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DERIVATIVE FINANCIAL INSTRUMENTS | 9 Months Ended
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Sep. 26, 2021
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, the Netherlands and Ireland. 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. Undesignated contracts may include contracts not designated as a hedge or for which the normal purchase normal sales (“NPNS”) exception was not elected, contracts that do not qualify for hedge accounting and derivatives that do not or no longer qualify for the NPNS scope exception. The fair value of each of these derivatives is recognized in the Condensed Consolidated Balance Sheets within Prepaid expenses and other current assets or Accrued expenses and other current liabilities. Changes in fair value of each derivative are recognized immediately in the Condensed Consolidated Statements of Income within Net sales, C ost of sales, Selling, general and administrative expense, or Foreign currency transaction loss (gain) depending on the risk the derivative is intended to mitigate. While management believes these instruments help mitigate various market risks, they are not designated and accounted for as hedges as a result of the extensive record keeping requirements. The Company has elected not to apply the NPNS exemption to a fixed-price product sales contract with a certain customer in order to mitigate various risk exposures and to try to achieve an accounting result that aligns the accounting for the derivative with the economics achieved through the use of the derivative. Transactions originating from this contact are accounted for as undesignated derivatives and recognized at fair value. The Company does not apply hedge accounting treatment to 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. 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 does apply hedge accounting to certain derivative financial instruments related to its U.K. and Europe reportable segment that it has purchased to mitigate foreign currency transaction exposures. Before the settlement date of the financial derivative instruments, the Company recognizes changes in the fair value of the cash flow hedge into accumulated other comprehensive income (“AOCI”). When the derivative financial instruments 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 does apply hedge accounting to a derivative financial instrument related to its U.S. reportable segment that it has purchased to mitigate variable interest rate exposures. The interest rate swap has monthly settlement dates. Upon each settlement date, the Company recognizes changes in the fair value of the cash flow hedge into AOCI. Upon settlement of the derivative instrument, 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. Information regarding the Company’s outstanding derivative instruments and cash collateral posted with brokers is included in the following table:
| September 26, 2021 |  | December 27, 2020
| (In thousands)
Fair values |  |  |
Commodity derivative assets | $ | 8,443 |  |  | $ | 24,059 |
Commodity derivative liabilities | (29,744) |  |  | (6,531) |
Foreign currency derivative assets | 1,814 |  |  | 2,204 |
Foreign currency derivative liabilities | (139) |  |  | (428) |
Interest rate swap derivative liabilities | (345) |  |  | (640) |
Sales contract derivative assets | 2,201 |  |  | — |
Cash collateral posted with brokers(a) | 54,111 |  |  | 782 |
Derivatives coverage(b): |  |  |
Corn | 13.8 | % |  | 16.0 | %
Soybean meal | 35.0 | % |  | 24.0 | %
Period through which stated percent of needs are covered: |  |  |
Corn | September 2022 |  | December 2021
Soybean meal | March 2022 |  | December 2021
(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 table presents the gains and losses of each derivative instrument held by the Company not designated or qualifying as hedging instruments:
| Three Months Ended |  | Nine Months Ended |  |
Losses (Gains) by Type of Contract (a) | September 26, 2021 |  | September 27, 2020 |  | September 26, 2021 |  | September 27, 2020 |  | Affected Line Item in the Condensed Consolidated Statements of Income
| (In thousands) |  |
Foreign currency derivatives gain (loss) | $ | (4,493) |  |  | $ | (7,741) |  |  | $ | (7,975) |  |  | $ | 19,815 |  |  | Foreign currency transaction loss (gain)
Commodity derivative gain | 25,632 |  |  | 19,883 |  |  | 44,430 |  |  | 9,458 |  |  | Cost of sales
Sales contract derivative gain (loss) | (2,932) |  |  | — |  |  | 2,201 |  |  | — |  |  | Net sales
Total | $ | 18,207 |  |  | $ | 12,142 |  |  | $ | 38,656 |  |  | $ | 29,273 |  |  |
(a)Amounts in parentheses represent income (expenses) related to results of operations. 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 26, 2021 |  | September 27, 2020 |  | September 26, 2021 |  | September 27, 2020
| (In thousands)
Foreign currency derivatives | $ | (984) |  |  | $ | 1,388 |  |  | $ | 1,327 |  |  | 4,088 |
Interest rate swap derivatives | (35) |  |  | 50 |  |  | (164) |  |  | (879) |
Total | $ | (1,019) |  |  | $ | 1,438 |  |  | $ | 1,163 |  |  | 3,209 |
| Three Months Ended September 26, 2021 |  | Three Months Ended September 27, 2020
| Net sales(a) |  | Cost of sales(b) |  | Interest expense, net of capitalized interest(b) |  | Net sales(a) |  | Cost of sales(b) |  | Interest expense, net of capitalized interest(b)
| (In thousands)
Total amounts of income and expense line items presented in the Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded | $ | 3,827,566 |  |  | $ | 3,455,723 |  |  | $ | 29,833 |  |  | $ | 3,075,121 |  |  | $ | 2,761,279 |  |  | $ | 30,564 |
Impact from cash flow hedging instruments: |  |  |  |  |  |  |  |  |  |  |
Interest rates swaps | — |  |  | — |  |  | 170 |  |  | — |  |  | — |  |  | 101 |
Foreign currency contracts | 67 |  |  | (2) |  |  | — |  |  | (206) |  |  | 649 |  |  | — |
(a) Amounts in parentheses represent income (expenses) related to net sales. (b) Amounts in parentheses represent (income) expenses related to cost of sales and interest expense.
| Nine Months Ended September 26, 2021 |  | Nine Months Ended September 27, 2020
| Net sales(a) |  | Cost of sales(b) |  | Interest expense, net of capitalized interest(b) |  | Net sales(a) |  | Cost of sales(b) |  | Interest expense, net of capitalized interest(b)
| (In thousands) |  |
Total amounts of income and expense line items presented in the Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded | $ | 10,738,689 |  |  | $ | 9,725,362 |  |  | $ | 110,818 |  |  | $ | 8,974,072 |  |  | $ | 8,363,272 |  |  | $ | 95,575 |
Impact from cash flow hedging instruments: |  |  |  |  |  |  |  |  |  |  |
Interest rates swaps | — |  |  | — |  |  | 460 |  |  | — |  |  | — |  |  | 99 |
Foreign currency contracts | 2,475 |  |  | 868 |  |  | — |  |  | (656) |  |  | 517 |  |  | — |
(a) Amounts in parentheses represent income (expenses) related to net sales. (b) Amounts in parentheses represent (income) expenses related to cost of sales and interest expense. At September 26, 2021, the pre-tax deferred net gains 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 $378.0 thousand. 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 26, 2021, 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 $345.0 thousand. 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 or gains 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 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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