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Financial Instruments | 9 Months Ended
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Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Financial Instruments | 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. We may be exposed to interest rate risk on existing debt or forecasted debt issuance. To mitigate this risk, we may enter into interest rate hedge contracts. The Company entered into a total of $600 million of interest rate hedge contracts during the fourth quarter of 2021 and first quarter of 2022. These contracts were terminated during the second quarter of 2023 in parallel with the issuance of $600 million of long-term debt. Terminating the contracts resulted in a pre-tax gain of $84.2 million which was recorded in accumulated other comprehensive income and will be reclassified to earnings over the 10-year maturity associated with the new long-term debt. Our primary foreign currency hedge contracts pertain to the British pound, the Canadian dollar, the Mexican peso and the Chinese yuan. The gross U.S. dollar equivalent notional amount of all foreign currency derivative hedges outstanding at September 30, 2023 was $463.2 million. Based on foreign exchange rates as of September 30, 2023, we estimat e that $13.1 million of net derivative gains included in accumulated other comprehensive income as of September 30, 2023 will be reclassified to earnings within the next twelve months. The fair values of derivative instruments on the consolidated balance sheets as of September 30, 2023 and December 31, 2022 were as follows:
|  |  |  |  | Fair Value |
(In millions) |  | Location |  |  | September 30, 2023 |  |  | December 31, 2022 |
Assets: |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | Other current assets |  |  | $ | 2.7 |  |  | $ | 5.0 |
Interest rate contracts |  | Other current assets |  |  |  | - |  |  |  | 84.6 |
|  | Total assets |  |  | $ | 2.7 |  |  | $ | 89.6 |
Liabilities: |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | Other current liabilities |  |  | $ | 2.3 |  |  | $ | 0.7 |
Commodity contracts |  | Other current liabilities |  |  |  | - |  |  |  | 3.6 |
|  | Total liabilities |  |  | $ | 2.3 |  |  | $ | 4.3 |
The effects of derivative financial instruments on the statements of comprehensive income for the thirty-nine weeks ended September 30, 2023 and nine months ended September 30, 2022 were as follows:
(In millions) |  | Classification and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships |
|  | Thirty-Nine Weeks Ended September 30, 2023 |
|  | Cost of products sold |  |  | Interest expense |  |  | Other income, net |
Total amounts per Consolidated Statements of Comprehensive Income |  | $ | 2,048.4 |  |  | $ | 87.9 |  |  | $ | 20.9 |
The effects of fair value and cash flow hedging: |  |  |  |  |  |  |  |  |
Gain (loss) on fair value hedging relationships |  |  |  |  |  |  |  |  |
Foreign exchange contracts: |  |  |  |  |  |  |  |  |
Hedged items |  |  | - |  |  |  | - |  |  |  | 1.4 |
Derivative designated as hedging instruments |  |  | - |  |  |  | - |  |  |  | 0.4 |
Gain (loss) on cash flow hedging relationships |  |  |  |  |  |  |  |  |
Foreign exchange contracts: |  |  |  |  |  |  |  |  |
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income |  |  | 4.1 |  |  |  | - |  |  |  | - |
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 |  |  | - |  |  |  | 5.8 |  |  |  | - |
(In millions) |  | Classification and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships |
|  | Nine Months Ended September 30, 2022 |
|  | Cost of products sold |  |  | Interest expense |  |  | Other income, net |
Total amounts per Consolidated Statements of Comprehensive Income |  | $ | 2,130.5 |  |  | $ | 85.3 |  |  | $ | 5.2 |
The effects of fair value and cash flow hedging: |  |  |  |  |  |  |  |  |
Gain (loss) on fair value hedging relationships |  |  |  |  |  |  |  |  |
Foreign exchange contracts: |  |  |  |  |  |  |  |  |
Hedged items |  |  | - |  |  |  | - |  |  |  | (28.1 | )
Derivative designated as hedging instruments |  |  | - |  |  |  | - |  |  |  | 25.5 |
Gain (loss) on cash flow hedging relationships |  |  |  |  |  |  |  |  |
Foreign exchange contracts: |  |  |  |  |  |  |  |  |
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income |  |  | 2.1 |  |  |  | - |  |  |  | - |
Commodity contracts: |  |  |  |  |  |  |  |  |
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income |  |  | (4.2 | ) |  |  | - |  |  |  | - |
Interest rate contracts: |  |  |  |  |  |  |  |  |
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income |  |  | - |  |  |  | 2.5 |  |  |  | - |
The effects of derivative financial instruments on the statements of comprehensive income for the thirteen weeks ended September 30, 2023 and three months ended September 30, 2022 were as follows:
(In millions) |  | Classification and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships |
|  | Thirteen Weeks Ended September 30, 2023 |
|  | Cost of products sold |  |  | Interest expense |  |  | Other income, net |
Total amounts per Consolidated Statements of Comprehensive Income |  | $ | 721.1 |  |  | $ | 33.3 |  |  | $ | 9.4 |
The effects of fair value and cash flow hedging: |  |  |  |  |  |  |  |  |
Gain (loss) on fair value hedging relationships |  |  |  |  |  |  |  |  |
Foreign exchange contracts: |  |  |  |  |  |  |  |  |
Hedged items |  |  | - |  |  |  | - |  |  |  | (3.0 | )
Derivative designated as hedging instruments |  |  | - |  |  |  | - |  |  |  | 3.3 |
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 |  |  | (0.1 | ) |  |  | - |  |  |  | - |
Interest rate contracts: |  |  |  |  |  |  |  |  |
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income |  |  | - |  |  |  | 3.2 |  |  |  | - |
(In millions) |  | Classification and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships |
|  | Three Months Ended September 30, 2022 |
|  | Cost of products sold |  |  | Interest expense |  |  | Other income, net |
Total amounts per Consolidated Statements of Comprehensive Income |  | $ | 716.6 |  |  | $ | 33.0 |  |  | $ | 2.8 |
The effects of fair value and cash flow hedging: |  |  |  |  |  |  |  |  |
Gain (loss) on fair value hedging relationships |  |  |  |  |  |  |  |  |
Foreign exchange contracts: |  |  |  |  |  |  |  |  |
Hedged items |  |  | - |  |  |  | - |  |  |  | (17.7 | )
Derivative designated as hedging instruments |  |  | - |  |  |  | - |  |  |  | 17.8 |
Gain (loss) on cash flow hedging relationships |  |  |  |  |  |  |  |  |
Foreign exchange contracts: |  |  |  |  |  |  |  |  |
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income |  |  | 0.8 |  |  |  | - |  |  |  | - |
Commodity contracts: |  |  |  |  |  |  |  |  |
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income |  |  | (3.9 | ) |  |  | - |  |  |  | - |
Interest rate contracts: |  |  |  |  |  |  |  |  |
Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income |  |  | - |  |  |  | 1.1 |  |  |  | - |

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