XML 27 R16.htm IDEA: XBRL DOCUMENT v3.22.2.2
Financial Instruments and Risk Management
 9 Months Ended
Sep. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial Instruments and Risk Management Financial Instruments and Risk Management
Net Investment Hedges
During the third quarter of 2022, we terminated our fixed-to-fixed cross currency interest rate swaps, accounted for as net investment hedges, and received net proceeds of $14.7 million. The proceeds are presented within cash provided by investing activities within the condensed consolidated statement of cash flows. The $14.7 million gain is reported as a component of the foreign currency adjustments (“CTA”) within Accumulated other comprehensive income (loss) ("AOCI") on the condensed consolidated balance sheet. The gain on net investment hedges are reclassified to earnings only when the related CTA are required to be reclassified, usually upon sale or liquidation of the investment.
The fair value of our net investment hedge was a net asset (liability) of zero and $1.0 million at September 30, 2022 and December 31, 2021, respectively. During the three and nine months ended September 30, 2022, we recognized net interest income associated with this financial instrument of $0.1 million and $2.8 million, respectively, and during the three and nine months ended September 30, 2021, we recognized net interest income associated with this financial instrument of $0.1 million and $0.3 million, respectively.
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 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 condensed consolidated statement of operations when the forecasted transaction occurs. As of September 30, 2022, there were $5.6 million open foreign currency derivative contracts. The fair value of the designated foreign currency hedge contracts was an asset (liability) of $0.9 million and $0.5 million at September 30, 2022 and December 31, 2021, 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 September 30, 2022, we had 1.4 million and 0.4 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 as cash flow hedges. As of September 30, 2022, open commodity contracts hedge forecasted transactions until December 2023. The fair value of the outstanding designated natural gas commodity hedge contracts as of September 30, 2022 and December 31, 2021 was a net asset (liability) of $1.9 million and $(0.6) million, respectively.
Interest Rate Risk Management 
During the year we had floating-to-fixed interest rate swaps with a combined 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. Per the terms of these instruments, we received floating rate interest payments based upon three-month U.S. dollar LIBOR and in return were obligated to pay interest at a fixed rate of 3.79 percent until July 2023. Due to the repayment of our term loan (refer to Note 9 for more information), during the second quarter of 2022, we terminated these interest rate swap instruments. Upon termination of the interest rate swap instruments, we reclassified a $1.7 million gain from AOCI into Interest expense, net on the condensed consolidated statement of operations. The fair value of outstanding interest rate instruments at September 30, 2022 and December 31, 2021 was an asset (liability) of zero and $(4.0) million, respectively.
Effect of Cash Flow and Net Investment Hedge Accounting on AOCI
In millionsAmount of Gain (Loss) Recognized in AOCIAmount of Gain (Loss) Reclassified from AOCI into Net incomeLocation of Gain (Loss) Reclassified from AOCI in Net income
Three Months Ended September 30,
2022202120222021
Cash flow hedging derivatives
Currency exchange contracts$0.5 $0.1 $(0.8)$(0.2)Net sales
Natural gas contracts3.0 2.8 (2.3)— Cost of sales
Interest rate swap contracts— 0.7 — — Interest expense, net
Total$3.5 $3.6 $(3.1)$(0.2)
Amount of Gain (Loss) Recognized in AOCIAmount 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 September 30,
2022202120222021
Net investment hedging derivative
Currency exchange contracts(1)
$4.4 $3.8 $0.1 $— Interest expense, net
Total$4.4 $3.8 $0.1 $— 
In millionsAmount of Gain (Loss) Recognized in AOCIAmount of Gain (Loss) Reclassified from AOCI into Net incomeLocation of Gain (Loss) Reclassified from AOCI in Net income
Nine Months Ended September 30,
2022202120222021
Cash flow hedging derivatives
Currency exchange contracts$1.8 $0.3 $(1.6)$(0.2)Net sales
Natural gas contracts7.4 3.7 (4.1)(0.1)Cost of sales
Interest rate swap contracts5.7 2.9 (1.7)— Interest expense, net
Total$14.9 $6.9 $(7.4)$(0.3)
In millionsAmount of Gain (Loss) Recognized in AOCIAmount 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)
Nine Months Ended September 30,
2022202120222021
Net investment hedging derivative
Currency exchange contracts (1)
$13.9 $8.0 $2.8 $0.2 Interest expense, net
Total$13.9 $8.0 $2.8 $0.2 
__________
(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 $4.8 million of net gains 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. 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 nonrecurring fair value measurements related to derivative assets and liabilities on the condensed consolidated balance sheets as of September 30, 2022 or December 31, 2021.
September 30, 2022
In millions
Level 1(1)
Level 2(2)
Level 3(3)
Total
Assets:
Currency exchange contracts (4)
$— $0.9 $— $0.9 
Natural gas contracts (4)
— 2.1 — 2.1 
Total assets$— $3.0 $— $3.0 
Liabilities:
Natural gas contracts (6)
$— $0.2 $— $0.2 
Total liabilities$— $0.2 $— $0.2 
December 31, 2021
In millions
Level 1(1)
Level 2(2)
Level 3(3)
Total
Assets:
Currency exchange contracts (4)
$— $0.5 $— $0.5 
Net investment hedge (5)
— 2.0 — 2.0 
Total assets$— $2.5 $— $2.5 
Liabilities:
Natural gas contracts (6)
$— $0.6 $— $0.6 
Net investment hedge (7)
— 1.0 — 1.0 
Interest rate swap contracts (7)
— 4.0 — 4.0 
Total liabilities$— $5.6 $— $5.6 
__________
(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 "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.