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DERIVATIVES AND HEDGING (Tables)
 9 Months Ended
Jul. 27, 2014
Derivatives and hedging  
Schedule of fair values of derivative instruments

The fair values of the Company’s derivative instruments (in thousands) as of July 27, 2014, and October 27, 2013, were as follows:

 

 

 

 

 

Fair Value (1)

 

 

Location on
Consolidated
Statements of Financial Position

 

July 27,
2014

 

October 27,
2013

Asset Derivatives:

 

 

 

 

 

 

Derivatives Designated as Hedges:

 

 

 

 

 

 

Commodity contracts

 

Other current assets

 
$
(42,024)

 
$
(25,802)

 

 

 

 

 

 

 

Derivatives Not Designated as Hedges:

 

 

 

 

 

 

Commodity contracts

 

Other current assets

 
(12,774)

 
(3,783)

 

 

 

 

 

 

 

Total Asset Derivatives

 

 

 
$
(54,798)

 
$
(29,585)

 

 

 

 

 

 

 

(1)  Amounts represent the gross fair value of derivative assets and liabilities.  The Company nets the derivative assets and liabilities for each of its hedging programs, including cash collateral, when a master netting arrangement exists between the Company and the counterparty to the derivative contract.  The amount or timing of cash collateral balances may impact the classification of the derivative in the Consolidated Statement of Financial Position.   See Note J “Fair Value Measurements” for a discussion of these net amounts as reported in the Consolidated Statements of Financial Position.

 

Schedule of gains or losses (before tax) related to derivative instruments

Derivative Gains and Losses:  Gains or losses (before tax, in thousands) related to the Company’s derivative instruments for the third quarter ended July 27, 2014, and July 28, 2013, were as follows:

 

 

 

Gain/(Loss)
Recognized in
AOCL
(Effective Portion)
(1)(2)

 

Location on
Consolidated

 

Gain/(Loss)
Reclassified from
AOCL into Earnings
(Effective Portion) (1)(2)

 

Gain/(Loss)
Recognized in
Earnings (Ineffective
Portion) (3) (5)

 

 

 

Three Months Ended

 

 

 

Three Months Ended

 

 

Three Months Ended

Cash Flow Hedges:

 

July 27,
2014

 

July 28,
2013

 

Statements
of Operations

 

July 27,
2014

 

July 28,
2013

 

July 27,
2014

 

July 28,
2013

Commodity contracts

 

$  (18,159)  

 

$  (5,913)

 

Cost of products sold

 
$
(1,028)

 
$
(838)

 
$
(30)

 
$
(259)

 

 

 

 

 

 

 

 

 

 

 

 

 

Location on
Consolidated

 

Gain/(Loss)
Recognized in Earnings
(Effective Portion) (4)

 

Gain/(Loss)
Recognized in
Earnings (Ineffective
Portion) (3) (6)

 

 

 

 

 

 

Three Months Ended

 

 

Three Months Ended

Fair Value Hedges:

 

 

 

 

 

Statements
of Operations

 

July 27,
2014

 

July 28,
2013

 

July 27,
2014

 

July 28,
2013

Commodity contracts

 

 

 

 

 

 

 

Cost of products sold

 
$
(6,685)

 
$
2,327 

 

 
$
266 

 
$
16 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain/(Loss)
Recognized
in Earnings (2)

 

 

 

 

 

 

Location on
Consolidated
Statements
of Operations

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Derivatives Not
Designated as Hedges:

 

 

 

 

 

 

July 27,
2014

 

July 28,
2013

 

 

 

 

Commodity contracts

 

 

 

 

 

 

 

Cost of products sold

 
$
(2,453)

 
$
(266)

 

 

 

 

 

 

Foreign exchange contracts

 

 

 

 

 

 

 

Net sales

 
$
(0)

 
$
(79)

 

 

 

 

 

 

 

Derivative Gains and Losses:  Gains or losses (before tax, in thousands) related to the Company’s derivative instruments for the nine months ended July 27, 2014, and July 28, 2013, were as follows:

 

 

 

Gain/(Loss)
Recognized in
AOCL
(Effective Portion)
(1)(2)

 

Location on

 

Gain/(Loss)
Reclassified from
AOCL into Earnings
(Effective Portion) (1)(2)

 

Gain/(Loss)
Recognized in
Earnings (Ineffective
Portion) (3) (5)

 

 

 

Nine Months Ended

 

Consolidated

 

Nine Months Ended

 

Nine Months Ended

 

Cash Flow Hedges:

 

July 27,
2014

 

July 28,
2013

 

Statements
of Operations

 

July 27,
2014

 

July 28,
2013

 

July 27,
2014

 

July 28,
2013

 

Commodity contracts

 

$ (13,854)

 

$ (18,382)

 

Cost of products sold

 
$
(7,144)

 
$
8,148 

 

$    193

 

$    (485)

 

 

 

 

 

 

Location on

 

Gain/(Loss)
Recognized in Earnings
(Effective Portion) (4)

 

Gain/(Loss)
Recognized in
Earnings (Ineffective
Portion) (3) (6)

 

 

 

 

 

Consolidated

 

Nine Months Ended

 

Nine Months Ended

 

Fair Value Hedges:

 

 

 

 

 

Statements
of Operations

 

July 27,
2014

 

July 28,
2013

 

July 27,
2014

 

July 28,
2013

 

Commodity contracts

 

 

 

 

 

Cost of products sold

 
$
(21,320)

 
$
4,869 

 

$    (209)

 

$    71

 

 

 

 

 

 

Location on

 

Gain/(Loss)
Recognized
in Earnings (2)

 

 

 

 

 

 

 

Consolidated

 

Nine Months Ended

 

 

 

Derivatives Not
Designated as Hedges:

 

 

 

 

 

Statements
of Operations

 

July 27,
2014

 

July 28,
2013

 

 

 

 

 

Commodity contracts

 

 

 

 

 

Cost of products sold

 

$   (1,764)

 

$     (999)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

 

 

 

 

Net sales

 

$      (0)

 

$       (79)

 

 

 

 

 

 

(1)

Amounts represent gains or losses in AOCL before tax. See Note G “Accumulated Other Comprehensive Loss” or the Consolidated Statements of Comprehensive Income for the after tax impact of these gains or losses on net earnings.

(2)

During fiscal year 2013, the Company dedesignated and ceased hedge accounting for its corn futures contracts held for its hog operations. At the date of dedesignation of these hedges, losses of $2.0 million (before tax) were deferred in AOCL, with $0.2 million (before tax) remaining as of July 27, 2014. These losses will remain in AOCL until the hedged transactions occur or it is probable the hedged transactions will not occur. Gains or losses related to these contracts after the date of dedesignation have been recognized in earnings as incurred.

(3)

There were no gains or losses excluded from the assessment of hedge effectiveness during the third quarter or first nine months of fiscal years 2014 and 2013.

(4)

Amounts represent losses on commodity contracts designated as fair value hedges that were closed during the third quarter or first nine months of fiscal years 2014 or 2013, which were offset by a corresponding gain on the underlying hedged purchase commitment. Additional gains or losses related to changes in the fair value of open commodity contracts, along with the offsetting gain or loss on the hedged purchase commitment, are also marked-to-market through earnings with no impact on a net basis.

(5)

There were no gains or losses resulting from the discontinuance of cash flow hedges during the third quarter or first nine months of fiscal years 2014 and 2013.

(6)

There were no gains or losses recognized as a result of a hedged firm commitment no longer qualifying as a fair value hedge during the third quarter or first nine months of fiscal years 2014 and 2013.

 

Derivatives not designated as hedges
  
Derivatives and hedging  
Schedule of outstanding commodity futures contracts

 

 

 

 

Volume

Commodity

 

July 27, 2014

 

October 27, 2013

Corn

 

3.5 million bushels

 

1.7 million bushels

 

Cash Flow Hedges
  
Derivatives and hedging  
Schedule of outstanding commodity futures contracts

 

 

 

 

Volume

Commodity

 

July 27, 2014

 

October 27, 2013

  Corn

 

17.4 million bushels

 

14.7 million bushels

 

 

 

Fair Value Hedges
  
Derivatives and hedging  
Schedule of outstanding commodity futures contracts

 

 

 

 

Volume

Commodity

 

July 27, 2014

 

October 27, 2013

Corn

 

7.5 million bushels

 

5.8 million bushels

Lean hogs

 

0.7 million cwt

 

1.4 million cwt