DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

12 Months Ended

Dec. 31, 2022

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

NOTE 10—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 Consolidated Statements 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. As of December 31, 2022 and 2021, all derivative instruments are accounted for using hedge accounting.

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 $10 of this accumulated comprehensive gain is expected to be charged to earnings in 2023. Approximately $282 in accumulated other comprehensive loss for foreign currency derivatives is expected to be reclassified to other income, net in 2023.

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

	December 31, 2022
	Notional
	Amounts		Assets		Liabilities
Derivatives designated as hedging instruments:
Foreign currency derivatives	$	7,264	$	—	$	(282)
Commodity derivatives		189		10		—
Total derivatives			$	10	$	(282)

	December 31, 2021
	Notional
	Amounts		Assets		Liabilities
Derivatives designated as hedging instruments:
Foreign currency derivatives	$	6,729	$	426	$	—
Commodity derivatives		6,012		231		(107)
Total derivatives			$	657	$	(107)

The effects of derivative instruments on the Company’s Consolidated Statement of Earnings, Comprehensive Earnings and Retained Earnings for year ended December 31, 2022 and 2021 are as follows:

	For Year Ended December 31, 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 derivatives	$	(484)	$	223	$	—
Commodity derivatives		233		347		—
Total	$	(251)	$	570	$	—

	For Year Ended December 31, 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 derivatives	$	93	$	445	$	—
Commodity derivatives		1,330		2,148		—
Total	$	1,423	$	2,593	$	—