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Financial Instruments and Derivatives | 9 Months Ended
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Oct. 03, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Financial Instruments and Derivatives | Financial Instruments and Derivatives 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.
|  | October 3, 2021 |  | December 31, 2020
|  | Carrying Amount |  | Fair Value |  | Carrying Amount |  | Fair Value
Long-term debt, net of current portion |  | $ | 1,192,707 |  |  | $ | 1,428,316 |  |  | $ | 1,244,440 |  |  | $ | 1,538,132 |
The carrying value of cash and cash equivalents and short-term 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 which is considered a Level 2 fair value measurement. Cash Flow Hedges At October 3, 2021 and December 31, 2020, 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 2022, 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 Certain derivative contracts entered into to manage the cost of anticipated purchases of natural gas and aluminum have been designated by the Company as hedges. At October 3, 2021, these contracts included natural gas swaps covering approximately 2.9 million MMBTUs. These contracts represent approximately 66% and 21% of anticipated usage in North America for 2021 and 2022, respectively. The Company also has certain natural gas hedges that it does not treat as Cash Flow Hedges. See Other Derivatives below for a discussion of these hedges. The Company has also designated swap contracts covering 904 metric tons of aluminum as hedges. These contracts represent approximately 53% of anticipated aluminum usage for the remainder of 2021. The fair values of the Company’s commodity cash flow hedges netted to a gain position of $7,530 at October 3, 2021 and a loss position of $(647) at December 31, 2020. The amount of the gain included in Accumulated Other Comprehensive Income at October 3, 2021 expected to be reclassified to the income statement during the next twelve months is $4,690. Foreign Currency Cash Flow Hedges The Company has entered into forward contracts to hedge certain anticipated foreign currency denominated sales, purchases, and capital spending expected to occur in 2021 and 2022. The net positions of these contracts at October 3, 2021 were as follows (in thousands):
Currency | Action | Quantity
Colombian peso | purchase | 5,000,669 |
Mexican peso | purchase | 84,193 |
Polish zloty | purchase | 21,064 |
Czech koruna | purchase | 13,119 |
Euro | purchase | 12,803 |
Canadian dollar | purchase | 3,368 |
British pound | purchase | 1,697 |
Turkish lira | purchase | 633 |
The fair value of foreign currency cash flow hedges related to forecasted sales and purchases netted to a gain position of $131 and $555 at October 3, 2021 and December 31, 2020, respectively. Gains of $131 are expected to be reclassified from accumulated other comprehensive loss 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 October 3, 2021 and December 31, 2020, the net position of these contracts was $(525) and $47, respectively. During the nine months ended October 3, 2021, gains from these hedges totaling $42 were reclassified from accumulated other comprehensive loss and included in the carrying value of the capitalized expenditures. Losses of $(522) are expected to be reclassified from accumulated other comprehensive loss and included in the carrying value of the related fixed assets acquired during the next twelve months. Net Investment Hedge In January 2020, the Company entered into a cross-currency swap agreement with a notional amount of $250,000 to effectively convert a portion of the Company's fixed-rate, U.S. dollar denominated debt, including the semi-annual interest payments, to fixed-rate euro-denominated debt. The risk management objective was to manage foreign currency risk relating to net investments in certain European subsidiaries denominated in foreign currencies. As a result of significant strengthening of the U.S. dollar and a reduction in the differential between U.S. and European interest rates, the fair market value of the swap position appreciated significantly during the first quarter of 2020. In March 2020, the Company terminated the swap agreement and received a net cash settlement of $14,480. The Company recorded this foreign currency translation gain in "Accumulated other comprehensive loss," net of a tax provision of $7,581. Other Derivatives The Company routinely enters into forward contracts or swaps to economically hedge the currency exposure of intercompany debt and 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 currency positions of these contracts at October 3, 2021, were as follows (in thousands):
