XML 31 R22.htm IDEA: XBRL DOCUMENT
v3.22.1

Derivatives | 3 Months Ended
--- | ---
Apr. 02, 2022
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. Soybean meal options are entered into with the intent of managing the impact of changing prices for poultry meal sales. 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 and option contracts are entered into to mitigate the foreign exchange rate risk for transactions designated in a currency other than the local functional currency. At April 2, 2022, the Company had corn option contracts, soybean meal forward contracts and foreign exchange forward and option contracts outstanding that qualified and were designated for hedge accounting as well as corn forward contracts and foreign currency forward contracts that did not qualify and were not designated for hedge accounting. Cash Flow Hedges In fiscal 2021, 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 2022. At April 2, 2022 and January 1, 2022, the aggregate fair value of these corn option contracts was approximately $10.2 million and $2.8 million, respectively. These amounts are included in accrued expenses on the balance sheet, with an offset recorded in accumulated other comprehensive loss. The Company may enter into corn option contracts in the future from time to time. In fiscal 2021 and fiscal 2022, the Company entered into foreign exchange forward and option contracts that are designated as cash flow hedges. Under the terms of the foreign exchange contracts, the Company hedged a portion of its forecasted collagen sales in currencies other than the functional currency through the fourth quarter of fiscal 2023. At April 2, 2022 and January 1, 2022, the aggregate fair value of these foreign exchange contracts was approximately $41.1 million and $0.6 million, respectively. These amounts are included in other current assets, noncurrent assets and accrued expense on the balance sheet, with an offset recorded in accumulated other comprehensive loss. In fiscal 2021 and fiscal 2022, the Company entered into soybean meal forward contracts to hedge a portion of its forecasted poultry meal sales into the third quarter of fiscal 2022. At April 2, 2022 and January 1, 2022, the aggregate fair value of the soybean meal contracts was $0.1 million and $0.1 million, respectively. These amounts are included in other current assets and accrued expenses on the balance sheet, with an offset recorded in accumulated other comprehensive loss. As of April 2, 2022, the Company had the following designated and non-designated outstanding forward and option contract amounts that were entered into to hedge foreign currency transactions in currencies other than the functional currency and forecasted transactions in currencies other than the functional currency (in thousands):
Functional Currency |  | Contract Currency
Type | Amount |  | Type | Amount
Brazilian real | 60,371 |  |  | Euro | 10,520 |
Brazilian real | 3,074,644 |  |  | U.S. dollar | 737,900 |
Euro | 34,817 |  |  | U.S. dollar | 39,265 |
Euro | 25,215 |  |  | Polish zloty | 120,000 |
Euro | 5,653 |  |  | Japanese yen | 752,890 |
Euro | 29,996 |  |  | Chinese renminbi | 212,151 |
Euro | 14,759 |  |  | Australian dollar | 22,400 |
Euro | 3,412 |  |  | British pound | 2,860 |
Euro | 36 |  |  | Canadian dollar | 50 |
Polish zloty | 431 |  |  | U.S. dollar | 100 |
Polish zloty | 34,710 |  |  | Euro | 7,338 |
British pound | 229 |  |  | Euro | 273 |
Japanese yen | 331,807 |  |  | U.S. dollar | 2,792 |
U.S. dollar | 275 |  |  | Japanese yen | 34,000 |
U.S. dollar | 236,171 |  |  | Euro | 215,000 |
Australian dollar | 1,243 |  |  | Euro | 786 |
Canadian dollar | 13,107 |  |  | U.S. dollar | 10,500 |
The Company estimates the amount that will be reclassified from accumulated other comprehensive income at April 2, 2022 into earnings over the next 12 months will be approximately $7.9 million. As of April 2, 2022, no amounts have been reclassified into earnings as a result of the discontinuance of cash flow hedges. The table below summarizes the effect of derivatives not designated as hedges on the Company's consolidated statements of operations for the three months ended April 2, 2022 and April 3, 2021 (in thousands):
|  |  |  | Loss or (Gain) Recognized in Income on Derivatives Not Designated as Hedges
|  |  |  | Three Months Ended |
Derivatives not designated as hedging instruments |  | Location |  | April 2, 2022 | April 3, 2021 |  |
Foreign exchange |  | Foreign currency loss |  | $ | 7,466 |  | $ | 5,389 |  |  |
Foreign exchange |  | Net sales |  | 158 |  | 729 |  |  |
Foreign exchange |  | Cost of sales and operating expenses |  | (256) |  | (444) |  |  |
Foreign exchange |  | Selling, general and administrative expenses |  | (6,524) |  | 2,531 |  |  |
Corn options and futures |  | Net sales |  | (2,136) |  | (998) |  |  |
Corn options and futures |  | Cost of sales and operating expenses |  | 5,553 |  | 1,469 |  |  |
Total |  |  |  | $ | 4,261 |  | $ | 8,676 |  |  |
At April 2, 2022, the Company had forward purchase agreements in place for purchases of approximately $126.2 million of natural gas and diesel fuel. The Company intends to take physical delivery of the commodities under the forward purchase agreements and accordingly, these contracts are not subject to the requirements of fair value accounting because they qualify as normal purchases.

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://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
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration