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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  _______ to _______            
Commission File number 1-9273
  PPC-20200329_G1.JPG
PPC-20200329_G2.JPG
PILGRIM’S PRIDE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-1285071
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1770 Promontory Circle 80634-9038
Greeley CO
(Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code: (970) 506-8000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of Exchange on which Registered
Common Stock, Par Value $0.01 PPC The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ý Accelerated Filer   ¨
Non-accelerated Filer
¨ 
Smaller reporting company  
Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ý
Number of shares outstanding of the issuer’s common stock, $0.01 par value per share, as of April 29, 2020, was 246,737,862.




INDEX
PILGRIM’S PRIDE CORPORATION
Item 1.
2
2
3
4
5
6
7
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.

1


PART I.  FINANCIAL INFORMATION
ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 29, 2020 December 29, 2019
  (In thousands)
Cash and cash equivalents $ 511,183    $ 260,568   
Restricted cash and cash equivalents 25,234    20,009   
Trade accounts and other receivables, less allowance for
doubtful accounts
754,246    741,281   
Accounts receivable from related parties 743    944   
Inventories 1,362,358    1,383,535   
Income taxes receivable 53,495    60,204   
Prepaid expenses and other current assets 152,920    131,695   
Total current assets 2,860,179    2,598,236   
Deferred tax assets 4,443    4,426   
Other long-lived assets 34,511    36,325   
Identified intangible assets, net 568,183    596,053   
Goodwill 935,266    973,750   
Operating lease assets, net 286,606    301,513   
Property, plant and equipment, net 2,562,794    2,592,061   
Total assets $ 7,251,982    $ 7,102,364   
Accounts payable $ 915,663    $ 993,780   
Accounts payable to related parties 7,998    3,819   
Revenue contract liability 32,084    41,770   
Accrued expenses and other current liabilities 532,509    575,319   
Income taxes payable 1,951    7,075   
Current maturities of long-term debt 25,877    26,392   
Total current liabilities 1,516,082    1,648,155   
Noncurrent operating lease liability, less current maturities 219,860    235,382   
Long-term debt, less current maturities 2,620,907    2,276,029   
Noncurrent income taxes payable 7,731    7,731   
Deferred tax liabilities 309,471    301,907   
Other long-term liabilities 101,440    97,100   
Total liabilities 4,775,491    4,566,304   
Common stock 2,612    2,611   
Treasury stock (262,798)   (234,892)  
Additional paid-in capital 1,955,936    1,955,261   
Retained earnings 945,080    877,812   
Accumulated other comprehensive loss (174,917)   (75,129)  
Total Pilgrim’s Pride Corporation stockholders’ equity 2,465,913    2,525,663   
Noncontrolling interest 10,578    10,397   
Total stockholders’ equity 2,476,491    2,536,060   
Total liabilities and stockholders’ equity $ 7,251,982    $ 7,102,364   
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
2




PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
  Three Months Ended
  March 29, 2020 March 31, 2019
  (In thousands, except per share data)
Net sales $ 3,074,928    $ 2,724,675   
Cost of sales 2,897,829    2,505,736   
Gross profit 177,099    218,939   
Selling, general and administrative expense 92,713    81,924   
Administrative restructuring activity —    (27)  
Operating income 84,386    137,042   
Interest expense, net of capitalized interest 32,688    33,562   
Interest income (1,690)   (3,340)  
Foreign currency transaction loss (gain) (18,385)   2,636   
Miscellaneous, net (34,188)   (357)  
Income before income taxes 105,961    104,541   
Income tax expense 38,512    20,416   
Net income 67,449    84,125   
Less: Net income attributable to noncontrolling
interests
181    114   
Net income attributable to Pilgrim’s Pride Corporation $ 67,268    $ 84,011   
Weighted average shares of Pilgrim's Pride Corporation common stock outstanding:
Basic 249,347    249,167   
Effect of dilutive common stock equivalents 275    390   
Diluted 249,622    249,557   
Net income attributable to Pilgrim’s Pride Corporation
per share of common stock outstanding:
Basic $ 0.27    $ 0.34   
Diluted $ 0.27    $ 0.34   
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

3




PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended
March 29, 2020 March 31, 2019
(In thousands)
Net income $ 67,449    $ 84,125   
Other comprehensive income:
Foreign currency translation adjustment:
Gains (losses) arising during the period (96,765)   37,442   
Derivative financial instruments designated as cash
flow hedges:
Gains (losses) arising during the period 4,048    (898)  
Reclassification to net earnings for losses (gains) realized 742    (221)  
Available-for-sale securities:
Gains arising during the period 12    22   
Income tax effect (3)   (5)  
Reclassification to net earnings for gains realized —    (135)  
Income tax effect —    34   
Defined benefit plans:
Gains (losses) arising during the period (10,810)   3,200   
Income tax effect 2,705    (779)  
Reclassification to net earnings of losses realized 376    328   
Income tax effect (93)   (80)  
Total other comprehensive income (loss), net of tax (99,788)   38,908   
Comprehensive income (loss) (32,339)   123,033   
Less: Comprehensive income attributable to noncontrolling interests 181    114   
Comprehensive income (loss) attributable to Pilgrim's Pride Corporation $ (32,520)   $ 122,919   
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


4




PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
  Common Stock Treasury Stock Additional
Paid-in
Capital
Retained Earnings Accumulated
Other
Comprehensive
Loss
Noncontrolling
Interest
Total
  Shares Amount Shares Amount
  (In thousands)
Balance at December 29, 2019 261,119    $ 2,611    (11,547)   $ (234,892)   $ 1,955,261    $ 877,812    $ (75,129)   $ 10,397    $ 2,536,060   
Net income —    —    —    —    —    67,268    —    181    67,449   
Other comprehensive income, net of tax —    —    —    —    —    —    (99,788)   —    (99,788)  
Share-based compensation plans:
Common stock issued under compensation plans 66      —    —    (1)   —    —    —    —   
Requisite service period recognition —    —    —    —    676    —    —    —    676   
Common stock purchased under share repurchase program —    —    (1,466)   (27,906)   —    —    —    —    (27,906)  
Balance at March 29, 2020 261,185    $ 2,612    (13,013)   $ (262,798)   $ 1,955,936    $ 945,080    $ (174,917)   $ 10,578    $ 2,476,491   
Balance at December 31, 2018 260,396    $ 2,604    (11,431)   $ (231,994)   $ 1,945,136    $ 421,888    $ (127,834)   $ 9,785    $ 2,019,585   
Net income —    —    —    —    —    84,011    —    114    84,125   
Other comprehensive income, net of tax —    —    —    —    —    —    38,908    —    38,908   
Share-based compensation plans:
Common stock issued under compensation plans 459      —    —    (5)   —    —    —    —   
Requisite service period recognition —    —    —    —    1,882    —    —    —    1,882   
Balance at March 31, 2019 260,855    $ 2,609    (11,431)   $ (231,994)   $ 1,947,013    $ 505,899    $ (88,926)   $ 9,899    $ 2,144,500   
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
5




