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DERIVATIVES | 6 Months Ended
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Apr. 03, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVES | DERIVATIVES Derivative financial instruments are used by the Company principally in the management of its foreign currency exchange rates. The Company does not hold or issue derivative financial instruments for trading purposes. Cash Flow Hedges 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 inventory purchases or the sale of product. Until the purchase or sale is recognized, the fair value of the related hedge is recorded in Accumulated Other Comprehensive Income ("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 purchase price variance in Cost of Goods Sold or Net Sales on the Condensed Consolidated Statements of Income. At April 3, 2022, the Company had a series of foreign exchange derivative contracts outstanding through September 29, 2023. The derivative net gain estimated to be reclassified from AOCI into earnings over the next 12 months is $5.2 million, net of tax. At April 3, 2022 and September 30, 2021, the Company had foreign exchange derivative contracts designated as cash flow hedges with a notional value of $276.7 million and $279.9 million, respectively. The following table summarizes the impact of designated cash flow hedges and the pre-tax gain (loss) recognized in the Condensed Consolidated Statements of Income for the three and six month periods ended April 3, 2022 and April 4, 2021, respectively:
|  | Gain in OCI |  | Reclassified Gain (Loss) to Continuing Operations
For the three month periods ended (in millions) |  | April 3, 2022 |  | April 4, 2021 |  | Line Item |  | April 3, 2022 |  | April 4, 2021
Foreign exchange contracts |  | $ | 0.1 |  |  | $ | 0.1 |  |  | Net sales |  | $ | — |  |  | $ | 0.1 |
Foreign exchange contracts |  | 4.7 |  |  | 5.2 |  |  | Cost of goods sold |  | 1.5 |  |  | (3.2) |
Total |  | $ | 4.8 |  |  | $ | 5.3 |  |  |  |  | $ | 1.5 |  |  | $ | (3.1) |
|  | Gain (Loss) in OCI |  | Reclassified Gain (Loss) to Continuing Operations
For the six month periods ended (in millions) |  | April 3, 2022 |  | April 4, 2021 |  | Line Item |  | April 3, 2022 |  | April 4, 2021
Foreign exchange contracts |  | $ | 0.1 |  |  | $ | 0.1 |  |  | Net sales |  | $ | — |  |  | $ | — |
Foreign exchange contracts |  | 3.9 |  |  | (8.1) |  |  | Cost of goods sold |  | 3.6 |  |  | (5.8) |
Total |  | $ | 4.0 |  |  | $ | (8.0) |  |  |  |  | $ | 3.6 |  |  | $ | (5.8) |
Derivative Contracts Not Designated as Hedges for Accounting Purposes The Company periodically enters into foreign exchange forward 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, Australian Dollars, Polish Zlotys, Mexican Pesos, or Japanese Yen, among others. 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 gain 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 April 3, 2022, the Company had a series of forward exchange contracts outstanding through July 20, 2022. At April 3, 2022 and September 30, 2021, the Company had $109.8 million and $198.4 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 and six month periods ended April 3, 2022 and April 4, 2021, pre-tax:
|  |  |  | Three Month Periods Ended |  | Six Month Periods Ended
(in millions) |  | Line Item |  | April 3, 2022 |  | April 4, 2021 |  | April 3, 2022 |  | April 4, 2021
Foreign exchange contracts |  | Other non-operating expense (income) |  | $ | 0.2 |  |  | $ | (4.6) |  |  | $ | (0.9) |  |  | $ | (8.5) |
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 |  | April 3, 2022 |  | September 30, 2021
Derivative Assets |  |  |  |  |  |
Foreign exchange contracts – designated as hedge |  | Other receivables |  | $ | 7.4 |  |  | $ | 5.2 |
Foreign exchange contracts – designated as hedge |  | Deferred charges and other |  | 0.1 |  |  | 0.9 |
Foreign exchange contracts – not designated as hedge |  | Other receivables |  | 0.5 |  |  | 0.7 |
Total Derivative Assets |  |  |  | $ | 8.0 |  |  | $ | 6.8 |
Derivative Liabilities |  |  |  |  |  |
Foreign exchange contracts – designated as hedge |  | Accounts payable |  | $ | 0.4 |  |  | $ | 0.1 |
Foreign exchange contracts – designated as hedge |  | Other long term liabilities |  | 0.1 |  |  | — |
Foreign exchange contracts – not designated as hedge |  | Accounts payable |  | 1.2 |  |  | 2.4 |
Total Derivative Liabilities |  |  |  | $ | 1.7 |  |  | $ | 2.5 |
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 April 3, 2022. 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 April 3, 2022, and September 30, 2021, there was no cash collateral outstanding and no posted standby letters of credit related to such liability positions. Net Investment Hedge SBI has €425.0 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. Any gains and losses attributable to the translation of the Euro denominated debt designated as net investment hedge are 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 Expense (Income). As of April 3, 2022, the full principal amount was designated as a net investment hedge and considered fully effective. The following summarizes the gain (loss) from the net investment hedge recognized in Other Comprehensive Income for the three and six month periods ended April 3, 2022 and April 4, 2021, pre-tax:
|  | Three Month Periods Ended |  | Six Month Periods Ended
Gain (loss) in OCI (in millions) |  | April 3, 2022 |  | April 4, 2021 |  | April 3, 2022 |  | April 4, 2021
Net investment hedge |  | $ | 11.9 |  |  | $ | 20.1 |  |  | $ | 22.5 |  |  | $ | (1.4) |
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 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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