Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Executive Summary
Overview
We are one of the largest protein companies in the world, and as a vertically integrated company, we are able to control nearly every phase of the production process, which helps us manage food safety and quality, control margins, and improve customer service. This gives us the opportunity to continue to create growth and development opportunities, further increasing our position as a leading domestic and global protein company.
We reported net income attributable to Pilgrim’s Pride Corporation of $1.1 billion, or $4.54 per diluted common share, and profit before tax totaling $1.5 billion, for 2025. These operating results included gross profit of $2.4 billion and generated $1.4 billion of cash from operations. We generated consolidated operating margins of 8.7% with operating margins of 10.7%, 5.1%, and 7.9% in our U.S., Europe, and Mexico reportable segments, respectively. During 2025, we generated EBITDA and Adjusted EBITDA of $2.1 billion and $2.3 billion, respectively. A reconciliation of net income to EBITDA and Adjusted EBITDA is included later in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this annual report.
We operate on the basis of a 52/53-week fiscal year that ends on the Sunday falling on or before December 31. Any reference we make to a particular year applies to our fiscal year and not the calendar year. Fiscal years 2025 and 2024 were both 52-week fiscal years.
Global Economic Conditions
Our business is subject to global inflationary trends. U.S. consumer price index inflation rose 2.7% in the twelve months ended December 2025. The fluctuations were driven by policy changes, supply chain dynamics, and consumer spending behavior. U.K. consumer price index inflation rose 3.6% in the twelve months ended December 2025, driven by increases in alcohol and tobacco and transportation costs, as well as smaller increases in food and restaurant prices. The E.U. region saw a slight decrease in the year-over-year inflation rate to 2.0% for the twelve months ended December 2025, primarily driven by decreased energy prices, offset by rising food prices. The Russia-Ukraine war's impact on the global feed ingredient and energy markets continues to be less pronounced than during the initial onset of the war, but there remain many risks and uncertainties that may impact global markets. Mexico consumer price index inflation declined to 3.7% in the twelve months ended December 2025 partially driven by decreases in fresh agricultural prices and energy, partially offset by increases in services, such as restaurants and food services, as well as, prepared food prices and food, beverages, and tobacco prices.
The British pound strengthened against the U.S. dollar during 2025. The Mexican peso weakened against the U.S. dollar during 2025, but future trends will be impacted by economic uncertainties in Mexico and with their primary trading partners, such as the U.S.
We are monitoring changes in tariffs and trade policies both in the U.S. and throughout other countries where we operate and do business. Changes to these policies may impact our export sales and international operations. Our U.S. business is primarily characterized with inputs being made in country and our products being sold in country, demonstrated by our export sales from the U.S. accounting for less than 3% of our total net sales. The impact of trade policy changes is uncertain and evolving; however, we do not anticipate material impacts to our results of operations. We will continue to monitor potential impacts and take mitigation actions as necessary.
We generally respond to these challenges in global economic conditions through discussions with customers to mitigate the impact of extraordinary costs we experience. We also continue to focus on operational initiatives that aim to deliver labor efficiencies, better agricultural performance and improved yields.
Raw Materials and Input Costs
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.
During 2025, the global prices of corn, soybean, and wheat decreased modestly relative to 2024 prices, reflecting an increase in production and elevated stocks. Demand for these grains increased in 2025 compared to 2024 levels, however supply outpaced demand resulting in slightly lower prices and higher ending stocks.
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Corn(a) Soybean Meal(a) Wheat(a)
Highest Price Lowest Price Highest Price Lowest Price Highest Price Lowest Price
(In whole dollars) (In whole pounds sterling)
(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.
During 2025, U.S. commodity market prices for chicken products moderated slightly compared to elevated levels in 2024, reflecting a combination of factors, such as increased broiler production, improved supply chain stability, and normalization of consumer demand following inflation-driven protein substitution in prior periods. The USDA’s January 2026 World Agriculture Supply and Demand Estimate (“WASDE”) report indicates broiler production growth in 2025, supported by increased placements and improved feed conversion ratios, which increased available supply relative to demand. The incremental supply reduced pricing pressure seen in 2024, when supply was tighter and feed costs were slightly elevated.
U.S. commodity market prices throughout 2026 will be impacted by the evolution of foodservice, retail, and export meat demand, influenced by factors such as government regulation, spread of avian influenza cases both domestically and abroad, evolution of the general economy, and overall protein supply.
During 2025, the U.K. chicken market prices remained elevated compared to 2024 levels, yet stable, reflecting a balance between strong domestic consumption, increased domestic production, and easing input cost pressures. Supply increased in 2025 due to higher average live weights and higher slaughter numbers, but pricing remained firm due to increased labor costs and animal welfare costs. Through customer contracts and additional negotiations, we have offset the majority of these cost increases. Partially offsetting the labor and animal welfare costs was an easing of feed costs in 2025 relative to 2024. Due to increased competition with the U.K. egg market, there continues to be an increase in costs to retain growers. We continue to focus on managing costs, including labor and yield efficiencies, agricultural performance and increasing operational efficiencies through investments in capital projects.
Commodity prices for chicken in Mexico in 2025 averaged above prior-year prices, driven by strong consumer demand and the viability of chicken as the most affordable animal protein option. While Mexico’s poultry production increased in 2025 relative to 2024 levels, demand outpaced supply. Feed costs decreased in 2025 relative to 2024, but these cost savings were partially offset by increases in supply chain and labor costs.
U.K. market prices for pork products in 2025 remained elevated relative to historical averages, continuing an upward trend from 2022, despite higher production volumes and easing of market pressures from EU price movements. Production increases in 2025 were driven by heavier carcass weights and higher slaughter numbers, while breeding herd constraints and increased exports limited oversupply in the U.K.
U.K. prices for prepared foods have increased due to inflationary pressures. We continue to focus on partnering with our Key Customers and increasing operational efficiency.
Sustainability
We believe sustainability involves continuously improving social responsibility, economic viability, and environmental stewardship. We are committed to helping society meet the global challenge of feeding a growing population in a responsible manner.
Environmental Stewardship. We are focused on improving the efficiency of our operations and supporting producers to reduce our environmental footprint. In support of this initiative, in April 2021, we issued $1.0 billion of sustainability-linked bonds, which require us to reduce our Scope 1 and Scope 2 global greenhouse gas emissions intensity of 17.7% by 2025 and by
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30.0% by 2030 from our 2019 baseline. To that end, we have invested in a variety of equipment, implemented operating procedures, and enhanced reporting systems to identify opportunities and drive further emission reduction opportunities.
Social Responsibility. Safety of our team members is a core value at Pilgrim’s. The physical health and mental well-being of our workforce continues to be a top priority for our business. As such, we implemented hundreds of safety measures within our facilities and continue to evolve our operations as needed. To support the communities where our team members live and work, we have committed $20 million in funding for local projects focused on alleviating food insecurity and strengthening long-term community infrastructure through our Hometown Strong initiative. To date, we have approved over $15 million for these areas. We also continue to build on Hometown Strong through our Better Futures program, which provides team members and their dependents in tuition free, higher education program, to improve their skills and career opportunities.The program has been exceptionally well received, as we have over 2,200 participants since its inception. Finally, ensuring the well-being of animals under our care is an uncompromising commitment at Pilgrim’s. We continually strive to improve our welfare efforts through the use of new technologies and the implementation of standards that meet and exceed regulatory requirements and industry guidelines.
Governance. To cultivate discipline and drive accountability for sustainability-related matters, we use our annual budgeting process to establish strategies, plans, and risk mitigation tactics. This process is further reinforced by a series of key performance indicators to evaluate and monitor progress. These performance indicators are linked to compensation for both senior executives and plant-level personnel. As part of our business management processes, progress against these metrics is reviewed at least monthly and evaluated by external agencies to assess progress relative to industry peers. In addition, the Board of Directors formed a Sustainability Committee to provide oversight and counsel on strategies, policies, and investments to reduce the impact of climate change. The Sustainability Committee meets on a quarterly basis to monitor progress, provide feedback, and evaluate the impact of trends.
Reportable Segments
We operate in three reportable segments: the U.S., Europe, and Mexico. We measure segment profit as operating income. Certain corporate expenses are allocated to the Mexico and Europe reportable segments based upon various apportionment methods for specific expenditures incurred related thereto with the remaining amounts allocated to the U.S. For additional information, see “Note 20. Reportable Segments” of our Consolidated Financial Statements included in this annual report.
Results of Operations
2025 Compared to 2024
Net sales. Net sales for 2025 increased $0.6 billion, or 3.5%, from $17.9 billion generated in 2024 to $18.5 billion generated in 2025. The following table provides additional information regarding net sales:
Change from 2024 Impact on Change from 2024
(In thousands, except percent data)
U.S. Reportable Segment. U.S. net sales generated in 2025 increased $368.8 million, or 3.5%, from U.S. net sales generated in 2024 primarily because of an increase in sales volume of $365.2 million, or 3.4 percentage points, and a slight increase in net sales per pound of $3.6 million, or 0.1 percentage points. The increase in sales volume was primarily driven by increased demand for fresh products.
Europe Reportable Segment. Europe sales generated in 2025 increased $242.1 million, or 4.7%, from sales generated in 2024 primarily from a favorable impact of foreign currency translation and an increase in sales volume of $160.1 million, or 3.1 percentage points, and $130.3 million, or 2.5 percentage points, respectively. These increases were partially offset by a decrease in net sales per pound of $48.3 million, or 0.9 percentage points. The favorable impact of foreign currency translation was the result of a 3% strengthening of the British pound against the U.S. dollar. The increase in sales volume was primarily driven by increased domestic demand for fresh products.
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Mexico Reportable Segment. Mexico sales generated in 2025 increased $8.3 million, or 0.4%, from sales generated in 2024 primarily from an increase in net sales per pound and an increase in sales volume of $68.7 million, or 3.3 percentage points, and $46.1 million, or 2.2 percentage points, respectively. These increases in net sales were partially offset by a decrease due to the unfavorable impact of foreign currency translation of $106.5 million, or 5.1 percentage points. The increases in net sales per pound and sales volume were driven by improved product mix and increased commodity chicken prices. Sales volumes increased across all sales channels, except live chicken which slightly decreased. The unfavorable impact of foreign currency translation was due to a 5% weakening of the Mexican peso against the U.S. dollar.
Gross profit. Gross profit increased by $45.4 million, or 2.0%, from $2.31 billion generated in 2024 to $2.36 billion generated in 2025. The following tables provide gross profit information:
Change from 2024 Percent of Net Sales
(In thousands, except percent data)
Sources of gross profit 2025 Change from 2024
Amount Percent
(In thousands, except percent data)
Sources of cost of sales 2025 Change from 2024
Amount Percent
(In thousands, except percent data)
U.S. Reportable Segment. Cost of sales incurred by our U.S. operations in 2025 increased $298.8 million, or 3.3%, from cost of sales incurred by our U.S. operations in 2024. Cost of sales increased primarily due to an increase in sales volume of $311.5 million, or 3.4 percentage points, partially offset by a slight decrease in cost per pound sold of $12.7 million, or 0.1 percentage points. The increase in sales volume was primarily driven by increased demand of fresh products. The decrease in cost per pound sold was driven by a reduction in feed ingredients, such as corn and soy, costs in our live operations. The reduction in live operations costs was partially offset by increases in labor, incentive compensation, and grower costs.
Europe Reportable Segment. Cost of sales incurred by the Europe operations during 2025 increased $211.0 million, or 4.5%, from cost of sales incurred by the Europe operations during 2024 primarily due to the impact of foreign currency translation and an increase in sales volume of $143.5 million, or 3.1 percentage points, and $118.6 million, or 2.5 percentage points, respectively. These increases were partially offset by a decrease in cost per pound sold of $51.2 million, or 1.1 percentage points. The increase in sales volume was partially offset by the unfavorable impact of foreign currency translation of $140.1 million, or 2.9 percentage points. The decrease in cost per pound was driven by decreased feed ingredients, labor, utilities and other operating costs and from production efficiencies as a result of our restructuring initiatives.
Mexico Reportable Segment. Cost of sales incurred by the Mexico operations during 2025 increased $64.1 million, or 3.5%, from cost of sales incurred by the Mexico operations during 2024 primarily because of an increase in cost per pound sold and an increase in sales volume of $119.2 million, or 6.4 percentage points, and $39.8 million, or 2.2 percentage points, respectively. These increases were partially offset by the favorable impact of foreign currency translation of $94.9 million, or 5.1 percentage points. The increase in sales volume was driven by market requirements and product mix and the increase in cost per pound sold was driven by a shift in mix to higher value products, such as prepared foods. The favorable impact of foreign currency translation was due to a 5% weakening of the Mexican peso against the U.S. dollar.
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Operating income. Operating income increased $107.5 million, or 7.1%, from $1.5 billion generated for 2024 to $1.6 billion generated for 2025. The following tables provide operating income information:
Change from 2024 Percent of Net Sales
(In thousands, except percent data)
Sources of operating income 2025 Amount Percent
(In thousands, except percent data)
Sources of SG&A expenses (defined below) 2025 Change from 2024
Amount Percent
(In thousands, except percent data)
Sources of restructuring activities charges 2025 Change from 2024
Amount Percent
(In thousands, except percent data)
(a)Our Consolidated Financial Statements include the accounts of our company and our majority owned subsidiaries. We eliminate all significant affiliate accounts and transactions upon consolidation.
U.S. Reportable Segment. Selling, general and administrative (“SG&A”) expense incurred by the U.S. operations during 2025 increased $9.6 million, or 2.1%, from SG&A expense incurred by the U.S. operations during 2024 primarily from increases in incentive compensation costs, marketing costs, and professional fees, such as legal defense costs, partially offset by a decrease in litigation settlement costs.
Europe Reportable Segment. SG&A expense incurred by the Europe operations during 2025 decreased $9.6 million, or 4.8%, from SG&A expense incurred by the Europe operations during 2024 primarily due to decreased labor and employee-related costs as a result of the restructuring initiatives consolidating backoffice support. The decreased labor costs were partially offset by an increase from the unfavorable impact of foreign currency translation.
Mexico Reportable Segment. SG&A expense incurred by the Mexico operations during 2025 decreased $0.1 million, or 0.1%, from SG&A expense incurred by the Mexico operations during 2024. SG&A expense decreased primarily from the favorable impact of foreign currency translation due to the weakening of the Mexican peso against the U.S. dollar, partially offset by increased wages and employee profit share costs.
Net interest expense. Consolidated interest expense increased 24.6% to $110.3 million in 2025 from $88.5 million in 2024. The increase in net interest expense resulted primarily from a decrease in interest income earned on lower cash balances, an increase from early extinguishment of debt from a gain recognized in the prior year, partially offset by a decrease in interest expense on outstanding borrowings due to debt repurchases reducing the outstanding borrowings. As a percent of net sales, net interest expense in 2025 and 2024 was 0.6% and 0.5%, respectively.
Income taxes. Our consolidated income tax expense in 2025 was $418.8 million, compared to income tax expense of $325.0 million in 2024. The increase in income tax expense in 2025 resulted primarily from an increase in pre-tax income and higher state income tax expense recognized during 2025.
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2024 Compared to 2023
For discussion of 2024 results of operations in comparison to 2023 results of operations, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II of the 2024 Annual Report on Form 10-K filed on February 13, 2025.
Liquidity and Capital Resources
Our principal sources of liquidity are cash generated from operations, funds from borrowings, and existing cash on hand. The following table presents our available sources of liquidity as of December 28, 2025:
Sources of Liquidity FacilityAmount AmountOutstanding Available
(In millions)
Cash and cash equivalents $ — $ — $ 640.2
Borrowing arrangements:
Mexico BBVA Credit Facility(b) 71.2 — 71.2
Mexico Bajio Credit Facility(c) 83.8 — 83.8
(a)Availability under the U.S. Credit Facility is also reduced by our outstanding standby letters of credit. Standby letters of credit outstanding at December 28, 2025 totaled $4.0 million.
(b)As of December 28, 2025, the U.S. dollar-equivalent of the amount available under the Mexico BBVA Credit Facility was $71.2 million ($1.3 billion Mexican pesos).
(c)As of December 28, 2025, the U.S. dollar-equivalent of the amount available under the Mexico Bajio Credit Facility was $83.8 million ($1.5 billion Mexican pesos).
(d)As of December 28, 2025, the U.S. dollar-equivalent of the amount available under the Europe Credit Facility was $202.5 million (£150.0 million).
On March 13, 2025, the Company declared a special dividend of $6.30 per share, to stockholders of record as of April 3, 2025. On April 17, 2025, the Company paid that special dividend from retained earnings of approximately $1.5 billion. The Company used cash on hand to fund the special cash dividend.
On July 30, 2025, the Company declared a special dividend of $2.10 per share, to stockholders of record as of August 20, 2025. The Company paid that special dividend from retained earnings of approximately $500.0 million on September 3, 2025. The Company used cash on hand to fund the special cash dividend.
On October 30, 2025, we entered into an unsecured credit agreement (the “Mexico Bajio Credit Facility”) with Banco del Bajio as lender. The loan commitment under the Mexico Bajio Credit Facility is Mex$1.5 billion and can be borrowed on a revolving basis. Outstanding borrowings under the Mexico Bajio Credit Facility accrue interest at a rate equal to TIIE plus 1.41%. The Mexico Bajio Credit Facility will be used for general corporate and working capital purposes. The Mexico Bajio Credit Facility will mature on October 30, 2028.
On December 18, 2025, we extended an unsecured credit agreement (the “Mexico BBVA Credit Facility”) with BBVA as lender. The loan commitment under the Mexico BBVA Credit Facility is Mex$1.3 billion and can be borrowed on a revolving basis. Outstanding borrowings under the Mexico BBVA Credit Facility accrue interest at a rate equal to TIIE plus 1.35%. The Mexico BBVA Credit Facility will be used for general corporate and working capital purposes. The Mexico BBVA Credit Facility will mature on December 18, 2030.
We expect cash flows from operations, combined with availability under our credit facilities, to provide sufficient liquidity to fund current obligations, projected working capital requirements, maturities of long-term debt and capital spending for at least the next twelve months.
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Historical Flow of Funds
Year Ended
Cash Flows from Operating Activities December 28, 2025 December 29, 2024
(In millions)
Changes in operating assets and liabilities:
Trade accounts and other receivables (113.1) 88.3
Prepaid expenses and other current assets (44.5) (33.3)
Accounts payable and accrued expenses 155.8 126.7
Long-term pension and other postretirement obligations (1.9) 26.1
Other operating assets and liabilities (57.6) (28.8)
Cash provided by operating activities $ 1,371.7 $ 1,990.1
Net Noncash Expenses
Items necessary to reconcile from net income to cash flow provided by operating activities included net noncash expenses of $507.8 million for the year ended December 28, 2025. Net noncash expense items included $456.2 million of depreciation and amortization, stock-based compensation expense of $29.4 million, deferred income tax expense of $10.0 million, loan cost amortization of $4.9 million, a $3.9 million loss on property disposals, accretion of bond discount of $2.4 million, loss on early extinguishment of debt recognized as a component of interest expense of $0.6 million, and asset impairment of $0.5 million.
Items necessary to reconcile from net income to cash flow provided by operating activities included net noncash expenses of $480.0 million for the year ended December 29, 2024. Net noncash expense items included $433.6 million of depreciation and amortization, deferred income tax expense of $4.8 million, asset impairment of $28.6 million, stock-based compensation expense of $14.9 million, gain on early extinguishment of debt recognized as a component of interest expense of $11.2 million, loan cost amortization of $5.0 million, accretion of bond discount of $2.5 million, and a $1.8 million gain on property disposals.
Changes in Operating Assets and Liabilities
The change in trade accounts and other receivables, including accounts receivable from related parties, represented a $113.1 million use of cash in 2025. The change in cash was primarily due to an increase in sales volume. The change in trade accounts and other receivables, including accounts receivable from related parties, represented an $88.3 million source of cash in 2024. The change in cash was primarily due to the timing of customer payments, and collections of insurance proceeds.
The change in inventories represented a $193.5 million use of cash in 2025. The change in cash resulted from an increase in our finished goods inventories to meet increased demand. The change in inventories represented a $134.5 million source of cash in 2024. The change in cash resulted from a decrease in our finished goods inventories and lower input costs included in inventory values.
The change inprepaid expenses and other current assets represented a $44.5 million use of cash in 2025. This change resulted primarily from an increase in prepaid indirect taxes in our Mexico and Europe reportable segments, and an increase in prepaid grower housing incentives. The change in prepaid expenses and other current assets represented a $33.3 million use of cash in 2024. This change resulted primarily from a net increase in the commodity derivatives assets from favorable fair value positions, an increase from short-term available-for-sale investments, and the impact of foreign currency translation.
Accounts payable and accrued expenses, including accounts payable to related parties, represented a $155.8 million source of cash in 2025. This change resulted primarily from the increases in litigation settlement and payroll accruals. Accounts payable and accrued expenses, including accounts payable to related parties, represented a $126.7 million source of cash in 2024. This change resulted primarily from increases in litigation settlement and incentive compensation accruals.
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
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loss, represented a $35.4 million source of cash in 2025. This change resulted primarily from the timing of estimated tax payments. 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 $109.4 million source of cash in 2024. This change resulted primarily from the timing of estimated tax payments and higher profitability in 2024 which increased our income tax payables and reduced income tax receivable.
Year Ended
Cash Flows from Investing Activities December 28, 2025 December 29, 2024
(In millions)
Acquisitions of property, plant and equipment $ (711.1) $ (476.2)
Proceeds from property disposals 5.6 15.4
Cash used in investing activities $ (705.5) $ (460.8)
Capital expenditures were incurred primarily for growth projects, projects to improve operational efficiencies, portfolio enhancement projects, such as the conversion of a commodity plant to a plant supporting our U.S. retail customers, and projects to reduce costs during the year ended December 28, 2025. Proceeds from property disposals were primarily for a feed mill in the U.S., breeder farm equipment in Mexico, and other miscellaneous equipment.
Year Ended
Cash Flows from Financing Activities December 28, 2025 December 29, 2024
(In millions)
Payments for dividends $ (1,994.3) $ —
Payments on early extinguishment of debt (2.1) (0.2)
Purchase of noncontrolling interest (1.3) —
Cash used in financing activities $ (2,113.0) $ (150.9)
Payments for dividends during 2025 are related to the special cash dividends that were paid in April and September 2025. Payments on revolving line of credit, long-term borrowings, and finance lease obligations and payments on early extinguishment of debt during 2025, are primarily related to open market repurchases of outstanding senior notes. The repurchase of noncontrolling interest represents cash paid in exchange for equity of a subsidiary that was previously owned by a noncontrolling interest partner.
Payments on revolving line of credit, long-term borrowings and finance lease obligations during 2024 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 during 2024 were an allocation made during tax year 2023 for payment of historical tax adjustments. Payments on early extinguishment of debt during 2024 are transaction fees related to the bond repurchases.
Long-Term Debt and Other Borrowing Arrangements
Our long-term debt and other borrowing arrangements consist of senior notes, revolving credit facilities and other term loan agreements. For a description, refer to Part II, Item 8, Notes to Consolidated Financial Statements, “Note 13. Debt.”
Capital Expenditures
We anticipate spending between $900 million and $950 million on the acquisition of property, plant and equipment in 2026. Capital expenditures will primarily be incurred to grow our operations, to improve efficiencies, to reduce costs, and to sustain our operations. We expect to fund these capital expenditures with cash flow from operations and cash on hand.
Contractual Obligations
In addition to our debt commitments at December 28, 2025, we had other commitments and contractual obligations that require us to make specified payments in the future. The following table summarizes the total amounts due as of December 28, 2025, under all debt agreements, commitments and other contractual obligations. The table indicates the years in which payments are due under the contractual obligations.
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Payments Due By Period
(In thousands)
(a)Long-term debt is presented at face value and excludes $4.0 million in letters of credit outstanding related to normal business transactions. Long-term debt includes the Live Oak CHP Project PACE Loan. For a description, refer to Part II, Item 8, Notes to Consolidated Financial Statements, “Note 13. Debt.”
(b)Interest expense in the table above assumes the continuation of interest rates and outstanding borrowings as of December 28, 2025.
(c)Includes agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction.
We expect cash flows from operations, combined with availability under the U.S., Mexico, and Europe Credit Facilities to provide sufficient liquidity to fund current obligations, projected working capital requirements, maturities of long-term debt and capital spending for at least the next twelve months.
Pillar II Tax Initiative
Global Minimum Tax
The Organization for Economic Co-operation and Development (“OECD”) is an international organization composed of 38 member countries that work together to establish international standards and develop solutions for various social, economic, and environmental challenges. These solutions range from improving economic performance and job creation to promoting quality education and combating international tax evasion.
Regarding the fight against tax evasion, the Base Erosion and Profit Shifting (“BEPS”) project was launched in 2013 as a collaboration between the G20 (a group of the world’s 20 largest economies) and the OECD. The project aims to implement 15 measures to combat tax avoidance, enhance the consistency of international tax rules, and ensure a more transparent global tax environment. It seeks to prevent the misuse of tax regulations that result in the erosion of the tax base, particularly through profit shifting to jurisdictions with more favorable or no taxation.
Pillar II is part of one of the OECD’s most recent initiatives, known as BEPS 2.0, which aims to address tax challenges arising from evolving business models in a globalized economy. The goal of Pillar II is to establish a global minimum tax system for multinational enterprises (“MNEs”) with annual consolidated revenue exceeding EUR 750 million. This additional taxation seeks to balance the global allocation of corporate income taxes and ensure that multinational groups pay a minimum effective tax rate of 15% per jurisdiction where they operate.
Starting in the 2024 calendar year, the Pillar II rules came into effect in several jurisdictions, impacting multinational companies operating in these markets. However, during the first three years of implementation, transitional rules (Safe Harbor) have been introduced to simplify the calculation of the effective tax rate per jurisdiction, facilitating the adaptation of multinational groups to the new requirements. As the Group operates in multiple jurisdictions where the global minimum tax is effective, including France, Ireland, Luxembourg, Malta, the Netherlands, and the United Kingdom, the Company carried out the assessment procedures to analyze the potential impacts arising from these regulations. Based on the analyses conducted to date, no material tax exposure has been identified as a result of the application of this tax.
Recent Accounting Pronouncements
Refer to Part II, Item 8, Notes to Consolidated Financial Statements, “Note 1. Business and Summary of Significant Accounting Policies.”
Critical Accounting Policies and Estimates
General. Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us
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to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. We continually evaluate our estimates, including those related to revenue recognition, inventory, goodwill and other intangible assets, litigation and income taxes. We base our estimates on historical experience and on various other assumptions, which are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.
Revenue Recognition. The vast majority of our 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 us. We account 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.
We evaluate the transaction for distinct performance obligations, which are the sale of our products to customers. Since our products are commodity market-priced, the sales price is representative of the observable, standalone selling price. Each performance obligation is recognized based upon a pattern of recognition that reflects the transfer of control to the customer at a point in time, which is upon destination (customer location or port of destination) and depicts the transfer of control and recognition of revenue. There are instances of customer pick-up at our facilities, in which case control transfers to the customer at that point and we recognize revenue. Our performance obligations are typically fulfilled within days to weeks of the acceptance of the order.
We make 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.
Inventories. Live chicken and pig inventories are stated at the lower of cost or net realizable value and breeder hen, breeder sow, and boar inventories at the lower of cost, less accumulated amortization, or net realizable value. The costs associated with breeder hen inventories are accumulated up to the production stage and amortized over their productive lives using the unit-of-production method. The costs associated with breeder sow inventories are accumulated up to the production stage and amortized on a straight-line basis over their productive lives to the estimated residual cull value. The costs associated with finished poultry products, finished pork products, feed, eggs and other inventories are stated at the lower of cost or net realizable value. Inventory within a production facility typically transfers from one stage of production to another at a standard cost, at which point it accumulates additional cost directly incurred with the production of inventory, including overhead. The standard cost at which each type of inventory transfers is set by management to reflect the actual costs incurred in the prior steps. We monitor and adjust standard costs throughout the year to ensure that standard costs reasonably reflect the actual average cost of the inventory produced.
We allocate meat costs between our various finished chicken products based on a by-product costing technique that reduces the cost of the whole bird by estimated yields and amounts to be recovered for certain by-product parts. This primarily includes leg quarters, wings, tenders and offal, which are carried in inventory at the estimated recovery amounts, with the remaining amount being reflected as our breast meat cost. We allocate meat costs between our various finished pork products based on a by-product costing technique that allocates the cost of the whole pig into the primal cuts by estimated yields and amounts to be recovered for certain by-product parts. This primarily includes legs, shoulders, bellies, offal and fifth quarter parts, which are carried in inventory at the estimated recoverable amounts, with the remaining amount being reflected as our loin meat cost.
For our prepared foods inventories, raw materials, and packaging materials are valued at the lower of weighted average cost and net realizable value, work in progress is valued at the latest production cost (raw materials, packaging), finished goods are valued at the lower of the latest actual monthly production cost (raw materials, packaging and direct labor) and attributable overheads and net realizable value, and engineering spares and consumables are valued at cost with an appropriate provision for obsolete engineering spares consistent with historical practice.
Generally, we perform an evaluation of whether any lower of cost or net realizable value adjustments are required at the country level based on a number of factors, including: (1) pools of related inventory, (2) product continuation or
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discontinuation, (3) estimated market selling prices and (4) expected distribution channels. If actual market conditions or other factors are less favorable than those projected by management, additional inventory adjustments may be required. We also record valuation adjustments, when necessary, for estimated obsolescence at or equal to the difference between the cost of inventory and the estimated market value based upon known conditions affecting inventory obsolescence, including significantly aged products, discontinued product lines, or damaged or obsolete products.
Goodwill and Other Intangibles, net. Goodwill represents the excess of the aggregate purchase price over the fair value of the net identifiable assets acquired in a business combination. Identified intangible assets represent trade names and customer relationships arising from acquisitions that are recorded at fair value as of the date acquired less accumulated amortization, if any. We use various market valuation techniques to determine the fair value of our identified intangible assets.
Goodwill is not amortized but is tested for impairment on an annual basis in the fourth quarter of each fiscal year or more frequently if impairment indicators arise. For goodwill, an impairment loss is recognized for any excess of the carrying amount of a reporting unit’s goodwill over the implied fair value of that goodwill. Management first reviews relevant qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent), that the fair value of a reporting unit is less than the unit’s carrying amount (including goodwill). If management determines it is more likely than not that the carrying amount of a reporting unit goodwill might be impaired, a quantitative impairment test is performed. Management has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the quantitative impairment test. Management would be able to resume performing the qualitative assessment in any subsequent period. When performing quantitative impairment tests, we estimate the fair value of our reporting units with material goodwill carrying amounts using an income approach (discounted cash flow method). We develop projections for cash flows over a 5-year period based on assumptions about revenue growth and margin changes using internally-developed economic projections and industry data obtained from government authorities such as the U.S. Department of Agriculture and other sources. We also make terminal value assumptions about revenue growth and margin changes for periods beyond the projection period. We utilize margin assumptions based on operating performance expectations, margins historically realized in the reporting units’ industries, and general macroeconomic trends. We utilize the weighted average cost of capital as a proxy for the discount rate. We consider reporting units that have 20% or less excess fair value over carrying amount to have a heightened risk of future goodwill impairment.
In 2023, we experienced (1) an increase in long-term treasury rates that management determined could negatively affect discount rates and (2) continued inflationary pressures impacting primarily our Moy Park and Pilgrim’s Food Masters reporting units that management determined could negatively affect our margins. Both discount rates and margins are used in estimating the fair value of the reporting units. Therefore, management elected to bypass qualitative assessments and performed quantitative goodwill impairment tests for the Moy Park, Pilgrim’s Food Masters, Pilgrim’s Mexico, and Pilgrim’s U.S. reporting units as of December 31, 2023. Our Pilgrim’s U.K. reporting unit reported goodwill of $2.3 million at December 31, 2023. This amount was considered immaterial to warrant quantitative goodwill impairment testing. Based on the outcome of the quantitative tests, management determined that no goodwill impairment existed in the Moy Park, Pilgrim’s Food Masters, Pilgrim’s Mexico, or Pilgrim’s U.S. reporting units as of December 31, 2023.
On July 1, 2024, the Company effectively completed a reorganization within its Europe reportable segment. The previous reporting units were Moy Park, Pilgrim's UK, and Pilgrim's Food Masters. The new reporting units were Fresh Pork/Lamb, Fresh Poultry, Food Service, Meals, and Brands & Snacking. As a result of this reorganization, the Company reassigned assets and liabilities to the applicable reporting units and allocated goodwill using the relative net assets approach. The Company then performed an interim impairment test on the reporting units on both a pre- and post-reorganization basis. There was no impairment recognized as a result of these tests.
On July 28, 2025, the Company modified its previous reorganization within its Europe reportable segment. The previous reporting units were Fresh Pork/Lamb, Fresh Poultry, Food Service, Meals, and Brands & Snacking. The new 2025 reorganization resulted in one plant moving from Fresh Pork/Lamb into Fresh Poultry and combining Meals and Brands & Snacking into one reporting unit called Added Value. The resulting reporting units of this reorganization are Fresh Pork/Lamb, Fresh Poultry, Food Service, and Added Value. As a result of this reorganization, the Company reassigned assets and liabilities to the applicable reporting units and allocated goodwill using the relative net assets approach which is consistent with the reallocation method using in the prior year’s reorganization. The Company then assessed if the reorganization was a triggering event that required an interim impairment test. This resulted in an interim impairment test being performed on the Fresh Pork/Lamb reporting unit on both a pre- and post-reorganization basis. There was no impairment recognized as a result of this test.
As of December 28, 2025, the Company assessed qualitative factors to determine if it was necessary to perform quantitative impairment tests related to the carrying amounts of its goodwill. Based on these assessments, the Company determined that it was not necessary to perform quantitative impairment tests related to the carrying amount of its goodwill at that date.
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Other intangible assets with indefinite lives are not amortized but are tested for impairment on an annual basis in the fourth quarter of each fiscal year or more frequently if impairment indicators arise. An impairment loss is recognized if the carrying amount of an indefinite-life intangible asset exceeds the estimated fair value of that intangible asset. Management first reviews relevant qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that an intangible asset is impaired. If management determines there is an indication that the carrying amount of the intangible asset might be impaired, a quantitative impairment test is performed. Management has the option to bypass the qualitative assessment for any indefinite-life intangible asset in any period and proceed directly to performing the quantitative impairment test.
The fair value of our indefinite-life intangible assets is calculated principally using a relief-from-royalty valuation approach, which uses significant unobservable inputs as defined by the fair value hierarchy, and is believed to reflect market participant views which would exist in an exit transaction. Under this valuation approach, we make estimates and assumptions about brand sales growth, royalty rates and discount rates based on specific brand sales projections, general economic projections, anticipated future cash flows and marketplace data. We consider indefinite-life intangible assets that have 20% or less excess fair value over carrying amount to have a heightened risk of future impairment.
In 2023, we experienced an increase in long-term treasury rates that management determined could negatively affect discount rates, which are used in estimating the fair value of the reporting units. Therefore, management elected to bypass qualitative assessments for all indefinite-life intangible assets and performed quantitative impairment tests. Based on the outcome of the quantitative tests, management determined that no material impairment existed as of December 28, 2025.
The Company additionally assessed if the July 1, 2024 Pilgrim’s Europe reorganization indicated that any carrying amounts of its non-goodwill intangible assets might not be recoverable. The reorganization did not result in any change in business use for any of the intangible assets and therefore, the Company determined no indicators were present that required us to test the recoverability of the asset group-level carrying amounts of its Europe intangible assets at that date.
The Company additionally assessed if the July 28, 2025 modification to the Pilgrim’s Europe reorganization indicated that any carrying amounts of its non-goodwill intangible assets might not be recoverable. The reorganization did not result in any change in business use for any of the intangible assets and therefore, the Company determined no indicators were present that required us to test the recoverability of the asset group-level carrying amounts of its Europe intangible assets at that date.
As of December 28, 2025, the Company assessed qualitative factors to determine if it was necessary to perform quantitative impairment tests related to the carrying amounts of its intangible assets not subject to amortization. Based on these assessments, the Company determined that it was not necessary to perform quantitative impairment tests related to the carrying amount of its intangible assets not subject to amortization at that date.
Identifiable intangible assets with definite lives, such as customer relationships and trade names that we expect to use for a limited amount of time, are amortized over their estimated useful lives on a straight-line basis. The useful lives range from 15 to 20 years for trade names and three to 18 years for customer relationships. Identified intangible assets with definite lives are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Management assessed if events or changes in circumstances indicated that the aggregate carrying amount of its identified intangible assets with definite lives might not be recoverable and determined that there were no impairment indicators during the years ended December 28, 2025 and December 29, 2024.
Litigation and Contingent Liabilities. We are subject to lawsuits, investigations and other claims related to employment, environmental, product, and other matters. We are required to assess the likelihood of any adverse judgments or outcomes, as well as potential ranges of probable losses, to these matters. We estimate the amount of reserves required for these contingencies when losses are determined to be probable and after considerable analysis of each individual issue. We expense legal costs related to such loss contingencies as they are incurred. With respect to our environmental remediation obligations, the accrual for environmental remediation liabilities is measured on an undiscounted basis. These reserves may change in the future due to changes in our assumptions, the effectiveness of strategies, or other factors beyond our control.
Income Taxes. We follow provisions under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, with regard to members of a group that file a consolidated tax return but issue separate financial statements. We file certain state unitary returns with JBS USA Food Company Holdings. Our income tax expense is computed using the separate return method. The provision for income taxes has been determined using the asset and liability approach of accounting for income taxes. For the unitary states, we have an obligation to make tax payments to JBS USA Food Company Holdings for our share of the unitary taxable income, which is included in taxes payable in our Consolidated Balance Sheets. Under this approach, deferred income taxes reflect the net tax effect of temporary differences between the book and tax bases of recorded assets and liabilities, net operating losses and tax credit carry forwards. The amount of deferred tax on these temporary differences is determined using the tax rates expected to apply to the period when the asset is realized or the liability is settled, as applicable, based on the tax rates and laws in the respective tax
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jurisdiction enacted as of the balance sheet date. We recognize potential interest and penalties related to income tax positions as a part of the income tax provision.
Defined Benefit Pension and Other Postretirement Plans. We sponsor two qualified defined benefit pension plans, two nonqualified defined benefit retirement plans, and one defined benefit postretirement life insurance plan. Some of these plans are administered by a board of trustees made up of management within the participating companies and representatives from associated labor groups while others are administered by an investment committee made up of management from the participating company. We use independent third-party actuaries to assist in determining our pension obligations and net periodic benefit cost. We, along with the actuaries, review assumptions including estimates of the present value of projected future pension payments to participants. We accumulate and amortize the impact of actuarial gains and losses over future periods.
Our defined benefit pension and other postretirement plans contain uncertainties because it requires management to make assumptions and apply judgments. The key assumptions made in developing key estimates include discount rates, expected returns on plan assets, retirement rates, and mortality. These assumptions can have a material impact on the funded status and the net periodic benefit cost. The discount rates reflect yields on high-quality corporate bonds as of the measurement date and were compared to the effective discount rate determined by discounting plan cash flows using the 12/26/2025 Empower Above Mean Curve. All other assumptions reflect estimates of future experience and considering relevant historical information, such as credible plan experience, from representative populations and relevant plan characteristics. The mortality assumption reflects experience from representative populations, based on the Pri-2012 Private Retirement Plans Mortality Table Report issued by the Society of Actuaries (“SOA”) in October 2019 and the Mortality Improvement Scale MP-2021 Report issued by the SOA in October 2021. It is reasonable to expect that changes in external factors will result in changes to the assumptions noted above that are used to measure pension obligations and net periodic benefit cost in future periods.
During 2024, we terminated our Pilgrim’s Pride Pension Plan for Legacy Gold Kist (“LGK Plan”) and our Pilgrim’s Pride Retirement Plan for Union Employees (“Union Plan”). The termination included settling all outstanding obligations through a combination of lump-sum payouts to participants who elected to receive one and through a purchase of annuities for the participants who did not elect a lump-sum payout. In order to fund the lump-sum payments and purchases of nonparticipating annuity contracts, all invested assets within each of the two plans were liquidated. The remaining assets within the two plans at the end of 2024 represented an excess of the liquidated assets over the amount of outstanding obligations at time of termination. These assets were split between an amount transferred to our qualifying 401(k) retirement plan and an amount reverted to the Company less applicable excise taxes in Q1 2025.
We evaluated the termination of our LGK and Union Plans to confirm if this transaction met the definition of a settlement as defined under ASC Topic 715 Compensation—Retirement Benefits, which defines a settlement as “a transaction that is an irrevocable action, relieves the employer (or the plan) of primary responsibility for a pension or postretirement obligation, and eliminates significant risks related to the obligation and the assets used to effect the settlement.” The termination of our LGK and Union Plans was an irrevocable action that relieved us from the pension obligations through the payment of lump-sum payouts and nonparticipating annuity purchases using the liquidated assets of the plans. Additionally, through the termination and settlement of all obligations, we eliminated the significant risks associated with maintaining the obligations and assets. Through this analysis, it was determined we met the criteria of a full settlement of the pension obligations, we applied settlement accounting which required us to recognize the net loss remaining in accumulated other comprehensive loss at the time of settlement as a net loss in Miscellaneous, net on the Statement of Income for the year ended December 29, 2024.
Business Combination Accounting. We allocate the consideration of an acquired business to its identifiable assets and liabilities based on estimated fair values. The excess of the consideration over the amount allocated to the assets and liabilities, if any, is recorded to goodwill. We use all available information to estimate fair values. We use various models to determine the value of assets acquired and liabilities assumed such as net realizable value to value inventory, cost method and market approach to value property, relief-from-royalty and multi-period excess earnings to value intangibles and discounted cash flow to value goodwill. We typically engage third-party valuation specialists to assist in the fair value determination of tangible long-lived assets and intangible assets other than goodwill. The fair value of acquired inventories is typically determined by extending physical counts of the inventories taken at or near the acquisition date to market pricing in effect for such inventories at or near the acquisition date. The carrying values of acquired receivables and accounts payable have historically approximated their fair values as of the business combination date. As necessary, we may engage third-party specialists to assist in the estimation of fair value for certain liabilities. We adjust the preliminary acquisition accounting, as necessary, typically up to one year after the acquisition closing date for those items that existed at the acquisition date and were provisionally accounted for at that time, as we obtain more information regarding asset valuations and liabilities assumed.
Our acquisition accounting methodology contains uncertainties because it requires management to make assumptions and to apply judgment to estimate the fair value of acquired assets and liabilities. Management estimates the fair value of assets and liabilities based upon quoted market prices, the carrying value of the acquired assets and widely accepted valuation
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techniques, including discounted cash flows and market multiple analyses. Unanticipated events or circumstances may occur which could affect the accuracy of our fair value estimates, including changes in assumptions regarding industry economic factors and business strategies. If actual results are materially different than the assumptions used to determine fair value of the assets and liabilities acquired through a business combination, it is possible that adjustments to the carrying values of such assets and liabilities will have an impact on our net earnings.
Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Adjusted Net Income
“EBITDA” is defined as the sum of net income (loss) plus interest, taxes, depreciation and amortization. “Adjusted EBITDA” is calculated by adding to EBITDA certain items of expense and deducting from EBITDA certain items of income that we believe are not indicative of our ongoing operating performance consisting of: (1) foreign currency transaction losses (gains), (2) costs related to litigation settlements, (3) restructuring activities losses, (4) loss on settlement of pension from plan termination, (5) inventory write-down as a result of hurricane, and (6) net income attributable to noncontrolling interest. “Adjusted Net Income” is calculated by adding to Net Income certain items of expense and deducting from Net Income certain items of income that we believe are not indicative of our ongoing performance consisting of: items (1) through (6) above and (7) gain on early extinguishment of debt. EBITDA is presented because it is used by us and we believe it is frequently used by securities analysts, investors and other interested parties, in addition to and not in lieu of results prepared in conformity with U.S. GAAP, to compare the performance of companies. We believe investors would be interested in our Adjusted EBITDA because this is how our management analyzes EBITDA applicable to continuing operations. We also believe that Adjusted EBITDA, in combination with our financial results calculated in accordance with U.S. GAAP, provides investors with additional perspective regarding the impact of certain significant items on EBITDA and facilitates a more direct comparison of our performance with our competitors. EBITDA and Adjusted EBITDA are not measurements of financial performance under U.S. GAAP. EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as substitutes for an analysis of our results as reported under U.S. GAAP. Some of the limitations of these measures are:
•They do not reflect our cash expenditures, future requirements for capital expenditures or contractual commitments;
•They do not reflect changes in, or cash requirements for, our working capital needs;
•They do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our debt;
•Although depreciation and amortization are noncash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;
•They are not adjusted for all noncash income or expense items that are reflected in our statements of cash flows;
•EBITDA does not reflect the impact of earnings or charges attributable to noncontrolling interests;
•They do not reflect the impact of earnings or charges resulting from matters we consider to not be indicative of our ongoing operations; and
•They do not reflect limitations on or costs related to transferring earnings from our subsidiaries to us.
In addition, other companies in our industry may calculate these measures differently than we do, limiting their usefulness as a comparative measure. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as an alternative to net income as indicators of our operating performance or any other measures of performance derived in accordance with U.S. GAAP. You should compensate for these limitations by relying primarily on our U.S. GAAP results and using EBITDA and Adjusted EBITDA only on a supplemental basis.
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Reconciliation of Adjusted EBITDA
(Unaudited)
Year Ended
Add:
Add:
Foreign currency transaction losses (gains) 6,777 (10,025)
Loss on settlement of pension from plan termination — 21,649
Inventory write-down as a result of hurricane — 8,075
Minus:
Net income attributable to noncontrolling interest 985 785
Reconciliation of Adjusted Net Income
(Unaudited)
Year Ended
Add:
Foreign currency transaction losses (gains) 6,777 (10,025)
Loss on settlement of pension from plan termination — 21,649
Inventory write-down as a result of hurricane — 8,075
Net tax benefit of adjustments(b) (49,288) (66,057)
Weighted average diluted shares of common stock outstanding 238,449 237,800
(a)The gain on early extinguishment of debt recognized as a component of interest expense in 2024 was due to the bond repurchases.
(b)Net tax impact of adjustments represents the tax impact of all adjustments shown above.
Item 7A.Quantitative and Qualitative Disclosures about Market Risk
Market Risk-Sensitive Instruments and Positions
The risk inherent in our market risk-sensitive instruments and positions is primarily the potential loss arising from adverse changes in commodity prices, foreign currency exchange rates, interest rates and the credit quality of available-for-sale
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securities as discussed below. The sensitivity analyses presented do not consider the effects that such adverse changes may have on overall economic activity, nor do they consider additional actions our management may take to mitigate our exposure to such changes. Actual results may differ from those described below.
Commodity Prices
We purchase certain commodities, primarily corn, soybean meal, soybean oil, and wheat, for use as ingredients in the feed we either sell commercially or consume in our live operations. As a result, our earnings are affected by changes in the price and availability of such feed ingredients. We have from time to time attempted to minimize our exposure to the changing price and availability of such feed ingredients using various techniques, including, but not limited to, (1) executing purchase agreements with suppliers for future physical delivery of feed ingredients at established prices and (2) purchasing or selling derivative financial instruments such as futures and options.
For this sensitivity analysis, market risk is estimated as a hypothetical 10% increase in the weighted-average cost of our primary feed ingredients as of the periods presented. The impact of this fluctuation, if realized, could be mitigated by related commodity hedging activity. However, fluctuations greater than 10% could occur.
Amount Impact of 10% Increase in Feed Ingredient Prices
(In thousands)
(a)Based on our feed consumption, a 10% increase in the price of our feed ingredient purchases would have increased cost of sales for the year ended December 28, 2025.
(b)A 10% increase in ending feed ingredient prices would have increased inventories as of December 28, 2025.
Amount Impact of 10% Increase to the Fair Value of Commodity Derivative Assets
(In thousands)
Commodity derivative assets(a) $ 8,167 $ 817
(a)We purchase commodity derivative financial instruments, specifically exchange-traded futures and options, in an attempt to mitigate price risk related to our anticipated consumption of commodity inputs for the next 12 months. A 10% increase in corn, soybean meal, soybean oil and wheat prices would have resulted in an increase in the fair value of our net commodity derivative asset position, including margin cash, as of December 28, 2025.
Interest Rates
Fixed-rate debt. Market risk for fixed-rate debt is estimated as the potential decrease in fair value resulting from a hypothetical increase in interest rates of 10%. Using a discounted cash flow analysis, a hypothetical 10% increase in interest rates would have decreased the fair value of our fixed-rate debt by $87.9 million as of December 28, 2025.
Foreign Currency
Mexico Foreign Investments
We are exposed to foreign exchange-related variability of investments and earnings from our Mexican subsidiaries. Foreign currency market risk is the possibility that our financial results or financial position could be better or worse than planned because of changes in foreign currency exchange rates. For this sensitivity analysis, market risk is estimated as a hypothetical 10% change in exchange rates used to convert Mexican peso to U.S. dollars, and the effect of this change on our Mexican foreign investments.
Net Assets. As of December 28, 2025, our Mexican subsidiaries that are denominated in Mexican peso had net assets of $711.2 million. A 10% weakening in Mexican peso against the U.S. dollar exchange rate would cause a decrease in the net assets of our Mexican subsidiaries by $(64.7) million. A 10% strengthening in the Mexican peso against the U.S dollar exchange rate would cause an increase in the net assets of our Mexican subsidiaries of $79.0 million
We are also exposed to the effect of potential currency exchange rate fluctuations to the extent that amounts are repatriated from Mexico to the U.S. The Mexican peso exchange rate can directly and indirectly impact our financial condition and results of operations.
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Europe Foreign Investments
We are exposed to foreign exchange-related variability of investments and earnings from our Europe subsidiaries. Foreign currency market risk is the possibility that our financial results or financial position could be better or worse than planned because of changes in foreign currency exchange rates. For this sensitivity analysis, market risk is estimated as a hypothetical 10% change in exchange rates used to convert British pound and euro to U.S. dollars, and the effect of this change on our Europe foreign investments.
Net Assets. As of December 28, 2025, our Europe subsidiaries that are denominated in the British pound had net assets of $1.1 billion. A 10% weakening in the British pound against the U.S. dollar exchange rate would cause a decrease in the net assets of our Europe subsidiaries by $96.0 million. A 10% strengthening in the British pound against the U.S. dollar exchange rate would cause an increase in the net assets of our Europe subsidiaries by $117.3 million.
Cash flow hedging transactions. We periodically enter into foreign currency forward contracts, which are designated and qualify as cash flow hedges, to hedge foreign currency risk on a portion of sales generated and purchases made by our Europe reportable segment. A 10% weakening or strengthening of the U.S. dollar against the British pound and U.S. dollar against the euro would result in immaterial changes in the fair values of these derivative instruments. No assurance can be given as to how future movements in currency rates could affect our future financial condition or results of operations.
Quality of Investments
Certain retirement plans that we sponsor invest in a variety of financial instruments. We have analyzed our portfolios of investments and, to the best of our knowledge, none of our investments, including money market funds units, commercial paper and municipal securities, have been downgraded, and neither we nor any fund in which we participate hold significant amounts of structured investment vehicles, auction rate securities, collateralized debt obligations, credit derivatives, hedge funds investments, fund of funds investments or perpetual preferred securities. Certain postretirement funds in which we participate hold significant amounts of mortgage-backed securities. However, none of the mortgages collateralizing these securities are considered subprime.
Impact of Inflation
The U.S., Mexico and most of Europe continue to experience inflation at above-historical levels, though to a lesser degree than in the prior year. None of the locations in which we operate are experiencing hyperinflation. We have responded to these inflationary challenges by continuing negotiations with customers to recoup the extraordinary costs we have experienced. We also continue to focus on operational initiatives that aim to deliver labor efficiencies, better agricultural performance and improved yields.
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Item 8.Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Pilgrim's Pride Corporation:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Pilgrim's Pride Corporation and subsidiaries (the Company) as of December 28, 2025 and December 29, 2024, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the fiscal years in the three-year period ended December 28, 2025, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 28, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 28, 2025 and December 29, 2024, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended December 28, 2025, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 28, 2025 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made
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only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of tax claims and proceedings in connection with the acquisition of Tyson de México
As discussed in Notes 1 and 21 to the consolidated financial statements, the Company is subject to various proceedings and claims. The Company is required to assess the likelihood of any adverse judgments or outcomes, as well as potential ranges of probable losses, related to these matters. The Company evaluated complex Mexican tax laws and regulations related to tax assessments from its acquisition of Tyson de México and estimated a probable loss of $88.2 million as of December 28, 2025.
We identified the evaluation of the tax assessments against the Company in connection with its acquisition of Tyson de México as a critical audit matter. Subjective auditor judgment, and specialized skills and knowledge, were required to evaluate the Company's assessment of the probability of an unfavorable outcome because of the complexity of interpreting and applying Mexican tax laws and regulations.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s proceedings and claims process. This included controls over the Company’s interpretation and application of Mexican tax laws and regulations. We evaluated the Company’s assessment of the probability of the loss by reading certain written analyses from the Company. In addition, we involved tax professionals with specialized skills and knowledge, who assisted in assessing the probability of the loss by inspecting correspondence and assessments from Mexican tax authorities, interpreting complex Mexican tax laws and regulations and comparing our interpretation to the Company’s analyses.
/s/ KPMG LLP
We have served as the Company’s auditor since 2012.
Kansas City, Missouri
February 11, 2026
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PILGRIM’S PRIDE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value data)
Restricted cash and cash equivalents — 2,324
Investment in available-for-sale securities — 10,220
Accounts receivable from related parties 13,398 2,608
Current maturities of long-term debt 924 858
Noncurrent operating lease liabilities, less current maturities 199,315 195,944
Total Pilgrim’s Pride Corporation stockholders’ equity 3,680,050 4,239,406
The accompanying notes are an integral part of these Consolidated Financial Statements.
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PILGRIM’S PRIDE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year Ended
(In thousands, except per share data)
Less: Net income attributable to noncontrolling interest 985 785 743
Weighted average shares of Pilgrim’s Pride Corporation common stock outstanding:
Effect of dilutive common stock equivalents 1,022 792 572
The accompanying notes are an integral part of these Consolidated Financial Statements.
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended
(In thousands)
Other comprehensive income (loss):
Foreign currency translation adjustment
Derivative financial instruments designated as cash flow hedges
Gains (losses) arising during the period (2,282) 1,756 (2,565)
Reclassification to net earnings for losses (gains) realized 2,814 (1,849) 1,813
Available-for-sale securities
Gains (losses) arising during the period (150) 72 (166)
Reclassification to net earnings for losses (gains) realized 156 (82) 175
Defined benefit plans
Gains (losses) realized during the period (11) 15,535 6,751
Reclassification to net earnings of losses (gains) realized (1,690) 22,530 1,065
Less: Comprehensive income attributable to noncontrolling interests 985 785 743
The accompanying notes are an integral part of these Consolidated Financial Statements.
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PILGRIM’S PRIDE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Pilgrim’s Pride Corporation Stockholders
Shares Amount Shares Amount
(In thousands)
Comprehensive income:
Stock-based compensation plans:
Common stock issued under compensation plans 320 3 — — (3) — — — —
Requisite service period recognition — — — — 7,594 — — — 7,594
Comprehensive income:
Capital contribution under TSA — — — — — — — — —
Stock-based compensation plans:
Common stock issued under compensation plans 332 3 — — (3) — — — —
Requisite service period recognition — — — — 15,413 — — — 15,413
Comprehensive income:
Stock-based compensation plans:
Common stock issued under compensation plans 425 4 — — (4) — — — —
Requisite service period recognition — — — — 29,354 — — — 29,354
Purchase of noncontrolling interest — — — — — — — (1,294) (1,294)
The accompanying notes are an integral part of these Consolidated Financial Statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended
(In thousands)
Cash flows from operating activities
Adjustments to reconcile net income to cash provided by operating activities:
Loss (gain) on equity method investments — (7) 328
Changes in operating assets and liabilities
Long-term pension and other postretirement obligations (1,881) 26,052 (9,993)
Cash flows from investing activities
Proceeds from property insurance recoveries — — 20,681
Cash flows from financing activities
Proceeds from revolving line of credit and long-term borrowings — — 1,768,236
Payment of cash dividends (1,994,347) — —
Payment on early extinguishment of debt (2,120) (200) (13,780)
Purchase of noncontrolling interest (1,294) — —
Payment of capitalized loan costs — (16) (19,816)
Supplemental Disclosure Information
The accompanying notes are an integral part of these Consolidated Financial Statements.
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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 food companies 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 is primarily a chicken producer, with pork and lamb operations in the U.K. 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 (from its U.K. operations) to over 120 countries. Our fresh products consist of refrigerated whole or cut-up chicken, selected chicken parts that are either marinated or non-marinated, primary pork cuts, added value pork, pork ribs and lamb products. The Company’s prepared products include fully cooked, ready-to-cook and individually frozen chicken parts, strips, nuggets and patties, processed sausages, bacon, smoked meat, gammon joints, pre-packed meats, sandwich and deli counter meats and meat balls. The Company’s other products include plant-based protein offerings, ready-to-eat meals, multi-protein frozen foods, vegetarian foods and desserts. The Company also provides direct-to-consumer meals and hot food to-go solutions in the U.K. and the Republic of Ireland. We operate feed mills, hatcheries, processing plants and distribution centers in 14 U.S. states, the U.K., Mexico, France, Puerto Rico, the Netherlands and the Republic of Ireland.
Consolidated Financial Statements
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 in the notes to these Consolidated Financial Statements applies to our fiscal year and not the calendar year. Fiscal years 2025 and 2024 were both 52-week fiscal years.
The Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the U.S. (“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, identifiable intangible assets, valuation of deferred tax assets, insurance accruals, valuation of pension and other postretirement benefits obligations, income tax accruals, certain derivative positions and valuations of acquired businesses.
The functional currency of the Company’s U.S. 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. In 2024, the Company determined that there was a significant change in economic factors that necessitated a reassessment of the appropriate functional currency of the Mexico reportable segment. The primary economic factors driving the change included 1) the recent sustained, historical strengthening of the Mexican peso against the U.S. dollar and against other global currencies without a correlated impact on the average product sales prices of our Mexico operations and 2) a shift in the proportional volume of spend we have that is denominated in Mexican peso in relation to spend that is denominated in U.S. dollar. As a result of this reassessment, on April 1, 2024, the Company changed the functional currency of its Mexico operations from U.S. dollar to the Mexican peso. The functional currency of the Company’s operations in Mexico during fiscal year 2025 is the Mexican peso. For foreign currency-denominated entities, 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. 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 Consolidated Balance Sheets. For the Company’s Mexico operations prior to April 1, 2024, remeasurement from the Mexican peso to U.S. dollars was performed for monetary assets and liabilities using the exchange rate in effect as of the balance sheet date. Remeasurement was performed for non-monetary assets using the historical exchange rate in effect on the date of each asset’s acquisition. Income and expense accounts were remeasured using average exchange rates for the period. Net adjustments that resulted from remeasurement of the financial records, as well as foreign currency transaction gains and losses, are reflected in Foreign currency transaction losses (gains) in the Consolidated Statements of Income.
The Company or its subsidiaries may use derivatives for the purpose of mitigating exposure to changes in foreign currency exchange rates. Foreign currency transaction gains or losses are reported in the Consolidated Statements of Income.
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Revenue Recognition
The vast majority of the Company’s revenue is derived from contracts which are based upon a customer ordering its products. While there may be master agreements, the contract is only established when the customer’s order is accepted by the Company. The Company accounts for a contract, which may be verbal or written, when it is approved and committed by both parties, the rights of the parties are identified along with payment terms, the contract has commercial substance and collectability is probable.
The Company evaluates the transaction for distinct performance obligations, which are the sale of its products to customers. Since its products are commodity market-priced, the sales price is representative of the observable, standalone selling price. Each performance obligation is recognized based upon a pattern of recognition that reflects the transfer of control to the customer at a point in time, which is upon destination (customer location or port of destination), and depicts the transfer of control and recognition of revenue. There are instances of customer pick up at the Company’s facilities, 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 the 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.
Shipping and Handling Costs
In the rare case when shipping and handling activities are performed after a customer obtains control of the good, the Company has elected to account for shipping and handling as activities to fulfill the promise to transfer the good. When revenue is recognized for the related good before the shipping and handling activities occur, the related costs of those shipping and handling activities are accrued. Shipping and handling costs are recorded within cost of sales.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising costs are included in Selling, general and administrative (“SG&A”) expense and totaled $80.3 million, $70.1 million and $56.7 million for 2025, 2024 and 2023, respectively.
Research and Development Costs
Research and development costs are expensed as incurred. Research and development costs totaled $17.9 million, $12.4 million and $5.7 million for 2025, 2024 and 2023, respectively.
Cash and Cash Equivalents
The Company considers highly liquid investments with an original maturity of three months or less when acquired to be cash equivalents. The majority of the Company’s disbursement bank accounts are zero balance accounts where cash needs are funded as checks are presented for payment by the holder. Checks issued pending clearance that result in overdraft balances for accounting purposes are classified as accounts payable and the change in the related balance is reflected in operating activities on the Consolidated Statements of Cash Flows.
Restricted Cash
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 may also include investments in U.S. Treasury Bills that qualify as 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 Consolidated Balance Sheets to the total of the same amounts shown in the Consolidated Statements of Cash Flows:
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(In thousands)
Restricted cash and restricted cash equivalents — 2,324
Investments
The Company’s current investments are all highly liquid investments classified as either cash equivalents or short-term investments with an original maturity of less than one year at the time of acquisition. The Company’s current investments are comprised of fixed income securities, such as commercial paper. These investments are classified as available for sale. These securities are recorded at fair value, and unrealized holding gains and losses are recorded, net of tax, as a component of accumulated other comprehensive loss. Investments in fixed income securities with remaining maturities of less than one year and those identified by management at the time of purchase for funding operations in less than one year are classified as current assets. Investments in fixed income securities with remaining maturities in excess of one year that management has not identified at the time of purchase for funding operations in less than one year are classified as long-term assets. Unrealized losses are charged against net earnings when a decline in fair value is determined to be other-than-temporary. Management reviews several factors to determine whether a loss is other-than-temporary, such as the length of time a security is in an unrealized loss position, the extent to which fair value is less than amortized cost, the impact of changing interest rates in the short and long term, and the Company’s intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. The Company determines the cost of each security sold and each amount reclassified out of accumulated other comprehensive loss into earnings using the specific identification method. Purchases and sales are recorded on a settlement-date basis.
Investments in entities in which the Company has an ownership interest greater than 50% and exercises control over the entity are consolidated in the Consolidated Financial Statements. Investments in entities in which the Company has an ownership interest between 20% and 50% and exercises significant influence are accounted for using the equity method. The Company invests from time to time in ventures in which its ownership interest is less than 20% and over which it does not exercise significant influence. Such investments are carried at cost, less any impairment, and adjusted for observable price changes in orderly transactions for an identical or similar investment of the same issuer. The fair values for investments not traded on a quoted exchange are estimated based upon the historical performance of the ventures, the ventures’ forecasted financial performance and management’s evaluation of the ventures’ viability and business models. To the extent the book value of an investment exceeds its assessed fair value, the Company will record an appropriate impairment charge.
Accounts Receivable
The Company records accounts receivable when revenue is recognized. The Company records an allowance for expected 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. The Company writes off accounts receivable when it becomes apparent, based on age or customer circumstances, that such amounts will not be collected. Generally, the Company does not require collateral for its accounts receivable.
Inventories
Live chicken and pig inventories are stated at the lower of cost or net realizable value and breeder hen, breeder sow, and boar inventories are stated at the lower of cost, less accumulated amortization, or net realizable value. The costs associated with breeder hen inventories are accumulated up to the production stage and amortized over their productive lives using the unit-of-production method. The costs associated with breeder sow inventories are accumulated up to the production stage and amortized on a straight-line basis over their productive lives to the estimated residual cull value. Finished poultry products, finished pork products, feed, eggs and other inventories are stated at the lower of cost (average) or net realizable value. Inventory typically transfers from one stage of production to another at a standard cost, where it accumulates additional cost directly incurred with the production of inventory, including overhead. The standard cost at which each type of inventory transfers is set by management to reflect the actual costs incurred in the prior steps. The Company monitors and adjusts standard costs throughout the year to ensure that standard costs reasonably reflect the actual average cost of the inventory produced.
The Company allocates meat costs between its various finished chicken products based on a by-product costing technique that reduces the cost of the whole bird by estimated yields and amounts to be recovered for certain by-product parts.
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This primarily includes leg quarters, wings, tenders, and offal, which are carried in inventory at the estimated recovery amounts, with the remaining amount being reflected as its breast meat cost. The Company allocates meat costs between its various finished pork products based on a by-product costing technique that allocates the cost of the whole pig into the primal cuts by estimated yields and amounts to be recovered for certain by-product parts. This primarily includes legs, shoulders, bellies, offal, and fifth quarter parts, which are carried in inventory at the estimated recoverable amounts, with the remaining amount being reflected as its loin meat cost.
The Company values its other prepared foods products, raw materials and packaging materials at the lower of weighted average cost and net realizable value. Work-in-progress is valued at the latest production cost (raw materials, packaging), finished goods are valued at the lower of the latest actual monthly production cost (raw materials, packaging and direct labor) and attributable overhead and net realizable value, and engineering spares and consumables are valued at cost with an appropriate provision for obsolete engineering spares consistent with historical practice.
Generally, the Company performs an evaluation of whether any lower-of-cost-or-net-realizable-value adjustments are required at the country level based on a number of factors, including: (1) pools of related inventory, (2) product continuation or discontinuation, (3) estimated market selling prices and (4) expected distribution channels. If actual market conditions or other factors are less favorable than those projected by management, additional inventory adjustments may be required. The Company also records valuation adjustments, when necessary, for estimated obsolescence at or equal to the difference between the cost of inventory and the estimated market value based on known conditions affecting inventory obsolescence, including significantly aged products, discontinued product lines, or damaged or obsolete products.
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in Operating lease assets, net, Accrued expenses, and other current liabilities, and Noncurrent operating lease liabilities, less current maturities, in our Consolidated Balance Sheets. Finance leases are included in Property, plant and equipment, net, Current maturities of long-term debt and Long-term debt, less current maturities in our Consolidated Balance Sheets.
Operating lease assets and operating lease liabilities are initially recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As most of the Company’s leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate (“IBR”) based on the information available at commencement date in determining the present value of future payments. IBR is derived from the Company’s credit facility’s margin as a basis with adjustments to the periodically updated SOFR swap rate and foreign-currency curve. The operating lease asset also includes any lease payments made, including upfront costs and prepayments, and excludes lease incentives and initial direct costs incurred. The Company’s lease terms may include options to extend or terminate a lease when it is reasonably certain that it will exercise that option. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term with a corresponding reduction to the operating lease asset.
The Company has lease agreements with lease and non-lease components. Lease and non-lease components are generally accounted for separately. For certain equipment leases, such as vehicles, the Company accounts for the lease and non-lease components as a single lease component.
Property, Plant and Equipment
Property, plant, and equipment are stated at cost, and repair and maintenance costs are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of these assets. Estimated useful lives for buildings, machinery and equipment are five to 33 years and for automobiles and trucks are three to ten years. The charge to income resulting from amortization of assets recorded under capital leases is included within depreciation expense.
