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DERIVATIVE FINANCIAL INSTRUMENTS | 9 Months Ended
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Sep. 27, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE FINANCIAL INSTRUMENTS | 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 Company has exposure to variability in cash flows from interest payments due to the use of variable interest rates on certain long-term debt arrangements in the U.S. reportable segment. The Company has purchased an interest rate swap contract to convert the variable interest rate to a fixed interest rate on a portion of its outstanding long-term debt arrangements in order to manage this interest rate risk and add stability to interest expense and cash flows. 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 Net sales and Cost of sales in the Condensed Consolidated Statements of Income. The Company has designated a derivative financial instrument related to its U.S. reportable segment that it has purchased to mitigate variable interest rate exposures as a cash flow hedge. The interest rate swap has monthly settlement dates. Upon each settlement date, the Company recognizes changes in the fair value of the effective portion of the cash flow hedge into AOCI, while it recognizes changes in the ineffective portion immediately in earnings. Upon settlement of the effective portion, the amount in AOCI is then reclassified to earnings. Gains or losses related to the interest rate swap derivative financial instrument are included in the line item Interest expense, net of capitalized interest in the Condensed Consolidated Statements of Income. The Company recognized net gains of $12.0 million and net losses of $10.0 million related to changes in the fair value of its derivative financial instruments during the three months ended September 27, 2020 and September 29, 2019, respectively. The Company recognized net gains of $29.2 million and net losses of $18.5 million related to changes in the fair value of its derivative financial instruments during the nine months ended September 27, 2020 and September 29, 2019, respectively. Information regarding the Company’s outstanding derivative instruments and cash collateral posted with brokers is included in the following table:
| September 27, 2020 |  | December 29, 2019
| (In thousands)
Fair values: |  |  |
Commodity derivative assets | $ | 12,639 |  |  | $ | 5,053 |
Commodity derivative liabilities | (6,079) |  |  | (5,430) |
Foreign currency derivative assets | 7,919 |  |  | 426 |
Foreign currency derivative liabilities | (316) |  |  | (5,400) |
Interest rate swap derivative liabilities | (780) |  |  | — |
Cash collateral posted with brokers(a) | 17,106 |  |  | 20,009 |
Derivatives coverage(b): |  |  |
Corn | — | % |  | 12.0 | %
Soybean meal | 17.0 | % |  | 44.0 | %
Period through which stated percent of needs are covered: |  |  |
Corn | NA |  | December 2020
Soybean meal | July 2021 |  | 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 |  | Nine Months Ended
| September 27, 2020 |  | September 29, 2019 |  | September 27, 2020 |  | September 29, 2019
| (In thousands)
Foreign currency derivatives | $ | 1,388 |  |  | $ | (1,644) |  |  | $ | 4,088 |  |  | $ | (1,257) |
Interest rate swap derivatives | 50 |  |  | — |  |  | (879) |  |  | — |
Total | $ | 1,438 |  |  | $ | (1,644) |  |  | $ | 3,209 |  |  | $ | (1,257) |
| Gain (Loss) Reclassified from AOCI into Income
| Three Months Ended |  | Nine Months Ended
| September 27, 2020 |  | September 29, 2019 |  | September 27, 2020 |  | September 29, 2019
| (In thousands)
Foreign currency derivatives | $ | 1,720 |  |  | $ | 247 |  |  | $ | 1,138 |  |  | $ | 74 |
Interest rate swap derivatives | (101) |  |  | — |  |  | (99) |  |  | — |
Total | $ | 1,619 |  |  | $ | 247 |  |  | $ | 1,039 |  |  | $ | 74 |
At September 27, 2020, the pre-tax deferred net losses on foreign currency derivatives recorded in AOCI that are expected to be reclassified to the Condensed Consolidated Statements of Income during the next twelve months are $1.9 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 losses to earnings. At September 27, 2020, the pre-tax deferred net losses on interest rate swap derivatives recorded in AOCI that are expected to be reclassified to the Condensed Consolidated Statements of Income during the next twelve months are $0.5 million. This expectation is based on the anticipated settlements on the hedged interest rate that will occur over the next twelve months, at which time the Company will recognize the deferred losses to earnings.

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- 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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