PILGRIMS PRIDE CORP [PPC] Filings

10-Q 1 ppc-20230924.htm 10-Q ppc-20230924

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 September 24, 2023


☐			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 October 25, 2023, was 236,789,929.

INDEX

PILGRIM’S PRIDE CORPORATION


PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements	2
	Condensed Consolidated Balance Sheets September 24, 2023 and December 25, 2022	2
	Condensed Consolidated Statements of Income Three and Nine Months Ended September 24, 2023 and September 25, 2022	3
	Condensed Consolidated Statements of Comprehensive Income Three and Nine Months Ended September 24, 2023 and September 25, 2022	4
	Condensed Consolidated Statements of Stockholders’ Equity Three and Nine Months Ended September 24, 2023 and September 25, 2022	5
	Condensed Consolidated Statements of Cash Flows Three and Nine Months Ended September 24, 2023 and September 25, 2022	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	49
Item 4.	Controls and Procedures	53
PART II. OTHER INFORMATION		54
Item 1.	Legal Proceedings	54
Item 1A.	Risk Factors	54

Item 5.	Other Information	55
Item 6.	Exhibits	56
SIGNATURES		57

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS

	(Unaudited)
	September 24, 2023		December 25, 2022
	(In thousands)
Cash and cash equivalents	$	899,460	$	400,988
Restricted cash and restricted cash equivalents	39,657		33,771

Trade accounts and other receivables, less allowance for credit losses	1,151,442		1,097,212
Accounts receivable from related parties	1,676		2,512
Inventories	1,996,720		1,990,184
Income taxes receivable	120,418		155,859
Prepaid expenses and other current assets	219,852		211,092
Total current assets	4,429,225		3,891,618
Deferred tax assets	26,165		1,969
Other long-lived assets	27,982		41,574
Operating lease assets, net	265,579		305,798
Intangible assets, net	832,271		846,020
Goodwill	1,243,173		1,227,944
Property, plant and equipment, net	3,103,421		2,940,846
Total assets	$	9,927,816	$	9,255,769


Accounts payable	$	1,467,892	$	1,587,939
Accounts payable to related parties	20,284		12,155
Revenue contract liabilities	75,168		34,486
Accrued expenses and other current liabilities	933,473		850,899
Income taxes payable	33,560		58,411
Current maturities of long-term debt	940		26,279
Total current liabilities	2,531,317		2,570,169
Noncurrent operating lease liabilities, less current maturities	201,699		230,701
Long-term debt, less current maturities	3,701,453		3,166,432

Deferred tax liabilities	346,556		364,184
Other long-term liabilities	55,568		71,007
Total liabilities	6,836,593		6,402,493
Common stock	2,619		2,617
Treasury stock	(544,687)		(544,687)
Additional paid-in capital	1,975,434		1,969,833
Retained earnings	1,936,420		1,749,499
Accumulated other comprehensive loss	(292,210)		(336,448)
Total Pilgrim’s Pride Corporation stockholders’ equity	3,077,576		2,840,814
Noncontrolling interest	13,647		12,462
Total stockholders’ equity	3,091,223		2,853,276
Total liabilities and stockholders’ equity	$	9,927,816	$	9,255,769

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


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

	Three Months Ended				Nine Months Ended
	September 24, 2023		September 25, 2022		September 24, 2023		September 25, 2022
	(in thousands, except per share data)
Net sales	$	4,360,196	$	4,468,969	$	12,833,915	$	13,341,012
Cost of sales	4,014,314		3,971,699		12,036,561		11,624,991
Gross profit	345,882		497,270		797,354		1,716,021
Selling, general and administrative expense	138,569		158,068		420,683		461,902
Restructuring activities	940		—		38,684		—
Operating income	206,373		339,202		337,987		1,254,119
Interest expense, net of capitalized interest	45,645		36,895		135,459		111,303
Interest income	(12,115)		(2,673)		(23,343)		(4,957)
Foreign currency transaction losses	8,924		54		43,462		14,348
Miscellaneous, net	(2,201)		(19,822)		(26,185)		(21,834)
Income before income taxes	166,120		324,748		208,594		1,155,259
Income tax expense	44,553		65,749		20,488		253,679
Net income	121,567		258,999		188,106		901,580
Less: Net income attributable to noncontrolling interests	289		647		1,185		674
Net income attributable to Pilgrim’s Pride Corporation	$	121,278	$	258,352	$	186,921	$	900,906

