PILGRIM'S PRIDE CORPORATION Executive Summary Overview We reported net income attributable to Pilgrim's of$67.3 million , or$0.27 per diluted common share, and profit before tax totaling$106.0 million , for the three months endedMarch 29, 2020 . These operating results included net sales of$3.1 billion , gross profit of$177.1 million and$21.1 million of cash generated from operations. We generated operating margins of 2.7% with operating margins of 4.4%, 2.8% and (7.3)% in ourUnited States ("U.S."),United Kingdom ("U.K.") andEurope , andMexico reportable segments, respectively. Impact of COVID-19 The novel Coronavirus ("COVID-19"), which has been declared a pandemic, has spread to multiple global regions, including theU.S. ,Mexico andEurope . The extensive impact of this pandemic has resulted and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world. In an effort to halt the outbreak of COVID-19, a number of countries, states, counties and other jurisdictions have imposed various measures, including but not limited to, voluntary and mandatory quarantines, stay-at-home orders, travel restrictions, limitations on gatherings of people, reduced operations and extended closures of businesses. OnApril 28, 2020 ,President Trump signed an executive order directing theDepartment of Agriculture to ensure meat and poultry processors in theU.S. continue operations uninterrupted to the maximum extent possible and designating meat and poultry processing plants as critical infrastructure. The disruptions caused by COVID-19 did not have a material impact on our financial results for the three months endedMarch 29, 2020 ; however, as the global spread of the virus began to accelerate late in the three months endedMarch 29, 2020 , we began to experience adverse impacts to our business and financial results. We believe that we will continue to experience disruptions to our business due to the COVID-19 pandemic through the end of the second quarter, and the disruptions due to COVID-19 could also extend into the second half of 2020. The impact of COVID-19 and measures to prevent its spread are affecting our business in a number of ways. •Our workforce. Employee health and safety is our priority. As an essential business in a critical infrastructure industry, we continue to produce chicken and pork products, while coordinating with and implementing guidance from theU.S. Centers for Disease Control and Prevention , theNational Institute of Occupational Safety and Health , and local and regional Departments of Health in an effort to keep our employees safe and healthy. Measures we have implemented include, but are not limited to: increasing physical distancing of our employees, where possible, by staggering start and shift breaks, placing on-site tents to create more space for employees at break and at meal times, and installing physical barriers to distance employees while working on production lines; adding temperature and symptom screening stations for employees prior to entering our facilities; increasing personal hygiene practices and providing our employees additional personal protective equipment and sanitation stations; and increasing sanitation of our facilities. In theU.S. , we have provided appreciation bonuses to eligible employees and expanded certain sick leave policies to provide more flexibility. In addition, we implemented global travel restrictions and work-from-home policies for employees who have the ability to work remotely. •Our operations. As ofApril 10, 2020 , all of our 60 production facilities except for three facilities inEurope (which are temporarily closed for commercial reasons) are operating, although some facilities have reduced production levels and outputs due to increased health and safety measures and as a consequence of the decline in demand by restaurants and other foodservice businesses. To date, we have not experienced a material impact from a plant closure and our facilities have largely been exempt from government closure orders. •Demand for our products. COVID-19 and the implementation of restricted living have led to a shift in demand from restaurants to retail grocery stores, with consumers eating more at home due to stay-at-home orders. In ourU.S. andMexico businesses, demand for parts and whole-birds (typically bound for restaurants) and prepared foods (distributed, in part, to schools) has declined, while ourU.K. andEurope business, which is more retail focused, has generally seen less of an impact. In an effort to counter the adverse effects of COVID-19, we have transitioned, where commercially reasonable and possible to do so, our business operations to be in the best position to supply COVID-19 market demands. These efforts have included transferring live supply to case ready, shifting production form and mix from foodservice to retail, increasing capacity utilization of retail packaging equipment, and analyzing export positions. 39 -------------------------------------------------------------------------------- •Liquidity. Our liquidity position is strong and we have taken additional measures to increase liquidity to prepare for the challenging environment ahead. OnMarch 20, 2020 andMarch 25, 2020 , we elected to borrow$200.0 million and$150.0 million , respectively, under theU.S. Credit Facility as a precautionary measure in order to increase our cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 outbreak. The draw-down proceeds are expected to be held on our balance sheet and may be used for general corporate purposes. •Foreign currency exchange rates and commodity prices. During the three months endedMarch 29, 2020 , we experienced increased volatility in foreign currency exchange rates and commodity prices, in part related to the uncertainty from COVID-19, as well as actions taken by governments and central banks in response to COVID-19. We expect continued volatility in foreign currency exchange rates and commodity prices during 2020, though we cannot reasonably estimate the duration, extent or impact of that volatility. •CARES Act. OnMarch 27, 2020 , theU.S. government enacted the CARES Act, which includes modifications to the limitation on business interest expense and net operating loss provisions, and provides a payment delay of employer payroll taxes during 2020 after the date of enactment. We estimate the payment of approximately$51 million of employer payroll taxes otherwise due in 2020 will be delayed with 50% due byDecember 31, 2021 and the remaining 50% byDecember 31, 2022 . Raw Materials and Pricing OurU.S. andMexico segments use corn and soybean meal as the main ingredients for feed production, while ourU.K. andEurope segment uses wheat, soybean meal and barley as the main ingredients for feed production. Market prices for chicken products during the three months endedMarch 29, 2020 trended in-line with seasonality but near the bottom of the historical range as the industry experienced an increase in production compared to the three months endedMarch 31, 2019 . Market prices were at levels higher than the costs of feed ingredients and sufficient to provide positive profits for the industry. However, the spread of COVID-19 and the subsequent market reactions in the latter part of the three months endedMarch 29, 2020 have resulted in an unexpected shift in demand from foodservice to retail markets. This has triggered a short-term imbalance in supply and demand as some foodservice items cannot be quickly reworked to retail products. As a result, market prices for fresh chicken products became volatile, and more recently, decreased production of poultry and other proteins due to worker absenteeism caused by the COVID-19 pandemic resulted in increased market prices. How quickly and to what levels chicken prices will return to normal price ranges will depend on the recovery of the foodservice industry, together with other factors beyond chicken supply, such as supply of other proteins and substitutions by consumers of non-protein foods because of uncertainty surrounding the general economy and unemployment rates. Potential Impact of Tariffs We continue to monitor recent trade and tariff activity and its potential impact to exports and inputs costs across our reportable segments. Currently, we are experiencing impacts to domestic and export prices of chicken resulting from uncertainty in trade policies and increased tariffs. We are unable to give any assurance as to the scope, duration, or impact of any changes in trade policies or tariffs, how successful any mitigation efforts will be, or the extent to which mitigation will be necessary, and accordingly, changes in trade policies and increased tariffs could have a material adverse effect on our business and results of operations. Reportable Segments We operate in three reportable segments:U.S. ,U.K. andEurope , andMexico . We measure segment profit as operating income. Corporate expenses are allocated to theMexico andU.K. andEurope reportable segments based upon various apportionment methods for specific expenditures incurred related thereto with the remaining amounts allocated to theU.S. For additional information, see "Note 19. Reportable Segments" of our Condensed Consolidated Financial Statements included in this quarterly report. 40 -------------------------------------------------------------------------------- Results of Operations Three Months Ended EndedMarch 29, 2020 Compared to Three Months Ended EndedMarch 31, 2019
Net sales. Net sales generated in the three months ended
Change from Three Months Ended March
Three Months Ended 31, 2019
Sources of net sales March 29, 2020 Amount Percent
(In thousands, except percent data)
U.S. $ 1,926,880 $ 43,289 2.3 %
U.K. and Europe 822,262 307,300 59.7 %
Mexico 325,786 (336) (0.1) %
Total net sales $ 3,074,928 $ 350,253 12.9 %
U.S. Reportable Segment. U.S. net sales generated in the three months ended
March 29, 2020 increased $43.3 million , or 2.3%, from U.S. net sales generated
in the three months ended March 31, 2019 primarily because of increases in both
net sales per pound and sales volume. The sales volume increase experienced by
the U.S. segment contributed $26.7 million , or 1.4 percentage points, to the
increase in net sales. The increase in net sales per pound contributed
$16.6 million , or 0.9 percentage points, to the increase in net sales.
U.K. and Europe Reportable Segment. U.K. and Europe net sales generated in the
three months ended March 29, 2020 increased $307.3 million , or 59.7%, from U.K.
and Europe net sales generated in the three months ended March 31, 2019
primarily because of the recently acquired Tulip operations, partially offset by
a decrease in net sales by our existing U.K. and Europe operations. The impact
of the acquired Tulip operations contributed $321.1 million , or 62.4 percentage
points, to the increase in net sales. The decrease in net sales by our existing
U.K. and Europe operations was mainly due to the unfavorable impact of foreign
currency translation and a decrease in net sales per pound of $8.9 million , or
1.7 percentage points, and $8.4 million , or 1.6 percentage points, respectively.
Partially offsetting the unfavorable impact of foreign currency translation and
the decrease in net sales per pound was an increase in sales volume of $3.5
million , or 0.7 percentage points.
Mexico Reportable Segment. Mexico net sales generated in the three months ended
March 29, 2020 decreased $0.3 million , or 0.1%, from Mexico net sales generated
in the three months ended March 31, 2019 primarily because of the unfavorable
impact of foreign currency remeasurement of $12.4 million , or 3.8 percentage
points. The unfavorable impact of foreign currency remeasurement was partially
offset by an increase in net sales per pound and increase in sales volume of
$6.7 million , or 2.0 percentage points, and $5.4 million , or 1.7 percentage
points, respectively.
Gross profit. Gross profit decreased by $41.8 million , or 19.1%, from $218.9
million generated in the three months ended March 31, 2019 to $177.1 million
generated in the three months ended March 29, 2020 . The following tables provide
information regarding gross profit and cost of sales information:
Change from Three Months Ended March 31, Percent of Net Sales
Three Months Ended 2019 Three Months Ended
Components of gross profit March 29, 2020 Amount Percent March 29, 2020 March 31, 2019
(In thousands, except percent data)
Net sales $ 3,074,928 $ 350,253 12.9 % 100.0 % 100.0 %
Cost of sales 2,897,829 392,093 15.6 % 94.2 % 92.0 %
Gross profit $ 177,099 $ (41,840) (19.1) % 5.8 % 8.0 %
Change from Three Months Ended March
Three Months Ended 31, 2019
Sources of gross profit March 29, 2020 Amount Percent
(In thousands, except percent data)
U.S. $ 138,103 $ (32,069) (18.8) %
U.K. and Europe 52,128 22,544 76.2 %
Mexico (13,156) (32,315) (168.7) %
Elimination 24 - - %
Total gross profit $ 177,099 $ (41,840) (19.1) %
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Change from Three Months Ended March
Three Months Ended 31, 2019
Sources of cost of sales March 29, 2020 Amount Percent
(In thousands, except percent data)
U.S. $ 1,788,777 $ 75,358 4.4 %
U.K. and Europe 770,134 284,756 58.7 %
Mexico 338,942 31,979 10.4 %
Elimination (24) - - %
Total cost of sales $ 2,897,829 $ 392,093 15.6 %
U.S. Reportable Segment. Cost of sales incurred by our U.S. operations during
the three months ended March 29, 2020 increased $75.4 million , or 4.4%, from
cost of sales incurred by our U.S. segment during the three months ended
March 31, 2019 . Cost of sales increased primarily because of the impact of
increased cost per pound and increased sales volume, resulting in increases of
$50.2 million , or 2.9 percentage points, and $24.3 million , or 1.4 percentage
points, respectively. Included in the increase in cost per pound sold and
increased sales volume was an increase in live input costs of $52.7 million ,
which included increases in feed cost, grower pay and chick costs of $30.9
million , $10.2 million and $8.6 million , respectively. An increase in payroll
costs, mainly due to increased pay rates, contributed $21.5 million to the
increase in cost of sales. Other factors affecting cost of sales were
individually immaterial.
U.K. and Europe Reportable Segment. Cost of sales incurred by our U.K. and
Europe operations during the three months ended March 29, 2020 increased $284.8
million , or 58.7%, from cost of sales incurred by our U.K. and Europe segment
during the three months ended March 31, 2019 , primarily because of costs
incurred by the acquired Tulip operations, partially offset by a decrease in
cost of sales incurred by our existing U.K. and Europe operations. Cost of sales
incurred by the acquired Tulip operations contributed $314.5 , or 64.8 percentage
points, to the increase in cost of sales. Cost of sales related to the existing
U.K. and Europe operations decreased $29.8 million , or 6.1 percentage points,
primarily from a decrease in cost per pound sold and the favorable impact of
foreign currency translation of $25.0 million , or 5.2 percentage points, and
$8.1 million , or 1.7 percentage points, respectively. Partially offsetting the
decrease in cost per pound sold and favorable impact of foreign currency
translation was an increase in sales volume of $3.3 million , or 0.7 percentage
points. Included in the increase in cost per pound and decreased sales volume
was a $25.6 million decrease in feed costs mainly due to feed deflation during
the three months ended March 29, 2020 , partially offset by a $4.3 million
increase in labor costs due to increased minimum wage and pension costs. Other
factors affecting cost of sales were individually immaterial.
Mexico Reportable Segment. Cost of sales incurred by our Mexico operations
during the three months ended March 29, 2020 increased $32.0 million , or 10.4%,
from cost of sales incurred by our Mexico segment during the three months ended
March 31, 2019 . This increase was primarily because of an increase in cost per
pound sold and increased sales volume contributing $39.8 million , or 13.0
percentage points, and $5.1 million , or 1.7 percentage points, respectively.
Partially offsetting these increases to cost of sales by $12.9 million , or 4.2
percentage points, was the favorable impact of foreign currency remeasurement.
Included in the increases in cost per pound sold and sales volume were costs and
sales volume related to expanded operations in Monterrey and Veracruz and a $6.3
million increase in costs due to grain, labor and egg purchases. Other factors
affecting cost of sales were individually immaterial.
Operating income. Operating income decreased by $52.7 million , or 38.4%,
from $137.0 million generated in the three months ended March 31, 2019 to $84.4
million generated in the three months ended March 29, 2020 . The following tables
provide information regarding operating income and selling, general and
administrative ("SG&A") expense:
Change from Three Months Ended March 31, Percent of Net Sales
Components of operating Three Months Ended 2019 Three Months Ended
income March 29, 2020 Amount Percent March 29, 2020 March 31, 2019
(In thousands, except percent data)
Gross profit $ 177,099 $ (41,840) (19.1) % 5.8 % 8.0 %
SG&A expense 92,713 10,789 13.2 % 3.0 % 3.0 %
Administrative restructuring
activity - 27 (100.0) % - % - %
Operating income $ 84,386 $ (52,656) (38.4) % 2.7 % 5.0 %
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Change from Three Months Ended March 31 ,
Three Months Ended 2019
Sources of operating income March 29, 2020 Amount Percent
(In thousands, except percent data)
U.S. $ 85,052 $ (29,789) (25.9) %
U.K. and Europe 23,190 10,477 82.4 %
Mexico (23,880) (33,344) (352.3) %
Eliminations 24 - - %
Total operating income $ 84,386 $ (52,656) (38.4) %
Change from Three Months Ended March 31,
Three Months Ended 2019
Sources of SG&A expense March 29, 2020 Amount Percent
(In thousands, except percent data)
U.S. $ 53,051 $ (2,307) (4.2) %
U.K. and Europe 28,938 12,067 71.5 %
Mexico 10,724 1,029 10.6 %
Total SG&A expense $ 92,713 $ 10,789 13.2 %
U.S. Reportable Segment. SG&A expense incurred by our U.S. reportable segment
during the three months ended March 29, 2020 decreased $2.3 million , or 4.2%,
from SG&A expense incurred by our U.S. reportable segment during the three
months ended March 31, 2019 . These decreases were primarily from a $3.8 million
reduction in incentive compensation expenses, partially offset by a $1.7 million
increase in legal fees due to increased litigation. Other factors affecting SG&A
expense were individually immaterial.
U.K. and Europe Reportable Segment. SG&A expense incurred by our U.K. and Europe
reportable segment during the three months ended March 29, 2020 increased $12.1
million , or 71.5%, from SG&A expense incurred by our U.K. and Europe segment
during the three months ended March 31, 2019 . SG&A expenses by our U.K. and
Europe reportable segment increased primarily due to expenses incurred by the
acquired Tulip operations and our existing U.K. and Europe operations by $8.5
million and $3.6 million , respectively. The increased expenses in our existing
U.K. and Europe operations were primarily due to a $2.2 million increase in
payroll expenses and a $2.0 million increase in bad debt expenses. Other factors
affecting SG&A expense were individually immaterial.
Mexico Reportable Segment. SG&A expense incurred by our Mexico reportable
segment during the three months ended March 29, 2020 increased approximately
$1.0 million , or 10.6%, from SG&A expense incurred by our Mexico segment during
the three months ended March 31, 2019 . Factors affecting our Mexico segment's
SG&A expense were individually immaterial.
Net interest expense. Net interest expense increased to $31.0 million
recognized in the three months ended March 29, 2020 from $30.2 million
recognized in the three months ended March 31, 2019 . Average borrowings
increased $81.9 million from the three months ended March 31, 2019 to the three
months ended March 29, 2020 and the weighted average interest rate decreased
from 5.4% in the three months ended March 31, 2019 to 5.1% in the three months
ended March 29, 2020 . As a percent of net sales, interest expense in the three
months ended March 29, 2020 and March 31, 2019 was 1.1% and 1.2%, respectively.
Income taxes. Income tax expense increased to $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 resulted primarily from
the effects of foreign currency fluctuations.
43
--------------------------------------------------------------------------------Liquidity and Capital Resources
The following table presents our available sources of liquidity as of
March 29, 2020 :
Facility Amount Amount
Source of Liquidity Amount Outstanding Available
(In millions)
Cash and cash equivalents $ - $ - $ 511.2
Borrowing arrangements:
U.S. Credit Facility(a) 750.0 350.0 359.6
Mexico Credit Facility(b) 64.3 - 64.3
U.K. and Europe Credit Facilities(c) 135.7 - 135.7
(a)Availability under theU.S. Credit Facility is also reduced by our outstanding standby letters of credit. Standby letters of credit outstanding atMarch 29, 2020 totaled$40.4 million . (b)TheU.S. dollar-equivalent of the amount available under the Mexico Credit Facility was$64.3 million . The Mexico Credit Facility provides for a loan commitment of$1.5 billion Mexican pesos. (c)TheU.K. and Europe Credit Facilities provide for aggregate loan commitments of £100.0 million (or$124.6 million U.S. dollar-equivalent) and €10.0 million (or$11.1 million U.S. dollar equivalent). We expect cash flows from operations, combined with availability under our credit facilities, to provide sufficient liquidity to fund current obligations, projected working capital requirements, maturities of long-term debt and capital spending for at least the next twelve months. Historical Flow of Funds Three Months EndedMarch 29, 2020 Cash provided by operating activities was$21.1 million for the three months endedMarch 29, 2020 . The cash flows provided by operating activities resulted primarily from net income of$67.4 million , net noncash expenses of$100.3 million , a change in inventory of$9.3 million and a change in other operating assets and liabilities of$7.0 million . These cash flows were offset by the use of$108.0 million related to accounts payable, accrued expenses and other current liabilities, the use of$26.3 million in cash related to trade accounts and other receivables, the use of$22.4 million in cash related to prepaid expenses and other current assets, and the use of$6.3 million in cash related to long-term pension and other postretirement obligations. Net noncash expenses provided$100.3 million in cash related to operating activities for the three months endedMarch 29, 2020 . Net noncash expense items included depreciation and amortization of$79.8 million , deferred income tax expense of$17.0 million , an adjustment to a previously recognized gain on a bargain purchase of$1.7 million , loan cost amortization of$1.2 million , share-based compensation expense of$0.7 million and a loss in equity-method investments and accretion of discounts related to Senior Notes of$0.3 million and$0.2 million , respectively. These expense items were partially offset by gains on property disposals and amortization of premiums related to Senior Notes of$0.5 million and$0.2 million , respectively. The change in trade accounts and other receivables, including accounts receivable from related parties, represented$26.3 million use of cash related to operating activities for the three months endedMarch 29, 2020 . This change is primarily due to customer payment timing. The change in inventories represented a$9.3 million source of cash related to operating activities for the three months endedMarch 29, 2020 . This change resulted primarily from a decrease in our processed and work-in-process inventories. The change in prepaid expenses and other current assets represented a$22.4 million use of cash related to operating activities for the three months endedMarch 29, 2020 . This change resulted primarily from a net increase in commodity and currency rate derivative assets and value-added tax receivables.
The change in accounts payable, revenue contract liabilities, accrued
expenses and other current liabilities, including accounts payable to related
parties, represented a
Cash used in investing activities totaled $78.3 million for the three months
ended March 29, 2020 . Cash used to acquire property, plant and equipment totaled
$77.2 million and cash used related to the purchase of Tulip totaled $1.7
million . Capital expenditures were primarily incurred to improve operational
efficiencies and reduce costs. These uses of cash were
44
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partially offset by proceeds generated from property disposals totaled
Cash proceeds from financing activities totaled $315.2 million for the three
months ended March 29, 2020 . Cash proceeds from revolving line of credit and
long-term debt totaled $356.5 million . These cash proceeds were partially offset
by cash used to purchase common stock under the share repurchase program of
$27.9 million and payments on revolving line of credit and long-term debt of
$13.4 million .
