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~~June 30, 2019



¨☐	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
Greeley	CO
(Address of principal executive offices)		(Zip code)

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

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



Title of each class	Trading Symbol	Name of Exchange on Which Registered
Common Stock, Par Value $0.01	PPC	The NASDAQ Stock Market LLC

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

Indicate by check mark whether the registrant has submitted electronically ~~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,~~July 31, 2019, was ~~248,752,508.~~249,307,521.

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~~ June 30, 2019 and December ~~25, 2016~~30, 2018	2
	Condensed Consolidated ~~and Combined~~ Statements of Income Thirteen and ~~Thirty-Nine~~Twenty-Six Weeks Ended ~~September 24, 2017~~June 30, 2019 and ~~September 25, 2016~~July 1, 2018	3
	Condensed Consolidated ~~and Combined~~ Statements of Comprehensive Income Thirteen and ~~Thirty-Nine~~Twenty-Six Weeks Ended ~~September 24, 2017~~June 30, 2019 and ~~September 25, 2016~~July 1, 2018	4
	Condensed Consolidated ~~and Combined~~ Statements of Stockholders’ Equity ~~Thirty-Nine~~ Thirteen and Twenty-Six Weeks Ended ~~September 24, 2017~~June 30, 2019 and ~~September 25, 2016~~July 1, 2018	5
	Condensed Consolidated ~~and Combined~~ Statements of Cash Flows ~~Thirty-Nine~~ Twenty-Six Weeks Ended ~~September 24, 2017~~June 30, 2019 and ~~September 25, 2016~~	6
	~~Notes to Condensed Consolidated and Combined Financial Statements~~ ~~as of September 24, 2017~~July 1, 2018	7
	Notes to Condensed Consolidated Financial Statements as of June 30, 2019	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3942
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5355
Item 4.	Controls and Procedures	5558
PART II. OTHER INFORMATION		5759
Item 1.	Legal Proceedings	5759
Item 1A.	Risk Factors	5861
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
Item 6.	Exhibits	62
~~Item 6.~~		~~Exhibits~~SIGNATURES	63
~~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)
								June 30, 2019			December 30, 2018
	September 24, 2017			December 25, 2016				(In thousands)
	(In thousands)
Cash and cash equivalents	$	401,789		$	292,544			$	538,227		$	338,386
Restricted cash	4,841			4,979
Restricted cash and cash equivalents								33,379			23,192
Trade accounts and other receivables, less allowance for doubtful accounts	624,802			445,553				582,296			561,549
Accounts receivable from related parties	970			4,010				957			1,331
Inventories	1,196,201			975,608				1,186,655			1,159,519
Income taxes receivable	16,362			—				22,273			38,479
Prepaid expenses and other current assets	102,914			81,932				113,409			112,023
Assets held for sale	2,777			5,259				146			178
Total current assets	2,350,656			1,809,885				2,477,342			2,234,657
Deferred tax assets								4,321			4,248
Other long-lived assets	20,007			19,260				15,289			16,717
Identified intangible assets, net	620,693			471,591				552,922			564,128
Goodwill	995,582			887,221				949,869			949,750
Operating lease assets, net								317,963			—
Property, plant and equipment, net	2,076,347			1,833,985				2,210,212			2,161,702
Total assets	$	6,063,285		$	5,021,942			$	6,527,918		$	5,931,202

Accounts payable	$	743,528		$	790,378			$	816,126		$	830,059
Accounts payable to related parties	7,091			4,468				5,938			7,269
Revenue contract liability								23,016			33,328
Accrued expenses and other current liabilities	416,476			347,021				508,337			386,941
Income taxes payable	191,432			27,578				8,930			8,221
Current maturities of long-term debt	61,811			15,712				30,282			30,405
Total current liabilities	1,420,338			1,185,157				1,392,629			1,296,223
Noncurrent operating lease liability, less current maturities								243,661			—
Long-term debt, less current maturities	2,548,575			1,396,124				2,283,847			2,295,190
Noncurrent income taxes payable								7,731			7,731
Deferred tax liabilities	286,038			251,807				235,487			237,422
Other long-term liabilities	98,098			102,722				91,299			75,051
Total liabilities	4,353,049			2,935,810				4,254,654			3,911,617
Common stock	2,602			307,288				2,609			2,604
Treasury stock	(231,758		)	(217,117		)		(234,892		)	(231,994		)
Additional paid-in capital	1,926,386			3,100,332				1,950,348			1,945,136
Retained earnings (accumulated deficit)	39,606			(782,785		)
Retained earnings								675,967			421,888
Accumulated other comprehensive loss	(36,517		)	(329,858		)		(130,679		)	(127,834		)
Total Pilgrim’s Pride Corporation stockholders’ equity	1,700,319			2,077,860				2,263,353			2,009,800
Noncontrolling interest	9,917			8,272				9,911			9,785
Total stockholders’ equity	1,710,236			2,086,132				2,273,264			2,019,585
Total liabilities and stockholders’ equity	$	6,063,285		$	5,021,942			$	6,527,918		$	5,931,202

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
CONDENSED CONSOLIDATED STATEMENTS OF INCOME													CONDENSED CONSOLIDATED 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				June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
	(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			$	2,843,085		$	2,836,713		$	5,567,760		$	5,583,391
Cost of sales	2,315,301			2,242,221			6,815,701			6,632,568				2,475,221			2,562,491			4,980,957			5,021,504
Gross profit	478,584			253,060			1,209,810			875,113				367,864			274,222			586,803			561,887
Selling, general and administrative expense	102,191			75,933			284,009			229,786				88,357			87,975			170,281			173,258
Administrative restructuring charges	4,147			279			8,496			279
Administrative restructuring activities														(43		)	1,135			(70		)	1,924
Operating income	372,246			176,848			917,305			645,048				279,550			185,112			416,592			386,705
Interest expense, net of capitalized interest	24,636			19,119			66,315			58,480				33,594			40,267			67,156			90,567
Interest income	(2,128		)	(253		)	(3,600		)	(2,000		)		(3,444		)	(4,834		)	(6,784		)	(6,424		)
Foreign currency transaction loss (gain)	(888		)	4,569			(2,500		)	(1,769		)
Foreign currency transaction loss														2,260			5,630			4,896			3,909
Miscellaneous, net	(1,083		)	(2,371		)	(5,198		)	(7,327		)		1,513			(817		)	1,156			(2,434		)
Income before income taxes	351,709			155,784			862,288			597,664				245,627			144,866			350,168			301,087
Income tax expense	113,396			53,819			278,046			202,979				75,547			38,522			95,963			75,519
Net income	238,313			101,965			584,242			394,685				170,080			106,344			254,205			225,568
Less: Net income from Granite Holdings Sàrl prior to acquisition by Pilgrim's Pride Corporation	6,093			3,438			23,486			25,105
Less: Net income (loss) attributable to noncontrolling interests	(460		)	(130		)	514			(334		)		12			(197		)	126			(391		)
Net income attributable to Pilgrim’s Pride Corporation	$	232,680		$	98,657		$	560,242		$	369,914			$	170,068		$	106,541		$	254,079		$	225,959

Weighted average shares of Pilgrim's Pride Corporation common stock outstanding:
Basic	248,753			254,460			248,732			254,607				249,400			248,981			249,283			248,909
Effect of dilutive common stock equivalents	235			460			230			430				236			76			320			116
Diluted	248,988			254,920			248,962			255,037				249,636			249,057			249,603			249,025

Net income attributable to Pilgrim’s Pride Corporation per share of common stock outstanding:
Basic	$	0.94		$	0.39		$	2.25		$	1.45			$	0.68		$	0.43		$	1.02		$	0.91
Diluted	$	0.93		$	0.39		$	2.25		$	1.45			$	0.68		$	0.43		$	1.02		$	0.91

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
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME													CONDENSED CONSOLIDATED 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				June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
	(In thousands)													(In thousands)
Net income	$	238,313		$	101,965		$	584,242		$	394,685			$	170,080		$	106,344		$	254,205		$	225,568
Other comprehensive loss:
Foreign currency translation adjustment
Gains (losses) arising during the period	22,378			(43,961		)	89,153			(171,509		)
Losses arising during the period														(38,053		)	(92,696		)	(611		)	(40,131		)
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				1,298			(88		)	400			(103		)
Reclassification to net earnings for losses (gains) realized	—			(285		)	9			(35		)
Reclassification to net earnings of losses (gains) realized														48			222			(173		)	472
Available-for-sale securities
Gains (losses) arising during the period	—			—			—			426
Gains arising during the period														172			858			194			1,232
Income tax effect	—			—			—			(161		)		(42		)	(209		)	(47		)	(300		)
Reclassification to net earnings for losses (gains) realized	—			—			—			(534		)
Reclassification to net earnings of gains realized														(172		)	(727		)	(307		)	(899		)
Income tax effect	—			—			—			202				42			177			76			219
Defined benefit plans
Gains (losses) arising during the period	393			2,852			(4,078		)	(11,500		)		(7,171		)	693			(3,971		)	6,592
Income tax effect	(148		)	(1,077		)	1,539			4,342				1,877			(171		)	1,098			(1,605		)
Reclassification to net earnings of losses realized	233			165			699			494				328			300			656			601
Income tax effect	(88		)	(62		)	(264		)	(187		)		(80		)	(73		)	(160		)	(146		)
Total other comprehensive income (loss), net of tax	25,200			(42,303		)	90,132			(178,295		)
Total other comprehensive loss, net of tax														(41,753		)	(90,053		)	(2,845		)	(32,444		)
Comprehensive income	263,513			59,662			674,374			216,390				128,327			16,291			251,360			193,124
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 (loss) attributable to noncontrolling interests	(460		)	(130		)	514			(334		)		12			(197		)	126			(391		)
Comprehensive income attributable to Pilgrim's Pride Corporation	$	263,513		$	102,224		$	585,810		$	369,651			$	128,315		$	16,488		$	251,234		$	193,515

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
Shares Amount Shares Amount
(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
Granite Holdings Sàrl balance at December 25, 2016 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
Net income —
—
—
—
—
583,728
—
514
584,242
Other comprehensive income, net of tax —
—
—
—
—
—
90,132
—
90,132
Share-based compensation plans:
Common stock issued under compensation plans 486
5
—
—
(5 ) —
—
—
—
Requisite service period recognition —
—
—
—
2,454
—
—
—
2,454
Common stock purchased under share repurchase program —
—
(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



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

For the twenty-six weeks ended June 30, 2019	Common Stock			Treasury Stock					Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Loss			Noncontrolling Interest		Total
	Shares	Amount		Shares		Amount			Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Loss			Noncontrolling Interest		Total
	(In thousands)
Balance at December 30, 2018	260,396	$	2,604	(11,431	)	$	(231,994	)	$	1,945,136		$	421,888	$	(127,834	)	$	9,785	$	2,019,585
Net income	—	—		—		—			—			254,079		—			126		254,205
Other comprehensive loss, net of tax	—	—		—		—			—			—		(2,845		)	—		(2,845		)
Share-based compensation plans:
Common stock issued under compensation plans	459	5		—		—			(5		)	—		—			—		—
Requisite service period recognition	—	—		—		—			5,217			—		—			—		5,217
Common stock purchased under share repurchase program	—	—		(115,994	)	(2,898		)	—			—		—			—		(2,898		)
Balance at June 30, 2019	260,855	$	2,609	(127,425	)	$	(234,892	)	$	1,950,348		$	675,967	$	(130,679	)	$	9,911	$	2,273,264



For the thirteen weeks ended June 30, 2019	Common Stock			Treasury Stock					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Noncontrolling Interests		Total
	Shares	Amount		Shares		Amount			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Noncontrolling Interests		Total
	(In thousands)
Balance at March 31, 2019	260,855	$	2,609	(11,431	)	$	(231,994	)	$	1,947,013	$	505,899	$	(88,926	)	$	9,899	$	2,144,500
Net income	—	—		—		—			—		170,068		—			12		170,080
Other comprehensive loss, net of tax	—	—		—		—			—		—		(41,753		)	—		(41,753		)
Share-based compensation plans:
Common stock issued under compensation plans	—	—		—		—			—		—		—			—		—
Requisite service period recognition	—	—		—		—			3,335		—		—			—		3,335
Common stock purchased under share repurchase program	—	—		(115,994	)	(2,898		)	—		—		—			—		(2,898		)
Balance at June 30, 2019	260,855	$	2,609	(127,425	)	$	(234,892	)	$	1,950,348	$	675,967	$	(130,679	)	$	9,911	$	2,273,264



PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)
(Unaudited)
For the twenty-six weeks ended July 1, 2018	Common Stock			Treasury Stock					Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total
	Shares	Amount		Shares		Amount			Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total
	(In thousands)
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 loss, 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



For the thirteen weeks ended July 1, 2018	Common Stock			Treasury Stock					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests			Total
	Shares	Amount		Shares		Amount			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests			Total
	(In thousands)
Balance at April 1, 2018	260,396	$	2,604	(11,416	)	$	(231,758	)	$	1,933,780	$	293,361	$	26,469		$	9,311		$	2,033,767
Net income (loss)	—	—		—		—			—		106,541		—			(197		)	106,344
Other comprehensive loss, net of tax	—	—		—		—			—		—		(90,053		)	—			(90,053		)
Share-based compensation plans:
Common stock issued under compensation plans	—	—		—		—			—		—		—			—			—
Requisite service period recognition	—	—		—		—			4,360		—		—			—			4,360
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

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
PILGRIM’S PRIDE CORPORATION							PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS							CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Thirty-Nine Weeks Ended							Twenty-Six Weeks Ended
	September 24, 2017			September 25, 2016				June 30, 2019			July 1, 2018
	(In thousands)							(In thousands)
Cash flows from operating activities:
Net income	$	584,242		$	394,685			$	254,205		$	225,568
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	204,625			174,128				138,530			136,087
Share-based compensation								5,217			5,633
Deferred income tax benefit								(3,354		)	(11,927		)
Loan cost amortization								2,401			3,392
Accretion of discount related to Senior Notes								491			321
Amortization of premium related to Senior Notes								(334		)	(334		)
Loss on property disposals								230			239
Foreign currency transaction loss related to borrowing arrangements	6,830			—				37			4,221
Gain on equity-method investments								(32		)	(32		)
Noncash loss on early extinguishment of debt								—			4,918
Asset impairment	4,947			—				—			573
Gain on property disposals	(540		)	(7,315		)
Loss (gain) on equity method investments	(44		)	194
Share-based compensation	2,454			5,404
Deferred income tax expense (benefit)	25,768			(6		)
Changes in operating assets and liabilities:
Trade accounts and other receivables	(146,477		)	(65,649		)		(20,385		)	(31,913		)
Inventories	(149,806		)	(18,099		)		(27,212		)	60,303
Prepaid expenses and other current assets	(15,377		)	1,990				(1,339		)	(31,099		)
Accounts payable, accrued expenses and other current liabilities	(36,105		)	35,346				20,664			103,991
Income taxes	149,063			45,789				34,013			(161,571		)
Long-term pension and other postretirement obligations	(9,660		)	(8,294		)		(1,121		)	(5,323		)
Other operating assets and liabilities	(1,429		)	(6,190		)		1,353			942
Cash provided by operating activities	618,491			551,983				403,364			303,989
Cash flows from investing activities:
Acquisitions of property, plant and equipment	(258,364		)	(221,035		)		(177,609		)	(155,188		)
Purchase of acquired businesses, net of cash acquired	(658,520		)	—
Proceeds from property disposals	2,585			12,977				1,740			1,205
Cash used in investing activities	(914,299		)	(208,058		)		(175,869		)	(153,983		)
Cash flows from financing activities:
Proceeds from note payable to bank	—			36,838
Payments on note payable to bank	—			(65,564		)
Payments on revolving line of credit, long-term borrowings and capital lease obligations								(113,079		)	(673,452		)
Proceeds from revolving line of credit and long-term borrowings	1,013,662			515,292				99,636			604,062
Payments on revolving line of credit, long-term borrowings and capital lease obligations	(609,678		)	(504,078		)
Proceeds from equity contribution under Tax Sharing Agreement between JBS USA Food Company Holdings and Pilgrim’s Pride Corporation	5,038			3,691
Capital contributions to subsidiary by noncontrolling stockholders	—			7,252
Purchase of common stock under share repurchase program								(2,898		)	—
Payment of capitalized loan costs	(4,550		)	(693		)		(596		)	(5,708		)
Purchase of common stock under share repurchase program	(14,641		)	(20,333		)
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		)
Proceeds (payment) from equity contribution (distribution) under Tax Sharing Agreement between JBS USA Food Company Holdings and Pilgrim's Pride Corporation								(525		)	5,558
Cash used in financing activities								(17,462		)	(69,540		)
Effect of exchange rate changes on cash and cash equivalents	15,084			(28,937		)		(5		)	4,030
Increase (decrease) in cash, cash equivalents and restricted cash	109,107			(428,391		)
Increase in cash, cash equivalents and restricted cash								210,028			84,496
Cash, cash equivalents and restricted cash, beginning of period	297,523			696,553				361,578			589,531
Cash, cash equivalents and restricted cash, end of period	$	406,630		$	268,162			$	571,606		$	674,027

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,~~June 30, 2019, Pilgrim’s had approximately ~~52,000~~52,600 employees and the capacity to process approximately ~~45.2~~45.4 million birds per ~~five-day~~ work week for a total of ~~approximately 12.8~~more than 12.9 billion pounds of live chicken annually. Approximately ~~5,100~~5,000 contract growers supply poultry for the Company’s operations. As of ~~September 24, 2017,~~June 30, 2019, JBS S.A., through its indirect wholly-owned subsidiaries (together, “JBS”), beneficially owned ~~78.6%~~78.4% 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~~June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December ~~31, 2017.~~29, 2019. For further information, refer to the consolidated financial statements and ~~footnotes~~notes thereto included in the Company’s annual report on Form 10-K for the year ended December ~~25, 2016.~~30, 2018.

~~Pilgrim’s~~The Company 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)~~2019) 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 from September 30, 2015 through September 7, 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, theThe Condensed Consolidated ~~and Combined~~ Financial Statements include the accounts of the Company and its majority-owned ~~subsidiaries, including Moy Park.~~subsidiaries. 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, 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 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

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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,~~ ~~depending on the nature of the transaction,~~losses (gains) in the Condensed Consolidated ~~and Combined~~ Statements of Income.

Leases

The Company ~~reported~~determines if an ~~adjustment resulting from the translation of~~arrangement is a ~~British pound-denominated note payable owed to JBS S.A. as a component of~~ ~~Accumulated~~lease at inception. Operating leases are included in Operating lease assets, net, Accrued expenses and other ~~comprehensive loss~~current liabilities, and Noncurrent operating lease liabilities, less current maturities, in ~~the~~our Condensed Consolidated Balance ~~Sheet as~~Sheet. Finance leases are included in Property, plant and equipment, net, Current portion of ~~September 24, 2017.~~long-term debt, and Long-term debt, less current maturities, in our Condensed Consolidated Balance Sheet.

Beginning with the adoption of Accounting Standards Update (“ASU”) 2016-02 on December 31, 2018, operating lease assets and operating lease liabilities are initially recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The ~~Company designated this note payable as~~operating lease asset also includes any lease payments made, including upfront costs and prepayments, and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate a ~~hedge~~lease when it is reasonably certain that we will exercise that option. Leases with an initial term of ~~its net investment in Moy Park.~~12 months or less are not recorded on the balance sheet. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term with a corresponding reduction to the operating lease asset.

The Company ~~or its subsidiaries may use derivatives~~has lease agreements with lease and non-lease components. Beginning in 2019, lease and non-lease components are generally accounted for separately. For certain equipment leases, such as vehicles, we account for the ~~purpose of mitigating exposure to changes in foreign currency exchange rates. Foreign currency transaction gains or losses~~lease and non-lease components as a single lease component. The Company's finance lease agreements are ~~reported in the Condensed Consolidated and Combined Statements of Income.~~

~~Revenue Recognition~~

We recognize revenue when all of 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 rise to the revision become known.

~~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.immaterial.

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:



	June 30, 2019		December 30, 2018
	(In thousands)
Cash and cash equivalents	$	538,227	$	338,386
Restricted cash	33,379		23,192
Total cash, cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows	$	571,606	$	361,578

September 24, 2017 December 25, 2016
(In thousands)
Cash and cash equivalents $ 401,789
$ 292,544
Restricted cash 4,841
4,979
Total cash, cash equivalents and restricted cash shown in the
Condensed Consolidated and Combined Statements of Cash Flows $ 406,630
$ 297,523

Recent Accounting Pronouncements Adopted as of June 30, 2019

In ~~May 2014,~~February 2016, 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~~ASU 2016-02, Leases (Topic 842), along with customers. The new standard 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 this standard as of January 1, 2018, the beginning of our 2018 fiscal year, using the modified retrospective approach. Under this method, we would not restate the prior financial statements presented; however, we would be required to provide additional disclosures of 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 the impact of the new guidance on these contracts. Additionally, our evaluation includes the impact of the new standard on certain common practices currently employed by us, such as slotting fees, discounts, rebates and other pricing allowances, and marketing funds. Although we are still evaluating the impact, we do not currently expect 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, 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.

~~In February 2016, the FASB issued new accounting guidance on lease arrangements,~~updates, 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 operating 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~~may elect to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach or the beginning of the period of adoption using a cumulative-effect adjustment approach. We adopted the new standard on December 31, 2018 and recognized and measured leases at the beginning of the period of adoption. We elected the package of practical expedients available under the transition guidance which, among other things, allows the carry-forward of historical lease classification. The ~~provisions~~Company also elected the practical expedient allowing use of hindsight in assessing the lease term. We made an accounting policy election to not apply the new guidance to leases with a term of 12 months or less and will recognize those payments in the Condensed Consolidated Statement of Income on a straight-line basis over the lease term. We implemented a system solution for administering our leases and facilitating compliance with the new guidance. Adoption of the standard had a material impact on our Condensed Consolidated Balance Sheet as a result of the increase in assets and liabilities from recognition of operating lease assets and operating lease liabilities. However, the standard did not have a material impact on our Condensed Consolidated Statement of Income.

