Derivative Financial Instruments

12 Months Ended

Jan. 01, 2017

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

11. 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 certain commodity price risk. Derivative instruments held 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 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.

		Fiscal Year
(in thousands)	Classification of Gain (Loss)	2016		2015			2014
Commodity hedges	Cost of sales	$	2,896	$	(2,354	)	$	-
Commodity hedges	Selling, delivery and administrative expenses		1,832		(1,085	)		-
Total gain (loss)		$	4,728	$	(3,439	)	$	-

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	January 1, 2017		January 3, 2016
Assets:
Commodity hedges at fair market value	Prepaid expenses and other current assets	$	1,289	$	-
Commodity hedges at fair market value	Other assets		-		3
Total assets		$	1,289	$	3
Liabilities:
Commodity hedges at fair market value	Other liabilities	$	-	$	3,442
Total liabilities		$	-	$	3,442

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 Company’s consolidated balance sheet and the net amounts of derivative liabilities are recognized in other accrued liabilities or other liabilities in the consolidated balance sheets. The following table summarizes the Company’s gross derivative assets and gross derivative liabilities in the consolidated balance sheets:

(in thousands)	January 1, 2017		January 3, 2016
Gross derivative assets	$	1,297	$	222
Gross derivative liabilities		8		3,661

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

(in thousands)	January 1, 2017		January 3, 2016
Notional amount of outstanding commodity derivative agreements	$	13,146	$	64,884
Latest maturity date of outstanding commodity derivative agreements	December 2017		December 2017