Pilgrim’s Pride Reports Q3 Net Sales of $3.08 Billion, Operating Income of $94 Million and GAAP EPS of $0.14

Wednesday, 28. October 2020 21:15

GREELEY, Colo., Oct. 28, 2020 (GLOBE NEWSWIRE) -- Pilgrim’s Pride Corporation (NASDAQ: PPC) reports third quarter 2020 financial results.

Third Quarter Highlights

  • Net Sales of $3.08 billion.
  • Net GAAP Income of $33.4 million. Adjusted Net Income of $161.7 million or adjusted EPS of $0.66 excluding $110.5 million DOJ agreement.
  • Consolidated Operating Income margin of 3% with Adjusted Operating Income margins of 6.7% in U.S. excluding DOJ agreement, 18.4% in Mexico and 3.5% in Europe.
  • Adjusted EBITDA of $305.0 million, or a 9.9% margin, 18% higher than a year ago.
  • Faced with the global Covid-19 pandemic, we continue to be guided by our principles of an uncompromising commitment to the safety of our team members, our duty to provide quality food globally, and our responsibility to provide continued employment opportunities and benefits for our team. To support the local communities where we operate, we initiated the “Hometown Strong” initiative, and are committed to invest $20 million in 2020.
  • Strong focus in execution and dedication by our team members, supported by portfolio strategy of differentiated products, strong Key Customer relationships, and diversified global presence have helped us to counter challenging market conditions due to Covid-19 and improve the resiliency in our results.
  • Demand in U.S. recovering, with our Retail and QSR business stronger than a year ago, though volatility and challenging conditions in commodity segments still remaining. Relative performance versus the industry continuing to improve, supported by our agility in adapting mix and Key Customer approach.
  • Mexico experienced a significant rebound to record one of the strongest Q3 in its history despite unfavorable mix impact and added operating costs. Strong execution, higher economic activities, better supply/demand balance, a stronger Peso, and our increased share of non-commodity products contributed to the strength.
  • The legacy European chicken business continued to improve its results despite Covid-19 impact, with better operational efficiencies and a commitment to innovation. Momentum of newly acquired European pork assets in generating positive EBITDA continuing, while margins also increasing on a consistent basis.
  • Our liquidity position remains strong, supported by the relentless emphasis on cash flow generation, focus on working capital management, and disciplined investments in high-return projects, preserving the opportunity to maintain strategic growth priorities while strengthening our differentiated global platforms.
Unaudited (2) Three Months Ended Nine Months Ended
  September 27,
2020
 September 29,
2019
 Y/Y Change September 27,
2020
 September 29,
2019
 Y/Y Change
             
  (In millions, except per share and percentages)
Net sales $3,075.1  $2,778.0  +10.7 % $8,974.1  $8,345.7  +7.5 %
U.S. GAAP EPS $0.14  $0.44  (68.2)% $0.38  $1.46  (74.0)%
Operating income $94.3  $188.2  (49.9)% $206.0  $604.8  (65.9)%
Adjusted EBITDA(1) $305.0  $258.3  +18.1 % $582.7  $812.1  (28.2)%
Adjusted EBITDA margin(1) 9.9% 9.3% +0.6 pts   6.5% 9.7% -3.2 pts  

(1) Reconciliations for non-U.S. GAAP measures are provided in subsequent sections within this release.
(2) Comparisons include newly acquired European pork assets (Tulip) from 10/15/19 forward.

“Once again we are grateful to our team for their continued commitment, dedication and hard work, in supporting our ability to keep our team members safe and healthy, and allowing us the capability to maintain production and supply to our customers during this unprecedented crisis. Although conditions have been improving, the markets have remained volatile and challenging in Q3 as a result of Covid-19. However, our diversified strategy has continued to mitigate the tough environment and produce the expected results in relative performance to industry competition, and deliver more resilient performance regardless of changes in specific market conditions. For Q3, the U.S. and Mexico rebounded from a difficult first half, with Mexico recording one of the strongest Q3 in its history, while Europe also continuing to improve despite the increase in operating costs related to Covid-19. We remain agile and are continuing to adapt our operations to changes in market conditions,” stated Fabio Sandri, Chief Executive Officer of Pilgrim's.

