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Derivative Financial Instruments
 9 Months Ended
Sep. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments Derivative Financial Instruments
Our ongoing business operations expose us to various risks, such as fluctuating interest rates, foreign currency exchange rates and increasing commodity prices. To manage these market risks, we periodically enter into derivative financial instruments, such as interest rate swaps, options and foreign exchange contracts for periods consistent with, and for notional amounts equal to or less than, the related underlying exposures. We do not purchase or hold any derivative financial instruments for investment or trading purposes. All derivatives are recorded in our condensed consolidated balance sheet at fair value.

Foreign Exchange Rate Risk

We have entered into forward exchange contracts, designated as fair value hedges, to manage our exposure to fluctuating foreign exchange rates on cross-currency intercompany loans. As of both September 30, 2020 and December 31, 2019, the total amount of these forward exchange contracts was Singapore Dollar (“SGD”) 601.5 million and $13.4 million.
In addition, we have entered into several foreign currency contracts, designated as cash flow hedges, for periods of up to eighteen months, intended to hedge the currency risk associated with a portion of our forecasted transactions denominated in foreign currencies. As of September 30, 2020, we had outstanding foreign currency contracts to purchase and sell certain pairs of currencies, as follows:

(in millions)Sell
CurrencyPurchaseUSDEuro
USD74.7 — 64.8 
Yen9,876.6 55.9 32.5 
SGD57.9 33.3 7.2 

In December 2019, we entered into the cross-currency swap for $90 million, which we designated as a hedge of our net investment in Daikyo. The notional amount of the cross-currency swap is ¥9.8 billion ($90 million) and the swap termination date is December 31, 2024. Under the cross-currency swap, we receive floating interest rate payments based on three-month U.S. Dollar (“USD”) LIBOR plus a margin, in return for paying floating interest rate payments based on three-month Japanese Yen (“Yen”) LIBOR plus a margin.

Commodity Price Risk

Many of our proprietary products are made from synthetic elastomers, which are derived from the petroleum refining process. We purchase the majority of our elastomers via long-term supply contracts, some of which contain clauses that provide for surcharges related to fluctuations in crude oil prices. The following economic hedges did not qualify for hedge accounting treatment since they did not meet the highly effective requirement at inception.

From November 2017 through September 2020, we purchased several series of call options for a total of 439,732 barrels of crude oil to mitigate our exposure to such oil-based surcharges and protect operating cash flows with regards to a portion of our forecasted elastomer purchases.

As of September 30, 2020, we had outstanding contracts to purchase 137,035 barrels of crude oil from October 2020 to March 2022, at a weighted-average strike price of $60.47 per barrel.

Effects of Derivative Instruments on Financial Position and Results of Operations

Please refer to Note 10, Fair Value Measurements, for the balance sheet location and fair values of our derivative instruments as of September 30, 2020 and December 31, 2019.
The following table summarizes the effects of derivative instruments designated as fair value hedges on the condensed consolidated statements of income:
Amount of Loss (Gain) Recognized in Income for theAmount of Loss (Gain) Recognized in Income for the
Three Months Ended
September 30,		Nine Months Ended
September 30,		Location on Statement of Income
($ in millions)2020201920202019
Fair Value Hedges:
Hedged item (intercompany loan)
$9.3 $(8.4)$25.1 $(14.1)Other expense (income)
Derivative designated as hedging instrument
$(9.3)$8.4 $(25.1)$14.1 Other expense (income)
Amount excluded from effectiveness testing
$(1.9)$4.3 $(5.9)$(5.0)Other expense (income)
Total$(1.9)$4.3 $(5.9)$(5.0)

We recognize in earnings the initial value of forward point components on a straight-line basis over the life of the fair value hedge. The amounts recognized in earnings, pre-tax, for forward point components for the three and nine months ended September 30, 2020 and 2019 were $1.3 million, $5.0 million, and $2.2 million, $6.4 million, respectively.

The following tables summarize the effects of derivative instruments designated as fair value, cash flow, and net investment hedges on other comprehensive income (“OCI”) and earnings, net of tax:
 Amount of (Loss) Gain Recognized in OCI for theAmount of (Gain) Loss Reclassified from Accumulated OCI into Income for theLocation of (Gain) Loss Reclassified from Accumulated OCI into Income
Three Months Ended
September 30,		Three Months Ended
September 30,
($ in millions)2020201920202019 
Fair Value Hedges
Foreign currency hedge contracts$(0.1)$(0.6)$(0.7)$2.9 Other expense (income)
Total$(0.1)$(0.6)$(0.7)$2.9 
Cash Flow Hedges:     
Foreign currency hedge contracts$(0.5)$0.7 $0.2 $(0.3)Net sales
Foreign currency hedge contracts— 0.6 0.1 (0.2)Cost of goods and services sold
Forward treasury locks— — 0.1 0.1 Interest expense
Total$(0.5)$1.3 $0.4 $(0.4) 
Net Investment Hedges:     
Foreign currency-denominated debt$— $0.7 $— $— Other expense (income)
Cross-currency swap(3.0)— — — Other expense (income)
Total$(3.0)$0.7 $— $—  
 Amount of Gain (Loss) Recognized in OCI for theAmount of (Gain) Loss Reclassified from Accumulated OCI into Income for theLocation of (Gain) Loss Reclassified from Accumulated OCI into Income
Nine Months Ended
September 30,		Nine Months Ended
September 30,
($ in millions)2020201920202019 
Fair Value Hedges
Foreign currency hedge contracts$2.8 $3.9 $(3.3)$(3.3)Other expense (income)
Total$2.8 $3.9 $(3.3)$(3.3)
Cash Flow Hedges:     
Foreign currency hedge contracts$— $1.0 $(0.3)$(0.7)Net sales
Foreign currency hedge contracts(0.3)1.1 (0.1)(0.5)Cost of goods and services sold
Forward treasury locks— — 0.2 0.2 Interest expense
Total$(0.3)$2.1 $(0.2)$(1.0) 
Net Investment Hedges:     
Foreign currency-denominated debt$— $0.5 $— $— Other (income)
Cross-currency swap(2.0)— — — Other (income)
Total$(2.0)$0.5 $— $—  

The following table summarizes the effects of derivative instruments designated as fair value, cash flow, and net investment hedges by line item in our condensed consolidated statements of income:
Three Months Ended
September 30,		Nine Months Ended
September 30,
($ in millions)2020201920202019
Net sales$0.2 $(0.3)$(0.3)$(0.7)
Cost of goods and services sold0.1 (0.2)(0.1)(0.5)
Interest expense0.1 0.1 0.2 0.2 
Other expense (income)(0.7)2.9 (3.3)(3.3)


The following table summarizes the effects of derivative instruments not designated as hedges on the condensed consolidated statements of income:
Amount of Loss Recognized in Income for theAmount of Loss Recognized in Income for the
Three Months Ended
September 30,		Nine Months Ended
September 30,		Location on Statement of Income
($ in millions)2020201920202019
Commodity call options$0.1 $0.1 $0.3 $0.3 Cost of goods and services sold
Total$0.1 $0.1 $0.3 $0.3 

For the three and nine months ended September 30, 2020 and 2019, there was no material ineffectiveness related to our hedges.