PILGRIM’S PRIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
  March 29, 2020 March 31, 2019
  (In thousands)
Cash flows from operating activities:
Net income $ 67,449    $ 84,125   
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization 79,773    67,182   
Deferred income tax expense (benefit) 17,023    (4,089)  
Negative adjustment to previously recognized gain on bargain purchase 1,740    —   
Loan cost amortization 1,212    1,201   
Share-based compensation 676    1,882   
Gain on property disposals (521)   (108)  
Loss (gain) on equity-method investments 309    (16)  
Accretion of discount related to Senior Notes 246    246   
Amortization of premium related to Senior Notes (167)   (167)  
Foreign currency transaction gain related to borrowing arrangements —    (1,034)  
Changes in operating assets and liabilities:
Trade accounts and other receivables (26,296)   2,381   
Inventories 9,333    (1,368)  
Prepaid expenses and other current assets (22,419)   (11,479)  
Accounts payable, accrued expenses and other current liabilities (108,004)   (21,968)  
Income taxes (16)   6,579   
Long-term pension and other postretirement obligations (6,282)   (1,315)  
Other operating assets and liabilities 7,008    (1,683)  
Cash provided by operating activities 21,064    120,369   
Cash flows from investing activities:
Acquisitions of property, plant and equipment (77,168)   (87,941)  
Purchase of acquired business, net of cash acquired (1,740)   —   
Proceeds from property disposals 632    539   
Cash used in investing activities (78,276)   (87,402)  
Cash flows from financing activities:
Proceeds from revolving line of credit and long-term borrowings 356,547    67,193   
Purchase of common stock under share repurchase program (27,906)   —   
Payments on revolving line of credit, long-term borrowings and finance lease obligations (13,396)   (62,293)  
Payment from equity distribution under Tax Sharing Agreement between JBS USA Food Company Holdings and Pilgrim’s Pride Corporation
—    (525)  
Payment of capitalized loan costs —    (458)  
Cash provided by financing activities 315,245    3,917   
Effect of exchange rate changes on cash and cash equivalents (2,193)   429   
Increase in cash, cash equivalents and restricted cash 255,840    37,313   
Cash, cash equivalents and restricted cash, beginning of period 280,577    361,578   
Cash, cash equivalents and restricted cash, end of period $ 536,417    $ 398,891   
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
6



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1. GENERAL
Business
Pilgrim’s Pride Corporation (referred to herein as “Pilgrim’s,” “PPC,” “the Company,” “we,” “us,” “our,” or similar terms) is one of the largest chicken producers in the world, with operations in the United States (“U.S.”), the United Kingdom (“U.K.”), Mexico, France, Puerto Rico and the Netherlands. Pilgrim’s products are sold to foodservice, retail and frozen entrée customers. The Company’s primary distribution is through retailers, foodservice distributors and restaurants throughout the countries listed above. Additionally, the Company exports chicken and pork products to approximately 100 countries. Pilgrim’s fresh products consist of refrigerated (nonfrozen) whole chickens, whole cut-up chickens, selected chicken parts that are either marinated or non-marinated, primary pork cuts, added value pork and pork ribs. The Company’s prepared products include fully cooked, ready-to-cook and individually frozen chicken parts, strips, nuggets and patties, some of which are either breaded or non-breaded and either marinated or non-marinated, processed sausages, bacon, slow-cooked, smoked meat and gammon joints. The Company’s other products include ready-to-eat meals, multi-protein frozen foods, vegetarian foods and desserts, pre-packed meats, sandwich, deli counter meats, pulled pork balls, meat balls and coated foods. As a vertically integrated company, we control every phase of the production of our products. We operate feed mills, hatcheries, processing plants and distribution centers in 14 U.S. states, the U.K., Mexico, France, Puerto Rico and the Netherlands. As of March 29, 2020, Pilgrim’s had approximately 53,300 employees and the capacity to process approximately 44.9 million birds per work week for a total of more than 13.0 billion pounds of live chicken annually. Approximately 4,800 contract growers supply poultry for the Company’s operations. As of March 29, 2020, Pilgrim's had 5,300 employees and the capacity to process more than 43,000 pigs per week for a total of 413.1 million pounds of live pork annually. Approximately 290 contract growers supply pork for the Company's operations. As of March 29, 2020, JBS S.A., through its indirect wholly-owned subsidiaries (together, “JBS”), beneficially owned 78.8% of the Company’s outstanding common stock.
Condensed Consolidated Financial Statements
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal and recurring adjustments unless otherwise disclosed) considered necessary for a fair presentation have been included. Operating results for the three months ended March 29, 2020 are not necessarily indicative of the results that may be expected for the year ending December 27, 2020. For further information, refer to the consolidated and combined financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 29, 2019.
The Company operates on the basis of a 52/53 week fiscal year ending on the Sunday falling on or before December 31. Any reference we make to a particular year (for example, 2020) in the notes to these Condensed Consolidated Financial Statements applies to our fiscal year and not the calendar year. The three months ended March 29, 2020 represents the period from December 30, 2019 through March 29, 2020. The three months ended March 31, 2019 represents the period from December 31, 2018 through March 31, 2019.
The Condensed Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries. We eliminate all significant affiliate accounts and transactions upon consolidation.
The Condensed Consolidated Financial Statements have been prepared in conformity with U.S. GAAP using management’s best estimates and judgments. These estimates and judgments affect the reported amounts of assets and liabilities and disclosure of the contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ materially from these estimates and judgments. Significant estimates made by the Company include the allowance for doubtful accounts, reserves related to inventory obsolescence or valuation, useful lives of long-lived assets, goodwill, valuation of deferred tax assets, insurance accruals, valuation of pension and other postretirement benefits obligations, income tax accruals, certain derivative positions and valuations of acquired businesses.
The functional currency of the Company's U.S. and Mexico operations and certain holding-company subsidiaries in Luxembourg, the U.K. and Ireland is the U.S. dollar. The functional currency of its U.K. operations is the British pound. The functional currency of the Company's operations in France and the Netherlands is the euro. For foreign currency-denominated
7


