Derivatives

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

We are directly and indirectly affected by changes in foreign currency, which may adversely impact our financial performance and are referred to as “market risks.” When deemed appropriate, we use derivatives as a risk management tool to mitigate the potential impact of certain market risks. We do not enter into derivative financial instruments for trading purposes.

We use a layered hedging program to hedge select anticipated foreign currency cash flows to reduce volatility in cash flows. We account for the designated foreign exchange forward contracts as cash flow hedges. These foreign exchange forward contracts, the remaining of which expired during 2019, generally had maturities up to 12 months and the counterparties to the transactions were typically large international financial institutions.

We enter into foreign currency contracts to manage our foreign exchange exposure related to certain balance sheet items that do not meet the requirements for hedge accounting. These derivative instruments are adjusted to fair value at the end of each period through earnings. The gain or loss recorded on these instruments is substantially offset by the remeasurement adjustment on the foreign currency denominated asset or liability.

We pay interest under our Credit Agreement which fluctuates based on changes in our benchmark interest rates. In order to mitigate the risk of increases in benchmark rates, we enter into interest rate swaps whereby we agree to exchange with the counterparty, at specified intervals, the difference between fixed and variable amounts calculated by reference to the notional amount. The interest rate swaps were designated as cash flow hedges. Cash flows related to the interest rate swap agreements are included in interest expense.

We determine the fair value of our foreign currency derivatives and our interest rate swaps based on observable market-based inputs or unobservable inputs that are corroborated by market data. We do not view the fair value of our derivatives in isolation, but rather in relation to the fair values or cash flows of the underlying exposure. Our derivatives are over-the-counter instruments with liquid markets. All derivatives are carried at fair value in our consolidated balance sheets in other assets and other liabilities. We consider the risk of counterparty default to be minimal. We report cash flows from our hedging instruments in the same cash flow statement category as the hedged items.

The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of December 31, 2019:

Derivative Assets

Derivative Liabilities

Notional Amount

Maturity Date

Classification

Fair Value

Classification

Fair Value

Cash flow hedges

Interest rate swaps

450,000

May 2022 and May 2025

Other assets, net

—

Other liabilities

17,436

The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of December 31, 2018:



				Derivative Assets			Derivative Liabilities
	Notional Amount		Maturity Date	Classification	Fair Value		Classification	Fair Value
Cash flow hedges
Interest rate swaps	$	450,000	May 2022 and May 2025	Other assets, net	$	—	Other liabilities	$	6,875
Foreign currency contracts	$	25,592	January 2019 - December 2019	Other assets, net	$	20	Other liabilities	$	—

Economic (non-designated) hedges
Foreign currency contracts	$	32,683	January 2019 - April 2019	Other assets, net	$	—	Other liabilities	$	198

The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the year ended December 31, 2019:



	Amount of Loss Recognized in Other Comprehensive Loss			Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income	Total Amount of Expense Line Items Presented in the Consolidated Statement of Operations in Which the Effects are Recorded			Amount of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Income
Interest rate swaps	$	(12,983	)	Interest expense, net	$	(98,113	)	$	(2,423	)
Foreign currency contracts	$	(28	)	Cost of goods sold	$	(8,082,448	)	$	517

The amount of ineffectiveness associated with these contracts was immaterial for the periods presented.

For the year ended December 31, 2019 we recognized a gain of $1.0 million associated with our economic (non-designated) foreign currency contracts. For the year ended December 31, 2018, we recognized a loss of $1.6 million associated with our economic (non-designated) foreign currency contracts.

We recorded the change in fair value of derivative instruments and the remeasurement adjustment on the foreign currency denominated asset or liability in acquisition-related and exit and realignment charges for contracts assumed with the Halyard acquisition and in other operating expense, net for all other foreign exchange contracts.

For the year ended December 31, 2019, we reclassified $2.4 million associated with our interest rate swaps and $0.5 million associated with our foreign currency contracts out of accumulated other comprehensive loss. For the year ended December 31, 2018, we reclassified $1.0 million associated with our interest rate swaps and $0.1 million associated with our foreign currency contracts out of accumulated other comprehensive loss.