SFD filing — read by section

Item 8. Financial Statements and Supplementary Data

ITEM 8. 
 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 
 
 INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE 
 
 PAGE 
 
 Report of Independent Registered Public Accounting Firms on Consolidated Financial Statements 
 64 
 
 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) 
 66 
 
 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) 
 67 
 
 Consolidated Balance Sheets as of December 28, 2014 and December 29, 2013 
 68 
 
 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) 
 69 
 
 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) 
 70 
 
 Notes to Consolidated Financial Statements 
 72 
 
 Schedule II—Valuation and Qualifying Accounts 
 121 
 
 63 

 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 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. 
 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 
 Richmond, VA 
 March 25, 2015 
 
 64 

 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. 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. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. 
 We conducted our audits 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 the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. 
 In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Smithfield Foods, Inc. and subsidiaries at April 28, 2013 and April 29, 2012, and the consolidated results of their operations and their cash flows for each of the three years in the period ended April 28, 2013, in conformity with U.S. generally accepted accounting principles. 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. 
 /s/ E RNST & Y OUNG LLP 
 Richmond, Virginia 
 June 18, 2013, except for Note 13, as to which the date is March 25, 2015 
 
 65 

 SMITHFIELD FOODS, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF INCOME 
 (in millions) 
 
 Successor 
 
 Predecessor 
 
 Twelve Months Ended 
 
 Twelve Months Ended 
 
 December 28, 2014 
 
 September 27 - December 29, 2013 
 
 April 29 - September 26, 2013 
 
 April 28, 2013 
 
 April 29, 2012 
 
 Sales 
 $ 
 15,031.3 
 
 $ 
 3,894.2 
 
 $ 
 5,679.5 
 
 $ 
 13,221.1 
 
 $ 
 13,094.3 
 
 Cost of sales 
 13,255.7 
 
 3,543.1 
 
 5,190.1 
 
 11,901.4 
 
 11,544.9 
 
 Gross profit 
 1,775.6 
 
 351.1 
 
 489.4 
 
 1,319.7 
 
 1,549.4 
 
 Selling, general and administrative expenses 
 902.2 
 
 213.4 
 
 341.7 
 
 815.4 
 
 816.9 
 
 Merger related costs 
 — 
 
 23.9 
 
 18.0 
 
 — 
 
 — 
 
 (Income) loss from equity method investments 
 (58.2 
 ) 
 
 2.6 
 
 0.5 
 
 (15.0 
 ) 
 
 9.9 
 
 Operating profit 
 931.6 
 
 111.2 
 
 129.2 
 
 519.3 
 
 722.6 
 
 Interest expense 
 159.4 
 
 59.0 
 
 64.6 
 
 168.7 
 
 176.7 
 
 Non-operating (gain) loss 
 (0.9 
 ) 
 
 1.7 
 
 — 
 
 120.7 
 
 12.2 
 
 Income before income taxes 
 773.1 
 
 50.5 
 
 64.6 
 
 229.9 
 
 533.7 
 
 Income tax expense 
 217.0 
 
 15.8 
 
 12.7 
 
 46.1 
 
 172.4 
 
 Net income 
 $ 
 556.1 
 
 $ 
 34.7 
 
 $ 
 51.9 
 
 $ 
 183.8 
 
 $ 
 361.3 
 
 See Notes to Consolidated Financial Statements 
 
 66 

 SMITHFIELD FOODS, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 
 (in millions) 
 
 Successor 
 
 Predecessor 
 
 Twelve Months Ended 
 
 Twelve Months Ended 
 
 December 28, 2014 
 
 September 27 - December 29, 2013 
 
 April 29 - September 26, 2013 
 
 April 28, 2013 
 
 April 29, 2012 
 
 Net income 
 
 $ 
 556.1 
 
 $ 
 34.7 
 
 $ 
 51.9 
 
 $ 
 183.8 
 
 $ 
 361.3 
 
 Other comprehensive income (loss): 
 
 Foreign currency translation: 
 
 Translation adjustment 
 
 (167.5 
 ) 
 
 29.6 
 
 23.3 
 
 (12.5 
 ) 
 
 (185.7 
 ) 
 
 Tax benefit (expense) 
 
 12.8 
 
 (2.3 
 ) 
 
 (6.4 
 ) 
 
 1.4 
 
 25.9 
 
 Pension accounting: 
 
 Net actuarial gains (losses) 
 
 (217.5 
 ) 
 
 23.7 
 
 — 
 
 (93.9 
 ) 
 
 (326.1 
 ) 
 
 Reclassification of losses into net income 
 
 3.3 
 
 — 
 
 24.8 
 
 52.8 
 
 23.5 
 
 Tax benefit (expense) 
 
 82.0 
 
 (9.1 
 ) 
 
 (9.7 
 ) 
 
 15.9 
 
 117.6 
 
 Hedge accounting: 
 
 Net derivative gains (losses) 
 
 (166.3 
 ) 
 
 (2.3 
 ) 
 
 (26.6 
 ) 
 
 53.3 
 
 105.6 
 
 Reclassification of net (gains) losses into net income 
 
 214.1 
 
 (2.4 
 ) 
 
 (29.2 
 ) 
 
 (165.4 
 ) 
 
 (100.9 
 ) 
 
 Tax benefit (expense) 
 
 (18.5 
 ) 
 
 1.8 
 
 21.8 
 
 43.1 
 
 (1.6 
 ) 
 
 Total other comprehensive income (loss) 
 
 (257.6 
 ) 
 
 39.0 
 
 (2.0 
 ) 
 
 (105.3 
 ) 
 
 (341.7 
 ) 
 
 Total comprehensive income 
 
 $ 
 298.5 
 
 $ 
 73.7 
 
 $ 
 49.9 
 
 $ 
 78.5 
 
 $ 
 19.6 
 
 See Notes to Consolidated Financial Statements 
 
 67 

 SMITHFIELD FOODS, INC. AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS 
 (in millions, except share data) 
 
 December 28, 
2014 
 
 December 29, 
2013 
 
 ASSETS 
 
 Current assets: 
 
 Cash and cash equivalents 
 
 $ 
 433.5 
 
 $ 
 193.4 
 
 Accounts receivable, net 
 
 864.0 
 
 810.9 
 
 Inventories 
 
 2,206.8 
 
 2,274.7 
 
 Prepaid expenses and other current assets 
 
 244.3 
 
 225.1 
 
 Total current assets 
 
 3,748.6 
 
 3,504.1 
 
 Property, plant and equipment, net 
 
 2,753.4 
 
 2,745.9 
 
 Goodwill 
 
 1,626.2 
 
 1,622.5 
 
 Intangible assets, net 
 
 1,380.9 
 
 1,405.8 
 
 Investments 
 
 498.0 
 
 496.5 
 
 Other assets 
 
 140.5 
 
 180.0 
 
 Total assets 
 
 $ 
 10,147.6 
 
 $ 
 9,954.8 
 
 LIABILITIES AND SHAREHOLDER'S EQUITY 
 
 Current liabilities: 
 
 Current portion of long-term debt and capital lease obligations 
 
 48.1 
 
 48.5 
 
 Accrued expenses and other current liabilities 
 
 745.0 
 
 632.7 
 
 Accounts payable 
 
 675.1 
 
 614.4 
 
 Total current liabilities 
 
 1,468.2 
 
 1,295.6 
 
 Long-term debt and capital lease obligations 
 
 2,694.6 
 
 2,997.4 
 
 Deferred income taxes, net 
 
 697.5 
 
 745.9 
 
 Net long-term pension liability 
 
 574.9 
 
 504.4 
 
 Other liabilities 
 
 122.2 
 
 131.1 
 
 Redeemable noncontrolling interests 
 
 49.8 
 
 48.6 
 
 Commitments and contingencies 
 
 Equity: 
 
 Shareholder's equity: 
 
 Common stock, no par value, 1,000 authorized shares; 1,000 issued and outstanding 
 
 — 
 
 — 
 
 Additional paid-in capital 
 
 4,167.3 
 
 4,157.4 
 
 Retained earnings 
 
 590.8 
 
 34.7 
 
 Accumulated other comprehensive income (loss) 
 
 (218.6 
 ) 
 
 39.0 
 
 Total shareholder's equity 
 
 4,539.5 
 
 4,231.1 
 
 Noncontrolling interests 
 
 0.9 
 
 0.7 
 
 Total equity 
 
 4,540.4 
 
 4,231.8 
 
 Total liabilities and shareholder's equity 
 
 $ 
 10,147.6 
 
 $ 
 9,954.8 
 
 See Notes to Consolidated Financial Statements 

 68 

 SMITHFIELD FOODS, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF CASH FLOWS 
 (in millions) 
 
 Successor 
 
 Predecessor 
 
 Twelve Months Ended 
 
 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: 
 
 Net income 
 
 $ 
 556.1 
 
 $ 
 34.7 
 
 $ 
 51.9 
 
 $ 
 183.8 
 
 $ 
 361.3 
 
 Adjustments to reconcile net cash flows from operating activities: 
 
 (Income) loss from equity method investments 
 
 (58.2 
 ) 
 
 2.6 
 
 0.5 
 
 (15.0 
 ) 
 
 9.9 
 
 Depreciation and amortization 
 
 230.8 
 
 55.4 
 
 106.5 
 
 239.9 
 
 242.8 
 
 Impact of inventory fair value step-up on cost of sales 
 
 — 
 
 45.4 
 
 — 
 
 — 
 
 — 
 
 Deferred income taxes 
 
 62.0 
 
 14.5 
 
 (3.7 
 ) 
 
 (5.3 
 ) 
 
 90.2 
 
 Impairment of assets 
 
 6.2 
 
 0.5 
 
 2.0 
 
 4.2 
 
 2.9 
 
 Pension expense 
 
 50.6 
 
 11.9 
 
 44.8 
 
 96.1 
 
 57.2 
 
 Pension contributions 
 
 (173.7 
 ) 
 
 (9.1 
 ) 
 
 (9.7 
 ) 
 
 (17.7 
 ) 
 
 (142.8 
 ) 
 
 Changes in operating assets and liabilities and other, net: 
 
 Accounts receivable 
 
 (91.7 
 ) 
 
 (37.8 
 ) 
 
 (86.0 
 ) 
 
 (39.9 
 ) 
 
 47.8 
 
 Inventories 
 
 17.9 
 
 199.8 
 
 (108.7 
 ) 
 
 (273.9 
 ) 
 
 (89.8 
 ) 
 
 Prepaid expenses and other current assets 
 
 (22.5 
 ) 
 
 (66.7 
 ) 
 
 72.8 
 
 52.0 
 
 (68.1 
 ) 
 
 Accounts payable 
 
 77.4 
 
 107.0 
 
 64.2 
 
 14.7 
 
 2.5 
 
 Accrued expenses and other current liabilities 
 
 92.8 
 
 151.7 
 
 (150.3 
 ) 
 
 (15.9 
 ) 
 
 12.6 
 
 Other 
 
 65.4 
 
 (50.6 
 ) 
 
 (10.1 
 ) 
 
 (50.3 
 ) 
 
 43.6 
 
 Net cash flows from operating activities 
 
 813.1 
 
 459.3 
 
 (25.8 
 ) 
 
 172.7 
 
 570.1 
 
 Cash flows from investing activities: 
 
 Acquisition of Smithfield Foods, Inc. 
 
 — 
 
 (4,896.6 
 ) 
 
 — 
 
 — 
 
 — 
 
 Capital expenditures 
 
 (301.4 
 ) 
 
 (69.9 
 ) 
 
 (139.8 
 ) 
 
 (278.0 
 ) 
 
 (290.7 
 ) 
 
 Business acquisition, net of cash acquired 
 
 (11.0 
 ) 
 
 — 
 
 (32.8 
 ) 
 
 (24.0 
 ) 
 
 — 
 
 Net (expenditures) proceeds from breeding stock transactions 
 
 13.3 
 
 5.1 
 
 (5.3 
 ) 
 
 (18.4 
 ) 
 
 (2.3 
 ) 
 
 Proceeds from sale of property, plant and equipment 
 
 3.8 
 
 2.3 
 
 1.7 
 
 16.9 
 
 6.4 
 
 Advance note and other 
 
 3.6 
 
 — 
 
 (10.0 
 ) 
 
 (0.2 
 ) 
 
 — 
 
 Net cash flows from investing activities 
 
 (291.7 
 ) 
 
 (4,959.1 
 ) 
 
 (186.2 
 ) 
 
 (303.7 
 ) 
 
 (286.6 
 ) 
 
 Cash flows from financing activities: 
 
 Net proceeds from equity contributions 
 
 — 
 
 4,162.1 
 
 — 
 
 — 
 
 — 
 
 Proceeds from the issuance of long-term debt 
 
 13.0 
 
 900.3 
 
 — 
 
 1,219.2 
 
 — 
 
 Principal payments on long-term debt and capital lease obligations 
 
 (34.5 
 ) 
 
 (218.7 
 ) 
 
 (458.7 
 ) 
 
 (716.5 
 ) 
 
 (152.7 
 ) 
 
 Proceeds from Securitization Facility 
 
 255.0 
 
 240.0 
 
 170.0 
 
 — 
 
 — 
 
 Payments on Securitization Facility 
 
 (360.0 
 ) 
 
 (255.0 
 ) 
 
 (50.0 
 ) 
 
 — 
 
 — 
 
 Net borrowings (repayments) on revolving credit facilities and notes payables 
 
 (159.6 
 ) 
 
 (367.9 
 ) 
 
 490.3 
 
 13.9 
 
 (0.3 
 ) 
 
 Repurchase of common stock 
 
 — 
 
 — 
 
 — 
 
 (386.4 
 ) 
 
 (189.5 
 ) 
 
 Change in cash collateral 
 
 — 
 
 — 
 
 — 
 
 — 
 
 23.9 
 
 Debt issuance costs and other 
 
 (0.2 
 ) 
 
 (20.4 
 ) 
 
 0.1 
 
 (14.5 
 ) 
 
 (9.8 
 ) 
 
 Net cash flows from financing activities 
 
 (286.3 
 ) 
 
 4,440.4 
 
 151.7 
 
 115.7 
 
 (328.4 
 ) 
 
 Effect of foreign exchange rate changes on cash 
 
 5.0 
 
 2.3 
 
 0.2 
 
 1.6 
 
 (5.5 
 ) 
 
 Net change in cash and cash equivalents 
 
 240.1 
 
 (57.1 
 ) 
 
 (60.1 
 ) 
 
 (13.7 
 ) 
 
 (50.4 
 ) 
 
 Cash and cash equivalents at beginning of period 
 
 193.4 
 
 250.5 
 
 310.6 
 
 324.3 
 
 374.7 
 
 Cash and cash equivalents at end of period 
 
 $ 
 433.5 
 
 $ 
 193.4 
 
 $ 
 250.5 
 
 $ 
 310.6 
 
 $ 
 324.3 
 
 See Notes to Consolidated Financial Statements 

 69 

 SMITHFIELD FOODS, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY 
 (in millions) 
 
 Common Stock (Shares) 
 
 Common Stock (Amount) 
 
 Additional Paid-in Capital 
 
 Stock Held in Trust 
 
 Retained Earnings 
 
 Accumulated Other Comprehensive Income (Loss) 
 
 Total Shareholder's Equity 
 
 Noncontrolling Interests 
 
 Total Equity 
 
 Predecessor 
 
 Balance, May 1, 2011 
 
 166.1 
 
 $ 
 83.0 
 
 $ 
 1,638.7 
 
 $ 
 (66.7 
 ) 
 
 $ 
 2,059.7 
 
 $ 
 (169.2 
 ) 
 
 $ 
 3,545.5 
 
 $ 
 1.1 
 
 $ 
 3,546.6 
 
 Common stock repurchased 
 
 (9.2 
 ) 
 
 (4.6 
 ) 
 
 (90.3 
 ) 
 
 (94.6 
 ) 
 
 (189.5 
 ) 
 
 (189.5 
 ) 
 
 Issuance of common stock 
 
 0.5 
 
 0.3 
 
 (5.0 
 ) 
 
 — 
 
 — 
 
 — 
 
 (4.7 
 ) 
 
 — 
 
 (4.7 
 ) 
 
 Stock compensation expense 
 
 — 
 
 — 
 
 14.4 
 
 — 
 
 — 
 
 — 
 
 14.4 
 
 — 
 
 14.4 
 
 Purchase of stock for trust 
 
 — 
 
 — 
 
 — 
 
 (1.6 
 ) 
 
 — 
 
 — 
 
 (1.6 
 ) 
 
 — 
 
 (1.6 
 ) 
 
 Other 
 
 — 
 
 — 
 
 3.2 
 
 0.4 
 
 — 
 
 — 
 
 3.6 
 
 0.4 
 
 4.0 
 
 Comprehensive income: 
 
 Net income (loss) 
 
 — 
 
 — 
 
 — 
 
 — 
 
 361.3 
 
 — 
 
 361.3 
 
 (0.8 
 ) 
 
 360.5 
 
 Other comprehensive income, net of tax 
 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 (341.7 
 ) 
 
 (341.7 
 ) 
 
 — 
 
 (341.7 
 ) 
 
 Balance, April 29, 2012 
 
 157.4 
 
 78.7 
 
 1,561.0 
 
 (67.9 
 ) 
 
 2,326.4 
 
 (510.9 
 ) 
 
 3,387.3 
 
 0.7 
 
 3,388.0 
 
 Common stock repurchased 
 
 (19.1 
 ) 
 
 (9.5 
 ) 
 
 (189.3 
 ) 
 
 — 
 
 (187.6 
 ) 
 
 — 
 
 (386.4 
 ) 
 
 — 
 
 (386.4 
 ) 
 
 Issuance of common stock 
 
 0.6 
 
 0.3 
 
 (1.1 
 ) 
 
 — 
 
 — 
 
 — 
 
 (0.8 
 ) 
 
 — 
 
 (0.8 
 ) 
 
 Stock compensation expense 
 
 — 
 
 — 
 
 19.1 
 
 — 
 
 — 
 
 — 
 
 19.1 
 
 — 
 
 19.1 
 
 Purchase of stock for trust 
 
 — 
 
 — 
 
 — 
 
 (1.8 
 ) 
 
 — 
 
 — 
 
 (1.8 
 ) 
 
 — 
 
 (1.8 
 ) 
 
 Other 
 
 — 
 
 — 
 
 0.2 
 
 0.9 
 
 — 
 
 — 
 
 1.1 
 
 (0.4 
 ) 
 
 0.7 
 
 Comprehensive income: 
 
 Net income (loss) 
 
 — 
 
 — 
 
 — 
 
 — 
 
 183.8 
 
 — 
 
 183.8 
 
 0.4 
 
 184.2 
 
 Other comprehensive loss, net of tax 
 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 (105.3 
 ) 
 
 (105.3 
 ) 
 
 — 
 
 (105.3 
 ) 
 
 Balance, April 28, 2013 
 
 138.9 
 
 69.5 
 
 1,389.9 
 
 (68.8 
 ) 
 
 2,322.6 
 
 (616.2 
 ) 
 
 3,097.0 
 
 0.7 
 
 3,097.7 
 
 Issuance of common stock 
 
 0.4 
 
 0.1 
 
 (2.4 
 ) 
 
 — 
 
 — 
 
 — 
 
 (2.3 
 ) 
 
 — 
 
 (2.3 
 ) 
 
 Stock compensation expense 
 
 — 
 
 — 
 
 26.4 
 
 — 
 
 — 
 
 — 
 
 26.4 
 
 — 
 
 26.4 
 
 Purchase of stock for trust 
 
 — 
 
 — 
 
 — 
 
 (0.7 
 ) 
 
 — 
 
 — 
 
 (0.7 
 ) 
 
 — 
 
 (0.7 
 ) 
 
 Other 
 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 (0.3 
 ) 
 
 (0.3 
 ) 
 
 Comprehensive income: 
 
 Net income 
 
 — 
 
 — 
 
 — 
 
 — 
 
 51.9 
 
 — 
 
 51.9 
 
 0.2 
 
 52.1 
 
 Other comprehensive loss, net of tax 
 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 (2.0 
 ) 
 
 (2.0 
 ) 
 
 — 
 
 (2.0 
 ) 
 
 Balance, September 26, 2013 
 
 139.3 
 
 $ 
 69.6 
 
 $ 
 1,413.9 
 
 $ 
 (69.5 
 ) 
 
 $ 
 2,374.5 
 
 $ 
 (618.2 
 ) 
 
 $ 
 3,170.3 
 
 $ 
 0.6 
 
 $ 
 3,170.9 
 
 See Notes to Consolidated Financial Statements 

 70 

 SMITHFIELD FOODS, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY - (Continued) 
 (in millions) 
 
 Successor 
 
 Additional Paid-in Capital 
 
 Retained Earnings 
 
 Accumulated Other Comprehensive Income (Loss) 
 
 Total Shareholder's Equity 
 
 Noncontrolling Interests 
 
 Total Equity 
 
 Balance, September 27, 2013 
 
 4,162.1 
 
 — 
 
 — 
 
 4,162.1 
 
 0.6 
 
 4,162.7 
 
 Adjustment to redeemable noncontrolling interests 
 
 (2.2 
 ) 
 
 — 
 
 — 
 
 (2.2 
 ) 
 
 — 
 
 (2.2 
 ) 
 
 Other 
 
 (2.5 
 ) 
 
 — 
 
 — 
 
 (2.5 
 ) 
 
 — 
 
 (2.5 
 ) 
 
 Comprehensive income: 
 
 Net income 
 
 — 
 
 34.7 
 
 — 
 
 34.7 
 
 0.1 
 
 34.8 
 
 Other comprehensive income, net of tax 
 
 — 
 
 — 
 
 39.0 
 
 39.0 
 
 — 
 
 39.0 
 
 Balance, December 29, 2013 
 
 $ 
 4,157.4 
 
 $ 
 34.7 
 
 $ 
 39.0 
 
 $ 
 4,231.1 
 
 $ 
 0.7 
 
 $ 
 4,231.8 
 
 Stock compensation expense 
 
 9.2 
 
 — 
 
 — 
 
 9.2 
 
 — 
 
 9.2 
 
 Adjustment to redeemable noncontrolling interests 
 
 0.3 
 
 — 
 
 — 
 
 0.3 
 
 — 
 
 0.3 
 
 Other 
 
 0.4 
 
 — 
 
 — 
 
 0.4 
 
 — 
 
 0.4 
 
 Comprehensive income: 
 
 Net income 
 
 — 
 
 556.1 
 
 — 
 
 556.1 
 
 0.2 
 
 556.3 
 
 Other comprehensive loss, net of tax 
 
 — 
 
 — 
 
 (257.6 
 ) 
 
 (257.6 
 ) 
 
 — 
 
 (257.6 
 ) 
 
 Balance, December 28, 2014 
 
 $ 
 4,167.3 
 
 $ 
 590.8 
 
 $ 
 (218.6 
 ) 
 
 $ 
 4,539.5 
 
 $ 
 0.9 
 
 $ 
 4,540.4 
 
 See Notes to Consolidated Financial Statements 
 
 71 

 SMITHFIELD FOODS, INC. AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 NOTE 1 : SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 
 Organization 
 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 . 

 72 

 For comparative purposes, the Consolidated Statements of Income for the eight months ended December 29, 2013 and December 30, 2012 are presented as follows: 
 
 Successor 
 
 Predecessor 
 
 (unaudited) 
 
 Eight Months Ended 
 
 September 27 - December 29, 2013 
 
 April 29 - September 26, 2013 
 
 December 30, 2012 
 
 (in millions) 
 
 Sales 
 
 $ 
 3,894.2 
 
 $ 
 5,679.5 
 
 $ 
 8,898.7 
 
 Cost of sales 
 
 3,543.1 
 
 5,190.1 
 
 7,943.5 
 
 Gross profit 
 
 351.1 
 
 489.4 
 
 955.2 
 
 Selling, general and administrative expenses 
 
 213.4 
 
 341.7 
 
 540.5 
 
 Merger related costs 
 
 23.9 
 
 18.0 
 
 — 
 
 Loss (income) from equity method investments 
 
 2.6 
 
 0.5 
 
 (6.5 
 ) 
 
 Operating profit 
 
 111.2 
 
 129.2 
 
 421.2 
 
 Interest expense 
 
 59.0 
 
 64.6 
 
 111.8 
 
 Loss on debt extinguishment 
 
 1.7 
 
 — 
 
 120.7 
 
 Income before income taxes 
 
 50.5 
 
 64.6 
 
 188.7 
 
 Income tax expense 
 
 15.8 
 
 12.7 
 
 58.7 
 
 Net income 
 
 $ 
 34.7 
 
 $ 
 51.9 
 
 $ 
 130.0 
 
 Principles of Consolidation 
 The consolidated financial statements include the accounts of all wholly owned subsidiaries, as well as all majority owned subsidiaries and other entities for which we have a controlling interest. Entities that are 50% owned or less are accounted for under the equity method when we have the ability to exercise significant influence. We use the cost method of accounting for investments in which our ability to exercise significant influence is limited. 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 on our financial position for the fiscal periods presented. 
 Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at the balance sheet date. 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 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 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. As such, we have elected to consolidate the results of these operations on a one-month lag. We do not believe the impact of reporting the results of these entities on a one-month lag is material to the consolidated financial statements. 
 The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the U.S., which require us to make estimates and use assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. 

 73 

 Cash and Cash Equivalents 
 We consider all highly liquid investments with original maturities of 90 days or less to be cash equivalents. The majority of our cash is concentrated in demand deposit accounts or money market funds. The carrying value of cash equivalents approximates market value. 
 Accounts Receivable 
 Accounts receivable are recorded net of the allowance for doubtful accounts. We regularly evaluate the collectibility of our accounts receivable based on a variety of factors, including the length of time the receivables are past due, the financial health of the customer and historical experience. 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 $7.5 million and $3.2 million as of December 28, 2014 and December 29, 2013 , respectively. 
 Inventories 
 Inventories consist of the following: 
 
 December 28, 
2014 
 
 December 29, 
2013 
 
 (in millions) 
 
 Livestock 
 
 $ 
 928.1 
 
 $ 
 1,054.8 
 
 Fresh and packaged meats 
 
 961.9 
 
 956.7 
 
 Grains 
 
 191.6 
 
 134.5 
 
 Manufacturing supplies 
 
 79.8 
 
 69.3 
 
 Other 
 
 45.4 
 
 59.4 
 
 Total inventories 
 
 $ 
 2,206.8 
 
 $ 
 2,274.7 
 
 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. Costs for fresh and packaged meats include meat, labor, supplies and overhead. Average costing is primarily utilized to account for fresh and packaged meats and grains. Manufacturing supplies principally consist of ingredients and packaging materials. 
 Derivative Financial Instruments and Hedging Activities 
 See Note 4 — Derivative Financial Instruments for our policy. 
 Property, Plant and Equipment, Net 
 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 $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. 

 74 

 Property, plant and equipment, net, consists of the following: 
 
 Useful Life 
 
 December 28, 
2014 
 
 December 29, 
2013 
 
 (in Years) 
 
 (in millions) 
 
 Land and improvements 
 
 0-20 
 
 $ 
 546.4 
 
 $ 
 551.9 
 
 Buildings and improvements 
 
 20-40 
 
 866.1 
 
 846.3 
 
 Machinery and equipment 
 
 5-25 
 
 1,125.5 
 
 996.4 
 
 Breeding stock 
 
 2 
 
 193.0 
 
 193.2 
 
 Computer hardware and software 
 
 3-5 
 
 34.3 
 
 35.3 
 
 Other 
 
 3-10 
 
 67.2 
 
 66.4 
 
 Construction in progress 
 
 191.2 
 
 106.4 
 
 3,023.7 
 
 2,795.9 
 
 Accumulated depreciation 
 
 (270.3 
 ) 
 
 (50.0 
 ) 
 
 Property, plant and equipment, net 
 
 $ 
 2,753.4 
 
 $ 
 2,745.9 
 
 Goodwill and Other Intangible Assets 
 Goodwill represents the excess of the purchase price over the fair value of identifiable net assets of businesses acquired. Intangible assets with finite lives are amortized over their estimated useful lives. The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to future cash flows. 
 Goodwill and indefinite-lived intangible assets are tested for impairment annually in the fourth quarter, or sooner if impairment indicators arise. In the evaluation of goodwill for impairment, we may perform a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is not, no further analysis is required. If it is, a prescribed two-step goodwill impairment test is performed to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit, if any. 
 The first step in the two-step impairment test is to identify if a potential impairment exists by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The fair value of a reporting unit is estimated by applying valuation multiples and/or estimating future discounted cash flows. The selection of multiples is dependent upon assumptions regarding future levels of operating performance as well as business trends and prospects, and industry, market and economic conditions. When estimating future discounted cash flows, we consider the assumptions that hypothetical marketplace participants would use in estimating future cash flows. In addition, where applicable, an appropriate discount rate is used, based on an industry-wide average cost of capital or location-specific economic factors. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered to have a potential impairment and the second step of the impairment test is not necessary. However, if the carrying amount of a reporting unit exceeds its fair value, the second step is performed to determine if goodwill is impaired and to measure the amount of impairment loss to recognize, if any. 
 
