Financial Instruments

6 Months Ended

Jun. 30, 2021

Derivative Instruments And Hedging Activities Disclosure [Abstract]

7.	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 Mexican peso and the Chinese yuan. The gross U.S. dollar equivalent notional amount of all foreign currency derivative hedges outstanding at June 30, 2021 was $443.7 million. Based on foreign exchange rates as of June 30, 2021, we estimate that $1.2 million of net derivative gains included in accumulated other comprehensive income as of June 30, 2021 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, 2021 and December 31, 2020 were as follows:

		Fair Value
(In millions)	Location	June 30, 2021		December 31, 2020
Assets:
Foreign exchange contracts	Other current assets	$	4.5	$	3.7
Commodity contracts	Other current assets		—		1.9
	Total assets	$	4.5	$	5.6
Liabilities:
Foreign exchange contracts	Other current liabilities	$	4.6	$	6.5
Commodity contracts	Other current liabilities		0.1		—
	Total liabilities	$	4.7	$	6.5

The effects of derivative financial instruments on the statements of comprehensive income for the six months ended June 30, 2021 and 2020 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, 2021
	Cost of products sold			Interest expense		Other expense, net
Total amounts per Consolidated Statements of Comprehensive Income	$	2,357.2		$	42.6	$	2.0
The effects of fair value and cash flow hedging:
Gain (loss) on fair value hedging relationships
Foreign exchange contracts:
Hedged items		—			—		1.7
Derivative designated as hedging instruments		—			—		(3.7	)
Gain (loss) on cash flow hedging relationships
Foreign exchange contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		(0.7	)		—		—
Commodity contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		0.9			—		—
Interest rate contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		—			0.3		—

(In millions)	Classification and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships
	Six Months Ended June 30, 2020
	Cost of products sold			Interest expense		Other income, net
Total amounts per Consolidated Statements of Comprehensive Income	$	1,802.4		$	44.3	$	11.3
The effects of fair value and cash flow hedging:
Gain (loss) on fair value hedging relationships
Foreign exchange contracts:
Hedged items		—			—		(8.8	)
Derivative designated as hedging instruments		—			—		10.0
Gain (loss) on cash flow hedging relationships
Foreign exchange contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		(0.7	)		—		—
Commodity contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		(0.4	)		—		—
Interest rate contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		—			0.3		—

The effects of derivative financial instruments on the statements of comprehensive income for the three months ended June 30, 2021 and 2020 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, 2021
	Cost of products sold			Interest expense		Other income, net
Total amounts per Consolidated Statements of Comprehensive Income	$	1,230.3		$	21.2	$	1.3
The effects of fair value and cash flow hedging:
Gain (loss) on fair value hedging relationships
Foreign exchange contracts:
Hedged items		—			—		2.5
Derivative designated as hedging instruments		—			—		(3.7	)
Gain (loss) on cash flow hedging relationships
Foreign exchange contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		0.1			—		—
Commodity contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		0.8			—		—
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, 2020
	Cost of products sold			Interest expense		Other income, net
Total amounts per Consolidated Statements of Comprehensive Income	$	892.9		$	22.2	$	5.2
The effects of fair value and cash flow hedging:
Gain (loss) on fair value hedging relationships
Foreign exchange contracts:
Hedged items		—			—		1.2
Derivative designated as hedging instruments		—			—		(0.5	)
Gain (loss) on cash flow hedging relationships
Foreign exchange contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		(1.3	)		—		—
Commodity contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		(0.2	)		—		—
Interest rate contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income		—			0.1		—

The cash flow hedges recognized in other comprehensive income were a net loss of $0.6 million and a net loss of $6.7 million in the six months ended June 30, 2021 and 2020, respectively. The cash flow hedges recognized in other comprehensive income were a net gain of $1.4 million and a net loss of $0.2 million in the three months ended June 30, 2021 and 2020, respectively.