The company measures the fair value of its derivative portfolio by using the price that would be received to sell an asset or paid to transfer a liability in the principal market for that asset or liability. These measurements are classified into a hierarchy by the inputs used to perform the fair value calculation as follows:

Level 1: Fair value based on unadjusted quoted prices for identical assets or liabilities at the measurement date

Level 2: Modeled fair value with model inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

Level 3: Modeled fair value with unobservable model inputs that are used to estimate the fair value of the asset or liability

The company enters into commodity derivatives designated as cash-flow hedges of existing or future exposure to changes in commodity prices. The company’s primary raw materials are flour, sweeteners and shortening, along with pulp, paper and petroleum-based packaging products. Natural gas, which is used as oven fuel, and diesel fuel are also important commodity inputs.

As of October 5, 2024, the company’s hedge portfolio contained commodity derivatives, which are recorded in the following accounts with fair values measured as indicated (amounts in thousands):


	Level 1			Level 2		Level 3		Total
Assets:
Other current	$	606		$	—	$	—	$	606
Other long-term		66			—		—		66
Total		672			—		—		672

Liabilities:
Other current		(38	)		—		—		(38	)
Other long-term		—			—		—		—
Total		(38	)		—		—		(38	)
Net Fair Value	$	634		$	—	$	—	$	634

As of December 30, 2023, the company’s hedge portfolio contained commodity derivatives, which are recorded in the following accounts with fair values measured as indicated (amounts in thousands):


	Level 1			Level 2		Level 3		Total
Assets:
Other current	$	55		$	—	$	—	$	55
Other long-term		—			—		—		—
Total		55			—		—		55

Liabilities:
Other current		(1,918	)		—		—		(1,918	)
Other long-term		(2	)		—		—		(2	)
Total		(1,920	)		—		—		(1,920	)
Net Fair Value	$	(1,865	)	$	—	$	—	$	(1,865	)

The positions held in the portfolio are used to hedge economic exposure to changes in various raw material prices and effectively fix, or limit increases in, prices for a period extending into Fiscal 2025. These instruments are designated as cash-flow hedges. The change in the fair value for these derivatives is reported in AOCI. All the company-held commodity derivatives at October 5, 2024 and December 30, 2023, respectively, qualified for hedge accounting.

The company enters into interest derivatives designated as cash-flow hedges of existing or future exposure to changes in interest rates. The company's risk management objective and strategy with respect to interest rate swaps is to protect the company against adverse fluctuations in interest rates by reducing its exposure to variability in cash flows relating to interest payments on a forecasted issuance of long-term debt. This swap is designated as a cash flow hedge.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in AOCI and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the company’s fixed-rate bonds.

As of October 5, 2024, the company’s hedge portfolio contained interest derivatives, which are recorded in the following accounts with fair values measured as indicated (amounts in thousands):


	Level 1		Level 2		Level 3		Total
Assets:
Other current	$	—	$	—	$	—	$	—
Other long-term		633		—		—		633
Total		633		—		—		633

Liabilities:
Other current		—		—		—		—
Other long-term		—		—		—		—
Total		—		—		—		—
Net Fair Value	$	633	$	—	$	—	$	633

The company's hedge portfolio did not contain any interest derivatives as of December 30, 2023.

During the first quarter of Fiscal 2021, the company entered into treasury locks to fix the interest rate for the 2031 notes issued on March 9, 2021. The derivative positions were closed when the debt was priced on March 2, 2021 with a cash settlement net receipt of $3.9 million that offset changes in the benchmark treasury rate between execution of the treasury rate locks and the debt pricing date. These rate locks were designated as a cash flow hedge and the deferred amount reported in AOCI is being reclassified to interest expense as interest payments are made on the notes through the maturity date.

The company previously entered into treasury rate locks at the time we executed the 2026 notes. These rate locks were designated as a cash flow hedge and the fair value at termination was deferred in AOCI. The deferred amount reported in AOCI is being reclassified to interest expense as interest payments are made on the related notes through the maturity date.

The company has the following derivative instruments located on the Condensed Consolidated Balance Sheets, which are utilized for the risk management purposes detailed above (amounts in thousands):


	Derivative Assets						Derivative Liabilities
	October 5, 2024			December 30, 2023			October 5, 2024			December 30, 2023
Derivatives Designated as Hedging Instruments	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Commodity contracts	Other current assets	$	606	Other current assets	$	55	Other accrued liabilities	$	38	Other accrued liabilities	$	1,918
Commodity contracts	Other assets		699	Other assets		—	Other long-term liabilities		—	Other long-term liabilities		2
Total		$	1,305		$	55		$	38		$	1,920

The company had the following derivative instruments for deferred gains and (losses) on closed contracts and the effective portion for changes in fair value recorded in AOCI (no amounts were excluded from the effectiveness test), all of which are utilized for the risk management purposes detailed above (amounts in thousands and net of tax):


	Amount of (Loss) or Gain						Amount of Gain or (Loss)
	Recognized in AOCI on Derivatives						Reclassified from AOCI
	(Effective Portion)					Location of Gain or (Loss)	into Income (Effective Portion)
Derivatives in Cash Flow	For the Twelve Weeks Ended					Reclassified from AOCI	For the Twelve Weeks Ended
Hedge Relationships(1)	October 5, 2024		October 7, 2023			into Income (Effective Portion)(2)	October 5, 2024			October 7, 2023
Interest rate contracts	$	492	$	—		Interest expense	$	86		$	86
Commodity contracts		731		(1,579	)	Production costs(3)		(214	)		(383	)
Total	$	1,223	$	(1,579	)		$	(128	)	$	(297	)


	Amount of (Loss) or Gain						Amount of Gain or (Loss)
	Recognized in AOCI on Derivatives						Reclassified from AOCI
	(Effective Portion)					Location of Gain or (Loss)	into Income (Effective Portion)
Derivatives in Cash Flow	For the Forty Weeks Ended					Reclassified from AOCI	For the Forty Weeks Ended
Hedge Relationships(1)	October 5, 2024		October 7, 2023			into Income (Effective Portion)(2)	October 5, 2024			October 7, 2023
Interest rate contracts	$	470	$	—		Interest expense	$	287		$	287
Commodity contracts		631		(1,531	)	Production costs(3)		(986	)		(1,819	)
Total	$	1,101	$	(1,531	)		$	(699	)	$	(1,532	)

Amounts in parentheses indicate debits to determine net income.

Amounts in parentheses, if any, indicate credits to determine net income.

Included in materials, supplies, labor and other production costs (exclusive of depreciation and amortization shown separately).

There was no hedging ineffectiveness, and no amounts were excluded from the ineffectiveness testing, during the twelve and forty weeks ended October 5, 2024 and October 7, 2023, respectively, related to the company’s commodity risk hedges.

At October 5, 2024, the balance in AOCI related to commodity price risk and interest rate risk derivative transactions that closed or will expire over the following years are as follows (amounts in thousands and net of tax) (amounts in parenthesis indicate a debit balance):


	Commodity Price Risk Derivatives			Interest Rate Risk Derivatives		Totals
Closed contracts	$	(210	)	$	2,029	$	1,819
Expiring in 2024		(36	)		—		(36	)
Expiring in 2025		510			—		510
Expiring in 2026		—			470		470
Total	$	264		$	2,499	$	2,763

The company’s derivative instruments contain no credit-risk related contingent features at October 5, 2024. As of October 5, 2024 and December 30, 2023, the company had $3.3 million and $6.3 million, respectively, in other current assets representing collateral for hedged positions. As of October 5, 2024 and December 30, 2023, the company had $3.3 million and $3.2 million, respectively, recorded in other accrued liabilities representing collateral due to counterparties for hedged positions.