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Accounting Policies | 12 Months Ended
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Dec. 31, 2018
Accounting Policies |
Accounting Policies | (2) Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the Company and its majority and wholly owned subsidiaries. Upon consolidation, all intercompany accounts and transactions are eliminated. Cash Equivalents Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase and consist primarily of money market funds, for which the carrying amount is a reasonable estimate of fair value. Allowance for Doubtful Accounts The allowance for doubtful accounts is established to represent the Company’s best estimate of the net realizable value of the outstanding accounts receivable. The development of the Company’s allowance for doubtful accounts varies by region but in general is based on a review of past due amounts, historical write‑off experience, as well as aging trends affecting specific accounts and general operational factors affecting all accounts. In addition, factors are developed in certain regions utilizing historical trends of sales and returns and allowances and cash discount activities to derive a reserve for returns and allowances and cash discounts. The Company uniformly considers current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. The Company also aggressively monitors the creditworthiness of the Company’s largest customers and periodically reviews customer credit limits to reduce risk. If circumstances relating to specific customers change or unanticipated changes occur in the general business environment, the Company’s estimates of the recoverability of receivables could be further adjusted. Concentration of Credit The Company sells products to a diversified customer base and, therefore, has no significant concentrations of credit risk. In 2018, 2017, and 2016, no customer accounted for 10% or more of the Company’s total sales or accounts receivable. Inventories Inventories are stated at the lower of cost or market, using the first‑in, first‑out method. Market value is determined by replacement cost or net realizable value. Historical usage is used as the basis for determining the reserve for excess or obsolete inventories. Goodwill and Other Intangible Assets Goodwill is recorded when the consideration paid for acquisitions exceeds the fair value of net tangible and intangible assets acquired. Goodwill and other intangible assets with indefinite useful lives are not amortized, but rather are tested for impairment at least annually or more frequently if events or circumstances indicate that it is “more likely than not” that they might be impaired, such as from a change in business conditions. The Company performs its annual goodwill and indefinite-lived intangible assets impairment assessment in the fourth quarter of each year. Long-Lived Assets Intangible assets with estimable lives and other long‑lived assets are reviewed for indicators of impairment at least quarterly or more frequently if events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Depreciation is provided on a straight‑line basis over the estimated useful lives of the assets, which range from 10 to 40 years for buildings and improvements and 3 to 15 years for machinery and equipment. Leasehold improvements are depreciated over the lesser of the economic useful life of the asset or the remaining lease term. Taxes, Other than Income Taxes Taxes assessed by governmental authorities on sale transactions are recorded on a net basis and excluded from sales in the Company’s consolidated statements of operations. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes tax benefits when the item in question meets the more–likely–than‑not (greater than 50% likelihood of being sustained upon examination by the taxing authorities) threshold. As of December 31, 2018, the Company had gross unrecognized tax benefits of approximately $10.2 million, approximately $4.5 million of which, if recognized, would affect the effective tax rate. The difference between the amount of unrecognized tax benefits and the amount that would affect the effective tax rate consists of the federal tax benefit of state income tax items and allowable correlative adjustments that are available for certain jurisdictions. A reconciliation of the beginning and ending amount of unrecognized tax is as follows:
|  | (in millions)
Balance at January 1, 2018 |  | $ | 7.7
Increases related to prior year tax positions |  |  | 2.5
Increases related to current year tax provisions |  |  | 2.5
Settlements |  |  | (2.1)
Currency movement |  |  | (0.4)
Balance at December 31, 2018 |  | $ | 10.2
The Company estimates that it is reasonably possible that the balance of unrecognized tax benefits as of December 31, 2018 may decrease by approximately $0.5 million in the next twelve months, as a result of lapses in statutes of limitations and settlements of open audits. In February 2018, the United States Internal Revenue Service concluded an audit of the Company’s 2015 and 2016 tax years. There were no material adjustments as a result of the audit. The Company conducts business in a variety of locations throughout the world resulting in tax filings in numerous domestic and foreign jurisdictions. The Company is subject to tax examinations regularly as part of the normal course of business. The Company’s major jurisdictions are the U.S., France, Germany, Canada, and the Netherlands. The statute of limitations in the U.S. is subject to tax examination for 2015 and later; France, Germany, Canada and the Netherlands are subject to tax examination for 2012-2014 and later. All other jurisdictions, with few exceptions, are no longer subject to tax examinations in state, local or international jurisdictions for tax years before 2013. The Company accounts for interest and penalties related to uncertain tax positions as a component of income tax expense. Foreign Currency Translation The functional currency for most of the Company’s foreign subsidiaries is their local currency. For non-U.S. subsidiaries that transact in a functional currency other than the U.S. dollar, assets and liabilities are translated at current rates of exchange at the balance sheet date. Income and expense items are translated at the average foreign currency exchange rates for the period. Adjustments resulting from the translation of the financial statements of foreign operations into U.S. dollars are excluded from the determination of net income and are recorded in accumulated other comprehensive income, a separate component of equity. For subsidiaries where the functional currency of the assets and liabilities differs from the local currency, non-monetary assets and liabilities are translated at the rate of exchange in effect on the date assets were acquired while monetary assets and liabilities are translated at current rates of exchange as of the balance sheet date. Income and expense items are translated at the average foreign currency rates for the period. Translation adjustments of these subsidiaries are included in other (income) expense, net in the consolidated statements of operations. Stock‑Based Compensation The Company records compensation expense in the financial statements for share‑based awards based on the grant date fair value of those awards for restricted stock awards and deferred stock awards. Stock‑based compensation expense for restricted stock awards and deferred stock awards is recognized over the requisite service periods of the awards on a straight‑line basis, which is generally commensurate with the vesting term. The performance stock units offered by the Company to employees are amortized to expense over the vesting period, and based on the Company’s performance relative to the performance goals, may be adjusted. Changes to the estimated shares expected to vest will result in adjustments to the related share-based compensation expense that will be recorded in the period of change. In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” and the Company adopted this standard in the first quarter of 2017 with an immaterial change to retained earnings. As part of the adoption of this standard, the Company elected to account for forfeitures as they occur, rather than estimate expected forfeitures over the vesting period of the respective grant. The Company also no longer reclassifies the benefits associated with tax deductions in excess of recognized compensation cost from operating activities to financing activities in the Consolidated Statement of Cash Flows. At December 31, 2018, the Company had one stock‑based compensation plan with total unrecognized compensation costs related to unvested stock‑based compensation arrangements of approximately $17.4 million and a total weighted average remaining term of 1.61 years. For 2018, 2017 and 2016, the Company recognized compensation costs related to stock‑based programs of approximately $13.8 million, $13.9 million and $13.4 million, respectively. For 2018, 2017 and 2016 stock compensation expense, $0.9 million, $0.8 million and $0.9 million, respectively, was recorded in cost of goods sold and $12.9 million, $13.1 million and $12.5 million, respectively, was recorded in selling, general and administrative expenses. For 2017 and 2016, the Company recorded approximately $0.1 million and $0.8 million, respectively, of tax benefits for the compensation expense relating to its stock options. For 2018, 2017 and 2016, the Company recorded approximately $2.8 million, $3.9 million and $2.8 million, respectively, of tax benefit for its other stock‑based plans. For 2018, 2017 and 2016, the recognition of total stock‑based compensation expense impacted both basic and diluted net income per common share by $0.32, $0.28 and $0.29, respectively. Net Income Per Common Share Basic net income per common share is calculated by dividing net income by the weighted average number of common shares outstanding. The calculation of diluted net income per share assumes the conversion of all dilutive securities. Net income and the number of shares used to compute net income per share, basic and assuming full dilution, are reconciled below:
|  | Year Ended December 31,
|  | 2018 |  | 2017 |  | 2016
|  |  |  |  |  |  | Per |  |  |  |  |  |  | Per |  |  |  |  |  |  | Per
|  | Net |  |  |  | Share |  | Net |  |  |  | Share |  | Net |  |  |  | Share
|  | Income |  | Shares |  | Amount |  | Income |  | Shares |  | Amount |  | Income |  | Shares |  | Amount
|  | (Amounts in millions, except per share information)
Basic EPS |  | $ | 128.0 |  | 34.3 |  | $ | 3.73 |  | $ | 73.1 |  | 34.4 |  | $ | 2.12 |  | $ | 84.2 |  | 34.4 |  | $ | 2.45
Dilutive securities, principally common stock options |  |  | — |  | — |  |  | — |  |  | — |  | — |  |  | — |  |  | — |  | 0.1 |  |  | (0.01)
Diluted EPS |  | $ | 128.0 |  | 34.3 |  | $ | 3.73 |  | $ | 73.1 |  | 34.4 |  | $ | 2.12 |  | $ | 84.2 |  | 34.5 |  | $ | 2.44
The computation of diluted net income per share for the year ended December 31, 2016 excludes the effect of the potential exercise of options to purchase approximately 0.1 million shares because the exercise price of the option was greater than the average market price of the Class A common stock and the effect would have been anti‑dilutive. Financial Instruments In the normal course of business, the Company manages risks associated with commodity prices, foreign exchange rates and interest rates through a variety of strategies, including the use of hedging transactions, executed in accordance with the Company’s policies. The Company’s hedging transactions include, but are not limited to, the use of various derivative financial and commodity instruments. As a matter of policy, the Company does not use derivative instruments unless there is an underlying exposure. Any change in value of the derivative instruments would be substantially offset by an opposite change in the value of the underlying hedged items. The Company does not use derivative instruments for trading or speculative