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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
 3 Months Ended
Mar. 31, 2018
Text Block [Abstract]  
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

NOTE 9. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to global market risks, including risks from changes in FX rates and changes in interest rates. Accordingly, the Company uses derivatives in certain instances to manage the aforementioned financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for speculative purposes.

Derivatives and non-derivative instruments designated as accounting hedges:

Interest Rate Swaps

The Company has entered into interest rate swaps to convert the fixed interest rate on certain of its long-term debt to a floating interest rate based on the 3-month LIBOR. The purpose of these hedges is to mitigate the risk associated with changes in the fair value of the long-term debt, thus the Company has designated these swaps as fair value hedges. The fair value of the swaps is adjusted quarterly with a corresponding adjustment to the carrying value of the debt. The changes in the fair value of the swaps and the underlying hedged item generally offset and the net cash settlements on the swaps are recorded each period within interest expense, net in the Company’s consolidated statement of operations.

The following table summarizes the Company’s interest rate swaps designated as fair value hedges:

Hedged ItemNature of SwapNotional AmountFloating Interest Rate
As of March 31, 2018As of December 31, 2017
2010 Senior Notes due 2020Pay Floating/Receive Fixed$500.0$500.03-month LIBOR
2014 Senior Notes due 2019Pay Floating/Receive Fixed$450.0$450.03-month LIBOR
2012 Senior Notes due 2022Pay Floating/Receive Fixed$80.0$80.03-month LIBOR

The following table summarizes the impact to the statement of operations of the Company’s interest rate swaps designated as fair value hedges:

Amount of Income Recognized in the Consolidated Statements of Operations
Three Months Ended March 31,
Derivatives Designated as Fair Value Accounting HedgesLocation on Consolidated Statement of Operations20182017
Interest rate swapsInterest expense, net$(0.1)$2.4

Cross-currency swaps and net investment hedges

In conjunction with the issuance of the 2015 Senior Notes, the Company entered into a cross-currency swap to exchange €100 million for U.S. dollars on the date of the settlement of the notes. The purpose of this cross-currency swap was to mitigate FX risk on the remaining principal balance on the 2015 Senior Notes that initially was not designated as a net investment hedge. Under the terms of the swap, the Company paid the counterparty interest on the $110.5 million received at 3.945% per annum and the counterparty paid the Company interest on the €100 million paid at 1.75% per annum. These interest payments were settled in March of each year, beginning in 2016, until either the maturity of the cross-currency swap in 2027 or upon early termination at the discretion of the Company. The principal payments on this cross currency swap were to be settled in 2027, concurrent with the repayment of the 2015 Senior Notes at maturity or upon early termination at the discretion of the Company. In March 2016, the Company designated these cross-currency swaps as cash flow hedges. Accordingly, changes in fair value subsequent to the date the swaps were designated as cash flow hedges were recognized in OCI. Gains and losses on the swaps initially recognized in OCI were reclassified to the statement of operations in the period in which changes in the underlying hedged item affects net income. On December 18, 2017, the Company terminated the cross-currency swap and designated the full €500 million principal of the 2015 Senior Notes as a net investment hedge as discussed below.

The Company has designated €500 million of the 2015 Senior Notes Due 2027 as a net investment hedge. This hedge is intended to mitigate FX exposure related to euro net investments in certain foreign subsidiaries against changes in euro/USD exchange rates. This net investment hedge is designated as accounting hedges under the applicable sections of Topic 815 of the ASC and will end upon the repayment of the notes in 2027 unless terminated earlier at the discretion of the Company.

Hedge effectiveness is assessed based on the overall changes in the fair value of the hedge. For hedges that meet the effectiveness requirements, any change in the fair value is recorded in OCI in the foreign currency translation account. Any change in the fair value of the Company’s outstanding net hedges that is the result of ineffectiveness would be recognized immediately in other non-operating (expense) income, net in the Company’s consolidated statement of operations.

