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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | 9 Months Ended
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Sep. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIESThe Company uses derivative financial instruments to manage its currency exchange rate risk and its interest rate risk as summarized below. Notional amounts are stated in United States dollar equivalents at spot exchange rates at the respective dates. The Company does not enter into these arrangements for trading or speculation purposes.
| Notional Amount
| September 30, 2022 |  | December 31, 2021
| (in millions)
Foreign currency forward exchange contracts | $ | 1,439.9 |  |  | $ | 1,498.8 |
Cross currency swap contracts | 300.0 |  |  | 300.0 |
Derivative financial instruments involve credit risk in the event the counterparty should default. It is the Company's policy to execute such instruments with global financial institutions that the Company believes to be creditworthy. The Company diversifies its derivative financial instruments among counterparties to minimize exposure to any one of these entities. The Company also uses International Swap Dealers Association master-netting agreements. The master-netting agreements provide for the net settlement of all contracts through a single payment in a single currency in the event of default, as defined by the agreements. The Company uses foreign currency forward exchange contracts and cross currency swap contracts to manage its exposure to changes in currency exchange rates from (a) future cash flows associated with intercompany transactions and certain local currency expenses expected to occur within the next 13 months (designated as cash flow hedges), (b) its net investment in certain foreign subsidiaries (designated as net investment hedges) and (c) foreign currency denominated assets or liabilities (designated as fair value hedges). The Company also uses foreign currency forward exchange contracts that are not designated as hedging instruments to offset the transaction gains and losses associated with revaluation of certain assets and liabilities denominated in currencies other than their functional currencies (resulting principally from intercompany and local currency transactions). All derivative financial instruments are recognized at fair value in the consolidated condensed balance sheets. For each derivative instrument that is designated as a fair value hedge, the gain or loss on the derivative included in the assessment of hedge effectiveness is recognized immediately to earnings, and offsets the loss or gain on the underlying hedged item. The Company reports in "Accumulated Other Comprehensive Loss" the gain or loss on derivative financial instruments that are designated, and that qualify, as cash flow hedges. The Company reclassifies these gains and losses into earnings in the same line item and in the same period in which the underlying hedged transactions affect earnings. Changes in the fair value of net investment hedges are reported in "Accumulated Other Comprehensive Loss" as a part of the cumulative translation adjustment and would be reclassified into earnings if the underlying net investment is sold or substantially liquidated. The portion of the change in fair value related to components excluded from the hedge effectiveness assessment are amortized into earnings over the life of the derivative. The gains and losses on derivative financial instruments for which the Company does not elect hedge accounting treatment are recognized in the consolidated statements of operations in each period based upon the change in the fair value of the derivative financial instrument. Cash flows from net investment hedges are reported as investing activities in the consolidated statements of cash flows, and cash flows from all other derivative financial instruments are reported as operating activities. The following table presents the location and fair value amounts of derivative instruments reported in the consolidated condensed balance sheets (in millions):
|  |  |  | Fair Value
Derivatives designated as hedging instruments |  | Balance Sheet Location |  | September 30, 2022 |  | December 31, 2021
Assets |  |  |  |  |  |
Foreign currency contracts |  | Other current assets |  | $ | 93.7 |  |  | $ | 36.2 |
Foreign currency contracts |  | Other assets |  | $ | 3.8 |  |  | $ | — |