“During the third quarter, in the U.S. we are continuing to see demand recovering at our fresh operations, including from some sectors within foodservice, with more states gradually loosening travel and movement restrictions. Our Retail and QSR businesses have been especially strong, and demand from our customers has been outperforming the industry. Commodity large bird deboning was once again the most challenged this quarter. Operationally however, we continue to improve our relative performance versus the industry across all our business units, including commodity segments. We also continue to adapt quickly to changes in channel demand by adjusting the mix of our production capabilities, supported by our close partnerships with Key Customers, strong focus in execution by our team members, the geographical diversity of our footprint, and our presence across all bird size categories.”

“After a very difficult first half in 2020, our Mexican operations delivered great results in Q3, and we generated one of the strongest Q3 in the company's history in Mexico despite the unfavorable mix impact and added operating costs relative to the same period last year. A normalization in economic activities, an improved supply/demand balance in the market, a stronger Peso, and a very good operational performance, all contributed to the strength. We are continuing to invest in our Del Dia and premium Pilgrim’s brands (both prepared and fresh), as well as seeking more market share in the modern channel, which will bring more stable margins to our operations.”

“Our legacy European chicken operations are continuing to improve, driven by exposure to retail as well as a recovery in foodservice demand, particularly from QSR, despite the significant impact of Covid-19 on the operations. In addition, our strong internal operating performance and commitment to innovation have helped in mitigating the difficult environment. The positive momentum in improvement from the newly acquired European pork assets has been maintained, with positive EBITDA and margins continuing to increase. The performance was driven by strong demand at retail partially offset by a reduction in foodservice, continuing strength in pork exports especially to China, as well as the implementations of operational improvements and synergy capture.”

Conference Call Information

A conference call to discuss Pilgrim’s quarterly results will be held tomorrow, October 29, at 7:00 a.m. MT (9 a.m. ET).  Participants are encouraged to pre-register for the conference call using the link below.  Callers who pre-register will be given a unique PIN to gain immediate access to the call and bypass the live operator.  Participants may pre-register at any time, including up to and after the call start time.
To pre-register, go to: https://services.choruscall.com/links/ppc201029.html

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

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

Replays of the conference call will be available on Pilgrim’s website approximately two hours after the call concludes and can be accessed through the “Investor” section of www.pilgrims.com. The webcast will be available for replay through January 29, 2021.

About Pilgrim’s Pride

Pilgrim’s employs approximately 55,400 people and operates protein processing plants and prepared-foods facilities in 14 states, Puerto Rico, Mexico, the U.K, and continental Europe. The Company’s primary distribution is through retailers and foodservice distributors. For more information, please visit www.pilgrims.com.

Forward-Looking Statements

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

Contact:Dunham Winoto
 Investor Relations
 IRPPC@pilgrims.com
 (970) 506-8192
 www.pilgrims.com


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
  September 27, 2020 December 29, 2019
     
  (In thousands)
Cash and cash equivalents $768,031  $260,568 
Restricted cash and cash equivalents 17,105  20,009 
Trade accounts and other receivables, less allowance for doubtful accounts 706,123  741,281 
Accounts receivable from related parties 616  944 
Inventories 1,328,704  1,383,535 
Income taxes receivable 77,651  60,204 
Prepaid expenses and other current assets 159,643  131,695 
Total current assets 3,057,873  2,598,236 
Deferred tax assets 4,126  4,426 
Other long-lived assets 15,079  36,325 
Identified intangible assets, net 566,696  596,053 
Goodwill 955,087  973,750 
Operating lease assets, net 284,820  301,513 
Property, plant and equipment, net 2,585,818  2,592,061 
Total assets $7,469,499  $7,102,364 
     
