Derivative Instruments

9 Months Ended

Oct. 01, 2011

Derivative Instruments [Abstract]

Derivative Instruments

14. 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 risk, 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 consolidated balance sheets. Accordingly, 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 1, 2011.

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 income or 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.

At October 1, 2011, the Company had an additional $1.0 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 October 2, 2010, the Company had an additional $1.6 million, net of tax, of derivative gains on closed hedge instruments in AOCI that was realized in earnings when the hedged items impacted earnings.

As of October 1, 2011, the Company had outstanding the following commodity forward contracts (with maturities extending through June 2013) to hedge forecasted purchases of commodities (in millions):

	Notional Amount
Copper	$	164.0
Aluminum		5.1
Natural Gas		0.5
Zinc		0.1

As of October 1, 2011, the Company had outstanding the following currency forward contracts (with maturities extending through December 2013) to hedge forecasted foreign currency cash flows (in millions):

	Notional Amount
Mexican Peso	$	238.7
Indian Rupee		64.9
Chinese Renminbi		16.6
Australian Dollar		2.8
Thai Baht		2.3

As of October 1, 2011, the total notional amount of the Company's receive-variable/pay-fixed interest rate swaps was $250.0 million (with maturities extending to August 2017).

Fair values of derivative instruments as of October 1, 2011 and January 1, 2011 were (in millions):

	October 1, 2011
	Prepaid Expenses		Other Noncurrent Assets		Accrued Expenses		Hedging Obligations
Designated as hedging instruments:
Interest rate swap contracts	$	—	$	—	$	—	$	44.5
Foreign exchange contracts		0.8		0.5		10.5		10.8
Commodity contracts		1.1		—		28.2		1.6
Not designated as hedging instruments:
Foreign exchange contracts		0.7		—		—		—
Commodity contracts		2.6		0.2		2.7		0.2
Total Derivatives:	$	5.2	$	0.7	$	41.4	$	57.1

	January 1, 2011
	Prepaid Expenses		Other Noncurrent Assets		Accrued Expenses		Hedging Obligations
Designated as hedging instruments:
Interest rate swap contracts	$	—	$	—	$	—	$	39.1
Foreign exchange contracts		7.1		1.4		0.1		0.1
Commodity contracts		24.7		4.2		0.1		—
Not designated as hedging instruments:
Foreign exchange contracts		0.2		—		—		—
Commodity contracts		0.2		—		—		—
Total Derivatives:	$	32.2	$	5.6	$	0.2	$	39.2

The effect of derivative instruments on the condensed consolidated statements of equity and earnings for the three and nine months ended October 1, 2011 and October 2, 2010, was (in millions):

Derivatives Designated as Cash Flow Hedging Instruments

	Three Months Ended October 1, 2011												Three Months Ended October 2, 2010
	Commodity Forwards			Currency Forwards			Interest Rate Swaps			Total			Commodity Forwards		Currency Forwards			Interest Rate Swaps			Total
Gain (Loss) recognized in Other Comprehensive Income (Loss)	$	(42.0	)	$	(30.8	)	$	(9.7	)	$	(82.5	)	$	23.0	$	7.5		$	(9.1	)	$	21.4
Amounts reclassified from Other Comprehensive Income (Loss) were:
Gain recognized in Net Sales	$	—		$	0.1		$	—		$	0.1		$	—	$	0.1		$	—		$	0.1
Gain (Loss) recognized in Cost of Sales	$	4.5		$	2.3		$	—		$	6.8		$	0.1	$	(0.5	)	$	—		$	(0.4	)
Loss recognized in Interest Expense	$	—		$	—		$	(3.5	)	$	(3.5	)	$	—	$	—		$	(3.1	)	$	(3.1	)

Derivatives Designated as Cash Flow Hedging Instruments

	Nine Months Ended October 1, 2011												Nine Months Ended October 2, 2010
	Commodity Forwards			Currency Forwards			Interest Rate Swaps			Total			Commodity Forwards		Currency Forwards			Interest Rate Swaps			Total
Gain (Loss) recognized in Other Comprehensive Income (Loss)	$	(42.2	)	$	(22.2	)	$	(15.4	)	$	(79.8	)	$	18.1	$	9.3		$	(26.0	)	$	1.4
Amounts reclassified from Other Comprehensive Income (Loss) were:
Gain recognized in Net Sales	$	—		$	0.5		$	—		$	0.5		$	—	$	—		$	—		$	—
Gain (Loss) recognized in Cost of Sales	$	21.6		$	5.2		$	—		$	26.8		$	5.6	$	(2.2	)	$	—		$	3.4
Loss recognized in Interest Expense	$	—					$	(9.9	)	$	(9.9	)	$	—	$	—		$	(9.1	)	$	(9.1	)

The ineffective portion of hedging instruments recognized during the three and nine months ended October 1, 2011 and October 2, 2010 was immaterial.

Derivatives Not Designated as Cash Flow Hedging Instruments

	Three Months Ended October 1, 2011									Three Months Ended October 2, 2010							Nine Months Ended October 1, 2011									Nine Months Ended October 2, 2010
	Commodity Forwards			Currency Forwards			Total			Commodity Forwards		Currency Forwards			Total		Commodity Forwards			Currency Forwards			Total			Commodity Forwards			Currency Forwards			Total
Loss recognized in Sales	$	—		$	(0.3	)	$	(0.3	)	$	—	$	—		$	—	$	—		$	(0.3	)	$	(0.3	)	$	—		$	—		$	—
Gain (Loss) recognized in Cost of Sales	$	(0.2	)	$	0.7		$	0.5		$	0.1	$	(0.1	)	$	—	$	(0.4	)	$	(0.2	)	$	(0.6	)	$	(0.5	)	$	(0.2	)	$	(0.7	)

The net AOCI hedging component balance of ($57.4) million loss at October 1, 2011 includes ($27.5) million of net current deferred losses expected to be realized in the next twelve months.