EQUITY

Common Stock

Upon completion of the Merger, all outstanding shares of Smithfield were cancelled and the Company's shareholders received the Merger Consideration for each share of common stock held prior to the effective time of the Merger.

As a result of the Merger, all of the outstanding shares of Merger Sub were converted into 1,000 shares of common stock of the Company, no par value, and such shares are owned by a wholly-owned subsidiary of WH Group. There are no other shares of stock outstanding in the Company. See Note 2—Merger and Acquisitions for further information on the Merger.

Common Stock Repurchases

During fiscal 2013, we repurchased 19,068,079 shares of our common stock for $386.4 million, including related fees. The price of the repurchased shares was allocated among common stock, additional paid-in capital and retained earnings in our consolidated condensed balance sheet in accordance with applicable accounting guidance.

From June 2011 through the Merger Date, we repurchased 28,244,783 shares of our common stock for $575.9 million, including related commissions, at an average price of $20.38.

Preferred Stock

Prior to the Merger, we had 1,000,000 shares of $1.00 par value preferred stock authorized, none of which were issued. The board of directors was authorized to issue preferred stock in series and to fix, by resolution, the designation, dividend rate, redemption provisions, liquidation rights, sinking fund provisions, conversion rights and voting rights of each series of preferred stock. As a result of the Merger, we no longer have authorized shares of preferred stock.

Stock-Based Compensation

During fiscal 2009, we adopted the 2008 Incentive Compensation Plan (the Incentive Plan), which replaced the 1998 Stock Incentive Plan and provided for the issuance of non-statutory stock options and other awards to employees, non-employee directors and consultants.

Upon completion of the Merger, all then-outstanding stock-based compensation awards, whether vested or unvested, were converted into the right to receive the Merger Consideration, less the exercise price of such awards, if any. As a result, we made aggregate cash payments totaling $82.1 million to plan participants following the Merger, which were included as a component of the purchase price consideration. The Incentive Plan was discontinued as a result of the Merger.

Stock Options

Under the Incentive Plan, we granted options for periods not exceeding 10 years, which either cliff vested five years after the date of grant or vested ratably over a three-year period with an exercise price of not less than 100% of the fair market value of the common stock on the date of grant. Compensation expense for stock options was $1.2 million, $4.9 million, $6.1 million and $3.8 million for the Predecessor Period, fiscal year ended April 28, 2013, fiscal year ended April 29, 2012 and fiscal year ended May 1, 2011, respectively. The related income tax benefits recognized were $0.4 million, $1.8 million, $2.4 million and $1.5 million, for the Predecessor Period, fiscal year ended April 28, 2013, fiscal year ended April 29, 2012 and fiscal year ended May 1, 2011, respectively. There was no compensation expense capitalized as part of inventory or fixed assets during the fiscal year ended April 28, 2013, fiscal year ended April 29, 2012 and fiscal year ended May 1, 2011, respectively.

The fair value of each option granted was estimated on the date of grant using the Black-Scholes option pricing model. The expected annual volatility was based on the historical volatility of our stock and other factors. We used historical data to estimate option exercises and employee termination within the pricing model. The expected term of options granted represented the period of time that options were expected to be outstanding. The following table summarizes the assumptions made in determining the fair value of stock options granted in the fiscal years indicated:



	Fiscal Year Ended
	April 28, 2013		April 29, 2012		May 1, 2011
Expected annual volatility	57	%	55	%	54	%
Dividend yield	—	%	—	%	—	%
Risk free interest rate	0.52	%	1.11	%	1.62	%
Expected option life (years)	4		4		4

No stock options were granted during the Predecessor Period. The options granted in the fiscal year ended April 28, 2013, fiscal year ended April 29, 2012 and fiscal year ended May 1, 2011 were valued in separate tranches according to the expected life of each tranche. The above table reflects the weighted average risk free interest rate and expected option life of each tranche. The expected dividend yield was the same for all options granted in the fiscal year ended April 28, 2013, fiscal year ended April 29, 2012 and fiscal year ended May 1, 2011. We have never paid a cash dividend on our common stock.

The following table summarizes stock option activity under the Incentive Plan during the Predecessor Period:



	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in millions)
Outstanding as of April 28, 2013	2,858,153		$	22.34
Exercised	(139,040	)	$	22.54
Forfeited	(6,000	)	$	21.09
Outstanding as of September 26, 2013 ⁽¹⁾	2,713,113		$	22.33	3.9	$	31.6
Exercisable as of September 26, 2013	2,226,459		$	22.55	3.6	$	25.4

——————————————


⁽¹⁾	All options were canceled upon the Merger and the holders received cash of $34.00 per share, less the exercise price of the options.

The weighted average grant-date fair value of options granted during the fiscal year ended April 28, 2013, fiscal year ended April 29, 2012 and fiscal year ended May 1, 2011 was $8.92, $9.36 and $6.61, respectively. The total intrinsic value of options exercised during the fiscal year ended April 28, 2013, fiscal year ended April 29, 2012 and fiscal year ended May 1, 2011 was $2.4 million, $0.9 million and $0.4 million, respectively.