Accounts payable $915,661  $993,780 
Accounts payable to related parties 5,752  3,819 
Revenue contract liability 57,221  41,770 
Accrued expenses and other current liabilities 691,329  575,319 
Income taxes payable   7,075 
Current maturities of long-term debt 25,485  26,392 
Total current liabilities 1,695,448  1,648,155 
Noncurrent operating lease liability, less current maturities 215,924  235,382 
Long-term debt, less current maturities 2,610,668  2,276,029 
Noncurrent income taxes payable 7,731  7,731 
Deferred tax liabilities 339,051  301,907 
Other long-term liabilities 169,365  97,100 
Total liabilities 5,038,187  4,566,304 
Common stock 2,612  2,611 
Treasury stock (342,698) (234,892)
Additional paid-in capital 1,953,969  1,955,261 
Retained earnings 972,490  877,812 
Accumulated other comprehensive loss (165,520) (75,129)
Total Pilgrim’s Pride Corporation stockholders’ equity 2,420,853  2,525,663 
Noncontrolling interest 10,459  10,397 
Total stockholders’ equity 2,431,312  2,536,060 
Total liabilities and stockholders’ equity $7,469,499  $7,102,364 


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
         
  Three Months Ended Nine Months Ended
  September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019
         
  (In thousands, except per share data)
Net sales $3,075,121  $2,777,970  $8,974,072  $8,345,730 
Cost of sales 2,761,279  2,495,773  8,363,272  7,476,731 
Gross profit 313,842  282,197  610,800  868,999 
Selling, general and administrative expense 219,554  94,032  404,837  264,313 
Administrative restructuring activity   (20)   (90)
Operating income 94,288  188,185  205,963  604,776 
Interest expense, net of capitalized interest 30,564  32,028  95,575  99,184 
Interest income (1,763) (4,698) (4,611) (11,481)
Foreign currency transaction losses (gains) 9,092  3,027  (3,768) 7,923 
Miscellaneous, net 360  1,367  (33,873) 2,521 
Income before income taxes 56,035  156,461  152,640  506,629 
Income tax expense 22,344  46,365  57,900  142,328 
Net income 33,691  110,096  94,740  364,301 
Less: Net income (loss) attributable to noncontrolling interests 245  331  62  457 
Net income attributable to Pilgrim’s Pride Corporation $33,446  $109,765  $94,678  $363,844 
         
Weighted average shares of common stock outstanding:        
Basic 244,186  249,467  246,740  249,344 
Effect of dilutive common stock equivalents 190  262  158  308 
Diluted 244,376  249,729  248,308  249,652 
         
Net income attributable to Pilgrim's Pride Corporation per share of
common stock outstanding:
        
Basic $0.14  $0.44  $0.38  $1.46 
Diluted $0.14  $0.44  $0.38  $1.46 


PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
  Nine Months Ended
  September 27, 2020 September 29, 2019
     
  (In thousands)
Cash flows from operating activities:    
Net income $94,740  $364,301 
Adjustments to reconcile net income to cash provided by operating activities:    
Depreciation and amortization 248,641  210,381 
Deferred income tax expense 37,739  2,396 
Gain on property disposals (8,009) (9,546)
Negative adjustment to previously recognized gain on bargain purchase 3,746   
Loan cost amortization 3,635  3,609 
Stock-based compensation (1,291) 7,322 
Accretion of discount related to Senior Notes 737  737 
Amortization of premium related to Senior Notes (501) (501)
Loss (gain) on equity-method investments 297  (48)
Foreign currency transaction loss related to borrowing arrangements   1,259 
Changes in operating assets and liabilities:    
Trade accounts and other receivables 44,615  (46,648)
Inventories 41,292  (108,117)
Prepaid expenses and other current assets (29,290) 3,536 
Accounts payable, accrued expenses and other current liabilities 93,114  67,308 
Income taxes (30,868) 40,549 
Long-term pension and other postretirement obligations (823) (1,578)
Other operating assets and liabilities 10,561  544 
Cash provided by operating activities 508,335  535,504 
Cash flows from investing activities:    
Acquisitions of property, plant and equipment (242,603) (258,725)
Proceeds from property disposals 21,715  15,168 
Purchase of acquired business, net of cash acquired (4,216)  
Cash used in investing activities (225,104) (243,557)
Cash flows from financing activities:    
Proceeds from revolving line of credit and long-term borrowings 386,696  99,638 
Purchase of common stock under share repurchase program (107,806) (2,898)
Payments on revolving line of credit, long-term borrowings and finance lease      obligations (56,763) (123,276)
Payment from equity distribution under Tax Sharing Agreement between JBS USA Food Company Holdings and Pilgrim’s Pride Corporation   (525)
Payment of capitalized loan costs   (652)
Cash provided by financing activities 222,127  (27,713)
Effect of exchange rate changes on cash and cash equivalents (799) (808)
Increase in cash, cash equivalents and restricted cash 504,559  263,426 
Cash, cash equivalents and restricted cash, beginning of period 280,577  361,578 
Cash, cash equivalents and restricted cash, end of period $785,136  $625,004 


