PILGRIMS PRIDE CORP
For the period ended Jun 30, 2024. Filed Aug 1, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 1, 2024
PPC$28.53-0.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-02.
0000802481-24-000036
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-01.
0000802481-24-000066
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 84 previous paragraphs and 102 current paragraphs.
42 unchanged; 35 reworded; 19 added; 7 removed; 0 previous and 6 current paragraphs rearranged.
Tables are not compared: 13 previous and 22 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (19)
Current report
(a)We obtain corn and soybean meal prices from the Chicago Board of Trade, and we obtain wheat prices from the London International Financial Futures and Options Exchange.
Current report
U.S. commodity market prices for chicken products continued to increase during the second quarter of 2024 above the historical five-year average and stabilized late in the second quarter. Per the July 2024 U.S. Department of Agriculture (or “USDA”) report on poultry slaughter, estimated industry ready-to-cook production ended the quarter 0.9% above prior year levels primarily due to incremental increases in broilers processed and average liveweights.
Current report
Europe Reportable Segment. Europe net sales generated inthe three months ended June 30, 2024 decreased $9.2 million, or 0.7%, from Europe net sales generated in the three months ended June 25, 2023 primarily due to a decrease in net sales per pound of $60.3 million, or 4.6 percentage points. The decrease in net sales per pound was partially offset by an increase in an increase in sales volume and favorable impact of foreign currency translation of $38.3 million, or 2.9 percentage points, and $12.8 million, or 1.0 percentage points, respectively. The decrease in net sales per pound was primarily due to the structure of certain customer contracts impacted by lower input costs.
Current report
Mexico Reportable Segment. Mexico net sales generated in the three months ended June 30, 2024 increased $42.7 million, or 7.7%, from Mexico net sales generated in the three months ended June 25, 2023 due to an increase in net sales per pound of $16.1 million, or 2.9%, the favorable impact of foreign currency translation of $15.7 million, or 2.8 percentage points, and an increase in sales volume of $10.9 million, or 2.0 percentage points. The increase in net sales per pound was driven by an increase in commodity chicken prices. The increase in sales volume was driven by shifts in product mix.
Current report
U.S. Reportable Segment. Cost of sales incurred by our U.S. operations during the three months ended June 30, 2024 decreased $120.5 million, or 5.2%, from cost of sales incurred by our U.S. segment during the three months ended June 25, 2023. The decrease in cost of sales was primarily driven by a decrease in cost per pound sold of $171.7 million, or 7.4 percentage points, partially offset by an increase in sales volume of $51.2 million, or 2.2 percentage points. The decrease from prior year in cost per pound sold is primarily due to declining feed ingredients costs, specifically corn and soybean meal. Corn market prices decreased approximately 31% from prior year levels and soybean meal market prices decreased approximately 23% from prior year levels. Factors that are partially offsetting the decrease in cost of sales from feed ingredients are increased payroll and incentive compensation costs and an increase in insurance costs related to prior year recognition of income for business interruption insurance recoveries.
Current report
Europe Reportable Segment. Cost of sales incurred by our Europe operations during the three months ended June 30, 2024 decreased $36.1 million, or 2.9%, from cost of sales incurred by our Europe segment during the three months ended June 25, 2023. The increase in cost of sales was primarily driven by a decrease in cost per pound sold of $83.5 million, or 6.8 percentage points. The decrease in cost per pound sold was partially offset by an increase in sales volume and the unfavorable impact of foreign currency translation of $35.7 million, or 2.9 percentage points, and $11.7 million, or 1.0 percentage points, respectively.
Current report
Mexico Reportable Segment. Cost of sales incurred by our Mexico operations during thethree months ended June 30, 2024 decreased $5.2 million, or 1.1%, from cost of sales incurred by our Mexico segment during the three months ended June 25, 2023. This decrease was driven by a decrease in cost per pound sold of $27.0 million, or 5.7 percentage points. The decrease was partially offset by the unfavorable impact of foreign currency translation of $12.4 million, or 2.6 percentage points and an increase in sales volume of $9.4 million, or 2.0 percentage points. The decrease in cost per pound sold was driven by decreased input costs, such as commodity feed ingredients.
Current report
U.S. Reportable Segment. SG&A expense incurred by our U.S. reportable segment during the three months ended June 30, 2024 increased $67.5 million, or 87.9%, from SG&A expense incurred by our U.S. reportable segment during the three months ended June 25, 2023. The increase in SG&A expense resulted primarily from incremental legal settlement expense recognized in the three months ended June 30, 2024 and an increase in incentive compensation costs.
Current report
Restructuring activities. Losses on restructuring activities of $36.7 million were recognized in the three months ended June 30, 2024. These charges were incurred by our Europe reportable segment primarily as a result of asset impairment recognized on assets in our Pilgrim’s U.K. business that had previously ceased operations, severance and asset impairment related to the closure of facilities within our Pilgrim’s Food Masters business, and severance related to our Pilgrim’s Europe restructuring initiative.
Current report
Net interest expense. Net interest expense decreased to $15.3 million recognized in the three months ended June 30, 2024 from $39.5 million recognized in the three months ended June 25, 2023. The decrease in net interest expense resulted primarily from a gain on early extinguishment of deb t and an increase in interest income on higher cash balances. During the three months ended June 30, 2024, we repurchased $143.6 million of outstanding principal of the Senior Notes due 2031 and $20.0 million of outstanding principal of the Senior Notes due 2033, resulting in gross realized gains of $13.7 million.
Current report
Six Months Ended June 30, 2024 Compared to the Six Months Ended June 25, 2023
Current report
Net sales. Net sales generated in the six months ended June 30, 2024 increased $447.5 million, or 5.3%, from net sales generated in the six months ended June 25, 2023. The following table provides net sales information:
Current report
Europe Reportable Segment. Europe net sales generated inthe six months ended June 30, 2024 increased $19.4 million, or 0.8%, from Europe net sales generated in the six months ended June 25, 2023 primarily due to a favorable impact of foreign currency translation and an increase in sales volume of $69.6 million, or 2.8 percentage points, and $48.1 million, or 1.9 percentage points, respectively. The increase in net sales was partially offset by a decrease in net price per pound sold of $98.2 million, or 3.9 percentage points. The decrease in net sales per pound was primarily due to the structure of certain customer contracts impacted by lower input costs.
Current report
Mexico Reportable Segment. Mexico net sales generated in the six months ended June 30, 2024 increased $63.6 million, or 6.1%, from Mexico net sales generated in the six months ended June 25, 2023 primarily due to an increase from the impact of foreign currency translation and an increase in sales volume of $68.6 million, or 6.6 percentage points, and $29.4 million, or 2.8 percentage points, respectively, partially offset by a decrease in net sales per pound of $34.4 million, or 3.3 percentage points. The increase in sales volume was driven by market requirements in mix with a year-over-year increase in volume in live chicken markets and an increase in imports, partially offset by a decrease in processed chicken volumes. The decrease in price per pound sold was driven by the shift in product mix.
Current report
U.S. Reportable Segment. Cost of sales incurred by our U.S. operations during the six months ended June 30, 2024 decreased $172.7 million, or 3.7%, from cost of sales incurred by our U.S. segment during the six months ended June 25, 2023. The decrease in cost of sales was primarily driven by a decrease in cost per pound sold of $268.5 million, or 5.7 percentage points, partially offset by an increase in sales volume of $95.8 million, or 2.0 percentage points. The decrease from prior year in cost per pound sold is primarily due to declining feed ingredients costs, specifically corn and soybean meal. Corn market prices decreased approximately 28% from prior year levels and soybean meal market prices decreased approximately 16% from prior year levels. Factors that are partially offsetting the decrease in cost of sales from feed ingredients are increased payroll and incentive compensation costs and an increase in insurance costs related to prior year recognition of income for business interruption insurance recoveries.
Current report
U.S. Reportable Segment. SG&A expense incurred by our U.S. reportable segment during the six months ended June 30, 2024 increased $59.0 million, or 41.1%, from SG&A expense incurred by our U.S. reportable segment during the six months ended June 25, 2023. The increase in SG&A expense resulted primarily from an increase in legal settlement expense and incentive compensation costs, partially offset by an insurance recovery recognized in the current year.
Current report
Restructuring activities. Losses on restructuring activities of $51.2 million were recognized in the six months ended June 30, 2024. These charges were incurred by our Europe reportable segment primarily as a result of asset impairment recognized on assets in our Pilgrim’s U.K. business that had previously ceased operations, severance and asset impairment related to the closure of facilities within our Pilgrim’s Food Masters business, and severance related to our Pilgrim’s Europe restructuring initiative.
Current report
On May 1, 2024, the Pilgrim’s Board of Directors approved a bond repurchase program which authorizes the Company to repurchase up to $200.0 million worth of our outstanding senior notes. During the three months ended June 30, 2024, we repurchased $143.6 million of outstanding principal of the Senior Notes Due 2031 and $20.0 million of the outstanding principal of the Senior Notes due 2033 for an aggregate of $149.9 million.
Current report
(b) For the six months ended June 30, 2024, the Obligor Group recognized $471.4 million of dividend income from distributions from our Mexico reportable segment.
Removed paragraphs (7)
Previous report
U.S. commodity market prices for chicken products trended in line with the historical five-year average during the first half of the first quarter of 2024 before accelerating during the seasonal climb in the second half of the quarter. Prices as of the end of the first quarter of 2024 were above the historical five-year average. Per the April 2024 U.S. Department of
Previous report
Agriculture (or “USDA”) report on poultry slaughter, estimated industry ready-to-cook production declined relative to prior year levels by 1.0%. The decrease is due to fewer head counts while average liveweights ended the first quarter in line with the prior year.
Previous report
Europe Reportable Segment. Europe net sales generated inthe three months ended March 31, 2024 increased $28.6 million, or 2.3%, from Europe net sales generated in the three months ended March 26, 2023 primarily due to a favorable impact of foreign currency translation of $55.6 million, or 4.5 percentage points, and an increase in sales volume of $10.5 million, or 0.8 percentage points, partially offset by a decrease in net sales per pound of $37.5 million, or 3.0 percentage points. The decrease in net sales per pound was driven by mechanisms for cost recovery from feed ingredients, labor, utilities and other operating costs leading to a decrease in sales prices.
Previous report
Mexico Reportable Segment. Mexico net sales generated in the three months ended March 31, 2024 increased $20.9 million, or 4.2%, from Mexico net sales generated in the three months ended March 26, 2023 primarily due to an increase from the impact of foreign currency remeasurement of $48.7 million, or 9.9 percentage points, and an increase in sales volume of $16.0 million, or 3.2 percentage points, partially offset by a decrease in net sales per pound of $43.8 million, or 8.9 percentage points. The increase in sales volume was due to a shift in product mix related to market demands, primarily due to increases in live chicken volume and imports volume. The decrease in net sales per pound resulted from a decrease in commodity prices.
