Derivative Financial Instruments

6 Months Ended

Jun. 30, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

12. Derivative Financial Instruments

We are exposed to various market risks, including changes in foreign currency exchange rates and interest rate changes. We enter into financial instruments to manage and reduce the impact of these risks, not for trading or speculative purposes. The counterparties to these financial instruments are major financial institutions. We continually monitor our foreign currency exposures in order to maximize the overall effectiveness of our foreign currency hedge positions. Principal currencies hedged against the U.S. dollar include the Euro, Australian dollar, Canadian dollar, Swedish krona, British pound and Japanese yen. We are subject to credit risk, which relates to the ability of counterparties to meet their contractual payment obligations or the potential non-performance by counterparties to financial instrument contracts. Management continues to monitor the status of our counterparties and will take action, as appropriate, to further manage our counterparty credit risk. There are no credit contingency features in our derivative financial instruments.

When hedge accounting is applicable, on the date we enter into a derivative, the derivative is designated as a hedge of the identified exposure. We measure the effectiveness of our hedging relationships both at hedge inception and on an ongoing basis.

Forward Currency Contracts

We enter into forward foreign currency contracts with third parties to reduce the effect of fluctuating foreign currencies, primarily on foreign denominated inventory purchases and intercompany loans. Our primary exposure to currency movements is in the Euro, the Swedish krona, the British pound, the Brazilian real, the Australian dollar, the Canadian dollar, and the Mexican peso.

Forward currency contracts are used to hedge foreign denominated inventory purchases for Europe, Australia, Canada, Japan and New Zealand, and are designated as cash flow hedges. Unrealized gains and losses on these contracts are deferred in Accumulated Other Comprehensive Income (Loss) ("AOCI") until the contracts are settled and the underlying hedged transactions relating to inventory purchases are recognized, at which time the deferred gains or losses will be reported in the

"Cost of products sold" line in the Consolidated Statements of (Loss) Income. As of June 30, 2024 and December 31, 2023, we had cash flow foreign exchange contracts outstanding with a U.S. dollar equivalent notional value of $82.7 million and $80.2 million, respectively, which were designated as hedges.

Forward currency contracts used to hedge foreign denominated intercompany loans are not designated as hedging instruments. Gains and losses on these derivative instruments are recognized within "Other (income) expense, net" in the Consolidated Statements of (Loss) Income and are largely offset by the change in the current translated value of the hedged item. The periods of the forward foreign exchange contracts correspond to the periods of the hedged transactions, with some relating to intercompany loans which extend beyond June 2025. As of June 30, 2024 and December 31, 2023, we had foreign exchange contracts outstanding with a U.S. dollar equivalent notional value of $138.5 million and $102.3 million, respectively, which were not designated as hedges.

The following table summarizes the fair value of our derivative financial instruments as of June 30, 2024 and December 31, 2023:


	Fair Value of Derivative Instruments
	Derivative Assets					Derivative Liabilities
(in millions)	Balance Sheet Location	June 30, 2024		December 31, 2023		Balance Sheet Location	June 30, 2024		December 31, 2023
Derivatives designated as hedging instruments:
Foreign exchange contracts	Other current assets	$	0.7	$	0.3	Other current liabilities	$	0.4	$	1.6
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Other current assets		0.6		1.0	Other current liabilities		0.6		0.1
Foreign exchange contracts	Other non-current assets		3.8		3.2	Other non-current liabilities		3.8		3.2
Total derivatives		$	5.1	$	4.5		$	4.8	$	4.9

The following tables summarize the pre-tax effect of our derivative financial instruments on the condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023:


	The Effect of Derivative Instruments in Cash Flow Hedging Relationships on the Consolidated Financial Statements
	Amount of Gain (Loss) Recognized in AOCI (Effective Portion)				Location of (Gain) Loss Reclassified from AOCI to Income	Amount of (Gain) Loss Reclassified from AOCI to Income (Effective Portion)
	Three months ended June 30,					Three months ended June 30,
(in millions)	2024		2023			2024			2023
Cash flow hedges:
Foreign exchange contracts	$	0.6	$	1.0	Cost of products sold	$	(0.5	)	$	(0.3	)


	The Effect of Derivative Instruments in Cash Flow Hedging Relationships on the Consolidated Financial Statements
	Amount of Gain (Loss) Recognized in AOCI (Effective Portion)				Location of (Gain) Loss Reclassified from AOCI to Income	Amount of (Gain) Loss Reclassified from AOCI to Income (Effective Portion)
	Six months ended June 30,					Six months ended June 30,
(in millions)	2024		2023			2024			2023
Cash flow hedges:
Foreign exchange contracts	$	1.6	$	0.4	Cost of products sold	$	(0.9	)	$	(0.8	)


	The Effect of Derivatives Not Designated as Hedging Instruments on the Consolidated Financial Statements
	Location of (Gain) Loss Recognized in Income on Derivatives	Amount of (Gain) Loss Recognized in Income					Amount of (Gain) Loss Recognized in Income
		Three months ended June 30,					Six months ended June 30,
(in millions)		2024			2023		2024			2023
Foreign exchange contracts	Other expense (income), net	$	(3.4	)	$	1.3	$	(2.1	)	$	3.0