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Derivative Financial Instruments | 6 Months Ended
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Jun. 30, 2019
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | Note 7 — Derivative Financial Instruments Interest Rate Swap and Interest Lock Agreements As of June 30, 2019, the Company had interest rate swaps, having a combined notional value of $50.0 million, that swap floating rate obligations for fixed rate obligations at an average rate of 1.09% against LIBOR in U.S. dollars. Both swaps mature in September 2019. The swaps are accounted for as cash flow hedges of our floating rate bank loan. To ensure the swaps were highly effective, all of the critical terms of the swaps matched the terms of the bank loan. The fair value of the interest rate swaps was an asset of $0.1 million at June 30, 2019 and $0.6 million at December 31, 2018. At June 30, 2019 we had interest rate swaps related to European debt obligations which had a combined notional value of approximately €44.9 million. These derivatives swapped floating rate obligations for fixed rate obligations at a weighted average rate of 0.52% against Euribor in Euros. The swaps amortize through the final maturities of the obligations, on June 30, 2023 and June 30, 2024, in annual installments. The derivatives are accounted for as cash flow hedges of the floating rate term loans. To ensure the swaps were highly effective, all of the critical terms of the swap matched the terms of the bank loans. The fair value of the interest rate swaps was a liability of $0.8 million at June 30, 2019, and $0.5 million at December 31, 2018. The Company had treasury lock agreements to protect against unfavorable movements in the benchmark treasury rate related to the issuance of our 3.95% Senior Unsecured Notes. These hedges were designated as cash flow hedges therefore any change in fair value was recorded as a component of other comprehensive income. As part of the issuance of these notes, we net settled the derivatives and therefore the previously deferred gains recorded in other comprehensive income will be released to interest expense over the life of the senior notes. The effect of these treasury locks reduced the effective interest rate on these notes by approximately 0.25%. Foreign Currency Forward Exchange Contracts A number of our European subsidiaries are exposed to the impact of exchange rate volatility between the U.S. dollar and the subsidiaries’ functional currencies, being either the Euro or the British Pound sterling. We entered into contracts to exchange U.S. dollars for Euros and British Pound sterling through December 2021, which we account for as cash flow hedges. The aggregate notional amount of these contracts was $412.1 million and $416.5 million at June 30, 2019 and December 31, 2018, respectively. The purpose of these contracts is to hedge a portion of the forecasted transactions of our European subsidiaries under long-term sales contracts with certain customers. These contracts are expected to provide us with a more balanced matching of future cash receipts and expenditures by currency, thereby reducing our exposure to fluctuations in currency exchange rates. The effective portion of the hedges, losses of $5.2 million and $8.8 million were recorded in other comprehensive income (“OCI”) for the three and six months ended June 30, 2019 and losses of $20.9 million and $12.5 million for the three and six months ended June 30, 2018. We classified the carrying amount of these contracts of $0.4 million in other assets and $18.7 million in other liabilities, of which $6.7 million is recorded in noncurrent liabilities, on the Condensed Consolidated Balance Sheets at June 30, 2019 and $1.3 million in other assets and $15.3 million in other liabilities at December 31, 2018. We recognized net losses of $2.8 million and $4.6 million in gross margin during the three and six months ended June 30, 2019 and net gains of $1.1 million and $3.4 million for the three and six months ended June 30, 2018. In addition, we enter into foreign exchange forward contracts which are not designated as hedges. These are used to provide an offset to transactional gains or losses arising from the re-measurement of non-functional monetary assets and liabilities such as accounts receivable. The change in the fair value of the derivatives is recorded in the statement of operations. There are no credit contingency features in these derivatives. During the quarters ended June 30, 2019 and 2018, we recognized net foreign exchange losses of $0.9 million and losses of $6.0 million, respectively, in the Condensed Consolidated Statements of Operations. During the six months ended June 30, 2019 and 2018, we recognized net foreign exchange losses of $0.6 million and $4.0 million, respectively. The net foreign exchange impact recognized from these hedges offset the translation exposure of these transactions. The carrying amount of the contracts for derivatives not designated as hedging instruments was less than $0.1 million classified in other assets and $0.1 million in other liabilities at June 30, 2019, and $0.3 million in other assets at December 31, 2018, in the Condensed Consolidated Balance Sheets. The change in fair value of our foreign currency forward exchange contracts under hedge designations recorded net of tax within accumulated other comprehensive income for the quarters ended June 30, 2019 and June 30, 2018 was as follows:
|  | Quarter Ended June 30, |  |  | Six Months Ended June 30, |
(In millions) |  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
Unrealized (losses) gains at beginning of period, net of tax |  | $ | (11.4 | ) |  | $ | 13.4 |  |  | $ | (10.6 | ) |  | $ | 8.6 |
Losses (gains) reclassified to net sales |  |  | 2.2 |  |  |  | (0.7 | ) |  |  | 3.5 |  |  |  | (2.3 | )
Decrease in fair value |  |  | (4.6 | ) |  |  | (15.8 | ) |  |  | (6.7 | ) |  |  | (9.4 | )
Unrealized losses at end of period, net of tax |  | $ | (13.8 | ) |  | $ | (3.1 | ) |  | $ | (13.8 | ) |  | $ | (3.1 | )
Unrealized losses of $8.7 million recorded in accumulated other comprehensive loss, net of tax of $3.0 million, as of June 30, 2019, are expected to be reclassified into earnings over the next twelve months as the hedged sales are recorded. Commodity Swap Agreements On occasion we enter into commodity swap agreements to hedge against price fluctuations of raw materials, including propylene (the principal component of acrylonitrile). As of June 30, 2019, we had commodity swap agreements with a notional value of $20.6 million. The swaps mature monthly through June 2021. The swaps are accounted for as a cash flow hedge of our forward raw material purchases. To ensure the swaps are highly effective, all of the critical terms of the swap matched the terms of the hedged items. The fair value of the commodity swap agreements was a liability of $4.7 million at June 30, 2019.

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- 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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