Previous report
U.S. Reportable Segment. Cost of sales incurred by our U.S. operations during the three months ended March 31, 2024 decreased $52.2 million, or 2.2%, from cost of sales incurred by our U.S. segment during the three months ended March 26, 2023. The decrease in cost of sales was primarily driven by a decrease in cost per pound sold of $96.0 million, or 4.0 percentage points, partially offset by an increase in sales volume of $43.8 million, or 1.8 percentage points. The decrease in cost per pound sold was driven by a decrease in live operations costs of $122.8 million, which resulted primarily from decreased feed ingredient costs. Prices for both corn and soy, our main ingredients in feed, were down versus prior year. The decrease in live operations costs within cost per pound sold was partially offset by an increase in cost of sales related to the prior year one-time recognition of business interruption insurance income of $25.9 million.
Previous report
U.S. Reportable Segment. SG&A expense incurred by our U.S. reportable segment during the three months ended March 31, 2024 decreased $8.6 million, or 12.9%, from SG&A expense incurred by our U.S. reportable segment during the three months ended March 26, 2023. The decrease in SG&A expense resulted primarily from lower legal settlements and legal defense costs. Other factors affecting U.S. SG&A expense were individually immaterial.
Previous report
Restructuring activities. Losses on restructuring activities of $14.6 million were recognized in the three months ended March 31, 2024. These losses were incurred by our Europe reportable segment as a result of the beginning phases of the Pilgrim's Europe integration plan.
Reworded paragraphs (35)
Previous wording
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. We reported net income attributable to Pilgrim’s of $174.4 million, or $0.73 per diluted common share, and income before tax totaling $227.0 million, for the three months ended March 31, 2024. These operating results included net sales of $4.4 billion, gross profit of $383.9 million and $271.0 million of cash provided by operating activities. We generated a consolidated operating margin of 5.7%. For the three months ended March 31, 2024, we generated EBITDA and Adjusted EBITDA of $361.2 million and $371.9 million, respectively. A reconciliation of net income to EBITDA and Adjusted EBITDA is included below.
Current wording
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. We reported net income attributable to Pilgrim’s of $500.7 million, or $2.11 per diluted common share, and income before tax totaling $654.2 million, for the six months ended June 30, 2024. These operating results included net sales of $8.9 billion, gross profit of $1.1 billion and $989.7 million of cash provided by operating activities. We generated a consolidated operating margin of 7.7%. For the six months ended June 30, 2024, we generated EBITDA and Adjusted EBITDA of $911.7 million and $1.0 billion, respectively. A reconciliation of net income to EBITDA and Adjusted EBITDA is included below.
Previous wording
During the first quarter of 2024, global inflation levels declined, but remain above historical averages, in commodity, labor and other operating costs leading to reduced costs from these inputs across all our businesses. The global energy market continues to be impacted by the Russia-Ukraine war, driving up prices as supply out of the Black Sea region is disrupted and future production is at risk. The global feed ingredient market is less impacted by the Russia-Ukraine war in 2024 as global supply in other growing areas has developed and grain exports from the Black Sea region have remained steady throughout the first quarter of 2024. The U.K. and E.U. region saw a decrease in inflation and increased demand, leading to cost recovery for our business and price reductions for customers, though labor costs continue to be a challenge for our Europe operations. We have and will continue to invest in our people and implement supply chain solutions to mitigate global economic impacts in our Europe operations. Inflation in Mexico has decreased and there has been a slight strengthening of the peso in the first quarter of 2024 against the U.S. dollar, however, Mexico remains a relatively volatile market given continuing inflationary pressures, an evolving global protein industry, and overall business seasonality.
Current wording
During the second quarter of 2024, global inflation levels continued to decline, but remain above historical averages, in commodity, labor and other operating costs leading to reduced costs from these inputs across all our businesses. The global energy market continues to be impacted by the Russia-Ukraine war, driving up prices as supply out of the Black Sea region is disrupted and future production is at risk. The Russia-Ukraine war's impact on the global feed ingredient market is currently less pronounced as global supply in other growing areas has developed and grain exports from the Black Sea region have remained steady throughout the first half of 2024, with exception of moderate impact on winter wheat crop as noted below. The U.K. and E.U. region saw a continued decrease in inflation rate and flat demand, leading to cost recovery for our business and stabilizing prices for customers, though labor costs continue to be a challenge for our Europe operations. We have and will continue to invest in our people and implement supply chain solutions to mitigate global economic impacts in our Europe operations. In Mexico, inflation remains high and the peso weakened against the U.S. dollar in the second quarter of 2024. Mexico remains a relatively volatile market given overall business seasonality.
Previous wording
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 first quarter of 2024, Ukraine grain export volumes remained steady despite the ongoing conflict. Any remaining conflict-related supply constraints did not have a material impact on our costs during the first quarter.
Current wording
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. During the second quarter of 2024, feed wheat price increased 12% as a result of deterioration in Russia winter wheat crop. These gains were reversed 9% in June as weather turned favorable for spring production in the northern hemisphere and winter planting in the southern hemisphere.
