Derivative and Hedging Activities

3 Months Ended

Apr. 02, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative and Hedging Activities

Derivative and Hedging Activities

The Company has traditionally entered into interest rate swap agreements to reduce its exposure to the variable rate portion of its long-term debt. The Company also considers counterparty credit risk and its own credit risk in its determination of all estimated fair values.

The Company has historically entered into derivative instruments covered by master netting arrangements whereby, in the event of a default as defined by the 2018 Credit Agreement (as defined below) or termination event, the non-defaulting party has the right to offset any amounts payable against any obligation of the defaulting party under the same counterparty agreement. See Note 15, Debt, for more information.

Derivatives Not Accounted for as Hedges

Interest Rate Swaps

On March 15, 2017, the Company entered into an interest rate swap agreement, with an effective date of March 31, 2017. The swaps have a notional value of $250.0 and fix the variable portion of the Company’s floating rate debt at 1.815%. The swap expired in March 2020. The fair value of the swap, using Level 2 inputs, was a liability of $0.0 as of April 2, 2020 and $0.1 as of December 31, 2019. The Company recorded $0.0 swap activity for the three months ended April 2, 2020.

Derivatives Accounted for as Hedges

Cash Flow Hedges

During the third quarter of 2019, the Company entered into two interest rate swap agreements with a combined notional value of $450.0. These derivatives have been designated as cash flow hedges by the Company. The fair value of these hedges was a liability of $13.7 as of April 2, 2020.

Changes in the fair value of cash flow hedges are recorded in Accumulated Other Comprehensive Income ("AOCI") and recorded in earnings in the period in which the hedged transaction occurs. The loss recognized in AOCI was $12.9 for the three months ended April 2, 2020. For the three months ended April 2, 2020, a loss of $0.1 was reclassified from AOCI to earnings. Within the next 12 months, the Company expects to recognize a loss of $5.7 in earnings related to these hedged contracts. As of April 2, 2020, the maximum term of hedged forecasted transactions was 3 years.