PILGRIM’S PRIDE CORPORATION

Non-GAAP Financial Measures Reconciliation

(Unaudited)

This earnings release and the following financial statement tables include several supplemental non-GAAP financial measures, including EBITDA, Adjusted EBITDA, EBITDA Margin, Adjusted Operating Income, Adjusted Net Income, and Adjusted EPS, as further described below.

“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) income (loss) attributable to noncontrolling interests, (2) transaction costs related to acquisitions, (3) charges or income from restructuring activities, (4) litigation settlement income or charges, (5) gain on bargain purchase and (6) foreign currency transaction losses (gains). EBITDA is presented because it is used by management and we believe it is frequently used by securities analysts, investors and other interested parties, in addition to and not in lieu of results prepared in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”), to compare the performance of companies. We believe investors would be interested in our Adjusted EBITDA because this is how our management analyzes EBITDA. The Company also believes that Adjusted EBITDA, in combination with the Company’s financial results calculated in accordance with U.S. GAAP, provides investors with additional perspective regarding the impact of certain significant items on EBITDA and facilitates a more direct comparison of its performance with its competitors. EBITDA and Adjusted EBITDA are not measurements of financial performance under U.S. GAAP. They should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net income as indicators of our operating performance or any other measures of performance derived in accordance with U.S. GAAP.

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted EBITDA
(Unaudited)
        
 Three Months Ended Nine Months Ended
 September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019
        
 (In thousands)
Net income$33,691  $110,096  $94,740  $364,301 
Add:       
Interest expense, net28,801  27,330  90,964  87,703 
Income tax expense22,344  46,365  57,900  142,328 
Depreciation and amortization84,265  71,851  248,641  210,381 
EBITDA169,101  255,642  492,245  804,713 
Add:       
Foreign currency transaction losses (gains)9,092  3,027  (3,768) 7,923 
Transaction costs related to acquisitions    134   
DOJ agreement110,524    110,524   
Restructuring activity  (20)   (90)
Hometown Strong commitment14,506    14,506   
Minus:       
Negative adjustment to previously recognized gain on bargain purchase(2,006)   (3,746)  
Shareholder litigation settlement    34,643   
Net income attributable to noncontrolling interest245  331  62  457 
Adjusted EBITDA$304,984  $258,318  $582,682  $812,089 


The summary unaudited consolidated income statement data for the twelve months ended September 27, 2020 (the LTM Period) have been calculated by subtracting the applicable unaudited consolidated income statement data for the nine months ended September 29, 2019 from the sum of (1) the applicable audited consolidated income statement data for the year ended December 29, 2019 and (2) the applicable audited consolidated income statement data for the nine months ended September 27, 2020.