entities other than the Company's Mexico operations, translation from local currencies into U.S. dollars is performed for most assets and liabilities using the exchange rates in effect as of the balance sheet date. Income and expense accounts are remeasured using average exchange rates for the period. Adjustments resulting from translation of these financial records are reflected as a separate component of Accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets. For the Company's Mexico operations, remeasurement from the Mexican peso to U.S. dollars is performed for monetary assets and liabilities using the exchange rate in effect as of the balance sheet date. Remeasurement is performed for non-monetary assets using the historical exchange rate in effect on the date of each asset’s acquisition. Income and expense accounts are remeasured using average exchange rates for the period. Net adjustments resulting from remeasurement of these financial records, as well as foreign currency transaction gains and losses, are reflected in Foreign currency transaction loss (gain) in the Condensed Consolidated Statements of Income.
Restricted Cash
The Company is required to maintain cash balances with a broker as collateral for exchange traded futures contracts. These balances are classified as restricted cash as they are not available for use by the Company to fund daily operations. The balance of restricted cash may also include investments in U.S. Treasury Bills that qualify as cash equivalents, as required by the broker, to offset the obligation to return cash collateral.
The following table reconciles cash, cash equivalents and restricted cash as reported in the Condensed Consolidated Balance Sheets to the total of the same amounts shown in the Condensed Consolidated Statements of Cash Flows:
March 29, 2020 December 29, 2019
(In thousands)
Cash and cash equivalents $ 511,183    $ 260,568   
Restricted cash 25,234    20,009   
Total cash, cash equivalents and restricted cash shown in the
Condensed Consolidated Statements of Cash Flows
$ 536,417    $ 280,577   
Recent Accounting Pronouncements Adopted as of March 29, 2020
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which, in an effort to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments, replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual right to receive cash. The adoption of this guidance did not have a material impact on our financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, new accounting guidance to improve the effectiveness of disclosures related to fair value measurements. The new guidance removes certain disclosure requirements related to transfers between Level 1 and Level 2 of the fair value hierarchy along with the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements. Additions to the disclosure requirements include more quantitative information related to significant unobservable inputs used in Level 3 fair value measurements and gains and losses included in other comprehensive income. The adoption of this guidance did not have a material impact on our financial statements.
In August 2018, the FASB issued ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans, new accounting guidance to improve the effectiveness of disclosures related to defined benefit plans by eliminating certain required disclosures, clarifying existing disclosures, and adding new disclosures. Changes include removing disclosures related to the amounts in accumulated other comprehensive income expected to be recognized in the next fiscal year, adding narrative disclosure of the reasons for significant gains and losses related to changes in the defined benefit obligation, and clarifying the disclosures required for plans with projected and accumulated benefit obligations in excess of plan assets. The adoption of this guidance did not have a material impact on our financial statements.
Recent Accounting Pronouncements Not Yet Adopted as of March 29, 2020
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which is intended to improve consistency and simplify several areas of existing guidance. ASU 2019-12 removes certain exceptions to the general
8


principles related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the effect that the ASU 2019-12 will have on our consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to the application of current GAAP to existing contracts, hedging relationships and other transactions affected by reference rate reform. The new guidance will ease the transition to new reference rates by allowing entities to update contracts and hedging relationships without applying many of the contract modification requirements specific to those contracts. The provisions of the new guidance will be effective beginning March 12, 2020, extending through December 31, 2022 with the option to apply the guidance at any point during that time period. Once an entity elects an expedient or exception it must be applied to all eligible contracts or transactions. We currently have debt agreements that reference LIBOR and will apply the new guidance as these contracts are modified to reference other rates.
2. BUSINESS ACQUISITION
On October 15, 2019, the Company acquired 100% of the equity of Tulip Limited and its subsidiaries (together, “Tulip”) from Danish Crown AmbA for £311.3 million, or $393.3 million. The acquisition was funded with cash on hand. Tulip is a leading, integrated prepared pork supplier headquartered in Warwick, U.K. The acquisition solidifies Pilgrim's as a leading European food company, creating one of the largest integrated prepared foods businesses in the U.K. The Tulip operations are included in the Company’s U.K. and Europe reportable segment.
        Transaction costs incurred in conjunction with the acquisition were approximately $1.5 million. These costs were expensed as incurred.
        The results of operations of the acquired business since October 15, 2019 are included in the Company’s Condensed Consolidated Statements of Income. Net sales generated and net loss incurred by the acquired business during the three months ended March 29, 2020 totaled $321.1 million and $3.9 million, respectively.
        The assets acquired and liabilities assumed in the Tulip acquisition were measured at their fair values as of October 15, 2019 as set forth below. The excess of the fair values of the net tangible assets and identifiable intangible assets over the purchase price was recorded as gain on bargain purchase in the Company’s U.K. and Europe reportable segment. The fair values recorded were determined based upon various external and internal valuations. The fair values recorded for the assets acquired and liabilities assumed for Tulip are as follows (in thousands):

9


Cash and cash equivalents $ 6,854   
Trade accounts and other receivables 146,423   
Inventories 104,211   
Prepaid expenses and other current assets 6,579   
Operating lease assets 5,613   
Property, plant and equipment 329,711   
Identified intangible assets 40,418   
Other assets 14,647   
Total assets acquired 654,456   
Accounts payable 110,296   
Other current liabilities 55,830   
Operating lease liabilities 5,613   
Deferred tax liabilities 14,798   
Pension obligations 18,435   
Other long-term liabilities 1,056   
Total liabilities assumed 206,028   
Total identifiable net assets 448,428   
Gain on bargain purchase (55,140)  
Total consideration transferred $ 393,288   
Significant assumptions used in the Company's valuation of the assets and liabilities of Tulip and the bases for their determination are summarized as follows:
Property, plant and equipment, net. Property, plant and equipment at fair value gave consideration to the highest and best use of the assets. The valuation of the Company's real property improvements and the majority of its personal property was based on the cost approach. The valuation of the Company's land, as if vacant, and certain personal property assets was based on the market or sales comparison approach.
Customer relationships. The Company valued Tulip customer relationships using the income approach, specifically the multi-period excess earnings model. Under this model, the fair value of the customer relationships asset was determined by estimating the net cash inflows from the relationships discounted to present value. In estimating the fair value of the customer relationships, net sales related to existing Tulip customers were estimated to grow at a rate of 2.0% annually, but we also anticipate losing existing Tulip customers at an attrition rate of 10.0%. Income taxes were estimated at 18.0% of pre-tax income in 2020 and 17.0% of pre-tax income thereafter and net cash flows attributable to our existing customers were discounted using a rate of 22.0%. The resulting customer relationships intangible asset has a fair value of $40.4 million and a useful life of 11 years.
        See “Note 9. Goodwill and Intangible Assets” for additional information regarding the goodwill and intangible assets recognized by the Company in the Tulip acquisition.
The following unaudited pro forma information presents the combined financial results for the Company and Tulip as if the acquisition had been completed at the beginning of 2019.
Three Months Ended
March 29, 2020 March 31, 2019
(In thousands, except per share amounts)
Net sales $ 3,074,928    $ 3,066,174   
Net income attributable to Pilgrim's 68,513    103,736   
Net income attributable to Pilgrim's per common share - diluted 0.27    0.42   
The above unaudited pro forma financial information is presented for informational purposes only and does not purport to represent what the Company’s results of operations would have been had it completed the acquisitions on the date assumed, nor is it necessarily indicative of the results that may be expected in future periods. Pro forma adjustments exclude cost savings from any synergies resulting from the acquisitions.
10


3. REVENUE RECOGNITION
        The vast majority of the Company's revenue is derived from contracts which are based upon a customer ordering our products. While there may be master agreements, the contract is only established when the customer’s order is accepted by the Company. The Company accounts for a contract, which may be verbal or written, when it is approved and committed by both parties, the rights of the parties are identified along with payment terms, the contract has commercial substance and collectability is probable.
        The Company evaluates the transaction for distinct performance obligations, which are the sale of its products to customers. Since its products are commodity market-priced, the sales price is representative of the observable, standalone selling price. Each performance obligation is recognized based upon a pattern of recognition that reflects the transfer of control to the customer at a point in time, which is upon destination (customer location or port of destination), which faithfully depicts the transfer of control and recognition of revenue. There are instances of customer pick-up at the Company's facility, in which case control transfers to the customer at that point and the Company recognizes revenue. The Company's performance obligations are typically fulfilled within days to weeks of the acceptance of the order.
        The Company makes judgments regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from revenue and cash flows with customers. Determination of a contract requires evaluation and judgment along with the estimation of the total contract value and if any of the contract value is constrained. Due to the nature of our business, there is minimal variable consideration, as the contract is established at the acceptance of the order from the customer. When applicable, variable consideration is estimated at contract inception and updated on a regular basis until the contract is completed. Allocating the transaction price to a specific performance obligation based upon the relative standalone selling prices includes estimating the standalone selling prices including discounts and variable consideration.
Disaggregated Revenue
        Revenue has been disaggregated into the categories below to show how economic factors affect the nature, amount, timing and uncertainty of revenue and cash flows.
Three Months Ended March 29, 2020
Domestic Export Net Sales
(In thousands)
U.S. $ 1,868,027    $ 58,853    $ 1,926,880   
U.K. and Europe 745,099    77,163    822,262   
Mexico 325,786    —    325,786   
Net sales $ 2,938,912    $ 136,016    $ 3,074,928   

