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Derivative Financial Instruments | 12 Months Ended
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Jan. 01, 2022
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments |
Note 1 0. | Derivative Financial Instruments
The company measures the fair value of its derivative portfolio by using the price that would be received to sell an asset or paid to transfer a liability in the principal market for that asset or liability. These measurements are classified into a hierarchy by the inputs used to perform the fair value calculation as follows: Level 1: Fair value based on unadjusted quoted prices for identical assets or liabilities at the measurement date Level 2: Modeled fair value with model inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3: Modeled fair value with unobservable model inputs that are used to estimate the fair value of the asset or liability Commodity Price Risk The company enters into commodity derivatives, designated as cash-flow hedges of existing or future exposure to changes in commodity prices. The company’s primary raw materials are flour, sweeteners, yeast, and shortening, along with pulp, paper, and petroleum-based packaging products. Natural gas, which is used as oven fuel, is also an important commodity used for production. As of January 1, 2022, the company’s commodity hedge portfolio contained derivatives which are recorded in the following accounts with fair values measured as indicated (amounts in thousands):
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other current assets |  | $ | 3,955 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,955 |
Other long-term assets |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 3,955 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,955 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other current liabilities |  | $ | (220 | ) |  | $ | — |  |  | $ | — |  |  | $ | (220 | )
Other long-term liabilities |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | (220 | ) |  | $ | — |  |  | $ | — |  |  | $ | (220 | )
Net Fair Value |  | $ | 3,735 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,735 |
As of January 2, 2021, the company’s commodity hedge portfolio contained derivatives which are recorded in the following accounts with fair values measured as indicated (amounts in thousands):
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other current assets |  | $ | 16,684 |  |  | $ | — |  |  | $ | — |  |  | $ | 16,684 |
Other long-term assets |  |  | 731 |  |  |  | — |  |  |  | — |  |  |  | 731 |
Total |  | $ | 17,415 |  |  | $ | — |  |  | $ | — |  |  | $ | 17,415 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other current liabilities |  | $ | (5 | ) |  | $ | — |  |  | $ | — |  |  | $ | (5 | )
Other long-term liabilities |  |  | (83 | ) |  |  | — |  |  |  | — |  |  |  | (83 | )
Total |  |  | (88 | ) |  |  | — |  |  |  | — |  |  |  | (88 | )
Net Fair Value |  | $ | 17,327 |  |  | $ | — |  |  | $ | — |  |  | $ | 17,327 |
The positions held in the portfolio are used to hedge economic exposure to changes in various raw materials and production input prices and effectively fixes the price, or limits increases in prices, during Fiscal 2022. These instruments are designated as cash-flow hedges. See Note 2, Summary of Significant Accounting Policies, for the accounting treatment of these hedged transactions. Interest Rate Risk During the first quarter of Fiscal 2021, the company entered into treasury locks to fix the interest rate for the 2031 notes issued on March 9, 2021. The derivative positions were closed when the debt was priced on March 2, 2021 with a cash settlement net receipt of $3.9 million that offset changes in the benchmark treasury rate between execution of the treasury rate locks and the debt pricing date. These rate locks were designated as a cash flow hedge and the deferred amount reported in AOCI is being reclassified to interest expense as interest payments are made on the notes through the maturity date. The company previously entered into treasury rate locks at the time we executed the 2026 notes. These rate locks were designated as a cash flow hedge and the fair value at termination was deferred in AOCI. The deferred amount reported in AOCI is being reclassified to interest expense as interest payments are made on the related notes through the maturity date. Derivative Assets and Liabilities The company had the following derivative instruments recorded on the Consolidated Balance Sheets, all of which are utilized for the risk management purposes detailed above (amounts in thousands):
|  | Derivative Assets |
|  | January 1, 2022 |  |  | January 2, 2021 |
Derivatives Designated as Hedging Instruments |  | Balance Sheet Location |  | Fair Value |  |  | Balance Sheet Location |  | Fair Value |
Commodity contracts |  | Other current assets |  | $ | 3,955 |  |  | Other current assets |  | $ | 16,684 |
Commodity contracts |  | Other long-term assets |  |  | — |  |  | Other long-term assets |  |  | 731 |
Total |  |  |  | $ | 3,955 |  |  |  |  | $ | 17,415 |
|  | Derivative Liabilities |
|  | January 1, 2022 |  |  | January 2, 2021 |
Derivatives Designated as Hedging Instruments |  | Balance Sheet Location |  | Fair Value |  |  | Balance Sheet Location |  | Fair Value |
Commodity contracts |  | Other current liabilities |  | $ | 220 |  |  | Other current liabilities |  | $ | 5 |
Commodity contracts |  | Other long-term liabilities |  |  | — |  |  | Other long-term liabilities |  |  | 83 |
Total |  |  |  | $ | 220 |  |  |  |  | $ | 88 |
Derivative AOCI transactions The company had the following derivative instruments for deferred gains and (losses) on closed contracts and the effective portion for changes in fair value recorded in AOCI (no amounts were excluded from the effectiveness test), all of which are utilized for the risk management purposes detailed above (amounts in thousands and net of tax):
|  | Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion) (Net of tax) |
Derivatives in Cash Flow Hedging Relationships |  | Fiscal 2021 |  |  | Fiscal 2020 |  |  | Fiscal 2019 |
Interest rate contracts |  | $ | 2,926 |  |  | $ | — |  |  | $ | — |
Commodity contracts |  | $ | (8,274 | ) |  | $ | 9,298 |  |  | $ | 8,457 |
Total |  | $ | (5,348 | ) |  | $ | 9,298 |  |  | $ | 8,457 |
|  | Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)(Net of tax) |  |  | Location of Gain or (Loss) Reclassified from AOCI into Income
Derivatives in Cash Flow Hedging Relationships |  | Fiscal 2021 |  |  | Fiscal 2020 |  |  | Fiscal 2019 |  |  | (Effective Portion)
Interest rate contracts |  | $ | 95 |  |  | $ | (109 | ) |  | $ | (107 | ) |  | Interest income (expense)
Commodity contracts |  |  | 1,586 |  |  |  | (2,007 | ) |  |  | 2,771 |  |  | Production costs (1)
Total |  | $ | 1,681 |  |  | $ | (2,116 | ) |  | $ | 2,664 |  |  |
1. | Included in Materials, supplies, labor and other production costs (exclusive of depreciation and amortization shown separately).
The balance (credit or (debit) balance) in AOCI related to commodity price risk and interest rate risk derivative transactions that are closed or will expire over the next three years are as follows (amounts in thousands and net of tax) at January 1, 2022:
|  | Commodity Price Risk Derivatives |  |  | Interest Rate Risk Derivatives |  |  | Totals |
Closed contracts |  | $ | 179 |  |  | $ | 3,063 |  |  | $ | 3,242 |
Expiring in 2022 |  |  | 2,801 |  |  |  | — |  |  |  | 2,801 |
Total |  | $ | 2,980 |  |  | $ | 3,063 |  |  | $ | 6,043 |
See Note 2, Summary of Significant Accounting Policies, for the accounting treatment of OCI for these hedged transactions. Derivative transactions notional amounts As of January 1, 2022, the company had entered into the following financial contracts to hedge commodity risks (amounts in thousands):
Derivatives in Cash Flow Hedging Relationships |  | Notional amount |
Wheat contracts |  | $ | 32,731 |
Soybean oil contracts |  |  | 7,088 |
Natural gas contracts |  |  | 3,663 |
Corn contracts |  |  | 342 |
Total |  | $ | 43,824 |
The company’s derivative instruments contained no credit-risk-related contingent features at January 1, 2022. As of January 1, 2022 and January 2, 2021, the company had $2.0 million and $1.2 million, respectively, recorded in other current assets representing collateral to counterparties for hedged positions. As of January 1, 2022 and January 2, 2021, the company had $3.4 million and $14.0 million, respectively, recorded in other accrued liabilities representing collateral from counterparties for hedged positions.

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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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