Three Months Ended March 31, 2019
Cash provided by operating activities was $120.4 million for the three months
ended March 31, 2019 . The cash flows provided by operating activities resulted
primarily from net income of $84.1 million and net noncash expenses of $65.1
million , a change in accounts payable, accrued expenses and other current
liabilities of $22.0 million and a change in prepaid expenses and other current
assets of $11.5 million . These cash flows were partially offset by $6.6 million
in cash provided by income taxes and $2.4 million in cash provided by trade
accounts and other receivables.
The change in trade accounts and other receivables, including accounts
receivable from related parties, represented $2.4 million source of cash related
to operating activities for the three months ended March 31, 2019 . This change
is primarily due to customer payment timing.
The change in inventories represented a
The change in prepaid expenses and other current assets represented a $11.5
million use of cash related to operating activities for the three months ended
March 31, 2019 . This change resulted primarily from a net increase in
value-added tax receivables.
The change in accounts payable, revenue contract liabilities, accrued
expenses and other current liabilities, including accounts payable to related
parties, represented a $22.0 million use of cash related to operating activities
for the three months ended March 31, 2019 . This change resulted primarily from
the timing of payments.
The change in income taxes, which includes income taxes receivable, income
taxes payable, deferred tax assets, deferred tax liabilities reserves for
uncertain tax positions, and the tax components within accumulated other
comprehensive loss, represented a
Net noncash expenses provided $65.1 million in cash related to operating
activities for the three months ended March 31, 2019 . Net noncash expense items
included depreciation and amortization of $67.2 million , share-based
compensation of $1.9 million and loan cost amortization of $1.2 million , which
were partially offset by a deferred income tax benefit of $4.1 million and a
foreign currency transaction gain related to borrowing arrangements of $1.0
million .
Cash used in investing activities totaled $87.4 million for the three months
ended March 31, 2019 . Cash used to acquire property, plant and equipment totaled
$87.9 million . Capital expenditures were primarily incurred to improve
operational efficiencies and reduce costs. Cash proceeds generated from property
disposals totaled $0.5 million during the thirteen weeks ended March 31, 2019 .
Cash proceeds from financing activities totaled $3.9 million for the three
months ended March 31, 2019 . Cash proceeds from revolving line of credit and
long-term debt totaled $67.2 million . These cash proceeds were offset by cash
payments on revolving line of credit and long-term debt of $62.3 million , a cash
distribution under our tax sharing agreement with JBS USA Food Company Holdings
of $0.5 million and cash used to pay capitalized loan costs of $0.5 million .
Debt
Our long-term debt and other borrowing arrangements consist of senior notes, revolving credit facilities and other term loan agreements. For a description, refer to "Note 13. Debt." Collateral Substantially all of our domestic inventories and domestic fixed assets are pledged as collateral to secure the obligations under theU.S. Credit Facility. 45 --------------------------------------------------------------------------------
Contractual Obligations
Contractual obligations at
Less than One to Three to Greater than
Contractual Obligations(a) Total One Year Three Years Five Years Five Years
(In thousands)
Long-term debt(b) $ 2,669,187 $ 25,408 $ 50,029 $ 1,743,750 $ 850,000
Interest(c) 752,112 127,832 253,444 221,023 149,813
Finance leases 2,267 562 988 717 -
Operating leases 324,473 76,240 119,335 76,186 52,712
Derivative liabilities 18,086 18,086 - - -
Purchase obligations(d) 318,529 318,529 - - -
Total $ 4,084,654 $ 566,657 $ 423,796 $ 2,041,676 $ 1,052,525
(a)The total amount of unrecognized tax benefits at March 29, 2020 was $12.8
million . We did not include this amount in the contractual obligations table
above as reasonable estimates cannot be made at this time of the amounts or
timing of future cash outflows.
(b)Long-term debt is presented at face value and excludes $40.4 million in
letters of credit outstanding related to normal business transactions.
(c)Interest expense in the table above assumes the continuation of interest
rates and outstanding borrowings as of March 29, 2020 .
(d)Includes agreements to purchase goods or services that are enforceable and
legally binding on us and that specify all significant terms, including fixed or
minimum quantities to be purchased; fixed, minimum, or variable price
provisions; and the approximate timing of the transaction.
Recent Accounting Pronouncements
See "Note 1. General" of our Condensed Consolidated Financial Statements
included in this quarterly report for additional information relating to these
recent accounting pronouncements.
Critical Accounting Policies and Estimates
For a description of our critical accounting policies and estimates, refer to
"Part II, Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations-Critical Accounting Policies and Estimates" in our
2019 Annual Report.
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