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Financial Instruments and Derivatives
 6 Months Ended
Jul. 03, 2011
Financial Instruments and Derivatives [Abstract]  
Financial Instruments and Derivatives
Note 8: Financial Instruments and Derivatives
The following table sets forth the carrying amounts and fair values of the Company’s significant financial instruments for which the carrying amount differs from the fair value.
                                 
    July 3, 2011   December 31, 2010
    Carrying   Fair   Carrying   Fair
    Amount   Value   Amount   Value
 
Long-term debt, net of current portion
  $ 716,807     $ 739,649     $ 603,941     $ 624,786  
 
The carrying value of cash and cash equivalents, short-term debt and long-term variable-rate debt approximates fair value. The fair value of long-term debt is based on quoted market prices or is determined by discounting future cash flows using interest rates available to the Company for issues with similar terms and average maturities.
In accordance with U.S. GAAP, the Company records its derivatives as assets or liabilities on the balance sheet at fair value using published market prices or estimated values based on current price quotes and discounted cash flows. Changes in the fair value of derivatives are recognized either in net income or in other comprehensive income, depending on the designated purpose of the derivative. It is the Company’s policy not to speculate in derivative instruments. The Company has determined all hedges to be highly effective and, as a result, no material ineffectiveness has been recorded.
The Company uses derivatives to mitigate the effect of fluctuations in some of its raw material and energy costs, foreign currency fluctuations and interest rate movements. The Company purchases commodities, such as recovered paper, metal and energy, generally at market or at fixed prices that are established with the vendor as part of the purchase process for quantities expected to be consumed in the ordinary course of business. The Company may enter into forward contracts or other similar derivative contracts in order to reduce the effect of commodity price fluctuations, and to manage its exposure to foreign currency cash flows, assets, and liabilities. The Company is exposed to interest-rate fluctuations as a result of using debt as a source of financing for its operations. To manage its exposure to interest rate movements, the Company may from time to time use traditional, unleveraged interest rate swaps to adjust its mix of fixed and variable rate debt.
Cash Flow Hedges
At July 3, 2011 and December 31, 2010, the Company had derivative financial instruments outstanding to hedge anticipated transactions and certain asset and liability related cash flows. To the extent considered effective, the changes in fair value of these contracts are recorded in other comprehensive income and reclassified to income or expense in the period in which the hedged item impacts earnings.
Commodity Cash Flow Hedges
The Company has entered into certain derivative contracts to manage the cost of anticipated purchases of natural gas, aluminum, old corrugated containers and diesel fuel. At July 3, 2011, natural gas swaps covering approximately 5.4 million MMBtus were outstanding. These contracts represent approximately 71%, 63%, and 12% of anticipated U.S. and Canadian usage for 2011, 2012 and 2013, respectively. Additionally, the Company had swap contracts covering 2.1 thousand metric tons of aluminum representing approximately 32% and 3% of anticipated usage for 2011 and 2012, respectively, 38.7 thousand short tons of old corrugated containers representing approximately 6% of anticipated usage for 2011, and 201.5 thousand gallons of diesel fuel representing approximately 8% of expected usage through August 2011. The fair values of the Company’s commodity cash flow hedges were in loss positions of $7,801 and $12,421 at July 3, 2011 and December 31, 2010, respectively. The amount of the loss included in accumulated other comprehensive loss at July 3, 2011, that is expected to be reclassified to the income statement during the next twelve months is $6,743.
Foreign Currency Cash Flow Hedges
The Company has entered into forward contracts to hedge certain anticipated foreign currency denominated sales and purchases forecast to occur in 2011. At July 3, 2011, the net position of these contracts was to purchase 42.7 million Canadian dollars, 101.8 million Mexican pesos, 5.0 million euros, 5.1 billion Colombian pesos, 3.5 billion Indonesian rupiah and 795 thousand British pounds, and to sell 2.6 million Australian dollars, 1.5 million New Zealand dollars, 6.4 million Malaysian ringgits and 65.3 million Thai baht. The fair value of these foreign currency cash flow hedges was $1,737 at July 3, 2011, and $229 at December 31, 2010. During the first quarter of 2011, certain foreign currency cash flow hedges related to construction in progress were settled as the capital expenditures were made. Gains of $6 and $540 were reclassified from accumulated other comprehensive loss and netted against the carrying value of the assets during the three- and six-month periods ended July 3, 2011, respectively. The amount of the gain included in accumulated other comprehensive loss at July 3, 2011 expected to be reclassified to the income statement during the next twelve months is $1,661.
Other Derivatives
The Company routinely enters into forward contracts or swaps to economically hedge the currency exposure of intercompany debt and existing foreign currency denominated receivables and payables. The Company does not apply hedge accounting treatment for these instruments. As such, changes in fair value are recorded directly to income and expense in the periods that they occur. At July 3, 2011, the net positions of these contracts were to purchase 3.9 million Canadian dollars, 735 thousand British pounds, 877 thousand euros and 11.0 billion Colombian pesos. The total fair value of these hedges was $1,345 at July 3, 2011, and $60 at December 31, 2010.
The following table sets forth the location and fair values of the Company’s derivative instruments at July 3, 2011:
             
Description   Balance Sheet Location   Fair Value
Derivatives designated as hedging instruments:
           
Commodity Contracts
  Other Current Assets   $ 756  
Commodity Contracts
  Other Current Liabilities   $ (7,211 )
Commodity Contracts
  Other Long Term Assets   $ 14  
Commodity Contracts
  Other Long Term Liabilities   $ (1,360 )
Foreign Exchange Contracts
  Other Current Assets   $ 2,407  
Foreign Exchange Contracts
  Other Current Liabilities   $ (670 )
Derivatives not designated as hedging instruments:
           
Foreign Exchange Contracts
  Other Current Assets   $ 1,272  
Foreign Exchange Contracts
  Other Current Liabilities   $ (4 )
Foreign Exchange Contracts
  Other Long Term Assets   $ 77  
The following table sets forth the effect of the Company’s derivative instruments on financial performance for the three months ended July 3, 2011 and June 27, 2010:
                                 
            Location of Gain                
    Amount of Gain or   or (Loss)   Amount of Gain or   Location of Gain or   Amount of Gain or
    (Loss) Recognized   Reclassified from   (Loss) Reclassified   (Loss) Recognized in   (Loss) Recognized
    in OCI on   Accumulated OCI   from Accumulated   Income on   in Income on
    Derivative   Into Income   OCI Into Income   Derivative   Derivative
Description   (Effective Portion)   (Effective Portion)   (Effective Portion)   (Ineffective Portion)   (Ineffective Portion)
Three months ended July 3, 2011
                               
 
                               
Derivatives in Cash Flow Hedging Relationships:
                               
 
                               
Foreign Exchange Contracts
  $ 578     Net sales   $ 1,736     Net sales   $ —  
 
          Cost of sales   $ (918 )            
 
                               
Commodity Contracts
  $ (715 )   Cost of sales   $ (2,327 )   Cost of sales   $ 63  
 
                               
Three months ended June 27, 2010
                               
 
                               
Derivatives in Cash Flow Hedging Relationships:
                               
 
                               
Foreign Exchange Contracts
  $ (453 )   Net sales   $ 1,135     Net sales   $ (284 )
 
                               
 
          Cost of sales   $ (467 )            
Commodity Contracts
  $ 1,669     Cost of sales   $ (2,784 )   Cost of sales   $ (586 )
 
                               
Fair value hedge derivatives:
                               
 
                               
Interest Rate Swap
                      Interest expense   $ 228  
             
    Location of Gain or    
Derivatives not   (Loss) Recognized    
designated as hedging   in Income   Gain or (Loss)
instruments:   Statement   Recognized
Three months ended July 3, 2011        
 
           
Foreign Exchange Contracts
  Cost of sales   $ 855  
 
  Selling, general and administrative   $ 10  
 
           
Three months ended June 27, 2010        
 
           
Foreign Exchange Contracts
  Cost of sales   $ (549 )
 
  Selling, general and administrative   $ (76 )
The following table sets forth the effect of the Company’s derivative instruments on financial performance for the six months ended July 3, 2011 and June 27, 2010:
                                 
            Location of Gain              
    Amount of Gain or   or (Loss)   Amount of Gain or   Location of Gain or   Amount of Gain or
    (Loss) Recognized   Reclassified from   (Loss) Reclassified   (Loss) Recognized in   (Loss) Recognized
    in OCI on   Accumulated OCI   from Accumulated   Income on   in Income on
    Derivative   Into Income   OCI Into Income   Derivative   Derivative
Description   (Effective Portion)   (Effective Portion)   (Effective Portion)   (Ineffective Portion)   (Ineffective Portion)
Six months ended
July 3, 2011
                       
 
                               
Derivatives in Cash Flow Hedging Relationships:
                               
Foreign Exchange Contracts
  $ 3,293     Net sales   $ 2,793     Net sales   $ 12  
 
          Cost of sales   $ (1,517 )            
 
                               
Commodity Contracts
  $ (1,527 )   Cost of sales   $ (6,027 )   Cost of sales   $ 112  
 
                               
Six months ended
June 27, 2010
                       
 
                               
Derivatives in Cash Flow Hedging Relationships:
                               
Foreign Exchange Contracts
  $ 1,339     Net sales   $ 1,602     Net sales   $ (284 )
 
                               
 
          Cost of sales   $ (686 )            
Commodity Contracts
  $ (6,722 )   Cost of sales   $ (5,006 )   Cost of sales   $ (1,099 )
 
                               
Fair value hedge
derivatives:
                               
 
                               
Interest Rate Swap
                      Interest expense   $ 199  
             
    Location of Gain or    
Derivatives not   (Loss) Recognized    
designated as hedging   in Income   Gain or (Loss)
instruments:   Statement   Recognized
Six months ended July 3, 2011        
 
           
Foreign Exchange Contracts
  Cost of sales   $ 1,268  
 
           
 
  Selling, general and administrative   $ 18  
 
           
Six months ended June 27, 2010
           
 
           
Foreign Exchange Contracts
  Cost of sales   $ (8 )
 
  Selling, general and administrative   $ (72 )