The Company records impairment charges on long-lived assets held for use when events and circumstances indicate that the assets may be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. When this occurs, the impairment charge is determined based on the amount the net book value of the assets exceeds their fair market value. In making these determinations, the Company utilizes certain assumptions, including but not limited to: (1) future cash flows estimated to be generated by these assets, which are based on additional assumptions such as asset utilization, remaining length of service and estimated salvage values, (2) estimated fair market value of the assets, and (3) determinations with respect to the lowest level of cash flows relevant to the respective impairment test, generally groupings of related operational facilities. Given the interdependency of the Company’s individual facilities during the production process, that operate as a vertically integrated network, it evaluates impairment of assets held for use at the country level (i.e., the U.S. and Mexico). Management believes this is the lowest level of identifiable cash flows for its assets
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that are held for use in production activities. At present, the Company’s forecasts indicate that it can recover the carrying value of its assets held for use based on the projected undiscounted cash flows of the operations.
The Company records impairment charges on long-lived assets held for sale when the carrying amount of those assets exceeds their fair value less appropriate selling costs. Fair value is based on amounts documented in sales contracts or letters of intent accepted by the Company, amounts included in counteroffers initiated by the Company, or, in the absence of current contract negotiations, amounts determined using a sales comparison approach for real property and amounts determined using a cost approach for personal property. Under the sales comparison approach, sales and asking prices of reasonably comparable properties are considered to develop a range of unit prices within which the current real estate market is operating. Under the cost approach, a current cost to replace the asset new is calculated and then the estimated replacement cost is reduced to reflect the applicable decline in value resulting from physical deterioration, functional obsolescence and economic obsolescence. Appropriate selling costs include reasonable broker’s commissions, costs to produce title documents, filing fees, legal expenses and the like.
Goodwill and Other Intangibles, net
Goodwill represents the excess of the aggregate purchase price over the fair value of the net identifiable assets acquired in a business combination. Identified intangible assets represent trade names, customer relationships, and non-compete agreements arising from acquisitions that are recorded at fair value as of the date acquired, less accumulated amortization, if any. The Company uses various market valuation techniques to determine the fair value of its identified intangible assets.
Goodwill and other intangible assets with indefinite lives are not amortized, but are tested for impairment on an annual basis in the fourth quarter of each fiscal year or more frequently if impairment indicators arise. For goodwill, an impairment loss is recognized for any excess of the carrying amount of a reporting unit’s goodwill over the implied fair value of that goodwill. Management first reviews relevant qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than the unit’s carrying amount (including goodwill). If management determines it is more likely than not that the carrying amount of a reporting unit’s goodwill might be impaired, a quantitative analysis is performed. Management performed a qualitative analysis noting that it was not more likely than not that there was goodwill impairment in any of its reporting units as of December 28, 2025. For indefinite-lived intangible assets, an impairment loss is recognized if the carrying amount of an indefinite-lived intangible asset exceeds the estimated fair value of that intangible asset. Management first reviews relevant qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that an intangible asset is impaired. If management determines there is an indication that the carrying amount of the intangible asset might be impaired, and a quantitative analysis is performed. Management performed a qualitative analysis noting that it was not more likely than not that there was impairment for any of its indefinite-lived intangible assets as of December 28, 2025.
Identifiable intangible assets with definite lives, such as customer relationships and trade names, that the Company expects to use for a limited amount of time, are amortized over their estimated useful lives on a straight-line basis. The useful lives range from 15 to 20 years for trade names and three to 18 years for customer relationships. Identified intangible assets with definite lives are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Management assessed if events or changes in circumstances indicated that the aggregate carrying amount of its identified intangible assets with definite lives might not be recoverable and determined that there were no impairment indicators during the years ended December 28, 2025 and December 29, 2024.
Litigation and Contingent Liabilities
The Company is subject to lawsuits, investigations, and other claims related to employment, environmental, product, and other matters. The Company is required to assess the likelihood of any adverse judgments or outcomes, as well as potential ranges of probable losses related to these matters. The Company estimates the amount of reserves required for these contingencies when losses are determined to be probable and after considerable analysis of each individual issue. The Company expenses legal costs related to such loss contingencies as they are incurred. The accrual for environmental remediation liabilities is measured on an undiscounted basis. These reserves may change in the future due to changes in the Company’s assumptions, the effectiveness of strategies, or other factors beyond the Company’s control.
Accrued Self-Insurance
Insurance expense for casualty claims and employee-related health care benefits is estimated using historical and current experience and actuarial estimates. Stop-loss coverage is maintained with third-party insurers to limit the Company’s total exposure. Certain categories of claim liabilities are actuarially determined. The assumptions used to arrive at periodic expenses are reviewed regularly by management. However, actual expenses could differ from these estimates and could result in adjustments being recognized.
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Asset Retirement Obligations
The Company monitors certain asset retirement obligations in connection with its operations. These obligations relate to clean-up, removal, or replacement activities and related costs for “in-place” exposures only when those exposures are moved or modified, such as during renovations of the Company’s facilities. These in-place exposures include asbestos, refrigerants, wastewater, oil, lubricants, and other contaminants common in manufacturing environments. Under existing regulations, the Company is not required to remove these exposures and there are no plans to undertake a renovation that would require removal of the asbestos or the remediation of the other in-place exposures at this time. The facilities are expected to be maintained and repaired by activities that will not result in the removal or disruption of these in-place exposures at this time. As a result, there is an indeterminate settlement date for these asset retirement obligations because the range of time over which the Company may incur these liabilities is unknown and cannot be reasonably estimated. Therefore, the Company has not recorded the fair value of any potential liability.
Income Taxes
The Company follows provisions stated in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, with regard to members of a group that file a consolidated tax return but issue separate financial statements. The Company files certain state unitary returns with JBS USA Food Company Holdings (“JBS USA Holdings”). The income tax expense of the Company is computed using the separate return method. The provision for income taxes has been determined using the asset and liability approach of accounting for income taxes. For the unitary states, we have an obligation to make tax payments to JBS USA Holdings for our share of the unitary taxable income, which is included in taxes payable in our Consolidated Balance Sheets. Under this approach, deferred income taxes reflect the net tax effect of temporary differences between the book and tax bases of recorded assets and liabilities, net operating losses and tax credit carryforwards. The amount of deferred tax on these temporary differences is determined using the tax rates expected to apply to the period when the asset is realized or the liability is settled, as applicable, based on the tax rates and laws in the respective tax jurisdiction enacted as of the balance sheet date.
The Company reviews its deferred tax assets for recoverability and establishes a valuation allowance based on historical taxable income, potential for carryback of tax losses, projected future taxable income, applicable tax strategies, and the expected timing of the reversals of existing temporary differences. A valuation allowance is provided when it is more likely than not that some or all of the deferred tax assets will not be realized. Valuation allowances have been established primarily for net operating loss carryforwards of certain foreign subsidiaries.
During 2025, the Company changed its assertion regarding the permanent reinvestment of certain foreign earnings. For Mexico, we no longer consider cumulative earnings through 2025 to be permanently reinvested. As a result, the Company recognized a deferred tax liability and associated income tax expense of approximately $7.1 million. For Puerto Rico, the U.K., the Republic of Ireland, France, the Netherlands, Luxembourg, and Malta, there are no positive cumulative earnings from these jurisdictions as of December 28, 2025, and therefore the Company is precluded from making a permanent reinvestment assertion for these jurisdictions.
The Company follows provisions within ASC Topic 740, Income Taxes, that provide a recognition threshold and measurement criteria for the financial statement recognition of a tax benefit taken or expected to be taken in a tax return. Tax benefits are recognized only when it is more-likely-than-not, based on the technical merits, that the benefits will be sustained on examination. Tax benefits that meet the more-likely-than-not recognition threshold are measured using a probability weighting of the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement. Whether the more-likely-than-not recognition threshold is met for a particular tax benefit is a matter of judgment based on the individual facts and circumstances evaluated in light of all available evidence as of the balance sheet date. See “Note 12. Income Taxes” to the Consolidated Financial Statements.
On December 30, 2024, the Company entered into a tax sharing agreement (the “Tax Sharing Agreement”) with JBS USA governing the allocation, and certain payment and reimbursement obligations of U.S. income tax liabilities and assets among the Company and its relevant U.S. corporate subsidiaries, on the one hand, and JBS USA and its relevant U.S. subsidiaries, on the other hand. The Tax Sharing Agreement is effective for each tax year beginning on or after December 30, 2024, or such other date on which PPC becomes a member of the Parent Consolidated Group (as defined in the Tax Sharing Agreement). The Tax Sharing Agreement is attached as Exhibit 10.15 to this Annual Report.
Pension and Other Postemployment Benefits
Our pension and other postemployment benefit costs and obligations are dependent on the various actuarial assumptions used in calculating such amounts. These assumptions relate to discount rates, long-term return on plan assets, and other factors. We base the discount rate assumptions on current investment yields on high-quality corporate long-term bonds.
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We determine the long-term return on plan assets based on historical portfolio results and management’s expectation of the future economic environment. Actual results that differ from our assumptions are accumulated and, if in excess of the lesser of 10% of the projected benefit obligation or the fair market value of plan assets, amortized over either (1) the estimated average future service period of active plan participants if the plan is active or (2) the estimated average future life expectancy of all plan participants if the plan is frozen.
Derivative Financial Instruments
The Company uses derivative financial instruments (e.g., futures, forwards options, and swaps) for the purpose of mitigating exposure to changes in commodity prices and foreign currency exchange rates.
•Commodity Price Risk - The Company utilizes various raw materials, which are all considered commodities, in its operations, including corn, soybean meal, soybean oil, wheat, natural gas, electricity, and diesel fuel. The Company considers these raw materials to be 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 the Company’s control, such as economic and political conditions, supply and demand, weather, governmental regulation and other circumstances. Generally, the Company enters into derivative contracts such as physical forward contracts and exchange-traded futures or option contracts in an attempt to mitigate price risk related to its anticipated consumption of commodity inputs for periods up to 12 months. The Company may enter into longer-term derivatives on particular commodities if deemed appropriate.
•Foreign Currency Risk - The Company has foreign operations and, therefore, has exposure to foreign exchange risk when the financial results of those operations are translated to U.S. dollars. The Company will occasionally purchase derivative financial instruments such as foreign currency forward contracts in an attempt to mitigate currency exchange rate exposure in its Mexico reportable segment. The Company’s Europe reportable segment also attempts to mitigate foreign currency exposure on certain transactions denominated in foreign currencies through the use of derivative financial instruments.
Pilgrim’s recognizes all commodity derivative instruments that qualify for derivative accounting treatment as either assets or liabilities and measures those instruments at fair value unless they qualify for, and we elect, the normal purchases and normal sales scope exception (“NPNS”). The permitted accounting treatments include: cash flow hedge; fair value hedge, and undesignated contracts. Undesignated contract accounting is the default accounting treatment for all derivatives unless they qualify, and we specifically designate them, for one of the other accounting treatments. Derivatives designated for any of the elective accounting treatments must meet specific, restrictive criteria both at the time of designation and on an ongoing basis.
The Company has generally applied the NPNS exception for certain of its forward physical grain purchase and energy purchase contracts. NPNS contracts are accounted for using the accrual method of accounting; therefore, there were no amounts recorded in the Consolidated Financial Statements at December 28, 2025 and December 29, 2024.
