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Derivative instruments
 12 Months Ended
Dec. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative instruments Derivative instruments

The following table presents the fair values of derivative instruments included in the consolidated balance sheets as of December 31, 2019 and 2018: 



Assets
 

Liabilities
Type of Derivative
Balance Sheets Location
2019
2018
 
Balance Sheets Location
2019
2018
Derivatives designated as hedging instruments
 
 


Cash Flow hedge





 



Forward contracts
Other receivables
$
259

$
628

 
Accrued payroll and other liabilities
$
(532
)
$
(180
)
Cross-currency interest rate swap
Derivative instruments
37,219

37,869

 
Derivative instruments
(8,179
)
(8,728
)
Call spread
Derivative instruments
20,609

16,867

 
Derivative instruments
—

—

Coupon-only swap
Derivative instruments
—

—

 
Derivative instruments
(5,326
)
(5,152
)
Subtotal

58,087

55,364

 

(14,037
)
(14,060
)
Derivatives not designated as hedging instruments




 





Forward contracts
Other receivables
20

99

 
Accrued payroll and other liabilities
—

(144
)
Subtotal

20

99

 

—

(144
)
Total derivative instruments
$
58,107

$
55,463

 

$
(14,037
)
$
(14,204
)











Derivatives designated as hedging instruments

Cash flow hedge

Forward contracts

The Company has entered into various forward contracts in a few territories to hedge a portion of the foreign exchange risk associated with forecasted imports of goods. The effect of the hedges results in fixing the cost of goods acquired (i.e. the net settlement or collection adjusts the cost of inventory paid to the suppliers). As of December 31, 2019, the Company has forward contracts outstanding with a notional amount of $25,700 that mature during 2020.

The Company made net collections (payments) totaling $711, $75 and $(1,236) during fiscal years 2019, 2018 and 2017, respectively, as a result of the net settlements of these derivatives.

Cross-currency interest rate swap

The Company entered into three cross-currency interest rate swap agreements to hedge all the variability in a portion (73%) of the principal and interest collections of its BRL intercompany loan receivables with ADBV. The agreements were signed during November 2013 (amended in February 2017), June and July 2017. The following table presents information related to the terms of the agreements:

Bank
 
Payable
 
Receivable
 
Interest payment dates
 
Maturity
 
Currency
 
Amount
 
Interest rate
 
Currency
 
Amount
 
Interest rate
 
JP Morgan Chase Bank, N.A. (i)
 
BRL
 
108,000

 
13
%
 
$
 
35,400

 
4.38
%
 
March 31/ September 30
 
September 2023
JP Morgan Chase Bank, N.A.
 
BRL
 
98,670

 
13
%
 
$
 
30,000

 
6.02
%
 
March 31/ September 30
 
September 2023
Citibank N.A.
 
BRL
 
94,200

 
13
%
 
$
 
30,000

 
6.29
%
 
March 31/ September 30
 
September 2023

(i)
During the fiscal year ended December 31, 2017, the agreement was amended twice: on February 9, 2017 and February 22, 2017. All the terms of the swap agreement match the terms of the BRL intercompany loan receivable. As a result of the amendments the Company paid $2,689. According to ASC 815-30-40, the amount deferred in accumulated other comprehensive loss until the date of the last amendment, amounting to $677 as of December 31, 2017, will be amortized to earnings as the originally hedged cash flows affects the statement of income.

During April 2017, the Company’s Brazilian subsidiary entered into similar agreements in order to hedge all the variability in a portion (50%) of the principal and interest payable of intercompany loan payables nominated in US dollar.

The following table presents information related to the terms of the agreements:
Bank
 
Payable
 
Receivable
 
Interest payment dates
 
Maturity
 
Currency
 
Amount
 
Interest rate
 
Currency
 
Amount
 
Interest rate
 
BAML (i)
 
BRL
 
156,250

 
13.64
%
 
$
 
50,000

 
6.91
%
 
March 31/ September 30
 
April 2027
Banco Santander S.A.
 
BRL
 
155,500

 
13.77
%
 
$
 
50,000

 
6.91
%
 
June 30/ December 31
 
September 2023

(i)
Bank of America Merrill Lynch Banco Múltiplo S.A.
Derivatives designated as hedging instruments (continued)

Cash flow hedge (continued)

Cross-currency interest rate swap (continued)

The Company paid $8,692, $10,671 and $6,163 of net interest during the fiscal years ended December 31, 2019, 2018 and 2017, respectively.

Call spread

During April 2017, the Company’s Brazilian subsidiary entered into two call spread agreements in order to hedge the variability in a portion (50%) of the principal of intercompany loan payables nominated in US dollar. Call spread agreements consist of a combination of two call options: the Company bought an option to buy US dollar at a strike price equal to the BRL exchange rate at the date of the agreements, and wrote an option to buy US dollar at a higher strike price than the previous one. Both pair of options have the same notional amount and are based on the same underlying with the same maturity date.

The following table presents information related to the terms of the agreements:
Bank
 
Nominal Amount
 
Strike price
 
Maturity
 
Currency
 
Amount
 
Call option written
Call option bought
 
Citibank S.A.
 
$
 
50,000

 
 
4.49

 
3.11

 
September 2023
JP Morgan S.A.
 
$
 
50,000

 
 
5.20

 
3.13

 
April 2027

Coupon-only swap

During April 2017, the Company’s Brazilian subsidiary entered into two coupon-only swap agreements in order to hedge the variability (50%) in the interest payable related to the intercompany loan aforementioned.

The following table presents information related to the terms of the agreements:
Bank
 
Payable
 
Receivable
 
Interest payment dates
 
Maturity
 
Currency
 
Amount
 
Interest rate
 
Currency
 
Amount
 
Interest rate
 
Citibank S.A.
 
BRL
 
155,500

 
11.08
%
 
$
 
50,000

 
6.91
%
 
June 30/ December 31
 
September 2023
JP Morgan S.A.
 
BRL
 
156,250

 
11.18
%
 
$
 
50,000

 
6.91
%
 
March 31/ September 30
 
April 2027


The Company paid $2,036, $2,900 and $1,390 of net interest during the fiscal years ended December 31, 2019, 2018 and 2017, respectively, related to these agreements.
Derivatives designated as hedging instruments (continued)

Cash flow hedge (continued)

Additional disclosures

The following table present the pretax amounts affecting income and other comprehensive income for the fiscal years ended December 31, 2019, 2018 and 2017 for each type of derivative relationship: 
Derivatives in Cash Flow
Hedging Relationships
 
Gain (Loss) Recognized in Accumulated OCI on Derivative (Effective Portion)
 
 (Gain) Loss Reclassified from Accumulated OCI into Income (Effective Portion) (i)
 
2019
2018
2017
 
2019
2018
2017
Forward contracts
 
$
(10
)
$
731

$
(1,344
)
 
$
(711
)
$
(75
)
$
1,236

Cross-currency interest rate swaps
 
(8,506
)
11,279

5,828

 
2,056

(18,888
)
1,965

Call Spread
 
4,377

4,034

21,047

 
(3,561
)
(15,421
)
2,791

Coupon-only swap
 
(1,889
)
1,864

(13,598
)
 
1,860

2,415

(5,933
)
Total
 
$
(6,028
)
$
17,908

$
11,933

 
$
(356
)
$
(31,969
)
$
59


(i)
The results recognized in income related to forward contracts were recorded as an adjustment to food and paper. The net gain (loss) recognized in income, related to cross-currency interest rate swaps is presented as follows:

Adjustment to:
2019
 
2018
 
2017
Foreign currency exchange results
$
6,346

 
$
28,588

 
$
7,532

Net interest expense
(8,402
)
 
(9,700
)
 
(9,497
)
Total
$
(2,056
)
 
$
18,888

 
$
(1,965
)

The results recognized in income related to call spread agreements and coupon-only swap agreements were recorded as an adjustment to foreign currency exchange and interest expense, respectively.

Fair value hedge

Cross-currency interest rate swaps

On March 29, 2016, the Company entered into five cross-currency interest rate swap agreements to fully hedge the principal and interest cash flows of the Secured Loan Agreement described in Note 12, into BRL. The agreements were signed with the Brazilian subsidiaries of the banks participating in the secured loan. All the terms of the cross-currency interest rate swap agreements matched the terms of the Secured Loan Agreement. Pursuant to these agreements, the Company received interest in US dollar at an interest rate equal to the one it had to pay to the off-shore lenders over a notional amount of $167.3 million and paid interest in BRL at CDI plus 4.50% per year, over a notional amount of BRL 613.9 million quarterly, beginning June 2016.

During April 2017, the Company unwound these agreements as a consequence of the repayment of the Secured Loan Agreement mentioned in Note 12. The total payment amounted to $39.1 million (BRL122.7 million), including $0.9 million of accrued and unpaid interest.

    

Derivatives designated as hedging instruments (continued)

During fiscal year 2017, the accrued interest amounted to $6,921. This charge do not include the effect of the Secured Loan Agreement mentioned in Note 12, amounting to a loss of $2,570. Including this effect the total interest cost amounts to $9,491.

These amounts were recorded within “Net interest expense” in the Company’s consolidated statement of income. According to ASC 815-25-35, the change in the fair value of the hedging instrument and the change in the fair value of the hedged item shall be recognized in earnings. If those results are not perfectly offset, the difference shall be considered as hedge ineffectiveness.

The following table presents the pretax amounts affecting income for the fiscal year ended December 31, 2017:
 
 
Cross-currency swaps (i)
Derivatives in Fair Value Hedging Relationships
 
2017
 
 
 
Loss recognized in Income on hedging derivatives
 
(9,599
)
Gain recognized in Income on hedging items
 
4,118


(i)
The loss amounting to $5,481 in 2017, related to the ineffective portion of derivatives, was recorded within “Gain (loss) from derivative instruments” in the Company’s consolidated statement of income.

Derivatives not designated as hedging instruments

The Company enters into certain derivatives that are not designated for hedge accounting, therefore the changes in the fair value of these derivatives are recognized immediately in earnings, together with the gain or loss from the hedged balance sheet position within "Gain (loss) from derivative instruments".

The Company collected (paid) $787, ($81) and ($1,156) during the fiscal years ended December 31, 2019, 2018 and 2017, respectively, related to those forward contracts.