 The second step compares the implied fair value of goodwill with the carrying amount of goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination (i.e., the fair value of the reporting unit is allocated to all the assets and liabilities, including any unrecognized intangible assets, as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit). If the implied fair value of goodwill exceeds the carrying amount, goodwill is not considered impaired. However, if the carrying amount of goodwill exceeds the implied fair value, an impairment loss is recognized in an amount equal to that excess. 
 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. 
 
 75 

 Intangible assets consist of the following: 
 
 Useful Life 
 
 December 28, 
2014 
 
 December 29, 
2013 
 
 (in Years) 
 
 (in millions) 
 
 Amortized intangible assets: 
 
 Customer relations assets 
 
 14-16 
 
 $ 
 54.4 
 
 $ 
 55.2 
 
 Patents, rights and leasehold interests 
 
 5-25 
 
 3.0 
 
 3.0 
 
 Contractual relationships 
 
 17-22 
 
 40.0 
 
 40.0 
 
 Accumulated amortization 
 
 (8.2 
 ) 
 
 (1.6 
 ) 
 
 Amortized intangible assets, net 
 
 89.2 
 
 96.6 
 
 Non-amortized intangible assets: 
 
 Trademarks 
 
 Indefinite 
 
 1,291.7 
 
 1,309.2 
 
 Intangible assets, net 
 
 $ 
 1,380.9 
 
 $ 
 1,405.8 
 
 The fair values of trademarks are calculated using a royalty rate method. Assumptions about royalty rates are based on the rates at which similar brands and trademarks are licensed in the marketplace. If the carrying value of our indefinite-lived intangible assets exceeds their fair value, an impairment loss is recognized in an amount equal to that excess. Intangible assets with finite lives are reviewed for recoverability when indicators of impairment are present using estimated future undiscounted cash flows related to those assets. We have determined that no impairments of our intangible assets existed for any of the periods presented. 
 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 
 Debt issuance costs, premiums and discounts are amortized into interest expense over the terms of the related loan agreements using the effective interest method or other methods which approximate the effective interest method. 
 Investments 
 See Note 5 — Investments for our policy. 
 Income Taxes 
 Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in earnings in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to amounts more likely than not to be realized. 
 The determination of our provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items. 
 We record unrecognized tax benefit liabilities for known or anticipated tax issues based on our analysis of whether, and the extent to which, additional taxes will be due. We accrue interest and penalties related to unrecognized tax benefits in other liabilities and recognize the related expense in income tax expense. 

 76 

 Pension Accounting 
 We recognize the funded status of our defined benefit pension plans in the consolidated balance sheets. 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. These assumptions include discount rates, salary growth, mortality rates and expected returns on plan assets. 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 
 We are self-insured for certain levels of general and vehicle liability, property, workers’ compensation, product recall and health care coverage. The cost of these self-insurance programs is accrued based upon estimated settlements for known and anticipated claims. Any resulting adjustments to previously recorded reserves are reflected in current period earnings. 
 Contingent Liabilities 
 We are subject to lawsuits, investigations and other claims related to the operation of our farms, labor, livestock procurement, securities, environmental, product, taxing authorities and other matters, and are required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses and fees. 
 
 A determination of the amount of accruals and disclosures required, if any, for these contingencies is made after considerable analysis of each individual issue. 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 material loss is at least reasonably possible or probable. 
 Our contingent liabilities contain uncertainties because the eventual outcome will result from future events. Our determination of accruals and any reasonably possible losses in excess of those accruals require estimates and judgments related to future changes in facts and circumstances, interpretations of the law, the amount of damages or fees, and the effectiveness of strategies or other factors beyond our control. If actual results are not consistent with our estimates or assumptions, we may be exposed to gains or losses that could be material. 
 Revenue Recognition 
 We recognize revenues from product sales upon delivery to customers or when title passes. Revenue is recorded at the invoice price for each product net of estimated returns and sales incentives provided to customers. Sales incentives include various rebate and trade allowance programs with our customers, primarily discounts and rebates based on achievement of specified volume or growth in volume levels. 
 Advertising and Promotional Costs 
 Advertising and promotional costs are expensed as incurred except for certain production costs, which are expensed upon the first airing of the advertisement. Promotional sponsorship costs are expensed as the promotional events occur. 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 
 Shipping and handling costs are reported as a component of cost of sales. 

 77 

 Research and Development Costs 
 Research and development costs are expensed as incurred. 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. 
 
 NOTE 2 : 
 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. 

 78 

 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 
 
 $ 
 250.5 
 
 Accounts receivable 
 
 764.6 
 
 Inventories 
 
 2,504.7 
 
 Prepaid expenses and other current assets 
 
 214.2 
 
 Property, plant and equipment 
 
 2,719.2 
 
 Goodwill 
 
 1,631.5 
 
 Investments 
 
 479.1 
 
 Intangible assets 
 
 1,403.0 
 
 Other assets 
 
 171.7 
 
 Assets acquired by WH Group 
 
 10,138.5 
 
 Current portion of long-term debt and capital lease obligations 
 
 239.1 
 
 Accounts payable 
 
 535.3 
 
 Accrued expenses and other current liabilities 
 
 590.8 
 
 Long-term debt and capital lease obligations 
 
 2,509.1 
 
 Net long-term pension liability 
 
 522.8 
 
 Deferred income taxes, net 
 
 664.4 
 
 Other liabilities 
 
 125.8 
 
 Liabilities assumed by WH Group 
 
 5,187.3 
 
 Redeemable noncontrolling interests and noncontrolling interests 
 
 48.2 
 
 Total purchase consideration 
 
 $ 
 4,903.0 
 
 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. 

 79 

 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) 
 
 Sales 
 
 $ 
 9,573.7 
 
 $ 
 13,221.1 
 
 Net income 
 
 192.9 
 
 219.6 
 
 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. 

 80 

 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 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. 
 NOTE 3 : DISPOSAL OF LONG-LIVED ASSETS 
 Portsmouth, Virginia Plant 
 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. 

 81 

 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 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. 
 NOTE 4 : DERIVATIVE FINANCIAL INSTRUMENTS 
 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. While this hedging may limit our ability to participate in gains from favorable commodity fluctuations, it also tends to reduce the risk of loss from adverse changes in raw material prices. We attempt to closely match the commodity contract terms with the hedged item. We also periodically enter into interest rate swaps to hedge exposure to changes in interest rates on certain financial instruments and foreign exchange forward contracts to hedge certain exposures to fluctuating foreign currency rates. 
 We record all derivatives in the balance sheet as either assets or liabilities at fair value. Accounting for changes in the fair value of a derivative depends on whether it qualifies and has been designated as part of a hedging relationship. For derivatives that qualify and have been designated as hedges for accounting purposes, changes in fair value have no net impact on earnings, to the extent the derivative is considered perfectly effective in achieving offsetting changes in fair value or cash flows attributable to the risk being hedged, until the hedged item is recognized in earnings (commonly referred to as the “hedge accounting” method). For derivatives that do not qualify or are not designated as hedging instruments for accounting purposes, changes in fair value are recorded in current period earnings (commonly referred to as the “mark-to-market” method). We may elect either method of accounting for our derivative portfolio, assuming all the necessary requirements are met. We have in the past availed ourselves of either acceptable method and expect to do so in the future. We believe all of our derivative instruments represent economic hedges against changes in prices and rates, regardless of their designation for accounting purposes. 
 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 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. 
 
 82 

 The following tables present the fair values of our open derivative financial instruments on a gross basis: 
 
 Assets 
 
 Liabilities 
 
 December 28, 
2014 
 December 29, 
2013 
 
 December 28, 
2014 
 December 29, 
2013 
 
 (in millions) 
 
 (in millions) 
 
 Derivatives using the "hedge accounting" method: 
 
 Grain contracts 
 
 $ 
 4.8 
 
 $ 
 5.5 
 
 $ 
 24.8 
 
 $ 
 16.2 
 
 Livestock contracts 
 
 60.7 
 
 0.7 
 
 — 
 
 1.1 
 
 Interest rate contracts 
 
 — 
 
 — 
 
 0.1 
 
 — 
 
 Foreign exchange contracts 
 
 — 
 
 0.6 
 
 0.2 
 
 — 
 
 Total 
 
 65.5 
 
 6.8 
 
 25.1 
 
 17.3 
 
 Derivatives using the "mark-to-market" method: 
 
 Grain contracts 
 
 1.1 
 
 0.6 
 
 8.5 
 
 1.1 
 
 Livestock contracts 
 
 5.9 
 
 2.8 
 
 8.6 
 
 9.5 
 
 Energy contracts 
 
 — 
 
 2.9 
 
 10.1 
 
 — 
 
 Foreign exchange contracts 
 
 0.7 
 
 0.6 
 
 0.1 
 
 0.2 
 
 Total 
 
 7.7 
 
 6.9 
 
 27.3 
 
 10.8 
 
 Total fair value of derivative instruments 
 
 $ 
 73.2 
 
 $ 
 13.7 
 
 $ 
 52.4 
 
 $ 
 28.1 
 
 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. 

 83 

 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) 
 
 Assets: 
 
 Commodities 
 
 $ 
 72.5 
 
 $ 
 (14.6 
 ) 
 
 $ 
 57.9 
 
 $ 
 (12.3 
 ) 
 
 $ 
 45.6 
 
 Foreign exchange contracts 
 
 0.7 
 
 (0.3 
 ) 
 
 0.4 
 
 — 
 
 0.4 
 
 Total 
 
 $ 
 73.2 
 
 $ 
 (14.9 
 ) 
 
 $ 
 58.3 
 
 $ 
 (12.3 
 ) 
 
 $ 
 46.0 
 
 Liabilities: 
 
 Commodities 
 
 52.0 
 
 (14.6 
 ) 
 
 37.4 
 
 (32.3 
 ) 
 
 5.1 
 
 Interest rate contracts 
 
 0.1 
 
 — 
 
 0.1 
 
 — 
 
 0.1 
 
 Foreign exchange contracts 
 
 0.3 
 
 (0.3 
 ) 
 
 — 
 
 — 
 
 — 
 
 Total 
 
 $ 
 52.4 
 
 $ 
 (14.9 
 ) 
 
 $ 
 37.5 
 
 $ 
 (32.3 
 ) 
 
 $ 
 5.2 
 
 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) 
 
 Assets: 
 
 Commodities 
 
 $ 
 12.5 
 
 $ 
 (7.4 
 ) 
 
 $ 
 5.1 
 
 $ 
 — 
 
 $ 
 5.1 
 
 Foreign exchange contracts 
 
 1.2 
 
 — 
 
 1.2 
 
 — 
 
 1.2 
 
 Total 
 
 $ 
 13.7 
 
 $ 
 (7.4 
 ) 
 
 $ 
 6.3 
 
 $ 
 — 
 
 $ 
 6.3 
 
 Liabilities: 
 
 Commodities 
 
 27.9 
 
 (7.4 
 ) 
 
 20.5 
 
 (15.6 
 ) 
 
 4.9 
 
 Foreign exchange contracts 
 
 0.2 
 
 — 
 
 0.2 
 
 — 
 
 0.2 
 
 Total 
 
 $ 
 28.1 
 
 $ 
 (7.4 
 ) 
 
 $ 
 20.7 
 
 $ 
 (15.6 
 ) 
 
 $ 
 5.1 
 
 See Note 12 — Fair Value Measurements for additional information about the fair value of our derivatives. 
 Hedge Accounting Method 
 Cash Flow Hedges 
 We enter into derivative instruments, such as futures, swaps and options contracts, to manage our exposure to the variability in expected future cash flows attributable to commodity price risk associated with the forecasted sale of live hogs and fresh pork, and the forecasted purchase of corn, wheat and soybean meal. 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 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. The ineffective portion of derivative gains and losses is recognized as part of current period 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 SG&A expenses for foreign exchange contracts. Gains and losses on derivatives designed to hedge price risk associated with fresh pork sales are recorded in the Hog Production segment. 
 
 84 

 During 2014 , the range of notional volumes associated with open derivative instruments designated in cash flow hedging relationships was as follows: 
 
 Minimum 
 
 Maximum 
 
 Metric 
 
 Commodities: 
 
 Corn 
 
 42,575,000 
 
 99,580,000 
 
 Bushels 
 
 Soybean meal 
 
 346,500 
 
 827,300 
 
 Tons 
 
 Lean hogs 
 
 103,280,000 
 
 1,847,680,000 
 
 Pounds 
 
 Interest rate 
 
 — 
 
 20,886,129 
 
 U.S. Dollars 
 
 Foreign currency (1) 
 
 10,966,921 
 
 34,363,900 
 
 U.S. Dollars 
 
 —————————————— 
 
 (1) 
 Amounts represent the U.S. dollar equivalent of various foreign currency contracts. 
 
