PPC-2012.03.25-10Q
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 (Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 25, 2012
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  _______ to _______            
Commission File number 1-9273
 
PILGRIM’S PRIDE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
 
75-1285071
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
1770 Promontory Circle,
Greeley, CO
 
80634-9038
(Address of principal executive offices)
 
(Zip code)
Registrant’s telephone number, including area code: (970) 506-8000 
(Former name, former address and former fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer
 
¨
  
Accelerated Filer
 
ý
 
 
 
 
Non-accelerated Filer
 
¨ (Do not check if a smaller reporting company)
  
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ý    No  ¨
Number of shares outstanding of the issuer’s common stock, $0.01 par value per share, as of April 27, 2012, was 258,926,358.


Table of Contents

INDEX
PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES
Item 1.
 
 
 
 
 
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 5.
Item 6.





























1
Table of Contents


PART I.
FINANCIAL INFORMATION
ITEM 1.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
 
March 25, 2012
 
December 25, 2011
 
 
(Unaudited)
 
 
 
 
(In thousands)
Cash and cash equivalents
 
$
47,570

 
$
41,609

Restricted cash and cash equivalents
 
4,684

 
7,680

Investment in available-for-sale securities
 
156

 
157

Trade accounts and other receivables, less allowance for doubtful
    accounts
 
350,832

 
349,222

Account receivable from JBS USA, LLC
 
19,406

 
21,198

Inventories
 
910,430

 
879,094

Income taxes receivable
 
63,884

 
59,067

Prepaid expenses and other current assets
 
40,588

 
52,350

Assets held for sale
 
50,220

 
53,816

Total current assets
 
1,487,770

 
1,464,193

Investment in available-for-sale securities
 
591

 
497

Deferred tax assets
 
71,099

 
71,099

Other long-lived assets
 
51,445

 
57,921

Identified intangible assets, net
 
42,656

 
44,083

Property, plant and equipment, net
 
1,224,880

 
1,241,752

Total assets
 
$
2,878,441

 
$
2,879,545

 
 
 
 
 
Accounts payable
 
$
293,131

 
$
328,864

Account payable to JBS USA, LLC
 
8,339

 
11,653

Accrued expenses and other current liabilities
 
290,637

 
281,797

Current deferred tax liabilities
 
79,328

 
79,248

Current maturities of long-term debt
 
15,614

 
15,611

Total current liabilities
 
687,049

 
717,173

Long-term debt, less current maturities
 
1,249,510

 
1,408,001

Note payable to JBS USA Holdings, Inc.
 
—

 
50,000

Other long-term liabilities
 
144,906

 
145,941

Total liabilities
 
2,081,465

 
2,321,115

Common stock
 
2,589

 
2,143

Additional paid-in capital
 
1,641,566

 
1,443,484

Accumulated deficit
 
(804,772
)
 
(843,945
)
Accumulated other comprehensive loss
 
(45,650
)
 
(46,070
)
Total Pilgrim’s Pride Corporation stockholders’ equity
 
793,733

 
555,612

Noncontrolling interest
 
3,243

 
2,818

Total stockholders’ equity
 
796,976

 
558,430

Total liabilities and stockholders’ equity
 
$
2,878,441

 
$
2,879,545

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


2
Table of Contents

PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
 
Thirteen Weeks Ended
 
 
March 25, 2012
 
March 27, 2011
 
 
(In thousands, except per share data)
Net sales
 
$
1,888,773

 
$
1,892,476

Cost of sales
 
1,778,708

 
1,944,238

Operational restructuring charges
 
—

 
1,348

Gross profit (loss)
 
110,065

 
(53,110
)
Selling, general and administrative expense
 
45,256

 
53,248

Administrative restructuring charges
 
2,885

 
418

Operating income (loss)
 
61,924

 
(106,776
)
Interest expense, net of capitalized interest
 
28,245

 
27,507

Interest income
 
(274
)
 
(710
)
Foreign currency transaction gains
 
(5,928
)
 
(2,735
)
Miscellaneous, net
 
(370
)
 
(1,071
)
Income (loss) before income taxes
 
40,251

 
(129,767
)
Income tax expense (benefit)
 
653

 
(9,872
)
Net income (loss)
 
39,598

 
(119,895
)
Less: Net income attributable to noncontrolling interests
 
425

 
865

Net income (loss) attributable to Pilgrim’s Pride Corporation
 
$
39,173

 
$
(120,760
)
 
 
 
 
 
Comprehensive income (loss)
 
$
40,018

 
$
(120,410
)
Comprehensive income attributable to noncontrolling interests
 
425

 
865

Comprehensive income (loss) attributable to Pilgrim's Pride Corporation
 
$
39,593

 
$
(121,275
)
 
 
 
 
 
Weighted average shares of common stock outstanding:
 
 
 
 
Basic (Note 13. Stockholders' Equity)
 
223,562

 
224,996

Effect of common stock equivalents
 
69

 
—

Diluted
 
223,631

 
224,996

 
 
 
 
 
Net income (loss) per share of common stock outstanding:
 

 

Basic
 
$
0.18

 
$
(0.54
)
Diluted
 
$
0.18

 
$
(0.54
)
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


















3
Table of Contents

PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
 
 
Pilgrim’s Pride Corporation Stockholders
 
 
 
 
 
Common Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interests
 
Total
 
Shares
 
Amount
 
 
(In thousands)
Balance at December 25, 2011
214,282

 
$
2,143

 
$
1,443,484

 
$
(843,945
)
 
$
(46,070
)
 
$
2,818

 
$
558,430

Comprehensive income:

 

 

 

 

 

 

Net income


 


 


 
39,173

 


 
425

 
39,598

Other comprehensive income, net of tax:

 

 

 

 

 

 

Net unrealized holding gains on available-for-sale
    securities, net of tax of $0


 


 


 


 
5

 


 
5

Gains associated with pension and other
    postretirement benefit obligations, net of tax
    of $0


 


 


 


 
415

 


 
415

Total other comprehensive income, net of tax

 

 

 

 

 

 
420

Total comprehensive income

 

 

 

 

 

 
40,018

Issuance of common stock
44,444

 
444

 
197,935

 


 


 


 
198,379

Share-based compensation
200

 
2

 
147

 


 


 


 
149

Balance at March 25, 2012
258,926

 
$
2,589

 
$
1,641,566

 
$
(804,772
)
 
$
(45,650
)
 
$
3,243

 
$
796,976

Balance at December 26, 2010
214,282

 
$
2,143

 
$
1,442,810

 
$
(348,653
)
 
$
(23,637
)
 
$
5,933

 
$
1,078,596

Comprehensive loss:

 

 

 

 

 

 

Net income (loss)
—

 
—

 
—

 
(120,760
)
 
—

 
865

 
(119,895
)
Other comprehensive loss, net of tax:

 

 

 

 

 

 

Net unrealized holding losses on available-for-sale
    securities, net of tax of $0
—

 
—

 
—

 
—

 
(477
)
 
—

 
(477
)
Losses associated with pension and other
    postretirement benefit obligations, net of tax
    of $0
—

 
—

 
—

 
—

 
(38
)
 
—

 
(38
)
Total other comprehensive loss, net of tax

 

 

 

 

 

 
(515
)
Total comprehensive loss

 

 

 

 

 

 
(120,410
)
Share-based compensation
—

 
—

 
120

 
—

 
—

 
—

 
120

Balance at March 27, 2011
214,282

 
$
2,143

 
$
1,442,930

 
$
(469,413
)
 
$
(24,152
)
 
$
6,798

 
$
958,306

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

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Table of Contents

PILGRIM’S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Thirteen Weeks Ended
 
March 25, 2012
 
March 27, 2011
 
(In thousands)
Cash flows from operating activities:
 
 
 
Net income (loss)
$
39,598

 
$
(119,895
)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating
    activities:
 
 
 
Depreciation and amortization
35,766

 
50,852

Foreign currency transaction gains
(5,407
)
 
(2,776
)
Accretion of bond discount
114

 
111

Impairment expense
1,342

 
—

Loss (gain) on property disposals
859

 
(1,135
)
Share-based compensation
149

 
120

Deferred income tax benefit
—

 
(11,106
)
Changes in operating assets and liabilities:
 
 
 
Restricted cash and cash equivalents
7,996

 
(164
)
Trade accounts and other receivables
3,043

 
(67,283
)
Inventories
(25,813
)
 
64,273

Prepaid expenses and other current assets
13,144

 
11,407

Accounts payable, accrued expenses and other current liabilities
(35,003
)
 
(28,054
)
Income taxes
(3,421
)
 
992

Deposits
—

 
135

Other operating assets and liabilities
(2,985
)
 
120

Cash provided by (used in) operating activities
29,382

 
(102,403
)
Cash flows from investing activities:
 
 
 
Acquisitions of property, plant and equipment
(16,670
)
 
(63,960
)
Purchases of investment securities
(88
)
 
(1,353
)
Proceeds from sale or maturity of investment securities
—

 
831

Proceeds from property disposals
3,066

 
4,402

Cash used in investing activities
(13,692
)
 
