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 interest expense, natural gas usage, diesel fuel usage, inventory, forecasted sales and foreign currency exchange rates. The Company does not use derivative instruments for trading purposes. Interest rate swaps are entered into with the intent of managing overall borrowing costs by reducing the potential impact of increases in interest rates on floating-rate long-term debt. 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 forecasted sales of 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 January 3, 2015, the Company had corn options outstanding that qualified and were designated for hedge accounting as well as heating oil swaps and options, corn options 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.

In November 2013, the Company entered into foreign currency exchange forward contracts that did not qualify for hedge accounting to mitigate the foreign exchange rate risk of the expected acquisition price of the VION Acquisition. Under the terms of the exchange contracts, the Company exchanged U.S. dollars for €1.0 billion at a fixed weighted average price of approximately1.346 with a maturity date of early January 2014. The foreign currency contract was not designated for hedge accounting. In the fourth quarter of fiscal 2013 the Company recorded an unrealized gain of $27.5 million and upon settlement of the exchange contracts recorded a loss in the first quarter of fiscal 2014 of $12.6 million.

Cash Flow Hedges

In fiscal 2013 and fiscal 2014, the Company has 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 plants expected natural gas usage in fiscal 2015. As of January 3, 2015, all of the fiscal 2013 contracts and fiscal 2014 contracts have expired and settled according to the contracts with activity disclosed below.

In fiscal 2013 and 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 it's forecasted sales of BBP into the second quarter of fiscal 2015. As of January 3, 2015, all fiscal 2013 contracts and some of the fiscal 2014 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 January 3, 2015, 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 functional currency. All of these transactions are currently not designated for hedge accounting. (in thousands):



Functional Currency		Contract Currency
Type	Amount	Type	Amount
Brazilian real	11,721	Euro	3,650
Brazilian real	18,877	U.S. Dollar	7,400
Euro	289,385	U.S. Dollar	359,631
Euro	8,348	Polish zloty	35,000
Euro	3,429	Japanese yen	488,926
Euro	31,600	Chinese renminbi	242,054
Euro	21,146	Australian dollar	31,350
Euro	1,842	British pound	1,448
Polish zloty	11,544	Euro	2,741

The Company estimates the amount that will be reclassified from accumulated other comprehensive gain at January 3, 2015 into earnings over the next 12 months will be approximately $0.1 million. As of January 3, 2015, 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 as of January 3, 2015 and December 28, 2013 (in thousands):



Derivatives Designated	Balance Sheet	Asset Derivatives Fair Value
as Hedges	Location	January 3, 2015		December 28, 2013
Natural gas swaps	Other current assets	$	—	$	120
Corn options	Other current assets	247		2,349

Total derivatives designated as hedges		$	247	$	2,469

Derivatives not Designated as Hedges
Foreign currency contracts	Other current assets	$	11,559	$	27,516
Corn options and futures	Other current assets	69		—
Heating oil swaps	Other current assets	353		43

Total derivatives not designated as hedges		$	11,981	$	27,559

Total asset derivatives		$	12,228	$	30,028



Derivatives Designated	Balance Sheet	Liability Derivatives Fair Value
as Hedges	Location	January 3, 2015		December 28, 2013
Corn options	Accrued expenses	$	—	$	1

Total derivatives designated as hedges		$	—	$	1

Derivatives not Designated as Hedges
Foreign currency contracts	Accrued Expenses	$	2,019	$	—
Corn options and futures	Accrued Expenses	3		—
Heating oil swaps	Accrued Expenses	993		2

Total derivatives not designated as hedges		$	3,015	$	2

Total liability derivatives		$	3,015	$	3

The effect of the Company's derivative instruments on the consolidated financial statements for the fiscal years ended January 3, 2015 and December 28, 2013 are 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	$	1,812	$	7,350	$	3,868	$	5,486	$	92		$	274
Natural gas swaps	11		248		196		41		(1		)	(4		)

Total	$	1,823	$	7,598	$	4,064	$	5,527	$	91		$	270


(a)	Amount recognized in accumulated OCI (effective portion) is reported as accumulated other comprehensive gain of approximately $1.8 million and approximately $7.6 million recorded net of taxes of approximately $0.7 million and approximately $2.9 million for the year ended January 3, 2015 and December 28, 2013, respectively.


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


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

At January 3, 2015, the Company had forward purchase agreements in place for purchases of approximately $4.2 million of natural gas and diesel fuel. These forward purchase agreements have no net settlement provisions and the Company intends to take physical delivery. Accordingly, the forward purchase agreements are not subject to the requirements of fair value accounting because they qualify as normal purchases as defined.