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Pension And Other Postretirement Benefits
12 Months Ended
Dec. 25, 2011
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]  
Pension And Other Postretirement Benefits
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, and defined contribution retirement savings plans. Under all of our retirement plans, the Company’s expenses were $7.9 million, $9.4 million, $2.2 million, and $10.1 million in 2011, 2010, the Transition Period and 2009, respectively.
The Company used a year-end measurement date of December 25, 2011 for its pension and postretirement benefits plans. Certain disclosures are listed below. Other disclosures are not material to the financial statements.
Qualified Defined Benefit Pension Plans
The Company sponsored three qualified defined benefit pension plans:
 
The Pilgrim’s Pride Retirement Plan for Union Employees (the “Union Plan”),
The Pilgrim’s Pride Retirement Plan for El Dorado Union Employees (the “El Dorado” Plan), and
The Pilgrim’s Pride Pension Plan for Legacy Gold Kist Employees (the “GK Pension Plan”).
The Union Plan covers certain locations or work groups within PPC. The El Dorado Plan was spun off from the Union Plan effective January 1, 2008 and covered certain eligible locations or work groups within the Company. This plan was settled in 2010. The GK Pension Plan covers certain eligible US employees who were employed at locations that the Company purchased through its acquisition of Gold Kist in 2007. Participation in the GK Pension Plan was frozen as of February 8, 2007, for all participants with the exception of terminated vested participants who are or may become permanently and totally disabled. The plan was frozen for that group as of March 31, 2007.
Nonqualified Defined Benefit Pension Plans
The Company sponsored two nonqualified defined benefit retirement plans:
 
The Former Gold Kist Inc. Supplemental Executive Retirement Plan (the “SERP Plan”), and
The Former Gold Kist Inc. Directors’ Emeriti Retirement Plan (the “Directors’ Emeriti Plan”).
 
Pilgrim’s Pride assumed sponsorship of the SERP Plan and Directors’ Emeriti Plan through its acquisition of Gold Kist in 2007. The SERP Plan provides benefits on compensation in excess of certain Internal Revenue Code limitations to certain former executives with whom Gold Kist negotiated individual agreements. Benefits under the SERP Plan were frozen as of February 8, 2007. The Directors’ Emeriti Plan provides benefits to former Gold Kist directors.
Defined Benefit Postretirement Life Insurance Plan
The Company currently sponsors one defined benefit postretirement life insurance plan named the Gold Kist Inc. Retiree Life Insurance Plan (the “Insurance Plan”).
Pilgrim’s Pride also assumed defined benefit postretirement medical and life insurance obligations, including the Insurance Plan, through its acquisition of Gold Kist in 2007. In January 2001, Gold Kist began to substantially curtail its programs for active employees. On July 1, 2003, Gold Kist terminated medical coverage for retirees age 65 or older, and only retired employees in the closed group between ages 55 and 65 could continue their coverage at rates above the average cost of the medical insurance plan for active employees. These retired employees will all reach the age of 65 by 2012 and liabilities of the postretirement medical plan will then end.
















Defined Benefit Plans Obligations and Assets
The following tables provide reconciliations of the changes in the plans’ projected benefit obligations and fair value of assets as well as statements of the funded status, balance sheet reporting and economic assumptions for these plans:
 
Pension Benefits
 
Other Benefits
 
2011
 
2010
 
2011
 
2010
Change in projected benefit obligation:
(In thousands)
Projected benefit obligation, beginning of year
$
155,653

 
$
161,607

 
$
2,127

 
$
2,114

Service cost
173

 
165

 

 

Interest cost
8,213

 
8,659

 
112

 
115

Actuarial losses (gains)
12,072

 
6,675

 
(170
)
 
3

Benefits paid
(8,180
)
 
(6,306
)
 
(108
)
 
(105
)
Curtailments and settlements

 
(15,147
)
 

 

Projected benefit obligation, end of year
$
167,931

 
$
155,653

 
$
1,961

 
$
2,127


 
Pension Benefits
 
Other Benefits
 
2011
 
2010
 
2011
 
2010
Change in plan assets:
(In thousands)
Fair value of plan assets, beginning of year
$
84,863

 
$
85,690

 
$

 
$

Actual return on plan assets
(3,247
)
 
11,332

 

 

Contributions by employer
7,757

 
9,817

 
108

 
105

Benefits paid
(8,180
)
 
(6,306
)
 
(108
)
 
(105
)
Curtailments and settlements

 
(15,670
)
 

 

Fair value of plan assets, end of year
$
81,193

 
$
84,863

 
$

 
$

 
 
 
 
 
 
 
 
 
Pension Benefits
 
Other Benefits
 
2011
 
2010
 
2011
 
2010
Funded status:
(In thousands)
Funded status
$
(86,738
)
 
$
(70,790
)
 