(60,080
)
Cash flows from financing activities:
 
 
 
Proceeds from revolving line of credit and long-term borrowings
183,200

 
255,300

Payments on revolving line of credit, long-term borrowings and capital lease
    obligations
(341,802
)
 
(135,625
)
Payment of note payable to JBS USA Holdings, Inc.
(50,000
)
 
—

Proceeds from sale of common stock, net
198,379

 
—

Payment of capitalized loan costs
—

 
(689
)
Cash provided by (used in) financing activities
(10,223
)
 
118,986

Effect of exchange rate changes on cash and cash equivalents
494

 
433

Increase (decrease) in cash and cash equivalents
5,961

 
(43,064
)
Cash and cash equivalents, beginning of period
41,609

 
106,077

Cash and cash equivalents, end of period
$
47,570

 
$
63,013

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

5


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1.
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Business
Pilgrim’s Pride Corporation (referred to herein as “Pilgrim’s,” “PPC,” “the Company,” “we,” “us,” “our,” or similar terms) is the second-largest chicken company in the world, with operations in the United States (“U.S.”), Mexico and Puerto Rico. Pilgrim's products are sold to foodservice, retail and frozen entrée customers. The Company's primary distribution is through retailers, foodservice distributors and restaurants throughout the United States and Puerto Rico and in the northern and central regions of Mexico. Additionally, the Company exports chicken products to approximately 105 countries. Pilgrim's fresh chicken products consist of refrigerated whole chickens, whole cut-up chickens and selected chicken parts that are either marinated or non-marinated. The Company's prepared chicken products include fully cooked, ready-to-cook and individually frozen chicken parts, strips, nuggets and patties, some of which are are either breaded or non-breaded and either marinated or non-marinated. As a vertically integrated company, we control every phase of the production of our products. We operate feed mills, hatcheries, processing plants and distribution centers in 12 U.S. states, Puerto Rico and Mexico. Pilgrim's employs approximately 38,500 people and has the capacity to process more than 36 million birds per week for a total of more than 9.5 billion pounds of live chicken annually. Approximately 4,100 contract growers supply poultry for the Company's operations.
Consolidated Financial Statements
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements. In the opinion of management, all adjustments (consisting of normal and recurring adjustments unless otherwise disclosed) considered necessary for a fair presentation have been included. Operating results for the thirteen weeks ended March 25, 2012 are not necessarily indicative of the results that may be expected for the year ending December 30, 2012. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 25, 2011.
Pilgrim’s operates on a 52/53-week fiscal year that ends on the Sunday falling on or before December 31. The reader should assume any reference we make to a particular year (for example, 2012) in the notes to these Condensed Consolidated Financial Statements applies to our fiscal year and not the calendar year.
The Condensed Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries. We eliminate all significant affiliate accounts and transactions upon consolidation.

The Company measures the financial statements of its Mexico subsidiaries as if the U.S. dollar were the functional currency. Accordingly, we remeasure assets and liabilities, other than non-monetary assets, of the Mexico subsidiaries at current exchange rates. We remeasure non-monetary assets using the historical exchange rate in effect on the date of each asset’s acquisition. We remeasure income and expenses at average exchange rates in effect during the period. Currency exchange gains or losses are included in the line item Foreign currency transaction losses (gains) in the Condensed Consolidated Statements of Operations.
Reclassifications
We have made certain reclassifications to the 2011 Condensed Consolidated Financial Statements with no impact to reported net loss in order to conform to the 2012 presentation.
Reportable Segment
We operate in one reportable business segment, as a producer and seller of chicken products we either produce or purchase for resale.
Revenue Recognition
We recognize revenue when all of the following circumstances are satisfied: (i) persuasive evidence of an arrangement exists, (ii) price is fixed or determinable, (iii) collectability is reasonably assured and (iv) delivery has occurred. Delivery occurs in the period in which the customer takes title and assumes the risks and rewards of ownership of the products specified in the customer’s purchase order or sales agreement. Revenue is recorded net of estimated incentive offerings including special pricing agreements, promotions and other volume-based incentives. Revisions to these estimates are charged back to net sales in the period in which the facts that give rise to the revision become known.

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Book Overdraft
The majority of the Company's disbursement bank accounts are zero balance accounts where cash needs are funded as checks are presented for payment by the holder. Checks issued pending clearance that result in overdraft balances for accounting purposes are classified as accounts payable and the change in the related balance is reflected in operating activities on the Condensed Consolidated Statements of Cash Flows.
2.     EXIT OR DISPOSAL ACTIVITIES
From time to time, the Company will incur costs to implement exit or disposal efforts for specific operations. These exit or disposal plans, each of which is approved by the Company's Board of Directors, focus on various aspects of operations, including closing and consolidating certain processing facilities, rationalizing headcount and aligning operations in the most strategic and cost-efficient structure. Specific exit or disposal efforts that were ongoing during either the thirteen weeks ended March 25, 2012 or the thirteen weeks ended March 27, 2011 included the following:
 
 
Facilities Closures(a)
 
Administrative Integration(b)
 
Total
 
 
(In thousands, except positions eliminated)
Earliest implementation date
 
July 2009

 
January 2010

 
 
Latest expected completion date
 
September 2014

 
March 2012

 
 
Positions eliminated
 
2,410

 
480

 
2,890

 
 
 
 
 
 
 
Costs expected to be incurred:
 
 
 
 
 
 
Employee-related costs
 
$
3,170

 
$
14,578

 
$
17,748

Asset impairment costs
 
17,902

 
32,530

 
50,432

Inventory valuation costs
 
850

 
—

 
850

Other exit or disposal costs
 
19,379

 
—

 
19,379

Total exit or disposal costs
 
$
41,301

 
$
47,108

 
$
88,409

 
 
 
 
 
 
 
Costs incurred during the thirteen weeks ended
     March 25, 2012:
 
 
 
 
 
 
Employee-related costs
 
$
78

 
$
—

 
$
78

Asset impairment costs
 
960

 
382

 
1,342

Other exit or disposal costs
 
1,543

 
—

 
1,543

Total exit or disposal costs
 
$
2,581

 
$
382

 
$
2,963

 
 
 
 
 
 
 
Costs incurred during the thirteen weeks ended
     March 27, 2011:
 
 
 
 
 
 
Employee-related costs
 
$
—

 
$
540

 
$
540

Asset impairment costs
 
1,766

 
—

 
1,766

Total exit or disposal costs
 
$
1,766

 
$
540

 
$
2,306

 
 
 
 
 
 
 
Costs incurred since inception:
 
 
 
 
 
 
Employee-related costs
 
$
3,170

 
$
14,578

 
$
17,748

Asset impairment costs
 
17,902

 
32,530

 
50,432

Inventory valuation costs
 
850

 
—

 
850

Other exit or disposal costs
 
6,793

 
—

 
6,793

Total exit or disposal costs
 
$
28,715

 
$
47,108

 
$
75,823

(a)
Significant facilities closed included one processing plant in 2008, two processing plants in 2009, two processing plants in the transition period and one processing plant in 2011. The transition period began September 27, 2009 and ended December 27, 2009 and resulted from the Company's change in its fiscal year end from the Saturday nearest September 30 each year to the last Sunday in December of each year.
(b)
Company management implemented certain activities to integrate the administrative functions of the Company into those of JBS USA Holdings, Inc. These included the closures of administrative offices in Georgia and Texas.

 



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Accrued exit or disposal costs are included in Accrued expenses and other current liabilities on the accompanying Condensed Consolidated Balance Sheets. The following table sets forth activity that was recorded through the Company’s accrued exit or disposal cost accounts during the thirteen weeks ended March 25, 2012 and March 27, 2011:
 
 
 
Accrued
Severance
 
Accrued
Inventory
Charges
 
Total
 
 
(In thousands)
Balance at December 25, 2011
 
$
90

 
$
793

 
$
883

Accruals
 
—

 
—

 
—

Payment /Disposal
 
(147
)
 
(136
)
 
(283
)
Adjustments
 
78

 
—

 
78

Balance at March 25, 2012
 
$
21

 
$
657

 
$
678

 
 
 
 
 
 
 
Balance at December 26, 2010
 
$
4,150

 
$
793

 
$
4,943

Accruals
 
1,101

 
—

 
1,101

Payment /Disposal
 
(3,258
)
 
—

 
(3,258
)
Adjustments
 
(561
)
 
—

 
(561
)
Balance at March 27, 2011
 
$
1,432

 
$
793

 
$
2,225

Exit or disposal costs were included on the following lines in the accompanying Condensed Consolidated Statements of Operations:
 
 
Thirteen Weeks Ended
 
 
March 25, 2012
 
March 27, 2011
 
 
(In thousands)
Cost of sales
 
$
78

 
$
—

Operational restructuring charges
 
—

 
1,348

Selling, general and administrative expense
 
—

 
540

Administrative restructuring charges
 
2,885

 
418

Total exit or disposal costs
 
$
2,963

 
$
2,306

Certain exit or disposal costs were classified as either Operational restructuring charges or Administrative restructuring charges on the accompanying Condensed Consolidated Statements of Operations because management believed these costs were not directly related to the Company’s ongoing operations. Components of operating restructuring charges and administrative restructuring charges recognized during the thirteen weeks ended March 25, 2012 and March 27, 2011 are summarized below:
 
