Financial Instruments

12 Months Ended

Dec. 31, 2020

Financial Instruments [Abstract]

Financial Instruments Disclosure

FINANCIAL INSTRUMENTSThe Company has limited involvement with derivative financial instruments and does not use them for trading purposes. The Company enters into certain interest rate and cross currency swap agreements in order to manage its exposure to changes in interest rates. At December 31, 2020, the interest payments associated with 78% of the Company’s debt are fixed obligations. The amount of the Company’s fixed obligation interest payments may change based upon the expiration dates of its interest rate and cross currency swap agreement and the level and composition of its debt. The Company also enters into certain foreign currency forward contracts to limit the Company’s exposure to currency fluctuations on the respective hedged items. For additional disclosures on derivative instruments regarding balance sheet location, fair value, and the amounts reclassified into other comprehensive income and the effective portion of the cash flow hedges, also see Note 7 and Note 11 to the consolidated financial statements. As

also mentioned in Note 10, the Company has designated its euro-denominated debt as a hedge of a portion of its net investment in a euro-denominated foreign subsidiary.

Cash Flow Hedges

In June 2019, the Company entered into a cross currency swap arrangement designated as a cash flow hedge. The agreement converts $50 million of borrowings under the Company's credit facility into synthetic Swiss franc debt, which allows the Company to effectively change the floating rate LIBOR-based interest payment, excluding the credit spread, to a fixed Swiss franc income of 0.82%. The swap began in June 2019 and matures in June 2023.

In June 2019, the Company entered into a cross currency swap arrangement designated as a cash flow hedge. The agreement converts $50 million of borrowings under the Company’s credit facility into synthetic Swiss franc debt, which allows the Company to effectively change the floating rate LIBOR-based interest payment, excluding the credit spread, to a fixed Swiss franc income of 0.95%. The swap began in June 2019 and matures in June 2021.

In February 2019, the Company entered into a cross currency swap arrangement designated as a cash flow hedge. The agreement converts $50 million of borrowings under the Company’s credit facility into synthetic Swiss franc debt, which allows the Company to effectively change the floating rate LIBOR-based interest payment, excluding the credit spread, to a fixed Swiss franc income of 0.78%. The swap began in February 2019 and matures in June 2021.

In 2015, the Company entered into a forward-starting interest rate swap agreement. The agreement changes the floating rate LIBOR-based interest payments associated with $100 million in borrowings under the Company’s credit agreement to a fixed obligation of 2.25% which began in February 2017 and matures in February 2022.

In 2013, the Company entered into an interest rate swap agreement designated as a cash flow hedge. The agreement was a swap which had the effect of changing the floating rate LIBOR-based interest payments associated with $50 million in borrowings under the Company’s credit agreement to a fixed obligation of 2.52% which began in October 2015 and matured in October 2020.

The Company’s cash flow hedges are recorded gross at fair value in the consolidated balance sheet at December 31, 2020 and 2019 and are disclosed in Note 7 to the consolidated financial statements. A derivative loss of $0.7 million based upon interest rates at December 31, 2020 is expected to be reclassified from other comprehensive income (loss) to earnings in the next 12 months. Through December 31, 2020, no hedge ineffectiveness has occurred in relation to these cash flow hedges.

Other Derivatives

The Company primarily enters into foreign currency forward contracts in order to economically hedge short-term intercompany balances largely denominated in Swiss franc, other major European currencies, and the Chinese renminbi with its foreign businesses. In accordance with U.S. GAAP, these contracts are considered “derivatives not designated as hedging instruments.” Gains or losses on these instruments are reported in current earnings. The foreign currency forward contracts are recorded at fair value in the consolidated balance sheet at December 31, 2020 and 2019, as disclosed in Note 7 to the consolidated financial statements. The Company recognized in other charges (income) a net gain of $4.8 million and net loss of $3.7 million and $1.2 million during the years ended December 31, 2020, 2019, and 2018, respectively, which offset the related net transaction gains (losses) associated with these

contracts. At December 31, 2020 and 2019, these contracts had a notional value of $536.5 million and $494.6 million, respectively.

The Company may be exposed to credit losses in the event of nonperformance by the counterparties to its derivative financial instrument contracts. Counterparties are established banks and financial institutions with high credit ratings. The Company believes that such counterparties will be able to fully satisfy their obligations under these contracts.