 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 Income (Loss) into Earnings (Effective Portion) 
 
 Loss Recognized in Earnings on Derivative (Ineffective Portion) 
 
 Successor 
 
 Successor 
 
 Successor 
 
 Twelve Months Ended 
 
 Twelve Months Ended 
 
 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) 
 (in millions) 
 (in millions) 
 
 Commodity contracts: 
 
 Grain contracts 
 
 $ 
 (28.9 
 ) 
 
 $ 
 (8.9 
 ) 
 
 $ 
 1.7 
 
 $ 
 (0.9 
 ) 
 
 $ 
 (3.8 
 ) 
 
 $ 
 (3.7 
 ) 
 
 Lean hog contracts 
 
 (137.0 
 ) 
 
 3.1 
 
 (218.7 
 ) 
 
 3.0 
 
 (6.4 
 ) 
 
 — 
 
 Interest rate contracts 
 
 (0.1 
 ) 
 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 Foreign exchange contracts 
 
 (0.3 
 ) 
 
 3.5 
 
 2.9 
 
 0.3 
 
 — 
 
 — 
 
 Total 
 
 $ 
 (166.3 
 ) 
 
 $ 
 (2.3 
 ) 
 
 $ 
 (214.1 
 ) 
 
 $ 
 2.4 
 
 $ 
 (10.2 
 ) 
 
 $ 
 (3.7 
 ) 
 
 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) 
 
 Predecessor 
 
 Predecessor 
 
 Predecessor 
 
 Twelve Months Ended 
 
 Twelve Months Ended 
 
 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) 
 
 (in millions) 
 
 (in millions) 
 
 Commodity contracts: 
 
 Grain contracts 
 
 $ 
 3.1 
 
 $ 
 39.1 
 
 $ 
 5.5 
 
 $ 
 23.6 
 
 $ 
 108.4 
 
 $ 
 75.1 
 
 $ 
 1.3 
 
 $ 
 — 
 
 $ 
 (0.2 
 ) 
 
 Lean hog contracts 
 
 (29.3 
 ) 
 
 13.6 
 
 102.8 
 
 5.9 
 
 54.9 
 
 32.3 
 
 (0.8 
 ) 
 
 0.4 
 
 (0.5 
 ) 
 
 Interest rate contracts 
 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 (2.4 
 ) 
 
 — 
 
 — 
 
 — 
 
 Foreign exchange contracts 
 
 (0.4 
 ) 
 
 0.4 
 
 (2.5 
 ) 
 
 (0.3 
 ) 
 
 2.1 
 
 (4.1 
 ) 
 
 — 
 
 — 
 
 — 
 
 Total 
 
 $ 
 (26.6 
 ) 
 
 $ 
 53.1 
 
 $ 
 105.8 
 
 $ 
 29.2 
 
 $ 
 165.4 
 
 $ 
 100.9 
 
 $ 
 0.5 
 
 $ 
 0.4 
 
 $ 
 (0.7 
 ) 
 
 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. 

 85 

 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 
 We enter into derivative instruments (primarily futures contracts) that are designed to hedge changes in the fair value of live hog inventories and firm commitments to buy grains. When fair value hedge accounting is applied, derivative gains and losses are recognized in earnings currently along with the change in fair value of the hedged item attributable to the risk being hedged. 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 2014 , the range of notional volumes associated with open derivative instruments designated in fair value hedging relationships was as follows: 
 
 Minimum 
 
 Maximum 
 
 Metric 
 
 Commodities: 
 
 Corn 
 
 450,000 
 
 9,195,000 
 
 Bushels 
 
 86 

 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 
 
 Successor 
 
 Predecessor 
 
 Twelve Months Ended 
 
 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) 
 
 $ 
 2.4 
 
 $ 
 — 
 
 $ 
 0.5 
 
 $ 
 (12.8 
 ) 
 
 $ 
 21.9 
 
 —————————————— 
 
 (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 
 
 Successor 
 
 Predecessor 
 
 Twelve Months Ended 
 
 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 
 
 $ 
 (2.0 
 ) 
 
 $ 
 0.1 
 
 $ 
 (0.5 
 ) 
 
 $ 
 5.0 
 
 $ 
 (16.7 
 ) 
 
 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 cost of sales for commodity contracts and SG&A for foreign exchange contracts. 

 87 

 During 2014 , the range of notional volumes associated with open derivative instruments using the “mark-to-market” method was as follows: 
 
 Minimum 
 
 Maximum 
 
 Metric 
 
 Commodities: 
 
 Lean hogs 
 
 600,000 
 
 414,600,000 
 
 Pounds 
 
 Corn 
 
 490,000 
 
 24,640,000 
 
 Bushels 
 
 Soybean meal 
 
 — 
 
 18,500 
 
 Tons 
 
 Soybeans 
 
 75,000 
 
 3,545,000 
 
 Bushels 
 
 Wheat 
 
 — 
 
 85,000 
 
 Bushels 
 
 Natural gas 
 
 8,030,000 
 
 11,040,000 
 
 Million BTU 
 
 Diesel 
 
 — 
 
 6,888,000 
 
 Gallons 
 
 Live cattle 
 
 — 
 
 80,000 
 
 Pounds 
 
 Propane 
 
 — 
 
 966,000 
 
 Gallons 
 
 Foreign currency (1) 
 
 6,272,810 
 
 85,251,053 
 
 U.S. Dollars 
 
 —————————————— 
 
 (1) 
 Amounts represent the U.S. 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 periods indicated: 
 
 Successor 
 
 Predecessor 
 
 Twelve Months Ended 
 
 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 
 
 $ 
 2.4 
 
 $ 
 (5.9 
 ) 
 
 $ 
 8.5 
 
 $ 
 42.6 
 
 $ 
 6.4 
 
 Foreign exchange contracts 
 
 0.5 
 
 1.2 
 
 (0.2 
 ) 
 
 3.7 
 
 7.7 
 
 Total 
 
 $ 
 2.9 
 
 $ 
 (4.7 
 ) 
 
 $ 
 8.3 
 
 $ 
 46.3 
 
 $ 
 14.1 
 
 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 the period presented. The table includes amounts for both realized and unrealized gains and losses. The table is not, therefore, a simple representation of unrealized gains and losses recognized in the income statement during any period presented. 
 NOTE 5 : INVESTMENTS 
 Investments consist of the following: 
 
 Equity Investment 
 
 Segment 
 
 % Owned 
 
 December 28, 
2014 
 
 December 29, 
2013 
 
 (in millions) 
 
 Campofrío Food Group (CFG) (1) 
 
 International 
 
 37% 
 
 $ 
 330.0 
 
 $ 
 351.4 
 
 Mexican joint ventures 
 
 International 
 
 50% 
 
 142.8 
 
 118.0 
 
 All other equity method investments 
 
 Various 
 
 Various 
 
 25.2 
 
 27.1 
 
 Total investments 
 
 $ 
 498.0 
 
 $ 
 496.5 
 
 —————————————— 
 
 (1) 
 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. 
 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. 

 88 

 (Income) loss from equity method investments consists of the following: 
 
 Successor 
 
 Predecessor 
 
 Twelve Months Ended 
 
 Twelve Months Ended 
 
 Equity Investment 
 
 Segment 
 
 December 28, 2014 
 
 September 27 - December 29, 2013 
 
 April 29 - September 26, 2013 
 
 April 28, 2013 
 
 April 29, 2012 
 
 (in millions) 
 
 CFG 
 
 International 
 
 $ 
 (11.1 
 ) 
 
 $ 
 (0.3 
 ) 
 
 $ 
 (0.4 
 ) 
 
 $ 
 (4.8 
 ) 
 
 $ 
 25.0 
 
 Mexican joint ventures 
 
 International 
 
 (43.7 
 ) 
 
 2.4 
 
 2.1 
 
 (9.3 
 ) 
 
 (13.4 
 ) 
 
 All other equity method investments 
 
 Various 
 
 (3.4 
 ) 
 
 0.5 
 
 (1.2 
 ) 
 
 (0.9 
 ) 
 
 (1.7 
 ) 
 
 (Income) loss from equity method investments 
 
 $ 
 (58.2 
 ) 
 
 $ 
 2.6 
 
 $ 
 0.5 
 
 $ 
 (15.0 
 ) 
 
 $ 
 9.9 
 
 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 (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. Dollars: 
 
 Twelve Months Ended 
 
 Twelve Months Ended 
 
 December 28, 2014 
 
 April 29 - December 29, 2013 
 
 April 28, 2013 
 
 April 29, 2012 
 
 (in millions) 
 
 Income statement information: 
 
 Sales 
 
 $ 
 2,564.4 
 
 $ 
 1,717.6 
 
 $ 
 2,464.6 
 
 $ 
 2,536.1 
 
 Gross profit 
 
 571.9 
 
 389.9 
 
 564.4 
 
 583.0 
 
 Net income (loss) 
 
 12.6 
 
 8.1 
 
 13.0 
 
 (71.2 
 ) 
 
 December 28, 
2014 
 
 December 29, 
2013 
 
 (in millions) 
 
 Balance sheet information: 
 
 Current assets 
 
 $ 
 913.3 
 
 $ 
 821.5 
 
 Long-term assets 
 
 2,046.2 
 
 2,051.2 
 
 Current liabilities 
 
 1,021.9 
 
 999.0 
 
 Long-term liabilities 
 
 1,046.8 
 
 1,077.7 
 
 89 

 NOTE 6 : ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES 
 Accrued expenses and other current liabilities consist of the following: 
 
 December 28, 
2014 
 
 December 29, 
2013 
 
 (in millions) 
 
 Payroll and related benefits 
 
 $ 
 295.1 
 
 $ 
 222.9 
 
 Customer incentives and marketing 
 
 139.6 
 
 105.5 
 
 Derivative instruments and broker deposits 
 
 5.2 
 
 20.7 
 
 Insurance reserves 
 
 63.4 
 
 63.5 
 
 Accrued interest 
 
 63.8 
 
 64.7 
 
 Other 
 
 177.9 
 
 155.4 
 
 Total accrued expenses and other current liabilities 
 
 $ 
 745.0 
 
 $ 
 632.7 
 
 NOTE 7 : DEBT 
 Long-term debt consists of the following: 
 
 December 28, 
2014 
 
 December 29, 
2013 
 
 (in millions) 
 
 6.625% senior unsecured notes, due August 2022, including unamortized premiums of $19.7 million and $21.7 million 
 
 $ 
 1,014.3 
 
 $ 
 1,021.3 
 
 7.75% senior unsecured notes, due July 2017, including unamortized premiums of $38.1 million and $54.0 million 
 
 519.3 
 
 538.4 
 
 5.25% senior unsecured notes, due August 2018 
 
 500.0 
 
 500.0 
 
 5.875% senior unsecured notes, due August 2021 
 
 400.0 
 
 400.0 
 
 Floating rate senior unsecured term loan, due May 2018 
 
 200.0 
 
 200.0 
 
 Inventory Revolver, LIBOR plus 2.75% 
 
 — 
 
 145.0 
 
 Securitization Facility, the lender's cost of funds of 0.30% plus 1.05% 
 
 — 
 
 105.0 
 
 Various, interest rates from 0.0% to 3.13%, due January 2015 through March 2019 
 
 84.2 
 
 110.4 
 
 Total debt 
 
 2,717.8 
 
 3,020.1 
 
 Current portion 
 
 (46.9 
 ) 
 
 (47.3 
 ) 
 
 Total long-term debt 
 
 $ 
 2,670.9 
 
 $ 
 2,972.8 
 
 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. 

 90 

 Scheduled principal payments on long-term debt for the next five years are as follows: 
 
 Year 
 
 (in millions) 
 
 2015 
 
 $ 
 46.9 
 
 2016 
 
 32.4 
 
 2017 
 
 501.6 
 
 2018 
 
 676.3 
 
 2019 
 
 8.1 
 
 2022 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 
 2011 Notes 
 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 
 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. As a result of the July 2012 Tender Offer, we paid $649.4 million to repurchase 2013 Notes and 2014 Notes with face values of $105.0 million and $456.6 million , respectively. Also in August 2012, we exercised the redemption feature available under our 2014 Notes and paid $155.5 million to repurchase the remaining $132.8 million of our 2014 Notes. 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 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 . 

 91 

 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 . 
 Debt Assumed 
 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, 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 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. 
 Availability under the Inventory Revolver is a function of the level of eligible inventories, subject to reserves. The Inventory Revolver matures in June 2016. 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 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. 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. The SPV is included in our consolidated financial statements and therefore, the accounts receivable owned by it are included in our consolidated balance sheet. 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 December 28, 2014 , th e SPV held $660.5 million of accounts receivable and we had no outstanding borrowings on the Securitization Facility. 

 92 

 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 . These facilities and lines are generally at prevailing market rates. We pay commitment fees on the unused portion of the facilities. 
 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, 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; incur debt; make acquisitions and investments; dispose of or transfer assets; pay dividends or make other payments in respect of our stock; 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 the twelve months ended April 28, 2013 . 
 Convertible Notes 
 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 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. 
 NOTE 8 : LEASE OBLIGATIONS, COMMITMENTS AND GUARANTEES 
 Lease Obligations 
 We lease facilities and equipment under non-cancelable operating leases. The terms of each lease agreement vary and may contain renewal or purchase options. 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 $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. 

 93 

 Future rental commitments under non-cancelable operating leases as of December 28, 2014 are as follows: 
 
 Year 
 
 (in millions) 
 
 2015 
 
 $ 
 42.5 
 
 2016 
 
 32.7 
 
 2017 
 
 27.4 
 
 2018 
 
 22.1 
 
 2019 
 
 18.0 
 
 Thereafter 
 
 41.8 
 
 Total 
 
 $ 
 184.5 
 
 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 $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. 
 Commitments 
 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 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. Other arrangements obligate us to purchase a fixed amount of livestock. We also use independent farmers and their facilities to raise hogs produced from our breeding stock in exchange for a performance-based service fee payable upon delivery. We estimate the future obligations under these commitments based on available commodity livestock futures prices and internal projections about future hog prices, expected quantities delivered and anticipated performance. Our estimated future obligations under these commitments are as follows: 
 
 Year 
 
 (in millions) 
 
 2015 
 
 $ 
 1,524.3 
 
 2016 
 
 1,245.3 
 
 2017 
 
 1,090.3 
 
 2018 
 
 963.4 
 
 2019 
 
 926.2 
 
 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. 
 Guarantees 
 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 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 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. 