$
(1,961
)
 
$
(2,127
)
Unrecognized prior service cost

 
19

 

 

Unrecognized net actuarial loss (gain)
31,108

 
9,708

 
(217
)
 
(47
)
Accrued benefit cost
$
(55,630
)
 
$
(61,063
)
 
$
(2,178
)
 
$
(2,174
)
 
 
 
 
 
 
 
 
 
Pension Benefits
 
Other Benefits
 
2011
 
2010
 
2011
 
2010
Amounts recognized in the balance sheets:
(In thousands)
Accrued benefit cost (current)
$
(10,993
)
 
$
(12,820
)
 
$
(166
)
 
$
(183
)
Accrued benefit cost (long-term)
(75,745
)
 
(57,970
)
 
(1,795
)
 
(1,944
)
Accumulated other comprehensive loss (income)
31,108

 
9,727

 
(217
)
 
(47
)
Net amount recognized
$
(55,630
)
 
$
(61,063
)
 
$
(2,178
)
 
$
(2,174
)
The accumulated benefit obligation for all defined benefit plans was $169.8 million and $157.8 million at December 25, 2011 and December 26, 2010, respectively. All of the Company’s defined benefit plans had an accumulated benefit obligation in excess of plan assets at December 25, 2011 and December 26, 2010.
 

Net Periodic Benefit Cost (Income)
The following table provides the components of net periodic benefit cost (income) for the plans:
 
 
Pension Benefits
 
Other Benefits
 
2011
 
2010
 
Transition Period
 
2009
 
2011
 
2010
 
Transition Period
 
2009
 
(In thousands)
Service cost
$
173

 
$
165

 
$
166

 
$
672

 
$

 
$

 
$

 
$

Interest cost
8,213

 
8,659

 
2,198

 
8,899

 
112

 
115

 
32

 
135

Estimated return on plan
    assets
(6,177
)
 
(6,117
)
 
(1,547
)
 
(6,781
)
 

 

 

 

Curtailment loss
16

 
36

 

 

 

 

 

 

Settlement loss (gain)

 
1,504

 
78

 

 

 

 

 
(60
)
Amortization of prior service
    cost
3

 
3

 
2

 
61

 

 

 

 

Amortization of net loss (gain)
96

 
1

 
(420
)
 
(2,227
)
 

 

 
(2
)
 
(49
)
Effect of special events

 

 

 
410

 

 

 

 

Net periodic benefit cost
$
2,324

 
$
4,251

 
$
477

 
$
1,034

 
$
112

 
$
115

 
$
30

 
$
26

Economic Assumptions
The following table presents the assumptions used in determining the benefit obligations:
 
Pension Benefits
 
Other Benefits
 
2011
 
2010
 
2011
 
2010
Discount rate
5.09
%
 
5.50
%
 
5.09
%
 
5.50
%
Rate of increase in compensation levels
3.00
%
 
3.00
%
 
NA

 
NA

The decrease in discount rate resulted in an increase in pension benefit obligation of $12.0 million.
The following table presents the assumptions used in determining the net periodic benefit cost amounts:
 
Pension Benefits
 
Other Benefits
 
2011
 
2010
 
Transition Period
 
2009
 
2011
 
2010
 
Transition Period
 
2009
Discount rate
5.50
%
 
5.69
%
 
5.47
%
 
7.42
%
 
5.50
%
 
5.69
%
 
6.98
%
 
7.53
%
Rate of increase in
    compensation levels
3.00
%
 
3.00
%
 
3.00
%
 
3.00
%
 
NA

 
NA

 
NA

 
NA

Expected return on plan assets
7.75
%
 
7.67
%
 
7.65
%
 
7.77
%
 
NA

 
NA

 
NA

 
NA

The expected rate of return on plan assets was determined based on the current interest rate environment and historical market premiums relative to the fixed income rates of equities and other asset classes. We also take into consideration anticipated asset allocations, investment strategies and the views of various investment professionals when developing this rate.
 






Plan Assets
The following table reflects the pension plans’ actual asset allocations:
 
2011
 
2010
Cash and money market funds
%
 
1
%
Equity securities
71
%
 
72
%
Debt securities
29
%
 
27
%
Total assets
100
%
 
100
%
Absent regulatory or statutory limitations, the target asset allocation for the investment of the assets for our ongoing pension plans is 30% in debt securities and 70% in equity securities. The plans only invest in debt and equity instruments for which there is a ready public market. We develop our expected long-term rate of return assumptions based on the historical rates of returns for equity and debt securities of the type in which our plans invest.
The fair value measurements of plan assets fell into the following levels of the fair value hierarchy as of December 25, 2011:
 
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In thousands)
Equity securities
$

 
$
57,495

 
$

 
$
57,495

Debt securities

 
23,698

 

 
23,698

Total
$

 
$
81,193

 
$

 
$
81,193

The valuation of plan assets 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 equity and fixed income securities funds.
 
