Quarterly report pursuant to Section 13 or 15(d)

Financial Instruments

v3.20.2
Financial Instruments
 9 Months Ended
Sep. 26, 2020
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 uses normal operating and financing activities, along with derivative financial instruments, to minimize these risks. Refer to Note 14 in the Notes to Consolidated Financial Statements in the 2019 Form 10-K for further details regarding the Company's financial instruments and hedging policies.

Commodity Price. The Company uses commodity swaps to hedge anticipated purchases of aluminum. As of September 26, 2020, the notional value of commodity swap contracts outstanding was $5.2 million, with the contracts maturing through 2021. The Company had no outstanding commodity swap contracts at December 31, 2019 and September 28, 2019. The amount of
gain or loss associated with the change in fair value of these instruments is deferred in Accumulated other comprehensive loss and recognized in Cost of sales in the same period or periods during which the hedged transaction affects earnings. As of September 26, 2020, the Company estimates that during the next 12 months it will reclassify nominal net losses (based on current prices) from Accumulated other comprehensive loss to Cost of sales.

Foreign Currency Derivatives. Forward exchange contracts outstanding at September 26, 2020, December 31, 2019 and September 28, 2019 had notional contract values of $293.3 million, $332.5 million and $309.8 million, respectively. The notional contract values of option contracts outstanding totaled $10.4 million at September 26, 2020 and $17.8 million as of December 31, 2019 and September 28, 2019, respectively. The forward contracts outstanding at September 26, 2020 mature through 2022 and mainly relate to the Euro, Australian dollar, Canadian dollar and Japanese yen. As of September 26, 2020, the Company estimates that during the next 12 months, it will reclassify approximately $1.5 million of net losses (based on current rates) from Accumulated other comprehensive loss to Cost of sales.

Interest Rate Derivatives. The Company previously entered into fixed-to-floating interest rate swaps to convert a portion of its long-term debt from fixed to floating rate debt. In the second half of 2019, the Company settled its fixed-to-floating interest rate swaps, resulting in a net deferred gain of $2.5 million included within Debt. The Company will reclassify $0.7 million of net deferred gains from Debt to Interest expense during the next 12 months. As a result of the settlement, there are no outstanding interest rate swaps as of September 26, 2020 or December 31, 2019. As of September 28, 2019, the outstanding swaps had a total notional contract value of $50.0 million corresponding 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 26, 2020, December 31, 2019 and September 28, 2019, the Company had $1.5 million, $2.0 million and $2.1 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 26, 2020, the Company estimates that during the next 12 months, it will reclassify $0.6 million net losses resulting from settled forward-starting interest rate swaps from Accumulated other comprehensive loss to Interest expense.

As of September 26, 2020, December 31, 2019 and September 28, 2019, 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 26, 2020 Dec 31, 2019 Sep 28, 2019 Sep 26, 2020 Dec 31, 2019 Sep 28, 2019
Derivatives Designated as Cash Flow Hedges
Foreign exchange contracts Prepaid expenses and other $ 2.1  $ 4.1  $ 9.0  Accrued expenses $ 3.2  $ 2.3  $ 1.3 
Commodity contracts
 Prepaid expenses and other 0.0  —  —  Accrued expenses 0.1  —  — 
Total
 $ 2.1  $ 4.1  $ 9.0  $ 3.3  $ 2.3  $ 1.3 
Derivatives Designated as Fair Value Hedges
Interest rate contracts
 Other long-term assets $ —  $ —  $ 2.2  Other long-term liabilities $ —  $ —  $ — 
Total
 $ —  $ —  $ 2.2  $ —  $ —  $ — 
Other Hedging Activity
Foreign exchange contracts Prepaid expenses and other $ 0.5  $ 0.1  $ 0.5  Accrued expenses $ 0.4  $ 0.9  $ 0.5 
    The effect of derivative instruments on the Condensed Consolidated Statements of Comprehensive Income for the three months and nine months ended September 26, 2020 and September 28, 2019 was: 
(in millions)
Derivatives Designated as Cash Flow Hedging Instruments Amount of Gain (Loss) on Derivatives Recognized in Accumulated Other Comprehensive Loss Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Earnings
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Earnings
Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
Sep 26,
2020		 Sep 28,
2019		 Sep 26,
2020		 Sep 28,
2019		 Sep 26,
2020		 Sep 28,
2019		 Sep 26,
2020		 Sep 28,
2019
Interest rate contracts $ —  $ —  $ —  $ —  Interest expense $ (0.1) $ (0.1) $ (0.4) $ (0.4)
Foreign exchange contracts (3.0) 7.8  3.6  8.8  Cost of sales 1.4  2.6  8.1  8.0 
Commodity contracts 0.0  —  (0.1) —  Cost of sales 0.0  —  (0.0) — 
Total $ (3.0) $ 7.8  $ 3.5  $ 8.8    $ 1.3  $ 2.5  $ 7.7  $ 7.6 

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 26,
2020		 Sep 28,
2019		 Sep 26,
2020		 Sep 28,
2019
Interest rate contracts Interest expense $ 0.2  $ 0.3  $ 0.5  $ 0.1 

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 26, 2020 Sep 28, 2019 Sep 26, 2020 Sep 28, 2019
Foreign exchange contracts Cost of sales $ (0.5) $ 3.2  $ 2.9  $ 3.9 
Foreign exchange contracts Other expense, net (0.1) (1.3) 1.1  (0.7)
Total   $ (0.6) $ 1.9  $ 4.0  $ 3.2 
    
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 26, 2020, December 31, 2019 and September 28, 2019, the fair value of the Company’s long-term debt, including short-term debt and current maturities, was approximately $1,192.4 million, $1,214.6 million and $1,233.9 million, respectively, and was determined using Level 1 and Level 2 inputs described in Note 7 in the Notes to Consolidated Financial Statements in the 2019 Form 10-K. The carrying value of long-term debt, including short-term debt and current maturities, was $1,082.9 million, $1,131.6 million and $1,151.8 million as of September 26, 2020, December 31, 2019 and September 28, 2019, respectively.