XML 70 R22.htm IDEA: XBRL DOCUMENT v3.22.2.2
DERIVATIVE FINANCIAL INSTRUMENTS
 9 Months Ended
Sep. 30, 2022
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 SOFR-based interest payments. There were no significant collateral deposits on derivative financial instruments as of September 30, 2022 or October 2, 2021.
Cash Flow Hedges
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 30, 2022, the Company had $12.4 million, net of tax, of derivative gains on closed hedge instruments in AOCI that will be realized in earnings when the hedged items impact earnings. At January 1, 2022, the Company had $5.6 million, net of tax, of derivative gains on closed hedge instruments in AOCI that was subsequently realized in earnings when the hedged items impacted earnings.
As of September 30, 2022, the Company had the following currency forward contracts outstanding (with maturities extending through December 2023) to hedge forecasted foreign currency cash flows (in millions):
 Notional Amount (in US Dollars)
Chinese Renminbi$201.4 
Mexican Peso181.0 
Euro204.7 
Indian Rupee49.3 
Australian Dollar0.5 
British Pound1.6 

As of September 30, 2022, the Company had the following commodity forward contracts outstanding (with maturities extending through February 2024) to hedge forecasted purchases of commodities (notional amounts expressed in terms of the dollar value of the hedged item (in millions)):
 Notional Amount
Copper$126.4 
Aluminum5.5 

The Company entered into two receive variable/pay-fixed forward starting non-amortizing interest rate swaps in June 2020, with a total notional amount of $250.0 million, which were subsequently terminated in March 2022. The cash proceeds of $16.2 million received to settle the terminated swaps will be recognized as a reduction of interest expense via the effective interest rate method through July 2025 when the terminated swaps were scheduled to expire. The Company entered into two
additional receive variable/pay-fixed forward starting non-amortizing interest rate swaps in May 2022, with a total notional amount of $250.0 million. These swaps will expire in March 2027.
The following table presents the fair values of derivative instruments as of September 30, 2022 and January 1, 2022 (in millions):
 September 30, 2022
 Prepaid Expenses and Other Current AssetsOther Noncurrent AssetsOther Accrued ExpensesOther Noncurrent Liabilities
Designated as Hedging Instruments:
Interest Rate Swap Contracts$— $8.9 $— $— 
Currency Contracts8.9 0.6 9.3 0.7 
Commodity Contracts— — 23.8 2.5 
Not Designated as Hedging Instruments:
Currency Contracts0.3 — 1.0 — 
Commodity Contracts— — 0.5 0.1 
Total Derivatives$9.2 $9.5 $34.6 $3.3 
 January 1, 2022
 Prepaid Expenses and Other Current AssetsOther Noncurrent AssetsOther Accrued ExpensesOther Noncurrent Liabilities
Designated as Hedging Instruments:
Interest Rate Swap Contracts$— $5.3 $— $— 
Currency Contracts8.3 0.7 1.3 — 
Commodity Contracts8.9 0.1 1.2 0.5 
Not Designated as Hedging Instruments:
Currency Contracts0.3 — 0.4 — 
Commodity Contracts0.4 — — 0.1 
Total Derivatives$17.9 $6.1 $2.9 $0.6 
The following table presents the effect of derivative instruments on the Condensed Consolidated Statements of Income and Condensed Consolidated Statement of Comprehensive Income (pre-tax) (in millions):
Derivatives Designated as Cash Flow Hedging Instruments
Three Months Ended
September 30, 2022October 2, 2021
Commodity ForwardsCurrency ForwardsInterest Rate SwapsTotalCommodity ForwardsCurrency ForwardsInterest Rate SwapsTotal
(Loss) Gain Recognized in Other Comprehensive Income (Loss)$(12.3)$(2.4)$10.1 $(4.6)$(2.6)$(1.7)$(0.2)$(4.5)
Amounts Reclassified from Other Comprehensive Income (Loss):
Gain recognized in Net Sales— — — — — 0.1 — 0.1 
(Loss) Gain Recognized in Cost of Sales(0.7)2.7 — 2.0 11.4 3.3 — 14.7 
Gain (Loss) Recognized in Interest Expense— — 0.1 0.1 — — (0.2)(0.2)
Nine Months Ended
September 30, 2022October 2, 2021
Commodity ForwardsCurrency ForwardsInterest Rate SwapsTotalCommodity ForwardsCurrency ForwardsInterest Rate SwapsTotal
(Loss) Gain Recognized in Other Comprehensive Income (Loss)$(34.5)$2.0 $18.9 $(13.6)$22.4 $6.0 $3.8 $32.2 
Amounts Reclassified from Other Comprehensive Income (Loss):
Gain Recognized in Net Sales— 0.1 — 0.1 — 0.2 — 0.2 
Gain Recognized in Cost of Sales8.9 8.1 — 17.0 25.2 9.9 — 35.1 
Gain Recognized in Operating Expenses— — — — — 2.2 — 2.2 
Loss Recognized in Interest Expense— — (0.2)(0.2)— — (0.1)(0.1)
Derivatives Not Designated as Cash Flow Hedging Instruments (in millions):
Three Months Ended
September 30, 2022October 2, 2021
Commodity ForwardsCurrency ForwardsCommodity ForwardsCurrency Forwards
(Loss) Gain recognized in Cost of Sales$(0.3)$— $0.1 $— 
(Loss) Gain recognized in Operating Expenses— (2.9)— 1.8 
Nine Months Ended
September 30, 2022October 2, 2021
Commodity ForwardsCurrency ForwardsCommodity ForwardsCurrency Forwards
(Loss) Gain recognized in Cost of Sales$(0.9)$— $0.5 $— 
Gain recognized in Operating Expenses— 2.1 — 3.9 

The net AOCI hedging component balance of a $(2.2) million loss at September 30, 2022 includes $14.5 million of net current deferred gains expected to be realized in the next twelve months. The gain/loss reclassified from AOCI into earnings on such derivatives will be recognized in the same period in which the related item affects earnings.
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 at September 30, 2022 and January 1, 2022.
The following table presents the derivative assets and derivative liabilities presented on a net basis under enforceable master netting agreements (in millions):
September 30, 2022
Gross Amounts as Presented in the Condensed Consolidated Balance SheetDerivative Contract Amounts Subject to Right of Offset Derivative Contracts as Presented on a Net Basis
Prepaid Expenses and Other Current Assets:
Derivative Currency Contracts$9.2 $(5.4)$3.8 
Other Noncurrent Assets:
Derivative Currency Contracts0.6 — 0.6 
Other Accrued Expenses:
Derivative Currency Contracts10.3 (5.4)4.9 
Derivative Commodity Contracts24.3 — 24.3 
Other Noncurrent Liabilities:
Derivative Currency Contracts0.7 — 0.7 
Derivative Commodity Contracts2.6 — 2.6 
January 1, 2022
Gross Amounts as Presented in the Condensed Consolidated Balance SheetDerivative Contract Amounts Subject to Right of OffsetDerivative Contracts as Presented on a Net Basis
Prepaid Expenses and Other Current Assets:
Derivative Currency Contracts$8.6 $(1.7)$6.9 
Derivative Commodity Contracts9.3 (1.2)8.1 
Other Noncurrent Assets:
Derivative Currency Contracts0.7 — 0.7 
Derivative Commodity Contracts0.1 (0.1)— 
Other Accrued Expenses:
Derivative Currency Contracts1.7 (1.7)— 
Derivative Commodity Contracts1.2 (1.2)— 
Other Noncurrent Liabilities:
Derivative Commodity Contracts0.6 (0.1)0.5