XML 28 R16.htm IDEA: XBRL DOCUMENT
v3.24.3

Derivative Financial Instruments | 9 Months Ended
--- | ---
Sep. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | Derivative Financial Instruments Our ongoing business operations expose us to various risks, such as fluctuating interest rates, foreign currency exchange rates and increasing commodity prices. To manage these market risks, we periodically enter into derivative financial instruments, such as interest rate swaps, options and foreign exchange contracts for periods consistent with, and for notional amounts equal to or less than, the related underlying exposures. We do not purchase or hold any derivative financial instruments for investment or trading purposes. All derivatives are recorded in our condensed consolidated balance sheet at fair value. Foreign Exchange Rate Risk We have entered into forward exchange contracts, designated as fair value hedges, to manage our exposure to fluctuating foreign exchange rates on cross-currency intercompany loans. As of September 30, 2024 the notional amount of these forward exchange contracts was Singapore Dollar (“SGD”) 421.9 million and $13.4 million. As of December 31, 2023 the notional amount of these forward exchange contracts was SGD 601.5 million and $13.4 million. We have also entered into forward exchange contracts, designated as fair value hedges, to manage our exposure to fluctuating foreign exchange rates on cross-currency intercompany demand notes which were executed at various times throughout 2023 and 2024. As of September 30, 2024, the total notional amounts of these forward exchange contracts were Euro ("EUR") 143.9 million and $47.1 million. As of December 31, 2023, the total notional amounts of these forward exchange contracts were EUR 278.6 million and SGD 94.0 million. In addition, we have entered into several foreign currency contracts, designated as cash flow hedges, for periods of up to eighteen months, intended to hedge the currency risk associated with a portion of our forecasted transactions denominated in foreign currencies. As of September 30, 2024, we had outstanding foreign currency contracts to purchase and sell certain pairs of currencies, as follows:
(in millions) |  |  | Sell
Currency | Purchase |  | USD | Euro | SGD
EUR | 24.1 |  |  | 26.5 |  | — |  | — |
Yen | 6,102.9 |  |  | 28.7 |  | 11.4 |  | 1.7 |
SGD | 43.4 |  |  | 19.0 |  | 12.5 |  | — |
In December 2019, we entered into a cross-currency swap for $90 million, which we designated as a hedge of our net investment in Daikyo. The cross-currency swap had an original maturity date of December 31, 2024, but was extinguished in July 2024. In July 2024, we entered into a new cross-currency swap for $130 million, which we designated as a hedge of our net investment in Daikyo. As of September 30, 2024, the notional amount of the cross-currency swap is ¥17.0 billion ($130.0 million) and the swap termination date is July 2, 2027. Under the cross-currency swap, we receive fixed USD interest rate payments in return for paying fixed JPY interest rate payments. Additionally, we will periodically enter into forward exchange contracts to mitigate our exposure to fluctuating foreign exchange rates on assets and liabilities, other than the intercompany loans and demand notes referenced above, which are denominated in foreign currencies. The Company has elected not to designate these forward contracts in hedging relationships, and any change in the value of the contracts is recognized in income. Commodity Price Risk Many of our proprietary products are made from synthetic elastomers, which are derived from the petroleum refining process. We purchase the majority of our elastomers via long-term supply contracts, some of which contain clauses that provide for surcharges related to fluctuations in crude oil prices. The following economic hedges did not qualify for hedge accounting treatment since they did not meet the highly effective requirement at inception. From November 2017 through September 2024, we purchased several series of call options for a total of 1,106,908 barrels of crude oil to mitigate our exposure to such oil-based surcharges and protect operating cash flows with regard to a portion of our forecasted elastomer purchases. As of September 30, 2024, we had outstanding contracts to purchase 187,861 barrels of crude oil from September 2024 to March 2026, at a weighted-average strike price of $85.66 per barrel. Effects of Derivative Instruments on Financial Position and Results of Operations Please refer to Note 10, Fair Value Measurements, for the balance sheet location and fair values of our derivative instruments as of September 30, 2024 and December 31, 2023. The following table summarizes the effects of derivative instruments designated as fair value hedges on the condensed consolidated statements of income:
| Amount of Gain (Loss) Recognized in Income for the |  | Amount of Gain (Loss) Recognized in Income for the |  |
| Three Months Ended September 30, |  | Nine Months Ended September 30, |  | Location on Statement of Income
($ in millions) | 2024 |  | 2023 |  | 2024 |  | 2023 |  |
Fair Value Hedges: |  |  |  |  |  |  |  |  |
Hedged item (intercompany loan) | $ | (16.6) |  |  | $ | (1.2) |  |  | $ | (6.2) |  |  | $ | 8.7 |  |  | Other expense (income)
