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Derivative Instruments and Hedging Activities
 6 Months Ended
Jul. 01, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative instruments and hedging activities
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We enter into certain derivative financial instruments, when available on a cost-effective basis, to mitigate our risk associated with changes in interest rates and foreign currency exchange rates as follows:

Interest rate risk management - We are exposed to the impact of interest rate changes through our cash investments and borrowings. We utilize a variety of strategies to manage the impact of changes in interest rates, including using a mix of debt maturities along with both fixed-rate and variable-rate debt. In addition, we may enter into treasury-lock agreements and interest rate swap agreements on certain investing and borrowing transactions to manage our exposure to interest rate changes and our overall cost of borrowing.

Foreign currency exchange risk management - We conduct business in several major currencies other than the U.S. dollar and are subject to risks associated with changing foreign exchange rates. Our objective is to reduce cash flow volatility associated with foreign exchange rate changes on a consolidated basis to allow management to focus its attention on business operations. Accordingly, we enter into various contracts that change in value as foreign exchange rates change to protect the value of existing foreign currency assets and liabilities, commitments, and anticipated foreign currency sales and expenses.
    
All derivative instruments are managed on a consolidated basis to efficiently net exposures and thus take advantage of any natural offsets. Gains and losses related to the derivative instruments are expected to be offset largely by gains and losses on the original underlying asset or liability. We do not use derivative financial instruments for speculative purposes.

     All of our designated derivatives were classified as cash flow hedges as of July 1, 2017 and December 31, 2016. Designated derivatives meet hedge accounting criteria, which means the fair value of the hedge is recorded in shareholders’ equity as a component of OCI, net of tax. The deferred gains and losses are recognized in income in the period in which the hedged item affects earnings. Any ineffective portion of the change in fair value of the derivative is immediately recognized in earnings. All of our designated derivatives are assessed for hedge effectiveness quarterly.

We also have economic non-designated derivatives that do not meet hedge accounting criteria. These derivative instruments are adjusted to current market value at the end of each period through earnings. Gains or losses on these instruments are offset substantially by the remeasurement adjustment on the hedged item.    

Interest Rate Swaps and Treasury Locks

Interest rate swap agreements are contracts to exchange floating rate for fixed rate payments (or vice versa) over the life of the agreement without the exchange of the underlying notional amounts. The notional amounts of the interest rate swap agreements are used to measure interest to be paid or received and do not represent the amount of exposure to credit loss. The differential paid or received on the interest rate swap agreements is recognized as an adjustment to interest expense.

During the three months ended July 1, 2017, we repaid $584.4 million of senior notes with an interest rate of 4.000% due 2023 and $309.5 million of senior notes with an interest rate of 5.300% due 2043 (refer to Note 10). As a result of the senior note repayments on June 15, 2017, the proportionate amount remaining in OCI related to the pre-issuance hedge was reclassified to earnings. Accordingly, we recorded a loss of $5.9 million in Other expense, net, during the three months ended July 1, 2017 for the amount remaining in OCI.

During the six months ended December 31, 2015, we entered into a forward interest rate swap to hedge against changes in the benchmark interest rate between the date the interest rate swap was entered into and the date of expected future debt issuance. The interest rate swap was designated as a cash flow hedge and had a notional amount totaling $200.0 million. The interest rate swap was settled upon the issuance of an aggregate $1.2 billion principal amount of senior notes on March 7, 2016 for a cumulative after-tax loss of $7.0 million in OCI during the six months ended July 2, 2016.
    
Foreign Currency Derivatives

We enter into foreign currency forward contracts, both designated and non-designated, in order to manage the impact of foreign exchange fluctuations on expected future purchases and related payables denominated in a foreign currency, as well as to hedge the impact of foreign exchange fluctuations on expected future sales and related receivables denominated in a foreign currency. Both types of forward contracts have a maximum maturity date of 18 months. The total notional amount for these contracts was $644.9 million and $533.5 million as of July 1, 2017 and December 31, 2016, respectively.

Effects of Derivatives on the Financial Statements
    
The below tables indicate the effects of all derivative instruments on the Condensed Consolidated Financial Statements. All amounts exclude income tax effects and are presented in millions.

The balance sheet location and gross fair value of our outstanding derivative instruments were as follows:
 
Asset Derivatives
 
Balance Sheet Location
 
Fair Value
 
 
 
July 1,
2017
 
December 31,
2016
Designated derivatives:
 
 
 
 
 
Foreign currency forward contracts
Other current assets
 
$
5.2

 
$
3.1

Non-designated derivatives:
 
 
 
 
 
Foreign currency forward contracts
Other current assets
 
$
11.4

 
$
0.7

 
Liability Derivatives
 
Balance Sheet Location
 
Fair Value
 
 
 
July 1,
2017
 
December 31,
2016
Designated derivatives:
 
 
 
 
 
Foreign currency forward contracts
Accrued liabilities
 
$
2.9

 
$
3.0

Non-designated derivatives:
 
 
 
 
 
Foreign currency forward contracts
Accrued liabilities
 
$
1.1

 
$
2.0



The gains (losses) recorded in OCI for the effective portion of our designated cash flow hedges were as follows:
 
 
Amount of Gain/(Loss) Recorded in OCI
(Effective Portion)
 
 
Three Months Ended
 
Six Months Ended
Designated Cash Flow Hedges
 
July 1,
2017
 
July 2,
2016
 
July 1,
2017
 
July 2,
2016
Interest rate swap agreements
 
$
—

 
$
—

 
$
—

 
$
(9.0
)
Foreign currency forward contracts
 
2.7

 
(0.3
)
 
5.2

 
1.3

Total
 
$
2.7

 
$
(0.3
)
 
$
5.2

 
$
(7.7
)


The gains (losses) reclassified from AOCI into earnings for the effective portion of our designated cash flow hedges were as follows:
 
 
 
 
Amount of Gain/(Loss) Reclassified from AOCI into Earnings
(Effective Portion)
 
 
 
 
Three Months Ended
 
Six Months Ended
Designated Cash Flow Hedges
 
Income Statement Location
 
July 1,
2017
 
July 2,
2016
 
July 1,
2017
 
July 2,
2016
Interest rate swap agreements
 
Interest expense, net
 
$
(0.6
)
 
$
(0.6
)
 
$
(1.3
)
 
$
(1.1
)
 
 
Other expense, net
 
(5.9
)
 
—

 
(5.9
)
 
—

Foreign currency forward contracts
 
Net sales
 
0.6

 
(0.1
)
 
0.9

 
0.4

 
 
Cost of sales
 
0.9

 
0.6

 
1.6

 
0.9

 
 
Interest expense, net
 
(0.5
)
 
(0.6
)
 
(1.1
)
 
(0.9
)
 
 
Other expense, net
 
—

 
1.7

 
(0.5
)
 
1.9

Total
 
 
 
$
(5.5
)
 
$
1.0

 
$
(6.3
)
 
$
1.2



The net of tax amount expected to be reclassified from AOCI into earnings during the next 12 months is a $2.0 million gain.

The gains (losses) recognized against earnings for the ineffective portion of our designated cash flow hedges were as follows:
 
 
 
 
Amount of Gain/(Loss) Recognized against Earnings
(Ineffective Portion)
 
 
 
 
Three Months Ended
 
Six Months Ended
Designated Cash Flow Hedges
 
Income Statement
Location
 
July 1,
2017
 
July 2,
2016
 
July 1,
2017
 
July 2,
2016
Interest rate swap agreements
 
Other expense, net
 
$
—

 
$
—

 
$
—

 
$
(0.1
)
Foreign currency forward contracts
 
Net sales
 
—

 
(0.1
)
 
—

 
0.1

 
 
Cost of sales
 
—

 
(0.1
)
 
—

 
—

 
 
Other expense, net
 
0.1

 
0.6

 
1.0

 
0.6

Total
 
 
 
$
0.1

 
$
0.4

 
$
1.0

 
$
0.6



The effects of our non-designated derivatives on the Condensed Consolidated Statements of Operations were as follows:
 
 
 
 
Amount of Gain/(Loss) Recognized against Earnings
 
 
 
 
Three Months Ended
 
Six Months Ended
Non-Designated Derivatives
 
Income Statement Location
 
July 1,
2017
 
July 2,
2016
 
July 1,
2017
 
July 2,
2016
Foreign currency forward contracts
 
Other expense, net
 
$
(5.0
)
 
$
(1.6
)
 
$
(13.9
)
 
$
(8.5
)
 
 
Interest expense, net
 
(0.7
)
 
(0.6
)
 
(1.1
)
 
(0.5
)
Total
 
 
 
$
(5.7
)
 
$
(2.2
)
 
$
(15.0
)
 
$
(9.0
)
Derivatives, policy
We enter into certain derivative financial instruments, when available on a cost-effective basis, to mitigate our risk associated with changes in interest rates and foreign currency exchange rates as follows:

Interest rate risk management - We are exposed to the impact of interest rate changes through our cash investments and borrowings. We utilize a variety of strategies to manage the impact of changes in interest rates, including using a mix of debt maturities along with both fixed-rate and variable-rate debt. In addition, we may enter into treasury-lock agreements and interest rate swap agreements on certain investing and borrowing transactions to manage our exposure to interest rate changes and our overall cost of borrowing.

Foreign currency exchange risk management - We conduct business in several major currencies other than the U.S. dollar and are subject to risks associated with changing foreign exchange rates. Our objective is to reduce cash flow volatility associated with foreign exchange rate changes on a consolidated basis to allow management to focus its attention on business operations. Accordingly, we enter into various contracts that change in value as foreign exchange rates change to protect the value of existing foreign currency assets and liabilities, commitments, and anticipated foreign currency sales and expenses.
    
All derivative instruments are managed on a consolidated basis to efficiently net exposures and thus take advantage of any natural offsets. Gains and losses related to the derivative instruments are expected to be offset largely by gains and losses on the original underlying asset or liability. We do not use derivative financial instruments for speculative purposes.

     All of our designated derivatives were classified as cash flow hedges as of July 1, 2017 and December 31, 2016. Designated derivatives meet hedge accounting criteria, which means the fair value of the hedge is recorded in shareholders’ equity as a component of OCI, net of tax. The deferred gains and losses are recognized in income in the period in which the hedged item affects earnings. Any ineffective portion of the change in fair value of the derivative is immediately recognized in earnings. All of our designated derivatives are assessed for hedge effectiveness quarterly.

We also have economic non-designated derivatives that do not meet hedge accounting criteria. These derivative instruments are adjusted to current market value at the end of each period through earnings. Gains or losses on these instruments are offset substantially by the remeasurement adjustment on the hedged item