Three Months Ended March 31, 2019
Domestic Export Net Sales
(In thousands)
U.S. $ 1,818,146    $ 65,445    $ 1,883,591   
U.K. and Europe 451,799    63,163    514,962   
Mexico 326,122    —    326,122   
Net sales $ 2,596,067    $ 128,608    $ 2,724,675   
Shipping and Handling Costs
        In the rare case when shipping and handling activities are performed after a customer obtains control of the good, the Company has elected to account for shipping and handling as activities to fulfill the promise to transfer the good. When revenue is recognized for the related good before the shipping and handling activities occur, the related costs of those shipping and handling activities are accrued. Shipping and handling costs are recorded within cost of sales.
Contract Costs
        The Company can incur incremental costs to obtain or fulfill a contract such as broker expenses that are not expected to be recovered. The amortization period for such expenses is less than one year; therefore, the costs are expensed as incurred.
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Taxes
        There is no change in accounting for taxes due to the adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), on January 1, 2018 as there is no material change to the timing of revenue recognition. We exclude all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer (for example, sales, use, value added and some excise taxes) from the transaction price.
Contract Balances
        The Company receives payment from customers based on terms established with the customer. Payments are typically due within two weeks of delivery. There are rarely contract assets related to costs incurred to perform in advance of scheduled billings. Revenue contract liabilities relate to payments received in advance of satisfying the performance under the customer contract. The revenue contract liability relates to customer prepayments and the advanced consideration received from governmental agency contracts for which performance obligations to the end customer have not been satisfied.
        Changes in the revenue contract liability balances are as follows:
Three Months Ended
March 29, 2020
(In thousands)
Balance, beginning of period $ 41,770   
Revenue recognized (41,767)  
Cash received, excluding amounts recognized as revenue during the period 32,081   
Balance, end of period $ 32,084   
Accounts Receivable
        The Company records accounts receivable when revenue is recognized. The Company records an allowance for doubtful accounts to reduce the receivables balance to an amount it estimates is collectible from customers. Estimates used in determining the allowance for doubtful accounts are based on historical collection experience, current trends, aging of accounts receivable and periodic credit evaluations of customers’ financial condition. The Company writes off accounts receivable when it becomes apparent, based upon age or customer circumstances, that such amounts will not be collected. Generally, the Company does not require collateral for its accounts receivable.
4. LEASES
The Company is party to operating lease agreements for warehouses, office space, vehicle maintenance facilities and livestock growing farms in the U.S., distribution centers, hatcheries and office space in Mexico and farms, processing facilities and office space in the U.K. and Europe. Additionally, the Company leases equipment, over-the-road transportation vehicles and other assets in all three geographic business segments. The Company is also party to a limited number of finance lease agreements in the U.S.
Our leases have remaining lease terms of one year to 39 years, some of which may include options to extend the lease for up to one year and some which may include options to terminate the lease within one year. The exercise of options to extend lease terms is at our sole discretion. Certain leases also include options to purchase the leased property.
Certain lease agreements include rental payment increases over the lease term that can be either fixed or variable. Fixed payment increases and variable payment increases based on an index or rate are included in the initial lease liability using the index or rate at commencement date. Variable payment increases not based on an index are recognized as incurred. Certain lease agreements contain residual value guarantees, primarily vehicle and transportation equipment leases.
The following table presents components of lease expense. Operating lease cost, finance lease amortization and finance lease interest are respectively included in Cost of sales, Selling, general and administrative expense and Interest expense, net of capitalized interest in the Condensed Consolidated Statements of Income.
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Three Months Ended
March 29, 2020 March 31, 2019
(In thousands)
Operating lease cost(a)
$ 22,467    $ 24,794   
Amortization of finance lease assets 109    27   
Interest on finance leases 28     
Short-term lease cost 16,720    14,218   
Variable lease cost(a)
1,042    869   
Net lease cost $ 40,366    $ 39,912   
(a)Variable lease cost of $0.9 million was previously presented in Operating lease cost on our interim report on Form 10-Q for the quarterly period ended March 31, 2019 that was reclassified to conform to Variable lease cost presented as of March 29, 2020.
The weighted-average remaining lease term and discount rate for lease liabilities included in our Condensed Consolidated Balance Sheets are as follows:
Three Months Ended
March 29, 2020 March 31, 2019
Weighted-average remaining lease term (years):
Operating leases 5.65 6.35
Finance leases 4.32 1.75
Weighted-average discount rate:
Operating leases 4.74% 4.80%
Finance leases 5.10% 8.51%
Supplemental cash flow information related to leases is as follows:
Three Months Ended
March 29, 2020 March 31, 2019
(In thousands)
Cash paid for amounts included in the measurement of
lease liabilities:
Operating cash flows from operating leases $ 25,128    $ 23,994   
Operating cash flows from finance leases 28     
Financing cash flows from finance leases 121    27   
Operating lease assets obtained in exchange for
operating lease liabilities
8,028 22,798   
Future minimum lease payments under noncancellable leases at March 29, 2020 are as follows:
Operating Leases Finance Leases
(In thousands)
Future minimum lease payments:
Year 1 $ 76,240    $ 562   
Year 2 64,417    494   
Year 3 54,918    494   
Year 4 44,389    494   
Year 5 31,797    223   
Thereafter 52,712    —   
Total future minimum lease payments 324,473    2,267   
Less: imputed interest (40,351)   (237)  
Present value of lease liabilities $ 284,122    $ 2,030   
Lease liabilities as of March 29, 2020 are included in our Condensed Consolidated Balance Sheets as follows:
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Operating Leases Finance Leases
(In thousands)
Accrued expenses and other current liabilities $ 64,262    $ —   
Current maturities of long-term debt —    469   
Noncurrent operating lease liability, less current maturities 219,860    —   
Long-term debt, less current maturities —    1,561   
Total lease liabilities $ 284,122    $ 2,030   
Lease liabilities as of December 29, 2019 are included in our Condensed Consolidated Balance Sheets as follows:
Operating Leases Finance Leases
(In thousands)
Accrued expenses and other current liabilities $ 66,239    $ —   
Current maturities of long-term debt —    486   
Noncurrent operating lease liability, less current maturities 235,382    —   
Long-term debt, less current maturities —    1,664   
Total lease liabilities $ 301,621    $ 2,150   
As of March 29, 2020, the Company had immaterial operating leases and did not have finance leases that have not commenced.
5.  DERIVATIVE FINANCIAL INSTRUMENTS
        The Company utilizes various raw materials in its operations, including corn, soybean meal, soybean oil, wheat, natural gas, electricity and diesel fuel, which are all considered commodities. The Company considers these raw materials generally available from a number of different sources and believes it can obtain them to meet its requirements. These commodities are subject to price fluctuations and related price risk due to factors beyond our control, such as economic and political conditions, supply and demand, weather, governmental regulation and other circumstances. Generally, the Company purchases derivative financial instruments, specifically exchange-traded futures and options, in an attempt to mitigate price risk related to its anticipated consumption of commodity inputs for approximately the next twelve months. The Company may purchase longer-term derivative financial instruments on particular commodities if deemed appropriate.
        The Company has operations in Mexico, the U.K., France and the Netherlands. Therefore, it has exposure to translational foreign exchange risk when the financial results of those operations are remeasured in U.S. dollars. The Company has purchased foreign currency forward contracts to manage this translational foreign exchange risk.
        The fair value of derivative assets is included in the line item Prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets while the fair value of derivative liabilities is included in the line item Accrued expenses and other current liabilities on the same statements. The Company’s counterparties require that it post collateral for changes in the net fair value of the derivative contracts. This cash collateral is reported in the line item Restricted cash and cash equivalents on the Condensed Consolidated Balance Sheets.
        The Company has not designated certain derivative financial instruments that it has purchased to mitigate commodity purchase exposures in the U.S. and Mexico or foreign currency transaction exposures on our Mexico operations as cash flow hedges. Therefore, the Company recognized changes in the fair value of these derivative financial instruments immediately in earnings. Gains or losses related to the commodity derivative financial instruments are included in the line item Cost of sales in the Condensed Consolidated Statements of Income. Gains or losses related to the foreign currency derivative financial instruments are included in the line item Foreign currency transaction loss (gain) and Cost of sales in the Condensed Consolidated Statements of Income.
        The Company has designated certain derivative financial instruments related to its U.K. and Europe reportable segment that it has purchased to mitigate foreign currency transaction exposures as cash flow hedges. Before the settlement date of the financial derivative instruments, the Company recognizes changes in the fair value of the effective portion of the cash flow hedge into accumulated other comprehensive income (“AOCI”) while it recognize changes in the fair value of the ineffective portion immediately in earnings. When the derivative financial instruments associated with the effective portion are settled, the amount in AOCI is then reclassified to earnings. Gains or losses related to these derivative financial instruments are included in the line item Cost of sales in the Condensed Consolidated Statements of Income.
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The Company recognized net gains of $27.8 million and net losses of $8.0 million related to changes in the fair value of its derivative financial instruments during the three months ended March 29, 2020 and March 31, 2019, respectively. Information regarding the Company’s outstanding derivative instruments and cash collateral posted with brokers is included in the following table:
March 29, 2020 December 29, 2019
  (In thousands)
Fair values:
Commodity derivative assets $ 12,544    $ 5,053   
Commodity derivative liabilities (17,988)   (5,430)  
Foreign currency derivative assets 12,053    426   
Foreign currency derivative liabilities (98)   (5,400)  
Cash collateral posted with brokers(a)
25,234    20,009   
Derivatives coverage(b):
Corn 16.0  % 12.0  %
Soybean meal 8.0  % 44.0  %
Period through which stated percent of needs are covered:
Corn December 2020 December 2020
Soybean meal December 2020 July 2020
(a)Collateral posted with brokers consists primarily of cash, short-term treasury bills, or other cash equivalents.
(b)Derivatives coverage is the percent of anticipated commodity needs covered by outstanding derivative instruments through a specified date.
        The following tables present the components of the gain or loss on derivatives that qualify as cash flow hedges:
Gain (Loss) Recognized in Other Comprehensive Income on Derivative
Three Months Ended
March 29, 2020 March 31, 2019
(In thousands)
Foreign currency derivatives $ 4,123    $ (915)  
Total $ 4,123    $ (915)  
Gain (Loss) Reclassified from AOCI into Income
Three Months Ended
March 29, 2020 March 31, 2019
(In thousands)
Foreign currency derivatives $ (742)   $ 221   
Total $ (742)   $ 221   
        At March 29, 2020, the pre-tax deferred net losses on derivatives recorded in AOCI that are expected to be reclassified to the Condensed Consolidated Statements of Income during the next twelve months are $3.8 million. This expectation is based on the anticipated settlements on the hedged investments in foreign currencies that will occur over the next twelve months, at which time the Company will recognize the deferred gains (losses) to earnings.
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6. TRADE ACCOUNTS AND OTHER RECEIVABLES
        Trade accounts and other receivables, less allowance for doubtful accounts, consisted of the following:
March 29, 2020 December 29, 2019
  (In thousands)
Trade accounts receivable $ 710,702    $ 696,372   
Notes receivable - current 4,495    4,187   
Other receivables 48,109    48,189   
Receivables, gross 763,306    748,748   
Allowance for doubtful accounts (9,060)   (7,467)  
Receivables, net $ 754,246    $ 741,281   
Accounts receivable from related parties(a)
$ 743    $ 944   
(a) Additional information regarding accounts receivable from related parties is included in “Note 18. Related Party Transactions.”
        Activity in the allowance for doubtful accounts for the three months ended March 29, 2020 was as follows (in thousands):
Balance, beginning of period $ (7,467)  
Provision charged to operating results (2,445)  
Account write-offs and recoveries 258   
Effect of exchange rate 594   
Balance, end of period $ (9,060)  

