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Derivative Instruments and Hedging Activities | 3 Months Ended
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Mar. 31, 2017
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
Derivative Instruments and Hedging Activities | 9. Derivative Instruments and Hedging Activities Foreign Currency Instruments The Company designates certain foreign currency derivatives, primarily comprised of foreign currency forward contracts, as freestanding derivatives for which hedge accounting does not apply. The changes in the fair market value of these freestanding derivatives are included in selling, general and administrative expenses in the Company’s condensed consolidated statements of income. The Company uses freestanding foreign currency derivatives to hedge foreign-currency-denominated intercompany transactions and to partially mitigate the impact of foreign currency fluctuations. The fair value of the freestanding foreign currency derivatives is based on third-party quotes. The Company’s foreign currency derivative contracts are generally executed on a monthly basis. The Company designates as cash-flow hedges those foreign currency forward contracts it enters into to hedge forecasted inventory purchases and intercompany management fees that are subject to foreign currency exposures. Forward contracts are used to hedge forecasted inventory purchases over specific months. Changes in the fair value of these forward contracts, excluding forward points, designated as cash-flow hedges are recorded as a component of accumulated other comprehensive income (loss) within shareholders’ equity, and are recognized in cost of sales in the condensed consolidated statements of income during the period which approximates the time the hedged inventory is sold. The Company also hedges forecasted intercompany management fees over specific months. These contracts allow the Company to sell Euros in exchange for U.S. dollars at specified contract rates. Changes in the fair value of these forward contracts designated as cash flow hedges are recorded as a component of accumulated other comprehensive income (loss) within shareholders’ equity, and are recognized in selling, general and administrative expenses in the condensed consolidated statements of income during the period when the hedged item and underlying transaction affect earnings. As of March 31, 2017 and December 31, 2016, the aggregate notional amounts of all foreign currency contracts outstanding designated as cash flow hedges were approximately $117.0 million and $90.0 million, respectively. At March 31, 2017, these outstanding contracts were expected to mature over the next fifteen months. The Company’s derivative financial instruments are recorded on the condensed consolidated balance sheet at fair value based on third-party quotes. As of March 31, 2017, the Company recorded assets at fair value of $2.7 million and liabilities at fair value of $4.5 million relating to all outstanding foreign currency contracts designated as cash-flow hedges. As of December 31, 2016, the Company recorded assets at fair value of $4.6 million. The Company assesses hedge effectiveness and measures hedge ineffectiveness at least quarterly. During the three months ended March 31, 2017 and 2016, the ineffective portion relating to these hedges was immaterial and the hedges remained effective as of March 31, 2017 and December 31, 2016. As of March 31, 2017 and December 31, 2016, the majority of the Company’s outstanding foreign currency forward contracts had maturity dates of less than twelve months with the majority of freestanding derivatives expiring within one month as of both March 31, 2017 and December 31, 2016. As of March 31, 2017, the Company had aggregate notional amounts of approximately $358.8 million of foreign currency contracts, inclusive of freestanding contracts and contracts designated as cash flow hedges. Gains and Losses on Derivative Instruments The following table summarizes gains (losses) relating to derivative instruments recorded in other comprehensive income (loss) during the three months ended March 31, 2017 and 2016:
|  | Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) |
|  | For the Three Months Ended |
|  | March 31, 2017 |  |  | March 31, 2016 |
|  | (In millions) |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |
Foreign exchange currency contracts relating to inventory and intercompany management fee hedges |  | $ | (6.1 | ) |  | $ | (0.9 | )
As of March 31, 2017, the estimated amount of existing net losses related to cash flow hedges recorded in accumulated other comprehensive loss that are expected to be reclassified into earnings over the next twelve months was $1.1 million. The following table summarizes gains (losses) relating to derivative instruments recorded to income during the three months ended March 31, 2017 and 2016:
|  | Location of Gain |  | Amount of Gain (Loss) Recognized in Income |
|  | (Loss) |  | For the Three Months Ended |
|  | Recognized in Income |  | March 31, 2017 |  |  | March 31, 2016 |
|  |  |  | (In millions) |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |
Foreign exchange currency contracts relating to inventory hedges and intercompany management fee hedges(1) |  | Selling, general and administrative expenses |  | $ | (0.5 | ) |  | $ | (0.4 | )
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |
Foreign exchange currency contracts |  | Selling, general and administrative expenses |  | $ | (1.3 | ) |  | $ | (2.3 | )
(1) | For foreign exchange contracts designated as hedging instruments, the amounts recognized in income primarily represent the amounts excluded from the assessment of hedge effectiveness. There were no material ineffective amounts reported for derivatives designated as hedging instruments.
The following table summarizes gains (losses) relating to derivative instruments reclassified from accumulated other comprehensive loss into income during the three months ended March 31, 2017 and 2016:
|  | Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive |  | Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income |
|  | Income (Loss) into Income |  | For the Three Months Ended |
|  | (Effective Portion) |  | March 31, 2017 |  |  | March 31, 2016 |
|  |  |  | (In millions) |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |
Foreign exchange currency contracts relating to inventory hedges |  | Cost of sales |  | $ | 0.9 |  |  | $ | 5.0 |
Foreign exchange currency contracts relating to intercompany management fee hedges |  | Selling, general and administrative expenses |  | $ | 0.5 |  |  | $ | (0.1 | )
The Company reports its derivatives at fair value as either assets or liabilities within its condensed consolidated balance sheet. See Note 12, Fair Value Measurements, for information on derivative fair values and their condensed consolidated balance sheet location as of March 31, 2017 and December 31, 2016.

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