 
 
Thirteen Weeks Ended
 
 
March 25, 2012
 
March 27, 2011
 
 
(In thousands)
Operational restructuring charges:
 
 
 
 
Asset impairment costs (Note 8. Property, Plant and Equipment)
 
$
—

 
$
1,348

 
 
 
 
 
Administrative restructuring charges:
 
 
 
 
Asset impairment costs (Note 8. Property, Plant and Equipment)
 
$
1,342

 
$
418

Loss on egg sales and flock depletion expensed as incurred
 
455

 
—

Other restructuring costs
 
1,088

 
—

Total administrative restructuring charges
 
$
2,885

 
$
418

We continue to review and evaluate various restructuring and other alternatives to streamline our operations, improve efficiencies and reduce costs. Such initiatives may include selling assets, consolidating operations and functions, employee relocation and voluntary and involuntary employee separation programs. Any such actions may require us to obtain the pre-

8
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approval of our lenders under our U.S. Credit Facility (as defined in Note 10). In addition, such actions will subject the Company to additional short-term costs, which may include asset impairment charges, lease commitment costs, employee retention and severance costs and other costs. Certain of these activities may have a disproportionate impact on our income relative to the cost savings in a particular period.
3.     FAIR VALUE MEASUREMENTS
The asset (liability) amounts recorded in the Condensed Consolidated Balance Sheets (carrying amounts) and the estimated fair values of financial instruments at March 25, 2012 and December 25, 2011 consisted of the following:
 
 
March 25, 2012
 
December 25, 2011
 
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
 
 
 
(In thousands)
 
 
Short-term investments in available-for-sale securities
 
$
156

 
$
156

 
$
157

 
$
157

Commodity derivative assets(a):
 
 
 
 
 
 
 
 
Futures
 
3,399

 
3,399

 
2,870

 
2,870

Long-term investments in available-for-sale securities
 
591

 
591

 
497

 
497

Commodity derivative liabilities(b):
 
 
 
 
 
 
 
 
Futures
 
(3,745
)
 
(3,745
)
 
(2,120
)
 
(2,120
)
Options
 
—

 
—

 
(603
)
 
(603
)
Long-term debt and other borrowing arrangements(c)
 
(1,265,124
)
 
(1,289,698
)
 
(1,423,612
)
 
(1,421,517
)
Note payable to JBS USA Holdings, Inc.
 
—

 
—

 
(50,000
)
 
(50,077
)
 
(a)
Commodity derivative assets are included in Prepaid expenses and other current assets on the Condensed Consolidated Balance Sheet.
(b)
Commodity derivative liabilities are included in Accrued expenses on the Condensed Consolidated Balance Sheet.
(c)
The fair values of the Company’s long-term debt and other borrowing arrangements were estimated by calculating the net present value of future payments for each debt obligation or borrowing by: (i) using a risk-free rate applicable for an instrument with a life similar to the remaining life of each debt obligation or borrowing plus the current estimated credit risk spread for the Company or (ii) using the quoted market price at March 25, 2012 or December 25, 2011.
The carrying amounts of our cash and cash equivalents, derivative trading accounts margin cash, restricted cash and cash equivalents, accounts receivable, accounts payable and certain other liabilities approximate their fair values due to their relatively short maturities. The Company adjusts its investments, commodity derivative assets and commodity derivative liabilities to fair value based on quoted market prices in active markets for identical instruments, quoted market prices in active markets for similar instruments with inputs that are observable for the subject instrument, or unobservable inputs such as discounted cash flow models or valuations.
The Company follows guidance under ASC Topic 820, Fair Value Measurements and Disclosures, which establishes a framework for measuring fair value and required enhanced disclosures about fair value measurements. The guidance under ASC Topic 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. ASC Topic 820 also requires disclosure about how fair value was determined for assets and liabilities and established a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:
Level 1
  
Unadjusted quoted prices in active markets for identical assets or liabilities;
 
 
Level 2
  
Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or
 
 
Level 3
  
Unobservable inputs, such as discounted cash flow models or valuations.
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
As of March 25, 2012, the Company held certain items that are required to be measured at fair value on a recurring basis. These included cash and cash equivalents, derivative assets and liabilities, short-term investments in available-for-sale securities and long-term investments in available-for-sale securities. Cash equivalents consist of short-term, highly liquid, income-producing investments such as money market funds and other funds that have maturities of 90 days or less. Derivative assets and liabilities consist of long and short positions on both exchange-traded commodity futures and commodity options as well as margin cash on account with the Company’s derivatives brokers. Short-term investments in available-for-sale securities consist of short-term, highly liquid, income-producing investments such as municipal debt securities that have maturities of greater than 90 days but

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less than one year. Long-term investments in available-for-sale securities consist of income-producing investments such as municipal debt securities, corporate debt securities, equity securities and fund-of-funds units that have maturities of greater than one year.

The following items were measured at fair value on a recurring basis at March 25, 2012:
 
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
 
 
(In thousands)
 
 
Short-term investments in available-for-sale securities
 
$
—

 
$
156

 
$
—

 
$
156

Commodity derivative assets:
 
 
 
 
 
 
 


Futures
 
3,399

 
—

 
—

 
3,399

Long-term investments in available-for-sale securities
 
—

 
532

 
59

 
591

Commodity derivative liabilities:
 
 
 
 
 
 
 

Futures
 
(3,745
)
 
—

 
—

 
(3,745
)
Financial assets and liabilities classified in Level 1 at March 25, 2012 include cash and cash equivalents, restricted cash and cash equivalents, equity securities and commodity futures derivative instruments traded in active markets. The valuation of these instruments is determined using a market approach, taking into account current interest rates, creditworthiness, and liquidity risks in relation to current market conditions, and is based upon unadjusted quoted prices for identical assets in active markets. The valuation of financial assets and liabilities in Level 2 is determined using a market approach based upon quoted prices for similar assets and liabilities in active markets or other inputs that are observable for substantially the full term of the financial instrument. Level 2 securities primarily include fixed income securities and commodity option derivative instruments. The valuation of financial assets in Level 3 is determined using an income approach based on unobservable inputs such as discounted cash flow models or valuations. The Company’s sole Level 3 financial asset at March 25, 2012 was a fund-of-funds investment.
The following table presents activity for the thirteen weeks ended March 25, 2012 and March 27, 2011, respectively, related to the Company’s investment in a fund-of-funds asset that is measured at fair value on a recurring basis using Level 3 inputs:
 
Thirteen Weeks Ended
 
March 25, 2012
 
March 27, 2011
 
(In thousands)
Balance at beginning of period
$
59

 
$
1,190

Included in other comprehensive income
—

 
43

Balance at end of period
$
59

 
$
1,233

 
In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company records certain assets and liabilities at fair value on a nonrecurring basis. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges when required by U.S. GAAP. Certain long-lived assets held for sale with a carrying amount of $2.0 million were written down to their fair value of $0.7 million, resulting in a loss of $1.3 million recorded in earnings during the thirteen weeks ended March 25, 2012. These assets are classified as Level 2 assets because their fair value can be corroborated based on observable market data.
4.     TRADE ACCOUNTS AND OTHER RECEIVABLES
Trade accounts and other receivables, less allowance for doubtful accounts, consisted of the following:
 
 
March 25, 2012
 
December 25, 2011
 
 
(In thousands)
Trade accounts receivable
 
$
344,411

 
$
337,411

Account receivable from JBS USA, LLC
 
19,406

 
21,198

Other receivables
 
11,258

 
16,974

Receivables, gross
 
375,075

 
375,583

Allowance for doubtful accounts
 
(4,837
)
 
(5,163
)
Receivables, net
 
$
370,238

 
$
370,420




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5.     INVENTORIES
Inventories consisted of the following:
 
March 25, 2012
 
December 25, 2011
 
(In thousands)
Chicken:
 
 
 
Live chicken and hens
$
384,062

 
$
363,590

Feed, eggs and other
253,467

 
238,449

Finished chicken products
269,433

 
273,363

Total chicken inventories
906,962

 
875,402

Other products:
 
 
 
Commercial feed, table eggs and other
3,450

 
3,674

Distribution inventories (other than chicken products)
18

 
18

Total other products inventories
3,468

 
3,692

Total inventories
$
910,430

 
$
879,094

6.
INVESTMENTS IN SECURITIES
We recognize investments in available-for-sale securities as cash equivalents, current investments or long-term investments depending upon each security’s length to maturity. Additionally, those securities identified by management at the time of purchase for funding operations in less than one year are classified as current. The following table summarizes our investments in available-for-sale securities: 
 
March 25, 2012
 
December 25, 2011
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
 
(In thousands)
Short-term investments:
 
 
 
 
 
 
 
Fixed income securities
$
151

 
$
156

 
$
152

 
$
157

Long-term investments:
 
 
 
 
 
 
 
