INCENTIVE COMPENSATION

9 Months Ended

Sep. 29, 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 September 29, 2019, the Company has accrued $23.6 million, $1.3 million, $2.9 million and $1.6 million related to cash bonus awards that could potentially be awarded under the STIP, JFC LTIP, MPIP and PMIP, respectively.

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 liability-based awards to the Company’s officers and other employees, members of the Board of Directors and any consultants (the “LTIP”). 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”). Equity-based awards are converted into shares of the Company's common stock shortly after award vesting. Compensation cost to be recognized for an equity-based awards grant is determined by multiplying the number of awards granted by the closing price of a share of the Company's common stock on the award grant date. Liability-based awards granted under the LTIP are converted into cash shortly after award vesting. Compensation cost to be recognized for a liability-based awards grant is first determined by multiplying the number of awards granted by the closing price of a share of the Company's common stock on the award grant date. However, the compensation cost to be recognized is adjusted at each subsequent milestone date (i.e., forfeiture date, vesting date or financial reporting date) by multiplying the number of awards granted by the closing price of a share of the Company's common stock on the milestone date. At September 29, 2019, we have in reserve approximately 3.8 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 LTIP awards were outstanding during the thirty-nine weeks ended September 29, 2019:

Award Type

Awards Granted

Grant Date

Intended Settlement Method

Grant Date Fair Value
per Award

Milestone Date Fair Value per Award

Vesting Condition

Vesting Date

Awards Forfeited to Date

RSU

410,000

2/14/2018

Stock

25.59

Service

1/1/2019

—

RSU

163,764

3/1/2018

Stock

24.93

Service

(a)

45,755

RSU

250,351

3/1/2018

Stock

24.93

Performance / Service

(b)

151,229

RSU

33,174

3/1/2018

Cash

24.93

31.31

Performance / Service

(c)

—

RSU

8,358

5/10/2018

Stock

21.54

Service

(d)

—

RSU

2,786

5/10/2018

Cash

21.54

26.86

Service

5/1/2019

—

RSU

262,500

12/18/2018

Stock

16.06

Service

7/1/2019

—

RSU

396,763

1/7/2019

Stock

16.47

Performance / Service

(e)

92,075

RSU

109,654

1/7/2019

Cash

16.47

31.31

Performance / Service

(f)

—

RSU

200,000

4/30/2019

Stock

26.91

Service

7/1/2020

—

RSU

11,170

5/24/2019

Stock

27.86

Service

(d)

—


(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 $2.5 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)	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 $1.0 million based on a closing stock price for the Company's common stock of $31.31 per share on September 29, 2019. Compensation cost will be amortized to profit/loss over the remaining vesting period.


(d)	These restricted stock units were granted to the 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.

(e)

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 $5.1 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.

(f)

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 $3.4 million based on a closing stock price for the Company's common stock of $31.31 per share on September 29, 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				Thirty-Nine Weeks Ended
	September 29, 2019		September 30, 2018		September 29, 2019		September 30, 2018
	(In thousands)
Equity-based awards compensation cost:
Cost of sales	$	149	$	124	$	311	$	293
Selling, general and administrative expense	1,956		3,502		7,011		8,966
Total cost	2,105		3,626		7,322		9,259
Income tax benefit	512		883		1,782		2,254
Net cost	$	1,593	$	2,743	$	5,540	$	7,005

Liability-based awards compensation cost:
Selling, general and administrative expense	$	224	$	—	$	452	$	—
Income tax benefit	55		—		110		—
Net cost	$	169	$	—	$	342	$	—

The Company’s RSU activity is included below:



	Thirty-Nine Weeks Ended September 29, 2019				Thirty-Nine Weeks Ended September 30, 2018
	Number		Weighted Average Grant Date Fair Value		Number		Weighted Average Grant Date Fair Value
	(In thousands, except weighted average fair values)
Equity-based RSUs:
Outstanding at beginning of period	1,033		$	22.91	389		$	18.39
Granted	608		20.11		849		25.20
Vested	(721	)	22.08		—		—
Forfeited	(227	)	21.51		(427	)	18.97
Outstanding at end of period	693		21.79		811		25.22

	Thirty-Nine Weeks Ended September 29, 2019				Thirty-Nine Weeks Ended September 30, 2018
	Number		Weighted Average Milestone Date Fair Value(a)		Number		Weighted Average Milestone Date Fair Value(a)
	(In thousands, except weighted average fair values)
Liability-based RSUs:
Outstanding at beginning of period	—		$	—	—		$	—
Granted	146		16.25		—		—
Vested	(3	)	26.86		—		—
Outstanding at end of period	143		31.31		—		—


(a)	The milestone date fair value is the closing price of a share of the Company's common stock on the respective milestone date (i.e., grant date, vesting date, forfeiture date or financial reporting date).

The total fair values of equity-based awards and liability-based awards vested during the thirty-nine weeks ended September 29, 2019 were $14.0 million and $0.1 million, respectively. No awards vested during the thirty-nine weeks ended September 30, 2018.

At September 29, 2019, the total unrecognized compensation cost related to all nonvested equity-based awards was $10.0 million. This cost is expected to be recognized over a weighted average period of 1.62 years. At September 29, 2019, the

total unrecognized compensation cost related to all nonvested liability-based awards was $3.2 million. This cost is expected to be recognized over a weighted average period of 2.18 years.

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