What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-09 compared with 2022-02-18 · 433 added, 719 removed, 1569 unchanged (42% of the section changed)

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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).

We have audited the accompanying consolidated balance sheets of Pilgrim's Pride Corporation and subsidiaries (the Company) as of December 25, 2022 and December 26, 2021, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 25, 2022, and the related notes and financial statement schedule II (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of December 25, 2022, 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.

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 25, 2022 and December 26, 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 25, 2022, in conformity with U.S.

generally accepted accounting principles.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 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.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 25, 2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

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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.

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

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

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

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

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

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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;

(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.

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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.

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.

Evaluation of qualitative goodwill impairment assessment

As discussed in Notes 1 and 9 to the consolidated financial statements, the goodwill balance as of December 25, 2022 was $1.2 billion, of which $1.1 billion related to reporting units within the Company’s U.K.

and Europe reportable segment.

The Company performs qualitative or quantitative goodwill impairment assessments at least annually in the fourth quarter of each fiscal year or more frequently whenever circumstances indicate that the fair value of a reporting unit may be less than its carrying value.

When a qualitative assessment is performed, the Company assesses relevant qualitative factors to determine whether it is more likely than not that the fair value of its reporting units are less than their carrying amounts.

We identified the evaluation of the Company’s qualitative goodwill impairment assessment of the goodwill related to the reporting units in the Company’s U.K.

and Europe segment as a critical audit matter.

A higher degree of subjective auditor judgment was required to evaluate the factors utilized by management in the Company’s qualitative goodwill impairment assessment.

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 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 evaluated the design and tested the operating effectiveness of an internal control related to the Company’s qualitative goodwill impairment assessment, including the identification and assessment of the factors impacting the fair value of the reporting units.

We evaluated the Company’s assessment of qualitative factors by:

• analyzing the reasonableness of macroeconomic, industry, and market conditions identified by the Company by assessing the relevance and reliability of the assumptions and data selected by the Company and comparing them to publicly available economic data

• assessing the reasonableness of forecasted financial performance of the reporting units based on historical results as well as the macroeconomic, industry and market conditions considered by the Company

In addition, we involved a valuation specialist with specialized skills and knowledge, who assisted in evaluating the overall financial performance of the reporting units by comparing current valuation multiples of the Company and the reporting units in the Company’s U.K.

and Europe segment to comparable guideline companies.

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

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Operating lease assets, net 305,798 351,226

Identified intangible assets, net 963,243 589,913

Intangible assets, net 846,020 963,243

Goodwill 1,227,944 1,337,252

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Common stock, $ .01 par value, 800,000,000 shares authorized;

261,348,030 and

261,184,998 shares issued at year-end 2021 and year-end 2020, respectively;

243,675,522 and 243,512,490 shares outstanding at year-end 2021 and year-end

2020, respectively

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

261,610,518 and 261,348,030 shares issued at year-end 2022 and year-end 2021, respectively;

236,469,365 and 243,675,522 shares outstanding at year-end 2022 and year-end 2021, respectively

Treasury stock, at cost, 25,141,153 shares at year-end 2022 and 17,672,508 shares at year-end 2021

( 544,687 ) ( 345,134 )

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Interest income ( 9,028 ) ( 6,056 ) ( 7,305 )

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

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

Foreign currency transaction losses (gains) 30,817 ( 9,382 ) 760

Reduction in gain on bargain purchase — — 3,746

Miscellaneous, net ( 23,339 ) ( 11,580 ) ( 39,681 )

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Net income $ 746,538 $ 31,268 $ 95,070

Other comprehensive income:

Other comprehensive income (loss):

Foreign currency translation adjustment

Gains (losses) arising during the period ( 297,066 ) ( 55,541 ) 83,890

Derivative financial instruments designated as cash

Derivative financial instruments designated as cash flow hedges

Gains (losses) arising during the period ( 2,915 ) 398 3,719

Income tax effect — 22 160

Reclassification to net earnings for losses (gains)

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

Reclassification to net earnings for losses (gains) realized 4,142 ( 1,437 ) ( 2,664 )

Income tax effect ( 24 ) ( 157 ) —

Available-for-sale securities

Gains arising during the period — 73 510

Gains (losses) arising during the period ( 3 ) — 73

Income tax effect 2 — ( 18 )

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Comprehensive income 458,087 3,891 149,579

Comprehensive income attributable to

noncontrolling interests 268 313 612

Comprehensive income attributable to Pilgrim's Pride

Corporation $ 3,623 $ 149,266 $ 508,629

Comprehensive income attributable to noncontrolling interests 608 268 313

Comprehensive income attributable to Pilgrim's Pride Corporation $ 457,479 $ 3,623 $ 149,266

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

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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 )

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

Capital distribution under TSA — — — — ( 1,961 ) — — — ( 1,961 )

Stock-based compensation plans:

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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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Requisite service period recognition — — — — 7,400 — — — 7,400

Common stock purchased under share repurchase program — — ( 7,469 ) ( 199,553 ) — — — — ( 199,553 )

Balance at December 25, 2022 261,611 $ 2,617 ( 25,142 ) $ ( 544,687 ) $ 1,969,833 $ 1,749,499 $ ( 336,448 ) $ 12,462 $ 2,853,276

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Deferred income tax expense (benefit) 21,295 ( 86,391 ) 37,337

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

Gain on property disposals ( 18,908 ) ( 1,476 ) ( 13,766 )

Stock-based compensation activity 6,985 11,655 ( 276 )

Loan cost amortization 4,753 5,095 4,848

Asset impairment 3,559 — —

Accretion of bond discount 1,717 1,533 982

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

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

Loss (gain) on equity method investments ( 2 ) ( 16 ) 291

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

Amortization of bond premium — ( 167 ) ( 668 )

Gain on bargain purchase — — 3,746

Noncash loss on subsidiary dissolution — 115 —

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

Noncash gain on subsidiary dissolution — — 115

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 ( 487,110 ) ( 381,671 ) ( 354,762 )

Proceeds from property disposals 35,516 24,724 31,976

Proceeds from insurance recoveries 16,034 — —

Purchase of acquired businesses, net of cash acquired ( 9,692 ) ( 966,766 ) ( 4,216 )

Cash used in investing activities ( 445,252 ) ( 1,323,713 ) ( 327,002 )

Cash flows from financing activities

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

Payments on revolving line of credit, long-term borrowings and finance lease obligations ( 388,299 ) ( 2,006,195 ) ( 430,988 )

Proceeds from revolving line of credit and long-term borrowings 362,540 2,951,707 404,522

Purchase of common stock under share repurchase program ( 199,553 ) — ( 110,242 )

Payment of capitalized loan costs ( 4,741 ) ( 22,293 ) —

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

Distribution of capital under the TSA ( 1,961 ) ( 650 ) —

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

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

Cash provided by (used in) financing activities ( 232,014 ) 901,311 ( 136,708 )

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Increase (decrease) in cash and cash equivalents ( 15,362 ) ( 98,285 ) 267,829

Cash and cash equivalents, beginning of year 548,406 280,577 361,578

Cash and cash equivalents, end of year $ 450,121 $ 548,406 $ 280,577

Cash and cash equivalents, restricted cash and restricted cash equivalents, beginning of year 450,121 548,406 280,577

Cash and cash equivalents, restricted cash and restricted cash equivalents, end of year $ 434,759 $ 450,121 $ 548,406

Supplemental Disclosure Information

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The Company’s primary distribution is through retailers, foodservice distributors and restaurants throughout the countries listed above.

Additionally, the Company exports chicken and pork products to approximately 125 countries.

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.

Additionally, the Company exports chicken and pork products to over 120 countries.

Our fresh products consist of refrigerated (nonfrozen) whole or cut-up chicken, 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, processed sausages, bacon, smoked meat, gammon joints, pre-packed meats, sandwich and deli counter meats and meat balls.

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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 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.

On September 24, 2021, the Company acquired 100.0 % of the equity of the Kerry Consumer Foods’ meats and meals businesses, collectively known as Pilgrim’s Food Masters (or “PFM”), for cash of £ 698.8 million, or $ 958.9 million.

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

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Foreign currency transaction gains or losses are reported in the Consolidated Statements of Income.

Revenue Recognition

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Cash and cash equivalents $ 400,988 $ 427,661

Restricted cash 22,460 782

Total cash, cash equivalents and restricted cash shown in the

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

Restricted cash and restricted cash equivalents 33,771 22,460

Total cash, cash equivalents, restricted cash and restricted cash equivalents shown in the Consolidated Statements of Cash Flows $ 434,759 $ 450,121

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.

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The Company records accounts receivable when revenue is recognized.

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

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

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

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Finance leases are included in Property, plant and equipment, net, Current maturities of long-term debt and Long-term debt, less current maturities in our Consolidated Balance Sheets.

Beginning with the adoption of Accounting Standards Update (“ASU”) 2016-02 on December 31, 2018, operating lease assets and operating lease liabilities are initially recognized based on the present value of the future minimum lease payments over the lease term at commencement date.

Operating lease assets and operating lease liabilities are initially recognized based on the present value of the future minimum lease payments over the lease term at commencement date.

As most of the Company’s leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate (“IBR”) based on the information available at commencement date in determining the present value of future payments.

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The Company has lease agreements with lease and non-lease components.

Beginning in 2019, lease and non-lease components are generally accounted for separately.

Lease and non-lease components are generally accounted for separately.

For certain equipment leases, such as vehicles, the Company accounts for the lease and non-lease components as a single lease component.

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For goodwill, an impairment loss is recognized for any excess of the carrying amount of a reporting unit’s goodwill over the implied fair value of that goodwill.

Management first reviews relevant qualitative factors to determine if an indication of impairment exists for a reporting unit.

If management determines there is an indication that the carrying amount of reporting unit goodwill might be impaired, a quantitative analysis is performed.

Management performed a qualitative analysis noting no indications of goodwill impairment in any of its reporting units as of December 26, 2021.

Management first reviews relevant qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent), that the fair value of a reporting unit is less than the unit’s carrying amount (including goodwill)..

If management determines it is more likely than not that the carrying amount of a reporting unit goodwill might be impaired, a quantitative analysis is performed.

Management performed a qualitative analysis noting that is was not more likely than not that there was goodwill impairment in any of its reporting units as of December 25, 2022.

For indefinite-lived intangible assets, an impairment loss is recognized if the carrying amount of an indefinite-lived intangible asset exceeds the estimated fair value of that intangible asset.

Management first reviews relevant qualitative factors to determine if an indication of impairment exists.

If management determines there is an indication that the carrying amount of the intangible asset might be impaired, a quantitative analysis is performed.

Management performed a qualitative analysis noting no indications of impairment for any of its indefinite-lived intangible assets as of December 26, 2021.

Management first reviews relevant qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that an intangible asset is impaired.

If management determines there is an indication that the carrying amount of the intangible asset might be impaired, and quantitative analysis is performed.

Management performed a qualitative analysis noting that it was not more likely than not that there was impairment for any of its indefinite-lived intangible assets as of December 25, 2022.

Identifiable intangible assets with definite lives, such as customer relationships, non-compete agreements and trade names that the Company expects to use for a limited amount of time, are amortized over their estimated useful lives on a straight-line basis.

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Management assessed if events or changes in circumstances indicated that the aggregate carrying amount of its identified intangible assets with definite lives might not be recoverable and determined that there were no impairment indicators during the years ended December 25, 2022 and December 26, 2021.

Book Overdraft Balances

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

Checks issued pending clearance that result in overdraft balances for accounting purposes are classified as accounts payable and the change in the related balance is reflected in operating activities on the Consolidated Statements of Cash Flows.

Litigation and Contingent Liabilities

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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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

total exposure.

Stop-loss coverage is maintained with third-party insurers to limit the Company’s 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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• Interest Rate Risk - The Company has exposure to variability in cash flows from interest payments due to the use of variable interest rates on certain long-term debt arrangements.

The Company has purchased an interest rate swap contract to convert the variable interest rate to a fixed interest rate on a portion of its outstanding long-term debt arrangements in order to manage this interest rate risk and add stability to interest expense and cash flows.

The Company has purchased in the past an interest rate swap contract to convert the variable interest rate to a fixed interest rate on a portion of its outstanding long-term debt arrangements in order to manage this interest rate risk and add stability to interest expense and cash flows.

Pilgrim’s recognizes all commodity derivative instruments that qualify for derivative accounting treatment as either assets or liabilities and measures those instruments at fair value unless they qualify for, and we elect, the normal purchases and normal sales scope exception (“NPNS”).

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Derivatives designated for any of the elective accounting treatments must meet specific, restrictive criteria both at the time of designation and on an ongoing basis.

The Company has generally applied the NPNS exception to its forward physical grain purchase contracts.

The Company has generally applied the NPNS exception for certain of its forward physical grain purchase contracts.

NPNS contracts are accounted for using the accrual method of accounting;

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

Changes in fair value of these derivatives are recognized immediately in the Consolidated Statements of Income within Net sales , Cost of sales or Selling, general and administrative expense , depending on the risk they are intended to mitigate.

Changes in fair value of these derivatives are recognized immediately in the Consolidated Statements of Income within Net sales , Cost of sales or SG&A expense , depending on the risk they are intended to mitigate.

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.

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Actual results could differ from those estimates.

We make significant estimates in regard to receivables collectability;

inventory valuation;

realization of deferred tax assets;

We make significant estimates in regard to realization of deferred tax assets;

valuation of long-lived assets;

valuation of contingent liabilities, liabilities subject to compromise and self-insurance liabilities;

valuation of pension and other postretirement benefits obligations;

and valuation of acquired businesses.

Recent Accounting Pronouncements Adopted in 2022

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326):

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

The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual right to receive cash.

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

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement , new accounting guidance to improve the effectiveness of disclosures related to fair value measurements.

The new guidance removes certain disclosure requirements related to transfers between Level 1 and Level 2 of the fair value hierarchy along with the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements.

Additions to the disclosure requirements include more quantitative information related to significant unobservable inputs used in Level 3 fair value measurements and gains and losses included in other comprehensive income.

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

In August 2018, the FASB issued ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20):

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 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.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance , which requires annual disclosures for transactions with a government authority that are accounted for by a grant or contribution model.

The guidance requires disclosure about the nature of certain government assistance received, the accounting treatment for the transactions and the effect of the transactions on the financial statements.

The guidance is effective for annual periods beginning after December 15, 2021, with early adoption permitted.

The adoption of this guidance did not have a material impact on our Condensed Consolidated Financial Statements.

Recent Accounting Pronouncements Adopted in 2021

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , along with several updates, which, in an effort to increase transparency and comparability among organizations utilizing leasing, requires an entity that is a lessee to recognize the assets and liabilities arising from operating leases on the balance sheet.

This guidance also requires disclosures about the amount, timing and uncertainty of cash flows arising from leases.

In transition, the entity may elect to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach or the beginning of the period of adoption using a cumulative-effect adjustment approach.

We adopted the new standard on December 31, 2018 and recognized and measured leases at the beginning of the period of adoption.

We elected the package of practical expedients available under the transition guidance which, among other things, allows the carry-forward of historical lease classification.

The Company also elected the practical expedient allowing use of hindsight in assessing the lease term.

We made an accounting policy election to not apply the new guidance to leases with a term of 12 months or less and will recognize those payments in the Consolidated Statement of Income on a straight-line basis over the lease term.

We implemented a system solution for administering our leases and facilitating compliance with the new guidance.

Adoption of the standard had a material impact on our Consolidated Balance Sheets as a result of the increase in assets and liabilities from recognition of operating lease assets and operating lease liabilities.

However, the standard did not have a material impact on our Consolidated Statement of Income.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities , an accounting standard update that simplifies the application of hedge accounting guidance in current U.S.

GAAP and improves the reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements.

Among the simplification updates, the standard eliminates the requirement in current U.S.

GAAP to separately recognize periodic hedge ineffectiveness.

Mismatches between the changes in value of the hedged item and hedging instrument may still occur but they will no longer be separately reported.

The standard requires the presentation of the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is reported.

The standard is effective for annual and interim reporting periods beginning after December 15, 2018, but early adoption is permitted.

We have adopted this standard as of December 31, 2018.

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

In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income , an accounting standard update that allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the U.S.

Tax Cuts and Jobs Act.

The Company will not reclassify the stranded tax effects associated with the U.S.

Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings.

We adopted this standard as of December 31, 2018.

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

In July 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting , an accounting standard update to improve non-employee share-based payment accounting.

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

The accounting standards update is effective as of the beginning of our 2019 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company adopted no accounting pronouncements in 2021.

Recent Accounting Pronouncements Not Yet Adopted as of December 25, 2022

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The new guidance will ease the transition to new reference rates by allowing entities to update contracts and hedging relationships without applying many of the contract modification requirements specific to those contracts.

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.

We currently have hedging transactions and debt agreements that reference LIBOR and will apply the new guidance as these contracts are modified to reference other rates.

The provisions of the new guidance are 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 March 2021, the U.K.

Financial Conduct Authority announced that the intended cessation date of USD LIBOR would be June 30, 2023.

As a result, in December 2022, the FASB issued ASU 2022-06, Deferral of the Sunset Date of Topic 848 , which extends the sunset date of Reference Rate Reform (Topic 848) from December 31, 2022 to December 31, 2024.

We currently have debt agreements that reference LIBOR and we will apply the new guidance as these contracts are modified to reference other rates.

The Company does not expect implementation to have a material impact on our Condensed Consolidated Financial Statements.

In September 2022, the FASB issued ASU 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations , which requires disclosure of the existence of supplier financing programs.

The guidance requires disclosure about the nature of the supplier financing agreements, including key terms and payment timing and determination of amounts, the accounting treatment for the transactions and the effect of the transactions on the financial statements, as well as any assets pledged or guarantees provided to the providers of the financing programs.

The provisions of the new guidance will be effective for years beginning after December 15, 2022 with the requirement to add rollforward disclosures for years beginning after December 15, 2023.

The Company plans to adopt this guidance effective December 26, 2022 and is assessing the impacts on our Condensed Consolidated Financial Statements.

BUSINESS ACQUISITIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pilgrim’s Food Masters

On September 24, 2021, the Company acquired 100.0 % of the equity of the Kerry Consumer Foods’ meats and meals businesses, collectively known as PFM, for cash of £ 698.8 million, or $ 958.9 million.

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

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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.

Transaction costs incurred in conjunction with this acquisition were approximately $ 19.3 million.

These costs were expensed as incurred and are reflected within SG&A 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.

Net sales and net income generated by the acquired business during 2022 totaled $ 1.0 billion and $ 8.4 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.

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

and Europe reportable segment.

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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

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

Cash and cash equivalents $ 113

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Total consideration transferred $ 958,907

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

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

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

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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:

The following unaudited pro forma information presents the combined financial results for the Company and PFM for 2022, 2021 and 2020 as if the acquisition had been completed at the beginning of 2020:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2022 2021 2020

(In thousands, except per share amounts)

Net sales $ 17,468,377 $ 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

Net income attributable to Pilgrim's Pride Corporation 746,599 19,389 92,991

Net income attributable to Pilgrim's Pride Corporation per common share - diluted $ 3.11 $ 0.08 $ 0.38

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.

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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.

Transaction costs were immaterial, these costs were expensed as incurred and are reflected within SG&A 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.

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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 100.0 % 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.

Tulip, which has subsequently changed its name to Pilgrim’s Pride Ltd.

(“PPL”), is a leading, integrated prepared pork supplier headquartered in Warwick, U.K.

The acquisition solidifies Pilgrim’s as a leading European food company, creating one of the largest integrated prepared foods businesses in the U.K.

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

and Europe reportable segment.

Transaction costs incurred in conjunction with the acquisition were approximately $ 1.4 million.

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

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

and Europe reportable segment.

The fair values recorded were determined based upon various external and internal valuations.

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

Cash and cash equivalents $ 6,854

Trade accounts and other receivables 146,423

Inventories 104,211

Prepaid expenses and other current assets 6,579

Operating lease assets 5,613

Property, plant and equipment 329,711

Identified intangible assets 40,418

Other assets 14,647

Total assets acquired 654,456

Accounts payable 110,296

Other current liabilities 55,830

Operating lease liabilities 5,613

Deferred tax liabilities 16,804

Pension obligations 18,435

Other long-term liabilities 1,056

Total liabilities assumed 208,034

Total identifiable net assets 446,422

Gain on bargain purchase ( 53,134 )

Total consideration transferred $ 393,288

The Company performed a valuation of the assets and liabilities of PPL as of October 15, 2019.

Significant assumptions used in the valuation and the bases for their determination are summarized as follows:

Property, plant and equipment, net .

Property, plant and equipment at fair value gave consideration to the highest and best use of the assets.

The valuation of PPL’s real property improvements and the majority of its personal property was based on the cost approach.

The valuation of PPL’s land, as if vacant, and certain personal property assets was based on the market or sales comparison approach.

Customer relationships .

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

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 %.

Income taxes were estimated at 18.0 % of pre-tax income in 2020 and 17.0 % of pre-tax income thereafter and net cash flows attributable to PPL’s existing customers were discounted using a rate of 22.0 %.

The resulting customer relationships intangible asset has a fair value of $ 40.4 million and a useful life of 11 years.

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

FAMPAT/Plan Pro

On April 1, 2020, Avícola Pilgrim’s Pride de Mexico S.A.

acquired 100 % of the equity of FAMPAT S.A.

and Plan Pro Restaurantes S.A.

(together, “FAMPAT/Plan Pro”) for an aggregate purchase price of 70.4 million Mexican pesos, or $ 3.0 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 produce value-added products such as taquitos, enchiladas and pizza, bringing additional breadth and diversity to the Company ’ s product portfolio.

T he results of operations and financial position of FAMPAT/Plan Pro have been included in the consolidated results of operations and financial position of the Company from the date of acquisition.

The FAMPAT/Plan Pro operations are included in the Company’s Mexico reportable segment.

The allocation of the purchase price reflects fair value using Level 3 unobservable inputs and resulted in a fair value of goodwill of $ 2.2 million at the acquisition date, which is not deductible for income tax purposes.

The values recorded were determined based on a valuation using management’s estimates and assumptions.

REVENUE RECOGNITION

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

Year Ended December 27, 2020

Fresh Prepared Export Other Total

(In thousands)

$ 6,137,264 $ 714,563 $ 306,478 $ 337,712 $ 7,496,017

and Europe 1,594,373 1,237,486 297,414 145,019 3,274,292

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

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

Contract Costs

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The Company receives payment from customers based on terms established with the customer.

Payments are typically due within two weeks of delivery.

There are rarely contract assets related to costs incurred to perform in advance of scheduled billings.

Payments are typically due within 14 to 30 days of delivery.

Revenue contract liabilities relate to payments received in advance of satisfying the performance under the customer contract.

The revenue contract liability relates to customer prepayments and the advanced consideration received from governmental agency contracts for which performance obligations to the end customer have not been satisfied.

The revenue contract liabilities relate to customer prepayments and the advanced consideration, such as cash, received from governmental agency contracts for which performance obligations to the end customer have not been satisfied.

Changes in the revenue contract liability balances for the years ended December 25, 2022 and December 26, 2021 were as follows:

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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.

Additionally, the Company leases equipment, over-the-road transportation vehicles and other assets in all three reportable segments.

Additionally, the Company leases equipment, over-the-road transportation vehicles

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and other assets in all three reportable segments.

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

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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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The following table presents components of lease expense (in thousands).

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

Operating lease cost, finance lease amortization and finance lease interest are respectively included in Cost of sales, SG&A expense and Interest expense, net of capitalized interest in the Consolidated Statements of Income.

For the Year Ended

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Future minimum lease payments under noncancelable leases as of December 25, 2022 are as follows (in thousands):

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Operating Leases Finance Leases

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Present value of lease liabilities $ 309,923 $ 3,624

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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There is not an outstanding interest rate swap contract at the end of the reporting year because this interest rate contract expired during the second quarter.

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

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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.

Changes in fair value of each derivative are recognized immediately in the Consolidated Statements of Income within Net sales , C ost of sales , SG&A 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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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”).

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

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

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Cash collateral posted with brokers (a)

33,771 22,459

Derivatives Coverage (b) :

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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)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Type of Contract (a)

December 25, 2022 December 26, 2021 December 27, 2020 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

Foreign currency derivatives gain (loss) $ ( 35,586 ) $ 12,806 $ ( 6,637 ) Foreign currency transaction losses (gains)

Commodity derivative gain (loss) 53,899 50,404 47,554 Cost of sales

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

Sales contract derivative gain (loss) 8,985 ( 12,691 ) ( 209 ) Net sales

Total $ 27,298 $ 50,519 $ 40,708

1 unchanged sentence

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

Gain (Loss) Recognized in Other Comprehensive Loss

December 25, 2022 December 26, 2021 December 27, 2020

3 unchanged sentences

Total $ 1,817 $ 383 $ 3,664

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Gain (Loss) Reclassified from AOCL into Income

December 25, 2022 December 26, 2021

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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.

Interest rates swap derivatives — — 98 — — 631

Foreign currency derivatives ( 3,194 ) 851 — 1,372 ( 55 ) —

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

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

As of December 25, 2022, there were immaterial pre-tax deferred net losses on foreign currency derivatives recorded in AOCL that are expected to be reclassified to the Condensed Consolidated Statements of Income during the next twelve months..

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

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

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Related Party Transactions.”

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Inventories consisted of the following:

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Total inventories $ 1,990,184 $ 1,575,658

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INVESTMENTS IN SECURITIES

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Gross realized gains during 2022 and 2021 related to the Company’s available-for-sale securities totaled $ 7.1 million and $ 5.4 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 2022 and 2021 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 2022 and 2021 are disclosed in “Note 14.

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Total $ 1,005,245 $ 350,364 $ ( 18,357 ) $ 1,337,252

Identified intangible assets consisted of the following:

December 27, 2020 Additions Amortization Currency Translation December 26, 2021

I ntangible assets consisted of the following:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 26, 2021 Amortization Disposals Currency Translation December 25, 2022

(In thousands)

Carrying amount:

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

Trade names not subject to amortization $ 609,713 $ — $ — $ ( 60,689 ) $ 549,024

Trade names subject to amortization 114,268 — — ( 2,211 ) 112,057

Customer relationships 455,459 — — ( 27,797 ) 427,662

5 unchanged sentences

Total $ 963,243 $ ( 33,738 ) $ — $ ( 83,485 ) $ 846,020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 27, 2020 Additions Amortization Currency Translation December 26, 2021

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Carrying amount:

Trade names not subject to

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

Trade names subject to

amortization 78,343 — — — 78,343

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

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Non-compete agreements 3 years

The Company recognized amortization expense related to identified intangible assets of $ 26.4 million in 2021, $ 22.7 million in 2020 and $ 22.9 million in 2019.

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 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.

There were no indicators present that required the Company to test the recoverability of the aggregate carrying amount of its identified intangible assets subject to amortization at that date.

The Company recognized amortization expense related to intangible assets of $ 33.7 million in 2022, $ 26.4 million in 2021 and $ 22.7 million in 2020.

The Company expects to recognize amortization expense associated with intangible assets of $ 30.8 million in 2023, $ 30.8 million in 2024, $ 30.8 million in 2025, $ 30.8 million in 2026 and $ 24.1 million in 2027.

As of December 25, 2022, 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 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 intangible assets not subject to amortization at that date.

As of December 25, 2022, the Company assessed if events or changes in circumstances indicated that the aggregate carrying amount of its intangible assets subject to amortization might not be recoverable.

There were no indicators present that required the Company to test the recoverability of the aggregate carrying amount of its intangible assets subject to amortization at that date.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PROPERTY, PLANT AND EQUIPMENT

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PP&E, net $ 2,940,846 $ 2,917,806

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recognized depreciation expense of $ 369.4 million, $ 354.4 million and $ 314.4 million during 2022, 2021 and 2020, respectively.

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During 2022, the Company sold certain PP&E for $ 35.5 million and recognized a gain of $ 18.9 million.

PP&E sold in 2022 consisted of a farm in Mexico and other miscellaneous equipment.

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

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 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.

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As of December 25, 2022, the carrying amount of these idled assets was $ 30.6 million based on depreciable value of $ 168.2 million and accumulated depreciation of $ 137.6 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.

During 2022, the Company recognized an impairment loss on PP&E of $ 3.6 million incurred as a result of planned restructuring activities.

Additional information regarding restructuring activities is included in “Note 18.

Restructuring-Related Activities.”

As of December 25, 2022, 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.

There were no indicators present that required the Company to test the recoverability of the aggregate carrying amount of its property, plant and equipment held for use at that date.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CURRENT LIABILITIES

8 unchanged sentences

Accounts payable to related parties (a)

12,155 22,317

Revenue contract liabilities (b)

5 unchanged sentences

79,222 82,947

Taxes 68,163 67,812

Insurance and self-insured claims 72,453 64,697

Accrued sales rebates 55,002 35,613

Taxes 33,550 68,163

Interest and debt-related fees 32,433 31,810

Derivative liabilities (d)

DOJ agreement — 110,524

18,917 31,866

Other accrued expenses 201,994 147,981

5 unchanged sentences

Revenue Recognition.”

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18 unchanged sentences

Total deferred 21,295 ( 86,391 ) 37,336

$ 61,122 $ 66,755 $ 161,009

Total $ 278,935 $ 61,122 $ 66,755

The effective tax rate for 2022 was 27.2 % compared to 66.2 % for 2021 and 41.2 % for 2020.

6 unchanged sentences

DOJ agreement — — 14.3

Mexico tax audit 3.8 — —

Intercompany financing ( 1.9 ) ( 14.1 ) ( 9.5 )

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Total 27.2 % 66.2 % 41.2 %

Included in the Mexico tax audit is an increase of 3.8 % in the effective tax rate related to the Mexican tax authority’s claim that Avicola Pilgrim’s Pride de Mexico, S.A.

should have considered dividends paid out of its subsidiaries as partially taxable in tax years 2009 and 2010.

The amount was recorded during the year ended December 25, 2022.

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.

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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.

Significant components of the Company’s deferred tax liabilities and assets are as follows:

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Operating lease liabilities 76,914 88,028

Advance payments 68,361 —

Interest expense limitations 37,353 —

Other 33,785 10,666

7 unchanged sentences

As of December 25, 2022, 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 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.

As of December 25, 2022, the Company’s valuation allowance is $ 64.4 million, of which $ 3.9 million relates to Moy Park operations, $ 6.9 million relates to PPL operations, $ 0.4 million relates to Mexico operations, $ 30.5 million relates to Onix Investments UK Limited, an indirect subsidiary of Pilgrim’s, $ 10 million relates to Puerto Rico operations, $ 11.8 million relates to U.S.

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

4 unchanged sentences

As of December 25, 2022, the Company had approximately $ 6.1 million of state tax credit carry forwards that begin to expire in 2023.

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 years ended December 25, 2022 and December 26, 2021, there is a tax effect of $( 2.5 ) million and $( 8.2 ) million, respectively, reflected in other comprehensive loss.

For the years ended December 25, 2022 and December 26, 2021, there are immaterial tax effects reflected in income tax expense due to excess tax benefits and shortfalls related to stock-based compensation.

7 unchanged sentences

Decrease for lapse in statute of limitations ( 6,473 ) ( 657 )

Decrease for tax positions of prior years ( 134 ) —

Unrecognized tax benefits, end of year $ 27,585 $ 20,242

15 unchanged sentences

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 25, 2022 December 26, 2021

(In thousands)

Senior notes payable, net of discount of 3.50 %

Senior notes payable at 3.50 %

2032 $ 900,000 $ 900,000

3 unchanged sentences

2027 846,582 845,866

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 4.33 %

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

LIBOR or EURIBOR plus 1.25 % to 2.00 %

Mexico Credit Facility (defined below) with notes payable at

TIIE Rate plus 1.50 %

and Europe Revolving Facility (defined below) with notes payable at SONIA plus 1.25 %

Mexico Credit Facility (defined below) with notes payable at TIIE Rate plus 1.50 %

Secured loans with payables at weighted average of 3.34 %

4 unchanged sentences

Capitalized financing costs ( 29,265 ) ( 29,951 )

Long-term debt, less current maturities, net of capitalized

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

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

On September 29, 2017, the Company completed an add-on offering of $ 250.0 million of these senior notes.

The issuance price of this add-on offering was 102.0 %, which created gross proceeds of $ 255.0 million.

The additional $ 5.0 million will be amortized over the remaining life of the senior notes.

On March 7, 2018, the Company completed another add-on offering of $ 250.0 million of these senior notes (together with the senior notes issued in March 2015 and September 2017, the “Senior Notes due 2025”).

The issuance price of this add-on offering was 99.25 %, which created gross proceeds of $ 248.1 million.

The $ 1.9 million discount will be amortized over the remaining life of the senior notes.

Each issuance of the Senior Notes due 2025 is treated as a single class for all purposes under the 2015 Indenture (defined below) and have the same terms.

The Senior Notes due 2025 are governed by, and were issued pursuant to, an indenture dated as of March 11, 2015 by and among the Company, its guarantor subsidiaries and Regions Bank, as trustee (the “2015 Indenture”).

The 2015 Indenture provides, among other things, that the Senior Notes due 2025 bear interest at a rate of 5.75 % per annum from the date of issuance until maturity, payable 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.

Long-term debt, less current maturities, net of capitalized financing costs $ 3,166,432 $ 3,191,161

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Future minimum principal payments as of December 25, 2022 are as follows (in thousands):

For the fiscal years ending December:

2023 $ 24,453

Senior Notes Due 2027

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

add-on offering was 97.25 %, which created gross proceeds of $ 243.1 million.

The issuance price of this add-on offering was 97.25 %, which created gross proceeds of $ 243.1 million.

The $ 6.9 million discount will be amortized over the remaining life of the Senior Notes due 2027.

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.

Senior Notes Due 2031

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 Company used the net proceeds, together with cash on hand, to redeem previously issued senior notes.

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

4 unchanged sentences

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 22, 2022, the Company announced expiration and receipt of requisite consents in its consent solicitation for certain amendments to its Senior Notes due 2031.

The proposed amendments conform certain provisions and restrictive covenants in each indenture to reflect PPC investment grade status.

The proposed amendments permanently eliminated certain covenants for the Company, including limitation on incurrence of additional debt, issuance of capital stock, restricted payments, asset sales, restrictions on distributions, affiliate transactions, guarantees of debt by restricted subsidiaries and provisions related to mergers and consolidation.

