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Derivative Instruments and Hedging Activities | 12 Months Ended
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Dec. 26, 2015
Derivative Instruments and Hedging Activities [Abstract] |
Derivative Instruments and Hedging Activities | Note 15 – Derivative Instruments and Hedging Activities The Company's earnings and cash flows are subject to fluctuations due to changes in commodity prices, foreign currency exchange rates, and interest rates. The Company uses derivative instruments such as commodity futures contracts, foreign currency forward contracts, and interest rate swaps to manage these exposures. Commodity Futures Contracts Copper and brass represent the largest component of the Company's variable costs of production. The cost of these materials is subject to global market fluctuations caused by factors beyond the Company's control. The Company occasionally enters into forward fixed-price arrangements with certain customers; the risk of these arrangements is generally managed with commodity futures contracts. These futures contracts have been designated as cash flow hedges. At December 26, 2015, the Company held open futures contracts to purchase approximately $33.9 million of copper over the next 12 months related to fixed price sales orders. The fair value of those futures contracts was a $1.5 million loss position, which was determined by obtaining quoted market prices (Level 1 within the fair value hierarchy). In the next twelve months, the Company will reclassify into earnings realized gains or losses relating to cash flow hedges. At December 26, 2015, this amount was approximately $1.0 million of deferred net losses, net of tax. The Company may also enter into futures contracts to protect the value of inventory against market fluctuations. At December 26, 2015, the Company held open futures contracts to sell approximately $13.6 million of copper over the next three months related to copper inventory. The fair value of those futures contracts was a $30 thousand loss position, which was determined by obtaining quoted market prices (Level 1 within the fair value hierarchy). Interest Rate Swap On February 20, 2013, the Company entered into a two-year forward-starting interest rate swap agreement with an effective date of January 12, 2015, and an underlying notional amount of $200.0 million, pursuant to which the Company receives variable interest payments based on one-month LIBOR and pays fixed interest at a rate of 1.4 percent. Based on the Company's current variable premium pricing on its Term Loan Facility, the all-in fixed rate on the effective date is 2.7 percent. The interest rate swap will mature on December 11, 2017, and is structured to offset the interest rate risk associated with the Company's floating-rate, LIBOR-based Term Loan Facility Agreement. The swap was designated and accounted for as a cash flow hedge from inception. The fair value of the interest rate swap is estimated based on the present value of the difference between expected cash flows calculated at the contracted interest rate and the expected cash flows at the current market interest rate using observable benchmarks for LIBOR forward rates at the end of the period (Level 2 within the fair value hierarchy). Interest payable and receivable under the swap agreement is accrued and recorded as an adjustment to interest expense. The fair value of the interest rate swap was a $1.7 million loss position recorded in other liabilities at December 26, 2015, and there was $1.1 million of deferred net losses, net of tax, included in AOCI that is expected to be reclassified into interest expense over the term of the hedged item. The Company presents its derivative assets and liabilities in the Consolidated Balance Sheets on a net basis by counterparty. The following table summarizes the location and fair value of the derivative instruments and disaggregates the net derivative assets and liabilities into gross components on a contract-by-contract basis:
| Asset Derivatives |  | Liability Derivatives |
|  |  | Fair Value |  |  |  | Fair Value |
(In thousands) | Balance Sheet Location |  | 2015 |  |  | 2014 |  | Balance Sheet Location |  | 2015 |  |  | 2014 |
Hedging instrument: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts - gains | Other current assets |  | $ | 60 |  |  | $ | 99 |  | Other current liabilities |  | $ | 238 |  |  | $ | 15 |
Commodity contracts - losses | Other current assets |  |  | — |  |  |  | (4 | ) | Other current liabilities |  |  | (1,864 | ) |  |  | (832 | )
Foreign currency contracts - gains | Other current assets |  |  | — |  |  |  | — |  | Other current liabilities |  |  | 34 |  |  |  | — |
Foreign currency contracts - losses | Other current assets |  |  | — |  |  |  | — |  | Other current liabilities |  |  | (75 | ) |  |  | (81 | )
Interest rate swap | Other assets |  |  | — |  |  |  | — |  | Other liabilities |  |  | (1,692 | ) |  |  | (927 | )
Total derivatives (1) |  |  | $ | 60 |  |  | $ | 95 |  |  |  | $ | (3,359 | ) |  | $ | (1,825 | )
(1) Does not include the impact of cash collateral provided to counterparties. |
The following tables summarize the effects of derivative instruments on the Consolidated Statements of Income:
(In thousands) | Location | 2015 |  | 2014 |
Fair value hedges: |  |  |  |  |
Gain on commodity contracts (qualifying) | Cost of goods sold |  | $ | 3,374 |  |  | $ | 6,783 |
Loss on hedged item - Inventory | Cost of goods sold |  |  | (3,665 | ) |  |  | (5,958 | )
Undesignated derivatives: |  |  |  |  |  |  |
Gain on commodity contracts (nonqualifying) | Cost of goods sold |  | $ | 3,474 |  |  | $ | 1,466 |
The following tables summarize amounts recognized in and reclassified from AOCI during the period:
|  | Year Ended December 26, 2015 |
(In thousands) |  | (Loss) Gain Recognized in AOCI (Effective Portion), Net of Tax |  | Classification Gains (Losses) |  | Loss (Gain) Reclassified from AOCI (Effective Portion), Net of Tax |
Cash flow hedges: |  |  |  |  |  |  |
Commodity contracts |  | $ | (3,817 | ) | Cost of goods sold |  | $ | 3,310 |
Foreign currency contracts |  |  | (39 | ) | Depreciation expense |  |  | — |
Interest rate swap |  |  | (727 | ) | Interest expense |  |  | 238 |
Other |  |  | (21 | ) | Other |  |  | — |
|  | Year Ended December 27, 2014 |
(In thousands) |  | (Loss) Gain Recognized in AOCI (Effective Portion), Net of Tax |  | Classification Gains (Losses) |  | Loss (Gain) Reclassified from AOCI (Effective Portion), Net of Tax |
Cash flow hedges: |  |  |  |  |  |  |
Commodity contracts |  | $ | (1,088 | ) | Cost of goods sold |  | $ | 267 |
Foreign currency contracts |  |  | (275 | ) | Depreciation expense |  |  | — |
Interest rate swap |  |  | (1,435 | ) | Interest expense |  |  | — |
Other |  |  | 32 |  | Other |  |  | — |
The Company enters into futures and forward contracts that closely match the terms of the underlying transactions. As a result, the ineffective portion of the open hedge contracts through December 26, 2015 was not material to the Consolidated Statements of Income. The Company primarily enters into International Swaps and Derivatives Association master netting agreements with major financial institutions that permit the net settlement of amounts owed under their respective derivative contracts. Under these master netting agreements, net settlement generally permits the Company or the counterparty to determine the net amount payable for contracts due on the same date and in the same currency for similar types of derivative transactions. The master netting agreements generally also provide for net settlement of all outstanding contracts with the counterparty in the case of an event of default or a termination event. The Company does not offset fair value amounts for derivative instruments and fair value amounts recognized for the right to reclaim cash collateral. At December 26, 2015 and December 27, 2014, the Company had recorded restricted cash in other current assets of $2.6 million and $0.5 million, respectively, as collateral related to open derivative contracts under the master netting arrangements.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624171-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41620-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624163-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5579240-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624177-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80784-113994 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41641-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5579245-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624258-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5708775-113959 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5708773-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5618551-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5580258-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624181-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41638-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 + Details
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