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In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, 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 have adopted this standard as of December 31, 2018. The adoption of this guidance did not have a material impact on our financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, 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 not reclassify the stranded tax effects associated with the U.S. Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. We adopted this standard as of December 31, 2018. The adoption of this guidance did not have a material impact on our financial statements.

In July 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, 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 ~~fiscal year. Early~~calendar year with early adoption is permitted. We ~~are currently evaluating the impact of the new guidance on our financial statements and have not yet selected an adoption date.~~

In March 2016, the FASB issued new accounting guidance on employee share-based payments, which, 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 onas of December ~~26, 2016, the beginning~~31, 2018. The adoption 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 Companythis guidance did not have a ~~cumulative-effect adjustment,~~material impact on our financial statements.

Recent Accounting Pronouncements Not Yet Adopted as ~~there were no previous unrecognized excess tax benefits that would impact retained earnings. As a result, there was no retrospective adjustment to the prior period statement~~ of ~~cash flows of excess tax benefits as an operating activity rather than a financing activity.~~June 30, 2019

In June 2016, the FASB issued ~~new accounting guidance~~ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on ~~the measurement of credit losses on financial instruments,~~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,~~August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, new accounting guidance onto improve the ~~classification and presentation~~effectiveness of ~~restricted cash in the statement of cash flows in order~~disclosures related to ~~eliminate the diversity that currently exists in how companies present these changes.~~fair value measurements. The new guidance ~~requires restricted cash~~removes certain disclosure requirements related to ~~be included with cash~~transfers between Level 1 and ~~cash equivalents when explaining~~Level 2 of 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 complyfair value hierarchy along with the ~~applicable disclosures~~policy for ~~a change in an accounting principle. These disclosures include the nature~~timing of ~~and reason for the change in accounting principle, the transition method, a description of the prior-period information that has been retrospectively adjusted~~transfers between levels and the ~~effect of~~valuation processes for Level 3 fair value measurements. Additions to the ~~change on the financial statement line items. A description of the prior-period~~disclosure requirements include more quantitative information ~~that has been retrospectively adjusted~~related to significant unobservable inputs used in Level 3 fair value measurements 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~~gains and ~~net periodic postretirement benefit cost, which,~~losses included 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.~~comprehensive income. The new guidance will be effective as of ~~the beginning of~~ our ~~2019~~2020 fiscal 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,~~2018, the FASB issued ~~an accounting standard update that simplifies~~ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the ~~application of hedge~~Disclosure Requirements for Defined Benefit Plans, new accounting guidance to improve the effectiveness of disclosures related to defined benefit plans by eliminating certain required disclosures, clarifying existing disclosures, and adding new disclosures. Changes include removing disclosures related to the amounts in ~~current GAAP~~accumulated other comprehensive income expected to be recognized in the next fiscal year, adding narrative disclosure of the reasons for significant gains and ~~improves the reporting of hedging relationships~~losses related 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~~the defined benefit obligation, and clarifying the disclosures required for plans with projected and accumulated benefit obligations in excess of ~~the hedged item and hedging instrument may still occur but they~~plan assets. The new guidance will ~~no longer~~ be ~~separately reported. The standard requires the presentation~~effective as 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, butour 2020 fiscal year with early adoption is permitted. We are currently evaluating the impact of the ~~adoption of this standard will have~~new guidance on our financial ~~statements.~~statements and have not yet selected an adoption date.


2.	~~BUSINESS ACQUISITIONS~~

~~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. 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 13 processing and manufacturing units in Northern Ireland, the U.K., France, the Netherlands and Ireland, Moy Park processes 6.0 million birds per seven-day work week, in addition to producing around 200,000 tons 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. 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 million. These costs were expensed as incurred. 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 weeks ended September 25, 2016 totaled $1.5 billion. 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 income generated by Moy Park during the thirty-nine weeks ended September 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):~~

~~Table of Contents~~

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 million and $322.3 million, respectively The acquired business generated net income during the thirteen and thirty-nine weeks ended September 24, 2017 totaling $9.8 million and $24.6 million, respectively.

The assets acquired and liabilities assumed in 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

~~Table of Contents~~

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 weeks ended September 24, 2017, the Company recognized restructuring charges in the amounts of $0.7 million and $2.6 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 as if the acquisition had been completed at the beginning of the Company’s prior year, December 28, 2015.

Thirty-Nine Weeks
Ended
September 24, 2017

Thirty-Nine Weeks
Ended
September 25, 2016
(In thousands, except per share amount)
Net sales $ 8,031,311
$ 7,833,406
Net income attributable to Pilgrim's Pride Corporation 572,063
363,735
Net income attributable to Pilgrim's Pride Corporation
per common share - diluted 2.30
1.40

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

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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:

~~Table of Contents~~



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~~June 30, 2019 and December ~~25, 2016,~~30, 2018, 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:



	June 30, 2019
	Level 1			Total
	(In thousands)
Fair value assets:
Commodity futures instruments	$	3,594		$	3,594
Commodity options instruments	393			393
Foreign currency instruments	1,372			1,372
Fair value liabilities:
Commodity futures instruments	(14,116		)	(14,116		)
Commodity options instruments	(6,519		)	(6,519		)
Foreign currency instruments	(166		)	(166		)

September 24, 2017
Level 1 Total
(In thousands)
Fair value assets:
     Commodity futures instruments $ 2,168
$ 2,168
     Commodity options instruments 1,200
1,200
Foreign currency instruments 586
586
Fair value liabilities:
     Commodity futures instruments (1,587 ) (1,587 )
     Commodity options instruments (2,196 ) (2,196 )
Foreign currency instruments (387 ) (387 )



	December 30, 2018
	Level 1			Total
	(In thousands)
Fair value assets:
Commodity futures instruments	$	2,244		$	2,244
Foreign currency instruments	1,311			1,311
Fair value liabilities:
Commodity futures instruments	(1,479		)	(1,479		)
Commodity option instruments	(3,312		)	(3,312		)
Foreign currency instruments	(6,649		)	(6,649		)

December 25, 2016
Level 1 Total
(In thousands)
Fair value assets:
     Commodity futures instruments $ 5,341
$ 5,341
     Commodity options instruments 98
98
Foreign currency instruments 516
516
Fair value liabilities:
     Commodity futures instruments (4,063 ) (4,063 )
     Commodity option instruments (2,764 ) (2,764 )
Foreign currency instruments (153 ) (153 )

See “Note 7.6. 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.~~

~~Table of Contents~~

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.

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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.

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



	June 30, 2019						December 30, 2018
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
				(In thousands)
Fixed-rate senior notes payable at 5.75%, at Level 1 inputs	$	(1,002,296	)	$	(1,017,210	)	$	(1,002,497	)	$	(937,300	)
Fixed-rate senior notes payable at 5.875%, at Level 1 inputs	(844,075		)	(881,875		)	(843,717		)	(768,188		)
Secured loans, at Level 3 inputs	(1,942		)	(1,910		)	(319		)	(319		)

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~~June 30, 2019 or December ~~25, 2016,~~30, 2018, 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~~June 30, 2019 or December ~~25, 2016,~~30, 2018, 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 gains or losses recognized for such assets and liabilities in the ~~periods~~period reported.


4.	~~TRADE ACCOUNTS AND OTHER RECEIVABLES~~

3. TRADE ACCOUNTS AND OTHER RECEIVABLES

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



	June 30, 2019			December 30, 2018
	(In thousands)
Trade accounts receivable	$	540,989		$	533,645
Notes receivable - current	4,223			4,630
Other receivables	44,564			31,331
Receivables, gross	589,776			569,606
Allowance for doubtful accounts	(7,480		)	(8,057		)
Receivables, net	$	582,296		$	561,549

Account receivable from related parties^(a)	$	957		$	1,331

September 24, 2017 December 25, 2016
(In thousands)
Trade accounts receivable $ 612,983
$ 435,818
Notes receivable - current 5,130
630
Other receivables 14,644
15,766
Receivables, gross 632,757
452,214
Allowance for doubtful accounts (7,955 ) (6,661 )
Receivables, net $ 624,802
$ 445,553

Account receivable from related parties^(a)
$ 970
$ 4,010

(a)Additional information regarding accounts receivable from related parties is included in “Note ~~16.~~19. Related Party Transactions.”

Activity in the allowance for doubtful accounts for the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 was as follows (in thousands):



Balance, beginning of period	$	(8,057	)
Provision charged to operating results	(724		)
Account write-offs and recoveries	1,186
Effect of exchange rate	115
Balance, end of period	$	(7,480	)

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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 )

4. INVENTORIES

Inventories consisted of the following:



	June 30, 2019		December 30, 2018
	(In thousands)
Raw materials and work-in-process	$	710,952	$	747,801
Finished products	377,732		317,410
Operating supplies	43,975		43,825
Maintenance materials and parts	53,996		50,483
Total inventories	$	1,186,655	$	1,159,519


5.	~~INVENTORIES~~

~~Inventories consisted of the following:~~

~~Table of Contents~~

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


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:



	June 30, 2019				December 30, 2018
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Cash equivalents:
Fixed income securities	$	260,291	$	260,291	$	135,286	$	135,286
Other	88,700		88,700		67,474		67,474

September 24, 2017 December 25, 2016
Amortized Cost Fair
Value Amortized Cost Fair
Value
(In thousands)
Cash equivalents:
Fixed income securities $ 155,216
$ 155,216
$ 140,480
$ 140,480
Other 62
62
61
61

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~~June 30, 2019 related to the Company’s available-for-sale securities totaled $2.9 million and $5.1 million while gross realized losses were immaterial. Gross realized gains during the thirteen and twenty-six weeks ended 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. 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~~thirteen and twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 and ~~September 25, 2016.~~July 1, 2018, respectively. Net unrealized holding gains and losses on the Company’s available-for-sale securities recognized during the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~weeks ended June 30, 2019 and ~~September 25, 2016~~July 1, 2018 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~~twenty-six weeks ended ~~September 24, 2017~~weeks ended June 30, 2019 and ~~September 25, 2016 is~~July 1, 2018 are disclosed in “Note ~~14.~~15. Stockholders’ ~~Equity - Accumulated Other Comprehensive Loss.”~~Equity”.


7.6.	DERIVATIVE FINANCIAL INSTRUMENTS

The Company utilizes various raw materials in its operations, including corn, soybean meal, soybean oil, wheat 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~~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.

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.

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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

~~Table of Contents~~

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. This cash collateral is reported in the line item Restricted cash and cash equivalents on the Condensed Consolidated Balance Sheets.

We have not designated certain derivative financial instruments that we have purchased to mitigate commodity purchase exposures in the U.S. and Mexico 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~~the commodity derivative financial instruments are included in the line item Cost of sales in the Condensed Consolidated ~~and Combined~~ Statements of Income. Gains or losses related to the foreign currency derivative financial instruments are included in the line item Foreign currency transaction loss and Cost of sales in the Condensed Consolidated 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~~$0.5 million and ~~net losses of $16.7~~$24.0 million related to changes in the fair value of its derivative financial instruments during the thirteen weeks ended ~~September 24, 2017~~June 30, 2019 and ~~September 25, 2016,~~July 1, 2018, respectively. The Company ~~also~~ recognized ~~net gains of $7.3 million and~~ net losses of ~~$10.5~~$8.5 million and $17.6 million related to changes in the fair value of its derivative financial instruments during the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 and ~~September 25, 2016,~~July 1, 2018, 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			June 30, 2019			December 30, 2018
	(Fair values in thousands)						(Fair values in thousands)
Fair values:
Commodity derivative assets	$	3,368		$	5,439		$	3,987		$	2,263
Commodity derivative liabilities	(3,782		)	(6,827		)	(20,635		)	(4,791		)
Foreign currency derivative assets	586			516			1,372			1,311
Foreign currency derivative liabilities	(387		)	(153		)	(166		)	(6,649		)
Cash collateral posted with brokers	4,841			4,979
Derivatives coverage^(a):
Collateral posted with brokers^(a)							33,379			23,192
Derivatives coverage^(b):
Corn	0.7		%	2.3		%	27.7		%	6.0		%
Soybean meal	0.2		%	0.3		%	29.6		%	6.0		%
Period through which stated percent of needs are covered:
Corn	September 2018			September 2018			July 2020			March 2020
Soybean meal	August 2018			July 2017			May 2020			December 2019


(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:



	Gain (Loss) Recognized in Other Comprehensive Loss on Derivative
	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	June 30, 2019			July 1, 2018			June 30, 2019		July 1, 2018
	(In thousands)
Foreign currency derivatives	$	1,303		$	(98	)	$	388	$	(97	)
Total	$	1,303		$	(98	)	$	388	$	(97	)

	Gain (Loss) Reclassified from AOCI into Income
	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	June 30, 2019			July 1, 2018			June 30, 2019		July 1, 2018
	(In thousands)
Foreign currency derivatives	$	(48	)	$	(222	)	$	173	$	(472	)
Total	$	(48	)	$	(222	)	$	173	$	(472	)

~~Table of Contents~~

Gain (Loss) Recognized in Other Comprehensive Income on Derivative (Effective Portion)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
September 24, 2017 September 25, 2016 September 24, 2017 September 25, 2016
(In thousands)
Foreign currency derivatives $ (779 ) $ (220 ) $ (128 ) $ 132
Total $ (779 ) $ (220 ) $ (128 ) $ 132

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

Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
September 24, 2017 September 25, 2016 September 24, 2017 September 25, 2016
(In thousands)
Foreign currency derivatives $ —
$ 285
$ (9 ) $ 35
Total $ —
$ 285
$ (9 ) $ 35

At ~~September 24, 2017,~~June 30, 2019, 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~~$0.9 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.~~


8.7.	GOODWILL AND INTANGIBLE ASSETS

The activity in goodwill by segment for the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 was as follows:



	December 30, 2018		Currency Translation		June 30, 2019
	(In thousands)
U.S.	$	41,936	$	—	$	41,936
U.K. and Europe	782,207		119		782,326
Mexico	125,607		—		125,607
Total	$	949,750	$	119	$	949,869

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 30, 2018			Amortization			Currency Translation		June 30, 2019
	(In thousands)
Carrying amount:
Trade names	$	78,343		$	—		$	—	$	78,343
Customer relationships	247,706			—			13		247,719
Non-compete agreements	320			—			—		320
Trade names not subject to amortization	380,067			—			56		380,123
Accumulated amortization:
Trade names	(43,552		)	(982		)	—		(44,534		)
Customer relationships	(98,441		)	(10,357		)	68		(108,730		)
Non-compete agreements	(315		)	(4		)	—		(319		)
Total identified intangible assets	$	564,128		$	(11,343	)	$	137	$	552,922

~~Table of Contents~~

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

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

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At June 30, 2019, 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.


8.	LEASES

The Company is party to operating lease agreements for warehouses, office space, vehicle maintenance facilities and livestock growing farms in the U.S., distribution centers, hatcheries and office space in Mexico and farms, processing facilities and office space in the U.K. and Europe. Additionally, the Company leases equipment, over-the-road transportation vehicles and other assets in all three geographic business segments. The Company is also party to a limited number of finance lease agreements in the U.S.

Our leases have remaining lease terms of one year to 16 years, some of which may include options to extend the lease for up to one year and some of which may include options to terminate the lease within one year. The exercise of options to extend lease terms is at our sole discretion. Certain leases also include options to purchase the leased property.

Certain lease agreements include rental payment increases over the lease term that can be either fixed or variable. Fixed payment increases and variable payment increases based on an index or rate are included in the initial lease liability using the index or rate at commencement date. Variable payment increases not based on an index are recognized as incurred. Certain lease agreements contain residual value guarantees, primarily vehicle and transportation equipment leases.

The following table presents components of lease expense. Operating lease cost, finance lease amortization and finance lease interest are respectively included in Cost of sales, Selling, general and administrative expense and Interest expense, net of capitalized interest in the Condensed Consolidated Statements of Income.



	Thirteen Weeks Ended		Twenty-Six Weeks Ended
	June 30, 2019		June 30, 2019
	(In thousands)
Operating lease cost ^(a)	$	25,804	$	51,467
Amortization of finance lease liabilities	21		48
Interest on finance leases	3		6
Short-term and variable lease cost	11,892		26,110
Net lease cost	$	37,720	$	77,631

(a) Sublease income is immaterial and not included in operating lease costs.

The weighted-average remaining lease term and discount rate for lease liabilities included in our Condensed Consolidated Balance Sheet are as follows:



	June 30, 2019
Weighted-average remaining lease term (years):
Operating leases	5.89
Finance leases	1.36
Weighted-average discount rate:
Operating leases	4.86	%
Finance leases	8.50	%

Supplemental cash flow information related to leases is as follows (in thousands):

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	Twenty-Six Weeks Ended
	June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	49,987
Financing cash flows from finance leases	48

Operating lease assets obtained in exchange for operating lease liabilities	$	17,565

Future minimum lease payments under noncancellable leases at June 30, 2019 are as follows (in thousands):



	Operating Leases		Finance Leases
For the fiscal years ending December:
Year 1	$	88,181	$	98
Year 2	65,947		43
Year 3	56,513		—
Year 4	47,836		—
Year 5	37,267		—
Thereafter	70,608		—
Total future minimum lease payments	366,352		141
Less: imputed interest	47,716		9
Present value of lease liabilities	$	318,636	$	132

Future minimum lease payments under capital and noncancellable operating leases with terms exceeding one year at December 30, 2018 were as follows (in thousands):



	Capital Lease Obligations			Noncancellable Operating Lease Obligations
For the fiscal years ending December:
Year 1	$	2,971		$	84,220
Year 2	1,033			63,196
Year 3	36			53,908
Year 4	3			45,557
Year 5	—			36,136
Thereafter	—			66,637
Net minimum lease payments	4,043			$	349,654
Amount representing interest	(337		)
Present value of net minimum lease payments	$	3,706

Lease liabilities as of June 30, 2019 are included in our Condensed Consolidated Balance Sheet as follows (in thousands):



	Operating Leases		Finance Leases
Accrued expenses and other current liabilities	$	74,975	$	1
Current maturities of long-term debt	—		90
Noncurrent operating lease liability, less current maturities	243,661		—
Long-term debt, less current maturities	—		41
Total lease liabilities	$	318,636	$	132

As of June 30, 2019, the Company's operating and finance leases that have not commenced are immaterial.

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9.	PROPERTY, PLANT AND EQUIPMENT

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



	June 30, 2019			December 30, 2018
	(In thousands)
Land	$	197,582		$	196,769
Buildings	1,711,629			1,697,703
Machinery and equipment	2,636,922			2,618,213
Autos and trucks	61,538			59,195
Construction-in-progress	323,020			269,166
PP&E, gross	4,930,691			4,841,046
Accumulated depreciation	(2,720,479		)	(2,679,344		)
PP&E, net	$	2,210,212		$	2,161,702

September 24, 2017 December 25, 2016
(In thousands)
Land $ 204,176
$ 150,127
Buildings 1,650,262
1,487,353
Machinery and equipment 2,442,031
2,268,526
Autos and trucks 56,641
58,454
Construction-in-progress 237,323
255,086
PP&E, gross 4,590,433
4,219,546
Accumulated depreciation (2,514,086 ) (2,385,561 )
PP&E, net $ 2,076,347
$ 1,833,985

The Company recognized depreciation expense of ~~$63.8~~$65.7 million and ~~$53.4~~$61.9 million during the thirteen weeks ended ~~September 24, 2017~~June 30, 2019 and ~~September 25, 2016,~~July 1, 2018, respectively. The Company recognized depreciation expense of ~~$181.1~~$127.2 million and ~~$156.9~~$122.6 million during the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 and ~~September 25, 2016,~~July 1, 2018, respectively.

During the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017,~~June 30, 2019, Pilgrim's spent ~~$258.4~~$177.6 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$116.5 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~~June 30, 2019 to improve efficiencies and reduce costs. During the twenty-six weeks ended July 1, 2018, the Company spent $155.2 million on capital projects and transferred $109.6 million of completed projects from construction-in-progress to depreciable assets.

During the ~~thirty-nine~~thirteen and twenty-six weeks ended ~~September 24, 2017,~~June 30, 2019, the Company sold certain PP&E for $1.2 million and $1.7 million, respectively, in cash and recognized net losses on these sales of $0.3 million and $0.2 million, respectively. PP&E sold in the twenty-six weeks ended June 30, 2019 included a breeder farm in Texas, vacant land in Minnesota and miscellaneous equipment. During the thirteen and twenty-six weeks ended July 1, 2018, the Company sold certain PP&E for cash of ~~$2.6~~$0.2 million and $1.2 million, respectively, and recognized net ~~gains~~losses on these sales of ~~$0.5 million.~~$0.1 million and $0.2 million, respectively. PP&E sold in the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~July 1, 2018 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~~miscellaneous equipment that no longer ~~fit~~fits 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~~June 30, 2019 and December ~~25, 2016,~~30, 2018, the Company reported ~~properties and related~~ assets totaling ~~$2.8~~$0.1 million and ~~$5.3~~$0.2 million, respectively, in the line item Assets held for sale on its Condensed Consolidated ~~and Combined~~ Balance Sheets. The fair values of the ~~Alabama processing complex, which was~~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,~~30, 2019 were ~~both~~ based on quoted market prices.

The Company tested the recoverability of its Alabama processing complex held for sale as of June 25, 2017 and September 24, 2017. The Company determined that the aggregate carrying amount at June 25, 2017 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 million related to 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 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,~~June 30, 2019, the carrying amounts of these idled assets totaled $~~50.4~~41.9 million based on depreciable value of $~~169.4~~137.1 million and accumulated depreciation of $~~119.0~~95.2 million.

