SUMMARY

The following is a summary of some of the information contained in this prospectus. It does not contain all the details concerning JBS Foods International or the transaction, including information that may be important to you. We urge you to read this entire document carefully, including “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Condensed and Combined Financial Data of JBS Foods International” and the financial statements and the notes thereto included elsewhere in this prospectus.

Overview

We are one of the world’s largest food companies and the world’s largest protein company in terms of revenue. Our pro forma net revenue for the nine-month period ended September 30, 2016 and the year ended December 31, 2015 was R$109,422.5 million (US$33,709.9 million) and R$136,257.0 million (US$41,976.9 million), respectively. Through strategic acquisitions in new geographies, primarily in the United States, Australia, Brazil and Europe, we have created a diversified global platform that allows us to prepare, package and deliver fresh, processed and value-added beef, poultry, pork, lamb and sheep products and animal by-products. During 2015 and the nine-month period ended September 30, 2016, we sold our products in approximately 190 countries on six continents, and for the nine-month period ended September 30, 2016 and the year ended December 31, 2015, we generated 92.7% and 92.6%, respectively, of our pro forma gross revenue from sales outside of Brazil. Our protein products are recognized through our well-known brands, including “Swift,” “Swift Premium,” “1855,” “Pilgrim’s Pride,” “Pierce,” “Gold Kist Farms” and “Del Dia” in North America, “Seara,” “Doriana” and “Cabaña Las Lilas” in South America, “Primo,” “Great Southern” and “Beehive” in Australia and New Zealand and “Moy Park” and “O’Kane” in Europe.

We believe that, as of September 30, 2016, we were one of the largest:

 

•

beef producers in the world in terms of capacity, with operations in the United States, Canada, Australia, Argentina, Paraguay, and Uruguay and an aggregate daily processing capacity of approximately 47,800 head of cattle;

 

•

poultry producers in the world in terms of capacity, with operations in the United States, Mexico, Puerto Rico, Brazil and the United Kingdom and an aggregate daily processing capacity of approximately 13.7 million chickens;

 

•

pork producers in the United States and Brazil in terms of capacity, with aggregate daily processing capacities of approximately 89,700 hogs and 21,200 hogs, respectively. We also operate one pork facility in Australia with a daily processing capacity of approximately 4,000 hogs; and

 

•

lamb and sheep producers in the world in terms of capacity, with operations in Australia and an aggregate daily slaughtering capacity of approximately 23,800 lambs.

We also believe that we are a significant producer of further processed and value-added meat products in the world, with an aggregate monthly production capacity of approximately 189,400 tons as of September 30, 2016.

Our fresh products include fresh and frozen cuts of beef, pork, lamb and sheep, whole chickens and chicken parts. Our branded processed and value-added meat products include products that are cut, ground and packaged in a customized manner for specific orders and include frozen, cooked, canned, seasoned, marinated and consumer-ready products.

We sell our products primarily to retailers (such as supermarkets, club stores and other retail distributors), many of which products include our proprietary brands, and foodservice companies (such as restaurants, hotels, foodservice distributors and additional processors) in the countries where we operate our facilities, which we classify as domestic sales, and elsewhere, which we classify as export sales. As of September 30, 2016, we had more than 250,000 active customers worldwide, including retailers and wholesalers.

 

The following table sets forth some of our main pro forma financial information for the periods indicated:

 

		For the nine-month period ended September 30,								For the year ended December 31,
		2016 (1)				2016				2015 (1)				2015
		(unaudited)
		(in millions of U.S. dollars)				(in millions of reais, except percentages)				(in millions of U.S. dollars)				(in millions of reais, except percentages)
Pro forma net revenue			33,709.9				109,422.5				41,976.9				136,257.0
Pro forma EBITDA (2)			2,059.9				6,686.5				3,419.4				11,099.5
Pro forma Adjusted EBITDA (2)			2,067.1				6,709.7				3,471.8				11,269.6
Pro forma Adjusted EBITDA Margin (3)							6.1	%							8.3	%

 

(1)

Solely for the convenience of the reader, amounts in reais have been translated into U.S. dollars at an exchange rate of R$3.246 per US$1.00, which was the commercial selling rate for U.S. dollars in effect on September 30, 2016, as reported by the Central Bank of Brazil. These U.S. dollar amounts have not been audited.

(2)

EBITDA and Adjusted EBITDA are used as measures of performance by our management. We calculate EBITDA as net income plus: income taxes; finance expense (income), net; and depreciation and amortization (including amortization of biological assets). We calculate Adjusted EBITDA as EBITDA minus: share of profit of equity – accounted investees, net of tax; plus: bargain purchase gain, indemnity, reorganization and restructuring expenses and other non-recurring items, net; and non-recurring tax contingencies.

EBITDA and Adjusted EBITDA are useful tools for assessing financial performance but are not reliable indicators of a company’s ability to generate cash to service its debt obligations because certain of the items added to net income (loss) to determine EBITDA and Adjusted EBITDA involve outlays of cash. As a result, actual cash available to service debt obligations will be different from EBITDA and Adjusted EBITDA. You should rely primarily on our IFRS results, and use EBITDA and Adjusted EBITDA in a supplemental manner in making your investment decision. For more information about the limitations of EBITDA and Adjusted EBITDA, see “Presentation of Financial and Other Information—Non-IFRS Financial Measures.”

For reconciliations of EBITDA and Adjusted EBITDA to net income for the periods indicated, see “Summary—Summary Historical and Pro Forma Financial Data— Summary Unaudited Pro Forma Condensed and Combined Financial Data of JBS Foods International—Non-IFRS Financial Measures.”