PILGRIM'S PRIDE CORPORATION
Reconciliation of LTM Adjusted EBITDA
(Unaudited)
           
  Three Months Ended LTM Ended
  December 29,
2019
 March 29,
2020
 June 28,
2020
 September 27,
2020
 September 27,
2020
           
  (In thousands)
Net income $92,235  $67,449  $(6,400) $33,691  $186,975 
Add:          
Interest expense, net 30,650  30,998  31,165  28,801  121,614 
Income tax expense 18,681  38,512  (2,956) 22,344  76,581 
Depreciation and amortization 76,849  79,773  84,603  84,265  325,490 
EBITDA 218,415  216,732  106,412  169,101  710,660 
Add:          
Foreign currency transaction losses
(gains)
 (1,006) (18,385) 5,525  9,092  (4,774)
Transaction costs related to acquisitions 1,239  215  (81)   1,373 
DOJ agreement       110,524  110,524 
Restructuring activity 6        6 
Hometown Strong commitment       14,506  14,506 
Minus:          
Gain on bargain purchase 56,880  (1,740)   (2,006) 53,134 
Shareholder litigation settlement   34,643      34,643 
Net income attributable to
noncontrolling interest
 155  181  (364) 245  217 
Adjusted EBITDA $161,619  $165,478  $112,220  $304,984  $744,301 



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

PILGRIM'S PRIDE CORPORATION
Reconciliation of EBITDA Margin
(Unaudited)
                 
  Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
  September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019
                 
  (In thousands)
Net income $33,691  $110,096  $94,740  $364,301  1.10 % 3.96% 1.06 % 4.37%
Add:                
Interest expense, net 28,801  27,330  90,964  87,703  0.94 % 0.98% 1.01 % 1.05%
Income tax expense 22,344  46,365  57,900  142,328  0.73 % 1.67% 0.65 % 1.71%
Depreciation and amortization 84,265  71,851  248,641  210,381  2.74 % 2.59% 2.77 % 2.53%
EBITDA 169,101  255,642  492,245  804,713  5.51 % 9.20% 5.49 % 9.66%
Add:                
Foreign currency transaction losses (gains) 9,092  3,027  (3,768) 7,923  0.29 % 0.11% (0.04)% 0.10%
Acquisition charges     134     % %  % %
DOJ agreement 110,524    110,524    3.59 % % 1.23 % %
Restructuring activity   (20)   (90)  % %  % %
Hometown Strong commitment 14,506    14,506    0.47 % % 0.16 % %
Minus:                
Negative adjustment to previously recognized gain on bargain purchase (2,006)   (3,746)   (0.07)% % (0.04)% %
Shareholder litigation settlement     34,643     % % 0.39 % %
Net income (loss) attributable to noncontrolling interest 245  331  62  457  0.01 % 0.01%  % 0.01%
Adjusted EBITDA $304,984  $258,318  $582,682  $812,089  9.92 % 9.30% 6.49 % 9.75%
                 
Net sales $3,075,121  $2,777,970  $8,974,072  $8,345,730  $3,075,121   $2,777,970  $8,974,072   $8,345,730 


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

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted Operating Income
(Unaudited)
        
 Three Months Ended Nine Months Ended
 September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019
        
 (In thousands)
GAAP operating income (U.S. operations)$2,451  $125,168  $126,951  $426,968 
DOJ agreement110,524    110,524   
Hometown Strong commitment14,506    14,506   
Adjusted operating income (U.S. operations)$127,481  $125,168  $251,981  $426,968 
        
Adjusted operating income margin (U.S. operations)6.7% 6.5% 4.5% 7.4%



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

PILGRIM'S PRIDE CORPORATION
Reconciliation of GAAP Operating Income Margin to Adjusted Operating Income Margin
(Unaudited)
        
 Three Months Ended Nine Months Ended
 September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019
        
 (In percent)
GAAP operating income margin (U.S. operations)0.1% 6.5% 2.2% 7.4%
DOJ agreement5.8% % 2.0% %
Hometown Strong commitment0.8% % 0.3% %
Adjusted operating income margin (U.S. operations)6.7% 6.5% 4.5% 7.4%