Performance Share Units

The Incentive Plan also provided for the issuance of performance share units (PSU) to reward employees for the achievement of performance goals. We granted PSUs that contained performance conditions, which required the achievement of specified financial and/or operational performance metrics. We also granted PSUs that contained market conditions, which required the achievement of certain stock price targets or the achievement of specified levels of shareholder return relative to other companies in our industry. PSUs generally vested over a required employee service period, which typically ranged from one to five years and closely matched the performance period. Each performance share unit represented and had a value equal to one share of our common stock. Payment of vested performance share units was generally in our common stock.

PSUs containing performance conditions were generally measured at fair value as if they were vested and issued on the grant date. The fair value of PSUs containing market conditions was estimated using a Monte Carlo simulation model, which simulated a range of possible future stock prices after incorporating assumptions about risk free rates, volatility and other relevant assumptions pertinent to the specific awards. The grant date fair value of performance share units was recognized as compensation expense over the requisite employee service period.

The following table summarizes performance share unit activity under the Incentive Plan during the the Predecessor Period. The number of awards granted and outstanding reflects the maximum number of share units that may vest under the awards.



	Number of Share Units
Outstanding as of April 28, 2013	1,212,567
Granted	519,000
Vested and issued	(377,933	)
Forfeited	(85,634	)
Outstanding as of September 26, 2013 ⁽¹⁾	1,268,000

——————————————


⁽¹⁾	All PSUs fully vested upon the Merger and the holders received $34.00 per unit.

The weighted average grant date fair value for PSUs granted in the Predecessor Period, fiscal year ended April 28, 2013, fiscal year ended April 29, 2012 and fiscal year ended May 1, 2011, was $33.70, $21.03, $20.63 and $17.57 per share unit, respectively. The total intrinsic value of PSUs converted into shares of our common stock and issued in the Predecessor Period, fiscal year ended April 28, 2013 and the fiscal year ended April 29, 2012 was $12.2 million, $10.9 million and $15.2 million, respectively. No PSUs were converted into shares of our common stock in the fiscal year ended May 1, 2011. Compensation expense for performance share units was $5.3 million, $8.1 million, $8.3 million and $7.5 million in the Predecessor Period, fiscal year ended April 28, 2013, fiscal year ended April 29, 2012 and fiscal year ended May 1, 2011, respectively. The related income tax benefits recognized were $1.9 million, $3.0 million, $3.2 million and $2.9 million for the Predecessor Period, fiscal year ended April 28, 2013, fiscal year ended April 29, 2012 and fiscal year ended May 1, 2011, respectively.

Executive Stock Purchase Plan (ESPP)

As part of the Incentive Plan, we maintained a non-qualified deferred compensation plan that permitted executive officers to voluntarily defer up to 25% of the payouts under their annual cash incentive awards in exchange for a performance award payable in the form of Company stock at such time in the future as elected by the officers, but not less than three years from the end of the performance period. As a result of the Merger, the Company will provide a 100% match to the officers' deferral in the form of cash, instead of restricted stock as prescribed under the Incentive Plan. The match is subject to three-year cliff vesting and will be forfeited if the officer voluntarily terminates employment before vesting.

The fair value of these restricted stock awards was generally measured as if they were vested and issued on the grant date. We granted 139,730 and 450,241 restricted stock units in the Predecessor Period and the fiscal year ended April 28, 2013, including the company match. There were no restricted stock units outstanding as of April 29, 2012. On the Merger Date, these units were converted into the right to receive cash and paid as merger consideration and/or deferred based on the payment option elected and the continuation of the match vesting period. The deferred amount of $6.5 million is included in other liabilities on the consolidated balance sheet and will be paid to participants as originally scheduled under the ESPP. This amount was included as a component of the purchase price consideration.

We recognized compensation expense of $0.8 million, $3.5 million and $4.9 million in the Predecessor Period, fiscal year ended April 28, 2013 and fiscal year ended April 29, 2012, respectively, related to restricted stock awards under the ESPP.

Call Spread Transactions

In connection with the issuance of the Convertible Notes (see Note 7—Debt), we entered into separate convertible note hedge transactions with respect to our common stock to minimize the impact of potential economic dilution upon conversion of the Convertible Notes, and separate warrant transactions.

We purchased call options in private transactions that permitted us to acquire up to approximately 17.6 million shares of our common stock at an initial strike price of $22.68 per share, subject to adjustment, for $88.2 million. In general, the call options allowed us to acquire a number of shares of our common stock initially equal to the number of shares of common stock issuable to the holders of the Convertible Notes upon conversion. These call options terminated upon the maturity of the Convertible Notes.

We also sold warrants in private transactions for total proceeds of approximately $36.7 million. The warrants permitted the purchasers to acquire up to approximately 17.6 million shares of our common stock at an initial exercise price of $30.54 per share, subject to adjustment.

