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Derivatives | 6 Months Ended
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Jun. 30, 2024
Derivatives |
Derivatives | Note 14. Derivatives We record all derivatives, whether designated in a hedging relationship or not, at fair value on the Condensed Consolidated Balance Sheets. We use various types of derivative instruments including, but not limited to, forward contracts, futures contracts, and options contracts for certain commodities. Forward and futures contracts are agreements to buy or sell a quantity of a commodity at a predetermined future date, and at a predetermined rate or price. Forward contracts are traded over the counter whereas future contracts are traded on an exchange. Option contracts are agreements to facilitate a potential transaction involving the commodity at a preset price and date. The accounting for gains and losses that result from changes in the fair values of derivative instruments depends on whether the derivatives have been designated and qualify as hedging instruments and the types of hedging relationships. Derivatives can be designated as fair value hedges, cash flow hedges or hedges of net investments in foreign operations. The changes in the fair values of derivatives that have not been designated and for which hedge accounting is not applied, are recorded in the same line item in our Condensed Consolidated Statements of Operations as the changes in the fair value of the hedged items attributable to the risk being hedged. The changes in fair values of derivatives that have been designated and qualify as cash flow hedges are recorded in accumulated other comprehensive income (loss) (“AOCI”) and are reclassified into the line item in the Condensed Consolidated Statements of Operations in which the hedged items are recorded in the same period the hedged items affect earnings. For derivatives that will be accounted for as hedging instruments, we formally designate and document, at inception, the financial instrument as a hedge of a specific underlying exposure, the risk management objective and the strategy for undertaking the hedge transaction. In addition, we formally assess both at the inception and at least quarterly thereafter, whether the financial instruments used in hedging transactions are highly effective at offsetting changes in either the fair values or cash flows of the related underlying exposures. We use cash flow hedges to minimize the variability in cash flows of assets or liabilities or forecasted transactions caused by fluctuations in commodity prices. The changes in fair values of hedges that are determined to be ineffective are immediately reclassified from AOCI into earnings. We did not discontinue any cash flow hedging relationships during the six months ended June 30, 2024 or 2023. Within our Beverage Solutions segment, we have entered into coffee futures contracts to hedge our exposure to price fluctuations on green coffee associated with certain price-to-be-fixed purchase contracts, which generally range from three to twelve months in length. These derivative instruments have been designated as cash flow hedges. The objective of this hedging program is to reduce the variability of cash flows associated with future purchases of green coffee. The notional amount for the coffee futures contracts that were designated and qualified for our commodity cash flow hedging program was 15.5 million pounds and 11.5 million pounds as of June 30, 2024 and December 31, 2023, respectively. During the three and six months ended June 30, 2024, the Company purchased coffee futures contracts and coffee options contracts under our cash flow hedging program with aggregate notional amounts of 20.1 million pounds and 30.0 million pounds, respectively. During the three and six months ended June 30, 2023, the Company purchased coffee futures contracts and coffee options contracts under our cash flow hedging program with aggregate notional amounts of 15.2 million pounds and 23.6 million pounds, respectively. Approximately $3.5 million and $3.6 million of net realized gains, representing the effective portion of the cash flow hedge, were subsequently reclassified from AOCI to earnings and recognized in costs of sales in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024, respectively. Approximately $1.4 million and $2.1 million of net realized losses, representing the effective portion of the cash flow hedge, were subsequently reclassified from AOCI to earnings and recognized in costs of sales in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023, respectively. As of June 30, 2024, the estimated amount of net gains reported in AOCI that is expected to be reclassified to the Condensed Consolidated Statements of Operations within the next twelve months is $8.7 million. Within our Sustainable Sourcing & Traceability segment, the Company’s forward sales and forward purchase contracts are for physical delivery of green coffee in a future period. While the Company considers these contracts to be effective economic hedges, the Company does not designate or account for forward sales or forward purchase contracts as hedges as defined under current accounting standards. See Note 4 for a description of the treatment of realized and unrealized gains and losses on forward sales and forward purchase contracts. The fair value of our derivative assets and liabilities included in the Condensed Consolidated Balance Sheets are set forth below: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(Thousands) |  | Balance Sheet Location |  | June 30, 2024 |  | December 31, 2023
Derivative assets designated as cash flow hedging instruments: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Coffee futures contracts(1) | ​ | Derivative assets | ​ | $ | 3,924 | ​ | $ | 3,355
Options contracts | ​ | Derivative assets | ​ | ​ | 712 | ​ | ​ | —
Total | ​ | ​ | ​ | $ | 4,636 | ​ | $ | 3,355
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Derivative assets not designated as cash flow hedging instruments: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Forward purchase and sales contracts | ​ | Derivative assets | ​ | $ | 13,115 | ​ | $ | 10,303
Total | ​ | ​ | ​ | ​ | 13,115 | ​ | ​ | 10,303
Total derivative assets | ​ | ​ | ​ | $ | 17,751 | ​ | $ | 13,658
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Derivative liabilities not designated as cash flow hedging instruments: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Forward purchase and sales contracts | ​ | Derivative liabilities | ​ | $ | 5,044 | ​ | $ | 3,731
Total derivative liabilities | ​ | ​ | ​ | $ | 5,044 | ​ | $ | 3,731
1 - The fair value of coffee futures excludes amounts related to margin accounts. The following table presents the pre-tax net gains and losses for our derivative instruments for the three and six months ended June 30, 2024 and 2023, respectively: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Three Months Ended June 30, | ​ | Six Months Ended June 30,
(Thousands) |  | Statement of Operations Location |  | 2024 |  | 2023 |  | 2024 |  | 2023
Derivative assets designated as cash flow hedging instruments: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net realized gains (losses) on coffee derivatives | ​ | Costs of sales | ​ | $ | 3,480 | ​ | $ | (1,366) | ​ | $ | 3,572 | ​ | $ | (2,087)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Derivative assets and liabilities not designated as cash flow hedging instruments: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net unrealized gains (losses) on forward sales and purchase contracts | ​ | Costs of sales | ​ | $ | (141) | ​ | $ | 2,098 | ​ | $ | 2,200 | ​ | $ | 1,070
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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/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
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