Quarterly report pursuant to Section 13 or 15(d)

Financial Instruments

v3.10.0.1
Financial Instruments
 9 Months Ended
Sep. 29, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial Instruments
Financial Instruments

The Company operates globally with manufacturing and sales facilities around the world. Due to the Company’s global operations, the Company engages in activities involving both financial and market risks. The Company utilizes normal operating and financing activities, along with derivative financial instruments, to minimize these risks. See Note 14 in the Notes to Consolidated Financial Statements in the 2017 Form 10-K for further details regarding the Company's financial instruments and hedging policies.

Foreign Currency Derivatives. Forward exchange contracts outstanding at September 29, 2018, December 31, 2017 and September 30, 2017 had notional contract values of $358.4 million, $312.6 million and $294.7 million, respectively. Option contracts outstanding at September 29, 2018, December 31, 2017 and September 30, 2017 had notional contract values of $27.2 million, $18.0 million and $18.0 million, respectively. The forward and option contracts outstanding at September 29, 2018 mature through 2020 and mainly relate to the Euro, Japanese Yen, Canadian dollar and Brazilian real. As of September 29, 2018, the Company estimates that during the next 12 months, it will reclassify approximately $4.3 million of net gains (based on current rates) from Accumulated other comprehensive loss to Cost of sales.

Interest Rate Derivatives. The Company enters into fixed-to-floating interest rate swaps to convert a portion of its long-term debt from fixed to floating rate debt. As of September 29, 2018, December 31, 2017 and September 30, 2017, the outstanding swaps had notional contract values of $200.0 million, of which $150.0 million corresponds to the Company's 4.625 percent Senior notes due 2021 and $50.0 million corresponds to the Company's 7.375 percent Debentures due 2023. These instruments have been designated as fair value hedges, with the fair value recorded in long-term debt.

As of September 29, 2018, December 31, 2017 and September 30, 2017, the Company had $2.7 million, $3.4 million and $3.7 million, respectively, of net deferred losses associated with all settled forward-starting interest rate swaps, which were designated as cash flow hedges with gains and losses included in Accumulated other comprehensive loss. As of September 29, 2018, the Company estimates that during the next 12 months, it will reclassify approximately $0.6 million of net losses resulting from settled forward-starting interest rate swaps from Accumulated other comprehensive loss to Interest expense.

As of September 29, 2018, December 31, 2017 and September 30, 2017, the fair values of the Company’s derivative instruments were:
(in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative Assets
 
Derivative Liabilities
Instrument
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
 
 
 
 
Sep 29,
2018
 
Dec 31,
2017
 
Sep 30,
2017
 
 
 
Sep 29,
2018
 
Dec 31,
2017
 
Sep 30,
2017
Derivatives Designated as Cash Flow Hedges
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
Prepaid expenses and other
 
$
4.8

 
$
2.5

 
$
1.7

 
Accrued expenses
 
$
0.9

 
$
5.5

 
$
10.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives Designated as Fair Value Hedges
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
 
Prepaid expenses and other
 
$
0.0

 
$
2.1

 
$
2.9

 
Accrued expenses
 
$
0.1

 
$
1.8

 
$
2.3

Interest rate contracts
 
Other long-term assets
 
—

 
0.7

 
2.3

 
Other long-term liabilities
 
4.0

 
0.3

 
—

Total
 
 
 
$
0.0

 
$
2.8

 
$
5.2

 
 
 
$
4.1

 
$
2.1

 
$
2.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Hedging Activity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
Prepaid expenses and other
 
$
1.1

 
$
0.7

 
$
0.3

 
Accrued expenses
 
$
0.7

 
$
0.1

 
$
0.3


The effect of derivative instruments on the Condensed Consolidated Statements of Comprehensive Income for the three months and nine months ended September 29, 2018 and September 30, 2017 was: 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives Designated as Cash Flow Hedging Instruments
 
Amount of Gain (Loss) on Derivatives Recognized in Accumulated Other Comprehensive Loss (Effective Portion)
 
Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Earnings (Effective Portion)
 
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Earnings (Effective Portion)
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
Sep 29,
2018
 
Sep 30,
2017
 
Sep 29,
2018
 
Sep 30,
2017
 
 
 
Sep 29,
2018
 
Sep 30,
2017
 
Sep 29,
2018
 
Sep 30,
2017
Interest rate contracts
 
$
—

 
$
—

 
$
—

 
$
—

 
Interest expense
 
$
(0.2
)
 
$
(0.3
)
 
$
(0.7
)
 
$
(0.8
)
Foreign exchange contracts
 
1.2

 
(10.4
)
 
5.4

 
(15.3
)
 
Cost of sales
 
0.7

 
(0.9
)
 
(3.8
)
 
1.2

Total
 
$
1.2

 
$
(10.4
)
 
$
5.4

 
$
(15.3
)
 
 
 
$
0.5

 
$
(1.2
)
 
$
(4.5
)
 
$
0.4


Derivatives Designated as Fair Value Hedging Instruments
 
Location of Gain (Loss) on Derivatives
Recognized in Earnings
 
Amount of Gain (Loss) on Derivatives Recognized in Earnings
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
 
Sep 29,
2018
 
Sep 30,
2017
 
Sep 29,
2018
 
Sep 30,
2017
Interest rate contracts
 
Interest expense
 
$
0.1

 
$
0.5

 
$
0.1

 
$
1.6


Other Hedging Activity
 
Location of Gain (Loss) on Derivatives
Recognized in Earnings
 
Amount of Gain (Loss) on Derivatives Recognized in Earnings
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
 
Sep 29,
2018
 
Sep 30,
2017
 
Sep 29,
2018
 
Sep 30,
2017
Foreign exchange contracts
 
Cost of sales
 
$
0.7

 
$
(4.9
)
 
$
8.1

 
$
(11.8
)
Foreign exchange contracts
 
Other expense, net
 
0.1

 
(0.1
)
 
0.8

 
(1.1
)
Total
 
 
 
$
0.8

 
$
(5.0
)
 
$
8.9

 
$
(12.9
)

    
Fair Value of Other Financial Instruments. The carrying values of the Company’s short-term financial instruments, including cash and cash equivalents and accounts and notes receivable approximate their fair values because of the short maturity of these instruments. At September 29, 2018, December 31, 2017 and September 30, 2017, the fair value of the Company’s debt was approximately $1,279.8 million, $492.1 million and $492.8 million, respectively, and was determined using Level 1 and Level 2 inputs described in Note 7 – Fair Value Measurements in the Notes to Consolidated Financial Statements in the 2017 Form 10-K. The carrying value of debt, including short-term debt and current maturities of long-term debt, was $1,238.3 million, $439.1 million and $441.8 million as of September 29, 2018, December 31, 2017 and September 30, 2017, respectively.