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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 | Derivatives and Hedging In the normal course of business, the Company and its subsidiaries are exposed to gains and losses resulting from fluctuations in foreign currency exchange rates. The Company uses designated cash flow hedges and non-designated hedges in the form of foreign currency forward contracts as part of its strategy to manage the exposure to fluctuations in foreign currency exchange rates and to mitigate the impact of foreign currency translation on transactions that are denominated primarily in Japanese Yen, British Pounds, Euros, Canadian Dollars, Australian Dollars and Korean Won. The Company also uses interest rate hedge contracts to mitigate the impact of variable rates on its long-term debt. The Company accounts for its foreign currency forward contracts and interest rate hedge contracts in accordance with ASC Topic 815, “Derivatives and Hedging”, (“ASC Topic 815”). ASC Topic 815 requires the recognition of all derivative instruments as either assets or liabilities on the balance sheet, the measurement of those instruments at fair value and the recognition of changes in the fair value of derivatives in earnings in the period of change, unless the derivative qualifies as a designated cash flow hedge that offsets certain exposures. Certain criteria must be satisfied in order for derivative financial instruments to be classified and accounted for as a cash flow hedge. Gains and losses from the remeasurement of qualifying cash flow hedges are recorded as a component of accumulated other comprehensive income (loss) and released into earnings as a component of cost of products, other income and interest expense during the period in which the hedged transaction takes place. Remeasurement gains or losses of derivatives that are not elected for hedge accounting treatment are recorded in earnings immediately as a component of other income. Foreign currency forward contracts and interest rate hedge contracts are used only to meet the Company’s objectives of minimizing variability in the Company’s operating results arising from foreign exchange rate movements and changes in interest rates. The Company does not enter into foreign currency forward contracts and interest rate hedge contracts for speculative purposes. The Company utilizes counterparties for its derivative instruments that it believes are creditworthy at the time the transactions are entered into and the Company closely monitors the credit ratings of these counterparties. The following table summarizes the fair value of the Company’s derivative instruments as well as the location of the asset and/or liability on the consolidated condensed balance sheets as of June 30, 2022 and December 31, 2021 (in millions):
| Balance Sheet Location |  | Fair Value of Asset Derivatives
| June 30, 2022 |  | December 31, 2021
Derivatives designated as cash flow hedging instruments: |  |  |  |  |
Foreign currency forward contracts | Other current assets |  | $ | 2.6 |  |  | $ | 0.1 |
Interest rate hedge contracts | Other current assets |  | 1.1 |  |  | — |
Interest rate hedge contracts | Other assets |  | 1.0 |  |  | — |
Total |  |  | $ | 4.7 |  |  | $ | 0.1 |
Derivatives not designated as hedging instruments: |  |  |  |  |
Foreign currency forward contracts | Other current assets |  | 15.2 |  |  | 0.2 |
Total asset position |  | $ | 19.9 |  |  | $ | 0.3 |
| Balance Sheet Location |  | Fair Value of Liability Derivatives
| June 30, 2022 |  | December 31, 2021
Derivatives designated as cash flow hedging instruments: |  |  |  |  |
Interest rate hedge contracts | Accounts payable and accrued expenses |  | $ | — |  |  | $ | 4.1 |
Interest rate hedge contracts | Other long-term liabilities |  | — |  |  | 4.6 |
|  |  | — |  |  | 8.7 |
Derivatives not designated as hedging instruments: |  |  |  |  |
Foreign currency forward contracts | Accounts payable and accrued expenses |  | 0.1 |  |  | 0.2 |
Total liability position |  | $ | 0.1 |  |  | $ | 8.9 |
The Company’s derivative instruments are subject to a master netting agreement with each respective counterparty bank and are therefore net settled at their maturity date. Although the Company has the legal right of offset under the master netting agreements, the Company has elected not to present these contracts on a net settlement amount basis, and therefore present these contracts on a gross basis on the accompanying consolidated condensed balance sheets as of June 30, 2022 and consolidated balance sheets as of December 31, 2021. Cash Flow Hedging Instruments Foreign Currency Forward Contracts The Company uses foreign currency derivatives designated as qualifying cash flow hedging instruments, including foreign currency forward contracts to help mitigate the Company's foreign currency exposure from intercompany sales of inventory and intercompany expense reimbursement to its foreign subsidiaries. These contracts generally mature within 12 months to 15 months from their inception. As of June 30, 2022 and December 31, 2021, the notional amounts of the Company's foreign currency forward contracts designated as cash flow hedge instruments were approximately $23.4 million and $3.3 million, respectively. A s of June 30, 2022, the Company recorded a net gain of $3.7 million in accumulated other comprehensive loss related to foreign currency forward contracts. Of this amount, net gains of $1.1 million for the three months ended June 30, 2022 and $1.5 million for the six months ended June 30, 2022, were removed from accumulated other comprehensive income (loss) and recognized in cost of products for the underlying sales that were recognized. Additionally, for the three and six months ended June 30, 