Derivative Financial Instruments | 9 Months Ended |
Sep. 27, 2014 |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' |
Derivative Financial Instruments | ' |
Derivative Financial Instruments |
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The Corporation uses derivative financial instruments to reduce its exposure to adverse fluctuations in diesel fuel prices. On the date a derivative is entered into, the Corporation designates the derivative as (i) a fair value hedge, (ii) a cash flow hedge, (iii) a hedge of a net investment in a foreign operation or (iv) a risk management instrument not designated for hedge accounting. The Corporation recognizes all derivatives on its Condensed Consolidated Balance Sheets at fair value. |
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Diesel Fuel Risk |
Independent freight carriers, used by the Corporation to deliver its products, charge the Corporation a basic rate per mile that is subject to a mileage surcharge for diesel fuel price increases. The Corporation enters into variable to fixed rate commodity swap agreements with two financial counterparties to manage fluctuations in fuel costs. The Corporation hedges approximately 50% of its diesel fuel surcharge exposure for the next twelve months. The Corporation uses the hedge agreements to mitigate the volatility of diesel fuel prices and related fuel surcharges, and not to speculate on the future price of diesel fuel. The hedge agreements are designed to add stability to the Corporation's costs, enabling the Corporation to make pricing decisions and lessen the economic impact of abrupt changes in diesel fuel prices over the term of the contract. The hedging instruments consist of a series of financially settled fixed forward contracts with expiration dates ranging up to twelve months. The contracts have been designated as cash flow hedges of future diesel purchases, and as such, the net amount paid or received upon monthly settlements is recorded as an adjustment to freight expense, while the effective change in fair value is recorded as a component of accumulated other comprehensive income in the equity section of the Corporation's Condensed Consolidated Balance Sheets. |
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As of September 27, 2014, $0.2 million of deferred net losses, net of tax, included in equity ("Accumulated other comprehensive income" in the Corporation's Condensed Consolidated Balance Sheets) related to the diesel hedge agreements are expected to be reclassified to current earnings ("Selling and administrative expenses" in the Corporation's Condensed Consolidated Statements of Comprehensive Income) over the next twelve months. |
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The location and fair value of derivative instruments reported in the Corporation's Condensed Consolidated Balance Sheets are as follows (in thousands): |
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| | | | Asset (Liability) Fair Value | | | | | | |
| | Balance Sheet Location | | September 27, 2014 | | December 28, 2013 | | | | | | |
Diesel fuel swap | | Accounts payable and accrued expenses | | $ | (362 | ) | | $ | — | | | | | | | |
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Diesel fuel swap | | Prepaid expenses and other current assets | | — | | | 176 | | | | | | | |
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| | | | $ | (362 | ) | | $ | 176 | | | | | | | |
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The effect of derivative instruments on the Corporation's Condensed Consolidated Statements of Comprehensive Income for the three months ended September 27, 2014 was as follows (in thousands): |
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Derivatives in Cash Flow Hedge Relationship | | Before-tax Gain (Loss) Recognized in AOCI on Derivative (Effective Portion) | | Locations of Gain (Loss) Reclassified from AOCI into Income (Effective Portion) | | Before-Tax Gain (Loss) Reclassified from AOCI Into Income (Effective Portion) | | Locations of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion) | | Gain (Loss) Recognized in Income on Derivative (Ineffective Portion) |
Diesel fuel swap | | $ | (542 | ) | | Selling and administrative expenses | | $ | (38 | ) | | Selling and administrative expenses | | $ | — | |
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Total | | $ | (542 | ) | | | | $ | (38 | ) | | | | $ | — | |
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The effect of derivative instruments on the Corporation's Condensed Consolidated Statements of Comprehensive Income for the nine months ended September 27, 2014 was as follows (in thousands): |
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Derivatives in Cash Flow Hedge Relationship | | Before-tax Gain (Loss) Recognized in AOCI on Derivative (Effective Portion) | | Locations of Gain (Loss) Reclassified from AOCI into Income (Effective Portion) | | Before-Tax Gain (Loss) Reclassified from AOCI Into Income (Effective Portion) | | Locations of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion) | | Gain (Loss) Recognized in Income on Derivative (Ineffective Portion) |
Diesel fuel swap | | $ | (487 | ) | | Selling and administrative expenses | | $ | 49 | | | Selling and administrative expenses | | $ | (4 | ) |
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Total | | $ | (487 | ) | | | | $ | 49 | | | | | $ | (4 | ) |
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The effect of derivative instruments on the Corporation's Condensed Consolidated Statements of Comprehensive Income for the three months ended September 28, 2013 was as follows (in thousands): |
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Derivatives in Cash Flow Hedge Relationship | | Before-tax Gain (Loss) Recognized in AOCI on Derivative (Effective Portion) | | Locations of Gain (Loss) Reclassified from AOCI into Income (Effective Portion) | | Before-Tax Gain (Loss) Reclassified from AOCI Into Income (Effective Portion) | | Locations of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion) | | Gain (Loss) Recognized in Income on Derivative (Ineffective Portion) |
Diesel fuel swap | | $ | 24 | | | Selling and administrative expenses | | $ | 33 | | | Selling and administrative expenses | | $ | 3 | |
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Total | | $ | 24 | | | | | $ | 33 | | | | | $ | 3 | |
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The effect of derivative instruments on the Corporation's Condensed Consolidated Statements of Comprehensive Income for the nine months ended September 28, 2013 was as follows (in thousands): |
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Derivatives in Cash Flow Hedge Relationship | | Before-tax Gain (Loss) Recognized in AOCI on Derivative (Effective Portion) | | Locations of Gain (Loss) Reclassified from AOCI into Income (Effective Portion) | | Before-Tax Gain (Loss) Reclassified from AOCI Into Income (Effective Portion) | | Locations of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion) | | Gain (Loss) Recognized in Income on Derivative (Ineffective Portion) |
Diesel fuel swap | | $ | 414 | | | Selling and administrative expenses | | $ | 245 | | | Selling and administrative expenses | | $ | (1 | ) |
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Total | | $ | 414 | | | | | $ | 245 | | | | | $ | (1 | ) |
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The Corporation entered into master netting agreements with the two financial counterparties where they entered into commodity swap agreements that permit the net settlement of amounts owed under their respective derivative contracts. Under these master netting agreements, net settlement of all outstanding contracts with a counterparty in the case of an event of default or a termination event is allowed. The amounts under the master netting agreement are immaterial and no further disclosure is deemed necessary. |