(3)	Pro forma Adjusted EBITDA margin is calculated by dividing pro forma Adjusted EBITDA by pro forma net revenue.

Competitive Strengths

Our competitive strengths include the following:

Scale and leading market positions

We are one of the world’s largest food companies and the world’s largest protein company in terms of revenue. In terms of daily processing capacity, we believe we are among the leading beef, pork, chicken and lamb processors in the world. We are well positioned to be a primary provider of beef, pork, chicken and lamb, in addition to branded processed and value-added products, for our customers’ protein needs and to capitalize on growing global demand within the food industry. We are a valued supplier for our large integrated customers due to our ability to ensure supply and provide competitive pricing. We have established a reputation for dependable quality and highly responsive service.

 

Our economies of scale allow us to spread our fixed costs and maintain a competitive cost position in the markets in which we operate. Furthermore, our scale provides us with leverage in negotiating vendor agreements, such as freight, packaging, maintenance suppliers and services.

Diversified business model with international reach

Our business is well-diversified across different types of products and all major distribution channels. Our business is also well-diversified geographically with respect to production and distribution.

 

•

Diversified food products offerings: We are well positioned to be a primary protein provider to our customers. Selling multiple sources of food products grants us the opportunity to cross-sell to our customers and to diversify typical industry risks such as industry cycles, the impact of species-based diseases and outbreaks and changes in consumer preferences. As a result of our diversification of products across multiple proteins, our business is less likely to be severely impacted by issues affecting any one form of protein.

 

•

Sales and distribution channel diversification: We benefit from our diversified sales and distribution channels, which include national and regional retailers (including supermarket chains, independent grocers, club stores and wholesale distributors), the foodservice industry (including foodservice distributors, which service restaurants and hotel chains and other institutional customers) and further processors (including makers of bacon, sausage and deli and luncheon meats). As of September 30, 2016, we sold our products to more than 250,000 customers worldwide, with no single customer accounting for more than 5.0% of our pro forma net sales for the nine-month period ended September 30, 2016. This diversification reduces our dependence on any one market or customer and provides multiple channels for potential growth.

 

•

Geographic and export diversification: Our processing platforms in the major meat-producing countries provide us with sufficient scale and operating flexibility to satisfy demand regardless of market conditions and sanitary restrictions. We sell our products in approximately 190 countries on six continents. Our geographic diversification enables us to reduce exposure to any one market and capitalize on worldwide demand. Additionally, having access to international markets allows us to potentially generate higher returns as many of our export products, such as tongue, heart, kidney and other variety meats, garner higher demand and prices in foreign markets with diverse local customs, particularly in Asia and the Middle East.

 

•

Successful integration of acquisitions: Our management has a strong track record of acquiring and successfully integrating operations, as evidenced by the more than 30 acquisitions we have made over the last 20 years, including, most recently, the Primo Acquisition, the Acquisition of Tyson Foods Assets in Mexico, the Cargill Pork Acquisition and the Moy Park Acquisition in 2015, the Acquisition of Tyson Foods Assets in Brazil in 2014 and the Seara Acquisition in 2013. Furthermore, we have leveraged this expertise to rapidly integrate and realize cost savings and margin improvement from our acquisitions. We continue to identify and develop plans to realize additional cost saving opportunities from the integration of our acquisitions. We believe that due to our leadership, global production scale, financial stability and experience in acquiring and integrating companies, we are well positioned to operate as one of the leading companies in the consolidation of the global food industry.

Established customer relationships

We have long-standing relationships with numerous well-established, global customers, many of whom have been doing business with us for more than 20 years. We believe our scale and footprint position us to serve large national and multinational customers (including the largest foodservice distributors, restaurants and retail chains), to whom we can provide a variety of products at locations around the world. Additionally, we are focused on developing long-term, mutually beneficial relationships with our customers, who, we believe,

 

consider us to be an extension of their operations. Our high-quality, long-standing relationships provide us with greater revenue stability and forecasting transparency.

Proven management team

Our management team has a significant knowledge of the beef, pork and poultry industries. Certain members of our management have more than 25 years of experience in the management of our company or in the industries in which we operate. We believe that our management is one of the main factors responsible for the increase in our sales, improvement of our business and integration of our new acquisitions, transforming us into one of the leading companies in the global food industry.

We also benefit from management ideas, best practices and talent shared with the seasoned management team at our parent company, JBS S.A., which has more than 50 years of experience operating beef processing plants in Brazil. Wesley Mendonça Batista, chief executive officer JBS S.A., has more than 25 years of operating experience in both the United States and Brazil, and along with the other members of the Batista Family, holds a significant stake in JBS S.A.

Our Strategy

Our strategy is continue our development as a leading global food company, with a focus on improving our processed, value added and branded product offerings and to seek consolidation opportunities to further enhance our diversified global production platform.

Grow our prepared foods business

Currently, we have established prepared foods businesses in Brazil (operating under the “Seara” brand) and in Australia (under the “Primo” and “Hans” brands). Prepared foods businesses allow us to integrate our activities and improve the profitability of our operations across the value chain. In addition, prepared foods generally have higher and more stable margins than our core fresh and frozen protein businesses. We intend to continue to invest in the growth of our prepared foods business through both organic growth and acquisitions in order to improve our margins and generate more stable earnings.

