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Item 8. Financial Statements and Supplementary Data

2022-02-18 compared with 2021-02-11 · 683 added, 544 removed, 1605 unchanged (43% of the section changed)

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Pilgrim's Pride Corporation:

Opinion on the Consolidated Financial Statements

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Pilgrim's Pride Corporation and subsidiaries (the Company) as of December 26, 2021 and December 27, 2020, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the fiscal years in the three-year period ended December 26, 2021, and the related notes and financial statement schedule II (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 27, 2020 and December 29, 2019, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended December 27, 2020 in conformity with U.S.

We also have audited the Company’s internal control over financial reporting as of December 26, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 26, 2021 and December 27, 2020, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended December 26, 2021, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 27, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 10, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for expected credit losses on financial instruments as of December 30, 2019 due to the adoption of ASU 2016-13, Financial Instruments-Credit Losses .

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of December 31, 2018 due to the adoption of ASU 2016-02, Leases .

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 26, 2021 based on the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control Integrated Framework (2013).

The Company acquired Pilgrim's Food Masters during 2021, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 26, 2021, Pilgrim's Food Masters’ internal control over financial reporting associated with total assets of $1.3 billion and total revenues of $293.6 million included in the consolidated financial statements of the Company as of and for the fiscal year ended December 26, 2021.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Pilgrim's Food Masters.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit

preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

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The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of cost of inventory

As discussed in Note 1 to the consolidated financial statements, certain types of inventory are recorded at the lower of cost or net realizable value.

The Company had inventories of approximately $1.4 billion as of December 27, 2020.

Certain inventory is recorded at standard cost, which is set by management to reflect the actual costs incurred.

The production of inventory is a process with many steps.

When transferred to the next stage in the production process, the transfer is often done at a standard cost, where additional costs may be incurred.

As such, the cost of inventory at a particular step in the production process is often dependent on the costs recorded at a previous step in the production process.

We identified the evaluation of the cost of certain types of inventory as a critical audit matter.

Due to the frequent movement of products, the many steps that a product takes through the production cycle, and the variety of costs incurred at certain steps, especially challenging auditor judgement was required to evaluate the amounts recorded as the costs are incurred and transferred throughout steps in the production process.

Acquisition-date fair value of certain acquired intangible assets

As discussed in Notes 1 and 2 to the consolidated financial statements, the Company acquired the Specialty Meats and Ready Meals businesses of Kerry Group plc, collectively known as Pilgrim’s Food Masters, on September 24, 2021, which included customer relationships and trade names intangibles.

The acquisition-date fair values of the customer relationships and trade names intangibles were $250.9 million and $164.3 million, respectively, and were based on preliminary estimates which may change as additional information is obtained during the measurement period.

We identified the evaluation of the acquisition-date fair values of customer relationships and trade names intangibles in this acquisition as a critical audit matter.

A high degree of subjective auditor judgment was involved in evaluating certain assumptions used to estimate the fair values of these intangibles.

These assumptions included forecasted revenue growth rates, forecasted margins, discount rates, and royalty rates.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s inventory costing process, including controls over 1) actual costs incurred, 2) the monitoring of variances between actual costs incurred and standard costs, and 3) the accumulation and transfer of costs throughout steps in the production process.

For a sample of transactions, we assessed the actual costs incurred and the transfer of costs throughout steps in the production process by obtaining evidence over the actual costs incurred and tracing the standard cost transferred to the prior step in the production process.

For certain aggregate variances between actual costs incurred and standard costs, we assessed the reasonableness of standard cost by evaluating the nature and cause of the variance.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s preliminary fair value measurement process, including controls related to the development of the assumptions described above.

We evaluated the forecasted revenue growth rates and forecasted margins assumptions by comparing them to historical results of the acquired businesses and other comparable companies, considering current industry, macroeconomic, and market conditions.

We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating (1) the discount rates, which included comparing the Company’s discount rates to our independently developed discount rates using publicly available data for comparable entities, and (2) the royalty rates by assessing the royalty transactions used by management’s valuation specialist and considering a profit split analysis and qualitative factors.

We have served as the Company’s auditor since 2012.

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Restricted cash and cash equivalents 22,460 782

Trade accounts and other receivables, less allowance for doubtful accounts 741,992 741,281

Trade accounts and other receivables, less allowance for credit losses 1,013,437 741,992

Accounts receivable from related parties 1,345 1,084

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Accounts payable to related parties 22,317 9,650

Revenue contract liability 65,918 41,770

Revenue contract liabilities 22,321 65,918

Accrued expenses and other current liabilities 859,885 807,847

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Total current liabilities 2,390,823 1,937,580

Noncurrent operating lease liability, less current maturities 217,432 235,382

Noncurrent operating lease liabilities, less current maturities 271,366 217,432

Long-term debt, less current maturities 3,191,161 2,255,546

Noncurrent income taxes payable — 7,731

Deferred tax liabilities 369,185 339,831

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2020, respectively

Treasury stock, at cost, 17,672,508 shares and 11,546,945 shares at year-end 2020 and year-end 2019, respectively

Treasury stock, at cost, 17,672,508 shares at both year-end 2021 and year-end 2020

( 345,134 ) ( 345,134 )

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Selling, general and administrative expense 1,148,861 592,610 379,910

Administrative restructuring activities 123 ( 84 ) 4,765

Restructuring activities 5,802 123 ( 84 )

Operating income 211,164 245,463 690,568

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Interest income ( 6,056 ) ( 7,305 ) ( 14,277 )

Foreign currency transaction loss 760 6,917 17,160

Foreign currency transaction (gains) losses ( 9,382 ) 760 6,917

Gain on bargain purchase — 3,746 ( 56,880 )

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Net income 31,268 95,070 456,536

Net income (loss) attributable to noncontrolling interest 313 612 ( 1,141 )

Net income attributable to noncontrolling interest 268 313 612

Net income attributable to Pilgrim’s Pride Corporation $ 31,000 $ 94,757 $ 455,924

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Gains (losses) arising during the period ( 55,541 ) 83,890 54,662

Income tax effect — — 1,624

Derivative financial instruments designated as cash

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realized ( 1,437 ) ( 2,664 ) 383

Income tax effect ( 157 ) — —

Available-for-sale securities

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Defined benefit plans

Losses realized during the period ( 38,845 ) ( 2,161 ) ( 1,242 )

Gains (losses) realized during the period 35,122 ( 38,845 ) ( 2,161 )

Income tax effect ( 7,524 ) 7,121 1,016

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Comprehensive income 3,891 149,579 509,241

Comprehensive income (loss) attributable to

Comprehensive income attributable to

noncontrolling interests 268 313 612

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Comprehensive income:

Net income (loss) — — — — — 247,945 — ( 1,141 ) 246,804

Other comprehensive loss, net of tax benefit of $ 1,627

Net income — — — — — 455,924 — 612 456,536

Other comprehensive income, net of tax benefit of $ 723

— — — — — — 52,705 — 52,705

Capital distribution under Tax Sharing Agreement between JBS USA Food Company Holdings and Pilgrim's Pride Corporation (the "TSA") — — — — ( 524 ) — — — ( 524 )

Stock-based compensation plans:

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Common stock purchased under share repurchase program — — ( 116 ) ( 2,898 ) — — — — ( 2,898 )

Capital contribution to subsidiary by noncontrolling interest — — — — — — — 1,421 1,421

Balance at December 29, 2019 261,119 $ 2,611 ( 11,547 ) $ ( 234,892 ) $ 1,955,261 $ 877,812 $ ( 75,129 ) $ 10,397 $ 2,536,060

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— — — — — — 54,509 — 54,509

Capital distribution under Tax Sharing Agreement between JBS USA Holdings and Pilgrim's Pride Corporation (the “TSA”) — — — — ( 650 ) — — — ( 650 )

Stock-based compensation plans:

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Common stock purchased under share repurchase program — — ( 6,126 ) ( 110,242 ) — — — — ( 110,242 )

Dissolution of subsidiary — — — — — — — 876 876

Balance at December 27, 2020 261,185 $ 2,612 ( 17,673 ) $ ( 345,134 ) $ 1,954,334 $ 972,569 $ ( 20,620 ) $ 11,586 $ 2,575,347

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Net income — — — — — 31,000 — 268 31,268

Other comprehensive income, net of tax benefit of $ 6,907

Other comprehensive loss, net of tax expense of $ 8,197

— — — — — — ( 27,377 ) — ( 27,377 )

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Requisite service period recognition — — — — 11,657 — — — 11,657

Common stock purchased under share repurchase program — — ( 6,126 ) ( 110,242 ) — — — — ( 110,242 )

Dissolution of subsidiary — — — — — — — 876 876

Balance at December 26, 2021 261,347 $ 2,614 ( 17,673 ) $ ( 345,134 ) $ 1,964,028 $ 1,003,569 $ ( 47,997 ) $ 11,854 $ 2,588,934

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Depreciation and amortization 380,824 337,104 287,230

Deferred income tax expense 37,337 42,478 32,540

Gain on property disposals ( 13,766 ) ( 10,896 ) ( 1,889 )

Deferred income tax expense (benefit) ( 86,391 ) 37,337 42,478

Loss on early extinguishment of debt recognized as a component of interest expense 24,654 — —

Stock-based compensation activity 11,655 ( 276 ) 10,132

Loan cost amortization 5,095 4,848 4,821

Gain on bargain purchase 3,746 ( 56,880 ) —

Accretion of bond discount 1,533 982 982

Gain on property disposals ( 1,476 ) ( 13,766 ) ( 10,896 )

Amortization of bond premium ( 167 ) ( 668 ) ( 668 )

Loss (gain) on equity method investments ( 16 ) 291 ( 63 )

Stock-based compensation ( 276 ) 10,132 13,153

Gain on bargain purchase — 3,746 ( 56,880 )

Noncash loss on subsidiary dissolution — 115 —

Foreign currency transaction losses (gains) related to borrowing arrangements — — ( 4,970 )

Loss on early extinguishment of debt recognized as a component of interest expense — — 15,818

Asset impairment — — 3,504

Changes in operating assets and liabilities:

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Cash flows from investing activities:

Purchase of acquired businesses, net of cash acquired ( 966,766 ) ( 4,216 ) ( 384,694 )

Acquisitions of property, plant and equipment ( 381,671 ) ( 354,762 ) ( 348,120 )

Proceeds from property disposals 24,724 31,976 15,753

Purchase of acquired business, net of cash acquired ( 4,216 ) ( 384,694 ) —

Cash used in investing activities ( 1,323,713 ) ( 327,002 ) ( 717,061 )

Cash flows from financing activities:

Payments on revolving line of credit, long-term borrowings and finance lease obligations ( 430,988 ) ( 289,917 ) ( 1,117,009 )

Proceeds from revolving line of credit and long-term borrowings 2,951,707 404,522 259,466

Purchase of common stock under stock repurchase program ( 110,242 ) ( 2,898 ) ( 236 )

Payments on revolving line of credit, long-term borrowings and finance lease obligations ( 2,006,195 ) ( 430,988 ) ( 289,917 )

Payment of capitalized loan costs ( 22,293 ) — ( 652 )

Proceeds (distribution) from capital contribution under the TSA — ( 525 ) 5,558

Payment on early extinguishment of debt ( 21,258 ) — —

Capital contributions to subsidiary by noncontrolling stockholders — — 1,421

Cash used in financing activities ( 136,708 ) ( 34,526 ) ( 384,246 )

Distribution of capital under the TSA ( 650 ) — ( 525 )

Purchase of common stock under stock repurchase program — ( 110,242 ) ( 2,898 )

Cash provided by (used in) financing activities 901,311 ( 136,708 ) ( 34,526 )

Effect of exchange rate changes on cash and cash equivalents ( 2,342 ) 7,292 4,065

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Pilgrim’s products are sold to foodservice, retail and frozen entrée customers.

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Pilgrim’s fresh products consist of refrigerated (nonfrozen) whole chickens, whole cut-up chickens, selected chicken parts that are either marinated or non-marinated, primary pork cuts, added value pork and pork ribs.

The Company’s prepared 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, either marinated or non-marinated, processed sausages, bacon, slow-cooked, smoked meat and gammon joints.

The Company’s other products include ready-to-eat meals, multi-protein frozen foods, vegetarian foods and desserts, pre-packed meats, sandwich, deli counter meats, pulled pork balls, meat balls and coated foods.

As a vertically integrated company, we control every phase of the production of our products.

The Company’s prepared products include fully cooked, ready-to-cook and individually frozen chicken parts, strips, nuggets and patties, processed sausages, bacon, smoked meat, gammon joints, pre-packed meats, sandwich and deli counter meats and meat balls.

The Company’s other products include plant-based protein offerings, ready-to-eat meals, multi-protein frozen foods, vegetarian foods and desserts.

The Company also provides direct-to-consumer meals and hot food to-go solutions in the U.K.

and the Republic of Ireland.

We operate feed mills, hatcheries, processing plants and distribution centers in 14 U.S.

states, the U.K., Mexico, France, Puerto Rico and the Netherlands.

As of December 27, 2020, Pilgrim’s had approximately 56,400 employees.

As of December 27, 2020, Pilgrim’s had the capacity to process more than 44.9 million birds per week for a total of more than 13.2 billion pounds of live chicken annually.

Approximately 4,800 contract growers supply poultry for the Company’s operations.

As of December 27, 2020, Pilgrim’s had the capacity to process more than 45,000 pigs per week for a total of 436.7 million pounds of live pork annually.

Approximately 300 contract growers supply pork for the Company’s operations.

As of December 27, 2020, JBS S.A., through its indirect wholly-owned subsidiaries (together, “JBS”) beneficially owned 80.26 % of the Company’s outstanding common stock.

states, the U.K., Mexico, France, Puerto Rico, the Netherlands and the Republic of Ireland.

Consolidated Financial Statements

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Any reference we make to a particular year in the notes to these Consolidated Financial Statements applies to our fiscal year and not the calendar year.

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.

Moy Park was acquired by JBS S.A.

from an unrelated third party on September 30, 2015.

For the period from September 30, 2015 through September 7, 2017, the Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries combined with the accounts of Moy Park.

For the periods subsequent to September 8, 2017, the Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries, including Moy Park.

On September 24, 2021, the Company acquired 100.0 % of the equity of the specialty meats and ready meals businesses of Kerry Group plc, collectively known as Pilgrim’s Food Masters (“PFM”), for cash of £ 695.3 million, or $ 954.1 million, subject to customary working capital adjustments.

The acquired operations are included in the Company’s U.K.

and Europe reportable segment.

For the periods subsequent to September 24, 2021, the Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries, including PFM.

We eliminate all significant affiliate accounts and transactions upon consolidation.

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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.

Significant estimates made by the Company include the allowance for credit losses, reserves related to inventory obsolescence or valuation, useful lives of long-lived assets, goodwill, 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.

and Mexico operations and certain holding-company subsidiaries in Luxembourg, the U.K., Malta and the Republic of Ireland is the U.S.

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 is the euro.

The functional currency of the Company’s operations in France, the Netherlands and the Republic of Ireland is the euro.

For foreign currency-denominated entities other than the Company’s Mexico operations, translation from local currencies into U.S.

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Remeasurement is performed for non-monetary assets using the historical exchange rate in effect on the date of each asset’s acquisition.

Income and expense accounts are remeasured

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

using average exchange rates for the period.

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 Foreign currency transaction losses (gains) in the Consolidated Statements of Income.

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Revenue Recognition

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The vast majority of the Company’s revenue is derived from contracts which are based upon a customer ordering its products.

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Cash and Cash Equivalents

The Company considers highly liquid investments with a maturity of three months or less when acquired to be cash equivalents.

The Company considers highly liquid investments with an original maturity of three months or less when acquired to be cash equivalents.

The majority of the Company’s disbursement bank accounts are zero balance accounts where cash needs are funded as checks are presented for payment by the holder.

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Treasury Bills that qualify as cash equivalents, as required by the broker, to offset the obligation to return cash collateral.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table reconciles cash, cash equivalents and restricted cash as reported in the Consolidated Balance Sheets to the total of the same amounts shown in the Consolidated Statements of Cash Flows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 26, 2021 December 27, 2020

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Consolidated Statements of Cash Flows $ 450,121 $ 548,406

The Company’s current investments are all highly liquid investments with a maturity of three months or less when acquired and are, therefore, considered cash equivalents.

The Company’s current investments are all highly liquid investments with an original maturity of three months or less when acquired and are, therefore, considered cash equivalents.

The Company’s current investments are comprised of fixed income securities, primarily commercial paper and a money market fund.

These investments are classified as available-for-sale.

These securities are recorded at fair value, and unrealized holding gains and losses are recorded, net of tax, as a separate component of accumulated other comprehensive income.

These securities are recorded at fair value, and unrealized holding gains and losses are recorded, net of tax, as a separate component of accumulated other comprehensive loss.