Benefit Payments
The following table reflects the benefits as of December 25, 2011 expected to be paid in each of the next five years and in the aggregate for the five years thereafter from our pension and other postretirement plans. Because our pension plans are primarily funded plans, the anticipated benefits with respect to these plans will come primarily from the trusts established for these plans. Because our other postretirement plans are unfunded, the anticipated benefits with respect to these plans will come from our own assets.
 
 
Pension Benefits
 
Other Benefits
 
(In thousands)
2012
$
10,993

 
$
166

2013
10,796

 
169

2014
10,667

 
170

2015
10,250

 
171

2016
10,368

 
171

2017-2021
49,860

 
817

Total
$
102,934

 
$
1,664


We anticipate contributing $9.9 million and $0.2 million to our pension and other postretirement plans, respectively, during 2012.
Unrecognized Benefit Amounts in Accumulated Other Comprehensive Loss (Income)
The amounts in accumulated other comprehensive income (loss) that were not recognized as components of net periodic benefits cost and the changes in those amounts are as follows:
 
 
Pension Benefits
 
Other Benefits
 
2011
 
2010
 
2011
 
2010
 
(In thousands)
Net actuarial loss (gain)
$
31,108

 
$
9,708

 
$
(217
)
 
$
(47
)
Net prior service cost

 
19

 

 

Total
$
31,108

 
$
9,727

 
$
(217
)
 
$
(47
)
 
 
Pension Benefits
 
Other Benefits
 
2011
 
2010
 
Transition Period
 
2009
 
2011
 
2010
 
Transition Period
 
2009
 
(In thousands)
Net actuarial loss
  (gain), beginning
   of period
$
9,708

 
$
10,017

 
$
19,967

 
$
(30,714
)
 
$
(47
)
 
$
(50
)
 
$
14

 
$
(670
)
Amortization
(96
)
 
(1
)
 
(612
)
 
2,227

 

 

 
(2
)
 
49

Curtailment and 
  settlement
  adjustments

 
(1,768
)
 
(78
)
 
(410
)
 

 

 

 
60

Actuarial loss
  (gain)
12,072

 
6,675

 
(12,444
)
 
43,362

 
(170
)
 
3

 
(62
)
 
270

Asset loss (gain)
9,424

 
(5,215
)
 
3,184

 
6,193

 

 

 

 

Other

 

 

 
(691
)
 

 

 

 
305

Net actuarial loss
  (gain), end of
  period
$
31,108

 
$
9,708

 
$
10,017

 
$
19,967

 
$
(217
)
 
$
(47
)
 
$
(50
)
 
$
14

Net prior service
  cost, beginning of
  period
$
19

 
$
58

 
$
60

 
$
121

 
$

 
$

 
$

 
$

Amortization
(19
)
 
(39
)
 
(2
)
 
(61
)
 

 

 

 

Net prior service
  cost, end of
  period
$

 
$
19

 
$
58

 
$
60

 
$

 
$

 
$

 
$

The Company expects to recognize in net periodic benefit cost throughout 2012 a pension benefits actuarial loss of $1.7 million that was recorded in accumulated other comprehensive income at December   25, 2011.
Defined Contribution Plans
The Company currently sponsors two defined contribution retirement savings plans:
The Pilgrim’s Pride Retirement Savings Plan (the “RS Plan”), a Section 401(k) salary deferral plan, and
The To-Ricos Employee Savings and Retirement Plan (the “To-Ricos Plan”), a Section 1165(e) salary deferral plan.
Under the RS Plan, eligible US employees may voluntarily contribute a percentage of their compensation. The Company matches up to 30.0% of the first 2.14% to 6.00% of salary based on the salary deferral and compensation levels up to $245,000. The Company’s expenses related to contributions to the RS Plan totaled $5.5 million, $4.5 million, $1.3 million and $5.9 million in 2011, 2010, the Transition Period and 2009, respectively. The To-Ricos Plan is maintained for certain eligible Puerto Rican employees. Under the To-Ricos Plan, eligible employees may voluntarily contribute a percentage of their compensation and there are various company matching provisions. During 2011, 2010, the Transition Period and 2009, the Company’s expenses related to contributions to the To-Ricos Plan were immaterial.
The Company also maintains three postretirement plans for eligible Mexico employees as required by Mexico law that primarily cover termination benefits. Separate disclosure of the Mexican plan obligations is not considered material.
 
Certain retirement plans that the Company 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.