Increase our value-added product offerings

End consumers, as well retail and foodservice customers, are increasingly seeking more organic and natural protein products that are sold at premium prices. We have a number of products that have been introduced across all of our markets that offer organic, antibiotic free (ABF), vegetarian fed and/or all natural products to customers. We plan to continue to invest in the growth of these products, which are sold under the following brands: “Swift,” “Swift Premium,” “1855,” “Pilgrim’s Pride,” “Pierce,” “Gold Kist Farms” and “Del Dia” in North America; “Seara,” “Doriana” and “Cabaña Las Lilas” in South America; “Primo,” “Great Southern” and “Beehive” in Australia and New Zealand; and “Moy Park” and “O’Kane” in Europe.

We continue to grow our value-added and case-ready products, which lower labor cost for our customers and offer greater convenience for consumers. Examples of our value-added product offerings include sliced, cubed, tenderized, canned, marinated and other consumer-ready products. These products are primarily offered to customers under our own brands. We intend to continue to expand our branded value-added product offerings through increased investment in our production facilities and selective acquisitions. We also intend to continue to invest in marketing to increase the awareness and consumer perception of our brands. We believe that increased sales of value-added products will significantly enhance our product margins.

 

Drive operational improvement in our core business

We have an established track record of reducing costs and increasing production yields. We intend to continue to be one of the most efficient food companies in the world with a focus on improving the efficiency of our production processes, logistics and distribution networks, investing in information technology and automation while continuing to benefit from gains in economies of scale and operating synergies from acquisitions. We believe we can enhance our yields through the development and implementation of modern processes and improvement of products throughout the production chain, improving carcass yield for fresh and processed meat, as well as processing hides. We will continue to focus on developing innovative processes and improving products throughout the production chain.

Continue to successfully integrate acquisitions

We have a successful history of acquiring and improving the operating performance of companies. We have successfully captured operational synergies, including the streamlining of managerial jobs, improvements to sales networks, consolidation of distribution networks, enhancement of freight and storage costs and the consolidation of risk and financial management systems. We have used this experience to integrate businesses such as PPC, Seara Brasil, Primo, Moy Park and Cargill Pork and will continue to apply this experience to integrate other companies that we may acquire in the future.

Continue to prioritize food safety and animal welfare

We prioritize food safety and animal welfare objectives in order to accomplish two principal goals. First, we focus on maintaining a high standard of food safety in order to ensure the quality of our products and attempt to avoid the potential adverse market reaction that is associated with recalls that occur from time to time in the meat processing industry. In addition, we understand our role in protecting public health requires constant research and the implementation of new and maturing best practices. We know that healthy animals produce healthy, quality products. We continually strive to improve our animal handling and husbandry efforts, working with industry leaders, academics and internal experts to ensure the well-being of the animals, which is critical to the success of our business.

Recent Developments

On November 29, 2016, PPC entered into a definitive agreement to acquire GNP Company, a leading provider of premium branded chicken products in the Upper Midwest of the United States, in an all cash, US$350.0 million transaction. The consummation of this acquisition is subject to customary closing conditions, including regulatory review and approval. PPC expects to close this acquisition during the first quarter of 2017.

 

Corporate Structure

The following diagram sets forth our simplified corporate structure:

 

(1)

as of November 24, 2016 (excluding JBS S.A. treasury shares):

 

 

(2)

immediately following the completion of the asset contribution (assuming the shareholding structure of JBS S.A. as of November 24, 2016):

 

 

(3)

immediately following the completion of the JBS Foods International IPO (assuming the shareholding structure of JBS S.A. as of November 24, 2016 and no exercise of the over-allotment option):

 

Rationale for the Transaction

We believe the principal advantages of the transaction for our shareholders will be to:

 

•

better reflect our global presence and diverse international operations by obtaining a NYSE listing for the JBS Foods International common A shares;

 

•

improve our access to international equity and debt capital markets, which we expect to enhance our ability to raise financing to support our operations and fund growth, as well as lower our cost of capital;

 

•

enhance our ability to participate in the expected further consolidation of the global food industry and to better compete with other global food companies for international development opportunities;

 

•

raise our profile among the global institutional investor community and create greater proximity to our trading comparables; and

 

•

keep JBS S.A. as a listed company in Brazil, which is intended to allow the existing Brazilian shareholders of JBS S.A. to participate in our expected global growth.

 

 

JBS Foods International was incorporated on November 24, 2016, as a private limited liability company (besloten vennootschap met beperkte aansprakelijkheid) under Dutch law, with its corporate seat in the Netherlands, with the name “JBS Foods International B.V.” On                     , JBS Foods International was converted to a public limited liability company (naamloze vennootschap) under Dutch law with its corporate seat in the Netherlands.

JBS Foods International’s corporate seat (statutaire zetel) is in Amsterdam, the Netherlands. Its registered office and principal place of business is located at Bankrashof 3, 5^th Floor, 1183 NP Amstelveen, The Netherlands. Its telephone number is +31 20 656 4707.

 

SUMMARY OF THE OFFERING

The following is a brief summary of the terms of the JBS Foods International IPO.

 

Issuer

JBS Foods International N.V.

Underwriters

 

Public Offering Price

We anticipate that the initial public offering price will be between US$             and US$             per JBS Foods International common A share.

 

Common A Shares Offered

JBS Foods International common A shares.

 

Common A Shares Outstanding Before this Offering

JBS Foods International common A shares.

 

Common A Shares to be Outstanding Immediately Following the Completion of this Offering

JBS Foods International common A shares ( JBS Foods International common A shares if the underwriters exercise the over-allotment option in full).

 

We base the number of JBS Foods International common A shares outstanding immediately following the completion of this offering on the number of JBS Foods International common A shares outstanding as of the date of this prospectus.

 

Common B Shares to be Outstanding Immediately Following the Completion of this Offering

JBS Foods International common B shares.

 

Total Common A Shares and Common B Shares to be Outstanding Immediately Following the Completion of this Offering

JBS Foods International shares.

Over-Allotment Option

 

Stock Exchange Listing

Currently, there is no public market for JBS Foods International common A shares. We intend to apply to list JBS Foods International common A shares on the NYSE under the symbol “JBS.”

 

Use of Proceeds

We estimate that the net proceeds to us from this offering, after deducting estimated underwriting discounts and offering expenses that are payable by us, will be approximately US$             million (or approximately US$             million if the underwriters exercise the over-allotment option in full), assuming the JBS Foods International common A shares are offered at US$             per JBS Foods International common A share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus.

 

We intend to use the net proceeds of this offering to repay certain of our indebtedness based on an evaluation of applicable interest rates, outstanding principal amounts, maturity dates and such other factors as our management deems to be important and consistent with our liquidity and risk management policies. Currently, we expect to repay certain export financing agreements with annual interest rates

 

between 5.0% and 17.0% and maturities between 2017 and 2019. Pending any specific application, the net proceeds from this offering may be invested in cash and cash equivalents and short-term marketable securities. For more information, see “Use of Proceeds.”

 

Payment and Settlement

The JBS Foods International common A shares are expected to be delivered against payment on or about                     , 2017.

 

Voting Rights

Each JBS Foods International common A share confers the right to cast one vote at a general meeting of shareholders, and each JBS Foods International common B share confers the right to cast ten votes. Resolutions are passed by a simple majority of the votes cast, unless Dutch law or the articles of association of JBS Foods International prescribes a larger majority. For more information, see “Description of Share Capital.”

 

For more information about the risks related to our dual-class share structure, see “Risk Factors—Risks Relating to the Transaction and Ownership of the JBS Foods International Common A shares—JBS Foods International’s dual-class share structure with different voting rights, will limit your ability as a holder of JBS Foods International common A shares to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of the JBS Foods International common A shares may view as beneficial.”

 

Dividends

Since its incorporation on November 24, 2016, JBS Foods International has not declared or paid any dividends.

 

Under Brazilian corporate law and JBS S.A.’s bylaws, JBS S.A. is required to distribute annually to its shareholders a mandatory minimum dividend in an amount equal to not less than 25% of its adjusted consolidated net income, as calculated under Brazilian GAAP and adjusted as required by Brazilian corporate law (which may differ significantly from consolidated net income under IFRS), unless JBS S.A.’s board of directors advises its shareholders at its annual general shareholders’ meeting that payment of the mandatory minimum dividend for the preceding year is inadvisable in light of its financial condition and JBS S.A.’s shareholders approve that recommendation.

 

In order to allow JBS S.A. to distribute its mandatory minimum dividend to its shareholders, we currently intend to pay a regular annual dividend following the closing of the transaction to our shareholders in an amount equal to the lesser of (x) 25% of our adjusted consolidated net income or (y) 25% of JBS S.A.’s adjusted consolidated net income, unless our board of directors advises our shareholders at our annual shareholders’ meeting that payment of the mandatory minimum dividend for the preceding year is inadvisable in light of our financial condition and our shareholders approve that recommendation. In addition, any such determination to pay dividends will also be dependent on then-existing conditions, including our financial condition, earnings, legal requirements,

 

including limitations under Dutch law, restrictions in our debt agreements that limit our ability to pay dividends to shareholders and other factors our board of directors deems relevant.

 

The JBS Foods International common A shares and the JBS Foods International common B shares have the same dividend rights.

 

For more information about our dividend policy, see “Dividends and Dividend Policy—JBS Foods International.”

 

For more information about the risks related to our dividend policy and our ability to declare dividends to our shareholders, see “Risk Factors—Risks Relating to the Transaction and Ownership of the JBS Foods International Common A shares—Our ability to make dividend payments is subject to, inter alia, our future financial performance and cash flow position and by limitations under our debt agreements and Dutch law. Investors may not be able to rely on dividends to receive a return on their investment.”

 

For information about U.S. federal income and Dutch tax issues relating to dividend payments, see “Taxation— Certain U.S. Federal Income Tax Consequences—Dividends” and “—Certain Dutch Tax Consequences— Dividend Withholding Tax,” respectively.

 

Tax Consequences

For a summary of certain U.S. federal income tax and certain Dutch tax consequences of the acquisition, ownership and disposition of the JBS Foods International common A shares, see “Taxation.”

 

Risk Factors

You should review the risks relating to the transaction and ownership of the JBS Foods International common A shares, our business and industries and the markets in which we operate described in “Risk Factors.”

 

The Asset Contribution

Prior to the closing of the JBS Foods International IPO, JBS S.A. intends to contribute substantially all of its assets, excluding the Brazil Beef Businesses, to JBS Foods International. In connection with the asset contribution, JBS Foods International will also assume all of the obligations of JBS S.A. as guarantor under the indentures governing certain notes and the obligations of JBS S.A. and/or its subsidiaries as borrower or guarantor under certain debt agreements. For more information, see “The Asset Contribution.”

