Financial Instruments

6 Months Ended

Jun. 30, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

8.	Financial Instruments

We do not enter into financial instruments for trading or speculative purposes. We principally use financial instruments to reduce the impact of changes in foreign currency exchange rates and commodities used as raw materials in our products. The principal derivative financial instruments we enter into on a routine basis are foreign exchange contracts. Derivative financial instruments are recorded at fair value. The counterparties to derivative contracts are major financial institutions. We are subject to credit risk on these contracts equal to the fair value of these instruments. Management currently believes that the risk of incurring material losses is unlikely and that the losses, if any, would be immaterial to the Company.

Raw materials used by the Company are subject to price volatility caused by weather, supply conditions, geopolitical and economic variables, and other unpredictable external factors. As a result, from time to time, we enter into commodity swaps to manage the price risk associated with forecasted purchases of materials used in our operations.

Our primary foreign currency hedge contracts pertain to the Canadian dollar, the British pound, the Chinese yuan and the Mexican peso. The gross U.S. dollar equivalent notional amount of all foreign currency derivative hedges outstanding at June 30, 2019 was $392.9 million. Based on foreign exchange rates as of June 30, 2019, we estimate that $0.4 million of net foreign currency derivative gains included in other comprehensive income as of June 30, 2019 will be reclassified to earnings within the next twelve months.

The fair values of derivative instruments on the consolidated balance sheets as of June 30, 2019 and December 31, 2018 were as follows:

(In millions)			Fair Value
Type of hedge	Type of contract	Location	June 30, 2019		December 31, 2018
Cash flow	Foreign exchange contracts	Other current assets	$	1.3	$	3.9
Fair value	Foreign exchange contracts	Other current assets		0.7		1.4
Net investment hedges	Net investment hedges	Other current assets		-		0.7
		Total assets	$	2.0	$	6.0
Cash flow	Foreign exchange contracts	Other current liabilities	$	0.7	$	0.3
Fair value	Foreign exchange contracts	Other current liabilities		0.4		1.6
Net investment hedges	Net investment hedges	Other current liabilities		0.5		1.6
		Total liabilities	$	1.6	$	1.9

8.	Financial Instruments (Continued)

The effects of derivative financial instruments on the statements of comprehensive income for the six months ended June 30, 2019 and 2018 were as follows:

(In millions)

Classification and Amount of Gain (Loss)

Recognized in Income on Fair Value and

Cash Flow Hedging Relationships

Six Months Ended June 30, 2019

Cost of

products sold

Interest

expense

Other income,

net

Total amounts per Consolidated Statements of Earnings

1,838.7

48.2

1.9

The effects of fair value and cash flow hedging:

Gain (loss) on fair value hedging relationships

Foreign exchange contracts:

Hedged items

0.5

Derivative designated as hedging instruments

(0.2

)

Gain (loss) on cash flow hedging relationships

Foreign exchange contracts:

Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income

2.8

Commodity contracts:

Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income

Interest rate contracts:

Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income

0.2

(In millions)

Classification and Amount of Gain (Loss)

Recognized in Income on Fair Value and

Cash Flow Hedging Relationships

Six Months Ended June 30, 2018

Cost of

products sold

Interest

expense

Other income,

net

Total amounts per Consolidated Statements of Earnings

1,719.9

32.1

6.2

The effects of fair value and cash flow hedging:

Gain (loss) on fair value hedging relationships

Foreign exchange contracts:

Hedged items

(1.6

)

Derivative designated as hedging instruments

1.2

Gain (loss) on cash flow hedging relationships

Foreign exchange contracts:

Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income

Commodity contracts:

Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income

Interest rate contracts:

Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income

8.	Financial Instruments (Continued)

The effects of derivative financial instruments on the statements of comprehensive income for the three months ended June 30, 2019 and 2018 were as follows:

(In millions)	Classification and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships
	Three Months Ended June 30, 2019
	Cost of products sold			Interest expense		Other income, net
Total amounts per Consolidated Statements of Earnings	$	969.6		$	24.5	$	0.7
The effects of fair value and cash flow hedging:
Gain (loss) on fair value hedging relationships
Foreign exchange contracts:
Hedged items							(0.5	)
Derivative designated as hedging instruments							0.7
Gain (loss) on cash flow hedging relationships
Foreign exchange contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		1.6
Commodity contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		(0.1	)
Interest rate contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income					0.1

(In millions)	Classification and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships
	Three Months Ended June 30, 2018
	Cost of products sold			Interest expense		Other income, net
Total amounts per Consolidated Statements of Earnings	$	904.9		$	17.4	$	3.4
The effects of fair value and cash flow hedging:
Gain (loss) on fair value hedging relationships
Foreign exchange contracts:
Hedged items							(4.2	)
Derivative designated as hedging instruments							3.2
Gain (loss) on cash flow hedging relationships
Foreign exchange contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		0.6
Commodity contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		(0.1	)
Interest rate contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income					—

The cash flow hedges recognized in other comprehensive income was a net loss of $0.2 million and a net gain of $4.0 million in the six months ended June 30, 2019 and 2018, respectively. The cash flow hedges recognized in other comprehensive income was a net loss of $0.7 million and $0.3 million in the three months ended June 30, 2019 and 2018, respectively.