 94 

 NOTE 9 : INCOME TAXES 
 Income tax expense consists of the following: 
 
 Successor 
 
 Predecessor 
 
 Twelve Months Ended 
 
 Twelve Months Ended 
 
 December 28, 2014 
 
 September 27 - December 29, 2013 
 
 April 29 - September 26, 2013 
 
 April 28, 2013 
 
 April 29, 2012 
 
 (in millions) 
 
 Current income tax expense: 
 
 Federal 
 
 $ 
 122.5 
 
 $ 
 0.2 
 
 $ 
 13.8 
 
 $ 
 39.8 
 
 $ 
 72.7 
 
 State 
 
 16.2 
 
 0.9 
 
 0.1 
 
 6.1 
 
 8.4 
 
 Foreign 
 
 16.3 
 
 0.2 
 
 2.5 
 
 5.5 
 
 1.1 
 
 155.0 
 
 1.3 
 
 16.4 
 
 51.4 
 
 82.2 
 
 Deferred income tax expense (benefit): 
 
 Federal 
 
 43.6 
 
 7.4 
 
 7.1 
 
 (2.6 
 ) 
 
 82.1 
 
 State 
 
 26.4 
 
 1.7 
 
 (11.4 
 ) 
 
 (10.5 
 ) 
 
 11.2 
 
 Foreign 
 
 (8.0 
 ) 
 
 5.4 
 
 0.6 
 
 7.8 
 
 (3.1 
 ) 
 
 62.0 
 
 14.5 
 
 (3.7 
 ) 
 
 (5.3 
 ) 
 
 90.2 
 
 Total income tax expense 
 
 $ 
 217.0 
 
 $ 
 15.8 
 
 $ 
 12.7 
 
 $ 
 46.1 
 
 $ 
 172.4 
 
 A reconciliation of taxes computed at the federal statutory rate to the effective tax rate is as follows: 
 
 Successor 
 
 Predecessor 
 
 Twelve Months Ended 
 
 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 
 
 35.0 
 % 
 
 35.0 
 % 
 
 35.0 
 % 
 
 35.0 
 % 
 
 35.0 
 % 
 
 State income taxes, net of federal tax benefit 
 
 3.5 
 
 3.8 
 
 (10.6 
 ) 
 
 (0.2 
 ) 
 
 2.1 
 
 Foreign income taxes 
 
 (3.4 
 ) 
 
 16.4 
 
 10.4 
 
 (1.7 
 ) 
 
 (0.2 
 ) 
 
 Net change in uncertain tax positions 
 
 — 
 
 (1.8 
 ) 
 
 (1.3 
 ) 
 
 0.6 
 
 (2.4 
 ) 
 
 Net change in valuation allowance 
 
 (0.8 
 ) 
 
 (20.1 
 ) 
 
 (10.1 
 ) 
 
 (4.8 
 ) 
 
 (0.9 
 ) 
 
 Tax credits 
 
 (0.8 
 ) 
 
 (4.5 
 ) 
 
 (6.5 
 ) 
 
 (5.7 
 ) 
 
 (1.0 
 ) 
 
 Manufacturer's deduction 
 
 (1.6 
 ) 
 
 (0.6 
 ) 
 
 (0.2 
 ) 
 
 (1.5 
 ) 
 
 (1.7 
 ) 
 
 Foreign restructuring 
 
 (2.3 
 ) 
 
 — 
 
 — 
 
 — 
 
 — 
 
 Other 
 
 (1.5 
 ) 
 
 3.1 
 
 3.0 
 
 (1.6 
 ) 
 
 1.4 
 
 Effective tax rate 
 
 28.1 
 % 
 
 31.3 
 % 
 
 19.7 
 % 
 
 20.1 
 % 
 
 32.3 
 % 
 
 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. 

 95 

 The tax effects of temporary differences consist of the following: 
 
 December 28, 
2014 
 
 December 29, 
2013 
 
 (in millions) 
 
 Deferred tax assets: 
 
 Pension and other retirement liabilities 
 
 $ 
 222.3 
 
 $ 
 160.8 
 
 Tax credits, carryforwards and net operating losses 
 
 54.8 
 
 68.0 
 
 Accrued expenses and other current liabilities 
 
 46.8 
 
 49.8 
 
 Derivatives 
 
 — 
 
 28.8 
 
 Employee benefits 
 
 24.8 
 
 26.6 
 
 Other 
 
 26.8 
 
 28.3 
 
 375.5 
 
 362.3 
 
 Valuation allowance 
 
 (34.9 
 ) 
 
 (42.3 
 ) 
 
 Total deferred tax assets 
 
 $ 
 340.6 
 
 $ 
 320.0 
 
 Deferred tax liabilities: 
 
 Property, plant and equipment 
 
 $ 
 508.6 
 
 $ 
 518.1 
 
 Intangible assets 
 
 434.2 
 
 415.7 
 
 Derivatives 
 
 9.7 
 
 — 
 
 Investments in subsidiaries 
 
 20.0 
 
 65.6 
 
 Total deferred tax liabilities 
 
 $ 
 972.5 
 
 $ 
 999.4 
 
 The following table presents the classification of deferred taxes in our balance sheets as of December 28, 2014 and December 29, 2013 : 
 
 December 28, 
2014 
 
 December 29, 
2013 
 
 (in millions) 
 
 Prepaids and other current assets 
 
 $ 
 65.6 
 
 $ 
 66.5 
 
 Other assets 
 
 — 
 
 — 
 
 Deferred income taxes, net 
 
 697.5 
 
 745.9 
 
 Management makes an assessment to determine if its deferred tax assets are more likely than not to be realized. Valuation allowances are established in the event that management believes the related tax benefits will not be realized. 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 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. 

 96 

 A reconciliation of the beginning and ending liability for unrecognized tax benefits is as follows: 
 
 (in millions) 
 
 Balance, April 29, 2012 
 
 $ 
 15.3 
 
 Additions for tax positions taken in the current year 
 
 3.9 
 
 Reduction for tax positions taken in prior years 
 
 (1.8 
 ) 
 
 Settlements with taxing authorities 
 
 (1.0 
 ) 
 
 Lapse of statute of limitations 
 
 (0.7 
 ) 
 
 Balance, April 28, 2013 
 
 15.7 
 
 Additions for tax positions taken in the current year 
 
 1.6 
 
 Reduction for tax positions taken in prior years 
 
 (0.2 
 ) 
 
 Settlements with taxing authorities 
 
 (2.1 
 ) 
 
 Lapse of statute of limitations 
 
 (1.1 
 ) 
 
 Balance, December 29, 2013 
 
 13.9 
 
 Additions for tax positions taken in the current year 
 
 2.4 
 
 Additions for tax positions taken in prior years 
 
 0.4 
 
 Settlements with taxing authorities 
 
 (1.7 
 ) 
 
 Lapse of statute of limitations 
 
 (1.3 
 ) 
 
 Balance, December 28, 2014 
 
 $ 
 13.7 
 
 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 $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. Within specific countries, we may be subject to audit by various tax authorities, or subsidiaries operating within the country may be subject to different statute of limitations expiration dates. We have concluded all U.S. 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. 

 97 

 NOTE 10 : PENSION AND OTHER RETIREMENT BENEFIT PLANS 
 Company Sponsored Defined Benefit Pension Plans 
 We provide the majority of our U.S. employees with pension benefits. Salaried employees are provided benefits based on years of service and average salary levels. Hourly employees are provided benefits of stated amounts for each year of service. 
 The following table presents a reconciliation of the pension benefit obligation, plan assets and the funded status of these pension plans: 
 
 December 28, 
2014 
 
 December 29, 
2013 
 
 (in millions) 
 
 Change in benefit obligation: 
 
 Benefit obligation at beginning of year (1) 
 
 $ 
 1,653.0 
 
 $ 
 1,813.2 
 
 Service cost 
 
 48.9 
 
 32.4 
 
 Interest cost 
 
 84.3 
 
 54.4 
 
 Settlements 
 
 (69.4 
 ) 
 
 — 
 
 Benefits paid (2) 
 
 (154.9 
 ) 
 
 (66.6 
 ) 
 
 Remeasurement at the Merger Date 
 
 — 
 
 (189.8 
 ) 
 
 Actuarial loss 
 
 254.0 
 
 9.2 
 
 Other 
 
 — 
 
 0.2 
 
 Benefit obligation at end of year 
 
 1,815.9 
 
 1,653.0 
 
 Change in plan assets: (3) 
 
 Fair value of plan assets at beginning of year 
 
 1,122.8 
 
 1,110.6 
 
 Actual return on plan assets 
 
 122.4 
 
 34.7 
 
 Employer contributions 
 
 167.1 
 
 18.8 
 
 Settlements 
 
 (69.4 
 ) 
 
 — 
 
 Benefits paid (2) 
 
 (128.2 
 ) 
 
 (42.1 
 ) 
 
 Other 
 
 — 
 
 0.8 
 
 Fair value of plan assets at end of year 
 
 1,214.7 
 
 1,122.8 
 
 Funded status 
 
 $ 
 (601.2 
 ) 
 
 $ 
 (530.2 
 ) 
 
 Amounts recognized in the consolidated balance sheet: 
 
 Net long-term pension liability 
 
 (574.9 
 ) 
 
 (504.4 
 ) 
 
 Accrued expenses and other current liabilities 
 
 (26.7 
 ) 
 
 (25.8 
 ) 
 
 Other assets 
 
 0.4 
 
 — 
 
 Net amount recognized at end of year 
 
 $ 
 (601.2 
 ) 
 
 $ 
 (530.2 
 ) 
 
 —————————————— 
 
 (1) 
 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. 
 
 (2) 
 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. 
 
 (3) 
 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 $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. 

 98 

 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: 
 
 December 28, 
2014 
 
 December 29, 
2013 
 
 (in millions) 
 
 Unrecognized actuarial gain (loss) 
 
 $ 
 (193.3 
 ) 
 
 $ 
 20.9 
 
 Unrecognized prior service credit 
 
 — 
 
 — 
 
 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: 
 
 Successor 
 
 Predecessor 
 
 Twelve Months Ended 
 
 Twelve Months Ended 
 
 December 28, 2014 
 
 September 27 - December 29, 2013 
 
 April 29 - September 26, 2013 
 
 April 28, 2013 
 
 April 29, 2012 
 
 (in millions) 
 
 Service cost 
 $ 
 48.9 
 
 $ 
 9.8 
 
 $ 
 22.6 
 
 $ 
 47.2 
 
 $ 
 37.4 
 
 Interest cost 
 84.3 
 
 21.6 
 
 32.8 
 
 74.8 
 
 75.9 
 
 Expected return on plan assets 
 (85.9 
 ) 
 
 (19.5 
 ) 
 
 (35.4 
 ) 
 
 (78.8 
 ) 
 
 (79.6 
 ) 
 
 Net amortization 
 — 
 
 — 
 
 24.8 
 
 52.9 
 
 23.5 
 
 Settlement loss (1) 
 3.3 
 
 — 
 
 — 
 
 — 
 
 — 
 
 Net periodic pension cost 
 $ 
 50.6 
 
 $ 
 11.9 
 
 $ 
 44.8 
 
 $ 
 96.1 
 
 $ 
 57.2 
 
 —————————————— 
 
 (1) 
 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: 
 
 Successor 
 
 Predecessor 
 
 Twelve Months Ended 
 
 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 
 5.25 
 % 
 
 5.30 
 % 
 
 4.45 
 % 
 
 4.75 
 % 
 
 5.85 
 % 
 
 Discount rate to determine benefit obligation 
 4.30 
 
 5.25 
 
 5.30 
 
 4.45 
 
 4.75 
 
 Expected long-term rate of return on plan assets 
 7.50 
 
 7.25 
 
 7.25 
 
 7.75 
 
 7.75 
 
 Rate of compensation increase 
 4.00 
 
 4.00 
 
 4.00 
 
 4.00 
 
 4.00 
 
 We use an independent third-party actuary to assist in the determination of assumptions used and the measurement of our pension obligation and related costs. We review and select the discount rate to be used in connection with our pension obligation annually. 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. Using imputed interest rates, the model sums the present value of each cash flow stream to calculate an equivalent weighted average discount rate. We use this resulting weighted average discount rate to determine our final discount rate. 

 99 

 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 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. 
 Pension plan assets may be invested in cash and cash equivalents, equities, debt securities, insurance contracts and real estate. Our investment policy for the pension plans is to balance risk and return through a diversified portfolio of high-quality equity and fixed income securities. Equity targets for the pension plans are as indicated in the following table. Maturity for fixed income securities is managed such that sufficient liquidity exists to meet near-term benefit payment obligations. 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 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. 
 
 December 28, 
2014 
 
 December 29, 
2013 
 
 Target 
 Range 
 
 Asset category: 
 
 (in millions) 
 
 Cash and cash equivalents, net of unsettled transactions 
 
 $ 
 103.1 
 
 $ 
 60.0 
 
 0-4% 
 
 Equity securities 
 
 459.4 
 
 455.7 
 
 30-50% 
 
 Debt securities 
 
 555.4 
 
 512.4 
 
 35-55% 
 
 Alternative assets 
 
 96.8 
 
 94.7 
 
 5-20% 
 
 Total 
 
 $ 
 1,214.7 
 
 $ 
 1,122.8 
 
 See Note 12 — Fair Value Measurements for additional information about the fair value of our pension assets. 
 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. 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: 
 
 Year 
 
 (in millions) 
 
 2015 
 
 $ 
 98.0 
 
 2016 
 
 101.1 
 
 2017 
 
 105.1 
 
 2018 
 
 88.2 
 
 2019 
 
 91.8 
 
 2020-2024 
 
 511.2 
 
 Multiemployer Defined Benefit Pension Plans 
 
 In addition to our Company sponsored defined benefit pension plans, we contribute to several multiemployer defined benefit pension plans under collective bargaining agreements that cover certain of our union-represented employees. The risks of participating in such plans are different from the risks of single-employer plans, in the following respects: 
 
 ▪ 
 Assets contributed to a multiemployer plan by one employer may be used to provide benefits to employees of other participating employers. 
 
 ▪ 
 If a participating employer ceases to contribute to a multiemployer plan, the unfunded obligation of the plan may be borne by the remaining participating employers. 
 
 100 

 ▪ 
 If we were to withdraw from a multiemployer plan, we may be required to pay the plan an amount based on the underfunded status of the plan and on the history of our participation in the plan prior to withdrawal. This is referred to as a withdrawal liability. 
 
 Each multiemployer plan in which we participate has a certified zone status as currently defined by the Pension Protection Act of 2006. The zone status is based on information provided to us and other participating employers by each plan and is certified by the plan's actuary. The following are descriptions of the zone status types based on criteria established under the Internal Revenue Code (IRC): 
 
 ▪ 
 "Red” Zone —Plan has been determined to be in “critical status” and is generally less than 65% funded. A rehabilitation plan, as required under the IRC, must be adopted by plans in the "red" zone. Plan participants may be responsible for the payment of surcharges, in addition to the contribution rate specified in the applicable collective bargaining agreement, for a plan in “critical status,” in accordance with the requirements of the IRC. 
 
 ▪ 
 "Yellow” Zone —Plan has been determined to be in “endangered status” and is generally less than 80% funded. A funding improvement plan, as required under the IRC, must be adopted. 
 
 ▪ 
 "Green” Zone —Plan has been determined to be neither in “critical status” nor in “endangered status,” and is generally at least 80% funded. 
 
