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Derivative Instruments | 9 Months Ended
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Sep. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | Derivative Instruments The Company utilizes certain derivative instruments to enhance its ability to manage currency exposure as well as raw materials price risk. Derivative instruments are entered into for periods consistent with the related underlying exposures and do not constitute positions independent of those exposures. The Company does not enter into contracts for speculative purposes. The contracts are executed with major financial institutions with no credit loss anticipated for failure of the counterparties to perform. Cash Flow Hedges With the exception of its net investment hedges, the Company designates all of its hedging instruments as cash flow hedges. For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), gains or losses on the derivative instrument are reported as a component of other comprehensive loss, net of tax, and are reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. Foreign Currency Forward Contracts The Company is exposed to foreign currency exchange risk as a result of transactions in currencies other than the functional currency of certain subsidiaries. The Company utilizes foreign currency forward purchase and sale contracts to manage the volatility associated with foreign currency purchases, sales and certain intercompany transactions in the normal course of business. Principal currencies for which the Company utilizes foreign currency forward contracts from time to time include the British pound, Canadian dollar, Euro and Mexican peso. Gains and losses on these instruments are recorded in accumulated other comprehensive loss, net of tax, until the underlying transaction is recorded in earnings. When the hedged item is realized, gains or losses are reclassified from accumulated other comprehensive loss to the consolidated statement of earnings. The assessment of effectiveness for forward contracts is based on changes in the forward rates. These hedges have been determined to be effective. The majority of the amounts in accumulated other comprehensive loss for cash flow hedges are expected to be reclassified into earnings within one year. The majority of the amounts in accumulated other comprehensive loss for cash flow hedges are expected to be reclassified into earnings within one year. The combined fair value of the foreign currency forward contracts was a liability balance of $1.2 million as of September 30, 2024 which was recorded in Accrued liabilities within the consolidated balance sheet. The combined fair value of the foreign currency forward contracts was an asset balance of $0.9 million as of December 31, 2023 which was recorded in Other current assets within the consolidated balance sheet. The following table summarizes, by currency, the contractual amounts of the Company’s foreign currency forward contracts as of the dates indicated that were designated as cash flow hedges:
(dollars in millions) | September 30, 2024 |  | December 31, 2023
| Buy |  | Sell |  | Buy |  | Sell
Canadian dollar | $ | — |  |  | $ | 48.9 |  |  | $ | — |  |  | $ | 80.5 |
Euro | 20.0 |  |  | — |  |  | 24.1 |  |  | — |
Mexican peso | 26.3 |  |  | — |  |  | 14.2 |  |  | — |
Total | $ | 46.3 |  |  | $ | 48.9 |  |  | $ | 38.3 |  |  | $ | 80.5 |
Net Investment Hedges The Company enters into certain foreign currency forward contracts to hedge the exposure to a portion of the Company’s net investments in certain non-U.S. subsidiaries against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. For the derivative instruments that are designated and qualify as net investment hedges, gains and losses are reported in other comprehensive loss where they offset gains and losses recorded on the Company’s net investments in its non-U.S. subsidiaries. These hedges are determined to be effective. The Company recognized $4.0 million and $0.2 million of after-tax losses associated with hedges of net investments in non-U.S. subsidiaries in currency translation adjustment in other comprehensive loss in the three months ended September 30, 2024 and September 30, 2023, respectively. The Company recognized $1.4 million and $1.1 million of after-tax gains associated with hedges of net investments in non-U.S. subsidiaries in currency translation adjustment in other comprehensive loss in the nine months ended September 30, 2024 and September 30, 2023, respectively. The contractual amount of the Company's foreign currency forward contracts that are designated as net investment hedges was zero as of September 30, 2024. The combined fair value of the net investment hedges was zero as of September 30, 2024. The combined fair value of the net investment hedges was a liability balance of $4.2 million as of December 31, 2023 which was recorded in Accrued liabilities within the consolidated balance sheet. The effect of cash flow hedges on the condensed consolidated statement of earnings: Three Months Ended September 30 (dollars in millions):
Derivatives in ASC 815 cash flow hedging relationships |  | Amount of (loss) gain recognized in other comprehensive loss on derivatives |  | Location of (loss) gain reclassified from accumulated other comprehensive loss into earnings |  | Amount of gain reclassified from accumulated other comprehensive loss into earnings
|  | 2024 |  | 2023 |  |  |  | 2024 |  | 2023
Foreign currency contracts |  | $ | (0.8) |  |  | $ | 1.4 |  |  | Cost of products sold |  | $ | 0.5 |  |  | $ | 2.5 |
Nine Months Ended September 30 (dollars in millions):
Derivatives in ASC 815 cash flow hedging relationships |  | Amount of (loss) gain recognized in other comprehensive loss on derivatives |  | Location of gain reclassified from accumulated other comprehensive loss into earnings |  | Amount of gain reclassified from accumulated other comprehensive loss into earnings
|  | 2024 |  | 2023 |  |  |  | 2024 |  | 2023
Foreign currency contracts |  | $ | (0.3) |  |  | $ | 3.6 |  |  | Cost of products sold |  | $ | 1.9 |  |  | $ | 6.7 |
Balance Sheet Hedges Foreign Exchange Contracts The Company periodically enters into foreign exchange contracts to mitigate the foreign currency volatility relative to certain intercompany loans. These foreign exchange contracts did not qualify for hedge accounting in accordance with ASC 815 and as such were marked to market through earnings. The fair value of the foreign exchange contracts was zero as of September 30, 2024. The fair value of the foreign exchange contracts was a liability balance of $0.8 million as of December 31, 2023 which was recorded in Accrued liabilities within the consolidated balance sheet. The following table summarizes the contractual amounts of the Company's foreign exchange contracts that are designated as balance sheet hedges:
(dollars in millions) | September 30, 2024 |  | December 31, 2023
| Buy |  | Sell |  | Buy |  | Sell
Canadian dollar | $ | — |  |  | $ | 18.7 |  |  | $ | 44.1 |  |  | $ | — |
Chinese yuan | — |  |  | — |  |  | 206.8 |  |  | — |
Total | $ | — |  |  | $ | 18.7 |  |  | $ | 250.9 |  |  | $ | — |
The amounts recognized within the consolidated statements of earnings related to the Company's foreign exchange contracts are set forth below. Three Months Ended September 30 (dollars in millions):
Derivatives not designated as hedging instruments: | Location of expense within the consolidated statements of earnings |  | 2024 |  | 2023
Foreign exchange contracts | Other (income) expense - net |  | $ | (3.6) |  |  | $ | 1.1 |
Nine Months Ended September 30 (dollars in millions):
Derivatives not designated as hedging instruments: | Location of expense within the consolidated statements of earnings |  | 2024 |  | 2023
Foreign exchange contracts | Other (income) expense - net |  | $ | 2.1 |  |  | $ | 1.1 |

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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://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
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