Weighted average shares of Pilgrim’s Pride Corporation common stock outstanding:
Basic	236,787		238,559		236,702		240,865
Effect of dilutive common stock equivalents	560		649		542		629
Diluted	237,347		239,208		237,244		241,494

Net income attributable to Pilgrim’s Pride Corporation per share of common stock outstanding:
Basic	$	0.51	$	1.08	$	0.79	$	3.74
Diluted	$	0.51	$	1.08	$	0.79	$	3.73

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


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

	Three Months Ended				Nine Months Ended
	September 24, 2023		September 25, 2022		September 24, 2023		September 25, 2022
	(In thousands)
Net income	$	121,567	$	258,999	$	188,106	$	901,580
Other comprehensive income (loss):
Foreign currency translation adjustment:
Gains (losses) arising during the period	(104,656)		(314,600)		39,269		(572,130)
Derivative financial instruments designated as cash flow hedges:
Gains (losses) arising during the period	1,384		(1,919)		(275)		(2,242)
Income tax effect	—		—		—		—
Reclassification to net earnings for gains (losses) realized	133		1,342		(216)		2,661
Income tax effect	—		—		—		(24)
Available-for-sale securities:
Losses arising during the period	(112)		(28)		(166)		(28)
Income tax effect	27		7		40		7
Reclassification to net earnings for gains realized	139		—		168		—
Income tax effect	(34)		—		(41)		—
Defined benefit plans:
Gains (losses) arising during the period	(365)		2,472		9,628		18,625
Income tax effect	(1,583)		(555)		(4,710)		(4,564)
Reclassification to net earnings of gains realized	266		346		714		923
Income tax effect	(67)		(84)		(173)		(225)
Total other comprehensive income (loss), net of tax	(104,868)		(313,019)		44,238		(556,997)
Comprehensive income (loss)	16,699		(54,020)		232,344		344,583
Less: Comprehensive income attributable to noncontrolling interests	289		647		1,185		674
Comprehensive income (loss) attributable to Pilgrim’s Pride Corporation	$	16,410	$	(54,667)	$	231,159	$	343,909

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


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

Nine Months Ended September 24, 2023	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total
	Shares	Amount		Shares	Amount
	(In thousands)
Balance at December 25, 2022	261,611	$	2,617	(25,142)	$	(544,687)	$	1,969,833	$	1,749,499	$	(336,448)	$	12,462	$	2,853,276
Net income	—	—		—	—		—		186,921		—		1,185		188,106
Other comprehensive income, net of tax	—	—		—	—		—		—		44,238		—		44,238
Stock-based compensation plans:
Common stock issued under compensation plans	264	2		—	—		(2)		—		—		—		—
Requisite service period recognition	—	—		—	—		5,603		—		—		—		5,603

Balance at September 24, 2023	261,875	$	2,619	(25,142)	$	(544,687)	$	1,975,434	$	1,936,420	$	(292,210)	$	13,647	$	3,091,223

Three Months Ended September 24, 2023	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total
	Shares	Amount		Shares	Amount
	(In thousands)
Balance at June 25, 2023	261,875	$	2,619	(25,142)	$	(544,687)	$	1,973,498	$	1,815,142	$	(187,342)	$	13,358	$	3,072,588
Net income	—	—		—	—		—		121,278		—		289		121,567
Other comprehensive loss, net of tax	—	—		—	—		—		—		(104,868)		—		(104,868)
Stock-based compensation plans:

Requisite service period recognition	—	—		—	—		1,936		—		—		—		1,936

Balance at September 24, 2023	261,875	$	2,619	(25,142)	$	(544,687)	$	1,975,434	$	1,936,420	$	(292,210)	$	13,647	$	3,091,223


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
	(In thousands)
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	—	—		—	—		—		900,906		—		674		901,580
Other comprehensive loss, net of tax	—	—		—	—		—		—		(556,997)		—		(556,997)
Stock-based compensation plans:
Common stock issued under compensation plans	262	3		—	—		(3)		—		—		—		—
Requisite service period recognition	—	—		—	—		6,285		—		—		—		6,285
Common stock purchased under share repurchase program	—	—		(7,469)	(199,553)		—		—		—		—		(199,553)
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 September 25, 2022	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total
	Shares	Amount		Shares	Amount
	(In thousands)
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	—	—		—	—		—		258,352		—		647		258,999
Other comprehensive loss, net of tax	—	—		—	—		—		—		(313,019)		—		(313,019)
Stock-based compensation plans:
Common stock issued under compensation plans	31	1		—	—		(1)		—		—		—		—
Requisite service period recognition	—	—		—	—		1,749		—		—		—		1,749
Common stock purchased under share repurchase program	—	—		(2,837)	(79,564)		—		—		—		—		(79,564)
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