Adjusted net income attributable to Pilgrim's Pride Corporation ("Pilgrim's") is calculated by adding to Net Income attributable to Pilgrim's certain items of expense and deducting from Net Income attributable to Pilgrim's certain items of income. Management believes that presentation of Adjusted net income attributable to Pilgrim's provides useful supplemental information about our operating performance and enables comparison of our performance between periods because certain costs shown below are not indicative of our current operating performance. A reconciliation of net income attributable to Pilgrim's per common diluted share to adjusted net income attributable to Pilgrim's per common diluted share is as follows:

PILGRIM'S PRIDE CORPORATION
Reconciliation of Adjusted Net Income
(Unaudited)
        
 Three Months Ended Nine Months Ended
 September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019
        
 (In thousands, except per share data)
Net income attributable to Pilgrim's$33,446  $109,765  $94,678  $363,844 
Adjustments:       
Acquisition charges and restructuring activity  43  134  (26)
DOJ agreement110,524    110,524   
Hometown Strong commitment14,506    14,506   
Foreign currency transaction losses (gains)9,092  3,027  (3,768) 7,923 
Net tax expense (benefit) of adjustments(a)(5,916) (747) (9,158) (1,923)
Adjusted net income attributable to Pilgrim's$161,652  $112,088  $206,916  $369,818 
Weighted average diluted shares of common stock outstanding244,376  249,729  248,308  249,652 
Adjusted net income attributable to Pilgrim's per common diluted share$0.66  $0.45  $0.83  $1.48 

(a) Net tax expense (benefit) of adjustments represents the tax impact of all adjustments shown above with the exclusion of the DOJ antitrust fine as this item is non-deductible for tax purposes.


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

PILGRIM'S PRIDE CORPORATION
Reconciliation of GAAP EPS to Adjusted EPS
(Unaudited)
        
 Three Months Ended Nine Months Ended
 September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019
        
 (In thousands, except per share data)
GAAP EPS$0.14  $0.44  $0.38  $1.46 
Adjustments:       
Acquisition charges and restructuring activity       
DOJ agreement0.45    0.45   
Hometown Strong commitment0.06    0.06   
Foreign currency transaction losses (gains)0.04  0.01  (0.02) 0.03 
Net tax impact of adjustments(a)(0.02)   (0.04) (0.01)
Adjusted EPS$0.66  $0.45  $0.84  $1.48 
        
Weighted average diluted shares of common stock outstanding244,376  249,729  246,898  249,652 

(a) Net tax impact of adjustments represents the tax impact of all adjustments shown above with the exclusion of the DOJ antitrust fee as this item is non-deductible for tax purposes.


PILGRIM'S PRIDE CORPORATION
Supplementary Selected Segment and Geographic Data
(Unaudited)
         
  Three Months Ended Nine Months Ended
  September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019
         
  (In thousands)
Sources of net sales by geographic region of origin:        
US $1,894,222  $1,931,657  $5,619,791  $5,732,201 
Europe 845,677  517,531  2,425,140  1,568,396 
Mexico 335,222  328,782  929,141  1,045,133 
Total net sales $3,075,121  $2,777,970  $8,974,072  $8,345,730 
         
Sources of cost of sales by geographic region of origin:        
US $1,711,089  $1,739,474  $5,210,534  $5,123,278 
Europe 785,347  474,490  2,256,034  1,452,254 
Mexico 265,078  281,833  897,163  901,271 
Elimination (235) (24) (459) (72)
Total cost of sales $2,761,279  $2,495,773  $8,363,272  $7,476,731 
         
Sources of gross profit by geographic region of origin:        
US $183,133  $192,183  $409,257  $608,923 
Europe 60,330  43,041  169,106  116,142 
Mexico 70,144  46,949  31,978  143,862 
Elimination 235  24  459  72 
Total gross profit $313,842  $282,197  $610,800  $868,999 
         
Sources of operating income by geographic region of origin:        
US $2,451  $125,168  $126,951  $426,968 
Europe 29,949  25,325  76,324  62,233 
Mexico 61,653  37,668  2,229  115,503 
Elimination 235  24  459  72 
Total operating income $94,288  $188,185  $205,963  $604,776 

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