DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 29, 2014

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block]

The following table presents the fair values of our open derivative financial instruments on a gross basis.

	Assets				Liabilities
	June 29, 2014		December 29, 2013		June 29, 2014		December 29, 2013
	(in millions)				(in millions)
Derivatives using the "hedge accounting" method:
Grain contracts	$	24.2	$	5.5	$	20.0	$	16.2
Livestock contracts	3.4		0.7		198.4		1.1
Foreign exchange contracts	0.4		0.6		—		—
Total	28.0		6.8		218.4		17.3
Derivatives using the "mark-to-market" method:
Grain contracts	1.7		0.6		1.2		1.1
Livestock contracts	7.8		2.8		14.9		9.5
Energy contracts	2.1		2.9		—		—
Foreign exchange contracts	0.1		0.6		0.1		0.2
Total	11.7		6.9		16.2		10.8
Total fair value of derivative instruments	$	39.7	$	13.7	$	234.6	$	28.1

DERIVATIVES FINANCIAL INSTRUMENTS

The following table presents the amount of gains (losses) recognized in the consolidated condensed statements of income on derivative instruments using the "mark-to-market" method by type of derivative contract for the periods indicated:

	Successor			Predecessor			Successor			Predecessor
	Three Months Ended						Six Months Ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
	(in millions)						(in millions)
Commodity contracts (sales)	$	6.7		$	29.7		$	12.1		$	29.9
Commodity contracts (cost of sales)	0.7			(4.0		)	2.5			(0.9		)
Foreign exchange contracts	(0.2		)	0.5			(0.1		)	0.8
Total	$	7.2		$	26.2		$	14.5		$	29.8

The table above reflects gains and losses from both open and closed contracts including, among other things, gains and losses related to contracts designed to hedge price movements that occur entirely within a quarter. The table includes amounts for both realized and unrealized gains and losses. The table is not, therefore, a simple representation of unrealized gains and losses recognized in the income statement during any period presented.

DERIVATIVE FINANCIAL INSTRUMENTS

Our meat processing and hog production operations use various raw materials, primarily live hogs, corn and soybean meal, which are actively traded on commodity exchanges. We hedge these commodities when we determine conditions are appropriate to mitigate price risk. While this hedging may limit our ability to participate in gains from favorable commodity fluctuations, it also tends to reduce the risk of loss from adverse changes in raw material prices. We attempt to closely match the commodity contract terms with the hedged item. We also periodically enter into interest rate swaps to hedge exposure to changes in interest rates on certain financial instruments and foreign exchange forward contracts to hedge certain exposures to fluctuating foreign currency rates.

We record all derivatives in the balance sheet as either assets or liabilities at fair value. Accounting for changes in the fair value of a derivative depends on whether it qualifies and has been designated as part of a hedging relationship. For derivatives that qualify and have been designated as hedges for accounting purposes, changes in fair value have no net impact on earnings, to the extent the derivative is considered perfectly effective in achieving offsetting changes in fair value or cash flows attributable to the risk being hedged, until the hedged item is recognized in earnings (commonly referred to as the "hedge accounting" method). For derivatives that do not qualify or are not designated as hedging instruments for accounting purposes, changes in fair value are recorded in current period earnings (commonly referred to as the "mark-to-market" method). We may elect either method of accounting for our derivative portfolio, assuming all the necessary requirements are met. We have in the past availed ourselves of either acceptable method and expect to do so in the future. We believe all of our derivative instruments represent economic hedges against changes in prices and rates, regardless of their designation for accounting purposes.

Changes in commodity prices could have a significant impact on cash deposit requirements under our broker and counter-party agreements. Additionally, certain of our derivative contracts contain credit risk-related contingent features, which would require us to post additional cash collateral to cover net losses on open derivative instruments if our credit rating was downgraded. As of June 29, 2014, the net liability position of our open derivative instruments that are subject to credit risk related contingent features was not material.

We are exposed to losses in the event of nonperformance or nonpayment by counter parties under financial instruments. Although our counter parties primarily consist of financial institutions that are investment grade, there is still a possibility that one or more of these companies could default. However, a majority of our financial instruments are exchange traded futures contracts held with brokers and counter parties with whom we maintain margin accounts that are settled on a daily basis, thereby limiting our credit exposure to non-exchange traded derivatives. Determination of the credit quality of our counter parties is based upon a number of factors, including credit ratings and our evaluation of their financial condition. As of June 29, 2014, we had credit exposure of $11.6 million on non-exchange traded derivative contracts, excluding the effects of netting arrangements. As a result of netting arrangements, we had no significant credit exposure as of June 29, 2014. No significant concentrations of credit risk existed as of June 29, 2014. 

The size and mix of our derivative portfolio varies from time to time based upon our analysis of current and future market conditions. All derivative contracts are recorded in prepaid expenses and other current assets or accrued expenses and other current liabilities within the consolidated condensed balance sheets, as appropriate.

Cash Flow Hedging

Schedule of Notional Amounts of Outstanding Derivative Positions [Table Text Block]

During the six months ended June 29, 2014, the range of notional volumes associated with open derivative instruments designated in cash flow hedging relationships was as follows:

	Minimum	Maximum	Metric
Commodities:
Corn	42,575,000	87,375,000	Bushels
Soybean meal	346,500	827,300	Tons
Lean hogs	103,280,000	1,847,680,000	Pounds
Foreign currency (1)	15,144,435	33,405,406	U.S. Dollars

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⁽¹⁾  Amounts represent the U.S. dollar equivalent of various foreign currency contracts.

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance [Table Text Block]

The following table presents the effects on our consolidated condensed financial statements of pre-tax gains and losses on derivative instruments designated in cash flow hedging relationships for the periods indicated:

	Gains (Losses) Recognized in Other Comprehensive Income (Loss) on Derivative (Effective Portion)						Gains (Losses) Reclassified from Accumulated Other Comprehensive Loss into Earnings (Effective Portion)						Gains (Losses) Recognized in Earnings on Derivative (Ineffective Portion)
	Successor			Predecessor			Successor			Predecessor			Successor			Predecessor
	Three Months Ended						Three Months Ended						Three Months Ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
	(in millions)						(in millions)						(in millions)
Commodity contracts:
Grain contracts	$	(20.8	)	$	(17.6	)	$	7.7		$	34.3		$	(2.7	)	$	1.7
Lean hog contracts	(12.5		)	(18.0		)	(90.9		)	(0.6		)	(2.3		)	(1.0		)
Foreign exchange contracts	0.2			(0.7		)	0.2			0.7			—			—
Total	$	(33.1	)	$	(36.3	)	$	(83.0	)	$	34.4		$	(5.0	)	$	0.7
	Six Months Ended						Six Months Ended						Six Months Ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
	(in millions)						(in millions)						(in millions)
Commodity contracts:
Grain contracts	$	37.5		$	(57.6	)	$	6.3		$	80.5		$	(0.3	)	$	(0.5	)
Lean hog contracts	(310.1		)	21.2			(116.6		)	4.5			(17.8		)	(0.8		)
Foreign exchange contracts	0.5			(0.1		)	3.2			2.1			—			—
Total	$	(272.1	)	$	(36.5	)	$	(107.1	)	$	87.1		$	(18.1	)	$	(1.3	)

For the periods presented, foreign exchange contracts were determined to be highly effective. We have excluded from the assessment of effectiveness differences between spot and forward rates, which we have determined to be immaterial. 

Fair Value Hedging

Schedule of Notional Amounts of Outstanding Derivative Positions [Table Text Block]

During the six months ended June 29, 2014, the range of notional volumes associated with open derivative instruments designated in fair value hedging relationships was as follows:

	Minimum	Maximum	Metric
Commodities:
Corn	450,000	8,200,000	Bushels

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance [Table Text Block]

The following table presents the effects on our consolidated condensed statements of income of gains and losses on derivative instruments designated in fair value hedging relationships and the related hedged items for the periods indicated:

	Gains Recognized in Earnings on Derivative				Losses Recognized in Earnings on Related Hedged Item
	Successor		Predecessor		Successor			Predecessor
	Three Months Ended				Three Months Ended
	June 29, 2014		June 30, 2013		June 29, 2014			June 30, 2013
	(in millions)				(in millions)
Commodity contracts	$	2.9	$	1.3	$	(2.7	)	$	(1.3	)
	Six Months Ended				Six Months Ended
	June 29, 2014		June 30, 2013		June 29, 2014			June 30, 2013
	(in millions)				(in millions)
Commodity contracts	$	2.0	$	3.3	$	(1.7	)	$	(3.4	)

We recognized losses of $0.1 million and gains of $1.5 million for the three months ended June 29, 2014 and June 30, 2013, respectively, and losses of $0.9 million for the six months ended June 30, 2013, on closed commodity derivative contracts as the underlying cash transactions affected earnings. There were no similar gains or losses recognized for the six months ended June 29, 2014. 

Not Designated as Hedging Instrument [Member]

Schedule of Notional Amounts of Outstanding Derivative Positions [Table Text Block]

During the six months ended June 29, 2014, the range of notional volumes associated with open derivative instruments using the "mark-to-market" method was as follows:

	Minimum	Maximum	Metric
Commodities:
Lean hogs	720,000	414,600,000	Pounds
Corn	490,000	5,880,000	Bushels
Soybean meal	—	5,500	Tons
Soybeans	75,000	1,835,000	Bushels
Wheat	—	25,000	Bushels
Natural gas	8,260,000	11,040,000	Million BTU
Live cattle	—	40,000	Pounds
Diesel	—	1,008,000	Gallons
Foreign currency (1)	6,377,390	34,772,967	U.S. Dollars

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⁽¹⁾  Amounts represent the U.S. dollar equivalent of various foreign currency contracts.