Financial Instruments and Derivatives

3 Months Ended

Mar. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The following table sets forth the carrying amounts and fair values of the Company’s significant financial instruments for which the carrying amount differs from the fair value.


	March 31, 2019						December 31, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, net of current portion	$	1,189,415	$	1,273,699	$	1,189,717	$	1,270,521

The carrying value of cash and cash equivalents, short-term debt and long-term variable-rate debt approximates fair value. The fair value of long-term debt is determined based on recent trade information in the financial markets of the Company’s public debt or is determined by discounting future cash flows using interest rates available to the Company for issues with similar terms and maturities. It is considered a Level 2 fair value measurement.

Cash Flow Hedges

At March 31, 2019 and December 31, 2018, the Company had derivative financial instruments outstanding to hedge anticipated transactions and certain asset and liability related cash flows. These contracts, which have maturities ranging to December 2020, qualify as cash flow hedges under U.S. GAAP. For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings and is presented in the same income statement line item as the earnings effect of the hedged item.

Commodity Cash Flow Hedges

The Company has entered into certain derivative contracts to manage the cost of anticipated purchases of natural gas and aluminum. At March 31, 2019, natural gas swaps covering approximately 6.0 million MMBTUs were outstanding. These contracts represent approximately 74% and 42% of anticipated U.S. and Canadian usage for the remainder of 2019 and 2020, respectively. Additionally, the Company had swap contracts covering 3,062 metric tons of aluminum, representing approximately 51% of anticipated usage for the remainder of 2019. The fair values of the Company’s commodity cash flow hedges netted to a loss position of $(914) and $(1,571) at March 31, 2019 and December 31, 2018 respectively. The amount of the loss included in Accumulated Other Comprehensive Loss at March 31, 2019, that is expected to be reclassified to the income statement during the next twelve months is $(918).

Foreign Currency Cash Flow Hedges

The Company has entered into forward contracts to hedge certain anticipated foreign currency denominated sales, purchases, and capital spending forecast to occur in 2019. The net positions of these contracts at March 31, 2019 were as follows (in thousands):


Currency	Action	Quantity
Colombian peso	purchase	12,928,059
Mexican peso	purchase	341,547
Polish zloty	purchase	50,222
Canadian dollar	purchase	46,690
Czech koruna	purchase	34,652
Turkish lira	purchase	4,917
British pound	purchase	1,133


Swedish krona	sell	(2,180)
Euro	sell	(13,542)
Russian ruble	sell	(83,981)

The fair value of foreign currency cash flow hedges related to forecasted sales and purchases netted to a gain position of $155 at March 31, 2019 and a loss position of $(1,624) at December 31, 2018. Gains of $155 are expected to be reclassified from accumulated other comprehensive income to the income statement during the next twelve months. In addition, the Company has entered into forward contracts to hedge certain foreign currency cash flow transactions related to construction in progress. As of March 31, 2019 and at December 31, 2018, the net position of these contracts were $(57) and $(88), respectively. During the three months ended March 31, 2019, losses from these hedges totaling $(45) were reclassified from accumulated other comprehensive income and included in the carrying value of the related fixed assets acquired. Losses of $(57) are expected to be reclassified from accumulated other comprehensive income and included in the carrying value of the related fixed assets acquired during the next twelve months.

Other Derivatives

The Company routinely enters into forward contracts or swaps to economically hedge the currency exposure of intercompany debt and existing foreign currency denominated receivables and payables. The Company does not apply hedge accounting treatment under ASC 815 for these instruments. As such, changes in fair value are recorded directly to income and expense in the periods that they occur.

The net positions of these contracts at March 31, 2019, were as follows (in thousands):


Currency	Action	Quantity
Colombian peso	purchase	9,199,944
Mexican peso	purchase	420,776
Canadian dollar	purchase	21,475


South African rand	sell	(8,261)

The fair value of the Company’s other derivatives was a loss position of $(164) and a gain position of $166 at March 31, 2019 and December 31, 2018, respectively.

The following table sets forth the location and fair values of the Company’s derivative instruments at March 31, 2019 and December 31, 2018:


Description	Balance Sheet Location	March 31, 2019		December 31, 2018
Derivatives designated as hedging instruments:
Commodity Contracts	Prepaid expenses	$	144	$	282
Commodity Contracts	Other assets	$	95	$	—
Commodity Contracts	Accrued expenses and other	$	(1,153)	$	(1,843)
Commodity Contracts	Other liabilities	$	—	$	(10)
Foreign Exchange Contracts	Prepaid expenses	$	1,119	$	770
Foreign Exchange Contracts	Accrued expenses and other	$	(1,021)	$	(2,482)
Derivatives not designated as hedging instruments:
Foreign Exchange Contracts	Prepaid expenses	$	—	$	727

Foreign Exchange Contracts	Accrued expenses and other	$	(164)	$	(561)

While certain of the Company’s derivative contract arrangements with its counterparties provide for the ability to settle contracts on a net basis, the Company reports its derivative positions on a gross basis. There are no collateral arrangements or requirements in these agreements.

The following tables set forth the effect of the Company’s derivative instruments on financial performance for the three months ended March 31, 2019 and April 1, 2018:


Description	Amount of Gain or (Loss) Recognized in OCI on Derivatives		Location of Gain or (Loss) Reclassified from Accumulated OCI Into Income	Amount of Gain or (Loss) Reclassified from Accumulated OCI Into Income
Derivatives in Cash Flow Hedging Relationships:
Three months ended March 31, 2019
Foreign Exchange Contracts	$	1,930	Net sales	$	317
			Cost of sales	$	(288)
Commodity Contracts	$	1,092	Cost of sales	$	435
Three months ended April 1, 2018
Foreign Exchange Contracts	$	1,646	Net sales	$	810
			Cost of sales	$	(527)
Commodity Contracts	$	(171)	Cost of sales	$	(58)


Description	Gain or (Loss) Recognized		Location of Gain or (Loss) Recognized in Income Statement
Derivatives not Designated as Hedging Instruments:
Three months ended March 31, 2019
Foreign Exchange Contracts	$	—	Cost of sales
	$	(1,465)	Selling, general and administrative
Three months ended April 1, 2018
Foreign Exchange Contracts	$	—	Cost of sales
	$	754	Selling, general and administrative


	Three months ended March 31, 2019						Three months ended April 1, 2018
Description	Revenue		Cost of sales		Revenue		Cost of sales
Total amount of income and expense line items presented in the Condensed Consolidated Statements of Income	$	317	$	147	$	810	$	(585)

The effects of cash flow hedging:













Gain or (loss) on cash flow hedging relationships in Subtopic 815-20:
Foreign exchange contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income into net income	$	317	$	(288)	$	810	$	(527)


Commodity contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income into net income	$	—	$	435	$	—	$	(58)