2022, net gains related to the amortization of forward points were nominal and $0.1 million, respectively, and were removed from accumulated other comprehensive income (loss) and recognized in cost of products. Based on the current valuation, the Company expects to reclassify net gains of $2.7 million related to foreign currency forward contracts from accumulated other comprehensive income (loss) into net earnings during the next 12 months. The Company recognized a net a gain of $0.2 million and nominal net loss in cost of products related to its forward contracts during the three and six months ended June 30, 2021, respectively. Interest Rate Hedge Contract In order to mitigate the risk of changes in interest rates associated with the Company’s variable-rate Term Loan, the Company used an interest rate hedge designated as a cash flow hedge (see Note 6). Over the life of the Term Loan, the Company will receive variable interest payments from the counterparty lenders in exchange for the Company making fixed interest rate payments at 2.54%, without exchange of the underlying notional amount. The notional amounts outstanding under the interest rate hedge contract were $193.3 million and $194.3 million as of June 30, 2022 and December 31, 2021, respectively. During the three and six months ended June 30, 2022, the Company recorded a net gain of $1.7 million and $8.8 million, respectively, related to the remeasurement of the interest rate hedge contract in accumulated other comprehensive income (loss). Of these amounts, net losses of $0.8 million and $2.0 million were realized f rom accumulated other comprehensive loss and recognized in interest expense during the three and six months ended June 30, 2022, respectively. Based on the current valuation, the Company expects to reclassify a net gain of $1.1 million related to the interest rate hedge contract from accumulated other comprehensive income (loss) into earnings during the next 12 months. The Company recognized net losses of $1.2 million and $2.4 million in interest expense related to the interest rate hedge contract during the three and six months ended June 30, 2021, respectively. The following tables summarize the net effect of all cash flow hedges on the consolidated condensed financial statements for the three and six months ended June 30, 2022 and 2021 (in millions):
|  | Gain/(Loss) Recognized in Other Comprehensive Income
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
Derivatives designated as cash flow hedging instruments |  | 2022 |  | 2021 |  | 2022 |  | 2021
Foreign currency forward contracts |  | $ | 2.7 |  |  | $ | (0.1) |  |  | $ | 3.7 |  |  | $ | 2.1 |
Interest rate hedge agreements |  | 1.7 |  |  | (0.5) |  |  | 8.8 |  |  | 2.2 |
|  | $ | 4.4 |  |  | $ | (0.6) |  |  | $ | 12.5 |  |  | $ | 4.3 |
|  | Gain/(Loss) Reclassified from Other Comprehensive Income into Earnings
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
Derivatives designated as cash flow hedging instruments |  | 2022 |  | 2021 |  | 2022 |  | 2021
Foreign currency forward contracts |  | $ | 1.1 |  |  | $ | 0.2 |  |  | $ | 1.5 |  |  | $ | — |
Interest rate hedge agreements |  | (0.8) |  |  | (1.2) |  |  | (2.0) |  |  | (2.4) |
|  | $ | 0.3 |  |  | $ | (1.0) |  |  | $ | (0.5) |  |  | $ | (2.4) |
Foreign Currency Forward Contracts Not Designated as Hedging Instruments The Company uses foreign currency forward contracts that are not designated as qualifying cash flow hedging instruments to mitigate the exposure to fluctuations in foreign currency exchange rates due to the remeasurement of certain balance sheet payables and receivables denominated in foreign currencies, as well as gains and losses resulting from the translation of the operating results of the Company’s international subsidiaries into U.S. dollars for financial reporting purposes. These contracts generally mature within 12 months from inception. As of June 30, 2022 and December 31, 2021, the notional amounts of the Company’s foreign currency forward contracts used to mitigate the exposures discussed above were approximately $285.1 million and $67.8 million, respectively. The Company estimates the fair values of foreign currency forward contracts based on pricing models using current market rates, and records all derivatives on the balance sheet at fair value with changes in fair value recorded in the consolidated condensed statements of operations. Foreign currency forward contracts are classified under Level 2 of the fair value hierarchy (see Note 14). The following table summarizes the location of net gains and losses in the consolidated condensed statements of operations that were recognized during the three and six months ended June 30, 2022 and 2021, respectively, in addition to the derivative contract type (in millions):
|  | Location of Net Gain (Loss) Recognized in Income on Derivative Instruments |  | Amount of Net Gain (Loss) Recognized in Income on Derivative Instruments
Derivatives not designated as hedging instruments |  | Three Months Ended June 30, |  | Six Months Ended June 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
Foreign currency forward contracts |  | Other income, net |  | $ | 25.4 |  |  | $ | (1.6) |  |  | $ | 38.6 |  |  | $ | 9.0 |
In addition, during the three months ended June 30, 2022 and 2021, the Company recognized a net foreign currency transaction losses of $14.3 million and $1.6 million, respectively, and a net foreign currency transaction l osses of $20.0 million and $3.1 million, for the six months ended June 30, 2022 and 2021, respectively, in its consolidated condensed statements of operations.

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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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