 

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The following summary historical financial data of JBS Foods International, summary historical consolidated financial data of JBS S.A. and summary pro forma combined financial data of JBS Foods International are being provided to help you decide whether to invest in the JBS Foods International common A shares. The summary pro forma combined financial data of JBS Foods International and pro forma per share data of JBS Foods International have been prepared for illustrative purposes only and are not necessarily indicative of what the operating results or financial position of JBS Foods International would have been had the transaction been completed at the beginning of the periods or on the dates indicated, nor are they necessarily indicative of the results of operations or financial condition that may be expected for any future period or date. You should read this information in conjunction with the financial statements included elsewhere in this prospectus and with the sections of this prospectus entitled “Presentation of Financial and Other Information,” “Selected Historical Financial Data,” “Unaudited Pro Forma Condensed and Combined Financial Data of JBS Foods International,” “Historical and Pro Forma Per Share Data,” “Business,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Summary Historical Financial Data of JBS Foods International

JBS Foods International was incorporated on November 24, 2016, as a private limited liability company (besloten vennootschap met beperkte aansprakelijkheid) under Dutch law, with its corporate seat in the Netherlands, with the name “JBS Foods International B.V.” On             , JBS Foods International was converted to a public limited liability company (naamloze vennootschap) under Dutch law with its corporate seat in the Netherlands. JBS Foods International maintains its books and records in U.S. dollars, its functional currency. JBS Foods International’s presentation currency is the real.

The summary historical financial data of JBS Foods International presented below has been derived from the audited historical financial statements of JBS Foods International as of November 25, 2016, and for the period from November 24, 2016, our date of incorporation, to November 25, 2016, and the related notes thereto, which are included elsewhere in this prospectus.

 

		As of November 25, 2016 and for the period from November 24, 2016 to November 25, 2016
		(in U.S. dollars)
Statement of financial position data at period end:
Cash and cash equivalents			4
Total assets			4
Total liabilities			—
Total equity			4
Cash flow data:
Cash flows related to:
Financing activities
Issuance of shares			4

Summary Historical Consolidated Financial Data of JBS S.A.

JBS S.A. maintains its books and records in reais, its functional currency, as well as its presentation currency. JBS S.A.’s historical consolidated financial statements included in this prospectus are also presented in reais. Further, JBS S.A.’s historical financial statements have been prepared in accordance with IFRS as issued by the IASB.

 

The summary historical consolidated financial data of JBS S.A. presented below has been derived from: (1) the unaudited historical interim consolidated financial statements of JBS S.A. as of September 30, 2016 and for the three- and nine-month periods ended September 30, 2016 and 2015, and the related notes thereto, which are included elsewhere in this prospectus; (2) the audited historical consolidated financial statements of JBS S.A. as of December 31, 2015 and 2014, and for the years ended December 31, 2015, 2014 and 2013, and the related notes thereto, which are included elsewhere in this prospectus; and (3) the historical consolidated financial statements of JBS S.A. as of December 31, 2013, which are not included in this prospectus.

JBS S.A.’s historical consolidated financial statements included in this prospectus include the historical financial information of the Brazil Beef Businesses, which is not expected to be transferred to JBS Foods International in connection with the asset contribution. For more information about the asset contribution, see “The Asset Contribution.”

JBS S.A.’s consolidated results of operations for the nine-month period ended September 30, 2016 and the year ended December 31, 2015 are of limited comparability with its consolidated results of operations for the nine-month period ended September 30, 2015 and the year ended December 31, 2014, respectively, primarily due to the Primo Acquisition, the Acquisition of Tyson Foods Assets in Mexico, the Moy Park Acquisition and the Cargill Pork Acquisition, which closed on March 30, 2015, June 29, 2015, September 28, 2015 and October 30, 2015, respectively. JBS S.A.’s consolidated results of operations for the year ended December 31, 2014 are of limited comparability with its results of operations for the year ended December 31, 2013, primarily due to the Zenda Acquisition and the Seara Acquisition, which closed on June 30, 2013 and September 30, 2013, respectively. For more information about these acquisitions, see “Business—History and Development.”

Solely for the convenience of the reader, we have translated certain amounts in reais included below into U.S. dollars at the rate of R$3.246 to US$1.00, which was the commercial selling rate at closing for the purchase of U.S. dollars in effect as of September 30, 2016, as reported by the Central Bank of Brazil. The U.S. dollar equivalent information included in this prospectus is provided solely for the convenience of investors and should not be construed as implying that the amounts in reais represent, or could have been or could be converted into, U.S. dollars at such rates or at any other rate. See “Exchange Rate Information” for further information about recent fluctuations in exchange rates.

 

		As of and for the nine-month period ended September 30,												As of and for the year ended December 31,
		2016 (1)				2016				2015				2015 (1)				2015				2014				2013
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
		(in millions of U.S. dollars, except as otherwise indicated)				(in millions of reais, except as otherwise indicated)								(in millions of U.S. dollars, except as otherwise indicated)				(in millions of reais, except as otherwise indicated)
Statement of income (loss) data:
Net revenue			39,664.2				128,749.9				115,753.3				50,752.2				162,914.5				120,469.7				92,902.8
Cost of sales			(34,926.8	)			(113,372.5	)			(98,857.3	)			(43,714.7	)			(140,324.2	)			(101,796.3	)			(81,056.1	)
Gross profit			4,737.4				15,377.4				16,896.0				7,037.5				22,590.3				18,673.4				11,846.7
General and administrative expenses			(981.2	)			(3,184.9	)			(2,763.6	)			(1,274.8	)			(4,092.1	)			(3,715.7	)			(2,435.9	)
Selling expense			(2,276.2	)			(7,388.7	)			(6,561.3	)			(2,921.5	)			(9,377.9	)			(7,154.3	)			(5,262.2	)
Operating expense			(3,257.4	)			(10,573.6	)			(9,324.9	)			(4,196.2	)			(13,470.0	)			(10,870.0	)			(7,698.1	)
Operating profit			1,479.9				4,803.8				7,571.2				2,841.3				9,120.3				7,803.3				4,148.6

