DERIVATIVE FINANCIAL INSTRUMENTS

3 Months Ended

Apr. 02, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

Currency Forward Contracts

From time to time, we enter into forward contracts to manage the exposure on contracts with forecasted transactions denominated in non-functional currencies and to manage the risk of transaction gains and losses associated with assets/liabilities denominated in currencies other than the functional currency of certain subsidiaries (“FX forward contracts”). In addition, some of our contracts contain currency forward embedded derivatives (“FX embedded derivatives”), because the currency of exchange is not “clearly and closely” related to the functional currency of either party to the transaction. Certain of our FX forward contracts are designated as cash flow hedges. To the extent these derivatives are effective in offsetting the variability of the hedged cash flows, changes in the derivatives’ fair value are not included in current earnings, but are included in accumulated other comprehensive income (“AOCI”). These changes in fair value are reclassified into earnings as a component of revenues or cost of products sold, as applicable, when the forecasted transaction impacts earnings.

We had FX forward contracts with an aggregate notional amount of $58.8 and $139.8 outstanding as of April 2, 2016 and December 31, 2015, respectively, all of which are scheduled to mature within one year. We also had FX embedded derivatives with an aggregate notional amount of $22.2 and $120.8 at April 2, 2016 and December 31, 2015, respectively, with notional amounts of $6.0 and $16.2 scheduled to mature within one and two years thereafter, respectively. The decline in the notional amount of FX forward contracts and FX embedded derivatives was due primarily to the sale of our dry cooling business. The unrealized losses, net of tax, recorded in AOCI related to FX forward contracts were $0.0 and $0.6 as of April 2, 2016 and December 31, 2015, respectively.

With regard to our FX forward contacts, these arrangements are designed to provide the right of setoff in the event of counterparty default or insolvency, and, thus, we have elected to offset the fair values of these instruments in our condensed consolidated balance sheets. The gross fair values of our FX forward contracts were $0.7 and $0.1 (gross assets) and $0.2 and $1.5 (gross liabilities) at April 2, 2016 and December 31, 2015, respectively.

The fair values of our embedded derivative instruments were not material in relation to our condensed consolidated balance sheets as of April 2, 2016 and December 31, 2015.

Commodity Contracts

From time to time, we enter into commodity contracts to manage the exposure on forecasted purchases of commodity raw materials. At April 2, 2016 and December 31, 2015, the outstanding notional amount of commodity contracts was 3.3 and 4.2 pounds of copper, respectively. We designate and account for these contracts as cash flow hedges and, to the extent these commodity contracts are effective in offsetting the variability of the forecasted purchases, the change in fair value is included in AOCI. We reclassify AOCI associated with our commodity contracts to cost of products sold when the forecasted transaction impacts earnings. As of April 2, 2016 and December 31, 2015, the fair value of these contracts was $0.4 (current liability) and $1.7 (current liability), respectively. The unrealized losses, net of tax, recorded in AOCI were $0.6 and $1.2 as of April 2, 2016 and December 31, 2015, respectively. We anticipate reclassifying the unrealized losses as of April 2, 2016 to income over the next 12 months.