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Derivative instruments

12 Months Ended

Dec. 31, 2021

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, 2021 and 2020: 

						Assets												Liabilities
Type of Derivative			Balance Sheets Location			2021			2020						Balance Sheets Location			2021			2020
Derivatives designated as hedging instruments
Cash Flow hedge
Forward contracts			Other receivables			$	660		$	—					Accrued payroll and other liabilities			$	(51)		$	(1,264)
Cross-currency interest rate swap			Derivative instruments			107,386			86,534						Derivative instruments			(2,898)			(6,194)
Call spread			Derivative instruments			—			21,858						Derivative instruments			—			—
Coupon-only swap			Derivative instruments			—			3,591						Derivative instruments			—			—
Subtotal						108,046			111,983									(2,949)			(7,458)
Derivatives not designated as hedging instruments
Call spread			Derivative instruments			4,791			3,798						Derivative instruments			—			—
Coupon-only swap			Derivative instruments			—			202						Derivative instruments			(7,555)			(5,017)
Call Spread + Coupon-only swap			Derivative instruments			8,194			6,620						Derivative instruments			(12,473)			(8,050)
Subtotal						12,985			10,620									(20,028)			(13,067)
Total derivative instruments						$	121,031		$	122,603								$	(22,977)		$	(20,525)

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, 2021, the Company had forward contracts outstanding with a notional amount of $22,128 that mature during 2022.

The Company made net (payments) collections totaling $(507), $1,757 and $711 during fiscal years 2021, 2020 and 2019, respectively, as a result of the net settlements of these derivatives.

Cross-currency interest rate swap

The Company entered into four cross-currency interest rate swap agreements to hedge all the variability of the principal and interest collections of its BRL intercompany loan receivables. The agreements were signed during November 2013 (amended in February 2017), June and July 2017 and October 2020. The following table presents information related to the terms of the agreements:

Derivatives designated as hedging instruments (continued)

Cash flow hedge (continued)

Cross-currency interest rate swap (continued)

Bank						Payable																		Receivable																		Interest payment dates						Maturity
						Currency						Amount						Interest rate						Currency						Amount						Interest rate
JP Morgan Chase Bank, N.A.						BRL						108,000						13		%				$						35,390						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
Citibank N.A.						BRL						112,738						13		%				$						20,049						8.08		%				March 31/ September 30						September 2023

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 certain 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.

The Company paid $4,132, $4,031 and $8,692 of net interest during the fiscal years ended December 31, 2021, 2020 and 2019, respectively.

Call spread

During April 2017, the Company’s Brazilian subsidiary entered into two call spread agreements in order to hedge all the variability in a portion (50%) of the principal of certain 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.

Derivatives designated as hedging instruments (continued)

Cash flow hedge (continued)

Call spread (continued)

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

In May 2021, the Company unwound these agreements before their maturity and collected $18.8 million (BRL99.7 million). Although the hedge relationships were discontinued, the Company expects to maintain the underlying loans until maturity. As a consequence, the amounts recorded in accumulated other comprehensive loss until May 2021 will be amortized to earnings as the originally hedged cash flows affected earnings.

Coupon-only swap

During April 2017, the Company’s Brazilian subsidiary entered into two coupon-only swap agreements in order to hedge all the variability in a portion (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

In May 2021, the Company unwound these agreements before their maturity and collected $4.4 million (BRL23.5 million). Although the hedge relationships were discontinued, the Company expects to maintain the underlying loans until maturity. As a consequence, the amounts recorded in accumulated other comprehensive loss until May 2021 will be amortized to earnings as the originally hedged cash flows affected earnings.

The Company made net collections of $170 of net interest during 2021 until the agreements were unwound, and payments amounting to $(197) and $(2,036) of net interest during the fiscal years ended December 31, 2020, and 2019, 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, 2021, 2020 and 2019 for each type of derivative relationship: 

Derivatives in Cash Flow Hedging Relationships						Gain (Loss) Recognized in Accumulated OCI on Derivative												(Gain) Loss Reclassified from Accumulated OCI into income (loss)(i)
						2021			2020			2019						2021			2020			2019
Forward contracts						$	1,366		$	904		$	(10)					$	507		$	(1,895)		$	(711)
Cross-currency interest rate swaps						23,802			55,124			(8,506)						(8,564)			(37,376)			2,056
Call Spread (ii)						(2,593)			6,758			4,377						1,915			(18,153)			(3,561)
Coupon-only swap (ii)						1,093			8,604			(1,889)						(797)			(421)			1,860
Total						$	23,668		$	71,390		$	(6,028)					$	(6,939)		$	(57,845)		$	(356)

(i)The results recognized in income related to forward contracts were recorded as an adjustment to food and paper.

(ii)Agreements unwound in May 2021.

The net gain (loss) recognized in income, related to cross-currency interest rate swaps is presented as follows:

Adjustment to:			2021						2020						2019
Foreign currency exchange results			$	12,392					$	40,353					$	6,346
Net interest expense			(3,828)						(2,977)						(8,402)
Total			$	8,564					$	37,376					$	(2,056)

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.

Derivatives not designated as hedging instruments

In October 2020, the Company’s Brazilian subsidiary entered into certain derivatives that are not designated as hedge accounting, therefore the changes in the fair value of these derivatives are recognized immediately in earnings, within “(Loss) Gain from derivative instruments”. These agreements are:

–A call spread with JPMorgan, consisting of a combination of two call options. This agreement matures in April 2027.

The following table presents information related to the terms of the agreements:

			Nominal Amount															Strike price
			Currency						Amount									Call option written						Call option bought
			$						30,000									8.20						5.62

Derivatives not designated as hedging instruments (continued)

–A coupon-only swap with JP Morgan that matures in April 2027.

The following table presents information related to the terms of the agreements:

Payable

Receivable

Interest payment dates

Currency

Amount

Interest rate (i)

Currency

Amount

Interest rate

BRL

168,690

CDI plus 2.42%

$

30,000

5.46

%

April 30/ October 31

(i) “CDI” Certificados de Depósitos Interbancários

The Company made net payments of $33 during fiscal year ended December 31, 2021, related to this agreement.

–A combination of call spread + coupon only swap into one agreement with Itaú Unibanco S.A, that matures in April 2027.

The following tables present information related to the terms of the agreements:

			Nominal Amount															Strike price
			Currency						Amount									Call option written						Call option bought
			$						50,000									8.20						5.62

Payable

Receivable

Interest payment dates

Currency

Amount

Interest rate (i)

Currency

Amount

Interest rate

BRL

281,150

CDI plus 2.47%

$

50,000

5.46%

April 30/ October 31

(i) “CDI” Certificados de Depósitos Interbancários

The Company made net payments of $94 during fiscal year ended December 31, 2021, related to this agreement.

In addition, during the fiscal years ended December 31, 2020 and 2019, the Company entered into certain forward contracts that generated net (payments) and collections of ($39) and $787, respectively.

X

- References

No definition available.

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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

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