 All plans in which we participate were in the "green" zone for the two most recent benefit plan years that have been certified. 
 The following table summarizes our contributions to multiemployer plans (1) : 
 
 Twelve Months Ended 
 
 Twelve Months Ended 
 
 Plan 
 
 EIN / PN (2) 
 
 December 28, 2014 
 
 April 29 - December 29, 2013 
 
 April 28, 2013 
 
 April 29, 2012 
 
 Expiration Dates of Collective Bargaining Agreements 
 
 (in millions) 
 
 United Food and Commercial Workers International Union Industry Pension Fund 
 
 51-6055922 / 001 
 
 $ 
 1.3 
 
 $ 
 0.9 
 
 $ 
 1.2 
 
 $ 
 1.1 
 
 Multiple (3) 
 
 Central Pension Fund of the International Union of Operating Engineers and Participating Employers 
 
 36-6052390 / 001 
 
 0.2 
 
 0.1 
 
 0.2 
 
 0.2 
 
 October 2018 
 
 IAM National Pension Fund National Pension Plan 
 
 51-6031295 / 002 
 
 0.1 
 
 0.1 
 
 0.1 
 
 0.1 
 
 February 2018 
 
 Total contributions to multiemployer plans 
 
 $ 
 1.6 
 
 $ 
 1.1 
 
 $ 
 1.5 
 
 $ 
 1.4 
 
 —————————————— 
 
 (1) 
 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. 
 
 (2) 
 Represents the Employer Identification Number and the three-digit plan number assigned to a plan by the Internal Revenue Service. 
 
 (3) 
 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 October 2015, May 2016, January 2018 and December 2018. 
 
 Other Employee Benefit Plans 
 We sponsor defined contribution pension plans (401(k) plans) covering substantially all U.S. employees. 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 $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. These plans are unfunded and generally pay covered costs reduced by retiree premium contributions, co-payments and deductibles. We retain the right to modify or eliminate these benefits. We consider disclosures related to these plans immaterial to the consolidated financial statements and related notes. 

 101 

 NOTE 11 : EQUITY 
 Common 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 
 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 
 
 42 
 % 
 
 Dividend yield 
 
 — 
 % 
 
 Risk free interest rate 
 
 2.06 
 % 
 
 Expected option life (years) 
 
 3.5 
 
 —————————————— 
 
 (1) 
 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 2014. 
 
 102 

 The following table summarizes stock option activity under the WH Group Incentive Plan during 2014: 
 
 Number of Shares 
 
 Weighted Average Exercise Price (HKD) 
 
 Weighted Average Exercise Price (USD) 
 
 Weighted Average Remaining Contractual Term (Years) 
 
 Aggregate Intrinsic Value 
(HKD) 
 
 Aggregate Intrinsic Value 
 (USD) 
 
 (in millions) 
 
 Outstanding as of December 29, 2013 
 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 Granted 
 
 160,500,000 
 
 $ 
 6.20 
 
 $ 
 0.80 
 
 Forfeited 
 
 (9,100,000 
 ) 
 
 $ 
 6.20 
 
 $ 
 0.80 
 
 Outstanding as of December 28, 2014 
 
 151,400,000 
 
 $ 
 6.20 
 
 $ 
 0.80 
 
 9.6 
 
 $ 
 — 
 
 $ 
 — 
 
 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. 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 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 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. 

 103 

 Stock Held in Trust 
 We maintain a non-qualified defined Supplemental Pension Plan (the Supplemental Plan) the purpose of which is to provide supplemental retirement income benefits for those eligible employees whose benefits under the tax-qualified plans are subject to statutory limitations. A grantor trust has been established for the purpose of satisfying the obligations under the plan. 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: 
 
 Successor 
 
 Predecessor 
 
 December 28, 
2014 
 
 December 29, 
2013 
 
 April 28, 
2013 
 
 (in millions) 
 
 Foreign currency translation 
 
 $ 
 (127.4 
 ) 
 
 $ 
 27.3 
 
 $ 
 (170.5 
 ) 
 
 Pension accounting 
 
 (117.6 
 ) 
 
 14.6 
 
 (427.9 
 ) 
 
 Hedge accounting 
 
 26.4 
 
 (2.9 
 ) 
 
 (17.8 
 ) 
 
 Accumulated other comprehensive income (loss) 
 
 $ 
 (218.6 
 ) 
 
 $ 
 39.0 
 
 $ 
 (616.2 
 ) 
 
 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): 
 
 Successor 
 
 Twelve Months Ended 
 
 December 28, 2014 
 
 September 27 - December 29, 2013 
 
 Before Tax 
 
 Tax 
 
 After Tax 
 
 Before Tax 
 
 Tax 
 
 After Tax 
 
 (in millions) 
 
 Foreign currency translation: 
 
 Translation adjustment arising during the period 
 
 $ 
 (167.5 
 ) 
 
 $ 
 12.8 
 
 $ 
 (154.7 
 ) 
 
 $ 
 29.6 
 
 $ 
 (2.3 
 ) 
 
 $ 
 27.3 
 
 Pension accounting: 
 
 Actuarial loss 
 
 (217.5 
 ) 
 
 83.3 
 
 (134.2 
 ) 
 
 — 
 
 — 
 
 — 
 
 Amortization of actuarial losses and prior service credits reclassified to cost of sales 
 
 1.0 
 
 (0.4 
 ) 
 
 0.6 
 
 8.5 
 
 (3.3 
 ) 
 
 5.2 
 
 Amortization of actuarial losses and prior service credits reclassified to SG&A 
 
 2.3 
 
 (0.9 
 ) 
 
 1.4 
 
 15.2 
 
 (5.8 
 ) 
 
 9.4 
 
 Hedge accounting: 
 
 Losses arising during the period 
 
 (166.3 
 ) 
 
 65.2 
 
 (101.1 
 ) 
 
 (2.3 
 ) 
 
 0.9 
 
 (1.4 
 ) 
 
 (Gains) losses reclassified to sales 
 
 218.7 
 
 (85.0 
 ) 
 
 133.7 
 
 (3.0 
 ) 
 
 1.2 
 
 (1.8 
 ) 
 
 (Gains) losses reclassified to cost of sales 
 
 (1.7 
 ) 
 
 0.7 
 
 (1.0 
 ) 
 
 0.9 
 
 (0.4 
 ) 
 
 0.5 
 
 Gains reclassified to SG&A 
 
 (2.9 
 ) 
 
 0.6 
 
 (2.3 
 ) 
 
 (0.3 
 ) 
 
 0.1 
 
 (0.2 
 ) 
 
 Total other comprehensive income (loss) 
 
 $ 
 (333.9 
 ) 
 
 $ 
 76.3 
 
 $ 
 (257.6 
 ) 
 
 $ 
 48.6 
 
 $ 
 (9.6 
 ) 
 
 $ 
 39.0 
 
 104 

 Predecessor 
 
 Twelve Months Ended 
 
 April 29 - September 26, 2013 
 
 April 28, 2013 
 
 April 29, 2012 
 
 Before Tax 
 
 Tax 
 
 After Tax 
 
 Before Tax 
 
 Tax 
 
 After Tax 
 
 Before Tax 
 
 Tax 
 
 After Tax 
 
 (in millions) 
 
 Foreign currency translation: 
 
 Translation adjustment arising during the period 
 
 $ 
 23.3 
 
 $ 
 (6.4 
 ) 
 
 $ 
 16.9 
 
 $ 
 (12.5 
 ) 
 
 $ 
 1.4 
 
 $ 
 (11.1 
 ) 
 
 $ 
 (185.7 
 ) 
 
 $ 
 25.9 
 
 $ 
 (159.8 
 ) 
 
 Pension accounting: 
 
 Amortization of actuarial losses and prior service credits reclassified to cost of sales 
 
 7.4 
 
 (2.9 
 ) 
 
 4.5 
 
 (12.3 
 ) 
 
 4.8 
 
 (7.5 
 ) 
 
 (90.8 
 ) 
 
 35.3 
 
 (55.5 
 ) 
 
 Amortization of actuarial losses and prior service credits reclassified to SG&A 
 
 17.4 
 
 (6.8 
 ) 
 
 10.6 
 
 (28.8 
 ) 
 
 11.1 
 
 (17.7 
 ) 
 
 (211.8 
 ) 
 
 82.3 
 
 (129.5 
 ) 
 
 Hedge accounting: 
 
 Gains (losses) arising during the period 
 
 (26.6 
 ) 
 
 10.3 
 
 (16.3 
 ) 
 
 53.3 
 
 (20.8 
 ) 
 
 32.5 
 
 105.6 
 
 (42.6 
 ) 
 
 63.0 
 
 Gains (losses) reclassified to sales 
 
 (5.9 
 ) 
 
 2.3 
 
 (3.6 
 ) 
 
 (54.9 
 ) 
 
 21.4 
 
 (33.5 
 ) 
 
 (32.3 
 ) 
 
 12.6 
 
 (19.7 
 ) 
 
 Gains reclassified to cost of sales 
 
 (23.6 
 ) 
 
 9.2 
 
 (14.4 
 ) 
 
 (108.4 
 ) 
 
 42.1 
 
 (66.3 
 ) 
 
 (75.1 
 ) 
 
 29.2 
 
 (45.9 
 ) 
 
 (Gains) losses reclassified to SG&A 
 
 0.3 
 
 — 
 
 0.3 
 
 (2.1 
 ) 
 
 0.4 
 
 (1.7 
 ) 
 
 4.1 
 
 (0.8 
 ) 
 
 3.3 
 
 Losses reclassified to interest expense 
 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 2.4 
 
 — 
 
 2.4 
 
 Total other comprehensive income (loss) 
 
 $ 
 (7.7 
 ) 
 
 $ 
 5.7 
 
 $ 
 (2.0 
 ) 
 
 $ 
 (165.7 
 ) 
 
 $ 
 60.4 
 
 $ 
 (105.3 
 ) 
 
 $ 
 (483.6 
 ) 
 
 $ 
 141.9 
 
 $ 
 (341.7 
 ) 
 
 NOTE 12 : FAIR VALUE MEASUREMENTS 
 Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We are required to consider and reflect the assumptions of market participants in fair value calculations. These factors include nonperformance risk (the risk that an obligation will not be fulfilled) and credit risk, both of the reporting entity (for liabilities) and of the counterparty (for assets). 
 We use, as appropriate, a market approach (generally, data from market transactions), an income approach (generally, present value techniques), and/or a cost approach (generally, replacement cost) to measure the fair value of an asset or liability. These valuation approaches incorporate inputs such as observable, independent market data that we believe are predicated on the assumptions market participants would use to price an asset or liability. These inputs may incorporate, as applicable, certain risks such as nonperformance risk, which includes credit risk. 
 The FASB has established a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The fair value hierarchy gives the highest priority to quoted market prices (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of inputs used to measure fair value are as follows: 
 
 ▪ 
 Level 1—quoted prices in active markets for identical assets or liabilities accessible by the reporting entity. 
 
 ▪ 
 Level 2—observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. 
 
 ▪ 
 Level 3—unobservable for an asset or liability. Unobservable inputs should only be used to the extent observable inputs are not available. 
 
 105 

 We have classified assets and liabilities measured at fair value based on the lowest level of input that is significant to the fair value measurement. For the periods presented, we had no transfers of assets or liabilities between levels within the fair value hierarchy. The timing of any such transfers would be determined at the end of each reporting period. 
 Assets and Liabilities Measured at Fair Value on a Recurring Basis 
 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 
 
 Level 1 
 
 Level 2 
 
 Level 3 
 
 Total 
 
 Level 1 
 
 Level 2 
 
 Level 3 
 
 Total 
 
 (in millions) 
 
 (in millions) 
 
 Assets 
 
 Derivatives: 
 
 Commodity contracts 
 
 $ 
 57.8 
 
 $ 
 0.1 
 
 $ 
 — 
 
 $ 
 57.9 
 
 $ 
 0.2 
 
 $ 
 4.9 
 
 $ 
 — 
 
 $ 
 5.1 
 
 Foreign exchange contracts 
 
 — 
 
 0.4 
 
 — 
 
 0.4 
 
 — 
 
 1.2 
 
 — 
 
 1.2 
 
 Bond securities 
 
 15.9 
 
 — 
 
 — 
 
 15.9 
 
 19.8 
 
 — 
 
 — 
 
 19.8 
 
 Insurance contracts 
 
 — 
 
 70.0 
 
 — 
 
 70.0 
 
 — 
 
 65.8 
 
 — 
 
 65.8 
 
 Total 
 
 $ 
 73.7 
 
 $ 
 70.5 
 
 $ 
 — 
 
 $ 
 144.2 
 
 $ 
 20.0 
 
 $ 
 71.9 
 
 $ 
 — 
 
 $ 
 91.9 
 
 Liabilities 
 
 Derivatives: 
 
 Commodity contracts 
 
 18.0 
 
 19.4 
 
 — 
 
 37.4 
 
 15.1 
 
 5.4 
 
 — 
 
 20.5 
 
 Interest rate swaps 
 
 — 
 
 0.1 
 
 — 
 
 0.1 
 
 — 
 
 — 
 
 — 
 
 — 
 
 Foreign exchange contracts 
 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 0.2 
 
 — 
 
 0.2 
 
 Total 
 
 $ 
 18.0 
 
 $ 
 19.5 
 
 $ 
 — 
 
 $ 
 37.5 
 
 $ 
 15.1 
 
 $ 
 5.6 
 
 $ 
 — 
 
 $ 
 20.7 
 
 The following are descriptions of the valuation methodologies and key inputs used to measure financial assets and liabilities recorded at fair value on a recurring basis: 
 
 ▪ 
 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 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. 
 
 ▪ 
 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. 
 
 Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis 
 Certain assets and liabilities are measured at fair value on a nonrecurring basis after initial recognition; 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. 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. 

