Derivatives and Hedging Activities (Notes)

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 19 - Derivative Instruments and Hedging Activities

The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by using derivative instruments are foreign currency exchange rate risk, commodity price risk and interest rate risk. Forward exchange contracts on various foreign currencies are entered into in order to manage the foreign currency exchange rate risk associated with certain of the Company’s commitments denominated in foreign currencies.

The Company designates certain foreign currency forward contracts as cash flow hedges of forecasted revenues and expenses and certain interest rate hedges as fair value hedges of fixed-rate borrowings.

The Company does not purchase or hold any derivative financial instruments for trading purposes. As of September 30, 2017 and December 31, 2016, the Company had $223.2 million and $282.8 million, respectively, of outstanding foreign currency forward contracts at notional value. Refer to Note 18 - Fair Value for the fair value disclosure of derivative financial instruments.

Cash Flow Hedging Strategy:

For certain derivative instruments that are designated and qualify as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any (i.e., the ineffective portion), or hedge components excluded from the assessment of effectiveness, are recognized in the Consolidated Statement of Income during the current period.

To protect against a reduction in the value of forecasted foreign currency cash flows resulting from export sales over the next year, the Company has instituted a foreign currency cash flow hedging program. The Company hedges portions of its forecasted revenue or expense denominated in foreign currencies with forward contracts. When the dollar strengthens significantly against foreign currencies, the decline in the present value of future foreign currency revenue is offset by gains in the fair value of the forward contracts designated as hedges. Conversely, when the dollar weakens, the increase in the present value of future foreign currency cash flows is offset by losses in the fair value of the forward contracts.

The length of time over which the Company hedges its exposure to the variability in future cash flows for forecasted transactions is generally 18 months or less.

Fair Value Hedging Strategy:

For derivative instruments that are designated and qualify as fair value hedges (i.e., hedging the exposure to changes in the fair value of an asset or a liability or an identified portion thereof that is attributable to a particular risk), the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in the same line item associated with the hedged item (i.e., in interest expense when the hedged item is fixed-rate debt).

Purpose for Derivative Instruments not Designated as Hedging Instruments:

For derivative instruments that are not designated as hedging instruments, the instruments typically are forward contracts. In general, the practice is to reduce volatility by selectively hedging transaction exposures including intercompany loans, accounts payable and accounts receivable. Intercompany loans between entities with different functional currencies typically are hedged with a forward contract at the inception of the loan with a maturity date at the maturity of the loan. The revaluation of these contracts, as well as the underlying balance sheet items, is recorded directly to the income statement so the adjustment generally offsets the revaluation of the underlying balance sheet items to protect cash payments and reduce income statement volatility.

The following table presents the fair value of the Company's derivative instruments. Those balances are presented in the other non-current assets/liabilities accounts within the Consolidated Balance Sheets.



	Derivative Assets				Derivatives Liabilities
Derivatives designated as hedging instruments	Fair Value at 9/30/17		Fair Value at 12/31/16		Fair Value at 9/30/17		Fair Value at 12/31/16
Foreign currency forward contracts	$	0.3	$	2.3	$	2.9	$	0.5

Derivatives not designated as hedging instruments
Foreign currency forward contracts	1.3		7.6		1.0		1.6
Total Derivatives	$	1.6	$	9.9	$	3.9	$	2.1

The following tables present the impact of derivative instruments and their location within the Consolidated Statements of Income:



	Amount of gain or (loss) recognized in Other Comprehensive Income on derivative instruments
	Three Months Ended September 30,						Nine Months Ended September 30,
Derivatives in cash flow hedging relationships	2017			2016			2017			2016
Foreign currency forward contracts	$	(1.6	)	$	(0.5	)	$	(4.7	)	$	(2.5	)
Interest rate swaps	(2.4		)	—			(2.4		)	—
Total	$	(4.0	)	$	(0.5	)	$	(7.1	)	$	(2.5	)



	Amount of gain or (loss) reclassified from Accumulated Other Comprehensive Loss into income (effective portion)
	Three Months Ended September 30,						Nine Months Ended September 30,
Derivatives in cash flow hedging relationships	2017			2016			2017			2016
Foreign currency forward contracts	$	(0.9	)	$	(0.4	)	$	(0.2	)	$	0.4
Interest rate swaps	—			(0.1		)	(0.2		)	(0.3		)
Total	$	(0.9	)	$	(0.5	)	$	(0.4	)	$	0.1



		Amount of gain or (loss) recognized in income on derivative instruments
		Three Months Ended September 30,					Nine Months Ended September 30,
Derivatives not designated as hedging instruments	Location of gain or (loss) recognized in income on derivative	2017		2016			2017			2016
Foreign currency forward contracts	Other income (expense), net	$	2.7	$	(0.2	)	$	(5.6	)	$	(4.5	)