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Item 8. Financial Statements and Supplementary Data

2015-03-25 compared with 2013-06-18 · 909 added, 567 removed, 809 unchanged (65% of the section changed)

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INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements

Consolidated Statements of Income for the Fiscal Years 2013, 2012 and 2011

Consolidated Statements of Comprehensive Income for the Fiscal Years 2013, 2012 and 2011

Consolidated Balance Sheets as of April 28, 2013 and April 29, 2012

Consolidated Statements of Cash Flows for the Fiscal Years 2013, 2012 and 2011

Consolidated Statements of Shareholders’ Equity for the Fiscal Years 2013, 2012 and 2011

Report of Independent Registered Public Accounting Firms on Consolidated Financial Statements

Consolidated Statements of Income - for the Year Ended December 28, 2014 (Successor), September 27, 2013 to December 29, 2013 (Successor);

April 29, 2013 to September 26, 2013 (Predecessor) and for the Twelve Months Ended April 28, 2013 and April 29, 2012 (Predecessor)

Consolidated Statements of Comprehensive Income - for the Year Ended December 28, 2014 (Successor), September 27, 2013 to December 29, 2013 (Successor);

April 29, 2013 to September 26, 2013 (Predecessor) and for the Twelve Months Ended April 28, 2013 and April 29, 2012 (Predecessor)

Consolidated Balance Sheets as of December 28, 2014 and December 29, 2013

Consolidated Statements of Cash Flows - for the Year Ended December 28, 2014 (Successor);

September 27, 2013 to December 29, 2013 (Successor);

April 29, 2013 to September 26, 2013 (Predecessor) and for the Twelve Months Ended April 28, 2013 and April 29, 2012 (Predecessor)

Consolidated Statements of Shareholder's Equity - for the Year Ended December 28, 2014 (Successor);

September 27, 2013 to December 29, 2013 (Successor);

April 29, 2013 to September 26, 2013 (Predecessor) and for the Twelve Months Ended April 28, 2013 and April 29, 2012 (Predecessor)

Notes to Consolidated Financial Statements

Schedule II—Valuation and Qualifying Accounts

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON

INTERNAL CONTROL OVER FINANCIAL REPORTING

The Board of Directors and Shareholders of Smithfield Foods, Inc

We have audited Smithfield Foods, Inc.

and subsidiaries' internal control over financial reporting as of April 28, 2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria).

Smithfield Foods, Inc.

and subsidiaries' management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Annual Report on Internal Control over Financial Reporting in Item 9A.

Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.

REPORT OF DELOITTE & TOUCHE LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Board of Directors and Shareholder of Smithfield Foods, Inc.

Smithfield, Virginia

We have audited the accompanying consolidated balance sheets of Smithfield Foods Inc.

and subsidiaries (the "Company") as of December 28, 2014 and December 29, 2013 , and the related consolidated statements of income, comprehensive income, shareholder's equity, and cash flows for the year ended December 28, 2014 and the periods from September 27, 2013 to December 29, 2013 (Successor) and from April 29, 2013 to September 26, 2013 (Predecessor).

Our audits also included the financial statement schedule listed in the Index at Item 15.

These financial statements and financial statement schedule are the responsibility of the Company's management.

Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

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

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion .

An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

We believe that our audit provides a reasonable basis for our opinion.

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

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

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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

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

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

In our opinion, Smithfield Foods, Inc.

and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of April 28, 2013, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Smithfield Foods, Inc.

and subsidiaries as of April 28, 2013 and April 29, 2012, and the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended April 28, 2013 of Smithfield Foods, Inc.

and subsidiaries and our report dated June 18, 2013 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Richmond, Virginia

June 18, 2013

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

ON CONSOLIDATED FINANCIAL STATEMENTS

The Board of Directors and Shareholders of Smithfield Foods, Inc.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Smithfield Foods Inc.

and subsidiaries as of December 28, 2014 and December 29, 2013, and the results of their operations and their cash flows for the year ended December 28, 2014 and the periods from September 27, 2013 to December 29, 2013 (Successor) and from April 29, 2013 to September 26, 2013 (Predecessor), in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 2 to the financial statements, on September 26, 2013, WH Group Limited (WH Group), formerly Shuanghui International Holdings Limited, acquired all of the outstanding shares of the Company and WH Group's cost of acquiring the Company has been pushed-down to establish a new accounting basis for the Company.

/s/ D ELOITTE & T OUCHE LLP

March 25, 2015

REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Board of Directors and Shareholder of Smithfield Foods, Inc.

Smithfield, Virginia

We have audited the accompanying consolidated balance sheets of Smithfield Foods, Inc.

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Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Smithfield Foods, Inc.

/s/ Ernst & Young LLP

/s/ E RNST & Y OUNG LLP

Richmond, Virginia

June 18, 2013

June 18, 2013, except for Note 13, as to which the date is March 25, 2015

SMITHFIELD FOODS, INC.

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CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share data)

(in millions)

Twelve Months Ended

December 28, 2014

September 27 - December 29, 2013

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

Cost of sales

Selling, general and administrative expenses

Gain on fire insurance recovery

Merger related costs

(Income) loss from equity method investments

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Interest expense

Loss on debt extinguishment

Non-operating (gain) loss

Income before income taxes

Income tax expense

Net income per share:

Weighted average shares outstanding:

Effect of dilutive shares

See Notes to Consolidated Financial Statements

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(in millions)

Twelve Months Ended

December 28, 2014

September 27 - December 29, 2013

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

Other comprehensive income (loss):

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Translation adjustment

Tax benefit (expense)

Pension accounting:

Net actuarial (losses) gains

Net actuarial gains (losses)

Reclassification of losses into net income

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Hedge accounting:

Net derivative gains

Reclassification of gains into net income

Net derivative gains (losses)

Reclassification of net (gains) losses into net income

Tax benefit (expense)

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Intangible assets, net

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES AND SHAREHOLDER'S EQUITY

Current liabilities:

Current portion of long-term debt and capital lease obligations

Accounts payable

Accrued expenses and other current liabilities

Accounts payable

Total current liabilities

Long-term debt and capital lease obligations

Deferred income taxes, net

Net long-term pension liability

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Commitments and contingencies

Shareholders' equity:

Preferred stock, $1.00 par value, 1,000,000 authorized shares

Common stock, $.50 par value, 500,000,000 authorized shares;

138,919,056 and 157,408,077 issued and outstanding

Shareholder's equity:

Common stock, no par value, 1,000 authorized shares;

1,000 issued and outstanding

Additional paid-in capital

Stock held in trust

Retained earnings

Accumulated other comprehensive loss

Total shareholders’ equity

Accumulated other comprehensive income (loss)

Total shareholder's equity

Noncontrolling interests

Total liabilities and shareholders' equity

Total liabilities and shareholder's equity

See Notes to Consolidated Financial Statements

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(in millions)

Twelve Months Ended

December 28, 2014

September 27 - December 29, 2013

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

Cash flows from operating activities:

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Depreciation and amortization

Gain on fire insurance recovery

Impact of inventory fair value step-up on cost of sales

Deferred income taxes

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Cash flows from investing activities:

Acquisition of Smithfield Foods, Inc.

Capital expenditures

Business acquisition, net of cash acquired

Insurance proceeds

Net (expenditures) proceeds from breeding stock transactions

Proceeds from sale of property, plant and equipment

Advance note and other

Net cash flows from investing activities

Cash flows from financing activities:

Net proceeds from equity contributions

Proceeds from the issuance of long-term debt

Principal payments on long-term debt and capital lease obligations

Proceeds from Securitization Facility

Payments on Securitization Facility

Net borrowings (repayments) on revolving credit facilities and notes payables

Repurchase of common stock

Net proceeds from the issuance of common stock and stock option exercises

Change in cash collateral

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY

(in millions)

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Retained Earnings

Accumulated Other Comprehensive Loss

Total Shareholders' Equity

Accumulated Other Comprehensive Income (Loss)

Total Shareholder's Equity

Noncontrolling Interests

Balance, May 1, 2011

Common stock repurchased

Issuance of common stock

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Other comprehensive income, net of tax

Balance, May 1, 2011

Balance, April 29, 2012

Common stock repurchased

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Balance, April 28, 2013

Common stock repurchased

Issuance of common stock

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Other comprehensive loss, net of tax

Balance, April 28, 2013

Balance, September 26, 2013

See Notes to Consolidated Financial Statements

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY - (Continued)

(in millions)

Additional Paid-in Capital

Retained Earnings

Accumulated Other Comprehensive Income (Loss)

Total Shareholder's Equity

Noncontrolling Interests

Balance, September 27, 2013

Adjustment to redeemable noncontrolling interests

Comprehensive income:

Other comprehensive income, net of tax

Balance, December 29, 2013

Stock compensation expense

Adjustment to redeemable noncontrolling interests

Comprehensive income:

Other comprehensive loss, net of tax

Balance, December 28, 2014

See Notes to Consolidated Financial Statements

SMITHFIELD FOODS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unless otherwise stated, amounts presented in these notes to our consolidated financial statements are for all fiscal periods included.

Smithfield Foods, Inc., together with its subsidiaries ("Smithfield," "the Company,” “we,” “us” or “our”), is the largest hog producer and pork processor in the world.

We produce and market a wide variety of fresh meat and packaged meats products both domestically and internationally.

We conduct our operations through five reportable segments:

Fresh Pork, Packaged Meats, Hog Production, International and Corporate.

See Note 15 — Reportable Segments for additional information about changes to our reportable segments during the current year.

On September 26, 2013 (the Merger Date), pursuant to the Agreement and Plan of Merger dated May 28, 2013 (the Merger Agreement) with WH Group Limited, formerly Shuanghui International Holdings Limited, a corporation formed under the laws of the Cayman Islands hereinafter referred to as WH Group, the Company merged with Sun Merger Sub, Inc., a Virginia corporation and wholly owned subsidiary of WH Group (Merger Sub), in a transaction hereinafter referred to as the Merger.

As a result of the Merger, the Company survived as a wholly owned subsidiary of WH Group.

See Note 2 — Merger and Acquisitions for further information on the Merger.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and with the instructions to Form 10-K and Regulation S-X.

The information reflects all normal recurring adjustments which we believe are necessary to present fairly the financial position and results of operations for all periods included.

The Merger was accounted for as a business combination using the acquisition method of accounting.

WH Groups's cost of acquiring the Company has been pushed-down to establish a new accounting basis for the Company.

Accordingly, the consolidated financial statements are presented for two periods, Predecessor and Successor, which represent the accounting periods preceding and succeeding the completion of the Merger.

The Predecessor and Successor periods have been separated by a vertical line on the face of the consolidated financial statements to highlight the fact that the financial information for such periods has been prepared under two different historical-cost bases of accounting.

Certain prior year amounts have been reclassified to conform to current year presentation.

Change in Fiscal Year End

On January 16, 2014, the Company elected to change its fiscal year end from the 52 or 53 week period which previously ended on the Sunday nearest to April 30 to the 52 or 53 week period which ends on the Sunday nearest to December 31.

The change became effective at the end of the period ended December 29, 2013.

Unless otherwise noted, all references to 2014 in this report are to the twelve months ended December 28, 2014 .

For comparative purposes, the Consolidated Statements of Income for the eight months ended December 29, 2013 and December 30, 2012 are presented as follows:

Eight Months Ended

September 27 - December 29, 2013

April 29 - September 26, 2013

December 30, 2012

(in millions)

Cost of sales

Selling, general and administrative expenses

Merger related costs

Loss (income) from equity method investments

Operating profit

Interest expense

Loss on debt extinguishment

Income before income taxes

Income tax expense

Principles of Consolidation

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All intercompany transactions and accounts have been eliminated.

Consolidating the results of operations and financial position of variable interest entities for which we are the primary beneficiary does not have a material effect on sales, net income, or net income per diluted share, or on our financial position for the fiscal periods presented.

Consolidating the results of operations and financial position of variable interest entities for which we are the primary beneficiary does not have a material effect on sales, net income, or on our financial position for the fiscal periods presented.

Foreign currency denominated assets and liabilities are translated into U.S.

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Results of operations and cash flows in foreign currencies are translated into U.S.

dollars using the average exchange rate over the course of the fiscal year.

The effect of exchange rate fluctuations on the translation of assets and liabilities is included as a component of shareholders’ equity in accumulated other comprehensive loss and included in other comprehensive income for each period.

dollars using the average exchange rate over the course of the year.

The effect of exchange rate fluctuations on the translation of assets and liabilities is included as a component of shareholder's equity in accumulated other comprehensive income (loss) and included in other comprehensive income (loss) for each period.

Gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in selling, general and administrative expenses as incurred.

We recorded net gains on foreign currency transactions of $1.1 million in fiscal 2013 and net losses of $7.4 million and $0.4 million in fiscal 2012 and fiscal 2011 , respectively.

We recorded net losses on foreign currency transactions of $4.0 million in 2014, net gains of $0.2 million , $0.3 million and $1.1 million in the three months ended December 29, 2013 , the five months ended September 26, 2013 and the twelve months ended April 28, 2013 , respectively, and net losses of $7.4 million in the twelve months ended April 29, 2012 .

Our Polish operations have different fiscal period end dates.

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Actual results could differ from those estimates.

Our fiscal year consists of 52 or 53 weeks and ends on the Sunday nearest April 30.

All fiscal years included consisted of 52 weeks.

Cash and Cash Equivalents

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Based on our evaluation, we record reserves to reduce the related receivables to amounts we reasonably believe are collectible.

Our reserve for uncollectible accounts receivable was $14.6 million and $16.0 million as of April 28, 2013 and April 29, 2012 , respectively.

Our reserve for uncollectible accounts receivable was $7.5 million and $3.2 million as of December 28, 2014 and December 29, 2013 , respectively.

Inventories consist of the following:

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Total inventories

Livestock are generally valued at the lower of first-in, first-out cost or market, adjusted for changes in the fair value of livestock that are hedged.

Costs include purchase costs, feed, medications, contract grower fees and other production expenses.

Livestock are valued at the lower of the average cost of production or market and further adjusted for changes in the fair value of livestock that are hedged.

Costs include feed, medications, contract grower fees and other production expenses.

Fresh and packaged meats are valued based on USDA and other market prices and adjusted for the cost of further processing.

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Property, Plant and Equipment, Net

Property, plant and equipment is generally stated at historical cost, which includes the then fair values of assets acquired in business combinations, and depreciated on a straight-line basis over the estimated useful lives of the assets.

Assets held under capital leases are classified in property, plant and equipment, net and amortized over the lease term.

The amortization of assets held under capital leases is included in depreciation expense.

The cost of assets held under capital leases was $34.0 million and $34.0 million at April 28, 2013 and April 29, 2012 , respectively.

The assets held under capital leases had accumulated amortization of $3.1 million and $1.7 million at April 28, 2013 and April 29, 2012 , respectively.

Depreciation expense is included in either cost of sales or selling, general and administrative expenses, as appropriate.

Depreciation expense totaled $235.3 million , $238.6 million and $227.4 million in fiscal 2013 , 2012 and 2011 , respectively.

Property, plant and equipment is generally stated at historical cost and depreciated on a straight-line basis over the estimated useful lives of the assets.

Assets held under capital leases are classified in property, plant and equipment, net and depreciated over the lease term.

The depreciation of assets held under capital leases is included in depreciation expense.

The cost of assets held under capital leases was $28.5 million and $28.6 million at December 28, 2014 and December 29, 2013 , respectively.

The assets held under capital leases had accumulated depreciation of $1.2 million and $0.6 million at December 28, 2014 and December 29, 2013 , respectively.

Depreciation expense is included in either cost of sales or selling, general and administrative (SG&A) expenses, as appropriate.

Depreciation expense totaled $223.7 million , $53.7 million , $104.8 million , $235.3 million and $238.6 million in 2014 , the three months ended December 29, 2013 , the five months ended September 26, 2013 , the twelve months ended April 28, 2013 and the twelve months ended April 29, 2012 , respectively.

Interest is capitalized on property, plant and equipment over the construction period.

Total interest capitalized was $4.8 million , $2.8 million and $1.6 million in fiscal 2013 , 2012 and 2011 , respectively.

Total interest capitalized was $1.1 million , $0.4 million , $0.7 million , $4.8 million and $2.8 million in 2014 , the three months ended December 29, 2013 , the five months ended September 26, 2013 , the twelve months ended April 28, 2013 and the twelve months ended April 29, 2012 , respectively.

Property, plant and equipment, net, consists of the following:

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Based on the results of our annual goodwill impairment tests, as of our testing date, no impairment indicators were noted for all the periods presented.

The carrying amount of goodwill includes cumulative impairment losses of $6.0 million as of April 28, 2013 and April 29, 2012 .

Intangible assets consist of the following:

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We have determined that no impairments of our intangible assets existed for any of the periods presented.

Amortization expense for intangible assets was $3.1 million , $3.0 million and $3.2 million in fiscal 2013 , 2012 and 2011 , respectively.

As of April 28, 2013 , the estimated amortization expense associated with our intangible assets for each of the next five fiscal years is expected to be $3.4 million .

Amortization expense for intangible assets was $6.8 million , $1.7 million , $1.7 million , $3.1 million and $3.0 million in 2014 , the three months ended December 29, 2013 , the five months ended September 26, 2013 , the twelve months ended April 28, 2013 and the twelve months ended April 29, 2012 , respectively.

As of December 28, 2014 , the estimated amortization expense associated with our intangible assets for each of the next five years is expected to be $6.8 million .

Debt Issuance Costs, Premiums and Discounts

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We recognize the funded status of our defined benefit pension plans in the consolidated balance sheets.

We also recognize in other comprehensive income, the net of tax results of the gains or losses and prior service costs or credits that arise during the period but are not recognized in net periodic benefit cost.

These amounts are adjusted out of accumulated other comprehensive loss as they are subsequently recognized as components of net periodic benefit cost.