 

		As of and for the nine-month period ended September 30,												As of and for the year ended December 31,
		2016 (1)				2016				2015				2015 (1)				2015				2014				2013
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
		(in millions of U.S. dollars, except as otherwise indicated)				(in millions of reais, except as otherwise indicated)								(in millions of U.S. dollars, except as otherwise indicated)				(in millions of reais, except as otherwise indicated)
Finance income			1,359.1				4,411.6				12,700.6				3,605.6				11,574.0				1,538.3				1,255.9
Finance expense			(3,013.9	)			(9,783.1	)			(12,264.6	)			(4,010.8	)			(12,874.6	)			(5,175.9	)			(3,636.2	)
Finance income (expense), net			(1,654.8	)			(5,371.5	)			436.0				(405.2	)			(1,300.6	)			(3,637.6	)			(2,380.3	)
Share of profit of equity-accounted investee, net of tax			4.3				14.0				48.2				18.4				58.9				26.1				6.7
Profit (loss) before taxes			(170.6	)			(553.7	)			8,055.4				2,454.4				7,878.6				4,191.8				1,775.0
Current income taxes			(178.7	)			(580.2	)			(2,205.7	)			(928.3	)			(2,979.7	)			(1,656.9	)			(166.2	)
Deferred income taxes			339.6				1,102.3				(511.4	)			71.6				229.7				(128.5	)			(490.4	)
			160.8				522.1				(2,717.1	)			(856.7	)			(2,750.0	)			(1,785.4	)			(656.7	)
Net income (loss)			(9.7	)			(31.6	)			5,338.4				1,597.7				5,128.6				2,406.4				1,118.3
Attributable to:
Controlling interests			(97.9	)			(317.9	)			4,915.3				1,445.5				4,640.1				2,035.9				926.9
Non-controlling interests			88.2				286.2				423.1				152.2				488.5				370.5				191.4
			(9.7	)			(31.6	)			5,338.4				1,597.7				5,128.6				2,406.4				1,118.3
Weighted average JBS S.A. common shares outstanding (in millions) (2):
Basic							2,810.9				2,887.4								2,894.6				2,881.7				2,866.9
Diluted (3)							2,810.9				2,891.0								2,898.3				2,884.2				2,866.9
Earnings (loss) per JBS S.A. common share (in reais):
Basic (4)			(0.03	)			(0.11	)			1.70				0.50				1.60				0.71				0.32
Diluted (5)			(0.03	)			(0.11	)			1.70				0.50				1.60				0.71				0.32
Cash dividends declared per JBS S.A. common share (in reais) (6)			—				—				—				0.12				0.38				0.17				0.08
Statement of financial position data at period end:
Cash and cash equivalents			2,251.1				7,307.2								5,870.4				18,844.0				14,910.4				9,013.1
Trade accounts receivable			2,873.8				9,328.3								3,775.6				12,119.7				9,577.5				8,919.9
Inventories			3,134.8				10,175.7								3,461.0				11,109.7				8,273.1				6,904.6
Property, plant and equipment			10,147.5				32,938.8								11,022.1				35,381.1				24,188.9				20,940.6
Goodwill			6,817.8				22,130.6								7,604.8				24,411.4				13,213.7				11,387.1
Total assets			30,944.2				100,445.0								38,162.9				122,502.9				82,315.6				68,867.4
Total loans and financing (7)			17,302.0				56,162.4								20,524.2				65,882.7				40,079.1				32,761.3
Total equity			7,779.5				25,252.1								9,227.8				29,621.3				25,873.0				23,307.6

 

		As of and for the nine-month period ended September 30,												As of and for the year ended December 31,
		2016 (1)				2016				2015				2015 (1)				2015				2014				2013
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
		(in millions of U.S. dollars, except as otherwise indicated)				(in millions of reais, except as otherwise indicated)								(in millions of U.S. dollars, except as otherwise indicated)				(in millions of reais, except as otherwise indicated)
Cash flow data:
Cash flows related to:
Operating activities			56.1				182.0				5,878.7				1,870.4				6,004.1				6,798.1				2,143.4
Investing activities			(912.9	)			(2,963.4	)			(18,151.7	)			(6,035.9	)			(19,375.3	)			(4,635.4	)			(2,260.2	)
Financing activities			(2,469.4	)			(8,015.7	)			19,016.7				4,724.4				15,165.3				3,424.3				3,458.4
Other financial data (unaudited):
EBITDA (8)			2,515.4				8,164.8				4,756.3				4,010.0				12,872.1				10,376.2				6,194.1
Adjusted EBITDA (8)			2,518.3				8,174.1				4,734.7				4,143.4				13,300.4				11,090.0				6,130.3

 

 

(1)

Solely for the convenience of the reader, amounts in reais have been translated into U.S. dollars at an exchange rate of R$3.246 per US$1.00, which was the commercial amounts in reais rate for U.S. dollars in effect on September 30, 2016, as reported by the Central Bank of Brazil. These U.S. dollar amounts have not been audited.