Previous wording
Our U.S. and Mexico segments use corn and soybean meal as the main ingredients for feed production, while our Europe segment uses wheat, soybean meal and barley as the main ingredients for feed production.
Current wording
Our U.S. and Mexico segments use corn and soybean meal as the main ingredients for feed production, while our Europe segment uses wheat, soybean meal and barley as the main ingredients for feed production. The following table reflects the highest and lowest prices reached on nearby futures for one bushel of corn, one ton of soybean meal, and one metric ton of wheat during the current and previous years:
Previous wording
During the first quarter of 2024, the U.S. chicken market experienced robust volume demand, supported by growth in both the retail and foodservice distribution channels throughout the quarter. Export volume in shipments were lower than the five-year historical average, but relatively flat compared to prior year. Chicken cold storage inventories ended the quarter 10.5% below prior year levels after declining 12.8% from year-end 2023 levels due to growth in domestic demand and despite lower export volumes.
Current wording
During the second quarter of 2024, the U.S. chicken market experienced robust volume demand, supported by growth in both the retail and foodservice distribution channels throughout the quarter. Export volume in shipments were lower than the five-year historical average, but were sufficient to prevent buildup of dark meat inventories in cold storage while sustaining price levels which were higher than prior year. Chicken cold storage inventories ended the quarter 12.6% below prior year levels after declining seasonally during the quarter.
Previous wording
Domestic volume demand growth in foodservice distribution and retail were sufficient to absorb broiler production and reduce cold storage inventories of chicken at rates that allowed for U.S. chicken market pricing to see strong seasonal improvements ending the first quarter of 2024 above the historical five-year average.
Current wording
Domestic volume demand growth in foodservice distribution and retail were sufficient to absorb broiler production and reduce cold storage inventories of chicken at rates that allowed the U.S. chicken market to maintain price levels above the five-year historical average throughout the second quarter.
Previous wording
During the first quarter of 2024, the U.K. chicken market volume was higher than in same quarter prior year while stagnant compared to fourth quarter of 2023. European supplies into U.K. are increasing slightly as other markets for the E.U. are declining. Our utilities and feed ingredient costs are lower relative to first quarter of 2023. We continue to focus on managing costs, including labor and yield efficiencies, agricultural performance and increasing operational efficiency through investments in capital projects.
Current wording
During the second quarter of 2024, the U.K. chicken market volume was higher than in the same quarter of the prior year and also increased compared to the first quarter of 2024. European supplies into U.K. are increasing slightly as other markets for the E.U. are declining. Our utilities and feed ingredient costs are lower relative to second quarter of 2023. We continue to focus on managing costs, including labor and yield efficiencies, agricultural performance and increasing operational efficiency through investments in capital projects.
Previous wording
Commodity prices for chicken in Mexico were above prior year prices throughout the quarter, but steadily declining and ended the quarter below end of 2023 levels.
Current wording
Commodity prices for chicken in Mexico increased incrementally during the second quarter and on average were above prior year prices, but stabilized towards the end of the second quarter.
Previous wording
U.K. market prices for pork products are flat to slightly higher than first quarter of 2023, while declining slightly from fourth quarter of 2023 per normal seasonal trends. The slight increase from prior continues the upward trend from 2022, reflecting pig reduction from a 15% reduction of the English sow herd since 2022. As the level of pigs stabilized, the pig prices have started to wear off and the E.U. pig price ended the quarter at 5% below the U.K. standard pig price. The pig supply is still shrinking and the first quarter of 2024 U.K. headkill is 5% below first quarter of 2023. U.K. pig farming became profitable in the second quarter of 2023 and remained profitable through the end of 2023.
Current wording
U.K. market prices for pork products are flat compared to first quarter of 2024, while declining slightly from fourth quarter of 2023. The current levels are above 2022, reflecting pig reduction from a 15% reduction of the English sow herd since 2022. As the level of pigs stabilized, the pig prices have started to wear off and the E.U. pig price ended the quarter at 5.6% below the U.K. standard pig price. The pig supply is shrinking for the first half of 2024 as U.K. head kill is 1.5% below first half of 2023. U.K. pig farming became profitable in the second quarter of 2023 and remained profitable through the end of 2023.
Previous wording
Net sales. Net sales generated in the three months ended March 31, 2024 increased $196.3 million, or 4.7%, from net sales generated in the three months ended March 26, 2023. The following table provides net sales information:
Current wording
Net sales. Net sales generated in the three months ended June 30, 2024 increased $251.2 million, or 5.8%, from net sales generated in the three months ended June 25, 2023. The following table provides net sales information:
Previous wording
U.S. Reportable Segment. U.S. net sales generated in the three months ended March 31, 2024 increased $146.8 million, or 6.0%, from U.S. net sales generated in the three months ended March 26, 2023 primarily due to an increase in net sales per pound of $102.3 million, or 4.2 percentage points, and an increase in sales volume of $44.5 million, or 1.8 percentage points. The increase in net sales per pound was driven primarily by favorable market pricing conditions. The first quarter average commodity chicken market prices were above both prior year and the historical five-year average.
Current wording
U.S. Reportable Segment. U.S. net sales generated in the three months ended June 30, 2024 increased $217.8 million, or 8.9%, from U.S. net sales generated in the three months ended June 25, 2023 primarily due to an increase in net sales per pound of $164.0 million, or 6.7 percentage points, and an increase in sales volume of $53.7 million, or 2.2 percentage points. The increase in net sales per pound was driven primarily by favorable market pricing conditions. The second quarter average commodity chicken market prices were above both prior year and the historical five-year average.
