Financial instruments and derivatives

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The following table sets forth the carrying amounts and fair values of the Company’s significant financial instruments where the carrying amount differs from the fair value.


	December 31, 2019						December 31, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt	$	1,193,135	$	1,351,397	$	1,189,717	$	1,270,521

The carrying value of cash and cash equivalents, short-term debt and long-term variable-rate debt approximates fair value. The fair value of long-term debt is based on recent trade information in the financial markets of the Company’s public debt or is determined by discounting future cash flows using interest rates available to the Company for issues with similar terms and maturities. It is considered a Level 2 fair value measurement.

Cash flow hedges

At December 31, 2019 and 2018, the Company had derivative financial instruments outstanding to hedge anticipated transactions and certain asset and liability related cash flows. To the extent considered effective, the changes in fair value of these contracts are recorded in other comprehensive income and reclassified to income or expense in the period in which the hedged item impacts earnings.

Commodity cash flow hedges

The Company has entered into certain derivative contracts to manage some of the cost of anticipated purchases of natural gas and aluminum. At December 31, 2019, natural gas swaps covering approximately 4.4 million MMBTUs were outstanding. These contracts represent approximately 61% of anticipated U.S. and Canadian usage for 2020. Additionally, the Company had swap contracts covering 1,225 metric tons of aluminum representing approximately 23% of anticipated usage for 2020. The total fair values of the Company’s commodity cash flow hedges were in net loss positions totaling $(1,625) and $(1,571) at December 31, 2019 and December 31, 2018, respectively. The amount of the loss included in accumulated other comprehensive loss at December 31, 2019, expected to be reclassified to the income statement during the next twelve months is $(1,578).

Foreign currency cash flow hedges

The Company has entered into forward contracts to hedge certain anticipated foreign currency denominated sales and purchases forecasted to occur in 2020. The net positions of these contracts at December 31, 2019, were as follows:


Currency	Action	Quantity
Colombian peso	Purchase	15,486,745
Mexican peso	Purchase	335,494
Polish zloty	Purchase	89,750
Czech koruna	Purchase	40,333
Canadian dollar	Purchase	20,812
British pound	Purchase	6,187
Turkish lira	Purchase	3,419
New Zealand dollar	Sell	(439)
Australian dollar	Sell	(929)
Swedish krona	Sell	(3,933)
Euro	Sell	(30,323)
Russian ruble	Sell	(182,187)

The fair values of the Company’s foreign currency cash flow hedges related to forecasted sales and purchases netted to a gain position of $1,058 at December 31, 2019 and a loss position of $(1,712) at December 31, 2018. Gains of $1,057 are expected to be reclassified from accumulated other comprehensive loss to the income statement during the next twelve months. In addition, the Company has entered into forward contracts to hedge certain foreign currency cash flow transactions related to construction in progress. As of December 31, 2019 and December 31, 2018, the net position of these contracts was $1 and $(305) respectively. Gains totaling $107 and losses of $(88) were reclassified from accumulated other comprehensive loss and netted against the carrying value of the capitalized expenditures during the years ended December 31, 2019 and December 31, 2018, respectively. Gains of $1 are expected to be reclassified from accumulated other comprehensive loss and included in the carrying value of the related fixed assets acquired during the next twelve months.

Other derivatives

The Company routinely enters into forward contracts or swaps to economically hedge the currency exposure of intercompany debt and existing foreign currency denominated receivables and payables. The Company does not apply hedge accounting treatment under ASC 815 for these instruments. As such, changes in fair value are recorded directly to income and expense in the periods that they occur. The net positions of these contracts at December 31, 2019, were as follows:

Currency

Action

Quantity

Colombian peso

Purchase

10,536,995

Mexican peso

Purchase

320,964

Canadian dollar

Purchase

10,931

The fair value of the Company’s other derivatives was $54 and $166 at December 31, 2019 and 2018, respectively.

The following table sets forth the location and fair values of the Company’s derivative instruments:


		Fair Value at December 31
Description	Balance Sheet Location	2019		2018
Derivatives designated as hedging instruments:
Commodity Contracts	Prepaid expenses	$	—	$	282
Commodity Contracts	Other assets	$	—	$	—
Commodity Contracts	Accrued expenses and other	$	(1,625)	$	(1,843)
Commodity Contracts	Other liabilities	$	—	$	(10)
Foreign Exchange Contracts	Prepaid expenses	$	1,236	$	770
Foreign Exchange Contracts	Accrued expenses and other	$	(178)	$	(2,482)
Derivatives not designated as hedging instruments:
Foreign Exchange Contracts	Prepaid expenses	$	88	$	727

Foreign Exchange Contracts	Accrued expenses and other	$	(34)	$	(561)

While certain of the Company's derivative contract arrangements with its counterparties provide for the ability to settle contracts on a net basis, the Company reports its derivative positions on a gross basis. There are no collateral arrangements or requirements in these agreements.

Beginning in January 2020, the Company is party to a cross-currency swap agreement with a notional amount of $250,000 to effectively convert a portion of the Company's fixed-rate U.S. dollar denominated debt, including the semi-annual interest payments, to fixed-rate euro-denominated debt. The swap agreement matures November 1, 2024. Under the terms of the swap agreement, the Company will receive semi-annual interest payments in U.S. dollars at a rate of 5.75% and pay interest in euros at a rate of 3.856%.

The following table sets forth the effect of the Company’s derivative instruments on financial performance for the twelve months ended December 31, 2019, excluding the gains on foreign currency cash flow hedges that were reclassified from accumulated other comprehensive loss to the carrying value of the capitalized expenditures:


Description	Amount of Gain or (Loss) Recognized in OCI on Derivatives		Location of Gain or (Loss) Reclassified from Accumulated OCI Into Income		Amount of Gain or (Loss) Reclassified from Accumulated OCI Into Income
Derivatives in Cash Flow Hedging Relationships:
Foreign Exchange Contracts	$	2,495	Net sales		$	1,381
			Cost of sales		$	(1,758)
Commodity Contracts	$	216	Cost of sales		$	270
			Location of Gain or (Loss) Recognized in Income Statement		Gain or (Loss) Recognized
Derivatives not designated as hedging instruments:
Foreign Exchange Contracts			Cost of sales		$	—
			Selling, general and administrative		$	(704)
Description	Revenue		Cost of Sales
Total amount of income and expense line items presented in the Consolidated Statements of Income	$	1,381	$	(1,488)

The effects of cash flow hedging:

Gain or (loss) on cash flow hedging relationships:
Foreign exchange contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income into net income	$	1,381	$	(1,758)

Commodity contract:
Amount of gain or (loss) reclassified from accumulated other comprehensive income into net income	$	—	$	270

The following table sets forth the effect of the Company’s derivative instruments on financial performance for the twelve months ended December 31, 2018, excluding the gains on foreign currency cash flow hedges that were reclassified from accumulated other comprehensive loss to the carrying value of the capitalized expenditures:


Description	Amount of Gain or (Loss) Recognized in OCI on Derivatives		Location of Gain or (Loss) Reclassified from Accumulated OCI Into Income		Amount of Gain or (Loss) Reclassified from Accumulated OCI Into Income
Derivatives in Cash Flow Hedging Relationships:
Foreign Exchange Contracts	$	(2,354)	Net sales		$	(203)
			Cost of sales		$	(20)
Commodity Contracts	$	258	Cost of sales		$	115
			Location of Gain or (Loss) Recognized in Income Statement		Gain or (Loss) Recognized
Derivatives not designated as hedging instruments:
Foreign Exchange Contracts			Cost of sales		$	—
			Selling, general and administrative		$	41
Description	Revenue		Cost of Sales
Total amount of income and expense line items presented in the Condensed Consolidated Statements of Income	$	(203)	$	95

The effects of cash flow hedging:

Gain or (loss) on cash flow hedging relationships:
Foreign exchange contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income into net income	$	(203)	$	(20)

Commodity contract:
Amount of gain or (loss) reclassified from accumulated other comprehensive income into net income	$	—	$	115