Investments in fixed income securities with remaining maturities of less than one year and those identified by management at the time of purchase for funding operations in less than one year are classified as current assets.

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Management reviews several factors to determine whether a loss is other than temporary, such as the length of time a security is in an unrealized loss position, the extent to which fair value is less than amortized cost, the impact of changing interest rates in the short and long term, and the Company’s intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.

The Company determines the cost of each security sold and each amount reclassified out of accumulated other comprehensive income into earnings using the specific identification method.

The Company determines the cost of each security sold and each amount reclassified out of accumulated other comprehensive loss into earnings using the specific identification method.

Purchases and sales are recorded on a settlement date basis.

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The Company records accounts receivable when revenue is recognized.

We record an allowance for doubtful accounts, reducing our receivables balance to an amount we estimate is collectible from our customers.

Estimates used in determining the allowance for doubtful accounts are based on historical collection experience, current trends, aging of accounts receivable, and periodic credit evaluations of our customers’ financial condition.

We record an allowance for credit losses, reducing our receivables balance to an amount we estimate is collectible from our customers.

Estimates used in determining the allowance for credit losses are based on historical collection experience, current trends, aging of accounts receivable, and periodic credit evaluations of our customers’ financial condition.

We write 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 its accounts receivable.

Live chicken inventories are stated at the lower of cost or net realizable value and breeder hen inventories at the lower of cost, less accumulated amortization, or net realizable value.

Live chicken and pig inventories are stated at the lower of cost or net realizable value and breeder hen, breeder sow and boar inventories are stated at the lower of cost, less accumulated amortization, or net realizable value.

The costs associated with breeder hen inventories are accumulated up to the production stage and amortized over their productive lives using the unit-of-production method.

Finished poultry products, feed, eggs and other inventories are stated at the lower of average cost or net realizable value.

The costs associated with breeder sow inventories are accumulated up to the production stage and amortized on a straight-line basis over their productive lives to the estimated residual cull value.

Finished poultry products, finished pork products, feed, eggs and other inventories are stated at the lower of cost (average) or net realizable value.

Inventory typically transfers from one stage of production to another at a standard cost, where it accumulates additional cost directly incurred with the production of inventory, including overhead.

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We monitor and adjust standard costs throughout the year to ensure that standard costs reasonably reflect the actual average cost of the inventory produced.

Pork inventories are stated at the lower of cost or net realizable value.

Cost includes expenditures incurred in bringing each product to its present location and condition such as purchase price, transportation, labor, and appropriate proportion of manufacturing overhead based on actual production.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company records valuation adjustments for its inventory and for estimated obsolescence at or equal to the difference between the cost of inventory and the estimated market value based upon known conditions affecting inventory, including significantly aged products, discontinued product lines, or damaged or obsolete products.

The Company allocates meat costs between its various finished chicken products based on a by-product costing technique that reduces the cost of the whole bird by estimated yields and amounts to be recovered for certain by-product parts.

This primarily includes leg quarters, wings, tenders and offal, which are carried in inventory at the estimated recovery amounts, with the remaining amount being reflected as its breast meat cost.

Generally, the Company performs an evaluation of whether any lower of cost or net realizable value adjustments are required at the country level based on a number of factors, including:

The Company allocates meat costs between its various

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

finished pork products based on a by-product costing technique that allocates the cost of the whole pig into the primal cuts by estimated yields and amounts to be recovered for certain by-product parts.

This primarily includes legs, shoulders, bellies, offal and fifth quarter parts, which are carried in inventory at the estimated recoverable amounts, with the remaining amount being reflected as our loin meat cost.

The Company values its other prepared foods products, raw materials and packaging materials at the lower of weighted average cost and net realizable value.

Work in progress is valued at the latest production cost (raw materials, packaging), finished goods are valued at the lower of the latest actual monthly production cost (raw materials, packaging and direct labor) and attributable overheads and net realizable value, and engineering spares and consumables are valued at cost with an appropriate provision for obsolete engineering spares consistent with historical practice.

Generally, the Company performs an evaluation of whether any lower of cost or market adjustments are required at the country level based on a number of factors, including:

(1) pools of related inventory, (2) product continuation or discontinuation, (3) estimated market selling prices and (4) expected distribution channels.

If actual market conditions or other factors are less favorable than those projected by management, additional inventory adjustments may be required.

The Company also records valuation adjustments, when necessary, for estimated obsolescence at or equal to the difference between the cost of inventory and the estimated market value based upon known conditions affecting inventory obsolescence, including significantly aged products, discontinued product lines, or damaged or obsolete products.

The Company determines if an arrangement is a lease at inception.

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At the present time, the Company’s forecasts indicate that it can recover the carrying value of its assets held for use based on the projected undiscounted cash flows of the operations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company records impairment charges on long-lived assets held for sale when the carrying amount of those assets exceeds their fair value less appropriate selling costs.

Fair value is based on amounts documented in sales contracts or letters of intent accepted by the Company, amounts included in counteroffers initiated by the Company, or, in the absence of current contract negotiations, amounts determined using a sales comparison approach for real property and amounts determined using a cost approach for personal property.

Under the sales comparison approach, sales and asking prices of reasonably comparable

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

properties are considered to develop a range of unit prices within which the current real estate market is operating.

Under the sales comparison approach, sales and asking prices of reasonably comparable properties are considered to develop a range of unit prices within which the current real estate market is operating.

Under the cost approach, a current cost to replace the asset new is calculated and then the estimated replacement cost is reduced to reflect the applicable decline in value resulting from physical deterioration, functional obsolescence and economic obsolescence.

Appropriate selling costs includes reasonable broker’s commissions, costs to produce title documents, filing fees, legal expenses and the like.

We estimate appropriate closing costs as 4 % to 6 % of asset fair value.

This range of rates is considered reasonable for our assets held for sale based on historical experience.

Goodwill and Other Intangibles, net

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Identified intangible assets with definite lives are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

Management assessed if events or changes in circumstances indicated that the aggregate carrying amount of its identified intangible assets with definite lives might not be recoverable and determined that there were no impairment indicators during the year ended December 27, 2020 and year ended December 29, 2019.

Book Overdraft Balances

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Insurance expense for casualty claims and employee-related health care benefits are estimated using historical and current experience and actuarial estimates.

Stop-loss coverage is maintained with third-party insurers to limit the Company’s total exposure.

Stop-loss coverage is maintained with third-party insurers to limit the Company’s

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

total exposure.

Certain categories of claim liabilities are actuarially determined.

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However, actual expenses could differ from these estimates and could result in adjustments to be recognized.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Asset Retirement Obligations

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Valuation allowances have been established primarily for net operating loss carry forwards of certain foreign subsidiaries.

The Company deems its earnings from Mexico, Puerto Rico and the U.K.

as of December 27, 2020 to be permanently reinvested.

The Company deems its earnings from Mexico, Puerto Rico, the U.K., the Republic of Ireland, France, the Netherlands, Luxembourg and Malta as of December 26, 2021 to be permanently reinvested.

As such, U.S.

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Actual results that differ from our assumptions are accumulated and, if in excess of the lesser of 10% of the projected benefit obligation or the fair market value of plan assets, amortized over either (1) the estimated average future service period of active plan participants if the plan is active or (2) the estimated average future life expectancy of all plan participants if the plan is frozen.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Derivative Financial Instruments

The Company uses derivative financial instruments (e.g., futures, forwards options and swaps) for the purpose of mitigating exposure to changes in commodity prices, foreign currency exchange rates and interest rates.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• Commodity Price Risk - The Company utilizes various raw materials, which are all considered commodities, in its operations, including corn, soybean meal, soybean oil, wheat, natural gas, electricity and diesel fuel.

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The Company may enter into longer-term derivatives on particular commodities if deemed appropriate.

• Foreign Currency Risk - The Company has foreign operations and, therefore, has exposure to foreign exchange risk when the financial results of those operations are translated to US dollars.

• Foreign Currency Risk - The Company has foreign operations and, therefore, has exposure to foreign exchange risk when the financial results of those operations are translated to U.S.

The Company will occasionally purchase derivative financial instruments such as foreign currency forward contracts in an attempt to mitigate currency exchange rate exposure related to the net assets of its Mexico reportable segment that are denominated in Mexican pesos.

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While management believes these instruments help mitigate various market risks, they are not designated nor accounted for as hedges as a result of the extensive record keeping requirements.

Business Combination Accounting

Pilgrim’s allocates the consideration of an acquired business to its identifiable assets and liabilities based on estimated fair values.

The excess of the consideration over the amount allocated to the assets and liabilities, if any, is recorded to goodwill.

The Company uses all available information to estimate fair values.

Pilgrim’s uses various models to determine the value of assets acquired and liabilities assumed such as net realizable value to value inventory, cost method and market approach to value property, relief-from-royalty and multi-period excess earnings to value intangibles and discounted cash flow to value goodwill.

The Company typically engages third-party valuation specialists to assist in the fair value determination of tangible long-lived assets and intangible assets other than goodwill.

The fair value of acquired inventories is determined by extending physical counts of the inventories taken at or near the acquisition date to market pricing in effect for such inventories at or near the acquisition date.

The carrying values of acquired receivables and accounts payable have historically approximated their fair values as of the business combination date.

As necessary, Pilgrim’s may engage third-party specialists to assist in the estimation of fair value for certain liabilities.

The Company adjusts the preliminary acquisition accounting, as necessary,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

typically up to one year after the acquisition closing date for those items that existed at the acquisition date and were provisionally accounted for at that time, as it obtains more information regarding asset valuations and liabilities assumed.

The Company’s acquisition accounting methodology contains uncertainties because it requires management to make assumptions and to apply judgment to estimate the fair value of acquired assets and liabilities.

Management estimates the fair value of assets and liabilities based upon quoted market prices, the carrying value of the acquired assets and widely accepted valuation techniques, including discounted cash flows and market multiple analyses.

Unanticipated events or circumstances may occur which could affect the accuracy of the Company’s fair value estimates, including changes in assumptions regarding industry economic factors and business strategies.

If actual results are materially different than the assumptions used to determine fair value of the assets and liabilities acquired through a business combination, it is possible that adjustments to the carrying values of such assets and liabilities will have an impact on the Company’s net earnings.

Business Acquisitions” to the Consolidated Financial Statements for the acquisition-related information associated with significant acquisitions completed in the last three fiscal years.

Use of Estimates

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Measurement of Credit Losses on Financial Instruments , which, in an effort to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments, replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual right to receive cash.

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 adoption of this guidance did not have a material impact on our financial statements.

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Disclosure Framework—Changes to the 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 accumulated other comprehensive income expected to be recognized in the next fiscal year, adding narrative disclosure of the reasons for significant gains and losses related to changes in the defined benefit obligation, and clarifying the disclosures required for plans with projected and accumulated benefit obligations in excess of plan assets.

Changes include removing disclosures related to the amounts in accumulated other comprehensive loss expected to be recognized in the next fiscal year, adding narrative disclosure of the reasons for significant gains and losses related to changes in the defined benefit obligation, and clarifying the disclosures required for plans with projected and accumulated benefit obligations in excess of plan assets.

The adoption of this guidance did not have a material impact on our financial statements.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes , which is intended to improve consistency and simplify several areas of existing guidance.

ASU 2019-12 removes certain exceptions to the general principles related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The new guidance also clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

The adoption of this guidance did not have a material impact on our financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In January 2020, the FASB issued ASU 2020-01, Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 , which clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method.

This update also specifies that for the purpose of applying paragraph 815-10-15-1419(a) an entity should not consider whether, upon the settlement of the forward contract or exercise of the purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity method in Topic 323 or the fair value option in accordance with the financial instruments guidance in Topic 825.

The entity also would evaluate the remaining characteristics in paragraph 815-10-15-141 to determine the accounting for those forward contracts and purchased options.

The adoption of this guidance did not have a material impact on our financial statements.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements , which provided codification updates for technical corrections such as conforming amendments, clarifications to guidance, simplifications to wording or structure of guidance, and other minor improvements.

Additionally, changes to clarify the codification or correct unintended application of guidance that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities were also included in this update.

The adoption of this guidance did not have a material impact on our financial statements.

Recent Accounting Pronouncements Adopted in 2019

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The accounting standard update more closely aligns the accounting for employee and non-employee share based payments.

The accounting standards update is effective as of the beginning of our 2019 calendar year with early adoption

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accounting standards update is effective as of the beginning of our 2019 calendar year with early adoption permitted.

We adopted this standard as of December 31, 2018.

The adoption of this guidance did not have a material impact on our financial statements.

Recent Accounting Pronouncements Adopted in 2018

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , which provides for a single five-step model to be applied to all revenue contracts 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.

We adopted this as of January 1, 2018, the beginning of our 2018 fiscal year, using the cumulative effect adjustment, often referred to as modified retrospective approach.

Under this method, we did not restate the prior financial statements presented, and would record any adjustments in the opening balance sheet for January 2018.

There was no cumulative effect to be recorded as an adjustment to the opening balance of retained earnings.

The comparative information was not restated and continues to be presented under the accounting standards in effect for those periods.

Additional disclosures will include the amount by which each financial statement line item is affected in the current reporting period during 2018, as compared to the prior guidance.

We expect minimal impact from the adoption of the new standard to the financial statements on a go forward basis, except for expanded disclosures.

Revenue is currently recognized at destination and will continue to be recognized at point in time under the new guidance.

Additional information regarding revenue recognition is included in “Note 3.

Revenue Recognition.”

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recent Accounting Pronouncements Not Yet Adopted as of December 26, 2021

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes , which is intended to improve consistency and simplify several areas of existing guidance.

The new guidance also clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020, including interim periods within those fiscal years, with early adoption permitted.

We are currently evaluating the effect that the ASU 2019-12 will have on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

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The provisions of the new guidance will be effective beginning March 12, 2020, extending through December 31, 2022 with the option to apply the guidance at any point during that time period.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848) , which provides further clarification on the scope of Topic 848 so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions in Topic 848.

Once an entity elects an expedient or exception it must be applied to all eligible contracts or transactions.

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BUSINESS ACQUISITIONS

Pilgrim’s Food Masters

The acquisition was funded with the Company’s recent senior notes offering and borrowings under the credit facility.

The acquisition solidifies Pilgrim’s as a leading European food company.

The specialty meats business is a leading manufacturer of branded and private label meats, meat snacks and food-to-go products in the U.K.

and the Republic of Ireland.

The ready meals business is a leading ethnic chilled and frozen ready meals business in the U.K.

The acquired operations are included in the Company’s U.K.

and Europe reportable segment.

Transaction costs incurred in conjunction with the acquisition were approximately $ 18.4 million for the year ended December 26, 2021.

These costs were expensed as incurred and are reflected within Selling, general and administrative expense in the Company’s Consolidated Statements of Income.

The results of operations of the acquired business since September 24, 2021 are included in the Company’s Consolidated Statements of Income.

Net sales and net income generated by the acquired business during 2021 totaled $ 293.6 million and $ 2.3 million, respectively.

The assets acquired and liabilities assumed in the acquisition were measured at their estimated fair values as of September 24, 2021 as set forth below.

The excess of the purchase price over the preliminary fair value of the identified net assets was recorded as goodwill in the Company’s U.K.

and Europe reportable segment.

The factors contributing to the amount of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the acquisition as well as the assembled workforce.

Benefits include (1) complementary product offerings, (2) an enhanced footprint in the U.K.

and the Republic of Ireland and (3) an enhanced position in the fast-growing plant-based protein, direct-to-consumer and hot food-to-go markets.

The goodwill is not expected to be tax deductible for tax purposes.

The initial accounting for this business combination is incomplete for certain intangible assets and property, plant and equipment as additional information is necessary to conclude on assumptions used to establish the estimated fair values.

The amounts recognized in these financial statements for this business combination thus have been determined only provisionally.

We are currently completing fair value assessments with the assistance of third-party valuation specialists.

Any adjustments identified in the measurement period, which will not exceed one year from the acquisition date, will be accounted for prospectively.

The cumulative effect of these adjustments will be recorded in the period of change.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash and cash equivalents $ 113

Trade accounts and other receivables 7,387

Inventories 60,341

Prepaid expenses and other current assets 1,727

Operating lease assets 14,648

Property, plant and equipment 247,133

Identified intangible assets 415,157

Other assets 335

Total assets acquired 746,841

Accounts payable 4,615

Other current liabilities 407

Operating lease liabilities 18,996

Deferred tax liabilities 114,701

Other long-term liabilities 2,612

Total liabilities assumed 141,331

Identified net assets 605,510

Goodwill 348,550

Total consideration transferred $ 954,060

The provisional valuation of identified intangible assets of $ 415.2 million consisted of:

1) trade names with indefinite lives of $ 214.0 million;

2) trade names of $ 36.8 million with useful lives ranging from 15 years to 20 years;

and 3) customer and distributor relationships of $ 164.3 million with useful lives ranging from 15 years to 18 years.