Fixed income securities
454

 
533

 
367

 
438

Other
59

 
59

 
59

 
59


Maturities for the Company’s investments in fixed income securities as of March 25, 2012 were as follows:
 
Amount
 
Percent
 
(In thousands)
Matures in less than one year
$
156

 
23
%
Matures between one and two years
109

 
16
%
Matures between two and five years
200

 
29
%
Matures in excess of five years
224

 
32
%
 
$
689

 
100
%
The Company and certain retirement plans that it sponsors invest in a variety of financial instruments. Certain postretirement funds in which the Company participates hold significant amounts of mortgage-backed securities. However, none of the mortgages collateralizing these securities are considered subprime.
Certain investments are held in trust as compensating balance arrangements for our insurance liability and are classified as long-term based on a maturity date greater than one year from the balance sheet date and management’s intention not to use such assets in the next year.
7.     DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes various raw materials in its operations, including corn, soybean meal, soybean oil and energy, such as natural gas, electricity and diesel fuel, which are all considered commodities. The Company considers these raw materials generally available from a number of different sources and believes it can obtain them to meet its requirements. These commodities are subject to price fluctuations and related price risk due to factors beyond our control, such as economic and political conditions,

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supply and demand, weather, governmental regulation and other circumstances. Generally, the Company purchases derivative financial instruments, specifically exchange-traded futures and options, in an attempt to mitigate price risk related to its anticipated consumption of commodity inputs for periods of up to 12 months. The Company may purchase longer-term derivative financial instruments on particular commodities if deemed appropriate. The fair value of derivative assets is included in the line item Prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets while the fair value of derivative liabilities is included in the line item Accrued expenses and other current liabilities on the same statements. Our counterparties require that we post cash collateral for changes in the net fair value of the derivative contracts.

We have not designated the derivative financial instruments that we have purchased to mitigate commodity purchase exposures as cash flow hedges. Therefore, we recognized changes in the fair value of these derivative financial instruments immediately in earnings. Gains or losses related to these derivative financial instruments are included in the line item Cost of sales in the Condensed Consolidated Statements of Operations. The Company recognized net losses of $4.6 million and net gains of $32.0 million related to changes in the fair value of its derivative financial instruments during the thirteen weeks ended March 25, 2012 and March 27, 2011, respectively.
Information regarding the Company’s outstanding derivative instruments and cash collateral posted with (owed to) brokers is included in the following table:
 
March 25, 2012
 
December 25, 2011
 
(Fair values in thousands)
Fair values:
 
 
 
Commodity derivative assets
$
3,399

 
$
2,870

Commodity derivative liabilities
(3,745
)
 
(2,723
)
Cash collateral posted with brokers
3,315

 
3,271

Derivatives Coverage(a):
 
 
 
Corn
(a)

 
 (a)

Soybean meal
(a)

 
 (a)

Period through which stated percent of needs are covered:
 
 
 
Corn
(a)

 
 (a)

Soybean meal
(a)

 
 (a)

Written put options outstanding(b):
 
 
 
Fair value
$
—

 
$
(603
)
Number of contracts:
 
 
 
Corn
—

 
500

Soybean meal
—

 
—

Expiration dates
—

 
March 2012

Short positions on outstanding futures derivative instruments(b):
 
 
 
Fair value
$
(1,387
)
 
$
495

Number of contracts:
 
 
 
Corn
1,590

 
2,531

Soybean meal
988

 
96

Soybean oil
37

 
—

 
(a)
Derivatives coverage is the percent of anticipated corn and soybean meal needs covered by outstanding derivative instruments through a specified date. As of March 25, 2012, the Company had short derivative positions to offset long forward cash purchases, which exceeded open long derivative positions for corn, soybean meal and soybean oil. These positions expire by March 2013.
(b)
A written put option is an option that the Company has sold that grants the holder the right, but not the obligation, to sell the underlying asset at a certain price for a specified period of time. When the Company takes a short position on a futures derivative instrument, it agrees to sell the underlying asset in the future at a price established on the contract date. The Company writes put options and takes short positions on futures derivative instruments to minimize the impact of feed ingredients price volatility on its operating results.




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8.     PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment (“PP&E”), net consisted of the following:
 
March 25, 2012
 
December 25, 2011
 
(In thousands)
Land
$
65,537

 
$
65,413

Buildings
1,081,869

 
1,077,789

Machinery and equipment
1,493,472

 
1,492,251

Autos and trucks
57,918

 
58,518

Construction-in-progress
31,771

 
36,094

PP&E, gross
2,730,568

 
2,730,065

Accumulated depreciation
(1,505,687
)
 
(1,488,313
)
PP&E, net
$
1,224,880

 
$
1,241,752

The Company recognized depreciation expense of $31.9 million and $46.9 million during the thirteen weeks ended March 25, 2012 and March 27, 2011, respectively.
During the thirteen weeks ended March 25, 2012, the Company sold certain PP&E for cash of $3.1 million and recognized net losses on these sales of $0.9 million. PP&E sold in 2012 included various broiler and breeder farms in Texas and miscellaneous processing equipment. During the thirteen weeks ended March 27, 2011, the Company sold certain PP&E for cash of $4.4 million and recognized net gains on these sales of $1.1 million. PP&E sold in 2011 included various broiler and breeder farms in Texas and miscellaneous processing equipment.
 
Management has committed to the sale of certain properties and related assets, including, but not limited to, processing plants, office buildings and farms, which no longer fit into the operating plans of the Company. The Company is actively marketing these properties and related assets for immediate sale and believes a sale of each property can be consummated within the next 12 months. At March 25, 2012 and December 25, 2011, the Company reported properties and related assets totaling $50.2 million and $53.8 million, respectively, in Assets held for sale on its Condensed Consolidated Balance Sheets. For the thirteen weeks ended March 25, 2012, the Company recognized impairment expense of $1.3 million on certain of these assets.
As part of the exit or disposal activities discussed in “Note 2. Exit or Disposal Activities,” the Company closed or idled various processing complexes, processing plants, hatcheries and broiler farms throughout the U.S. Neither the Board of Directors nor JBS USA Holdings, Inc. has determined if it would be in the best interest of the Company to divest any of these idled assets. Management is therefore not certain that it can or will divest any of these assets within one year, is not actively marketing these assets and, accordingly, has not classified them as assets held for sale. The Company continues to depreciate these assets. At March 25, 2012, the carrying amount of these idled assets was $62.8 million based on depreciable value of $151.9 million and accumulated depreciation of $89.1 million.
The Company last tested the recoverability of its long-lived assets held and used in December 2011. At that time, the Company determined that the carrying amount of its long-lived assets held and used was recoverable over the remaining life of the primary asset in the group and that long-lived assets held and used passed the Step 1 recoverability test under ASC 360-10-35, Impairment or Disposal of Long-Lived Assets. There were no indicators present during the thirteen weeks ended March 25, 2012 that required the Company to test its long-lived assets held and used for recoverability.








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9.     CURRENT LIABILITIES
Current liabilities, other than income taxes and current maturities of long-term debt, consisted of the following components:
 
March 25, 2012
 
December 25, 2011
 
(In thousands)
Accounts payable:
 
 
 
Trade accounts
$
223,690

 
$
294,662

Unfunded payments
68,594

 
32,958

Other payables
847

 
1,244

Total accounts payable
293,131

 
328,864

Accounts payable to JBS USA, LLC
8,339

 
11,653

Accrued expenses and other current liabilities:
 
 
 
Compensation and benefits
81,092

 
72,328

Interest and debt-related fees
20,795

 
13,809

Insurance and self-insured claims
102,095

 
102,256

Commodity derivative liabilities:
 
 
 
Futures
3,745

 
2,120

Options
—

 
603

Other accrued expenses
82,631

 
89,855

Pre-petition obligations
279

 
826

Total accrued expenses and other current liabilities
290,637

 
281,797

 
$
592,107

 
$
622,314

 
10.
LONG-TERM DEBT AND OTHER BORROWING ARRANGEMENTS
Long-term debt and other borrowing arrangements consisted of the following components: 
 
 
Maturity
 
March 25, 2012
 
December 25, 2011
 
 
 
 
(In thousands)
Senior notes, at 7  7/8%, net of unaccreted discount
 
2018
 
$
496,960

 
$
496,846

U.S. Credit Facility Term B-1 note payable at 4.75%
 
2014
 
275,443

 
275,443

U.S. Credit Facility Term B-2 note payable at 9.00%
 
2014
 
295,270

 
299,145

U.S. Credit Facility with one revolving note payable on which the Company had funds borrowed at 4.25% and 6.25%
 
2014
 
192,600

 
347,300

Mexico Credit Facility with notes payable at TIIE Rate plus 2.25% or Equilibrium Interbank Interest Rate plus 4.5%
 
2014
 
—

 
—

JBS USA Holdings, Inc. Subordinated Loan Agreement with one term note payable at 9.845%
 
2015
 
—

 
50,000

Other
 
Various
 
4,851

 
4,878

Long-term debt
 
 
 
1,265,124

 
1,473,612

Less: Current maturities of long-term debt
 
 
 
(15,614
)
 
(15,611
)
Long-term debt, less current maturities
 
 
 
$
1,249,510

 
$
1,458,001

Senior and Subordinated Notes
At March 25, 2012, the Company has outstanding an aggregate principal balance of $500.0 million of 7  7/8% Senior Notes due in 2018 (the “2018 Notes”) that are registered under the Securities Act of 1933. The 2018 Notes are unsecured obligations of the Company and are guaranteed by one of the Company’s subsidiaries. Interest is payable on December 15 and June 15 of each year, commencing on June 15, 2011. Additionally, the Company has an aggregate principal balance of $3.9 million of 7  5/8% senior unsecured notes, 8  3/8% senior subordinated unsecured notes and 9 1/4% senior unsecured notes outstanding at March 25, 2012.
On June 23, 2011, the Company entered into a Subordinated Loan Agreement with JBS USA Holdings, Inc. ("JBS USA") (the “Subordinated Loan Agreement”), which provided an aggregate commitment of $100.0 million. On June 23, 2011, JBS USA

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made a term loan to the Company in the principal amount of $50.0 million. Pursuant to the terms of the Subordinated Loan Agreement, the Company has also agreed to reimburse JBS USA up to $56.5 million for potential draws upon letters of credit issued for JBS USA's account that support certain obligations of the Company or its subsidiaries. On December 16, 2011, the Company and JBS USA executed an amendment to the Subordinated Loan Agreement that, among other things, provided that if the Company consummated a stock rights offering (the "Rights Offering") that allowed stockholders of record as of January 17, 2012 to purchase an aggregate 44,444,444 shares of the Company's common stock on or before March 24, 2012, the loan commitment under the Subordinated Loan Agreement would be terminated. The Company consummated the Rights Offering on February 29, 2012. Further, under the U.S. Credit Facility (as defined below), following the consummation of the Rights Offering, (i) the Company, at its option, was permitted to prepay the outstanding $50.0 million term loan under the Subordinated Loan Agreement and (ii) the existing commitment of JBS USA to make an additional $50.0 million term loan to the Company under the Subordinated Loan Agreement would be terminated. On March 7, 2012, the Company repaid the outstanding $50.0 million term loan under the Subordinated Loan Agreement, plus accrued interest, with proceeds received from the Rights Offering.
JBS USA agreed to arrange for letters of credit to be issued on its account in the amount of $56.5 million to an insurance company serving the Company in order to allow that insurance company to return cash it held as collateral against potential workers compensation, auto and general liability claims. In return for providing this letter of credit, the Company will reimburse JBS USA for the letter of credit cost the Company would otherwise incur under its U.S. credit facility. The total costs accrued by the Company as of March 25, 2012 to reimburse JBS USA totaled $1.0 million.
U.S. Credit Facility
Pilgrim’s and certain of its subsidiaries have entered into a credit agreement (the "U.S. Credit Facility") with CoBank ACB, as administrative agent and collateral agent, and other lenders party thereto, which currently provides a $700.0 million revolving credit facility and a Term B facility. The U.S. Credit Facility also includes an accordion feature that allows us, at any time, to increase the aggregate revolving loan commitment by up to an additional $100.0 million and to increase the aggregate Term B loans commitment by up to an additional $400.0 million, in each case subject to the satisfaction of certain conditions, including an aggregate cap on all commitments under the U.S. Credit Facility of $1.85 billion. On April 22, 2011, we increased the amount of the sub-limit for swingline loans under the U.S. Credit Facility to $100.0 million. The revolving loan commitment and the Term B loans will mature on December 28, 2014.
On December 28, 2009, the Company paid loan costs totaling $50.0 million related to the U.S. Credit Facility that it recognized as an asset on its balance sheet. The Company amortizes these capitalized costs to interest expense over the life of the U.S. Credit Facility.
Subsequent to the end of each fiscal year, a portion of our cash flow must be used to repay outstanding principal amounts under the Term B loans. In April 2011, the Company paid approximately $46.3 million of its excess cash flow toward the outstanding principal under the Term B loans. After giving effect to this prepayment and other prepayments of the Term B loans, the Term B loans must be repaid in 16 quarterly installments of approximately $3.9 million beginning on April 15, 2011, with the final installment due on December 28, 2014. The Company did not have excess cash flow from 2011 to be applied toward the outstanding principal under the Term B loans. The U.S. Credit Facility also requires us to use the proceeds we receive from certain asset sales and specified debt or equity issuances and upon the occurrence of other events to repay outstanding borrowings under the U.S. Credit Facility. The cash proceeds received by the Company from the Rights Offering were not subject to this requirement. On March 25, 2012, a principal amount of $570.7 million under the Term B loans commitment was outstanding.
Actual borrowings by the Company under the revolving credit commitment component of the U.S. Credit Facility are subject to a borrowing base, which is a formula based on certain eligible inventory, eligible receivables and restricted cash under the control of CoBank ACB. As of March 25, 2012, the applicable borrowing base was $671.0 million, the amount available for borrowing under the revolving loan commitment was $439.2 million and outstanding borrowings and letters of credit under the revolving loan commitment were $192.6 million and $39.2 million, respectively.
The U.S. Credit Facility contains financial covenants and various other covenants that may adversely affect our ability to, among other things, incur additional indebtedness, incur liens, pay dividends or make certain restricted payments, consummate certain assets sales, enter into certain transactions with JBS USA and our other affiliates, merge, consolidate and/or sell or dispose of all or substantially all of our assets. On June 23, 2011 and December 16, 2011, the Company entered into amendments to the U.S. Credit Facility, which, among other things, (i) temporarily suspended the requirement for the Company to comply with the fixed charge coverage ratio and senior secured leverage ratio financial covenants until September 24, 2012, (ii) modified the fixed charge coverage ratio financial covenant so that when testing of this covenant resumes on September 24, 2012, the Company can calculate the fixed charge coverage ratio based upon a specified number of fiscal quarters selected by the Company, (iii) reduced the minimum allowable consolidated tangible net worth to the sum of $450 million plus 50% of the cumulative net income (excluding any losses) of the Company from December 16, 2011 through such date of calculation and (iv) increased the maximum

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allowable senior secured leverage ratio, determined for any period of four consecutive fiscal quarters ending on the last day of each fiscal quarter, to be no greater than 4.00:1.00 for periods calculated from September 24, 2012 and thereafter. The Company is currently in compliance with the modified consolidated tangible net worth covenant. The Company also expects to be in compliance with the modified fixed charge coverage ratio and senior secured leverage ratio financial covenants when the testing of these covenants resumes on September 24, 2012.
All obligations under the U.S. Credit Facility are unconditionally guaranteed by certain of the Company's subsidiaries and are secured by a first priority lien on (i) the accounts receivable and inventories of the Company and both its U.S. and Puerto Rico subsidiaries, (ii) 100% of the equity interests in the Company's U.S. and Puerto Rico subsidiaries and 65% of the equity interests in the Company's direct foreign subsidiaries, (iii) substantially all of the personal property and intangibles of the Company, its Puerto Rico subsidiaries and the guarantor subsidiaries under the U.S. Credit Facility and (iv) substantially all of the real estate and fixed assets of the Company and the guarantor subsidiaries under the U.S. Credit Facility.
Mexico Credit Facility
On October 19, 2011, Avícola Pilgrim's Pride de México, S.A. de C.V. , Pilgrim's Pride S. de R.L. de C.V. and certain Mexican subsidiaries entered into an amended and restated credit agreement (the “Mexico Credit Facility”) with ING Bank (México), S.A. Institución de Banca Múltiple, ING Grupo Financiero, as lender and ING Capital LLC, as administrative agent. The Mexico Credit Facility has a final maturity date of September 25, 2014. The Mexico Credit Facility is secured by substantially all of the assets of the Company's Mexico subsidiaries. As of March 25, 2012, the U.S. dollar-equivalent of the loan commitment under the Mexico Credit Facility was $43.7 million. There were no outstanding borrowings under the Mexico Credit Facility at March 25, 2012.
11.
INCOME TAXES
The Company recorded income tax expense of $0.7 million, a 1.6% effective tax rate, for the thirteen weeks ended March 25, 2012, compared to an income tax benefit of $9.9 million, a 7.6% effective tax rate, for the thirteen weeks ended March 27, 2011. The income tax expense recognized for the thirteen weeks ended March 25, 2012 was primarily the result of the tax expense recorded on the Company's year-to-date income and an increase in reserves for unrecognized tax benefits, offset by a decrease in valuation allowance as a result of earnings in the current period.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carry back and carry forward periods), projected future taxable income and tax-planning strategies in making this assessment. As of March 25, 2012, the Company does not believe it has sufficient positive evidence to conclude that realization of its federal, state and foreign net deferred tax assets is more likely than not to be realized.
For the thirteen weeks ended March 25, 2012 and March 27, 2011, there is no tax effect reflected in other comprehensive income (loss) because the Company has a valuation allowance.
With few exceptions, the Company is no longer subject to U.S. federal, state or local income tax examinations for years prior to 2003 and is no longer subject to Mexico income tax examinations for years prior to 2006. The Company continues to be under examination for Gold Kist and its subsidiaries for the tax years ended June 30, 2004 through December 27, 2006. The Company is currently working with the Internal Revenue Service (“IRS”) through the normal processes and procedures that are available to all taxpayers outside of bankruptcy to resolve the IRS' proofs of claim. There has been no significant change in the resolution of the IRS' claim since December 25, 2011. See “Note 15. Commitments and Contingencies” for additional information.
12.
PENSION AND OTHER POSTRETIREMENT BENEFITS
The Company sponsors programs that provide retirement benefits to most of its employees. These programs include qualified defined benefit pension plans, nonqualified defined benefit retirement plans, a defined benefit postretirement life insurance plan, defined contribution retirement savings plans and deferred compensation plans. Under all of our retirement plans, the Company’s expenses were $2.1 million and $2.3 million in the thirteen weeks ended March 25, 2012 and March 27, 2011, respectively.





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The following table provides the components of net periodic benefit cost for the defined benefit plans mentioned above:
 
Thirteen Weeks Ended
March 25, 2012
 
March 27, 2011
 
Pension
Benefits
 
Other
Benefits
 
Pension
Benefits
 
Other
Benefits
 
(In thousands)
Service cost
$
12

 
$
—

 
$
52

 
$
—

Interest cost
2,029

 
24

 
2,465

 
34

Estimated return on plan assets
(1,435
)
 
—

 
(1,856
)
 
—

Amortization of prior service cost
—

 
—

 
1

 
—

Amortization of net loss
415

 
—

 
28

 
—

Net periodic benefit cost
$
1,021

 
$
24

 
$
690

 
$
34

During the thirteen weeks ended March 25, 2012, the Company contributed $1.4 million to its defined benefit plans.
13.
STOCKHOLDERS' EQUITY
Rights Offering
In January 2012, Pilgrim's commenced the Rights Offering for stockholders of record as of January 17, 2012 (the “Record Date”). The basic subscription privilege gave stockholders the option to purchase 0.2072 shares of Pilgrim's common stock, rounded up to the next largest whole number, at a subscription price of $4.50 per share for each share of Pilgrim's common stock they owned as of the Record Date. The multiplier was determined by dividing the 44,444,444 million shares being offered in the Rights Offering by the total number of shares owned by all stockholders on the Record Date. Those stockholders that exercised their basic subscription privilege in full also received an over-subscription privilege that afforded them the opportunity to purchase additional shares at the subscription price of $4.50 per share from a pool of the shares left over should not all stockholders elect to exercise their basic subscription privileges in full. JBS USA committed to participate in the Rights Offering and exercise its basic and over-subscription privileges in full. The last day a stockholder could exercise either their basic subscription rights or their over-subscription rights was February 29, 2012. On March 7, 2012, the Company issued 44,444,444 shares of common stock to stockholders that exercised their basic subscription privileges and over-subscription privileges under the Rights Offering. Gross proceeds received under the Rights Offering totaled $200.0 million. The Company incurred costs directly attributable to the Rights Offering of $1.6 million that it deferred and charged against the proceeds of the Rights Offering in Additional Paid-in Capital on the Condensed Consolidated Balance Sheet. The Company used the net proceeds of $198.4 million for additional working capital to improve its capital position and for general corporate purposes. Pilgrim's also used a portion of the net proceeds to repay the outstanding principal amount of $50.0 million, plus accrued interest, of its subordinated debt owed to JBS USA and to repay indebtedness under the U.S. Credit Facility.
The Rights Offering contained a subscription price that was less than the fair value of the Company's common stock on the last day the rights could be exercised. This price discount is considered a bonus element similar to a stock dividend. Because of this bonus element, the Company adjusted both the weighted average basic and diluted shares outstanding as reported in the Quarterly Report on Form 10-Q filed with the SEC on April 29, 2011 by multiplying those weighted average shares by an adjustment factor that represented the $6.40 fair value of a share of the Company's common stock immediately prior to the exercise of the basic and over-subscription privileges under the Rights Offering divided by the $6.07 theoretical ex-rights fair value of a share of the Company's common stock immediately prior to the exercise of the basic and over-subscription privileges under the Rights Offering. Weighted average basic and diluted shares outstanding and net loss per weighted average basic and diluted share for the thirteen weeks ended March 27, 2011 as originally reported and as adjusted for this bonus element were as follows:
 
As Originally Reported
 
As Adjusted
 
Effect of Change
 
(In thousands, except per share data)
Weighted average basic shares
214,282

 
224,996

 
10,714

Weighted average diluted shares
214,282

 
224,996

 
10,714

Net loss per weighted average basic share
$
(0.56
)
 
$
(0.54
)
 
$
0.02

Net loss per weighted average diluted share
$
(0.56
)
 
$
(0.54
)
 
$
0.02




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Share-Based Compensation
The Company granted 200,000 restricted shares of its common stock to William W. Lovette, the Company’s Chief Executive Officer, effective January 14, 2011 in connection with the employment agreement with Mr. Lovette. Restrictions on fifty percent of these shares will lapse on January 3, 2013 and restrictions on the remaining shares will lapse on January 3, 2014, subject to Mr. Lovette’s continued employment with the Company through the applicable vesting date. The $1.4 million fair value of the shares as of the grant date was determined by multiplying the number of shares granted by the closing market price of the Company’s common stock on the grant date. Assuming no forfeiture of shares, the Company will recognize share-based compensation expense of $0.7 million ratably from January 14, 2011 to January 3, 2013. The Company will also recognize share-based compensation expense of $0.7 million ratably from January 14, 2011 to January 3, 2014. During both the thirteen weeks ended March 25, 2012 and March 27, 2011, the Company recognized share-based compensation expense totaling $0.1 million.
Anti-dilutive Common Stock Equivalents
Due to the net loss incurred in the thirteen weeks ended March 27, 2011, the Company did not include 15,240 common stock equivalents in the calculation of the denominator used for net loss per weighted average diluted common share outstanding as these common stock equivalents would be anti-dilutive.
Restrictions on Retained Earnings
The U.S. Credit Facility prohibits us from paying dividends on the common stock of the Company. Further, the indenture governing the 2018 Notes restricts, but does not prohibit, the Company from declaring dividends.
14.     RELATED PARTY TRANSACTIONS
On December 28, 2009, JBS USA became the holder of the majority of the common stock of the Company. Lonnie A. “Bo” Pilgrim and certain entities related to Mr. Pilgrim collectively owned the second-largest block of Pilgrim’s common stock. On March 12, 2012, Mr. Pilgrim and certain entities related to Mr. Pilgrim entered into an agreement to sell 18,924,438 shares of the Company's common stock to JBS USA. This agreement closed on March 26, 2012. The transaction increased JBS USA's beneficial ownership of the Company's common stock to 75.3%. Mr. Pilgrim served as the Founder Director of the Company until he resigned on March 12, 2012.
Transactions with a JBS USA subsidiary and the former Founder Director are summarized below:
 
Thirteen Weeks Ended
 
March 25,
2012
 
March 27,
2011
 
(In thousands)
JBS USA, LLC:
 
 
 
Purchases from JBS USA, LLC
$
14,729

 
$
40,046

Expenditures paid by JBS USA, LLC on behalf of Pilgrim’s Pride Corporation(a)
15,325

 
7,869

Sales to JBS USA, LLC
58,142

 
23,734

Expenditures paid by Pilgrim’s Pride Corporation on behalf of JBS USA, LLC(a)
1,124

 
171

Former Founder Director:
 
 
 
Contract grower compensation paid to former Founder Director
297

 
300

Consulting fee paid to former Founder Director(b)
374

 
374

Board fees paid to former Founder Director(b)
45

 
37

Sales to former Founder Director
1

 
1

(a)
On January 19, 2010, the Company entered into an agreement with JBS USA, LLC in order to allocate costs associated with JBS USA, LLC’s procurement of SAP licenses and maintenance services for its combined companies. Under this agreement, the fees associated with procuring SAP licenses and maintenance services are allocated between the Company and JBS USA, LLC in proportion to the percentage of licenses used by each company. The agreement expires on the date of expiration, or earlier termination, of the underlying SAP license agreement. On May 5, 2010, the Company also entered into an agreement with JBS USA, LLC in order to allocate the costs of supporting the business operations by one consolidated corporate team, which have historically been supported by their respective corporate teams. Expenditures paid by JBS USA, LLC on behalf of the Company will be reimbursed by the Company and expenditures paid by the Company on behalf of JBS USA, LLC will be reimbursed by JBS USA, LLC. This agreement expires on May 5, 2015.
(b)
In connection with the Company’s plan of reorganization, the Company and the former Founder Director entered into a consulting agreement, which became effective on December 28, 2009. The terms of the consulting agreement include, among other things, that the former Founder Director (i) will provide services to the Company that are comparable in the aggregate with the services provided by him to the Company prior to December 28, 2009, (ii) will be appointed to the Board of Directors of the Company and during the term of the consulting agreement will be nominated to serve subsequent terms as Founder Director, (iii) will be compensated for services rendered to the Company at a rate of $1.5 million per year for a term of five years, (iv) will be subject to customary non-solicitation and non-competition provisions and (v) will be, along with his spouse, provided with medical benefits (or will be

