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Financial Instruments | 9 Months Ended
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Sep. 26, 2015
Fair Value Disclosures [Abstract] |
Financial Instruments | Financial Instruments Debt Instruments The carrying values of the Company’s debt instruments vary from their fair values. The fair values were determined by reference to the quoted market prices of these securities (Level 2 input based on the GAAP fair value hierarchy). As of September 26, 2015, the aggregate carrying value of the Company’s Notes and Term Loan Facility was $1,971.9 million, as compared to an estimated aggregate fair value of $1,968.7 million. As of December 31, 2014, the aggregate carrying value of the Company's Notes was $1,718.7 million, as compared to an estimated aggregate fair value of $1,749.3 million. Accounts Receivable Factoring In the fourth quarter of 2014, one of the Company's European subsidiaries entered into an uncommitted factoring agreement, which provides for aggregate purchases of specified customer accounts of up to €200 million. As of September 26, 2015, there were no factored receivables outstanding. The Company cannot provide any assurances that this factoring facility will be available or utilized in the future. Derivative Instruments and Hedging Activities The Company has used derivative financial instruments, including forwards, futures, options, swaps and other derivative contracts to reduce the effects of fluctuations in foreign exchange rates, interest rates and commodity prices and the resulting variability of the Company’s operating results. The Company is not a party to leveraged derivatives. The Company’s derivative financial instruments are subject to master netting arrangements that provide for the net settlement of contracts, by counterparty, in the event of default or termination. On the date that a derivative contract is entered into, the Company designates the derivative as either (1) a hedge of the exposure to changes in the fair value of a recognized asset or liability or of an unrecognized firm commitment (a fair value hedge), (2) a hedge of the exposure of a forecasted transaction or of the variability in the cash flows of a recognized asset or liability (a cash flow hedge) or (3) a hedge of a net investment in a foreign operation (a net investment hedge). For a fair value hedge, both the effective and ineffective portions of the change in the fair value of the derivative are recorded in earnings and reflected in the consolidated statement of income on the same line as the gain or loss on the hedged item attributable to the hedged risk. For a cash flow hedge, the effective portion of the change in the fair value of the derivative is recorded in accumulated other comprehensive loss in the consolidated balance sheet. When the underlying hedged transaction is realized, the gain or loss included in accumulated other comprehensive loss is recorded in earnings and reflected in the consolidated statement of income on the same line as the gain or loss on the hedged item attributable to the hedged risk. For a net investment hedge, the effective portion of the change in the fair value of the derivative is recorded in cumulative translation adjustment, which is a component of accumulated other comprehensive loss in the consolidated balance sheet. In addition, for both cash flow and net investment hedges, changes in the fair value of the derivative that are excluded from the Company’s effectiveness assessments and the ineffective portion of changes in the fair value of the derivative are recorded in earnings and reflected in the consolidated statement of income as other expense, net. Foreign Exchange The Company uses forwards, swaps and other derivative contracts to reduce the effects of fluctuations in foreign exchange rates on known foreign currency exposures. Gains and losses on the derivative instruments are intended to offset gains and losses on the hedged transaction in an effort to reduce exposure to fluctuations in foreign exchange rates. The principal currencies hedged by the Company include the Mexican peso, various European currencies, the Thai baht, the Canadian dollar and the Chinese renminbi. As of September 26, 2015 and December 31, 2014, contracts designated as cash flow hedges with $934.7 million and $1,160.9 million, respectively, of notional amount were outstanding with maturities of less than eighteen months. As of September 26, 2015 and December 31, 2014, the fair value of these contracts was approximately ($56.7) million and ($37.7) million, respectively. As of September 26, 2015 and December 31, 2014, other foreign currency derivative contracts that did not qualify for hedge accounting with $895.7 million and $170.1 million, respectively, of notional amount were outstanding. These foreign currency derivative contracts consist principally of hedges of cash transactions of up to eighteen months, hedges of intercompany loans and hedges of certain other balance sheet exposures. As of September 26, 2015 and December 31, 2014, the fair value of these contracts was approximately $1.8 million and $1.1 million, respectively. The fair value of outstanding foreign currency derivative contracts and the related classification in the accompanying condensed consolidated balance sheets as of September 26, 2015 and December 31, 2014, are shown below (in millions):
