Derivative Financial Instruments

12 Months Ended

Dec. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

NOTE F – DERIVATIVE FINANCIAL INSTRUMENTS

Interest-rate contracts involve the exchange of fixed for floating rate or floating for fixed rate interest payments based on the contractual notional amounts in a single currency. The Company is exposed to interest-rate risk caused by market volatility as a result of its borrowing activities. The objective of these contracts is to mitigate the fluctuations on earnings, cash flows and fair value of borrowings. Net amounts paid or received are reflected as adjustments to interest expense.

At December 31, 2023, the notional amount of these contracts totaled $314.6 with amounts expiring over the next 8.9 years. Notional maturities for all interest-rate contracts are nil for 2024, $80.0 for 2025, $30.0 for 2026, $139.1 for 2027, $8.5 for 2028 and $57.0 thereafter.

The following table presents the balance sheet classification, fair value and gross and net amounts of derivative financial instruments:

	As of December 31
	2023						2022
Interest-rate contracts:	Assets			Liabilities			Assets			Liabilities
Other assets	$	1.2					$	4.0
Accounts payable, accrued expenses and other				$	5.2					$	19.7
Gross amounts recognized in Balance Sheets		1.2			5.2			4.0			19.7
Less amounts not offset in financial instruments		(.4	)		(.4	)		(1.1	)		(1.1	)
Pro forma net amount	$	.8		$	4.8		$	2.9		$	18.6

Cash Flow Hedges

Certain of the Company’s interest-rate contracts have been designated as cash flow hedges. Changes in the fair value of derivatives designated as cash flow hedges are recorded in AOCI. The maximum length of time over which the Company is hedging its exposure to the variability in future cash flows is 8.9 years.

Amounts in AOCI are reclassified into net income in the same period in which the hedged transaction affects earnings and are presented in the same income statement line as the earnings effect of the hedged transaction. The amount of gain recorded in AOCI at December 31, 2023 that is estimated to be reclassified to interest expense in the following 12 months if interest rates remain unchanged is approximately $7.7, net of taxes. The fixed interest earned on finance receivables will offset the amount recognized in interest expense, resulting in a stable interest margin consistent with the Company’s interest-rate risk management strategy.

Fair Value Hedges

Changes in the fair value of derivatives designated as fair value hedges are recorded in earnings together with the changes in fair value of the hedged item attributable to the risk being hedged. The following table presents the amounts recorded on the Balance Sheets related to cumulative basis adjustments for fair value hedges:

	December 31			December 31
	2023			2022
Medium-term notes
Carrying amount of hedged liabilities	$	76.4		$	215.8
Cumulative basis adjustment included in the carrying amount		(3.6	)		(19.2	)

The above table excludes the cumulative basis adjustments on discontinued hedge relationships of $(10.3) and $(4.8) as of December 31, 2023 and 2022, respectively.

The following table presents the amount of (income) expense on cash flow and fair value hedges recognized in Interest and other borrowing costs on the Statements of Income:

	As of December 31
		2023			2022
(Gain) loss on fair value hedges
Derivatives	$	(15.5	)	$	8.9
Hedged items		22.6			(8.1	)
(Gain) loss on cash flow hedges
Reclassified from AOCI into income		(4.6	)		27.9
	$	2.5		$	28.7