Derivatives

9 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

9. DERIVATIVES

Our business and financial results are affected by fluctuations in global financial markets, including interest rates and currency exchange rates.  Our hedging policy has been developed to manage these risks to an acceptable level based on management’s judgment of the appropriate trade-off between risk, opportunity and cost.  We do not hold financial instruments for trading or speculative purposes.

Currency derivative contracts  From time to time, we use foreign currency forward contracts to reduce the effects of fluctuations in exchange rates relating to certain foreign currencies.  As of September 30, 2019, we have currency forward contracts outstanding with a total notional amount of $191.5 million that hedge our exposure to changes in foreign currency exchange rates for certain payroll expenses into the third quarter of 2022 and other items into the second quarter of 2020. 

Fixed-to-fixed cross-currency swap In the third quarter of 2019, we entered into a fixed-to-fixed cross-currency swap to reduce the variability of functional currency equivalent cash flows associated with changes in exchange rates on certain Euro-based intercompany loans. As of September 30, 2019, the notional amount of the fixed-to-fixed cross-currency swap was $217.9 million, and hedges our exposure to changes in exchange rates on the intercompany loans into the second quarter of 2024.

Variable-to-fixed interest rate swap In 2018, we entered into a variable-to-fixed interest rate swap to reduce the variability of cash flows associated with interest payments on our variable rate debt. In the second quarter of 2019, we discontinued this variable-to-fixed interest rate swap, which was a liability of $9.7 million on the date that it was discontinued.

Also in the second quarter of 2019, we entered into a new variable-to-fixed interest rate swap to reduce the variability of cash flows associated with interest payments on our variable rate debt. We have the following notional amounts hedged in relation to our variable-to-fixed interest rate swap: $1.0 billion through May 2020, $900.0 million through May 2021, $750.0 million through May 2022, $600.0 million through May 2023 and $500.0 million through May 2024.

The following table summarizes the reclassification of derivative gains and losses into net income from accumulated other comprehensive income (loss) for those derivative instruments designated as cash flow hedges under ASC 815 - Derivatives and Hedging:

	Location	Gain (Loss) Reclassified During											Total of Financial			Gain (Loss) Expected
	of Gain (Loss)	Three Months Ended						Nine Months Ended					Statement			to be Reclassified
	Reclassified into	September 30,						September 30,					Line Item			During the
	Net Income	2019			2018			2019		2018			2019			Next 12 Months
		(in millions)
Currency forward contracts	Cost of Goods Sold	$	0.9		$	(0.9	)	$	1.8	$	(3.7	)	$	4,381.7		$	2.0
Fixed-to-fixed cross-currency swap	Other Income (Expense), net	7.6			—			7.6		—			(9.0		)	—
Variable-to-fixed interest rate swap	Interest Expense	(1.7		)	0.8			0.2		2.1			(163.9		)	(9.1		)

 

See Note 14 - Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (AOCI) for amounts recognized in other comprehensive income (loss) during the three and nine months ended September 30, 2019 and 2018.

The following table summarizes the amount and location of gains and losses recognized in the Condensed Consolidated Statements of Operations for those derivative instruments not designated as hedging instruments under ASC 815:

		Gain (Loss) Recognized During											Total of Financial
	Location of Gain (Loss)	Three Months Ended						Nine Months Ended					Statement Line
	Recognized in	September 30,						September 30,					Item
	Net Income	2019			2018			2019			2018		2019
		(in millions)
Currency forward contracts	Cost of Goods Sold	$	(0.5	)	$	2.3		$	1.3		$	2.8	$	4,381.7
Currency forward contracts	Other Income (Expense), net	0.1			(0.5		)	(0.5		)	1.3		(9.0		)