|6 Months Ended|
Jul. 01, 2017
|Derivative Instruments and Hedging Activities Disclosure [Abstract]|
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 2016 Form 10-K for further details regarding the Company's financial instruments and hedging policies.
Foreign Currency Derivatives. Forward exchange contracts outstanding at July 1, 2017, December 31, 2016 and July 2, 2016 had notional contract values of $309.3 million, $263.7 million and $237.8 million, respectively. There were no option contracts outstanding at July 1, 2017. Option contracts outstanding at December 31, 2016 and July 2, 2016 had notional contract values of $30.4 million and $55.0 million, respectively. The forward contracts outstanding at July 1, 2017 mature during 2017 and 2018 and mainly relate to the Euro, Japanese yen, Canadian dollar, Australian dollar, Swedish krona, Brazilian real, British pound, Mexican peso, Norwegian krone, Hungarian forint and New Zealand dollar. As of July 1, 2017, the Company estimates that during the next 12 months, it will reclassify approximately $0.9 million of net losses (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 the Company's long-term debt from fixed to floating rate debt. As of July 1, 2017, December 31, 2016 and July 2, 2016, 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.
As of July 1, 2017, December 31, 2016 and July 2, 2016, the Company had $4.0 million, $4.5 million and $5.1 million, respectively, of net deferred losses associated with all settled forward-starting interest rate swaps, which were included in Accumulated other comprehensive loss. As of July 1, 2017, the Company estimates that during the next 12 months, it will reclassify approximately $1.1 million of net losses resulting from settled forward-starting interest rate swaps from Accumulated other comprehensive loss to Interest expense.
Commodity Price Derivatives. There were no commodity swap contracts outstanding at July 1, 2017 and December 31, 2016. As of July 2, 2016, the notional value of commodity swap contracts outstanding was $4.9 million. The amount of gain or loss associated with the change in fair value of these instruments is either recorded through earnings each period as incurred or, if designated as cash flow hedges, 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 July 1, 2017, December 31, 2016 and July 2, 2016, the fair values of the Company’s derivative instruments were:
The effect of derivative instruments on the Condensed Consolidated Statements of Comprehensive Income for the three months and six months ended July 1, 2017 and July 2, 2016 was:
Fair Value of Other Financial Instruments. The carrying values of the Company’s short-term financial instruments, including cash and cash equivalents, accounts and notes receivable and short-term debt approximate their fair values because of the short maturity of these instruments. At July 1, 2017, December 31, 2016 and July 2, 2016, the fair value of the Company’s long-term debt was approximately $499.3 million, $498.5 million and $472.8 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 2016 Form 10-K . The carrying value of long-term debt, including current maturities, was $443.1 million, $444.6 million and $447.3 million as of July 1, 2017, December 31, 2016 and July 2, 2016, respectively.
The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.
Reference 1: http://www.xbrl.org/2003/role/presentationRef