Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2022

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

Note 6 — Derivative Instruments and Hedging Activities

From time to time, the Company uses derivative instruments, including foreign currency forward contracts and commodity futures contracts to manage its exposures to foreign exchange and commodity prices. Commodity futures 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 hedge accounting for its foreign currency and commodity derivative instruments as discussed above. 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. Approximately $102 and $(2) of this accumulated comprehensive gain (loss) is expected to be reclassified to earnings in 2022 and 2023, respectively. Approximately $162 and $3 reported in accumulated other comprehensive gain for foreign currency derivatives are expected to be reclassified to other income, net in 2022 and 2023, respectively.  

The following table summarizes the Company’s outstanding derivative contracts and their effects on its Condensed Consolidated Statements of Financial Position at June 30, 2022, December 31, 2021 and June 30, 2021:

	June 30, 2022
	Notional
	Amounts		Assets		Liabilities
Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	8,503	$	186	$	(21)
Commodity futures contracts		2,185		111		(11)
Total derivatives			$	297	$	(32)
	December 31, 2021
	Notional
	Amounts		Assets		Liabilities
Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	6,729	$	426	$	—
Commodity futures contracts		6,012		231		(107)
Total derivatives			$	657	$	(107)
	June 30, 2021
	Notional
	Amounts		Assets		Liabilities
Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	4,795	$	717	$	-
Commodity futures contracts		2,884		754		-
Total derivatives			$	1,471	$	-

The effects of derivative instruments on the Company’s Condensed Consolidated Statements of Earnings and Retained Earnings and the Condensed Consolidated Statements of Comprehensive Earnings for periods ended June 30, 2022 and June 30, 2021 are as follows:

	For Quarter Ended June 30, 2022
					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	$	(149)	$	86	$	-
Commodity futures contracts		(80)		62		-
Total	$	(229)	$	148	$	-
	For Quarter Ended June 30, 2021
					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	$	94	$	131	$	-
Commodity futures contracts		747		663		-
Total	$	841	$	794	$	-
	For Year to Date Ended June 30, 2022
					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	$	(73)	$	188	$	-
Commodity futures contracts		65		89		-
Total	$	(8)	$	277	$	-
	For Year to Date Ended June 30, 2021
					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	$	173	$	234	$	-
Commodity futures contracts		1,144		1,331		-
Total	$	1,317	$	1,565	$	-