UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 24, 2017~~July 1, 2018



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File number 1-9273

PILGRIM’S PRIDE CORPORATION

(Exact name of registrant as specified in its charter)



Delaware		75-1285071
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1770 Promontory Circle, Greeley, CO		80634-9038
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code: (970) 506-8000

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large Accelerated Filer	ý	Accelerated Filer	¨

Non-accelerated Filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

Number of shares outstanding of the issuer’s common stock, $0.01 par value per share, as of ~~November 7, 2017,~~August 1, 2018, was ~~248,752,508.~~248,980,659.

INDEX

PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES



PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated and Combined Financial Statements	2
	Condensed Consolidated ~~and Combined~~ Balance Sheets ~~September 24, 2017~~ July 1, 2018 and December ~~25, 2016~~31, 2017	2
	Condensed Consolidated and Combined Statements of Income Thirteen and ~~Thirty-Nine~~Twenty-Six Weeks Ended ~~September 24,~~July 1, 2018 and June 25, 2017 ~~and September 25, 2016~~	3
	Condensed Consolidated and Combined Statements of Comprehensive Income Thirteen and ~~Thirty-Nine~~Twenty-Six Weeks Ended ~~September 24,~~July 1, 2018 and June 25, 2017 ~~and September 25, 2016~~	4
	Condensed Consolidated and Combined Statements of Stockholders’ Equity ~~Thirty-Nine~~ Twenty-Six Weeks Ended ~~September 24,~~July 1, 2018 and June 25, 2017 ~~and September 25, 2016~~	5
	Condensed Consolidated and Combined Statements of Cash Flows ~~Thirty-Nine~~ Twenty-Six Weeks Ended ~~September 24,~~July 1, 2018 and June 25, 2017 ~~and September 25, 2016~~	6
	Notes to Condensed Consolidated and Combined Financial Statements as of ~~September 24, 2017~~July 1, 2018	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3941
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5355
Item 4.	Controls and Procedures	5557
PART II. OTHER INFORMATION		5759
Item 1.	Legal Proceedings	5759
Item 1A.	Risk Factors	58
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	6260
Item 6.	Exhibits	6362
SIGNATURES		64

Table of Contents


PART I.	FINANCIAL INFORMATION


ITEM 1.	CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

														PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS
CONDENSED CONSOLIDATED BALANCE SHEETS							CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
	September 24, 2017			December 25, 2016				July 1, 2018			December 31, 2017
	(In thousands)							(In thousands)
Cash and cash equivalents	$	401,789		$	292,544			$	640,842		$	581,510
Restricted cash	4,841			4,979				33,185			8,021
Trade accounts and other receivables, less allowance for doubtful accounts	624,802			445,553				589,933			565,478
Accounts receivable from related parties	970			4,010				1,179			2,951
Inventories	1,196,201			975,608				1,190,017			1,255,070
Income taxes receivable	16,362			—
Prepaid expenses and other current assets	102,914			81,932				132,820			102,550
Assets held for sale	2,777			5,259				2,904			708
Total current assets	2,350,656			1,809,885				2,590,880			2,516,288
Deferred tax assets								3,149			—
Other long-lived assets	20,007			19,260				18,276			18,165
Identified intangible assets, net	620,693			471,591				593,751			617,163
Goodwill	995,582			887,221				982,560			1,001,889
Property, plant and equipment, net	2,076,347			1,833,985				2,113,953			2,095,147
Total assets	$	6,063,285		$	5,021,942			$	6,302,569		$	6,248,652

Accounts payable	$	743,528		$	790,378			$	815,696		$	733,027
Accounts payable to related parties	7,091			4,468				26,941			2,889
Revenue contract liability								32,200			36,607
Accrued expenses and other current liabilities	416,476			347,021				407,442			410,152
Income taxes payable	191,432			27,578				60,174			222,073
Current maturities of long-term debt	61,811			15,712				44,606			47,775
Total current liabilities	1,420,338			1,185,157				1,387,059			1,452,523
Long-term debt, less current maturities	2,548,575			1,396,124				2,584,486			2,635,617
Deferred tax liabilities	286,038			251,807				196,561			208,492
Other long-term liabilities	98,098			102,722				80,045			96,359
Total liabilities	4,353,049			2,935,810				4,248,151			4,392,991
Common stock	2,602			307,288				2,604			2,602
Treasury stock	(231,758		)	(217,117		)		(231,758		)	(231,758		)
Additional paid-in capital	1,926,386			3,100,332				1,938,140			1,932,509
Retained earnings (accumulated deficit)	39,606			(782,785		)
Accumulated other comprehensive loss	(36,517		)	(329,858		)
Retained earnings								399,902			173,943
Accumulated other comprehensive income (loss)								(63,584		)	(31,140		)
Total Pilgrim’s Pride Corporation stockholders’ equity	1,700,319			2,077,860				2,045,304			1,846,156
Noncontrolling interest	9,917			8,272				9,114			9,505
Total stockholders’ equity	1,710,236			2,086,132				2,054,418			1,855,661
Total liabilities and stockholders’ equity	$	6,063,285		$	5,021,942			$	6,302,569		$	6,248,652

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

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

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended						Thirteen Weeks Ended						Twenty-Six Weeks Ended
	September 24, 2017			September 25, 2016			September 24, 2017			September 25, 2016			July 1, 2018			June 25, 2017			July 1, 2018			June 25, 2017
	(In thousands, except per share data)												(In thousands, except per share data)
Net sales	$	2,793,885		$	2,495,281		$	8,025,511		$	7,507,681		$	2,836,713		$	2,752,286		$	5,583,391		$	5,231,626
Cost of sales	2,315,301			2,242,221			6,815,701			6,632,568			2,562,491			2,277,454			5,021,504			4,500,410
Gross profit	478,584			253,060			1,209,810			875,113			274,222			474,832			561,887			731,216
Selling, general and administrative expense	102,191			75,933			284,009			229,786			87,975			92,148			173,258			181,808
Administrative restructuring charges	4,147			279			8,496			279			1,135			4,349			1,924			4,349
Operating income	372,246			176,848			917,305			645,048			185,112			378,335			386,705			545,059
Interest expense, net of capitalized interest	24,636			19,119			66,315			58,480			40,267			22,567			90,567			41,679
Interest income	(2,128		)	(253		)	(3,600		)	(2,000		)	(4,834		)	(1,104		)	(6,424		)	(1,472		)
Foreign currency transaction loss (gain)	(888		)	4,569			(2,500		)	(1,769		)	5,630			(2,303		)	3,909			(1,612		)
Miscellaneous, net	(1,083		)	(2,371		)	(5,198		)	(7,327		)	(817		)	(1,272		)	(2,434		)	(4,115		)
Income before income taxes	351,709			155,784			862,288			597,664			144,866			360,447			301,087			510,579
Income tax expense	113,396			53,819			278,046			202,979			38,522			115,256			75,519			164,650
Net income	238,313			101,965			584,242			394,685			106,344			245,191			225,568			345,929
Less: Net income from Granite Holdings Sàrl prior to acquisition by Pilgrim's Pride Corporation	6,093			3,438			23,486			25,105			—			11,118			—			17,393
Less: Net income (loss) attributable to noncontrolling interests	(460		)	(130		)	514			(334		)	(197		)	432			(391		)	974
Net income attributable to Pilgrim’s Pride Corporation	$	232,680		$	98,657		$	560,242		$	369,914		$	106,541		$	233,641		$	225,959		$	327,562

Weighted average shares of Pilgrim's Pride Corporation common stock outstanding:
Basic	248,753			254,460			248,732			254,607			248,981			248,753			248,909			248,722
Effect of dilutive common stock equivalents	235			460			230			430			76			220			116			228
Diluted	248,988			254,920			248,962			255,037			249,057			248,973			249,025			248,950

Net income attributable to Pilgrim’s Pride Corporation per share of common stock outstanding:
Basic	$	0.94		$	0.39		$	2.25		$	1.45		$	0.43		$	0.94		$	0.91		$	1.32
Diluted	$	0.93		$	0.39		$	2.25		$	1.45		$	0.43		$	0.94		$	0.91		$	1.32

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

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

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended						Thirteen Weeks Ended						Twenty-Six Weeks Ended
	September 24, 2017			September 25, 2016			September 24, 2017			September 25, 2016			July 1, 2018			June 25, 2017			July 1, 2018			June 25, 2017
	(In thousands)												(In thousands)
Net income	$	238,313		$	101,965		$	584,242		$	394,685		$	106,344		$	245,191		$	225,568		$	345,929
Other comprehensive loss:
Other comprehensive income (loss):
Foreign currency translation adjustment
Gains (losses) arising during the period	22,378			(43,961		)	89,153			(171,509		)	(92,696		)	53,269			(40,131		)	67,096
Income tax effect	3,211			—			3,211			—			1,661			—			1,624			—
Derivative financial instruments designated as cash flow hedges
Gains (losses) arising during the period	(779		)	65			(137		)	167			(88		)	640			(103		)	718
Reclassification to net earnings for losses (gains) realized	—			(285		)	9			(35		)	222			(116		)	472			(67		)
Available-for-sale securities
Gains (losses) arising during the period	—			—			—			426
Gains arising during the period													858			—			1,232			—
Income tax effect	—			—			—			(161		)	(209		)	—			(300		)	—
Reclassification to net earnings for losses (gains) realized	—			—			—			(534		)
Reclassification to net earnings for gains realized													(727		)	—			(899		)	—
Income tax effect	—			—			—			202			177			—			219			—
Defined benefit plans
Gains (losses) arising during the period	393			2,852			(4,078		)	(11,500		)	693			(6,362		)	6,592			(4,471		)
Income tax effect	(148		)	(1,077		)	1,539			4,342			(171		)	2,401			(1,605		)	1,687
Reclassification to net earnings of losses realized	233			165			699			494			300			233			601			466
Income tax effect	(88		)	(62		)	(264		)	(187		)	(73		)	(88		)	(146		)	(176		)
Total other comprehensive income (loss), net of tax	25,200			(42,303		)	90,132			(178,295		)	(90,053		)	49,977			(32,444		)	65,253
Comprehensive income	263,513			59,662			674,374			216,390			16,291			295,168			193,124			411,182
Less: Comprehensive income (loss) for Granite Holdings Sàrl prior to acquisition by Pilgrim's Pride Corporation	460			(42,432		)	88,050			(152,927		)
Less: Comprehensive income for Granite Holdings Sàrl prior to acquisition by Pilgrim's Pride Corporation													—			64,912			—			85,140
Less: Comprehensive income (loss) attributable to noncontrolling interests	(460		)	(130		)	514			(334		)	(197		)	432			(391		)	974
Comprehensive income attributable to Pilgrim's Pride Corporation	$	263,513		$	102,224		$	585,810		$	369,651		$	16,488		$	229,824		$	193,515		$	325,068

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

																																																	PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES	CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS’ EQUITY	(Unaudited)
	Common Stock					Treasury Stock					Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Noncontrolling Interest			Total			Common Stock			Treasury Stock					Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Noncontrolling Interest			Total
	Shares		Amount			Shares		Amount			Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Noncontrolling Interest			Total			Shares	Amount		Shares		Amount			Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Noncontrolling Interest			Total
																										(In thousands)
Pilgrim's Pride Corporation balance at December 31, 2017																										260,168	$	2,602	(11,416	)	$	(231,758	)	$	1,932,509		$	173,943		$	(31,140	)	$	9,505		$	1,855,661
Net income (loss)																										—	—		—		—			—			225,959			—			(391		)	225,568
Other comprehensive income, net of tax																										—	—		—		—			—			—			(32,444		)	—			(32,444		)
Share-based compensation plans:
Common stock issued under compensation plans																										228	2		—		—			(2		)	—			—			—			—
Requisite service period recognition																										—	—		—		—			5,633			—			—			—			5,633
Balance at July 1, 2018																										260,396	$	2,604	(11,416	)	$	(231,758	)	$	1,938,140		$	399,902		$	(63,584	)	$	9,114		$	2,054,418
	(In thousands)
Pilgrim's Pride Corporation balance at December 25, 2016	259,682		$	2,597		(10,636	)	$	(217,117	)	$	1,686,742		$	(520,635	)	$	(64,243	)	$	9,403		$	896,747		259,682	$	2,597	(10,636	)	$	(217,117	)	$	1,686,742		$	(520,635	)	$	(64,243	)	$	9,403		$	896,747
Granite Holdings Sàrl balance at December 25, 2016	13,000		304,691			—		—			1,413,590			(262,150		)	(265,615		)	(1,131		)	1,189,385			13,000	304,691		—		—			1,413,590			(262,150		)	(265,615		)	(1,131		)	1,189,385
Combined balance at December 25, 2016	272,682		307,288			(10,636	)	(217,117		)	3,100,332			(782,785		)	(329,858		)	8,272			2,086,132			272,682	307,288		(10,636	)	(217,117		)	3,100,332			(782,785		)	(329,858		)	8,272			2,086,132
Net income	—		—			—		—			—			583,728			—			514			584,242			—	—		—		—			—			344,955			—			974			345,929
Other comprehensive income, net of tax	—		—			—		—			—			—			90,132			—			90,132			—	—		—		—			—			—			65,253			—			65,253
Share-based compensation plans:
Common stock issued under compensation plans	486		5			—		—			(5		)	—			—			—			—			486	5		—		—			(5		)	—			—			—			—
Requisite service period recognition	—		—			—		—			2,454			—			—			—			2,454			—	—		—		—			1,947			—			—			—			1,947
Common stock purchased under share repurchase program	—		—			(780	)	(14,641		)	—			—			—			—			(14,641		)	—	—		(780	)	(14,641		)	—			—			—			—			(14,641		)
Deemed equity contribution resulting from the transfer of Granite Holdings Sàrl net assets from JBS S.A. to Pilgrim's Pride Corporation in a common-control transaction	—		—			—		—			237,195			—			—			—			237,195
Transfer of Granite Holdings Sàrl net assets from JBS S.A. to Pilgrim's Pride Corporation in a common-control transaction	(13,000	)	(304,691		)	—		—			(1,413,590		)	238,663			203,209			1,131			(1,275,278		)
Balance at September 24, 2017	260,168		$	2,602		(11,416	)	$	(231,758	)	$	1,926,386		$	39,606		$	(36,517	)	$	9,917		$	1,710,236

Pilgrim's Pride Corporation balance at December 27, 2015	259,685		$	2,597		(4,862	)	$	(99,233	)	$	1,675,674		$	(261,252	)	$	(58,930	)	$	2,954		$	1,261,810
Granite Holdings Sàrl balance at December 27, 2015	13,000		304,691			—		—			1,414,716			(287,668		)	(32,543		)	(1,131		)	1,398,065
Combined balance at December 27, 2015	272,685		307,288			(4,862	)	(99,233		)	3,090,390			(548,920		)	(91,473		)	1,823			2,659,875
Net income (loss)	—		—			—		—			—			395,019			—			(334		)	394,685
Other comprehensive loss, net of tax	—		—			—		—			—			—			(178,295		)	—			(178,295		)
Requisite service period recognition under share-based compensation plans	—		—			—		—			5,404			—			—			—			5,404
Common stock purchased from retirement plan participants	(3	)	—			—		—			(73		)	—			—			—			(73		)
Common stock purchased under share repurchase program	—		—			(925	)	(20,333		)	—			—			—			—			(20,333		)
Equity contributions to subsidiary by noncontrolling stockholders	—		—			—		—			—			—			—			7,252			7,252
Dividend paid by Granite Holdings Sàrl to JBS S.A.	—		—			—		—			—			(14,870		)	—			—			(14,870		)
Special cash dividend	—		—								—			(699,915		)	—			—			(699,915		)
Other	—		—			—		—			(1,126		)	—			—			—			(1,126		)
Balance at September 25, 2016	272,682		$	307,288		(5,787	)	$	(119,566	)	$	3,094,595		$	(868,686	)	$	(269,768	)	$	8,741		$	2,152,604
Balance at June 25, 2017																										273,168	$	307,293	(11,416	)	$	(231,758	)	$	3,102,274		$	(437,830	)	$	(264,605	)	$	9,246		$	2,484,620

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

													PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES	CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS	(Unaudited)
	Thirty-Nine Weeks Ended						Twenty-Six Weeks Ended
	September 24, 2017			September 25, 2016			July 1, 2018			June 25, 2017
	(In thousands)						(In thousands)
Cash flows from operating activities:
Net income	$	584,242		$	394,685		$	225,568		$	345,929
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	204,625			174,128			139,479			132,613
Noncash loss on early extinguishment of debt							4,918			—
Foreign currency transaction loss related to borrowing arrangements	6,830			—			4,221			5,634
Amortization of premium related to Senior Notes							(334		)	—
Accretion of discount related to Senior Notes							321			—
Asset impairment	4,947			—			573			3,534
Gain on property disposals	(540		)	(7,315		)
Loss (gain) on equity method investments	(44		)	194
Loss (gain) on property disposals							239			(768		)
Gain on equity-method investments							(32		)	(30		)
Share-based compensation	2,454			5,404			5,633			1,947
Deferred income tax expense (benefit)	25,768			(6		)	(11,927		)	25,857
Changes in operating assets and liabilities:
Trade accounts and other receivables	(146,477		)	(65,649		)	(31,913		)	(93,391		)
Inventories	(149,806		)	(18,099		)	60,303			(93,901		)
Prepaid expenses and other current assets	(15,377		)	1,990			(31,099		)	(15,323		)
Accounts payable, accrued expenses and other current liabilities	(36,105		)	35,346			103,991			(46,506		)
Income taxes	149,063			45,789			(161,571		)	73,207
Long-term pension and other postretirement obligations	(9,660		)	(8,294		)	(5,323		)	(3,916		)
Other operating assets and liabilities	(1,429		)	(6,190		)	942			(1,337		)
Cash provided by operating activities	618,491			551,983			303,989			333,549
Cash flows from investing activities:
Acquisitions of property, plant and equipment	(258,364		)	(221,035		)	(155,188		)	(197,989		)
Purchase of acquired businesses, net of cash acquired	(658,520		)	—			—			(359,698		)
Proceeds from property disposals	2,585			12,977			1,205			1,466
Cash used in investing activities	(914,299		)	(208,058		)	(153,983		)	(556,221		)
Cash flows from financing activities:
Proceeds from note payable to bank	—			36,838
Payments on note payable to bank	—			(65,564		)
Proceeds from revolving line of credit and long-term borrowings	1,013,662			515,292			604,062			1,013,662
Payments on revolving line of credit, long-term borrowings and capital lease obligations	(609,678		)	(504,078		)	(673,452		)	(591,904		)
Proceeds from equity contribution under Tax Sharing Agreement between JBS USA Food Company Holdings and Pilgrim’s Pride Corporation	5,038			3,691			5,558			5,038
Capital contributions to subsidiary by noncontrolling stockholders	—			7,252
Payment of capitalized loan costs	(4,550		)	(693		)	(5,708		)	(2,777		)
Purchase of common stock under share repurchase program	(14,641		)	(20,333		)	—			(14,641		)
Purchase of common stock from retirement plan participants	—			(73		)
Payment of special cash dividends	—			(715,711		)
Cash provided by (used in) financing activities	389,831			(743,379		)	(69,540		)	409,378
Effect of exchange rate changes on cash and cash equivalents	15,084			(28,937		)	4,030			9,273
Increase (decrease) in cash, cash equivalents and restricted cash	109,107			(428,391		)
Increase in cash, cash equivalents and restricted cash							84,496			195,979
Cash, cash equivalents and restricted cash, beginning of period	297,523			696,553			589,531			297,524
Cash, cash equivalents and restricted cash, end of period	$	406,630		$	268,162		$	674,027		$	493,503

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

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)


1.	DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Business

Pilgrim’s Pride Corporation (referred to herein as “Pilgrim’s,” “PPC,” “the Company,” “we,” “us,” “our,” or similar terms) is one of the largest chicken producers in the world, with operations in the United States (“U.S.”), the United Kingdom (“U.K.”), Mexico, France, Puerto Rico and the ~~Netherlands and Ireland. Pilgrim's~~Netherlands. Pilgrim’s products are sold to foodservice, retail and frozen entrée customers. The ~~Company's~~Company’s primary distribution is through retailers, foodservice distributors and restaurants throughout the countries listed above. Additionally, the Company exports chicken products to approximately 85100 countries. Pilgrim’s fresh chicken products consist of refrigerated (nonfrozen) whole chickens, whole cut-up chickens and selected chicken parts that are either marinated or non-marinated. The Company’s prepared chicken products include fully cooked, ready-to-cook and individually frozen chicken parts, strips, nuggets and patties, some of which are either breaded or non-breaded and either marinated or non-marinated. The Company’s other products include ready-to-eat meals, multi-protein frozen foods, vegetarian foods and desserts. As a vertically integrated company, we control every phase of the production of our products. We operate feed mills, hatcheries, processing plants and distribution centers in 14 U.S. states, the U.K., ~~Europe,~~ Mexico, France, Puerto Rico and ~~Puerto Rico.~~the Netherlands. As of ~~September 24, 2017,~~July 1, 2018, Pilgrim’s had approximately ~~52,000~~51,600 employees and the capacity to process approximately ~~45.2~~45.3 million birds per ~~five-day~~ work week for a total of ~~approximately~~more than 12.8 billion pounds of live chicken annually. Approximately ~~5,100~~5,200 contract growers supply poultry for the Company’s operations. As of ~~September 24, 2017,~~July 1, 2018, JBS S.A., through its indirect wholly-owned subsidiaries (together, “JBS”), beneficially owned ~~78.6%~~78.5% of the Company’s outstanding common stock.

Condensed Consolidated and Combined Financial Statements

The accompanying unaudited condensed consolidated and combined financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal and recurring adjustments unless otherwise disclosed) considered necessary for a fair presentation have been included. Operating results for the ~~thirty-nine~~thirteen and twenty-six weeks ended ~~September 24, 2017~~July 1, 2018 are not necessarily indicative of the results that may be expected for the year ending December ~~31, 2017.~~30, 2018. For further information, refer to the consolidated and combined financial statements and ~~footnotes~~notes thereto included in the Company’s annual report on Form 10-K for the year ended December ~~25, 2016.~~31, 2017.

Pilgrim’s operates on a 52/53-week fiscal year that ends on the Sunday falling on or before December 31. The reader should assume any reference we make to a particular year (for example, ~~2017)~~2018) in the notes to these Condensed Consolidated and Combined Financial Statements applies to our fiscal year and not the calendar year.

On September 8, 2017, a subsidiary of the Company acquired 100% of the issued and outstanding shares of Granite Holdings Sàrl and its subsidiaries (together, “Moy Park”) from JBS ~~S.A.~~ in a common-control transaction. ~~For the period~~Moy Park was acquired by JBS from an unrelated third party on September 30, ~~2015 through September 7,~~2015. The Condensed Consolidated and Combined Financial Statements presented for the thirteen and twenty-six weeks ended June 25, 2017 ~~the condensed consolidated and combined financial statements~~ include the accounts of the Company and its majority-owned subsidiaries combined with the accounts of Moy Park. ~~For the period from September 8, 2017 through September 24, 2017, the~~The Condensed Consolidated and Combined Financial Statements presented for the thirteen and twenty-six weeks ended July 1, 2018 and the Condensed Consolidated Balance Sheet presented as of December 31, 2017 include the accounts of the Company and its majority-owned subsidiaries, including Moy Park. We eliminate all significant affiliate accounts and transactions upon consolidation.

The Condensed Consolidated and Combined Financial Statements have been prepared in conformity with U.S. GAAP using management’s best estimates and judgments. These estimates and judgments affect the reported amounts of assets and liabilities and disclosure of the contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ materially from these estimates and judgments. Significant estimates made by the Company include the allowance for doubtful accounts, allowances for product claims and sales deductions, reserves related to inventory obsolescence or valuation, useful lives of long-lived assets, goodwill, valuation of deferred tax assets, insurance accruals, valuation of pension and other postretirement benefits obligations, income tax accruals, certain derivative positions and valuations of acquired businesses.

The functional currency of the Company's U.S. and Mexico operations and certain holding-company subsidiaries in Luxembourg, the U.K. and 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 and the Netherlands ~~and Ireland~~ is the euro. For foreign ~~currency- denominated~~ currency-denominated

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entities other than the Company's Mexico operations, translation from local currencies into U.S. dollars is performed for most assets and liabilities using the exchange rates in effect as of the balance sheet date. Income and expense accounts are

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remeasured using average exchange rates for the period. Adjustments resulting from translation of these financial records are reflected as a separate component of Accumulated other comprehensive loss in the Condensed Consolidated ~~and Combined~~ Balance Sheets. For the Company's Mexico operations, remeasurement from the Mexican peso to U.S. dollars is performed for monetary assets and liabilities using the exchange rate in effect as of the balance sheet date. Remeasurement is performed for non-monetary assets using the historical exchange rate in effect on the date of each asset’s acquisition. Income and expense accounts are remeasured using average exchange rates for the period. Net adjustments resulting from remeasurement of these financial records are reflected in ~~either~~ ~~Cost of sales~~ or Foreign currency transaction ~~loss,~~losses (gains) ~~depending on the nature of the transaction,~~ in the Condensed Consolidated and Combined Statements of Income.

The Company reported an adjustment resulting from the translation of a British pound-denominated note payable owed to JBS ~~S.A.~~ as a component of Accumulated other comprehensive loss in the Condensed Consolidated Balance Sheet as of ~~September 24, 2017.~~July 1, 2018. The Company designated this note payable as a hedge of its net investment in Moy Park.

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 Condensed Consolidated and Combined Statements of Income.

~~Revenue Recognition~~

We ~~recognize revenue when all of~~made the following circumstances are satisfied: (i) persuasive evidence of an arrangement exists, (ii) price is fixed or determinable, (iii) collectability is reasonably assured and (iv) delivery has occurred. Delivery occurs in the period in which the customer takes title and assumes the risks and rewards of ownership of the products specified in the customer’s purchase order or sales agreement. Revenue is recorded net of estimated incentive offerings including special pricing agreements, promotions and other volume-based incentives. Revisions to these estimates are charged back to net sales in the period in which the facts that give risereclassification to the ~~revision become known.~~Condensed Consolidated Balance Sheet presented as of December 31, 2017 in order to conform to the Condensed Consolidated Balance Sheet presented as of July 1, 2018:



	December 31, 2017
	As Presented in 2017 Annual Report on Form 10-K		Adjustment Resulting from Adoption of FASB Guidance			As Presented in the Condensed Consolidated Balance Sheet
	(In thousands)
Accounts payable	$	762,444	$	(29,417	)	$	733,027
Accrued expense and other current liabilities	417,342		(7,190		)	410,152
Revenue contract liability	—		36,607			36,607

Book Overdraft

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 Condensed Consolidated and Combined 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 and restricted cash as reported in the Condensed Consolidated ~~and Combined~~ Balance Sheets to the total of the same amounts shown in the Condensed Consolidated and Combined Statements of Cash Flows:


	September 24, 2017		December 25, 2016		July 1, 2018		December 31, 2017
	(In thousands)				(In thousands)
Cash and cash equivalents	$	401,789	$	292,544	$	640,842	$	581,510
Restricted cash	4,841		4,979		33,185		8,021
Total cash, cash equivalents and restricted cash shown in the Condensed Consolidated and Combined Statements of Cash Flows	$	406,630	$	297,523	$	674,027	$	589,531

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance on revenue recognition, which provides for a single five-step model to be applied to all revenue contracts with customers. The new standard

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also requires additional financial statement disclosures that will enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. Companies have an option to use either a retrospective approach or cumulative effect adjustment approach to implement the standard. In June 2015, the FASB agreed to defer by one year the mandatory effective date of this standard, but will also provide entities the option to adopt the new guidance as of the original effective date. The provisions of the new guidance will be effective as of the beginning of our 2018 fiscal year, but we

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~~had the option to adopt the guidance as early as the beginning of our 2017 fiscal year.~~ We ~~have elected to adopt~~adopted this standard as of January 1, 2018, the beginning of our 2018 fiscal year, using the cumulative effect adjustment, often referred to as modified retrospective approach. Under this method, we ~~would~~did not restate the prior financial statements ~~presented; however, we~~presented, and would record any adjustments in the opening balance sheet for January 2018. There was no cumulative effect to be ~~required~~recorded as an adjustment to ~~provide additional~~the opening balance of retained earnings. The comparative information was not restated and continues to be presented under the accounting standards in effect for those periods. Additional disclosures ofwill include the amount by which each financial statement line item is affected in the current reporting period during 2018, as compared to the prior guidance.

We ~~are finalizing our assessment of contracts with customers and evaluating~~expect minimal impact from the ~~impact of the new guidance on these contracts. Additionally, our evaluation includes the impact~~adoption of the new standard to the financial statements on ~~certain common practices~~a go forward basis, except for expanded disclosures. Revenue is currently ~~employed by us, such as slotting fees, discounts, rebates~~recognized at destination and ~~other pricing allowances, and marketing funds. Although we are still evaluating the impact, we do not currently expect~~will continue to be recognized at point in time under the new ~~guidance to have a material impact on our financial statements beyond additional disclosure requirements.~~

~~In July 2015, the FASB issued new accounting guidance on the subsequent measurement of inventory, which,~~guidance. Additional information regarding revenue recognition is included in an effort to simplify unnecessarily complicated accounting guidance that can result in several potential outcomes, requires an entity to measure inventory at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Current accounting guidance requires an entity to measure inventory at the lower of cost or market. Market could be replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. The provisions of the new guidance were effective as of the beginning of our 2017 fiscal year. The initial adoption of this guidance did not have a material impact on our financial statements.“Note 13. Revenue Recognition.”

In February 2016, the FASB issued new accounting guidance on lease arrangements, which, in an effort to increase transparency and comparability among organizations utilizing leasing, requires an entity that is a lessee to recognize the assets and liabilities arising from leases on the balance sheet. This guidance also requires disclosures about the amount, timing and uncertainty of cash flows arising from leases. In transition, the entity is required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The provisions of the new guidance will be effective as of the beginning of our 2019 calendar year. We have elected to adopt the new standard as of the beginning of our 2019 fiscal year. ~~Early adoption is permitted.~~ We are currently assessing our leasing and other arrangements, and evaluating the impact of the new guidance on these arrangements and our financial ~~statements~~statements. Implementation of a system solution to track, account for and ~~have not yet selected an adoption date.~~

~~In March 2016, the FASB issued new accounting guidance on employee share-based payments, which,~~provide required disclosures of leasing agreements is in an effort to simplify unnecessarily complicated aspects of accounting and reporting for share-based payment transactions, requires an entity to amend accounting and reporting methodology for areas such as the income tax consequences of share-based payments, classification of share-based awards as either equity or liabilities, and classification of share-based payment transactions in the statement of cash flows. The transition approach will vary depending on the area of accounting and reporting methodology to be amended. The Company adopted this standard on December 26, 2016, the beginning of our 2017 fiscal year, and will prospectively present excess tax benefits or deficiencies in the income statement as a component of “Provision for income taxes” rather than in the “Equity” section of the Balance Sheet. As part of the adoption, the Company did not have a cumulative-effect adjustment, as there were no previous unrecognized excess tax benefits that would impact retained earnings. As a result, there was no retrospective adjustmentprocess with completion expected prior to the ~~prior period statement of cash flows of excess tax benefits as an operating activity rather than a financing activity.~~required adoption date.

In June 2016, the FASB issued new accounting guidance on the measurement of credit losses on financial instruments, which, in an effort to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments, replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual right to receive cash. The provisions of the new guidance will be effective as of the beginning of our 2020 fiscal year. Early adoption is permitted after our 2018 fiscal year. We are currently evaluating the impact of the new guidance on our financial statements and have not yet selected an adoption date.

In November 2016, the FASB issued new accounting guidance on the classification and presentation of restricted cash in the statement of cash flows in order to eliminate the diversity that currently exists in how companies present these changes. The new guidance requires restricted cash to be included with cash and cash equivalents when explaining the changes in cash in the statement of cash flows. We elected to early adopt this guidance as of December 26, 2016, the beginning of our 2017 fiscal year. An entity should apply the new guidance on a retrospective basis, wherein the statement of cash flow of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. Upon transition, an entity is required to comply with the applicable disclosures for a change in an accounting principle. These disclosures include the nature of and reason for the change in accounting principle, the transition method, a description of the prior-period information that has been retrospectively adjusted and the effect of the change on the financial statement line items. A description of the prior-period information that has been retrospectively adjusted and the effect of the change on the statement of cash flow line items is not disclosed as it is not material.

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In March 2017, the FASB issued new accounting guidance on the presentation of net periodic pension cost and net periodic postretirement benefit cost, which, in an effort to improve consistency and transparency, requires the service cost component of defined benefit pension cost and postretirement benefit cost (“net benefit cost”) to be reported in the same line of the income statement as other compensation costs earned by the employee and the other components of net benefit cost to be reported below income from operations. The new guidance will be effective as of the beginning of our 2019 ~~fiscal~~calender year with early adoption permitted. We are currently evaluating the impact of the new guidance on our financial statements and have not yet selected an adoption date.

In August 2017, the FASB issued an accounting standard update that simplifies the application of hedge accounting guidance in current GAAP and improves the reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. Among the simplification updates, the standard eliminates the requirement in current GAAP to separately recognize periodic hedge ineffectiveness. Mismatches between the changes in value of the hedged item and hedging instrument may still occur but they will no longer be separately reported. The standard requires the presentation of the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is reported. The standard is effective for annual and interim reporting periods beginning after December 15, 2018, but early adoption is permitted. We are currently evaluating the impact the adoption of this standard will have on our financial statements.

In February 2018, the FASB issued an accounting standard update that allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act. The Company will need to decide whether to reclassify the stranded tax effects associated with the U.S. Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. If the Company chooses to reclassify we will need to calculate the amount of the reclassification and prepare the related disclosures The accounting standards is effective as of the beginning of our 2019 calendar year with early adoption permitted. We are currently evaluating the impact of the new guidance on our financial statements and have not yet selected an adoption date.

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In July 2018, the FASB issued an accounting standard update to improve non-employee share-based payment accounting. The accounting standard update more closely aligns the accounting for employee and non-employee share based payments. The accounting standards update is effective as of the beginning of our 2019 calendar year with early adoption permitted. We are currently evaluating the impacts of the new guidance on our financial statements and have not yet selected an adoption date.


2.	BUSINESS ~~ACQUISITIONS~~ACQUISITION

~~Moy Park~~

On September 8, 2017, the Company purchased 100% of the issued and outstanding shares of Moy Park from JBS ~~S.A.~~ for cash of $301.3 million and a note payable to the seller in the amount of £562.5 ~~million.~~million (the "JBS S.A. Promissory Note"). Moy Park is one of the top-ten food companies in the U.K., Northern Ireland's largest private sector business and one of Europe's leading poultry producers. With 134 fresh processing plants, 10 prepared foods cook plants, 3 feed mills, 6 hatcheries and ~~manufacturing units~~1 rendering facility currently operating in Northern Ireland, ~~the U.K.,~~England, France and the Netherlands, ~~and Ireland,~~ Moy Park ~~processes 6.0~~possesses the capacity to process approximately 6.1 million birds per seven-day work week, in addition to ~~producing around 200,000 tons~~the capacity to produce approximately 460.0 million pounds of prepared foods per year. Its product portfolio comprises fresh and ~~added-value~~further processed poultry, ready-to-eat meals, breaded and multi-protein frozen foods, vegetarian foods and desserts, supplied to major food retailers and restaurant chains in Europe (including the U.K.). Moy Park ~~currently~~ has approximately ~~10,100 employees.~~10,300 employees as of July 1, 2018. The Moy Park operations ~~will~~ comprise our U.K. and Europe segment.

The acquisition was treated as a common-control transaction under U.S. GAAP. A common-control transaction is a transfer of net assets or an exchange of equity interests between entities under the control of the same parent. The accounting and reporting for a transaction between entities under common control is not to be considered a business combination under U.S. GAAP. Since there is no change in control over the net assets from the parent’s perspective, there is no change in basis in the assets or liabilities. Therefore, Pilgrim's, as the receiving entity, recognized the assets and liabilities received at their historical carrying amounts, as reflected in the parent’s financial statements. The difference between the proceeds transferred and the carrying amounts of the net assets on the date of the acquisition is recognized in equity.

Transaction costs incurred in conjunction with the acquisition were approximately ~~$15.0~~$19.9 million. These costs were expensed as incurred. Beginning September 8, 2017, the results of operations and financial position of Moy Park have been included in the consolidated results of operations and financial position of the Company. The results of operations and financial position of Moy Park have been combined with the results of operations and financial position of Pilgrim's from September 30, 2015, the common control date, through September 7, 2017. Beginning September 8, 2017, the results of operations and financial position of Moy Park have been included in the consolidated results of operations and financial position of the Company. Net sales generated by Moy Park from the September 8, 2017 acquisition date through September 24, 2017 totaled $199.9 million. Net sales generated by Moy Park from December 26, 2016 through September 7, 2017 totaled $1.3 billion. Net sales generated by Moy Park during the ~~thirty-nine~~thirteen weeks ended ~~September~~July 1, 2018 and June 25, ~~2016 totaled $1.5 billion.~~2017 were $563.1 million and $500.7 million, respectively. Net income generated by Moy Park from the September 8, 2017 acquisition date through September 24, 2017 totaled $2.1 million. Net income generated by Moy Park from December 26, 2016 through September 7, 2017 totaled $23.5 million. Net incomesales generated by Moy Park during the ~~thirty-nine~~twenty-six weeks ended ~~September~~July 1, 2018 and June 25, ~~2016 totaled~~ ~~$25.1 million.~~

~~GNP~~

~~On January 6,~~ 2017 the Company acquired 100% of the membership interests of JFC LLC and its subsidiaries (together, “GNP”) from Maschhoff Family Foods, LLC for cash. GNP is a vertically integrated poultry business based in Saint Cloud, Minnesota. The acquired business has a production capacity of 2.1 million birds per five-day work week in its three plants and employs approximately 1,700 people.

~~The following table summarizes the consideration paid for GNP (in thousands):~~

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Negotiated sales price $ 350,000
Working capital adjustment 7,252
Preliminary purchase price $ 357,252

~~Transaction costs incurred in conjunction with the purchase~~ were approximately $0.6 million. These costs were expensed as incurred. The results of operations of the acquired business since January 6, 2017 are included in the Company’s Condensed Consolidated and Combined Statements of Income. Net sales generated by the acquired business during the thirteen and thirty-nine weeks ended September 24, 2017 totaled $108.6$1,107.4 million and ~~$322.3~~$959.5 million, ~~respectively The acquired business~~respectively. Moy Park generated net income during the thirteen ~~and thirty-nine~~ weeks ended ~~September 24,~~July 1, 2018 and June 25, 2017 totaling ~~$9.8~~$19.3 million and ~~$24.6~~$11.1 million, respectively.

~~The assets acquired and liabilities assumed in~~ Moy Park generated net income during the GNP acquisition were measured at their fair values at January 6, 2017 as set forth below. The excess of the purchase price over the fair values of the net tangible assets and identifiable intangible assets was recorded as goodwill. The factors contributing to the recognition of the amount of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the acquisition as well the assembled workforce. These benefits include (i) complementary product offerings, (ii) an enhanced footprint in the U.S., (iii) shared knowledge of innovative technologies such as gas stunning, aeroscalding and automated deboning, (iv) enhanced position in the fast-growing antibiotic-free and certified organic chicken segments due to the addition of GNP’s portfolio of Just BARE® Certified Organic and Natural/American Humane Certified^TM/No-Antibiotics-Ever product lines and (v) attractive cost-reduction synergy opportunities and value creation. The Company has tax basis in the goodwill, and therefore, the goodwill is deductible for tax purposes. The preliminary fair values recorded were determined based upon a preliminary valuation. The estimates and assumptions used in such valuation are subject to change, which could be significant, within the measurement period (up to one year from the acquisition date). The primary areas of acquisition accounting that are not yet finalized relate to the preliminary nature of the valuation of property, plant and equipment, intangible assets and residual goodwill. We continue to review inputs and assumptions used in the preliminary valuations.

~~The fair values recorded for the assets acquired and liabilities assumed for GNP are as follows (in thousands):~~

Cash and cash equivalents $ 10
Trade accounts and other receivables 18,453
Inventories 56,459
Prepaid expenses and other current assets 3,414
Property, plant and equipment 144,138
Identifiable intangible assets 131,120
Other long-lived assets 829
Total assets acquired 354,423
Accounts payable 23,848
Other current liabilities 11,866
Other long-term liabilities 3,393
Total liabilities assumed 39,107
Total identifiable net assets 315,316
Goodwill 41,936
Total net assets $ 357,252

The Company recognized certain identifiable intangible assets as of January 6, 2017 due to this acquisition. The following table presents the fair values and useful lives, where applicable, of these assets:

Fair Value Useful Life
(In thousands) (In years)
Customer relationships $ 92,900
13.0
Trade names 38,200
20.0
Non-compete agreement 20
3.0
Total fair value $ 131,120

Weighted average useful life 15.2

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The Company performed a valuation of the assets and liabilities of GNP as of January 6, 2017. Significant assumptions used in the preliminary valuation and the bases for their determination are summarized as follows:

~~Property, plant and equipment, net~~. Property, plant and equipment at fair value gave consideration to the highest and best use of the assets. The valuation of the Company's real property improvements and the majority of its personal property was based on the cost approach. The valuation of the Company's land, as if vacant, and certain personal property assets was based on the market or sales comparison approach.

~~Trade names~~. The Company valued two trade names using the income approach, specifically the relief from royalty method. Under this method, the asset value of each trade name was determined by estimating the hypothetical royalties that would have to be paid if it was not owned. Royalty rates were selected based on consideration of several factors, including (i) prior transactions involving GNP trade names, (ii) incomes derived from license agreements on comparable trade names within the food industry and (iii) the relative profitability and perceived contribution of each trade name. The royalty rate used in the determination of the fair values of the two trade names was 2.0% of expected net sales related to the respective trade names. In estimating the fair value of the trade names, net sales related to the respective trade names were estimated to grow at a rate of 2.5%. Income taxes were estimated at 39.3% of pre-tax income, a tax amortization benefit factor was estimated at 1.2098 and the hypothetical savings generated by avoiding royalty costs were discounted using a rate of 13.8%.

~~Customer relationships~~. The Company valued GNP customer relationships using the income approach, specifically the multi-period excess earnings model. Under this model, the fair value of the customer relationships asset was determined by estimating the net cash inflows from the relationships discounted to present value. In estimating the fair value of the customer relationships, net sales related to existing GNP customers were estimated to grow at a rate of 2.5% annually, but we also anticipate losing existing GNP customers at an attrition rate of 4.0%. Income taxes were estimated at 39.3% of pre-tax income, a tax amortization benefit factor was estimated at 1.2098 and net cash flows attributable to our existing customers were discounted using a rate of 13.8%.

~~See “Note 8. Goodwill and Intangible Assets” for additional information regarding the goodwill and intangible assets recognized by the Company in the GNP acquisition.~~

~~During the thirty-nine~~twenty-six weeks ended ~~September 24,~~July 1, 2018 and June 25, 2017 ~~the Company recognized restructuring charges in the amounts of $0.7~~totaling $21.8 million and ~~$2.6~~$17.4 million, ~~related to the elimination of prepaid costs associated with obsolete GNP software and severance costs related to the GNP acquisition,~~ respectively. ~~These charges are reported in the line item~~ ~~Administrative restructuring charges~~ on the Condensed Consolidated and Combined Statements of Income. The Company expects to incur additional restructuring costs related to GNP of approximately $1.7 million during the remainder of 2017 and 2018.

The following unaudited pro forma information presents the combined financial results for the Company and ~~GNP~~Moy Park as if the acquisition had been completed at the beginning of the Company’s prior year, December ~~28, 2015.~~25, 2016.


	Thirty-Nine Weeks Ended September 24, 2017		Thirty-Nine Weeks Ended September 25, 2016		Twenty-Six Weeks Ended July 1, 2018		Twenty-Six Weeks Ended June 25, 2017
	(In thousands, except per share amount)				(In thousands, except per share amount)
Net sales	$	8,031,311	$	7,833,406	$	5,583,391	$	5,231,626
Net income attributable to Pilgrim's Pride Corporation	572,063		363,735		226,185		314,946
Net income attributable to Pilgrim's Pride Corporation per common share - diluted	2.30		1.40		0.91		1.27

The above unaudited pro forma financial information is presented for informational purposes only and does not purport to represent what the Company’s results of operations would have been had it completed the acquisition on the date assumed, nor is it necessarily indicative of the results that may be expected in future periods. Pro forma adjustments exclude cost savings from any synergies resulting from the acquisition.


3.	FAIR VALUE MEASUREMENTS

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Assets and liabilities measured at fair value must be categorized into one of three different levels depending on the assumptions (i.e., inputs) used in the valuation:

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Level 1		Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2		Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or

Level 3		Unobservable inputs, such as discounted cash flow models or valuations.

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement in its entirety.

As of ~~September 24, 2017~~July 1, 2018 and December ~~25, 2016,~~31, 2017, the Company held derivative assets and liabilities that were required to be measured at fair value on a recurring basis. Derivative assets and liabilities consist of long and short positions on exchange-traded commodity futures instruments, commodity options instruments and foreign currency ~~forward contracts~~instruments to manage translation and remeasurement risk.

The following items were measured at fair value on a recurring basis:


	September 24, 2017						July 1, 2018
	Level 1			Total			Level 1			Total
	(In thousands)						(In thousands)
Fair value assets:
Commodity futures instruments	$	2,168		$	2,168		$	18,590		$	18,590
Commodity options instruments	1,200			1,200			88			88
Foreign currency instruments	586			586			527			527
Fair value liabilities:
Commodity futures instruments	(1,587		)	(1,587		)	(25,920		)	(25,920		)
Commodity options instruments	(2,196		)	(2,196		)	(16,641		)	(16,641		)
Foreign currency instruments	(387		)	(387		)	(278		)	(278		)


	December 25, 2016						December 31, 2017
	Level 1			Total			Level 1			Total
	(In thousands)						(In thousands)
Fair value assets:
Commodity futures instruments	$	5,341		$	5,341		$	301		$	301
Commodity options instruments	98			98			421			421
Foreign currency instruments	516			516			45			45
Fair value liabilities:
Commodity futures instruments	(4,063		)	(4,063		)	(296		)	(296		)
Commodity option instruments	(2,764		)	(2,764		)	(3,551		)	(3,551		)
Foreign currency instruments	(153		)	(153		)	(211		)	(211		)

See “Note 7. Derivative Financial Instruments” for additional information.

~~Fair value and carrying value for our fixed-rate debt obligation is as follows:~~

September 24, 2017 December 25, 2016
Carrying
Amount Fair
Value Carrying
Amount Fair
Value
(In thousands)
Fixed-rate senior notes payable at 5.75%, at Level 1 inputs $ (500,000 ) $ (521,250 ) $ (500,000 ) $ (503,395 )
Fixed-rate senior notes payable at 6.25%, at Level 1 inputs (401,983 ) (415,622 ) (369,736 ) (389,709 )
Chattels Mortgages, at Level 3 inputs (1,015 ) (989 ) (1,432 ) (1,379 )

~~See “Note 11. Long-Term Debt and Other Borrowing Arrangements” for additional information.~~

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The valuation of financial assets and liabilities classified in Level 1 is determined using a market approach, taking into account current interest rates, creditworthiness, and liquidity risks in relation to current market conditions, and is based upon unadjusted quoted prices for identical assets in active markets. The valuation of financial assets and liabilities in Level 2 is determined using a market approach based upon quoted prices for similar assets and liabilities in active markets or other inputs that are observable for substantially the full term of the financial instrument. The valuation of financial assets in Level 3 is determined using an income approach based on unobservable inputs such as discounted cash flow models or valuations. For each class of assets and liabilities not measured at fair value in the Condensed Consolidated ~~and Combined~~ Balance Sheet but for which fair value is disclosed, the Company is not required to provide the quantitative disclosure about significant unobservable inputs used in fair value measurements categorized within Level 3 of the fair value hierarchy.

In addition to the fair value disclosure requirements related to financial instruments carried at fair value, accounting standards require ~~periodic~~interim disclosures regarding the fair value of all of the Company’s financial instruments. The methods and significant assumptions used to estimate the fair value of financial instruments and any changes in methods or significant assumptions from prior periods are also required to be disclosed.

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The carrying amounts and estimated fair values of our fixed-rate debt obligation recorded in the Condensed Consolidated Balance Sheets consisted of the following:



	July 1, 2018						December 31, 2017
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
				(In thousands)
Fixed-rate senior notes payable at 5.75%, at Level 1 inputs	$	(1,002,698	)	$	(960,000	)	$	(750,000	)	$	(774,375	)
Fixed-rate senior notes payable at 5.875%, at Level 1 inputs	(843,359		)	(791,716		)	(604,820		)	(619,080		)
Fixed-rate senior notes payable at 6.25%, at Level 1 inputs	—			—			(403,444		)	(418,787		)
Secured loans, at Level 3 inputs	(580		)	(576		)	(873		)	(855		)

See “Note 11. Long-Term Debt and Other Borrowing Arrangements” for additional information.

The carrying amounts of our cash and cash equivalents, derivative trading accounts' margin cash, restricted cash and cash equivalents, accounts receivable, accounts payable and certain other liabilities approximate their fair values due to their relatively short maturities. Derivative assets were recorded at fair value based on quoted market prices and are included in the line item Prepaid expenses and other current assets on the Condensed Consolidated ~~and Combined~~ Balance ~~Sheets.~~Sheet. Derivative liabilities were recorded at fair value based on quoted market prices and are included in the line item Accrued expenses and other current liabilities on the Condensed Consolidated ~~and Combined~~ Balance ~~Sheets.~~Sheet. The fair value of the Company’s Level 1 fixed-rate debt obligations was based on the quoted market price at ~~September 24, 2017~~July 1, 2018 or December ~~25, 2016,~~31, 2017, as applicable. The fair value of the Company’s Level 3 fixed-rate debt obligation was based on discounted cash flows at ~~September 24, 2017~~July 1, 2018 or December ~~25, 2016,~~31, 2017, as applicable.

In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company records certain assets and liabilities at fair value on a nonrecurring basis. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges when required by U.S. GAAP. There were no significant fair value measurement losses recognized for such assets and liabilities in the periods reported.


4.	~~TRADE ACCOUNTS AND OTHER RECEIVABLES~~

4. TRADE ACCOUNTS AND OTHER RECEIVABLES

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


	September 24, 2017			December 25, 2016			July 1, 2018			December 31, 2017
	(In thousands)						(In thousands)
Trade accounts receivable	$	612,983		$	435,818		$	559,778		$	548,472
Notes receivable - current	5,130			630			5,130			5,130
Other receivables	14,644			15,766			33,403			20,021
Receivables, gross	632,757			452,214			598,311			573,623
Allowance for doubtful accounts	(7,955		)	(6,661		)	(8,378		)	(8,145		)
Receivables, net	$	624,802		$	445,553		$	589,933		$	565,478

Account receivable from related parties^(a)	$	970		$	4,010		$	1,179		$	2,951

(a) Additional information regarding accounts receivable from related parties is included in “Note ~~16.~~20. Related Party Transactions.”

Activity in the allowance for doubtful accounts for the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~July 1, 2018 was as follows (in thousands):

Balance, beginning of period $ (6,661 )
Provision charged to operating results (1,962 )
Account write-offs and recoveries 858
Effect of exchange rate (190 )
Balance, end of period $ (7,955 )


5.	~~INVENTORIES~~

~~Inventories consisted of the following:~~



Balance, beginning of period	$	(8,145	)
Provision charged to operating results	(1,132		)
Account write-offs and recoveries	894
Effect of exchange rate	5
Balance, end of period	$	(8,378	)

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5. INVENTORIES

Inventories consisted of the following:

September 24, 2017 December 25, 2016
(In thousands)
Live chicken and hens $ 471,394
$ 407,475
Feed, eggs and other 263,576
257,049
Finished chicken products 399,085
243,824
Total chicken inventories 1,134,055
908,348
Commercial feed and other 62,146
67,260
Total inventories $ 1,196,201
$ 975,608



	July 1, 2018		December 31, 2017
	(In thousands)
Raw materials and work-in-process	$	751,534	$	722,083
Finished products ^(a)	345,158		444,796
Operating supplies	38,770		35,442
Maintenance materials and parts	54,555		52,749
Total inventories	$	1,190,017	$	1,255,070


(a)	Finished products contains a $54.4 million reclassification related to both in-transit and non-chicken finished products that were previously presented in Feed, eggs and other on our annual report on Form 10-K for the year ended December 31, 2017 to conform to the inventories presented as of July1,2018.


6.	INVESTMENTS IN SECURITIES

We recognize investments in available-for-sale securities as cash equivalents, current investments or long-term investments depending upon each security's length to maturity. Additionally, those securities identified by management at the time of purchase for funding operations in less than one year are classified as current.

The following table summarizes our investments in available-for-sale securities:


	September 24, 2017				December 25, 2016				July 1, 2018				December 31, 2017
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)								(In thousands)
Cash equivalents:
Fixed income securities	$	155,216	$	155,216	$	140,480	$	140,480	$	524,806	$	524,806	$	330,456	$	330,456
Other	62		62		61		61		1,323		1,323		942		942

Securities classified as cash and cash equivalents mature within 90 days. Securities classified as short-term investments mature between 91 and 365 days. Securities classified as long-term investments mature after 365 days. The specific identification method is used to determine the cost of each security sold and each amount reclassified out of accumulated other comprehensive loss to earnings. Gross realized gains ~~and gross realized losses recognized~~ during the thirteen and ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017 and September 25, 2016~~July 1, 2018 related to the Company’s available-for-sale securities totaled $1.8 million and $2.9 million while gross realized losses were immaterial. Gross realized gains during the thirteen and twenty-six weeks ended June 25, 2017 related to the Company’s available-for-sale securities totaled $1.0 million and $1.1 million while gross realized losses were immaterial. Proceeds received from the sale or maturity of available-for-sale securities recognized as either ~~short-~~short or long-term investments are historically disclosed in the Condensed Consolidated and Combined Statements of Cash Flows. No proceeds were received from the sale or maturity of available-for-sale securities recognized as either short- or long-term investments during the thirty-nine weeks ended September 24, 2017 and September 25, 2016. Net unrealized holding gains and losses on the Company’s available-for-sale securities recognized during the ~~thirty-nine~~thirteen and twenty-six weeks ended ~~September 24,~~July 1, 2018 and June 25, 2017 ~~and September 25, 2016~~ that have been included in accumulated other comprehensive loss and the net amount of gains and losses reclassified out of accumulated other comprehensive loss to earnings during the ~~thirty-nine~~thirteen and twenty-six weeks ended ~~September 24,~~July 1, 2018 and June 25, 2017 ~~and September 25, 2016 is~~are disclosed in “Note ~~14.~~15. Stockholders’ ~~Equity - Accumulated Other Comprehensive Loss.”~~Equity”.


7.	DERIVATIVE FINANCIAL INSTRUMENTS

The Company utilizes various raw materials in its operations, including corn, soybean meal, soybean oil, and energy, such as natural gas, electricity and diesel fuel, which are all considered commodities. The Company considers these raw materials generally available from a number of different sources and believes it can obtain them to meet its requirements. These commodities are subject to price fluctuations and related price risk due to factors beyond our control, such as economic and political conditions, supply and demand, weather, governmental regulation and other circumstances. Generally, the Company purchases derivative financial instruments, specifically exchange-traded futures and options, in an attempt to mitigate price risk related to its anticipated consumption of commodity inputs for approximately the next 12 months. The Company may purchase longer-term derivative financial instruments on particular commodities if deemed appropriate.

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The Company has operations in Mexico and Europe (including the U.K.) and, therefore, has exposure to translational foreign exchange risk when the financial results of those operations are remeasured in U.S. dollars. The Company has purchased foreign currency forward contracts to manage this translational foreign exchange risk.

The fair value of derivative assets is included in the line item Prepaid expenses and other current assets on the Condensed Consolidated ~~and Combined~~ Balance Sheets while the fair value of derivative liabilities is included in the line item Accrued

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expenses and other current liabilities on the same statements. Our counterparties require that we post ~~cash~~ collateral for changes in the net fair value of the derivative contracts.

We have not designated certain derivative financial instruments that we have purchased to mitigate commodity purchase or foreign currency transaction exposures on our Mexico operations as cash flow hedges. Items designated as cash flow hedges are disclosed and described further below. Therefore, we recognized changes in the fair value of these derivative financial instruments immediately in earnings. Gains or losses related to these derivative financial instruments are included in the line item Cost of sales in the Condensed Consolidated and Combined Statements of Income.

We have designated certain derivative financial instruments related to our U.K. and Europe segment that we have purchased to mitigate foreign currency transaction exposures as cash flow hedges. Before the settlement date of the financial derivative instruments, we recognize changes in the fair value of the effective portion of the cash flow hedge into accumulated other comprehensive income (“AOCI”) while we recognize changes in the fair value of the ineffective portion immediately in earnings. When the derivative financial instruments associated with the effective portion 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 Cost of sales in the Condensed Consolidated and Combined Statements of Income.

The Company recognized net ~~gains~~losses of ~~$6.9~~$24.0 million and net ~~losses~~gains of ~~$16.7~~$3.2 million related to changes in the fair value of its derivative financial instruments during the thirteen weeks ended ~~September 24,~~July 1, 2018 and June 25, 2017, ~~and September 25, 2016,~~ respectively. The Company ~~also~~ recognized net losses of $17.6 million and net gains of ~~$7.3 million and net losses of $10.5~~$0.3 million related to changes in the fair value of its derivative financial instruments during the ~~thirty-nine~~twenty-six weeks ended ~~September 24,~~July 1, 2018 and June 25, 2017, ~~and September 25, 2016,~~ respectively.

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


	September 24, 2017			December 25, 2016			July 1, 2018			December 31, 2017
	(Fair values in thousands)						(Fair values in thousands)
Fair values:
Commodity derivative assets	$	3,368		$	5,439		$	18,678		$	722
Commodity derivative liabilities	(3,782		)	(6,827		)	(42,561		)	(3,847		)
Foreign currency derivative assets	586			516			527			45
Foreign currency derivative liabilities	(387		)	(153		)	(278		)	(211		)
Cash collateral posted with brokers	4,841			4,979
Derivatives coverage^(a):
Collateral posted with brokers^(a)							33,185			8,021
Derivatives coverage^(b):
Corn	0.7		%	2.3		%	24.7		%	3.1		%
Soybean meal	0.2		%	0.3		%	18.4		%	1.7		%
Period through which stated percent of needs are covered:
Corn	September 2018			September 2018			March 2019			March 2019
Soybean meal	August 2018			July 2017			July 2019			December 2018


(a)	Collateral posted with brokers consists primarily of cash, short term treasury bills, or other cash equivalents.


(b)	Derivatives coverage is the percent of anticipated commodity needs covered by outstanding derivative instruments through a specified date.

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

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	Gain (Loss) Recognized in Other Comprehensive Income on Derivative (Effective Portion)											Gain (Loss) Recognized in Other Comprehensive Income on Derivative (Effective Portion)
	Thirteen Weeks Ended						Thirty-Nine Weeks Ended					Thirteen Weeks Ended						Twenty-Six Weeks Ended
	September 24, 2017			September 25, 2016			September 24, 2017			September 25, 2016		July 1, 2018			June 25, 2017			July 1, 2018			June 25, 2017
	(In thousands)											(In thousands)
Foreign currency derivatives	$	(779	)	$	(220	)	$	(128	)	$	132	$	(98	)	$	622		$	(97	)	$	698
Total	$	(779	)	$	(220	)	$	(128	)	$	132	$	(98	)	$	622		$	(97	)	$	698

	Net Realized Gains (Losses) Recognized in Income on Derivative (Ineffective Portion)											Net Realized Gains (Losses) Recognized in Income on Derivative (Ineffective Portion)
	Thirteen Weeks Ended						Thirty-Nine Weeks Ended					Thirteen Weeks Ended						Twenty-Six Weeks Ended
	September 24, 2017			September 25, 2016			September 24, 2017			September 25, 2016		July 1, 2018			June 25, 2017			July 1, 2018			June 25, 2017
	(In thousands)											(In thousands)
Foreign currency derivatives	$	—		$	—		$	—		$	—	$	—		$	—		$	—		$	—
Total	$	—		$	—		$	—		$	—	$	—		$	—		$	—		$	—

	Gain (Loss) Reclassified from AOCI into Income (Effective Portion)											Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
	Thirteen Weeks Ended						Thirty-Nine Weeks Ended					Thirteen Weeks Ended						Twenty-Six Weeks Ended
	September 24, 2017			September 25, 2016			September 24, 2017			September 25, 2016		July 1, 2018			June 25, 2017			July 1, 2018			June 25, 2017
	(In thousands)											(In thousands)
Foreign currency derivatives	$	—		$	285		$	(9	)	$	35	$	222		$	(116	)	$	472		$	(67	)
Total	$	—		$	285		$	(9	)	$	35	$	222		$	(116	)	$	472		$	(67	)

At ~~September 24, 2017,~~July 1, 2018, the ~~before-tax~~pre-tax deferred net gains on derivatives recorded in AOCI that are expected to be reclassified to the Condensed Consolidated and Combined Statements of Income during the next twelve months are ~~$1.2~~$0.1 million. 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 gains (losses) to earnings.

~~The Company reported a $16.9 million adjustment resulting from the translation of a British pound-denominated note payable owed to JBS S.A. as a component of~~ ~~Accumulated other comprehensive loss~~ ~~in the Condensed Consolidated Balance Sheet as of September 24, 2017. The Company designated this note payable as a hedge of its net investment in Moy Park.~~


8.	GOODWILL AND INTANGIBLE ASSETS

The activity in goodwill by segment for the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~July 1, 2018 was as follows:

December 25, 2016 Additions Currency Translation September 24, 2017
(In thousands)
United States $ —
$ 41,936
$ —
$ 41,936
U.K. and Europe 761,613
—
66,425
828,038
Mexico 125,608
—
—
125,608
Total $ 887,221
$ 41,936
$ 66,425
$ 995,582

~~Identified intangible assets consisted of the following:~~



	December 31, 2017		Currency Translation			July 1, 2018
	(In thousands)
U.S.	$	41,936	$	—		$	41,936
U.K. and Europe	834,346		(19,329		)	815,017
Mexico	125,607		—			125,607
Total	$	1,001,889	$	(19,329	)	$	982,560

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Identified intangible assets consisted of the following:

December 25, 2016 Periodic Activity September 24, 2017
Carrying Amount Accumulated Amortization Net Carrying Amount Additions Amortization Currency Translation Impairment Net Carrying Amount
(In thousands)
Identified intangible
     assets subject to
     amortization:

     Trade names $ 41,369
$ (37,029 ) $ 4,340
$ 38,200
$ (2,794 ) $ 61
$ —
$ 39,807
     Customer
          relationships
171,152
(72,327 ) 98,825
92,900
(16,418 ) 5,851

181,158
     Non-compete
          agreements
300
(300 ) —
20
(5 ) —
—
15
Identified intangible
     assets not subject
     to amortization:

     Trademarks 368,426
—
368,426
—
—
31,287
—
399,713
Total identified
     intangible assets
$ 581,247
$ (109,656 ) $ 471,591
$ 131,120
$ (19,217 ) $ 37,199
$ —
$ 620,693



	December 31, 2017			Amortization			Currency Translation			Reclassification			July 1, 2018
	(In thousands)
Carrying amount:
Trade names	$	79,686		$	—		$	—		$	(1,343	)	$	78,343
Customer relationships	251,952			—			(2,070		)	1,343			251,225
Non-compete agreements	320			—			—			—			320
Trade names not subject to amortization	403,594			—			(8,563		)	—			395,031
Accumulated amortization:
Trade names	(40,888		)	(1,864		)	—			623			(42,129		)
Customer relationships	(77,194		)	(11,586		)	675			(623		)	(88,728		)
Non-compete agreements	(307		)	(4		)	—			—			(311		)
Total identified intangible assets	$	617,163		$	(13,454	)	$	(9,958	)	$	—		$	593,751

Intangible assets are amortized over the estimated useful lives of the assets as follows:



Customer relationships	5-16 years
Trade names	3-20 years
Non-compete agreements	3 years

At July 1, 2018, the Company assessed if events or changes in circumstances indicated that the aggregate carrying amount of its identified intangible assets subject to amortization might not be recoverable. There were no indicators present that required the Company to test the recoverability of the aggregate carrying amount of its identified intangible assets subject to amortization at that date.


9.	PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment (“PP&E”), net consisted of the following:


	September 24, 2017			December 25, 2016			July 1, 2018			December 31, 2017
	(In thousands)						(In thousands)
Land	$	204,176		$	150,127		$	196,934		$	205,087
Buildings	1,650,262			1,487,353			1,675,963			1,681,610
Machinery and equipment	2,442,031			2,268,526			2,622,713			2,533,522
Autos and trucks	56,641			58,454			60,731			58,159
Construction-in-progress	237,323			255,086			210,970			187,094
PP&E, gross	4,590,433			4,219,546			4,767,311			4,665,472
Accumulated depreciation	(2,514,086		)	(2,385,561		)	(2,653,358		)	(2,570,325		)
PP&E, net	$	2,076,347		$	1,833,985		$	2,113,953		$	2,095,147

The Company recognized depreciation expense of ~~$63.8~~$61.9 million and ~~$53.4~~$61.9 million during the thirteen weeks ended ~~September 24,~~July 1, 2018 and June 25, 2017, ~~and September 25, 2016,~~ respectively. The Company recognized depreciation expense of ~~$181.1~~$122.6 million and ~~$156.9~~$117.3 million during the ~~thirty-nine~~twenty-six weeks ended ~~September 24,~~July 1, 2018 and June 25, 2017, ~~and September 25, 2016,~~ respectively.

During the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017,~~July 1, 2018, Pilgrim's spent ~~$258.4~~$155.2 million on capital projects and transferred $272.5 million of completed projects from construction-in-progress to depreciable assets. During the thirty-nine weeks ended September 25, 2016, the Company spent $221.0 million on capital projects and transferred $176.8$109.6 million of completed projects from construction-in-progress to depreciable assets. Capital expenditures were primarily incurred during the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~July 1, 2018 to improve efficiencies and reduce costs. During the twenty-six weeks ended June 25, 2017, the Company spent $198.0 million on capital projects and transferred $159.1 million of completed projects from construction-in-progress to depreciable assets.

During the ~~thirty-nine~~thirteen and twenty-six weeks ended ~~September 24,~~July 1, 2018, the Company sold certain PP&E for $0.2 million and $1.2 million, respectively, in cash and recognized net loss on these sales of $0.1 million and $0.2 million, respectively. PP&E sold in twenty-six weeks ended July 1, 2018 included a processing plant in Alabama and miscellaneous equipment. During the thirteen

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and twenty-six weeks ended June 25, 2017, the Company sold certain PP&E for cash of ~~$2.6~~$1.3 million and $1.5 million, respectively and recognized net ~~gains~~gain on these sales of ~~$0.5 million.~~$0.9 million and $0.8 million, respectively. PP&E sold in the ~~thirty-nine~~twenty-six weeks ended ~~September 24,~~June 25, 2017 included ~~a processing plant in Texas, a feed mill in Arkansas,~~ poultry farms in Alabama and Texas, vacant land in Texas and miscellaneous equipment. During the thirty-nine weeks ended September 25, 2016, the Company sold certain PP&E for cash of $13.0 million and recognized net gains on these sales of $7.3 million. PP&E sold in the thirty-nine weeks ended September 25, 2016 included

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~~a processing plant in Louisiana, poultry farms in Mexico and Texas, an office building in Texas, vacant land in Alabama and Texas, and miscellaneous equipment.~~

Management has committed to the sale of ~~certain properties and related assets, including, but not limited to,~~ a processing complex in ~~Alabama, a processing plant in Dublin, Ireland, which~~Minnesota and miscellaneous equipment that no longer fit into the operating plans of the Company. The Company is actively marketing these ~~properties and related~~ assets for immediate sale and believes a sale of each ~~property~~asset can be consummated within the next 12 months. At ~~September 24, 2017~~July 1, 2018 and December ~~25, 2016,~~31, 2017, the Company reported properties and related assets totaling $~~2.8~~2.9 million and ~~$5.3~~$0.7 million, respectively, in the line item Assets held for sale on its Condensed Consolidated ~~and Combined~~ Balance Sheets. The fair values of the ~~Alabama~~Minnesota processing complex ~~which was~~and the miscellaneous equipment that were classified as ~~an asset~~assets held for sale as of ~~June 25, 2017, and the Dublin processing plant, which was classified as an asset held for sale as of September 24, 2017,~~July 1, 2018 were both based on quoted market prices.

The Company tested the recoverability of its ~~Alabama~~Minnesota processing complex held for sale as of ~~June 25, 2017~~April 1, 2018 and ~~September 24, 2017.~~July 1, 2018. The Company determined that the aggregate carrying amount at ~~June 25, 2017~~April 1, 2018 of this asset group was not recoverable over the remaining life of the primary asset in the group and recognized impairment cost of ~~$3.5~~$0.5 million ~~related to~~within the U.S. segment, which it reported in the line item Administrative restructuring charges on its Condensed Consolidated and Combined Statements of Income. The Company determined that the aggregate carrying amount ~~st September 24, 2017~~at July 1, 2018 of this asset group was recoverable over the remaining life of the primary asset in the group.

The Company tested the recoverability of the Dublin processing plant held for sale as of September 24, 2017. The Company determined that the aggregate carrying amount at September 26, 2014 of this asset group was not recoverable over the remaining life of the primary asset in the group and recognized impairment cost of $1.6 million related to the U.K. and Europe segment, which it reported in the line item ~~Administrative restructuring charges~~ ~~on its Condensed Consolidated and Combined Statements of Income.~~

~~The Company did not recognize impairment cost during the thirteen or thirty-nine weeks ended September 25, 2016.~~

~~The Company~~ has closed or idled various ~~processing complexes, processing plants, hatcheries, broiler farms,~~facilities in the U.S. and ~~feed mills throughout~~in the ~~U.S.~~U.K. Neither the Board of Directors nor JBS has determined if it would be in the best interest of the Company to divest any of these idled assets. Management is therefore not certain that it can or will divest any of these assets within one year, is not actively marketing these assets and, accordingly, has not classified them as assets held for sale. The Company continues to depreciate these assets. At ~~September 24, 2017,~~July 1, 2018, the carrying amounts of these idled assets totaled $~~50.4~~49.3 million based on depreciable value of $~~169.4~~170.0 million and accumulated depreciation of $~~119.0~~120.7 million.

~~The Company last tested the recoverability of its long-lived assets held and used in December 2016.~~ At ~~that time,~~July 1, 2018, the Company ~~determined~~assessed if events or changes in circumstances indicated that the aggregate carrying amount of its ~~long-lived assets~~property, plant and equipment held ~~and used was recoverable over the remaining life of the primary asset in the group and that long-lived assets held and used passed the Step 1 recoverability test under ASC 360-10-35,~~ ~~Impairment or Disposal of Long-Lived Assets~~.for use might not be recoverable. There were no indicators present ~~during the thirty-nine weeks ended September 24, 2017~~ that required the Company to test the recoverability of the aggregate carrying amount of its ~~long-lived assets~~property, plant and equipment held ~~and used~~ for ~~recoverability.~~use at that date.


10.	CURRENT LIABILITIES

Current liabilities, other than current notes payable to banks, income taxes and current maturities of long-term debt, consisted of the following components:

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	September 24, 2017		December 25, 2016		July 1, 2018		December 31, 2017
	(In thousands)				(In thousands)
Accounts payable:
Trade accounts	$	653,248	$	722,495	$	740,943	$	661,759
Book overdrafts	77,189		63,577		60,857		56,022
Other payables	13,091		4,306		13,896		15,246
Total accounts payable	743,528		790,378		815,696		733,027
Accounts payable to related parties^(a)	7,091		4,468		26,941		2,889
Revenue contract liability^(b)					32,200		36,607
Accrued expenses and other current liabilities:
Compensation and benefits	168,551		160,591		134,377		181,678
Interest and debt-related fees	16,452		10,907		36,142		29,750
Insurance and self-insured claims	80,210		82,544		82,590		79,911
Derivative liabilities:
Commodity futures	1,587		4,063		25,920		296
Commodity options	2,196		2,764		16,641		3,551
Foreign currency derivatives	387		153		278		211
Other accrued expenses	147,093		85,999		111,494		114,755
Total accrued expenses and other current liabilities	416,476		347,021		407,442		410,152
	$	1,167,095	$	1,141,867	$	1,282,279	$	1,182,675

(a) Additional information regarding accounts payable to related parties is included in “Note ~~16.~~20. Related Party Transactions.”

2017

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~~11.~~	~~LONG-TERM DEBT AND OTHER BORROWING ARRANGEMENTS~~

(b)Additional information regarding revenue contract liabilities is included in “Note 13. Revenue Recognition.”

11.LONG-TERM DEBT AND OTHER BORROWING ARRANGEMENTS

Long-term debt and other borrowing arrangements, including current notes payable to banks, consisted of the following components:


	Maturity	September 24, 2017			December 25, 2016			Maturity	July 1, 2018			December 31, 2017
		(In thousands)							(In thousands)
Long-term debt and other long-term borrowing arrangements:
Senior notes payable at 5.75%	2025	$	500,000		$	500,000
Senior notes payable, net of premium and discount at 5.75%								2025	$	1,002,698		$	754,820
Senior notes payable, net of discount at 5.875%								2027	843,359			600,000
Senior notes payable at 6.25%	2021	401,982			369,736			2021	—			403,444
U.S. Credit Facility (defined below):
Term note payable at 2.55%	2022	790,000			500,000
Revolving note payable at 2.48%	2022	73,262			—
Term note payable at 3.60%								2022	760,000			780,000
Revolving note payable at 5.25%								2022	—			73,262
Mexico Credit Facility (defined below) with notes payable at TIIE Rate plus 0.95%	2019	84,524			23,304			2019	—			76,307
Moy Park Multicurrency Revolving Facility with notes payable at LIBOR rate plus 2.5%	2018	9,953			11,985			2018	—			9,590
Moy Park Receivable with payables at LIBOR plus 1.5%	2020	—			—
Moy Park France Invoice Discounting Revolver with payables at EURIBOR plus 0.8%	2018	3,930			8,918			2018	—			1,815
Chattels mortgages with payables at weighted average of 3.74%	Various	1,015			1,432
JBS S.A. Promissory Note at 0.0%	2018	753,705			—
Term Loan Agence L'eau	2018	6			6
Moy Park Bank of Ireland Revolving Facility with notes payable at LIBOR or EURIBOR plus 1.25% to 2.00%								2023	39,624			—
Secured loans with payables at weighted average of 3.74%								Various	580			873
Capital lease obligations	Various	10,703			14,600			Various	6,322			9,239
Long-term debt		2,629,080			1,429,981				2,652,583			2,709,350
Less: Current maturities of long-term debt		(61,811		)	(15,712		)		(44,606		)	(47,775		)
Long-term debt, less current maturities		2,567,269			1,414,269				2,607,977			2,661,575
Less: Capitalized financing costs		(18,694		)	(18,145		)		(23,491		)	(25,958		)
Long-term debt, less current maturities, net of capitalized financing costs:		$	2,548,575		$	1,396,124			$	2,584,486		$	2,635,617

U.S. Senior Notes

On March 11, 2015, the Company completed a sale of $500.0 million aggregate principal amount of its 5.75% senior notes due 2025 (the “Senior Notes due 2025”). The Company used the net proceeds from the sale of the Senior Notes due 2025 to repay $350.0 million and $150.0 million of the term loan indebtedness under the U.S. Credit Facility (defined below) on March 12, 2015 and April 22, 2015, respectively.2025. On September 29, 2017, the Company completed an add-on offering of $250.0 million of these senior notes. The issuance price of this add-on offering was 102.0%, which created gross proceeds of $255.0 million. The additional $5.0 million will be amortized over the remaining life of the senior notes. On March 7, 2018, the Company completed another add-on offering of $250.0 million of these senior notes (together with the senior notes issued in March 2015 and September 2017, the “Senior Notes due 2025”). The issuance price of this add-on offering was 99.25%, which created gross proceeds of $248.1 million. The $1.9 million discount will be amortized over the remaining life of the senior notes. Each issuance of the Senior Notes due 2025 ~~(the “Additional Senior Notes due 2025”). The Additional Senior Notes due 2025 will be~~is treated as a single class ~~with the existing Senior Notes due 2025~~ for all purposes under the 2015 Indenture (defined below) and ~~will~~ have the same terms as those of the existing Senior Notes due 2025. The Additional Senior Notes due 2025 were sold to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States to non-U.S. persons pursuant to Regulation S under the Securities Act.terms.

The ~~Senior Notes due 2025 and the Additional~~ Senior Notes due 2025 are governed by, and were issued pursuant to, an indenture dated as of March 11, 2015 by and among the Company, its guarantor subsidiary and Wells Fargo Bank, National Association, as trustee (the “2015 Indenture”). The 2015 Indenture provides, among other things, that the Senior Notes due 2025 ~~and the Additional Senior Notes due 2025~~ bear interest at a rate of 5.75% per annum from the date of issuance until maturity, payable semi-annually in cash in arrears, beginning on September 15, 2015 for the Senior Notes due 2025 that were issued in March 2015 and beginning on March 15, 2018 for the ~~Additional Senior Notes due 2025. The~~ Senior Notes due 2025 that were issued in September 2017 and the Additional Senior Notes due 2025 are guaranteed on a senior unsecured basis by the Company’s guarantor subsidiary. In addition, any of the Company’s other existing or future domestic restricted subsidiaries that incur or guarantee any other indebtedness (with limited exceptions) must also guarantee the Senior Notes due 2025 and the Additional Senior Notes due 2025. The Senior Notes due 2025 and the Additional Senior Notes due 2025 and related guarantees are unsecured senior obligations of the Company and its guarantor subsidiary and rank equally with all of the Company’s and its guarantor subsidiary’s other unsubordinated indebtedness. The Senior Notes due 2025 and the Additional Senior Notes due 2025 and the 2015 Indenture also contain customary covenants and events of default, including failure to pay principal or interest on the Senior Notes due 2025 and the Additional Senior Notes due 2025 when due, among others.

~~Table of Contents~~

March 2018.

On September 29, 2017, the Company completed a sale of $600.0 million aggregate principal amount of its 5.875% senior notes due ~~2027 (the~~2027. On March 7, 2018, the Company completed an add-on offering of $250.0 million of these senior notes (together with the senior notes issued in September 2017, the “Senior Notes due 2027”). The ~~Company used~~issuance price of this add-on offering was 97.25%, which created gross proceeds of $243.1 million. The $6.9 million discount will be amortized over the ~~net proceeds from~~ remaining life of

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the ~~sale~~Senior Notes due 2027. Each issuance of the Senior Notes due 2027 ~~to repay in full~~is treated as a single class for all purposes under the ~~JBS S.A. Promissory Note~~2017 Indenture (defined below) ~~issued as part of~~and have the Moy Park acquisition. The Senior Notes due 2027 were sold to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and outside the United States to non-U.S. persons pursuant to Regulation S under the Securities Act.same terms.

The Senior Notes due 2027 are governed by, and were issued pursuant to, an indenture dated as of September 29, 2017 by and among the Company, its guarantor subsidiary and U.S. Bank National Association, as trustee (the “2017 Indenture”). The 2017 Indenture provides, among other things, that the Senior Notes due 2027 bear interest at a rate of 5.875% per annum from the date of issuance until maturity, payable semi-annually in cash in arrears, beginning on March 30, 2018 for the Senior Notes due 2027 that were issued in September 2017 and beginning on March 15, 2018 for the Senior Notes due 2027 that were issued in March 2018.

The Senior Notes due 2025 and the Senior Notes due 2027 are each guaranteed on a senior unsecured basis by the Company’s guarantor subsidiary. In addition, any of the Company’s other existing or future domestic restricted subsidiaries that incur or guarantee any other indebtedness (with limited exceptions) must also guarantee the Senior Notes due 2025 and the Senior Notes due 2027. The Senior Notes due 2025 and the Senior Notes due 2027 and related guarantees are unsecured senior obligations of the Company and its guarantor subsidiary and rank equally with all of the Company’s and its guarantor subsidiary’s other unsubordinated indebtedness. The Senior Notes due 2025, the 2015 Indenture, the Senior Notes due 2027 and the 2017 Indenture also contain customary covenants and events of default, including failure to pay principal or interest on the Senior Notes due 2025 and the Senior Notes due 2027 when due, among others.

~~Moy Park Senior Notes~~

~~On May 29, 2014, Moy Park (Bondco) Plc completed~~The Company used the net proceeds from the sale of ~~a £200.0 million aggregate principal amount of its 6.25% senior notes~~the Senior Notes due ~~2021 (the “Moy Park Notes”). On April 17, 2015, an add-on offering of £100.0 million~~2025 and the Senior Notes due 2027 that were issued in September 2017 to repay in full the JBS S.A. Promissory Note issued as part of the Moy Park acquisition and for general corporate purposes. The Company used the net proceeds from the sale of the Senior Notes ~~(the “Additional Moy Park Notes”) was completed. The~~due 2025 and the Senior Notes due 2027 that were issued in March 2018 to pay the second tender price of Moy Park Notes (as described below), repay a portion of outstanding secured debt, and for general corporate purposes. The Senior Notes due 2025 and the ~~Additional Moy Park~~Senior Notes due 2027 were sold to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States to non-U.S. persons pursuant to Regulation S under the Securities ~~Act~~.Act.

~~The~~ Moy Park Senior Notes ~~and the Additional Moy Park Notes are governed by, and were issued pursuant to, an indenture dated as of~~

Between May 29, 2014 byand April 17, 2015, Moy Park (Bondco) ~~Plc, as issuer, Moy Park Holdings (Europe) Limited, Moy Park (Newco) Limited, Moy Park Limited, O’Kane Poultry Limited, as guarantors, and The Bank~~plc completed the sale of ~~New York Mellon, as trustee~~£300.0 million aggregate principal amount of its 6.25% senior notes due 2021 (the “Moy Park ~~Indenture”~~Senior Notes”). ~~The~~Between November 3, 2017 and March 8, 2018, Moy Park ~~Indenture provides, among other things, that~~(Bondco) plc completed the purchase for cash of the Moy Park Senior Notes ~~and the Additional Moy Park Notes bear interest at~~through a rate of 6.25% per annum from the date of issuance until maturity, payable semiannually in cash in arrears, beginning on November 29, 2014 for the Moy Park Notes and May 28, 2015 for the Additional Moy Park Notes. The Moy Park Notes and the Additional Moy Park Notes are guaranteed by each of the subsidiary guarantors described above. The Moy Park Indenture contains customary covenants and events of default that may limit Moy Park (Bondco) Plc’s ability and the ability of certain subsidiaries to incur additional debt, declare or pay dividends or make certain investments, among others.

~~On November 2, 2017, Moy Park (Bondco) Plc announced the final results of its previously announced~~ tender ~~offer to purchase for cash any and all of its issued and outstanding Moy Park Notes and Moy Park Additional Notes.~~offer. As of ~~November 2, 2017, £1,185,000~~March 8, 2018, £234.3 million principal amount of Moy Park ~~Notes and Moy Park Additional~~Senior Notes had been validly tendered ~~(and not validly withdrawn).~~and purchased by Moy Park (Bondco) ~~Plc has purchased all validly tendered (and not validly withdrawn)~~plc.

On May 29, 2018, Moy Park ~~Notes and~~(Bondco) plc redeemed all remaining Moy Park ~~Additional~~Senior Notes outstanding at the redemption price equal to 101.56% of the principal amount, plus accrued and unpaid interest. The principal value of the Moy Park Senior Notes redeemed on ~~or prior to November 2, 2017, with such settlement occurring on November 3, 2017.~~May 29, 2018 was £65.7 million. As of July 1, 2018, there are no Moy Park Senior Notes outstanding.

U.S. Credit Facility

On May 8, 2017, the Company and certain of its subsidiaries entered into a Third Amended and Restated Credit Agreement (the “U.S. Credit Facility”) with Coöperatieve Rabobank U.A., New York Branch (“Rabobank”), as administrative agent and collateral agent, and the other lenders party thereto. The U.S. Credit Facility provides for a revolving loan commitment of up to $750.0 million and a term loan commitment of up to $800.0 million (the “Term Loans”). The U.S. Credit Facility also includes an accordion feature that allows the Company, at any time, to increase the aggregate revolving loan and term loan commitments by up to an additional $1.0 billion, subject to the satisfaction of certain conditions, including obtaining the lenders’ agreement to participate in the increase.

The revolving loan commitment under the U.S. Credit Facility matures on May 6, 2022. All principal on the Term Loans is due at maturity on May 6, 2022. Installments of principal are required to be made, in an amount equal to 1.25% of the original principal amount of the Term Loans, on a quarterly basis prior to the maturity date of the Term Loans. Covenants in the U.S. Credit Facility also require the Company to use the proceeds it receives from certain asset sales and specified debt or equity issuances and upon the occurrence of other events to repay outstanding borrowings under the U.S. Credit Facility. As of ~~September 24, 2017,~~July 1, 2018, the ~~company~~Company had Term Loans outstanding totaling ~~$790.0~~$760.0 million and the amount available for borrowing under the revolving loan commitment was ~~$631.9~~$705.1 million. The Company had letters of credit of ~~$44.8~~$44.9 million and no borrowings ~~of $73.3 million~~ outstanding under the revolving loan commitment as of ~~September 24, 2017.~~July 1, 2018.

~~Table of Contents~~

The U.S. Credit Facility includes a $75.0 million sub-limit for swingline loans and a $125.0 million sub-limit for letters of credit. Outstanding borrowings under the revolving loan commitment and the Term Loans bear interest at a per annum rate equal to (i) in the case of LIBOR loans, LIBOR plus 1.50% through ~~September 24,~~March 26, 2017 and, thereafter, based on the Company’s net senior secured leverage ratio, between LIBOR plus 1.25% and LIBOR plus 2.75% and (ii) in the case of alternate base rate loans,

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the base rate plus 0.50% through ~~September 24,~~March 26, 2017 and, based on the Company’s net senior secured leverage ratio, between the base rate plus 0.25% and base rate plus 1.75% thereafter.

The U.S. Credit Facility contains financial covenants and various other covenants that may adversely affect the Company’s ability to, among other things, incur additional indebtedness, incur liens, pay dividends or make certain restricted payments, consummate certain assets sales, enter into certain transactions with JBS and the Company’s other affiliates, merge, consolidate and/or sell or dispose of all or substantially all of our assets. The U.S. Credit Facility requires the Company to comply with a minimum level of tangible net worth covenant. The U.S. Credit Facility also provides that we may not incur capital expenditures in excess of $500.0 million in any fiscal year. The Company is currently in compliance with the covenants under the U.S. Credit Facility.

All obligations under the U.S. Credit Facility continue to be unconditionally guaranteed by certain of the Company’s subsidiaries and continue to be secured by a first priority lien on (i) the accounts receivable and inventory of our ~~company~~Company and its non-Mexico subsidiaries, (ii) 100% of the equity interests in ~~our~~the Company's domestic subsidiaries, To-Ricos, Ltd. and To-Ricos Distribution, Ltd., and 65% of the equity interests in our direct foreign subsidiaries and (iii) substantially all of the assets of the Company and the guarantors under the U.S. Credit Facility.

On July 20, 2018, the Company, and certain of the Company's subsidiaries entered into a Fourth Amended and Restated Credit Agreement with CoBank, ACB, as administrative agent and collateral agent, and the other lenders party thereto. See “Note 22. Subsequent Events” for additional information.

Mexico Credit Facility

On September 27, 2016, certain of ~~our~~the Company's Mexican subsidiaries entered into an unsecured credit agreement (the “Mexico Credit Facility”) with BBVA Bancomer, S.A. Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer, as lender. The loan commitment under the Mexico Credit Facility was $1.5 billion Mexican pesos. Outstanding borrowings under the Mexico Credit Facility accrued interest at a rate equal to the Interbank Equilibrium Interest Rate plus 0.95%. The Mexico Credit Facility is scheduled to mature on September 27, 2019. ~~As of September 24, 2017, the U.S. dollar-equivalent loan commitment under the Mexico Credit Facility was $84.5 million, and there were $84.5 million outstanding~~Outstanding borrowings under the Mexico Credit Facility ~~that~~ bear interest at a per annum rate of ~~8.33%~~8.81%. As of ~~September 24, 2017,~~July 1, 2018, the U.S. dollar-equivalent loan commitment and the U.S. dollar-equivalent borrowing availability ~~was less than $0.1~~under the Mexico Credit Facility were $75.4 million and $75.4 million, respectively. As of July 1, 2018, there were no outstanding borrowings under the Mexico Credit Facility.

Moy Park Bank of Ireland Revolving Facility Agreement

On June 2, 2018, Moy Park Holdings (Europe) Ltd. and its subsidiaries entered into an unsecured multicurrency revolving facility agreement (the “Bank of Ireland Facility Agreement”) with the Governor and Company of the Bank of Ireland, as agent, and the other lenders party thereto. The Bank of Ireland Facility Agreement provides for a multicurrency revolving loan commitment of up to £100.0 million. The multicurrency revolving loan commitments under the Bank of Ireland Facility Agreement matures on June 2, 2023. Outstanding borrowings under the Bank of Ireland Facility Agreement bear interest at a rate per annum equal to the sum of (i) LIBOR or, in relation to any loan in euros, EURIBOR, plus (ii) a margin, ranging from 1.25% to 2.00% based on Leverage (as defined in the Bank of Ireland Facility Agreement). All obligations under the Bank of Ireland Facility Agreement are guaranteed by certain of Moy Park's subsidiaries. As of July 1, 2018, the U.S. dollar-equivalent loan commitment, borrowing availability and outstanding borrowings under the Bank of Ireland Facility Agreement were $132.1 million, $92.5 million, and $39.6 million, respectively.

The Bank of Ireland Facility Agreement contains representations and warranties, covenants, indemnities and conditions that the Company believes are customary for transactions of this type. Pursuant to the terms of the Bank of Ireland Facility Agreement, Moy Park is required to meet certain financial and other restrictive covenants. Additionally, Moy Park is prohibited from taking certain actions without consent of the lenders, including, without limitation, incurring additional indebtedness, entering into certain mergers or other business combination transactions, permitting liens or other encumbrances on its assets and making restricted payments, including dividends, in each case except as expressly permitted under the Bank of Ireland Facility Agreement. The Bank of Ireland Facility Agreement contains events of default that the Company believes are customary for transactions of this type. If a default occurs, any outstanding obligations under the Bank of Ireland Facility Agreement may be accelerated.

Moy Park Multicurrency Revolving Facility Agreement

Table of September 24, 2017, the U.S. dollar-equivalent loan commitment under Moy Park multicurrency revolving facility was $26.8 million and there were $10.0 million outstanding borrowings. Outstanding borrowings under the facility bear interest at a per annum rate equal to LIBOR plus a margin determined by Company’s Net Debt to EBITDA ratio. The current margin stands at 2.5%. As of September 24, 2017, the U.S. dollar-equivalent borrowing availability was $16.8 million.Contents

The facility contains financial covenants and various other covenants that may adversely affect Moy Park's ability to, among other things, incur additional indebtedness, consummate certain assets sales, enter into certain transactions with JBS and the Company's other affiliates, merge, consolidate and/or sell or dispose of all or substantially all of the Moy Park's assets.

Moy Park Receivables Finance Agreement

Moy Park ~~Limited, a subsidiary of Granite Holdings Sàrl,~~Ltd., entered into a £45.0 million receivables finance agreement on January 29, 2016 (the “Receivables Finance Agreement”), with Barclays Bank ~~plc, which matures on January 29, 2020. As of September 24, 2017, the U.S. dollar-equivalent loan commitment under~~plc. Moy Park Holdings (Europe) Ltd. repaid the Receivables Finance Agreement ~~was $60.3 million~~in full using available cash and ~~there were no outstanding borrowings. Outstanding borrowings under~~proceeds from the ~~facility bear interest at a per annum rate equal to LIBOR plus 1.5%. The~~Bank of Ireland Facility Agreement and terminated the Receivables Finance Agreement includes an accordion feature that allows us, at any time, to increase the commitments by up to an additional £15.0 million (U.S. dollar-equivalent $20.1 million as of September 24, 2017), subject to the satisfaction of certain conditions.

The Receivables Finance Agreement contains financial covenants and various other covenants that may adversely affect Moy Park's ability to, among other things, incur additional indebtedness, consummate certain asset sales, enter into certain transactions with ~~JBS and the Company's other affiliates, merge, consolidate and/or sell or dispose of all or substantially all of Moy Park's assets.~~

~~Table of Contents~~

Barclays Bank plc on June 4, 2018.

Moy Park France Invoice Discounting Facility

In June 2009, Moy Park France ~~Sàrl, a subsidiary of Granite Holdings~~ Sàrl entered into a €20.0 million invoice discounting facility with GE De Facto (the “Invoice Discounting Facility”). The facility limit was ~~increased~~decreased €10.0 million in ~~September 2016~~June 2018 to ~~€30.0~~€10.0 million. The Invoice Discounting Facility is payable on demand and the term is extended on an annual basis. The agreement can be terminated by either party with three months’ notice. As of September 24, 2017, the U.S. dollar-equivalent loan commitment under the Invoice Discounting Facility was $35.7 million and there were $3.9 million outstanding borrowings. As of September 24, 2017, the U.S. dollar-equivalent borrowing availability was $31.8 million. Outstanding borrowings under the Invoice Discounting Facility bear interest at a per annum rate equal to EURIBOR plus a margin of 0.80%. As of July 1, 2018, the U.S. dollar-equivalent loan commitment and borrowing availability under the Invoice Discounting Facility were $11.7 million and $11.7 million, respectively. As of July 1, 2018, there were no outstanding borrowings under the Invoice Discounting Facility.

The Invoice Discounting Facility contains financial covenants and various other covenants that may adversely affect Moy Park's ability to, among other things, incur additional indebtedness, consummate certain asset sales, enter into certain transactions with JBS and the Company's other affiliates, merge, consolidate and/or sell or dispose of all or substantially all of Moy Park's assets.

~~JBS S.A. Promissory Note~~

On September 8, 2017, Onix Investments UK Ltd., a wholly owned subsidiary of Pilgrim’s Pride Corporation, executed a subordinated promissory note payable to JBS S.A. (the “JBS S.A. Promissory Note”) for £562.5 million, which had a maturity date of September 6, 2018. Interest on the outstanding principal balance of the JBS S.A. Promissory Note accrued at the rate per annum equal to (i) from and after November 8, 2017 and prior to January 7, 2018, 4.00%, (ii) from and after January 7, 2018 and prior to March 8, 2018, 6.00% and (iii) from and after March 8, 2018, 8.00%. The JBS S.A. Promissory Note was repaid in full on October 2, 2017 using the net proceeds from the sale of Senior Notes due 2027 and the Additional Senior Notes due 2025.


~~12.~~	~~INCOME TAXES~~

12. INCOME TAXES

The Company recorded income tax expense of ~~$278.0~~$75.5 million, a 25.1% effective tax rate, for the twenty-six weeks ended July 1, 2018 compared to income tax expense of $164.7 million, a 32.2% effective tax rate, for the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017 compared to income tax expense of $203.0 million, a 34.0% effective tax rate, for the thirty-nine weeks ended September~~June 25, ~~2016.~~2017. The ~~increase~~decrease in income tax expense in ~~2017~~2018 resulted primarily from ~~an increase~~a reduction in pre-tax income as well as a reduction in the U.S. corporate income tax rate as a result of the recently enacted comprehensive tax legislation.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation (the “Tax Act”), which significantly revises the ongoing U.S. corporate income tax law by lowering the U.S. federal corporate income tax rate from 35.0% to 21.0%, implementing a territorial tax system, imposing a one-time tax on foreign unremitted earnings and setting limitations on deductibility of certain costs (e.g., interest expense), among other things.

The Company is applying the guidance in Staff Accounting Bulletin (“SAB”) 118 when accounting for the enactment-date effects of the Tax Act. As of July 1, 2018, the Company has not completed its accounting for all of the tax effects of the Tax Act. In certain cases, as described below, the Company has made a reasonable estimate of certain effects of the Tax Act. In other cases, the Company has not been able to make a reasonable estimate and continues to account for those items based on existing accounting under Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, and the provisions of the tax laws that were in effect immediately prior to enactment. For example, the Company has yet to make a reasonable estimate for the effect of the various federal income tax elements of the Tax Act on its state tax rate. In all cases, the Company will continue to make and refine its calculations as additional analysis is completed. Estimates may also be affected as the Company gains a more thorough understanding of the Tax Act. These changes could be material to income tax expense.

As of December 31, 2017, the Company estimated no tax liability on foreign unremitted earnings due to a net earnings and profits (“E&P”) deficit on accumulated post-1986 deferred foreign income. Therefore, the Company did not accrue any amount of tax expense for the Tax Act’s one-time transition tax on the foreign subsidiaries’ accumulated, unremitted earnings going back to 1986 for the year ended December 31, 2017. As of July 1, 2018, the Company continues to estimate no tax liability for the one-time transition tax. As the Company continues to refine its E&P analysis, the Company will adjust its calculations of the one-time transition tax, which could affect the measurement of this liability.

The Tax Act subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for GILTI, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. Given the complexity of the GILTI provisions, the Company is still evaluating the effects of the GILTI provisions and has not yet determined the accounting policy it will elect. As of July 1, 2018, the Company estimates a $6.9 million federal GILTI tax liability, which is reflected in the Company's estimated annual effective tax rate.

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The Tax Act provides for a foreign-derived intangible income (“FDII”) deduction, which is available to domestic C corporations that derive income from the export of property and services. As of July 1, 2018, the Company estimated a federal FDII benefit of $0.7 million, which is reflected in the Company’s estimated annual effective tax rate. The Company will continue to refine its FDII calculations, which may result in changes to this estimated benefit.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carry back and carry forward periods), projected future taxable income and tax-planning strategies in making this assessment. As of ~~September 24, 2017,~~July 1, 2018, the Company did not believe it had sufficient positive evidence to conclude that realization of ~~its federal capital loss carry forwards and~~ a portion of its foreign net deferred tax assets are more likely than not to be realized.

For the ~~thirty-nine~~twenty-six weeks ended ~~September 24,~~July 1, 2018 and June 25, 2017, ~~and September 25, 2016,~~ there is a tax effect of ~~$4.5~~($0.2) million and ~~$4.2~~$1.5 million, respectively, reflected in other comprehensive income.

~~Beginning in 2017, as a result of new FASB guidance on share-based payments, excess tax benefits are now required to be reported in income tax expense rather than in additional paid-in capital.~~ For the ~~thirty-nine~~twenty-six weeks ended ~~September 24,~~July 1, 2018 and June 25, 2017, there ~~is an~~are immaterial tax ~~effect~~effects reflected in income tax expense due to excess tax benefits related to share-based compensation. For the thirty-nine weeks ended September 25, 2016, there is no tax effect reflected in additional paid-in capital due to excess tax benefits related to share-based compensation. See “Note 1. Description of Business and Basis of Presentation” for additional information.

The Company and its subsidiaries file a variety of consolidated and standalone income tax returns in various jurisdictions. In the normal course of business, our income tax filings are subject to review by various taxing authorities. In general, tax returns filed by our ~~company~~Company and our subsidiaries for years prior to ~~2010~~2011 are no longer subject to examination by tax authorities.

13. REVENUE RECOGNITION

The ~~United States Fifth Circuit Court of Appeals rendered judgment in favor~~vast majority of the Company's revenue is derived from contracts which are based upon a customer ordering our products. While there may be master agreements, the contract is only established when the customer’s order is accepted by the Company. The Company accounts for a contract, which may be verbal or written, when it is approved and committed by both parties, the rights of the parties are identified along with payment terms, the contract has commercial substance and collectability is probable.

The Company evaluates the transaction for distinct performance obligations, which are the sale of its products to customers. Since its products are commodity market-priced, the sales price is representative of the observable, standalone selling price. Each performance obligation is recognized based upon a pattern of recognition that reflects the transfer of control to the customer at a point in time, which is upon destination (customer location or port of destination), which faithfully depicts the transfer of control and recognition of revenue. There are instances of customer pick-up at the Company's facility, in which case control transfers to the customer at that point and the Company recognizes revenue. The Company's performance obligations are typically fulfilled within days to weeks of the acceptance of the order.

The Company makes judgments regarding the ~~IRS’ amended proof~~nature, amount, timing and uncertainty of ~~claim relating~~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 ~~tax year~~nature of our business, there is minimal variable consideration, as the contract is established at the acceptance of the order from the customer. When applicable, variable consideration is estimated at contract inception and updated on a regular basis until the contract is completed. Allocating the transaction price to a specific performance obligation based upon the relative standalone selling prices includes estimating the standalone selling prices including discounts and variable consideration.

Disaggregated Revenue

Revenue has been disaggregated into the categories below to show how economic factors affect the nature, amount, timing and uncertainty of revenue and cash flows.



	Thirteen Weeks Ended July 1, 2018						Twenty-Six Weeks Ended July 1, 2018
	Domestic		Export		Net Sales		Domestic		Export		Net Sales
	(In thousands)						(In thousands)
U.S.	$	1,844,662	$	54,773	$	1,899,435	$	3,610,602	$	129,938	$	3,740,540
U.K. and Europe	477,939		85,163		563,102		942,306		165,096		1,107,402
Mexico	374,176		—		374,176		735,449		—		735,449
Net Sales	$	2,696,777	$	139,936	$	2,836,713	$	5,288,357	$	295,034	$	5,583,391

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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.

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

There is no change in accounting for taxes due to the adoption of the new revenue standard, as there is no material change to the timing of revenue recognition. We exclude all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer (for example, sales, use, value added, and some excise taxes) from the transaction price.

Contract Balances

The Company receives payment from customers based on terms established with the customer. Payments are typically due within two weeks of delivery. There are rarely contract assets related to costs incurred to perform in advance of scheduled billings. Revenue contract liabilities relate to payments received in advance of satisfying the performance under the customer contract. The revenue contract liability relates to customer prepayments and the advanced consideration received from governmental agency contracts for which performance obligations to the end customer have not been satisfied.

Changes in the revenue contract liability balances during the twenty-six weeks ended ~~June 26, 2004~~July 1, 2018 are as follows (in thousands):



Balance, beginning of period	$	36,607
Revenue recognized that was included in revenue contract liability at the beginning of the period	(19,201		)
Cash received, excluding amounts recognized as revenue during the period	14,794
Balance, end of period	$	32,200

Accounts Receivable

The Company records accounts receivable when revenue is recognized. The Company records an allowance for ~~Gold Kist Inc. (“Gold Kist”). See “Note 17. Commitments~~doubtful accounts to reduce the receivables balance to an amount it estimates is collectible from customers. Estimates used in determining the allowance for doubtful accounts are based on historical collection experience, current trends, aging of accounts receivable and ~~Contingencies”~~periodic credit evaluations of customers’ financial condition. The Company writes off accounts receivable when it becomes apparent, based upon age or customer circumstances, that such amounts will not be collected. Generally, the Company does not require collateral for ~~additional information.~~its accounts receivable.


~~13.~~14.	PENSION AND OTHER POSTRETIREMENT BENEFITS

The Company sponsors programs that provide retirement benefits to most of its employees. These programs include qualified defined benefit pension plans, nonqualified defined benefit retirement plans, a defined benefit postretirement life insurance plan and defined contribution retirement savings ~~plans.~~plan. Expenses recognized under all of these retirement plans totaled ~~$2.8~~$3.1 million

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and ~~$2.3~~$2.5 million in the thirteen weeks ended ~~September 24,~~July 1, 2018 and June 25, 2017, ~~and September 25, 2016,~~ respectively, and ~~$8.0~~$6.2 million and ~~$6.9~~$5.2 million in the ~~thirty-nine~~twenty-six weeks ended ~~September 24,~~July 1, 2018 and June 25, 2017, ~~and September 25, 2016,~~ respectively.

Defined Benefit Plans Obligations and Assets

The change in benefit obligation, change in fair value of plan assets, funded status and amounts recognized in the Condensed Consolidated ~~and Combined~~ Balance Sheets for ~~these~~the defined benefit plans were as follows:

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Thirty-Nine Weeks Ended
September 24, 2017 Thirty-Nine Weeks Ended
September 25, 2016
Pension Benefits Other Benefits Pension Benefits Other Benefits
Change in projected benefit obligation: (In thousands)
Projected benefit obligation, beginning of period $ 167,159
$ 1,648
$ 165,952
$ 1,672
Interest cost 4,178
38
4,189
38
Actuarial losses (gains) 9,433
25
12,233
95
Benefits paid (7,571 ) (111 ) (7,274 ) (105 )
Projected benefit obligation, end of period $ 173,199
$ 1,600
$ 175,100
$ 1,700

Thirty-Nine Weeks Ended
September 24, 2017 Thirty-Nine Weeks Ended
September 25, 2016
Pension Benefits Other Benefits Pension Benefits Other Benefits
Change in plan assets: (In thousands)
Fair value of plan assets, beginning of period $ 97,526
$ —
$ 96,947
$ —
Actual return on plan assets 9,321
—
4,769
—
Contributions by employer 10,538
111
8,983
105
Benefits paid (7,571 ) (111 ) (7,274 ) (105 )
Fair value of plan assets, end of period $ 109,814
$ —
$ 103,425
$ —



	Twenty-Six Weeks Ended July 1, 2018						Twenty-Six Weeks Ended June 25, 2017
	Pension Benefits			Other Benefits			Pension Benefits			Other Benefits
Change in projected benefit obligation:	(In thousands)
Projected benefit obligation, beginning of period	$	178,247		$	1,603		$	167,159		$	1,648
Interest cost	2,731			23			2,786			25
Actuarial losses (gains)	(9,465		)	(62		)	8,885			101
Benefits paid	(4,473		)	(74		)	(4,430		)	(74		)
Projected benefit obligation, end of period	$	167,040		$	1,490		$	174,400		$	1,700

September 24, 2017 December 25, 2016
Pension Benefits Other Benefits Pension Benefits Other Benefits
Funded status: (In thousands)
Unfunded benefit obligation, end of period $ (63,385 ) $ (1,600 ) $ (69,633 ) $ (1,648 )



	Twenty-Six Weeks Ended July 1, 2018						Twenty-Six Weeks Ended June 25, 2017
	Pension Benefits			Other Benefits			Pension Benefits			Other Benefits
Change in plan assets:	(In thousands)
Fair value of plan assets, beginning of period	$	112,570		$	—		$	97,526		$	—
Actual return on plan assets	97			—			7,142			—
Contributions by employer	5,581			74			4,502			74
Benefits paid	(4,473		)	(74		)	(4,430		)	(74		)
Fair value of plan assets, end of period	$	113,775		$	—		$	104,740		$	—

September 24, 2017 December 25, 2016
Pension Benefits Other Benefits Pension Benefits Other Benefits
Amounts recognized in the Condensed Consolidated and Combined Balance Sheets at end of period: (In thousands)
Current liability $ (13,098 ) $ (147 ) $ (13,113 ) $ (147 )
Long-term liability (50,287 ) (1,453 ) (56,520 ) (1,501 )
Recognized liability $ (63,385 ) $ (1,600 ) $ (69,633 ) $ (1,648 )



	July 1, 2018						December 31, 2017
	Pension Benefits			Other Benefits			Pension Benefits			Other Benefits
Funded status:	(In thousands)
Unfunded benefit obligation, end of period	$	(53,265	)	$	(1,490	)	$	(65,677	)	$	(1,603	)

September 24, 2017 December 25, 2016
Pension Benefits Other Benefits Pension Benefits Other Benefits
Amounts recognized in accumulated other comprehensive loss at end of period: (In thousands)
Net actuarial loss (gain) $ 49,847
$ (6 ) $ 46,494
$ (31 )



	July 1, 2018						December 31, 2017
	Pension Benefits			Other Benefits			Pension Benefits			Other Benefits
Amounts recognized in the Condensed Consolidated Balance Sheets at end of period:	(In thousands)
Current liability	$	(12,159	)	$	(148	)	$	(12,168	)	$	(149	)
Long-term liability	(41,106		)	(1,342		)	(53,509		)	(1,454		)
Recognized liability	$	(53,265	)	$	(1,490	)	$	(65,677	)	$	(1,603	)



	July 1, 2018					December 31, 2017
	Pension Benefits		Other Benefits			Pension Benefits		Other Benefits
Amounts recognized in accumulated other comprehensive income (loss) at end of period:	(In thousands)
Net actuarial loss (gain)	$	47,104	$	(27	)	$	54,235	$	35

The accumulated benefit obligation for ~~our~~the Company's defined benefit pension plans was ~~$173.2~~$167.0 million and ~~$167.2~~$178.2 million at ~~September 24, 2017~~July 1, 2018 and December ~~25, 2016,~~31, 2017, respectively. Each of ~~our~~the Company's defined benefit pension plans had accumulated benefit obligations that exceeded the fair value of plan assets at ~~September 24, 2017~~July 1, 2018 and December ~~25, 2016, respectively.~~31, 2017. As of ~~September 24, 2017,~~July 1, 2018, the weighted average duration of ~~our~~the Company's defined benefit pension obligation is ~~32.72~~30.91 years.

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Net Periodic Benefit Costs

Net defined benefit pension and other postretirement costs included the following components:


	Thirteen Weeks Ended September 24, 2017					Thirteen Weeks Ended September 25, 2016					Thirty-Nine Weeks Ended September 24, 2017					Thirty-Nine Weeks Ended September 25, 2016					Thirteen Weeks Ended July 1, 2018					Thirteen Weeks Ended June 25, 2017					Twenty-Six Weeks Ended July 1, 2018					Twenty-Six Weeks Ended June 25, 2017
	Pension Benefits			Other Benefits		Pension Benefits			Other Benefits		Pension Benefits			Other Benefits		Pension Benefits			Other Benefits		Pension Benefits			Other Benefits		Pension Benefits			Other Benefits		Pension Benefits			Other Benefits		Pension Benefits			Other Benefits
	(In thousands)																				(In thousands)
Interest cost	$	1,392		$	13	$	1,396		$	12	$	4,178		$	38	$	4,189		$	38	$	1,365		$	11	$	1,393		$	12	$	2,731		$	23	$	2,786		$	25
Estimated return on plan assets	(1,314		)	—		(1,314		)	—		(3,940		)	—		(3,942		)	—		(1,516		)	—		(1,313		)	—		(3,033		)	—		(2,626		)	—
Amortization of net loss	233			—		165			—		699			—		494			—		301			—		233			—		602			—		466			—
Net costs	$	311		$	13	$	247		$	12	$	937		$	38	$	741		$	38	$	150		$	11	$	313		$	12	$	300		$	23	$	626		$	25

Economic Assumptions

The weighted average assumptions used in determining pension and other postretirement plan information were as follows:


	September 24, 2017				December 25, 2016				July 1, 2018				December 31, 2017
	Pension Benefits		Other Benefits		Pension Benefits		Other Benefits		Pension Benefits		Other Benefits		Pension Benefits		Other Benefits
Assumptions used to measure benefit obligation at end of period:
Discount rate	3.87	%	3.41	%	4.31	%	3.81	%	4.24	%	4.02	%	3.69	%	3.39	%


	Thirty-Nine Weeks Ended September 24, 2017				Thirty-Nine Weeks Ended September 25, 2016				Twenty-Six Weeks Ended July 1, 2018				Twenty-Six Weeks Ended June 25, 2017
	Pension Benefits		Other Benefits		Pension Benefits		Other Benefits		Pension Benefits		Other Benefits		Pension Benefits		Other Benefits
Assumptions used to measure net pension and other postretirement cost:
Discount rate	4.32	%	3.81	%	4.47	%	4.47	%	3.69	%	3.39	%	4.31	%	3.81	%
Expected return on plan assets	5.50	%	NA		5.50	%	NA		5.50	%	N/A		5.50	%	NA

The discount rate represents the interest rate used to determine the present value of future cash flows currently expected to be required to settle the Company's pension and other benefit obligations. The weighted average discount rate for each plan was established by comparing the projection of expected benefit payments to the AA Above Median yield curve. The expected benefit payments were discounted by each corresponding discount rate on the yield curve. For payments beyond 30 years, the Company extended the curve assuming the discount rate derived in year 30 is extended to the end of the plan's payment expectations. Once the present value of the string of benefit payments was established, the Company determined the single rate on the yield curve, that when applied to all obligations of the plan, would exactly match the previously determined present value. As part of the evaluation of pension and other postretirement assumptions, the Company applied assumptions for mortality that incorporate generational white and blue collar mortality trends. In determining its benefit obligations, the Company used generational tables that take into consideration increases in plan participant longevity. As of ~~September 24, 2017~~July 1, 2018 and December ~~25, 2016,~~31, 2017, all pension and other postretirement benefit plans used variations of the RP2014 mortality table and the MP2015 mortality improvement scale.

The sensitivity of the projected benefit obligation for pension benefits to changes in the discount rate is set out below. The impact of a change in the discount rate of 0.25% on the projected benefit obligation for other benefits is less than $1,000. This sensitivity analysis is based on changing one assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to variations in significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as for calculating the liability recognized in the Condensed Consolidated ~~and Combined~~ Balance Sheets.



	Increase in Discount Rate of 0.25%			Decrease in Discount Rate of 0.25%
	(In thousands)
Impact on projected benefit obligation for pension benefits	$	(4,767	)	$	4,525

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Increase in Discount Rate of 0.25% Decrease in Discount Rate of 0.25%
(In thousands)
Impact on projected benefit obligation for pension benefits $ (4,786 ) $ 5,088

The expected rate of return on plan assets was primarily based on the determination of an expected return and behaviors for each plan's current asset portfolio that the Company believes are likely to prevail over long periods. This determination was made using assumptions for return and volatility of the portfolio. Asset class assumptions were set using a combination of empirical and forward-looking analysis. To the extent historical results were affected by unsustainable trends or events, the effects of those trends or events were quantified and removed. The Company also considered anticipated asset allocations, investment strategies and the views of various investment professionals when developing this rate.

Plan Assets

The following table reflects the pension plans’ actual asset allocations:


	September 24, 2017		December 25, 2016		July 1, 2018		December 31, 2017
Cash and cash equivalents	—	%	—	%	—	%	5	%
Pooled separate accounts^(a):
Equity securities	5	%	5	%	5	%	5	%
Fixed income securities	5	%	5	%	4	%	4	%
Common collective trust funds^(a):
Equity securities	61	%	60	%	46	%	56	%
Fixed income securities	29	%	30	%	41	%	30	%
Real estate					4	%	—	%
Total assets	100	%	100	%	100	%	100	%

(a)

Pooled separate accounts (“PSAs”) and common collective trust funds (“CCTs”) are two of the most common types of alternative vehicles in which benefit plans invest. These investments are pooled funds that look like mutual funds, but they are not registered with the SEC. Often times, they will be invested in mutual funds, real estate trusts or other marketable securities, but the unit price generally will be different from the value of the underlying securities because the fund may also hold cash for liquidity purposes, and the fees imposed by the fund are deducted from the fund value rather than charged separately to investors. Some PSAs and CCTs have no restrictions as to their investment strategy and can invest in riskier investments, such as derivatives, hedge funds, private equity funds, or similar investments.

Absent regulatory or statutory limitations, the target asset allocation for the investment of pension assets in the pooled separate accounts is 50% in each of fixed income securities and equity securities and the target asset allocation for the investment of pension assets in the common collective trust funds is 30% in fixed income securities and 70% in equity securities. The plans only invest in fixed income and equity instruments for which there is a readily available public market. ~~We develop our~~The Company develops its expected long-term rate of return assumptions based on the historical rates of returns for equity and fixed income securities of the type in which ~~our~~its plans invest.

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The fair value measurements of plan assets fell into the following levels of the fair value hierarchy as of ~~September 24, 2017~~July 1, 2018 and December ~~25, 2016:~~31, 2017:


	September 24, 2017								December 25, 2016								July 1, 2018								December 31, 2017
	Level 1^(a)		Level 2^(b)		Level 3^(c)		Total		Level 1^(a)		Level 2^(b)		Level 3^(c)		Total		Level 1^(a)		Level 2^(b)		Level 3^(c)		Total		Level 1^(a)		Level 2^(b)		Level 3^(c)		Total
	(In thousands)																(In thousands)
Cash and cash equivalents	$	146	$	—	$	—	$	146	$	119	$	—	$	—	$	119	$	831	$	—	$	—	$	831	$	6,128	$	—	$	—	$	6,128
Pooled separate accounts:
Large U.S. equity funds^(d)	—		3,228		—		3,228		—		3,302		—		3,302		—		3,025		—		3,025		—		3,483		—		3,483
Small/Mid U.S. equity funds^(e)	—		388		—		388		—		406		—		406		—		386		—		386		—		420		—		420
International equity funds^(f)	—		1,585		—		1,585		—		1,231		—		1,231		—		1,717		—		1,717		—		1,665		—		1,665
Fixed income funds^(g)	—		5,024		—		5,024		—		4,867		—		4,867		—		4,904		—		4,904		—		4,799		—		4,799
Common collective trusts funds:
Large U.S. equity funds^(d)	—		27,077		—		27,077		—		24,547		—		24,547		—		20,443		—		20,443		—		22,695		—		22,695
Small U.S. equity funds^(e)	—		19,853		—		19,853		—		17,344		—		17,344		—		8,013		—		8,013		—		20,592		—		20,592
International equity funds^(f)	—		20,306		—		20,306		—		17,006		—		17,006		—		24,393		—		24,393		—		19,923		—		19,923
Fixed income funds^(g)	—		32,207		—		32,207		—		28,704		—		28,704		—		44,889		—		44,889		—		32,865		—		32,865
Real estate^(h)																	—		5,174		—		5,174		—		—		—		—
Total assets	$	146	$	109,668	$	—	$	109,814	$	119	$	97,407	$	—	$	97,526	$	831	$	112,944	$	—	$	113,775	$	6,128	$	106,442	$	—	$	112,570


(a)	Unadjusted quoted prices in active markets for identical assets are used to determine fair value.


(b)	Quoted prices in active markets for similar assets and inputs that are observable for the asset are used to determine fair value.


(c)	Unobservable inputs, such as discounted cash flow models or valuations, are used to determine fair value.


(d)	This category is comprised of investment options that invest in stocks, or shares of ownership, in large, well-established U.S. companies. These investment options typically carry more risk than fixed income options but have the potential for higher returns over longer time periods.


(e)	This category is generally comprised of investment options that invest in stocks, or shares of ownership, in small to medium-sized U.S. companies. These investment options typically carry more risk than larger U.S. equity investment options but have the potential for higher returns.


(f)	This category is comprised of investment options that invest in stocks, or shares of ownership, in companies with their principal place of business or office outside of the U.S.

(g)

This category is comprised of investment options that invest in bonds, or debt of a company or government entity (including U.S. and non-U.S. entities). ~~It may also include real estate investment options that directly own property.~~ These investment options typically carry more risk than short-term fixed income investment options, ~~(including, for real estate investment options, liquidity risk),~~ but less overall risk than equities.


(h)	This category is comprised of investment options that invest in real estate investment trusts or private equity pools that own real estate. These long-term investments are primarily in office buildings, industrial parks, apartments or retail complexes. These investment options typically carry more risk, including liquidity risk, than fixed income investment options.

The valuation of plan assets in Level 2 is determined using a market approach based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for substantially the full term of the financial instrument. Level 2 securities primarily include equity and fixed income securities funds.

Benefit Payments

The following table reflects the benefits as of ~~September 24, 2017~~July 1, 2018 expected to be paid through ~~2026~~2027 from ~~our~~the Company's pension and other postretirement plans. Because ~~our~~its pension plans are primarily funded plans, the anticipated benefits with respect to these plans will come primarily from the trusts established for these plans. Because ~~our~~the Company's other postretirement plans are unfunded, the anticipated benefits with respect to these plans will come from ~~our~~its own assets.


	Pension Benefits		Other Benefits		Pension Benefits		Other Benefits
	(In thousands)				(In thousands)
2017 (remaining)	$	4,241	$	37
2018	11,617		147		$	9,184	$	74
2019	11,088		146		11,889		148
2020	11,019		144		11,687		146
2021	10,790		142		11,337		143
2022-2026	49,927		640
2022					11,160		139
2023-2027					50,628		611
Total	$	98,682	$	1,256	$	105,885	$	1,261

~~We anticipate~~

Table of Contents

The Company anticipates contributing ~~$0.1~~$6.6 million and less than $0.1 million, as required by funding regulations or laws, to ~~our~~its pension plans and other postretirement plans, respectively, during the remainder of ~~2017.~~

~~Table of Contents~~

2018.

Unrecognized Benefit Amounts in Accumulated Other Comprehensive Loss

The amounts in accumulated other comprehensive loss that were not recognized as components of net periodic benefits cost and the changes in those amounts are as follows:


	Thirty-Nine Weeks Ended September 24, 2017						Thirty-Nine Weeks Ended September 25, 2016						Twenty-Six Weeks Ended July 1, 2018						Twenty-Six Weeks Ended June 25, 2017
	Pension Benefits			Other Benefits			Pension Benefits			Other Benefits			Pension Benefits			Other Benefits			Pension Benefits			Other Benefits
	(In thousands)												(In thousands)
Net actuarial loss (gain), beginning of period	$	46,494		$	(31	)	$	38,115		$	(79	)	$	54,235		$	35		$	46,494		$	(31	)
Amortization	(699		)	—			(494		)	—			(602		)	—			(466		)	—
Curtailment and settlement adjustments	—			—			—			—
Actuarial loss (gain)	9,433			25			12,233			95			(9,465		)	(62		)	8,885			101
Asset loss (gain)	(5,381		)	—			(828		)	—			2,936			—			(4,515		)	—
Net actuarial loss (gain), end of period	$	49,847		$	(6	)	$	49,026		$	16		$	47,104		$	(27	)	$	50,398		$	70

The Company expects to recognize in net pension cost throughout the remainder of ~~2017~~2018 an actuarial loss of ~~$0.2~~$0.6 million that was recorded in accumulated other comprehensive loss at ~~September 24, 2017.~~July 1, 2018.

Risk Management

Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below:

Asset volatility.The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets under perform this yield, this will create a deficit. The pension plans hold a significant proportion of equities, which are expected to outperform corporate bonds in the long-term while contributing volatility and risk in the short-term. The Company monitors the level of investment risk but has no current plan to significantly modify the mixture of investments. The investment position is discussed more below.

Changes in bond yields. A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings.

The investment position is managed and monitored by a committee of individuals from various departments. This group actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from the pension obligations. The group has not changed the processes used to manage its risks from previous periods. The group does not use derivatives to manage its risk. Investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. The majority of equities are in U.S. large and small cap companies with some global diversification into international entities. The plans are not exposed to significant foreign currency risk.

Remeasurement

The Company remeasures both plan assets and obligations on a quarterly basis.


~~14.~~15.	STOCKHOLDERS' EQUITY

Accumulated Other Comprehensive ~~Loss~~Income (Loss)

The following tables provide information regarding the changes in accumulated other comprehensive ~~loss:~~income (loss):

2928

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	Thirty-Nine Weeks Ended September 24, 2017^(a)														Twenty-Six Weeks Ended July 1, 2018^(a)
	Gains (Losses) Related to Foreign Currency Translation			Unrealized Gains (Losses) on Derivative Financial Instruments Classified as Cash Flow Hedges			Losses Related to Pension and Other Postretirement Benefits			Unrealized Holding Gains on Available-for-Sale Securities		Total			Gains Related to Foreign Currency Translation			Unrealized Losses on Derivative Financial Instruments Classified as Cash Flow Hedges			Losses Related to Pension and Other Postretirement Benefits			Unrealized Holding Gains on Available-for-Sale Securities			Total
	(In thousands)														(In thousands)
Balance, beginning of period	$	(265,714	)	$	99		$	(64,243	)	$	—	$	(329,858	)	$	42,081		$	(1,848	)	$	(71,434	)	$	61		$	(31,140	)
Granite Holdings Sàrl common-control transaction	204,577			(1,368		)	—			—		203,209
Other comprehensive income (loss):
Other comprehensive income (loss) before reclassifications	92,364			(137		)	(2,539		)	—		89,688			(38,507		)	(97		)	4,987			932			(32,685		)
Amounts reclassified from accumulated other comprehensive loss to net income	—			9			435			—		444
Net current period other comprehensive income (loss)	92,364			(128		)	(2,104		)	—		90,132
Amounts reclassified from accumulated other comprehensive income (loss) to net income															—			472			455			(680		)	247
Impact of currency translation															—			(6		)	—			—			(6		)
Net other comprehensive income (loss)															(38,507		)	369			5,442			252			(32,444		)
Balance, end of period	$	31,227		$	(1,397	)	$	(66,347	)	$	—	$	(36,517	)	$	3,574		$	(1,479	)	$	(65,992	)	$	313		$	(63,584	)


	Thirty-Nine Weeks Ended September 25, 2016^(a)															Twenty-Six Weeks Ended June 25, 2017^(a)
	Losses Related to Foreign Currency Translation			Unrealized Gains (Losses) on Derivative Financial Instruments Classified as Cash Flow Hedges			Losses Related to Pension and Other Postretirement Benefits			Unrealized Holding Gains on Available-for-Sale Securities			Total			Losses Related to Foreign Currency Translation			Unrealized Gains on Derivative Financial Instruments Classified as Cash Flow Hedges			Losses Related to Pension and Other Postretirement Benefits			Unrealized Holding Gains on Available-for-Sale Securities		Total
	(In thousands)															(In thousands)
Balance, beginning of period	$	(32,482	)	$	(61	)	$	(58,997	)	$	67		$	(91,473	)	$	(265,714	)	$	99		$	(64,243	)	$	—	$	(329,858	)
Comprehensive income (loss):
Other comprehensive income (loss) before reclassifications	(171,509		)	167			(7,158		)	265			$	(178,235	)	67,096			698			(2,784		)	—		65,010
Amounts reclassified from accumulated other comprehensive loss to net income	—			(35		)	307			(332		)	$	(60	)
Net current period other comprehensive income (loss)	(171,509		)	132			(6,851		)	(67		)	(178,295		)
Amounts reclassified from accumulated other comprehensive income (loss) to net income																—			(67		)	290			—		223
Impact of currency translation																—			20			—			—		20
Net other comprehensive income (loss)																67,096			651			(2,494		)	—		65,253
Balance, end of period	$	(203,991	)	$	71		$	(65,848	)	$	—		$	(269,768	)	$	(198,618	)	$	750		$	(66,737	)	$	—	$	(264,605	)


(a)	All amounts are net of tax. Amounts in parentheses indicate debits to accumulated other comprehensive ~~loss.~~income (loss).


	Amounts Reclassified from Accumulated Other Comprehensive Loss^(a)							Amounts Reclassified from Accumulated Other Comprehensive Loss^(a)
Details about Accumulated Other Comprehensive Loss Components	Thirty-Nine Weeks Ended September 24, 2017			Thirty-Nine Weeks Ended September 25, 2016			Affected Line Item in the Condensed Consolidated and Combined Statements of Income	Twenty-Six Weeks Ended July 1, 2018			Twenty-Six Weeks Ended June 25, 2017			Affected Line Item in the Condensed Consolidated and Combined Statements of Income
	(In thousands)							(In thousands)
Realized gain (loss) on settlement of derivative financial instruments classified as cash flow hedges	$	(9	)	$	35		Cost of sales
Realized loss on settlement of derivative financial instruments classified as cash flow hedges								$	(472	)	$	67		Cost of sales
Realized gain on sale of securities	—			534			Interest income	899			—			Interest income
Amortization of defined benefit pension and other postretirement plan actuarial losses:
Union employees pension plan^(b)(d)	(18		)	(15		)	Cost of sales	(24		)	(12		)	Cost of sales
Legacy Gold Kist plans^(c)(d)	(212		)	(149		)	Cost of sales	(180		)	(142		)	Cost of sales
Legacy Gold Kist plans^(c)(d)	(469		)	(330		)	Selling, general and administrative expense	(397		)	(312		)	Selling, general and administrative expense
Total before tax	(708		)	75				(174		)	(399		)
Tax benefit (expense)	264			(15		)
Tax benefit								(73		)	176
Total reclassification for the period	$	(444	)	$	60			$	(247	)	$	(223	)

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(a)	Amounts in parentheses represent debits to results of operations.

~~Table of Contents~~


(b)	The Company sponsors the ~~Pilgrim’s Pride Retirement~~Union Plan, ~~for Union Employees,~~ a qualified defined benefit pension plan covering certain locations or work groups with collective bargaining agreements.

(c)

The Company sponsors the ~~Pilgrim’s Pride~~GK Pension Plan, ~~for Legacy Gold Kist Employees,~~ a qualified defined benefit pension plan covering certain eligible U.S. employees who were employed at locations that the Company purchased through its acquisition of Gold Kist in 2007, the ~~Former Gold Kist Inc. Supplemental Executive Retirement~~SERP Plan, a nonqualified defined benefit retirement plan covering certain former Gold Kist executives, the ~~Former Gold Kist Inc.~~ Directors’ Emeriti Plan, a nonqualified defined benefit retirement plan covering certain former Gold Kist directors and the ~~Gold Kist Inc.~~ Retiree Life ~~Insurance~~ Plan, a defined benefit postretirement life insurance plan covering certain retired Gold Kist ~~employees.~~employees (collectively, the “Legacy Gold Kist Plans”).


(d)	These accumulated other comprehensive ~~income~~loss components are included in the computation of net periodic pension cost. See “Note ~~13.~~14. Pension and Other Postretirement Benefits” to the Condensed Consolidated and Combined Financial Statements.

~~Share Repurchase Program and Treasury Stock~~

On July 28, 2015, the Company’s Board of Directors approved a $150.0 million share repurchase authorization. The Company plans to repurchase shares through various means, which may include but are not limited to open market purchases, privately negotiated transactions, the use of derivative instruments and/or accelerated share repurchase programs. The share repurchase program was originally scheduled to expire on July 27, 2016. On February 10, 2016, the Company’s Board of Directors approved an increase of the share repurchase authorization to $300.0 million and an extension of the expiration to February 9, 2017. On February 8, 2017, the Company's Board of Directors further extended the program expiration to August 9, 2017. The extent to which the Company repurchases its shares and the timing of such repurchases will vary and depend upon market conditions and other corporate considerations, as determined by the Company’s management team. The Company reserves the right to limit or terminate the repurchase program at any time without notice. As of September 24, 2017, the Company had repurchased approximately 11.4 million shares under this program with a market value at the time of purchase of approximately $231.8 million. The Company accounted for the shares repurchased using the cost method.

Restrictions on Dividends

The U.S. Credit Facility, the 2015 Indenture governing the Senior Notes due 2025 and the 2017 Indenture governing the Senior Notes due 2027 restrict, but do not prohibit, the Company from declaring dividends.


~~15.~~16.	INCENTIVE COMPENSATION

The Company sponsors a short-term incentive plan that provides the grant of either cash or share-based bonus awards payable upon achievement of specified performance goals (the “STIP”). Full-time, salaried exempt employees of the Company and its affiliates who are selected by the administering committee are eligible to participate in the STIP. ~~The~~At July 1, 2018, the Company has accrued ~~$20.7~~$0.8 million ~~in costs related to the STIP at September 24, 2017~~ related to cash bonus awards that could potentially be awarded under the STIP during the remainder of ~~2017~~2018 and ~~2018.~~2019. The Company assumed responsibility for the JFC LLC Long-Term Equity Incentive Plan dated January 1, 2014, as amended (the “JFC LTIP”) through its acquisition of ~~GNP~~JFC LLC and its subsidiaries (together, “GNP”) on January 6, 2017. The Company has accrued ~~$3.4~~$2.2 million in costs related to the JFC LTIP at ~~September 24, 2017.~~July 1, 2018. The Company assumed responsibility for the Moy Park Incentive Plan dated January 1, 2013, as amended (the “MPIP”) through its acquisition of Moy Park on September 8, 2017. The Company has accrued $0.6 million in costs related to the MPIP at ~~September 24, 2017.~~July 1, 2018.

The Company also sponsors a performance-based, omnibus long-term incentive plan that provides for the grant of a broad range of long-term equity-based and cash-based awards to the Company’s officers and other employees, members of the Board of Directors and any consultants (the “LTIP”). The equity-based awards that may be granted under the LTIP include “incentive stock options,” within the meaning of the ~~Internal Revenue Code,~~IRC, nonqualified stock options, stock appreciation rights, restricted stock awards and restricted stock units (“RSUs”). At ~~September 24, 2017,~~July 1, 2018, we have reserved approximately ~~4.8~~4.4 million shares of common stock for future issuance under the LTIP.

~~Table of Contents~~

The following awards were outstanding during the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017:~~July 1, 2018:

Award Type

Benefit

Plan

Awards Granted

Grant

Date

Grant Date Fair Value per Award^(a)

Vesting Condition

Vesting Date

Vesting Date Fair Value per Award^(a)

Estimated Forfeiture Rate

Awards Forfeited to Date

Settlement Method

Benefit

Plan

Awards Granted

Grant

Date

Grant Date Fair Value per Award

Vesting Condition

Vesting Date

Awards Forfeited to Date

Settlement Method

RSU

LTIP

449,217

02/19/2014

16.70

Service

12/31/2016

18.99

13.49

86,458

Stock

LTIP

389,424

01/19/2017

18.38

Performance / Service

^(a)

389,424

^(a)

Stock

RSU

LTIP

223,701

03/03/2014

17.18

Performance / Service

12/31/2017

12.34

55,516

Stock

LTIP

410,000

02/14/2018

25.59

Service

01/01/2019

—

Stock

RSU

(b)

LTIP

45,961

02/11/2015

25.87

Service

12/31/2017

18.99

12.34

—

Stock

LTIP

161,215

03/01/2018

24.93

Service

^(b)

5,097

Stock

RSU

LTIP

251,136

03/30/2016

25.36

Performance / Service

12/31/2019

18.99

(d)

251,136

Stock

LTIP

266,478

03/01/2018

24.93

Performance / Service

^(c)

22,548

Stock

RSU

(b)

LTIP

74,536

10/13/2016

20.93

Service

12/31/2016

—

Stock

LTIP

11,144

05/10/2018

21.54

^(d)

—

Stock

RSU

LTIP

389,424

01/19/2017

18.39

Performance / Service

(e)

—

Stock

RSU

(c)

LTIP

48,586

02/13/2017

20.52

Service

2/13/2017

—

Stock

RSU

(c)

LTIP

23,469

02/13/2017

20.52

Service

12/31/2017

—

Stock


(a)	~~The fair value of each RSU granted or vested represents the closing price of the Company's common stock on the respective grant date or vesting date.~~

~~(b)~~

On February 17, 2015, the Company paid a special cash dividend to stockholders of record as of January 30, 2015 totaling $5.77 per share. On January 27, 2015, the Compensation Committee of the Company's Board of Directors agreed to grant additional RSUs to LTIP participants that were equal to the amount of the dividend that would be awarded to them had their RSUs existing as of the dividend record date been vested. The additional RSUs that were granted to the LTIP participants are subject to the same vesting requirements as the underlying RSUs granted under the LTIP.

~~(c)~~

On May 18, 2016, the Company paid a special cash dividend to stockholders of record as of May 10, 2015 totaling $2.75 per share. On October 27, 2016, the Compensation Committee of the Company's Board of Directors agreed to grant additional RSUs to LTIP participants that were equal to the amount of the dividend that would be awarded to them had their RSUs existing as of the dividend record date been vested. The additional RSUs that were granted to the LTIP participants are subject to the same vesting requirements as the underlying RSUs granted under the LTIP.


~~(d)~~	Performance conditions associated with these awards were not satisfied. Therefore, 100% of the awards were forfeited during the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017.~~July 1, 2018.


~~(e)~~(b)	~~The subject RSUs will~~These restricted stock units vest in ratable tranches on December 31, 2018, December 31, 2019 and December 31, 2020. Expected compensation cost related to these units totals $4.0 million based on a closing stock price for the Company’s common stock of $24.93 per share on March 1, 2018. Compensation cost will be amortized to profit/loss over the remaining vesting period.

(c)

If performance conditions related to the Company's 2018 operating results are satisfied, these restricted stock units vest in ratable tranches on December 31, 2019, December 31, 2020 and December 31, 2021. Expected compensation cost related to these units totals $6.6 million based on a closing stock price for the Company's common stock of $24.93 per share on March 1, 2018. Compensation cost will be amortized to profit/loss upon satisfaction of the performance conditions over the remaining vesting period.


(d)	These restricted stock units were granted to the four non-employees who currently serve on the Company's Board of Directors. Each participating director's units will vest upon his departure from the Company's Board of Directors. Compensation cost was recognized in profit/loss upon the grant date.

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Compensation costs and the income tax benefit recognized for our share-based compensation arrangements are included below:

Thirteen Weeks Ended Thirty-Nine Weeks Ended
September 24, 2017 September 25, 2016 September 24, 2017 September 25, 2016
(In thousands)
Share-based compensation cost:
Cost of sales $ 32
$ 449
$ 219
$ 710
Selling, general and administrative expense 475
3,086
2,235
4,694
Total $ 507
$ 3,535
$ 2,454
$ 5,404

Income tax benefit $ 132
$ 1,083
$ 733
$ 1,633

~~Table of Contents~~



	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	July 1, 2018		June 25, 2017		July 1, 2018		June 25, 2017
	(In thousands)
Share-based compensation cost:
Cost of sales	$	117	$	38	$	169	$	187
Selling, general and administrative expense	4,243		449		5,464		1,760
Total	$	4,360	$	487	$	5,633	$	1,947

Income tax benefit	$	1,061	$	184	$	1,371	$	601

The Company’s RSU activity is included below:


	Thirty-Nine Weeks Ended September 24, 2017				Thirty-Nine Weeks Ended September 25, 2016				Twenty-Six Weeks Ended July 1, 2018				Twenty-Six Weeks Ended June 25, 2017
	Number		Weighted Average Grant Date Fair Value		Number		Weighted Average Grant Date Fair Value		Number		Weighted Average Grant Date Fair Value		Number		Weighted Average Grant Date Fair Value
	(In thousands, except weighted average fair values)								(In thousands, except weighted average fair values)
Outstanding at beginning of period	906		$	20.00	774		$	19.30	389		$	18.39	906		$	20.00
Granted	462		18.72		251		25.36		849		25.20		462		18.72
Vested	(486	)	17.73		—		—		—		—		(486	)	17.73
Forfeited	(251	)	25.36		(193	)	24.51		(417	)	18.82		(251	)	25.36
Outstanding at end of period	631		$	18.68	832		$	19.92	821		$	25.21	631		$	18.68

No awards vested during the twenty-six weeks ended July 1, 2018. The total fair value of awards vested during the ~~thirty-nine~~twenty-six weeks ended ~~September 24,~~June 25, 2017 was ~~$8.6~~$9.2 million. ~~No awards vested during the thirty-nine weeks ended September 25, 2016.~~

At ~~September 24, 2017,~~July 1, 2018, the total unrecognized compensation cost related to all nonvested awards was ~~$8.5~~$15.7 million. That cost is expected to be recognized over a weighted average period of ~~2.06~~1.57 years.

Historically, we have issued new shares to satisfy award conversions.

17. RESTRUCTURING-RELATED ACTIVITIES

During 2017, the Company initiated a restructuring initiative to capitalize on cost-saving opportunities within its GNP operations located in Luverne, Minnesota and St. Cloud, Minnesota. Implementation of the initiative is expected to result in total pre-tax charges of approximately $7.0 million, and approximately $5.4 million of these charges are estimated to result in cash outlays. These activities were initiated in the first quarter of 2017 and are expected to be substantially completed by the second quarter of 2020.

During 2018, the Company elected to close its 40 North Foods product incubator operation located in Boulder, Colorado. Implementation of this restructuring initiative is expected to result in total pre-tax charges of approximately $0.7 million, and approximately $0.6 million of these charges are estimated to result in cash outlays. These activities were initiated in the second quarter of 2018 and are expected to be substantially completed by the third quarter of 2019.

The following table provides a summary of our estimates of costs associated with these restructuring initiatives by major type of cost:

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	GNP		40 North Foods		Total Estimated Amount Expected to be Incurred
	(In thousands)
Employee termination benefits	$	4,074	$	449	$	4,523
Inventory adjustments	472		—		472
Asset impairments	470		103		573
Other charges^(a)	1,983		150		2,133
Total estimated cost	$	6,999	$	702	$	7,701


~~16.~~ ^(a)	Comprised of other costs directly related to the restructuring initiatives, including prepaid software impairment, St. Cloud, Minnesota office lease costs, Luverne, Minnesota plant closure costs, and Boulder, Colorado office lease costs.

During the thirteen and twenty-six weeks ended July 1, 2018, the Company recognized the following costs and incurred the following cash outlays related to these restructuring initiatives:



	Thirteen Weeks Ended July 1, 2018				Twenty-Six Weeks Ended July 1, 2018
	Expenses		Cash Outlays		Expenses			Cash Outlays
	(In thousands)
GNP initiative:
Employee termination benefits	$	433	$	524	$	979		$	1,165
Inventory adjustments	—		—		(227		)	—
Asset impairments	—		—		470			—
Other charges	—		5		—			65
	433		529		1,222			1,230
40 North Foods initiative:
Employee termination benefits	449		405		449			405
Asset impairments	103		—		103			—
Other	150		9		150			9
	702		414		702			414
Total	$	1,135	$	943	$	1,924		$	1,644

These expenses are reported in the line item Administrative restructuring charges on the Condensed Consolidated and Combined Statements of Income and are recognized in the U.S. segment.

The following table reconciles liabilities and reserves associated with this restructuring initiative from the beginning to the end of the twenty-six weeks ended ended July 1, 2018. Ending liability balances for employee termination benefits and other charges are reported in the line item Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets. The ending reserve balance for inventory adjustments is reported in the line item Inventories in the Condensed Consolidated Balance Sheets.



	GNP Initiative												40 North Foods Initiative
	Employee Termination Benefits			Inventory Adjustments			Other Charges			Total			Employee Termination Benefits			Other Charges			Total
	(In thousands)
Beginning liability or reserve	$	800		$	699		$	752		$	2,251		$	—		$	—		$	—
Restructuring charges	979			(227		)	—			752			449			150			599
Payments and disposals	(1,165		)	(472		)	(65		)	(1,702		)	(405		)	(9		)	(414		)
Ending liability or reserve	$	614		$	—		$	687		$	1,301		$	44		$	141		$	185

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18. PUERTO RICO HURRICANE IMPACT

Hurricane Maria became the strongest storm to make landfall in Puerto Rico in 85 years when it came ashore on September 20, 2017. The Company suffered significant damage because of the storm. Pilgrim’s lost 2.1 million birds on the island, many of the Company’s contract growers lost their poultry houses, and the Company incurred damage at its processing plant, feed mill and hatchery. PPC does not expect that its operations on the island will be fully functional until the third quarter of 2018.

Estimated damages incurred by the Company through July 1, 2018 included property and casualty losses totaling $5.2 million and a business interruption claim totaling $14.8 million. Pilgrim’s expects to receive insurance proceeds related to these damages in the amount of $11.5 million and has recorded a receivable from its insurance provider for that amount. The amount of insurance recovery related to both the property and casualty losses and the business interruption claim are included in Cost of sales in the Condensed Consolidated and Combined Statements of Income and are recognized in the U.S. segment.


19.	COMMITMENTS AND CONTINGENCIES

General

The Company is a party to many routine contracts in which it provides general indemnities in the normal course of business to third parties for various risks. Among other considerations, the Company has not recorded a liability for any of these indemnities because, based upon the likelihood of payment, the fair value of such indemnities would not have a material impact on its financial condition, results of operations and cash flows.

Financial Instruments

The Company’s loan agreements generally obligate the Company to reimburse the applicable lender for incremental increased costs due to a change in law that imposes (i) any reserve or special deposit requirement against assets of, deposits with or credit extended by such lender related to the loan, (ii) any tax, duty or other charge with respect to the loan (except standard income tax) or (iii) capital adequacy requirements. In addition, some of the Company’s loan agreements contain a withholding tax provision that requires the Company to pay additional amounts to the applicable lender or other financing party, generally if withholding taxes are imposed on such lender or other financing party as a result of a change in the applicable tax law. These increased costs and withholding tax provisions continue for the entire term of the applicable transaction, and there is no limitation on the maximum additional amounts the Company could be obligated to pay under such provisions. Any failure to pay amounts due under such provisions generally would trigger an event of default, and, in a secured financing transaction, would entitle the lender to foreclose upon the collateral to realize the amount due.

Litigation

The Company is subject to various legal proceedings and claims which arise in the ordinary course of business. In the Company’s opinion, it has made appropriate and adequate accruals for claims where necessary; however, the ultimate liability for these matters is uncertain, and if significantly different than the amounts accrued, the ultimate outcome could have a material effect on the financial condition or results of operations of the Company. For a discussion of the material legal proceedings and claims, see Part II, Item 1. “Legal Proceedings.” Below is a summary of some of these material proceedings and claims. The Company believes it has substantial defenses to the claims made and intends to vigorously defend these cases.

Tax Claims and Proceedings

A Mexico subsidiary of the Company is currently appealing an unfavorable tax adjustment proposed by Mexican Tax Authorities due to an examination of a specific transaction undertaken by the Mexico subsidiary during tax years 2009 and 2010. Amounts under appeal are $24.3 million and $16.1 million for tax years 2009 and 2010, respectively. No loss has been recorded for these amounts at this time.

Other Claims and Proceedings

Between September 2, 2016 and October 13, 2016, a series of purported federal class action lawsuits styled as In re Broiler Chicken Antitrust Litigation, No. 1:16-cv-08637 were brought against PPC and 13 other producers by and on behalf of direct and indirect purchasers of broiler chickens alleging violations of federal and state antitrust and unfair competition laws. The

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complaints, which were filed with the U.S. District Court for the Northern District of Illinois, seek, among other relief, treble damages for an alleged conspiracy among defendants to reduce output and increase prices of broiler chickens from the period of January 2008 to the present. The class plaintiffs have filed three consolidated amended complaints: one on behalf of direct purchasers and two on behalf of distinct groups of indirect purchasers. The defendants, including PPC, filed motions to dismiss these actions. On November 20, 2017, the court denied all pending motions to dismiss with the exception of certain state-law claims by indirect purchasers that were dismissed or narrowed in scope. Discovery is proceeding and is currently scheduled to be complete by June 13, 2019. Between December 2017 and July 2018 eight individual direct action complaints (Affiliated Foods, Inc., et al., v. Claxton Poultry Farms, Inc., et al., No. 1:17-cv-08850; Winn Dixie Stores, Inc. v. Koch Foods, Inc., No. 1:18-cv-00245; Sysco Corp. v. Tyson Foods Inc., et al; No. 1:18-cv-00700; US Foods Inc. v. Tyson Foods Inc., et al; No. 1:18-cv-00702; Action Meat Distributors, Inc., et al., v. Claxton Poultry Farms, Inc., et al., No. 1:18-cv-03471; Jetro Holdings, LLC, v. Tyson Foods, Inc., et al., No. 1:18-cv-04000; Associated Grocers of the South, Inc., et al., v. Tyson Foods, Inc., et al., No. 1:18-cv-4616; and The Kroger Co., et al., v. Tyson Foods, Inc., et al., No. 1:18-cv-04534) were filed with the U.S. District Court for the Northern District of Illinois by individual direct purchaser entities, the allegations of which largely mirror those in the class action complaints. The Court’s scheduling order currently requires the substantial completion of document discovery for the class cases by July 18, 2018, with fact discovery ending on June 13, 2019, class certification briefing and expert reports proceeding from July 15, 2019 to March 16, 2020 and summary judgment to proceed 60 days after the Court rules on motions for class certification. The Court has ordered the parties to coordinate scheduling of the direct action complaints with the class complaints with any necessary modifications to reflect time of filing. Discovery will be consolidated. In May 2018, an individual direct action complaint was filed with the U.S. District Court for the District of Kansas (Associated Wholesale Grocers, Inc. v. Koch Foods, Inc., et al., No. 2:18-cv-02258), the allegations of which largely mirror those in the class action complaints. The defendants, including PPC, filed a motion to transfer this action to the U.S. District Court for the Northern District of Illinois. This motion was fully briefed on July 27, 2018.

On October 10, 2016, Patrick Hogan, acting on behalf of himself and a putative class of persons who purchased shares of PPC’s stock between February 21, 2014 and October 6, 2016, filed a class action complaint in the U.S. District Court for the District of Colorado against PPC and its named executive officers. The complaint alleges, among other things, that PPC’s SEC filings contained statements that were rendered materially false and misleading by PPC’s failure to disclose that (i) the Company colluded with several of its industry peers to fix prices in the broiler-chicken market as alleged in the In re Broiler Chicken Antitrust Litigation, (ii) its conduct constituted a violation of federal antitrust laws, (iii) PPC’s revenues during the class period were the result of illegal conduct and (iv) that PPC lacked effective internal control over financial reporting. The complaint also states that PPC’s industry was anticompetitive. On April 4, 2017, the Court appointed another stockholder, George James Fuller, as lead plaintiff. On May 11, 2017, the plaintiff filed an amended complaint, which extended the end date of the putative class period to November 17, 2017. PPC and the other defendants moved to dismiss on June 12, 2017, and the plaintiff filed its opposition on July 12, 2017. PPC and the other defendants filed their reply on August 1, 2017. On March 14, 2018, the Court dismissed the plaintiff’s complaint without prejudice and issued final judgment in favor of PPC and the other defendants. On April 11, 2018, the plaintiff moved for reconsideration of the Court’s decision and for permission to file a Second Amended Complaint. PPC and the other defendants filed a response to the plaintiff’s motion on April 25, 2018. The plaintiff's motion for reconsideration is currently pending.

On January 27, 2017, a purported class action on behalf of broiler chicken farmers was brought against PPC and four other producers in the Eastern District of Oklahoma, alleging, among other things, a conspiracy to reduce competition for grower services and depress the price paid to growers. The plaintiffs allege violations of the Sherman Act and the Packers and Stockyards Act and seek, among other relief, treble damages. The complaint was consolidated with a subsequently filed consolidated amended class action complaint styled as In re Broiler Chicken Grower Litigation, Case No. CIV-17-033-RJS (the “Grower Litigation”). The defendants (including PPC) jointly moved to dismiss the consolidated amended complaint on September 9, 2017. The Court initially held oral argument on January 19, 2018, during which it considered and granted only motions from certain other defendants. challenging jurisdiction. Oral argument on the remaining pending motions in the Oklahoma court occurred on April 20, 2018. Rulings on the motion are pending. Following the Oklahoma court’s dismissal of certain defendants in January 2018, the plaintiffs filed a separate complaint in the U.S. District Court for the District of North Carolina, consisting of the same allegations but strictly against those defendants previously dismissed by the Oklahoma court (the “North Carolina Action”). The plaintiffs sought transfer and consolidation of the North Carolina Action with the Grower Litigation in Oklahoma from the Judicial Panel on Multi-District Litigation (“JPML”). The JPML has scheduled oral argument on the motion for May 31, 2018. In addition, on March 12, 2018, the Northern District of Texas, Fort Worth Division (“Bankruptcy Court”) enjoined the plaintiffs from litigating the Grower Litigation complaint as pled against the Company because allegations in the consolidated complaint violate the confirmation order relating to the Company’s bankruptcy proceedings in 2008 and 2009. Specifically, the 2009 bankruptcy confirmation order bars any claims against the Company based on conduct occurring before December 28, 2009. On March 13, 2018, Pilgrim’s notified the trial court of the Bankruptcy Court’s injunction. To date, the plaintiffs have not amended the consolidated complaint to comply with the Bankruptcy Court’s injunction order or the confirmation order.

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On March 9, 2017, a stockholder derivative action styled as DiSalvio v. Lovette, et al., No. 2017 cv. 30207, was brought against all of PPC’s directors and its Chief Financial Officer, Fabio Sandri, in the District Court for the County of Weld in Colorado. The complaint alleges, among other things, that the named defendants breached their fiduciary duties by failing to prevent PPC and its officers from engaging in an antitrust conspiracy as alleged in the In re Broiler Chicken Antitrust Litigation, and issuing false and misleading statements as alleged in the Hogan class action litigation. On April 17, 2017, a related stockholder derivative action styled Brima v. Lovette, et al., No. 2017 cv. 30308, was brought against all of PPC’s directors and its Chief Financial Officer in the District Court for the County of Weld in Colorado. The Brima complaint contains largely the same allegations as the DiSalvio complaint. On May 4, 2017, the plaintiffs in both the DiSalvio and Brima actions moved to (i) consolidate the two stockholder derivative cases, (ii) stay the consolidated action until the resolution of the motion to dismiss in the Hogan putative securities class action, and (iii) appoint co-lead counsel. The Court granted the motion on May 8, 2017, staying the proceedings pending resolution of the motion to dismiss in the Hogan action.

In January 2018, a stockholder derivative action entitled Raul v. Nogueira de Souza, et al., was filed in the U.S. District Court for the District of Colorado against the Company, as nominal defendant, as well as the Company’s directors, its Chief Financial Officer, and majority shareholder, JBS S.A. The complaint alleges, among other things, that (i) defendants permitted the Company to omit material information from its proxy statements filed in 2014 through 2017 related to the conduct of Wesley Mendonça Batista and Joesley Mendonça Batista, (ii) the individual defendants and JBS breached their fiduciary duties by failing to prevent the Company and its officers from engaging in an antitrust conspiracy as alleged in the Broiler Litigation and (iii) issuing false and misleading statements as alleged in the Hogan class action litigation. The defendants are currently in discussions with counsel for the Raul plaintiffs regarding the possibility of consolidating the Raul action with the consolidated state court derivative action, which is currently stayed, or in the alternative, determining a motion to dismiss briefing schedule. On May 17, 2018, the plaintiffs filed an unopposed motion to stay proceedings pending a final resolution of the Hogan class action litigation. To date, the Court has not ruled on this motion to stay proceedings. The court-ordered deadline for the defendants to file an answer or otherwise respond to the complaint is July 30, 2018.

On January 25, 2018, a stockholder derivative action styled as Sciabacucchi v. JBS S.A., et al., was brought against all of PPC’s directors, JBS S.A., JBS USA Holding Lux S.à r.l. (“JBS Holding Lux”) and several members of the Batista family, in the Court of Chancery of the State of Delaware. The complaint alleges, among other things, that the named defendants breached their fiduciary duties arising out of the Company’s acquisition of Moy Park. On March 15, 2018, the members of the Batista family were dismissed from the action without prejudice by stipulation. On March 20, 2018, nominal defendant PPC filed its answer. On March 20, 2018, the remaining defendants, including PPC’s directors, JBS S.A., and JBS Holding Lux moved to dismiss the complaint. On April 19, 2018, director defendants Bell, Macaluso, and Cooper filed their opening brief in support of their motion to dismiss. On April 19, 2018, defendants JBS S.A., JBS Holding Lux, and director defendants Lovette, Nogueira de Souza, Tomazoni, Farahat, Molina, and de Vasconcellos, Jr. filed their opening brief in support of their motion to dismiss.

The Company believes it has strong defenses in each of the above litigations and intends to contest them vigorously. The Company cannot predict the outcome of these actions nor when they will be resolved. If the plaintiffs were to prevail in any of these litigations, the Company could be liable for damages, which could be material and could adversely affect its financial condition or results of operations.

J&F Investigation

On May 3, 2017, certain officers of J&F Investimentos S.A. (“J&F,” and the companies controlled by J&F, the “J&F Group”), a company organized in Brazil and an indirect controlling stockholder of the Company, including a former senior executive and former board members of the Company, entered into plea bargain agreements (collectively, the “Plea Bargain Agreements”) with the Brazilian Federal Prosecutor’s Office (Ministério Público Federal) (the “MPF”), in connection with certain illicit conduct involving improper payments made to Brazilian politicians, government officials and other individuals in Brazil committed by or on behalf of J&F and certain J&F Group companies. The details of such illicit conduct are set forth in separate annexes to the Plea Bargain Agreements, and include admissions of improper payments to politicians and political parties in Brazil during a ten-year period in exchange for receiving, or attempting to receive, favorable treatment for certain J&F Group companies in Brazil.

Pursuant to the terms of the Plea Bargain Agreements, the MPF agreed to grant immunity to the individuals in exchange for such individuals agreeing, among other considerations, to: (1) pay fines totaling 225.0 million Brazilian reais; and (2) cooperate with the MPF, including providing supporting evidence of the illicit conduct identified in the annexes to the Plea Bargain Agreements.

On June 5, 2017, J&F, for itself and in its role as the controlling shareholder of the J&F Group, entered into a leniency agreement (the “Leniency Agreement”) with the MPF, whereby J&F assumed responsibility for the conduct that was described in the annexes to the Plea Bargain Agreements. In connection with the Leniency Agreement, J&F has agreed to pay a fine of 10.3 billion Brazilian reais, adjusted for inflation, over a 25-year period. On November 14, 2017, J&F made the initial payment

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of 50.0 million Brazilian reais on the total fine, which payment was accepted by the MPF. In exchange, the MPF agreed not to initiate or propose any criminal, civil or administrative actions against J&F, the J&F Group and the officers of J&F that ratify or adhere to the Leniency Agreement with respect to such conduct.

In August and September 2017, the Fifth Chamber of Coordination and Reviews of the MPF and the 10th Federal Court of the Federal District in Brasília, respectively, ratified the Leniency Agreement. Revocation or non-compliance with certain provisions of the (i) Plea Bargain Agreements by the individuals party thereto and (ii) the Leniency Agreement by J&F, may result in the applicable Plea Bargain Agreement or the Leniency Agreement, as the case may be, being terminated.

In September 2017 and February 2018, the MPF requested that the Supreme Court of Brazil (Supremo Tribunal Federal or “STF”) terminate the Plea Bargain Agreements of (i) Joesley Mendonça Batista and a former director of J&F and (ii) Wesley Mendonça Batista and a former executive of J&F, respectively, in both cases, on grounds that they failed to disclose certain conduct to the authorities, as required by their Plea Bargain Agreements, including certain alleged dealings with a prosecutor (the “Prosecutor”) in connection with the preparation of the Plea Bargain Agreements and the Leniency Agreement. The MPF’s termination requests as to all four individuals are currently pending before the STF.

On June 25, 2018, the MPF announced criminal corruption charges against Joesley Mendonça Batista and the former executive of J&F with respect to the alleged dealings with the Prosecutor described above.

The termination of the Plea Bargain Agreements or the Leniency Agreement may cause the termination of certain stabilization agreements entered into by JBS and certain of its subsidiaries, which would permit the lenders of the debt that is subject to the terms of such stabilization agreements to accelerate such debt. A default by JBS or acceleration of JBS' indebtedness could have a material adverse effect on JBS and its subsidiaries (including the Company).

J&F is conducting an internal investigation in accordance with the terms of the Leniency Agreement, and has engaged outside advisors to assist in conducting this investigation, which is ongoing, and with which we are fully cooperating. JBS and the Company have engaged outside U.S. legal counsel to: (i) conduct an independent investigation in connection with matters disclosed in the Leniency Agreement and the Plea Bargain Agreements; and (ii) communicate with relevant U.S. authorities, including the Department of Justice, regarding the factual findings of that investigation. Additionally, JBS and the Company have taken, and are continuing to take, measures to enhance their compliance programs, including to prevent and detect bribery and corruption. We cannot predict when the investigations mentioned above will be completed or the results of such investigations, including whether any litigation will be brought against us or the outcome or impact of any resulting litigation. We will monitor the results of the investigations. Any proceedings that require us to make substantial payments, affect our reputation or otherwise interfere with our business operations could have a material adverse effect on our business, financial condition and operating results.

Separately, Joesley Mendonça Batista and Wesley Mendonça Batista are both under investigation by the Securities and Exchange Commission of Brazil (Comissão de Valores Mobiliários or “CVM”) for possible violations of insider trading law involving shares of JBS and foreign exchange futures contracts prior to the announcement of the Plea Bargain Agreements. Joesley Mendonça Batista and Wesley Mendonça Batista are also facing criminal prosecution by the MPF based on similar allegations. In addition, on April 26, 2018, the CVM opened an investigation into a potential breach by Joesley Mendonça Batista and Wesley Mendonça Batista of certain Brazilian corporate law, which, among other things, prohibits stockholders from voting in certain corporate matters in which they have a conflict of interest.

Any further developments in these matters involving Joesley Mendonça Batista and/or Wesley Mendonça Batista may materially adversely affect the public perception or reputation of JBS and its subsidiaries (including the Company) and could have a material adverse effect on JBS and its subsidiaries (including the Company).

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20.	RELATED PARTY TRANSACTIONS

Pilgrim’s has been and, in some cases, continues to be a party to certain transactions with affiliated companies.



	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	July 1, 2018		June 25, 2017		July 1, 2018		June 25, 2017
	(In thousands)
Sales to related parties:
JBS USA Food Company^(a)	$	4,479	$	4,833	$	6,008	$	9,396
JBS Five Rivers Cattle Feeding, LLC	—		9,394		7,096		16,516
JBS Chile Ltda	—		—		60		—
J&F Investimentos Ltd.	—		—		—		104
JBS Global (U.K.) Ltd.	—		—		—		19
Total sales to related parties	$	4,479	$	14,227	$	13,164	$	26,035

Cost of goods purchased from related parties:
JBS USA Food Company^(a)	$	34,003	$	24,994	$	61,827	$	52,283
Seara Meats B.V.	13,437		3,014		17,677		6,375
JBS Aves Ltda	380		—		1,083		—
JBS Toledo NV	125		45		290		45
JBS Global (UK) Ltd.	21		—		21		—
Total cost of goods purchased from related parties	$	47,966	$	28,053	$	80,898	$	58,703

Expenditures paid by related parties:
JBS USA Food Company^(b)	$	28,763	$	7,349	$	39,262	$	18,298
JBS S.A.	—		1,918		—		3,777
Seara Alimentos	—		64		—		64
JBS Chile Ltda	3		—		3		—
Total expenditures paid by related parties	$	28,766	$	9,331	$	39,265	$	22,139

Expenditures paid on behalf of related parties:
JBS USA Food Company^(b)	$	2,625	$	1,623	$	4,913	$	2,488
Seara Meats B.V.	—		4		—		4
JBS S.A.	164		5		164		5
Seara International Ltd.	11		80		31		80
Total expenditures paid on behalf of related parties	$	2,800	$	1,712	$	5,108	$	2,577

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Thirteen Weeks Ended Thirty-Nine Weeks Ended
September 24, 2017 September 25, 2016 September 24, 2017 September 25, 2016
(In thousands)
JBS S.A.:
JBS S.A. Promissory Note^(a)
$ 753,704
$ —
$ 753,704
$ —

Expenditures paid by JBS S.A. on
     behalf of Pilgrim's Pride Corporation^(b)
—
5,887
3,824
5,887

Expenditures paid by Pilgrim's Pride Corporation on
     behalf of JBS S.A.^(b)
—
—
5
19

JBS USA Food Company Holdings:
Letter of credit fees^(c)
—
—
—
202

JBS USA Food Company:
Purchases from JBS USA Food Company^(d)
31,161
28,799
83,444
75,687

Expenditures paid by JBS USA Food Company on behalf
     of Pilgrim’s Pride Corporation^(e)
10,856
17,242
29,127
33,568

Sales to JBS USA Food Company^(d)
4,221
4,819
13,618
12,235

Expenditures paid by Pilgrim’s Pride Corporation on
     behalf of JBS USA Food Company^(e)
1,516
1,142
3,976
9,858

JBS Chile Ltda.:
  Sales to JBS Chile Ltda. —
126
—
438

JBS Global (UK) Ltd.:
  Sales to JBS Global (UK) Ltd. —
—
19,217
122

JBS Five Rivers:
Sales to JBS Five Rivers 7,271
—
23,787
—

J&F Investimentos Ltd..:
Sales to J&F Investimentos Ltd.^(f)
—
—
104
—

JBS Seara International Ltd.:
Sales to JBS Seara International Ltd.^(g)
2
—
2
—

Expenditures paid by Pilgrim’s Pride Corporation on
     behalf of JBS Seara International Ltd.^(g)
—
—
—
43

Toledo International NV:

Purchases from Toledo International NV^(h)
149
67
190
67

       Sales to Toledo International NV^(h)
—
—
—
148

JBS Seara Alimentos:
Purchases from JBS Seara Alimentos⁽ⁱ⁾
—
—
64
—

JBS Seara Meats B.V.:
Purchases from JBS Seara Meats B.V.^(j)
3,343
5,702
9,719
16,730

Expenditures paid by Pilgrim’s Pride Corporation on
     behalf of JBS Seara Meats B.V.^(j)
—
—
4
—



	July 1, 2018		December 31, 2017
	(In thousands)
Accounts receivable from related parties:
JBS USA Food Company^(a)	$	1,130	$	2,826
JBS Chile Ltda.	37		108
Seara International Ltd.	12		15
Seara Meats B.V.	—		2
Total accounts receivable from related parties	$	1,179	$	2,951

Accounts payable to related parties:
JBS USA Food Company^(a)	$	23,379	$	440
Seara Meats B.V.	3,483		2,410
JBS Toledo NV	59		39
JBS Global (UK) Ltd.	20		—
Total accounts payable to related parties	$	26,941	$	2,889

(a)

~~On September 8, 2017, Onix Investments UK Ltd., a wholly owned subsidiary of the~~The Company executed the JBS S.A. Promissory Note, which had a maturity date of September 6, 2018. Interest on the outstanding principal balance of the JBS S.A. Promissory Note accrued at the rate per annum equal to (i) from and after November 8, 2017 and prior to January 7, 2018, 4.00%, (ii) from and after January 7, 2018 and prior to March 8, 2018, 6.00% and (iii) from and after March 8, 2018, 8.00%. The JBS S.A. Promissory Note was repaid in full on October 2, 2017.