The following unaudited pro forma information presents the combined financial results for the Company and PFM as if the acquisition had been completed at the beginning of 2020:

(In thousands, except per share amounts)

Net sales $ 15,442,724 $ 13,023,345

Net income (loss) attributable to Pilgrim's Pride Corporation 19,519 104,607

Net income (loss) attributable to Pilgrim's Pride Corporation

per common share - diluted $ 0.08 $ 0.43

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 include depreciation on the provisional values of acquired property, plant and equipment, amortization on the provisional values of acquired intangible assets, interest expense on debt issued to finance the acquisition, acquisition-related costs incurred by Pilgrim’s and its subsidiaries and the related income tax effect of these adjustments.

Pro forma adjustments exclude cost savings from any synergies resulting from the acquisition.

Randall Parker Foods Limited

On November 12, 2021, the Company acquired 100.0 % of the equity of Randall Parker Foods Limited and its subsidiaries (together “RPF”) from several sellers for £ 10.0 million, or $ 13.4 million.

The acquisition was funded with cash on hand.

Transaction costs were immaterial, these costs were expensed as incurred and are reflected within Selling, general and administrative expense in the Company’s Consolidated Statements of Income.

The acquired operations include lamb processing and retail packaging operations and will connect the Company’s existing lamb supply chain, bringing its farmers and customers closer together.

The RPF operations are included in the Company’s U.K.

and Europe reportable segment.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The estimated fair values of the assets acquired and liabilities assumed are preliminary and we are currently completing our fair value assessment with the assistance of third-party valuation specialists.

Any adjustments identified in the measurement period, which will not exceed one year from the acquisition date, will be accounting for prospectively.

Tulip Limited

On October 15, 2019, the Company acquired 100 % of the equity of Tulip Limited and its subsidiaries (together “Tulip”) from Danish Crown AmbA for £ 311.3 million, or $ 393.3 million, subject to customary working capital adjustments.

On October 15, 2019, the Company acquired 100.0 % of the equity of Tulip Limited and its subsidiaries (together “Tulip”) from Danish Crown AmbA for £ 311.3 million, or $ 393.3 million.

The acquisition was funded with cash on hand.

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These costs were expensed as incurred and are reflected within Selling, general and administrative expense in the Company’s Consolidated Statements of Income.

The results of operations of the acquired business since October 15, 2019 are included in the Company’s Consolidated Statements of Income.

Net sales and net income generated by the acquired business during 2020 totaled $ 1.4 billion and $ 9.6 million, respectively.

The assets acquired and liabilities assumed in the acquisition were measured at their fair values as of October 15, 2019 as set forth below.

The excess of the fair values of the net tangible assets and identifiable intangible assets over the purchase

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

price was recorded as gain on bargain purchase in the Company’s U.K.

The excess of the fair values of the net tangible assets and identifiable intangible assets over the purchase price was recorded as gain on bargain purchase in the Company’s U.K.

and Europe reportable segment.

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The Company valued PPL 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.

Under this model, the fair value of the customer relationships asset was determined by

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 PPL customers were estimated to grow at a rate of 2.0 % annually, but the Company also anticipates losing existing PPL customers at an attrition rate of 10.0 %.

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Goodwill and Intangible Assets” for additional information regarding the goodwill and intangible assets recognized by the Company in the acquisition.

The following unaudited pro forma information presents the combined financial results for the Company and PPL as if the acquisition had been completed at the beginning of 2018:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2020 2019 2018

(In thousands, except per share amounts)

Net sales $ 12,091,901 $ 12,462,566 $ 12,342,474

Net income attributable to Pilgrim's Pride Corporation 97,038 344,869 189,152

Net income attributable to Pilgrim's Pride Corporation

per common share - diluted 0.39 1.38 0.76

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 acquisitions 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 acquisitions.

FAMPAT/Plan Pro

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REVENUE RECOGNITION

The vast majority of the Company's revenue is derived from contracts which are based upon a customer ordering its products.

General” for more information regarding the Company’s policies for 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 nature, amount, timing and uncertainty of revenue and cash flows arising from revenue and cash flows with customers.

Determination of a contract requires evaluation and judgment along with the estimation of the total contract value and if any of the contract value is constrained.

Due to the nature of our business, there is minimal variable consideration, as the contract is established at the acceptance of the order from the customer.

When applicable, variable consideration is estimated at contract inception and updated on a regular basis until the contract is completed.

Allocating the transaction price to a specific performance obligation based upon the relative standalone selling prices includes estimating the standalone selling prices including discounts and variable consideration.

Disaggregated Revenue

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 26, 2021

Domestic Export Net Sales

Fresh Prepared Export Other Total

(In thousands)

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Mexico 1,515,453 128,208 — 85,856 1,729,517

Net sales $ 11,488,009 $ 603,892 $ 12,091,901

Total net sales 9,931,231 3,241,002 917,959 687,266 14,777,458

Year Ended December 27, 2020

Domestic Export Net Sales

Fresh Prepared Export Other Total

(In thousands)

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Mexico 1,210,952 66,572 — 44,068 1,321,592

Net sales $ 10,848,213 $ 561,006 $ 11,409,219

Shipping and Handling Costs

General” for more information regarding shipping and handling costs.

Total 8,942,589 2,018,621 603,892 526,799 12,091,901

Contract Costs

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company can incur incremental costs to obtain or fulfill a contract such as broker expenses that are not expected to be recovered.

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therefore, the costs are expensed as incurred.

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.

The Company excludes all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer (for example, sales, use, value added and some excise taxes) from the transaction price.

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Balance, end of year $ 22,321 $ 65,918

Accounts Receivable

General” for more information regarding the Company’s policies for accounts receivable.

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.

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The Company is also party to a limited number of finance lease agreements in the U.S.

The Company’s leases have remaining lease terms of one year to 15 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 Company’s leases have remaining lease terms of less than one year to 14 years, some of which may include options to extend the lease for up to ten years and some of which may include options to terminate the lease within one year .

The exercise of options to extend lease terms is at the Company’s sole discretion.

Certain leases also include options to purchase the leased property.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Certain lease agreements include rental payment increases over the lease term that can be either fixed or variable.

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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 Consolidated Statements of Income.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended

December 26, 2021 December 27, 2020

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Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 91,254 $ 100,473

Operating cash flow from finance leases 99 32

Financing cash flows from finance leases 486 167

Operating cash flows - operating leases $ 77,113 $ 91,254

Operating cash flows - finance leases 124 99

Financing cash flows - finance leases 76 486

Operating lease assets obtained in exchange for operating lease liabilities $ 144,028 $ 60,776

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Present value of lease liabilities $ 354,313 $ 4,548

Lease liabilities as of December 27, 2020 are included in our Consolidated Balance Sheets as follows (in thousands):

Operating Leases Finance Leases (a)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Lease liabilities are included in our Consolidated Balance Sheets as follows (in thousands):

December 26, 2021 December 27, 2020

Operating Leases Finance Leases Operating Leases Finance Leases

Accrued expenses and other current liabilities $ 82,947 $ — $ 71,592 $ —

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Total lease liabilities $ 354,313 $ 4,548 $ 289,024 $ 1,664

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(a) Additional information regarding finance lease assets is included in “Note 10.

Property, Plant and Equipment.”

As of December 27, 2020, the Company had $ 1.7 million operating leases and no finance leases that have not yet commenced.

DERIVATIVE FINANCIAL INSTRUMENTS

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The Company may purchase longer-term derivative financial instruments on particular commodities if deemed appropriate.

The Company has operations in Mexico, the U.K., France and the Netherlands.

The Company has operations in Mexico, the U.K., France, the Netherlands and the Republic of Ireland.

Therefore, it has exposure to translational foreign exchange risk when the financial results of those operations are remeasured in U.S.

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

The Company has not designated certain derivative financial instruments that it has 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.

Undesignated contracts may include contracts not designated as a hedge or for which the normal purchase normal sales (“NPNS”) exception was not elected, contracts that do not qualify for hedge accounting and derivatives that do not or no longer qualify for the NPNS scope exception.

The fair value of each of these derivatives is recognized in the Consolidated Balance Sheets within Prepaid expenses and other current assets or Accrued expenses and other current liabilities .

Changes in fair value of each derivative are recognized immediately in the Consolidated Statements of Income within Net sales , C ost of sales , Selling, general and administrative expense , or Foreign currency transaction losses (gains) depending on the risk the derivative is intended to mitigate.

While management believes these instruments help mitigate various market risks, they are not designated and accounted for as hedges as a result of the extensive record keeping requirements.

The Company has elected not to apply the NPNS exemption to a fixed-price product sales contract with a certain customer in order to mitigate various risk exposures and to try to achieve an accounting result that aligns the accounting for the derivative with the economics achieved through the use of the derivative.

Transactions originating from this contact are accounted for as undesignated derivatives and recognized at fair value.

The Company does not apply hedge accounting treatment to certain derivative financial instruments that it has purchased to mitigate commodity purchase exposures in the U.S.

and Mexico or foreign currency transaction exposures on our Mexico operations.

Therefore, the Company recognized changes in the fair value of these derivative financial instruments immediately in earnings.

Gains or losses related to the commodity derivative financial instruments are included in the line item Cost of sales in the Consolidated Statements of Income.

Gains or losses related to the foreign currency derivative financial instruments are included in the line item Foreign currency transaction loss (gain) and Cost of sales in the Consolidated Statements of Income.

The Company has designated certain derivative financial instruments related to its U.K.

and Europe reportable segment that it has purchased to mitigate foreign currency transaction exposures as cash flow hedges.

Before the settlement date of the financial derivative instruments, the Company recognizes changes in the fair value of the effective portion of the cash flow hedge into accumulated other comprehensive income (“AOCI”) while it 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 Net sales and Cost of sales in the Consolidated Statements of Income.

The Company has designated a derivative financial instrument related to its U.S.

reportable segment that it has purchased to mitigate variable interest rate exposures as a cash flow hedge.

Gains or losses related to the foreign currency derivative financial instruments are included in the line item Foreign currency transaction losses (gains) and Cost of sales in the Consolidated Statements of Income.

The Company does apply hedge accounting to certain derivative financial instruments related to its U.K.

and Europe reportable segment that it has purchased to mitigate foreign currency transaction exposures.

Before the settlement date of the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

financial derivative instruments, the Company recognizes changes in the fair value of the cash flow hedge into accumulated other comprehensive loss (“AOCL”).

When the derivative financial instruments are settled, the amount in AOCL is then reclassified to earnings.

Gains or losses related to these derivative financial instruments are included in the line items Net sales and Cost of sales in the Consolidated Statements of Income.

The Company does apply hedge accounting to a derivative financial instrument related to its U.S.

reportable segment that it has purchased to mitigate variable interest rate exposures.

The interest rate swap has monthly settlement dates.

Upon each settlement date, the Company recognizes changes in the fair value of the effective portion of the cash flow hedge into AOCI, while it recognizes changes in the ineffective portion immediately in earnings.

Upon settlement of the effective portion, the amount in AOCI is then reclassified to earnings.

Upon each settlement date, the Company recognizes changes in the fair value of the cash flow hedge into AOCL.

Upon settlement of the derivative instrument, the amount in AOCL is then reclassified to earnings.

Gains or losses related to the interest rate swap derivative financial instrument are included in the line item Interest expense, net of capitalized interest in the Consolidated Statements of Income.

The Company recognized $ 40.7 million in net gains during 2020 and $ 30.1 million and $ 27.1 million in net losses related to changes in the fair value of its derivative financial instruments during 2019 and 2018, respectively.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 26, 2021 December 27, 2020

5 unchanged sentences

Interest rate swap derivative liabilities ( 98 ) ( 640 )

Sales contract derivative liabilities ( 12,691 ) —

Cash collateral posted with brokers (a)

4 unchanged sentences

Corn December 2022 December 2021

Soybean meal December 2021 July 2020

Soybean meal December 2022 December 2021

(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.

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

Gain (Loss) Recognized in Other Comprehensive Loss on Derivative

December 27, 2020 December 29, 2019 December 30, 2018

Foreign currency derivatives $ 4,514 $ ( 2,052 ) $ 829

Interest rate swap derivatives ( 850 ) — —

The following table presents the gains and losses of each derivative instrument held by the Company not designated or qualifying as hedging instruments:

Losses (Gains) by Type of Contract (a)

December 26, 2021 December 27, 2020 December 29, 2019 Affected Line Item in the Consolidated Statements of Income

Foreign currency derivatives gain (loss) $ 12,806 $ ( 6,637 ) $ ( 17,839 ) Foreign currency transaction (gains) losses

Commodity derivative gain (loss) 50,404 47,554 ( 12,306 ) Cost of sales

Sales contract derivative loss ( 12,691 ) ( 209 ) — Net sales

Total $ 50,519 $ 40,708 $ ( 30,145 )

Gain (Loss) Reclassified from AOCI into Income

(a) Amounts in parentheses represent income (expenses) related to results of operations.

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

Gain (Loss) Recognized in Other Comprehensive Income on Derivative

December 26, 2021 December 27, 2020 December 29, 2019

(In thousands)

Foreign currency derivatives $ 471 $ 4,514 $ ( 2,052 )

1 unchanged sentence

Total $ 383 $ 3,664 $ ( 2,052 )

As of December 27, 2020, the pre-tax deferred net gains on derivatives recorded in AOCI that are expected to be reclassified to the Consolidated Statements of Income during the next twelve months are $ 0.7 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 to earnings.

At December 27, 2020, the pre-tax deferred net losses on interest rate swap derivatives recorded in AOCI that are expected to be reclassified to the Consolidated Statements of Income during the next twelve months are $ 0.5 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 26, 2021 December 27, 2020

Net sales (a)

Cost of sales (b)

Interest expense, net of capitalized interest (b)

Net sales (a)

Cost of sales (b)

Interest expense, net of capitalized interest (b)

(In thousands)

Total amounts of income and expense line items presented in the Consolidated Statements of Income in which the effects of cash flow hedges are recorded $ 14,777,458 $ 13,411,631 $ 145,792 $ 12,091,901 $ 11,253,705 $ 126,118

Impact from cash flow hedging instruments:

Interest rates swaps — — 631 — — 209

Foreign currency contracts 1,372 ( 55 ) — ( 2,143 ) — —

(a) Amounts in parentheses represent income (expenses) related to net sales.

(b) Amounts in parentheses represent (income) expenses related to cost of sales and interest expense.

As of December 26, 2021, the pre-tax deferred net losses on derivatives recorded in AOCL that are expected to be reclassified to profit or loss during the next twelve months are $ 0.9 million.

At December 26, 2021, the pre-tax deferred net losses on interest rate swap derivatives recorded in AOCL that are expected to be reclassified to profit or loss during the next twelve months are $ 0.1 million.

This expectation is based on the anticipated settlements on the hedged interest rate that will occur over the next twelve months, at which time the Company will recognize the deferred losses to earnings.

TRADE ACCOUNTS AND OTHER RECEIVABLES

Trade accounts and other receivables (including accounts receivable from related parties), less allowance for doubtful accounts, consisted of the following:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Trade accounts and other receivables (including accounts receivable from related parties), less allowance for credit losses, consisted of the following:

December 26, 2021 December 27, 2020

4 unchanged sentences

Receivables, gross 1,023,110 749,165

Allowance for doubtful accounts ( 7,173 ) ( 7,467 )

Allowance for credit losses ( 9,673 ) ( 7,173 )

Receivables, net $ 1,013,437 $ 741,992

3 unchanged sentences

Related Party Transactions.”

Changes in the allowance for doubtful accounts were as follows:

(In thousands)

Balance, beginning of year $ ( 7,467 )

Provision charged to operating results ( 94 )

Account write-offs and recoveries 574

Effect of exchange rate ( 186 )

Balance, end of year $ ( 7,173 )

Inventories consisted of the following:

6 unchanged sentences

Total inventories $ 1,575,658 $ 1,358,793

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 Company recognizes investments in available-for-sale securities as cash equivalents, current investments or long-term investments depending upon each security’s length to maturity.

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

The following table summarizes our investments in available-for-sale securities accounted for as cash equivalents:

2 unchanged sentences

Fixed income securities $ 48,851 $ 48,851 $ 178,677 $ 178,677

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 recognized during 2020 and 2019 related to the Company’s available-for-sale securities totaled $ 5.8 million and $ 11.5 million, respectively, while gross realized losses were immaterial.

Proceeds received from the sale or maturity of available-for-sale securities investments during 2020 and 2019 are disclosed in the Consolidated Statements of Cash Flows.

Net unrealized holding gains and losses on the Company’s available-for-sale securities recognized during 2020 and 2019 that have been included in accumulated other comprehensive loss and the net amount of gains

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and losses reclassified out of accumulated other comprehensive loss to earnings during 2020 and 2019 are disclosed in “Note 14.

Gross realized gains during 2021 and 2020 related to the Company’s available-for-sale securities totaled $ 5.4 million and $ 5.8 million, respectively, while gross realized losses were immaterial.

Proceeds received from the sale or maturity of available-for-sale securities investments are disclosed in the Consolidated Statements of Cash Flows.

Net unrealized holding gains and losses on the Company’s available-for-sale securities recognized during 2021 and 2020 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 2021 and 2020 are disclosed in “Note 14.

Stockholders’ Equity.”

17 unchanged sentences

Carrying amount:

Trade names $ 78,343 $ — $ — $ — $ 78,343

Customer relationships 292,278 — — 4,784 297,062

Non-compete agreements 320 — — — 320

Trade names not subject to

amortization $ 405,240 $ 214,047 $ — $ ( 9,574 ) $ 609,713

Trade names subject to

amortization 78,343 36,825 — ( 900 ) 114,268

Customer relationships 297,062 164,285 — ( 5,888 ) 455,459

Non-compete agreements 320 — — — 320

Accumulated amortization:

3 unchanged sentences

Total $ 589,913 $ 415,157 $ ( 26,372 ) $ ( 15,455 ) $ 963,243

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 29, 2019 Additions Amortization Currency Translation December 27, 2020

1 unchanged sentence

Carrying amount:

Trade names $ 78,343 $ — $ — $ — $ 78,343

Customer relationships 247,706 40,418 — 4,154 292,278

Non-compete agreements 320 — — — 320

Trade names not subject to

amortization $ 391,431 $ — $ — $ 13,809 $ 405,240

Trade names subject to

amortization 78,343 — — — 78,343

Customer relationships 292,278 — — 4,784 297,062

Non-compete agreements 320 — — — 320

Accumulated amortization:

3 unchanged sentences

Total $ 596,053 $ — $ ( 22,715 ) $ 16,575 $ 589,913

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Additions shown in above table for 2019 are comprised of a customer relationships intangible asset recorded as part of the PPL acquisition.

The Company valued this asset using the income approach resulting in a fair value of $ 40.4 million.

The intangible asset has a useful life of eleven years .

For additional information regarding the initial valuation and assumptions used, refer to “Note 2.

For additional information regarding the additions in above tables, refer to “Note 2.

Business Acquisitions.”

1 unchanged sentence

Customer relationships 3 - 18 years

Trade names 20 years

Trade names subject to amortization 15 - 20 years

Non-compete agreements 3 years

1 unchanged sentence

The Company expects to recognize amortization expense associated with identified intangible assets of $ 35.4 million in 2022, $ 34.3 million in 2023, $ 33.3 million in 2024 and $ 33.3 million in 2025, and $ 31.3 million in 2026.

As of December 27, 2020, the Company assessed qualitative factors to determine if it was necessary to perform either the two-step quantitative impairment test related to the carrying amount of its goodwill or quantitative impairment tests related to the carrying amounts of its identified intangible assets not subject to amortization.

Based on these assessments, the Company determined that it was not necessary to perform either the two-step quantitative impairment test related to the carrying amount of its goodwill nor the quantitative impairment tests related to the carrying amounts of its identified intangible assets not subject to amortization at that date.

As of December 26, 2021, the Company assessed qualitative factors to determine if it was necessary to perform quantitative impairment tests related to the carrying amounts of its goodwill or its identified intangible assets not subject to amortization.

Based on these assessments, the Company determined that it was not necessary to perform quantitative impairment tests related to the carrying amount of its goodwill nor its identified intangible assets not subject to amortization at that date.

As of December 26, 2021, 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.

13 unchanged sentences

PP&E, net $ 2,917,806 $ 2,657,491

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recognized depreciation expense of $ 354.4 million, $ 314.4 million and $ 264.3 million during 2021, 2020 and 2019, respectively.

3 unchanged sentences

During 2021, the Company sold certain PP&E for $ 24.7 million and recognized a gain of $ 1.5 million.

PP&E sold in 2020 consisted of broiler farms in Mexico, vacant land in Alabama and other miscellaneous equipment.

PP&E sold in 2021 consisted of a broiler farm in Mexico, two processing plants within the U.K.

and other miscellaneous equipment.

During 2020, the Company sold certain PP&E for $ 32.0 million and recognized a gain of $ 13.8 million.

PP&E sold in 2019 included broiler farms in Mexico, a breeder farm in Texas, vacant land in Minnesota and miscellaneous equipment.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PP&E sold in 2020 consisted of broiler farms in Mexico, vacant land in Alabama and other miscellaneous equipment.

The Company has closed or idled various facilities in the U.S.

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.

The Board of Directors has not 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.

1 unchanged sentence

As of December 26, 2021, the carrying amount of these idled assets was $ 40.2 million based on depreciable value of $ 205.5 million and accumulated depreciation of $ 165.3 million.

During 2021, the Company recognized an impairment loss of $ 3.8 million incurred as a result of a tornado in Mayfield, Kentucky in December 2021 that significantly damaged two hatcheries and a feed mill.

As of December 26, 2021, the Company assessed if events or changes in circumstances indicated that the aggregate carrying amount of its property, plant and equipment held for use might not be recoverable.

14 unchanged sentences

Compensation and benefits 224,368 189,767

Other accrued expenses (d)

150,074 172,510

DOJ agreement 110,524 —

Nonrecurring legal settlement 75,000 —

Litigation settlements 172,440 75,000

Current maturities of operating lease liabilities (c)

2 unchanged sentences

Insurance and self-insured claims 64,697 61,212

Accrued sales rebates (d)

44,708 20,378

Accrued sales rebates 35,613 44,708

Interest and debt-related fees 31,810 29,559

Derivative liabilities (e)

Derivative liabilities (d)

DOJ agreement — 110,524

Other accrued expenses 147,981 150,074

Total accrued expenses and other current liabilities 859,885 807,847

4 unchanged sentences

Revenue Recognition.”

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(d) Accrued sales rebates contains a $ 20.4 million reclassification previously presented in Other accrued expenses on our annual Form 10-K report for the year ended December 29, 2019 to conform to Current liabilities presented as of December 27, 2020.

(e) Additional information regarding derivative liabilities is included in “Note 5.

(d) Additional information regarding derivative liabilities is included in “Note 5.

Derivative Financial Instruments.”

23 unchanged sentences

State tax rate, net ( 4.5 ) 6.7 3.0

One-time transition tax — — 7.9

Global intangible low-taxed income — ( 7.3 ) 1.5

DOJ fine 14.3 — —

DOJ agreement — 14.3 —

Intercompany financing ( 14.1 ) ( 9.5 ) ( 1.6 )

9 unchanged sentences

Total 66.2 % 41.2 % 26.1 %

Included in the change in reserve for unrecognized tax benefits is an increase of 2.6 % in the effective tax rate related to a specific transaction undertaken by a Mexico subsidiary of the Company during tax year 2011.

Included in the change in reserve for unrecognized tax benefits is an increase of 7.0 % in the effective tax rate related to interest deductions in the U.K.

for tax years 2017 through 2021.

The amount was recorded during the year ended December 26, 2021.

Included in the change in reserve for unrecognized tax benefits is an increase of 2.6 % in the effective tax rate related to a

specific transaction undertaken by a Mexico subsidiary of the Company during tax year 2011.

The amount was recorded and paid during the year ended December 29, 2019.

6 unchanged sentences

Insurance claims and losses 33,416 32,679

Business combinations 54,257 47,450

Incentive compensation 11,444 16,204

6 unchanged sentences

Credit carry forwards 19,026 15,223

Allowance for doubtful accounts 4,005 5,429

Allowance for credit losses 6,996 4,005

Accrued liabilities 103,482 94,769

11 unchanged sentences

As of December 26, 2021, the Company believes it has sufficient positive evidence to conclude that realization of its federal, state and foreign net deferred tax assets are more likely than not to be realized.

As of December 27, 2020, the Company’s valuation allowance is $ 32.9 million, of which $ 12.4 million relates to Moy Park operations, $ 7.7 million relates to PPL operations, $ 11.8 million relates to U.S.

As of December 26, 2021, the Company’s valuation allowance is $ 24.3 million, of which $ 7.0 million relates to Moy Park operations, $ 4.5 million relates to PPL operations, $ 0.1 million relates to Mexico operations, $ 11.8 million relates to U.S.

foreign tax credits and $ 0.9 million relates to state net operating losses.

5 unchanged sentences

For the year ended December 26, 2021 and year ended December 27, 2020, there is a tax effect of $( 8.2 ) million and $ 6.9 million, respectively, reflected in other comprehensive income.

For the year ended December 27, 2020, there are immaterial tax effects reflected in income tax expense due to excess tax benefits and shortfalls related to stock-based compensation.

For the year ended December 29, 2019, there are immaterial tax effects reflected in income tax expense due to excess tax benefits and shortfalls related to stock-based compensation.

General” for additional information.

For the years ended December 26, 2021 and December 27, 2020, there are immaterial tax effects reflected in income tax expense due to excess tax benefits and shortfalls related to stock-based compensation.

Business and Summary of Significant Accounting Policies” for additional information.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

2 unchanged sentences

Unrecognized tax benefits, beginning of year $ 13,271 $ 12,776

Increase as a result of tax positions taken during the current year 6,472 —

Increase as a result of tax positions taken during prior years 1,156 731

7 unchanged sentences

The Company operates in the U.S.

(including multiple state jurisdictions), Puerto Rico and several foreign locations including Mexico and the U.K.

(including multiple state jurisdictions), Puerto Rico and several foreign locations including Mexico, the U.K.

and the Republic of Ireland.

With few exceptions, the Company is no longer subject to examinations by taxing authorities for years prior to 2017 in U.S.

1 unchanged sentence

As of July 27, 2020, JBS owns in excess of 80% of the outstanding common stock of Pilgrim’s.

JBS has a federal tax election to file a consolidated tax return with subsidiaries in which it holds an ownership of at least 80%.

The Company is currently analyzing the related impacts to our federal and state tax return filings.

JBS USA Holdings has a federal tax election to file a consolidated tax return with subsidiaries in which it holds an ownership of at least 80%.

The Company has a tax sharing agreement with JBS USA Holdings effective for tax years beginning 2010.

The net tax payable for year 2020 of $ 0.6 million was accrued in 2020 as a capital contribution and an account payable to a related party in our Consolidated Balance Sheet.

The tax sharing agreement was updated during 2020 to consider the impact of Pilgrims’s joining the JBS consolidated tax return.

The net tax payable for year 2021 of $ 2.0 million was accrued in 2021 as a capital distribution and an account payable to a related party in our Consolidated Balance Sheet.

The tax sharing agreement was updated during 2020 to consider the impact of Pilgrim’s joining the JBS consolidated tax return.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Maturity December 26, 2021 December 27, 2020

(In thousands)

Senior notes payable, net of premium and discount at 5.75 %

Senior notes payable, net of discount of 3.50 %

2032 $ 900,000 $ —

Senior notes payable, net of discount of 4.25 %

2031 990,691 —

Senior notes payable, net of discount at 5.875 %

2027 845,866 845,149

Senior notes payable, net of premium and discount at 5.75 %

2025 — 1,001,693

Fifth Amended and Restated U.S.

Credit Facility (defined below)

2 unchanged sentences

Revolving note payable at 3.50 %

Fourth Amended and Restated U.S.

Credit Facility (defined below)

Term note payable at 1.33 %

2023 — 450,000

Revolving note payable at 3.50 %

Moy Park Bank of Ireland Revolving Facility with notes payable at

3 unchanged sentences

Secured loans with payables at weighted average of 3.34 %

Various 38 948

Finance lease obligations Various 4,548 1,664

5 unchanged sentences

financing costs $ 3,191,161 $ 2,255,546

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On March 11, 2015, the Company completed a sale of $ 500.0 million aggregate principal amount of its 5.75 % senior notes due 2025.

8 unchanged sentences

The 2015 Indenture provides, among other things, that the Senior Notes due 2025 bear interest at a rate of 5.75 % per annum from the date of issuance until maturity, payable semiannually in cash in arrears, beginning on September 15, 2015 for the Senior Notes due 2025 that were issued in March 2015 and beginning on March 15, 2018 for the Senior Notes due 2025 that were issued in September 2017 and March 2018.

On April 8, 2021, the Company announced the early tender results in connection with its previously announced offer to purchase for cash any and all of the $ 1.0 billion aggregate principal amount of the Senior Notes due 2025.

Outstanding principal totaling $ 896.1 million, representing 89.6 % of the Senior Notes due 2025, was validly tendered.

On April 14, 2021, the Company redeemed $ 103.9 million, which represented the remaining outstanding principal balance of the Senior Notes due 2025.

Tender and call premium of $ 21.3 million, capitalized financing costs of $ 4.6 million, remaining original issue premium of $ 2.6 million from the add-on offering in September 2017 and remaining original issue discount of $ 1.1 million from the add-on offering in March 2018 were recognized in earnings during the second quarter of 2021.

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 issuance price of this

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

2 unchanged sentences

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 semiannually in cash in arrears, beginning on March 30, 2018 for the Senior Notes due 2027 that were issued in September 2017 and beginning on March 15, 2018 for the Senior Notes due 2027 that were issued in March 2018.

The Senior Notes due 2025 and the Senior Notes due 2027 are each guaranteed on a senior unsecured basis by the Company’s guarantor subsidiaries.

On April 8, 2021, the Company completed a sale of $ 1.0 billion aggregate principal amount of its 4.25 % sustainability-linked senior notes due 2031 (“Senior Notes due 2031”).

The Company used the net proceeds, together with cash on hand, to redeem the Senior Notes due 2025.

The issuance price of this offering was 98.994 %, which created gross proceeds of $ 989.9 million.

The $ 10.1 million discount will be amortized over the remaining life of the Senior Notes due 2031.

Each issuance of the Senior Notes due 2031 is treated as a single class for all purposes under the April 2021 Indenture (defined below) and have the same terms.

The Senior Notes due 2031 are governed by, and were issued pursuant to, an indenture dated as of April 8, 2021 by and among the Company, its guarantor subsidiaries and Regions Bank, as trustee (the “April 2021 Indenture”).

The April 2021 Indenture provides, among other things, that the Senior Notes due 2031 bear interest at a rate of 4.25 % per annum payable semi-annually on April 15 and October 15 of each year, beginning on October 15, 2021.

From and including October 15, 2026, the interest rate payable on the notes shall be increased to 4.50 % per annum unless the Company has notified the trustee at least 30 days prior to October 15, 2026 that in respect of the year ended December 31, 2025, (1) the Company’s greenhouse gas emissions intensity reduction target of 17.679 % by December 31, 2025 from a 2019 baseline (the “Sustainability Performance Target”) has been satisfied and (2) the satisfaction of the Sustainability Performance Target has been confirmed by a qualified provider of third-party assurance or attestation services appointed by the Company to review the Company’s statement of the greenhouse gas emissions intensity in accordance with its customary procedures.

On September 2, 2021, the Company completed a sale of $ 900.0 million in aggregate principal amount of its 3.50 % senior notes due 2032 (“Senior Notes due 2032”).

The Company used the proceeds, together with borrowings under the delayed draw term loan under its U.S.

Credit Facility, to finance the Kerry Meats and Meals Acquisition and to pay related fees and expenses.

Each issuance of the Senior Notes due 2032 is treated as a single class for all purposes under the September 2021 Indenture (defined below) and have the same terms.

The Senior Notes due 2032 are governed by, and were issued pursuant to, an indenture dated as of September 2, 2021 by and among the Company, its guarantor subsidiaries and Regions Bank, as trustee (the “September 2021 Indenture”).

The September 2021 Indenture provides, among other things, that the Senior Notes due 2032 bear interest at a rate of 3.50 % per annum payable semi-annually on March 1 and September 1 of each year, beginning on March 1, 2022.

The Senior Notes due 2025, the Senior Notes due 2027, the Senior Notes due 2031 and the Senior Notes due 2032 were and are each guaranteed on a senior unsecured basis by the Company’s guarantor subsidiaries.

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 and the Senior Notes due 2031.

The Senior Notes due 2025 and the Senior Notes due 2027 and related guarantees are unsecured senior obligations of the Company and its guarantor subsidiaries and rank equally with all of the Company’s and its guarantor subsidiaries’ 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, respectively, when due, among others.

The Senior Notes due 2025, the Senior Notes due 2027, the Senior Notes due 2031 and the Senior Notes due 2032 and related guarantees were and are unsecured senior obligations of the Company and its guarantor subsidiaries and rank equally with all of the Company’s and its guarantor subsidiaries’ other unsubordinated indebtedness.

The Senior Notes due 2027, the 2017 Indenture, the Senior Notes due 2031, the April 2021 Indenture, the Senior Notes due 2032 and the September 2021 Indenture also contain customary covenants and events of default, including failure to pay principal or interest on the Senior Notes due 2027, the Senior Notes due 2031 and the Senior Notes due 2032, respectively, when due, among others.

