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Derivative instruments
 9 Months Ended
Sep. 28, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative instruments Derivative instruments
The Company is exposed to certain market risks such as changes in interest rates, foreign currency exchange rates, and price fluctuations, which exist as a part of its ongoing business operations. Management uses derivative and nonderivative financial and commodity instruments to manage these risks. Instruments used as hedges must be effective at reducing the risk associated with the exposure being hedged. As a matter of policy, the Company does not engage in trading or speculative hedging transactions.
Prior to the Spin-Off, the Company participated in Kellanova's hedging program, which uses derivative and nonderivative financial and commodity instruments, including futures, options, and swaps, where appropriate, to manage risks. Since these derivative instruments were entered into and settled by Kellanova for both the Company and Kellanova's other businesses, no asset or liability was recorded on the Company's Unaudited Consolidated Balance Sheets prior to the Spin-Off. However, an appropriate allocation of the gains/losses and fees associated with entering into derivative instruments has been included in the Company's Unaudited Consolidated Statements of Income for each period presented prior to the Spin-Off.
After the Spin-Off, the Company has entered into its own derivative instruments. Derivative instruments are classified on the Unaudited Consolidated Balance Sheet based on the contractual maturity of the instrument or the timing of the underlying cash flows of the instrument for derivatives with contractual maturities beyond one year. Any collateral associated with derivative instruments is classified as Other assets or Other current liabilities on the Unaudited Consolidated Balance Sheet depending on whether the counterparty collateral is in an asset or liability position. Margin deposits related to exchange-traded commodities are recorded in accounts receivable, net on the Unaudited Consolidated Balance Sheet. On the Unaudited Consolidated Statement of Cash Flows, cash flows associated with derivative instruments are classified according to the nature of the underlying hedged item. Cash flows associated with collateral and margin deposits on exchange-traded commodities are classified as investing cash flows when the collateral account is in an asset position and as financing cash flows when the collateral account is in a liability position.
Total notional amounts of the Company’s derivative instruments as of September 28, 2024 and December 30, 2023 were as follows:
(millions)September 28,
2024		December 30,
2023
Foreign currency exchange contracts$300 $— 
Commodity contracts60 — 
Interest rate contracts250 — 
Total$610 $— 
Following is a description of each category in the fair value hierarchy and the financial assets and liabilities of the Company that were included in each category at September 28, 2024 and December 30, 2023, measured on a recurring basis.
Level 1 – Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market. For the Company, level 1 financial assets and liabilities consist primarily of commodity derivative contracts.
Level 2 – Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. For the Company, level 2 financial assets and liabilities consist of interest rate swaps, over-the-counter commodity and currency contracts.
The Company's calculation of the fair value of the interest rate swaps is derived from a discounted cash flow analysis based on the terms of the contract and interest rate curve. Over-the-counter commodity derivatives are valued using an income approach based on the commodity index prices less the contract rate multiplied by the notional amount. Foreign currency contracts are valued using an income approach based on forward rates less the contract rate multiplied by the notional amount. The Company’s calculation of the fair value of level 2 financial assets and liabilities takes into consideration the risk of nonperformance, including counterparty credit risk.
The following table presents assets and liabilities that were measured at fair value in the Unaudited Consolidated Balance Sheet on a recurring basis as of September 28, 2024 and December 30, 2023:
Derivatives designated as hedging instruments
September 28, 2024December 30, 2023
(millions)Level 1Level 2TotalLevel 1Level 2Total
Liabilities:
Interest rate contracts:
Other liabilities— 2 2 — — — 
Total liabilities$— $2 $2 $— $— $— 
Derivatives not designated as hedging instruments
September 28, 2024December 30, 2023
(millions)Level 1Level 2TotalLevel 1Level 2Total
Liabilities:
Foreign currency exchange contracts:
Other current liabilities$— $4 $4 $— $— $— 
Commodity contracts:
Other current liabilities2 — 2 — — — 
Total liabilities$2 $4 $6 $— $— $— 
During the quarter and year-to-date periods ended September 28, 2024 and September 30, 2023, the Company did not recognize any realized gains or losses associated with the interest rate swaps. These derivatives are accounted for as cash flow hedges and the related net gain or loss is recorded in AOCI and will be amortized to interest expense over the term of the related fixed rate debt.
The effect of derivative instruments on the Company's Unaudited Consolidated Statement of Income and Unaudited Consolidated Statement of Comprehensive Income for the quarters and year-to-date periods ended September 28, 2024 and September 30, 2023 was as follows:
Derivatives designated as hedging instruments
Gain (loss) recognized in AOCIGain (loss) excluded from assessment of hedge effectivenessLocation of gain (loss) in income of excluded component
(millions)September 28, 2024September 30, 2023September 28, 2024September 30, 2023
Interest rate contracts$(2)$— $— $— Interest expense
Quarter endedYear-to-date period ended
September 28,
2024		September 30,
2023		September 28,
2024		September 30,
2023
(millions)Interest ExpenseInterest ExpenseInterest ExpenseInterest Expense
Interest rate contracts:$— $— $— $— 
     Amount of gain (loss) reclassified from AOCI into income$— $— $— $— 
Derivatives not designated as hedging instruments
The effect of derivative instruments on the Company's Unaudited Consolidated Statement of Income for the quarters ended September 28, 2024 and September 30, 2023 was as follows:
Gain (loss) recognized in cost of goods soldGain (loss) recognized in other income (expense), net
(millions)September 28, 2024September 30, 2023September 28, 2024September 30, 2023
Commodity contracts$(1)$1 $— $— 
Foreign currency derivatives$(4)$(3)$— $— 
The effect of derivative instruments on the Company's Unaudited Consolidated Statement of Income for the year-to-date periods ended September 28, 2024 and September 30, 2023 was as follows:
Gain (loss) recognized in cost of goods soldGain (loss) recognized in other income (expense), net
(millions)September 28, 2024September 30, 2023September 28, 2024September 30, 2023
Commodity contracts$(2)$(12)$— $— 
Foreign currency derivatives$(6)$(2)$— $— 
Counterparty credit risk concentration and collateral requirements
The Company could incur losses in the event of nonperformance by counterparties to over-the-counter ("OTC") financial and commodity derivatives contracts. Management believes risk of loss with respect to derivative contracts is limited due to the use of master netting agreements with credit-ratings based collateralization requirements for OTC derivatives and the use of exchange-traded commodity contracts. As of September 28, 2024, the Company was not in a material net asset position with any OTC derivatives counterparties.