Derivative Financial Instruments

12 Months Ended

Dec. 28, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Note 12. Derivative Financial Instruments

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

Commodity Price Risk

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, yeast, and shortening, along with pulp, paper, and petroleum-based packaging products. Natural gas, which is used as oven fuel, is also an important commodity used for production.

As of December 28, 2024, the company’s commodity hedge portfolio contained 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 assets	$	723		$	—	$	—	$	723
Other long-term assets		—			—		—		—
Total	$	723		$	—	$	—	$	723
Liabilities:
Other current liabilities	$	(1,290	)	$	—	$	—	$	(1,290	)
Other long-term liabilities		—			—		—		—
Total	$	(1,290	)	$	—	$	—	$	(1,290	)
Net Fair Value	$	(567	)	$	—	$	—	$	(567	)

As of December 30, 2023, the company’s commodity hedge portfolio contained 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 assets	$	55		$	—	$	—	$	55
Other long-term assets		—			—		—		—
Total	$	55		$	—	$	—	$	55
Liabilities:
Other current liabilities	$	(1,918	)	$	—	$	—	$	(1,918	)
Other long-term liabilities		(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 materials and production input prices and effectively fixes the price, or limits increases in prices, for a period of time extending into Fiscal 2025. These instruments are designated as cash-flow hedges. See Note 2, Summary of Significant Accounting Policies, for the accounting treatment of these hedged transactions.

Interest Rate Risk

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. These swaps are designated as cash flow hedges.

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 long-term debt.

As of December 28, 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 assets	$	—	$	—	$	—	$	—
Other long-term assets		7,686		—		—		7,686
Total	$	7,686	$	—	$	—	$	7,686
Liabilities:
Other current liabilities	$	—	$	—	$	—	$	—
Other long-term liabilities		—		—		—		—
Total		—		—		—		—
Net Fair Value	$	7,686	$	—	$	—	$	7,686

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

The company previously entered into treasury rate locks at the time we executed the 2026 notes and 2031 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.

Derivative Assets and Liabilities

The company had the following derivative instruments recorded on the Consolidated Balance Sheets, all of which are utilized for the risk management purposes detailed above (amounts in thousands):


	Derivative Assets
	December 28, 2024			December 30, 2023
Derivatives Designated as Hedging Instruments	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Commodity contracts	Other current assets	$	723	Other current assets	$	55
Interest rate contracts	Other long-term assets		7,686	Other long-term assets		—
Total		$	8,409		$	55


	Derivative Liabilities
	December 28, 2024			December 30, 2023
Derivatives Designated as Hedging Instruments	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Commodity contracts	Other current liabilities	$	1,290	Other current liabilities	$	1,918
Commodity contracts	Other long-term liabilities		—	Other long-term liabilities		2
Total		$	1,290		$	1,920

Derivative AOCI transactions

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 Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion) (Net of tax)
Derivatives in Cash Flow Hedging Relationships	Fiscal 2024			Fiscal 2023			Fiscal 2022
Interest rate contracts	$	5,758		$	—		$	—
Commodity contracts		(354	)		(2,951	)		790
Total	$	5,404		$	(2,951	)	$	790


	Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)(Net of tax)								Location of Gain or (Loss) Reclassified from AOCI into Income
Derivatives in Cash Flow Hedging Relationships	Fiscal 2024			Fiscal 2023			Fiscal 2022		(Effective Portion)
Interest rate contracts	$	374		$	373		$	373	Interest income (expense)
Commodity contracts		(1,094	)		(2,188	)		4,361	Production costs (1)
Total	$	(720	)	$	(1,815	)	$	4,734

(1)

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

The balance (credit or (debit) balance) in AOCI related to commodity price risk and interest rate risk derivative transactions that are closed or will expire over the next two years are as follows (amounts in thousands and net of tax) at December 28, 2024:


	Commodity Price Risk Derivatives		Interest Rate Risk Derivatives			Totals
Closed contracts	$	189	$	(1,943	)	$	(1,754	)
Expiring in 2025		425		—			425
Expiring in 2026		—		(5,758	)		(5,758	)
Total	$	614	$	(7,701	)	$	(7,087	)

See Note 2, Summary of Significant Accounting Policies, for the accounting treatment of OCI for these hedged transactions.

Derivative transactions notional amounts

As of December 28, 2024, the company had entered into the following financial contracts to hedge commodity risks (amounts in thousands):


Derivatives in Cash Flow Hedging Relationships	Notional amount
Wheat contracts	$	6,301
Soybean oil contracts		9,922
Natural gas contracts		1,846
Corn contracts		1,416
Interest rate contracts		150,000
Total	$	169,485

The company’s derivative instruments contained no credit-risk-related contingent features at December 28, 2024. As of December 28, 2024 and December 30, 2023, the company had $4.0 million and $6.3 million, respectively, recorded in other current assets representing collateral to counterparties for hedged positions. As of December 28, 2024 and December 30, 2023, the company had $2.1 million and $3.2 million, respectively, recorded in other accrued liabilities representing collateral from counterparties for hedged positions.