~~(b)~~	~~There was no outstanding receivable from JBS S.A. at September 24, 2017. The outstanding receivable from JBS S.A. at December 25, 2016 was less than $0.1 million, respectively.~~

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~~(c)~~

JBS USA Food Company Holdings (“JBS USA Holdings”) arranged for letters of credit to be issued on its account in the aggregate amount of $56.5 million to an insurance company on behalf of the Company in order to allow that insurance company to return cash it held as collateral against potential workers’ compensation, auto liability and general liability claims. In return for providing this letter of credit, the Company has agreed to reimburse JBS USA Holdings for the letter of credit fees the Company would otherwise incur under its U.S. Credit Facility. The letter of credit arrangements for $40.0 million and $16.5 million were terminated on March 7, 2016 and April 1, 2016, respectively. For the thirty-nine weeks ended September 25, 2016, the Company paid JBS USA Holdings $0.2 million for letter of credit fees.

~~(d)~~

We routinely ~~execute~~executes transactions to both purchase products from JBS USA Food Company (“JBS USA”) and sell products to them. As of September 24, 2017 and December 25, 2016, the outstanding payable to JBS USA was $5.6 million and $1.4 million, respectively. As of September 24, 2017 and December 25, 2016, the outstanding receivable from JBS USA was $0.9 million and $3.8 million, respectively. As of September 24, 2017,July 1, 2018, approximately ~~$0.7~~$0.6 million of goods purchased from JBS USA were in transit and not reflected on our Condensed Consolidated Balance Sheet.

~~(e)~~(b)

The Company has an agreement with JBS USA to allocate costs associated with JBS USA’s procurement of SAP licenses and maintenance services for its combined companies. Under this agreement, the fees associated with procuring SAP licenses and maintenance services are allocated between the Company and JBS USA in proportion to the percentage of licenses used by each company. The agreement expires on the date of expiration, or earlier termination, of the underlying SAP license agreement. The Company also has an agreement with JBS USA to allocate the costs of supporting the business operations by one consolidated corporate team, which have historically been supported by their respective corporate teams. Expenditures paid by JBS USA on behalf of the Company will be reimbursed by the Company and expenditures paid by the Company on behalf of JBS USA will be reimbursed by JBS USA. This agreement expires on December 31, 2019.


~~(f)~~	The outstanding receivable from J&F Investimentos Ltd. at September 24, 2017 was less than $0.1 million. There was no outstanding receivable or payable from J&F Investimentos Ltd. at December 25, 2016.


~~(g)~~	The outstanding receivable from JBS Seara International Ltd. at September 24, 2017 and December 25, 2016 was less than $0.1 million, respectively. There was no outstanding payable from JBS Seara International Ltd. at September 24, 2017 and December 25, 2016.


~~(h)~~	There was no outstanding receivable from Toledo International NV at September 24, 2017 and December 25, 2016. The outstanding payable from Toledo International NV at September 24, 2017 and December 25, 2016 was less than $0.1 million, respectively.


~~(i)~~	~~There was no outstanding receivable or payable from JBS Seara Alimentos at September 24, 2017 and December 25, 2016.~~


~~(j)~~	There was no outstanding receivable from JBS Seara Meats B.V. at September 24, 2017 and December 25, 2016. The outstanding payable from JBS Seara Meats B.V. at September 24, 2017 and December 25, 2016 was $1.3 million and $3.0 million, respectively.

The Company entered into a tax sharing agreement during 2014 with JBS USA Holdings effective for tax years starting in 2010. The net tax receivable of $5.0 million for tax year 2016 was accrued in 2016 and paid in February 2017. The net tax receivable of $3.7 million for tax year 2015 was accrued in 2015 and paid in January 2016.


~~17.~~	~~COMMITMENTS AND CONTINGENCIES~~

We are a party to many routine contracts in which we provide general indemnities in the normal course of business to third parties for various risks. Among other considerations, we have not recorded a liability for any of these indemnities as based upon the likelihood of payment, the fair value of such indemnities would not have a material impact on our financial condition, results of operations and cash flows.21. SEGMENT REPORTING

~~Tax Claims and Proceedings~~

In 2009, the IRS asserted claims against the Company totaling $74.7 million. Pilgrim's entered into two Stipulations of Settled Issues agreements with the IRS (the “Stipulations”) on December 12, 2012 that accounted for approximately $29.3 million of the claims and should result in no additional tax due. The Company is currently working with the IRS to finalize the complete tax calculations associated with the Stipulations.

~~Other Claims and Proceedings~~

~~Between September 2, 2016 and October 13, 2016, a series of purported federal class action lawsuits styled as~~ ~~In re Broiler Chicken Antitrust Litigation~~ were brought against Pilgrim's and 13 other producers by and on behalf of direct and indirect purchasers of broiler chickens alleging violations of federal and state antitrust and unfair competition laws. The complaints, which were filed with the U.S. District Court for the Northern District of Illinois, seek, among other relief, treble damages for an alleged conspiracy among defendants to reduce output and increase prices of broiler chickens from the period of January 2008 to the present. The plaintiffs have filed three consolidated amended complaints: one on behalf of direct purchasers and two on behalf of distinct groups of indirect purchasers. The defendants (including the Company) moved to dismiss all complaints on January 27, 2017, which are fully briefed and a ruling by the court is pending.

On October 10, 2016, Patrick Hogan, acting on behalf of himself and a putative class of persons who purchased shares of Pilgrim’s common stock between February 21, 2014 and October 4, 2016, filed a class action complaint in the U.S. District Court for the District of Colorado against the Company and its named executive officers. The complaint alleges, among other

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things, that the Company’s SEC filings contained statements that were rendered materially false and misleading by its failure to disclose that (i) Pilgrim's colluded with several of its industry peers to fix prices in the broiler chicken market as alleged in the ~~In re Broiler Chicken Antitrust Litigation~~, (ii) the Company's conduct constituted a violation of federal antitrust laws, (iii) Pilgrim's revenues during the class period were the result of illegal conduct and (iv) the Company lacked effective internal control over financial reporting, as well as stating that Pilgrim's industry was anticompetitive. On April 4, 2017, the court appointed another stockholder, George James Fuller, as lead plaintiff. On April 26, 2017, the court set a briefing schedule for the filing of an amended complaint and the defendants' motion to dismiss. On May 11, 2017, the plaintiff filed an amended complaint, which extended the end date of the putative class period to November 17, 2016. The defendants moved to dismiss on June 12, 2017, and the plaintiff filed its Opposition on July 12, 2017. The defendants replied on August 1, 2017. The Court’s decision on the motion is currently pending.

On January 27, 2017, a purported class action on behalf of broiler chicken farmers was brought against Pilgrim's and four other producers in the Eastern District of Oklahoma, alleging, among other things, a conspiracy to reduce competition for grower services and depress the price paid to growers. Plaintiffs allege violations of the Sherman Act and the Packers and Stockyards Act and seek, among other relief, treble damages. The complaint was consolidated with a subsequently filed class action complaint styled as ~~In re Broiler Chicken Antitrust Litigation, Case No. CIV-17-033-RJS~~. The defendants (including PPC) moved to dismiss the consolidated amended complaint on September 9, 2017. Briefing on the motions will be complete on November 22, 2017, and a hearing on the motions has been scheduled for January 19, 2018. In addition, on August 29, 2017, PPC filed a Motion to Enforce Confirmation Order Against Growers in the U.S. Bankruptcy Court in the Eastern District of Texas (~~In re Pilgrim’s Pride Corporation~~, Case No. 08-45664 (DML) seeking an order enjoining the Grower Plaintiffs from pursuing the class action against PPC. A hearing on this motion was held October 12, 2017. The Court’s decision on the motion is currently pending.

~~On March 9, 2017, a stockholder derivative action styled as~~ ~~DiSalvio v. Lovette, et al.~~, No. 2017 cv. 30207, was brought against all of the Company's directors and its Chief Financial Officer, Fabio Sandri, in the District Court for the County of Weld in Colorado. The complaint alleges, among other things, that the named defendants breached their fiduciary duties by failing to prevent the Company and its officers from engaging in an antitrust conspiracy as alleged in the ~~In re Broiler Chicken Antitrust Litigation, and issuing false and misleading statements as alleged in the~~ ~~Hogan~~ ~~class action litigation. On April 17, 2017, a related stockholder derivative action styled~~ ~~Brima v. Lovette, et al., No. 2017 cv. 30308, was brought against all of the Company's directors and its Chief Financial Officer in the District Court for the County of Weld in Colorado. The~~ ~~Brima~~ ~~complaint contains largely the same allegations as the~~ ~~DiSalvio~~ ~~complaint. On May 4, 2017, the plaintiffs in both the~~ ~~DiSalvio~~ ~~and~~ ~~Brima~~ ~~actions moved to (i) consolidate the two stockholder derivative cases, (ii) stay the consolidated action until the resolution of the motion to dismiss in the~~ ~~Hogan~~ ~~putative securities class action, and (iii) appoint co-lead counsel. The court granted the motion on May 8, 2017, staying the proceedings pending resolution of the motion to dismiss in the~~ ~~Hogan~~ ~~action.~~

~~J&F Investigation~~

On May 3, 2017, certain officers of J&F Investimentos S.A. (“J&F,” and the companies controlled by J&F, the “J&F Group”) (including two former directors of the Company), a company organized in Brazil and an indirect controlling stockholder of the Company, entered into plea bargain agreements (the “Plea Bargain Agreements”) with the Brazilian Federal Prosecutor’s Office (Ministério Público Federal) (“MPF”) in connection with certain illicit conduct involving improper payments made to Brazilian politicians, government officials and other individuals in Brazil committed by or on behalf of J&F and certain J&F Group companies. The details of such illicit conduct are set forth in separate annexes to the Plea Bargain Agreements, and include admissions of improper payments to politicians and political parties in Brazil over the last 10 years in exchange for receiving, or attempting to receive, favorable treatment for certain J&F Group companies in Brazil.

Pursuant to the terms of the Plea Bargain Agreements, the MPF agreed to grant immunity to the officers in exchange for such officers agreeing, among other considerations, to: (1) pay fines totaling $225.0 million; (2) cooperate with the MPF, including providing supporting evidence of the illicit conduct identified in the annexes to the Plea Bargain Agreements; and (3) present any previously undisclosed illicit conduct within 120 days following the execution of the Plea Bargain Agreements as long as the description of such conduct had not been omitted in bad faith. In addition, the Plea Bargain Agreements provide that the MPF may terminate any Plea Bargain Agreement and request that the Supreme Court of Brazil (Supremo Tribunal Federal) (“STF”) ratify such termination if any illicit conduct is identified that was not included in the annexes to the Plea Bargain Agreements.

~~Table of Contents~~

the Plea Bargain Agreements. In connection with the Leniency Agreement, J&F has agreed to pay a fine of R$10.3 billion, adjusted for inflation, over a 25-year period. In exchange, the MPF agreed not to initiate or propose any criminal, civil or administrative actions against J&F, the companies of the J&F Group or those officers of J&F with respect to such conduct. Pursuant to the terms of the Leniency Agreement, if the Plea Bargain Agreement is annulled by the STF, then the Leniency Agreement may also be terminated by the Fifth Chamber of Coordination and Reviews of the MPF or, solely with respect to the criminal related provisions of the Leniency Agreement, by the 10th Federal Court of the Federal District in Brasília, the authorities responsible for the ratification of the Leniency Agreement.

On August 24, 2017, the Fifth Chamber ratified the Leniency Agreement. On September 8, 2017, the 10th Federal Court ratified the Leniency Agreement. In compliance with the terms of the Leniency Agreement, J&F is conducting an internal investigation involving improper payments made in Brazil by or on behalf of J&F, certain companies of the J&F Group and certain officers of J&F (including two former directors of the Company). J&F has engaged outside advisors to assist it in conducting the investigation, including an assessment as to whether any of the misconduct disclosed to Brazilian authorities had any connection to the Company or Moy Park, or resulted in a violation of U.S. law. The internal investigation is ongoing and the Company is fully cooperating with J&F in connection with the investigation. We cannot predict when the investigation will be completed or the results of the investigation, including the outcome or impact of any government investigations or any resulting litigation.

On September 8, 2017, at the request of the MPF, the STF issued an order temporarily revoking the immunity from prosecution previously granted to Joesley Mendonça Batista and another executive of J&F in connection with the Plea Bargain Agreements. The MPF requested the revocation of their immunity following public disclosure of certain voice recordings involving them in which they discussed certain alleged illicit activities the MPF claims were not covered by the annexes to their respective Plea Bargain Agreements. On September 10, 2017, Joesley Mendonça Batista voluntarily turned himself into police in Brazil. On September 11, 2017, the 10th Federal Court suspended its ratification of the criminal provisions of the Leniency Agreement as a result of the STF’s temporary revocation of Joesley Mendonça Batista immunity under his Plea Bargain Agreement. On October 11, 2017, Judge Vallisney de Souza of the 10th Federal Court revalidated the criminal provisions of the Leniency Agreement.

We cannot predict whether the Plea Bargain Agreements will be upheld or terminated by the STF, and, if terminated, whether the Leniency Agreement will be also terminated by either the Fifth Chamber and/or the 10th Federal Court, and to what extent. If the Leniency Agreement is terminated, in whole or in part, as a result of any Plea Bargain Agreement being terminated, this may materially adversely affect the public perception or reputation of the J&F Group, including the Company, and could have a material adverse effect on the J&F Group’s business, financial condition, results of operations and prospects. Furthermore, the termination of the Leniency Agreement may cause the termination of certain stabilization agreements entered into by JBS S.A. and certain of its subsidiaries, which would permit the lenders of the debt that is the subject to the terms of the stabilization agreements to accelerate their debt, which could have a material adverse effect on JBS S.A. and its subsidiaries (including the Company).

~~18. SEGMENT REPORTING~~

~~We operate~~operates in three reportable segments: U.S., U.K. and Europe, and Mexico. ~~We measure~~The Company measures segment profit as operating income. Corporate expenses are allocated to Mexico based upon various apportionment methods for specific expenditures incurred related thereto with the remaining amounts allocated to the U.S.

On September 8, 2017, wethe Company acquired Moy Park, one of the ~~top-ten~~top food companies in the U.K., Northern Ireland's largest private sector business and one of Europe's leading poultry producers, from JBS S.A. in a common-control transaction. Moy Park's results from operations subsequent to the common-control date of September 30, 2015 comprise the U.K. and Europe segment.

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On January 6, 2017, the Company acquired GNP, a vertically integrated poultry business with locations in Minnesota and Wisconsin. GNP's results from operations subsequent to the acquisition date are included in the U.S. segment.

Information on segments and a reconciliation to income before income taxes are as follows:


Net sales	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
									Thirteen Weeks Ended				Twenty-Six Weeks Ended
	September 24, 2017		September 25, 2016		September 24, 2017		September 25, 2016		July 1, 2018		June 25, 2017		July 1, 2018		June 25, 2017
	(In thousands)								(In thousands)
U.S.	$	1,938,542	$	1,724,625	$	5,557,089	$	5,072,351	$	1,899,435	$	1,882,142	$	3,740,540	$	3,618,547
U.K. and Europe	514,325		463,560		1,473,854		1,484,708		563,102		500,681		1,107,402		959,530
Mexico	341,018		307,096		994,568		950,622		374,176		369,463		735,449		653,549
Total net sales	$	2,793,885	$	2,495,281	$	8,025,511	$	7,507,681	$	2,836,713	$	2,752,286	$	5,583,391	$	5,231,626


Operating income	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
													Thirteen Weeks Ended						Twenty-Six Weeks Ended
	September 24, 2017			September 25, 2016			September 24, 2017			September 25, 2016			July 1, 2018			June 25, 2017			July 1, 2018			June 25, 2017
	(In thousands)												(In thousands)
U.S.	$	307,962		$	141,195		$	719,121		$	480,280		$	99,469		$	277,602		$	226,755		$	411,159
U.K. and Europe	18,569			13,027			51,874			55,841			23,662			18,932			45,075			33,305
Mexico	45,692			22,603			146,241			108,856			61,997			81,778			114,867			100,549
Elimination	23			23			69			71			(16		)	23			8			46
Total operating income	372,246			176,848			917,305			645,048			185,112			378,335			386,705			545,059
Interest expense, net of capitalized interest	24,636			19,119			66,315			58,480			40,267			22,567			90,567			41,679
Interest income	(2,128		)	(253		)	(3,600		)	(2,000		)	(4,834		)	(1,104		)	(6,424		)	(1,472		)
Foreign currency transaction gain	(888		)	4,569			(2,500		)	(1,769		)
Foreign currency transaction losses (gains)													5,630			(2,303		)	3,909			(1,612		)
Miscellaneous, net	(1,083		)	(2,371		)	(5,198		)	(7,327		)	(817		)	(1,272		)	(2,434		)	(4,115		)
Income before income taxes	$	351,709		$	155,784		$	862,288		$	597,664		$	144,866		$	360,447		$	301,087		$	510,579

In addition to the net sales reported above, the U.S. segment also generated intersegment net sales of ~~$21.0~~$45.6 million and ~~$22.0~~$25.3 million in the thirteen weeks ended ~~September 24,~~July 1, 2018 and June 25, 2017, ~~and September 25, 2016,~~ respectively, from transactions with the Mexico segment and intersegment net sales of ~~$66.7~~$72.1 million and ~~$70.6~~$45.8 million in the ~~thirty-nine~~twenty-six weeks ended ~~September 24,~~July 1, 2018 and June 25, 2017, ~~and September 25, 2016,~~ respectively, from transactions with the Mexico segment. These intersegment net sales were transacted at market prices.

Goodwill September 24, 2017 December 25, 2016
(In thousands)
U.S. $ 41,936
$ —
U.K. and Europe 828,038
761,613
Mexico 125,608
125,608
Total goodwill $ 995,582
$ 887,221
Information on segments for goodwill and total assets are as follows:


Assets	September 24, 2017			December 25, 2016
								July 1, 2018		December 31, 2017
	(In thousands)							(In thousands)
U.S.	$	3,515,513		$	2,472,931			$	41,936	$	41,936
U.K. and Europe	2,204,885			2,013,725				815,017		834,346
Mexico	947,112			840,088				125,607		125,607
Eliminations	(604,225		)	(304,802		)	(a)
Total assets	$	6,063,285		$	5,021,942
Total goodwill								$	982,560	$	1,001,889



	July 1, 2018			December 31, 2017
	(In thousands)
U.S.	$	4,850,511		$	4,444,918
U.K. and Europe	2,049,592			2,226,895
Mexico	963,869			934,511
Eliminations^(a)	(1,561,403		)	(1,357,672		)
Total assets	$	6,302,569		$	6,248,652

(a)

Eliminations for the period ended ~~September 24, 2017~~July 1, 2018 include the elimination of the U.S. segment's $191.7 million investment in the Mexico segment, the elimination of ~~$111.2~~$111.0 million in intersegment receivables and payables between the U.S. and Mexico segments and the elimination of the U.S. segment's ~~$301.3 million~~$1.3 billion investment in the U.K. and Europe segment. Eliminations for the period ended December ~~25, 2016~~31, 2017 include the elimination of the U.S. segment's ~~$191.8~~$191.7 million investment in the Mexico segment and the elimination of ~~$113.0~~$111.1 million in intersegment receivables and payables between the U.S. and Mexico ~~segments.~~segments and the elimination of the U.S. segment's $1.1 billion investment in the U.K. and Europe segment.

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~~19.~~22. SUBSEQUENT EVENTS

On ~~September 29, 2017,~~July 20, 2018, the Company, ~~completed an offering~~and certain of ~~$250.0~~the Company’s subsidiaries entered into a Fourth Amended and Restated Credit Agreement (the “New Credit Agreement”) with CoBank, ACB, as administrative agent and collateral agent, and the other lenders party thereto. The New Credit Agreement provides for a $750.0 million ~~Additional Senior Notes due 2025~~revolving credit commitment and a ~~sale of $600.0~~$500.0 million ~~aggregate principal amount of the Senior Notes due 2027.~~term loan commitment. The Company used the ~~net~~ proceeds from the ~~sale~~term loan commitment under the New Credit Agreement, together with cash on hand, to repay the outstanding loans under the Company’s previous credit agreement with Coöperatieve Rabobank U.A., New York Branch, as administrative agent, and the other lenders and financial institutions party thereto.

Under the New Credit Agreement, the maturity date of the ~~Additional Senior Notes due 2025~~revolving loan commitment and the ~~Senior Notes due 2027~~term loans was extended from May 6, 2022 to ~~repay in full the JBS S.A. Promissory Note issued as part of the Moy Park acquisition. See “Note 11. Long-Term Debt and Other Borrowing Arrangements” for additional information.~~

~~On October 24, 2017,~~July 20, 2023. The New Credit Agreement includes an accordion feature that provides the Company, ~~announced that it will close~~at any time, to increase the ~~Luverne, Minnesota, poultry processing facility effective December 29, 2017.~~ aggregate revolving loan and term loan commitments by up to an additional $1.25 billion, subject to the satisfaction of certain conditions, including obtaining the lenders’ agreement to participate in the increase.

The ~~decision~~New Credit Agreement continues to ~~close~~contain customary financial and other various covenants for transactions of this type, including restrictions on the ~~facility will allow~~Company's ability to incur additional indebtedness, incur liens, pay dividends, make certain restricted payments, consummate certain asset sales, enter into certain transactions with the Company’s affiliates, or merge, consolidate and/or sell or dispose of all or substantially all of our assets. The New Credit Agreement requires the Company to ~~shift production~~comply with a minimum level of tangible net worth covenant. The New Credit Agreement also provides that the Company may not incur capital expenditures in excess of $500.0 million in any fiscal year. All obligations under the New Credit Agreement continue to be unconditionally guaranteed and ~~equipment to more efficient operations with~~secured in the ~~objective of enhancing synergies and better serving~~same manner as the ~~Company’s key customers.~~U.S. Credit Facility.


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Description of the Company

We are one of the largest chicken producers in the world, with operations in the United States (“U.S.”), United Kingdom (“U.K.”), Mexico, France, Puerto Rico and the ~~Netherlands, and 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 Ireland.~~Netherlands. As of ~~September 24, 2017,~~July 1, 2018, we had approximately ~~52,000~~51,600 employees and the capacity to process approximately ~~45.2~~45.3 million birds per work week for a total of approximately 12.8 billion pounds of live chicken annually. Approximately ~~5,100~~5,200 contract growers supply poultry for our operations. As of ~~September 24, 2017,~~July 1, 2018, JBS S.A., through its indirect wholly-owned subsidiaries (together, “JBS”), beneficially owned ~~78.6%~~78.5% of our outstanding common stock. See “Note 1. Description of Business and Basis of Presentation” of our Condensed Consolidated and Combined Financial Statements included in this quarterly report for additional information.

We operate on a 52/53-week fiscal year that ends on the Sunday falling on or before December 31. The reader should assume any reference we make to a particular year (for example, ~~2017)~~2018) in this quarterly report applies to our fiscal year and not the calendar year.

Executive Summary

We reported net income attributable to Pilgrim’s Pride Corporation of ~~$560.2~~$106.5 million, or ~~$2.25~~$0.43 per diluted common share, for the ~~thirty-nine~~thirteen weeks ended ~~September 24, 2017.~~July 1, 2018. These operating results included gross profit of ~~$1,209.8~~$274.2 million. During the ~~thirty-nine~~thirteen weeks ended ~~September 24, 2017,~~July 1, 2018, we generated ~~$618.5~~$303.3 million of cash from operations.

~~Market prices~~We reported net income attributable to Pilgrim’s Pride Corporation of $226.0 million, or $0.91 per diluted common share, for the twenty-six weeks ended July 1, 2018. These operating results included gross profit of $561.9 million. During the twenty-six weeks ended July 1, 2018, we generated $304.0 million of cash from operations.

Our U.S. and Mexico segments use corn and soybean meal as the main ingredients for feed ~~ingredients remain volatile. Consequently, there can be no assurance that~~production, while our U.K. and Europe segment uses wheat as the main ingredient for feed ~~ingredients prices will not increase materially and that such increases would not negatively impact our financial position, results of operations and cash flow.~~production. The following table compares the highest and lowest prices reached on nearby futures for one bushel of corn, ~~and~~ one ton of soybean meal and one metric ton of wheat during the current ~~year~~ and previous ~~two~~ years:


	Corn				Soybean Meal				Corn^(a)					Soybean Meal^(a)								Wheat^(a)
	Highest Price		Lowest Price		Highest Price		Lowest Price		Highest Price		Lowest Price			Highest Price				Lowest Price				Highest Price				Lowest Price
2017:
Third Quarter	$	4.15	$	3.46	$	346.20	$	296.50
									Highest Price				Lowest Price				Highest Price				Lowest Price				Highest Price				Lowest Price
2018:
Second Quarter	3.96		3.66		321.00		297.20		$	4.27	$	3.66			$	391.70			$	329.90			£	156.75			£	142.40
First Quarter	3.86		3.55		352.70		314.10		4.01		3.63			394.10				319.60				139.20				134.70
2016:
2017:
Fourth Quarter	3.98		3.58		320.70		269.00		3.68		3.47			346.30				315.50				143.65				136.25
Third Quarter	3.94		3.16		401.00		302.80		4.15		3.46			346.20				296.50				154.00				137.25
Second Quarter	4.38		3.52		418.30		266.80		3.96		3.66			321.00				297.20				150.00				140.00
First Quarter	3.73		3.52		275.30		257.20		3.86		3.55			352.70				314.10				149.15				139.35
2015:
Fourth Quarter	3.98		3.58		320.70		269.00
Third Quarter	4.34		3.48		374.80		302.40
Second Quarter	4.10		3.53		326.40		286.50
First Quarter	4.13		3.70		377.40		317.50


(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.

We purchase derivative financial instruments, specifically exchange-traded futures and options, in an attempt to mitigate price risk related to our anticipated consumption of commodity inputs such as corn, soybean meal, wheat, soybean oil and natural gas. We will sometimes ~~take a short position on~~purchase a derivative instrument to minimize the impact of a commodity’s price volatility on our operating results. We will also ~~occasionally~~ purchase derivative financial instruments in an attempt to mitigate currency exchange rate exposure related to the financial statements of our Mexico segment that are denominated in Mexican pesos and our U.K. and Europe segment that are denominated in British ~~pounds.~~ pounds and euros.

For our Mexico segment, we do not designate derivative financial instruments that we purchase to mitigate commodity purchase or currency exchange rate exposures as cash flow hedges; therefore, we recognize changes in the fair value of these derivative financial instruments immediately in earnings.

For our U.K. and Europe segment, we do designate certain derivative financial instruments that we have purchased to mitigate foreign currency transaction exposures as cash flow hedges; therefore, before the settlement date of the financial derivative

instruments, we recognize changes in the fair value of the effective portion of the cash flow hedge in accumulated other comprehensive income (loss) while we recognize changes in the fair value of the ineffective portion immediately in earnings. When the derivative financial instruments associated with the effective portion are settled, the amount in accumulated other comprehensive income (loss) is then reclassified to earnings. Gains or losses related to these derivative financial instruments are included in the line item Cost of sales in the Condensed Consolidated and Combined Statements of Income.

During the thirteen weeks ended ~~September 24,~~July 1, 2018 and June 25, 2017, ~~and September 25, 2016,~~ we recognized net ~~gains~~losses totaling ~~$6.9~~$24.0 million and net ~~losses~~gains totaling ~~$16.7~~$3.2 million, respectively, related to changes in the fair ~~values~~value of our derivative financial instruments. During the ~~thirty-nine~~twenty-six weeks ended ~~September 24,~~July 1, 2018 and June 25, 2017, ~~and September 25, 2016,~~ we recognized net ~~gains~~losses totaling ~~$7.3~~$17.6 million and net ~~losses~~gains totaling ~~$10.5~~$0.3 million, respectively, related to changes in the fair ~~values~~value of our derivative financial instruments.

Although changes in the market price paid for feed ingredients impact cash outlays at the time we purchase the ingredients, ~~such~~these changes do not immediately impact cost of sales. The cost of feed ingredients is recognized in cost of sales, on a first-in-first-out basis, at the same time that the sales of the chickens that consume the feed grains are recognized. Thus, there is a lag between the time cash is paid for feed ingredients and the time the cost of such feed ingredients is reported in cost of goods sold. For example, corn delivered to a feed mill and paid for one week might be used to manufacture feed the following week. However, the chickens that eat that feed might not be processed and sold for another 42 to 63 days, and only at that time will the costs of the feed consumed by the chicken become included in cost of goods sold.

Commodities such as corn, soybean meal and soybean oil are actively traded through various exchanges with future market prices quoted on a daily basis. These quoted market prices, although a good indicator of the ~~commodity’s~~commodity's base price, do not represent the final price for which we can purchase these commodities. There are several components in addition to the quoted market price, such as freight, storage and seller premiums, that are included in the final price that we pay for grain. Although changes in quoted market prices may be a good indicator of the commodity’s base price, the components mentioned above may have a significant impact on the total change in grain costs recognized from period to period.

Market prices for chicken products are currently at levels sufficient to offset the costs of feed ingredients. However, there can be no assurance that chicken prices will not decrease due to such factors as competition from other proteins and substitutions by consumers of non-protein foods because of uncertainty surrounding the general economy and unemployment.

Moy Park Acquisition

On September 8, 2017, we acquired 100% of the issued and outstanding shares of ~~Granite Holdings Sàrl and its subsidiaries (together, “Moy Park”)~~Moy Park from JBS ~~S.A.~~ for cash of $301.3 million and a ~~promissory~~ note payable to the seller in the amount of £562.5 million. Moy Park is one of the top-ten food companies in the U.K., Northern Ireland's largest private sector business and one of Europe's leading poultry producers. With 134 fresh processing plants, 10 prepared foods cook plants, 3 feed mills, 6 hatcheries and ~~manufacturing units~~1 rendering facility currently operating in Northern Ireland, ~~the U.K.,~~England, France and the Netherlands, ~~and Ireland,~~Moy Park possesses the ~~company processes 5.6~~capacity to process approximately 6.1 million birds per seven-day work week, in addition to ~~producing around 200,000 tons~~the capacity to produce approximately 460.0 million pounds of prepared foods per year. Its product portfolio comprises fresh and added-value poultry, ready-to-eat meals, breaded and multi-protein frozen foods, vegetarian foods and desserts, supplied to major food retailers and restaurant chains in Europe (including the U.K.). Moy Park ~~currently~~ has approximately ~~10,100 employees.~~10,300 employees as of July 1, 2018. The Moy Park operations comprise our U.K. and Europe segment. See “Note 2. Business Acquisition” of our Condensed Consolidated and Combined Financial Statements included in this ~~quarterly~~ report for additional information relating to this acquisition. ~~The Moy Park operations constitutes our U.K. and Europe segment.~~

The acquisition was treated as a common-control transaction under accounting principles generally accepted in the U.S. ~~GAAP.~~(“U.S. GAAP”). A common-control transaction is a transfer of net assets or an exchange of equity interests between entities under the control of the same parent. The accounting and reporting for a transaction between entities under common control is not to be considered a business combination under U.S. GAAP. Accordingly, ~~for the period from September 30, 2015 through September 7, 2017,~~ the Condensed Consolidated and Combined Financial Statements ~~includes~~presented for the thirteen and twenty-six weeks ended June 25, 2017 include the accounts of ~~the Company~~us and ~~its~~our majority-owned subsidiaries combined with the accounts of Moy Park. ~~For the period from September 8, 2017 through September 24, 2017, the~~The Condensed Consolidated and Combined Financial Statements ~~includes~~presented for the thirteen and twenty-six weeks ended July 1, 2018 and the Condensed Consolidated Balance Sheet presented as of December 31, 2017 include the accounts of ~~the Company~~us and ~~its~~our majority-owned subsidiaries, including Moy Park.

2017 Tax Reform

On December 22, 2017, the U.S. government enacted comprehensive tax legislation (the “Tax Act”), which significantly revises the ongoing U.S. corporate income tax law by lowering the U.S. federal corporate income tax rate from 35.0% to 21.0%, implementing a territorial tax system, imposing one-time tax on foreign unremitted earnings and setting limitations on deductibility of certain costs (e.g., interest expense), among other things.

~~GNP Acquisition~~We are applying the guidance in Staff Accounting Bulletin (“SAB”) 118 when accounting for the enactment-date effects of the Tax Act. As of July 1, 2018, we have not completed our accounting for all of the tax effects of the Tax Act. In certain cases, as described below, we have made a reasonable estimate of certain effects of the Tax Act. In other cases, we have not been able to make a reasonable estimate and continue to account for those items based on existing accounting under Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, and the provisions of the tax laws that were in effect immediately prior to enactment. For example, we have yet to make a reasonable estimate for the effect of the various federal income tax elements of the Tax Act on our state tax rate. In all cases, we will continue to make and refine our calculations as additional analysis is completed. Estimates may also be affected as we gain a more thorough understanding of the Tax Act. These changes could be material to income tax expense.

~~On January 6,~~As of December 31, 2017, we ~~acquired 100%~~estimated no tax liability on foreign unremitted earnings due to a net earnings and profits (“E&P”) deficit on accumulated post-1986 deferred foreign income. Therefore, we did not accrue any amount of tax expense for the Tax Act’s one-time transition tax on the foreign subsidiaries’ accumulated, unremitted earnings going back to 1986 for the year ended December 31, 2017. As of July 1, 2018, we continue to estimate no tax liability for the one-time transition tax. As we continue to refine our E&P analysis, we will adjust our calculations of the ~~membership interests~~one-time transition tax, which could affect the measurement of ~~JFC LLC~~this liability.

The Tax Act subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The Financial Accounting Standards Board (“FASB”) Staff Q&A, Topic 740, No. 5, Accounting for GILTI, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. Given the complexity of the GILTI provisions, we are still evaluating the effects of the GILTI provisions and ~~its subsidiaries (together, “GNP”) from Maschhoff Family Foods, LLC~~have not yet determined the accounting policy that we will elect. As of July 1, 2018, we are estimating a $6.9 million federal GILTI tax liability, which is reflected in our estimated annual effective tax rate.

The Tax Act provides for a ~~cash purchase price~~foreign-derived intangible income (“FDII”) deduction, which is available to domestic C corporations that derive income from the export of ~~$350~~property and services. As of July 1, 2018, we estimated a federal FDII benefit of $0.7 million, ~~subject~~which is reflected in our estimated annual effective tax rate. We will continue to ~~customary working capital adjustments. GNP is a vertically integrated poultry business based~~refine our FDII calculations, which may result in St. Cloud, Minnesota. The acquired business has a production capacity of 2.1 million birds per five-day work week in its three plants and currently has approximately 1,700 employees. See “Note 2. Business Acquisition” of our Condensed Consolidated and Combined Financial Statements included in this quarterly report for additional information relatingchanges to this ~~acquisition. GNP operations are included in our U.S. segment.~~estimated benefit.

Segment and Geographic Reporting

We operate in three reportable segments: U.S., U.K. and Europe, and Mexico. We measure segment profit as operating income. Corporate expenses are allocated to Mexico based upon various apportionment methods for specific expenditures incurred related thereto with the remaining amounts allocated to the U.S. For geographic reporting purposes, we include Puerto Rico within our U.S. segment and combine the U.K., France and the Netherlands ~~and Ireland~~ operations into our U.K. and Europe segment. See “Note 21. Segment Reporting” of our Condensed Consolidated and Combined Financial Statements included in this quarterly report for additional information.

Results of Operations

Thirteen Weeks Ended ~~September 24, 2017~~July 1, 2018 Compared to Thirteen Weeks Ended ~~September~~June 25, ~~2016~~2017

Net sales. Net sales generated in the thirteen weeks ended ~~September 24, 2017~~July 1, 2018 increased ~~$298.6~~$84.4 million, or ~~12.0%~~3.1%, from net sales generated in the thirteen weeks ended ~~September~~June 25, ~~2016.~~2017. The following table provides net sales information:


Sources of net sales	Thirteen Weeks Ended September 24, 2017		Change from Thirteen Weeks Ended September 25, 2016					Thirteen Weeks Ended July 1, 2018		Change from Thirteen Weeks Ended June 25, 2017
Sources of net sales	Thirteen Weeks Ended September 24, 2017		Amount		Percent			Thirteen Weeks Ended July 1, 2018		Amount		Percent
	(In thousands, except percent data)							(In thousands, except percent data)
United States	$	1,938,542	$	213,917	12.4	%	(a)
U.S.^(a)								$	1,899,435	$	17,293	0.9	%
U.K. and Europe(b)	514,325		50,765		11.0	%	(b)	563,102		62,420		12.5	%
Mexico(c)	341,018		33,922		11.0	%	(c)	374,176		4,714		1.3	%
Total net sales	2,793,885		298,604		12.0	%		$	2,836,713	$	84,427	3.1	%

(a)

U.S. net sales generated in the thirteen weeks ended ~~September 24, 2017~~July 1, 2018 increased ~~$213.9~~$17.3 million, or ~~12.4%~~0.9%, from U.S. net sales generated in the thirteen weeks ended ~~September~~June 25, ~~2016~~2017 primarily because of ~~net sales generated by the recently acquired GNP operations and~~ an increase in ~~net~~ sales ~~per pound~~volume. The increase in sales volume experienced by our ~~existing operations. The impact of the acquired business~~U.S. segment contributed ~~$108.6~~$16.6 million, or ~~6.3~~0.9 percentage points, to the increase in net sales. ~~The net~~Net sales per pound increase experienced by our existing U.S. segment contributed $199.7 million, or 11.5 percentage points, to the increase in net sales. A decrease in sales volume experienced by our existing U.S. segment partially offset the effect that the acquired business and the increase in net sales per pound had on U.S. net sales by $94.4 million, or 5.5 percentage points. Lower sales volume resulted primarily from decreased exported chicken products resulting from shipping delays at Southeastern U.S. ports following the recent hurricanes.was consistent year over year. Included in U.S. net sales generated during the thirteen weeks ended ~~September 24,~~July 1, 2018 and June 25, 2017 ~~and September 25, 2016~~ were net sales to JBS USA Food Company totaling ~~$11.5~~$4.5 million and $4.8 million, respectively.

(b)

U.K. and Europe net sales generated in the thirteen weeks ended ~~September 24, 2017~~July 1, 2018 increased ~~$50.8~~$62.4 million, or ~~11.0%~~12.5%, from U.K. and Europe net sales generated in the thirteen weeks ended ~~September~~June 25, ~~2016~~2017 primarily because of the favorable impact of foreign currency translation, an increase in sales ~~volume. Increased sales~~ volume ~~resulted in~~and an increase in net sales ~~by $66.3~~per pound. The favorable impact of foreign currency translation contributed $32.8 million, or ~~14.3~~6.5 percentage ~~points. The~~points, to the increase in net sales. An increase in sales volume contributed $17.4 million, or 3.5 percentage points, and an increase in net sales ~~from increased sales volume was partially offset by~~per pound contributed $12.3 million, or 2.4 percentage points, to the increase in net sales.

~~negative impact of foreign currency translation and a decrease in net sales per pound of $2.1 million, or 0.5 percentage points, and $13.4 million, or 2.9 percentage points, respectively.~~

(c)

Mexico net sales generated in the thirteen weeks ended ~~September 24, 2017~~July 1, 2018 increased ~~$33.9~~$4.7 million, or ~~11.0%~~1.3%, from Mexico net sales generated in the thirteen weeks ended ~~September~~June 25, ~~2016~~2017 primarily because of ~~the~~an increase in ~~net~~ sales ~~per pound and~~volume, partially offset by the ~~positive~~negative impact of foreign currency remeasurement. Increased ~~net~~ sales ~~per pound, which resulted primarily from higher market prices, and impact of foreign currency remeasurement~~volume resulted in an increase in net sales ~~by $15.0~~of $21.2 million, or ~~4.9~~5.7 percentage ~~points, and $16.5 million, or 5.4 percentage points, respectively. An~~points. The negative impact of foreign currency remeasurement offset the increase in sales volume ~~also contributed to the increase in net sales~~ by ~~$2.4~~$15.8 million, or ~~0.8~~4.3 percentage points. Net sales per pound was consistent year over year.