(2)	Excludes treasury shares.

(3)	Adjusted for the effects of all potential common shares that are dilutive. Beginning in January 2015, the only category of potential common shares that would cause dilution were outstanding options to purchase common shares.

(4)	Basic earnings per JBS S.A. common share is calculated by dividing (i) net income (loss) during the period attributable to controlling interests by (ii) the weighted average number of common shares outstanding during the period (basic), excluding treasury shares.

(5)	Diluted earnings per JBS S.A. common share is calculated by dividing (i) net income (loss) during the period attributable to controlling interests by (ii) the weighted average number of common shares outstanding during the period (diluted), excluding treasury shares.

(6)	For more information, see “Dividends and Dividend Policy—JBS S.A.”

(7)	Total current loans and financing plus total non-current loans and financing.

(8)

EBITDA and Adjusted EBITDA are used as measures of performance by JBS S.A.’s management. JBS S.A. calculates EBITDA as net income plus: income taxes; finance expense (income), net; and depreciation and amortization (including amortization of biological assets). JBS S.A. calculates Adjusted EBITDA as EBITDA minus: share of profit of equity – accounted investees, net of tax; plus: bargain purchase gain, indemnity, reorganization and restructuring expenses and other non-recurring items, net; and non-recurring tax contingencies.

EBITDA and Adjusted EBITDA are useful tools for assessing financial performance but are not reliable indicators of a company’s ability to generate cash to service its debt obligations because certain of the items added to net income (loss) to determine EBITDA and Adjusted EBITDA involve outlays of cash. As a result, actual cash available to service debt obligations will be different from EBITDA and Adjusted EBITDA. You should rely primarily on JBS S.A.’s IFRS results, and use EBITDA and Adjusted EBITDA in a supplemental manner in making your investment decision. For more information about the limitations of EBITDA and Adjusted EBITDA, see “Presentation of Financial and Other Information—Non-IFRS Financial Measures.”

 

Each of EBITDA and Adjusted EBITDA is reconciled to net income (loss) below (unaudited):

 

		For the nine-month period ended September 30,												For the year ended December 31,
		2016 (a)				2016				2015				2015 (a)				2015				2014				2013
		(in millions of U.S. dollars)				(in millions of reais)								(in millions of U.S. dollars)				(in millions of reais)
Net income (loss)			(9.7	)			(31.6	)			5,338.4				1,597.7				5,128.6				2,406.4				1,118.3
Income taxes			(160.8	)			(522.1	)			(2,717.1	)			856.7				2,750.0				1,785.4				656.7
Finance income			(1,359.1	)			(4,411.6	)			(12,700.6	)			(3,605.6	)			(11,574.0	)			(1,538.3	)			(1,255.9	)
Finance expense			3,013.9				9,783.1				12,264.6				4,010.8				12,874.6				5,175.9				3,636.2
Depreciation and amortization			1,031.1				3,347.0				2,571.0				1,150.4				3,692.8				2,546.8				2,038.8
EBITDA			2,515.4				8,164.8				4,756.3				4,010.0				12,872.1				10,376.2				6,194.1
Share of profit of equity – accounted investees, net of tax			(4.3	)			(14.0	)			(48.3	)			(18.4	)			(58.9	)			(26.1	)			(6.7	)
Bargain purchase gain, indemnity, reorganization and restructuring expenses and other non-recurring items, net			7.2				23.3				26.7				151.8				487.2				403.6				(57.1	)
Non-recurring tax contingencies (b)			—				—				—				—				—				336.3				—
Adjusted EBITDA			2,518.3				8,174.1				4,734.7				4,143.4				13,300.4				11,090.0				6,130.3

 

 

(a)

Solely for the convenience of the reader, amounts in reais have been translated into U.S. dollars at an exchange rate of R$3.246 per US$1.00, which was the commercial selling rate for U.S. dollars in effect on September 30, 2016, as reported by the Central Bank of Brazil. These U.S. dollar amounts have not been audited.

(b)

During the year ended December 31, 2014, JBS S.A. recognized a one-time charge of R$336.3 million (or US$103.6 million at the September 30, 2016 exchange rate of R$3.246 per US$1.00) related to a State of Goiás value-added tax (Imposto sobre Circulação de Bens e Serviços), or ICMS, debt installment payment plan, and this charge has been included in selling, general and administrative expenses.

Summary Unaudited Pro Forma Condensed and Combined Financial Data of JBS Foods International

Prior to the closing of the JBS Foods International IPO, JBS S.A. intends to contribute substantially all of its assets, excluding the Brazil Beef Businesses, to JBS Foods International. In connection with the asset contribution, JBS Foods International will also assume all of the obligations of JBS S.A. as guarantor under the indentures governing certain notes and the obligations of JBS S.A. and/or its subsidiaries as borrower or guarantor under certain debt agreements. For more information about the asset contribution, see “The Asset Contribution.”

The summary unaudited pro forma condensed and combined financial data of JBS Foods International presented below has been derived from the unaudited pro forma condensed and combined statement of financial position of JBS Foods International as of September 30, 2016 and the unaudited pro forma condensed and combined statements of income (loss) of JBS Foods International for the nine-month period ended September 30, 2016 and for the year ended December 31, 2015, which are included elsewhere in this prospectus and which, combined with the notes thereto, we refer to as our “pro forma financial information.”

 

Our pro forma financial information gives effect to the asset contribution as if it had taken place on September 30, 2016, in the case of the unaudited pro forma condensed and combined statement of financial position, and on January 1, 2015, in the case of the unaudited pro forma condensed and combined statements of income (loss). Our pro forma financial information has been presented for informational purposes only and may not be indicative of the results that actually would have occurred if the asset contribution had occurred on the dates indicated, or the results that will be obtained in the future.

Our pro forma financial information has been derived from the (1) unaudited historical interim consolidated financial statements of JBS S.A. (as predecessor to JBS Foods International) as of September 30, 2016 and for the three- and nine-month periods ended September 30, 2016 and 2015, and the related notes thereto, and (2) audited historical consolidated financial statements of JBS S.A. (as predecessor to JBS Foods International) as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013, and the related notes thereto, in each case, which are included elsewhere in this prospectus. Our pro forma financial information should be read in conjunction with, and is qualified in its entirety by reference to, such historical financial statements and historical financial information and the related notes contained therein. The pro forma adjustments are based upon currently available information and certain estimates and assumptions, and actual results may differ from the pro forma adjustments. However, we believe that these estimates and assumptions provide a reasonable basis for presenting the significant effects of the contemplated transaction and that the pro forma adjustments are factually supportable and give appropriate effect to those estimates and assumptions.

 

						As of and for the nine-month period ended September 30, 2016												For the year ended December 31, 2015
						Historical				Pro Forma Adjustments —1(a)				Pro Forma				Historical				Pro Forma Adjustments —1(a)				Pro Forma
						(in millions of reais, except as otherwise indicated)												(in millions of reais, except as otherwise indicated)
Statement of income (loss) data:
Net revenue							128,749.9				(19,327.5	)			109,422.5				162,914.5				(26,657.6	)			136,256.9
Cost of sales							(113,372.5	)			14,877.9				(98,494.6	)			(140,324.2	)			20,740.0				(119,584.2	)
Gross profit							15,377.4				(4,449.6	)			10,927.9				22,590.3				(5,917.6	)			16,672.7
General and administrative expenses							(3,184.9	)			1,349.9				(1,835.1	)			(4,092.1	)			1,765.8				(2,326.3	)
Selling expense							(7,388.7	)			2,177.7				(5,210.9	)			(9,377.9	)			3,140.5				(6,237.4	)
Operating expense							(10,573.6	)			3,527.6				(7,046.0	)			(13,470.0	)			4,906.3				(8,563.7	)
Operating profit							4,803.8				(922.0	)			3,881.9				9,120.3				(1,011.3	)			8,109.0
Finance income (1)							4,411.6												11,574.0
Finance expense (1)							(9,783.1	)											(12,874.6	)
Finance expense, net							(5,371.5	)											(1,300.6	)
Share of profit of equity – accounted investees, net of tax							14.0				(14.0	)			—				58.9				(58.9	)			—
Profit (loss) before taxes							(553.7	)											7,878.6
Current income taxes (2)							(580.2	)											(2,979.7	)
Deferred income taxes (2)							1,102.3												229.7
							522.1												(2,750.0	)
Net income (loss)							(31.6	)											5,128.6

 

						As of and for the nine-month period ended September 30, 2016												For the year ended December 31, 2015
						Historical				Pro Forma Adjustments —1(a)				Pro Forma				Historical				Pro Forma Adjustments —1(a)				Pro Forma
						(in millions of reais, except as otherwise indicated)												(in millions of reais, except as otherwise indicated)
Attributable to:
Controlling interests							(317.9	)											4,640.1
Non-controlling interests							286.2												488.5
							(31.6	)											5,128.6
Weighted average shares outstanding (in millions):
Basic			1	(b)			2,810.9												2,894.6
Diluted			1	(b)			2,810.9												2,898.3
Earnings (loss) per share (in reais):
Basic							(0.11	)											1.60
Diluted							(0.11	)											1.60
Statement of financial position data:
Cash and cash equivalents							7,307.2				(4,365.5	)			2,941.7
Trade accounts receivable							9,328.3				(2,262.6	)			7,065.7
Inventories							10,175.7				(2,374.0	)			7,801.7
Property, plant and equipment							32,938.8				(12,614.0	)			20,324.8
Goodwill							22,130.6				(10,437.1	)			11,693.5
Total assets							100,445.0				(36,518.2	)			63,926.9
Total loans and financing (3)							56,162.4				(9,241.9	)			46,920.5
Total equity							25,252.1				(23,378.6	)			1,873.5
Total equity:
Attributable to controlling interests							24,070.7				(23,376.2	)			694.5
Attributable to non-controlling interests							1,181.4				(2.4	)			1,179.0
							25,252.1				(23,378.6	)			1,873.5

 

 

(1)	The effect of the transaction on finance income (expense) has not yet been determined.

(2)	The effect on income taxes of JBS Foods International becoming a Dutch taxpayer has not yet been determined.

(3)	Total current loans and financing plus total non-current loans and financing.

Notes to the Unaudited Pro Forma Condensed and Combined Financial Information of JBS Foods International

 

1.	Pro Forma Adjustments and Assumptions

The following pro forma adjustments have been prepared as if the asset contribution to be effected prior to the closing of the JBS Foods International IPO had taken place on September 30, 2016, in the case of the unaudited pro forma condensed and combined statement of financial position, and on January 1, 2015, in the case of the unaudited pro forma condensed and combined statements of income (loss).

 

(a)

Asset contribution

These pro forma adjustments eliminate the portion of JBS S.A.’s investments in entities and other assets and liabilities that will not be contributed to JBS Foods International, including the JBS S.A.