Currency | Action | Quantity
Indonesian rupiah | purchase | 30,699,411 |
Colombian peso | purchase | 26,283,009 |
Mexican peso | purchase | 336,655 |
Canadian dollar | purchase | 5,258 |
In addition to the contracts designated as cash flow hedges described above, the Company has entered into other derivative contracts to manage the cost of anticipated purchases of natural gas. At October 3, 2021, these contracts consisted of natural gas swaps covering approximately 1.6 million MMBTUs and represent approximately 21% of anticipated usage in North America for 2022. The Company's designated and non-designated natural gas derivative contracts total approximately 4.5 million MMBTUs and represent approximately 66% and 42% of anticipated natural gas usage in North America for 2021 and 2022, respectively. The fair value of the Company’s other derivatives position was a gain of $3,117 an d $599 at October 3, 2021 and December 31, 2020, respectively. The following table sets forth the location and fair values of the Company’s derivative instruments at October 3, 2021 and December 31, 2020:
Description |  | Balance Sheet Location |  | October 3, 2021 |  | December 31, 2020
Derivatives designated as hedging instruments: |  |  |  |  |  |
Commodity Contracts |  | Prepaid expenses |  | $ | 4,690 |  |  | $ | 867 |
Commodity Contracts |  | Other assets |  | $ | 2,840 |  |  | $ | — |
Commodity Contracts |  | Accrued expenses and other |  | $ | — |  |  | $ | (1,512) |
Commodity Contracts |  | Other liabilities |  | $ | — |  |  | $ | (2) |
Foreign Exchange Contracts |  | Prepaid expenses |  | $ | 333 |  |  | $ | 997 |
Foreign Exchange Contracts |  | Accrued expenses and other |  | $ | (725) |  |  | $ | (395) |
Foreign Exchange Contracts |  | Other liabilities |  | $ | (2) |  |  | $ | — |
Derivatives not designated as hedging instruments: |  |  |  |  |  |
Commodity Contracts |  | Prepaid expenses |  | $ | — |  |  | $ | 484 |
Commodity Contracts |  | Other assets |  | $ | 2,861 |  |  | $ | — |
Foreign Exchange Contracts |  | Prepaid expenses |  | $ | 256 |  |  | $ | 140 |
Foreign Exchange Contracts |  | Accrued expenses and other |  | $ | — |  |  | $ | (25) |
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. Pursuant to the May 25, 2021 maturity of the Company's 1%, 150,000 euro-denominated debt discussed in Note 8, the Company entered into two forward contracts on April 7, 2021, to buy a total of 150,000 euros, with the risk management objective of managing foreign currency risk related to the Company's funding of the debt repayment upon maturity. The Company recognized a gain of $4,387 upon the May 21, 2021, maturity of these forward contracts. The gain is included in "Selling, general and administrative expenses" on the Company's Condensed Consolidated Statements of Income for the nine months ended October 3, 2021. Pursuant to the bond tender discussed in Note 8, the Company entered into a reverse treasury lock agreement on April 28, 2021 with the intent to fix the cash cost to fund approximately $100,000 of the maximum $300,000 principal amount subject to being tendered. The settlement of the reverse treasury lock on May 13, 2021 resulted in a loss of $1,356. The loss is included in "Loss from the early extinguishment of debt" on the Company's Condensed Consolidated Statements of Income for the nine months ended October 3, 2021. The following tables set forth the effect of the Company’s derivative instruments on financial performance for the three months ended October 3, 2021 and September 27, 2020, excluding the gains on foreign currency cash flow hedges that were reclassified from accumulated other comprehensive loss to the carrying value of the capitalized expenditures:
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 October 3, 2021 |  |  |  |  |  |  |  |
Foreign Exchange Contracts |  | $ | (407) |  |  | Net sales |  | $ | 937 |  |  |  |  |
|  |  |  | Cost of sales |  | $ | (711) |  |  |  |  |
Commodity Contracts |  | $ | 4,200 |  |  | Cost of sales |  | $ | 2,051 |  |  |  |  |
Three months ended September 27, 2020 |  |  |  |  |  |  |  |
Foreign Exchange Contracts |  | $ | 90 |  |  | Net sales |  | $ | (1,723) |  |  |  |  |
|  |  |  | Cost of sales |  | $ | 867 |  |  |  |  |
Commodity Contracts |  | $ | 1,286 |  |  | Cost of sales |  | $ | (792) |  |  |  |  |
Description |  | Gain or (Loss) Recognized |  | Location of Gain or (Loss) Recognized in Income Statement
Derivatives not Designated as Hedging Instruments: |  |  |  |
Three months ended October 3, 2021 |  |
Commodity Contracts |  | $ | 2,861 |  |  | Cost of sales
Foreign Exchange Contracts |  | $ | (675) |  |  | Selling, general and administrative
Three months ended September 27, 2020 |  |
Commodity Contracts |  | $ | (436) |  |  | Cost of sales
Foreign Exchange Contracts |  | $ | 486 |  |  | Selling, general and administrative
| Three months ended October 3, 2021 |  | Three months ended September 27, 2020
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 | $ | 937 |  | $ | 1,340 |  |  | $ | (1,723) |  | $ | 75 |
The effects of cash flow hedging: |  |  |  |  |
Gain or (loss) on cash flow hedging relationships: |  |  |  |
Foreign exchange contracts: |  |  |  |  |
Amount of gain or (loss) reclassified from accumulated other comprehensive loss into net income | $ | 937 |  | $ | (711) |  |  | $ | (1,723) |  | $ | 867 |
Commodity contracts: |  |  |  |  |
Amount of gain reclassified from accumulated other comprehensive loss into net income | $ | — |  | $ | 2,051 |  |  | $ | — |  | $ | (792) |
The following tables set forth the effect of the Company’s derivative instruments on financial performance for the nine months ended October 3, 2021 and September 27, 2020, excluding the gains on foreign currency cash flow hedges that were reclassified from accumulated other comprehensive loss to the carrying value of the capitalized expenditures:
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: |  |  |  |  |  |
Nine months ended October 3, 2021 |  |  |  |  |  |  |  |
Foreign Exchange Contracts |  | $ | 156 |  |  | Net sales |  | $ | 2,766 |  |  |  |  |
|  |  |  | Cost of sales |  | $ | (2,129) |  |  |  |  |
Commodity Contracts |  | $ | 10,801 |  |  | Cost of sales |  | $ | 2,626 |  |  |  |  |
Nine months ended September 27, 2020 |  |  |  |  |  |  |  |
Foreign Exchange Contracts |  | $ | (4,985) |  |  | Net sales |  | $ | (6,245) |  |  |  |  |
|  |  |  | Cost of sales |  | $ | 3,744 |  |  |  |  |
Commodity Contracts |  | $ | 640 |  |  | Cost of sales |  | $ | (1,346) |  |  |  |  |
Description |  | Gain or (Loss) Recognized |  | Location of Gain or (Loss) Recognized in Income Statement
Derivatives not Designated as Hedging Instruments: |  |  |  |
Nine months ended October 3, 2021 |  |  |  |
Commodity Contracts |  | $ | 3,295 |  |  | Cost of sales
Foreign Exchange Contracts |  | $ | (906) |  |  | Selling, general and administrative
Nine months ended September 27, 2020 |  |  |  |
Commodity Contracts |  | $ | (252) |  |  | Cost of sales
Foreign Exchange Contracts |  | $ | (3,565) |  |  | Selling, general and administrative
| Nine months ended October 3, 2021 |  | Nine months ended September 27, 2020
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 | $ | 2,766 |  | $ | 497 |  |  | $ | — |  | $ | 2,398 |
The effects of cash flow hedging: |  |  |  |  |
Gain or (loss) on cash flow hedging relationships: |  |  |  |
Foreign exchange contracts: |  |  |  |  |
Amount of gain or (loss) reclassified from accumulated other comprehensive loss into net (loss)/income | $ | 2,766 |  | $ | (2,129) |  |  | $ | (6,245) |  | $ | 3,744 |
Commodity contracts: |  |  |  |  |
Amount of gain or (loss) reclassified from accumulated other comprehensive loss into net (loss)/income | $ | — |  | $ | 2,626 |  |  | $ | — |  | $ | (1,346) |

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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 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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