Gross profit. Gross profit ~~increased~~decreased by ~~$225.5~~$200.6 million, or ~~89.1%~~42.2%, from ~~$253.1~~$474.8 million generated in the thirteen weeks ended ~~September~~June 25, ~~2016~~2017 to ~~$478.6~~$274.2 million generated in the thirteen weeks ended ~~September 24, 2017.~~July 1, 2018. The following tables provide information regarding gross profit and cost of sales information:


Components of gross profit	Thirteen Weeks Ended September 24, 2017		Change from Thirteen Weeks Ended September 25, 2016				Percent of Net Sales					Thirteen Weeks Ended July 1, 2018		Change from Thirteen Weeks Ended June 25, 2017					Percent of Net Sales
			Change from Thirteen Weeks Ended September 25, 2016				Thirteen Weeks Ended							Change from Thirteen Weeks Ended June 25, 2017					Thirteen Weeks Ended
			Amount		Percent		September 24, 2017		September 25, 2016					Amount			Percent		July 1, 2018		June 25, 2017
	In thousands, except percent data											In thousands, except percent data
Net sales	$	2,793,885	$	298,604	12.0	%	100.0	%	100.0	%		$	2,836,713	$	84,427		3.1	%	100.0	%	100.0	%
Cost of sales(c)	2,315,301		73,080		3.3	%	82.9	%	89.9	%	(a)(b)(c)	2,562,491		285,037			12.5	%	90.3	%	82.7	%
Gross profit	$	478,584	$	225,524	89.1	%	17.1	%	10.1	%		$	274,222	$	(200,610	)	(42.2	)%	9.7	%	17.3	%


Sources of gross profit	Thirteen Weeks Ended September 24, 2017		Change from Thirteen Weeks Ended September 25, 2016						Thirteen Weeks Ended July 1, 2018			Change from Thirteen Weeks Ended June 25, 2017
Sources of gross profit	Thirteen Weeks Ended September 24, 2017		Amount			Percent			Thirteen Weeks Ended July 1, 2018			Amount			Percent
	(In thousands, except percent data)								(In thousands, except percent data)
United States	$	377,209	$	197,873		110.3	%	(a)
U.S.^(a)									$	153,924		$	(180,965	)	(54.0	)%
U.K. and Europe(b)	46,951		3,981			9.3	%	(b)	49,111			(339		)	(0.7	)%
Mexico(c)	54,401		23,671			77.0	%	(c)	71,203			(19,267		)	(21.3	)%
Elimination	23		(1		)	(4.2	)%		(16		)	(39		)	(169.6	)%
Total gross profit	$	478,584	$	225,524		89.1	%		$	274,222		$	(200,610	)	(42.2	)%


Sources of cost of sales	Thirteen Weeks Ended September 24, 2017			Change from Thirteen Weeks Ended September 25, 2016					Thirteen Weeks Ended July 1, 2018		Change from Thirteen Weeks Ended June 25, 2017
Sources of cost of sales	Thirteen Weeks Ended September 24, 2017			Amount		Percent			Thirteen Weeks Ended July 1, 2018		Amount		Percent
	(In thousands, except percent data)								(In thousands, except percent data)
United States	$	1,561,333		$	16,044	1.0	%	(a)
U.S.^(a)									$	1,745,511	$	198,259	12.8	%
U.K. and Europe(b)	467,374			46,784		11.1	%	(b)	513,991		62,759		13.9	%
Mexico(c)	286,617			10,251		3.7	%	(c)	302,973		23,980		8.6	%
Elimination	(23		)	1		(4.2	)%		16		39		(169.6	)%
Total cost of sales	$	2,315,301		$	73,080	3.3	%		$	2,562,491	$	285,037	12.5	%

(a)

Cost of sales incurred by our U.S. segment during the thirteen weeks ended ~~September 24, 2017~~July 1, 2018 increased ~~$16.0~~$198.3 million, or ~~1.0%~~12.8%, from cost of sales incurred by our U.S. segment during the thirteen weeks ended ~~September~~June 25, ~~2016.~~2017. Cost of sales increased primarily because of ~~costs incurred by the acquired GNP operations. Cost of~~increased net sales, ~~incurred by the acquired GNP operations contributed $89.1 million, or 5.8 percentage points, to the~~an increase in ~~U.S. cost~~feed costs of ~~sales. An decrease~~$61.1 million resulting from increased grain prices and increased live pounds produced, an increase in freight and storage costs of $25.3 million resulting from increased rates from driver shortages, an increase in derivative expenses of $27.2 million and an increase in grower expenses of $16.0 million resulting from increased pay rates and utility payments. Other factors affecting cost of sales incurred by our existing U.S. segment partially offset the impact that the GNP operations had on cost of sales by $72.9 million, or 4.7 percentage points. Cost of sales incurred by our existing U.S. segment decreased primarily because of a $63.7 million decrease in feed costs, a $23.9 million net increase in derivative gains, a $4.2 million decrease in repair and maintenance costs, partially offset by a $22.4 million increase in compensation costs and $1.9 million in damages to our Puerto Rico assets resulting from Hurricane Maria.were individually immaterial.

(b)

Cost of sales incurred by our U.K. and Europe segment during the thirteen weeks ended ~~September 24, 2017~~July 1, 2018 increased ~~$46.8~~$62.8 million, or ~~11.1%~~13.9%, from cost of sales incurred by our U.K. and Europe segment during the thirteen weeks ended ~~September~~June 25, ~~2016~~.2017. U.K. and Europe c~~ost~~cost of sales increased primarily because ~~of a $37.8 million~~an increase in net sales, increased raw material costs ~~a $4.2~~of $31.9 million due to increased sales volume, and the unfavorable impact of foreign currency translation contributing $30.9 million to the increase in ~~labor costs, and a $2.4 million increase in freight costs.~~

cost of sales. Other factors affecting cost of sales were individually immaterial.

(c)

Cost of sales incurred by our Mexico segment during the thirteen weeks ended ~~September 24, 2017~~July 1, 2018 increased ~~$10.3~~$24.0 million, or ~~3.7%~~8.6%, from cost of sales incurred by our Mexico segment during the thirteen weeks ended ~~September~~June 25, ~~2016~~2017. Mexico cost of sales increased primarily because of ~~a $14.6~~increased feed prices impacting the cost of raw grain totaling an increase of $33.8 million, ~~increase in contracted grower pay,~~which was partially offset by a $1.4 million decrease in catching costs, a $1.1 million decrease in depreciation expense on machinery and equipment, a $1.2 increase in other income, and a $0.6 million decrease in travel and entertainment costs.the favorable impact of foreign currency remeasurement of $13.2 million. Other factors affecting cost of sales were individually immaterial.

Operating income. Operating income ~~increased~~decreased by ~~$195.4~~$193.2 million, or ~~110.5%~~51.1%, from ~~$176.8~~$378.3 million generated in the thirteen weeks ended ~~September~~June 25, ~~2016~~2017 to ~~$372.2~~$185.1 million generated in the thirteen weeks ended ~~September 24, 2017.~~July 1, 2018. The following tables provide information regarding operating income and SG&A expense:



Components of operating income	Thirteen Weeks Ended July 1, 2018		Change from Thirteen Weeks Ended June 25, 2017					Percent of Net Sales
			Change from Thirteen Weeks Ended June 25, 2017					Thirteen Weeks Ended
			Amount			Percent		July 1, 2018		June 25, 2017
	(In thousands, except percent data)
Gross profit	$	274,222	$	(200,610	)	(42.2	)%	9.7	%	17.3	%
SG&A expense^(a)(b)(c)	87,975		(4,173		)	(4.5	)%	3.1	%	3.3	%
Administrative restructuring charges^(d)(e)	1,135		(3,214		)	(73.9	)%	—	%	0.2	%
Operating income	$	185,112	$	(193,223	)	(51.1	)%	6.5	%	13.7	%

Components of operating income Thirteen
Weeks Ended
September 24, 2017 Change from
Thirteen Weeks Ended
September 25, 2016 Percent of Net Sales
Thirteen Weeks Ended
Amount Percent September 24, 2017 September 25, 2016

(In thousands, except percent data)
Gross profit $ 478,584
$ 225,524
89.1 % 17.1 % 10.1 %
SG&A expense 102,191
26,257
34.6 % 3.7 % 3.0 % (a)(b)(c)
Administrative restructuring charges 4,147
3,869
1,386.4 % 0.1 % — % (d)(e)
Operating income $ 372,246
$ 195,398
110.5 % 13.3 % 7.1 %


Sources of operating income	Thirteen Weeks Ended September 24, 2017		Change from Thirteen Weeks Ended September 25, 2016						Thirteen Weeks Ended July 1, 2018			Change from Thirteen Weeks Ended June 25, 2017
Sources of operating income	Thirteen Weeks Ended September 24, 2017		Amount			Percent			Thirteen Weeks Ended July 1, 2018			Amount			Percent
	(In thousands, except percent data)								(In thousands, except percent data)
United States	$	307,962	$	166,767		118.1	%
U.S.									$	99,469		$	(178,133	)	(64.2	)%
U.K. and Europe	18,569		5,542			42.5	%		23,662			4,729			25.0	%
Mexico	45,692		23,089			102.2	%		61,997			(19,780		)	(24.2	)%
Elimination	23		—			—	%		(16		)	(39		)	(169.6	)%
Total operating income	$	372,246	$	195,398		110.5	%		$	185,112		$	(193,223	)	(51.1	)%

Sources of SG&A expense	Thirteen Weeks Ended September 24, 2017		Change from Thirteen Weeks Ended September 25, 2016						Thirteen Weeks Ended July 1, 2018			Change from Thirteen Weeks Ended June 25, 2017
Sources of SG&A expense	Thirteen Weeks Ended September 24, 2017		Amount			Percent			Thirteen Weeks Ended July 1, 2018			Amount			Percent
	(In thousands, except percent data)								(In thousands, except percent data)
United States	$	66,793	$	28,930		76.4	%	(a)
U.S.^(a)									$	53,320		$	382		0.7	%
U.K. and Europe(b)	26,689		(3,255		)	(10.9	)%	(b)	25,449			(5,069		)	(16.6	)%
Mexico(c)	8,709		582			7.2	%	(c)	9,206			514			5.9	%
Total SG&A expense	$	102,191	$	26,257		34.6	%		$	87,975		$	(4,173	)	(4.5	)%

Sources of administrative restructuring charges	Thirteen Weeks Ended September 24, 2017		Change from Thirteen Weeks Ended September 25, 2016						Thirteen Weeks Ended July 1, 2018			Change from Thirteen Weeks Ended June 25, 2017
Sources of administrative restructuring charges	Thirteen Weeks Ended September 24, 2017		Amount			Percent			Thirteen Weeks Ended July 1, 2018			Amount			Percent
	(In thousands, except percent data)								(In thousands, except percent data)
United States	$	2,454	$	2,176		779.6	%	(d)
U.S.^(d)									$	1,135		$	(3,214	)	(73.9	)%
U.K. and Europe	1,693		1,693			100.0	%	(e)	—			—			—	%
Mexico	—		—			—	%		—			—			—	%
Total administrative restructuring charges	$	4,147	$	3,869		1,386.4	%		$	1,135		$	(3,214	)	(73.9	)%

(a)

SG&A expense incurred by our U.S. segment during the thirteen weeks ended ~~September 24, 2017~~July 1, 2018 increased ~~$28.9~~$0.4 million, or ~~76.4%~~0.7%, from SG&A expense incurred by our U.S. segment during the thirteen weeks ended ~~September~~June 25, 2016, primarily because of expenses incurred by the acquired GNP operations and by increases in SG&A expenses incurred by our existing operations. Expenses incurred by the acquired GNP business contributed $7.3 million, or 19.2 percentage points, to the overall increase in SG&A expenses. Expenses incurred by our existing U.S. segment contributed $21.6 million, or 57.2 percentage points, to the overall increase in SG&A expenses. SG&A expense incurred by our existing U.S. segment increased primarily because of $14.0 million in transaction costs related to the Moy Park acquisition, a $2.1 million increase in wages and benefits, a $1.8 million increase in legal fees, a $1.0 million increase in charitable contributions, and a $1.0 million increase in depreciation expenses. Other factors affecting SG&A expense were individually immaterial.

~~(b)~~

~~SG&A expense incurred by our U.K. and Europe segment during the thirteen weeks ended September 24,~~ 2017, decreased $3.3 million, or 10.9%, from SG&A expense incurred by our U.K. and Europe segment during the thirteen weeks ended September 25, 2016. SG&A expense incurred by our U.K. and Europe segment decreased primarily because of a ~~$5.9 million decrease in management fees paid to JBS S.A., a $0.9~~$3.5 million increase in ~~other selling~~professional service expenses ~~a $0.6 million~~resulting from increased consulting fees and legal fees related to pending litigation, an increase ~~in personnel expenses and a $.6 million increase in amortization expense.~~ ~~Other factors affecting SG&A expense were individually immaterial.~~

~~(c)~~

SG&A expense incurred by our Mexico segment during the thirteen weeks ended September 24, 2017 increased $0.6 million, or 7.2%, from SG&A expense incurred by our Mexico segment during the thirteen weeks ended September 25, 2016. SG&A expense incurred by our existing Mexico segment increased primarily because of ~~a $0.9 million increase in employee relations, offset by a $0.2 million decrease in contracted security expenses. Other factors affecting SG&A expense were individually immaterial.~~


~~(d)~~	~~Administrative restructuring charges incurred by our U.S. segment during the thirteen weeks ended September 24, 2017 included $2.5~~$2.8 million in ~~severance costs related to the GNP acquisition.~~


~~(e)~~	~~Administrative restructuring charges incurred by the U.K. and Europe segment during the thirteen weeks ended September 24, 2017 included a $1.7 million impairment of property in Dublin, Ireland.~~

~~Net interest expense.~~ ~~Net interest expense increased 19.3% to $22.5 million recognized in the thirteen weeks ended September 24, 2017~~payroll-related expenses resulting from $18.9 million recognized in the thirteen weeks ended September 25, 2016 primarily because of an increase in average borrowings compared to the same period in the prior year. Average borrowings increased from $1.5 billion in the thirteen weeks ended September 25, 2016 to $1.9 billion in the thirteen weeks ended September 24, 2017 due to increased borrowings necessary to fund the GNP acquisition. The weighted average interest rate increased from 4.4% in the thirteen weeks ended September 25, 2016 to 4.5% in the thirteen weeks ended September 24, 2017.

~~Income taxes.~~ Income tax expense increased to $113.4 million, a 32.2% effective tax rate, for the thirteen weeks ended September 24, 2017 compared to income tax expense of $53.8 million, a 34.5% effective tax rate, for the thirteen weeks ended September 25, 2016. The increase in income tax expense in 2017 resulted primarily from an increase in pre-tax income.

~~Thirty-Nine Weeks Ended September 24, 2017 Compared to Thirty-Nine Ended September 25, 2016~~

~~Net sales.~~ Net sales generated in the thirty-nine weeks ended September 24, 2017 increased $517.8 million, or 6.9%, from net sales generated in the thirty-nine weeks ended September 25, 2016. The following table provides net sales information:

Sources of net sales Thirty-Nine
Weeks Ended
September 24, 2017 Change from
Thirty-Nine Weeks Ended
September 25, 2016
Amount Percent
(In thousands, except percent data)
United States $ 5,557,089
$ 484,737
9.6 % (a)
U.K. and Europe 1,473,854
(10,854 ) (0.7 )% (b)
Mexico 994,568
43,946
4.6 % (c)
Total net sales $ 8,025,511
$ 517,829
6.9 %

~~(a)~~

U.S. net sales generated in the thirty-nine weeks ended September 24, 2017 increased $484.7 million, or 9.6%, from U.S. net sales generated in the thirty-nine weeks ended September 25, 2016 primarily because of net sales generated by the recently acquired GNP operations and an increase in net sales per pound experienced by our existing operations. The impact of the acquired business contributed $322.4 million, or 6.4 percentage points, to the increase in net sales. The net sales per pound increase experienced by our existing U.S. segment contributed $332.0 million, or 6.5 percentage points, to the increase in net sales. A decrease in sales volume experienced by our existing U.S. segment partially offset the effect that the acquired business and the increase in net sales per pound had on U.S. net sales by $169.6 million, or 3.3 percentage points. Decreased sales volume resulted primarily from lower demand for exported chicken products and domestic prepared foods products. Included in U.S. net sales generated during the thirty-nine weeks ended September 24, 2017 and September 25, 2016 were net sales to JBS USA Food Company totaling $37.4 million and $12.2 million, respectively.

~~(b)~~

U.K. and Europe net sales generated in the thirty-nine weeks ended September 24, 2017 decreased $10.9 million, or 0.7%, from U.K. and Europe net sales generated in the thirty-nine weeks ended September 25, 2016 primarily because of the negative impact of foreign currency translation and increased sales volume. The negative impact of foreign currency translation contributed to the decrease in net sales by $135.3 million, or 9.1 percentage points. The negative impacts of foreign currency translation were offset by increased sales volume and net sales per pound by $51.7 million, or 3.5 percentage points, and $72.7 million, or 4.9 percentage points, respectively.

~~(c)~~

Mexico net sales generated in the thirty-nine weeks ended September 24, 2017 increased $43.9 million, or 4.6%, from Mexico net sales generated in the thirty-nine weeks ended September 25, 2016 primarily because of the increase in net sales per pound and increased sales volume. Higher net sales per pound, which resulted primarily from higher market prices, and increased sales volume resulted in increases in net sales of $68.3 million, or 7.2 percentage points, and $14.0 million, or 1.5 percentage points, respectively. The negative impact of foreign currency remeasurement partially offset the increase in net sales by $38.3 million, or 4.0 percentage points. Other factors affecting the decrease in Mexico net sales were immaterial.

~~Gross profit.~~ Gross profit increased by $334.7 million, or 38.2%, from $875.1 million generated in the thirty-nine weeks ended September 25, 2016 to $1,209.8 million generated in the thirty-nine weeks ended September 24, 2017. The following tables provide information regarding gross profit and cost of sales information:

Components of gross profit
Thirty-Nine
Weeks Ended
September 24, 2017
Change from
Thirty-Nine Weeks Ended
September 25, 2016 Percent of Net Sales
Thirty-Nine Weeks Ended
Amount Percent September 24, 2017 September 25, 2016
In thousands, except percent data
Net sales $ 8,025,511
$ 517,829
6.9 % 100.0 % 100.0 %
Cost of sales 6,815,701
183,133
2.8 % 84.9 % 88.3 % (a)(b)
Gross profit $ 1,209,810
$ 334,696
38.2 % 15.1 % 11.7 %

Sources of gross profit Thirty-Nine
Weeks Ended
September 24, 2017 Change from
Thirty-Nine Weeks Ended
September 25, 2016
Amount Percent
(In thousands, except percent data)
United States $ 900,262
$ 298,560
49.6 % (a)
U.K. and Europe 137,734
(3,732 ) (2.6 )% (b)
Mexico 171,745
39,871
30.2 % (c)
Elimination 69
(1 ) (1.4 )%
Total gross profit $ 1,209,810
$ 334,696
38.2 %

Sources of cost of sales Thirty-Nine Weeks Ended
September 24, 2017 Change from
Thirty-Nine Weeks Ended
September 25, 2016
Amount Percent
(In thousands, except percent data)
United States $ 4,656,825
$ 186,177
4.2 % (a)
U.K. and Europe 1,336,123
(7,120 ) (0.5 )% (b)
Mexico 822,822
4,073
0.5 % (c)
Elimination (69 ) 2
(2.8 )%
Total cost of sales $ 6,815,701
$ 183,133
2.8 %

~~(a)~~

Cost of sales incurred by our U.S. segment during the thirty-nine weeks ended September 24, 2017 increased $186.2 million, or 4.2%, from cost of sales incurred by our U.S. segment during the thirty-nine weeks ended September 25, 2016. Cost of sales increased primarily because of costs incurred by the acquired GNP operations. Cost of sales incurred by the acquired GNP operations contributed $267.3 million, or 6.0 percentage points, to the increase in U.S. cost of sales. A decrease in cost of sales incurred by our existing U.S. segment partially offset the impact that the acquired business had on cost of sales by $80.9 million, or 1.8 percentage points. Cost of sales incurred by our existing operations decreased primarily because of a $103.1 million decrease in feed costs, an $18.4 million net increase in derivative gains, a $7.3 million decrease in scrapped materials,share-based compensation, partially offset by a ~~$49.5 million increase in compensation and benefit costs and $1.9 million in damages to our Puerto Rico assets resulting from Hurricane Maria.~~

~~(b)~~

Cost of sales incurred by our U.K. and Europe segment during the thirty-nine weeks ended September 24, 2017 decreased $7.1 million, or 0.5%, from cost of sales incurred by our U.K. and Europe segment during the thirty-nine weeks ended September 25, 2016~~. The decrease in cost of sales was due to a $23.9 million increase in cost of raw materials, offset by a $16.3~~$4.6 million decrease in ~~labor costs,~~benefits resulting from a ~~$12.5 million~~ decrease in ~~other cost of sales, and a $3.4 million decrease in bird amortization costs.~~

~~(c)~~

Cost of sales incurred by our Mexico segment during the thirty-nine weeks ended September 24, 2017 increased $4.1 million, or 0.5%, from cost of sales incurred by our Mexico segment during the thirty-nine weeks ended September 25, 2016. The increase in cost of sales was primarily due to a $29.4 million increase in grower pay and a $6.0 million increase in utility costs that were partially offset by the $27.6 million impact of inventory valuation adjustments resulting from currency rate movement and a $3.8 million decrease in catching costs.

~~Operating income.~~ Operating income increased by $272.3 million, or 42.2%, from $645.0 million generated in the thirty-nine weeks ended September 25, 2016 to $917.3 million generated in the thirty-nine weeks ended September 24, 2017. The following tables provide information regarding operating income and SG&A expense:

Components of operating income Thirty-Nine
Weeks Ended
September 24, 2017 Change from
Thirty-Nine Weeks Ended
September 25, 2016 Percent of Net Sales
Thirty-Nine Weeks Ended
Amount Percent September 24, 2017 September 25, 2016

(In thousands, except percent data)
Gross profit $ 1,209,810
$ 334,696
38.2 % 15.1 % 11.7 %
SG&A expense 284,009
54,223
23.6 % 3.5 % 3.1 % (a)(b)(c)
Administrative restructuring charges 8,496
8,217
2,945.2 % 0.1 % — % (d)(e)
Operating income $ 917,305
$ 272,256
42.2 % 11.5 % 8.6 %

Sources of operating income Thirty-Nine
Weeks Ended
September 24, 2017 Change from
Thirty-Nine Weeks Ended
September 25, 2016
Amount Percent
(In thousands, except percent data)
United States $ 719,121
$ 238,841
49.7 %
U.K. and Europe 51,874
(3,967 ) (7.1 )%
Mexico 146,241
37,385
34.3 %
Elimination 69
(3 ) (2.8 )%
Total operating income $ 917,305
$ 272,256
42.2 %

Sources of SG&A expense Thirty-Nine
Weeks Ended
September 24, 2017 Change from
Thirty-Nine Weeks Ended
September 25, 2016
Amount Percent
(In thousands, except percent data)
United States $ 174,340
$ 53,196
43.9 % (a)
U.K. and Europe 84,165
(1,460 ) (1.7 )% (b)
Mexico 25,504
2,487
10.8 % (c)
Total SG&A expense $ 284,009
$ 54,223
23.6 %

Sources of administrative restructuring charges
Thirty-Nine
Weeks Ended
September 24, 2017
Change from
Thirty-Nine Weeks Ended
September 25, 2016
Amount Percent
(In thousands, except percent data)
United States $ 6,803
$ 6,524
2,338.4 % (d)
U.K. and Europe 1,693
1,693
— % (e)
Mexico —
—
— %
Total administrative restructuring charges $ 8,496
$ 8,217
2,945.2 %

~~(a)~~

SG&A expense incurred by our U.S. segment during the thirty-nine weeks ended September 24, 2017 increased $53.2 million, or 43.9%, from SG&A expense incurred by our U.S. segment during the thirty-nine weeks ended September 25, 2016, primarily because of expenses incurred by the acquired GNP operations and, to a lesser extent, by increases in SG&A expense incurred by our existing U.S. segment. Expenses incurred by the acquired GNP business contributed $27.4 million, or 22.6 percentage points, to the overall increase in SG&A expenses. Expenses incurred by our existing U.S. segment contributed $25.8 million, or 21.3 percentage points, to the overall increase in SG&A expenses. SG&A expenses incurred by our existing U.S. segment increased primarily because of $14.0 million in transaction costs related to the Moy Park acquisition, a $4.8 million increase in allocated costs charged for administrative functions shared with JBS USA Food Company, a $2.8 million increase in legal fees and a $2.1 million increase in advertising and promotion expenses.incentive compensation. Other factors affecting SG&A expense were individually immaterial.

(b)

SG&A expense incurred by our U.K. and Europe segment during the ~~thirty-nine~~thirteen weeks ended ~~September 24, 2017~~July 1, 2018 decreased ~~$1.5~~$5.1 million, or ~~1.7%~~16.6%, from SG&A expense incurred by our U.K. and Europe segment during the ~~thirty-nine~~thirteen weeks ended ~~September~~June 25, ~~2016~~2017. SG&A expense incurred by our U.K. and Europe segment decreased primarily because of a ~~$2.3~~$6.8 million decrease in ~~advertising~~selling expenses related to freight and a ~~$2.2~~$1.9 million decrease in management fees paid to JBS. Moy Park no longer pays a management fee to JBS ~~S.A. that~~subsequent to its acquisition by Pilgrim's. These decreases in SG&A were partially offset by a ~~$1.2~~$3.3 million increase in ~~amortization expenses and a $1.3 million increase in miscellaneous income from sale of assets.~~severance expenses. Other factors affecting SG&A expense were individually immaterial.

(c)

SG&A expense incurred by our Mexico segment during the ~~thirty-nine~~thirteen weeks ended ~~September 24, 2017~~July 1, 2018 increased ~~$2.5~~$0.5 million, or ~~10.8%~~5.9%, from SG&A expense incurred by our Mexico segment during the ~~thirty-nine~~thirteen weeks ended ~~September~~June 25, ~~2016~~2017. SG&A expense incurred by our Mexico segment increased primarily because of a $0.6 million increase in payroll expenses. Other factors affecting SG&A expense were individually immaterial.


(d)	Administrative restructuring charges incurred by our U.S. segment during the thirteen weeks ended July 1, 2018 included $0.4 million in severance costs related to the GNP acquisition and $0.7 million in severance, asset impairment and lease obligations resulting from termination of 40 North Foods operations.

Net interest expense. Net interest expense increased 65.1% to $35.4 million recognized in the thirteen weeks ended July 1, 2018 from $21.5 million recognized in the thirteen weeks ended June 25, 2017. Average borrowings increased from $1.9 billion in the thirteen weeks ended June 25, 2017 to $2.7 billion in the thirteen weeks ended July 1, 2018. The weighted average interest rate increased from 4.7% in the thirteen weeks ended June 25, 2017 to 5.2% in the thirteen weeks ended July 1, 2018.

Income taxes. Income tax expense decreased to $38.5 million, a 26.6% effective tax rate, for the thirteen weeks ended July 1, 2018 compared to income tax expense of $115.3 million, a 32.0% effective tax rate, for the thirteen weeks ended June 25, 2017. The decrease in income tax expense in 2018 resulted primarily from a reduction in pre-tax income as well as a reduction in the U.S. corporate income tax rate because of the recently enacted Tax Act.

Twenty-Six Weeks Ended July 1, 2018 Compared to Twenty-Six Weeks Ended June 25, 2017

Net sales. Net sales generated in the twenty-six weeks ended July 1, 2018 increased $351.8 million, or 6.7%, from net sales generated in the twenty-six weeks ended June 25, 2017. The following table provides net sales information:



Sources of net sales	Twenty-Six Weeks Ended July 1, 2018		Change from Twenty-Six Weeks Ended June 25, 2017
Sources of net sales	Twenty-Six Weeks Ended July 1, 2018		Amount		Percent
	(In thousands, except percent data)
U.S.^(a)	$	3,740,540	$	121,993	3.4	%
U.K. and Europe^(b)	1,107,402		147,872		15.4	%
Mexico^(c)	735,449		81,900		12.5	%
Total net sales	$	5,583,391	$	351,765	6.7	%

(a)

U.S. net sales generated in the twenty-six weeks ended July 1, 2018 increased $122.0 million, or 3.4%, from U.S. net sales generated in the twenty-six weeks ended June 25, 2017 primarily because of an increase in net sales per pound and an increase in sales volume. The increases in net sales per pound and sales volume experienced by our U.S. segment contributed $70.5 million, or 1.9 percentage points, and $51.5 million, or 1.4 percentage points, respectively, to the increase in net sales. Included in U.S. net sales generated during the twenty-six weeks ended July 1, 2018 and June 25, 2017 were net sales to JBS USA Food Company totaling $6.0 million and $9.4 million, respectively.

(b)

U.K. and Europe net sales generated in the twenty-six weeks ended July 1, 2018 increased $147.9 million, or 15.4%, from U.K. and Europe net sales generated in the twenty-six weeks ended June 25, 2017 primarily because of the favorable impact of foreign currency translation, an increase in sales volume and an increase in net sales per pound. The favorable impact of foreign currency translation contributed $94.1 million, or 9.8 percentage points, to the increase in net sales. An increase in sales volume contributed $37.8 million, or 3.9 percentage points, and an increase in net sales per pound contributed $16.0 million, or 1.7 percentage points, to the increase in net sales.

(c)

Mexico net sales generated in the twenty-six weeks ended July 1, 2018 increased $81.9 million, or 12.5%, from Mexico net sales generated in the twenty-six weeks ended June 25, 2017 primarily because of an increase in sales volume, an increase in net sales per pound and the positive impact of foreign currency remeasurement. Increased sales volume resulted in an increase in net sales of $32.3 million, or 4.9 percentage points, and the increase net sales per pound contributed $32.9 million, or 5.0 percentage points, to the increase in net sales. The favorable impact of foreign currency remeasurement contributed $16.7 million, or 2.6 percentage points, to the increase in net sales.

Gross profit. Gross profit decreased by $169.3 million, or 23.2%, from $731.2 million generated in the twenty-six weeks ended June 25, 2017 to $561.9 million generated in the twenty-six weeks ended July 1, 2018. The following tables provide information regarding gross profit and cost of sales information:



Components of gross profit	Twenty-Six Weeks Ended July 1, 2018		Change from Twenty-Six Weeks Ended June 25, 2017					Percent of Net Sales
			Change from Twenty-Six Weeks Ended June 25, 2017					Twenty-Six Weeks Ended
			Amount			Percent		July 1, 2018		June 25, 2017
	In thousands, except percent data
Net sales	$	5,583,391	$	351,765		6.7	%	100.0	%	100.0	%
Cost of sales^(a)(b)(c)	5,021,504		521,094			11.6	%	89.9	%	86.0	%
Gross profit	$	561,887	$	(169,329	)	(23.2	)%	10.1	%	14.0	%



Sources of gross profit	Twenty-Six Weeks Ended July 1, 2018		Change from Twenty-Six Weeks Ended June 25, 2017
Sources of gross profit	Twenty-Six Weeks Ended July 1, 2018		Amount			Percent
	(In thousands, except percent data)
U.S.^(a)	$	336,295	$	(186,749	)	(35.7	)%
U.K. and Europe^(b)	91,843		1,063			1.2	%
Mexico^(c)	133,741		16,396			14.0	%
Elimination	8		(39		)	(83.0	)%
Total gross profit	$	561,887	$	(169,329	)	(23.2	)%



Sources of cost of sales	Twenty-Six Weeks Ended July 1, 2018			Change from Twenty-Six Weeks Ended June 25, 2017
Sources of cost of sales	Twenty-Six Weeks Ended July 1, 2018			Amount		Percent
	(In thousands, except percent data)
U.S.^(a)	$	3,404,245		$	308,743	10.0	%
U.K. and Europe^(b)	1,015,559			146,809		16.9	%
Mexico^(c)	601,708			65,503		12.2	%
Elimination	(8		)	39		(83.0	)%
Total cost of sales	$	5,021,504		$	521,094	11.6	%

(a)

Cost of sales incurred by our U.S. segment during the twenty-six weeks ended July 1, 2018 increased $308.7 million, or 10.0%, from cost of sales incurred by our U.S. segment during the twenty-six weeks ended June 25, 2017. Cost of sales increased primarily because of an increase in net sales, an increase in feed costs of $99.7 million resulting from increased grain prices and increased live pounds produced, an increase in freight and storage costs of $51.8 million resulting from increased rates from driver shortages and inclement weather, an increase in grower expenses of $39.9 million resulting from increased pay rates and payment of utilities, an increase in labor costs of $18.3 million resulting from an increase in the number of operational employees and an increase in derivative expenses of $18.0 million. Other factors affecting cost of sales were individually immaterial.

(b)

Cost of sales incurred by our U.K. and Europe segment during the twenty-six weeks ended July 1, 2018 increased $146.8 million, or 16.9%, from cost of sales incurred by our U.K. and Europe segment during the twenty-six weeks ended June 25, 2017. U.K. and Europe cost of sales increased primarily because of increased net sales, an increase in raw material costs of $81.3 million due to increased sales volume, the unfavorable impact of foreign currency translation that contributed $86.3 million to the increase in cost of sales and an increase of $27.9 million in payroll-related expenses. Other factors affecting cost of sales were individually immaterial.

(c)

Cost of sales incurred by our Mexico segment during the twenty-six weeks ended July 1, 2018 increased $65.5 million, or 12.2%, from cost of sales incurred by our Mexico segment during the twenty-six weeks ended June 25, 2017. Mexico cost of sales increased primarily because of an increase in net sales, an increase in feed costs of $44.4 million, the unfavorable impact of foreign currency remeasurement contributing $13.7 million, and a $12.6 million increase in grower expenses due to increases in pay rates. Other factors affecting cost of sales were individually immaterial.

Operating income. Operating income decreased by $158.4 million, or 29.1%, from $545.1 million generated in the twenty-six weeks ended June 25, 2017 to $386.7 million generated in the twenty-six weeks ended July 1, 2018. The following tables provide information regarding operating income and SG&A expense:



Components of operating income	Twenty-Six Weeks Ended July 1, 2018		Change from Twenty-Six Weeks Ended June 25, 2017					Percent of Net Sales
			Change from Twenty-Six Weeks Ended June 25, 2017					Twenty-Six Weeks Ended
			Amount			Percent		July 1, 2018		June 25, 2017
	(In thousands, except percent data)
Gross profit	$	561,887	$	(169,329	)	(23.2	)%	10.1	%	14.0	%
SG&A expense^(a)(b)(c)	173,258		(8,550		)	(4.7	)%	3.1	%	3.5	%
Administrative restructuring charges^(d)(e)	1,924		(2,425		)	(55.8	)%	—	%	0.1	%
Operating income	$	386,705	$	(158,354	)	(29.1	)%	6.9	%	10.4	%



Sources of operating income	Twenty-Six Weeks Ended July 1, 2018		Change from Twenty-Six Weeks Ended June 25, 2017
Sources of operating income	Twenty-Six Weeks Ended July 1, 2018		Amount			Percent
	(In thousands, except percent data)
U.S.	$	226,755	$	(184,404	)	(44.8	)%
U.K. and Europe	45,075		11,770			35.3	%
Mexico	114,867		14,318			14.2	%
Elimination	8		(38		)	(82.6	)%
Total operating income	$	386,705	$	(158,354	)	(29.1	)%

Sources of SG&A expense	Twenty-Six Weeks Ended July 1, 2018		Change from Twenty-Six Weeks Ended June 25, 2017
Sources of SG&A expense	Twenty-Six Weeks Ended July 1, 2018		Amount			Percent
	(In thousands, except percent data)
U.S.^(a)	$	107,616	$	79		0.1	%
U.K. and Europe^(b)	46,768		(10,708		)	(18.6	)%
Mexico^(c)	18,874		2,079			12.4	%
Total SG&A expense	$	173,258	$	(8,550	)	(4.7	)%

Sources of administrative restructuring charges	Twenty-Six Weeks Ended July 1, 2018		Change from Twenty-Six Weeks Ended June 25, 2017
Sources of administrative restructuring charges	Twenty-Six Weeks Ended July 1, 2018		Amount			Percent
	(In thousands, except percent data)
U.S.^(d)	$	1,924	$	(2,425	)	(55.8	)%
U.K. and Europe	—		—			—	%
Mexico	—		—			—	%
Total administrative restructuring charges	$	1,924	$	(2,425	)	(55.8	)%

(a)

SG&A expense incurred by our U.S. segment during the twenty-six weeks ended July 1, 2018 increased $0.1 million, or 0.1%, from SG&A expense incurred by our U.S. segment during the twenty-six weeks ended June 25, 2017, primarily because of a $5.7 million increase in professional service expenses resulting from increased consulting fees and legal fees related to pending litigation, partially offset by a $3.8 million decrease in benefits resulting from a decrease in incentive compensation and a $2.6 million decrease in marketing and development expenses resulting from decreased market research costs. Other factors affecting SG&A expense were individually immaterial.

(b)

SG&A expense incurred by our U.K. and Europe segment during the twenty-six weeks ended July 1, 2018 decreased $10.7 million, or 18.6%, from SG&A expense incurred by our U.K. and Europe segment during the twenty-six weeks ended June 25, 2017. SG&A expense incurred by our U.K. and Europe segment decreased primarily because of an $11.4 million decrease in selling expenses related to freight and a $3.8 million decrease in management fees paid to JBS. Moy Park no longer pays a management fee to JBS subsequent to its acquisition by Pilgrim's. These decreases in SG&A expenses were partially offset by a $3.3 million increase in severance expenses. Other factors affecting SG&A expense were individually immaterial.

(c)

SG&A expense incurred by our Mexico segment during the twenty-six weeks ended July 1, 2018 increased $2.1 million, or 12.4%, from SG&A expense incurred by our Mexico segment during the twenty-six weeks ended June 25, 2017. SG&A expense incurred by our Mexico segment increased primarily because of $1.5 million increase in payroll expenses, a $0.9 million increase in employee relations expenses, ~~and~~ a ~~$1.4~~$0.9 million increase ~~advertising and promotion expenses that were~~in customer relationship amortization, partially offset by a ~~$0.8~~$1.1 million ~~decrease in contract service expenses.~~gain on asset disposals. Other factors affecting SG&A expense were individually immaterial.

(d)

Administrative restructuring charges incurred by ~~the~~our U.S. segment during the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~July 1, 2018 included ~~a $3.5 million impairment of the aggregate carrying amount of an asset group held for sale in Alabama, $2.6~~$1.0 million in severance costs related to the GNP acquisition, $0.7 million in severance, asset impairment and ~~the elimination~~lease obligations resulting from termination of ~~prepaid costs totaling $0.7~~40 North Foods operations and $0.2 million related to ~~obsolete software assumed in~~ the ~~GNP acquisition,~~


~~(e)~~	~~Administrative restructuring charges incurred by~~closure of the ~~U.K. and Europe segment during the thirty-nine weeks ended September 24, 2017 included a $1.7 million impairment of property in Dublin, Ireland.~~Luverne, Minnesota facility.

Net interest expense. Net interest expense increased ~~11.1%~~109.3% to ~~$62.8~~$84.1 million recognized in the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~July 1, 2018 from ~~$56.5 million~~$40.2 million recognized in the ~~thirty-nine~~twenty-six weeks ended ~~September~~June 25, ~~2016 primarily because of an increase in average borrowings compared to the same period in the prior year.~~2017. Average borrowings increased from ~~$1.5 billion~~$1,824.2 million in the ~~thirty-nine~~twenty-six weeks ended ~~September~~June 25, ~~2016~~2017 to ~~$1.8 billion~~$2,716.7 million in the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017 due to increased borrowings necessary to fund the GNP acquisition.~~July 1, 2018. The weighted average interest rate increased from 4.4% in the ~~thirty-nine~~twenty-six weeks ended ~~September~~ended June 25, ~~2016~~2017 to ~~4.5%~~5.1% in the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017.~~July 1, 2018.

Income taxes. Income tax expense ~~increased~~decreased to ~~$278.0~~$75.5 million, a 25.1% effective tax rate, for the twenty-six weeks ended July 1, 2018 compared to income tax expense of $164.7 million, a 32.2% effective tax rate, for the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017 compared to income tax expense of $203.0 million, a 34.0% effective tax rate, for the thirty-nine~~

~~weeks ended September~~June 25, ~~2016.~~2017. The ~~increase~~decrease in income tax expense in ~~2017~~2018 resulted primarily from ~~an increase~~a reduction a reduction in pre-tax ~~income.~~income as well as a reduction in the U.S. corporate income tax rate because of the recently enacted Tax Act.

Liquidity and Capital Resources

The following table presents our available sources of liquidity as of ~~September 24, 2017:~~July 1, 2018:


Source of Liquidity	Facility Amount		Amount Outstanding		Amount Available			Facility Amount		Amount Outstanding		Amount Available
	(In millions)							(In millions)
Cash and cash equivalents					$	401.8						$	640.8
Borrowing arrangements:
U.S. Credit Facility(a)	$	750.0	$	73.3	631.9		(a)	$	750.0	$	—	705.1
Mexico Credit Facility^(b)	84.5		84.5		—		(b)	75.4		—		75.4
U.K. and Europe Credit Facilities^(c)	122.8		13.9		108.9			143.8		39.6		104.2


(a)	Availability under the U.S. Credit Facility (as described below) is also reduced by our outstanding standby letters of credit. Standby letters of credit outstanding at ~~September 24, 2017~~July 1, 2018 totaled ~~$44.8~~$44.9 million.


(b)	As of ~~September 24, 2017,~~July 1, 2018, the U.S. dollar-equivalent of the amount available under the Mexico Credit Facility (as described below) was ~~$5,636.~~$75.4 million. The Mexico Credit Facility provides for a loan commitment of $1.5 billion Mexican pesos.

(c)

As of ~~September 24, 2017,~~July 1, 2018, the U.S. dollar-equivalent of the amount available under the U.K. and Europe Credit Facilities (as described below) ~~was $108.9~~were $104.2 million. The U.K. and Europe Credit Facilities provide for loan commitments of ~~£45.0~~£100.0 million (or ~~$60.1 million U.S. dollar equivalent), £20.0 million (or $26.8~~$132.1 million U.S. dollar equivalent) and ~~€30.0~~€10.0 million (or ~~$35.7~~$11.7 million U.S. dollar equivalent).

Long-Term Debt and Other Borrowing Arrangements

U.S. Senior Notes

On March 11, 2015, ~~the Company~~we completed a sale of $500.0 million aggregate principal amount of ~~its~~our 5.75% senior notes due ~~2025 (the~~2025. On September 29, 2017, we completed an add-on offering of $250.0 million of these senior notes. The issuance price of this add-on offering was 102.0%, which created gross proceeds of $255.0 million. The additional $5.0 million will be amortized over the remaining life of the senior notes. On March 7, 2018, we completed another add-on offering of $250.0 million of these senior notes (together with the senior notes issued in March 2015 and September 2017, the “Senior Notes due 2025”). The ~~Company~~issuance price of this add-on offering was 99.25%, which created gross proceeds of $248.1 million. The $1.9 million discount will be amortized over the remaining life of the senior notes. Each issuance of the Senior Notes due 2025 is treated as a single class for all purposes under the 2015 Indenture (defined below) and have the same terms.

The Senior Notes due 2025 are governed by, and were issued pursuant to, an indenture dated as of March 11, 2015 by and among us, our guarantor subsidiary and Wells Fargo Bank, National Association, as trustee (the “2015 Indenture”). The 2015 Indenture provides, among other things, that the Senior Notes due 2025 bear interest at a rate of 5.75% per annum from the date of issuance until maturity, payable semi-annually in cash in arrears, beginning on September 15, 2015 for the Senior Notes due 2025 that were issued in March 2015 and beginning on March 15, 2018 for the Senior Notes due 2025 that were issued in September 2017 and March 2018.

On September 29, 2017, we completed a sale of $600.0 million aggregate principal amount of our 5.875% senior notes due 2027. On March 7, 2018, we completed an add-on offering of $250.0 million of these senior notes (together with the senior notes issued in September 2017, the “Senior Notes due 2027”). The issuance price of this add-on offering was 97.25%, which created gross proceeds of $243.1 million. The $6.9 million discount will be amortized over the remaining life of the Senior Notes due 2027. Each issuance of the Senior Notes due 2027 is treated as a single class for all purposes under the 2017 Indenture (defined below) and have the same terms.

The Senior Notes due 2027 are governed by, and were issued pursuant to, an indenture dated as of September 29, 2017 by and among us, our guarantor subsidiary and U.S. Bank National Association, as trustee (the “2017 Indenture”). The 2017 Indenture provides, among other things, that the Senior Notes due 2027 bear interest at a rate of 5.875% per annum from the date of issuance until maturity, payable semi-annually in cash in arrears, beginning on March 30, 2018 for the Senior Notes due 2027 that were issued in September 2017 and beginning on March 15, 2018 for the Senior Notes due 2027 that were issued in March 2018.

The Senior Notes due 2025 and the Senior Notes due 2027 are each guaranteed on a senior unsecured basis by our guarantor subsidiary. In addition, any of our other existing or future domestic restricted subsidiaries that incur or guarantee any other indebtedness (with limited exceptions) must also guarantee the Senior Notes due 2025 and the Senior Notes due 2027. The Senior Notes due 2025 and the Senior Notes due 2027 and related guarantees are unsecured senior obligations of us and our guarantor subsidiary and rank equally with all of our and our guarantor subsidiary’s other unsubordinated indebtedness. The Senior Notes due 2025, the 2015 Indenture, the Senior Notes due 2027 and the 2017 Indenture also contain customary covenants

and events of default, including failure to pay principal or interest on the Senior Notes due 2025 and the Senior Notes due 2027 when due, among others.

We used the net proceeds from the sale of the Senior Notes due 2025 and the Senior Notes due 2027 that were issued in September 2017 to repay ~~$350.0 million and $150.0 million~~in full the JBS S.A. Promissory Note issued as part of the ~~term loan indebtedness under~~Moy Park acquisition and for general corporate purposes. We used the ~~U.S. Credit Facility (defined below) on March 12, 2015 and April 22, 2015, respectively. On September 29, 2017,~~net proceeds from the ~~Company completed an add-on offering of $250.0 million~~sale of the Senior Notes due 2025 ~~(the “Additional~~and the Senior Notes due ~~2025”).~~2027 that were issued in March 2018 to pay the second tender price of Moy Park Notes (as described below), repay a portion of outstanding secured debt, and for general corporate purposes. The ~~Additional~~ Senior Notes due 2025 ~~will be treated as a single class with~~and the ~~existing~~ Senior Notes due ~~2025 for all purposes under the 2015 Indenture (defined below) and will have the same terms as those of the existing Senior Notes due 2025. The Additional Senior Notes due 2025~~2027 were sold to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States to non-U.S. persons pursuant to Regulation S under the Securities Act.

The Senior Notes due 2025 and the Additional Senior Notes due 2025 are governed by, and were issued pursuant to, an indenture dated as of March 11, 2015 by and among the Company, its guarantor subsidiary and Wells Fargo Bank, National Association, as trustee (the “2015 Indenture”). The 2015 Indenture provides, among other things, that the Senior Notes due 2025 and the Additional Senior Notes due 2025 bear interest at a rate of 5.75% per annum from the date of issuance until maturity, payable semi-annually in cash in arrears, beginning on September 15, 2015 for the Senior Notes due 2025 and March, 15 2018 for the Additional Senior Notes due 2025. The Senior Notes due 2025 and the Additional Senior Notes due 2025 are guaranteed on a senior unsecured basis by the Company’s guarantor subsidiary. In addition, any of the Company’s other existing or future domestic restricted subsidiaries that incur or guarantee any other indebtedness (with limited exceptions) must also guarantee the Senior Notes due 2025 and the Additional Senior Notes due 2025. The Senior Notes due 2025 and the Additional Senior Notes due 2025 and related guarantees are unsecured senior obligations of the Company and its guarantor subsidiary and rank equally with all of the Company’s and its guarantor subsidiary’s other unsubordinated indebtedness. The Senior Notes due 2025 and the Additional Senior Notes due 2025 and the 2015 Indenture also contain customary covenants and events of default, including failure to pay principal or interest on the Senior Notes due 2025 and the Additional Senior Notes due 2025 when due, among others.

On September 29, 2017, the Company completed a sale of $600.0 million aggregate principal amount of its 5.875% senior notes due 2027 (the “Senior Notes due 2027”). The Company used the net proceeds from the sale of the Senior Notes due 2027 to repay in full the JBS S.A. Promissory Note (defined below) issued as part of the Moy Park acquisition. The Senior Notes due 2027 were sold to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and outside the United States to non-U.S. persons pursuant to Regulation S under the Securities Act.

the date of issuance until maturity, payable semi-annually in cash in arrears, beginning on March 30, 2018. The Senior Notes due 2027 are guaranteed on a senior unsecured basis by the Company’s guarantor subsidiary. In addition, any of the Company’s other existing or future domestic restricted subsidiaries that incur or guarantee any other indebtedness (with limited exceptions) must also guarantee the Senior Notes due 2027. The Senior Notes due 2027 and related guarantees are unsecured senior obligations of the Company and its guarantor subsidiary and rank equally with all of the Company’s and its guarantor subsidiary’s other unsubordinated indebtedness. The Senior Notes due 2027 and the 2017 Indenture also contain customary covenants and events of default, including failure to pay principal or interest on the Senior Notes due 2027 when due, among others.

Moy Park Senior Notes

OnBetween May 29, 2014 and April 17, 2015, Moy Park (Bondco) ~~Plc~~plc completed the sale of ~~a £200.0~~£300.0 million aggregate principal amount of its 6.25% senior notes due 2021 (the “Moy Park Senior Notes”). ~~On April 17, 2015, an add-on offering of £100.0 million~~Between November 3, 2017 and March 8, 2018, Moy Park (Bondco) plc completed the purchase for cash of the Moy Park Senior Notes (the “Additional Moy Park Notes”) was completed. The Moy Park Notes and the Additional Moy Park Notes were sold to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and outside the United States to non-U.S. persons pursuant to Regulation S under the Securities Act.

The Moy Park Notes and the Additional Moy Park Notes are governed by, and were issued pursuant to, an indenture dated as of May 29, 2014 by Moy Park (Bondco) Plc, as issuer, Moy Park Holdings (Europe) Limited, Moy Park (Newco) Limited, Moy Park Limited, O’Kane Poultry Limited, as guarantors, and The Bank of New York Mellon, as trustee (the “Moy Park Indenture”). The Moy Park Indenture provides, among other things, that the Moy Park Notes and the Additional Moy Park Notes bear interest atthrough a rate of 6.25% per annum from the date of issuance until maturity, payable semiannually in cash in arrears, beginning on November 29, 2014 for the Moy Park Notes and May 28, 2015 for the Additional Moy Park Notes. The Moy Park Notes and the Additional Moy Park Notes are guaranteed by each of the subsidiary guarantors described above. The Moy Park Indenture contains customary covenants and events of default that may limit Moy Park (Bondco) Plc’s ability and the ability of certain subsidiaries to incur additional debt, declare or pay dividends or make certain investments, among others.

U.S. Credit Facility

On May 8, 2017, ~~the Company~~we and certain of ~~its~~our subsidiaries entered into a Third Amended and Restated Credit Agreement (the “U.S. Credit Facility”) with Coöperatieve Rabobank U.A., New York Branch (“Rabobank”), as administrative agent and collateral agent, and the other lenders party thereto. The U.S. Credit Facility provides for a revolving loan commitment of up to $750.0 million and a term loan commitment of up to $800.0 million (the “Term Loans”). The U.S. Credit Facility also includes an accordion feature that allows ~~the Company,~~us, at any time, to increase the aggregate revolving loan and term loan commitments by up to an additional $1.0 billion, subject to the satisfaction of certain conditions, including obtaining the lenders’ agreement to participate in the increase.

The revolving loan commitment under the U.S. Credit Facility matures on May 6, 2022. All principal on the Term Loans is due at maturity on May 6, 2022. Installments of principal are required to be made, in an amount equal to 1.25% of the original principal amount of the Term Loans, on a quarterly basis prior to the maturity date of the Term Loans. Covenants in the U.S. Credit Facility also require ~~the Company~~us to use the proceeds ~~it receives~~we receive from certain asset sales and specified debt or equity issuances and upon the occurrence of other events to repay outstanding borrowings under the U.S. Credit Facility. As of ~~September 24, 2017, the company~~July 1, 2018, we had Term Loans outstanding totaling ~~$790.0~~$760.0 million and the amount available for borrowing under the revolving loan commitment was ~~$631.9~~$705.1 million. ~~The Company~~We had letters of credit of ~~$44.8~~$44.9 million and no borrowings ~~of $73.3 million~~ outstanding under the revolving loan commitment as of ~~September 24, 2017.~~July 1, 2018.

The U.S. Credit Facility includes a $75.0 million sub-limit for swingline loans and a $125.0 million sub-limit for letters of credit. Outstanding borrowings under the revolving loan commitment and the Term Loans bear interest at a per annum rate equal to (i) in the case of LIBOR loans, LIBOR plus 1.50% through ~~September 24,~~March 26, 2017 and, thereafter, based on ~~the Company’s~~our net senior secured leverage ratio, between LIBOR plus 1.25% and LIBOR plus 2.75% and (ii) in the case of alternate base rate loans, the base rate plus 0.50% through ~~September 24,~~March 26, 2017 and, based on ~~the Company’s~~our net senior secured leverage ratio, between the base rate plus 0.25% and base rate plus 1.75% thereafter.

The U.S. Credit Facility contains financial covenants and various other covenants that may adversely affect ~~the Company’s~~our ability to, among other things, incur additional indebtedness, incur liens, pay dividends or make certain restricted payments, consummate certain assets sales, enter into certain transactions with JBS and ~~the Company’s~~our other affiliates, merge,

consolidate and/or sell or dispose of all or substantially all of our assets. The U.S. Credit Facility requires ~~the Company~~us to comply with a minimum level of tangible net worth covenant. The U.S. Credit Facility also provides that we may not incur capital expenditures in excess of $500.0 million in any fiscal year. ~~The Company is~~We are currently in compliance with the covenants under the U.S. Credit Facility.

All obligations under the U.S. Credit Facility continue to be unconditionally guaranteed by certain of ~~the Company’s~~our subsidiaries and continue to be secured by a first priority lien on (i) the accounts receivable and inventory of ~~our company~~us and ~~its~~our non-Mexico subsidiaries, (ii) 100% of the equity interests in our domestic subsidiaries, To-Ricos, Ltd. and To-Ricos Distribution, Ltd., and 65% of the equity interests in our direct foreign subsidiaries and (iii) substantially all of the assets of ~~the Company~~us and ~~the~~our guarantors under the U.S. Credit Facility.

On July 20, 2018, we, and certain of our subsidiaries entered into a Fourth Amended and Restated Credit Agreement with CoBank, ACB, as administrative agent and collateral agent, and the other lenders party thereto. See “Note 22. Subsequent Events” for additional information.

Mexico Credit Facility

On September 27, 2016, certain of our Mexican subsidiaries entered into an unsecured credit agreement (the “Mexico Credit Facility”) with BBVA Bancomer, S.A. Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer, as lender. The loan commitment under the Mexico Credit Facility was $1.5 billion Mexican pesos. Outstanding borrowings under the Mexico Credit Facility accrued interest at a rate equal to the Interbank Equilibrium Interest Rate plus 0.95%. The Mexico Credit Facility is scheduled to mature on September 27, 2019. ~~As of September 24, 2017, the U.S. dollar-equivalent loan commitment under the Mexico Credit Facility was $84.5 million, and there were $84.5 million outstanding~~Outstanding borrowings under the Mexico Credit Facility ~~that~~ bear interest at a per annum rate of ~~8.33%~~8.81%. As of ~~September 24, 2017,~~July 1, 2018, the U.S. dollar-equivalent loan commitment and the U.S. dollar-equivalent borrowing availability ~~was less than $0.1 million.~~under the Mexico Credit Facility were $75.4 million and $75.4 million, respectively. As of July 1, 2018, there were no outstanding borrowings under the Mexico Credit Facility.

~~U.K. and Europe Credit Facilities~~Moy Park Bank of Ireland Revolving Facility Agreement

The Bank of Ireland Facility Agreement contains representations and warranties, covenants, indemnities and conditions that we believe are customary for transactions of this type. Pursuant to the terms of the Bank of Ireland Facility Agreement, Moy Park is required to meet certain financial and other restrictive covenants. Additionally, Moy Park is prohibited from taking certain actions without consent of the lenders, including, without limitation, incurring additional indebtedness, entering into certain mergers or other business combination transactions, permitting liens or other encumbrances on its assets and making restricted payments, including dividends, in each case except as expressly permitted under the Bank of Ireland Facility Agreement. The Bank of Ireland Facility Agreement contains events of default that we believe are customary for transactions of this type. If a default occurs, any outstanding obligations under the Bank of Ireland Facility Agreement may be accelerated.

Moy Park Multicurrency Revolving Facility Agreement

On March 19, 2015, Moy Park Holdings (Europe) ~~Limited, a subsidiary of Granite Holdings Sàrl,~~Ltd. and its subsidiaries, entered into an agreement with Barclays Bank plc, which ~~matures~~expired on March 19, 2018. The agreement ~~provides~~provided for a multicurrency revolving loan commitment of up to £20.0 million. As of September 24, 2017, the U.S. dollar-equivalent loan commitment under Moy Park multicurrency revolving facility was $26.8 million and there were $10.0 million outstanding borrowings. Outstanding borrowings under the facility bear interest at a per annum rate equal to LIBOR plus a margin determined by Company’s Net Debt to EBITDA ratio. The current margin stands at 2.5%. As of September 24, 2017, the U.S. dollar-equivalent borrowing availability was $16.8 million.

Moy Park Receivables Finance Agreement

The Receivables Finance Agreement contains financial covenants and various other covenants that may adversely affect Moy Park's ability to, among other things, incur additional indebtedness, consummate certain asset sales, enter into certain transactions with JBS and the Company's other affiliates, merge, consolidate and/or sell or dispose of all or substantially all of Moy Park's assets.

Moy Park France Invoice Discounting Facility

As of July 1, 2018, the U.S. dollar-equivalent loan commitment and borrowing availability under the Invoice Discounting Facility were $11.7 million and $11.7 million, respectively. As of July 1, 2018, there were no outstanding borrowings under the Invoice Discounting Facility.

transactions with JBS and ~~the Company's~~our other affiliates, merge, consolidate and/or sell or dispose of all or substantially all of Moy Park's assets.

~~JBS S.A. Promissory Note~~Collateral

~~On September 8, 2017, Onix Investments UK Ltd., a wholly owned subsidiary~~Substantially all of ~~Pilgrim’s Pride Corporation, executed a subordinated promissory note payable~~our domestic inventories and domestic fixed assets are pledged as collateral to ~~JBS S.A. (the “JBS S.A. Promissory Note”) for £562.5 million, which had a maturity date of September 6, 2018. Interest~~secure the obligations under the U.S. Credit Facility. In addition, there is no collateral pledged on the ~~outstanding principal balance of the JBS S.A. Promissory Note accrued at the rate per annum equal to (i) from~~other U.K. and after November 8, 2017 and prior to January 7, 2018, 4.00%, (ii) from and after January 7, 2018 and prior to March 8, 2018, 6.00% and (iii) from and after March 8, 2018, 8.00%. The JBS S.A. Promissory Note was repaid in full on October 2, 2017 using the net proceeds from the sale of Senior Notes due 2027 and the Additional Senior Notes due 2025.Europe credit facilities.

Off-Balance Sheet Arrangements

We maintain operating leases for various types of equipment, some of which contain residual value guarantees for the market value of assets at the end of the term of the lease. The terms of the lease maturities range from one to ten years. We estimate the maximum potential amount of the residual value guarantees is approximately ~~$11.0~~$51.0 million; however, the actual amount would be offset by any recoverable amount based on the fair market value of the underlying leased assets. No liability has been recorded related to this contingency as the likelihood of payments under these guarantees is not considered to be probable, and the fair value of the guarantees is immaterial. We historically have not experienced significant payments under similar residual guarantees.

We are a party to many routine contracts in which we provide general indemnities in the normal course of business to third parties for various risks. Among other considerations, we have not recorded a liability for any of these indemnities as, based upon the likelihood of payment, the fair value of such indemnities would not have a material impact on our financial condition, results of operations and cash flows.

Historical Flow of Funds

Twenty-Six Weeks Ended July 1, 2018

Cash provided by operating activities was ~~$618.5 million and $552.0~~$304.0 million for the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017 and September 25, 2016, respectively.~~July 1, 2018. The ~~increase in~~ cash flows provided by operating activities ~~was~~resulted primarily ~~a result of increased~~from net income ~~for the thirty-nine weeks ended September 24, 2017 as compared to the thirty-nine weeks ended September 25, 2016 and an increase in net operating assets~~ of ~~$209.8~~$225.6 million, for the thirty-nine weeks ended September 24, 2017 as compared to an increase in net operating assets of $15.1 million for the thirty-nine weeks ended September 25, 2016. The impact of net income and net operating assets movement on cash provided by operating activities was partially offset by increased net noncash expenses ~~for~~of $143.1 million and inventories of $60.3 million. These cash flows were offset by the ~~thirty-nine weeks ended September 24, 2017 as compared~~use of $161.6 million in cash related to income taxes, the ~~thirty-nine weeks ended September 25, 2016.~~use of $31.9 million in cash related to trade accounts and other receivables and the use of $31.1 million in cash related to prepaid expenses and other current assets.

~~Trade~~The change in trade accounts and other receivables, including accounts receivable from related parties, ~~increased $176.2~~represented a$31.9 million ~~or 39.2%,~~use of cash related to ~~$625.8 million at September 24, 2017 from $449.6 million at December 25, 2016.~~ operating activities for the twenty-six weeks ended July 1, 2018. This change is primarily due to customer payment timing.

The change ~~resulted primarily from an increase~~ in ~~sales generated in~~inventories represented a $60.3 million source of cash related to operating activities for the ~~two~~twenty-six weeks ended September 24, 2017 as compared to sales generated in the two weeks ended December 25, 2016 and $67.6 million in increased receivables related to the GNP acquisition. Trade accounts and other receivables, including accounts receivable from related parties, increased $51.4 million, or 11.9%, to $482.9 million at September 25, 2016 from $431.5 million at December 27, 2015. The change resulted primarily from a increase in sales generated in the two weeks ended September 25, 2016 as compared to sales generated in the two weeks ended December 27, 2015.

Inventories increased $220.6 million, or 22.6%, to $1,196.2 million at September 24, 2017 from $975.6 million at December 25, 2016. This change resulted primarily from an increase of $132.8 million for build up of freezer inventories, a $46.5 million increase in inventory related to the GNP acquisition and increased work-in-process inventories of $25.1 million. Inventories decreased $4.9 million, or 0.5%, to $968.4 million at September 25, 2016 from $973.3 million at December 27, 2015.

Prepaid expenses and other current assets increased $21.0 million, or 25.6%, to $102.9 million at September 24, 2017 from $81.9 million at December 25, 2016. This increase resulted primarily from a $22.5 million net increase in value-added tax receivables. Prepaid expenses and other current assets decreased $5.6 million, or 5.2%, to $101.1 million at September 25, 2016 from $106.7 million at December 27, 2015.July 1, 2018. This change resulted primarily from a ~~$6.1 million net~~ decrease in our finished products inventory.

The change in prepaid expenses and other current assets represented a $31.1 million use of cash related to operating activities for the twenty-six weeks ended July 1, 2018. This change resulted primarily from a net increase in both commodity derivatives and value-added tax ~~receivables~~receivables.

The change in accounts payable, revenue contract liabilities, accrued expenses and ~~a $6.5 million decrease in prepaid workers compensation reserves, primarily offset by a $5.9 million increase in margin cash.~~

~~Accounts payable,~~other current liabilities, including accounts payable to related parties, ~~decreased $44.2~~represented a $104.0 million ~~or 5.6%,~~source of cash related to ~~$750.6 million at September 24, 2017 from $794.8 million at December 25, 2016.~~operating activities for the twenty-six weeks ended July 1, 2018. This change resulted primarily from ~~a $46.9 million decrease~~the timing of payments.

The change in trade payables, partially offset by a $2.6 million increase in the payable to related parties. Accounts payable, including accounts payable to related parties, increased $8.8 million, or 1.2%, to $755.2 million at September 25, 2016 from $746.4 million at December 27, 2015. This change resulted primarily from a $4.1million increase in trade payables and a $4.7 million increase in the payables to related parties.

Accrued expenses and other current liabilities increased $69.5 million, or 20.0%, to $416.5 million at September 24, 2017 from $347.0 million at December 25, 2016. This change resulted primarily from accrued expenses of $22.0 million related to the acquired GNP business, a $24.4 million increase in sales and marketing liabilities and a $20.5 million increase in contract services. Accrued expenses and other current liabilities decreased $17.4 million, or 4.7%, to $351.6 at September 25, 2016 from $369.0 million at December 27, 2015. This change resulted primarily from a $19.4 million decrease in incentive pay accruals.

~~Income~~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, ~~increased by $186.8~~represented a $161.6 million ~~or 65.7%,~~use of cash related to ~~a net liability position of $471.4 million at September 24, 2017 from a net liability position of $284.6 million at December 25, 2016.~~operating activities for the twenty-six weeks ended July 1, 2018. This change resulted primarily from tax expense recorded on our year-to-date income and the timing of estimated tax payments. Income taxes increased by $5.4 million, or 2.3%, to a net liability position of $239.1 million at September 25, 2016 from a net liability position of $233.6 million at December 27, 2015. This change resulted primarily from tax expense recorded on our year-to-date income and the timing of estimated tax payments.

Net noncash expenses ~~totaled $244.0~~provided $143.1 million ~~and $172.4 million~~in cash related to operating activities for the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017 and September 25, 2016, respectively.~~ended July 1, 2018. Net noncash ~~expenses for the thirty-nine weeks ended September 24, 2017~~expense items included depreciation and amortization ~~expense~~ of ~~$204.6~~$139.5 million, $5.6 million related to share-based compensation, foreign currency transaction loss related to borrowing arrangements of $4.2 million, and noncash loss on early extinguishment of debt of $4.9 million, which were partially offset by a deferred income tax ~~expense~~benefit of $25.8 million and other net noncash expenses totaling $13.6 million. Net noncash expenses for the thirty-nine weeks ended September 25, 2016 included depreciation and amortization expense of $174.1 million, a net gain on property disposals of $7.3 million and other net noncash expenses totaling $5.6$11.9 million.

Cash used in investing activities ~~was $914.3 million and $208.1~~totaled $154.0 million for the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017 and September 25, 2016, respectively. The increase was primarily attributable to funding of the GNP and Moy Park acquisitions and an increase in capital spending.~~July 1, 2018. Cash ~~of $357.2 million and $301.3 million was~~ used to acquire ~~GNP~~property, plant and ~~Moy Park, respectively, net of cash acquired,~~equipment totaled $155.2 million. Capital expenditures were primarily incurred to improve operational efficiencies and reduce costs. Cash proceeds generated from property disposals totaled $1.2 million during the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017. Capital expenditures~~July 1, 2018.

Cash used by financing activities totaled ~~$258.4~~$69.5 million ~~and $221.0 million in~~for the ~~thirty-nine~~twenty-six weeks ended September 24, 2017 and September 25, 2016, respectively. Capital expenditures increased by $37.3 million primarily because of the number of projects that were active during the thirty-nine weeks ended weeks ended September 24, 2017 as compared to the thirty-nine weeks ended September 25, 2016. Capital expenditures for 2017 cannot exceed $500.0 million under the U.S. Credit Facility.July 1, 2018. Cash proceeds from ~~property disposals in the thirty-nine weeks ended September 24, 2017 and September 25, 2016 were $2.6 million and $13.0 million, respectively.~~

~~Cash provided by financing activities was $389.8~~long-term debt totaled $604.1 million and cash used in financing activities was $743.4 million in the thirty-nine weeks ended September 24, 2017 and September 25, 2016, respectively. During the thirty-nine weeks ended September 24, 2017, cash of $609.7 million was used for payments on our revolving lines of credit and capital lease obligations, cash of $14.6 million was used to purchase common stockproceeds from equity contributions under the share repurchase program and cash of $4.6 million was used to pay capitalized loan costs. During the thirty-nine weeks ended September 24, 2017, cash of $1.0 billion, including $272.0 million used to purchase GNP, was provided through our revolving lines of credit and cash of $5.0 million was provided from a tax sharing agreement with JBS USA ~~Holdings. During the thirty-nine weeks ended September 25, 2016,~~Food Company Holdings totaled $5.6 million. These sources of cash ~~of $715.7~~were offset by $673.5 million ~~was used to fund a special~~in cash ~~dividend, cash of $504.1 million was~~ used for payments on ~~our~~ revolving lines of credit, long-term borrowings and capital lease obligations ~~cash of $65.6~~and $5.7 million ~~was used for payments on a current note payable to bank,~~in cash ~~of $20.3 million was used to purchase common stock under the share repurchase program and cash of $0.7 million was~~ used to pay capitalized loan costs. ~~During~~

Twenty-Six Weeks Ended June 25, 2017

Cash provided by operating activities was $333.5 million for the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017,~~June 25, 2017. The cash flows provided by operating activities were primarily from net income of ~~$515.3~~$345.9 million, net noncash expenses of $168.8 million, changes in income taxes of $73.2 million and deferred income tax expense of $25.9 million. These cash flows were offset by the use of $93.9 million in cash related to inventories, the use of $93.4 million in cash related to trade accounts and other receivables and the use of $46.5 million in cash related to accounts payable, accrued expenses and other current liabilities.

The change in trade accounts and other receivables, including accounts receivable from related parties, represented a $93.4 million use of cash related to operating activities for the twenty-six weeks ended June 25, 2017. This change is primarily due to customer payment timing.

The change in inventories represented a $93.9 million use of cash related to operating activities for the twenty-six weeks ended June 25, 2017. This change in cash related to inventories was primarily related to increases in our live chicken and finished chicken products.

The change in prepaid expenses and other current assets represented a $15.3 million use of cash related to operating activities for the twenty-six weeks ended June 25, 2017. This change resulted primarily from a net decrease in commodity derivatives.

The change in accounts payable, revenue contract liabilities, accrued expenses and other current liabilities, including accounts payable to related parties, represented a $46.5 million use of cash related to operating activities for the twenty-six weeks ended June 25, 2017. This change resulted primarily from the timing of 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 $73.2 million source of cash related to operating activities for the twenty-six weeks ended June 25, 2017. This change resulted primarily from the timing of estimated tax payments.

Net noncash expenses provided ~~through~~$168.8 million in cash related to operating activities for the twenty-six weeks ended June 25, 2017. Net noncash expense items included depreciation and amortization of $132.6 million, cash proceeds of $25.9 million related to deferred income tax expense, cash proceeds of $5.6 million from foreign currency transactions related to borrowing arrangements and cash proceeds of $3.5 million and $1.9 million related to asset impairment and share-based compensation, respectively.

Cash used in investing activities totaled $556.2 million for the twenty-six weeks ended June 25, 2017. Cash used to acquire GNP, net of cash acquired, totaled $359.7 million, and cash used to acquire property, plant and equipment totaled $198.0 million. Capital expenditures were primarily incurred to improve operational efficiencies, reduce costs and tailor processes to meet specific customer needs in order to further solidify our competitive advantages. Cash proceeds from property disposals totaled $1.5 million.

Cash proceeds from financing activities totaled $409.4 million for the twenty-six weeks ended June 25, 2017. Cash proceeds from long-term debt totaled $1,013.7 million and cash proceeds from equity contributions under a tax sharing agreement with JBS USA Food Company Holdings totaled $5.0 million. These sources of cash were partially offset by $591.9 million in cash used for payments on revolving lines of credit, long-term borrowings and capital lease obligations, and $14.6 million in cash used for the purchase of ~~$36.8 million was provided through~~common stock under a ~~current note payable.~~share repurchase program.

5153

Contractual Obligations

Contractual obligations at ~~September 24, 2017~~July 1, 2018 were as follows:


Contractual Obligations^(a)	Total		Less than One Year		One to Three Years		Three to Five Years		Greater than Five Years		Total		Less than One Year		One to Three Years		Three to Five Years		Greater than Five Years
	(In thousands)										(In thousands)
Long-term debt^(b)	$	2,618,378	$	809,734	$	164,987	$	1,143,657	$	500,000	$	2,650,202	$	40,494	$	80,085	$	679,623	$	1,850,000
Interest^(c)	431,220		83,945		155,926		119,474		71,875		988,110		134,804		265,162		248,425		339,719
Capital leases	10,803		5,780		4,999		24		—		6,910		4,503		2,385		22		—
Operating leases	230,887		50,444		78,295		51,915		50,233		235,180		54,878		104,699		45,323		30,280
Derivative liabilities	4,169		4,169		—		—		—		268,924		268,924		—		—		—
Purchase obligations^(d)	122,505		122,505		—		—		—		187,664		187,037		627		—		—
Total	$	3,417,962	$	1,076,577	$	404,207	$	1,315,070	$	622,108	$	4,336,990	$	690,640	$	452,958	$	973,393	$	2,219,999


(a)	The total amount of unrecognized tax benefits at ~~September 24, 2017~~July 1, 2018 was ~~$15.9~~$11.9 million. We did not include this amount in the contractual obligations table above as reasonable estimates cannot be made at this time of the amounts or timing of future cash outflows.

(b)

Long-term debt is presented at face value and excludes ~~$44.8~~$44.9 million in letters of credit outstanding related to normal business transactions. Included in the long-term debt maturing in less than one year is the $753.8 million JBS S.A. Promissory Note, which was paid off on October 2, 2017 using the net proceeds from the sale of Senior Notes due 2027 on September 29, 2017 and the $250.0 million add-on to existing Senior Notes.


(c)	Interest expense in the table above assumes the continuation of interest rates and outstanding borrowings as of ~~September 24, 2017.~~July 1, 2018.


(d)	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. Credit Facility,~~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.

On September 29, 2017, the Company completed an offering of $250.0 million Additional Senior Notes due 2025 and a sale of $600.0 million aggregate principal amount of the Senior Notes due 2027. The Company used the net proceeds from the sale of the Additional Senior Notes due 2025 and the Senior Notes due 2027 to repay in full the JBS S.A. Promissory Note issued as part of the Moy Park acquisition. See “Note 11. Long-Term Debt and Other Borrowing Arrangements” for additional information.

Recent Accounting Pronouncements

In May 2014, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued new accounting guidance on revenue recognition, which provides for a single five-step model to be applied to all revenue contracts with customers.

~~In July 2015, the FASB issued~~ We adopted this new ~~accounting~~ guidance on the subsequent measurement of inventory, which, in an effort to simplify unnecessarily complicated accounting guidance that can result in several potential outcomes, requires an entity to measure inventory at the lower of cost or net realizable value.effective January 1, 2018.

In February 2016, the FASB issued new accounting guidance on lease arrangements, which requires an entity that is a lessee to recognize the assets and liabilities arising from leases on the balance sheet.

~~In March 2016, the FASB issued~~ We will adopt this new ~~accounting~~ guidance on employee share-based payments, which requires an entity to amend accounting and reporting methodology for areas such as the income tax consequences of share-based payments, classification of share-based awards as either equity or liabilities, and classification of share-based payment transactions in the statement of cash flows.effective December 31, 2018.

In June 2016, the FASB issued new accounting guidance on the measurement of credit losses on financial instruments, which replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

~~In November 2016,~~ We are currently evaluating the ~~FASB issued~~impact of the new ~~accounting~~ guidance on ~~the classification~~our financial statements and ~~presentation of restricted cash in the statement of cash flows in order to eliminate the discrepancies that currently exist in how companies present these changes.~~have not yet selected an adoption date.

In March 2017, the FASB issued new accounting guidance on the presentation of net periodic pension cost and net periodic postretirement benefit cost, which requires the service cost component of net benefit cost to be reported in the same line of the income statement as other compensation costs earned by the employee and the other components of net benefit cost to be reported below income from operations.

We are currently evaluating the impact of the new guidance on our financial statements and have not yet selected an adoption date.

In February 2018, the FASB issued an accounting standard update that allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act. We are currently evaluating the impact of the new guidance on our financial statements and have not yet selected an adoption date.

In July 2018, the FASB issued an accounting standard update to improve non-employee share-based payment accounting. The accounting standard update more closely aligns the accounting for employee and non-employee share based payments. We are currently evaluating the impacts of the new guidance on our financial statements and have not yet selected an adoption date.

See “Note 1. Description of Business and Basis of Presentation” of our Condensed Consolidated and Combined Financial Statements included in this quarterly report for additional information relating to these new accounting pronouncements.

Critical Accounting Policies

During the ~~thirteen~~twenty-six weeks ended ~~September 24, 2017,~~July 1, 2018, (i) ~~we did not change any of~~updates to our ~~existing~~ critical accounting policies related to the adoption of ASC 2014-09, Revenue from Contracts with Customers on January 1, 2018 are included in “Note 13. Revenue Recognition”, (ii) no existing accounting policies became critical accounting policies because of an increase in the materiality of associated transactions or changes in the circumstances to which associated judgments and estimates relate and (iii) other than the changes included in "Note 13. Revenue Recognition", there were no significant changes in the manner in which critical accounting policies were applied or in which related judgments and estimates were developed.


~~ITEM 3.~~	~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

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 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.

Commodity Prices

We purchase certain commodities, primarily corn, ~~and~~ soybean meal 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. In the past, 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, (i) executing purchase agreements with suppliers for future physical delivery of feed ingredients at established prices and (ii) purchasing or selling derivative financial instruments such as futures and options.

For this sensitivity analysis, market risk is estimated as a hypothetical 10.0% change in the weighted-average cost of our

primary feed ingredients as of ~~September 24, 2017.~~July 1, 2018. However, fluctuations greater than 10.0% could occur. Based on our feed consumption during the thirteen weeks ended ~~September 24, 2017,~~July 1, 2018, such a change would have resulted in a change to cost of sales of approximately ~~$108.7~~$77.5 million, excluding the impact of any feed ingredients derivative financial instruments in that period. A 10.0% change in ending feed ingredient inventories at ~~September 24, 2017~~July 1, 2018 would be ~~$12.1~~$14.1 million, excluding any potential impact on the production costs of our chicken inventories.

~~The Company purchases~~We purchase commodity derivative financial instruments, specifically exchange-traded futures and options, in an attempt to mitigate price risk related to ~~its~~our anticipated consumption of commodity inputs for the next 12 months. A 10.0% change in corn and soybean meal ~~and soybean oil~~ prices on ~~September 24, 2017~~July 1, 2018 would have resulted in a change of approximately ~~$0.4~~$0.9 million in the fair value of our net commodity derivative asset position, including margin cash, as of that date.

Interest Rates

Our variable-rate debt instruments represent approximately ~~36.1%~~30.4% of our total debt at ~~September 24, 2017.~~July 1, 2018. Holding other variables constant, including levels of indebtedness, an increase in interest rates of 25 basis points would have increased our interest expense by ~~$0.6~~$0.5 million for the thirteen weeks ended ~~September 24, 2017.~~July 1, 2018.

Market risk for fixed-rate debt is estimated as the potential increase in fair value resulting from a hypothetical decrease in interest rates of 10.0%. Using a discounted cash flow analysis, a hypothetical 10.0% decrease in interest rates would have decreased the fair value of our fixed-rate debt by ~~approximately $5.4~~approximately $10.6 million as of ~~September 24, 2017.~~July 1, 2018.

Foreign Currency

Our earnings are also affected by foreign exchange rate fluctuations related to the Mexican peso net monetary position of our Mexico subsidiaries. We manage this exposure primarily by attempting to minimize our Mexican peso net monetary position.

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. We currently anticipate that the future cash flows of our Mexico subsidiaries will be reinvested in our Mexico segment.

The Mexican peso exchange rate can directly and indirectly impact our financial condition and results of operations in

several ways, including potential economic recession in Mexico because of devaluation of their currency. Foreign currency exchange ~~gains,~~losses, representing the change in the U.S. dollar value of the net monetary assets of our Mexican subsidiaries denominated in Mexican pesos, were a ~~gain~~loss of ~~$1.2~~$3.4 million and a ~~loss~~gain of ~~$4.1~~$1.8 million in the thirteen weeks ended ~~September 24, 2017~~July 1, 2018 and ~~September~~June 25, ~~2016,~~

2017, respectively. Foreign currency exchange ~~gains,~~losses, representing the change in the U.S. dollar value of the net monetary assets of our Mexican subsidiaries denominated in Mexican pesos, were a ~~gain~~loss of ~~$2.4~~$3.7 million and a gain of ~~$0.8~~$1.2 million in the ~~thirty-nine~~twenty-six weeks ended ~~September 24,~~July 1, 2018 and June 25, 2017, ~~and September 25, 2016,~~ respectively. The average exchange rates for the thirteen weeks ended ~~September 24,~~July 1, 2018 and June 25, 2017 ~~and September 25, 2016~~ were ~~17.81~~19.41 Mexican pesos to 1 U.S. dollar and ~~18.73~~18.59 Mexican pesos to 1 U.S. dollar, respectively. For this sensitivity analysis, market risk is estimated as a hypothetical 10.0% deterioration in the current exchange rate used to convert Mexican pesos to U.S. dollars as of ~~September 24, 2017~~July 1, 2018 and ~~September~~June 25, ~~2016.~~2017. However, fluctuations greater than 10.0% could occur. Based on the net monetary asset position of our Mexico segment at ~~September 24,~~July 1, 2018, such a change would have resulted in a increase in foreign currency transaction losses recognized in the thirteen weeks ended July 1, 2018 of approximately $2.7 million. Based on the net monetary asset position of our Mexico segment at June 25, 2017, such a change would have resulted in a decrease in foreign currency transaction gains recognized in the thirteen weeks ended ~~September 24,~~June 25, 2017 of approximately $2.0 million. Based on the net monetary asset position of our Mexico segment at September 25, 2016, such a change would have resulted in a decrease in foreign currency transaction gains recognized in the thirteen weeks ended September 25, 2016 of approximately $1.1$5.0 million. No assurance can be given as to how future movements in the Mexican peso could affect our future financial condition or results of operations.

Additionally, we are exposed to foreign exchange-related variability of investments and earnings from our foreign investments in Europe (including the U.K.). 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. At ~~September 24, 2017,~~July 1, 2018, our U.K. and Europe segment had net ~~equity~~assets of approximately ~~$617.7 million, or 35.2% of total net equity,~~$2.0 billion, denominated in British pounds, after consideration of our derivative and nonderivative financial instruments. Based on our sensitivity analysis, a 10% adverse change in exchange rates would cause a reduction of ~~$61.8~~$205.0 million to our net ~~equity.~~assets.

At ~~September 24, 2017,~~July 1, 2018, we had foreign currency forward contracts, which were designated and qualify as cash flow hedges, with an aggregate notional amount of ~~$22.7~~$27.6 million to hedge a portion of our investments in Europe (including the U.K.). On the basis of our sensitivity analysis, a weakening of the U.S. dollar against the British pound by 10% would result in a ~~$2.3~~$2.7 million negative change in our cash flows on settlement while a weakening of the U.S. dollar against the euro by 10% would result in a less than$0.1 million negative change in our cash flows on settlement. 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

Due to low to moderate inflation in the U.S., Europe (including the U.K.) and Mexico and our rapid inventory turnover rate, the results of operations have not been significantly affected by inflation during the past three-year period.

Forward Looking Statements

Certain written and oral statements made by our Company and subsidiaries of our Company may constitute “forward-looking statements” as defined under the Private Securities Litigation Reform Act of 1995. This includes statements made herein, in our other filings with the SEC, in press releases, and in certain other oral and written presentations. Statements of our intentions, beliefs, expectations or predictions for the future, denoted by the words “anticipate,” “believe,” “estimate,” “expect,” “project,” “plan,” “imply,” “intend,” “should,” “foresee” and similar expressions, are forward-looking statements that reflect our current views about future events and are subject to risks, uncertainties and assumptions. Such risks, uncertainties and assumptions include the following:

Matters affecting the chicken industry generally, including fluctuations in the commodity prices of feed ingredients and chicken;

Our ability to obtain and maintain commercially reasonable terms with vendors and service providers;

Our ability to maintain contracts that are critical to our operations;

Our ability to retain management and other key individuals;

Outbreaks of avian influenza or other diseases, either in our own flocks or elsewhere, affecting our ability to conduct our operations and/or demand for our poultry products;

Contamination of our products, which has previously and can in the future lead to product liability claims and product recalls;

Exposure to risks related to product liability, product recalls, property damage and injuries to persons, for which insurance coverage is expensive, limited and potentially inadequate;

Changes in laws or regulations affecting our operations or the application thereof;

Our ability to ensure that our directors, officers, employees, agents, third-party intermediaries and the companies to which we outsource certain of our business operations will comply with anti-corruption laws or other laws governing the conduct of business with government entities;

New immigration legislation or increased enforcement efforts in connection with existing immigration legislation that cause our costs of business to increase, cause us to change the way in which we do business or otherwise disrupt our operations;

Competitive factors and pricing pressures or the loss of one or more of our largest customers;

Inability to consummate, or effectively integrate, any acquisition, including the ~~acquisitions~~acquisition of Moy Park, ~~and GNP,~~ or to realize the associated anticipated cost savings and operating synergies;

Currency exchange rate fluctuations, trade barriers, exchange controls, expropriation and other risks associated with foreign segments;

Restrictions imposed by, and as a result of, the leverage of Pilgrim's ~~Pride's leverage;~~Pride;

Disruptions in international markets and distribution channels;

Our ability to maintain favorable labor relations with our employees and our compliance with labor laws;

Extreme weather or natural disasters;

The impact of uncertainties in litigation; and

Other risks described herein and under “Risk Factors” in our annual report on Form 10-K for the year ended December ~~25, 2016~~31, 2017 as filed with the SEC.

Actual results could differ materially from those projected in these forward-looking statements as a result of these factors, among others, many of which are beyond our control.

In making these statements, we are not undertaking, and specifically decline to undertake, any obligation to address or update each or any factor in future filings or communications regarding our business or results, and we are not undertaking to address how any of these factors may have caused changes to information contained in previous filings or communications. Although we have attempted to list comprehensively these important cautionary risk factors, we must caution investors and others that other factors may in the future prove to be important and affect our business or results of operations.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), “disclosure controls and procedures” means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it files with the U.S. Securities and Exchange Commission (“SEC”) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our ~~company~~Company in the reports that

it files with the SEC is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As of ~~September 24, 2017,~~July 1, 2018, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation

of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information we are required to disclose in our reports filed with the SEC is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

In connection with the evaluation described above, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, identified no change in the Company’s internal control over financial reporting that occurred during the ~~thirteen~~twenty-six weeks ended ~~September 24, 2017~~July 1, 2018 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company's evaluation of internal control over financial reporting did not include the internal control of GNP, which the Company acquired in the first quarter of 2017. The amount of total assets and revenue of GNP included in our Condensed Consolidated and Combined Financial Statements as of and for the thirty-nine weeks ended September 24, 2017 was $428.4 million and $322.4 million, respectively. Also, ourOur evaluation of internal control over financial reporting did not include the internal control of Moy Park, which the Company acquired in ~~the third quarter of~~September 2017. The amount of total assets and revenue of Moy Park included in our Condensed Consolidated and Combined Financial Statements as of and for the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~July 1, 2018 was ~~$2.2~~$2.0 billion and ~~$1.5~~$1.1 billion, respectively.

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PART II. OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

Tax Claims and Proceedings

In 2009, the IRS asserted claims against PPC totaling $74.7 million. PPC entered into two stipulations of Settled Issues agreements with the IRS (the “Stipulations”) on December 12, 2012 that accounted for approximately $29.3 millionA Mexico subsidiary of the ~~claims and should result in no additional tax due. PPC~~Company is currently ~~working with~~appealing an unfavorable tax adjustment proposed by Mexican Tax Authorities due to an examination of a specific transaction undertaken by the ~~IRS to finalize the complete~~Mexico subsidiary during tax ~~calculations associated with the Stipulations.~~years 2009 and 2010. Amounts under appeal are $24.3 million and $16.1 million for tax years 2009 and 2010, respectively. No loss has been recorded for these amounts at this time.

Other Claims and Proceedings

Between September 2, 2016 and October 13, 2016, a series of purported federal class action lawsuits styled as In re Broiler Chicken Antitrust Litigation, ~~Case~~ No. 1:16-cv-08637 were brought against PPC and 13 other producers by and on behalf of direct and indirect purchasers of broiler chickens alleging violations of federal and state antitrust and unfair competition laws. The complaints, which were filed with the U.S. District Court for the Northern District of Illinois, seek, among other relief, treble damages for an alleged conspiracy among defendants to reduce output and increase prices of broiler chickens from the period of January 2008 to the present. The class plaintiffs have filed three consolidated amended complaints: one on behalf of direct purchasers and two on behalf of distinct groups of indirect purchasers. The defendants, ~~(including PPC) moved~~including PPC, filed motions to dismiss these actions. On November 20, 2017, the Court denied all pending motions to dismiss with the exception of certain state-law claims by indirect purchasers that were dismissed or narrowed in scope. Discovery is proceeding and is currently scheduled to be complete by June 13, 2019. Between December 2017 and July 2018 eight individual direct action complaints (Affiliated Foods, Inc., et al., v. Claxton Poultry Farms, Inc., et al., No. 1:17-cv-08850; Winn Dixie Stores, Inc. v. Koch Foods, Inc., No. 1:18-cv-00245; Sysco Corp. v. Tyson Foods Inc., et al; No. 1:18-cv-00700; US Foods Inc. v. Tyson Foods Inc., et al; No. 1:18-cv-00702; Action Meat Distributors, Inc., et al., v. Claxton Poultry Farms, Inc., et al., No. 1:18-cv-03471; Jetro Holdings, LLC, v. Tyson Foods, Inc., et al., No. 1:18-cv-04000; Associated Grocers of the South, Inc., et al. v. Tyson Foods, Inc., et al., No. 1:18-cv-4616; and The Kroger Co., et al. v. Tyson Foods, Inc., et al., No. 1:18-cv-04535) were filed with the U.S. District Court for the Northern District of Illinois by individual direct purchaser entities, the allegations of which largely mirror those in the class action complaints. The Court’s scheduling order currently requires the substantial completion of document discovery for the class cases by July 18, 2018, with fact discovery ending on ~~January 27, 2017,~~June 13, 2019, class certification briefing and expert reports proceeding from July 15, 2019 to March 16, 2020 and summary judgment to proceed 60 days after the Court rules on motions for class certification. The Court has ordered the parties to coordinate scheduling of the direct action complaints with the class complaints with any necessary modifications to reflect time of filing. Discovery will be consolidated. In May 2018, an individual direct action complaint was filed with the U.S. District Court for the District of Kansas (Associated Wholesale Grocers, Inc. v. Koch Foods, Inc., et al., No. 2:18-cv-02258), the allegations of which ~~are~~largely mirror those in the class action complaints. The defendants, including PPC, filed a motion to transfer this action to the U.S. District Court for the Northern District of Illinois. This motion was fully briefed ~~and a ruling by the court is pending.~~on July 27, 2018.

On October 10, 2016, Patrick Hogan, acting on behalf of himself and a putative class of persons who purchased shares of PPC’s stock between February 21, 2014 and October 4,6, 2016, filed a class action complaint in the U.S. District Court for the District of Colorado against PPC and its named executive officers. The complaint alleges, among other things, that PPC’s SEC filings contained statements that were rendered materially false and misleading by PPC’s failure to disclose that (i) the ~~company~~Company colluded with several of its industry peers to fix prices in the broiler-chicken market as alleged in the In re Broiler Chicken Antitrust Litigation, (ii) its conduct constituted a violation of federal antitrust laws, (iii) PPC’s revenues during the class period were the result of illegal conduct and (iv) that PPC lacked effective internal control over financial ~~reporting, as well as stating~~reporting. The complaint also states that PPC’s industry was anticompetitive. On April 4, 2017, the ~~court~~Court appointed another stockholder, George James Fuller, as lead plaintiff. On ~~April 26, 2017, the court set a briefing schedule for the filing an amended complaint and the defendants’ motion to dismiss. On~~ May 11, 2017, ~~Plaintiff~~the plaintiff filed an amended complaint, which extended the end date of the putative class period to November 17, ~~2016. Defendants~~2017. PPC and the other defendants moved to dismiss on June 12, 2017, and ~~Plaintiff~~the plaintiff filed its opposition on July 12, 2017. ~~Defendants~~PPC and the other defendants filed their reply on August 1, 2017. ~~The~~On March 14, 2018, the Court dismissed the plaintiff’s complaint without prejudice and issued final judgment in favor of PPC and the other defendants. On April 11, 2018, the plaintiff moved for reconsideration of the Court’s decision and for permission to file a Second Amended Complaint. PPC and the other defendants filed a response to the plaintiff’s motion on ~~the~~April 25, 2018. The plaintiff's motion for reconsideration is currently pending.

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The defendants (including PPC) jointly moved to dismiss the consolidated amended complaint on September 9, 2017. ~~Briefing~~The Court initially held oral argument on January 19, 2018, during which it considered and granted only motions from certain other defendants challenging jurisdiction. Oral argument on the remaining pending motions ~~will be complete~~in the Oklahoma court occurred on ~~November 22, 2017, and a hearing~~April 20, 2018. Rulings on the ~~motions~~motion are pending. Following the Oklahoma court’s dismissal of certain defendants in January 2018, the plaintiffs filed a separate complaint in the U.S. District Court for the District of North Carolina, consisting of the same allegations but strictly against those defendants previously dismissed by the Oklahoma court (the “North Carolina Action”). The plaintiffs sought transfer and consolidation of the North Carolina Action with the Grower Litigation in Oklahoma from the Judicial Panel on Multi-District Litigation (“JPML”). The JPML has ~~been~~ scheduled oral argument on the motion for ~~January 19,~~May 31, 2018. In addition, on ~~August 29, 2017, PPC filed a Motion to Enforce Confirmation Order Against Growers in~~March 12, 2018, the ~~U.S. Bankruptcy Court in the Eastern~~Northern District of Texas, (Fort Worth Division (“Bankruptcy Court”) enjoined the plaintiffs from litigating the ~~In re~~Grower Litigation complaint as pled against the Company because allegations in the consolidated complaint violate the confirmation order relating to the Company’s bankruptcy proceedings in 2008 and 2009. Specifically, the 2009 bankruptcy confirmation order bars any claims against the Company based on conduct occurring before December 28, 2009. On March 13, 2018, Pilgrim’s ~~Pride Corporation, Case No. 08-45664 (DML) seeking an~~notified the trial court of the Bankruptcy Court’s injunction. To date, the plaintiffs have not amended the consolidated complaint to comply with the Bankruptcy Court’s injunction order ~~enjoining~~or the ~~Grower Plaintiffs from pursuing the class action against PPC. A hearing on this motion was held October 12, 2017. The Court’s decision on the motion is currently pending.~~confirmation order.

On March 9, 2017, a stockholder derivative action styled as DiSalvio v. Lovette, et al., No. 2017 cv. 30207, was brought against all of PPC’s directors and its Chief Financial Officer, Fabio Sandri, in the District Court for the County of Weld in Colorado. The complaint alleges, among other things, that the named defendants breached their fiduciary duties by failing to prevent PPC and its officers from engaging in an antitrust conspiracy as alleged in the In re Broiler Chicken Antitrust Litigation, and issuing false and misleading statements as alleged in the Hogan class action litigation. On April 17, 2017, a related stockholder derivative action styled Brima v. Lovette, et al., No. 2017 cv. 30308, was brought against all of PPC’s directors and its Chief Financial Officer in the District Court for the County of Weld in Colorado. The Brima complaint contains largely the same allegations as the DiSalvio complaint. On May 4, 2017, the plaintiffs in both the DiSalvio and Brima actions moved to (i) consolidate the two stockholder derivative cases, (ii) stay the consolidated action until the resolution of the motion to dismiss in the Hogan putative securities class action, and (iii) appoint co-lead counsel. The ~~court~~Court granted the motion on May 8, 2017, staying the proceedings pending resolution of the motion to dismiss in the Hogan action.

In January 2018, a stockholder derivative action entitled Raul v. Nogueira de Souza, et al., was filed in the U.S. District Court for the District of Colorado against the Company, as nominal defendant, as well as the Company’s directors, its Chief Financial Officer, and majority shareholder, JBS S.A. The complaint alleges, among other things, that (i) defendants permitted the Company to omit material information from its proxy statements filed in 2014 through 2017 related to the conduct of Wesley Mendonça Batista and Joesley Mendonça Batista, (ii) the individual defendants and JBS breached their fiduciary duties by failing to prevent the Company and its officers from engaging in an antitrust conspiracy as alleged in the Broiler Litigation and (iii) issuing false and misleading statements as alleged in the Hogan class action litigation. On May 17, 2018, the plaintiffs filed an unopposed motion to stay proceedings pending a final resolution of the Hogan class action litigation. To date, the Court has not ruled on this motion to stay proceedings. The court-ordered deadline for the defendants to file an answer or otherwise respond to the complaint is July 30, 2018.

57On January 25, 2018, a stockholder derivative action styled as Sciabacucchi v. JBS S.A., et al., was brought against all of PPC’s directors, JBS S.A., JBS USA Holding Lux S.à r.l. (“JBS Holding Lux”) and several members of the Batista family, in the Court of Chancery of the State of Delaware. The complaint alleges, among other things, that the named defendants breached their fiduciary duties arising out of the Company’s acquisition of Moy Park. On March 15, 2018, the members of the Batista family were dismissed from the action without prejudice by stipulation. On March 20, 2018, nominal defendant PPC filed its answer. On March 20, 2018, the remaining defendants, including PPC’s directors, JBS S.A., and JBS Holding Lux moved to dismiss the complaint. On April 19, 2018, director defendants Bell, Macaluso, and Cooper filed their opening brief in support of their motion to dismiss. On April 19, 2018, defendants JBS S.A., JBS Holding Lux, and director defendants Lovette, Nogueira de Souza, Tomazoni, Farahat, Molina, and de Vasconcellos, Jr. filed their opening brief in support of their motion to dismiss.

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~~PPC believes it has~~We believe we have strong defenses in each of the above litigations and ~~intends~~intend to contest them vigorously. ~~PPC~~We cannot predict the outcome of these actions nor when they will be resolved. If the plaintiffs were to prevail in any of these ligations, ~~PPC~~we could be liable for damages, which could be material and could adversely affect ~~its~~our financial condition or results of operations.

We are also subject to various legal proceedings and claims which arise in the ordinary course of business. In our opinion, we have made appropriate and adequate accruals for claims where necessary; however, the ultimate liability for these matters is uncertain, and if significantly different than the amounts accrued, the ultimate outcome could have a material effect on the financial condition or results of operations of the Company.


ITEM 1A.	RISK FACTORS

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In addition to the other information set forth in this quarterly report, you should carefully consider the risks discussed in our annual report on Form 10-K for the year ended December ~~25, 2016,~~31, 2017, including under the heading “Item 1A. Risk Factors”, which, along with risks disclosed in this report, are risks we believe could materially affect the Company’s business, financial condition or future results. These risks are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that it currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition or future results. ~~The following risk factors either update or supplement those contained in our annual report on Form 10-K for the year ended December 25, 2016:~~

~~We may not be able to successfully integrate the operations of companies we acquire, including Moy Park or GNP, or benefit from growth opportunities.~~

We intend to pursue additional selected growth opportunities in the future. These opportunities, including the Moy Park acquisition and the GNP acquisition, may expose us to successor liability relating to actions involving any acquired entities, their respective management or contingent liabilities incurred prior to our involvement and will expose us to liabilities associated with ongoing operations, in particular to the extent we are unable to adequately and safely manage such acquired operations. A material liability associated with these types of opportunities, or our failure to successfully integrate any acquired entities into our business, could adversely affect our reputation and have a material adverse effect on us.

Undisclosed liabilities from our acquisitions may harm our financial condition and operating results. If we make acquisitions in the future, these transactions may be structured in such a manner that would result in our assumption of undisclosed liabilities or liabilities not identified during our pre-acquisition due diligence. These obligations and liabilities could adversely affect our financial condition and operating results.

We may not be able to successfully integrate any growth opportunities we may undertake in the future, including the Moy Park acquisition and the GNP acquisition, or successfully implement appropriate operational, financial and administrative systems and controls to achieve the benefits that we expect to result therefrom. These risks include: (1) failure of the acquired entities to achieve expected results; (2) possible inability to retain or hire key personnel of the acquired entities; and (3) possible inability to achieve expected synergies and/or economies of scale. In addition, the process of integrating businesses could cause interruption of, or loss of momentum in, the activities of our existing business. The diversion of our management’s attention and any delays or difficulties encountered in connection with the integration of these businesses could adversely affect our business, results of operations and prospects.

~~Our foreign operations pose special risks to our business and operations.~~

We have significant operations and assets located in Mexico and Europe and may participate in or acquire operations and assets in other foreign countries in the future. Foreign operations are subject to a number of special risks such as currency exchange rate fluctuations, trade barriers, exchange controls, expropriation and changes in laws and policies, including tax laws and laws governing foreign-owned operations.

Currency exchange rate fluctuations have adversely affected us in the past. Exchange rate fluctuations or one or more other risks may have a material adverse effect on our business or operations in the future.

Our operations in Mexico are conducted through subsidiaries organized under the laws of Mexico. Claims of creditors of our subsidiaries, including trade creditors, will generally have priority as to the assets of our subsidiaries over our claims. Additionally, the ability of our Mexican subsidiaries to make payments and distributions to us may be limited by the terms of our Mexico Credit Facility and will be subject to, among other things, Mexican law. In the past, these laws have not had a material adverse effect on the ability of our Mexican subsidiaries to make these payments and distributions. However, laws such as these may have a material adverse effect on the ability of our Mexican subsidiaries to make these payments and distributions in the future.

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The terms of the Moy Park Indenture restrict Moy Park’s ability and the ability of certain of Moy Park’s subsidiaries to, among other things, make payments and distributions to us. These restrictions may have a material adverse effect on Moy Park’s ability to make these payments and distributions in the future.

J&F Investimentos S.A. is investigating improper payments made in Brazil in connection with admissions of illicit conduct to the Brazilian Federal Prosecutor’s Office and the outcome of this investigation and related investigations by the Brazilian government could have a material adverse effect on us.

On May 3, 2017, certain officers of J&F Investimentos S.A. (“J&F,” and the companies controlled by J&F, the “J&F Group”) (including two former directors of the Company), a company organized in Brazil and an indirect controlling stockholder of the Company, entered into plea bargain agreements (the “Plea Bargain Agreements”) with the Brazilian Federal Prosecutor’s Office (~~Ministério Público Federal~~) (“MPF”) in connection with certain illicit conduct involving improper payments made to Brazilian politicians, government officials and other individuals in Brazil committed by or on behalf of J&F and certain J&F Group companies. The details of such illicit conduct are set forth in separate annexes to the Plea Bargain Agreements, and include admissions of improper payments to politicians and political parties in Brazil over the last 10 years in exchange for receiving, or attempting to receive, favorable treatment for certain J&F Group companies in Brazil.

Pursuant to the terms of the Plea Bargain Agreements, the MPF agreed to grant immunity to the officers in exchange for such officers agreeing, among other considerations, to: (1) pay fines totaling R$225.0 million; (2) cooperate with the MPF, including providing supporting evidence of the illicit conduct identified in the annexes to the Plea Bargain Agreements; and (3) present any previously undisclosed illicit conduct within 120 days following the execution of the Plea Bargain Agreements as long as the description of such conduct had not been omitted in bad faith. In addition, the Plea Bargain Agreements provide that the MPF may terminate any Plea Bargain Agreement and request that the Supreme Court of Brazil (~~Supremo Tribunal Federal) (“STF”) ratify such termination if any illicit conduct is identified that was not included in the annexes to the Plea Bargain Agreements.~~

On June 5, 2017, J&F, in its role as the controlling shareholder of the J&F Group, entered into a leniency agreement (the “Leniency Agreement”) with the MPF, whereby J&F assumed responsibility for the conduct that was described in the annexes to the Plea Bargain Agreements. In connection with the Leniency Agreement, J&F has agreed to pay a fine of R$10.3 billion, adjusted for inflation, over a 25-year period. In exchange, the MPF agreed not to initiate or propose any criminal, civil or administrative actions against J&F, the companies of the J&F Group or those officers of J&F with respect to such conduct. Pursuant to the terms of the Leniency Agreement, if the Plea Bargain Agreement is annulled by the STF, then the Leniency Agreement may also be terminated by the Fifth Chamber of Coordination and Reviews of the MPF or, solely with respect to the criminal related provisions of the Leniency Agreement, by the 10th ~~Federal Court of the Federal District in Brasília, the authorities responsible for the ratification of the Leniency Agreement.~~

~~On August 24, 2017, the Fifth Chamber ratified the Leniency Agreement. On September 8, 2017, the 10~~th Federal Court ratified the Leniency Agreement. In compliance with the terms of the Leniency Agreement, J&F is conducting an internal investigation involving improper payments made in Brazil by or on behalf of J&F, certain companies of the J&F Group and certain officers of J&F (including two former directors of the Company). J&F has engaged outside advisors to assist it in conducting the investigation, including an assessment as to whether any of the misconduct disclosed to Brazilian authorities had any connection to the Company or Moy Park, or resulted in a violation of U.S. law. The internal investigation is ongoing and the Company is fully cooperating with J&F in connection with the investigation. We cannot predict when the investigation will be completed or the

~~results of the investigation, including the outcome or impact of any government investigations or any resulting litigation.~~

~~September 11, 2017, the 10~~th Federal Court suspended its ratification of the criminal provisions of the Leniency Agreement as a result of the STF’s temporary revocation of Joesley Mendonça Batista immunity under his Plea Bargain Agreement. The provisions of the Leniency Agreement related to criminal conduct will remain suspended until the STF issues a final decision on the validity of the Plea Bargain Agreements.

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and certain of its subsidiaries, which would permit the lenders of the debt that is the subject to the terms of the stabilization agreements to accelerate their debt, which could have a material adverse effect on JBS S.A. and its subsidiaries (including the Company).

Separately, Wesley Mendonça Batista (the former Chief Executive Officer of JBS S.A.) was arrested on September 13, 2017, as a result of a separate investigation by Brazil’s federal police alleging that Joesley Mendonça Batista and Wesley Mendonça Batista carried out insider trading transactions involving the sale of shares of JBS S.A. and foreign exchange futures contracts prior to the announcement of the Plea Bargain Agreements. The Securities and Exchange Commission of Brazil (~~Comissão de Valores Mobiliários~~) is also investigating these insider trading transactions. On September 21, 2017, the Brazilian federal police formally requested that the federal prosecutor bring charges against Joesley Mendonça Batista and Wesley Mendonça Batista as a result of this investigation. These investigations, possible indictments and any further developments in this matter may materially adversely affect the public perception or reputation of JBS S.A. and its subsidiaries (including the Company) and could have a material adverse effect on JBS S.A. and its subsidiaries (including the Company).

~~We are subject to anti-corruption laws in the jurisdictions in which we operate, including the U.S. Foreign Corrupt Practices Act and the UK Bribery Act.~~

~~We are subject to a number of anti-corruption laws, including the U.S. Foreign Corrupt Practices Act (“FCPA”) and the UK Bribery Act.~~

The FCPA and similar anti-bribery laws generally prohibit companies and their intermediaries from making improper payments or improperly providing anything of value to foreign officials, directly or indirectly, for the purpose of obtaining or keeping business and/or other benefits. Some of these laws have legal effect outside the jurisdictions in which they are adopted under certain circumstances. The FCPA also requires maintenance of adequate record-keeping and internal accounting practices to accurately reflect transactions. Under the FCPA, companies operating in the United States may be held liable for actions taken by their strategic or local partners or representatives.

The UK Bribery Act is broader in scope than the FCPA in that it directly prohibits commercial bribery (i.e. bribing others than government officials) in addition to bribery of government officials and it does not recognize certain exceptions, notably for facilitation payments, that are permitted by the FCPA. The UK Bribery Act also has wide jurisdiction. It covers any offense committed in the United Kingdom, but proceedings can also be brought if a person who has a close connection with the United Kingdom commits the relevant acts or omissions outside the United Kingdom. The UK Bribery Act defines a person with a close connection to include British citizens, individuals ordinarily resident in the United Kingdom and bodies incorporated in the United Kingdom.

The UK Bribery Act also provides that any organization that conducts part of its business in the United Kingdom, even if it is not incorporated in the United Kingdom, can be prosecuted for the corporate offense of failing to prevent bribery by an associated person, even if the bribery took place entirely outside the United Kingdom and the associated person had no connection with the United Kingdom. Other jurisdictions in which we operate have adopted similar anti-corruption, anti-bribery and anti-kickback laws to which we are subject. Civil and criminal penalties may be imposed for violations of these laws.

Although the code of ethics and standards of conduct adopted by JBS S.A. in late 2015 requires our employees to comply with the FCPA and the UK Bribery Act, we are still implementing a formal compliance program and policies that cover our employees and consultants. We operate in some countries which are viewed as high risk for corruption. Despite our ongoing efforts to ensure compliance with the FCPA, the UK Bribery Act and similar laws, there can be no assurance that our directors, officers, employees, agents, third-party intermediaries and the companies to which we outsource certain of our business operations, will comply with those laws and our anti-corruption policies, and we may be ultimately held responsible for any such non-compliance. If we or our directors or officers violate anti-corruption laws or other laws governing the conduct of business with government entities (including local laws), we or our directors or officers may be subject to criminal and civil penalties or other remedial measures, which could harm our reputation and have a material adverse impact on our business, financial condition, results of operations and prospects. Any actual or alleged violations of such laws could also harm our reputation or have an adverse impact on our business, financial condition, results of operations and prospects.

~~Our future financial and operating flexibility may be adversely affected by significant leverage.~~

On a consolidated basis, as of September 24, 2017, we had approximately $1.6 billion in secured indebtedness, $991.0 million of unsecured indebtedness and had the ability to borrow approximately $744.8 million under our credit agreements. Significant amounts of cash flow will be necessary to make payments of interest and repay the principal amount of such indebtedness.

~~The degree to which we are leveraged could have important consequences because:~~

~~Table of Contents~~

~~It could affect our ability to satisfy our obligations under our credit agreements and any other financing arrangements;~~

A substantial portion of our cash flow from operations is required to be dedicated to interest and principal payments and may not be available for operations, working capital, capital expenditures, expansion, acquisitions or general corporate or other purposes;

~~Our ability to obtain additional financing and to fund working capital, capital expenditures and other general corporate requirements in the future may be impaired;~~

~~We may be more highly leveraged than some of our competitors, which may place us at a competitive disadvantage;~~

~~Our flexibility in planning for, or reacting to, changes in our business may be limited;~~

~~It may limit our ability to pursue acquisitions and sell assets; and~~

~~It may make us more vulnerable in the event of a continued or new downturn in our business or the economy in general.~~

Our ability to make payments on and to refinance our debt, including our credit facilities, will depend on our ability to generate cash in the future. This, to a certain extent, is subject to various business factors (including, among others, the commodity prices of feed ingredients and chicken) and general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our control.

There can be no assurance that we will be able to generate sufficient cash flow from operations or that future borrowings will be available under our credit facilities in an amount sufficient to enable us to pay our debt obligations, including obligations under our credit facilities, or to fund our other liquidity needs. We may need to refinance all or a portion of their debt on or before maturity. There can be no assurance that we will be able to refinance any of their debt on commercially reasonable terms or at all.

~~Assumption of unknown liabilities in acquisitions may harm our financial condition and operating results~~.

Acquisitions may be structured in such a manner that would result in the assumption of unknown liabilities not disclosed by the seller or uncovered during pre-acquisition due diligence. For example, our acquisitions of GNP and Moy Park were structured as a stock purchase in which we effectively assumed all of the liabilities of GNP and Moy Park, respectively, including liabilities that may be unknown. Such unknown obligations and liabilities could harm our financial condition and operating results.

~~The vote by the U.K. electorate in favor of having the U.K. exit the European Union could adversely impact our business, results of operations and financial condition.~~

In a referendum held in the United Kingdom on June 23, 2016, a majority of those voting voted for the United Kingdom to leave the European Union (referred to as “Brexit”). For now, the United Kingdom remains a member of the European Union and there will not be any immediate change in either European Union or U.K. law as a consequence of the vote. European Union law does not govern contracts and the United Kingdom is not part of the European Union’s monetary union. However, Brexit vote signals the beginning of a lengthy process under which the terms of the United Kingdom’s withdrawal from, and future relationship with, the European Union will be negotiated and legislation to implement the United Kingdom’s withdrawal from the European

Union will be enacted. The ultimate impact of Brexit vote will depend on the terms that are negotiated in relation to the United Kingdom’s future relationship with the European Union. Although the timetable for U.K. withdrawal is not at all clear at this stage, it is likely that the withdrawal of the United Kingdom from the European Union will take more than two years to be negotiated and conclude.

Brexit could impair our ability to transact business in the United Kingdom and in countries in the European Union. Brexit has already and could continue to adversely affect European and/or worldwide economic and market conditions and could continue to contribute to instability in the global financial markets. The long-term effects of Brexit will depend in part on any agreements the United Kingdom makes to retain access to markets in the European Union following the United Kingdom’s withdrawal from the European Union. In addition, we expect that Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which European Union laws to replicate or replace. If the United Kingdom were to significantly alter its regulations affecting the food industry, we could face significant new costs. It may also be time-consuming and expensive for us to alter our internal operations in order to comply with new regulations. Additionally, Moy Park’s results of operations may be adversely affected if the United Kingdom is unable to secure replacement trade agreements and arrangements on terms as favorable as those currently enjoyed by the United Kingdom. Any of the effects of Brexit could adversely affect our business, business opportunities, results of operations, financial condition and cash flows.

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~~ITEM 2.~~	~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

On July 28, 2015, our Board of Directors approved a $150.0 million share repurchase authorization. We plan to repurchase shares through various means, which may include but are not limited to open market purchases, privately negotiated transactions, the use of derivative instruments and/or accelerated share repurchase programs. The share repurchase program was originally scheduled to expire on July 27, 2016. On February 10, 2016, the Company’s Board of Directors approved an increase of the share repurchase authorization to $300.0 million and an extension of the expiration to February 9, 2017. On February 8, 2017, the Company's Board of Directors further extended the program expiration to August 9, 2017. The extent to which we repurchase our shares and the timing of such repurchases will vary and depend upon market conditions and other corporate considerations, as determined by our management team. We reserve the right to limit or terminate the repurchase program at any time without notice. As of September 24, 2017, we had repurchased 11,415,373 shares under this program with a market value at the time of purchase of approximately $231.8 million. Set forth below is information regarding our stock repurchases for the thirteen weeks ended September 24, 2017.

Issuer Purchases of Equity Securities
Period Total Number of Shares Purchased Average Price
Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of the Shares That May Yet Be Purchased Under the Plans or Programs
June 26, 2017 through July 23, 2017 —
$ —
—
$ 72,913,018
July 24, 2017 through August 27, 2017 —
—
—
72,913,018
August 28, 2017 through September 24, 2017 —
—
—
72,913,018
Total —
$ —
—
$ 72,913,018

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ITEM 6. EXHIBITS



2.1			Agreement and Plan of Merger dated September 27, 2000 (incorporated by reference from Exhibit 2 of WLR Foods, Inc.’s current report on Form 8-K (No. 000-17060) dated September 28, 2000).
2.2			Agreement and Plan of Merger dated as of December 3, 2006, by and among the Company, Protein Acquisition Corporation, a wholly owned subsidiary of the Company, and Gold Kist Inc. (incorporated by reference from Exhibit 99.(D)(1) to Amendment No. 11 to the Company’s Tender Offer Statement on Schedule TO (No. 005-81998) filed on December 5, 2006).
2.3			Stock Purchase Agreement by and between the Company and JBS USA Holding Lux, S.à.r.l., formerly known as JBS USA Holdings, LLC, dated September 16, 2009 (incorporated by reference from Exhibit 2.1 of the Company’s current report on Form 8-K (No. 001-09273) filed September 18, 2009).
2.4			Amendment No.1 to the Stock Purchase Agreement by and between the Company and JBS USA Holding Lux, S.à.r.l., formerly known as JBS USA Holdings, LLC, dated December 28, 2009 (incorporated by reference from Exhibit 2.5 of the Company’s annual report on Form 10-K/A (No. 001-09273) filed January 22, 2010).
2.5			Share Purchase Agreement, dated as of September 8, 2017, among JBS S.A., Granite Holdings S.à r.l., Onix Investments UK Limited and Pilgrim’s Pride Corporation (incorporated by reference from Exhibit 2.1 to the Company’s current report on Form 8-K (No. 001-09273) filed on September 11, 2017).
3.1			Amended and Restated Certificate of Incorporation of the Company (incorporated by reference from Exhibit 3.1 of the Company’s Form 8-A (No. 001-09273) filed on December 27, 2012).
3.2			Amended and Restated Corporate Bylaws of Pilgrim’s Pride Corporation, as amended.*amended (incorporated by reference from Exhibit 3.2 of the Company’s Quarterly Report on Form 10-Q (No. 001-09273) filed on November 8, 2017).
4.1			Amended and Restated Certificate of Incorporation of the Company (included as Exhibit 3.1).
4.2			Amended and Restated Corporate Bylaws of the Company, as amended (included as Exhibit 3.2).
4.3			Stockholders Agreement dated December 28, 2009 between the Company and JBS USA Holding Lux, S.à.r.l., formerly known as JBS USA Holdings, LLC, as amended (incorporated by reference from Exhibit ~~4.1~~3.3 to the Company’s Form 8-A (No. 001-09273) filed on December 27, 2012).
4.4			Form of Common Stock Certificate (incorporated by reference from Exhibit 4.1 to the Company’s current report on Form 8-K (No. 001-09273) filed on December 29, 2009).
4.5			Indenture dated as of March 11, 2015 among the Company, Pilgrim’s Pride Corporation of West Virginia, Inc. and Wells Fargo Bank, National Association, as Trustee, Form of Senior 5.750% Note due 2025, and Form of Guarantee attached (incorporated by reference from Exhibit 4.1 of the Company’s current report on Form 8-K (No. 001-09273) filed on March 11, 2015).
~~10.1~~4.6			~~First Amendment to Third Amended and Restated Credit Agreement~~Indenture dated as of September 6,29, 2017 among the Company, Pilgrim’s Pride Corporation ~~the other loan parties thereto,~~of West Virginia, Inc., Gold’n Plump Poultry, LLC, Gold’n Plump Farms, LLC, JFC LLC and ~~the lenders party thereto, and Coöperatieve Rabobank U.A., New York Branch,~~U.S. Bank National Association, as ~~administrative agent and collateral agent~~Trustee (incorporated by reference from Exhibit ~~10.1 to~~4.2 of the Company’s ~~current report~~Current Report on Form 8-K (No. 001-09273) filed on ~~September 11,~~October 3, 2017).
~~10.2~~4.7			~~Seller~~Form of Senior 5.750% Note due 2025 (included in Exhibit 4.5).
4.8			Form of Senior 5.875% Note due 2027 (included in Exhibit 4.6).
10.1			Multicurrency Revolving Facility Agreement, dated as of ~~September 8, 2017~~June 2, 2018 by and among ~~Pilgrim’s Pride Corporation, JBS S.A.~~Moy Park Holdings (Europe) Limited, certain of its subsidiaries, the Governor and ~~Onix Investments UK Limited~~Company of the Bank of Ireland, as agent, and the other lenders party thereto (incorporated by reference from Exhibit ~~10.2 to~~10.1 of the ~~Company’s current report~~Company's Current Report on Form 8-K (No. 001-09273) filed on ~~September 11, 2017)~~June 12, 2018).
12			Ratio of Earnings to Fixed Charges for the ~~thirteen~~twenty-six weeks ended ~~September 24, 2017~~July 1, 2018 and ~~September~~June 25, ~~2016.~~2017.*
31.1			Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2			Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1			Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2			Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS			XBRL Instance Document
101.SCH			XBRL Taxonomy Extension Schema
101.CAL			XBRL Taxonomy Extension Calculation
101.DEF			XBRL Taxonomy Extension Definition
101.LAB			XBRL Taxonomy Extension Label
101.PRE			XBRL Taxonomy Extension Presentation



*		Filed herewith.

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**		Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		PILGRIM’S PRIDE CORPORATION

Date: ~~November 7, 2017~~August 1, 2018		/s/ Fabio Sandri
		Fabio Sandri
		Chief Financial Officer
		(Principal Financial Officer, Chief Accounting Officer and Duly Authorized Officer)



Negotiated sales price	$	350,000
Working capital adjustment	7,252
Preliminary purchase price	$	357,252



Cash and cash equivalents	$	10
Trade accounts and other receivables	18,453
Inventories	56,459
Prepaid expenses and other current assets	3,414
Property, plant and equipment	144,138
Identifiable intangible assets	131,120
Other long-lived assets	829
Total assets acquired	354,423
Accounts payable	23,848
Other current liabilities	11,866
Other long-term liabilities	3,393
Total liabilities assumed	39,107
Total identifiable net assets	315,316
Goodwill	41,936
Total net assets	$	357,252



	Fair Value		Useful Life
	(In thousands)		(In years)
Customer relationships	$	92,900	13.0
Trade names	38,200		20.0
Non-compete agreement	20		3.0
Total fair value	$	131,120
Weighted average useful life			15.2



	December 25, 2016		Additions		Currency Translation		September 24, 2017
	(In thousands)
United States	$	—	$	41,936	$	—	$	41,936
U.K. and Europe	761,613		—		66,425		828,038
Mexico	125,608		—		—		125,608
Total	$	887,221	$	41,936	$	66,425	$	995,582



	December 25, 2016							Periodic Activity									September 24, 2017
	Carrying Amount		Accumulated Amortization			Net Carrying Amount		Additions		Amortization			Currency Translation		Impairment		Net Carrying Amount
	(In thousands)
Identified intangible assets subject to amortization:
Trade names	$	41,369	$	(37,029	)	$	4,340	$	38,200	$	(2,794	)	$	61	$	—	$	39,807
Customer relationships	171,152		(72,327		)	98,825		92,900		(16,418		)	5,851				181,158
Non-compete agreements	300		(300		)	—		20		(5		)	—		—		15
Identified intangible assets not subject to amortization:
Trademarks	368,426		—			368,426		—		—			31,287		—		399,713
Total identified intangible assets	$	581,247	$	(109,656	)	$	471,591	$	131,120	$	(19,217	)	$	37,199	$	—	$	620,693



Sources of net sales	Thirty-Nine Weeks Ended September 24, 2017		Change from Thirty-Nine Weeks Ended September 25, 2016
Sources of net sales	Thirty-Nine Weeks Ended September 24, 2017		Amount			Percent
	(In thousands, except percent data)
United States	$	5,557,089	$	484,737		9.6	%	(a)
U.K. and Europe	1,473,854		(10,854		)	(0.7	)%	(b)
Mexico	994,568		43,946			4.6	%	(c)
Total net sales	$	8,025,511	$	517,829		6.9	%



Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of the Shares That May Yet Be Purchased Under the Plans or Programs
June 26, 2017 through July 23, 2017	—	$	—	—	$	72,913,018
July 24, 2017 through August 27, 2017	—	—		—	72,913,018
August 28, 2017 through September 24, 2017	—	—		—	72,913,018
Total	—	$	—	—	$	72,913,018