Derivative Instruments | 9 Months Ended |
Sep. 28, 2013 |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' |
Derivative Instruments | ' |
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, 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 condensed consolidated balance sheets. 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 September 28, 2013. |
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. All derivative instruments used by the Company impact operating cash flows. |
At September 28, 2013, the Company had $(1.8) million, net of tax, of derivative losses on closed hedge instruments in Accumulated Other Comprehensive Income (Loss) (“AOCI”) that will be realized in earnings when the hedged items impact earnings. At December 29, 2012, the Company had $(0.3) million, net of tax, of derivative losses on closed hedge instruments in AOCI that was realized in earnings when the hedged items impacted earnings. |
As of September 28, 2013, the Company had outstanding the following commodity forward contracts (with maturities extending through December 2014) to hedge forecasted purchases of commodities (notional amounts expressed in terms of the dollar value of the hedged item in millions): |
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| Notional | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amount | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Copper | $ | 130.5 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Aluminum | 10 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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As of September 28, 2013, the Company had outstanding the following currency forward contracts (with maturities extending through December 2015) to hedge forecasted foreign currency cash flows (in millions): |
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| Notional | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amount | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mexican Peso | $ | 219.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Chinese Renminbi | 132.7 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Indian Rupee | 38 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Thai Baht | 5.9 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Australian Dollar | 1.7 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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As of September 28, 2013, 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 September 28, 2013 and December 29, 2012 were (in millions): |
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| September 28, 2013 | | | | | | | | | | | | | | | | |
| Prepaid | | Other | | Hedging | | Hedging | | | | | | | | | | | | | | | | |
Expenses and Other Current Assets | Noncurrent | Obligations | Obligations | | | | | | | | | | | | | | | | |
| Assets | (current) | | | | | | | | | | | | | | | | | |
Designated as hedging instruments: | | | | | | | | | | | | | | | | | | | | | | | |
Interest rate swap contracts | $ | — | | | $ | — | | | $ | 7.6 | | | $ | 17.4 | | | | | | | | | | | | | | | | | |
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Foreign exchange contracts | 7.3 | | | 0.9 | | | 3.2 | | | 2.2 | | | | | | | | | | | | | | | | | |
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Commodity contracts | 2.8 | | | 0.1 | | | 4.6 | | | 0.1 | | | | | | | | | | | | | | | | | |
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Not designated as hedging instruments: | | | | | | | | | | | | | | | | | | | | | | | |
Commodity contracts | 0.2 | | | — | | | 0.3 | | | — | | | | | | | | | | | | | | | | | |
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Total Derivatives | $ | 10.3 | | | $ | 1 | | | $ | 15.7 | | | $ | 19.7 | | | | | | | | | | | | | | | | | |
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| December 29, 2012 | | | | | | | | | | | | | | | | |
| Prepaid | | Other | | Hedging | | Hedging | | | | | | | | | | | | | | | | |
Expenses and Other Current Assets | Noncurrent | Obligations | Obligations | | | | | | | | | | | | | | | | |
| Assets | (current) | | | | | | | | | | | | | | | | | |
Designated as hedging instruments: | | | | | | | | | | | | | | | | | | | | | | | |
Interest rate swap contracts | $ | — | | | $ | — | | | $ | — | | | $ | 35.4 | | | | | | | | | | | | | | | | | |
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Foreign exchange contracts | 6.8 | | | 2.3 | | | 4.6 | | | 0.3 | | | | | | | | | | | | | | | | | |
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Commodity contracts | 3.6 | | | 0.2 | | | 1.2 | | | — | | | | | | | | | | | | | | | | | |
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Not designated as hedging instruments: | | | | | | | | | | | | | | | | | | | | | | | |
Commodity contracts | 0.6 | | | — | | | 0.5 | | | — | | | | | | | | | | | | | | | | | |
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Total Derivatives | $ | 11 | | | $ | 2.5 | | | $ | 6.3 | | | $ | 35.7 | | | | | | | | | | | | | | | | | |
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The effect of derivative instruments on the Condensed Consolidated Statements of Comprehensive Income (pre-tax) for the three and nine months ended September 28, 2013 and September 29, 2012, was (in millions): |
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Derivatives Designated as Cash Flow Hedging Instruments |
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| Three Months Ended |
| September 28, 2013 | | September 29, 2012 |
| Commodity | | Currency | | Interest | | Total | | Commodity | | Currency | | Interest | | Total |
Forwards | Forwards | Rate | Forwards | Forwards | Rate |
| | Swaps | | | Swaps |
Gain (loss) recognized in Other Comprehensive Income (Loss) | $ | 10.3 | | | $ | (2.4 | ) | | $ | (0.9 | ) | | $ | 7 | | | $ | 9.2 | | | $ | 8.6 | | | $ | (1.4 | ) | | $ | 16.4 | |
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Amounts reclassified from Other Comprehensive Income (Loss): | | | | | | | | | | | | | | | |
Loss recognized in Net Sales | — | | | (0.1 | ) | | — | | | (0.1 | ) | | — | | | (0.2 | ) | | — | | | (0.2 | ) |
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Gain (loss) recognized in Cost of Sales | (4.9 | ) | | 1.7 | | | — | | | (3.2 | ) | | (2.6 | ) | | (2.7 | ) | | — | | | (5.3 | ) |
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Loss recognized in Interest Expense | — | | | — | | | (3.2 | ) | | (3.2 | ) | | — | | | — | | | (2.4 | ) | | (2.4 | ) |
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| Nine Months Ended |
| September 28, 2013 | | September 29, 2012 |
| Commodity | | Currency | | Interest | | Total | | Commodity | | Currency | | Interest | | Total |
Forwards | Forwards | Rate | Forwards | Forwards | Rate |
| | Swaps | | | Swaps |
Gain (Loss) recognized in Other Comprehensive Income (Loss) | $ | (12.5 | ) | | $ | 3.9 | | | $ | 0.8 | | | $ | (7.8 | ) | | $ | 13 | | | $ | 23.7 | | | $ | (5.6 | ) | | $ | 31.1 | |
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Amounts reclassified from Other Comprehensive Income (Loss): | | | | | | | | | | | | | | | | |
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Loss recognized in Net Sales | — | | | (0.6 | ) | | — | | | (0.6 | ) | | — | | | (1.2 | ) | | — | | | (1.2 | ) |
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Gain (loss) recognized in Cost of Sales | (4.5 | ) | | 5.8 | | | — | | | 1.3 | | | (9.1 | ) | | (3.1 | ) | | — | | | (12.2 | ) |
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Loss recognized in Interest Expense | — | | | — | | | (9.6 | ) | | (9.6 | ) | | — | | | — | | | (9.2 | ) | | (9.2 | ) |
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The ineffective portion of hedging instruments recognized during the three and nine months ended September 28, 2013 and September 29, 2012 was immaterial. |
Derivatives Not Designated as Cash Flow Hedging Instruments (in millions): |
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| Three Months Ended | | | | | | | | | | | | | | | | |
| September 28, | | September 29, | | | | | | | | | | | | | | | | |
2013 | 2012 | | | | | | | | | | | | | | | | |
| Commodity Forwards | | Currency Forwards | | Commodity Forwards | | Currency Forwards | | | | | | | | | | | | | | | | |
Gain (loss) recognized in Cost of Sales | $ | 0.1 | | | $ | 0.2 | | | $ | 0.4 | | | $ | (0.5 | ) | | | | | | | | | | | | | | | | |
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| Nine Months Ended | | | | | | | | | | | | | | | | |
| September 28, | | September 29, | | | | | | | | | | | | | | | | |
2013 | 2012 | | | | | | | | | | | | | | | | |
| Commodity Forwards | | Currency Forwards | | Commodity Forwards | | Currency Forwards | | | | | | | | | | | | | | | | |
Gain (loss) recognized in Cost of Sales | $ | (0.1 | ) | | $ | 0.6 | | | $ | 0.1 | | | $ | 0.1 | | | | | | | | | | | | | | | | | |
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The net AOCI hedging component balance of $(16.7) million loss at September 28, 2013 includes $(6.6) million of net current deferred losses expected to be realized in the next twelve months. |
The Company's commodity and currency derivative contracts are subject to master netting agreements with the respective counterparties which allow the Company to net settle transactions with a single net amount payable by one party to another party. The Company has elected to present the derivative assets and derivative liabilities on the Condensed Consolidated Balance Sheets on a gross basis for the periods ended September 28, 2013 and December 29, 2012. |
The following table presents the derivative assets and derivative liabilities presented on a net basis under enforceable master netting agreements (in millions): |
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| September 28, 2013 | | | | | | | | | | | | | | | | | | | | |
| Gross Amounts as Presented in the Condensed Consolidated Balance Sheet | | Derivative Contract Amounts Subject to Right of Offset | | Derivative Contracts as Presented on a Net Basis | | | | | | | | | | | | | | | | | | | | |
Prepaid Expenses and Other Current Assets: | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Currency Contracts | $ | 7.3 | | | $ | (0.5 | ) | | $ | 6.8 | | | | | | | | | | | | | | | | | | | | | |
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Derivative Commodity Contracts | 3 | | | (3.0 | ) | | — | | | | | | | | | | | | | | | | | | | | | |
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Other Noncurrent Assets: | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Currency Contracts | 0.9 | | | (0.2 | ) | | 0.7 | | | | | | | | | | | | | | | | | | | | | |
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Derivative Commodity Contracts | 0.1 | | | (0.1 | ) | | — | | | | | | | | | | | | | | | | | | | | | |
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Hedging Obligations Current: | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Currency Contracts | 3.2 | | | (0.5 | ) | | 2.7 | | | | | | | | | | | | | | | | | | | | | |
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Derivative Commodity Contracts | 4.9 | | | (3.0 | ) | | 1.9 | | | | | | | | | | | | | | | | | | | | | |
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Hedging Obligations: | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Currency Contracts | 2.2 | | | (0.2 | ) | | 2 | | | | | | | | | | | | | | | | | | | | | |
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Derivative Commodity Contracts | 0.1 | | | (0.1 | ) | | — | | | | | | | | | | | | | | | | | | | | | |
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| 29-Dec-12 | | | | | | | | | | | | | | | | | | | | |
| Gross Amounts as Presented in the Condensed Consolidated Balance Sheet | | Derivative Contract Amounts Subject to Right of Offset | | Derivative Contracts as Presented on a Net Basis | | | | | | | | | | | | | | | | | | | | |
Prepaid Expenses and Other Current Assets: | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Currency Contracts | $ | 6.8 | | | $ | (1.5 | ) | | $ | 5.3 | | | | | | | | | | | | | | | | | | | | | |
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Derivative Commodity Contracts | 4.2 | | | (1.3 | ) | | 2.9 | | | | | | | | | | | | | | | | | | | | | |
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Other Noncurrent Assets: | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Currency Contracts | 2.3 | | | — | | | 2.3 | | | | | | | | | | | | | | | | | | | | | |
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Derivative Commodity Contracts | 0.2 | | | — | | | 0.2 | | | | | | | | | | | | | | | | | | | | | |
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Hedging Obligations Current: | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Currency Contracts | 4.6 | | | (1.6 | ) | | 3 | | | | | | | | | | | | | | | | | | | | | |
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Derivative Commodity Contracts | 1.7 | | | (1.2 | ) | | 0.5 | | | | | | | | | | | | | | | | | | | | | |
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Hedging Obligations: | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Currency Contracts | 0.3 | | | — | | | 0.3 | | | | | | | | | | | | | | | | | | | | | |
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