Cross currency swap contracts |  | Other assets |  | $ | 59.3 |  |  | $ | 19.1 |
Liabilities |  |  |  |  |  |
Foreign currency contracts |  | Accounts payable and accrued liabilities |  | $ | 4.4 |  |  | $ | 3.9 |
The following table presents the effect of master-netting agreements and rights of offset on the consolidated condensed balance sheets (in millions):
|  |  |  |  |  |  | Gross Amounts Not Offset in the Consolidated Balance Sheet |  |
|  |  | Gross Amounts Offset in the Consolidated Balance Sheet |  |  |  |
|  |  | Net Amounts Presented in the Consolidated Balance Sheet |  |
September 30, 2022 | Gross Amounts |  | Financial Instruments |  | Cash Collateral Received |  | Net Amount
Derivative assets |  |  |  |  |  |  |  |  |  |  |
Foreign currency contracts | $ | 97.5 |  |  | $ | — |  |  | $ | 97.5 |  |  | $ | (4.4) |  |  | $ | — |  |  | $ | 93.1 |
Cross currency swap contracts | $ | 59.3 |  |  | $ | — |  |  | $ | 59.3 |  |  | $ | — |  |  | $ | — |  |  | $ | 59.3 |
Derivative liabilities |  |  |  |  |  |  |  |  |  |  |
Foreign currency contracts | $ | 4.4 |  |  | $ | — |  |  | $ | 4.4 |  |  | $ | (4.4) |  |  | $ | — |  |  | $ | — |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |
Derivative assets |  |  |  |  |  |  |  |  |  |  |
Foreign currency contracts | $ | 36.2 |  |  | $ | — |  |  | $ | 36.2 |  |  | $ | (2.8) |  |  | $ | — |  |  | $ | 33.4 |
Cross currency swap contracts | $ | 19.1 |  |  | $ | — |  |  | $ | 19.1 |  |  | $ | — |  |  | $ | — |  |  | $ | 19.1 |
Derivative liabilities |  |  |  |  |  |  |  |  |  |  |
Foreign currency contracts | $ | 3.9 |  |  | $ | — |  |  | $ | 3.9 |  |  | $ | (2.8) |  |  | $ | — |  |  | $ | 1.1 |
The following tables present the effect of derivative and non-derivative hedging instruments on the consolidated condensed statements of operations and consolidated condensed statements of comprehensive income (in millions):
|  | Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) |  |  |  | Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
|  | Three Months Ended September 30, |  | Location of Gain or (Loss) Reclassified from Accumulated OCI into Income |  | Three Months Ended September 30,
|  | 2022 |  | 2021 |  | 2022 |  | 2021
Cash flow hedges |  |  |  |  |  |  |  |  |  |
Foreign currency contracts |  | $ | 55.5 |  |  | $ | 14.2 |  |  | Cost of sales |  | $ | 27.1 |  |  | $ | (10.8) |
|  |  |  |  |  | Selling, general, and administrative expenses |  | $ | — |  |  | $ | (0.3) |
|  | Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) |  |  |  | Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
|  | Nine Months Ended September 30, |  | Location of Gain or (Loss) Reclassified from Accumulated OCI into Income |  | Nine Months Ended September 30,
|  | 2022 |  | 2021 |  | 2022 |  | 2021
Cash flow hedges |  |  |  |  |  |  |  |  |  |
Foreign currency contracts |  | $ | 138.1 |  |  | $ | 38.5 |  |  | Cost of sales |  | $ | 50.7 |  |  | $ | (24.6) |
|  |  |  |  |  | Selling, general, and administrative expenses |  | $ | — |  |  | $ | (0.6) |
|  | Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) |  |  |  | Amount of Gain or (Loss) Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)
|  | Three Months Ended September 30, |  | Location of Gain or (Loss) Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing) |  | Three Months Ended September 30,
|  | 2022 |  | 2021 |  | 2022 |  | 2021
Net investment hedges |  |  |  |  |  |  |  |  |  |
Cross currency swap contracts |  | $ | 16.9 |  |  | $ | 6.5 |  |  | Interest (income) expense, net |  | $ | 1.8 |  |  | $ | 1.6 |
|  | Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) |  |  |  | Amount of Gain or (Loss) Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)
|  | Nine Months Ended September 30, |  | Location of Gain or (Loss) Reclassified from Accumulated OCI into Income |  | Nine Months Ended September 30,
|  | 2022 |  | 2021 |  | 2022 |  | 2021
Net investment hedges |  |  |  |  |  |  |  |  |  |
Cross currency swap contracts |  | $ | 40.2 |  |  | $ | 11.9 |  |  | Interest (income) expense, net |  | $ | 5.4 |  |  | $ | 4.7 |
The cross currency swap contracts have an expiration date of June 15, 2028. At maturity of the cross currency swap contracts, the Company will deliver the notional amount of €257.2 million and will receive $300.0 million from the counterparties. The Company will receive semi-annual interest payments from the counterparties based on a fixed interest rate until maturity of the agreements.
