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Venezuela
1 Months Ended
Feb. 28, 2013
Venezuela Devaluation [Abstract]  
Venezuela [Text Block]

NOTE 14

VENEZUELA

Venezuela was designated as a highly inflationary economy as of the beginning of the Company's 2010 fiscal year. Gains and losses resulting from the translation of the financial statements of subsidiaries operating in highly inflationary economies are recorded in earnings. In February 2013, the Venezuelan government announced a 46.5% devaluation of the official CADIVI (now named CENCOEX) exchange rate from 4.3 bolivars to 6.3 bolivars to the U.S. dollar. Additionally, the Transaction System for Foreign Currency Denominated Securities (SITME), used between May 2010 and January 2013 to translate the Company's Venezuelan subsidiary's financial statements to U.S. dollars, was eliminated. Accordingly, in February 2013 the Company began using the CENCOEX exchange rate to translate the Company's Venezuelan subsidiary's financial statements to U.S. dollars and in 2013, the Company recognized a $15 million charge as a result of the devaluation of the CENCOEX exchange rate. The CENCOEX exchange is restricted to some raw materials, finished goods, and machinery for sectors considered as national priorities, which is primarily food and medicines.

In March, 2013, the Venezuelan government announced a new auction-based currency transaction program referred to as SICAD1. SICAD1 allows entities in specific sectors to bid for U.S. dollars to be used for specified import transactions, with the minimum exchange rate to be offered being 6.3 bolivars to the U.S. dollar. As of January 3, 2015, the published SICAD1 rate offered was 12.0 bolivars to the U.S. dollar and availability of U.S. dollars at either exchange rate continues to be limited.

In January, 2014, the Venezuelan government announced the expansion of the SICAD1 auction program to prospective dividends and royalties and new profit margin controls. As the Company's Venezuelan subsidiary declares dividends or pays royalties in the future, based on the availability of U.S. dollars exchanged under the SICAD1 program, the realized exchange losses on payments made in U.S. dollars would be recognized in earnings. On profit margin controls, the Company continues to ensure the Company is complying with the requirements.

In February 2014, the Venezuelan government announced plans to launch a third foreign exchange mechanism, known as SICAD2, which became operational on March 24, 2014. SICAD2 relies on U.S. dollar cash and U.S. dollar denominated bonds offered by the Venezuelan Central Bank, PDVSA (the national oil and gas company) and private companies. The Venezuelan government has allowed that all industry sectors will be able to access SICAD2 and has indicated that its use will not be restricted as to purpose. As of January 3, 2015, the published SICAD2 rate was 51.0 bolivars to the U.S. dollar.

In February 2015, the Venezuelan government announced plans to launch a new foreign exchange mechanism, known as SIMADI, which is expected to become operational in 2015. The SIMADI exchange mechanism, which will replace SICAD2, has been reported to be an open market in which rates will be determined based on supply and demand.

In light of the current difficult macroeconomic environment in Venezuela, the Company continues to monitor and actively manage its investment and exposures in Venezuela. The Company's Venezuelan business does not rely heavily on imports and when items are imported, they are largely exchanged at the CENCOEX rate. As of January 3, 2015 the Company translated its Venezuelan subsidiary's financial statements to U.S. dollars using the CENCOEX exchange rate. The Company will continue to monitor local conditions, the continued ability to obtain U.S. dollars at the CENCOEX exchange rate, and the use, if applicable, of the SICAD1, SICAD2 or SIMADI, once operational, mechanisms to determine the appropriate rate for translation. For fiscal year 2014, Venezuela represented approximately 2% of total net sales and 5% of total operating profit. As of January 3, 2015, the Company's net monetary assets denominated in the Venezuelan bolivar were approximately $100 million in U.S. dollars applying the CENCOEX exchange rate.

If the CENCOEX exchange rate were to devalue further or if the currently less favorable SICAD1 exchange rate were extended to apply to a greater portion of the Company's net monetary assets in Venezuela, the Company could recognize a devaluation charge in earnings. The Company continues to monitor the currency developments in Venezuela and take protective measures against currency devaluation which may include converting monetary assets into non-monetary assets which the Company can use in its business.