purposes. Derivative instruments may be designated and accounted for as either a hedge of a recognized asset or liability (fair value hedge) or a hedge of a forecasted transaction (cash flow hedge). For a fair value hedge, both the effective and ineffective portions of the change in fair value of the derivative instrument, along with an adjustment to the carrying amount of the hedged item for fair value changes attributable to the hedged risk, are recognized in earnings. For a cash flow hedge, changes in the fair value of the derivative instrument that are highly effective are deferred in accumulated other comprehensive income or loss until the underlying hedged item is recognized in earnings. The Company has two interest rate swaps designated as cash flow hedges as of December 31, 2018 and 2017. The Company also has foreign exchange hedges designated as cash flow hedges as of December 31, 2018. Refer to Note 17 for further details. If a fair value or cash flow hedge were to cease to qualify for hedge accounting or be terminated, it would continue to be carried on the balance sheet at fair value until settled, but hedge accounting would be discontinued prospectively. If a forecasted transaction were no longer probable of occurring, amounts previously deferred in accumulated other comprehensive income would be recognized immediately in earnings. On occasion, the Company may enter into a derivative instrument that does not qualify for hedge accounting because it is entered into to offset changes in the fair value of an underlying transaction which is required to be recognized in earnings (natural hedge). These instruments are reflected in the Consolidated Balance Sheets at fair value with changes in fair value recognized in earnings. Portions of the Company’s outstanding debt are exposed to interest rate risks. The Company monitors its interest rate exposures on an ongoing basis to maximize the overall effectiveness of its interest rates. Fair Value Measurements Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. An entity is required to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value. The Company has certain financial assets and liabilities that are measured at fair value on a recurring basis and certain nonfinancial assets and liabilities that may be measured at fair value on a nonrecurring basis. The fair value disclosures of these assets and liabilities are based on a three‑level hierarchy, which is defined as follows:
Level 1 | Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date.
Level 2 | Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Assets and liabilities subject to this hierarchy are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Refer to Note 17 for further details. Shipping and Handling Shipping and handling costs included in selling, general and administrative expense amounted to $56.3 million, $52.1 million and $47.9 million for the years ended December 31, 2018, 2017 and 2016, respectively. Research and Development Research and development costs included in selling, general, and administrative expense amounted to $34.5 million, $29.0 million and $26.5 million for the years ended December 31, 2018, 2017 and 2016, respectively. Revenue Recognition The Company recognizes revenue under the core principle to depict the transfer of control to the Company’s customers in an amount reflecting the consideration to which the Company expects to be entitled. In order to achieve that core principle, the Company applies the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. The Company’s revenue for product sales is recognized on a point in time model, at the point control transfers to the customer, which is generally when products are shipped from the Company’s manufacturing or distribution facilities or when delivered to the customer’s named location. Sales tax, value-added tax, or other taxes collected concurrent with revenue producing activities are excluded from revenue. Freight costs billed to customers for shipping and handling activities are included in revenue with the related cost included in selling, general and administrative expenses. See Note 4 for further disclosures and detail regarding revenue recognition. Basis of Presentation Certain amounts in the 2017 and 2016 consolidated financial statements have been reclassified to permit comparison with the 2018 presentation, includ ing from adoption of recent accounting standards. These reclassifications had no effect on reported results of operations or stockholders' equity. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Recently Adopted Accounting Standards In February 2018, the FASB issued ASU 2018-02 “Income Statement-Reporting Comprehensive Income.” ASU 2018-02 provides guidance on the reclassification of certain tax effects from the 2017 Tax Cuts and Jobs Act (“2017 Tax Act”) from accumulated other comprehensive income. Current generally accepted accounting principles requires deferred tax liabilities and deferred tax assets to be adjusted for the effect of a change in tax laws or tax rates, with that effect included in income from operations in the period of enactment. This included the income tax effects of items in accumulated other comprehensive income. This guidance allows a reclassification from accumulated other comprehensive income to retained earnings for the tax effects on items in accumulated other comprehensive income related to the change in tax rates from the 2017 Tax Act. This standard is effective for all entities for fiscal years beginning after December 15, 2018, including interim periods within that reporting period. Early adoption of this standard is permitted. The Company adopted this standard in the first quarter of 2018, and it did not have a material impact on the Company’s financial statements. On January 1, 2018, the Company adopted the accounting standard ASC 606, Revenue from Contracts with Customers and all the related amendments (“new revenue standard” or “ASU 2014-09”) to all contracts using the modified retrospective