We measure our pension and other postretirement benefit plan obligations and related plan assets as of the last day of our fiscal year.

We measure our pension and other postretirement benefit plan obligations and related plan assets as of the last day of our year.

The measurement of our pension obligations and related costs is dependent on the use of assumptions and estimates.

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Changes in assumptions and future investment returns could potentially have a material impact on our expenses and related funding requirements.

We also recognize in other comprehensive income (loss), the net of tax results of the gains or losses and prior service costs or credits that arise during the period but are not recognized in net periodic benefit cost.

These amounts are adjusted out of accumulated other comprehensive income (loss) as they are subsequently recognized as components of net periodic benefit cost.

Self-Insurance Programs

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We accrue for contingent liabilities when an assessment of the risk of loss is probable and can be reasonably estimated.

We disclose contingent liabilities when the risk of loss is at least reasonably possible or probable.

We disclose contingent liabilities when the risk of material loss is at least reasonably possible or probable.

Our contingent liabilities contain uncertainties because the eventual outcome will result from future events.

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Promotional sponsorship costs are expensed as the promotional events occur.

Advertising costs totaled $143.1 million , $122.9 million and $120.1 million in fiscal 2013 , 2012 and 2011 , respectively, and are included in selling, general and administrative expenses.

Advertising costs totaled $165.8 million , $48.0 million , $63.5 million , $143.1 million and $122.9 million in 2014 , the three months ended December 29, 2013 , the five months ended September 26, 2013 , the twelve months ended April 28, 2013 and the twelve months ended April 29, 2012 , respectively, and are included in SG&A.

Shipping and Handling Costs

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Research and development costs are expensed as incurred.

Research and development costs totaled $80.9 million , $75.9 million and $47.0 million in fiscal 2013 , 2012 and 2011 , respectively.

Net Income per Share

We present dual computations of net income per share.

The basic computation is based on weighted average common shares outstanding during the period.

The diluted computation reflects the potentially dilutive effect of common stock equivalents, such as stock options and convertible notes, during the period.

We excluded stock based awards for approximately 2.1 million , 1.7 million and 1.8 million shares in fiscal 2013 , 2012 and 2011 , respectively, from the diluted computation because their effect would have been anti-dilutive.

American Skin Food Group, LLC

In September 2012 (fiscal 2013), we acquired a 70% controlling interest in American Skin Food Group, LLC (American Skin) for $24.2 million in cash, including post-closing adjustments for differences in American Skin's calendar 2012 earnings and working capital at closing from agreed-upon targets.

Located in Burgaw, North Carolina, American Skin manufactures and supplies pork rinds to the snack food industry.

By leveraging our coordinated sales and marketing team, we believe American Skin can expand into new markets both domestically and internationally, which could substantially increase current sales of approximately $25 million and net income of approximately $3 million annually over the next five to seven years with minimal additional plant investment.

The acquisition of American Skin was accounted for in the Pork segment using the acquisition method of accounting, which requires, among other things, that assets acquired, liabilities assumed and noncontrolling interests in the acquiree be recognized at their fair values as of the acquisition date.

The following table summarizes the fair values of the assets acquired, liabilities assumed and noncontrolling interests recognized as of the date of acquisition for American Skin:

Research and development costs totaled $75.3 million , $23.2 million , $31.9 million , $80.9 million and $75.9 million in 2014 , the three months ended December 29, 2013 , the five months ended September 26, 2013 , the twelve months ended April 28, 2013 and the twelve months ended April 29, 2012 , respectively.

Recent Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2013-11, Presentation of an Unrecognized Tax Benefit when a Net Operating Loss Carryforward, a Similar Tax Loss or a Tax Credit Carryforward Exists (ASU 2013-11).

This update does not have a significant impact on our consolidated condensed balance sheet.

In May 2014, the FASB and International Accounting Standards Board (IASB) issued Accounting Standards Update 2014-09, Revenues from Contracts with Customers (ASU 2014-09).

The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance.

The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The ASU applies to all contracts with customers, except those that are within the scope of other topics in the FASB Accounting Standards Codification.

Compared with current U.S.

GAAP, the ASU also requires significantly expanded disclosures about revenue recognition.

The new guidance is effective for fiscal year and interim periods within those years beginning after December 15, 2016 and early adoption is not permitted.

The guidance permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment.

The guidance is not currently effective for us and has not been applied to our financial statements.

We are currently in the process of evaluating the potential impact of future adoption but at this time do not anticipate it will have a material impact on our consolidated financial statements.

In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements-Going Concern (ASU 2014-15).

The new guidance is effective for annual reporting periods ending after December 15, 2016, and for annual and interim periods thereafter.

Early adoption is permitted.

The impact of adoption will not effect our consolidated financial statements.

MERGER AND ACQUISITIONS

WH Group Merger

On May 28, 2013, we entered into the Merger Agreement with WH Group and Merger Sub.

The Merger was consummated on the Merger Date, and as a result, Merger Sub merged with and into the Company, with the Company surviving as a wholly owned subsidiary of WH Group.

Upon completion of the Merger, all outstanding shares of Smithfield were cancelled and the Company's shareholders received $34.00 in cash (the Merger Consideration) for each share of common stock held prior to the effective time of the Merger.

Additionally, all outstanding stock-based compensation awards, both vested and unvested, were converted into the right to receive the Merger Consideration, less the exercise price of such awards, if any.

The total consideration paid in connection with the Merger was approximately $4.9 billion .

On July 31, 2013, Merger Sub issued $500.0 million aggregate principal amount of 5.25% senior notes due August 1, 2018 and $400.0 million aggregate principal amount of 5.875% senior notes due August 1, 2021 (together, the Merger Sub Notes).

Merger Sub incurred $20.4 million in transaction fees in connection with issuance of the Merger Sub Notes, which are being amortized over the life of the Merger Sub Notes.

As a result of the Merger and the transactions entered into in connection therewith, we have assumed the liabilities and obligations of Merger Sub, including Merger Sub's obligations under the Merger Sub Notes.

Proceeds from the Merger Sub Notes were held in escrow prior to the Merger Date and used in funding the Merger.

The proceeds were used to fund a portion of the total consideration paid , repay certain outstanding debt of the Company and pay certain transaction fees associated with the Merger.

WH Group is the majority shareholder of Henan Shuanghui Investment & Development Co., which is China's largest meat processing enterprise and China's largest publicly traded meat products company as measured by market capitalization.

WH Group is a pioneer in the Chinese meat processing industry with over 30 years of history.

WH Group's businesses include hog production, meat processing, fresh meat and packaged meats production and distribution.

The merging of WH Group's distribution network with our strong management team, leading brands and vertically integrated model will allow us to provide high-quality, competitively priced and safe U.S.

meat products to consumers in markets around the world.

WH Group's cost of acquiring the Company has been pushed-down to establish a new accounting basis for the Company.

The consolidated balance sheets, as of December 28, 2014 and December 29, 2013 , reflect various fair value estimates and analyses, including work performed by third-party valuation specialists.

This work was finalized during the third quarter of 2014 with no material adjustments.

The following is a summary of the allocation of the total purchase consideration to the estimated fair values of our assets acquired, liabilities assumed and noncontrolling interests by WH Group in the transaction:

(in millions)

Cash and cash equivalents

Accounts receivable, net

Property, plant and equipment, net

Intangible assets, net

Assets acquired

Accounts receivable

Prepaid expenses and other current assets

Property, plant and equipment

Intangible assets

Assets acquired by WH Group

Current portion of long-term debt and capital lease obligations

Accounts payable

Liabilities assumed

Noncontrolling interests

Purchase price

Intangible assets acquired include customer relationship assets, contractual rights and trademarks with fair values of $9.7 million , $2.6 million and $0.1 million , respectively.

The customer relationship assets and contractual rights will be amortized over useful lives of 15 years and 12 years , respectively.

Accrued expenses and other current liabilities

Long-term debt and capital lease obligations

Net long-term pension liability

Deferred income taxes, net

Other liabilities

Liabilities assumed by WH Group

Redeemable noncontrolling interests and noncontrolling interests

Total purchase consideration

Accounts receivable and accounts payable, as well as certain other current and non-current assets and liabilities, were valued at their existing carrying values as they approximated fair value of those items at the time of the Merger, based on management's judgments and estimates.

Inventories were valued using a net realizable value approach with the exception of manufacturing supplies and other inventories, which were valued using the replacement cost approach.

Property, plant and equipment have been valued using a combination of the market approach and the indirect cost approach which is based on current replacement and/or reproduction cost of the asset as new, less depreciation attributable to physical, functional and economic factors.

Intangible assets acquired include trademarks, customer relations assets, contractual relationships and rights with fair values of $1.3 billion , $55.0 million , $40.0 million and $3.0 million , resp ectively.

The customer relations assets, contractual relationships and rights will be amortized over useful lives of 14 y ears, 17 years and 12 yea rs, respectively.

The trademarks are not subject to amortization.

Trademarks, including trade names, have been valued using the relief from royalty method.

We utilized a bottoms-up approach to assess the appropriate royalty rates for trade names focused on consideration of the profitability of each trade name, the implied premium margin earned on branded versus private label sales of similar products for each trade name, market studies and third-party comparable licensing agreements.

Customer relations assets were determined using the multi-period excess earnings methodology utilizing our forecasted metrics and/or a market participant distributor model.

Contractual relationships were valued based on the time and associated costs that would be required to recreate the existing relationships in addition to the lost profits over this time period using the avoided costs or lost profits method.

Rights were also valued using an avoided costs or lost profits method.

The benefit obligation for both our qualified and non-qualified defined benefit pension plans was remeasured as of the Merger Date with the assistance of an independent third-party actuary.

Existing long-term debt assumed in the Merger was fair valued based on quoted market prices.

Long-term debt assumed included our outstanding 6.625% senior unsecured notes due August 2022 (the 2022 Notes) and our outstanding 7.75% senior unsecured notes due July 2017 (the 2017 Notes).

Deferred income tax assets and liabilities as of the Merger Date represent the expected future tax consequences of temporary differences between the fair values of the assets acquired and the liabilities assumed as a result of the Merger and their tax basis.

Goodwill reflects the amount of the total consideration paid that exceeded the fair value of the identifiable assets acquired, liabilities assumed and noncontrolling interests.

Goodwill recognized as a result of the Merger and is not deductible for tax purposes.

See Note 15 — Reportable Segments for the allocation of goodwill to our reportable segments.

In connection with the Merger, we incurred $23.9 million and $18.0 million of professional fees during the three months ended December 29, 2013 and the five months ended September 26, 2013 , respectively.

These fees are recognized in merger related costs on the consolidated statements of income.

In addition, Merger Sub deferred $17.3 million of debt issuance costs for a financing arrangement.

We recognized these deferred costs in interest expense during the three months ended December 29, 2013 upon termination of the financing arrangement following the Merger.

All of these charges are reflected in the results of our Corporate segment.

The following unaudited pro forma financial data summarizes the Company's results of operations as if the Merger had occurred as of April 30, 2012.

The pro forma data is for informational purposes only and may not necessarily reflect the actual results of operations had the Merger been consummated on April 30, 2012.

Eight Months Ended

Twelve Months Ended

December 29, 2013

April 28, 2013

(in millions and unaudited)

The most significant pro forma adjustments were to reflect the impact of fair value step-ups of both assets and liabilities (e.g., inventory, property, plant and equipment, long-term debt) and fees and expenses related to the Merger noted above.

Kansas City Sausage, LLC

In May 2013, we acquired a 50% interest in Kansas City Sausage Company, LLC (KCS), for $36.0 million in cash.

Upon closing, in addition to the cash purchase price, we advanced $10.0 million to the seller in exchange for a promissory note, which is secured by the remaining membership interests in KCS held by the seller (the Advance Note).

The Advance Note was recorded in other assets in the consolidated balance.

Additionally, we entered into a revolving loan agreement with KCS, under which we agreed to make loans from time to time up to an aggregate principal amount of $20.0 million .

The aggregate amount of any obligations incurred under the revolving loan agreement is secured by a first priority security interest in all of the assets of KCS.

KCS is a leading U.S.

sausage producer and sow processor with annual revenues exceeding $300.0 million in 2014.

The merging of KCS's low-cost, efficient operations and high-quality products with our strong brands and sales and marketing team should contribute growth to our packaged meats business.

KCS operates in Des Moines, Iowa and Kansas City, Missouri.

In Des Moines, KCS produces premium raw materials for sausage, as well as value-added products, including boneless hams and hides.

KCS is managed by its Board of Directors, which makes decisions that most significantly impact the economic performance of KCS.

We have the right to nominate and elect the majority of the members of the Board of Directors of KCS, and based on the associated voting rights, we have determined that we have a controlling financial interest in KCS.

As a result, the acquisition of our interest in KCS was accounted for in the Fresh Pork and Packaged Meats segments using the acquisition method of accounting, which requires, among other things, that assets acquired, liabilities assumed and noncontrolling interests in the acquiree be recognized at their fair values as of the acquisition date.

The purchase price allocation includes assets acquired, excluding goodwill, of $39.2 million , liabilities assumed of $10.7 million , goodwill of $43.5 million and redeemable noncontrolling interests of $36.0 million .

Our initial estimate of the fair value of the noncontrolling interests was measured based on market multiples for similar companies in our industry and consideration of the terms of the acquisition, which provide the noncontrolling interest holder the right to exercise a put option at any time after the fifth anniversary of the acquisition, which would obligate us to redeem their interest.

The noncontrolling interests is classified outside of equity as redeemable noncontrolling interests in the consolidated condensed balance sheet.

The redemption amount is the greater of $45.0 million or the result of a computed amount based on a fixed multiple of earnings.

We have elected to accrete changes in the redemption amount of the noncontrolling interest over the five year period until it becomes redeemable.

If the noncontrolling interests had been redeemable as of December 28, 2014 , the redemption amount would have been $45.0 million .

American Skin Food Group, LLC

In September 2012, we acquired a 70% controlling interest in American Skin Food Group, LLC (American Skin) for $24.2 million in cash.

Located in Burgaw, North Carolina, American Skin manufactures and supplies pork rinds to the snack food industry.

By leveraging our coordinated sales and marketing team, we believe American Skin can expand into new markets both domestically and internationally, which could substantially increase current sales of approximately $25.0 million and net income of approximately $3.0 million annually over the next five to seven years with minimal additional plant investment.

The acquisition of American Skin was accounted for in the Packaged Meats segment using the acquisition method of accounting.

The purchase price allocation includes assets acquired, excluding goodwill, of $18.7 million , liabilities assumed of $0.5 million , goodwill of $16.4 million and noncontrolling interests of $10.4 million .

Goodwill was recognized to reflect the amount of the enterprise fair value that exceeded the fair value of the identifiable assets acquired and liabilities assumed.

The amount of goodwill that is expected to be deductible for tax purposes is $10.5 million .

The fair value of the noncontrolling interests was measured based on market multiples for similar public companies and consideration of the terms of the acquisition, which provide the noncontrolling interest holders the right to exercise a put option, which would obligate us to redeem their interests.

The fair value of the noncontrolling interests was measured based on market multiples for similar public companies and consideration of the terms of the acquisition, which provide the noncontrolling interests holders the right to exercise a put option, which would obligate us to redeem their interests.

The redemption amount is based on a fixed multiple of earnings, which is consistent with the formula utilized in determining the purchase price for our 70% interest.

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Portsmouth, Virginia Plant

In November 2011 (fiscal 2012), we announced that we would shift the production of hot dogs and lunchmeat from The Smithfield Packing Company, Inc.'s (Smithfield Packing) Portsmouth, Virginia plant to our Kinston, North Carolina plant and permanently close the Portsmouth facility.

The Kinston facility will be expanded to handle the additional production and will incorporate state of the art technology and equipment, which is expected to produce significant production efficiencies and cost reductions.

The Kinston expansion will require an estimated $85 million in capital expenditures, substantially all of which had been incurred by the end of fiscal 2013..

The expansion of the Kinston facility and the closure of the Portsmouth facility are expected to be completed in the first half of fiscal 2014.

As a result of this decision, we performed an impairment analysis of the related assets at the Portsmouth facility in the second quarter of fiscal 2012 and determined that the net cash flows expected to be generated over the anticipated remaining useful life of the plant are sufficient to recover its book value.

In November 2011, we announced that we would shift the production of hot dogs and lunchmeat from The Smithfield Packing Company, Inc.'s (Smithfield Packing) Portsmouth, Virginia plant to our Kinston, North Carolina plant and permanently close the Portsmouth facility.

The Kinston facility was expanded to handle the additional production and incorporates state of the art technology and equipment, which is expected to produce significant production efficiencies and cost reductions.

The expansion of the Kinston facility and the closure of the Portsmouth facility were completed in the second half of calendar year 2013.

As a result of this decision, we performed an impairment analysis of the related assets at the Portsmouth facility in the second quarter of the twelve months ended April 29, 2012 and determined that the net cash flows expected to be generated over the anticipated remaining useful life of the plant are sufficient to recover its book value.

As such, no impairment existed.

However, we revised depreciation estimates to reflect the use of the related assets at the Portsmouth facility over their shortened useful lives.

As a result, we recognized accelerated depreciation charges of $4.4 million and $3.3 million in cost of sales during fiscal 2013 and fiscal 2012, respectively.

Also, in connection with this decision, we wrote-down inventory by $0.8 million in cost of sales and accrued $0.6 million for employee severance in selling, general and administrative expenses in the second quarter of fiscal 2012.

All of these charges are reflected in the Pork segment.

In January 2011 (fiscal 2011), we sold a portion of our Dalhart, Texas hog production assets to a crop farmer for net proceeds of $9.1 million and recognized a loss on the sale of $1.8 million in selling, general and administrative expenses in our Hog Production segment in the third quarter of fiscal 2011.