Derivative designated as hedging instrument | 16.6 |  |  | 0.7 |  |  | 6.2 |  |  | (10.0) |  |  | Other expense (income)
Amount excluded from effectiveness testing | (1.8) |  |  | (1.5) |  |  | (5.3) |  |  | (0.4) |  |  | Other expense (income)
Total | $ | (1.8) |  |  | $ | (2.0) |  |  | $ | (5.3) |  |  | $ | (1.7) |  |  |
We recognize in earnings the initial value of forward point components for hedges of intercompany loans on a straight-line basis over the life of the fair value hedge. The value of forward point components for hedges of intercompany demand notes is recognized currently in earnings using a market approach. The expense recognized in earnings, pre-tax, for forward point components for the three and nine months ended September 30, 2024 was $1.8 million and $5.3 million, respectively. The income recognized in earnings, pre-tax, for forward point components for the three and nine months ended September 30, 2023 was $0.2 million and $1.6 million, respectively. The following tables summarize the effects of derivative instruments designated as fair value, cash flow, and net investment hedges on other comprehensive income (“OCI”) and earnings, net of tax:
| Amount of Gain (Loss) Recognized in OCI for the |  | Amount of (Gain) Loss Reclassified from Accumulated OCI into Income for the |  | Location of (Gain) Loss Reclassified from Accumulated OCI into Income
| Three Months Ended September 30, |  | Three Months Ended September 30, |
($ in millions) | 2024 |  | 2023 |  | 2024 |  | 2023 |  |
Fair Value Hedges: |  |  |  |  |  |  |  |  |
Foreign currency hedge contracts | $ | 0.5 |  |  | $ | (0.3) |  |  | $ | — |  |  | $ | 2.3 |  |  | Other expense (income)
Total | $ | 0.5 |  |  | $ | (0.3) |  |  | $ | — |  |  | $ | 2.3 |  |  |
Cash Flow Hedges: |  |  |  |  |  |  |  |  |
Foreign currency hedge contracts | $ | 0.2 |  |  | $ | 0.5 |  |  | $ | — |  |  | $ | 0.1 |  |  | Net sales
Foreign currency hedge contracts | 5.3 |  |  | (2.5) |  |  | 0.5 |  |  | 1.1 |  |  | Cost of goods and services sold
Forward treasury locks | — |  |  | — |  |  | — |  |  | — |  |  | Interest expense
Total | $ | 5.5 |  |  | $ | (2.0) |  |  | $ | 0.5 |  |  | $ | 1.2 |  |  |
Net Investment Hedges: |  |  |  |  |  |  |  |  |
Cross-currency swap | $ | (8.1) |  |  | $ | 2.9 |  |  | $ | — |  |  | $ | — |  |  | Other expense (income)
Total | $ | (8.1) |  |  | $ | 2.9 |  |  | $ | — |  |  | $ | — |  |  |
| Amount of Gain (Loss) Recognized in OCI for the |  | Amount of (Gain) Loss Reclassified from Accumulated OCI into Income for the |  | Location of (Gain) Loss Reclassified from Accumulated OCI into Income
| Nine Months Ended September 30, |  | Nine Months Ended September 30, |
($ in millions) | 2024 |  | 2023 |  | 2024 |  | 2023 |  |
Fair Value Hedges: |  |  |  |  |  |  |  |  |
Foreign currency hedge contracts | $ | 0.7 |  |  | $ | (2.3) |  |  | $ | (0.7) |  |  | $ | 4.2 |  |  | Other expense (income)
Total | $ | 0.7 |  |  | $ | (2.3) |  |  | $ | (0.7) |  |  | $ | 4.2 |  |  |
Cash Flow Hedges: |  |  |  |  |  |  |  |  |
Foreign currency hedge contracts | $ | 0.3 |  |  | $ | (0.4) |  |  | $ | (0.2) |  |  | $ | 1.2 |  |  | Net sales
Foreign currency hedge contracts | (1.3) |  |  | (6.1) |  |  | 3.1 |  |  | 1.5 |  |  | Cost of goods and services sold
Forward treasury locks | — |  |  | — |  |  | 0.1 |  |  | 0.1 |  |  | Interest expense
Total | $ | (1.0) |  |  | $ | (6.5) |  |  | $ | 3.0 |  |  | $ | 2.8 |  |  |
Net Investment Hedges: |  |  |  |  |  |  |  |  |
Cross-currency swap | $ | 0.3 |  |  | $ | 10.1 |  |  | $ | — |  |  | $ | — |  |  | Other expense (income)
Total | $ | 0.3 |  |  | $ | 10.1 |  |  | $ | — |  |  | $ | — |  |  |
Refer to the above table which summarizes the effects of derivative instruments designated as fair value hedges within the other expense (income) line in our condensed consolidated statements of income for the three and nine months ended September 30, 2024 and September 30, 2023. The following table summarizes the effects of derivative instruments designated as cash flow and net investment hedges by line item in our condensed consolidated statements of income:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
($ in millions) | 2024 |  | 2023 |  | 2024 |  | 2023
Net sales | $ | — |  |  | $ | 0.1 |  |  | $ | (0.2) |  |  | $ | 1.2 |
Cost of goods and services sold | 0.5 |  |  | 1.1 |  |  | 3.1 |  |  | 1.5 |
Interest expense | — |  |  | — |  |  | 0.1 |  |  | 0.1 |
The following table summarizes the effects of derivative instruments not designated as hedges on the condensed consolidated statements of income:
| Amount of (Loss) Gain Recognized in Income for the |  | Amount of Gain (Loss) Recognized in Income for the |  |
| Three Months Ended September 30, |  | Nine Months Ended September 30, |  | Location on Statement of Income
($ in millions) | 2024 |  | 2023 |  | 2024 |  | 2023 |  |
Commodity call options | $ | (0.5) |  |  | $ | 0.5 |  |  | $ | (0.6) |  |  | $ | (0.5) |  |  | Other expense (income)
Currency Forwards | (3.2) |  |  | — |  |  | (2.7) |  |  | (0.2) |  |  | Other expense (income)
Total | $ | (3.7) |  |  | $ | 0.5 |  |  | $ | (3.3) |  |  | $ | (0.7) |  |  |
For the three and nine months ended September 30, 2024 and 2023, there was no material ineffectiveness related to our hedges.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration