Financial Instruments
 3 Months Ended
Mar. 29, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial Instruments
Financial Instruments

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. The primary risks managed by using derivative instruments are interest rate risk, foreign currency exchange risk and commodity price risk. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates, foreign exchange rates or commodity prices.
The Company manages interest rate risk based on the varying circumstances of anticipated borrowings and existing variable and fixed rate debt, including the Company’s revolving credit facility. Examples of interest rate management strategies include capping interest rates using targeted interest cost benchmarks, hedging portions of the total amount of debt, or hedging a period of months and not always hedging to maturity, and at other times locking in rates to fix interests costs.
Certain parts of the Company’s foreign operations in Canada expose the Company to fluctuations in foreign exchange rates. The Company’s goal is to reduce its exposure to such foreign exchange risks on its foreign currency cash flows and fair value fluctuations on recognized foreign currency denominated assets, liabilities and unrecognized firm commitments to acceptable levels primarily through the use of foreign exchange-related derivative financial instruments. The Company enters into derivative financial instruments to protect the value or fix the amount of certain obligations in terms of its functional currency. The Company does not enter into these transactions for non-hedging purposes.
The Company purchases raw materials in quantities expected to be used in a reasonable period of time in the normal course of business. The Company generally enters into agreements for either spot market delivery or forward delivery. The prices paid in the forward delivery contracts are generally fixed, but may also be variable within a capped or collared price range. Forward derivative contracts on certain commodities are entered into to manage the price risk associated with forecasted purchases of materials used in the Company’s manufacturing processes.
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. During the three months ended March 29, 2015 and March 30, 2014, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.
As of March 29, 2015, the Company had the following interest rate swaps that were designated as cash flow hedges of interest rate risk:
 
Product
 
Number of
Instruments
 
Current
Notional
Amount
 
Fixed Rate Range
 
Index
 
Trade Dates
 
Maturity
Dates
Interest Rate Swaps
 
15
 
$
1,497,450

 
 0.84% - 2.97%
 
 USD-LIBOR-BBA
 
 Apr 2013 - Oct 2013
 
 Apr 2015 - Apr 2020


The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated Other Comprehensive Loss ("AOCL") in the Consolidated Balance Sheets and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. Amounts reported in AOCL related to derivatives will be reclassified to Interest expense as interest payments are made on the Company’s variable-rate debt. During the next twelve months, the Company estimates that an additional $2,537 will be reclassified as an increase to Interest expense.

Cash Flow Hedges of Foreign Exchange Risk
The Company’s operations in Canada expose the Company to changes in the U.S. Dollar – Canadian Dollar ("USD-CAD") foreign exchange rate. From time to time, the Company’s Canadian subsidiary purchases inventory denominated in U.S. Dollars ("USD"), a currency other than its functional currency. The subsidiary sells that inventory in Canadian dollars ("CAD"). The subsidiary uses currency forward and collar agreements to manage its exposure to fluctuations in the USD-CAD exchange rate. Currency forward agreements involve fixing the USD-CAD exchange rate for delivery of a specified amount of foreign currency on a specified date. Currency collar agreements involve the sale of Canadian Dollar ("CAD") currency in exchange for receiving USD if exchange rates rise above an agreed upon rate and purchase of USD currency in exchange for paying CAD currency if exchange rates fall below an agreed upon rate at specified dates.
As of March 29, 2015, the Company had the following foreign currency exchange contracts (in aggregate) that were designated as cash flow hedges of foreign exchange risk:
 
Product
 
Number of
Instruments
 
Notional Sold in
Aggregate in CAD
 
Notional
Purchased in
Aggregate in USD
 
USD to CAD
Exchange
Rates
 
Trade Date
 
Maturity
Dates
CAD $ Contracts
 
9
 
$
18,000

 
$
16,372

 
1.096 - 1.102
 
Aug 2014
 
May 2015 - Dec 2015


The effective portion of changes in the fair value of derivatives designated that qualify as cash flow hedges of foreign exchange risk is recorded in AOCL in the Consolidated Balance Sheets and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portions of the change in fair value of the derivative, as well as amounts excluded from the assessment of hedge effectiveness, are recognized directly in Cost of products sold in the Consolidated Statements of Operations.
Non-designated Hedges of Commodity Risk
Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to commodity price risk but do not meet the authoritative guidance for hedge accounting. From time to time, the Company enters into commodity forward contracts to fix the price of diesel fuel, heating oil, natural gas and soybean oil purchases and other commodities at a future delivery date. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in Cost of products sold in the Consolidated Statements of Operations.

As of March 29, 2015, the Company had the following derivative instruments that were not designated in qualifying hedging relationships:

Commodity Contracts
 
Number of
Instruments
 
Notional Purchased in Aggregate
 
Price/Index
 
Trade Dates
 
Maturity
Dates
Diesel Fuel Contracts
 
5
 
10,281,259 Gallons
 
 $3.67 - $3.80 per Gallon
 
September 2014 - November 2014
 
April 2015 - December 2016
Heating Oil Contracts
 
1
 
1,935,550 Gallons
 
$1.82 Per Gallon
 
January 2015
 
January 2016
- December 2016
Natural Gas Contracts
 
2
 
671,960 MMBTU's
 
$4.12 - $4.40 per MMBTU
 
June 2014 - July 2014
 
April 2015 - December 2015
Soybean Oil Contracts
 
2
 
70,072,559 Pounds
 
 $0.32 - $0.35 per Pound
 
December 2014 - March 2015
 
April 2015 - December 2016

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification in the Consolidated Balance Sheets as of March 29, 2015 and December 28, 2014.
 
 
Tabular Disclosure of Fair Values of Derivative Instruments
 
 
Asset Derivatives
 
Liability Derivatives
 
 
Balance Sheet Location
 
Fair Value
as of
March 29, 2015
 
Balance Sheet Location
 
Fair Value
as of
March 29, 2015
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
Interest Rate Contracts
 
 
 
 
 
Accrued liabilities
 
$
905

 
 
 
 
 
 
Other long-term liabilities
 
10,957

Foreign Exchange Contracts
 
Other current assets
 
2,104

 
 
 
 
Total derivatives designated as hedging instruments
 
 
 
$
2,104

 
 
 
$
11,862

Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
Commodity Contracts
 
Other assets, net
 
$
152

 
Accrued liabilities
 
8,885

 
 
 
 
 
 
Other long-term liabilities
 
$
3,167

Total derivatives not designated as hedging instruments
 
 
 
$
152

 
 
 
$
12,051

 
 
 
 
 
 
 
 
 
 
 
Balance Sheet Location
 
Fair Value
as of
December 28, 2014
 
Balance Sheet Location
 
Fair Value
as of
December 28, 2014
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
Interest Rate Contracts
 
Other assets, net
 
$
6,420

 
Accrued liabilities
 
$
1,280

 
 
 
 
 
 
Other long-term liabilities
 
3,263

Foreign Exchange Contracts
 
Other current assets
 
1,294

 
 
 


Total derivatives designated as hedging instruments
 
 
 
$
7,714

 
 
 
$
4,543

Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
Commodity Contracts
 
 
 


 
Accrued liabilities
 
$
8,995

 
 
 
 
 
 
Other long-term liabilities
 
3,016

Total derivatives not designated as hedging instruments
 
 
 
$
—

 
 
 
$
12,011



The Company has elected not to offset the fair values of derivative assets and liabilities executed with the same counterparty that are generally subject to enforceable netting agreements. However, if the Company were to offset and record the asset and liability balances of derivatives on a net basis, the amounts presented in the Consolidated Balance Sheets as of March 29, 2015 and December 28, 2014 would be adjusted as detailed in the following table:
 
 
March 29, 2015
 
December 28, 2014
Derivative Instrument
 
Gross Amounts Presented in the Consolidated Balance Sheet
 
Gross Amounts Not Offset in the Consolidated Balance Sheet Subject to Netting Agreements
 
Net Amount
 
Gross Amounts Presented in the Consolidated Balance Sheet
 
Gross Amounts Not Offset in the Consolidated Balance Sheet Subject to Netting Agreements
 
Net Amount
Total asset derivatives
 
$
2,256

 
(2,256
)
 
$
—

 
$
7,714

 
(5,039
)
 
$
2,675

 
 
 
 
 
 
 
 
 
 
 
 
 
Total liability derivatives
 
$
23,913

 
(2,256
)
 
21,657

 
$
16,554

 
(5,039
)
 
$
11,515



The table below presents the effect of the Company’s derivative financial instruments in the Consolidated Statements of Operations and AOCL for the three months ended March 29, 2015 and March 30, 2014.

