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Derivatives | 3 Months Ended
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Dec. 29, 2019
Derivatives [Abstract] |
Derivatives | NOTE 11 - DERIVATIVES Cash Flow Hedges Commodity Swaps. The Company is exposed to risk from fluctuating prices for raw materials, specifically brass used in its manufacturing processes. Brass consists of zinc and copper. The Company hedges a portion of the risk associated with the purchase of these materials using commodity swaps. The hedge contracts are designated as cash flow hedges with the fair value changes recorded in AOCI and as a hedge asset or liability, as applicable. The unrecognized changes in fair value of the hedge contracts are reclassified from AOCI into earnings when the hedged purchase of raw materials also affects earnings. The swaps effectively fix the floating price on a specified quantity of raw materials through a specified date. At December 29, 2019, the Company had a series of brass swap contracts outstanding through May 31, 2021. The derivative net loss estimated to be reclassified from AOCI into earnings over the next 12 months is $0.1 million, net of tax. The Company had the following commodity swap contracts outstanding as of December 29, 2019 and September 30, 2019.
|  | December 29, 2019 |  | September 30, 2019
(in millions, except notional) |  | Notional |  | Contract Value |  | Notional |  | Contract Value
Brass swap contracts |  |  | 0.9 Tons |  | $ | 4.2 |  |  | 0.9 Tons |  | $ | 4.4
Foreign exchange contracts. The Company periodically enters into forward foreign exchange contracts to hedge a portion of the risk from forecasted foreign currency denominated third party and intercompany sales or payments. These obligations generally require the Company to exchange foreign currencies for U.S. Dollars, Euros, Pound Sterling, Canadian Dollars, Australian Dollars, or Japanese Yen. These foreign exchange contracts are cash flow hedges of fluctuating foreign exchange related to sales of product or raw material purchases. Until the sale or purchase is recognized, the fair value of the related hedge is recorded in AOCI and as a derivative hedge asset or liability, as applicable. At the time the sale or purchase is recognized, the fair value of the related hedge is reclassified as an adjustment to Net Sales or purchase price variance in Cost of Goods Sold on the Condensed Consolidated Statements of Income. At December 29, 2019, the Company had a series of foreign exchange derivative contracts outstanding through June 30, 2021. The derivative net gain estimated to be reclassified from AOCI into earnings over the next 12 months is $0.4 million, net of tax. At December 29, 2019 and September 30, 2019, the Company had foreign exchange derivative contracts designated as cash flow hedges with a notional value of $242.4 million and $235.6 million, respectively. Interest Rate Swaps. As of September 30, 2018, the Company had a series of U.S. dollar denominated interest rate swaps outstanding which effectively fixed the interest on floating rate debt related to the 2022 Term Loan, exclusive of lender spreads, at 1.76% for a notional principal amount of $300.0 million through May 8, 2020. On January 4, 2019, the underlying debt and related hedge were settled. As a result, the Company recognized a gain of $3.6 million during the three months ended December 30, 2018, recognized as a component of discontinued operations as interest expense from the Term Loans allocated to discontinued operations per Note 2 – Divestitures. As of December 29, 2019, there are no outstanding interest rate swaps hedges. The following table summarizes the impact of designated cash flow hedges and the pretax gain (loss) recognized in the Condensed Consolidated Statement of Income for the three month periods ended December 29, 2019 and December 30, 2018, respectively:
For the three month periods |  |  |  |  |  |  |  |  |  | Reclassified to
ended December 29, 2019 |  | Gain (Loss) |  | Reclassified to Continuing Operations |  | Discontinued
(in millions) |  | in OCI |  | Line Item |  | Gain (Loss) |  | Operations
Commodity swaps |  | $ | 0.2 |  | Cost of goods sold |  | $ | (0.1) |  | $ | —
Foreign exchange contracts |  |  | 0.1 |  | Net sales |  |  | — |  |  | —
Foreign exchange contracts |  |  | (6.5) |  | Cost of goods sold |  |  | 2.7 |  |  | —
Total |  | $ | (6.2) |  |  |  | $ | 2.6 |  | $ | —
For the three month periods |  |  |  |  |  |  |  |  |  | Reclassified to
ended December 30, 2018 |  | Gain (Loss) |  | Reclassified to Continuing Operations |  | Discontinued
(in millions) |  | in OCI |  | Line Item |  | Gain (Loss) |  | Operations
Interest rate swaps |  | $ | (0.6) |  | Interest expense |  | $ | — |  | $ | 2.2
Commodity swaps |  |  | (1.1) |  | Cost of goods sold |  |  | (0.1) |  |  | (2.6)
Foreign exchange contracts |  |  | (0.1) |  | Net sales |  |  | — |  |  | —
Foreign exchange contracts |  |  | 7.3 |  | Cost of goods sold |  |  | 3.0 |  |  | 0.5
Total |  | $ | 5.5 |  |  |  | $ | 2.9 |  | $ | 0.1