Credit Facility

On July 20, 2018, the Company, and certain of the Company’s subsidiaries entered into a Fourth Amended and Restated Credit Agreement (the “U.S.

On July 20, 2018, the Company, and certain of the Company’s subsidiaries entered into a Fourth Amended and Restated Credit Agreement (the “Fourth U.S.

Credit Facility”) with CoBank, ACB, as administrative agent and collateral agent, and the other lenders party thereto.

The Fourth U.S.

Credit Facility provides for a $ 750.0 million revolving credit commitment and a term loan commitment of up to $ 500.0 million (the “Term Loans”).

1 unchanged sentence

Credit Facility, 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.

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 $ 1.25 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 July 20, 2023.

All principal on the Term Loans is due at maturity on 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.

On August 9, 2021, the Company refinanced the Fourth U.S.

Credit Facility resulting in

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 27, 2020, the Company had outstanding borrowings under the term loan commitment of $ 450.0 million.

a loss on early extinguishment of debt of $ 400 thousand from capitalized loan costs recognized as component of interest expense.

On August 9, 2021, the Company, and certain of the Company’s subsidiaries refinanced the Fourth U.S.

Credit Facility, entering into a Fifth Amended and Restated Credit Agreement (the “Fifth U.S.

Credit Facility”) with CoBank, ACB, as administrative agent and collateral agent, and the other lenders party thereto.

The Fifth U.S.

Credit Facility provides for an $ 800.0 million revolving credit commitment and a term loan commitment of up to $ 700.0 million (the “New Term Loans”), with outstanding borrowings of $ 506.3 million and a delayed draw commitment of $ 193.7 million for up to six months from the effective date.

The Company used the proceeds of the New Term Loans for refinancing the Fourth U.S.

Credit Facility maturing on July 20, 2023, to pay the fees and expenses incurred in connection with the transaction and for general corporate purposes.

On February 8, 2022, the Company borrowed the remaining $ 193.7 million of the delayed draw commitment on the New Term Loans.

The Fifth U.S.

Credit Facility includes an incremental commitment and loan feature that allows the Company, subject to certain conditions, to increase the aggregate revolving loan and term loan commitments.

The aggregate amount of incremental commitments and loans shall not exceed the sum of $ 500.0 million plus the maximum amount that would result in a senior secured leverage ratio, on a pro-forma basis, of not more than 3.00 to 1.00.

The revolving loan commitment under the Fifth U.S.

Credit Facility matures on August 9, 2026.

All principal on the New Term Loans is due at maturity on August 9, 2026.

Installments of principal are required to be made, in an amount equal to 1.25 % of the original principal amount of the New Term Loans, on a quarterly basis prior to the maturity date of the New Term Loans.

As of December 26, 2021, the Company had outstanding letters of credit and available borrowings under the revolving credit commitment of $ 36.1 million and $ 763.9 million, respectively.

Credit Facility includes a $ 75.0 million sublimit for swingline loans and a $ 125.0 million sublimit for letters of credit.

Outstanding borrowings under the revolving loan commitment and the Term Loans bear interest at a per annum rate equal to (1) in the case of LIBOR loans, LIBOR plus a margin based on the Company’s net senior secured leverage ratio, between LIBOR plus 1.25 % and LIBOR plus 2.75 % and (2) in the case of alternate base rate loans, the base rate plus a margin 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 Fifth U.S.

Credit Facility includes an $ 80.0 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 New Term Loans bear interest at a per annum rate, based on Company's senior secured net leverage ratio, equal to (1) in the case of LIBOR loans, between LIBOR plus 1.25 % and LIBOR plus 2.75 % and (2) in the case of base rate loans, between the base rate plus 0.25 % and the base rate plus 1.75 %.

The Fifth U.S.

Credit Facility contains customary financial and other various covenants for transactions of this type, including restrictions on the Company’s ability to incur additional indebtedness, incur liens, pay dividends, make certain restricted payments, consummate certain asset sales, enter into certain transactions with the Company’s affiliates, or merge, consolidate and/or sell or dispose of all or substantially all of its assets, among other things.

Credit Facility requires the Company to comply with a minimum level of tangible net worth covenant.

Credit Facility also provides that the Company may not incur capital expenditures in excess of $ 500.0 million in any fiscal year.

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 (1) the accounts receivable and inventory of the Company and its non-Mexico subsidiaries, (2) 100 % of the equity interests in the Company's domestic subsidiaries, To-Ricos, Ltd.

and To-Ricos Distribution, Ltd., and 65 % of the equity interests in its direct foreign subsidiaries and (3) substantially all of the assets of the Company and the guarantors under the U.S.

The Fifth U.S.

Credit Facility requires the Company to comply with a minimum net leverage ratio and a minimum interest coverage ratio.

All obligations under the Fifth U.S.

Credit Facility continue to be secured by first priority liens on (1) all present and future personal property of the Company, and certain of the Company’s subsidiaries and the guarantors, including all material domestic and first-tier direct foreign subsidiaries, (2) all present and future shares of capital stock of the borrowers and guarantors, and (3) substantially all of the present and future assets of the Company and the guarantors under the Fifth U.S.

Credit Facility.

The Company is currently in compliance with the covenants under the U.S.

The Company is currently in compliance with the covenants under the Fifth U.S.

Credit Facility.

11 unchanged sentences

Pursuant to the terms of the Bank of Ireland Facility Agreement, Moy Park is required to meet certain financial and other restrictive covenants.

Additionally, Moy Park is prohibited from taking certain actions without consent of the lenders, including, without limitation, incurring additional indebtedness, entering into certain mergers or other business combination transactions, permitting liens or other encumbrances on its assets and making restricted payments, including dividends, in each case except as expressly permitted under the Bank of Ireland Facility Agreement.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

As of December 31, 2021, banks in Europe are no longer using LIBOR as the reference rate.

They are now using the Sterling Overnight Interbank Average rate.

Mexico Credit Facility

8 unchanged sentences

As of December 26, 2021, there were no outstanding borrowings under the Mexico Credit Facility.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

STOCKHOLDERS’ EQUITY

12 unchanged sentences

Balance, end of year $ 27,241 $ ( 2,365 ) $ ( 72,873 ) $ — $ ( 47,997 )

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 Gains on Available-for-Sale Securities Total

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Gains (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 Gains on Available-for-Sale Securities Total

(In thousands)

8 unchanged sentences

Balance, end of year $ 82,782 $ ( 1,191 ) $ ( 102,211 ) $ — $ ( 20,620 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Details about Accumulated Other Comprehensive Loss Components Amount Reclassified from Accumulated Other Comprehensive Loss (a)

3 unchanged sentences

derivatives classified as cash flow hedges $ 1,359 $ 2,987 Net sales

Realized loss on settlement of foreign currency

Realized gain (loss) on settlement of foreign currency

derivatives classified as cash flow hedges 709 ( 114 ) Cost of sales

8 unchanged sentences

Total reclassification for the period $ ( 146 ) $ 1,591

(a) Amounts in parentheses represent income (expenses) related to results of operations.

(a) Positive amounts represent income to the results of operations while amounts in parentheses represent expenses to the results of operations.

(b) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost.

1 unchanged sentence

Pension and Other Postretirement Benefits.”

Preferred Stock

The Company has authorized 50,000,000 shares of $ 0.01 par value preferred stock, although no shares have been issued and no shares are outstanding.

Share Repurchase Program and Treasury Stock

On October 31, 2018, the Company’s Board of Directors approved a $ 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 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 December 27, 2020, the Company had repurchased approximately 6.3 million shares under this program with a market value of approximately $ 113.4 million.

The Company repurchased shares through open market purchase.

As of December 26, 2021, the Company repurchased approximately 6.3 million shares under this program with a market value of approximately $ 113.4 million.

The Company accounted for the shares repurchased using the cost method.

The Company currently plans to maintain these shares as treasury stock.

This program expired on February 16, 2021.

Restrictions on Dividends

Both the U.S.

Both the Fifth U.S.

Credit Facility and the indentures governing the Company’s senior notes restrict, but do not prohibit, the Company from declaring dividends.

Additionally, the Moy Park Multicurrency Revolving Facility Agreement restricts 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.

Additionally, Moy Park’s Bank of Ireland Facility Agreement restricts 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENSION AND OTHER POSTRETIREMENT BENEFITS

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Participation in the GK Pension Plan was frozen as of February 8, 2007 for all participants with the exception of terminated vested participants who are or may become permanently and totally disabled.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

frozen for that group as of March 31, 2007.

The plan was frozen for that group as of March 31, 2007.

Plans cover certain eligible active and former U.K.

18 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pension Benefits Other Benefits

4 unchanged sentences

Interest cost 5,763 8,102 18 36

Actuarial losses 38,822 20,729 90 132

Actuarial losses (gains) ( 14,535 ) 38,822 ( 33 ) 90

Benefits paid ( 13,483 ) ( 13,745 ) — —

1 unchanged sentence

Prior service cost — 20 — —

Tulip acquisition — 198,417 — —

Currency translation loss 10,155 3,984 — —

Currency translation loss (gain) ( 2,163 ) 10,155 — —

Projected benefit obligation, end of year $ 373,062 $ 404,194 $ 1,346 $ 1,593

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pension Benefits Other Benefits

8 unchanged sentences

Expenses paid from assets ( 425 ) ( 715 ) — —

Tulip acquisition — 179,702 — —

Currency translation gain 6,634 3,708 — —

Currency translation gain (loss) ( 2,471 ) 6,634 — —

Fair value of plan assets, end of year $ 326,409 $ 305,983 $ — $ —

8 unchanged sentences

(In thousands)

Current liability $ ( 7,510 ) $ ( 14,967 ) $ ( 169 ) $ ( 158 )

Long-term liability ( 90,701 ) ( 59,510 ) ( 1,424 ) ( 1,369 )

Recognized liability $ ( 98,211 ) $ ( 74,477 ) $ ( 1,593 ) $ ( 1,527 )

Current liabilities $ ( 6,063 ) $ ( 7,510 ) $ ( 157 ) $ ( 169 )

Long-term liabilities ( 40,590 ) ( 90,701 ) ( 1,189 ) ( 1,424 )

Recognized liabilities $ ( 46,653 ) $ ( 98,211 ) $ ( 1,346 ) $ ( 1,593 )

Pension Benefits Other Benefits

9 unchanged sentences

Net benefit costs include the following components:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pension Benefits Other Benefits

3 unchanged sentences

Estimated return on plan assets ( 10,562 ) ( 13,071 ) ( 6,921 ) — — —

Settlement loss (gain) 3,371 3,538 — 7 7 ( 3 )

Other 735 ( 62 ) — — — —

Settlement loss 2,313 3,371 3,538 21 7 7

Expenses paid from assets 425 735 ( 62 ) — — —

Amortization of net loss 2,257 1,503 1,313 2 — —

Amortization of past service cost 19 — — — — —

Net cost $ 215 $ 640 $ 4,541 $ 41 $ 43 $ 59

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Economic Assumptions

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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 discount rate assumptions used to determine future pension obligations at December 26, 2021 and December 27, 2020 were based on Prudential Financial, Inc.’s (“Prudential”) Pru Above Mean yield curve, which was designed by Prudential to provide a means for plan sponsors to value the liabilities of their postretirement benefit plans.

The Pru Above Mean yield curve represents a series of annual discount rates from bonds with an AA minimum average credit quality rating as rated by Moody’s Investor Service, Standard & Poor’s and Fitch Ratings.

The expected benefit payments were discounted by each corresponding discount rate on the yield curve.

1 unchanged sentence

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.

The discount rate assumptions used to determine future pension obligations for the U.K.

pension plans at December 26, 2021 and December 27, 2020 were based on corporate bond spot yield curves provided by Merrill Lynch.

Merrill Lynch bases this calculation entirely on AA1-AA3 rated bonds.

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.

pension and other postretirement benefit plans used variations of the Pri-2012 mortality table for both 2020 and 2019 in combination with the MP2020 mortality improvement scale for 2020 and the MP2019 mortality improvement scale for 2019.

For pre-retirement employees, the U.K.

pension plans used variations of the AxC00 mortality table for both 2020 and 2019 in combination with the CMI_2019 Sk=7.5 mortality improvement scale for 2020 and the CMI_2018 Sk=7.5 mortality improvement scale for 2019.

For postretirement employees, the U.K.

pension plans used variations of the S3PMA mortality table for both 2020 and 2019 in combination with the CMI_2019 Sk=7.5 mortality improvement scale for 2020 and the CMI_2018 Sk=7.5 mortality improvement scale for 2019.

As of December 26, 2021 and December 27, 2020, the U.S.

pension and other postretirement benefit plans used variations of the Pri-2012 mortality table.

The MP-2021 and MP-2020 mortality improvement scales were used for 2021 and 2020, respectively.

As of December 26, 2021 and December 27, 2020, the U.K.

pension plans used variations of the AxC00 mortality table in combination with the CMI_2020 Sk=7.5 and CMI_2019 Sk=7.5 mortality improvement scales for 2021 and 2020, respectively, for pre-retirement employees and the S3PMA mortality table in combination with the CMI_2020 Sk=7.5 and CMI_2019 Sk=7.5 mortality improvement scales for 2021 and 2020, respectively, for postretirement employees.

The sensitivity of the projected benefit obligation for pension benefits to changes in the discount rate is set out below.

3 unchanged sentences

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 that for calculating the liability recognized in the Consolidated Balance Sheets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Increase in Discount Rate of 0.25% Decrease in Discount Rate of 0.25%

7 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash and cash equivalents 2 % 1 %

16 unchanged sentences

Absent regulatory or statutory limitations, the target asset allocation for the investment of pension assets in the PSAs for the Union Plan is 50 % in each of fixed income securities and equity securities, the target asset allocation for the investment of pension assets in the PSAs and/or CCTs for the GK Pension Plan is 35 % in fixed income securities, 60 % in equity securities and 5 % in real estate and investment of pension assets in the PSAs for the U.K.

Plans is 28 % in fixed income securities, 62 % in equity securities and 10 % in real estate.

Plans is 28 % in equity-linked liability driven investments, 11 % in liability driven investments, 36 % in equity securities, 15 % in cash and 10 % in real estate.

The plans only invest in fixed income and equity instruments for which there is a readily available public market.

67 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As required by funding regulations or laws, the Company anticipates contributing $ 7.5 million and $ 0.2 million to its pension and other postretirement plans, respectively, during 2021.

Unrecognized Benefit Amounts in Accumulated Other Comprehensive Loss (Gain)

As required by funding regulations or laws, the Company anticipates contributing $ 6.2 million and less than $ 0.2 million to its pension and other postretirement plans, respectively, during 2022.

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:

9 unchanged sentences

Currency translation loss 308 2,557 — — — —

Net actuarial loss (gain), end of year $ 95,522 $ 58,239 $ 54,343 $ 174 $ 91 $ ( 34 )

Net actuarial loss, end of year $ 58,143 $ 95,522 $ 58,239 $ 118 $ 174 $ 91

Risk Management

35 unchanged sentences

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.

As of December 27, 2020, the Company has accrued $ 27.9 million, $ 3.8 million and $ 2.9 million related to cash bonus awards that could potentially be awarded under the STIP, MPIP and PMIP, respectively.

As of December 26, 2021, the Company has accrued $ 45.4 million, $ 30.0 thousand and $ 7.0 million related to cash bonus awards that could potentially be awarded under the STIP, MPIP and PMIP, respectively.

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 liability-based awards to the Company’s officers and other employees, members of the Board of Directors and any consultants (the “LTIP”).

9 unchanged sentences

The following awards were outstanding during 2021:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Benefit Plan Award Type Grant Date Grant Date Fair Value per Award Vesting Condition Vesting Date Intended Settlement Method Milestone Date Fair Value per Award Awards Granted Performance

6 unchanged sentences

2009 LTIP RSU 1/7/2019 $ 16.47 Performance/Service (f) Cash $ 27.55 109,654 13,705 —

2009 LTIP RSU 4/30/2019 $ 26.91 Service 7/1/2020 Cash $ 15.12 200,000 — —

2009 LTIP RSU 5/24/2019 $ 27.86 Service (d) Stock NA 11,170 — —

2019 LTIP RSU 1/8/2020 $ 30.94 Performance/Service (g) Stock NA 195,149 115,676 ( 66,930 )

2019 LTIP RSU 1/8/2020 $ 30.94 Performance/Service (h) Cash $ 27.55 121,310 71,573 —

2019 LTIP RSU 4/29/2020 $ 22.01 Service (d) Stock NA 13,630 — —

2019 LTIP RSU 1/8/2020 $ 30.94 Performance/Service (h) Stock NA 195,140 — ( 33,729 )

2019 LTIP RSU 1/8/2020 $ 30.94 Performance/Service (i) Cash $ 19.35 121,310 — —

2019 LTIP RSU 1/8/2021 $ 19.73 Service (i) Stock NA 95,000 — —

2019 LTIP RSU 1/8/2021 $ 19.73 Service (j) Cash $ 27.55 50,000 — —

2019 LTIP RSU 1/8/2021 $ 19.73 Performance/Service (k) Stock NA 300,000 — —

2019 LTIP RSU 1/8/2021 $ 19.73 Performance/Service (l) Cash $ 27.55 100,000 — —

2019 LTIP RSU 2/10/2021 $ 22.96 Performance/Service (m) Stock NA 307,986 — ( 35,558 )

2019 LTIP RSU 2/10/2021 $ 22.96 Performance/Service (n) Cash $ 27.55 208,117 — —

2019 LTIP RSU 3/15/2021 $ 25.45 Performance/Service (o) Stock NA 27,350 — —

2019 LTIP RSU 4/28/2021 $ 24.69 Service (d) Stock NA 14,586 — —

2019 LTIP RSU 5/3/2021 $ 23.81 Service (p) Stock NA 31,500 — —

2019 LTIP RSU 8/16/2021 $ 27.46 Performance/Service (q) Stock NA 5,470 — —

(a) The restricted stock units vest in ratable tranches on December 31, 2018, December 31, 2019 and December 31, 2020.