The following table provides information on the gains/(losses) on the Company’s net investment and cash flow hedges:

Amount of Gain/(Loss) Recognized in AOCI on Derivative (Effective Portion), net of TaxAmount of Gain/(Loss) Reclassified from AOCI into Income (Effective Portion), net of TaxAmount of Gain/(Loss) Recognized Directly into Income (Ineffective Portion), net of tax
Non-Derivative Instruments in Net Investment Hedging RelationshipsThree Months EndedThree Months EndedThree Months Ended
March 31,March 31,March 31,
201820172018201720182017
Long-term debt$(10.9)$(3.6)$-$-$-$-
Total net investment hedges$(10.9)$(3.6)$-$-$-$-
Derivatives in Cash Flow Hedging Relationships
Cross currency swap$1.5$(0.2)$0.1*$1.0*$(0.5)**$-
Interest rate contracts---(0.1)--
Total cash flow hedges$1.5$(0.2)$0.1$0.9$(0.5)$-
Total $(9.4)$(3.8)$0.1$0.9$(0.5)$-
* For the three months ended March, 31, 2018, reflects $0.1 million in gains recorded in other non-operating income (expense), net. For the three months ended March 31, 2017, reflects reflects $1.5 million in gains recorded in other non-operating income (expense), net and $0.5 million relating to the tax effect of the aforementioned item.
** For the three months ended March, 31, 2018, reflects $0.7 million in losses recorded in other non-operating income (expense), net and $0.2 million relating to the tax effect of the aforementioned item.

The cumulative amount of realized and unrecognized net investment hedge and cash flow hedge gains (losses) recorded in AOCI is as follows:

Cumulative Gains/(Losses), net of tax
March 31,December 31,
Net investment hedges20182017
FX forwards $23.5$23.5
Long-term debt (35.6)(24.7)
Total net investment hedges$(12.1)$(1.2)
Cash flow hedges
Interest rate contracts$(0.4)$(0.4)
Cross currency swap2.71.3
Total cash flow hedges2.30.9
Total net losses in AOCI$(9.8)$(0.3)

Derivatives not designated as accounting hedges:

Foreign exchange forwards

The Company also enters into foreign exchange forwards to mitigate the change in fair value on certain assets and liabilities denominated in currencies other than a subsidiary’s functional currency. These forward contracts are not designated as accounting hedges under the applicable sections of Topic 815 of the ASC. Accordingly, changes in the fair value of these contracts are recognized immediately in other non-operating (expense) income, net in the Company’s consolidated statements of operations along with the FX gain or loss recognized on the assets and liabilities denominated in a currency other than the subsidiary’s functional currency. These contracts have expiration dates at various times through July 2018.

The following table summarizes the notional amounts of the Company’s outstanding foreign exchange forwards:

March 31,December 31,
20182017
Notional amount of currency pair:SellBuySellBuy
Contracts sell USD for GBP$708.7£512.9$484.7£362.3
Contracts to sell USD for Japanese Yen$24.9 ¥ 2,700.0$24.3 ¥ 2,700.0
Contracts to sell USD for Canadian dollars$51.7C$64.0$51.7C$64.0
Contracts to sell USD for Singapore dollars$-S$-$39.2S$53.0
Contracts to sell USD for Euros$74.8€60.0$465.2€390.0
NOTE: € = Euro, £ = British pound, $ = U.S. dollar, ¥ = Japanese Yen, C$ = Canadian dollar, S$= Singapore dollars

The following table summarizes the impact to the consolidated statements of operations relating to the net (losses) gains on the Company’s derivatives which are not designated as hedging instruments:

Three Months Ended
March 31,
Derivatives Not Designated as Accounting HedgesLocation on Statement of Operations20182017
Foreign exchange forwardsOther non-operating income, net$27.6$(2.3)

The table below shows the classification between assets and liabilities on the Company’s consolidated balance sheets for the fair value of the derivative instrument as well as the carrying value of its non-derivative debt instruments designated and qualifying as net investment hedges:

Derivative and Non-Derivative Instruments
Balance Sheet LocationMarch 31, 2018December 31, 2017
Assets:
Derivatives designated as accounting hedges:
Interest rate swapsOther assets$-$0.5
Total derivatives designated as accounting hedges-0.5
Derivatives not designated as accounting hedges:
FX forwards on certain assets and liabilitiesOther current assets14.512.5
Total assets$14.5$13.0
Liabilities:
Derivatives designated as accounting hedges:
Interest rate swapsOther non-current liabilities$12.2$3.5
Total derivatives designated as accounting hedges12.23.5
Non-derivative instrument designated as accounting hedge
Long-term debt designated as net investment hedgeLong-term debt614.9600.4
Derivatives not designated as accounting hedges:
FX forwards on certain assets and liabilitiesAccounts payable and accrued liabilities4.12.0
Total liabilities$631.2$605.9