XML 32 R22.htm IDEA: XBRL DOCUMENT
v3.23.3

Derivatives and Hedging Activities | 9 Months Ended
--- | ---
Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives and Hedging Activities | Derivatives and Hedging Activities We report all derivative instruments on our Condensed Consolidated Balance Sheets at fair value and establish criteria for designation and effectiveness of transactions entered into for hedging purposes. As a global organization, we face exposure to market risks, such as fluctuations in foreign currency exchange rates and interest rates. To manage the volatility relating to these exposures, we enter into various derivative instruments from time to time under our risk management policies. We designate derivative instruments as hedges on a transaction basis to support hedge accounting. The changes in fair value of these hedging instruments offset in part or in whole corresponding changes in the fair value or cash flows of the underlying exposures being hedged. We assess the initial and ongoing effectiveness of our hedging relationships in accordance with our policy. We do not purchase, hold or sell derivative financial instruments for trading purposes. Our practice is to terminate derivative transactions if the underlying asset or liability matures or is sold or terminated, or if we determine the underlying forecasted transaction is no longer probable of occurring. We record the fair value positions of all derivative financial instruments on a net basis by counterparty for which a master netting arrangement is utilized. Foreign Currency Forward Contracts Designated as Cash Flow Hedges The primary purpose of our cash flow hedging activities is to manage the potential changes in value associated with the amounts receivable or payable on equipment and raw material purchases that are denominated in foreign currencies in order to minimize the impact of the changes in foreign currencies. We record gains and losses on foreign currency forward contracts qualifying as cash flow hedges in Accumulated Other Comprehensive Loss (“AOCL”) to the extent that these hedges are effective and until we recognize the underlying transactions in net earnings, at which time we recognize these gains and losses in Cost of sales, on our Condensed Consolidated Statements of Operations. Cash flows from derivative financial instruments designated as cash flow hedges are classified as Cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows. These contracts generally have original maturities of less than 12 months. Net unrealized after-tax gains/losses related to cash flow hedging activities that were included in AOCL were a $0.9 million gain and $1.2 million loss for the three and nine months ended September 30, 2023, respectively, and a $3.1 million gain and a $4.9 million gain for the three and nine months ended September 30, 2022, respectively. The unrealized amount in AOCL will fluctuate based on changes in the fair value of open contracts during each reporting period. We estimate that $1.1 million of net unrealized gains related to cash flow hedging activities included in AOCL will be reclassified into earnings within the next twelve months. Foreign Currency Forward Contracts Not Designated as Hedges Our subsidiaries have foreign currency exchange exposure from buying and selling in currencies other than their functional currencies. The primary purposes of our foreign currency hedging activities are to manage the potential changes in value associated with the amounts receivable or payable on transactions denominated in foreign currencies and to minimize the impact of the changes in foreign currencies related to foreign currency-denominated interest-bearing intercompany loans and receivables and payables. The changes in fair value of these derivative contracts are recognized in Other expense, net, on our Condensed Consolidated Statements of Operations and are largely offset by the remeasurement of the underlying foreign currency-denominated items indicated above. Cash flows from derivative financial instruments not designated as hedges are classified as Cash flows from investing activities in the Condensed Consolidated Statements of Cash Flows. These contracts generally have original maturities of less than 12 months. Interest Rate Swaps From time to time, we may use interest rate swaps to manage our fixed and floating interest rates on our outstanding indebtedness. At September 30, 2023 and December 31, 2022, we had no outstanding interest rate swaps. Net Investment Hedge In February 2023, the €400.0 million 4.500% senior notes issued in June 2015 that were previously designated as a net investment hedge, hedging a portion of our net investment in a certain European subsidiary against fluctuations in foreign exchange rates, were repaid, which settled the net investment hedge. See Note 13, "Debt and Credit Facilities," for additional information about the repayment of the notes. In the first quarter of 2023, we entered into a series of cross-currency swaps with a combined notional amount of $432.8 million. Each of these cross-currency swaps were designated as net investment hedges of the Company's foreign currency exposure of its net investment in certain Euro-functional currency subsidiaries with Euro-denominated net assets, and the Company pays a fixed rate of Euro-based interest and receives a fixed rate of U.S. dollar interest. The Company has elected the spot method for assessing the effectiveness of these contracts. The maturity date for this series of cross-currency swaps is February 1, 2028. The fair value of this hedge as of September 30, 2023 was a $2.5 million loss and is included within Other non-current liabilities on our Condensed Consolidated Balance Sheets. We recognized $0.8 million and $2.1 million of interest income within Interest expense, net on the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023, respectively, related to these contracts. For derivative instruments that are designated and qualify as hedges of net investments in foreign operations, changes in fair values of the derivative instruments are recognized in unrealized net gain or loss on derivative instruments for net investment hedge, a component of AOCL, net of taxes, to offset the changes in the values of the net investments being hedged. Any portion of the net investment hedge that is determined to be ineffective is recorded in Other expense, net on the Condensed Consolidated Statements of Operations. Other Derivative Instruments We may use other derivative instruments from time to time to manage exposure to foreign exchange rates and to access international financing transactions. These instruments can potentially limit foreign exchange exposure by swapping borrowings denominated in one currency for borrowings denominated in another currency. Fair Value of Derivative Instruments See Note 15, “Fair Value Measurements, Equity Investments and Other Financial Instruments,” for a discussion of the inputs and valuation techniques used to determine the fair value of our outstanding derivative instruments. The following table details the fair value of our derivative instruments included on our Condensed Consolidated Balance Sheets.