Tabular Disclosure of the Effect of Derivative Instruments
Gain/(Loss)
 
 
 
 
 
 
 
 
 
 
Derivatives in Cash Flow Hedging
Relationships
 
Recognized in
AOCL on
Derivative
(Effective
Portion)
 
Effective portion
reclassified from AOCL to:
 
Reclassified
from AOCL
into Earnings
(Effective
Portion)
 
Ineffective portion
recognized in Earnings in:
 
Recognized in
Earnings on
Derivative
(Ineffective
Portion)
Interest Rate Contracts
 
$
(14,131
)
 
Interest expense
 
$
(393
)
 
Interest expense
 


Foreign Exchange Contracts
 
1,515

 
Cost of products sold
 
703

 
Cost of products sold
 
(2
)
Three months ended March 29, 2015
 
$
(12,616
)
 
 
 
$
310

 
 
 
$
(2
)
 
 
 
 
 
 
 
 
 
 
 
Interest Rate Contracts
 
$
(8,732
)
 
Interest expense
 
$
(41
)
 
Interest expense
 
$
—

Foreign Exchange Contracts
 
991

 
Cost of products sold
 
413

 
Cost of products sold
 
3

Three months ended March 30, 2014
 
$
(7,741
)
 
 
 
$
372

 
 
 
$
3

 
 
 
 
 
 
 
 
 
 
 
Derivatives Not Designated as Hedging Instruments
 
Recognized in Earnings in:
 
Recognized in
Earnings on
Derivative
 
 
 
 
Commodity Contracts
 
 
 
Cost of products sold
 
$
(2,008
)
 
 
 
 
Three months ended March 29, 2015
 
 
 
$
(2,008
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity Contracts
 
 
 
Cost of products sold
 
$
(354
)
 
 
 
 
Interest Rate Contracts
 
 
 
Interest expense
 
$
11

 
 
 
 
Three months ended March 30, 2014
 
 
 
$
(343
)
 
 
 
 


Credit risk-related contingent features
The Company has agreements with certain counterparties that contain a provision whereby the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness. As of March 29, 2015, the Company has not posted any collateral related to these agreements. If the Company had breached this provision at March 29, 2015, it could have been required to settle its obligations under the agreements at their termination value, which differs from the recorded fair value. The table below summarizes the aggregate fair values of those derivatives that contain credit risk-related contingent features as of March 29, 2015 and December 28, 2014.
March 29, 2015
 
Asset/(Liability)
 
 
 
 
 
 
 
 
 
 
Counterparty
 
Contract
Type
 
Termination
Value
 
Performance
Risk
Adjustment
 
Accrued
Interest
 
Fair Value
(excluding
interest)
Barclays
 
Interest Rate Contracts
 
$
(5,886
)
 
$
828

 
$
(88
)
 
$
(4,970
)
 
 
Foreign Exchange Contracts
 
2,108

 
(4
)
 
—

 
2,104

 
 
Commodity Contracts
 
(6,350
)
 
—

 
—

 
(6,350
)
Bank of America
 
Interest Rate Contracts
 
(3,011
)
 
776

 
—

 
(2,235
)
 
 
Commodity Contracts
 
(22
)
 
—

 
—

 
(22
)
Credit Suisse
 
Interest Rate Contracts
 
(1,829
)
 
82

 
(88
)
 
(1,659
)
Macquarie
 
Interest Rate Contracts
 
(3,160
)
 
84

 
(77
)
 
(2,999
)
 
 
Commodity Contracts
 
(5,526
)
 
—

 
—

 
(5,526
)
Total
 
 
 
$
(23,676
)
 
$
1,766

 
$
(253
)
 
$
(21,657
)

December 28, 2014
 
Asset/(Liability)
 
 
 
 
 
 
 
 
 
 
Counterparty
 
Contract
Type
 
Termination
Value
 
Performance
Risk
Adjustment
 
Accrued
Interest
 
Fair Value
(excluding
interest)
Barclays
 
Interest Rate Contracts
 
$
550

 
$
667

 
$
(90
)
 
$
1,307

 
 
Foreign Exchange Contracts
 
1,294

 
—

 
—

 
1,294

 
 
Commodity Contracts
 
(6,300
)
 
—

 
—

 
(6,300
)
Bank of America
 
Interest Rate Contracts
 
1,578

 
627

 
—

 
2,205

Credit Suisse
 
Interest Rate Contracts
 
322

 
58

 
(90
)
 
470

Macquarie
 
Interest Rate Contracts
 
(2,262
)
 
80

 
(77
)
 
(2,105
)
 
 
Commodity Contracts
 
(5,711
)
 
—

 
—

 
(5,711
)
Total
 
 
 
$
(10,529
)
 
$
1,432

 
$
(257
)
 
$
(8,840
)