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HEDGING ACTIVITIES | 9 Months Ended
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Sep. 29, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
HEDGING ACTIVITIES | HEDGING ACTIVITIES The Company manages interest rate risk, commodity price risk, and foreign currency risk related to foreign currency denominated transactions and investments in foreign subsidiaries. Depending on the circumstances, the Company may manage these risks by utilizing derivative financial instruments. Some derivative financial instruments are marked to market and recorded in the Company's consolidated statements of earnings, while others may be accounted for as fair value, cash flow, or net investment hedges. Derivative financial instruments have credit and market risk. The Company manages these risks of derivative instruments by monitoring limits as to the types and degree of risk that can be taken, and by entering into transactions with counterparties who are recognized, stable multinational banks. Fair value of derivative instruments at September 29, 2018 and December 30, 2017 are as follows:
Derivatives designated as hedging instruments: | Balance sheet location |  | September 29, 2018 |  | December 30, 2017
Commodity forward contracts | Prepaid expenses and other assets |  | $ | 854 |  |  | $ | — |
Foreign currency forward contracts | Prepaid expenses and other assets |  | 4,534 |  |  | — |
Foreign currency forward contracts | Accrued expenses |  | — |  |  | (826 | )
Cross currency swap contracts | Prepaid expenses and other assets |  | 206 |  |  | — |
Cross currency swap contracts | Accrued expenses |  | (2,715 | ) |  | — |
|  |  | $ | 2,879 |  |  | $ | (826 | )
Gains (losses) on derivatives recognized in the condensed consolidated statements of earnings for the thirteen and thirty-nine weeks ended September 29, 2018 and September 30, 2017 are as follows:
|  |  | Thirteen weeks ended |  | Thirty-nine weeks ended
Derivatives designated as hedging instruments: | Statements of earnings location |  | September 29, 2018 |  | September 30, 2017 |  | September 29, 2018 |  | September 30, 2017
Commodity forward contracts | Product cost of sales |  | $ | 717 |  |  | $ | — |  |  | $ | 717 |  |  | $ | — |
Foreign currency forward contracts | Other income (expense) |  | 230 |  |  | — |  |  | 230 |  |  | — |
Interest rate hedges | Interest expense |  | (395 | ) |  | (19 | ) |  | (439 | ) |  | (56 | )
Cross currency swap contracts | Interest expense |  | 206 |  |  | — |  |  | 206 |  |  | — |
|  |  | $ | 758 |  |  | $ | (19 | ) |  | $ | 714 |  |  | $ | (56 | )
Cash Flow Hedges In 2018, the Company entered into steel hot rolled coil (HRC) forward contracts which qualified as a cash flow hedge of the variability in the cash flows attributable to future steel purchases. The forward contracts have a notional amount of $8,469 for the purchase of 3,500 short tons for each month from July 2018 to September 2018 and a notional amount of $15,563 for the purchase of 6,500 short tons for each month from October 2018 to December 2018. The gain/(loss) realized upon settlement is recorded in product cost of sales in the condensed consolidated statements of earnings over average inventory turns. (8) HEDGING ACTIVITIES (Continued) On June 19, 2018, the Company issued and sold $200,000 aggregate principal amount of the Company’s 5.00% senior notes due 2044 and $55,000 aggregate principal amount of the Company’s 5.25% senior notes due 2054. During the second quarter of 2018, the Company executed contracts to hedge the risk of potential fluctuations in the treasury rates on the 2044 Notes and 2054 Notes which would change the amount of net proceeds received from the debt offering. These contracts had a combined notional amount of $175,000. On June 8, 2018, these contracts were settled with the Company paying $2,467 to the counterparties which was recorded in OCI and will be amortized as an increase to interest expense over the term of the debt. Due to the retirement of the 2020 bonds in July 2018, the Company wrote off the remaining $411 unamortized loss on the related cash flow hedge. Net Investment Hedges The Company previously executed two six-month foreign currency forward contracts which qualified as net investment hedges, in order to mitigate foreign currency risk on the grinding media business that is denominated in both Australian dollars and British pounds. Due to the sale of the grinding media business in the second quarter of 2018, the Company reclassified the net investment hedge loss of $1,621 ($1,215 after tax) from OCI to loss from divestiture of grinding media business in the Statements of Earnings. In the second quarter of 2018, the Company entered into two foreign currency forward contracts to mitigate foreign currency risk of the Company's investment in its Australian dollar and Euro denominated businesses. The forward contracts, which qualify as net investment hedges, have a maturity date of May 2020 and notional amounts to sell Australian dollars and Euro to receive $100,000 and $50,000, respectively. Effective in the third quarter of 2018, in conjunction with the adoption of recently issued hedging accounting guidance (see Note 1 for further information), the Company elected as an accounting policy to change its method of assessing effectiveness for all net investment hedges from the forward method to the spot method. As a result of this election, all existing and future net investment hedges will be accounted for under the spot method. As an additional accounting policy election to be applied to similar hedges under this new standard, the initial value of any component excluded from the assessment of effectiveness will be recognized in income or expense using a systematic and rational method over the life of the hedging instrument. Due to the change in the method used to assess effectiveness from the forward to the spot method in the third quarter of 2018, the Euro and Australian dollar net investment hedges were de-designated. The forward contracts were then re-designated as net investment hedges under the spot method and the initial excluded component value related to the Australian dollar and Euro net investment hedges were $538 and $3,190, respectively, which the Company has elected to amortize in other income (expense) in the condensed consolidated statements of earnings using the straight-line method over the remaining term of the contracts. On August 24, 2018, the Company entered into three fixed-for-fixed cross currency swaps (“CCS”), swapping U.S. dollar principal and interest payments on a portion of its 5.00% senior unsecured notes due 2044 for Danish krone (DKK) and Euro denominated payments. The CCS were entered into in order to mitigate foreign currency risk on the Company's Euro and DKK investments and to reduce interest expense. Interest is exchanged twice per year on April 1 and October 1. (8) HEDGING ACTIVITIES (Continued) Key terms of the three CCS are as follows:
Currency | Notional Amount | Termination Date | Swapped Interest Rate | Set Settlement Amount
Danish Kroner, DKK | $ | 60,000 |  | October 1, 2023 | 2.52% | DKK 386,118
Euro | $ | 25,000 |  | October 1, 2020 | 2.14% | €21,580
Euro | $ | 10,000 |  | October 1, 2021 | 2.29% | €8,631
The Company designated the full notional amount of the three CCS ($95,000) as a hedge of the net investment in certain Danish and European subsidiaries under the spot method, with all changes in the fair value of the CCS that are included in the assessment of effectiveness (changes due to spot foreign exchange rates) are recorded as cumulative foreign currency translation within OCI, and will remain in OCI until either the sale or substantially complete liquidation of the related subsidiaries. Net interest receipts will be recorded as a reduction of interest expense over the life of the CCS.

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- Definition 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. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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