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Derivative Financial Instruments and Fair Value Measurements | 6 Months Ended
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Jun. 30, 2019
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments and Fair Value Measurements | (13) Derivative Financial Instruments and Fair Value Measurements Derivative Financial Instruments We are exposed to various market risks relating to our ongoing business operations. The primary market risks, which are managed using derivative instruments, are foreign currency exchange rate risk and interest rate risk. In certain circumstances, we enter into foreign currency forward exchange contracts (“forward contracts”) and cross-currency swaps to reduce the effects of fluctuating foreign currency exchange rates on our cash flows denominated in foreign currencies. Our exposure to market risk for changes in interest rates relates primarily to our long-term debt obligations. We have historically managed interest rate risk through the use of a combination of fixed and variable rate borrowings. The €400.0 ($453.3) notes due September 2022 and the €500.0 ($563.4) notes due June 2026 were designated as a hedge of our net investment in our foreign subsidiaries with a Euro-functional currency as of June 30, 2019. The gain or loss associated with foreign currency translation on these notes is recorded as a component of accumulated other comprehensive loss ("AOCI"), net of taxes. On occasion, forward contracts are also designated as a hedge of our net investment in our foreign subsidiaries. In April 2019, we entered into a cross-currency swap agreement to convert our intercompany fixed-rate, Swiss franc (“CHF”) denominated note, including the annual interest payment and the payment of remaining principal at maturity, to a fixed-rate Euro denominated note. The economic effect of the swap agreement was to eliminate the uncertainty of cash flows in CHF associated with the notes by fixing the principal at €202.3 with a fixed annual interest rate of 1.256%. This hedging arrangement has been designated as a cash flow hedge. The swap matures in April 2022, which matches the term of the intercompany note. Gains and losses from the hedge offsets the changes in the value of principal and interest payments as a result of changes in foreign exchange rates. We assessed the hedging relationship at the inception of the hedge in order to determine whether the derivatives that are used in the hedging transaction are highly effective in offsetting the cash flows of the hedged item and will continue to assess the relationship on an ongoing basis. We use the hypothetical derivative method in conjunction with regression analysis using a third party valuation to measure effectiveness of our cross-currency swap agreement. The change in the fair value of the swap is deferred in AOCI in the Consolidated Statement of Operations until the hedged item impacts earnings. The effect of our net investment hedges and cross-currency swaps on AOCI for the three and six months ended June 30, 2019, and 2018 was as follows:
|  | Gain (Loss) Recognized in |  |  | Location of Gain Reclassified |  | Gain Reclassified |
Instrument |  | Other Comprehensive Income |  |  | from AOCI into Income |  | from AOCI into Income |
|  | 3 Months Ended June 30, |  |  |  |  | 3 Months Ended June 30, |
|  | 2019 |  |  | 2018(1) |  |  |  |  | 2019 |  |  | 2018(1) |
Euro Notes |  | $ | (13.9 | ) |  | $ | 47.1 |  |  | Interest and other (income) expenses, net |  | $ | - |  |  | $ | - |
Cross-currency swaps |  |  | 5.0 |  |  |  | - |  |  | Interest and other (income) expenses, net |  |  | 5.4 |  |  |  | - |
|  | Gain Recognized in |  |  | Location of Gain Reclassified |  | Gain Reclassified |
Instrument |  | Other Comprehensive Income |  |  | from AOCI into Income |  | from AOCI into Income |
|  | 6 Months Ended June 30, |  |  |  |  | 6 Months Ended June 30, |
|  | 2019 |  |  | 2018(1) |  |  |  |  | 2019 |  |  | 2018(1) |
Euro Notes |  | $ | 8.5 |  |  | $ | 25.9 |  |  | Interest and other (income) expenses, net |  | $ | - |  |  | $ | - |
Cross-currency swaps |  |  | 5.0 |  |  |  | - |  |  | Interest and other (income) expenses, net |  |  | 5.4 |  |  |  | - |
(1) | The prior period amounts have been revised to conform with the current period presentation.
We expect the net amount of pre-tax derivative gains and losses included in AOCI at June 30, 2019 to be reclassified into earnings within the next twelve months will not be significant. The actual amount that will be reclassified to earnings over the next twelve months will vary due to future currency exchange rates. For our forward contracts that are not designated as hedges, any gain or loss resulting from the change in fair value is recognized in the current period earnings. These gains or losses are offset by the exposure related to receivables and payables with our foreign subsidiaries and to interest due on our Euro-denominated notes, which is paid annually in June and September. The effect of our forward contracts that are not designated as hedging instruments on the Consolidated Statements of Operations for the three and six months ended June 30 was as follows:
|  | Location of Gain |  | Amount of Gain Recognized in Income |
Instrument |  | Recognized in Income |  | 3 Months Ended June 30, |  |  | 6 Months Ended June 30, |
|  |  |  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
Foreign currency forward contracts |  | Interest and other (income) expenses, net |  | $ | 9.1 |  |  | $ | 2.1 |  |  | $ | 9.2 |  |  | $ | 2.1 |
The following tables present the fair value of derivative and non-derivative assets and liabilities on the Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018:
|  | Assets |
|  |  |  | June 30, |  |  | December 31, |
|  | Balance Sheet Location |  | 2019 |  |  | 2018 |
Instruments designated as hedges: |  |  |  |  |  |  |  |  |  |
Cross-currency swaps |  | Prepaid expenses and other assets |  | $ | 5.1 |  |  | $ | - |
Instruments not designated as hedges: |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | Accounts receivable, net |  |  | 9.2 |  |  |  | 0.1 |
Total instruments |  |  |  | $ | 14.3 |  |  | $ | 0.1 |
|  | Liabilities |
|  |  |  | June 30, |  |  | December 31, |
|  | Balance Sheet Location |  | 2019 |  |  | 2018 |
Instruments designated as hedges: |  |  |  |  |  |  |  |  |  |
Euro Notes |  | Long-term debt |  |  | 1,083.5 |  |  |  | 1,032.0 |
Instruments not designated as hedges: |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | Accrued liabilities |  |  | — |  |  |  | 0.1 |
Total instruments |  | $ | 1,083.5 |  |  | $ | 1,032.1 |
Fair Value Measurements The carrying value of long-term debt approximates fair value, except for the Euro-denominated notes. The fair value of the Euro-denominated notes, as observable at commonly quoted intervals (Level 2 inputs), was $1,083.5 and $1,052.9 as of June 30, 2019 and December 31, 2018, respectively, compared to a carrying value of $1,016.7 and $1,024.6, respectively. Our deferred compensation plan assets were $101.6 and $89.5 as of June 30, 2019 and December 31, 2018 respectively. We determine the fair value of these assets, comprised of publicly traded securities, by using market quotes as of the last day of the period (Level 1 inputs). We measure the fair value of the foreign currency forward contracts and cross-currency swaps at the value based on either directly or indirectly observable inputs from third parties (Level 2 inputs).

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- References No definition available. + Details
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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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