~~The Company last tested the recoverability of its long-lived assets held and used in December 2016.~~ At ~~that time,~~June 30, 2019, 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:

1918

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	June 30, 2019		December 30, 2018
	(In thousands)
Accounts payable:
Trade accounts	$	736,963	$	744,105
Book overdrafts	63,421		69,475
Other payables	15,742		16,479
Total accounts payable	816,126		830,059
Accounts payable to related parties^(a)	5,938		7,269
Revenue contract liability^(b)	23,016		33,328
Accrued expenses and other current liabilities:
Compensation and benefits	156,809		149,507
Interest and debt-related fees	31,552		33,596
Insurance and self-insured claims	77,801		80,990
Current maturities of operating lease liabilities	74,975		—
Derivative liabilities:
Commodity futures	14,116		1,479
Commodity options	6,519		3,312
Foreign currency derivatives	166		6,649
Other accrued expenses	146,399		111,408
Total accrued expenses and other current liabilities	508,337		386,941
	$	1,353,417	$	1,257,597

September 24, 2017 December 25, 2016
(In thousands)
Accounts payable:
Trade accounts $ 653,248
$ 722,495
Book overdrafts 77,189
63,577
Other payables 13,091
4,306
Total accounts payable 743,528
790,378
Accounts payable to related parties^(a)
7,091
4,468
Accrued expenses and other current liabilities:
Compensation and benefits 168,551
160,591
Interest and debt-related fees 16,452
10,907
Insurance and self-insured claims 80,210
82,544
Derivative liabilities:
Commodity futures 1,587
4,063
Commodity options 2,196
2,764
Foreign currency derivatives 387
153
Other accrued expenses 147,093
85,999
Total accrued expenses and other current liabilities 416,476
347,021
$ 1,167,095
$ 1,141,867

(a)Additional information regarding accounts payable to related parties is included in “Note ~~16.~~19. Related Party Transactions.”

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

2019

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

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	June 30, 2019			December 30, 2018
		(In thousands)
Long-term debt and other long-term borrowing arrangements:
Senior notes payable, net of premium and discount at 5.75%	2025	$	1,002,296		$	1,002,497
Senior notes payable, net of discount at 5.875%	2027	844,075			843,717
U.S. Credit Facility (defined below):
Term note payable at 3.69%	2023	487,500			500,000
Revolving note payable at 5.25%	2023	—			—
Moy Park France Invoice Discounting Revolver with payables at EURIBOR plus 0.8%	2019	3,387			2,277
Moy Park Credit Agricole Bank Overdraft with notes payable at EURIBOR plus 1.50%	On Demand	—			88
Moy Park Bank of Ireland Revolving Facility with notes payable at LIBOR or EURIBOR plus 1.25% to 2.00%	2023	—			—
Mexico Credit Facility (defined below) with notes payable at TIIE Rate plus 1.50%	2023	—			—
Secured loans with payables at weighted average of 3.69%	Various	1,942			319
Finance lease obligations	Various	131			3,707
Long-term debt		2,339,331			2,352,605
Less: Current maturities of long-term debt		(30,282		)	(30,405		)
Long-term debt, less current maturities		2,309,049			2,322,200
Less: Capitalized financing costs		(25,202		)	(27,010		)
Long-term debt, less current maturities, net of capitalized financing costs:		$	2,283,847		$	2,295,190

Maturity September 24, 2017 December 25, 2016
(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 at 6.25% 2021 401,982
369,736
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
—
Mexico Credit Facility (defined below) with notes payable at
TIIE Rate plus 0.95% 2019 84,524
23,304
Moy Park Multicurrency Revolving Facility with notes payable at
LIBOR rate plus 2.5%

2018 9,953
11,985
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
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
Capital lease obligations Various 10,703
14,600
Long-term debt 2,629,080
1,429,981
Less: Current maturities of long-term debt (61,811 ) (15,712 )
Long-term debt, less current maturities 2,567,269
1,414,269
Less: Capitalized financing costs (18,694 ) (18,145 )
Long-term debt, less current maturities, net of capitalized financing costs: $ 2,548,575
$ 1,396,124

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.~~ 2025 that were issued in September 2017 and 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. 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 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.

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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 ~~Additional~~ Senior Notes due ~~2025~~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 ~~Additional~~ Senior Notes due ~~2025.~~2027. 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.

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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 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. 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 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 sale of a £200.0 million aggregate principal amount of its 6.25% senior notes due 2021 (the “Moy Park Notes”). On April 17, 2015, an add-on offering of £100.0 million of the Moy Park 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 at 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. As of November 2, 2017, £1,185,000 principal amount of Moy Park Notes and Moy Park Additional Notes had been validly tendered (and not validly withdrawn). Moy Park (Bondco) Plc has purchased all validly tendered (and not validly withdrawn) Moy Park Notes and Moy Park Additional Notes on or prior to November 2, 2017, with such settlement occurring on November 3, 2017.

U.S. Credit Facility

On ~~May 8, 2017,~~July 20, 2018, the Company, and certain of ~~its~~the Company’s subsidiaries entered into a ~~Third~~Fourth Amended and Restated Credit Agreement (the “U.S. Credit Facility”) with ~~Coöperatieve Rabobank U.A., New York Branch (“Rabobank”),~~CoBank, ACB, 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 revolving credit commitment and a term loan commitment of up to ~~$800.0~~$500.0 million (the “Term Loans”). The Company used the proceeds from the term loan commitment under the U.S. Credit Facility, ~~also~~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.

The U.S. Credit Facility 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~~$1.25 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.~~July 20, 2023. All principal on the Term Loans is due at maturity on ~~May 6, 2022.~~July 20, 2023. 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,~~June 30, 2019, the ~~company~~Company had Term Loans outstanding totaling ~~$790.0~~$487.5 million and the amount available for borrowing under the revolving loan commitment was ~~$631.9~~$708.4 million. The Company had letters of credit of ~~$44.8~~$41.6 million and no borrowings ~~of $73.3 million~~ outstanding under the revolving loan commitment as of ~~September 24, 2017.~~

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June 30, 2019.

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%~~1.25% through ~~September 24, 2017~~August 2, 2018 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, the base rate plus ~~0.50%~~0.25% through ~~September 24, 2017~~August 2, 2018 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 customary financial and other various covenants ~~and various other covenants that may adversely affect~~for transactions of this type, including restrictions on the ~~Company’s~~Company's ability to ~~among other things,~~ incur additional indebtedness, incur liens, pay dividends, or make certain restricted payments, consummate certain ~~assets~~asset sales, enter into certain transactions with ~~JBS and~~ the Company’s ~~other~~ affiliates, or merge, consolidate and/or sell or dispose of all or substantially all of ~~our assets.~~its assets, among other things. 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 wethe Company 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~~the 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~~its direct foreign subsidiaries and (iii) substantially all of the assets of the Company and the guarantors under the U.S. Credit Facility.

~~Mexico Credit Facility~~

~~On September 27, 2016, certain of our Mexican subsidiaries entered into an unsecured credit agreement (the “Mexico Credit Facility”)~~ The Company is currently in compliance with ~~BBVA Bancomer, S.A. Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer, as lender. The loan commitment~~the covenants under the ~~Mexico~~U.S. Credit ~~Facility was $1.5 billion Mexican pesos. Outstanding borrowings under the Mexico~~Facility.

U.K. and Europe 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 borrowings under the Mexico Credit Facility that bear interest at a per annum rate of 8.33%. As of September 24, 2017, the U.S. dollar-equivalent borrowing availability was less than $0.1 million.

~~Moy Park Multicurrency Revolving Facility Agreement~~

On March 19, 2015, Moy Park Holdings (Europe) Limited, a subsidiary of Granite Holdings Sàrl, and its subsidiaries, entered into an agreement with Barclays Bank plc which matures on March 19, 2018. The agreement provides 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.

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, 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 the Receivables Finance Agreement was $60.3 million and there were no outstanding borrowings. Outstanding borrowings under the facility bear interest at a per annum rate equal to LIBOR plus 1.5%. 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.

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Facilities

Moy Park France Invoice Discounting Facility

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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 €10.0 million~~decreased by 50 percent in ~~September 2016 to €30.0 million.~~June 2018. 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 June 30, 2019, the U.S. dollar-equivalent loan commitment, borrowing availability, and outstanding borrowings under the Invoice Discounting Facility were $11.4 million, $8.0 million, and $3.4 million, respectively.

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~~Moy Park Credit Agricole Bank Overdraft

On ~~September 8, 2017, Onix Investments UK~~December 3, 2018, Moy Park entered into an unsecured €0.5 million bank overdraft agreement (the “Overdraft Agreement”) with Credit Agricole. The Overdraft Agreement is payable on demand and can be cancelled anytime by the Company or Credit Agricole. Outstanding borrowings under the Overdraft Agreement bear interest at a per annum rate equal to EURIBOR plus 1.50%. As of June 30, 2019, there were no outstanding borrowings under the Overdraft Agreement.

Moy Park Bank of Ireland Revolving Facility Agreement

On June 2, 2018, Moy Park Holdings (Europe) Ltd.~~, a wholly owned subsidiary~~ and its subsidiaries entered into an unsecured multicurrency revolving facility agreement (the “Bank of ~~Pilgrim’s Pride Corporation, executed a subordinated promissory note payable to JBS S.A. (the “JBS S.A. Promissory Note”~~Ireland Facility Agreement”) ~~for £562.5 million, which had a maturity date of September 6, 2018. Interest on~~with the ~~outstanding principal balance~~Governor and Company of the ~~JBS S.A. Promissory Note accrued~~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 mature on June 2, 2023. Outstanding borrowings under the Bank of Ireland Facility Agreement bear interest at ~~the~~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 June 30, 2019, both the U.S. dollar-equivalent loan commitment and ~~after November 8, 2017~~borrowing availability under the Bank of Ireland Facility Agreement were $127.0 million. As of June 30, 2019, there were no outstanding borrowings under the Bank of Ireland Facility Agreement.

The Bank of Ireland Facility Agreement contains representations and ~~prior~~warranties, covenants, indemnities and conditions that the Company believes are customary for transactions of this type. Pursuant to ~~January 7,~~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.

Mexico Credit Facility

On December 14, 2018, ~~4.00%, (ii) from~~certain of the Company's Mexican subsidiaries entered into an unsecured credit agreement (the “Mexico Credit Facility”) with Banco del Bajio, Sociedad Anónima, Institución de Banca Múltiple, as lender. The loan commitment under the Mexico Credit Facility is $1.5 billion Mexican pesos and ~~after January 7, 2018 and prior~~can be borrowed on a revolving basis. The U.S. dollar-equivalent of the loan commitment under the Mexico Credit Facility is $78.0 million. Outstanding borrowings under the Mexico Credit Facility accrue interest at a rate equal to ~~March 8, 2018, 6.00% and (iii) from and after March 8, 2018, 8.00%~~the 28-Day Interbank Equilibrium Interest Rate plus 1.50%. The ~~JBS S.A. Promissory Note was repaid in full~~Mexico Credit Facility contains covenants and defaults that the Company believes are customary for transactions of this type. The Mexico Credit Facility will be used for general corporate and working capital purposes. The Mexico Credit Facility will mature on ~~October 2, 2017 using~~December 14, 2023. As of June 30, 2019, there were no outstanding borrowings under the ~~net proceeds from the sale of Senior Notes due 2027 and the Additional Senior Notes due 2025.~~Mexico Credit Facility.


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

12. INCOME TAXES

The Company recorded income tax expense of ~~$278.0~~$96.0 million, a ~~32.2%~~27.4% effective tax rate, for the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 compared to income tax expense of ~~$203.0~~$75.5 million, a ~~34.0%~~25.1% effective tax rate, for the ~~thirty-nine~~twenty-six weeks ended ~~September 25, 2016.~~July 1, 2018. The increase in income tax expense in ~~2017~~2019 resulted primarily from an increase in pre-tax ~~income.~~income and an increase in unrecognized tax benefits in Mexico.

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

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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,~~June 30, 2019, 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, 2017~~June 30, 2019 and ~~September 25, 2016,~~July 1, 2018, there ~~is a~~are tax ~~effect~~effects of ~~$4.5~~($0.9) million and ~~$4.2~~($0.2) million, respectively, reflected in other comprehensive ~~income.~~loss.

~~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, 2017,~~June 30, 2019 and July 1, 2018, there ~~is an~~are immaterial tax ~~effect~~effects reflected in income tax expense due to excess tax benefits and shortfalls 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~~the Company and our subsidiaries for years prior to ~~2010~~2011 are no longer subject to examination by tax authorities.

The ~~United States Fifth Circuit Court of Appeals rendered judgment in favor~~Mexican tax authorities have assessed a Mexico subsidiary of the Company $16.5 million related to a specific transaction undertaken during tax year 2011. A loss for this amount has been recorded during the twenty-six weeks ended June 30, 2019.

13. REVENUE RECOGNITION

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

The Company evaluates the transaction for distinct performance obligations, which are the sale of its products to customers. Since its products are commodity market-priced, the sales price is representative of the observable, standalone 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 June 30, 2019						Twenty-Six Weeks Ended June 30, 2019
	Domestic		Export		Net Sales		Domestic		Export		Net Sales
	(In thousands)
U.S.	$	1,847,491	$	69,463	$	1,916,954	$	3,665,637	$	134,907	$	3,800,544
U.K. and Europe	468,882		67,020		535,902		920,681		130,184		1,050,865
Mexico	390,229		—		390,229		716,351		—		716,351
Net Sales	$	2,706,602	$	136,483	$	2,843,085	$	5,302,669	$	265,091	$	5,567,760

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	Thirteen Weeks Ended July 1, 2018						Twenty-Six Weeks Ended July 1, 2018
	Domestic		Export		Net Sales		Domestic		Export		Net Sales
	(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

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~~30, 2019 are as follows (in thousands):



Balance, beginning of period	$	33,328
Revenue recognized	(18,590		)
Cash received, excluding amounts recognized as revenue during the period	8,278
Balance, end of period	$	23,016

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~~$5.7 million

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and ~~$2.3~~$3.1 million in the thirteen weeks ended ~~September 24, 2017~~June 30, 2019 and ~~September 25, 2016,~~July 1, 2018, respectively, and ~~$8.0~~$9.6 million and ~~$6.9~~$6.2 million in the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 and ~~September 25, 2016,~~July 1, 2018, respectively.

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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:


	Thirty-Nine Weeks Ended September 24, 2017						Thirty-Nine Weeks Ended September 25, 2016						Twenty-Six Weeks Ended June 30, 2019						Twenty-Six Weeks Ended July 1, 2018
	Pension Benefits			Other Benefits			Pension Benefits			Other Benefits			Pension Benefits			Other Benefits			Pension Benefits			Other Benefits
Change in projected benefit obligation:	(In thousands)												(In thousands)
Projected benefit obligation, beginning of period	$	167,159		$	1,648		$	165,952		$	1,672		$	157,619		$	1,462		$	178,247		$	1,603
Interest cost	4,178			38			4,189			38			2,934			26			2,731			23
Actuarial losses (gains)	9,433			25			12,233			95			13,734			96			(9,465		)	(62		)
Benefits paid	(7,571		)	(111		)	(7,274		)	(105		)	(3,020		)	(74		)	(4,473		)	(74		)
Curtailments and settlements													(5,718		)	—			—			—
Projected benefit obligation, end of period	$	173,199		$	1,600		$	175,100		$	1,700		$	165,549		$	1,510		$	167,040		$	1,490


	Thirty-Nine Weeks Ended September 24, 2017						Thirty-Nine Weeks Ended September 25, 2016						Twenty-Six Weeks Ended June 30, 2019						Twenty-Six Weeks Ended July 1, 2018
	Pension Benefits			Other Benefits			Pension Benefits			Other Benefits			Pension Benefits			Other Benefits			Pension Benefits			Other Benefits
Change in plan assets:	(In thousands)												(In thousands)
Fair value of plan assets, beginning of period	$	97,526		$	—		$	96,947		$	—		$	102,414		$	—		$	112,570		$	—
Actual return on plan assets	9,321			—			4,769			—			12,504			—			97			—
Contributions by employer	10,538			111			8,983			105			3,924			74			5,581			74
Benefits paid	(7,571		)	(111		)	(7,274		)	(105		)	(3,020		)	(74		)	(4,473		)	(74		)
Curtailments and settlements													(5,718		)	—			—			—
Fair value of plan assets, end of period	$	109,814		$	—		$	103,425		$	—		$	110,104		$	—		$	113,775		$	—


	September 24, 2017						December 25, 2016						June 30, 2019						December 30, 2018
	Pension Benefits			Other Benefits			Pension Benefits			Other Benefits			Pension Benefits			Other Benefits			Pension Benefits			Other Benefits
Funded status:	(In thousands)												(In thousands)
Unfunded benefit obligation, end of period	$	(63,385	)	$	(1,600	)	$	(69,633	)	$	(1,648	)	$	(55,445	)	$	(1,510	)	$	(55,205	)	$	(1,462	)


	September 24, 2017						December 25, 2016						June 30, 2019						December 30, 2018
	Pension Benefits			Other Benefits			Pension Benefits			Other Benefits			Pension Benefits			Other Benefits			Pension Benefits			Other Benefits
Amounts recognized in the Condensed Consolidated and Combined Balance Sheets at end of period:	(In thousands)
Amounts recognized in the Condensed Consolidated Balance Sheets at end of period:													(In thousands)
Current liability	$	(13,098	)	$	(147	)	$	(13,113	)	$	(147	)	$	(8,239	)	$	(148	)	$	(8,267	)	$	(149	)
Long-term liability	(50,287		)	(1,453		)	(56,520		)	(1,501		)	(47,206		)	(1,362		)	(46,938		)	(1,313		)
Recognized liability	$	(63,385	)	$	(1,600	)	$	(69,633	)	$	(1,648	)	$	(55,445	)	$	(1,510	)	$	(55,205	)	$	(1,462	)



	June 30, 2019				December 30, 2018
	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)	$	55,685	$	62	$	54,343	$	(34	)

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 )

The accumulated benefit obligation for ~~our~~the Company's defined benefit pension plans was ~~$173.2~~$165.6 million and ~~$167.2~~$157.6 million at ~~September 24, 2017~~June 30, 2019 and December ~~25, 2016,~~30, 2018, 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~~June 30, 2019 and December ~~25, 2016, respectively.~~30, 2018. As of ~~September 24, 2017,~~June 30, 2019, the weighted average duration of ~~our~~the Company's defined benefit pension obligation is ~~32.72~~29.69 years.

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Net Periodic Benefit Costs

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



	Thirteen Weeks Ended June 30, 2019					Thirteen Weeks Ended July 1, 2018					Twenty-Six Weeks Ended June 30, 2019					Twenty-Six Weeks Ended July 1, 2018
	Pension Benefits			Other Benefits		Pension Benefits			Other Benefits		Pension Benefits			Other Benefits		Pension Benefits			Other Benefits
	(In thousands)
Interest cost	$	1,467		$	13	$	1,365		$	11	$	2,934		$	26	$	2,731		$	23
Estimated return on plan assets	(1,349		)	—		(1,516		)	—		(2,698		)	—		(3,033		)	—
Settlement loss	1,930			—		—			—		1,930			—		—			—
Amortization of net loss	328			—		301			—		656			—		602			—
Net costs	$	2,376		$	13	$	150		$	11	$	2,822		$	26	$	300		$	23

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
Pension Benefits Other Benefits Pension Benefits Other Benefits Pension Benefits Other Benefits Pension Benefits Other Benefits
(In thousands)
Interest cost $ 1,392
$ 13
$ 1,396
$ 12
$ 4,178
$ 38
$ 4,189
$ 38
Estimated return on plan assets (1,314 ) —
(1,314 ) —
(3,940 ) —
(3,942 ) —
Amortization of net loss 233
—
165
—
699
—
494
—
Net costs $ 311
$ 13
$ 247
$ 12
$ 937
$ 38
$ 741
$ 38

Economic Assumptions

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


	September 24, 2017				December 25, 2016				June 30, 2019				December 30, 2018
	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	%	3.60	%	3.15	%	4.40	%	4.07	%



	Twenty-Six Weeks Ended June 30, 2019				Twenty-Six Weeks Ended July 1, 2018
	Pension Benefits		Other Benefits		Pension Benefits		Other Benefits
Assumptions used to measure net pension and other postretirement cost:
Discount rate	4.40	%	4.07	%	3.69	%	3.39	%
Expected return on plan assets	5.50	%	NA		5.50	%	NA

Thirty-Nine Weeks Ended
September 24, 2017 Thirty-Nine Weeks Ended
September 25, 2016
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 %
Expected return on plan assets 5.50 % NA
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~~June 30, 2019 and December ~~25, 2016,~~30, 2018, 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.

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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	$	(4,122	)	$	4,329

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		June 30, 2019		December 30, 2018
Cash and cash equivalents	—	%	—	%	1	%	—	%
Interest income receivable					—	%	—	%
Pooled separate accounts^(a):
Equity securities	5	%	5	%	5	%	4	%
Fixed income securities	5	%	5	%	4	%	5	%
Common collective trust funds^(a):
Equity securities	61	%	60	%	45	%	45	%
Fixed income securities	29	%	30	%	40	%	41	%
Real estate					5	%	5	%
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~~June 30, 2019 and December ~~25, 2016:~~30, 2018:


	September 24, 2017								December 25, 2016								June 30, 2019								December 30, 2018
	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	$	966	$	—	$	—	$	966	$	110	$	—	$	—	$	110
Interest income receivable																	1		—		—		1		—		—		—		—
Pooled separate accounts:
Large U.S. equity funds^(d)	—		3,228		—		3,228		—		3,302		—		3,302		—		3,036		—		3,036		—		2,491		—		2,491
Small/Mid U.S. equity funds^(e)	—		388		—		388		—		406		—		406		—		364		—		364		—		292		—		292
International equity funds^(f)	—		1,585		—		1,585		—		1,231		—		1,231		—		1,730		—		1,730		—		1,489		—		1,489
Fixed income funds^(g)	—		5,024		—		5,024		—		4,867		—		4,867		—		4,670		—		4,670		—		4,763		—		4,763
Common collective trusts funds:
Large U.S. equity funds^(d)	—		27,077		—		27,077		—		24,547		—		24,547		—		20,013		—		20,013		—		17,351		—		17,351
Small U.S. equity funds^(e)	—		19,853		—		19,853		—		17,344		—		17,344		—		6,475		—		6,475		—		5,880		—		5,880
International equity funds^(f)	—		20,306		—		20,306		—		17,006		—		17,006		—		23,376		—		23,376		—		22,516		—		22,516
Fixed income funds^(g)	—		32,207		—		32,207		—		28,704		—		28,704		—		44,003		—		44,003		—		42,217		—		42,217
Real estate^(h)																	—		5,470		—		5,470		—		5,305		—		5,305
Total assets	$	146	$	109,668	$	—	$	109,814	$	119	$	97,407	$	—	$	97,526	$	967	$	109,137	$	—	$	110,104	$	110	$	102,304	$	—	$	102,414


(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~~June 30, 2019 expected to be paid through ~~2026~~2028 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
	(In thousands)
2019 (remaining)	$	8,986	$	74
2020	11,526		147
2021	11,200		145
2022	10,891		141
2023	10,627		137
2024-2028	48,429		589
Total	$	101,659	$	1,233

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Pension Benefits Other Benefits
(In thousands)
2017 (remaining) $ 4,241
$ 37
2018 11,617
147
2019 11,088
146
2020 11,019
144
2021 10,790
142
2022-2026 49,927
640
Total $ 98,682
$ 1,256

~~We anticipate~~The Company anticipates contributing ~~$0.1~~$4.3 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~~

2019.

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:



	Twenty-Six Weeks Ended June 30, 2019						Twenty-Six Weeks Ended July 1, 2018
	Pension Benefits			Other Benefits			Pension Benefits			Other Benefits
	(In thousands)
Net actuarial loss (gain), beginning of period	$	54,343		$	(34	)	$	54,235		$	35
Amortization	(656		)	—			(602		)	—
Curtailment and settlement adjustments	(1,930		)	—			—			—
Actuarial loss (gain)	13,734			96			(9,465		)	(62		)
Asset loss (gain)	(9,806		)	—			2,936			—
Net actuarial loss (gain), end of period	$	55,685		$	62		$	47,104		$	(27	)

Thirty-Nine Weeks Ended
September 24, 2017 Thirty-Nine Weeks Ended
September 25, 2016
Pension Benefits Other Benefits Pension Benefits Other Benefits
(In thousands)
Net actuarial loss (gain), beginning of period $ 46,494
$ (31 ) $ 38,115
$ (79 )
Amortization (699 ) —
(494 ) —
Curtailment and settlement adjustments —
—
—
—
Actuarial loss (gain) 9,433
25
12,233
95
Asset loss (gain) (5,381 ) —
(828 ) —
Net actuarial loss (gain), end of period $ 49,847
$ (6 ) $ 49,026
$ 16

The Company expects to recognize in net pension cost throughout the remainder of ~~2017~~2019 an actuarial loss of ~~$0.2~~$0.7 million that was recorded in accumulated other comprehensive loss at ~~September 24, 2017.~~June 30, 2019.

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

The following tables provide information regarding the changes in accumulated other comprehensive loss:

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	Thirty-Nine Weeks Ended September 24, 2017^(a)														Twenty-Six Weeks Ended June 30, 2019^(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			Losses 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 Losses on Available-for-Sale Securities			Total
	(In thousands)														(In thousands)
Balance, beginning of period	$	(265,714	)	$	99		$	(64,243	)	$	—	$	(329,858	)	$	(55,770	)	$	(683	)	$	(71,463	)	$	82		$	(127,834	)
Granite Holdings Sàrl common-control transaction	204,577			(1,368		)	—			—		203,209
Other comprehensive income (loss) before reclassifications	92,364			(137		)	(2,539		)	—		89,688			(611		)	388			(2,873		)	147			(2,949		)
Amounts reclassified from accumulated other comprehensive loss to net income	—			9			435			—		444
Amounts reclassified from accumulated other comprehensive income (loss) to net income															—			(173		)	496			(231		)	92
Currency translation															—			12			—			—			12
Net current period other comprehensive income (loss)	92,364			(128		)	(2,104		)	—		90,132			(611		)	227			(2,377		)	(84		)	(2,845		)
Balance, end of period	$	31,227		$	(1,397	)	$	(66,347	)	$	—	$	(36,517	)	$	(56,381	)	$	(456	)	$	(73,840	)	$	(2	)	$	(130,679	)


	Thirty-Nine Weeks Ended September 25, 2016^(a)															Twenty-Six Weeks Ended July 1, 2018^(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			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	$	(32,482	)	$	(61	)	$	(58,997	)	$	67		$	(91,473	)	$	42,081		$	(1,848	)	$	(71,434	)	$	61		$	(31,140	)
Other comprehensive income (loss) before reclassifications	(171,509		)	167			(7,158		)	265			$	(178,235	)	(38,507		)	(97		)	4,987			932			(32,685		)
Amounts reclassified from accumulated other comprehensive loss to net income	—			(35		)	307			(332		)	$	(60	)
Amounts reclassified from accumulated other comprehensive income (loss) to net income																—			472			455			(680		)	247
Currency translation																—			(6		)	—			—			(6		)
Net current period other comprehensive income (loss)	(171,509		)	132			(6,851		)	(67		)	(178,295		)	(38,507		)	369			5,442			252			(32,444		)
Balance, end of period	$	(203,991	)	$	71		$	(65,848	)	$	—		$	(269,768	)	$	3,574		$	(1,479	)	$	(65,992	)	$	313		$	(63,584	)


(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)
Details about Accumulated Other Comprehensive Loss Components	Twenty-Six Weeks Ended June 30, 2019			Twenty-Six Weeks Ended July 1, 2018			Affected Line Item in the Condensed Consolidated Statements of Income
	(In thousands)
Realized gain (loss) on settlement of derivative financial instruments classified as cash flow hedges	$	173		$	(472	)	Cost of sales
Realized gain on sale of securities	307			899			Interest income
Amortization of defined benefit pension and other postretirement plan actuarial losses:
Union employees pension plan^(b)(d)	(36		)	(24		)	Cost of sales
Legacy Gold Kist plans^(c)(d)	(193		)	(180		)	Cost of sales
Legacy Gold Kist plans^(c)(d)	(427		)	(397		)	Selling, general and administrative expense
Total before tax	(176		)	(174		)
Tax benefit	84			(73		)
Total reclassification for the period	$	(92	)	$	(247	)

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
(In thousands)
Realized gain (loss) on settlement of derivative
     financial instruments classified as cash flow
     hedges
$ (9 ) $ 35
Cost of sales
Realized gain on sale of securities —
534
Interest income
Amortization of defined benefit pension
     and other postretirement plan actuarial
     losses:

Union employees pension plan^(b)(d)
(18 ) (15 ) Cost of sales
Legacy Gold Kist plans^(c)(d)
(212 ) (149 ) Cost of sales
Legacy Gold Kist plans^(c)(d)
(469 ) (330 ) Selling, general and administrative expense
Total before tax (708 ) 75

Tax benefit (expense) 264
(15 )
Total reclassification for the period $ (444 ) $ 60


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

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(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,~~October 31, 2018, the Company’s Board of Directors approved a ~~$150.0~~$200.0 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. The Company currently plans to maintain these shares as treasury stock.

Restrictions on Dividends

~~The~~Both the U.S. Credit Facility and the ~~2015 Indenture~~indentures governing the ~~Senior Notes due 2025 and the 2017 Indenture governing the Senior Notes due 2027~~Company’s senior notes restrict, but do not prohibit, the Company from declaring dividends. The Moy Park Bank of Ireland Revolving Facility Agreement restrict Moy Park's ability and the ability of certain of Moy Park's subsidiaries to, among other things, make payments and distributions to the Company.


~~15.~~16.	INCENTIVE COMPENSATION

The Company sponsors a short-term incentive ~~plan~~plans that provides the grant of either cash or share-based bonus awards payable upon achievement of specified performance ~~goals (the “STIP”).~~goals. Full-time, salaried exempt employees of the ~~Company and its affiliates~~Company's U.S. operations who are selected by the administering committee are eligible to participate in the ~~STIP. The Company has accrued $20.7 million~~Pilgrim's Short Term Incentive Plan (“STIP”). Certain full-time, salaried employees of the Company’s Mexico operations are eligible to participate in ~~costs related to~~ the ~~STIP at September 24, 2017 related to cash bonus awards that could potentially be awarded during the remainder of 2017 and 2018.~~Pilgrim’s Mexico Incentive Plan (“PMIP”). 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 million in costs related to the JFC LTIP at September 24,~~ 2017. 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~~At June 30, 2019, the Company has accrued ~~$0.6~~$16.0 million, ~~in costs~~$1.3 million, $1.3 million and $0.8 million related to cash bonus awards that could potentially be awarded under the STIP, JFC LTIP, MPIP ~~at September 24, 2017.~~and PMIP, respectively, during 2019.

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~~liability-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~~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”). Equity-based awards are converted into shares of the Company's common stock shortly after award vesting. Compensation cost to be recognized for an equity-based awards grant is determined by multiplying the number of awards granted by the closing price of a share of the Company's common stock on the award grant date. Liability-based awards granted under the LTIP are converted into cash shortly after award vesting. Compensation cost to be recognized for a liability-based awards grant is first determined by multiplying the number of awards granted by the closing price of a share of the Company's common stock on the award grant date. However, the compensation cost to be recognized is adjusted at each subsequent milestone date (i.e., forfeiture date, vesting date or financial reporting date) by multiplying the number of awards granted by the closing price of a share of the Company's common stock on the milestone date. At ~~September 24, 2017,~~June 30, 2019, we have ~~reserved~~in reserve approximately ~~4.8~~3.8 million shares of common stock for future issuance under the LTIP. The LTIP will expire pursuant to its terms on December 28, 2019 and no awards will be granted under the LTIP after that date. On May 1, 2019, the Company's stockholders approved the Pilgrim’s Pride Corporation 2019 Long Term Incentive Plan (the “2019 LTIP”) and reserved 2.0 million shares of common stock for awards under the plan. The 2019 LTIP is intended to replace the expiring plan. The 2019 LTIP will be effective as of December 28, 2019.

Table of Contents

The following LTIP awards were outstanding during the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017:~~June 30, 2019:

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

Awards Granted

Grant Date

Intended Settlement Method

Grant Date Fair Value
per Award

Milestone Date Fair Value per Award

Vesting Condition

Vesting Date

Awards Forfeited to Date

RSU

LTIP

449,217

02/19/2014

16.70

Service

12/31/2016

18.99

13.49

86,458

Stock

410,000

2/14/2018

Stock

25.59

Service

1/1/2019

—

RSU

LTIP

223,701

03/03/2014

17.18

Performance / Service

12/31/2017

12.34

55,516

Stock

163,764

3/1/2018

Stock

24.93

Service

(a)

45,755

RSU

(b)

LTIP

45,961

02/11/2015

25.87

Service

12/31/2017

18.99

12.34

—

Stock

250,351

3/1/2018

Stock

24.93

Performance / Service

(b)

151,229

RSU

LTIP

251,136

03/30/2016

25.36

Performance / Service

12/31/2019

18.99

(d)

251,136

Stock

33,174

3/1/2018

Cash

24.93

25.39

Performance / Service

(c)

—

RSU

(b)

LTIP

74,536

10/13/2016

20.93

Service

12/31/2016

—

Stock

8,358

5/10/2018

Stock

21.54

Service

(d)

—

RSU

LTIP

389,424

01/19/2017

18.39

Performance / Service

(e)

—

Stock

2,786

5/10/2018

Cash

21.54

26.86

Service

5/1/2019

—

RSU

(c)

LTIP

48,586

02/13/2017

20.52

Service

2/13/2017

—

Stock

262,500

12/18/2018

Stock

16.06

Service

7/1/2019

—

RSU

(c)

LTIP

23,469

02/13/2017

20.52

Service

12/31/2017

—

Stock

396,763

1/7/2019

Stock

16.47

Performance / Service

(e)

89,285

RSU

109,654

1/7/2019

Cash

16.47

25.39

Performance / Service

(f)

—

RSU

200,000

4/30/2019

Stock

26.91

Service

7/1/2020

—


(a)	The ~~fair value of each RSU granted or vested represents the closing price of the Company's common~~restricted 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 weeks ended September 24, 2017.~~


~~(e)~~	~~The subject RSUs will~~units vest in ratable tranches on December 31, 2018, December 31, 2019 and December 31, 2020. Expected compensation cost related to these units totals $2.9 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.


(b)	The 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 $2.5 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)	The 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 $0.8 million based on a closing stock price for the Company's common stock of $25.39 per share on June 30, 2019. Compensation cost will be amortized to profit/loss over the remaining vesting period.


(d)	These restricted stock units were granted to the three 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.

(e)

If performance conditions related to the Company's 2019 operating results are satisfied, the restricted stock units vest in ratable tranches on December 31, 2020, December 31, 2021 and December 31, 2022. Expected compensation cost related to these units totals $5.1 million based on a closing stock price for the Company's common stock of $16.47 per share on January 7, 2019. Compensation cost will be amortized to profit/loss upon satisfaction of the performance conditions over the remaining vesting period.

(f)

If performance conditions related to the Company's 2019 operating results are satisfied, the restricted stock units vest in ratable tranches on December 31, 2020, December 31, 2021 and December 31, 2022. Expected compensation cost related to these units totals $2.8 million based on a closing stock price for the Company's common stock of $25.39 per share on June 30, 2019. Compensation cost will be amortized to profit/loss upon satisfaction of the performance conditions over the remaining vesting period.

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



	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	June 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018
	(In thousands)
Equity-based awards compensation cost:
Cost of sales	$	150	$	117	$	162	$	169
Selling, general and administrative expense	3,185		4,243		5,055		5,464
Total cost	3,335		4,360		5,217		5,633
Income tax benefit	812		1,061		1,270		1,371
Net cost	$	2,523	$	3,299	$	3,947	$	4,262

Liability-based awards compensation cost:
Selling, general and administrative expense	$	228	$	—	$	228	$	—
Income tax benefit	55		—		55		—
Net cost	$	173	$	—	$	173	$	—

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

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The Company’s RSU activity is included below:



	Twenty-Six Weeks Ended June 30, 2019				Twenty-Six Weeks Ended July 1, 2018
	Number		Weighted Average Grant Date Fair Value		Number		Weighted Average Grant Date Fair Value
	(In thousands, except weighted average fair values)
Equity-based RSUs:
Outstanding at beginning of period	1,033		$	22.91	389		$	18.39
Granted	597		19.97		849		25.20
Vested	(459	)	25.52		—		—
Forfeited	(224	)	21.57		(417	)	18.82
Outstanding at end of period	947		$	20.11	821		$	25.21

	Twenty-Six Weeks Ended June 30, 2019				Twenty-Six Weeks Ended July 1, 2018
	Number		Weighted Average Milestone Date Fair Value^(a)		Number		Weighted Average Milestone Date Fair Value^(a)
	(In thousands, except weighted average fair values)
Liability-based RSUs:
Outstanding at beginning of period	—		$	—	—		$	—
Granted	146		16.25		—		—
Vested	(3	)	26.86		—		—
Outstanding at end of period	143		$	25.39	—		$	—

Thirty-Nine Weeks Ended September 24, 2017 Thirty-Nine Weeks Ended September 25, 2016
Number Weighted Average Grant Date Fair Value Number Weighted Average Grant Date Fair Value
(In thousands, except weighted average fair values)
Outstanding at beginning of period 906
$ 20.00
774
$ 19.30
Granted 462
18.72
251
25.36
Vested (486 ) 17.73
—
—
Forfeited (251 ) 25.36
(193 ) 24.51
Outstanding at end of period 631
$ 18.68
832
$ 19.92


(a)	The milestone date fair value is the closing price of a share of the Company's common stock on the respective milestone date (i.e., grant date, vesting date, forfeiture date or financial reporting date).

The total fair ~~value~~values of equity-based awards and liability-based awards vested during the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017 was $8.6 million.~~June 30, 2019 were $7.1 million and $0.1 million, respectively. No awards vested during the ~~thirty-nine~~twenty-six weeks ended ~~September 25, 2016.~~July 1, 2018.

At ~~September 24, 2017,~~June 30, 2019, the total unrecognized compensation cost related to all nonvested equity-based awards was ~~$8.5~~$12.0 million. ~~That~~This cost is expected to be recognized over a weighted average period of ~~2.06~~1.74 years. At June 30, 2019, the total unrecognized compensation cost related to all nonvested liability-based awards was $3.5 million. This cost is expected to be recognized over a weighted average period of 2.34 years.

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

17. RESTRUCTURING-RELATED ACTIVITIES

In 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 $0.6 million, and approximately $0.5 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.

In 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 $6.2 million, and approximately $4.3 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.

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

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Type of Cost	40 North Foods		GNP		Total Estimated Amount Expected to be Incurred
	(In thousands)
Employee termination benefits	$	449	$	4,224	$	4,673
Inventory adjustments	—		472		472
Asset impairments	103		781		884
Other, net^(a)	18		736		754
Total estimated costs, net	$	570	$	6,213	$	6,783


^(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 and sublease income.

During the thirteen and twenty-six weeks ended June 30, 2019, the Company recognized the following expenses (income) and paid (received) the following cash related to each restructuring initiative:



	Thirteen Weeks Ended June 30, 2019						Twenty-Six Weeks Ended June 30, 2019
	Expenses (Income)			Cash Outlays (Receipts)			Expenses (Income)			Cash Outlays (Receipts)
	(In thousands)
40 North Foods - Other, net	$	(43	)	$	(15	)	$	(70	)	$	(14	)
GNP - Employee termination benefits	—			19			—			53
	$	(43	)	$	4		$	(70	)	$	39

The expenses (income) are reported in the line item Administrative restructuring activities on the Condensed Consolidated Statements of Income and are recognized in the U.S. segment.

The following table reconciles liabilities and reserves associated with each restructuring initiative from initiative inception to June 30, 2019. 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 impairments is reported in the line item Inventories in our Condensed Consolidated Balance Sheets.



	40 North Foods									GNP
	Employee Termination Benefits			Other, Net			Total			Employee Termination Benefits			Inventory Impairments			Other, Net			Total
	(In thousands)
Restructuring charges incurred	$	—		$	—		$	—		$	3,381		$	699		$	752		$	4,832
Cash payments and disposals	—			—			—			(2,581		)	—			—			(2,581		)
Liability or reserve at December 31, 2017	—			—			—			800			699			752			2,251
Restructuring charges incurred	449			150			599			936			(227		)	(17		)	692
Restructuring income recognized	—			(35		)	(35		)	—			—			—			—
Cash payments and disposals	(449		)	(65		)	(514		)	(1,500		)	(472		)	(735		)	(2,707		)
Cash received	—			36			36			—			—			—			—
Liability or reserve at December 30, 2018	—			86			86			236			—			—			236
Restructuring income recognized	—			(70		)	(70		)	—			—			—			—
Cash payments and disposals	—			(56		)	(56		)	(53		)	—			—			(53		)
Cash received	—			70			70			—			—			—			—
Liability or reserve at June 30, 2019	$	—		$	30		$	30		$	183		$	—		$	—		$	183


~~16.~~18.	COMMITMENTS AND CONTINGENCIES

General

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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, Case No. 1:16-cv-08637 were filed with the U.S. District Court for the Northern District of Illinois 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 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. Between December 8, 2017 and June 21, 2019, 26 individual direct action complaints (Affiliated Foods, Inc., et al. v. Claxton Poultry Farms, Inc., et al., Case No. 1:17-cv-08850; Sysco Corp. v. Tyson Foods Inc., et al., Case No. 1:18-cv-00700; U.S. Foods Inc. v. Tyson Foods Inc., et al., Case No. 1:18-cv-00702; Action Meat Distributors, Inc., et al. v. Claxton Poultry Farms, Inc., et al.,Case No. 1:18-cv-03471; Jetro Holdings, LLC, v. Tyson Foods, Inc. et al., Case No. 1:18-cv-04000; Associated Grocers of the South, Inc.,et al. v. Tyson Foods, Inc., et al., Case No. 1:18-cv-4616; The Kroger Co., et al. v. Tyson Foods, Inc., et al., Case No. 1:18-cv-04534; Ahold Delhaize USA, Inc. v. Koch Foods, Inc., et al., Case No. 1:18-cv-05351; Samuels as Trustee In Bankruptcy for Central Grocers, Inc. et al. v. Norman W. Fries, Inc., d/b/a Claxton Poultry Farms, Inc. et al., Case No. 1:18-cv-05341; W. Lee Flowers & Company, Inc. v. Norman W. Fries, Inc., d/b/a Claxton Poultry Farms, Inc. et al., Case No. 1:18-cv-05345; BJ’s Wholesale Club, Inc. v. Tyson Foods, Inc., et al., Case No. 1:18-cv-05877;United Supermarkets LLC, et al. v. Tyson Foods Inc., et al., Case No. 1:18-cv-06693; Associated Wholesale Grocers, Inc. v. Koch Foods, Inc., et al., Case No. 1:18-cv-06316 (transferred from the U.S. District Court for the District of Kansas on September 17, 2018, following Defendants’ successful motion to transfer);

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Shamrock Foods Company et al. v. Tyson Foods, Inc., et al., Case No. 1:18-cv-7284; Winn-Dixie Stores, Inc., et al. v. Koch Foods, Inc., et al., Case No. 1:18-cv-00245; Quirch Foods, LLC, f/k/a Quirch Foods Co. v. Koch Foods, Inc., et al., Case No. 1:18-cv-08511; Sherwood Food Distributors, L.L.C., et al. v. Tyson Foods, Inc., et al., Case No. 1:19-cv-00354, Hooters of America, LLC v. Tyson Foods, Inc., et al., Case No. 1:19-cv-00390; Darden Restaurants, Inc. v. Tyson Foods, Inc., et al., Case No. 1:19-cv-00530; Associated Grocers, Inc., et al. v. Norman W. Fries, Inc., d/b/a Claxton Poultry Farms, et al., Case No. 1:19-cv-00638; Checkers Drive-In Restaurants, Inc. v. Tyson Foods, Inc. et al., Case No. 1:19- cv-01283; Conagra Brands, Inc. et al. v. Tyson Foods, Inc. et al., Case No. 1:19-cv-02190; Giant Eagle, Inc. v. Norman W. Fries, Inc., d/b/a Claxton Poultry Farms et al., Case No. 1:19-cv-02758; Save Mart Supermarkets v. Tyson Foods, Inc., et al., Case No. 1:19-cv-02805; Walmart Inc., et al. v. Pilgrim’s Pride Corporation, et al., Case No. 1:19-cv-03915 (transferred from the U.S. District Court for the Western District of Arkansas on June 11, 2019, following Plaintiffs’ unopposed motion to transfer); and Services Group of America, Inc. v. Tyson Food, Inc., et al., Case No. 1:19-cv-04194) were filed with the U.S. District Court for the Northern District of Illinois by individual direct purchaser entities naming PPC as a defendant, the allegations of which largely mirror those in the class action complaints. On June 20, 2019, an additional direct action complaint (Commonwealth of Puerto Rico v. Koch Foods, Inc., et al., Case No. 3:19-cv-01605) was filed with U.S. District Court for the District of Puerto Rico by the Commonwealth of Puerto Rico, the allegations of which also largely mirror those in the class action complaints. Substantial completion of document discovery for most defendants, including PPC, occurred on July 18, 2018. The Court’s scheduling order currently requires completion of fact discovery on March 13, 2020, class certification briefing and expert reports proceeding from April 13, 2020 to December 14, 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.

On June 21, 2019, the United States Department of Justice filed a motion to intervene and stay discovery in the In re Broiler Chicken Antitrust Litigation for a period of 6 months. Following a hearing on June 27, 2019, on June 28, 2019, the Court granted the government’s motion to intervene, and ordered a limited 3-month stay of discovery until September 27, 2019. On July 1, 2019, the Department of Justice issued a subpoena to PPC in connection with its investigation.

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) PPC 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. On November 19, 2018, the Court denied the plaintiff’s motion for reconsideration and granted plaintiff leave to file a Second Amended Complaint. As of the date of this quarterly report, the plaintiff has not yet filed a Second Amended Complaint.

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. 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, or 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 certain other defendants’ motions challenging jurisdiction. Oral argument on the remaining pending motions in the Oklahoma court occurred on April 20, 2018. Rulings on the motion are pending. In addition, on March 12, 2018, the Northern District of Texas, Fort Worth Division, or the Bankruptcy Court, enjoined plaintiffs from litigating the Grower Litigation complaint as pled against PPC because allegations in the consolidated complaint violate the confirmation order relating to PPC’s bankruptcy proceedings in 2008 and 2009. Specifically, the 2009 bankruptcy confirmation order bars any claims against PPC based on conduct occurring before December 28, 2009. On March 13, 2018, PPC notified the trial court of the Bankruptcy Court’s injunction. To date, 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 PPC, as nominal defendant, as well as PPC’s directors, its Chief Financial Officer, and majority shareholder, JBS S.A. The complaint alleges, among other things, that (i) defendants permitted PPC 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 S.A. breached their fiduciary duties by failing to prevent PPC 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. The court-ordered deadline for the defendants to file an answer or otherwise respond to the complaint was originally set for July 30, 2018. This deadline was extended to August 31, 2018, at which time the plaintiffs filed an unopposed motion to voluntarily dismiss the complaint without prejudice. The Court granted the plaintiffs’ motion on September 4, 2018.

On January 24, 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 and several members of the Batista family, in the Court of Chancery of the State of Delaware, or the Chancery Court. The complaint alleges, among other things, that the named defendants breached their fiduciary duties arising out of PPC’s acquisition of Moy Park. On May 24, 2018, Employees Retirement System of the City of St. Louis filed a derivative complaint, which was virtually identical to the Sciabacucchi complaint. On July 2, 2018, the Chancery Court granted a stipulation consolidating the cases and making the first complaint (Sciabacucchi) the operative complaint. Also by stipulation, various defendants have been voluntarily dismissed from the case without prejudice. The remaining defendants are JBS S.A., JBS USA Holding, and directors Lovette, Nogueira de Souza, Tomazoni, and Molina. PPC also remains in the case as a nominal defendant. On March 15, 2019, the Chancery Court denied the non-PPC defendants’ motion to dismiss. As a result, the case is proceeding to discovery, with fact discovery scheduled to close in February 2020, expert discovery scheduled to close in May 2020, and, subject to the Chancery Court’s availability, trial commencing in November 2020.

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 together with 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 misconduct by J&F and such individuals acting in their capacity as J&F executives. The details of such misconduct are set forth in separate annexes to the Plea Bargain Agreements, and include admissions of 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.

On June 5, 2017, J&F, for itself and as the controlling shareholder of the J&F Group companies, 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. Various proceedings by Brazilian governmental authorities remain pending against J&F and certain of its former or current officers to potentially invalidate the Plea Bargain Agreements and impose more severe penalties for additional alleged misconduct that were not disclosed in the annexes to the Plea Bargain Agreements.

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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 S.A. 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 S.A. 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 J&F and JBS S.A. investigations 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.

Any further developments in these, or other, matters involving the controlling shareholders, directors, or officers of J&F, or other parties affiliated with us, could subject JBS S.A. and its subsidiaries (including the Company) to potential fines or penalties, 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).

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19.	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
	June 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018
	(In thousands)
Sales to related parties:
JBS USA Food Company^(a)	$	3,511	$	4,479	$	7,169	$	6,008
JBS Five Rivers	—		—		—		7,096
JBS Global (UK) Ltd.	43		—		86		—
JBS Chile Ltda.	54		—		132		60
Combo, Mercado De Congelados	24		—		28		—
Total sales to related parties	$	3,632	$	4,479	$	7,415	$	13,164

Cost of goods purchased from related parties:
JBS USA Food Company^(a)	$	32,828	$	34,003	$	63,241	$	61,827
Seara Meats B.V.	4,369		13,437		8,890		17,677
JBS Aves Ltda.	—		380		—		1,083
JBS Toledo NV	88		125		208		290
JBS Global (UK) Ltd.	—		21		—		21
Total cost of goods purchased from related parties	$	37,285	$	47,966	$	72,339	$	80,898

Expenditures paid by related parties:
JBS USA Food Company^(b)	$	8,103	$	28,763	$	18,109	$	39,262
Seara Alimentos	7		—		7		—
JBS Chile Ltda.	1		3		6		3
Total expenditures paid by related parties	$	8,111	$	28,766	$	18,122	$	39,265

Expenditures paid on behalf of related parties:
JBS USA Food Company^(b)	$	1,776	$	2,625	$	3,979	$	4,913
JBS S.A.	—		164		—		164
Seara International Ltd.	—		11		—		31
Total expenditures paid on behalf of related parties	$	1,776	$	2,800	$	3,979	$	5,108

3339

Table of Contents



	June 30, 2019		December 30, 2018
	(In thousands)
Accounts receivable from related parties:
JBS USA Food Company^(a)	$	904	$	1,236
JBS Chile Ltda.	50		—
Combo, Mercado de Congelados	—		79
Seara International Ltd.	3		16
Total accounts receivable from related parties	$	957	$	1,331

Accounts payable to related parties:
JBS USA Food Company^(a)	$	4,261	$	5,121
Seara Meats B.V.	1,655		2,142
JBS Toledo NV	22		—
JBS Chile Ltda.	—		6
Total accounts payable to related parties	$	5,938	$	7,269

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
—

(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.~~

~~Table of Contents~~

~~(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,June 30, 2019, approximately ~~$0.7~~$1.2 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~~

Table 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.Contents

20. 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

~~Table of Contents~~

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, we acquired Moy Park, 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, 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.

~~Table of Contents~~

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
	September 24, 2017		September 25, 2016		September 24, 2017		September 25, 2016		Thirteen Weeks Ended					Twenty-Six Weeks Ended
	(In thousands)								June 30, 2019			July 1, 2018		June 30, 2019		July 1, 2018
Net Sales									(In thousands)
U.S.	$	1,938,542	$	1,724,625	$	5,557,089	$	5,072,351	$	1,916,954		$	1,899,435	$	3,800,544	$	3,740,540
U.K. and Europe	514,325		463,560		1,473,854		1,484,708		535,902		��	563,102		1,050,865		1,107,402
Mexico	341,018		307,096		994,568		950,622		390,229			374,176		716,351		735,449
Total net sales	$	2,793,885	$	2,495,281	$	8,025,511	$	7,507,681	$	2,843,085		$	2,836,713	$	5,567,760	$	5,583,391



	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
Operating Income	(In thousands)
U.S.	$	186,960		$	99,469		$	301,800		$	226,755
U.K. and Europe	24,194			23,662			36,908			45,075
Mexico	68,372			61,997			77,836			114,867
Elimination	24			(16		)	48			8
Total operating income	279,550			185,112			416,592			386,705
Interest expense, net of capitalized interest	33,594			40,267			67,156			90,567
Interest income	(3,444		)	(4,834		)	(6,784		)	(6,424		)
Foreign currency transaction losses (gains)	2,260			5,630			4,896			3,909
Miscellaneous, net	1,513			(817		)	1,156			(2,434		)
Income before income taxes	$	245,627		$	144,866		$	350,168		$	301,087

Operating income Thirteen Weeks Ended Thirty-Nine Weeks Ended
September 24, 2017 September 25, 2016 September 24, 2017 September 25, 2016
(In thousands)
U.S. $ 307,962
$ 141,195
$ 719,121
$ 480,280
U.K. and Europe 18,569
13,027
51,874
55,841
Mexico 45,692
22,603
146,241
108,856
Elimination 23
23
69
71
Total operating income 372,246
176,848
917,305
645,048
Interest expense, net of capitalized interest 24,636
19,119
66,315
58,480
Interest income (2,128 ) (253 ) (3,600 ) (2,000 )
Foreign currency transaction gain (888 ) 4,569
(2,500 ) (1,769 )
Miscellaneous, net (1,083 ) (2,371 ) (5,198 ) (7,327 )
Income before income taxes $ 351,709
$ 155,784
$ 862,288
$ 597,664

In addition to the net sales reported above, the U.S. segment also generated intersegment net sales of ~~$21.0~~$32.5 million and ~~$22.0~~$45.6 million in the thirteen weeks ended ~~September 24, 2017~~June 30, 2019 and ~~September 25, 2016,~~July 1, 2018, respectively, from transactions with the Mexico segment and intersegment net sales of ~~$66.7~~$67.5 million and ~~$70.6~~$72.1 million in the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 and ~~September 25, 2016,~~July 1, 2018, 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


Assets	September 24, 2017			December 25, 2016
	(In thousands)							June 30, 2019		December 30, 2018
Long-Lived Assets^(a)								(In thousands)
U.S.	$	3,515,513		$	2,472,931			$	1,562,325	$	1,506,217
U.K. and Europe	2,204,885			2,013,725				358,782		359,621
Mexico	947,112			840,088				289,105		295,864
Eliminations	(604,225		)	(304,802		)	(a)
Total assets	$	6,063,285		$	5,021,942			$	2,210,212	$	2,161,702

(a)

~~Eliminations for the period ended September 24, 2017 include the elimination of the U.S. segment's $191.7 million investment~~For this disclosure, we exclude financial instruments, deferred tax assets, operating lease assets and intangible assets in ~~the Mexico segment, the elimination of $111.2 million~~accordance with Accounting Standards Codification (“ASC”) 280-10-50-41, Segment Reporting. Long-lived assets, as used in intersegment receivables and payables between the U.S. and Mexico segments and the elimination of the U.S. segment's $301.3 million investment in the U.K. and Europe segment. Eliminations for the period ended December 25, 2016 include the elimination of the U.S. segment's $191.8 million investment in the Mexico segment and the elimination of $113.0 million in intersegment receivables and payables between the U.S. and Mexico segments.ASC 280-10-50-41, implies hard assets that cannot be readily removed.

3841

~~Table of Contents~~

~~19. SUBSEQUENT EVENTS~~

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.

On October 24, 2017, the Company announced that it will close the Luverne, Minnesota, poultry processing facility effective December 29, 2017. The decision to close the facility will allow the Company to shift production and equipment to more efficient operations with the objective of enhancing synergies and better serving the Company’s key customers.


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,~~June 30, 2019, we had approximately ~~52,000~~52,600 employees and the capacity to process approximately ~~45.2~~45.4 million birds per work week for a total of approximately ~~12.8~~12.9 billion pounds of live chicken annually. Approximately ~~5,100~~5,000 contract growers supply poultry for our operations. As of ~~September 24, 2017,~~June 30, 2019, JBS S.A., through its indirect wholly-owned subsidiaries (together, “JBS”), beneficially owned ~~78.6%~~78.4% 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)~~2019) 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~~$170.1 million, or ~~$2.25~~$0.68 per diluted common share, for the ~~thirty-nine~~thirteen weeks ended ~~September 24, 2017.~~June 30, 2019. These operating results included gross profit of ~~$1,209.8~~$367.9 million. During the ~~thirty-nine~~thirteen weeks ended ~~September 24, 2017,~~June 30, 2019, we generated ~~$618.5~~$283.0 million of cash from operations.

~~Market prices~~We reported net income attributable to Pilgrim’s Pride Corporation of $254.2 million, or $1.02 per diluted common share, for the twenty-six weeks ended June 30, 2019. These operating results included gross profit of $586.8 million. During the twenty-six weeks ended June 30, 2019, we generated $403.4 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
2019:
Second Quarter	3.96		3.66		321.00		297.20		$	4.69	$	3.72			$	334.90			$	295.50			£	176.21			£	174.54
First Quarter	3.86		3.55		352.70		314.10		3.98		3.66			330.20				305.30				173.80				155.30
2016:
2018:
Fourth Quarter	3.98		3.58		320.70		269.00		3.90		3.68			327.30				307.80				179.30				167.00
Third Quarter	3.94		3.16		401.00		302.80		3.87		3.43			341.40				303.30				194.65				165.75
Second Quarter	4.38		3.52		418.30		266.80		4.27		3.66			391.70				329.90				159.75				142.40
First Quarter	3.73		3.52		275.30		257.20		4.01		3.63			394.10				319.60				139.20				134.70
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.~~additional information see “Note 6. Derivative Financial Instruments”.

During the thirteen weeks ended ~~September 24, 2017~~June 30, 2019 and ~~September 25, 2016,~~July 1, 2018, we recognized net ~~gains~~losses totaling ~~$6.9~~$0.5 million and ~~net losses totaling $16.7~~$24.0 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, 2017~~June 30, 2019 and ~~September 25, 2016,~~July 1, 2018, we recognized net ~~gains~~losses totaling ~~$7.3~~$8.5 million and ~~net losses totaling $10.5~~$17.6 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.

Brexit

~~Moy Park Acquisition~~

~~On September 8, 2017, we acquired 100%~~The anticipated exit of the ~~issued~~U.K. from the European Union (“E.U.”) (commonly referred to as “Brexit”) and ~~outstanding shares~~the resulting significant change to the relationship between the U.K. and the E.U., as well as relationships between the U.K. and countries outside the E.U., could disrupt the overall economic growth or stability of ~~Granite Holdings Sàrl~~the U.K. and ~~its subsidiaries (together, “Moy Park”) from JBS S.A.~~the E.U. and otherwise negatively impact our European operations. The U.K. is due to exit the E.U. on October 31, 2019. The U.K. could leave the E.U. prior to October 31, 2019 if a withdrawal agreement negotiated between the U.K. and the E.U. is approved by the U.K. Parliament. If the U.K. were to approve the withdrawal agreement, it would maintain the status quo regarding trade rights with the E.U. until December 2020 in order to allow negotiation of a free trade agreement between the two governments. If the withdrawal agreement is not approved by October 31, 2019, the U.K. would either leave the E.U. immediately under World Trade Organization terms or would request and be reliant upon the E.U. approving a further extension to the exit date.

It is possible that Brexit could result in our European operations becoming subject to materially different, and potentially conflicting, laws, regulations or tariffs which could require costly new compliance initiatives. There could also be additional adverse impacts on immigration and trade between the U.K. and the E.U. or countries outside the E.U. Such impacts might directly increase our costs or could decrease demand for ~~cash~~our goods. The completion of ~~$301.3 million~~Brexit could also adversely affect the value of our British pound- and ~~a promissory note payable~~euro-denominated assets and obligations. Future fluctuations in the exchange rate between the British pound, the euro and other currencies of our suppliers may have the effect of increasing the cost of goods sold by our European operations. We might not be able to ~~seller of £562.5 million. Moy Park is~~pass on such increases to our customers. Any one of these impacts could have an adverse effect on our results of operations and financial condition.

To prepare for the ~~top-ten food companies in~~impacts of Brexit, our European operations have (i) engaged with various U.K. and E.U. government departments to highlight the issues of Brexit and to develop potential solutions to those issues, (ii) engaged with customers to formalize contingency plans to minimize business disruption should the U.K.~~, Northern Ireland's largest private sector~~ exit the E.U. without an approved withdrawal agreement, (iii) analyzed product flows and reviewed meat availability to determine appropriate plans for customers, (iv) engaged with customers to commence post-Brexit business plans and ~~one of Europe's leading poultry producers. With 13 processing~~to negotiate cost-sharing arrangements for such plans, and ~~manufacturing units in Northern Ireland,~~(v) increased stock levels where possible to help manage border delays that could occur following Brexit.

Significant uncertainty remains until the U.K., France, the Netherlands and Ireland, the company processes 5.6 million birds per seven-day work week, in addition to producing around 200,000 tons of prepared foods per year. Moy Park currently has approximately 10,100 employees. 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 U.S. GAAP. A common-control transaction is a transfer of net assets or an exchange of equity interests between entities under the controlterms of the ~~same parent. The accounting~~exit are known. We will continue to analyze and ~~reporting for a transaction between entities under common control is not to be considered a business combination under U.S. GAAP. Accordingly,~~plan for the period from September 30, 2015 through September 7, 2017, the Condensed Consolidated and Combined Financial Statements includes 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 Condensed Consolidated and Combined Financial Statements includes the accounts of the Company and its majority-owned subsidiaries, including Moy Park.

~~GNP Acquisition~~

On January 6, 2017, we acquired 100% of the membership interests of JFC LLC and its subsidiaries (together, “GNP”) from Maschhoff Family Foods, LLC for a cash purchase price of $350 million, subject to customary working capital adjustments. GNP is a vertically integrated poultry business based 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 additionalexit as information ~~relating to this acquisition. GNP operations are included in our U.S. segment.~~becomes available.

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~~additional information, see “Note 20. Segment Reporting” of our ~~U.S. segment and combine the U.K., France, the Netherlands, and Ireland operations into our U.K. and Europe segment.~~Condensed Consolidated Financial Statements included in this quarterly report.

Results of Operations

Thirteen Weeks Ended ~~September 24, 2017~~June 30, 2019 Compared to Thirteen Weeks Ended ~~September 25, 2016~~July 1, 2018

Net sales. Net sales generated in the thirteen weeks ended ~~September 24, 2017~~June 30, 2019 increased ~~$298.6~~$6.4 million, or ~~12.0%~~0.2%, from net sales generated in the thirteen weeks ended ~~September 25, 2016.~~July 1, 2018. 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 June 30, 2019		Change from Thirteen Weeks Ended July 1, 2018
Sources of net sales	Thirteen Weeks Ended September 24, 2017		Amount		Percent			Thirteen Weeks Ended June 30, 2019		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)								$	1,916,954	$	17,519		0.9	%
U.K. and Europe(b)	514,325		50,765		11.0	%	(b)	535,902		(27,200		)	(4.8	)%
Mexico(c)	341,018		33,922		11.0	%	(c)	390,229		16,053			4.3	%
Total net sales	2,793,885		298,604		12.0	%		$	2,843,085	$	6,372		0.2	%

(a)

U.S. net sales generated in the thirteen weeks ended ~~September 24, 2017~~June 30, 2019 increased ~~$213.9~~$17.5 million, or ~~12.4%~~0.9%, from U.S. net sales generated in the thirteen weeks ended ~~September 25, 2016~~July 1, 2018 primarily because of ~~net~~an increase in sales ~~generated~~volume, partially offset by ~~the recently acquired GNP operations and an increase~~a decrease in net sales per ~~pound~~pound. The increase in sales volume experienced by our ~~existing operations. The impact of the acquired business~~U.S. segment contributed ~~$108.6~~$31.8 million, or ~~6.3~~1.7 percentage points, to the increase in net sales. The impact of increased sales volume on 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. segmentwas partially offset ~~the effect that the acquired business and the increase~~by a decrease in net sales per pound ~~had on U.S. net sales by $94.4~~of $14.2 million, or ~~5.5~~0.7 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.~~ Included in U.S. net sales generated during the thirteen weeks ended ~~September 24, 2017~~June 30, 2019 and ~~September 25, 2016~~July 1, 2018 were net sales to JBS USA Food Company totaling ~~$11.5~~$3.5 million and ~~$4.8~~$4.5 million, respectively.

(b)

U.K. and Europe net sales generated in the thirteen weeks ended ~~September 24, 2017 increased $50.8~~June 30, 2019 decreased $27.2 million, or ~~11.0%~~4.8%, from U.K. and Europe net sales generated in the thirteen weeks ended ~~September 25, 2016~~July 1, 2018 primarily because of ~~an increase~~a decrease in sales ~~volume. Increased sales~~ volume ~~resulted in~~and the unfavorable impact of foreign currency translation, partially offset by an increase in net sales ~~by $66.3~~per pound. The decrease in sales volume contributed $41.1 million, or ~~14.3~~7.3 percentage ~~points. The~~points, and the unfavorable impact of foreign currency translation contributed $31.3 million, or 5.6 percentage points, to the decrease in net sales. An increase in net sales ~~from increased sales volume was~~per pound partially offset the decrease in net sales by ~~the~~$45.2 million, or 8.0 percentage points.

~~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~~June 30, 2019 increased ~~$33.9~~$16.1 million, or ~~11.0%~~4.3%, from Mexico net sales generated in the thirteen weeks ended ~~September 25, 2016~~July 1, 2018 primarily because of ~~the~~an increase in net sales per pound and the positive impact of foreign currency ~~remeasurement.~~remeasurement, partially offset by a decrease in sales volume. Increased net sales per pound ~~which resulted primarily from higher market prices,~~ and the positive impact of foreign currency remeasurement resulted in an increase in net sales ~~by $15.0~~of $22.0 million, or ~~4.9~~5.9 percentage points, and ~~$16.5~~$5.9 million, or ~~5.4~~1.6 percentage points, respectively. ~~An increase~~These increases were partially offset by a decrease in sales volume ~~also contributed to the increase in net sales by $2.4~~of $11.8 million, or ~~0.8~~3.2 percentage points.

Gross profit. Gross profit increased by ~~$225.5~~$93.6 million, or ~~89.1%~~34.1%, from ~~$253.1~~$274.2 million generated in the thirteen weeks ended ~~September 25, 2016~~July 1, 2018 to ~~$478.6~~$367.9 million generated in the thirteen weeks ended ~~September 24, 2017.~~June 30, 2019. 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 June 30, 2019		Change from Thirteen Weeks Ended July 1, 2018					Percent of Net Sales
			Change from Thirteen Weeks Ended September 25, 2016				Thirteen Weeks Ended							Change from Thirteen Weeks Ended July 1, 2018					Thirteen Weeks Ended
			Amount		Percent		September 24, 2017		September 25, 2016					Amount			Percent		June 30, 2019		July 1, 2018
	In thousands, except percent data											(In thousands, except percent data)
Net sales	$	2,793,885	$	298,604	12.0	%	100.0	%	100.0	%		$	2,843,085	$	6,372		0.2	%	100.0	%	100.0	%
Cost of sales(c)	2,315,301		73,080		3.3	%	82.9	%	89.9	%	(a)(b)(c)	2,475,221		(87,270		)	(3.4	)%	87.1	%	90.3	%
Gross profit	$	478,584	$	225,524	89.1	%	17.1	%	10.1	%		$	367,864	$	93,642		34.1	%	12.9	%	9.7	%


Sources of gross profit	Thirteen Weeks Ended September 24, 2017		Change from Thirteen Weeks Ended September 25, 2016						Thirteen Weeks Ended June 30, 2019		Change from Thirteen Weeks Ended July 1, 2018
Sources of gross profit	Thirteen Weeks Ended September 24, 2017		Amount			Percent			Thirteen Weeks Ended June 30, 2019		Amount			Percent
	(In thousands, except percent data)								(In thousands, except percent data)
United States	$	377,209	$	197,873		110.3	%	(a)
U.S.									$	246,570	$	92,646		60.2	%
U.K. and Europe	46,951		3,981			9.3	%	(b)	43,516		(5,595		)	(11.4	)%
Mexico	54,401		23,671			77.0	%	(c)	77,754		6,551			9.2	%
Elimination	23		(1		)	(4.2	)%
Intersegment transactions, net									24		40			(250.0	)%
Total gross profit	$	478,584	$	225,524		89.1	%		$	367,864	$	93,642		34.1	%


Sources of cost of sales	Thirteen Weeks Ended September 24, 2017			Change from Thirteen Weeks Ended September 25, 2016					Thirteen Weeks Ended June 30, 2019			Change from Thirteen Weeks Ended July 1, 2018
Sources of cost of sales	Thirteen Weeks Ended September 24, 2017			Amount		Percent			Thirteen Weeks Ended June 30, 2019			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)									$	1,670,384		$	(75,127	)	(4.3	)%
U.K. and Europe(b)	467,374			46,784		11.1	%	(b)	492,386			(21,605		)	(4.2	)%
Mexico(c)	286,617			10,251		3.7	%	(c)	312,475			9,502			3.1	%
Elimination	(23		)	1		(4.2	)%
Intersegment transactions, net									(24		)	(40		)	(250.0	)%
Total cost of sales	$	2,315,301		$	73,080	3.3	%		$	2,475,221		$	(87,270	)	(3.4	)%

(a)

Cost of sales incurred by our U.S. segment during the thirteen weeks ended ~~September 24, 2017 increased $16.0~~June 30, 2019 decreased $75.1 million, or ~~1.0%~~4.3%, from cost of sales incurred by our U.S. segment during the thirteen weeks ended ~~September 25, 2016.~~July 1, 2018. Cost of sales ~~increased~~decreased primarily because of ~~costs incurred~~the $104.3 million impact of decreased cost per pound sold, partially offset by a $29.2 million impact from sales volume increases. Included in the ~~acquired GNP operations. Cost~~decreased cost per pound sold and the impact of sales ~~incurred by the acquired GNP operations contributed $89.1 million, or 5.8 percentage points, to the increase in U.S. cost of sales. An decrease~~volume increases in 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 ofis a ~~$63.7~~$38.6 million decrease in feed ingredient costs, a ~~$23.9 million net increase in derivative gains, a $4.2~~$28.3 million decrease in ~~repair~~losses related to commodity derivatives and ~~maintenance costs, partially offset by~~ a ~~$22.4~~$6.5 million ~~increase~~decrease in ~~compensation costs and $1.9 million in damages to our Puerto Rico assets resulting from Hurricane Maria.~~freight costs. Other factors affecting cost of sales were individually immaterial.

(b)

Cost of sales incurred by our U.K. and Europe segment during the thirteen weeks ended ~~September 24, 2017 increased $46.8~~June 30, 2019 decreased $21.6 million, or ~~11.1%~~4.2%, from cost of sales incurred by our U.K. and Europe segment during the thirteen weeks ended ~~September 25, 2016~~.July 1, 2018. U.K. and Europe c~~ost~~cost of sales ~~increased~~decreased primarily because of ~~a $37.8~~the $37.5 million impact of reduced sales volume and the $28.8 million favorable impact of foreign currency translation. Partially offsetting the decreases in sales volume and impact of foreign currency translation was an increase in ~~raw material~~cost per pound sold of $44.7 million. Included in the impact of reduced sales volume, foreign currency translation and increased cost per pound sold on the decrease in cost of sales was a reduction of live bird input costs ~~a $4.2 million increase in labor costs, and a $2.4 million increase in freight costs.~~

of $20.1 million. 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~~June 30, 2019 increased ~~$10.3~~$9.5 million, or ~~3.7%~~3.1%, from cost of sales incurred by our Mexico segment during the thirteen weeks ended ~~September 25, 2016~~.July 1, 2018. Mexico c~~ost~~cost of sales increased primarily because of the $14.4 million impact of increased cost per pound sold and the $4.7 million unfavorable impact of foreign currency remeasurement. Partially offsetting the impact of the increases in both cost per pound sold and the impact of foreign currency remeasurement was the $9.6 million impact from reduced sales volume. Included in the impact of increased cost per pound sold, foreign currency remeasurement and reduced sales volume was a ~~$14.6~~$3.3 million increase in ~~contracted~~outsourced labor costs, a $2.7 million increase in grower pay, ~~partially offset by~~ a ~~$1.4~~$1.8 million ~~decrease in catching costs, a $1.1 million decrease in depreciation expense on machinery and equipment, a $1.2~~ increase in ~~other income,~~direct production labor costs and a ~~$0.6~~$1.7 million ~~decrease~~increase in ~~travel~~warehousing and ~~entertainment~~freight costs.

Other factors affecting cost of sales were individually immaterial.

Operating income. Operating income increased by ~~$195.4~~$94.4 million, or ~~110.5%~~51.0%, from ~~$176.8~~$185.1 million generated in the thirteen weeks ended ~~September 25, 2016~~July 1, 2018 to ~~$372.2~~$279.6 million generated in the thirteen weeks ended ~~September 24, 2017.~~June 30, 2019. The following tables provide information regarding operating income and SG&A expense:


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 June 30, 2019			Change from Thirteen Weeks Ended July 1, 2018					Percent of Net Sales
			Change from Thirteen Weeks Ended September 25, 2016				Thirteen Weeks Ended								Change from Thirteen Weeks Ended July 1, 2018					Thirteen Weeks Ended
			Amount		Percent		September 24, 2017		September 25, 2016						Amount			Percent		June 30, 2019		July 1, 2018
	(In thousands, except percent data)											(In thousands, except percent data)
Gross profit	$	478,584	$	225,524	89.1	%	17.1	%	10.1	%		$	367,864		$	93,642		34.1	%	12.9	%	9.7	%
SG&A expense(c)	102,191		26,257		34.6	%	3.7	%	3.0	%	(a)(b)(c)	88,357			382			0.4	%	3.1	%	3.1	%
Administrative restructuring charges	4,147		3,869		1,386.4	%	0.1	%	—	%	(d)(e)
Administrative restructuring activities^(d)												(43		)	(1,178		)	(103.8	)%	—	%	—	%
Operating income	$	372,246	$	195,398	110.5	%	13.3	%	7.1	%		$	279,550		$	94,438		51.0	%	9.8	%	6.5	%


Sources of operating income	Thirteen Weeks Ended September 24, 2017		Change from Thirteen Weeks Ended September 25, 2016						Thirteen Weeks Ended June 30, 2019			Change from Thirteen Weeks Ended July 1, 2018
Sources of operating income	Thirteen Weeks Ended September 24, 2017		Amount			Percent			Thirteen Weeks Ended June 30, 2019			Amount			Percent
	(In thousands, except percent data)								(In thousands, except percent data)
United States	$	307,962	$	166,767		118.1	%
U.S.									$	186,960		$	87,491		88.0	%
U.K. and Europe	18,569		5,542			42.5	%		24,194			532			2.2	%
Mexico	45,692		23,089			102.2	%		68,372			6,375			10.3	%
Elimination	23		—			—	%
Intersegment transactions, net									24			40			(250.0	)%
Total operating income	$	372,246	$	195,398		110.5	%		$	279,550		$	94,438		51.0	%

Sources of SG&A expense	Thirteen Weeks Ended September 24, 2017		Change from Thirteen Weeks Ended September 25, 2016						Thirteen Weeks Ended June 30, 2019			Change from Thirteen Weeks Ended July 1, 2018
Sources of SG&A expense	Thirteen Weeks Ended September 24, 2017		Amount			Percent			Thirteen Weeks Ended June 30, 2019			Amount			Percent
	(In thousands, except percent data)								(In thousands, except percent data)
United States	$	66,793	$	28,930		76.4	%	(a)
U.S.^(a)									$	59,653		$	6,333		11.9	%
U.K. and Europe(b)	26,689		(3,255		)	(10.9	)%	(b)	19,322			(6,127		)	(24.1	)%
Mexico(c)	8,709		582			7.2	%	(c)	9,382			176			1.9	%
Total SG&A expense	$	102,191	$	26,257		34.6	%		$	88,357		$	382		0.4	%

Sources of administrative restructuring charges	Thirteen Weeks Ended September 24, 2017		Change from Thirteen Weeks Ended September 25, 2016
Sources of administrative restructuring charges	Thirteen Weeks Ended September 24, 2017		Amount			Percent
Sources of administrative restructuring activities									Thirteen Weeks Ended June 30, 2019			Change from Thirteen Weeks Ended July 1, 2018
Sources of administrative restructuring activities									Thirteen Weeks Ended June 30, 2019			Amount			Percent
	(In thousands, except percent data)								(In thousands, except percent data)
United States	$	2,454	$	2,176		779.6	%	(d)
U.S.^(d)									$	(43	)	$	(1,178	)	(103.8	)%
U.K. and Europe	1,693		1,693			100.0	%	(e)	—			—			—	%
Mexico	—		—			—	%		—			—			—	%
Total administrative restructuring charges	$	4,147	$	3,869		1,386.4	%
Total administrative restructuring activities									$	(43	)	$	(1,178	)	(103.8	)%

(a)

SG&A expense incurred by our U.S. segment during the thirteen weeks ended ~~September 24, 2017~~June 30, 2019 increased ~~$28.9~~$6.3 million, or ~~76.4%~~11.9%, from SG&A expense incurred by our U.S. segment during the thirteen weeks ended ~~September 25, 2016,~~July 1, 2018, primarily because of a $3.0 million increase in incentive compensation expenses, ~~incurred by the acquired GNP operations~~a $2.5 million increase in advertising and bypromotion expenses related to Internet promotions and a $1.4 million increase in deferred compensation expenses. These increases in SG&A expenses ~~incurred~~were partially offset 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 becausea decrease of ~~$14.0~~$1.2 million in ~~transaction costs related~~professional service fees primarily due to ~~the Moy Park acquisition,~~ a ~~$2.1 million increase~~reduction 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.~~consulting fees. 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~~June 30, 2019 decreased ~~$3.3~~$6.1 million, or ~~10.9%~~24.1%, from SG&A expense incurred by our U.K. and Europe segment during the thirteen weeks ended ~~September 25, 2016.~~July 1, 2018. SG&A expense incurred by our U.K. and Europe segment decreased primarily because of a ~~$5.9~~decrease of $3.3 million in severance expenses, a $1.3 million decrease in ~~management fees paid to JBS S.A.~~,administrative payroll expenses, a $0.9 million ~~increase~~decrease in ~~other selling expenses,~~legal fees and a $0.6 million ~~increase in personnel expenses and a $.6 million increase~~decrease in amortization ~~expense.~~related costs. 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~~June 30, 2019 increased ~~$0.6~~$0.2 million, or ~~7.2%~~1.9%, 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 factorsJuly 1, 2018. Factors affecting SG&A ~~expense~~expenses by our Mexico segment were individually immaterial.

(d)

Administrative restructuring ~~charges~~activities incurred by our U.S. segment during the thirteen weeks ended ~~September 24, 2017~~June 30, 2019 included ~~$2.5~~$43,000 of sublease income related to the termination of 40 North Foods operations. Administrative restructuring activities 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.~~acquisition and $0.7 million in severance, asset impairment and lease obligations resulting from termination of 40 North Foods operations.


~~(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%~~decreased 14.9% to ~~$22.5~~$30.2 million recognized in the thirteen weeks ended ~~September 24, 2017~~June 30, 2019 from ~~$18.9~~$35.4 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.~~July 1, 2018. Average borrowings ~~increased~~decreased from ~~$1.5~~$2.7 billion in the thirteen weeks ended ~~September 25, 2016~~July 1, 2018 to ~~$1.9~~$2.3 billion in the thirteen weeks ended ~~September 24, 2017 due to increased borrowings necessary to fund the GNP acquisition.~~June 30, 2019. The weighted average interest rate increased from ~~4.4%~~5.2% in the thirteen weeks ended ~~September 25, 2016~~July 1, 2018 to ~~4.5%~~5.4% in the thirteen weeks ended ~~September 24, 2017.~~June 30, 2019.

Income taxes. Income tax expense increased to ~~$113.4~~$75.5 million, a ~~32.2%~~30.8% effective tax rate, for the thirteen weeks ended ~~September 24, 2017~~June 30, 2019 compared to income tax expense of ~~$53.8~~$38.5 million, a ~~34.5%~~26.6% effective tax rate, for the thirteen weeks ended ~~September 25, 2016.~~July 1, 2018. The increase in income tax expense in ~~2017~~2019 resulted primarily from an increase in pre-tax ~~income.~~income and an increase in unrecognized tax benefits in Mexico.

~~Thirty-Nine~~

Twenty-Six Weeks Ended ~~September 24, 2017~~June 30, 2019 Compared to ~~Thirty-Nine~~Twenty-Six Weeks Ended ~~September 25, 2016~~July 1, 2018

Net sales. Net sales generated in the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017 increased $517.8~~June 30, 2019 decreased $15.6 million, or ~~6.9%~~0.3%, from net sales generated in the ~~thirty-nine~~twenty-six weeks ended ~~September 25, 2016.~~July 1, 2018. 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						Twenty-Six Weeks Ended June 30, 2019		Change from Twenty-Six Weeks Ended July 1, 2018
Sources of net sales	Thirty-Nine Weeks Ended September 24, 2017		Amount			Percent			Twenty-Six Weeks Ended June 30, 2019		Amount			Percent
	(In thousands, except percent data)								(In thousands, except percent data)
United States	$	5,557,089	$	484,737		9.6	%	(a)
U.S.^(a)									$	3,800,544	$	60,004		1.6	%
U.K. and Europe(b)	1,473,854		(10,854		)	(0.7	)%	(b)	1,050,865		(56,537		)	(5.1	)%
Mexico(c)	994,568		43,946			4.6	%	(c)	716,351		(19,098		)	(2.6	)%
Total net sales	$	8,025,511	$	517,829		6.9	%		$	5,567,760	$	(15,631	)	(0.3	)%

(a)

U.S. net sales generated in the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 increased ~~$484.7~~$60.0 million, or ~~9.6%~~1.6%, from U.S. net sales generated in the ~~thirty-nine~~twenty-six weeks ended ~~September 25, 2016~~July 1, 2018, primarily because of ~~net~~an increase in sales ~~generated by the recently acquired GNP operations~~volume and an increase in net sales per pound. The increases in sales volume and net sales per pound experienced by our ~~existing operations. The impact of the acquired business~~U.S. segment contributed ~~$322.4~~$48.1 million, or ~~6.4~~1.3 percentage points, and $11.9 million, or 0.3 percentage points, respectively, 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~~twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 and ~~September 25, 2016~~July 1, 2018 were net sales to JBS USA Food Company totaling ~~$37.4~~$7.2 million and ~~$12.2~~$6.0 million, respectively.

(b)

U.K. and Europe net sales generated in the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 decreased ~~$10.9~~$56.5 million, or ~~0.7%~~5.1%, from U.K. and Europe net sales generated in the ~~thirty-nine~~twenty-six weeks ended ~~September 25, 2016~~July 1, 2018, primarily because of the ~~negative~~unfavorable impact of foreign currency translation and ~~increased~~a decrease in sales ~~volume.~~volume, partially offset by an increase in net sales per pound. The ~~negative~~unfavorable impact of foreign currency translation and decrease in sales volume contributed $66.6 million, or 6.0 percentage points, and $64.0 million, or 5.8 percentage points, respectively, to the decrease in net ~~sales by $135.3 million, or 9.1 percentage points. The negative impacts of foreign currency translation~~sales. These decreases were partially offset by ~~increased sales volume and~~an increase in net sales per pound ~~by $51.7~~of $74.1 million, or ~~3.5~~6.7 percentage ~~points, and $72.7 million, or 4.9 percentage points, respectively.~~points.

(c)

Mexico net sales generated in the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017 increased $43.9~~June 30, 2019 decreased $19.1 million, or ~~4.6%~~2.6%, from Mexico net sales generated in the ~~thirty-nine~~twenty-six weeks ended ~~September 25, 2016~~July 1, 2018, primarily because of a decrease net sales per pound, a decrease in sales volume and the ~~increase~~unfavorable impact of foreign currency remeasurement. The decrease 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 $14.0contributed $11.3 million, or 1.5 percentage points, ~~respectively.~~to the decrease in net sales. The ~~negative~~decrease in sales volume and the unfavorable impact of foreign currency remeasurement ~~partially offset the increase in net sales by $38.3~~contributed $4.4 million, or ~~4.0~~0.6 percentage ~~points. Other factors affecting~~points, and $3.4 million, or 0.5 percentage points, respectively, to the decrease in ~~Mexico~~ net ~~sales were immaterial.~~sales.

Gross profit. Gross profit increased by ~~$334.7~~$24.9 million, or ~~38.2%~~4.4%, from ~~$875.1~~$561.9 million generated in the ~~thirty-nine~~twenty-six weeks ended ~~September 25, 2016~~July 1, 2018 to ~~$1,209.8~~$586.8 million generated in the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017.~~June 30, 2019. 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 %



Components of gross profit	Twenty-Six Weeks Ended June 30, 2019		Change from Twenty-Six Weeks Ended July 1, 2018					Percent of Net Sales
			Change from Twenty-Six Weeks Ended July 1, 2018					Twenty-Six Weeks Ended
			Amount			Percent		June 30, 2019		July 1, 2018
	(In thousands, except percent data)
Net sales	$	5,567,760	$	(15,631	)	(0.3	)%	100.0	%	100.0	%
Cost of sales^(a)(b)(c)	4,980,957		(40,547		)	(0.8	)%	89.5	%	89.9	%
Gross profit	$	586,803	$	24,916		4.4	%	10.5	%	10.1	%


Sources of gross profit	Thirty-Nine Weeks Ended September 24, 2017		Change from Thirty-Nine Weeks Ended September 25, 2016						Twenty-Six Weeks Ended June 30, 2019		Change from Twenty-Six Weeks Ended July 1, 2018
Sources of gross profit	Thirty-Nine Weeks Ended September 24, 2017		Amount			Percent			Twenty-Six Weeks Ended June 30, 2019		Amount			Percent
	(In thousands, except percent data)								(In thousands, except percent data)
United States	$	900,262	$	298,560		49.6	%	(a)
U.S.									$	416,741	$	80,446		23.9	%
U.K. and Europe	137,734		(3,732		)	(2.6	)%	(b)	73,101		(18,742		)	(20.4	)%
Mexico	171,745		39,871			30.2	%	(c)	96,913		(36,828		)	(27.5	)%
Elimination	69		(1		)	(1.4	)%
Intersegment transactions, net									48		40			500.0	%
Total gross profit	$	1,209,810	$	334,696		38.2	%		$	586,803	$	24,916		4.4	%


Sources of cost of sales	Thirty-Nine Weeks Ended September 24, 2017			Change from Thirty-Nine Weeks Ended September 25, 2016						Twenty-Six Weeks Ended June 30, 2019			Change from Twenty-Six Weeks Ended July 1, 2018
Sources of cost of sales	Thirty-Nine Weeks Ended September 24, 2017			Amount			Percent			Twenty-Six Weeks Ended June 30, 2019			Amount			Percent
	(In thousands, except percent data)									(In thousands, except percent data)
United States	$	4,656,825		$	186,177		4.2	%	(a)
U.S.^(a)										$	3,383,803		$	(20,442	)	(0.6	)%
U.K. and Europe(b)	1,336,123			(7,120		)	(0.5	)%	(b)	977,764			(37,795		)	(3.7	)%
Mexico(c)	822,822			4,073			0.5	%	(c)	619,438			17,730			2.9	%
Elimination	(69		)	2			(2.8	)%
Intersegment transactions, net										(48		)	(40		)	500.0	%
Total cost of sales	$	6,815,701		$	183,133		2.8	%		$	4,980,957		$	(40,547	)	(0.8	)%

(a)

Cost of sales incurred by our U.S. segment during the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017 increased $186.2~~June 30, 2019 decreased $20.4 million, or ~~4.2%~~0.6%, from cost of sales incurred by our U.S. segment during the ~~thirty-nine~~twenty-six weeks ended ~~September 25, 2016.~~July 1, 2018. 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~~$64.2 million impact of decreased cost per pound sold, partially offset by a $43.8 million impact of increased sales volume. Included in the decreased cost per pound sold and increased sales volume was a $26.9 million decrease in feed ingredient costs, an ~~$18.4 million net increase in derivative gains, a $7.3~~$18.7 million decrease in ~~scrapped materials,~~losses related to commodity derivatives, a $7.7 million deferment of costs related to outgoing product shipments in transit at the reporting date and a $7.6 million decrease in freight costs. These decreases in costs of sales were partially offset by a ~~$49.5~~$41.8 million increase in ~~compensation and benefit costs and $1.9 million in damages to our Puerto Rico assets resulting from Hurricane Maria.~~hourly payroll increases. Other factors affecting cost of sales were individually immaterial.