|  |  |  | Amount of Gain or (Loss) Recognized in Income on Derivative
|  |  |  | Three Months Ended September 30,
|  | Location of Gain or (Loss) Recognized in Income on Derivative |
|  | 2022 |  | 2021
Fair value hedges |  |  |  |  |  |
Foreign currency contracts |  | Other expense (income), net |  | $ | 4.5 |  |  | $ | 1.0 |
|  |  |  | Amount of Gain or (Loss) Recognized in Income on Derivative
|  |  |  | Nine Months Ended September 30,
|  | Location of Gain or (Loss) Recognized in Income on Derivative |
|  | 2022 |  | 2021
Fair value hedges |  |  |  |  |  |
Foreign currency contracts |  | Other expense (income), net |  | $ | 4.5 |  |  | $ | 8.8 |
|  |  |  | Amount of Gain or (Loss) Recognized in Income on Derivative
|  |  |  | Three Months Ended September 30,
|  | Location of Gain or (Loss) Recognized in Income on Derivative |
|  | 2022 |  | 2021
Derivatives not designated as hedging instruments |  |  |  |  |  |
Foreign currency contracts |  | Other expense (income), net |  | $ | 24.0 |  |  | $ | 5.7 |
|  |  |  | Amount of Gain or (Loss) Recognized in Income on Derivative
|  |  |  | Nine Months Ended September 30,
|  | Location of Gain or (Loss) Recognized in Income on Derivative |
|  | 2022 |  | 2021
Derivatives not designated as hedging instruments |  |  |  |  |  |
Foreign currency contracts |  | Other expense (income), net |  | $ | 66.1 |  |  | $ | 16.6 |
The following tables present the effect of fair value and cash flow hedge accounting on the consolidated condensed statements of operations (in millions):
| Location and Amount of Gain or (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships
| Three Months Ended September 30, 2022 |  | Nine Months Ended September 30, 2022
| Cost of sales |  | Selling, general, and administrative expenses |  |  |  | Other Expense (Income), net |  | Cost of sales |  | Selling, general, and administrative expenses |  |  |  | Other Expense (Income), net
Total amounts of income and expense line items presented in the consolidated condensed statements of operations in which the effects of fair value or cash flow hedges are recorded | $ | (253.8) |  |  | $ | (377.3) |  |  |  |  | $ | (2.0) |  |  | $ | (822.5) |  |  | $ | (1,156.6) |  |  |  |  | $ | (1.0) |
The effects of cash flow hedging: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gain (loss) on fair value hedging relationships: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hedged items | $ | — |  |  | $ | — |  |  |  |  | $ | (4.1) |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | (4.1) |
Derivatives designated as hedging instruments | $ | — |  |  | $ | — |  |  |  |  | $ | 4.1 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 4.1 |
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach | $ | — |  |  | $ | — |  |  |  |  | $ | 0.4 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 0.4 |
Gain (loss) on cash flow hedging relationships: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amount of gain (loss) reclassified from accumulated OCI into income | $ | 27.1 |  |  | $ | — |  |  |  |  | $ | — |  |  | $ | 50.7 |  |  | $ | — |  |  |  |  | $ | — |
| Location and Amount of Gain or (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships
| Three Months Ended September 30, 2021 |  | Nine Months Ended September 30, 2021
| Cost of sales |  | Selling, general, and administrative expenses |  |  |  | Other Expense (Income), net |  | Cost of sales |  | Selling, general, and administrative expenses |  |  |  | Other Expense (Income), net
Total amounts of income and expense line items presented in the consolidated condensed statements of operations in which the effects of fair value or cash flow hedges are recorded | $ | (311.7) |  |  | $ | (364.4) |  |  |  |  | $ | 1.4 |  |  | $ | (939.4) |  |  | $ | (1,069.7) |  |  |  |  | $ | 11.3 |
The effects of fair value and cash flow hedging: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gain (loss) on fair value hedging relationships: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hedged items | $ | — |  |  | $ | — |  |  |  |  | $ | (0.2) |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | (6.4) |
Derivatives designated as hedging instruments | $ | — |  |  | $ | — |  |  |  |  | $ | 0.2 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 6.4 |
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach | $ | — |  |  | $ | — |  |  |  |  | $ | 0.8 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 2.4 |
Gain (loss) on cash flow hedging relationships: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amount of gain (loss) reclassified from accumulated OCI into income | $ | (10.8) |  |  | $ | (0.3) |  |  |  |  | $ | — |  |  | $ | (24.6) |  |  | $ | (0.6) |  |  |  |  | $ | — |
The Company expects that during the next twelve months it will reclassify to earnings a $38.1 million gain currently recorded in "Accumulated Other Comprehensive Loss."

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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 https://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 https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
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