 106 

 Pension Plan Assets 
 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 
 
 Level 1 
 
 Level 2 
 
 Level 3 
 
 Total 
 
 Level 1 
 
 Level 2 
 
 Level 3 
 
 Total 
 
 (in millions) 
 
 (in millions) 
 
 Cash and cash equivalents 
 
 $ 
 95.0 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 95.0 
 
 $ 
 53.2 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 53.2 
 
 Equity securities: 
 
 U.S. common stock: 
 
 Health care 
 
 30.7 
 
 — 
 
 — 
 
 30.7 
 
 28.2 
 
 — 
 
 — 
 
 28.2 
 
 Financial services 
 
 44.5 
 
 — 
 
 — 
 
 44.5 
 
 33.4 
 
 — 
 
 — 
 
 33.4 
 
 Retail and consumer products 
 
 36.5 
 
 — 
 
 — 
 
 36.5 
 
 40.0 
 
 — 
 
 — 
 
 40.0 
 
 Energy 
 
 9.4 
 
 — 
 
 — 
 
 9.4 
 
 15.0 
 
 — 
 
 — 
 
 15.0 
 
 Information technology 
 
 75.3 
 
 — 
 
 — 
 
 75.3 
 
 42.7 
 
 — 
 
 — 
 
 42.7 
 
 Manufacturing and industrials 
 
 26.0 
 
 — 
 
 — 
 
 26.0 
 
 20.5 
 
 — 
 
 — 
 
 20.5 
 
 Telecommunications 
 
 4.7 
 
 — 
 
 — 
 
 4.7 
 
 6.5 
 
 — 
 
 — 
 
 6.5 
 
 International common stock 
 
 131.8 
 
 — 
 
 — 
 
 131.8 
 
 139.3 
 
 — 
 
 — 
 
 139.3 
 
 Mutual funds: 
 
 International 
 
 — 
 
 75.0 
 
 — 
 
 75.0 
 
 — 
 
 95.9 
 
 — 
 
 95.9 
 
 Domestic small cap 
 
 — 
 
 25.5 
 
 — 
 
 25.5 
 
 — 
 
 34.2 
 
 — 
 
 34.2 
 
 Commingled funds: 
 
 Mutual funds 
 
 — 
 
 14.0 
 
 — 
 
 14.0 
 
 — 
 
 18.1 
 
 — 
 
 18.1 
 
 Asset-backed securities 
 
 — 
 
 17.4 
 
 — 
 
 17.4 
 
 — 
 
 15.7 
 
 — 
 
 15.7 
 
 Emerging markets securities 
 
 — 
 
 22.6 
 
 — 
 
 22.6 
 
 — 
 
 23.5 
 
 — 
 
 23.5 
 
 Corporate debt securities 
 
 — 
 
 297.2 
 
 — 
 
 297.2 
 
 — 
 
 343.1 
 
 — 
 
 343.1 
 
 Government debt securities 
 
 — 
 
 204.2 
 
 — 
 
 204.2 
 
 — 
 
 112.0 
 
 — 
 
 112.0 
 
 Alternative investments: 
 
 Diversified investment funds 
 
 — 
 
 59.5 
 
 — 
 
 59.5 
 
 — 
 
 55.8 
 
 — 
 
 55.8 
 
 Limited partnerships 
 
 — 
 
 — 
 
 36.4 
 
 36.4 
 
 — 
 
 — 
 
 37.8 
 
 37.8 
 
 Insurance contracts 
 
 — 
 
 — 
 
 0.9 
 
 0.9 
 
 — 
 
 — 
 
 1.1 
 
 1.1 
 
 Total fair value 
 
 $ 
 453.9 
 
 $ 
 715.4 
 
 $ 
 37.3 
 
 1,206.6 
 
 $ 
 378.8 
 
 $ 
 698.3 
 
 $ 
 38.9 
 
 1,116.0 
 
 Unsettled transactions, net 
 
 8.1 
 
 6.8 
 
 Total plan assets 
 
 $ 
 1,214.7 
 
 $ 
 1,122.8 
 
 107 

 The following are descriptions of the valuation methodologies and key inputs used to measure pension plan assets recorded at fair value: 
 
 ▪ 
 Cash and cash equivalents— Cash equivalents include highly liquid investments with original maturities of three months or less. Due to their short-term nature, the carrying amount of these instruments approximates the estimated fair value. Actively traded money market funds are measured at their NAV, which approximates fair value, and classified as Level 1. The fair value of certain money market funds for which quoted prices are available but traded less frequently have been classified as Level 2. 
 
 ▪ 
 Equity securities— When available, the fair value of equity securities are based on quoted prices in active markets and classified as Level 1. Level 1 financial instruments include highly liquid instruments with quoted prices, such as equities and mutual funds traded in active markets. 
 
 If quoted prices are not available, fair values are obtained from pricing services, broker quotes or other model-based valuation techniques with observable inputs and classified as Level 2. The nature of these equity securities include securities for which quoted prices are available but traded less frequently, securities 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 equity securities include preferred stock and mutual funds not actively traded. 
 
 ▪ 
 Fixed income— The fair values of fixed income instruments are obtained from pricing services, broker quotes or other model-based valuation techniques with observable inputs and classified as Level 2. 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, 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. The nature of these alternative investments 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 alternative investments include diversified investment funds, domestic options contracts and futures contracts. 
 
 ▪ 
 Limited partnerships— The valuation of limited partnership investments requires the use of significant unobservable inputs due to the absence of quoted market prices, inherent lack of liquidity and long-term nature of such assets and are classified as Level 3. These investments are initially valued at cost with quarterly valuations performed utilizing available market data to determine the fair value of these investments. Such market data consists primarily of the observations of trading multiples of public companies considered comparable to the investments with adjustments for investment-specific issues, the lack of liquidity and other items. 
 
 ▪ 
 Insurance contracts— The valuation of these guaranteed annuity insurance contracts is primarily based on quoted prices in active markets with adjustments for unobservable inputs caused by the unique nature of applying investment earnings as part of the participation guarantee. Due to these unobservable inputs and the long-term nature of these investments, the contracts are classified as Level 3. 
 
 108 

 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 
 
 Limited Partnerships 
 
 (in millions) 
 
 Balance, April 28, 2013 
 
 $ 
 1.2 
 
 $ 
 40.1 
 
 Actual return on plan assets: 
 
 Related to assets held at the reporting date 
 
 — 
 
 (10.4 
 ) 
 
 Related to assets sold during the period 
 
 — 
 
 4.0 
 
 Purchases, sales and settlements, net 
 
 (0.1 
 ) 
 
 4.1 
 
 Balance, December 29, 2013 
 
 1.1 
 
 37.8 
 
 Actual return on plan assets: 
 
 Related to assets held at the reporting date 
 
 — 
 
 (10.3 
 ) 
 
 Related to assets sold during the period 
 
 — 
 
 6.0 
 
 Purchases, sales and settlements, net 
 
 (0.2 
 ) 
 
 2.9 
 
 Balance, December 28, 2014 
 
 $ 
 0.9 
 
 $ 
 36.4 
 
 Other Financial Instruments 
 We determine the fair value of public debt using Level 2 inputs based on quoted market prices. 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 December 28, 2014 and December 29, 2013 : 
 
 December 28, 2014 
 
 December 29, 2013 
 
 Fair 
 Value 
 
 Carrying Value 
 
 Fair 
 Value 
 
 Carrying Value 
 
 (in millions) 
 
 Debt 
 
 $ 
 2,782.0 
 
 $ 
 2,717.8 
 
 $ 
 3,120.2 
 
 $ 
 3,020.1 
 
 The carrying amounts of cash and cash equivalents, accounts receivable, notes payable and accounts payable approximate their fair values because of the relatively short-term maturity of these instruments. 

 109 

 NOTE 13 : RELATED PARTY TRANSACTIONS 
 The following table presents amounts owed from and to related parties as of December 28, 2014 and December 29, 2013 : 
 
 December 28, 
2014 
 
 December 29, 
2013 
 
 (in millions) 
 
 Current receivables from related parties 
 
 $ 
 2.5 
 
 $ 
 4.2 
 
 Total receivables from related parties 
 
 $ 
 2.5 
 
 $ 
 4.2 
 
 Current payables to related parties 
 
 1.2 
 
 0.4 
 
 Total payables to related parties 
 
 $ 
 1.2 
 
 $ 
 0.4 
 
 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. 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. 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. 

 110 

 NOTE 14 : REGULATION AND CONTINGENCIES 
 Like other participants in the industry, we are subject to various laws and regulations administered by federal, state and other government entities, including the United States Environmental Protection Agency (EPA) and corresponding state agencies, as well as the United States Department of Agriculture, the Grain Inspection, Packers and Stockyard Administration, the United States Food and Drug Administration, the United States Occupational Safety and Health Administration, the Commodities and Futures Trading Commission and similar agencies in foreign countries. 
 We from time to time receive notices and inquiries from regulatory authorities and others asserting that we are not in compliance with such laws and regulations. In some instances, litigation ensues. In addition, individuals may initiate litigation against us. 
 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. 
 NOTE 15 : 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. 
 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. 

 111 

 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. 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 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: 
 
 Successor 
 
 Predecessor 
 
 Twelve Months Ended 
 
 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 
 
 85 
 % 
 
 81 
 % 
 
 80 
 % 
 
 76 
 % 
 
 80 
 % 
 
 External hog sales 
 
 8 
 
 13 
 
 13 
 
 14 
 
 17 
 
 Other products (1) 
 
 7 
 
 6 
 
 7 
 
 10 
 
 3 
 
 100 
 % 
 
 100 
 % 
 
 100 
 % 
 
 100 
 % 
 
 100 
 % 
 
 —————————————— 
 
 (1) 
 Consists primarily of grains, feed and gains (losses) on derivatives. 
 
 International Segment 
 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, 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. 

 112 

 The following table shows the percentages of International segment revenues derived from packaged meats, fresh meats and hog production for the periods indicated: 
 
 Successor 
 
 Predecessor 
 
 Twelve Months Ended 
 
 Twelve Months Ended 
 
 December 28, 2014 
 
 September 27 - December 29, 2013 
 
 April 29 - September 26, 2013 
 
 April 28, 2013 
 
 April 29, 2012 
 
 Packaged meats 
 
 41 
 % 
 
 42 
 % 
 
 46 
 % 
 
 49 
 % 
 
 46 
 % 
 
 Fresh meats (1) 
 
 55 
 
 57 
 
 53 
 
 50 
 
 53 
 
 Hog production (2) 
 
 4 
 
 1 
 
 1 
 
 1 
 
 1 
 
 100 
 % 
 
 100 
 % 
 
 100 
 % 
 
 100 
 % 
 
 100 
 % 
 
 —————————————— 
 
 (1) 
 Includes feathers, by-products and rendering . 
 
 (2) 
 Includes external hog and feed sales . 
 
 Corporate Segment 
 The Corporate segment provides management and administrative services to support our other segments. 
 Segment Results 
 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. We do not allocate income taxes to segments. Segment assets exclude intersegment account balances as we believe their inclusion would be misleading or not meaningful. We believe all intersegment sales are at prices that approximate market. 

 113 

 Successor 
 
 Twelve Months Ended 
 
 December 28, 2014 
 
 September 27 - December 29, 2013 
 
 (in millions) 
 
 Segment Profit Information 
 
 Sales: 
 
 Segment sales— 
 
 Fresh Pork (1) 
 
 $ 
 5,780.0 
 
 $ 
 1,347.3 
 
 Packaged Meats 
 
 7,173.0 
 
 1,968.9 
 
 Hog Production 
 
 3,384.6 
 
 889.2 
 
 International 
 
 1,654.0 
 
 428.2 
 
 Total segment sales 
 
 17,991.6 
 
 4,633.6 
 
 Intersegment sales— 
 
 Fresh Pork (1) 
 
 (56.4 
 ) 
 
 (12.0 
 ) 
 
 Packaged Meats 
 
 (0.2 
 ) 
 
 (0.2 
 ) 
 
 Hog Production 
 
 (2,862.8 
 ) 
 
 (716.8 
 ) 
 
 International 
 
 (40.9 
 ) 
 
 (10.4 
 ) 
 
 Total intersegment sales 
 
 (2,960.3 
 ) 
 
 (739.4 
 ) 
 
 Consolidated sales 
 
 $ 
 15,031.3 
 
 $ 
 3,894.2 
 
 Depreciation and amortization: 
 
 Fresh Pork 
 
 59.8 
 
 14.3 
 
 Packaged Meats 
 
 89.9 
 
 22.0 
 
 Hog Production 
 
 47.3 
 
 10.8 
 
 International 
 
 31.6 
 
 7.7 
 
 Corporate 
 
 2.2 
 
 0.6 
 
 Consolidated depreciation and amortization 
 
 $ 
 230.8 
 
 $ 
 55.4 
 
 Interest (income) expense: 
 
 Fresh Pork 
 
 0.3 
 
 — 
 
 Packaged Meats 
 
 (1.2 
 ) 
 
 (0.3 
 ) 
 
 Hog Production 
 
 195.9 
 
 53.3 
 
 International 
 
 12.7 
 
 6.0 
 
 Corporate 
 
 (48.3 
 ) 
 
 — 
 
 Consolidated interest expense 
 
 $ 
 159.4 
 
 $ 
 59.0 
 
 (Income) loss from equity method investments 
 
 Fresh Pork 
 
 (1.2 
 ) 
 
 (0.1 
 ) 
 
 Packaged Meats 
 
 (1.1 
 ) 
 
 0.3 
 
 Hog Production 
 
 (1.0 
 ) 
 
 (0.1 
 ) 
 
 International 
 
 (54.9 
 ) 
 
 2.5 
 
 Consolidated (income) loss from equity method investments 
 
 $ 
 (58.2 
 ) 
 
 $ 
 2.6 
 
 Operating profit (loss): 
 
 Fresh Pork 
 
 96.7 
 
 96.0 
 
 Packaged Meats 
 
 459.8 
 
 81.7 
 
 Hog Production 
 
 344.2 
 
 (40.6 
 ) 
 
 International 
 
 155.8 
 
 25.4 
 
 Corporate 
 
 (124.9 
 ) 
 
 (51.3 
 ) 
 
 Consolidated operating profit 
 
 $ 
 931.6 
 
 $ 
 111.2 
 
 —————————————— 
 
 (1) 
 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. 
 