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


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

	Nine Months Ended
	September 24, 2023		September 25, 2022
	(In thousands)
Cash flows from operating activities:
Net income	$	188,106	$	901,580
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	307,414		300,962
Deferred income tax benefit	(46,808)		(48,611)
Gain on property disposals	(8,416)		(5,620)
Loan cost amortization	6,059		4,311
Stock-based compensation	5,236		5,982
Asset impairment	4,011		—
Accretion of discount related to Senior Notes	1,581		1,288
Loss on equity-method investments	330		1
Changes in operating assets and liabilities:
Trade accounts and other receivables	(65,183)		(211,827)
Inventories	(12,957)		(455,465)
Prepaid expenses and other current assets	(8,039)		(3,525)
Accounts payable, accrued expenses and other current liabilities	12,224		297,271
Income taxes	40,463		10,241
Long-term pension and other postretirement obligations	(1,700)		(3,128)
Other operating assets and liabilities	(22,723)		(2,847)
Cash provided by operating activities	399,598		790,613
Cash flows from investing activities:
Acquisitions of property, plant and equipment	(432,339)		(342,588)
Proceeds from insurance recoveries	20,681		7,339
Proceeds from property disposals	17,188		14,607
Purchase of acquired business, net of cash acquired	—		(9,692)
Cash used in investing activities	(394,470)		(330,334)
Cash flows from financing activities:
Proceeds from revolving line of credit and long-term borrowings	1,278,032		362,541
Payments on revolving line of credit, long-term borrowings and finance lease obligations	(765,899)		(370,332)
Payments of capitalized loan costs	(10,275)		(3,070)
Payment of equity distribution under Tax Sharing Agreement between JBS USA Holdings and Pilgrim’s Pride Corporation	(1,592)		(1,961)
Purchase of common stock under share repurchase program	—		(199,553)
Cash provided by (used in) financing activities	500,266		(212,375)
Effect of exchange rate changes on cash and cash equivalents	(1,036)		(13,932)
Increase in cash, cash equivalents, restricted cash and restricted cash equivalents	504,358		233,972
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period	434,759		450,121
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period	$	939,117	$	684,093

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 110 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 the U.S., the U.K., Mexico, France, Puerto Rico, the Netherlands and the Republic of Ireland. As of September 24, 2023, Pilgrim’s had approximately 61,200 employees and had the capacity to process approximately 42.1 million birds per 5-day work week. Approximately 4,650 contract growers supply chicken for the Company’s operations. As of September 24, 2023, PPC had the capacity to process approximately 42,000 pigs per 5-day work week and 220 contract growers supply pigs for the Company’s operations. As of September 24, 2023, JBS S.A., through its indirect wholly-owned subsidiaries (collectively, “JBS”), beneficially owned 82.5% 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 nine months ended September 24, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. 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 25, 2022.

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, 2023) in the notes to these Condensed Consolidated Financial Statements applies to our fiscal year and not the calendar year. The nine months ended September 24, 2023 represents the period from December 26, 2022 through September 24, 2023. The nine months ended September 25, 2022 represents the period from December 27, 2021 through September 25, 2022.

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 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 assets and liabilities using the exchange rates in effect as of the balance sheet date.

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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 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:


	September 24, 2023		December 25, 2022
	(In thousands)
Cash and cash equivalents	$	899,460	$	400,988
Restricted cash and restricted cash equivalents	39,657		33,771
Total cash, cash equivalents, restricted cash and restricted cash equivalents shown in the Condensed Consolidated Statements of Cash Flows	$	939,117	$	434,759

Accounting Pronouncements Adopted in 2023

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 were effective for years beginning after December 15, 2022 with the requirement to add rollforward disclosures for years beginning after December 15, 2023. The Company adopted this guidance effective December 26, 2022. The adoption of this guidance did not have a material impact on our Condensed Consolidated Financial Statements. Additional information regarding supplier finance programs is included in “Note 10. Supplier Finance Programs.”