In addition, provisions related to limitation on liens, sale and leaseback transactions, substitution of the company and measuring compliance were amended.

Senior Notes Due 2032

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.

Credit Facility, to finance the acquisition of the Kerry Consumer Foods’ meats and meals businesses (now Pilgrim’s Food Masters) 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

On September 22, 2022, the Company announced expiration and receipt of requisite consents in its consent solicitation for certain amendments to its Senior Notes due 2032.

The proposed amendments conform certain provisions and restrictive covenants in each indenture to (i) reflect PPC investment grade status and (ii) the corresponding provisions and restrictive covenants set forth in the indenture governing its Senior Notes due 2032.

In addition, provisions related to limitation on liens, sale and leaseback transactions, substitution of the company and measuring compliance were amended.

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, 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 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 “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”).

The Company used the proceeds from the term loan commitment under the U.S.

Credit Facility, together with cash on hand, to repay the outstanding loans under 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.

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

Credit Facility resulting in

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 Facilities

On August 9, 2021, the Company and certain of the Company’s subsidiaries entered into a Fifth Amended and Restated Credit Agreement (the “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 provides for an $ 800.0 million revolving credit commitment and a term loan commitment of up to $ 700.0 million (the “Term Loans”).

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.

The revolving loan commitment under the 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.

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

Installments of principal in amounts predetermined by CoBank, ACB are required to be made on a quarterly basis prior to the maturity date of the Term Loans beginning in January 2022.

As of December 25, 2022, the Company had outstanding borrowings under the term loan commitment of $ 480.1 million.

As of December 25, 2022, the Company had outstanding letters of credit and available borrowings under the revolving credit commitment of $ 35.0 million and $ 765.0 million, respectively.

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.

Outstanding borrowings under the revolving loan commitment and the Term Loans bear interest at a per annum rate, based on the 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 %.

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.

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.

All obligations under the 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 U.S.

Credit Facility.

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

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

Credit Facility.

Moy Park Bank of Ireland Revolving Facility Agreement

On June 2, 2018, Moy Park Holdings (Europe) Ltd.

and its subsidiaries entered into an unsecured multicurrency revolving facility agreement (the “Bank of Ireland Facility Agreement”) with the Governor and Company of the Bank of Ireland, as agent, and the other lenders party thereto.

The Bank of Ireland Facility Agreement provides for a multicurrency revolving loan commitment of up to £ 100.0 million.

The multicurrency revolving loan commitments under the Bank of Ireland Facility Agreement mature on June 2, 2023.

Outstanding borrowings under the Bank of Ireland Facility Agreement bear interest at a rate per annum equal to the sum of (1) LIBOR or, in relation to any loan in euros, EURIBOR, plus (2) a margin, ranging from 1.25 % to 2.00 % based on Leverage (as defined in the Bank of Ireland Facility Agreement).

All obligations under the Bank of Ireland Facility Agreement are guaranteed by certain of Moy Park’s subsidiaries.

As of December 26, 2021, the U.S.

dollar-equivalent loan commitment and borrowing availability were both $ 134.1 million.

As of December 26, 2021, there were no outstanding borrowings under the Bank of Ireland Facility Agreement.

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

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

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

and Europe Revolving Facility

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.

On June 24, 2022, Moy Park Holdings (Europe) Ltd.

(“MPH(E)”) and other Pilgrim’s entities located in the U.K.

and Republic of Ireland entered into an unsecured multicurrency revolving facility agreement (the “U.K.

and Europe Revolver Facility”) with the Governor and Company of the Bank of Ireland, as agent, and the other lenders party thereto.

and Europe Revolver Facility provides for a multicurrency revolving loan commitment of up to £ 150.0 million.

The loan commitment matures on June 24, 2027.

Outstanding borrowings bear interest at the (1) current index interest rate, depending on the currency of the borrowing, plus (2) a margin, ranging from 1.25 % to 2.00 % based on leverage (as defined in the U.K.

and Europe Revolver Facility).

All obligations under this agreement are guaranteed by certain of the Company’s subsidiaries.

As of December 25, 2022, both the U.S.

dollar-equivalent loan commitment and borrowing availability were $ 124.5 million and there were no outstanding borrowings under this agreement.

and Europe Revolver Facility contains representations and warranties, covenants, indemnities and conditions, in each case, that the Company believes are customary for transactions of this type.

Pursuant to the terms of the agreement, the Company is required to meet certain financial and other restrictive covenants.

Additionally, the Company 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 U.K.

and Europe Revolver Facility.

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

and Europe Revolver Facility.

Mexico Credit Facility

11 unchanged sentences

The following tables provide information regarding the changes in accumulated other comprehensive loss during 2022 and 2021:

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

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 Gains (Losses) on Available-for-Sale Securities Total

(In thousands)

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

Other comprehensive income (loss)

before reclassifications ( 55,541 ) 405 27,598 — ( 27,538 )

Amounts reclassified from accumulated

other comprehensive loss to net income — ( 1,594 ) 1,740 — 146

Other comprehensive income (loss) before reclassifications ( 297,066 ) ( 1,718 ) 6,383 ( 1 ) ( 292,402 )

Amounts reclassified from accumulated other comprehensive loss to net income — 4,118 1,043 ( 13 ) 5,148

Currency translation — ( 1,197 ) — — ( 1,197 )

Net current year other comprehensive

income (loss) ( 55,541 ) ( 1,174 ) 29,338 — ( 27,377 )

Net current year other comprehensive income (loss) ( 297,066 ) 1,203 7,426 ( 14 ) ( 288,451 )

Balance, end of year $ ( 269,825 ) $ ( 1,162 ) $ ( 65,447 ) $ ( 14 ) $ ( 336,448 )

3 unchanged sentences

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

Other comprehensive income (loss)

before reclassifications 83,890 3,823 ( 31,724 ) 55 56,044

Amounts reclassified from accumulated

other comprehensive loss to net income — ( 2,664 ) 1,128 ( 55 ) ( 1,591 )

Other comprehensive income (loss) before reclassifications ( 55,541 ) 405 27,598 — ( 27,538 )

Amounts reclassified from accumulated other comprehensive loss to net income — ( 1,594 ) 1,740 — 146

Currency translation — 15 — — 15

Net current year other comprehensive

income (loss) 83,890 1,215 ( 30,596 ) — 54,509

Net current year other comprehensive income (loss) ( 55,541 ) ( 1,174 ) 29,338 — ( 27,377 )

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

2 unchanged sentences

(In thousands)

Realized gain on settlement of foreign currency

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

Realized gain (loss) on settlement of foreign currency

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

Realized loss on settlement of interest rate swap

derivatives classified as cash flow hedges ( 631 ) ( 209 ) Interest expense, net of capitalized interest

Realized gain (loss) on settlement of foreign currency derivatives classified as cash flow hedges $ ( 3,193 ) $ 1,359 Net sales

Realized gain (loss) on settlement of foreign currency derivatives classified as cash flow hedge ( 851 ) 709 Cost of sales

Realized loss on settlement of interest rate swap derivatives classified as cash flow hedges ( 98 ) ( 631 ) Interest expense, net of capitalized interest

Realized gain on sale of securities 17 — Interest income

Amortization of pension and other postretirement

plan actuarial losses (b)

Amortization of pension and other postretirement plan actuarial losses (b)

( 1,381 ) ( 2,278 ) Miscellaneous, net

10 unchanged sentences

On October 31, 2018, the Company’s Board of Directors approved a $ 200.0 million share repurchase authorization.

The Company repurchased shares through open market purchase.

The Company repurchased shares through open market purchases.

As of December 25, 2022, the Company repurchased approximately 6.3 million shares under this program with a market value of approximately $ 113.4 million.

2 unchanged sentences

This program expired on February 6, 2021.

On March 8, 2022, the Company’s Board of Directors approved a $ 200.0 million share repurchase authorization.

The Company repurchased shares through open market purchases.

As of September 25, 2022, the Company repurchased approximately 7.5 million shares under this plan with a market value of approximately $ 199.6 million.

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restrictions on Dividends

Both the Fifth U.S.

Both the U.S.

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

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

Additionally, the U.K.

and Europe Revolver Facility prohibits MPH(E) and other Pilgrim’s entities located in the U.K.

and Republic of Ireland to, among other things, make payments and distributions to the Company.

PENSION AND OTHER POSTRETIREMENT BENEFITS

36 unchanged sentences

2022 2021 2022 2021

Change in projected benefit obligation:

(In thousands)

Change in projected benefit obligation (In thousands)

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

Interest cost 6,777 5,763 23 18

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

Actuarial gains ( 106,909 ) ( 14,535 ) ( 184 ) ( 33 )

Benefits paid ( 12,867 ) ( 13,483 ) ( 16 ) —

Curtailments and settlements ( 5,053 ) ( 6,714 ) — ( 232 )

Prior service cost — 20 — —

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

Currency translation gain ( 18,863 ) ( 2,163 ) — —

Projected benefit obligation, end of year $ 236,147 $ 373,062 $ 1,169 $ 1,346

1 unchanged sentence

2022 2021 2022 2021

Change in plan assets:

(In thousands)

Change in plan assets (In thousands)

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

4 unchanged sentences

Expenses paid from assets ( 337 ) ( 425 ) — —

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

Currency translation loss ( 18,329 ) ( 2,471 ) — —

Fair value of plan assets, end of year $ 210,133 $ 326,409 $ — $ —

1 unchanged sentence

2022 2021 2022 2021

Funded status:

(In thousands)

Funded status (In thousands)

Unfunded benefit obligation, end of year $ ( 26,014 ) $ ( 46,653 ) $ ( 1,169 ) $ ( 1,346 )

1 unchanged sentence

2022 2021 2022 2021

Amounts recognized in the Consolidated Balance Sheets as of end of year:

(In thousands)

Amounts recognized in the Consolidated Balance Sheets as of end of year (In thousands)

Current liabilities $ ( 841 ) $ ( 6,063 ) $ ( 177 ) $ ( 157 )

3 unchanged sentences

2022 2021 2022 2021

Amounts recognized in accumulated other

comprehensive loss at end of year:

(In thousands)

Net actuarial loss $ 58,143 $ 95,522 $ 118 $ 174

Amounts recognized in accumulated other comprehensive loss at end of year (In thousands)

Net actuarial loss (gain) $ 48,121 $ 58,143 $ ( 66 ) $ 118

The accumulated benefit obligation for the Company’s defined benefit pension plans was $ 236.1 million and $ 373.1 million as of December 25, 2022 and December 26, 2021, respectively.

13 unchanged sentences

Amortization of past service cost 17 19 — — — —

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

Net cost (income) $ ( 212 ) $ 215 $ 640 $ 23 $ 41 $ 43

Economic Assumptions

8 unchanged sentences

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 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 discount rate assumptions used to determine future pension obligations at December 25, 2022 and December 26, 2021 were based on the Empower Above Mean Curve, which was designed by Empower to provide a means for plan sponsors to value the liabilities of their postretirement benefit plans.

The Empower Above Mean 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.

37 unchanged sentences

Fixed income funds 1 % 19 %

Liability driven investments 13 % — %

Real estate 8 % 6 %

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

Plans is 25 % overseas equity, 25 % diversified alternatives, 15 % real estate, 15 % equity-linked liability driven investments, 15 % other liability driven investments and 5 % cash for the Tulip Pension Plan;

and 37 % global equities, 20 % equity-linked liability driven investments, 18 % liability driven investments, 15 % corporate bonds and 10 % cash for the Geo Adams Group Pension Fund.

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

32 unchanged sentences

— 31,767 — 31,767 — 71,883 — 71,883

Fixed income funds (e)

Fixed income funds (g)

— 3,081 — 3,081 — 60,914 — 60,914

1 unchanged sentence

— 16,297 — 16,297 — 18,601 — 18,601

Liability driven investments (i)

— 28,726 — 28,726 — — — —

Total assets $ 12,072 $ 198,061 $ — $ 210,133 $ 6,166 $ 320,243 $ — $ 326,409

13 unchanged sentences

These investment options typically carry more risk, including liquidity risk, than fixed income investment options.

(i) This category is comprised of investments that seek to ensure availability of funds to cover current and future liabilities.

These investments are typically focused on both the assets and liabilities of the plan.

Benefit Payments

4 unchanged sentences

Therefore, anticipated benefits with respect to these plans will come from the Company’s own assets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pension Benefits Other

7 unchanged sentences

Total $ 159,808 $ 1,240

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As required by funding regulations or laws, the Company anticipates contributing $ 0.8 million and less than $ 0.2 million to its pension and other postretirement plans, respectively, during 2023.

4 unchanged sentences

(In thousands)

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

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

Amortization ( 1,381 ) ( 2,276 ) ( 1,503 ) — ( 2 ) —

4 unchanged sentences

Currency translation loss 82 308 2,557 — — —

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

Net actuarial loss (gain), end of year $ 48,121 $ 58,143 $ 95,522 $ ( 66 ) $ 118 $ 174

Risk Management

17 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Defined Contribution Plans

9 unchanged sentences

INCENTIVE COMPENSATION

The Company sponsors short-term incentive plans that provides the grant of either cash or stock-based bonus awards payable upon achievement of specified performance goals.

Full-time, salaried exempt employees of the Company’s U.S.

operations who are selected by the administering committee are eligible to participate in the Pilgrim’s Short Term Incentive

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Plan (“STIP”).

Certain full-time, salaried employees of the Company’s Mexico operations are eligible to participate in the Pilgrim’s Mexico Incentive Plan (“PMIP”).

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 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 sponsors short-term incentive plans that provide the grant of either cash or stock-based bonus awards payable upon achievement of specified performance goals.

As of December 25, 2022, the Company has accrued $ 61.8 million, $ 6.9 million and $ 3.5 million related to cash bonus awards that are recognized in the U.S., U.K & Europe, and Mexico reportable segments, 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”).

8 unchanged sentences

As of December 25, 2022, we have in reserve approximately 0.9 million shares of common stock for future issuance under the 2019 LTIP.

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

Award Adjustment Awards Forfeited to Date

2009 LTIP RSU 3/1/2018 $ 24.93 Service (a) Stock NA 163,764 — ( 51,491 )

2009 LTIP RSU 3/1/2018 $ 24.93 Performance/Service (b) Stock NA 217,253 ( 53,376 ) ( 83,527 )

2009 LTIP RSU 3/1/2018 $ 24.93 Performance/Service (c) Cash $ 27.55 66,272 ( 17,863 ) ( 15,235 )

2009 LTIP RSU 5/10/2018 $ 21.54 Service (d) Stock NA 8,358 — —

2009 LTIP RSU 1/7/2019 $ 16.47 Performance/Service (e) Stock NA 414,620 39,620 ( 198,103 )

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

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 1/8/2021 $ 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.

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 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.

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

(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 or her departure from the Company’s Board of Directors.

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

(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.

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

(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.

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.

(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:

23 unchanged sentences

Vested ( 266 ) 23.25 ( 153 ) 19.48 ( 66 ) 24.93

Forfeited ( 686 ) 23.44 ( 325 ) 25.95 ( 227 ) 21.51

Forfeited awards reinstated (forfeited) 300 23.52 ( 686 ) 23.44 ( 325 ) 25.95

Outstanding at end of year 993 $ 22.00 554 $ 20.40 584 $ 22.12

18 unchanged sentences

This cost is expected to be recognized over a weighted average period of 1.60 years.

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

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

FAIR VALUE MEASUREMENTS

25 unchanged sentences

The methods and significant assumptions used to estimate the fair value of financial instruments and any changes in methods or significant assumptions from prior periods are also required to be disclosed.

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

The carrying amounts and estimated fair values of our debt obligations recorded in the Consolidated Balance Sheets consisted of the following:

December 25, 2022 December 26, 2021

9 unchanged sentences

( 900,000 ) ( 726,498 ) ( 900,000 ) ( 915,120 )

Variable-rate term note payable at 5.00 %, at Level 3 inputs

( 480,078 ) ( 489,857 ) — —

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

3 unchanged sentences

Derivative assets were recorded at fair value based on quoted market prices and are included in the line item Prepaid expenses and other current assets on the Consolidated Balance Sheets.

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 2 fixed-rate debt obligation was based on the quoted

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

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.

Consolidated Balance Sheets.

The fair values of the Company’s Level 2 fixed-rate debt obligation was based on the quoted market price at December 25, 2022 or December 26, 2021, as applicable.

The fair value of the Company’s Level 3 variable-rate term note payable was based on discounted cash flow using weighted average cost of debt of 5.0% as of December 25, 2022.

The fair value of the Company’s level 3 variable-rate term not payable approximated the carrying value as of December 26, 2021.

The fair value of the Company’s Level 3 fixed-rate secured loans were based on discounted cash flow using weighted average cost of debt of 0.5 % as of December 25, 2022 and December 26, 2021.

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.

RESTRUCTURING-RELATED ACTIVITIES

In 2022, the Company initiated a restructuring initiative to phase out and reduce processing volumes at multiple production facilities throughout the U.K.

and Europe reportable segment.

Implementation of this initiative is expected to result in total pre-tax charges of approxim ately $ 58.0 million, and approximately $ 53.0 million of these charges are estimated to result in cash outlays.

These activities were initiated in the fourth quarter of 2022 and are expected to be substantially completed by the end of the second quarter of 2023.

