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Derivatives | 9 Months Ended
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Sep. 30, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | Derivatives The Company’s operations are exposed to market risks relating to commodity prices that affect the Company’s cost of raw materials, finished product prices and energy costs and the risk of changes in interest rates and foreign currency exchange rates. The Company makes limited use of derivative instruments to manage cash flow risks related to natural gas usage, diesel fuel usage, inventory, forecasted sales and foreign currency exchange rates. The Company does not use derivative instruments for trading purposes. Natural gas swaps and options are entered into with the intent of managing the overall cost of natural gas usage by reducing the potential impact of seasonal weather demands on natural gas that increases natural gas prices. Heating oil swaps and options are entered into with the intent of managing the overall cost of diesel fuel usage by reducing the potential impact of seasonal weather demands on diesel fuel that increases diesel fuel prices. Corn options and future contracts are entered into with the intent of managing U.S. forecasted sales of bakery by-products (“BBP”) by reducing the impact of changing prices. Foreign currency forward contracts are entered into to mitigate the foreign exchange rate risk for transactions designated in a currency other than the local functional currency. At September 30, 2017, the Company had natural gas swap contracts and corn option contracts outstanding that qualified and were designated for hedge accounting as well as corn option and forward contracts, foreign currency forward contracts and soybean meal option contracts that did not qualify and were not designated for hedge accounting. Entities are required to report all derivative instruments in the statement of financial position at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, on the reason for holding the instrument. If certain conditions are met, entities may elect to designate a derivative instrument as a hedge of exposures to changes in fair value, cash flows or foreign currencies. If the hedged exposure is a cash flow exposure, the effective portion of the gain or loss on the derivative instrument is reported initially as a component of other comprehensive income (outside of earnings) and is subsequently reclassified into earnings when the forecasted transaction affects earnings. Any amounts excluded from the assessment of hedge effectiveness, as well as the ineffective portion of the gain or loss, are reported in earnings immediately. If the derivative instrument is not designated as a hedge, the gain or loss is recognized in earnings in the period of change. Cash Flow Hedges In the first nine months of fiscal 2017, the Company entered into natural gas swap contracts that are considered cash flow hedges. Under the terms of the natural gas swap contracts, the Company fixed the expected purchase cost of a portion of its U.S. plants' forecasted natural gas usage into the first quarter of fiscal 2018. As of September 30, 2017, some of the contracts have expired and settled according to the contracts while the remaining contract positions and activity are disclosed below. In fiscal 2016 and the first nine months of fiscal 2017, the Company entered into corn option contracts on the Chicago Board of Trade that are designated as cash flow hedges. Under the terms of the corn option contracts, the Company hedged a portion of its U.S. forecasted sales of BBP into the fourth quarter of fiscal 2018. As of September 30, 2017, some of the contracts have been settled while the remaining contract positions and activity are disclosed below. From time to time, the Company may enter into corn option contracts in the future. As of September 30, 2017, the Company had the following outstanding forward contract amounts that were entered into to hedge the future payments of intercompany note transactions, foreign currency transactions in currencies other than the functional currency and forecasted transactions in currencies other than the functional currency. All of these transactions are currently not designated for hedge accounting (in thousands):
Functional Currency |  | Contract Currency
Type | Amount |  | Type | Amount
Brazilian real | 33,790 |  |  | Euro | 9,030 |
Brazilian real | 80,286 |  |  | U.S. dollar | 24,430 |
Brazilian real | 953 |  |  | Mexican peso | 5,472 |
Euro | 82,573 |  |  | U.S. dollar | 97,985 |
Euro | 7,463 |  |  | Polish zloty | 32,000 |
Euro | 4,040 |  |  | Japanese yen | 526,400 |
Euro | 60,758 |  |  | Chinese renminbi | 474,901 |
Euro | 11,455 |  |  | Australian dollar | 17,200 |
Euro | 2,281 |  |  | British pound | 2,000 |
Polish zloty | 35,960 |  |  | Euro | 8,383 |
Japanese yen | 40,395 |  |  | U.S. dollar | 362 |
The Company estimates the amount that will be reclassified from accumulated other comprehensive gain at September 30, 2017 into earnings over the next 12 months will be approximately $2.2 million. As of September 30, 2017, no amounts have been reclassified into earnings as a result of the discontinuance of cash flow hedges. The following table presents the fair value of the Company’s derivative instruments under FASB authoritative guidance as of September 30, 2017 and December 31, 2016 (in thousands):
Derivatives Designated | Balance Sheet | Asset Derivatives Fair Value
as Hedges | Location | September 30, 2017 | December 31, 2016
Corn options | Other current assets | $ | 2,876 |  | $ | 4,235 |
Corn options | Other assets | 106 |  | — |
Natural gas swaps | Other current assets | 82 |  | — |
Total asset derivatives designated as hedges | $ | 3,064 |  | $ | 4,235 |
Derivatives Not Designated as Hedges |  |  |  |  |
Foreign currency contracts | Other current assets | $ | 1,153 |  | $ | 8,939 |
Corn options and futures | Other current assets | 1,167 |  | 151 |
Soybean meal options | Other current assets | 64 |  | — |
Total asset derivatives not designated as hedges | $ | 2,384 |  | $ | 9,090 |
Total asset derivatives |  | $ | 5,448 |  | $ | 13,325 |
Derivatives Designated | Balance Sheet | Liability Derivatives Fair Value
as Hedges | Location | September 30, 2017 | December 31, 2016
Natural gas swaps | Accrued expenses | $ | 4 |  | $ | — |
Total liability derivatives designated as hedges | $ | 4 |  | $ | — |
Derivatives Not Designated as Hedges |  |  |  |  |
Foreign currency contracts | Accrued expenses | $ | 1,063 |  | $ | 608 |
Corn options and futures | Accrued expenses | 21 |  | 122 |
Total liability derivatives not designated as hedges | $ | 1,084 |  | $ | 730 |
Total liability derivatives | $ | 1,088 |  | $ | 730 |
The effect of the Company’s derivative instruments on the consolidated financial statements as of and for the three months ended September 30, 2017 and October 1, 2016 is as follows (in thousands):
Derivatives Designated as Cash Flow Hedges | Gain or (Loss) Recognized in Other Comprehensive Income (“OCI”) on Derivatives (Effective Portion) (a) | Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) (b) | Gain or (Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) (c)
| 2017 | 2016 | 2017 | 2016 | 2017 | 2016
Corn options | $ | 2,740 |  | $ | 2,060 |  | $ | 1,352 |  | $ | 861 |  | $ | 1,655 |  | $ | 323 |
Natural gas swaps | 36 |  | — |  | — |  | — |  | 34 |  | — |
Total | $ | 2,776 |  | $ | 2,060 |  | $ | 1,352 |  | $ | 861 |  | $ | 1,689 |  | $ | 323 |
(a) | Amount recognized in accumulated OCI (effective portion) is reported as accumulated other comprehensive income/(loss) of approximately $2.8 million and $2.1 million recorded net of taxes of approximately $(1.1) million and $(0.8) million as of September 30, 2017 and October 1, 2016, respectively.
(b) | Gains and (losses) reclassified from accumulated OCI into income (effective portion) for corn options are included in cost of sales, respectively, in the Company’s consolidated statements of operations.
(c) | Gains and (losses) recognized in income on derivatives (ineffective portion) for corn options are included in other income/ (expense), net in the Company’s consolidated statements of operations.
The effect of the Company’s derivative instruments on the consolidated financial statements as of and for the nine months ended September 30, 2017 and October 1, 2016 is as follows (in thousands):
Derivatives Designated as Cash Flow Hedges | Gain or (Loss) Recognized in Other Comprehensive Income (“OCI”) on Derivatives (Effective Portion) (a) | Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) (b) | Gain or (Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) (c)
| 2017 | 2016 | 2017 | 2016 | 2017 | 2016
Corn options | $ | 1,918 |  | $ | 5,255 |  | $ | 3,750 |  | $ | 3,204 |  | $ | 350 |  | $ | 537 |
Natural gas swaps | 36 |  | — |  | — |  | — |  | 34 |  | — |
Total | $ | 1,954 |  | $ | 5,255 |  | $ | 3,750 |  | $ | 3,204 |  | $ | 384 |  | $ | 537 |
(a) | Amount recognized in accumulated OCI (effective portion) is reported as accumulated other comprehensive income/(loss) of approximately $2.0 million and $5.3 million recorded net of taxes of approximately $(0.8) million and $(2.0) million as of September 30, 2017 and October 1, 2016, respectively.
(b) | Gains and (losses) reclassified from accumulated OCI into income (effective portion) for corn options are included in cost of sales, respectively, in the Company’s consolidated statements of operations.
(c) | Gains and (losses) recognized in income on derivatives (ineffective portion) for corn options are included in other income/ (expense), net in the Company’s consolidated statements of operations.
The table below summarizes the effect of derivatives not designated as hedges on the Company's consolidated statements of operations for the three and nine months months ended September 30, 2017 and October 1, 2016 (in thousands):
|  |  |  | Loss or (Gain) Recognized in Income on Derivatives Not Designated as Hedges
|  |  |  | Three Months Ended | Nine Months Ended
Derivatives not designated as hedging instruments |  | Location |  | September 30, 2017 | October 1, 2016 | September 30, 2017 | October 1, 2016
Foreign Exchange |  | Foreign currency loss/(gain) |  | $ | 3,142 |  | $ | 1,871 |  | $ | 12,418 |  | $ | 5,954 |
Foreign Exchange |  | Selling, general and administrative expense |  | (2,118 | ) | (786 | ) | (3,107 | ) | (7,565 | )
Corn options and futures |  | Net sales |  | 165 |  | 267 |  | 125 |  | 612 |
Corn options and futures |  | Cost of sales and operating expenses |  | (1,566 | ) | (997 | ) | (1,250 | ) | (1,610 | )
Heating Oil swaps and options |  | Net sales |  | 492 |  | 323 |  | 492 |  | 476 |
Soybean Meal |  | Net sales |  | (131 | ) | — |  | (412 | ) | 7 |
Soybean Oil |  | Net sales |  | — |  | — |  | 45 |  | — |
Total |  |  |  | $ | (16 | ) | $ | 678 |  | $ | 8,311 |  | $ | (2,126 | )
At September 30, 2017, the Company had forward purchase agreements in place for purchases of approximately $58.6 million of natural gas and diesel fuel. These forward purchase agreements have no net settlement provisions and the Company intends to take physical delivery of the underlying product. Accordingly, the forward purchase agreements are not subject to the requirements of fair value accounting because they qualify and the Company has elected to account for these as normal purchases as defined in the FASB authoritative guidance.

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- References No definition available. + Details
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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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