Previous wording
Gross profit and cost of sales. Gross profit increased by $210.9 million, or 121.9%, from $173.0 million generated in the three months ended March 26, 2023 to $383.9 million generated in the three months ended March 31, 2024. The following tables provide information regarding gross profit and cost of sales information:
Current wording
Gross profit and cost of sales. Gross profit increased by $413.2 million, or 148.4%, from $278.4 million generated in the three months ended June 25, 2023 to $691.6 million generated in the three months ended June 30, 2024. The following tables provide information regarding gross profit and cost of sales information:
Previous wording
Operating income and SG&A expense. Operating income increased by $218.9 million, or 698.5%, from income of$31.3 million generated in the three months ended March 26, 2023 to income of $250.3 million generated in the three months ended March 31, 2024. The following tables provide information regarding operating income and selling, general and administrative (“SG&A”) expense:
Current wording
Operating income and SG&A expense. Operating income increased by $340.5 million, or 339.6%, from income of$100.3 million generated in the three months ended June 25, 2023 to income of $440.8 million generated in the three months ended June 30, 2024. The following tables provide information regarding operating income and selling, general and administrative (“SG&A”) expense:
Previous wording
Europe Reportable Segment. SG&A expense incurred by our Europe reportable segment during the three months ended March 31, 2024 decreased $4.4 million, or 8.7%, from SG&A expense incurred by our Europe segment during the three months ended March 26, 2023. The decrease in SG&A expense was primarily due to a decrease in salaries expense related to the Pilgrim's Europe central restructuring initiative. Other factors affecting Europe SG&A expense were individually immaterial.
Current wording
Europe Reportable Segment. SG&A expense incurred by our Europe reportable segment during the three months ended June 30, 2024 decreased $1.6 million, or 2.9%, from SG&A expense incurred by our Europe segment during the three months ended June 25, 2023. The decrease in SG&A expense was primarily due to a decrease in salaries expense related to the Pilgrim’s Europe central restructuring initiative.
Previous wording
Mexico Reportable Segment. SG&A expense incurred by our Mexico reportable segment during the three months ended March 31, 2024 decreased approximately $1.6 million, or 10.0%, from SG&A expense incurred by our Mexico segment during the three months ended March 26, 2023. The primary driver of the decrease in SG&A expense was a decrease in marketing spend and labor costs. Other factors affecting Mexico SG&A expense were individually immaterial.
Current wording
Mexico Reportable Segment. SG&A expense incurred by our Mexico reportable segment during the three months ended June 30, 2024 decreased approximately $0.2 million, or 1.1%, from SG&A expense incurred by our Mexico segment during the three months ended June 25, 2023. All factors affecting Mexico SG&A expense were individually immaterial.
Previous wording
Europe Reportable Segment. Cost of sales incurred by our Europe operations during the three months ended March 31, 2024 increased $20.7 million, or 1.8%, from cost of sales incurred by our Europe segment during the three months ended March 26, 2023. The increase in cost of sales was primarily driven by the unfavorable impact of foreign currency translation of $51.6 million, or 4.5 percentage points, and an increase in sales volume of $9.6 million, or 0.8 percentage points, partially offset by a decrease in cost per pound sold of $40.3 million, or 3.5 percentage points. The decrease in cost per pound sold was driven bycost recovery from feed ingredients, labor, utilities and other operating costs and was partially offset by an increase related to the prior year one-time recognition of business interruption insurance income.
Current wording
Europe Reportable Segment. Cost of sales incurred by our Europe operations during the six months ended June 30, 2024 decreased $15.4 million, or 0.6%, from cost of sales incurred by our Europe segment during the six months ended June 25, 2023. The increase in cost of sales was primarily driven by a decrease in cost per pound sold of $124.2 million, or 5.2 percentage points. The decrease in cost per pound sold was partially offset by the unfavorable impact of foreign currency translation and an increase in sales volume of $64.0 million, or 2.8 percentage points, and $44.8 million, or 1.9 percentage points, respectively. The decrease in cost per pound sold was driven bycost recovery from feed ingredients, labor, utilities and other operating costs and was partially offset by an increase related to the prior year one-time recognition of business interruption insurance income.
Previous wording
Mexico Reportable Segment. Cost of sales incurred by our Mexico operations during thethree months ended March 31, 2024 increased $17.0 million, or 3.8%, from cost of sales incurred by our Mexico segment during the three months ended March 26, 2023. This increase was driven by an unfavorable impact of foreign currency remeasurement and an increase in volume of $43.6 million, or 9.8 percentage points, and $14.4 million, or 3.2 percentage points, respectively. These increases in cost of sales were partially offset by a decrease in cost per pound sold of $41.0 million, or 9.2 percentage points. The increase in sales volume was due to a shift in product mix related to market demands, primarily due to increases in live chicken volume and imports volume. The decrease in cost per pound sold resulted primarily from a decrease in commodity prices.
