Quarterly report pursuant to Section 13 or 15(d)

Financial Instruments

v3.21.1
Financial Instruments
 3 Months Ended
Apr. 03, 2021
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 2020 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 April 3, 2021, December 31, 2020 and March 28, 2020, the notional value of commodity swap contracts outstanding were $14.0 million, $10.0 million and $1.2 million, respectively, and the contracts mature through 2022. 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 April 3, 2021, the Company estimates that during the next 12 months it will reclassify approximately $2.5 million in net gains (based on current prices) from Accumulated other comprehensive loss to Cost of sales.

Foreign Currency Derivatives. Forward exchange contracts outstanding at April 3, 2021, December 31, 2020 and March 28, 2020 had notional contract values of $493.9 million, $395.9 million and $281.1 million, respectively. There were no option contracts outstanding at either April 3, 2021 or December 31, 2020. Option contracts outstanding at March 28, 2020 had
a notional contract value of $17.8 million. The forward contracts outstanding at April 3, 2021 mature through 2022 and mainly relate to the Euro, Australian dollar, Japanese yen, and Canadian dollar. As of April 3, 2021, the Company estimates that during the next 12 months, it will reclassify approximately $4.6 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. There are no outstanding fixed-to-floating interest rate swaps as of April 3, 2021, December 31, 2020 or March 28, 2020.

During the first quarter of 2021, the Company entered into forward-starting interest rate swaps to hedge the interest rate risk associated with anticipated debt issuances. As of April 3, 2021, the outstanding forward-starting interest rate swaps had a total notional contract value of $150.0 million. As of April 3, 2021, the Company had $8.6 million of net deferred gains associated with forward-starting interest rate swaps and as of December 31, 2020 and March 28, 2020, the Company had $1.4 million and $1.8 million, respectively, of net deferred losses associated with previously settled forward-starting interest rate swaps. These forward-starting interest rate swaps were designated as cash flow hedges with gains and losses included in Accumulated other comprehensive loss. As of April 3, 2021, 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 April 3, 2021, December 31, 2020 and March 28, 2020, the fair values of the Company’s derivative instruments were:
(in millions) Fair Value
Asset Derivatives April 3, 2021 December 31, 2020 March 28, 2020
Derivatives Designated as Cash Flow Hedges
Foreign exchange contracts $ 3.3  $ 1.3  $ 9.7 
Commodity contracts
 2.5  0.9  — 
Interest rate contracts 9.8  —  — 
Total
 $ 15.6  $ 2.2  $ 9.7 
Other Hedging Activity
Foreign exchange contracts $ 0.2  $ 0.0  $ 2.6 
Liability Derivatives
Derivatives Designated as Cash Flow Hedges
Foreign exchange contracts $ 6.9  $ 11.3  $ 3.3 
Commodity contracts
 —  —  0.1 
Total
 $ 6.9  $ 11.3  $ 3.4 
Other Hedging Activity
Foreign exchange contracts $ 0.4  $ 0.7  $ 0.2 
As of April 3, 2021, December 31, 2020 and March 28, 2020, asset derivatives are included within Prepaid expenses and other and Other long-term assets and liability derivatives are included within Accrued expenses and Other long-term liabilities, in the Condensed Consolidated Balance Sheets.

The effect of derivative instruments on the Condensed Consolidated Statements of Comprehensive Income for the three months ended April 3, 2021 and March 28, 2020 are as shown in the tables below.

Gain (loss) on derivatives recognized in Accumulated other comprehensive loss was as follows:

(in millions)
Derivatives Designated as Cash Flow Hedging Instruments April 3, 2021 March 28, 2020
Interest rate contracts $ 9.8  $ — 
Foreign exchange contracts 2.6  9.5 
Commodity contracts 2.1  (0.1)
Total $ 14.5  $ 9.4 

The amount of Gain (loss) reclassified from Accumulated other comprehensive loss into earnings was as follows:
(in millions)
Derivatives Designated as Cash Flow Hedging Instruments Location of Gain (Loss) April 3, 2021 March 28, 2020
Interest rate contracts Interest expense $ (0.1) $ (0.1)
Foreign exchange contracts Cost of sales (3.1) 2.7 
Commodity contracts Cost of sales 0.3  — 
Total $ (2.9) $ 2.6 
Derivatives Designated as Fair Value Hedging Instruments
Interest rate contracts Interest expense $ 0.2  $ 0.2 
Other Hedging Activity
Foreign exchange contracts Cost of sales $ 1.8  $ 4.8 
Foreign exchange contracts Other (expense) income, net (2.2) 1.1 
Total $ (0.4) $ 5.9 
    
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 April 3, 2021, December 31, 2020 and March 28, 2020, the fair value of the Company’s long-term debt, including short-term debt and current maturities, was approximately $1,063.2 million, $1,062.3 million and $1,503.0 million, respectively, and was determined using Level 1 and Level 2 inputs described in Note 7 to the Notes to Consolidated Financial Statements in the 2020 Form 10-K. The carrying value of long-term debt, including short-term debt and current maturities, was $965.2 million, $972.1 million and $1,516.6 million as of April 3, 2021, December 31, 2020 and March 28, 2020, respectively.