In April 2011 (fiscal 2011), we completed the sale of the remaining assets of our Dalhart, Texas operation and received net proceeds of $32.5 million .

As a result of the sale, we recognized a gain of $13.6 million , after allocating $8.5 million in goodwill to the asset group, in selling, general and administrative expenses in our Hog Production segment in the fourth quarter of fiscal 2011.

Goodwill was allocated to this business based on its fair value relative to the estimated fair value of our domestic hog production reporting unit.

The operating results and cash flows from these asset groups were not considered material for separate disclosure.

Oklahoma and Iowa

In January 2011 (fiscal 2011), we completed the sale of certain hog production assets located in Oklahoma and Iowa.

As a result of these sales, we received total net proceeds of $70.4 million and recognized gains totaling $6.9 million , after allocating $17.0 million of goodwill to these asset groups.

Goodwill was allocated to this business based on its fair value relative to the estimated fair value of our domestic hog production reporting unit.

The gains were recorded in selling, general and administrative expenses in our Hog Production segment in the third quarter of fiscal 2011.

The operating results and cash flows from these asset groups were not considered material for separate disclosure.

In the first half of fiscal 2011, we began reducing the hog population on certain hog farms in Missouri in order to comply with an amended consent decree.

The amended consent decree allows us to return the farms to full capacity upon the installation of an approved "next generation" technology that would reduce the level of odor produced by the farms.

The reduced hog raising capacity at these farms was replaced with third party contract farmers in Iowa.

In the first quarter of fiscal 2011, in connection with the anticipated reduction in finishing capacity, we performed an impairment analysis of these hog farms and determined that the book value of the assets was recoverable and thus, no impairment existed.

Based on the favorable hog raising performance experienced with these third party contract farmers and the amount of capital required to install "next generation" technology at our Missouri farms, we made the decision in the first quarter of fiscal 2012 to permanently idle certain of the assets on these farms.

Depreciation estimates were revised to reflect the shortened useful lives of the assets.

As a result, we recognized accelerated depreciation charges of $8.2 million in fiscal 2012.

These charges are reflected in the Hog Production segment.

Butterball, LLC (Butterball)

In June 2010 (fiscal 2011), we announced that we had made an offer to purchase our joint venture partner’s 51% ownership interest in Butterball and our partner’s related turkey production assets.

In accordance with Butterball’s operating agreement, our partner had to either accept the offer to sell or be required to purchase our 49% interest and our related turkey production assets, which we refer to below as our turkey operations.

In September 2010 (fiscal 2011), we were notified of our joint venture partner’s decision to purchase our 49% interest in Butterball and our related turkey production assets.

In December 2010 (fiscal 2011), we completed the sale of these assets for $167.0 million and recognized a gain of $0.2 million .

The gain was calculated as the cash selling price, net of costs to sell, less the carrying amount of the asset disposal group.

The operating results and cash flows from our turkey operations were not considered material for separate disclosure.

As a result, we recognized accelerated depreciation charges of $4.4 million and $3.3 million in cost of sales during the twelve months ended April 28, 2013 and the twelve months ended April 29, 2012 , respectively.

Also, in connection with this decision, we wrote-down inventory by $0.8 million in cost of sales and accrued $0.6 million for employee severance in SG&A in the second quarter of the twelve months ended April 29, 2012 .

All of these charges are reflected in the Packaged Meats segment.

DERIVATIVE FINANCIAL INSTRUMENTS

Our meat processing and hog production operations use various raw materials, primarily live hogs, corn and soybean meal, which are actively traded on commodity exchanges.

Our meat processing and hog production operations use various raw materials, primarily live hogs, corn, soybean meal and wheat, which are actively traded on commodity exchanges.

We hedge these commodities when we determine conditions are appropriate to mitigate price risk.

9 unchanged sentences

We believe all of our derivative instruments represent economic hedges against changes in prices and rates, regardless of their designation for accounting purposes.

We do not offset the fair value of derivative instruments with cash collateral held with or received from the same counterparty under a master netting arrangement.

As of April 28, 2013 , prepaid expenses and other current assets included $75.0 million representing cash on deposit with brokers to cover losses on our open derivative instruments and accrued expenses and other current liabilities included $3.6 million representing cash deposits received from brokers to cover gains on our open derivative instruments.

Changes in commodity prices could have a significant impact on cash deposit requirements under our broker and counterparty agreements.

Changes in commodity prices could have a significant impact on cash deposit requirements under our broker and counter-party agreements.

Additionally, certain of our derivative contracts contain credit risk related contingent features, which would require us to post additional cash collateral to cover net losses on open derivative instruments if our credit rating was downgraded.

As of April 28, 2013 , the net liability position of our open derivative instruments that are subject to credit risk related contingent features was not material.

We are exposed to losses in the event of nonperformance or nonpayment by counterparties under financial instruments.

Although our counterparties primarily consist of financial institutions that are investment grade, there is still a possibility that one or more of these companies could default.

However, a majority of our financial instruments are exchange traded futures contracts held with brokers and counterparties with whom we maintain margin accounts that are settled on a daily basis, thereby limiting our credit exposure to non-exchange traded derivatives.

Determination of the credit quality of our counterparties is based upon a number of factors, including credit ratings and our evaluation of their financial condition.

As of April 28, 2013 , we had credit exposure of $11.4 million on non-exchange traded derivative contracts, excluding the effects of netting arrangements.

As a result of netting arrangements, we had no significant credit exposure as of April 28, 2013 .

No significant concentrations of credit risk existed as of April 28, 2013 .

As of December 28, 2014 , the net liability position of our open derivative instruments that are subject to credit risk related contingent features was not material.

We are exposed to losses in the event of nonperformance or nonpayment by counter-parties under financial instruments.

Although our counter-parties primarily consist of financial institutions that are investment grade, there is still a possibility that one or more of these companies could default.

However, a majority of our financial instruments are exchange traded futures contracts held with brokers and counter-parties with whom we maintain margin accounts that are settled on a daily basis, thereby limiting our credit exposure to non-exchange traded derivatives.

Determination of the credit quality of our counter-parties is based upon a number of factors, including credit ratings and our evaluation of their financial condition.

As of December 28, 2014 , we had no significant credit exposure on non-exchange traded derivative contracts.

No significant concentrations of credit risk existed as of December 28, 2014 .

The size and mix of our derivative portfolio varies from time to time based upon our analysis of current and future market conditions.

All derivative contracts are recorded in prepaid expenses and other current assets or accrued expenses and other current liabilities within the consolidated balance sheets, as appropriate.

The following table presents the fair values of our open derivative financial instruments in the consolidated balance sheets on a gross basis.

The following tables present the fair values of our open derivative financial instruments on a gross basis:

(in millions)

3 unchanged sentences

Livestock contracts

Interest rate contracts

Foreign exchange contracts

5 unchanged sentences

Total fair value of derivative instruments

The majority of our derivatives are exchange traded futures contracts held with brokers, subject to netting arrangements that are enforceable during the ordinary course of business.

Additionally, we have a smaller portfolio of over-the-counter derivatives that are held by counterparties under netting arrangements found in typical master netting agreements.

These agreements legally allow for net settlement in the event of bankruptcy.

We offset the fair values of derivative assets and liabilities, along with the related cash collateral, that are executed with the same counter-party under these arrangements in the consolidated balance sheet.

The following tables reconcile the gross amounts of derivative assets and liabilities to the net amounts presented in our consolidated balance sheets and the related effects of cash collateral under netting arrangements that provide a legal right of offset of assets and liabilities:

December 28, 2014

Gross Amount of Derivative Assets/ Liabilities

Netting of Derivative Assets/Liabilities

Net Derivative Assets/Liabilities

Cash Collateral

Net Amount Presented in the Consolidated Balance Sheet

(in millions)

Foreign exchange contracts

Interest rate contracts

Foreign exchange contracts

December 29, 2013

Gross Amount of Derivative Assets/ Liabilities

Netting of Derivative Assets/Liabilities

Net Derivative Assets/Liabilities

Cash Collateral

Net Amount Presented in the Consolidated Balance Sheet

(in millions)

Foreign exchange contracts

See Note 12 — Fair Value Measurements for additional information about the fair value of our derivatives.

Hedge Accounting Method

2 unchanged sentences

In addition, we enter into interest rate swaps to manage our exposure to changes in interest rates associated with our variable interest rate debt, and we enter into foreign exchange contracts to manage our exposure to the variability in expected future cash flows attributable to changes in foreign exchange rates associated with the forecasted purchase or sale of assets denominated in foreign currencies.

As of April 28, 2013 , we had no cash flow hedges for forecasted transactions beyond April 2014 .

As of December 28, 2014 , we had no cash flow hedges for forecasted transactions beyond March 2016 .

When cash flow hedge accounting is applied, derivative gains or losses are recognized as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings.

Derivative gains and losses, when reclassified into earnings, are recorded in cost of sales for grain contracts, sales for lean hog contracts, interest expense for interest rate contracts and selling, general and administrative expenses for foreign exchange contracts.

The ineffective portion of derivative gains and losses is recognized as part of current period earnings.

Gains and losses on derivatives designed to hedge price risk associated with fresh pork sales are recorded in the Hog Production segment.

During fiscal 2013 , the range of notional volumes associated with open derivative instruments designated in cash flow hedging relationships was as follows:

During 2014 , the range of notional volumes associated with open derivative instruments designated in cash flow hedging relationships was as follows:

1,847,680,000

Interest rate

Foreign currency (1)

2 unchanged sentences

dollar equivalent of various foreign currency contracts.

The following table presents the effects on our consolidated financial statements of pre-tax gains and losses on derivative instruments designated in cash flow hedging relationships for the fiscal years indicated:

The following tables present the effects on our consolidated financial statements of pre-tax gains and losses on derivative instruments designated in cash flow hedging relationships for the periods indicated:

Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivative (Effective Portion)

Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Earnings (Effective Portion)

Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Earnings (Effective Portion)

Loss Recognized in Earnings on Derivative (Ineffective Portion)

Twelve Months Ended

December 28, 2014

September 27 - December 29, 2013

December 28, 2014

September 27 - December 29, 2013

December 28, 2014

September 27 - December 29, 2013

(in millions)

Commodity contracts:

Grain contracts

Lean hog contracts

Interest rate contracts

Foreign exchange contracts

Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivative (Effective Portion)

Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Earnings (Effective Portion)

Gain (Loss) Recognized in Earnings on Derivative (Ineffective Portion)

Twelve Months Ended

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

(in millions)

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Foreign exchange contracts

For the fiscal periods presented, foreign exchange contracts were determined to be highly effective.

For the periods presented, foreign exchange contracts were determined to be highly effective.

We have excluded from the assessment of effectiveness differences between spot and forward rates, which we have determined to be immaterial.

During fiscal 2012 and 2011, we discontinued cash flow hedge accounting on certain grain contracts as it became probable that the original forecasted transactions would not transpire.

As a result of this change, the table above for fiscal 2012 includes gains of $12.0 million on grain contracts de-designated from hedging relationships that were reclassified from accumulated other comprehensive loss into earnings in fiscal 2012.

The related impact of discontinued cash flow hedges in fiscal 2011 was immaterial.

As of April 28, 2013 , there were deferred net losses of $17.8 million , net of tax of $11.3 million , in accumulated other comprehensive loss.

We expect to reclassify $39.0 million ( $23.8 million net of tax) of the deferred net gains on closed commodity contracts into earnings in fiscal 2014 .

We are unable to estimate the unrealized gains or losses to be reclassified into earnings in fiscal 2014 related to open contracts as their values are subject to change.

During the twelve months ended April 29, 2012 , we discontinued cash flow hedge accounting on certain grain contracts as it became probable that the original forecasted transactions would not transpire.

As a result of this change, the table above for the twelve months ended April 29, 2012 includes gains of $12.0 million on grain contracts de-designated from hedging relationships that were reclassified from accumulated other comprehensive income (loss) into earnings in the twelve months ended April 29, 2012 .

As of December 28, 2014 , there were deferred net gains of $26.4 million , net of tax of $17.1 million , in accumulated other comprehensive income (loss).

We expect to reclassify $1.9 million ( $1.2 million net of tax) of the deferred net gains on closed commodity contracts into earnings in 2015 .

We are unable to estimate the unrealized gains or losses to be reclassified into earnings in 2015 related to open contracts as their values are subject to change.

Fair Value Hedges

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The gains or losses on the derivative instruments and the offsetting losses or gains on the related hedged items are recorded in cost of sales for commodity contracts.

During fiscal 2013 , the range of notional volumes associated with open derivative instruments designated in fair value hedging relationships was as follows:

The following table presents the effects on our consolidated statements of income of gains and losses on derivative instruments designated in fair value hedging relationships and the related hedged items for the fiscal years indicated:

During 2014 , the range of notional volumes associated with open derivative instruments designated in fair value hedging relationships was as follows:

The following tables present the effects on our consolidated statements of income of gains and losses on derivative instruments designated in fair value hedging relationships and the related hedged items for the periods indicated:

Gain (Loss) Recognized in Earnings on Derivative

Gain (Loss) Recognized in Earnings on Related Hedged Item

Twelve Months Ended

December 28, 2014

September 27 - December 29, 2013

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

(in millions)

Commodity contracts (1)

——————————————

Includes losses of $7.5 million in the twelve months ended April 28, 2013 and gains of $5.1 million in the twelve months ended April 29, 2012 , representing differences between the spot and futures prices for fair value hedges of hog inventory, which are recorded directly into earnings as they occur.

There were no fair value hedges of hog inventory during 2014 nor during the three months ended December 29, 2013 nor during the five months ended September 26, 2013 and, therefore, no differences between spot and futures prices were recognized in those periods.

Gain (Loss) Recognized in Earnings on Related Hedged Item

Twelve Months Ended

December 28, 2014

September 27 - December 29, 2013

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

(in millions)

Commodity contracts

We recognized losses of $2.5 million in fiscal 2013 , gains of $6.0 million in fiscal 2012 and losses of $24.9 million in fiscal 2011 , respectively, on closed commodity derivative contracts as the underlying cash transactions affected earnings.

For fair value hedges of hog inventory, we elect to exclude from the assessment of effectiveness differences between the spot and futures prices.

These differences are recorded directly into earnings as they occur.

These differences resulted in losses of $7.5 million in fiscal 2013 and gains of $5.1 million and $0.2 million in fiscal 2012 and fiscal 2011 , respectively.

We recognized gains of $2.8 million and $4.1 million in 2014 and the five months ended September 26, 2013 , losses of $2.5 million in the twelve months ended April 28, 2013 and gains of $6.0 million in twelve months ended April 29, 2012 , respectively, on closed commodity derivative contracts as the underlying cash transactions affected earnings.

Mark-to-Market Method

Derivative instruments that are not designated as a hedge, have been de-designated from a hedging relationship, or do not meet the criteria for hedge accounting are marked-to-market with the unrealized gains and losses together with actual realized gains and losses from closed contracts being recognized in current period earnings.

Under the mark-to-market method, gains and losses are recorded in either sales or cost of sales for commodity contracts, and selling, general and administrative expenses for foreign exchange contracts.

During fiscal 2013 , the range of notional volumes associated with open derivative instruments using the “mark-to-market” method was as follows:

Under the mark-to-market method, gains and losses are recorded in cost of sales for commodity contracts and SG&A for foreign exchange contracts.

During 2014 , the range of notional volumes associated with open derivative instruments using the “mark-to-market” method was as follows:

Foreign currency (1)

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dollar equivalent of various foreign currency contracts.

The following table presents the amount of gains (losses) recognized in the consolidated statements of income on derivative instruments using the “mark-to-market” method by type of derivative contract for the fiscal years indicated:

Twelve Months Ended

December 28, 2014

September 27 - December 29, 2013

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

(in millions)

Commodity contracts (cost of sales)

Commodity contracts (sales)

Commodity contracts

Foreign exchange contracts

The table above reflects gains and losses from both open and closed contracts including, among other things, gains and losses related to contracts designed to hedge price movements that occur entirely within a fiscal year.

The table includes amounts for both realized and unrealized gains and losses.

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Total investments

——————————————

Beginning in June 2014, our investment in CFG is through our interest in Sigma & WH Europe, as described below.

We record our share of earnings and losses from our equity method investments in (income) loss from equity method investments.

Some of these results are reported on a one-month lag which, in our opinion, does not materially impact our consolidated financial statements.

Each quarter, we review the carrying value of our investments and consider whether indicators of impairment exist.

Examples of impairment indicators include a history or expectation of future operating losses and declines in a quoted share price, among other factors.

If an impairment indicator exists, we must evaluate the fair value of our investment to determine if a loss in value, which is other than temporary, has occurred.

If we consider any such decline to be other than temporary (based on various factors, including historical financial results, product development activities and the overall health of the affiliate’s industry), then a write-down of the investment to its estimated fair value would be recorded.

We have determined that no write-down was necessary for all periods presented.

As of April 28, 2013 , we held 37,811,302 shares of CFG common stock.

Shares of CFG are publicly traded on the Bolsa de Madrid Exchange (Madrid Exchange).

As the table below shows, the carrying value of our investment in CFG was above the quoted market price on the Madrid Exchange as of April 28, 2013 , indicating a possible impairment of our investment in CFG.

However, we do not believe the quoted share price on the Madrid Exchange is, by itself, reflective of the fair value of our investment in CFG for the following reasons:

the minority shares traded on the Madrid Exchange confer no special rights or privileges to buyers.

In contrast, the shares comprising our 37% stake in CFG contractually entitle us to two seats on CFG's 9 -person board of directors, giving us the ability to exert significant influence over the strategic and operational decisions of our investee.

the stock is very thinly traded.

CFG is a closely held company, with the three largest shareholders owning approximately 76% of the outstanding shares.

We are CFG's largest shareholder, with a 37% stake.

The average daily trading volume during the last 24 months represents less than three hundredths of one percent of the total outstanding shares.

