The Company enters into derivative arrangements to manage changes in market conditions related to interest on debt obligations, foreign currency exposures and occasionally on commodity prices. Derivative instruments utilized during the period include interest rate and foreign currency swap agreements. All derivative instruments are recognized as either assets or liabilities on the balance sheet at fair value at the end of each period. The counterparties to the Company's contractual derivative agreements are all major global financial institutions. The Company is exposed to credit loss in the event of nonperformance by these counterparties. The Company continually monitors its positions and the credit ratings of its counterparties, and does not anticipate nonperformance by the counterparties. For designated hedging relationships, the Company formally documents the hedging relationship and its risk management objective and strategy for undertaking the hedge, the hedging instrument, the hedged item, the nature of the risk being hedged, how the hedging instrument's effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively. The Company also formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting cash flows of hedged items.

In December 2018, the Company entered into cross-currency swap agreements to hedge its net investment in Euro-denominated assets against future volatility in the exchange rate between the U.S. dollar and the Euro. By doing so, the Company synthetically converted a portion of its U.S. dollar-based long-term debt into Euro-denominated long-term debt. The agreements have a five-year maturity at notional amounts declining from $600.0 million to $360.0 million over the contract period. Under the terms of the swap agreements, the Company is to receive net interest payments at a fixed rate of 4.8255% and pay Euros at rates ranging from 2.19% to 2.315%. At inception, the cross-currency swaps were designated as net investment hedges.

For a fixed-fixed cross currency swap at final maturity, (i) the total change in fair value of the swap will be the realized accruals of the pay and receive legs of the swap recorded in earnings and (ii) the final cash settlement of the principal at maturity recorded in cumulative translation adjustments (“CTA”). The accruals of the pay and receive legs of the swap represent the forward points or “carry” on the swap and the final cash settlement of the principal at maturity will be equal to the spot-to-spot change over its life. On a mark-to-market basis during its life, there will be three components to the change in fair value of the swap. The spot-to-spot change in fair value of the swap, non-discounted, based on the swap’s principal amount, will be recorded in CTA each period. The accrual of the pay and receive legs of the swap each period, representing the amortization in systematic fashion of the impact of changes in fair value of the swap from all other factors, will be recorded in earnings. The difference between the change in fair value of the excluded component of the cross currency swap and the amount recognized in earnings represented by accrual of the pay and receive legs of the swap will be recorded in CTA each period. This amount includes the change in fair value of the future interest payments and the impact of changes in discount factors as it impacts the value of the final principal exchange. As of March 31, 2019, the Company recorded $15.8 million to CTA and recognized approximately $3.8 interest income, net of the pay and receive legs of the swap.

The Company has historically utilized its cross currency interest rate swaps to mitigate foreign currency and interest rate cash flow exposure related to its non-functional currency long-term debt held at the Company’s wholly owned Dutch subsidiary. The currency adjustments related to this loan were recorded in Other non-operating (income) expense, net. The offsetting gains and losses on the related derivative contracts were recorded in other non-operating (income) expense, net. In December of 2016 the Company entered into a cross-currency interest rate swap that converted $100.0 million of U.S. dollar denominated floating interest payments to functional currency (euro) fixed interest payments during the life of the hedging instrument. The Company designated the $100.0 million swap as a cash flow hedge, with the effective portion of the gain or loss on the derivative reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction impacts earnings. In addition, the Company entered into two cross-currency interest rate swaps that converted an additional $70.0 million of the U.S. dollar denominated floating interest payments (one for $40 million and the other for $30 million) to functional currency (euro) floating interest payments during the life of the hedging instruments. The effective period of one of the cross-currency interest rate swaps, in the amount of $30 million, expired as of December 31, 2017. On October 2, 2018, the Company terminated both the $100 million and the $40 million cross-currency interest rate swap agreements and paid approximately $14.0 million to settle the swap agreements.

In December 2018, the Company entered into an interest rate swap agreement designed to eliminate the cash flow risk caused by interest rate changes on the forecasted interest payments expected to occur related to a portion of its outstanding borrowings under the Altra Credit Agreement for a notional value of $600 million at 4.8255%. The Company recognized $0.5 million in interest expense as of March 31, 2019. The effective period of the swap was December 4, 2018, and the maturity date is September 29, 2023.

In January 2017, the Company entered into an interest rate swap agreement designed to fix the variable interest rate payable on a portion of its outstanding borrowings for a notional value of $50.0 million, at 1.625%. The effective date was January 31, 2017 and the maturity date is January 31, 2020.

These interest rate swap agreements are designed to manage exposure to interest rates on the Company’s variable rate indebtedness. The Company recognizes all derivatives on its balance sheet at fair value. The Company has designated these interest rate swap agreements as cash flow hedges. Changes in the fair value of the swap will be recognized in other comprehensive income until the hedged items are recognized in earnings.

The following table summarizes outstanding swaps that the Company has recorded at March 31, 2019.

Initial US$

Date

Derivative

Notional

Entered

Financial

Amount

Fixed Rate

Floating Leg

Fixed Rate

Floating Leg

Settlement

Effective

into

Instrument

(millions)

(swap

counterparty)

(swap

counterparty)

(Company)

Dates

Period of Swap

12/10/2018

Cross currency

interest rate

swap

240.0

4.8255%

N/A

2.315%

N/A

Quarterly on the last

day of each

December,

March,

June, and

September

12/10/2018 - 9/29/2023

12/10/2018

Cross currency

interest rate

swap

192.0

4.8255%

N/A

2.235%

N/A

Quarterly on the last

day of each

December,

March,

June, and

September

12/10/2018 - 9/29/2023

12/10/2018

Cross currency

interest rate

swap

108.0

4.8255%

N/A

2.190%

N/A

Quarterly on the last

day of each

December,

March,

June, and

September

12/10/2018 - 9/29/2023

12/10/2018

Cross currency

interest rate

swap

60.0

4.8255%

N/A

2.290%

N/A

Quarterly on the last

day of each

December,

March,

June, and

September

12/10/2018 - 9/29/2023

12/4/2018

Interest rate swap

600.0

4.8255%

Variable rate 1-

month USD

LIBOR plus 2%

N/A

1 Month USD-

LIBOR-BBA

plus 2%

Monthly on the last

business day

of each month

commencing with

December 31,

2018 in

accordance with

Modified

Following

Business Day

Convention

12/4/2018 - 9/29/2023

1/31/2017

Interest rate swap

50.0

N/A

Variable rate 1-

month USD

LIBOR

1.625% USD

N/A

Monthly on the last

banking day of

each month

commencing

February 28, 2017

1/31/2017 - 1/31/2020

The following table summarizes the location and fair value, using Level 2 inputs (see Note 6 for a description of the fair value levels), of the Company's derivatives designated and not designated as hedging instruments in the unaudited condensed consolidated balance sheets (in millions).


	Balance Sheet Location	March 31, 2019			December 31, 2018
Designated as hedging instruments:
Cross currency swap agreements	Other long-term (assets)/liabilities	$	(7.4	)	$	8.4
Interest rate swap agreement	Other long-term (assets)		(0.3	)		(0.5	)
Interest rate swap agreement	Other long-term liabilities		12.4			7.9
		$	4.7		$	15.8