XML 24 R14.htm IDEA: XBRL DOCUMENT
v3.22.1

DERIVATIVE FINANCIAL INSTRUMENTS | 3 Months Ended
--- | ---
Mar. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE FINANCIAL INSTRUMENTS | DERIVATIVE FINANCIAL INSTRUMENTS The Company operates internationally, with manufacturing and sales facilities in various locations around the world. In the normal course of business, the Company uses cash flow derivatives to manage exposures. For a derivative to qualify for hedge accounting treatment at inception and throughout the hedge period, the Company formally documents the nature and relationships between hedging instruments and hedged items, as well as its risk-management objectives and strategies for undertaking various hedge transactions, and methods of assessing hedge effectiveness. Additionally, for hedges of forecasted transactions, significant characteristics and expected terms of a forecasted transaction must be specifically identified, and it must be probable that each forecasted transaction will occur. If it is deemed probable the forecasted transaction will not occur, then the gain or loss would be recognized in current earnings. Financial instruments qualifying for hedge accounting must maintain a specified level of effectiveness between the hedging instrument and the item being hedged. The Company does not engage in trading or other speculative use of financial instruments. The Company records all derivative contracts at fair value on a recurring basis. Commodity Swaps Derivatives designated as cash flow hedging instruments include commodity swaps with outstanding notional value of $19.2 million and $22.5 million at March 31, 2022 and December 31, 2021, respectively. Commodity swaps outstanding at March 31, 2022 mature on or before August 31, 2022. The Company uses commodity swaps to mitigate price risk for hot rolled coil steel. Fair value of commodity swaps are based on observable market data for similar assets and liabilities. Changes in the fair value of commodity swaps are deferred in Accumulated other comprehensive income (loss) (“AOCI”). Gains or losses on commodity swaps are reclassified to Cost of goods sold (“COGS”) in the Condensed Consolidated Statement of Comprehensive Income (Loss) when the hedged transaction affects earnings. Cross Currency Swaps Derivatives designated as net investment hedging instruments include cross currency swaps with outstanding notional value of $66.4 million and $68.2 million at March 31, 2022 and December 31, 2021, respectively. The Company uses these cross currency swaps to mitigate its exposure to changes in foreign currency exchange rates related to a net investment in a Euro-denominated functional currency subsidiary. Fair values of cross currency swaps are based on the present value of future cash payments and receipts. Changes in the fair value of cross currency swaps are deferred in AOCI. Gains or losses on cross currency swaps are reclassified to Selling, general and administrative expenses in the Condensed Consolidated Statement of Comprehensive Income (Loss) when the net investment is liquidated. Foreign Exchange Contracts The Company enters into foreign exchange contracts to manage variability of future cash flows associated with changing currency exchange rates. Foreign currency exchange contracts, whether designated or not designated as cash flow hedges, are used to mitigate exposure to changes in foreign currency exchange rates on recognized assets and liabilities. Fair values of these contracts are derived using quoted forward foreign exchange prices to interpolate values of outstanding trades at the reporting date based on their maturities. Foreign exchange contracts outstanding at March 31, 2022 mature during the second quarter of 2022. The Company had $23.7 million and $19.4 million notional value of foreign exchange contracts outstanding that were designated as cash flow hedging instruments at March 31, 2022 and December 31, 2021, respectively. For effective hedging instruments, changes in the fair value of foreign exchange contracts are deferred in AOCI until the underlying hedged transactions settle. Gains or losses on foreign exchange contracts are reclassified to COGS in the Condensed Consolidated Statement of Comprehensive Income (Loss). The Company had $194.0 million and $139.7 million notional value of foreign exchange contracts outstanding that were not designated as cash flow hedging instruments at March 31, 2022 and December 31, 2021, respectively. The majority of gains and losses recognized from foreign exchange contracts not designated as hedging instruments are offset by changes in the underlying hedged items, resulting in no material net impact on earnings. Changes in the fair value of these derivative financial instruments are recognized as gains or losses in COGS and Other income (expense) – net in the Condensed Consolidated Statement of Comprehensive Income (Loss). Interest Rate Caps In October 2021, the Company terminated all outstanding interest rate caps. The Company used interest rate caps to mitigate its exposure to changes in interest rates related to variable rate debt. Fair value of interest rate caps were based on the present value of future cash payments and receipts. Changes in the fair value of interest rate were deferred in AOCI. Gains or losses on interest rate caps were reclassified to Interest expense in the Condensed Consolidated Statement of Comprehensive Income (Loss) when the underlying hedged transactions occur. The following table provides the location and fair value amounts of derivative instruments designated and not designated as hedging instruments that are reported in the Condensed Consolidated Balance Sheet (in millions):
|  | March 31, 2022 |  | December 31, 2021
Instrument (1) | Balance Sheet Account | Derivatives designated as hedges | Derivatives not designated as hedges |  | Derivatives designated as hedges | Derivatives not designated as hedges
Foreign exchange contracts | Other current assets | $ | 0.1 |  | $ | 1.0 |  |  | $ | (0.1) |  | $ | 0.7 |
Commodity swaps | Other current assets | 6.9 |  | — |  |  | 4.3 |  | — |
Foreign exchange contracts | Other current liabilities | (0.1) |  | (0.3) |  |  | — |  | — |
Cross currency swaps - net investment hedge | Other current liabilities | (0.1) |  | — |  |  | (0.5) |  | — |
Commodity swaps | Other current liabilities | (0.1) |  | — |  |  | (1.1) |  | — |
Cross currency swaps - net investment hedge | Other non-current liabilities | (2.0) |  | — |  |  | (2.4) |  | — |
Net derivative asset (liability) | $ | 4.7 |  | $ | 0.7 |  |  | $ | 0.2 |  | $ | 0.7 |
(1) Categorized as Level 2 under the ASC 820 Fair Value Hierarchy. The following tables provide the effect of derivative instruments that are designated as hedges in AOCI (in millions):
| Gain (Loss) Recognized on Derivatives in OCI, net of tax |  | Gain (Loss) Reclassified from AOCI into Income (Loss)
Instrument | Three Months Ended March 31, 2022 |  | Three Months Ended March 31, 2021 | Income Statement Account | Three Months Ended March 31, 2022 |  | Three Months Ended March 31, 2021
Foreign exchange contracts | $ | 0.1 |  |  | $ | — |  | Cost of goods sold | $ | — |  |  | $ | — |
Commodity swaps | (1.8) |  |  | 7.9 |  | Cost of goods sold | 5.0 |  |  | (0.3) |
Cross currency swaps - net investment hedge | 0.7 |  |  | 2.9 |  | Selling, general and administrative expenses | — |  |  | — |
Interest rate caps | — |  |  | 3.0 |  | Interest expense | — |  |  | (0.3) |
Total | $ | (1.0) |  |  | $ | 13.8 |  | Total | $ | 5.0 |  |  | $ | (0.6) |
The following tables provide the effect of derivative instruments that are designated as hedges in the Condensed Consolidated Statement of Comprehensive Income (Loss) (in millions):
| Classification and amount of Gain (Loss) Recognized in Income (Loss)
| Cost of goods sold |  | Interest expense
| Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 |  | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021
Income Statement Accounts in which effects of cash flow hedges are recorded | $ | (816.7) |  | $ | (688.8) |  |  | $ | (10.6) |  | $ | (15.3) |
Gain (loss) reclassified from AOCI into Income (loss): |  |  |  |  |
Commodity swaps | 5.0 |  | (0.3) |  |  | — |  | — |
Interest rate caps | — |  | — |  |  | — |  | (0.3) |
Amount excluded from effectiveness testing recognized in Income (loss) based on amortization approach:
Cross currency swaps - net investment hedge | — |  | — |  |  | 0.1 |  | 0.2 |
Total | $ | 5.0 |  | $ | (0.3) |  |  | $ | 0.1 |  | $ | (0.1) |
Derivatives not designated as hedges are used to offset foreign exchange gains or losses resulting from the underlying exposures of foreign currency denominated assets and liabilities. The following table provides the effect of non-designated derivatives in the Condensed Consolidated Statement of Comprehensive Income (Loss) (in millions):
|  | Gain (Loss) Recognized in Income (Loss)
|  | Three Months Ended March 31, |  |
Instrument | Income Statement Account | 2022 | 2021 |  |  |
Foreign exchange contracts | Cost of goods sold | $ | (0.1) |  | $ | (0.2) |  |  |  |
Foreign exchange contracts | Other income (expense) – net | (0.7) |  | (0.1) |  |  |  |
| Total | $ | (0.8) |  | $ | (0.3) |  |  |  |
In the Condensed Consolidated Statement of Comprehensive Income (Loss), the Company records hedging activity related to commodity swaps, cross currency swaps, foreign exchange contracts and interest rate caps in the accounts for which the hedged items are recorded. On the Condensed Consolidated Statement of Cash Flows, the Company presents cash flows from hedging activities in the same manner as it records the underlying item being hedged. Counterparties to the Company’s derivative financial instruments are major financial institutions and commodity trading companies with credit ratings of investment grade or better and no collateral is required. There are no significant risk concentrations. Management continues to monitor counterparty risk and believes the risk of incurring losses on derivative contracts related to credit risk is unlikely and any losses would be immaterial.
See Note L - “Stockholders’ Equity” for unrealized net gains (losses), net of tax, included in AOCI. Within unrealized net gains (losses) included in AOCI as of March 31, 2022, it is estimated that approximately $5 million of gains are expected to be reclassified into earnings in the next twelve months.

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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration