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Financial Instruments | 6 Months Ended
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Jun. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Financial Instruments | Financial Instruments The Company’s financial instruments include cash and marketable securities. Due to the short-term nature of these instruments, their book value approximates their fair value. The Company’s financial instruments may include long-term debt, interest rate and cross-currency swaps, commodity derivative contracts and foreign currency derivative contracts. All derivative contracts are placed with counterparties that have an S&P, or equivalent, investment grade credit rating at the time of the contracts’ placement. At June 30, 2018 and December 31, 2017, the Company had no derivative contracts that contained credit risk related contingent features. The Company uses certain commodity derivative contracts to protect against commodity price changes related to forecasted raw material and component purchases. The Company primarily utilizes forward and option contracts, which are designated as cash flow hedges. At June 30, 2018, the following commodity derivative contracts were outstanding. At December 31, 2017, there were no commodity derivative contracts outstanding.
|  | Commodity derivative contracts
|  | Volume hedged |  |  |  |
Commodity |  | June 30, 2018 |  | Units of measure |  | Duration
Copper |  | 151.0 |  |  | Metric Tons |  | Dec - 18
The Company manages its interest rate risk by balancing its exposure to fixed and variable rates while attempting to optimize its interest costs. The Company selectively uses interest rate swaps to reduce market value risk associated with changes in interest rates (fair value hedges). At June 30, 2018 and December 31, 2017, the Company had no outstanding interest rate swaps. The Company uses foreign currency forward and option contracts to protect against exchange rate movements for forecasted cash flows (cash flow hedges), remeasurement exposures that affect earnings (non-designated hedges), and exposures associated with the Company’s net investments in certain foreign operations (net investment hedges). Forecasted cash flows may include capital expenditures, inventory purchases, operating expenses or sales transactions designated in currencies other than the functional currency of the operating unit. The Company has also designated its Euro-denominated debt as a net investment hedge of the Company's investment in a European subsidiary. Foreign currency derivative contracts require the Company, at a future date, to either buy or sell foreign currency in exchange for the operating units' local currency. At June 30, 2018 and December 31, 2017, the following foreign currency derivative contracts were outstanding:
Foreign currency derivatives (in millions)
Functional currency |  | Traded currency |  | Notional in traded currency June 30, 2018 |  | Notional in traded currency December 31, 2017 |  | Ending Duration
Brazilian real |  | Euro |  | 1.9 |  |  | 1.1 |  |  | Dec - 18
British pound |  | Euro |  | 15.9 |  |  | — |  |  | Dec - 18
British pound |  | US dollar |  | 5.8 |  |  | — |  |  | Dec - 18
Chinese renminbi |  | US dollar |  | 11.6 |  |  | 36.0 |  |  | Sep - 18
Chinese renminbi |  | Euro |  | — |  |  | 18.6 |  |  | Jun - 18
Euro |  | Chinese renminbi |  | 37.0 |  |  | 85.0 |  |  | Dec - 18
Euro |  | British pound |  | 2.0 |  |  | 3.9 |  |  | Dec - 18
Euro |  | Japanese yen |  | 525.3 |  |  | 1,311.3 |  |  | Dec - 18
Euro |  | Swedish krona |  | 267.4 |  |  | 267.4 |  |  | Jun -19
Euro |  | US dollar |  | 24.7 |  |  | 56.5 |  |  | Mar - 19
Japanese yen |  | Chinese renminbi |  | 44.0 |  |  | — |  |  | Dec - 18
Japanese yen |  | US dollar |  | 1.4 |  |  | — |  |  | Dec - 18
Korean won |  | Euro |  | 0.8 |  |  | 3.1 |  |  | Dec - 18
Korean won |  | Japanese yen |  | 213.5 |  |  | 619.0 |  |  | Dec - 18
Korean won |  | US dollar |  | 29.8 |  |  | 11.2 |  |  | Dec - 18
Swedish krona |  | Euro |  | 83.1 |  |  | 109.7 |  |  | Jan - 20
US dollar |  | Euro |  | — |  |  | 42.0 |  |  | Dec - 18
US dollar |  | Mexican peso |  | 264.9 |  |  | — |  |  | Dec - 18
The Company selectively uses cross-currency swaps to hedge the foreign currency exposure associated with our net investment in certain foreign operations (net investment hedges). At June 30, 2018, the following cross-currency swap contracts were outstanding. At December 31, 2017, there were no cross-currency swap derivative contracts outstanding.
| Cross-Currency Swaps
(millions of dollars) | Notional in USD |  | Notional in Local Currency |  | Duration
Fixed $ to fixed € | $ | 250.0 |  |  | € | 206.2 |  |  | Sep - 20
Fixed $ to fixed ¥ | $ | 100.0 |  |  | ¥ | 10,977.5 |  |  | Feb - 23
At June 30, 2018 and December 31, 2017, the following amounts were recorded in the Condensed Consolidated Balance Sheets as being payable to or receivable from counterparties:
(in millions) |  | Assets |  | Liabilities
Derivatives designated as hedging instruments Under Topic 815: |  | Location |  | June 30, 2018 |  | December 31, 2017 |  | Location |  | June 30, 2018 |  | December 31, 2017
Foreign currency |  | Prepayments and other current assets |  | $ | 1.5 |  |  | $ | 0.9 |  |  | Accounts payable and accrued expenses |  | $ | 4.0 |  |  | $ | 3.9 |
|  | Other non-current assets |  | $ | — |  |  | $ | 0.8 |  |  | Other non-current liabilities |  | $ | 1.7 |  |  | $ | — |
Commodity |  | Prepayments and other current assets |  | $ | — |  |  | $ | — |  |  | Accounts payable and accrued expenses |  | $ | 0.1 |  |  | $ | — |
Net investment hedges |  | Other non-current assets |  | $ | 6.6 |  |  | $ | — |  |  | Other non-current liabilities |  | $ | — |  |  | $ | — |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency |  | Prepayments and other current assets |  | — |  |  | — |  |  | Accounts payable and accrued expenses |  | 0.5 |  |  | 1.1 |
Effectiveness for cash flow hedges is assessed at the inception of the hedging relationship and quarterly, thereafter. Gains and losses arising from these contracts that are included in the assessment of effectiveness are deferred into accumulated other comprehensive income (loss) ("AOCI") and reclassified into income as the underlying operating transactions are recognized. These realized gains or losses offset the hedged transaction and are recorded on the same line in the statement of operations. The initial value of any component excluded from the assessment of effectiveness will be recognized in income using a systematic and rational method over the life of the hedging instrument. Any difference between the change in fair value of the excluded component and amounts recognized in income under that systematic and rational method will be recognized in AOCI. Effectiveness for net investment hedges is assessed at the inception of the hedging relationship and quarterly, thereafter. Gains and losses arising from these contracts that are included in the assessment of effectiveness are deferred into foreign currency translation adjustments and only released when the subsidiary being hedged is sold or substantially liquidated. The initial value of any component excluded from the assessment of effectiveness will be recognized in income using a systematic and rational method over the life of the hedging instrument. Any difference between the change in fair value of the excluded component and amounts recognized in income under that systematic and rational method will be recognized in AOCI. The table below shows deferred gains (losses) reported in AOCI as well as the amount expected to be reclassified to income in one year or less. The amount expected to be reclassified to income in one year or less assumes no change in the current relationship of the hedged item at June 30, 2018 market rates.
(in millions) |  | Deferred gain (loss) in AOCI at |  | Gain (loss) expected to be reclassified to income in one year or less
Contract Type |  | June 30, 2018 |  | December 31, 2017 |
Foreign currency |  | $ | (4.4 | ) |  | $ | (2.3 | ) |  | $ | (2.6 | )
Commodity |  | (0.1 | ) |  | — |  |  | (0.1 | )
Net investment hedges: |  |  |  |  |  |
Foreign currency |  | 2.9 |  |  | 2.9 |  |  | — |
Cross-currency swaps |  | 6.6 |  |  | — |  |  | — |
Foreign currency denominated debt |  | (41.1 | ) |  | (57.1 | ) |  | — |
Total |  | $ | (36.1 | ) |  | $ | (56.5 | ) |  | $ | (2.7 | )
The Company recognized a deferred loss of $0.4 million and $5.9 million in AOCI related to cash flow hedges during the three and six months ended June 30, 2018, respectively. The Company recognized a deferred loss of $1.4 million and $0.9 million in AOCI related to cash flow hedges during the three and six months ended June 30, 2017, respectively. The Company recognized a deferred gain of $45.9 million and $22.6 million in foreign currency translation adjustment related to net investment hedges during the three and six months ended June 30, 2018, respectively. The Company recognized a deferred loss of $44.9 million and $51.7 million in foreign currency translation adjustment related to net investment hedges during the three and six months ended June 30, 2017, respectively. Derivative instruments designated as cash flow hedge instruments as defined by ASC Topic 815 held during the period resulted in the following gains and (losses) recorded in income:
|  | Three Months Ended June 30, 2018
(in millions) |  | Net sales |  | Cost of sales |  | Selling, general and administrative expenses
Total amounts of income and expense line items presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded |  | $ | 2,694.0 |  |  | $ | 2,114.8 |  |  | $ | 236.0 |
Gain (loss) on cash flow hedging relationships: |  |  |  |  |  |
Foreign currency |  |  |  |  |  |
Gain (loss) reclassified from AOCI to income |  | $ | (0.7 | ) |  | $ | (1.5 | ) |  | $ | (0.3 | )
Gain (loss) reclassified from AOCI to income as a result that a forecasted transaction is no longer probable of occurring |  | $ | — |  |  | $ | — |  |  | $ | — |
Commodity |  |  |  |  |  |
Gain (loss) reclassified from AOCI to income |  | $ | — |  |  | $ | — |  |  | $ | — |
Gain (loss) reclassified from AOCI to income as a result that a forecasted transaction is no longer probable of occurring |  | $ | — |  |  | $ | — |  |  | $ | — |
|  | Six Months Ended June 30, 2018
(in millions) |  | Net sales |  | Cost of sales |  | Selling, general and administrative expenses
Total amounts of income and expense line items presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded |  | $ | 5,478.3 |  |  | $ | 4,307.3 |  |  | $ | 489.4 |
Gain (loss) on cash flow hedging relationships: |  |  |  |  |  |
Foreign currency |  |  |  |  |  |
Gain (loss) reclassified from AOCI to income |  | $ | (0.8 | ) |  | $ | (2.6 | ) |  | $ | (0.3 | )
Gain (loss) reclassified from AOCI to income as a result that a forecasted transaction is no longer probable of occurring |  | $ | — |  |  | $ | — |  |  | $ | — |
Commodity |  |  |  |  |  |
Gain (loss) reclassified from AOCI to income |  | $ | — |  |  | $ | — |  |  | $ | — |
Gain (loss) reclassified from AOCI to income as a result that a forecasted transaction is no longer probable of occurring |  | $ | — |  |  | $ | — |  |  | $ | — |
|  | Three Months Ended June 30, 2017
(in millions) |  | Net sales |  | Cost of sales |  | Selling, general and administrative expenses
Total amounts of income and expense line items presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded |  | $ | 2,389.7 |  |  | $ | 1,876.8 |  |  | $ | 215.1 |
Gain (loss) on cash flow hedging relationships: |  |  |  |  |  |
Foreign currency |  |  |  |  |  |
Gain (loss) reclassified from AOCI to income |  | $ | 0.9 |  |  | $ | 0.5 |  |  | $ | — |
Gain (loss) reclassified from AOCI to income as a result that a forecasted transaction is no longer probable of occurring |  | $ | — |  |  | $ | — |  |  | $ | (0.1 | )
Commodity |  |  |  |  |  |
Gain (loss) reclassified from AOCI to income |  | $ | — |  |  | $ | 0.1 |  |  | $ | — |
Gain (loss) reclassified from AOCI to income as a result that a forecasted transaction is no longer probable of occurring |  | $ | — |  |  | $ | — |  |  | $ | — |
|  | Six Months Ended June 30, 2017
(in millions) |  | Net sales |  | Cost of sales |  | Selling, general and administrative expenses
Total amounts of income and expense line items presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded |  | $ | 4,796.7 |  |  | $ | 3,767.5 |  |  | $ | 434.1 |
Gain (loss) on cash flow hedging relationships: |  |  |  |  |  |
Foreign currency |  |  |  |  |  |
Gain (loss) reclassified from AOCI to income |  | $ | 2.0 |  |  | $ | 1.3 |  |  | $ | — |
Gain (loss) reclassified from AOCI to income as a result that a forecasted transaction is no longer probable of occurring |  | $ | — |  |  | $ | — |  |  | $ | — |
Commodity |  |  |  |  |  |
Gain (loss) reclassified from AOCI to income |  | $ | — |  |  | $ | 0.3 |  |  | $ | — |
Gain (loss) reclassified from AOCI to income as a result that a forecasted transaction is no longer probable of occurring |  | $ | — |  |  | $ | — |  |  | $ | — |
There were no gains and (losses) recorded in income related to components excluded from the assessment of effectiveness for derivative instruments designated as cash flow hedges. Derivatives designated as net investment hedge instruments as defined by ASC Topic 815 held during the period resulted in the following gains and (losses) recorded in income on components excluded from the assessment of effectiveness:
(in millions) |  |  |  | Three months ended
Contract Type |  | Location |  | June 30, 2018 |  | June 30, 2017
Cross-currency swap |  | Interest expense and finance charges |  | $ | 2.2 |  |  | $ | — |
(in millions) |  |  |  | Six months ended
Contract Type |  | Location |  | June 30, 2018 |  | June 30, 2017
Cross-currency swap |  | Interest expense and finance charges |  | $ | 3.5 |  |  | $ | — |
There were no gains and (losses) recorded in income related to components excluded from the assessment of effectiveness for foreign currency denominated debt designated as net investment hedges. There were no gains and losses reclassified from AOCI for net investment hedges during the periods presented. Derivatives not designated as hedging instruments are used to hedge remeasurement exposures of monetary assets and liabilities denominated in currencies other than the operating units’ functional currency. These derivatives resulted in the following gains and (losses) recorded in income:
(in millions) |  |  |  | Three months ended
Contract Type |  | Location |  | June 30, 2018 |  | June 30, 2017
Foreign currency |  | Selling, general and administrative expenses |  | $ | 2.5 |  |  | $ | 1.1 |
(in millions) |  |  |  | Six months ended
Contract Type |  | Location |  | June 30, 2018 |  | June 30, 2017
Foreign currency |  | Selling, general and administrative expenses |  | $ | (1.2 | ) |  | $ | 0.1 |

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- References No definition available. + Details
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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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