 114 

 Predecessor 
 
 Twelve Months Ended 
 
 April 29 - September 26, 2013 
 
 April 28, 2013 
 
 April 29, 2012 
 
 (in millions) 
 
 Segment Profit Information 
 
 Sales: 
 
 Segment sales— 
 
 Fresh Pork 
 
 $ 
 2,240.3 
 
 $ 
 4,924.1 
 
 $ 
 5,089.4 
 
 Packaged Meats 
 
 2,541.7 
 
 6,152.0 
 
 6,003.6 
 
 Hog Production 
 
 1,439.1 
 
 3,135.1 
 
 3,052.6 
 
 International 
 
 643.6 
 
 1,468.5 
 
 1,466.7 
 
 Total segment sales 
 
 6,864.7 
 
 15,679.7 
 
 15,612.3 
 
 Intersegment sales— 
 
 Fresh Pork 
 
 (19.0 
 ) 
 
 (39.8 
 ) 
 
 (37.0 
 ) 
 
 Packaged Meats 
 
 — 
 
 (1.6 
 ) 
 
 (0.1 
 ) 
 
 Hog Production 
 
 (1,150.3 
 ) 
 
 (2,380.1 
 ) 
 
 (2,444.6 
 ) 
 
 International 
 
 (15.9 
 ) 
 
 (37.1 
 ) 
 
 (36.3 
 ) 
 
 Total intersegment sales 
 
 (1,166.2 
 ) 
 
 (2,418.8 
 ) 
 
 (2,481.0 
 ) 
 
 Consolidated sales 
 
 $ 
 5,679.5 
 
 $ 
 13,221.1 
 
 $ 
 13,094.3 
 
 Depreciation and amortization: 
 
 Fresh Pork 
 
 22.2 
 
 50.2 
 
 45.0 
 
 Packaged Meats 
 
 38.1 
 
 85.9 
 
 82.8 
 
 Hog Production 
 
 28.1 
 
 63.8 
 
 71.9 
 
 International 
 
 16.8 
 
 35.8 
 
 39.9 
 
 Corporate 
 
 1.3 
 
 4.2 
 
 3.2 
 
 Consolidated depreciation and amortization 
 
 $ 
 106.5 
 
 $ 
 239.9 
 
 $ 
 242.8 
 
 Interest expense (income): 
 
 Fresh Pork 
 
 (0.2 
 ) 
 
 (2.5 
 ) 
 
 11.6 
 
 Packaged Meats 
 
 (0.5 
 ) 
 
 (3.0 
 ) 
 
 17.1 
 
 Hog Production 
 
 83.8 
 
 167.0 
 
 131.8 
 
 International 
 
 11.1 
 
 28.2 
 
 29.8 
 
 Corporate 
 
 (29.6 
 ) 
 
 (21.0 
 ) 
 
 (13.6 
 ) 
 
 Consolidated interest expense 
 
 $ 
 64.6 
 
 $ 
 168.7 
 
 $ 
 176.7 
 
 (Income) loss from equity method investments 
 
 Fresh Pork 
 
 (0.4 
 ) 
 
 (0.9 
 ) 
 
 (1.3 
 ) 
 
 Packaged Meats 
 
 (1.1 
 ) 
 
 (0.6 
 ) 
 
 (1.4 
 ) 
 
 Hog Production 
 
 (0.1 
 ) 
 
 0.1 
 
 0.3 
 
 International 
 
 2.1 
 
 (13.6 
 ) 
 
 12.3 
 
 Consolidated (income) loss from equity method investments 
 
 $ 
 0.5 
 
 $ 
 (15.0 
 ) 
 
 $ 
 9.9 
 
 Operating profit (loss): 
 
 Fresh Pork 
 
 (50.7 
 ) 
 
 161.6 
 
 222.0 
 
 Packaged Meats 
 
 149.2 
 
 470.0 
 
 401.7 
 
 Hog Production 
 
 81.4 
 
 (119.1 
 ) 
 
 166.1 
 
 International 
 
 15.9 
 
 108.2 
 
 42.8 
 
 Corporate 
 
 (66.6 
 ) 
 
 (101.4 
 ) 
 
 (110.0 
 ) 
 
 Consolidated operating profit 
 
 $ 
 129.2 
 
 $ 
 519.3 
 
 $ 
 722.6 
 
 115 

 Segment Asset Information 
 
 December 28, 
2014 
 
 December 29, 
2013 
 
 (in millions) 
 
 Total assets: 
 
 Fresh Pork and Packaged Meats (1) 
 
 $ 
 3,807.5 
 
 $ 
 3,786.8 
 
 Hog Production 
 
 2,142.9 
 
 2,136.6 
 
 International 
 
 1,536.2 
 
 1,714.2 
 
 Corporate (2) 
 
 2,661.0 
 
 2,317.2 
 
 Consolidated total assets 
 
 $ 
 10,147.6 
 
 $ 
 9,954.8 
 
 Investments: 
 
 Fresh Pork and Packaged Meats (1) 
 
 21.1 
 
 19.7 
 
 Hog Production 
 
 3.9 
 
 3.3 
 
 International 
 
 472.8 
 
 473.3 
 
 Corporate 
 
 0.2 
 
 0.2 
 
 Consolidated investments 
 
 $ 
 498.0 
 
 $ 
 496.5 
 
 —————————————— 
 
 (1) 
 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. 
 
 (2) 
 $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). 
 
 Successor 
 
 Predecessor 
 
 Twelve Months Ended 
 
 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) 
 
 $ 
 120.9 
 
 $ 
 27.1 
 
 $ 
 80.0 
 
 $ 
 156.9 
 
 $ 
 143.5 
 
 Hog Production 
 
 132.4 
 
 37.4 
 
 51.6 
 
 90.0 
 
 89.4 
 
 International 
 
 48.1 
 
 5.3 
 
 7.6 
 
 24.8 
 
 26.5 
 
 Corporate 
 
 — 
 
 0.1 
 
 0.6 
 
 6.3 
 
 31.3 
 
 Consolidated capital expenditures 
 
 $ 
 301.4 
 
 $ 
 69.9 
 
 $ 
 139.8 
 
 $ 
 278.0 
 
 $ 
 290.7 
 
 —————————————— 
 
 (1) 
 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. 
 
 116 

 117 

 The following table shows the change in the carrying amount of goodwill by reportable segment for the periods noted: 
 
 Pork (1) 
 
 International 
 
 Hog Production 
 
 Total 
 
 (in millions) 
 
 Predecessor 
 
 Balance, April 28, 2013 
 
 $ 
 231.8 
 
 $ 
 130.6 
 
 $ 
 420.0 
 
 $ 
 782.4 
 
 Acquisition (2) 
 
 43.5 
 
 — 
 
 — 
 
 43.5 
 
 Other goodwill adjustments (3) 
 
 — 
 
 2.1 
 
 — 
 
 2.1 
 
 Balance, September 26, 2013 
 
 $ 
 275.3 
 
 $ 
 132.7 
 
 $ 
 420.0 
 
 $ 
 828.0 
 
 —————————————— 
 
 (1) 
 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. 
 
 (2) 
 See Note 2 — Merger and Acquisitions for discussion of acquisition. 
 
 (3) 
 Other goodwill adjustments primarily include the effects of foreign currency translation. 
 
 Fresh Pork 
 
 Packaged Meats 
 
 International 
 
 Hog Production 
 
 Total 
 
 (in millions) 
 
 Successor 
 
 Balance, September 27, 2013 
 
 $ 
 25.1 
 
 $ 
 1,518.9 
 
 $ 
 74.5 
 
 $ 
 4.0 
 
 $ 
 1,622.5 
 
 Balance, December 29, 2013 
 
 25.1 
 
 1,518.9 
 
 74.5 
 
 4.0 
 
 1,622.5 
 
 Purchase accounting adjustments (1) 
 
 2.3 
 
 (0.6 
 ) 
 
 7.4 
 
 (0.1 
 ) 
 
 9.0 
 
 Other goodwill adjustments (2) 
 
 4.8 
 
 — 
 
 (10.1 
 ) 
 
 — 
 
 (5.3 
 ) 
 
 Balance, December 28, 2014 
 
 $ 
 32.2 
 
 $ 
 1,518.3 
 
 $ 
 71.8 
 
 $ 
 3.9 
 
 $ 
 1,626.2 
 
 —————————————— 
 
 (1) 
 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. 
 
 (2) 
 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 : 
 
 Successor 
 
 Predecessor 
 
 Twelve Months Ended 
 
 Twelve Months Ended 
 
 December 28, 2014 
 
 September 27 - December 29, 2013 
 
 April 29 - September 26, 2013 
 
 April 28, 2013 
 
 April 29, 2012 
 
 (in millions) 
 
 Sales: 
 
 U.S. 
 
 $ 
 13,418.2 
 
 $ 
 3,476.4 
 
 $ 
 5,051.8 
 
 $ 
 11,789.7 
 
 $ 
 11,663.9 
 
 International 
 
 1,613.1 
 
 417.8 
 
 627.7 
 
 1,431.4 
 
 1,430.4 
 
 Total sales 
 
 $ 
 15,031.3 
 
 $ 
 3,894.2 
 
 $ 
 5,679.5 
 
 $ 
 13,221.1 
 
 $ 
 13,094.3 
 
 The following table presents our long-lived assets attributed to operations by geographic area as of December 28, 2014 and December 29, 2013 : 

 118 

 December 28, 
2014 
 
 December 29, 
2013 
 
 (in millions) 
 
 Long-lived assets: 
 
 U.S. 
 
 $ 
 5,402.9 
 
 $ 
 5,397.6 
 
 International 
 
 996.1 
 
 1,053.1 
 
 Total long-lived assets 
 
 $ 
 6,399.0 
 
 $ 
 6,450.7 
 
 119 

 NOTE 16 : SUPPLEMENTAL CASH FLOW INFORMATION 
 
 Successor 
 
 Predecessor 
 
 Twelve Months Ended 
 
 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: 
 
 (in millions) 
 
 Interest paid, including capitalized interest 
 
 $ 
 (182.1 
 ) 
 
 $ 
 (10.9 
 ) 
 
 $ 
 (76.4 
 ) 
 
 $ 
 (147.9 
 ) 
 
 $ 
 (149.6 
 ) 
 
 Income taxes (paid) refunded, net 
 
 (178.8 
 ) 
 
 (0.1 
 ) 
 
 43.8 
 
 (3.7 
 ) 
 
 (225.7 
 ) 
 
 NOTE 17 : QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) 
 
 First 
 
 Second 
 
 Third 
 
 Fourth 
 
 Total 
 
 (in millions) 
 
 2014 
 
 Sales 
 
 $ 
 3,422.1 
 
 $ 
 3,814.0 
 
 $ 
 3,702.3 
 
 $ 
 4,092.9 
 
 $ 
 15,031.3 
 
 Gross profit 
 
 396.7 
 
 468.5 
 
 454.0 
 
 456.4 
 
 1,775.6 
 
 Operating profit 
 
 196.4 
 
 260.2 
 
 250.1 
 
 224.9 
 
 931.6 
 
 Net income 
 
 105.3 
 
 142.9 
 
 155.3 
 
 152.6 
 
 556.1 
 
 2013 (1) 
 
 Sales 
 
 $ 
 3,326.9 
 
 $ 
 3,337.8 
 
 $ 
 3,337.2 
 
 $ 
 3,894.2 
 
 $ 
 13,896.1 
 
 Gross profit 
 
 259.0 
 
 306.2 
 
 288.6 
 
 351.2 
 
 1,205.0 
 
 Operating profit 
 
 58.8 
 
 89.8 
 
 78.6 
 
 111.3 
 
 338.5 
 
 Net income 
 
 18.2 
 
 32.4 
 
 35.4 
 
 34.7 
 
 120.7 
 
 —————————————— 
 
 (1) 
 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. 
 
 120 

 NOTE 18 : SUBSEQUENT EVENTS 
 
 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. 
 
 Schedule II 
 
 SMITHFIELD FOODS, INC. AND SUBSIDIARIES 
 VALUATION AND QUALIFYING ACCOUNTS 
 (in millions) 
 
 Column A 
 
 Column B 
 
 Column C Additions 
 
 Column D 
 
 Column E 
 
 Description 
 
 Balance at Beginning of Period 
 
 Charged to costs and expenses 
 
 Charged to other 
 accounts (1) 
 
 Deductions 
 
 Balance at End of Period 
 
 Reserve for uncollectible accounts receivable: 
 
 Twelve months ended December 28, 2014 
 
 Successor 
 
 $ 
 3.2 
 
 $ 
 4.5 
 
 $ 
 — 
 
 $ 
 (0.2 
 ) 
 
 $ 
 7.5 
 
 Three months ended December 29, 2013 
 
 Successor 
 
 — 
 
 3.8 
 
 0.1 
 
 (0.7 
 ) 
 
 3.2 
 
 Five months ended September 26, 2013 
 
 Predecessor 
 
 14.6 
 
 1.7 
 
 — 
 
 (1.2 
 ) 
 
 15.1 
 
 Twelve months ended April 28, 2013 
 
 Predecessor 
 
 16.0 
 
 2.7 
 
 (0.3 
 ) 
 
 (3.8 
 ) 
 
 14.6 
 
 Twelve months ended April 29, 2012 
 
 Predecessor 
 
 17.6 
 
 2.4 
 
 (2.5 
 ) 
 
 (1.5 
 ) 
 
 16.0 
 
 Lower of cost or market allowance: 
 
 Twelve months ended December 28, 2014 
 
 Successor 
 
 $ 
 10.2 
 
 $ 
 7.8 
 
 $ 
 1.4 
 
 $ 
 (2.2 
 ) 
 
 $ 
 17.2 
 
 Three months ended December 29, 2013 
 
 Successor 
 
 — 
 
 11.2 
 
 — 
 
 (1.0 
 ) 
 
 10.2 
 
 Five months ended September 26, 2013 
 
 Predecessor 
 
 17.1 
 
 4.3 
 
 0.3 
 
 (3.8 
 ) 
 
 17.9 
 
 Twelve months ended April 28, 2013 
 
 Predecessor 
 
 15.5 
 
 5.4 
 
 (0.1 
 ) 
 
 (3.7 
 ) 
 
 17.1 
 
 Twelve months ended April 29, 2012 
 
 Predecessor 
 
 14.8 
 
 3.2 
 
 (0.6 
 ) 
 
 (1.9 
 ) 
 
 15.5 
 
 Deferred tax valuation allowance: 
 
 Twelve months ended December 28, 2014 
 
 Successor 
 
 $ 
 42.3 
 
 $ 
 3.3 
 
 $ 
 (3.4 
 ) 
 
 $ 
 (7.3 
 ) 
 
 $ 
 34.9 
 
 Three months ended December 29, 2013 
 
 Successor 
 
 37.7 
 
 1.2 
 
 14.6 
 
 (11.2 
 ) 
 
 42.3 
 
 Five months ended September 26, 2013 
 
 Predecessor 
 
 43.5 
 
 1.3 
 
 0.5 
 
 (7.6 
 ) 
 
 37.7 
 
 Twelve months ended April 28, 2013 
 
 Predecessor 
 
 54.6 
 
 7.2 
 
 (0.4 
 ) 
 
 (17.9 
 ) 
 
 43.5 
 
 Twelve months ended April 29, 2012 
 
 Predecessor 
 
 66.8 
 
 7.8 
 
 (7.4 
 ) 
 
 (12.6 
 ) 
 
 54.6 
 
 —————————————— 
 
 (1) 
 Activity primarily includes the reserves recorded in connection with the creation of the opening balance sheets of entities acquired and currency translation adjustments. 
 
 121 

 ITEM 9. 
 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
 
 None.
SMITHFIELD FOODS INC 10-K

Item 8. Financial Statements and Supplementary Data
