Derivative Financial Instruments

9 Months Ended

Sep. 27, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

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 commodity derivative instruments. The Company does not use commodity derivative instruments for trading or speculative purposes. These commodity derivative instruments are not designated as hedging instruments under GAAP and are used as “economic hedges” to manage certain commodity price risk. The Company uses several different financial institutions for commodity derivative instruments to minimize the concentration of credit risk. While the Company would be exposed to credit loss in the event of nonperformance by these counterparties, the Company does not anticipate nonperformance by these parties.

Commodity derivative instruments held by the Company are marked to market on a monthly basis and recognized in earnings consistent with the expense classification of the underlying hedged item. Settlements of commodity derivative instruments are included in cash flows from operating activities in the condensed consolidated statements of cash flows. The following table summarizes pre-tax changes in the fair values of the Company’s commodity derivative instruments and the classification of such changes in the condensed consolidated statements of operations:

	Third Quarter				First Nine Months
(in thousands)	2020		2019		2020		2019
Cost of sales	$	1,194	$	487	$	924	$	(482)
Selling, delivery and administrative expenses	575		(74)		(949)		2,575
Total gain (loss)	$	1,769	$	413	$	(25)	$	2,093

All commodity derivative instruments are recorded at fair value as either assets or liabilities in the condensed consolidated balance sheets. The Company has master agreements with the counterparties to its commodity derivative instruments 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 condensed consolidated balance sheets and the net amounts of derivative liabilities are recognized in either other accrued liabilities or other liabilities in the condensed consolidated balance sheets. The

following table summarizes the fair values of the Company’s commodity derivative instruments and the classification of such instruments in the condensed consolidated balance sheets:

(in thousands)	September 27, 2020		December 29, 2019
Assets:
Prepaid expenses and other current assets	$	1,049	$	1,007
Total assets	$	1,049	$	1,007
Liabilities:
Other accrued liabilities	$	1,376	$	1,174
Total liabilities	$	1,376	$	1,174

The following table summarizes the Company’s gross commodity derivative instrument assets and gross commodity derivative instrument liabilities in the condensed consolidated balance sheets:

(in thousands)	September 27, 2020		December 29, 2019
Gross commodity derivative instrument assets	$	1,049	$	3,298
Gross commodity derivative instrument liabilities	1,376		3,465

The following table summarizes the Company’s outstanding commodity derivative instruments:

(in thousands)	September 27, 2020		December 29, 2019
Notional amount of outstanding commodity derivative instruments	$	73,010	$	171,699
Latest maturity date of outstanding commodity derivative instruments	December 2020		December 2020