on early extinguishment of debt recognized as a component of interest expense	—		24,254		Loss on early extinguishment of debt recognized as a component of interest expense	—		24,654
Amortization of premium related to Senior Notes	Amortization of premium related to Senior Notes	—		(167)		Amortization of premium related to Senior Notes	—		(167)

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Trade accounts and other receivables	Trade accounts and other receivables	(216,523)		(117,610)		Trade accounts and other receivables	(211,827)		(138,948)
Inventories	Inventories	(309,360)		(173,947)		Inventories	(455,465)		(149,653)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	13,173		(6,027)		Prepaid expenses and other current assets	(3,525)		13,718
Accounts payable, accrued expenses and other current liabilities	Accounts payable, accrued expenses and other current liabilities	96,083		266,487		Accounts payable, accrued expenses and other current liabilities	297,271		274,932
Income taxes	Income taxes	21,959		46,638		Income taxes	10,241		66,413

Long-term pension and other postretirement obligations	Long-term pension and other postretirement obligations	(1,717)		(9,507)		Long-term pension and other postretirement obligations	(3,128)		(13,491)
Other operating assets and liabilities	Other operating assets and liabilities	(2,189)		(1,642)		Other operating assets and liabilities	(2,847)		(2,330)
Cash provided by operating activities	Cash provided by operating activities	421,219		114,952		Cash provided by operating activities	790,613		327,495
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Acquisitions of property, plant and equipment	Acquisitions of property, plant and equipment	(196,205)		(183,744)		Acquisitions of property, plant and equipment	(342,588)		(280,820)
Proceeds from property disposals						Proceeds from property disposals	14,607		22,896
Purchase of acquired business, net of cash acquired	Purchase of acquired business, net of cash acquired	(4,847)		—		Purchase of acquired business, net of cash acquired	(9,692)		(953,947)
Proceeds from property disposals		2,362		21,385

Proceeds from insurance recoveries						Proceeds from insurance recoveries	7,339		—

Cash used in investing activities	Cash used in investing activities	(198,690)		(162,359)		Cash used in investing activities	(330,334)		(1,211,871)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Payments on revolving line of credit, long-term borrowings and finance lease obligations						Payments on revolving line of credit, long-term borrowings and finance lease obligations	(370,332)		(2,005,960)
Proceeds from revolving line of credit and long-term borrowings	Proceeds from revolving line of credit and long-term borrowings	351,065		1,540,133		Proceeds from revolving line of credit and long-term borrowings	362,541		2,951,707
Payments on revolving line of credit, long-term borrowings and finance lease obligations		(170,022)		(1,522,416)
Purchase of common stock under share repurchase program	Purchase of common stock under share repurchase program	(119,989)		—		Purchase of common stock under share repurchase program	(199,553)		—
Payments of capitalized loan costs	Payments of capitalized loan costs	(3,052)		(8,650)		Payments of capitalized loan costs	(3,070)		(22,293)
Payment of equity distribution under Tax Sharing Agreement between JBS USA Holdings and Pilgrim’s Pride Corporation	Payment of equity distribution under Tax Sharing Agreement between JBS USA Holdings and Pilgrim’s Pride Corporation	(1,961)		(650)		Payment of equity distribution under Tax Sharing Agreement between JBS USA Holdings and Pilgrim’s Pride Corporation	(1,961)		(650)
Payments on early extinguishment of debt	Payments on early extinguishment of debt	—		(21,258)		Payments on early extinguishment of debt	—		(21,258)

Cash provided by (used in) financing activities	Cash provided by (used in) financing activities	56,041		(12,841)		Cash provided by (used in) financing activities	(212,375)		901,546
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(6,067)		1,859		Effect of exchange rate changes on cash and cash equivalents	(13,932)		(381)
Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents		272,503		(58,389)
Increase in cash, cash equivalents, restricted cash and restricted cash equivalents						Increase in cash, cash equivalents, restricted cash and restricted cash equivalents	233,972		16,789
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period	Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period	450,121		548,406		Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period	450,121		548,406
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period	Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period	$	722,624	$	490,017	Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period	$	684,093	$	565,195

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Pilgrim’s Pride Corporation (referred to herein as “Pilgrim’s,” “PPC,” “the Company,” “we,” “us,” “our,” or similar terms) is one of the largest chicken producers in the world, with operations in the United States (“U.S.”), the United Kingdom (“U.K.”), Mexico, France, Puerto Rico, the Netherlands and the Republic of Ireland. Pilgrim’s products are sold to foodservice, retail and frozen entrée customers. The Company’s primary distribution is through retailers, foodservice distributors and restaurants throughout the countries listed above. Additionally, the Company exports chicken and pork products to approximately 120 countries. Our fresh products consist of refrigerated (nonfrozen) whole or cut-up chicken, selected chicken parts that are either marinated or non-marinated, primary pork cuts, added value pork and pork ribs. The Company’s prepared products include fully cooked, ready-to-cook and individually frozen chicken parts, strips, nuggets and patties, processed sausages, bacon, smoked meat, gammon joints, pre-packed meats, sandwich and deli counter meats and meat balls. The Company’s other products include plant-based protein offerings, ready-to-eat meals, multi-protein frozen foods, vegetarian foods and desserts. The Company also provides direct-to-consumer meals and hot food-to-go solutions in the U.K. and the Republic of Ireland. We operate feed mills, hatcheries, processing plants and distribution centers in 14 U.S. states, the U.K., Mexico, France, Puerto Rico, the Netherlands and the Republic of Ireland. As of ~~June 26,~~September 25, 2022, Pilgrim’s had over ~~60,000 employees. As of June 26, 2022, PPC~~61,800 employees and had the capacity to process approximately ~~43.5~~43.1 million birds per 5-day work week. Approximately 4,750 contract growers supply chicken for the Company’s operations. As of ~~June 26,~~September 25, 2022, PPC had the capacity to process approximately 49,500 pigs per 5-day work week and approximately ~~275~~260 contract growers supply ~~pork~~pigs for the Company’s operations. As of ~~June 26,~~September 25, 2022, JBS S.A., through its indirect wholly-owned subsidiaries (together, ~~“JBS��~~“JBS”), beneficially owned ~~81.7%~~82.7% of the Company’s outstanding common stock.

Condensed Consolidated Financial Statements

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal and recurring adjustments unless otherwise disclosed) considered necessary for a fair presentation have been included. Operating results for the ~~six~~nine months ended ~~June 26,~~September 25, 2022 are not necessarily indicative of the results that may be expected for the year ending December 25, 2022. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 26, 2021.

The Company operates on the basis of a 52/53 week fiscal year ending on the Sunday falling on or before December 31. Any reference we make to a particular year (for example, 2022) in the notes to these Condensed Consolidated Financial Statements applies to our fiscal year and not the calendar year. The three months ended ~~June 26,~~September 25, 2022 represents the period from ~~March 28,~~June 27, 2022 through ~~June 26,~~September 25, 2022. The three months ended ~~June 27,~~September 26, 2021 represents the period from ~~March 29,~~June 28, 2021 through ~~June 27,~~September 26, 2021. The ~~six~~nine months ended ~~June 26,~~September 25, 2022 represents the period from December 27, 2021 through ~~June 26,~~September 25, 2022. The ~~six~~nine months ended ~~June 27,~~September 26, 2021 represents the period from December 28, 2020 through ~~June 27,~~September 26, 2021.

The Condensed Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries. We eliminate all significant affiliate accounts and transactions upon consolidation.

The Condensed Consolidated Financial Statements have been prepared in conformity with U.S. GAAP using management’s best estimates and judgments. These estimates and judgments affect the reported amounts of assets and liabilities and disclosure of the contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ materially from these estimates and judgments. Significant estimates made by the Company include the allowance for credit losses, reserves related to inventory obsolescence or valuation, useful lives of long-lived assets, goodwill, valuation of deferred tax assets, insurance accruals, valuation of pension and other postretirement benefits obligations, income tax accruals, certain derivative positions, certain litigation reserves and valuations of acquired businesses.

The functional currency of the Company’s U.S. and Mexico operations and certain holding-company subsidiaries in Luxembourg, the U.K., Malta and the Republic of Ireland is the U.S. dollar. The functional currency of its U.K. operations is

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the British pound. The functional currency of the Company’s operations in France, the Netherlands and the Republic of Ireland is the euro. For foreign currency-denominated entities other than the Company’s Mexico operations, translation from local currencies into U.S. dollars is performed for most assets and liabilities using the exchange rates in effect as of the balance sheet date. Income and expense accounts are remeasured using average exchange rates for the period. Adjustments resulting from translation of these financial records are reflected as a separate component of Accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets. For the Company’s Mexico operations, remeasurement from the Mexican peso to U.S. dollars is performed for monetary assets and liabilities using the exchange rate in effect as of the balance sheet date. Remeasurement is performed for non-monetary assets using the historical exchange rate in effect on the date of each asset’s acquisition. Income and expense accounts are remeasured using average exchange rates for the period. Net adjustments resulting from remeasurement of these financial records, as well as foreign currency transaction gains and losses, are reflected in Foreign currency transaction losses in the Condensed Consolidated Statements of Income.

Restricted Cash and Restricted Cash Equivalents

The Company is required to maintain cash balances with a broker as collateral for ~~exchange traded~~exchange-traded futures contracts. These balances are classified as restricted cash as they are not available for use by the Company to fund daily operations. The balance of restricted cash and restricted cash equivalents may also include investments in U.S. Treasury Bills that qualify as restricted cash equivalents, as required by the broker, to offset the obligation to return cash collateral.

The following table reconciles cash, cash equivalents, restricted cash and restricted cash equivalents as reported in the Condensed Consolidated Balance Sheets to the total of the same amounts shown in the Condensed Consolidated Statements of Cash Flows:


		June 26, 2022		December 26, 2021			September 25, 2022		December 26, 2021
		(In thousands)					(In thousands)
Cash and cash equivalents	Cash and cash equivalents	$	682,126	$	427,661	Cash and cash equivalents	$	654,213	$	427,661
Restricted cash and restricted cash equivalents	Restricted cash and restricted cash equivalents	40,498		22,460		Restricted cash and restricted cash equivalents	29,880		22,460
Total cash, cash equivalents, restricted cash and restricted cash equivalents shown in the Condensed Consolidated Statements of Cash Flows	Total cash, cash equivalents, restricted cash and restricted cash equivalents shown in the Condensed Consolidated Statements of Cash Flows	$	722,624	$	450,121	Total cash, cash equivalents, restricted cash and restricted cash equivalents shown in the Condensed Consolidated Statements of Cash Flows	$	684,093	$	450,121

Accounting Pronouncements Adopted in 2022

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which requires annual disclosures for transactions with a government authority that are accounted for by a grant or contribution model. The guidance requires disclosure about the nature of certain government assistance received, the accounting treatment for the transactions and the effect of the transactions on the financial statements. The guidance is effective for annual periods beginning after December 15, 2021, with early adoption permitted. The adoption of this guidance did not have a material impact on our Condensed Consolidated Financial Statements.

Accounting Pronouncements Not Yet Adopted as of ~~June 26,~~September 25, 2022

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to the application of current GAAP to existing contracts, hedging relationships and other transactions affected by reference rate reform. The new guidance will ease the transition to new reference rates by allowing entities to update contracts and hedging relationships without applying many of the contract modification requirements specific to those contracts. The provisions of the new guidance ~~will be~~are effective beginning March 12, 2020, extending through December 31, 2022 with the option to apply the guidance at any point during that time period. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which provides further clarification on the scope of Topic 848 so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions in Topic 848. Once an entity elects an expedient or exception it must be applied to all eligible contracts or transactions. We currently have hedging transactions and debt agreements that reference LIBOR and will apply the new guidance as these contracts are modified to reference other rates. The Company plans to adopt this guidance effective December 26, 2022 and does not expect implementation to have a material impact on our Condensed Consolidated Financial Statements.

In September 2022, the FASB issued ASU 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, which requires disclosure of the existence of supplier financing programs. The guidance requires disclosure about the nature of the supplier financing agreements, including key terms and payment timing and determination of amounts, the accounting treatment for the transactions and the effect of the transactions on the financial statements, as well as any assets pledged or guarantees provided to the providers of the financing programs. The provisions of the new guidance will be effective for years beginning after December 15, 2022 with the requirement to add

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rollforward disclosures for years beginning after December 15, 2023. The Company plans to adopt this guidance effective December 26, 2022 and is assessing the impacts on our Condensed Consolidated Financial Statements.

2. BUSINESS ACQUISITION

On September 24, 2021, the Company acquired 100% of the equity of the Kerry Consumer Foods’ meats and meals businesses, collectively known as Pilgrim’s Food Masters (“PFM”), for cash of £695.3 million, or $954.1 million, subject to working capital adjustments. The acquisition was funded with the Company’s recent senior notes offering and borrowings under the credit facility. During the first quarter of 2022, a payment of $4.8 million for working capital and net debt adjustments was paid

to the sellers bringing the total cash paid to $958.9 million. The acquisition solidifies Pilgrim’s as a leading European food company. The specialty meats business is a leading manufacturer of branded and private label meats, meat snacks and food-to-go products in the U.K. and the Republic of Ireland. The ready meals business is a leading ethnic chilled and frozen ready meals business in the U.K. The acquired operations are included in the Company’s U.K. and Europe reportable segment.

To date, transaction costs incurred in conjunction with this acquisition were approximately $19.3 million. These costs were expensed as incurred and are reflected within Selling, general and administrative expense in the Company’s Consolidated Statements of Income.

The results of operations of the acquired business since September 24, 2021 are included in the Company’s Condensed Consolidated Statements of Income. Net sales and net income generated by the acquired business during the three months ended ~~June 26,~~September 25, 2022 totaled ~~$265.8~~$247.6 million and ~~$3.5~~$4.9 million, respectively. Net sales ~~generated~~ and net income generated by the acquired business during the ~~six~~nine months ended ~~June 26,~~September 25, 2022 totaled ~~$526.5~~$774.1 million and ~~$5.4~~$10.3 million, respectively.

The assets acquired and liabilities assumed in the acquisition were measured at their fair values as of September 24, 2021 as set forth below. The excess of the purchase price over the fair value of the identified net assets was recorded as goodwill in the Company’s U.K. and Europe reportable segment. The factors contributing to the amount of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the acquisition as well as the assembled workforce. Benefits include (1) complementary product offerings, (2) an enhanced footprint in the U.K. and the Republic of Ireland and (3) an enhanced position in the fast-growing plant-based protein, direct-to-consumer and hot food-to-go markets. The goodwill is not expected to be tax deductible.

The fair values recorded for the assets acquired and liabilities assumed for the acquisition are as follows (in thousands):


Cash and cash equivalents	$	113
Trade accounts and other receivables	7,387
Inventories	60,341
Prepaid expenses and other current assets	1,727
Operating lease assets	14,648
Property, plant and equipment	247,133
Intangible assets	415,157
Other assets	335
Total assets acquired	746,841

Accounts payable	4,615
Other current liabilities	407
Operating lease liabilities	18,996
Deferred tax liabilities	114,701
Other long-term liabilities	2,612
Total liabilities assumed	141,331
Total identifiable net assets	605,510
Goodwill	353,397
Total consideration transferred	$	958,907

The valuation of intangible assets of $415.2 million consisted of: (1) trade names with indefinite lives of $214.0 million; (2) trade names of $36.8 million with useful lives ranging from 15 years to 20 years; and (3) customer and distributor relationships of $164.3 million with useful lives ranging from 15 years to 18 years.

The following unaudited pro forma information presents the combined financial results for the Company and PFM for 2021 as if the acquisition had been completed at the beginning of 2021:
Six Months Ended
June 26, 2022 June 27, 2021
(In thousands, except per share amounts)
Net sales $ 8,872,043 $ 7,354,634
Net income (loss) attributable to Pilgrim's Pride Corporation 643,223 (97,526)
Net income (loss) attributable to Pilgrim's Pride Corporation
per common share - diluted $ 2.65 $ (0.40)


	Nine Months Ended
	September 25, 2022		September 26, 2021
	(In thousands, except per share amounts)
Net sales	$	13,341,012	$	11,403,955
Net income attributable to Pilgrim's Pride Corporation	901,575		(43,684)
Net income attributable to Pilgrim's Pride Corporation per common share - diluted	$	3.73	(0.18)

The above unaudited pro forma financial information is presented for informational purposes only and does not purport to represent what the Company’s results of operations would have been had it completed the acquisition on the date assumed, nor is it necessarily indicative of the results that may be expected in future periods. Pro forma adjustments include depreciation on the values of acquired property, plant and equipment, amortization on the values of acquired intangible assets, interest expense on debt issued to finance the acquisition, acquisition-related costs incurred by Pilgrim’s and its subsidiaries and the related income tax effect of these adjustments. Pro forma adjustments exclude cost savings from any synergies resulting from the acquisition.

3. REVENUE RECOGNITION

The vast majority of the Company’s revenue is derived from contracts which are based upon a customer ordering our products. While there may be master agreements, the contract is only established when the customer’s order is accepted by the Company. The Company accounts for a contract, which may be verbal or written, when it is approved and committed by both parties, the rights of the parties are identified along with payment terms, the contract has commercial substance and collectability is probable.

The Company evaluates the transaction for distinct performance obligations, which are the sale of its products to customers. Since its products are commodity market-priced, the sales price is representative of the observable, standalone selling price. Each performance obligation is recognized based upon a pattern of recognition that reflects the transfer of control to the customer at a point in time, which is upon destination (customer location or port of destination), which faithfully depicts the transfer of control and recognition of revenue. There are instances of customer pick-up at the Company’s facility, in which case control transfers to the customer at that point and the Company recognizes revenue. The Company’s performance obligations are typically fulfilled within days to weeks of the acceptance of the order.

The Company makes judgments regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from revenue and cash flows with customers. Determination of a contract requires evaluation and judgment along with the estimation of the total contract value and if any of the contract value is constrained. Due to the nature of our business, there is minimal variable consideration, as the contract is established at the acceptance of the order from the customer. When applicable, variable consideration is estimated at contract inception and updated on a regular basis until the contract is completed. Allocating the transaction price to a specific performance obligation based upon the relative standalone selling prices includes estimating the standalone selling prices including discounts and variable consideration.

910

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Disaggregated Revenue

Revenue has been disaggregated into the categories below to show how economic factors affect the nature, amount, timing and uncertainty of revenue and cash flows:


		Three Months Ended June 26, 2022											Three Months Ended September 25, 2022
		(In thousands)											(In thousands)
		Fresh		Prepared		Export		Other		Total			Fresh		Prepared		Export		Other		Total
U.S.	U.S.	$	2,312,418	$	303,963	$	141,015	$	142,482	$	2,899,878	U.S.	$	2,309,402	$	280,114	$	146,704	$	100,700	$	2,836,920
U.K. and Europe	U.K. and Europe	232,045		791,189		184,862		36,956		1,245,052		U.K. and Europe	205,403		783,048		180,605		34,039		1,203,095
Mexico	Mexico	425,849		39,338		—		21,531		486,718		Mexico	364,060		40,785		—		24,109		428,954
Total net sales	Total net sales	$	2,970,312	$	1,134,490	$	325,877	$	200,969	$	4,631,648	Total net sales	$	2,878,865	$	1,103,947	$	327,309	$	158,848	$	4,468,969


		Three Months Ended June 27, 2021											Three Months Ended September 26, 2021
		(In thousands)											(In thousands)
		Fresh		Prepared		Export		Other		Total			Fresh		Prepared		Export		Other		Total
U.S.	U.S.	$	1,807,640	$	207,309	$	115,844	$	117,676	$	2,248,469	U.S.	$	1,931,953	$	235,763	$	117,454	$	181,680	$	2,466,850
U.K. and Europe	U.K. and Europe	279,968		525,769		94,813		35,296		935,846		U.K. and Europe	248,232		543,838		104,442		33,928		930,440
Mexico	Mexico	402,295		29,738		—		21,350		453,383		Mexico	375,470		31,209		—		23,597		430,276
Total net sales	Total net sales	$	2,489,903	$	762,816	$	210,657	$	174,322	$	3,637,698	Total net sales	$	2,555,655	$	810,810	$	221,896	$	239,205	$	3,827,566

Six Months Ended June 26, 2022
(In thousands)
Fresh Prepared Export Other Total
U.S. $ 4,400,039 $ 559,050 $ 274,813 $ 247,184 $ 5,481,086
U.K. and Europe 469,354 1,537,825 358,273 71,582 2,437,034
Mexico 836,269 75,479 — 42,175 953,923
Total net sales $ 5,705,662 $ 2,172,354 $ 633,086 $ 360,941 $ 8,872,043
Six Months Ended June 27, 2021
(In thousands)
Fresh Prepared Export Other Total
U.S. $ 3,405,063 $ 401,581 $ 229,815 $ 211,570 $ 4,248,029
U.K. and Europe 666,855 901,889 174,194 47,641 1,790,579
Mexico 775,016 57,143 — 40,356 872,515
Total net sales $ 4,846,934 $ 1,360,613 $ 404,009 $ 299,567 $ 6,911,123


	Nine Months Ended September 25, 2022
	(In thousands)
	Fresh		Prepared		Export		Other		Total
U.S.	$	6,709,441	$	839,164	$	421,517	$	347,885	$	8,318,007
U.K. and Europe	674,758		2,320,873		538,878		105,620		3,640,129
Mexico	1,200,329		116,264		—		66,283		1,382,876
Total net sales	$	8,584,528	$	3,276,301	$	960,395	$	519,788	$	13,341,012


	Nine Months Ended September 26, 2021
	(In thousands)
	Fresh		Prepared		Export		Other		Total
U.S.	$	5,337,016	$	637,344	$	347,269	$	393,250	$	6,714,879
U.K. and Europe	915,087		1,445,728		278,636		81,568		2,721,019
Mexico	1,150,486		88,352		—		63,953		1,302,791
Total net sales	$	7,402,589	$	2,171,424	$	625,905	$	538,771	$	10,738,689

Contract Costs

The Company can incur incremental costs to obtain or fulfill a contract such as broker expenses that are not expected to be recovered. The amortization period for such expenses is less than one year; therefore, the costs are expensed as incurred.

Taxes

The Company excludes all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer (for example, sales, use, value added and some excise taxes) from the transaction price.

Contract Balances

The Company receives payment from customers based on terms established with the customer. Payments are typically due within 14 to 30 days of delivery. Revenue contract liabilities relate to payments received in advance of satisfying the performance under the customer contract. The revenue contract liabilities relate to customer prepayments and the advanced consideration, such as cash, received from governmental agency contracts for which performance obligations to the end customer have not been satisfied.

Changes in the revenue contract liabilities balance are as follows (in thousands):

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Balance as of December 26, 2021	$	22,321
Revenue recognized	~~(21,334)~~(33,681)
Cash received, excluding amounts recognized as revenue during the period	~~27,201~~47,094
Balance as of ~~June 26,~~September 25, 2022	$	~~28,188~~35,734

Accounts Receivable

The Company records accounts receivable when revenue is recognized. We record an allowance for credit losses, reducing our receivables balance to an amount we estimate is collectible from our customers. Estimates used in determining the allowance for credit losses are based on historical collection experience, current trends, aging of accounts receivable and periodic credit evaluations of our customers’ financial condition. We write off accounts receivable when it becomes apparent, based upon age or customer circumstances, that such amounts will not be collected. Generally, the Company does not require collateral for its accounts receivable.

4. DERIVATIVE FINANCIAL INSTRUMENTS

The Company utilizes various raw materials in its operations, including corn, soybean meal, soybean oil, wheat, natural gas, electricity and diesel fuel, which are all considered commodities. The Company considers these raw materials generally available from a number of different sources and believes it can obtain them to meet its requirements. These commodities are subject to price fluctuations and related price risk due to factors beyond our control, such as economic and political conditions, supply and demand, weather, governmental regulation and other circumstances. Generally, the Company purchases derivative financial instruments, specifically exchange-traded futures and options, in an attempt to mitigate price risk related to its anticipated consumption of commodity inputs for approximately the next twelve months. The Company may purchase longer-term derivative financial instruments on particular commodities if deemed appropriate.

The Company has operations in Mexico, the U.K., France, the Netherlands and the Republic of Ireland. Therefore, it has exposure to translational foreign exchange risk when the financial results of those operations are remeasured in U.S. dollars. The Company has purchased foreign currency forward contracts to manage this translational foreign exchange risk.

The Company has exposure to variability in cash flows from interest payments due to the use of variable interest rates on certain long-term debt arrangements in the U.S. reportable segment. The Company purchased an interest rate swap contract, which expired in May 2022, to convert the variable interest rate to a fixed interest rate on a portion of its outstanding long-term debt arrangements in order to manage this interest rate risk and add stability to interest expense and cash flows.

The fair value of derivative assets is included in the line item Prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets while the fair value of derivative liabilities is included in the line item Accrued expenses and other current liabilities on the same statements. The Company’s counterparties require that it post collateral for changes in the net fair value of the derivative contracts. This cash collateral is reported in the line item Restricted cash and restricted cash equivalents on the Condensed Consolidated Balance Sheets.

Undesignated contracts may include contracts not designated as ~~a hedge~~hedges or ~~for which the normal purchase normal sales (“NPNS”) exception was not elected,~~ contracts that do not qualify for hedge ~~accounting and derivatives that do not or no longer qualify for the NPNS scope exception.~~accounting. The fair value of each of these derivatives is recognized in the Condensed Consolidated Balance Sheets within Prepaid expenses and other current assets or Accrued expenses and other current liabilities. Changes in fair value of each derivative are recognized immediately in the Condensed Consolidated Statements of Income within Net sales, Cost of sales, Selling, general and administrative expense, or Foreign currency transaction losses depending on the risk the derivative is intended to mitigate. While management believes these instruments help mitigate various market risks, they are not designated and accounted for as hedges as a result of the extensive record keeping requirements.

The Company has elected not to apply the NPNS exemption to a fixed-price product sales contract with a certain customer in order to mitigate various risk exposures and to try to achieve an accounting result that aligns the accounting for the derivative with the economics achieved through the use of the derivative. Transactions originating from this contract are accounted for as undesignated derivatives and recognized at fair value.

The Company does not apply hedge accounting treatment to certain derivative financial instruments that it has purchased to mitigate commodity purchase exposures in the U.S. and Mexico or foreign currency transaction exposures on our Mexico operations. Therefore, the Company recognized changes in the fair value of these derivative financial instruments immediately in earnings. Gains or losses related to the commodity derivative financial instruments are included in the line item Cost of sales in the Condensed Consolidated Statements of Income. Gains or losses related to the foreign currency derivative

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financial instruments are included in the line item Foreign currency transaction losses and Cost of sales in the Condensed Consolidated Statements of Income.

The Company does apply hedge accounting treatment to certain derivative financial instruments related to its U.K. and Europe reportable segment that it has purchased to mitigate foreign currency transaction exposures. Before the settlement date of the financial derivative instruments, the Company recognizes changes in the fair value of the cash flow hedge into accumulated other comprehensive income (“AOCI”). When the derivative financial instruments are settled, the amount in AOCI is then reclassified to earnings. Gains or losses related to these derivative financial instruments are included in the line item Net sales and Cost of sales in the Condensed Consolidated Statements of Income.

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The Company did apply hedge accounting treatment in prior periods to a derivative financial instrument related to its U.S. reportable segment that it had purchased to mitigate variable interest rate exposures; however, this instrument disqualified from hedge accounting treatment in the first quarter of 2022 due to a change in the variable interest rate used on the underlying instrument. Gains or losses related to the interest rate swap derivative financial instrument are included in the line item Interest expense, net of capitalized interest in the Condensed Consolidated Statements of Income.

Information regarding the Company’s outstanding derivative instruments and cash collateral posted with brokers is included in the following table:


		June 26, 2022			December 26, 2021				September 25, 2022			December 26, 2021
		(In thousands)							(In thousands)
Fair values:	Fair values:							Fair values:
Commodity derivative assets	Commodity derivative assets	$	5,987		$	17,567		Commodity derivative assets	$	16,641		$	17,567
Commodity derivative liabilities	Commodity derivative liabilities	(18,524)			(14,119)			Commodity derivative liabilities	(11,720)			(14,119)
Foreign currency derivative assets	Foreign currency derivative assets	3,974			518			Foreign currency derivative assets	5,403			518
Foreign currency derivative liabilities	Foreign currency derivative liabilities	(1,171)			(4,958)			Foreign currency derivative liabilities	(2,027)			(4,958)
Interest rate swap derivative liabilities	Interest rate swap derivative liabilities	—			(98)			Interest rate swap derivative liabilities	—			(98)
Sales contract derivative liabilities	Sales contract derivative liabilities	(4,508)			(12,691)			Sales contract derivative liabilities	(11,243)			(12,691)
Cash collateral posted with brokers(a)	Cash collateral posted with brokers(a)	40,498			22,459			Cash collateral posted with brokers(a)	29,880			22,459
Derivatives coverage(b):	Derivatives coverage(b):							Derivatives coverage(b):
Corn	Corn	24.5		%	6.6		%	Corn	16.9		%	6.6		%
Soybean meal	Soybean meal	34.0		%	11.8		%	Soybean meal	14.6		%	11.8		%
Period through which stated percent of needs are covered:	Period through which stated percent of needs are covered:							Period through which stated percent of needs are covered:
Corn	Corn	May 2023			December 2022			Corn	July 2023			December 2022
Soybean meal	Soybean meal	January 2023			December 2022			Soybean meal	August 2023			December 2022

(a)Collateral posted with brokers consists primarily of cash, short-term treasury bills or other cash equivalents.

(b)Derivatives coverage is the percent of anticipated commodity needs covered by outstanding derivative instruments through a specified date.

The following table presents the gains and losses of each derivative instrument held by the Company not designated or qualifying as hedging instruments:


		Three Months Ended				Six Months Ended						Three Months Ended				Nine Months Ended
Gains (Losses) by Type of Contract (a)	Gains (Losses) by Type of Contract (a)	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021		Affected Line Item in the Condensed Consolidated Statements of Income	Gains (Losses) by Type of Contract (a)	September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021		Affected Line Item in the Condensed Consolidated Statements of Income
		(In thousands)										(In thousands)
Foreign currency derivatives	Foreign currency derivatives	$	(5,260)	$	(8,822)	$	(18,560)	$	(3,482)	Foreign currency transaction losses	Foreign currency derivatives	$	(51)	$	(4,493)	$	(18,611)	$	(7,975)	Foreign currency transaction losses
Commodity derivatives	Commodity derivatives	(12,517)		1,420		19,023		18,798		Cost of sales	Commodity derivatives	28,810		25,632		47,833		44,430		Cost of sales
Sales contract derivative		16,849		23,237		8,182		5,133		Net sales
Sales contract derivative liabilities											Sales contract derivative liabilities	(6,734)		(2,932)		1,448		2,201		Net sales
Total	Total	$	(928)	$	15,835	$	8,645	$	20,449		Total	$	22,025	$	18,207	$	30,670	$	38,656

(a)Amounts represent income (expenses) related to results of operations.

The following tables present the components of the gain or loss on derivatives that qualify as cash flow hedges:


	Gain (Loss) Recognized in Other Comprehensive Income on Derivative
	Three Months Ended				Nine Months Ended
	September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
	(In thousands)
Foreign currency derivatives	$	(1,974)	$	(984)	$	(2,317)	$	1,327
Interest rate swap derivatives	—		(35)		—		(164)
Total	$	(1,974)	$	(1,019)	$	(2,317)	$	1,163

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Gain (Loss) Recognized in Other Comprehensive Income on Derivative
Three Months Ended Six Months Ended
June 26, 2022 June 27, 2021 June 26, 2022 June 27, 2021
(In thousands)
Foreign currency derivatives $ (866) $ 824 (343) 2,309
Interest rate swap derivatives — (98) — (127)
Total (866) 726 (343) 2,182


		Gain (Loss) Reclassified from AOCI into Income													Gain (Loss) Reclassified from AOCI into Income
		Three Months Ended June 26, 2022						Three Months Ended June 27, 2021							Three Months Ended September 25, 2022						Three Months Ended September 26, 2021
		Net sales(a)		Cost of sales(b)		Interest expense, net of capitalized interest(b)		Net sales(a)		Cost of sales(b)		Interest expense, net of capitalized interest(b)			Net sales(a)		Cost of sales(b)		Interest expense, net of capitalized interest(b)		Net sales(a)		Cost of sales(b)		Interest expense, net of capitalized interest(b)
		(In thousands)													(In thousands)
Total amounts of income and expense line items presented in the Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded	Total amounts of income and expense line items presented in the Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded	$	4,631,648	$	3,954,877	$	38,112	$	3,637,698	$	3,257,457	$	50,651	Total amounts of income and expense line items presented in the Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded	$	4,468,969	$	3,971,699	$	36,895	$	3,827,566	$	3,455,723	$	29,833
Impact from cash flow hedging instruments:	Impact from cash flow hedging instruments:													Impact from cash flow hedging instruments:
Foreign currency derivatives	Foreign currency derivatives	(966)		196		—		1,582		344		—		Foreign currency derivatives	(1,067)		275		—		67		(2)		—
Interest rates swap derivatives	Interest rates swap derivatives	—		—		—		—		—		158		Interest rates swap derivatives	—		—		—		—		—		170

(a) Amounts represent income (expenses) related to net sales.

(b) Amounts represent expenses (income) ~~expenses~~ related to cost of sales and interest expense.


		Gain (Loss) Reclassified from AOCI into Income													Gain (Loss) Reclassified from AOCI into Income
		Six Months Ended June 26, 2022						Six Months Ended June 27, 2021							Nine Months Ended September 25, 2022						Nine Months Ended September 26, 2021
		Net sales(a)		Cost of sales(b)		Interest expense, net of capitalized interest(b)		Net sales(a)		Cost of sales(b)		Interest expense, net of capitalized interest(b)			Net sales(a)		Cost of sales(b)		Interest expense, net of capitalized interest(b)		Net sales(a)		Cost of sales(b)		Interest expense, net of capitalized interest(b)
		(In thousands)													(In thousands)
Total amounts of income and expense line items presented in the Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded	Total amounts of income and expense line items presented in the Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded	$	8,872,043	$	7,653,292	$	74,408	$	6,911,123	$	6,269,639	$	80,985	Total amounts of income and expense line items presented in the Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded	$	13,341,012	$	11,624,991	$	111,303	$	10,738,689	$	9,725,362	$	110,818
Impact from cash flow hedging instruments:	Impact from cash flow hedging instruments:													Impact from cash flow hedging instruments:
Foreign currency derivatives	Foreign currency derivatives	(933)		288		—		2,408		870		—		Foreign currency derivatives	(2,001)		562		—		2,475		868		—
Interest rates swap derivatives	Interest rates swap derivatives	—		—		98		—		—		290		Interest rates swap derivatives	—		—		98		—		—		460

(a) Amounts represent income (expenses) related to net sales.

(b) Amounts represent expenses (income) ~~expenses~~ related to cost of sales and interest expense.

At ~~June 26,~~September 25, 2022, there were immaterial pre-tax deferred net losses on foreign currency derivatives recorded in AOCI that are expected to be reclassified to the Condensed Consolidated Statements of Income during the next twelve months. This expectation is based on the anticipated settlements on the hedged investments in foreign currencies that will occur over the next twelve months, at which time the Company will recognize the deferred losses to earnings.

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5. TRADE ACCOUNTS AND OTHER RECEIVABLES

Trade accounts and other receivables, less allowance for credit losses, consisted of the following:


		June 26, 2022		December 26, 2021			September 25, 2022		December 26, 2021
		(In thousands)					(In thousands)
Trade accounts receivable	Trade accounts receivable	$	1,120,031	$	947,697	Trade accounts receivable	$	1,031,180	$	947,697

Notes receivable	Notes receivable	13,456		18,697		Notes receivable	22,110		18,697
Other receivables	Other receivables	60,454		56,716		Other receivables	71,270		56,716
Receivables, gross	Receivables, gross	1,193,941		1,023,110		Receivables, gross	1,124,560		1,023,110
Allowance for credit losses	Allowance for credit losses	(9,716)		(9,673)		Allowance for credit losses	(9,404)		(9,673)
Receivables, net	Receivables, net	$	1,184,225	$	1,013,437	Receivables, net	$	1,115,156	$	1,013,437

Accounts receivable from related parties(a)	Accounts receivable from related parties(a)	$	1,696	$	1,345	Accounts receivable from related parties(a)	$	9,855	$	1,345

(a) Additional information regarding accounts receivable from related parties is included in “Note 16. Related Party Transactions.”

Activity in the allowance for credit losses was as follows:

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	~~Six~~Nine Months Ended
	~~June 26,~~September 25, 2022
	(In thousands)
Balance, beginning of period	$	(9,673)
Provision charged to operating results	~~(638)~~(772)
Account write-offs and recoveries	~~534~~552
Effect of exchange rate	61489
Balance, end of period	$	~~(9,716)~~(9,404)

6. INVENTORIES

Inventories consisted of the following:


		June 26, 2022		December 26, 2021(a)			September 25, 2022		December 26, 2021(a)
		(In thousands)					(In thousands)
Raw materials and work-in-process	Raw materials and work-in-process	$	1,173,485	$	1,034,518	Raw materials and work-in-process	$	1,215,034	$	1,034,518
Finished products	Finished products	490,986		369,292		Finished products	548,960		369,292
Operating supplies	Operating supplies	87,005		87,332		Operating supplies	82,949		87,332
Maintenance materials and parts	Maintenance materials and parts	88,986		84,516		Maintenance materials and parts	87,755		84,516
Total inventories	Total inventories	$	1,840,462	$	1,575,658	Total inventories	$	1,934,698	$	1,575,658

(a) The inventory component amounts as of December 26, 2021 reported in this table differ from the inventory component amounts as of December 26, 2021 reported in our annual report on Form 10-K. We increased Operating supplies and Maintenance material and parts amounts as of December 26, 2021 by $10.7 million and $9.9 million, respectively, and decreased Raw materials and work-in-process and Finished products amounts as of December 26, 2021 by $10.2 million and $10.4 million, respectively, to conform to the inventory component amounts presented as of ~~June 26,~~September 25, 2022.

7. INVESTMENTS IN SECURITIES

The Company recognizes investments in available-for-sale securities as cash equivalents, current investments or long-term investments depending upon each security’s length to maturity. The following table summarizes our investments in available-for-sale securities:


		June 26, 2022				December 26, 2021					September 25, 2022				December 26, 2021
		Cost		Fair Value		Cost		Fair Value			Cost		Fair Value		Cost		Fair Value
		(In thousands)									(In thousands)
Cash equivalents:	Cash equivalents:									Cash equivalents:
Fixed income securities	Fixed income securities	$	7,999	$	7,999	$	48,851	$	48,851	Fixed income securities	$	359,542	$	359,660	$	48,851	$	48,851

Gross realized gains during the three and ~~six~~nine months ended ~~June 26,~~September 25, 2022 related to the Company’s available-for-sale securities totaled $1.8 million and $3.3 million, respectively, while gross realized losses were immaterial. Gross realized gains during the three and ~~six~~nine months ended ~~June 27,~~September 26, 2021 related to the Company’s available-for-sale securities totaled $1.0 million and $3.9 million, respectively, while gross realized losses were immaterial. Proceeds received from the sale or maturity of available-for-sale securities investments are historically disclosed in the Condensed Consolidated Statements of Cash Flows. Net unrealized holding gains and losses on the Company’s available-for-sale securities recognized during the nine months ended September 25, 2022 and September 26, 2021 that have been included in accumulated other comprehensive income (loss) and the net amount of gains and losses reclassified out of accumulated other comprehensive income (loss) to earnings during the nine months ended September 25, 2022 and September 26, 2021 are disclosed in “Note 13. Stockholders’ Equity”.

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8. GOODWILL AND INTANGIBLE ASSETS

The activity in goodwill by segment for the ~~six~~nine months ended ~~June 26,~~September 25, 2022 was as follows:


		December 26, 2021		Additions		Currency Translation		June 26, 2022				December 26, 2021		Additions		Currency Translation		September 25, 2022
		(In thousands)								(In thousands)
U.S.	U.S.	$	41,936	$	—	$	—	$	41,936		U.S.	$	41,936	$	—	$	—	$	41,936
U.K. and Europe	U.K. and Europe	1,167,512		4,570		(98,286)		1,073,796			U.K. and Europe	1,167,512		5,401		(218,367)		954,546
Mexico	Mexico	127,804		—		—		127,804			Mexico	127,804		—		—		127,804
Total	Total	$	1,337,252	$	4,570	$	(98,286)	$	1,243,536		Total	$	1,337,252	$	5,401	$	(218,367)	$	1,124,286

Additions shown in goodwill table above are primarily comprised of working capital adjustments made as part of the prior year business acquisitions. For additional information, refer to “Note 2. Business ~~Acquisitions.~~Acquisition.”

Intangible assets consisted of the following:


		December 26, 2021		Additions		Amortization		Currency Translation			June 26, 2022			December 26, 2021		Amortization		Disposals		Currency Translation		September 25, 2022
		(In thousands)								(In thousands)
Cost:	Cost:												Cost:
Trade names not subject to amortization	Trade names not subject to amortization	$	609,713	$	—	$	—	$	(50,558)		$	559,155	Trade names not subject to amortization	$	609,713	$	—	$	—	$	(119,483)	$	490,230
Trade names subject to amortization	Trade names subject to amortization	114,268		—				(2,972)			111,296		Trade names subject to amortization	114,268		—		—		(1,865)		112,403
Customer relationships	Customer relationships	455,459		—		—		(24,255)			431,204		Customer relationships	455,459		—		—		(53,724)		401,735
Non-compete agreements	Non-compete agreements	320		—		—		—			320		Non-compete agreements	320		—		(320)		—		—
Accumulated amortization:	Accumulated amortization:												Accumulated amortization:
Trade names	Trade names	(49,901)		—		(2,063)		95			(51,869)		Trade names	(49,901)		(2,961)		—		111		(52,751)
Customer relationships	Customer relationships	(166,296)		—		(15,382)		6,140			(175,538)		Customer relationships	(166,296)		(22,668)		—		16,968		(171,996)
Non-compete agreements	Non-compete agreements	(320)		—		—		—			(320)		Non-compete agreements	(320)		—		320		—		—
Intangible assets, net	Intangible assets, net	$	963,243	$	—	$	(17,445)	$	(71,550)		$	874,248	Intangible assets, net	$	963,243	$	(25,629)	$	—	$	(157,993)	$	779,621

Intangible assets are amortized over the estimated useful lives of the assets as follows:


Customer relationships			3-18 years
Trade names subject to amortization			15-20 years
Non-compete agreements			3 years

At ~~June 26,~~September 25, 2022, the Company assessed if events or changes in circumstances indicated that the asset group-level carrying amounts of its intangible assets subject to amortization might not be recoverable. There were no indicators present that required the Company to test the recoverability of the asset group-level carrying amounts of its intangible assets subject to amortization at that date.

9. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment (“PP&E”), net consisted of the following:

June 26, 2022 December 26, 2021
(In thousands)
Land $ 256,592 $ 260,079
Buildings 2,033,477 2,043,034
Machinery and equipment 3,559,063 3,594,482
Autos and trucks 76,183 76,710
Finance leases 5,710 5,710
Construction-in-progress 284,078 229,837
PP&E, gross 6,215,103 6,209,852
Accumulated depreciation (3,361,217) (3,292,046)
PP&E, net $ 2,853,886 $ 2,917,806

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	September 25, 2022		December 26, 2021
	(In thousands)
Land	$	251,259	$	260,079
Buildings	1,994,467		2,043,034
Machinery and equipment	3,488,169		3,594,482
Autos and trucks	76,493		76,710
Finance leases	5,709		5,710
Construction-in-progress	325,325		229,837
PP&E, gross	6,141,422		6,209,852
Accumulated depreciation	(3,329,373)		(3,292,046)
PP&E, net	$	2,812,049	$	2,917,806

The Company recognized depreciation expense of ~~$91.1~~$90.8 million and ~~$89.9~~$86.3 million during the three months ended ~~June 26,~~September 25, 2022 and ~~June 27,~~September 26, 2021, respectively. The Company recognized depreciation expense of ~~$184.5~~$275.3 million and ~~$170.6~~$256.9 million during the ~~six~~nine months ended ~~June 26,~~September 25, 2022 and ~~June 27,~~September 26, 2021, respectively.

During the ~~six~~nine months ended ~~June 26,~~September 25, 2022, Pilgrim’s spent ~~$196.2~~$342.6 million on capital projects and transferred ~~$135.5~~$230.7 million of completed projects from construction-in-progress to depreciable assets. Capital expenditures were primarily incurred during the ~~six~~nine months ended ~~June 26,~~September 25, 2022 to improve efficiencies and reduce costs. During the ~~six~~nine months ended ~~June 27,~~September 26, 2021, the Company spent ~~$183.7~~$280.8 million on capital projects and transferred ~~$129.4~~$324.1 million of completed projects from construction-in-progress to depreciable assets.

During the three and ~~six~~nine months ended ~~June 26,~~September 25, 2022, the Company sold certain PP&E for ~~$1.6~~$12.2 million and ~~$2.4~~$14.6 million, respectively, in cash and recognized a net ~~loss~~gain of ~~$0.8~~$8.3 million and ~~$2.7~~$5.6 million, respectively, on these sales. PP&E sold during the ~~six~~nine months ended ~~June 26,~~September 25, 2022 consisted of a farm in Mexico and other miscellaneous equipment. During the three and ~~six~~nine months ended ~~June 27,~~September 26, 2021, the Company sold miscellaneous equipment for cash of ~~$8.3~~$1.5 million and ~~$21.4~~$22.9 million, respectively, and recognized a net loss of $1.5 million and a net gain of $3.6 million on these sales, ~~of $2.7 million and $5.1 million,~~ respectively.

The Company has closed or idled various facilities in the U.S. and in the U.K. The Board of Directors has not determined if it would be in the best interest of the Company to divest any of these idled assets. Management is therefore not certain that it can or will divest any of these assets within one year, is not actively marketing these assets and, accordingly, has not classified them as assets held for sale. The Company continues to depreciate these assets. As of ~~June 26,~~September 25, 2022, the carrying amounts of these idled assets totaled ~~$35.6~~$33.8 million based on depreciable value of ~~$191.0~~$182.3 million and accumulated depreciation of ~~$155.4~~$148.5 million.

As of ~~June 26,~~September 25, 2022, the Company assessed if events or changes in circumstances indicated that the asset group-level carrying amounts of its ~~property, plant and equipment~~PP&E held for use might not be recoverable. There were no indicators present that required the Company to test the recoverability of the asset group-level carrying amounts of its ~~property, plant and equipment~~PP&E held for use at that date.

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10. CURRENT LIABILITIES

Current liabilities, other than income taxes and current maturities of long-term debt, consisted of the following

components:

June 26, 2022 December 26, 2021
(In thousands)
Accounts payable:
Trade accounts $ 1,368,748 $ 1,273,297
Book overdrafts 85,313 77,139
Other payables 27,579 27,641
Total accounts payable 1,481,640 1,378,077
Accounts payable to related parties(a)
11,250 22,317
Revenue contract liabilities(b)
28,188 22,321
Accrued expenses and other current liabilities:
Compensation and benefits 212,508 224,368
Taxes 87,045 68,163
Current maturities of operating lease liabilities 77,750 82,947
Litigation settlements 74,126 172,440
Insurance and self-insured claims 68,960 64,697
Accrued sales rebates 45,979 35,613
Interest and debt-related fees 32,068 31,810
Derivative liabilities 24,203 31,866
Other accrued expenses 189,360 147,981
Total accrued expenses and other current liabilities 811,999 859,885
Total $ 2,333,077 $ 2,282,600


	September 25, 2022		December 26, 2021
	(In thousands)
Accounts payable:
Trade accounts	$	1,412,572	$	1,273,297
Book overdrafts	112,106		77,139
Other payables	15,074		27,641
Total accounts payable	1,539,752		1,378,077
Accounts payable to related parties(a)	17,055		22,317
Revenue contract liabilities(b)	35,734		22,321
Accrued expenses and other current liabilities:
Compensation and benefits	264,384		224,368
Litigation settlements(c)	93,426		172,440
Current maturities of operating lease liabilities	74,180		82,947
Insurance and self-insured claims	68,033		64,697
Taxes	65,858		68,163
Interest and debt-related fees	47,657		31,810
Accrued sales rebates	44,386		35,613
Derivative liabilities(d)	24,990		31,866
Other accrued expenses	174,275		147,981
Total accrued expenses and other current liabilities	857,189		859,885
Total	$	2,449,730	$	2,282,600

(a) Additional information regarding accounts payable to related parties is included in “Note 16. Related Party Transactions.”

(b) Additional information regarding revenue contract liabilities is included in “Note 3. Revenue Recognition.”

~~Table of Contents~~

(d) Additional information regarding derivative liabilities is included in “Note 4. Derivative Financial Instruments.”

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11. INCOME TAXES

The Company recorded income tax expense of ~~$187.9~~$253.7 million, a ~~22.6%~~21.9% effective tax rate, for the ~~six~~nine months ended ~~June 26,~~September 25, 2022 compared to income tax expense of ~~$25.5~~$55.9 million, a ~~(63.1)%~~110.3% effective tax rate, for the ~~six~~nine months ended ~~June 27,~~September 26, 2021. The increase in income tax expense in 2022 resulted primarily from the increase of profit before income taxes.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carry back and carry forward periods), projected future taxable income and tax-planning strategies in making this assessment. As of ~~June 26,~~September 25, 2022, the Company did not believe it had sufficient positive evidence to conclude that realization of a portion of its foreign net deferred tax assets are more likely than not to be realized.

For the ~~six~~nine months ended ~~June 26,~~September 25, 2022 and ~~June 27,~~September 26, 2021, there is a tax effect of ~~$(4.2)~~$(4.8) million and ~~$(10.2)~~$(8.5) million, respectively, reflected in other comprehensive income.

For the ~~six~~nine months ended ~~June 26,~~September 25, 2022 and ~~June 27,~~September 26, 2021, there are immaterial tax effects reflected in income tax expense due to excess tax windfalls and shortfalls related to stock-based compensation.

The Company and its subsidiaries file a variety of consolidated and standalone income tax returns in various jurisdictions. In the normal course of business, our income tax filings are subject to review by various taxing authorities. In general, tax returns filed by the Company and its subsidiaries for years prior to 2011 are no longer subject to examination by tax authorities.