Current wording
Mexico Reportable Segment. Cost of sales incurred by our Mexico operations during thesix months ended June 30, 2024 increased $11.7 million, or 1.3%, from cost of sales incurred by our Mexico segment during thesix months ended June 25, 2023 June 25, 2023. This increase was driven by an unfavorable impact of foreign currency remeasurement and an increase in volume of $57.4 million, or 6.3 percentage points, and $25.8 million, or 2.8 percentage points, respectively. These increases in cost of sales were partially offset by a decrease in cost per pound sold of $71.5 million, or 7.8 percentage points. The increase in volume was driven by market requirements in mix with a year-over-year increase in volume in live chicken markets and an increase in imports, partially offset by a decrease in processed chicken volumes. The decrease in cost per pound sold was driven by decreased commodity feed ingredient input costs.
Previous wording
Net interest expense. Net interest expense decreased to $30.9 million recognized in the three months ended March 31, 2024 from $39.1 million recognized in the three months ended March 26, 2023. The decrease in net interest expense resulted primarily from an increase in interest income earned from investments in available-for-sale securities, and a decrease in interest expense.
Current wording
Net interest expense. Net interest expense decreased to $46.2 million recognized in the six months ended June 30, 2024 from $78.6 million recognized in the six months ended June 25, 2023. The decrease in net interest expense resulted primarily from gains on early extinguishment of debt and an increase in interest income on higher cash balances.
Previous wording
Income taxes. Income tax expense increased to $52.1 million, a 22.9% effective tax rate, for the three months ended March 31, 2024 compared to an income tax benefit of $8.8 million, a 275.5% effective tax rate, for the three months ended March 26, 2023. The change from an income tax benefit to an income tax expense in 2024 resulted primarily from the increase in profit before income taxes.
Current wording
Income taxes. Income tax expense increased to $152.7 million, a 23.3% effective tax rate, for the six months ended June 30, 2024 compared to an income tax benefit of $24.1 million, a (56.7)% effective tax rate, for the six months ended June 25, 2023. The change from an income tax benefit to an income tax expense in 2024 resulted primarily from the increase in profit before income taxes.
Previous wording
(b)The U.S. dollar-equivalent of the facility amount under the Mexico Credit Facility is $67.0 million (Mex$1.1 billion).
Current wording
(b)The U.S. dollar-equivalent of the facility amount under the Mexico Credit Facility is $60.6 million (Mex$1.1 billion).
Previous wording
(c)The U.S. dollar-equivalent of the facility amount under the Europe Credit Facility is $189.3 million (£150 million).
Current wording
(c)The U.S. dollar-equivalent of the facility amount under the Europe Credit Facility is $189.7 million (£150 million).
Previous wording
Items necessary to reconcile from net income to cash flow provided by operating activities included net noncash expenses of $127.3 million for the three months ended March 31, 2024. Net noncash expense items included depreciation and amortization of $103.4 million, deferred income tax expense of $15.5 million, stock-based compensation costs of $4.7 million, losses on property disposals of $1.8 million, loan cost amortization of $1.3 million, and accretion of discounts related to Senior Notes of $0.6 million. Other net noncash items were immaterial.
Current wording
Items necessary to reconcile from net income to cash flow provided by operating activities included net noncash expenses of $235.9 million for the six months ended June 30, 2024. Net noncash expense items included depreciation and amortization of $211.3 million, asset impairment of $13.4 million, gain on early extinguishment of debt recognized as component of interest expense of $11.2 million, deferred income tax expense of $9.0 million, stock-based compensation costs of $6.8 million, losses on property disposals of $2.7 million, loan cost amortization of $2.6 million, and accretion of discounts related to Senior Notes of $1.3 million. Other net noncash items were immaterial.
Previous wording
Items necessary to reconcile from net income to cash flow provided by or used in operating activities included net noncash expenses of $65.4 million for the three months ended March 26, 2023. Net noncash expense items included depreciation and amortization of $98.3 million, loan cost amortization of $1.3 million, stock-based compensation of $1.2 million and accretion of discounts related to Senior Notes of $0.4 million. These expense items were partially offset by a deferred income tax benefit of $26.3 million and gains on property disposals of $9.3 million.
Current wording
Items necessary to reconcile from net income to cash flow provided by operating activities included net noncash expenses of $151.0 million for the six months ended June 25, 2023. Net noncash expense items included depreciation and amortization of $203.1 million, loan cost amortization of $4.7 million, asset impairment of $4.0 million, stock-based compensation of $3.3 million accretion of discounts related to Senior Notes of $1.0 million, and gain on equity method investment of $0.3 million. These expense items were partially offset by a deferred income tax benefit of $56.2 million and gains on property disposals of $9.3 million.
Previous wording
The change in trade accounts and other receivables represented a $72.4 million source of cash related to operating activities for the three months ended March 31, 2024. This change primarily resulted from a decrease in trade accounts receivable and receivables from insurance recoveries. The change in trade accounts and other receivables represented a $132.8 million use of cash related to operating activities for the three months ended March 26, 2023. This change primarily resulted from an increase in trade accounts receivable and receivables from insurance recoveries recognized in March 2023.
Current wording
The change in trade accounts and other receivables represented a $62.4 million source of cash related to operating activities for the six months ended June 30, 2024. This change primarily resulted from a decrease in trade accounts receivable due to timing of payments received. The change in trade accounts and other receivables represented a $55.0 million use of cash related to operating activities for the six months ended June 25, 2023. This change primarily resulted from an increase in trade accounts receivable from increased sales prices and volumes.
Previous wording
The change in inventories represented a $114.5 million source of cash related to operating activities for the three months ended March 31, 2024. This change resulted primarily from decreased raw materials and work-in-process and finished goods inventories primarily due to lower feed ingredient costs. The change in inventories represented a $30.3 million use of cash related to operating activities for the three months ended March 26, 2023. This change resulted primarily from increased raw material costs, such as feed ingredients, and increased finished goods inventories.
Current wording
The change in inventories represented a $146.2 million source of cash related to operating activities for the six months ended June 30, 2024. This change resulted primarily from decreased raw materials, work-in-process inventories due to lower feed ingredient costs, and lower finished goods inventories. The change in inventories represented a $45.2 million use of cash related to operating activities for the six months ended June 25, 2023. This change resulted primarily from increased raw material costs, such as feed ingredients, and increased finished goods inventories.
Previous wording
The change in prepaid expenses and other current assets represented a $27.6 million use of cash related to operating activities for the three months ended March 31, 2024. This change resulted primarily from an increase in prepaid indirect taxes in our Mexico and Europe reportable segments. The change in prepaid expenses and other current assets represented a $20.3 million use of cash related to operating activities for the three months ended March 26, 2023. This change resulted primarily from a net increase in VAT refund receivables.
Current wording
The change in prepaid expenses and other current assets represented a $43.5 million use of cash related to operating activities for the six months ended June 30, 2024. This change resulted primarily from an increase in prepaid indirect taxes in our Mexico and Europe reportable segments. The change in prepaid expenses and other current assets represented a $27.8 million use of cash related to operating activities for the six months ended June 25, 2023. This change resulted primarily from a net increase in VAT refund receivables.
Previous wording
The change in accounts payable, accrued expenses and other current liabilities represented a $212.8 million use of cash related to operating activities for the three months ended March 31, 2024. This change resulted primarily from timing of payments to our suppliers and a reduction in grain input costs. The change in accounts payable, revenue contract liabilities, accrued expenses and other current liabilities represented a $43.6 million use of cash related to operating activities for the three months ended March 26, 2023. This change resulted primarily from the payment of bonuses accrued in 2022.
Current wording
The change in accounts payable, accrued expenses and other current liabilities represented a $14.3 million source of cash related to operating activities for the six months ended June 30, 2024. This change resulted primarily from timing of payments to our suppliers, a reduction in grain input costs, and timing of legal settlement payments. The change in accounts payable, revenue contract liabilities, accrued expenses and other current liabilities represented a $5.1 million use of cash related to operating activities for the six months ended June 25, 2023. This change resulted primarily from the timing of payments to suppliers and reduction of use of the supplier finance programs.
Previous wording
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 $35.8 million and $3.1 million source of cash for the three months ended March 31, 2024 and March 26, 2023, respectively.
Current wording
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 $88.6 million and $9.9 million source of cash for the six months ended June 30, 2024 and June 25, 2023, respectively.
Previous wording
Capital expenditures were incurred for growth projects, such as the South Georgia protein conversion plant, and to improve operational efficiencies, system enhancement projects, and reduce costs for the three months ended March 31, 2024.
Current wording
Capital expenditures were incurred for growth projects, such as the South Georgia protein conversion plant, and to improve operational efficiencies, system enhancement projects, and reduce costs for the six months ended June 30, 2024.
Previous wording
Capital expenditures for the three months ended March 26, 2023 were primarily incurred to improve operational efficiencies and reduce costs and also included investments in the Athens, GA plant expansion, the South Georgia protein conversion plant and other automation projects. Proceeds from property disposals for the three months ended March 26, 2023 were primarily for the sale of a farm in Mexico. Proceeds from property insurance recoveries for the three months ended March 26, 2023 reflects cash received on insurance claims related to the losses incurred from the Mayfield, Kentucky tornado that occurred in December 2021.
Current wording
Capital expenditures for the six months ended June 25, 2023 were primarily incurred to improve operational efficiencies and reduce costs. Capital expenditures in 2023 also included investments in the Athens, GA plant expansion, the South Georgia protein conversion plant and other automation projects. Proceeds from property disposals were primarily for the sale of a farm in Mexico. Proceeds from property insurance recoveries reflects cash received on insurance claims related to the property losses incurred from the Mayfield, Kentucky tornado that occurred in December 2021.
Previous wording
The proceeds from the Tax Sharing Agreement with JBS USA Holdings were a payment of net tax incurred during the tax year 2023. Payments on revolving line of credit, long-term borrowings and finance lease obligations are primarily related to payments on finance lease obligations.
Current wording
Payments on revolving line of credit, long-term borrowings and finance lease obligations are primarily related to open market repurchases of outstanding senior notes. The proceeds from contribution of capital under the Tax Sharing Agreement with JBS USA Holdings were a payment of net tax incurred during the tax year 2023. Payments on early extinguishment of debt are transaction fees related to the bond repurchases.
Previous wording
For the three months ended March 26, 2023, proceeds from revolving line of credit and long-term borrowings include the borrowing on the revolver under the U.S. Credit Facility of $35.0 million. Payments on revolving line of credit, long-term borrowings and finance lease obligations include a principal payment of $6.3 million on the U.S. term loan and payments of $0.2 million on finance leases. The Distribution from Tax Sharing Agreement with JBS USA Holdings is payment of net tax incurred during the tax year 2022 under the tax sharing agreement.
