14. Related Party Transactions

3 Months Ended

Mar. 25, 2012

14. RELATED PARTY TRANSACTIONS [Abstract]

Related Party Transactions Disclosure [Text Block]

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 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.