The lack of an active market can cause significant fluctuations and volatility in the stock price that are not commensurate with fundamental changes in the underlying business and the fair value of our holding in CFG.

Shares trading on the Madrid Exchange have ranged from a high of €9.28 ( $13.74 ) to a low of €4.12 ( $5.39 ) per share during the last 24 months, with upward and downward fluctuations in between.

The table below shows CFG's intra-day high share price and Smithfield's carrying value, expressed in euro per share, on various dates relevant to our disclosures during the last 24 months.

Carrying Value

February 17, 2012

April 29, 2012 (1)

April 28, 2013 (1) (2)

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Share prices on quarter end date reflect the last trading day in the quarter.

Subsequent to the end of fiscal 2013, CFG's share price traded as high as €5.88 per share on May 30, 2013 .

As noted above, we do not consider the share price on the Madrid Exchange, by itself, to be determinative of fair value.

In assessing the fair value of our investment, we considered a variety of information, including an independent third party valuation report, which incorporates generally accepted valuation techniques, CFG's history of positive cash flows, expectations about the future cash flows of CFG, market multiples for comparable businesses, and an influence premium applied to the market price of CFG's shares on the Madrid Exchange to adjust for our contractual right to two board seats and our ability to exert significant influence over the operational and strategic decisions of the company.

Based on an evaluation of all these factors, we concluded the fair value of our investment in CFG as of April 28, 2013 , exceeded its carrying amount.

However, our estimate of fair value has declined over the last 24 months, significantly eroding the gap between fair value and carrying value.

The fair value decline is primarily attributable to persistent recessionary conditions in Western Europe, which have dampened CFG's current operating performance.

In addition, rising interest rates associated with European sovereign debt crises have forced discount rates higher, diminishing the values calculated using our discounted cash flow techniques.

Finally, CFG's share price on the Madrid Exchange has declined and, notwithstanding our reservations about the Madrid Exchange price, we nonetheless utilize it as a component of our valuation work and believe such declines must be considered as part of our fair value estimate.

While we do not believe our investment is impaired as of April 28, 2013 , the confluence of these and other factors has decreased our estimate of CFG's fair value and increased the risk of impairment.

If the trends contributing to our lower estimate of CFG's fair value continue, the investment would become impaired.

Specifically, if the most sensitive factors affecting our fair value calculations (i.e., estimates of future cash flows, interest rates and share price) continue to deteriorate, it is reasonably possible that our estimate of fair value could fall below carrying value.

If that occurs, and we determine that the decline is other than temporary, we would record a charge to income for the difference between the estimate of fair value and the carrying amount of our investment.

In November 2013, Mexican processed meats producer Sigma Alimentos (Sigma) announced its intention to tender for all of CFG’s outstanding shares (CFG Tender Offer).

In December 2013, we announced our intention to participate in the CFG Tender Offer by retaining our 37% interest in CFG.

In June 2014, we finalized our shareholder agreement with Sigma creating a new entity called Sigma & WH Food Europe, S.L.

(Sigma & WH Europe) to hold all shares of CFG owned by Sigma and the Company.

At the formation of Sigma & WH Europe, both the Company and Sigma contributed all of our shares of CFG to Sigma & WH Europe in exchange for the same number of shares in Sigma & WH Europe.

Effective September 19, 2014, CFG's common stock ceased to trade on the Madrid Exchange.

As of December 28, 2014 , Sigma & WH Europe owned approximately 98% of the outstanding shares of CFG.

The CFG Tender Offer and the shareholder agreement with Sigma had no impact on the book value of our investment in CFG.

(Income) loss from equity method investments consists of the following:

Twelve Months Ended

Equity Investment

December 28, 2014

September 27 - December 29, 2013

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

(in millions)

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All other equity method investments

Loss (income) from equity method investments

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CFG prepares its financial statements in accordance with International Financial Reporting Standards.

Our share of CFG’s results reflects U.S.

GAAP adjustments and thus, there may be differences between the amounts we report for CFG and the amounts reported by CFG.

In December 2011 (fiscal 2012), the board of CFG approved a multi-year plan to consolidate and streamline its manufacturing operations to improve operating efficiencies and increase utilization (the CFG Consolidation Plan ).

(Income) loss from equity method investments

In December 2011, the board of CFG approved a multi-year plan to consolidate and streamline its manufacturing operations to improve operating efficiencies and increase utilization (the CFG Consolidation Plan ).

The CFG Consolidation Plan includes the disposal of certain assets, employee redundancy costs and the contribution of CFG's French cooked ham business into a newly formed joint venture.

As a result, we recorded our share of CFG's charges totaling $38.7 million in loss (income) from equity method investments within the International segment in fiscal 2012.

The following summarized financial information for CFG is based on CFG's financial statements and translated into U.S.

As a result, we recorded our share of CFG's charges totaling $38.7 million in (income) loss from equity method investments within the International segment in the twelve months ended April 29, 2012.

The following summarized financial information for Sigma & WH Europe is based on its financial statements and translated into U.S.

Twelve Months Ended

December 28, 2014

April 29 - December 29, 2013

April 28, 2013

April 29, 2012

(in millions)

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Payroll and related benefits

Customer incentives

Customer incentives and marketing

Derivative instruments and broker deposits

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(in millions)

6.625% senior unsecured notes, due August 2022, including unamortized discounts of $4.7 million

10% senior secured notes, due July 2014, including unamortized discounts of $7.0 million

10% senior secured notes, due July 2014, including unamortized premiums of $4.4 million

7.75% senior unsecured notes, due July 2017

4% senior unsecured Convertible Notes, due June 2013, including unamortized discounts of $4.1 million and $26.8 million

7.75% senior unsecured notes, due May 2013

6.625% senior unsecured notes, due August 2022, including unamortized premiums of $19.7 million and $21.7 million

7.75% senior unsecured notes, due July 2017, including unamortized premiums of $38.1 million and $54.0 million

5.25% senior unsecured notes, due August 2018

5.875% senior unsecured notes, due August 2021

Floating rate senior unsecured term loan, due May 2018

Floating rate senior unsecured term loan, due February 2014

Various, interest rates from 0.0% to 7.22%, due May 2013 through June 2017

Inventory Revolver, LIBOR plus 2.75%

Securitization Facility, the lender's cost of funds of 0.30% plus 1.05%

Various, interest rates from 0.0% to 3.13%, due January 2015 through March 2019

Current portion

Total long-term debt

Scheduled maturities of total debt are as follows:

As noted in Note 2 — Merger and Acquisitions , existing long-term debt assumed by WH Group was adjusted to fair value based on quoted market prices.

Premiums shown above represent the unamortized balance of the fair value adjustment to our 2022 Notes and 2017 Notes.

Scheduled principal payments on long-term debt for the next five years are as follows:

(in millions)

In August 2012 (fiscal 2013), we issued $1.0 billion aggregate principal amount of ten year, 6.625% senior unsecured notes at a price equal to 99.5% of their face value in a registered public offering (2022 Notes).

We received net proceeds of $981.2 million , after underwriting discounts and commissions and offering expenses, upon settlement of the 2022 Notes in August 2012 (fiscal 2013).

We incurred $18.0 million in transaction fees in connection with issuance of the 2022 Notes, which are being amortized over the ten -year life of the notes.

In August 2012, we issued $1.0 billion aggregate principal amount of ten year, 6.625% senior unsecured notes at a price equal to 99.5% of their face value in a registered public offering (2022 Notes).

We received net proceeds of $981.2 million , after underwriting discounts and commissions and offering expenses, upon settlement of the 2022 Notes in August 2012.

We incurred $18.0 million in transaction fees in connection with issuance of the 2022 Notes, which were being amortized over the ten -year life of the notes.

The unamortized amount of transaction fees incurred in connection with the issuance of the 2022 Notes was written off when we performed the allocation of the total purchase consideration to the assets and liabilities assumed by WH Group in the Merger.

Debt Extinguishments

During fiscal 2011, we repurchased $522.2 million of our 7% senior unsecured notes due August 2011 (2011 Notes) for $543.1 million and recognized losses on debt extinguishment totaling $21.4 million , including the write-off of related unamortized premiums and debt costs.

During fiscal 2012, we redeemed the remaining $77.8 million of our 7% senior unsecured notes due August 2011.

During the twelve months ended April 29, 2012, we redeemed the remaining $77.8 million of our 7% senior unsecured notes due August 2011.

2013 Notes and 2014 Notes

In January 2011 (fiscal 2011), we commenced a Dutch auction cash tender offer to purchase for $450.0 million in cash (the January Tender Offer) the maximum aggregate principal amount of our outstanding 7.75% senior unsecured notes due May 2013 (2013 Notes) and our outstanding 10% senior secured notes due July 2014 (2014 Notes).

As a result of the January Tender Offer, we paid $450.0 million to repurchase 2013 Notes and 2014 Notes with face values of $190.0 million and $200.9 million , respectively, and recognized losses on debt extinguishment totaling $71.1 million in the fourth quarter of fiscal 2011, including the write-off of related unamortized discounts and debt costs.

During fiscal 2012, we repurchased $59.7 million of our 2014 Notes for $68.3 million and recognized losses on debt extinguishment of $11.0 million , including the write-off of related unamortized discounts and debt costs.

In conjunction with the issuance of the 2022 Notes in July 2012, we commenced a tender offer to purchase any and all of our outstanding 2013 Notes and any and all of our outstanding 2014 Notes (the July 2012 Tender Offer).

During the twelve months ended April 29, 2012, we repurchased $59.7 million of our 10% senior secured notes due July (2014 Notes) for $68.3 million and recognized losses on debt extinguishment of $11.0 million , including the write-off of related unamortized discounts and debt costs.

In conjunction with the issuance of the 2022 Notes in July 2012, we commenced a tender offer to purchase any and all of our outstanding 7.75% senior unsecured notes due May 2013 (2013 Notes) and any and all of our outstanding 2014 Notes (the July 2012 Tender Offer).

The July 2012 Tender Offer expired in August 2012.

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Net proceeds from the issuance of the 2022 Notes were used to make all of the repurchases of the 2013 Notes and 2014 Notes.

As a result of these repurchases, we recognized losses on debt extinguishment totaling $120.7 million in fiscal 2013, including the write-off of related unamortized discounts, premiums and debt issuance costs.

As a result of these repurchases, we recognized losses on debt extinguishment totaling $120.7 million in the twelve months ended April 28, 2013, including the write-off of related unamortized discounts, premiums and debt issuance costs.

In May 2013, we repaid the remaining outstanding principal amount on our 7.75% senior unsecured notes totaling $55.0 million .

2017 Notes and 2022 Notes

During the three months ended December 29, 2013 , we repurchased $15.6 million and $0.4 million of our 2017 Notes and 2022 Notes, respectively, for $18.1 million and recognized losses on debt extinguishment of $1.7 million .

On July 31, 2013, Merger Sub issued the Merger Sub Notes as part of the financing for the acquisition of the Company.

Upon the consummation of the Merger and release of the proceeds from escrow, the Merger Sub Notes became unsecured obligations of the Company ranking equally in right of payment with all of our existing and future senior unsecured indebtedness.

The proceeds were used in part to repay the outstanding $200.0 million due on our Bank of America Term Loan.

See Note 2 — Merger and Acquisitions for further information on the Merger Sub Notes.

Working Capital Facilities

In June 2011 (fiscal 2012), we refinanced our asset-based revolving credit agreement totaling $1.0 billion that supported short-term funding needs and letters of credit (the ABL Credit Facility) into two separate facilities:

In June 2011, we refinanced our asset-based revolving credit agreement totaling $1.0 billion that supported short-term funding needs and letters of credit (the ABL Credit Facility) into two separate facilities:

(1) an inventory-based revolving credit facility totaling $925.0 million , with an option to expand up to $1.225 billion (the Inventory Revolver), and (2) an accounts receivable securitization facility totaling $275.0 million (the Securitization Facility).

We may request working capital loans and letters of credit under both facilities.

As a result of the refinancing, we recognized a loss on debt extinguishment of $1.2 million in the first quarter of fiscal 2012 for the write-off of unamortized debt issuance costs associated with the ABL Credit Facility.

In January 2013 (fiscal 2013), we partially exercised the accordion feature of our Second Amended and Restated Credit Agreement and increased the borrowing capacity of the Inventory Revolver from a total of $925.0 million to a total of $1.025 billion .

All other terms and conditions of the Inventory Revolver remain unchanged, including the limitation on the actual amount of credit that is available from time to time under the Inventory Revolver as a result of borrowing base valuations of our inventory, accounts receivable and certain cash balances.

As a result of the refinancing, we recognized a loss on debt extinguishment of $1.2 million in the first quarter of the twelve months ended April 29, 2012 for the write-off of unamortized debt issuance costs associated with the ABL Credit Facility.

In January 2013, we partially exercised the accordion feature of our Second Amended and Restated Credit Agreement and increased the borrowing capacity of the Inventory Revolver from a total of $925.0 million to a total of $1.025 billion .

All other terms and conditions of the Inventory Revolver were unchanged, including the limitation on the actual amount of credit that is available from time to time under the Inventory Revolver as a result of borrowing base valuations of our inventory, accounts receivable and certain cash balances.

We have the right to further exercise the accordion feature and increase its total revolving commitment by an additional aggregate amount not to exceed $200.0 million, to the extent that any one or more new or existing lenders commit to being a lender for the additional amount and certain other customary conditions are met.

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The unused commitment fee and the interest rate spreads are a function of our leverage ratio (as defined in the Second Amended and Restated Credit Agreement).

As of April 28, 2013 , the unused commitment fee and interest rate were 0.5% and LIBOR plus 3% , respectively.

As of December 28, 2014 , the unused commitment fee rate and interest rate were 0.50% and LIBOR plus 2.75% , respectively.

The Inventory Revolver includes financial covenants.

The ratio of our funded debt to capitalization (as defined in the Second Amended and Restated Credit Agreement) may not exceed 0.5 to 1.0, and our EBITDA to interest expense ratio (as defined in the Second Amended and Restated Credit Agreement) may not be less than 2.5 to 1.0.

Obligations under the Inventory Revolver are guaranteed by our material U.S.

subsidiaries and are secured by a first priority lien on certain personal property, including cash and cash equivalents, deposit accounts, inventory, intellectual property, and certain equity interests.

We incurred approximately $9.7 million in transaction fees in connection with the Inventory Revolver, which are being amortized over its five-year life.

The term of the Securitization Facility is three years.

As part of the arrangement, all accounts receivable of our major Pork segment subsidiaries are sold to a wholly-owned “bankruptcy remote” special purpose vehicle (SPV).

We and our material U.S.

subsidiaries are jointly and severally liable for, as primary obligors, the obligations under the Inventory Revolver, and those obligations are secured by a first priority lien on certain personal property, including cash and cash equivalents, deposit accounts, inventory, intellectual property, and certain equity interests.

We incurred approximately $9.7 million in transaction fees in connection with the Inventory Revolver, which were being amortized over its five-year life.

The unamortized amount of transaction fees incurred in connection with the Inventory Revolver was written off when we performed the allocation of the total purchase consideration to the assets and liabilities assumed by WH Group in the Merger.

In December 2014, we amended our Securitization Facility and increased the borrowing capacity from a total of $275.0 million to a total of $325.0 million .

As a result of the amended agreement, our maturity date was extended from May 2016 to December 2017, the interest rate spread was decreased from 1.15% to 1.05% and the unused commitment fee decreased from 0.45% to 0.40% .

As part of the arrangement, all accounts receivable of our major Fresh Pork and Packaged Meats subsidiaries are sold to a wholly owned “bankruptcy remote” special purpose vehicle (SPV).

The SPV pledges the receivables as security for loans and letters of credit.

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However, the accounts receivable owned by the SPV are separate and distinct from our other assets and are not available to our other creditors should we become insolvent.

As of April 28, 2013 , the SPV held $411.1 million of accounts receivable and we had no outstanding borrowings on the Securitization Facility.

The unused commitment fee and the interest rate spreads under the Securitization Facility are a function of our leverage ratio (as defined in the Second Amended and Restated Credit Agreement).

As of April 28, 2013 , the unused commitment fee and interest rate were 0.5% and 0.2% plus 1.75% , respectively.

We incurred approximately $1.3 million in transaction fees in connection with the Securitization Facility, which are being amortized over its original three-year life.

As of April 28, 2013 , we had aggregate credit facilities and credit lines totaling $1.4 billion .

As of December 28, 2014 , th e SPV held $660.5 million of accounts receivable and we had no outstanding borrowings on the Securitization Facility.

The unused commitment fee rate and the interest rate under the Securitization Facility were 0.40% and 0.30% plus 1.05% as of December 28, 2014 , respectively.

We incurred approximately $1.3 million in transaction fees in connection with the financing of the Securitization Facility in 2011, which were being amortized over its original three-year life.

The unamortized amount of transaction fees incurred in connection with the Securitization Facility was written off when we performed the allocation of the total purchase consideration to the assets and liabilities assumed by WH Group in the Merger.

As of December 28, 2014 , we had aggregate credit facilities and credit lines totaling $1.5 billion .

Our unused capacity under these credit facilities and credit lines was $1.3 billion .

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We pay commitment fees on the unused portion of the facilities.

Average borrowings under credit facilities and credit lines were $105.4 million , $99.8 million and $81.6 million at average interest rates of 5.2% , 4.9% and 4.8% during fiscal 2013 , 2012 and 2011 , respectively.

Maximum borrowings were $229.9 million , $245.3 million and $256.9 million in fiscal 2013 , 2012 and 2011 , respectively.

Total outstanding borrowings were $82.3 million as of April 28, 2013 and $64.9 million as of April 29, 2012 with average interest rates of 4.4% and 5.7% , respectively.

Bank of America Term Loan

In February 2013 (fiscal 2013), we executed a new $200.0 million term loan with a scheduled maturity date of February 4, 2014 (the Bank of America Term Loan).

