XML 26 R16.htm IDEA: XBRL DOCUMENT
v3.4.0.3

DERIVATIVES AND HEDGING | 6 Months Ended
--- | ---
Apr. 24, 2016
DERIVATIVES AND HEDGING |
DERIVATIVES AND HEDGING | NOTE G DERIVATIVES AND HEDGING The Company uses hedging programs to manage price risk associated with commodity purchases. These programs utilize futures contracts and swaps to manage the Company’s exposure to price fluctuations in the commodities markets. The Company has determined that its programs which are designated as hedges are highly effective in offsetting the changes in fair value or cash flows generated by the items hedged. Cash Flow Hedges: The Company currently utilizes corn futures to offset the price fluctuation in the Company’s future direct grain purchases, and has historically entered into various swaps to hedge the purchases of grain at certain locations. The financial instruments are designated and accounted for as cash flow hedges, and the Company measures the effectiveness of the hedges at least quarterly. Effective gains or losses related to these cash flow hedges are reported in accumulated other comprehensive loss (AOCL) and reclassified into earnings, through cost of products sold, in the period or periods in which the hedged transactions affect earnings. Any gains or losses related to hedge ineffectiveness are recognized in the current period cost of products sold. The Company typically does not hedge its grain exposure beyond the next two upcoming fiscal years. As of April 24, 2016, and October 25, 2015, the Company had the following outstanding commodity futures contracts that were entered into to hedge forecasted purchases:
|  | Volume
Commodity |  | April 24, 2016 |  | October 25, 2015
Corn |  | 26.4 million bushels |  | 20.1 million bushels
As of April 24, 2016, the Company has included in AOCL, hedging losses of $2.1 million (before tax) relating to these positions, compared to gains of $1.0 million (before tax) as of October 25, 2015. The Company expects to recognize the majority of these losses over the next 12 months. Fair Value Hedges: The Company utilizes futures to minimize the price risk assumed when forward priced contracts are offered to the Company’s commodity suppliers. The intent of the program is to make the forward priced commodities cost nearly the same as cash market purchases at the date of delivery. The futures contracts are designated and accounted for as fair value hedges, and the Company measures the effectiveness of the hedges at least quarterly. Changes in the fair value of the futures contracts, along with the gain or loss on the hedged purchase commitment, are marked-to-market through earnings and are recorded on the Consolidated Statements of Financial Position as a current asset and liability, respectively. Effective gains or losses related to these fair value hedges are recognized through cost of products sold in the period or periods in which the hedged transactions affect earnings. Any gains or losses related to hedge ineffectiveness are recognized in the current period cost of products sold. As of April 24, 2016, and October 25, 2015, the Company had the following outstanding commodity futures contracts designated as fair value hedges:
|  | Volume
Commodity |  | April 24, 2016 |  | October 25, 2015
Corn |  | 1.0 million bushels |  | 5.3 million bushels
Lean hogs |  | 0.2 million cwt |  | 0.4 million cwt
Other Derivatives: The Company holds certain futures and options contract positions as part of a merchandising program and to manage the Company’s exposure to fluctuations in commodity markets. The Company has not applied hedge accounting to these positions. As of April 24, 2016, and October 25, 2015, the Company had the following outstanding futures related to these programs:
|  | Volume
Commodity |  | April 24, 2016 |  | October 25, 2015
Corn |  | 3.9 million bushels |  | 2.6 million bushels
Soybean meal |  | 17,900 tons |  | 11,500 tons
Fair Values: The fair values of the Company’s derivative instruments (in thousands) as of April 24, 2016, and October 25, 2015, were as follows:
|  |  |  | Fair Value (1)
|  | Location on Consolidated Statements of Financial Position |  | April 24, 2016 |  | October 25, 2015
Asset Derivatives: |  |  |  |  |  |
Derivatives Designated as Hedges: |  |  |  |  |  |
Commodity contracts |  | Other current assets |  | $ | (3,370) |  | $ | 305
Derivatives Not Designated as Hedges: |  |  |  |  |  |
Commodity contracts |  | Other current assets |  | 319 |  | 248
Total Asset Derivatives |  |  |  | $ | (3,051) |  | $ | 553
| (1) |  | Amounts represent the gross fair value of derivative assets and liabilities. The Company nets the derivative assets and liabilities for each of its hedging programs, including cash collateral, when a master netting arrangement exists between the Company and the counterparty to the derivative contract. The amount or timing of cash collateral balances may impact the classification of the derivative in the Consolidated Statements of Financial Position. See Note L “Fair Value Measurements” for a discussion of these net amounts as reported in the Consolidated Statements of Financial Position.
