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DERIVATIVE FINANCIAL INSTRUMENTS
 9 Months Ended
Sep. 28, 2019
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 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 September 28, 2019 or September 29, 2018.
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 the same line within the Condensed Consolidated Statement of Income as the earnings effect of the hedged item 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.
At September 28, 2019, the Company had $(0.4) 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. At December 29, 2018, the Company had $(2.1) million, net of tax, of derivative losses on closed hedge instruments in AOCI that was subsequently realized in earnings when the hedged items impacted earnings.
As of September 28, 2019, the Company had the following currency forward contracts outstanding (with maturities extending through April 2021) to hedge forecasted foreign currency cash flows (in millions):
 
Notional Amount (in US Dollars)
Chinese Renminbi
$
137.9

Mexican Peso
174.0

Euro
119.6

Indian Rupee
47.0

Canadian Dollar
17.4

Australian Dollar
31.5

Swedish Krona
2.4

British Pound
11.2

Thai Baht
6.6


As of September 28, 2019, the Company had the following commodity forward contracts outstanding (with maturities extending through January 2021) to hedge forecasted purchases of commodities (notional amounts expressed in terms of the dollar value of the hedged item (in millions)):
 
Notional Amount
Copper
$
70.1

Aluminum
5.2


As of September 28, 2019, 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.
The following table presents the fair values of derivative instruments as of September 28, 2019 and December 29, 2018 (in millions):
 
September 28, 2019
 
Prepaid Expenses and Other Current Assets
 
Other Noncurrent Assets
 
Current Hedging Obligations
 
Noncurrent Hedging Obligations
Designated as Hedging Instruments:
 
 
 
 
 
 
 
Interest Rate Swap Contracts
$
—

 
$
—

 
$
—

 
$
1.3

Currency Contracts
5.7

 
11.1

 
6.1

 
0.9

Commodity Contracts
0.1

 
—

 
3.8

 
—

Not Designated as Hedging Instruments:
 
 
 
 
 
 
 
Currency Contracts
0.2

 
—

 
0.8

 
—

Commodity Contracts
—

 
—

 
0.2

 
—

Total Derivatives
$
6.0

 
$
11.1

 
$
10.9

 
$
2.2

 
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


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.
The following table presents the effect of derivative instruments on the Condensed Consolidated Statements of Income and Condensed Consolidated Statement of Comprehensive Income (pre-tax) (in millions):
Derivatives Designated as Cash Flow Hedging Instruments
 
Three Months Ended
 
September 28, 2019
 
September 29, 2018
 
Commodity Forwards
 
Currency Forwards
 
Interest Rate Swaps
 
Total
 
Commodity Forwards
 
Currency Forwards
 
Interest Rate Swaps
 
Total
Gain (Loss) Recognized in Other Comprehensive Income (Loss)
$
(3.9
)
 
$
(3.2
)
 
$
0.6

 
$
(6.5
)
 
$
(3.9
)
 
$
6.9

 
$
1.0

 
$
4.0

Amounts Reclassified from Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
 


 


 


 


Gain Recognized in Net Sales
—

 
0.1

 
—

 
0.1

 
—

 
—

 
—

 
—

Gain (Loss) Recognized in Cost of Sales
(1.8
)
 
2.0

 
—

 
0.2

 
0.7

 
(0.7
)
 
—

 
—

Gain Recognized in Operating Expenses
—

 
3.2

 
—

 
3.2

 
—

 
0.6

 
—

 
0.6

Gain Recognized in Interest Expense
—

 
—

 
0.7

 
0.7

 
—

 
—

 
0.7

 
0.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Nine Months Ended

September 28, 2019
 
September 29, 2018

Commodity Forwards
 
Currency Forwards
 
Interest Rate Swaps
 
Total
 
Commodity Forwards
 
Currency Forwards
 
Interest Rate Swaps
 
Total
Gain (Loss) Recognized in Other Comprehensive Income (Loss)
$
(3.3
)
 
$
8.5

 
$
0.6

 
$
5.8

 
$
(12.8
)
 
$
13.8

 
$
2.0

 
$
3.0

Amounts Reclassified from Other Comprehensive Income (Loss):


 


 


 


 


 


 


 


Gain Recognized in Net Sales
—

 
0.3

 
—

 
0.3

 
—

 
0.3

 
—

 
0.3

Gain (Loss) Recognized in Cost of Sales
(5.4
)
 
3.8

 
—

 
(1.6
)
 
7.4

 
1.2

 
—

 
8.6

Gain Recognized in Operating Expenses
—

 
3.6

 
—

 
3.6

 
—

 
4.9

 
—

 
4.9

Gain Recognized in Interest Expense
—

 
—

 
1.9

 
1.9

 
—

 
—

 
1.2

 
1.2

Derivatives Not Designated as Cash Flow Hedging Instruments (in millions):
 
Three Months Ended
 
September 28, 2019
 
September 29, 2018
 
Commodity Forwards
 
Currency Forwards
 
Commodity Forwards
 
Currency Forwards
Gain (Loss) recognized in Operating Expenses
$
—

 
$
0.6

 
$
—

 
$
(4.1
)
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
September 28, 2019
 
September 29, 2018
 
Commodity Forwards
 
Currency Forwards
 
Commodity Forwards
 
Currency Forwards
Gain (Loss) recognized in Cost of Sales
$
0.1

 
$
—

 
$
(0.3
)
 
$
—

Gain (Loss) recognized in Operating Expenses
—

 
0.1

 
—

 
(6.3
)

The net AOCI hedging component balance of a $(4.2) million loss at September 28, 2019 includes $(3.2) million of net current deferred loss 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 September 28, 2019 and December 29, 2018.
The following table presents the derivative assets and derivative liabilities presented on a net basis under enforceable master netting agreements (in millions):
 
September 28, 2019
 
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
$
5.9

 
$
(3.2
)
 
$
2.7

Derivative Commodity Contracts
0.1

 
(0.1
)
 
—

Other Noncurrent Assets:
 
 
 
 
 
Derivative Currency Contracts
11.1

 
(0.1
)
 
11.0

Current Hedging Obligations:
 
 
 
 
 
Derivative Currency Contracts
6.9

 
(3.2
)
 
3.7

Derivative Commodity Contracts
4.0

 
(0.1
)
 
3.9

Noncurrent Hedging Obligations:
 
 
 
 
 
Derivative Currency Contracts
0.9

 
(0.1
)
 
0.8

 
December 29, 2018
 
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
$
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