method. The adoption of ASU 2014-09 was not material to the Company and as such, there was no cumulative effect upon the January 1, 2018 adoption date. As the impact of the new revenue standard is not material to the Company, there is no pro-forma disclosure presented for the year ended December 31, 2018. The Company expects the impact of the adoption of the new standard to be immaterial to the Company’s financial statements on an ongoing basis. See “Revenue Recognition” within this Note 2 and Note 4 of Notes to Consolidated Financial Statements in this Annual Report Form 10-K for further details. In October 2016, the FASB issued ASU 2016-16 “Intra-Entity Transfers of Assets Other than Inventory.” ASU 2016-16 provides guidance on the timing of recognition of tax consequences of an intra-entity transfer of an asset other than inventory. The Company adopted the provision of this ASU during the first quarter of 2018, using the modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the quarter. The adoption of this guidance did not have a material impact on the Company’s financial statements. Accounting Standards Updates In August 2018, the FASB issued ASU 2018-15 “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40)-Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance requires an entity in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within that reporting period. The Company is currently evaluating the impact of this guidance on the Company’s financial statements, and does not expect the adoption of this guidance to have a material impact on the Company’s financial statements. In August 2018, the FASB issued ASU 2018-13 “Fair Value Measurement (Topic 820)-Disclosure Framework- Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the disclosure requirements on fair value measurements under Topic 820. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within that reporting period. The Company is currently evaluating the impact of this guidance on the Company’s disclosures; however, this guidance does not impact the Company’s financial statements. In August 2017, the FASB issued ASU 2017-12 “Derivatives and Hedging (Topic 815)-Targeted Improvements to Accounting for Hedging Activities.” ASU 2017-12 amends the hedge accounting guidance to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in the financial statements. This guidance permits hedge accounting for risk components in hedging relationships that involve nonfinancial risk, reduces complexity in hedging for fair value hedges of interest rate risk, eliminates the requirement to separately measure and report hedging ineffectiveness, and simplifies certain hedge effectiveness assessment requirements. This standard is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period. The Company is currently evaluating the impact of this guidance, including transition elections and required disclosures, on its financial statements, and does not expect the adoption of this guidance to have a material impact on the Company’s financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016‑02 requires a lessee to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term for both finance and operating leases with a term longer than twelve months. Topic 842 was subsequently amended by ASU 2018-01, “Land Easement Practical Expedient for Transition to Topic 842,” ASU 2018-10, “Codification Improvements to Topic 842, Leases,” and ASU 2018-11 “Targeted Improvements.” ASU 2016-02 is effective for financial statements issued for annual periods beginning after December 15, 2018 and all interim periods thereafter. Early adoption is permitted for all entities. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. The Company may choose to use either 1) the effective date of the standard or 2) the beginning of the earliest comparable period presented in the financial statements as the date of initial application. The Company adopted the new standard on January 1, 2019 and used the effective date of the standard as the date of the Company’s initial application. By electing this approach, the financial information and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. The new standard provides a number of optional practical expedients throughout the transition. The Company elected the “package of practical expedients,” which permits the Company to not reassess under the new standard the Company’s prior conclusions about lease identification, lease classification, and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements, the latter not being applicable to the Company. The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize right-of-use assets or lease liabilities, and this includes not recognizing right-of-use assets or lease liabilities for existing short-term leases of those assets in transition. The Company also elected the practical expedient not to separate lease and non-lease components for all of the Company’s leases. The Company completed its analysis of the impacts of the new lease standard, and has designed the necessary changes to its existing processes and configured all system requirements that are required to implement this new standard. The Company has a variety of categories of lease arrangements, including real estate, automobiles, manufacturing equipment, facility equipment, office equipment and certain service arrangements. The Company has reviewed its leasing arrangements in order to evaluate the impact of this standard on the Company’s financial statements, and expects to record a right-of-use asset in the range of $25-40 million and a lease liability in the range of $25-40 million related to the recognition, on a discounted basis, of the Company’s minimum commitments under non-cancelable operating leases on its consolidated balance sheets in the first quarter of 2019. The Company currently does not expect ASC 842 to have a material effect on either its consolidated statement of operations or its consolidated statement of cash flow.

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