Derivative Financial Instruments

9 Months Ended

Sep. 27, 2015

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

9.  Derivative Financial Instruments

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 following summarizes Q3 2015 and Q3 2014 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.

		Third Quarter
In Thousands	Classification of Gain (Loss)	2015			2014
Commodity hedges	Cost of sales	$	(1,438	)	$	(319	)
Commodity hedges	Selling, delivery and administrative expenses		(692	)		0
Total		$	(2,130	)	$	(319	)

The following summarizes YTD 2015 and YTD 2014 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 Nine Months
In Thousands	Classification of Gain (Loss)	2015			2014
Commodity hedges	Cost of sales	$	(2,119	)	$	552
Commodity hedges	Selling, delivery and administrative expenses		(117	)		0
Total		$	(2,236	)	$	552

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

	Balance Sheet	Sept. 27,		Dec. 28,		Sept. 28,
In Thousands	Classification	2015		2014		2014
Assets:
Commodity hedges at fair market value	Prepaid expenses and other current assets	$	0	$	0	$	552
Commodity hedges at fair market value	Other assets		39		0		0
Total assets		$	39	$	0	$	552
Liabilities:
Commodity hedges at fair market value	Other accrued liabilities	$	1,918	$	0	$	0
Commodity hedges at fair market value	Other liabilities		357		0		0
Total liabilities		$	2,275	$	0	$	0

The Company has master agreements with the counterparties to its derivative financial agreements that provide for net settlement of derivative transactions. Accordingly, the net amounts of derivative assets are recognized in either prepaid expenses and other current assets or other assets in the consolidated balance sheet at September 27, 2015 and the net amounts of derivative liabilities are recognized in either other accrued liabilities or other liabilities in the consolidated balance sheet at September 27, 2015.  The Company had gross derivative assets of $0.8 million and gross derivative liabilities of $3.0 million as of September 27, 2015. The Company did not have any outstanding derivative transactions at December 28, 2014. The Company did not have any offsetting derivative transactions with its counterparties on September 28, 2014, and, accordingly, the gross amounts of derivative assets are recognized in prepaid expenses and other current assets in the consolidated balance sheet at September 28, 2014.

The Company’s outstanding commodity derivative agreements as of September 27, 2015 had a notional amount of $75.9 million and a latest maturity date of December 2016.