Derivative Financial Instruments

12 Months Ended

Dec. 30, 2012

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

10.    Derivative Financial Instruments

Interest

As of December 30, 2012, the Company had $0.6 million in gains from terminated interest rate swap agreements to be amortized over the next 27 months.

Unamortized gains from terminated interest rate swap agreements and forward interest rate agreements are presented in accrued interest payable (current) and other liabilities (noncurrent) on the balance sheet.

During 2012, 2011 and 2010, the Company amortized deferred gains related to previously terminated interest rate swap agreements and forward interest rate agreements, which reduced interest expense by $1.1 million, $1.2 million and $1.2 million, respectively. Interest expense will be reduced by the amortization of these deferred gains in 2013 through 2015 as follows: $0.5 million, $0.6 million and $0.1 million, respectively.

The Company had no interest rate swap agreements outstanding at December 30, 2012 and January 1, 2012.

Commodities

The Company is subject to the risk of increased costs arising from adverse changes in certain commodity prices. In the normal course of business, the Company manages these risks through a variety of strategies, including the use of derivative instruments. The Company does not use derivative instruments for trading or speculative purposes. All derivative instruments are recorded at fair value as either assets or liabilities in the Company’s consolidated balance sheets. These derivative instruments are not designated as hedging instruments under GAAP and are used as “economic hedges” to manage certain commodity price risk. Derivative instruments held are marked to market on a monthly basis and recognized in earnings consistent with the expense classification of the underlying hedged item. Settlements of derivative agreements are included in cash flows from operating activities on the Company’s consolidated statements of cash flows.

The Company uses several different financial institutions for commodity derivative instruments, to minimize the concentration of credit risk. While the Company is exposed to credit loss in the event of nonperformance by these counterparties, the Company does not anticipate nonperformance by these parties.

The Company has master agreements with the counterparties to its derivative financial agreements that provide for net settlement of derivative transactions.

The Company periodically uses derivative instruments to hedge part or all of its requirements for diesel fuel and aluminum. In the third quarter of 2012, the Company entered into agreements to hedge a portion of the Company’s 2013 aluminum purchases.

The following summarizes 2012, 2011 and 2010 pre-tax changes in the fair value of the Company’s commodity derivative financial instruments and the classification, either as cost of sales or S,D&A expenses, of such changes in the consolidated statements of operations.

In Thousands	Classification of Gain (Loss)	Fiscal Year
		2012		2011			2010
Commodity hedges	S,D&A expenses	$	0	$	(171	)	$	(1,445	)
Commodity hedges	Cost of sales		500		(6,666	)		(3,786	)
Total		$	500	$	(6,837	)	$	(5,231	)
The following summarizes the fair values and classification in the consolidated balance sheets of derivative instruments held by the Company:
In Thousands	Balance Sheet Classification	Dec. 30,   2012		Jan. 1,   2012
Assets
Commodity hedges at fair market value	Prepaid expenses and other current assets	$	500	$0
Unamortized cost of commodity hedging agreements	Prepaid expenses and other current assets		562	0
Total		$	1,062	$0

The following table summarizes the Company’s outstanding commodity derivative agreements as of December 30, 2012:

In Millions	Notional Amount		Latest Maturity
Commodity hedging agreements	$	12.0		June 2013

There were no outstanding commodity derivative agreements as of January 1, 2012.