(b)

Cost of sales incurred by our U.K. and Europe segment during the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 decreased ~~$7.1~~$37.8 million, or ~~0.5%~~3.7%, from cost of sales incurred by our U.K. and Europe segment during the ~~thirty-nine~~twenty-six weeks ended ~~September 25, 2016. The~~July 1, 2018. U.K. and Europe cost of sales decreased primarily because of a $62.0 million impact of foreign currency translation and the $58.7 million impact due to a reduction in sales volume. These decreases in cost of sales were partially offset by an increase in cost per pound sold of $82.9 million. Included in the impact of foreign currency translation, reduced sales volume and increased cost per pound sold on the decrease in cost of sales was ~~due to~~ a ~~$23.9~~reduction in live bird input costs of $48.5 million. The impact of reduced live bird input costs on cost of sales was partially offset by a $5.8 million increase in ~~cost of raw materials, offset by~~contract labor due to an increase in the national minimum wage, a ~~$16.3~~$3.1 million ~~decrease~~increase in ~~labor~~electricity costs and a ~~$12.5~~$2.9 million ~~decrease~~increase in ~~other~~gas costs due to increased rates. Other factors affecting cost of sales ~~and a $3.4 million decrease in bird amortization costs.~~

were individually immaterial.

(c)

Cost of sales incurred by our Mexico segment during the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 increased ~~$4.1~~$17.7 million, or ~~0.5%~~2.9%, from cost of sales incurred by our Mexico segment during the ~~thirty-nine~~twenty-six weeks ended ~~September 25, 2016. The~~July 1, 2018. Mexico cost of sales increased primarily because of the impact of increased cost per pound sold of $24.2 million. This increase in cost per pound was partially offset by a $3.6 million impact of reduced sales volume and a $2.9 million favorable impact of foreign currency remeasurement. Included in the impact of increased cost per pound sold, decrease in sales volume and impact of foreign currency remeasurement was ~~primarily due to~~ a ~~$29.4~~$6.3 million increase in grower pay ~~and~~due to increased rates, a $6.0 million increase in ~~utility~~direct production labor costs, ~~that were partially offset by the $27.6~~a $3.4 million ~~impact of inventory valuation adjustments resulting from currency rate movement~~increase in electricity costs and a ~~$3.8~~$3.4 million ~~decrease~~increase in ~~catching~~freight and warehouse costs.

Other factors affecting cost of sales were individually immaterial.

Operating income. Operating income increased by ~~$272.3~~$29.9 million, or ~~42.2%~~7.7%, from ~~$645.0~~$386.7 million generated in the ~~thirty-nine~~twenty-six weeks ended ~~September 25, 2016~~July 1, 2018 to ~~$917.3~~$416.6 million generated in the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017.~~June 30, 2019. 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					Twenty-Six Weeks Ended June 30, 2019			Change from Twenty-Six Weeks Ended July 1, 2018					Percent of Net Sales
			Change from Thirty-Nine Weeks Ended September 25, 2016				Thirty-Nine Weeks Ended								Change from Twenty-Six Weeks Ended July 1, 2018					Twenty-Six Weeks Ended
			Amount		Percent		September 24, 2017		September 25, 2016						Amount			Percent		June 30, 2019		July 1, 2018
	(In thousands, except percent data)											(In thousands, except percent data)
Gross profit	$	1,209,810	$	334,696	38.2	%	15.1	%	11.7	%		$	586,803		$	24,916		4.4	%	10.5	%	10.1	%
SG&A expense(c)	284,009		54,223		23.6	%	3.5	%	3.1	%	(a)(b)(c)	170,281			(2,977		)	(1.7	)%	3.1	%	3.1	%
Administrative restructuring charges	8,496		8,217		2,945.2	%	0.1	%	—	%	(d)(e)
Administrative restructuring activities^(d)												(70		)	(1,994		)	(103.6	)%	—	%	—	%
Operating income	$	917,305	$	272,256	42.2	%	11.5	%	8.6	%		$	416,592		$	29,887		7.7	%	7.5	%	6.9	%

4548


Sources of operating income	Thirty-Nine Weeks Ended September 24, 2017		Change from Thirty-Nine Weeks Ended September 25, 2016						Twenty-Six Weeks Ended June 30, 2019			Change from Twenty-Six Weeks Ended July 1, 2018
Sources of operating income	Thirty-Nine Weeks Ended September 24, 2017		Amount			Percent			Twenty-Six Weeks Ended June 30, 2019			Amount			Percent
	(In thousands, except percent data)								(In thousands, except percent data)
United States	$	719,121	$	238,841		49.7	%
U.S.									$	301,800		$	75,045		33.1	%
U.K. and Europe	51,874		(3,967		)	(7.1	)%		36,908			(8,167		)	(18.1	)%
Mexico	146,241		37,385			34.3	%		77,836			(37,031		)	(32.2	)%
Elimination	69		(3		)	(2.8	)%
Intersegment transactions, net									48			40			500.0	%
Total operating income	$	917,305	$	272,256		42.2	%		$	416,592		$	29,887		7.7	%


Sources of SG&A expense	Thirty-Nine Weeks Ended September 24, 2017		Change from Thirty-Nine Weeks Ended September 25, 2016						Twenty-Six Weeks Ended June 30, 2019			Change from Twenty-Six Weeks Ended July 1, 2018
Sources of SG&A expense	Thirty-Nine Weeks Ended September 24, 2017		Amount			Percent			Twenty-Six Weeks Ended June 30, 2019			Amount			Percent
	(In thousands, except percent data)								(In thousands, except percent data)
United States	$	174,340	$	53,196		43.9	%	(a)
U.S.^(a)									$	115,011		$	7,395		6.9	%
U.K. and Europe^(b)									36,193			(10,575		)	(22.6	)%
Mexico^(c)									19,077			203			1.1	%
Total SG&A expense									$	170,281		$	(2,977	)	(1.7	)%

Sources of administrative restructuring activities									Twenty-Six Weeks Ended June 30, 2019			Change from Twenty-Six Weeks Ended July 1, 2018
Sources of administrative restructuring activities									Twenty-Six Weeks Ended June 30, 2019			Amount			Percent
									(In thousands, except percent data)
U.S.^(d)									$	(70	)	$	(1,994	)	(103.6	)%
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
Sources of administrative restructuring charges	Thirty-Nine Weeks Ended September 24, 2017		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	%
Total administrative restructuring activities									$	(70	)	$	(1,994	)	(103.6	)%

(a)

SG&A expense incurred by our U.S. segment during the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 increased ~~$53.2~~$7.4 million, or ~~43.9%~~6.9%, from SG&A expense incurred by our U.S. segment during the ~~thirty-nine~~twenty-six weeks ended ~~September 25, 2016,~~July 1, 2018, primarily because of a $4.4 million increase in incentive compensation expenses, ~~incurred by the acquired GNP operations~~a $3.3 million increase in Internet promotion expenses, a $2.6 million increase in administrative payroll expenses and to a ~~lesser extent, by~~$1.2 million increase in deferred compensation expenses. These increases in SG&A ~~expense incurred~~expenses were partially offset by ~~our existing U.S. segment. Expenses incurred by the acquired GNP business contributed $27.4~~a $3.6 million ~~or 22.6 percentage points,~~decrease in professional fees mainly due to ~~the overall increase~~a reduction 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 promotionconsulting expenses. 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~~twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 decreased ~~$1.5~~$10.6 million, or ~~1.7%~~22.6%, from SG&A expense incurred by our U.K. and Europe segment during the ~~thirty-nine~~twenty-six weeks ended ~~September 25, 2016~~July 1, 2018. SG&A expense incurred by our U.K. and Europe segment decreased primarily because of a ~~$2.3~~$3.9 million decrease in ~~advertising~~administrative payroll expenses, ~~and~~ a ~~$2.2~~$3.3 million decrease in ~~management fees paid to JBS S.A. that were partially offset by~~severance expenses, a ~~$1.2~~$2.0 million ~~increase~~decrease in ~~amortization~~legal expenses and a $1.3 million ~~increase~~decrease in ~~miscellaneous income from sale of assets.~~amortization expenses. Other factors affecting SG&A expense were individually immaterial.

(c)

SG&A expense incurred by our Mexico segment during the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 increased ~~$2.5~~$0.2 million, or ~~10.8%~~1.1%, from SG&A expense incurred by our Mexico segment during the ~~thirty-nine~~twenty-six weeks ended September 25, 2016 because of a $1.9 million increase in employee relations expenses and a $1.4 million increase advertising and promotion expenses that were partially offset by a $0.8 million decrease in contract service expenses. Other factorsJuly 1, 2018. Factors affecting SG&A ~~expense~~expenses by our Mexico segment were individually immaterial.

(d)

Administrative restructuring ~~charges~~activities incurred by ~~the~~our U.S. segment during the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 included ~~a $3.5 million impairment~~$70,000 of sublease income related to the ~~aggregate carrying amount~~termination of ~~an asset group held for sale in Alabama, $2.6~~40 North Foods operations. Administrative restructuring activities incurred by our U.S. segment during the twenty-six weeks ended July 1, 2018 included $1.0 million in severance costs related to the GNP acquisition, ~~and the elimination of prepaid costs totaling~~ $0.7 million in severance, asset impairment and lease obligations resulting from termination of 40 North Foods operations and $0.2 million in costs 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%~~decreased 28.3% to ~~$62.8~~$60.4 million recognized in the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 from ~~$56.5 million~~$84.1 million recognized in the ~~thirty-nine~~twenty-six weeks ended ~~September 25, 2016 primarily because of an increase in average borrowings compared to the same period in the prior year.~~July 1, 2018. Average borrowings ~~increased~~decreased from ~~$1.5~~$2.7 billion in the ~~thirty-nine~~twenty-six weeks ended ~~September 25, 2016~~July 1, 2018 to ~~$1.8~~$2.3 billion in the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017 due to increased borrowings necessary to fund the GNP acquisition.~~June 30, 2019. The weighted average interest rate increased from ~~4.4%~~5.1% in the ~~thirty-nine~~twenty-six weeks ended ~~September 25, 2016~~ended July 1, 2018 to ~~4.5%~~5.4% in the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017.~~June 30, 2019.

Income taxes. Income tax expense increased to ~~$278.0~~$96.0 million, a ~~32.2%~~27.4% effective tax rate, for the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 compared to income tax expense of ~~$203.0~~$75.5 million, a ~~34.0%~~25.1% effective tax rate, for the ~~thirty-nine~~

twenty-six weeks ended ~~September 25, 2016.~~July 1, 2018. The increase in income tax expense in ~~2017~~2019 resulted primarily from an increase in pre-tax ~~income.~~income and an increase in unrecognized tax benefits in Mexico.

Liquidity and Capital Resources

The following table presents our available sources of liquidity as of ~~September 24, 2017:~~June 30, 2019:


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						$	538.2
Borrowing arrangements:
U.S. Credit Facility(a)	$	750.0	$	73.3	631.9		(a)	$	750.0	$	—	708.4
Mexico Credit Facility^(b)	84.5		84.5		—		(b)	78.0		—		78.0
U.K. and Europe Credit Facilities^(c)	122.8		13.9		108.9			138.4		3.4		135.0


(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~~June 30, 2019 totaled ~~$44.8~~$41.6 million.


(b)	As of ~~September 24, 2017,~~June 30, 2019, the U.S. dollar-equivalent of the amount available under the Mexico Credit Facility (as described below) was ~~$5,636.~~$78.0 million. The Mexico Credit Facility provides for a loan commitment of $1.5 billion Mexican pesos.

(c)

As of ~~September 24, 2017,~~June 30, 2019, the U.S. dollar-equivalent of the amount available under the U.K. and Europe Credit Facilities (as described below) ~~was $108.9~~were $135.0 million. The U.K. and Europe Credit Facilities provide for loan commitments of ~~£45.0~~£100.0 million (or ~~$60.1~~$127.0 million U.S. dollar equivalent)~~, £20.0~~ under the Bank of Ireland Facility Agreement (as described below) and €10.0 million (or ~~$26.8~~$11.4 million U.S. dollar equivalent) ~~and €30.0 million (or $35.7 million U.S. dollar equivalent)~~under the Invoice Discounting Facility (as described below).

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 “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~~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 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~~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 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.March 2018.

On September 29, 2017, ~~the Company~~we completed a sale of $600.0 million aggregate principal amount of ~~its~~our 5.875% senior notes due ~~2027 (the~~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 ~~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 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~~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 ~~the Company’s~~our guarantor subsidiary. In addition, any of ~~the Company’s~~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 ~~the Company~~us and ~~its~~our guarantor subsidiary and rank equally with all of ~~the Company’s~~our and ~~its~~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.

~~Moy Park Senior Notes~~

U.S. Credit Facility

On ~~May 8, 2017, the Company~~July 20, 2018, we, and certain of ~~its~~our subsidiaries entered into a ~~Third~~Fourth Amended and Restated Credit Agreement (the “U.S. Credit Facility”) with ~~Coöperatieve Rabobank U.A., New York Branch (“Rabobank”),~~CoBank, ACB, 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 revolving credit commitment and a term loan commitment of up to ~~$800.0~~$500.0 million (the “Term Loans”). We used the proceeds from the term loan commitment under the U.S. Credit Facility, together with cash on hand, to repay the outstanding loans under our previous credit agreement with Coöperatieve Rabobank U.A., New York Branch, as administrative agent, and the other lenders and financial institutions party thereto.

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~~$1.25 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.~~July 20, 2023. All principal on the Term Loans is due at maturity on ~~May 6, 2022.~~July 20, 2023. 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~~June 30, 2019, we had Term Loans outstanding totaling ~~$790.0~~$487.5 million, and the amount available for borrowing under the revolving loan commitment was ~~$631.9~~$708.4 million. ~~The Company~~We had letters of credit of ~~$44.8~~$41.6 million and no borrowings ~~of $73.3 million~~ outstanding under the revolving loan commitment as of ~~September 24, 2017.~~June 30, 2019.

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%~~1.25% through ~~September 24, 2017~~August 2, 2018 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%~~0.25% through ~~September 24, 2017~~August 2, 2018 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 customary financial and other various covenants ~~and various other covenants that may adversely affect the Company’s~~for transactions of this type, including restrictions on our ability to ~~among other things,~~ incur additional indebtedness, incur liens, pay dividends, or make certain restricted payments, consummate certain ~~assets~~asset sales, enter into certain transactions with ~~JBS and the Company’s other~~our affiliates, or merge,

consolidate and/or sell or dispose of all or substantially all of our ~~assets.~~assets, among other things. 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 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 guarantors under the U.S. Credit Facility.

~~Mexico Credit Facility~~

~~On September 27, 2016, certain of our Mexican subsidiaries entered into an unsecured credit agreement (the “Mexico Credit Facility”)~~ We are currently in compliance with ~~BBVA Bancomer, S.A. Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer, as lender. The loan commitment~~the covenants under the ~~Mexico~~U.S. 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 borrowings under the Mexico Credit Facility that bear interest at a per annum rate of 8.33%. As of September 24, 2017, the U.S. dollar-equivalent borrowing availability was less than $0.1 million.Facility.

U.K. and Europe Credit Facilities

~~Moy Park Multicurrency Revolving Facility Agreement~~

~~Moy Park Receivables Finance Agreement~~

Moy Park France Invoice Discounting Facility

As of June 30, 2019, the U.S. dollar-equivalent loan commitment, borrowing availability, and outstanding borrowings under the Invoice Discounting Facility were was $11.4 million, $8.0 million, and $3.4 million, respectively.

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~~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~~

Moy Park Credit Agricole Bank Overdraft

On ~~September 8, 2017, Onix Investments UK~~December 3, 2018, Moy Park entered into an unsecured €0.5 million bank overdraft agreement (the “Overdraft Agreement”) with Credit Agricole. The Overdraft Agreement is payable on demand and can be cancelled anytime by us or Credit Agricole. Outstanding borrowings under the Overdraft Agreement bear interest at a per annum rate equal to EURIBOR plus 1.50%. As of June 30, 2019, there were no outstanding borrowings under the Overdraft Agreement.

Moy Park Bank of Ireland Revolving Facility Agreement

The Bank of Ireland Facility Agreement contains representations and ~~prior~~warranties, covenants, indemnities and conditions that we believe are customary for transactions of this type. Pursuant 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.~~

~~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~~Bank of Ireland Facility Agreement, Moy Park is required to meet certain financial and other restrictive covenants. Additionally, Moy Park is prohibited from ~~one to ten years. We estimate the maximum potential amount~~taking certain actions without consent of the ~~residual value guarantees~~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.

Mexico Credit Facility

On December 14, 2018, certain of our Mexican subsidiaries entered into an unsecured credit agreement (the “Mexico Credit Facility”) with Banco del Bajio, Sociedad Anónima, Institución de Banca Múltiple, as lender. The loan commitment under the Mexico Credit Facility is ~~approximately $11.0 million; however,~~$1.5 billion Mexican pesos and can be borrowed on a revolving basis. The U.S. dollar-equivalent of the ~~actual amount would be~~loan commitment under the Mexico Credit Facility is $78.0 million. Outstanding borrowings under the Mexico Credit Facility accrue interest at a rate equal to the 28-Day Interbank Equilibrium Interest Rate plus 1.50%. The Mexico Credit Facility contains covenants and defaults that we believe are customary for transactions of this type. The Mexico Credit Facility is used for general corporate and working capital purposes. The Mexico Credit Facility will mature on December 14, 2023. As of June 30, 2019, there were no outstanding borrowings under the Mexico Credit Facility.

Collateral

Substantially all of our domestic inventories and domestic fixed assets are pledged as collateral to secure the obligations under the U.S. Credit Facility. The U.K. and Europe and Mexico credit facilities are unsecured.

Historical Flow of Funds

Twenty-Six Weeks Ended June 30, 2019

Cash provided by operating activities was $403.4 million for the twenty-six weeks ended June 30, 2019. The cash flows provided by operating activities resulted primarily from net income of $254.2 million, net noncash expenses of $143.2 million, a change in accounts payable, accrued expenses and other current liabilities of $20.7 million and changes in income taxes of $34.0 million. These cash flows were offset by ~~any recoverable amount based on~~ the ~~fair market value~~use of ~~the underlying leased assets. No liability has been recorded~~$27.2 million in cash related to ~~this contingency as~~inventories and $20.4 million use of cash related to trade accounts and other receivables.

The change in trade accounts and other receivables, including accounts receivable from related parties, represented a$20.4 million use of cash related to operating activities for the ~~likelihood~~twenty-six weeks ended June 30, 2019. This change is primarily due to customer payment timing.

The change in inventories represented a $27.2 million use of ~~payments under these guarantees is not considered~~cash related to ~~be probable,~~operating activities for the twenty-six weeks ended June 30, 2019. This change resulted primarily from an increase in our finished products inventory.

The change in prepaid expenses and other current assets represented a $1.3 million use of cash related to operating activities for the twenty-six weeks ended June 30, 2019. This change resulted primarily from a net increase in value-added tax receivables.

The change in accounts payable, revenue contract liabilities, accrued expenses and other current liabilities, including accounts payable to related parties, represented a $20.7 million source of cash related to operating activities for the twenty-six weeks ended June 30, 2019. 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 ~~fair value~~tax components within accumulated other comprehensive loss, represented a $34.0 million source of cash related to operating activities for the ~~guarantees is immaterial. We historically have not experienced significant~~twenty-six weeks ended June 30, 2019. This change resulted primarily from the timing of estimated tax payments and an increase in unrecognized tax benefits in Mexico.

Net noncash expenses provided $143.2 million of cash related to operating activities for the twenty-six weeks ended ended June 30, 2019. Net noncash expense items included depreciation and amortization of $138.5 million, share-based compensation of $5.2 million and loan cost amortization of $2.4 million, which were partially offset by a deferred income tax benefit of $3.4 million.

Cash used in investing activities totaled $175.9 million for the twenty-six weeks ended June 30, 2019. Cash used to acquire property, plant and equipment totaled $177.6 million. Capital expenditures were primarily incurred to improve operational efficiencies and reduce costs. Cash proceeds generated from property disposals totaled $1.7 million during the twenty-six weeks ended June 30, 2019.

Cash used by financing activities totaled $17.5 million for the twenty-six weeks ended June 30, 2019. Uses of cash included payments on revolving lines of credit, long-term borrowings and capital lease obligations totaling $113.1 million, the purchase of common stock under ~~similar residual guarantees.~~share repurchase program totaling $2.9 million, capitalized loan costs totaling $0.6 million and a $0.5 million cash payment from equity distributions under a tax sharing agreement with JBS USA Food Company Holdings. These uses of cash were partially offset by proceeds from revolving line of credit and long-term debt totaling $99.6 million.

Twenty-Six Weeks Ended July 1, 2018

Cash provided by operating activities was $304.0 million for the twenty-six weeks ended July 1, 2018. The cash flows provided by operating activities resulted primarily from net income of $225.6 million, net noncash expenses of $143.1 million, a $104.0 million source of cash related to accounts payable, accrued expenses and other current liabilities and a $60.3 million source of cash related to inventories. These cash flows were partially offset by the use of $161.6 million in cash related to income taxes, the 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.

The change in trade accounts and other receivables, including accounts receivable from related parties, represented a$31.9 million use of cash related to operating activities for the twenty-six weeks ended July 1, 2018. This change was primarily due to customer payment timing.

The change in inventories represented a $60.3 million source of cash related to operating activities for the twenty-six weeks ended July 1, 2018. This change resulted primarily from a 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.

The change in accounts payable, revenue contract liabilities, accrued expenses and other current liabilities, including accounts payable to related parties, represented a $104.0 million source of cash related to operating activities for the twenty-six weeks ended July 1, 2018. 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 $161.6 million use of cash related to operating activities for the twenty-six weeks ended July 1, 2018. This change resulted primarily from the timing of estimated tax payments.

Net noncash expenses provided $143.1 million of cash related to operating activities for the twenty-six weeks ended ended July 1, 2018. Net noncash expense items included depreciation and amortization of $139.5 million, share-based compensation of $5.6 million, 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 benefit of $11.9 million.

Cash used in investing activities totaled $154.0 million for the twenty-six weeks ended July 1, 2018. Cash used to acquire property, plant and 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 twenty-six weeks ended July 1, 2018.

Cash used by financing activities totaled $69.5 million for the twenty-six weeks ended July 1, 2018. Cash used for payments on revolving lines of credit, long-term borrowings and capital lease obligations totaled $673.5 million. Cash used to pay capitalized loan costs totaled $5.7 million. These cash payments were partially offset by cash proceeds from revolving line of credit and long-term debt totaling $604.1 million and equity contributions under a tax sharing agreement with JBS USA Food Company Holdings totaling $5.6 million.

Contractual Obligations

Contractual obligations at June 30, 2019 were as follows:



Contractual Obligations^(a)	Total		Less than One Year		One to Three Years		Three to Five Years		Greater than Five Years
	(In thousands)
Long-term debt^(b)	$	2,342,828	$	30,192	$	50,136	$	412,500	$	1,850,000
Interest^(c)	840,098		125,545		247,958		234,314		232,281
Finance leases	141		98		43		—		—
Operating leases	366,352		88,181		122,461		85,103		70,607
Derivative liabilities	20,801		20,801		—		—		—
Purchase obligations^(d)	458,980		452,255		6,725		—		—
Total	$	4,029,200	$	717,072	$	427,323	$	731,917	$	2,152,888


(a)	The total amount of unrecognized tax benefits at June 30, 2019 was $23.8 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 $41.6 million in letters of credit outstanding related to normal business transactions.


(c)	Interest expense in the table above assumes the continuation of interest rates and outstanding borrowings as of June 30, 2019.


(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 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~~

Cash provided by operating activities was $618.5 million and $552.0 million for the thirty-nine weeks ended September 24, 2017 and September 25, 2016, respectively. The increase in cash flows provided by operating activities was primarily a result of increased 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 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 the thirty-nine weeks ended September 24, 2017 as compared to the thirty-nine weeks ended September 25, 2016.

Trade accounts and other receivables, including accounts receivable from related parties, increased $176.2 million, or 39.2%, to $625.8 million at September 24, 2017 from $449.6 million at December 25, 2016. The change resulted primarily from an increase in sales generated in the two 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. This change resulted primarily from a $6.1 million net decrease in value-added tax receivables and a $6.5 million decrease in prepaid workers compensation reserves, primarily offset by a $5.9 million increase in margin cash.

Accounts payable, including accounts payable to related parties, decreased $44.2 million, or 5.6%, to $750.6 million at September 24, 2017 from $794.8 million at December 25, 2016. This change resulted primarily from a $46.9 million decrease 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 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 million, or 65.7%, 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. 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 million and $172.4 million for the thirty-nine weeks ended September 24, 2017 and September 25, 2016, respectively. Net noncash expenses for the thirty-nine weeks ended September 24, 2017 included depreciation and amortization expense of $204.6 million, deferred income tax expense 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 million.

Cash used in investing activities was $914.3 million and $208.1 million for the thirty-nine 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. Cash of $357.2 million and $301.3 million was used to acquire GNP and Moy Park, respectively, net of cash acquired, during the thirty-nine weeks ended September 24, 2017. Capital expenditures totaled $258.4 million and $221.0 million in the thirty-nine 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. 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 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 stock 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, cash of $715.7 million was used to fund a special cash dividend, cash of $504.1 million was used for payments on our revolving lines of credit and capital lease obligations, cash of $65.6 million was used for payments on a current note payable to bank, 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 the thirty-nine weeks ended September 24, 2017, cash of $515.3 million was provided through our revolving lines of credit and cash of $36.8 million was provided through a current note payable.

~~Contractual Obligations~~

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

Contractual Obligations^(a)
Total
Less than
One Year

One to
Three Years

Three to
Five Years

Greater than
Five Years
(In thousands)
Long-term debt^(b)
$ 2,618,378
$ 809,734
$ 164,987
$ 1,143,657
$ 500,000
Interest^(c)
431,220
83,945
155,926
119,474
71,875
Capital leases 10,803
5,780
4,999
24
—
Operating leases 230,887
50,444
78,295
51,915
50,233
Derivative liabilities 4,169
4,169
—
—
—
Purchase obligations^(d)
122,505
122,505
—
—
—
Total $ 3,417,962
$ 1,076,577
$ 404,207
$ 1,315,070
$ 622,108


~~(a)~~	The total amount of unrecognized tax benefits at September 24, 2017 was $15.9 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 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.~~


~~(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.

Recent Accounting Pronouncements Adopted as of June 30, 2019

In ~~May 2014,~~February 2016, 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.~~

In July 2015, the FASB issued 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.

~~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. We adopted the standard as of December 31, 2018. Adoption of the standard had a material impact on our Condensed Consolidated Balance Sheet as a result of the increase in assets and liabilities from recognition of operating assets and lease liabilities. However, the standard did not have a material impact on our Condensed Consolidated Statement of Income.

In ~~March 2016,~~August 2017, the FASB issued ~~new~~an accounting standard update that simplifies the application of hedge accounting guidance in current accounting principles generally accepted in the U.S. and improves the reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. We adopted this standard as of December 31, 2018. The adoption of this guidance did not have a material impact on ~~employee share-based payments, which requires~~our financial statements.

In February 2018, the FASB issued an ~~entity~~accounting standard update that allows a reclassification from accumulated other comprehensive income to ~~amend~~retained earnings for stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act. We adopted this standard as of December 31, 2018, and elected not to reclassify the stranded tax effects. The adoption of this guidance did not have a material impact on our financial statements.

In July 2018, the FASB issued an 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~~standard update to improve non-employee share-based payment ~~transactions in~~accounting. The accounting standard update more closely aligns the ~~statement~~accounting for employee and non-employee share based payments. We adopted this standard as of ~~cash flows.~~December 31, 2018. The adoption of this guidance did not have a material impact on our financial statements.

Recent Accounting Pronouncements Not Yet Adopted as of June 30, 2019

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,~~ The provisions of the ~~FASB issued~~ new ~~accounting~~guidance will be effective as of the beginning of our 2020 fiscal year. We are currently evaluating the impact of the new guidance on ~~the classification 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.~~our financial statements.

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.

In August ~~2017,~~2018, the FASB issued an accounting standard update ~~that simplifies~~to improve the ~~application~~effectiveness of ~~hedge~~disclosures related to fair value measurements. This accounting standard update removes certain disclosure requirements related to transfers between fair value hierarchy levels and the valuation processes used for certain fair value measurements. The update requires additional disclosures as to significant unobservable inputs used in certain fair value measurements and gains and losses included in other comprehensive income. The new guidance ~~in current GAAP and improves~~will be effective as of our 2020 fiscal year. We are currently evaluating the ~~reporting~~impact of ~~hedging relationships to better portray~~ the ~~economic results of an entity’s risk management activities in its~~new guidance on our financial statements.

In August 2018, the FASB issued an accounting standard update to improve the effectiveness of disclosures related to defined benefit plans. The update removes disclosures related to the amounts in accumulated other comprehensive income expected to be recognized in the next fiscal year, adds narrative disclosure of the reasons for significant gains and losses related to changes in the defined benefit obligation, and clarifies the disclosures required for plans with projected and accumulated benefit obligations in excess of plan assets. The new guidance will be effective as of our 2020 fiscal year. We are currently evaluating the impact of the new guidance on our financial statements.

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~~recent accounting pronouncements.

Critical Accounting Policies

During the ~~thirteen~~twenty-six weeks ended ~~September 24, 2017,~~June 30, 2019, (i) ~~we did not change any of our existing critical accounting policies, (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)~~(ii) 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.~~June 30, 2019. However, fluctuations greater than 10.0% could occur. Based on our feed consumption during the thirteen weeks ended ~~September 24, 2017,~~June 30, 2019, such a change would have resulted in a change to cost of sales of approximately ~~$108.7~~$71.6 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~~June 30, 2019 would be ~~$12.1~~$12.0 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~~June 30, 2019 would have resulted in a change of approximately ~~$0.4~~$1.7 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%~~21.0% of our total debt at ~~September 24, 2017.~~June 30, 2019. 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~~less than $0.1 million for the thirteen weeks ended ~~September 24, 2017.~~June 30, 2019.

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 $2.8 million as of ~~September 24, 2017.~~June 30, 2019.

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 of ~~$1.2~~$3.5 million and a loss of ~~$4.1~~$3.4 million in the thirteen weeks ended ~~September 24, 2017~~June 30, 2019 and ~~September 25, 2016,~~July 1, 2018, 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 of ~~$2.4~~$4.3 million and a ~~gain~~loss of ~~$0.8~~$3.7 million in the ~~thirty-nine~~twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 and ~~September 25, 2016,~~July 1, 2018, respectively. The average exchange rates for the thirteen weeks ended ~~September 24, 2017~~June 30, 2019 and ~~September 25, 2016~~July 1, 2018 were ~~17.81~~19.11 Mexican pesos to 1 U.S. dollar and ~~18.73~~19.41 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~~June 30, 2019 and ~~September 25, 2016.~~July 1, 2018. However, fluctuations greater than 10.0% could occur. Based on the net monetary asset position of our Mexico segment at ~~September 24, 2017,~~June 30, 2019, such a change would have resulted in a decrease in foreign currency transaction gains recognized in the thirteen weeks ended ~~September 24, 2017~~June 30, 2019 of approximately ~~$2.0~~$14.1 million. Based on the net monetary asset position of our Mexico segment at ~~September 25, 2016,~~July 1, 2018, such a change would have resulted in ~~a decrease~~an increase in foreign currency transaction ~~gains~~losses recognized in the thirteen weeks ended ~~September 25, 2016~~July 1, 2018 of approximately ~~$1.1~~$2.7 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,~~June 30, 2019, our U.K. and Europe segment had net ~~equity~~assets of approximately ~~$617.7 million, or 35.2% of total net equity,~~$1.6 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~~$157.0 million to our net ~~equity.~~

assets.

At ~~September 24, 2017,~~June 30, 2019, we had foreign currency forward contracts, which were designated and qualify as cash flow hedges, with an aggregate notional amount of ~~$22.7~~$16.5 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~~$2.2 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 $0.6 million increase 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~~30, 2018 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”)~~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,~~June 30, 2019, 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~~made changes during the ~~Company’s~~twenty-six weeks ended June 30, 2019 to the Company's internal controls over financial reporting for the implementation of a new information technology system relating to the adoption of Accounting Standards Update 2016-02, Leases (Topic 842). No other changes to the Company's internal control over financial reporting ~~that~~ occurred during the ~~thirteen~~twenty-six weeks ended ~~September 24, 2017~~June 30, 2019 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, our 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 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 weeks ended September 24, 2017 was $2.2 billion and $1.5 billion, respectively.

5658

Table of Contents

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~~filed with the U.S. District Court for the Northern District of Illinois 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. Between December 8, 2017 and June 21, 2019, 26 individual direct action complaints (Affiliated Foods, Inc., et al. v. Claxton Poultry Farms, Inc., et al., Case No. 1:17-cv-08850; Sysco Corp. v. Tyson Foods Inc., et al., Case No. 1:18-cv-00700; U.S. Foods Inc. v. Tyson Foods Inc., et al., Case No. 1:18-cv-00702; Action Meat Distributors, Inc., et al. v. Claxton Poultry Farms, Inc., et al.,Case No. 1:18-cv-03471; Jetro Holdings, LLC, v. Tyson Foods, Inc. et al., Case No. 1:18-cv-04000; Associated Grocers of the South, Inc.,et al. v. Tyson Foods, Inc., et al., Case No. 1:18-cv-4616; The ~~defendants (including PPC) moved~~Kroger Co., et al. v. Tyson Foods, Inc., et al., Case No. 1:18-cv-04534; Ahold Delhaize USA, Inc. v. Koch Foods, Inc., et al., Case No. 1:18-cv-05351; Samuels as Trustee In Bankruptcy for Central Grocers, Inc. et al. v. Norman W. Fries, Inc., d/b/a Claxton Poultry Farms, Inc. et al., Case No. 1:18-cv-05341; W. Lee Flowers & Company, Inc. v. Norman W. Fries, Inc., d/b/a Claxton Poultry Farms, Inc. et al., Case No. 1:18-cv-05345; BJ’s Wholesale Club, Inc. v. Tyson Foods, Inc., et al., Case No. 1:18-cv-05877;United Supermarkets LLC, et al. v. Tyson Foods Inc., et al., Case No. 1:18-cv-06693; Associated Wholesale Grocers, Inc. v. Koch Foods, Inc., et al., Case No. 1:18-cv-06316 (transferred from the U.S. District Court for the District of Kansas on September 17, 2018, following Defendants’ successful motion to ~~dismiss all complaints~~transfer); Shamrock Foods Company et al. v. Tyson Foods, Inc., et al., Case No. 1:18-cv-7284; Winn-Dixie Stores, Inc., et al. v. Koch Foods, Inc., et al., Case No. 1:18-cv-00245; Quirch Foods, LLC, f/k/a Quirch Foods Co. v. Koch Foods, Inc., et al., Case No. 1:18-cv-08511; Sherwood Food Distributors, L.L.C., et al. v. Tyson Foods, Inc., et al., Case No. 1:19-cv-00354, Hooters of America, LLC v. Tyson Foods, Inc., et al., Case No. 1:19-cv-00390; Darden Restaurants, Inc. v. Tyson Foods, Inc., et al., Case No. 1:19-cv-00530; Associated Grocers, Inc., et al. v. Norman W. Fries, Inc., d/b/a Claxton Poultry Farms, et al., Case No. 1:19-cv-00638; Checkers Drive-In Restaurants, Inc. v. Tyson Foods, Inc. et al., Case No. 1:19- cv-01283; Conagra Brands, Inc. et al. v. Tyson Foods, Inc. et al., Case No. 1:19-cv-02190; Giant Eagle, Inc. v. Norman W. Fries, Inc., d/b/a Claxton Poultry Farms et al., Case No. 1:19-cv-02758; Save Mart Supermarkets v. Tyson Foods, Inc., et al., Case No. 1:19-cv-02805; Walmart Inc., et al. v. Pilgrim’s Pride Corporation, et al., Case No. 1:19-cv-03915 (transferred from the U.S. District Court for the Western District of Arkansas on ~~January 27, 2017,~~June 11, 2019, following Plaintiffs’ unopposed motion to transfer); and Services Group of America, Inc. v. Tyson Food, Inc., et al., Case No. 1:19-cv-04194) were filed with the U.S. District Court for the Northern District of Illinois by individual direct purchaser entities naming PPC as a defendant, the allegations of which ~~are fully briefed and a ruling~~largely mirror those in the class action complaints. On June 20, 2019, an additional direct action complaint (Commonwealth of Puerto Rico v. Koch Foods, Inc., et al., Case No. 3:19-cv-01605) was filed with U.S. District Court for the District of Puerto Rico by the ~~court is pending.~~Commonwealth of Puerto Rico, the allegations of which also largely mirror those in the class action complaints. Substantial completion of document discovery for most defendants, including PPC, occurred on July 18, 2018. The Court’s scheduling order currently requires completion of fact discovery on March 13, 2020, class certification briefing and expert reports proceeding from April 13, 2020 to December 14, 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.

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

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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~~PPC 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 April 25, 2018. On November 19, 2018, the Court denied the plaintiff’s motion ~~is currently pending.~~for reconsideration and granted plaintiff leave to file a Second Amended Complaint. As of the date of this quarterly report, the plaintiff has not yet filed a Second Amended Complaint.

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. 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, or the Grower Litigation. 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 certain other defendants’ motions 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 has been scheduled for January 19, 2018.~~motion are pending. 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, (~~In re Pilgrim’s Pride Corporation, Case No. 08-45664 (DML) seeking an~~Fort Worth Division, or the Bankruptcy Court, enjoined plaintiffs from litigating the Grower Litigation complaint as pled against PPC because allegations in the consolidated complaint violate the confirmation order ~~enjoining~~relating to PPC’s bankruptcy proceedings in 2008 and 2009. Specifically, the ~~Grower Plaintiffs from pursuing~~2009 bankruptcy confirmation order bars any claims against PPC based on conduct occurring before December 28, 2009. On March 13, 2018, PPC notified the ~~class action against PPC. A hearing on this motion was held October 12, 2017. The~~trial court of the Bankruptcy Court’s ~~decision on~~injunction. To date, plaintiffs have not amended the ~~motion is currently pending.~~consolidated complaint to comply with the Bankruptcy Court’s injunction order or the 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.

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granted a stipulation consolidating the cases and making the first complaint (Sciabacucchi) the operative complaint. Also by stipulation, various defendants have been voluntarily dismissed from the case without prejudice. The remaining defendants are JBS S.A., JBS USA Holding, and directors Lovette, Nogueira de Souza, Tomazoni, and Molina. PPC also remains in the case as a nominal defendant. On March 15, 2019, the Chancery Court denied the non-PPC defendants’ motion to dismiss. As a result, the case is proceeding to discovery, with fact discovery scheduled to close in February 2020, expert discovery scheduled to close in May 2020, and, subject to the Chancery Court’s availability, trial commencing in November 2020.

The Company believes it has strong defenses in each of the above litigations and intends to contest them vigorously. ~~PPC~~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 ~~ligations, PPC~~litigations, the Company could be liable for damages, which could be material and could adversely affect its 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

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,~~30, 2018, 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:~~

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~~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~~

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

On ~~July 28, 2015, our~~October 31, 2018, the Company’s Board of Directors approved a ~~$150.0~~$200.0 million share repurchase authorization. ~~We plan~~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 ~~we repurchase our~~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 ~~our~~the Company’s management team. ~~We reserve~~The Company reserves 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 repurchasesThe Company accounted for the ~~thirteen weeks ended September 24, 2017.~~shares repurchased using the cost method. The Company currently plans to maintain these shares as treasury stock.

													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		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 ^(a)
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
April 1, 2019 through April 28, 2019							4,100	$	21.42	4,100	$	199,675,684
April 29, 2019 through June 2, 2019							39,357	25.41		39,357	198,675,697
June 3, 2019 through June 30, 2019							72,537	24.95		72,537	196,865,927
Total	—	$	—	—	$	72,913,018	115,994	$	24.98	115,994	$	196,865,927

(a) Reflects the remaining dollar value of shares that may yet be repurchased under our share repurchase authorization.

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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 ~~dated as~~due 2025 (included in Exhibit 4.5).
4.8			Form of ~~September 8, 2017 among Pilgrim’s~~Senior 5.875% Note due 2027 (included in Exhibit 4.6).
10.1			Pilgrim's Pride Corporation ~~JBS S.A. and Onix Investments UK Limited (incorporated by reference from Exhibit 10.2~~2019 Long Term Incentive Plan (previously filed as Annex A to the ~~Company’s current report~~Company's proxy statement on Form ~~8-K~~DEF 14A (No. 001-09273) filed on ~~September 11, 2017).~~
12			~~Ratio of Earnings to Fixed Charges for the thirteen weeks ended September 24, 2017~~April 5, 2019 and ~~September 25, 2016.~~incorporated herein by reference).***
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~~101			~~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~~The following financial information from our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in iXBRL (inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Stockholder's Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to Condensed Consolidated Financial Statements.



*		Filed herewith.



**		Furnished herewith.



***		Represents a management contract or compensation plan arrangement.

6362

Table of Contents

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~~July 31, 2019		/s/ Fabio Sandri
		Fabio Sandri
		Chief Financial Officer
		(Principal Financial Officer, Chief Accounting Officer and Duly Authorized Officer)

6463



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



	Thirty-Nine Weeks Ended September 24, 2017		Thirty-Nine Weeks Ended September 25, 2016
	(In thousands, except per share amount)
Net sales	$	8,031,311	$	7,833,406
Net income attributable to Pilgrim's Pride Corporation	572,063		363,735
Net income attributable to Pilgrim's Pride Corporation per common share - diluted	2.30		1.40



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	)



	September 24, 2017				December 25, 2016
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Cash equivalents:
Fixed income securities	$	155,216	$	155,216	$	140,480	$	140,480
Other	62		62		61		61



	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



	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
	Pension Benefits			Other Benefits		Pension Benefits			Other Benefits		Pension Benefits			Other Benefits		Pension Benefits			Other Benefits
	(In thousands)
Interest cost	$	1,392		$	13	$	1,396		$	12	$	4,178		$	38	$	4,189		$	38
Estimated return on plan assets	(1,314		)	—		(1,314		)	—		(3,940		)	—		(3,942		)	—
Amortization of net loss	233			—		165			—		699			—		494			—
Net costs	$	311		$	13	$	247		$	12	$	937		$	38	$	741		$	38