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Financial Instruments and Risk Management | 6 Months Ended
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Jun. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Financial Instruments and Risk Management | Financial Instruments and Risk Management Net Investment Hedges Beginning in the second quarter of 2019, we have entered into fixed-to-fixed cross-currency interest rate swaps with an aggregate notional amount of $166.2 million and a maturity date of July 2023. We designated the swaps to hedge a portion of our net investment in a euro functional currency denominated subsidiary against foreign currency fluctuations. These contracts involve the exchange of fixed U.S. dollars with fixed euro interest payments periodically over the life of the contract and an exchange of the notional amount at maturity. This effectively converts a portion of our U.S. dollar denominated fixed-rate debt from a weighted average rate of 3.79 percent to a euro denominated weighted average fixed-rate debt at a rate of 1.35 percent. Any difference between the fixed interest rate between the U.S. dollar denominated debt to euro denominated debt is recorded as interest income on the condensed consolidated statements of operations. The fair value of the fixed-to-fixed cross currency interest rate swap was a net asset (liability) of $7.6 million and $3.0 million at June 30, 2020 and December 31, 2019, respectively. During the three and six months ending June 30, 2020, we recognized net interest income associated with this financial instrument of $0.5 million and $1.3 million, respectively, and during both the three and six months ended June 30, 2019, we recognized net interest income associated with this financial instrument of $0.6 million. Cash Flow Hedges Foreign Currency Exchange Risk Management We manufacture and sell our products in several countries throughout the world and, thus, we are exposed to changes in foreign currency exchange rates. To manage the volatility relating to these exposures, we net the exposures on a consolidated basis to take advantage of natural offsets. To manage the remaining exposure, from time to time, we utilize forward currency exchange contracts and zero cost collar option contracts to minimize the volatility to earnings and cash flows resulting from the effect of fluctuating foreign currency exchange rates on export sales denominated in foreign currencies (principally the euro). These contracts are generally designated as cash flow hedges. Designated cash flow hedges entered to minimize foreign currency exchange risk of forecasted revenue transactions are recorded to "Net sales" on the consolidated statement of operations when the forecasted transaction occurs. As of June 30, 2020, there were $10.2 million open foreign currency derivative contracts. The fair value of the designated foreign currency hedge contracts was an asset (liability) of $0.1 million and zero at June 30, 2020 and December 31, 2019, respectively. Commodity Price Risk Management Certain energy sources used in our manufacturing operations are subject to price volatility caused by weather, supply and demand conditions, economic variables, and other unpredictable factors. This volatility is primarily related to the market pricing of natural gas. To mitigate expected fluctuations in market prices and the volatility to earnings and cash flow resulting from changes to pricing of natural gas purchases, from time to time, we will enter into swap contracts and zero cost collar option contracts and designate these contracts as cash flow hedges. As of June 30, 2020, we had 1.4 million and 0.6 million mmBTUS (millions of British Thermal Units) in aggregate notional volume of outstanding natural gas commodity swap contracts and zero cost collar option contracts, respectively. Designated commodity cash flow hedge gains or losses recorded in Accumulated other comprehensive income ("AOCI") are recognized in "Cost of sales" on the condensed consolidated statements of operations when the inventory is sold. As of June 30, 2020, open commodity contracts hedge forecasted transactions until November 2021. The fair value of the outstanding designated natural gas commodity hedge contracts as of June 30, 2020 and December 31, 2019 was an asset (liability) of $(0.3) million and $(0.5) million, respectively. Interest Rate Risk Management Our policy is to manage interest expense using a mix of fixed and variable rate debt. To manage interest rate risk effectively, from time to time, we may enter into cash flow interest rate derivative instruments, which can consist of forward starting swaps and treasury locks. In all cases, the notional amount of the interest rate swap agreements is equal to or less than the designated debt being hedged. Designated interest rate cash flow hedge gains or losses recorded in AOCI are recognized in "Interest expense, net" on the condensed consolidated statements of operations on a straight-line basis over the remaining maturity of the underlying debt. These instruments are designated as cash flow hedges. As of June 30, 2020, we have entered into interest rate swaps with a notional amount of $166.2 million to manage the variability of cash flows in the interest rate payments associated with our existing LIBOR-based interest payments, effectively converting $166.2 million of our floating rate debt to a fixed rate. In accordance with the terms of this instrument, we receive floating rate interest payments based upon three-month U.S. dollar LIBOR and in return are obligated to pay interest at a weighted average fixed rate of 3.79 percent until July 2023. The fair value of the interest rate swap was an asset (liability) of $(10.4) million and $(3.9) million at June 30, 2020 and December 31, 2019, respectively. Effect of Cash Flow and Net Investment Hedge Accounting on AOCI
In millions | Amount of Gain (Loss) Recognized in AOCI |  |  |  | Amount of Gain (Loss) Reclassified from AOCI into Net income |  |  |  | Location of Gain (Loss) Reclassified from AOCI in Net income
| Three Months Ended June 30, |  |  |  |  |  |  |  |
| 2020 |  | 2019 |  | 2020 |  | 2019 |  |
Cash flow hedging derivatives |  |  |  |  |  |  |  |  |
Currency exchange contracts | $ | (0.1) |  |  | $ | — |  |  | $ | 0.2 |  |  | $ | — |  |  | Net sales
Natural gas contracts | (0.1) |  |  | (0.7) |  |  | (0.5) |  |  | 0.1 |  |  | Cost of sales
Interest rate swap contracts | (0.4) |  |  | (4.1) |  |  | — |  |  | — |  |  | Interest expense, net
Total | $ | (0.6) |  |  | $ | (4.8) |  |  | $ | (0.3) |  |  | $ | 0.1 |  |  |
| Amount of Gain (Loss) Recognized in AOCI |  |  |  | Amount of Gain (Loss) Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing) |  |  |  | Location of Gain or (Loss) Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)
| Three Months Ended June 30, |  |  |  |  |  |  |  |
| 2020 |  | 2019 |  | 2020 |  | 2019 |  |
Net investment hedging derivative |  |  |  |  |  |  |  |  |
Currency exchange contracts(1) | $ | (2.8) |  |  | $ | (0.2) |  |  | $ | 0.5 |  |  | $ | 0.6 |  |  | Interest expense, net
Total | $ | (2.8) |  |  | $ | (0.2) |  |  | $ | 0.5 |  |  | $ | 0.6 |  |  |
In millions | Amount of Gain (Loss) Recognized in AOCI |  |  |  | Amount of Gain (Loss) Reclassified from AOCI into Net income |  |  |  | Location of Gain (Loss) Reclassified from AOCI in Net income
| Six Months Ended June 30, |  |  |  |  |  |  |  |
| 2020 |  | 2019 |  | 2020 |  | 2019 |  |
Cash flow hedging derivatives |  |  |  |  |  |  |  |  |
Currency exchange contracts | $ | 0.2 |  |  | $ | — |  |  | $ | 0.2 |  |  | $ | — |  |  | Net sales
Natural gas contracts | (0.5) |  |  | (0.6) |  |  | (0.6) |  |  | 0.6 |  |  | Cost of sales
Interest rate swap contracts | (6.5) |  |  | (4.1) |  |  | — |  |  | — |  |  | Interest expense, net
Total | $ | (6.8) |  |  | $ | (4.7) |  |  | $ | (0.4) |  |  | $ | 0.6 |  |  |
| Amount of Gain (Loss) Recognized in AOCI |  |  |  | Amount of Gain (Loss) Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing) |  |  |  | Location of Gain or (Loss) Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)
| Six Months Ended June 30, |  |  |  |  |  |  |  |
| 2020 |  | 2019 |  | 2020 |  | 2019 |  |
Net investment hedging derivative |  |  |  |  |  |  |  |  |
Currency exchange contracts(1) | $ | 4.6 |  |  | $ | (0.2) |  |  | $ | 1.3 |  |  | $ | 0.6 |  |  | Interest expense, net
Total | $ | 4.6 |  |  | $ | (0.2) |  |  | $ | 1.3 |  |  | $ | 0.6 |  |  |
__________ (1) Reclassifications from AOCI to Net Income were zero for all periods presented. Gains and losses would be reclassified from AOCI to Other (income) expense, net. Within the next twelve months, we expect to reclassify $0.6 million of net losses from AOCI to income, before taxes. Fair-Value Measurements The following information is presented for derivative assets and liabilities that are recorded in the condensed consolidated balance sheets at fair value measured on a recurring basis. See Note 6 for more information on our fair value measurements. There were no transfers of assets and liabilities that are recorded at fair value between Level 1 and Level 2 during the periods reported. There were no non-recurring fair value measurements in the condensed consolidated balance sheets as of June 30, 2020 or December 31, 2019.
In millions | Level 1(1) |  | Level 2(2) |  | Level 3(3) |  | Total
June 30, 2020 |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |
Currency exchange contracts(4) | $ | — |  |  | $ | 0.1 |  |  | $ | — |  |  | $ | 0.1 |
Net investment hedge (5) | — |  |  | 7.8 |  |  | — |  |  | 7.8 |
Total assets | $ | — |  |  | $ | 7.9 |  |  | $ | — |  |  | $ | 7.9 |
Liabilities: |  |  |  |  |  |  |
Natural gas contracts (6) | $ | — |  |  | $ | 0.3 |  |  | $ | — |  |  | $ | 0.3 |
Net investment hedge (7) | — |  |  | 0.2 |  |  | — |  |  | 0.2 |
Interest rate swap contracts (7) | — |  |  | 10.4 |  |  | — |  |  | 10.4 |
Total liabilities | $ | — |  |  | $ | 10.9 |  |  | $ | — |  |  | $ | 10.9 |
In millions | Level 1(1) |  | Level 2(2) |  | Level 3(3) |  | Total
December 31, 2019 |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |
Net investment hedge (5) | $ | — |  |  | $ | 3.0 |  |  | $ | — |  |  | $ | 3.0 |
Total assets | $ | — |  |  | $ | 3.0 |  |  | $ | — |  |  | $ | 3.0 |
Liabilities: |  |  |  |  |  |  |
Natural gas contracts (6) | $ | — |  |  | $ | 0.5 |  |  | $ | — |  |  | $ | 0.5 |
Interest rate swap contracts (7) | — |  |  | 3.9 |  |  | — |  |  | 3.9 |
Total liabilities | $ | — |  |  | $ | 4.4 |  |  | $ | — |  |  | $ | 4.4 |
__________ (1) Quoted prices in active markets for identical assets. (2) Quoted prices for similar assets and liabilities in active markets. (3) Significant unobservable inputs. (4) Included within "Prepaid and other current assets" on the condensed consolidated balance sheet. (5) Included within "Other assets" on the condensed consolidated balance sheet. (6) Included within "Accrued expenses" on the condensed consolidated balance sheet. (7) Included within "Other liabilities" on the condensed consolidated balance sheet.

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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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