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Financial Instruments and Risk Management | 9 Months Ended
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Sep. 30, 2017
Investments, All Other Investments [Abstract] |
Financial Instruments and Risk Management | DERIVATIVE FINANCIAL INSTRUMENTS The Company follows FASB ASC Topic 815, Derivatives and Hedging ("ASC 815"), which is intended to improve transparency in financial reporting and requires that all derivative instruments be recorded on the consolidated condensed balance sheets at fair value by establishing criteria for designation and effectiveness of hedging relationships. The Company does not hold or issue financial instruments for trading purposes. The Company utilizes foreign currency forward exchange contracts to manage the volatility associated primarily with U.S. dollar inventory purchases made by non-U.S. wholesale operations in the normal course of business. These foreign currency forward exchange hedge contracts extend out to a maximum of 363 days, 356 days and 335 days, as of September 30, 2017, December 31, 2016 and September 10, 2016, respectively. The Company also utilizes foreign currency forward exchange contracts that are not designated as hedging instruments to manage foreign currency translation exposure. Foreign currency derivatives not designated as hedging instruments are offset by foreign exchange gains or losses resulting from the underlying exposures of foreign currency denominated assets and liabilities. The Company has two interest rate swap arrangements, one of which matured on October 6, 2017, and the other, unless otherwise terminated, will mature on July 13, 2020. These agreements, which exchange floating rate for fixed rate interest payments over the life of the agreements without the exchange of the underlying notional amounts, have been designated as cash flow hedges of the debt. The notional amounts of the interest rate swap arrangements are used to measure interest to be paid or received and do not represent the amount of exposure to credit loss. The Company has a cross currency swap to minimize the impact of exchange rate fluctuations. The hedging instrument, which, unless otherwise terminated, will mature on September 1, 2021, has been designated as a hedge of a net investment in a foreign operation. The Company will pay 2.75% on the euro-denominated notional amount and receive 5.00% on the USD notional amount, with an exchange of principal at maturity. Changes in fair value related to movements in the foreign currency exchange spot rate are recorded in accumulated other comprehensive income (loss), offsetting the currency translation adjustment related to the underlying net investment that is also recorded in accumulated other comprehensive income (loss). All other changes in fair value are recorded in interest expense. The notional amounts of the Company’s derivative instruments are as follows:
(Dollars in millions) | September 30, 2017 |  | December 31, 2016 |  | September 10, 2016
Foreign exchange contracts: |  |  |  |  |
Hedge contracts | $ | 159.8 |  |  | $ | 169.2 |  |  | $ | 161.4 |
Non-hedge contracts | — |  |  | 2.1 |  |  | 10.8 |
Interest rate swaps | 464.0 |  |  | 496.0 |  |  | 537.9 |
Cross currency swap | 106.4 |  |  | — |  |  | — |
The recorded fair values of the Company’s derivative instruments are as follows:
(In millions) | September 30, 2017 |  | December 31, 2016 |  | September 10, 2016
Financial assets: |  |  |  |  |
Foreign exchange contracts - hedge | $ | 0.2 |  |  | $ | 6.6 |  |  | $ | 2.5 |
Interest rate swaps | — |  |  | 0.1 |  |  | — |
Financial liabilities: |  |  |  |  |
Foreign exchange contracts - hedge | $ | (5.6 | ) |  | $ | (0.3 | ) |  | $ | (1.6 | )
Foreign exchange contracts - non-hedge | — |  |  | — |  |  | (0.5 | )
Interest rate swaps | (3.0 | ) |  | (5.3 | ) |  | (12.1 | )
Cross currency swap | (11.8 | ) |  | — |  |  | — |
Hedge effectiveness on the foreign exchange contracts is evaluated by the hypothetical derivative method. Any hedge ineffectiveness is reported within the cost of goods sold line item in the consolidated condensed statements of operations. Hedge ineffectiveness was not material to the Company’s consolidated condensed financial statements for the quarters ended September 30, 2017 and September 10, 2016. If, in the future, the foreign exchange contracts are determined to be ineffective hedges or terminated before their contractual termination dates, the Company would be required to reclassify into earnings all or a portion of the unrealized amounts related to the cash flow hedges that are currently included in Accumulated other comprehensive income (loss) (“AOCI”) within stockholders’ equity. The differential paid or received on the interest rate swap arrangements is recognized as interest expense. In accordance with ASC 815, the Company has formally documented the relationship between the interest rate swaps and the variable rate borrowings, as well as its risk management objective and strategy for undertaking the hedge transaction. This process included linking the derivative to the specific liability or asset on the balance sheet. The Company also assessed at the hedges’ inception, and continues to assess on an ongoing basis, whether the derivatives used in the hedging transaction are highly effective in offsetting changes in the cash flows of the hedged item. The effective portion of unrealized gains (losses) is deferred as a component of AOCI and will be recognized in earnings at the time the hedged item affects earnings. Any ineffective portion of the change in fair value will be immediately recognized as a component of interest expense. Hedge effectiveness on the cross currency swap is assessed using the spot method. In accordance with ASC 815, the Company has formally documented the relationship between the cross currency swap and the Company’s investment in its euro-denominated subsidiary, as well as its risk management objective and strategy for undertaking the hedge transaction. This process included linking the derivative to its net investment on the balance sheet. The Company also assessed at the hedges’ inception, and continues to assess on an ongoing basis, whether the derivative used in the hedging transaction is highly effective in offsetting changes in expected cash flows of the hedged item. The effective portion of unrealized gains (losses) is deferred as a component of AOCI and will be recognized in earnings at the time the hedged item affects earnings. Any ineffective portion of the change in fair value will be immediately recognized as a component of interest expense.

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- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
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- References No definition available. + Details
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