Expected compensation cost related to these units totals $ 2.8 million based on a closing stock price for the Company’s common stock of $ 24.93 per share on March 1, 2018.

Compensation cost related to these units totals $ 2.8 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.

(b) The restricted stock units vested or will vest in ratable tranches on December 31, 2019, December 31, 2020 and December 31, 2021.

Performance target achievement was 65 %.

Expected compensation cost related to these units totals $ 2.1 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 vested or will vest in ratable tranches on December 31, 2019, December 31, 2020 and December 31, 2021.

Performance target achievement was 65 %.

Expected compensation cost related to these units totals $ 0.9 million based on a closing stock price for the Company’s common stock of $ 27.55 per share on December 26, 2021.

1 unchanged sentence

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

Each participating director’s units will vest upon his or her departure from the Company’s Board of Directors.

Compensation cost was recognized in profit/loss upon the grant date.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(e) The restricted stock units vest in ratable tranches on December 31, 2020, December 31, 2021 and December 31, 2022.

(e) The restricted stock units vested or will vest in ratable tranches on December 31, 2020, December 31, 2021 and December 31, 2022.

Performance target achievement was 112.5 %.

Expected compensation cost related to these units totals $ 4.9 million based on a closing stock price for the Company’s common stock of $ 16.47 per share on January 7, 2019.

1 unchanged sentence

(f) The restricted stock units vest in ratable tranches on December 31, 2020, December 31, 2021 and December 31, 2022.

Performance target achievement was 112.5 %.

Expected compensation cost related to these units totals $ 3.5 million based on a closing stock price for the Company’s common stock of $ 27.55 per share on December 26, 2021.

Compensation cost will be amortized to profit/loss upon satisfaction of the performance conditions over the remaining vesting period.

(g) The restricted stock units were cancelled in their entirety by the Company's Board of Directors on December 8, 2020.

(h) If performance conditions related to the Company's 2020 operating results are satisfied, the restricted stock units vest in ratable tranches on December 31, 2021, December 31, 2022 and December 31, 2023.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(g) The restricted stock units will vest in ratable tranches on December 31, 2021, December 31, 2022 and December 31, 2023.

Performance target achievement was 159 %.

Expected compensation cost related to these units totals $ 2.7 million based on a closing stock price for the Company’s common stock of $ 30.94 per share on January 8, 2020.

Compensation cost will be amortized to profit/loss upon satisfaction of the performance conditions over the remaining vesting period.

(i) If performance conditions related to the Company's 2020 operating results are satisfied, the restricted stock units vest in ratable tranches on December 31, 2021, December 31, 2022 and December 31, 2023.

(h) The restricted stock units will vest in ratable tranches on December 31, 2021, December 31, 2022 and December 31, 2023.

Performance target achievement was 159 %.

Expected compensation cost related to these units totals $ 5.5 million based on a closing stock price for the Company’s common stock of $ 27.55 per share on December 26, 2021.

Compensation cost will be amortized to profit/loss upon satisfaction of the performance conditions over the remaining vesting period.

(i) The restricted stock units will vest in ratable tranches on July 1, 2022, July 1, 2023 and July 1, 2024.

Expected compensation cost related to these units totals $ 1.9 million based on a closing stock price for the Company’s common stock of $ 19.73 per share on January 8, 2020.

Compensation cost will be amortized to profit/loss over the remaining vesting period.

(j) The restricted stock units will vest in ratable tranches on July 1, 2022, July 1, 2023 and July 1, 2024.

Expected compensation cost related to these units totals $ 1.4 million based on a closing stock price for the Company’s common stock of $ 27.55 per share on December 26, 2021.

Compensation cost will be amortized to profit/loss upon satisfaction of the performance conditions over the remaining vesting period.

(k) If performance conditions related to the Company’s 2021-2023 cash flows are satisfied, the restricted stock units will vest in ratable tranches on July 1, 2024, July 1, 2025 and July 1, 2026.

Assuming we achieve 100 % target performance, expected compensation cost related to these units totals $ 5.9 million based on a closing stock price for the Company’s common stock of $ 19.73 per share on January 8, 2021.

Compensation cost will be amortized to profit/loss upon satisfaction of the performance conditions over the remaining vesting period.

(l) If performance conditions related to the Company’s 2021-2023 cash flows are satisfied, the restricted stock units will vest in ratable tranches on July 1, 2024, July 1, 2025 and July 1, 2026.

Assuming we achieve 100 % target performance, expected compensation cost related to these units totals $ 2.9 million based on a closing stock price for the Company’s common stock of $ 27.55 per share on December 26, 2021.

Compensation cost will be amortized to profit/loss upon satisfaction of the performance conditions over the remaining vesting period.

(m) If performance conditions related to the Company’s 2021 operating results are satisfied, the restricted stock units will vest in ratable tranches on December 31, 2022, December 31, 2023 and December 31, 2024.

Assuming we achieve 100 % target performance, expected compensation cost related to these units totals $ 7.1 million based on a closing stock price for the Company’s common stock of $ 22.96 per share on February 10, 2021.

Compensation cost will be amortized to profit/loss upon satisfaction of the performance conditions over the remaining vesting period.

(n) If performance conditions related to the Company’s 2021 operating results are satisfied, the restricted stock units will vest in ratable tranches on December 31, 2022, December 31, 2023 and December 31, 2024.

Compensation cost will be amortized to profit/loss upon satisfaction of the performance conditions over the remaining vesting period.

(o) If performance conditions related to the Company’s 2021 operating results are satisfied, the restricted stock units will vest in ratable tranches on December 31, 2022, December 31, 2023 and December 31, 2024.

Assuming we achieve 100 % target performance, expected compensation cost related to these units totals $ 0.7 million based on a closing stock price for the Company’s common stock of $ 25.45 per share on March 15, 2021.

Compensation cost will be amortized to profit/loss upon satisfaction of the performance conditions over the remaining vesting period.

(p) The restricted stock units will vest in ratable tranches on December 31, 2022, December 31, 2023 and December 31, 2024.

Expected compensation cost related to these units totals $ 0.8 million based on a closing stock price for the Company’s common stock of $ 23.81 per share on May 3, 2021.

Compensation cost will be amortized to profit/loss over the remaining vesting period.

(q) If performance conditions related to the Company’s 2021 operating results are satisfied, the restricted stock units will vest in ratable tranches on December 31, 2022, December 31, 2023 and December 31, 2024.

Assuming we achieve 100 % target performance, expected compensation cost related to these units totals $ 0.2 million based on a closing stock price for the Company’s common stock of $ 27.46 per share on August 16, 2021.

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 stock-based compensation arrangements are included below:

12 unchanged sentences

The Company’s RSU activity is included below:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2021 2020 2019

10 unchanged sentences

Outstanding at end of year 554 $ 20.40 584 $ 22.12 926 $ 24.04

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2021 2020 2019

17 unchanged sentences

This cost is expected to be recognized over a weighted average period of 1.90 years.

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

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

FAIR VALUE MEASUREMENTS

5 unchanged sentences

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 26, 2021 and December 27, 2020, 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, foreign currency forward contracts to manage translation and remeasurement risk and interest rate swap instruments.

Derivative assets and liabilities consist of long and short positions on exchange-traded commodity futures instruments, commodity options instruments, sales contracts instruments, foreign currency instruments to manage translation and remeasurement risk and interest rate swap instruments.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 26, 2021 December 27, 2020

Level 1 Total Level 1 Total

Level 1 Level 2 Total Level 1 Level 2 Total

(In thousands) (In thousands)

Commodity futures instruments $ 13,285 $ 13,285 $ 4,147 $ 4,147

Commodity options instruments 10,774 10,774 906 906

Foreign currency instruments 2,204 2,204 426 426

Commodity futures instruments ( 4,496 ) ( 4,496 ) ( 4,797 ) ( 4,797 )

Commodity options instruments ( 2,035 ) ( 2,035 ) ( 633 ) ( 633 )

Foreign currency instruments ( 428 ) ( 428 ) ( 5,400 ) ( 5,400 )

Interest rate swap instrument ( 640 ) ( 640 ) — —

Commodity derivative assets $ 17,567 $ — $ 17,567 $ 24,059 $ — $ 24,059

Foreign currency derivative assets 518 — 518 2,204 — 2,204

Commodity derivative liabilities ( 14,119 ) — ( 14,119 ) ( 6,531 ) — ( 6,531 )

Foreign currency derivative liabilities ( 4,958 ) — ( 4,958 ) ( 428 ) — ( 428 )

Interest rate swap derivative liabilities — ( 98 ) ( 98 ) ( 640 ) — ( 640 )

Sales contract derivative liabilities — ( 12,691 ) ( 12,691 ) — — —

Derivative Financial Instruments” for additional information.

13 unchanged sentences

( 845,866 ) ( 900,193 ) ( 845,149 ) ( 911,957 )

Fixed-rate senior notes payable at 4.25 %, at Level 2 inputs

( 990,691 ) ( 1,055,140 ) — —

Fixed-rate senior notes payable at 3.50 %, at Level 2 inputs

( 900,000 ) ( 915,120 ) — —

Secured loans, at Level 3 inputs ( 3 ) ( 3 ) ( 38 ) ( 38 )

4 unchanged sentences

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 Consolidated Balance Sheets.

The fair values of the Company’s Level 1 fixed-rate debt obligation was based on the quoted market price at December 27, 2020 or December 29, 2019, as applicable.

The fair value of the Company’s Level 3 fixed-rate debt obligation was based on discounted cash flow using weighted average cost of capital of 0.5 % as of December 27, 2020 and ranging from 0.5 % to 3.6 % as of December 29, 2019.

The fair values of the Company’s Level 2 fixed-rate debt obligation was based on the quoted

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

market price at December 26, 2021 or December 27, 2020, as applicable.

The fair value of the Company’s Level 3 fixed-rate debt obligation was based on discounted cash flow using weighted average cost of debt of 0.5 % as of December 26, 2021 and December 27, 2020.

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.

1 unchanged sentence

There were no significant fair value measurement losses recognized for such assets and liabilities in the periods reported.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RELATED PARTY TRANSACTIONS

5 unchanged sentences

$ 17,296 $ 14,228 $ 14,108

JBS Five Rivers — — 7,096

JBS Global (UK) Ltd.

JBS Chile Ltda.

Combo, Mercado de Congelados 887 207 159

JBS Australia Pty.

2,439 2,540 —

Combo, Mercado de Congelados 1,368 887 207

JBS Chile Ltda.

JBS Global (UK) Ltd.

Total sales to related parties $ 21,456 $ 17,880 $ 14,938

4 unchanged sentences

$ 210,657 $ 142,615 $ 134,790

Penasul UK LTD 6,697 — —

Seara Meats B.V.

4,722 8,138 22,797

JBS Aves Ltda.

JBS Toledo NV 155 307 445

JBS Global (UK) Ltd.

Planterra Food Company 152 — —

Vivera Topholding B.V.

JBS Asia CO Limited 5 — —

JBS Toledo NV — 155 307

Total cost of goods purchased from related parties $ 223,135 $ 151,582 $ 158,064

4 unchanged sentences

$ 97,713 $ 39,025 $ 32,161

JBS Chile Ltda.

Seara Food Europe Holdings 13 9 77

JBS Chile Ltda.

Total expenditures paid by related parties $ 97,726 $ 39,034 $ 32,244

4 unchanged sentences

$ 42,951 $ 16,266 $ 9,103

Seara International Ltd.

Total expenditures paid on behalf of related parties $ 42,951 $ 16,266 $ 9,103

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 26, 2021 December 27, 2020 December 29, 2019

4 unchanged sentences

Total other related party transactions $ 1,961 $ 650 $ —

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 26, 2021 December 27, 2020

2 unchanged sentences

JBS USA Food Company (a)

JBS Chile Ltda.

$ 1,059 $ 714

JBS Australia Pty.

Combo, Mercado de Congelados 84 —

JBS Chile Ltda.

Total accounts receivable from related parties $ 1,345 $ 1,084

4 unchanged sentences

$ 21,628 $ 8,562

JBS Global UK Ltd.

Seara Meats B.V.

Penasul UK LTD 147 —

JBS Chile Ltda.

JBS Global (UK) Ltd.

Total accounts payable to related parties $ 22,317 $ 9,650

7 unchanged sentences

This agreement expires on December 31, 2021.

(c) The Company entered into a tax sharing agreement during 2014 with JBS USA Holdings effective for tax years starting in 2010.

The net tax payable for tax year 2021 was accrued in 2021 and will be paid in 2022.

14 unchanged sentences

The segment’s primary distribution is through retailers, foodservice distributors and restaurants.

and Europe reportable segment processes primarily chicken and pork products that are sold to foodservice, retail and frozen entrée customers.

and Europe reportable segment processes primarily fresh chicken, pork products, specialty meats, ready meals and other prepared foods that are sold to foodservice, retail and direct to consumer customers.

The segment’s primary distribution is through retailers, foodservice distributors and restaurants.

2 unchanged sentences

Additional information regarding reportable segments is as follows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 26, 2021 (a)

December 27, 2020 (b)

December 30, 2018 (c)

(In thousands)

3 unchanged sentences

Total $ 14,777,458 $ 12,091,901 $ 11,409,219

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(a) For the year 2020, the United States reportable segment had intercompany sales to the Mexico reportable segment of $ 210.6 million.

These sales consisted of fresh products, prepared products and grain.

(b) For the year 2019, the United States reportable segment had intercompany sales to the Mexico reportable segment of $ 188.9 million.

(a) For the year 2021, the U.S.

reportable segment had intercompany sales to the Mexico reportable segment of $ 296.9 million.

These sales consisted of fresh products, prepared products, eggs and grain.

(b) For the year 2020, the U.S.

reportable segment had intercompany sales to the Mexico reportable segment of $ 210.6 million.

These sales consisted of fresh products, prepared products and grain.

(c) For the year 2018, the United States reportable segment had intercompany sales to the Mexico reportable segment of $ 100.7 million.

reportable segment had intercompany sales to the Mexico reportable segment of $ 188.9 million.

These sales consisted of fresh products, prepared products and grain.

5 unchanged sentences

Mexico 228,773 72,879 124,015

Elimination 473 96 132

Eliminations 54 473 96

Total operating income 211,164 245,463 690,568

1 unchanged sentence

Interest income ( 6,056 ) ( 7,305 ) ( 14,277 )

Foreign currency transaction loss 760 6,917 17,160

Foreign currency transaction (gains) losses ( 9,382 ) 760 6,917

Gain on bargain purchase — 3,746 ( 56,880 )

17 unchanged sentences

Total $ 381,671 $ 354,762 $ 348,120

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 26, 2021 December 27, 2020

6 unchanged sentences

Total $ 8,913,205 $ 7,474,497

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 26, 2021 December 27, 2020 December 29, 2019

24 unchanged sentences

(In thousands)

Fresh $ 6,137,265 $ 6,214,954 $ 5,959,458

Prepared 714,563 842,365 773,983

Exports 306,478 282,791 258,732

chicken 7,158,306 7,340,110 6,992,173

and Europe chicken:

Fresh 863,670 918,852 925,124

Prepared 751,196 817,292 865,864

reportable segment:

Fresh products $ 7,264,448 $ 6,137,265 $ 6,214,954

Prepared foods 898,614 714,563 842,365

Exports 459,371 306,478 282,791

and Europe chicken 1,842,090 1,998,185 2,094,909

Mexico chicken:

Fresh 1,210,952 1,245,976 1,252,403

Prepared 66,572 95,733 76,860

Total Mexico chicken 1,277,524 1,341,709 1,329,263

Total chicken 10,277,920 10,680,004 10,416,345

and Europe pork:

Fresh 730,703 135,985 —

Prepared 486,290 134,426 —

Other Products 491,446 337,711 296,606

reportable segment 9,113,879 7,496,017 7,636,716

and Europe reportable segment:

Fresh products 1,151,330 1,594,373 1,054,837

Prepared foods 2,214,180 1,237,486 951,718

Exports 458,588 297,414 278,215

and Europe pork 1,287,183 286,585 —

Other Products 109,964 145,019 99,023

337,711 296,606 433,488

and Europe 145,019 99,023 53,757

Mexico 44,068 47,001 34,194

Total other products 526,798 442,630 521,439

and Europe reportable segment 3,934,062 3,274,292 2,383,793

Mexico reportable segment:

Fresh products 1,515,453 1,210,952 1,245,976

Prepared foods 128,208 66,572 95,733

Other products 85,856 44,068 47,001

Total Mexico reportable segment 1,729,517 1,321,592 1,388,710

Total net sales $ 14,777,458 $ 12,091,901 $ 11,409,219

3 unchanged sentences

Purchase Obligations

The Company will sometimes enter into noncancelable contracts to purchase capital equipment and certain commodities such as corn, soybean meal, wheat and electricity.

As of December 27, 2020, the Company was party to outstanding purchase contracts totaling $ 450.4 million payable in 2021 and $ 0.2 million payable in 2022.

There were no outstanding purchase contracts in 2023 and thereafter.

The Company will sometimes enter into noncancelable contracts to purchase capital equipment and certain commodities such as corn, soybean meal, wheat and energy.

As of December 26, 2021, the Company was party to outstanding purchase contracts totaling $ 540.0 million payable in 2022, $ 2.8 million payable in 2023, $ 2.2 million in 2024, $ 2.1 million payable in 2025 and $ 16.4 million payable thereafter.

Operating Leases

1 unchanged sentence

Financial Instruments

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

with or credit extended by such lender related to the loan, (2) any tax, duty or other charge with respect to the loan (except standard income tax) or (3) capital adequacy requirements.

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 (1) any reserve or special deposit requirement against assets of, deposits with or credit extended by such lender related to the loan, (2) any tax, duty or other charge with respect to the loan (except standard income tax) or (3) 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.

1 unchanged sentence

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company is subject to various legal proceedings and claims which arise in the ordinary course of business.

1 unchanged sentence

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 material legal proceedings and claims, see Part II, Item 1.

“Legal Proceedings.” The Company believes it has substantial defenses to the claims made in the pending litigations described below and intends to vigorously defend these cases.

Tax Claims and Proceedings

4 unchanged sentences

and Comercializadora de Carnes de México S.

de R.L de C.V.

(both in 2009) and Pilgrim’s Pride, S.

As a result, PPC Mexico should have considered dividends paid out of these subsidiaries partially taxable since a portion of the dividend amount was not paid from the net tax profit account ( CUFIN ).

As a result, according to the tax authorities, PPC Mexico should have considered dividends paid out of these subsidiaries partially taxable since a portion of the dividend amount was not paid from the net tax profit account ( CUFIN ).

PPC Mexico is currently appealing.

4 unchanged sentences

1:16-cv-08637 were filed with the U.S.

District Court for the Northern District of Illinois (the “Illinois Court”) against PPC and 19 other defendants by and on behalf of direct and indirect purchasers of broiler chickens alleging violations of federal and state antitrust and unfair competition laws.

District Court for the Northern District of Illinois (“Illinois Court”) against PPC and other defendants by and on behalf of direct and indirect purchasers of broiler chickens alleging violations of antitrust and unfair competition laws (the “Broilers Litigation”).

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 (“the Direct Purchaser Plaintiff Class”) and two on behalf of distinct groups of indirect purchasers.

Between December 8, 2017 and January 15, 2021, 61 individual direct action complaints were filed with the Illinois Court by individual direct purchaser entities naming PPC as a defendant, the allegations of which largely mirror those in the class action complaints .

Subsequent amendments to certain complaints added allegations of price fixing and bid rigging on certain sales, which have been stayed by the Illinois Court pending resolution of the original supply reduction conspiracy.

On August 28, 2020, the Illinois Court issued a revised scheduling order through trial, which contemplates class certification briefing and related expert reports proceeding from October 30, 2020 to May 6, 2021, the close of all merits fact discovery on June 11, 2021, and summary judgment briefing and related expert reports proceeding from July 2, 2021 to February 22, 2022.

The Illinois Court has set a trial date of October 17, 2022.

On January 11, 2021, PPC announced that it had entered into an agreement to settle all claims made by the putative Direct Purchaser Plaintiff Class, which is subject to court approval.

Pursuant to this agreement, PPC agreed to pay the Direct Purchaser Plaintiff Class $ 75.0 million, which PPC recognized as an expense during the fourth quarter of fiscal 2020.

The putative class plaintiffs have filed three consolidated amended complaints:

one on behalf of direct purchasers (the “DPPs”) and two on behalf of distinct groups of indirect purchasers.

Between December 8, 2017 and September 1, 2021, 82 individual direct action complaints were filed with the Illinois Court by individual purchaser entities (“DAPs”) naming PPC as a defendant, the allegations of which largely mirror those in the class action complaints .

Subsequent amendments to certain complaints added allegations of price fixing and bid rigging on certain sales.

On June 17, 2021, the Illinois Court issued a revised scheduling order through trial, under which merits fact discovery for defendants and most plaintiffs closed on July 31, 2021, with additional discovery of subsequent DAPs proceeding in six month increments following consolidation of each DAP complaint.

On February 8, 2022, the Illinois Court issued a revised scheduling order for certain plaintiffs who limited their claims to reduction of output, which sets the first trial date in the Fall 2023.

The schedule for the rest of the plaintiffs is still awaiting an order from the Illinois Court.

On January 11, 2021, PPC announced that it had entered into an agreement to settle all claims made by the DPPs.

The Illinois Court granted final approval of the settlement on June 29, 2021.

As a result of this agreement PPC recorded an expense of $ 75.0 million in Selling, general and administrative expense in the Consolidated Statement of Income during the year ended December 27, 2020.

Pursuant to this agreement, PPC paid the DPPs this amount during the three months ended March 28, 2021.

On July 28, 2021, PPC and the putative End-User Consumer Indirect Purchaser Plaintiff Class (“EUCPs”) reached an agreement to settle all claims.

The Illinois Court granted final approval of the settlement on December 20, 2021.

In addition, on August 3, 2021, PPC and the putative Commercial and Institutional Indirect Purchaser Plaintiff Class (“CIIPPs”) reached an agreement to settle all claims, which is subject to approval by the Illinois Court.

The Illinois Court granted preliminary approval of the settlement on January 14, 2022 and a final approval hearing is scheduled for April 18, 2022.

Under the terms of these settlements, PPC paid the EUCPs an amount of $ 75.5 million and has agreed to pay the CIIPPs an amount of $ 45.0 million to release all outstanding claims brought by such classes.

As a result of these agreements, PPC recognized the expense within Selling, general and administrative expense in the Consolidated Statement of Income for the three months ended September 26, 2021.

The settlements with the DPPs, EUCPs and CIIPPs do not cover the claims of the DAPs or other parties who have or will opt out of such settlements (collectively, the “Opt Outs”).

PPC will therefore continue to litigate against such Opt Outs and will seek reasonable settlements where they are available.

PPC has recognized an expense of $ 489.3 million to cover both negotiated and potential settlements with various Opt Outs.

PPC recognized this expense within Selling, general and administrative expense in the Consolidated Statement of Income for the year ended December 26, 2021.

On February 21, 2017, the Attorney General of Florida (“Florida AG”), issued a civil investigative demand (“CID”) regarding the broiler chicken market.

The CID requests, among other things, data and information related to the acquisition and processing of broiler chickens and the sale of chicken products.

PPC is cooperating with the Florida AG in producing documents pursuant to the CID.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On August 6, 2020, the Attorney General of Washington (“Washington AG”), issued a CID regarding similar broiler chicken matters that are the subject of the Florida CID.

PPC cooperated with the Washington AG in producing documents pursuant to the CID.

On October 28, 2021, the Washington AG filed a complaint in the King County Superior Court for the State of Washington.

The complaint alleges the same claims as those made in the Broilers Litigation under Washington state law.

PPC filed its answer to the complaint on January 21, 2022.

On September 1, 2020, the Attorney General of New Mexico filed a complaint in the First Judicial District Court in the County of Santa Fe, New Mexico.

The complaint alleges the same claims as those made in the In re Broiler Chicken Antitrust Litigation under New Mexico state law.

The complaint alleges the same claims as those made in the Broilers Litigation under New Mexico state law.

PPC filed its answer to the complaint on February 1, 2021.

On February 22, 2021, the Attorney General of Alaska filed a complaint in Superior Court in the Third Judicial District in Anchorage, Alaska.

The complaint alleges the same claims as those made in the Broilers Litigation under Alaska state law.

PPC filed its answer to the complaint on June 14, 2021.

On each of February 24, 2021 and May 4, 2021, the Attorney General of Louisiana (“Louisiana AG”), issued a CID regarding similar broiler chicken matters that are the subject of the Florida CID.

PPC is cooperating with the Louisiana AG in producing documents pursuant to the CIDs.

Other Claims and Proceedings

On October 20, 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 (the “Colorado Court”) against PPC and its named executive officers (the “Hogan Litigation”).

The complaint alleges, among other things, that PPC’s SEC filings contained statements that were rendered materially false and

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

misleading by PPC’s failure to disclose that (2) 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, (2) its conduct constituted a violation of federal antitrust laws, (3) PPC’s revenues during the class period were the result of illegal conduct and (4) that PPC lacked effective internal control over financial reporting.

The complaint also states that PPC’s industry was anticompetitive and seeks compensatory damages.

District Court for the District of Colorado (“Colorado Court”) against PPC and its named executive officers (the “Hogan Litigation”).

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 (1) PPC colluded with several of its industry peers to fix prices in the broiler-chicken market as alleged in the Broilers Litigation , (2) its conduct constituted a violation of federal antitrust laws and (3) PPC’s revenues during the class period were the result of illegal conduct.

The complaint seeks compensatory damages as well as attorneys’ fees and costs.

On April 4, 2017, the Colorado 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, 2016.

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 Colorado Court dismissed the plaintiff’s complaint without prejudice and issued final judgment in favor of PPC and the other defendants.

PPC and the other defendants moved to dismiss the amended complaint on June 12, 2017, and on March 14, 2018, the Colorado 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 Colorado 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 Colorado Court denied the plaintiff’s motion for reconsideration and granted plaintiff leave to file a Second Amended Complaint.

On November 19, 2018, the Colorado Court denied the plaintiff’s motion for reconsideration, but granted the plaintiff leave to file a second amended complaint.

On June 8, 2020, the plaintiff filed a second amended complaint against the same defendants, based in part on the Indictment (defined below).

On July 31, 2020, defendants filed a motion to dismiss the Second Amended Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.

Plaintiffs filed an opposition to the motion to dismiss on August 31, 2020, and defendants filed their reply on September 20, 2020.

The Colorado Court's decision on the motion to dismiss is pending.

On July 31, 2020, defendants filed a motion to dismiss the second amended complaint.

The Colorado Court granted the motion to dismiss on April 19, 2021, and issued judgment in favor of the defendants.

On May 17, 2021, the plaintiff filed a motion for amended judgment, which the Colorado Court denied on November 29, 2021.

The plaintiff then filed a notice of appeal on December 28, 2021, and the appeal has been opened in the Tenth Circuit, which PPC will oppose in due course.

The appeal is expected to be fully briefed by April 15, 2022.

On January 27, 2017, a purported class action on behalf of broiler chicken farmers was brought against PPC and four other producers in the U.S.

1 unchanged sentence

Plaintiffs allege violations of the Sherman Antitrust Act and the Packers and Stockyards Act and seek, among other relief, treble damages.

The complaint was consolidated with a subsequently filed consolidated amended class action complaint styled as In re Broiler Chicken Grower Litigation, Case No.

CIV-17-033-RJS (the “ Grower Litigation ”).

The defendants (including PPC) jointly moved to dismiss the consolidated amended complaint on September 9, 2017 for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure.

The complaint was consolidated with a subsequently filed class action complaint and was styled as In re Broiler Chicken Grower Litigation, Case No.

CIV-17-033-RJS.

The defendants (including PPC) jointly moved to dismiss the consolidated amended complaint on September 9, 2017.

The Oklahoma Court granted only certain other defendants’ motions challenging jurisdiction.

On January 6, 2020, the Oklahoma Court denied the pending Rule 12 motion, and lifted the stay on discovery.

The case is currently in discovery.

On October 6, 2020, the Oklahoma plaintiffs filed a motion with the U.S.

Judicial Panel on Multidistrict Litigation (the “JPML”) seeking consolidation of a series of copycat complaints filed in September and October 2020 in the U.S.

On January 6, 2020, the Oklahoma Court denied the motion to dismiss, and lifted the stay on discovery.

On October 6, 2020, the plaintiffs filed a motion with the U.S.

Judicial Panel on Multidistrict Litigation (“JPML”) seeking consolidation of a series of copycat complaints filed in September and October 2020 in the U.S.

District Courts for the District of Colorado, the District of Kansas, and the Northern District of California.

On December 15, 2020, the JPML ordered the transfer of all cases to the Oklahoma Court for consolidated or coordinated pretrial proceedings.

On November 8, 2021, the Oklahoma Court entered a revised case management order in the multi-district litigation setting a deadline of August 1, 2022 for the close of fact discovery.

That order also set a deadline of March 17, 2023 for the filing of class certification motions, with deadlines of April 28, 2023 for opposition briefing and June 9, 2023 for reply briefing.

Under the order, motions for summary judgment are to be filed on July 31, 2023, with oppositions and replies due September 22, 2023, and October 13, 2023, respectively.

PPC has recognized an

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

estimate of probable loss as expense that is subject to change.

PPC recognized this expense within Selling, general and administrative expense in the Consolidated Statement of Income for the year ended December 26, 2021.

On March 9, 2017, a stockholder derivative action, DiSalvio v.

Lovette, et al., No.

30207, was brought against all of PPC’s directors and its Chief Financial Officer, Fabio Sandri, in the Nineteenth Judicial District Court for the County of Weld in Colorado (the “Weld County Court”).

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.

30207, was brought against all of PPC’s directors and its then-Chief Executive Officer, William Lovette, and its then-Chief Financial Officer, Fabio Sandri, in the Nineteenth Judicial District Court for the County of Weld in Colorado (the “Weld County Court”).

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 Broilers Litigation , and issuing false and misleading statements as alleged in the Hogan Litigation.

On April 17, 2017, a related stockholder derivative action, Brima v.

Lovette, et al., No.

30308, was brought against all of PPC’s directors and its Chief Financial Officer in the Weld County Court.

30308, was brought against all of PPC’s directors and Messrs.

Lovette and Sandri in the Weld County Court.

The Brima complaint contains largely the same allegations as the DiSalvio complaint.

The DiSalvio and Brima litigations (“the Derivative Litigation”) have been consolidated, and on October 14, 2020, an amended shareholder derivative complaint was filed which alleges, among other things, that the named defendants breached their fiduciary duties by failing to prevent PPC from engaging in an antitrust conspiracy as alleged in the Broiler litigation, the Indictment (as defined below), and other related proceedings;

and by failing to prevent the issuance of false and misleading statements as alleged in the Hogan securities litigation and the UFCW securities litigation (as defined below).

The consolidated case is currently stayed, pending the resolution of the motion to dismiss in the Hogan Litigation described above.

On January 24, 2018, a stockholder derivative action styled as Sciabacucchi v.

was brought against all of PPC’s directors, JBS S.A., JBS USA Holdings and several members of the Batista family, in the Court of Chancery of the State of Delaware (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.

Both complaints sought compensatory damages.

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 proceeded to discovery, and trial was scheduled to commence in November 2020.

On October 3, 2019, the parties entered into a stipulation agreeing to settle the dispute for (1) a cash payment to PPC by the non-PPC defendants of $ 42.5 million less any fees and expenses awarded to the plaintiffs’ counsel,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

as well as any applicable taxes (the “Settlement Amount”), and (2) corporate governance changes to be implemented by PPC.

No portion of the Settlement Amount will be paid by PPC to the non-PPC defendants.

The settlement was approved by the Chancery Court on January 28, 2020.

On March 2, 2020, the Settlement Amount was transferred to PPC, and as a result, PPC recognized income, net of legal fees, of $ 34.6 million, which is included in Miscellaneous, net in the Consolidated Statement of Income for the year ended December 27, 2020.

The DiSalvio and Brima litigations (collectively, the “Derivative Litigation”) were consolidated on May 4, 2017.

On October 14, 2020, an amended shareholder derivative complaint was filed that added former PPC executives Jayson Penn, Roger Austin and Jimmie Little as named defendants and alleges, among other things, that the named defendants breached their fiduciary duties by (1) failing to prevent PPC from engaging in an antitrust conspiracy as alleged in the Broilers Litigation, the Indictment (as defined below), and other related proceedings;

and (2) failing to prevent the issuance of false and misleading statements as alleged in the Hogan Litigation and the UFCW Litigation (as defined below).

The Derivative Litigation was stayed, pending the resolution of the motion to dismiss in the Hogan Litigation described above.

Following the Colorado Court granting defendants’ motion to dismiss in the Hogan Litigation, the stay was lifted.

The parties then filed a joint motion to continue the stay pending the Colorado Court’s decision on the motion for amended judgment, which the Weld County Court granted on June 22, 2021.

Upon the Colorado Court’s denial of plaintiff’s motion for amended judgment in the Hogan Litigation, the stay was again lifted.

On February 4, 2022, the Weld County Court ordered another stay until the earlier of (1) resolution of the appeal in the Hogan Litigation or (2) an order ruling on the motion to dismiss in the UFCW Litigation.

Between August 30, 2019 and October 16, 2019, four purported class action lawsuits were filed in the U.S.

District Court for the District of Maryland (the “Maryland Court”) against PPC and a number of other chicken producers, as well as WMS (Webber, Meng, Sahl and Company) and Agri Stats.

District Court for the District of Maryland (“Maryland Court”) against PPC and a number of other chicken producers, as well as Webber, Meng, Sahl & Company and Agri Stats.

The plaintiffs seek to represent a nationwide class of processing plant production and maintenance workers (“Plant Workers”).

2 unchanged sentences

The defendants (including PPC) jointly moved to dismiss the consolidated complaint on November 22, 2019.

Shortly thereafter, the plaintiffs informed the defendants and the Maryland Court that they would be amending their complaint, which they did on December 20, 2019.

The consolidated amended complaint asserts largely similar allegations to the pleadings in the consolidated complaint, but was expanded to include more class members and turkey processors as well as chicken processors.

The defendants moved to dismiss the consolidated amended complaint on March 2, 2020.

Shortly thereafter, the plaintiffs amended their complaint on December 20, 2019.

The consolidated amended complaint asserts largely similar allegations to the pleadings in the consolidated complaint, but was extended to include more class members and turkey processors as well as chicken processors.

The defendants filed motions to dismiss the consolidated amended complaint on March 2, 2020.

The Maryland Court dismissed PPC and a number of other defendants on September 16, 2020 without prejudice.

Plaintiffs subsequently filed amended complaints on November 2, 2020 re-naming PPC and the other dismissed defendants.

Defendants moved to dismiss on December 18, 2020.

The briefing is set to be complete on February 25, 2021.

The plaintiffs subsequently filed amended complaints on November 2, 2020 re-naming PPC and the other dismissed defendants.

Defendants moved to dismiss on December 18, 2020, which the Maryland Court denied on March 10, 2021.

On June 14, 2021, PPC entered into a binding Settlement Agreement to settle all claims with the putative class of Plant Workers for $ 29.0 million and paid the plaintiffs this amount during the third quarter of 2021.

PPC recognized this expense in Selling, general and administrative expense in the Consolidated Statement of Income for the year ended December 26, 2021.

On December 17, 2021, the plaintiffs filed a motion for leave to amend their complaint.

The motion will not be fully briefed until March 4, 2022 at the earliest, and the Maryland Court will have to rule on the motion.

The PPC Settlement Agreement is still subject to final approval by the Maryland Court.

On July 6, 2020, United Food and Commercial Workers International Union Local 464A (“UFCW”), acting on behalf of itself and a putative class of persons who purchased shares of PPC stock between February 9, 2017 and June 3, 2020, filed a class action complaint in the Colorado Court against PPC, and Messrs.

Lovette, Penn, and Sandri.

The complaint alleges, among other things, that PPC’s public statements regarding its business and the drivers behind its financial results were false and misleading due to the defendants’ purported failure to disclose its participation in an antitrust conspiracy as alleged in the Broiler litigation and the Indictment (defined below).

On September 4, 2020, UFCW and the New Mexico State Investment Council filed competing motions to be appointed lead plaintiff under the Private Litigation Securities Reform Act.

A decision on the lead plaintiff motions is currently pending.

PPC believes it has strong defenses in the pending litigations described above and intends to contest them vigorously.

Lovette, Penn, and Sandri (the “UFCW Litigation”).

On September 4, 2020, UFCW and the New Mexico State Investment Council (“NMSIC”) filed competing motions to be appointed lead plaintiff under the Private Litigation Securities Reform Act, and on March 17, 2021, the court appointed NMSIC as lead plaintiff.

On May 26, 2021, NMSIC filed an amended complaint, and PPC and the other defendants moved to dismiss the amended complaint on July 19, 2021, which is now fully briefed.

The Colorado Court’s decision on the motion to dismiss is currently pending.

PPC cannot predict the outcome of these pending litigations nor when they will be resolved.

The consequences of the pending litigation matters are inherently uncertain, and adverse actions, judgments or settlements in some or all of these matters has resulted and may in the future result in materially adverse monetary damages, fines, penalties or injunctive relief against PPC.

The consequences of the pending litigation matters are inherently uncertain, and adverse actions, judgments or settlements in some or all of these matters may result in materially adverse monetary damages, fines, penalties or injunctive relief against PPC.

Any claims or litigation, even if fully indemnified or insured, could damage PPC’s reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DOJ Antitrust Matter

On July 1, 2019, the DOJ issued a subpoena to PPC in connection with its investigation arising from the In re Broiler Chicken Antitrust Litigation .

On July 1, 2019, the DOJ issued a subpoena to PPC in connection with its investigation arising from the Broilers Litigation.

The Company has been cooperating with the DOJ investigation.

On June 3, 2020, PPC learned of an indictment by a Grand Jury in the Colorado Court against Jayson Penn, the chief executive officer and president of PPC at that time, in addition to two former employees of PPC and a former employee of a different company (the “Indictment”).

The Indictment alleges that the defendants entered into and engaged in a conspiracy to suppress and eliminate competition by rigging bids and fixing prices and other price-related terms for broiler chicken products sold in the U.S., in violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C.

On June 4, 2020, PPC learned that Mr.

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In connection with Mr.

Penn’s leave of absence, PPC’s Board of Directors appointed the chief financial officer of PPC, Fabio Sandri, to serve in the additional role of PPC’s interim president and chief executive officer.

On September 22, 2020, PPC's Board of Directors appointed Fabio Sandri as PPC's President and Chief Executive Officer in addition to his role as Chief Financial Officer.

Penn’s leave of absence, PPC’s Board of Directors appointed the Chief Financial Officer of PPC, Mr.

Sandri, to serve in the additional role of PPC’s interim President and Chief Executive Officer.

On September 22, 2020, PPC disclosed that Mr.

Penn was no longer with the Company.

The Company has initiated a search process to identify a new chief financial officer.

On October 6, 2020, PPC learned of a superseding indictment by a Grand Jury in the Colorado Court against former Chief Executive Officer of PPC, William Lovette, one additional former employee of PPC, and four employees of different companies.

On the same day, PPC’s Board of Directors appointed Mr.

Sandri as PPC’s President and Chief Executive Officer in addition to his role as Chief Financial Officer.

On February 10, 2021, PPC appointed Matthew Galvanoni to succeed Mr.

Sandri in his role as Chief Financial Officer, effective March 15, 2021.

The Superseding Indictment alleges similar claims to the Indictment.

On October 13, 2020, the Company announced that it had entered into a plea agreement (the “Plea Agreement”) with the DOJ pursuant to which the Company agreed to (1) plead guilty to one count of conspiracy in restraint of competition involving sales of broiler chicken products in the U.S.

in violation of the Sherman Antitrust Act, 15 U.S.C.

§ 1, and (2) pay a

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

fine of $ 110,524,140 .

The Company recognized the fine as expense which is included in Selling, general and administrative expense in the Consolidated Statements of Income for the year ended December 27, 2020.

Under the Plea Agreement, which is subject to the approval of the Colorado Court, the DOJ agreed not to bring further charges against the Company for any antitrust violation involving the sale of broiler chicken products in the U.S.

in violation of Section 1 of the Sherman Antitrust Act, and (2) pay a fine of $ 110.5 million.

The Company recognized the fine as expense which is included in Selling, general and administrative expense in the Consolidated Statement of Income for the year ended December 27, 2020.

Under the Plea Agreement, the DOJ agreed not to bring further charges against the Company for any antitrust violation involving the sale of broiler chicken products in the U.S.

occurring prior to the date of the Plea Agreement.

On February 23, 2021, the Colorado Court approved the Plea Agreement and assessed as an amended fine of $ 107.9 million.

The Company continues to cooperate with the DOJ in connection with the ongoing federal antitrust investigation into alleged price fixing and other anticompetitive conduct in the broiler chicken industry.

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 cooperation agreements ( acordos de colaboração ) (collectively, the “Cooperation Agreements”) with the Brazilian Office of the Prosecutor General ( Procuradoria-Geral da República ) in connection with certain illicit conduct by J&F and such individuals acting in their capacity as J&F executives.

The details of such illicit conduct are set forth in separate annexes to the Cooperation Agreements, and include admissions of improper payments to politicians and political parties in Brazil during a ten-year period in exchange for receiving, or attempting to receive, favorable treatment for certain J&F Group companies in Brazil.

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 Brazilian Federal Prosecutor (Ministério Público Federal) whereby J&F assumed responsibility for the conduct that was described in the annexes to the Cooperation 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 seeking to invalidate the Cooperation Agreements and impose more severe penalties for additional alleged illicit conduct that was not disclosed in the annexes to the Cooperation Agreements.

On October 14, 2020, certain affiliates of the Company – J&F Investimentos, S.A., JBS S.A., Joesley Batista and Wesley Batista – entered into a settlement agreement (the “Settlement”) with the SEC.

The Company was not a party to the Settlement, was not a respondent in the related proceedings, and is not required to make any related payment.

Under the Settlement, the SEC issued an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934 (the “SEC Order”) finding securities law violations by such affiliates that resulted in the Company, an indirect subsidiary, failing to maintain accurate books and records and internal accounting controls.

According to the SEC Order, the violations, which related to certain intercompany transactions from 2009 to 2015, were unbeknownst to the Company’s management, and the SEC Order will have no impact on the Company’s previously filed financial statements or its prior assessments of internal control over financial reporting.

On October 14, 2020, J&F reached an agreement (the “J&F Plea Agreement”) with the DOJ regarding violations stemming from the same facts and conduct that were the subject of the Leniency Agreement and the Cooperation Agreements (described above).

Pursuant to the J&F Plea Agreement, J&F pled guilty to one count of conspiracy to violate the U.S.

Foreign Corrupt Practices Act.

The J&F Plea Agreement imposed a fine of $ 256,497,026 , and J&F was required to make a payment of $ 128,248,513 under the J&F Plea Agreement (due to J&F receiving a 50 % credit for amounts paid to Brazilian authorities).

JBS and PPC are not parties to the J&F Plea Agreement and will not bear any liabilities arising from it.

The J&F Plea Agreement resolved the U.S.

criminal legal exposure of J&F and all its affiliates related to the conduct that was the subject of the Leniency Agreement and the Cooperation Agreements.

On July 29, 2021, PPC learned of an additional indictment by a Grand Jury in the Colorado Court against four former employees of PPC (the “Second Indictment”), which alleged similar claims to the First Indictment.

A trial pursuant to the First Indictment commenced on October 25, 2021 and ended on December 16, 2021.

The jury did not return a verdict and the Court declared a mistrial.

The DOJ is expected to retry the case beginning on February 22, 2022.

A trial pursuant to the Second Indictment is currently scheduled to begin on July 18, 2022.

On February 9, 2022, the Company learned that the DOJ has opened a civil investigation into human resources antitrust matters.

The Company plans to cooperate when a CID is served.

government’s recent focus and attention on market dynamics in the meat processing industry could expose PPC to additional costs and risks.

MARKET RISKS AND CONCENTRATIONS

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The Company does not believe it has significant concentrations of credit risk in its trade accounts receivable.

As of December 27, 2020, we employed approximat ely 30,900 persons in the U.S.

reportable segment, approximately 10,500 persons in the Mexico reportable segment and approximately 15,000 persons in the U.K.

and Europe reportable segment.

As of December 26, 2021, we employed almost 59,400 persons.

Approximately 45.4 % of the Company’s employees were covered under collective bargaining agreements.

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We have not experienced any labor-related work stoppage at any location in over ten years .

We believe our relationship

We believe our relationship with our employees and union leadership is satisfactory.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

with our employees and union leadership is satisfactory.

At any given time, we will likely be in some stage of contract negotiations with various collective bargaining units.

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As of December 26, 2021, the aggregate carrying amount of net assets belonging to our Mexico and U.K.

and Europe reportable segments was $ 922.5 million and $ 2.3 billion, respectively.

and Europe reportable segments was $ 1.1 billion and $ 3.2 billion, respectively.

As of December 27, 2020, the aggregate carrying amount of net assets belonging to our Mexico and U.K.

and Europe reportable segments was $ 922.5 million and $ 2.3 billion, respectively.

QUARTERLY RESULTS (UNAUDITED)

2020 First (a)

Second Third (b)

(In thousands, except per share data)

Net sales $ 3,074,928 $ 2,824,023 $ 3,075,121 $ 3,117,829 $ 12,091,901

Gross profit 177,099 119,859 313,842 227,396 838,196

Net income (loss) attributable to PPC 67,268 ( 6,036 ) 33,446 79 94,757

Net income (loss) per share amounts - basic 0.27 ( 0.02 ) 0.14 — 0.39

Net income (loss) per share amounts - diluted 0.27 ( 0.02 ) 0.14 — 0.39

Number of days in period 91 91 91 91 364

2019 First Second Third Fourth (c)

(In thousands, except per share data)

Net sales $ 2,724,675 $ 2,843,085 $ 2,777,970 $ 3,063,489 $ 11,409,219

Gross profit 218,939 367,864 282,197 201,394 1,070,394

Net income attributable to PPC 84,011 170,068 109,765 92,080 455,924

Net income per share amounts - basic 0.34 0.68 0.44 0.37 1.83

Net income per share amounts - diluted 0.34 0.68 0.44 0.37 1.83

Number of days in period 91 91 91 91 364

2018 First (d)

(In thousands, except per share data)

Net sales $ 2,746,678 $ 2,836,713 $ 2,697,604 $ 2,656,789 $ 10,937,784

Gross profit 287,665 274,222 169,741 111,848 843,476

Net income (loss) attributable to PPC 119,418 106,541 29,310 ( 7,324 ) 247,945

Net income (loss) per share amounts - basic 0.48 0.43 0.12 ( 0.03 ) 1.00

Net income (loss) per share amounts - diluted 0.48 0.43 0.12 ( 0.03 ) 1.00

Number of days in period 91 91 91 91 364

(a) In the first quarter of 2020, the company recognized a negative adjustment to the previously recognized gain on bargain purchase from the 2019 acquisition of PPL for approximately $ 1.7 million.

(b) In the third quarter of 2020, the company recognized a negative adjustment to the previously recognized gain on bargain purchase from the 2019 acquisition of PPL for approximately $ 2.0 million.

(c) On October 15, 2019, the Company acquired 100 % of the equity of PPL and its subsidiaries (together, “PPL”) from Danish Crown AmbA for £ 311.3 million, or $ 393.3 million for cash.

In the fourth quarter of 2019, the Company recognized a gain on bargain purchase of $ 56.9 million and transaction costs of approximately $ 1.3 million related to the acquisition of PPL.

(d) In the first quarter of 2018, the Company recognized impairment charges of approximately $ 0.5 million related to the Luverne, Minnesota plant held for sale.

Also in the first quarter of 2018, the Company had transaction costs of approximately $ 0.2 million related to the acquisition of Moy Park and GNP.

(e) In the second quarter of 2018, the Company recognized impairment charges of approximately $ 0.1 million related to its 40 North Foods leasehold improvements.

(f) In the third quarter of 2018, the Company recognized impairment charges of approximately $ 0.3 million related to the Luverne, Minnesota plant held for sale.

(g) In the fourth quarter of 2018, the Company recognized impairment charges of approximately $ 2.6 million related to Rose Energy Ltd.

within its U.K.

and Europe reportable segment.

Also in the fourth quarter of 2018, the Company recognized nonrecurring charges of $ 3.0 million and $ 11.9 million related to Hurricane Michael and Hurricane Maria, respectively.

Hurricane Michael hit the Company’s Live Oak complex in October 2018, causing two days of plant closure.

Hurricane Maria hit the Company’s Puerto Rico complex in September 2017, causing six months of plant closure.

PILGRIM’S PRIDE CORPORATION

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Trade Accounts and Other Receivables—

Allowance for Doubtful Accounts:

Allowance for Credit Losses:

2021 $ 7,173 $ 2,243 $ 51 $ ( 206 ) (a)

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data