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

Type of Cost Moy Park Pilgrim’s Pride Ltd.

Pilgrim’s Food Masters Total Estimated Amount Expected to be Incurred

(In thousands)

Contract termination $ 9,437 $ 833 $ 2,170 $ 12,440

Asset impairment 3,559 — — 3,559

Severance 8,244 6,160 5,303 19,707

Employee retention benefits 1,398 276 — 1,674

Other employee costs 301 181 121 603

Lease termination 458 642 1,808 2,908

Inventory adjustment 470 615 — 1,085

Other charges (a)

7,543 1,386 7,110 16,039

Total estimated costs, net $ 31,410 $ 10,093 $ 16,512 $ 58,015

(a) Comprised of other costs directly related to the restructuring initiatives including Moy Park flock depletion, Pilgrim’s Pride Ltd.

prepayment balances and maintenance contracts exit costs and Pilgrim’s Pride Ltd.

consulting fees.

During 2022, the Company recognized the following expenses and paid the following cash related to each restructuring initiative:

Expenses Cash Outlays

(In thousands)

Moy Park $ 19,325 $ 10,526

Pilgrim’s Pride Ltd.

Pilgrim’s Food Masters 1,001 341

$ 30,466 $ 13,457

These expenses are reported in the line item Restructuring activities on the Consolidated Statements of Income.

The following table reconciles liabilities and reserves associated with each restructuring initiative from initiative inception to December 25, 2022.

Ending liability balances for employee termination benefits and other charges are reported in the line item Accrued expenses and other current liabilities in our Consolidated Balance Sheets.

The ending reserve balance for inventory impairments is reported in the line item Inventories in our Consolidated Balance Sheets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restructuring charges incurred Cash payments and disposals Currency translation Liability or reserve as of December 25, 2022

(In thousands)

Employee retention benefits $ 9,590 $ ( 9,452 ) $ ( 138 ) $ —

Other employee costs 18 (17) (1) —

Asset impairment 3,559 ( 1,053 ) ( 115 ) 2,391

Contract termination 122 — — 122

Inventory adjustments 5 ( 4 ) — 1

Other charges 6,031 — ( 6 ) 6,025

Total $ 19,325 $ ( 10,526 ) $ ( 260 ) $ 8,539

Pilgrim’s Pride Ltd.

Restructuring charges incurred Cash payments and disposals Currency translation Liability or reserve as of December 25, 2022

(In thousands)

Employee retention benefits $ 994 $ ( 984 ) $ ( 10 ) $ —

Severance 7,211 ( 1,606 ) ( 102 ) 5,503

Inventory adjustments 621 — ( 6 ) 615

Lease termination 808 — ( 8 ) 800

Other charges 506 — ( 5 ) 501

Total $ 10,140 $ ( 2,590 ) $ ( 131 ) $ 7,419

Pilgrim’s Food Masters

Restructuring charges incurred Cash payments and disposals Currency translation Liability or reserve as of December 25, 2022

(In thousands)

Severance $ 959 $ ( 300 ) $ ( 20 ) $ 639

Other charges 42 ( 41 ) ( 1 ) —

Total $ 1,001 $ ( 341 ) $ ( 21 ) $ 639

RELATED PARTY TRANSACTIONS

7 unchanged sentences

2,855 2,439 2,540

Combo, Mercado de Congelados 1,368 887 207

JBS Chile Ltda.

JBS Global (UK) Ltd.

Other related parties 2,868 1,721 1,112

Total sales to related parties $ 29,947 $ 21,456 $ 17,880

4 unchanged sentences

$ 156,452 $ 210,657 $ 142,615

Penasul UK LTD 6,697 — —

Seara Meats B.V.

44,364 4,722 8,138

JBS Global (UK) Ltd.

Planterra Food Company 152 — —

Vivera Topholding B.V.

Penasul UK LTD 13,516 6,697 —

JBS Asia CO Limited 7,762 5 —

JBS Toledo NV — 155 307

Other related parties 1,476 1,054 829

Total cost of goods purchased from related parties $ 223,570 $ 223,135 $ 151,582

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 25, 2022 December 26, 2021 December 27, 2020

3 unchanged sentences

$ 91,568 $ 97,713 $ 39,025

Seara Food Europe Holdings 13 9 77

JBS Chile Ltda.

Other related parties 97 13 9

Total expenditures paid by related parties $ 91,665 $ 97,726 $ 39,034

4 unchanged sentences

$ 53,065 $ 42,951 $ 16,266

Other related parties 5,514 — —

Total expenditures paid on behalf of related parties $ 58,579 $ 42,951 $ 16,266

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 25, 2022 December 26, 2021 December 27, 2020

3 unchanged sentences

$ 1,592 $ 1,961 $ 650

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

December 25, 2022 December 26, 2021

3 unchanged sentences

$ 2,062 $ 1,059

JBS Australia Pty.

Combo, Mercado de Congelados 84 —

JBS Chile Ltda.

Seara Meats B.V.

Other related parties 389 286

Total accounts receivable from related parties $ 2,512 $ 1,345

4 unchanged sentences

$ 7,434 $ 21,628

JBS Asia Co Limited 2,099 —

Seara Meats B.V.

Penasul UK LTD 940 147

JBS Chile Ltda.

JBS Global (UK) Ltd.

Other related parties 117 8

Total accounts payable to related parties $ 12,155 $ 22,317

(a) The Company routinely execute transactions to both purchase products from JBS USA Food Company (“JBS USA”) and sell products to them.

(a) The Company routinely execute transactions to both purchase products from JBS USA Food Company and sell products to them.

As of December 25, 2022, approximately $ 0.9 million of goods from JBS USA were in transit and not reflected on our Consolidated Balance Sheets.

8 unchanged sentences

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

The net tax payable for tax year 2020 was accrued in 2020 and was paid in 2021.

REPORTABLE SEGMENTS

5 unchanged sentences

reportable segment.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We conduct separate operations in the continental U.S.

10 unchanged sentences

Additional information regarding reportable segments is as follows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 25, 2022 (a)

8 unchanged sentences

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

For the year 2022, the U.K.

and Europe reportable segment had intercompany sales of eggs to the U.S.

reportable segment of $ 5.3 million.

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

14 unchanged sentences

Interest income ( 9,028 ) ( 6,056 ) ( 7,305 )

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

Foreign currency transaction losses (gains) 30,817 ( 9,382 ) 760

Gain on bargain purchase — — 3,746

10 unchanged sentences

Total $ 403,110 $ 380,824 $ 337,104

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 25, 2022 December 26, 2021 December 27, 2020

5 unchanged sentences

Total $ ( 487,110 ) $ 381,671 $ 354,762

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 25, 2022 December 26, 2021

(In thousands)

Total assets:

$ 6,847,209 $ 6,390,845

24 unchanged sentences

Long-lived assets, as used in ASC 280-10-50-41, implies hard assets that cannot be readily removed.

The following table sets forth net sales attributable to each of our primary product lines and markets served with those products.

We based the table on our internal sales reports and their classification of products.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

(In thousands)

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

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

Other Products 109,964 145,019 99,023

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

Information regarding net sales attributable to each of our primary product lines and markets served with those products is included in “Note 2.

Revenue Recognition.” We based the table on our internal sales reports and their classification of products.

COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

Purchase Obligations

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

As of December 25, 2022, the Company was party to outstanding purchase contracts totaling $ 588.1 million payable in 2023, $ 115.2 million payable in 2024, $ 2.1 million payable in 2025, $ 2.0 million payable in 2026 and $ 14.4 million payable thereafter.

Operating Leases

5 unchanged sentences

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.

2 unchanged sentences

Tax Claims and Proceedings

During 2014 and 2015, the Mexican tax authorities opened a review of Avícola Pilgrim’s Pride de Mexico, S.A.

(“PPC Mexico”) in regards to tax years 2009 and 2010, respectively.

In both instances, the Mexican tax authorities claim that controlled company status did not exist for certain subsidiaries because PPC Mexico did not own 50% of the shares in voting rights of Incubadora Hidalgo, S.

During 2014 and 2015, the Mexican Tax Administration Service (“SAT”) opened a review of Avícola Pilgrim’s Pride de Mexico, S.A.

(“Avícola”) with regard to tax years 2009 and 2010.

In both instances, the SAT claims that controlled company status did not exist for certain subsidiaries because Avícola did not own 50% of the shares in voting rights of Incubadora Hidalgo, S.

de R.L de C.V.

and Comercializadora de Carnes de México S.

de R.L de C.V.

(both in 2009) and Pilgrim’s Pride, S.

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.

Amounts under appeal are $ 29.6 million and $ 17.9 million for tax years 2009 and 2010, respectively.

As a result, according to the SAT, Avícola 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).

Avícola appealed the opinion, and on January 31, 2023, the appeal as to tax year 2009 was dismissed by the Mexico Supreme Court.

Accordingly, the Company has accrued $39.2 million with regard to both tax years in connection with the dismissal.

PPC recognized this expense in Income tax expense in the Consolidated Statement of Income statement for year ended December 25, 2022.

On May 12, 2022, the Mexican Tax Authorities issued tax assessments against Pilgrim’s Pride, S.

and Provemex Holdings, LLC in connection with PPC’s acquisition of Tyson de México.

Following the acquisition, PPC re-domiciled Provemex Holdings, LLC from the U.S.

The tax authorities claim that Provemex Holdings, LLC was a Mexican entity at the time of the acquisition and, as a result, was obligated to pay taxes on the sale.

The Mexican subsidiaries of PPC are currently appealing these assessments.

Amounts under appeal are approximately $ 255.0 million for such tax assessments.

No loss has been recorded for these amounts at this time.

In re Broiler Chicken Antitrust Litigation

Between September 2, 2016 and October 13, 2016, a series of purported federal class action lawsuits styled as In re Broiler Chicken Antitrust Litigation, Case No.

1:16-cv-08637 were filed with the U.S.

District Court for the Northern District of Illinois (“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”).

Between September 2, 2016 and October 13, 2016, a series of federal class action lawsuits were filed with the U.S.

1:16-cv-08637 (“Broiler Antitrust 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 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 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 (“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 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.

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.

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.

District Court for the Eastern District of Oklahoma (the “Oklahoma Court”) alleging, among other things, a conspiracy to reduce competition for grower services and depress the price paid to growers.

Plaintiffs allege violations of the Sherman Antitrust Act and the Packers and Stockyards Act and seek, among other relief, treble damages.

The complaint was consolidated with a subsequently filed class action complaint 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 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

The class plaintiffs have filed three consolidated amended complaints:

the direct purchasers (“Broiler DPPs”), the commercial and institutional indirect purchasers (“Broiler CIIPPs”), and the end-user consumer indirect purchasers (“Broiler EUCPs”).

Between December 8, 2017 and September 1, 2021, 82 individual direct action complaints were filed with the Illinois Court by individual direct purchaser entities (“Broiler DAPs”) naming PPC as a defendant, the allegations of which largely mirror those in the class action complaints, though some added allegations of price

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 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 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 (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.

fixing and bid rigging on certain sales.

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 on September 12, 2023.

The schedule for the rest of the plaintiffs is still awaiting an order from the Illinois Court.

On May 27, 2022, the Illinois Court certified each of the three classes.

PPC has entered into agreements to settle all claims made by the Broiler DPPs, Broiler CIIPPs, and Broiler EUCPs, for an aggregate total of $ 195.5 million, each of which has received final approval from the Illinois Court.

PPC continues to defend itself against the Broiler DAPs as well as parties that have opted out of the class settlements (collectively, the “Broiler Opt Outs”).

PPC will seek reasonable settlements where they are available.

To date, PPC has recognized an expense of $ 514.4 million to cover settlements with various Broiler Opt Outs.

PPC recognized these settlement expenses in SG&A expense in the Consolidated Statements of Income for the years ended December 25, 2022 and December 26, 2021.

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 (“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”).

They allege that the defendants conspired to fix and depress the compensation paid to Plant Workers in violation of the Sherman Act and seek damages from January 1, 2009 to the present.

On November 12, 2019, the Maryland Court ordered the consolidation of the four cases for pretrial purposes.

The defendants (including PPC) jointly moved to dismiss the consolidated complaint on November 22, 2019.

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.

The plaintiffs subsequently filed amended complaints on November 2, 2020 re-naming PPC and the other dismissed defendants.

The plaintiffs are a putative class of poultry processing plant production and maintenance workers (“Poultry Workers Class”) and allege that the defendants conspired to fix and depress the compensation paid to Poultry Workers Class in violation of the Sherman Antitrust Act.

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 “UFCW Litigation”).

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 Broilers Litigation and the Indictment (defined below).

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 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.

On June 14, 2021, PPC entered into an agreement to settle all claims made by the Poultry Workers Class for $ 29.0 million, though the agreement is still subject to final approval by the Maryland Court.

On February 16, 2022, the plaintiffs filed a an amended complaint, which extended the relevant period, added defendants, and included additional workers in the class.

PPC recognizes these settlement expenses within SG&A expenses in the Consolidated Statements of Income.

On January 27, 2017, a purported class action on behalf of broiler chicken farmers was brought against PPC and other chicken producers in the U.S.

The complaint was consolidated with several subsequently filed consolidated amended class action complaints and styled as In re Broiler Chicken Grower Litigation, Case No.

The defendants (including PPC) jointly moved to dismiss the consolidated amended complaint, which the Oklahoma Court denied as to PPC and certain other defendants.

PPC, therefore, continues to litigate against the putative class plaintiffs.

On October 20, 2016, Patrick Hogan, acting on behalf of himself and a putative class of certain PPC stockholders, filed a class action complaint in the U.S.

District Court for the District of Colorado (“Colorado Court”) against PPC and its named executive officers styled as Hogan v.

Pilgrim’s Pride Corporation, et al., No.

16-CV-02611 (“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.

On July 31, 2020, defendants filed a motion to dismiss, which the Colorado Court granted on April 19, 2021.

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 was opened in the U.S.

Court of Appeals for the Tenth Circuit, which is now fully briefed, including oral argument on January 17, 2023, and is awaiting a decision.

Between March 9, 2017 and April 17, 2017, a series of putative stockholder derivative class actions were brought against all of PPC’s directors and two executives, William Lovette and Fabio Sandri, in the Nineteenth Judicial District Court for the County of Weld in Colorado (“Weld County Court”).

The complaints allege, 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 Broiler Antitrust Litigation and issuing false and misleading statements as alleged in the Hogan Litigation.

The complaints were amended and consolidated, adding former PPC executives Jayson Penn, Roger Austin, and Jimmie Little as named defendants, and styled as DiSalvio and Brima v.

Tomazoni, et al., 2017 CV 30207.

Following a series of stays in the action, PPC filed a motion to dismiss, which the Weld County Court granted in its entirety and with prejudice on December 12, 2022.

On December 27, 2022, the plaintiffs filed a motion for reconsideration, which PPC plans to oppose in due course.

State Matters

From February 21, 2017 through May 4, 2021, the Attorneys General for multiple U.S.

states have issued civil investigative demands (“CIDs”).

The CIDs request, 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 Attorneys General in these states in producing documents pursuant to the CIDs.

On September 1, 2020, February 22, 2021, and October 28, 2021, the Attorneys General in New Mexico (State of New Mexico v.

Koch Foods, et al., D-101-CV-2020-01891), Alaska (State of Alaska v.

Agri Stats, Inc., et al., 3AN-21-04632), and

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 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.

On June 4, 2020, PPC learned that Mr.

Penn pleaded not guilty to the charges.

Effective June 15, 2020, Mr.

Penn began a paid leave of absence from PPC.

In connection with Mr.

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.

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.

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 (the “Superseding Indictment” and together with the Indictment, the “First Indictment”).

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 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.

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.

Washington (State of Washington v.

Tyson Foods Inc., et al., 21-2-14174-5), respectively, filed complaints against PPC based on allegations similar to those asserted in the Broiler Antitrust Litigation.

PPC has answered all of the complaints and each case is now in discovery.

Federal Matters

On February 9, 2022, the Company lea rned that the DOJ opened a civil investigation into human resources antitrust matters, and on October 6, 2022 the Company learned that the DOJ opened a civil investigation into grower contracts and payment practices.

The Company has begun, and will continue, to cooperate with the DOJ in its investigations.

BUSINESS INTERRUPTION INSURANCE

On December 10, 2021, the Company experienced a tornado in Mayfield, Kentucky that significantly damaged two hatcheries and a feed mill.

The Company maintains certain insurance coverage, including business interruption insurance, intended to cover such circumstances.

In the year ended December 25, 2022, the Company received $ 11.0 million in proceeds from business interruption insurance.

In the year ended December 25, 2022, the Company recognized $ 26.4 million in income from business interruption insurance on the Consolidated Statement of Income.

MARKET RISKS AND CONCENTRATIONS

7 unchanged sentences

The Company does not believe it has significant concentrations of credit risk in its trade accounts receivable.

As of December 26, 2021, we employed almost 59,400 persons.

As of December 25, 2022, we employed over 61,500 people.

Approximately 46.4 % of the Company’s employees were covered under collective bargaining agreements.

2 unchanged sentences

We believe our relationship with our employees and union leadership is satisfactory.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At any given time, we will likely be in some stage of contract negotiations with various collective bargaining units.

3 unchanged sentences

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.

PILGRIM’S PRIDE CORPORATION

24 unchanged sentences

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