In the course of business, the Company enters into contractual arrangements (also referred to as derivatives), to reduce its exposure to foreign currency. The Company has master netting agreements with all of its counterparties that allow for the settlement of contracts in an asset position with contracts in a liability position in the event of default. The Company manages counterparty risk through the utilization of investment grade commercial banks, diversification of counterparties, and its counterparty netting arrangements. The section below outlines the types of derivatives that existed at December 31, 2019 and September 30, 2019, as well as the Company’s objectives and strategies for holding derivative instruments.

A significant share of the Company’s sales is tied to currencies other than the U.S. dollar, the Company’s reporting currency. As such, a weakening of currencies relative to the U.S. dollar can have a negative impact on reported earnings. Conversely, strengthening of currencies relative to the U.S. dollar can improve reported results. The primary currencies to which the Company is exposed include the euro, the Japanese yen, the British pound, the Canadian dollar, and the Australian dollar.

Additionally, the Company’s foreign subsidiaries enter into internal and external transactions that create non-functional currency balance sheet positions at the foreign subsidiary level. These exposures are generally the result of intercompany purchases, intercompany loans and, to a lesser extent, external purchases, and are revalued in the foreign subsidiary’s local currency at the end of each period. Changes in the value of the non-functional currency balance sheet positions in relation to the foreign subsidiary’s local currency results in an exchange gain or loss recorded in Other (income) expense, net. The primary currency to which the Company’s foreign subsidiaries are exposed is the U.S. dollar.

At December 31, 2019, the Company maintained a cash flow hedging program related to foreign currency risk. These derivative instruments have a high correlation to the underlying exposure being hedged and have been deemed highly effective by the Company for accounting purposes in offsetting the associated risk.

The Company entered into a series of forward currency contracts to hedge cash flow uncertainty associated with currency fluctuations. These transactions are accounted for as cash flow hedges. The Company had an unrealized pre-tax loss of $0.1 and an unrealized pre-tax gain of $1.7 at December 31, 2019 and September 30, 2019, respectively, on these forward currency contracts, which are accounted for as cash flow hedges, and are included in AOCI. Assuming foreign exchange rates versus the U.S. dollar remain at December 31, 2019 levels over the next 12 months, most of the pre-tax gain included in AOCI at December 31, 2019 is expected to be included in Other (income) expense, net. Contract maturities for these hedges extend into fiscal 2020. At December 31, 2019, there were 61 open foreign currency contracts with a total notional value of $125.0.

The Company entered into foreign currency derivative contracts which are not designated as cash flow hedges for accounting purposes to hedge balance sheet exposures. Any gains or losses on these contracts are expected to be offset by exchange gains or losses on the underlying exposures and thus are not subject to significant market risk. The change in estimated fair value of the foreign currency contracts for the three months ended December 31, 2019 resulted in a gain of $0.3, compared to a loss of $1.3 for the three months ended December 31, 2018, and was recorded in Other (income) expense, net in the Condensed Consolidated Statements of Earnings. At December 31, 2019, there were five open foreign currency derivative contracts not designated as cash flow hedges, with a total notional value of $39.0.


	Fair Value of Asset (Liability) ⁽¹⁾
	December 31, 2019		September 30, 2019
Derivatives designated as cash flow hedging relationships:
Foreign currency contracts	$	(0.1)	$	1.7
Derivatives not designated as cash flow hedging relationships:
Foreign currency contracts	$	0.2	$	0.4

(1)All derivative assets are presented in Other current assets or Other assets. All derivative liabilities are presented in Other current liabilities or Other liabilities.


	Three Months Ended December 31,
	2019		2018
Derivatives designated as cash flow hedging relationships:
Foreign currency contracts
Loss recognized in OCI ⁽¹⁾	$	(0.9)	$	(0.2)
Gain reclassified from AOCI into income (effective portion) ^{(1) (2)}	0.9		1.8
Derivatives not designated as cash flow hedging relationships:
Foreign currency contracts
Gain (loss) recognized in income ⁽²⁾	$	0.3	$	(1.3)

(1)Each of these derivative instruments had a high correlation to the underlying exposure being hedged for the periods indicated and had been deemed highly effective in offsetting associated risk.


	At December 31, 2019						At September 30, 2019
	Assets ⁽¹⁾		Liabilities ⁽²⁾		Assets ⁽¹⁾		Liabilities ⁽²⁾
Foreign currency contracts
Gross amounts of recognized assets (liabilities)	$	1.0	$	(0.7)	$	2.4	$	(0.5)
Gross amounts offset in the balance sheet	(0.2)		—		—		0.2
Net amounts of assets (liabilities) presented in the balance sheet	$	0.8	$	(0.7)	$	2.4	$	(0.3)

Accounting guidance on fair value measurements for certain financial assets and liabilities requires that assets and liabilities carried at fair value be classified in one of the following three categories:

The following table sets forth the Company’s financial assets and liabilities, which are carried at fair value and measured on a recurring basis during the period, all of which are classified as Level 2 within the fair value hierarchy:


	December 31, 2019		September 30, 2019
Liabilities at estimated fair value:
Deferred compensation	$	(40.1)	$	(40.6)
Derivatives - foreign currency contracts	0.1		2.1
Net liabilities at estimated fair value	$	(40.0)	$	(38.5)

At December 31, 2019, the estimated fair value of foreign currency contracts is the amount that the Company would receive or pay to terminate the contracts, considering first the quoted market prices of comparable agreements or, in the absence of quoted market prices, factors such as interest rates, currency exchange rates, and remaining maturities. The estimated fair value of the deferred compensation liability is determined based upon the quoted market prices of the investment options that are offered under the plan.

At December 31, 2019 and September 30, 2019, the fair market value of fixed rate long-term debt was $1,095.6 and $1,071.2, respectively, compared to its carrying value of $1,100.0. The estimated fair value of the long-term debt was estimated using yields obtained from independent pricing sources for similar types of borrowing arrangements. The estimated fair value of long-term debt, excluding revolving credit facilities, have been determined based on Level 2 inputs.

Due to the nature of cash and cash equivalents and short-term borrowings, including notes payable, carrying amounts on the balance sheets approximate fair value. Additionally, the carrying amounts of the Company’s revolving credit facilities, which are classified as long-term debt on the balance sheet, approximate fair value due to the revolving nature of the balances. The estimated fair value of cash and cash equivalents, short-term borrowings, and the revolving credit agreements have been determined based on Level 2 inputs.