Fair Value Measurement

6 Months Ended

Jul. 01, 2023

FASB authoritative guidance defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The following table presents the Company’s financial instruments that are measured at fair value on a recurring and nonrecurring basis as of July 1, 2023 and are categorized using the fair value hierarchy under FASB authoritative guidance. The fair value hierarchy has three levels based on the reliability of the inputs used to determine the fair value.


			Fair Value Measurements at July 1, 2023 Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands of dollars)	Total		(Level 1)		(Level 2)		(Level 3)
Assets
Derivative instruments	$	56,124	$	—	$	56,124	$	—
Total Assets	$	56,124	$	—	$	56,124	$	—

Liabilities
Derivative instruments	$	14,155	$	—	$	14,155	$	—
Contingent consideration	87,329		—		—		87,329
6% Senior notes	974,300		—		974,300		—
5.25% Senior notes	482,500		—		482,500		—
3.625% Senior notes	548,045		—		548,045		—
Term loan A-1	399,000		—		399,000		—
Term loan A-2	485,063		—		485,063		—
Term loan A-3	298,500		—		298,500		—
Term loan A-4	494,391		—		494,391		—
Term loan B	200,000		—		200,000		—
Revolver debt	484,542		—		484,542		—
Total Liabilities	$	4,467,825	$	—	$	4,380,496	$	87,329


			Fair Value Measurements at December 31, 2022 Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands of dollars)	Total		(Level 1)		(Level 2)		(Level 3)
Assets
Derivative instruments	$	20,324	$	—	$	20,324	$	—
Total Assets	$	20,324	$	—	$	20,324	$	—

Liabilities
Derivative instruments	$	5,406	$	—	$	5,406	$	—
Contingent consideration	169,903		—		—		169,903
6% Senior notes	977,200		—		977,200		—
5.25% Senior notes	485,700		—		485,700		—
3.625% Senior notes	533,155		—		533,155		—
Term loan A-1	398,000		—		398,000		—
Term loan A-2	488,813		—		488,813		—
Term loan B	199,000		—		199,000		—
Revolver debt	133,003		—		133,003		—
Total Liabilities	$	3,390,180	$	—	$	3,220,277	$	169,903

Derivative assets and liabilities consist of the Company’s corn option and future contracts, foreign currency forward and option contracts, soybean meal forward contracts and interest rate swap contracts which represent the difference

between observable market rates of commonly quoted intervals for similar assets and liabilities in active markets and the fixed swap rate considering the instruments term, notional amount and credit risk. See Note 15 (Derivatives) to the Company's Consolidated Financial Statements included herein for discussion on the Company's derivatives.

The carrying amount of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximates fair value due to the short maturity of these instruments and as such have been excluded from the table above.

The fair value of the senior notes, term loan A-1, term loan A-2, term loan A-3, term loan A-4, term loan B and revolver debt is based on market quotation from third-party banks. The carrying amount of the Company's other debt is not deemed to be significantly different from the fair value and all other instruments have been recorded at fair value.

The fair value measurement of the contingent consideration liability uses significant unobservable inputs (level 3). The changes in contingent consideration are due to the following:


(in thousands of dollars)	Contingent Consideration
Balance as of December 31, 2022	$	169,903
Out-of-period correction (1)	(85,144)
Total included in earnings during period	(5,443)
Exchange rate changes	8,013
Balance as of July 1, 2023	$	87,329

(1) As disclosed in Note 2(g), the immaterial out-of-period correction made during the quarter ended July 1, 2023 resulted in a reduction of goodwill recorded associated with the FASA Acquisition of approximately $85.1 million.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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