Derivative Contracts Not Designated as Hedges for Accounting Purposes Foreign exchange contracts. The Company periodically enters into forward foreign exchange contracts to economically hedge a portion of the risk from third party and intercompany payments resulting from existing obligations. These obligations generally require the Company to exchange foreign currencies for U.S. Dollars, Canadian Dollars, Euros, Pounds Sterling, Taiwanese Dollars, Philippine Peso, or Australian Dollars. These foreign exchange contracts are fair value hedges of a related liability or asset recorded in the accompanying Condensed Consolidated Statements of Financial Position. The gain or loss on the derivative hedge contracts is recorded in earnings as an offset to the change in value of the related liability or asset at each period end. At December 29, 2019, the Company had a series of forward exchange contracts outstanding through January 24, 2020. At December 29, 2019 and September 30, 2019, the Company had $604.7 million and $977.5 million, respectively, of notional value of such foreign exchange derivative contracts outstanding. The following summarizes the impact of derivative instruments on the accompanying Condensed Consolidated Statements of Income for the three month periods ended December 29, 2019 and December 30, 2018, pretax:
|  |  |  | Three Month Periods Ended
(in millions) |  | Line Item |  | December 29, 2019 |  | December 30, 2018
Foreign exchange contracts |  | Other non-operating expense (income) |  | $ | 7.2 |  | $ | (4.3)
‎ NOTE 11 – DERIVATIVES (continued) Fair Value of Derivative Instruments The fair value of the Company’s outstanding derivative contracts recorded in the Condensed Consolidated Statements of Financial Position is as follows:
(in millions) |  | Line Item |  | December 29, 2019 |  | September 30, 2019
Derivative Assets |  |  |  |  |  |  |  |
Commodity swaps - designated as hedge |  | Other receivables |  | $ | 0.1 |  | $ | —
Foreign exchange contracts - designated as hedge |  | Other receivables |  |  | 1.1 |  |  | 7.8
Foreign exchange contracts - designated as hedge |  | Deferred charges and other |  |  | — |  |  | 0.5
Foreign exchange contracts - not designated as hedge |  | Other receivables |  |  | 1.4 |  |  | 1.2
Total Derivative Assets |  |  |  | $ | 2.6 |  | $ | 9.5
Derivative Liabilities |  |  |  |  |  |  |  |
Commodity swaps - designated as hedge |  | Accounts payable |  | $ | — |  | $ | 0.2
Foreign exchange contracts - designated as hedge |  | Accounts payable |  |  | 1.5 |  |  | 0.2
Foreign exchange contracts - designated as hedge |  | Other long term liabilities |  |  | 0.5 |  |  | —
Foreign exchange contracts - not designated as hedge |  | Accounts payable |  |  | 0.1 |  |  | 1.9
Total Derivative Liabilities |  |  |  | $ | 2.1 |  | $ | 2.3
The Company is exposed to the risk of default by the counterparties with which it transacts and generally does not require collateral or other security to support financial instruments subject to credit risk. The Company monitors counterparty credit risk on an individual basis by periodically assessing each counterparty’s credit rating exposure. The maximum loss due to credit risk equals the fair value of the gross asset derivatives that are concentrated with certain domestic and foreign financial institution counterparties. The Company considers these exposures when measuring its credit reserve on its derivative assets, which were not significant as of December 29, 2019. The Company’s standard contracts do not contain credit risk related contingent features whereby the Company would be required to post additional cash collateral because of a credit event. However, the Company is typically required to post collateral in the normal course of business to offset its liability positions. As of December 29, 2019, and September 30, 2019, there was no cash collateral outstanding and no posted standby letters of credit related to such liability positions. Net Investment Hedge SBI has €425 million aggregate principle amount of 4.00% Notes designated as a non-derivative economic hedge, or net investment hedge, of the translation of the Company’s net investments in Euro denominated subsidiaries at the time of issuance. The hedge effectiveness is measured on the beginning balance of the net investment and re-designated every three months. Due to changes in the net investments in Euro denominated subsidiaries, €318.5 million of the original principal amount was designated as a net investment hedge for the three month period ended December 29, 2019. As a result, any gains and losses attributable to the translation of the Euro denominated debt designated as net investment hedge were recognized as a component of foreign currency translation within AOCI, and gains and losses attributable to the translation of the undesignated portion are recognized as foreign currency translation gains or losses within Other Non-Operating Income (Expense). For the three month period ended December 30, 2018, the full principal amount was designated as a net investment hedge and considered fully effective. The following summarizes the pretax gains (loss) recorded as foreign currency translation adjustment (“CTA”) within other comprehensive income (loss) related to net investment hedge for the three month periods ended December 29, 2019 and December 30, 2018, respectively:
|  | Three Month Periods Ended
Gain (loss) in OCI (in millions) |  | December 29, 2019 |  | December 30, 2018
Net investment hedge |  | $ | (4.9) |  | $ | 8.9
The pretax loss related to the translation of the undesignated portion of the debt obligation recognized in earnings was $1.7 million for the three month period ended December 29, 2019. Net gains or losses from the net investment hedge are reclassified from AOCI into earnings upon a liquidation event or deconsolidation of Euro denominated subsidiaries. \

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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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