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Derivatives (Notes)

9 Months Ended

Sep. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

6. DERIVATIVES

Our business and financial results are affected by fluctuations in global financial markets, including interest rates and currency exchange rates.  Our hedging policy has been developed to manage these risks to an acceptable level based on management’s judgment of the appropriate trade-off between risk, opportunity and cost. We do not hold financial instruments for trading or speculative purposes.

Currency derivative contracts  From time to time, we use foreign currency forward contracts to reduce the effects of fluctuations in exchange rates relating to certain foreign currencies.  As of September 30, 2021 and December 31, 2020, we had currency forward contracts outstanding with a total notional amount of $167.3 million and $178.2 million, respectively, that hedge our exposure to changes in foreign currency exchange rates for certain payroll expenses into the second quarter of 2024 and the purchase of certain direct and indirect inventory and other working capital items into the second quarter of 2022. 

Fixed-to-fixed cross-currency swap In 2019, we entered into a fixed-to-fixed cross-currency swap to reduce the variability of functional currency equivalent cash flows associated with changes in exchange rates on certain Euro-based intercompany loans. In the first quarter of 2020, we discontinued this fixed-to-fixed cross-currency swap, which was in an asset position of $9.8 million on the date that it was discontinued.

Also in the first quarter of 2020, we entered into a new fixed-to-fixed cross-currency swap to reduce the variability of functional currency equivalent cash flows associated with changes in exchange rates on certain Euro-based intercompany loans. The notional amount of the fixed-to-fixed cross-currency swap is €200.0 million, which was equivalent to $231.5 million and $244.2 million at September 30, 2021 and December 31, 2020, respectively. The fixed-to-fixed cross-currency swap hedges our exposure to changes in exchange rates on the intercompany loans into the second quarter of 2024.

Variable-to-fixed interest rate swap In 2019, we entered into a variable-to-fixed interest rate swap to reduce the variability of cash flows associated with interest payments on our variable rate debt. We have the following notional amounts hedged in relation to our variable-to-fixed interest rate swap: $750.0 million through May 2022, $600.0 million through May 2023 and $500.0 million through May 2024.

The following table summarizes the reclassification of pre-tax derivative gains and losses into net income (loss) from accumulated other comprehensive income (loss) for those derivative instruments designated as cash flow hedges under ASC 815 - Derivatives and Hedging:

						Location						Gain (Loss) Reclassified During																								Total of Financial						Gain (Loss) Expected
						of Gain (Loss)						Three Months Ended												Nine Months Ended												Statement						to be Reclassified
						Reclassified into						September 30,												September 30,												Line Item						During the
						Net Income						2021						2020						2021						2020						2021						Next 12 Months
												(in millions)
Currency forward contracts						Cost of Goods Sold						$	1.1					$	(1.3)					$	5.2					$	(2.3)					$	3,338.8					$	1.1
Fixed-to-fixed cross-currency swap						Other Income (Expense), net						6.0						(9.3)						14.0						(9.3)						(1.3)						1.7
Variable-to-fixed interest rate swap						Interest Expense						(3.5)						(4.1)						(11.4)						(10.1)						(150.7)						(12.5)

See Note 12 - Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (AOCI) for amounts recognized in other comprehensive income (loss) during the three and nine months ended September 30, 2021 and 2020.

The following table summarizes the amount and location of gains and losses recognized in the Condensed Consolidated Statements of Operations for those derivative instruments not designated as hedging instruments under ASC 815:

												Gain (Loss) Recognized During																								Total of Financial
						Location of Gain (Loss)						Three Months Ended												Nine Months Ended												Statement Line
						Recognized in						September 30,												September 30,												Item
						Net Income						2021						2020						2021						2020						2021
												(in millions)
Currency forward contracts						Cost of Goods Sold						$	—					$	0.9					$	—					$	(6.7)					$	3,338.8
Currency forward contracts						Other Income (Expense), net						(0.5)						—						(0.1)						(0.5)						(1.3)

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- References

No definition available.

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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

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