| September 26, 2015 |  | December 31, 2014
Contracts qualifying for hedge accounting: |  |  |
Other current assets | $ | 9.3 |  |  | $ | 6.8 |
Other long-term assets | 0.7 |  |  | 0.1 |
Other current liabilities | (54.4 | ) |  | (38.5 | )
Other long-term liabilities | (12.3 | ) |  | (6.1 | )
| (56.7 | ) |  | (37.7 | )
Contracts not qualifying for hedge accounting: |  |  |
Other current assets | 4.2 |  |  | 2.1 |
Other current liabilities | (2.4 | ) |  | (1.0 | )
| 1.8 |  |  | 1.1 |
| $ | (54.9 | ) |  | $ | (36.6 | )
Pretax amounts related to foreign currency derivative contracts that were recognized in and reclassified from accumulated other comprehensive loss are shown below (in millions):
| Three Months Ended |  | Nine Months Ended
| September 26, 2015 |  | September 27, 2014 |  | September 26, 2015 |  | September 27, 2014
Contracts qualifying for hedge accounting: |  |  |  |  |  |  |
(Losses) gains recognized in accumulated other comprehensive loss | $ | (34.2 | ) |  | $ | (7.7 | ) |  | $ | (43.4 | ) |  | $ | 2.8 |
Losses (gains) reclassified from accumulated other comprehensive loss | 12.5 |  |  | (3.2 | ) |  | 24.4 |  |  | (7.7 | )
Comprehensive loss | $ | (21.7 | ) |  | $ | (10.9 | ) |  | $ | (19.0 | ) |  | $ | (4.9 | )
For the three and nine months ended September 26, 2015, net sales includes gains of $1.4 million and $2.4 million, respectively, reclassified from accumulated other comprehensive loss related to foreign currency derivative contracts. For the three and nine months ended September 26, 2015, cost of sales includes losses of $(13.9) million and $(26.8) million, respectively, reclassified from accumulated other comprehensive loss related to foreign currency derivative contracts. For the three and nine months ended September 27, 2014, net sales includes gains of $0.1 million and $0.7 million, respectively, reclassified from accumulated other comprehensive loss related to foreign currency derivative contracts. For the three and nine months ended September 27, 2014, cost of sales includes gains of $3.1 million and $7.0 million, respectively, reclassified from accumulated other comprehensive loss related to foreign currency derivative contracts. Interest Rate Historically, the Company used interest rate swap and other derivative contracts to manage its exposure to fluctuations in interest rates. As of September 26, 2015 and December 31, 2014, there were no interest rate contracts outstanding. The Company will continue to evaluate, and may use, derivative financial instruments, including forwards, futures, options, swaps and other derivative contracts to manage its exposures to fluctuations in interest rates in the future. Commodity Prices Historically, the Company used commodity swap and other derivative contracts to reduce its exposure to fluctuations in certain commodity prices. These derivative instruments were utilized to hedge forecasted inventory purchases, and to the extent that they met hedge accounting criteria, they were accounted for as cash flow hedges. Commodity swap contracts that were not accounted for as cash flow hedges were marked to market with changes in fair value recognized immediately in the accompanying condensed consolidated statements of comprehensive income. As of September 26, 2015 and December 31, 2014, there were no commodity swap contracts outstanding. Accumulated Other Comprehensive Loss - Derivative Instruments and Hedging As of September 26, 2015 and December 31, 2014, pretax net losses of approximately $56.7 million and $37.7 million, respectively, related to the Company’s derivative instruments and hedging activities were recorded in accumulated other comprehensive loss. During the next twelve month period, the Company expects to reclassify into earnings net losses of approximately $45.1 million recorded in accumulated other comprehensive loss as of September 26, 2015. Such losses will be reclassified at the time that the underlying hedged transactions are realized. During the three and nine months ended September 26, 2015 and September 27, 2014, amounts recognized in the accompanying condensed consolidated statements of comprehensive income related to changes in the fair value of cash flow and fair value hedges excluded from the Company’s effectiveness assessments and the ineffective portion of changes in the fair value of cash flow and fair value hedges were not material. Fair Value Measurements GAAP provides that fair value is an exit price, defined as a market-based measurement that represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value measurements are based on one or more of the following three valuation techniques:
Market: |  | This approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
Income: |  | This approach uses valuation techniques to convert future amounts to a single present value amount based on current market expectations.
Cost: |  | This approach is based on the amount that would be required to replace the service capacity of an asset (replacement cost).
Further, GAAP prioritizes the inputs and assumptions used in the valuation techniques described above into a three-tier fair value hierarchy as follows:
Level 1: |  | Observable inputs, such as quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date.
Level 2: |  | Inputs, other than quoted market prices included in Level 1, that are observable either directly or indirectly for the asset or liability.
Level 3: |  | Unobservable inputs that reflect the entity’s own assumptions about the exit price of the asset or liability. Unobservable inputs may be used if there is little or no market data for the asset or liability at the measurement date.
The Company discloses fair value measurements and the related valuation techniques and fair value hierarchy level for its assets and liabilities that are measured or disclosed at fair value. Items Measured at Fair Value on a Recurring Basis Fair value measurements and the related valuation techniques and fair value hierarchy level for the Company’s assets and liabilities measured at fair value on a recurring basis as of September 26, 2015 and December 31, 2014, are shown below (in millions):
| September 26, 2015
| Frequency |  | Asset (Liability) |  | Valuation Technique |  | Level 1 |  | Level 2 |  | Level 3
Foreign currency derivative contracts, net | Recurring |  | $ | (54.9 | ) |  | Market/ Income |  | $ | — |  |  | $ | (54.9 | ) |  | $ | — |
| December 31, 2014
| Frequency |  | Asset (Liability) |  | Valuation Technique |  | Level 1 |  | Level 2 |  | Level 3
Foreign currency derivative contracts, net | Recurring |  | $ | (36.6 | ) |  | Market/ Income |  | $ | — |  |  | $ | (36.6 | ) |  | $ | — |
The Company determines the fair value of its derivative contracts using quoted market prices to calculate the forward values and then discounts such forward values to the present value. The discount rates used are based on quoted bank deposit or swap interest rates. If a derivative contract is in a net liability position, the Company adjusts these discount rates, if required, by an estimate of the credit spread that would be applied by market participants purchasing these contracts from the Company’s counterparties. To estimate this credit spread, the Company uses significant assumptions and factors other than quoted market rates, which would result in the classification of its derivative liabilities within Level 3 of the fair value hierarchy. As of September 26, 2015 and December 31, 2014, there were no derivative contracts that were classified within Level 3 of the fair value hierarchy. In addition, there were no transfers in or out of Level 3 of the fair value hierarchy during the third quarter of 2015. Items Measured at Fair Value on a Non-Recurring Basis The Company measures certain assets and liabilities at fair value on a non-recurring basis, which are not included in the table above. As these non-recurring fair value measurements are generally determined using unobservable inputs, these fair value measurements are classified within Level 3 of the fair value hierarchy. As a result of the acquisition of Eagle Ottawa in 2015, Level 3 fair value estimates related to property, plant and equipment of $141.4 million, intangible assets of $211.3 million and contingent consideration of $16.7 million were recorded in the accompanying condensed consolidated balance sheet as of September 26, 2015 (see Note 2, "Acquisition"). Fair value estimates of property, plant and equipment were based on independent appraisals, giving consideration to the highest and best use of the assets. Key assumptions used in the appraisals were based on a combination of market and cost approaches, as appropriate. Fair value estimates of customer-based intangible assets were based on the present value of future earnings attributable to the asset group after recognition of required returns to other contributory assets. Fair value estimates of contingent consideration were based on an income approach. As of December 31, 2014, there were no significant assets or liabilities measured at fair value on a non-recurring basis. For further information on assets measured at fair value on a non-recurring basis, see Note 2, "Acquisition," and Note 3, "Restructuring."

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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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