Financial Instruments

12 Months Ended

Dec. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging

In the normal course of business, the Company is exposed to risks relating to changes in foreign currency exchange rates, commodity prices and interest rates. Derivative financial instruments, such as foreign currency exchange forward contracts, commodities futures contracts, interest rate swaps and net investment hedges are used to manage the risks associated with changes in the conditions of those markets. All derivatives are recognized in the Consolidated Balance Sheets at fair value. The counterparties to the Company’s derivative agreements are primarily major international financial institutions. The Company continually monitors its derivative positions and the credit ratings of its counterparties and does not anticipate nonperformance on their part.

Foreign Currency

The Company conducts a significant portion of its business in currencies other than the U.S. dollar and a portion of its business in currencies other than the functional currencies of its subsidiaries. As a result, the Company’s operating results are impacted by foreign currency exchange rate volatility.

At December 31, 2020, the Company held foreign currency forward contracts to purchase and sell various currencies to mitigate foreign currency exposure with the U.S. dollar. The Company has not designated any foreign currency exchange forward contracts as eligible for hedge accounting and, as a result, changes in the fair value of foreign currency forward contracts are recorded in the Consolidated Statements of Operations as "Other (expense) income, net." The total notional value of foreign currency exchange forward contracts held at December 31, 2020 and 2019 was approximately $78.5 million and $74.2 million, respectively, with settlement dates generally within one year.

Commodities

As part of its risk management policy, the Company enters into commodity futures contracts for the purpose of mitigating its exposure to fluctuations in prices of certain metals used in the production of its finished goods. The Company held futures contracts to purchase and sell various metals, primarily tin and silver, for a notional amount of $25.0 million and $28.6 million at December 31, 2020 and 2019, respectively. Substantially all contracts outstanding at December 31, 2020 have delivery dates within one year. The Company has not designated these derivatives as hedging instruments and, accordingly, records changes in their fair values in the Consolidated Statements of Operations as "Other (expense) income, net."

Unrealized gains and losses on derivative contracts are accounted for in the Consolidated Statements of Cash Flows as "Operating activities."

Interest Rates and Related Strategies

The Company entered into interest rate swaps to mitigate its exposure to fluctuations in interest rates on its term loan through January 2024. The interest rate swaps effectively fix the floating rate of interest payments associated with the term loan under the Credit Agreement. The Company designated these contracts as cash flow hedges and changes in the fair value are recorded in "Other comprehensive (loss) income" and reclassified into earnings as the underlying hedged item affects earnings. Amounts reclassified into earnings related to interest rate swaps are included in the Consolidated Statements of Operations as "Interest expense, net."

The Company entered into cross-currency swaps to effectively convert the $750 million term loan under the Credit Agreement, a U.S. dollar-denominated debt obligation, into fixed-rate euro-denominated debt through January 2024. The Company is obligated to make periodic euro-denominated coupon payments to the hedge counterparties on an aggregate initial notional amount of €662 million, in exchange for periodic U.S. dollar-denominated coupon payments from these hedge counterparties on an aggregate initial notional amount of $750 million. The Company has designated these contracts as a net investment hedge of the foreign currency exposure of a portion of its net investment in its European operations. Changes in the fair value are recorded in "Foreign currency translation" in "Accumulated other comprehensive loss."

All interest payments to be paid during the last two years preceding the maturity date of the term loan will revert back to a floating rate of interest for both the interest rate swaps and cross-currency swaps. The proceeds from these contracts are reflected as cash flows from Operating Activities on the Consolidated Statement of Cash Flows.

The net result of the above hedges, which expire in January 2024, is an interest rate of approximately 2.4%, which could vary due to changes in the euro and the U.S. dollar exchange rate.

During 2020 and 2019, the Company's interest rate swaps and cross-currency swaps were deemed highly effective. The Company expects to reclassify $17.6 million of expense from "Accumulated other comprehensive loss" to "Interest expense, net" in the Consolidated Statements of Operations during 2021.

Fair Value Measurements

The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis:


			December 31,
(dollars in millions)	Balance sheet location	Classification	2020		2019
Asset Category
Foreign exchange contracts not designated as hedging instruments	Other current assets	Level 2	$	0.2	$	0.9
Metals contracts not designated as hedging instruments	Other current assets	Level 2	0.4		0.3

Cross currency swaps designated as net investment hedge	Other current assets	Level 2	16.3		18.4


Available for sale equity securities	Other assets	Level 1	—		0.3
Total			$	16.9	$	19.9

Liability Category
Interest rate swaps designated as cash flow hedging instruments	Accrued expenses and other current liabilities	Level 2	$	17.6	$	6.9
Foreign exchange contracts not designated as hedging instruments	Accrued expenses and other current liabilities	Level 2	0.7		0.2
Metals contracts not designated as hedging instruments	Accrued expenses and other current liabilities	Level 2	1.6		0.7
Interest rate swaps designated as cash flow hedging instruments	Other liabilities	Level 2	33.5		19.7
Cross currency swaps designated as net investment hedge	Other Liabilities	Level 2	43.3		0.3
Total			$	96.7	$	27.8

The following methods and assumptions were used to estimate the fair value of each class of the Company’s financial assets and liabilities:

Derivatives - Derivative assets and liabilities include foreign currency, metals and interest rate derivatives. The values are determined using pricing models based upon observable market inputs, such as market spot and futures prices on over-the-counter derivative instruments, market interest rates and consideration of counterparty credit risk.

Available for sale equity securities - Available for sale equity securities classified as Level 1 assets are measured using quoted market prices at the reporting date multiplied by the quantity held.

There were no significant transfers between the fair value hierarchy levels during 2020.

The carrying value and estimated fair value of the Company’s long-term debt totaled $1.52 billion and $1.55 billion, respectively, at December 31, 2020. At December 31, 2019, the carrying value and estimated fair value totaled $1.52 billion and $1.58 billion, respectively. The carrying values noted above include unamortized discounts and debt issuance costs. The estimated fair value of long-term debt is measured using quoted market prices at the reporting date multiplied by the gross carrying amount of the related debt, which excludes unamortized discounts and debt issuance costs. Such instruments are valued using Level 2 inputs.