As of July 27, 2020, JBS owns in excess of 80% of Pilgrim’s. JBS has a federal tax election to file a consolidated tax return with subsidiaries in which it holds an ownership of at least 80%.

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which includes significant law changes relating to tax, climate change, energy and health care. The Company is currently analyzing the tax effects of this legislation, most of which are applicable for tax years beginning after December 31, 2022.

12. DEBT

Long-term debt and other borrowing arrangements, including current notes payable to banks, consisted of the following components:


		Maturity	June 26, 2022		December 26, 2021			Maturity	September 25, 2022		December 26, 2021
			(In thousands)						(In thousands)
Senior notes payable at 3.50%	Senior notes payable at 3.50%	2032	$	900,000	$	900,000	Senior notes payable at 3.50%	2032	$	900,000	$	900,000
Senior notes payable, net of discount, at 4.25%	Senior notes payable, net of discount, at 4.25%	2031	991,191		990,691		Senior notes payable, net of discount, at 4.25%	2031	991,441		990,691
Senior notes payable, net of discount, at 5.875%	Senior notes payable, net of discount, at 5.875%	2027	846,224		845,866		Senior notes payable, net of discount, at 5.875%	2027	846,403		845,866
Fifth Amended and Restated U.S. Credit Facility (defined below):
Term note payable at 2.09%		2026	686,483		506,250
Revolving note payable at 3.50%		2026	—		—
Moy Park Bank of Ireland Revolving Facility with notes payable at specified index rates, depending upon borrowing currency, plus 1.25% to 2.00%		2027	—		—
Moy Park Bank of Ireland Revolving Facility with notes payable at LIBOR or EURIBOR plus 1.25% to 2.00%		2023	—		—
U.S. Credit Facility (defined below):							U.S. Credit Facility (defined below):
Term note payable at 4.43%							Term note payable at 4.43%	2026	486,405		506,250
Revolving note payable at 4.33%							Revolving note payable at 4.33%	2026	—		—
U.K. and Europe Revolving Facility (defined below) with notes payable at Sonia plus 1.25%							U.K. and Europe Revolving Facility (defined below) with notes payable at Sonia plus 1.25%	2027	10,859		—
Mexico Credit Facility (defined below) with notes payable at TIIE plus 1.50%	Mexico Credit Facility (defined below) with notes payable at TIIE plus 1.50%	2023	—		—		Mexico Credit Facility (defined below) with notes payable at TIIE plus 1.50%	2023	—		—
Secured loans with payables at weighted average of 3.34%	Secured loans with payables at weighted average of 3.34%	2022	—		3		Secured loans with payables at weighted average of 3.34%	2022	—		3
Finance lease obligations	Finance lease obligations	Various	4,091		4,548		Finance lease obligations	Various	3,859		4,548

Long-term debt	Long-term debt		3,427,989		3,247,358		Long-term debt		3,238,967		3,247,358
Less: Current maturities of long-term debt	Less: Current maturities of long-term debt		(26,260)		(26,246)		Less: Current maturities of long-term debt		(26,269)		(26,246)
Long-term debt, less current maturities	Long-term debt, less current maturities		3,401,729		3,221,112		Long-term debt, less current maturities		3,212,698		3,221,112
Less: Capitalized financing costs	Less: Capitalized financing costs		(30,356)		(29,951)		Less: Capitalized financing costs		(28,747)		(29,951)
Long-term debt, less current maturities, net of capitalized financing costs	Long-term debt, less current maturities, net of capitalized financing costs		$	3,371,373	$	3,191,161	Long-term debt, less current maturities, net of capitalized financing costs		$	3,183,951	$	3,191,161

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U.S. Senior Notes

On September 29, 2017, the Company completed a sale of $600.0 million aggregate principal amount of its 5.875% senior notes due 2027. On March 7, 2018, the Company completed an add-on offering of $250.0 million of these senior notes (together with the senior notes issued in September 2017, the “Senior Notes due 2027”). The issuance price of this add-on offering was 97.25%, which created gross proceeds of $243.1 million. The $6.9 million discount will be amortized over the remaining life of the Senior Notes due 2027. Each issuance of the Senior Notes due 2027 is treated as a single class for all purposes under the 2017 Indenture (defined below) and have the same terms.

The Senior Notes due 2027 are governed by, and were issued pursuant to, an indenture dated as of September 29, 2017 by and among the Company, its guarantor subsidiaries and Regions Bank, as trustee (the “2017 Indenture”). The 2017 Indenture provides, among other things, that the Senior Notes due 2027 bear interest at a rate of 5.875% per annum from the date of issuance until maturity, payable semi-annually in cash in arrears, beginning on March 30, 2018 for the Senior Notes due 2027 that were issued in September 2017 and beginning on March 15, 2018 for the Senior Notes due 2027 that were issued in March 2018.

On April 8, 2021, the Company completed a sale of $1.0 billion aggregate principal amount of its 4.25% sustainability-linked senior notes due 2031 (“Senior Notes due 2031”). The Company used the net proceeds, together with cash on hand, to redeem ~~the Senior Notes due 2025.~~previously issued senior notes. The issuance price of this offering was 98.994%, which created gross proceeds of $989.9 million. The $10.1 million discount will be amortized over the remaining life of the Senior Notes due 2031. Each issuance of the Senior Notes due 2031 is treated as a single class for all purposes under the April 2021 Indenture (defined below) and have the same terms.

The Senior Notes due 2031 are governed by, and were issued pursuant to, an indenture dated as of April 8, 2021 by and among the Company, its guarantor subsidiaries and Regions Bank, as trustee (the “April 2021 Indenture”). The April 2021 Indenture provides, among other things, that the Senior Notes due 2031 bear interest at a rate of 4.25% per annum payable semi-annually on April 15 and October 15 of each year, beginning on October 15, 2021. From and including October 15, 2026, the interest rate payable on the notes shall be increased to 4.50% per annum unless the Company has notified the trustee at least 30 days prior to October 15, 2026 that in respect of the year ended December 31, 2025, (1) the Company’s greenhouse gas emissions intensity reduction target of 17.679% by December 31, 2025 from a 2019 baseline (the “Sustainability Performance Target”) has been satisfied and (2) the satisfaction of the Sustainability Performance Target has been confirmed by a qualified provider of third-party assurance or attestation services appointed by the Company to review the Company’s statement of the greenhouse gas emissions intensity in accordance with its customary procedures.

On September 22, 2022, the Company announced expiration and receipt of requisite consents in its consent solicitation for certain amendments to its Senior Notes due 2031. The proposed amendments conform certain provisions and restrictive covenants in each indenture to reflect PPC investment grade status. The proposed amendments permanently eliminated certain covenants for the Company, including limitation on incurrence of additional debt, issuance of capital stock, restricted payments, asset sales, restrictions on distributions, affiliate transactions, guarantees of debt by restricted subsidiaries and provisions related to mergers and consolidation. In addition, provisions related to limitation on liens, sale and leaseback transactions, substitution of the company and measuring compliance were amended.

On September 2, 2021, the Company completed a sale of $900.0 million in aggregate principal amount of its 3.50% senior notes due 2032 (“Senior Notes due 2032”). The Company used the proceeds, together with borrowings under the delayed draw term loan under its U.S. Credit Facility, to finance the acquisition of the Kerry Consumer Foods’ meats and meals businesses (now Pilgrim’s Food Masters) and to pay related fees and expenses. Each issuance of the Senior Notes due 2032 is treated as a single class for all purposes under the September 2021 Indenture (defined below) and have the same terms.

The Senior Notes due 2032 are governed by, and were issued pursuant to, an indenture dated as of September 2, 2021 by and among the Company, its guarantor subsidiaries and Regions Bank, as trustee (the “September 2021 Indenture”). The September 2021 Indenture provides, among other things, that the Senior Notes due 2032 bear interest at a rate of 3.50% per annum payable semi-annually on March 1 and September 1 of each year, beginning on March 1, 2022.

On September 22, 2022, the Company announced expiration and receipt of requisite consents in its consent solicitation for certain amendments to its Senior Notes due 2032. The proposed amendments conform certain provisions and restrictive covenants in each indenture to (i) reflect PPC investment grade status and (ii) the corresponding provisions and restrictive covenants set forth in the indenture governing its Senior Notes due 2032. The proposed amendments permanently eliminated certain covenants for the Company, including limitation on incurrence of additional debt, issuance of capital stock, restricted payments, asset sales, restrictions on distributions, affiliate transactions, guarantees of debt by restricted subsidiaries and provisions related to mergers and consolidation. In addition, provisions related to limitation on liens, sale and leaseback transactions, substitution of the company and measuring compliance were amended.

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The Senior Notes due 2027, the Senior Notes due 2031 and the Senior Notes due 2032 were and are each guaranteed on a senior unsecured basis by the Company’s guarantor subsidiaries. In addition, any of the Company’s other existing or future domestic restricted subsidiaries that incur or guarantee any other indebtedness (with limited exceptions) must also guarantee the Senior Notes due 2027 and the Senior Notes due 2031. The Senior Notes due 2027, the Senior Notes due 2031 and the Senior Notes due 2032 and related guarantees were and are unsecured senior obligations of the Company and its guarantor subsidiaries and rank equally with all of the Company’s and its guarantor subsidiaries’ other unsubordinated indebtedness. The Senior Notes due 2027, the 2017 Indenture, the Senior Notes due 2031, the April 2021 Indenture, the Senior Notes due 2032 and the September 2021 Indenture also contain customary covenants and events of default, including failure to pay principal or interest on the Senior Notes due 2027, the Senior Notes due 2031 and the Senior Notes due 2032, respectively, when due, among others.

U.S. Credit Facilities

On August 9, 2021, the Company and certain of the Company’s subsidiaries entered into a Fifth Amended and Restated Credit Agreement (the “U.S. Credit Facility”) with CoBank, ACB, as administrative agent and collateral agent, and the other lenders party thereto. The U.S. Credit Facility provides for an $800.0 million revolving credit commitment and a term

~~Table of Contents~~

loan commitment of up to $700.0 million (the “Term Loans”). The U.S. Credit Facility includes an incremental commitment and loan feature that allows the Company, subject to certain conditions, to increase the aggregate revolving loan and term loan commitments. The aggregate amount of incremental commitments and loans shall not exceed the sum of $500.0 million plus the maximum amount that would result in a senior secured leverage ratio, on a pro-forma basis, of not more than 3.00 to 1.00.

The revolving loan commitment under the U.S. Credit Facility matures on August 9, 2026. All principal on the Term Loans is due at maturity on August 9, 2026. Installments of principal in amounts predetermined by CoBank, ACB are required to be made on a quarterly basis prior to the maturity date of the Term Loans beginning in January 2022. As of ~~June 26,~~September 25, 2022, the Company had outstanding borrowings under the term loan commitment of ~~$686.5~~$486.4 million. As of ~~June 26,~~September 25, 2022, the Company had outstanding letters of credit and available borrowings under the revolving credit commitment of $36.1 million and $763.9 million, respectively.

The U.S. Credit Facility includes an $80.0 million sub-limit for swingline loans and a $125.0 million sub-limit for letters of credit. Outstanding borrowings under the revolving loan commitment and the Term Loans bear interest at a per annum rate, based on the Company’s senior secured net leverage ratio, equal to (1) in the case of LIBOR loans, between LIBOR plus 1.25% and LIBOR plus 2.75% and (2) in the case of base rate loans, between the base rate plus 0.25% and the base rate plus 1.75%.

The U.S. Credit Facility contains customary financial and other various covenants for transactions of this type, including restrictions on the Company’s ability to incur additional indebtedness, incur liens, pay dividends, make certain restricted payments, consummate certain asset sales, enter into certain transactions with the Company’s affiliates, or merge, consolidate and/or sell or dispose of all or substantially all of its assets, among other things. The U.S. Credit Facility requires the Company to comply with a minimum net leverage ratio and a minimum interest coverage ratio.

All obligations under the U.S. Credit Facility continue to be secured by first priority liens on (1) all present and future personal property of the ~~the~~ Company and certain of the Company’s subsidiaries and the guarantors, including all material domestic and first-tier direct foreign subsidiaries, (2) all present and future shares of capital stock of the borrowers and guarantors and (3) substantially all of the present and future assets of the Company and the guarantors under the U.S. Credit Facility. The Company is currently in compliance with the covenants under the U.S. Credit Facility.

~~Moy Park Bank of Ireland~~U.K. and Europe Revolving Facility ~~Agreements~~

On June 2, 2018, Moy Park Holdings (Europe) Ltd. and its subsidiaries entered into an unsecured multicurrency revolving facility agreement (the “2018 Revolver Agreement”) with the Governor and Company of the Bank of Ireland, as agent, and the other lenders party thereto. The 2018 Revolver Agreement provides for a multicurrency revolving loan commitment of up to £100.0 million. The loan commitments under the 2018 Revolver Agreement mature on June 2, 2023. Outstanding borrowings under the 2018 Revolver Agreement bear interest at a rate per annum equal to the sum of (1) LIBOR or, in relation to any loan in euros, EURIBOR, plus (2) a margin, ranging from 1.25% to 2.00% based on leverage (as defined in the 2018 Revolver Agreement). All obligations under the 2018 Revolver Agreement are guaranteed by certain of Moy Park’s subsidiaries. On June 24, 2022, the 2018 Revolver Agreement was cancelled upon the execution of the 2022 Revolver Agreement (defined below).

The 2018 Revolver Agreement contains representations and warranties, covenants, indemnities and conditions that the Company believes are customary for transactions of this type. Pursuant to the terms of the 2018 Revolver Agreement, Moy Park is required to meet certain financial and other restrictive covenants. Additionally, Moy Park is prohibited from taking certain actions without consent of the lenders, including, without limitation, incurring additional indebtedness, entering into certain mergers or other business combination transactions, permitting liens or other encumbrances on its assets and making restricted payments, including dividends, in each case except as expressly permitted under the 2018 Revolver Agreement. The 2018 Revolver Agreement contains events of default that the Company believes are customary for transactions of this type. If a default occurs, any outstanding obligations under the 2018 Revolver Agreement may be accelerated.

On June 24, 2022, Moy Park Holdings (Europe) Ltd. (“MPH(E)”) and other Pilgrim’s entities located in the U.K. and Republic of Ireland entered into an unsecured multicurrency revolving facility agreement (the ~~“2022~~“U.K. and Europe Revolver ~~Agreement”~~Facility”) with the Governor and Company of the Bank of Ireland, as agent, and the other lenders party thereto. The ~~2022~~U.K. and Europe Revolver ~~Agreement~~Facility provides for a multicurrency revolving loan commitment of up to £150.0 million. The loan commitment ~~under the 2022 Revolver Agreement~~ matures on June 24, 2027. Outstanding borrowings ~~under the 2022 Revolver Agreement~~ bear interest at the (1) current index interest rate, depending on the currency of the borrowing, plus (2) a margin, ranging from 1.25% to 2.00% based on leverage (as defined in the ~~2022~~U.K. and Europe Revolver ~~Agreement)~~Facility). All obligations under ~~the 2022 Revolver Agreement~~this agreement are guaranteed by certain of the Company’s subsidiaries. As of ~~June 26,~~September 25, 2022, the U.S. dollar-equivalent loan commitment and borrowing availability were ~~both $184.0 million.~~$162.9 million and $152.0 million, respectively. As of ~~June 26,~~September 25, 2022, there were no$10.9 million outstanding borrowings under ~~the 2022 Revolver Agreement.~~this agreement.

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The ~~2022~~U.K. and Europe Revolver ~~Agreement~~Facility contains representations and warranties, covenants, indemnities and conditions, in each case, that the Company believes are customary for transactions of this type. Pursuant to the terms of the ~~2022 Revolver Agreement,~~agreement, the Company is required to meet certain financial and other restrictive covenants. Additionally, the Company is prohibited from taking certain actions without consent of the lenders, including, without limitation, incurring additional indebtedness, entering into certain mergers or other business combination transactions, permitting liens or other encumbrances on its assets and making restricted payments, including dividends, in each case, except as expressly permitted under the ~~2022~~U.K. and Europe Revolver Agreement. The 2022 Revolver Agreement contains events of default that the Company believes are customary for transactions of this type. If a default occurs, any outstanding obligations under the 2022 Revolver Agreement may be accelerated.Facility. The Company is currently in compliance with the covenants under the ~~2022~~U.K. and Europe Revolver ~~Agreement.~~Facility.

Mexico Credit Facility

On December 14, 2018, certain of the Company’s Mexican subsidiaries entered into an unsecured credit agreement (the “Mexico Credit Facility”) with Banco del Bajio, Sociedad Anónima, Institución de Banca Múltiple, as lender. The loan commitment under the Mexico Credit Facility is Mex$1.5 billion and can be borrowed on a revolving basis. Outstanding borrowings under the Mexico Credit Facility accrue interest at a rate equal to the 28-Day Interbank Equilibrium Interest Rate plus 1.5%. The Mexico Credit Facility contains covenants and defaults that the Company believes are customary for transactions of this type. The Company is currently in compliance with the covenants under the Mexico Credit Facility. The Mexico Credit Facility will be used for general corporate and working capital purposes. The Mexico Credit Facility will mature on December 14, 2023. As of ~~June 26,~~September 25, 2022, the U.S. dollar-equivalent of the loan commitment and borrowing availability was ~~$75.5~~$74.2 million. As of ~~June 26,~~September 25, 2022, there were no outstanding borrowings under the Mexico Credit Facility.

13. STOCKHOLDERS’ EQUITY

Accumulated Other Comprehensive Income (Loss)

The following tables provide information regarding the changes in accumulated other comprehensive income (loss):

Six Months Ended June 26, 2022
Gains (Losses) Related to Foreign Currency Translation Losses on Derivative Financial Instruments Classified as Cash Flow Hedges Losses Related to Pension and Other Postretirement Benefits Total
(In thousands)
Balance, beginning of period $ 27,241 $ (2,365) $ (72,873) $ (47,997)
Other comprehensive income before reclassifications (257,530) (343) 12,144 (245,729)
Amounts reclassified from accumulated other comprehensive loss to net income — 1,295 436 1,731
Currency translation — 20 — 20
Net current period other comprehensive income (loss) (257,530) 972 12,580 (243,978)
Balance, end of period $ (230,289) $ (1,393) $ (60,293) $ (291,975)


		Six Months Ended June 27, 2021									Nine Months Ended September 25, 2022
		Gains Related to Foreign Currency Translation		Losses on Derivative Financial Instruments Classified as Cash Flow Hedges		Losses Related to Pension and Other Postretirement Benefits		Total			Gains (Losses) Related to Foreign Currency Translation		Losses on Derivative Financial Instruments Classified as Cash Flow Hedges		Losses Related to Pension and Other Postretirement Benefits		Gains (Losses) on Available-for-Sale Securities		Total
		(In thousands)									(In thousands)
Balance, beginning of period	Balance, beginning of period	$	82,782	$	(1,191)	$	(102,211)	$	(20,620)	Balance, beginning of period	$	27,241	$	(2,365)	$	(72,873)	$	—	$	(47,997)

Other comprehensive income before reclassifications		49,138		2,214		29,185		80,537
Other comprehensive income (loss) before reclassifications										Other comprehensive income (loss) before reclassifications	(572,130)		(2,317)		14,061		(21)		(560,407)
Amounts reclassified from accumulated other comprehensive loss to net income	Amounts reclassified from accumulated other comprehensive loss to net income	—		(1,320)		730		(590)		Amounts reclassified from accumulated other comprehensive loss to net income	—		2,637		698		—		3,335
Currency translation	Currency translation	—		27		—		27		Currency translation	—		75		—		—		75
Net current period other comprehensive income		49,138		921		29,915		79,974
Net current period other comprehensive income (loss)										Net current period other comprehensive income (loss)	(572,130)		395		14,759		(21)		(556,997)
Balance, end of period	Balance, end of period	$	131,920	$	(270)	$	(72,296)	$	59,354	Balance, end of period	$	(544,889)	$	(1,970)	$	(58,114)	$	(21)	$	(604,994)

2022

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Amount Reclassified from Accumulated Other Comprehensive Loss(a)
Details about Accumulated Other Comprehensive Income Components Six Months Ended June 26, 2022 Six Months Ended June 27, 2021 Affected Line Item in the Condensed Consolidated Statements of Income
(In thousands)
Realized gains (losses) on settlement of foreign currency derivatives classified as cash flow hedges $ (933) $ 1,282 Net sales
Realized gains (losses) on settlement of foreign currency derivatives classified as cash flow hedges (288) 255 Cost of sales
Realized losses on settlement of interest rate swap derivatives classified as cash flow hedges (98) (289) Interest expense, net of capitalized interest
Amortization of pension and other postretirement plan actuarial losses(b)
(577) (955) Miscellaneous, net
Total before tax (1,896) 293
Tax expense 165 297
Total reclassification for the period $ (1,731) $ 590


	Nine Months Ended September 26, 2021
	Gains Related to Foreign Currency Translation		Losses on Derivative Financial Instruments Classified as Cash Flow Hedges		Losses Related to Pension and Other Postretirement Benefits		Gains (Losses) on Available-for-Sale Securities		Total
	(In thousands)
Balance, beginning of period	$	82,782	$	(1,191)	$	(102,211)	$	—	$	(20,620)

Other comprehensive income before reclassifications	13,135		1,204		23,524		—		37,863
Amounts reclassified from accumulated other comprehensive loss to net income	—		(1,261)		1,200		—		(61)
Currency translation	—		16		—		—		16
Net current period other comprehensive income	13,135		(41)		24,724		—		37,818
Balance, end of period	$	95,917	$	(1,232)	$	(77,487)	$	—	$	17,198


	Amount Reclassified from Accumulated Other Comprehensive Loss(a)
Details about Accumulated Other Comprehensive Loss Components	Nine Months Ended September 25, 2022		Nine Months Ended September 26, 2021		Affected Line Item in the Condensed Consolidated Statements of Income
	(In thousands)
Realized gains (losses) on settlement of foreign currency derivatives classified as cash flow hedges	$	(2,001)	$	746	Net sales
Realized gains (losses) on settlement of foreign currency derivatives classified as cash flow hedges	(562)		860		Cost of sales
Realized losses on settlement of interest rate swap derivatives classified as cash flow hedges	(98)		(460)		Interest expense, net of capitalized interest
Amortization of pension and other postretirement plan actuarial losses(b)	(923)		(1,568)		Miscellaneous, net
Total before tax	(3,584)		(422)
Tax expense	249		483
Total reclassification for the period	$	(3,335)	$	61

(a) Positive amounts represent income to the results of operations while amounts in parentheses represent expenses to the results of operations.

(b) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See “Note 14. Pension and Other Postretirement Benefits.”

Preferred Stock

The Company has authorized 50,000,000 shares of $0.01 par value preferred stock, although no shares have been issued and no shares are outstanding.

Share Repurchase Plan and Treasury Stock

On March 8, 2022, the Company’s Board of Directors approved a $200.0 million share repurchase authorization. The Company repurchased shares through open market purchases. As of ~~June 26,~~September 25, 2022, the Company repurchased approximately ~~4.6~~7.5 million shares under this plan with a market value of approximately ~~$120.0~~$199.6 million. The Company accounted for the shares repurchased using the cost method. The Company currently plans to maintain these shares as treasury stock.

Restrictions on Dividends

Both the ~~Fifth~~ U.S. Credit Facility and the indentures governing the Company’s senior notes restrict, but do not prohibit, the Company from declaring dividends. Additionally, ~~Moy Park’s Bank~~the U.K. and Europe Revolver Facility prohibits MPH(E) and other Pilgrim's entities located in the U.K. and Republic of Ireland ~~Facility Agreement restricts Moy Park’s ability and the ability of certain of Moy Park’s subsidiaries~~ to, among other things, make payments and distributions to the Company.

14. PENSION AND OTHER POSTRETIREMENT BENEFITS

The Company sponsors programs that provide retirement benefits to most of its employees. These programs include qualified defined benefit pension plans such as the Pilgrim’s Pride Retirement Plan for Union Employees (the “Union Plan”)

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the Pilgrim’s Pride Pension Plan for Legacy Gold Kist Employees (the “GK Pension Plan”), the Tulip Limited Pension Plan (the “Tulip Plan”) and the Geo Adams Group Pension Fund (the “Geo Adams Plan”), nonqualified defined benefit retirement plans, a defined benefit postretirement life insurance plan and defined contribution retirement savings plan. Expenses recognized under all retirement plans totaled ~~$10.4~~$7.1 million and ~~$4.0~~$4.3 million in the three months ended ~~June 26,~~September 25, 2022 and ~~June 27,~~September 26, 2021, respectively, and ~~$16.8~~$23.9 million and ~~$9.3~~$13.6 million in the ~~six~~nine months ended ~~June 26,~~September 25, 2022 and ~~June 27,~~September 26, 2021, respectively.

Defined Benefit Plans Obligations and Assets

The change in benefit obligation, change in fair value of plan assets, funded status and amounts recognized in the Condensed Consolidated Balance Sheets for the defined benefit plans were as follows:


	Nine Months Ended
	September 25, 2022				September 26, 2021
	Pension Benefits		Other Benefits		Pension Benefits		Other Benefits
	(In thousands)
Change in projected benefit obligation:
Projected benefit obligation, beginning of period	$	373,062	$	1,346	$	404,194	$	1,593
Interest cost	4,885		15		4,119		12
Actuarial gain	(105,562)		(135)		(9,873)		(20)
Benefits paid	(9,305)		(105)		(9,792)		(113)
Curtailments and settlements	(4,436)		—		(4,393)		—

Currency translation loss (gain)	(22,079)		—		2,169		—
Projected benefit obligation, end of period	$	236,565	$	1,121	$	386,424	$	1,472


	Nine Months Ended
	September 25, 2022				September 26, 2021
	Pension Benefits		Other Benefits		Pension Benefits		Other Benefits
	(In thousands)
Change in plan assets:
Fair value of plan assets, beginning of period	$	326,409	$	—	$	305,983	$	—
Actual return on plan assets	(80,820)		—		28,325		—
Contributions by employer	7,679		105		10,569		113
Benefits paid	(9,305)		(105)		(9,792)		(113)
Curtailments and settlements	(4,436)		—		(4,393)		—
Expenses paid from assets	(247)		—		(279)		—
Currency translation gain (loss)	(21,136)		—		1,466		—
Fair value of plan assets, end of period	$	218,144	$	—	$	331,879	$	—


	September 25, 2022				December 26, 2021
	Pension Benefits		Other Benefits		Pension Benefits		Other Benefits
	(In thousands)
Funded status:
Unfunded benefit obligation, end of period	$	(18,421)	$	(1,121)	$	(46,653)	$	(1,346)


	September 25, 2022				December 26, 2021
	Pension Benefits		Other Benefits		Pension Benefits		Other Benefits
	(In thousands)
Amounts recognized in the Condensed Consolidated Balance Sheets at end of period:
Current liability	$	(1,934)	$	(165)	$	(6,063)	$	(157)
Long-term liability	(16,487)		(956)		(40,590)		(1,189)
Recognized liability	$	(18,421)	$	(1,121)	$	(46,653)	$	(1,346)

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Six Months Ended
June 26, 2022 June 27, 2021
Pension Benefits Other Benefits Pension Benefits Other Benefits
(In thousands)
Change in projected benefit obligation:
Projected benefit obligation, beginning of period $ 373,062 $ 1,346 $ 404,194 $ 1,593
Interest cost 3,224 10 2,437 8
Actuarial gain (62,285) (116) (28,552) (35)
Benefits paid (6,344) (66) (5,978) (70)
Curtailments and settlements (3,762) — (2,689) —
Currency translation (gain) loss (11,305) — 10,196 —
Projected benefit obligation, end of period $ 292,590 $ 1,174 $ 379,608 $ 1,496

Six Months Ended
June 26, 2022 June 27, 2021
Pension Benefits Other Benefits Pension Benefits Other Benefits
(In thousands)
Change in plan assets:
Fair value of plan assets, beginning of period $ 326,409 $ — $ 305,983 $ —
Actual return on plan assets (42,499) — 14,564 —
Contributions by employer 5,494 66 6,832 70
Benefits paid (6,344) (66) (5,978) (70)
Curtailments and settlements (3,762) — (2,689) —
Expenses paid from assets (188) — (169) —
Currency translation (gain) loss (10,747) — 8,764 —
Fair value of plan assets, end of period $ 268,363 $ — $ 327,307 $ —

June 26, 2022 December 26, 2021
Pension Benefits Other Benefits Pension Benefits Other Benefits
(In thousands)
Funded status:
Unfunded benefit obligation, end of period $ (24,227) $ (1,174) $ (46,653) $ (1,346)

June 26, 2022 December 26, 2021
Pension Benefits Other Benefits Pension Benefits Other Benefits
(In thousands)
Amounts recognized in the Condensed Consolidated Balance Sheets at end of period:
Current liability $ (2,996) $ (167) $ (6,063) $ (157)
Long-term liability (21,231) (1,007) (40,590) (1,189)
Recognized liability $ (24,227) $ (1,174) $ (46,653) $ (1,346)


		June 26, 2022				December 26, 2021					September 25, 2022				December 26, 2021
		Pension Benefits		Other Benefits		Pension Benefits		Other Benefits			Pension Benefits		Other Benefits		Pension Benefits		Other Benefits
		(In thousands)									(In thousands)
Amounts recognized in accumulated other comprehensive loss at end of period:	Amounts recognized in accumulated other comprehensive loss at end of period:									Amounts recognized in accumulated other comprehensive loss at end of period:
Net actuarial loss		$	41,420	$	3	$	58,143	$	118
Net actuarial loss (gain)										Net actuarial loss (gain)	$	38,294	$	(17)	$	58,143	$	118

The accumulated benefit obligation for the Company’s defined benefit pension plans was ~~$292.6~~$236.6 million and $373.1 million at ~~June 26,~~September 25, 2022 and December 26, 2021, respectively. Each of the Company’s defined benefit pension plans had accumulated benefit obligations that exceeded the fair value of plan assets at both ~~June 26,~~September 25, 2022 and December 26, 2021.

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Net Periodic Benefit Costs

Net defined benefit pension and other postretirement costs included the following components:


		Three Months Ended								Six Months Ended									Three Months Ended								Nine Months Ended
		June 26, 2022				June 27, 2021				June 26, 2022				June 27, 2021					September 25, 2022				September 26, 2021				September 25, 2022				September 26, 2021
		Pension Benefits		Other Benefits		Pension Benefits		Other Benefits		Pension Benefits		Other Benefits		Pension Benefits		Other Benefits			Pension Benefits		Other Benefits		Pension Benefits		Other Benefits		Pension Benefits		Other Benefits		Pension Benefits		Other Benefits
		(In thousands)																	(In thousands)
Interest cost	Interest cost	$	1,716	$	6	$	987	$	3	$	3,224	$	10	$	2,437	$	8	Interest cost	$	1,661	$	5	$	1,682	$	4	$	4,885	$	15	$	4,119	$	12
Estimated return on plan assets	Estimated return on plan assets	(2,611)		—		(1,815)		—		(5,014)		—		(4,456)		—		Estimated return on plan assets	(2,519)		—		(3,170)		—		(7,533)		—		(7,626)		—
Settlement loss	Settlement loss	1,167		—		837		—		1,167		—		837		—		Settlement loss	229		—		539		—		1,396		—		1,376		—
Expenses paid from assets	Expenses paid from assets	73		—		91		—		188		—		169		—		Expenses paid from assets	59		—		110		—		247		—		279		—
Amortization of net loss	Amortization of net loss	341		—		381		—		568		—		946		1		Amortization of net loss	342		—		607		—		910		—		1,553		1
Amortization of past service cost	Amortization of past service cost	4		—		3		—		9		—		8		—		Amortization of past service cost	4		—		6		—		13		—		14		—
Net costs(a)	Net costs(a)	$	690	$	6	$	484	$	3	$	142	$	10	$	(59)	$	9	Net costs(a)	$	(224)	$	5	$	(226)	$	4	$	(82)	$	15	$	(285)	$	13

(a) Net costs are included in the line item Miscellaneous, net on the Condensed Consolidated Statements of Income.

Economic Assumptions

The weighted average assumptions used in determining pension and other postretirement plan information were as follows:

June 26, 2022 December 26, 2021
Pension Benefits Other Benefits Pension Benefits Other Benefits
Assumptions used to measure benefit obligation at end of period:
Discount rate 3.69 % 4.10 % 2.23 % 2.38 %
Six Months Ended
June 26, 2022 June 27, 2021
Pension Benefits Other Benefits Pension Benefits Other Benefits
Assumptions used to measure net pension and other postretirement cost:
Discount rate 2.29 % 2.38 % 1.86 % 1.80 %
Expected return on plan assets 3.32 % NA 3.53 % NA


	September 25, 2022				December 26, 2021
	Pension Benefits		Other Benefits		Pension Benefits		Other Benefits
Assumptions used to measure benefit obligation at end of period:
Discount rate	4.97	%	4.53	%	2.23	%	2.38	%


	Nine Months Ended
	September 25, 2022				September 26, 2021
	Pension Benefits		Other Benefits		Pension Benefits		Other Benefits
Assumptions used to measure net pension and other postretirement cost:
Discount rate	2.40	%	2.38	%	1.87	%	1.80	%

Expected return on plan assets	3.31	%	NA		3.53	%	NA

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Unrecognized Benefit Amounts in Accumulated Other Comprehensive Loss

The amounts in accumulated other comprehensive loss that were not recognized as components of net periodic benefits cost and the changes in those amounts are as follows:


		Six Months Ended									Nine Months Ended
		June 26, 2022				June 27, 2021					September 25, 2022				September 26, 2021
		Pension Benefits		Other Benefits		Pension Benefits		Other Benefits			Pension Benefits		Other Benefits		Pension Benefits		Other Benefits
		(In thousands)									(In thousands)
Net actuarial loss, beginning of period	Net actuarial loss, beginning of period	$	58,143	$	118	$	95,522	$	174	Net actuarial loss, beginning of period	$	58,143	$	118	$	95,522	$	174
Amortization	Amortization	(577)		—		(954)		(1)		Amortization	(923)		—		(1,567)		(1)
Settlement adjustments	Settlement adjustments	(1,167)		—		(837)		—		Settlement adjustments	(1,396)		—		(1,376)		—
Actuarial gain	Actuarial gain	(62,285)		(115)		(28,552)		(35)		Actuarial gain	(105,562)		(135)		(9,873)		(20)
Asset loss (gain)	Asset loss (gain)	47,513		—		(10,109)		—		Asset loss (gain)	88,353		—		(20,699)		—
Currency translation loss (gain)	Currency translation loss (gain)	(207)		—		776		—		Currency translation loss (gain)	(321)		—		508		—
Net actuarial loss, end of period		$	41,420	$	3	$	55,846	$	138
Net actuarial loss (gain), end of period										Net actuarial loss (gain), end of period	$	38,294	$	(17)	$	62,515	$	153

Remeasurement

The Company remeasures both plan assets and obligations on a quarterly basis.

Defined Contribution Plans

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The Company sponsors 2two defined contribution retirement savings plans in the U.S. reportable segment for eligible U.S. and Puerto Rico employees. The Company maintains 3three postretirement plans for eligible employees in the Mexico reportable segment, as required by Mexico law, which primarily cover termination benefits. The Company maintains 7seven defined contribution retirement savings plans in the U.K. and Europe reportable segment for eligible U.K. and Europe employees, as required by U.K. and Europe law. The Company’s expenses related to its defined contribution plans totaled ~~$8.9~~$6.6 million in the three months ended ~~June 26,~~September 25, 2022 and ~~$14.4~~$21.0 million in the ~~six~~nine months ended ~~June 26,~~September 25, 2022.

15. FAIR VALUE MEASUREMENT

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Assets and liabilities measured at fair value must be categorized into one of three different levels depending on the assumptions (i.e., inputs) used in the valuation:


Level 1						Unadjusted quoted prices available in active markets for identical assets or liabilities at the measurement date;

Level 2						Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or

Level 3						Unobservable inputs, such as discounted cash flow models or valuations.

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement in its entirety.

As of ~~June 26,~~September 25, 2022 and December 26, 2021, the Company held derivative assets and liabilities that were required to be measured at fair value on a recurring basis. Derivative assets and liabilities consist of long and short positions on exchange-traded commodity futures instruments, commodity options instruments, sales contracts instruments, foreign currency instruments to manage translation and remeasurement risk and interest rate swap instruments.

The following items were measured at fair value on a recurring basis:

June 26, 2022 December 26, 2021
Level 1 Level 2 Total Level 1 Level 2 Total
(In thousands)
Assets:
Commodity derivative assets $ 5,987 $ — $ 5,987 $ 17,567 $ — $ 17,567
Foreign currency derivative assets 3,974 — 3,974 518 — 518
Liabilities:
Commodity derivative liabilities (18,524) — (18,524) (14,119) — (14,119)
Foreign currency derivative liabilities (1,171) 0 (1,171) (4,958) — (4,958)
Interest rate swap derivative liabilities — — — — (98) (98)
Sales contract derivative liabilities — (4,508) (4,508) — (12,691) (12,691)

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	September 25, 2022						December 26, 2021
	Level 1		Level 2		Total		Level 1		Level 2		Total
	(In thousands)
Assets:
Commodity derivative assets	$	16,641	$	—	$	16,641	$	17,567	$	—	$	17,567
Foreign currency derivative assets	5,403		—		5,403		518		—		518
Liabilities:
Commodity derivative liabilities	(11,721)		—		(11,721)		(14,119)		—		(14,119)
Foreign currency derivative liabilities	(2,027)		—		(2,027)		(4,958)		—		(4,958)
Sales contract derivative liabilities	—		(11,243)		(11,243)		—		(12,691)		(12,691)
Interest rate swap derivative liabilities	—		—		—		—		(98)		(98)

See “Note 4. Derivative Financial Instruments” for additional information.

The valuation of financial assets and liabilities classified in Level 1 is based upon unadjusted quoted prices for identical assets or liabilities in active markets. The valuation of financial assets and liabilities in Level 2 is determined using a market approach based upon quoted prices for similar assets and liabilities in active markets or other inputs that are observable for substantially the full term of the financial instrument. The valuation of financial assets in Level 3 is determined using an income approach based on unobservable inputs such as discounted cash flow models or valuations. For each class of assets and liabilities not measured at fair value in the Condensed Consolidated Balance Sheets but for which fair value is disclosed, the Company is not required to provide the quantitative disclosure about significant unobservable inputs used in fair value measurements categorized within Level 3 of the fair value hierarchy.

In addition to the fair value disclosure requirements related to financial instruments carried at fair value, accounting standards require interim disclosures regarding the fair value of all of the Company’s financial instruments. The methods and significant assumptions used to estimate the fair value of financial instruments and any changes in methods or significant assumptions from prior periods are also required to be disclosed.

The carrying amounts and estimated fair values of our fixed-rate debt obligation recorded in the Condensed Consolidated Balance Sheets consisted of the following:

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		June 26, 2022				December 26, 2021					September 25, 2022				December 26, 2021
		Carrying Amount		Fair Value		Carrying Amount		Fair Value			Carrying Amount		Fair Value		Carrying Amount		Fair Value
		(In thousands)									(In thousands)
Fixed-rate senior notes payable at 3.50%, at Level 2 inputs	Fixed-rate senior notes payable at 3.50%, at Level 2 inputs	$	(900,000)	$	(729,000)	$	(900,000)	$	(915,120)	Fixed-rate senior notes payable at 3.50%, at Level 2 inputs	$	(900,000)	$	(704,016)	$	(900,000)	$	(915,120)
Fixed-rate senior notes payable at 4.25%, at Level 2 inputs	Fixed-rate senior notes payable at 4.25%, at Level 2 inputs	(991,191)		(864,340)		(990,691)		(1,055,140)		Fixed-rate senior notes payable at 4.25%, at Level 2 inputs	(991,441)		(818,000)		(990,691)		(1,055,140)
Fixed-rate senior notes payable at 5.875%, at Level 2 inputs	Fixed-rate senior notes payable at 5.875%, at Level 2 inputs	(846,224)		(823,350)		(845,866)		(900,193)		Fixed-rate senior notes payable at 5.875%, at Level 2 inputs	(846,406)		(837,250)		(845,866)		(900,193)
Secured loans, at Level 3 inputs	Secured loans, at Level 3 inputs	—		—		(3)		(3)		Secured loans, at Level 3 inputs	—		—		(3)		(3)

See “Note 12. Debt” for additional information.

The carrying amounts of our cash and cash equivalents, restricted cash and restricted cash equivalents, accounts receivable, accounts payable and certain other liabilities approximate their fair values due to their relatively short maturities. Derivative assets were recorded at fair value based on quoted market prices and are included in the line item Prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets. Derivative liabilities were recorded at fair value based on quoted market prices and are included in the line item Accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets. The fair value of the Company’s Level 2 fixed-rate debt obligations was based on the quoted market price at ~~June 26,~~September 25, 2022 or December 26, 2021, as applicable. ~~The fair value of the Company’s Level 3 fixed-rate debt obligation was based on discounted cash flows using weighted average cost of debt of 0.5% as of December 26, 2021.~~

In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company records certain assets and liabilities at fair value on a nonrecurring basis. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges when required by U.S. GAAP. There were no significant fair value measurement losses recognized for such assets and liabilities in the periods reported.

16. RELATED PARTY TRANSACTIONS

Pilgrim’s has been and, in some cases, continues to be a party to certain transactions with affiliated companies.

Three Months Ended Six Months Ended
June 26, 2022 June 27, 2021 June 26, 2022 June 27, 2021
(In thousands)
Sales to related parties:
JBS USA Food Company(a)
$ 4,986 $ 4,017 $ 9,597 $ 7,082
JBS Australia Pty. Ltd. 865 939 1,396 1,822
Other Related Parties 297 325 1,035 864
Total sales to related parties $ 6,148 $ 5,281 $ 12,028 $ 9,768

Three Months Ended Six Months Ended
June 26, 2022 June 27, 2021 June 26, 2022 June 27, 2021
(In thousands)
Cost of goods purchased from related parties:
JBS USA Food Company(a)
$ 51,251 $ 49,547 $ 113,154 $ 105,796
Seara Meats B.V. 11,663 643 13,131 2,344
Penasul UK LTD 2,883 2,838 6,423 5,156
JBS Asia Co Limited 1,797 — 3,921 5
Other Related Parties 400 318 463 687
Total cost of goods purchased from related parties $ 67,994 $ 53,346 $ 137,092 $ 113,988

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Three Months Ended Six Months Ended
June 26, 2022 June 27, 2021 June 26, 2022 June 27, 2021
(In thousands)
Expenditures paid by related parties:
JBS USA Food Company(b)
$ 29,762 $ 16,987 $ 53,939 $ 40,732
Other Related Parties 55 2 55 12
Total expenditures paid by related parties $ 29,817 $ 16,989 $ 53,994 $ 40,744


	Three Months Ended				Nine Months Ended
	September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
	(In thousands)
Sales to related parties:
JBS USA Food Company(a)	$	8,314	$	4,437	$	17,911	$	11,519
JBS Australia Pty. Ltd.	935		172		2,331		1,994
Other related parties	748		467		1,783		1,331
Total sales to related parties	$	9,997	$	5,076	$	22,025	$	14,844

Three Months Ended Six Months Ended
June 26, 2022 June 27, 2021 June 26, 2022 June 27, 2021
(In thousands)
Expenditures paid on behalf of related parties:
JBS USA Food Company(b)
$ 6,817 $ 11,072 $ 39,342 $ 27,446
Total expenditures paid on behalf of related parties $ 6,817 $ 11,072 $ 39,342 $ 27,446


	Three Months Ended				Nine Months Ended
	September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
	(In thousands)
Cost of goods purchased from related parties:
JBS USA Food Company(a)	$	6,393	$	62,371	$	119,546	$	168,167
Seara Meats BV	14,795		1,074		27,926		3,418
Penasul UK LTD	4,091		1,071		10,514		6,227
JBS Asia Co Limited	2,448		—		6,370		5
Other related parties	699		266		1,161		953
Total cost of goods purchased from related parties	$	28,426	$	64,782	$	165,517	$	178,770

June 26, 2022 December 26, 2021
(In thousands)
Accounts receivable from related parties:
JBS USA Food Company(a)
$ 865 $ 1,059
Other Related Parties 831 286
Total accounts receivable from related parties $ 1,696 $ 1,345


	Three Months Ended				Nine Months Ended
	September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
	(In thousands)
Expenditures paid by related parties:
JBS USA Food Company(b)	$	19,035	$	27,295	$	72,974	$	68,027
Other related parties	16		—		71		12




Total expenditures paid by related parties	$	19,051	$	27,295	$	73,045	$	68,039

June 26, 2022 December 26, 2021
(In thousands)
Accounts payable to related parties:
JBS USA Food Company(a)
$ 6,303 $ 21,628
JBS Asia Co Limited 2,658 —
Penasul UK LTD 1,407 147
Other Related Parties 882 542
Total accounts payable to related parties $ 11,250 $ 22,317


	Three Months Ended				Nine Months Ended
	September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
	(In thousands)
Expenditures paid on behalf of related parties:
JBS USA Food Company(b)	$	7,553	$	8,011	$	46,895	$	35,457




Total expenditures paid on behalf of related parties	$	7,553	$	8,011	$	46,895	$	35,457


	September 25, 2022		December 26, 2021
	(In thousands)
Accounts receivable from related parties:
JBS USA Food Company(a)	$	650	$	1,059
Seara Meats BV	8,483		—
Other related parties	722		286
Total accounts receivable from related parties	$	9,855	$	1,345


	September 25, 2022		December 26, 2021
	(In thousands)
Accounts payable to related parties:
JBS USA Food Company(a)	$	6,581	$	21,628
Seara Meats BV	3,976		534
JBS Asia Co Limited	3,588		—
Penasul UK LTD	2,639		147
Other related parties	271		8
Total accounts payable to related parties	$	17,055	$	22,317

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(a) The Company routinely executes transactions to both purchase products from JBS USA Food Company (“JBS USA”) and sell products to them. As of ~~June 26,~~September 25, 2022, approximately $1.6 million of goods ~~purchased and in transit~~ from JBS USA were ~~immaterial~~in transit and not reflected on our ~~Condensed~~ Consolidated Balance ~~Sheet.~~Sheets.

(b) The Company has an agreement with JBS USA to allocate costs associated with JBS USA’s procurement of SAP licenses and maintenance services for its combined companies. Under this agreement, the fees associated with procuring SAP licenses and maintenance services are allocated between the Company and JBS USA in proportion to the percentage of licenses used by each company. The agreement expires on the date of expiration, or earlier termination, of the underlying SAP license agreement. The Company also has an agreement with JBS USA to allocate the costs of supporting the business operations by one consolidated corporate team, which have historically been supported by their respective corporate teams. Expenditures paid by JBS USA on behalf of the Company will be reimbursed by the Company and expenditures paid by the Company on behalf of JBS USA will be reimbursed by JBS USA. This agreement ~~expired~~expires on December 31, ~~2021.~~2023.

17. REPORTABLE SEGMENTS

The Company operates in 3three reportable segments: U.S., U.K. and Europe, and Mexico. The Company measures segment profit as operating income. Corporate expenses are allocated to the Mexico and U.K. and Europe reportable segments based upon various apportionment methods for specific expenditures incurred related thereto with the remaining amounts allocated to the U.S. reportable segment.

We conduct separate operations in the continental U.S. and in Puerto Rico. For segment reporting purposes, the Puerto Rico operations are included in the U.S. reportable segment. The chicken products processed by the U.S. reportable segment are sold to foodservice, retail and frozen entrée customers. The segment’s primary distribution is through retailers, foodservice distributors and restaurants.

The U.K. and Europe reportable segment processes primarily fresh chicken, pork products, specialty meats, ready meals and other prepared foods that are sold to foodservice, retail and direct to consumer customers. The segment’s primary distribution is through retailers, foodservice distributors and restaurants.

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The chicken products processed by the Mexico reportable segment are sold to foodservice, retail and frozen entrée customers. The segment’s primary distribution is through retailers, foodservice distributors and restaurants.

Additional information regarding reportable segments is as follows:


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		June 26, 2022(a)		June 27, 2021(b)		June 26, 2022(c)		June 27, 2021(d)			September 25, 2022(a)		September 26, 2021(b)		September 25, 2022(c)		September 26, 2021(d)
		(In thousands)									(In thousands)
Net sales	Net sales									Net sales
U.S.	U.S.	$	2,899,879	$	2,248,470	$	5,481,087	$	4,248,029	U.S.	$	2,836,920	$	2,466,850	$	8,318,007	$	6,714,879
U.K. and Europe	U.K. and Europe	1,245,052		935,845		2,437,034		1,790,579		U.K. and Europe	1,203,095		930,440		3,640,129		2,721,019
Mexico	Mexico	486,717		453,383		953,922		872,515		Mexico	428,954		430,276		1,382,876		1,302,791
Total	Total	$	4,631,648	$	3,637,698	$	8,872,043	$	6,911,123	Total	$	4,468,969	$	3,827,566	$	13,341,012	$	10,738,689

(a)For the three months ended ~~June 26,~~September 25, 2022, the U.S. reportable segment had intercompany sales to the Mexico reportable segment of ~~$26.3~~$31.9 million. These sales consisted of fresh products, prepared products, grain and egg sales.

(b)For the three months ended ~~June 27,~~September 26, 2021, the U.S. reportable segment had intercompany sales to the Mexico reportable segment of ~~$82.8~~$83.9 million. These sales consisted of fresh products, prepared products and grain.

(c)For the ~~six~~nine months ended ~~June 26,~~September 25, 2022, the U.S. reportable segment had intercompany sales to the Mexico reportable segment of ~~$69.7~~$101.6 million. These sales consisted of fresh products, prepared products, grain and egg sales.

(d)For the ~~six~~nine months ended ~~June 27,~~September 26, 2021, the U.S. reportable segment had intercompany sales to the Mexico reportable segment of ~~$150.8~~$234.7 million. These sales consisted of fresh products, prepared products and grain.

Three Months Ended Six Months Ended
June 26, 2022 June 27, 2021 June 26, 2022 June 27, 2021
(In thousands)
Reportable segment profit (loss):
U.S. $ 453,198 $ (224,171) $ 808,273 $ (156,046)
U.K. and Europe 7,848 21,831 (13,792) 32,326
Mexico 51,844 79,195 120,408 159,025
Eliminations 14 14 28 28
Total operating income (loss) 512,904 (123,131) 914,917 35,333
Interest expense, net of capitalized interest 38,112 50,651 74,408 80,985
Interest income (1,010) (842) (2,284) (3,208)
Foreign currency transaction losses 2,758 4,145 14,294 6,659
Miscellaneous, net (1,688) (770) (2,012) (8,614)
Income (loss) before income taxes 474,732 (176,315) 830,511 (40,489)
Income tax expense (benefit) 112,711 (9,812) 187,930 25,546
Net income (loss) $ 362,021 $ (166,503) $ 642,581 $ (66,035)

June 26, 2022 December 26, 2021
(In thousands)
Total assets by reportable segment:
U.S. $ 6,989,372 $ 6,390,845
U.K. and Europe 4,044,272 4,292,558
Mexico 1,207,388 1,146,204
Eliminations (2,918,100) (2,916,402)
Total assets $ 9,322,932 $ 8,913,205

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		June 26, 2022		December 26, 2021			Three Months Ended				Nine Months Ended
		(In thousands)					September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
Long-lived assets by reportable segment(a):
							(In thousands)
Reportable segment profit:						Reportable segment profit:
U.S.	U.S.	$	1,864,868	$	1,862,584	U.S.	$	338,548	$	70,666	$	1,146,821	$	(85,380)
U.K. and Europe	U.K. and Europe	1,022,478		1,125,197		U.K. and Europe	14,198		445		406		32,771
Mexico	Mexico	285,256		284,980		Mexico	(13,558)		49,652		106,850		208,677
Eliminations	Eliminations	(3,702)		(3,729)		Eliminations	14		14		42		42
Total long-lived assets		$	3,168,900	$	3,269,032
Total operating income						Total operating income	339,202		120,777		1,254,119		156,110
Interest expense, net of capitalized interest						Interest expense, net of capitalized interest	36,895		29,833		111,303		110,818
Interest income						Interest income	(2,673)		(1,244)		(4,957)		(4,452)
Foreign currency transaction losses						Foreign currency transaction losses	54		2,359		14,348		9,018
Miscellaneous, net						Miscellaneous, net	(19,822)		(1,391)		(21,834)		(10,005)

Income before income taxes						Income before income taxes	324,748		91,220		1,155,259		50,731
Income tax expense						Income tax expense	65,749		30,385		253,679		55,931
Net income (loss)						Net income (loss)	$	258,999	$	60,835	$	901,580	$	(5,200)


	September 25, 2022		December 26, 2021
	(In thousands)
Total assets by reportable segment:
U.S.	$	7,126,485	$	6,390,845
U.K. and Europe	3,610,728		4,292,558
Mexico	1,265,673		1,146,204
Eliminations	(2,923,874)		(2,916,402)
Total assets	$	9,079,012	$	8,913,205


	September 25, 2022		December 26, 2021
	(In thousands)
Long-lived assets by reportable segment(a):
U.S.	$	1,909,697	$	1,862,584
U.K. and Europe	910,395		1,125,197
Mexico	289,209		284,980
Eliminations	(3,688)		(3,729)
Total long-lived assets	$	3,105,613	$	3,269,032

(a)For this disclosure, we exclude financial instruments, deferred tax assets and intangible assets in accordance with ASC 280-10-50-41, Segment Reporting. Long-lived assets, as used in ASC 280-10-50-41, implies hard assets that cannot be readily removed.

18. COMMITMENTS AND CONTINGENCIES

General

The Company is a party to many routine contracts in which it provides general indemnities in the normal course of business to third parties for various risks. Among other considerations, the Company has not recorded a liability for any of these indemnities because, based upon the likelihood of payment, the fair value of such indemnities would not have a material impact on its financial condition, results of operations and cash flows.

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Financial Instruments

The Company’s loan agreements generally obligate the Company to reimburse the applicable lender for incremental increased costs due to a change in law that imposes (1) any reserve or special deposit requirement against assets of, deposits with or credit extended by such lender related to the loan, (2) any tax, duty or other charge with respect to the loan (except standard income tax) or (3) capital adequacy requirements. In addition, some of the Company’s loan agreements contain a withholding tax provision that requires the Company to pay additional amounts to the applicable lender or other financing party, generally if withholding taxes are imposed on such lender or other financing party as a result of a change in the applicable tax law. These increased cost and withholding tax provisions continue for the entire term of the applicable transaction and there is no limitation on the maximum additional amounts the Company could be obligated to pay under such provisions. Any failure to pay amounts due under such provisions generally would trigger an event of default and, in a secured financing transaction, would entitle the lender to foreclose upon the collateral to realize the amount due.

Litigation

The Company is subject to various legal proceedings and claims which arise in the ordinary course of business. In the Company’s opinion, it has made appropriate and adequate accruals for claims where necessary; however, the ultimate liability for these matters is uncertain, and if significantly different than the amounts accrued, the ultimate outcome could have a material effect on the financial condition or results of operations of the Company.

Tax Claims and Proceedings

During 2014 and 2015 the Mexican Tax Authorities opened a review of Avícola Pilgrim’s Pride de Mexico, S.A. de C.V. (“Avícola”) in regards to tax years 2009 and 2010, respectively. In both instances, the Mexican Tax Authorities claim that controlled company status did not exist for certain subsidiaries because Avícola did not own 50% of the shares in voting rights of Incubadora Hidalgo, S. de R.L de C.V. and Comercializadora de Carnes de México S. de R.L de C.V. (both in 2009) and Pilgrim’s Pride, S. de R.L. de C.V. (in 2010). As a result, according to the tax authorities, Avícola should have considered dividends paid out of these subsidiaries partially taxable since a portion of the dividend amount was not paid from the net tax profit account (CUFIN). Avícola is currently appealing the opinion. Amounts under appeal, calculated by PPC and its advisors, are ~~$33.0~~$32.4 million and ~~$20.2~~$19.8 million for tax years 2009 and 2010, respectively. No loss has been recorded for these amounts at this time.

On May 12, 2022, the Mexican Tax Authorities issued tax assessments against Pilgrim’s Pride, S. de R.L. de C.V. and Provemex Holdings, LLC in connection with PPC’s acquisition of Tyson de México. Following the acquisition, PPC re-domiciled Provemex Holdings, LLC from the U.S. to Mexico. The tax authorities claim that Provemex Holdings, LLC was a Mexican entity at the time of the acquisition and, as a result, was obligated to pay taxes on the sale. The Mexican subsidiaries of PPC are currently appealing these assessments. Amounts under appeal are approximately ~~$248.4~~$244.4 million for such tax assessments. No loss has been recorded for these amounts at this time.

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In re Broiler Chicken Antitrust Litigation

Between September 2, 2016 and October 13, 2016, a series of federal class action lawsuits styled as In re Broiler Chicken Antitrust Litigation, Case No. 1:16-cv-08637 were filed with the U.S. District Court for the Northern District of Illinois (“Illinois Court”) against PPC and other defendants by and on behalf of direct and indirect purchasers of broiler chickens alleging violations of antitrust and unfair competition laws (the “Broilers Litigation”). The complaints seek, among other relief, treble damages for an alleged conspiracy among defendants to reduce output and increase prices of broiler chickens from the period of January 2008 to the present. The class plaintiffs have filed 3three consolidated amended complaints: one on behalf of direct purchasers (the “DPPs”) and two on behalf of distinct groups of indirect purchasers. Between December 8, 2017 and September 1, 2021, 82 individual direct action complaints were filed with the Illinois Court by individual direct purchaser entities (“DAPs”) naming PPC as a defendant, the allegations of which largely mirror those in the class action complaints. Subsequent amendments to certain complaints added allegations of price fixing and bid rigging on certain sales. On February 8, 2022, the Illinois court issued a revised scheduling order for certain plaintiffs who limited their claims to reduction of output, which sets the first trial date in fall 2023. The schedule for the rest of the plaintiffs is still awaiting an order from the Illinois Court. On May 27, 2022, the Illinois Court certified each of the three classes.

On January 11, 2021, PPC announced that it had entered into an agreement to settle all claims made by the ~~DPPs. The Illinois Court granted final approval of the settlement on June 29, 2021. As a result of this agreement, PPC recognized an expense of~~DPPs for $75.0 million within Selling, general and administrative expense in the Condensed Consolidated Statement of Income for the year ended December 27, 2020. ~~Pursuant to this agreement, PPC paid~~The Illinois Court granted final approval of the ~~DPPs this amount during the three months ended March 28,~~settlement on June 29, 2021.

On July 28, 2021, PPC and the putative End-User Consumer Indirect Purchaser Plaintiff Class (“EUCPs”) reached an agreement to settle all ~~claims.~~claims for $75.5 million. The Illinois Court granted final approval of the settlement on December 20,

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2021. ~~In addition, on~~On August 3, 2021, PPC and the putative Commercial and Institutional Indirect Purchaser Plaintiff Class (“CIIPPs”) reached an agreement to settle all ~~claims.~~claims for $45.0 million. The Illinois Court granted final approval of the settlement on April 18, 2022. Under the terms of these settlements, PPC paid the EUCPs an amount of $75.5 million and has agreed to pay the CIIPPs an amount of $45.0 million to release all outstanding claims brought by such classes. As a result of these agreements, PPC recognized this expense within ~~Selling, general and administrative expense~~ ~~in the Condensed Consolidated Statement of Income for the three months ended September 26, 2021.~~

The settlements with the DPPs, EUCPs and CIIPPs do not cover the claims of the DAPs or other parties who have or will opt out of such settlements (collectively, the “Opt Outs”). PPC will therefore continue to litigate against such Opt Outs and will seek reasonable settlements where they are available. To date, PPC has recognized an expense of ~~$489.3~~$508.6 million to cover settlements with various Opt Outs. PPC recognizes these expenses within Selling, general and administrative expense in the Consolidated Statements of Income.

On February 21, 2017, the Attorney General of Florida (“Florida AG”), issued a civil investigative demand (“CID”) regarding the broiler chicken market. The CID requests, among other things, data and information related to the acquisition and processing of broiler chickens and the sale of chicken products. PPC is cooperating with the Florida AG in producing documents pursuant to the CID.

On August 6, 2020, the Attorney General of Washington (“Washington AG”), issued a CID regarding similar broiler chicken matters that are the subject of the Florida CID. PPC cooperated with the Washington AG in producing documents pursuant to the CID. On October 28, 2021, the Washington AG filed a complaint in the King County Superior ~~County~~Court for the State of Washington. The complaint alleges the same claims as those made in the Broilers Litigation under Washington state law. PPC filed its answer to the complaint on January 21, 2022.

On September 1, 2020, the Attorney General of New Mexico filed a complaint in the First Judicial District Court in the County of Santa Fe, New Mexico. The complaint alleges the same claims as those made in the Broilers Litigation under New Mexico state law. PPC answered the complaint on February 1, 2021.

On February 22, 2021, the Attorney General of Alaska filed a complaint in Superior Court in the Third Judicial District in Anchorage, Alaska. The complaint alleges the same claims as those made in the Broilers Litigation under Alaska state law. PPC answered the complaint on June 14, 2021.

On each of February 24, 2021 and May 4, 2021, the Attorney General of Louisiana (“Louisiana AG”) issued a CID regarding similar broiler chicken matters that are the subject of Florida CID. PPC is cooperating with the Louisiana AG in producing documents pursuant to the CID.

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Other Claims and Proceedings

On October 20, 2016, Patrick Hogan, acting on behalf of himself and a putative class of persons who purchased shares of PPC’s stock between February 21, 2014 and October 6, 2016, filed a class action complaint in the U.S. District Court for the District of Colorado (“Colorado Court”) against PPC and its named executive officers (the “Hogan Litigation”). The complaint alleges, among other things, that PPC’s SEC filings contained statements that were rendered materially false and misleading by PPC’s failure to disclose that (1) PPC colluded with several of its industry peers to fix prices in the broiler-chicken market as alleged in the Broilers Litigation, (2) its conduct constituted a violation of federal antitrust laws and (3) PPC’s revenues during the class period were the result of illegal conduct. The complaint seeks compensatory damages as well as attorneys’ fees and costs. On April 4, 2017, the Colorado Court appointed another stockholder, George James Fuller, as lead plaintiff. On May 11, 2017, the plaintiff filed an amended complaint, which extended the end date of the putative class period to November 17, 2016. PPC and the other defendants moved to dismiss the amended complaint on June 12, 2017, and on March 14, 2018, the Colorado Court dismissed the plaintiff’s complaint without prejudice and issued final judgment in favor of PPC and the other defendants. On April 11, 2018, the plaintiff moved for reconsideration of the Colorado Court’s decision and for permission to file a second amended complaint. On November 19, 2018, the Colorado Court denied the plaintiff’s motion for reconsideration but granted the plaintiff leave to file a second amended complaint. On June 8, 2020, the plaintiff filed a second amended complaint against the same defendants, based in part on the Indictment (defined below). On July 31, 2020, defendants filed a motion to dismiss the second amended complaint. The Colorado Court granted the motion to dismiss on April 19, 2021 and issued judgment in favor of defendants. On May 17, 2021, the plaintiff filed a motion for amended judgment, which the Colorado Court denied on November 29, 2021. The plaintiff then filed a notice of appeal on December 28, 2021, and the appeal was opened in the U.S. Court of Appeals for the Tenth Circuit, which is now fully briefed with oral argument ~~set for September 27, 2022.~~to occur the week of January 17, 2023.

On January 27, 2017, a purported class action on behalf of broiler chicken farmers was brought against PPC and 4four other producers in the U.S. District Court for the Eastern District of Oklahoma (the “Oklahoma Court”) alleging, among other things, a conspiracy to reduce competition for grower services and depress the price paid to growers. Plaintiffs allege violations of the Sherman Antitrust Act and the Packers and Stockyards Act and seek, among other relief, treble damages. The complaint was consolidated with a subsequently filed consolidated amended class action complaint styled as In re Broiler Chicken Grower Litigation, Case No. CIV-17-033-RJS. The defendants (including PPC) jointly moved to dismiss the consolidated amended

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complaint on September 9, 2017. The Oklahoma Court granted only certain other defendants’ motions challenging jurisdiction. On January 6, 2020, the Oklahoma Court denied the motion to dismiss, and lifted the stay on discovery. On October 6, 2020, the plaintiffs filed a motion with the U.S. Judicial Panel on Multidistrict Litigation (“JPML”) seeking consolidation of a series of copycat complaints filed in September and October 2020 in the U.S. District Courts for the District of Colorado, the District of Kansas, and the Northern District of California. On December 15, 2020, the JPML ordered the transfer of all cases to the Oklahoma Court for consolidated or coordinated pretrial proceedings. On November 8, 2021, the Oklahoma Court entered a revised case management order in the multi-district litigation setting a deadline of August 1, 2022 for the close of fact discovery. That order also set a deadline of March 17, 2023 for the filing of class certification motions, with deadlines of April 28, 2023 for opposition briefing and June 9, 2023 for reply briefing. Under the order, motions for summary judgment are to be filed on July 31, 2023, with oppositions and replies due September 22, 2023, and October 13, 2023, respectively. ~~PPC has recognized an estimate of probable loss as expense that is subject to change. PPC recognized this expense within Selling, general and administrative expense~~ ~~in the Consolidated Statement of Income for the year ended December 26, 2021 and incremental expense in the Condensed Consolidated Statement of Income for the six months ended June 26, 2022.~~

On March 9, 2017, a stockholder derivative action, DiSalvio v. Lovette, et al., No. 2017 cv. 30207, was brought against all of PPC’s directors and its then-Chief Executive Officer, William Lovette, and then-Chief Financial Officer, Fabio Sandri, in the Nineteenth Judicial District Court for the County of Weld in Colorado (the “Weld County Court”). The complaint alleges, among other things, that the named defendants breached their fiduciary duties by failing to prevent PPC and its officers from engaging in an antitrust conspiracy as alleged in the Broilers Litigation, and issuing false and misleading statements as alleged in the Hogan Litigation. On April 17, 2017, a related stockholder derivative action, Brima v. Lovette, et al., No. 2017 cv. 30308, was brought against all of PPC’s directors and Messrs. Lovette and Sandri in the Weld County Court. The Brima complaint contains largely the same allegations as the DiSalvio complaint. The DiSalvio and Brima litigations (collectively, “the Derivative Litigation”) were consolidated on May 4, 2017. On October 14, 2020, an amended shareholder derivative complaint was filed that added former PPC executives Jayson Penn, Roger Austin, and Jimmie Little as named defendants and alleges, among other things, that the defendants breached their fiduciary duties by (1) failing to prevent PPC from engaging in an antitrust conspiracy as alleged in the Broiler litigation, the Indictment (as defined below), and other related proceedings; and (2) failing to prevent the issuance of false and misleading statements as alleged in the Hogan Litigation and the UFCW Litigation (as defined below). The Derivative Litigation was stayed, pending the resolution of the motion to dismiss in the Hogan Litigation described above. Following the Colorado Court granting defendants’ motion to dismiss in the Hogan litigation, the stay was lifted. The parties then filed a joint motion to continue the stay pending the Colorado Court’s decision on the motion for amended judgment, which the Weld County Court granted on June 22, 2021. Upon the Colorado Court’s denial of plaintiff’s

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motion for amended judgment in the Hogan Litigation, the stay was again lifted. On February 4, 2022, the Weld County Court ordered another stay until the earlier of (1) resolution of the appeal in the Hogan Litigation or (2) an order ruling on the motion to dismiss in the UFCW Litigation. Given the ruling in the UFCW Litigation, the Derivative Litigation stay has been lifted and PPC filed a motion to dismiss, which ~~will be~~is fully briefed ~~by August 29, 2022.~~and awaiting a decision from the Weld County Court.

Between August 30, 2019 and October 16, 2019, 4four purported class action lawsuits were filed in the U.S. District Court for the District of Maryland (“Maryland Court”) against PPC and a number of other chicken producers, as well as Webber, Meng, Sahl & Company and Agri Stats. The plaintiffs seek to represent a nationwide class of processing plant production and maintenance workers (“Plant Workers”). They allege that the defendants conspired to fix and depress the compensation paid to Plant Workers in violation of the Sherman Act and seek damages from January 1, 2009 to the present. On November 12, 2019, the Maryland Court ordered the consolidation of the 4four cases for pretrial purposes. The defendants (including PPC) jointly moved to dismiss the consolidated complaint on November 22, 2019. Shortly thereafter, the plaintiffs amended their complaint on December 20, 2019. The consolidated amended complaint asserts largely similar allegations to the pleadings in the consolidated complaint, but it was extended to include more class members and turkey processors as well as chicken processors. The defendants filed motions to dismiss the consolidated amended complaint on March 2, 2020. The Maryland Court dismissed PPC and a number of other defendants on September 16, 2020 without prejudice. The plaintiffs subsequently filed amended complaints on November 2, 2020 re-naming PPC and the other dismissed defendants. Defendants moved to dismiss on December 18, 2020, which the Maryland Court denied on March 10, 2021. On June 14, 2021, PPC entered into a binding Settlement Agreement to settle all claims with the putative class of Plant Workers for $29.0 million and paid ~~the plaintiffs~~ this amount during the third quarter of ~~2021. PPC recognized this expense within~~ ~~Selling, general and administrative expense~~ in2021, though the ~~Consolidated Statement of Income for~~agreement is still subject to final approval by the ~~year ended December 26, 2021.~~Maryland Court. On December 17, 2021, the plaintiffs filed a motion for leave to amend their complaint, which the Maryland Court granted on March 21, 2022. ~~The PPC Settlement Agreement is still subject to final approval by the Maryland Court.~~

On July 6, 2020, United Food and Commercial Workers International Union Local 464A (“UFCW”), acting on behalf of itself and a putative class of persons who purchased shares of PPC stock between February 9, 2017 and June 3, 2020, filed a class action complaint in the Colorado Court against PPC, and Messrs. Lovette, Penn, and Sandri (the “UFCW Litigation”). The complaint alleges, among other things, that PPC’s public statements regarding its business and the drivers behind its financial results were false and misleading due to the defendants’ purported failure to disclose its participation in an antitrust conspiracy as alleged in the Broilers Litigation and the Indictment (defined below). On September 4, 2020, UFCW and the New Mexico State Investment Council (“NMSIC”) filed competing motions to be appointed lead plaintiff under the Private Litigation Securities Reform Act, and on March 17, 2021, the court appointed NMSIC as lead plaintiff. On May 26, 2021, NMSIC filed

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an amended complaint, and PPC and the other defendants moved to dismiss the amended complaint on July 19, 2021, which is now fully briefed. On March 8, 2022, the Colorado Court granted the motion to dismiss with prejudice as to all claims. The plaintiffs filed a motion to amend the judgment on April 5, 2022, which ~~is now fully briefed and awaiting a decision from~~ the Colorado ~~Court.~~Court denied on October 21, 2022.

PPC cannot predict the outcome of these pending litigations nor when they will be resolved. The consequences of the pending litigation matters are inherently uncertain, and adverse actions, judgments or settlements in some or all of these matters may result in materially adverse monetary damages, fines, penalties or injunctive relief against PPC. Any claims or litigation, even if fully indemnified or insured, could damage PPC’s reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future.

DOJ Antitrust Matter

On July 1, 2019, the U.S. Department of Justice (the “DOJ”) issued a subpoena to PPC in connection with its investigation arising from the Broilers Litigation. ~~The Company has been cooperating with the DOJ investigation.~~

On ~~June 3, 2020,~~July 29, 2021, PPC learned of an indictment by a Grand Jury in the Colorado Court against ~~Jayson Penn, the chief executive officer and president of PPC at that time, in addition to 2~~four former employees of PPC ~~and a former employee of a different company~~ (the ~~“Indictment”~~“July 29 Indictment”)~~. The Indictment alleges~~, which alleged, among other charges, that the defendants entered into and engaged in a conspiracy to suppress and eliminate competition by rigging bids and fixing prices and other price-related terms for broiler chicken products sold in the U.S., in violation of Section 1 of the Sherman Antitrust Act. On June 4, 2020, PPC learned that Mr. Penn pleaded not guilty to the charges. Effective June 15, 2020, Mr. Penn began a paid leave of absence from PPC, and on September 22, 2020, PPC disclosed that Mr. Penn was no longer with the Company.

On October 6, 2020, PPC learned of a superseding indictment by a Grand Jury in the Colorado Court against former Chief Executive Officer of PPC, William Lovette, 1 additional former employee of PPC, and 4 employees of different companies (the “Superseding Indictment” and together with the Indictment, the “First Indictment”). The Superseding Indictment alleges similar claims to the Indictment.

~~Table of Contents~~

On October 13, 2020, the Company announced that it had entered into a plea agreement (the “Plea Agreement”) with the DOJ pursuant to which the Company agreed to (1) plead guilty to 1 count of conspiracy in restraint of competition involving sales of broiler chicken products in the U.S. in violation of Section 1 of the Sherman Antitrust Act, and (2) pay a fine of $110.5 million. The Company recognized the fine as an expense which was included in ~~Selling, general and administrative expense~~ in the Consolidated Statement of Income for the year ended December 27, 2020. Under the Plea Agreement, the DOJ agreed not to bring further charges against the Company for any antitrust violation involving the sale of broiler chicken products in the U.S. occurring prior to the date of the Plea Agreement. On February 23, 2021, the Colorado Court approved the Plea Agreement and assessed an amended fine of $107.9 million. The Company continues to cooperate with the DOJ in connection with the ongoing federal antitrust investigation into alleged price fixing and other anticompetitive conduct in the broiler chicken industry.

On July 29, 2021, PPC learned of an additional indictment by a Grand Jury in the Colorado Court against 4 former employees of PPC (the “July 29 Indictment”), which alleged similar claims to the First Indictment. On July 12, 2022, PPC learned of a superseding indictment by a Grand Jury in the Colorado Court alleging that 1one of the former employees named in the July 29 Indictment engaged in witness tampering and obstruction of an official proceeding (together with the July 29 Indictment, the ~~“Second Indictment”~~“Indictment”).

~~A trial pursuant to the First Indictment commenced on October 25, 2021 and ended on December 16, 2021. The jury did not return a verdict and~~On August 11, 2022, the Colorado Court ~~declared a mistrial. A retrial~~granted an unopposed motion to dismiss two of the ~~case began~~former PPC employees from the Indictment, and on ~~February 22,~~October 17, 2022, ~~and ended on March 24, 2022. The jury again did not reach a verdict and~~ the Colorado Court ~~declared another mistrial. The third trial, this time against only Messrs. Penn and Lovette, 2 additional~~granted a separate motion to dismiss for the remaining two former PPC employees ~~of PPC, and a former employee of a different company, commenced on June 6, 2022 and ended on July 7, 2022. The jury reached a verdict of not guilty as to all defendants. A trial pursuant to~~from the ~~Second Indictment is currently scheduled to begin on October 31, 2022.~~Indictment.

On February 9, 2022, the Company learned that the DOJ ~~has~~ opened a civil investigation into human resources antitrust ~~matters.~~matters, and on October 6, 2022 the Company learned that the DOJ opened a civil investigation into grower contracts and payment practices. The Company has begun, and will continue, to cooperate with the DOJ in its ~~investigation.~~investigations.

The U.S. government’s recent focus and attention on market dynamics in the meat processing industry could expose PPC to additional costs and risks.

19. BUSINESS INTERRUPTION INSURANCE

On December 10, 2021, the Company experienced a tornado in Mayfield, Kentucky that significantly damaged two hatcheries and a feed mill. The Company maintains certain insurance coverage, including business interruption insurance, intended to cover such circumstances. In the three and nine months ended September 25, 2022, the Company received $5.5 million in proceeds from business interruption insurance. In the three and nine months ended September 25, 2022, the Company recognized $12.2 million in income from business interruption insurance on the Condensed Consolidated Statement of Income.

20. SUBSEQUENT EVENTS

On September 6, 2022, one of the Company's U.K. subsidiaries announced that it had entered into consultation proceedings with employee representatives regarding the proposed closures of two facilities in that country that would put approximately 610 employees at risk of redundancy. During consultation proceedings for redundancies of 100 or more employees, which requires a minimum of 45 days to complete, expected severance, retention, relocation and other employee-related costs can change significantly. Recognition of such costs does not occur until the consultation proceedings have been completed. As a result of the closures, the Company also expects to incur costs related to contract terminations with growers and other vendors, lease terminations and dilapidation-related repairs. The Company currently estimates that exit or disposal costs related to these planned closures will total approximately £7.9 million.

3234

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Summary

Overview

We reported net income attributable to Pilgrim’s of ~~$642.6~~$900.9 million, or ~~$2.65~~$3.73 per diluted common share, and income before tax totaling ~~$830.5 million,~~$1.2 billion, for the ~~six~~nine months ended ~~June 26,~~September 25, 2022. These operating results included net sales of ~~$8.9~~$13.3 billion, gross profit of ~~$1.2~~$1.7 billion and ~~$421.2~~$790.6 million of cash provided by operating activities. We generated a consolidated operating margin of ~~10.3%~~9.4% with operating margins of ~~14.7%~~13.8%, ~~(0.6)%~~0.0% and ~~12.6%~~7.7% in our U.S., U.K. and Europe, and Mexico reportable segments, respectively. For the ~~six~~nine months ended ~~June 26,~~September 25, 2022, we generated EBITDA and Adjusted EBITDA of ~~$1.1~~$1.6 billion and ~~$1.1~~$1.6 billion, respectively. A reconciliation of net income to EBITDA and Adjusted EBITDA is included below.

Global Economic Conditions

During the ~~second~~third quarter of 2022, we continued to experience solid recoveries in volume throughout the business from prior year levels as COVID-19 restrictions eased, but were confronted with significant challenges from inflation in commodity, labor and other operating costs across all our businesses. The global feed ingredient and energy markets continue to be impacted by ~~the outbreak of~~ the Russia-Ukraine war, driving up prices as supply out of the Black Sea region is disrupted and future production is at risk. We continued to experience labor shortages in the U.K. as European Union (or “E.U.”) workers returned to their home countries following Brexit, thus affecting our ability to process, pack and transport products. Hog prices remained low during the first quarter driven by an oversupply in Europe, though some areas, such as Germany and the U.K., experienced an uptick in prices that extended into the second quarter. Despite inflationary headwinds and softening consumer demand throughout the U.K. and E.U., we have and will continue to invest in our people, ~~to improve staffing,~~ implement supply chain solutions, and conduct customer negotiations for cost recovery. Our Mexico segment ~~also managed~~is managing through significant challenges as Mexico remains a volatile market given inflationary pressures, implications of more significant bird disease, an evolving global protein industry, and overall business seasonality.

We have responded to these challenges by continuing negotiations with customers to recoup the extraordinary costs we have experienced. We also continue to focus on operational initiatives that aim to deliver labor efficiencies, better agricultural performance and improved yields.

Russia-Ukraine War Impacts

The Russia-Ukraine war began in February 2022. The impact of the ongoing war and sanctions will not be limited to businesses that operate in Russia and Ukraine and may negatively impact other global economic markets including where we operate. The impacts have included and may continue to include, but are not limited to, higher prices for commodities, such as food products, ingredients and energy products, increasing inflation in some countries, and disrupted trade and supply chains. The conflict has disrupted shipments of grains, vegetable oils, fertilizer and energy products.

The impact on the agriculture markets falls into two main categories: (1) the effect on Ukrainian crop production, as the region is key in global grain production; and (2) the duration of the disruption in trade flows. Safety and financing concerns in the region are restricting export execution, which is in turn forcing grain and oil demand to find alternative supply. The duration of the war and related volatility makes global markets extremely sensitive to growing-season weather in other global grain producing regions and has led to a large risk premium in futures prices. The continued volatility in the global markets as a result of the war has adversely impacted our costs by driving up prices, raising inflation and increasing pressure on the supply of feed ingredients and energy products throughout the global markets. In the third quarter of 2022, Ukraine resumed water-borne exports and their export volumes continue to climb. Their supply constraints did not have a material impact on our costs during the third quarter.

In addition, the U.S. government and other governments in jurisdictions in which we operate have imposed sanctions and export controls against Russia, Belarus and interests therein and threatened additional sanctions and controls. Our U.K. and Europe business may be impacted by the increase in energy prices and the availability of energy during the winter months. The impact of these measures, now and in the future, could adversely affect our business, supply chain or customers.

Impact of COVID-19

The impact of COVID-19 and measures to prevent its spread continue to affect our business in a number of ways.

•Our workforce. Employee health and safety is our priority. As an essential business in a critical infrastructure industry, we continue to produce chicken and pork products. Measures we implemented during the height of the pandemic that remain in place today include, but are not limited to: increasing physical distancing of our employees,

where possible; staggering start and shift breaks; increasing personal hygiene practices and providing our employees additional personal protective equipment and sanitation stations; and increasing sanitation of our facilities. We have also continued to support and encourage our employees and their family members to be vaccinated against COVID-19.

•Our operations. All of our production facilities continue to operate. To date, we have not experienced a material impact from a plant closure.

•Demand for our products. As global vaccination levels increased and governmental restrictions eased, we noted the trend towards pre-pandemic levels of demand at retail grocery stores and restaurants and are not currently experiencing any significant change in demand as a result of the COVID-19 pandemic.

•CARES Act. On March 27, 2020, the U.S. government enacted the CARES Act, which includes modifications to the limitation on business interest expense and net operating loss provisions, and provides a payment delay of employer payroll taxes during 2020 after the date of enactment. We delayed the payment of $52 million in employer payroll taxes otherwise due in 2020. The first 50% was paid on December 31, 2021 and the remaining 50% is due and payable by December 31, 2022.

Raw Materials and Pricing

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

U.S. commodity market prices for chicken products ~~entered the second quarter at~~declined 30% from historical highs in early July to levels ~~73%~~slightly above the 5-year average by the end of September due to increasing chicken supply which outpaced the volume demand. As a result, chicken volumes in cold storage and ~~remained above prior year levels and historical norms throughout the period.~~availability increased, driving prices to decline more than seasonal norms. During the ~~second~~third quarter of 2022, industry production levels ~~were slightly up from the~~trended above previous year ~~+0.2%~~levels, +2.8% year-over-year, in ~~liveweight~~ready to cook pounds. The increase in ~~liveweight~~ production was due to ~~growth~~both the improvement in layer productivity and hatchability rates since late in the second quarter of ~~egg sets which has continued throughout the year and has~~2022. Both factors led to more birds processed relative to the same time ~~last~~previous year. ~~This increase in birds processed occurred despite hatchability headwinds that persisted throughout~~Average chicken liveweights for the ~~first four months of 2022. Hatchability has recently began trending~~quarter remained in line with ~~prior~~a year ~~levels. We experienced~~ago. Third quarter demand remained steady ~~demand throughout~~across the ~~second quarter of 2022.~~channels as indicated by increased sales. In the foodservice channel, commercial foodservice ~~restaurant~~restaurants volume demand ~~declined slightly, but was offset by significant growth in~~remained flat while the non-commercial ~~foodservice subchannel.~~subchannel grew significantly relative to same quarter prior year. In retail, Pilgrim's fresh ~~and frozen value-added~~ sales volumes ~~remained steady relative to~~outpaced the ~~second quarter of prior year. Sales volume in~~relatively flat market volumes; while the frozen subchannel saw mixed results as declining frozen commodity ~~and retail~~volumes more than offset value-added growth. The deli ~~subchannels declined during the second quarter.~~subchannel also experienced steady volume sales, even at elevated prices. The export market ~~remained strong for April and May, growing 5%~~declined 9% in volume ~~relative to prior year levels. Cold storage inventories have trended below average historical levels throughout 2022, ending June at 7% below the 5-year average. Despite elevated wholesale~~shipments for July and ~~retail pricing, chicken remains a cost competitive protein option.~~August.

During the ~~second~~third quarter of 2022, the U.K. chicken market ~~experienced unprecedented cost increases in~~continued to see rising costs of feed ingredients, utilities and labor. Through our current customer models and additional negotiations ~~together with recovery in the foodservice sector,~~ we have ~~partially~~ offset ~~some~~the majority of these cost increases. We continue to focus on managing costs, including labor and yield efficiencies, agricultural performance and increasing operational ~~efficiency.~~efficiency through investments in capital projects.

Commodity prices for chicken in Mexico increased during the ~~second~~third quarter of 2022 and remained well above prices from same quarter prior year. The increase is primarily from increased demand that outpaced supply. The cost to produce also increased from same quarter prior year due to significant increases in corn and soy, the two main ingredients used for feed in Mexico.

While commodity market prices for chicken products ~~have sustained high levels throughout the second quarter of 2022,~~declined, prices for the remainder of the year will depend on (1) the evolution of foodservice, retail and export meat demand and (2) factors such as government regulation, the ongoing Russia-Ukraine war, further spread of avian influenza both domestically and abroad, uncertainty surrounding the general economy and overall protein supply.

U.K. market prices for pork products during the three months ended ~~June 26,~~September 25, 2022 ~~increased~~continued an upward trend, though the rate of growth slowed from ~~the low prices of the first quarter. The pig prices increased by approximately 30%~~31% in the second quarter ~~following significant price increases~~to 21% in the third quarter driven by the slowing of EU prices. The increase in Germany was at a more moderate growth rate of 6% in the third quarter compared to more than 50% in late ~~March.~~first quarter. Despite some pig price recovery, the cost of production continued to exceed market prices, ~~although the~~with pig farmers reducing their loss to around £16 per pig ~~experienced by growers has decreased~~ in the third quarter, which is a significant improvement over first and second ~~quarter. The increased prices follow a reduction of the overall breeding herd in the U.K. and Germany during 2021.~~quarter which had losses well above £50 per pig. Input costs for feed and energy in the U.K. continue to rise ~~following~~in the ~~outbreak out of the Russia-Ukraine war and~~third quarter consistent with ~~the 6% national minimum wage increase in April,~~global market conditions, with the recovery of inflation through retailers ~~continues to be~~ an ongoing area of focus.

Reportable Segments

We operate in three reportable segments: U.S., U.K. and Europe, and Mexico. We measure segment profit as operating income. Certain corporate expenses are allocated to the Mexico and U.K. and Europe reportable segments based upon various apportionment methods for specific expenditures incurred related thereto with the remaining amounts allocated to the U.S. For additional information, see “Note 17. Reportable Segments” of our Condensed Consolidated Financial Statements included in this quarterly report.

Results of Operations

Three Months Ended ~~June 26,~~September 25, 2022 Compared to the Three Months Ended ~~June 27,~~September 26, 2021

Net sales. Net sales generated in the three months ended ~~June 26,~~September 25, 2022 increased ~~$994.0~~$641.4 million, or ~~27.3%~~16.8%, from net sales generated in the three months ended ~~June 27,~~September 26, 2021. The following table provides net sales information:


Sources of net sales	Sources of net sales	Three Months Ended June 26, 2022		Change from Three Months Ended June 27, 2021				Sources of net sales	Three Months Ended September 25, 2022		Change from Three Months Ended September 26, 2021
				Amount		Percent					Amount		Percent
		(In thousands, except percent data)							(In thousands, except percent data)
U.S.	U.S.	$	2,899,879	$	651,409	29.0	%	U.S.	$	2,836,920	$	370,070	15.0	%
U.K. and Europe	U.K. and Europe	1,245,052		309,207		33.0	%	U.K. and Europe	1,203,095		272,655		29.3	%
Mexico	Mexico	486,717		33,334		7.4	%	Mexico	428,954		(1,322)		(0.3)	%
Total net sales	Total net sales	$	4,631,648	$	993,950	27.3	%	Total net sales	$	4,468,969	$	641,403	16.8	%

U.S. Reportable Segment. U.S. net sales generated in the three months ended ~~June 26,~~September 25, 2022 increased ~~$651.4~~$370.1 million, or ~~29.0%~~15.0%, from U.S. net sales generated in the three months ended ~~June 27,~~September 26, 2021 primarily due to an increase in net sales per pound which ~~contributed $628.6~~increased $386.4 million, or ~~28.0~~15.7 percentage points, to the increase in net sales. The increase in net sales per pound was partially offset by a decrease in sales volume of $16.3 million, or 0.7 percentage points. The increase in net sales per pound was driven primarily by ~~higher-than-average market pricing for chicken and~~ increases in price necessary to recover increased feed ingredients, labor, utilities and other operating costs during the three months ended ~~June 26,~~September 25, 2022. ~~Also contributing to the increase in net sales was an increase in sales volume of $22.8 million, or 1.0 percentage points.~~

U.K. and Europe Reportable Segment. U.K. and Europe net sales generated in the three months ended ~~June 26,~~September 25, 2022 increased ~~$309.2~~$272.7 million, or ~~33.0%~~29.3%, from U.K. and Europe net sales generated in the three months ended ~~June 27,~~September 26, 2021 primarily due to the acquisition of Pilgrim’s Food Masters (“PFM”) which contributed ~~$265.8~~$247.6 million to the increase in net sales. The existing U.K. and Europe businesses contributed ~~$43.4~~$25.1 million to the increase in net sales. This increase to net sales of the existing operations was driven by an increase inof $238.0 million from increased net sales per pound, ~~of $171.2 million,~~ or ~~18.3~~25.4 percentage points, partially offset by ~~a decrease in sales volume of $23.9 million, or 2.6 percentage points, and~~ the unfavorable impact of foreign currency translation of ~~$104.4~~$158.4 million, or ~~11.2~~16.9 percentage points, and a decrease in sales volume of $54.5 million, or 5.8 percentage points. The increase in net sales per pound was driven by price increases necessary to recover increased feed ingredients, labor, utilities and other operating costs.

Mexico Reportable Segment. Mexico net sales generated in the three months ended ~~June 26,~~September 25, 2022 ~~increased $33.3~~decreased $1.3 million, or ~~7.4%~~0.3%, from Mexico net sales generated in the three months ended ~~June 27,~~September 26, 2021 primarily due to a decrease in sales volume of $47.5 million, or 11.0 percentage points, and the unfavorable impact of foreign currency remeasurement of $4.9 million, or 1.2 percentage points, partially offset by an increase in net sales per pound of ~~$77.9~~$51.1 million, or ~~17.2 percentage points, and the favorable impact of foreign currency remeasurement of $0.8 million, or 0.2 percentage points, partially offset by a decrease in sales volume of $45.4 million, or 10.0~~11.9 percentage points. The increase in net sales per pound was driven primarily by higher chicken prices that resulted from solid market fundamentals.

Gross profit and cost of sales. Gross profit increased by ~~$296.5~~$125.4 million, or ~~78.0%~~33.7%, from ~~$380.2~~$371.8 million generated in the three months ended ~~June 27,~~September 26, 2021 to ~~$676.8~~$497.3 million generated in the three months ended ~~June 26,~~September 25, 2022. The following tables provide information regarding gross profit and cost of sales information:


Components of gross profit	Components of gross profit	Three Months Ended June 26, 2022		Change from Three Months Ended June 27, 2021						Percent of Net Sales						Components of gross profit	Three Months Ended September 25, 2022			Change from Three Months Ended September 26, 2021					Percent of Net Sales
									Three Months Ended										Three Months Ended
						Amount			Percent			June 26, 2022			June 27, 2021									Amount			Percent			September 25, 2022	September 26, 2021
		(In thousands, except percent data)																	(In thousands, except percent data)
Net sales	Net sales	$	4,631,648	$	993,950		27.3	%		100.0	%		100.0	%		Net sales	$	4,468,969		$	641,403	16.8	%		100.0	%		100.0	%
Cost of sales	Cost of sales	3,954,877		697,420			21.4	%		85.4	%		89.5	%		Cost of sales	3,971,699			515,976		14.9	%		88.9	%		90.3	%
Gross profit	Gross profit	$	676,771	$	296,530		78.0	%		14.6	%		10.5	%		Gross profit	$	497,270		$	125,427	33.7	%		11.1	%		9.7	%

3537


Sources of gross profit	Sources of gross profit	Three Months Ended June 26, 2022		Change from Three Months Ended June 27, 2021				Sources of gross profit	Three Months Ended September 25, 2022		Change from Three Months Ended September 26, 2021
				Amount		Percent					Amount		Percent
		(In thousands, except percent data)							(In thousands, except percent data)
U.S.	U.S.	$	544,636	$	304,288	126.6	%	U.S.	$	445,308	$	167,280	60.2	%
U.K. and Europe	U.K. and Europe	68,955		18,910		37.8	%	U.K. and Europe	52,469		20,145		62.3	%
Mexico	Mexico	63,166		(26,668)		(29.7)	%	Mexico	(521)		(61,998)		(100.8)	%
Elimination	Elimination	14		—		—	%	Elimination	14		—		—	%
Total gross profit	Total gross profit	$	676,771	$	296,530	78.0	%	Total gross profit	$	497,270	$	125,427	33.7	%


Sources of cost of sales	Sources of cost of sales	Three Months Ended June 26, 2022		Change from Three Months Ended June 27, 2021				Sources of cost of sales	Three Months Ended September 25, 2022		Change from Three Months Ended September 26, 2021
				Amount		Percent					Amount		Percent
		(In thousands, except percent data)							(In thousands, except percent data)
U.S.	U.S.	$	2,355,243	$	347,121	17.3	%	U.S.	$	2,391,612	$	202,790	9.3	%
U.K. and Europe	U.K. and Europe	1,176,097		290,297		32.8	%	U.K. and Europe	1,150,626		252,510		28.1	%
Mexico	Mexico	423,551		60,002		16.5	%	Mexico	429,475		60,676		16.5	%
Elimination	Elimination	(14)		—		—	%	Elimination	(14)		—		—	%
Total cost of sales	Total cost of sales	$	3,954,877	$	697,420	21.4	%	Total cost of sales	$	3,971,699	$	515,976	14.9	%

U.S. Reportable Segment. Cost of sales incurred by our U.S. operations during the three months ended ~~June 26,~~September 25, 2022 increased ~~$347.1~~$202.8 million, or ~~17.3%~~9.3%, from cost of sales incurred by our U.S. segment during the three months ended ~~June 27,~~September 26, 2021. ~~Contributing to the~~The increase in cost of sales ~~were the impact of increased~~was primarily driven by an increase in cost per pound sold of ~~$326.8~~$217.3 million, or ~~16.3~~9.9 percentage points, ~~and an increase in~~partially offset by the impact of decreased sales volume of ~~$20.3~~$14.5 million, or ~~1.0~~0.6 percentage points. The increase in cost per pound sold included increases in live operations costs, prepared foods purchases, payroll costs, contract labor costs, supplies costs and utility costs. The increase in live operations costs includes an increase of ~~$107.2~~$91.4 million in feed costs and a ~~$21.5~~$25.3 million increase in chick costs. The increase in feed costs was driven primarily from higher corn and soy prices, our main ingredients in feed.

U.K. and Europe Reportable Segment. Cost of sales incurred by our U.K. and Europe operations during the three months ended ~~June 26,~~September 25, 2022 increased ~~$290.3~~$252.5 million, or ~~32.8%~~28.1%, from cost of sales incurred by our U.K. and Europe segment during the three months ended ~~June 27,~~September 26, 2021 primarily because of costs incurred by the acquired PFM operations and from increases in cost of sales incurred by our existing U.K. and Europe operations. Cost of sales related to the existing U.K. and Europe operations increased due to higher cost per pound sold, partially offset by ~~decreased sales volume and~~ the favorable impact of foreign currency ~~translation.~~translation and decreased sales volume. The increase in cost per pound sold was driven by inflation in feed ingredients, utilities, CO2 costs and ~~utilities as well as increases in~~ labor ~~costs due to shortages resulting from Brexit and an increase in the national minimum wage.~~costs.

Mexico Reportable Segment. Cost of sales incurred by our Mexico operations during the three months ended March 28, 2021 increased ~~$60.0~~$60.7 million, or 16.5%, from cost of sales incurred by our Mexico segment during the three months ended ~~June 27,~~September 26, 2021. This increase was driven by increased cost per pound sold of ~~$95.7~~$106.3 million, or ~~26.3 percentage points, and the unfavorable impact of foreign currency remeasurement of $0.7 million, or 0.2~~28.8 percentage points. The increase in cost per pound sold was driven by higher input costs, such as feed ingredients and cost of chicks which was negatively impacted by the cost to import eggs to offset the impacts of bird disease at our locations, and an unfavorable shift in product mix due to market demands. These increases were partially offset by a decrease in sales volume of ~~$36.4~~$40.7 million, or ~~10.0~~11.0 percentage points, and the favorable impact of foreign currency remeasurement of $4.9 million, or 1.3 percentage points.

Operating income and SG&A expense. Operating income increased by ~~$636.0~~$218.4 million, or ~~516.6%~~180.8%, from ~~a loss of $123.1 million incurred in the three months ended June 27, 2021 to~~ income of ~~$512.9~~$120.8 million generated in the three months ended ~~June~~September 26, 2021 to income of $339.2 million generated in the three months ended September 25, 2022. The following tables provide information regarding operating income and selling, general and administrative (“SG&A”) expense:

Components of operating income Three Months Ended June 26, 2022 Change from Three Months Ended June 27, 2021 Percent of Net Sales
Three Months Ended
Amount Percent June 26, 2022 June 27, 2021
(In thousands, except percent data)
Gross profit $ 676,771 $ 296,530 78.0 % 14.6 % 10.5 %
SG&A expense 163,867 (339,505) (67.4) % 3.5 % 13.8 %
Operating income $ 512,904 $ 636,035 516.6 % 11.1 % (3.4) %

3638

Sources of operating income Three Months Ended June 26, 2022 Change from Three Months Ended June 27, 2021
Amount Percent
(In thousands, except percent data)
U.S. $ 453,198 $ 677,369 302.2 %
U.K. and Europe 7,848 (13,983) (64.1) %
Mexico 51,844 (27,351) (34.5) %
Eliminations 14 — — %
Total operating income $ 512,904 $ 636,035 516.6 %
Sources of SG&A expense Three Months Ended June 26, 2022 Change from Three Months Ended June 27, 2021
Amount Percent
(In thousands, except percent data)
U.S. $ 91,438 $ (373,081) (80.3) %
U.K. and Europe 61,107 32,893 116.6 %
Mexico 11,322 683 6.4 %
Total SG&A expense $ 163,867 $ (339,505) (67.4) %


Components of operating income	Three Months Ended September 25, 2022		Change from Three Months Ended September 26, 2021				Percent of Net Sales
							Three Months Ended
			Amount		Percent		September 25, 2022		September 26, 2021
	(In thousands, except percent data)
Gross profit	$	497,270	$	125,427	33.7	%	11.1	%	9.7	%
SG&A expense	158,068		(92,998)		(37.0)	%	3.5	%	6.6	%

Operating income	$	339,202	$	218,425	180.8	%	7.6	%	3.2	%


Sources of operating income	Three Months Ended September 25, 2022		Change from Three Months Ended September 26, 2021
			Amount		Percent
	(In thousands, except percent data)
U.S.	$	338,548	$	267,882	379.1	%
U.K. and Europe	14,198		13,753		3,090.6	%
Mexico	(13,558)		(63,210)		(127.3)	%
Eliminations	14		—		—	%
Total operating income	$	339,202	$	218,425	180.8	%

Sources of SG&A expense	Three Months Ended September 25, 2022		Change from Three Months Ended September 26, 2021
			Amount		Percent
	(In thousands, except percent data)
U.S.	$	106,760	$	(100,602)	(48.5)	%
U.K. and Europe	38,271		6,392		20.1	%
Mexico	13,037		1,212		10.2	%
Total SG&A expense	$	158,068	$	(92,998)	(37.0)	%

U.S. Reportable Segment. SG&A expense incurred by our U.S. reportable segment during the three months ended ~~June 26,~~September 25, 2022 decreased ~~$373.1~~$100.6 million, or ~~80.3%~~48.5%, from SG&A expense incurred by our U.S. reportable segment during the three months ended ~~June 27,~~September 26, 2021. The decrease in SG&A expense resulted primarily from recognition of legal settlements and acquisition transaction costs in the prior year. ~~The~~A net increase in other U.S. SG&A expense ~~that~~ partially offsets the decrease infrom legal settlement expense ~~was immaterial.~~and acquisition transaction costs. This net increase is driven by incentive compensation costs.

U.K. and Europe Reportable Segment. SG&A expense incurred by our U.K. and Europe reportable segment during the three months ended ~~June 26,~~September 25, 2022 increased ~~$32.9~~$6.4 million, or ~~116.6%~~20.1%, from SG&A expense incurred by our U.K. and Europe segment during the three months ended ~~June 27,~~September 26, 2021 primarily from the acquisition of the PFM business. Other factors affecting U.K. and Europe SG&A expense were individually immaterial.

Mexico Reportable Segment. SG&A expense incurred by our Mexico reportable segment during the three months ended ~~June 26,~~September 25, 2022 increased approximately ~~$0.7~~$1.2 million, or ~~6.4%~~10.2%, from SG&A expense incurred by our Mexico segment during the three months ended ~~June 27,~~September 26, 2021. The primary driver of the increase in SG&A expense was ~~compensation-related~~marketing costs. Other factors affecting Mexico SG&A expense were individually immaterial.

Net interest expense. Net interest expense ~~decreased~~increased to ~~$37.1~~$34.2 million recognized in the three months ended ~~June 26,~~September 25, 2022 from ~~$49.8~~$28.6 million recognized in the three months ended ~~June 27,~~September 26, 2021. The ~~decrease~~increase in net interest expense resulted primarily ~~due to a $24.3 million loss on early extinguishment of debt recognized in the prior year, partially offset by an increase in~~from interest expense on outstanding ~~borrowings of $10.2 million.~~borrowings. Average borrowings increased by ~~$1.2~~$0.7 billion from ~~$2.3~~$2.6 billion during the three months ended ~~June 27,~~September 26, 2021 to ~~$3.5~~$3.4 billion during the three months ended ~~June 26,~~September 25, 2022 due to the ~~sale~~issuance of the 2032 Senior Notes in ~~the third quarter of 2021.~~September 2021 to purchase PFM. As a percent of net sales, interest expense in the three months ended ~~June 26,~~September 25, 2022 and ~~June 27,~~September 26, 2021 was 0.8% and ~~1.4%~~0.8%, respectively.

Income taxes. Income tax expense increased to ~~$112.7~~$65.7 million, a ~~23.7%~~20.2% effective tax rate, for the three months ended ~~June 26,~~September 25, 2022 compared to an income tax ~~benefit~~expense of ~~$9.8~~$30.4 million, a ~~5.6%~~33.3% effective tax rate, for the three months ended ~~June 27,~~September 26, 2021. The increase in income tax expense resulted primarily from the increase in profit before taxes.

3739

~~Six~~Nine Months Ended ~~June 26,~~September 25, 2022 Compared to the ~~Six~~Nine Months Ended ~~June 27,~~September 26, 2021

Net sales. Net sales generated in the ~~six~~nine months ended ~~June 26,~~September 25, 2022 increased ~~$2.0~~$2.6 billion, or ~~28.4%~~24.2%, from net sales generated in the ~~six~~nine months ended ~~June 27,~~September 26, 2021. The following table provides net sales information:


Sources of net sales	Sources of net sales	Six Months Ended June 26, 2022		Change from Six Months Ended June 27, 2021				Sources of net sales	Nine Months Ended September 25, 2022		Change from Nine Months Ended September 26, 2021
				Amount		Percent					Amount		Percent
		(In thousands, except percent data)							(In thousands, except percent data)
U.S.	U.S.	$	5,481,087	$	1,233,058	29.0	%	U.S.	$	8,318,007	$	1,603,128	23.9	%
U.K. and Europe	U.K. and Europe	2,437,034		646,455		36.1	%	U.K. and Europe	3,640,129		919,110		33.8	%
Mexico	Mexico	953,922		81,407		9.3	%	Mexico	1,382,876		80,085		6.1	%
Total net sales	Total net sales	$	8,872,043	$	1,960,920	28.4	%	Total net sales	$	13,341,012	$	2,602,323	24.2	%

U.S. Reportable Segment. U.S. net sales generated in the ~~six~~nine months ended ~~June 26,~~September 25, 2022 increased ~~$1.2~~$1.6 billion, or ~~29.0%~~23.9%, from U.S. net sales generated in the ~~six~~nine months ended ~~June 27,~~September 26, 2021 primarily due to an increase in net sales per pound which contributed ~~$1.2~~$1.6 billion, or ~~28.6~~23.8 percentage points, to the increase in net sales. The increase in net sales per pound was driven primarily by price increases necessary to recover increased feed ingredients, labor ~~utilities~~costs, supplies costs, utility costs and other operating costs. Also contributing to the increase in net sales was an increase in sales volume of ~~$18.2~~$4.0 million, or ~~0.4~~0.1 percentage points.

U.K. and Europe Reportable Segment. U.K. and Europe net sales generated in the ~~six~~nine months ended ~~June 26,~~September 25, 2022 increased ~~$646.5~~$919.1 million, or ~~36.1%~~33.8%, from U.K. and Europe net sales generated in the ~~six~~nine months ended ~~June 27,~~September 26, 2021 primarily due to the acquisition of ~~Pilgrim’s Food Masters (“PFM”)~~PFM which contributed ~~$526.5~~$774.1 million to the increase in net sales. The existing U.K. and Europe businesses contributed ~~$120.0~~$145.0 million to the increase in net sales. This increase was driven by an increase inof $506.7 million from increased net sales per pound, ~~of $268.6 million,~~ or ~~15.0~~18.6 percentage points, partially offset by the unfavorable impact of foreign currency translation of ~~$126.3~~$285.0 million, or ~~7.1~~10.5 percentage points, and a decrease in sales volume of ~~$22.3~~$76.7 million, or ~~1.2~~2.8 percentage points. The increase in net sales per pound was driven by price increases necessary to recover increased feed ingredients, labor ~~utilities~~costs, CO2 costs, utility costs and other operating costs.

Mexico Reportable Segment. Mexico net sales generated in the ~~six~~nine months ended ~~June 26,~~September 25, 2022 increased ~~$81.4~~$80.1 million, or ~~9.3%~~6.1%, from Mexico net sales generated in the ~~six~~nine months ended ~~June 27,~~September 26, 2021 primarily due to an increase in net sales per pound of ~~$118.6~~$170.9 million, or ~~13.6~~13.1 percentage points, partially offset by a decrease in sales volume of ~~$32.2~~$80.7 million, or ~~3.7~~6.2 percentage points, and a decrease from the unfavorable impact of foreign currency remeasurement of ~~$5.0~~$10.1 million, or ~~0.6~~0.8 percentage points. The increase in net sales per pound was driven primarily by higher chicken prices that resulted from solid market fundamentals.

Gross profit and cost of sales. Gross profit increased by ~~$577.3~~$702.7 million, or ~~90.0%~~69.3%, from ~~$641.5 million generated in the six months ended June 27, 2021 to $1.2~~$1.0 billion generated in the ~~six~~nine months ended ~~June~~September 26, 2021 to $1.7 billion generated in the nine months ended September 25, 2022. The following tables provide information regarding gross profit and cost of sales information:


Components of gross profit	Components of gross profit	Six Months Ended June 26, 2022		Change from Six Months Ended June 27, 2021						Percent of Net Sales						Components of gross profit	Nine Months Ended September 25, 2022			Change from Nine Months Ended September 26, 2021					Percent of Net Sales
									Six Months Ended										Nine Months Ended
						Amount			Percent			June 26, 2022			June 27, 2021									Amount			Percent			September 25, 2022	September 26, 2021
		(In thousands, except percent data)																	(In thousands, except percent data)
Net sales	Net sales	$	8,872,043	$	1,960,920		28.4	%		100.0	%		100.0	%		Net sales	$	13,341,012		$	2,602,323	24.2	%		100.0	%		100.0	%
Cost of sales	Cost of sales	7,653,292		1,383,653			22.1	%		86.3	%		89.5	%		Cost of sales	11,624,991			1,899,629		19.5	%		87.1	%		90.6	%
Gross profit	Gross profit	$	1,218,751	$	577,267		90.0	%		13.7	%		10.5	%		Gross profit	$	1,716,021		$	702,694	69.3	%		12.9	%		9.4	%


Sources of gross profit	Sources of gross profit	Six Months Ended June 26, 2022		Change from Six Months Ended June 27, 2021				Sources of gross profit	Nine Months Ended September 25, 2022		Change from Nine Months Ended September 26, 2021
				Amount		Percent					Amount		Percent
		(In thousands, except percent data)							(In thousands, except percent data)
U.S.	U.S.	$	966,640	$	593,433	159.0	%	U.S.	$	1,411,948	$	760,713	116.8	%
U.K. and Europe	U.K. and Europe	108,034		20,181		23.0	%	U.K. and Europe	160,503		40,326		33.6	%
Mexico	Mexico	144,049		(36,347)		(20.1)	%	Mexico	143,528		(98,345)		(40.7)	%
Elimination	Elimination	28		—		—	%	Elimination	42		—		—	%
Total gross profit	Total gross profit	$	1,218,751	$	577,267	90.0	%	Total gross profit	$	1,716,021	$	702,694	69.3	%

3840


Sources of cost of sales	Sources of cost of sales	Six Months Ended June 26, 2022		Change from Six Months Ended June 27, 2021				Sources of cost of sales	Nine Months Ended September 25, 2022		Change from Nine Months Ended September 26, 2021
				Amount		Percent					Amount		Percent
		(In thousands, except percent data)							(In thousands, except percent data)
U.S.	U.S.	$	4,514,447	$	639,625	16.5	%	U.S.	$	6,906,059	$	842,415	13.9	%
U.K. and Europe	U.K. and Europe	2,329,000		626,274		36.8	%	U.K. and Europe	3,479,626		878,784		33.8	%
Mexico	Mexico	809,873		117,754		17.0	%	Mexico	1,239,348		178,430		16.8	%
Elimination	Elimination	(28)		—		—	%	Elimination	(42)		—		—	%
Total cost of sales	Total cost of sales	$	7,653,292	$	1,383,653	22.1	%	Total cost of sales	$	11,624,991	$	1,899,629	19.5	%

U.S. Reportable Segment. Cost of sales incurred by our U.S. operations during the ~~six~~nine months ended ~~June 26,~~September 25, 2022 increased ~~$639.6~~$842.4 million, or ~~16.5%~~13.9%, from cost of sales incurred by our U.S. segment during the ~~six~~nine months ended ~~June 27,~~September 26, 2021. Cost of sales increased primarily because of ~~the impact of increased~~an increase in cost per pound sold ~~of $623.0~~which contributed $838.8 million, or ~~16.1~~13.8 percentage points, and an increase in sales volume of ~~$16.6~~$3.6 million, or ~~0.4~~0.1 percentage points. The increase in cost per pound sold included increases in live operations costs, payroll costs, prepared foods purchases, contract labor costs, supplies costs, utility costs and higher realized losses in commodity derivatives. The increase in live operations costs includes an increase of ~~$201.5~~$292.8 million in feed costs and a ~~$44.1~~$69.5 million increase in chick costs. The increase in feed costs was driven primarily from higher corn and soy prices, our main ingredients in feed.

U.K. and Europe Reportable Segment. Cost of sales incurred by our U.K. and Europe operations during the ~~six~~nine months ended ~~June 26,~~September 25, 2022 increased ~~$626.3~~$878.8 million, or ~~36.8%~~33.8%, from cost of sales incurred by our U.K. and Europe segment during the ~~six~~nine months ended ~~June 27,~~September 26, 2021 primarily because of costs incurred by the acquired PFM operations and from increases in cost of sales incurred by our existing U.K. and Europe operations. Cost of sales related to the existing U.K. and Europe operations increased due to an increase in cost per pound sold, partially offset by ~~a decrease in sales volume and~~ the favorable impact of foreign currency ~~translation.~~translation and a decrease in sales volume. The increase in cost per pound sold was driven by inflation in feed ingredients, ~~and utilities~~CO2 costs, utility costs, as well as increases in labor costs due to shortages resulting from Brexit and an increase in the national minimum wage.

Mexico Reportable Segment. Cost of sales incurred by our Mexico operations during the ~~six~~nine months ended ~~June 26,~~September 25, 2022 increased ~~$117.8~~$178.4 million, or ~~17.0%~~16.8%, from cost of sales incurred by our Mexico segment during the ~~six~~nine months ended ~~June 27,~~September 26, 2021. This increase was driven by increased cost per pound sold of ~~$147.5~~$253.2 million, or ~~16.1~~23.9 percentage points, partially offset by a decrease in sales volume of ~~$25.6~~$65.7 million, or ~~3.7~~6.2 percentage points, and the favorable impact of foreign currency remeasurement of ~~$4.2~~$9.0 million, or ~~0.6~~0.9 percentage points. The increase in cost per pound sold was driven by higher input costs, such as feed ingredients, chick costs and ~~chick~~packaging costs, and an unfavorable shift in product mix due to market demands.

Operating income and SG&A expense. Operating income increased by ~~$879.6 million~~$1.1 billion from ~~$35.3~~$156.1 million generated in the ~~six~~nine months ended ~~June 27,~~September 26, 2021 to ~~$914.9 million~~$1.3 billion generated in the ~~six~~nine months ended ~~June 26,~~September 25, 2022. The following tables provide information regarding operating income and selling, general and administrative (“SG&A”) expense:

Components of operating income Six Months Ended June 26, 2022 Change from Six Months Ended June 27, 2021 Percent of Net Sales
Six Months Ended
Amount Percent June 26, 2022 June 27, 2021
(In thousands, except percent data)
Gross profit $ 1,218,751 $ 577,267 90.0 % 13.7 % 9.3 %
SG&A expense 303,834 (302,317) (49.9) % 3.4 % 8.8 %
Operating income $ 914,917 $ 879,584
NM(1)
10.3 % 0.5 %

~~(1)This year-over-year percent change is designated not meaningful (or “NM”) due to significant one-time items recognized in prior year.~~


Components of operating income	Nine Months Ended September 25, 2022		Change from Nine Months Ended September 26, 2021				Percent of Net Sales
							Nine Months Ended
			Amount		Percent		September 25, 2022		September 26, 2021
	(In thousands, except percent data)
Gross profit	$	1,716,021	$	702,694	69.3	%	12.9	%	9.4	%
SG&A expense	461,902		(395,315)		(46.1)	%	3.5	%	8.0	%

Operating income	$	1,254,119	$	1,098,009	703.4	%	9.4	%	1.5	%

3941


Sources of operating income	Sources of operating income	Six Months Ended June 26, 2022		Change from Six Months Ended June 27, 2021				Sources of operating income	Nine Months Ended September 25, 2022		Change from Nine Months Ended September 26, 2021
				Amount		Percent					Amount		Percent
		(In thousands, except percent data)							(In thousands, except percent data)
U.S.	U.S.	$	808,273	$	964,319	618.0	%	U.S.	$	1,146,821	$	1,232,201	NM(1)
U.K. and Europe	U.K. and Europe	(13,792)		(46,118)		(142.7)	%	U.K. and Europe	406		(32,365)		(98.8)	%
Mexico	Mexico	120,408		(38,617)		(24.3)	%	Mexico	106,850		(101,827)		(48.8)	%
Eliminations	Eliminations	28		—		—	%	Eliminations	42		—		—	%
Total operating income	Total operating income	$	914,917	$	879,584	NM(1)		Total operating income	$	1,254,119	$	1,098,009	703.4	%
(1)This year-over-year percent change is designated not meaningful (or “NM”) due to significant one-time items recognized in prior year.	(1)This year-over-year percent change is designated not meaningful (or “NM”) due to significant one-time items recognized in prior year.							(1)This year-over-year percent change is designated not meaningful (or “NM”) due to significant one-time items recognized in prior year.

Sources of SG&A expense	Sources of SG&A expense	Six Months Ended June 26, 2022		Change from Six Months Ended June 27, 2021				Sources of SG&A expense	Nine Months Ended September 25, 2022		Change from Nine Months Ended September 26, 2021
				Amount		Percent					Amount		Percent
		(In thousands, except percent data)							(In thousands, except percent data)
U.S.	U.S.	$	158,367	$	(370,886)	(70.1)	%	U.S.	$	265,127	$	(471,488)	(64.0)	%
U.K. and Europe	U.K. and Europe	121,826		66,299		119.4	%	U.K. and Europe	160,097		72,691		83.2	%
Mexico	Mexico	23,641		2,270		10.6	%	Mexico	36,678		3,482		10.5	%
Total SG&A expense	Total SG&A expense	$	303,834	$	(302,317)	(49.9)	%	Total SG&A expense	$	461,902	$	(395,315)	(46.1)	%

U.S. Reportable Segment. SG&A expense incurred by our U.S. reportable segment during the ~~six~~nine months ended ~~June 26,~~September 25, 2022 decreased ~~$370.9~~$471.5 million, or ~~70.1%~~64.0%, from SG&A expense incurred by our U.S. reportable segment during the ~~six~~nine months ended ~~June 27,~~September 26, 2021. The decrease in SG&A expense resulted primarily from recognition of legal settlements and acquisition transaction costs in the prior year. ~~The~~A net increase in other U.S. SG&A expense ~~that~~ partially offsets the decrease infrom legal settlement expense ~~was immaterial.~~and acquisition transaction costs. This net increase is driven by incentive compensation and legal defense costs.

U.K. and Europe Reportable Segment. SG&A expense incurred by our U.K. and Europe reportable segment during the ~~six~~nine months ended ~~June 26,~~September 25, 2022 increased ~~$66.3~~$72.7 million, or ~~119.4%~~83.2%, from SG&A expense incurred by our U.K. and Europe segment during the ~~six~~nine months ended ~~June 27,~~September 26, 2021 primarily from the acquisition of the PFM business. Other factors affecting SG&A expense were individually immaterial.

Mexico Reportable Segment. SG&A expense incurred by our Mexico reportable segment during the ~~six~~nine months ended ~~June 26,~~September 25, 2022 increased approximately ~~$2.3~~$3.5 million, or ~~10.6%~~10.5%, from SG&A expense incurred by our Mexico segment during the ~~six~~nine months ended ~~June 27,~~September 26, 2021. The primary ~~driver~~drivers of the increase in SG&A expense ~~was~~were compensation-related costs and marketing costs. Other factors affecting our Mexico segment’s SG&A expense were individually immaterial.

Net interest expense. Net interest expense slightly decreased to ~~$72.1~~$106.3 million recognized in the ~~six~~nine months ended ~~June 26,~~September 25, 2022 from ~~$77.8~~$106.4 million recognized in the ~~six~~nine months ended ~~June 27,~~September 26, 2021. The decrease in net interest expense resulted primarily due to a ~~$24.3~~$24.7 million loss on early extinguishment of debt recognized in the prior year, partially offset by an increase in interest expense on outstanding borrowings of ~~$15.0~~$23.1 million. Average borrowings increased by ~~$1.1~~$1.0 billion from ~~$2.3~~$2.4 billion during the ~~six~~nine months ended ~~June 27,~~September 26, 2021 to $3.4 billion during the ~~six~~nine months ended ~~June 26,~~September 25, 2022 due to the ~~sale~~issuance of the 2031 Senior ~~Notes.~~Notes in September 2021 to fund the acquisition of PFM. As a percent of net sales, interest expense in the ~~six~~nine months ended ~~June 26,~~September 25, 2022 and ~~June 27,~~September 26, 2021 was 0.8% and ~~1.1%~~1.0%, respectively.

Income taxes. Income tax expense increased to ~~$187.9~~$253.7 million, a ~~22.6%~~21.9% effective tax rate, for the ~~six~~nine months ended ~~June 26,~~September 25, 2022 compared to an income tax expense of ~~$25.5~~$55.9 million, a ~~(63.1)%~~110.3% effective tax rate, for the ~~six~~nine months ended ~~June 27,~~September 26, 2021. The increase in income tax expense resulted primarily from the increase in profit before taxes.

4042

Liquidity and Capital Resources

The following table presents our available sources of liquidity as of ~~June 26,~~September 25, 2022:


Sources of Liquidity	Sources of Liquidity	Facility Amount		Amount Outstanding		Amount Available		Sources of Liquidity	Facility Amount		Amount Outstanding		Amount Available
		(In millions)							(In millions)
Cash and cash equivalents	Cash and cash equivalents	$	—	$	—	$	682.1	Cash and cash equivalents	$	—	$	—	$	654.2
Borrowing arrangements:	Borrowing arrangements:							Borrowing arrangements:
U.S. Credit Facility Revolving Note Payable(a)	U.S. Credit Facility Revolving Note Payable(a)	800.0		—		763.9		U.S. Credit Facility Revolving Note Payable(a)	800.0		—		763.9
U.S. Credit Facility Term Loans(b)	U.S. Credit Facility Term Loans(b)	700.0		686.5		13.5		U.S. Credit Facility Term Loans(b)	700.0		486.4		—
Mexico Credit Facility(c)	Mexico Credit Facility(c)	75.5		—		75.5		Mexico Credit Facility(c)	74.2		—		74.2
U.K. and Europe Credit Facility(d)		184.0		—		184.0
U.K. and Europe Revolver Facility(d)								U.K. and Europe Revolver Facility(d)	162.9		10.9		152.0

(a)Availability under the U.S. Credit Facility is also reduced by our outstanding standby letters of credit. Standby letters of credit outstanding at ~~June 26,~~September 25, 2022 totaled $36.1 million.

(b)For more information on the U.S. Credit Facility Term Loans, refer to “Note 12. Debt.”

(c)The U.S. dollar-equivalent of the facility amount under the Mexico Credit Facility is ~~$75.5~~$74.2 million (Mex$1.5 billion).

(d)The U.S. dollar-equivalent of the facility amount under the U.K. and Europe ~~Credit~~Revolver Facility is ~~$184.0~~$162.9 million (£150.0 million).

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

Historical Flow of Funds


Cash Flows from Operating Activities	Cash Flows from Operating Activities	Six Months Ended				Cash Flows from Operating Activities	Nine Months Ended
		June 26, 2022		June 27, 2021			September 25, 2022		September 26, 2021
		(In millions)					(In millions)
Net income (loss)	Net income (loss)	$	642.6	$	(66.0)	Net income (loss)	$	901.6	$	(5.2)
Net noncash expenses	Net noncash expenses	177.2		176.6		Net noncash expenses	258.3		282.1
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Trade accounts and other receivables	Trade accounts and other receivables	(216.5)		(117.6)		Trade accounts and other receivables	(211.8)		(138.9)
Inventories	Inventories	(309.4)		(173.9)		Inventories	(455.5)		(149.7)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	13.2		(6.0)		Prepaid expenses and other current assets	(3.5)		13.7
Accounts payable, accrued expenses and other current liabilities	Accounts payable, accrued expenses and other current liabilities	96.1		266.5		Accounts payable, accrued expenses and other current liabilities	297.3		274.9
Income taxes	Income taxes	22.0		46.6		Income taxes	10.2		66.4
Long-term pension and other postretirement obligations	Long-term pension and other postretirement obligations	(1.7)		(9.5)		Long-term pension and other postretirement obligations	(3.1)		(13.5)
Other operating assets and liabilities	Other operating assets and liabilities	(2.3)		(1.7)		Other operating assets and liabilities	(2.9)		(2.4)
Cash provided by operating activities	Cash provided by operating activities	$	421.2	$	115.0	Cash provided by operating activities	$	790.6	$	327.4

Net Noncash Expenses

Items necessary to reconcile from net income to cash flow provided by operating activities included net noncash expenses of ~~$177.2~~$258.3 million for the ~~six~~nine months ended ~~June 26,~~September 25, 2022. Net noncash expense items included depreciation and amortization of ~~$202.0~~$301.0 million, stock-based compensation of ~~$4.3~~$6.0 million, loan cost amortization of ~~$2.8 million, losses on property disposals of $2.7~~$4.3 million and accretion of discounts related to Senior Notes of ~~$0.9~~$1.3 million. These expense items were partially offset by a deferred income tax benefit of ~~$35.5~~$48.6 million and gains on property disposals of $5.6 million.

Items necessary to reconcile from net income to cash flow provided by operating activities included net noncash expenses of ~~$176.6~~$282.1 million for the ~~six~~nine months ended ~~June 27,~~September 26, 2021. Net noncash expense items included depreciation and amortization of ~~$182.3~~$274.3 million, loss on early extinguishment of debt of ~~$24.3~~$24.7 million, stock-based compensation of ~~$5.2~~$8.4 million, loan cost amortization of ~~$2.3~~$3.8 million and accretion of discounts related to Senior Notes of ~~$0.7~~$1.1 million. These expense items were partially offset by a deferred income tax benefit of ~~$32.8~~$26.4 million, gains on property disposals of ~~$5.1~~$3.6 million and amortization of premiums related to Senior Notes of $0.2 million.

Changes in Operating Assets and Liabilities

The change in trade accounts and other receivables represented a ~~$216.5~~$211.8 million use of cash related to operating activities for the ~~six~~nine months ended ~~June 26,~~September 25, 2022. This change primarily resulted from an increase in trade accounts ~~receivable~~

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receivable due to increased sales prices. The change in trade accounts and other receivables, including accounts receivable from related parties, represented a ~~$117.6~~$138.9 million use of cash related to operating activities for the ~~six~~nine months ended ~~June 27,~~September 26, 2021. This change primarily resulted from an increase in trade accounts receivable due to customer payment timing and increased sales.

