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GIS » Topics » Volatility in the market value of derivatives we use to hedge exposures to fluctuations in commodity prices will cause volatility in our gross margins and net earnings.These excerpts taken from the GIS 10-K filed Jul 11, 2008. Volatility
in the market value of derivatives we use to hedge exposures to
fluctuations in commodity prices will cause volatility in our
gross margins and net earnings.
We utilize derivatives to hedge price risk for some of our
principal ingredient and energy costs, including grains (oats,
wheat, and corn), oils (principally soybean), non-fat dry milk,
natural gas, and diesel fuel. Changes in the values of these
derivatives are recorded in earnings currently, resulting in
volatility in both gross margin and net earnings. These gains
and losses are reported in cost of sales in our Consolidated
Statements of Earnings and in unallocated corporate items in our
segment operating results until we utilize the underlying input
in our manufacturing process, at which time the gains and losses
are reclassified to segment operating profit. We also record our
grain inventories at fair value. We may experience volatile
earnings as a result of these accounting treatments.
Volatility in the market value of derivatives we use to hedge exposures to fluctuations in commodity prices will cause volatility in our gross margins and net earnings. We utilize derivatives to hedge price risk for some of our principal ingredient and energy costs, including grains (oats, wheat, and corn), oils (principally soybean), non-fat dry milk, natural gas, and diesel fuel. Changes in the values of these derivatives are recorded in earnings currently, resulting in volatility in both gross margin and net earnings. These gains and losses are reported in cost of sales in our Consolidated Statements of Earnings and in unallocated corporate items in our segment operating results until we utilize the underlying input in our manufacturing process, at which time the gains and losses are reclassified to segment operating profit. We also record our grain inventories at fair value. We may experience volatile earnings as a result of these accounting treatments. | EXCERPTS ON THIS PAGE:
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