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 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. The Company adopted this guidance effective December 26, 2022. The adoption did not have a material impact on our Condensed Consolidated Financial Statements.

2. 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

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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.

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 September 24, 2023
	(In thousands)
	Fresh		Prepared		Export		Other		Total
U.S.	$	2,020,480	$	241,933	$	129,624	$	96,280	$	2,488,317
U.K. and Europe	267,748		888,299		114,768		41,390		1,312,205
Mexico	479,100		53,126		—		27,448		559,674
Total net sales	$	2,767,328	$	1,183,358	$	244,392	$	165,118	$	4,360,196


	Three Months Ended September 25, 2022
	(In thousands)
	Fresh		Prepared		Export		Other		Total
U.S.	$	2,309,402	$	280,114	$	146,704	$	100,700	$	2,836,920
U.K. and Europe	205,403		783,048		180,605		34,039		1,203,095
Mexico	364,060		40,785		—		24,109		428,954
Total net sales	$	2,878,865	$	1,103,947	$	327,309	$	158,848	$	4,468,969


	Nine Months Ended September 24, 2023
	(In thousands)
	Fresh		Prepared		Export		Other		Total
U.S.	$	5,956,474	$	708,389	$	397,397	$	304,833	$	7,367,093
U.K. and Europe	813,118		2,598,748		349,492		100,861		3,862,219
Mexico	1,364,761		149,330		—		90,512		1,604,603
Total net sales	$	8,134,353	$	3,456,467	$	746,889	$	496,206	$	12,833,915


	Nine Months Ended September 25, 2022
	(In thousands)
	Fresh		Prepared		Export		Other		Total
U.S.	$	6,709,441	$	839,164	$	421,516	$	347,886	$	8,318,007
U.K. and Europe	674,757		2,320,873		538,878		105,621		3,640,129
Mexico	1,200,329		116,264		—		66,283		1,382,876
Total net sales	$	8,584,527	$	3,276,301	$	960,394	$	519,790	$	13,341,012

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.

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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):


Balance as of December 25, 2022	$	34,486
Revenue recognized	(24,357)
Cash received, excluding amounts recognized as revenue during the period	65,039
Balance as of September 24, 2023	$	75,168

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.

3. 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 a portion of this foreign exchange risk.

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 hedges or contracts that do not qualify for hedge 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 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

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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. Realized gains and losses related to cash flows are disclosed in the Condensed Consolidated Statements of Cash Flows in Cash Provided by Operating Activities. Unrealized gains and losses related to cash flows are disclosed in the Condensed Consolidated Statements of Cash Flows in the line item Other operating assets and liabilities. Gains or losses related to the foreign currency derivative 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.

We have generally applied the normal purchase and normal sale scope exception (“NPNS”) to our forward physical grain purchase contracts delivered by truck and to our forward physical natural gas and solar-generated power purchase contracts. NPNS contracts are accounted for using the accrual method of accounting; therefore, amounts payable under these contracts are recorded when we take delivery of the contracted product and no amounts were recorded for the fair value of these contracts in the condensed consolidated financial statements at September 24, 2023 and December 25, 2022.

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


	September 24, 2023			December 25, 2022
	(In thousands)
Fair values:
Commodity derivative assets	$	5,071		$	17,922
Commodity derivative liabilities	(22,874)			(9,042)
Foreign currency derivative assets	944			555
Foreign currency derivative liabilities	(1,395)			(6,170)

Sales contract derivative assets	1,923			—
Sales contract derivative liabilities	—			(3,705)
Cash collateral posted with brokers(a)	39,657			33,771
Derivatives coverage(b):
Corn	10.9		%	14.4		%
Soybean meal	18.7		%	10.1		%
Period through which stated percent of needs are covered:
Corn	July 2024			December 2023
Soybean meal	July 2024			December 2023

(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				Nine Months Ended
Gains (Losses) by Type of Contract (a)	September 24, 2023		September 25, 2022		September 24, 2023		September 25, 2022		Affected Line Item in the Condensed Consolidated Statements of Income
	(In thousands)
Foreign currency derivatives	$	(6,164)	$	(51)	$	(53,818)	$	(18,611)	Foreign currency transaction losses
Commodity derivatives	3,324		28,810		(13,023)		47,833		Cost of sales
Sales contract derivative	3,100		(6,734)		5,628		1,448		Net sales
Total	$	260	$	22,025	$	(61,213)	$	30,670