The change in inventories represented a ~~$309.4~~$455.5 million use of cash related to operating activities for the ~~six~~nine months ended ~~June 26,~~September 25, 2022. This change resulted primarily from increased raw material costs, such as feed ~~ingredients.~~ingredients, and a build-up of our finished goods inventories. The change in inventories represented a ~~$173.9~~$149.7 million use of cash related to operating activities for the ~~six~~nine months ended ~~June 27,~~September 26, 2021. This change resulted primarily from an increase in our raw materials and work-in-process inventories due to increased feed and chick costs.

The change in prepaid expenses and other current assets represented a ~~$13.2~~$3.5 million ~~source~~use of cash related to operating activities for the ~~six~~nine months ended ~~June 26,~~September 25, 2022. This change resulted primarily from a net decrease in commodity derivative assets. The change in prepaid expenses and other current assets represented a ~~$6.0~~$13.7 million ~~use~~source of cash related to operating activities for the ~~six~~nine months ended ~~June 27,~~September 26, 2021. This change resulted primarily from a net increase in commodity derivative assets.

The change in accounts payable, revenue contract liabilities, accrued expenses and other current liabilities represented a ~~$96.1~~$297.3 million source of cash related to operating activities for the ~~six~~nine months ended ~~June 26,~~September 25, 2022. This change resulted primarily from increased cost of feed ingredients and other input costs and the timing of payments. The change in accounts payable, revenue contract liabilities, accrued expenses and other current liabilities, including accounts payable to related parties, represented a ~~$266.5~~$274.9 million source of cash related to operating activities for the ~~six~~nine months ended ~~June 27,~~September 26, 2021. This change resulted primarily from an accrual for probable ~~settlement of~~losses related to ongoing litigation and a net increase in the liability position of commodity derivatives, partially offset by the payments of the previously accrued DOJ agreement and a $75.0 million legal settlement, as well as payment of incentive compensation and revenue recognized on contract liabilities.litigation.

The change in income taxes, which includes income taxes receivable, income taxes payable, deferred tax assets, deferred tax liabilities, reserves for uncertain tax positions, and the tax components within accumulated other comprehensive loss, represented a ~~$22.0~~$10.2 million source of cash related to improved operating results for the ~~six~~nine months ended ~~June 26,~~September 25, 2022. The change in income taxes, which includes income taxes receivable, income taxes payable, deferred tax assets, deferred tax liabilities, reserves for uncertain tax positions, and the tax components within accumulated other comprehensive loss, represented a ~~$46.6~~$66.4 million source of cash related to operating activities for the ~~six~~nine months ended ~~June 27,~~September 26, 2021.


Cash Flows from Investing Activities	Cash Flows from Investing Activities	Six Months Ended				Cash Flows from Investing Activities	Nine Months Ended
		June 26, 2022		June 27, 2021			September 25, 2022		September 26, 2021
		(In millions)					(In millions)
Acquisitions of property, plant and equipment	Acquisitions of property, plant and equipment	$	(196.2)	$	(183.8)	Acquisitions of property, plant and equipment	$	(342.5)	$	(280.9)
Proceeds from property disposals						Proceeds from property disposals	14.6		22.9
Purchase of acquired businesses, net of cash acquired	Purchase of acquired businesses, net of cash acquired	(4.9)		—		Purchase of acquired businesses, net of cash acquired	(9.7)		(953.9)
Proceeds from property disposals		2.4		21.4
Proceeds from insurance recoveries						Proceeds from insurance recoveries	7.3		—
Cash used in investing activities	Cash used in investing activities	$	(198.7)	$	(162.4)	Cash used in investing activities	$	(330.3)	$	(1,211.9)

Capital expenditures were primarily incurred to improve operational efficiencies and reduce costs for the ~~six~~nine months ended ~~June 26,~~September 25, 2022 and ~~June 27,~~September 26, 2021. Purchase of acquired businesses, net of cash acquired primarily represents a payment for a working capital adjustment related to the acquisition of PFM. Proceeds from property disposals were primarily for the sale of a farm in Mexico. Proceeds from insurance recoveries reflects cash received on property insurance recoveries related to the Mayfield, Kentucky tornado that occurred in December 2021.


Cash Flows from Financing Activities	Cash Flows from Financing Activities	Six Months Ended				Cash Flows from Financing Activities	Nine Months Ended
		June 26, 2022		June 27, 2021			September 25, 2022		September 26, 2021
		(In millions)					(In millions)
Payments on revolving line of credit, long-term borrowings and finance lease obligations						Payments on revolving line of credit, long-term borrowings and finance lease obligations	$	(370.3)	$	(2,006.0)
Proceeds from revolving line of credit and long-term borrowings	Proceeds from revolving line of credit and long-term borrowings	$	351.1	$	1,540.3	Proceeds from revolving line of credit and long-term borrowings	362.5		2,951.9
Payments on revolving line of credit, long-term borrowings and finance lease obligations		(170.0)		(1,522.4)
Purchase of common stock under share repurchase program	Purchase of common stock under share repurchase program	(120.0)		—		Purchase of common stock under share repurchase program	(199.5)		—
Payments of capitalized loan costs	Payments of capitalized loan costs	(3.1)		(8.7)		Payments of capitalized loan costs	(3.1)		(22.3)
Distribution from Tax Sharing Agreement with JBS USA Holdings	Distribution from Tax Sharing Agreement with JBS USA Holdings	(2.0)		(0.7)		Distribution from Tax Sharing Agreement with JBS USA Holdings	(2.0)		(0.7)
Payment on early extinguishment of debt	Payment on early extinguishment of debt	—		(21.3)		Payment on early extinguishment of debt	—		(21.3)
Cash provided by financing activities		$	56.0	$	(12.8)
Cash provided by (used in) financing activities						Cash provided by (used in) financing activities	$	(212.4)	$	901.6

Proceeds from revolving line of credit and long-term borrowings include the drawdown of the delayed draw commitment on the term loan under the U.S. Credit Facility of $193.7 million and ~~$68.6~~$80.1 million ofon the U.K. and Europe ~~Revolving Credit~~Revolver Facility. Payments on revolving line of credit, long-term borrowings and finance lease obligations include

the payment of ~~$14.9~~$215.2 million on the U.S. term loans and $67.3 million on the U.K. and Europe ~~Revolving Credit~~Revolver Facility. The payments of capitalized loan costs were those loan costs incurred as part of the refinancing of the U.S. Credit Facility and the U.K. and Europe ~~Revolving Credit~~Revolver Facility. The Distribution from Tax Sharing Agreement with JBS USA Holdings is payment of net tax incurred during the tax year 2021 under the Tax Sharing Agreement. During the ~~six~~nine months ended ~~June 26,~~September 25, 2022, ~~4.6~~7.5 million shares were repurchased under the share repurchase program. For further information relating to the share repurchase program, refer to “Note 13. Stockholders’ Equity.”

Debt

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

Collateral

Substantially all of our domestic inventories and domestic fixed assets are pledged as collateral to secure the obligations under the U.S. Credit Facility.

Recent Accounting Pronouncements

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

Critical Accounting Policies and Estimates

For a description of our critical accounting policies and estimates, refer to “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates” in our annual report on Form 10-K for the fiscal year ended December 26, 2021, filed with the Securities and Exchange Commission (the “SEC”) on February 18, 2022 ~~(the~~(as amended on March 15, 2022, the “2021 Annual Report”).

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

“EBITDA” is defined as the sum of net income (loss) plus interest, taxes, depreciation and amortization. “Adjusted EBITDA” is calculated by adding to EBITDA certain items of expense and deducting from EBITDA certain items of income that we believe are not indicative of our ongoing operating performance consisting of: (1) foreign currency transaction losses, (2) transaction costs related to business acquisitions, (3) costs related to litigation settlements, (4) ~~initial~~property insurance recoveries for Mayfield, Kentucky tornado property damage losses and (5) net income attributable to noncontrolling interests. EBITDA is presented because it is used by us and we believe it is frequently used by securities analysts, investors and other interested parties, in addition to and not in lieu of results prepared in conformity with U.S. GAAP, to compare the performance of companies. We believe investors would be interested in our Adjusted EBITDA because this is how our management analyzes EBITDA applicable to continuing operations. We also believe that Adjusted EBITDA, in combination with our financial results calculated in accordance with U.S. GAAP, provides investors with additional perspective regarding the impact of certain significant items on EBITDA and facilitates a more direct comparison of ~~its~~our performance with ~~its~~our competitors. EBITDA and Adjusted EBITDA are not measurements of financial performance under U.S. GAAP. EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as substitutes for an analysis of our results as reported under U.S. GAAP. Some of the limitations of these measures are:

•They do not reflect our cash expenditures, future requirements for capital expenditures or contractual commitments;

•They do not reflect changes in, or cash requirements for, our working capital needs;

•They do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our debt;

•Although depreciation and amortization are noncash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;

•They are not adjusted for all noncash income or expense items that are reflected in our statements of cash flows;

•EBITDA does not reflect the impact of earnings or charges attributable to noncontrolling interests;

•They do not reflect the impact of earnings or charges resulting from matters we consider to not be indicative of our ongoing operations; and

•They do not reflect limitations on or costs related to transferring earnings from our subsidiaries to us.

In addition, other companies in our industry may calculate these measures differently than we do, limiting their usefulness as a comparative measure. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as an alternative to net income as indicators of our operating performance or any other measures of performance derived in accordance with U.S. GAAP. You should compensate for these limitations by relying primarily on our U.S. GAAP results and using EBITDA and Adjusted EBITDA only on a supplemental basis.


	~~Six~~Nine Months Ended
	~~June 26,~~September 25, 2022
	(In thousands)
Net income	$	~~642,581~~901,580
Add:
Interest expense, net	~~72,124~~106,346
Income tax expense	~~187,930~~253,679
Depreciation and amortization	~~201,996~~300,962
EBITDA	~~1,104,631~~1,562,567
Add:
Foreign currency transaction losses	~~14,294~~14,348
Transaction costs related to business acquisitions	972
Litigation settlements	~~8,982~~28,282
Minus:
~~Insurance~~Property insurance recoveries for Mayfield tornado losses	~~3,815~~19,997
Net income attributable to noncontrolling interest	27674
Adjusted EBITDA	$	~~1,125,037~~1,585,498

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk-Sensitive Instruments and Positions

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

Commodity Prices

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

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


		Three Months Ended June 26, 2022					Three Months Ended September 25, 2022
		Amount		Impact of 10% Increase in Feed Ingredient Prices			Amount		Impact of 10% Increase in Feed Ingredient Prices
		(In thousands)					(In thousands)
Feed ingredient purchases(a)	Feed ingredient purchases(a)	$	1,138,502	$	113,850	Feed ingredient purchases(a)	$	1,196,562	$	119,656
Feed ingredient inventory(b)	Feed ingredient inventory(b)	226,057		22,606		Feed ingredient inventory(b)	247,161		24,716

(a)Based on our feed consumption, a 10% increase in the price of our feed ingredient purchases would have increased cost of sales for the three months ended ~~June 26,~~September 25, 2022.

(b)A 10% increase in ending feed ingredient prices would have increased inventories as of ~~June 26,~~September 25, 2022.

June 26, 2022
Amount Impact of 10% Increase in Commodity Prices
(In thousands)
Net commodity derivative assets(a)
$ 27,961 $ 2,796


	September 25, 2022
	Amount		Impact of 10% Increase in Commodity Prices
	(In thousands)
Net commodity derivative assets(a)	$	34,800	$	3,480

(a)We purchase commodity derivative financial instruments, specifically exchange-traded futures and options, in an attempt to mitigate price risk related to our anticipated consumption of commodity inputs for the next 12 months. A 10% increase in corn, soybean meal, soybean oil and wheat prices would have resulted in an increase in the fair value of our net commodity derivative asset position, including margin cash, as of ~~June 26,~~September 25, 2022.

Interest Rates

Fixed-rate debt. Market risk for fixed-rate debt is estimated as the potential decrease in fair value resulting from a hypothetical increase in interest rates of 10%. Using a discounted cash flow analysis, a hypothetical 10% increase in interest rates would have decreased the fair value of our fixed-rate debt by ~~$77.7~~$75.6 million as of ~~June 26,~~September 25, 2022.

Variable-rate debt. Our variable-rate debt instruments represent approximately ~~20.4%~~15.7% of our total debt as of ~~June 26,~~September 25, 2022. Holding other variables constant, including levels of indebtedness, an increase in interest rates of 25 basis points would have increased our interest expense by ~~$0.5~~$2.5 million for the three months ended ~~June 26,~~September 25, 2022.

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Foreign Currency

Mexico Subsidiaries

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

The Mexican peso exchange rate can directly and indirectly impact our financial condition and results of operations. For this sensitivity analysis, market risk is estimated as a hypothetical 10% change in the current exchange rate used to convert Mexican pesos to U.S. dollars as of ~~June 26,~~September 25, 2022. However, fluctuations greater than 10% could occur. No assurance can be given as to how future movements in the Mexican peso could affect our future financial condition or results of operations.


		Three Months Ended June 26, 2022					Three Months Ended September 25, 2022
		Impact of 10% Deterioration in Exchange Rate		Impact of 10% Appreciation in Exchange Rate			Impact of 10% Deterioration in Exchange Rate		Impact of 10% Appreciation in Exchange Rate
		(In thousands, except for exchange rate data)					(In thousands, except for exchange rate data)
Foreign currency remeasurement gain (loss)	Foreign currency remeasurement gain (loss)	$	(8,510)	$	10,401	Foreign currency remeasurement gain (loss)	$	(2,391)	$	2,922
Exchange rate of Mexican peso to the U.S. dollar:	Exchange rate of Mexican peso to the U.S. dollar:					Exchange rate of Mexican peso to the U.S. dollar:
As reported	As reported	19.87		19.87		As reported	20.21		20.21
Hypothetical 10% change	Hypothetical 10% change	21.86		17.88		Hypothetical 10% change	22.23		18.19

U.K. and Europe Foreign Investments

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

Net Assets. As of ~~June 26,~~September 25, 2022, our U.K. and Europe subsidiaries that are denominated in British ~~pound~~pounds had net assets of ~~$2.7~~$2.4 billion. A 10% weakening in British pound against the U.S. dollar exchange rate would cause a decrease in the net assets of our U.K. and Europe subsidiaries by ~~$242.0~~$218.8 million. A 10% strengthening in the British pound against the U.S dollar exchange rate would cause an increase in the net assets of our U.K. and Europe subsidiaries of ~~$295.7~~$267.4 million.

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

Quality of Investments

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

Impact of Inflation

The U.S., Mexico and most of Europe are currently experiencing pronounced inflation. None of the locations in which we operate are experiencing hyperinflation. We have responded to these inflationary challenges by continuing negotiations with customers to recoup the extraordinary costs we have experienced. We also continue to focus on operational initiatives that aim to deliver labor efficiencies, better agricultural performance and improved yields.

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Forward Looking Statements

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

•The impact of the COVID-19 pandemic, efforts to contain the pandemic and resulting economic downturn on our operations and financial condition;

•Matters affecting the chicken and pork industries generally, including fluctuations in the commodity prices of feed ingredients, pigs and chicken;

•Our ability to obtain and maintain commercially reasonable terms with vendors and service providers;

•Our ability to maintain contracts that are critical to our operations;

•Our ability to retain management and other key individuals;

•Outbreaks of avian influenza or other diseases, either in our own flock or elsewhere, affecting our ability to conduct our operations and/or demand for our poultry products;

•Contamination of our products, which has previously and can in the future lead to product liability claims and product recalls;

•Exposure to risks related to product liability, product recalls, property damage and injuries to persons, for which insurance coverage is expensive, limited and potentially inadequate;

•Changes in laws or regulations affecting our operations or the application thereof;

•Our ability to ensure that our directors, officers, employees, agents, third-party intermediaries and the companies to which we outsource certain of our business operations will comply with anti-corruption laws or other laws governing the conduct of business with government entities;

•New immigration legislation or increased enforcement efforts in connection with existing immigration legislation that cause our costs of business to increase, cause us to change the way in which we do business or otherwise disrupt our operations;

•Competitive factors, inflation and pricing pressures, or the loss of one or more of our largest customers;

•Inability to consummate, or effectively integrate, any acquisition or to realize the associated anticipated cost savings and operating synergies;

•Currency exchange rate fluctuations, trade barriers, exchange controls, expropriation and other risks associated with foreign segments, including risks associated with Brexit;

•Restrictions imposed by, and as a result of, Pilgrim’s leverage;

•Disruptions in international markets and distribution channels for various reasons, including, but not limited to, the ongoing Russia-Ukraine war;

•The impact of cyber-attacks, natural disasters, power losses, unauthorized access, telecommunication failures, and other problems on our information systems;

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•Our ability to maintain favorable labor relations with our employees and our compliance with labor laws;

•Extreme weather or natural disasters;

•The impact of uncertainties in litigation; and

•Other risks described herein and under “Risk Factors” in our ~~annual report on Form 10-K for the year ended December 26,~~ 2021 ~~as filed with the SEC.~~Annual Report.

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

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

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ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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

As of ~~June 26,~~September 25, 2022, the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures. ~~Consistent with guidance issued by the SEC for a recently acquired business, management is excluding the internal control over financial reporting of Pilgrim~~’~~s Food Masters (~~“~~PFM~~”) from its evaluation of the effectiveness of the Company’s disclosure controls and procedures as of June 26, 2022. Total assets and net sales of PFM, which the Company acquired on September 24, 2021, included in our Condensed Consolidated Financial Statements as of and for the six months ended June 26, 2022 were $1.2 billion and $526.5 million, respectively.

Based on that evaluation and subject to the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of ~~June 26,~~September 25, 2022, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information we are required to disclose in our reports filed with the SEC is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

The Company’s management, including the Chief Executive Officer and Chief Financial Officer, identified no change in the Company’s internal control over financial reporting that occurred during the three months ended ~~June 26,~~September 25, 2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. As mentioned above, the Company acquired PFM on September 24, 2021. The Company is in the process of reviewing the internal control structure of PFM and, if necessary, will make appropriate changes as it integrates PFM into the Company's overall internal control over financial reporting process.

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Table of Contents

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information required with respect to this item can be found in Part I, Item 1, Notes to Consolidated Financial Statements, “Note 18. Commitments and Contingencies” in this quarterly report and is incorporated by reference into this Item 1.

ITEM 1A. RISK FACTORS

For a discussion of ~~the Company’s~~our potential risks and uncertainties, please see “ Part I—Item 1A—Risk Factors” and “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in ~~the Company’s annual report on Form 10-K for the year ended December 26,~~our 2021 Annual Report and “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein, in each case as updated by the Company’s periodic filings with the SEC and the risk ~~factor~~factors listed below.

Our business may be negatively impacted by economic or other consequences from Russia’s war against Ukraine and the sanctions imposed as a response to that action.

We face risks related to the ongoing Russia-Ukraine war that began in February 2022. The impact of the ongoing war and sanctions will not be limited to businesses that operate in Russia and Ukraine and may negatively impact other global economic markets including where we operate. The impacts have included and may continue to include, but are not limited to, higher prices for commodities, such as food products, ingredients and energy products, increasing inflation in some countries, and disrupted trade and supply chains. The conflict has disrupted shipments of grains, vegetable oils, fertilizer and energy products.

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

Finally, there may be increased risk of cyberattack as a result of the ongoing conflict. We have not seen any new or heightened risk of potential cyberattacks since the outbreak of the Russia-Ukraine war. See our risk factors disclosed in our 2021 Annual Report.

Extreme weather, natural disasters or other events beyond our control as well as interruption by man-made problems such as power disruptions could negatively impact our business.

Bioterrorism, fire, pandemic, extreme weather or natural disasters, including droughts, floods, excessive cold or heat, hurricanes or other storms, could impair the ~~annual report~~health or growth of our flocks, production or availability of feed ingredients, or interfere with our operations due to power outages, fuel shortages, damage to our production and processing facilities or disruption of transportation channels, among other things. Any of these factors could have an adverse effect on ~~Form 10-K~~our financial results. Moreover, climate change, including the impact of global warming, has resulted in risks that include changes in weather conditions, extreme weather events and adverse impacts on agricultural production, as well as potential regulatory compliance risks, all of which could have a material adverse effect on our results of operations, financial condition and liquidity.

The British National Grid recently warned that the U.K., where the Company has significant operations, could face planned power cuts to homes and businesses throughout the winter of 2023 if the country is unable to import electricity from Europe and it struggles to attract enough gas imports to fuel its gas-fired power plants. A significant power outage could have a material adverse impact on our business, results of operations, and financial condition. Although we maintain incident management and disaster response plans, in the event of a major disruption caused by a man-made problem such as a power disruption, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our development activities, lengthy interruptions in service, breaches of data security and loss of critical data, and our insurance may not cover such events or may be insufficient to compensate us for the ~~year ended December 26, 2021, for additional information on cyberattack risk factors.~~potentially significant losses we may incur.

Table of Contents

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On March 9, 2022, the Company announced that, on March 8, 2022, its Board of Directors approved a $200.0 million share repurchase program. The Company intends to repurchase shares through various means, which may ~~included~~include but are not limited to open market purchases, privately negotiated transactions, the use of derivative instruments and/or accelerated share repurchase programs, in each case, in compliance with applicable laws and regulations. The extent to which the Company repurchases its shares and the timing of such repurchases will vary and depend upon market conditions and other corporate considerations, as determined by the Company’s management team. The repurchase program has no termination date. As of ~~June 26,~~September 25, 2022, the Company had repurchased ~~4,631,577~~7,468,645 shares under this plan for an aggregate cost of ~~$120.0~~$199.6 million ~~and~~at an average price of ~~$25.9068~~$26.7187 per share.

Set forth below is information regarding our stock repurchases for the three months ended ~~June 26,~~September 25, 2022. During that period, we did not act in concert with any affiliate or any other person to acquire any of our common stock and, accordingly, we do not believe that purchases by any such affiliate or other person (if any) are reportable in the following table.

~~Table of Contents~~


Issuer Purchases of Equity Securities	Issuer Purchases of Equity Securities							Issuer Purchases of Equity Securities
Period	Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of the Shares That May Yet Be Purchased Under the Plans or Programs (a)		Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of the Shares That May Yet Be Purchased Under the Plans or Programs (a)
March 28, 2021 through April 24, 2022		2,080,521	$	25.6305	3,238,973	$	119,652,103
April 25, 2022 through May 29, 2022		820,794	27.5919		4,059,767	97,004,848
May 30, 2022 through June 26, 2022		571,810	29.7197		4,631,577	80,010,851
June 27, 2022 through July 24, 2022								June 27, 2022 through July 24, 2022	260,464	$	29.9139	260,464	$	72,219,363
July 25, 2022 through August 28, 2022								July 25, 2022 through August 28, 2022	494,654	29.7796		494,654	57,488,765
August 29, 2022 through September 25, 2022								August 29, 2022 through September 25, 2022	2,081,950	27.3980		2,081,950	447,475
Total	Total	3,473,125	$	26.7673	4,631,577	$	80,010,851	Total	2,837,068	$	28.0442	2,837,068	$	447,475

(a) Reflects the remaining dollar value of shares that may yet be repurchased under our share repurchase authorization.

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ITEM 6. EXHIBITS


3.1						Amended and Restated Certificate of Incorporation of the Company. (incorporated by reference from Exhibit 3.1 of the Company's Current Form 8-K (No. 001-09273) filed on May 3, 2021).

3.2						Amended and Restated Corporate Bylaws of the Company. (incorporated by reference from Exhibit 3.2 of the Company's Current Form 8-K (No. 001-09273) filed on May 3, 2021).

~~10.1~~4.1						~~Multicurrency Revolving Facility Agreement,~~First Supplemental Indenture, dated as of ~~June 24,~~September 22, 2022 among the Company, as issuer, Pilgrim’s Pride Corporation of West Virginia, Inc., Gold’n Plump Poultry, LLC, Gold’n Plump Farms, LLC and JFC LLC, as Guarantors, and Regions Bank, as Trustee (incorporated by ~~and among Moy Park Holdings (Europe) Limited and other Pilgrim's subsidiaries, the Governor and Company~~reference from Exhibit 4.1 of the Company's Current Report on Form 8-K (No. 001-09273) filed on September 26, 2022).

4.2						First Supplemental Indenture, dated as of September 22, 2022 among the Company, as issuer, Pilgrim's Pride Corporation of West Virginia, Inc., Gold'n Plump Poultry, LLC, Gold'n Plump Farms, LLC and JFC LLC, as Guarantors, and Regions Bank, as Trustee (incorporated by reference from Exhibit 4.1 of ~~Ireland, as agent, and~~ the other lenders party thereto.*Company's Current Report on Form 8-K (No. 001-09273) filed on September 26, 2022).

31.1						Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2						Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1						Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.2						Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

101.INS						Inline XBRL Instance Document

101.SCH						Inline XBRL Taxonomy Extension Schema

101.CAL						Inline XBRL Taxonomy Extension Calculation

101.DEF						Inline XBRL Taxonomy Extension Definition

101.LAB						Inline XBRL Taxonomy Extension Label

101.PRE						Inline XBRL Taxonomy Extension Presentation

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*						Filed herewith.
**						Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						PILGRIM’S PRIDE CORPORATION

Date: ~~July 27,~~October 26, 2022						/s/ Matthew Galvanoni
						Matthew Galvanoni
						Chief Financial Officer and Chief Accounting Officer
						(Principal Financial Officer, Principal Accounting Officer and Authorized Signatory)

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