DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

3 Months Ended

Jan. 02, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to market risks, such as changes in interest rates, currency exchange rates and commodity prices. To manage a portion of the volatility related to these exposures, the Company enters into various financial transactions. The utilization of these financial transactions is governed by policies covering acceptable counterparty exposure, instrument types and other hedging practices. The Company does not hold or issue derivative financial instruments for speculative trading purposes.

Exchange Rate Risk Management

The Company uses currency forward contracts to manage the exchange rate risk associated with intercompany loans and certain other balances denominated in foreign currencies. Currency forward contracts are valued using observable forward rates in commonly quoted intervals for the full term of the contracts. The notional amount of outstanding currency forward contracts was $161.5, $128.7 and $160.1 at January 2, 2021, December 28, 2019 and September 30, 2020, respectively. Contracts outstanding at January 2, 2021 will mature over the next fiscal quarter.

Interest Rate Risk Management

The Company enters into interest rate swap agreements as a means to hedge its variable interest rate risk on debt instruments. Net amounts to be received or paid under the swap agreements are reflected as adjustments to interest expense. The Company has outstanding interest rate swap agreements with major financial institutions that effectively convert a portion of

the Company’s variable-rate debt to a fixed rate. Interest rate swap agreements are valued based on the present value of the estimated future net cash flows using implied rates in the applicable yield curve as of the valuation date. The swap agreements had a maximum total U.S. dollar equivalent notional amount of $600.0, $850.0 and $600.0 at January 2, 2021, December 28, 2019 and September 30, 2020, respectively. Refer to “NOTE 7. DEBT” for the terms of the swap agreements outstanding at January 2, 2021. Included in the AOCL balance at January 2, 2021 was a loss of $6.7 related to interest rate swap agreements that is expected to be reclassified to earnings during the next twelve months, consistent with the timing of the underlying hedged transactions.

Commodity Price Risk Management

The Company enters into hedging arrangements designed to fix the price of a portion of its projected future urea, diesel and resin requirements. Commodity contracts are valued using observable commodity exchange prices in active markets. Included in the AOCL balance at January 2, 2021 was a gain of $1.3 related to commodity hedges that is expected to be reclassified to earnings during the next twelve months, consistent with the timing of the underlying hedged transactions.

The Company had the following outstanding commodity contracts that were entered into to hedge forecasted purchases:

COMMODITY

JANUARY 2,
2021

DECEMBER 28,
2019

SEPTEMBER 30,
2020

Urea

40,500 tons

45,500 tons

76,500 tons

Resin

4,000,000 pounds

11,000,000 pounds

9,100,000 pounds

Diesel

4,704,000 gallons

4,368,000 gallons

5,838,000 gallons

Heating Oil

2,100,000 gallons

1,344,000 gallons

2,142,000 gallons

Fair Values of Derivative Instruments

The fair values of the Company’s derivative instruments, which represent Level 2 fair value measurements, were as follows:


		ASSETS / (LIABILITIES)
DERIVATIVES DESIGNATED AS HEDGING INSTRUMENTS	BALANCE SHEET LOCATION	JANUARY 2, 2021		DECEMBER 28, 2019		SEPTEMBER 30, 2020



Interest rate swap agreements	Other current liabilities	$	(9.4)	$	(5.4)	$	(10.4)
	Other liabilities	(7.9)		(3.8)		(9.7)
Commodity hedging instruments	Prepaid and other current assets	2.1		—		0.9
	Other current liabilities	—		(1.6)		(0.7)
Total derivatives designated as hedging instruments		$	(15.2)	$	(10.8)	$	(19.9)

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS	BALANCE SHEET LOCATION
Currency forward contracts	Prepaid and other current assets	$	—	$	—	$	0.5
	Other current liabilities	(6.6)		(2.2)		(1.9)
Commodity hedging instruments	Prepaid and other current assets	0.4		0.1		—
	Other current liabilities	—		—		(0.9)
Total derivatives not designated as hedging instruments		(6.2)		(2.1)		(2.3)
Total derivatives		$	(21.4)	$	(12.9)	$	(22.2)

The effect of derivative instruments on AOCL, net of tax, and the Condensed Consolidated Statements of Operations for each of the periods presented was as follows:


DERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPS	AMOUNT OF GAIN / (LOSS) RECOGNIZED IN AOCL
	THREE MONTHS ENDED
	JANUARY 2, 2021		DECEMBER 28, 2019

Interest rate swap agreements	$	0.3	$	0.4
Commodity hedging instruments	2.2		(1.8)
Total	$	2.5	$	(1.4)


DERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPS	RECLASSIFIED FROM AOCL INTO STATEMENT OF OPERATIONS	AMOUNT OF GAIN / (LOSS)
		THREE MONTHS ENDED
		JANUARY 2, 2021		DECEMBER 28, 2019

Interest rate swap agreements	Interest expense	$	(1.8)	$	(0.8)
Commodity hedging instruments	Cost of sales	(0.1)		—
Total		$	(1.9)	$	(0.8)


DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS	RECOGNIZED IN STATEMENT OF OPERATIONS	AMOUNT OF GAIN / (LOSS)
		THREE MONTHS ENDED
		JANUARY 2, 2021		DECEMBER 28, 2019

Currency forward contracts	Other income / expense, net	$	(8.0)	$	(4.8)
Commodity hedging instruments	Cost of sales	0.7		0.5
Total		$	(7.3)	$	(4.3)