Derivative Gains and Losses: Gains or losses (before tax, in thousands) related to the Company’s derivative instruments for the second quarter ended April 24, 2016, and April 26, 2015, were as follows:
|  | Gain/(Loss) Recognized in AOCL (Effective Portion) (1) |  | Location on Consolidated Statements of Operations |  | Gain/(Loss) Reclassified from AOCL into Earnings (Effective Portion) (1) |  | Gain/(Loss) Recognized in Earnings (Ineffective Portion) (2) (4)
|  | Three Months Ended |  |  | Three Months Ended |  | Three Months Ended
Cash Flow Hedges: |  | April 24, 2016 | April 26, 2015 |  |  | April 24, 2016 | April 26, 2015 |  | April 24, 2016 | April 26, 2015
Commodity contracts |  | $ | (1,620) | $ | (5,033) |  | Cost of products sold |  | $ | (577) | $ | (2,705) |  | $ | (29) | $ | -
|  |  |  | Location on Consolidated Statements of Operations |  | Gain/(Loss) Recognized in Earnings (Effective Portion) (3) |  | Gain/(Loss) Recognized in Earnings (Ineffective Portion) (2) (5)
|  |  |  |  | Three Months Ended |  | Three Months Ended
Fair Value Hedges: |  |  |  |  |  | April 24, 2016 | April 26, 2015 |  | April 24, 2016 | April 26, 2015
Commodity contracts |  |  |  |  | Cost of products sold |  | $ | 664 | $ | (3,769) |  | $ | 13 | $ | 203
|  |  |  |  | Location on Consolidated Statements of Operations |  | Gain/(Loss) Recognized in Earnings |  |
|  |  |  |  |  | Three Months Ended |  |
Derivatives Not Designated as Hedges: |  |  |  |  |  | April 24, 2016 | April 26, 2015 |  |  |
Commodity contracts |  |  |  |  | Cost of products sold |  | $ | 50 | $ | (264) |  |  |
Derivative Gains and Losses: Gains or losses (before tax, in thousands) related to the Company’s derivative instruments for the six months ended April 24, 2016, and April 26, 2015, were as follows:
|  | Gain/(Loss) Recognized in AOCL (Effective Portion) (1) |  | Location on Consolidated Statements of Operations |  | Gain/(Loss) Reclassified from AOCL into Earnings (Effective Portion) (1) |  | Gain/(Loss) Recognized in Earnings (Ineffective Portion) (2) (4)
|  | Six Months Ended |  |  | Six Months Ended |  | Six Months Ended
Cash Flow Hedges: |  | April 24, 2016 | April 26, 2015 |  |  | April 24, 2016 | April 26, 2015 |  | April 24, 2016 | April 26, 2015
Commodity contracts |  | $ | (4,468) | $ | (1,370) |  | Cost of products sold |  | $ | (1,344) | $ | (7,084) |  | $ | (28) | $ | -
|  |  |  | Location on Consolidated Statements of Operations |  | Gain/(Loss) Recognized in Earnings (Effective Portion) (3) |  | Gain/(Loss) Recognized in Earnings (Ineffective Portion) (2) (5)
|  |  |  |  | Six Months Ended |  | Six Months Ended
Fair Value Hedges: |  |  |  |  |  | April 24, 2016 | April 26, 2015 |  | April 24, 2016 | April 26, 2015
Commodity contracts |  |  |  |  | Cost of products sold |  | $ | 1,906 | $ | (3,937) |  | $ | (239) | $ | 93
|  |  |  |  | Location on Consolidated Statements of Operations |  | Gain/(Loss) Recognized in Earnings |  |
|  |  |  |  |  | Six Months Ended |  |
Derivatives Not Designated as Hedges: |  |  |  |  |  | April 24, 2016 | April 26, 2015 |  |  |
Commodity contracts |  |  |  |  | Cost of products sold |  | $ | (430) | $ | (135) |  |  |
| (1) |  | Amounts represent gains or losses in AOCL before tax. See Note I “Accumulated Other Comprehensive Loss” or the Consolidated Statements of Comprehensive Income for the after-tax impact of these gains or losses on net earnings.
| (2) |  | There were no gains or losses excluded from the assessment of hedge effectiveness during the second quarter or first six months.
| (3) |  | Amounts represent losses on commodity contracts designated as fair value hedges that were closed during the second quarter or first six months, which were offset by a corresponding gain on the underlying hedged purchase commitment. Additional gains or losses related to changes in the fair value of open commodity contracts, along with the offsetting gain or loss on the hedged purchase commitment, are also marked-to-market through earnings with no impact on a net basis.
| (4) |  | There were no gains or losses resulting from the discontinuance of cash flow hedges during the second quarter or first six months.
| (5) |  | There were no gains or losses recognized as a result of a hedged firm commitment no longer qualifying as a fair value hedge during the second quarter or first six months.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624171-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41620-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624163-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5579240-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624177-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80784-113994 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41641-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5579245-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624258-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5708775-113959 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5708773-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5618551-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5580258-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624181-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41638-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration