Derivatives

The Company’s operations are exposed to market risks relating to commodity prices that affect the Company’s cost of raw materials, finished product prices and energy costs and the risk of changes in interest rates and foreign currency exchange rates.

The Company makes limited use of derivative instruments to manage cash flow risks related to natural gas usage, diesel fuel usage, inventory, forecasted sales and foreign currency exchange rates. The Company does not use derivative instruments for trading purposes. Natural gas swaps and options are entered into with the intent of managing the overall cost of natural gas usage by reducing the potential impact of seasonal weather demands on natural gas that increases natural gas prices. Heating oil swaps and options are entered into with the intent of managing the overall cost of diesel fuel usage by reducing the potential impact of seasonal weather demands on diesel fuel that increases diesel fuel prices. Corn options and future contracts are entered into with the intent of managing U.S. forecasted sales of bakery by-products ("BBP") by reducing the impact of changing prices. Foreign currency forward contracts are entered into to mitigate the foreign exchange rate risk for transactions designated in a currency other than the local functional currency. At September 27, 2014, the Company had corn option contracts and natural gas contracts outstanding that qualified and were designated for hedge accounting as well as heating oil swap contracts, corn options contracts and foreign currency forward contracts that did not qualify and were not designated for hedge accounting.

Entities are required to report all derivative instruments in the statement of financial position at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, on the reason for holding the instrument. If certain conditions are met, entities may elect to designate a derivative instrument as a hedge of exposures to changes in fair value, cash flows or foreign currencies. If the hedged exposure is a cash flow exposure, the effective portion of the gain or loss on the derivative instrument is reported initially as a component of other comprehensive income (outside of earnings) and is subsequently reclassified into earnings when the forecasted transaction affects earnings. Any amounts excluded from the assessment of hedge effectiveness, as well as the ineffective portion of the gain or loss are reported in earnings immediately. If the derivative instrument is not designated as a hedge, the gain or loss is recognized in earnings in the period of change.

Cash Flow Hedges

In fiscal 2013 and the first nine months of fiscal 2014, the Company entered into natural gas swap contracts that are considered cash flow hedges. Under the terms of the natural gas swap contracts, the Company fixed the expected purchase cost of a portion of its U.S. plants' forecasted natural gas usage into the fourth quarter of fiscal 2014. As of September 27, 2014, some of the contracts have expired and settled according to the contracts while the remaining contract positions and activity are disclosed below.

In fiscal 2013 and the first nine months of fiscal 2014, the Company entered into corn option contracts that are considered cash flow hedges. Under the terms of the corn option contracts, the Company hedged a portion of its U.S. forecasted sales of BBP through fiscal 2014. As of September 27, 2014, some of the contracts have settled while the remaining contract positions and activity are disclosed below. From time to time, the Company may enter into corn option contracts in the future.

As of September 27, 2014, the Company had the following outstanding forward contract amounts that were entered into to hedge the future payments of intercompany note transactions, foreign currency transactions in currencies other than the functional currency and forecasted transactions in currencies other than the function currency. All of these transactions are currently not designated for hedge accounting. (in thousands):



Functional Currency		Contract Currency
Type	Amount	Type	Amount
Brazilian real	10,322	Euro	3,350
Brazilian real	27,990	U.S. dollar	12,000
Euro	267,227	U.S. dollar	351,244
Euro	8,472	Polish zloty	35,698
Euro	4,046	Japanese yen	556,946
Euro	30,466	Chinese renminbi	242,054
Euro	7,495	Australian dollar	10,450
Euro	3,079	British pound	2,448

The Company estimates the amount that will be reclassified from accumulated other comprehensive gain at September 27, 2014 into earnings over the next 12 months will be approximately $1.8 million. As of September 27, 2014, no amounts have been reclassified into earnings as a result of the discontinuance of cash flow hedges.

The following table presents the fair value of the Company’s derivative instruments under FASB authoritative guidance as of September 27, 2014 and December 28, 2013 (in thousands):



Derivatives Designated	Balance Sheet	Asset Derivatives Fair Value
as Hedges	Location	September 27, 2014		December 28, 2013
Corn options	Other current assets	$	1,912	$	2,349
Natural gas swaps	Other current assets	—		120

Total asset derivatives designated as hedges		$	1,912	$	2,469

Derivatives Not Designated as Hedges
Foreign currency contracts	Other current assets	$	11,879	$	27,516
Heating oil swaps and options	Other current assets	—		43
Corn options	Other current assets	19		—

Total asset derivatives not designated as hedges		$	11,898	$	27,559

Total asset derivatives		$	13,810	$	30,028



Derivatives Designated	Balance Sheet	Liability Derivatives Fair Value
as Hedges	Location	September 27, 2014		December 28, 2013
Corn options and futures	Accrued expenses	$	—	$	1
Natural gas swaps	Accrued expenses	51		—

Total liability derivatives designated as hedges		$	51	$	1

Derivatives Not Designated as Hedges
Foreign currency contracts	Accrued expenses	$	1,995	$	—
Heating oil swaps and options	Accrued expenses	142		2

Total liability derivatives not designated as hedges		$	2,137	$	2

Total liability derivatives		$	2,188	$	3

The effect of the Company’s derivative instruments on the consolidated financial statements as of and for the three months ended September 27, 2014 and September 28, 2013 is as follows (in thousands):



Derivatives Designated as Cash Flow Hedges	Gain or (Loss) Recognized in Other Comprehensive Income ("OCI") on Derivatives (Effective Portion) (a)					Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) (b)					Gain or (Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) (c)
	2014		2013			2014		2013			2014		2013
Corn options	$	2,538	$	2,676		$	1,212	$	2,155		$	22	$	215
Natural gas swaps	5		(14		)	70		(95		)	4		1

Total	$	2,543	$	2,662		$	1,282	$	2,060		$	26	$	216


(a)	Amount recognized in accumulated OCI (effective portion) is reported as accumulated other comprehensive income/ (loss) of approximately $2.5 million and approximately $2.7 million recorded net of taxes of approximately $1.0 million and $1.0 million as of September 27, 2014 and September 28, 2013, respectively.


(b)	Gains and (losses) reclassified from accumulated OCI into income (effective portion) for corn options and natural gas swaps are included in cost of sales, respectively, in the Company’s consolidated statements of operations.


(c)	Gains and (losses) recognized in income on derivatives (ineffective portion) for corn options and natural gas swaps is included in other income/ (expense), net in the Company’s consolidated statements of operations.

The effect of the Company’s derivative instruments on the consolidated financial statements as of and for the nine months ended September 27, 2014 and September 28, 2013 is as follows (in thousands):



Derivatives Designated as Cash Flow Hedges	Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion) (a)				Gain or (Loss) Reclassified From Accumulated OCI into Income (Effective Portion) (b)				Gain or (Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) (c)
	2014		2013		2014		2013		2014			2013
Corn options	$	2,265	$	5,717	$	2,536	$	3,063	$	753		$	249
Natural gas swaps	160		73		427		92		(1		)	8

Total	$	2,425	$	5,790	$	2,963	$	3,155	$	752		$	257


(a)	Amount recognized in accumulated OCI (effective portion) is reported as accumulated other comprehensive income/ (loss) of approximately $2.4 million and approximately $5.8 million recorded net of taxes of approximately less than $0.9 million and $2.2 million as of September 27, 2014 and September 28, 2013, respectively.


(b)	Gains and (losses) reclassified from accumulated OCI into income (effective portion) for corn options and natural gas swaps are included in cost of sales, respectively, in the Company’s consolidated statements of operations.


(c)	Gains and (losses) recognized in income on derivatives (ineffective portion) for corn options and natural gas swaps is included in other income/ (expense), net in the Company’s consolidated statements of operations.

At September 27, 2014, the Company had forward purchase agreements in place for purchases of approximately $4.4 million of natural gas and diesel fuel. These forward purchase agreements have no net settlement provisions and the Company intends to take physical delivery of the underlying product. Accordingly, the forward purchase agreements are not subject to the requirements of fair value accounting because they qualify and the Company has elected to account for these as normal purchases as defined in the FASB authoritative guidance.