Tyson Foods 2015 Annual Report Download - page 68
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Please find page 68 of the 2015 Tyson Foods annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.NOTE 12: DERIVATIVE FINANCIAL INSTRUMENTS
Ourbusinessoperationsgiverisetocertainmarketriskexposuresmostlyduetochangesincommodityprices,foreigncurrencyexchangeratesandinterestrates.
Wemanageaportionoftheserisksthroughtheuseofderivativefinancialinstrumentstoreduceourexposuretocommoditypricerisk,foreigncurrencyriskand
interestraterisk.OurriskmanagementprogramsareperiodicallyreviewedbyourBoardofDirectors'AuditCommittee.Theseprogramsaremonitoredbysenior
managementandmayberevisedasmarketconditionsdictate.Ourcurrentriskmanagementprogramsutilizeindustry-standardmodelsthattakeintoaccountthe
implicitcostofhedging.Risksassociatedwithourmarketrisksandthosecreatedbyderivativeinstrumentsandthefairvaluesarestrictlymonitored,usingvalue-
at-riskandstresstests.Creditrisksassociatedwithourderivativecontractsarenotsignificantasweminimizecounterpartyconcentrations,utilizemarginaccounts
orlettersofcredit,anddealwithcredit-worthycounterparties.Additionally,ourderivativecontractsaremostlyshort-termindurationandwegenerallydonot
makeuseofcredit-risk-relatedcontingentfeatures.NosignificantconcentrationsofcreditriskexistedatOctober3,2015.
Wehadthefollowingaggregatedoutstandingnotionalamountsrelatedtoourderivativefinancialinstruments:
inmillions,exceptsoymealtons
Metric
October3,2015
September27,2014
Corn
Bushels
18
—
SoyMeal
Tons
284,900
198,100
LiveCattle
Pounds
102
405
LeanHogs
Pounds
166
350
ForeignCurrency
UnitedStatesdollar
$ 42
$ 109
WerecognizeallderivativeinstrumentsaseitherassetsorliabilitiesatfairvalueintheConsolidatedBalanceSheets,withtheexceptionofnormalpurchasesand
normalsalesexpectedtoresultinphysicaldelivery.Forthosederivativeinstrumentsthataredesignatedandqualifyashedginginstruments,wedesignatethe
hedginginstrumentbasedupontheexposurebeinghedged(i.e.,cashflowhedgeorfairvaluehedge).Wedesignatecertainforwardcontractsasfollows:
• CashFlowHedges–includecertaincommodityforwardandoptioncontractsofforecastedpurchases(i.e.,grains)andcertainforeignexchangeforward
contracts.
• FairValueHedges–includecertaincommodityforwardcontractsoffirmcommitments(i.e.,livestock).
Cashflowhedges
Derivativeinstrumentsaredesignatedashedgesagainstchangesintheamountoffuturecashflowsrelatedtoprocurementofcertaincommoditiesutilizedinour
productionprocesses.Forthederivativeinstrumentswedesignateandqualifyasacashflowhedge,theeffectiveportionofthegainorlossonthederivativeis
reportedasacomponentofothercomprehensiveincome(OCI)andreclassifiedintoearningsinthesameperiodorperiodsduringwhichthehedgedtransaction
affectsearnings.Gainsandlossesrepresentinghedgeineffectivenessarerecognizedinearningsinthecurrentperiod.Ineffectivenessrelatedtoourcashflow
hedgeswasnotsignificantduringfiscal2015,2014and2013.AsofOctober3,2015,thenetamountsexpectedtobereclassifiedintoearningswithinthenext12
monthsarepretaxlossesof$1million.Duringfiscal2015,2014and2013,wedidnotreclassifysignificantpretaxgains/lossesintoearningsasaresultofthe
discontinuanceofcashflowhedges.
ThefollowingtablesetsforththepretaximpactofcashflowhedgederivativeinstrumentsintheConsolidatedStatementsofIncome:
inmillions
Gain(Loss)
RecognizedinOCI
onDerivatives
Consolidated
StatementsofIncome
Classification
Gain(Loss)
Reclassifiedfrom
OCItoEarnings
2015
2014
2013
2015
2014
2013
CashFlowHedge–Derivativesdesignatedas
hedginginstruments:
Commoditycontracts $ (4)
$(7)
$ (29)
CostofSales
$(7)
$ (10)
$(5)
Foreignexchangecontracts —
(1)
(2)
OtherIncome/Expense
—
—
(4)
Total $ (4)
$(8)
$ (31)
$(7)
$ (10)
$(9)
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