XML 36 R26.htm IDEA: XBRL DOCUMENT
v3.23.1

Derivative Financial Instruments | 3 Months Ended
--- | ---
Mar. 31, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | Derivative Financial Instruments Derivatives and Hedging We utilize a combination of cross-currency swaps and foreign exchange collars (together the “Foreign Exchange Collar Contracts”) as a net investment hedge of a portion of our investments in certain international subsidiaries that use the euro as their functional currency in order to reduce the volatility caused by changes in exchange rates. As a result of our acquisition of Howden, we are also a party to foreign currency contracts not designated as hedging instruments (the “Foreign Currency Contracts”) which are used to mitigate the risk associated with cash management activities and customer forward sale agreements denominated in currencies other than the applicable local currency, and to match costs and expected revenues where production facilities have a different currency than the selling currency. On September 16, 2022, immediately following the termination of the aforementioned cross-currency swap, we entered into a pay-fixed rate, receive-fixed rate cross-currency swap that provides for an exchange of principal on a notional amount of $99.8 swapped to euro 100.0 million on its June 30, 2025 maturity and receipt of U.S. dollar interest from our swap counterparties at a fixed rate of 1.6% per annum (the “September 16 Swap”). Concurrent to entering into the September 16 Swap, we also entered into a separate zero cost foreign exchange collar contract (the “Collar Contract”) with the same counterparty, notional amount and expiration date as the September 16 Swap. Under the Collar Contract, we sold a put option with a lower strike price and purchased a call option with an upper strike price to manage final settlement of the September 16 Swap. Our Foreign Exchange Collar Contracts are measured at fair value with changes in fair value recorded as foreign currency translation adjustments with in accumulated other comprehensive loss. W e classify cash flows related to our Foreign Exchange Collar Contracts as investing activities within our condensed consolidated statements of cash flows. Our Foreign Currency Contracts are measured at fair value with changes in fair value recorded within foreign currency (gain) loss. We classify cash flows related to our Foreign Currency Contracts as operating activities within our condensed consolidated statements of cash flows. The notional value of our Foreign Currency Contracts was $346.7 as of March 31, 2023. Our derivative contracts are entered into with major financial institutions in order to reduce credit risk and risk of nonperformance by third parties. We believe the credit risks with respect to the counterparties, and the foreign currency risks that would not be hedged if the counterparties fail to fulfill their obligations under the contract, are not material in view of our understanding of the financial strength of the counterparties. Our derivative contracts are not exchange traded instruments and their fair value is determined using the cash flows of the contracts, discount rates to account for the passage of time, implied volatility, current foreign exchange market data and credit risk, which are all based on inputs readily available in public markets and categorized as Level 2 fair value hierarchy measurements. The following table represents the fair value of our asset and liability derivatives:
|  | Asset Derivatives |  | Liability Derivatives |  |
|  |  |  | March 31, 2023 |  | December 31, 2022 |  |  |  | March 31, 2023 |  | December 31, 2022 |  |
Derivatives designated as net investment hedge |  | Balance Sheet Location |  | Fair Value |  | Fair Value |  | Balance Sheet Location |  | Fair Value |  | Fair Value |  |
Foreign Exchange Collar Contracts (1) |  | Other assets |  | $ | — |  |  | $ | — |  |  | Other long-term liabilities |  | $ | 3.7 |  |  | $ | 2.7 |  |  |
Total derivatives designated as net investment hedge |  |  |  | — |  |  | — |  |  |  |  | 3.7 |  |  | 2.7 |  |  |
Derivatives not designated as hedges |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign Currency Contracts |  | Other current assets |  | 4.1 |  |  | — |  |  | Other current liabilities |  | 2.5 |  |  | — |  |  |
Foreign Currency Contracts |  | Other assets |  | 0.1 |  |  | — |  |  | Other long-term liabilities |  | — |  |  | — |  |  |
Total derivatives not designated as hedges |  |  |  | 4.2 |  |  | — |  |  |  |  | 2.5 |  |  | — |  |  |
Total derivatives |  |  |  | $ | 4.2 |  |  | $ | — |  |  |  |  | $ | 6.2 |  |  | $ | 2.7 |  |  |
_______________ (1)Represents foreign exchange swaps and foreign exchange options. The following table represents the net effect derivative instruments designated in hedging relationships had on accumulated other comprehensive loss on the condensed consolidated statements of operations and comprehensive (loss) income:
|  | Unrealized loss recognized in accumulated other comprehensive loss on derivatives, net of taxes |  |
Derivatives designated as net investment hedge |  | Three Months Ended March 31, 2023 |  |
Foreign Exchange Collar Contracts (1) (2) |  | $ | 0.8 |  |  |
_______________ (1)Our designated derivative instruments are highly effective. As such, there were no gains or losses recognized immediately in income related to hedge ineffectiveness during the three months ended March 31, 2023. (2)Represents amount excluded from effectiveness testing. Our Foreign Exchange Collar Contracts are designated with terms based on the spot rate of the euro. Future changes in the components related to the spot change on the notional will be recorded in other comprehensive income and remain there until the hedged subsidiaries are substantially liquidated. All coupon payments are classified in interest expense, net in the condensed consolidated statements of operations and comprehensive (loss) income, and the initial value of excluded components currently recorded in accumulated other comprehensive loss as a foreign currency translation adjustment are amortized to interest expense, net over the remaining term of the Foreign Exchange Contract. The following table represents the effect that derivative instruments not designated as hedges had on net income:
|  |  | Amount of gain (loss) recognized in income
|  |  | Three Months Ended March 31, |  | Three Months Ended March 31,
Derivatives not designated as hedges | Location of gain (loss) recognized in income |  | 2023 |  | 2022
Foreign Currency Contracts | Foreign currency gain (loss) |  | $ | 2.5 |  |  | $ | — |
The following table represents interest income, included within interest expense, net on the condensed consolidated statements of operations and comprehensive (loss) income related to amounts excluded from the assessment of hedge effectiveness for derivative instruments designated as net investment hedges:
|  | Amount of gain recognized in income on derivative (amount excluded from effectiveness testing)
|  | Three Months Ended March 31, |  | Three Months Ended March 31,
Derivatives designated as net investment hedge |  | 2022 |  | 2022
Foreign Exchange Collar Contracts (1) (2) |  | $ | 0.4 |  |  | $ | — |
_______________ (1)Represents foreign exchange swaps and foreign exchange options. (2)Represents amount excluded from effectiveness testing. Our Foreign Exchange Collar Contracts are designated with terms based on the spot rate of the euro. Future changes in the components related to the spot change on the notional will be recorded in other comprehensive income and remain there until the hedged subsidiaries are substantially liquidated. All coupon payments are classified in interest expense, net in the condensed consolidated statements of operations and comprehensive (loss) income, and the initial value of excluded components currently recorded in accumulated other comprehensive loss as a foreign currency translation adjustment are amortized to interest expense, net over the remaining term of the Foreign Exchange Contract.

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://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
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration