INCENTIVE COMPENSATION

3 Months Ended

Mar. 31, 2019

The Company sponsors short-term incentive plans that provides the grant of either cash or share-based bonus awards payable upon achievement of specified performance goals. Full-time, salaried exempt employees of the Company's U.S. operations who are selected by the administering committee are eligible to participate in the Pilgrim's Short Term Incentive Plan (“STIP”). Certain full-time, salaried employees of the Company’s Mexico operations are eligible to participate in the Pilgrim’s Mexico Incentive Plan (“PMIP”). The Company assumed responsibility for the JFC LLC Long-Term Equity Incentive Plan dated January 1, 2014, as amended (the “JFC LTIP”) through its acquisition of JFC LLC and its subsidiaries (together, “GNP”) on January 6, 2017. The Company assumed responsibility for the Moy Park Incentive Plan dated January 1, 2013, as amended (the “MPIP”) through its acquisition of Moy Park on September 8, 2017. At March 31, 2019, the Company had accrued $8.7 million and $1.3 million in costs related to cash bonus awards that could potentially be awarded under the STIP and JFC LTIP, respectively, during 2019. At March 31, 2019, the Company had accrued no costs related to cash bonus awards that could potentially be awarded under either the PMIP or MPIP.

The Company also sponsors a performance-based, omnibus long-term incentive plan that provides for the grant of a broad range of long-term equity-based and cash-based awards to the Company’s officers and other employees, members of the Board of Directors and any consultants (the “LTIP”). The equity-based awards that may be granted under the LTIP include “incentive stock options,” within the meaning of the IRC, nonqualified stock options, stock appreciation rights, restricted stock awards and restricted stock units (“RSUs”). At March 31, 2019, we have reserved approximately 3.9 million shares of common stock for future issuance under the LTIP. The LTIP will expire pursuant to its terms on December 28, 2019 and no awards will be granted under the LTIP after that date. On May 1, 2019, the Company's stockholders approved the Pilgrim’s Pride Corporation 2019 Long Term Incentive Plan (the “2019 LTIP”) and reserved 2.0 million shares of common stock for awards under the plan. The 2019 LTIP is intended to replace the expiring plan. The 2019 LTIP will be effective as of December 28, 2019.

The following awards were outstanding during the thirteen weeks ended March 31, 2019:

Award Type

Benefit

Plan

Awards Granted

Grant

Date

Grant Date Fair Value per Award

Vesting Condition

Vesting Date

Vesting Date Fair Value per Award^(a)

Awards Forfeited to Date

Settlement Method

RSU

LTIP

410,000

02/14/2018

25.59

Service

01/01/2019

15.51

—

Stock

RSU

LTIP

163,764

03/01/2018

24.93

Service

(a)

15.51

45,755

Stock

RSU

LTIP

283,525

03/01/2018

24.93

Performance / Service

(b)

—

151,228

Stock

RSU

LTIP

11,144

05/10/2018

21.54

Service

(c)

—

Stock

RSU

LTIP

262,500

12/18/2018

16.06

Service

07/01/2019

—

Stock

RSU

LTIP

506,417

01/07/2019

16.47

Performance / Service

(d)

—

83,705

Stock


(a)	The restricted stock units vest in ratable tranches on December 31, 2018, December 31, 2019 and December 31, 2020. Expected compensation cost related to these units totals $2.9 million based on a closing stock price for the Company’s common stock of $24.93 per share on March 1, 2018. Compensation cost will be amortized to profit/loss over the remaining vesting period.


(b)	The restricted stock units vest in ratable tranches on December 31, 2019, December 31, 2020 and December 31, 2021. Expected compensation cost related to these units totals $3.3 million based on a closing stock price for the Company’s common stock of $24.93 per share on March 1, 2018. Compensation cost will be amortized to profit/loss over the remaining vesting period.


(c)	These restricted stock units were granted to the four non-employees who currently serve on the Company's Board of Directors. Each participating director's units will vest upon his departure from the Company's Board of Directors. Compensation cost was recognized in profit/loss upon the grant date.

(d)

If performance conditions related to the Company's 2019 operating results are satisfied, the restricted stock units vest in ratable tranches on December 31, 2020, December 31, 2021 and December 31, 2022. Expected compensation cost related to these units totals $7.0 million based on a closing stock price for the Company's common stock of $16.47 per share on January 7, 2019. Compensation cost will be amortized to profit/loss upon satisfaction of the performance conditions over the remaining vesting period.

Compensation costs and the income tax benefit recognized for our share-based compensation arrangements are included below:



	Thirteen Weeks Ended
	March 31, 2019		April 1, 2018
	(In thousands)
Share-based compensation cost:
Cost of sales	$	12	$	52
Selling, general and administrative expense	1,870		1,221
Total	$	1,882	$	1,273

Income tax benefit	$	458	$	310

The Company’s RSU activity is included below:



	Thirteen Weeks Ended March 31, 2019				Thirteen Weeks Ended April 1, 2018
	Number		Weighted Average Grant Date Fair Value		Number		Weighted Average Grant Date Fair Value
	(In thousands, except weighted average fair values)
Outstanding at beginning of period	1,069		$	22.97	389		$	18.39
Granted	506		16.47		708		25.19
Vested	(459	)	25.52		—		—
Forfeited	(218	)	21.70		(389	)	18.39
Outstanding at end of period	898		$	18.31	708		$	25.19

The fair value of awards that vested during the thirteen weeks ended March 31, 2019 was $7.1 million. No awards vested during the thirteen weeks ended April 1, 2018.

At March 31, 2019, the total unrecognized compensation cost related to all nonvested awards was $14.0 million. That cost is expected to be recognized over a weighted average period of 1.94 years.

Historically, we have issued new shares to satisfy award conversions.