Derivative Instruments

9 Months Ended

Oct. 03, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

DERIVATIVE INSTRUMENTS

The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by using derivative instruments are commodity price, currency exchange and interest rate risk. Forward contracts on certain commodities are entered into to manage the price risk associated with forecasted purchases of materials used in the Company’s manufacturing process. Forward contracts on certain currencies are entered into to manage forecasted cash flows in certain foreign currencies. Interest rate swaps are entered into to manage interest rate risk associated with the Company’s floating rate borrowings.

The Company must recognize all derivative instruments as either assets or liabilities at fair value in the condensed consolidated balance sheets. The Company designates commodity forward contracts as cash flow hedges of forecasted purchases of commodities, currency forward contracts as cash flow hedges of forecasted foreign currency cash flows and interest rate swaps as cash flow hedges of forecasted LIBOR-based interest payments. There were no significant collateral deposits on derivative financial instruments as of October 3, 2015.

Cash flow hedges

For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive loss and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or changes in market value of derivatives not designated as hedges are recognized in current earnings. All derivative instruments used by the Company impact operating cash flows.

At October 3, 2015, the Company had $7.4 million, net of tax, of derivative losses on closed hedge instruments in Accumulated Other Comprehensive Income (“AOCI”) that will be realized in earnings when the hedged items impact earnings. At January 3, 2015, the Company had $2.2 million, net of tax, of derivative losses on closed hedge instruments in AOCI that was realized in earnings when the hedged items impacted earnings.

As of October 3, 2015, the Company had outstanding the following currency forward contracts (with maturities extending through December 2018) to hedge forecasted foreign currency cash flows (in millions):

	Notional Amount (in U.S. Dollars)
Chinese Renminbi	$	381.5
Mexican Peso	349.9
Euro	58.5
Indian Rupee	48.1
Canadian Dollar	4.0
Australian Dollar	2.3
Japanese Yen	2.7
Thai Baht	1.3

As of October 3, 2015, the Company had outstanding the following commodity forward contracts (with maturities extending through December 2016) to hedge forecasted purchases of commodities (notional amounts expressed in terms of the dollar value of the hedged item (in millions):

	Notional Amount
Copper	$	76.2
Aluminum	4.1

As of October 3, 2015, the total notional amount of the Company’s receive-variable/pay-fixed interest rate swap was $100.0 million (with maturity in August 2017).

Fair values of derivative instruments as of October 3, 2015 and January 3, 2015 were (in millions):

	October 3, 2015
	Prepaid Expenses and Other Current Assets		Other Noncurrent Assets		Hedging Obligations (current)		Hedging Obligations (non-current)
Designated as hedging instruments:
Interest rate swap contracts	$	—	$	—	$	—	$	9.6
Currency contracts	1.2		0.7		28.0		21.4
Commodity contracts	—		—		10.3		0.2
Not designated as hedging instruments:
Currency contracts	0.9		—		4.5		—
Commodity contracts	4.6		0.3		4.8		0.3
Total Derivatives	$	6.7	$	1.0	$	47.6	$	31.5

	January 3, 2015
	Prepaid Expenses and Other Current Assets		Other Noncurrent Assets		Hedging Obligations (current)		Hedging Obligations (non-current)
Designated as hedging instruments:
Interest rate swap contracts	$	—	$	—	$	—	$	11.9
Currency contracts	1.6		—		15.9		10.3
Commodity contracts	—		—		9.8		0.1
Not designated as hedging instruments:
Currency contracts	—		—		1.6		0.2
Commodity contracts	2.3		—		2.4		—
Total Derivatives	$	3.9	$	—	$	29.7	$	22.5

The effect of derivative instruments on the Condensed Consolidated Statements of Income and Comprehensive Income (pre-tax) was as follows (in millions):

Derivatives Designated as Cash Flow Hedging Instruments

	Three Months Ended
	October 3, 2015												September 27, 2014
	Commodity Forwards			Currency Forwards			Interest Rate Swaps			Total			Commodity Forwards			Currency Forwards			Interest Rate Swaps			Total
Loss recognized in Other Comprehensive Income (Loss)	$	(10.1	)	$	(27.3	)	$	(0.7	)	$	(38.1	)	$	(3.2	)	$	(3.9	)	$	1.2		$	(5.9	)
Amounts reclassified from Other Comprehensive Income (Loss):
Gain recognized in Net Sales	—			0.1			—			0.1			—			—			—			—
Gain (Loss) recognized in Cost of Sales	(3.9		)	(5.9		)	—			(9.8		)	(1.6		)	2.8			—			1.2
Loss recognized in Interest Expense	—			—			(1.3		)	(1.3		)	—			—			(2.4		)	(2.4		)

	Nine Months Ended
	October 3, 2015												September 27, 2014
	Commodity Forwards			Currency Forwards			Interest Rate Swaps			Total			Commodity Forwards			Currency Forwards		Interest Rate Swaps			Total
Loss recognized in Other Comprehensive Income (Loss)	$	(17.6	)	$	(38.4	)	$	(1.6	)	$	(57.6	)	$	(10.0	)	$	0.6	$	0.2		$	(9.2	)
Amounts reclassified from Other Comprehensive Income (Loss):
Gain recognized in Net Sales	—			0.2			—			0.2			—			—		—			—
Gain (Loss) recognized in Cost of Sales	(13.6		)	(10.7		)	—			(24.3		)	(7.1		)	6.5		—			(0.6		)
Loss recognized in Interest Expense	—			—			(3.9		)	(3.9		)	—			—		(8.9		)	(8.9		)

The ineffective portion of hedging instruments recognized during the three and nine months endedOctober 3, 2015 and September 27, 2014, respectively, was immaterial.

Derivatives Not Designated as Cash Flow Hedging Instruments (in millions):

	Three Months Ended
	October 3, 2015						September 27, 2014
	Commodity Forwards			Currency Forwards			Commodity Forwards		Currency Forwards
(Loss) recognized in Cost of Sales	$	(0.1	)	$	—		$	—	$	(0.3	)
(Loss) recognized in Operating Expenses	$	—		$	(4.0	)	$	—	$	—

	Nine Months Ended
	October 3, 2015						September 27, 2014
	Commodity Forwards			Currency Forwards			Commodity Forwards		Currency Forwards
Gain (Loss) recognized in Cost of Sales	$	(0.1	)	$	—		$	0.1	$	(0.2	)
(Loss) recognized in Operating Expenses	$	—		$	(4.5	)	$	—	$	—

The net AOCI hedging component balance of$(49.3) million loss at October 3, 2015 includes $(28.5) million of net current deferred losses expected to be realized in the next twelve months.

The Company's commodity and currency derivative contracts are subject to master netting agreements with the respective counterparties which allow the Company to net settle transactions with a single net amount payable by one party to another party. The Company has elected to present the derivative assets and derivative liabilities on the Condensed Consolidated Balance Sheets on a gross basis for the periods ended October 3, 2015 and January 3, 2015.

The following table presents the derivative assets and derivative liabilities presented on a net basis under enforceable master netting agreements (in millions):

	October 3, 2015
	Gross Amounts as Presented in the Condensed Consolidated Balance Sheet		Derivative Contract Amounts Subject to Right of Offset			Derivative Contracts as Presented on a Net Basis
Prepaid Expenses and Other Current Assets:
Derivative Currency Contracts	$	2.1	$	(2.0	)	$	0.1
Derivative Commodity Contracts	4.6		(4.6		)	—
Other Noncurrent Assets:
Derivative Currency Contracts	0.7		(0.7		)	—
Derivative Commodity Contracts	0.3		(0.3		)	—
Hedging Obligations Current:
Derivative Currency Contracts	32.5		(2.0		)	30.5
Derivative Commodity Contracts	15.1		(4.6		)	10.5
Hedging Obligations:
Derivative Currency Contracts	21.4		(0.7		)	20.7
Derivative Commodity Contracts	0.5		(0.3		)	0.2

	January 3, 2015
	Gross Amounts as Presented in the Condensed Consolidated Balance Sheet		Derivative Contract Amounts Subject to Right of Offset			Derivative Contracts as Presented on a Net Basis
Prepaid Expenses and Other Current Assets:
Derivative Currency Contracts	$	1.6	$	(1.3	)	$	0.3
Derivative Commodity Contracts	2.3		(2.3		)	—
Hedging Obligations Current:
Derivative Currency Contracts	17.5		(1.3		)	16.2
Derivative Commodity Contracts	12.2		(2.3		)	9.9
Hedging Obligations:
Derivative Currency Contracts	10.5		—			10.5
Derivative Commodity Contracts	0.1		—			0.1