Current wording
For the six months ended June 25, 2023, proceeds from revolving line of credit and long-term borrowings include the $1.0 billion issuance of the U.S. Senior Notes Due 2033 in April 2023 and additional borrowing on the revolver under the U.S. Credit Facility of $35.0 million. Payments on revolving line of credit, long-term borrowings and finance lease obligations include a pay down of the U.S. term loan and outstanding revolver balance. Payments of capitalized loan costs include costs incurred in relation to the issuance of the U.S. Senior Notes Due 2033. The Distribution from Tax Sharing Agreement with JBS USA Holdings is payment of net tax incurred during the tax year 2022 under the tax sharing agreement.
Previous wording
All of the senior unsecured registered notes (collectively, the “Pilgrim’s Senior Notes”) issued by Pilgrim’s Pride Corporation prior to March 31, 2024 are fully and unconditionally guaranteed by Pilgrim’s Pride Corporation of West Virginia Inc., JFC LLC, Gold’n Plump Farms LLC and Gold’n Plump Poultry LLC (the “Subsidiary Guarantors”). As of the date of this report, there have been no significant changes to our senior unsecured reigstered notes from those described in “Part II, Item 8. Financial Statements and Supplementary Data-Note 13. Debt” in our annual report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2024 (the “2023 Annual Report”).
Current wording
All of the senior unsecured registered notes (collectively, the “Pilgrim’s Senior Notes”) issued by Pilgrim’s Pride Corporation prior to June 30, 2024 are fully and unconditionally guaranteed by Pilgrim’s Pride Corporation of West Virginia Inc., JFC LLC, Gold’n Plump Farms LLC and Gold’n Plump Poultry LLC (the “Subsidiary Guarantors”). As of the date of this report, except for bond repurchases described in Item 1. Note 12 herein, there have been no significant changes to our senior unsecured registered notes from those described in “Part II, Item 8. Financial Statements and Supplementary Data-Note 13. Debt” in our annual report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2024 (the “2023 Annual Report”).
Previous wording
(a) For the three months ended March 31, 2024, the Obligor Group recognized $46.0 million of net sales to the non-obligated subsidiaries and no purchases from the non-obligated subsidiaries.
Current wording
(a) For the six months ended June 30, 2024, the Obligor Group recognized $73.0 million of net sales to the non-obligated subsidiaries and no purchases from the non-obligated subsidiaries.
Previous wording
Starting in 2024, Pillar II legislation has come into effect in various countries, impacting multinational companies operating in these jurisdictions. As of March 31, 2024, the Company continues to monitor the impacts of Pillar II and has yet to identify any material impacts to the Condensed Consolidated Financial Statements.
Current wording
Starting in 2024, Pillar II legislation has come into effect in various countries, impacting multinational companies operating in these jurisdictions. As of June 30, 2024, the Company continues to monitor Pillar II legislation and guidance and has yet to accrue any top-up taxes in the Condensed Consolidated Financial Statements.
Rearranged current paragraphs (6)
Current report — wording carried from elsewhere
Income taxes. Income tax expense increased to $100.7 million, a 23.6% effective tax rate, for the three months ended June 30, 2024 compared to an income tax benefit of $15.2 million, a (33.3)% effective tax rate, for the three months ended June 25, 2023. The change from an income tax benefit to an income tax expense in 2024 resulted primarily from the increase in profit before income taxes, recognition of a deferred tax asset in a corporate legal entity, and intercompany dividend distributions from our Mexico reportable segment to our U.S. reportable segment.
Current report — wording carried from elsewhere
U.S. Reportable Segment. U.S. net sales generated in the six months ended June 30, 2024 increased $364.5 million, or 7.5%, from U.S. net sales generated in the six months ended June 25, 2023 primarily due to an increase in net sales per pound of $265.6 million, or 5.5 percentage points, and an increase in sales volume of $98.9 million, or 2.0 percentage points. The increase in net sales per pound was driven primarily by favorable market pricing conditions. The first half average commodity chicken market prices were above both prior year and the historical five-year average.
Current report — wording carried from elsewhere
Gross profit and cost of sales. Gross profit increased by $624.1 million from $451.5 million generated in the six months ended June 25, 2023 to $1.1 billion generated in the six months ended June 30, 2024. The following tables provide information regarding gross profit and cost of sales information:
Current report — wording carried from elsewhere
Operating income and SG&A expense. Operating income increased by$559.5 million, or 425.1%, from income of$131.6 million generated in the six months ended June 25, 2023 to income of $691.1 million generated in the six months ended June 30, 2024. The following tables provide information regarding operating income and selling, general and administrative (“SG&A”) expense:
Current report — wording carried from elsewhere
Europe Reportable Segment. SG&A expense incurred by our Europe reportable segment during the six months ended June 30, 2024 decreased $6.0 million, or 5.7%, from SG&A expense incurred by our Europe segment during the six months ended June 25, 2023. The decrease in SG&A expense was primarily due to a decrease in salaries expense related to the Pilgrim’s Europe central restructuring initiative.
Current report — wording carried from elsewhere
Mexico Reportable Segment. SG&A expense incurred by our Mexico reportable segment during the six months ended June 30, 2024 decreased $1.8 million, or 5.5%, from SG&A expense incurred by our Mexico segment during the six months ended June 25, 2023. The primary driver of the decrease in SG&A expense was a decrease in marketing spend and labor costs, partially offset by an increase driven by the unfavorable impact of foreign currency translation.