Derivative Financial Instruments

12 Months Ended

Dec. 31, 2011

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

(13) Derivative Financial Instruments

The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed using derivative instruments are commodity price risk, currency exchange risk, and interest rate risk. Forward contracts on certain commodities are entered into to manage the price risk associated with forecasted purchases of materials used in the Company's manufacturing process. Forward contracts on certain currencies are entered into to manage forecasted cash flows in certain foreign currencies. Interest rate swaps are entered into to manage interest rate risk associated with the Company's floating rate borrowings.

The Company is exposed to credit losses in the event of non-performance by the counterparties to various financial agreements, including its commodity hedging transactions, foreign currency exchange contracts and interest rate swap agreements. Exposure to counterparty credit risk is managed by limiting counterparties to major international banks and financial institutions meeting established credit guidelines and continually monitoring their compliance with the credit guidelines. The Company does not obtain collateral or other security to support financial instruments subject to credit risk. The Company does not anticipate non-performance by its counterparties, but cannot provide assurances.

The Company recognizes all derivative instruments as either assets or liabilities at fair value in the statement of financial position. Accordingly, the Company designates commodity forward contracts as cash flow hedges of forecasted purchases of commodities, currency forward contracts as cash flow hedges of forecasted foreign currency cash flows and interest rate swaps as cash flow hedges of forecasted LIBOR-based interest payments. There were no significant collateral deposits on derivative financial instruments as of December 31, 2011.

Cash flow hedges

For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or changes in market value of derivatives not designated as hedges are recognized in current earnings. At December 31, 2011 and January 1, 2011 the Company had an additional $(2.5) million and $4.1 million, net of tax, of derivative (losses) gains on closed hedge instruments in AOCI that will be realized in earnings when the hedged items impact earnings.

The Company had outstanding the following notional amounts to hedge forecasted purchases of commodities (in millions):

	December 31, 2011		January 1, 2011
Copper		221.7		106.3
Aluminum		13.2		4.2
Natural Gas		0.2		0.7
Zinc		—		0.2

As of December 31, 2011, the maturities of commodity forward contracts extended through July, 2013.

The Company had outstanding the following notional amounts of currency forward contracts (in millions):

	December 31, 2011		January 1, 2011
Mexican Peso		237.5		86.3
Indian Rupee		37.0		36.4
Chinese Renminbi		34.3		8.9
Thai Baht		6.3		2.4

As of December 31, 2011, the maturities of currency forward contracts extended through June, 2014.

As of December 31, 2011 and January 1, 2011, the total notional amount of the Company's receive-variable/pay-fixed interest rate swaps was $250.0 million (with maturities extending to August 2017).

Fair values of derivative instruments were (in millions):

			December 31, 2011
	Prepaid Expenses		Other Noncurrent Assets		Hedging Obligations (current)		Hedging Obligations
Designated as hedging instruments:
Interest rate swap contracts	$	—	$	—	$	—	$	42.0
Foreign exchange contracts		0.4		0.1		13.6		11.7
Commodity contracts		2.1		1.0		12.2		1.4
Not designated as hedging instruments:
Foreign exchange contracts		0.1		—		—		—
Commodity contracts		0.2		—		0.3		—
Total Derivatives:	$	2.8	$	1.1	$	26.1	$	55.1
			January 1, 2011
	Prepaid Expenses		Other Noncurrent Assets		Hedging Obligations (current)		Hedging Obligations
Designated as hedging instruments:
Interest rate swap contracts	$	—	$	—	$	—	$	39.1
Foreign exchange contracts		7.1		1.4		0.2		0.1
Commodity contracts		24.7		4.2		0.1		—
Not designated as hedging instruments:
Foreign exchange contracts		0.2		—		—		—
Commodity contracts		0.2		—		—		—
Total Derivatives:	$	32.2	$	5.6	$	0.3	$	39.2

The effect of derivative instruments on the consolidated statements of equity and income for the three fiscal years in the period ended December 31, 2011 were (in millions):

Derivatives Designated as Cash Flow Hedging Instruments

	Year Ended December 31, 2011												Year Ended January 1, 2011											Year Ended January 2, 2010
	Commodity Forwards			Currency Forwards			Interest Rate Swaps			Total			Commodity Forwards		Currency Forwards			Interest Rate Swaps			Total			Commodity Forwards			Currency Forwards			Interest Rate Swaps			Total
Gain (Loss) recognized in
Other Comprehensive Income (Loss)	$	(29.4	)	$	(26.7	)	$	(16.0	)	$	(72.1	)	$	38.5	$	11.1		$	(20.5	)$		29.1		$	30.6		$	12.1		$	6.9 $			49.6
Amounts reclassified from other comprehensive income (loss) were:
Gain recognized in Net Sales		—			0.2			—			0.2			—		—			—			—			—			(3.3	)		—			(3.3	)
Gain (Loss) recognized in Cost of Sales		21.4			5.7			—			27.1			10.1		(2.7	)		—			7.4			(51.4	)		(14.1	)		—			(65.5	)
Loss recognized in Interest Expense		—			—			(13.1	)		(13.1	)		—		—			(12.7	)		(12.7	)		—			—			(11.5	)		(11.5	)

The ineffective portion of hedging instruments recognized was immaterial for all periods presented.

Derivatives Not Designated as Cash Flow Hedging Instruments

	Year Ended December 31, 2011								Year Ended January 1, 2011								Year Ended January 2, 2010
	Commodity Forwards		Currency Forwards			Total			Commodity Forwards			Currency Forwards		Total			Commodity Forwards		Currency Forwards			Total
Gain (loss) recognized in Cost of Sales	$	—	$	(0.1	)	$	(0.1	)	$	(0.6	)	$	0.2	$	(0.4	)	$	9.4	$	(1.4	)	$	8.0

The net AOCI balance related to hedging activities of $(50.8) million losses at December 31, 2011 includes $(21.5) million of net current deferred losses expected to be realized in the next twelve months. There were no gains or losses reclassified from AOCI to earnings based on the probability that the forecasted transaction would not occur.