7. INVENTORIES
        Inventories consisted of the following:
March 29, 2020 December 29, 2019
  (In thousands)
Raw materials and work-in-process $ 788,229    $ 800,749   
Finished products 412,684    425,919   
Operating supplies 81,503    82,447   
Maintenance materials and parts 79,942    74,420   
Total inventories $ 1,362,358    $ 1,383,535   

8. INVESTMENTS IN SECURITIES
        We recognize investments in available-for-sale securities as cash equivalents, current investments or long-term investments depending upon each security's length to maturity. Additionally, those securities identified by management at the time of purchase for funding operations in less than one year are classified as current.
        The following table summarizes our investments in available-for-sale securities:
March 29, 2020 December 29, 2019
Cost Fair
Value
Cost Fair
Value
(In thousands)
Cash equivalents:
Fixed income securities $ 361,215    $ 361,215    $ 159,623    $ 159,623   
Other 34,665    34,665    —    —   
        Securities classified as cash and cash equivalents mature within 90 days. Securities classified as short-term investments mature between 91 and 365 days. Securities classified as long-term investments mature after 365 days. The specific
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identification method is used to determine the cost of each security sold and each amount reclassified out of accumulated other comprehensive loss to earnings. Gross realized gains during the three months ended March 29, 2020 related to the Company’s available-for-sale securities totaled $1.5 million while gross realized losses were immaterial. Gross realized gains during the three months ended March 31, 2019 related to the Company’s available-for-sale securities totaled $2.3 million, while gross realized losses were immaterial. Proceeds received from the sale or maturity of available-for-sale securities recognized as either short- or long-term investments are historically disclosed in the Condensed Consolidated Statements of Cash Flows. Net unrealized holding gains and losses on the Company’s available-for-sale securities recognized during the three months ended March 29, 2020 and March 31, 2019 that have been included in accumulated other comprehensive loss and the net amount of gains and losses reclassified out of accumulated other comprehensive loss to earnings during the three months ended March 29, 2020 and March 31, 2019 are disclosed in “Note 14. Stockholders’ Equity”.
9.  GOODWILL AND INTANGIBLE ASSETS
        The activity in goodwill by segment for the three months ended March 29, 2020 was as follows:
December 29, 2019 Currency Translation March 29, 2020
(In thousands)
U.S. $ 41,936    $ —    $ 41,936   
U.K. and Europe 806,207    (38,484)   767,723   
Mexico 125,607    —    125,607   
     Total $ 973,750    $ (38,484)   $ 935,266   
Identified intangible assets consisted of the following:
December 29, 2019 Amortization Currency Translation March 29, 2020
(In thousands)
Cost:
     Trade names $ 78,343    $ —    $ —    $ 78,343   
     Customer relationships 292,278    —    (6,285)   285,993   
     Non-compete agreements 320    —    —    320   
Trade names not subject to amortization 391,431    —    (18,222)   373,209   
Accumulated amortization:
     Trade names (45,518)   (492)   —    (46,010)  
     Customer relationships (120,481)   (4,746)   1,875    (123,352)  
     Non-compete agreements (320)   —    (320)  
Total $ 596,053    $ (5,238)   $ (22,632)   $ 568,183   
        Intangible assets are amortized over the estimated useful lives of the assets as follows:
Customer relationships
5-16 years
Trade names
3-20 years
Non-compete agreements 3 years
        At March 29, 2020, the Company assessed if events or changes in circumstances indicated that the aggregate carrying amount of its identified intangible assets subject to amortization might not be recoverable. There were no indicators present that required the Company to test the recoverability of the aggregate carrying amount of its identified intangible assets subject to amortization at that date.
10. PROPERTY, PLANT AND EQUIPMENT
        Property, plant and equipment (“PP&E”), net consisted of the following:
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March 29, 2020 December 29, 2019
(In thousands)
Land $ 240,336    $ 222,076   
Buildings 1,887,082    1,754,219   
Machinery and equipment 3,030,430    3,139,748   
Autos and trucks 69,607    64,122   
Finance leases 2,182    2,182   
Construction-in-progress 199,149    229,015   
PP&E, gross 5,428,786    5,411,362   
Accumulated depreciation (2,865,992)   (2,819,301)  
PP&E, net $ 2,562,794    $ 2,592,061   
The Company recognized depreciation expense of $74.5 million and $61.5 million during the three months ended March 29, 2020 and March 31, 2019, respectively.
        During the three months ended March 29, 2020, Pilgrim's spent $77.2 million on capital projects and transferred $87.2 million of completed projects from construction-in-progress to depreciable assets. Capital expenditures were primarily incurred during the three months ended March 29, 2020 to improve efficiencies and reduce costs. During the three months ended ended March 31, 2019, the Company spent $87.9 million on capital projects and transferred $56.1 million of completed projects from construction-in-progress to depreciable assets.
        During the three months ended March 29, 2020, the Company sold miscellaneous equipment for $0.6 million in cash and recognized a net gain on these sales of $0.5 million. During the three months ended March 31, 2019, the Company sold miscellaneous equipment for cash of $0.5 million and recognized a net gain on these sales of $0.1 million.
        The Company has closed or idled various facilities in the U.S. and in the U.K. Neither the Board of Directors nor JBS has determined if it would be in the best interest of the Company to divest any of these idled assets. Management is therefore not certain that it can or will divest any of these assets within one year, is not actively marketing these assets and, accordingly, has not classified them as assets held for sale. The Company continues to depreciate these assets. As of March 29, 2020, the carrying amounts of these idled assets totaled $42.0 million based on depreciable value of $221.1 million and accumulated depreciation of $179.1 million.
        As of March 29, 2020, the Company assessed if events or changes in circumstances indicated that the aggregate carrying amount of its property, plant and equipment held for use might not be recoverable. There were no indicators present that required the Company to test the recoverability of the aggregate carrying amount of its property, plant and equipment held for use at that date.
11. CURRENT LIABILITIES
        Current liabilities, other than current notes payable to banks, income taxes and current maturities of long-term debt, consisted of the following components:
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March 29, 2020 December 29, 2019
(In thousands)
Accounts payable:
Trade accounts $ 836,052    $ 875,374   
Book overdrafts 59,836    98,267   
Other payables 19,775    20,139   
Total accounts payable 915,663    993,780   
Accounts payable to related parties(a)
7,998    3,819   
Revenue contract liability(b)
32,084    41,770   
Accrued expenses and other current liabilities:
Compensation and benefits 132,935    164,946   
Taxes 44,256    41,901   
Interest and debt-related fees 29,040    31,183   
Insurance and self-insured claims 67,502    67,332   
Current maturities of operating lease liabilities 64,262    66,239   
Derivative liability 18,086    10,830   
Other accrued expenses 176,428    192,888   
Total accrued expenses and other current liabilities 532,509    575,319   
Total accounts payable, accrued expenses and other current liabilities $ 1,488,254    $ 1,614,688   
(a) Additional information regarding accounts payable to related parties is included in “Note 18. Related Party Transactions.”
(b) Additional information regarding revenue contract liabilities is included in “Note 3. Revenue Recognition.”
12. INCOME TAXES
The Company recorded income tax expense of $38.5 million, a 36.3% effective tax rate, for the three months ended March 29, 2020 compared to income tax expense of $20.4 million, a 19.5% effective tax rate, for the three months ended March 31, 2019. The increase in income tax expense in 2020 resulted primarily from the effects of foreign currency fluctuations.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carry back and carry forward periods), projected future taxable income and tax-planning strategies in making this assessment. As of March 29, 2020, the Company did not believe it had sufficient positive evidence to conclude that realization of a portion of its foreign net deferred tax assets are more likely than not to be realized.
For the three months ended March 29, 2020 and March 31, 2019, there is a tax effect of $2.6 million and $(0.8) million, respectively, reflected in other comprehensive income.
        For the three months ended March 29, 2020 and March 31, 2019, there are immaterial tax effects reflected in income tax expense due to excess tax benefits and shortfalls related to share-based compensation.
        The Company and its subsidiaries file a variety of consolidated and standalone income tax returns in various jurisdictions. In the normal course of business, our income tax filings are subject to review by various taxing authorities. In general, tax returns filed by our Company and our subsidiaries for years prior to 2011 are no longer subject to examination by tax authorities.
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13. DEBT
        Long-term debt and other borrowing arrangements, including current notes payable to banks, consisted of the following components: 
Maturity March 29, 2020 December 29, 2019
  (In thousands)
Senior notes payable, net of premium and discount at 5.75%
2025 $ 1,001,994    $ 1,002,095   
Senior notes payable, net of discount at 5.875%
2027 844,613    844,433   
U.S. Credit Facility (defined below):
Term note payable at 2.83%
2023 468,750    475,000   
Revolving note payable at 2.10%
2023 350,000    —   
Moy Park Bank of Ireland Revolving Facility with notes payable at
     LIBOR or EURIBOR plus 1.25% to 2.00%
2023 —    —   
Mexico Credit Facility (defined below) with notes payable at
     TIIE plus 1.50%
2023 —    —   
Secured loans with payables at weighted average of 3.34%
Various 437    948   
Finance lease obligations Various 2,030    2,150   
Long-term debt 2,667,824    2,324,626   
Less: Current maturities of long-term debt (25,877)   (26,392)  
Long-term debt, less current maturities 2,641,947    2,298,234   
Less: Capitalized financing costs (21,040)   (22,205)  
Long-term debt, less current maturities, net of capitalized
financing costs:
$ 2,620,907    $ 2,276,029   
U.S. Senior Notes
On March 11, 2015, the Company completed a sale of $500.0 million aggregate principal amount of its 5.75% senior notes due 2025. On September 29, 2017, the Company completed an add-on offering of $250.0 million of these senior notes. The issuance price of this add-on offering was 102.0%, which created gross proceeds of $255.0 million. The additional $5.0 million will be amortized over the remaining life of the senior notes. On March 7, 2018, the Company completed another add-on offering of $250.0 million of these senior notes (together with the senior notes issued in March 2015 and September 2017, the “Senior Notes due 2025”). The issuance price of this add-on offering was 99.25%, which created gross proceeds of $248.1 million. The $1.9 million discount will be amortized over the remaining life of the senior notes. Each issuance of the Senior Notes due 2025 is treated as a single class for all purposes under the 2015 Indenture (defined below) and have the same terms.
The Senior Notes due 2025 are governed by, and were issued pursuant to, an indenture dated as of March 11, 2015 by and among the Company, its guarantor subsidiaries and U.S. Bank National Association, as trustee (the “2015 Indenture”). The 2015 Indenture provides, among other things, that the Senior Notes due 2025 bear interest at a rate of 5.75% per annum from the date of issuance until maturity, payable semi-annually in cash in arrears, beginning on September 15, 2015 for the Senior Notes due 2025 that were issued in March 2015 and beginning on March 15, 2018 for the Senior Notes due 2025 that were issued in September 2017 and March 2018.
On September 29, 2017, the Company completed a sale of $600.0 million aggregate principal amount of its 5.875% senior notes due 2027. On March 7, 2018, the Company completed an add-on offering of $250.0 million of these senior notes (together with the senior notes issued in September 2017, the “Senior Notes due 2027”). The issuance price of this add-on offering was 97.25%, which created gross proceeds of $243.1 million. The $6.9 million discount will be amortized over the remaining life of the Senior Notes due 2027. Each issuance of the Senior Notes due 2027 is treated as a single class for all purposes under the 2017 Indenture (defined below) and have the same terms.
The Senior Notes due 2027 are governed by, and were issued pursuant to, an indenture dated as of September 29, 2017 by and among the Company, its guarantor subsidiaries and U.S. Bank National Association, as trustee (the “2017 Indenture”). The 2017 Indenture provides, among other things, that the Senior Notes due 2027 bear interest at a rate of 5.875% per annum from the date of issuance until maturity, payable semi-annually in cash in arrears, beginning on March 30, 2018 for the Senior Notes due 2027 that were issued in September 2017 and beginning on March 15, 2018 for the Senior Notes due 2027 that were issued in March 2018.
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The Senior Notes due 2025 and the Senior Notes due 2027 are each guaranteed on a senior unsecured basis by the Company’s guarantor subsidiaries. In addition, any of the Company’s other existing or future domestic restricted subsidiaries that incur or guarantee any other indebtedness (with limited exceptions) must also guarantee the Senior Notes due 2025 and the Senior Notes due 2027. The Senior Notes due 2025 and the Senior Notes due 2027 and related guarantees are unsecured senior obligations of the Company and its guarantor subsidiaries and rank equally with all of the Company’s and its guarantor subsidiaries’ other unsubordinated indebtedness. The Senior Notes due 2025, the 2015 Indenture, the Senior Notes due 2027 and the 2017 Indenture also contain customary covenants and events of default, including failure to pay principal or interest on the Senior Notes due 2025 and the Senior Notes due 2027, respectively, when due, among others.
U.S. Credit Facility
On July 20, 2018, the Company, and certain of the Company’s subsidiaries entered into a Fourth Amended and Restated Credit Agreement (the “U.S. Credit Facility”) with CoBank, ACB, as administrative agent and collateral agent, and the other lenders party thereto. The U.S. Credit Facility provides for a $750.0 million revolving credit commitment and a term loan commitment of up to $500.0 million (the “Term Loans”). The Company used the proceeds from the term loan commitment under the U.S. Credit Facility, together with cash on hand, to repay the outstanding loans under the Company’s previous credit agreement with Coöperatieve Rabobank U.A., New York Branch, as administrative agent, and the other lenders and financial institutions party thereto.
The U.S. Credit Facility includes an accordion feature that allows the Company, at any time, to increase the aggregate revolving loan and term loan commitments by up to an additional $1.25 billion, subject to the satisfaction of certain conditions, including obtaining the lenders’ agreement to participate in the increase.
The revolving loan commitment under the U.S. Credit Facility matures on July 20, 2023. All principal on the Term Loans is due at maturity on July 20, 2023. Installments of principal are required to be made, in an amount equal to 1.25% of the original principal amount of the Term Loans, on a quarterly basis prior to the maturity date of the Term Loans. Covenants in the U.S. Credit Facility also require the Company to use the proceeds it receives from certain asset sales and specified debt or equity issuances and upon the occurrence of other events to repay outstanding borrowings under the U.S. Credit Facility. As of March 29, 2020, the Company had outstanding borrowings under the term loan commitment of $468.8 million. As of March 29, 2020, the Company had outstanding borrowings, outstanding letters of credit and available borrowings under the revolving credit commitment of $350.0 million, $40.4 million and $359.6 million, respectively.
The U.S. Credit Facility includes a $75.0 million sub-limit for swingline loans and a $125.0 million sub-limit for letters of credit. Outstanding borrowings under the revolving loan commitment and the Term Loans bear interest at a per annum rate equal to (1) in the case of LIBOR loans, LIBOR plus 1.25% through August 2, 2018 and, thereafter, based on the Company’s net senior secured leverage ratio, between LIBOR plus 1.25% and LIBOR plus 2.75% and (2) in the case of alternate base rate loans, the base rate plus 0.25% through August 2, 2018 and, based on the Company’s net senior secured leverage ratio, between the base rate plus 0.25% and base rate plus 1.75% thereafter.
The U.S. Credit Facility contains customary financial and other various covenants for transactions of this type, including restrictions on the Company's ability to incur additional indebtedness, incur liens, pay dividends, make certain restricted payments, consummate certain asset sales, enter into certain transactions with the Company’s affiliates, or merge, consolidate and/or sell or dispose of all or substantially all of its assets, among other things. The U.S. Credit Facility requires the Company to comply with a minimum level of tangible net worth covenant. The U.S. Credit Facility also provides that the Company may not incur capital expenditures in excess of $500.0 million in any fiscal year.
All obligations under the U.S. Credit Facility continue to be unconditionally guaranteed by certain of the Company’s subsidiaries and continue to be secured by a first priority lien on (1) the accounts receivable and inventory of the Company and its non-Mexico subsidiaries, (2) 100% of the equity interests in the Company's domestic subsidiaries, To-Ricos, Ltd. and To-Ricos Distribution, Ltd., and 65% of the equity interests in its direct foreign subsidiaries and (3) substantially all of the assets of the Company and the guarantors under the U.S. Credit Facility. The Company is currently in compliance with the covenants under the U.S. Credit Facility.
Moy Park Bank of Ireland Revolving Facility Agreement
On June 2, 2018, Moy Park Holdings (Europe) Ltd. and its subsidiaries entered into an unsecured multicurrency revolving facility agreement (the “Bank of Ireland Facility Agreement”) with the Governor and Company of the Bank of Ireland, as agent, and the other lenders party thereto. The Bank of Ireland Facility Agreement provides for a multicurrency revolving loan commitment of up to £100.0 million. The multicurrency revolving loan commitments under the Bank of Ireland Facility Agreement mature on June 2, 2023. Outstanding borrowings under the Bank of Ireland Facility Agreement bear interest at a rate per annum equal to the sum of (1) LIBOR or, in relation to any loan in euros, EURIBOR, plus (2) a margin, ranging
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from 1.25% to 2.00% based on Leverage (as defined in the Bank of Ireland Facility Agreement). All obligations under the Bank of Ireland Facility Agreement are guaranteed by certain of Moy Park's subsidiaries. As of March 29, 2020, the U.S. dollar-equivalent loan commitment and borrowing availability were both $124.6 million. As of March 29, 2020, there were no outstanding borrowings under the Bank of Ireland Facility Agreement.
The Bank of Ireland Facility Agreement contains representations and warranties, covenants, indemnities and conditions that the Company believes are customary for transactions of this type. Pursuant to the terms of the Bank of Ireland Facility Agreement, Moy Park is required to meet certain financial and other restrictive covenants. Additionally, Moy Park is prohibited from taking certain actions without consent of the lenders, including, without limitation, incurring additional indebtedness, entering into certain mergers or other business combination transactions, permitting liens or other encumbrances on its assets and making restricted payments, including dividends, in each case except as expressly permitted under the Bank of Ireland Facility Agreement. The Bank of Ireland Facility Agreement contains events of default that the Company believes are customary for transactions of this type. If a default occurs, any outstanding obligations under the Bank of Ireland Facility Agreement may be accelerated.
Mexico Credit Facility
On December 14, 2018, certain of the Company's Mexican subsidiaries entered into an unsecured credit agreement (the “Mexico Credit Facility”) with Banco del Bajio, Sociedad Anónima, Institución de Banca Múltiple, as lender. The loan commitment under the Mexico Credit Facility is $1.5 billion Mexican pesos and can be borrowed on a revolving basis. Outstanding borrowings under the Mexico Credit Facility accrue interest at a rate equal to the 28-Day Interbank Equilibrium Interest Rate plus 1.5%. The Mexico Credit Facility contains covenants and defaults that the Company believes are customary for transactions of this type. The Mexico Credit Facility will be used for general corporate and working capital purposes. The Mexico Credit Facility will mature on December 14, 2023. As of March 29, 2020, the U.S. dollar-equivalent of the loan commitment and borrowing availability were both $64.3 million. As of March 29, 2020, there were no outstanding borrowings under the Mexico Credit Facility.
14. STOCKHOLDERS' EQUITY
Accumulated Other Comprehensive Loss
        The following tables provide information regarding the changes in accumulated other comprehensive loss:
Three Months Ended March 29, 2020(a)
Losses Related to Foreign Currency Translation Unrealized Gains on Derivative Financial Instruments Classified as Cash Flow Hedges Losses Related to Pension and Other Postretirement Benefits Unrealized Holding Gains on Available-for-Sale Securities Total
(In thousands)
Balance, beginning of period $ (1,108)   $ (2,406)   $ (71,615)   $ —    $ (75,129)  
Other comprehensive income (loss) before
reclassifications
(96,765)   4,123    (8,105)     (100,738)  
Amounts reclassified from accumulated other
comprehensive loss to net income
—    742    283    —    1,025   
Currency translation