The Bank of America Term Loan bears interest at a rate of LIBOR plus 3.25% per annum or, at our election, a base rate plus 2.25% per annum .

In addition, we may elect to prepay the Bank of America Term Loan at any time, subject to the payment of a prepayment premium of 1% applicable to prepayments made at any time during the first eight months of the term .

The Bank of America Term Loan contains various restrictive covenants substantially similar to those contained in the Inventory Revolver, including with respect to liens, indebtedness, investments and acquisitions, capital expenditures, distributions, mergers and asset sales, in each case, subject to certain qualifications and exceptions.

In addition, the Bank of America Term Loan contains financial covenants that are also substantially similar to those contained in the Inventory Revolver.

Average borrowings under credit facilities and credit lines were $443.2 million , $541.7 million , $349.4 million , $105.4 million and $99.8 million at average interest rates of 3.0% , 3.0% , 3.0% , 5.2% and 4.9% during 2014 , the three months ended December 29, 2013 , the five months ended September 26, 2013 , the twelve months ended April 28, 2013 and the twelve months ended April 29, 2012 , respectively.

Maximum borrowings were $946.7 million , $759.3 million , $719.3 million , $229.9 million and $245.3 million in 2014 , the three months ended December 29, 2013 , the five months ended September 26, 2013 , the twelve months ended April 28, 2013 and the twelve months ended April 29, 2012 , respectively.

Total outstanding borrowings were $50.1 million as of December 28, 2014 and $314.1 million as of December 29, 2013 with average interest rates of 3.0% and 2.8% , respectively.

Rabobank Term Loan

In August 2012 (fiscal 2013), we amended our $200.0 million term loan with Rabobank (the Rabobank Term Loan).

As a result of the amended agreement, our maturity date was extended from June 2016 (fiscal 2017) to May 2018 (fiscal 2019) and the interest rate increased to an annual rate equal to LIBOR plus 4%, or at our election, a base rate plus 3% .

In August 2012, we amended our $200.0 million term loan with Rabobank.

As a result of the amended agreement, our maturity date was extended from June 2016 to May 2018 and the interest rate increased to an annual rate equal to LIBOR plus 4%, or at our election, a base rate plus 3% .

The amended agreement contains affirmative and negative covenants that, among other things, limit or restrict our ability to create liens and encumbrances;

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in each case, subject to certain qualifications and exceptions that are generally consistent with the terms and conditions of the 2022 Notes.

In addition, the amended agreement contains a financial covenant requiring us to maintain a minimum interest coverage ratio (ratio of consolidated EBITDA to consolidated interest expense) of not less than 1.75 to 1.0 commencing with our third quarter of fiscal 2013 .

Convertible Notes

In July 2008 (fiscal 2009), we issued $400 million aggregate principal amount of 4% convertible senior notes due June 30, 2013 (the Convertible Notes) in a registered offering.

The Convertible Notes are senior unsecured obligations.

The Convertible Notes are payable with cash and, at certain times, are convertible into shares of our common stock based on an initial conversion rate, subject to adjustment, of 44.082 shares per $1,000 principal amount of Convertible Notes (which represents an initial conversion price of approximately $22.68 per share).

Upon conversion, a holder will receive cash up to the principal amount of the Convertible Notes and shares of our common stock for the remainder, if any, of the conversion obligation.

On April 1, 2013, holders obtained the ability to convert their Convertible Notes at any time prior to the close of business on the third scheduled trading day immediately preceding the maturity date.

On the date of issuance of the Convertible Notes, our nonconvertible debt borrowing rate was determined to be 10.2% .

Based on that rate of interest, the equity component of the Convertible Notes was determined to be $95.8 million .

In July 2008, we issued $400 million aggregate principal amount of 4% convertible senior notes due June 30, 2013 (the Convertible Notes) in a registered offering.

The Convertible Notes were senior unsecured obligations.

In connection with the issuance of the Convertible Notes, we entered into separate convertible note hedge transactions with respect to our common stock to reduce potential economic dilution upon conversion of the Convertible Notes, and separate warrant transactions (collectively referred to as the Call Spread Transactions).

We purchased call options that permit us to acquire up to approximately 17.6 million shares of our common stock, subject to adjustment, which is the number of shares initially issuable upon conversion of the Convertible Notes.

We purchased call options that permitted us to acquire up to approximately 17.6 million shares of our common stock, subject to adjustment, which is the number of shares initially issuable upon conversion of the Convertible Notes.

In addition, we sold warrants permitting the purchasers to acquire up to approximately 17.6 million shares of our common stock, subject to adjustment.

See Note 11 — Equity for more information on the Call Spread Transactions.

In July 2013, we repaid the outstanding principal amount on our Convertible Notes totaling $400.0 million .

In October 2013, we paid $79.4 million to holders of the warrants to unwind the contracts due to the change of control related to the Merger.

LEASE OBLIGATIONS, COMMITMENTS AND GUARANTEES

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Rental payments under operating leases are charged to expense on the straight-line basis over the period of the lease.

Rental expense under operating leases of real estate, machinery, vehicles and other equipment was $47.1 million , $46.5 million and $42.3 million in fiscal 2013 , 2012 and 2011 , respectively.

Future rental commitments under non-cancelable operating leases as of April 28, 2013 are as follows:

Rental expense under operating leases of real estate, machinery, vehicles and other equipment was $43.0 million , $11.7 million , $19.2 million , $47.1 million and $46.5 million in 2014 , the three months ended December 29, 2013 , the five months ended September 26, 2013 , the twelve months ended April 28, 2013 and the twelve months ended April 29, 2012 , respectively.

Future rental commitments under non-cancelable operating leases as of December 28, 2014 are as follows:

(in millions)

As of April 28, 2013 , future minimum lease payments under capital leases were approximately $26.6 million .

As of December 28, 2014 , future minimum lease payments under capital leases were approximately $25.2 million .

The present value of the future minimum lease payments was $24.9 million .

The long-term portion of capital lease obligations was $25.2 million and $26.1 million as of April 28, 2013 and April 29, 2012 , respectively, and the current portion was $1.0 million and $1.0 million as of April 28, 2013 and April 29, 2012 , respectively.

We have agreements, expiring through fiscal 2022 , to use cold storage warehouses owned by partnerships, of which we are 50% partners.

The long-term portion of capital lease obligations was $23.7 million and $24.6 million as of December 28, 2014 and December 29, 2013 , respectively, and the current portion was $1.2 million and $1.2 million as of December 28, 2014 and December 29, 2013 , respectively.

We have agreements, expiring through 2022 , to use cold storage warehouses owned by partnerships, of which we are 50% partners.

We have agreed to pay prevailing competitive rates for use of the facilities, subject to aggregate guaranteed minimum annual fees.

In fiscal 2013 , 2012 and 2011 , we paid $16.6 million , $14.0 million and $18.2 million , respectively, in fees for use of the facilities.

We had investments in the partnerships of $2.6 million as of April 28, 2013 , and $2.2 million as of April 29, 2012 , respectively.

In 2014 , the three months ended December 29, 2013 , the five months ended September 26, 2013 , the twelve months ended April 28, 2013 and the twelve months ended April 29, 2012 , we paid $20.7 million , $4.5 million , $7.4 million , $16.6 million and $14.0 million , respectively, in fees for use of the facilities.

We had investments in the partnerships of $4.2 million as of December 28, 2014 and $3.0 million as of December 29, 2013 , respectively.

We have purchase commitments with certain livestock producers that obligate us to purchase all the livestock that these producers deliver.

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(in millions)

As of April 28, 2013 , we were also committed to purchase approximately $480.3 million under forward grain contracts payable in fiscal 2014 .

We had $53.9 million of committed funds related to approved capital expenditure projects as of April 28, 2013 .

As of December 28, 2014 , we were also committed to purchase approximately $269.6 million under forward grain contracts payable in 2015 .

We had $40.2 million of committed funds related to approved capital expenditure projects as of December 28, 2014 .

These projects are expected to be funded with cash flows from operations and/or borrowings under credit facilities.

As part of our business, we are a party to various financial guarantees and other commitments as described below.

These arrangements involve elements of performance and credit risk that are not included in the consolidated balance sheets as of April 28, 2013 .

These arrangements involve elements of performance and credit risk that are not included in the consolidated balance sheet as of December 28, 2014 .

We could become liable in connection with these obligations depending on the performance of the guaranteed party or the occurrence of future events that we are unable to predict.

If we consider it probable that we will become responsible for an obligation, we will record the liability on our consolidated balance sheet.

As of April 28, 2013 , we continue to guarantee $10.2 million of leases that were transferred to JBS S.A.

in connection with the sale of Smithfield Beef, Inc.

Some of these lease guarantees may be released in the near future and others may remain in place until the leases expire through February 2022.

As of December 28, 2014 , we continued to guarantee $7.7 million of leases that were transferred to JBS S.A.

in connection with the sale of Smithfield Beef, Inc which closed in October 2008.

This guaranty may remain in place until the leases expire through February 2022.

Income tax expense consists of the following:

Twelve Months Ended

December 28, 2014

September 27 - December 29, 2013

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

(in millions)

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Total income tax expense

A reconciliation of taxes computed at the federal statutory rate to the provision for income taxes is as follows:

A reconciliation of taxes computed at the federal statutory rate to the effective tax rate is as follows:

Twelve Months Ended

December 28, 2014

September 27 - December 29, 2013

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

Federal income taxes at statutory rate

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Foreign income taxes

Unremitted earnings

Net change in uncertain tax positions

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Manufacturer's deduction

Adjustment to goodwill

Foreign restructuring

Effective tax rate

The unremitted earnings impact to the effective tax rate in fiscal 2012 resulted primarily from the CFG Consolidation Plan.

We had income taxes receivable of $79.4 million and $101.7 million as of April 28, 2013 and April 29, 2012 , respectively, in prepaid expenses and other current assets.

We had income taxes receivable of $64.4 million and $36.7 million as of December 28, 2014 and December 29, 2013 , respectively, in prepaid expenses and other current assets.

Additionally, we had current taxes payable of $1.2 million and $1.0 million as of December 28, 2014 and December 29, 2013 , respectively, in other current liabilities.

The tax effects of temporary differences consist of the following:

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Intangible assets

Employee benefits

Investments in subsidiaries

Total deferred tax liabilities

The following table presents the classification of deferred taxes in our balance sheets as of April 28, 2013 and April 29, 2012 :

The following table presents the classification of deferred taxes in our balance sheets as of December 28, 2014 and December 29, 2013 :

(in millions)

Prepaids and other current assets

Other liabilities

Deferred income taxes, net

Management makes an assessment to determine if its deferred tax assets are more likely than not to be realized.

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The valuation allowance primarily relates to state credits, state net operating loss carryforwards and losses in foreign jurisdictions for which no tax benefit was recognized.

During fiscal 2013 , the valuation allowance decreased by $11.1 million resulting primarily from the utilization of tax losses in foreign jurisdictions.

The tax credits, carryforwards and net operating losses expire from fiscal 2014 to 2033.

There were foreign subsidiary net earnings that were considered permanently reinvested of $149.5 million and $123.6 million as of April 28, 2013 and April 29, 2012 , respectively.

During 2014 , the valuation allowance decreased by $7.4 million which is primarily due to foreign valuation allowance releases and expirations.

During the three months ended December 29, 2013 , the valuation allowance increased by $ 4.6 million which is primarily the net of purchase price allocations related to the Merger and the utilization of tax losses in foreign jurisdictions.

During the five months ended September 26, 2013 , the valuation allowance decreased by $ 5.8 million resulting primarily from the utilization of tax losses in foreign jurisdictions.

The tax credits, carryforwards and net operating losses expire from 2014 to 2034.

There were foreign subsidiary net earnings that were considered permanently reinvested of $110.2 million and $17.0 million as of December 28, 2014 and December 29, 2013 , respectively.

It is not reasonably determinable as to the amount of deferred tax liability that would need to be provided if such earnings were not reinvested.

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(in millions)

Balance, May 1, 2011

Balance, April 29, 2012

Additions for tax positions taken in the current year

Additions for tax positions taken in prior years

Reduction for tax positions taken in prior years

Settlements with taxing authorities

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Lapse of statute of limitations

Balance, April 28, 2013

Balance, December 29, 2013

Additions for tax positions taken in the current year

Additions for tax positions taken in prior years

Settlements with taxing authorities

Lapse of statute of limitations

Balance, December 28, 2014

We operate in multiple taxing jurisdictions, both within the U.S.

and outside of the U.S., and are subject to examination from various tax authorities.

The liability for unrecognized tax benefits included $5.1 million and $4.7 million of accrued interest as of April 28, 2013 and April 29, 2012 , respectively.

We recognized $0.4 million of net interest expense during fiscal 2013 and $3.5 million and $0.1 million of net interest income during fiscal 2012 and fiscal 2011 , respectively, in income tax expense.

The liability for unrecognized tax benefits included $14.9 million as of April 28, 2013 and $14.1 million as of April 29, 2012 , that if recognized, would impact the effective tax rate.

The liability for unrecognized tax benefits included $4.9 million and $4.5 million of accrued interest as of December 28, 2014 and December 29, 2013 , respectively.

We recognized $0.3 million of net interest expense during 2014 , $0.5 million of net interest income during the eight months ended December 29, 2013 , $0.4 million of net interest expense during the twelve months ended April 28, 2013 and $3.5 million of net interest income during the twelve months ended April 29, 2012 , respectively, in income tax expense.

The liability for unrecognized tax benefits included $13.0 million as of December 28, 2014 and $13.3 million as of December 29, 2013 , that if recognized, would impact the effective tax rate.

We are currently being audited in several tax jurisdictions and remain subject to examination until the statute of limitations expires for the respective tax jurisdiction.

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We have concluded all U.S.

federal income tax matters through fiscal 2012.

We are currently under U.S federal examination for the 2013 tax year.

Based upon the expiration of statutes of limitations and/or the conclusion of tax examinations in several jurisdictions as of April 28, 2013 , we believe it is reasonably possible that the total amount of previously unrecognized tax benefits may decrease by up to $2.5 million within twelve months of April 28, 2013 .

federal income tax matters through the tax year ended September 26, 2013 .

We are currently under U.S federal examination for the tax years ended December 29, 2013 and December 28, 2014 .

Based upon the expiration of statutes of limitations and/or the conclusion of tax examinations in several jurisdictions as of December 28, 2014 , we believe it is reasonably possible that the total amount of previously unrecognized tax benefits may decrease by up to $3.8 million within twelve months of December 28, 2014 .

Beginning with the three months ended December 29, 2013 , the Company, with its respective subsidiaries, is included in its U.S.

parent company's consolidated federal income tax group and consolidated income tax return.

The members of the consolidated group have elected to allocate income taxes among the members of the group by the separate return method, under which the parent company credits the subsidiary for income tax reductions resulting from the subsidiary's inclusion in the consolidated return, or the parent company charges the subsidiary for its allocated share of the consolidated income tax liability.

PENSION AND OTHER RETIREMENT BENEFIT PLANS

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Benefits paid (2)

Remeasurement at the Merger Date

Actuarial loss

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——————————————

The beginning of the year is December 30, 2013 and April 29, 2013 for the period ending December 28, 2014 and December 29, 2013 , respectively.

Benefit payments for our defined benefit pension plans during the three months ended December 29, 2013 and the five months ended September 26, 2013 were $39.4 million and $27.2 million , respectively.

Benefit payments for our qualified defined benefit pension plans during the three months ended December 29, 2013 and the five months ended September 26, 2013 were $16.1 million and $26.0 million , respectively.

Excludes the assets and related activity of our non-qualified defined benefit pension plans.

The fair value of assets related to our non-qualified plans was $121.0 million and $107.1 million as of April 28, 2013 and April 29, 2012 , respectively.

We made no contributions to our non-qualified plans in fiscal 2013 and fiscal 2012 .

Benefits paid for our non-qualified plans were $3.9 million and $3.5 million for fiscal 2013 and fiscal 2012 , respectively.

The accumulated benefit obligation for all defined benefit pension plans was $1.7 billion and $1.5 billion as of April 28, 2013 and April 29, 2012 , respectively.

The accumulated benefit obligation for all of our defined benefit pension plans exceeded the fair value of plan assets for both periods presented.

The following table shows the pre-tax unrecognized items included as components of accumulated other comprehensive loss related to our defined benefit pension plans as of the dates indicated.

The fair value of assets related to our non-qualified plans was $107.9 million and $124.1 million as of December 28, 2014 and December 29, 2013 , respectively.

We made $6.6 million of cash contributions to our non-qualified plans in the twelve months ended December 28, 2014 .

We made no cash contributions to our non-qualified plans in the three months ended December 29, 2013 nor the five months ended September 26, 2013 .

Benefits paid for our non-qualified plans were $26.7 million , $23.3 million and $1.2 million for the twelve months ended December 28, 2014 , the three months ended December 29, 2013 and the five months ended September 26, 2013 , respectively.

The accumulated benefit obligation for all defined benefit pension plans was $1.7 billion and $1.6 billion as of December 28, 2014 and December 29, 2013 , respectively.

The accumulated benefit obligation for all of our defined benefit pension plans exceeded the fair value of plan assets for all periods presented.

The following table shows the pre-tax unrecognized items included as components of accumulated other comprehensive income (loss) related to our defined benefit pension plans as of the dates indicated:

(in millions)

Unrecognized actuarial loss

Unrecognized actuarial gain (loss)

Unrecognized prior service credit

We expect to recognize $59.8 million of the actuarial loss and prior service cost as net periodic pension cost in fiscal 2014 .

The following table presents the components of the net periodic pension costs for the periods indicated:

We expect to recognize $4.7 million of the actuarial loss in net periodic pension cost in 2015 .

