Financial Instruments

12 Months Ended

Dec. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial instruments

FINANCIAL INSTRUMENTS

The Company’s financial instruments include cash and marketable securities. Due to the short-term nature of these instruments, their book value approximates their fair value. The Company’s financial instruments may include long-term debt, interest rate and cross-currency swaps, commodity derivative contracts and foreign currency derivatives. All derivative contracts are placed with counterparties that have an S&P, or equivalent, investment grade credit rating at the time of the contracts’ placement. At December 31, 2015 and 2014, the Company had no derivative contracts that contained credit risk related contingent features.

As a result of the Remy acquisition, the Company acquired foreign exchange forward contracts with market values reflecting a cumulative loss of $7.5 million and commodity derivative contracts with market values reflecting a cumulative loss of $9.2 million. These contracts were assumed by the Company at fair market value and designated as hedges of future cash flows.

The Company uses certain commodity derivative contracts to protect against commodity price changes related to forecasted raw material and supplies purchases. The Company primarily utilizes forward and option contracts, which are designated as cash flow hedges. At December 31, 2015, the following commodity derivative contracts were outstanding:

	Commodity derivative contracts
Commodity	Volume hedged December 31, 2015	Units of measure	Duration
Copper	6,273.2	Metric Tons	Dec -16

The Company manages its interest rate risk by balancing its exposure to fixed and variable rates while attempting to optimize its interest costs. The Company selectively uses interest rate swaps to reduce market value risk associated with changes in interest rates (fair value hedges). At December 31, 2015, the following interest rate swaps were outstanding:

	Interest rate swap contracts
(in millions)	Hedge Type	Notional Amount		Duration
Fixed to floating	Fair value	$	250.0	Sept - 20
Fixed to floating	Fair value	$	134.0	Oct - 19

The Company uses foreign currency forward and option contracts to protect against exchange rate movements for forecasted cash flows, including capital expenditures, purchases, operating expenses or sales transactions designated in currencies other than the functional currency of the operating unit. In addition, the Company uses foreign currency forward contracts to hedge exposure associated with our net investment in certain foreign operations (net investment hedges). The Company has also designated its Euro denominated debt as a net investment hedge of the Company's investment in a European subsidiary. Foreign currency derivative contracts require the Company, at a future date, to either buy or sell foreign currency in exchange for the operating units’ local currency. At December 31, 2015 and December 31, 2014, the following foreign currency derivative contracts were outstanding:

Foreign currency derivatives (in millions)
Functional currency	Traded currency	Notional in traded currency December 31, 2015	Notional in traded currency December 31, 2014	Duration
Chinese yuan	Euro	30.5	—	Dec - 16
Chinese yuan	US dollar	13.8	24.9	Dec - 16
Euro	British pound	—	5.7	Dec - 15
Euro	Hungarian forint	3,434.5	—	Dec - 16
Euro	Japanese yen	487.1	4,371.8	Dec - 16
Euro	US dollar	30.1	23.5	Dec - 16
Japanese yen	Chinese yuan	92.6	88.6	Dec - 16
Japanese yen	Korean won	5,998.9	6,712.5	Dec - 16
Japanese yen	US dollar	3.0	3.8	Dec - 16
Korean won	Euro	2.5	2.5	Dec - 16
Korean won	Japanese yen	—	72.0	Dec - 15
Korean won	US dollar	77.9	22.7	Dec - 16
Mexican peso	US dollar	—	22.6	Dec - 15
Swedish krona	Euro	—	31.4	Dec - 15
US dollar	Mexican peso	469.0	—	Sept - 16

At December 31, 2015 and 2014, the following amounts were recorded in the Consolidated Balance Sheets as being payable to or receivable from counterparties under ASC Topic 815:

	Assets					Liabilities
(millions of dollars)	Location	December 31, 2015		December 31, 2014		Location	December 31, 2015		December 31, 2014
Foreign currency	Prepayments and other current assets	$	2.7	$	3.7	Accounts payable and accrued expenses	$	8.7	$	2.4
	Other non-current assets	$	—	$	0.1	Other non-current liabilities	$	—	$	0.5
Commodity	Prepayments and other current assets	$	—	$	—	Accounts payable and accrued expenses	$	10.4	$	—
Interest rate swaps	Other non-current assets	$	—	$	—	Other non-current liabilities	$	2.7	$	—

Effectiveness for cash flow and net investment hedges is assessed at the inception of the hedging relationship and quarterly, thereafter. To the extent that derivative instruments are deemed to be effective, gains and losses arising from these contracts are deferred into accumulated other comprehensive income (loss) ("AOCI") and reclassified into income as the underlying operating transactions are recognized. These realized gains or losses offset the hedged transaction and are recorded on the same line in the statement of operations. To the extent that derivative instruments are deemed to be ineffective, gains or losses are recognized into income.

The table below shows deferred gains (losses) reported in AOCI as well as the amount expected to be reclassified to income in one year or less. The amount expected to be reclassified to income in one year or less assumes no change in the current relationship of the hedged item at December 31, 2015 market rates.

	Deferred gain (loss) in AOCI at					Gain (loss) expected to be reclassified to income in one year or less
(millions of dollars)	December 31, 2015			December 31, 2014
Foreign currency	$	(0.1	)	$	1.3	$	(0.1	)
Commodity	(2.1		)	—		(2.0		)
Net investment hedges	12.2			0.2		—
Foreign currency denominated debt	0.1			$	—	—
Total	$	10.1		$	1.5	$	(2.1	)

Derivative instruments designated as hedging instruments as defined by ASC Topic 815 held during the period resulted in the following gains and losses recorded in income:

		Gain (loss) reclassified from AOCI to income (effective portion)							Gain (loss) recognized in income (ineffective portion)
		Year Ended December 31,							Year Ended December 31,
(millions of dollars)	Location	2015			2014			Location	2015			2014
Foreign currency	Sales	$	(1.4	)	$	1.2		SG&A expense	$	(0.5	)	$	0.2
Foreign currency	Cost of goods sold	$	7.2		$	(1.0	)	SG&A expense	$	0.2		$	—
Foreign currency	SG&A expense	$	—		$	(0.8	)	SG&A expense	$	—		$	—
Commodity	Cost of goods sold	$	(0.1	)	$	—		Cost of goods sold	$	—		$	—
Cross-currency swap	Interest expense	$	0.4		$	—		Interest expense	$	—		$	(0.7	)

At December 31, 2015, derivative instruments that were not designated as hedging instruments as defined by ASC Topic 815 were immaterial.