QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
−Removed: Our operations are exposed to market risks from adverse changes in commodity prices affecting the cost of raw materials and energy, foreign currency exchange rates, and interest rates.
+Added: Our operations are exposed to market risks from adverse changes in commodity prices affecting the cost of raw materials and energy, changes in currency rates, and interest rates.
In the normal course of business, we may periodically enter into derivatives to minimize these risks, but not for trading purposes.
−Removed: The effects of the COVID-19 pandemic and the disruptions in the global economy caused by the war in Ukraine have resulted in volatility and uncertainty in the markets in which we operate.
−Removed: At the time of this filing, we are unable to predict or determine the impacts that these events may continue to have on our exposure to market risk from commodity prices, foreign currency exchange rates and interest rates, among other factors.
−Removed: For additional discussion, refer to “Forward-Looking Statements,” “Liquidity and Capital Resources” within “Part II, Item 7.
−Removed: Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as “Item 1A.
−Removed: Risk Factors” of this Form 10-K.
−Removed: Based on our open commodity contract hedge positions as of May 29, 2022 and May 30, 2021, a hypothetical 10 percent decline in market prices applied to the fair value of the instruments would result in a charge to “Cost of sales” of $4.5 million ($3.5 million after-tax) and $7.7 million ($5.9 million after-tax), respectively.
−Removed: Additionally, based on our LWM joint venture’s open commodity contract hedge positions as of May 29, 2022 and May 30, 2021, a hypothetical 10 percent decline in market prices applied to the fair value of the instruments would result in a charge to “Equity method investment earnings” of $6.1 million ($4.6 million after-tax) and $1.5 million ($1.1 million after-tax), respectively.
+Added: All of the following potential changes are based on sensitivity analyses performed on our financial positions as of May 28, 2023 and May 29, 2022.
+Added: Actual results may differ materially.
+Added: Commodity Price Risk
+Added: The objective of our commodity exposure management is to minimize volatility in earnings due to large fluctuations in the price of commodities.
+Added: We may use commodity swap or forward purchase contracts, in addition to sourcing from multiple providers, to manage risks associated with market fluctuations in oil and energy prices.
+Added: Based on our open commodity contract hedge positions as of May 28, 2023, a hypothetical 10 percent decline in market prices applied to the fair value of the instruments would result in a charge to “Cost of sales” of $9.0 million ($6.8 million after-tax).
+Added: Based on our open commodity hedge positions as of May 29, 2022, a hypothetical 10 percent decline in market prices applied to the fair value of the instruments would have resulted in a charge to “Cost of sales” of $4.5 million ($3.5 million after-tax) and a charge to “Equity method investment earnings” of $6.1 million ($4.6 million after-tax).
It should be noted that any change in the fair value of the contracts, real or hypothetical, would be substantially offset by an inverse change in the value of the underlying hedged item.
−Removed: Including our joint ventures, we transact business in multiple currencies and are subject to currency exchange rate risk through investments and businesses owned and operated in foreign countries.
−Removed: At May 29, 2022 and May 30, 2021, we had no financial instruments to hedge foreign currency risk.
+Added: Foreign Currency Exchange Rate Risk
+Added: We are subject to currency exchange rate risk through investments and businesses owned and operated in foreign countries.
+Added: Our operations in foreign countries export to, and compete with imports from other regions.
+Added: As such, currency movements can have a number of direct and indirect impacts on our financial statements.
+Added: Direct impacts include the translation of international operations’ local currency financial statements into U.S.
+Added: dollars and the remeasurement impact associated with non-functional currency financial assets and liabilities.
+Added: Indirect impacts include the change in competitiveness of exports out of the United States (and the impact on local currency pricing of products that are traded internationally).
+Added: The currency that has the most impact is the Euro.
+Added: From time to time, we may economically hedge currency risk with foreign currency contracts, such as forward contracts.
+Added: Based on monetary assets and liabilities denominated in foreign currencies, we estimate that a hypothetical 10 percent adverse change in exchange rates versus the U.S.
+Added: dollar would result in losses of $48.8 million ($37.1 million after-tax) and $6.5 million ($5.0 million after-tax) as of May 28, 2023 and May 29, 2022, respectively.
+Added: The increased hypothetical risk from May 29, 2022 is primarily related to the increase in our non-U.S.
+Added: assets and liabilities.
+Added: Interest Rate Risk
+Added: We issue fixed and floating rate debt in a proportion that management deems appropriate based on current and projected market conditions.
At May 28, 2023, we had $2,170.0 million of fixed-rate and $1,309.8 million of variable-rate debt outstanding.
At May 29, 2022, we had $2,170.0 million of fixed-rate and $575.0 million of variable-rate debt outstanding.
−Removed: We have interest rate risk associated with our variable-rate debt.
−Removed: A one percent increase in interest rates related to variable-rate debt would result in an increase in interest expense and a corresponding decrease in income before taxes of $5.8 million annually ($4.5 million after-tax) and $5.9 million annually ($4.6 million after-tax) at May 29, 2022 and May 30, 2021, respectively.
−Removed: For more information about our market risks, see Note 7, Debt and Financing Obligations, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
+Added: A one percent increase in interest rates related to variable-rate debt would result in an annual increase in interest expense and a corresponding decrease in income before taxes of $13.3 million annually ($10.3 million after-tax) and $5.8 million annually ($4.5 million after-tax) at May 28, 2023 and May 29, 2022, respectively.
+Added: For more information about our debt, see Note 8, Debt and Financing Obligations, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
Financial Statements and Supplementary Data” of this Form 10-K.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.