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

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


	Gains (Losses) Recognized in Other Comprehensive Income
	Three Months Ended				Nine Months Ended
	September 24, 2023		September 25, 2022		September 24, 2023		September 25, 2022
	(In thousands)
Foreign currency derivatives	$	1,346	$	(1,974)	$	(302)	$	(2,317)


	Gains (Losses) Reclassified from AOCI into Income
	Three Months Ended September 24, 2023						Three Months Ended September 25, 2022
	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)
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	$	4,360,196	$	4,014,314	$	45,645	$	4,468,969	$	3,971,699	$	36,895
Impact from cash flow hedging instruments:
Foreign currency derivatives	106		239		—		(1,067)		275		—

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

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


	Gains (Losses) Reclassified from AOCI into Income
	Nine Months Ended September 24, 2023						Nine Months Ended September 25, 2022
	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)
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	$	12,833,915	$	12,036,561	$	135,459	$	13,341,012	$	11,624,991	$	111,303
Impact from cash flow hedging instruments:
Foreign currency derivatives	440		224		—		(2,001)		562		—
Interest rates swap derivatives	—		—		—		—		—		98

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

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

At September 24, 2023, there was a $1.9 million pre-tax deferred net loss on foreign currency derivatives recorded in AOCI that is 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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4. TRADE ACCOUNTS AND OTHER RECEIVABLES

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


	September 24, 2023		December 25, 2022
	(In thousands)
Trade accounts receivable	$	1,084,388	$	984,332

Notes receivable from third parties	14,576		33,477
Other receivables	60,505		88,962
Receivables, gross	1,159,469		1,106,771
Allowance for credit losses	(8,027)		(9,559)
Receivables, net	$	1,151,442	$	1,097,212

Accounts receivable from related parties(a)	$	1,676	$	2,512

(a) Additional information regarding accounts receivable from related parties is included in “Note 17. Related Party Transactions.”

Activity in the allowance for credit losses was as follows:


	Nine Months Ended
	September 24, 2023
	(In thousands)
Balance, beginning of period	$	(9,559)
Provision charged to operating results	(316)
Account write-offs and recoveries	2,431
Effect of exchange rate	(583)
Balance, end of period	$	(8,027)

In June 2023, the Company and JBS USA Food Company (“JBS USA”) jointly entered into a receivables purchase agreement with a bank for an uncommitted facility with a maximum capacity of $265.0 million and no recourse to the Company or JBS USA. Under the facility, the Company may sell eligible trade receivables in exchange for cash. Transfers under the agreement are recorded as a sale under ASC 860, Broad Transactions – Transfers and Servicing. At the transfer date, the Company received cash equal to the face value of the receivables sold less a fee based on the current Secured Overnight Financing Rate (“SOFR”) plus an applicable margin applied over the customer payment term. The fees are immaterial.

5. INVENTORIES

Inventories consisted of the following:


	September 24, 2023		December 25, 2022
	(In thousands)
Raw materials and work-in-process	$	1,157,966	$	1,204,092
Finished products	662,178		596,375
Operating supplies	71,167		95,367
Maintenance materials and parts	105,409		94,350
Total inventories	$	1,996,720	$	1,990,184

6. 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:


	September 24, 2023				December 25, 2022
	Cost		Fair Value		Cost		Fair Value
	(In thousands)
Cash equivalents:
Fixed income securities	$	374,484	$	374,591	$	167,366	$	167,430

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Gross realized gains during the three and nine months ended September 24, 2023 related to the Company’s available-for-sale securities were $5.8 million and $12.1 million, respectively and gross realized gains during the three and nine months ended September 25, 2022 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 24, 2023 and September 25, 2022 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 24, 2023 and September 25, 2022 are disclosed in “Note 13. Stockholders’ Equity.”

7. GOODWILL AND INTANGIBLE ASSETS

The activity in goodwill by segment for the nine months ended September 24, 2023 was as follows:


	December 25, 2022		Currency Translation		September 24, 2023
	(In thousands)
U.S.	$	41,936	$	—	$	41,936
U.K. and Europe	1,058,204		15,229		1,073,433
Mexico	127,804		—		127,804
Total	$	1,227,944