In July 2013, we repaid the outstanding principal amount on our Convertible Notes totaling $400.0 million. As part of the settlement of the Convertible Notes, we delivered 3,894,476 shares of our common stock to the holders of the notes. Simultaneously, we exercised a call option, which we entered into in connection with the original issuance of the Convertible Notes, entitling us to receive 3,894,510 shares from the counter-parties. As a result, we retired 34 net shares of our common stock upon the settlement of the Convertible Notes.

In October 2013, we paid $79.4 million to holders of the warrants to unwind the contracts due to the change of control related to the Merger.

Stock Held in Trust

We maintain a non-qualified defined Supplemental Pension Plan (the Supplemental Plan) the purpose of which is to provide supplemental retirement income benefits for those eligible employees whose benefits under the tax-qualified plans are subject to statutory limitations. A grantor trust has been established for the purpose of satisfying the obligations under the plan. As of April 28, 2013, the Supplemental Plan held 2,616,687 shares of our common stock at an average cost of $23.75. The shares held by the Supplemental Plan were converted to cash as a result of the Merger.

As part of the Incentive Plan director fee deferral program, we purchased shares of our common stock on the open market for the benefit of the plan's participants. These shares were held in a rabbi trust until transferred to the participants. As of April 28, 2013, the rabbi trust held 330,180 shares of our common stock at an average cost of $20.17. The shares held by the rabbi trust were converted to cash as a result of the Merger.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) consists of the following:



	Successor			Predecessor
	December 29, 2013			April 28, 2013			April 29, 2012
	(in millions)
Foreign currency translation	$	27.3		$	(170.5	)	$	(159.4	)
Pension accounting	14.6			(427.9		)	(402.7		)
Hedge accounting	(2.9		)	(17.8		)	51.2
Accumulated other comprehensive income (loss)	$	39.0		$	(616.2	)	$	(510.9	)

Other Comprehensive Income (Loss)

The following tables present changes in the accumulated balances for each component of other comprehensive income (loss) and the related effects on net income of amounts reclassified out of other comprehensive income (loss).



	Successor									Predecessor
	September 27 - December 29, 2013									April 29 - September 26, 2013
	September 27 - December 29, 2013									April 29 - September 26, 2013
	Before Tax			Tax			After Tax			Before Tax			Tax			After Tax
	(in millions)
Foreign currency translation:
Translation adjustment arising during the period	$	29.6		$	(2.3	)	$	27.3		$	23.3		$	(6.4	)	$	16.9

Pension accounting:
Amortization of actuarial gains and prior service credits reclassified to cost of sales	8.5			(3.3		)	5.2			7.4			(2.9		)	4.5
Amortization of actuarial gains and prior service credits reclassified to SG&A	15.2			(5.8		)	9.4			17.4			(6.8		)	10.6

Hedge accounting:
Losses arising during the period	(2.3		)	0.9			(1.4		)	(26.6		)	10.3			(16.3		)
Gains reclassified to sales	(3.0		)	1.2			(1.8		)	(5.9		)	2.3			(3.6		)
(Gains) losses reclassified to cost of sales	0.9			(0.4		)	0.5			(23.6		)	9.2			(14.4		)
(Gains) losses reclassified to SG&A	(0.3		)	0.1			(0.2		)	0.3			—			0.3
Total other comprehensive income (loss)	$	48.6		$	(9.6	)	$	39.0		$	(7.7	)	$	5.7		$	(2.0	)



	Predecessor
	Fiscal Year Ended
	April 28, 2013									April 29, 2012									May 1, 2011
	Before Tax			Tax			After Tax			Before Tax			Tax			After Tax			Before Tax			Tax			After Tax
	(in millions)
Foreign currency translation:
Translation adjustment arising during the period	$	(12.5	)	$	1.4		$	(11.1	)	$	(185.7	)	$	25.9		$	(159.8	)	$	120.2		$	2.9		$	123.1

Pension accounting:
Amortization of actuarial losses and prior service credits reclassified to cost of sales	(12.3		)	4.8			(7.5		)	(90.8		)	35.3			(55.5		)	25.9			(9.6		)	16.3
Amortization of actuarial losses and prior service credits reclassified to SG&A	(28.8		)	11.1			(17.7		)	(211.8		)	82.3			(129.5		)	73.8			(27.5		)	46.3

Hedge accounting:
Gains (losses) arising during the period	53.3			(20.8		)	32.5			105.6			(42.6		)	63.0			144.9			(57.1		)	87.8
Gains (losses) reclassified to sales	(54.9		)	21.4			(33.5		)	(32.3		)	12.6			(19.7		)	44.5			(17.3		)	27.2
Gains reclassified to cost of sales	(108.4		)	42.1			(66.3		)	(75.1		)	29.2			(45.9		)	(80.7		)	31.4			(49.3		)
(Gains) losses reclassified to SG&A	(2.1		)	0.4			(1.7		)	4.1			(0.8		)	3.3			2.6			—			2.6
Losses reclassified to interest expense	—			—			—			2.4			—			2.4			7.0			(2.7		)	4.3
Total other comprehensive income (loss)	$	(165.7	)	$	60.4		$	(105.3	)	$	(483.6	)	$	141.9		$	(341.7	)	$	338.2		$	(79.9	)	$	258.3