The following table presents the components of the net periodic pension cost for the periods indicated:

Twelve Months Ended

December 28, 2014

September 27 - December 29, 2013

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

(in millions)

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Net amortization

Settlement loss (1)

Net periodic pension cost

——————————————

A settlement loss was recognized as the result of terminated vested participants in our qualified plans electing an early cash payout.

The following table shows our weighted average assumptions for the periods indicated:

Twelve Months Ended

December 28, 2014

September 27 - December 29, 2013

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

Discount rate to determine net periodic benefit cost

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We review and select the discount rate to be used in connection with our pension obligation annually.

In determining the discount rate, we use the yield on corporate bonds (rated AA or better) that coincides with the cash flows of the plans’ estimated benefit payouts.

In determining the discount rate, we used a hypothetical model that used the yield on corporate bonds (rated AA or better) that coincides with the cash flows of the plans’ estimated benefit payouts.

The model uses a yield curve approach to discount each cash flow of the liability stream at an interest rate specifically applicable to the timing of each respective cash flow.

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We use this resulting weighted average discount rate to determine our final discount rate.

During 2014, we used a new mortality table based on the Mercer Industry Longevity Experience Study (MILES).

The mortality table has the flexibility to consider industry specific groups, such as blue collar or white collar.

To determine the expected long-term return on plan assets, we consider the current and anticipated asset allocations, as well as historical and estimated returns on various categories of plan assets.

Long-term trends are evaluated relative to market factors such as inflation, interest rates and fiscal and monetary polices in order to assess the capital market assumptions.

Over the 5-year period ended April 28, 2013 and April 29, 2012 , the average rate of return on plan assets was approximately 4.01% and 1.40% percent, respectively.

Over the 5-year period ended December 28, 2014 and December 29, 2013 , the average rate of return on plan assets was approximately 9.81% and 12.11% , respectively.

Actual results that differ from our assumptions are accumulated and amortized over future periods and, therefore, affect expense in future periods.

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The plans retain outside investment advisors to manage plan investments within parameters established by our plan trustees.

The following table presents the fair value of our qualified pension plan assets by major asset category as of April 28, 2013 and April 29, 2012 .

The following table presents the fair value of our qualified pension plan assets by major asset category as of December 28, 2014 and December 29, 2013 .

The allocation of our pension plan assets is based on the target range presented in the following table.

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See Note 12 — Fair Value Measurements for additional information about the fair value of our pension assets.

As of April 28, 2013 and April 29, 2012 , the amount of our common stock included in plan assets was 2,054,344 and 4,154,344 shares, respectively, with market values of $53.3 million and $88.2 million , respectively.

We generally contribute the minimum amount required under government regulations to our qualified pension plans, plus amounts necessary to maintain an 80% funded status in order to avoid benefit restrictions under the Pension Protection Act.

Minimum employer contributions to our qualified pension plans are expected to be $51.6 million for fiscal 2014 .

We do not expect to have a funding requirement in 2015 for our qualified pension plans.

Expected future benefit payments for our defined benefit pension plans are as follows:

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The following table summarizes our contributions to multiemployer plans (1) :

Twelve Months Ended

December 28, 2014

April 29 - December 29, 2013

April 28, 2013

April 29, 2012

Expiration Dates of Collective Bargaining Agreements

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Contributions represent the amounts we contributed to the plans during the fiscal periods ending in the specified year.

Contributions represent the amounts we contributed to the plans during the periods ending in the specified year.

Our contributions to each plan did not exceed 5% of total plan contributions for any plan year presented.

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We have multiple collective bargaining agreements associated with the United Food and Commercial Workers International Union Industry Pension Fund.

These agreements are currently scheduled to expire in December 2013, January 2014, October 2015 and May 2016.

These agreements are currently scheduled to expire in October 2015, May 2016, January 2018 and December 2018.

Other Employee Benefit Plans

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Our contributions vary depending on the plan but are based primarily on each participant’s level of contribution and cannot exceed the maximum allowable for tax purposes.

Total contributions were $15.0 million , $13.9 million and $13.9 million in fiscal 2013 , fiscal 2012 and fiscal 2011 , respectively.

Total contributions were $18.2 million , $4.1 million , $8.0 million , $15.0 million , and $13.9 million in 2014 , the three months ended December 29, 2013 , the five months ended September 26, 2013 , twelve months ended April 28, 2013 and twelve months ended April 29, 2012 , respectively.

We also provide health care and life insurance benefits for certain retired employees.

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We consider disclosures related to these plans immaterial to the consolidated financial statements and related notes.

Share Repurchase Program

In June 2012 (fiscal 2013), we announced that our board of directors had approved a new share repurchase program authorizing us to buy up to $250.0 million of our common stock over the subsequent 24 months in addition to the $250.0 million authorized during fiscal 2012 (Share Repurchase Program).

In July 2012 (fiscal 2013), our board of directors approved an increase of $100.0 million to the authorized amount under the Share Repurchase Program.

Share repurchases may be made on the open market or in privately negotiated transactions.

The number of shares repurchased, and the timing of any buybacks, will depend on our corporate cash balances, business and economic conditions, and other factors, including investment opportunities.

The program may be discontinued at any time.

The Merger Agreement, as defined in "Note 18 — Subsequent Events , generally prohibits the Company from repurchasing any of its shares prior to the completion of the Merger

During fiscal 2013 , we repurchased 19,068,079 shares of our common stock for $386.4 million , including related fees.

The price of the repurchased shares has been allocated among common stock, additional paid-in capital and retained earnings in our consolidated condensed balance sheet in accordance with applicable accounting guidance.

Since the inception of the Share Repurchase Program in June 2011 (fiscal 2012) and through April 28, 2013 , we have repurchased 28,244,783 shares of our common stock for $575.9 million , including related commissions, at an average price of $20.38 .

Preferred Stock

We have 1,000,000 shares of $1.00 par value preferred stock authorized, none of which are issued.

The board of directors is authorized to issue preferred stock in series and to fix, by resolution, the designation, dividend rate, redemption provisions, liquidation rights, sinking fund provisions, conversion rights and voting rights of each series of preferred stock.

Upon completion of the Merger, all outstanding shares of Smithfield were cancelled and the Company's shareholders received the Merger Consideration for each share of common stock held prior to the effective time of the Merger.

As a result of the Merger, all of the outstanding shares of Merger Sub were converted into 1,000 shares of common stock of the Company, no par value, and such shares are owned by a wholly owned subsidiary of WH Group.

There are no other shares of stock outstanding in the Company.

See Note 2 — Merger and Acquisitions for further information on the Merger.

Common Stock Repurchases

During the twelve months ended April 28, 2013 , we repurchased 19,068,079 shares of our common stock for $386.4 million , including related fees.

The price of the repurchased shares was allocated among common stock, additional paid-in capital and retained earnings in our consolidated condensed balance sheet in accordance with applicable accounting guidance.

From June 2011 through the Merger Date, we repurchased 28,244,783 shares of our common stock for $575.9 million , including related commissions, at an average price of $20.38 .

Stock-Based Compensation

Under the terms of the merger agreement with Shuanghui, which is further described in Note 18 — Subsequent Events , immediately prior to the merger, the maximum number of shares underlying all then-outstanding stock-based compensation awards, whether vested or unvested, will be surrendered in exchange for the right to receive cash of $34.00 per share, less the exercise price of such awards, if any.

The disclosures that follow surrounding stock-based compensation are provided without regard to the possibility of such merger occurring.

During fiscal 2009, we adopted the 2008 Incentive Compensation Plan (the Incentive Plan), which replaced the 1998 Stock Incentive Plan and provides for the issuance of non-statutory stock options and other awards to employees, non-employee directors and consultants.

There are 12,583,397 shares reserved under the Incentive Plan.

As of April 28, 2013 , there were 7,140,603 shares available for grant under this plan.

Stock Options

Under the Incentive Plan, we grant options for periods not exceeding 10 years, which either cliff vest five years after the date of grant or vest ratably over a three-year period with an exercise price of not less than 100% of the fair market value of the common stock on the date of grant.

Compensation expense for stock options was $4.9 million , $6.1 million and $3.8 million for fiscal 2013 , 2012 and 2011 , respectively.

The related income tax benefits recognized were $1.8 million , $2.4 million and $1.5 million , for fiscal 2013 , 2012 and 2011 , respectively.

There was no compensation expense capitalized as part of inventory or fixed assets during fiscal 2013 , 2012 and 2011 .

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model.

The expected annual volatility is based on the historical volatility of our stock and other factors.

We use historical data to estimate option exercises and employee termination within the pricing model.

The expected term of options granted represents the period of time that options are expected to be outstanding.

The following table summarizes the assumptions made in determining the fair value of stock options granted in the fiscal years indicated:

During 2014, WH Group adopted a share incentive plan to provide incentives to various executives and management of WH Group and its subsidiaries (the WH Group Incentive Plan).

The WH Group stock trades on the Stock Exchange of Hong Kong Limited.

In 2014, 160,500,000 stock options were granted to Smithfield executives and management under the WH Group Incentive Plan.

Stock options granted under the WH Group Incentive Plan are subject to graded vesting over five years and were valued in five separate tranches, according to the expected life of each tranche.

We recognized $9.2 million of compensation expense for the stock options in 2014.

The related income tax benefit recognized was $3.4 million .

There was no compensation expense capitalized as part of inventory or fixed assets.

The fair value of each option granted was estimated on the date of grant using a binomial option pricing model.

The expected annual volatility was based on the historical volatility of comparable companies.

The following table summarizes the assumptions made in determining the fair value of stock options granted in 2014 (1) :

Twelve Months Ended

December 28, 2014

Expected annual volatility

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Expected option life (years)

The options granted in fiscal 2013 , 2012 and 2011 were valued in separate tranches according to the expected life of each tranche.

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The options granted in 2014 were valued in separate tranches according to the expected life of each tranche.

The above table reflects the weighted average risk free interest rate and expected option life of each tranche.

The expected dividend yield was the same for all options granted in fiscal 2013 , 2012 and 2011 .

We have never paid a cash dividend on our common stock.

The following table summarizes stock option activity under the Incentive Plan as of April 28, 2013 , and changes during the fiscal year then ended:

The expected dividend yield was the same for all options granted in 2014.

The following table summarizes stock option activity under the WH Group Incentive Plan during 2014:

Number of Shares

Weighted Average Exercise Price

Weighted Average Exercise Price (HKD)

Weighted Average Exercise Price (USD)

Weighted Average Remaining Contractual Term (Years)

Aggregate Intrinsic Value

(in millions)

Outstanding as of April 29, 2012

Outstanding as of April 28, 2013

Exercisable as of April 28, 2013

The weighted average grant-date fair value of options granted during fiscal 2013 , 2012 and 2011 was $8.92 , $9.36 and $6.61 , respectively.

The total intrinsic value of options exercised during fiscal 2013 , 2012 and 2011 was $2.4 million , $0.9 million and $0.4 million , respectively.

As of April 28, 2013 , there was $2.9 million of total unrecognized compensation cost related to nonvested stock options granted under the Incentive Plan.

Outstanding as of December 29, 2013

Outstanding as of December 28, 2014

Exercisable as of December 28, 2014

The weighted average grant-date fair value of options granted during 2014 was $0.42 USD ( $3.22 HKD).

As of December 28, 2014 , there was $53.7 million of total unrecognized compensation cost related to nonvested stock options granted under the WH Group Incentive Plan.

That cost is expected to be recognized over a weighted average period of 3.1 years.

The total fair value of stock options vested during fiscal 2013 , 2012 and 2011 was $7.5 million , $5.7 million and $1.9 million , respectively.

Performance Share Units

The Incentive Plan also provides for the issuance of performance share units (PSU) to reward employees for the achievement of performance goals.

We grant PSUs that contain performance conditions, which require the achievement of specified financial and/or operational performance metrics.

We also grant PSUs that contain market conditions, which require the achievement of certain stock price targets or the achievement of specified levels of shareholder return relative to other companies in our industry.

PSUs generally vest over a required employee service period, which typically ranges from one to five years and closely matches the performance period.

Each performance share unit represents and has a value equal to one share of our common stock.

Payment of vested performance share units is generally in our common stock.

PSUs containing performance conditions are generally measured at fair value as if they were vested and issued on the grant date.

The fair value of PSUs containing market conditions is estimated using a Monte Carlo simulation model, which simulates a range of possible future stock prices after incorporating assumptions about risk free rates, volatility and other relevant assumptions pertinent to the specific awards.

The grant date fair value of performance share units is recognized as compensation expense over the requisite employee service period.

The following table summarizes performance share unit activity under the Incentive Plan as of April 28, 2013 , and changes during the fiscal year then ended.

The number of awards granted and outstanding reflects the maximum number of share units that may vest under the awards.

Number of Share Units

Outstanding as of April 29, 2012

Vested and issued

Outstanding as of April 28, 2013

The weighted average grant date fair value for PSUs granted in fiscal 2013 , 2012 and 2011 was $21.03 , $20.63 and $17.57 per share unit, respectively.

The total intrinsic value of PSUs converted into shares of our common stock and issued in fiscal 2013 and fiscal 2012 was $10.9 million and $15.2 million , respectively.

No PSUs were converted into shares of our common stock in fiscal 2011 .

Compensation expense for performance share units was $8.1 million , $8.3 million and $7.5 million in fiscal 2013 , 2012 and 2011 , respectively.

The related income tax benefits recognized were $3.0 million , $3.2 million and $2.9 million for fiscal 2013 , 2012 and 2011 , respectively.

As of April 28, 2013 , there was approximately $6.8 million of total unrecognized compensation cost related to the performance share units, which is expected to be recognized over a weighted average period of 1.5 years.

Executive Stock Purchase Plan (ESPP)

As part of the Incentive Plan, we maintain a nonqualified deferred compensation plan that permits executive officers to voluntarily defer up to 25% of the payouts under their annual cash incentive awards in exchange for a performance award payable in the form of Company stock at such time in the future as elected by the officers, but not less than three years from the end of the performance period.

The Company will provide a 100% match to the officers' deferral in the form of restricted stock under the Incentive Plan.

The match is subject to three-year cliff vesting and will be forfeited if the officer voluntarily terminates employment before vesting.

The fair value of these restricted stock awards is generally measured as if they were vested and issued on the grant date.

We granted a total of 450,793 restricted stock units in fiscal 2013, including the company match, of which 250,575 are fully vested.

All of these units were outstanding as of April 28, 2013 .

There were no restricted stock units outstanding as of April 29, 2012 .

We recognized compensation expense of $3.5 million and $4.9 million in fiscal 2013 and 2012, respectively, related to restricted stock awards under the ESPP.

For awards granted under the ESPP through the date of this filing, we expect to recognize an additional $5.0 million of compensation expense over a weighted average period of 1.8 years.

No options vested during 2014.

During the twelve months ended May 3, 2009, we adopted the 2008 Incentive Compensation Plan (the Incentive Plan), which replaced the 1998 Stock Incentive Plan and provided for the issuance of non-statutory stock options and other awards to employees, non-employee directors and consultants.

Upon completion of the Merger, all then-outstanding stock-based compensation awards, whether vested or unvested, were converted into the right to receive the Merger Consideration, less the exercise price of such awards, if any.

As a result, we made aggregate cash payments totaling $82.1 million to plan participants following the Merger, which were included as a component of the purchase price consideration.

The Incentive Plan was discontinued as a result of the Merger.

Stock-based compensation expense was $2.0 million , $8.4 million , and $11.0 million for the five months ended September 26, 2013 , the twelve months ended April 28, 2013 and the twelve months ended April 29, 2012 , respectively.

The related income tax benefits recognized were $0.4 million , $1.8 million , and $2.4 million , for the five months ended September 26, 2013 , the twelve months ended April 28, 2013 and the twelve months ended April 29, 2012 , respectively.

There was no compensation expense capitalized as part of inventory or fixed assets during the five months ended September 26, 2013 , twelve months ended April 28, 2013 and twelve months ended April 29, 2012 .

Call Spread Transactions

In connection with the issuance of the Convertible Notes (see Note 7 — Debt ), we entered into separate convertible note hedge transactions with respect to our common stock to minimize the impact of potential economic dilution upon conversion of the Convertible Notes, and separate warrant transactions.

We purchased call options in private transactions that permit us to acquire up to approximately 17.6 million shares of our common stock at an initial strike price of $22.68 per share, subject to adjustment, for $88.2 million .

In general, the call options allow us to acquire a number of shares of our common stock initially equal to the number of shares of common stock issuable to the holders of the Convertible Notes upon conversion.

These call options will terminate upon the maturity of the Convertible Notes.

We purchased call options in private transactions that permitted us to acquire up to approximately 17.6 million shares of our common stock at an initial strike price of $22.68 per share, subject to adjustment, for $88.2 million .

In general, the call options allowed us to acquire a number of shares of our common stock initially equal to the number of shares of common stock issuable to the holders of the Convertible Notes upon conversion.

These call options terminated upon the maturity of the Convertible Notes.

We also sold warrants in private transactions for total proceeds of approximately $36.7 million .

The warrants permit the purchasers to acquire up to approximately 17.6 million shares of our common stock at an initial exercise price of $30.54 per share, subject to adjustment.

The warrants expire on various dates from October 2013 (fiscal 2014) to December 2013 (fiscal 2014).

The Call Spread Transactions, in effect, increase the initial conversion price of the Convertible Notes from $22.68 per share to $30.54 per share, thus reducing the potential future economic dilution associated with conversion of the notes.

The Convertible Notes and the warrants could have a dilutive effect on our earnings per share to the extent that the price of our common stock during a given measurement period exceeds the respective exercise prices of those instruments.

The call options are excluded from the calculation of diluted earnings per share as their impact is anti-dilutive.

We have analyzed the Call Spread Transactions and determined that they meet the criteria for classification as equity instruments.

As a result, we recorded the purchase of the call options as a reduction to additional paid-in capital and the proceeds of the warrants as an increase to additional paid-in capital.

Subsequent changes in fair value of those instruments are not recognized in the financial statements as long as the instruments continue to meet the criteria for equity classification.

The warrants permitted the purchasers to acquire up to approximately 17.6 million shares of our common stock at an initial exercise price of $30.54 per share, subject to adjustment.

In July 2013, we repaid the outstanding principal amount on our Convertible Notes totaling $400.0 million .

As part of the settlement of the Convertible Notes, we delivered 3,894,476 shares of our common stock to the holders of the notes.

Simultaneously, we exercised a call option, which we entered into in connection with the original issuance of the Convertible Notes, entitling us to receive 3,894,510 shares from the counter-parties.

As a result, we retired 34 net shares of our common stock upon the settlement of the Convertible Notes.

In October 2013, we paid $79.4 million to holders of the warrants to unwind the contracts due to the change of control related to the Merger.

Stock Held in Trust

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A grantor trust has been established for the purpose of satisfying the obligations under the plan.

As of April 28, 2013 , the Supplemental Plan held 2,616,687 shares of our common stock at an average cost of $23.75 .

As part of the Incentive Plan director fee deferral program, we purchase shares of our common stock on the open market for the benefit of the plan's participants.

These shares are held in a rabbi trust until they are transferred to the participants.

As of April 28, 2013 , the rabbi trust held 330,180 shares of our common stock at an average cost of $20.17 .

Accumulated Other Comprehensive (Loss) Income

Accumulated other comprehensive (loss) income consists of the following:

The shares of the Company's stock held by the Supplemental Plan were converted to cash as a result of the Merger.

As part of the Incentive Plan director fee deferral program, we purchased shares of our common stock on the open market for the benefit of the plan's participants.

These shares were held in a rabbi trust until transferred to the participants.

The shares held by the rabbi trust were converted to cash as a result of the Merger.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) consists of the following:

(in millions)

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Hedge accounting

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Other Comprehensive Income (Loss)

The following tables present changes in the accumulated balances for each component of other comprehensive income (loss) and the related effects on net income of amounts reclassified out of other comprehensive income (loss):

Twelve Months Ended

December 28, 2014

September 27 - December 29, 2013

(in millions)

Foreign currency translation:

Translation adjustment arising during the period

Pension accounting:

Actuarial loss

Amortization of actuarial losses and prior service credits reclassified to cost of sales

Amortization of actuarial losses and prior service credits reclassified to SG&A

Hedge accounting:

Losses arising during the period

(Gains) losses reclassified to sales

(Gains) losses reclassified to cost of sales

Gains reclassified to SG&A

Total other comprehensive income (loss)

Twelve Months Ended

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

(in millions)

Foreign currency translation:

Translation adjustment arising during the period

Pension accounting:

Amortization of actuarial losses and prior service credits reclassified to cost of sales

Amortization of actuarial losses and prior service credits reclassified to SG&A

Hedge accounting:

Gains (losses) arising during the period

Gains (losses) reclassified to sales

Gains reclassified to cost of sales

(Gains) losses reclassified to SG&A

Losses reclassified to interest expense

Total other comprehensive income (loss)

FAIR VALUE MEASUREMENTS

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables set forth, by level within the fair value hierarchy, our non-pension financial assets and liabilities that were measured at fair value on a recurring basis as of April 28, 2013 and April 29, 2012 :

April 28, 2013

April 29, 2012

The following tables set forth, by level within the fair value hierarchy, our financial assets and liabilities, including assets held in a rabbi trust used to fund the Supplemental Plan, that were measured at fair value on a recurring basis as of December 28, 2014 and December 29, 2013 :

December 28, 2014

December 29, 2013

(in millions)

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Foreign exchange contracts

Open-ended mutual funds

Bond securities

Insurance contracts

Commodity contracts

Interest rate swaps

Foreign exchange contracts

1 unchanged sentence

Derivatives— Derivatives classified within Level 1 are valued using quoted market prices.

In some cases where quoted market prices are not available, we value the derivatives using pricing models based on the net present value of estimated future cash flows to calculate fair value, in which case the measurements are classified within Level 2.

In some cases where quoted market prices are not available, we value the derivatives using market based pricing models that utilize the net present value of estimated future cash flows to calculate fair value, in which case the measurements are classified within Level 2.

These valuation models make use of market-based observable inputs, including exchange traded prices and rates, yield curves, credit curves, and measures of volatility.

Open-ended mutual funds —Open-ended mutual funds are valued at their net asset value (NAV), which approximates fair value, and classified as Level 1.

Bond securities —Bond securities are valued at quoted market prices and are classified within Level 1.

Insurance contracts— Insurance contracts are valued at their cash surrender value using the daily asset unit value (AUV) which is based on the quoted market price of the underlying securities and classified within Level 2.

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that is, the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, for example, when there is evidence of impairment.

During fiscal 2013 and fiscal 2012 , we had no significant assets or liabilities that were measured and recorded at fair value on a nonrecurring basis.

We had no significant assets or liabilities that were measured and recorded at fair value on a nonrecurring basis during 2014 or the Transition Period, except for the preliminary allocation of the total purchase consideration to the estimated fair values of our assets acquired and liabilities assumed by WH Group as part of the Merger .

We finalized the allocation in the third quarter of 2014 with no material adjustments.

See Note 2 — Merger and Acquisitions for further information on the Merger.

Pension Plan Assets

The following table summarizes our pension plan assets measured at fair value on a recurring basis (at least annually) as of April 28, 2013 and April 29, 2012 :

April 28, 2013

April 29, 2012

The following table summarizes our qualified pension plan assets measured at fair value on a recurring basis (at least annually) as of December 28, 2014 and December 29, 2013 :

December 28, 2014

December 29, 2013

(in millions)

2 unchanged sentences

Equity securities:

Preferred stock

common stock:

8 unchanged sentences

Domestic small cap

Domestic large cap

Fixed income:

Commingled funds:

Asset-backed securities

4 unchanged sentences

Diversified investment funds

Domestic options contracts

Futures contracts

Limited partnerships

15 unchanged sentences

The nature of these fixed income instruments include instruments for which quoted prices are available but traded less frequently, instruments whose fair value has been derived using a model where inputs to the model are directly observable in the market, or can be derived principally from or corroborated by observable market data and securities that are valued using other financial instruments, the parameters of which can be directly observed.

Level 2 fixed income instruments include mutual funds, asset-backed securities, corporate debt securities and government debt securities.

Level 2 fixed income instruments include mutual funds, asset-backed securities, corporate debt securities, emerging market securities and government debt securities.

Alternative Investments— The fair values of alternative investments are obtained from pricing services, broker quotes or other model-based valuation techniques with observable inputs and classified as Level 2.

6 unchanged sentences

Due to these unobservable inputs and the long-term nature of these investments, the contracts are classified as Level 3.

The following table summarizes the changes in our Level 3 pension plan assets for the year-ended April 28, 2013 and April 29, 2012 :

The following table summarizes the changes in our Level 3 pension plan assets for the twelve months ended December 28, 2014 and the eight months ended December 29, 2013 :

Insurance Contracts

1 unchanged sentence

(in millions)

Balance, May 1, 2011

Balance, April 28, 2013

Actual return on plan assets:

2 unchanged sentences

Purchases, sales and settlements, net

Balance, April 29, 2012

Balance, December 29, 2013

Actual return on plan assets:

2 unchanged sentences

Purchases, sales and settlements, net

Balance, April 28, 2013

Balance, December 28, 2014

Other Financial Instruments

1 unchanged sentence

The carrying amount of all other debt approximates fair value as those instruments are based on variable interest rates.

The following table presents the fair value and carrying value of long-term debt, including the current portion of long-term debt as of April 28, 2013 and April 29, 2012 .

April 28, 2013

April 29, 2012

The following table presents the fair value and carrying value of long-term debt, including the current portion of long-term debt as of December 28, 2014 and December 29, 2013 :

December 28, 2014

December 29, 2013

Carrying Value

3 unchanged sentences

RELATED PARTY TRANSACTIONS

The following table presents amounts owed from and to related parties as of April 28, 2013 and April 29, 2012 :

The following table presents amounts owed from and to related parties as of December 28, 2014 and December 29, 2013 :

(in millions)

Current receivables from related parties

Long-term receivables from related parties

Total receivables from related parties

Current payables to related parties

Long-term payables to related parties

Total payables to related parties

Wendell Murphy, a director of ours, or his immediate family members hold ownership interests in Arrowhead Farms, Inc., BAZ, LLC, Crusader Farms, LLC, DM Farms, LLC, Enviro-Tech Farms, Inc., Golden Farms, Inc., Ironside Investment Management, LLC, Lisbon 1 Farm, Inc.

(Lisbon), Murphy Family Ventures, Murphy-Honour Farms, Inc., Murphy Milling Company, Quarter M Ranch, Inc., PSM Associates LLC, Pure Country Farms, LLC, Stantonsburg Farm, Inc., Triumph Associates, LLC and Webber Farms, Inc.

A vice president of our Hog Production segment also holds an ownership interest in Lisbon.

These farms either produce hogs for us or produce and sell feed ingredients to us.

In fiscal 2013 , 2012 and 2011 , we paid $51.6 million , $52.2 million and $70.4 million , respectively, to these entities for hogs, feed ingredients and reimbursement of associated farm and other support costs.

Sales on the consolidated statements of income during 2014 and the three months ended December 29, 2013 include $183.2 million and $10.2 million , respectively, of sales to other subsidiaries of WH Group.

One of our vice presidents of our Hog Production segment holds an ownership interests in JCT LLC (JCT).

JCT owns certain farms that produce hogs under contract with the Hog Production segment.

In fiscal 2013 , 2012 and 2011 , we paid $6.2 million , $7.9 million and $7.8 million , respectively, to JCT for the production of hogs.

In fiscal 2013 , 2012 and 2011 , we received $2.6 million , $3.1 million and $3.3 million , respectively, from JCT for reimbursement of associated farm and other support costs.

Also, multiple other vice presidents of the Hog Production segment hold ownership interests in Seacoast, LLC, Advantage Farms, LLC, Old Oak Farms LLC and Pork Partners, Inc.

During 2014 , the eight months ended December 29, 2013 , the twelve months ended April 28, 2013 and the twelve months ended April 29, 2012 , we paid $1.7 million , $1.4 million , $6.2 million and $7.9 million , respectively, to JCT for the production of hogs.

During the eight months ended December 29, 2013 , the twelve months ended April 28, 2013 and the twelve months ended April 29, 2012 , we received $0.2 million , $2.6 million and $3.1 million , respectively, from JCT for reimbursement of associated farm and other support costs.

We received no amounts from JCT during 2014 for reimbursement of associated farm and other support costs.

Also, multiple other vice presidents of the Hog Production segment hold ownership interests in Seacoast, LLC, Advantage Farms, LLC, Old Oak Farms LLC, Pork Partners, Inc.

and Lisbon 1 Farms Inc.

These companies produce and raise hogs for us under contractual arrangements that are consistent with third party grower contracts.

In fiscal 2013 , 2012 and 2011 , we paid service fees of $1.5 million , $1.7 million and $1.9 million , respectively, to these companies.

In fiscal 2013 , 2012 and 2011 , we received $0.2 million , $0.4 million and $0.5 million , respectively, from these companies for reimbursement of associated farm and other support costs.

During 2014 , the eight months ended December 29, 2013 , the twelve months ended April 28, 2013 and the twelve months ended April 29, 2012 , we paid service fees of $2.8 million , $1.1 million , $1.5 million and $1.7 million , respectively, to these companies.

In 2014 , the twelve months ended April 28, 2013 and the twelve months ended April 29, 2012 , we received $0.1 million , $0.2 million and $0.4 million , respectively, from these companies for reimbursement of associated farm and other support costs.

We received no amounts from these companies during the eight months ended December 29, 2013 for reimbursement of associated farm and other support costs.

Wendell Murphy, a former director of the Company, and his immediate family members hold ownership interests in multiple farms that conduct business with us.

These farms either produce hogs for us or produce and sell feed ingredients to us.

In the twelve months ended April 28, 2013 and the twelve months ended April 29, 2012 , we paid $51.6 million and $52.2 million , respectively, to these entities for hogs, feed ingredients and reimbursement of associated farm and other support costs.

As a result of the Merger, Mr.

Murphy is no longer a director of the Company.

We believe that the terms of the foregoing arrangements were no less favorable to us than if entered into with unaffiliated companies.

4 unchanged sentences

In addition, individuals may initiate litigation against us.

We have no material contingencies or uncertainties that could be expected to affect the fairness of presentation of our consolidated financial statements as of April 28, 2013 .

Fire Insurance Settlement

In July 2009 (fiscal 2010), a fire occurred at the primary manufacturing facility of our subsidiary, Patrick Cudahy, Inc.

(Patrick Cudahy), in Cudahy, Wisconsin.

The fire damaged a portion of the facility’s production space and required the temporary cessation of operations, but did not consume the entir e facility.

Shortly after the fire, we resumed production activities in undamaged portions of the plant, including the distribution center, and took steps to address the supply needs for Patrick Cudahy products by shifting production to other Company and third-party facilities.

We maintain comprehensive general liability and property insurance, including business interruption insurance.

In December 2010 (fiscal 2011), we reached an agreement with our insurance carriers to settle the claim for a total of $208.0 million , of which $70.0 million had been advanced to us in fiscal 2010.

We allocated these proceeds to first recover the book value of the property lost, out-of-pocket expenses incurred and business interruption losses that resulted from the fire.

The remaining proceeds were recognized as an involuntary conversion gain of $120.6 million in the Corporate segment in the third quarter of fiscal 2011.

The involuntary conversion gain was classified in a separate line item on the consolidated statement of income.

We also recognized $15.8 million of the insurance proceeds in fiscal 2011 in cost of sales in our Pork segment to offset business interruption losses incurred.

Of the $138.0 million in insurance proceeds received in fiscal 2011 to settle the claim, $120.6 million was classified in net cash flows from investing activities in the consolidated statements of cash flows, which represents the portion of proceeds related to destruction of the facility.

The remainder of the proceeds was recorded in net cash flows from operating activities in the consolidated statements of cash flows and was attributed to business interruption recoveries and reimbursable costs covered under our insurance policy.

REPORTING SEGMENTS

North Carolina Nuisance Litigation

In July, August and September 2013, 25 complaints were filed in the Superior Court of Wake County, North Carolina by 479 individual plaintiffs against Smithfield and our wholly owed subsidiary, Murphy-Brown alleging causes of actions for nuisance and related claims.

All 25 complaints were dismissed without prejudice in September and October 2014.

In August, September and October 2014, 25 complaints were filed in the Eastern District of North Carolina by 515 individual plaintiffs against our wholly owned subsidiary, Murphy-Brown, alleging causes of action for nuisance and related claims.

The complaints stemmed from the nuisance cases previously filed in the Superior Court of Wake County.

On February 23, 2015, all 25 complaints were amended and one complaint was severed into two separate actions.

The 26 currently pending complaints were filed on behalf of 541 plaintiffs and relate to approximately 14 company-owned and 75 contract farms.

All 26 complaints include causes of action for temporary nuisance and negligence and seek recovery of an unspecified amount of compensatory, special and punitive damages, as well as unspecified injunctive and equitable relief.

Murphy-Brown is in the process of responding to the complaints in all 26 cases.

The Company believes that the claims are unfounded and intends to defend the suits vigorously.

Our policy for establishing accruals and disclosures for contingent liabilities is contained in Note 1-Summary of Significant Accounting Policies.

We established a reserve estimating our expenses to defend against these and similar potential claims on the Successor's opening balance sheet.

Consequently, expenses and other liabilities associated with these claims for subsequent periods will not affect our profits or losses unless our reserve proves to be insufficient or excessive.

However, legal expenses incurred in our and our subsidiaries’ defense of these claims and any payments made to plaintiffs through unfavorable verdicts or otherwise will negatively impact our cash flows and our liquidity position.

Given that these matters are in its very preliminary stages and given the inherent uncertainty of the outcome for these and similar potential claims, we cannot estimate the reasonably possible loss or range of loss for these loss contingencies outside the expenses we will incur to defend against these claims.

We will continue to review whether an additional accrual is necessary and whether we have the ability to estimate the reasonably possible loss or range of loss for these matters.

REPORTABLE SEGMENTS

Our operating segments are determined on the basis of how we internally report and evaluate financial information used to make operating decisions and assess performance.

For external reporting purposes, we aggregate operating segments which have similar economic characteristics, products, production processes, types or classes of customers and distribution methods into reportable segments based on a combination of factors, including products produced and geographic areas of operations.

Our reportable segments are:

Pork, Hog Production, International, Other and Corporate, each of which is comprised of a number of subsidiaries, joint ventures and other investments.

The Pork segment consists mainly of our three wholly-owned U.S.

fresh pork and packaged meats subsidiaries:

Smithfield Packing, Farmland Foods, Inc.

and John Morrell Food Group.

The Pork segment produces a wide variety of fresh pork and packaged meats products in the U.S.

Prior to the second quarter of 2014, we conducted our operations through four reportable segments:

Pork, Hog Production, International and Corporate.

Over the past several years, the Pork segment has undergone significant structural change and consolidation.

In the second quarter of 2014, two of the largest Pork segment operating companies, The Smithfield Packing Company, Inc.

and Farmland Foods, Inc., merged to form Smithfield Farmland Corp (Smithfield Farmland).

With this merger, only two large operating companies remain;

Smithfield Farmland, which produces both fresh pork and packaged meats, and John Morrell Food Group, which is predominately a packaged meats company.

Based on the evolution of the Pork segment over the past several years and the recent merger of Smithfield Farmland, the former Pork segment has been reorganized from an independent operating company structure to a product division structure to more closely align with the way in which the chief operating decision maker (CODM) views the business, assesses segment performance and allocates resources.

