Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2012

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

Note 5 — Derivative Instruments and Hedging Activities

From time to time, the Company uses derivative instruments, including foreign currency forward contracts, commodity futures contracts and commodity option contracts, to manage its exposures to foreign exchange and commodity prices. Commodity futures contracts and most commodity option contracts are intended and effective as hedges of market price risks associated with the anticipated purchase of certain raw materials (primarily sugar).  Foreign currency forward contracts are intended and effective as hedges of the Company’s exposure to the variability of cash flows, primarily related to the foreign exchange rate changes of products manufactured in Canada and sold in the United States, and periodic equipment purchases from foreign suppliers denominated in a foreign currency.  The Company does not engage in trading or other speculative use of derivative instruments.

The Company recognizes all derivative instruments as either assets or liabilities at fair value in the Condensed Consolidated Statement of Financial Position.  Derivative assets are recorded in other receivables and derivative liabilities are recorded in accrued liabilities.  The Company uses either hedge accounting or mark-to-market accounting for its derivative instruments.  Derivatives that qualify for hedge accounting are designated as cash flow hedges by formally documenting the hedge relationships, including identification of the hedging instruments, the hedged items and other critical terms, as well as the Company’s risk management objectives and strategies for undertaking the hedge transaction.

Changes in the fair value of the Company’s cash flow hedges are recorded in accumulated other comprehensive loss, net of tax, and are reclassified to earnings in the periods in which earnings are affected by the hedged item.  Substantially all amounts reported in accumulated other comprehensive loss for commodity derivatives are expected to be reclassified to cost of goods sold.  Substantially all amounts reported in accumulated other comprehensive loss for foreign currency derivatives are expected to be reclassified to other income, net.

The following table summarizes the Company’s outstanding derivative contracts and their effects on its Condensed Consolidated Statements of Financial Position at June 30, 2012, December 31, 2011 and July 2, 2011:

	June 30, 2012
	Notional
	Amounts		Assets		Liabilities
Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	4,350	$	70	$	—
Commodity futures contracts	3,738		56		(188		)
Commodity option contracts	171		1		—
Total derivatives designated as hedges			127		(188		)
Derivatives not designated as hedging instruments:
Commodity futures contracts	1,290		14		(33		)
Total derivatives not designated as hedges			14		(33		)
Total derivatives			$	141	$	(221	)

	December 31, 2011
	Notional
	Amounts		Assets		Liabilities
Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	13,044	$	205	$	—
Commodity futures contracts	4,557		341		(138		)
Commodity option contracts	—		—		—
Total derivatives			$	546	$	(138	)

	July 2, 2011
	Notional
	Amounts		Assets		Liabilities
Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	1,192	$	368	$	—
Commodity futures contracts	7,773		615		(42		)
Commodity option contracts	1,160		566		(1		)
Total derivatives designated as hedges			1,549		(43		)
Derivatives not designated as hedging instruments:
Commodity option contracts	370		—		—
Total derivatives not designated as hedges			—		—
Total derivatives			$	1,549	$	(43	)

The effects of derivative instruments on the Company’s Condensed Consolidated Statement of Earnings, Comprehensive Earnings and Retained Earnings for quarters and years to date ended June 30, 2012 and July 2, 2011 are as follows:

	For Quarter Ended June 30, 2012
							Gain (Loss)
				Gain (Loss)			on Amount Excluded
	Gain(Loss)			Reclassified from			from Effectiveness
	Recognized			Accumulated OCI			Testing Recognized
	in OCI			into Earnings			in Earnings
Foreign currency forward contracts	$	(124	)	$	115		$	—
Commodity futures contracts	(543		)	30			—
Commodity option contracts	(32		)	(30		)	—
Total	$	(699	)	$	115		$	—

	For Quarter Ended July 2, 2011
							Gain (Loss)
				Gain (Loss)			on Amount Excluded
	Gain (Loss)			Reclassified from			from Effectiveness
	Recognized			Accumulated OCI			Testing Recognized
	in OCI			into Earnings			in Earnings
Foreign currency forward contracts	$	13		$	244		$	—
Commodity futures contracts	1,614			1,415			—
Commodity option contracts	(1,627		)	(52		)	—
Total	$	—		$	1,607		$	—

	For Year to Date Ended June 30, 2012
							Gain (Loss)
				Gain (Loss)			on Amount Excluded
	Gain(Loss)			Reclassified from			from Effectiveness
	Recognized			Accumulated OCI			Testing Recognized
	in OCI			into Earnings			in Earnings
Foreign currency forward contracts	$	128		$	264		$	—
Commodity futures contracts	(287		)	48			—
Commodity option contracts	(34		)	(30		)	—
Total	$	(193	)	$	282		$	—

	For Year to Date Ended July 2, 2011
							Gain (Loss)
				Gain (Loss)			on Amount Excluded
	Gain (Loss)			Reclassified from			from Effectiveness
	Recognized			Accumulated OCI			Testing Recognized
	in OCI			into Earnings			in Earnings
Foreign currency forward contracts	$	121		$	695		$	—
Commodity futures contracts	3,856			5,593			—
Commodity option contracts	(4,836		)	(287		)	—
Total	$	(859	)	$	6,001		$	—

During the quarters and years to date ended June 30, 2012 and July 2, 2011, the Company recognized earnings/(losses) of $7 and $(105), and $53 and $16 respectively, related to mark-to-market accounting for certain commodity option and future contracts.