| Cash Flow Hedge |  | Net Investment Hedge |  | Non-Designated as Hedging Instruments |  | Total
(In millions) | September 30, 2023 |  | December 31, 2022 |  | September 30, 2023 |  | December 31, 2022 |  | September 30, 2023 |  | December 31, 2022 |  | September 30, 2023 |  | December 31, 2022
Derivative Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts | $ | 1.5 |  |  | $ | 2.1 |  |  | $ | — |  |  | $ | — |  |  | $ | 1.3 |  |  | $ | 5.8 |  |  | $ | 2.8 |  |  | $ | 7.9 |
Total Derivative Assets | $ | 1.5 |  |  | $ | 2.1 |  |  | $ | — |  |  | $ | — |  |  | $ | 1.3 |  |  | $ | 5.8 |  |  | $ | 2.8 |  |  | $ | 7.9 |
Derivative Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts | $ | (0.5) |  |  | $ | (0.8) |  |  | $ | — |  |  | $ | — |  |  | $ | (7.3) |  |  | $ | (2.4) |  |  | $ | (7.8) |  |  | $ | (3.2) |
Cross-currency swaps | — |  |  | — |  |  | (2.5) |  |  | — |  |  | — |  |  | — |  |  | (2.5) |  |  | — |
Total Derivative Liabilities(1) | $ | (0.5) |  |  | $ | (0.8) |  |  | $ | (2.5) |  |  | $ | — |  |  | $ | (7.3) |  |  | $ | (2.4) |  |  | $ | (10.3) |  |  | $ | (3.2) |
Net Derivatives(2) | $ | 1.0 |  |  | $ | 1.3 |  |  | $ | (2.5) |  |  | $ | — |  |  | $ | (6.0) |  |  | $ | 3.4 |  |  | $ | (7.5) |  |  | $ | 4.7 |
(1)Excludes €400.0 million of euro-denominated debt that was repaid in February 2023 ($426.0 million equivalent at December 31, 2022), which was designated as a net investment hedge. See Note 13, "Debt and Credit Facilities," for additional details. (2)The following table reconciles gross positions without the impact of master netting agreements to the balance sheet classification:
| Other Current Assets |  | Other Current Liabilities |  |  |  | Other Non-current Liabilities
(In millions) | September 30, 2023 |  | December 31, 2022 |  | September 30, 2023 |  | December 31, 2022 |  |  |  |  |  | September 30, 2023 |  | December 31, 2022
Gross position | $ | 2.8 |  |  | $ | 7.9 |  |  | $ | (7.8) |  |  | $ | (3.2) |  |  |  |  |  |  | $ | (2.5) |  |  | $ | — |
Impact of master netting agreements | (1.0) |  |  | (1.1) |  |  | 1.0 |  |  | 1.1 |  |  |  |  |  |  | — |  |  | — |
Net amounts recognized on the Condensed Consolidated Balance Sheets | $ | 1.8 |  |  | $ | 6.8 |  |  | $ | (6.8) |  |  | $ | (2.1) |  |  |  |  |  |  | $ | (2.5) |  |  | $ | — |
The following table details the effect of our derivative instruments on our Condensed Consolidated Statements of Operations.
|  |  | Amount of Gain (Loss) Recognized in Earnings on Derivatives
| Location of Gain (Loss) Recognized on |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(In millions) | Condensed Consolidated Statements of Operations |  | 2023 |  | 2022 |  | 2023 |  | 2022
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |
Cash Flow Hedges: |  |  |  |  |  |  |  |  |
Foreign currency forward contracts | Cost of sales |  | $ | 1.0 |  |  | $ | 3.1 |  |  | $ | 2.9 |  |  | $ | 7.4 |
Treasury locks | Interest expense, net |  | — |  |  | — |  |  | 0.1 |  |  | 0.1 |
Sub-total cash flow hedges |  |  | 1.0 |  |  | 3.1 |  |  | 3.0 |  |  | 7.5 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |
Foreign currency forward contracts | Other expense, net |  | (1.1) |  |  | 1.7 |  |  | 5.6 |  |  | 3.8 |
Total |  |  | $ | (0.1) |  |  | $ | 4.8 |  |  | $ | 8.6 |  |  | $ | 11.3 |

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://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration