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Risk Management Activities
6 Months Ended
Nov. 24, 2024
Risk Management Activities [Abstract]  
Risk Management Activities
 
(6) Risk Management Activities
 
Many commodities we
 
use in the
 
production and distribution
 
of our products
 
are exposed to
 
market price risks.
We
utilize derivatives
to manage price risk for our principal
 
ingredients and energy costs, including
 
grains (oats, wheat, and corn), oils
 
(principally soybean),
dairy products, natural
 
gas, and diesel fuel.
 
Our primary objective
 
when entering into
 
these derivative contracts
 
is to achieve
 
certainty
with
 
regard
 
to
 
the
 
future
 
price
 
of
 
commodities
 
purchased
 
for
 
use
 
in
 
our
 
supply
 
chain.
We
manage
 
our
 
exposures
 
through
 
a
combination of purchase orders, long-term
 
contracts with suppliers, exchange-traded
 
futures and options, and over-the-counter
 
options
and swaps.
We
offset
 
our exposures
 
based on
 
current and
 
projected market
 
conditions and
 
generally seek
 
to acquire
 
the inputs
 
at as
close as possible to or below our planned cost.
We
 
use derivatives
 
to manage
 
our exposure
 
to changes
 
in commodity
 
prices. We
 
do not
 
perform the
 
assessments required
 
to achieve
hedge
 
accounting
 
for
 
commodity
 
derivative
 
positions.
 
Accordingly,
 
the
 
changes
 
in
 
the
 
values
 
of
 
these
 
derivatives
 
are
 
recorded
currently in cost of sales in our Consolidated Statements of Earnings.
Although we do
 
not meet the
 
criteria for
 
cash flow hedge
 
accounting, we believe
 
that these instruments
 
are effective
 
in achieving our
objective of providing certainty
 
in the future price of commodities purchased
 
for use in our supply chain.
 
Accordingly, for
 
purposes of
measuring
 
segment
 
operating
 
performance,
 
these
 
gains
 
and
 
losses
 
are
 
reported
 
in
 
unallocated
 
corporate
 
items
 
outside
 
of
 
segment
operating results
 
until such time
 
that the exposure
 
we are managing
 
affects earnings.
 
At that time,
 
we reclassify
 
the gain or
 
loss from
unallocated
 
corporate
 
items
 
to
 
segment
 
operating
 
profit,
 
allowing
 
our
 
operating
 
segments
 
to
 
realize
 
the
 
economic
 
effects
 
of
 
the
derivative without experiencing any resulting mark-to-market volatility,
 
which remains in unallocated corporate items.
 
Unallocated corporate items for the quarters and six-month periods ended
 
November 24, 2024, and November 26, 2023, included:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
Six-Month Period Ended
In Millions
Nov. 24, 2024
Nov. 26, 2023
Nov. 24, 2024
Nov. 26, 2023
Net gain (loss) on mark-to-market valuation of certain
 
 
commodity positions
$
3.4
$
(38.2)
$
(34.3)
$
(9.8)
Net loss on commodity positions reclassified from
 
 
unallocated corporate items to segment operating profit
19.1
14.6
36.3
17.8
Net mark-to-market revaluation of certain grain inventories
6.9
(1.5)
(1.4)
11.8
Net mark-to-market valuation of certain commodity
 
 
positions recognized in unallocated corporate items
$
29.4
$
(25.1)
$
0.6
$
19.8
 
 
 
 
 
 
 
 
 
 
 
As of
 
November
 
24,
 
2024,
 
the net
 
notional
 
value
 
of
 
commodity
 
derivatives
 
was $
264.5
 
million,
 
of
 
which
 
$
157.4
 
million
 
related
 
to
agricultural inputs and $
107.1
 
million related to energy inputs. These contracts relate to inputs
 
that generally will be utilized within the
next
12
 
months.
We also
 
have net investments in foreign
 
subsidiaries that are denominated
 
in euros. As of November
 
24, 2024, we hedged a
 
portion of
these investments with €
3,986.5
 
million of euro-denominated bonds.
During the
 
second quarter of
 
fiscal 2025, in
 
advance of planned
 
debt financing,
 
we entered into
 
$
350.0
 
million of treasury
 
locks. The
treasury locks were terminated during the second quarter
 
of fiscal 2025, in conjunction with the Company’s
 
issuance of $
750.0
 
million
of
 
fixed-rate
 
notes
 
due
January 30, 2035
.
 
Upon
 
termination,
 
a
 
gain
 
of $
0.1
 
million
 
was recognized
 
in AOCI
 
and
 
will be
 
amortized
through interest expense over the respective term of the debt.
During the
 
second quarter
 
of fiscal
 
2025, we
 
entered into
 
a $
750.0
 
million notional
 
amount interest
 
rate swap
 
to convert
 
our $
750.0
million of fixed-rate notes due January 30, 2030, to a floating rate.
During the second quarter of fiscal 2025, our
 
$
500.0
 
million notional amount interest rate swap to convert
 
our $
500.0
 
million of fixed-
rate notes due
 
November 18, 2025
 
to a floating
 
rate was called
 
by the counterparty
 
prior to the
 
maturity date. The
 
previously existing
swap was designated
 
as a fair value
 
hedge, and concurrent
 
with the swap
 
being called, we
 
ceased recording
 
market value adjustments
to the associated hedged debt.
The
 
fair
 
values
 
of
 
the
 
derivative
 
positions
 
used
 
in
 
our
 
risk
 
management
 
activities
 
and
 
other
 
assets
 
recorded
 
at
 
fair
 
value
 
were
 
not
material
 
as
 
of
 
November
 
24,
 
2024,
 
and
 
were
 
Level
 
1
 
or
 
Level
 
2
 
assets
 
and
 
liabilities
 
in
 
the
 
fair
 
value
 
hierarchy.
 
We
 
did
 
not
significantly change our valuation techniques from prior periods.
 
We
 
offer
 
certain
 
suppliers
 
access
 
to
 
third-party
 
services
 
that
 
allow
 
them
 
to
 
view
 
our
 
scheduled
 
payments
 
online.
 
The
 
third-party
services also
 
allow suppliers
 
to finance
 
advances on
 
our scheduled
 
payments at
 
the sole
 
discretion of
 
the supplier
 
and the third
 
party.
We
 
have no
 
economic interest
 
in these
 
financing arrangements
 
and no
 
direct relationship
 
with the
 
suppliers, the
 
third parties,
 
or any
financial institutions
 
concerning these
 
services, including
 
not providing
 
any form
 
of guarantee
 
and not
 
pledging assets
 
as security
 
to
the third
 
parties or
 
financial institutions.
 
All of
 
our accounts
 
payable remain
 
as obligations
 
to our
 
suppliers as
 
stated in
 
our supplier
agreements.
 
As
 
of
 
November
 
24,
 
2024,
 
$
1,555.2
 
million
 
of
 
our
 
total
 
accounts
 
payable
 
were
 
payable
 
to
 
suppliers
 
who
 
utilize
 
these
third-party services.
 
As of
 
May 26,
 
2024, $
1,404.4
 
million of
 
our total
 
accounts payable
 
were payable
 
to suppliers
 
who utilize
 
these
third-party services.