Therefore, the former Pork segment now consists of two reportable segments;

the Fresh Pork segment and the Packaged Meats segment.

As such, beginning with the second quarter of 2014, our reportable segments are:

Fresh Pork, Packaged Meats, Hog Production, International and Corporate.

The changes to our reportable segments have been applied retrospectively for all periods presented.

During all periods presented, our CODM has been the President and Chief Executive Officer of the Company.

Fresh Pork Segment

The Fresh Pork segment consists of our U.S.

fresh pork operations.

The Fresh Pork segment processes live hogs and produces a wide variety of fresh pork products in the U.S.

and markets them nationwide and to numerous foreign markets, including China, Japan, Mexico, Russia and Canada.

Fresh pork products include loins, butts, picnics and ribs, among others.

Packaged meats products include smoked and boiled hams, bacon, sausage, hot dogs (pork, beef and chicken), deli and luncheon meats, specialty products such as pepperoni, dry meat products, and ready-to-eat, prepared foods such as pre-cooked entrees and pre-cooked bacon and sausage.

The following table shows the percentages of Pork segment revenues derived from packaged meats and fresh pork for the fiscal years indicated.

Packaged meats

Fresh pork (1)

——————————————

Includes by-products and rendering.

The Fresh Pork segment processed 27.9 million hogs during 2014.

Packaged Meats Segment

The Packaged Meats segment consists of our U.S.

packaged meats operations.

The Packaged Meats segment utilizes fresh pork and other raw meat products to produce a wide variety of packaged meats products in the U.S.

and markets them primarily in the U.S.

Packaged meats products include smoked and boiled hams, bacon, sausage, hot dogs (pork, beef and chicken), deli and luncheon meats, speciality products such as pepperoni, dry meat products, and ready-to-eat, prepared foods such as pre-cooked entrees and pre-cooked bacon and sausage.

The Packaged Meats segment sales volume totaled 2.8 billion pounds in 2014.

Hog Production Segment

The Hog Production segment consists of our hog production operations located in the U.S.

The Hog Production segment operates numerous facilities with approximately 853,000 sows producing about 16.0 million market hogs annually.

The Hog Production segment produces approximately 53% of the Pork segment’s live hog requirements.

We own certain genetic lines of specialized breeding stock which are marketed using the name Smithfield Premium Genetics (SPG).

The following table shows the percentages of Hog Production segment revenues derived from hogs sold internally and externally, and other products for the fiscal years indicated.

The Hog Production segment operates numerous facilities with approximately 894,000 sows and produced 14.7 million hogs in 2014.

The Hog Production segment produces approximately 47% of the Fresh Pork segment's live hog requirements.

The following table shows the percentages of Hog Production segment revenues derived from hogs sold internally and externally, and other products for the periods indicated:

Twelve Months Ended

December 28, 2014

September 27 - December 29, 2013

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

Internal hog sales

5 unchanged sentences

The International segment includes our meat processing and distribution operations in Poland, Romania and the United Kingdom, our interests in meat processing operations, mainly in Western Europe and Mexico, our hog production operations located in Poland and Romania and our interests in hog production operations in Mexico.

Our international meat processing operations produce a wide variety of fresh pork, beef, poultry and packaged meats products, including cooked hams, sausages, hot dogs, bacon and canned meats.

The following table shows the percentages of International segment revenues derived from packaged meats, fresh meats and other products for the fiscal years indicated.

Our international meat processing operations produce a wide variety of fresh pork, poultry and packaged meats products, including cooked hams, sausages, hot dogs, bacon and canned meats.

The International segment processed 4.3 million hogs and sold 489.3 million pounds and 533.7 million pounds of packaged meats and fresh pork, respectively, during 2014.

The following table shows the percentages of International segment revenues derived from packaged meats, fresh meats and hog production for the periods indicated:

Twelve Months Ended

December 28, 2014

September 27 - December 29, 2013

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

Packaged meats

Other products (1)

Fresh meats (1)

Hog production (2)

——————————————

Includes external hog sales, feed, feathers, by-products and rendering .

Other Segment

The Other segment, contains the results of our former turkey production operations and our previous 49% interest in Butterball, LLC (Butterball), which were sold in December 2010 (fiscal 2011).

Includes feathers, by-products and rendering .

Includes external hog and feed sales .

Corporate Segment

1 unchanged sentence

Segment Results

The following tables present information about the results of operations and the assets of our reportable segments for the fiscal years presented.

The following tables present information about the results of operations and the assets of our reportable segments.

The information contains certain allocations of expenses that we deem reasonable and appropriate for the evaluation of results of operations.

2 unchanged sentences

We believe all intersegment sales are at prices that approximate market.

Twelve Months Ended

December 28, 2014

September 27 - December 29, 2013

(in millions)

1 unchanged sentence

Segment sales—

Fresh Pork (1)

Packaged Meats

Hog Production

2 unchanged sentences

Intersegment sales—

Fresh Pork (1)

Packaged Meats

Hog Production

3 unchanged sentences

Depreciation and amortization:

Packaged Meats

Hog Production

1 unchanged sentence

Consolidated depreciation and amortization

Interest expense (income):

Interest (income) expense:

Packaged Meats

Hog Production

2 unchanged sentences

(Income) loss from equity method investments

Packaged Meats

Hog Production

1 unchanged sentence

Consolidated (income) loss from equity method investments

Operating profit:

Operating profit (loss):

Packaged Meats

Hog Production

1 unchanged sentence

Consolidated operating profit

——————————————

We do not reflect transfers of Fresh Pork to Packaged Meats as sales.

In WH Group's segment reporting the Fresh Pork segment includes transfers of fresh pork to the Packaged Meats segment as sales.

As such, Fresh Pork segment information reported by WH Group includes an additional $2.4 billion and $601.7 million of sales for the twelve months ended December 28, 2014 and the three months ended December 29, 2013 , respectively.

Twelve Months Ended

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

(in millions)

Segment Profit Information

Segment sales—

Packaged Meats

Hog Production

International

Total segment sales

Intersegment sales—

Packaged Meats

Hog Production

International

Total intersegment sales

Consolidated sales

Depreciation and amortization:

Packaged Meats

Hog Production

International

Consolidated depreciation and amortization

Interest expense (income):

Packaged Meats

Hog Production

International

Consolidated interest expense

(Income) loss from equity method investments

Packaged Meats

Hog Production

International

Consolidated (income) loss from equity method investments

Operating profit (loss):

Packaged Meats

Hog Production

International

Consolidated operating profit

Segment Asset Information

(in millions)

Total assets:

Fresh Pork and Packaged Meats (1)

Hog Production

International

Corporate (2)

Consolidated total assets

Fresh Pork and Packaged Meats (1)

Hog Production

1 unchanged sentence

Consolidated investments

——————————————

Given the nature of the Fresh Pork and Packaged Meats operations, many of their assets are shared and not allocated.

Accordingly, we have disclosed the assets on a combined basis, consistent with how they are reported to the CODM.

$1.2 billion of trademarks related to our domestic brands are owned by certain holding companies included within Corporate.

Additionally, $660.5 million and $539.0 million of accounts receivable were held by the SPV and included within Corporate as of December 28, 2014 and December 29, 2013 , respectively (see Note 7 — Debt for further information).

Twelve Months Ended

December 28, 2014

September 27 - December 29, 2013

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

(in millions)

Capital expenditures:

Fresh Pork and Packaged Meats (1)

Hog Production

1 unchanged sentence

Consolidated capital expenditures

The following table shows the change in the carrying amount of goodwill by reportable segment:

——————————————

Given the nature of the Fresh Pork and Packaged Meats operations, many of their assets are shared and not allocated.

Accordingly, we have disclosed the capital expenditures on a combined basis, consistent with how they are reported to the CODM.

The following table shows the change in the carrying amount of goodwill by reportable segment for the periods noted:

International

1 unchanged sentence

(in millions)

Balance, May 1, 2011

Other goodwill adjustments (1)

Balance, April 28, 2013

1 unchanged sentence

Other goodwill adjustments (3)

Balance, April 28, 2013

Balance, September 26, 2013

——————————————

Predecessor goodwill was allocated to the Pork segment.

Upon changing our segments in 2014, to segregate the Fresh Pork and Packaged Meats components into separate reportable segments, we did not reallocate historical goodwill balances to the new segments as it was not practicable to do so.

See Note 2 — Merger and Acquisitions for discussion of acquisition.

Other goodwill adjustments primarily include the effects of foreign currency translation.

See Note 2 — Acquisitions for discussion of acquisition.

The following table presents our consolidated sales and long-lived assets attributed to operations by geographic area for the fiscal years ended April 28, 2013 , April 29, 2012 and May 1, 2011 :

Packaged Meats

International

Hog Production

(in millions)

Balance, September 27, 2013

Balance, December 29, 2013

Purchase accounting adjustments (1)

Other goodwill adjustments (2)

Balance, December 28, 2014

——————————————

Purchase accounting adjustments relate to adjustments recognized in connection with the purchase price allocation due to the Merger.

We consider these adjustments immaterial to the Successor opening balance sheet and as such, did not retrospectively apply the adjustments to the Successor opening balance sheet.

Other goodwill adjustments primarily include the effects of foreign currency translation and an immaterial business acquisition during the second quarter of 2014.

The following table presents our consolidated sales attributed to operations by geographic area for 2014 , the three months ended December 29, 2013 , the five months ended September 26, 2013 , the twelve months ended April 28, 2013 and the twelve months ended April 29, 2012 :

Twelve Months Ended

December 28, 2014

September 27 - December 29, 2013

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

(in millions)

International

The following table presents our long-lived assets attributed to operations by geographic area as of December 28, 2014 and December 29, 2013 :

(in millions)

3 unchanged sentences

SUPPLEMENTAL CASH FLOW INFORMATION

Twelve Months Ended

December 28, 2014

September 27 - December 29, 2013

April 29 - September 26, 2013

April 28, 2013

April 29, 2012

Supplemental disclosures of cash flow information:

3 unchanged sentences

QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

(in millions, except per share data)

(in millions)

Operating profit

Net income per share:

Operating profit

Net income per share:

——————————————

Per common share amounts for the quarters and full years have each been calculated separately.

Accordingly, quarterly amounts may not add to the annual amounts because of differences in the weighted average common shares outstanding during each period.

The following significant infrequent or unusual items impacted our quarterly results in fiscal 2013 and fiscal 2012 :

Net income in the second quarter included loss on debt extinguishment of $120.7 million .

Net income in the first, second and third quarters included losses on debt extinguishment of $1.2 million , $6.4 million and $4.6 million , respectively.

Operating profit in the first and fourth quarters included charges of $39.0 million and a net benefit of $16.8 million , respectively, related to the Missouri litigation.

Gross profit in the first, second and third quarters included accelerated depreciation charges associated with the idling of certain Missouri hog farm assets of $4.3 million , $3.2 million , and $0.7 million , respectively.

Operating profit in the second, third and fourth quarters included charges associated with the planned closure of our Portsmouth facility of $1.8 million , $1.7 million , and $1.2 million , respectively.

Operating profit in the first and second quarters included professional fees related to the potential acquisition of a controlling interest in CFG of $5.7 million and $0.7 million , respectively.

In June 2011 (fiscal 2012), we terminated negotiations to purchase the additional interest.

Operating profit in the third quarter included our share of charges related to the CFG Consolidation Plan of $38.7 million .

2013 represents the twelve months ended December 29, 2013 .

The following significant infrequent or unusual items impacted our quarterly results in the twelve months ended December 29, 2013 .

There were no significant infrequent or unusual items that impacted our quarterly results in 2014.

Operating profit in the third and fourth quarters included professional fees related to the Merger of $18.0 million and $23.9 million , respectively.

Gross profit in the fourth quarter included $45.4 million of non-cash costs related to the fair value step-up of inventories due to the Merger.

SUBSEQUENT EVENTS

Definitive Merger Agreement

On May 28, 2013, we entered into an Agreement and Plan of Merger (the Merger Agreement) with Shuanghui International Holdings Limited, a corporation formed under the laws of the Cayman Islands (Shuanghui) and Sun Merger Sub, Inc., a Virginia corporation and wholly owned subsidiary of Shuanghui (Merger Sub and, together with Shuanghui, the Parent Parties), pursuant to which Merger Sub will merge with and into the Company (the Merger), with the Company surviving the Merger as a wholly owned subsidiary of Shuanghui.

Shuanghui is the majority shareholder of Henan Shuanghui Investment & Development Co., which is China's largest meat processing enterprise and China's largest publicly traded meat products company as measured by market capitalization.

Under the terms of the Merger Agreement, which has been unanimously approved by the boards of directors of both companies, Shuanghui will acquire all of the outstanding shares of Smithfield for $34.00 per share in cash.

Upon completion of the Merger, all then-outstanding stock-based compensation awards, whether vested or unvested, will be converted into the right to receive cash of $34.00 per share (without interest), less the exercise price of such awards, if any.

The Merger Agreement contains certain termination rights for the Company and Shuanghui.

Upon termination of the Merger Agreement under specified customary circumstances, the Company will be required to pay Shuanghui a termination fee.

If the Merger Agreement is terminated in connection with the Company entering into an alternative acquisition agreement in respect of a superior proposal or making a change of recommendation, or in certain other customary circumstances, the termination fee payable by the Company to Shuanghui will be $175.0 million .

Under specified circumstances, if the Company enters into a definitive agreement with a Qualified Pre-Existing Bidder with respect to an alternative acquisition proposal on or before June 27, 2013, the amount of the termination fee will instead be reduced to $75.0 million .

The Merger Agreement also provides that Shuanghui will be required to pay the Company a reverse termination fee of $275.0 million (which is not exclusive in the case of a willful breach) if the Merger Agreement is terminated under certain circumstances in connection with a willful breach by Shuanghui, termination primarily caused by the failure to obtain required U.S.

or foreign antitrust or other regulatory approvals (other than CFIUS), or termination as a result of the failure by Shuanghui to receive the proceeds of its committed debt financing and consummate the Merger.

The Merger will be financed through a combination of cash provided by Shuanghui , rollover of certain existing Company debt, as well as debt financing which has been committed by Morgan Stanley Senior Funding, Inc.

and a syndicate of banks.

The Merger Agreement does not contain a financing condition.

The closing of the Merger is subject to certain conditions, including, among others, approval by our shareholders, the receipt of approval under applicable U.S.

and specified foreign antitrust and anti-competition laws, and if review by CFIUS has concluded, the absence of any action by the President of the United States to block or prevent the consummation of the Merger and other customary closing conditions.

The Merger is expected to close in the second half of calendar 2013.

Kansas City Sausage, LLC

In May 2013 (fiscal 2014), we acquired a 50% interest in Kansas City Sausage Company, LLC (KCS), for $35.0 million in cash, subject to a customary post-closing adjustment for differences between working capital at closing and an agreed-upon target.

Additionally, we entered into a revolving loan agreement with KCS, under which we agreed to make loans from time to time up to an aggregate principal amount of $20.0 million .

The aggregate amount of any obligations incurred under the revolving loan agreement is secured by a first priority security interest in all of the assets of KCS.

KCS is a leading U.S.sausage producer and sow processor.

We intend to merge KCS's low-cost, efficient operations and high-quality products with our strong brands and sales and marketing team to continue to grow our packaged meats business.

The venture will operate in Des Moines, Iowa and Kansas City, Missouri.

In Des Moines, the venture will produce premium raw materials for sausage, as well as value-added products, including boneless hams and hides.

The Kansas City plant is a modern sausage processing facility in the U.S.

and is designed for optimum efficiency to provide retail and foodservice customers with high quality products.

With our strong ongoing focus on building our packaged meats business, and with 15% of the U.S.

sow population, this joint venture is a logical fit for the Company.

It will provide a growth platform in two key packaged meats categories — breakfast sausage and dinner sausage — and will allow us to expand our product offerings to our customers.

These categories represent over $4.0 billion in retail and foodservice sales annually.

2015 Tender Offer

In January 2015, we commenced a cash tender offer for our 2017, 2018, 2021 and 2022 Notes, subject to a maximum aggregate purchase price of up to $275 million (2015 Tender Offer).

The 2015 Tender Offer expired in February 2015.

As a result of the 2015 Tender Offer, we paid $275 million to repurchase $258 million of principal.

As a result of these repurchases, we will recognize losses on debt extinguishment of approximately $12 million in the first quarter of 2015, including the write-off of related unamortized premiums and debt issuance costs.

SMITHFIELD FOODS, INC.

1 unchanged sentence

VALUATION AND QUALIFYING ACCOUNTS

FOR THE THREE YEARS ENDED APRIL 28, 2013

(in millions)

Column C Additions

Balance at Beginning of Year

Balance at Beginning of Period

Charged to costs and expenses

Charged to other

Balance at End of Year

Balance at End of Period

Reserve for uncollectible accounts receivable:

Fiscal year ended April 28, 2013

Fiscal year ended April 29, 2012

Fiscal year ended May 1, 2011

Reserve for obsolete inventory:

Fiscal year ended April 28, 2013

Fiscal year ended April 29, 2012

Fiscal year ended May 1, 2011

Twelve months ended December 28, 2014

Three months ended December 29, 2013

Five months ended September 26, 2013

Twelve months ended April 28, 2013

Twelve months ended April 29, 2012

Lower of cost or market allowance:

Twelve months ended December 28, 2014

Three months ended December 29, 2013

Five months ended September 26, 2013

Twelve months ended April 28, 2013

Twelve months ended April 29, 2012

Deferred tax valuation allowance:

Fiscal year ended April 28, 2013

Fiscal year ended April 29, 2012

Fiscal year ended May 1, 2011

Twelve months ended December 28, 2014

Three months ended December 29, 2013

Five months ended September 26, 2013

Twelve months ended April 28, 2013

Twelve months ended April 29, 2012

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2 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