Quarterly report pursuant to Section 13 or 15(d)

Financial Instruments, Fair Value, Hedging Activities, and Concentrations of Credit Risk

v3.20.1
Financial Instruments, Fair Value, Hedging Activities, and Concentrations of Credit Risk
3 Months Ended
Mar. 31, 2020
Text Block [Abstract]  
Financial Instruments, Fair Value, Hedging Activities, and Concentrations of Credit Risk

2. FINANCIAL INSTRUMENTS, FAIR VALUE, HEDGING ACTIVITIES, AND CONCENTRATIONS OF CREDIT RISK

The carrying values of cash and cash equivalents, restricted cash, due from related parties, accounts payable, due to related parties and all other current liabilities approximate fair value.

We measure certain assets and liabilities at fair value on a recurring basis, including short-term investments, financing lease obligations and commodity futures and options. The accounting guidance establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as of the measurement date as follows:

Level 1: Fair values are based on unadjusted quoted prices in active trading markets for identical assets and liabilities.

Level 2: Fair values are based on observable quoted prices other than those in Level 1, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

Level 3: Fair values are based on at least one significant unobservable input for the asset or liability.

Fair Value Measurements and Financial Statement Presentation

The fair values of our assets, liabilities, and derivative positions recorded at fair value and their respective levels in the fair value hierarchy as of March 31, 2020 and December 31, 2019, were as follows:

 

 

March 31, 2020

 

 

March 31, 2020

 

 

Fair Values of Assets

 

 

Fair Values of Liabilities

 

In Thousands

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Other items reported at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments

$

38,620

 

 

$

 

 

$

 

 

$

38,620

 

 

$

 

 

$

 

 

$

 

 

$

 

Commodity futures and options

 

603

 

 

 

 

 

 

 

 

 

603

 

 

 

 

 

 

 

 

 

 

 

 

 

Financing lease obligations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,509

 

 

 

 

 

 

15,509

 

Total

$

39,223

 

 

$

 

 

$

 

 

$

39,223

 

 

$

 

 

$

15,509

 

 

$

 

 

$

15,509

 

 

 

December 31, 2019

 

 

December 31, 2019

 

 

Fair Values of Assets

 

 

Fair Values of Liabilities

 

In Thousands

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Other items reported at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financing lease obligations

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

15,651

 

 

$

 

 

$

15,651

 

Commodity futures and options

 

62

 

 

 

 

 

 

 

 

 

62

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

$

62

 

 

$

 

 

$

 

 

$

62

 

 

$

 

 

$

15,651

 

 

$

 

 

$

15,651

 

The composition of our short-term investments at March 31, 2020 and December 31, 2019 were as follows:

 

As of March 31,

 

 

As of December 31,

 

In Thousands

2020

 

 

2019

 

Corporate debt securities

$

29,677

 

 

$

 

Commercial paper

 

8,943

 

 

 

 

Total

$

38,620

 

 

$

 

 

Commodity Price Risk

We enter into seed and grain production agreements (Forward Purchase Contracts) with settlement values based on commodity futures market prices. These Forward Purchase Contracts allow the counterparty to fix their sales prices at various times as defined in the contract. We are also engaged in the business of selling soybean oil and meal under a variety of pricing structures. We may enter hedging arrangements to either fix variable exposures or convert fixed prices to floating prices through commodity derivative contracts. As of March 31, 2020, we held commodity contracts with a notional amount of $23.6 million.

We have designated all our commodity derivative contracts as cash flow hedges. As a result, all gains or losses associated with recording commodity derivative contracts at fair value are recorded as a component of accumulated other comprehensive income (loss) (AOCI). We reclassify amounts from AOCI to cost of goods sold when we sell the underlying products to which those hedges relate. As of March 31, 2020, we expect the entire AOCI balance to be reclassified into earnings within the next eight months.

Certain amounts related to our hedging activities are as follows:

 

 

Amount of Gain (Loss)

Recognized in AOCI

 

 

Amount of Gain (Loss)

Reclassified to Earnings

 

 

For the Three Months Ended March 31,

 

 

For the Three Months Ended March 31,

 

In thousands

2020

 

 

2019

 

 

2020

 

 

2019

 

Cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity derivative contracts

$

(163

)

 

$

 

 

$

14

 

 

$

 

Total

$

(163

)

 

$

 

 

$

14

 

 

$

 

 

Foreign Exchange Risk

Foreign currency fluctuations affect our foreign currency cash flows related primarily to payments to Cellectis. Our principal foreign currency exposure is to the euro. We do not hedge these exposures, and we do not believe that the current level of foreign currency risk is significant to our operations.

Concentrations of Credit Risk

We invest our cash, cash equivalents and restricted cash in highly liquid securities and investment funds and until late December 2019, also held deposits at a financial institution that exceeded insured limits. In the first quarter of 2020, we diversified this risk by shifting our investments to a diverse portfolio of short-dated, high investment-grade securities we classify as short-term investments that are recorded at fair value in our consolidated financial statements. We ensure the credit risk in this portfolio is in accordance with our internal policies and if necessary, make changes to investments to ensure credit risk is minimized. We have not experienced any counterparty credit losses.