XML 37 R22.htm IDEA: XBRL DOCUMENT v3.10.0.1
Derivative Financial Instruments
12 Months Ended
Dec. 29, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments
Derivative Financial Instruments

The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed using derivative instruments are commodity price risk, currency exchange risk, 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 utilized to manage interest rate risk associated with the Company's floating rate borrowings.

The Company is exposed to credit losses in the event of non-performance by the counterparties to various financial agreements, including its commodity hedging transactions, foreign currency exchange contracts and interest rate swap agreements. Exposure to counterparty credit risk is managed by limiting counterparties to major international banks and financial institutions meeting established credit guidelines and continually monitoring their compliance with the credit guidelines. The Company does not obtain collateral or other security to support financial instruments subject to credit risk. The Company does not anticipate non-performance by its counterparties, but cannot provide assurances.
The Company recognizes all derivative instruments as either assets or liabilities at fair value in the 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 December 29, 2018 or December 30, 2017.

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 AOCI 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.

As of December 29, 2018 and December 30, 2017, the Company had $(2.1) million and $(2.0) million, net of tax, of derivative losses on closed hedge instruments in AOCI that will be realized in earnings when the hedged items impact earnings.
As of December 29, 2018, the Company had the following commodity forward contracts outstanding (with maturities extending through March 2020) to hedge forecasted purchases of commodities (notional amounts expressed in terms of the dollar value of the hedged item (in millions):
 
 
December 29, 2018
 
December 30, 2017
 
 
 
Copper
 
$
95.4

 
$
80.8

Aluminum
 
10.0

 
7.7



As of December 29, 2018, the Company had the following currency forward contracts outstanding (with maturities extending through April 2021) to hedge forecasted foreign currency cash flows (in millions):
 
 
December 29, 2018
 
December 30, 2017
 
 
 
Mexican Peso
 
$
182.3

 
$
137.1

Chinese Renminbi
 
125.5

 
214.9

Indian Rupee
 
44.0

 
35.8

Euro
 
225.7

 
26.4

Canadian Dollar
 
11.4

 
47.7

Australian Dollar
 
13.2

 
14.9

Thai Baht
 
6.7

 
7.5

British Pound
 
15.3

 
2.7



As of December 29, 2018, the total notional amount of the Company's receive-variable/pay-fixed interest rate swap was $88.4 million with a maturity of April 12, 2021.
Fair values of derivative instruments as of December 29, 2018 and December 30, 2017 were (in millions):
 
 
December 29, 2018
 
 
Prepaid Expenses and Other Current Assets
 
Other Noncurrent Assets
 
Current Hedging Obligations
 
Noncurrent Hedging Obligations
Designated as Hedging Instruments:
 
 
 
 
 
 
 
 
   Currency Contracts
 
$
6.0

 
$
7.2

 
$
4.3

 
$
1.1

   Commodity Contracts
 
0.1

 

 
6.0

 
0.1

Not Designated as Hedging Instruments:
 
 
 
 
 
 
 
 
   Currency Contracts
 
0.6

 

 
0.7

 

   Commodity Contracts
 

 

 
0.3

 

Total Derivatives
 
$
6.7

 
$
7.2

 
$
11.3

 
$
1.2


 
 
December 30, 2017
 
 
Prepaid Expenses and Other Current Assets
 
Other Noncurrent Assets
 
Current Hedging Obligations
 
Noncurrent Hedging Obligations
Designated as Hedging Instruments:
 
 
 
 
 
 
 
 
   Currency Contracts
 
$
11.5

 
$
2.5

 
$
7.9

 
$
0.9

   Commodity Contracts
 
10.8

 
0.7

 

 

Not Designated as Hedging Instruments:
 
 
 
 
 
 
 
 
   Currency Contracts
 
4.1

 

 
0.2

 

   Commodity Contracts
 
0.2

 

 

 

Total Derivatives
 
$
26.6

 
$
3.2

 
$
8.1

 
$
0.9


As of December 29, 2018, the Company's interest rate swap had an immaterial balance and is not presented in the fair value amounts above.
 
Derivatives Designated as Cash Flow Hedging Instruments

The effect of derivative instruments designated as cash flow hedges on the Consolidated Statements of Income and Consolidated Statements of Comprehensive Income for fiscal years 2018, 2017 and 2016 were (in millions):
 
 
Fiscal 2018
 
 
 
 
 
 
Interest
 
 
 
 
Commodity
 
Currency
 
Rate
 
 
 
 
Forwards
 
Forwards
 
Swaps
 
Total
Gain (Loss) Recognized in Other Comprehensive Income
 
$
(17.9
)
 
$
11.0

 
$
1.7

 
$
(5.2
)
Amounts Reclassified from Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
 
Gain Recognized in Net Sales
 

 
0.2

 

 
0.2

Gain Recognized in Cost of Sales
 
5.0

 
2.9

 

 
7.9

Gain Recognized in Operating Expense
 

 
6.1

 

 
6.1

Gain Recognized in Interest Expense
 

 

 
1.6

 
1.6


 
 
Fiscal 2017
 
 
 
 
 
 
Interest
 
 
 
 
Commodity
 
Currency
 
Rate
 
 
 
 
Forwards
 
Forwards
 
Swaps
 
Total
Gain Recognized in Other Comprehensive Loss
 
$
21.7

 
$
46.3

 
$
0.5

 
$
68.5

Amounts Reclassified from Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
 
Gain Recognized in Net Sales
 

 
0.9

 

 
0.9

Gain (Loss) Recognized in Cost of Sales
 
12.2

 
(22.1
)
 

 
(9.9
)
Loss Recognized in Interest Expense
 

 

 
(2.8
)
 
(2.8
)

 
 
Fiscal 2016
 
 
 
 
 
 
Interest
 
 
 
 
Commodity
 
Currency
 
Rate
 
 
 
 
Forwards
 
Forwards
 
Swaps
 
Total
Gain (Loss) Recognized in Other Comprehensive Loss
 
$
6.4

 
$
(46.1
)
 
$
(0.3
)
 
$
(40.0
)
Amounts Reclassified from Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
 
Gain Recognized in Net Sales
 

 
0.2

 

 
0.2

Loss Recognized in Cost of Sales
 
(13.6
)
 
(32.1
)
 

 
(45.7
)
Loss Recognized in Interest Expense
 

 

 
(4.8
)
 
(4.8
)


The ineffective portion of hedging instruments recognized was immaterial for all periods presented.

Derivatives Not Designated as Cash Flow Hedging Instruments

The effect of derivative instruments not designated as cash flow hedges on the Consolidated Statements of Income for fiscal years 2018, 2017 and 2016 were (in millions):
 
 
 
 
Fiscal 2018
 
 
 
 
Commodity Forwards
 
Currency Forwards
 
Total
Loss Recognized in Cost of Sales
 
$
(0.5
)
 
$

 
$
(0.5
)
Loss Recognized in Operating Expenses
 

 
(6.8
)
 
(6.8
)

 
 
 
 
Fiscal 2017
 
 
 
 
Commodity Forwards
 
Currency Forwards
 
Total
Loss Recognized in Cost of Sales
 
$
(1.1
)
 
$

 
$
(1.1
)
Gain Recognized in Operating Expenses
 

 
14.3

 
14.3


 
 
 
 
Fiscal 2016
 
 
 
 
Commodity Forwards
 
Currency Forwards
 
Total
Gain Recognized in Cost of Sales
 
 
 
$
2.6

 
$

 
$
2.6

Loss Recognized in Operating Expenses
 

 
(5.2
)
 
(5.2
)


The net AOCI balance related to hedging activities of a $(5.4) million gain as of December 29, 2018 includes $(3.2) million of net deferred losses expected to be reclassified to the Consolidated Statement of Comprehensive Income in the next twelve months. There were no gains or losses reclassified from AOCI to earnings based on the probability that the forecasted transaction would not occur.

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 Consolidated Balance Sheets on a gross basis for the periods ended December 29, 2018 and December 30, 2017.

The following table presents the derivative assets and derivative liabilities presented on a net basis under enforceable master netting agreements (in millions):
 
 
December 29, 2018
 
 
Gross Amounts as Presented in the 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
 
$
6.6

 
$
(3.6
)
 
$
3.0

Derivative Commodity Contracts
 
0.1

 
(0.1
)
 

Other Noncurrent Assets:
 
 
 
 
 
 
Derivative Currency Contracts
 
7.2

 
(0.6
)
 
6.6

Current Hedging Obligations:
 
 
 
 
 
 
Derivative Currency Contracts
 
5.0

 
(3.6
)
 
1.4

Derivative Commodity Contracts
 
6.3

 
(0.1
)
 
6.2

Noncurrent Hedging Obligations:
 
 
 
 
 
 
Derivative Currency Contracts
 
1.1

 
(0.6
)
 
0.5

Derivative Commodity Contracts
 
0.1

 

 
0.1

 
 
December 30, 2017
 
 
Gross Amounts as Presented in the 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
 
$
15.6

 
$
(5.9
)
 
$
9.7

Derivative Commodity Contracts
 
11.0

 

 
11.0

Other Noncurrent Assets:
 
 
 
 
 
 
Derivative Currency Contracts
 
2.5

 
(0.7
)
 
1.8

Derivative Commodity Contracts
 
0.7

 

 
0.7

Current Hedging Obligations:
 
 
 
 
 
 
Derivative Currency Contracts
 
8.1

 
(5.9
)
 
2.2

Noncurrent Hedging Obligations:
 
 
 
 
 
 
  Derivative Currency Contracts
 
0.9

 
(0.7
)
 
0.2