Derivative Financial Instruments

6 Months Ended

Jul. 01, 2012

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

11. Derivative Financial Instruments

Interest

As of July 1, 2012, the Company has $1.0 million in gains from terminated interest rate swap agreements to be amortized ($.3 million over the next 5 months and $.7 million over the next 33 months).

During both YTD 2012 and YTD 2011, the Company amortized deferred gains related to terminated interest rate swap agreements and forward interest rate agreements, which reduced interest expense by $.6 million.

The Company had no interest rate swap agreements outstanding at July 1, 2012, January 1, 2012 and July 3, 2011.

Commodities

The Company is subject to the risk of loss arising from adverse changes in 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 suspended the use of derivative instruments to hedge its projected diesel fuel, unleaded gasoline and aluminum purchase requirements at the end of 2011.

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 used derivative instruments to hedge all of the Company’s projected diesel fuel and unleaded gasoline purchases for the second, third and fourth quarters of 2011. These derivative instruments related to diesel fuel and unleaded gasoline used by the Company’s delivery fleet and other vehicles. The Company used derivative instruments to hedge approximately 75% of the Company’s aluminum purchase requirements in 2011.

The following table summarizes Q2 2012 and Q2 2011 net gains and losses on the Company’s fuel and aluminum derivative financial instruments and the classification, either as cost of sales or selling, delivery and administrative (“S,D&A”) expenses, of such net gains and losses in the consolidated statements of operations:

		Second Quarter
In Thousands	Classification of Gain (Loss)	2012		2011
Fuel hedges – contract premium and contract settlement	S,D&A expenses	$	0	$	(105	)
Fuel hedges – mark-to-market adjustment	S,D&A expenses		0		(25	)
Aluminum hedges – contract premium and contract settlement	Cost of sales		0		783
Aluminum hedges – mark-to-market adjustment	Cost of sales		0		(1,708	)
Total Net Gain (Loss)		$	0	$	(1,055	)

The following table summarizes YTD 2012 and YTD 2011 net gains and losses on the Company’s fuel and aluminum derivative financial instruments and the classification, either as cost of sales or selling, delivery and administrative (“S,D&A”) expenses, of such net gains and losses in the consolidated statements of operations:

		First Half
In Thousands	Classification of Gain (Loss)	2012		2011
Fuel hedges – contract premium and contract settlement	S,D&A expenses	$	0	$	66
Fuel hedges – mark-to-market adjustment	S,D&A expenses		0		(171	)
Aluminum hedges – contract premium and contract settlement	Cost of sales		0		1,304
Aluminum hedges – mark-to-market adjustment	Cost of sales		0		(2,216	)
Total Net Gain (Loss)		$	0	$	(1,017	)

The following table summarizes the fair values and classification in the consolidated balance sheets of derivative instruments held by the Company as of July 1, 2012, January 1, 2012 and July 3, 2011:

	Balance Sheet	July 1,		Jan. 1,		July 3,
In Thousands	Classification	2012		2012		2011
Unamortized cost of fuel hedging agreements	Prepaid expenses and other current assets	$	0	$	0	$	526
Aluminum hedges at fair market value	Prepaid expenses and other current assets		0		0		4,450
Unamortized cost of aluminum hedging agreements	Prepaid expenses and other current assets		0		0		1,316
Total		$	0	$	0	$	6,292