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DERIVATIVES AND HEDGING | 6 Months Ended
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Jun. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVES AND HEDGING | Note 11 — DERIVATIVES AND HEDGING We are exposed to market risks, such as changes in foreign currency exchange rates and interest rates. To manage the volatility related to these exposures we may enter into various derivative transactions. We formally assess, designate and document, as a hedge of an underlying exposure, the qualifying derivative instrument that will be accounted for as an accounting hedge at inception. Additionally, we assess both at inception and at least quarterly thereafter, whether the financial instruments used in the hedging transaction are effective at offsetting changes in either the fair values or cash flows of the underlying exposures. In accordance with ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12), that ongoing assessment will be done qualitatively for highly effective relationships. Net Investment Hedge As a means of mitigating the future impact of currency fluctuations on our euro investments in foreign entities, we enter into cross currency swaps in which we generally pay fixed-rate interest in euros and receive fixed-rate interest in U.S. dollars. In April and May 2022, we settled €1.0 billion of our existing cross currency swaps and concurrently entered into €1.1 billion of new cross currency swaps, to align with our planned financing of the Dyneema Acquisition, receiving cash proceeds of $75.1 million. We currently have 11 cross currency swaps with a combined notional amount of €1.4 billion with maturities in 2023 and 2028. These effectively convert a portion of our U.S. dollar denominated fixed-rate debt to euro denominated fixed-rate debt. Included in Interest expense, net within the Condensed Consolidated Statements of Income are gains of $7.0 million and $12.6 million for the three and six months ended June 30, 2022, compared to gains of $3.5 million and $7.0 million for the three and six months ended June 30, 2021, respectively. We designated the cross currency swaps as net investment hedges of our net investment in our European operations under ASU 2017-12 and applied the spot method to these hedges. The changes in fair value of the derivative instruments that are designated and qualify as hedges of net investments in foreign operations are recognized within A ccumulated Other Comprehensive Income (AOCI) to offset the changes in the values of the net investment being hedged. For the three and six months ended June 30, 2022, gains of $45.2 million and $52.0 million were recognized within translation adjustments in AOCI, net of tax, respectively, compared to a loss of $5.2 million and a gain of $17.7 million for the three and six months ended June 30, 2021, respectively. Derivatives Designated as Cash Flow Hedging Instruments In August 2018, we entered into two interest rate swaps with a combined notional amount of $150.0 million to manage the variability of cash flows in the interest rate payments associated with our existing LIBOR-based interest payments, effectively converting $150.0 million of our floating rate debt to a fixed rate. We began to receive floating rate interest payments based upon one-month U.S. dollar LIBOR and in return are obligated to pay interest at a fixed rate of 2.732% until November 2022. We have designated these interest rate swap contracts as cash flow hedges pursuant to ASC Topic 815, Derivatives and Hedging. The net interest payments accrued are reflected in net income as adjustments of interest expense and the remaining change in the fair value of the derivatives is recorded as a component of AOCI. The amount of expense recognized within Interest expense, net in our Condensed Consolidated Statements of Income was $0.6 million and $1.6 million for the three and six months ended June 30, 2022, compared to $1.0 million and $2.0 million for the three and six months ended June 30, 2021. For the three and six months ended June 30, 2022, gains of $0.9 million and $2.1 million, net of tax, were recognized in AOCI, compared to gains of $0.7 million $1.5 million for the three and six months ended June 30, 2021. Derivatives Not Designated for Hedge Accounting On April 20, 2022, we executed additional cross currency swaps, pursuant to which we will pay fixed-rate interest in euros and receive fixed-rate interest in U.S. dollars with a combined notional amount of €900 million, which mature in April 2028, as a means of mitigating the impact of currency fluctuations on our future euro investments in foreign entities related to the Dyneema Acquisition. Additionally, we entered into foreign currency forward contracts with an aggregate notional amount of €350 million, which are scheduled to mature within one year, to mitigate the impact of currency fluctuations on the euro-denominated Purchase Price for the Dyneema Acquisition. Changes in the fair value of the cross-currency swaps and foreign exchange forward contracts are recorded in earnings directly. The amount of income recognized within Other income, net in our Condensed Consolidated Statements of Income was $0.9 million for the three and six months ended June 30, 2022. All of our derivative assets and liabilities measured at fair value are classified as Level 2 within the fair value hierarchy. We determine the fair value of our derivatives based on valuation methods, which project future cash flows and discount the future amounts present value using market based observable inputs, including interest rate curves and foreign currency rates. The fair value of derivative financial instruments recognized in the Condensed Consolidated Balance Sheets is as follows:
(In millions) | Balance Sheet Location |  | As of June 30, 2022 |  | As of December 31, 2021
Assets |  |  |  |  |
Cross Currency Swaps (Net Investment Hedge) | Other current assets |  | $ | 22.6 |  |  | $ | — |
Cross Currency Swaps (Net Investment Hedge) | Other non-current assets |  | 10.9 |  |  | 31.7
Mark-to-Market Cross Currency Swaps | Other non-current assets |  | 13.0 |  |  | — |
Liabilities |  |  |  |  |
Interest Rate Swaps (Cash Flow Hedge) | Other current liabilities |  | $ | 0.2 |  |  | $ | 3.1 |
Mark-to-Market Foreign Exchange Forwards | Other current liabilities |  | 12.1 |  |  | — |

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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 https://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 https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
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