Derivative Financial Instruments

6 Months Ended

Jun. 29, 2014

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

12. Derivative Financial Instruments

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 commodity price risk. Derivative instruments 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 did not have any offsetting derivative transactions with its counterparties on June 29, 2014. Accordingly, the gross amounts of derivative assets are recognized in prepaid expenses and other current assets in the consolidated balance sheet at June 29, 2014. The Company did not have any outstanding derivative transactions at December 29, 2013 or June 30, 2013.

The Company periodically uses derivative instruments to hedge part or all of its requirements for diesel fuel and aluminum. In the first quarter of 2014, the Company entered into agreements to hedge a portion of the Company’s 2014 commodity purchases. In the third quarter of 2012, the Company entered into agreements to hedge a portion of the Company’s 2013 commodity purchases.

The following summarizes Q2 2014 and Q2 2013 pre-tax changes in the fair value of the Company’s commodity derivative financial instruments and the classification of such changes in the consolidated statements of operations.

		Second Quarter
In Thousands	Classification of Gain (Loss)	2014		2013
Commodity hedges	Cost of sales	$	91	$	(10	)
Total		$	91	$	(10	)

The following summarizes YTD 2014 and YTD 2013 pre-tax changes in the fair value of the Company’s commodity derivative financial instruments and the classification of such changes in the consolidated statements of operations.

		First Half
In Thousands	Classification of Gain (Loss)	2014		2013
Commodity hedges	Cost of sales	$	871	$	(500	)
Total		$	871	$	(500	)

The following table summarizes the fair values and classification in the consolidated balance sheets of derivative instruments held by the Company:

In Thousands	Balance Sheet Classification	June 29, 2014		Dec. 29, 2013		June 30, 2013
Commodity hedges at fair market value	Prepaid expenses and other current assets	$	871	$	0	$	0
Unamortized cost of commodity hedging agreements	Prepaid expenses and other current assets		731		0		0
Total		$	1,602	$	0	$	0

The following table summarizes the Company’s outstanding commodity derivative agreements as of June 29, 2014:

	Notional		Latest
In Millions	Amount		Maturity
Commodity hedging agreements	$	20.9		Dec. 2014