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Financial Instruments and Derivative Instruments | 3 Months Ended
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Mar. 29, 2020
Financial Instruments and Derivative Instruments |
Financial Instruments and Derivative Instruments | 5. Financial Instruments and Derivative Instruments ​ Fair Value ​ The carrying amounts of cash and cash equivalents, trade receivables and trade payables approximate fair value because of the short maturity of these financial instruments. ​ The fair value of the Company’s 5.05% senior notes due 2020 is based on quoted market prices of similar notes (level 2). The fair value of the Company’s borrowings outstanding under the Credit Agreement and the Company’s variable rate debt approximates its carrying value. The carrying amount and the estimated fair market value of the Company’s long-term debt, including the current portion, are as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 29, | ​ | December 31,
​ |  | 2020 |  | 2019
​ | ​ | (in millions)
Carrying amount | ​ | $ | 380.0 | ​ | $ | 310.0
Estimated fair value | ​ | $ | 380.7 | ​ | $ | 310.5
​ Financial Instruments ​ The Company measures certain financial assets and liabilities at fair value on a recurring basis, including deferred compensation plan assets and related liabilities, redeemable financial instruments, and derivatives. The fair values of these financial assets and liabilities were determined using the following inputs at March 29, 2020 and December 31, 2019: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fair Value Measurement at March 29, 2020 Using:
​ | ​ | ​ | ​ | ​ | Quoted Prices in Active | ​ | Significant Other | ​ | Significant
​ | ​ | ​ | ​ | ​ | Markets for Identical | ​ | Observable | ​ | Unobservable
​ | ​ | ​ | ​ | ​ | Assets | ​ | Inputs | ​ | Inputs
​ |  | Total |  | (Level 1) |  | (Level 2) |  | (Level 3)
​ | ​ | (in millions)
Assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Plan asset for deferred compensation(1) | ​ | $ | 2.1 | ​ | $ | 2.1 | ​ | $ | — | ​ | $ | —
Designated foreign currency hedges (4) | ​ | $ | 0.6 | ​ | $ | — | ​ | $ | 0.6 | ​ | $ | —
Total assets | ​ | $ | 2.7 | ​ | $ | 2.1 | ​ | $ | 0.6 | ​ | $ | —
Liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate swaps (3) | ​ | $ | 1.0 | ​ | $ | — | ​ | $ | 1.0 | ​ | $ | —
Plan liability for deferred compensation(2) | ​ | $ | 2.1 | ​ | $ | 2.1 | ​ | $ | — | ​ | $ | —
Total liabilities | ​ | $ | 3.1 | ​ | $ | 2.1 | ​ | $ | 1.0 | ​ | $ | —
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fair Value Measurements at December 31, 2019 Using:
​ | ​ | ​ | ​ | ​ | Quoted Prices in Active | ​ | Significant Other | ​ | Significant
​ | ​ | ​ | ​ | ​ | Markets for Identical | ​ | Observable | ​ | Unobservable
​ |  | ​ | ​ | ​ | Assets | ​ | Inputs | ​ | Inputs
​ | ​ | Total |  | (Level 1) |  | (Level 2) |  | (Level 3)
​ | ​ | (in millions)
Assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Plan asset for deferred compensation(1) | ​ | $ | 2.5 | ​ | $ | 2.5 | ​ | $ | — | ​ | $ | —
Interest rate swaps (1) | ​ | $ | 1.2 | ​ | $ | — | ​ | $ | 1.2 | ​ | $ | —
Total assets | ​ | $ | 3.7 | ​ | $ | 2.5 | ​ | $ | 1.2 | ​ | $ | —
Liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Plan liability for deferred compensation(2) | ​ | $ | 2.5 | ​ | $ | 2.5 | ​ | $ | — | ​ | $ | —
Designated foreign currency hedge(3) | ​ | $ | 0.2 | ​ | $ | — | ​ | $ | 0.2 | ​ | $ | —
Total liabilities | ​ | $ | 2.7 | ​ | $ | 2.5 | ​ | $ | 0.2 | ​ | $ | —
(1) | Included on the Company’s consolidated balance sheet in other assets (other, net).
​
(2) | Included on the Company’s consolidated balance sheet in accrued compensation and benefits.
​ (3)Included on the Company’s consolidated balance sheet in accrued expenses and other liabilities. ​ (4)Included on the Company’s consolidated balance sheet in other current assets (prepaids expenses and other current assets). ​ Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase and consist primarily of money market funds, for which the carrying amount is a reasonable estimate of fair value. ​ The Company uses financial instruments from time to time to enhance its ability to manage risk, including foreign currency and commodity pricing exposures, which exist as part of its ongoing business operations. The use of derivatives exposes the Company to counterparty credit risk for nonperformance and to market risk related to changes in currency exchange rates and commodity prices. The Company manages its exposure to counterparty credit risk through diversification of counterparties. The Company’s counterparties in derivative transactions are substantial commercial banks with significant experience using such derivative instruments. The impact of market risk on the fair value and cash flows of the Company’s derivative instruments is monitored and the Company restricts the use of derivative financial instruments to hedging activities. The Company does not enter into contracts for trading purposes nor does the Company enter into any contracts for speculative purposes. The use of derivative instruments is approved by senior management under written guidelines. ​ Interest Rate Swaps ​ On February 12, 2016, the Company entered into a Credit Agreement (the “Credit Agreement”) pursuant to which it received a funding commitment under a Term Loan of $300 million, of which the entire $300 million has been drawn on, and a Revolving Commitment (“Revolver”) of $500 million, of which $80.0 million had been drawn as of March 29, 2020. Both facilities mature on February 12, 2021. For each facility, the Company can choose either an Adjusted LIBOR or Alternative Base Rate (“ABR”). Accordingly, the Company’s earnings and cash flows are exposed to interest rate risk from changes in Adjusted LIBOR. In order to manage the Company’s exposure to changes in cash flows attributable to fluctuations in LIBOR-indexed interest payments related to the Company’s floating rate debt, the Company entered into two interest rate swaps. For each interest rate swap, the Company receives the three-month USD-LIBOR subject to a 0% floor, and pays a fixed rate of 1.31375% on a notional amount of $225.0 million. The swaps mature on February 12, 2021. The Company formally documents the hedge relationships at hedge inception to ensure that its interest rate swaps qualify for hedge accounting. On a quarterly basis, the Company assesses whether the interest rate swaps are highly effective in offsetting changes in the cash flow of the hedged item. The Company does not hold or issue interest rate swaps for trading purposes. The swaps are designated as cash flow hedges. For the first quarters ended March 29, 2020, and March 31, 2019, respectively, losses of $1.6 million and $1.3 million were recorded in Accumulated Other Comprehensive Loss to recognize the effective portion of the fair value of interest rate swaps that qualify as a cash flow hedge. Refer to Note 10 of Notes to the Consolidated Financial Statements for additional information about the Company’s interest rate swaps. ​ Designated Foreign Currency Hedges ​ The Company’s foreign subsidiaries transact most business, including certain intercompany transactions, in foreign currencies. Such transactions are principally purchases or sales of materials. The Company has exposure to a number of foreign currencies, including the Canadian dollar, the euro, and the Chinese yuan. The Company uses a layering methodology, whereby at the end of each quarter, the Company enters into forward exchange contracts hedging Canadian dollar to U.S. dollar, which hedge approximately 70% to 80% of the forecasted intercompany purchase transactions between one of the Company’s Canadian subsidiaries and the Company’s U.S. operating subsidiaries for the next twelve months. The Company uses a similar layering methodology when entering into forward exchange contracts hedging U.S. dollar to the Chinese yuan, which hedge up to 60% of the forecasted intercompany sales transactions between one of the Company’s Chinese subsidiaries and one of the Company’s U.S. operating subsidiaries for the next twelve months. As of March 29, 2020, all designated foreign exchange hedge contracts were cash flow hedges under ASC 815, Derivatives and Hedging ("ASC 815"). The Company records the effective portion of the designated foreign currency hedge contracts in other comprehensive income until inventory turns and is sold to a third-party. Once the third-party transaction associated with the hedged forecasted transaction occurs, the effective portion of any related gain or loss on the designated foreign currency hedge will be reclassified into earnings within cost of goods sold. In the event the notional amount of the derivatives exceeds the forecasted intercompany purchases for a given month, the excess hedge position will be attributed to the following month’s forecasted purchases. However, if the following month’s forecasted purchases cannot absorb the excess hedge position from the current month, the effective portion of the hedge recorded in other comprehensive income will be reclassified to earnings. ​ The notional amount outstanding as of March 29, 2020 for the Canadian dollar to U.S. dollar contracts was $13.5 million. The fair value of the Company’s designated foreign hedge contracts outstanding as of March 29, 2020 was an asset balance of $0.6 million. All outstanding forward exchange contracts for the U.S. dollar to the Chinese yuan have been settled as of March 29, 2020. As of March 29, 2020, the amount expected to be reclassified into cost of goods sold from other comprehensive income in the next twelve months is a gain of $0.2 million.

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- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
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- References No definition available. + Details
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