INCENTIVE COMPENSATION

12 Months Ended

Dec. 29, 2019

Share-based Payment Arrangement [Abstract]

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 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. As of December 29, 2019, the Company has accrued $32.9 million, $1.3 million, $3.8 million and $3.9 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. As of December 29, 2019, we have in reserve approximately 3.3 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 became effective as of December 28, 2019.

The following awards were outstanding during 2019:

Award Type

Benefit Plan

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

LTIP

410,000

02/14/2018

Stock

25.59

Service

01/01/2019

—

RSU

LTIP

163,764

03/01/2018

Stock

24.93

Service

(a)

45,755

RSU

LTIP

250,351

03/01/2018

Stock

24.93

Performance / Service

(b)

151,229

RSU

LTIP

33,174

03/01/2018

Cash

24.93

32.97

Performance / Service

(c)

—

RSU

LTIP

8,358

05/10/2018

Stock

21.54

Service

(d)

—

RSU

LTIP

2,786

05/10/2018

Cash

21.54

26.86

Service

05/01/2019

—

RSU

LTIP

262,500

12/18/2018

Stock

16.06

Service

07/01/2019

—

RSU

LTIP

396,763

01/07/2019

Stock

16.47

Performance / Service

(e)

92,075

RSU

LTIP

109,654

01/07/2019

Cash

16.47

32.97

Performance / Service

(f)

—

RSU

LTIP

200,000

04/30/2019

Stock

26.91

Service

07/01/2020

—

RSU

LTIP

11,170

05/24/2019

Stock

27.86

Service

(d)

—

RSU

LTIP

470,000

04/30/2019

Stock

26.91

Performance

(g)

—


(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 $32.97 per share on December 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 $5.0 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.

(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 $3.6 million based on a closing stock price for the Company's common stock of $32.97 per share on December 29, 2019. Compensation cost will be amortized to profit/loss upon satisfaction of the performance conditions over the remaining vesting period.

(g)

If performance conditions related to the Company's 2019 free cash flow results are satisfied, the restricted stock units vest in ratable tranches on July 1, 2022, July 1 2023, and July 1, 2024. Expected compensation cost related to these units totals $6.3 million based on a closing price for the Company's common stock of $26.91 per share on April 30, 2019. Compensation cost will be amortized to profit/loss upon satisfaction of the performance conditions over the remaining vesting period. Currently, management assumes a 50% probability that the performance conditions will be satisfied.

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



	2019		2018		2017
	(In thousands)
Equity-based awards compensation cost:
Cost of sales	$	461	$	389	$	256
Selling, general and administrative expense	9,671		12,764		2,763
Total cost	10,132		13,153		3,019
Income tax benefit	2,466		3,202		1,006
Net cost	$	7,666	$	9,951	$	2,013

Liability-based awards compensation cost:
Selling, general and administrative expense	$	671	$	—	$	—
Income tax benefit	163		—		—
Net cost	$	508	$	—	$	—

The Company’s RSU activity is included below:



	2019				2018				2017
	Number		Weighted Average Milestone Date Fair Value^(a)		Number		Weighted Average Milestone Date Fair Value^(a)		Number		Weighted Average Milestone Date Fair Value^(a)
	(In thousands, except weighted average fair values)
Equity-based RSUs:
Outstanding at beginning of period	1,069		$	22.97	389		$	18.39	906		$	20.00
Transferred to liability-based awards	(36	)	24.67		—		—		—		—
Granted	843		22.01		1,114		23.05		461		18.72
Vested	(723	)	22.08		—		—		(714	)	18.09
Forfeited	(227	)	21.51		(434	)	19.06		(264	)	25.33
Outstanding at end of period	926		$	24.04	1,069		$	22.97	389		$	18.39



	2019				2018			2017
	Number		Weighted Average Milestone Date Fair Value^(a)		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	—		$	—	—	$	—	—	$	—
Transferred from equity-based awards	36		14.77
Granted	110		16.47		—	—		—	—
Vested	(3	)	26.86		—	—		—	—
Forfeited	—		—		—	—		—	—
Outstanding at end of period	143		$	32.97	—	$	—	—	$	—


(a)	The milestone date fair value is either the closing price of the Company’s common stock on the grant date for equity-based awards or the closing price of a share of the Company's common stock on the respective milestone date for cash-based liability-based awards (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 2019 were $14.0 million and $0.1 million, respectively. No awards vested during 2018.

As of December 29, 2019, the total unrecognized compensation cost related to all nonvested equity-based awards was $13.5 million. This cost is expected to be recognized over a weighted average period of 1.40 years. As of December 29, 2019, the total unrecognized compensation cost related to all nonvested liability-based awards was $3.0 million. This cost is expected to be recognized over a weighted average period of 2.28 years.

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