Undesignated contracts may include contracts not designated as a hedge or for which the NPNS exception was not elected, contracts that do not qualify for hedge accounting and derivatives that do not or no longer qualify for the NPNS scope exception. The fair value of these derivatives is recognized in the Consolidated Balance Sheets within Prepaid expenses and other current assets or Accrued expenses and other current liabilities. Changes in fair value of these derivatives are recognized immediately in the Consolidated Statements of Income within Net sales, Cost of sales or Foreign currency transaction losses (gains), depending on the risk they are intended to mitigate. 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 Consolidated Balance Sheets, except in scenarios where the margin cash is not fully settled and in these scenarios, the outstanding balance is reported in Accrued expenses and other liabilities on the Consolidated Balance Sheets. While management believes these instruments help mitigate various market risks, they are not designated nor accounted for as hedges as a result of the extensive record keeping requirements.
The Company does apply hedge accounting treatment to certain derivative financial instruments related to its 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 Consolidated Statements of Income.
Business Combination Accounting
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Pilgrim’s allocates the consideration of an acquired business to its identifiable assets and liabilities based on estimated fair values. The excess of the consideration over the amount allocated to the assets and liabilities, if any, is recorded to goodwill. The Company uses all available information to estimate fair values. Pilgrim’s uses various models to determine the value of assets acquired and liabilities assumed such as net realizable value to value inventory, cost method and market approach to value property, relief-from-royalty and multi-period excess earnings to value intangibles and discounted cash flow to value goodwill. The Company typically engages third-party valuation specialists to assist in the fair value determination of tangible long-lived assets and intangible assets other than goodwill. The fair value of acquired inventories is determined by extending physical counts of the inventories taken at or near the acquisition date to market pricing in effect for such inventories at or near the acquisition date. The carrying values of acquired receivables and accounts payable have historically approximated their fair values as of the business combination date. As necessary, Pilgrim’s may engage third-party specialists to assist in the estimation of fair value for certain liabilities. The Company adjusts the preliminary acquisition accounting, as necessary, typically up to one year after the acquisition closing date for those items that existed at the acquisition date and were provisionally accounted for at that time, as it obtains more information regarding asset valuations and liabilities assumed.
The Company’s acquisition accounting methodology contains uncertainties because it requires management to make assumptions and apply judgment to estimate the fair value of acquired assets and liabilities. Management estimates the fair value of assets and liabilities based upon quoted market prices, the carrying value of the acquired assets and widely accepted valuation techniques, including discounted cash flows and market multiple analyses. Unanticipated events or circumstances may occur which could affect the accuracy of the Company’s fair value estimates, including changes in assumptions regarding industry economic factors and business strategies. If actual results are materially different than the assumptions used to determine fair value of the assets and liabilities acquired through a business combination, it is possible that adjustments to the carrying values of such assets and liabilities will have an impact on the Company’s net earnings.
Industrial Revenue Bond Transactions
On November 7, 2025, the Company closed an industrial revenue bond transaction with the Walker County Development Authority (the “Authority”) in order to receive a ten-year property tax incentive on the Company’s production facility in Walker County currently under development. Pursuant to this transaction, the Authority issued an industrial development revenue bond in the amount of $460.5 million (subject to drawdowns as construction progresses) to the Company in order to acquire legal title to the land for the facility from the Company. The Authority then leased the land back to the Company under a finance lease, the terms of which provide for the payment of rent in an amount equal to the debt service owed by the Authority on the bonds. Title to buildings to be constructed and equipment to be acquired will also be acquired by the Authority and leased to the Company through this program. At this time, only the related land is recorded as an asset in Property, plant, and equipment, net on the Company’s Consolidated Balance Sheet. The Company has the legal right to set-off and intends to set-off the corresponding lease and bond debt service payments, therefore the Company has netted the finance lease obligation with the bond asset. As such, no amount for our obligation under the finance lease or the corresponding industrial revenue bond asset are reflected in our Consolidated Balance Sheet.
On August 22, 2024, the Company closed an industrial revenue bond transaction with the Douglas-Coffee County Industrial Authority d/b/a Douglas-Coffee County Development Authority (the “County”) to receive a five-year real property tax abatement on the Company’s newly constructed Douglas, Georgia protein conversion facility. Pursuant to this transaction, the County issued an industrial revenue bond for $130.0 million principal amount to the Company and then used the proceeds of the bond issuance to purchase the land and facility from the Company. The County then leased the facility back to the Company under a finance lease, the terms of which provide for the payment of rent in an amount equal to that of bond service costs. The related land and building are recorded as assets in Property, plant, and equipment, net on the Company’s Consolidated Balance Sheet. The Company has the legal right to set-off and intends to set-off the corresponding lease and bond service payments, therefore the Company has netted the finance lease obligation with the bond asset. As such, no amount for our obligation under the finance lease or the corresponding industrial revenue bond asset are reflected in our Consolidated Balance Sheet.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company makes significant estimates in regard to realization of deferred tax assets; valuation of long-lived assets; valuation of contingent liabilities and self-insurance liabilities; and valuation of acquired businesses.
Recent Accounting Pronouncements Adopted in 2025
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In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires additional disclosures for income taxes to enhance transparency and usefulness of income tax disclosures. The guidance requires additional disclosures for the tabular rate reconciliation, income taxes paid, and the disaggregation of domestic, federal and state, and foreign components within income (or loss) from continuing operations before income tax expense (or benefit) and income tax expense (or benefit) from continuing operations. The provisions of the new guidance is effective for years beginning after December 15, 2024. The Company adopted this guidance effective for fiscal year 2025. The adoption of this guidance did not have a material impact on our Consolidated Financial Statements. Additional information regarding segments is included in “Note 12. Income Taxes.”
Recent Accounting Pronouncements Adopted in 2024
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires additional disclosures for reportable segments. The guidance requires disclosures about significant segment expenses that are regularly provided to the chief operating decision maker along with additional measures of segment profit that are regularly used by the chief operating decision maker in assessing segment performance and deciding how to allocate resources. The provisions of the new guidance will be effective for years beginning after December 15, 2023 and interim periods in fiscal years beginning after December 15, 2024. The Company adopted this guidance effective December 29, 2024. The adoption of this guidance did not have a material impact on our Consolidated Financial Statements. Additional information regarding segments is included in “Note 20. Reportable Segments.”
Recent Accounting Pronouncements Not Yet Adopted as of December 28, 2025
In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40), which requires additional disclosures for certain costs and expenses to help investors better understand major components of an entity’s income statement. The guidance requires additional disclosures for costs and expenses such as purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The provisions of the new guidance will be effective for annual reporting years beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. The Company plans to adopt this guidance as it becomes effective and is assessing the impacts on our Consolidated Financial Statements.
2. REVENUE RECOGNITION
Disaggregated Revenue
Revenue has been disaggregated into the following categories below to show how economic factors affect the nature, amount, timing, and uncertainty of revenue and cash flows:
Fresh Prepared Export Other(a) Total
(In thousands)
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Fresh Prepared Export Other(a) Total
(In thousands)
Fresh Prepared Export Other(a) Total
(In thousands)
(a)Included in Other sales shown above are sales of commodity grains and protein byproducts.
Additional disaggregation of revenue by sales channel is provided below:
Retail Foodservice Export Other Total
(In thousands)
Retail Foodservice Export Other Total
(In thousands)
Retail Foodservice Export Other Total
(In thousands)
(a)Included in Mexico foodservice channel are sales to wholesale public meat markets that typically sell product on to foodservice customers. Included in Mexico other channel are sales to live chicken markets.
Contract Costs
The Company can incur incremental costs to obtain or fulfill a contract such as broker expenses that are not expected to be recovered. The amortization period for such expenses is less than one year; therefore, the costs are expensed as incurred.
Taxes
The Company excludes all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer (for example, sales, use, value added and some excise taxes) from the transaction price.
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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 liability balances for the years ended December 28, 2025 and December 29, 2024 were as follows:
(In thousands)
3. LEASES
The Company is party to operating lease agreements for warehouses, office space, vehicle maintenance facilities and livestock growing farms in the U.S., distribution centers, hatcheries and office space in Mexico and farms, processing facilities and office space in Europe. Additionally, the Company leases equipment, over-the-road transportation vehicles and other assets in all three reportable segments. The Company is also party to a limited number of finance lease agreements in the U.S.
The Company’s leases have remaining lease terms of less than one year to 17 years, some of which may include options to extend the lease for up to five years and some of which may include options to terminate the lease within one year. The exercise of options to extend lease terms is at the Company’s sole discretion. Certain leases also include options to purchase the leased property.
Certain lease agreements include rental payment increases over the lease term that can be either fixed or variable. Fixed payment increases and variable payment increases based on an index or rate are included in the initial lease liability using the index or rate at commencement date. Variable payment increases not based on an index are recognized as incurred. Certain lease agreements contain residual value guarantees, primarily vehicle and transportation equipment leases.
The following table presents components of lease expense (in thousands). Operating lease cost, finance lease amortization and finance lease interest are respectively included in Cost of sales, SG&A expense and Interest expense, net of capitalized interest in the Consolidated Statements of Income.
Year Ended
Amortization of finance lease assets 426 650
Interest on finance leases 39 58
(a)Sublease income is immaterial and not included in operating lease costs.
The weighted-average remaining lease term and discount rate for lease liabilities included in our Consolidated Balance Sheets are as follows:
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Weighted-average remaining lease term:
Operating leases 6.05 years 6.11 years
Finance leases 2.39 years 3.35 years
Weighted-average discount rate:
Supplemental cash flow information related to leases is as follows (in thousands):
Year Ended
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases $ 86,231 $ 84,806
Operating cash flows - finance leases 43 40
Financing cash flows - finance leases 540 616
Future minimum lease payments under noncancelable leases as of December 28, 2025 are as follows (in thousands):
Operating Leases Finance Leases
For the fiscal years ending December:
Less: imputed interest (40,285) (51)
Present value of lease liabilities $ 258,945 $ 1,389
Lease liabilities are included in our Consolidated Balance Sheets as follows (in thousands):
Operating Leases Finance Leases Operating Leases Finance Leases
Accrued expenses and other current liabilities $ 59,630 $ — $ 63,327 $ —
Current maturities of long-term debt — 585 — 536
Long-term debt, less current maturities — 804 — 1,256
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4. DERIVATIVE FINANCIAL INSTRUMENTS
Information regarding the Company’s outstanding derivative instruments and cash collateral posted with brokers is included in the following table:
(In thousands)
Fair values
Commodity derivative assets $ 9,509 $ 6,598
Commodity derivative liabilities (1,343) (2,494)
Foreign currency derivative assets 95 755
Foreign currency derivative liabilities (205) (1,397)
Sales contract derivative liabilities (2,638) (778)
Cash collateral posted with brokers(a) — 2,324
Margin cash payable(b) (3,886) —
Derivatives coverage(c)
Period through which stated percent of needs are covered:
(a)Collateral posted with brokers consists primarily of cash, short term treasury bills, or other cash equivalents.
(b)Collateral that is owed to brokers is reflected in margin cash payable
(c)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:
Year Ended
(a)Amounts represent income (expenses) related to results of operations.
The following tables present the components of the gain or loss on derivatives that qualify as cash flow hedges:
Gains (Losses) Recognized in Other Comprehensive Income (Loss)
(In thousands)
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Gains (Losses) Reclassified from AOCI into Income
Net sales(a) Cost of sales(b) Net sales(a) Cost of sales(b)
(In thousands)
Impact from cash flow hedging instruments:
(a)Amounts represent income (expenses) related to net sales.
(b)Amounts represent expenses (income) related to cost of sales and interest expense.
As of December 28, 2025, there were $1.5 million of pre-tax deferred net losses on foreign currency derivatives recorded in AOCI expected to be reclassified to the 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.