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Table of Contents

compensated for medical coverage) that are comparable in the aggregate to the medical benefits afforded to employees of the Company. As a result of Mr. Pilgrim's resignation as Founder Director on March 12, 2012, the Company is no longer required to nominate Mr. Pilgrim to serve subsequent terms as Founder Director during the remaining term of the consulting agreement.
As of March 25, 2012 and December 25, 2011, the outstanding payable to JBS USA, LLC was $8.3 million and $11.7 million, respectively. As of March 25, 2012 and December 25, 2011, the outstanding receivable from JBS USA, LLC was $19.4 million and $21.2 million, respectively. As of March 25, 2012, approximately $3.9 million of goods from JBS USA, LLC were in transit and not reflected on our Condensed Consolidated Balance Sheet.
The Company is party to grower contracts involving farms owned by the former Founder Director that provide for the placement of Company-owned flocks on these farms during the grow-out phase of production. These contracts are on terms substantially the same as contracts executed by the Company with unaffiliated parties. The former Founder Director can terminate the contracts upon completion of the grow-out phase for each flock. The Company can terminate the contracts within a specified timeframe pursuant to newly-issued regulations by the Grain Inspection, Packers and Stockyards Administration of the U.S. Department of Agriculture.
The Company maintains depository accounts with a financial institution in which the former Founder Director is also a major stockholder. Fees paid to this bank during the thirteen weeks ended March 25, 2012 and March 27, 2011 were insignificant. The Company had account balances at this financial institution of approximately $1.5 million and $1.9 million at March 25, 2012 and December 25, 2011, respectively.
The former Founder Director has deposited $0.3 million with the Company as an advance on miscellaneous expenditures.
A son of the former Founder Director occasionally sells commodity feed products and a limited amount of other services to the Company. There were no significant purchases during the thirteen weeks ended March 25, 2012 and March 27, 2011. He also leases a small amount of land from the Company for an insignificant rental amount.
On March 2, 2011, the Company agreed to purchase the home of Bill Lovette, our Chief Executive Officer, in Arkansas on reasonable and customary commercial terms and at a purchase price not to exceed approximately $2.1 million. Consequently, Mr. Lovette transferred all of the rights and the Company assumed all obligations relative to the property for a purchase price of $2.1 million. His home has not yet been resold. The Company will be responsible for commissions and closing costs on the resale of the home.
On June 23, 2011, the Company entered into the Subordinated Loan Agreement with JBS USA. For additional information regarding the Subordinated Loan Agreement, see "Note 10. Long-Term Debt and Other Borrowing Arrangements."
JBS USA agreed to arrange for letters of credit to be issued on its account in the amount of $56.5 million to an insurance company serving the Company in order to allow that insurance company to return cash it held as collateral against potential workers compensation, auto and general liability claims. In return for providing this letter of credit, the Company will reimburse JBS USA for the letter of credit cost the Company would otherwise incur under its U.S. credit facility. The total costs accrued by the Company as of March 25, 2012 to reimburse JBS USA totaled $1.0 million.
15.
COMMITMENTS AND CONTINGENCIES
We are a party to many routine contracts in which we provide general indemnities in the normal course of business to third parties for various risks. Among other considerations, we have not recorded a liability for any of these indemnities as based upon the likelihood of payment, the fair value of such indemnities would not have a material impact on our financial condition, results of operations and cash flows.
The Company is subject to various legal proceedings and claims which arise in the ordinary course of business. In the Company’s opinion, it has made appropriate and adequate accruals for claims where necessary; however, the ultimate liability for these matters is uncertain, and if significantly different than the amounts accrued, the ultimate outcome could have a material effect on the financial condition or results of operations of the Company. For a discussion of the material legal proceedings and claims, see Part II, Item 1. “Legal Proceedings.” Below is a summary of some of these material proceedings and claims. The Company believes it has substantial defenses to the claims made and intends to vigorously defend these cases.
On December 1, 2008, Pilgrim’s and six of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the Northern District of Texas, Fort Worth Division. The cases were jointly administered under Case No. 08-45664. The Company emerged from Chapter 11 on December 28, 2009. The Company continues to work through the claims allowance process with respect to claims arising before December 28, 2009. The Company will be responsible to the extent those claims become allowed claims. The Company has resolved a majority of the claims filed against it through settlement or by Bankruptcy Court order. The claims resolution process continues for the remaining unresolved claims

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Table of Contents

and will continue until all claims are concluded. Unpaid amounts related to unresolved claims are classified in Accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets. During the thirteen weeks ended March 25, 2012 the Company did not make any payments to creditors to settle allowed claim amounts. During the thirteen weeks ended March 27, 2011, the Company paid creditors approximately $0.4 million to settle allowed claim amounts and interest accrued on those claim amounts. As of March 25, 2012, the following pre-petition obligations relating to claims not subject to litigation remain outstanding:
In thousands
 
Trade claims
$
251

Interest accrued on unpaid claims
28

Total pre-petition obligations
$
279

The Company is also the named defendant in several pre-petition lawsuits that, as of March 25, 2012, have not been resolved. Among the claims presently pending are claims brought against certain current and former directors, executive officers and employees of the Company, the Pilgrim’s Pride Administrative Committee and the Pilgrim’s Pride Pension Committee seeking unspecified damages under section 502 of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1132. These claims were brought by individual participants in the Pilgrim’s Pride Retirement Savings Plan, individually and on behalf of a putative class, alleging that the defendants breached fiduciary duties to plan participants and beneficiaries or otherwise violated ERISA. Although the Company is not a named defendant in these claims, our bylaws require us to indemnify our current and former directors and officers from any liabilities and expenses incurred by them in connection with actions they took in good faith while serving as an officer or director. In these actions the plaintiffs assert claims in excess of $35.0 million. The likelihood of an unfavorable outcome or the amount or range of any possible loss to the Company cannot be determined at this time.
Also, among the claims presently pending against the Company are two identical claims seeking unspecified damages, each brought by a stockholder, individually and on behalf of a putative class, alleging violations of certain antifraud provisions of the Securities Exchange Act of 1934. The court consolidated these cases into one matter. The parties have reached an agreement to settle this matter for $1.5 million, subject to court approval. A Stipulation of Settlement was filed on November 14, 2011. On January 23, 2012, the court issued an Order Preliminarily Approving Settlement, in which the court set a hearing date for the final approval of the settlement for May 1, 2012. If the case does not settle as expected, the defendants intend to defend vigorously against the merits of the action and any attempts by the lead plaintiff to certify a class action.

Other claims presently pending against the Company are claims seeking unspecified damages brought by current or former contract chicken growers who allege, along with other assertions, that the Company breached grower contracts and made false representations to induce the plaintiffs into building chicken farms and entering into chicken growing agreements with the Company. In the case styled Shelia Adams, et al. v. Pilgrim's Pride Corporation, on September 30, 2011, the trial court issued its findings of fact and conclusions of law stating that the Company violated section 192(e) of the Packers and Stockyards Act of 1921 by purportedly attempting to manipulate the price of chicken by idling the El Dorado, Arkansas complex and rejecting the El Dorado growers' contracts. The trial court awarded damages in the amount of $25.8 million. Afterward, the Company filed post-judgment motions attacking the trial court's findings of fact and conclusions of law, which, on December 28, 2011, were granted in part and resulted in a reduction of the damages award from $25.8 million to $25.6 million. On January 19, 2012, the Company appealed the findings of fact and conclusions of law and decision concerning the post-judgment motions to the United States Fifth Circuit Court of Appeals. The Company intends to vigorously pursue its appellate rights and defend against the underlying judgment. While the outstanding judgment is reasonably possible, the Company has recorded an estimated probable loss that is less than the outstanding judgment. The remaining growers' claims are now scheduled to be tried in the summer and fall of 2012. The Company intends to vigorously defend against these claims. Although the likelihood of financial loss related to the remaining growers' claims is reasonably possible, an estimate of potential loss cannot be determined at this time because of now conflicting legal authority, the factual nature of the various growers' individual claims, and a new judge who will preside over the remaining bench trials. There can be no assurances that other similar claims may not be brought against the Company.
The IRS has filed an amended proof of claim in the Bankruptcy Court pursuant to which the IRS asserts claims that total $74.7 million. We have filed in the Bankruptcy Court (i) an objection to the IRS' amended proof of claim, and (ii) a motion requesting the Bankruptcy Court to determine our U.S. federal tax liability pursuant to Sections 105 and 505 of the Bankruptcy Code. The objection and motion assert that the Company has no liability for the additional U.S. federal taxes that have been asserted for pre-petition periods by the IRS. The IRS has responded in opposition to our objection and motion. On July 8, 2010, the Bankruptcy Court granted our unopposed motion requesting that the Bankruptcy Court abstain from determining our federal tax liability. As a result, we intend to work with the IRS through the normal processes and procedures that are available to all taxpayers outside of bankruptcy (including the United States Tax Court (“Tax Court”) proceedings discussed below) to resolve the IRS' amended proof of claim.
In connection with the amended proof of claim, on May 26, 2010, we filed a petition in Tax Court in response to a Notice

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Table of Contents

of Deficiency that was issued to the Company as the successor in interest to Gold Kist. The Notice of Deficiency and the Tax Court proceeding relate to a loss that Gold Kist claimed for its tax year ended June 30, 2004. The matter is currently in litigation before the Tax Court.
On August 10, 2010, we filed two petitions in Tax Court. The first petition relates to three Notices of Deficiency that were issued to us with respect to our 2003, 2005 and 2007 tax years. The second petition relates to a Notice of Deficiency that was issued to us with respect to Gold Kist’s tax year ended June 30, 2005 and its short tax year ended September 30, 2005. Both cases are currently in litigation before the Tax Court.
We express no opinion as to the likelihood of an unfavorable outcome or the amount or range of any possible loss to us related to the above Tax Court cases. If adversely determined, the outcome could have a material effect on the Company’s operating results and financial position.
The Notices of Deficiency and the Tax Court proceedings discussed above cover the same tax years and the same amounts that were asserted by the IRS in its $74.7 million amended proof of claim that was filed in the Bankruptcy Court.
16.     SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
On December 15, 2010, the Company closed on the sale of $500.0 million of 7 7/8% Senior Notes due in 2018 (the “2018 Notes”). The 2018 Notes are unsecured obligations of the Company and are fully and unconditionally guaranteed on a senior unsecured basis by Pilgrim’s Pride Corporation of West Virginia, Inc., a wholly owned subsidiary of the Company (the “Guarantor”). In accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act of 1933, the following condensed consolidating financial statements present the financial position, results of operations and cash flows of the Company (referred to as “Parent” for the purpose of this note only) on a Parent-only basis, the Guarantor on a Guarantor-only basis, the combined non-Guarantor subsidiaries and elimination entries necessary to arrive at the information for the Parent, the Guarantor and non-Guarantor subsidiaries on a consolidated basis. Investments in subsidiaries are accounted for by the Company using the equity method for this presentation.
The tables below present the condensed consolidating balance sheets as of March 25, 2012 and December 25, 2011, the condensed consolidating statements of operations and cash flows for the thirteen weeks ended March 25, 2012 and March 27, 2011 based on the guarantor structure.




























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Table of Contents

CONDENSED CONSOLIDATING BALANCE SHEETS
March 25, 2012
 
 
 
Parent
 
Subsidiary
Guarantor
 
Subsidiary
Non-Guarantors
 
Eliminations/
Adjustments
 
Consolidation
 
 
(In thousands)
Cash and cash equivalents
 
$
24,129

 
$
—

 
$
23,441

 
$
—

 
$
47,570

Restricted cash and cash equivalents
 
—

 
—

 
4,684

 
—

 
4,684

Investment in available-for-sale securities
 
—

 
—

 
156

 
—

 
156

Trade accounts and other receivables, less allowance for doubtful accounts
 
302,877

 
1,632

 
46,323

 
—

 
350,832

Account receivable from JBS USA, LLC
 
19,406

 
—

 
—

 
—

 
19,406

Inventories
 
788,755

 
22,635

 
99,040

 
—

 
910,430

Income taxes receivable
 
60,112

 
—

 
4,614

 
(842
)
 
63,884

Current deferred tax assets
 
—

 
4,003

 
1,492

 
(5,495
)
 
—

Prepaid expenses and other current assets
 
22,834

 
156

 
17,598

 
—

 
40,588

Assets held for sale
 
34,185

 
—

 
16,035

 
—

 
50,220

Total current assets
 
1,252,298

 
28,426

 
213,383

 
(6,337
)
 
1,487,770

Investment in available-for-sale securities
 
—

 
—

 
591

 
—

 
591

Intercompany receivable
 
31,583

 
35,006

 
—

 
(66,589
)
 
—

Investment in subsidiaries
 
328,905

 
—

 
—

 
(328,905
)
 
—

Deferred tax assets
 
75,392

 
—

 
7

 
(4,300
)
 
71,099

Other long-lived assets
 
50,965

 
—

 
180,480

 
(180,000
)
 
51,445

Identified intangible assets, net
 
30,403

 
—

 
12,253

 
—

 
42,656

Property, plant and equipment, net
 
1,075,544

 
48,251

 
104,973

 
(3,888
)
 
1,224,880

Total assets
 
$
2,845,090

 
$
111,683

 
$
511,687

 
$
(590,019
)
 
$
2,878,441

Accounts payable
 
$
244,676

 
$
9,041

 
$
39,414

 
$
—

 
$
293,131

Account payable to JBS USA, LLC
 
8,339

 
—

 
—

 
—

 
8,339

Accrued expenses and other current liabilities
 
233,407

 
17,143

 
40,087

 
—

 
290,637

Income taxes payable
 
—

 
—

 
842

 
(842
)
 
—

Current deferred tax liabilities
 
83,809

 
—

 
1,014

 
(5,495
)
 
79,328

Current maturities of long-term debt
 
15,614

 
—

 
—

 
—

 
15,614

Total current liabilities
 
585,845

 
26,184

 
81,357

 
(6,337
)
 
687,049

Long-term debt, less current maturities
 
1,274,510

 
—

 
—

 
(25,000
)
 
1,249,510

Intercompany payable
 
—

 
—

 
66,589

 
(66,589
)
 
—

Deferred tax liabilities
 
—

 
4,003

 
297

 
(4,300
)
 
—

Other long-term liabilities
 
287,039

 
—

 
12,867

 
(155,000
)
 
144,906

Total liabilities
 
2,147,394

 
30,187

 
161,110

 
(257,226
)
 
2,081,465

Total Pilgrim’s Pride Corporation stockholders’ equity
 
697,696

 
81,496

 
347,334

 
(332,793
)
 
793,733

Noncontrolling interest
 
—

 
—

 
3,243

 
—

 
3,243

Total stockholders’ equity
 
697,696

 
81,496

 
350,577

 
(332,793
)
 
796,976

Total liabilities and stockholders’ equity
 
$
2,845,090

 
$
111,683

 
$
511,687

 
$
(590,019
)
 
$
2,878,441


















22
Table of Contents

CONDENSED CONSOLIDATING BALANCE SHEETS
December 25, 2011

 
 
Parent
 
Subsidiary
Guarantor
 
Subsidiary
Non-Guarantors
 
Eliminations/
Adjustments
 
Consolidation
 
 
(In thousands)
Cash and cash equivalents
 
$
13,733

 
$
30

 
$
27,846

 
$
—

 
$
41,609

Restricted cash and cash equivalents
 
—

 
—

 
7,680

 
—

 
7,680

Investment in available-for-sale securities
 
—

 
—

 
157

 
—

 
157

Trade accounts and other receivables, less allowance for doubtful accounts
 
302,809

 
1,575

 
44,838

 
—

 
349,222

Account receivable from JBS USA, LLC
 
21,198

 
—

 
—

 
—

 
21,198

Inventories
 
766,227

 
21,144

 
91,723

 
—

 
879,094

Income taxes receivable
 
62,160

 
—

 
528

 
(3,621
)
 
59,067

Current deferred tax assets
 
—

 
4,003

 
1,478

 
(5,481
)
 
—

Prepaid expenses and other current assets
 
35,877

 
87

 
16,386

 
—

 
52,350

Assets held for sale
 
37,754

 
—

 
16,062

 
—

 
53,816

Total current assets
 
1,239,758

 
26,839

 
206,698

 
(9,102
)
 
1,464,193

Investment in available-for-sale securities
 
—

 
—

 
497

 
—

 
497

Intercompany receivable
 
50,064

 
33,978

 
—

 
(84,042
)
 
—

Investment in subsidiaries
 
304,395

 
—

 
—

 
(304,395
)
 
—

Deferred tax assets
 
75,392

 
—

 
7

 
(4,300
)
 
71,099

Other long-lived assets
 
57,460

 
—

 
180,461

 
(180,000
)
 
57,921

Identified intangible assets, net
 
31,384

 
—

 
12,699

 
—

 
44,083

Property, plant and equipment, net
 
1,090,376

 
49,336

 
105,928

 
(3,888
)
 
1,241,752

Total assets
 
$
2,848,829

 
$
110,153

 
$
506,290

 
$
(585,727
)
 
$
2,879,545

Accounts payable
 
$
270,538

 
$
13,033

 
$
45,293

 
$
—

 
$
328,864

Account payable to JBS USA, LLC
 
11,653

 
—

 
—

 
—

 
11,653

Accrued expenses and other current liabilities
 
226,016

 
17,193

 
38,588

 
—

 
281,797

Income taxes payable
 
—

 
—

 
3,621

 
(3,621
)
 
—

Current deferred tax liabilities
 
83,795

 
—

 
934

 
(5,481
)
 
79,248

Current maturities of long-term debt
 
15,611

 
—

 
—

 
—